/raid1/www/Hosts/bankrupt/TCR_Public/031120.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, November 20, 2003, Vol. 7, No. 230
Headlines
ADEPT TECHNOLOGY: Completes $10MM Equity Financing Transaction
AMERCO: Equity Committee Hires Huron Consulting as Advisors
AMERICAN NATURAL ENERGY: Third-Quarter Net Loss Widens to $4 Mil.
ARTISOFT INC: Nasdaq Strikes Shares from Listing Effective Wed.
ATLANTIC COAST: Enters into Pacts to Acquire 25 Airbus Aircraft
BLUE DOLPHIN: Needs External Financing to Meet Cash Requirements
BURLINGTON: Hails Administration's Decision on China Safeguards
CHI-CHI'S: Koo Koo Roo's Assets Will Be Auctioned-Off Tomorrow
CHAMPIONSHIP AUTO: Deloitte & Touche Airs Going Concern Doubt
CINEMA RIDE: Sept. 30, 2003 Balance Sheet Upside-Down by $900K
CLEARWATER ENGINEERING: Case Summary & 13 Unsecured Creditors
CONSECO: Posts $2.2 Billion in Net Income for July-August Period
COVANTA ENERGY: Gets Nod to File Bidders' Disclosures Under Seal
DII INDUSTRIES: Commences Supplemental Solicitation Process
DRESSER INC: Third-Quarter Net Loss Reaches Close to $10 Million
DRESSER INC: Soliciting Consents from 9-3/8% Noteholders
DVI INC: Fitch Places Brazil Securitizations on Watch Negative
ENRON CORP: Selling Portland General Electric to Oregon Electric
ENRON CORP: Files Second Amended Plan and Disclosure Statement
EQUISTAR CHEMICALS: Selling $250-Mill. of 10-5/8% Senior Notes
EQUISTAR: New Inventory Revolving Facility Gets S&P's BB Rating
EXIDE: Taps S&P Consulting to Render Financial Advisory Services
FEDERAL-MOGUL: Sherill Balks at Seyfarth's Engagement as Counsel
FLEMING: Dunigan Panel Seeks Disallowance of Transferees' Claims
GAYLORD: Shareholders Approve ResortQuest Int'l Acquisition
GLOBAL CROSSING: Court Clears Flag Telecom Settlement Agreement
GLOBALSTAR: Thermo Capital Agrees to Acquire 81.25% Equity Stake
IMPERIAL PLASTECH: Files Plan of Compromise with Ontario Court
INDYMAC ABS: S&P Hatchets 3 Series SPMD Note Ratings to BB/CC/B
J.A. JONES: Want Additional Time to Make Lease-Related Decisions
LNR PROPERTY: Agrees to Sell Additional $50MM Senior Sub. Notes
LTV CORP: Bankruptcy Court Confirms Copperweld's Chapter 11 Plan
MAGNATRAX CORP: Judge Walsh Confirms Plan of Reorganization
MAJESTIC STAR CASINO: Makes Adjustment to Third-Quarter Results
MDC CORP: Files Preliminary Prospectus for New Securities
MEDCOMSOFT: Joins Intel & Gateway to Provide Automation Services
MESA AIR: Will Host 4th-Quarter & Year-End Conference Call Today
MILESTONE SCIENTIFIC: Capital Deficits Raise Going Concern Doubt
MILLENNIUM CHEMICALS: Offering $125MM of Conv. Sr. Debentures
MIRANT CORP: Entergy Services Seeks Stay Relief to Setoff Claims
MITEC TELECOM: Reports Two Key Executive Appointments
MORGAN STANLEY: Fitch Affirms Low-B Ratings on 6 Note Classes
NAT'L CENTURY: Board Wants Exclusivity Terminated & File a Plan
NAT'L STEEL: Challenges Paid & Overstated Claims
NEXIA: Losses and Capital Deficits Raise Going Concern Doubt
NOVO NETWORKS: Ability to Continue Operations Remain Uncertain
NRG ENERGY: Plan Confirmation Hearing Begins Tomorrow in Manhattan
NRG ENERGY: Court Approves Claims Settlement Agreement with Shaw
NRG ENERGY: Court OKs Harris Geno as Committee's Special Counsel
PACIFIC GAS: Lauds CPUC's Actions to Facilitate Chapter 11 Exit
PACIFIC GAS: Wants to Compromise Claims against El Paso Natural
PERRY ELLIS: Inks License Agreement for John Henry Neckwear
PHICO INSURANCE: Settles Claim Dispute with Penna. Insurance Dept.
PORTOLA PACKAGING: Aug. 31 Net Capital Deficit Reaches $26 Mill.
PRIME RETAIL: Shareholders Okay Sale of Co. to Lightstone Unit
PROTECTION ONE: S&P Maintains Negative Watch on Junk Ratings
RACE POINT CLO: Fitch Affirms Low-B Rating of Class D Notes
RACE POINT: Fitch Takes Rating Actions on Series 2001-RZ2 Notes
REALTY INCOME CORP: S&P Upgrades Low-B Preferred Share Rating
ROYAL CARIBBEAN: Prices Public Offering of 6.875% Senior Notes
ROYAL CARIBBEAN CRUISES: S&P Rates $350MM Senior Notes at BB+
SAFETY-KLEEN: Earns Nod to Expand Connolly Bove's Engagement
SATURN (SOLUTIONS): Fails to File First-Quarter Fin'l Results
SHOLODGE INC: Commences Cash Tender Offer for 7-1/2% Conv. Notes
SPIEGEL GROUP: Settles Spiegel and FCNB Bar Date Issue
TELETECH HOLDINGS: Enters Multi-Year Agreement with Best Buy Co.
TERAFORCE: Cuts Debt by $1.7 Million via Debt-for-Equity Swap
TYCO INTERNATIONAL: Repurchases $3.1 Billion of LYONS Due 2020
UICI: Completes Sale of Academic Management Services Unit to SLM
UNITED AIRLINES: Taps TPI as Appraisers for Stub Rent Valuations
UNUMPROVIDENT: Fitch Deems Sale of Canadian Operations Positive
VAIL RESORTS: Appoints Jeffrey W. Jones as New SVP and CFO
VICWEST: Ernst & Young Resigns and Deloitte & Touche Takes Over
WACKENHUT CORRECTIONS: Shareholders OK Name Change to Geo Group
WESTPOINT STEVENS: Laying-Off 200 Associates at Lanier Plant
WHEELING-PITTSBURGH STEEL: Files First Post-Confirmation Report
WIND RIVER: Red Ink Continued to Flow in Third-Quarter 2004
WINFIELD CAPITAL: Co.'s Ability to Continue Operations Uncertain
* DebtTraders' Real-Time Bond Pricing
*********
ADEPT TECHNOLOGY: Completes $10MM Equity Financing Transaction
--------------------------------------------------------------
Adept Technology, Inc. (OTCBB:ADTK), a leading manufacturer of
flexible automation for the semiconductor, life sciences,
electronics and automotive industries, has completed a $10.0
million private placement led by Special Situations Funds as
previously announced.
The closing of the financing was accompanied by the simultaneous
conversion of Adept's preferred stock into common stock. Adept
also announced reaching settlement of its San Jose lease
litigation to be completed upon payment of cash and a promissory
note.
The common stock and warrants sold in this private placement have
not been registered under the Securities Act of 1933 or qualified
under applicable state securities laws and may not be transferred
or sold in the United States absent such registration and
qualification or applicable exemptions from such registration and
qualification. The Company has agreed to register for resale the
common stock issued in this private placement, including the
shares of common stock underlying the warrants and the shares to
be issued to its preferred stockholder.
For a discussion of risk factors relating to Adept's business, see
Adept's annual report on Form 10-K for the fiscal year ended June
30, 2003, as amended, and its quarterly report on Form 10-Q for
the fiscal quarter ended September 27, 2003 including the
discussion in Management's Discussion and Analysis of Financial
Condition and Results of Operations contained therein.
Adept Technology -- whose June 30, 2003 balance sheet shows a
total shareholders' equity deficit of about $11 million --
designs, manufactures and markets factory automation components
and systems for the fiber optic, telecommunications,
semiconductor, automotive, food and durable goods industries
throughout the world. Adept's robots, controllers, and software
products are used for small parts assembly, material handling and
ultra precision process applications. Our intelligent automation
product lines include industrial robots, configurable linear
modules, flexible feeders, semiconductor process components,
nanopositioners, machine controllers for robot mechanisms and
other flexible automation equipment, machine vision, systems and
software, application software and simulation software. Founded in
1983, Adept is America's largest manufacturer of industrial
robots. More information is available at http://www.adept.com
AMERCO: Equity Committee Hires Huron Consulting as Advisors
-----------------------------------------------------------
The Official Committee of Equity Security Holders of the AMERCO
Debtors seeks the Court's authority to retain Huron Consulting
Group LLC as its forensic financial investigators and advisors,
nunc pro tunc to October 11, 2003.
According to Kaaran E. Thomas, Esq., at Beckley Singleton Chtd.,
in Reno, Nevada, the Equity Committee needs the services of a
Forensic Services Advisor to enable it to evaluate the complex
financial and economic issues raised by the Debtors'
reorganization proceedings and to effectively fulfill its
statutory duties. The Equity Committee selected Huron because of
the firm's expertise in providing Forensic Services to debtors
and creditors in restructuring and distressed situations.
Robert E. Ogle, a director at Huron Consulting Group LLC, relates
that Huron is a national consulting firm that is well qualified
to serve as the Equity Committee's forensic financial
investigators providing Forensic Services in these Chapter 11
cases. Huron and its professionals have extensive experience in
gathering and analyzing financial data of troubled companies in
complex financial and operational restructurings, both out of the
court and in the context of Chapter 11. In fact, Huron is
currently representing or has represented official committees or
creditors' interests in several significant bankruptcy
proceedings, including, among others:
(1) the creditors' committee in Conseco, Warnaco, DirecTV LA,
Mirant Corporation, PG&E National Energy Group and
Magnatrax Corporation; and
(2) the companies in Orion Refinery, United Airlines, Global
Crossing, MCI/WorldCom, ACL, Eagle, Comdisco, Doctors
Community Healthcare Corporation and Moltech Power
Systems.
In its capacity as the Equity Committee's advisor, Huron will:
(a) assist in the review and assessment of the financial and
accounting information or analysis thereof provided by
the financial advisors for the Debtors and the Creditors
Committee;
(b) assist in the analysis of the reasonableness of the
financial projections for the Debtors and their
subsidiaries;
(c) assist in the analysis of the level of debt that can be
reasonably supported by the Debtors' business operations;
(d) assist in the analysis of the reasonableness of Republic
West's insurance reserves;
(e) assist in the assessment of the Debtors' litigation
involving PricewaterhouseCoopers; and
(f) render other advisory services as may from time to time
be agreed on by the Equity Committee, its legal advisors
and Huron.
In performing its services under the engagement, Huron will
endeavor to avoid unnecessary costs and expenses, as well as
duplication with the services provided by any other advisor to
the Equity Committee. Huron agrees to cap its fee request at an
average of $50,000 per month. The cap will keep fees of the
Equity Committee professionals in line with the approved fee cap
for the financial advisors to the Creditors Committee.
Huron will seek compensation based on the current hourly rates of
its professionals. It will also seek reimbursement of reasonable
out-of-pocket expenses. Currently, Huron's hourly rates are:
Managing Directors $600
Directors 450
Managers 350
Associates 250
Analysts 175
Mr. Ogle assures the Court that Huron's principals and
professionals do not have any connection with the Debtors, their
creditors or any other party-in-interest, and to the extent
applicable, does not hold or represent an interest materially
adverse to the Debtors' estates. Thus, Huron's principals and
professionals are "disinterested persons" under Section 101(14)
of the Bankruptcy Code.
Debtors Respond
The Debtors complain that:
(1) the scope of the services that Huron proposes to provide,
under the current circumstance of the Debtors' Chapter 11
cases, far exceeds the proper role of any advisor for the
Equity Committee; and
(2) the Equity Committee failed to demonstrate why the
services to be provided by Huron are not duplicative of
the work to be been performed by Providence Capital Inc.
The Debtors are perplexed by the Equity Committee's request to
retain Huron. Bruce T. Beesley, Esq., at Beesley, Peck &
Matteoni, Ltd., in Reno, Nevada, relates that since the Petition
Date, the Debtors have made substantial progress in stabilizing
their business operations, rationalizing their capital structure
and formulating the terms of a plan of reorganization that will
enable the Debtors to emerge from Chapter 11 in a relatively
short period of time.
In the Debtors' proposed Plan of Reorganization, all creditors
will receive distributions equal to 100% of their allowed claims
and further provides that the holders of equity securities will
retain their interests on confirmation and the interests will be
unimpaired.
Moreover, the Debtors' activity in the short span in which they
have operated under Chapter 11 has been fully recognized by the
market. In fact, Amerco's preferred stock, which traded at $9.54
per share on June 20, 2003, was trading at $19.55 per share on
October 28, 2003. This change is even more pronounced in
Amerco's common stock, which was trading at $17.61 per share on
October 28, 2003 when it was trading only at $4.08 per share on
June 20, 2003.
Mr. Beesley recalls that when the Equity Committee was formed, it
requested and received, authority to retain a separate financial
advisor, Providence Capital, Inc., despite the fact that there
are already financial advisors for the Debtors and the Creditors
Committee and there are new auditors for the Debtors. Since
Providence was retained, the Debtors had not denied any request
for information nor has Providence asked for and been denied any
information previously provided for the financial advisor for the
Creditors Committee.
"Viewed in the light of significant progress having been made,
the Equity Committee's request to retain Huron is difficult to
comprehend," Mr. Beesley tells the Court. Certainly, the Equity
Committee failed to set forth any justification for its retention
of Huron at the expense of the estate.
Mr. Beesley explains that the scope of services Huron proposes to
provide exceed the proper role of any committee. The first three
services are already covered by Providence. With respect to
Republic West's insurance reserve, Republic West is not a debtor
in these proceedings. As an insurance company, it is heavily
regulated by state regulatory bodies throughout the country.
Insurance reserves of a non-debtor entity should not be a concern
to the Equity Committee. Since the Petition Date, the Arizona
Department of Insurance has fully appraised itself of the events
of these Chapter 11 proceedings, and has actively supervised
Republic West. Whatever assistance the Equity Committee thinks
Huron may be able to provide is irrelevant to these cases.
The proposed "assessment of the PwC litigation" is even more
peculiar and troubling. Neither the Disclosure Statement nor the
Plan seeks to resolve the PwC Litigation. In addition, Mr.
Beesley notes that no motion to compromise the PwC Litigation has
been filed with the Court. The parties in the PwC Litigation had
their first meeting with the state trial court on September 8,
2003. Further discovery is yet to commence in a meaningful way
in the state court proceeding.
The practical problems of that assessment or evaluation are
enormous. One would suspect that neither the counsel for the
litigants nor any key witness in the litigation for either side
would likely be willing to discuss critical considerations with a
third party, knowing full well that by doing so, work product and
attorney-client privilege might well be forfeited by those
discussions.
Accordingly, the Debtors ask the Court to deny the Equity
Committee's request to retain Huron at the estates' expense.
(AMERCO Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
AMERICAN NATURAL ENERGY: Third-Quarter Net Loss Widens to $4 Mil.
-----------------------------------------------------------------
American Natural Energy Corporation (TSX Venture: ANR.U) announced
results of operations for the nine and three month periods ended
September 30, 2003.
ANEC incurred a net loss of US$3,929,000 (US$0.15 per share) in
the nine months ended September 30, 2003 compared to a net loss of
US$983,000 (US$0.04 per share) for the same period in 2002.
During the nine months ended September 30, 2003, revenues were
comprised of oil and gas sales and operations income totaling
US$1,352,000 compared with oil and gas sales of US$234,000 in
2002.
ANEC incurred a net loss of US$444,000 (US$0.02 per share) in the
three months ended September 30, 2003 compared to net loss of
US$374,000 (US$0.01 per share) for the same period in 2002.
During the three months ended September 30, 2003, income was
comprised of oil and gas and operations revenues of US$629,000
compared with US$231,000 in 2002.
Production for the nine months ended September 30, 2003 amounted
to 44,000 barrels of oil with no natural gas compared to 7,200
barrels of oil and 13,000 mcf of natural gas for the same period
in 2002. Average prices for the nine months periods were US$30.29
per barrel in 2003 compared to US$27.03 per barrel and US$2.58 per
mcf in 2002. For the three months ended September 30, 2003,
production was 18,500 barrels of oil at an average price of
US$33.52 per barrel. For the same period of 2002, production was
7,200 barrels of oil at an average price of US$27.03 and 13,000
mcf of natural gas at an average price of US$2.58.
ANEC is a Tulsa, Oklahoma based independent exploration and
production company with operations in St. Charles Parish,
Louisiana.
* * *
Liquidity and Capital Resources
In its most recent Form 10-Q filed with the Securities and
Exchange Commission, ANEC reported:
The Company has sustained substantial losses in the first three
quarters of 2003 and for the year 2002, totaling approximately
$3.9 million and $8.6 million, has a stockholders' deficit of $3.9
million and $1.4 million at September 30, 2003 and December 31,
2002, a working capital deficiency of approximately $3.6 million
all of which lead to questions concerning the ability of the
Company to meet its obligations as they come due. The Company also
has a need for substantial funds to develop its oil and gas
properties.
The Company's financial statements have been prepared on a going
concern basis which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the
ordinary course of business. As a result of the losses incurred
and current negative working capital, there is no assurance that
the carrying amounts of assets will be realized or that
liabilities will be liquidated or settled for the amounts
recorded. The ability of the Company to continue as a going
concern is dependent upon adequate sources of capital and the
ability to sustain positive results of operations and cash flows
sufficient to continue to explore for and develop its oil and gas
reserves.
In the ordinary course of business, the Company makes substantial
capital expenditures for the exploration and development of oil
and natural gas reserves. Historically, the Company has financed
its capital expenditures, debt service and working capital
requirements with the proceeds of debt and private offering of its
securities. Cash flow from operations is sensitive to the prices
the Company receives for its oil and natural gas.
A reduction in planned capital spending or an extended decline in
oil and gas prices could result in less than anticipated cash flow
from operations and an inability to sell more of its common stock
or refinance its debt with current lenders or new lenders, which
would likely have a further material adverse effect on the
Company.
The net proceeds of the Convertible Secured Debenture issuance,
after the payment of various debt and payables obligations, are
being used to fund the Company's exploration program on its
ExxonMobil joint development area. To the extent additional funds
are required to fully exploit and develop this area, it is
management's plan to raise additional capital through the sale of
its common stock, however, it currently has no firm commitment
from any potential investors.
ARTISOFT INC: Nasdaq Strikes Shares from Listing Effective Wed.
---------------------------------------------------------------
Artisoft(R), Inc., developer of the first software-based phone
system, announced its Common Stock was delisted from the Nasdaq
SmallCap Market, effective with the open of business on Wednesday,
November 19, 2003.
The Company's Common Stock was eligible for quotation on the OTC
Bulletin Board effective with the open of business on November 19,
2003. Nasdaq advised the Company that, as the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003
reported total shareholders' equity below the required minimum of
$2.5 million, the Company had not satisfied the requirement for
continued listing.
"As an early stage company, it has become impractical for Artisoft
to meet the continuing listing requirements of Nasdaq," said Steve
Manson, Artisoft's president and CEO. "Our priorities are to
continue managing the significant growth we are experiencing and
to capitalize on the large market opportunities in front of us.
With five consecutive quarters of solid revenue growth and a
strong cash position, Artisoft is well positioned for success."
Artisoft, Inc. -- whose June 30, 2003 balance sheet shows a total
shareholders' equity deficit of about $320,000 -- is a leading
developer of open, standards-based telephone systems that bring
together voice and data for more powerful and productive
communications. Artisoft's TeleVantage delivers greater
functionality, flexibility, and value than proprietary PBXs to a
variety of customers, from small offices to large enterprise
organizations with sophisticated call centers. Artisoft's
innovative software products have consistently garnered industry
recognition, winning more than 30 awards for technical excellence.
