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/raid1/www/Hosts/bankrupt/TCR_Public/031027.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, October 27, 2003, Vol. 7, No. 212 Headlines ABITIBI-CONSOLIDATED: Forges 10-Year Recycling Pact with Eureka ADELPHIA: Wants Until January 15 to File Schedules of Assets AIR CANADA: Court Appoints URRC to Represent Union Retiree Panel ALAMOSA HOLDINGS: Will Release Third Quarter Results on Nov. 6 ALLEGHENY TECH: Low-B Rating on Watch with Negative Implications AMERCO: Wants Court to Fix Nov. 10 as General Claims Bar Date AMERICAN PLUMBING: Asks to Bring-In Conway Del Genio as Advisors AMERICAN PROD: Southborrough Files Purchase Pact in Mich. Court AMERICA WEST: Initiates Nonstop Transcontinental Flights ANC RENTAL: Court Okays $12 Mill. Postpetition Bonding Facility ANTARES PHARMA: LibiGel Phase II Trial Yields Positive Results ARCH COAL: Board Declares Quarterly Dividend Payable on Dec. 15 ATLANTIC COAST: Pilots Applaud Plan for New Independent Carrier AUDIOVOX CORPORATION: Appoints Grant Thornton as New Auditors AURA SYSTEMS: Needs Additional Financing to Continue Operations BAC SYNTHETIC: Fitch Takes Rating Actions on Various Classes BANC OF AMERICA: Fitch Assigns Low-Bs to Classes 1-B-4 & 1-B-5 BETHLEHEM STEEL: Court Clears Severance Settlement Procedures BUDGET GROUP: U.K. Administrators Depose Skadden Arps BURLINGTON: Seeks to Sell Stokedale Center to Generation for $2M CALPINE CORP: Signs Two-Year Energy Agreement with Reliant C-BASS: Fitch Downgrades Class B-2 Rating to B CENTERPOINT ENERGY: Sells Final International Asset to Corbin COEUR D' ALENE: Reports Improved 3rd Quarter & 9 Months Results COMM 2001-FL5: Fitch Cuts B-Level Ratings on Four Note Classes COMMSCOPE: Plans to Release Third Quarter 2003 Results on Oct 29 COVANTA ENERGY: Court Approves Disclosure Statement CROWN AMERICAN: 3rd Quarter FFO Per Share Increases by 21% DELTA AIR LINES: Elects Larry D. Thompson to Board Of Directors DELTA FUNDING: Fitch Takes Rating Actions on Series 1997 Notes DOBSON COMMS: Unit Closes New $700-Mil. Secured Credit Facility DOBSON COMMS: Completes Tender Offer for 12-1/4% Preferreds DOBSON COMMS: Discloses Third Quarter 2003 Customer Additions D.R. HORTON: Fiscal Year 2003 Conference Call Set for Nov. 13 EASYLINK: Broker Adversary Obtains Favorable Court Decision ELIZABETH ARDEN: S&P Junks Senior Unsecured Debt Rating to CCC+ EMTEC MAGNETICS: Imation Obtains Nod for Acquisition of Assets ENCOMPASS: Asks Court Nod to Commute AIG Insurance Policies ENRON: ENA Demands $42-Mill. Termination Pay from Goldman Sachs EPRESENCE INC: Board of Directors Endorses Plan of Liquidation GENTEK: Fitch Withdraws CC/D Ratings on Senior Sec. & Sub. Notes GEORGETOWN STEEL: Wants to Extend Schedule Filing Until Dec. 20 GREEN POWER: Independent Auditors Raise Going Concern Doubts HASBRO: Fitch Says Senior Unsecured Debt Rating Upgrade Imminent HAUSER: Agrees to Sell Botanicals Extracts Division to Zuellig HAWAIIAN HOLDINGS: Amex Grants Extension to Regain Compliance IMC GLOBAL: Reports Losses Due to Rising Raw Material Costs INTERNATIONAL SHIPHOLDING: Q3 Net Loss Widens to $1.6 Million ISLE OF CAPRI: Acquires Interest in U.K.-Based Blue Chip Casinos IT GROUP: Unsecured Panel Moves to Prosecute Avoidance Actions L-3 COMMS: Planned Vertex Acquisition Spurs S&P to Affirm Rating LAND O'LAKES: Third Quarter Net Loss Narrows to $1.4 Million LNR PROPERTY: Selling Additional $50 Million of Senior Sub Notes LTV CORP: Exclusive Solicitation Time Extended to Feb. 24, 2004 MASSEY ENERGY: 3rd Quarter 2003 Net Loss Tops $15.6 Million MAURICE CORP.: Liquidating CEO Goes to Jail for Bankruptcy Fraud METALS USA: Cheryl Ketchie Discloses Ownership of Common Shares MIDWEST EXPRESS: Restructuring Costs Spur Third Quarter Losses MIRANT CORP: MAGI Committee Turns to Cadwalader for Advice NORTEL NETWORKS: Declares Class A Preferred Share Dividends NORTEL NETWORKS: Issues Preliminary Results for Third Quarter NUTRAQUEST INC: Case Summary & 5 Largest Unsecured Creditors OWENS: Committee Pushes for Appointment of Chapter 11 Trustee PACIFIC GAS: Gets Approval to Use $42,686,311 Cash Collateral PETROLEUM GEO: Commences Rights Offering As Part of Reorg. Plan PHOTOCHANNEL NETWORKS: Closes Private Placements of $2.7M Shares PLAINS ALL AMERICAN: Declares Distribution on Common & Sub Units PRIMUS TELECOM: Issuing Prospectus for Notes & Shares Offering QUANTUM CORP: Fiscal Second Quarter Net Loss Increases to $38MM READERS DIGEST: Hosting Q1 2004 Conference Call on October 30 RESIDENTIAL FUNDING: Fitch Affirms Ratings on Securitizations RETAIL GROUP INC: Voluntary Chapter 7 Case Summary RIVER ROCK: B+ Rating Assigned to Proposed Senior Secured Notes ROUGE INDUSTRIES: Severstal to Acquire Assets Under Bankruptcy RYERSON TULL: Discloses Third Quarter 2003 Results SOLECTRON: Weak Credit Measures Spur Fitch to Cut Rating to BB- SOLUTIA: Third Quarter Balance Sheet Upside Down by $369 Million SPIEGEL GROUP: Bringing-In Assessment Tech as Tax Consultants SR TELECOM: Third Quarter Results Conference Call is on Thursday SUREBEAM CORPORATION: Secures $5 Million in Equity Financing STELCO: Long-Term Credit Rating Down to B- over Poor Liquidity SUNRISE APARTMENTS: Fitch Further Junks Series A Revenue Bonds TENET HEALTHCARE: S&P Lowers and Keeps Neg. Outlook on Ratings TERRA INDUSTRIES: Will Webcast Q3 Conference Call on October 30 TOBACCO ROW PHASE 1A: Case Summary & 20 Largest Unsec. Creditors UBIQUITEL INC: Reports Third Quarter Subscriber Results UNITED AIRLINES: Exploring Alternatives for Expanding Operations UNITED STATIONERS: Reports Increasing Net Sales in Third Quarter UNIVERSAL COMMS: Board Ratifies Price's Retention as Auditor VERTEX AEROSPACE: On Watch Positive after L-3 Comms Acquisition VISUAL DATA CORP: Settles 6% Convertible Debentures W.R. GRACE: Reports Improved Third Quarter Financial Results WESTPOINT: Court Stretches Exclusive Plan Filing to March 31 WORLDCOM: Reaches Agreement Resolving Two EPORT Claims * Coudert Brothers Hosts French Minister of Justice * BOND PRICING: For the week of October 27 - 31, 2003 ********* ABITIBI-CONSOLIDATED: Forges 10-Year Recycling Pact with Eureka --------------------------------------------------------------- Abitibi-Consolidated Inc. (NYSE: ABY, TSX: A) and Eureka Recycling announced a ten-year agreement whereby a majority of recycled newspapers in Saint Paul will be sold to Abitibi-Consolidated. This private/non-profit partnership guarantees Eureka Recycling, the nonprofit recycler that manages Saint Paul's recycling program, a long-term, stable end-market for collected newspapers. In exchange, Abitibi-Consolidated, which recycles over three million tons of paper each year, will receive a steady flow of quality materials for their paper recycling mills throughout North America. "Through our partnership with Abitibi-Consolidated's Recycling Division, we are demonstrating that recycling is a viable, environmentally beneficial enterprise. Our common dedication to the wise use of our resources is resulting in the highest environmental and economic benefit possible for newspaper recycling in Saint Paul," explained Susan Hubbard, CEO, Eureka Recycling. "We see this partnership as a way to ensure that recycling remains sustainable, and profitable," added Tim Brownell, COO, Eureka Recycling. "Saint Paul has always been a true leader in recycling," according to Kate Krebs, Executive Director, National Recycling Coalition, a coalition that addresses recycling education and advocacy. "The City of Saint Paul should be congratulated for fostering such a unique combination of nonprofit, private and government involvement in the recycling industry's continued success." Abitibi-Consolidated will work in collaboration to enhance Saint Paul's recycling infrastructure, namely Eureka Recycling's new recycling processing center located midway between the Twin Cities of Minneapolis and Saint Paul. The facility is expected to strengthen the local economics of recycling and ensure that materials are recycled for their highest and best use. "We are pleased to be in partnership with a community-based recycler that understands the economic, environmental and operational issues of recycling and is taking proactive steps to ensure high-quality materials will be available for years to come," stated Michael Sullivan, Abitibi-Consolidated, Recycling Division General Manager. bitibi-Consolidated is the world's leading producer of newsprint and value-added paper as well as a major producer of wood products, generating sales of $5.1 billion in 2002. With 16,000 employees, the Company does business in more than 70 countries. Responsible for the forest management of 18 million hectares, Abitibi-Consolidated is committed to the sustainability of the natural resources in its care. The Company is also the world's largest recycler of newspapers and magazines, serving 17 metropolitan areas with more than 10,000 recycling locations. Abitibi-Consolidated operates 27 paper mills, 21 sawmills, 3 remanufacturing facilities and 1 engineered wood facility in Canada, the US, the UK, South Korea, China and Thailand. In November 2002, Moody's cut its rating on the Company's outstanding debentures to Ba1. Abitibi is also party to a C$541,875,000 credit facility arranged by Citicorp, Scotiabank and CIBC maturing on December 18, 2003. Eureka Recycling is a mission-driven nonprofit corporation that has managed Saint Paul's recycling program for over fifteen years in partnership with the City of Saint Paul, other community organizations and citizens. Through innovate resource management, Eureka Recycling demonstrates that recycling is more sustainable than wasting and fully invests any proceeds from its services and programs into the community it serves. ADELPHIA: Wants Until January 15 to File Schedules of Assets ------------------------------------------------------------ To recall, Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher LLP, in New York, notes, the Adelphia Communications Debtors have already filed their schedules of liabilities, schedules of executory contracts and unexpired leases and statements of financial affairs on July 31, 2003. The ACOM Debtors, with the assistance of their professional advisors, continue to work diligently and expeditiously on the preparation of their Schedules of Assets. However, due to the complexity and diversity of their operations and other demands of these cases, the ACOM Debtors anticipate that they will be unable to complete and file their Schedules of Assets prior to the current deadline. Accordingly, the ACOM Debtors ask the Court to further extend their deadline to file their Schedules of Assets through January 15, 2004. Mr. Shalhoub argues that the requested extension should be approved because: -- The ACOM Debtors continue to work diligently on numerous corporate, financial and legal issues involving, among other things, the Securities and Exchange Commission, the Justice Department, federal and state franchise regulatory authorities, financial statement and audit activities, and, of course, the myriad challenges incident to operating their cable and other businesses; and -- The ACOM Debtors recently prepared a confidential long-term business plan, which was presented to the advisors to the Debtors' primary constituents, and an analysis of distribution priorities that will lay the foundation for the distribution of value to creditors, which also was presented to the advisors to the Debtors' primary constituents. * * * The Court will convene a hearing on November 13, 2003 to consider the Debtors' request. Accordingly, Judge Gerber extends the ACOM Debtors' deadline to file their Schedules of Assets until the conclusion of that hearing. (Adelphia Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Court Appoints URRC to Represent Union Retiree Panel ---------------------------------------------------------------- Air Canada maintains defined benefit pension plans and defined contribution pension plans on behalf of its unionized employees. The majority of its DC Plans are held with respect to Jazz Air Inc. employees. Air Canada also maintains health insurance and life insurance benefits, which were offered to unionized employees, represented by different unions, for their retirement and which were utilized currently by Air Canada unionized retirees under its various DB Plans, pursuant to various collective agreement provisions and entitlements. As part of its reorganization, Air Canada took steps to restructure its pension plan obligations. Air Canada presented its first Pension Proposal to the unions in July 2003. Subsequently, Air Canada presented a revised Proposal to the Unions in August 2003. The Revised Pension Proposal is a planned course of action for dealing with the pension plan Air Canada maintains with its employees. The Proposal does not apply to Jazz Air operations. Susan Ursel, Esq., at Green & Chercover, in Toronto, Ontario, relates that the Revised Pension Proposal would have the impact on the group of currently employed union and non-union employees, existing union and non-union retirees, and vested plan members -- those who are no longer employed by Air Canada and are not yet eligible for a pension but who have a vested right to a pension under the applicable Air Canada pension plan. The active union employees are represented by their unions in the matter of these proposals. The active non-union employees are represented by Brian Bellmore of Bellmore and Moore. The non-union retirees are represented by John Varley of Pallet Valo LLP. In the course of these proposals, in August 2003, the federal pension regulator, the Office of the Superintendent of Financial Institutions expressed concerns that the unions now representing the active union employees may be placed in an appearance of conflict of interest or an actual conflict of interest if they also represent union retirees, surviving spouses, other beneficiaries and vested plan members. The unions do not agree with this assessment. However, they tried to cooperate with the OSFI. According to Ms. Ursel, the unions began to contact knowledgeable retirees to assist in seeking appropriate representatives of the different union retiree groups. In the course of the search, Ron Fontaine was approached as a possible representative of the International Association of Machinists and Aerospace Workers retirees. Mr. Fontaine agreed to take on the work. In consultation with their counsel, the union retiree representatives further agree to form a Union Retiree Representative Committee, with representative of each union retiree subgroup. The members of the proposed Union Retiree Representative Committee are: Ron Fontaine International Association of Machinists and Aerospace Workers Jeanette Forbes Canadian Union of Public Employees Tom Freeman National Automobile, Aerospace, Transportation and General Workers Union of Canada - CAW Canada Greg Cameron National Automobile, Aerospace, Transportation and General Workers Union of Canada - CAW Canada Denis Kennedy Canadian Air Line Dispatchers Association Larry Sawatsky Canadian Air Line Dispatchers Association Captain Robert Airline Pilots Association International Isaacson At the request of Mr. Fontaine, acting for and on behalf of the proposed Union Retiree Representative Committee, the CCAA Court appoints the Union Retiree Representative Committee to represent the interests of unionized retirees that retired as of April 1, 2003 as well as their beneficiaries. The Union Retiree Representative Committee will facilitate the communication of Air Canada proposals and any information relevant to the proposal, to the union retirees. The Court also appoints Susan Ursel and Green & Chercover as the Committee's counsel. Upon the execution of confidentiality agreements, the Applicants may provide information, documentation and communication facilities to the Union Retiree Representative Committee. The Applicants will also disburse the reasonable legal fees and expenses the Committee incurs in carrying out its responsibilities. The Committee's representation excludes the Air Canada Pilots Association. (Air Canada Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) ALAMOSA HOLDINGS: Will Release Third Quarter Results on Nov. 6 -------------------------------------------------------------- Alamosa Holdings, Inc. (OTC Bulletin Board: ALMO), the largest (based on number of subscribers) PCS Affiliate of Sprint (NYSE: FON, PCS), which operates the largest all-digital, all-CDMA Third- Generation (3G) wireless network in the United States, reported third quarter 2003 customer results for subscriber additions, customer churn and total subscribers. It also announced the schedule for its third quarter earnings release and conference call. Third Quarter Subscriber and Churn Results Net subscriber additions for the third quarter of 2003 totaled approximately 16,000. The customer churn rate was approximately 2.9 percent for the third quarter of 2003, up from 2.5 percent in the second quarter of 2003, but down significantly from 3.8 percent in the same quarter one year ago. Total subscribers were approximately 693,000 at September 30, 2003, an increase of approximately 2.4 percent and 17.3 percent from June 30, 2003 and September 30, 2002, respectively. "As expected, our customer churn increased during the third quarter directly impacting our net customer results," said David E. Sharbutt, Chairman and Chief Executive Officer of Alamosa Holdings, Inc. "This was still a positive quarter for Alamosa with increased prime customer additions to our base and progress being made on our current debt exchange offer that now has more than 68% support of existing note holders. We are focused on finishing out the year strong to achieve record financial performance for Alamosa in 2003." Third Quarter 2003 Earnings Release & Conference Call Alamosa will release its full third quarter 2003 results on Thursday, November 6, 2003, after the close of the market. In conjunction with the release, Alamosa has scheduled a conference call, which will be broadcast live over the Internet, on Friday, November 7, 2003, at 9:00 a.m. Eastern Time. What: Alamosa Holdings Third Quarter Earnings Conference Call When: Friday, November 7, 2003, at 9:00 a.m. Eastern Time How: Live via phone - By dialing 913-981-5572 and asking for the Alamosa call 10 minutes prior to the start time or listen live over the Internet by logging on to http://www.alamosapcs.comor http://www.fulldisclosure.com. Alamosa Holdings, Inc. (S&P, CC Corporate Credit Rating, Negative) is the largest PCS Affiliate of Sprint based on number of subscribers. Alamosa has the exclusive right to provide digital wireless mobile communications network services under the Sprint brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois and California. Alamosa's territory includes licensed population of 15.8 million residents. ALLEGHENY TECH: Low-B Rating on Watch with Negative Implications ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Pittsburgh, Pennsylvania-based Allegheny Technologies Inc. (BB+ Corporate Credit Rating) on CreditWatch with negative implications, reflecting the company's continuing weak financial performance and heightened concerns that lackluster demand from key markets and increased global competitive pressures and high input (scrap, nickel, and energy) costs will continue to more than offset management's efforts to improve its weak credit measures. Allegheny is one of the largest specialty steel and alloy manufacturers in North America. The majority of its revenues are derived from its highly cyclical, commodity flat-rolled stainless steel products segment, which has been significantly affected by declining market demand because of the sluggish economic environment. "Conditions in this segment have been further exacerbated by the addition of new, lower-cost production that has contributed to excess supply levels and weakened Allegheny's competitive position," said Standard & Poor's credit analyst Paul Vastola. In response to these challenging conditions management continues to implement plans to reduce its cost structure. The company also is re-evaluating its business segments, products and operating strategies in an attempt to bolster its market position and its profitability levels. Despite these actions and without a meaningful rebound in the company's key industrial markets, Standard & Poor's expects Allegheny will be challenged to realize significant improvement in its weak credit measures. In completing its review, Standard & Poor's will monitor the stainless steel industry fundamentals and assess the impact of company initiatives to improve its performance. AMERCO: Wants Court to Fix Nov. 10 as General Claims Bar Date ------------------------------------------------------------- According to Bruce T. Beesley, Esq., at Beesley, Peck & Matteoni, Ltd., in Reno, Nevada, the AMERCO Debtors need to establish a uniform bar date for filing proofs of claim in AMERCO and AREC's cases before the November 18, 2003 scheduled hearing to approve the Disclosure Statement. Thus, at the Debtors' request, Judge Zive sets November 10, 2003 as the Bar Date for filing of proofs of claim in the two Chapter 11 cases for all creditors' prepetition claims. Holders of secured claims are not required to file proofs of claim to preserve their claim. Any claims arising out of, or related to, the Debtors' rejection of any executory contract or unexpired lease under Section 365 of the Bankruptcy Code must be filed on or before the earlier of: (a) 30 days after the Court approves the rejection, provided that the effectiveness of the order has not been stayed; or (b) 45 days after the effective date of any plan of reorganization is confirmed by the Court. Moreover, the Court approves the form of the proof of claim to be filed in these cases and the procedures for providing notices of the Bar Date to creditors and other parties-in-interest. Mr. Beesley relates that each creditor listed in the Debtors' Rule 1007(b) schedules will receive, as part of the Bar Date Notice, information regarding the amount and priority of that creditor's claim as reflected on the schedules and if the claim is listed as disputed, unliquidated or contingent. The Bar Date Notice will also advise each creditor to file a proof of claim by the Bar Date if a creditor's claim is: (a) listed as contingent, unliquidated, or disputed on the schedules; (b) the creditor disagrees with the amount of the claim or the priority of the claim or the specific Debtor against which the claim is listed; or (c) the creditor's claim is not listed in the schedules. If a creditor agrees with the claim stated in the schedules and reflected in the Bar Date Notice, then that creditor does not need to file a proof of claim. To satisfy the requirements of Rules 2002 and 3003 of the Federal Rules of Bankruptcy Procedure, the Debtors will provide notice of the Bar Date Order by: (i) mailed notice to all creditors and parties-in-interest on the master mailing matrix the Claims Agent maintains; and (ii) daily publication in USA Today for two consecutive weeks. Any creditor who failed to file a proof of claim timely is: (1) forever barred, estopped and enjoined from: -- asserting any claim against any of the Debtors or their successors and assigns; and -- voting on or receiving any distribution under any plan of reorganization on account of their claim; (2) bound by the terms of any plan of reorganization confirmed with respect to the Debtors; and (3) not entitled to receive any further notice or mailings in these cases. (AMERCO Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERICAN PLUMBING: Asks to Bring-In Conway Del Genio as Advisors ---------------------------------------------------------------- American Plumbing & Mechanical Inc., and its debtor-affiliates ask for permission from the U.S. Bankruptcy Court for the Western District of Texas to employ Conway Del Genio Gries & Co., LLC as Financial and Operational Advisors. As their financial and operational advisors, Conway Del Genio will: a) perform general due diligence to assist the Company in defining their financial and operational difficulties, including gathering and analyzing data, interviewing appropriate management, and evaluating the Company's existing financial forecasts and budgets; b) review tire Company's current short-term liquidity forecasts and assisting management in modifying and updating such forecasts based upon current information, Conway Del Genio's observations, and other information as it becomes available; c) assist in the review and negotiation of current or future financing proposals and assessing the impact of these proposals on the Company; d) assist the Company in developing new or updating existing marketing materials for solicitation of alternative investment/financing proposals; e) develop lists of potential financial investors, contacting such parties, and assessing their interest in making an investment in AMPAM; f) evaluate any such investment/financing proposals and making recommendations to the Board of Directors with respect to such proposals; g) develop alternative strategies for improving liquidity (including the development and execution of overhead expense reduction, divestitures, and cash conservation programs) and assisting in the implementation thereof; h) assist the Company in the development and preparation of an operating plan, cash flow forecasts, and business plan and in presentation of such plans and forecasts to the Board of Directors and the Company's stakeholder/creditors; i) assist in the development and execution of plans to dispose of non-core assets; including the marketing of such assets; j) assist with the preparation of reports and communication with the Company's lenders and other constituencies; k) assist in addressing issues and in discussions with existing lenders and surety providers in connection with maintaining ongoing financing of the Company's operations, including debtor in possession and exit financing; l) manage the development, evaluation, negotiation, and execution of any potential restructuring transaction or plan of reorganization; m) assist in the negotiations with existing lenders, creditors, and other parties in interest in the implementation of a restructuring transaction; n) provide expert testimony concerning financial matters relating to a plan or plans of reorganization, including the feasibility of such reorganization plans, the valuation of any securities issued in connection with such reorganization plans, and advising in connection with any disclosure statements to be filed by the Company or its subsidiaries as part of a Chapter 11 reorganization; and o) conduct such other studies, analyses, or activities ac approved by the Board or otherwise related to the Company's restructuring efforts as the parties mutually agree. The Debtors agree to pay Conway Del Genio $150,000 per month, of which $50,000 will be credited toward any additional Restructuring Fee or Sale Transaction Fee. Headquartered in Round Rock, Texas, American Plumbing & Mechanical, Inc. and its affiliates provide plumbing, heating, ventilation and air conditioning contracting services to commercial industries and single family and multifamily housing markets. The Company filed for chapter 11 protection on October 13, 2003 (Bankr. W.D. Tex. Case No. 03-55789). Demetra L. Liggins, Esq., at Winstead Sechrest & Minick P.C., represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $282,456,000 in total assets and $256,696,000 in total debts. AMERICAN PROD: Southborrough Files Purchase Pact in Mich. Court --------------------------------------------------------------- The Board of Directors of Southborrough Ventures, Inc. (SBBV:OTC- BB) reports it has submitted its agreement to purchase the assets of American Production Machining, LLC to the Bankruptcy Court in Detroit, MI. The Company anticipates Court approval of its purchase agreement as the Company has the full support of Comerica Bank, APM's corporate banking partner. Comerica is APM's only secured creditor. With funding in place, the Company is confident that it will be successful in finalizing its purchase of APM on the closing date of November 15, 2003, as previously reported. The Company has retained the services of RM Communications of Toronto, Canada to develop its new corporate image upon approval of its name change and new trading symbol. RM Communications services such clients as AT & T; Ontario Hydro; Green Power Energy and Wits Basin Precious Metals. The Company has been asked by its shareholders to comment on the deflated price of its stock in recent days. The Company has no knowledge as to the reason behind the adverse market condition of its stock and is pleased to report that it is on track with its business model and planned acquisitions. The Company will apply its patented Laser Assisted Chip Control process ("LACC") to all of APM's current orders upon approval of its purchase agreement. The LACC process (http://www.southborrough.com)is designed to eliminate the "chip- control" problem inherent when steel parts such as axle and drive shafts, connecting rods, axle tubes and hubs are machined to a required specification. The acquisition of APM affords the Company the opportunity of not only processing parts for machining with the AmeriChip technology, but also to engage in the actual machining of automotive parts, thereby increasing the Company's market potential. AMERICA WEST: Initiates Nonstop Transcontinental Flights -------------------------------------------------------- America West Airlines (NYSE: AWA) will become the first and only low-fare carrier to operate nonstop transcontinental service between Los Angeles International Airport and both Boston Logan International and New York/JFK beginning this Sunday, Oct. 26, 2003. America West is providing customers the right airport at the right price with roundtrip leisure fares starting as low as $278 and one-way business fares as low as $299. "Because these new transcontinental routes serve as one of the last bastions of high-fare, monopoly service, customer response to the outstanding savings offered by America West's new service has been extremely enthusiastic," said Scott Kirby, executive vice president, sales and marketing. "Our entry into these markets has lowered the one-way walk-up, business fares by 75 percent, to as low as $299. Clearly offering convenient, nonstop service from the right airports at the right price has clicked with consumers." In addition to enjoying America West's business-friendly fares, customers will also appreciate the airline's flexible ticketing policies which include no Saturday night stay requirements, the ability to fly standby on the same day as their originally scheduled flight without an additional fee, and the option to use nonrefundable tickets within a year of the date of purchase. America West offers many other benefits that are particularly important for business travelers, including first-class seating and an award-winning frequent flyer program. FlightFund Elite benefits include unlimited, space-available upgrades, mileage bonuses, preferred seating, priority check-in and early boarding. The flight schedule for new service is listed below. New York/JFK to Los Angeles International Airport Flight Departs Arrives Start Date 307 8:00 a.m. 11:10 a.m. Oct. 26 301 5:00 p.m. 8:16 p.m. Oct. 26 Los Angeles International Airport to New York/JFK Flight Departs Arrives Start Date 300 8:00 a.m. 4:06 p.m. Oct. 26 302 12:40 p.m. 8:46 p.m. Oct. 26 Boston to Los Angeles International Airport Flight Departs Arrives Start Date 405 8:30 a.m. 11:55 a.m. Oct. 26 409 5:00 p.m. 8:25 p.m. Oct. 26 Los Angeles International Airport to Boston Flight Departs Arrives Start Date 408 8:00 a.m. 4:12 p.m. Oct. 26 400 12:05 p.m. 8:17 p.m. Oct. 26 America West will also initiate transcontinental flights between New York/JFK and San Francisco on Dec. 19, 2003 and between Boston and San Francisco on March 1, 2004. In addition to the new transcontinental flights, the airline has added five new markets this year. Memphis, Tenn. began in April; Cancun, Mexico in June; Monterrey, Mexico and Edmonton, Canada on Oct. 20, and new service to Costa Rica begins Dec. 1, 2003. For more information or to make a reservation, contact your professional travel agent or America West at 1-800-2-FLY-AWA (1- 800-235-9292). Reservation and information services are also available at http://www.americawest.com. Customers can sign up for FlightFund, the airline's worldwide frequent flyer program, at http://www.FlightFund.com,the frequent flyer section of http://www.americawest.comor by calling the FlightFund Service Center at 1-800-247-5691. Founded in 1983 and proudly celebrating its 20-year anniversary in 2003, America West Airlines is the nation's second largest low- fare airline and the only carrier formed since deregulation to achieve major airline status. America West's 13,000 employees serve nearly 55,000 customers a day in 90 destinations in the U.S., Canada and Mexico. * * * As reported in Troubled Company Reporter's July 30, 2003 edition, Standard & Poor's Ratings Services assigned its 'CCC' rating to America West Airlines Inc.'s $75 million 7.25% senior exchangeable notes due 2023, offered under Rule 144A with registration rights. The notes are guaranteed by America West Airlines' parent, America West Holdings Corp. (both rated B-/Negative/-). America West Holdings' major subsidiary is America West Airlines Inc., the eighth-largest airline in the U.S, with hubs located at Phoenix and Las Vegas. America West benefits from a low cost structure, among the lowest in the industry. However, it competes at Phoenix and Las Vegas against Southwest Airlines Co., the other major low-cost, low-fare, operator in the industry and financially the strongest. As a result, due to the competition from Southwest, as well as America West's reliance on lower-fare leisure travelers, its revenues per available seat mile also tend to be among the lowest in the industry. In addition, America West Holdings owns the Leisure Co., one of the nation's largest tour packagers. ANC RENTAL: Court Okays $12 Mill. Postpetition Bonding Facility --------------------------------------------------------------- ANC Rental Corporation, and its debtor-affiliates are required to support various aspects of their business with surety bonds, which allow them to operate their business. Travelers Casualty and Surety Company of America issued $9,400,000 in surety bonds pursuant to certain existing indemnity agreements. In recognition of the Debtors' critical need for Travelers Casualty and Surety Company of America's support and future bonding, as well as Travelers' concerns and requirements with respect to the bonding, representatives of both parties negotiated the terms and conditions applicable to the issuance by Travelers of certain surety bonds to the Debtors postpetition. The Debtors and Travelers have agreed to a term sheet, pursuant to which Travelers has agreed, subject to its normal underwriting requirements, to provide certain postpetition bonding to the Debtors up to $12,000,000. Travelers currently holds $12,000,000 in cash collateral, which supports existing bonds in the face amount of $9,400,000, exclusive of certain expenses and other obligations of the Debtors to Travelers. Travelers has agreed to issue $2,600,000 in additional bonds and to utilize, as security for those bonds, existing unencumbered collateral they currently hold in lieu of requiring additional collateral for these bonds. Pursuant to the terms of the Term Sheet, the Debtors will provide Travelers with a new indemnity agreement, which is in addition to, and not in lieu of, existing indemnity agreements. In addition, the Debtors will ratify all existing Travelers indemnity agreements. Pursuant to Sections 105, 363, and 364 of the Bankruptcy Code, the Debtors sought and obtained the Court's authority to: 1. enter into and perform the Term Sheet in order to obtain a postpetition bonding facility from Travelers for the issuance of surety bonds, which are absolutely essential to the Debtors' ability to operate their businesses and to reorganize successfully; 2. enter into and perform the Indemnity Agreement and to ratify all existing indemnity agreements; and 3. afford to Travelers all the protections set forth in the Term Sheet and Indemnity Agreement with regard to any new, renewed, or existing bonds. As noted, pursuant to the terms of the Term Sheet and the Indemnity Agreement, the Debtors will obtain a postpetition bonding facility from Travelers for the issuance of surety bonds, which are essential to the Debtors' ability to operate their businesses and to reorganize successfully. (ANC Rental Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392- 0900) ANTARES PHARMA: LibiGel Phase II Trial Yields Positive Results -------------------------------------------------------------- Antares Pharma Inc. (OTC Bulletin Board: ANTR) announced that its U.S. licensee for its topical testosterone gel product, BioSante Pharmaceuticals, Inc. (Amex: BPA), recently presented positive results from an ongoing Phase II clinical trial of LibiGel(TM) (topical testosterone gel) for the treatment of female sexual dysfunction. LibiGel utilizes Antares Pharma's proprietary advanced transdermal delivery (ATD(TM)) gel technology designed to allow delivery of hormones and other products across the skin. BioSante's data was presented at a meeting of the International Society for the Study of Women's Sexual Health (ISSWSH) in Amsterdam on October 17, 2003. The interim analysis of BioSante's U.S.-based, double-blind, placebo- controlled study to determine the effect of LibiGel on women's sexual activity and desire showed, after three months of treatment, a 130% increase from baseline in the frequency of satisfying sexual events, as measured by individual patient diaries. BioSante reported that the data indicate an effective LibiGel dose for the treatment of hypoactive sexual desire disorder (HSDD) in women and that LibiGel was well tolerated during the course of the trial. BioSante previously completed three Phase II/III LibiGel clinical trials to determine blood levels of testosterone delivered by six different doses of LibiGel, which is administered as a topical gel. Data from these studies was also presented at the ISSWSH and showed that LibiGel provides testosterone levels that are expected to be effective in treatment of HSDD. LibiGel is a gel formulation of bio-identical testosterone that utilizes Antares Pharma's ATD(TM) technology and is designed to be quickly absorbed through the skin after application on the arms, shoulders, or abdomen, delivering testosterone to the bloodstream evenly over time in a non-invasive and painless manner. Although generally characterized as a male hormone, testosterone is also present in women, and its deficiency has been found to decrease libido or sex drive. Antares Pharma will receive milestone payments from BioSante at certain stages of development and royalties from end sales of LibiGel in North America. Additionally, Antares Pharma has rights to the clinical data generated by BioSante for further licensing of testosterone for female sexual dysfunction in other territories. Antares Pharma's ATD(TM) Portfolio BioSante Pharmaceuticals is the exclusive North American licensee for Antares Pharma's ATD(TM) gel technology for testosterone and for other hormone therapy products, including an estradiol/progestin combination gel product and an estradiol gel product for the treatment of male hypogonadism and postmenopausal symptoms in women. Additionally, Solvay Pharmaceuticals in Europe is the licensee for an estradiol/progestin combination product that has completed Phase II trials in Europe. Antares Pharma licensees in Europe, Russia, Australia and New Zealand currently market an ibuprofen gel product. All of these products are designed to be quickly absorbed through the skin from an easily applied, cosmetic quality gel preparation, and the active drug is delivered evenly for periods of up to 24 hours. The formulations are generally non-irritating and leave no skin residue. Antares Pharma's technology can be broadly applied to drug candidates that can be delivered across the skin, and the ATD(TM) technology offers proprietary technology to facilitate drug transport rates that meet therapeutic needs. Antares Pharma -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $6 million -- develops pharmaceutical delivery systems, including needle-free and mini- needle injector systems and transdermal gel technologies. These delivery systems are designed to improve both the efficiency of drug therapies and the patient's quality of life. The Company currently distributes its needle-free injector systems in more than 20 countries. In addition, Antares Pharma conducts research and development with transdermal gel products and currently has several products in clinical evaluation with partners in the US and Europe. The Company is also conducting ongoing research to create new products that combine various elements of the Company's technology portfolio. Antares Pharma has corporate headquarters in Exton, Pennsylvania, with manufacturing and research facilities in Minneapolis, Minnesota, and research facilities in Basel, Switzerland. ARCH COAL: Board Declares Quarterly Dividend Payable on Dec. 15 --------------------------------------------------------------- The board of directors of Arch Coal, Inc. (NYSE: ACI) has declared a quarterly dividend of $.0575 per share on the company's common stock. The dividend is payable December 15, 2003, to shareholders of record on December 5, 2003. Arch Coal (S&P, BB+ Corporate Credit Ratying, Negative) is the nation's second largest coal producer, with subsidiary operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah. Through these operations, Arch Coal provides the fuel for approximately 6% of the electricity generated in the United States. ATLANTIC COAST: Pilots Applaud Plan for New Independent Carrier --------------------------------------------------------------- Atlantic Coast Airlines and the union representing its pilots have reached a tentative agreement that, pending union ratification, would provide the airline the tools it needs to proceed with its plan for developing a new, independent carrier. Captain Stephen Hunt, chairman of the Atlantic Coast (ACA) unit of the Air Line Pilots Association, International (ALPA), said that the new agreement is a positive move for both the pilot group and the Company. "From the beginning, our pilot group has been consistently enthusiastic about Atlantic Coast's plans to establish ourselves as an independent carrier," stated Captain Hunt. "This tentative agreement can give our chairman and CEO Kerry Skeen the leverage he will need to successfully execute this plan. Mr. Skeen's track record and business sense have proven his proficiency and we are confident in his ability to launch this independent airline. We believe this plan has merit and deserves the chance to unfurl -- it just makes good sense at this time." Headquartered in Dulles, Virginia, Atlantic Coast Airlines is one of the leading operators of regional jets in the U.S., with more than 1,600 pilots and a current fleet of 142 aircraft, including 112 regional jets. Founded in 1931, ALPA is the world's oldest and largest pilots' union, representing 66,000 pilots at 42 airlines in the U.S. and Canada. Visit the ALPA web site at http://www.alpa.org. Atlantic Coast Airlines (S&P, B- Corporate Credit Rating, Developing) 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 the Web site at http://www.atlanticcoast.com AUDIOVOX CORPORATION: Appoints Grant Thornton as New Auditors ------------------------------------------------------------- Audiovox Corporation (Nasdaq: VOXX) announced that, pursuant to the recommendation of its Audit Committee and its Board of Directors, the Company has appointed Grant Thornton LLP, the fifth largest global accounting firm, as its independent auditors. Grant Thornton LLP, replaces KPMG LLP, effective October 16, 2003 and will conduct the fiscal year 2003 audit. The decision to change auditors was made as part of the Audit Committee's desire to follow policies consistent with sound corporate governance, such as the suggested periodic rotation of auditors. The Company would like to thank KPMG LLP for its many years of service as its public accounting firm. Grant Thornton is a leading global accounting, tax, and business organization dedicated to serving the needs of middle-market companies. Founded in 1924, Grant Thornton LLP serves public and private middle-market clients through 51 offices in the United States and in 585 offices in 110 countries through members firms in Grant Thornton International. Audiovox Corporation is an international leader in the marketing of cellular telephones, mobile security and entertainment systems, and consumer electronics products. The Company conducts its business through two subsidiaries and markets its products both domestically and internationally under its own brands. It also functions as an OEM (Original Equipment Manufacturer) supplier to several customers. For additional information, visit http://www.audiovox.com * * * As reported in Troubled Company Reporter's June 10, 2003 edition, the Company's cash position as of February 28, 2003 was $43 million. In addition as of February 28, 2003, the Company had no direct borrowings under its main bank facility. The Company has requested waivers from its bank group on covenant violations related to income tests for all of fiscal 2002 and timely delivery of financial statements for the year ended November 30, 2002 and the quarter ended February 28, 2003. AURA SYSTEMS: Needs Additional Financing to Continue Operations --------------------------------------------------------------- In connection with the audit of Aura Systems Inc.'s consolidated financial statements for the year ended February 28, 2003, the Company received a report from its independent auditors that includes an explanatory paragraph describing uncertainty as to the Company's ability to continue as a going concern. The Company's consolidation and reduction of the scope of its operations has resulted in several writedowns of assets, which have occurred over time as the Company determines, based on its current information, that such asset is impaired. Further writedowns may occur and would occur were the Company to cease operations. The Company continues to experience acute liquidity challenges. The Company had cash of approximately $100,000 and $200,000 at August 31 and February 28, 2003, respectively. For the six months ended August 31, 2003 and the year ended February 28, 2003, the Company incurred a net loss of approximately $5,800,000 and $16,100,000, respectively, on net revenues of approximately $500,000 and $1,100,000, respectively. The Company had working capital deficiencies at August 31 and February 28, 2003 of approximately $12,400,000 and $15,600,000, respectively. These conditions, combined with the Company's historical operating losses, raise substantial doubt as to the Company's ability to continue as a going concern. At September 30, 2003, the Company had approximately $300,000 of cash. The Company requires additional debt or equity financing to fund ongoing operations. The Company is seeking to raise additional capital; however, there can be no assurance that the Company will raise sufficient capital to fund ongoing operations. The issuance of additional shares of equity in connection with such financing could dilute the interests of existing stockholders of the Company and such dilution could be substantial. The Company must increase its authorized shares in order to be able to sell common equity and intends to propose to stockholders such action as well as a reverse stock split of its common shares; there can be no assurance that either such action will be approved. The inability to secure additional funding could result in the Company having to cease operations. The cash flow generated from the Company's operations to date has not been sufficient to fund its working capital needs, and the Company does not expect that operating cash flow will be sufficient to fund its working capital needs in its fiscal year ending February 28, 2004. In order to maintain liquidity, the Company has relied and continues to rely upon external sources of financing, principally equity financing and private and bank indebtedness. The Company expects to fund any operating shortfall in the current fiscal year from cash on hand, sales of non-core assets and external financings. Currently, the Company has no firm commitments from third parties to provide additional financing and there can be no assurance that financing will be available at the times or in the amounts required. If financing cannot be arranged in the amounts and at the times required, the Company has said it will cease operations. The Company has no bank line of credit. The Company is currently in default on many of its payment obligations and needs to restructure its existing obligations. Management is seeking to raise financing for the Company and to restructure the Company's obligations but there can be no assurance that the Company will be successful. The Company's ability to continue as a going concern is dependent upon the successful achievement of profitable operations and the ability to generate sufficient cash from operations and financing sources to meet its obligations. BAC SYNTHETIC: Fitch Takes Rating Actions on Various Classes ------------------------------------------------------------ Fitch Ratings has downgraded one class, affirmed two classes and upgraded two classes of notes issued by BAC Synthetic CLO 2000-1 Limited, a synthetic balance sheet collateralized loan obligation established by Bank of America Securities CLO Corporation II to provide credit protection on a $10 billion portfolio of investment grade, corporate debt obligations. The following ratings actions have been taken: -- $25,000,000 class E notes downgraded to 'D' from 'C'; -- $265,000,000 class A notes affirmed at 'AAA'; -- $100,000,000 class D notes affirmed at 'CC'; -- $250,000,000 class B notes upgraded to 'A+' from 'A'; -- $100,000,000 class C notes upgraded to 'BBB-' from 'BB'. Under the terms of the transaction, Bank of America had the option to terminate the transaction beginning Oct. 14, 2003, and on each April and Oct. 14 thereafter. Bank of America chose not to terminate the swap on Oct. 14, 2003. Consequently, Bank of America settled all net losses to date on the reference assets that experienced credit events. Simultaneously, Bank of America provided an additional $60 million in credit enhancement for the benefit of the remaining outstanding notes, if Bank of America chose not to exercise the optional termination. Subsequently, an anomaly occurred whereby the class D notes experienced a partial write down of principal and then obtained upsized credit enhancement. The class E notes have been completely written down, and do not benefit from the additional credit enhancement. However, the class B & C notes, which were not affected by the realization of losses on the credit events, gained additional credit enhancement and were upgraded. BANC OF AMERICA: Fitch Assigns Low-Bs to Classes 1-B-4 & 1-B-5 -------------------------------------------------------------- Banc of America Mortgage Securities, Inc., series 2003-8, mortgage pass-through certificates, is rated by Fitch Ratings as follows: Group 1 certificates: -- $295,482,999 classes 1-A-1 through 1-A-13, and 1-A-WIO, 'AAA'; -- $100 class 1-A-R, 'AAA'; -- $4,608,000 class 1-B-1, 'AA'; -- $1,844,000 class 1-B-2, 'A'; -- $921,000 class 1-B-3, 'BBB'; -- $615,000 class 1-B-4, 'BB'; -- $461,000 class 1-B-5, 'B'. Group 2 certificates: -- $181,568,000 classes 2-A-1 through 2-A-6, and 2-A-WIO, 'AAA'. Group 3 certificates: -- $159,681,000 classes 3-A-1 through 3-A-10, and 3-A- WIO, 'AAA'. and certificates of all three groups: -- $5,787,943 class A-PO, 'AAA'. The 'AAA' ratings on the group 1 senior certificates reflect the 2.90% subordination provided by the 1.50% class 1-B-1, 0.60% class 1-B-2, 0.30% class 1-B-3, 0.20% privately offered class 1-B-4, 0.15% privately offered class 1-B-5 and 0.15% privately offered class 1-B-6, which is not rated by Fitch. The 'AAA' ratings on the group 2 senior certificates reflect the 1.10% subordination provided by the 0.50% class 2-B-1, 0.15% class 2-B-2, 0.20% class 2-B-3, 0.10% privately offered class 2-B-4, 0.05% privately offered class 2-B-5 and 0.10% privately offered class 2-B-6. Classes 2-B-1, 2-B-2, 2-B-3, and the privately offered classes 2-B-4, 2-B-5, and 2-B-6 are not rated by Fitch. The 'AAA' ratings on the group 3 senior certificates reflect the 2.70% subordination provided by the 1.45% class 3-B-1, 0.50% class 3-B-2, 0.30% class 3-B-3, 0.15% privately offered class 3-B-4, 0.15% privately offered class 3-B-5 and 0.15% privately offered class 3-B-6. Classes 3-B-1, 3-B-2, 3-B-3, and the privately offered classes 3-B-4, 3-B-5, and 3-B-6 are not rated by Fitch. The ratings also reflect the quality of the underlying collateral, the capabilities of Bank of America Mortgage, Inc. as servicer (rated 'RPS1' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction is secured by three pools of mortgage loans, which respectively collateralize the groups 1, 2 and 3 certificates. The three mortgage pools are not cross-collateralized. The class A-PO consists of three separate components that are not severable. The group 1 collateral consists of recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to four-family residential mortgage loans with original terms to stated maturity ranging from 240 to 360 months. The weighted average original loan-to-value ratio for the mortgage loans in the pool is approximately 67.61%. The average balance of the mortgage loans is $500,360 and the weighted average coupon of the loans is 5.984%. The weighted average FICO credit score for the group is 736. Second homes comprise 7.06% of the group 1 loans and there are no investor-occupied loans. Rate/Term and cashout refinances represent 50.91% and 14.97%, respectively, of the group 1 mortgage loans. The states that represent the largest portion of mortgage loans are California (49.99%), Virginia (7.61%), and Florida (5.87%). All other states comprise less than 5% of the group 1 loans. The group 2 collateral consists of recently originated, conventional, fixed-rate, fully amortizing, first lien, single family residential mortgage loans with original terms to stated maturity ranging from 120 to 180 months. The weighted average OLTV for the mortgage loans in the pool is approximately 56.83%. The average balance of the mortgage loans is $516,327 and the weighted average coupon of the loans is 5.338%. The weighted average FICO credit score for the group is 739. Second homes comprise 3.98% of the group 2 loans and there are no investor-occupied loans. Rate/Term and cashout refinances represent 72.97% and 19.90%, respectively, of the group 2 mortgage loans. The states of California (64.07%) and Florida (6.98%) represent the largest portion of mortgage loans. All other states comprise less than 5% of the group 2 loans. The group 3 collateral consists of recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to three-family residential mortgage loans with original terms to stated maturity ranging from 240 to 360 months. The weighted average OLTV for the mortgage loans in the pool is approximately 64.56%. The average balance of the mortgage loans is $512,047 and the weighted average coupon of the loans is 5.786%. The weighted average FICO credit score for the group is 739. Second homes and investor-occupied loans comprise 4.37% and 0.23%, respectively, of the group 3 loans. Rate/Term and cashout refinances represent 62.52% and 15.74%, respectively, of the group 3 mortgage loans. All of the mortgage loans in group 3 are from the state of California. