/raid1/www/Hosts/bankrupt/TCR_Public/031007.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, October 7, 2003, Vol. 7, No. 198
Headlines
AHOLD NV: Fitch Maintains Rating Watch Negative on Low-B Ratings
AIR CANADA: Firms-Up 14 Aircraft Lease Restructuring Transaction
AIR CANADA: Court Fixes November 15, 2003 as Claims Bar Date
ALLEGHENY ENERGY: Names Philip L. Goulding Vice President
ALLEGHENY ENERGY: Names David C. Benson President of AES Unit
AMERALIA INC: Delays Filing of Fin'l Statement Report with SEC
AMERCO: Equity Committee Taps Beckley Singleton as Local Counsel
AMERICAN COMM'L: Plan-Filing Exclusivity Intact Until Dec. 29
APPLIED EXTRUSION: Secures $100 Mill. Credit Facility from GECF
ARTISOFT INC: Restores Compliance with Nasdaq Listing Criteria
ATLANTIC COAST: Reports 17.1% Increase in September 2003 Traffic
BIOTRANSPLANT: Enters Amended Pact to Sell Eligix to Miltenyi
BRITISH ENERGY: SD/D Ratings Unaffected by Restructuring Pact
BURLINGTON: Wants to Keep Plan Exclusivity Until Jan. 31, 2004
CALPINE CORPORATION: Prices Canadian Natural Gas Trust IPO
C-BASS: Fitch Affirms Ratings on 3 RMBS Classes at Low-B Levels
CANNON EXPRESS: Delays Filing of Annual Report on SEC Form 10-K
CKE RESTAURANTS: Will Redeem $100 Million of 4.25% Conv. Notes
COMTEX NEWS: Must Raise Revenues to Meet Liquidity Requirements
COVANTA: Court OKs Payment of $3.4-Mill. Caithness Break-Up Fee
CRESCENT REAL ESTATE: Will Publish Q3 2003 Results on November 4
CRESCENT REAL ESTATE: AmeriCold Exploring Additional Financing
DATA TRANSMISSION: Wants to Pay $2.5 Mil. to Critical Vendors
ELIZABETH ARDEN: S&P Places B/CCC+ Ratings on Watch Positive
EMAC/FMAC: Fitch Downgrades Certain Franchise Loan Transactions
FIRST NATIONWIDE: Fitch Puts B Class III-B-5 Note on Watch Neg.
FLEXTRONICS: Will Publish Second-Quarter Results on October 22
GALEY & LORD: Keeps Plan Exclusivity Intact through December 10
GAUNTLET ENERGY: Continues Discussions with Lenders and Buyers
GENCORP INC: Michael Bryant Resigns as GDX Pres. and GenCorp VP
GEORGIA-PACIFIC: Completes Exchange Offer for Senior Notes
HINES HORTICULTURE: Closes Refinancing with New Credit Facility
HOMECOM COMMS: Significant Losses Raise Going Concern Doubt
HOVNANIAN ENTERPRISES: September 2003 Net Contracts Up 22%
IMPATH INC: Altman Group Serving as Claims and Docket Agent
IT GROUP: Gets Nod to Use Lenders' Cash Collateral Until Dec. 26
J.A. JONES: Has Until December 10 to Complete and File Schedules
J.C. PENNEY CO.: Maxine Clark Will Joining Board of Directors
LAIDLAW INC: Enters Stipulation Allowing U.S. Bank's $9MM Claim
LNR PROPERTY: Declares Quarterly Cash Dividend Payable Nov. 20
LTV: Wants to Substantively Consolidate LTV & Georgia Tubing
MIRANT CORP: Proposed Paul Hastings' Engagement Drawing Fire
MITEC TELECOM: Increases Private Placement Transaction by 20%
N.C. TECHNOLOGICAL DEVELOPMENT: Chapter 11 Case Summary
NORCRAFT: S&P Assigns B+ Corporate Rating with Stable Outlook
NORTHWEST AIRLINES: Flies 5.56B Revenue Passenger Miles in Sept.
NRG ENERGY: Court Okays Houlihan Loker as Committee's Advisors
OAKWOOD HOMES: Bankruptcy Court Approves Disclosure Statement
OMNOVA SOLUTION: Ratings Lowered on Weaker Financial Performance
ONE PRICE CLOTHING: Deloitte & Touche Airs Going Concern Doubt
ONENAME CORPORATION: Case Summary & 20 Largest Unsec. Creditors
OUTSOURCING SOLUTIONS: Missouri Court Intends to Confirm Plan
PARTNERS MORTGAGE: UST Appoints Official Creditors' Committee
PERLE SYSTEMS: Royal Capital Agrees to Forbear Until October 15
PG&E NATIONAL: Wins Court Approval to Change Company Name
PG&E NATIONAL: Creditors' Committee Hires Linowes and Blocher
PHILIP MORRIS: Appeals Panel Affirms Dismissal in Medicare Case
PILLOWTEX: Committee Wants Nod to Tap BDO Seidman as Accountant
PLYMOUTH RUBBER: Sinks into Red Ink in 3rd Quarter Fiscal 2003
POLAROID CORP: Asks Court to Approve Plan Solicitation Protocol
QUADRAMED CORP: Will Hold Investor Conference Call Tomorrow
RADIO UNICA: Enters into Definitive Pact to Sell Station Group
READER'S DIGEST: S&P Ratchets Corporate Credit Rating Down to BB
RELIANCE GROUP: Liquidator Intends to Sell RNIC (Europe) to Omni
RELIANT RESOURCES: Low-B Ratings Unfazed by FERC Settlement
REPUBLIC ENGINEERED: Commences Ch. 11 Reorganization Proceedings
REPUBLIC ENGINEERED: Case Summary & 20 Largest Unsec. Creditors
SALON MEDIA GROUP: Raises $100K from Note and Warrant Offering
SEVEN SEAS PETROLEUM: Ecopetrol Terminates Deep Dindal Contract
SOLECTRON: Inks Pact on Nortel Extended Supplier Relationship
SPIEGEL GROUP: Asks Court to Fix Excess Asset Sale Procedures
SWIFT & COMPANY: First-Quarter Results Reflect Strong Growth
TECSTAR: Plan Confirmation Hearing Scheduled for November 12
TERADYNE INC: Look for Third-Quarter 2003 Results on October 14
TIMKEN COMPANY: Moody's Downgrades Debt Ratings to Ba1
TRANSTECHNOLOGY: Taps Bradlau Group to Audit Overhaul/Repair Ops
TRANSWITCH CORP: Concludes Offers for 5.45% Conv Plus Cash Notes
UNIFORET INC: Finalizes Implementation of Plan of Arrangement
UNITED AIRLINES: Court OKs Amended Dubai Air Asset Purchase Pact
UNIVANCE TELECOMMS: Asks Court to Convert Case to Chapter 7
US AIRWAYS: September Revenue Passenger Miles Tumble 1.7%
US AIRWAYS: Agrees to Allow Two Banc of America Claims
USEC INC: Secures DOE Funding to Temporarily Retain 116 Jobs
VIEW SYSTEMS: Reaches Settlement in Weapons Technology Lawsuit
WICKES: Imagine Investments Agrees to Finance Note Tender Offer
WINDSWEPT: Must Raise Positive Cash Flow to Meet Cash Needs
W.R. GRACE: Hires State Street to Perform Fiduciary Services
XM SATELLITE: Declares Series B Preferred Quarterly Dividend
* Large Companies with Insolvent Balance Sheets
*********
AHOLD NV: Fitch Maintains Rating Watch Negative on Low-B Ratings
----------------------------------------------------------------
Fitch Ratings, the international rating agency, is maintaining its
Rating Watch Negative status on both the 'BB-' Senior Unsecured
debt and 'B' Short-term ratings of Koninklijke Ahold N.V., the
Netherlands-based international food retailer.
The company's news conference on 02 October clarified the group's
level of profitability, up until its FY02 "lost year", but did
little to address the issues facing the group and its ratings.
Fitch's 'BB-' rating for Ahold reflects the view that the company
remains a viable operating entity. However, many of the reasons
for Fitch's Rating Watch Negative remain, particularly the amount
of recent interim secured funding within the group, together with
the control and structural subordination mechanisms this may
afford, the reliance on continued support from core banks for
available credit facilities, and near-term (including 2005's bulk)
debt maturities. It is questionable if the US Foodservice profit
margin can increase from FY02's 1.7% level. The company has to
maximise cash, either from operational cashflow, sale of
activities, or a rights issue. The company does not expect to
report on these issues, or H103's results, until mid-October.
The company also published its accounts yesterday, clarifying the
level of profitability within the US Foodservice activities for
FY02 and presented (Dutch GAAP) accounting methodologies as to the
value and contingent liabilities of the Ahold group. Presentation
of the audited accounts was one requirement for bank lines
continuing.
The market has yet to see figures on H103's performance and the
on-going effect on sales and profits from a potential working
capital squeeze (due to a loss of confidence), and the distraction
of management from running the business in a competitive and
economic environment that even peers' operationally fully-focused
management has found challenging.
To date, after the reported repayment of the September 2003 EUR0.7
billion convertible, Ahold reports continued use of the USD1.3bn
plus EUR0.6bn secured tranches but no immediate need for the
additional USD0.9bn unsecured facility. YE02 net debt of EUR11.9bn
(not an operating lease-adjusted figure) has reportedly decreased
by a net EUR0.8bn.
AIR CANADA: Firms-Up 14 Aircraft Lease Restructuring Transaction
----------------------------------------------------------------
Air Canada provides the following update on the airline's
restructuring under the Companies' Creditors Arrangement Act:
Status of Aircraft Lease Negotiations
Air Canada said that together with Air Canada Jazz, it has
completed memoranda of understanding covering an additional 14
aircraft with four different aircraft lessors bringing to 184 the
total number of aircraft with restructured leases. Air Canada and
Air Canada Jazz are in the process of finalizing memoranda of
understanding on another 23 aircraft with six different lessors.
Substantive discussions are currently underway with respect to the
balance of the fleet. To date, 23 aircraft have been returned to
lessors and the Company is presently finalizing decisions on which
leases are to be repudiated to complete the process. Air Canada
and Air Canada Jazz are recommencing lease payments as memoranda
of understanding are completed.
Announcements on additional agreements will be made during the
course of the coming weeks.
Resignation of Eva Lee Kwok
Eva Lee Kwok, an Air Canada director since 1998 has resigned from
the Board of Air Canada effective immediately. In her letter of
resignation Mrs. Kwok said that she wanted to avoid the appearance
of conflict of interest in the equity solicitation process in view
of her business affiliations with the family of Mr.Victor T.K. Li,
one of the two short-listed equity investors announced on
September 26, 2003. While there was no legal conflict, for the
same reason, Mrs. Kwok did not participate in Board deliberations
leading to the selection of Cerberus Capital and Mr. Li as the two
qualified investors. The Board has accepted the resignation of
Mrs. Kwok with regret and acknowledged her valuable contribution
to the Company over the years.
AIR CANADA: Court Fixes November 15, 2003 as Claims Bar Date
------------------------------------------------------------
The Air Canada Pilots Association supports the desire of the
Applicants and the Monitor to identify at this early stage the
creditors and the asserted amounts of each of their claims,
Richard B. Jones, Esq., at Jones, Rogers LLP, in Toronto,
Ontario, advises the Applicants' counsel, Stikeman Elliott LLP,
in an e-mail. Mr. Jones, however, notes that the ACPA is not
prepared to accept the extended provisions of the Applicants'
proposal concerning the process for the determination of the
quantum of any disputed claim or the claims bar provisions. Mr.
Jones explains that the Applicants' proposal contains an
extremely broad definition of "Claim". While this is useful to
identify claims to assist the Applicants in formulating a plan of
arrangement, the definition is so broad that it encompasses
claims arising under collective agreements that pre-date the CCAA
filing.
"Presumably, the Applicants do not intend that such claims should
either be asserted in this process or barred under it," Mr. Jones
says.
It is anticipated that several categories of claims, including
post-filing grievances, issues relating to pension plans and
others, will be defined as being non-effected in the plan of
arrangement and, hence, within the category of "Excluded Claims".
The proposed claims process, however, requires that all such
claims must be documented and filed since nothing is excluded
from the sweep of the bar language.
Mr. Jones also relates that the ACPA have difficulties with the
procedure for claims quantum determination proposed. Mr. Jones
explains that Martin Teplitsky, Q.C., one of the proposed claims
officers, is a persona designata under the terms of amendments to
the collective agreement between ACPA and Air Canada. Mr. Jones
maintains that Mr. Teplitsky will not be acceptable as an
arbitrator in respect of any grievances outstanding between ACPA
and Air Canada.
Mr. Jones also notes that the decision of the Supreme Court of
Canada in Weber v. Ontario Hydro makes it clear that the CCAA
Court and its directed processes do not have jurisdiction to
adjudicate disputes arising directly from a collective agreement.
Therefore, the CCAA Court should direct Air Canada and each of
the unions that any disputed quanta of the unions' claims through
the processes mandated by the collective agreement in compliance
with the Canada Labour Code are subject to recourse and
adjudication as necessary by the Canada Industrial Relations
Board.
"That specialized tribunal can be assumed to be willing to
respond to such a request for its assistance," Mr. Jones says.
Mr. Jones points out that the proposed claims process is
unnecessary and inappropriate inasmuch as it contemplates a
requirement for the filing of proofs of claim by every single
employee. Mr. Jones explains that the Companies' Creditors'
Arrangement Act mandates that claims must be proved in accordance
with the Bankruptcy and Insolvency Act. As is specifically
confirmed by Section 126(2) of the BIA, a union will file a
single claim on behalf of all of its members with respect to any
unpaid wages.
The ACPA suggests that the Applicants consider revising the
claims process.
Canadian Attorney General Replies
The Attorney General of Canada wants the claims under Part III of
the Canada Labour Code excluded from the claims process. The
Attorney General believes that Part III claims, which relates to
standard hours, wages, vacations and holidays, are not subject to
compromise under any plan of arrangement that the Applicants will
propose.
Jacqueline Dais-Visca, Esq., of the Canada Department of Justice
Business Law Section, explains that Part III is a complete and
exclusive legislative code proscribing minimum standards for non-
unionized employees of a federal undertaking and assigning
exclusive jurisdiction to deal with these claims to the Minister
who then appoints adjudicators to resolve the claim. To sweep
these claims into the CCAA Claims process will bring the CCAA
into direct conflict with Part III of the Canada Labour Code.
"[I]t is our view that all claims, regardless of whether they are
pre-filing or post filing, are exempt from the CCAA as a result
of the substantive protection legislated through the
notwithstanding provision. It is for this reason that claims
under Part III are distinguishable from union claims under Part I
as there is no similar 'notwithstanding' provision in Part I of
the [Labour] Code," Ms. Dais-Visca says.
* * *
Mr. Justice Farley authorizes the Applicants to conduct the
claims process. The Applicants were authorized to send proof of
claim packages to all known potential creditors before
September 30, 2003.
Any creditor who believes that they have a prepetition claim
against the Applicants or a claim arising after the CCAA Petition
Date as a result of the restructuring, repudiation or termination
on or before September 17, 2003 of any contract or lease must
file a proof of claim and supporting documentation by
November 17, 2003. Any bondholder may file a claim for voting
purposes only on or before December 15, 2003.
Additionally, Mr. Justice Farley defers addressing issues
regarding pension matters.
Ernst & Young Inc. will meet with union counsel to deal with the
status of negotiations with respect to pre-June 1, 2003
grievances and discuss a potential resolution of the issue. The
Monitor will also meet with the counsel for the Attorney General
for Canada to discuss the issue of Part III claims under the
Canada Labour Code. (Air Canada Bankruptcy News, Issue No. 13;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ALLEGHENY ENERGY: Names Philip L. Goulding Vice President
---------------------------------------------------------
Allegheny Energy, Inc. (NYSE: AYE) announced that Philip L.
Goulding, Vice President and Partner with L.E.K. Consulting, has
been named Vice President, Strategic Planning of Allegheny Energy,
Inc., and Chief Commercial Officer of Allegheny Energy Supply
Company, effective October 13, 2003.
"I am pleased to welcome Phil to the new Allegheny leadership
team. His extensive experience in the energy industry,
particularly in strategic analysis and planning, will be
invaluable to Allegheny. His role as Vice President, Strategic
Planning, will put him at the forefront of our long-term business
planning efforts. In his role as Chief Commercial Officer, Phil
will be responsible for optimizing all the commercial aspects of
Allegheny, including particularly our generation portfolio," said
Paul J. Evanson, Allegheny Energy's Chairman, President, and Chief
Executive Officer.
Mr. Goulding, who has more than 20 years of experience in the
energy industry, has led L.E.K. Consulting's North American energy
practice since 1999, providing strategic counsel to various
clients, including electric and gas utilities, energy trading and
marketing businesses, and energy services firms. Previously, Mr.
Goulding was employed by Shell Oil Company for 16 years, including
senior positions in strategic planning and corporate finance.
He earned a Bachelor of Science degree, with a double major in
Mathematics and Computer Science, from Duke University, a Master
of Science degree in Finance from the University of Houston, and
completed Harvard Business School's Executive Program.
Consistent with the revised New York Stock Exchange listing
standards recently approved by the U.S. Securities and Exchange
Commission SEC, Allegheny Energy stated that Mr. Goulding will
receive an inducement award of 150,000 stock units on October 13,
2003. One-fifth of the units vest on each of October 13, 2004,
October 13, 2005, October 13, 2006, October 13, 2007, and
October 13, 2008. Payment of the units will be made in either
shares of Allegheny Energy stock or in cash, as will be determined
by the Company.
Allegheny Energy is an integrated energy company with a portfolio
of businesses, including Allegheny Energy Supply, which owns and
operates electric generating facilities and supplies energy and
energy-related commodities; and Allegheny Power, which delivers
low-cost, reliable electric and natural gas service to about four
million people in Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia. More information about the Company is available at
http://www.alleghenyenergy.com
* * *
As reported in Troubled Company Reporter's October 3, 2003
edition, Fitch Ratings downgraded Allegheny Energy Inc., and its
subsidiaries. In addition, the Rating Watch status for all related
entities is revised to Negative from Evolving, with the exception
of West Penn Funding LLC and insured bonds of Allegheny Energy
Supply Co. LLC.
Ratings downgraded and on Rating Watch Negative by Fitch:
Allegheny Energy, Inc.
--Senior unsecured debt to 'BB-' from 'BB';
--Bank credit facility maturing in 2005 to 'BB-' from 'BB';
--11 7/8% notes due 2008 lowered to 'B+' from 'BB-'.
Allegheny Capital Trust I
-- Mandatorily trust preferred stocks to 'B+' from 'BB-'.
Allegheny Energy Supply Company LLC
--Unsecured bank credit facilities to 'B-' from 'B';
--Senior unsecured notes lowered to 'B-' from 'B'.
Allegheny Generating Company
--Senior unsecured debentures lowered to 'B-' from 'B'.
Rating Watch revised to Negative from Evolving for the following
ratings:
Allegheny Energy Supply Company LLC
--Secured bank credit facilities with first priority
lien 'BB-';
--Secured bank credit facilities with a second priority
lien 'B+'.
Allegheny Energy Statutory Trust 2001-A Notes
--Senior secured notes 'B+'.
West Penn Power Company
--Medium-term notes 'BBB-'.
Potomac Edison Company
--First mortgage bonds 'BBB';
--Senior unsecured notes 'BBB-'.
Monongahela Power Company
--First mortgage bonds 'BBB';
--Medium-term notes/pollution control revenue
bonds (unsecured) 'BBB-';
--Preferred stock 'BB+'.
Ratings affirmed; Rating Outlook Stable:
West Penn Funding LLC
--Transition bonds 'AAA'.
Allegheny Energy Supply Company LLC
--Pollution control bonds (MBIA-insured) 'AAA'.
ALLEGHENY ENERGY: Names David C. Benson President of AES Unit
-------------------------------------------------------------
Allegheny Energy, Inc. (NYSE: AYE) announced that David C. Benson,
Executive Vice President of its energy supply subsidiary, has been
named President, Allegheny Energy Supply Company, LLC, effective
October 13, 2003.
"I am pleased that Dave will continue to lead Allegheny Energy
Supply. Excellence in generation operations is critical to our
long-term success, and Dave's capabilities and experience in this
area will be important factors in achieving that excellence," said
Paul J. Evanson, Allegheny Energy's Chairman, President, and Chief
Executive Officer.
Mr. Benson has 26 years of service with Allegheny Energy. He was
named Executive Vice President of Allegheny Energy Supply in
August. Prior to that, he served as Interim Executive Vice
President of Supply. He has also held positions as Vice President,
Production; Vice President, Production and Sales; Vice President,
Energy Supply Division; Vice President, Transmission Business
Unit; Director, System Operations; Director, Fuels; Manager,
Fuels; and Economist, Fuel and Traffic.
Mr. Benson is a graduate of Penn State University, with a Bachelor
of Science degree in Mineral Economics. He has done post-graduate
work in economics and mining engineering at the University of
Pittsburgh and has completed management training school at the
University of Idaho.
Allegheny Energy is an integrated energy company with a portfolio
of businesses, including Allegheny Energy Supply, which owns and
operates electric generating facilities and supplies energy and
energy-related commodities; and Allegheny Power, which delivers
low-cost, reliable electric and natural gas service to about four
million people in Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia. More information about the Company is available at
http://www.alleghenyenergy.com
* * *
As reported in Troubled Company Reporter's October 3, 2003
edition, Fitch Ratings downgraded Allegheny Energy Inc., and its
subsidiaries. In addition, the Rating Watch status for all related
entities is revised to Negative from Evolving, with the exception
of West Penn Funding LLC and insured bonds of Allegheny Energy
Supply Co. LLC.
Ratings downgraded and on Rating Watch Negative by Fitch:
Allegheny Energy, Inc.
--Senior unsecured debt to 'BB-' from 'BB';
--Bank credit facility maturing in 2005 to 'BB-' from 'BB';
--11 7/8% notes due 2008 lowered to 'B+' from 'BB-'.
Allegheny Capital Trust I
-- Mandatorily trust preferred stocks to 'B+' from 'BB-'.
Allegheny Energy Supply Company LLC
--Unsecured bank credit facilities to 'B-' from 'B';
--Senior unsecured notes lowered to 'B-' from 'B'.
Allegheny Generating Company
--Senior unsecured debentures lowered to 'B-' from 'B'.
Rating Watch revised to Negative from Evolving for the following
ratings:
Allegheny Energy Supply Company LLC
--Secured bank credit facilities with first priority
lien 'BB-';
--Secured bank credit facilities with a second priority
lien 'B+'.
Allegheny Energy Statutory Trust 2001-A Notes
--Senior secured notes 'B+'.
West Penn Power Company
--Medium-term notes 'BBB-'.
Potomac Edison Company
--First mortgage bonds 'BBB';
--Senior unsecured notes 'BBB-'.
Monongahela Power Company
--First mortgage bonds 'BBB';
--Medium-term notes/pollution control revenue
bonds (unsecured) 'BBB-';
--Preferred stock 'BB+'.
Ratings affirmed; Rating Outlook Stable:
West Penn Funding LLC
--Transition bonds 'AAA'.
Allegheny Energy Supply Company LLC
--Pollution control bonds (MBIA-insured) 'AAA'.
AMERALIA INC: Delays Filing of Fin'l Statement Report with SEC
--------------------------------------------------------------
AmerAlia, Inc.'s management has devoted a significant amount of
time to negotiations for the permanent financing for its
acquisition of the assets of White River Nahcolite Minerals Ltd.
Liability Co. and certain related contracts held by IMC Chemicals.
The acquisition was completed on February 20, 2003. The
finalization of the permanent financing will have significant
effect on AmerAlia's financial statements and its disclosures.
Because the permanent financing is still being negotiated,
AmerAlia will not be able to compile the information necessary to
complete its Financial Statement Report for timely filing with the
SEC without unreasonable effort or expense.
The finalization of the permanent financing will have a
significant effect on AmerAlia's interest expense, cash balances,
outstanding debt and effects on AmerAlia's financial statements.
AmerAlia's March 30, 2003, balance sheet discloses a net
capital deficit of about $723,000.
AmerAlia, through subsidiary Natural Soda, Inc., is developing a
sodium bicarbonate deposit on 1,320 acres of federal land in
Colorado's Piceance Creek Basin. The land, leased through 2011, is
estimated to contain about 300 million tons of the mineral per
square mile.
AMERCO: Equity Committee Taps Beckley Singleton as Local Counsel
----------------------------------------------------------------
Pursuant to Section 327(a) of the Bankruptcy Code and Rule
2014(a) of the Federal Rules of Bankruptcy Procedure, the
Official Committee of Equity Security Holders of the AMERCO
Debtors sought and obtained the Court's authority to retain
Beckley Singleton, Chtd. as its local bankruptcy counsel,
effective August 12, 2003.
According to Eric Miller, Chairperson of the Equity Committee,
Beckley has particular expertise in Chapter 11 cases.
Kaaran Thomas, Esq., a shareholder of Beckley Singleton, informs
the Court that the firm has represented these creditors or
parties-in-interest:
(a) Mutual of Omaha in insurance defense cases unrelated to
the Debtors' cases. Mutual's cases were closed as of
October 1999;
(b) U-Haul International in a labor matter, which was closed
in October 1999 and is unrelated to the Debtors' cases;
(c) Milberg Weiss as its local counsel in connection with a
derivative shareholder class action against Amerco in the
Second Judicial District Court of Washoe County, Nevada;
(d) John Hancock Advisors, Inc. in commercial litigation
unrelated to the Debtors' cases. The litigation is
inactive;
(e) Credit Suisse in commercial litigation unrelated to the
Debtors' cases. The case was closed in May 2002; and
(f) various Wells Fargo affiliates in matters unrelated to
the Debtors' cases.
Other than as disclosed, Ms. Thomas assures Judge Zive that
Beckley, its members, counsel and associates:
-- do not have any present connection with the Committee, the
Debtors, any creditors or any other party-in-interest, or
their attorneys and accountants, the U.S. Trustee or any
person employed thereby;
-- are "disinterested persons" as that term is defined in
Section 101(14) of the Bankruptcy Code; and
-- do not hold or represent any interest adverse to the
Debtors' estates.
Furthermore, neither the firm, nor any of its attorneys:
(a) hold or represents an interest adverse to the Debtors'
estate;
(b) is or was a creditor, an equity security holder or an
insider of the Debtor;
(c) is or was an investment banker for any outstanding
security of the Debtors;
(d) is or was, within three years prior to the Petition Date,
an investment banker for a security of the Debtor, or an
attorney for investment banker in connection with the
offer, sale or issuance of any security of the Debtors;
(e) is or was, within two years prior to the Petition Date, a
director, officer or employee of the Debtors or their
investment banker; and
(f) has an interest materially adverse to the interest of the
estates or of any class of creditors or equity security
holders, by reason of any direct or indirect relationship
to, connection with, or interest in the Debtor or an
investment banker, or for any other reason.
As the Equity Committee's local counsel, Beckley will seek
payment for the services rendered based on the firm's hourly
rates, which currently are:
Shareholders and counsel $300 - 400
Associates 185 - 200
Legal assistants 130
Beckley will also seek reimbursement of its reasonable out-of-
pocket expenses incurred in the rendition of services. (AMERCO
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
AMERICAN COMM'L: Plan-Filing Exclusivity Intact Until Dec. 29
-------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of Indiana,
American Commercial Lines LLC and its debtor-affiliates obtained
an extension of their exclusive periods. The Court gave the
Debtors, until December 29, 2003, the exclusive right to file
their plan of reorganization and until February 27, 2003, to
solicit acceptances of that Plan from their creditors.
American Commercial Lines LLC, an integrated marine transportation
and service company transporting more than 70 million tons of
freight annually using 5,000 barges and 200 towboats in North and
South American inland waterways, filed for chapter 11 protection
on January 31, 2003 (Bankr. S.D. Ind. Case No. 03-90305).
American Commercial is a wholly owned subsidiary of Danielson
Holding Corporation (Amex: DHC). Suzette E. Bewley, Esq., at
Baker & Daniels represents the Debtors in their restructuring
efforts. As of September 27, 2002, the Debtors listed total
assets of $838,878,000 and total debts of $770,217,000.
APPLIED EXTRUSION: Secures $100 Mill. Credit Facility from GECF
---------------------------------------------------------------
Applied Extrusion Technologies, Inc. (NASDAQ NMS: AETC) has
entered into a $100 million, five-year credit facility with GE
Commercial Finance.
The facility consists of a $50 million revolving line of credit,
replacing AET's existing revolver, and adds a $50 million term
loan. Approximately $39 million of the term loan proceeds were
utilized to repurchase all of the equipment leased pursuant to its
sale-leaseback transactions.
Additionally, the Company used these proceeds to retire $6.5
million of industrial revenue bonds due in 2004, and the remainder
was used to pay down the existing revolver. Unused availability
under the new revolving line of credit at closing of approximately
$14 million is $5 million greater than the amount available under
AET's prior banking arrangements. Unused availability is expected
to increase by an additional $12 million within approximately
forty-five days, after GECF completes perfection of its security
interests in the collateral.
"The new credit facility provides additional liquidity, and a net
increase in annual cash flow of approximately $3 million per year
from the reduction in rental cost associated with the repurchased
equipment," commented Amin J. Khoury, Chairman and Chief Executive
Officer. "Flexible packaging industry demand continues to be very
soft, and was further impacted by the particularly inclement
weather in many parts of the country this past summer. For this
reason, AET extended its previously announced fiscal fourth
quarter shutdown, reducing production by an additional 3 million
pounds, resulting in a total reduction of approximately 11 million
pounds. In addition, at the end of August, the Company reduced its
workforce by another 40 positions, increasing the total reductions
in staffing over the past twelve months to approximately 100
positions, or 10% of its workforce. These actions, together with
those announced in our July 28, 2003 press release, will
negatively impact operating earnings for the quarter by
approximately $6 million. However, the shutdown, additional cost
reduction initiatives, and the new credit facilities, combined
with the initial commercialization of the Company's new high value
product offerings will assist AET in dealing with this challenging
environment."
Applied Extrusion Technologies, Inc. (S&P/B/Negative) is a leading
North American developer and manufacturer of specialized oriented
polypropylene films used primarily in consumer products labeling
and flexible packaging applications.
ARTISOFT INC: Restores Compliance with Nasdaq Listing Criteria
--------------------------------------------------------------
Artisoft(R), Inc. (Nasdaq: ASFTC), developer of the first
software-based phone system, announced that its common stock will
continue to be listed on the Nasdaq SmallCap Market and that its
common stock resumed trading under the ASFT symbol as of the open
of business yesterday. The Company was informed of the decision by
the Nasdaq Listing Qualifications Panel.
The Company was informed by Nasdaq that the ticker symbol was
restored since the Company had regained compliance with the $2.5
million minimum shareholder equity requirement for continued
listing on the Nasdaq SmallCap Market, based upon the completion
of the Company's September 2003 $4 million financing.
The Nasdaq Listing Qualifications Panel will continue to monitor
Artisoft's quarterly compliance with the minimum listing
requirements. If at some future date the Company fails to meet any
of the listing criteria required by Nasdaq for continued listing,
the Listing Qualifications Panel could take further action
including but not limited to delisting the Company. If at some
future date the Company's common stock ceases to be listed on the
Nasdaq SmallCap Market, it may continue to be quoted in the OTC
Bulletin Board.
Artisoft, Inc. -- whose June 30, 2003 balance sheet shows a total
shareholders' equity deficit of about $320,000 -- is a leading
developer of open, standards-based telephone systems that bring
together voice and data for more powerful and productive
communications. Artisoft's TeleVantage delivers greater
functionality, flexibility, and value than proprietary PBXs to a
variety of customers, from small offices to large enterprise
organizations with sophisticated call centers. Artisoft's
innovative software products have consistently garnered industry
recognition, winning more than 30 awards for technical excellence.
The company distributes its products and services worldwide
through a dedicated and growing channel of authorized resellers.
For more information, visit http://www.artisoft.com
ATLANTIC COAST: Reports 17.1% Increase in September 2003 Traffic
----------------------------------------------------------------
Atlantic Coast Airlines (Nasdaq: ACAI) reported preliminary
consolidated passenger traffic results for September 2003.
Systemwide, the company generated 273.6 million revenue passenger
miles, a 17.1 percent increase over the same month last year,
while available seat miles rose to 396.6 million, an 8.9 percent
increase. Load factor was 69.0 percent versus 64.1 percent in
September 2002. For the month, 680,258 passengers were carried, a
13.7 percent increase over the same month last year.
For the third quarter ended September 30, 2003, compared to the
same period in 2002, RPMs grew to 877.5 million, an increase of
16.6 percent, while ASMs were 1.2 billion, a 7.6 percent increase.
The company carried 2,206,540 passengers during the third quarter
ended September 30, 2003, compared to 1,922,839 in 2002, an
increase of 14.8 percent on a year-over-year basis.