The company distributes its products and services worldwide
through a dedicated and growing channel of authorized resellers.
For more information, visit http://www.artisoft.com
ATLANTIC COAST: Enters into Pacts to Acquire 25 Airbus Aircraft
---------------------------------------------------------------
Atlantic Coast Airlines, the Dulles, VA-based carrier (Nasdaq:
ACAI), has entered into agreements to acquire 25 Airbus A320-
family aircraft, with options for additional aircraft.
These efficient, passenger-friendly aircraft will form the
backbone of the fleet for the company's low-fare airline. The
first of these aircraft will arrive in September 2004 and will be
ready for revenue service as early as November 2004.
The company has entered into a binding memorandum of understanding
with Airbus for a firm order of ten new A319 aircraft configured
with 132 seats, and five new A320 aircraft configured with 156
seats, including full conversion rights. It has also entered into
leasing commitments from operating lessors for ten additional A319
aircraft. Each aircraft will feature IAE V2500-A5 engines. The
aircraft will be equipped in a single-class configuration, and
will offer passengers a comfortable 33 inches of legroom between
most rows.
Atlantic Coast Airlines Chairman and Chief Executive Officer Kerry
Skeen said, "[Wednes]day's announcement represents a major step
forward in our strategy to transform the company into one of the
leading low-fare carriers in the industry. The addition of the
Airbus aircraft to our fleet will allow us to fly coast-to-coast
from our hub at Washington Dulles to serve major destinations
beyond the reach of the CRJ-200. This is a key component in our
plan to offer consumers in the Washington, DC area and across the
country an airline with low, simple fares, excellent service and
convenient schedules featuring frequent departures and flexible
ticketing rules.
"We are pleased with the favorable economics and business terms we
have achieved in this deal. By placing the order at this time we
are able to take advantage of these favorable terms as well as
delivery positions that are currently available, which are
critical to the implementation of our low-fare strategy." He
added, "Our Board's decision to go with Airbus aircraft was the
result of an intense bidding process. The company received
competitive proposals from airframe, engine, and equipment
suppliers, all of whom were vying to participate in this order
following their extensive review of our business plan. We believe
that this agreement clearly demonstrates the confidence that
Airbus and our new lessors have in our new business plan."
Atlantic Coast Airlines is uniquely positioned to execute its
strategy to establish an independent low-fare airline. The
Washington, DC metropolitan area is the fifth largest air travel
market in the U.S. with more than 40 million local passengers per
year. The company's existing infrastructure will provide
immediate critical mass at Dulles, and the company believes that
its cost structure will allow it to operate its Airbus aircraft at
competitive costs relative to other low-fare carriers. The
company's pilots have voiced their clear support for the company's
business strategy by overwhelmingly approving competitive pay
scales and work rules for the operation of the these aircraft as
part of their recently announced revised contract.
With 44 gates, 87 regional jets and a fleet that will include at
least 25 Airbus jets, ACA will operate more than 325 daily
departures from Dulles, offering high-frequency service to a large
number of markets for both local and connecting passengers. The
company's high-utilization operation and low distribution costs
will allow it to offer walk-up fares up to 70% lower than those
offered today for service to and from Washington Dulles.
The company intends to implement its new independent low-cost
carrier strategy as soon as its existing contract with United
Airlines has been terminated. The name and branding identity for
the low-fare airline will be revealed at a ceremony scheduled for
Wednesday, November 19th at 2:00pm, to be held at ACA's state-of-
the-art Washington Dulles maintenance facility.
ACA currently operates as United Express and Delta Connection in
the Eastern and Midwestern United States as well as Canada. On
July 28, 2003, ACA announced plans to establish a new, independent
low-fare airline to be based at Washington Dulles International
Airport. The company currently has a fleet of 148 aircraft-
including a total of 120 regional jets-and offers over 840
daily departures, serving 84 destinations.
The common stock of parent company Atlantic Coast Airlines
Holdings, Inc. is traded on the Nasdaq National Market under the
symbol ACAI. For more information about ACA, visit
http://www.atlanticcoast.com
Atlantic Coast Airlines (S&P, B- Corporate Credit Rating,
Developing) employs over 4,600 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
BLUE DOLPHIN: Needs External Financing to Meet Cash Requirements
----------------------------------------------------------------
At September 30, 2003, Blue Dolphin Energy Company's working
capital was approximately $1.2 million.
The Company began to receive payments from its working interest in
the High Island Block A-7 field which provided revenues net of
operating expenses and capital expenditures of approximately $1.1
million during the nine months ended September 30, 2003. Revenues
from the High Island Block A-7 Field have declined significantly
and are expected to cease by mid-2004.
The Company's future cash flows are subject to a number of
variables, primarily oil and gas production volumes from the High
Island Block A-7 field, utilization of its pipeline systems and
commodity prices among others. Approximately 65% of its revenues
from the nine months ended September 30, 2003 were from sales of
oil and gas production from the High Island A-7 field. In order to
satisfy its working capital and capital expenditure requirements
for the next twelve months, the Company believes that it may need
to raise approximately $0.5 to $1.0 million of capital.
The Company will need to arrange external financing and/or sell
assets to raise the necessary capital. Historically, the Company
has relied on the proceeds from the sale of assets and capital
raised from the issuance of debt and equity securities to
individual investors and related parties to sustain its
operations. There can be no assurance that the Company will be
able to obtain financing or sell assets on commercially acceptable
terms to meet its capital requirements. The Company's inability
to raise capital may have a material adverse effect on its
financial condition, ability to meet its obligations and operating
needs, and results of operations. The Company's capital
requirements raise substantial doubt about the Company's ability
to continue as a going concern.
BURLINGTON: Hails Administration's Decision on China Safeguards
---------------------------------------------------------------
Wilbur L. Ross, Chairman of Burlington Industries said, "We are
delighted with the Administration's decision regarding the China
safeguards. The textile and apparel industries have been hurt
severely by inappropriate behavior on the part of China and other
exporting countries. There is nothing inconsistent between
movement toward relaxation of trade barriers and moderation of
shock waves and it is encouraging that the Administration is
mindful of the textile industry's precarious condition. We
believe that the real solution to the China problem is to revise
the January 1, 2005 quota date to a more gradual phase in over a
number of years. That would give the industry a chance to
consolidate and restructure itself to cope with the inevitable
globalization."
With operations in the United States, Mexico and India and a
global manufacturing and product development network based in Hong
Kong, Burlington Industries is one of the world's most diversified
marketers and manufacturers of softgoods for apparel and interior
furnishings.
CHI-CHI'S: Koo Koo Roo's Assets Will Be Auctioned-Off Tomorrow
--------------------------------------------------------------
Pursuant to an Asset Purchase Agreement, Koo Koo Roo, Inc., a
debtor-affiliate of Chi-Chi's, Inc., seeks to sell substantially
all of its assets to the Fuddruckers, Inc., free and clear of all
liens and encumbrances. The proposed sale is subject to higher
and better offers.
To flush-out the highest and best price for the chain, the U.S.
Bankruptcy Court for the District of Delaware scheduled an auction
for tomorrow, at 10:00 a.m. Pacific Time to be held at the offices
of Irell & Manella LLP, Counsel for the Debtors, located at 814
Newport Center Drive, Suite 400, Newport Beach, California 92660.
A final hearing for the Asset Sale will convene on November 24, at
1:30 p.m. Arizona Time, before the Honorable Charles G. Case, II,
in the U.S. Bankruptcy Court for the District of Arizona.
Chi-Chi's, Inc., and its debtor-affiliates filed for Chapter 11
protection on October 8, 2003, (Bankr. Del. Case No. 03-13063).
Bruce Grohsgal, Esq., Laura Davis Jones, Esq., Rachel Lowy
Werkheiser, Esq., Sandra Gail McLamb, Esq., at Pachulski, Stang,
Ziehl, Young, Jones & Weintraub PC and William N. Lobel, Esq.,
Alan J. Friedman, Esq., Mike D. Neue, Esq., John P. Schafer, Esq.,
at Irell & Manella LLP, represent the Debtors in their liquidating
efforts.
CHAMPIONSHIP AUTO: Deloitte & Touche Airs Going Concern Doubt
-------------------------------------------------------------
On November 11, 2003, in response to a request by the management
of Championship Auto Racing Teams Inc., that Deloitte & Touche
LLP, the Company's independent auditor, reissue its report on the
Company's financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, and in
connection with the filing by the Company of a proxy statement on
November 13, 2003 relating to the pending transaction with Open
Wheel Racing Series LLC, Deloitte & Touche informed management
that its report on the Company's financial statements as of
December 31, 2002 and 2001, and for each of the three years in the
period ended December 31, 2002 would include an explanatory
paragraph indicating that developments during the nine-month
period ended September 30, 2003 raise substantial doubt about the
Company's ability to continue as a going concern.
CINEMA RIDE: Sept. 30, 2003 Balance Sheet Upside-Down by $900K
--------------------------------------------------------------
Cinema Ride, Inc. Pink Sheets:MOVE) announced its results of
operations for the three months and nine months ended
September 30, 2003.
Revenues decreased by $111,403 or 15.8% to $590,294 for the three
months ended September 30, 2003, as compared to $701,697 for the
three months ended September 30, 2002. The Company's equity in net
income of its Las Vegas Tickets2Nite business venture was $109,788
for the three months ended September 30, 2003, its first year of
operation. The net loss for the three months ended September 30,
2003, was $54,996, as compared to a net loss of $284,781 for the
same period in 2002. The net loss per common share was $0.01 for
the three months ended September 30, 2003, as compared to a net
loss of $0.05 for the same period in 2002. Weighted average common
shares outstanding were 6,127,225 for the three months ended
September 30, 2003, and 5,235,633 for the same period in 2002.
Revenues decreased by $356,173 or 19.7% to $1,449,409 for the nine
months ended September 30, 2003, as compared to $1,805,582 for the
nine months ended September 30, 2002. The Company's equity in net
income of its Las Vegas Tickets2Nite business venture was $207,482
for the nine months ended September 30, 2003, its first year of
operation. The net loss for the nine months ended September 30,
2003, was $822,857, as compared to a net loss of $1,066,265 for
the same period in 2002. The net loss per common share was $0.14
for the nine months ended September 30, 2003, as compared to a net
loss of $0.25 for the same period in 2002. Weighted average common
shares outstanding were 5,962,733 for the nine months ended
September 30, 2003, and 4,204,819 for the same period in 2002.
Cinema Ride, Inc.'s September 30, 2003 balance sheet shows a
working capital deficit of about $1.6 million, and a total
shareholders' equity deficit of about $900,000.
CLEARWATER ENGINEERING: Case Summary & 13 Unsecured Creditors
-------------------------------------------------------------
Debtor: Clearwater Engineering, Inc.
10460 S 199th West
Clearwater, Kansas 67026
Bankruptcy Case No.: 03-16331
Type of Business: The Debtor is a machining company. Clearwater
has a 13 year history of providing machining and
tooling services for customers in the aerospace
industry like Boeing, Bombardier and Cessna.
See http://www.clearwaterengineering.com/
Chapter 11 Petition Date: November 17, 2003
Court: Robert E. Nugent
Judge: District of Kansas (Wichita)
Debtors' Counsel: William H. Zimmerman, Jr., Esq.
Case, Moses, Zimmerman & Wilson, P.A.
150 North Main-Ste. 400
Wichita, Kansas 67202-1321
Tel: 316-303-0100
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 13 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Ellison Machinery Corp. $147,656
American Express Business $59,298
Reliance Metalcenter Div 14 $13,282
Murdock Industrial Supply $9,681
NMHG Financial Services $5,921
Midwest Machining Inc. $6,462
Metal Finishing Co., Inc. $2,823
Industrial Distribution Group $1,354
Citicapital Manufacturing Equip. $1,291
TW Metals $1,007
Safety Kleen $1,005
Michael L. Engle $1,000
Metal Improvement Co. $934
Manufacturing Tools & Supply Inc. $873
CONSECO: Posts $2.2 Billion in Net Income for July-August Period
----------------------------------------------------------------
Conseco, Inc. (NYSE:CNO) reported financial results for the
quarter and nine months ended September 30, 2003, the company's
first earnings report since emerging from Chapter 11 on
September 10, 2003. The results for periods following our
emergence from Chapter 11 reflect fresh-start accounting
adjustments as required by generally accepted accounting
principles. Accordingly, the Company's financial results for
periods following emergence from bankruptcy are not comparable to
our results for prior periods. For purposes of accounting
convenience, the Company has established a convenience fresh start
date of August 31, 2003.
Operating Results
For the two-month period of July-August 2003, Conseco
("predecessor company") reported net income of $2,241.3 million,
which included the following unusual items related to our
emergence from bankruptcy: (i) a gain on the discharge of pre-
petition liabilities of $3,151 million; (ii) adjustments to the
value of our assets and liabilities related to the adoption of
fresh-start accounting of $(950) million; and (iii) $38 million
related to professional fees.
For the month of September 2003, Conseco ("successor company")
reported net income (after dividends on convertible exchangeable
preferred stock) of $18.9 million, or 17 cents per diluted common
share. Results included after-tax realized investment gains and
venture capital income of $2.6 million, or 2 cents per diluted
common share.
Total collected premiums for the quarter, for the predecessor and
successor companies combined, were $1,003 million, compared with
$1,101 million in the third quarter of 2002. By product line,
collected premiums in 3Q03 were:
-- $231 million in annuity products, vs. $270 million in 3Q02.
-- $578 million in supplemental health products, vs. $588 million
in 3Q02.
-- $194 million in life and all other products, vs. $243 million
in 3Q02.
Fresh-Start Balance Sheet
Under fresh-start accounting, Conseco's capital structure and
resulting common book value were effectively set by the Plan of
Reorganization approved by the bankruptcy court. As such,
Conseco's agreed-upon enterprise value of $3.8 billion at
emergence consisted of $1.3 billion of bank debt, approximately
$860 million of convertible exchangeable preferred stock and
common shareholders' equity, or book value, of $1.64 billion, or
$16.39 per common share.
Fresh-start accounting also required Conseco to revalue, on a
mark-to-market basis, all assets and liabilities as of the
reorganization date. The value of policies in force - the
discounted value of the projected cash flows from all insurance
business on the books - was $2.84 billion at emergence.
The mark-to-market required by fresh-start accounting resulted in
an increase to the Conseco Insurance Group's aggregate long-term
care reserves of approximately $1.2 billion. After the fresh-start
adjustment, future loss ratios on this business (excluding
investment income earned on reserves) are projected at 100% to
120% over the next several years. Projected loss ratios on the
Bankers Life and Casualty long-term care business (excluding
investment income earned on reserves) are 65% to 85%. The value of
policies in force includes approximately $200 million and $400
million for long-term care business at the Conseco Insurance Group
and Bankers, respectively.
Conseco established a full valuation allowance for deferred tax
assets of approximately $2.6 billion at emergence and,
accordingly, the fresh-start balance sheet does not reflect the
value of our deferred tax assets. Goodwill, the value remaining
after revaluing all assets and liabilities that do appear on the
balance sheet, was $1.1 billion at emergence. Future utilization
of net operating loss (NOL) carryforwards and additional deferred
tax attributes reduces the goodwill asset in future periods.
At Sept. 30, 2003, the company's actively managed fixed maturity
investment portfolio had unrealized gains of $467 million and the
average credit quality of the portfolio was "A." Below investment
grade bonds comprised 4.2% of the portfolio at Sept. 30, 2003,
compared with 7.6% at Dec. 31, 2002.
Earnings Guidance
Conseco said it expects year one net income applicable to common
stock (excluding realized investment gains/losses) to be in the
range of $175 million to $200 million, for the twelve months
beginning October 1, 2003. The company's initial return on equity
(ROE) target is 9%-10%, and its initial target for annual net
income growth is 7%-10%. The company expects net income growth to
come from a combination of new sales and expense reductions.
Comments from Conseco CEO Bill Shea
"With our emergence from Chapter 11 and the accomplishments we
have achieved during our restructuring, we have a new, stronger
balance sheet. Our sole focus is on our insurance business. And we
have new priorities. Our primary business objective is to improve
our ratings as quickly as possible. Achieving improved ratings is
the key to building the value of our company. It will allow us to
compete for new business on much more favorable terms, and it will
support our policyholders' continuing trust in us.
"In order to earn the ratings we need and set the stage for
profitable and predictable growth, we are managing the company
against three key measures:
-- Combined statutory earnings and cash-flow capacity from our
insurance subsidiaries. Statutory earnings build the capital
adequacy required by ratings agencies and regulators. Statutory
earnings also combine with fees and interest paid by the
insurance companies to the parent company to create the "cash
flow capacity" the parent company needs to meet its
obligations, including debt service. Conseco's combined
statutory operating earnings (before realized gains and losses)
totaled $222 million for the first nine months of 2003, a $180
million increase over the same period in 2002. The 2003 period
included several positive operating income items resulting from
the sale of the General Motors Building. Going forward, our
reorganized holding company capital structure and reduced
operating expenses should allow us to retain a substantial
portion of future "cash-flow capacity" at the insurance
companies to support growth.
-- Combined statutory capital and surplus and combined risk-based
capital ratio. As a result of operating profits and realized
gains from the sale of the GM Building, Conseco's insurance
companies at September 30, 2003, had over $1.4 billion of
combined capital and surplus to protect policyholders, and an
estimated combined RBC ratio of over 250%, up from 166% at
year-end 2002. The RBC ratio is one of the most important
measures used by rating agencies and regulators to assess the
financial strength of insurance companies. Conseco's long-term
goal is to operate with an RBC ratio between 250% and 300%, a
level that not only protects policyholders, but also supports
higher ratings while allowing Conseco to meet its ROE
objectives.
-- Holding company debt level and debt-to-total-capital ratio. At
Sept. 30, 2003, our holding company debt amounted to $1.3
billion, or 34% of our total capital. Our goal is to reduce the
debt-to-total-capital ratio to 30% by the end of 2004. Longer-
term, our goal is to operate with a debt-to-total-capital ratio
commensurate with an investment-grade credit rating.
"We were very pleased with how well most of our insurance
distribution held together during the bankruptcy process. We are
especially proud of the performance of our career distribution
force at Bankers Life and Casualty, which generally maintained
sales levels year over year, despite significant ratings
downgrades. At Conseco Insurance Group, we deliberately cut back
sales of annuity and life products to conserve capital, and we
discontinued long-term care sales. Thanks to our strong
relationships with many key independent marketing organizations,
collected premiums for core supplemental health products were down
only slightly, and we feel that we have a good base to grow from
as we begin to earn higher ratings.
"With the active support of our 4,400 employee associates, we are
continuing to execute our turnaround program. We have much left to
do, but we are making progress. Our reorganization and other
actions have removed many of the "surprise" risks from our balance
sheet - fresh-start accounting required us to reset of all our
assumptions about the future of our business to reflect all that
we know today. We are now working very hard to eliminate the
"surprise" risks from our income statement, many of which have
been holdover issues:
-- We are working to further reduce operating expenses and improve
the efficiency of our operations across all business functions.
-- We are working to stem current losses and avoid future losses
in selected product segments, including acquired long-term care
and certain universal life blocks.
-- We are also working to streamline our back-office systems, many
of which, especially in Carmel, are too complicated and
cumbersome. Complexity adds unnecessary cost, and it gets in
the way of providing the excellent service our agents and
customers expect.
"In sum, we're simplifying the way we think about our business.
Like all life/health insurance companies, we have three core
disciplines:
-- We take in cash primarily from the renewal of insurance
policies that we sold in prior years, and secondarily from the
sale of new policies.
-- We invest that cash in bonds and other securities that will
earn a predictable, competitive return until it is needed to
pay customer claims and benefits.
-- We pay out cash to administer our business, including claims
and benefits; to provide service to agents and customers; and
to support our operations.
"In our 'back to basics' approach, we're working hard to execute
with excellence on each of those core disciplines, while laying
the foundation for sustained growth."