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Banc of America Mortgage Securities, Inc. deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, an election will be made to treat the trust as a real estate mortgage investment conduit. Wells Fargo Bank Minnesota, National Association will act as trustee. BETHLEHEM STEEL: Court Clears Severance Settlement Procedures ------------------------------------------------------------- Bethlehem Steel Corporation and its debtor-affiliates sought and obtained Court approval for their proposed procedures to settle potential disputes with former employees arising from their alleged obligations to make severance allowance payments to former employees under the Severance Plan. The Severance Plan Since January 1, 1990, pursuant to the Debtors' Severance Allowance Plan for Eligible Salaried Employees, the Debtors maintained a plan to provide severance allowances to certain employees whose employment was involuntarily terminated. Until February 1, 2003, the formula to determine the Severance Allowance of an eligible employee under the Severance Plan was calculated based on a gross amount derived from the employee's final weekly pay and the number of years of continuous service, less certain benefits paid to or on behalf of the employee. The Debtors amended the Severance Plan in March 2003 to eliminate, effective February 1, 2003, the reduction of the Severance Allowance by the Pension Offset and Retiree Health Offset -- the Retiree Offsets -- in recognition of the likelihood of the impending: -- termination of retiree health care benefits as a result of the Debtors' request to terminate its retiree health care benefits, which termination occurred on March 31, 2003; and -- reduction in pension benefits as a result of Pension Benefit Guaranty Corporation's complaint filed on December 18, 2002 in the U.S. District Court for the Eastern District of Pennsylvania to terminate and assume trusteeship of the Debtors' pension plan which termination occurred as of December 18, 2002 and assumption of trusteeship, which occurred on April 30, 2003. The Laid Off Employees From the Petition Date through January 31, 2003, the Debtors laid off 475 employees who consider, or the Debtors believed to consider themselves, eligible for Severance Allowances under the Severance Plan. Of the 475 Laid Off Employees, 108 sought payment of Severance Allowance claims as administrative expenses pursuant to a request filed on May 22, 2003 -- the Severance Claimants. The Debtors are also obtained the Court's approval of a stipulation settling the Severance Claimants' claims for Severance Allowances based on a formula that takes into account the reduced value of the pension and retiree health care benefits provided to employees whose employment the Debtors involuntarily terminated from the Petition Date through January 31, 2003, and reduces the remaining amount by 30% to reflect the uncertainty and legal expenses avoided by the Severance Claimants by settling their claims. Many of the Laid Off Employees, other than the Severance Claimants, contacted the Debtors concerning Severance Allowances and have filed proofs of claim for Severance Allowances, some of which seek allowance and payment of the claims as administrative expense claims. The Debtors believe that many other Remaining Laid Off Employees will make additional requests for Severance Allowance after learning of the terms of the Stipulation between them and the Severance Claimants. The Settlement Procedure In anticipation of requests by Remaining Laid Off Employees for additional Severance Allowance payments, and to promote the equitable treatment of the Debtors' employees through a consistent treatment of similarly situated employees, the Debtors will implement a settlement procedure that will offer Severance Allowance payments to the Remaining Laid Off Employees. The Debtors will use the same formula used to determine the Severance Claimants' Severance Allowance payments pursuant to the Stipulation, in exchange for the release by any accepting Remaining Laid Off Employee of any and all claims for Severance Allowance. After determining the amount of Severance Allowance payment to offer to each Remaining Laid Off Employee, the Debtors will send a letter to each Remaining Laid Off Employee explaining the Severance Formula and the payments made to the Severance Claimants. Each letter the Debtors will send to a Remaining Laid Off Employee eligible for payments under the Severance Formula will be accompanied by a check for the payment, and will clearly indicate that negotiation of the check by the Remaining Laid Off Employee will constitute a waiver of any and all of its claims for payment under the Severance Plan based on the termination of employment with the Debtors. The Remaining Laid Off Employees who are not eligible for payments under the Severance Formula will also be sent letters informing them of their ineligibility for additional Severance Allowance payments. The aggregated payment amount proposed under the Settlement Procedure is $4,000,000. (Bethlehem Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) BUDGET GROUP: U.K. Administrators Depose Skadden Arps ----------------------------------------------------- Simon Freakley and Gurpal Singh Johal, as Administrators of BRACII's insolvency proceedings in the High Court of Justice, Chancery Division, in London, England, began to depose by oral examination Skadden Arps Slate Meagher & Flom officers, directors, and managing agents beginning September 26, 2003 at the offices of Richards, Layton & Finger, P.A. at One Rodney Square in Wilmington, Delaware, in connection with the Administrators' efforts to resolve the issues on the allocation of sale proceeds between the U.S. Debtors and BRACII. Skadden was asked to produce: (A) The 1965 Trademark License Agreement (1) Documents referring or relating to the 1965 Trademark License Agreement between BRACC and BRACII, including but not limited to documents referring or relating to the termination of that agreement, or to the acquisition or assignment of that agreement by or to Cendant; (2) Documents referring or relating to the acquisition by Cendant of intellectual property, license or other legal rights in the trademarks, brand names, brands or franchises used by BRACC or BRACII in their businesses, including but not limited to the brands "Budget" and "Budget Rent-A-Car" or any combination of those terms, whatever the language, in any place in the world; and (3) Documents referring or relating to the ownership of or rights to use the names "Budget", "Budget Rent-A- Car" or other brands and trademarks used by BRACC or BRACII, anywhere in the world. (B) The 2002 Trademark License Agreement (1) Documents relating to the negotiation of the 2002 Trademark License Agreement; (2) Documents relating to the operation of the 2002 Trademark License Agreement; (3) All drafts of the 2002 Trademark License Agreement; (4) All drafts of any sublicense permitted pursuant to the 2002 Trademark License Agreement; (5) All documents concerning any sublicense permitted pursuant to the 2002 Trademark License Agreement; (6) All documents concerning any agreement or amendment, or proposed agreement or amendment, between BRACC and any sublicensee, as required, defined and described in the 2002 Trademark License Agreement; and (7) All documents concerning or constituting communications with BRACII, or BRACC, relating to the 2002 Trademark License Agreement. (C) Cendant Acquisition Documents (1) Documents relating to, reflecting or evidencing negotiations with Cendant concerning termination of the 1965 Trademark License Agreement; (2) Documents relating to, reflecting or evidencing any negotiations concerning any potential sale of any or all of the assets of BRACC, BRACII, or any other Budget Group, Inc. subsidiary or affiliate to Cendant or any other entity; (3) All drafts of the Asset and Stock Purchase Agreement; (4) Documents referring or relating to the ASPA, including but not limited to documents reflecting the negotiation and drafting of the ASPA; (5) Documents concerning the "Retained Business" that was excluded from the Cendant acquisition; (6) Documents referring or relating to negotiations or discussions regarding what business would comprise the "Retained Business" to be excluded from the Cendant acquisition; (7) Documents referring or relating to the matter of whether the 2002 Trademark License Agreement allowed BRACC to continue to license to BRACII the Budget trademark for use in the EMEA; (8) Documents referring or relating to the terms of any sublicense by BRACC to BRACII of the Budget trademark, under the 2002 Trademark License Agreement or otherwise; (9) Documents regarding the subject of BRACII's continuing right, if any, to use the Budget trademark after the Cendant acquisition; and (10) Operations documents concerning any services performed by BRACC or any of its non-BRACII affiliates for the benefit of BRACII or its subsidiaries after the closing of the Cendant sale. (D) Intercompany Claims Documentation (1) Documents concerning all intercompany transactions, including the advancement of money, between BRACC and BRACII since January 1, 2000; (2) Documents concerning the treatment on BRACC's books and records of any intercompany receivables due from BRACII since January 1, 2000; and (3) Documents concerning the treatment on BRACII's books and records of any intercompany obligations due to BRACC since January 1, 2000. (E) General Financial Information (1) Valuations, including drafts, of BGI, including but not limited to: (a) Quarterly and annual financial statements of BGI from January 1, 2000 to the present; (b) Annual reports prepared for BGI from January 1, 2000 to the present; (c) All opinions, letters, reports, studies, analyses, or, documents which refer or relate to BGI, the value of BGI or any of its assets, subsidiaries, divisions or securities; and (d) Any investigation, study and analysis requested, conducted, reviewed or received by Skadden with regard to any aspect of the value, ownership, control, management or capital structure of any of BGI, BRACC or BRACII; (2) Valuations, including drafts, concerning BRACC, its assets or any of its parts including: (a) Quarterly and annual financial statements of BRACC from January 1, 2000 to the present; (b) Annual reports prepared for BRACC from January 1, 2000 to the present; (c) All opinions, letters, reports, studies, analyses, or documents which refer or relate to BRACC, the value of BRACC or any of its assets or securities; and (d) Any investigation, study and analysis requested, conducted, reviewed or received by Skadden with regard to any aspect of BRACC's value, ownership, control, management or capital structure; (3) Valuations, including drafts, concerning BRACII, its assets or any of its parts including: (a) All opinions, letters, reports, studies, analyses, or documents which refer or relate to BRACII, the value of BRACII or any of its parts, assets or securities; and (b) Any investigation, study and analysis requested, conducted, reviewed or received by Skadden with regard to any aspect of the value, ownership, control, management or capital structure of BRACII; (4) Valuations, including drafts, concerning the Retained Business as defined in the ASPA, its assets or any of its parts including: (a) All opinions, letters, reports, studies, analyses, or documents which refer or relate to the Retained Business, the value of the Retained Business or any of its parts, assets or securities; and (b) Any investigation, study and analysis requested, conducted, reviewed or received by you with regard to any aspect of the value, ownership, control, management or capital structure of the Retained Business; (5) Documents concerning BRACII's financial contribution and/or proportional value to BGI and its affiliates; (6) Documents concerning BRACC's financial contribution or proportional value to BGI and its affiliates; (7) Valuations, including drafts, of the trade name and trademark "Budget" and similar names and marks, including, but not limited to their valuations in: (a) the worldwide market; (b) the United States, Canada and Puerto Rico; (c) the EMEA; and (d) any other country or geographic market; (8) Any and all documents identifying any capital expenditures made by BRACC during the period January 1, 2000 to present; (9) Any and all financial information relating to BRACC at any time from January 1, 2000 through the present, including, but not limited to statements of profit and loss, cash flow, balance sheets, and all other financial information relating to the financial condition or operations of BRACC or BRACII in each and every territory in which any of those companies or their subsidiaries operate, whether created by BRACC or delivered to BRACC from any other source; (10) Documents sufficient to identify each franchise relationship maintained by BRACC at any time from January 1, 2000 through the present, including, without limitation, each and every franchise agreement between BRACC, any BRACC subsidiary other than BRACII, and any franchiser; (11) All documents showing reports of revenue or earnings generated by any BRACC franchisee or subsidiary other than BRACII; and (12) All documents relating in any way to the value of any BRACC franchise or subsidiary other than BRACII. (Budget Group Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON: Seeks to Sell Stokedale Center to Generation for $2M ---------------------------------------------------------------- As part of their reorganization strategy, the Burlington Debtors continue to seek, to dispose through sale, assignment or otherwise, assets that are not necessary to their ongoing business operations. In connection with these efforts, the Debtors identified their Stokesdale Distribution Center located in Guilford County, North Carolina as an unproductive asset. The Stokesdale Center has been vacant since December 2002, several months after the Debtors sold the Burlington House Consumer Products Division to Springs Industries, Inc. Marketing Efforts Rebecca L. Booth, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, relates that the Debtors began extensive marketing efforts to sell the Stokesdale Center in January 2003. The Marketing Efforts included posting the Stokesdale Center with several economic developers in North Carolina, placing an auction sign on the building and having numerous discussions with interested parties about the Stokesdale Center. Between January 2003 and August 2003, the Debtors contacted, or were contacted by six potential purchasers. Of the six Potential Purchasers, two made initial offers to purchase the Stokesdale Center. Subsequently, the Debtors asked the Competing Bidders to complete their due diligence and present their best and final offers for the Stokesdale Center by July 23, 2003. Generation II, LLC and another Competing Bidder submitted written bids with cash offers to purchase the Stokesdale Center. The Debtors scheduled an auction to be held on July 29, 2003. The parties that submitted written bids were invited to participate in the auction. Unfortunately, prior to the auction, Generation and the Competing Bidder raised a number of questions, including environmental issues, costs of removing obsolete conveyor and racking systems and roof issues, which resulted in the reduction of their initial bids. Consequently, the highest offer received for the Stokesdale Center was $2,100,000. In light of the lowered bids, the Debtors decided to delay the auction and began re-marketing efforts. Not finding additional potential bidders and not receiving any higher offers, thereafter, the Debtors determined to proceed with an auction on October 7, 2003. At the conclusion of the Auction, the Debtors determined that Generation submitted the highest and best offer. Purchase Agreement The Debtors believe that the sale of the Stokesdale Center to Generation, on the terms and conditions of their Purchase Agreement, will: (a) generate the maximum value for the Stokesdale Center; (b) permit the Debtors to concentrate its attention and resources on the reorganization of its remaining businesses; and (c) relieve the Debtors of certain expenses related to the maintenance of the Center. Pursuant to the parties' Purchase Agreement, Burlington will sell the Stokesdale Center to Generation free and clear of all liens. Other significant terms of the Purchase Agreement are: A. Purchase Price The purchase price is $2,100,000. The Purchase Price will be paid to the Debtors in two payments: (1) $105,000 in earnest money, which was paid upon acceptance of the Purchase Agreement; and (b) $1,995,000 in cash at the Closing. B. The Property At the Closing, the Debtors will sell, transfer and convey to Generation the Stokesdale Distribution Center, which includes 124 acres, all buildings and improvements, all fixtures and appurtenances and all related personal property. C. As-Is Purchase Generation acknowledges and agrees that it is purchasing the Stokesdale Center "as-is", "where-is" and "with all faults" without any warranties, representations or guarantees, either expressed or implied, of any kind, nature, or type whatsoever from, or on behalf of, the Debtors. D. The Closing The Closing will occur within three business days after the entry of the Sale Order, but in no event later than November 15, 2003. At the Closing, the Debtors will execute and deliver a quitclaim deed, unless, pursuant to state law a quitclaim deed does not convey title insurable by a title company, in which case the conveyance will be by special or limited warranty deed, and certain related documents to Generation, and Generation will pay the Purchase Price. E. Conditions to the Closing The Closing is subject to these conditions: (a) that the title be good, marketable, fee simple and insurable; (b) that the Stokesdale Center be in substantially the same condition as of the date of the offer; and (c) that the Debtors cause a Sale Order to allow the closing to occur no later than November 15, 2003. Sale Should Be Approved Ms. Booth asserts that the Debtors' request is warranted because: (a) The Debtors exercised its sound business judgment in the Stokesdale Center Sale; (b) The marketing efforts have provided adequate and reasonable notice of the proposed sale of the Stokesdale Center; (c) The Purchase Price is fair and reasonable; and (d) The Purchase Agreement was negotiated in the utmost good faith and at arm's length. Ms. Booth notes that the Stokesdale Center is an unproductive asset that has remained vacant for 10 months, while causing the Debtors to incur ongoing maintenance costs, taxes and utility costs. The proposed sale will permit the Debtors to monetize the Stokesdale Center and relieve its estate of the ongoing costs associated with the ownership of the Stokesdale Center. Furthermore, the Debtors provided the Sale Notice of the Stokesdale Center, and have extended the opportunity to purchase the Stokesdale Center, to interested purchasers on a nationwide basis. In addition, each Potential Purchaser was invited to submit bids for the Stokesdale Center on a competitive basis without any restrictions. With respect to the Purchase Price, Generation's offer was the best offer for the Stokesdale Center received by the Debtors during the entire period and made under competitive bidding conditions. Accordingly, the Debtors ask the Court to approve the Stokesdale Purchase Agreement and authorize them to sell the Stokesdale Center to Generation free and clear of all liens. The Debtors believe that all lien holders could be compelled to accept a monetary satisfaction of their existing property interest. All the Liens will attach to the proceeds of the sale with the same force and effect as the property interest previously attached to the Stokesdale Center; provided, that all of the Debtors' claims, defenses and objections with respect to the amount, validity or priority of each Lien and the underlying liabilities are expressly preserved. (Burlington Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALPINE CORP: Signs Two-Year Energy Agreement with Reliant ---------------------------------------------------------- Calpine Corporation (NYSE: CPN), a leading North American power company and the largest independent power producer in Texas, has finalized a two-year agreement to supply electricity to Reliant Energy Electric Solutions, LLC of Houston, Texas. Under the terms of the agreement, Calpine will supply 150 megawatts beginning Jan. 1, 2004, increasing to 250 megawatts on Jan. 1, 2005. Calpine's energy agreement is designed to provide Reliant with daily scheduling flexibility and access to Calpine's fully integrated system in Texas including 11 energy-efficient power plants, totaling approximately 6,400 megawatts. Calpine's facilities are strategically located throughout the Electric Reliability Council of Texas (ERCOT). Reliant, the second largest retail power company in Texas, will pay Calpine a fixed capacity payment and a variable energy payment for electricity purchased. "With the breadth and quality of our power portfolio and ERCOT's market structure, Calpine is able to offer energy products to retail electricity providers to help them better manage their load requirements," said Carey Jordan, vice president of power marketing for Calpine. He added, "This is a good example of companies leveraging their combined strengths to enhance value for electricity end users." The company continues to execute its strategy of contracting the majority of its output under long-term power contracts. Year-to- date, Calpine has signed power sales contracts totaling in excess of 5,300 megawatts, including 20 contracts totaling 2,000 megawatts in the ERCOT market. In addition, the company recently announced two large power contracts. Earlier this month, Calpine signed a term sheet for a ten-year power sales agreement with San Diego Gas & Electric for the full output of Calpine's 570-megawatt Otay Mesa Energy Center currently under construction. The second agreement, also announced this month, is with the Mexican utility Comision Federal de Electricidad for a 525-megawatt, 25-year supply of electricity from Calpine's and Mitsui's proposed gas- fired energy center to be built in Mexico. Reliant provides a complete suite of energy products and services to approximately 1.7 million electricity customers in Texas ranging from residences and small businesses to large commercial, industrial and institutional customers. Reliant also serves large commercial, industrial and institutional clients in the PJM (Pennsylvania, New Jersey, Maryland) Interconnection. 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 900 billion 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 reported in the Troubled Company Reporter's October 23, 2003 edition, Moody's Investors Service changed its senior implied rating on Calpine to B2 from Ba3, with a stable outlook. The ratings on the company's senior unsecured debt, senior unsecured convertible debt and convertible preferred securities were also lowered. Calpine, for its part, reaffirmed that Moody's downgrade has no impact on the company's credit agreements, and the company continues to conduct its business with its usual creditworthy counterparties. C-BASS: Fitch Downgrades Class B-2 Rating to B ---------------------------------------------- Fitch Ratings has taken the following rating actions on 3 C-Bass issues: Series 2001-CB1: -- Classes A3-F & A1-A are affirmed at 'AAA'; -- Class M-1 is affirmed at 'AA'; -- Class M-2 is affirmed at 'A'; -- Class B-1 is affirmed at 'BBB'; -- Class B-2 is affirmed at 'BBB-'. Series 2001-CB2: -- Classes A2-F, A3-F & A1-A are affirmed at 'AAA'; -- Class M-1 is affirmed at 'AA'; -- Class M-2 is affirmed at 'A'; -- Class B-1 is affirmed at 'BBB'; -- Class B-2 is downgraded to 'B' from 'BB'. Series 2001-CB3: -- Class A1A is affirmed at 'AAA'; -- Class M-1 is affirmed at 'AA'; -- Class M-2 is affirmed at 'A'; -- Class B-1 is affirmed at 'BBB'; -- Class B-2 is affirmed at 'BB'. The affirmations on these classes reflect credit enhancement consistent with future loss expectations. The downgrade of C-Bass 2001-CB2 class B-2 to 'B' reflects the depletion of overcollateralization and a reduction in the amount of excess spread which would otherwise be available to cover losses. In addition, 90+ delinquencies are approximately 60% of the current pool, and cumulative losses are 3.79% of the initial pool. Approximately 13% of the current pool and 8.0% of the 90+ delinquencies consists of FHA/VA loans. CENTERPOINT ENERGY: Sells Final International Asset to Corbin ------------------------------------------------------------- CenterPoint Energy, Inc. (NYSE: CNP) announced the sale of its remaining international asset, a 25 percent indirect interest in Rain Calcining Ltd. in Hyderabad, India, to Corbin Holdings, Inc. As a result of the sale, the company will record a small gain in 2003. Terms of the agreement were not disclosed. Rain is a five-year-old coke calcining plant that cogenerates 54 megawatts of electricity and sells it into the local power market. "This sale of Rain completes our strategy of exiting the international energy market," said David McClanahan, president and chief executive officer for CenterPoint Energy. "We are committed to keeping CenterPoint Energy focused on our core businesses of energy delivery in the U.S." CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission and distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total approximately $20 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at http://www.CenterPointEnergy.com * * * As reported in Troubled Company Reporter's March 5, 2003 edition, Fitch Ratings affirmed the outstanding credit ratings of CenterPoint Energy, Inc., and its subsidiaries CenterPoint Energy Houston Electric LLC and CenterPoint Energy Resources Corp. The Rating Outlook for all three companies remains Negative. The following ratings were affirmed by Fitch: CenterPoint Energy, Inc. -- Senior unsecured debt 'BBB-'; -- Unsecured pollution control bonds 'BBB-'; -- Trust originated preferred securities 'BB+'; -- Zero premium exchange notes 'BB+'. CenterPoint Energy Houston Electric, LLC -- First mortgage bonds 'BBB+'; -- $1.3 billion secured term loan 'BBB'. CenterPoint Energy Resources Corp. -- Senior unsecured notes and debentures 'BBB'; -- Convertible preferred securities 'BBB-'. COEUR D' ALENE: Reports Improved 3rd Quarter & 9 Months Results --------------------------------------------------------------- Highlights -- Third quarter silver production of 3.3 million ounces at average cash cost of $3.04 per ounce -- Gold production of 31,000 ounces in the third quarter -- First nine months silver production of 10.7 million ounces at an average cash cost of $3.24 per ounce -- Nine months gold production of 93,000 ounces -- Cerro Bayo/Martha mines produced 1.2 million silver ounces in recent quarter, and 15,000 gold ounces, at cash costs of $1.18 per ounce/silver -- Nine months operating cash flow (before working capital changes) of $5.0 million compared to $(13.2) million in 2002's comparable period -- Crusher relocation successfully completed at Rochester, on time and within budget. Cash costs at Rochester have steadily declined during the year with completion of project to $3.66 per ounce in 3Q -- $76.0 million raised in oversubscribed 23.7 million-share common stock offering -- A total of $94.2 million in cash and short term investments at September 30 -- Total debt now just 8.7% of total capital, putting Coeur in strongest financial position in close to a decade -- Standard & Poor's rating agency issues positive outlook for Coeur CIBC World Markets initiates analyst coverage -- Success in South America leads to 35% expansion of exploration budget "Coeur continued to report stronger financial results in the third quarter and first nine months compared to last year, fueled by consistent production, reduced cash costs and increased metals prices," said Dennis E. Wheeler, Chairman and Chief Executive Officer. "With the success of our recent equity offering, Coeur is now in its best financial position in nearly a decade, with no net debt and available liquidity approaching $100 million. Meanwhile, we are moving ahead with final feasibility studies at our San Bartolome and Kensington development projects, which we expect will significantly increase the diversity of Coeur's asset base and future production and lower overall operating costs. "Our South American mines -- the Cerro Bayo and Martha -- continued to contribute strong production and cash flow, by increasing their silver equivalent ounces over last year's third quarter and first nine months, at an extremely low production cost. Because of our exploration success around these two new and highly prospective properties, we have increased our exploration budget in South America by 35 percent for the remainder of this year. We anticipate additional high-grade reserve increases there by year-end. "The major crusher relocation project was completed at Rochester, and we lowered cash costs there to $3.66 per ounce of silver in the third quarter, a reduction of 15 percent from the second quarter, and 43 percent below first quarter costs. "Also, at Silver Valley, our oldest and most long-lived reserve, we have initiated the long-term expansion plan designed to increase reserves and production, and to lower operating costs. By 2006, we expect a record seven million ounces of silver production from Silver Valley, with average cash costs of below $4 per ounce," Mr. Wheeler added. Financial Summary Coeur d'Alene Mines Corporation (NYSE: CDE), the world's largest primary silver producer, reported third quarter 2003 metals sales of $23.4 million, compared to $24.4 million in the same period last year, due primarily to the temporary suspension of operations at Silver Valley during the quarter to prepare the mine for its long-term expansion plan. For the first nine months of 2003, Company metals sales were $78.1 million, an increase of 29 percent from $60.5 million reported during in the same period last year. For the third quarter, Coeur realized an average silver price of $4.77 per ounce compared to an average realized price during last year's third quarter of $4.65 per ounce. For its gold sales, Coeur realized an average price of $353 per ounce during the third quarter compared to an average gold price of $315 per ounce during the same period last year. For the first nine months, Coeur realized an average silver price of $4.71 per ounce compared to an average realized price during last year's period of $4.67 per ounce. For its gold sales, Coeur realized an average price of $341 per ounce in the first nine months of this year compared to an average gold price of $306 per ounce during the same period last year. Third quarter production totaled 3.3 million ounces of silver and 31,000 ounces of gold, compared to 3.8 million ounces of silver and 34,000 ounces of gold in last year's third quarter. Consolidated cash costs in the quarter were $3.04 per ounce of silver, an increase of four percent from the last year's third quarter. The recent quarter's cash costs represent a 10 percent decrease from cash costs in the 2nd quarter of 2003. First nine-months production totaled 10,671,000 ounces of silver, a seven percent increase from last year's period, and gold production of 93,000 ounces, up 27 percent from last year's period. Consolidated cash costs for the first nine months were $3.24 per ounce of silver, a reduction of three percent from last year's comparable period. For the third quarter of 2003 the Company reported a net loss of $17.9 million, or $0.10 per share, compared to a net loss of $12.3 million, or $0.14 per share in the third quarter of 2002. This year's third quarter loss was impacted by $12.5 million in charges for interest expense and charges related to the early retirement of debt. Exclusive of these charges, the Company would have reported a net loss of $5.4 million, or $0.03 per share. For the first nine months of 2003, the Company's net loss was $53.5 million, or $0.35 per share, compared to a loss of $35.1 million, or $0.51 per share for the same period a year ago. This year's nine months period included $44.7 million in charges for interest expense and losses related to the early retirement of debt resulting from the issuance of common shares in excess of the original conversion ratio, and a charge of $2.3 million related to a change in accounting principle associated with reclamation accruals. Exclusive of these charges, the Company would have reported a net loss of $6.5 million, or $0.04 per share in this year's period. During the first nine months of 2003, operating cash flow before working capital changes improved to $5.0 million compared to $(13.2) million in 2002. In the third quarter, the Company's cash position and balance sheet strengthened to its best position in a decade with the successful completion of a 23.7 million common shares offering for $76.0 million of net proceeds. At September 30, 2003, cash and equivalents plus short-term investments, totaled $94.2 million. During the quarter, Coeur also eliminated $41.1 million in convertible debt from its balance sheet, with the conversion of $29.8 million of its 9% Senior Convertible Notes, the final conversion and/or redemption of $9.9 million of its 13 3/8% Senior Convertible Notes, exchanges of $1.0 million of 6 3/8% Convertible Subordinated Debentures, and $$0.4, and $0.4 million of 7 1/4% Convertible Subordinated Debentures. Total convertible debt at quarter-end was $18.7 million, or just 8.7 percent of capital. Overview of Operations South America Cerro Bayo (Chile)/Martha (Argentina) During the third quarter, silver production increased 31 percent over last year's third quarter to 1.2 million ounces. Gold production was consistent at 15,220 ounces, compared to 15,089 in last year's period. Cash operating costs in the quarter were $1.18 per ounce of silver, compared to $0.91 in 2002's comparable period. For the nine months period, silver production more than tripled to 3,775,953 ounces and gold production grew two-and-a-half times to 52,173 ounces compared to 1,141,891 ounces of silver and 21,000 ounces of gold produced in the first nine months of 2002. Cash costs through the first nine months were $0.73 per ounce of silver, versus $1.21 per ounce in the first nine months of 2002. North America Rochester Mine (Nevada) Near the end of the third quarter, Rochester completed its major crusher relocation project, on schedule and within budget. Measures taken to reduce operating costs during the project effectively lowered cash costs in the third quarter to $3.66 per ounce -- a reduction of 15 percent from the second quarter of this year, and 43 percent lower than the first quarter of this year. With the installation of the new crusher, cash costs are expected to continue at their lower, historical levels. Rochester produced 1.7 million ounces of silver and 15,346 ounces of gold during the third quarter, compared to 1.7 million ounces of silver and 18,885 ounces of gold in 2003's comparable period. Cash costs in last year's third quarter were $2.83 per ounce silver. First nine months of production at Rochester was 4.2 million ounces of silver and 41,237 ounces of gold at an average cash cost of $4.61 per ounce of silver. This compared to 4.8 million ounces of silver and 52,440 ounces of gold at an average cash cost of $3.11 a year ago. Coeur Silver Valley - Galena Mine (Idaho) At Coeur Silver Valley, silver production was 0.4 million ounces in the third quarter compared to 1.2 million ounces a year ago. The recent quarter's production was impacted by the temporary suspension of operations in the quarter, as maintenance work prepared the mine for start up of the long range development program designed to increase production 40 percent to 7 million ounces commencing in 2006, with estimated cash costs below $4.00 per ounce. The early focus of this optimization work is the exploration of a number of new high-grade silver veins located above the 5200 level, and extension of the more prolific vein systems at depth. Expanded South American Exploration Program Cerro Bayo Successful drilling continued during the quarter on the Javiera Sur vein and the new Veronica vein, where a recent thick, high- grade drill intercept recorded 27 feet of 0.77 ounces per ton gold equivalent. Both of these veins are located near existing mine infrastructure at Cerro Bayo. Drilling thus far totals 106,000 feet in 270 holes using three core rigs. Due to the ongoing exploration success in the area, the Cerro Bayo exploration budget was increased during the third quarter by $400,000 for a total of $2.2 million for the entire year. Exploration remains on track to meet the goal of discovering 267,000 ounces of new gold equivalent resources. Martha Mine and Santa Cruz Province Exploration success at Martha has led to an increase in the exploration budget there in the third quarter by $500,000, or 63 percent, to a total of $1.3 million for the year. Work now includes two full-time drill rigs and one reverse circulation drill around the existing mine. Drilling continued to look for extensions of the high-grade mineralization around the R4 Zone, an area of very high-grade ore shoots, 600 feet east of the Martha mine and along the eastern extension of the Martha vein. The proximity to the existing mine has the potential to add these new ounces quickly and economically into production. In addition, current exploration is delineating both shallow, open pit reserves and a southeast extension of the R4 Zone. A new geologic model is being prepared for R4 with this new information. Hedging Coeur does not currently have any of its silver production hedged. The Company currently has 27,000 ounces of gold sold forward over the next 15 months at an average price of $343 per ounce. In 2003, every 10 cent increase in silver price adds approximately $1.5 million in free cash flow on an annualized basis. Coeur d'Alene Mines Corporation is the country's largest silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile and Bolivia. * * * As reported in Troubled Company Reporter's October 8, 2003 edition, Standard & Poor's Ratings Services revised its outlook on silver and gold mining company Coeur D'Alene Mines Corp., to positive from negative following the company's recently completed equity sale. At the same time, Standard & Poor's affirmed its 'CCC' corporate credit rating on the company. The Coeur D'Alene, Idaho-based company currently has about $19 million in total debt. COMM 2001-FL5: Fitch Cuts B-Level Ratings on Four Note Classes -------------------------------------------------------------- Fitch Ratings downgrades and removes from Rating Watch Negative the following commercial mortgage pass-through certificates of COMM 2001-FL5: -- $19 million class G to 'BB' from 'BBB-'; -- $1.9 million class K-HH to 'BB-' from 'BBB-'; -- $1.4 million class L-HH to 'B' from 'BB+'; -- $3.3 million class M-HH to 'B-' from 'BB'. In addition, the following classes are upgraded by Fitch: -- $67.3 million class B to 'AAA' from 'AA'; -- $21.6 million class C to 'AA+' from 'AA-'. Fitch also affirms the following classes: -- $388.2 million class A-2 'AAA'; -- Interest-only classes X-1 and X-2 'AAA'; -- $59.1 million class D 'AA-'; -- $27.5 million class E 'A+'; -- $26.5 million class F 'A-'; -- $4.3 million class K-CP 'BBB+'; -- $1.7 million class K-GB 'BBB+'; -- $4.3 million class L-CP 'BBB'; -- $1.5 million class L-GB 'BBB'; -- $5.5 million class K-NB 'A-'. In addition, class K-NB is removed from Rating Watch Negative by Fitch. Fitch does not rate classes K-LG, L-LG or M-LG. The following classes have been paid in full: --Class A-1; --Class K-FF; --Class L-FF; --Class M-FF; --Class N-FF; --Class K-AA; -- Class L-AA; --Class M-AA; --Class N-AA. The downgrades are primarily due to the declines in performance of two hotel loans, the Hyatt Regency in Houston (11.1%) and the Irvine Marriott in California (4.7%). The K-HH, L-HH and M-HH classes directly reflect the performance of the B-note on the Hyatt Regency hotel loan. The upgrades are due to the increased credit enhancement on the classes resulting from the repayment of four loans, a 42.2% reduction in outstanding principal balance of the pool. The transaction has a rake structure and currently consists of seven floating-rate loans secured by ten assets. Each first mortgage loan is split into an A/B note, or an A/B/C note structure. Each A note and B note have been contributed to form the Trust Mortgage Asset. While the A notes are pooled, the B and C notes provide credit enhancement only to the loan to which they relate. As part of its review, Fitch analyzed the performance of each loan and the underlying collateral. Fitch compared each loan's debt service coverage ratio at issuance to the trailing-twelve-month June 30, 2003 or year-end 2002 DSCR. DSCRs are based on a Fitch stressed net cash flow and debt service based on a Fitch stressed constant and the TMA loan balance. An all-in DSCR was also calculated to take into account the debt service on the C note in order to fully reflect the entire stress on the loan. The current overall Fitch stressed weighted average DSCR for the TMA was 1.69 times, compared to 1.73x at issuance for those loans remaining in the pool. The current all-in weighted average DSCR (including the C notes) was 1.43x compared to 1.49x at issuance. In addition to the hotel loans of concern, Fitch is also concerned with the refinance risk, as all loans mature in 2004. This near- term refinance risk is partially mitigated as all of the loans have extension options available. Of the proceeds currently in the TMA, 84.2% remain investment grade. The performance decline at the Houston Hyatt is particularly severe. This hotel property is located in a downtown office sub- market that has experienced significant softening. Based on servicer reports, actual net cash flow dropped 60% since issuance. This hotel reports the lowest occupancy among hotels in its competitive set. As of June 30, 2003, the Hyatt's revenue per available room was $67, down from $93 at issuance. The Hyatt, with 977 rooms, had a TTM June 30, 2003Fitch stressed DSCR of 0.83x, compared to 1.74x at issuance. Although the Hyatt loan benefits from an operating lease to 2009 with the Hyatt Corporation, based on the performance, Fitch has downgraded the rake classes. The Irvine Marriott (4.7%), a 485-room hotel located in Irvine, CA, has