ACA currently operates as United Express and Delta Connection in
the Eastern and Midwestern United States as well as Canada. The
company also operates charter flights as ACA Private Shuttle. ACA
has a fleet of 146 aircraft -- including 118 jets -- and offers
over 830 daily departures, serving 84 destinations.
On July 28, 2003, ACA announced it anticipates that its
longstanding relationship with United Airlines will end, and that
it will establish a new, independent low-fare airline to be based
at Washington Dulles International Airport.
Atlantic Coast Airlines (S&P, B- Corporate Credit Rating,
Negative) employs over 4,800 aviation professionals. The common
stock of parent company Atlantic Coast Airlines Holdings, Inc. is
traded on the Nasdaq National Market under the symbol ACAI. For
more information about ACA, visit http://www.atlanticcoast.com
BIOTRANSPLANT: Enters Amended Pact to Sell Eligix to Miltenyi
-------------------------------------------------------------
BioTransplant, Inc. (OTC: BTRNQ.PK) has entered into an amended
agreement relating to the sale of its Eligix(TM) HDM Cell
Separation System to Miltenyi Biotec GmbH.
Because certain of the biological materials to be sold to Miltenyi
were destroyed in a casualty loss prior to the closing of the
transaction, the parties have negotiated a reduction in the
purchase price for the sale. Under the amended agreement, Miltenyi
has agreed to pay BioTransplant an upfront payment of $175,000 and
royalties of 4 to 8% on any future Miltenyi sales of Eligix
products during the lifetime of the patents. The Company had
previously disclosed that the upfront payment would be $450,000,
with potential royalties of 4 to 10%.
The Company has filed a casualty claim under its insurance policy
seeking to recover for the loss of the biological materials that
it intended to sell to Miltenyi. However, there can be no
assurance as to whether the Company will be able to recover any or
all of the loss through insurance.
As previously announced on February 27, 2003, BioTransplant and
Eligix, Inc., its wholly-owned subsidiary, filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court in Boston Massachusetts. The
sale of the Eligix assets in accordance with the amended agreement
is subject to Bankruptcy Court approval and other customary
closing conditions.
The Eligix(TM) HDM Cell Separation Systems use monoclonal
antibodies to remove unwanted cells from bone marrow, peripheral
blood stem cell and donor leukocyte grafts used in transplant
procedures.
BioTransplant Incorporated, a Delaware corporation located in
Medford, Massachusetts, is a life science company whose primary
assets are intellectual property rights that it has exclusively
licensed or is seeking to license to third parties. On February
27, 2003, the Company and Eligix, Inc., its wholly- owned
subsidiary, filed voluntary petitions for relief under Chapter 11
of the Bankruptcy Code in the United States Bankruptcy Court in
Boston Massachusetts. The Company has exclusively licensed
Siplizumab (MEDI-507), a monoclonal antibody product, to
MedImmune, Inc. The Company's assets also include the AlloMune
System technologies, which are intended to treat a variety of
hematologic malignancies and improve outcomes for solid organ
transplants. BioTransplant also has an interest in Immerge
BioTherapeutics, Inc., a joint venture with Novartis, to further
develop both companies' individual technology bases in
xenotransplantation.
BRITISH ENERGY: SD/D Ratings Unaffected by Restructuring Pact
-------------------------------------------------------------
Standard & Poor's Ratings Services' 'SD' corporate credit and 'D'
senior unsecured ratings on British Energy PLC are unaffected by
the company's announcement that it has agreed a proposed
restructuring with certain of its creditors and the Secretary of
State for Trade and Industry. Owing to its complexity, whether the
restructuring will be successful is uncertain.
The plan includes a proposal to swap British Energy's rated bonds
for a combination of new bonds and new shares. Bondholder recovery
is still expected to be significantly below par, however.
Standard & Poor's considers that the proposed restructuring plan
would strengthen British Energy. It would deleverage the company
and reduce its operating costs. In addition, the proposed
provision of a liquidity facility would offer partial protection
against the company's earnings and cash flow volatility.
The proposal would also reduce exposure to nuclear and
decommissioning liabilities, which would be rolled into a single
fund backstopped by the U.K. government.
Standard & Poor's regards the company's business profile as the
weakest among the major generators in the U.K. power sector.
British Energy's nuclear plant has very poor operational
flexibility because they are only able to run at full output. The
company will also continue to be exposed to counterparty risk
because it primarily operates in the wholesale power markets.
Volatile U.K. wholesale power prices are also challenging, owing
to the company's high fixed costs.
BURLINGTON: Wants to Keep Plan Exclusivity Until Jan. 31, 2004
--------------------------------------------------------------
According to Marc T. Foster, Esq., at Richards, Layton & Finger,
in Wilmington, Delaware, the Burlington Industries Debtors have
made substantial progress in their Chapter 11 cases to date and
currently are on the verge of emergence. Pursuant to modified
bidding procedures, the Debtors and their other professionals
marketed for sale:
-- all of the Debtors' outstanding capital stock issued under
the Plan, or
-- substantially all of the Debtors' assets to a single buyer
or a buyer consortium.
The Debtors' marketing and sale efforts culminated in the auction
of the Debtors' business and assets on July 28, 2003. Before the
auction, the Debtors selected the bid of WLR Recovery Fund II
L.P. for the purchase of substantially all of their assets for
$608,000,000 as the stalking horse agreement. The auction was
competitive and resulted in a $6,000,000 increase over the
initial stalking horse bid.
Ultimately, the Debtors considered the other bids received at the
auction and determined that the best offer was submitted by WLR.
WLR agreed to purchase the assets of the entire company for
$614,000,000, pursuant to the terms of its acquisition agreement.
The Court approved the auction results on August 1, 2003.
The Debtors then filed the Plan and the Disclosure Statement
incorporating the results of the auction and the WLR Purchase
Agreement. On August 27, 2003, the Court approved the Disclosure
Statement and the related solicitation and voting procedures.
The Debtors have distributed the solicitation packages, and are
preparing to request confirmation of the Plan at the October 30,
2003 hearing.
By this motion, the Debtors ask the Court to extend:
(a) their Exclusive Filing Period to January 31, 2004; and
(b) their Exclusive Solicitation Period to March 31, 2004.
"It is clear under applicable law that, in large and complex
Chapter 11 cases like these, exclusivity can and should be
extended where the debtor has made, and is continuing to make,
significant progress towards a successful reorganization," Mr.
Foster states.
The Debtors believe that the next couple of months will be
extremely productive, will continue to improve the results for
creditors in their Chapter 11 cases and will be very demanding on
them and their advisors based on the need to:
(a) complete the solicitation and vote tabulation process;
(b) finalize the Plan, the Plan Supplements and other exhibits
to the Plan in preparation for the confirmation hearing;
(c) respond to and address any objections to confirmation of
the Plan;
(d) obtain the confirmation order;
(e) continue discussions with their various constituencies
regarding the BII Distribution Trust and implementation
of the Plan;
(f) continue to close and liquidate certain facilities and
other assets prior to the confirmation;
(g) prosecute claims objections; and
(h) continue to manage the day-to-day operations of the
Debtors' businesses.
Finally, Mr. Foster maintains that neither the Debtors' creditors
nor any party-in-interest would be harmed by the requested
extension in light of:
(a) the current solicitation process and pending confirmation
hearing on October 30, 2003, as well as
(b) the fact that the Debtors have maintained excellent
communication with their key constituencies during the
restructuring process who predominantly support the Plan.
The Court will convene a hearing on October 30, 2003 to consider
the Debtors' request. By application of Del.Bankr.LR 9006-2, the
Debtors' Exclusive Filing Period is automatically extended
through the conclusion of that hearing. (Burlington Bankruptcy
News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
CALPINE CORPORATION: Prices Canadian Natural Gas Trust IPO
----------------------------------------------------------
Calpine Corporation (NYSE: CPN) (Calpine), a leading North
American power company, has priced the initial public offering of
a newly established Canadian trust -- the Calpine Natural Gas
Trust.
CNG Trust will issue to the public approximately 18.4 million
Trust Units at a price of Cdn$10.00 per unit, for gross proceeds
of approximately Cdn$184.5 million. On closing, the net proceeds
from the sale of Trust Units, together with approximately Cdn$61.5
million of proceeds from a concurrent issuance of units to Calpine
and bank debt of approximately Cdn$40 million, will be used to
acquire mature natural gas and oil properties in Alberta, Canada.
To cover over-allotments, Calpine has granted its underwriters an
option to purchase up to approximately 1.8 million Trust Units for
a period expiring 30 days following the closing of the offering.
CNG Trust and a Canadian financial institution have arranged
credit facilities in the aggregate amount of Cdn$71 million.
Calpine will initially hold 25 percent of the outstanding trust
units of CNG Trust and will participate, by way of investment, in
the business strategy of the CNG Trust. Calpine will have the
option to purchase up to 100 percent of CNG Trust's ongoing
production for use in its North America power generation assets.
A final prospectus was filed with securities commissions or
similar authorities in each of the provinces and territories of
Canada today. The offering is expected to close on October 15,
2003, with the first cash distribution expected to be paid on or
about December 15, 2003 to unitholders of record as of November
30, 2003. The initial monthly distribution is expected to be
$0.15 per Trust Unit. CNG Trust will make monthly cash
distributions to its unitholders.
The Toronto Stock Exchange has conditionally approved the listing
of the Trust Units, subject to the fulfillment of customary
conditions. It is expected that the Trust Units will trade under
the symbol CXT.UN.
CNG Trust will acquire from Calpine select natural gas and crude
oil properties in several major natural gas and oil fields
throughout Alberta, Canada, including interests in the
Markerville, Sylvan Lake and Innisfail areas. The average daily
net production of the initial properties for the six months ending
June 30, 2003 was approximately 28 million cubic feet of natural
gas equivalent per day, with proven reserves of approximately
83 billion cubic feet of natural gas equivalent (as of June 20,
2003). An executive team, independent of Calpine, will manage the
CNG Trust. The majority of the board of directors of CNG Trust
will be independent, with Calpine initially appointing three of
the seven directors.
Calpine's participation in the CNG Trust will allow it to increase
its competitiveness in the acquisition and development of
additional natural gas reserves in Canada to fuel its power
generation portfolio in North America. The proceeds generated by
Calpine from the sale of the natural gas and oil properties to the
CNG Trust will be used for general corporate purposes.
Scotia Capital Inc. is the lead underwriter for the offering.
The securities offered have not been registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration or an applicable
exemption from the registration requirements. A prospectus
relating to these securities has been filed with securities
commissions or similar authorities in each of the provinces and
territories of Canada.
Calpine Corporation is a leading North American power company
dedicated to providing electric power to wholesale and industrial
customers from clean, efficient, natural gas-fired and geothermal
power facilities. The company generates power at plants it owns
or leases in 22 states in the United States, three provinces in
Canada and in the United Kingdom. Calpine is also the world's
largest producer of renewable geothermal energy, and it owns
approximately one trillion cubic feet equivalent of proved natural
gas reserves in Canada and the United States. The company was
founded in 1984 and is publicly traded on the New York Stock
Exchange under the symbol CPN. For more information about
Calpine, visit http://www.calpine.com
* * *
As previously reported, Standard & Poor's Ratings Services
assigned its 'B' rating to Calpine Corp.'s $3.3 billion second-
priority senior debt. The $3.3 billion includes: a $750 million
term loan due 2007, $500 million floating rates notes due 2007,
$1.15 billion 8.5% secured notes due 2010, and $900 million
secured notes due 2013.
The notes carry the same rating as other Calpine senior secured
debt and are rated two notches higher than the 'CCC+' rated senior
unsecured debt.
At the same time, Standard & Poor's affirmed its 'B' corporate
credit rating on Calpine, its 'B' rating on Calpine's secured
debt, its 'CCC+' rating on Calpine's senior unsecured bonds, and
its 'CCC' rating on Calpine's preferred stock. The 'BB-' rating on
the existing $950 million secured term loan and the $950 million
secured revolver are withdrawn, as this debt was refinanced with
the proceeds of the recent $3.8 billion financing.
C-BASS: Fitch Affirms Ratings on 3 RMBS Classes at Low-B Levels
---------------------------------------------------------------
Fitch Ratings has affirmed eighteen residential mortgage-backed
securities (RMBS) classes from the following two C-BASS issues:
Series 1999-CB2 Group 1
--Classes IA & IA-PO 'AAA';
--Class IM-1 'AA';
--Class IM-2 'A';
--Class IM-3 'BBB';
--Class IB-1 'BB';
--Class IB-2 'B'.
Series 1999-CB2 Group 2
--Classes IIA-1 & IIA-2 'AAA';
--Class IIM-1 'AA';
--Class IIM-2 'A';
--Class IIB-1 'BBB+';
--Class IIB-2 'BBB-';
--Class IIB-3 'BB'.
Series 2000-CB2
--Class A1-A 'AAA';
--Class M-1 'AA';
--Class M-2 'A';
--Class B 'BBB'.
The affirmations on these classes reflect credit enhancement
consistent with future loss expectations.
CANNON EXPRESS: Delays Filing of Annual Report on SEC Form 10-K
---------------------------------------------------------------
Cannon Express, Inc.'s financial statements for the year ended
June 30, 2003, could not be filed within the prescribed time
period, as a result of unresolved issues with respect to possible
impaired assets and negotiations with the Company's lenders. The
Company is actively pursuing a resolution of these issues and
believes that it will resolve them within the extended period
permitted by Rule 12b-25.
It is anticipated that the Company's revenue will decrease from
$79.1 million in fiscal year 2002 to $61.2 million in fiscal year
2003 and the Company's net loss before income taxes will increase
from $12.2 million in fiscal 2002 to approximately $16.3 million
for fiscal 2003. Of this amount, it is expected that
approximately $1.4 million will be a loss on impaired assets.
Currently, the Company is engaged in discussions with its
accountants, lenders and other creditors to resolve questions
regarding the disposition of these assets.
As reported in Troubled Company Reporter's July 31, 2003, Cannon
Express, received notice from CitiCapital Commercial Corporation
that CitiCapital would exercise its right to terminate its funding
agreement with the Company. The agreement between the Company and
CitiCapital included, among other terms and conditions, a clause
which allowed CitiCapital certain remedies if conditions deemed to
be an "Event of Default" existed.
One such event was "if there shall be a material change in the
stockholders or management of the Borrower." Following the
previously announced, May 28, 2003 purchase by Arizona Diversified
of 60% of the Company's outstanding shares, the Company notified
CitiCapital of the change in both majority stockholders and in the
management of the Company, as required in such agreement. At that
date, the Company was also in default regarding a payment
obligation for equipment.
The Company reached an agreement with CitiCapital to extend this
funding agreement as well as certain equipment obligations until
August 30, 2003. The Company is also in negotiations with various
lenders to replace this funding relationship and will strive to
have a replacement for CitiCapital in the near future.
The irregular route, full truckload firm hauls general commodities
in the US and Canada. It operates a fleet of 775 tractors and more
than 1,600 trailers. The company ships retail and wholesale goods
(largely for discount merchandisers), automotive supplies and
parts, nonperishable food products, and paper goods. Major
customers include Wal-Mart and International Paper. Cannon Express
monitors and coordinates routes through a company-designed
computer system. The company also operates CarriersCo-Op.com, an
Internet-based forum for smaller carriers to share or swap extra
loads. Co-founders Dean and Rose Marie Cannon own 60% of the
company.
CKE RESTAURANTS: Will Redeem $100 Million of 4.25% Conv. Notes
--------------------------------------------------------------
CKE Restaurants, Inc. (NYSE: CKR) announced the redemption of $100
million of its outstanding 4.25 percent Convertible Subordinated
Notes Due 2004. The redemption price, pursuant to the related
indenture, is set at 100.708 percent of the principal amount, or
$1,007.08 per $1,000 of principal amount of the notes being
redeemed.
The redemption will occur on November 3, 2003. The Company will
use all of the net proceeds of its recently completed private
placement of its 4.0 percent Convertible Subordinated Notes Due
2023 to fund the redemption. The Company may repurchase a portion
of the notes to be redeemed in open market transactions prior to
the November 3 redemption date.
Approximately $22 million of the 4.25 percent Convertible
Subordinated Notes Due 2004 will remain outstanding after the
redemption. The Company plans to repay and retire the outstanding
notes at or prior to their maturity on March 15, 2004, by
replacing its existing $100 million senior credit facility with a
new $150-175 million facility and drawing down the necessary funds
under the new facility. The Company has secured an underwritten
lending commitment for this new facility from BNP Paribas, which
is subject to customary conditions.
CKE Restaurants, Inc. (S&P, B Corporate Credit Rating, Negative),
through its subsidiaries, franchisees and licensees, operates over
3,200 restaurants, including 1,000 Carl's Jr. restaurants, 2,181
Hardee's restaurants, and 97 La Salsa Fresh Mexican Grills in 44
states and in 14 countries. For more information, go to
http://www.ckr.com
COMTEX NEWS: Must Raise Revenues to Meet Liquidity Requirements
---------------------------------------------------------------
Comtex News Network Inc. is a wholesaler of electronic real-time
news and content to major financial and business information
distributors. It enhances and standardizes news and other content
received from more than 65 newswire services and publishers in
order to provide editorially superior and technically uniform
products to its customers. Its customers then package, integrate
and distribute its products to their end-users. The Company
processes more than 25,000 unique real-time news stories each day.
For each news story, processing includes, adding stock ticker
symbols, indexing by keyword and category, and converting the
diverse publisher materials and formats received into XML, the
industry standard delivery format.
Comtex is currently based in the United States. A wholly owned
subsidiary in Madrid, Spain was formed in the fall of 2001, to
expand operations throughout Europe; however, due to negative cash
flow from these operations and the lack of sales in Europe, the
subsidiary was shut down in December 2002.
For the year ended June 30, 2003, the Company incurred an
operating loss of approximately $1,211,000 and a net loss of
approximately $1,337,000. At June 30, 2003, it had a working
capital deficit of approximately $399,000 as compared with a
deficit of approximately $478,000 at June 30, 2002. The increase
in working capital was due primarily to the recovery of
approximately $394,000 in accrued expenses at June 30, 2002
related to the settlement of a lawsuit. The increase was
partially offset by the use of funds for capital expenditures and
payments on long-term debt. The Company had stockholders' equity
of approximately $786,000 at June 30, 2003, as compared to
stockholders' equity at June 30, 2002, of approximately
$2,100,000. The decrease in stockholders' equity was due
primarily to the net loss incurred during the fiscal year ended
June 30, 2003.
Currently Comtex is dependent on its cash reserves to fund
operations, it incurred net losses for the years ended June 30,
2002 and 2003 and its revenue base has been declining. Assuming
stability in the financial and corporate markets - its primary
markets, the Company believes continuing control of operating
expenses and a focus on revenue generation in both its existing
customer base and potential new markets will generate positive
operating cash flows to meet its obligations on a short-term
basis. Its ability to meet liquidity needs on a long-term basis
depends on its ability to generate sufficient revenues and cash to
cover current and long-term obligations. Any further corporate
consolidation or market deterioration affecting its customers
could limit its ability to generate such revenues. No assurance
may be given that it will be able to maintain the revenue base or
the size of profitable operations that may be necessary to achieve
its short-term or long-term liquidity needs.
COVANTA: Court OKs Payment of $3.4-Mill. Caithness Break-Up Fee
---------------------------------------------------------------
The Purchase Agreement between the Covanta Energy Debtors, on one
hand, and Caithness Energy, LLC, and ArcLight Capital Partners,
LLC, on the other hand, provides for payment of a break-up fee
equal to $3,375,000 to Caithness and ArcLight in certain
circumstances as a reimbursement for:
(a) the time and expense incurred by Caithness and ArcLight in
connection with the Proposed Sale; and
(b) the value added by Caithness and ArcLight to the
Geothermal Debtor Equity in establishing a minimum bid or
standard for other bidders and serving as a catalyst for
other potential or actual bidders at the Auction.
The Break-Up Fee would be payable in the event that the Debtors:
(a) have accepted a binding offer to an Alternative
Transaction as the winning bid in the Auction; or
(b) sell or transfer, within nine months from September 5,
2003, all or a substantial portion of the Interests or the
Assets of the Business to a party or parties other than
Caithness and ArcLight or their designee; or
(c) fail to satisfy its representations and warranties, except
if the failure results from events, conditions or
circumstances outside the control of Covanta or the Debtor
Sellers and of which Covanta or the Sellers had no
knowledge as of September 5, 2003.
If payable, the Break-Up Fee will constitute an administrative
priority claim against the Debtor Sellers and Covanta's estates
under Sections 503(b) and 507(a)(1) of the Bankruptcy Code and
will be paid, without further Court order, within 10 days of a
Break-Up Fee Event and, in the case of an Alternative Transaction,
within three business days of the consummation of an Alternative
Transaction from the first proceeds received by the Sellers from
the Alternative Transaction.
Accordingly, Judge Blackshear permits the Debtors to pay the
Break-Up Fee, if payable.
The Debtors also sought and obtained the Court's authority to pay
Caithness and ArcLight, if payable, an expense reimbursement.
The Expense Reimbursement will be $2,000,000 and payable to
Caithness and ArcLight in the event that:
(a) Caithness and ArcLight are entitled to the Break-Up Fee,
or
(b) the Purchase Agreement is not consummated due to a failure
to fulfill any of the conditions precedent set forth in
Article 7 of the Purchase Agreement including a failure to
obtain the conditions precedent that:
(1) the Court will have entered the Bidding Procedures
Order;
(2) the Bankruptcy Court will have entered the Proposed
Sale Order;
(3) the Bidding Procedures Order and the Proposed Sale
Order will be in a form and substance reasonably
satisfactory to Caithness and ArcLight; and
(4) the Proposed Sale Order will be a final order which
has not been reversed, modified, rescinded, or
stayed the time to appeal the Proposed Sale Order
has expired and the Proposed Sale Order is no
longer subject to appeal or further judicial
review.
The Initial Deposit will also be returned to Caithness and
ArcLight if the Purchase Agreement is terminated as a result of
the occurrence of a Material Adverse Effect. The Debtors will
pay to Caithness and ArcLight the Expense Reimbursement, if
payable, within 10 days from the date of the Expense Termination
Event. If payable, the Expense Reimbursement will constitute an
administrative priority claim against the Debtor Sellers' and
Covanta' estates under Sections 503(b) and 507(a)(1) of the
Bankruptcy Code.
In the event that the Purchase Agreement terminates as a result
of a Break-Up Fee Event or Expense Termination Event, Caithness'
and ArcLight's sole and exclusive remedy, will be strictly
limited to the payment of the Break-Up Fee or the Expense
Reimbursement or return of the Initial Deposit, as applicable, as
liquidated damages, except in the event of the Debtors' gross
negligence or fraud. In the event the Purchase Agreement
terminates as a result of a Buyer Default Termination, the Debtor
Sellers' sole and exclusive remedy, will be strictly limited to
the retention of the Geothermal Debtor Equity and of the Initial
Deposit as liquidated damages, except in the event of Caithness
and ArcLight's gross negligence or fraud.
Deborah M. Buell, Esq., at Cleary, Gottlieb, Steen & Hamilton, in
New York, points out that the Break-Up Fee, the Expense
Reimbursement and the Buyer Liability Limitation are:
(1) the result of extensive good faith negotiations between
Caithness, ArcLight and the Sellers;
(2) (a) actual and necessary cost and expense of preserving
the Debtors' estates, within the meaning of Section
503(b) of the Bankruptcy Code;
(b) of substantial benefit to the Debtors' estates;
(c) reasonable and appropriate, in light of:
-- the size and nature of the Proposed Sale, including
the sale of the Geothermal Debtor Equity;
-- the substantial efforts that have been and will be
expended by Caithness and ArcLight;
(3) the benefits Caithness and ArcLight are expected to
provide to the Debtors' estates and creditors and all
parties-in-interest, notwithstanding that the Proposed
Sale is subject to higher or better offers;
(4) not penalties, but rather, reasonable estimates of the
damages to be suffered by Caithness and ArcLight in the
event the transactions contemplated by the Purchase
Agreement are not consummated; and
(5) necessary to ensure that Caithness and ArcLight will
continue to pursue their proposed acquisition of the
Geothermal Debtor Equity.
Ms. Buell asserts that payment of the Break-Up Fee and Expense
Reimbursement is warranted because:
(a) no other party to date has been willing to enter into a
definitive agreement for the purchase of the Geothermal
Debtor Equity on terms acceptable to the Debtors;
(b) the execution of the Purchase Agreement is a necessary
prerequisite to determining whether any party other than
Caithness and ArcLight is willing to enter into a
definitive agreement for the purchase of the Geothermal
Debtor Equity on terms acceptable to the Debtors and their
creditor constituencies;
(c) the protections afforded to Caithness and ArcLight by the
Break-Up Fee and Expense Reimbursement are material
inducements for, and express conditions of, Caithness and
ArcLight's willingness to enter into the Purchase
Agreement; and
(d) Caithness and ArcLight are unwilling to commit to hold
open their offer to purchase the Geothermal Debtor Equity
unless they are assured of payment of the Break-Up Fee and
Expense Reimbursement. (Covanta Bankruptcy News, Issue No.
37; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CRESCENT REAL ESTATE: Will Publish Q3 2003 Results on November 4
----------------------------------------------------------------
Crescent Real Estate Equities Company (NYSE:CEI) will release its
third quarter 2003 earnings results before the market opens on
Tuesday, November 4, 2003.
The Company will also host a conference call and audio webcast,
both open to the general public, at 10:00 a.m. Central Time on
Tuesday, November 4, 2003, to discuss the third quarter results
and provide a Company update.
To participate in the conference call, please dial 800-818-4442
domestically or 706-679-3110 internationally, or you may access
the audio webcast on the Company's Web site --
http://www.crescent.com-- in the Investor Relations section.
During the call, reference will be made to a presentation that
will also be posted on the Company's website.
A replay of the conference call will be available through November
10, 2003, by dialing 800-642-1687 domestically or 706-645-9291
internationally with a passcode of 2751091. The webcast and
presentation will be available on Crescent's Web site.
Crescent Real Estate Equities Company (NYSE:CEI) is one of the
largest publicly held real estate investment trusts in the nation.
Through its subsidiaries and joint ventures, Crescent owns and
manages a portfolio of 74 premier office properties totaling 29.7
million square feet located primarily in the Southwestern United
States, with major concentrations in Dallas, Houston, Austin and
Denver. In addition, the Company has investments in world-class
resorts and spas and upscale residential developments.
* * *
As previously reported in Troubled Company Reporter, Standard &
Poor's affirmed its ratings on Crescent Real Estate Equities
Co., and Crescent Real Estate Equities L.P., and removed them
from CreditWatch, where they were placed on Jan. 23, 2002. The
outlook remains negative.
Ratings Affirmed And Removed From CreditWatch
Issue To From
Crescent Real Estate Equities Co.
Corporate credit rating BB BB/Watch Neg
$200 million 6-3/4%
preferred stock B B/Watch Neg
$1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg
Crescent Real Estate Equities L.P.
Corporate credit rating BB BB/Watch Neg
$150 million 6 5/8% senior
unsecured notes due 2002 B+ B+/Watch Neg
$250 million 7 1/8% senior
unsecured notes due 2007 B+ B+/Watch Neg
CRESCENT REAL ESTATE: AmeriCold Exploring Additional Financing
--------------------------------------------------------------
Crescent Real Estate Equities Company (NYSE:CEI) and Vornado
Realty Trust (NYSE:VNO), its joint venture partner in AmeriCold
Realty Trust, have engaged underwriters to explore additional
financing for AmeriCold.
It is anticipated that this non-recourse, medium term bank
financing will be in an amount in excess of $200 million. The use
of proceeds will allow Crescent and Vornado to make a meaningful
reduction of their investment in this business and will provide
additional financing for expansion.
AMERICOLD STRUCTURE
Crescent and Vornado own 40% and 60%, respectively, of AmeriCold.
AmeriCold Logistics LLC, the operator of the real estate assets,
is owned 40% by Crescent Operating, Inc. and 60% by Vornado
Operating Company.
Crescent Real Estate Equities Company (NYSE:CEI) is one of the
largest publicly held real estate investment trusts in the nation.
Through its subsidiaries and partners, Crescent owns and manages a
portfolio of 74 premier office buildings totaling nearly 29.7
million square feet primarily located in the Southwestern United
States, with major concentrations in Dallas, Houston, Austin and
Denver. In addition, the company invests in world-class resorts
and spas and upscale residential developments.
* * *
As previously reported in Troubled Company Reporter, Standard &
Poor's affirmed its ratings on Crescent Real Estate Equities
Co., and Crescent Real Estate Equities L.P., and removed them
from CreditWatch, where they were placed on Jan. 23, 2002. The
outlook remains negative.
Ratings Affirmed And Removed From CreditWatch
Issue To From
Crescent Real Estate Equities Co.
Corporate credit rating BB BB/Watch Neg
$200 million 6-3/4%
preferred stock B B/Watch Neg
$1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg
Crescent Real Estate Equities L.P.
Corporate credit rating BB BB/Watch Neg
$150 million 6 5/8% senior
unsecured notes due 2002 B+ B+/Watch Neg
$250 million 7 1/8% senior
unsecured notes due 2007 B+ B+/Watch Neg
DATA TRANSMISSION: Wants to Pay $2.5 Mil. to Critical Vendors
-------------------------------------------------------------
Data Transmission Network Corporation, and its debtor-affiliates
are seeking permission from the U.S. Bankruptcy Court for the
Southern District of New York to pay the prepetition claims of
their critical vendors.
The Debtors estimate that the maximum amount of outstanding
prepetition Trade Claims is $2,500,000. The Debtors submit that
paying the prepetition vendor claims will enable them to continue
to receive the goods and services that are the lifeblood of their
businesses and will permit them to preserve their going concern
value. Conversely, it would severely impede the Debtors' ability
to reorganize promptly and successfully.
The Debtors' ability to continue to receive goods and services is
essential to their day-to-day operations. In order to obtain and
facilitate such critical vendor support, the Debtors believe it is
necessary to satisfy the prepetition Claims of the Trade
Creditors. Otherwise, the Debtors submit, some, or all, of the
Trade Creditors will institute very stringent credit terms which
could result in a liquidity crunch and an interruption in the
supply of goods and services to the Debtors. Such a result could
threaten the Debtors' viability, as they require uninterrupted
delivery of goods and services. Moreover, in light of the Debtors'
successful prepetition solicitation of the Plan and the fact that
the Debtors have requested confirmation of the Plan to occur in
approximately 30 days, the Debtors submit that the relief
requested is appropriate under the circumstances.
The Debtors believe that payment of prepetition Trade Claims is
vital to their successful reorganization. As a business-to-
business information services and electronic communications
company, it is essential that the Debtors be able to provide real-
time information to their customers. In order to effectively
provide this information, the Debtors need access to certain goods
and services and need to maintain their business relationships
with critical Trade Creditors. If the delivery of essential goods
and services were interrupted or relationships with Trade
Creditors were hampered, such a result would undermine the
Debtors' reorganization efforts and significantly reduce, if not
eliminate, their collective going concern value.
Headquartered in Omaha, Nebraska, Data Transmission Network
Corporation, delivers targeted time-sensitive information via a
comprehensive communications system, including: Internet,
Satellite, leased lines and other technologies. The Company,
together with its debtor-affiliates filed for chapter 11
protection on September 25, 2003 (Bankr. S.D.N.Y. Case No.
03-16051). Jeffrey D. Saferstein, Esq., at Paul, Weiss, Rifkind,
Wharton & Garrison LLP represents the Debtors in their
restructuring efforts. When the Company filed for protection from
its creditors, it listed estimated assets of more than $100
million and debts of over $50 million.
ELIZABETH ARDEN: S&P Places B/CCC+ Ratings on Watch Positive
------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B' corporate credit
and secured debt ratings, as well as the 'CCC+' senior unsecured
debt rating of fragrance distributor Elizabeth Arden Inc., on
CreditWatch with positive implications. Total debt was $392
million at July 26, 2003.
The CreditWatch listing reflects Miami Lakes, Fla.-based Elizabeth
Arden's plan to use the net proceeds from a proposed public
offering of common stock to redeem a portion of its 11-3/4% senior
secured notes due 2011. The company has filed a preliminary
prospectus supplement to its existing shelf registration that
includes a proposal for a public offering of four million shares
of common stock, with the company offering 2,666,667 shares and a
selling shareholder offering the remaining 1,333,333 shares.
Following the redemption of a portion of senior secured notes,
Standard & Poor's estimates that operating lease-adjusted total
debt to EBITDA will be about 3x for fiscal 2004 (ending Jan. 31),
an improvement from 4x at fiscal 2003. "It is likely that the
successful completion of the offering will result in a one-notch
upgrade for Elizabeth Arden given the expected improvement in
credit quality following the repayment of debt," said Standard &
Poor's credit analyst Lori Harris.