Conseco, Inc.'s insurance companies help protect working American
families and seniors from financial adversity: Medicare
supplement, long-term care, cancer, heart/stroke and accident
policies protect people against major unplanned expenses;
annuities and life insurance products help people plan for their
financial future.
COVANTA ENERGY: Gets Nod to File Bidders' Disclosures Under Seal
----------------------------------------------------------------
The Covanta Energy Debtors sought and obtained the Court's
authority to file under seal certain supplemental disclosures
executed by the Debtors' co-counsel, Cleary, Gottlieb, Steen &
Hamilton. Copies of the Disclosures will be filed under seal for
in camera review by the Court and will be served only on counsel
to:
(a) the Official Committee of Unsecured Creditors,
(b) the Informal Committee of 9.25% Noteholders, and
(c) the agents to the Debtors' lenders.
Deborah M. Buell, Esq., at Cleary, Gottlieb, Steen & Hamilton, in
New York, explains that the Debtors seek to protect the
information concerning the identity of prospective bidders for
the auction of the Debtors' geothermal business in California to
be held before the Court on November 19, 2003.
Ms. Buell points out that Section 107(b) of the Bankruptcy Code
provides in relevant part that on request of a party-in-interest,
the Bankruptcy Court will "protect an entity with respect to a
trade secret or confidential research, development, or commercial
information." The Debtors contend that the contents of the
Disclosures constitute sensitive "commercial information."
(Covanta Bankruptcy News, Issue No. 40; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
DII INDUSTRIES: Commences Supplemental Solicitation Process
-----------------------------------------------------------
Halliburton (NYSE: HAL) announced that DII Industries, Kellogg
Brown & Root, and other affected subsidiaries have completed
amendments to documents implementing the companies' planned
asbestos and silica settlement and are mailing supplemental
solicitation materials to asbestos and silica creditors in
connection with voting on the amended plan of reorganization.
The Company also announced that the proposed filing entities have
set December 11, 2003 as the deadline for voting, or changing
votes, on the proposed plan.
The proposed filing entities have been advised by their balloting
agent that as of November 14, 2003, it had received votes from
approximately 220,000 asbestos and silica creditors, or
approximately 66% of known creditors. Of the votes received, over
97% of asbestos voting creditors and over 98% of silica voting
creditors have voted to accept the plan. With the distribution of
the supplemental solicitation materials, creditors have the right
to change their vote until the December 11th voting deadline.
The supplemental solicitation materials describe changes made to
the plan to incorporate the terms of the agreement in principle
with the asbestos claimants committee announced on November 6,
2003 to limit the cash required to settle pending asbestos and
silica claims currently subject to definitive agreements and
certain additional agreements to $2.775 billion. The supplemental
disclosure statement, including the text of amendments, is now
posted in the Asbestos Update section of the Halliburton web site
at www.halliburton.com .
Remaining conditions to a Chapter 11 filing by the affected
Halliburton subsidiaries include approval of the plan by required
creditors, including at least 75% of known present asbestos
claimants, and Halliburton board approval.
Halliburton, founded in 1919, is one of the world's largest
providers of products and services to the petroleum and energy
industries. The Company serves its customers with a broad range of
products and services through its Energy Services and Engineering
and Construction Groups. The Company's World Wide Web site can be
accessed at http://www.halliburton.com
DRESSER INC: Third-Quarter Net Loss Reaches Close to $10 Million
----------------------------------------------------------------
Dresser, Inc.,provided financial results for the third quarter of
2003. The company also provided earnings results for the first and
second quarters of 2003, fiscal year results for 2002, restated
results for the first three quarters of 2002, and restated fiscal
year results for 2001.
As previously announced, the Company is in the process of
restating prior period results and completing the audit of its
2002 results. The financial information and discussion in this
press release reflects the correction of errors and restatements
of the Company's financial statements for the year 2001 and the
first three quarters of 2002.
"Business conditions have begun to improve as evidenced by third
quarter results," stated Patrick Murray, CEO of Dresser, Inc. "We
are finishing the restatements of prior periods and the re-audit
of 2001, and expect to complete and make our outstanding filings
with the Securities and Exchange Commission ("SEC") by the
beginning of next month."
Consolidated third quarter 2003 financial results
compared to third quarter 2002 results; slight increase
in revenues and operating income
For the quarter ended September 30, 2003, the Company recorded
revenues of $417.5 million, an increase of $9.6 million over the
$407.9 million reported for the same period in 2002. Operating
income in the third quarter of 2003 was $22.1 million, an increase
of $1.2 million from $20.9 million in the third quarter of 2002.
The Company posted a net loss of $9.8 million for the quarter
ended September 30, 2003, compared to net income of $1.7 million
for the year-ago period.
EBITDA for the third quarter of 2003 was $32.2 million, an
increase of $0.9 million from $31.3 million in the same period
last year.
"Adjusted EBITDA" in the third quarter of 2003 was $47.2 million,
an increase of $3.5 million compared to adjusted EBITDA of $43.7
million in the third quarter of 2002. Total adjustments of $15.0
million in the third quarter of 2003 were composed primarily of
restructuring expenses of $6.5 million; effects of the work
stoppage in the natural gas engine business of $2.0 million;
expenses associated with an ongoing restatement and re-audit of
2001 totaling $2.7 million; and $1.6 million for acceleration of
pension plan service costs associated with plant closings.
Adjustments of $12.4 million in the third quarter of 2002 include
restructuring expenses of $2.5 million; and write-downs of excess
and obsolete inventories and inventory shrinkage of $9.6 million.
Gross margin for the three-month period ended September 30, 2003
was 26.6% compared to 24.8% for the same period in 2002.
SG&A expenses were 21.3% of revenues in the third quarter of 2003,
compared to 19.6% in the same period last year. In the third
quarter of 2003, SG&A included approximately $4.0 million of
restructuring expenses. In the same period in 2002, there were
restructuring and asset-write down expenses of $2.5 million.
Cash and cash equivalents totaled $113.2 million on September 30,
2003, compared to $92.6 million on September 30, 2002.
Borrowings under the Company's senior credit facility and senior
subordinated notes were $951.8 million at the end of the third
quarter of 2003 compared to $960.0 million at the end of the third
quarter of 2002. Total debt, including capital leases, on
September 30, 2003, was $973.0 million, compared to $997.5 million
on September 30, 2002.
Backlog on September 30, 2003 was $472.2 million, compared to
$373.0 million on September 30, 2002.
Patrick Murray, Chief Executive Officer of Dresser, Inc., said "On
a year-over-year basis, revenues and operating income in our
Measurement Systems segment were up significantly, partially
offset by decreases in our Flow Control and Compression and Power
Systems segments. In Measurement Systems, we were helped by
increased volumes and profits from the previously announced
purchase of certain North American Tokheim assets, improved market
conditions in our traditional retail fueling business, and the
benefit of previously announced restructuring programs. In Flow
Control, while international projects remained strong, relatively
soft U.S. markets caused overall revenues to be down from year-to-
year. Volumes in our control valve, pressure relief valve, and
instruments product lines were down compared to last year while
our on/off valve, metering and piping specialties product lines
increased. Compression and Power Systems volumes were down
primarily due to the effects of the strike, which ended in late
July, in our natural gas engine business."
Consolidated third quarter 2003 results compared
to second quarter 2003 results; sequential improvement
in revenues, operating income, and EBITDA
Revenues in the third quarter of $417.5 million were up $22.6
million from second quarter revenues of $394.9 million. Operating
income of $22.1 million for the quarter ended September 30, 2003,
was up $16.5 million from the $5.6 million recorded in the quarter
ended June 30, 2003. The net loss in the third quarter of $9.8
million improved by $7.4 million from a $17.2 million loss in the
second quarter of 2003. EBITDA in the third quarter of 2003 of
$32.2 million increased by $9.9 million from the $22.3 million
recorded in the second quarter of 2003.
Adjusted EBITDA was $47.2 million in the third quarter of 2003, an
improvement of $9.4 million from adjusted EBITDA of $37.8 million
in the second quarter. As described above, there were adjustments
of $15.0 million in the third quarter of 2003, compared to $15.5
million of adjustments in the second quarter. Second quarter
adjustments primarily included the effects of the strike in the
natural gas engine business of $11.0 million, expenses for the
restatement and re-audit of prior years of $5.8 million, $2.7
million in restructuring and exit costs, and $0.8 million related
to discontinued acquisition activities. These adjustments were
decreased by foreign exchange fluctuations of $4.8 million.
Gross margin of 26.6% in the third quarter of 2003 improved from
25.5% for the second quarter of 2003.
SG&A was 21.3% of revenues in the third quarter of 2003, a decline
from 24.1% in the second quarter of 2003, mainly due to lower
expenses associated with the restatement and re-audit of prior
years and expenses related to discontinued acquisition activities
in the second quarter.
Cash and cash equivalents totaled $113.2 million on September 30,
2003, compared to $102.2 million on June 30, 2002.
Borrowings under the Company's senior credit facility and senior
subordinated notes were $951.8 million at the end of the third
quarter of 2003 compared to $952.0 million at the end of the
second quarter of 2003. Total debt on September 30, 2003, was
$973.0 million, compared to $980.2 million on June 30, 2003. Total
debt on June 30, 2003 included a software related capital lease of
$4.9 million and $2.3 million for financing of insurance premiums
not included in the previous estimate of $973 million.
Backlog increased from $458.7 million on June 30, 2003 to $472.2
million on September 30, 2003.
"On a sequential basis," stated Murray, "there was significant
improvement in revenues, earnings, EBITDA, and adjusted EBITDA.
The settlement of the Waukesha Engine strike, which began in May
and ended in late July, had a less significant impact on the third
quarter compared to the second quarter. In our Flow Control
segment there was strengthening in international markets while
U.S. markets continue to be relatively weak. In our Measurement
Systems segment we saw an improving market and an end to the
consolidation costs of integrating the Tokheim North America
assets we purchased into our existing business. Finally, we had
lower restatement and re-audit costs and other expenses partially
offset by higher credit agreement amendment fees."
Consolidated First nine months of 2003 compared
to the first nine months of 2002; first half of 2003
weaker compared to first half of 2002
For the first nine months of 2003, revenues were $1,183.8 million,
a decline of $26.9 million compared to $1,210.7 million for the
first nine months of 2002. This was mainly due to weaker market
conditions in the first half of 2003 compared to the first half of
2002. Decreases in volume in the Flow Control and Compression and
Power Systems segments were partially offset by increases in the
Measurement Systems segment.
Operating income for the first nine months of 2003 was $40.3
million, a decline of $48.4 million compared to $88.7 million for
the first nine months of 2002. Lower volumes and margins in the
Flow Control and Compression and Power Systems segments, as well
as increased restructuring and other expenses, were only partially
offset by higher volumes and margins in the Measurement Systems
segment.
For the first nine months of 2003 the Company posted a net loss of
$31.8 million compared to net income of $8.1 million for the
comparable year-ago period. EBITDA in the first nine months of
2003 was $81.5 million compared to $123.5 million for the first
nine months of 2002.
Adjusted EBITDA for the first nine months of 2003 was $122.9
million compared to $137.7 million for the first nine months of
2002. Adjustments to EBITDA in the first nine months of 2003
included restructuring costs of $15.9 million; effects of the
strike in our natural gas engine business of $13.0 million;
restatement and re-audit expenses of $8.4 million; expenses
related to discontinued acquisition activities of $4.2 milllion;
and an impairment of capitalized software costs of $2.4 million.
Adjustments to EBITDA in the first nine months of 2002 included
restructuring expenses of $2.5 million, and asset write-downs of
$9.6 million and other costs of $2.1 million.
Gross margin declined slightly to 26.4% for the first nine months
of 2003 compared to 27.2% for the first nine months of 2002.
SG&A as a percentage of revenues for the first nine months of 2003
was 23.0% compared to 19.9% for the same period in 2002. The
majority of the increase in SG&A was in restructuring, restatement
and re-audit, and credit agreement amendment expenses.
"The Waukesha Engine strike, volume declines in the Flow Control
segment, and the previously discussed increases in corporate
expenses were the major factors in the EBITDA decline from year-
to-year," commented Murray. "Improved results in our Measurement
Systems segment only partially offset the declines in the other
segments."
Flow Control volumes down slightly year-on-year in the third
quarter, but up slightly on a sequential basis
In the Flow Control segment, revenues for the third quarter of
2003 were $253.8 million, down $1.1 million from $254.9 million in
the same year-ago period. Although international project business
remained strong, weakness in U.S. markets persisted, particularly
in gas transmission projects and aftermarket spending in refining,
petrochemical, and power generation markets.
Operating income of $13.1 million for the quarter ended
September 30, 2003, was up $0.5 million from $12.6 million
recorded in the same quarter last year. Restructuring and other
expenses in the third quarter of 2003 (primarily related to
manufacturing plant consolidations in Houston and Connecticut)
totaled $5.6 million, compared to $11.2 million of restructuring
expenses and asset write-downs in the third quarter of 2002.
Excluding these expenses, operating income in the third quarter of
2003 would have been down by $5.1 million from the corresponding
period in the prior year largely due to weak U.S. markets.
Backlog of $345.7 million on September 30, 2003 increased $66.7
million from $279.0 million on September 30, 2002
On a sequential basis, revenues in the third quarter of 2003 of
$253.8 million were up slightly from $248.0 million recorded in
the second quarter of 2003. Gains in the on/off valve and natural
gas distribution systems businesses were partially offset by
declines in the control valve, pressure relief valve, and
instruments businesses. This was reflective of a strengthening
international project market and soft U.S. markets, particularly
in aftermarket sales to maintenance and repair organizations.
Operating income of $13.1 million in the third quarter of 2003 was
down from $18.7 million in the second quarter of 2003. After
adjusting for restructuring and other expenses of $5.6 million in
the third quarter and $1.5 million in the second quarter,
operating income declined by $1.5 million on a sequential basis.
Backlog of $345.7 million on September 30, 2003 decreased slightly
from $348.6 million on June 30, 2003.
"The U.S. has been a soft market throughout 2003. Domestic
spending remains relatively weak and customers continue to defer
spending, for a variety of reasons, on maintenance and repair
activities." commented Murray. "On the other hand, the
international project business continues to generate strong
bookings in our Flow Control segment. As a result we expect
revenue increases in this segment in the fourth quarter. Adjusted
EBITDA however, is expected to decline primarily due to production
inefficiencies as we close several plants in Berea, Kentucky and
Houston, Texas and relocate production to new facilities, and
losses incurred on a recently completed international project
order."
Measurement Systems benefits from acquisition
of certain Tokheim North American assets and improved markets
On a year-on-year basis, third quarter 2003 Measurement Systems
revenues were $96.0 million, up $15.2 million from $80.8 million
in the corresponding period of 2002. Revenue of $8.3 million was
generated from the purchase of certain Tokheim North American
assets with the remaining growth from improved market conditions
in the U.S. and Europe.
Operating income in the third quarter of 2003 was $13.1 million,
up $5.0 million from third quarter 2002 operating income of $8.1
million. The purchased Tokheim North American assets contributed
$1.3 million in operating income during the quarter. Excluding
restructuring and other expenses of $1.4 million in the third
quarter of 2003 and $1.4 million in the third quarter of 2002,
operating income improved by $5.0 million.
Backlog on September 30, 2003 was $49.5 million compared to $47.9
million on September 30, 2002.
On a sequential basis, third quarter 2003 revenues of $96.0
million were up $4.0 million from second quarter 2003 revenues of
$92.0 million. Improving market conditions, particularly in the
U.S., were mainly responsible for the quarter-on-quarter increase.
Operating income in the third quarter of 2003 was $13.1 million,
up $8.3 million from second quarter operating income of $4.8
million. Restructuring and other expenses in the third quarter
were $1.4 million compared to $0.8 million in the second quarter.
Excluding these expenses, operating income in the third quarter
was up $8.9 million from the second quarter.
Backlog on September 30, 2003 was $49.5 million compared to $50.5
million on June 30, 2003.
"We have successfully consolidated most of the Tokheim North
America assets we purchased into our Dresser Wayne operations,"
said Murray. "With the bulk of transition costs in the second
quarter, we began to see anticipated efficiency improvements
create significant operating leverage from increased volumes."
Work stoppage at Waukesha Engine causes
year-on-year decline in Compression and Power Systems
segment, sequential results improve
Compression and power systems revenue in the third quarter of 2003
was $69.5 million, down $3.6 million from $73.1 million for the
same period in 2002. As previously announced, a new labor
agreement was reached July 28th in the natural gas engine
business, ending a union work stoppage begun in May at the
Waukesha, Wisconsin manufacturing facilities. Although production
was continued during the work stoppage with temporary and non-
union employees, reduced output levels contributed to lower
revenues and gross margins in this segment.
Operating income for the quarter ended September 30, 2003 was $1.4
million, compared to $3.9 million for the quarter ended September
30, 2002. The major factor contributing to the year-on-year
decline in operating income were the effects of the previously
discussed labor action, partly offset by improved results in the
industrial blower business.
Backlog on September 30, 2003 was $77.6 million compared to
backlog of $49.6 million on September 30, 2002. The increased
backlog was in part attributable to lower production volumes
during the strike.
On a sequential basis, revenue of $69.5 million in the third
quarter of 2003 was up $13.6 million from $55.9 million in the
second quarter of 2003. The increase in revenue was mainly due to
the output increases in the third quarter due to the ending of the
labor action in the natural gas engine business.
Operating income for the third quarter of 2003 was $1.4 million,
compared to a $4.3 million loss for the second quarter of 2003.
Lower work stoppage expenses, and increased output in the natural
gas engine business since the end of the strike, were mainly
responsible for the difference between the quarters, along with
improved operating income in the industrial blower business.
Commented Murray, "Manufacturing output in our natural gas engine
business has recovered since the end of the work stoppage in July.
The impact of the strike on the third quarter has obscured early
signs of an improvement in market conditions for our natural gas
engine business."
The Company provides fourth quarter outlook
"We expect adjusted EBITDA in the fourth quarter of 2003 to be up
significantly year-on-year," stated Murray. "On a sequential
basis, fourth quarter adjusted EBITDA is expected to be slightly
down from the third quarter. We expect a decrease in adjusted
EBITDA due in large part to inefficiencies in our flow control
segment as we work through the previously announced plant closures
and consolidations as well as the loss we incurred on a recently
completed international project order as discussed above."
Added Murray, "October was another solid bookings month, and we
expect to carry a healthy backlog into 2004. We have also begun to
see the benefit of increased operating leverage in the retail
fueling business from prior restructuring and cost reduction
initiatives. As we work through the current restructurings in flow
control we expect to see improved operating leverage from this
segment in 2004. Restatement and re-audit expenses should be lower
in the fourth quarter, although we do expect to have fees and
expenses related to a solicitation for the bond indenture
amendment announced today."
"In the fourth quarter Dresser plans to divest a small operation,"
stated Murray. "The Company has signed an agreement for the sale
of a non-core Italian valve manufacturing operation for
approximately $23.5 million in cash plus the assumption of
approximately $4.6 million in debt. This operation contributed
approximately $23 million in revenue and $3 million of EBITDA for
the trailing 12 months ended September 30, 2003. Subject to
satisfaction of customary closing conditions, we expect to
complete the transaction prior to the end of 2003. The Company
expects to recognize a loss of approximately $4 million on the
sale of the operation. Cash proceeds will be applied to debt."
First and second quarter 2003 results released
The Company announced earnings results for the first and second
quarters of 2003.
For the first quarter of 2003, revenues were $371.4 million, a
decrease of $13.4 million from first quarter 2002 revenues of
$384.8 million. Operating income for the quarter ended March 31,
2003 was $12.6 million, down $26.6 million from $39.2 million for
the quarter ended March 31, 2002. The Company posted a net loss of
$4.8 million for the first quarter of 2003, down $7.2 million from
net income of $2.4 million for the same period in 2002.
EBITDA in the first quarter of 2003 was $27.0 million, down $23.6
million from $50.6 million for the first quarter of 2002. Adjusted
EBITDA in the first quarter of 2003 was $37.9 million, down $10.3
million from adjusted EBITDA of $48.2 million in the first quarter
of 2002.