had declining performance as well. The YE 2002 Fitch stressed DSCR declined to 1.58x from 2.12x at issuance. The credit assessment for this loan is no longer considered investment grade. The third hotel loan in the pool is the Loews Miami Beach hotel (8.1%), located in Miami, FL. The Fitch stressed DSCR remains strong at 2.88x as of TTM June 30, 2003, compared to 2.79x at issuance. Although RevPAR fell to $146 from $159 at issuance, revenue growth has been strong in the first half of 2003. The remaining loans in the pool consist of three office loans (54.2%) and one retail loan (21.9%). The Crescent Portfolio (25.7%), the largest loan in the pool, is collateralized by three office buildings in Texas. Although current average occupancy dropped slightly to 88.7%, the Fitch stressed DSCR is stable at 1.58x as of TTM June 30, 2003, compared to 1.60x at issuance. Fitch is concerned with the weakened office market and the fact that major tenant leases expire in 2004 and 2006. However, these leases are currently below market. The Greensboro Executive Center loan (9.5%), consists of two office buildings in the Tyson's Corner market of suburban Washington, DC. Although the property is 99% leased, physical occupancy is 68% due to the tenant, Aether Systems, vacating its space before the end of its lease term. The borrower has leases out for signature which would bring the physical occupancy back to 99%. Fitch is concerned about the refinance risk of the property given that the Aether Systems lease is above market. Although occupancy for the Daily News Building (19%) remains slightly below issuance (91% as of June 30, 2003 compared to 94.9% at issuance), several new tenants with higher rents have replaced outgoing tenants. Based on leases in place and an adjustment for capital costs, the Fitch stressed DSCR for TTM June 30, 2003 was 1.84x, compared to 1.64x at issuance. Due to the improvement in net cash flow, the class associated with the B note for this loan, class K-NB has been removed from Rating Watch Negative. The Lend Lease Mall Portfolio (21.9%) was originally collateralized by three regional malls. The Westland Mall in MI was released at 110%. The two remaining malls, located in Roseville, MN and Newington, NH are stable with approximately 10% in-line vacancy. Comparable sales were flat. Fitch's YE Dec. 31, 2002 stressed DSCR increased to 1.62x from 1.50x at issuance. Fitch will continue to monitor this transaction, as surveillance is ongoing. COMMSCOPE: Plans to Release Third Quarter 2003 Results on Oct 29 ---------------------------------------------------------------- CommScope, Inc. (NYSE: CTV) plans to release its third quarter 2003 financial results at 4:00 p.m. on Wednesday, October 29, followed by a 5:00 p.m. ET conference call. You are invited to listen to the conference call or live webcast with Frank Drendel, Chairman and CEO; Brian Garrett, President and COO; and Jearld Leonhardt, Executive Vice President and CFO. To participate in the conference call, domestic and international callers should dial 212-346-7488. Please plan to dial in 10-15 minutes before the start of the call to facilitate a timely connection. The live, listen-only audio of the conference call will also be available via the Internet at: http://www.firstcallevents.com/service/ajwz391722991gf12.html If you are unable to participate on the call and would like to hear a replay, you may dial 800-633-8284. International callers should dial 402-977-9140 for the replay. The replay ID is 21163989. The replay will be available through Monday, November 3. A webcast replay will also be archived for a limited period of time following the conference call via the Internet on CommScope's Web site (http://www.commscope.com). CommScope, Inc. (NYSE: CTV) (S&P, BB Corporate Credit & B+ Subordinated Debt Ratings, Stable), is the world's largest manufacturer of broadband coaxial cable for Hybrid Fiber Coaxial applications and a leading supplier of fiber optic and twisted pair cables for LAN, wireless and other communications applications. COVANTA ENERGY: Court Approves Disclosure Statement --------------------------------------------------- Judge Blackshear finds that the Covanta Energy Debtors' Disclosure Statement on the Reorganization and Liquidation Plans contains adequate information for a creditor to make an informed judgment on the plans. Accordingly, the Court approves the Debtors' Disclosure Statement. James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, in New York, maintains that the Disclosure Statement is a product of the Debtors' extensive review and analysis of the circumstances leading to these Chapter 11 cases, the Chapter 11 cases themselves and a thorough analysis of the Plans. The Court also overrules these objections, to the extent not withdrawn or resolved: (a) American Airlines, Inc., (b) Bristol Resource Recovery Facility Operating Committee, (c) California Unions for Reliable Energy, (d) Connecticut Resources Recovery Authority, (e) County of Imperial, California, (f) Credit Suisse First Boston, (g) F. Browne Gregg, (h) the Informal Committee of Secured Debenture Holders, (i) the Official Committee of Unsecured Creditors, (j) Town of Babylon, (k) Town of Huntington, (l) United States Trustee, and (m) U.S. Bank National Association. Record Date The Record Date for determining which holders of Claims against the Debtors' estates are eligible to vote on the Reorganization Plan and the Liquidation Plan, and for determining the identity of each holder of Claims against and Equity Interests in the Debtors that will receive a copy of the Confirmation Hearing Notice is September 29, 2003. Holders of Allowed 9.25% Debenture Claims that purchase the securities after the Record Date or whose purchase of securities was registered after the Record Date and who wish to vote on the Reorganization Plan or the Liquidation Plan must arrange with their sellers to receive a proxy from the record holder as of the Record Date. Form of Ballot There will be a separate form of Ballot, and when applicable, Master Ballot, for each of these Classes or Subclasses of Allowed Claims entitled to vote: Reorganization Plan Class/Subclass Description ------------- ----------- Subclass 3A Secured Bank Claims Subclass 3B Secured 9.25% Debenture Claims Class 4 - Ballot Operating Company Unsecured Claims Class 6 - Ballot Parent and Holding Company Unsecured Claims Class 8 - Ballot Convenience Claims Liquidation Plan Class/Subclass Description -------------- ----------- Subclass 3A Liquidation Secured Claims Subclass 3B Secured CSFB Claims Subclass 3C Covanta Tulsa Secured Claims Solicitation Packages The Debtors will distribute the Solicitation Package not later than October 17, 2003 to all known holders of impaired Claims against and impaired Equity Interests in the Debtors. Procedures for Tabulation of Votes The procedures for tabulation of Votes for and against the Reorganization Plan and the Liquidation are: (a) All votes to accept or reject the Reorganization Plan or Liquidation Plan must be cast by using the appropriate Ballot or Master Ballot. Votes that are cast in any other manner will not be counted; (b) For purposes of tabulating votes in respect of the Reorganization Plan and the Liquidation Plan, the amount of a Claim or Equity Interest will be calculated on the basis of the amount of the Allowed Claim or Allowed Equity Interest on the Record Date. For voting purposes only: * the Subclass 3A Claims under the Reorganization Plan and the Secured Bank Claims under Subclass 3A of the Liquidation Plan are currently estimated in an aggregate amount of $434,000,000 including interest and fees, subject to ultimate resolution of the claims under the Prepetition Credit Agreement; and * the Subclass 3B Claims under the Reorganization Plan and the 9.25% Debenture Claims under Subclass 3A of the Liquidation Plan are currently estimated in an aggregate amount of $105,000,000 including interest and fees, subject to ultimate resolution of the claims under the 9.25% Debentures. (c) In order to be considered as acceptances or rejections of the Reorganization Plan or the Liquidation Plan, all Ballots and Master Ballots must be properly completed, executed, marked and actually received, via United States mail, overnight delivery or hand delivery by Bankruptcy Services, LLC, located at 757 Third Avenue, Third Floor, New York, NY 10017 -- the Balloting Agent on or before 4:00 p.m. prevailing Eastern Time on November 18, 2003 -- the Voting Deadline. (d) These procedures will be used regarding the tabulation of votes cast with respect to the Reorganization Plan and the Liquidation Plan: (1) Pursuant to Section 1126(e) of the Bankruptcy Code, a vote may be disregarded if the Court determines, after notice and a hearing, that a vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code; (2) A holder of Claims or Equity Interests in more than one Class must use separate Ballots for each Class of Claims or Equity Interests; (3) Votes cast by holders of Claims or Equity Interests in each Class under the applicable Plan will be tabulated separately by Class; (4) Votes cast by holders of Allowed Claims in Subclasses 3A and 3B under both the Reorganization Plan and the Liquidation Plan will be counted as a single Class of Claims under each Plan; (5) Any executed Ballot or Master Ballot received by the Balloting Agent that does not indicate either an acceptance or rejection of the Plan for which the vote was cast will be deemed to constitute an acceptance; (6) Ballots must be returned by U.S. mail, hand delivery or overnight mail to the Balloting Agent. Master Ballots, however, may be returned by U.S. mail, hand delivery, overnight mail or facsimile to the Balloting Agent; (7) Except to the extent determined by the Debtors in their reasonable discretion or as otherwise permitted by the Court, the Debtors will not accept or count any Ballots or Master Ballots received after the Voting Deadline; (8) Whenever a voter submits more than one Ballot voting the same Claim prior to the Voting Deadline, the last Ballot received will be deemed to reflect the voter's intent and thus supersede any prior Ballots; (9) The authority of the signatory of each Ballot or Master Ballot will be presumed; (10) Voters must vote all of their Claim in a class or in different Classes either to accept or reject a Plan, and Ballots cast by the same holder in different classes which do not all vote to accept or reject a Plan will not be counted. Voters may not split their vote and, accordingly, a Ballot that partially rejects and partially accepts will not be counted. Furthermore for purposes of computing the vote, a voter will be deemed to have voted the full Allowed amount, no more or less, of the voter's position as reflected on either: -- the Schedules as an undisputed, non-contingent, and liquidated Claim, or -- a proof of claim filed in these cases that has not been subject to an objection by the Debtors prior to October 27, 2003. It is provided, however, that if the Debtors file an objection to a proof of claim that seeks to reduce the amount of the proof of claim, the amount of the Claim will be counted as stated in the objection, unless temporarily allowed by the Court for voting purposes pursuant to Rule 3018(a) of the Federal Rules of Bankruptcy Procedure after notice and hearing or the objection is resolved by stipulation of the parties; and (11) The Debtors and their agents will have reasonable discretion to determine if a Ballot properly complies with these procedures and the voting instructions accompanying the Ballots and Master Ballots. (e) Any entity entitled to vote to accept or reject the Reorganization Plan or the Liquidation Plan may change its vote before the Voting Deadline by casting a superseding Ballot so that it is received on or before the deadline. Entities desiring to change their votes after the Voting Deadline may only do so if they file a motion with the Court with sufficient notice so that it can be heard and considered prior to or at the Confirmation Hearing and they demonstrate "cause" pursuant to Bankruptcy Rule 3018(a); (f) A holder of any Claim (i) that is scheduled at zero or listed as disputed, unliquidated or contingent on the Debtors' schedules of assets and liabilities with respect to which no proof of claim as been filed; or (ii) for which a proof of claim has been filed and as to which an objection seeking disallowance of that proof of claim has been filed on or before October 27, 2003, will not be entitled to vote for or against any of the Plans unless either: (1) the Court, upon application of any the holder, temporarily allows the Claim for the purpose of accepting or rejecting the Plans pursuant to Bankruptcy Rule 3018(a), in which case the amount of the Court-determined Allowed Claim will be used to tabulate the holder's vote; or (2) any objection by the Debtors is resolved by stipulation of the parties. (g) The Debtors' rights to redesignate Debtors as either Reorganizing Debtors, Heber Debtors, or Liquidating Debtors, without prejudice to the Proposed Buyers' rights under the Purchase Agreement, at any time prior to 10 days before the Confirmation Hearing are specifically reserved. Heber Holders of Claims or Equity Interests who are entitled to vote on the Plans who are affected by the redesignation will have five days from notice of any redesignation to vote to accept or reject the Reorganization Plan or the Liquidation Plan, as applicable. Claims Objection The Debtors are authorized to count and tabulate votes on the Reorganization Plan and the Liquidation Plan in accordance with any objections to claims seeking to: -- disallow or reduce a Claim for voting purposes, -- disallow a Claim, -- reduce the amount of a Claim, and -- reallocate and transfer a proof of claim from one Debtor to another Debtor. However, the Claims Objections must be filed on or before October 27, 2003 at 4:00 p.m. prevailing Eastern Time. Rule 3018(a) Motion Any party seeking temporary allowance of a Claim for voting purposes in a manner different than as stated in a Claims Objection will be required to file with the Court a motion, with evidence in support thereof, seeking temporary allowance of the Claim pursuant to Bankruptcy Rule 3018(a) on or before November 14, 2003 at 4:00 p.m. prevailing Eastern Time. Any holder of a Claim that is scheduled as zero, disputed, unliquidated or contingent in the Schedules who wishes to vote on the Reorganization Plan or the Liquidation Plan must file a Rule 3018(a) Motion on or prior to the Rule 3018(a) Motion Deadline. With regard to any timely Rule 3018(a) Motion, the Debtors will be permitted to file a response no later than November 17, 2003 at 4:00 p.m. prevailing Eastern Time. A hearing on Rule 3018(a) Motions, if any, will be held on November 19, 2003 at 2:00 p.m. prevailing Eastern Time. Confirmation Hearing The hearing to consider confirmation of the Heber Debtors' Plan is scheduled to commence on November 19, 2003 at 2:00 p.m. prevailing Eastern Time. In the event that the Debtors determine, without prejudice to the Proposed Buyers' rights under the Purchase Agreement, to consummate the Geothermal Sale pursuant to Section 363 of the Bankruptcy Code outside the context of a plan of reorganization, in accordance with the Court-approved bidding and auction procedures culminating in a competitive auction on November 19, 2003, the Debtors are authorized to seek approval of the sale to the successful bidder at the hearing on November 19, 2003, without further or prior notice. The hearing to consider confirmation of the Reorganization Plan and the Liquidation Plan is scheduled to commence on December 3, 2003 at 2:00 p.m. prevailing Eastern Time. Confirmation Objection and Discovery Cut-off Pursuant to Bankruptcy Rule 3020, the deadline for filing and serving objections to confirmation of the Heber Plan is November 12, 2003 at 4:00 p.m. prevailing Eastern Time while the deadline for filing and serving objections to confirmation of the Reorganization Plan or the Liquidation Plan is November 18, 2003 at 4:00 p.m. prevailing Eastern Time. The discovery cut-off date relating to confirmation of the Heber Plan is November 5, 2003 at 4:00 p.m. prevailing Eastern Time while the discovery cut-off date relating to confirmation of the Reorganization Plan or the Liquidation Plan is on November 12, 2003 at 4:00 p.m. prevailing Eastern Time. (Covanta Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392- 0900) CROWN AMERICAN: 3rd Quarter FFO Per Share Increases by 21% ---------------------------------------------------------- Crown American Realty Trust (NYSE: CWN), a real estate investment trust, announced financial results and operating information for the third quarter and for the nine months ended September 30, 2003. "Our Company's operating results continue to be encouraging," stated Company Chairman, CEO and President, Mark E. Pasquerilla. "Funds from Operations ("FFO") per common share were $0.35 for the quarter compared to $0.29 for the third quarter of last year, an increase of 21%. Earnings per common share ("EPS") for the third quarter of 2003, after preferred dividends, was a loss of $0.01 compared to a loss of $0.06 in the third quarter of 2002. However, third quarter results in 2002 were negatively impacted by approximately $0.03 per share due to the temporary per share dilution caused by the Company's common offering completed in June 2002; cash proceeds from the offering were used to acquire two enclosed malls in the fourth quarter of 2002 as previously announced. FFO and net income during the current quarter were reduced by $0.9 million, or $0.02 cents per share, from costs associated with our announced proposed merger with Pennsylvania Real Estate Investment Trust ("PREIT") (NYSE: PEI). The merger costs relate primarily to legal, accounting, and financial advisory services and were expensed in the period incurred as required by GAAP; these costs are continuing in the fourth quarter and are expected to be significant in amount. Same center NOI for the quarter was up 2.3% compared to last year due mostly to higher mall shop base rents." "Mall shop occupancy ended the quarter at 90%, the same as of June 30, 2003 and up from 89% a year ago. Average mall shop base rent per square foot increased for the 40th consecutive quarter to $21.25 per square foot, up 3.0% from a year ago. Leasing results for the third quarter 2003 included 173,000 square feet of leases signed representing $3.3 million in annualized base rental income. A total of 68 leases were signed, including 28 new leases and 40 renewals. Base rent on new leases averaged $23.84 per foot. The base rent in the third quarter of 2003 represented an uplift of 27% compared to the prior average rent on a same space basis. Tenant allowances on second generation space were $9.23 per square foot in the quarter, up from $5.67 last year. Our mall shop tenants' occupancy cost percentage was 10.2% at September 30, 2003, up from 10.1% a year ago. Comparable mall shop tenant sales per square foot for the first nine months were $180.09, a 3.0% increase from the $174.89 per square foot for the comparable period last year. Crown's property operating performance is expected to remain positive for the remainder of 2003. However, as I've already noted, we continue to incur costs related to the proposed merger with PREIT." Pasquerilla concluded, "The proposed merger with PREIT is progressing as expected. The joint proxy statement was mailed to the shareholders of PREIT and Crown on October 3, 2003 to solicit proxies related to the special meetings of PREIT's and Crown's shareholders called to approve the merger on November 11, 2003. The completion of the merger will occur no later than the third business day after the satisfaction or waiver of the conditions in the merger agreement." Financial Information -- Third Quarter and Nine Months For the quarter ended September 30, 2003, the Company reports that FFO before allocations to minority interest and to preferred dividends was $16.9 million, compared to $15.6 million for the third quarter of 2002. FFO allocable to common shares was $11.4 million, or $0.35 per common share, compared to $9.3 million, or $0.29 per common share, for the third quarter of 2002. FFO before allocations to minority interest and to preferred dividends for the third quarter compared to last year was impacted by the following factors: - $0.9 million increase in mall shop base and percentage rent as a result of higher average rental rates on new and renewal leases; - $0.2 million in higher temporary and seasonal leasing revenues; - $0.4 million in lower interest expense primarily due to lower rates on variable-rate debt; - $1.5 million contribution from the two malls acquired in late 2002; - $0.3 million of higher miscellaneous mall revenues; - $0.4 million of higher lease buyout income from tenants; - $0.2 million in higher gain on the sale of out-parcel land. These positive impacts for the quarter were partially offset by: - $0.9 million in costs associated with the proposed merger with PREIT; - $0.5 million in higher mall operating costs, net of tenant reimbursements; - $0.2 million in lower anchor base and percentage rents; - $0.2 million in higher net general and administrative expenses; and - $1.0 million reduction in FFO due to the sale of Carlisle Plaza Mall in October 2002 and Oak Ridge Mall in March 2003 and the elimination of the Cash Flow Support Agreement, as previously announced. Total revenues for the third quarter were $51.0 million, up $5.4 million or 12% from $45.6 million in the third quarter of 2003. The Company reported net income of $3.0 million for the third quarter of 2003 versus net income of $1.4 million in the same quarter of 2002. After deducting preferred dividends, there was a net loss applicable to common shares of $0.4 million in the third quarter of 2003, or $0.01 per share, compared to a net loss of $2.0 million in the third quarter of 2002, or $0.06 per share. For the first nine months of 2003, FFO before allocations to minority interest and to preferred dividends was $49.2 million, or $0.98 per share, as compared to $43.3 million, or $0.85 per share for the same period of 2002. Total revenues for the first nine months of 2003 were $150.9 million compared to $136.4 million for the same period of 2002, an increase of $14.5 million, or 11%. The Company reported a net loss of $10.8 million for the first nine months of 2003, compared to $1.4 million net income for the first nine months of 2002. However, 2003 results include a $14.0 million loss from discontinued operations which is mostly the $13.8 million loss on the sale of Oak Ridge Mall on March 31, 2003. After deducting preferred dividends, there was a net loss applicable to common shares of $21.0 million for the first nine months of 2003, or $0.65 per share, compared to a net loss of $8.8 million for the comparable period of 2002, or $0.31 per share. Operating Information - During the third quarter of 2003, leases for 173,000 square feet of mall shops were signed resulting in $3.3 million in annual base rental income. This compares to 174,000 square feet for $3.9 million during the same period in 2002. A total of 68 leases were signed during the third quarter of 2003, which included 40 renewals and 28 new leases. Annualized revenues from new and renewal signed mall shop leases during the nine months of 2003 were $12.3 million, compared to $11.6 million during the same period in 2002. - For the nine months ended September 30, 2003, the average rent for mall shop leases signed was $20.04 per square foot compared with $20.83 for the same period in 2002. The average rents per square foot were $21.43 for new leases and $19.18 for renewals in the first nine months of 2003, compared with $23.23 and $18.86 respectively, in 2002. - Net effective rent on new leases (after amortization of tenant allowances and leasing costs) for the nine months was $18.18 per square foot compared to $21.05 per square foot for the same period last year. - The average mall shop base rent of the portfolio at September 30, 2003 was $21.25 per square foot. This is a 3.0 % increase from $20.63 per square foot at September 30, 2002, and the 40th consecutive quarter that average mall shop base rent has increased. - Mall shop occupancy was 90% at September 30, 2003, compared to 89% at September 30, 2002. - Mall shop comparable sales for the nine months ended September 30, 2003 were $180.09 per square foot, up 3.0% over $174.89 for the nine months ended September 30, 2002. - Tenant occupancy costs, defined as the sum of base rent, percentage rent and expense recoveries as a percentage of mall shop sales, was 10.2% as of September 30, 2003, compared to 10.1% as of September 30, 2002. - Temporary and promotional leasing income for the first nine months of 2003 amounted to $7.3 million, compared to $6.3 million for the same period in 2002. Selected financial data together with a reconciliation of certain GAAP and non-GAAP financial data are included for Crown American Realty Trust for the three and nine months ended September 30, 2003. The Company's more detailed quarterly Supplemental Financial and Operational Information Package is available at http://www.crownamerican.comor by calling Investor Relations at 1-800-860-2011. Crown American Realty Trust through various affiliates and subsidiaries owns, acquires, operates and develops regional shopping malls in Pennsylvania, Maryland, West Virginia, Virginia, New Jersey, North Carolina, Tennessee, Georgia, Alabama and Wisconsin. The current portfolio includes 27 regional shopping malls. As reported in the Troubled Company Reporter's June 27, 2003 edition, Fitch Ratings maintains a 'B+' rating on Crown American's $124 million 11% redeemable preferred stock with a Stable Rating Outlook. DELTA AIR LINES: Elects Larry D. Thompson to Board Of Directors --------------------------------------------------------------- Delta Air Lines (NYSE: DAL) announced the election of Larry D. Thompson, most recently Deputy Attorney General of the United States, to its Board of Directors, effective immediately. "Larry Thompson is an outstanding and universally respected attorney and public servant who will bring to Delta's Board of Directors insight and deep experience in corporate affairs and governance, national security and an informed perspective of the role of business in our society," said Leo F. Mullin, Delta chairman and chief executive officer. "In addition to his public service, Larry also has extensive experience as a lawyer representing top U.S. companies and individuals as a corporate and private attorney. He will add a new and welcome dimension to Delta's strong and active Board." "Delta is one of the world's great airlines with strong values, a focus on customer service and wonderful people," Thompson said. "I look forward to working with Leo Mullin and the Board of Directors as the company competes, prospers and grows." Thompson, 57, was confirmed by the U.S. Senate as Deputy Attorney General, the No. 2 job in the Justice Department, in 2001. As Deputy Attorney General, Thompson served as the Chief Operating Officer for the Department of Justice (DOJ) with oversight responsibilities for the Department's components and initiatives, including the nation's U.S. Attorneys, law enforcement, prisons and national security. In 2002, he was designated to chair the Bush administrations' corporate fraud task force. Thompson left the Justice Department in August 2003 and joined the Brookings Institution, a public policy think tank in Washington, D.C., as a Senior Fellow. Beginning in January 2004, he will teach at the University of Georgia School of Law. Prior to his work at the DOJ, Thompson was a partner at King & Spalding, an Atlanta law firm, which he first joined in 1977. In the years since 1977, he left King & Spalding on several occasions for public service positions. In April 2000, Thompson was selected to chair the Judicial Review Commission on Foreign Asset Control. In 1995, he was independent counsel for the U.S. Department of Housing and Urban Development (HUD). From 1982 to 1986 he served as U.S. Attorney for the Northern District of Georgia. Prior to joining King & Spalding in 1977, he worked as an attorney at Monsanto Company in St. Louis, Mo. Thompson is a 1967 cum laude graduate with a bachelor's degree in sociology from Culver-Stockton College. He earned a master's degree in sociology from Michigan State University in 1969. He received his law degree in 1974 from the University of Michigan Law School. Delta Air Lines, the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offers 6,130 flights each day to 453 destinations in 82 countries on Delta, Song, Delta Shuttle, Delta Connection and Delta's worldwide partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. For more information, go to http://www.delta.com DELTA FUNDING: Fitch Takes Rating Actions on Series 1997 Notes -------------------------------------------------------------- Fitch has taken rating action on the following Delta Funding Corporation issues: Series 1997-2 -- Classes A-5, A-6, A-7 affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A+'; -- Class B-3 downgraded to 'B' from 'BBB' and removed from Rating Watch Negative. Series 1997-3 Group F -- Class A-6F affirmed at 'AAA'; -- Class M-1F upgraded to 'AAA' from 'AA+'; -- Class M-2F affirmed at 'A+'; -- Class B-1F affirmed at 'CCC'. Series 1997-3 Group A -- Class M-2A affirmed at 'AA-'; -- Class B-1A downgraded to 'B-' from 'BB-,' and removed from Rating Watch Negative. Series 1998-1 Group F -- Classes A-4F, A-5F, A-6F affirmed at 'AAA'; -- Class M-1F affirmed at 'AA+'; -- Class M-2F affirmed at 'A+'; -- Class B-1F affirmed at 'BBB,' and removed from Rating Watch Negative. Series 1998-1 Group A -- Class M-2A affirmed at 'A+'; -- Class B-1A downgraded to 'B-' from 'BB-,' and removed from Rating Watch Negative. Series 1998-2 Group F -- Classes A-5F, A-6F affirmed at 'AAA'; -- Class M-1F affirmed at 'AA'; -- Class M-2F affirmed at 'A'; -- Class B-1F affirmed at 'BBB'. Series 1998-2 Group A -- Class M-2A affirmed at 'A'; -- Class B-1A downgraded to 'CCC' from 'BB-,' and removed from Rating Watch Negative. Series 2000-2 -- Classes A-5F, A-6F, A-1A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'B-' from 'BBB-,' and removed from Rating Watch Negative. Series 2001-1 -- Classes A-1, A-2, IO affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B affirmed at 'BBB'. Series 2001-2 -- Classes A-1F, A-1A, IO affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B affirmed at 'BBB'. The negative rating actions are a result of high delinquencies and credit enhancement deterioration. The affirmations on the above classes reflect credit enhancement consistent with future loss expectations. In addition, the affirmations on the senior certificates in series 2000-2, 2001-1 and 2001-2 reflect a certificate insurance policy provided by Financial Security Assurance Inc. (FSA), whose insurer financial strength is rated 'AAA' by Fitch. Fitch will continue to closely monitor these deals. DOBSON COMMS: Unit Closes New $700-Mil. Secured Credit Facility --------------------------------------------------------------- Dobson Communications Corporation (Nasdaq:DCEL) announced that its wholly owned subsidiary, Dobson Cellular Systems Inc., has consummated a new $700 million secured credit facility, consisting of a $550 million, 6.5-year senior secured term loan B facility and a $150 million, 6-year senior secured revolving credit facility. The term loan will be amortized with quarterly payments of principal and interest, and, under certain circumstances, additional mandatory prepayments are required. In addition, at least 50 percent of the borrower's excess cash flows, as defined in the agreement, may be up-streamed to Dobson Communications subject to certain conditions and limitations. The credit facility is guaranteed by Dobson Communications and certain of its material subsidiaries and is secured by a pledge of Dobson Communications' equity interest in the borrower and by all the assets of the borrower and its material subsidiaries. Borrowings under the new credit facility will be used to fund the previously announced tender offers for all outstanding 12 1/4% Senior Notes due 2008 of Dobson's subsidiary, Dobson/Sygnet Communications Company, a portion of Dobson's outstanding 12 1/4% senior preferred stock; to repay the $54 million balance outstanding under the credit facility of Dobson's subsidiary, Sygnet Wireless, and for general corporate purposes. The consummation of Dobson's new credit facility satisfies the financing condition requirement of Dobson's tender offers for any or all of the outstanding 12-1/4% Senior Notes due 2008 issued by Dobson's subsidiary, Dobson/Sygnet Communications, and for a portion of the outstanding shares of Dobson's outstanding 12-1/4% Senior Exchangeable Preferred Stock. The tender offer for the Dobson/Sygnet notes is expected to close on October 24, 2003, and the tender offer for the shares of Dobson's senior preferred stock is expected to close on October 31, 2003. In September 2003, a portion of the proceeds from the issuance of $650 million principal amount of Dobson's 8-7/8% Senior Notes was used to repay all amounts outstanding under the credit facilities of Dobson's subsidiary, Dobson Operating Co., and a substantial portion of the outstanding balance under credit facilities of another subsidiary, Sygnet Wireless. In connection with the closing of its credit facility, Dobson also announced that it had merged its subsidiaries, Dobson/Sygnet Communications, Sygnet Communications, and Sygnet Wireless Inc. into Dobson Cellular Systems. Dobson Communications (S&P, CCC+ Senior Debt and B- Corporate Credit Rating, Stable Outlook) is a leading provider of wireless phone services to rural markets in the United States. Headquartered in Oklahoma City, the Company owns wireless operations in 16 states. For additional information on the Company and its operations, please visit its Web site at http://www.dobson.net DOBSON COMMS: Completes Tender Offer for 12-1/4% Preferreds ----------------------------------------------------------- Dobson Communications Corporation (Nasdaq:DCEL) announced that its wholly owned subsidiary, Dobson Cellular Systems, Inc., had closed on its new $700 million senior credit facility. The closing of the new credit facility was a condition to Dobson's cash tender offer for up to 250,000 shares of its 12-1/4% Senior Exchangeable Preferred Stock (CUSIP Nos. 256072307, 256069303 and 256072208). The tender offer is expected to close on October 31, 2003. The consideration offered in the Offer is an amount equal to $1,061.25 per Preferred Share, plus accrued and unpaid dividends to, but not including, the settlement date, payable in cash on the settlement date. The Offer commenced on September 8, 2003 and is scheduled to expire at 12:00 Midnight EDT on October 30, 2003. Dobson Communications is a leading provider of wireless phone services to rural markets in the United States. Headquartered in Oklahoma City, the Company owns wireless operations in 16 states. For additional information on the Company and its operations, please visit its Web site at http://www.dobson.net. DOBSON COMMS: Discloses Third Quarter 2003 Customer Additions ------------------------------------------------------------- Dobson Communications Corporation (Nasdaq:DCEL) reported that its gross subscriber additions (postpaid) for the third quarter ended September 30, 2003 were approximately 49,600, compared with 55,000 gross subscriber additions for the same period last year and 40,100 in the second quarter of 2003. These totals do not include results for American Cellular Corporation, which became a wholly owned, indirect subsidiary of Dobson on August 19, 2003. Postpaid customer churn was 1.7 percent for the third quarter of 2003, compared with churn of 2.0 percent for the same period last year and 1.5 percent in the second quarter of 2003. Consequently, Dobson's total net subscriber additions for the third quarter were approximately 10,200, compared with approximately 14,700 net subscribers added for the same period last year and 13,000 in the second quarter of 2003. Including the two new Alaska properties that the Company acquired in June 2003, Dobson served a total of approximately 877,800 subscribers as of September 30 2003. Local and preferred calling plans, primarily on two-year contracts, continued to account for a large majority of gross subscriber additions at both Dobson and American Cellular. American Cellular's gross subscriber additions (postpaid) were approximately 43,900 for the third quarter, compared with 49,900 gross subscriber additions for the same period last year and 37,900 in the second quarter of 2003. American's postpaid customer churn for the quarter was 2.0 percent, in line with churn for the same quarter last year and compared with 1.7 percent in the second quarter of 2003. Consequently, total net subscriber additions were approximately 4,200 for the third quarter ended September 30, 2003, compared with approximately 15,200 for the same period last year and 5,400 in the second quarter of 2003. American served a total of approximately 701,700 subscribers as of September 30, 2003. Both postpaid and prepaid subscribers are included in net subscriber additions. Gross subscriber additions and churn are reported on a postpaid basis only. As announced last week, Dobson plans to report full financial results for the third quarter before the beginning of market trading on Monday, November 10, 2003. Dobson Communications is a leading provider of wireless phone services to rural markets in the United States. Headquartered in Oklahoma City, the Company owns wireless operations in 16 states. For additional information on the Company and its operations, please visit its Web site at http://www.dobson.net D.R. HORTON: Fiscal Year 2003 Conference Call Set for Nov. 13 ------------------------------------------------------------- D.R. Horton, Inc. (NYSE: DHI) announced that it will release earnings for its fiscal year ended September 30, 2003 on Wednesday, November 12, 2003 after the close of the market. A conference call will be held on Thursday, November 13, 2003 at 10:00 a.m. Eastern Standard Time (EST). The dial-in number is 800-374-9096. Participants are encouraged to call in five minutes before the call begins (9:55 a.m. EST). Please reference the call host, Donald J. Tomnitz, CEO of D.R. Horton, Inc. The call will also be webcast from the Company's website at http://www.DRHORTON.comon the "Investor Relations" page. A replay of the call will be available after 2:00 p.m. EST on November 13, 2003 at 800-642-1687, reference number 3360089. The replay will also be available from the Company's website at http://www.DRHORTON.comon the "Investor Relations" page. The replays will be available through midnight EST on November 27, 2003. Founded in 1978, D.R. Horton, Inc. is engaged in the construction and sale of high quality homes designed principally for the entry- level and first time move-up markets. D.R. Horton currently builds and sells homes under the D.R. Horton, Cambridge, Continental, Dietz-Crane, Emerald, Melody, Milburn, Schuler, Stafford, Torrey, Trimark, and Western Pacific names in 20 states and 44 markets, with a geographic presence in the Midwest, Mid-Atlantic, Southeast, Southwest and Western regions of the United States. The Company also provides mortgage financing and title services for homebuyers through its mortgage and title subsidiaries. * * * As reported in the Troubled Company Reporter's June 24, 2003 edition, Fitch Ratings has assigned a 'BB+' rating to D.R. Horton, Inc.'s (NYSE: DHI) $100 million 5.875% senior notes due July 1, 2013. The Rating Outlook is Stable. The issue was ranked on a pari passu basis with all other senior unsecured debt, including D.R. Horton's $805 million unsecured bank credit facility. D.R. Horton expects to use the proceeds from the debt issue to call the approximately $100 million outstanding principal amount of its 9% senior notes due 2008. The new issue has more favorable rates and attractive maturity relative to the debt it would replace. Fitch remains comfortable with D.R. Horton's stated debt to capital target of 49% or less by the end of fiscal year 2003. EASYLINK: Broker Adversary Obtains Favorable Court Decision ----------------------------------------------------------- In EasyLink Services Corporations' pending litigation with the broker engaged to sell the portal operations of the Company's discontinued India.com business, the Court has reinstated the previously vacated judgment in favor of the broker in the original amount of $931,000. The Company has filed for an appeal. The Court has permitted the Company, in lieu of posting an appeal bond, to place $50,000 per month for eight months commencing November 7, 2003, for a total of $400,000, into a trust account to provide funds for the payment of the judgment if upheld on appeal. Although the Company intends to pursue its appeal vigorously, no assurance can be given as to the Company's likelihood of success or its ultimate liability, if any, in connection with this matter. For the years ended December 31, 2002, 2001 and 2000, EasyLink received a report from its independent accountants containing an explanatory paragraph stating that the Company suffered recurring losses from operations since inception and have a working capital deficiency that raise substantial doubt about its ability to continue as a going concern. As of June 30, 2003, the Company had $7.1 million of notes payable and capitalized interest payable within one year. Although the Company has substantially reduced its outstanding debt obligations, cash payments of principal and interest due within one year from June 30, 2003, amount to $6.6 million. If the Company's cash flow is not sufficient it may need additional financing to meet this debt service requirement and other cash requirements for its operations. However, if unable to raise additional financing, restructure or settle additional outstanding debt or generate sufficient cash flow, the Company has indicated that it may be unable to continue as a going concern. EasyLink believes its ability to continue as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required, and ultimately to achieve profitable operations. Management is continuing the process of further reducing operating costs and increasing its sales efforts. There can be no assurance that the Company will be successful in these efforts. Sales of additional equity securities could result in additional dilution to its stockholders. In addition, on an ongoing basis, the Company continues to evaluate potential acquisitions to complement its business messaging services. In order to complete these potential acquisitions, it may need additional equity or debt financing in the future. ELIZABETH ARDEN: S&P Junks Senior Unsecured Debt Rating to CCC+ --------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit and senior secured debt ratings to 'B+' from 'B' on prestige beauty products company Elizabeth Arden Inc. In addition, Standard & Poor's raised the company's senior unsecured debt rating to 'B-' from 'CCC+'. The ratings are removed from CreditWatch, where they were placed Oct. 3, 2003. The outlook is stable. Total debt was $392 million at July 26, 2003. "The upgrade reflects Elizabeth Arden's improved financial profile following the company's offering of common stock," said Standard & Poor's credit analyst Lori Harris. "Net proceeds of about $63 million will be used to redeem a portion of the company's 11_% senior secured notes due 2011." The ratings on Elizabeth Arden reflect the company's narrow product portfolio, highly seasonal sales, and concerns about the very competitive fragrance business. These factors are partially mitigated by Elizabeth Arden's solid position in fragrances and its wide distribution, especially in the high growth mass- merchandising trade channel. The company's operating performance improved during the 12 months ended July 26, 2003, compared with fiscal 2002 (ended Jan. 31, 2002) as evidenced by the 14% growth in revenues and 25% increase in operating profits. The better sales performance was due to expanded distribution, successful new product launches, and increased marketing support. Furthermore, a higher gross margin, better leveraging of the company's cost structure, and favorable foreign currency translation aided the operating margin. EMTEC MAGNETICS: Imation Obtains Nod for Acquisition of Assets -------------------------------------------------------------- Imation Corp. (NYSE: IMN), a worldwide leader in removable data storage media, announced it had been notified by the German Cartel Office that its proposal to purchase certain data storage assets of EMTEC Magnetics GmbH, a German- based manufacturing subsidiary of EMTEC International Holding GmbH, has been approved -- clearing the way for completion of the acquisition. Imation initially announced plans to acquire certain data storage assets from EMTEC Magnetics GmbH on June 30, 2003. The purchase price is approximately US $15 million in cash. Under the terms of the agreement, Imation will acquire assets and intellectual property, including patents, licenses, and technical knowledge, relating to removable data storage tape media. "We are pleased to receive regulatory approval for the completion of this acquisition which enables us to ensure the long-term worldwide availability of legacy tape products, such as 3480 and 3490E tape cartridges, to our data center customers," said Frank Russomanno, president, Imation's Data Storage and Information Management business. "This is another example of Imation's commitment to invest in technologies that strengthen our core removable media business and deliver long-term value to our global customers." Since EMTEC's insolvency filing in April 2003, a court-appointed Insolvency Administrator under Germany's Insolvency Act has managed the affairs of EMTEC Magnetics GmbH. As a result of the company's insolvency filing, there were some limitations in the availability of raw materials which caused temporary supply restrictions of legacy products, such as 3480, 3490 and 9490EE tape cartridges, to the market. This investment has enabled Imation to expedite the resumption of supply and secure long-term availability of chrome-based legacy tape products to the global market place. Imation's full portfolio of tape products for the mid-range server and enterprise environment include: DLTtape(TM), Super DLTtape(TM), Ultrium(TM), AIT-2 (Advanced Intelligent Tape(TM)), 9840, 9940, 3480, 3490E, 3590 and 3590E tape cartridges. For additional information on Imation's product portfolio, please visit http://www.imation.com About Imation Imation Corp. is a leading developer, manufacturer and supplier of magnetic and optical removable data storage media. With one of the broadest product lines in the industry-spanning from a few megabytes to hundreds of gigabytes of capacity in each piece of media, Imation serves customers in more than 60 countries, in both business and consumer markets. From large data centers to distributed networks, Imation's tape cartridges are used in data processing, security, business continuity, backup and archiving applications. Customer needs for reliability, convenience and portability to store and manage business data, photos, video, images and music on professional and home desktops and increasingly in consumer electronics devices drive demand for Imation's optical and diskette products. With more than 300 technology scientists and more than 300 data storage patents in the U.S. alone, Imation continues to pioneer today's proven magnetic and optical media technologies. As of September 2003, Imation employed approximately 2,800 people worldwide. Revenues from outside the U.S. contribute approximately 53 percent of total sales. Additional information about Imation is available on the company's Web site at http://www.imation.comor by calling 1-888-466-3456. ENCOMPASS: Asks Court Nod to Commute AIG Insurance Policies ----------------------------------------------------------- Lydia T. Protopapas, Esq., at Weil, Gotshal & Manges, LLP, in Houston, Texas, recalls that on December 18, 2002, Encompass Services and its debtor-affiliates sought and obtained the Court's permission to make all payments required under existing insurance policies and to enter into new insurance programs and premium finance agreements on the expiration of the existing insurance programs and finance agreements. On February 4, 2003, the Debtors asked Judge Greendyke's approval to pay prepetition insurance premium financing and other obligations arising under insurance policies. Specifically, the Debtors sought the Court's authority to pay all premiums and payments required by the terms of new postpetition insurance policies and related agreements, effective February 1, 2003, which were provided by American Home Assurance Company and certain other affiliates of American International Group, Inc. and financed, in part, by Imperial A.I. Credit Companies. The Court subsequently approved the Debtors' request on February 19, 2003. The AIG Policy provides coverage for worker's compensation, general