Standard & Poor's will resolve the CreditWatch listing after
completion of the offering and a meeting with management to
monitor Elizabeth Arden's financial and business strategies.
EMAC/FMAC: Fitch Downgrades Certain Franchise Loan Transactions
---------------------------------------------------------------
As part of Fitch's semi-annual franchise portfolio review, the
following deals are hereby downgraded as a result of portfolio
deterioration and expected losses falling outside of Fitch's
expected cases for their respective rating categories.
All of the downgraded classes are removed from Rating Watch
Negative.
EMAC Owner Trust 1999-1
--Class B from 'CCC' to 'C';
--Class C from 'CC' to 'D';
--Class D from 'C' to 'D';
--Class E from 'DDD' to 'D'.
EMAC Owner Trust 2000-1
--Class D from 'CC' to 'C';
--Class E from 'C' to 'D';
--Class F from 'C' to 'D'.
FMAC Loan Receivables Trust 1997-A
--Class A (including class A-X) from 'AAA' to 'AA';
--Class B from 'AA' to 'A'
--Class C from 'A' to 'BBB';
--Class D from 'BB' to 'B';
--Class E from 'CCC' to 'C'.
FMAC Loan Receivables Trust 1998-C
--Class A-1 from 'AAA' to 'AA';
--Class A-2 from 'AA' to 'A';
--Class A-3 from 'AA-' to 'A';
--Class B from 'A-' to 'BBB';
--Class C from 'BBB-' to 'BB'.
--Class D is removed from Rating Watch Negative and affirmed
at 'CCC'.
--Class E is removed from Rating Watch Negative and affirmed at
'CC'.
--Class F is removed from Rating Watch Negative and affirmed at
'C'.
Franchise Loan Trust 1998-1
--Classes A-2 and A-3 from 'A' to 'BBB';
--Class B from 'BBB' to 'BB';
--Classes A-X, A-1 are removed from Rating Watch Negative and
affirmed at 'A';
--Class C is removed from Rating Watch Negative and affirmed at
'CCC'.
Captec Grantor Trust 2000-1
--Class A (including Class IO) from 'AAA' to 'A';
--Class B from 'AA' to 'BBB';
--Class C from 'A-' to 'BB';
--Class D from 'B' to 'CCC';
--Class E from 'CCC' to 'CC';
--Class F from 'CC' to 'C'.
Peachtree Franchise Loan LLC 1999-A
--Class C from 'B' to 'CCC';
--Class D from 'CCC' to 'C';
--Class E from 'CC' to 'D'.
Fitch continues to be concerned with the performance of the
franchise loan industry and while the new default data has shown
improvement, ongoing collateral deterioration albeit at a slower
rate will continue to cause ratings volatility. Fitch is actively
monitoring its portfolio of franchise loan transactions and will
take additional rating actions when necessary.
FIRST NATIONWIDE: Fitch Puts B Class III-B-5 Note on Watch Neg.
---------------------------------------------------------------
Fitch Ratings has taken rating actions on the following First
Nationwide Trust, residential mortgage-backed certificates:
First Nationwide Trust, Mortgage Pass-Through Certificates, Series
1999-3 Group 3
--Class III-A affirmed at 'AAA';
--Class III-B-1 upgraded to 'AAA' from 'AA';
--Class III-B-2 upgraded to 'AA' from 'A';
--Class III-B-3 affirmed at 'BBB';
--Class III-B-4 affirmed at 'BB';
--Class III-B-5 rated 'B,' placed on Rating Watch Negative.
The upgrades reflect an increase in credit enhancement relative to
future loss expectations and the affirmations on the above classes
reflect credit enhancement consistent with future loss
expectations.
The Rating Watch action for the III-B-5 class is taken due to the
level of losses incurred and the high delinquencies in relation to
the applicable credit support levels as of the September 2003
distribution date.
FLEXTRONICS: Will Publish Second-Quarter Results on October 22
--------------------------------------------------------------
Flextronics (Nasdaq: FLEX) will report second quarter results on
October 22, 2003. The conference call, hosted by Flextronics'
senior management, will be held at 1:30 p.m. PDT to discuss the
financial results of the Company and its future outlook. This call
will be broadcast via the Internet and may be accessed by logging
on to the Company's Web site at http://www.flextronics.com
A replay of the broadcast will remain available on the Company's
Web site after the call.
Minimum requirements to listen to the broadcast are Microsoft
Windows Media Player software -- free download at
http://www.microsoft.com/windows/windowsmedia/download/default.asp
-- and at least a 28.8 Kbps bandwidth connection to the Internet.
Headquartered in Singapore, Flextronics (S&P, BB+ Corporate
Credit Rating, Stable) is the leading Electronics Manufacturing
Services provider focused on delivering supply chain services to
technology companies. Flextronics provides design, engineering,
manufacturing, and logistics operations in 29 countries and five
continents. This global presence allows for supply chain
excellence through a network of facilities situated in key markets
and geographies that provide customers with the resources,
technology, and capacity to optimize their operations.
Flextronics' ability to provide end-to-end services that include
innovative product design, test solutions, manufacturing, IT
expertise, network services, and logistics has established the
Company as the leading EMS provider with revenues of $13.4 billion
in its fiscal year ended March 31, 2003. For more information,
visit http://www.flextronics.com
GALEY & LORD: Keeps Plan Exclusivity Intact through December 10
---------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the Southern District of
New York, Galey & Lord, Inc., and its debtor-affiliates obtained a
seventh extension of their exclusive periods. The Court gives the
Debtors until December 10, 2003 the exclusive right to file their
plan of reorganization and until January 5, 2003 to solicit
acceptances of that Plan.
Galey & Lord, a leading global manufacturer of textiles for
sportswear, including cotton casuals, denim, and corduroy, and is
a major international manufacturer of workwear fabrics, filed for
chapter 11 protection on February 19, 2002 together with its
affiliates (Bankr. S.D.N.Y. Case No. 02-40445). When the Company
filed for protection from its creditors, it listed $694,362,000 in
total assets and $715,093,000 in total debts. Joel H. Levitin,
Esq., Esq., at Dechert, represents the Debtors, and Michael J.
Sage, Esq., at Stroock & Stroock & Lavan LLP, represents the
Official Committee of Unsecured Creditors.
GAUNTLET ENERGY: Continues Discussions with Lenders and Buyers
--------------------------------------------------------------
Gauntlet Energy Corporation provides the following update in
respect of the process undertaken to maximize value for its
various stakeholders.
The value of the current proposals from prospective purchasers of
the Corporation or its assets are less than the amount of its debt
with the principal lender of the Corporation.
Consequently, there can be no assurance that any plan under the
Companies Creditors Arrangement Act will be completed or, if
completed, what the level of participation of any of the
stakeholders, including holders of the common shares would be, if
any. The Corporation is continuing discussions with its principal
lender and prospective purchasers.
Gauntlet also announced that the previously announced legal
actions by the holders of flow-through shares of Gauntlet which
were purchased under the November 28, 2002 Prospectus have been
settled by all parties without admission of any liability.
GENCORP INC: Michael Bryant Resigns as GDX Pres. and GenCorp VP
---------------------------------------------------------------
Terry Hall, president and chief executive officer of GenCorp Inc.,
(NYSE: GY) announced that Michael Bryant has resigned from his
positions as president of GDX Automotive and as vice president of
GenCorp Inc.
Mr. Bryant will remain with the Company on special assignment. In
addition, certain GDX Automotive staff positions have been
eliminated.
Dave Bender, who was recently named executive vice president, GDX
Automotive, will continue to be responsible for GDX Automotive
operations, reporting directly to Terry Hall.
GenCorp (S&P, BB Corporate Credit Rating, Stable) is a multi-
national, technology-based manufacturer with operations in the
automotive, aerospace, defense and pharmaceutical fine chemicals
industries. Additional information about GenCorp can be obtained
by visiting the Company's Web site at http://www.GenCorp.com
GEORGIA-PACIFIC: Completes Exchange Offer for Senior Notes
----------------------------------------------------------
Georgia-Pacific Corp. (NYSE: GP) announced the successful
completion of its offer to exchange new 7.375 percent senior notes
due 2008 and 8 percent senior notes due 2014 that have been
registered under the Securities Act of 1933 for all of its
outstanding 7.375 percent senior notes due 2008 and 8 percent
senior notes due 2014, respectively, that originally were issued
by the company in June under Rule 144A and Regulation S of the
Securities Act.
The exchange offer expired Sept. 30. At that time, 100 percent of
the aggregate principal amount of each series of senior notes, or
$350 million of the 7.375 percent notes and $150 million of the 8
percent notes, had been submitted for exchange to the company's
exchange agent.
Headquartered at Atlanta, Georgia-Pacific (S&P, BB+ Corporate
Credit Rating, Negative) is one of the world's leading
manufacturers of tissue, packaging, paper, building products, pulp
and related chemicals. With 2002 annual sales of more than $23
billion, the company employs approximately 61,000 people at 400
locations in North America and Europe. Its familiar consumer
tissue brands include Quilted Northern(R), Angel Soft(R),
Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-
Dri(R), Green Forest(R) and Vanity Fair(R), as well as the
Dixie(R) brand of disposable cups, plates and cutlery. Georgia-
Pacific's building products distribution segment has long been
among the nation's leading wholesale suppliers of building
products to lumber and building materials dealers and large do-it-
yourself warehouse retailers. For more information, visit
http://www.gp.com
HINES HORTICULTURE: Closes Refinancing with New Credit Facility
---------------------------------------------------------------
Hines Horticulture Inc. (Nasdaq:HORT) closed its previously
announced refinancing plan which includes the issuance by its
wholly owned subsidiary Hines Nurseries Inc., of $175 million
principal amount of 10.25% senior notes due 2011 and a new senior
credit facility.
The new senior credit facility has a term of five years and
consists of a $145 million revolving facility, with availability
subject to a borrowing base, and a $40 million term loan facility.
Borrowings under the new senior secured credit facility are
secured by substantially all of the assets of Hines. The net
proceeds from the refinancing are being used to refinance all
borrowings under Hines Nurseries' existing credit facility and to
redeem all of Hines Nurseries' outstanding 12.75% senior
subordinated notes due 2005.
"We are extremely pleased to have completed this important
refinancing which extends the maturity of our debt and provides us
with significantly greater financial and operating flexibility,"
said Robert Ferguson, the company's acting CEO and President and
COO. Mr. Ferguson added, "The refinancing is an exciting strategic
step for us as we commit our focus to creating value for our
shareholders customers, and employees."
Hines Horticulture (S&P, B+ Corporate Credit Rating, Stable
Outlook) is a leading operator of commercial nurseries in North
America, producing one of the broadest assortments of container
grown plants in the industry. Hines Horticulture sells nursery
products primarily to the retail segment, which includes premium
independent garden centers, as well as leading home centers and
mass merchandisers, such as Home Depot, Lowe's and Wal-Mart.
HOMECOM COMMS: Significant Losses Raise Going Concern Doubt
-----------------------------------------------------------
Homecom Communications, Inc. has incurred significant losses since
its incorporation resulting in an accumulated deficit as of
June 30, 2003 of approximately $25.7 million. The Company
continues to experience negative cash flows from operations and is
dependent on one client that accounts for 97% of revenue. These
factors raise doubt about the Company's ability to continue as a
going concern.
The Company's sources of capital are extremely limited. It has
incurred operating losses since inception and as of June 30, 2003,
had an accumulated deficit of $25,705,031 and a working capital
deficit of $1,846,044. On March 23, 2001, the Company announced
its intentions to wind down operations. It has entered into an
agreement to sell substantially all of the operating assets of its
hosting and website maintenance business to Tulix and it has
entered into an agreement whereby it licenses certain technologies
from Eurotech. If the Company completes the Tulix transaction, its
primary assets will include cash and accounts receivable that it
does not transfer to Tulix, the assets that it licenses from
Eurotech, the Tulix Note and shares of Tulix stock.
On May 22, 2003, in connection with the closing of the licensing
transaction with Eurotech, Homecom executed a note in favor of one
of its preferred stockholders that provides that the Company may
borrow up to $150,000 for use solely in connection with the
technologies that it has licensed from Eurotech. Advances under
this agreement, which advances are secured by a security
agreement, bear interest at rate of 10% per annum and mature on
December 31, 2003. Homecom has borrowed $100,000 under this
agreement to date.
The Company states that it can provide no assurance that the
financing sources described above, or any other financing that it
may obtain in the future (if it is able to obtain financing from
any other sources), will enable it to sustain its operations. If
it cannot resolve its liabilities, and no other alternatives are
available, Homecom has indicated that it may be forced to seek
protection from its creditors. The aforementioned factors raise
substantial doubt about the Company's ability to continue as a
going concern.
HOVNANIAN ENTERPRISES: September 2003 Net Contracts Up 22%
----------------------------------------------------------
Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national
homebuilder, announced preliminary net contracts for the month of
September 2003.
The number of active selling communities company-wide on
September 30, 2003 increased to 256 communities from 190
communities at the end of September 2002. The number of net
contracts in the Northeast in September 2003 includes the effect
of the Summit Homes acquisition, which closed in April 2003. The
number of net contracts in the Southwest in September 2003
includes the effect of the Parkside Homes, Brighton Homes and
Great Western Homes' acquisitions, which closed in November 2002,
December 2002, and August 2003, respectively. The decline in net
contracts in the West in September 2003 compared with September
2002 was due primarily to a change in the mix of communities and a
decline in the number of active selling communities in California.
The Company is opening a significant number of new communities in
California over the next six months and expects to report an
increase in contracts in that state in fiscal 2004 when compared
with fiscal 2003.
Hovnanian Enterprises, Inc. (Fitch, BB+ Senior Unsecured and BB-
Senior Subordinated Ratings, Stable Outlook) founded in 1959 by
Kevork S. Hovnanian, Chairman, is headquartered in Red Bank, New
Jersey. The Company is one of the nation's largest homebuilders
with operations in Arizona, California, Maryland, New Jersey, New
York, Michigan, North Carolina, Ohio, Pennsylvania, South
Carolina, Texas, Virginia and West Virginia. The Company's homes
are marketed and sold under the trade names K. Hovnanian,
Washington Homes, Goodman Homes, Matzel & Mumford, Diamond Homes,
Westminster Homes, Fortis Homes, Forecast Homes, Parkside Homes,
Brighton Homes, Parkwood Builders, Summit Homes and Great Western
Homes. As the developer of K. Hovnanian's Four Seasons
communities, the Company is also one of the nation's largest
builders of active adult homes.
Additional information on Hovnanian Enterprises, Inc., including a
summary investment profile and the Company's 2002 annual report,
can be accessed through the Investors page of the Hovnanian Web
site at http://www.khov.com
IMPATH INC: Altman Group Serving as Claims and Docket Agent
-----------------------------------------------------------
Impath Inc., and its debtor-affiliates ask the U.S. Bankruptcy
Court for the Southern District of New York to appoint The Altman
Group, as claims and noticing agent.
The Debtors estimate that there are over 6,000 creditors in these
chapter 11 cases. To relieve that Clerk of Court's burden from the
noticing and receiving, docketing and maintaining of proofs of
claim, Altman Group will:
a. notify all potential creditors, security holders and
other required parties of the filing of the chapter 11
petitions and of the setting of the first meeting of
creditors pursuant to section 341(a) of the Bankruptcy
Code;
b. maintain an official copy of the Debtors' schedules of
assets and liabilities and statements of financial
affairs, listing the Debtors' known creditors and the
amounts owed thereto;
c. furnish a form for the filing of proofs of claim, after
approval of such notice and form by this Court;
d. once the bar date has been set, mail personalized proofs
of claim forms to all creditors and other identified
parties with the scheduled amount noted;
e. file with the Clerk, within ten (10) days of service, a
copy of the proof of claim notice, a list of persons to
whom it was mailed, and the date the notice was mailed;
f. docket all claims received, maintaining the official
claims registers for each Debtor on behalf of the Clerk,
and providing the Clerk with certified duplicate
unofficial Claims Registers on a monthly basis, unless
otherwise directed;
g. periodic updates of the Claims Register to reflect claim
amendments, stipulations, and rulings;
h. specify in the applicable Claims Register the following
information for each claim docketed:
(i) the claim number assigned,
(ii) the date received,
(iii) the name and address of the claimant and agent, if
applicable, who filed the claim, and
(iv) the classification of the claim (e.g., secured,
unsecured, priority, etc.);
i. relocate, by messenger, all of the actual proofs of
claim filed with the Court, if necessary to the Altman
Group, not less than weekly;
j. record all transfers of claims and providing any notices
of such transfers required by Rule 3001 of the Federal
Rules of Bankruptcy Procedure;
k. make changes in the Claims Registers pursuant to Court
Order;
l. upon completion of the docketing process for all claims
received by the Clerk's office, turn over to the Clerk
copies of the Claims Registers for the Clerk's review;
m. maintain the official mailing list for each Debtor of
all entities that have filed a proof of claim, which
list shall be available upon request by a party in
interest or the Clerk;
n. assist with, among other things, the mailing of
solicitation packages approved by the Court to parties
in interest in these cases;
o. receive ballots from and tabulating the votes of holders
of claims in those classes entitled to vote on the
Debtors' chapter 11 plan; and
p. 30 days prior to the close of these cases, submit an
Order dismissing the Altman Group and terminating the
services of the Altman Group upon completion of its
duties and responsibilities and upon the closing of
these cases.
Kenneth L. Altman, President of Altman Group, reports that his
firm's estimated fees for this engagement are:
Claims Docketing $100 to $275 per hour
Document Management $100 to $150 per hour
Custom Reports $125 to $175 per hour
Voting and Tabulation $100 per hour
Programming/Technical Services $125 to $175 per hour
Headquartered in New York, New York, Impath Inc., together with
its subsidiaries, is in the business of improving outcomes for
cancer patients by providing patient-specific diagnostic and
prognostic services to pathologists and oncologists, providing
products and services to biotechnology and pharmaceutical
companies, and licensing software to hospitals, laboratories, and
academic medical centers. The Company filed for chapter 11
protection on September 28, 2003 (Bankr. S.D.N.Y. Case No. 03-
16113). George A. Davis, Esq., at Weil, Gotshal & Manges, LLP
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$192,883,742 in total assets and $127,335,423 in total debts.
IT GROUP: Gets Nod to Use Lenders' Cash Collateral Until Dec. 26
----------------------------------------------------------------
U.S. Bankruptcy Court Judge Walrath allows The IT Group Debtors to
use the Cash Collateral in accordance with the updated budget and
cash flow forecast through December 26, 2003. (IT Group Bankruptcy
News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
J.A. JONES: Has Until December 10 to Complete and File Schedules
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Western District of North
Carolina gave J.A. Jones, Inc., and its debtor-affiliates an
extension to file their schedules of assets and liabilities,
statements of financial affairs and lists of executory contracts
and unexpired leases required under 11 U.S.C. Sec. 521(1). The
Debtors have until December 10, 2003 to file these financial
disclosure documents.
Headquartered in Charlotte, North Carolina, J.A. Jones, Inc. was
founded in 1890 by James Addison Jones, J.A. Jones is a subsidiary
of insolvent German construction group Philipp Holzmann and a
holding company for several US construction firms. The Company
filed for chapter 11 protection on September 25, 2003 (Bankr.
W.D.N.C. Case No. 03-33532). John P. Whittington, Esq., at
Bradley Arant Rose & White LLP and W. B. Hawfield, Jr., Esq., at
Moore & Van Allen represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed debs and assets of more than $100 million
each.
J.C. PENNEY CO.: Maxine Clark Will Joining Board of Directors
-------------------------------------------------------------
Allen Questrom, Chairman and Chief Executive Officer of J. C.
Penney Company, Inc. (NYSE:JCP) announced that the Company's Board
of Directors has elected Maxine Clark, Founder and Chief Executive
Officer of Build-A-Bear Workshop, Inc., a director of JCPenney,
effective December 10, 2003.
"Maxine Clark, throughout her distinguished 30-year retail career,
has developed a solid reputation as an industry innovator and
entrepreneur," said Questrom. "She has a proven track record that
combines keen intuition and business savvy. JCPenney and its
Directors are proud to welcome this highly creative and energetic
individual to the Board."
Prior to founding Build-A-Bear Workshop in 1997, Ms. Clark served
as President of Payless Shoesource, Inc. from 1992 to 1996.
Previously, she held key management and merchandising positions
throughout the May Department Stores organization, including roles
as Executive Vice President of Women's and Children's Apparel at
Famous Barr and Executive Vice President of Softlines for Venture
Stores, Inc. Ms. Clark's early retailing career was spent at the
Hecht Company, where she began her retail career as an Executive
Trainee in 1972.
Ms. Clark earned an undergraduate degree in Journalism from the
University of Georgia. She is a member of the Board of Directors
of the Simon Youth Foundation and the Girl Scout Council of
Greater St. Louis, the Board of Trustees of Washington University
in St. Louis, the Advisory Council of the Olin School of Business
at Washington University, the Board of Barnes-Jewish Hospital, and
the Board of Trustees of her alma mater, the University of
Georgia. Ms. Clark is also a member of the Board of Trustees of
the International Council of Shopping Centers and is a member of
the Committee of 200, the premier international organization for
female entrepreneurs and top corporate executives.
J. C. Penney Corporation, Inc. (Fitch, BB+ Secured Bank Facility,
BB Senior Unsecured Debt, B+ Convertible Subordinated Debt and B
Commercial Paper Ratings, Negative), the wholly-owned operating
subsidiary of the Company, is one of America's largest department
store, drugstore, catalog, and e-commerce retailers, employing
approximately 230,000 associates. As of July 26, 2003, it operated
1,040 JCPenney department stores throughout the United States,
Puerto Rico, and Mexico, and 56 Renner department stores in
Brazil. Eckerd Corporation operated 2,710 drugstores throughout
the Southeast, Sunbelt, and Northeast regions of the U.S. JCPenney
Catalog, including e-commerce, is the nation's largest catalog
merchant of general merchandise. J. C. Penney Corporation, Inc. is
a contributor to JCPenney Afterschool Fund, a charitable
organization committed to providing children with high quality
after school programs to help them reach their full potential.
LAIDLAW INC: Enters Stipulation Allowing U.S. Bank's $9MM Claim
---------------------------------------------------------------
U.S. Bank National Association is a successor trustee under an
Indenture dated as of August 1, 1995, with Tooele County, Utah,
as Issuer, pursuant to which an aggregate of $10,000,000 Tooele
County, Utah Hazardous Waste Disposal Revenue Bonds (Laidlaw
Inc./USPCI/Clive Project) Series 1995, were issued.
Tooele County and USPCI Clive Incineration Facility, Inc. were
also parties to a loan agreement wherein Tooele County made a
$10,000,000 loan to USPCI Clive. Under the Loan Agreement, USPCI
Clive promised to make installment payments sufficient to meet
the debt service on the Bonds and to pay U.S. Bank's fees and
expenses.
Furthermore, pursuant to a Guaranty Agreement, which likewise
took place on August 1, 1995, by and between Laidlaw Inc. and
U.S. Bank, Laidlaw guaranteed the payment of the principal of,
and interest on, the Bonds and all of the obligations of USPCI
Clive under the Loan Agreement.
On June 9, 2000, Safety-Kleen Clive, Inc., as successor-in-
interest to USPCI Clive, and its affiliates filed petitions for
relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. Pursuant
to the Loan Agreement and the Indenture, Safety-Kleen Clive's
Chapter 11 filing constituted an event of default.
Consequently, U.S. Bank became entitled to exercise all rights of
Tooele County against Safety-Kleen Clive under the Loan Agreement
to satisfy its claims under the Indenture and the Guaranty.
After the commencement of the Safety-Kleen Clive case, U.S. Bank
applied funds in its possession in accordance with the terms of
the Indenture and the Order of the Delaware Bankruptcy Court
dated December 11, 2001 and retains $160,000 in connection with
the Bonds.
By order dated August 7, 2001, the Court set October 16, 2001, as
the Bar Date for filing proofs of claim against the Debtors. On
the Bar Date, U.S. Bank filed two proofs of claim against the
Debtors on behalf of itself and the Bondholders for claims
arising under the Indenture, the Loan Agreement and the Guaranty.
Specifically, Claim No. 560 was filed by U.S. Bank, inclusive of
principal and accrued interest for $10,952,500. U.S. Bank also
filed Claim No. 561 for $50,000 on account of unpaid fees and
expenses of U.S. Bank under the Indenture. Claim No. 561 has
been satisfied in accordance with the terms of the Indenture and
the December 11, 2001 Court Order. After the application of
funds in U.S. Bank's possession in accordance with the terms of
the Indenture and the December 11, 2001 Court Order, the
remaining amount of Claim No. 561 is $9,459,722.
Subsequently, U.S. Bank and Laidlaw Inc. stipulated and agreed to
fix the allowed amount of the Claims with respect to the
Indenture, the Loan Agreement and the Guaranty in accordance with
the Plan.
Pursuant to the Stipulation, the Parties agreed that:
(a) Claim No. 560 will be allowed for $9,459,722 in full
satisfaction of any and all claims that U.S. Bank and the
Bondholders may have against the Debtors, whether asserted
in the Claims or otherwise, arising under the Indenture,
the Loan Agreement or the Guaranty. Claim No. 560 will be
satisfied in accordance with the treatment provided to
General Unsecured Claims in Class 6 under the Plan; and
(b) Claim No. 561 will be disallowed. (Laidlaw Bankruptcy News,
Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
LNR PROPERTY: Declares Quarterly Cash Dividend Payable Nov. 20
--------------------------------------------------------------
LNR Property Corporation (NYSE: LNR) declared a quarterly cash
dividend of $0.0125 per common share and $0.01125 per Class B
common share. Both dividends are payable on November 20, 2003 to
shareholders of record at the close of business on November 4,
2003.
LNR has approximately 29.7 million shares outstanding, 19.9
million of which are common stock and 9.8 million are Class B
common stock.
LNR Property Corporation (S&P, BB+ and BB- Debt Ratings, Stable
Outlook) is a real estate investment, finance and management
company.
LTV: Wants to Substantively Consolidate LTV & Georgia Tubing
------------------------------------------------------------
David G. Heiman, Esq., and Ryan T. Routh, Esq., at Jones Day, in
Cleveland, Ohio, tells the Court that LTV Steel Company, Inc., and
Georgia Tubing Corporation no longer function as operating
businesses and have disposed of virtually all of their non-cash
assets. That is why the Debtors want Judge Bodoh to substantively
consolidate both Chapter 11 estates.
Under the Winddown Order, LTV Steel currently is finalizing the
sales of its few remaining non-operating assets, collecting
amounts due to its estate in recovery and avoidance actions, and
resolving outstanding litigation and claims issues, all as a
precursor to making distributions to its administrative creditors
and thereafter dismissing its Chapter 11 case. Similarly, Georgia
Tubing is investigating the method by which it will resolve its
Chapter 11 case.
LTV Steel and Georgia Tubing have begun the process of developing
preliminary estimates of their liabilities and have attempted to
develop a preliminary estimate of the funds that will be available
for distribution to claimants in connection with the resolution of
their Chapter 11 cases. Nevertheless, LTV Steel and Georgia
Tubing have been unable to determine with precision the funds that
each would have available to distribute to their creditors because
of:
(a) pending intercompany claims between and among LTV
Steel, Georgia Tubing and the other Debtors;
(b) the uncertainty over the appeal of the orders
allocating the proceeds of the Integrated Steel Sale;
(c) the number of unresolved claims being litigated; and
(d) the integrated nature of the operations of the LTV
Tubular Business.
In addition, in August 2003, after lengthy negotiations, the
Debtors reached an agreement with their primary constituencies to
resolve the myriad complex intercompany claims issues that must be
addressed to conclude the Debtors' Chapter 11 cases. Approval of
the Intercompany Claims Settlement is necessary to determine the
funds available for distribution in each of the Debtors' estates
and, therefore, is a prerequisite to concluding the administration
of each of these cases.
Impact on Creditors
Substantive consolidation entails the merger of separate debtor
entities into one such that the assets and liabilities of each
debtor are aggregated to effect a more equitable distribution of
property among the entities' creditors. A bankruptcy court's
power to order the substantive consolidation of debtors' Chapter
11 estates, while not expressly set forth in the Bankruptcy Code,
is widely recognized. A factor central to the determination of
whether substantive consolidation is appropriate is the impact of
such action on the creditors of the debtors.
Over the past several months, the Debtors have conducted a review
of the estates of LTV Steel and Georgia Tubing with respect to the
various factors relevant to the substantive consolidation analysis
and in connection with the negotiations of the Intercompany Claims
Settlement. Ultimately, the Debtors determined that, based on the
closely integrated nature of the operations of Georgia Tubing and
LTV Steel within the LTV Tubular Business, the substantive
consolidation of these estates is appropriate.
Tubular Business -- Seamless and Integrated
The five operating facilities of the LTV Tubular Business -- four
of which were owned by LTV Steel and one of which was owned by
Georgia Tubing -- consistently functioned as a single business in
the years preceding the LTV Tubular Sale. The Cedar Springs,
Georgia plant owned by Georgia Tubing was not distinguished from
the other LTV Tubular Business plants owned by LTV Steel.
Instead, all of these facilities were run as a single business
unit and presented themselves in the marketplace as the LTV
Tubular Business. As such, vendors, suppliers and customers had
little reason to believe that they were doing business with, for
example, Georgia Tubing, rather than the entire "LTV Tubular"
business.
The officers and employees of the LTV Tubular Business had a
uniform internal reporting structure typical of a single
enterprise. Customers of the LTV Tubular Business made no
distinction between the two Debtors when placing orders or
entering into contracts with them. These agreements were made
with LTV Tubular and products were shipped from consolidated
distribution points without reference to their legal entity names.
Likewise, most vendors did not separately fill orders for or
contract with LTV Steel or Georgia Tubing, working instead with
the LTV Tubular consolidated purchasing department. None of the
major prepetition financiers of the Debtors lent money to only LTV
Steel or to only Georgia Tubing -- they lent money to the Debtors
as a whole. As wholly owned subsidiaries of LTV, LTV Steel and
Georgia Tubing participated in consolidated financial reporting
with LTV, under which the LTV Tubular Business was treated as a
single business unit of the Metal Fabrication Business.
In short, from the perspective of the Debtors and each of their
constituencies, the LTV Tubular Business was a seamlessly
integrated operation.
Substantial Identity of Interests
Substantial identity of interests that warrants substantive
consolidation was directly reflected in the method by which the
LTV Tubular Business assets of LTV Steel and Georgia Tubing were
disposed of in these Chapter 11 cases. After completing the sale
of their Integrated Steel Business in early 2002, the Debtors
focused their efforts on the potential sale of their entire Metal
Fabrication Business, including the LTV Tubular operations of LTV
Steel and Georgia Tubing, as well as businesses operated by other
Debtors. The Debtors marketed the assets of the Metal Fabrication
Business and proposed to sell the business either as a whole or as
four separate business units. One of the separate business units
offered for sale was the LTV Tubular Business. Tellingly, despite
offering prospective purchasers a variety of methods by which the
businesses could be purchased, the Debtors received three separate
bids that were considered to be "Qualified Offers" for the LTV
Tubular Business alone.
Consistent with the Debtors' operation of the LTV Tubular Business
and the perceptions of the business in the marketplace, the
purchasers plainly viewed the LTV Tubular Business as a single
business enterprise comprised of Georgia Tubing and LTV Steel
assets. Ultimately, these assets were sold as a single business
unit in a single transaction with Maverick Tube Corporation.
Because practically all parties treated the LTV Tubular Business
as an integrated enterprise, creditors of the business did not
have the reasonable expectation that they were relying separately
on the assets of LTV Steel or Georgia Tubing for repayment of
their debts. Instead, they did business with the LTV Tubular
Business as a whole, and substantive consolidation of LTV Steel
and Georgia Tubing, therefore, is not inconsistent with the
expectation of creditors.
Benefits of Substantive Consolidation Outweigh Burdens
Mr. Routh assures all parties that the substantive consolidation
of these Debtors' estates will provide a number of important
corollary benefits to the Chapter 11 cases of LTV Steel, Georgia
Tubing and the other Debtors. Mr. Routh asserts that it is also
true that an examination focused solely upon the likely economic
impact of the substantive consolidation on LTV Steel's and Georgia
Tubing's creditors demonstrates that the balance of benefits and
harms weighs in favor of substantive consolidation. Because LTV
Steel's bankruptcy estate is administratively insolvent,
prepetition creditors of LTV Steel will not be adversely affected
by the requested substantive consolidation.
Without substantive consolidation, the Debtors believe that
Georgia Tubing's prepetition creditors likely would receive
little, if any, recovery on their claims if most or all of the
substantial administrative and superpriority intercompany claims
asserted against Georgia Tubing's estate were allowed. Even
though it is possible that prepetition creditors of Georgia Tubing
could receive some small distribution absent substantive
consolidation, in light of the potential cost of fully litigating
intercompany claims, the potential cost of fully litigating the
proper allocation of the LTV Tubular Sale Proceeds and the
potential for litigation outcomes unfavorable to Georgia Tubing's
estate in these matters, the possibility and amount of any
recovery for such creditors is speculative.