For the second quarter of 2003, revenues were $394.9 million, a
decrease of $23.1 million from second quarter 2002 revenues of
$418.0 million. Operating income for the quarter ended June 30,
2003 was $5.6 million, down $23.0 million from $28.6 million for
the quarter ended June 30, 2002. The Company posted a net loss of
$17.2 million for the second quarter of 2003, down $21.2 million
from net income of $4.0 million for the same period in 2002.
EBITDA in the second quarter of 2003 was $22.3 million, down $19.3
million from $41.6 million for the second quarter of 2002.
Adjusted EBITDA in the second quarter of 2003 was $37.8 million,
down $8.0 million from adjusted EBITDA of $45.8 million in the
second quarter of 2002.
"As we noted in our business updates for the first and second
quarters," said Murray, "The first half of 2003 was weaker
compared to the first half of 2002. We believe our markets reached
a low in the fourth quarter of 2002 and started to recover in
2003. Our forward looking indicators at the time led us to believe
that the second half of 2003 would be significantly stronger than
the first half and that has proven to be the case so far."
Dresser announces launch of consent solicitation, full year 2002
and restated 2001 financial results, and plan for filings
The Company's restatement of prior years is substantially
complete. As part of the process of completing and delivering
audited financials to its senior lenders and completing
outstanding filings with the SEC, the Company separately announced
today the launch of a consent solicitation for the amendment and
waiver of certain financial reporting requirements in its senior
subordinated notes indenture. As announced previously the Company
has already obtained a comparable waiver from its senior lenders.
The purpose of the indenture amendment and waiver is to permit the
Company to present certain prior years' financial statements to
its note holders on an unaudited basis and to defer to
December 15, 2003 its obligation to comply with its indenture
reporting covenant. The solicitation also provides for a waiver of
all defaults under the indenture's reporting requirements through
the completion of the consent solicitation. The Company will offer
its note holders $2.50 in cash for each $1,000 principal amount of
notes to approve the amendment and waiver by December 4, 2003.
In connection with the consent solicitation, Dresser will furnish
to the SEC on Form 8-K a copy of the consent solicitation
statement, which will include as exhibits an unaudited draft of
the Company's report on Form 10-K for 2002 and unaudited draft
reports on Form 10-Q for the first two quarters of 2003 presented
as though the Company had completed the consent solicitation and
received the related waiver.
In the draft reports attached to the consent solicitation
statement, the Company reported that on a full-year consolidated
basis, revenues for 2002 were $1,589.4 million, an increase of
$49.3 million over the $1,540.1 million for 2001. Gross profit for
2002 was $430.7 million, a decrease of $30.7 million from 2001
gross profit of $461.4 million. Operating income for 2002 was
$92.0 million, a decrease of $24.7 million from operating income
of $116.7 million in 2001. A net loss of $14.1 million in 2002
decreased by $30.2 million from a net loss of $44.3 million in
2001.
EBITDA for fiscal year 2002 was $138.4 million, a decrease of
$34.3 million from EBITDA of $172.7 million in 2001.
Adjusted EBITDA in 2002 was $166.0 million, a decrease of $32.3
million from adjusted EBITDA of $198.3 million in 2001.
Since the previously announced preliminary results of restatements
of prior years, the Company has recorded several additional
changes including deferred income tax expense of $78.0 million and
a charge to retained earnings of $23.0 million associated with the
leveraged recapitalization in 2001. These non-cash charges were to
establish a valuation allowance against domestic deferred tax
assets, and are principally responsible for the difference between
the net loss in 2001 of $44.3 million versus the previous
estimated net income of $25 million. Neither of these items
impacts the Company's actual cash tax payments in prior or future
periods.
For a description of the errors and complete restated prior years'
results please see the unaudited draft of the Company's report on
Form 10-K for 2002 and unaudited draft reports on Form 10-Q for
the first two quarters of 2003 furnished to the SEC on Form 8-K in
connection with the consent solicitation statement.
Tables showing a comparison between selected restated and as-
reported financial information for the first, second, and third
quarters of 2002, as well as released earnings for the fourth
quarter of 2002 can be found attached to this earnings release and
in the exhibits to today's 8-K filing.
Upon consummating the consent soliciation, the Company will file
its annual report on Form 10-K for 2002; amended quarterly reports
on Form 10-Q for first, second and third quarters of 2002;
quarterly reports on Form 10-Q for the first, second and third
quarters of 2003; and deliver audited financials to its senior
lenders.
Headquartered in Dallas, Texas, Dresser, Inc. (S&P, BB- Corporate
Credit Rating) is a worldwide leader in the design, manufacture
and marketing of highly engineered equipment and services sold
primarily to customers in the flow control, measurement systems,
and compression and power systems segments of the energy industry.
Dresser has a widely distributed global presence, with over 7,500
employees and a sales presence in over 100 countries worldwide.
The Company's Web site can be accessed at http://www.dresser.com
DRESSER INC: Soliciting Consents from 9-3/8% Noteholders
--------------------------------------------------------
Dresser, Inc. announced that in connection with its previously
announced restatement of its financial statements, it has
commenced a solicitation of consent from holders of its
outstanding $550.0 million principal amount of 9-3/8% Senior
Subordinated Notes due 2011 for the amendment and waiver of
certain reporting requirements in the indenture for the notes.
The purpose of the proposed amendment and waiver is to permit the
Company to present to the note holders financial statements for
the year ended December 31, 2000 and prior years on an unaudited
basis and to defer to December 15, 2003 its obligation to comply
with its indenture financial reporting covenant, as so amended.
The consent solicitation also provides for a waiver of all
defaults under the indenture's reporting requirements through the
completion of the consent solicitation.
The proposed amendment and waiver require the consent of holders
of a majority in aggregate principal amount of the notes
outstanding. The Company will pay a fee of $2.50 in cash for each
$1,000 principal amount of notes for each consent properly
delivered and not revoked prior to the expiration of the consent
solicitation. The consent solicitation will expire at 5:00 p.m.,
New York City time, on Thursday, December 4, 2003, unless the
consent solicitation is extended by the Company. The Company will
pay consent payments on the first business day following the
expiration of the consent solicitation. The terms and conditions
of the consent solicitation are described in the Consent
Solicitation Statement dated November 18, 2003, copies of which
may be obtained from MacKenzie Partners, Inc.
The Company has engaged Morgan Stanley & Co. Incorporated to act
as solicitation agent in connection with the consent solicitation.
Questions regarding the consent solicitation should be directed to
Morgan Stanley & Co. Incorporated, attention Megan Leary, at 800-
624-1808 (U.S. toll free) and 212-761-1284 (collect). Requests for
documentation may be directed to MacKenzie Partners, Inc., the
information agent for the consent solicitation, at 800-322-2885
(U.S. toll free) and 212-929-5500 (collect).
Headquartered in Dallas, Texas, Dresser, Inc. (S&P, BB- Corporate
Credit Rating) is a worldwide leader in the design, manufacture
and marketing of highly engineered equipment and services sold
primarily to customers in the flow control, measurement systems,
and compression and power systems segments of the energy industry.
Dresser has a widely distributed global presence, with over 7,500
employees and a sales presence in over 100 countries worldwide.
The Company's Web site can be accessed at http://www.dresser.com
DVI INC: Fitch Places Brazil Securitizations on Watch Negative
--------------------------------------------------------------
Fitch Ratings has placed all tranches of MSF Funding LLC Series
2000-1 on Rating Watch Negative. The transaction is a
securitization of medical equipment leases originated from MSF, a
Brazilian subsidiary of DVI Inc. While Fitch downgraded the
senior tranches in October 2002, the current action is
specifically a result of DVI's insolvency and the ensuing
uncertainty regarding the servicing of the Brazilian portfolio.
To date, no 'Servicer Event of Default' has occurred, which would
require the replacement of MSF as servicer. Regardless, Fitch
expects DVI's financial problems to have an effect on normal
operations at the Brazilian subsidiary. The materiality of these
effects remains uncertain. While it seems limited at present, in
the past Fitch has witnessed resource and expertise sharing
between MSF and DVI.
Despite uncertainty pertaining to the servicing, several balancing
comments can be made regarding the securitization as a whole. On
Nov. 6, 2003, Fitch upgraded the Brazilian sovereign rating to
'B+' from 'B'. Increased stability in the local environment may
translate to positive performance on the underlying leases. At a
minimum, firmness of the local currency will reduce pressure on
local health care providers who earn in Brazilian reals but pay
leases in U.S. dollars. The performance of the securitization
continues to meet expectations. Approximately 92% to 94% of the
leases have consistently remained current on payments.
Delinquencies and defaults are expected to grow, but remain
manageable, and credit enhancement levels are increasing due to a
sequential pay trigger. Original enhancement levels for the class
A, B, C and D notes were 35%, 28%, 20% and 15% respectively.
Currently the same classes have approximately 42%, 34%, 24%, and
18% credit enhancement. Regarding servicing, in the event that MSF
is removed, Bradesco is named on behalf of JP Morgan Chase to act
as back up servicer. While Fitch would probably prefer the
experience of MSF, Bradesco as one of the largest and strongest
private Brazilian banks, should be a reliable replacement. The
transaction also benefits from various reserve accounts equal to
approximately 31% of the outstanding balance on the class A notes.
Nevertheless, the notes have been placed on Rating Watch Negative
reflecting the difficult to measure costs of a potential servicer
replacement. The current ratings on the notes are as follows:
-- Class A 'BBB', Rating Watch Negative;
-- Class B 'BBB-', Rating Watch Negative;
-- Class C 'BB', Rating Watch Negative;
-- Class D 'B', Rating Watch Negative.
Fitch continues to monitor the transaction for additional events
and will take further ratings action as necessary.
ENRON CORP: Selling Portland General Electric to Oregon Electric
----------------------------------------------------------------
Enron and Oregon Electric Utility Company, LLC have signed a
definitive agreement under which Oregon Electric will acquire
Portland General Electric from Enron. PGE is a public electric
utility, serving nearly half of Oregon's population.
The transaction, which has been approved by the Enron board of
directors and is supported by the Official Unsecured Creditors'
Committee in the Enron bankruptcy proceeding, requires the
approval of the Bankruptcy Court, which will conduct an "overbid"
process to give other potential buyers an opportunity to submit
superior bids. After the sale to Oregon Electric is approved by
the Court, the parties will seek approval of the Oregon Public
Utility Commission and certain federal regulatory agencies.
Subject to receiving these approvals, closing is anticipated in
the second half of 2004.
The transaction is valued at approximately $2.35 billion,
including the assumption of debt, with the final amount to be
determined on the basis of PGE's financial performance between
Jan. 1, 2003 and closing. In return, Oregon Electric will receive
100% of the outstanding shares of PGE, giving it full control of
PGE.
"Enron and its Official Unsecured Creditors' Committee believe
this transaction is the best option to deliver maximum value to
our economic stakeholders," said Stephen Cooper, Enron's chief
restructuring officer. "As we have said all along, we will not
break up PGE. This transaction supports that commitment."
Oregon Electric is a newly-formed entity financially backed by
investment funds managed by Texas Pacific Group, one of the
nation's leading private equity investment firms. Upon closing,
Oregon Electric will include three prominent Northwest business
and community leaders, former Oregon Governor Neil Goldschmidt,
Gerald Grinstein and Tom Walsh. Oregon Electric will appoint the
members of the PGE board of directors and these three individuals
are expected to serve on the board. PGE will retain its name, and
its headquarters will remain in Portland, Ore.
"We are very excited for Portland General to be an independent,
locally based company with the backing of strong financial
investors. We believe it is a solution that will work for
customers, employees and the communities that depend on PGE," said
Mr. Goldschmidt, who served as governor of Oregon from 1987-1991.
He was also former U.S. secretary of Transportation under
President Jimmy Carter and the former mayor of Portland. It is
expected Mr. Goldschmidt will serve as chairman of the board of
PGE when the sale is completed.
Gerald Grinstein is the former Chairman and CEO of Burlington
Northern and former Chairman of both Delta Air Lines and Agilent
Technologies. He serves on the board of directors of Delta Air
Lines, PACCAR, Vans and The Brinks Company.
Tom Walsh is a well-respected Oregon civic leader who is the
former head of Tri-Met, the regional transit authority. He has
served as chairman of the Oregon Board of Forestry and as vice
chairman of the Oregon Transportation Commission. He is also a
successful builder of affordable housing.
TPG's investors are largely institutions and a majority of its
capital comes from a number of America's largest public and
private pension funds, banks and insurance companies. One such
investor is the Oregon Public Employees Retirement Fund, which has
been an investor in TPG funds since TPG's inception.
"This is a terrific investment opportunity for us and for Oregon.
It enables PGE to focus on providing outstanding service to its
customers, while emphasizing independent operation and substantial
local participation on its board of directors," said David
Bonderman, founding partner of Texas Pacific Group.
Peggy Fowler, chairman and CEO of PGE, said "We're pleased to have
such high quality investors who understand local concerns. We are
hopeful we can work through the bankruptcy and OPUC processes to
complete this transaction and bring renewed stability to PGE. In
the meantime, PGE employees will continue to focus on delivering
safe, reliable power to our customers."
Portland General Electric is a recognized leader in the utility
industry with more than a century of experience delivering safe
and reliable electricity. PGE serves more than 750,000 retail
customers in the Northwest. The company supports the community
through a variety of innovative philanthropic, volunteer and
environmental stewardship efforts. Visit PGE on the Web at
http://www.portlandgeneral.com
Texas Pacific Group, with offices in San Francisco, London and
Fort Worth, Texas, is a private equity investment firm. TPG has
significant experience working in regulated industries including
airlines, financial services and healthcare. Since its founding in
1993, TPG has invested in more than 50 companies, of which it
continues to own more than 30. These companies have combined
revenues of more than $32 billion and employ more than 225,000
employees.
Enron's Internet address is http://www.enron.com
ENRON CORP: Files Second Amended Plan and Disclosure Statement
--------------------------------------------------------------
On November 13, 2003, Enron and its Creditors' Committee, filed a
Second Amended Plan of Reorganization and Disclosure Statement to
reflect various changes, including Classification and Treatment
of Claims against Debtors filing petitions since the filing of
the initial plan.
Stephen F. Cooper, Acting President, Acting Chief Executive
Officer and Chief Restructuring Officer of Enron Corporation,
recalls that when the Debtors filed the Plan of Reorganization on
July 13, 2003, that Plan reflects that global compromise between
the Debtors and the Creditors' Committee with the support of the
ENA Examiner. However, in October 2003, the ENA Examiner
withdrew his support for the Plan due, in large part, to the
Debtors and the Creditors Committee's failure to agree to waive
and release avoidance actions against certain creditors of ENA
and its subsidiaries that hold Enron Guaranty Claims. The ENA
Examiner contended that the waiver and release of individual
causes of action were part of the global inter-estate compromise.
This is despite the fact that the First Disclosure Statement
expressly stated that the inter-Debtor waivers will not affect
"the Debtors' ability to pursue third parties (including non-
Debtor affiliates) on any claims, causes of action or challenges
available to any of the Debtors in the absence of substantive
consolidation."
"The ENA Examiner's position is actually detrimental to his
purported constituency," Mr. Cooper comments. His insistence on
the waiver of avoidance actions against the holders of Enron
Guaranty Claims ignores the reality that the avoidance of any
voidable guarantees against ENE would increase the ENA Creditors'
recoveries. This increase would result from the reduction of
Claims against ENE, thereby increasing the distributions to be
made by ENE, which would, in turn, increase the distributions
to be made by ENA because ENA is ENE's single largest Creditor.
Moreover, the ENA Examiner's position gives no consideration to
the fact that his constituency is comprised of:
(a) Creditors who do not hold Enron Guaranty Claims;
(b) Creditors who hold Enron Guaranty Claims arising from
nonvoidable guarantees; and
(c) Creditors who hold Enron Guaranty Claims arising from
voidable guarantees.
Inexplicably, the ENA Examiner elected to favor this third group
to the detriment of holders of Allowed Claims. Apparently, the
ENA Examiner believes the global compromise is not fair because
it does not benefit a segment of his constituency holding
illegitimate Claims at the expense of another segment of his
constituency holding legitimate Claims. The Debtors and the
Creditors' Committee are unable to understand how the ENA
Examiner can find a settlement unfair when it maximizes
distributions to holders of valid and unavoidable claims.
Notwithstanding the ENA Examiner's repudiation of support for the
compromise, the Debtors and the Creditors' Committee elected to
propose the Plan incorporating all economic and governance
provisions as previously agreed. These provisions consist of:
* Recoveries to the Creditors will be equal to 30% of
recoveries in a substantive consolidation scenario plus 70%
of recoveries in a scenario where there is no
consolidation;
* Allowed Guaranty Claims will be entitled to participate in
the substantive consolidation scenario to the extent of 50%
of their Claims;
* Reallocation of the value of these assets attributed to ENE
on the Debtors' books and records will be made for the
benefit of ENA and its Creditors:
-- up to $870,000,000 of value attributable to Enron
Canada;
-- about $100,000,000 of value attributable to CPS; and
-- up to $40,000,000 of value attributable to Bridgeline;
* Distributions to Creditors will be made from a common
currency of pooled assets, except that holders of Allowed
Claims against ENA and its trading subsidiaries will be
entitled to receive Cash in lieu of up to $125,000,000 of
Plan Securities;
* Litigation Trust Claims (including the causes of action
alleged in the MegaClaim Litigation (other than avoidance
actions) and Special Litigation Trust Claims (including the
causes of actions alleged in the Montgomery County
Litigation) will be pooled as if all Debtors owned the
claims and the Debtors' estates were substantively
consolidated, and Intercompany Claims and Guaranty Claims
will not be entitled to interests in the Litigation Trust
or Special Litigation Trust;
* Upon conclusion of intense negotiations of all of the
foregoing, and in response to the demand that a
representative of ENA and its subsidiaries be appointed to
monitor the Reorganized Debtors' post-confirmation
activities and the resolution of Litigation Trust Claims,
the Debtors agreed that the ENA Examiner will be consulted
with respect to one of the five Persons to be appointed to
the Board of Directors of Reorganized ENE, the Litigation
Trust Board and the Remaining Asset Trust Boards.
In connection with its review of potential avoidance actions, the
Debtors and the Creditors' Committee have continued reviewing
whether any Claims based on guaranties are susceptible to
challenge. Pursuant to laws permitting the Debtors to avoid
obligations incurred in exchange for less than reasonably
equivalent value, the Debtors intend to challenge Claims
against ENE predicated upon guaranties issued, amended or
replaced during the one-year period preceding the Initial
Petition Date. The Debtors estimate that Claims meeting the
above criteria represent less than one-third in amount of all
Claims based on guaranties ENE executed.
Pursuant to the Plan, the Debtors will offer an opportunity to
compromise and settle the avoidance action litigation at varying
percentages based on the proximity of the execution of the
guaranty to the Initial Petition Date.
A copy of the Second Amended Plan and Disclosure Statement is
available for free at:
http://bankrupt.com/misc/SecondAmendedPlan.zip
(Enron Bankruptcy News, Issue No. 87; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
EQUISTAR CHEMICALS: Selling $250-Mill. of 10-5/8% Senior Notes
--------------------------------------------------------------
Equistar Chemicals, LP, a joint venture of Lyondell Chemical
Company (NYSE: LYO) and Millennium Chemicals Inc. (NYSE: MCH),
will sell $250 million of 10-5/8% senior notes due 2011 in a
private placement offering as part of a financing plan announced
earlier this week.
The notes will be priced at approximately 104.7% to yield 9-1/2%.
The terms of the senior notes will be the same as the terms of
Equistar's currently outstanding 10-5/8% senior notes. Equistar
will use $173 million of the net proceeds to repay in full the
term loans outstanding under Equistar's credit facility and will
use the remaining net proceeds to repay borrowings under
Equistar's revolving credit facility. The offering is expected to
close November 21, 2003.
The senior notes will be offered only to qualified institutional
buyers and other eligible purchasers in a private placement
offering. The notes will not be registered under the Securities
Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration.