liability and automobile liability. In accordance with the terms of the AIG Policy, the Debtors were required to pay total casualty costs of $37,360,000, of which $8,594,000 consisted of premium while $28,766,000 consisted of primary loss retention. The Debtors funded the premium by a combination of cash and a nine-month note. The Debtors will have complied with all of their obligations under the note upon the consummation of the transactions contemplated by a Close-Out Agreement. The Debtors were required to fund the loss retention by a combination of cash and a note in the aggregate of $22,766,000 and a $6,000,000 letter of credit. The Debtors will have complied with all of their cash and note payment obligations upon consummation of the transactions contemplated by the Close-Out Agreement. In accordance with the terms of the Close-Out Agreement, AIG's ability to draw on the letter of credit has been terminated. Despite the sizeable costs of the AIG Policy, Ms. Protopapas says, the Debtors did attempt to procure postpetition insurance policies, which reflected their scaled-down operations and their plans to further reduce their operations. Ultimately, however, the Debtors were unable to persuade an insurance carrier to assume the risk that their plans to reduce their operations might not materialize and accordingly, the Debtors were required to provide significant collateral and to make significant premium payments in order to obtain the AIG Policy. Even so, the AIG Policy does provide for retrospective premium payments, reimbursements and other obligations, including retention amounts, allocated loss expenses, claims administration expenses, and time and expense fees. On October 1, 2003, the AIG Policy was terminated by mutual agreement between AIG and the Reorganized Debtors. The AIG Policy is an occurrence-based policy and accordingly, claims that occurred during the policy period may continue to be made against the policy even though the primary policy period has expired. Therefore, the Reorganized Debtors seek the Court's approval to commute the AIG Policy and to enter into, and effectuate the provisions of the Close-Out Agreement. The Reorganized Debtors intend to settle all Obligations in accordance with the terms of the Close-Out Agreement. Ms. Protopapas informs the Court that the Close-Out Agreement generally provides that AIG will pay to the Reorganized Debtors $7,088,913 and will return the $6,000,000 letter of credit delivered in connection with the AIG Policy to the issuing bank and release its right to draw on the letter of credit. The payments to be made by AIG and the release of the letter of credit will be in full and final satisfaction of the Obligations. Although the Close-Out Agreement includes a mutual release of all claims except those arising out of the Close-Out Agreement itself, Ms. Protopapas points out that the commutation effectuated by the Close-Out Agreement will not release AIG from its obligation to provide coverage in accordance with the terms of the AIG Policy or any other insurance policy issued to or for the benefit of the Debtors, the Reorganized Debtors or their predecessors-in-interest. Although the Reorganized Debtors believe that Court approval of the Close-Out Agreement is not required due to the broad authorities vested in the Disbursing Agent under the Plan, out of an abundance of caution, and at AIG's request, the Reorganized Debtors seek the Court's authority to commute the AIG Policy in accordance with the terms of the Close-Out Agreement. Ms. Protopapas contends that entry into the Close-Out Agreement will eliminate significant uncertainty concerning the amount of collateral posted under the AIG Policy which the Reorganized Debtors are entitled to have returned and will expedite the Reorganized Debtors' receipt of those assets. Absent entry into the Close-Out Agreement, the Reorganized Debtors would not be entitled to the payment proposed to be made by AIG under the Close-Out Agreement. While the AIG payment might ultimately become due at some distant future date when all of the claims under the AIG Policy have been settled, the amount of that payment is currently unknown. Because the payment proposed to be made by AIG under the Close-Out Agreement will allow the Reorganized Debtors to rapidly realize significant sums of money for the benefit of the estates' creditors and will eliminate the uncertainty associated with the amount of the payment, Ms. Protopapas asserts that the Court should approve the Reorganized Debtors' request. (Encompass Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: ENA Demands $42-Mill. Termination Pay from Goldman Sachs --------------------------------------------------------------- Michael Schatzow, Esq., at Venable LLP, in Baltimore, Maryland, relates that Enron North America Corporation's predecessor-in- interest, Enron Capital & Trade Resources Corporation, entered into an ISDA Master Agreement dated October 21, 1996 with Goldman Sachs Capital Markets, LP. The Master Agreement provided that the parties would enter into one or more transactions that will be governed by the Master Agreement. ENA and Enron Capital entered into hundreds of derivative Transactions with Goldman Sachs Capital. To induce ENA to enter into certain Transactions with Goldman Sachs Capital, Goldman Sachs Group, LP and Goldman Sachs Group, Inc. guaranteed certain obligations of Goldman Sachs Capital. Pursuant to an unconditional guarantee dated September 30, 1997, Goldman Sachs LP guaranteed Goldman Sachs Capital's obligations to ENA. In addition, Goldman Sachs Inc. unconditionally guaranteed Goldman Sachs Capital's obligations to ENA relating to a weather derivative transaction by means of a guarantee dated May 30, 2001. Although ENA was performing under the Transactions, Mr. Schatzow informs the Court that by letter dated December 3, 2001, Goldman Sachs Capital notified ENA that it was, among other things, terminating all outstanding Transactions with the occurrence of an event of default under the Master Agreement. The Termination Notice designated December 4, 2001 as the Early Termination Date under the Master Agreement. Mr. Schatzow notes that pursuant to the Master Agreement, the Non-Defaulting party is to: (a) calculate the amount due under Section 6(e) of the Master Agreement as soon as reasonably practicable after the Early Termination Date; and (b) provide to the Defaulting Party a statement showing the calculation and the details supporting that calculation. In a letter dated June 29, 2002, Goldman Sachs Capital provided ENA with its determination of the alleged Termination Payment it must pay to ENA. However, the June 29 letter was deficient since it failed to provide the details, including the market quotes and valuation methodology that supports the calculation of the Termination Payment. Goldman Sachs Capital subsequently provided some, but not all, of the required information. According to Goldman Sachs Capital, it owes ENA $22,153,901, including interest, as the Termination Payment. ENA has independently determined that the amount due and owing from Goldman Sachs Capital is $42,274,929, excluding interest. Thus, ENA demanded from Goldman Sachs Capital the payment of the Termination Payment. However, neither Goldman Sachs Capital, Goldman Sachs LP nor Goldman Sachs Inc. paid any portion of the Termination Payment. Mr. Schatzow reports that Goldman Sachs Capital threatened to improperly invoke, or has actually invoked, alleged set-off provisions, which, according to Goldman Sachs Capital, purports to allow it to set off amounts owed to ENA under the Master Agreement against amounts ENA allegedly owes Goldman Sachs Capital's affiliate, J. Aron & Company. Goldman Sachs Capital and J. Aron claim that the amounts ENA owed to J. Aron are sufficiently large so as to offset any amount Goldman Sachs Capital owed to ENA, if an offset is available. However, Mr. Schatzow contends that Goldman Sachs Capital and J. Aron's valuation methodology is improper and inconsistent with the Master Agreement. In addition, the alleged set-off clause in the Master Agreement does not provide for the set-off asserted by Goldman Sachs Capital. Mr. Schatzow explains that the set-off provision, if applicable to the Termination Payment, in the Master Agreement claimed by Goldman Sachs Capital to allow for the non-mutual set-off of debts, is invalid, unenforceable and avoidable under Section 553(a) of the Bankruptcy Code and other applicable law. Moreover, the set-off provision is invalid and unenforceable because Goldman Sachs Capital's affiliates are not signatories to the Master Agreement and have never provided ENA with any consideration for the purported non-mutual set-off rights under the Master Agreement. Accordingly, ENA seeks a Court judgment: (1) ordering that Goldman Sachs Capital turn over $45,274,929, which is property belonging exclusively to ENA's estate; (2) awarding damages, in an amount to be determined at trial, resulting from Goldman Sachs Capital's failure to pay the Termination Payment resulting from the early termination of the GSCM ISDA Master Agreement; (3) awarding damages, in an amount to be determined at trial, resulting from Goldman Sachs Capital's unjust enrichment; (4) declaring the alleged non-mutual set-off provisions invalid and unenforceable to the extent Goldman Sachs Capital attempts to set off any amounts Goldman Sachs Capital owes to ENA against any amounts ENA allegedly owes Goldman Sachs Capital's affiliates, including, but not limited to, J. Aron; (5) declaring that Goldman Sachs Capital violated the automatic stay; (6) awarding damages against Goldman Sachs Group LP on account of the breach of its obligations under the Guarantee; (7) awarding damages against Goldman Sachs Group, Inc. on account of the breach of its obligations under the Guarantee; and (8) awarding interest, attorneys' fees, costs and expenses as provided by contract and as may be otherwise allowable under law. (Enron Bankruptcy News, Issue No. 84; Bankruptcy Creditors' Service, Inc., 609/392-0900) EPRESENCE INC: Board of Directors Endorses Plan of Liquidation -------------------------------------------------------------- ePresence, Inc. (Nasdaq:EPRE) announced that it has signed a definitive agreement to sell the assets of its services business to Unisys Corporation (NYSE:UIS). ePresence also announced that its Board of Directors has approved a plan of liquidation of the Company. ePresence will file a proxy statement seeking shareholder approval on these matters. Sale of Services Business Assets ePresence has entered into an agreement to sell its security and identity management (SIM) services business assets to Unisys Corporation for approximately $11.5 million in cash. These assets include ePresence's customer relationships and industry partnerships, and a majority of ePresence's employees are expected to become employees of Unisys. The transaction is subject to the approval of ePresence shareholders and other closing conditions, and is expected to be completed as early as December 2003. "The sale of our services business to Unisys is positive news for our clients, employees and shareholders," stated Bill Ferry, chairman and chief executive officer of ePresence. "Identity management is a growing field and Unisys is a strong player, offering a broad portfolio of security solutions and expertise across a number of industries. For our employees, we believe Unisys is an ideal cultural fit and provides an opportunity for them to advance their careers in security and identity management." Plan of Liquidation ePresence's Board of Directors has unanimously agreed to recommend to shareholders that the Company be liquidated. The Company and SG Cowen, its financial advisor, implemented an extensive sales process seeking out third parties that would be interested in acquiring ePresence. In addition, the Company worked with SG Cowen to explore opportunities to acquire other businesses and also analyze the liquidation value of ePresence. After considering all options, the Board of Directors determined that the sale of the services business assets to Unisys followed by the liquidation of the remaining portion of ePresence's assets was in the best interest of its shareholders. As of September 30, 2003, the Company's services business had cash and marketable securities totaling $44.2 million, exclusive of its holdings of the Company's majority-owned subsidiary, Switchboard Incorporated (Nasdaq:SWBD). Liabilities for the Company's services business on September 30, 2003 totaled $6.5 million. In addition to the cash and marketable securities noted above, the liquidation proceeds would include approximately $11.5 million in cash from the proposed sale of the services business assets to Unisys. ePresence also currently holds approximately 9.8 million shares of Switchboard common stock and currently plans to sell, subject to shareholder approval, all of these shares in an underwritten public offering in order to facilitate an orderly distribution of the shares. A registration statement for this offering is expected to be filed by Switchboard today with the SEC. Alternatively, ePresence may sell a portion of its Switchboard shares in such offering, either prior to or following its meeting of shareholders. ePresence intends to distribute to its shareholders the proceeds of any sales of Switchboard common stock and/or any remaining shares of Switchboard not sold. Any distribution to shareholders will be net of any tax liability resulting from such sale or distribution that is not offset by ePresence's net operating loss and tax credit carry-forwards. Based upon the $7.42 market price of Switchboard as of the market's closing Wednesday, this tax liability of ePresence would be approximately $1.0 million, and any increase in the price of Switchboard at the time of such sale or distribution would be taxable at approximately a 34% marginal rate. In addition to converting its remaining assets to cash and satisfying the liabilities currently on its balance sheet, the Company anticipates using cash in the next several months for a number of items, including but not limited to: (i) ongoing operating costs, including transaction fees, of at least $3.3 million, (ii) employee severance and related costs of at least $6.9 million and (iii) other costs, including costs to terminate a vendor relationship, insurance costs, costs to terminate leases and wind down costs of at least $6.7 million. In addition, ePresence expects to initially withhold a portion of its cash for any unknown liabilities that may arise. As a result, excluding the value of the Company's Switchboard holdings, the Company currently estimates that it will be able to distribute to its shareholders, in one or more cash distributions over time, approximately $1.10 - $1.40 per share in a liquidation. The amount that ePresence will be able to distribute to its shareholders with respect to its shares of Switchboard common stock will depend, in the case of shares that it sells, on the net proceeds after taxes and sales commissions that it realizes from such sales and, in the case of any shares not sold, on the after-tax value of such shares at the time they are distributed to ePresence shareholders. If the shareholders approve the plan of liquidation, the Company intends to dissolve by filing articles of dissolution, liquidate its remaining assets, satisfy its remaining obligations and make one or more distributions to its shareholders of cash or assets available for distribution. The Company currently anticipates that the articles of dissolution would be filed within approximately 10 days following shareholder approval of the plan of liquidation. Upon filing of the articles of dissolution, the Company expects to delist its shares from NASDAQ and close its stock transfer books, which would generally prohibit any further transfers of record of its shares following dissolution. The Company anticipates making an initial distribution to shareholders within approximately 20 days following the filing of the articles of dissolution. The precise timing of these events, however, cannot be predicted. "After a thorough review of all potential strategic alternatives with SG Cowen, our Board of Directors determined this was the most appropriate action for ePresence to take," Ferry said. "The Company's size was limiting its ability to fully capitalize on emerging opportunities in the security and identity management market. We thoroughly considered various initiatives to grow the business, including the acquisition of other businesses and technologies. Ultimately, after carefully evaluating all strategic alternatives, we determined that the sale of ePresence's services business and the subsequent liquidation of the Company was in the best interest of our shareholders." Third-Quarter Results Consolidated revenues for the third quarter of 2003 were $8.2 million, with $4.1 million generated by ePresence's services business and $4.1 million generated by Switchboard. This compares with consolidated revenues of $10.7 million in the third quarter of 2002, with $7.4 million generated by ePresence's services business and $3.4 million generated by Switchboard. For the third quarter of 2003, the Company's consolidated net loss was $(1.3) million, or $(0.06) per share. This compares with a consolidated net loss of $(3.3) million, or $(0.15) per share, for the third quarter of 2002. As of September 30, 2003, ePresence had a balance of $97.1 million in cash and marketable securities on a consolidated basis, of which $44.2 million was held by ePresence and $52.9 million was held by Switchboard. This compares with a consolidated balance of $96.5 million on June 30, 2003. Information regarding Switchboard's third-quarter financial results and fourth-quarter 2003 guidance is available in a separate news release issued on October 23, 2003, which can be accessed in the "Investors" section of Switchboard's Web site, http://www.switchboard.com. About ePresence ePresence, Inc. (Nasdaq:EPRE) is a market leader in delivering Security and Identity Management (SIM) solutions that help companies reduce cost, enhance security, improve customer service and increase revenues. Our highly focused solutions leverage technologies such as enterprise directories, metadirectories, single sign-on and provisioning systems, and have enabled numerous Fortune 1000-class companies to efficiently and securely provide personalized access to digital resources, thus maximizing the ROI of their IT-based initiatives. ePresence is headquartered in Westboro, Massachusetts and can be reached at 800-222-6926 or online at http://www.epresence.com. GENTEK: Fitch Withdraws CC/D Ratings on Senior Sec. & Sub. Notes ---------------------------------------------------------------- Fitch Ratings has withdrawn the ratings on GenTek Inc. senior secured bank facility and senior subordinated notes. GenTek's senior secured bank facility was rated 'CC'; the senior subordinated notes were rated 'D'. GenTek filed a petition for reorganization and protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code in October 2002. GEORGETOWN STEEL: Wants to Extend Schedule Filing Until Dec. 20 --------------------------------------------------------------- Georgetown Steel Company, LLC is asking the U.S. Bankruptcy Court for the District of South Carolina to give them an extension of time 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 Debtor reports 1,600 creditors and employees. Given the size and complexity of the its business and the fact that certain prepetition invoices have yet been received or entered into the Debtor's financial accounting systems, the Debtor has not had the opportunity to gather the necessary information to prepare and file the Schedules and Statements. The Debtor points out that the conduct and operation of its business requires it to maintain voluminous books and records and a complex accounting system. The Debtor's employees have commences the process of assembling the information necessary to complete the Schedules and Statements. At this point, the Debtor estimates it will need until December 20, 2003 to file complete and coherent Schedules and Statements with the Court. Headquartered in Georgetown, South Carolina, Georgetown Steel Company, LLC manufactures high-carbon steel wire rod products using the Direct Reduced Iron (DRI) process. The Company filed for chapter 11 protection on October 21, 2003 (Bankr. S.C. Case No. 03-13156). Michael M. Beal, Esq., at McNair Law Firm P.A., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $50 million each. GREEN POWER: Independent Auditors Raise Going Concern Doubts ------------------------------------------------------------ Green Power Energy Holdings Corporation is a generator and wholesaler of electric power to electric utilities serving the retail electric market. The Company currently owns and operates a 38-megawatt cogeneration facility in Kenansville, North Carolina, which has governmental permits to burn a variety of fuels. Its business strategy is to acquire and operate similar facilities throughout the eastern United States. As of October 15, 2003, no definitive agreements or understandings have been reached regarding the terms and conditions of any additional acquisitions. GPEH Corp. was originally organized on May 20, 2002. Its revenues for the quarter ended August 31, 2003 were $1,696,831. For the quarter ended August 31, 2003, the Company has experienced losses of approximately $1,105,500, principally as a result of the conversion of the plant to mixed-fuel use, startup costs and merger expenses. As stated in GPEH's auditor's report for the year ended May 31, 2003, substantial doubt exists about the Company's ability to continue as a going concern. At August 31, 2003, GPEH had approximately $9,860 in cash and cash equivalents. To date, the Company shows negative cash flowsand expects losses from operations and negative cash flow to continue for the foreseeable future. If its revenues and spending levels are not adjusted accordingly, management has said the Company may not generate sufficient revenues to achieve profitability. Even if profitability is achieved, the Company may not sustain or increase such profitability on a quarterly or annual basis in the future. Management is of the opinion that the Company will need to raise total capital of approximately $9,000,000 to properly fund the business for a period of 12 months. As of October 15, 2003, GPEH has been unable to determine the level of interest of any private investor or financial institution in its securities or proposed plan of operations. If unable to secure financing, management will be forced to reevaluate the viability of the Company's business plan. HASBRO: Fitch Says Senior Unsecured Debt Rating Upgrade Imminent ---------------------------------------------------------------- Hasbro, Inc.'s 'BB' rated senior unsecured debt is expected to be upgraded to 'BB+' by Fitch Ratings upon closing of its new unsecured bank credit facility. The new bank facility, expected to be similar in size to the current $380 million facility, will be rated 'BB+' as well. The upgrade takes into consideration the elimination of the structural subordination of the senior unsecured bondholders to the existing secured bank credit facility, as well as the ongoing operating improvements Hasbro has made. Upon consummation of the new facility, which is expected sometime next week, the 'BB+' rating on the existing secured facility will be withdrawn. About $825 million in debt is affected by this action. The Rating Outlook is Stable. The ratings reflect Hasbro's strong market presence and its diverse portfolio of brands, coupled with its improved operating and financial profile. Ongoing concerns center on Hasbro's ability to build its core brands over the longer term given the intensely competitive toy industry, which faces substantial new product introductions and innovations each year. Also considered is the significant customer concentration, particularly in the domestic market with three key retailers dominating toy sales in the U.S. Since 2001 Hasbro has been focused on rebuilding sales of its core brands and lessening its dependence on licensed and faddish products. Though revenues were relatively flat in 2002 versus 2001, its product development and brand building efforts have led to a 10.7% increase in revenues in the first nine months of fiscal 2003 from the same period last year. In addition, profitability continues to strengthen due to ongoing cost reduction efforts as the company makes progress in its goal of removing $100 million more in costs from its expense base by 2004, following a $100 million reduction in costs in 2001. In 2001 EBITDA/sales rebounded substantially to 15.2% from 8.6% in 2000 and though the 14.3% margin in 2002 suffered from significant sales of low margin Star Wars merchandise, profit margins have begun to return to higher levels. In the nine months ended Sept. 28, 2003 EBITDA/sales increased to 14.4% from 13.1% in the same period of 2002. Following its leverage peak at year-end 2000, Hasbro's credit and financial profile has improved, largely through its commitment to direct cash flow to reduce debt. Since year end 2000 the company has repaid over $400 million in debt and improved leverage (total debt/EBITDA) to 2.1 times (x) as of Sept. 28, 2003 from 4.3x at Dec. 31, 2000. Over the same period, EBITDA coverage of interest increased to 7.4x from 2.8x. Fitch expects further improvements in Hasbro's financial profile will be driven by additional debt reduction coupled with improvements in profitability. Hasbro, with 2002 revenues of about $2.8 billion, is the world's second largest toy and game company. The company maintains a diversified portfolio of brands including Monopoly, Clue, Playskool, Play-doh, GI Joe, Mr. Potato Head, and Transformers. In 2002, its largest brand accounted for less than 9% of revenues. HAUSER: Agrees to Sell Botanicals Extracts Division to Zuellig -------------------------------------------------------------- Hauser, Inc. (OTCBB:HAUS) agreed to sell the assets of its wholly owned subsidiary, Long Beach, California-based Botanicals International Extracts, Inc., to Zuellig Botanicals, Inc., a subsidiary of Zuellig Group N.A., Inc. The Zuellig companies are 34% shareholders of Hauser and could own approximately 43% of the company if they exercise their outstanding warrants. The sale is subject to overbid and approval by the United States Bankruptcy Court, Central District of California, which could take up to 60 days. Hauser expects proceeds from the sale of between $8.2 million and $9.2 million, a part of which will be used to pay down a majority of the outstanding indebtedness of $8.6 million to Wells Fargo Bank, N.A., the company's senior secured creditor. Botanicals International Extracts manufactures, markets and distributes botanical extracts, dietary and nutritional supplements, nutraceuticals and vitamins. For the 12 months ended September 30, 2003, the subsidiary had approximately $27 million in sales, which represents more than 70% of Hauser's revenues. "We continue to look for strategic buyers of our remaining business units, including Hauser Contract Research," said Kenneth Cleveland, president and chief executive officer. On April 1, 2003, Hauser filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The sale of Botanicals International Extracts and the other contemplated sales are part of the company's reorganization plan. Hauser, headquartered in El Segundo, California and Longmont, Colorado, is a leading supplier of herbal extracts and nutritional supplements. Hauser also provides chemical engineering services and contract research and development. Hauser's products and services are principally marketed to the pharmaceutical, dietary supplement and food ingredient businesses. Hauser's business units include: Botanicals International Extracts and the Hauser Contract Research Organization. Hauser also does business using the assumed name BI Nutraceuticals. HAWAIIAN HOLDINGS: Amex Grants Extension to Regain Compliance ------------------------------------------------------------- Hawaiian Holdings, Inc. (Amex: HA) announced that, on October 13, 2003, the Company received notice from the staff of the American Stock Exchange indicating that Amex is continuing the listing of the Company's stock and that Amex has granted the Company an extension of time to regain compliance with Amex's continued listing standards. On June 30, 2003, the Company received notification from Amex that the Company is not in compliance with certain of Amex's continued listing standards, with shareholders' equity of less than $2 million and losses from continuing operations and/or net losses in two out of its last three years, and with shareholders' equity of less than $4 million and losses from continuing operations and/or net losses in three of its four most recent fiscal years. Amex has also noted that the Company has failed to comply with its listing agreement due to its failure to file a Form 10-Q with the Securities and Exchange Commission for the fiscal quarter ending on June 30, 2003, which fact the Company has previously disclosed. Amex afforded the Company the opportunity to submit a plan on how it intended to come within compliance with the continued listing standards, and the Company submitted such a plan to Amex for consideration. The recent notification from Amex grants the Company an 18-month extension within which to regain compliance with the Amex continued listing standards. During this period, the Company will be subject to periodic review by Exchange staff. The Exchange has also informed the Company that, notwithstanding the 18 month extension, failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the extension period, or other developments, could result in the Company being de-listed from Amex. The Exchange continued the listing subject to a number of other conditions. Hawaiian Holdings is a Delaware company that has been public since August 2002, when Hawaiian Airlines, its sole operating subsidiary, which itself had been publicly held, became a wholly owned subsidiary of Hawaiian Holdings in an internal corporate reorganization. Hawaiian Airlines filed for chapter 11-bankruptcy protection on March 21, 2003. IMC GLOBAL: Reports Losses Due to Rising Raw Material Costs ----------------------------------------------------------- Bond tender premiums and fees and large increases in raw material costs were primary contributors to a net loss of $28.1 million, or 27 cents per diluted share, reported by IMC Global Inc. (NYSE: IGL) for the quarter ended September 30, 2003, which included the previously disclosed charge related to bond tender premiums and fees of $25.2 million ($17.1 million after tax), or 15 cents per diluted share. Excluding this charge, the Company reported a third quarter net loss of $11.0 million, or 12 cents per diluted share, primarily due to the major raw material cost increases. In the third quarter of 2002, IMC Global reported net earnings of $8.1 million, or 7 cents per diluted share. In addition, 2003 third quarter results were negatively impacted by lower phosphate shipments and higher idle plant costs from the shutdown of remaining Louisiana phosphate production for the month of July. Partially offsetting these negative factors were the impacts of higher phosphate pricing and potash sales volumes. Net sales in the third quarter improved slightly to $495.7 million versus $490.2 million in the comparable 2002 period. For the nine months of 2003, the Company reported a loss from continuing operations of $37.7 million, or 35 cents per diluted share, compared with earnings of $19.6 million, or 17 cents per diluted share, a year ago. Including predominantly non-cash losses from discontinued operations in both periods and the cumulative effective of a change in accounting principle this year, the Company reported a net loss of $71.6 million, or 64 cents per diluted share, in the nine months of 2003 compared to a 2002 nine-month loss of $34.5 million, or 30 cents per diluted share. Third quarter capital expenditures declined 3 percent to $33.4 million; nine month capital expenditures of $82.0 million compared with $100.1 million in the year-ago period. Operating earnings and depreciation, depletion and amortization expenses in the quarter were $20.6 million and $42.9 million, respectively, compared with $47.0 million and $40.9 million a year earlier. IMC PhosFeed IMC PhosFeed's third quarter net sales of $310.6 million decreased 7 percent compared with $334.8 million last year as a result of lower sales volumes, partially offset by higher prices. Total concentrated phosphate shipments of approximately 1.3 million short tons were below the prior-year level of approximately 1.4 million primarily due to the shutdown of remaining Louisiana phosphate production for the month of July to better balance supply with demand. This contributed to a domestic sales volume decline of 30 percent in the quarter. Export volumes rose slightly versus 2002 due to higher shipments to Brazil, Japan and India which offset a 300,000 metric ton reduction in Chinese volumes as a result of the absence of a Sinochem supply contract. During the third quarter, PhosChem signed a new multi-year DAP supply agreement with CNAMPGC of China that included an additional 400,000 metric tons to be shipped by year-end 2003. The average price realization for DAP of $156 per short ton in the third quarter increased $11, or 8 percent, versus the prior year but fell slightly from the second quarter level of $158. The third quarter gross margin loss of $1.3 million declined from a gross margin of $30.9 million a year ago primarily due to greatly increased ammonia, natural gas and sulphur raw material costs, coupled with reduced volume and higher idle plant costs from the total shutdown of Louisiana production for the month of July, partially offset by higher phosphate pricing. The slight third quarter gross margin loss improved markedly from the 2003 second quarter gross margin loss of $13.4 million, primarily due to easing raw material costs and improved operating costs. Approximately 30 percent of Louisiana concentrated phosphate output continued to be idled in August and September, a rate that is expected to be maintained until market conditions show sufficient and sustained improvement. For the nine months, revenues of $988.2 million were slightly below $1,009.1 million a year ago. The average DAP price per short ton of $151 increased 9 percent, or $13 per short ton, versus the prior-year period. Phosphate shipments of 4.2 million short tons for the nine months fell 10 percent compared with 4.6 million short tons in 2002, again primarily due to the total shutdown of Louisiana phosphate production for the months of June and July. Gross margin losses of $29.5 million in the nine months of 2003 compared with gross margins of $63.4 million a year earlier due to significantly higher ammonia, sulphur and natural gas costs, higher production costs, and lower sales volumes, partially offset by higher selling prices. IMC Potash IMC Potash's third quarter net sales increased 15 percent to $204.2 million versus last year's $178.1 million due to stronger worldwide shipments. Total sales volumes of 2.1 million short tons increased 17 percent versus approximately 1.8 million a year ago. Export and domestic shipments improved 28 percent and 12 percent, respectively. The average selling price, including all potash products, was $72 per short ton compared to $73 per short ton in the prior year, in spite of an 8 percent decline in export realizations primarily from higher freight rates. The Company announced a $10 per short ton MOP domestic price increase, effective July 15, and an additional $7 domestic MOP price increase, effective September 29. Third quarter gross margins of $49.8 million ($60.4 million excluding provincial levies) improved 27 percent from $39.1 million ($52.3 million excluding provincial levies) primarily as a result of higher sales volumes. Lower overall costs from stringent expense controls and effective hedging of foreign currency more than offset the impact of foreign currency translation and higher natural gas costs. IMC Potash continued to balance supply with demand by taking 15 weeks of mine shutdowns, unchanged from the prior year. Nine-month net sales of $657.5 million were 4 percent higher than last year's $632.7 million as higher volumes and domestic prices more than offset lower export realizations. Gross margins of $167.9 million ($210.3 million excluding provincial levies) increased 5 percent versus the prior year. The gross margin improvement was attributable to higher sales volumes partially offset by slightly lower export pricing. Sales volumes rose 6 percent to approximately 6.6 million short tons from approximately 6.3 million last year. Export shipments improved 16 percent, primarily due to strong volumes to China and Brazil. Domestic sales volumes were essentially unchanged year-over-year. The average selling price, including all potash products, of $73 per short ton was unchanged from the nine months of 2002. Observations and Outlook "A solid potash performance and a continuation of encouraging year-over-year improvements in DAP pricing in the third quarter were simply insufficient to offset the ongoing sting of large, double-digit increases in ammonia, sulphur and natural gas costs, which once again squeezed our phosphate margins," said Douglas A. Pertz, Chairman and Chief Executive Officer of IMC Global. "The slight third quarter PhosFeed gross margin loss was nonetheless a sequential improvement of $12 million versus the second quarter of 2003 as raw material costs eased and operating costs improved." Third quarter results also were impacted by the shutdown of all Louisiana phosphate production for the month of July and, as previously indicated, higher interest expense resulting from recent bond refinancing activities, which together amounted to 5 cents per diluted share. "We are encouraged that DAP pricing continued to register year- over-year increases and reinforce our belief at the start of 2003 that full-year realizations would be meaningfully higher than in 2002 and even more so from the bottom-of-the-cycle in 2001," Pertz noted. "Lower phosphate volumes in the quarter stemmed primarily from our attempts to achieve domestic price increases consistent with our list price levels, as well as our shutdown for July of all Louisiana phosphate production. We were able to achieve slightly higher export volumes despite a 300,000 metric ton decline in Chinese shipments from PhosChem's lack of a Sinochem supply agreement. We expect a significant improvement in sequential phosphate sales volumes in the fourth quarter as Chinese contract shipments are scheduled to be strong in November and December and U.S. fall demand accelerates as the harvest winds down. PhosChem is essentially sold out for the balance of the year, supporting the need to run our operations at current levels. 2004 export volumes look encouraging, especially in China and India, as both countries appear to be ending 2003 with extremely low DAP inventories." A 15 percent increase in IMC Potash net sales and nearly double that in margins reflected sustained strength in global demand, especially in markets such as China, Brazil and India, and slightly reduced production costs, despite lower export prices, Pertz noted. He added that IMC Global is on track for record export volumes in 2003. While higher freight rates are negatively affecting export netbacks, Pertz emphasized that strong domestic MOP pricing trends continue following first half increases. "We believe stronger domestic volumes in the third quarter in part reflect the view that the $10 per ton price increase posted for July 15 could be fully realized in the fourth quarter," Pertz said. "Based upon shipments to date in the fourth quarter, we are confident that the $10 per short ton price increase will be realized, which is significant for IMC Global since two-thirds of our annual volumes are domestic." With an expected fourth quarter sequential improvement in potash profitability and working from sequentially improved third quarter PhosFeed margins, the Company's results from continuing operations in the fourth quarter will ultimately depend upon the changes in phosphate pricing and raw material costs over the next several months. Based on current market pricing and raw material costs, the Company's fourth quarter results from continuing operations could be in the range of the 2003 third quarter loss (before bond tender premiums and fees) of 12 cents per diluted share. With 2002 revenues of $2.1 billion, IMC Global (S&P, B+ Corporate Credit Rating, Stable) is the world's largest producer and marketer of concentrated phosphates and potash crop nutrients for the agricultural industry and a leading global provider of feed ingredients for the animal nutrition industry. For more information, visit IMC Global's Web site at http://www.imcglobal.com INTERNATIONAL SHIPHOLDING: Q3 Net Loss Widens to $1.6 Million ------------------------------------------------------------- International Shipholding Corporation (NYSE:ISH) reported results for the three month and nine month periods ended September 30, 2003. Net loss for the three months ended September 30, 2003 was $1.644 Million as compared to a net loss of $1.125 Million for the three months ended September 30, 2002. For the first nine months of 2003, net income was $3.840 Million as compared to a net loss of $929,000 for the same period of 2002. The primary factor contributing to the third quarter 2003 loss was the recognition of costs associated with the necessity for retirement of debt related to our U.S. Flag coal carrier, ENERGY ENTERPRISE, amounting to $2.6 Million before tax or $1.7 Million after tax as a result of U.S. Generating New England, Inc., charterer of the ENERGY ENTERPRISE, having filed a petition for bankruptcy protection on July 8, 2003. This filing, as previously reported, became an event of default under the vessel's debt indenture resulting in the acceleration of principal and interest and triggering cross defaults under certain of the Company's other debt agreements. In order to cure these technical defaults thereby created, we secured alternative financing during August 2003 and paid in full the outstanding obligations associated with the ENERGY ENTERPRISE loan. Settlement of the loan included the payment of a "make-whole" prepayment penalty, which we otherwise would not have had to pay, and a write-off of deferred financing charges which together make up the total before tax charge of $2.6 Million or $1.7 Million after tax. Additionally, during the third quarter of 2003, we incurred unanticipated vessel repair costs on certain of our other vessels as a result of machinery deficiencies and accelerated deferred charge write-offs which, together with lost time, totaled approximately $2.0 Million before tax or $1.3 Million after tax. On the positive side, results in the third quarter of 2003 were improved in our Foreign Flag Transatlantic and U.S. Flag LASH liner services as compared to 2002, although the third quarter 2003 compared unfavorably to the second quarter of 2003 for the Transatlantic liner service as a result of lower cargo volumes. Improvement in the first nine months of 2003 occurred in several areas of our operations. Improved results were achieved in 2003 in our Rail/Ferry Service as a result of higher cargo volumes in the current period. Additionally, our U.S. Flag liner service made positive contributions in the first nine months of 2003 as compared to 2002. Also, our U.S Flag Coal Carrier, ENERGY ENTERPRISE, operating in the coast-wise trade was utilized for all but two days during the first nine months of 2003 under its basic time charter contract as compared to the same period of the previous year when it was out of service thirty-three days for repairs and during which it operated sixty days in the spot market at lower rates as compared to its basic charter. The charterer has exercised its option to extend the vessel's use in 2003 beyond the base charter period of two-hundred forty days in contract year number eight at contractually reduced rates, but comparable to current spot market rates. During the first nine months of 2003, we realized a before tax net gain of approximately $1.3 Million representing a discount on the retirement of approximately $10.685 Million of our 7.75% Unsecured Notes scheduled to mature in 2007. Retirements of debt during the past year, together with lower interest rates on variable rate loans, have resulted in reduced interest expense during the first nine months of 2003 as compared to the same period of the prior year. During the first nine months of 2002, we had other income of approximately $1.482 Million resulting primarily from interest that we earned on overpayments of foreign taxes made in prior years that were previously refunded. ISLE OF CAPRI: Acquires Interest in U.K.