Based on the over $2.8 billion in prepetition claims asserted
against Georgia Tubing's estate, any funds remaining for
distribution to prepetition creditors would result in a de minimis
percentage recovery. As such, substantive consolidation is
unlikely to have any "significant adverse effect" on Georgia
Tubing's prepetition creditors.
More Payment for Pre-APP Administrative LTV Claimants
By contrast, substantive consolidation likely will result in
enhanced recoveries to the greater than one thousand pre-APP
administrative claimants of LTV Steel. Thus, a narrow examination
of the likely impact of substantive consolidation on creditors, by
itself, clearly demonstrates that the equities support LTV Steel's
and Georgia Tubing's substantive consolidation.
Faster Case, Less Litigation
A broader examination of the equities provides further support
consolidation. In particular, substantive consolidation will
permit the resolution of issues regarding the separation of assets
of these two Debtors and will permit these two cases to move to
completion. Mr. Routh reminds all listeners that, although the
LTV Tubular Sale purchase price was approximately $120,000,000,
the Sale Order did not allocate that purchase price to individual
assets. To date, there has been no judicial determination by the
Court regarding what portion of the $120,000,000 proceeds should
be allocated to the estates of LTV Steel and Georgia Tubing.
Absent substantive consolidation, the Debtors may be required to
propose an allocation of these proceeds. Because any allocation
would impact the rights of the creditors of LTV Steel and Georgia
Tubing, it is likely that various creditors would challenge the
Debtors' allocation to suit their individual interests. As with
the allocation of the proceeds of the Integrated Steel Sale,
this could result in yet another complex, costly and time-
consuming allocation dispute. Thus, substantive consolidation of
these estates would allow the Debtors to avoid this litigation and
avoid further delay to the resolution of their cases.
Standards Applicable to Substantive Consolidation
Courts have long recognized a bankruptcy court's ability to order
the substantive consolidation of affiliated debtors' bankrupt
estates as part of its equitable powers. In fact, beginning in
the early 1990s, courts have recognized a "modern trend which is
more liberal" regarding bankruptcy courts' willingness to grant
substantive consolidation.
Because the purpose of substantive consolidation is to promote
equity and a court's power to authorize such relief stems from its
general equitable powers, there is no bright-line test to
determine when substantive consolidation is appropriate. Instead,
courts have commonly undertaken a fact-intensive approach to
determine the appropriateness of substantive consolidation. To
assist in this analysis, courts have developed tests and
identified certain factors that should be examined to determine
whether substantive consolidation is appropriate in a particular
case.
In particular, the Court previously has enunciated a balancing
test to determine whether substantive consolidation is
appropriate, identifying seven factors applicable to the balancing
inquiry. The overriding inquiry is "whether the creditors will
suffer greater prejudice in the absence of consolidation than the
debtors (and any objecting creditors) will suffer from its
imposition." In performing this balancing inquiry, these factors
are to be examined:
a. commingling of assets and business functions;
b. difficulty in segregating assets;
c. unity of interests in ownership;
d. existence of inter-corporate loan guarantees;
e. presence of consolidated financial statements;
f. profitability of consolidation at a single location;
and
g. the transfer of assets without observance of
corporate formalities.
These various factors are not requirements for substantive
consolidation, but are elements to be examined by a court that is
balancing the equities supporting and against consolidation. As
such, to obtain substantive consolidation, it is not necessary for
each of the relevant factors to support this relief as long as the
overall equities do. Moreover, most courts analyze these factors
in light of the overall balance of benefits and harms to
creditors. Applying the factors relevant to the facts of the
present case, Mr. Routh opines that substantive consolidation of
LTV Steel's and Georgia Tubing's estates is plainly appropriate.
LTV Steel and Georgia Tubing Commingled
Assets and Business Functions
The extensive commingling of assets and business functions of
Georgia Tubing and LTV Steel directly supports -- if not mandates
-- the substantive consolidation of their estates. LTV Steel and
Georgia Tubing have substantially commingled their assets and
business functions and have operated on a fully integrated basis
as a single business unit -- i.e., the LTV Tubular Business.
Until mid-2000, the LTV Tubular Business was operated and treated
as a division of LTV Steel. Following the Debtors' 1999
acquisition of the Copperweld Debtors and their affiliates, the
internal governance of the LTV Tubular Business assets was
reorganized and the LTV Tubular Business was operated and treated
as a division under the direction of Copperweld. Governance of
the LTV Tubular Business was further segregated during these
Chapter 11 cases, and it increasingly operated more as a stand-
alone business, with its own financing, under the ultimate
oversight of LTV Steel. Nonetheless, at all times, the assets and
business functions of LTV Steel and Georgia Tubing were commingled
and operated in an integrated manner as the LTV Tubular Business
and not as the assets and business functions of two separate
entities.
The integrated nature of the LTV Tubular Business and the
commingling of its assets and liabilities are demonstrated by the
relationships with customers, vendors, creditors and others and
the overall operation of the business. Examples of this
integration and commingling include:
* Uniform Products. As part of the LTV Tubular Business,
LTV Steel and Georgia Tubing manufactured the same
types of steel conduit product at their facilities,
with differences only in the range of sizes that were
produced. Thereafter, these products were sold to
customers without distinction as to the origin of the
conduit from either a Georgia Tubing or LTV Steel
plant.
* Consolidated Distribution. The distribution of tubular
products manufactured by both LTV Steel and Georgia
Tubing was accomplished through a consolidated
network of distribution centers and warehouses for the
LTV Tubular Business. Customers, therefore, received
shipments of LTV Tubular products -- which could be
from both LTV Steel and Georgia Tubing plants --
without distinction as to the origin of any particular
product.
* Consolidated Sales and Marketing. LTV Tubular Business
employees sold and marketed tube and pipe products
manufactured by both LTV Steel and Georgia Tubing to
customers under the LTV Tubular -- or later the LTV
Copperweld -- name, without distinguishing between
origin of the products. From the perspective of
customers, no distinction between LTV Steel and Georgia
Tubing products would have been apparent or meaningful.
These products were purchased from the LTV Tubular
Business through a single sales function and shipped
through a consolidated distribution mechanism.
* Consolidated Collections and Receipts. All invoicing,
receipts and collections from sales in the LTV Tubular
Business were conducted on a consolidated basis by the
same employees.
* Consolidated Cash Management and Lock Boxes. The LTV
Tubular Business utilized common bank accounts and
directed all customers -- regardless of the origin of
the purchased product -- to make payments to common
lock-box accounts maintained for LTV Tubular Business
receipts.
* Integrated Payables System. The LTV Tubular Business
utilized an integrated payables system for payment of
all bills relating to this business, whether relating
to LTV Steel or Georgia Tubing, including payments to
vendors and tax liabilities.
* Consolidated Vendor Payments. Records regarding vendor
liabilities within the LTV Tubular Business were
maintained within a unified accounts payable system.
As such, checks in payment of invoices to any
particular vendor of the LTV Tubular Business were
issued on a consolidated basis for any liabilities owed
by both LTV Steel and Georgia Tubing.
* Consolidated Budgeting Process. All plants within the
LTV Tubular Business participated in a single budgeting
process. As such, all operating budgets, capital
improvement expenditures and other funding requests
were approved on a consolidated basis by LTV Tubular
Business management.
* Consolidated Employee Functions. Numerous employees
had responsibility for LTV Tubular Business functions
covering both LTV Steel and Georgia Tubing Facilities.
For example, the manager of conduit operations for
Georgia Tubing's Cedar Springs, Georgia location
served in the same capacity at LTV Steel's Ferndale,
Michigan plant. Moreover, management employees were
charged with oversight for the entire LTV Tubular
Business. Finally, employees regularly provided
services to Georgia Tubing's facility even though they
maintained a formal employment relationship with LTV
Steel through mid-2000 and with Copperweld after that
-- but always at the LTV Tubular Business corporate
level.
* Unified Employee Chain of Command. A unified employee
chain of command was established for the entire LTV
Tubular Business. Ultimately, each of the LTV Tubular
Business plant managers report through the same chain
of command to the same corporate executives.
* Consolidated Corporate Policies and Programs. The LTV
Tubular Business imposed identical uniform policies and
procedures throughout the business in various areas,
including:
(a) significant accounting policies;
(b) expense reimbursements;
(c) record retention policy;
(d) data and information systems;
(e) Internet business use;
(f) Y2K compliance; and
(g) cellular service.
* Consolidated Environmental Control. All environmental
control and liability issues were addressed in a
uniform manner at the LTV Tubular Business corporate
level.
These facts, taken together, are "powerful evidence" of the
commingling of assets and business functions of the LTV Steel and
Georgia Tubing components of the LTV Tubular Business and the
complete integration of the LTV Tubular Business in its internal
operation and its external relationships. Courts have found that
commingling of assets and business function is an important factor
in the substantive consolidation analysis. Accordingly, the
substantial commingling of LTV Steel's and Georgia Tubing's assets
and business functions and the virtually complete integration of
their operations weighs strongly in favor of substantive
consolidation.
Public Appearances
Similarly, the manner in which LTV Steel and Georgia Tubing held
themselves out to their customers, vendors, lenders and other
third parties as a single economic enterprise further demonstrates
the commingling of assets and business functions and the need for
substantive consolidation. Due to the integrated manner in which
LTV Steel and Georgia Tubing conducted the LTV Tubular Business,
the Debtors do not believe that their creditors gauged -- or could
have gauged -- the independent creditworthiness of either LTV
Steel or Georgia Tubing in making their decisions to do business
with these entities. In fact, the purchase orders utilized by the
LTV Tubular Business indicated that purchases were being made by
the "LTV Tubular Products Company" or "LTV Copperweld Tubular
Products" and did not give creditors the expectation that they
would be paid by a particular legal entity. The sophisticated
major lenders to the Debtors also did not rely on the separate
creditworthiness of these entities, requiring both LTV Steel and
Georgia Tubing to be co-obligors under these debt instruments.
Accordingly, the Debtors do not believe that creditors of the LTV
Tubular Business would have their expectations upset by the
substantive consolidation of these two estates -- a fact that
weighs heavily in favor of substantive consolidation.
Not To Consolidate Is Unfair
Mr. Routh argues it would be inequitable not to substantively
consolidate these estates in light of creditors' reasonable
expectations. Absent substantive consolidation, a creditor of LTV
Steel and a creditor of Georgia Tubing that each did business with
the LTV Tubular Business and that otherwise hold identical claims
likely would receive different recoveries, even though these
creditors had little or no recognition of the fact that they were
dealing with two nominally separate entities. Such disparate
treatment would be arbitrary, and not equitable.
Litigating Segregation of Assets is Time-Consuming and Costly
Because of the integrated nature of the LTV Tubular Business
operations and the manner in which the LTV Tubular Business was
sold, the proper allocation of the assets and liabilities of LTV
Steel and Georgia Tubing is not obvious. Absent substantive
consolidation, the Debtors would likely be required to propose an
allocation to the Court to permit the estates to identify their
funds available for distribution to creditors. The Debtors
believe that any allocation they might propose would be subject to
objection by certain creditors seeking to protect their own
individual interests, which could result in a lengthy dispute over
the proper allocation of value to the assets. This would require
the retention and testimony of experts, the incurrence of
additional legal fees and expenses and further delays in
completing final distributions to creditors.
Certain of the difficulties that would be faced in conducting such
litigation to untangle and allocate the assets and liabilities of
these Debtors were inherent in the corporate structure at the
commencement of these cases and have been exacerbated by various
factors since then. Due to the LTV Tubular Sale, LTV Steel's and
Georgia Tubing's former operating assets and certain of their
business records are no longer in the Debtors' possession. In
addition, LTV Steel and Georgia Tubing no longer employ the
individuals most familiar with the operations of the LTV Tubular
Business, making them potentially unavailable as witnesses. Both
of these factors would make the discovery of facts relevant to
this matter difficult if allocation issues relating to the LTV
Tubular Sale proceeds were to be litigated.
The costs of disentangling multiple debtors' assets, in and of
themselves, can justify substantive consolidation where "the time
and expense necessary even to attempt to unscramble them is so
substantial as to threaten the realization of any net assets for
all the creditors or where no accurate identification and
allocation of assets is possible." Even where, as in these cases,
the situation may not be so dire, the time, cost and potential for
litigation in completing an allocation are all factors to be
weighed by courts.
Unity of Ownership Interest
Substantive consolidation is further warranted because of the
unity in ownership interests of LTV Steel and Georgia Tubing.
Both LTV Steel and Georgia Tubing are direct, wholly owned
subsidiaries of LTV. Accordingly, substantive consolidation
cannot unfairly prejudice or benefit the owner of one of the
entities to be consolidated over the other because the entities
have the same owner. Courts commonly authorize the substantive
consolidation of two subsidiary entities with a common owner.
Unity of Senior Management
LTV Steel and Georgia Tubing also share common officers and
directors, which further demonstrates their unity of ownership
interest. This weighs in favor of consolidation.
Existence of Inter-corporate Loan Guarantees
LTV Steel and Georgia Tubing were borrowers in respect of,
participants in or guarantors of the Debtors' major prepetition
financing facilities, which further supports substantive
consolidation. Georgia Tubing and LTV Steel each are guarantors
of LTV's obligations under a $225 million financing facility,
which provided for LTV's purchase of the shares of Copperweld,
Copperweld Canada Inc. and Welded Tube Holdings.
LTV Steel and Georgia Tubing each are guarantors of LTV's
obligations under approximately $275 million of 11.75% senior
unsecured notes due 2009, the proceeds of which also were used to
fund the Copperweld Acquisition.
LTV Steel and Georgia Tubing each are guarantors of LTV's
obligations under approximately $300 million of 8.20% senior notes
due 2007, which were issued to fund the 1997 purchase of the
operations of Debtor VP Buildings and its subsidiaries, and to
provide working capital to the Debtors as a whole.
Both LTV Steel and Georgia Tubing participated in the Debtors'
prepetition inventory and accounts receivable credit facilities
with various lenders by which the Debtors received working capital
financing through the sale of the inventory and accounts
receivable to certain special purpose vehicles on a daily basis.
In sum, in each instance where one of LTV Steel or Georgia Tubing
was obligated under a major prepetition debt obligation, the other
was equally obligated. The presence of such inter-corporate
guarantees weighs in favor of substantive consolidation.
Consolidated Financial Statements
The presence of consolidated financial statements further supports
the requested substantive consolidation. In the years preceding
the Petition Date, the financial statements filed by the Debtors
with the Securities and Exchange Commission reported financial
data for the LTV Tubular Business on a consolidated basis with the
other Debtors. Beginning in 1998, the financial reporting for the
LTV Tubular Business was consolidated with reporting for the Metal
Fabrication Business. At no time did the Debtors publicly report
the results or financial performance of LTV Steel or Georgia
Tubing separately. In addition, LTV Steel and Georgia Tubing --
along with the other Debtors -- filed consolidated tax returns
with the Internal Revenue Service.
Profitability of Consolidation Irrelevant
Anticipating arguments against consolidation, Mr. Routh says that
another factor that sometimes bears on the question of substantive
consolidation is the "continued profitability of corporate
entities operating on a consolidated basis." However, this factor
appears to be inapplicable under the current circumstances. An
analysis of profitability presumes that there are ongoing business
operations and seeks to judge whether such operations would be
impacted by substantive consolidation in a manner harmful to
creditors. LTV Steel and Georgia Tubing are no longer operating
businesses. Accordingly, substantive consolidation will not
impact their "profitability" in either a positive or a negative
manner because these entities are no longer operating for profit,
but are only monetizing their remaining assets for distribution to
stakeholders.
Transfer of Assets Without Observance of Corporate Formalities
Georgia Tubing and LTV Steel generally did not do business with
one another as if they were doing business with a third party.
Instead, their relations were governed by their common ownership
and the integrated nature of the LTV Tubular Business. As such,
transactions between the two entities, including allocation of
overhead expenses and other payments for intercompany transfers,
were not rigorously negotiated or documented in the manner of
third party transactions. Likewise, the formalities that would be
present in arm's-length transactions were not always present in
these companies' dealings.
Substantive Consolidation Nunc Pro Tunc to Petition Date
Courts have consistently held that when substantive consolidation
is ordered, it must be ordered effective as of the date of filing
of the debtors' bankruptcy petitions. Accordingly, LTV Steel and
Georgia Tubing ask Judge Bodoh to make the consolidation of their
Chapter 11 estates effective nunc pro tunc as of the Petition
Date. (LTV Bankruptcy News, Issue No. 55; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
MIRANT CORP: Proposed Paul Hastings' Engagement Drawing Fire
------------------------------------------------------------
The Bankruptcy Code requires that an attorney employed by the
debtor's estate (i) must be disinterested and (ii) may not hold
or represent an interest adverse to the estate. To be qualified
for employment, the attorney must meet both of these
requirements. The attorney must not be "a creditor, equity
holder, insider or have an interest adverse to the estate."
Deborah D. Williamson, Esq., at Cox & Smith Incorporated, in San
Antonio, Texas, representing the MAGI Creditors' Committee,
relates that in interpreting the "disinterested" requirements, the
Fifth Circuit stated that courts faced with questions of counsel
disinterestedness and adverse interests must be "guided by the
[principle] that court-appointed attorneys are officers of the
court, and fiduciaries . . . and the court must strictly apply the
equitable principle that a fiduciary can only serve one master."
Consolidated Bancshares, 785 F.2d at 1256 n.7.
Consistent with these concerns, courts previously refused to
approve the retention of special counsel by debtors where the
proposed counsel also represented a director, officer or other
insider with potential claims against the estates.
Pursuant to this authority, Ms. Williamson contends that the
Mirant Debtors' proposed employment of Paul Hastings is
inappropriate because it is in conflict with the Bankruptcy Code
requirement that a professional retained by the state not hold or
represent any interest adverse to the estate. Paul Hastings may
not be able to carry out its duties to the Debtors in a manner
that will represent the best interests of the Debtors' estates
when the firm is representing a Mirant officer in connection with
an ongoing SEC investigation into Mirant's accounting policies, as
well as representing the Debtors in connection with, among other
things, "general corporate governance and operational matters
that arise in connection with the Debtors' business." These two
roles are inconsistent, particularly when the officer will have
claims against the Mirant estate for indemnification.
Furthermore, Ms. Williamson points out, it is entirely possible
that during the SEC investigation, the interests of the
individual Mirant officers and the Debtors' interests may
diverge, thereby requiring Paul Hastings to "serve two masters"
-- precisely the situation that concerned the Fifth Circuit in
Consolidated Bancshares. Unless Paul Hastings agrees to cease
its representation of any and all Mirant officers, directors and
other insiders, the Debtors' employment of Paul Hastings would be
inconsistent with the Bankruptcy Code and should not be approved.
Accordingly, the MAGI Committee asks the Court to deny the final
approval of Paul Hastings' employment.
U.S. Trustee Comments
William T. Neary, the U.S. Trustee for Region 17, believes that
in addition to Paul Hastings, the Debtors use Skadden, Arps,
Slate, Meagher & Flom LLP and Alston & Bird as counsel in
corporate governance and operational matters. The U.S. Trustee
is concerned that there may be duplication of efforts between
Paul Hastings and any other special counsel, which the Debtors
may have historically employed but for whom no Section 327(e)
application has yet been filed. (Mirant Bankruptcy News, Issue No.
8; Bankruptcy Creditors' Service, Inc., 609/392-0900)
MITEC TELECOM: Increases Private Placement Transaction by 20%
-------------------------------------------------------------
In accordance with the agency agreement signed with Desjardins
Securities Inc., Mitec Telecom Inc. (TSX: MTM) further announced
that it has increased the size of the offering by 20%.
Mitec Telecom, whose July 31, 2003 balance sheet shows a working
capital deficit of about CDN$1.6 million, is a leading designer
and provider of products for the telecommunications sector as well
as a variety of other industries. The Company sells its products
worldwide to network providers for incorporation into high-
performing wireless networks used in voice and data/Internet
communications. Additionally, the Company provides value-added
services from design to final assembly and maintains test
facilities covering a range from DC to 60 GHz. Headquartered in
Montreal, Canada, the Company also operates facilities in the
United States, the United Kingdom and China.
Mitec Telecom Inc. is listed on the Toronto Stock Exchange under
the symbol MTM. On-line information about Mitec is available at
http://mitectelecom.com
N.C. TECHNOLOGICAL DEVELOPMENT: Chapter 11 Case Summary
-------------------------------------------------------
Debtor: North Carolina Technological Development Authority, Inc
2 Davis Drive
POB 13169
Durham, NC 27709
Bankruptcy Case No.: 03-83278
Type of business: The N.C. Technological Development Authority,
a nonprofit organization, was founded in 1992
to help nurture small technology companies
across the state
Chapter 11 Petition Date: October 3, 2003
Court: Middle District of North Carolina (Durham)
Judge: William L. Stocks
Debtor's Counsel: John A. Northen, Esq.
Stephanie Osborne-Rodgers, Esq.
Northen Blue LLP
P. O. Box 2208
Chapel Hill, NC 27514-2208
919-968-4441
Total Assets: $4.5 million
Total Debts: $4.1 million
NORCRAFT: S&P Assigns B+ Corporate Rating with Stable Outlook
-------------------------------------------------------------
Standard & Poor's Ratings Services has assigned its 'B+' corporate
credit rating to kitchen and bathroom cabinet maker Norcraft
Companies LLC. The outlook is stable.
In addition, Standard & Poor's assigned its 'BB-' bank loan rating
to Norcraft's proposed $70 million senior secured credit facility
and its 'B-' rating to Norcraft's proposed $150 million of senior
subordinated notes due 2011. The ratings are based on preliminary
terms and conditions.
Eagan, Minn.-based Norcraft will have $195 million in debt
outstanding once the financing closes.
"The ratings reflect the company's limited product diversity
within a cyclical industry, modest sales base, aggressive
leverage, and thin cash flow protection measures," said Standard &
Poor's credit analyst Dominick D'Ascoli. "Partly offsetting these
negative factors are the company's good cost position and
experienced management." Mr. D'Ascoli said that the bank loan
rating reflects the strong prospects for full recovery in a
default or bankruptcy scenario.
Norcraft is a North American manufacturer of kitchen and bathroom
cabinetry with last 12-month sales ended Aug. 31, 2003, of $238
million. This modest level of revenue ranks the company as the
fifth-largest cabinet maker in North America, as the industry is
highly fragmented with more than 5,000 manufacturers.
NORTHWEST AIRLINES: Flies 5.56B Revenue Passenger Miles in Sept.
----------------------------------------------------------------
Northwest Airlines (Nasdaq: NWAC) announced a systemwide September
load factor of 77.4 percent, 2.7 points above September 2002.
Northwest flew 5.56 billion revenue passenger miles and 7.18
billion available seat miles in September 2003, a traffic decline
of 2.9 percent and a capacity decline of 6.2 percent versus
September 2002.
Northwest Airlines (S&P, B+ Corporate Credit Rating) is the
world's fourth largest airline with hubs at Detroit,
Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,500 daily departures. With its travel partners,
Northwest serves nearly 750 cities in almost 120 countries on six
continents. In 2002, consumers from throughout the world
recognized Northwest's efforts to make travel easier. A
2002 J.D. Power and Associates study ranked airports at Detroit
and Minneapolis/St. Paul, home to Northwest's two largest hubs,
tied for second place among large domestic airports in overall
customer satisfaction. Readers of TTG Asia and TTG China named
Northwest "Best North American airline."
For more information pertaining to Northwest, visit Northwest's
Web site at http://www.nwa.com
NRG ENERGY: Court Okays Houlihan Loker as Committee's Advisors
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of the NRG Energy
Debtors sought and obtained the Court's authority to retain
Houlihan Lokey Howard & Zukin as its Financial Advisors pursuant
to the terms of an Engagement Letter, nunc pro tunc to May 21,
2003.
Houlihan Lokey's Financial Restructuring Group, which has more
than 75 professionals, is one of the leading advisors and
investment bankers to debtors, bondholder groups, secured and
unsecured creditors, acquirers and other parties-in-interest
involved in financially troubled companies, both in and outside
of bankruptcy. Houlihan Lokey was originally retained, along
with Bingham, to represent an ad hoc committee of NRG
noteholders, which during the prepetition period held, in the
aggregate, in excess of $2,100,000,000 face amount of NRG's
public notes.
Pursuant to the terms of the Engagement Letter, Houlihan Lokey
will render these professional services to the Committee:
(a) Evaluating the Debtors' assets and liabilities;
(b) Analyzing and reviewing the Debtors' financial and
operating statements;
(c) Analyzing the Debtors' business plans and forecasts;
(d) Evaluating all aspects of the Debtors' near term
liquidity, including all available financing alternatives;
(e) Providing specific valuation or other financial analyses
as the Committee may require in connection with these
cases;
(f) Assessing the financial issues and options concerning any
proposed restructuring transaction; and
(g) Preparing analyzing and explaining any restructuring
transaction to various constituencies.
Committee Chairman James Schaeffer discloses that Houlihan Lokey
will be paid:
A. Monthly Fee
Houlihan Lokey will be paid a $200,000 monthly fee.
B. Transaction Fee/Tail Period
On the consummation of a Transaction, Houlihan Lokey will be
paid in cash an additional fee equal to 0.40% of recoveries
received by all Note Holders. Approximately 25% of any
Monthly Fees earned and received by Houlihan Lokey for the
7th, 8th and 9th months of the engagement, and 50% of any
Monthly Fees earned and received by Houlihan Lokey for the
10th month and thereafter, will be credited against the
Transaction Fee. The Transaction Fee will be paid upon
the consummation of a Transaction either:
-- during the term of the Engagement Letter, or
-- within 12 months of the effective date of termination of
the Engagement Letter -- the Tail Period.
However, Houlihan Lokey will only be entitled to a Transaction
Fee for a Transaction that is consummated during the Tail
Period if:
-- the Transaction incorporates significant elements of a
structure proposed or designed by Houlihan Lokey or,
-- in the case of a Transaction involving a merger with or
acquisition by a Purchaser, the Transaction involves a
Purchaser with whom Houlihan Lokey had substantial
contact with regarding the Transaction during the term
of the Engagement Letter.
C. Reimbursement of Expenses
Upon request, Houlihan Lokey will be promptly reimbursed for
all out-of-pocket expenses reasonably incurred before
termination in connection with the matters contemplated by the
Engagement Letter.
D. Indemnification
Debtor NRG Energy, Inc. will indemnify Houlihan Lokey to
the fullest extent lawful, from and against any and all
losses, claims, damages or liabilities, joint or several,
arising out of or related to the Engagement Letter, any
actions taken or omitted to be taken by an Indemnified Party
in connection with Houlihan Lokey's provision of services to
the Ad Hoc Committee, or any Transaction or proposed
Transaction contemplated. In addition, the Debtors will
reimburse the Indemnified Parties for any legal or other
expenses reasonably incurred by them in respect thereof at
the time the expenses are incurred; provided, however, there
will be no liability under the foregoing indemnity and
reimbursement agreement for any loss, claim, damage or
liability which is finally judicially determined to have
resulted primarily from the willful misconduct, gross
negligence, bad faith or self-dealing of any Indemnified
Party.
Bingham, the Ad Hoc Committee, and the Debtors will not affect
any settlement or release from liability in connection with
any matter for which an Indemnified Party would be entitled to
indemnification from the Debtor unless, the settlement or
release contains a release of the Indemnified Parties
reasonably satisfactory in form and substance to Houlihan
Lokey. Bingham, the Ad Hoc Committee, and the Company will
not be required to indemnify any Indemnified Party for any
amount paid or payable by the party in the settlement or
compromise of any claim or action without the prior written
consent of the Ad Hoc Committee and the Company.
Neither Houlihan Lokey nor any other Indemnified Party will
have any liability, regardless of the legal theory advanced,
to Bingham, the Ad Hoc Committee, the Debtors or any other
person or entity related to or arising out of Houlihan Lokey's
engagement, except for any liability for losses, claims,
damages, liabilities or expenses incurred by Bingham, the Ad
Hoc Committee or the Debtors which are finally judicially
determined to have resulted primarily from the willful
misconduct, gross negligence, bad faith or self-dealing of any
Indemnified Party.
Houlihan Lokey's obligations are solely corporate obligations,
and no officer, director, employee, agent, shareholder or
controlling person of Houlihan Lokey will be subjected to any
personal liability whatsoever to any person, nor will any
claim be asserted by or on behalf of any other party to the
Engagement Letter or any person relying on the services
Provided. The Debtors' obligations with respect to any and
all payments owing to Houlihan Lokey and the indemnification,
reimbursement, contribution and other similar obligations of
the Debtors under the Engagement Letter will survive any
termination of the Engagement Letter.
For purposes of this Application and for Houlihan Lokey's
postpetition retention, each occurrence of the term "Ad Hoc
Committee" in the Engagement Letter will be deemed to refer to
the Committee. Furthermore, the final sentence of paragraph 3 of
the Engagement Letter is deemed not to include the words "or
fiduciary".
Houlihan Lokey has researched its client databases to determine
whether it had any relationships with other Interested Parties.
However, Houlihan is unable to state with certainty that every
client representation or other connection has been disclosed.
Houlihan Lokey provides that if discovered, it will file a
supplemental affidavit on the additional information with the
Court as promptly as possible.
Bradley C. Geer, a Director of Houlihan Lokey attests that
neither Houlihan Lokey nor any of its professionals hold or
represent any interest adverse to the Debtors in the matter for
which Houlihan Lokey is proposed to be retained. Houlihan Lokey
is a "disinterested person" as defined in Section 101(14) of the
Bankruptcy Code. (NRG Energy Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
OAKWOOD HOMES: Bankruptcy Court Approves Disclosure Statement
-------------------------------------------------------------
Oakwood Homes Corporation (OTC Bulletin Board: OKWHQ) announced
that the United States Bankruptcy Court has entered an order
approving the Company's disclosure statement and authorizing the
Company to solicit a vote of its creditors to approve the
Company's proposed plan of reorganization.
Myles E. Standish, Chief Executive Officer, commented: "Obtaining
the Court's permission to seek approval of the Company's
reorganization plan is one of the final steps in our efforts to
emerge from Chapter 11. The reorganization plan provides for the
conversion of the Company's $303 million of senior unsecured debt,
its guarantees of principal and interest on $275 million principal
amount of subordinated REMIC securities and certain other
unsecured indebtedness into 100% of the Company's post-
restructuring common shares. The reorganization plan also provides
for the conversion of the Company's existing common shares into
out-of-the-money warrants to purchase approximately 10% of the
post-restructuring common shares.
"Under our plan, Oakwood would emerge from bankruptcy free of
substantially all long-term debt. Moreover, while in bankruptcy
the Company has streamlined and strengthened its operations,
closed poorly performing units and exited less desirable markets.
Upon emergence, the Company should be a strong industry
competitor, well positioned to capitalize on the eventual recovery
in the manufactured housing industry, and with the resources to
operate with stability until industry conditions improve.
"Throughout the bankruptcy process, we have worked closely with
the Official Committee of Unsecured Creditors, and are pleased
that the Committee is urging all the Company's unsecured creditors
to vote in favor of the reorganization plan. We appreciate the
Committee's assistance, counsel and support."
The Company plans to distribute soon the disclosure statement and
ballot to those bankruptcy claimants entitled to vote on the plan,
and to target a confirmation hearing before the Court in late
November.
Implementation of the proposed plan is subject to certain
conditions, including closing new financing facilities to enable
the Company to pay the costs of exiting bankruptcy and to provide
for the Company's short-term liquidity and credit support needs
post-emergence. The Company has received from Greenwich Capital
Financial Products, Inc. a commitment letter for $250 million in
exit financing to replace both the Company's debtor-in-possession
credit facilities and the loan purchase facility that provides
short-term liquidity for warehousing loans in the consumer finance
company.
"We are pleased to be taking this big step forward in moving to
conclude the bankruptcy case," Standish concluded. "We are very
appreciative of the ongoing support and confidence of the
Committee, our creditors, suppliers, retail customers, independent
retailers and employees."
Oakwood Homes Corporation and its subsidiaries are engaged in the
production, sale and financing of manufactured housing throughout
the United States. The Company's products are sold through
Company-owned stores and an extensive network of independent
retailers.
OMNOVA SOLUTION: Ratings Lowered on Weaker Financial Performance
----------------------------------------------------------------
Standard & Poor's Ratings Services has lowered its corporate
credit rating on OMNOVA Solutions Inc., to 'BB-' from 'BB', citing
lower than expected operating and financial performance. The
current outlook is negative.
Fairlawn, Ohio-based OMNOVA Solutions, with about $679 million of
annual sales and approximately $212 million of outstanding debt,
manufactures emulsion polymers, decorative and functional
surfaces, such as commercial wallcovering, and specialty
chemicals.