Equistar Chemicals, LP (S&P, BB Corporate Credit Rating, Negative
Outlook), headquartered in Houston, Texas, is a joint venture
between Lyondell Chemical Company (NYSE: LYO) and Millennium
Chemicals Inc. (NYSE: MCH).
EQUISTAR: New Inventory Revolving Facility Gets S&P's BB Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' rating to
Equistar Chemicals LP's proposed $250 million inventory revolving
credit facility and its 'BB+' rating to a $450 million accounts
receivable purchase program that will be available to Equistar
Receivables II, LLC, a wholly owned subsidiary of Equistar
Chemicals LP. The ratings are notched above the corporate credit
rating to reflect strong prospects for full recovery in the event
of a default, because of the benefits of good collateral and
structural enhancements that provide protection to lenders.
Standard & Poor's said at the same time that it assigned its 'BB-'
rating to Equistar Chemical LP's proposed $200 million Senior
Notes due 2011 and affirmed its existing ratings, including the
'BB-/Negative/--' corporate credit rating, on the Houston, Texas-
based company.
Equistar has approximately $2.3 billion of outstanding debt (prior
to adjustments to capitalize operating leases). The proposed
financings will be used to repay additional existing debt
obligations, and will provide Equistar with borrowing capacity to
bolster liquidity.
"The completion of the proposed financing plan is an important
credit development, in that it improves Equistar's liquidity
position by extending debt maturities and by eliminating the
restrictive covenants associated with its prior bank facilities,"
said Standard & Poor's credit analyst Kyle Loughlin. "Still, given
the depth of the petrochemical industry downturn, ratings will
remain vulnerable to downgrade if emerging signs of economic
recovery fail to support a sustained trend of operating profit
improvements in each of the next several quarters," he continued.
The ratings reflect Equistar Chemicals LP's position as a major
petrochemical producer, as well as the risks associated with an
onerous debt burden and operating margins that vary widely over
the course of the business cycle. The business risks associated
with commodity petrochemical producers include volatile raw
material costs linked to oil and natural gas derivatives, capital
intensity, and pricing determined by the dynamic balance between
supply and demand. These limitations are offset partially by
Equistar's ability to generate strong free cash flows as business
conditions improve, a commitment to strengthening credit quality,
and by good sources of current liquidity.
EXIDE: Taps S&P Consulting to Render Financial Advisory Services
----------------------------------------------------------------
The Exide Debtors seek the Court's authority to employ Standard &
Poor's Corporate Value Consulting pursuant to Section 327(a) of
the Bankruptcy Code to perform financial advisory services for
the Debtors in these Chapter 11 cases.
Kathleen Marshall DePhillips, Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub PC, in Wilmington, Delaware, tells the
Court that the Debtors are familiar with the professional
standing and reputation of S&P Consulting. The Debtors
understand that S&P Consulting has a wealth of experience in
providing fresh-start and tax reporting valuation services and
enjoys an excellent reputation for the services it has rendered
in large and complex Chapter 11 cases on behalf of debtors and
creditors throughout the United States.
According to Ms. DePhillips, the services to be provided by S&P
Consulting are necessary to enable the Debtors to maximize the
value of their estates and reorganize successfully. S&P
Consulting is well qualified and able to represent the Debtors in
a cost-effective, efficient and timely manner. S&P Consulting
will provide accounting, consulting and advisory services as the
firm and the Debtors deem appropriate and feasible so as to
advise the Debtors in the course of their Chapter 11 cases.
Specifically, S&P Consulting will assist:
-- the Debtors in determining the value of their current
business operations;
-- with the financial modeling; and
-- in the valuation of the Debtors' tangible or intangible
assets for Fresh Start Accounting and tax reporting
purposes.
Aaron A. Gilcreast, S&P Consulting managing director, assures the
Court that the firm has no connection with the Debtors, their
creditors or other parties-in-interest in Exide's case. Mr.
Gilcreast attests that the firm does not hold any interest
adverse to the Debtors' estates and is a "disinterested person"
as the term is defined in Section 101(14) of the Bankruptcy Code.
S&P Consulting will conduct an ongoing review of its files to
ensure that no conflicts or other disqualifying circumstances
exist or arise.
The Debtors intend to pay S&P Consulting based on these customary
hourly rates, subject to periodic adjustments:
Managing Director $360
Director 330
Manager 290
Senior Associate/Associate 160 - 230
Ms. DePhillips relates that the Debtors were not clients of S&P
Consulting before the Petition Date, and the firm is not owed any
amount on account of prepetition services and expenses. (Exide
Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
FEDERAL-MOGUL: Sherill Balks at Seyfarth's Engagement as Counsel
----------------------------------------------------------------
Joseph Scott Sherrill objects to Seyfarth Shaw's simultaneous
representation of the Federal-Mogul Salaried Employee's
Investment Program, together with the Debtors and certain current
and former Federal-Mogul employees, officers and directors.
Mr. Sherrill believes that there is an actual conflict between the
Program's interest in recovering losses from the Debtors and
their Employees. The Debtors and their Employees are current or
former fiduciaries of the Program against whom claims have been
asserted for ERISA fiduciary breaches. Mr. Sherrill also asserts
that there is an actual conflict between the interests of the
Program and Chubb & Son, Seyfarth Shaw's other client, in
resisting payment of the Program's Claims. Chubb is the Debtors'
insurance carrier.
Mr. Sherrill contends that the Debtors have not provided evidence
that the Program, through the fiduciaries acting in the exclusive
interest of its participants and beneficiaries, and acting with
care, skill and prudence, as required by 29 U.S.C. Section
1104(a)(1), consented to Seyfarth Shaw's joint representation of
not only the Program but also, of the Debtors, their Employees
and Chubb. Nor could the consent be given.
The Debtors' application should, therefore, be denied. (Federal-
Mogul Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
FLEMING: Dunigan Panel Seeks Disallowance of Transferees' Claims
----------------------------------------------------------------
In June 2002, Fleming entered into a $975,000,000 credit facility
with the Deutsche Bank Trust Company Americas, as administrative
agent, and a consortium of 123 other lenders. Fleming used the
proceeds to fund the acquisition of the wholesale distribution
business comprised of Core-Mark International, Inc. and its
subsidiaries, and to repay certain obligations.
Pursuant to the Loan Documents, Fleming caused each of the
Debtors, including Dunigan Fuels Inc., to execute a Guarantee
Agreement, a Pledge Agreement, and a Security Agreement.
Dunigan, which operates Fleming's stand-alone fuel distribution
business, and each of the Co-Guarantors secured Fleming's
obligations under the Credit Agreement with first priority
security interests and liens on substantially all of their then
existing and after acquired assets, including their accounts
receivable and inventory.
As of the Petition Date, the Transferees made loans and advances
to Fleming, issued letters of credit on Fleming's behalf, and
incurred obligations in connection with certain treasury
services, all purportedly pursuant to the Credit Agreement. As
of the Petition Date, Fleming owed $604,000,000 to the
Transferees.
The Unofficial Committee of Dunigan Unsecured Trade Creditors
complains that Dunigan, which is a profitable company, received
nothing of value in exchange for the guaranty of Fleming's
obligations to the Transferees or the pledge of substantially all
its assets. At a hearing before the Court in connection with the
Debtors' Chapter 11 cases, Michael J. Maimone, Esq., at Gordon,
Fournaris & Mammarella, P.A., in Wilmington, Delaware, recounts
that Neil J. Rider, Dunigan's Vice President and Treasurer,
testified that Dunigan did not receive any value in exchange for
executing the pledge of the assets in favor of the Transferees.
Mr. Rider admitted that he was not aware of any funds from the
Credit Facility being used by Dunigan.
The Dunigan Committee is comprised of:
-- ExxonMobil Corporation,
-- Marathon Ashland Petroleum LLC,
-- TransMontaigne Product Services Inc.,
-- Santmyer Oil Company, Inc., and
-- Papco, Inc.
Dunigan Was Already Insolvent!
Before the Loan Documents were executed, Mr. Maimone relates that
Fleming entered into a series of unsecured indentures totaling
$1,400,000,000:
(a) Indenture dated as of March 15, 2001
Fleming issued 10-1/8% senior notes due in 2008. Fleming
received $355,000,000 from the sale of this Indenture.
Fleming is obligated to pay interest on this Indenture on
April 1 and October 1 of each year;
(b) Indenture dated as of March 15, 2001
Fleming issued 5-1/4% convertible senior subordinated
notes due in 2009. Fleming received $150,000,000 from the
sale of this Indenture. The holders of these notes may
elect to convert these notes into Fleming common stock at
an initial conversion price of $30.27 per share, subject
to adjustment under certain circumstances described in
this Indenture. Fleming is obligated to pay interest on
this Indenture on March 15 and September 15 of each year;
(c) Indenture dated as of October 15, 2001
Fleming issued 10-5/8% senior subordinated notes due in
2007. Fleming received $400,000,000 from the sale of this
Indenture. Fleming is obligated to pay Interest on this
Indenture on January 31 and July 31 of each year;
(d) Indenture dated as of April 15, 2002
Fleming issued 9-7/8% senior subordinated notes due in
2012. Fleming received $260,000,000 from the sale of this
Indenture. Fleming is obligated to pay interest on this
Indenture on May 1 and November 1 of each year; and
(e) Indenture dated as of June 18, 2002
Fleming issued 9-1/4% senior notes due in 2010. Fleming
received $200,000,000 from the sale of this Indenture.
Fleming is obligated to pay interest on this Indenture on
June 15 and December 15 of each year.
Each of the Debtors guaranteed the Indentures.
Mr. Maimone explains that as a result of Dunigan's obligations to
its trade creditors and to the holders of the Indentures, its
liabilities exceeded its assets before it was forced to execute
the Loan Documents. Accordingly, Dunigan was already insolvent
at the time it signed the Loan Documents. If Dunigan was solvent
before its execution of certain Loan Documents, then its
execution of the Loan Documents rendered it insolvent.
Dunigan's Condition On the Petition Date
According to its Schedules of Assets and Liabilities, Dunigan's
assets as of the Petition Date were valued at $16,154,727, which
included $16,052,844 in accounts receivable. Apparently,
Mr. Maimone states, Dunigan collected in excess of $10,600,000
since the Petition Date on account of its accounts receivable and
owed $9,263,022 to its trade creditors on the Petition Date.
Absent Dunigan's liability for Fleming's Obligations under the
Loan Documents and the Indentures, Mr. Maimone tells the Court
that Dunigan would not have been insolvent as of the Petition
Date. Dunigan had a positive cash flow at the time it executed
certain of the Loan Documents. Dunigan's cash flow remained
positive through the filing of its petition. Dunigan generated
positive cash flow in excess of $1,000,000 during the year before
the Petition Date. Other than any obligations Dunigan owed to
the Transferees under the Loan Documents, Dunigan was not in
default under any of the obligations to its creditors on the
Petition Date and was generally paying its debts as they became
due.
Effect of Dunigan's Liability on Trade Creditors
According to Mr. Maimone, Fleming withdrew cash resources from
Dunigan before the Petition Date to satisfy the claims of its own
creditors, including the Transferees, to the detriment of Dunigan
and its creditors. The Transferees provided neither money nor
goods nor services to Dunigan. Dunigan's trade creditors
provided goods and services on credit to Dunigan for which it had
ample cash flow, cash reserves, earnings, and profits to permit
payment in full.
As a result of its liability under the Loan Documents and its
bankruptcy filing, Mr. Maimone maintains that Dunigan failed to
pay $10,000,000 in trade claims, which it would have been able to
pay in full in the ordinary course of its business. Dunigan also
suffered disruptions in its creditor relations with its suppliers
and depletion of its cash resources. The bankruptcy filing
caused Fleming to shut down Dunigan's operations even though
Dunigan had a positive cash flow on and before the Petition Date.
Transferees' Claims Are Avoidable
Because Dunigan did not receive a reasonably equivalent value in
exchange for the claims and liens asserted by the Transferees
against it, the Dunigan Committee believes that the Transferees'
claims and liens are avoidable under Sections 548 and 544 of the
Bankruptcy Code. Because the Transfers occurred within one year
before the Petition Date in exchange for less than reasonably
equivalent value and Dunigan was either insolvent at the time or
became insolvent as a result of the Transfers, the Committee also
asserts that the Transfers are fraudulent in nature.
In this regard, the Dunigan Committee asks the Court to disallow
the Transferees' claims against Dunigan pursuant to Section
503(c). The Transferees should be estopped in equity from
enforcing the Loan Documents against Dunigan. In the
alternative, the Committee insists that the Transferees' claims
and liens should be subordinated to its claims.
Mr. Maimone points out that the terms of the Guarantee Agreement
recognize the priority of general trade creditors, but do not
expressly subordinate the Claim to the claims of Dunigan's
general trade creditors. (Fleming Bankruptcy News, Issue No. 16;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
GAYLORD: Shareholders Approve ResortQuest Int'l Acquisition
-----------------------------------------------------------
Gaylord Entertainment Company (NYSE: GET) and ResortQuest
International Inc. (NYSE: RZT) announced that ResortQuest's
stockholders voted overwhelmingly to approve Gaylord's proposed
acquisition of ResortQuest in a stock-for-stock transaction, and
that Gaylord's stockholders voted overwhelmingly to approve the
issuance of shares of Gaylord common stock in the acquisition.
As consideration for the merger, ResortQuest stockholders will
receive 0.275 shares of Gaylord common stock for each share of
ResortQuest common stock they hold, plus cash in lieu of
fractional shares. The transaction is currently expected to close
later this week.
"Upon completion of this acquisition, Gaylord Entertainment will
become a multi-product hospitality company that offers an
impressive range of accommodations to convention, business and
leisure travelers," said Colin Reed, president and chief executive
officer of Gaylord Entertainment. "ResortQuest's high-quality
vacation rental properties are complementary to both our meetings-
focused Gaylord Hotels brand and our 'country lifestyle' Grand Ole
Opry brand. We will cross-promote these three unique brands,
giving particular attention to developing widespread awareness of
the ResortQuest brand among Gaylord's existing customer base."
ResortQuest International, the first brand name "real-time" online
booking service -- http://www.resortquest.com-- in vacation
condominium and home rentals and sales, provides a one-stop
resource in more than 50 premier resort destinations in the U.S.
and Canada. ResortQuest is the nation's leading vacation rental
property management company, based on a portfolio of approximately
20,000 vacation rental properties with a combined real estate
value estimated in excess of $7.0 billion. For more information
about the company, visit http://www.resortquest.com
Gaylord Entertainment Company, a leading hospitality and
entertainment company based in Nashville, Tenn., owns and operates
Gaylord Hotels branded properties, including the Gaylord Opryland
Resort & Convention Center in Nashville and the Gaylord Palms
Resort & Convention Center in Kissimmee, Fla., and the Radisson
Opryland Hotel in Nashville. The Company's entertainment brands
include the Grand Ole Opry, the Ryman Auditorium, the General
Jackson Showboat, the Springhouse Golf Club, the Wildhorse Saloon
and WSM-AM. Gaylord Entertainment's common stock is traded on the
New York Stock Exchange under the symbol GET. For more information
about the Company, visit http://www.gaylordentertainment.com
* * *
Likely Default Under Loan Agreements
In its Form 10-Q filed with the Securities and Exchange
Commission, Gaylord reported:
"During May of 2003, the Company finalized a $225 million credit
facility with Deutsche Bank Trust Company Americas, Bank of
America, N.A., CIBC Inc. and a syndicate of other lenders. The
2003 Loans consist of a $25 million senior revolving facility, a
$150 million senior term loan and a $50 million subordinated term
loan. The 2003 Loans are due in 2006. The senior loan bears
interest of LIBOR plus 3.5%. The subordinated loan bears interest
of LIBOR plus 8.0%. The 2003 Loans are secured by the Gaylord
Palms assets and the Gaylord Texas Hotel. At the time of closing
the 2003 Loans, the Company engaged LIBOR interest rate swaps
which fixed the LIBOR rates of the 2003 Loans at 1.48% in year one
and 2.09% in year two. The Company is required to pay a commitment
fee equal to 0.5% per year of the average daily unused portion of
the 2003 Loans. At the end of the second quarter, the Company had
100% borrowing capacity of the $25 million revolver. Proceeds of
the 2003 Loans were used to pay off the Term Loan of $60 million
as discussed below and the remaining net proceeds of approximately
$134 million were deposited into an escrow account for the
completion of the construction of the Texas hotel. At June 30,
2003 the unamortized balance of the 2003 Loans deferred financing
costs were $2.6 million in current assets and $4.9 million in
long-term assets. The provisions of the 2003 Loans contain
covenants and restrictions including compliance with certain
financial covenants, restrictions on additional indebtedness,
escrowed cash balances, as well as other customary restrictions.
As of June 30, 2003, the Company was in compliance with all
covenants under the 2003 loans.
"During 2001, the Company entered into a three-year delayed-draw
senior term loan of up to $210.0 million with Deutsche Banc Alex.
Brown Inc., Salomon Smith Barney, Inc. and CIBC World Markets
Corp. During May 2003, the Company used $60 million of the
proceeds from the 2003 Loans to pay off the Term Loan. Concurrent
with the payoff of the Term Loan, the Company expensed the
remaining, unamortized deferred financing costs of $1.5 million
related to the Term Loan. The $1.5 million is recorded as interest
expense in the accompanying condensed consolidated statement of
operations. Proceeds of the Term Loan were used to finance the
construction of Gaylord Palms and the initial construction phases
of the Gaylord hotel in Texas as well as for general operating
purposes. The Term Loan was primarily secured by the Company's
ground lease interest in Gaylord Palms.
"During the first three months of 2002, the Company sold Word's
domestic operations, which required a prepayment on the Term Loan
in the amount of $80.0 million. As required by the Term Loan, the
Company used $15.9 million of the net cash proceeds, as defined
under the Term Loan agreement, received from the 2002 sale of the
Opry Mills investment to reduce the outstanding balance of the
Term Loan. In addition, the Company used $25.0 million of the net
cash proceeds, as defined under the Term Loan agreement, received
from the 2002 sale of Acuff-Rose Music Publishing to further
reduce the outstanding balance of the Term Loan. Excluding the
payoff amount of $60 million discussed above, the Company made
principal payments of approximately $0 and $4.1 million during
2003 and 2002, respectively, under the Term Loan. Net borrowings
under the Term Loan for 2003 and 2002 were $0 and $85.0 million,
respectively. As of June 30, 2003 and December 31, 2002, the
Company had outstanding borrowings of $0 million and $60 million,
respectively, under the Term Loan.
"The terms of the Term Loan required the Company to purchase an
interest rate instrument which capped the interest rate paid by
the Company. This instrument expired in the fourth quarter of
2002. Due to the expiration of the interest rate instrument, the
Company was out of compliance with the terms of the Term Loan.
Subsequent to December 31, 2002, the Company obtained a waiver
from the lenders whereby this event of non-compliance was waived
as of December 31, 2002 and also removed the requirement to
maintain such instruments for the remaining term of the Term Loan.
"In 2001, the Company, through wholly owned subsidiaries, entered
into two loan agreements, a $275.0 million senior loan and a
$100.0 million mezzanine loan with affiliates of Merrill Lynch &
Company acting as principal. The Senior Loan is secured by a first
mortgage lien on the assets of Gaylord Opryland Resort and
Convention Center and is due in March 2004. Amounts outstanding
under the Senior Loan bear interest at one-month LIBOR plus
approximately 1.02%. The Mezzanine Loan, secured by the equity
interest in the wholly-owned subsidiary that owns Gaylord
Opryland, is due in April 2004 and bears interest at one-month
LIBOR plus 6.0%. At the Company's option, the Senior and Mezzanine
Loans may be extended for two additional one-year terms beyond
their scheduled maturities, subject to Gaylord Opryland meeting
certain financial ratios and other criteria. The Company currently
anticipates meeting the financial ratios and other criteria and
exercising the option to extend the Senior Loan. However, based on
the Company's projections and estimates at June 30, 2003, the
Company does not anticipate meeting the financial ratios to extend
the Mezzanine Loan. The Company expects to refinance or replace
the Mezzanine Loan through a future debt instrument. Therefore,
the Company has recorded the outstanding balance of the Mezzanine
Loan of $66 million as current portion of long-term debt in the
accompanying condensed consolidated balance sheet as of June 30,
2003. There can be no assurance that the Company will be
successful in obtaining replacement financing on acceptable terms.