-Based Blue Chip Casinos ---------------------------------------------------------------- Isle of Capri Casinos, Inc. (Nasdaq: ISLE) officials announced that the Gaming Board for Great Britain has approved the acquisition of a majority interest in Blue Chip Casinos Plc. Isle of Capri is the first American casino operator to receive Gaming Board approval. Through a definitive agreement, which is expected to close by the end of the year, Isle of Capri Casinos, Inc. will acquire a two thirds interest in Blue Chip Casinos Plc for 5 million pounds sterling ($8 million). The remaining one-third interest of Blue Chip is held by English private investors. Blue Chip is acquiring the Castle Casino located in Dudley, England, near Birmingham, and also received consent to develop and operate two other properties in that area. Isle of Capri was advised in the transaction by CIBC World Markets PLC and S.J. Varghese & Co. Blue Chip was advised by Dawnay Day Corporate Finance Limited. Bernard Goldstein, Isle of Capri Casinos chairman and chief executive officer, said, "Isle of Capri has been a pioneer in the regional gaming industry in the United States, and we continue that tradition by being the first American casino company to enter the United Kingdom market." Timothy M. Hinkley, president and chief operating officer of the Isle of Capri, said, "Through our ownership in Blue Chip, we believe we gain an advantage -- giving us valuable experience prior to enactment of the proposed UK gaming reforms. This is the company's first step in our U.K. strategy, applying our proven business model of being first in regional markets with a highly branded product. We look forward to introducing Isle Style gaming to the United Kingdom." Also, as recently announced, Isle of Capri has signed Heads of Terms to own and operate a 100,000-square-foot entertainment complex, including an Isle of Capri Casino, in Coventry, England adjacent to the City's planned football arena. The project is subject to receiving all necessary approvals. Isle of Capri regards the United Kingdom as the cornerstone of its international expansion. Isle plans several additional regional entertainment complexes which will feature an Isle of Capri casino, as well as development of a local-market Isle Club concept. Isle of Capri Casinos, Inc. (S&P, B+ Corporate Credit Rating, Stable) owns and operates 15 riverboat, dockside and land-based casinos at 14 locations, including Biloxi, Vicksburg, Lula and Natchez, Mississippi; Bossier City and Lake Charles (two riverboats), Louisiana; Black Hawk (two land-based casinos) and Cripple Creek, Colorado; Bettendorf, Davenport and Marquette, Iowa; and Kansas City and Boonville, Missouri. The company also operates Pompano Park Harness Racing Track in Pompano Beach, Florida. IT GROUP: Unsecured Panel Moves to Prosecute Avoidance Actions -------------------------------------------------------------- On July 24, 2002, the Official Committee of Unsecured Creditors in the Chapter 11 cases of The IT Group, Inc. and its debtor- affiliates sought the Court's permission to prosecute the Debtors' causes of action against their Prepetition Senior Lenders. On the same day, the Committee commenced an adversary proceeding before the Court against the Prepetition Lenders asserting, among other things, Avoidance Actions. The Court subsequently approved the Committee's request to prosecute avoidance actions on August 14, 2002. However, the Committee Action remains pending, but is subject to a proposed Global Settlement between the Committee and the Prepetition Lenders. On March 26, 2003, the Court approved the Committee's retention of AlixPartners LLC as bankruptcy claims specialist in these cases to assist the Committee in its evaluation of the Debtors' Avoidance Actions, particularly potential preference actions. Based on AlixPartners' analysis, the Debtors made payments totaling $135,000,000 to creditors within the 90 days prior to the Petition Date. Of the $135,000,000, $85,000,000 in payments were made in respect of Assigned Contracts. Eric M. Sutty, Esq., at The Bayard Firm, in Wilmington, Delaware, relates that the Committee, the agent for the Debtors' Prepetition Senior Lenders and the Debtors have reached an agreement with respect to the principal terms of a global settlement in these Chapter 11 Cases to be incorporated in a Chapter 11 plan, which will be filed shortly. The Global Settlement provides, among other things, that: -- 80% of recoveries from the Debtors' Avoidance Actions will be distributed for the benefit of holders of allowed unsecured claims against the Debtors and the remaining 20% of these recoveries will be distributed to the Prepetition Lenders; and -- AlixPartners, as Plan Administrator, will have the responsibility of prosecuting, settling, releasing, selling, assigning, or otherwise transferring or compromising any causes of action of the Debtors' estates, subject to the provisions of the Chapter 11 plan. The two-year statute of limitations period under Section 546(a) of the Bankruptcy Code for the assertion of the Debtors' Avoidance Actions expires on January 16, 2004. AlixPartners performed an extensive analysis and review of the Debtors' Avoidance Actions from information and records made available by the Debtors. Notably, Mr. Sutty submits that there are millions of dollars of preference claims relating to the Assigned Contracts, which claims were expressly preserved by the Asset Purchase Agreement with Shaw, which the Committee believes will result in substantial recoveries for the Debtors' estates and creditors. Based upon AlixPartners' analysis to date, the Committee believes that significant Avoidance Actions exist which must be asserted prior to the expiration of the Statutory Deadline. In consultation with the Prepetition Lenders' Agent and the Debtors, the parties believe that the most expeditious and efficient means to proceed with the Avoidance Actions is to grant leave, standing and authority to the Committee and its professionals to prosecute the Avoidance Actions. The Committee, therefore, seeks Judge Walrath's permission to prosecute the Avoidance Actions, for the benefit of the Debtors' estates and creditors. Mr. Sutty explains that the Committee is simply seeking to expeditiously and efficiently address the prosecution of the Debtors' Avoidance Actions in light of the proposed Global Settlement and the Statutory Deadline in January 2004. (IT Group Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) L-3 COMMS: Planned Vertex Acquisition Spurs S&P to Affirm Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings, including the 'BB+' corporate credit rating, on defense electronics firm L-3 Communications Corp. The company has approximately $2.1 billion of debt. The outlook is stable. "The affirmation follows L-3's announcement that it will be acquiring Vertex Aerospace LLC for $650 million in cash," said Standard & Poor's credit analyst Christopher DeNicolo. The acquisition will be financed with cash on hand and revolver drawings, resulting in a small increase in L-3's lease-adjusted debt to capital ratio, which is currently around a satisfactory 50%. The increased leverage from the acquisition could be offset by the expected conversion to equity of $300 million of convertible debt securities at the next call date in December 2003. The conversion is likely as the stock of L-3's parent, L-3 Communications Holdings Inc., is currently trading above the conversion price. Vertex provides aviation training and maintenance services to the U.S. military and other government agencies and is expected to have approximately $800 million of revenues in 2004. The acquisition will bolster L-3's service offerings and improve its ability to benefit from increases in the operations and maintenance portion of the U.S. defense budget. The transaction is expected to close in December 2003. Ratings on New York, New York-based L-3 reflect a slightly below average business profile and an active acquisition program. Credit quality benefits from an increasingly diverse program base and efficient operations. Acquisitions are an important part of the company's growth strategy, and the balance sheet has periodically become highly leveraged because of debt-financed transactions. However, management has a good record of restoring financial flexibility by issuing equity. L-3's satisfactory overall financial profile should allow the company to continue to pursue moderate-size (less than $1 billion) acquisitions financed initially with debt. Risks associated with the company's ambitious acquisition program are mostly offset by the positive trends in spending for defense electronics. LAND O'LAKES: Third Quarter Net Loss Narrows to $1.4 Million ------------------------------------------------------------ Land O'Lakes, Inc. reported its third quarter and year-to-date financial results, while also commenting on individual business unit performance and progress against key strategic initiatives. Year-to-date, sales are $4.4 billion with net earnings of $42.9 million, compared to sales of $4.3 billion and net earnings of $35.3 million in the first nine months of 2002. For the third quarter, traditionally the company's weakest, Land O'Lakes is reporting $1.58 billion in sales and a net loss of $1.4 million, compared to $1.4 billion in sales and a net loss of $12.0 million in 2002. Bond EBITDA for the third quarter was $30.6 million, versus $35.4 million in the third quarter of 2002. For the first nine months of 2003, Bond EBITDA was $116.1 million, versus $136.2 million last year. Excluding litigation settlements, the year-to-date 2003 Bond EBITDA was $93.6 million, down 5.8% versus the 2002 Bond EBITDA of $99.4 million for the first three quarters, before settlements. The company indicated that it was lowering its full-year Bond EBITDA forecast from $230 million to $210 million. Strategic Initiatives Land O'Lakes reported progress against its key strategic initiatives. Land O'Lakes continues to report progress in paying down debt, portfolio management and the building of its branded businesses. Paying down debt. Land O'Lakes paid down term debt by $25 million during the third quarter and made another $16 million payment in October. Year-to-date, principal payments on the company's term debt have totaled $121 million. As Land O'Lakes closed the third quarter, its long-term debt to capital ratio was 3 percentage points better than one year ago. The company maintained strong liquidity, ending the quarter with a combination of cash-on-hand and unused borrowing authority totaling more than $225 million. Land O'Lakes remained in compliance with all its financing covenants. Growing Branded Businesses. Land O'Lakes completed the roll out of two new Dairy Foods products -- LAND O LAKES Spreadable Butter with Canola Oil and LAND O LAKES Soft Baking Butter with Canola Oil. Consumer acceptance of these soft-from-the-refrigerator products has been strong and sales are running ahead of forecasts. Land O'Lakes also continues to build on the strength of its brands in Deli Cheese, where branded volume was up 3%. In Ag Services, Land O'Lakes CROPLAN GENETICS brand is helping drive a record year in Seed; sales for the AgriSolutions-branded crop protection product line are up nearly 30% over a year ago; and the company's feed brands (LAND O LAKES and Purina) remain formidable assets. Proactive Portfolio Management. Land O'Lakes continued efforts to reduce its invested capital and exposure to market risk in Swine. Year-to-date, volume in Farrow-to-Finish and higher-risk Swine Programs was down 12%. The company is continuing efforts to reposition underperforming manufacturing assets in the Upper Midwest. Land O'Lakes completed the sale of its Perham, Minn., plant and will close its Volga, S.D., plant once Davisco Foods International's new cheese manufacturing facility in Lake Norden, S.D., is fully operational. Land O'Lakes has a milk supply and cheese marketing agreement with Davisco in place. Dairy Foods Dairy Foods is reporting a pretax loss of $19.0 million dollars through September, as compared to a loss of $15.4 million over the first three quarters of 2002. Dairy Food sales through September were $2.1 billion, down about 3% from one year ago. Dairy Foods Value Added operations achieved $21.7 million in pretax earnings through September, as compared to $23.5 one year ago. Year-to-date volumes for retail butter and spreads, driven by the strength of the LAND O LAKES brand, were up 3.3% versus 2002. In Deli, overall volumes were down 4%, while volume in higher-margin, branded Deli Cheese lines was up 3%. Through September, total cheese volume was about 2% behind one year ago, with a significant decline in retail cheese volumes being offset by volume increases in foodservice cheese. Overall Foodservice volume was up about 4.5%, driven primarily by strong sales in the school and casual and mid-scale restaurant channels. Despite recent market improvements, Land O'Lakes continues to face significant challenges in its Dairy Foods Industrial (manufacturing) operations. Industrial is reporting a year-to- date pretax loss of $40.6 million, as compared to a $38.9 million loss in 2002. While there have been recent improvements in dairy markets, year-to-date average milk, butter, whey and nonfat dry milk prices still remain below the first three quarters of 2002, while cheese prices are up about 6.5%. Finally, the allocation of additional staff and resources to resolve performance issues at Cheese and Protein International (CPI), the company's world-class cheese production plant in Tulare, Calif., is showing results. Early packaging issues have been resolved, and customer approval rates and make allowances in both cheese and whey have shown improvement. Land O'Lakes continues to position CPI for the scheduled Phase II expansion, which should significantly reduce per-unit costs. Feed Feed sales through September were $1.8 billion, and remain basically even with one year ago. Feed's year-to-date pretax earnings of $25.0 million, were down from $38.8 million through September of 2002. However, the 2002 earnings included $35.9 million in vitamin litigation settlement revenues, as compared to $22.4 million in litigation settlements over the first three quarters of this year. Factoring out litigation settlements, 2003 pretax earnings in Feed are running approximately even with 2002. Feed's livestock volumes are down 12% through September, with swine feed down 17% and dairy feed down 10%. Depressed dairy and swine markets have been key factors in volume declines. In the beef feed area, volume is up 3% year- to-date and 6% for the third quarter. Overall, lifestyle feed is down 4%, primarily due to a 12% decline in grass cattle feed volumes. The company realized growth in other lifestyle feed segments including companion animal feed, with volume up 2% for the year, and horse feed, with volume up 6% through September. Swine Year-to-date, swine prices averaged $41.44/cwt, compared to $37.15/cwt for the same period one year ago. As a result, the company is reporting a $6.7 million loss in Swine through September, as compared to an $11.3 million loss over the same period last year. Layers/Eggs MoArk, the joint venture through which Land O'Lakes participates in the egg market, continues to deliver improved performance -- reflecting stronger egg prices over the first three quarters of 2003. The egg business generated $9.2 million in earnings, as compared to a loss of $12.8 million over the same period last year. Also contributing to this improved performance was approximately $4 million in growth-related synergies and cost- saving initiatives. Dollar sales in eggs totaled $377 million through September, up 13% from one year ago. LAND O LAKES-branded eggs continued to perform well, with sales of 3.2 million dozen through September, a 23% increase over one year ago. Seed Seed is reporting $13.9 million in earnings through the third quarter, as compared to $10.0 million through the third quarter of 2002. Seed sales volumes through September are up 32% in corn, 27% in soybeans and 10% in alfalfa. Agronomy Land O'Lakes is reporting $27.8 million in pretax earnings in Agronomy through September, generated primarily through its 50% ownership in the Agriliance joint venture. These earnings are up from $16.5 million one year ago. Notably, Agriliance (which operates on a September 1-August 31 fiscal year) has reported increased earnings for three consecutive years. Land O'Lakes is a national, farmer-owned food and agricultural cooperative, with annual sales of approximately $6 billion. Land O'Lakes does business in all 50 states and more than 50 countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and local cooperatives with an extensive line of agricultural supplies (feed, seed, crop nutrients and crop protection products) and services. * * * As previously reported in Troubled Company Reporter, Moody's Investors Service downgraded the ratings on Land O'Lakes, Inc. Outlook is stable. Rating Action To From Land O'Lakes, Inc. * Senior implied rating B1 Ba2 * Senior secured rating B1 Ba2 * Senior unsecured issuer rating B2 Ba3 * $250 million Senior secured bank facility, due 2004 B1 Ba2 * $291 million Senior secured term loan A, due 2006 B1 Ba2 * $234 million Senior secured term loan B, due 2008 B1 Ba2 * $350 million 8.75% Senior unsecured guaranteed Notes, due 2011 B2 Ba3 Land O'Lakes Capital Trust I * $191 million 7.45% Trust preferred securities B3 Ba3 The lowered ratings reflect the company's weaker-than-expected operating performance, giving rise to a constrained financial flexibility and the deterioration of credit protection measures. LNR PROPERTY: Selling Additional $50 Million of Senior Sub Notes ---------------------------------------------------------------- LNR Property Corporation (NYSE: LNR) announced that it has agreed to sell $50 million of 7.25% Senior Subordinated Notes due 2013 to qualified institutional investors in a transaction complying with Securities and Exchange Commission Rule 144A or Regulation S. These are in addition to $300 million of 7.25% Senior Subordinated Notes LNR agreed to sell on October 15. LNR will use the proceeds to reduce secured senior revolving debt and for general corporate purposes. LNR also said that on October 21 and 22, it purchased a total of $51.7 million principal amount of its 10 1/2% Senior Subordinated Notes due 2009. This is in addition to $79.9 million principal amount it purchased on October 14 and 15. LNR has solicited tenders of all its outstanding 10 1/2% Notes, and has stated that on January 15, 2004, it will redeem any 10 1/2% Notes that are still outstanding. The 7.25% Notes have not been registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. * * * As reported in the Troubled Company Reporter's October 22, 2003 edition, Fitch Ratings has assigned a 'BB-' rating to LNR Property Corp's $300 million ten-year 7.25% senior subordinated notes. The notes have a final maturity in 2013 and are pari passu with LNR's existing senior subordinated debt. The Rating Outlook is Stable. Proceeds from the transaction will principally be used to refinance LNR's $250 million of 10.50% senior subordinated notes due in 2009 through a tender offer, and to pay an approximately $17 million early redemption penalty. The transaction is expected to close on Oct. 29, 2003. Based in Miami, FL with roots dating to 1969, LNR underwrites, purchases, and manages real estate and real estate-driven investments. LNR is one of the leading CMBS special servicers in the U.S. LNR primarily seeks investment opportunities where it can purchase assets at a discount and utilize its due diligence, repositioning, asset management, and workout expertise to improve cash flows and profitability. Specifically, activities include the development or purchase of office buildings, apartment buildings, affordable housing communities, retail space, investments in subordinated CMBS, and mortgage and real estate-backed loans. LTV CORP: Exclusive Solicitation Time Extended to Feb. 24, 2004 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Ohio approved the extension of LTV Corporation and its debtor- affiliates' exclusive solicitation period to February 2, 2004. (LTV Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 609/392-00900) MASSEY ENERGY: 3rd Quarter 2003 Net Loss Tops $15.6 Million ----------------------------------------------------------- Massey Energy Company (NYSE: MEE) reported financial results for its third quarter ended September 30, 2003. Produced coal revenues for the quarter were $310.7 million, a decrease of 9% from $343.2 million for the comparable 2002 period. Massey reported an after-tax loss for the third quarter of $3.8 million, or $0.05 per share, compared to a loss of $1.3 million, or $0.02 per share for the comparable period in 2002. The third quarter 2003 loss included the $21 million recovery of a property and business interruption insurance claim related to the October 2000 slurry spill at its Martin County Coal subsidiary. After adjusting for a previously booked receivable and claim settlement expenses, the Company recorded a gain of $17.7 million pre-tax, or $0.15 per share, as a result of the settlement. In 2002, the third quarter loss included a charge of $13.2 million pre-tax, or $0.11 per share, related to the write-off of capitalized development costs at certain idled mines. Coal sales volume for the quarter was 10.0 million tons, a decrease of 8% from 10.9 million tons in 2002. EBITDA for the third quarter totaled $50.7 million, a 28% decrease from $70.7 million in the comparable 2002 period. "We reported financial results for the quarter at the upper end of our revised projections due to improved operating performance in the second half of the quarter," said Don L. Blankenship, Massey's Chairman and CEO. "We were also pleased to see utility demand for coal continue to escalate throughout the quarter. Since our last earnings release, we contracted an additional 12 million tons of coal for 2004 delivery at attractive prices." The Company reported that indications of improving economic conditions and the prospect of a seasonably cold winter, along with the anticipated continuation of high natural gas prices and tightening coal supplies in Central Appalachia, are contributing to an enhanced market for coal producers. In addition, the weak dollar and significantly higher overseas freight rates are discouraging imports making U.S. metallurgical coal more competitive in the export marketplace. "After a difficult period in July and early August, caused by a variety of shipping and operations issues, productivity improved across the board at our mining operations," continued Blankenship. This productivity improvement helped offset the impact of lower than anticipated realized prices for the quarter, a result of shipping a different mix of coal than expected, including less metallurgical coal. The Company reported that its surface mines continue to be impacted by higher explosives and trucking costs. During the third quarter, the Company received the mining permit it had sought since 1999 for its Edwight, West Virginia surface mine, which has an estimated 14 million tons of reserves. This surface reserve is expected to yield low cost, high quality coal, requiring only minimal public highway trucking. Massey is encouraged by the improved flow of permitting through the West Virginia Department of Environmental Protection and expects to receive surface mining permits for a total of approximately 90 million tons of reserves during 2003. Massey and other Central Appalachian coal producers continue to experience permit delays at the federal level. Subsequent to the quarter, the Company was the successful bidder in an auction for surface reserves located near Chelyan, West Virginia, and controlled by Horizon Natural Resources Company, which is in bankruptcy proceedings. The total expected purchase price is approximately $19 million, including funds to buy out a secured debt position and production payments. These reserves are contiguous to other property controlled by Massey and are expected to yield approximately 30 million tons of low sulfur, mostly compliance coal. "The purchase of these reserves, which includes key permits, is an excellent example of the attractive, opportunistic acquisition Massey looks for," stated Blankenship. The purchase is subject to approval by the bankruptcy court. As previously reported, the Company completed the refinancing of its prior revolving credit facility during July. The Company executed a $355 million secured financing package, including a $105 million revolving multi-year credit facility maturing on January 1, 2007, and a $250 million 5-year term loan maturing on July 1, 2008, with an early maturity date of January 1, 2007 for the term loan if the Company's existing 6.95% Senior Notes are not refinanced by that date. A portion of the proceeds from the term loan was used to repay all outstanding amounts under the prior revolving credit facilities and Massey's accounts receivable financing program. At the end of the third quarter of 2003, Massey's total debt was $664.4 million, consisting of $283 million of 6.95% Senior Notes, $132 million of 4.75% Convertible Senior Notes and $249.4 million under the 5-year term loan, up from $603.3 million total debt at the end of the second quarter. At quarter end, there were no borrowings under the accounts receivable financing program or the $105 million revolving credit facility, but $34.3 million of letters of credit had been issued under the revolver's $55 million letter of credit sublimit. Available liquidity at September 30, 2003 was $178.4 million, including $70.7 million on its bank revolver, net of letters of credit, availability of $58.2 million under its accounts receivable financing program, which has a maximum capacity of $80 million, and $49.5 million in cash. Available liquidity at June 30, 2003 was $140.9 million. Total debt- to-book capitalization ratio at September 30, 2003 was 46.1%, as compared to 43.5% at June 30, 2003. Coal revenues of $939.0 million for the first nine months of 2003 decreased by 6% from $997.6 million for the same period in 2002. Tons sold of 30.7 million in the first nine months decreased by 3% from the 31.7 million tons sold in 2002. For the first nine months of 2003, Massey's net loss was $15.6 million, or $0.21 per share, before a $7.9 million, or $0.10 per share, charge to record the cumulative effect of an accounting change resulting from the adoption of SFAS 143, "Accounting for Asset Retirement Obligations," the new accounting standard for recording reclamation liabilities. Including this charge, the Company reported a loss of $23.5 million, or $0.31 per share, as compared to a loss of $22.0 million, or $0.30 per share, during the same period in 2002. The 2002 loss included a pre-tax charge of $25.6 million ($17.1 million after tax), or $0.23 per share, related to the Harman jury verdict. EBITDA for the first nine months in 2003 was $138.8 million compared with $146.7 million for the same period in 2002. The Company now projects sales of 41 to 42 million tons in 2003, at an expected average sales price of between $30.50 and $31.00 per ton, compared to $31.30 for the full year 2002. Sales commitments have been received for virtually all calendar 2003 projected shipments. For 2004, the Company expects to ship 44 to 47 million tons and has commitments for approximately 44 million tons at an estimated average price of $32.00 to $33.00. The Company anticipates shipping between 10 and 11 million tons during the quarter ending December 31, 2003, at an estimated average price per ton of between $31.00 and $31.50. Given the regular disruptions and reduced work hours caused by the holidays during the fourth quarter, the Company projects a loss of $0.10 to $0.30 per share and EBITDA of between $30 and $50 million. "Although we are not yet where we want to be, we are making progress on addressing our cost and productivity issues," stated Blankenship. The Company reported that overall longwall production has improved and that production at many of its other underground mines was running at or near budget in September and in the first half of October. "Together with the strengthening market and improved cost structure, we look forward to increasing profit margins in 2004 and estimate EBITDA of between $240 and $320 million," said Blankenship. Capital expenditures during the third quarter of 2003 totaled $34.3 million, compared to $28.4 million in the prior year third quarter. The Company now anticipates capital spending of between $130 and $140 million, excluding expected reserve purchases in the fourth quarter. Depreciation, depletion and amortization (DD&A) totaled $48.4 million in the third quarter of 2003, compared to $64.1 million for the prior year third quarter. DD&A for the third quarter of 2002 included $13.2 million related to the write-off of capitalized development costs at certain idled mines. DD&A is currently expected to total $190 to $195 million for 2003. Massey Energy Company, headquartered in Richmond, Virginia, is the fourth largest coal company in the United States based on produced coal revenue. * * * As reported in Troubled Company Reporter's July 15, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Massey Energy Company to stable from negative. At the same time, Standard & Poor's assigned its BB+ rating to Massey's $355 million secured credit facility. In addition, Standard & Poor's affirmed its existing ratings on the company. The new $355 million bank credit facility was rated 'BB+', one notch above the corporate credit rating. The new facility consists of a $250 million term loan due 2008 and a $105 million revolver due 2007 and is secured by various assets including certain account receivables, inventory, and certain property, plant & equipment. The term loan has a manageable amortization schedule of $0.6 million per quarter until maturity, and an early maturity trigger based on whether Massey's existing 6.95% senior notes are refinanced before January 1, 2007. MAURICE CORP.: Liquidating CEO Goes to Jail for Bankruptcy Fraud ---------------------------------------------------------------- A Phoenix, Arizona man was sentenced in federal court for bankruptcy fraud and embezzling over $1 million from bankruptcy debtor Maurice Corporation, a now-defunct Massachusetts clothing retailer. United States Attorney Michael J. Sullivan and Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation in New England, announced that DEAN BOZZANO, age 43, of Phoenix, Arizona, was sentenced by U.S. District Judge Nathaniel M. Gorton to 5 years' imprisonment, to be followed by 3 years of supervised release. Judge Gorton also ordered BOZZANO to pay $1,068,000 in restitution to the liquidating CEO of Maurice Corporation. BOZZANO pleaded guilty on June 3, 2003, to one count of bankruptcy embezzlement and one count of bankruptcy fraud. At the earlier plea hearing, the prosecutor told the Court that, had the case proceeded to trial, the Government's evidence would have proven that BOZZANO and his company, Magnum Capital, were authorized by the U.S. Bankruptcy Court in Worcester to act as the Liquidating Chief Executive Officer of Maurice Corporation, which had filed for bankruptcy in June, 2000. As the Liquidating CEO, BOZZANO controlled Maurice Corporation's assets which were to be used to pay creditors. On fourteen occasions from November, 2000 through July, 2001, BOZZANO caused a total of $1,060,000 to be wired from a Maurice Corporation bank account to an account in Phoenix, Arizona in the name of an entity owned and controlled by BOZZANO. BOZZANO then used the funds for personal and business reasons unrelated to Maurice Corporation. When BOZZANO was terminated as the Liquidating CEO for Maurice Corporation in January, 2002, he failed to return any of the funds. The prosecutor stated further that to conceal his fraudulent embezzlement scheme, BOZZANO caused monthly operating reports to be submitted to the U.S. Trustee's Office in Worcester and to attorneys representing Maurice Corporation, all of which failed to disclose the disbursements of the Maurice Corporation funds from its bank account to the account controlled by BOZZANO. BOZZANO also falsely represented the amounts remaining in the Maurice Corporation bank account. The case was referred to the U.S. Attorney's Office by the U.S. Trustee's Office in Worcester and Boston, and was investigated by the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorney Mark J. Balthazard in Sullivan's Economic Crimes Unit. METALS USA: Cheryl Ketchie Discloses Ownership of Common Shares --------------------------------------------------------------- Metals USA, Inc.'s Vice President and Controller, Cheryl Ketchie, reports to the Securities and Exchange Commission that she directly beneficially owns 1,461 shares of Common Stock Warrants and 12,500 shares of Non-Qualified Stock Options. (Metals USA Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) MIDWEST EXPRESS: Restructuring Costs Spur Third Quarter Losses -------------------------------------------------------------- Midwest Express Holdings, Inc. (NYSE: MEH) reported financial results for its Midwest Airlines and Skyway Airlines (dba Midwest Connect) operations. "We realized significant improvement in our quarterly results despite continued high fuel costs and deterioration in the revenue environment caused by intense competition in the Milwaukee market," explained Timothy E. Hoeksema, chairman and chief executive officer. "Costs related to restructuring resulted in an overall loss for the quarter, but those efforts were essential to our plan to return to profitability." The company incurred $5.8 million in pre-tax restructuring costs in the quarter, consisting of two charges. A $4.0 million loss was recorded on a sale/leaseback transaction for an MD-80 aircraft, while legal and other professional fees associated with the restructuring totaled $1.8 million. Comparing third quarter 2003 to third quarter 2002, operating revenue decreased 8.7% to $94.9 million. Operating results improved to a $5.1 million loss from a $13.4 million loss, while net loss improved to $3.6 million from $8.6 million in the same quarter a year ago. Per share results improved to a $0.23 loss from a $0.55 loss in the third quarter of 2002. Year to date, operating revenue decreased 11.7% to $285.9 million. Operating results improved to a $28.6 million loss from a $44.1 million loss, while net loss fell to $11.7 million from $3.8 million in the first nine months last year. Results per share fell to a $0.75 loss from a $0.26 loss in the first nine months of 2002. Hoeksema pointed out that operational performance at Midwest and Midwest Connect remains exceptional. Despite an increase in weather-related cancellations due to Hurricane Isabel, Midwest Airlines completed 98.6% of scheduled flights and Midwest Connect 99.1% in the quarter. On-time performance exceeded goals at both carriers for the quarter, and baggage handling statistics remain at the top of the industry. At Midwest Airlines, revenue per scheduled service available seat mile increased 3.0% in the quarter; an 11.9 percentage point improvement in load factor offset a 14.9% decrease in revenue yield. Load factor improved due to capacity reductions, while yields were affected by lower business fares, reduced business travel demand due to the stagnant economy, increased competition from other airlines and the overall depressed pricing environment. Midwest Airlines' per-gallon fuel costs increased 13.3% in the quarter from a year earlier. Into-plane fuel prices were $0.11 more per gallon, resulting in a $1.6 million unfavorable price variance and increasing per share loss by $0.07. Cost per available seat mile (unit costs) at Midwest Airlines increased 1.0% (decreased 0.9% holding fuel price constant) from third quarter 2002, due in part to a 16.1% reduction in capacity. Companywide cost-reduction initiatives -- which lowered costs related to labor, distribution, dining services and maintenance -- helped offset higher fuel prices, lease costs for the new Boeing 717 aircraft, and increased legal and professional services costs associated with the company's restructuring plan. Excluding restructuring costs and holding fuel price constant, unit costs declined 7.9%. At Midwest Connect, revenue per scheduled service available seat mile increased 8.9%. Load factor increased 11.0 percentage points due to a 13.5% increase in traffic, but revenue yield fell 13.7% due to the reduction in business travel, depressed industrywide pricing and longer flight lengths with lower yields. Despite a 7.8% reduction in capacity, cost per available seat mile decreased 3.8% (5.0% holding fuel price constant) due to a decrease in labor and distribution costs, and an increase in average trip lengths. Midwest Connect into-plane fuel prices were $0.09 per gallon more in the third quarter, generating an unfavorable $0.2 million price variance, or $0.01 per share. Hoeksema noted that the company currently has more than $55 million in unrestricted cash, compared to $35 million at the end of the second quarter. The current cash position includes the net funds received from the completed portion of the recently announced financing. Capital spending totaled $2.9 million in the quarter, primarily associated with the modification of aircraft for Midwest Airlines' new Saver Service and the acquisition of additional spare parts to support the Boeing 717 aircraft program. During the third quarter, Midwest Express Holdings completed major elements of a comprehensive restructuring plan designed to restore it to long- term financial health: -- Renegotiation of aircraft finance agreements with aircraft lessors and lenders. -- Labor cost savings and productivity improvements from the company's employee unions, and identification of process and productivity enhancements for non-represented employees. -- Adjustment of the company's fleet plan and delivery schedules. -- Arrangements, previously announced, to secure additional financing. -- The intention to complete a sale/leaseback of the Midwest Airlines headquarters facility. -- Introduction of Midwest Airlines' new low-fare Saver Service, which complements the airline's traditional Signature Service and Midwest Connect's regional service by allowing the airline to offer a portfolio of services and better position it competitively. Additionally in the third quarter: -- Midwest Airlines placed three additional Boeing 717 aircraft in service, bringing to eight the total number of 717 aircraft in its fleet. -- Midwest Airlines joined forces with Milwaukee-based The Mark Travel Corporation to offer new opportunities and value to leisure travelers. Midwest named Mark Travel to operate its leisure vacation program, Midwest Vacations, starting in 2004. In addition, Midwest Airlines will provide Funjet Vacations -- the flagship brand of Mark Travel -- with aircraft capacity on some of Funjet's most popular routes. -- Travel+Leisure named Midwest Airlines "Best Domestic Airline" in its 2003 World's Best Awards competition. Midwest has won the title five of the eight years it has been awarded. -- The 2003 Conde Nast Traveler Business Travel Awards poll named Midwest Airlines "Top Domestic Airline" in the single class airline category -- the sixth year in a row Midwest has taken a top honor in the poll. Midwest also made the top-five list in the single class value for cost category. In the fourth quarter: -- On October 1, Midwest Airlines launched nonstop Signature Service between Kansas City and Orange County -- with one-stop or connecting service from Milwaukee and connecting service from cities throughout the Midwest. -- Midwest Airlines will expand its low-fare Saver Service to Ft. Lauderdale, Ft. Myers and Tampa, Florida, coinciding with the November resumption of the airline's popular nonstop seasonal service to the three cities. Service will operate weekends from November 22 to December 14, 2003; daily service will be offered December 18, 2003 through April 25, 2004. "As a result of our restructuring efforts, we have an improved outlook as we work to return to profitability and sustained growth," Hoeksema concluded. "In the fourth quarter, we expect to finalize our financing, realize more of the benefits of our cost restructuring, and continue to demonstrate our sincere commitment to providing passengers with a superior level of service." Midwest Airlines features nonstop jet service to major destinations throughout the United States. Skyway Airlines, Inc. - - its wholly owned subsidiary -- operates Midwest Connect, which offers connections to Midwest Airlines as well as point-to-point service between select markets on regional jet and turboprop aircraft. Together, the airlines offer service to 50 cities. More information is available at http://www.midwestairlines.com * * * As reported in Troubled Company Reporter's August 26, 2003 edition, Midwest Express Holdings reached labor and aircraft financing restructuring agreements with its unions and aircraft lessors and lenders have been fully documented and finalized on terms that the company had anticipated. The company expects these restructuring measures to reduce costs by approximately $20 million annually going forward. The negotiation of these agreements enabled the company to avert the necessity of filing for reorganization under Chapter 11 of the Bankruptcy Code. Outlining the next step for the company, Robert S. Bahlman, Midwest's chief financial officer, noted, "Now we are in a better position to secure additional financing to complete our restructuring program." MIRANT CORP: MAGI Committee Turns to Cadwalader for Advice ---------------------------------------------------------- The Mirant Americas Generation LLC Creditors' Committee seeks the Court's authority to retain Cadwalader, Wickersham & Taft LLP as its attorneys effective July 25, 2003, pursuant to Sections 328(a) and 1103(a) of the Bankruptcy Code. Charles Greer, Co-Chair of the MAGI Committee, relates that Cadwalader was selected because of the firm's extensive experience, expertise and knowledge in the fields of debtors' and creditors' rights and business reorganization under Chapter 11. Cadwalader is a law firm of about 500 attorneys, having offices in New York, Charlotte, North Carolina, Washington, D.C. and London, England. Partners and associates of Cadwalader's Financial Restructuring Department represent creditors, committees and debtors in many of the largest and most complex U.S. and international reorganizations and financial restructurings. Moreover, Cadwalader attorneys that will be involved in the MAGI Committee representation have substantial expertise and experience in many facets and legal disciplines that will enable the firm to render highly qualified and efficient legal representation to the MAGI Committee. Accordingly, the MAGI Committee believes that Cadwalader's retention will provide the most effective and efficient representation of the interests of the MAGI Committee. As the MAGI Committee's attorneys, Cadwalader agree to: (a) assist, advise and represent the MAGI Committee with respect to the administration of MAGI's case and the exercise of oversight with respect to MAGI and the other Debtors' affairs, including all issues arising from or impacting MAGI and the other Debtors, the MAGI Committee or this Chapter 11 case; (b) provide all necessary legal advice with respect to the MAGI Committee's powers and duties; (c) assist the MAGI Committee in maximizing the value of the MAGI's assets for the benefit of all of MAGI's creditors; (d) pursue confirmation of a plan of reorganization and approval of an associated disclosure statement with respect to MAGI; (e) conduct any investigation, as the MAGI Committee deems appropriate, concerning, among other things, the assets, liabilities, financial condition and operating issues of MAGI; (f) commence and prosecute any and all necessary and appropriate actions and proceedings on behalf of the MAGI Committee that may be relevant to this case; (g) prepare on behalf of the MAGI Committee necessary applications, pleadings, motions, answers, orders, reports and other legal papers; (h) communicate with the MAGI Committee's constituents and others as the MAGI Committee may consider desirable in furtherance of its responsibilities; (i) appear in Court and represent the interests of the MAGI Committee; and (j) perform all other legal services for the MAGI Committee which are appropriate, necessary and proper in these Chapter 11 cases. Except as disclosed, Gregory M. Petrick, Esq., a partner at Cadwalader, Wickersham & Taft, assures the Court that to the best of his knowledge: (i) Cadwalader does not hold or represent any interest adverse to the MAGI Committee in the matters for which it is retained; (ii) Cadwalader is a "disinterested person" as that phrase is defined in Section 101(14) of the Bankruptcy Code; (iii) neither Cadwalader nor its professionals have any connection with the Debtors, the creditors or any other party-in-interest; (iv) Cadwalader's employment is necessary and in the best interests of the MAGI Committee and the Debtors' estates; and (v) Cadwalader has not represented the Debtors, their 50 largest creditors, or other parties-in-interest, or their attorneys, in any matters relating to the Debtors or their estates. According to Mr. Petrick, prior to the Petition Date and through the formation of the MAGI Committee, Cadwalader represented the interests of an informal committee in connection with these matters. Prior to the Petition Date, the Debtors agreed to compensate the firm for its fees and reimburse its expenses in representing the Informal Committee. With that representation, Cadwalader received from the Debtors $514,313 for the work performed for the Informal Committee from March 2003 through July 24, 2003. In connection with its representation of the Informal Committee, Cadwalader was also co-counsel in an action filed in the Delaware state court by certain MAGI Committee members against Mirant Corporation, Mirant Americas Generation LLC, and certain of the Debtors' current and former principal, including, S. Marce Fuller, Harvey A. Wagner, Richard Pershing, Raymond D. Hill, Randall E. Harrison, Gary J. Morsches, J. William Holden III, Edwin H. Adams, David J. Lesar, Ray M. Robinson, A.W. Dahlberg, Stuart Eizenstat, Robert F. MacCullough, A.D. Correll, Carlos Ghosn, William M. Hjerpe and James F. McDonald. As a condition to the acceptance of employment as MAGI Committee's counsel, Cadwalader will cease to represent any individual bondholder or creditor of any of the Debtors including in connection with the Delaware litigation. Mr. Petrick relates that Cadwalader will seek compensation for services based on the firm's hourly rates in effect from time to time, plus reimbursement of actual, necessary expenses incurred. The Cadwalader professionals' current hourly rates are: Bruce R. Zirinsky $735 Gregory M. Petrick 605 Other attorneys and paralegals 215 - 445 Partners and special counsel 475 - 735 Legal assistants 130 - 205 * * * On an interim basis, Judge Lynn authorizes the MAGI Committee to retain Cadwalader, Wickersham & Taft, nunc pro tunc to July 25, 2003. (Mirant Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) NORTEL NETWORKS: Declares Class A Preferred Share Dividends ----------------------------------------------------------- The board of directors of Nortel Networks Limited declared a dividend on each of the outstanding Cumulative Redeemable Class A Preferred Shares Series 5 (TSX:NTL.PR.F) and the outstanding Non- cumulative Redeemable Class A Preferred Shares Series 7 (TSX:NTL.PR.G). The dividend amount for each series is calculated in accordance with the terms and conditions applicable to each respective series, as set out in the Company's articles. The annual dividend rate for each series floats in relation to changes in the average of the prime rate of Royal Bank of Canada and The Toronto-Dominion Bank during the preceding month ("Prime") and is adjusted upwards or downwards on a monthly basis by an adjustment factor which is based on the weighted average daily trading price of each of the series for the preceding month, respectively. The maximum monthly adjustment for changes in the weighted average daily trading price of each of the series will be plus or minus 4.0% of Prime. The annual floating dividend rate applicable for a month will in no event be less than 50% of Prime or greater than Prime. The dividend on each series is payable on December 12, 2003 to shareholders of record of such series at the close of business on November 28, 2003. Nortel Networks (S&P, B Corporate Credit Rating, Stable) is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com NORTEL NETWORKS: Issues Preliminary Results for Third Quarter ------------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT) reported selected preliminary unaudited results (United States generally accepted accounting principles ("U.S. GAAP")) for the third quarter of 2003. The Company also announced that it intends to restate its financial results for 2000, 2001 and 2002 and the first and second quarters of 2003, as a result of its comprehensive asset and liability review and other related reviews (as more fully described below) which are still ongoing. While the work is not complete, Nortel Networks currently expects that the principal impacts of the restatements will be: a reduction in previously reported net losses for 2000, 2001 and 2002; and an increase in shareholders' equity and net assets previously reported on Nortel Networks balance sheet as at June 30, 2003. None of the adjustments are expected to have any impact on cash balance as at June 30, 2003 nor does the Company expect the adjustments to impact its forward business operations. The results reported by Nortel Networks are unaudited, preliminary in nature and therefore subject to change. The Company is only releasing preliminary selected results for the third quarter of 2003 at this time pending the completion of its comprehensive asset and liability review and related reviews, which may impact such results and will impact prior period results, including the first two quarters of 2003. The Company plans to file with the relevant regulatory authorities its unaudited financial statements, prepared in accordance with U.S. GAAP and Canadian generally accepted accounting principles ("Canadian GAAP"), for the third quarter of 2003 within the periods permitted for timely filings (mid-November 2003 in the United States and late November 2003 in Canada). At such time, we will also announce the impact of the foregoing on our year to date results. Restated financial statements for the other relevant periods are expected to be filed at the earliest possible time in the fourth quarter of 2003. Overview of Third Quarter 2003 Preliminary Results Revenues were US$2.27 billion for the third quarter of 2003. Nortel Networks reported net earnings in the third quarter of 2003 of approximately US$179 million, or approximately US$0.04 per common share on a diluted basis. Net earnings in the third quarter of 2003 included US$70 million of special charges related to restructuring activities; approximately US$56 million of net earnings from discontinued operations - net of tax; and aggregate charges of approximately US$48 million for the amortization of acquired technology and deferred stock option compensation associated with acquisitions. The Company's results also included a benefit of approximately US$98 million related to changes in ownership of certain European operations and an US$67 million benefit related to the completion of a customer contract settlement. Commenting on Nortel Networks financial performance, Frank Dunn, president and chief executive officer, Nortel Networks, said, "The preliminary results announced today reflect our continued progress in an environment of cautious capital spending by our customers. I am particularly pleased with the continued momentum in our wireless networking solutions, the market leadership of our converged networking and voice over packet solutions, and the building momentum in our enterprise segment. We continue to work very closely with our customers providing solutions that drive new revenue opportunities, reduced operating costs, enhanced customer service capability and improved productivity." Some highlights of Nortel Networks recent market successes include: Wireless Data -- Continued success and new inroads in the evolving third generation (3G) UMTS market with a framework agreement with Orange in Europe and a contract with AT&T Wireless in North America; -- Renewed and expanded relationship with Verizon Wireless signing a multi-year agreement, estimated to be worth approximately US$1 billion, for wireless infrastructure technology, including expansion and upgrade of its 3G CDMA and data network; -- Continued global momentum in CDMA, with several recent contract wins, including U.S. Cellular (U.S.), Pelephone (Israel), Movicel (Angola), and Centennial Communications (Dominican Republic), as well as deployments with Asia Pacific Broadband Wireless (Taiwan) and China Unicom (PRC), to provide networking equipment supporting leading edge high-speed wireless video, voice and data services; -- Increased global customer traction for Nortel Networks GSM and GPRS solutions with a deployment by Chunghwa