"The downgrade reflects concerns that lower than expected
operating results are likely to further delay an improvement in
the company's financial profile," said Standard & Poor's credit
analyst Franco DiMartino. Profitability and cash flow have been
negatively affected by elevated raw material costs and continued
weakness in key end markets due to lackluster economic conditions.
The shortfall in cash flow has increased leverage and further
weakened the financial profile.
The ratings on OMNOVA reflect the company's fair market positions
and decent product diversification, tempered by competitive
markets, exposure to volatile raw material costs and an aggressive
financial profile.
ONE PRICE CLOTHING: Deloitte & Touche Airs Going Concern Doubt
--------------------------------------------------------------
One Price Clothing Stores Inc. incurred operating losses during
its three most recent fiscal years and the six-month period ended
August 2, 2003, and as of August 2, 2003, the Company had a
substantial working capital deficit.
The Company believes that these recent losses were exacerbated by
difficult economic conditions existing in the retail market within
which the Company operates. Since the end of fiscal 2002, the
Company has experienced a negative sales trend as compared with
the same period in prior fiscal years, even after adjusting for
the decrease in the number of stores the Company operates. The
Company's net sales for the first twenty-six weeks of fiscal 2003
were 12.5% below those for the same twenty-six weeks of fiscal
2002 which is well below the level of sales assumed in the
Company's fiscal 2003 business plan. Comparable store sales for
the first twenty-six weeks of fiscal 2003 decreased 10.3% as
compared with the same period in fiscal 2002. This difficult sales
trend occurred during one of the historically strongest net sales
periods of the Company's fiscal year. The primary reasons
identified for the fiscal 2003 year to date decrease in net sales
were imbalances in select merchandise categories, continued
weakness in consumer spending on apparel, cooler and wetter than
normal weather conditions in many of the Company's markets, and
continued economic uncertainty.
Deloitte & Touche LLP, of Greenville, South Carolina, the
Company's independent auditors have stated: "We have previously
audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet of
the Company as of February 1, 2003, and the related consolidated
statements of operations, shareholders' equity, and cash flows for
the year then ended (not presented herein); and in our report
dated May 16, 2003, we expressed an unqualified opinion on those
consolidated financial statements, and included an explanatory
paragraph concerning matters that raise substantial doubt about
the Company's ability to continue as a going concern."
Historically, the Company's primary needs for liquidity and
capital have been to fund its new store expansion and the related
investment in merchandise inventories. The Company historically
has relied upon cash provided by operations and borrowed funds
from its revolving credit facility to meet its liquidity needs.
During the Company's three most recent fiscal years, the Company
has primarily relied upon its credit facilities to offset cash
used in operations and to expand, relocate and open new stores.
Because of its existing levels of debt, management considers its
primary risk to liquidity to be its ability to generate adequate
levels of net sales and gross margin while effectively controlling
operating expenses. The Company relies on net sales and resultant
gross margin to provide sufficient cash flow to meet its financial
obligations. When net sales and gross margin levels have not been
sufficient in the past, the Company has drawn funds under its
credit facilities and/or negotiated with its lenders to provide
additional availability to meet its liquidity needs.
On June 27, 2003, the Company obtained $7,000,000 in additional
funding as a result of closing a transaction with Sun One Price,
LLC, an affiliate of Sun Capital Partners, Inc. (a private
investment firm based in Boca Raton, Florida) and three co-
investors. In exchange for the $7,000,000, the Company issued to
Sun One Price, 5,119,101 shares of its common stock, 100 shares of
its preferred stock (which are convertible into 11,964,500 shares
of common stock immediately upon amendment of the Company's
Certificate of Incorporation) and an anti-dilution warrant, the
result of which gave Sun One Price 85% of the voting rights of the
Company's common stock. Upon conversion of the 100 shares of
preferred stock to common stock, Sun One Price will own
approximately 85% of the Company's common shares outstanding and
will retain approximately 85% of the associated voting rights. The
anti-dilution warrant will allow Sun One Price to maintain its 85%
ownership position upon the exercise of options or warrants by
other investors. In addition, the Company also amended its
existing credit facility to, among other things, increase the
maximum credit from $44,650,000 to $54,650,000. The completion of
the equity investment and the amendments to the credit facility
was subject to certain conditions, including the Company obtaining
certain concessions from its existing vendors and finalization of
documentation reflecting the agreed upon enhancements to its
existing credit facility. These concessions included forgiveness
of $5,915,000 and deferral of up to 36 months of $4,099,000 of
amounts the Company owed to such vendors as of June 27, 2003. The
deferred amount bears interest at 5% per year. These conditions
were satisfied and the stock purchase and related transactions
closed on June 27, 2003.
The Company's credit facilities consist of a revolving credit
agreement and term loan with its primary lender, a mortgage loan
collateralized by the Company's corporate offices and distribution
center and letter of credit facilities. Collectively, the credit
facilities contain certain financial and non-financial covenants,
with which the Company was in compliance at August 2, 2003.
The Company's ability to meet all obligations as they come due for
the twelve months ending July 2004, including planned capital
expenditures, is dependent upon the success in implementing its
strategies. There can be no assurance that the Company will be
successful in implementing these strategies.
ONENAME CORPORATION: Case Summary & 20 Largest Unsec. Creditors
---------------------------------------------------------------
Debtor: OneName Corporation
12233 Corliss Avenue North
Seattle, WA 98102-3007
Bankruptcy Case No.: 03-22581-PHB
Type of business: The company has invented a patented means to
provide persistent internet identity, i.e.,
the ability for any resource on the internet
to maintain an ongoing identity that can
cross different companies, websites, and
other domains.
Chapter 11 Petition Date: September 30, 2003
Court: Western District of Washington (Seattle)
Judge: Philip H. Brandt
Debtor's Counsel: Lawrence R. Ream, Esq.
Richard G Birinyi, Esq.
Bullivant Houser Bailey PC
1601 5th Ave #2300
Seattle, WA 98101-1618
(206) 292-8930
Email: ECF.Bankruptcy@Bullivant.com
Total Assets: $9,783,337 (as of September 29, 2003)
Total Debts: $4,457,580 (as of September 29, 2003)
List of Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Marcus J. LeMaitre $94,012
121 Bridgette Place
Leesburg, VA 20176
Loren J. West $67,590
5717 95th Place S.W.
Mukilteo, WA 98275
Theodore L. McCaugherty $59,479
1420 5th Avenue, #2200
Seattle, WA 98101
Scott E. Kelly $57,904
5103 Tonyawatha Trail
Monona, WI 53716
XNS Public Trust Organization $55,000
12233 Corliss Ave. N.
Seattle, WA 98133
Lance Hood $36,868
17909 N.E. 106th Ct.
Redmond, WA 98052
David H. Haines $33,843
1114 2nd Ave. North
Seattle, WA 98109
Gordon Stowe $28,281
P.O. Box 130413
Carlsbad, CA 92013
David G. Watkins $22,500
Complete ID
P.O. Box 130413
Carlsbad, CA 92013
John David McAlpin $22,308
5615 S.W. Teig Place
Seattle, WA 98116
AT&T Media Services $21,695
18 W. Mercer St., #100
Seattle, WA 98119
Peter Andrijeski $17,177
926 N. 93rd Street
Seattle, WA 98103
David Arnold $15,840
8410 N.E. 27th Place
Bellevue, WA 98004
Barbara L. Wilkie $14,770
729 N. 80th
Seattle, WA 98103-4311
Rich Holladay $13,193
7082 92nd Avenue S.E.
Mercer Island, WA 98040
James Barry Briggs $13,094
7729 40th Avenue N.E.
Seattle, WA 98115
Mercury Interactive $11,968
P.O. Box 200876
Dallas, TX 75320-0876
Tim Buckley $11,436
4805 Wynneford Way
Raleigh, NC 27614
Talisma Corp. $10,845
4600 Carillon Point
Kirkland, WA 98033
James C. Yan $9,620
5210 126th St. S.W.
Mukilteo, WA 98275
OUTSOURCING SOLUTIONS: Missouri Court Intends to Confirm Plan
-------------------------------------------------------------
Outsourcing Solutions Inc. said that the U.S. Bankruptcy Court for
the Eastern District of Missouri, at the close of the confirmation
hearing yesterday, announced its intention to confirm the
company's amended plan of reorganization.
A formal written order is expected to be entered soon, and OSI
anticipates emerging from Chapter 11 in the near future.
"This is a great day for OSI, our clients and our associates. We
will now be able to emerge from Chapter 11 with the strongest
balance sheet in our history and the resources to put this company
back on a growth track," said Kevin T. Keleghan, president and
CEO. "The remarkable speed with which OSI proceeded from a
voluntary Chapter 11 filing in mid-May to plan confirmation in
October - a period of just over four months - is a tribute to the
hard work of our associates, the loyalty of our clients and
vendors, and the support of our creditors, particularly our Senior
Secured Lenders."
Under the terms of the plan, OSI's long-term debt has been reduced
from approximately $600 million at the time of its voluntary
Chapter 11 filing in May to approximately $175 million.
"While much of our recent focus has necessarily been on fixing our
balance sheet, we have also taken important steps to strengthen
the company operationally and to enhance our position as a leading
provider of business process outsourcing services across the
credit-to-cash cycle," Keleghan said. "I could not be more
optimistic or excited about the future of this company."
The reorganization plan calls for the company's secured creditors
to receive 69 percent of the company's fully diluted equity, with
Madison Dearborn Partners, one of the largest private equity firms
in the U.S, acquiring 18.5 percent of the company's equity through
a new investment, and certain other creditors receiving 5 percent
of the equity. In addition, 7.5 percent of the equity has been
reserved for a management performance plan.
OSI is a leading business process outsourcing firm providing
receivables management services, which link a company's cash flow
objectives with credit management policies from beginning to end
of the credit-to-cash cycle. By improving the revenue cycle, OSI
enhances the financial performance of America's leading companies,
as well as government entities, healthcare providers, educational
institutions and other credit grantors. With industry-specific
strategies and services, OSI delivers results that improve the
bottom line through accelerated cash flow, lower operating costs,
reduced bad debt expense, and improved customer retention. St.
Louis-based OSI provides receivables management outsourcing to a
blue-chip roster of Fortune 500 clients. For more information
about OSI, visit http://www.osioutsourcing.com
PARTNERS MORTGAGE: UST Appoints Official Creditors' Committee
-------------------------------------------------------------
The United States Trustee for Region 18 appointed 7 members to an
Official Committee of Unsecured Creditors in Partners Mortgage
Corporation's Chapter 11 cases:
1. Seattle University
Attn: Denis S. Ransmeier, Vice President
900 Broadway
Seattle, WA 98122-4340
(206) 296-6150
(206) 296-6147 (fax)
denisr@seattleu.edu
2. W. Russell Daggatt
933 N. Northlake Way, Boat 13
Seattle, WA 98103
(206) 910-1515
russ@daggatt.com
3. Nieder Family
Attn: Daniel Nieder
5363 S. Kenyon St.
Seattle, WA 98118
(206) 760-6066
(206) 760-6065 (fax)
danielnieder@comcast.net
4. Stuart Heath
8321 - 23rd Avenue NW
Seattle, WA 98117
(206) 782-5200
stuart@elliottbay.net
5. Don and Janine Hasson
7515 - 86th Avenue SE
Mercer Island, WA 98040
(206) 232-2812
(425) 871-6125 (fax)
donhasson@hotmail.com
6. Ronald G. Neubauer
2033 - 6th Avenue, Room 925
Seattle, WA 98121
(206) 448-5666
(206) 622-5520 (fax)
rgn@neucap.net
7. C. Jack Jackson
8460 Benotho Place
Mercer Island, WA 98040
(206) 232-7237
(206) 275-0669 (fax)
coooum@aol.com
Official creditors' committees have the right to employ legal and
accounting professionals and financial advisors, at the Debtors'
expense. They may investigate the Debtors' business and financial
affairs. Importantly, official committees serve as fiduciaries to
the general population of creditors they represent. Those
committees will also attempt to negotiate the terms of a
consensual chapter 11 plan -- almost always subject to the terms
of strict confidentiality agreements with the Debtors and other
core parties-in-interest. If negotiations break down, the
Committee may ask the Bankruptcy Court to replace management with
an independent trustee. If the Committee concludes reorganization
of the Debtors is impossible, the Committee will urge the
Bankruptcy Court to convert the Chapter 11 cases to a liquidation
proceeding.
Headquartered in Mercer Island, Washington, Partners Mortgage
Corporation is a high-yield mortgage backed income fund. The
Company filed for chapter 11 protection on September 26, 2003
(Bankr. W.D. Wash. Case No. 03-22404). Shelly Crocker, Esq., at
Crocker Kuno LLC represents the Debtor in its restructuring
efforts. When the Company filed for protection from its
creditors, it estimated its debts and assets of over $50 million
each.
PERLE SYSTEMS: Royal Capital Agrees to Forbear Until October 15
---------------------------------------------------------------
Perle Systems Limited (OTCBB: PERL; TSX: PL), a leading provider
of networking products for Internet Protocol and e-business
access, announced that Royal Capital Management Inc., the holder
of all of Perle's senior secured debt, who previously announced
their intention to reorganize Perle's debt and capital structure,
has extended the Forbearance Agreement between the companies to
October 15, 2003.
This extension is made to allow the members of the special
committee of Perle's independent directors further time to
conclude its review of Roycap's proposal for the reorganization of
Perle's debt and capital structure, and to make a recommendation
to the full board. While the parties indicate that they are
considering various restructuring alternatives, Perle believes the
restructuring would in all likelihood yield little or no value to
holders of their common shares, given the size of the secured and
unsecured debt.
In addition, Perle has applied for and received permission from
the Toronto Stock Exchange to delist its common shares which, as
previously announced, were suspended from trading on September 4,
2003. This delisting will take effect at the close of business on
October 7, 2003.
Perle Systems is a leading developer, manufacturer and vendor of
high-reliability and richly featured networking products. These
products are used to connect remote users reliably and securely to
central servers for a wide variety of business applications. Perle
specializes in Internet Protocol connectivity applications,
including a focus on mid-size IP routing solutions. Product lines
include routers, remote access servers, serial/terminal servers,
console servers, emulation adapters, multi-port serial cards,
multi-modem cards, print servers and network controllers. Perle
distinguishes through extensive networking technology, depth of
experience in major real-world network environments and long-term
distribution and VAR channel relationships in major world markets.
Perle has offices and representative offices in 13 countries in
North America, Europe and Asia and sells its products through
distribution channels worldwide.
PG&E NATIONAL: Wins Court Approval to Change Company Name
---------------------------------------------------------
National Energy & Gas Transmission, Inc., announced that the U.S.
Bankruptcy Court for the District of Maryland has authorized this
new company name. Formerly known as PG&E National Energy Group,
the change reflects NEGT's pending separation from its parent,
PG&E Corporation (NYSE: PCG).
While the change is immediate and the company is now phasing in
the new name, NEGT will not become legally separated from PG&E
Corporation until NEGT emerges from bankruptcy and its Plan of
Reorganization is effective. If implemented, PG&E Corporation's
equity interest in NEGT would be eliminated.
The company's subsidiaries also have changed their names to delete
references to PG&E. The new names include Gas Transmission
Northwest Corporation (formerly PG&E Gas Transmission, Northwest
Corporation), which is not in bankruptcy.
The company's other major subsidiary, USGen New England, Inc. did
not change its name. USGenNE filed Chapter 11 in July and its case
is being separately administered.
Headquartered in Bethesda, Md, NEGT voluntarily filed for Chapter
11 on July 8, 2003, as part of its ongoing restructuring efforts.
The company has more than 7,300 megawatts of generation including
a mix of natural gas, coal/oil, hydroelectric, waste coal and wind
power at numerous facilities across the country. With more than
1,350 miles of gas pipelines, the company's Pacific Northwest
system has the ability to transport 2.9 million cubic feet of
natural gas per day from cost-competitive abundant supplies in
Western Canada to markets in California, Nevada and the Pacific
Northwest. The company also owns the 80-mile North Baja pipeline
in Southern California, which has capacity to ship 500 million
cubic feet of natural gas from U.S. producing regions to markets
in Northern Mexico and Southern California.
PG&E NATIONAL: Creditors' Committee Hires Linowes and Blocher
-------------------------------------------------------------
The Official Committee of Unsecured the PG&E National Energy Group
Creditors sought and obtained the Court's authority to retain
Linowes and Blocher LLP as its bankruptcy attorneys.
The Creditors' Committee selected Linowes as counsel because of
the firm's extensive experience in the knowledge of business
reorganization.
Linowes will:
(a) assist and advise the Creditors' Committee in its
consultation with the NEG Debtors related to the
administration of the cases;
(b) attend meetings and negotiate with the NEG Debtors'
representative;
(c) assist and advise the Creditors' Committee in its
examination and analysis of the conduct of the NEG
Debtors' affairs;
(d) assist the Creditors' Committee in the review, analysis
and negotiation of any reorganization plans filed, and
assist in the review, analysis and negotiation of the
disclosure statement accompanying the Plan;
(e) assist the Creditors' Committee in the review, analysis
and negotiation of any financing agreements;
(f) take all necessary action to protect and preserve the
interests of the Creditor's Committee, including:
(1) the investigation and prosecution of certain actions,
on the Creditors' Committee's behalf;
(2) negotiations concerning all litigation in which the
NEG Debtors are involved; and
(3) if appropriate, review, analyze and reconcile claims
filed against the NEG Debtors' estate.
(g) generally prepare, on behalf of the Creditors' Committee,
all necessary motions, applications, answers, orders,
reports and papers in support of positions taken by the
Creditors' Committee;
(h) appear, as appropriate, before the Bankruptcy Court,
the Appellate Courts, other courts and tribunals, and the
United States Trustee, and protect the Creditors'
Committee's interests before the Courts and the United
States Trustee; and
(i) perform other necessary and appropriate legal services
as the Creditors' Committee may request.
JPMorgan Chase Bank's Agnes L. Levy, Co-Chairperson of the
Creditors' Committee, states that although the total cost for
Linowes' extensive legal services cannot be estimated, Linowes
will be compensated on an hourly basis plus reimbursement of
actual and necessary expenses based on the firm's existing
standard rates. Linowes' standard hourly rates are:
Principal Attorneys $140 - 315
Paralegals 100 - 120
The Creditors' Committee believes that Linowes is qualified to
represent it in the Chapter 11 case in a cost-effective,
efficient and timely manner.
Bradford F. Englander, one of the partners of the firm, relates
that although Linowes has represented certain NEG creditors, it
is in matters not related to the bankruptcy case. Mr. Englander
assures the Court that Linowes does not represent any interest
adverse to the Creditors' Committee. (PG&E National Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
PHILIP MORRIS: Appeals Panel Affirms Dismissal in Medicare Case
---------------------------------------------------------------
Philip Morris USA said the Second Circuit U.S. Court of Appeals
has affirmed the dismissal of a lawsuit seeking damages on behalf
of a class of private plaintiffs under the federal Medicare
Secondary Payer Act, one of the laws that formed the original
basis for the Justice Department's lawsuit against the tobacco
industry.
"The plaintiffs' lawyers were asking the appeals court to create
an avenue for double recovery in smoking cases, and the appeals
court wisely rejected the invitation," said William S. Ohlemeyer,
Philip Morris USA vice president and associate general counsel.
"The court rejected the plaintiffs' theory that the companies
should be treated more like insurance companies than product
manufacturers."
The appellate court ruling was issued late Wednesday in the Mason
case, which had been dismissed by U.S. District Court Jack B.
Weinstein in July 2002.
The appellate ruling affirms the correctness of the decision by
the U.S. District Court for the District of Columbia, which
dismissed MSP-based claims brought by the Department of Justice
against the tobacco industry. The Second Circuit extensively cites
the District of Columbia court's opinion.
PILLOWTEX: Committee Wants Nod to Tap BDO Seidman as Accountant
---------------------------------------------------------------
BDO Seidman LLP, a New York registered limited liability
partnership, is a national tax and consulting firm consisting in
part of certified public accountants, with offices located at 330
Madison Avenue, New York, New York, and other locations
throughout the United States. Chip Stem, Committee Co-Chairman,
relates that during the administration of these Chapter 11 cases,
it will be necessary to retain accountants to:
(a) analyze the Pillowtex Debtors' financial operations, as
necessary;
(b) analyze the Debtors' real property interests, including
lease assumptions and rejections and potential real
property asset sales;
(c) perform claims analysis for the Committee, including
analysis of reclamation claims;
(d) verify the physical inventory of merchandise, supplies,
equipment and other and liabilities, as necessary;
(e) assist the Committee in its review of monthly statements
of operations to be submitted by the Debtors;
(f) assist the Committee in its evaluation of cash flow and
other projections prepared by the Debtors;
(g) scrutinize cash disbursements on an on-going basis for the
period subsequent to the Petition Date;
(h) analyze transactions with insiders, related and affiliated
companies;
(i) analyze transactions with the Debtors' financing
institutions;
(j) prepare and submit reports to the Creditors' Committee to
aid them in evaluating any proposed plan of liquidation;
(k) assist the Committee in its review of the financial
aspects of a plan of liquidation to be submitted by the
Debtors, or in arriving at a proposed liquidation plan;
(l) attend meetings of Creditors and conferences with
representatives of the creditor groups and their counsel;
(m) prepare hypothetical orderly liquidation analysis;
(n) monitor the sale or liquidation of the company; and
(o) perform other necessary services as the Committee or the
Committee's counsel may request from time to time with
respect to the financial, business and economic issues
that may arise.
By this application, the Official Committee of Unsecured
Creditors seeks the Court's authority to retain BDO Seidman, LLP
as its accountant, nunc pro tunc to August 11, 2003. Mr. Stem
relates that BDO is thoroughly familiar with and experienced in
Chapter 11 matters and has served as accountants for creditors'
committees and debtors in many other Chapter 11 cases.
Gerard J. D'Amato, a member of BDO, discloses that BDO's request
for compensation for professional services rendered for the
Committee will be:
-- based on the time expended to render the services;
-- at billing rates commensurate with the experience of the
person performing the services; and
-- computed at the hourly billing rates customarily charged by
BDO for those services.
Expenses will be charged at actual costs incurred, and will
include charges for copying, travel, telephone, computer rental,
etc.
Subject to changes in the ordinary course of its business, BDO's
current hourly billing rates are:
Partners $330 - 600
Senior Managers 215 - 480
Managers 195 - 330
Seniors 140 - 245
Staff 85 - 185
BDO's professionals bill their time in one-tenth hour increments.
In the normal course of business, BDO revises its hourly rates
during the year and BDO requests that the rates be revised to the
regular hourly rates, which will be in effect at that time.
To Mr. D'Amato's knowledge, neither BDO nor any of its members
had any business, professional or other connection with the
Debtors or any other party-in-interest, except that BDO
represented the Committee in connection with the Debtors initial
Chapter 11 bankruptcy petition filed on November 14, 2000.
Mr. D'Amato maintains that neither BDO nor any of its members is
related to the Debtors, the Debtors' officers or attorneys, or
holds any interest materially adverse to the estates in the
matter upon which BDO is to be engaged. Mr. D'Amato assures the
Court that BDO is a "disinterested person" within the meaning of
Section 101(14) of the Bankruptcy Code, and does not represent
any interest adverse to the Debtors or their estates in the
matters upon which it is seeking to be engaged.
In addition, Mr. D'Amato continues, neither BDO nor any of its
members has any business relationships with those parties, which
are or may be creditors of the Debtors, except:
(a) For previously performed assurance, tax or other services
for these creditors or parties-in-interest:
-- Parkdale Mills Inc.,
-- Foothill Capital Corporation,
-- Credit Suisse First Boston,
-- Southern Container Corporation,
-- Bank of America,
-- Congress Financial Corporation,
-- Comerica Bank, and
-- Fleet Bank.
Fees for each of these engagements represent less than 1%
of BDO's annual revenues, and relate to matters totally
unrelated to the case for which BDO is seeking to be
engaged.
(b) For previously or presently performed assurance, tax or
other services for these creditors or parties-in-interest:
-- El DuPont,
-- Continental Casualty Company,
-- Societe Generale,
-- The CIT Group,
-- Credit Lyonnais,
-- Wells Fargo Bank,
-- Gotham Partners, L.P., and
-- KPMG.
Fees for each of these engagements represent less than 1%
of BDO's annual revenues, and relate to matters totally
unrelated to the case for which BDO is seeking to be
engaged.
(c) For cases, proceedings and transactions involving many
different creditors, shareholders, attorneys, accountants,
financial consultants, investment bankers and other
entities, some of which may be, or represent claimants and
parties-in interest in the Debtors' case. BDO does not
represent any entity in connection with the pending case
or have a relationship with any entity or professional
which would be adverse to the Committee or the Debtor or
its estate.
>From time to time, BDO has been retained and likely will continue
to be retained by certain creditors of the Debtors, but BDO
intends to use commercially reasonable efforts to limit any
engagements to matters unrelated to these Chapter 11 cases. BDO
has undertaken a detailed search to determine, and to disclose,
whether it represents or has represented any significant
creditors, equity security holders, insiders or other parties-in-
interest in any unrelated matters. BDO also searched its
internal database, sent out e-mails to all of its Partners and
employees and investigated all responses to its search. Despite
commercially reasonable efforts to identify and disclose BDO's
connections with parties-in-interest in the Debtors' cases, Mr.
D'Amato admits that BDO is unable to state with certainty that
every client representation or other connection has been
disclosed because:
-- BDO has a large national practice;
-- BDO serves clients through over 35 offices; and
-- the Debtors are a large international enterprise with
thousands of creditors and other relationships.
In this regard, if BDO discovers additional information that, in
BDO's reasonable opinion requires disclosure, BDO will file a
supplemental disclosure with the Court as promptly as possible.
(Pillowtex Bankruptcy News, Issue No. 51; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PLYMOUTH RUBBER: Sinks into Red Ink in 3rd Quarter Fiscal 2003
--------------------------------------------------------------
Plymouth Rubber Company, Inc. (Amex: PLR.A - News, PLR.B - News)
announced financial results for the third quarter of fiscal 2003
ended August 29, 2003.
Sales for the third quarter of fiscal 2003 decreased 6.4% to
$15,970,000, from $17,061,000 last year. Net income for the third
quarter of fiscal 2003 decreased to a loss of $1,118,000, or a
loss of $0.54 diluted earnings per share, from a profit of
$509,000, or a profit of $0.23 diluted earnings per share last
year.
For the first nine months of 2003, sales were $47,800,000, a 2.2%
decrease from $48,856,000 last year. Net income for the first half
decreased to a loss of $2,682,000, or a loss of $1.30 diluted
earnings per share, from a profit of $1,100,000, or a profit of
$0.52 diluted earnings per share last year. The first nine months
of fiscal 2002 included a $187,000 tax benefit from carryback of
net operating losses.
"Despite higher sales of electrical tapes, our third quarter sales
were extremely disappointing, mostly due to temporary production
cutbacks in the U.S. auto industry, and to delays in highway
construction funding," stated Maurice J. Hamilburg, Plymouth's
President and Co-CEO. "In September, our sales have been stronger
and our backlogs have grown. We have recently made additional
expense cuts which, when combined with higher volumes, should
produce considerable improvement in our fourth quarter."
Plymouth Rubber Company, Inc. manufactures and distributes plastic
and rubber products, including automotive tapes, insulating tapes,
and other industrial tapes and films. The Company's tape products
are used by the electrical supply industry, electric utilities,
and automotive and other original equipment manufacturers. Through
its Brite-Line Technologies subsidiary, Plymouth manufactures and
supplies highway marking products.
* * *
Liquidity and Capital Resources
Prior to December, 2002, the Company's term debt agreements had
contained various covenants specifying certain financial
requirements, including minimum tangible net worth, fixed charge
and EBITDA coverage ratios, working capital and maximum ratio of
total liabilities to net worth. In addition, the revolving
working capital credit facility and the real estate term loan
contain an acceleration provision, which can be triggered if the
lender determines that an event of default has occurred.
As of each quarter end from September 1, 2000 through August 30,
2002, the Company had been in violation of certain covenants of
its term debt facility and therefore, due to a cross default
provision, the Company had not been in compliance with a
covenant under its revolving working capital credit facility and
real estate term loan. As a result, all of the Company's term
loans (except for that of its Spanish subsidiary) had been
classified as current liabilities on the Company's Consolidated
Balance Sheet at the end of each fiscal quarter end. In
addition, during July 2002, the Company received a demand from
its primary term debt lender for the payment of their
outstanding loan balances in the amount of $8,658,000, which
represented the total of all future payments and accumulated
late fees, and a demand letter from a smaller equipment lender
for approximately $69,000 of payments due.
During 2002, the Company negotiated with these lenders and, in
November 2002, reached formal agreement to obtain relief from
their demands and to restructure existing term debt facilities.
Under the new arrangements, the term debt lenders accepted
significantly reduced principal payments over the next three
years, eliminated financial covenants, waived existing defaults
and rescinded demands for accelerated payment, in return for
enhanced collateral positions.
As of February 28, 2003, the Company had approximately $744,000
of unused borrowing capacity under its revolving line of credit
with its primary working capital lender, after consideration of
collateral limitations.
The Company's working capital position decreased from a negative
$2,339,000 at November 29, 2002 to a negative $3,600,000 at
February 28, 2003, due to a $1,846,000 increase in accounts
payable, a $822,000 decrease in accounts receivable, a $254,000
increase in the current portion of long term borrowings, a
$199,000 increase in short term debt, a $159,000 decrease in
prepaid and other current assets, and a $34,000 decrease in
cash, partially offset by a $1,283,000 increase in inventory,
and a $770,000 decrease in accrued expenses.
During the second quarter of 2002, the Company received a
funding waiver from the Internal Revenue Service for the
$855,000 payment due to its defined benefit plan for the year
ended November 30, 2001, conditioned on the Company satisfying
the minimum funding requirements for the plan years ending
November 30, 2002 and November 30, 2003. The Company had
notified the Pension Benefit Guarantee Corporation that the
Company intended to make the $1,262,000 contribution for the
plan year ending November 30, 2002 by the final due date of
August 15, 2003, instead of on a quarterly basis. During the
first quarter of 2003, the Company requested a partial funding
waiver from the Internal Revenue Service for $1,030,000 of the
$1,262,000 payment due for the plan year ending November 30,
2002.
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of
business. The negative working capital position of $3,600,000,
the funding requirement for the defined benefit plan of
$1,262,000 for the plan year ending November 30, 2002, the lack
of sales growth, and the overall risks associated with the
fiscal 2003 plan may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time.
POLAROID CORP: Asks Court to Approve Plan Solicitation Protocol
---------------------------------------------------------------
In connection with the filing the Third Amended Plan and
Disclosure Statement on September 11, 2003, the Polaroid Debtors
and the Official Committee of Unsecured Creditors ask the Court
to:
(a) approve procedures and materials employed to provide
notice of the disclosure statement hearing and the
confirmation hearing,
(b) set the date, time and location of the Confirmation
Hearing,
(c) establish a record date and voting deadline,
(d) determine the treatment of certain claims and interests
for notice and voting purposes,
(e) approve solicitation procedures for confirmation, and
(f) order all banks, brokerages, transfer agents and
clearinghouses to disseminate the appropriate solicitation
packages to the holders and cooperate with the Proponents
with respect to the solicitation process.