The Nashville Hotel Loans require monthly principal payments of
$0.7 million during their three-year terms in addition to monthly
interest payments. The terms of the Senior Loan and the Mezzanine
Loan required the Company to purchase interest rate hedges in
notional amounts equal to the outstanding balances of the Senior
Loan and the Mezzanine Loan in order to protect against adverse
changes in one-month LIBOR. Pursuant to these agreements, the
Company had purchased instruments that cap its exposure to one-
month LIBOR at 7.5%. The Company used $235.0 million of the
proceeds from the Nashville Hotel Loans to refinance the Interim
Loan discussed below. At closing, the Company was required to
escrow certain amounts, including $20.0 million related to future
renovations and related capital expenditures at Gaylord Opryland.
The net proceeds from the Nashville Hotel Loans after refinancing
of the Interim Loan and paying required escrows and fees were
approximately $97.6 million. At June 30, 2003 and December 31,
2002, the unamortized balance of the deferred financing costs
related to the Nashville Hotel Loans was $4.3 million and $7.3
million, respectively. The weighted average interest rates for the
Senior Loan for the six months ended June 30, 2003 and 2002,
including amortization of deferred financing costs, were 4.3% and
4.5%, respectively. The weighted average interest rates for the
Mezzanine Loan for the six months ended June 30, 2003 and 2002,
including amortization of deferred financing costs, were 10.8% and
10.2%, respectively.
The terms of the Nashville Hotel Loans require that the Company
maintain certain escrowed cash balances and comply with certain
financial covenants, and impose limits on transactions with
affiliates and indebtedness. The financial covenants under the
Nashville Hotel Loans are structured such that noncompliance at
one level triggers certain cash management restrictions and
noncompliance at a second level results in an event of default.
Based upon the financial covenant calculations at December 31,
2002, the cash management restrictions were in effect which
requires that all excess cash flows, as defined, be escrowed and
may be used to repay principal amounts owed on the Senior Loan. As
of June 30, 2003, the noncompliance level which triggered cash
management restrictions was cured and the cash management
restrictions were lifted. During 2002, the Company negotiated
certain revisions to the financial covenants under the Nashville
Hotel Loans and the Term Loan. After these revisions, the Company
was in compliance with the covenants under the Nashville Hotel
Loans in which the failure to comply would result in an event of
default at June 30, 2003 and December 31, 2002. There can be no
assurance that the Company will remain in compliance with the
covenants that would result in an event of default under the
Nashville Hotel Loans. The Company believes it has certain other
possible alternatives to reduce borrowings outstanding under the
Nashville Hotel Loans which would allow the Company to remedy any
event of default. Any event of noncompliance that results in an
event of default under the Nashville Hotel Loans would enable the
lenders to demand payment of all outstanding amounts, which would
have a material adverse effect on the Company's financial
position, results of operations and cash flows."
GLOBAL CROSSING: Court Clears Flag Telecom Settlement Agreement
---------------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates obtained the
Court's approval of a Settlement Agreement with Flag Telecom
Global Network Limited, as embodied in amendments to the Original
Agreements.
Specifically, the parties agree that:
(a) Flag Telecom waives its rights to activate the Disputed
Capacity on East Asia Crossing System;
(b) Flag Telecom waives its rights under the Capacity
Agreement to activate any additional capacity on the
GX Debtors' Network;
(c) Flag Telecom releases the GX Debtors from any liability
with respect to the Undisputed Capacity on East Asia
Crossing System;
(d) If:
(i) Asia Pacific Commercial, as a result of insolvency or
bankruptcy on or before November 7, 2005, makes the
Undisputed Capacity unavailable to Flag Telecom; and
(ii) the GX Debtors are in need of capacity between cities
on Flag Telecom's Network, then the GX Debtors will
use reasonable efforts to purchase the necessary
capacity from Flag Telecom, up to the aggregate value
of the Undisputed Capacity. Section 5(d) of the
Capacity Agreement will govern the GX Debtors'
purchase of any Necessary Capacity;
(e) GX Services waives its rights to activate $18,635,000 of
capacity on Flag Telecom's Network, and retains only its
rights to activate $24,715,000 of the capacity purchased
under the IRU Agreement; and
(f) The deadline by which the GX Debtors must draw down
capacity under the IRU Agreement is extended to
December 31, 2009.
To recall, the Debtor Global Crossing Services Europe Limited is
party to two agreements with Flag Telecom Global Network Limited:
-- an Indefeasible Right of Use Agreement dated as of July 2,
2001; and
-- a capacity purchase agreement dated June 29, 2001.
Under the IRU Agreement, Flag Telecom sold network system
capacity to GX Services amounting to $43,350,000. GX Services
paid $40,000,000 on June 29, 2001 and the remainder on July 3,
2001.
The IRU Agreement required that GX Services activate and draw
down the purchased capacity by December 31, 2002, or otherwise
forfeit its rights to the capacity. GX Services did not activate
or draw down any of the network capacity paid for under the IRU
Agreement by the December 31, 2002 deadline.
Under the Capacity Agreement, GX Services sold network capacity
to Flag Telecom for $32,500,000. Flag Telecom paid the entire
amount upon execution of the Capacity Agreement. Like the IRU
Agreement, he Capacity Agreement required that Flag Telecom
activate and draw down the capacity purchased by December 31,
2002, or otherwise forfeit its rights to the capacity. In
addition to the right to activate and draw down its purchased
capacity on the GX Debtors' network, under the Capacity Agreement,
Flag Telecom was entitled to activate and draw down capacity on
the networks owned by Asia Global Crossing Asia Pacific Commercial
Ltd., including the East Asia Crossing System.
On September 28, 2001, GX Services and Flag Telecom executed an
amendment to the Capacity Agreement. Pursuant to the Amendment,
GX Services sold an additional $10,000,000 of capacity to Flag
Telecom. Furthermore, the parties agreed that the $10,000,000
worth of capacity under the amendment and $15,000,000 worth of
capacity under the Capacity Agreement, for a total of
$25,000,000, would be allocated so that Flag Telecom could
activate the capacity on East Asia. The remaining $17,500,000 of
network capacity under the Amended Capacity Agreement was to
remain available for activation anywhere on the Global Crossing
network.
On October 1, 2001, GX Services executed an assumption and
assignment agreement with Asia Pacific Commercial to assign to
Asia Pacific Commercial the obligation to provide the capacity on
East Asia Crossing System. Around the time the parties executed
the Asia Commercial Assignment, GX Services paid $15,000,000 and
procured Flag Telecom's $10,000,000 payment to Asia Pacific
Commercial in furtherance thereof. However, due to a clerical
error, the Asia Commercial Assignment only reflected payments to
Asia Pacific Commercial aggregating $15,000,000, rather than the
$25,000,000 actually paid to it, and only effected an assignment
of obligations in respect of $15,000,000 of capacity on East Asia
Crossing System.
To date, Flag Telecom has activated $9,000,000 worth of network
capacity on the GX Debtors' Network and $9,000,000 of the capacity
on East Asia Crossing System. However, due to changes in the
telecommunications market and the GX Debtors' revised business
plan, the GX Debtors do not immediately require the capacity they
purchased from Flag Telecom. In addition, the GX Debtors' current
business plan does not incorporate the additional capital
expenditures that would be required to activate the capacity
purchased from Flag Telecom. Thus, the GX Debtors did not activate
any of the network capacity purchased under the IRU Agreement.
The GX Debtors face potential liabilities of:
(i) $10,000,000 of capacity for the disputed Asia Pacific
Commercial obligations under the Asia Commercial
Assignment -- the Disputed Capacity;
(ii) $15,000,000, in the event that Asia Pacific Commercial
does not perform its obligations regarding the Undisputed
Capacity; and
(iii) forfeiture of the $43,350,000 paid to Flag Telecom for
capacity not activated by December 31, 2002.
Although the GX Debtors made repeated attempts to resolve the
error under the Asia Commercial Assignment, Asia Pacific
Commercial refused to recognize the additional $10,000,000
payment the GX Debtors made. (Global Crossing Bankruptcy News,
Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000)
GLOBALSTAR: Thermo Capital Agrees to Acquire 81.25% Equity Stake
----------------------------------------------------------------
Globalstar has filed a notice of material terms of a proposed
transaction with the U.S. Bankruptcy Court in Delaware.
Globalstar has requested Court approval for a new acquisition
agreement with Thermo Capital Partners, which would give Thermo an
81.25% ownership of a new company that would take control of
Globalstar's assets and operations, in exchange for a cash
investment of up to $43 million.
The remaining 18.75% of the equity interests in the new company
will be available to Globalstar for distribution to its creditors.
Additionally, Globalstar's creditors will have the right to
purchase additional equity interests in the new company for an
aggregate ownership interest of up to 33.87%.
This new agreement would supersede Globalstar's May 2003 agreement
with ICO Global Communications (Holdings) Limited, under which ICO
intended to acquire Globalstar.
The Court is expected to review this motion at a hearing on
Thursday, November 20. In the meantime, Globalstar's operations
are continuing normally. Globalstar management is confident that
the acquisition by Thermo will ensure the company's future.
Thermo Capital Partners is part of the Thermo Companies, based in
New Orleans, LA, and Denver, CO, a highly successful group of
privately-held companies focused on opportunities in the
telecommunications, power generation, natural resources and real
estate industry. For more information, visit the Thermo Web site
at http://www.thermocompanies.com
IMPERIAL PLASTECH: Files Plan of Compromise with Ontario Court
--------------------------------------------------------------
Imperial PlasTech Inc. (TSX: IPQ) and its subsidiaries filed a
plan of compromise and arrangement with the Ontario Superior Court
of Justice for consideration of creditors. By direction of the
Court, the Company shall distribute the Plan to its creditors and
hold a meeting of unsecured creditors on December 5, 2003 for the
purpose of voting on the Plan. The Plan provides that each holder
of a proven unsecured claim will receive its pro rata share of
$1,400,000. The interests of secured creditors and trust claims
are not addressed by the Plan and will not be compromised through
the CCAA proceedings. Those claims will either be paid out by the
Company or refinanced prior to implementation of the Plan.
As a condition of the Plan, AG Petzetakis SA, a significant
shareholder of IPQ, together with Mr. George Petzetakis, will
subscribe for that number of common shares of IPQ representing a
maximum of 97% or, if certain conditions are satisfied, that
percentage may be reduced to a minimum of 75% of the issued and
outstanding shares of IPQ in consideration for $2.0 million,
together with the value of past services provided by AGP to the
Company during the reorganization proceedings, subject to
regulatory and stock exchange approval. $1,400,000 of the cash
portion of the subscription proceeds will be used to fund the Plan
and the balance will be used for working capital purposes.
The Plan has been approved by IPQ's Board of Directors and has the
support of the Court-Appointed Monitor. The Company believes that
acceptance of the Plan will produce the best possible results for
the competing interests involved.
The implementation of the Plan and emergence from the
reorganization proceedings are subject to a number of conditions.
Accordingly, there is no assurance that the Company will emerge
from the reorganization proceedings.
The PlasTech Group is a diversified plastics manufacturer
supplying a number of markets and customers in the residential,
construction, industrial, oil and gas and telecommunications and
cable TV markets. Currently operating out of facilities in Atlanta
Georgia, Peterborough Ontario and Edmonton Alberta, the PlasTech
Group is focusing on the growth of its core businesses and
continues to assess its non-core businesses. For more information,
please access the groups Web site at http://www.implas.com
INDYMAC ABS: S&P Hatchets 3 Series SPMD Note Ratings to BB/CC/B
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on three
classes of certificates from series 2000-A, 2000-B, and 2001-A
(fixed-rate loan groups) issued by Home Equity Mortgage Loan
Asset-Backed Trust (IndyMac ABS Inc.). Concurrently, ratings are
affirmed on the remaining classes from the same securitizations.
The lowered ratings reflect:
-- Continued erosion of credit support due to deteriorating
collateral pool performance;
-- The averaged realized losses during the recent six months
have exceeded the averaged excess interest cash flow by at
least 2.49x;
-- Serious delinquencies (90-plus days, foreclosure, and real
estate owned) for the fixed-rate loan groups of 24.67%
(series 2000-A), 38.39% (2000-B), and 29.87% (2001-A); and
-- A consistent loss trend that is expected to continue based
on the current level of delinquencies.
As of the October 2003 remittance period, cumulative realized
losses, as a percentage of original pool balance, were 2.59%
($3,107,238), 2.78% ($3,503,957), and 1.69% ($2,747,570) for
series 2000-A, 2000-B, and 2001-A, respectively. Manufactured
housing (MH) loans accounted between 30.97% and 50.78% of the
losses. More importantly, at least 64% of the cumulative realized
losses for series 2000-B and 2001-A occurred during the most
recent 12 months. In the case of series 2000-A, at least 52% of
total realized losses occurred during the same period. Currently,
MH collateral in the downgraded transactions represents at least
19% of the outstanding pool balances. More recently, MH loans have
experienced high loss severities caused by the large inventory of
repossessed units. These loss severities have been as follows
(series; loss severity):
-- 2000-A; 64.92%
-- 2000-B; 69.04%
-- 2001-A; 49.14%
Standard & Poor's will continue monitoring the performance of the
transactions to ensure that the ratings remain consistent with the
credit support available.
The affirmations reflect sufficient levels of credit support to
maintain the current ratings, despite the high level of
delinquencies and poor performance trend.
Credit support for the BF classes is provided by excess interest
and overcollateralization; all of the other classes receive
additional support from subordination.
The collateral for these transactions consists of fixed-rate home
equity first and second lien loans secured primarily by one- to
four-family residential properties.
RATINGS LOWERED
Home Equity Mortgage Loan Asset-Backed Trust
Rating
Series Class To From
SPMD 2000-A BF BB BBB-
SPMD 2000-B BF CC B
SPMD 2001-A MF-2 B BB
RATINGS AFFIRMED
Home Equity Mortgage Loan Asset-Backed Trust
Series Class Rating
SPMD 2000-A AF-3 AAA
SPMD 2000-A MF-1 AA
SPMD 2000-A MF-2 A
SPMD 2000-B AF-1 AAA
SPMD 2000-B MF-1 AA
SPMD 2000-B MF-2 A
SPMD 2001-A AF-4,AF-5,AF-6,AF-IO AAA
SPMD 2001-A MF-1 AA
J.A. JONES: Want Additional Time to Make Lease-Related Decisions
----------------------------------------------------------------
J.A. Jones, Inc., and its debtor-affiliates are asking the U.S.
Bankruptcy Court for the Western District of North Carolina to
extend their time period to decide whether to assume, assume and
assign, or reject their unexpired nonresidential real property
leases.
The Debtors report that the Court has already approved the sales
of PPM, Inc. and certain of its subsidiaries, Rea Construction
Company, the International Division of JAJCC, and J.A.
Jones/Tompkins Builders, Inc. Certain of the other Debtors,
including Services, Properties, and LGE, are engaged in
negotiations with certain parties for the sale of substantially
all of their assets as going concerns.
The potential purchasers have expressed an interest in the
assumption and assignment of certain unexpired nonresidential real
property leases. Consequently, prompting the Debtors' application
to extend the deadline for assuming or rejecting all unexpired
nonresidential real property leases to December 31, 2003.
Headquartered in Charlotte, North Carolina, J.A. Jones, Inc. was
founded in 1890 by James Addison Jones, J.A. Jones is a subsidiary
of insolvent German construction group Philipp Holzmann and a
holding company for several US construction firms. The Company
filed for chapter 11 protection on September 25, 2003 (Bankr.
W.D.N.C. Case No. 03-33532). John P. Whittington, Esq., at
Bradley Arant Rose & White LLP and W. B. Hawfield, Jr., Esq., at
Moore & Van Allen represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed debs and assets of more than $100 million
each.
LNR PROPERTY: Agrees to Sell Additional $50MM Senior Sub. Notes
---------------------------------------------------------------
LNR Property Corporation (NYSE: LNR) has agreed to sell $50
million of its 7.25% Senior Subordinated Notes due 2013 to
qualified institutional investors at 100.5% of their par value in
a transaction complying with Securities and Exchange Commission
Rule 144A. These are in addition to $350 million of 7.25% Notes
LNR sold in October 2003. LNR will use the proceeds of the
current sale to reduce senior secured debt, most of which may be
reborrowed, and for general corporate purposes.
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 previously reported, Standard & Poor's Ratings Services
assigned its 'B+' senior subordinated debt rating to Miami Beach,
Florida-based LNR Property Corp.'s proposed issuance of $350
million, 10-year senior subordinated notes to be issued pursuant
to Rule 144A under the Securities Act of 1933, as amended.
The ratings on LNR, including the company's 'BB' long-term
counterparty credit rating, have been affirmed. The outlook
remains stable.
LTV CORP: Bankruptcy Court Confirms Copperweld's Chapter 11 Plan
----------------------------------------------------------------
Copperweld Corporation's reorganization plan was confirmed Monday
by the U.S. Bankruptcy Court in Youngstown, Ohio, clearing the way
for the steel tubular and bimetallic products company to emerge
from Chapter 11 as a stand-alone company by mid-December.
"We are very pleased to be on the threshold of a new era in our
company's history, better positioned to compete in our markets and
with a plan to resume profitable growth," said Dennis McGlone,
President and Chief Operating Officer.
"We could not have reached this point without the unwavering
support of our customers and suppliers over the past three years,
or the hard work and sacrifices of our exceptional group of
employees," Mr. McGlone said. He also acknowledged the support of
Copperweld's lender group.
Mr. McGlone reported that the assets of Copperweld have been sold
and restructured into four business units -- mechanical tubing,
structural tubing, automotive components and bimetallic products.
These organizations operate 11 tubular products plants in the U.S.
and Canada and two bimetallics facilities in the U.S. and the
United Kingdom. He noted that the Canadian and U.K. facilities
were not part of the bankruptcy proceedings.
"The new Copperweld will drive greater accountability for
financial results down to the business-unit level," Mr. McGlone
said. "That means that each business unit will have increased
responsibility for decisions governing sales, purchasing and
operations. The result will be faster response times and even
better customer service. In addition, we have cut costs by
consolidating operations, reducing staff, and eliminating
redundancies. These changes will better position us to re-invest
in growing the business and to create value for our stakeholders."
Copperweld Corporation was founded in 1915 to produce copper clad
steel wire and strand. It expanded into the mechanical and
structural tubing business in the 1950s and into the automotive
components business in the 1990s. In late 1999 it was acquired by
LTV and combined with another acquisition, Welded Tube Co. of
America, and LTV's existing tubular products business. Retaining
the Copperweld name, it's been the largest producer of steel
tubular products in North America and the largest producer of
bimetallic products in the world. The new Copperweld will continue
to be headquartered in Pittsburgh. The company employs 2,300
people.
MAGNATRAX CORP: Judge Walsh Confirms Plan of Reorganization
-----------------------------------------------------------
MAGNATRAX Corporation, a leading manufacturer and supplier of
custom, pre-engineered buildings and components for builders and
the commercial construction market, announced that its Plan of
Reorganization has been confirmed by the United States Bankruptcy
Court for the District of Delaware.
U.S. Bankruptcy Court Judge Peter J. Walsh approved MAGNATRAX'S
Plan of Reorganization, setting the stage for the company's
emergence from Chapter 11.
According to Joe Ahearn, Chief Restructuring Officer for
MAGNATRAX, "The confirmation of our Plan represented the clearance
of the major hurdle in the Company's path to exiting Chapter 11.
Upon completion of our last remaining restructuring activities, we
will emerge with a strong, revitalized Balance Sheet, the
financing required to move forward, and the ability to focus our
full attention on the needs of our Builders and their customers.
This is an immense moment for MAGNATRAX and all of its Group
companies. Despite the complexity of our bankruptcy process, we
reached our confirmation sooner than anyone anticipated."