Telecom (Taiwan) and recent contract wins with SERCOM (Guatemala) and Baykal Westcom (Russia), and for GSMRail (GSM-R) solutions with RFF (Reseau Ferre de France) and SNCF (Societe Nationale de Chemin deFer) selecting Nortel Networks to provide a national GSM-R network in France; Voice over Packet -- Continued market leadership in Voice over Packet securing top service provider market share position worldwide for both softswitches and media gateways in the second quarter of 2003, as reported by Synergy Research Group, as well as securing the global leader position in Internet Protocol (IP) telephony line shipments for the second quarter 2003, according to Dell'Oro Group; -- Announced the deployment of Nortel Networks high-performance, multi-gigabit capacity, converged IP network infrastructure by Worcester Polytechnic Institute, to provide fully-featured IP telephony and multimedia content; Multimedia Services and Applications -- Bell Canada announced its plan to invest an estimated US$146 million over 3 years to accelerate the availability of multimedia and IP telephony services to users in Canada using Nortel Networks multimedia communications services platform, and the creation of joint Innovation Center focused on creating new IP services; -- Nortel Networks was selected by China Netcom subsidiary, Shandong Netcom, to be the exclusive infrastructure supplier for a next generation network expected to bring broadband voice, data, video and multimedia services to three major cities in the Shandong Province; Broadband Networking -- Announced the availability of the Nortel Networks Optical Multiservice Edge solution which converges multiple services, architectures and layers onto a single platform, allowing carriers to provision broadband services more efficiently and with reduced capital and operating expenses; -- Continued momentum in Optical Broadband Services with the announcement by Sprint that it will market high-bandwidth, metro- area, optical network solutions that support enterprise customers in 12 major markets using Nortel Networks optical broadband services portfolio; and KPN introducing an enhanced Virtual Private Network service using Nortel Networks advanced Optical Ethernet portfolio; -- Nortel Networks has built the first optical long haul DWDM network for Korea Telecom, Korea's leading carrier; and -- Telefonica Group has deployed Passport 15000 and Passport 7000 as part of a data and voice network expansion in Brazil. Revenues by segment In the third quarter of 2003, Wireless Networks revenues were US$1.01 billion, Enterprise Networks revenues were US$579 million, Wireline Networks revenues were US$440 million and Optical Networks revenues were US$245 million. Revenues by geographic region In the third quarter of 2003, revenues in the United States were US$1.14 billion, revenues in the Europe, Middle East and Africa region were US$545 million, revenues in Canada were US$127 million and Other regions were US$457 million. Gross margin Gross margin for the third quarter of 2003 was approximately 52 percent of sales and included US$52 million benefit related to the gross margin component of the completion of a customer contract settlement. Margins in the quarter were favorably impacted by ongoing cost reduction programs, product mix and higher software sales associated with certain purchases in the quarter. However, Nortel Networks continues to expect gross margins to trend in the mid 40's range over the near term. Expenses Selling, general and administrative expenses were approximately US$485 million, and research and development expenses were approximately US$485 million, in the third quarter of 2003. Cash Cash balance at the end of the third quarter of 2003 was approximately US$3.6 billion which was down from approximately US$4.2 billion at the end of the second quarter of 2003. The reduction in cash from the end of the second quarter was primarily driven by a scheduled debt repayment of US$164 million, voluntary pension contributions of US$162 million, cash payments for restructuring of US$107 million, and the purchase of the remaining ownership interests in certain European operations for US$47 million. Discontinued operations The Company reported net earnings from discontinued operations of US$56 million, which primarily reflected gains from the settlement of certain receivables and a note owing to Nortel Networks. Outlook Commenting on the Company's outlook, Dunn said, "Based on our continued market success and customer engagements, we will continue our focus on gaining market share with our key solutions as we work with our customers to help them meet their business objectives. We will continue to manage each of our businesses based on market dynamics and performance. We expect revenue for the fourth quarter of 2003 to grow sequentially compared to the third quarter of 2003, and we expect a profit for the full year 2003." Update on Comprehensive Asset and Liability Review In 2001, Nortel Networks entered into an unprecedented period of business realignment in response to a significant adjustment in the telecommunications industry. Industry demand for networking equipment dramatically declined in response to the industry adjustment, severe economic downturns in various regions around the world and a tightening in the global capital markets. Nortel Networks implemented a company-wide restructuring work plan to streamline its operations and activities around core markets and operations which included significant workforce reductions, global real estate closures and dispositions, substantial write-downs of its capital assets and intangible assets and extensive contract settlements with customers and suppliers around the world. As a result of these actions, the Company's workforce declined from approximately 94,500 at January 1, 2001 to approximately 35,500 at September 30, 2003. Over the same time period, Nortel Networks reduced its facilities from over 700 to approximately 250 locations (a reduction of approximately 20 million square feet). The Company previously reported aggregate net losses of approximately US$31 billion in 2001 and 2002. With a period of relative stability beginning to take hold for the Company in 2003, as previously announced Nortel Networks initiated a comprehensive review and analysis of its assets and liabilities. As indicated above, the final outcome of the comprehensive review and related reviews will result in the restatement of the Company's financial results for 2000, 2001 and 2002 and the first and second quarters of 2003. Commenting on the comprehensive review and the planned restatement of the Company's financial results, Doug Beatty, chief financial officer, Nortel Networks, said, "The comprehensive review has been undertaken across all of our businesses and geographic regions. We remain committed to completing this work so that our restated results can be finalized at the earliest possible time." As part of its preliminary findings arising from the comprehensive review, Nortel Networks has determined that approximately US$900 million of liabilities (including accruals and provisions) carried on its previously reported balance sheet as at June 30, 2003 will be released into prior periods in the restatements. The analysis undertaken to date has indicated that these provisions were either recorded incorrectly in prior periods or not properly released, or adjusted for changes in estimates, in the appropriate periods. In certain cases, costs were incorrectly charged to operations rather than to the appropriate provisions. Certain provisions related to Nortel Networks restructuring work plan actions and contract and other accruals were recorded in excess of the amounts that now have been determined would have been appropriate at the time of recording. The liabilities in question represented approximately 7 percent of total liabilities on the Company's previously reported balance sheet as at June 30, 2003. In addition, Nortel Networks expects to reduce its net deferred income tax assets by approximately US$160 million representing the impact of related and other liability adjustments. The Company's income statements will also be affected by foreign exchange adjustments. Related reviews identified that aggregate revenue of approximately US$92 million recognized in 2000, 2001, 2002 and the first and second quarters of 2003 related to certain contracts should have been deferred to later periods. These revenue adjustments represent approximately 0.2 percent of the Company's aggregate previously reported revenue of approximately US$60.7 billion for these periods. These revenue adjustments represent amounts (known as unadjusted differences) which had been identified in prior periods and which had not been deemed to be material in the relevant prior periods. "The challenges that faced Nortel Networks and our industry over the past few years were unprecedented," said Dunn. "It is clear now that in such a volatile environment, errors were made. I want to assure Nortel Networks stakeholders that we are committed to working to identify the causes of the mistakes and to implement the appropriate measures to ensure that the problems do not recur in the future." The Company will be initiating an independent review to examine the facts and circumstances leading to the need to restate Nortel Networks financial statements for the relevant periods and to consider appropriate improvements to processes and procedures. The financial results of Nortel Networks Limited ("NNL"), Nortel Networks Corporation's principal operating subsidiary, are fully consolidated into Nortel Networks results. NNL's financial statements, which are prepared in accordance with U.S. GAAP and Canadian GAAP, will also be restated as a result of the comprehensive asset and liability review and other related reviews. NNL's preferred shares are publicly traded in Canada. Nortel Networks (S&P, B Corporate Credit Rating, Stable) is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com NUTRAQUEST INC: Case Summary & 5 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Nutraquest, Inc. 2231 Landmark Place Manasquan, New Jersey 08736 fka Nutriquest, Inc. fka Cytodyne Technologies, Inc. Bankruptcy Case No.: 03-44147 Type of Business: Nutraquest was the marketer of the ephedra-based weight loss supplement, Xenadrine RFA-1. The Debtor was forced to file for bankruptcy because of the increasing volume of lawsuits being filed against for its ephedra product after the March death of Baltimore Orioles pitcher Steven Bechler, who was allegedly taking the product. Chapter 11 Petition Date: October 16, 2003 Court: District of New Jersey (Trenton) Judge: Raymond T. Lyons Jr. Debtor's Counsel: Andrea Dobin, Esq. Simon Kimmelman, Esq. Sterns & Weinroth, P.C 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 Tel: 609-392-2100 Estimated Assets: $10 Million to $50 Million Estimated Debts: $50 Million to $100 Million Debtor's 5 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Jason A. Park $18,080,742 c/o James C. Krause, Esq. 1010 Second Avenue, Suite 1750 San Diego, CA 92101 Atlantic Aviation $21,588 Tudor Pkg. Corp. $4,193 Catalina & Associates $2,367 Eagle Graphics $2,000 OWENS: Committee Pushes for Appointment of Chapter 11 Trustee ------------------------------------------------------------- The Official Committee of Unsecured Creditors, representing the Owens Corning Debtors' prepetition bank lenders, bondholders, and trade creditors, asks the Court to appoint a Chapter 11 trustee to assume control of the bankruptcy process to "steer this case towards an appropriate resolution." William H. Sudell, Jr., Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, relates that the commercial creditors want to remedy the Debtors' continuing breach of their fiduciary duty of undivided loyalty to act in the best interest of all creditors and to pursue a fair, balanced, and confirmable reorganization plan. The commercial creditors have lost faith both in the current plan process and in the Debtors' ability to lead the way out of bankruptcy. Three years into the case, it is clear that Owens Corning's officers and directors have failed miserably in the discharge of their duty of undivided loyalty, Mr. Sudell says. Mr. Sudell recounts that Owens Corning entered bankruptcy as a respected Fortune 500 company with $3,700,000,000 in fixed, undisputed commercial debt and with contested asbestos liability, according to Owens Corning's own public representations, of $2,200,000,000, plus $1,300,000,000 for the separate liability of Fibreboard Corporation. From day one, the most important issue in the case was the liquidation as to the amount of the disputed tort liability, which was what drove Owens Corning into bankruptcy in the first place. The commercial creditors had the right to expect that, as a responsible debtor-in-possession, Owens Corning would protect its estate by rigorously resisting attempts to impose an inflated valuation for the disputed liability, all without regard to the self-interest of incumbent officers and directors. The key fiduciary obligation of those officers and directors was to fulfill this duty. But rather than focus from the outset on contesting questionable claims, as other debtors have done without prodding, the Owens Corning officers and directors concluded early on that their interests lay elsewhere -- namely, in currying favor with the asbestos plaintiffs' firms that would control Owens Corning's ability to use Section 524(g) of the Bankruptcy Code and that would effectively own Owens Corning after reorganization and determine the future employment of its current management. This just continued a pattern of prepetition conduct that included making hundreds of millions of dollars in preferential payments to the tort firms in the months leading up to the bankruptcy, according to Mr. Sudell. Owens Corning's officers and directors are giving the tort firms carte blanche to dictate the terms of a "dream" recovery plan that would hand them nearly 85% of Owens Corning's value without having to prove a single valid claim against the estate. Owens Corning's "plan process" is also phony and fundamentally flawed because: (1) it contains no rigorous mechanism for actually determining the real world, post-bankruptcy liquidation amount of Owens Corning's legitimate asbestos exposure; (2) it is premised on participation in the case by thousands of claimants who have never even filed a proof of claim, much less demonstrated the facial validity of their claims; and (3) it has no support from any significant non-asbestos constituency. Mr. Sudell explains that the centerpiece of the supposed "plan" is an arbitrary valuation of Owens Corning's tort liability at $16,000,000,000, a fantasy number completely divorced from the reality of Owens Corning's prepetition exposure. The supposed asbestos liability is several times larger than Owens Corning's own estimate in August 2002 and dramatically more than even the increased amount that it disclosed in October 2002. Mr. Sudell asserts that the $16,000,000,000 figure has one purpose only -- to dilute the fixed, undisputed claims of Owens Corning's commercial creditors and reduce their recovery to a small fraction of what they are owed, all to accommodate the preposterous demands of the constituency that will control the selection and incumbency of Owens Corning's future directors and officers. The Disclosure Statement provides no cogent rationale for this number, despite its materiality and centrality to the Debtors' version of the "plan process" in Owens Corning's case. Mr. Sudell further argues that the Debtors' abdication of their fiduciary duty of undivided loyalty has only emboldened the plaintiffs' firms to take ever more aggressive positions, apparently even among themselves. Despite repeated admonitions from the Court, the tort lawyers have not even been able to agree on a Trust Distribution Procedure to govern division of the spoils reaped from their inflated valuation. Given Owens Corning's failure to confront the unrealistic expectations of the asbestos claimants, and the plaintiffs' firms' assumption that Section 524(g) gives them absolute veto power over any recovery plan, it is not surprising that the tort constituencies also have largely refused to engage in settlement negotiations with the commercial creditors. The Debtors' Plan contains several other features reflecting Owens Corning's abdication to the tort interests: (1) It defers prosecution of Owens Corning's substantial fraudulent conveyance claims against the tort firms for looting Owens Corning in the months leading up to the bankruptcy filing, grown stale due to a stay sought by Owens Corning, to be pursued post-confirmation, if desired, by a Litigation Trust run by appointees of the defendants themselves; (2) It expropriates $140,000,000 from Owens Corning's creditors to enhance the recovery of Fibreboard claimants without adequately explaining how they could possibly have any claim to the assets; and (3) It provides a special $70,000,000 pool of restricted stock, to be doled out to Owens Corning's management and other employees in connection with unspecified "incentive" programs -- a valuable tool to reward management for its pliability and ensure its continued loyalty to Owens Corning's new owners. Mr. Sudell also notes that Professor Francis McGovern, who has served as the chief mediator in the bankruptcy, is widely perceived as being closely aligned with the tort plaintiffs' firms, which have been central to his extremely lucrative retention to mediate virtually all of the pending asbestos bankruptcies. In the Owens Corning case, Professor McGovern has been unable to induce the plaintiffs' firm to commit to sustained efforts to settle the case, and the commercial creditors regard him as too closely aligned with the plaintiffs' bar to be a neutral broker. The Commercial Committee believes that the appointment of a strong and truly independent trustee who could if appropriate leave qualified existing middle and senior management in place to oversee the Debtors' day-to-day operations is the only hope for an appropriate resolution of the Debtors' cases. This trustee would, simply by acting to impose realistic limitations on the tort firms' wild expectations, likely have the ability to bring about a settlement of these Chapter 11 cases. If a settlement could not promptly be achieved, a trustee would be able to launch a more realistic and fair process in which the Debtors themselves would appropriately contest disputed claims and protect the best interests of their undisputed creditors. In the alternative, the trustee might ultimately determine that conversion to a Chapter 7 liquidation was appropriate, if that proved to be the best way to maximize the value of the business by releasing it from the toils of a lengthy and inconclusive Chapter 11 case. Mr. Sudell reminds the Court that the Bankruptcy Code provides various remedies for a situation in which a debtor-in-possession has failed to act appropriately on behalf of its estate. Section 1104(a) of the Bankruptcy Code provides that, at any time prior to confirmation of a plan, on request of a party-in-interest or the United States Trustee, the Court may appoint a Chapter 11 trustee for the debtor on either of two alternate grounds: (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause; or (2) if the appointment is in the interest of creditors, any equity security holders, and other interests of the estate. In In re Marvel Entertainment Group, Inc., 140 F.3d 463, 471, the Third Circuit in 1998 indicated that the need for a trustee must be shown by clear and convincing evidence in view of the presumption that the debtor-in-possession, if properly exercising its fiduciary duties, is best suited to continue operating the company in reorganization. However, according to Judge Wolin in Official Committee of Asbestos Personal Injury Claimants v. Sealed Air Corp. (In re W.R. Grace & Co.), 285 B.R. 148, 158 (Bankr. D. Del.), the Bankruptcy Court has wide the discretion to apply the statute's open-ended and non-exclusive criteria to determine when the behavior of a debtor-in-possession constitutes "cause" under Section 1104(a)(1) or renders appointment of a trustee "in the best interest of creditors" under Section 1104(a)(2), Mr. Sudell relates. The Marvel court found the appointment of a trustee to be appropriate, among other reasons, because: (1) the conflicted debtor-in-possession was unable to resolve disputes with other parties in the case; (2) there was a heightened level of acrimony among the parties, beyond normal levels, with the debtor and certain of its creditors taking "dramatically different stances on many issues" in the case; and (3) both the "intense and high stakes bickering" among the parties and the inherent conflict in one creditor group's control of management made it impossible for the reorganization to proceed effectively. These criteria clearly apply to the Debtors' cases. (Owens Corning Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Gets Approval to Use $42,686,311 Cash Collateral ------------------------------------------------------------- Pacific Gas and Electric Company holds a Certificate of Consent to Self-Insure the thousands of employees under its wing, granted by the State of California Department of Industrial Relations. As a condition of self-insurance, PG&E must provide certain collateral with the State to cover the future liabilities of the self-insured program in the event that PG&E defaults on its obligations to pay benefits. PG&E has five surety bonds totaling $365,000,002 to satisfy the $347,686,313 collateral requirement. PG&E received notification from the State that the issuer of one of the surety bonds has failed to maintain an acceptable credit rating as required by California Code of Regulations, Title 8, Section 15210(h). PG&E is required to replace the collateral on or before September 15, 2003 or risk revocation of the Certificate. To provide the financial assurances, PG&E will need to use "cash collateral" to replace the $60,000,000 surety bond that no longer meet the State's financial strength requirements. Accordingly, PG&E sought and obtained the Court's authority to use $42,686,311 in cash collateral for the purpose and necessary compliance with applicable state regulations and with Section 3701 of the California Labor Code. Pursuant to discussions made between PG&E and the indenture trustee, BNY Western Trust Company, concerning the use of cash collateral, BNY Western reserves its right to object to the action and requires that PG&E carry the burden of establishing that BNY Western's interest are adequately protected. BNY Western holds a lien on substantially all of PG&E's real and personal property assets for the benefit of the mortgage bondholders. (Pacific Gas Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 609/392-0900) PETROLEUM GEO: Commences Rights Offering As Part of Reorg. Plan --------------------------------------------------------------- Petroleum Geo-Services ASA (debtor in possession) (OSE:PGS) (Pink Sheets:PGOGY) announced the commencement of the rights offering contemplated under the Company's Modified First Amended Plan of Reorganization. The Rights Offering gives holders of at least 23 existing ordinary shares (including holders of American Depositary Shares representing ordinary shares the right to purchase additional new ordinary shares of the reorganized Company. The subscription price for acquiring new ordinary shares under the Rights Offering is $14.17 per new share, payable in U.S. Dollars. Holders of existing ordinary shares (not ADSs) entitled to receive fewer than 100 new ordinary shares in the Rights Offering have the option to pay for these shares in Norwegian Kroners at a fixed exchange rate of NOK7.10 per U.S.$1.00. The offer period for the Rights Offering is expected to extend until November 5, 2003, the expected effective date of the Plan. Eligible shareholders must hold their existing ordinary shares as of the effective date of the Plan to validly exercise their rights under the Rights Offering. For more information on the Rights Offering, visit the company website, http://www.pgs.com, or contact the information agent, Georgeson Shareholder Communications, Inc., at 888-274-5146. Petroleum Geo-Services is a technologically focused oilfield service company principally involved in geophysical and floating production services. PGS provides a broad range of seismic- and reservoir services, including acquisition, processing, interpretation, and field evaluation. PGS owns and operates four floating production, storage and offloading units. PGS operates on a worldwide basis with headquarters in Oslo, Norway. PHOTOCHANNEL NETWORKS: Closes Private Placements of $2.7M Shares ---------------------------------------------------------------- PhotoChannel Networks Inc. (TSX.VEN: PNI), a global digital imaging network company, announces that the Company has closed its private placements of common shares and LP Units for total proceeds of $2,765,000. The common shares issued in the private placement are subject to a hold period expiring February 4, 2004. The warrants issued to First Associates are also subject to a four month hold period expiring February 4, 2004. Founded in 1995, PhotoChannel -- whose June 30, 2003 balance sheet shows a net capital deficit of about CDN$2.6 million -- is a leading digital imaging technology provider for a wide variety of businesses including photofinishing retailers and telecommunications companies. PhotoChannel has created and manages the open standard PhotoChannel Network environment whose focus is delivering digital image orders from capture to fulfillment under the control of the originating PhotoChannel Network partner. There are now over 6000 retail locations accepting print orders from the PhotoChannel system. For more information visit http://www.photochannel.com. PLAINS ALL AMERICAN: Declares Distribution on Common & Sub Units ---------------------------------------------------------------- Plains All American Pipeline, L.P. (NYSE: PAA) announced a cash distribution of $0.55 per unit on its outstanding limited partner units, which include Common Units, Class B Common Units and Subordinated Units. The distribution will be payable on November 14, 2003, to holders of record of such units at the close of business on November 4, 2003. The distribution represents an annualized distribution rate of $2.20 per unit. Plains All American Pipeline, L.P. (S&P, BB+ Senior Unsecured Debt Rating, Stable) is engaged in interstate and intrastate crude oil transportation, terminalling and storage, as well as crude oil and LPG gathering and marketing activities, primarily in Texas, California, Oklahoma and Louisiana and the Canadian Provinces of Alberta and Saskatchewan. The Partnership's common units are traded on the New York Stock Exchange under the symbol "PAA". The Partnership is headquartered in Houston, Texas. PRIMUS TELECOM: Issuing Prospectus for Notes & Shares Offering -------------------------------------------------------------- Primus Telecommunications Group, Inc. is issuing a prospectus covering resales by selling securityholders of its 33/4% convertible senior notes due September 15, 2010 and shares of its common stock into which the notes are convertible. The holders of the notes may convert the notes into shares of the Company's common stock at any time at a conversion price of $9.3234 per share which is equivalent to a conversion rate of 107.257 shares per each $1,000 principal amount of notes, subject to adjustment in specified events. The Company will pay interest on the notes on March 15 and September 15 of each year. The first interest payment will be made on March 15, 2004. Upon the occurrence of a change of control, holders of the notes may require Primus to repurchase some or all of their notes for cash, common stock or a combination of cash and common stock. The notes are Primus' senior unsecured obligations and rank equally in right of payment with all of its existing and future senior debt and senior in right of payment to all of its existing and future subordinated debt. The notes are effectively subordinated to all of the Company's existing and future secured debt to the extent of the value of the collateral securing such debt and structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. Prior to this offering, the notes have been eligible for trading on the PORTAL Market of the Nasdaq Stock Market. Notes sold by means of the prospectus are not expected to remain eligible for trading on the PORTAL Market. Primus does not intend to list the notes for trading on any national securities exchange or on the Nasdaq National Market. The Company's common stock currently trades on the Nasdaq National Market under the symbol "PRTL." The last reported sale price on October 17, 2003 was $7.60 per share. PRIMUS Telecommunications Group, Incorporated (NASDAQ: PRTL) -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $127 million -- is a global facilities- based telecommunications services provider offering international and domestic voice, Internet, data and hosting services to business and residential retail customers and other carriers located primarily in the United States, Canada, Australia, the United Kingdom and western Europe. PRIMUS provides services over its global network of owned and leased transmission facilities, including approximately 250 points-of-presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 carrier-grade international gateway and domestic switches, and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global state-of-the-art broadband fiber optic ATM+IP network and data centers to offer customers Internet, data, hosting and e-commerce services. Founded in 1994, Primus is based in McLean, Virginia. QUANTUM CORP: Fiscal Second Quarter Net Loss Increases to $38MM --------------------------------------------------------------- Quantum Corp. (NYSE: DSS), a global leader in storage, announced that revenue for its fiscal second quarter (FQ2), ended Sept. 28, 2003, was $195 million. The company reported a GAAP net loss of $38 million, or 22 cents per share, which included approximately $27 million in previously announced accounting charges. The non- GAAP loss for FQ2 was $6 million, or 4 cents per share. As Quantum announced when it revised its September quarter expectations earlier in the month, the company's results were impacted by continued pressure on media cartridge pricing. On a GAAP basis, the gross margin rate was approximately 30%, and the non-GAAP gross margin rate was 31.4%. Quantum continued to reduce costs during FQ2, with operating expenses totaling $68 million on a GAAP basis and $62 million on a non-GAAP basis. "We have pursued a number of aggressive changes over the past year that have resulted in some significant improvements in our business, including increased market share, higher product gross margins, lower operating expenses, and a range of exciting new products," said Rick Belluzzo, chairman and chief executive officer of Quantum. "However, we have also been confronted with new challenges over the last two quarters, primarily related to a steeper-than-expected decline in media prices. We have undertaken efforts to mitigate the impact of the media pricing pressure and accelerate our return to the positive trajectory we achieved in the second half of our fiscal year 2003 that ended in March." Even in the face of a challenging quarter, Quantum's accomplishments over the past year were evident in several year- over-year comparisons for FQ2. For example, excluding media, overall product revenue increased 26% year-over- year, reflecting the company's focus on improving and broadening its product offerings. Compared to the same quarter last year, Storage Solutions Group revenue was also up significantly in FQ2 and operating expenses were down, with a significant decline in general and administrative expenses. Fiscal 2004 second quarter revenue in the DLTtape(TM) Group was $135 million, comprised of $49 million in total tape media revenue and $86 million in tape drive revenue. The decline in media revenue reflected the impact of continued pricing pressure, affecting both Quantum-branded media and media sold by licensees on which Quantum receives a royalty. The company said its market data indicated that the media pricing issue was not specific to Quantum but was instead an industry-wide problem. Tape drive unit shipments for the September quarter were roughly flat sequentially but still up more than 50% compared to the same quarter last year, and tape drive gross margins increased for the fourth consecutive quarter. Both the increased shipments and higher margins are due to the efforts Quantum made over the past year to improve its tape drive business and broaden its product offerings, including through the Benchmark acquisition. As a further reflection of this progress, the DLT VS160 tape drive has begun shipping through Quantum's channel partners and one major system OEM, with two other major system OEMs having committed to the product. Quantum also recently announced that its new SDLT 600 tape drive would be generally available in the current quarter. This third- generation super drive is the fastest-performing drive in its class, is ideal for automation environments, and will ship with Quantum's award-winning DLTSage(TM) suite of predictive and preventive diagnostic tools which enables customers to more simply manage their tape storage resources. Fiscal 2004 second quarter revenue in Quantum's Storage Solutions Group, which includes tape automation, services and enhanced backup solutions, was $65 million. Although down slightly on a sequential basis, this represented an increase of more than 25% over the comparable quarter last year. Reflecting the company's continuing efforts to refine its enterprise sales model and offer a more solutions-oriented approach to customers, both OEM and channel sales of enterprise libraries were also up sequentially. Quantum's enterprise offerings have been further bolstered with the recent launch of its newest high-end tape library, the "MAKO" PX720. MAKO provides customers with unmatched reliability and flexibility and the ability to scale as their data protection needs increase by adding modular tape drive clusters "on-demand." September quarter shipments of the Quantum DX30 enhanced backup system increased over the prior quarter, with 50% of customers deciding to purchase multiple units. The company expects to expand its enhanced backup customer base further when it releases the Quantum DX100 later this quarter. "Looking forward, we have a clear set of priorities that will build off the many initiatives that we began during the past year," said Belluzzo. "These include continuing to introduce innovative new products, enhance our sales programs, and reduce costs. We will also pursue a set of structural changes that will enable more synergy across the company, further reductions in operating expenses, and general improvement in our ability to execute." Because Quantum is still evaluating what structural changes it will make, the company provided partial guidance for the third quarter of fiscal year 2004 (FQ3). Quantum said it expects total revenues to be roughly flat sequentially, reflecting its caution in light of continued uncertainty around media pricing and the fact that it will not yet see the full contribution of new products being introduced during the quarter. Non-GAAP gross margins and operating expenses are expected to be roughly flat. As a result, Quantum said it also expects the non-GAAP loss per share for the December quarter to be roughly flat sequentially. With the exception of an expected $4 million to $5 million in amortization of intangibles, the company said that it could not quantify its GAAP-based expectations for FQ3 at this time because the details of the structural changes it would be making had not yet been finalized. However, Quantum said it expected to incur restructuring charges for the quarter that could be material, depending on the final decisions reached. Quantum said it would provide an estimate of those charges and GAAP-based expectations once those decisions are finalized. Use of Non-GAAP Financial Measures The non-GAAP financial measures used in this press release exclude the impact of acquisition-related intangible asset amortization, special charges, valuation charges related to Quantum's former manufacturing facility in Malaysia and net deferred tax assets, goodwill write-down and adjustment, discontinued activities and operations, write down of equity investments, non- operating expenses related to the redemption of the company's 7 percent convertible debt, and related adjustments to provision for income taxes on Quantum's operating results. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non- GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Quantum's management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the company's operational performance. For instance, management believes these non-GAAP financial measures are helpful in assessing Quantum's core operating results. In addition, these non-GAAP financial measures facilitate management's internal comparisons to Quantum's historical operating results and comparisons to competitors' operating results. Quantum includes these non-GAAP financial measures in this press release because the company believes they are useful to investors in allowing for greater transparency related to supplemental information used by management in its financial and operational decision-making. In addition, Quantum has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in the company's financial reporting at this time. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures as provided in the table accompanying this press release. Quantum Corp. (S&P, BB- Corporate Credit and B Subordinated Debt Ratings, Negative), founded in 1980, is a global leader in storage, delivering highly reliable backup, archive and recovery solutions that meet demanding requirements for data availability and integrity with superior price performance. Quantum is the world's largest supplier of half-inch cartridge tape drives, and its DLTtape technology is the industry standard for tape backup, archiving, and recovery of business-critical data for the midrange enterprise. Quantum is also a leader in the design, manufacture and service of autoloaders and automated tape libraries used to manage, store and transfer data. Over the past year, Quantum has been one of the pioneers in the emerging market of disk-based backup, offering a solution that emulates a tape library and is optimized for data protection. Quantum sales for the fiscal year ended March 31, 2003, were approximately $871 million. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, 408- 944-4000, http://www.quantum.com READERS DIGEST: Hosting Q1 2004 Conference Call on October 30 ------------------------------------------------------------- Readers Digest Association (NYSE: RDA) announces the following Webcast: What: RDA Q1 2004 Financial Release Conference Call When: 10/30/03 @ 8:30 a.m. Eastern Where: http://www.firstcallevents.com/service/ajwz391755596gf12.html How: Live over the Internet -- Simply log on to the web at the address above. Contact: William Adler Director, Corporate Communications 914-244-7585 william.adler@readersdigest.com If you are unable to participate during the live webcast, the call will be archived at http://www.rd.com. The Reader's Digest Association, Inc. (S&P, BB Corporate Credit Rating, Negative Outlook) is a global publisher and direct marketer of products that inform, enrich, entertain and inspire people of all ages and all cultures around the world. Worldwide revenues were $2.5 billion for the fiscal year ended June 30, 2003. Global headquarters are located at Pleasantville, New York. RESIDENTIAL FUNDING: Fitch Affirms Ratings on Securitizations ------------------------------------------------------------- Fitch Ratings has affirmed 53 classes of Residential Funding Mortgage Securities I, Inc residential mortgage-backed certificates, as follows: Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S1 -- Class A 'AAA'; -- Class M3 'AA'; -- Class B1 'A-'; -- Class B2 'BB+'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S2 -- Class A at 'AAA'; -- Class M2 'A'; -- Class M3 'BBB'; Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S5 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AA-'; -- Class B1 'BB'; -- Class B2 'B'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S7 -- Class A 'AAA'; -- Class M3 'A+'; -- Class B1 'BB+'; -- Class B2 'B'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S9 -- Class A 'AAA'; -- Class M3 'A+'; -- Class B1 'BBB'; -- Class B2 'BB'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S11 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AA'; -- Class B1 'BBB+'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S12 -- Class A 'AAA'; -- Class M1 'AAA'; -- Class M2 'AA'; Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S13 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AA'; -- Class B1 'BBB+'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S14 -- Class A 'AAA'; -- Class M1 'AAA'; -- Class M2 'AA'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S15 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AAA'; -- Class B1 'AA'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S16 -- Class A 'AAA'; -- Class M1 'AAA'; -- Class M2 'A'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S17 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AAA'; -- Class B1 'AA-'. Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1994-S18 -- Class A 'AAA'; -- Class M3 'AAA'; -- Class B1 'AAA'; Residential Funding Mortgage Securities I, Inc., mortgage pass- through certificates, series 1996-S3 -- Class A 'AAA'; -- Class M2 'AAA'; -- Class M3 'AAA'; -- Class B1 'AA'; -- Class B2 'A'. The affirmations are due to credit enhancement consistent with future loss expectations. RETAIL GROUP INC: Voluntary Chapter 7 Case Summary -------------------------------------------------- Debtor: Retail Group Inc. 414 Olive Way #100 Seattle, Washington 98101 Bankruptcy Case No.: 03-23467 Type of Business: The Debtor was one of Seattle's most prominent consulting firms during the 1990s. Chapter 7 Petition Date: October 17, 2003 Court: Western District of Washington (Seattle) Judge: Karen A. Overstreet Debtor's Counsel: Edmund J. Wood, Esq. Wood & Jones PS 1601 5th Ave #710 Seattle, WA 98101-1625 Tel: 206-623-4382 Total Assets: $9,000 Total Debts: $1,284,381 RIVER ROCK: B+ Rating Assigned to Proposed Senior Secured Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to the River Rock Entertainment Authority's proposed $190 million senior secured note offering due 2011. Proceeds from the proposed note issue will be used to help fund the construction of the Authority's expansion project, to repay $54 million of existing indebtedness, to fund the settlement and related costs of litigation involving the tribe, and for fees and expenses associated with the transaction. In addition, Standard & Poor's assigned a 'B+' corporate credit rating to the Authority. These ratings are subject to review of final documentation and legal opinions. The outlook is stable. Pro forma total debt outstanding at June 30, 2003, was approximately $200 million. "The ratings reflect the Authority's narrow business focus operating a single gaming facility, relatively short operating history, high debt levels, and the potential for increased competition in the future," said Standard & Poor's credit analyst Peggy P. Hwan. She added, "These factors are mitigated by favorable demographics, the current limited competitive situation in its surrounding market, and the potential for EBITDA growth post-construction." Sonoma County, Calif.