Currently, the Debtors propose Solicitation Procedures similar to
those proposed in connection with the filing of their Second
Amended Plan and Disclosure Statement, but with these
modifications:
(a) November 14, 2003 at 10:00 a.m., Eastern Time, will be the
Confirmation Hearing Date of the Plan;
(b) November 10, 2003 will be the deadline for filing and
serving objections to confirmation of the Plan;
(c) A copy of the Confirmation Hearing Notice will be included
in each of the Solicitation Packages to be mailed by the
Voting Agent no later than four business days after the
Court approves the Solicitation Procedures Order -- the
Solicitation Mailing Deadline -- to Class 3 Claim Holders
under the Plan, as well as the SEC, the District Director
of the Internal Revenue Service and the United States
Trustee;
(d) September 29, 2003 will be the Record Date for determining
the creditors and interest holders entitled to receive
Solicitation Packages, and vote to accept or reject the
Plan;
(e) November 10, 2003 at 4:00 p.m., Eastern Time, will be the
Voting Deadline by which all ballots accepting or
rejecting the Plan must be received by Donlin Recano
Company, Inc., the Voting Agent;
(f) Holders of Class 4 Intercompany Claims and Class 5
Polaroid Interests and Subordinated Claims are deemed to
have rejected the Plan and solicitation of the votes of
Classes 4 and 5 is unnecessary;
(g) October 31, 2003 at 4:00 p.m., Eastern Time, will be the
deadline for any creditor to file and serve a motion
pursuant to Rule 3018(a) of the Federal Rules of
Bankruptcy Procedure seeking temporary allowance of a
claim for voting purposes;
(h) The ballots that will be utilized in soliciting votes on
the Plan are:
(1) Ballot for Class 3 General Unsecured Claims;
(2) Beneficial Owner Ballot for Class 3 holders of 6-
3/4% Notes due 2002;
(3) Master Ballot for DTC Participants of 2002 Notes;
(4) Beneficial Owner Ballot for Class 3 holders of 7-
1/4% Notes due 2007;
(5) Master Ballot for DTC Participants of 2007 Notes;
(6) Beneficial Owner Ballot for Class 3 holders of 11-
1/2% Notes due 2006; and
(7) Master Ballot for DTC Participants of 2006 Notes;
(i) The only persons holding Class 3 Claims who will receive a
Solicitation Package are those:
-- who have timely filed proofs of claim that have not
been disallowed by an order of the Court entered on
or before the Record Date; or
-- whose claims are scheduled in the Schedules;
(j) The Voting Agent will transmit on or before the
Solicitation Mailing Deadline to the holders of claims in
Class 3, as of the Record Date, the Solicitation
Package containing:
-- the Plan,
-- the Disclosure Statement,
-- an appropriate ballot,
-- the Confirmation Hearing Notice, and
-- the Solicitation Procedures Order;
(k) No Solicitation Packages or other notices need be
transmitted to:
(1) holders of claims listed on the Debtors' Schedules
that have already been paid in full during these
cases or that are authorized to be paid in full in
the ordinary course of business pursuant to orders
previously entered by the Bankruptcy Court; or
(2) any person to whom the Debtors mailed a notice of
the meeting of creditors under Section 341 of the
Bankruptcy Code and the notice was returned marked
"undeliverable" or "moved - no forwarding address"
or for a similar reason, unless the Debtors have
been informed in writing by the person of that
persons new address;
(l) Creditors may not divide their claims or interests, or the
votes associated therewith, except as it may relate to the
procedures with respect to Master Ballots, and holders of
claims or interests who vote must vote all of their claims
or interests within a particular class either to accept or
reject the Plan; and
(m) With regards to counting the ballots, the Proponents
will retain the right to object to the validity of the
second Master Ballot on any basis permitted by law,
including under Bankruptcy Rule 3018(a) and, if the
objection is sustained, the first Master Ballot will then
be counted. (Polaroid Bankruptcy News, Issue No. 45;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
QUADRAMED CORP: Will Hold Investor Conference Call Tomorrow
-----------------------------------------------------------
QuadraMed Corporation (QMDC.PK) will hold a conference call with
the investment community on Wednesday, October 8, 2003 at 5:00 PM
Eastern Time (2:00 PM Pacific).
The call will be webcast live and available to the public via the
Investor Relations section of QuadraMed's Webpage at
http://www.quadramed.com Please note that the webcast is listen-
only. Listeners should access the website at 4:45 PM Eastern (1:45
PM Pacific) to register and to download and install any necessary
audio software. Webcast replays will be available on the website
after the call.
QuadraMed -- whose June 30, 2003 balance sheet shows a total
shareholders' equity deficit of about $10 million -- is dedicated
to improving healthcare delivery by providing innovative
healthcare information technology and services. From clinical to
patient information management and revenue cycle to health
information management, QuadraMed delivers real-world solutions
that help healthcare professionals deliver outstanding patient
care with optimum efficiency. Behind our products and services is
a staff of more than 850 professionals whose healthcare experience
has earned QuadraMed the trust and loyalty of its more than 1,500
customers. To find out more about QuadraMed, visit
http://www.quadramed.com
RADIO UNICA: Enters into Definitive Pact to Sell Station Group
--------------------------------------------------------------
Radio Unica Communications Corp. (OTC Bulletin Board: UNCA), has
entered into a definitive asset purchase agreement to sell its
station group to Multicultural Radio Broadcasting, Inc., a
privately held company.
The Company also announced that it is in discussions with third
parties to sell its radio network, as well as its promotions
company, Mass Promotions, Inc. Radio Unica will continue to
broadcast its Spanish language programming and otherwise operate
its business in the normal course through the closing of the
transaction.
Under the Multicultural agreement the Company will receive
approximately $150 million in cash for its radio stations.
Completion of the transaction is subject to bankruptcy court
approval, regulatory approvals and other conditions. It is
expected that the transaction will be completed by the second
quarter of 2004. The transaction will be effected as part of a
prepackaged bankruptcy in which holders of the Company's 11 3/4%
Senior Discount Notes would receive approximately $700 in cash per
$1,000 principal amount, all other creditors would receive 100% of
their claims, and stockholders would receive the remainder
currently estimated to be between $0.47 and $1.03 per share.
Holders of approximately 93% of the Company's outstanding Senior
Discount Notes have agreed to support the transaction and vote in
favor of the prepackaged bankruptcy. The proceeds of sales of the
Company's radio network and promotions subsidiary would contribute
to the total recovery described above, although Mass Promotions,
Inc. is not expected to file for bankruptcy.
CIBC World Markets Corp. acted as financial advisor to Radio Unica
in this transaction. PGP Capital Advisors, LLC., based in Los
Angeles, acted as financial advisor to Multicultural.
Radio Unica Communications Corp is based in Miami, Florida and its
operations include the Radio Unica Network and an owned and/or
operated station group covering U.S. Hispanic markets including
Los Angeles, New York, Miami, San Francisco, Chicago, Houston, San
Antonio, McAllen, Dallas, Fresno, Phoenix, Sacramento, and Tucson.
MultiCultural Radio Broadcasting, Inc. is a leading ethnic media
company. MultiCultural owns 34 AM and FM radio stations covering
ethnically diverse markets in the U.S. with programming in
Mandarin, Cantonese, Korean, Russian, Spanish, Vietnamese and
other languages.
READER'S DIGEST: S&P Ratchets Corporate Credit Rating Down to BB
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Reader's Digest Association Inc. to 'BB' from 'BB+' and
removed the ratings from CreditWatch, where they were placed on
April 30, 2003.
The rating outlook is negative.
Pleasantville, N.Y.-based Reader's Digest Association publishes
the world's highest circulating, paid magazine and is a leading
direct marketer of books. Total debt as of June 30, 2003 was $866
million.
"The downgrade is based on the company's earnings drop in the
fiscal year ended June 30, 2003, its weak operating outlook for
the first half of fiscal 2004, and Standard & Poor's concerns
regarding the company's increased business risk and uncertain
long-term growth prospects," said Standard & Poor's credit analyst
Hal Diamond. EBITDA fell roughly 16% in fiscal 2003 versus the
prior year, pro forma for a full-year contribution from the May
2002 $760 million Reiman Publications acquisition. The decline in
international profitability was not fully offset by reduced losses
in the U.S. direct marketing book business. EBITDA from
international businesses fell 53% in fiscal 2003 resulting from
lower response rates in its direct marketing book business.
Reader's Digest still expects weaker results in the first half of
fiscal 2004, because of lower international profitability and
higher investment spending. The company is making $20 million of
incremental investments in fiscal 2005 to fuel future growth. The
company also is implementing an operational restructuring with the
goal of reducing costs by $70 million by fiscal 2005. Reader's
Digest expects that cost reductions should improve profitability
in the second half of fiscal 2004, resulting in flat to slightly
lower operating performance for the full fiscal 2004.
Nevertheless, Standard & Poor's is concerned that the ongoing weak
international operating environment may continue to have a
negative effect on profitability.
RELIANCE GROUP: Liquidator Intends to Sell RNIC (Europe) to Omni
----------------------------------------------------------------
M. Diane Koken, Insurance Commissioner of Pennsylvania, in her
official capacity as Liquidator of Reliance Insurance Company,
asks the Commonwealth Court to approve the Sale and Purchase
Agreement of the Entire Issued Capital of Reliance National
Insurance Company (Europe) Limited.
Reliance National (UK) Limited is a wholly owned subsidiary of
RIC. RNUK owns all the shares of RNICE. The Liquidator wants to
sell all of the shares of RNICE to Omni Whittington Investments
(Guernsey) Limited.
RNICE's Business and Financial Condition
According to Ann B. Laupheimer, Esq., at Blank Rome LLP, in
Philadelphia, Pennsylvania, RNICE sold most of the same product
lines as RIC and wrote both direct insured contracts and assumed
insurance contracts of others, including RIC.
Often, RNICE participated with a "lead" insurer in providing
coverage pursuant to London Market Practice. In those
situations, RNICE followed the leader in settling claims by
accepting the claims handling recommendations of the lead
underwriter. RNICE in turn, reinsured most of its coverage and
much of the reinsurance was written pursuant to Master
International Treaties, which listed RNICE and numerous other RIC
affiliates as named reinsureds.
Total assets of RNICE peaked in 2000, and Retained Earnings
peaked in 1999. However, beginning in 2000, substantial losses
emerged and materially eroded the retained earnings and equity in
the company. RNICE voluntarily ceased writing new policies early
in 2001 and formally entered runoff later in the year.
RNICE's financial statements show retained earnings of
GBP25,900,000 and equity of GBP111,000,000 at the end of 1999.
RNICE suffered a net loss of GBP21,000,000 in 2000 and a further
net loss of GBP57,700,000 in 2001, which contributed to its
reduction in retained earnings to GBP12,700,000 at the end of
2000 and negative GBP51,300,000 at the end of 2001. In similar
fashion, its equity was reduced from GBP111,000,000 to
GBP97,800,000 to GBP33,800,000 at the end of 2001.
Perhaps even more telling from a financial soundness perspective,
as of December 31, 1999, RNICE's equity was 22.4% of its total
assets and 47.4% of the outstanding claims against it. As of
June 30, 2003, its equity was only 7.6% of its total assets and
9.3% of the outstanding claims. RNICE had value, but it was
declining rapidly. The decline in both of these ratios over this
time period is a cause for serious concern.
Liquidator's Efforts to Sell RNICE
In view of the long time it would take to run-off RNICE and in
view of the fact that RNICE had value for the Reliance Estate but
which value was deteriorating, on February 13, 2002, RNUK and the
Liquidator appointed KPMG Corporate Finance to provide financial
advice and services in connection with the proposed sale.
KPMG Corporate Finance is a division of KPMG LLP, which is a
limited liability company organized under the laws of England and
Wales. KPMG Corporate Finance is authorized by the United
Kingdom's Financial Services Authority to engage in certain
investment business activities, and provides advice and
assistance to clients on a range of corporate finance matters.
Specifically, KPMG was retained to assist RNUK in:
(a) preparing a summary of RNICE's business and affairs;
(b) soliciting interest from potential bidders in RNICE;
(c) assisting RNUK in identifying and contacting potential
bidders;
(d) distributing the summary to potential bidders on RNUK's
behalf;
(e) organizing and administering the due diligence process;
and
(f) analyzing and negotiating the expressions of interest and
offers received by RNICE.
KPMG advised RNUK to sell RNICE through a "controlled auction
process". This methodology was selected to help ensure that
RNICE, despite its financial difficulties, could make appropriate
disclosures of its financial condition and still be in a position
to maintain bargaining power with potential buyers.
In February 2002, KPMG and RNUK compiled a list of 30 potential
purchasers. The list included companies that specialized in run-
off situations and also global reinsurers, regional insurers and
insurers. It was determined that seven parties were unlikely to
bid based on funding constraints and were excluded from the short
list.
First Round of Bidding -- March to April 2002
Of the 23 potential purchasers initially solicited to bid for
RNICE, 14 requested further information with a view to submitting
an offer. Each of those entities was provided with an
information memorandum and question and answer sessions were
arranged between RNICE management and each of them. Of the 14,
six submitted detailed expressions of interest. After extensive
evaluation, RNUK determined that is was necessary to request
further clarity in proposed terms and means of funding with
respect to each of the bids to determine which was the best offer
or to whittle down the offers further.
Second Round of Bidding -- April to May 2002
Ms. Laupheimer relates that five of the six first round bidders
accepted RNUK's invitation to resubmit. At this point, all
potential purchasers had experience operating companies in run-
off mode. RNUK provided additional information, including a
report prepared by a third party actuary regarding RNICE's
estimated claims reserves, samples of jointly held contracts and
further details on RNICE's financial position. Consequently, one
bidder withdrew from the process and RNUK eliminated another
because its bid was materially inferior.
Third Round of Bidding -- June to November 2002
The remaining three bidders were given access to RNICE's data
room, asked to submit a mark-up of a sample purchase and sale
agreement and were engaged in further discussions with RNICE
management. After extensive discussions and negotiations, Omni's
final bid emerged, in the Liquidator's determination, as clearly
the best available. After consultation with KPMG, RNUK decided
to proceed to negotiate final transaction terms with Omni.
Negotiations with Omni Whittington Group
In December 2002, Omni offered to pay GBP11,000,000 at closing
for the shares of RNICE. Like other offers, Omni was relying on
third party funding. Further, completion was subject to the
approval of the Financial Services Authority of the United
Kingdom and the Bankruptcy Court.
While a number of contractual issues had to be worked out, such
as warranties involving various contingent liabilities and
events, establishing an Escrow Account for certain unresolved and
difficult to quantify potential liabilities, and others, the Omni
offer was the best one received both in terms of price and in
terms of the number of conditions and issues to be resolved.
While these issues were being negotiated, RNICE's financial
situation continued to deteriorate. Omni made its bid predicated
in part on RNICE's financials as of December 31, 2001, which
showed equity in the company at about GBP33,800,000. When the
2002 year-end financials became available in early 2003, equity
declined to GBP27,400,000.
Omni was still prepared to proceed with the transaction on
financial terms based on its bid from December 2, 2002,
notwithstanding the diminution of equity from GBP33,800,000 to
GBP27,400,000 during 2002. However, three major developments
occurred during the first half of 2003 that led Omni's
anticipated capital funders to decline to participate in the
transactions as originally proposed:
(a) In the first quarter 2003, RNICE paid out more claims
than had been reserved for;
(b) In the second quarter 2003, new large claims were
incurred in excess of the projected incurred but not
reported claims; and
(c) detection of an accounting error by RIC that indicated
that an additional GBP1,000,000 of expenses should have
been booked in a prior period.
As a result, Ms. Laupheimer states, Omni and its anticipated
funders concluded, with justification, that RNICE's equity has
declined to GBP21,000,000 by June 30, 2003.
Due to this further deterioration, Omni advised RNICE that it
could no longer proceed with its GBP11,000,000 cash offer because
its funders were not willing to assume the risk given that the
"upside" possible reward was now considerably less. Omni said
that it could possibly proceed with a cash offer in the
GBP7,000,000 to GBP8,000,000 range, depending on their financial
backers, but suggested an alternative that would pay RNUK an
initial GBP1,000,000, plus a sharing of future dividends and
capital distributions that would likely ultimately produce more
than GBP11,000,000.
At this point, RNUK's choices were to accept a lesser cash
payment from Omni, attempt to negotiate the suggested sharing
arrangement with Omni or go back to the other bidders who in 2002
had substantially poorer bids.
By this time, RIC personnel had developed a high degree of
comfort with the Omni management and their competence and
integrity. However, Ms. Laupheimer points out, since a possible
sharing arrangement was now being considered, RIC personnel made
numerous inquiries within the industry about Omni, its experience
and the competence and integrity of its management. The
responses to those inquiries were uniformly positive.
RNUK decided that going back to previous bidders who had bid
lower than Omni before would only produce new bids lower than
where Omni now was and would risk losing Omni as a potential
buyer. It also decided, given the uniformly positive information
being received about Omni, that structuring a sharing arrangement
with Omni, which in the Liquidator's view, will likely produce
GBP8,000,000 -- the highest cash amount that Omni might pay at
that point -- and could produce more than GBP11,000,000 over
time, was the best way to proceed.
Omni originally proposed management fees to itself of 15% of
defined costs and that RNUK and it share all dividends and
capital distributions in a ratio of 70% for RNUK and 30% for
Omni. The RIC negotiating team decided to negotiate for a
sharing arrangement that would maximize the likelihood of
obtaining at least the GBP8,000,000 to GBP11,000,000, and would
give Omni the incentive to achieve even greater success. Thus,
it was negotiated that Omni would pay to RNUK for the RNICE
shares:
(a) GBP1,000,000 at closing;
(b) 90% of the first GBP5,000,000 in dividends or
distributions from the future run-off;
(c) 80% of the second GBP5,000,000 in dividends or
distributions;
(d) 70% of the third GBP5,000,000 in dividends or
distributions;
(e) 60% of the fourth GBP5,000,000 in dividends or
distributions; and
(f) 40% of all in dividends or distributions thereafter.
Under this arrangement, if Omni distributes just GBP10,000,000,
RNUK would receive GBP9,500,000 -- GBP1,000,000 +
0.9(GBP5,000,000) + 0.8(GBP5,000,000). Omni would only have to
distribute or dividend a little over GBP12,150,000 for RNUK to
realize the GBP11,000,000 that was initially offered. Both RIC
and Omni believe that there will be total distributions of at
least GBP12,150,000 -- of which RNUK will receive GBP11,000,000,
counting the initial payment -- and that the total distributions
likely will be greater.
Under the proposed arrangement therefore, RNUK would receive
these amounts assuming various levels of distributions and
dividends:
(In Millions)
Distributed Total to be
Amount RNUK Share Initial Payment Received by RNUK
----------- ---------- --------------- ----------------
GBP5 GBP4.5 GBP1.0 GBP5.5
10 8.5 1.0 9.5
15 12.0 1.0 13.0
20 15.0 1.0 16.0
25 17.0 1.0 18.0
Valuation of RNICE
Ms. Laupheimer notes that valuation of RNIC is not a simple task.
"Valuation in such a circumstance is simply an educated estimate
as to what an asset will bring upon reasonable exposure to the
marketplace," Ms. Laupheimer says. Given the complexities, the
RIC team, together with KPMG, determined that given the numerous
uncertainties in any valuation of RNICE, the best way to proceed
would be to determine value through the prolonged and extensive
exposure to the market.
RNIC Sale Should Be Approved
Ms. Laupheimer assures the Court that Omni has incentive to
produce for RIC the best possible result from the RNICE business
in run off. Omni has significant experience in run-off of
insurance businesses. Further, it has the ability to place RNICE
through a "solvent scheme of arrangement" under British law which
has the advantage of expediting and reducing uncertainty of the
claims resolution process, and minimizing the time and expenses
of the run off. This should assist in increasing the
distribution from RNICE's business.
Moreover, Ms. Laupheimer says, the proposed sale is structured so
that RNUK gets nearly all of the first distributions and Omni
only reaps substantial profits if it is successful in
administering the run off. The RIC negotiating team believes
RNUK will obtain, in addition to the initial GBP1,000,000, at
least another GBP10,000,000 in distributions by year 2008.
The transaction involves the sale of an illiquid, non-real estate
asset believed to be in excess of $5,000,000. Furthermore, the
transaction was negotiated at arm's length with the party that
made by far the best offer obtained after a substantial marketing
effort. (Reliance Bankruptcy News, Issue No. 41; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
RELIANT RESOURCES: Low-B Ratings Unfazed by FERC Settlement
-----------------------------------------------------------
Fitch anticipates no change in Reliant Resources, Inc.'s credit
ratings or Rating Outlook based on the announcement that RRI has
reached a settlement agreement with the Federal Energy Regulatory
Commission with respect to certain western energy market
investigations.
RRI's ratings are as follows:
- senior secured debt 'B+';
- senior unsecured debt 'B';
- convertible senior subordinated notes 'B-'
The Rating Outlook is Stable.
The terms of the settlement are consistent with Fitch's prior
expectation that the various regulatory investigations facing RRI
would ultimately be settled in a manner that would not materially
impact the company's near-term liquidity position. Under the terms
announced yesterday, RRI's financial exposure will be capped at
$50 million consisting of $25 million cash (consisting of three
installment payments through 2006) and the forfeiture of up to $25
million of potential profits through the offering of 824 megawatts
of generating capacity into the California market through 2006.
Importantly, RRI will not lose its market-based rate authority
under the terms of the settlement thus removing uncertainty over
RRI's ongoing ability to participate in the Western wholesale
power market.
REPUBLIC ENGINEERED: Commences Ch. 11 Reorganization Proceedings
----------------------------------------------------------------
Republic Engineered Products LLC was forced to file for protection
under Chapter 11 of the U.S. bankruptcy laws.
The company is negotiating to finalize a debtor-in-possession
financing commitment from among a number of offers. These funds
will enable the company to resume operations by mid-week following
an orderly shutdown that began last Thursday, during which blast
furnace and steel production at Lorain have been maintained.
Shipping of product was resumed last Friday.
"Before [Mon]day, we had exhausted our financial resources in
addressing the tragic, unforeseeable blast furnace explosion and
fire we sustained on August, 14, 2003, and we had been refused
further funding support," said Joseph F. Lapinsky, president and
chief executive officer. "Under the circumstances, this filing was
the only way for Republic to restore operations and preserve the
business.
"This step is necessary to restore our ability to purchase raw
materials and produce customer orders. We remain confident about
the outlook for Republic's business. Our continuing confidence is
rooted in our strong customer relationships and excellent
workforce. Now we need to perform in order to continue to create
value for our customers."
Monday's Chapter 11 filing freezes Republic's unsecured debts
until they are addressed by a court-approved reorganization plan.
Republic is seeking court approval to make priority post-petition
payments to suppliers on established terms, and to maintain
current wage and benefit programs for employees.
"Our first step toward restoring financial stability is finalizing
DIP financing," Lapinsky said. "The fact that we have a number of
options demonstrates confidence in Republic's viability. Now we
must intensify our focus on restoring and preserving the customer
relationships that have made Republic the leader in our industry
for many years. We intend to do just that through demonstrated
performance."
Republic Engineered Products LLC is North America's leading
supplier of special bar quality steel, a highly engineered product
used in axles, drive trains, suspensions and other critical
components of automobiles, off- highway vehicles and industrial
equipment. With headquarters in Fairlawn, Ohio, the company
operates steelmaking centers in Canton and Lorain, Ohio, and
value-added rolling and finishing facilities in Canton, Lorain and
Massillon, Ohio; Lackawanna, N.Y.; and Gary, Ind. Republic employs
approximately 2,400 people.
REPUBLIC ENGINEERED: Case Summary & 20 Largest Unsec. Creditors
---------------------------------------------------------------
Lead Debtor: Republic Engineered Products Holdings LLC
aka Blue Bar, L.P
3770 Embassy Parkway
Fairlawn, Oh 44333-8367
Bankruptcy Case No.: 03-55118-mss
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Republic Engineered Products LLC 03-55120-mss
Blue Steel Capital Corp. 03-55121-mss
Type of Business: Republic Engineered Products LLC is North
America's leading supplier of special bar
quality (SBQ) steel, a highly engineered
product used in axles, drive trains,
suspensions and other critical components of
automobiles, off-highway vehicles and
industrial equipment.
Chapter 11 Petition Date: October 6, 2003
Court: Northern District of Ohio (Akron)
Judge: Marilyn Shea-Stonum
Debtors' Counsel: Shawn M Riley, Esq.
McDonald, Hopkins, Burke & Haber Co LPA
600 Superior Ave, E, #2100
Cleveland, OH 44114
(216) 348-5400
Email: sriley@mcdonaldhopkins.com
Martin J. Bienenstock, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
Total Assets: $481,000,000 (as of June 30, 2003)
Total Debts: $467,939,000 (as of June 30, 2003)
Debtor's List of 20 Largest Unsecured Creditors:
A. Republic Engineered Products LLC
Entity Nature of Claim Claim Amount
------ --------------- ------------
Caterpillar World Trading Trade Debt $3,054,333
Corp.
100 Northeast Adams St.
Peoria, IL 61629-6321
Phone: (309) 675-1000
Fax: (309) 675-6620
Pittsburgh Logistics Trade Debt $1,318,692
The Quad Center
Rochester, PA 15074
Phone: (724) 709-9000
Fax: (724) 770-2612
National Fuel Resources Utilities $1,000,000
10 Lafayette Square, Rm. 800
Buffalo, NY 14203
Attn: Wayne A. Balas
Phone: (716) 857-7000
Fax: (716) 857-7688
Bar Processing Corp. Trade Debt $793,465
1000 Windom Road
Newton Falls, OH 44444
Phone: (330) 872-0914
Fax: (330) 872-0231
CSX Transportation Trade Debt $775,316
P.O. Box 640839
Pittsburgh, PA 15264-0839
Phone: (412) 928-4730
Fax: (904) 359-1248
Praxair Inc.- NY Trade Debt $627,775
175 East Park Drive
P.O. Box 44
Tonawanda, NY 14150-7891
Phone: (203) 837-2000
Fax: (203) 837-2515
Treated Water Outsourcing Trade Debt $604,166
One Nalco Center
Naperville, IL 60563-1198
Phone: (630) 778-4812
Stein Inc. Trade Debt $585,836
PO Box 470548
Broadview Hts., OH 44147
Phone: (440) 526-9301
Fax: (440) 526-9230
Columbia Iron & Metal Trade Debt $527,258
6600 Grant Avenue
Cleveland, OH 44105
Phone: (216) 883-4972
Fax: (216) 883-3561
Bridgestone-Firestone Trade Debt $503,652
Information Services
1655 South Main St.
Akron, OH 44301-2035
Phone: (330) 379-7028
Fax: (330) 379-4064
Millbank Materials USA, Ltd. Trade Debt $486,678
6715 NE 63rd Street
Suite 408
VanCouver, WA 98661
Phone: (604) 523-3022
Fax: (604) 533-3681
BCS Metal Prep, LLC Trade Debt $455,749
5800 Sterling Ave.
Maple Hts., OH 44137
Phone: (216) 663-1100
Fax: (216) 663-2454
North American Trade Debt $415,945
Refractories Co.
400 Fairway Dr.
Moon Twp, PA 15108
Phone: (412) 375-6600
Fax: (412) 375-6724
First Energy Services Utilities $414,945
395 Ghent Road
Suite 318
Akron, OH 44333
Phone: (800) 646-0400
Fax: (440) 546-8766
Bearing Service Company Trade Debt $388,526
of PA
8800 Sweet Valley Dr.
Cleveland, OH 44125
Phone: (216) 642-9922
Fax: (412) 963-8005
MPW Ind. Services - Lorain Trade Debt $331,695
1807 East 25th St.
Lorain, OH 44055
Attn: Stella Stemos
Phone: (440) 277-9241
Fax: (740) 928-1071
Progressive Processing Inc. Trade Debt $328,784
856 Garden St.
Elyria, OH 44035
Phone: (440) 322-1414
Fax: (440) 322-1733
Marathon Oil Company Utilities $328,202
5555 San Felipe
Houston, TX 772056
Attn: Jenny Ferguson
Phone: (713) 629-6600
Fax: (713) 296-4365
Heckett Multiserv Trade Debt $323,910
612 N. Main St.
P.O. Box 1071
Butler, PA 16003-1071
Phone: (724) 287-4791
Fax: (724) 283-2410
TYK America, Inc. Trade Debt $315,089
301 Brickyard Rd.
Clairton, PA 15025
Phone: (412) 384-4259
Fax: (412) 384-4242
B. Blue Steel Capital Corp.
- None
C. Republic Engineered Products Holdings LLC
- None
SALON MEDIA GROUP: Raises $100K from Note and Warrant Offering
--------------------------------------------------------------
On September 12, 2003, Salon Media Group, Inc. sold and issued a
convertible promissory note and warrants in a financing
transaction in which it raised gross proceeds of $100,000.
The terms of the transactions are set forth in the Note and
Warrant Purchase Agreement entered into between the Company and
Dr. John Warnock, a Director of the Company. The Note may be
convertible at a future date into equity securities of the Company
at a conversion price to be determined. The warrants grant the
holders thereof the right to purchase an aggregate of 300,000
shares of the Company's common stock at an exercise price of
$0.0575 per share. The Company will use the capital raised for
working capital and other general corporate purposes.
The Note automatically converts upon the first closing of the
Company's proposed Series C Preferred Stock securities proposed to
be issued and, if no such Financing shall have occurred by the
close of business on December 31, 2003, then the Note may be
converted into shares of the Company's common stock at the option
of the note holder. In the event of an automatic conversion of the
Note upon a Financing, the number of shares of preferred or common
stock to be issued upon conversion of this and other notes shall
equal the aggregate amount of the Note obligation divided by the
price per share of the securities issued and sold in the
Financing. In the event of a Note conversion into common stock
absent a Financing, the number of shares of the common stock to be
issued upon conversion of Notes shall equal the aggregate amount
of each Note obligations divided by the average closing price of
the Company's common stock over the 60 trading days ending on
September 30, 2003, or December 31, 2003, which ever is lower, as
reported on such market(s) and/or exchange(s) where the common
stock has traded during such sixty day trading period.
In connection with the Financing, the Company granted the Investor
security interests in the Company's assets, subject to the rights
of any Senior Indebtedness (as such term is defined in the
Agreement) and pre-existing rights.
Neither the Notes, warrants, nor the shares of common stock
underlying the warrants have been registered for sale under the
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration under such Act or an
applicable exemption from registration requirements.
* * *
Liquidity and Going Concern Uncertainty
In its SEC Form 10-Q for the period ended December 31, 2002, the
Company reported:
"As of December 31, 2002, Salon had $0.2 million in available
cash remaining from the issuance of a convertible redeemable
note issued in December 2002. Salon also had $0.5 million of
restricted cash held primarily as deposits for various lease
arrangements and $0.5 million of restricted cash from a deposit
against a future transaction from a stockholder who is also a
director of Salon.
"Net cash used in operations was $2.8 million for the nine
months ended December 31, 2002, compared to $4.0 million for the
nine months ended December 31, 2001. The principal use of cash
during the nine months ended December 31, 2002 was to fund the
$4.3 million net loss for the period and $0.5 million to
restrict the cash deposit received from a stockholder, offset
partly by non-cash charges of $1.5 million. The principal use of
cash during the nine months ended December 31, 2001 was to fund
the $6.6 million net loss for the period and a $0.7 million
decrease in liabilities, offset partly by non-cash charges of
$2.8 million and $0.5 million in deferred revenue, primarily
from the implementation of Salon Premium subscriptions in April
2001.
"No cash was used in investing activities for the nine months
ended December 31, 2002, compared to an immaterial amount for
the nine months ended December 31, 2001. Salon does not expect
any significant capital expenditures during the current fiscal
year.
"Net cash provided from financing activities was $1.4 million
for the nine months ended December 31, 2002, compared to $3.1
million for the nine months ended December 31, 2001. The
principal source of funds for the nine months ended December 31,
2002 was $0.9 million from the issuance of convertible
redeemable notes, $0.2 million from the issuance of a promissory
note, a $0.5 million deposit against a future transaction from a
stockholder, partly offset by $0.2 million of lease payments.
The principal source of funds for the nine months ended December
31, 2001 was $3.2 million from the issuance of Series A
convertible preferred stock, partly offset by $0.1 million of
lease payments.
"As of December 31, 2002, Salon's available cash resources were
sufficient to meet working capital needs for approximately one
month. Subsequent to December 31, 2002, Salon finalized an
agreement with a stockholder who had made a $0.5 million deposit
against a future transaction with Salon. Under the terms of the
agreement, $0.1 million was made available for general operating
use and $0.4 million was transferred to a segregated account. On
February 11, 2003 Salon finalized an additional agreement with
another investor and received $0.1 million. Effective January
22, 2002, Salon began to restrict access to predominately all of
Salon's content to either Salon Premium subscribers or to
website visitors who are willing to view some form of
advertisement. The additional restriction to Salon content is
anticipated to increase Salon Premium subscriptions with a
corresponding increase in cash receipts from the new
subscriptions. Since this is a substantial change of Salon's
business strategy, Salon cannot predict how much and when new
cash will be generated from the change. Salon believes with the
cash on hand on December 31, 2002, $0.2 million from the above
mentioned agreements, incremental new cash to be generated from
the restriction of Salon's content, together with collections of
accounts receivable, that it will be difficult to meet working
capital needs during February 2003.
"Salon needs to raise additional funds and is currently in the
process of exploring financing options. If it is unable to
complete the financial transactions it is pursuing or if it is
unable to otherwise fund its liquidity needs, then it may not be
able to continue as a going concern. Liquidity continues to be a
constraint on business operations, including Salon's ability
to react to competitive pressures or to take advantage of
unanticipated opportunities. If Salon raises additional funds by
selling equity securities, or instruments that convert into
equity securities, the percentage ownership of Salon's current
stockholders will be reduced and its stockholders will most
likely experience additional dilution. Given Salon's recent low
stock price, any dilution will likely be very substantial for
existing stockholders.
"Salon is contemplating selling its prepaid advertising rights
valued at $5.6 million as of December 31, 2002. It is possible
that the rights might be sold for $1 million to $3 million in
cash, which would result in recording a loss of $2.6 million to
$4.6 million. Salon cannot predict when and if such a sale will
occur.