The Company noted that the ruling is a real accolade to its loyal
customers and Builders, vendors, and its dedicated employees.
Allen Capsuto, MAGNATRAX CFO noted, "This Bankruptcy was an
especially difficult process. No one likes to be in an
uncomfortable position with suppliers and with the possibility of
jeopardizing their ability to deliver to our customers. In our
case, our suppliers continued to support us throughout the
process, which allowed us, with minor exception, to continue the
flow of deliveries to our customers. We are most grateful for the
support of our vendors and the loyalty of our Builders during this
difficult period. As our industry continues to deal with the
uncertainties of the times, we believe the financially
strengthened, streamlined MAGNATRAX Group of companies will reward
this loyalty and support."
The MAGNATRAX Group has spent the last six months restructuring
its business with an increased focus on its core pre-engineered
buildings and components businesses. This process allowed the
Group to improve its competitive position. "We know we still have
more work to do," said Capsuto, "but you will start to see us
press forward even harder and more aggressively, with more focus
and determination to win in the marketplace." As part of its
refocus on core businesses, MAGNATRAX plans to divest by year-end
its wholly owned subsidiaries, Republic Builders Products Company
and Windsor Door, Inc.
The Plan approved by the Court calls for the conversion of well in
excess of $100 million in debt into substantially all the Equity
of the reorganized MAGNATRAX Company, a $30 million line of credit
to fund operations, the divestiture of the non-core businesses,
and the compromised settlement of claims by the Company's
Unsecured Creditors. MAGNATRAX has strong operating companies with
significant brand name recognition and a nationwide footprint.
Noted Joe Ahearn, "The MAGNATRAX building companies include
American Buildings Company, Kirby Building Systems, Gulf States
Manufacturers, and CBC Steel Buildings, collectively have
thousands of loyal builders. The Group serves all 50 states and
Canada with a broad range of engineered building systems as well
as light gauge agricultural and builder products through the
VICWEST subsidiary. With these strong assets, customer focus, and
a restructured financial position, including a much stronger
balance sheet, MAGNATRAX is very well positioned for significant
growth going forward."
MAGNATRAX Corporation is a leading manufacturer and supplier of
metal buildings and components to builders and the commercial
construction market. It has established a national presence
through its American Buildings Company division and strong
regional positions through its Kirby Building Systems, Gulf States
Manufacturers and CBC Steel Buildings divisions. The company's
VICWEST division is a leader in the metal building component
market and Polymer Coil Coaters is a major provider of treated and
coated metals. The Republic and Windsor Door divisions comprise
the company's Entry System division.
MAJESTIC STAR CASINO: Makes Adjustment to Third-Quarter Results
---------------------------------------------------------------
The Majestic Star Casino, LLC announced adjusted financial results
for the three- and nine-month periods ended September 30, 2003.
MSC is a multi-jurisdictional gaming company that directly owns
and operates one dockside gaming facility located in Gary,
Indiana, and indirectly owns and operates three Fitzgeralds brand
casinos located in Tunica, Mississippi, Black Hawk, Colorado and
downtown Las Vegas, Nevada. Unless indicated otherwise, the
"Company" refers to The Majestic Star Casino, LLC and all of its
direct and indirect subsidiaries.
In connection with the closing of the Company's internal financial
statements for the month of October 31, 2003, the Company
performed a monitoring level review of financial results for the
period. During this review, it was determined that the liability
for accrued payroll at Majestic Star at September 30, 2003 (which
amount is the opening accrual for the month of October 2003) was
understated by approximately $175,000 due to a computational
error.
In the Company's press release dated November 12, 2003, the
Company excluded Fitzgeralds Las Vegas from it consolidated
results, since Fitzgeralds Las Vegas is now an unrestricted
subsidiary of MSC and is not a guarantor to the $260.0 million 9-
1/2% Senior Secured Notes issued on October 7, 2003. Our adjusted
results, as presented below and consistent with our earlier press
release regarding our third quarter 2003 results, will only
present the financial results for MSC and its restricted and
guarantor subsidiaries, which includes Majestic Investor Holdings,
LLC, Fitzgeralds Tunica and Fitzgeralds Black Hawk.
Adjusted Financial Results Excluding Fitzgeralds Las Vegas
On a consolidated basis for the three-months ended September 30,
2003, the Company previously reported net income of $267,000,
operating income of $8.3 million and EBITDA of $13.3 million.
Adjusted consolidated net income, operating income and EBITDA for
the three-months ended September 30, 2003 was $92,000, $8.1
million and $13.2 million, respectively. Consolidated net income,
operating income and EBITDA for the three-months ended September
30, 2002 was $2.2 million, $10.3 million and $15.5 million,
respectively.
For the nine-months ended September 30, 2003, the Company
previously reported consolidated net income, operating income and
EBITDA of $1.8 million, $25.8 million and $40.9 million,
respectively. On a consolidated basis, adjusted net income,
operating income and EBITDA was $1.6 million, $25.6 million and
$40.7 million, respectively. For the nine-months ended September
30, 2002, consolidated net income, operating income and EBITDA was
$4.6 million, $29.0 million and $44.4 million, respectively. For
both the three- and nine-month periods ended September 30, 2003,
the accrued payroll adjustment had no affect on the consolidated
net revenues reported by the Company.
For the three-months ended September 30, 2003, Majestic Star
previously reported net income of $791,000, operating income of
$4.4 million and EBITDA of $6.3 million. Adjusted net income,
operating income and EBITDA for the three-months ended September
30, 2003 was $616,000, $4.2 million and $6.2 million,
respectively. Net income, operating income and EBITDA for the
three-months ended September 30, 2002 was $1.2 million, $4.8
million and $7.2 million, respectively.
For the nine-months ended September 30, 2003, Majestic Star
previously reported net income, operating income and EBITDA of
$2.2 million, $13.0 million and $19.0 million, respectively.
Adjusted net income, operating income and EBITDA was $2.1 million,
$12.9 million and $18.8 million, respectively. For the nine-
months ended September 30, 2002, net income, operating income and
EBITDA was $3.4 million, $14.2 million and $21.1 million,
respectively. For both the three- and nine-month periods ended
September 30, 2003, the accrued payroll adjustment had no affect
on the net revenues reported by Majestic Star.
The Majestic Star Casino, LLC and Majestic Investor Holdings, LLC
(S&P, B+ Corporate Credit Rating, Stable Outlook) make available
free of charge their annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports as soon as reasonably practicable
after such material is electronically filed with or furnished to
the Securities and Exchange Commission. In addition, you may
obtain a copy of such filings at http://www.sec.govor from the
applicable web site, http://www.majesticstar.comor
http://www.fitzgeralds.com
MDC CORP: Files Preliminary Prospectus for New Securities
---------------------------------------------------------
MDC Corporation Inc. operating as MDC Partners of Toronto filed a
preliminary prospectus with the securities regulatory authorities
in each of the provinces of Canada to offer 3,903,451 Adjustable
Rate Exchangeable Securities due December 31, 2028.
The proceeds will be used for general corporate purposes. Interest
payments on the Exchangeable Securities will be made in the same
amount and on the same dates as the distributions paid on units of
Custom Direct Income Fund, but in no event will the monthly
payment be less than 0.25% per month (3.0% per annum).
A holder of an Exchangeable Security will have the right to
exchange the security for a unit of the Fund once MDC has
effectively exchanged its 20% ownership of Custom Direct, Inc.
into units of the Fund. MDC's shares of Custom Direct, Inc. are
effectively exchangeable into units of the Fund once (a) the Fund
has earned audited EBITDA of approximately US$22.2 million for
the year ending December 31, 2003 or for any fiscal year
subsequent to 2003, and (b) the Fund has made average monthly per
unit cash distributions of at least $0.1125 for the period from
May 29, 2003 to December 31, 2003 or for any fiscal year
subsequent to 2003. For purposes of determining whether the EBITDA
target has been met, the audited financial statements for the year
ending December 31, 2003 are anticipated to be prepared by March,
2004. The Exchangeable Securities will also be redeemable by MDC
for units of the Fund or for cash in certain circumstances.
The Exchangeable Securities and units of the Fund have not been
registered under the U.S. Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements.
MDC Corporation Inc. (S&P, BB- Long-Term Corporate Credit Rating)
is the 17th largest marketing communications firm in the world,
providing services in Canada, the United States, and the United
Kingdom. Through its network of entrepreneurial firms, MDC
services include advertising and media, customer relationship
management, and marketing services. MDC also offers security-
sensitive transaction products and services through its Secure
Transactions Division. MDC Class A shares are publicly traded on
the Toronto Stock Exchange under the symbol MDZ.A and on the
NASDAQ under the symbol MDCA.
MEDCOMSOFT: Joins Intel & Gateway to Provide Automation Services
----------------------------------------------------------------
MedcomSoft Inc. (TSX - MSF) formed a joint alliance with Intel
Corporation and Gateway, Inc. to provide comprehensive and tightly
integrated automation solutions to the healthcare market.
With the goal of improving healthcare efficiency and the quality
of patient care, the alliance partners will work together and pool
resources to market and deliver powerful electronic medical
records and practice management systems that are fully integrated
with the latest technologies from Intel, Gateway and MedcomSoft.
Designed to support and complement Intel's new wireless platform,
Intel(R) Centrino(R) Mobile Technology, Intel(R) Pentium(R) 4
Processors supporting Hyper-Threading Technology, and Intel(R)
Xeon(TM) Processors combined with Gateway's latest Tablet PC's,
Laptops, Profile(R) all-in-one PCs and servers, the optimized
platform will be powered by MedcomSoft suite of advanced clinical
automation systems to provide unique, end-to-end solutions to
medical practices.
"We are very excited about working together with Intel and Gateway
and leveraging additional resources that will enhance the efforts
and complement the services of our growing distribution channel,
and will give us the opportunity to showcase the medical clinic of
the future", said Dr. Aita, Chairman and Chief Executive Officer
of MedcomSoft.
"By working closely with a leading PC company, such as Gateway, a
branded integrator of personalized technology solutions and a
direct marketing pioneer whose products and services have received
more than 125 awards and honours in the last year, we believe that
MedcomSoft can now deliver superior integrated solutions and
exceptional services to healthcare providers", continued Dr.
Aita.
The initial products from the collaboration are expected to be
available through the expanded distribution channel in 2004.
MedcomSoft Inc. designs, develops and markets cutting-edge
software solutions to the healthcare industry. MedcomSoft has
pioneered the use of codified point of care medical terminologies
and intelligent pen-based data capture systems to create a new
generation of electronic medical records. As a result of
MedcomSoft innovations, physicians and managed care organizations
can now securely build and exchange complete, structured and
homogeneous electronic patient records. MedcomSoft applications
are written with the latest Microsoft tools to run on the Windows
platform (Windows 2000 & XP), operate with MS SQL Server 2000(TM),
support MS Terminal Server and fully integrate with MS Office
2003, Exchange and Outlook(R). MedcomSoft applications are fully
compatible with Tablet PCs and wireless technology.
On March 31, 2003, the company's current debts exceeded its
current assets by around $500,000. Net capital deficiency for that
same period is $1.5 million.
MESA AIR: Will Host 4th-Quarter & Year-End Conference Call Today
----------------------------------------------------------------
Mesa Air Group, Inc. (Nasdaq: MESA) will release financial and
operating results for the fourth quarter and year ended
September 30, 2003, on Thursday, November 20, 2003. The company
will also hold an analysts call to discuss financial results at
11:00 a.m. Mountain Standard Time on November 20, 2003.
Interested investors can access the Company's webcast of the
conference call at http://www.mesa-air.com. The call leader will
be Jonathan Ornstein, Chairman and CEO of Mesa and the call will
last approximately one hour. A replay of the call will also be
available approximately one hour after its conclusion.
Representatives from Mesa may make material non-public disclosures
during the conference call. The company does not intend to make
any further disclosure of such information and encourages all
interested parties to listen to the conference call live or via a
rebroadcast.
Mesa currently operates 151 aircraft with 984 daily system
departures to 159 cities, 39 states, the District of Columbia,
Canada, Mexico and the Bahamas. It operates in the West and
Midwest as America West Express; the Midwest and East as US
Airways Express; in Denver as Frontier Jet Express and United
Express; in Kansas City with Midwest Express and in New Mexico and
Texas as Mesa Airlines. The Company, which was founded in New
Mexico in 1982, has approximately 4,000 employees. Mesa is a
member of the Regional Airline Association and Regional Aviation
Partners.
MILESTONE SCIENTIFIC: Capital Deficits Raise Going Concern Doubt
----------------------------------------------------------------
Milestone Scientific Inc.'s condensed consolidated financial
statements have been prepared assuming Milestone will continue as
a going concern.
However, Milestone incurred net losses of approximately $1,787,000
and $1,604,000 and negative cash flows from operating activities
of $860,990 and $417,765 during the nine months ended September
30, 2003 and 2002, respectively. As a result, Milestone had a cash
balance of approximately $96,000, a working capital deficiency of
approximately $1,449,000 and a stockholders' deficiency of
approximately $2,877,000 as of September 30, 2003. These matters
raise substantial doubt about Milestone's ability to continue as a
going concern. Management believes that its initial concerns about
the Company's ability to continue as a going concern were
alleviated through its continuing efforts to reduce operating
overhead, its subsequent satisfaction of a substantial portion of
its outstanding obligations, the utilization of its equity
facility and the introduction of new products.
Nevertheless, management believes that it is probable that
Milestone will continue to incur losses and negative cash flows
from operating activities through at least September 30, 2004 and
that the Company will need to obtain additional equity or debt
financing, as well as to continue its ability to defer its
obligations, to sustain its operations until it can expand its
customer base and achieve profitability.
MILLENNIUM CHEMICALS: Offering $125MM of Conv. Sr. Debentures
-------------------------------------------------------------
Millennium Chemicals (NYSE:MCH) intends to offer, subject to
market conditions and other factors, $125 million of convertible
senior debentures due 2023, plus up to an additional $25 million
of convertible senior debentures due 2023 that may be issued at
the option of the initial purchasers.
The debentures will rank equal in right of payment with
Millennium's other senior unsecured indebtedness, will pay
interest semi-annually and will be convertible into shares of
Millennium common stock, upon the occurrence of certain events.
If the offering is consummated, it is anticipated that Millennium
will use proceeds of the offering to repay the remaining balance
of its term loan facility and to reduce borrowings under its
revolving credit facility.
The debentures and the shares of common stock issuable upon
conversion of the debentures have not been registered under the
Securities Act of 1933 or any state securities laws and may not be
offered or sold absent registration under, or an applicable
exemption from, the registration requirements of the Securities
Act of 1933 and applicable state securities laws. Any offers of
the debentures will be made exclusively by means of a private
offering memorandum.
At September 30, 2003, Millennium Chemicals Inc.'s restated
balance sheet discloses a net capital deficit of about $50
Million.
MIRANT CORP: Entergy Services Seeks Stay Relief to Setoff Claims
----------------------------------------------------------------
Entergy Services, Inc., in its capacity as agent for Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana,
Inc., Entergy Mississippi, Inc. and Entergy New Orleans, Inc.,
asks the Court to lift the automatic stay for it to exercise its
setoff or recoupment rights pursuant to Section 553 of the
Bankruptcy Code.
William J. Doby, Esq., at Locke Liddell & Sapp LLP, in Dallas,
Texas, relates that Entergy Services and Debtor Mirant Americas
Energy Marketing LP are parties to certain Point-to-Point
Transmission Service Agreements. The Point-to-Point Agreements
incorporate Entergy's Open Access Transmission Tariff.
Under the Point-to-Point Agreement, Entergy provides electric
power transmission services to MAEM whereby it is able to
transmit electric power over Entergy's comprehensive electric
power transmission system. Under this relationship, Entergy
Services would invoice MAEM, and MAEM would remit payments to
Entergy Services.
Mr. Doby informs the Court that as of the Petition Date, MAEM
owes Entergy Services $236,536 for services provided to MAEM
under the Point-to-Point Agreements -- the Point-to-Point Claim.
In addition, Entergy Services and MAEM, among numerous other
parties, entered into the Western Systems Power Pool Agreement.
Pursuant to the Pool Agreement, Entergy Services and MAEM engaged
in multiple power trade transactions whereby Entergy Services and
MAEM bought and sold electric power among each other to assist in
meeting their respective electric power requirements.
As of the Petition Date, Entergy Services owes MAEM $3,361,794
under the applicable Power Trade Transactions -- the Power Trade
Payable.
Mr. Doby contends that Entergy Services is entitled to relief
from the automatic stay to exercise its right to setoff pursuant
to Section 362(a0(7) of the Bankruptcy Code since the Point-to-
Point Claim and the Power Trade Payable arise out of the Point-
to-Point Agreement and the Power Trade Transactions. The claims
and debts qualify as mutual obligations of Entergy Services on
one hand and MAEM on the other. Furthermore, both claims and
debts arose prior to the Petition Date. Mr. Doby adds that there
are no substantial disputes as to the amounts due and owing
between the parties. Thus, Entergy Services should be allowed to
set off its $236,536 Point-to-Point Claim against the $3,361,794
Power Point Payable. (Mirant Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
MITEC TELECOM: Reports Two Key Executive Appointments
-----------------------------------------------------
Mitec Telecom Inc. (TSX: MTM) made two key appointments to its
executive team. Mr. Ken Allstaff has been named Vice President,
European Sales, and Mr. David Kennedy has been named Executive
Vice President, Global Sales and Marketing. The appointments are
effective immediately.
Mr. Allstaff has held a number of top management positions at
Mitec in the sales, marketing and operational spheres. His return
to Europe underscores the Company's heightened commitment to the
burgeoning European market.
"We are grateful to Ken for the various roles he has played over
the past two challenging years at Mitec," said Rajiv Pancholy,
Mitec's President and Chief Executive Officer. "As Vice President,
European Sales, he will be quarterbacking our engagement in a
market poised for significant growth. Ken's experience and
extensive knowledge of these markets are essential to Mitec's
success in a trading block that is expanding its economic
influence and collective technological capabilities by the day."
Mr. Kennedy brings to Mitec more than 20 years of experience with
the both the carrier and OEM markets, having held a number of
executive and senior management positions with companies such as
Motorola and Alcatel.
"I am delighted to make this very strategic appointment," said Mr.
Pancholy. "David is joining us at a very exciting time in our
corporate evolution. His insights in the carrier solutions space
will further increase our energy in this important market segment.
These two appointments enrich our sales and marketing team
immensely."
Mitec Telecom is a leading designer and provider of products for
the telecommunications sector as well as a variety of other
industries. The Company sells its products worldwide to network
providers for incorporation into high-performing wireless networks
used in voice and data/Internet communications. Additionally, the
Company provides value-added services from design to final
assembly and maintains test facilities covering a range from DC to
60 GHz. Headquartered in Montreal, Canada, the Company also
operates facilities in the United States, the United Kingdom and
China.
Mitec Telecom Inc., whose July 31, 2003 balance sheet shows a
working capital deficit of about CDN$1.6 million, is listed on the
Toronto Stock Exchange under the symbol MTM. On-line information
about Mitec is available at http://www.mitectelecom.com
MORGAN STANLEY: Fitch Affirms Low-B Ratings on 6 Note Classes
-------------------------------------------------------------
Fitch Ratings affirms Morgan Stanley Dean Witter Capital I Trust
commercial mortgage pass-through certificates, series 2001-TOP3 as
follows: $33.8 million class A-1, $89.7 million class A-2, $106.4
million class A-3, $617.4 million class A-4 and interest-only
classes X1 and X2 at 'AAA'; $30.8 million class B at 'AA'; $28.3
million class C at 'A'; $12.9 million class D at 'A-'; $18.0
million class E at 'BBB'; $11.6 million class F at 'BBB-'; $11.6
million class G at 'BB+'; $10.3 million class H at 'BB'; $9.0
million class J at 'BB-'; $3.9 million class K at 'B+'; $5.1
million class L at 'B'; and $2.6 million class M at 'B-'. Fitch
does not rate the $10.3 million class N.