-based River Rock Entertainment Authority was created to operate the River Rock Casino (River Rock) for the Dry Creek Rancheria Band of Pomo Indians (The Tribe), a federally recognized Native American tribe in California. The Tribe entered into its compact with the State of California, and the compact was approved by the U.S. Secretary of the Interior in May 2000. The compact permits Class III gaming, including up to 2,000 slot machines, subject to license availability, and expires on Dec. 31, 2020. The Tribe currently holds licenses to operate 1,600 gaming machines. River Rock is capacity constrained during peak operating hours due to limited parking at the facility. The Tribe is currently adding three parking structures, bringing the total number of spaces to 2,100 from 500 when including both self and valet-parked automobiles. River Rock was involved in a lawsuit brought upon by its former developers for allegedly breaching agreements previously executed between the plaintiff and The Tribe to develop a casino and hotel on The Tribe's reservation. The litigation was recently settled with an agreement that the Tribe will pay the plaintiff, out of a distribution from the Authority with funds to come out of the net proceeds of this offering. ROUGE INDUSTRIES: Severstal to Acquire Assets Under Bankruptcy -------------------------------------------------------------- Rouge Industries, Inc. (OTC Bulletin Board: RGID) announced that it has reached an agreement on a non-binding letter of intent to sell substantially all the assets of the Company to Severstal, Russia's second largest steel producer and one of the world's top twenty steel producers. Severstal is a leading automotive supplier in Russia with annual revenues in excess of $2 billion and annual steel production of 10.6 million tons. Rouge Industries, and its wholly owned subsidiaries, Rouge Steel Company, QS Steel Inc. and Eveleth Taconite Company, have filed voluntary petitions for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware in Wilmington. During the bankruptcy process, Rouge Steel Company and its affiliates will continue to manufacture and ship steel products and provide uninterrupted services to its customers. Rouge also announced that, subject to Bankruptcy Court approval, it has secured a commitment for a $150 million debtor-in- possession (DIP) credit facility, comprised of a $120 million revolving line of credit with a group of lenders led by Congress Financial Corporation and a $30 million term loan pursuant to an agreement in principle with Severstal. This facility will provide the Company with up to $35 million of incremental liquidity during the period required to complete the sale. The letter of intent to purchase the Company's assets is subject to Bankruptcy Court approval. Rouge intends to file a motion in the Bankruptcy Court to formalize a procedure for reviewing this and other purchase offers. Terms of the transaction will be included in filings to be made with the Bankruptcy Court. In accordance with Section 363 of the Bankruptcy Code, other companies will have an opportunity to submit bids through a court- supervised process. Rouge intends to ask the Bankruptcy Court to assign a near-term deadline for the submission of other bids, as well as dates for an auction and a final hearing. The DIP credit facility provides sufficient liquidity to fund employee salaries and benefits, materials and services from suppliers, ongoing operating expenses, and other working-capital requirements necessary for the continuity of the Company's operations. Carl L. Valdiserri, chairman and chief executive officer of Rouge Industries, Inc., said the Company would continue operations and fulfill customer obligations during the reorganization process and that management had sought to sell the assets of Rouge to provide maximum consideration for the Company's creditors while securing the future viability of the business and the jobs of Rouge employees. "We will continue to provide our customers the high level of quality, delivery and technical service they have grown to expect from Rouge Steel and its employees," said Mr. Valdiserri. "We have had extensive conversations with our Severstal friends and are very optimistic about the potential for our future. The benefit of their financial strength, technical capabilities and global reach will enhance the future of Rouge," said Mr. Valdiserri. "We view this as importing foreign investment instead of exporting American jobs. Our business combination will provide a mutually beneficial result." For Severstal, the acquisition of Rouge represents its first investment in the United States steel industry and the opportunity to expand its global steel making presence. Mr. Vadim Makhov, Deputy General Director, Strategy for Severstal has stated, "We are excited about the opportunity to acquire Rouge and join with its management and employees to continue to produce automotive quality steel." Mr. Valdiserri said the Company and other domestic steel producers have experienced unprecedented declines in steel product pricing and profits over the past four years and more recently a sluggish U.S. economy. Sharp increases in natural gas and scrap prices beginning in 2002 have markedly increased production costs for domestic steel producers. "Despite the difficult operating conditions, Rouge employees have been able to implement substantial cost reductions and productivity and quality improvements," said Mr. Valdiserri. "However, as part of our reorganization, we must put in place a cost structure that will enable us to become a profitable and competitive supplier, regardless of our ultimate restructured form. Accordingly, the Company and the UAW have agreed to meet to discuss a new labor agreement that will help ensure that Rouge Industries will continue to provide high-quality UAW-produced steel for our customers at competitive prices." Rouge Industries, Inc. and its single-site primary operating subsidiary, Rouge Steel Company, are located in Dearborn, Michigan, in the heart of the domestic automotive industry. Rouge Steel Company has 2,600 employees, 2,000 of whom are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW. RYERSON TULL: Discloses Third Quarter 2003 Results -------------------------------------------------- Ryerson Tull, Inc. (NYSE: RT) reported a net loss of $3.2 million, or $0.13 per share, for the third quarter of 2003. This compares with net income of $2.6 million, or $0.10 per share, in the third quarter of 2002, and a net loss of $4.1 million, or $0.17 per share, in the second quarter of 2003. "While sales expanded and we cut expenses in the third-quarter, gross profit margins declined under the pressure of a competitive marketplace," said Neil S. Novich, Chairman, President, and CEO of Ryerson Tull. "On a strategic level, we completed a number of initiatives that will enhance our short- and long-term competitive position, including the Collado Ryerson joint venture and the first phase of our growth program. Additional cost cutting actions, improvement of the funded position of our pension fund, plans to enhance our information technology capabilities and productivity, and putting the Ispat contingency behind us also strengthen the organization." Third-Quarter Performance Third quarter 2003 sales increased 3.4 percent from the third quarter of 2002, on a 0.9 percent increase in tons shipped per day and a 2.4 percent increase in the average selling price per ton. On a sequential basis, third quarter 2003 sales increased 1.7 percent from the second quarter of 2003, as a 3.7 percent increase in tons shipped per day was partially offset by a 1.8 percent decrease in the average selling price per ton. Gross profit per ton of $166 in the third quarter of 2003 decreased from $171 in the year-ago period and $173 in the second quarter of 2003. Third quarter 2003 expenses (defined as operating expenses plus depreciation) per ton declined to $167, compared to $174 in the year-ago period and the second quarter of 2003, as a result of expense control and higher volume. Restructuring Activity "We have continued to identify and capture ways to improve efficiency and cut costs," stated Novich. In the third quarter, the company took actions to improve productivity and asset utilization at its service centers by consolidating operations or sales and administrative services at locations in the East, Mountain region, and Pacific Northwest. As a result, Ryerson Tull took a third-quarter restructuring charge of $898,000. Additionally, there were accelerated depreciation charges of $614,000, associated with the plant rationalization. Collado Joint Venture "Our joint venture with G. Collado S.A. de C.V. provides our customers with the flexibility to take advantage of the benefits Mexico offers many U.S. manufacturers," said Novich. In September, Ryerson Tull made an equity investment of $3.4 million to form the joint venture-Collado Ryerson. The ISO-9002 certified Collado Ryerson is the largest plate processing and fabrication facility in Mexico. "This high tech facility-located just across the border in Mexico-provides cross-border flexibility and world-class quality." Ispat Contingencies "We were also pleased to resolve the $90 million Ispat indemnification," said Novich. On September 15, 2003, Ryerson Tull settled all environmental and other indemnification claims related to the 1998 sale of Inland Steel Company to Ispat International N.V. Under the settlement, Ryerson Tull paid $21 million to the Ispat Inland Pension Plan-an amount covered by a previously established reserve. That payment immediately reduced Ryerson Tull's $50 million letter of credit/guaranty to the PBGC supporting the Ispat Inland Pension Plan. The settlement also provides that Ryerson Tull's remaining $29 million letter of credit will continue to be reduced, on a dollar for dollar basis, as Ispat makes monthly payments to its pension plan during 2004. "Our strong commercial relationship with Ispat Inland will continue." Pension Funding During the third quarter of 2003, Ryerson Tull made a voluntary contribution to its pension fund of $56 million, as disclosed in the second- quarter release. "This contribution improves our funded status and makes any required funding unlikely in 2004 and 2005," added Novich. Systems Upgrade In order to reduce operating costs, streamline its business processes, and upgrade its systems capabilities, Ryerson Tull plans to consolidate its four operating platforms into one integrated platform. Following extensive research into various software and hardware options over the past two years, the company entered into agreements with SAP America, Inc. and Perot Systems Solutions Consulting in the third quarter. To minimize risks, the company will test and implement the system in a phased process, from late 2004 through 2006. Total capital expenditures and implementation expenses for this project are estimated at approximately $30 million. "Based on the direct cost savings alone, this project carries a substantially positive internal rate of return," stated Novich. "Moreover, it will significantly enhance our customer service capabilities." Growth Initiative "In addition to the other initiatives announced or completed in the third quarter, we concluded the initial rollout of our growth program in September," continued Novich. "We are encouraged by the early results and have added new customers and reactivated former ones as a result of our marketing activities." Financial Condition "We entered the third quarter with strong liquidity, enabling us to make a planned $56 million pension contribution, complete the $21 million settlement with Ispat Inland, and finance changes in working capital, while ending the quarter with sufficient liquidity and a solid balance sheet," commented Novich. As of the end of the third quarter of 2003, the company had debt of $302.4 million, a debt-to-capital ratio of 43 percent, and approximately $105 million available under its credit facility. Outlook "We expect to generate many, long-term advantages from our strategic initiatives," concluded Novich. "On a near-term basis, we are evaluating additional cost cutting actions that, if taken, could result in a restructuring charge of $3 million to $7 million in the fourth quarter. And while we are starting to see a more constructive tone, in terms of end market demand, the fourth quarter is the slowest of the year." Fourth-quarter tonnage typically trails the third quarter, on a daily shipment basis, and there are four fewer shipping days in the quarter. * * * As reported in the Troubled Company Reporter's February 14, 2003 issue, Standard & Poor's Ratings Services lowered its corporate credit rating on metals processor and distributor Ryerson Tull Inc., to 'BB-' from 'BB' based on expectations that the current poor operating environment and the company's weak credit protection measures will continue. The current outlook is stable. Chicago, Illinois-based Ryerson has about $260 million in debt. SOLECTRON: Weak Credit Measures Spur Fitch to Cut Rating to BB- --------------------------------------------------------------- Fitch Ratings has removed Solectron Corporation from Rating Watch Negative and downgraded the company's senior unsecured debt to 'BB-' from 'BB' and adjustable conversion rate equity security units to 'B' from 'B+'. The senior secured bank credit facility is affirmed at 'BB+'. The Rating Outlook is Negative. Approximately $2.8 billion of debt securities is affected by Fitch's actions. The rating actions reflect Solectron's constrained credit protection measures, weak operating margins, and challenging but stabilizing demand environment. Also considered are Solectron's top-tier position in the electronic manufacturing services (EMS) industry, consistent free cash flow, and improved capital structure. The negative outlook reflects uncertainty regarding sustained profitability in the intermediate-term, execution risk of the company's ongoing restructuring programs, event risk related to pending asset divestitures and the nearly $1 billion liquid yield option notes (LYONs) puttable in May 2004. Fitch believes the rating outlook could be changed to stable if the company is successful in divesting assets in a timely manner and meeting its LYONs put, which Fitch expects will be settled with cash. Due to industry-wide over-capacity, continued pricing pressures, and inefficiencies related to past acquisitions, Solectron's operating earnings have been minimal for the last eight quarters. While weak profitability continues to constrain cash interest coverage, continued debt reduction has contributed to the meaningful improvement in Solectron's adjusted leverage ratio. Cash interest coverage (EBITDA-to-cash interest) remains weak at approximately 2.3x and down from 2.8x in fiscal 2002 and Fitch estimates it was below current covenant levels as of the fourth quarter of fiscal year 2003. Cash, free cash flow, and proceeds from various debt offerings have been used to reduce the company's overall adjusted debt levels to the current $2.0 billion from $3.0 billion in fiscal 2002 and $5.3 billion in fiscal 2001, mainly by reducing Solectron's LYONs. Adjusted leverage (total debt adjusted with ACES equity credit-to-EBITDA) was 7.4x at fiscal year end versus 9.8x one year ago. Fitch believes restructuring efforts, improving end markets, and meeting the LYONs put should result in further meaningful improvement of these key credit metrics in the intermediate term. Solectron recently reported its tenth consecutive quarter of restructuring charges. The company's efforts to reduce past acquisition-related overhead and shift productive assets from high-cost to low-cost regions are expected to be completed during fiscal year 2004. The company recently announced plans to divest certain businesses which are not considered core to the long-term strategy. These planned asset divestitures are expected to result in approximately $500-$600 million of cash proceeds throughout fiscal 2004, which will be used to partially satisfy the LYONs put in May 2004. Fitch believes Solectron's solid liquidity could ultimately be negatively affected by any material delay or reduction in cash proceeds from these asset divestitures. Fitch continues to recognize Solectron's strong industry position, the new management team's focused strategy, consistent debt reduction, and improved working capital management. The company has won significant new contracts from existing customers who have reported strengthening demand in end markets during the second and third calendar quarters of 2003. Also, Solectron has significantly reduced its cash-conversion-cycle to a Fitch estimated 53 days for the fourth quarter of 2003 from 69 days for the fourth quarter of 2002. Improvements are somewhat tempered by EMS industry-wide reductions in cash conversion cycles over the same period, and Solectron continues to lag its peer group. Liquidity remains solid with cash as of the fourth quarter ending August 31, 2003, totaling $1.5 billion and the company's $450 million bank facility was unutilized. The bank facility consists of both a $200 million 364-day revolver and a $250 million multi- year revolver expiring February 2004 and 2005, respectively. Gross total debt was $2.8 billion as of August 31, 2003, but was $2.0 billion adjusting for a 70% equity credit applied to the ACES. The approximately $1.1 billion of ACES mature in 2006 but will be remarketed in August 2004. Adjusted total debt consists of the aforementioned $1.0 billion of LYONS due 2020 but puttable to the company in May 2004, $150 million of senior unsecured notes due 2006, and $500 million of senior unsecured notes due February 2009. SOLUTIA: Third Quarter Balance Sheet Upside Down by $369 Million ---------------------------------------------------------------- Solutia Inc. (NYSE: SOI) reported a third quarter net loss of $178 million, or $1.70 per share, on net sales of $578 million. This compares to a loss from continuing operations for the third quarter of 2002 of $6 million, or 6 cents per share, on net sales of $574 million. The net loss for the third quarter of 2003 included charges of $156 million after tax or $1.49 per share. These charges included $5 million after tax related to the Company's adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," that was recorded as a cumulative effect of change in accounting principle for consolidating the variable interest entity which holds the Company's lease on its corporate headquarters building in St. Louis, Missouri. This charge was not included in previous communication as the accounting guidance as to the effective date of this adoption had not been finalized at the time of that communication. Additionally, the impact of adoption resulted in the consolidation of $37 million of fixed assets and $43 million of debt and, prospectively, will result in a reclass of approximately $3 million of rent expense to interest expense. The third quarter loss from continuing operations in 2003 also included charges of $151 million after tax resulting from several events. A charge of $76 million after tax was recorded for the previously announced Alabama PCB settlement and to increase certain other litigation accruals. This charge included $37 million after tax for the warrants issuable to Monsanto and represents the value determined as of the date of the courts approval of the settlement. The Astaris joint venture, in which the Company has a fifty percent ownership stake, recorded restructuring charges during the quarter to reduce fixed costs through selective product and facility rationalizations, including the Conda, Idaho, purified wet acid facility which has performed significantly below expectations established during the formation of the joint venture. Solutia's share of these charges was $57 million after tax. In addition, as required by SFAS No. 88, the Company recorded a pension settlement charge of $18 million after tax. The pension settlement was triggered by a significant level of year-to-date lump sum distributions from the Company's qualified pension plan, primarily related to headcount reductions. The third quarter loss from continuing operations in 2002 included a pension settlement charge of $8 million after tax and a legal settlement charge of $3 million after tax. After consideration of these charges, Solutia's results for the third quarter versus the year ago period were also negatively impacted by elevated raw material and energy costs, the extended down time at the acrylonitrile facility at the Alvin, Texas plant and lower sales volumes, offset to some extent by improved manufacturing performance and favorable currency exchange rates. "In the past few months, we settled the Alabama PCB litigation and we completed the refinancing of our credit facility. Notwithstanding these accomplishments, there is still much to be done to improve the overall operational and financial health of the Company," said John Hunter, chairman and chief executive officer. "We continue to take cost containment actions and we continue to focus on the significant financial issues ahead of us including addressing debt maturities, reducing our leverage, managing the continuing drain from legacy liabilities and satisfying our pension funding obligations. We will continue to explore all alternatives to properly address these issues," Hunter said. Year-to-Date Results from Continuing Operations For the nine months ended September 30, 2003, Solutia's loss from continuing operations was $228 million, or $2.18 per share, on net sales of $1,785 million. The loss from continuing operations for the first nine months of 2003 included the aforementioned charges of $151 million incurred during the third quarter, an environmental charge of $17 million after tax for the Anniston, Alabama partial consent decree and charges of $19 million after tax primarily related to workforce reductions of approximately 460 positions and restructuring charges at the Flexsys and Astaris joint ventures, partially offset by a gain of $3 million after tax from the recovery of a previously written off customer account. This compares to income from continuing operations for the first nine months of 2002 of $9 million, or 9 cents per share, on net sales of $1,679 million. Earnings from continuing operations for the nine months ended September 30, 2002, included a gain of $3 million after tax from the sale of Solutia's interest in the Advanced Elastomer Systems joint venture, a pension settlement charge of $8 million after tax and a legal settlement charge of $3 million after tax. The decline in earnings for the first nine months of 2003 was primarily due to elevated raw material and energy costs, increased interest expense and lower sales volumes offset to some extent by higher sales prices, favorable currency exchange rate fluctuations and improved manufacturing operations. Segment Data Performance Products and Services' net sales for the third quarter of 2003 increased $7 million compared to the same period of 2002 primarily due to strengthened foreign currencies and modestly higher volumes. This sales increase was primarily in the Performance Films product lines and in Industrial Products. Pharmaceutical Services had a quarterly sales decline due to lower volumes. Performance Products and Services' profitability in the quarter increased $3 million versus the prior-year quarter. This increase was primarily due to higher net sales and favorable manufacturing variances, partially offset by higher raw material costs. For the first nine months of 2003, Performance Products and Services' net sales increased $42 million over the comparable prior year period primarily due to favorable currency exchange rate fluctuations and modest volume gains. Segment profitability increased $2 million primarily because of increased sales volume, lower marketing, administrative and technological expenses, and favorable manufacturing operations partially offset by severance charges associated with workforce reductions and increased raw material costs. Integrated Nylon's net sales for the third quarter of 2003 decreased $3 million compared to the third quarter of 2002 because of volume declines in acrylic fibers, partially offset by higher average selling prices. Price increases occurred principally in nylon intermediate chemicals. In addition, carpet fibers recorded modest improvements in average selling prices and volumes. Acrylic fiber sales volumes were down considerably reflecting weakness in the U.S. textiles industry which prompted the previously announced downsizing of this business. Integrated Nylon's segment profitability decreased $16 million over the prior year quarter. This was primarily due to higher raw material and energy costs of approximately $18 million and the extended down time at the acrylonitrile facility at the Alvin, Texas plant, offset by cost containment activities completed in the current year. For the first nine months of 2003, Integrated Nylon's net sales increased $64 million over the comparable prior year period because of higher average selling prices, partially offset by sales volume declines principally in acrylic fiber. Segment profitability declined by $64 million primarily because of approximately $125 million of higher raw material and energy costs and severance charges associated with cost reduction initiatives, partially offset by increased sales. Liquidity Cash provided by continuing operations was $45 million in the third quarter of 2003, compared to $18 million in the third quarter of 2002. Solutia reported free cash flow (cash flow from continuing operations less capital expenditures as presented on the statement of cash flows) of $32 million for the third quarter, after funding $13 million of capital expenditures. This compares to free cash flow of $1 million in the third quarter of 2002, after funding $17 million of capital expenditures. The increase in free cash flow was principally due to a $25 million advance payment received from Monsanto during the quarter for goods to be shipped over the next year, and no voluntary contributions to the qualified pension plan, partially offset by lower earnings. In exchange for the advance payment received from Monsanto, Solutia agreed to a modification of an existing supply contract. Cash and available borrowings as of September 30, 2003, after taking into consideration the impact of the new credit facility which was completed on October 9, 2003, was approximately $150 million. As of September 30, 2003, Solutia Inc. records a total shareholders' deficit of $369 million compared to $249 million as of December 31, 2002. Outlook While some broad indicators have shown recent evidence of a domestic economic recovery, we, like many of our peers, have not experienced the recovery and we remain guarded as to its timing and pace. Given the recent rise in energy costs, sluggish demand and weak consumer confidence, we do not expect a meaningful improvement in operating results for the fourth quarter 2003 or first quarter 2004. Accordingly, and consistent with the terms of our new credit facility, no dividends will be paid in the calendar year 2003. Solutia -- http://www.Solutia.com-- (Fitch, B- Senior Secured Bank Facility and CCC Senior Secured Notes Ratings, Negative) uses world-class skills in applied chemistry to create value-added solutions for customers, whose products improve the lives of consumers every day. Solutia is a world leader in performance films for laminated safety glass and after-market applications; process development and scale-up services for pharmaceutical fine chemicals; specialties such as water treatment chemicals, heat transfer fluids and aviation hydraulic fluid and an integrated family of nylon products including high-performance polymers and fibers. SPIEGEL GROUP: Bringing-In Assessment Tech as Tax Consultants ------------------------------------------------------------- Assessment Technologies, Ltd., is one of the largest ad valorem tax consulting firms in the Southwest with more than 40 tax professionals operating in its offices in Houston and San Antonio, Texas. Assessment's staff is comprised of economists, appraisers, tax strategists and client service professionals. Due to its excellent track record of producing significant tax savings, Assessment has been employed by numerous companies to provide tax consulting services throughout the country. The Spiegel Group Debtors determined that Assessment will ensure the most economic and effective means for them to be represented in their Chapter 11 cases while continuing to operate their businesses. Moreover, Assessment has stated its desire and willingness to act as the Debtors' property tax consultants and render the necessary professional services required. Accordingly, the Debtors seek the Court's authority to employ Assessment Technologies, Ltd. as their property tax consultants in connection with their Chapter 11 cases on the terms and conditions set forth in the parties' Service Agreement dated August 25, 2003. As property tax consultants, Assessment will: (a) review the current and proposed tax assessments on the Debtors' properties including supporting data, calculations and assumptions produced by the appropriate appraisal or assessing authority, as well as information provided by the Debtors; (b) represent the Debtors before appropriate tax assessing or collecting authorities using reasonable and appropriate means to negotiate the lowest possible assessment or tax claim amount; and (c) use local, state or federal remedies available. Assessment will be paid these fees for each tax year on a contingent fee basis: (a) Category I Fees: 35% of the Tax Savings on tax liabilities, which meet or exceed $50,000 per annum; and (b) Category II Fees: 45% of the Tax Savings on tax liabilities, which are less than $50,000 per annum. Fee category selection is determined on individual tax accounts and individual tax years and the path of resolution pursuit. The aggregate tax normally is represented when working through state administrative proceedings. However, when multiple taxing entities subdivide their interests into an individual taxing unit's claims, the subdivided tax applies as a determinant of the fee category. Tax Savings is defined in the Service Agreement as: * The positive difference between the proposed assessed valuation and final assessed valuation for the property for each tax year, multiplied by that year's tax rate; * Refunds, credits, interest, reductions in claims and other tax offsets; * Reduction in taxes arising from correction of errors in the tax roll for prior tax years; and * Reduction of penalties or interest payables. Furthermore, in the event a final assessed valuation is negotiated in advance of the formal posting of a proposed assessed value, the proposed assessed valuation for purposes of determining Tax Savings will be calculated by adding capital additions to the property for the past year to the prior year's original assessment, less any current year depreciation in value according to the Assessor's published schedule. In addition, the Service Agreement provides that Assessment's fees will be paid by the Debtors within 30 days of the Debtors' Actual Receipt of the Tax Savings. Actual Receipt is defined as: (1) if the Tax Savings is in the form of a refund, the date on which the refund is received by the Debtors and available for deposit in the Debtors' bank accounts; and (2) if the Tax Savings is in any form other than a refund, the date the Tax Savings is created, either by written agreement between the tax office and the Debtors or by a court order. The Debtors are not obligated to pay any fees to Assessment with respect to Tax Savings generated in future tax returns that incorporate discoveries and tax positions made by Assessment pursuant to the Service Agreement. Moreover, Assessment is responsible for paying all special property tax counsel legal fees, third party appraisal fees and any other fees incurred by Assessment in pursuing Tax Savings under the Service Agreement. Assessment will not maintain time records for the services it performs pursuant to the Services Agreement, because Assessment is seeking to be compensated on a contingency fee basis based on a percentage of the Debtors' Tax Savings rather than billing on an hourly basis. Assessment will, however, be keeping reasonably detailed descriptions of the services that are rendered pursuant to its engagement. Given the transactional nature of its engagement and the contingency arrangement, Assessment has further advised the Debtors that it seeks relief from complying with the monthly and interim fee application requirements pursuant to the Procedures for Monthly Compensation and Reimbursement of Expenses of Professionals. Instead, Assessment proposes to submit detailed invoices for payment of compensation to the Debtors, the U.S. Trustee and the Committee. During the course of its engagement, Assessment may employ special property tax counsel, third party appraisers and other persons or entities to assist the firm in providing property tax consulting services to the Debtors. James Hausman, Assessment's Senior Vice President, relates that: (a) Assessment will be solely responsible for the compensation of the Subcontractors; (b) The Debtors will not be liable to Assessment's Subcontractors for any fees and expenses incurred in connection with the subcontractors' employment in the Debtors' Chapter 11 cases; and (c) Assessment's Subcontractors will have no rights of any kind under, or with respect to, the Service Agreement or the Debtors. Mr. Hausman assures the Court that Assessment represents no interest adverse to the Debtors or their estates in the matters for which Assessment is to be employed. Furthermore, Assessment is a "disinterested person," as defined in Section 101(14) of the Bankruptcy Code. (Spiegel Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) SR TELECOM: Third Quarter Results Conference Call is on Thursday ---------------------------------------------------------------- OPEN TO: Analysts, investors and media DATE: Thursday, October 30, 2003 TIME: 10:00 A.M. Eastern Standard Time CALL: 514-807-8791 (FOR ALL MONTREAL AND OVERSEAS PARTICIPANTS) 1-800-814-4890 (FOR ALL OTHER NORTH AMERICAN CALLERS) Dial-in 15 minutes before the conference begins. If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 21023183(pound key) on your phone. This recording will be available on Thursday, October 30 as of 12:00 P.M. until 11:59 P.M. on Thursday, November 6. An archive of the conference call will also be available at http://www.srtelecom.com, http://www.newswire.caor at http://www.q1234.com. SR TELECOM (S&P, B+ Corporate Credit and Senior Unsecured Debt Ratings) is a world leader and innovator in Fixed Wireless Access technology, which links end-users to networks using wireless transmissions. SR Telecom's field-proven solutions include equipment, network planning, project management, installation and maintenance services. The Company offers the industry's broadest portfolio of fixed wireless products, designed to enable carriers and service providers to rapidly deploy high-quality voice, high- speed data and broadband applications. These products, which are used in over 110 countries, are among the most advanced and reliable available today. SUREBEAM CORPORATION: Secures $5 Million in Equity Financing ------------------------------------------------------------ SureBeam Corporation (Nasdaq: SUREE) announced it has secured approximately $5 million in equity financing from three institutional investors in the form of a private placement. The proceeds will be used for working capital needs and general corporate purposes. "This new infusion of cash has given us additional time to work to complete our review and refocus on a more profitable business model," said Terrance J. Bruggeman, SureBeam's president and chief executive officer. "We will continue to evaluate current processes and procedures as we develop a new business strategy. I appreciate these investors' confidence in our company." Financing Details The financing consists of 673 shares of newly-created Class A Convertible Preferred Stock. The Preferred Stock is convertible into shares of the company's common stock at a conversion price of $0.95 per share. Including the anticipated net proceeds of the offering of $4.5 million, as of October 22, 2003, the company had available cash of approximately $7.5 million. As part of the transaction, SureBeam also issued to the investors warrants entitling them to purchase, for a five-year period, an aggregate of up to approximately 2,700,000 shares of common stock, at an exercise price of $1.00 per share. Financial Update The company has filed a Form 8K-A with the Securities and Exchange Commission detailing the terms of the financing. The report also provides updates on the company. As of September 30, 2003, we had cash and cash equivalents of approximately $3.6 million, as compared with $27.3 million at December 31, 2002 and $11.8 million at June 30, 2003. As previously disclosed, we have implemented a cost reduction plan, and we are studying our business model to identify further non-essential expenditures. As a result of our continued losses and current cash resources, we will need to raise additional funds through public or private equity or debt financings, collaborative relationships or other arrangements in order to execute our business strategy and continue our operations. If our common stock is delisted from NASDAQ, as discussed below, it may have a detrimental impact upon our ability to obtain additional capital through equity financings. As previously disclosed, for the distribution of our stock by The Titan Corporation ("Titan") to continue to qualify as tax- free, there must not be a change in ownership of 50% or more in either the voting power or value of either our stock or Titan's stock that is considered to be part of a plan or a series of related transactions related to Titan's distribution of our stock to its stockholders. Accordingly, we believe that our completion of the offering of the Preferred Stock may limit us from engaging in any further equity financing until August 2004, when the restrictions on equity issuances from the tax-free distribution expire. In connection with our spin-off from Titan, we agreed that we would not take any action that would cause the spin-off to be taxable to Titan. Corporate Governance As previously disclosed, on August 21, 2003, we dismissed Deloitte & Touche LLP as our independent auditor. As of the date of this report, we do not yet have a successor independent auditor. Therefore, we have been unable to complete an auditor review of our Form 10-Q for the quarter ended June 30, 2003 (the "Form 10- Q"), and file such Form 10-Q. As previously disclosed, due to our failure to file the Form 10-Q, we have been notified by NASDAQ that we were in violation of its rules and that our common stock could be delisted from the NASDAQ. On September 25, 2003, we had a hearing before a NASDAQ Listing Qualifications Panel to review issues related to the late filing of the Form 10-Q, including whether our common stock would continue to be listed on NASDAQ. We have not yet been informed as to the outcome of the hearing; however, we expect to be notified by NASDAQ as to the outcome of the hearing during October 2003. As previously disclosed, effective September 30, 2003, Jack A. Henry, resigned from his positions as Director, member of our Compensation Committee, and member and chairman of our Audit Committee. This left our Audit Committee with only two members while NASDAQ rules require our Audit Committee to have three members. NASDAQ contacted us regarding our noncompliance with its Audit Committee requirements and reiterated that continued listing on the NASDAQ requires compliance with its rules. We are currently conducting interviews of additional Director and Audit Committee candidates. Our Audit Committee engaged a national accounting firm as of August 26, 2003, to conduct an independent review and evaluation of various accounting issues raised by Deloitte and Touche LLP, our previous auditors. Our Audit Committee has also engaged Latham & Watkins to act as special counsel to the Audit Committee to assist it in conducting its review of the accounting and auditor issues facing SureBeam. "While we navigate these difficult times, we remain focused on the importance of our life-saving solution to serious public health problems," said Mr. Bruggeman. "Going forward, we expect SureBeam's patented processes to play a key role in improving the quality of life by helping to eliminate food-borne illnesses, helping to reduce food and flower infestation, and reducing spoilage to extend the shelf life of fruits and vegetables." Headquartered in San Diego, California, SureBeam Corporation operates processing service centers located in Glendale Heights, Illinois; Sioux City, Iowa; College Station, Texas; and Rio de Janeiro, Brazil. The Company is a leading provider of electron beam food safety systems and services for the food industry. SureBeam's technology significantly improves food quality, extends product freshness, and provides disinfestation that helps to protect the environment. The SureBeam patented system is based on proven electron beam and x-ray technology that destroys harmful food-borne bacteria much like thermal pasteurization does to milk. This technology can also eliminate the need for toxic chemical fumigants used in pest control that may be harmful to the earth's ozone layer. * * * Liquidity and Capital Resources In its latest Form 10-Q filed with Securities and Exchange Commission, SureBeam Corporation reported: "We have used cash principally to construct systems for our strategic alliances and fund working capital advances for these strategic alliances, to construct our company-owned service center and systems in Brazil, and to fund our working capital requirements. We spend significant funds to construct systems for our strategic alliances in advance of payment. We also are spending significant funds on sales and marketing efforts relating to brand recognition and consumer acceptance programs. In addition, our service centers have operated at losses using significant funds. At March 31, 2003, we had available cash and cash equivalents of $20.2 million and restricted cash of $1.3 million. The restricted cash represents the money received as payment on our RESAL contract in anticipation of our first shipment of equipment. The cash will become unrestricted upon our shipment, which is scheduled for the second quarter of 2003. Status of Our $50.0 Million Credit Facility with Titan "During 2002, Titan extended to us a senior secured credit facility under which we could borrow up to a maximum of $50.0 million, subject to the terms and conditions of the credit facility. As of May 7, 2003, we have borrowed $25.0 million on this credit facility. The credit facility allows us to borrow, in addition to our previous borrowings, up to a maximum of $12.5 million per quarter through the fourth quarter of 2003, subject to the $50.0 million cumulative limitation on borrowing and the other terms and conditions of the credit facility. We are unable to borrow additional amounts if our cash balance is greater than $5.0 million. "We have not borrowed additional amounts on the credit facility since October 30, 2002, and, we do not anticipate borrowing, or being able to borrow, additional amounts on the credit facility during 2003 or during the remaining period that the credit facility is outstanding. As of March 31, 2003, we were in compliance with all covenants of the credit facility, however, we were not able to borrow additional funds during the second quarter because we did not meet the earnings before interest, taxes, depreciation and amortization (EBITDA) target for the first quarter of 2003 in our annual operating plan. We do not anticipate that we will have availability under the credit facility during the remaining period that the credit facility is outstanding. "We are obligated, with some exceptions, to use net proceeds from the sale of assets and securities to repay amounts advanced under the credit facility. During March 2003, the credit facility was amended to allow us to receive net proceeds of up to $25.0 million resulting from transactions involving the issuance of equity securities through September 30, 2004, without having to apply such net proceed towards repayment of the credit facility, provided that no default or event of default had occurred. We are required to make a mandatory prepayment on the credit facility in an amount equal to 50% of any net proceeds in excess of $25.0 million resulting from transactions involving the issuance of equity securities. "Under our credit facility, we are obligated to make minimum quarterly principal payments as follows: 13.75% of the outstanding principal balance as of December 31, 2003 during each quarter in 2004; 25% of the outstanding principal balance as of December 31, 2004 during each quarter in 2005; and, all remaining principal by December 31, 2005. The interest rate is Titan's effective weighted average term debt rate under Titan's credit agreement plus three percent. As of March 31, 2003, the interest rate on the credit facility was 7.92%. Interest is payable monthly beginning in January 2003. Through May 7, 2003, we have paid $1.4 million of interest related to the credit facility. The credit facility is secured by a first priority lien on all of our assets. Credit Facility Availability "During the quarter ending March 31, 2003, the maximum amount available for borrowing pursuant to the credit facility was $12.5 million, subject to the terms and conditions of the credit facility. The maximum amount available for borrowing in each of the second, third and fourth quarters of 2003 is based upon our earnings before interest, taxes, depreciation and amortization for the prior quarter as a percentage of the EBITDA target in our annual operating plan. "If actual EBITDA is negative $2.4 million or higher for the quarter ending March 31, 2003, then up to 100% of the quarterly maximum or $12.5 million will be available for borrowing during the quarter ending June 30, 2003. If our actual EBITDA is negative $3.0 million during the quarter ending March 31, 2003, then up to 50% of the quarterly maximum or $6.3 million will be available for borrowing during the quarter ending June 30, 2003. If our actual EBITDA is between negative $2.4 million and negative $3.0 million during the quarter ending March 31, 2003, then the maximum amount available for borrowing during the quarter ending June 30, 2003 shall be determined by linear interpolation between $6.3 million and $12.5 million. If our actual EBITDA is lower than negative $3.0 million for the quarter ending March 31, 2003, no amounts will be available for borrowing through the credit facility during the quarter ending June 30, 2003. No amounts are available for borrowing during the second quarter because our EBITDA was $6.8 million and therefore is less than the negative $3.0 million target. "For the quarter ending June 30, 2003, our target EBITDA is $505,000. If our actual EBITDA for the quarter ending June 30, 2003 is positive, but less than $126,000, or 25% of the target EBITDA, then the maximum amount available in the quarter ending September 30, 2003, would be $5.0 million, provided that no amounts would be available unless we covenant during the quarter ended September 30, 2003 to limit our total operating expenses (defined as research and development and selling, general and administrative expenses) to $5.0 million. No amounts would be available under the credit facility during the quarter ended September 30, 2003, if we have negative EBITDA for the quarter ending June 30, 2003. If our actual EBITDA for the quarter ended June 30, 2003 is $126,000, or 25% of the target EBITDA, then the maximum amount available in the quarter ended September 30, 2003, would be $6.3 million or 50% of the quarterly maximum and for each percentage of actual EBITDA above $126,000, or 25% of target EBITDA, the percentage of the quarterly maximum above 50% would be increased on a pro rata basis. "For the quarter ending September 30, 2003, our target EBITDA is $4.1 million. Therefore, if our actual EBITDA for the quarter ended September 30, 2003 is positive, but less than $1.0 million, or 25% of the target EBITDA, then the maximum amount available in the quarter ended December 31, 2003, would be $5.0 million, provided that no amounts would be available unless we covenant during the quarter ended December 31, 2003 to limit our total operating expenses (defined as research and development and selling, general and administrative expenses) to $5.0 million. No amounts would be available under the credit facility during the quarter ending December 31, 2003, if we have negative EBITDA for the quarter ending September 30, 2003. If our actual EBITDA for the quarter ended September 30, 2003 is $1.0 million, or 25% of the target EBITDA, then the maximum amount available in the quarter ended December 31, 2003, would be $6.3 million or 50% of the quarterly maximum and for each percentage of actual EBITDA above $1.0 million, or 25% of target EBITDA, the percentage of the quarterly maximum above 50% would be increased on a pro rata basis. "We do not anticipate that we will have further availability under the credit facility during the remaining period that the credit facility is outstanding. "The credit agreement also includes covenants limiting our incurrence of debt, investments, declaration of dividends and other restricted payments, sale of stock of subsidiaries and consolidations and mergers. The credit agreement, however, does not contain any financial covenants requiring us to maintain specific financial ratios. "In addition, Titan has guaranteed some of our lease obligations, and we are obligated to reimburse Titan for any payments they make under these guaranties. Any guarantee payments Titan makes reduces amounts available for future borrowing under the credit agreement. We will pay Titan a monthly fee of 10% of the guaranteed monthly payments. Some of the guaranteed leases have longer terms than the credit facility. If Titan remains a guarantor at the maturity date for the credit facility, then we plan to enter into a reimbursement agreement with Titan covering the outstanding guarantees. "For the three months ended March 31, 2003, we used cash in operations of $5.7 million as compared to having cash provided by operations of $5.5 million for the three months ended March 31, 2002. During the first quarter of 2003, our net loss plus depreciation and amortization were offset by an increase in working capital usage, particularly an increase in accounts receivable related to the increase of our unbilled receivables and restricted cash and was offset by the decrease in the amount due from Titan due to the $8.7 million we received for payment on our receivables during the quarter. Also during the quarter, we received $1.3 million of restricted cash related to a payment made based in a milestone payment on our RESAL contract. The release of the funds is tied to our initial shipment of equipment to Saudi Arabia that was delayed due to the war in Iraq but is now scheduled to ship in the second quarter of 2003. For the three months ended March 31, 2002, our net loss plus depreciation and amortization were offset by an increase in working capital usage, particularly an increase in our unbilled receivables and inventories and was offset by the decrease in the amount due from Titan due to the $19.5 million we received as payment on our receivables during the quarter. "We used approximately $1.5 million and $437,000 for investing activities for the three months ended March 31, 2003 and 2002, respectively. For the three months ended March 31, 2003 we had capital expenditures of $1.5 million primarily related to the continued construction of our company owned service centers. "The [Company's] consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended March 31, 2003, we have incurred substantial losses from operations and investments in infrastructure. Management believes that as we continue to expand significant funds on, sales and marketing, it is not anticipated that our revenues will sufficiently offset these expenses until at least 2004. Additionally, our construction and implementation period for systems sales to strategic alliances require a substantial use of cash for at least 12 to 18 months. Our arrangements to sell food irradiation systems to strategic alliances typically contain milestone provisions for payment, which are typically based upon time, stage of completion, and other factors. As a result, our unbilled receivables from our customers have increased $1.7 million for the three months ended March 31, 2003. Also, we have advanced funds aggregating $6.0 million to Hawaii Pride of which $230,000 was advanced during the three months ended March 31, 2003 and is included in selling, general and administrative expense in the accompanying consolidated financial statements. These advances were used primarily for land acquisition, for facility construction and for working capital purposes. We are not obligated to continue the funding of Hawaii Pride. We also have entered into a number of commitments to lease land and facilities in connection with construction of our four company-owned service centers all of which are operational. In addition, based on our customer requirements, we may expend funds to construct and install in-line systems that we will own and operate. "In addition to our current operating plans, which focus on increasing cash flow from operations, we are also evaluating a number of alternative plans to meet our future operating cash needs. These plans include raising additional funds from the capital markets. As of the date of the filing of this report, we have obtained $25.0 million under the senior secured credit facility with Titan. We do not anticipate making any additional borrowings under this credit facility. If the funds available from the capital markets are not available or not sufficient for us, or if we are unable to generate sufficient cash flow from operations, we may need to consider additional actions, including reducing or deferring capital expenditures, reducing or deferring research and development projects, curtailing construction of systems for customers in advance of payment and reducing marketing expenditures, which actions may have a material adverse impact on our ability to meet our business objectives. "At