"Salon has a ten-year operating lease for office space at its
San Francisco location with approximately seven years remaining.
Salon is attempting to reduce this commitment and has suspended
applicable lease payments effective December 2002. On January
29, 2003 Salon received a demand letter for $0.2 million from
the landlord. Payment of this demand would have a great adverse
effect on Salon's current financial position. To a lesser
extent, Salon has an operating lease for office space in New
York, NY with approximately two years remaining. Salon is
currently negotiating with the landlord to reduce this
commitment.
"Salon's independent accountants have included a paragraph in
their report for the fiscal years ending March 31, 2002 and 2001
indicating that substantial doubt exists as to Salon's ability
to continue as a going concern because it has recurring
operating losses and negative cash flows, and an accumulated
deficit. Salon has eliminated various positions, not filled
positions opened by attrition, implemented a wage reduction of
15% effective April 1, 2001, and has cut discretionary spending
to minimal amounts."
SEVEN SEAS PETROLEUM: Ecopetrol Terminates Deep Dindal Contract
---------------------------------------------------------------
Seven Seas Petroleum Inc. (OTC Pink Sheets: SVSSF) has received
notice from Ecopetrol confirming termination of the Deep Dindal
Association Contract.
The Company must meet statutory obligations with the Ministry of
Mines and Environment of Colombia before plugging and abandoning
the well. The Company has escrowed the necessary funds to cover
budgeted plugging and abandonment costs.
As previously announced, the Company has no source of cash flow
and is working to create value from several contingent assets for
the benefit of its creditors, whom the Company owes over
$150,000,000. Pursuant to the Plan of Reorganization approved by
the bankruptcy court, effective August 14, 2003, all secured,
unsecured and administrative claims will be paid before the
Company's shareholders.
The contingent assets consist of potential recoveries from
litigation against the Company's former directors and officers,
historical net operating losses in the Company's Colombian
subsidiaries, and the Company's estimated 2003 Colombian tax
refund. Value of the contingent assets is highly speculative and
it is uncertain whether any of the contingent assets will result
in recoveries for the Company's creditors.
Even if Seven Seas is successful in obtaining maximum value for
each of the contingent assets, it currently appears unlikely that
there will be any recovery for the Company's shareholders.
SOLECTRON: Inks Pact on Nortel Extended Supplier Relationship
-------------------------------------------------------------
Solectron Corporation (NYSE: SLR), a leading provider of
electronics manufacturing and supply chain management services,
announced an agreement intended to extend Solectron's role as an
electronics manufacturing services provider to Nortel Networks.
The new supply agreement, which replaces a four-year supply
agreement the companies signed in 2000, defines new terms and
conditions under which Solectron will offer Nortel Networks a full
suite of supply chain services, including design, new product
introduction, materials management, manufacturing, product
integration and testing, and repair. Additional product-specific
contracts will further specify terms as existing business is
transitioned to the new contract and as new business is awarded.
Nortel Networks is one of Solectron's largest customers.
"We view this new agreement as a step forward in solidifying the
strong business relationship that Nortel Networks and Solectron
have built over the years," said David Everett, executive vice
president, Worldwide Sales and Account Management for Solectron.
"We appreciate the opportunity to extend our relationship with
Nortel Networks. Our new agreement reflects the realities of
today's marketplace and incorporates the full range of value,
services and benefits that Solectron can deliver."
"Nortel Networks values its relationship with Solectron, and we
look forward to continued mutual success under this new
agreement," said John Haydon, vice president, Global Supply
Management for Nortel Networks.
Reflecting the changed industry conditions from when the 2000
contract was signed, the new agreement targets $7.5 billion in
revenue from 2000 through 2009, rather than the approximately
$10.4 billion in revenue originally anticipated under the 2000
contract. The new agreement positions Solectron to compete for
Nortel Networks business over a broad range of product offerings,
with actual annual volumes subject to the economic environment and
competitive terms and conditions.
Solectron (Fitch, BB- Corporate Credit Rating, Negative) --
http://www.solectron.com-- provides a full range of global
manufacturing and supply-chain management services to the world's
premier high-tech electronics companies. Solectron's offerings
include new-product design and introduction services, materials
management, high-tech product manufacturing, and product warranty
and end-of-life support. The company is based in Milpitas,
California, and had sales of $12.3 billion in fiscal 2002.
SPIEGEL GROUP: Asks Court to Fix Excess Asset Sale Procedures
-------------------------------------------------------------
James L. Garrity, Jr., Esq., at Shearman & Sterling LLP, in New
York, tells the Court that since the Petition Date, the Spiegel
Debtors engaged in an ongoing review of their operations with an
eye toward eliminating unnecessary expenditures, reducing costs
and maximizing the value of their estates for the benefit of their
creditors. As a result of this review, the Debtors have
identified certain assets of relatively minor or inconsequential
value that are no longer necessary for their business operations.
To maximize the value of these excess assets and to minimize the
costs associated with their disposition, the Debtors propose
either to sell or abandon the assets. In connection with the
sale of the Excess Assets, the Debtors will undertake a
reasonable asset valuation analysis of any Excess Asset to be
sold, including making reference to current market prices for
similar items. The Debtors will also undertake reasonable
marketing efforts to obtain the highest and best price for each
sale.
Sale Procedures
To save time and avoid the expenses associated with obtaining
Court approval under Section 363(b) of the Bankruptcy Code to
dispose of the Excess Assets outside of the ordinary course of
business, the Debtors propose that these procedures be
implemented in lieu of a separate notice and a hearing for each
sale:
(a) In the event that the proposed sale price for any
particular Excess Asset does not exceed $5,000, and the
aggregate sale price for all Excess Assets to be sold to
any one purchaser does not exceed $50,000, the Debtors are
authorized to sell these Tier I Excess Assets for cash to
the purchaser making the highest offer, and to take
actions necessary to close the transaction and obtain the
sale proceeds, including employing any necessary
professionals or brokers and paying reasonable
professional fees, brokers' commissions and similar costs
in connection with the sale without further Court order or
prior notice to any other party-in-interest;
(b) In the event that either (i) the proposed sale price for
any particular Excess Asset does not exceed $5,000 and the
sale price for all the Excess Assets to be sold to any
purchaser is between $50,000 and $400,000 or (ii) the
proposed sale price for any particular Excess Asset
exceeds $5,000 but is $200,000 or less and the sale price
for all the Excess Assets to be sold to any purchaser is
$400,000 or less, the Debtors are authorized to sell
these Tier II Excess Assets for cash to the purchaser
making the highest offer, and to take actions necessary to
close the transaction and obtain the sale proceeds,
including employing any necessary professionals or brokers
and paying reasonable professional fees, brokers'
commissions and similar costs in connection with the sale
without further Court order or prior notice to any
other party-in-interest, provided that the Debtors will
give five days' prior written notice to:
* The Office of the United States Trustee
33 Whitehall Street, 21st Floor
New York, New York 10004;
* Counsel for the Creditors' Committee
Howard Seife, Esq. and
David M. LeMay, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 408-5100
Facsimile: (212) 541-5369;
* The Debtors' postpetition lenders,
Marc D. Rosenberg, Esq. and
Benjamin Mintz, Esq.
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8000
Facsimile: (212) 836-8689; and
* any known holder of a lien on the property proposed to
be sold.
These procedures will be applicable to the sale of Tier II
Excess Assets:
-- Sale Notices will be served by facsimile or hand
delivery, so as to be received by 5:00 p.m. on the date
of service. The Sale Notice will specify:
* the assets to be sold;
* the identity of the proposed purchaser, including a
statement of any connection between the proposed
purchaser and Debtors and whether the Debtors believe
the proposed purchaser is a good faith purchaser;
* the proposed purchase price;
* the Debtors' estimate of the book value of the assets
to be sold; and
* a statement of any professionals to be employed in
connection with the sale and any professional fees,
brokers' commissions or similar costs to be paid by
the Debtors.
-- With respect to the proposed sale of any particular
Tier II Excess Assets, the Notice Parties will have
five days after the Sale Notice is served to object to
or request additional time to evaluate the proposed
transaction. Objections and requests for additional
time must be in writing and served by facsimile or hand
delivery, so as to be received by 5:00 p.m. on the date
of service on the Debtors' counsel:
James L. Garrity, Jr., Esq. and
Marc B. Hankin, Esq.,
Shearman & Sterling, LLP,
Facsimile: 212-848-7179
If, before the expiration of the five-day objection
period applicable to Tier II Excess Assets, counsel to
the Debtors receive no written objection to a proposed
sale of Tier II Excess Assets and no written request
for additional time to evaluate a proposed transaction,
the Debtors will be authorized to consummate the
proposed sale transaction and to take actions necessary
to close it.
If a Notice Party provides a written request for
additional time to evaluate a proposed sale of Tier II
Excess Assets, that Notice Party will have an
additional five days to object to the proposed
transaction.
-- If a Notice Party objects to the proposed sale of Tier
II Excess Assets within five days after the notice is
sent, the Debtors and the objecting party will use good
faith efforts to resolve the objection consensually.
If the Debtors and the objecting party are unable to
achieve a consensual resolution, the Debtors will not
consummate the sale unless and until the Debtors seek
and obtain Court approval of the proposed transaction
upon notice and a hearing.
In accordance with the Debtors' DIP facility, in no event will:
(i) the aggregate fair market value of the Excess Assets sold
pursuant to the Sale Procedures exceed $2,500,000 in any
fiscal year; or
(ii) the Debtors sell any Excess Assets that are not Equipment
pursuant to the Sale Procedures, without first obtaining
the approval of the Debtors' postpetition lenders.
Proposed Abandonment Procedures
In the event that the Debtors are unable to sell particular
Excess Assets or determine that Excess Assets are burdensome to
them or of inconsequential value to their estates and creditors,
the Debtors propose to abandon or dispose of the Excess Assets
pursuant to similar notice procedures. Specifically, the Debtors
will abandon or efficiently dispose of Excess Assets without
further notice to the Court, but upon three business days before
a written notice to the Notice Parties.
The Abandonment Notice will contain:
* a general description of the Excess Assets to be abandoned
or disposed of; and
* the names and addresses of the potential purchasers
contacted with respect to the Excess Assets.
After receipt of an Abandonment Notice, the Notice Parties will
have three business days to object to the proposed abandonment.
An objection to a proposed abandonment must be in writing and
served by facsimile or hand delivery so as to be received by 5:00
p.m. on the date of service by the Debtors' counsel. If a Notice
Party timely objects to the Abandonment Notice, the Debtors and
the objecting party will use good faith efforts to consensually
resolve the objection. If the Debtors and the objecting party
are unable to achieve a consensual resolution, the Debtors will
not abandon or dispose the Excess Assets unless and until they
seek and obtain Court approval.
Procedures Should Be Approved
Accordingly, the Debtors ask the Court to approve the proposed
procedures that will govern the sale of the Excess Assets free
and clear of liens, claims, interests and encumbrances and the
abandonment of certain assets.
Mr. Garrity contends that the request is warranted because:
(a) the sale and abandonment procedures will minimize
administrative costs in their Chapter 11 cases,
(b) the procedures will speed up the liquidation of
miscellaneous non-core assets,
(c) it will preserve the rights of interested parties to
object to material transactions,
(d) any lien attached to the Excess Asset will be transferred
and attached to the net proceeds obtained for the Excess
Assets, and
(e) the Debtors will give notice of any proposed sale of
Excess Assets to all entities known to have an interest
in property subject to the sale. (Spiegel Bankruptcy News,
Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
SWIFT & COMPANY: First-Quarter Results Reflect Strong Growth
------------------------------------------------------------
Swift & Company reported that net income for the first quarter
ended August 24, 2003 was $34.7 million, a 57% increase over the
first quarter ended August 25, 2002. The strong results were
driven by solid performance in Swift's US Beef and Pork segments.
"We are pleased to report an excellent start to fiscal year 2004.
The Company's record performance in the first quarter reflects
improvements in our operational execution and in our value-added
initiatives. The fact that we achieved this level of performance
in a quarter where cattle prices were at an all time high is a
tribute to our team and the focus they are placing on continuing
to improve the day to day operations of our business," said John
Simons, President and CEO of Swift & Company. He noted that
company performance exceeded expectations in several key areas:
-- Net sales increased 16% to $2.48 billion
-- Net income increased to $34.7 million, a 57% increase over FY03
first quarter
-- First quarter Earnings Before Income Taxes, Depreciation and
Amortization ("EBITDA") was $95.2 million, an increase of 87%
over first quarter FY03
-- Swift Beef first quarter operating income increased 42% to
$62.1 million
-- Swift Pork first quarter operating income increased 187% to
$14.7 million
-- Cash flow from operating activities was $52.3 million
"We continue to focus on our core business model. We are a three-
segment diversified protein processing business," Simons said.
"Swift operates in all U.S. distribution channels and has a
significant focus on the international and foodservice market
segments. Our industry-leading Australian beef business continues
to provide us with global diversification and a strong platform
for continued growth in the Pacific Rim marketplace. We have also
recently formed a food processing team to focus exclusively on
expanding our presence and brand in all value-added distribution
channels."
Consolidated Results
Swift & Company reported first quarter 2004 net sales of $2.48
billion and net income of $34.7 million versus prior year first
quarter net sales of $2.14 billion and net income of $22.1
million. First quarter 2003 EBITDA increased 87% to $95.2 million
compared to $51.0 million. The prior year amounts reflect the
results of all of the historical operations of the ConAgra Red
Meat Business.
Segment Information
Swift & Company is organized into three reportable business
segments: Swift Beef, Swift Pork and Swift Australia. All fiscal
2004 numbers are compared to fiscal 2003 numbers, which are on a
Predecessor Entity basis.
Swift Beef
Net sales of Swift Beef were $1.70 billion for the thirteen weeks
ended August 24, 2003 compared to $1.45 billion for the thirteen
weeks ended August 25, 2002. The sales increase of $250.0 million,
or 17.3%, reflects higher selling prices on nominally higher sales
volumes, growth in our international and foodservice channels, and
improvement in general market conditions. Industry-wide US boxed
beef selling prices per pound during the thirteen weeks ended
August 24, 2003 were at a 15 year high.
Operating income of $62.1 million for the thirteen weeks ended
August 24, 2003 compared to $43.6 million for the thirteen weeks
ended August 25, 2002. The increase of $18.5 million, or 42.4%,
reflects increased beef sales driven by growth in international
and foodservice channels, improved product optimization, and
improvement in general market conditions. Live cattle costs during
the quarter averaged 20.7% higher than the corresponding period of
the prior fiscal year, and industry statistics show that cattle
prices were at an all time high in the first quarter.
Swift Pork
Net sales of Swift Pork were $446.2 million for the thirteen weeks
ended August 24, 2003 compared to $384.1 million for the thirteen
weeks ended August 25, 2002. The increase of $62.1 million, or
16.2%, reflects a 2% increase in sales volume in addition to
higher average selling prices per pound.
Operating income of Swift Pork was $14.7 million for the thirteen
weeks ended August 24, 2003 compared to $5.1 million for the
thirteen weeks ended August 25, 2002. The increase of $9.6
million, or 187.1%, reflected an increase in the spread between
selling price and raw material cost per pound, partially offset by
increased variable plant costs due to a 2% increase in product
volumes.
Swift Australia
Net sales of Swift Australia were $387.3 million for the thirteen
weeks ended August 24, 2003 compared to $271.2 million for the
thirteen weeks ended August 25, 2002. The increase of $116.1
million, or 42.8%, resulted from an increase in sales prices
achieved under current market conditions where selling prices have
remained high. In addition, the Australian dollar to US dollar
exchange rate increased an average of 19.6% between the two
periods.
The operating loss of Swift Australia was $1.9 million for the
thirteen weeks ended August 24, 2003 compared to operating income
of $10.2 million for the thirteen weeks ended August 25, 2002. The
decrease of $12.1 million resulted from an increase in livestock
prices, partially offset by higher selling prices. Increased
selling, general and administrative expenses such as insurance
that are associated with becoming a stand-alone company also
contributed to the decrease in operating income.
The Australian beef processing industry has struggled under
difficult conditions during the thirteen weeks ended August 24,
2003. Australian cattle producing areas have not received rain in
sufficient volume to break the drought conditions. Carcass weights
have been lower by approximately 5% while cattle prices have
remained high, supported primarily by demand and sustained
processor competition for cattle. Australian trade with Japan has
been adversely affected by the increase in the tariff on chilled
beef imports from 38.5% to 50%, effective August 1, 2003.
Financial Highlights
Operating cash flow was $52.3 million for the first quarter of
fiscal 2004. Capital spending was $22.7 million for the quarter
and is expected to be approximately $75 million in fiscal year
2004. The Company is in the process of completing the expansion
projects at Worthington, Minnesota; Marshalltown, Iowa; Hyrum,
Utah; Greeley, Colorado, and Dinmore, Australia. Each of these
projects meets the company's criteria for a two-year or faster
payback on growth capital.
"We have now completed a full year as Swift & Company. In the
first year we have exceeded our financial targets, successfully
transitioned to a stand-alone company, repaid in excess of $71
million of senior debt, successfully implemented our back office
systems, strategically reorganized our domestic business into a
North American red meats company, and aligned our core initiatives
to focus on expanded customer and consumer capabilities," Simons
said. "We are pleased with our progress and are continuing our
focus on growing the company through our diversified business
model."
Value-Added, Consumer-Ready Products
and International Sales Continue to Grow
"Swift is focused on growing volume in targeted products and
channels," Simons continued. "We continue to grow our value-added
business significantly, particularly in consumer ready pork
products, which have grown by 35% on a year over year basis.
"Our two new products, 'Swift Premium Grillers' and 'Swift Premium
Roasters,' are being distributed to Wal-Mart Super Centers in 11
states, from New York to Texas," Simons said. These products
address consumer needs for appetizing, easy-to-prepare protein
products that are case-ready when delivered to the store.
"Internationally, our business continues its strong performance,"
Simons said. International volume grew 18% in the first quarter
FY04 versus first quarter FY03. The growth continues to be driven
by strong sales into Korea, Mexico and Japan.
Food Safety
Simons also emphasized Swift's continued leadership role in food
safety. "We are the first meat processor to implement double hot
water pasteurization in its U.S. beef plants to minimize the
presence of potentially harmful bacteria," Simons said. "This
additional process step provides an even higher degree of
effectiveness to Swift's industry-leading food safety protocols."
Swift & Company (S&P, BB- Corporate Credit and B+ Senior Unsecured
Debt Ratings) is one of the world's leading beef and pork
processing companies - processing, preparing, packaging,
marketing, and delivering fresh, further processed and value-added
beef and pork products to customers in the United States and in
international markets. For more information, please visit
http://www.swiftbrands.com
TECSTAR: Plan Confirmation Hearing Scheduled for November 12
------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
Tecstar, Inc., and its debtor-affiliates Disclosure Statement as
containing "adequate information" as that term is defined in
Section 1125(a)(1) of the Bankruptcy Code. The Court rules that
the Debtors' Disclosure Statement satisfies the requirement of
Section 1125(b) and can be distributed to creditors for a vote.
The hearing to consider confirmation of the Plan is currently
scheduled on November 12, 2003 at 2:00 p.m. to be held at the U.S.
Bankruptcy Court for the Eastern District of Pennsylvania, Second
Floor, Robert N.C. Nix Sr. Federal Courthouse, 900 Market Street,
Philadelphia, Pennsylvania 19107 before the Honorable Judge Kevin
J. Carey.
All written objections to the confirmation of the plan, if there
are any, must be filed with the Court on or before October 29,
2003.
Tecstar, Inc., n/k/a Don Julian, Inc., manufactures high-
efficiency solar cells that are primarily used in the construction
of spacecraft and satellite. The Company filed for chapter 11
protection on February 07, 2002 (Bankr. Del. Case No. 02-10378).
Tobey M. Daluz, Esq., at Ballard Spahr Andrews & Ingersoll LLP and
Jeffrey M. Reisner, Esq., at Irell & Manella LLP represent the
Debtors in their restructuring efforts. When the company filed for
protection from its creditors, it listed assets of over $10
million and debts of over $50 million.
TERADYNE INC: Look for Third-Quarter 2003 Results on October 14
---------------------------------------------------------------
Teradyne, Inc. (NYSE:TER) will release results for the Third
Quarter of 2003 on Tuesday, October 14, 2003, following the close
of markets, at 6:30 p.m. Eastern Daylight Time or later.
A conference call to discuss Third Quarter 2003 results and
management's outlook will follow at 10:00 a.m. Eastern Daylight
Time, Wednesday, October 15, 2003. The call will be broadcast
simultaneously over the Internet. Interested investors should
access the webcast at http://www.teradyne.comand click on
"Investors" at least five minutes before the call begins.
A replay will be available two hours after the completion of the
call. The replay number in the U.S. & Canada is 1-800-642-1687.
The replay number outside the U.S. & Canada is 1-706-645-9291. The
pass code is 3087243. A replay will also be available on the
Teradyne web site http://www.teradyne.com Click on "Investors"
for a link to the replay. The replay will be available via phone
and web site through October 29, 2003.
Teradyne (NYSE:TER) (S&P, B+ Corporate Credit & Senior Unsecured
Note Ratings, Stable) is the world's largest supplier of Automatic
Test Equipment, and a leading supplier of interconnection systems.
The company's products deliver competitive advantage to the
world's leading semiconductor, electronics, automotive and network
systems companies. In 2002, Teradyne had sales of $1.22 billion,
and currently employs about 6700 people worldwide. For more
information, visit http://www.teradyne.com
TIMKEN COMPANY: Moody's Downgrades Debt Ratings to Ba1
------------------------------------------------------
The Timken Company responded to Moody's Investors Services
announcement that it has lowered its rating of the company's debt
to Ba1.
The rating is on the company's senior unsecured debt and senior
implied and senior unsecured issuer ratings.
"We are obviously disappointed in the decision made by Moody's to
lower our debt rating," said James W. Griffith, president and CEO.
"While on September 18 we lowered our earnings outlook for 2003,
we believe Moody's gave insufficient weight to our commitment to
maintain a strong balance sheet. The impact of reduced earnings on
cash flow has been offset by other actions, including improving
working capital management, reducing capital expenditures and
continuing asset dispositions."
The impact of the lower rating on the company's earnings will be
minimal with only a slight increase in the cost of the company's
revolving credit facility. The company has no significant long-
term debt payments coming due in the next three years and believes
it has ample liquidity.
Earnings have been challenged by declines in North American
automotive production, inefficiencies in automotive plant
manufacturing, increased energy and raw material costs and
continuing weak industrial markets.
"We believe that the acquisition of The Torrington Company,
earlier this year, is a strong strategic move that positions
Timken for long-term competitiveness," said Mr. Griffith. "The
issues we are facing with regard to our 2003 earnings are short-
term, and corrective actions are being taken. We continue to be
committed to a strong balance sheet and will aggressively apply
discretionary cash to debt reduction.
"Given the strength of our leadership team, the recognition of our
brand name in the market and the additional capabilities we now
have with Torrington products, we are on the path of a winning
strategy," said Mr. Griffith.
The company is scheduled to release third quarter earnings and
discuss the results in a teleconference on October 23, 2003.
The Timken Company -- http://www.timken.com-- is a leading
international manufacturer of highly engineered bearings, alloy
and specialty steels and components, and a provider of related
products and services. Following its February 2003 acquisition of
The Torrington Company, Timken employs 28,000 people worldwide in
operations in 29 countries. In 2002, the combined companies had
sales of approximately $3.8 billion.
TRANSTECHNOLOGY: Taps Bradlau Group to Audit Overhaul/Repair Ops
----------------------------------------------------------------
TransTechnology Corporation (NYSE:TT) announced that its Board of
Directors has retained a fact-finding and forensic accounting
firm, The Bradlau Group of Morristown, NJ, to perform an audit and
review of the overhaul and repair operations of its Breeze-Eastern
division.
The company stated that the decision to authorize an independent
audit was in response to an investigation being conducted by the
Newark, NJ office of the United States Attorney with respect to
Breeze-Eastern's overhaul and repair operations, which account for
less than 20% of the company's yearly business operations. The
company was first made aware of the investigation upon receipt
last week of a search warrant. The company stated that it has and
will continue to cooperate fully with the government's
investigation and that its Board intends to share the findings of
the independent audit and review with the US Attorney's office.
In a related development, the company reported that
representatives of the financial institutions participating in the
refinancing of the company's debt have been made aware of the
investigation and the audit and have recently advised the company
that the refinancing process would not be completed until after
the report of The Bradlau Group is issued. The Bradlau Group,
whose audit and review is independent of the government's
investigation, will give a progress report within three weeks. The
independent audit is being supervised on behalf of the company by
William Recker, an independent member of the company's Board of
Directors and its Audit Committee and the retired Chairman and CEO
of Gretag Imaging.
Robert L.G. White, President and Chief Executive Officer of
TransTechnology, said, "Breeze- Eastern has a reputation of
providing high quality products to the aerospace industry for over
75 years and continues to be the world's leader in the design,
production and servicing of helicopter rescue hoists. We are
dedicated to maintaining our proud tradition of the highest
quality of service to our customers in all areas of our operations
and business practices. The company is cooperating fully with the
government's inquiry and the Board's independent audit. I am
confident that the results of each of these reviews will reaffirm
the well-earned reputation of Breeze-Eastern."
Mr. White further stated, "The inquiry has had no impact, and we
do not expect an impact, on the company's ability to manufacture
and ship products and meet customer delivery schedules. During
this process we will continue to focus upon serving each of our
customers in the high quality manner that they have come to expect
of us."
TransTechnology Corporation -- http://www.transtechnology.com--
operating as Breeze-Eastern -- http://www.breeze-eastern.com-- is
the world's leading designer and manufacturer of sophisticated
lifting devices for military and civilian aircraft, including
rescue hoists, cargo hooks, and weapons-lifting systems. The
company, which employs approximately 180 people at its facility in
Union, New Jersey, reported sales from continuing operations of
$55.0 million in the fiscal year ended March 31, 2003.
At June 29, 2003, TransTechnology's balance sheet shows a total
shareholders' equity deficit of about $5 million.
TRANSWITCH CORP: Concludes Offers for 5.45% Conv Plus Cash Notes
----------------------------------------------------------------
TranSwitch Corporation (Nasdaq: TXCC) consummated its exchange
offer with and new money offering to the holders of its 4-1/2%
Convertible Notes due September 12, 2005.
In such closing, the Company issued $97,963,000 aggregate
principal amount of new 5.45% Convertible Plus Cash Notes(SM) due
September 30, 2007, which represented $73,963,000 of new notes
issued in exchange for existing notes tendered in the exchange
offer and $24 million of new notes sold for cash to holders of
existing notes.
U.S. Bancorp Piper Jaffray Inc. served as the dealer manager for
the exchange offer and placement agent for the new money offering.
U.S. Bank National Association served as the exchange agent.
TranSwitch Corporation (S&P, B- Corporate Credit Rating,
Negative), headquartered in Shelton, Connecticut, is a leading
developer and global supplier of innovative high-speed VLSI
semiconductor solutions - Connectivity Engines(TM) - to original
equipment manufacturers who serve three end-markets: the Worldwide
Public Network Infrastructure, the Internet Infrastructure, and
corporate Wide Area Networks. Combining its in-depth understanding
of applicable global communication standards and its world-class
expertise in semiconductor design, TranSwitch Corporation
implements communications standards in VLSI solutions which
deliver high levels of performance. Committed to providing high-
quality products and service, TranSwitch is ISO 9001 - 2000
registered. Detailed information on TranSwitch products, news
announcements, seminars, service and support is available on
TranSwitch's home page at the World Wide Web site -
http://www.transwitch.com
UNIFORET INC: Finalizes Implementation of Plan of Arrangement
-------------------------------------------------------------
Uniforet Inc. and its subsidiaries, Uniforet Scierie-Pate Inc. and
Foresterie Port-Cartier Inc., have finalized the implementation of
their plan of arrangement pursuant to the Companies' Creditors
Arrangement Act (Canada), including the issuance of shares in
settlement of the Canadian convertible debentures.
The Canadian debentures have thus been cancelled and a total of
2,390,097 Class A Subordinate Voting Shares of Uniforet Inc. have
been issued from treasury upon conversion of the debentures. The
number of treasury shares issued to each holder in connection with
the conversion of the Canadian debentures has been rounded up to
the nearest whole number where the conversion gave rise to
fractional amount of 0.5 or more. In all other cases the
fractional amount has been disregarded.
As for the US notes, the cash payment contemplated by the Plan of
Arrangement as partial payment for these notes has been received
by the trustee and allocation of the new notes issued on August 8,
2003 is being completed.
All the other creditors of the Company as at April 17, 2001 have
now received confirmation of settlement of their claims in
accordance with the Plan of Arrangement.
Uniforet Inc. is a forest products company which manufactures
softwood lumber. It carries on its business through its
subsidiaries located in Port-Cartier and in the Peribonka area in
Quebec. Uniforet Inc.'s securities are listed on The Toronto Stock
Exchange under the trading symbol UNF.A, for the Class A
Subordinate Voting Shares.
UNITED AIRLINES: Court OKs Amended Dubai Air Asset Purchase Pact
----------------------------------------------------------------
United Airlines Inc., and Dubai Air have negotiated to eliminate
the execution, delivery and performance of the Maintenance Service
Agreement as a closing condition of the Sale. Previously, United
was to inspect and conduct any other repair work on nine PW4056
engines operated by Dubai. This was expected to provide
$7,000,000 in revenue to United in addition to the Aircraft
purchase price of $51,000,000. The Agreement now provides that
after delivery, the Parties will use their best efforts to
negotiate a maintenance services agreement to provide for the same
engine repair work.
As a result of the modification, the total consideration under
the Original Purchase Agreement has changed.
Accordingly, the Debtors sought and obtained Court approval of
the Modified Purchase Agreement.
* * *
The United Airlines Debtors will sell one used Boeing 747-422
aircraft, bearing manufacturer serial number 26903 and U.S.
registration number N108UA to Dubai Air Wing. The Debtors
determined that the aircraft was no longer essential to their
fleet plan. The aircraft will be sold for $51,000,000, free and
clear of liens, claims, and encumbrances. (United Airlines
Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
UNIVANCE TELECOMMS: Asks Court to Convert Case to Chapter 7
-----------------------------------------------------------
Univance Telecommunications, Inc., wants to convert its chapter 11
case to that of chapter 7 liquidation proceeding of the Bankruptcy
Code. Consequently, the Debtor asks the U.S. Bankruptcy Court for
the District of Colorado to enter a conversion order without
further delay.
Univance Telecommunications, Inc., filed for chapter 11 protection
on January 23, 2003 in the U.S. Bankruptcy Court for the District
of Colorado (Bankr. Colo. Case No. 03-11156). Douglas W. Jessop,
Esq., at Jessop & Company, PC represents the Debtor as it winds
down its operation. When the Company filed for protection from
its creditors, it listed assets of less than $10 million and debts
of over $10 million.
US AIRWAYS: September Revenue Passenger Miles Tumble 1.7%
---------------------------------------------------------
US Airways reported its September 2003 passenger traffic.
Revenue passenger miles for September 2003 decreased 1.7 percent
on 11.2 percent less capacity compared to September 2002. The
passenger load factor was 66.7 percent, a 6.4 percentage point
increase compared to September 2002.
For the third quarter 2003, revenue passenger miles decreased 3.8
percent on 10.2 percent less capacity compared to the same period
in 2002. The company reported a 76.9 percent load factor for the
quarter, up 5.1 percentage points compared to the third quarter of
2002.
Year-to-date 2003 revenue passenger miles decreased 9.3 percent on
11.3 percent less capacity compared to the first nine months of
2002. The passenger load factor for the period was 73.5 percent,
a 1.6 percentage point increase compared to the first nine months
of 2002.
The three wholly owned subsidiaries of US Airways Group, Inc. --
Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc.
-- reported a 19.1 percent decrease in revenue passenger miles for
the month of September on 20.3 percent less capacity. The
passenger load factor was 49.3 percent, a 0.7 percentage point
increase compared to September 2002.
For the third quarter 2003, the three wholly owned US Airways
Express carriers reported that revenue passenger miles decreased
16.0 percent on 16.5 percent less capacity. The load factor was
53.4 percent, a 0.3 percentage point increase compared to the
third quarter of 2002.
Year-to-date 2003, Allegheny Airlines, Inc., Piedmont Airlines,
Inc., and PSA, Inc., reported a 16.3 percent decrease in revenue
passenger miles on 15.6 percent less capacity. The passenger load
factor was 52.3 percent, a 0.4 percentage point decrease compared
to the first nine months of 2002.
System mainline passenger unit revenue for September 2003 is
expected to increase between 6 percent and 7 percent compared to
September 2002.
US Airways ended the month by completing 97.9 percent of its
scheduled flights compared to September 2002 when US Airways
completed 99.1 percent of its scheduled flights.