March 31, 2003, we had $20.2 million of cash and cash equivalents and $1.3 million of restricted cash. We believe that this balance will be sufficient to meet our cash needs through 2003. However, a variety of currently unanticipated events could require additional capital resources such as the acquisition of complementary businesses or technologies or increased working capital requirements to fund, among other things, construction of systems for our strategic alliances in advance of payment. Additionally, if our requirements vary from our current plans, we may require additional financing sooner than we anticipate. An inability in such circumstance to obtain additional financing on terms reasonable to us, or at all, could have a material adverse effect on our results of operations and financial condition." STELCO: Long-Term Credit Rating Down to B- over Poor Liquidity -------------------------------------------------------------- Standard & Poor's Ratings Services said it lowered the long-term corporate credit rating on integrated steel producer Stelco Inc. to 'B-' from 'B'. At the same time, the senior unsecured debt ratings on Stelco were lowered to 'CCC+', and the ratings on the subordinated notes were lowered to 'CCC'. The ratings remain on CreditWatch with negative implications. "The ratings were lowered due to the company's liquidity position, which declined a further C$26 million in third-quarter 2003," said Standard & Poor's credit analyst Donald Marleau. This is compounded by a deteriorating competitive position and increasingly limited options to stabilize its finances. Stelco will require significant changes in its cost structure to ensure its viability, particularly as several major steel producers in North America have restructured their operations and improved their cost profiles. At the end of third-quarter 2003, the company might only have liquidity to sustain its operations through mid to late 2004. The company is not in violation of any covenants that would result in loans being called. Stelco is currently generating a cash loss per ton, despite operating near full capacity. Management is undertaking a wide- ranging strategic review with the goal of enhancing the company's cost competitiveness. Although such an improvement may be achievable without entering a formal restructuring process, the company could enter Companies' Creditors Arrangement Act proceedings to effect the requisite reorganization. Stelco's financial performance is expected to be very weak in the medium term. To prevent ratings from being lowered further, the company must take actions in the next four months to improve liquidity and position itself to generate positive cash from operations. If steel prices do not improve in early 2004 or the company cannot eliminate sufficient costs, the ratings will be lowered. Hamilton, Ontario-based Stelco is the largest steel producer in Canada, with both integrated and mini-mill production of rolled and manufactured steel products at several production sites. In 2002, Stelco shipped 4.7 million tons of steel, equal to about one-quarter of all Canadian steel consumption. About 85% of Stelco's sales are in Canada, with the remainder primarily in the U.S. SUNRISE APARTMENTS: Fitch Further Junks Series A Revenue Bonds -------------------------------------------------------------- City of Indianapolis, Indiana multifamily revenue bonds (Sunrise Apartments Project), $3.3 million series A bonds are downgraded to 'C' from 'CCC' by Fitch Ratings. The bonds are secured by a first mortgage on a 320-unit multifamily property known as Sunrise Apartments. The property was built in 1974 and is located in Indianapolis, Indiana. Federal and state laws require that the property offer 20% of its units to families whose income is at, or below, 50% of the area's median income. Fitch's rating action is a result of the property's weak operating performance, the exhaustion of the Series A debt service reserve balance, and the limited availability of refinancing options. Based on discussions with TESCO Properties, the Property's management agent, Fitch is concerned about the transactions near term outlook and its ability to cover the next bond payment in December 2003. Fitch will continue to monitor this transaction, as surveillance is ongoing. TENET HEALTHCARE: S&P Lowers and Keeps Neg. Outlook on Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on health care service provider Tenet Healthcare Corp. to 'BB-' from 'BB'. The outlook remains negative. Tenet, based in Santa Barbara, California, had about $4.0 billion of debt as of June 30, 2003. "The downgrade reflects even weaker-than-expected profitability, and as a result, possibly weaker liquidity at Tenet," said Standard & Poor's credit analyst David Peknay. "These issues, in addition to other rating concerns of yet undetermined magnitude, indicate a credit profile more reflective of the lower rating." The unsecured bank loan is rated the same as the corporate credit rating, as bank lenders will fare no better than other unsecured lenders in the unlikely event of default. A key factor contributing to further declines in Tenet's profitability is a large increase in its bad debts. The company announced that it expects to take a charge of $200 million to $225 million to write down accounts receivable, and it will incur $240 million to $290 million in additional bad debt expense. Such an increase in bad debts is recognized as a growing issue in the hospital sector, one that is usually considered at some reasonable level in the ratings of other hospital companies. In Tenet's particular case, however, the bad debt expense include receivables from managed-care companies, which may indicate that renegotiations between Tenet and these payors over pricing may be more severe than anticipated. Although the portion of the write- off attributed to managed care is not large, and by itself would not be a concern, future earnings and cash flow may be weaker as the resultant "rebasing" of managed-care contracts rates may be lower than expected. It is also unclear what impact the company's announced cost reduction efforts will have on operating results. TERRA INDUSTRIES: Will Webcast Q3 Conference Call on October 30 --------------------------------------------------------------- Terra Industries Inc. (NYSE: TRA) announced that it has scheduled the webcast of its third quarter results conference call at 3:00 p.m. EST on Oct. 30, 2003. During the call, Terra President and CEO Michael Bennett, Chief Financial Officer Frank Meyer and Chief Administrative Officer Mark Rosenbury will discuss Terra Industries Inc.'s third quarter results. Persons wishing to listen to the webcast may register at http://www.firstcallevents.com/service/ajwz392035999gf12.htmlany time prior to the event. A recording of the webcast will be archived on Terra's web site for three months. Interested persons may listen to the archive by registering at the address above. The minimum requirement for listening to the broadcast is Windows Media Player software, (downloadable free from http://www.microsoft.com/windows/windowsmedia/EN/default.asp) and at least a 28.8 kbps connection to the Internet. Terra Industries Inc., with 2002 revenues of $1 billion, is a leading international producer of nitrogen products and methanol. * * * As reported in the Troubled Company Reporter's August 26, 2003 edition, Fitch Ratings downgraded Terra Industries' senior secured credit facility and senior secured notes to 'B+' from 'BB-' and has affirmed the senior secured second priority notes rated 'B-'. Fitch withdraws the rating for the senior unsecured notes which were rated 'B-'. The notes have been placed on Rating Watch Negative. The ratings downgrade reflects Terra's weak operating result's during the second quarter, higher than expected leverage; its exposure to natural gas price volatility; and a decline in the company's liquidity. This level of performance was expected to a certain degree, considering the poor volumes sold during the spring planting season and the higher average natural gas costs (a raw material). Unfortunately, performance was so weak that Terra had to draw on its previously undrawn credit facility. Looking forward, Q3 is of particular concern from a liquidity standpoint. The risk is that margins will remain negative and operations will use cash rather than provide cash. This situation would require continued use of the credit facility to fund cash needs. Continued use of the credit facility could force Terra to violate its minimum cash flow/EBITDA and minimum availability covenants. Moreover, the availability of the credit facility has declined, leaving Terra in a potentially vulnerable situation where the company is unable to meet interest payments. Improvement in cash flow will be affected by demand (fall season and spring prepayments) and margin. The Negative Watch captures the uncertainty in near-term future performance, the potential for covenant violations and the possibility of further liquidity deterioration. TOBACCO ROW PHASE 1A: Case Summary & 20 Largest Unsec. Creditors ---------------------------------------------------------------- Debtor: Tobacco Row Phase 1a Development, L.P. 2 South Street Richmond, Virginia 23219 Bankruptcy Case No.: 03-40033 Type of Business: The Company owns the Tobacco Row apartment buildings, which are in three former tobacco warehouse buildings, called the Cameron, Cameron Annex and Kinney buildings. Chapter 11 Petition Date: October 22, 2003 Court: Eastern District of Virginia (Richmond) Judge: Douglas O. Tice Jr. Debtor's Counsel: Bruce H. Matson, Esq. Christopher A. Jones, Esq. John Russell Bollinger, Esq. LeClair Ryan 707 East Main St., 11th Floor Richmond, VA 23219 Tel: 804-916-7104 Fax: 804-916-7204 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ McCormack Baron Ragan Trade Debt $119,311 Mgmt. Services McCormack Baron Salazar Trade Debt $61,702 SunAmerican Affordable Trade Debt $50,000 Housing AFCO Trade Debt $43,288 Troutman Sanders Trade Debt $21,996 Carpets by Jerry Pope Trade Debt $8,025 Maintenance Warehouse Trade Debt $4,770 Nixon Peabody, LLP Trade Debt $3,115 Aaron Rents, LLP Trade Debt $2,925 Gorden's Quality Painting Trade Debt $2,675 Network Multi-Family Trade Debt $2,565 Security Hughes Maintenance Repair Trade Debt $1,766 Simplex Grinnell, Inc. Trade Debt $1,461 Otis Elevator Trade Debt $1,157 Standby Systems, Inc. Trade Debt $1,144 For Rent Magazine Trade Debt $994 Browning Ferris Industries Trade Debt $839 Wilmar Industries Trade Debt $716 Fitness Resource, Inc. Trade Debt $671 R.E. Michel Company, Inc. Trade Debt $669 UBIQUITEL INC: Reports Third Quarter Subscriber Results ------------------------------------------------------- UbiquiTel Inc. (Nasdaq: UPCS), a PCS Affiliate of Sprint (NYSE: FON, PCS), reported subscriber results for the third quarter ended September 30, 2003. -- Net adds for the quarter were approximately 13,200, excluding resellers, bringing the ending subscriber base to approximately 305,000, excluding resellers. 73% of total subscribers were in the prime credit classes. UbiquiTel obtained an amendment to its senior secured credit facility on October 10, 2003 that made the company in compliance with the minimum subscriber covenant for the quarter ended September 30, 2003. -- As previously guided, churn increased to 3.4%, from 2.9% in the second quarter 2003, but down significantly from third quarter 2002 churn of 4.3%. The sequential increase in churn resulted primarily from an increase in voluntary deactivations. "UbiquiTel maintained our commitment to quality growth in the third quarter as evidenced by the 90% prime mix in our net subscriber additions," said Donald A. Harris, chairman and chief executive officer of UbiquiTel Inc. "Our focus on PCS Vision resulted in 57% of our gross subscriber additions purchasing Vision-capable handsets, increasing our revenue potential from 3G data usage." The company earlier announced that it will issue a press release summarizing its quarterly results after the market closes on Tuesday, November 11, and conduct a conference call on Wednesday, November 12, at 10:30 a.m., to discuss its results for the three months ended September 30, 2003 and provide guidance for the fourth quarter 2003. UbiquiTel (S&P, CCC Corporate Credit Rating, Developing) is the exclusive provider of Sprint digital wireless mobility communications network products and services under the Sprint brand name to midsize markets in the Western and Midwestern United States that include a population of approximately 10.0 million residents and cover portions of California, Nevada, Washington, Idaho, Wyoming, Utah, Indiana and Kentucky. UNITED AIRLINES: Exploring Alternatives for Expanding Operations ---------------------------------------------------------------- United Airlines (OTC Bulletin Board: UALAQ) issued the following statement: "United will remain a competitive force at Dulles International Airport and on the routes currently served by United Express with Atlantic Coast Airlines (ACA) as our service provider. Our contract with ACA remains in effect through 2010, and as such ACA is obligated to continue providing service to our customers. We remain committed to the United Express business model, and have been negotiating with ACA to reach a competitive agreement similar to those reached with other carriers within that model. Contrary to speculation, it is absolutely untrue that we have had any involvement in Mesa's offer to ACA. Because ACA has now made it clear they do not wish to reach a competitive United Express agreement, United will explore all the alternatives for providing United Express operations out of Dulles, including entering into a regional jet agreement similar to those United has recently reached with its current United Express carriers." United and United Express operate more than 3,300 flights a day on a route network that spans the globe. News releases and other information about United can be found at the company's web site at http://www.united.com. UNITED STATIONERS: Reports Increasing Net Sales in Third Quarter ---------------------------------------------------------------- United Stationers Inc. (Nasdaq: USTR) reported net sales for the third quarter ended September 30, 2003, of $979 million, up 5.0% compared with sales of $932 million for the third quarter of 2002. Net income for the third quarter of 2003 was $23.3 million, a 23.0% increase from $18.9 million in the comparable period last year. Earnings per share for the third quarter of 2003 were $0.69, up 21.1% compared with $0.57 in the prior-year quarter. Net sales for the nine months ended September 30, 2003 reached $2.9 billion, up 4.6% compared with sales of $2.8 billion in the same period last year. Net income for the nine months ended September 30, 2003, was $51.1 million, or $1.54 per share, compared with $58.8 million, or $1.73 per share, in the comparable prior-year period. For the nine months ended September 30, 2003, net income before the cumulative effect of a change in accounting principle and the early retirement of debt was $61.3 million, or $1.86 per share. The results for the first nine months of 2002 included a favorable restructuring charge reversal (representing a portion of the restructuring accrual recorded in the third quarter of 2001) of $2.4 million pre-tax ($1.5 million after tax), or $0.04 per share. A reconciliation of these items to the most comparable generally accepted accounting principles (GAAP) measures is presented at the end of this release. For the nine months ended September 30, 2003, net cash used in investing activities was $6.0 million. This includes $9.6 million of capital expenditures, partially offset by approximately $3.6 million in proceeds primarily from the sale of the company's Milwaukee and Charlotte distribution centers during the second quarter of 2003. In addition, capitalized software costs were $1.7 million, resulting in net capital spending of $7.7 million. For all of 2003, the company expects net capital spending to be in the range of $15 million to $20 million. A reconciliation of net capital spending to the most comparable GAAP measure for the nine months ended September 30, 2003, is presented at the end of this release. Successful Debt Reduction Efforts "During the trailing 12 months, we reduced total debt and securitization financing by over $130 million, to the lowest levels since April 1995," said Richard Gochnauer, president and chief executive officer. "Earnings, proceeds from the exercise of employee stock options, working capital improvement and lower capital spending all have contributed to reduced debt levels. As a result, our debt-to-total capitalization (including the securitization financing) was 23.4% at September 30, 2003, compared with 37.0% at this time last year." Operating Margin Increases Gross margin for the third quarter of 2003 increased to 14.9%, compared with 14.6% in the prior-year quarter. Gross margin in the quarter benefited from an increase in manufacturers' allowances resulting from higher inventory purchases, achieving volume hurdles and enhancements to supplier programs. In addition, the company experienced a favorable margin impact due to internal initiatives to reduce loss on damaged merchandise, as well as opportunistic inventory purchases. Improvements in margin were partially offset by a shift in the sales mix toward lower-margin computer consumables compared with the same quarter last year. Operating expenses for the third quarter of 2003 were $105.0 million, or 10.7% of sales, compared with $100.4 million, or 10.8% of sales, in the same period last year. The operating margin for the latest three months was 4.2%, up from 3.8% in the comparable year-ago quarter. Outlook: Initiatives Should Lead to Improved Results "Our improved results this quarter were a direct result of the hard work and dedication of our people," stated Gochnauer. "Their continued focus on reducing costs and increasing operating efficiencies contributed to our positive earnings performance. In addition, we continued to generate strong cash flows and ended the quarter with a very solid balance sheet. "In the third quarter, we continued to invest in our organizational structure. This included the addition of Senior Vice President of Operations Cody Phipps, as well as four regional vice presidents of operations, who are leading cost reduction efforts as well as driving productivity improvements. To further focus on sales growth, we hired three category managers and appointed two additional category managers from within the company. Their goal is to leverage our infrastructure by developing marketing programs tailored for specific product categories and sales channels," explained Gochnauer. "We expect that the fourth quarter will continue to benefit from our efforts. Our year-over-year sales growth percentage for October-to-date is in the low-single digits, with growth in computer consumables as a primary driver. We remain committed to taking steps that will yield near-term financial improvements and support our long-term objectives: to increase sales, reduce our cost structure, drive economic efficiencies, increase operating margin and improve customer satisfaction," Gochnauer concluded. United Stationers Inc. (S&P, BB Corporate Credit Rating, Negative), with trailing 12 months sales of approximately $3.8 billion, is North America's largest broad line wholesale distributor of business products and a provider of marketing and logistics services to resellers. Its integrated computer-based distribution system makes more than 40,000 items available to approximately 15,000 resellers. United is able to ship products within 24 hours of order placement because of its 35 United Stationers Supply Co. distribution centers, 24 Lagasse distribution centers that serve the janitorial and sanitation industry, two Azerty distribution centers in Mexico that serve computer supply resellers, and two distribution centers that serve the Canadian marketplace. Its focus on fulfillment excellence has given the company an average order fill rate of better than 97%, a 99.5% order accuracy rate, and a 99% on-time delivery rate. For more information, visit http://www.unitedstationers.com UNIVERSAL COMMS: Board Ratifies Price's Retention as Auditor ------------------------------------------------------------ Universal Communication Systems, Inc. (OTC Bulletin Board: UCSY) company chairman Michael J. Zwebner announced the results of the company's Annual Shareholder's Meeting, that took place on October 22, 2003, at the company's offices in Miami, Florida. Of the 69.2 million shares eligible to vote, 63.7 million placed their votes either directly or by proxy. This represents 92% of all shareholder votes. The following directors were re-elected to the Board: Michael Zwebner, Alexander H. Walker, Jr., Curtis A. Orgil and Ramsey Sweis. Ami Elazari was added to the Board. The shareholders also ratified the selection of Reuben E. Price, P.A. as the company's independent auditors for the current fiscal year. The Chairman, in a statement issued, said: "The overwhelming positive vote of the shareholders reflects investor and shareholders' interest and confidence in the current management team. The company has, since last year, entered the new and exciting field of 'water from air' technologies, as well as established a major foothold in the 'Photo Voltaic (PV) Solar Industry.' Our corporate plans are being well executed, and we are making serious and positive progress in all aspects of the business and its ongoing development." Universal Communication Systems' June 30, 2003, balance sheet reports a net capital deficit of about $6 million. VERTEX AEROSPACE: On Watch Positive after L-3 Comms Acquisition --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'B+' corporate credit rating, on Vertex Aerospace LLC on CreditWatch with positive implications. "The CreditWatch placement reflects Vertex Aerospace's announcement that it is being acquired by higher-rated L-3 Communications Corp. (BB+/Stable/--) for $650 million in cash," said Standard & Poor's credit analyst Christopher DeNicolo. Ratings on Vertex Aerospace will be withdrawn after the company's outstanding rated bank debt is repaid as part of the acquisition. The current ratings on Madison, Mississippi-based Vertex Aerospace reflect the firm's highly leveraged capital structure and modest, narrowly focused revenue base, albeit in the stable niche of providing technical services for noncombat military aircraft and support for military training. Vertex Aerospace is likely to benefit from increases in defense spending, especially the operations and maintenance portion of the U.S. defense budget, increased outsourcing by the military, higher operational tempo of U.S. military forces, and the aging of the noncombat U.S. military aircraft fleet. In addition, the company is likely to benefit from increased spending on heavy maintenance of aircraft as they return from the Iraq conflict. Vertex Aerospace has the leading share of the niche market in which it participates. The company faces competition from other aviation service providers, as well as the original manufacturers of the aircraft it services such as its former parent, Raytheon Co.; Boeing Co.; and Northrop Grumman Corp. VISUAL DATA CORP: Settles 6% Convertible Debentures --------------------------------------------------- Visual Data Corporation (Nasdaq: VDAT), reported it has completed a Redemption Agreement with Palladin Opportunity Fund, L.L.C. and Halifax Fund, L.P. with respect to a 6% Convertible Debenture Due December 8, 2003 and a 6% Convertible Debenture Due May 24, 2004 held by Palladin. Under the terms of the agreement, Visual Data has redeemed a portion of the 6% Convertible Debentures for approximately $610,000.00 in cash and Palladin converted the balance into an aggregate of 300,000 shares of VDAT common stock which the Company has been advised has been sold. To facilitate this settlement, Visual Data raised approximately $860,000 under a private financing transaction. The Company issued approximately 410,000 shares of unregistered common stock and granted approximately 82,000 four-year warrants with an exercise price of $3.00 per share. Randy Selman, President and CEO of Visual Data stated, "I am pleased to announce that with the successful completion of this transaction our debt elimination/restructuring program now been completed and with the exception of the long term loan and ordinary course of business payables, all other obligations of the Company have been eliminated or satisfied. With a clean balance sheet we believe it will make it easier for us to do business with a broader range of companies that may have had some reservations after reviewing our financial condition." Visual Data Corporation -- http://www.vdat.com-- is a business services provider, specializing in meeting the webcasting needs of corporations, government agencies and a wide range of organizations, as well as providing audio and video transport and collaboration services for the entertainment, advertising and public relations industries. * * * Liquidity and Going Concern In its SEC Form 10-QSB for the period ended March 31, 2003, the Company reported: "The consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since its inception, and has an accumulated deficit of $53,405,622 as of March 31, 2003. The Company's operations have been financed primarily through the issuance of equity. The Company's liquidity has substantially diminished because of such continuing operating losses and a working capital deficit of approximately $3.9 million and the Company will be required to seek additional capital to continue operations. As a result, there is substantial doubt about the Company's ability to continue as a going concern. For the six months ended March 31, 2003, we had a net loss from continuing operations of approximately $2,250,000, reclassified the approximately $1,500,000 convertible debenture from non-current to current and cash used in operations of approximately $338,000. The terms of our outstanding 6% convertible debentures provide that our failure to maintain a listing of our common stock on the Nasdaq Stock Market is an event of default under the debentures. If our common stock was to be delisted from the Nasdaq SmallCap Market, the debenture holders would have the right, after five days, to demand the repayment in full of all amounts outstanding under the debentures. The Company's forecast for fiscal year 2003 anticipates a reduction in cash used for operations. At March 31, 2003, we had approximately $11,000 of cash and cash equivalents. Subsequent to March 31, 2003 we have raised an additional $600,000 through the issuance of a promissory note. "The Company is currently seeking to raise up to $2.0 million of additional funds through the private placement of equity or a combination of debt and equity. Although the Company believes that there are a number of parties interested in participating in such placement, there is no guarantee that the Company will be successful in raising all or a portion of such funds. "We are constantly evaluating our cash needs and existing burn rate. In addition, we have a plan whereby certain non-essential personnel and administrative costs will continue to be reduced so that we may continue to meet operating and financing obligations as they come due. Based upon an ongoing evaluation of our cash needs, we may seek to raise additional capital through the sale of equity and debt securities to provide funding for ongoing future operations. No assurances can be given that we will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to us. Our ability to grow revenues, achieve cost savings or raise sufficient additional capital will be necessary to service our existing indebtedness. In addition, our ability to refinance existing indebtedness is subject to future economic conditions, market conditions, business conditions and other factors. We cannot assure you that we will be able to raise additional working capital to fund these anticipated deficits. Further, there can be no assurance that even if such additional capital is obtained or the planned cost reductions are implemented, that we will achieve profitability or positive cash flow. The Company's continued existence is dependent upon its ability to raise capital and to market and sell our services successfully. The financial statements do not include any adjustments to reflect future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty." W.R. GRACE: Reports Improved Third Quarter Financial Results ------------------------------------------------------------ W. R. Grace & Co. (NYSE:GRA) reported that 2003 third quarter sales totaled $521.0 million compared with $480.0 million in the prior year quarter, an 8.5% increase. Favorable currency translation effects from a weaker U.S. dollar accounted for about half of the increase, with revenue from added volume in certain product lines and from acquisitions also contributing. Grace reported a third quarter net loss of ($9.9 million), or ($0.15) per share, compared with net income of $14.0 million, or $0.21 per share, in the third quarter of 2002. The 2003 third quarter loss includes a $50.0 million pre-tax charge to adjust Grace's estimated liability for claims by the EPA for recovery of environmental cleanup costs around Libby, Montana. Pre-tax income from core operations in the third quarter of 2003 was $50.3 million compared with $52.9 million in the third quarter of 2002. A record quarter from Grace's Performance Chemicals segment, which delivered a 28.2% increase in operating earnings, was offset by lower profits from the Davison Chemicals segment and higher U.S. pension costs. "I am pleased with our third quarter operating results, particularly from our Performance Chemicals group," said Grace's Chairman, President and Chief Executive Officer Paul J. Norris. "We delivered our first improved quarter this year from our combined business segments, capitalizing on good construction weather in the U.S. and on our productivity initiatives. I am optimistic that we will see continued business improvement over the remainder of the year." For the first nine months of 2003, Grace reported sales of $1,469.2 million, a 7.6% increase over 2002. Currency translation accounted for 5.0 percentage points of the increase. As a result of the $50.0 million pre-tax environmental charge in the third quarter, Grace reported a net loss for the nine months ended September 30, 2003 of ($5.7 million) or ($0.09) per share, compared with net income of $47.6 million, or $0.73 per share, for the first nine months of 2002. Pre-tax income from core operations was $97.4 million, compared with $143.3 million for the first nine months of 2002. Year-to-date pre-tax operating margin was 6.6%, about four percentage points lower than last year. The decline in year-to-date operating profit and margins was caused by higher costs for pensions, certain raw materials, natural gas and plant maintenance, together with unfavorable regional and product sales mix. CORE OPERATIONS Davison Chemicals Catalyst and Silica Products Third quarter sales for the Davison Chemicals segment were $267.0 million, up 8.3% from the prior year quarter. Excluding the effects of favorable currency translation, sales were up 3.6% for the quarter. Sales of catalyst products, which include refining catalysts, polyolefin catalysts and other chemical catalysts, were $189.6 million, up 5.9% compared with the prior year quarter, primarily attributable to currency effects and an acquisition completed in Japan in August 2002. Sales of silica products were $77.4 million, up 14.7% compared with the third quarter of 2002, primarily from currency effects of the stronger Euro, growth programs in digital printing and separations applications, and higher sales of adsorbents and precipitated silica products. Operating income of the Davison Chemicals segment was $32.5 million, 8.2% lower than the 2002 third quarter; operating margin was 12.2%, lower than the prior year quarter by 2.2 percentage points. Although strong sales in silica products helped to increase profitability, operating income and margins in the third quarter of 2003 continued to be negatively affected by higher manufacturing costs, primarily from higher natural gas prices and maintenance requirements at certain production facilities, and from a product and regional sales mix that resulted in lower average margins. Year-to-date sales for the Davison Chemicals segment were $767.7 million, up 9.2% from 2002 (excluding currency translation impacts, sales were up 3.1%). Year-to-date operating income was $80.1 million, compared with $99.2 million for the prior year, a 19.3% decrease. Year-to-date operating results reflect a sluggish U.S. economy, and higher utilities, raw materials and other manufacturing costs. Performance Chemicals Construction Chemicals, Building Materials, and Sealants and Coatings Third quarter sales for the Performance Chemicals segment were $254.0 million, up 8.8% from the prior year quarter. Favorable currency translation accounted for 3.8 percentage points of the increase. Volume gains were realized in all product groups, primarily as a result of strong demand for construction products in the U.S. Sales of specialty construction chemicals, which include concrete admixtures, cement additives and masonry products, were $120.1 million, up 9.4% versus the year-ago quarter (5.0% excluding currency translation impacts). Sales were strong in all geographic regions, reflecting the success of new product programs and sales initiatives in key economies worldwide, as well as good construction weather in the U.S., which allowed a catch-up in project activity delayed due to poor weather earlier in the year. Sales of specialty building materials, which include waterproofing and fire protection products, were $65.0 million, up 7.6% compared with the third quarter of 2002 (up 5.8% excluding currency translation impacts). This increase also reflects good construction weather in the U.S., as catch-up activity in new construction and re-roofing drove strong waterproofing sales. Sales of specialty sealants and coatings, which include container sealants, coatings and polymers, were $68.9 million, up 8.8% compared with the third quarter of 2002 (up 4.2% excluding currency translation impacts), mainly reflecting coatings growth programs in Latin America and Asia. Operating income for the Performance Chemicals segment was $38.6 million, compared with $30.1 million in the prior year quarter, a 28.2% increase. Operating margin of 15.2% was 2.3 percentage points higher than 2002 third quarter margin, reflecting increased sales volume and the success of cost containment programs. Year-to-date sales of the Performance Chemicals segment were $701.5 million, up 6.0% from 2002 (excluding currency translation impacts, sales were up 2.1%). Year-to-date operating income was $76.5 million, about even with 2002, reflecting the strong third quarter, offsetting a weak first half due to soft construction activity and weather-delayed projects in the U.S. Corporate Costs Third quarter corporate costs related to core operations were $20.8 million, an $8.2 million increase from the prior year quarter. The increase is primarily attributable to added costs for pension benefits to account for the negative financial market factors that have impacted the funded status of defined benefit pension plans in recent years, and to higher director and officer liability insurance premiums. CHARGE FOR ENVIRONMENTAL LAWSUIT The third quarter includes a $50.0 million pre-tax charge to account for the ruling against Grace by the U.S. District Court of Montana, which requires Grace to reimburse the EPA for environmental cleanup costs related to previously operated vermiculite mining and processing sites near Libby, Montana. The ruling requires Grace to reimburse the U.S. government for $54.5 million of costs expended for cleanup activities through December 2001, and for all appropriate future costs to complete the cleanup. Grace intends to appeal the Court's ruling. As a result of such charges, Grace's total estimated liability for Libby-related reimbursable costs is now $110 million. Grace's estimate of expected reimbursable cost is based solely on public information about EPA spending plans. However, EPA cost estimates have increased substantially over the course of this cleanup. Consequently, Grace's estimate may change materially as more current public information becomes available. The payment of any amounts for this case will be subject to Grace's Chapter 11 proceedings. CASH FLOW AND LIQUIDITY Grace's cash flow provided by operating activities was $63.9 million for the first nine months of 2003, compared with $141.7 million for the comparable period of 2002. Year-to-date pre-tax income from core operations before depreciation and amortization was $173.5 million, 19.0% lower than 2002, reflecting the lower operating income described above. Cash used for investing activities was $67.0 million year-to-date, primarily for capacity expansion and capital replacements. At September 30, 2003, Grace had available liquidity in the form of cash ($299.9 million), net cash value of life insurance ($90.5 million) and unused credit under its debtor-in-possession facility ($215.7 million). Grace believes that these sources and amounts of liquidity are sufficient to support its strategic initiatives and Chapter 11 proceedings for the foreseeable future. CHAPTER 11 PROCEEDINGS On April 2, 2001 Grace and 61 of its United States subsidiaries and affiliates, including its primary U.S. operating subsidiary W. R. Grace & Co.-Conn., filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Filing"). Grace's non-U.S. subsidiaries and certain of its U.S. subsidiaries were not a part of the Filing. Since the Filing, all motions necessary to conduct normal business activities have been approved by the Bankruptcy Court. The Bankruptcy Court had established a bar date of March 31, 2003 for claims of general unsecured creditors, asbestos property damage claims and medical monitoring claims related to asbestos. The bar date did not apply to asbestos-related bodily injury claims or claims related to Zonoliter Attic Insulation, which will be dealt with separately. Approximately 15,000 claims were submitted by the bar date for all debtor entities. Grace is in the process of assessing the validity of such claims and determining what affect such claims may have on Grace's recorded liabilities. Grace has filed bankruptcy court motions objecting to certain of these claims and expects to file additional objections in the future. Most of Grace's noncore liabilities and contingencies (including asbestos-related litigation, environmental remediation claims, tax disputes and other potential obligations), are subject to compromise under the Chapter 11 process. The Chapter 11 proceedings, including litigation and the claims resolution process, could result in allowable claims that differ materially from recorded amounts. Grace will adjust its estimates of allowable claims as facts come to light during the Chapter 11 process that justify a change, and as Chapter 11 proceedings establish court-accepted measures of Grace's noncore liabilities. See Grace's recent Securities and Exchange Commission filings for discussion of noncore liabilities and contingencies. Grace is a leading global supplier of catalyst and silica products, specialty construction chemicals, building materials, and sealants and coatings. With annual sales of approximately $1.8 billion, Grace has over 6,000 employees and operations in nearly 40 countries. For more information, visit Grace's Web site at http://www.grace.com. WESTPOINT: Court Stretches Exclusive Plan Filing to March 31 ------------------------------------------------------------ WestPoint Stevens Inc. (OTC Bulletin Board: WSPTE) announced that the U.S. Bankruptcy Court extended the Company's exclusive right to file a plan of reorganization until March 31, 2004. The Company's official creditors' committee has the option to require a further hearing on the portion of the extension from January 31, 2004 to March 31, 2004. The Company is continuing to move forward on a consensual basis with negotiating new terms for a Chapter 11 plan of reorganization with all its major creditor constituencies. As previously announced, WestPoint Stevens Inc. and certain of its subsidiaries filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on June 1, 2003. WestPoint Stevens Inc. is the nation's premier home fashions consumer products marketing company, with a wide range of bed linens, towels, blankets, comforters and accessories marketed under the well-known brand names GRAND PATRICIAN, PATRICIAN, MARTEX, ATELIER MARTEX, BABY MARTEX, UTICA, STEVENS, LADY PEPPERELL, SEDUCTION, VELLUX and CHATHAM - all registered trademarks owned by WestPoint Stevens Inc. and its subsidiaries - and under licensed brands including RALPH LAUREN HOME, DISNEY HOME, GLYNDA TURLEY and SIMMONS BEAUTYREST. WestPoint Stevens is also a manufacturer of the MARTHA STEWART and JOE BOXER bed and bath lines. WestPoint Stevens can be found on the World Wide Web at http://www.westpointstevens.com. WORLDCOM: Reaches Agreement Resolving Two EPORT Claims ------------------------------------------------------ EPORT 600 Property Owner, LLC, as successor-in-interest to MW- CPAG Holdings, LLC, and the Worldcom Debtors are parties to a certain office lease, dated February 14, 2000. The Debtors lease from EPORT the building located at 600 West Chicago Avenue in Chicago, Illinois 60610. As part of their restructuring, the Debtors rejected the Lease effective as of February 28, 2003. Subsequently, EPORT filed Claim No. 25963 against MCI Network Services, Inc. EPORT later filed an amended claim, Claim No. 34772. Claim Nos. 25963 and 34772 assert: -- an aggregate unsecured claim for $4,232,079 for rejection damages; -- an aggregate $633,969 claim for mechanic's liens; and -- a $2,817 administrative priority claim. In EPORT's objection to the Debtors' Plan, EPORT argued that, in addition to the amounts asserted in the EPORT Claims, the Debtors might also be liable for additional claims, which includes: (a) $2,146,000 in contributions toward the Debtors' initial build-out in the building; and (b) an initial 15-month free-rent period provided to the Debtors in the approximate amount of $3,000,000. The Parties consequently engaged in arm's-length, good faith negotiations, wherein the Debtors and EPORT reached a stipulation to resolve EPORT's Plan Objection and Claims. Under the Court-approved stipulation, the Parties agree that: (a) The Plan Objection is considered withdrawn; (b) EPORT's Claim No. 25963 is expunged and disallowed as amended and superseded by Claim No. 34772; and (c) EPORT's Claim No. 34772 will be amended, and the amended claim will be allowed as an Allowed WorldCom General Unsecured Claim under Class 6 of the Plan for $6,505,263, in full and complete satisfaction of all claims which have been, or could have been, asserted against the Debtors. Without further Court order, upon the filing of the amended claim, Claim No. 34772 will be deemed expunged and disallowed as amended and superseded. (Worldcom Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Coudert Brothers Hosts French Minister of Justice --------------------------------------------------- The international law firm Coudert Brothers LLP, whose origins date back to three sons of an immigrant from France, honored its roots this week by hosting Monsieur Dominique Perben, French Minister of Justice, at the firm's New York headquarters. The meeting featured a briefing to a French delegation on U.S. Chapter 11 bankruptcy laws and relevant issues concerning the proposed revisions to the bankruptcy laws of France, and the Sarbanes-Oxley Act. The Minister was accompanied by French Ambassador to the U.S. Jean-David Levitte and Richard Duque, Consul General of France in New York, as well as other dignitaries. Both the bankruptcy and securities areas of U.S. law have seen significant changes over time to address the ever-evolving issues confronted in the domestic and international business community. Their effects have impacted many of the world's leading financial markets, including those of France. Monsieur Perben is leading the French effort to revise France's bankruptcy laws as a result of such high-profile French corporate instabilities as Alstom. The briefing on the U.S. Bankruptcy Code focused on the American system from a practical viewpoint. The Minister and his colleagues were also concerned about the extra- territorial aspects of the Sarbanes-Oxley Act. Coudert Brothers partners Edward A. Tillinghast III, who heads the financial restructuring & bankruptcy practice, and Jeffrey E. Cohen, head of the Firm's New York-based securities practice, led the briefings. "Coudert Brothers was the first law firm to provide truly cross- border business and legal advice, and over our 150-year history we have frequently advised governments in these areas," Mr. Tillinghast said. "Providing the Minister of Justice, the French Ambassador and their colleagues with briefings and practical advice based upon our daily experience and continuous analysis of comparative legal regimes effecting important business issues is the type of value-added advice we provide clients every day -- navigating the complexities of international law and business as well as cultural issues that often arise in cross-border matters." Also participating in the briefings for Coudert Brothers were New York Office Managing Partner Clyde E. Rankin III, former Coudert Brothers Chairman James B. Sitrick, Angela Mariana Freyre and Marcello Hallake of the New York office and Managing Partner George T. Yates III and Xavier J. Nyssen of the Paris office. This is the latest example of Coudert Brothers working to foster U.S.-French relations. The Firm pioneered the practice of solving cross- border legal issues with a highly noteworthy facilitation, when it paved the way for the Statue of Liberty's placement in New York Harbor. Firm founder Frederic Coudert helped bring the Statue to New York, then sat alongside U.S. president Grover Cleveland and French sculptor Auguste Bartholdi at the dedication ceremony in 1886. The founder's legacy of service to the U.S. and France continues to guide the Firm as it celebrates its 150th anniversary this year. About Coudert Brothers LLP Coudert Brothers LLP is a leading international law firm specializing in complex cross border transactions and dispute resolution. The Firm has more than 650 lawyers practicing in 30 offices in 18 countries. Major practice areas include corporate and commercial, customs and international trade, employment & labor, energy and natural resources, financial restructuring and insolvency, intellectual property, litigation and arbitration, life sciences, telecommunications, media/entertainment and technology. * BOND PRICING: For the week of October 27 - 31, 2003 ----------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Advantica Restaurant 11.250% 01/15/08 57 AK Steel Corp. 7.750% 06/15/12 68 AK Steel Corp. 7.875% 02/15/09 69 American & Foreign Power 5.000% 03/01/30 65 AMR Corp. 9.000% 09/15/16 75 AnnTaylor Stores 0.550% 06/18/19 69 Burlington Northern 3.200% 01/01/45 53 Calpine Corp. 7.750% 04/15/09 72 Calpine Corp. 7.875% 04/01/08 73 Calpine Corp. 8.500% 02/15/11 73 Calpine Corp. 8.625% 08/15/10 72 Coastal Corp. 6.950% 06/01/28 72 Coastal Corp. 7.420% 02/15/37 75 Comcast Corp. 2.000% 10/15/29 33 Continental Airlines 7.568% 12/01/06 71 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 33 Crown Cork & Seal 7.500% 12/15/96 75 Cummins Engine 5.650% 03/01/98 68 Delta Air Lines 7.900% 12/15/09 74 Delta Air Lines 8.300% 12/15/29 64 Delta Air Lines 9.000% 05/15/16 68 Delta Air Lines 9.250% 03/15/22 66 Delta Air Lines 9.750% 05/15/21 66 Delta Air Lines 10.375% 12/15/22 67 Dynex Capital 9.500% 02/28/05 1 El Paso Corp. 7.750% 01/15/32 75 Elwood Energy 8.159% 07/05/26 72 Fibermark Inc. 10.750% 04/15/11 70 Finova Group 7.500% 11/15/09 49 Gulf Mobile Ohio 5.000% 12/01/56 70 Internet Capital 5.500% 12/21/04 63 Kaiser Aluminum 9.875% 02/15/49 74 Kaiser Aluminum 10.875% 10/15/06 74 Level 3 Communications Inc. 6.000% 09/15/09 65 Level 3 Communications Inc. 6.000% 03/15/10 64 Liberty Media 3.750% 02/15/30 62 Liberty Media 4.000% 11/15/29 65 Lucent Technologies 6.450% 03/15/29 70 Lucent Technologies 6.500% 01/15/28 70 Mirant Corp. 5.750% 07/15/07 53 Missouri Pacific Railroad 4.750% 01/01/30 71 Missouri Pacific Railroad 5.000% 01/01/45 66 Northern Pacific Railway 3.000% 01/01/47 51 Northwest Airlines 7.875% 03/15/08 75 NTL Communications Corp. 7.000% 12/15/08 19 Orbital Imaging 11.625% 03/01/05 50 RCN Corporation 10.125% 01/15/10 46 Revlon Consumer Products 9.000% 11/01/06 70 Scotia Pacific Co. 6.550% 01/20/07 67 Solutia Inc. 7.375% 10/15/27 66 Titan Wheel International 8.750% 04/01/07 57 Universal Health Services 0.426% 06/23/20 64 US Timberlands 9.625% 11/15/07 64 Worldcom Inc. 6.400% 08/15/05 34 Xerox Corp. 0.570% 04/21/18 65 ********* 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., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***