September's operational performance was largely affected by three
Hurricanes -- Fabian, Henri, and Isabel, causing US Airways to
reschedule thousands of flights in the Caribbean, Florida, and
parts of the Mid-Atlantic and Northeast regions of the country.
Isabel alone contributed to the cancellation of more than 900 US
Airways, US Airways Shuttle and US Airways Express flights in
September.
US AIRWAYS: Agrees to Allow Two Banc of America Claims
------------------------------------------------------
Banc of America Leasing & Capital LLC filed Claim No. 3093 for
$3,801,145 and Claim No. 3094 for $4,112,027. BofA also seeks
other unliquidated amounts relating to two Boeing 737 Aircraft
bearing Tail Nos. N279AU and N278AU.
By this stipulation, the US Airways Debtors and BofA agree that
Claim No. 3093 relating to Tail No. N279AU is reduced and allowed
as a general unsecured Class USAI-7 claim for $2,306,530. Claim
No. 3094 relating to Tail No. N278AU is reduced and allowed as a
general unsecured Class USAI-7 claim for $2,303,688. All other
claims pertaining to Tail Nos. N278AU and N279AU are disallowed.
(US Airways Bankruptcy News, Issue No. 38; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
USEC INC: Secures DOE Funding to Temporarily Retain 116 Jobs
------------------------------------------------------------
USEC Inc. has secured U.S. Department of Energy (DOE) funding to
temporarily retain 116 USEC plant personnel, previously expected
to be laid off Thursday last week.
In July, USEC announced that DOE would not extend funding for the
Deposit Removal Program at the Portsmouth plant in Piketon Ohio
beyond September 30, 2003. That would have forced the termination
of 116 USEC employees working under that DOE contract, the Company
said. The new funding announced today will enable those workers to
be transferred to other DOE contract programs on which USEC works,
through November 1, 2003.
"Through the leadership and flexibility of Ohio Gov. Bob Taft,
Senators Mike DeWine and George Voinovich, Congressmen Rob
Portman, David Hobson and Bob Ney and the U.S. Department of
Energy, 116 USEC employees will continue to be employed as part of
the larger Portsmouth workforce," said USEC President and CEO
William H. Timbers. "I hope a permanent solution to this funding
issue can be reached so that these employees will remain to help
in the important array of Portsmouth programs in support of our
nation's energy security goals."
These programs at Portsmouth include cleaning up contaminated
uranium, site preparation for the American Centrifuge
Demonstration Facility and maintaining the plant in a cold standby
condition for potential government restart.
USEC Inc. (NYSE:USU) (S&P, BB Corporate Credit Rating, Stable), a
global energy company, is the world's leading supplier of enriched
uranium fuel for commercial nuclear power plants.
VIEW SYSTEMS: Reaches Settlement in Weapons Technology Lawsuit
--------------------------------------------------------------
View Systems, Inc. (OTC Bulletin Board: VYST), have reached a
settlement with a former owner and current subsidiary, Milestone
Technology, in a dispute over the assignment of the concealed
weapons technology from the Milestone subsidiary to the parent
company, View Systems Inc.
In March 2002, View Systems acquired Milestone Inc. the exclusive
licensee of the U.S. government's designed and patented Concealed
Weapons Detection technology. The focal point of the acquisition
of Milestone was the exclusive rights Milestone had to further
develop and market the SecureScan technology. View Systems'
intentions always have been to commercialize the CWD portal and
integrate it with other technologies, as well as View System's own
proprietary technology.
At the time of the acquisition, the CWD rights remained licensed
in the Milestone subsidiary. During the restructuring phase, View
Systems found themselves at odds with former executives and
employees of Milestone, Inc., where certain claims were asserted
to the ownership and validity of the CWD license. The completed
settlement addresses these claims and finalizes the integration of
Milestone as a wholly-owned subsidiary. The company has taken
further steps to protect its rights by having the Idaho National
Energy and Environmental Laboratories re-assign the exclusive
license directly to View Systems.
Chairman of View Systems, William D. Smith commented, "The
government laboratories developed this technology and is the sole
owner of the patents. Through this settlement, we reached a new
agreement that gives View the exclusive rights to commercialize,
manufacture and market the CWD technology. Now that this
litigation is settled, View can focus on the manufacturing and
mass distribution of the concealed weapons detection portal."
View Systems, Inc. provides products to law enforcement,
government agencies, educational facilities, events and commercial
businesses. View Systems has an extensive network of distributors
and strategic alliance affiliates.
* * *
Liquidity and Capital Resources
In its most recent SEC Form 10-QSB, the Company reported:
"Historically, we have funded our cash requirements primarily
through equity transactions. We are not currently generating
sufficient cash from our operations to finance our business and
will continue to need to raise capital from other sources. At
June 30, 2003 we had negative working capital of $1,139,775. We
had total assets of $2,886,635 at June 30, 2003 compared to total
assets of $3,014,709 at December 31, 2002. Total current
liabilities were $1,372,837 at June 30, 2003 compared to
$1,117,916 at December 31, 2002. This resulted in stockholders'
equity of $1,513,798 for the 2003 six month period compared to
$1,896,793 at December 31, 2002.
"During the six months ended June 30, 2003, net cash used in
operating activities was $408,723 compared to net cash used of
$834,391 for the 2002 six month period. Net cash provided by
investing activities was $4,500 in the 2003 six month period and
was related to advances from affiliated entities. Net cash
provided by investing activities was $10,831 in the 2002 six month
period and was primarily the result of the acquisition of cash in
the Milestone Technology acquisition.
"Net cash provided by financing activities during the 2003 six
month period was $404,050, consisting of proceeds received from
sales of stock of $86,550 and loans from shareholders of $317,500.
During the 2002 six month period net cash generated from financing
was $778,980 and was primarily the result of proceeds from sales
of our common stock.
"During the six month period ended June 30, 2003 we have relied
primarily on our management for cash infusions to sustain
operations. These cash infusions are in the form of advances
without repayment terms. It is anticipated that we will require
additional advances at least until equity financing is arranged.
There can be no assurance that these funds will be available in
the future
Commitments and Contingent Liabilities
"Our commitments include operating leases and current liabilities.
At December 31, 2002, future minimum payments for operating leases
related to properties in Colorado, Maryland and Idaho were
$183,069 through 2006. Other commitments include notes payable of
$916,950 for the 2003 six month period, which are related to notes
payable of $354,450 to former shareholders of companies we
acquired, $245,000 payable to a commercial bank and $317,500
advanced by shareholders during the 2003 second quarter.
Financing
"We operate in a very competitive industry that requires continued
large amounts of capital to develop and promote our products. We
currently estimate we will need between $1 million and $2 million
to fully develop our products and further expand our business
operations. We believe that it will be essential to continue to
raise additional capital, both internally and externally, to
compete in this industry. Management intends to finance our
operations through additional equity financing, which we expected
to complete by the first quarter of 2003. We delayed this
financing, but anticipate completion of equity financing before
the end of 2003. Any proceeds we may receive from these equity
transactions will be used for business operations. We cannot
assure that this financing will be successful and we may be
required to further reduce expenses and scale back our operations.
In addition to accessing the public and private equity markets, we
will pursue bank credit lines and equipment leases for certain
capital expenditures."
WICKES: Imagine Investments Agrees to Finance Note Tender Offer
---------------------------------------------------------------
Wickes, Inc. (OTCBB:WIKS), a leading distributor of building
materials and manufacturer of value-added building components,
announced that Imagine Investments, Inc., which, together with its
affiliates, owns approximately 51.7% of the Company's common
stock, has agreed to provide up to $10.5 million of financing to
Wickes to enable it to make a cash tender offer for its Senior
Subordinated Notes due December 15, 2003.
Commenting on the agreement, Jim O'Grady, Wickes President and
CEO, stated, "We are pleased that Imagine Investments has
continued to show strong support for Wickes. Over the last several
months, it has become clear to me that our Company has support
throughout our vendor community and employee base which are
invaluable to the Company's future prospects."
Funding of the loan is subject to the approval of the Company's
senior lenders, completion of a tender offer for the notes and
other customary conditions. Under the terms of the agreement,
Imagine's loan would mature on July 30, 2005 (subject to Imagine's
right to extend the maturity for one year), bear interest at 10%
per annum, be secured by a second security interest in the
Company's inventory and accounts receivable and be convertible
into shares of Wickes common stock at a price of $1.00 per share.
Mr. O'Grady continued, "Imagine has also encouraged Wickes to
consider a rights offering so that if Imagine converts its loan
into Wickes common stock, shareholders of Wickes would be entitled
to purchase additional shares at the same price per share at which
Imagine converts its Loan into shares of Wickes common stock."
The Company's Board of Directors has authorized the Company to
proceed with the preparation of an offer to purchase the notes for
cash at a significant discount to face value or to exchange new
securities for the notes, although the Company has not yet
established the specific terms of such offers. The Company
previously disclosed that it does not believe it will generate
sufficient cash from operations to pay the notes when due.
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.com-- offers a full range of services about the
building materials and construction industry.
WINDSWEPT: Must Raise Positive Cash Flow to Meet Cash Needs
-----------------------------------------------------------
Windswept Environmental Group, Inc., through its wholly-owned
subsidiaries, Trade-Winds Environmental Restoration, Inc. and
North Atlantic Laboratories, Inc., provides a full array of
emergency response, remediation and disaster restoration services
to a broad range of clients. The Company has expertise in areas of
hazardous materials remediation, testing, toxicology, training,
wetlands restoration, wildlife and natural resources
rehabilitation, technical advisory, restoration and site
renovation services. The Company believes that it has assembled
the resources, including key environmental professionals,
construction managers, and specialized equipment to become a
leader in the expanding worldwide emergency services market. The
Company further believes that few competitors provide the diverse
range of services provided by Windswept on an emergency response
basis. Management believes that its unique breadth of services and
its emergency response capability has positioned the Company for
rapid growth in this expanding market.
The Company's revenues decreased to $17,831,189 in the fiscal year
ended July 1, 2003 ("fiscal 2003") compared to $32,903,740 in the
fiscal year ended July 2, 2002 ("fiscal 2002"). This decrease of
$15,072,551, or 45.8%, was primarily the result of revenue
decreases in the Company's Trade-Winds subsidiary of $14,664,269
to $17,567,411 in fiscal 2003 from $32,231,680 in fiscal 2002. In
addition, revenues in the Company's NAL subsidiary decreased
$408,282, or 60.8%, to $263,778 in fiscal 2003 from $672,060 in
fiscal 2002.
The decrease in Trade-Winds revenue of $14,664,269 was primarily
attributable to decreases of $17,002,928 related to non-recurring
catastrophe response projects performed in the vicinity of the
World Trade Center, remediation services of $1,820,158 performed
at the site of a chemical explosion, mold remediation services of
$1,801,428 performed in Houston, Texas as a result of tropical
storm flooding, marine spill response services of $864,407 and
decreases in training related revenue of $110,000. The decreases
were partially offset by increases of $3,486,469 related to a
large non-recurring mold remediation project in Hawaii, $1,100,000
related to an asbestos project in New York City, $841,380 for
various services performed for a utility, $795,000 related to
insurance, $460,558 related to a commercial drying project in
Mexico and $343,543 related to a lead remediation project in New
York City. The decrease in NAL revenues of $408,282 is primarily
attributable to the planned downsizing of NAL in order that
management could better focus on Trade-Winds business.
Cost of revenues decreased to $14,314,519, or 80.3% of total
revenues, in fiscal 2003 compared to $20,755,677, or 63.1% of
total revenues, in fiscal 2002. Gross profit decreased $8,631,393
to $3,516,670, or 19.7% of total revenues, for the fiscal year
ended July 1, 2003 from $12,148,063, or 36.9% of total revenues,
for the fiscal year ended July 2, 2002. This decrease in gross
margin of $8,631,393, or 71.1%, was due primarily to the absence
of higher margin remediation work in the vicinity of the World
Trade Center that the Company was unable to replace with other
projects. Decreasing revenues and the absence of large projects
causes the Company's margins to erode. Direct field labor, union
benefits, equipment rental, workers compensation insurance and
disposal costs decreased $4,015,708, $541,675, $377,346, $619,137
and $168,317, respectively, primarily as a result of the absence
of the World Trade Center work. In addition, project manager
salaries decreased $184,212 due to a decrease in the number of
those employees. These decreases were partially offset by
increases in subcontractor costs and other job related costs of
$214,726 and $259,117, respectively. In response to lower
revenues, the Company reduced its direct labor force in
February 2003. This reduction produced cost savings of
approximately $228,000 in fiscal 2003. The Company's cost of
revenues consists primarily of labor and labor related costs,
including salaries to laborers, supervisors and foremen, payroll
taxes, training, insurance and benefits. Additionally, cost of
revenues include bonding and job related insurance costs, repairs,
maintenance and rental of job equipment, job materials and
supplies, testing and sampling, and transportation, disposal, and
depreciation of capital equipment.
Selling, general and administrative expenses increased by
$257,163, or 4.8%, to $5,603,557 in fiscal 2003 from $5,346,394 in
fiscal 2002 and constituted approximately 31.4% and 16.2% of total
revenues in fiscal 2003 and 2002, respectively. The increase was
primarily attributable to increases in legal expenses, sales
salaries and travel and entertainment of $390,443, $285,732 and
$134,606, respectively. The increases were partially offset by a
decrease in the provision for doubtful accounts and advertising
expenses of $216,882 and $169,163, respectively.
An increase in legal expenses of $390,443 was primarily due to the
settlement of outstanding litigation involving a class action
suit. The increase in sales salaries and the related travel and
entertainment of $285,732 and $134,606, respectively, was due to
the implementation of an aggressive marketing strategy that called
for increasing the number of sales personnel and increasing
attendance at trade shows and conferences.
Under the terms of an employment agreement, the Company's
President and Chief Executive Officer may sell to the Company all
shares of common stock of the Company held by him and all shares
of common stock underlying vested options to purchase shares of
common stock of the Company held by him. The expense related to
variable accounting treatment for officer options decreased by
$1,149,058 to a benefit of $593,246 in fiscal 2003 from an expense
of $555,812 in fiscal 2002. This was due to a decrease in the
market price of the Company's common stock and an increase in the
number of options outstanding that are vested. Due to the terms of
the options, changes in the market price of the Company's common
stock, in either direction, result in a corresponding expense or
benefit.
Interest expense decreased by $151,057, or 67.7%, in fiscal 2003
to $72,189 from $223,246 in fiscal 2002. The decrease in interest
expense was primarily attributable to lower levels of debt and
reductions in the LIBOR rate.
The (benefit) provision for income taxes reflects an effective
rate of (69.6)% and 42.1% in fiscal 2003 and 2002, respectively.
The book benefit for taxable losses generated in prior periods was
offset by recording a full valuation allowance. Such valuation
allowance was recorded because management does not believe that
the utilization of the tax benefits from operating losses, and
other temporary differences are "more likely than not" to be
realized, as required by accounting principles generally accepted
in the United States of America.
Net loss and basic net loss attributable to common stockholders
per share for fiscal 2003 were $469,004 and $.01, respectively.
This compares to net income and basic net income attributable to
common stockholders per share of $3,494,867 and $.05,
respectively, for fiscal 2002. The changes are primarily
attributable to the factors described above.
As of July 1, 2003, the Company had cash balances of $130,096,
working capital of $2,217,290 and stockholders' equity of
$2,825,379. At July 2, 2002, the Company had cash balances of
$399,679, working capital of $4,326,473 and stockholders' equity
of $3,372,383. Historically, the Company has financed its
operations primarily through issuance of debt and equity
securities, through short-term borrowings from its majority
shareholder, Spotless, and through cash generated from operations.
In the opinion of management, the Company expects to have
sufficient working capital to fund current operations. However,
market conditions and their effect on the Company's liquidity may
restrict the Company's use of cash. In the event that sufficient
positive cash flow from operations is not generated, the Company
may need to seek additional financing from Spotless, although
Spotless is under no legal obligation to provide such funds. The
Company currently has no credit facility for additional borrowing.
Net cash used in operating activities was a minus $317,504 in
fiscal 2003, as compared to net cash provided by (used in)
operating activities of $2,521,922 and a minus $136,364 in fiscal
2002 and 2001, respectively. Accounts receivable decreased
$1,275,628, or 25.4%, to $6,284,407 in fiscal 2003, reflecting the
collection of balances from the prior year's activities in the
vicinity of the World Trade Center and a reduction in sales
volume. Accounts receivable increased $2,275,940, or 37.0%, to
$8,428,232 in fiscal 2002, reflecting the increase in sales volume
attributable to work performed in the vicinity of the World Trade
Center. Accounts receivable increased $2,164,282, or 58.9%, to
$5,852,793 in fiscal 2001 reflecting the increase in sales
relative to a large mold remediation project. Accounts payable and
accrued expenses decreased by $119,145, or 4.3%, to $2,681,022 in
fiscal 2003 primarily as a result of reduced sales volume.
Accounts payable and accrued expenses increased by $301,190, or
10.1%, to $3,268,618 in fiscal 2002 primarily as a result of the
additional expenses incurred on the World Trade Center projects.
Investing activities used cash of $1,914,576, $688,073 and
$381,729 in fiscal 2003, 2002 and 2001, respectively, principally
for the purchase of property and equipment. Purchases of property
and equipment increased in fiscal 2003 due to the purchase of
commercial drying equipment enabling the Company to market such
services. During the 2001 transition period, the Company received
$249,878 for the sale of substantially all of the assets of an
unprofitable subsidiary.
Financing activities for fiscal 2003, fiscal 2002 and fiscal 2001
provided (used) net cash of $1,962,497, ($1,757,902) and $317,621,
respectively. In fiscal 2003, fiscal 2002 and fiscal 2001, these
amounts include proceeds from short-term notes from Spotless of
$2,325,000, $1,750,000 and $1,450,000 offset by repayments of
short-term notes to Spotless of $825,000, $2,750,000 and
$1,000,000, respectively. In addition, in fiscal 2003 and fiscal
2002, proceeds from long-term debt was $844,209 and $137,965,
respectively, offset by repayments of long-term debt of $203,712
and $84,549 in fiscal 2003 and fiscal 2002, respectively. In
fiscal 2003 and fiscal 2002, the Company repaid convertible notes
of $100,000 and $680,000 and paid dividends on preferred stock of
$78,000 and $214,500, respectively. In fiscal 2002 and fiscal 2001
the Company received proceeds from the exercise of stock options
of $83,182 and $3,250, respectively.
As of July 1, 2003, the Company owed Spotless $1,700,000 in short-
term loans to fund working capital. Between July 2, 2003 and
September 23, 2003, the Company borrowed an additional $1,835,000
from Spotless for working capital needs that increased the total
outstanding borrowings from Spotless to $3,535,000. All current
borrowings from Spotless bear interest at the London Interbank
Offering Rate ("LIBOR") plus 1 percent and are secured by all of
the Company's assets. As of July 1, 2003, interest of $26,336 was
accrued and unpaid on these borrowings.
Management believes the Company will require positive cash flow
from operations to meet its working capital needs over the next
twelve months. In the event that positive cash flow from
operations is not generated, the Company may be required to seek
additional financing to meet its working capital needs. Management
continues to pursue additional funding sources. The Company
anticipates revenue growth in new and existing service areas and
continues to bid on large projects, though there can be no
assurance that any of the Company's bids will be accepted. The
Company is striving to improve its gross margin and control its
selling, general and administrative expenses. There can be no
assurance, however, that changes in the Company's plans or other
events affecting the Company's operations will not result in
accelerated or unexpected cash requirements, or that it will be
successful in achieving positive cash flow from operations or
obtaining additional financing. The Company's future cash
requirements are expected to depend on numerous factors,
including, but not limited to: (i) the ability to obtain
environmental or related construction contracts, (ii) the ability
to generate positive cash flow from operations, and the extent
thereof, (iii) the ability to raise additional capital or obtain
additional financing, and (iv) economic conditions.
W.R. GRACE: Hires State Street to Perform Fiduciary Services
------------------------------------------------------------
W.R. Grace & Co., and its debtor-affiliates insist that the
retention of State Street is necessary to establish an independent
fiduciary that can perform its fiduciary obligations regarding
Grace Stock within the Grace Savings Plan, without encountering
the potential for competing duties and legal obligations to
others, including to the Debtors, the Debtors' creditors and other
equity holders.
The Debtors explain that State Street's appointment is intended
to protect them and their Board of Directors and management from
any potential liability, which could arise from competing duties
and obligations. Consistent with the marketplace and to preserve
employee morale, the Debtors believe that it is necessary to have
the estates directly pay the expenses of State Street's
retention. Any other outcome could have a detrimental impact on
the Debtors' estates.
Presently, the Debtors' Board of Directors and the Grace
Investment & Benefits Committee are responsible for providing the
Fiduciary Services. The Investment Committee is currently
comprised of two members of the Debtors' senior management team
who are also key participants in the day-to-day management of the
Debtors' Chapter 11 cases and are expected to be active
participants in the Chapter 11 plan negotiations.
In February 2003, the Board of Directors asked management to
pursue hiring an independent fiduciary to manage the Grace Stock
within the Savings Plan. The Grace Board concluded that the
Corporate Fiduciaries should be relieved of further
responsibility for decisions regarding Grace Stock within the
Savings Plan to avoid the potential for a conflict between the
Corporate Fiduciaries' obligations to the Savings Plan and its
participants, and their obligations under federal securities law
and the Bankruptcy Code.
The Debtors determined that retaining a party unrelated to them
to provide the Fiduciary Services would be the appropriate method
of replacing the Corporate Fiduciaries with respect to the Grace
Stock.
Selection of State Street
In conjunction with selecting an Independent Fiduciary, the
Debtors contacted at least five entities that would likely
consider providing the necessary fiduciary services. The
entities included AON Fiduciary Counselors, State Street, U.S.
Trust, The Northern Trust Company, and Fidelity Trust Company.
Of the entities contacted with respect to performing the
Fiduciary Services, only AON FC and State Street expressed any
interest. The Debtors evaluated the potential retention of AON
FC and State Street based on financial and legal sophistication,
experience, cost and financial resources. In May 2003, the
Debtors' Board of Directors approved the retention of State
Street as the Independent Stock Fiduciary for Grace Stock. In
June 2003, the Debtors began to negotiate terms of an arrangement
with State Street. A final agreement of all terms between the
Debtors and State Street was concluded in August, pending Court
approval. State Street represented to the Debtors that the final
terms included a fixed annual fee that was significantly below
what State Street has charged other clients in the same context.
Need for an Independent Fiduciary
As the Debtors' Chapter 11 cases progress, the Corporate
Fiduciaries may be inhibited from applying the standards under
ERISA with respect to decisions regarding Grace Stock within the
Savings Plan. Specifically, it may be difficult for the
Corporate Fiduciaries to discharge fiduciary duties under ERISA
Section 404(a) with regard to:
(a) whether and to what extent Grace Stock should be retained
within the Savings Plan at the same time certain Corporate
Fiduciaries are participating in the negotiation and
formation of a plan of reorganization, and
(b) sharing or acting upon information regarding the plan of
reorganization process, which may not be public
information, but which may be material to investment
decisions regarding Grace Stock within the Savings Plan.
Retention of State Street at this time to provide the Fiduciary
Services will:
(1) allow the Debtors' management to address future issues in
these Chapter 11 cases without the limitations imposed by
the fiduciary responsibilities under ERISA -- regarding
Grace Stock -- and
(2) protect the interests of participants in the Savings Plan
by having a fiduciary focused on the requirements of
ERISA, independent of the interests of the Debtors, its
creditors and other equity holders.
The Need for Speed
The appointment of an independent fiduciary for the Savings Plan
should not be delayed because there are several significant
events that will occur in the near future regarding the Debtors'
Chapter 11 cases that may impact the market price for Grace
Stock. These issues include:
(a) the resolution of the ZAI Science Trial; and
(b) the progress of asbestos personal injury legislation
through Congress.
In addition, conversations and negotiations regarding potential
plans of reorganization will likely become more intense within
the next several months. These events will need to be considered
by the fiduciary that manages the Grace Stock within the Savings
Plan.
It is appropriate to have in place an Independent Fiduciary as
soon as possible which:
(a) can evaluate the impact of these events vis-.-vis Grace
Stock within the Savings Plan, solely in the interests of
plan participants and considering the other requirements
of ERISA;
(b) does not have to be concerned with the potential
obligation to disclose non-public information; and
(c) is independent of the burden and potential liability
generated by the influence of potentially conflicting
interests of the Debtors and others.
Independent Fiduciaries for Other Companies
The Debtors are not the only corporation to attempt to address
these issues through the retention of an independent fiduciary.
At the time that the Debtors began considering such a retention,
these corporations had already retained Independent Fiduciaries:
(a) Federal Mogul retained AON FC after filing bankruptcy;
(b) United Airlines retained AON FC prior to filing
bankruptcy; and
(c) American Airlines retained U.S. Trust.
Debtors' Reasonable Business Judgment On Fees
The Debtors argue that the payment of State Street's fees is a
sound business judgment that is standard practice and is
necessary to maintain the morale of their employees. According
to Monet Ewing, a principal of State Street, the standard
practice in the independent fiduciary industry is for the company
or plan sponsor to pay the fees and expenses of an independent
fiduciary. It is rare for an independent fiduciary's fees and
expenses (including its advisors' fees and expenses) to be paid
from plan assets. An independent fiduciary is generally hired to
perform a fiduciary function that was previously the
responsibility of the company, its board of directors, or a
board-designated committee of officers, when these fiduciaries
are conflicted or are otherwise unable to fulfill their ERISA
responsibilities. Because the independent fiduciary performs
necessary services ordinarily performed by the corporate sponsor,
the corporate sponsor is required to pay for them.
In substantially all the cases in which State Street has been
engaged as an independent fiduciary in the past nine years, State
Street has been paid by the company or plan sponsor. In the
context of these Chapter 11 cases, with all of the attendant
uncertainty that inevitably arises during any Chapter 11 process,
placing the additional burden of State Street's fees on the
Debtors' employees through deductions from a Savings Plan, which
was already ravaged by the Debtors' bankruptcy, likely would be
interpreted negatively by the plan participants and all of the
Debtors' employees.
The Debtors believe that avoidance of the detrimental impact to
the morale of their employees justifies the costs of the
Fiduciary Services being borne by the Debtors and not by the
Savings Plan. Based on the Debtors' evaluation of their
circumstances -- including the significant efforts the Debtors
have taken throughout these Chapter 11 Cases to maintain employee
morale and enhance employee retention -- they believe that the
costs of the Fiduciary Services simply cannot be placed on their
employees through the Savings Plan. Indeed, in the Debtors'
judgment, contrary to wasting the Debtors' assets, retaining
State Street plays a key part in preserving them.
The fees and expenses being charged by State Street are
reasonable. State Street charges an annual fee between $500,000
and $1,500,000, plus fees and expenses of its advisors, for
investment manager and independent fiduciary services in
bankruptcy cases. Thus, the proposed $530,000 annual fee to be
paid by the Debtors for the Fiduciary Services is well within the
range of fees normally charged by State Street for similar
engagements. (W.R. Grace Bankruptcy News, Issue No. 47;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
XM SATELLITE: Declares Series B Preferred Quarterly Dividend
------------------------------------------------------------
XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) has declared a
regular quarterly dividend on its 8.25% Series B Convertible
Redeemable Preferred Stock.
The dividend is payable in shares of the Company's Class A Common
Stock at a rate of $1.0313 per share of Series B Preferred Stock
owned, with fractional shares to be paid in cash. The shares of
Class A Common Stock to be issued will be valued at 95% of the
average daily price of the Class A Common Stock for the 10
consecutive trading days ending on October 15, 2003. The dividend
is payable on November 1, 2003, to Series B convertible preferred
stockholders of record of XM Satellite Radio Holdings Inc. as of
October 22, 2003.
XM is America's #1 satellite radio service. With nearly 930,000
subscribers, XM is on pace for 1.2 million subscribers later this
year. Broadcasting live daily from studios in Washington, DC, New
York City and Nashville, Tennessee at the Country Music Hall of
Fame, XM provides its loyal listeners with 101 digital channels of
choice: 70 music channels, more than 35 of them commercial-free,
from hip hop to opera, classical to country, bluegrass to blues;
and 31 channels of premiere sports, talk, comedy, kid's and
entertainment programming. Compact and stylish XM satellite radio
receivers for the home, the car, the computer and even a boombox
for on the go are available from retailers nationwide. In
addition, XM is available in more than 80 different 2004 car
models. XM is a popular factory-installed option on more than 40
new General Motors models, as well as a standard feature on
several top-selling Honda and Acura models.
For more information about XM, visit http://www.xmradio.com
* * *
As previously reported in Troubled Company Reporter, Standard &
Poor's Ratings Services lowered its corporate credit ratings on
satellite radio provider XM Satellite Radio Inc., and its parent
company XM Satellite Radio Holdings Inc. (which are analyzed on a
consolidated basis) to 'SD' from 'CCC-'.
At the same time, Standard & Poor's lowered its rating on the
company's $325 million 14% senior secured notes due 2010 to 'D'
from 'CCC-'.
These actions follow XM's completion of its exchange offer on the
senior secured notes, at par, for new 14% senior secured notes due
2009.
All ratings were removed from CreditWatch with negative
implications where they were placed on Nov. 18, 2002.
* Large Companies with Insolvent Balance Sheets
-----------------------------------------------
Total
Shareholders Total Working
Equity Assets Capital
Company Ticker ($MM) ($MM) ($MM)
------- ------ ------------ ------- --------
Alliance Imaging AIQ (39) 683 43
Akamai Technologies AKAM (168) 230 60
Alaris Medical AMI (32) 586 173
Amazon.com AMZN (1,353) 1,990 550
Aphton Corp APHT (11) 16 (5)
Arbitron Inc. ARB (100) 156 (2)
Alliance Resource ARLP (46) 288 (16)
Atari Inc. ATAR (97) 232 (92)
Actuant Corp ATU (44) 295 18
Avon Products AVP (91) 3,327 73
Saul Centers Inc. BFS (13) 389 N.A.
Blount International BLT (369) 428 91
Cincinnati Bell CBB (2,104) 1,467 (327)
Cubist Pharmaceuticals CBST (7) 221 131
Choice Hotels CHH (114) 314 (37)
Columbia Laboratories COB (8) 13 5
Campbell Soup Co. CPB (114) 5,721 (1,479)
Caraco Pharm Labs CPD (20) 20 (2)
Centennial Comm CYCL (579) 1,447 (98)
Echostar Comm DISH (1,206) 6,210 1,674
D&B Corp DNB (19) 1,528 (104)
Graftech International GTI (351) 859 108
Hexcel Corp HXL (127) 708 (531)
Integrated Alarm IASG (11) 46 (8)
Imax Corporation IMAX (104) 243 31
Imclone Systems IMCL (186) 484 139
Gartner Inc. IT (29) 827 1
Journal Register JRC (4) 702 (20)
KCS Energy KCS (30) 268 (16)
Kos Pharmaceuticals KOSP (75) 69 (55)
Lodgenet Entertainment LNET (101) 298 (5)
Level 3 Comm Inc. LVLT (240) 8,963 581
Memberworks Inc. MBRS (21) 281 (100)
Moody's Corp. MCO (327) 631 (190)
McDermott International MDR (417) 1,278 154
McMoRan Exploration MMR (31) 72 5
Maguire Properti MPG (159) 622 N.A.
MicroStrategy MSTR (34) 80 7
Northwest Airlines NWAC (1,483) 13,289 (762)
ON Semiconductor ONNN (525) 1,243 195
Petco Animal PETC (11) 555 113
Primedia Inc. PRM (559) 1,836 (248)
Primus Telecomm PRTL (168) 724 65
Per-Se Tech Inc. PSTI (39) 209 32
Qwest Communications Q (1,094) 31,228 (1,167)
Rite Aid Corp RAD (93) 6,133 1,676
Ribapharm Inc RNA (363) 199 92
Sepracor Inc SEPR (392) 727 413
St. John Knits Int'l SJKI (76) 236 86
Solutia Inc. SOI (249) 3,342 (231)
I-Stat Corporation STAT 0 64 33
Town and Country Trust TCT (2) 504 N.A.
Tenneco Automotive TEN (75) 2,504 (50)
Thermadyne Holding THMD (665) 297 139
TiVo Inc. TIVO (25) 82 1
Triton PCS Holdings TPC (60) 1,618 173
UnitedGlobalCom UCOMA (3,040) 5,931 (6,287)
United Defense I UDI (30) 1,454 (27)
Ultimate Software ULTI (7) 31 (10)
UST Inc. UST (47) 2,765 829
Valassis Comm. VCI (33) 386 80
Valence Tech VLNC (17) 36 4
Ventas Inc. VTR (54) 895 N.A.
Warnaco Group WRNC (1,856) 948 471
Western Wireless WWCA (464) 2,399 (120)
Xoma Ltd. XOMA (11) 72 30
*********
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.
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for the term of the initial subscription or balance thereof are
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*** End of Transmission ***