The affirmations reflect consistent overall loan performance and
minimal reduction on the pool collateral balance since issuance.
The master servicer, Wells Fargo Bank, collected year-end 2002
financial statements for 100% of the pool. The resulting debt
service coverage ratio as of YE 2002 increased to 1.80 times from
1.79x at issuance. As of the October 2003 distribution, the
overall transaction balance for the pool has reduced approximately
2.5% since issuance to $1.002 billion.
Three loans (1.28%) reported year-end 2002 DSCRs less than 1.00x
and two loans (0.41%) are in special servicing. The first
specially serviced loan, Summer Grove Shopping Center (0.22%), is
secured by a 159,627 square foot retail property in Shreveport,
LA. The property became delinquent after the largest tenant,
Kmart, vacated the property. The second specially serviced loan,
2735 Cheshire Lane (0.19%), is backed by a 67,280 square foot
industrial building in Plymouth, MN. The loan was transferred to
special servicing in October 2001 for payment default and the loan
remains due for July 1, 2002. The special servicer has initiated
the judicial foreclosure process and is moving to install a
receiver.
The pool includes two credit assessed loans, Federal Plaza and 111
Pine Street. The Federal Plaza loan (3.6%) is secured by a retail
property in Rockville, MD. Fitch's stressed YE 2002 DSCR is 1.53x,
up from 1.45x at issuance. The loan still maintains an investment
grade credit assessment. 111 Pine Street loan (3.4%) is secured by
an office building in San Francisco, CA. This credit assessed loan
is being downgraded to below investment grade due to declining
operating performance resulting from negative trends in occupancy
and rental rates. Fitch's YE 2002 stressed DSCR is 1.15x, down
from 1.37x at issuance. The DSCRs for the two credit assessment
loans are calculated using Fitch's stressed refinance constant and
reserves for capital items.
Fitch will continue to monitor this transaction, as surveillance
is ongoing.
NAT'L CENTURY: Board Wants Exclusivity Terminated & File a Plan
---------------------------------------------------------------
The Board of Directors of National Century Financial Enterprises,
Inc., complain that Alvarez and Marsal has taken complete control
of the company and the Board's has little to no input into the
conduct of the bankruptcy case. The Board complains that
administrative priority professional expenses have already topped
$45 million. Additionally, the Board complains that the Debtor
has initiated and proposed settlements that will release estate
more than $500 million in claims against third parties.
Continuation of this bankruptcy case, with its enormous expense
and limited success, is obviously not in the best interests of
creditors and interest holders, R. Glen Ayres, Esq., at Langley &
Banak Incorporated in San Antonio, Texas, tells Judge Calhoun.
The Board wants to file an alternative chapter 11 plan that will
liquidate NCFE and its operating subsidiaries and leave NPF VI
and NPF XII untouched. Those securitization trusts, the Board
says, are bankruptcy remote subsidiaries and can be substantively
consolidated with NCFE's estate.
The Board envisions a plan that will liquidate the estates, pay
claims against NCFE subsidiaries in full and roll the balance
into a liquidation escrow account. As NCFE collects cash, claims
against NCFE will be paid in order of their statutory priority.
After payment of all claims and interest on those claims, the
balance would flow to the Class A, B and C shareholders, with
Class A holders facing an equitable subordination attack from the
Class B and C holders.
"It is the present intent of the Board to propose that all stock
distributions due the original founders, including Lance Poulsen,
Don Ayres, and Rebecca S. Parrett, be escrowed by the Plan
liquidation trustee until such time as it has been demonstrated
whether or not NPF VI and NPF XII have claims against those
persons as individuals," the Board relates.
The Board proposes that the liquidation be done by a third party
liquidator, a resident of Ohio, and selected and approved by the
Bankruptcy Court. (National Century Bankruptcy News, Issue No.
26; Bankruptcy Creditors' Service, Inc., 215/945-7000)
NAT'L STEEL: Challenges Paid & Overstated Claims
------------------------------------------------
During the review process, the National Steel Debtors determined
that 11 proofs of claim assert claims that were satisfied during
the Chapter 11 cases. The basis for curing these Claims included:
-- the assumption and cure of the contracts underlying the
claim; or
-- the settlement and payment of the Claims entitled to
priority under the Bankruptcy Code in satisfaction of all
claims held by the creditor.
Accordingly, the Debtors ask Judge Squires to mark the Paid
Claims as satisfied in full, without any right to receive further
distributions. The Paid Claims are:
Creditor Claim No. Amount
-------- --------- ------
Air Products Manufacturing Corp 30047 $3,212,102
City of River Rouge 101 50,000,000
DTE Energy 4178 7,667,305
General Electric Capital Corp. 4413 unliquidated
International Mill service Inc. 2982 157,800
Minnesota Power 4177 unliquidated
Panhandle Eastern Pipeline Co. 3872 450,657
Praxair, Inc. 5157 4,843,100
St. Paul Insurance Co. 5161 49,798,491
Stand Up for Steel Coalition 31388 321,050
Wilmington Trust Company 4426 unliquidated
No Basis and Overstated Claims
The Debtors determined that six claims have no cognizable basis
in law or fact. After reviewing the relevant Proof of Claim and
the supporting materials, the Debtors believe that they are not
liable for the No Basis or Overstated Claims because:
-- the claims are unenforceable against them under any
agreement or applicable law; and
-- to the extent that they have any liability for these
Claims, the Claims overstate the liability.
The No Basis or Overstated Claims are:
Creditor Claim No. Amount
-------- --------- ------
Charles & Peggy Moore 4418 $25,000,000
Karen Ward, et al. 102 50,000,000
Leonard Mazur 3866 150,000,000
Melinda Acuff, et al. 3524 90,000,000
Melinda Acuff, et al. 3525 244,500,000
Patricia Gilmour & Kimberly Mucciacco 3850 3,000,000
Timothy R. Pohl, Esq., at Skadden, Arps, Slate, Meagher & Flom,
explains that Claim Nos. 3524, 3525 and 3850 are claims for
environmental contamination caused by the Donner Hanna coke
plant. The Donner Hanna coke plant was operated from 1920 to
1982, for the majority of that time as a corporation jointly
owned by The Hanna Furnace Corporation, a debtor, and LTV Steel
Company, Inc. In 1989 and 1990, the plant was demolished and, at
present, Hanna Furnace and LTV each have a 50% ownership share in
the property.
Mr. Pohl recounts that in the spring of 1999, contamination was
discovered on certain properties in the Donner Hanna coke plant
vicinity. At that time, the Donner Hanna properties were already
transferred to the Buffalo Urban Renewal Agency. The properties
are located in a residential housing development commonly known
as the Hickory Woods Subdivision. Several of the properties have
had houses constructed on them, while several others remain
vacant.
In the spring of 2000, Hanna Furnace, LTV, and BURA entered into
an Administrative Order on Consent with the United States
Environmental Protection Agency, wherein they agreed to conduct a
removal action on the vacant lots and to reimburse EPA for
certain oversight costs. During the second half of 2000, EPA
conducted a soil sampling program for more than 80 properties in
the Hickory Woods Subdivision, including some of the properties
that were transferred by LTV and Hanna Furnace. The data from
this sampling program was evaluated by the New York State
Department of Health. The Health Department concluded that a few
properties merit further investigation, but generally the soils
in the Hickory Woods Subdivision do not pose an unacceptable risk
to human health.
In August 2001, National Steel Corporation was named as a
defendant, along with Hanna Furnace, LTV, the City, BURA and
Donner-Hanna Coke Corporation, in four lawsuits before the State
of New York Supreme Court, Eric County, initiated by residents of
more than 80 houses in the Donner Hanna coke plant vicinity. The
Plaintiffs allege that the Defendants are responsible for the
contamination of their properties, and their claims are based on
various common law theories.
The Debtors assert that:
(a) they are not liable for the Donner Hanna Claims; and
(b) the Donner Hanna Claims misstate or exaggerate the basis
of the claim or the extent of the Debtors' potential
liability.
Mr. Pohl informs the Court that Claim No. 3866 is a claim for
damages allegedly arising from the exposure of Leonard Mazur to
asbestos dust at the Donner Hanna coke plant. Mr. Mazur filed a
complaint against National Steel and Hanna Furnace before the
Supreme Court of the State of New York, County of New York,
setting forth various common law damage claims. The Debtors
assert that they have no liability for Mr. Mazur's Claim and that
the Claim misstates or exaggerates its basis and the extent of
their potential liability.
Claim No. 102 was filed on behalf of plaintiffs located near the
Debtors' Great Lakes Division operations. The Great Lakes Claim
is a claim for environmental contamination allegedly suffered as
a result of the Debtors' operation at their facilities in Wayne
County, Michigan. The Debtors assert that they have no liability
for the Great Lakes Claim and that the Claim misstates and
exaggerate the basis of the Claim or the extent of their
potential liability.
Claim No. 4418 asserts personal injury or property damage. The
Claim does not attach appropriate or sufficient backup detail for
the Debtors to determine the nature, extent and validity of the
Claim, Mr. Pohl relates.
By this objection, the Debtors ask the Court to disallow and
expunge the No Basis or Overstated Claims in their entirety.
(National Steel Bankruptcy News, Issue No. 39; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
NEXIA: Losses and Capital Deficits Raise Going Concern Doubt
------------------------------------------------------------
Nexia Holdings Inc.'s consolidated financial statements are
prepared using accounting principles generally accepted in the
United States of America applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
incurred cumulative operating losses through September 30, 2003 of
$9,441,638 and a working capital deficit of $264,981, all of which
raises substantial doubt about the Company's ability to continue
as a going concern.
Primarily, revenues have not been sufficient to cover the
Company's operating costs. Management's plans to enable the
Company to continue as a going concern include the following:
o Increasing revenues from rental properties by
implementing new marketing programs.
o Making certain improvements to certain rental
properties in order to make them more marketable.
o Reducing negative cash flows by selling rental
properties that do not at least break even.
o Refinancing high interest rate loans.
o Increasing consulting revenues by focusing on procuring
clients that pay for services rendered in cash or
highly liquid securities.
o Reducing expenses through consolidating or disposing of
certain subsidiary companies.
o Raising additional capital through private placements
of the Company's common stock.
o Paying for services through the issuance of common
stock instead of cash.
There can be no assurance that the Company can or will be
successful in implementing any of its plans or that they will be
successful in enabling the company to continue as a going concern.
Nexia recorded operating losses of $265,417 and $370,605 for the
three and nine month periods, respectively, ended September 30,
2003, compared to losses of $60,044 and $609,231 for the
comparable periods in the year 2002.
Nexia recorded net losses of $237,847 and $118,996 for the three
and nine months ended September 30, 2003, as compared to net
losses of $172,488 and $864,919 for the same periods in the
previous year. The decreased losses are attributable primarily to
the gain on the sale of Wichita, as well as cost cutting efforts
implemented by Nexia.
Nexia does not expect to operate at a profit through fiscal 2003.
Since Nexia's activities are closely tied to the securities
markets and the ability to operate its real estate properties at a
profit, future profitability or its revenue growth tends to follow
changes in the securities and real estate market place. There can
be no guarantee that profitability or revenue growth can be
realized in the future.
NOVO NETWORKS: Ability to Continue Operations Remain Uncertain
--------------------------------------------------------------
Novo Networks, Inc. is a company that, through its operating
subsidiaries, previously engaged in the business of providing
telecommunications services over a facilities-based network until
December, 2001. Prior to September 22, 1999, Novo was a publicly
held company with no material operations, formerly known as
eVentures Group, Inc., and prior thereto, as Adina, Inc., which
was incorporated in Delaware on June 24, 1987.
During fiscal 2002, the Company's principal telecommunications
operating subsidiaries, including AxisTel Communications, Inc.,
e.Volve Technology Group, Inc. and Novo Networks Operating Corp.
filed voluntary petitions under Chapter 11 of Title 11 of the
United States Code. In December of 2002, Novo purchased an
ownership interest in an Italian gelato company.
Due to the ongoing liquidation of substantially all of Novo's
debtor subsidiaries' assets, Novo Networks currently has no
operations or revenues, and is not providing any products or
services of any kind (including telecommunications services) to
any customers.
On December 19, 2002, Novo executed a purchase agreement with Ad
Astra Holdings LP, a Texas limited partnership, Paciugo Management
LLC, a Texas limited liability company and the sole general
partner of Ad Astra, and the collective equity owners of both Ad
Astra and PMLLC, being Ugo Ginatta, Cristiana Ginatta and Vincent
Ginatta. Pursuant to the Purchase Agreement, Novo acquired a 33%
membership interest in PMLLC and a 32.67% limited partnership
interest in Ad Astra, which results in the Company holding an
aggregate interest, including the PMLLC general partnership
interest, in Ad Astra equal to 33%, for a purchase price of $2.5
million.
In addition, Novo holds an option, exercisable for a period of two
years from December 19, 2002, to purchase a 17.3% membership
interest in PMLLC and a 17.127% interest in Ad Astra for $1.5
million. Together, the Initial Interest and the Subsequent
Interest would result in Novo holding a 50.3% membership interest
in PMLLC and a 49.797% limited partnership interest in Ad Astra,
for a total aggregate interest in Ad Astra, including the PMLLC
general partner interest, of 50.3%.
Collectively, Ad Astra and PMLLC, through a number of wholly owned
subsidiaries, own and manage a gelato manufacturing, retailing and
catering business operating under the brand name "Paciugo."
Throughout this article, reference is made collectively to Ad
Astra, PMLLC, and their subsidiaries as "Paciugo." Under the terms
of the Purchase Agreement, Novo provides services to support the
business operations of Paciugo, including administrative,
accounting, financial, human resources, information technology,
legal, and marketing services. The Support Services expressly
exclude providing certain capital expenditures as well as services
that are customarily performed by third party professionals. In
exchange for providing the Support Services, Novo is entitled to
receive an annual amount equal to the greater of $0.25 million or
2% of the consolidated gross revenues of Paciugo (excluding any
gross revenues shared with third parties under existing
contractual arrangements). Effective January 1, 2003, Novo began
receiving monthly payments from Paciugo in the amount of $20,833,
with positive cumulative differences, if any, between 2% of such
gross revenues and $20,833 per month to be paid within ten days of
the end of such month. In July and August, 2003, Novo recorded
other income from the provision of the Support Services to Paciugo
as agreed upon in the Purchase Agreement. In August of 2003,
certain disagreements arose between Novo and Paciugo concerning
the amount of the monthly payment for July of 2003, as well as
Novo's performance of the Support Services. As a result, Paciugo
has failed to make these payments since August of 2003. The loss
of these monthly payments by Paciugo could adversely affect Novo
Networks' financial condition. While the Company is attempting to
work through its disagreements with Paciugo, it can offer no
assurances that these issues will be resolved without any material
adverse effect on Novo's plan of operation. Paciugo may not cancel
or alter the scope of the Support Services without Novo's prior
approval or consent.
The Company is entitled, under the terms of the Purchase
Agreement, to such representation on the governing board of PMLLC
as is proportionate to its ownership interests therein. Effective
as of December 19, 2002, PMLLC's Board of Managers was composed of
Ugo Ginatta and Cristiana Ginatta, as the Equity Owners'
designees, and Barrett N. Wissman, as Novo's designee. PMLLC, as
the sole general partner of Ad Astra, is empowered to make all
decisions associated with Ad Astra, except for those requiring the
approval of the limited partners, as set forth in the limited
partnership agreement of Ad Astra or under applicable law.
Novo effectively maintains no ability to control the day-to-day
affairs of its Paciugo interest. On August 1, 2003, Susie C.
Holliday resigned from her position as Senior Vice President and
Chief Financial Officer of Paciugo along with her resignation from
her position with Novo Networks. On August 15, 2003, Patrick G.
Mackey was named Senior Vice President and Chief Financial Officer
of Paciugo. On August 25, 2003, Barrett N. Wissman resigned from
the position of President of Paciugo. In addition, during the
first three calendar quarters of 2003, Novo's Board of Directors
became increasingly more concerned about Paciugo's market
position, the industry in which Paciugo competes and Paciugo's
prospects for meaningful success therein. Accordingly, during the
current quarter, Novo concluded that it was reasonably unlikely
that it would expand its Paciugo interest and exercise its option
to acquire the Subsequent Interest. Therefore, effective on
October 1, 2003, Steven W. Caple and Patrick G. Mackey resigned
their positions as Senior Vice President and General Counsel and
Senior Vice President and Chief Financial Officer of Paciugo,
respectively.
Depending upon a variety of factors, including those outlined
above, most of which are beyond the Company's control, Novo may
determine it necessary to record impairment charges against the
Paciugo interest in its 2004 fiscal year. The factors that may
result in the impairment of Novo's Paciugo interest include,
without limitation:
* Paciugo's ability, outside of Novo's exercise of the
option to acquire the Subsequent Interest, to locate
additional working capital;
* Paciugo's ability to expand sales while controlling and
reducing costs; and
* Paciugo's ability to compete against more well-known
gelato, frozen dessert, and ice cream stores, many of
which maintain greater management, financial and other
resources.
Bankruptcy Proceedings
On April 2, 2001, another of Novo's subsidiaries, Internet Global
Services, Inc. filed a voluntary petition for protection under
Chapter 7 of the Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Texas due to iGlobal's
inability to service its debt obligations and contingent
liabilities, as well as Novo's inability to raise sufficient
capital to fund operating losses at iGlobal. As a result of the
filing, Novo Networks recorded an impairment loss of $62.4 million
during fiscal 2001, the majority of which related to non-cash
goodwill recorded in connection with Novo's acquisition of
iGlobal. During April 2003, iGlobal's trustee filed an adversary
proceeding against Novo Networks.
On July 30, 2001, the debtor subsidiaries filed voluntary
petitions for protection under the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware in order to
stabilize their operations and protect their assets while
attempting to reorganize their businesses.
As originally contemplated, the goal of the reorganization effort
relating to Novo's debtor subsidiaries that filed voluntary
petitions under Chapter 11 of the Bankruptcy Code was to preserve
the going concern value of its debtor subsidiaries' core assets
and to provide distributions to their creditors. However, based
largely on the fact that Novo's debtor subsidiaries ceased
receiving traffic from their sole remaining customer, a
determination was made that the continued viability of the debtor
subsidiaries was not realistic. Accordingly, the bankruptcy plan
was amended. The amended plan and disclosure statement were filed
with the Delaware Bankruptcy Court on December 31, 2001. The
amended plan provides for a liquidation of substantially all of
the assets of Novo's debtor subsidiaries, pursuant to Chapter 11
of the Bankruptcy Code, instead of a reorganization as previously
planned.
On January 14, 2002, the Delaware Bankruptcy Court approved the
amended disclosure statement, with certain minor modifications,
and on March 1, 2002, the Delaware Bankruptcy Court confirmed the
amended plan, again with minor modifications. On April 3, 2002,
the amended plan became effective and a liquidating trust was
formed, with funding provided by Novo in the amount of $0.2
million. Assets to be liquidated of $0.7 million were transferred
to the liquidating trust during the fourth quarter of fiscal 2002.
The purpose of the liquidating trust is to collect, liquidate and
distribute the remaining assets of the debtor subsidiaries and
prosecute certain causes of action against various third parties,
including, without limitation, Qwest Communications Corporation.
No assurance can be given that the liquidating trust will be
successful in liquidating substantially all of the debtor
subsidiaries' assets pursuant to the amended plan. Also, it is not
possible to predict the outcome of the prosecution of causes of
action against third parties, including, without limitation,
Qwest, as described in the amended plan and disclosure statement.
Nov has previously guaranteed certain indebtedness of one or more
of the debtor subsidiaries and, depending upon the treatment of
and distribution to holders of such indebtedness under the amended
plans, Novo Networks may be liable for some or all of this
indebtedness.
In connection with the bankruptcy proceedings, Novo initially
provided its debtor subsidiaries with approximately $1.9 million
in secured debtor-in-possession financing to fund their
reorganization efforts. The credit facility made funds available
to permit the debtor subsidiaries to pay employees, vendors,
suppliers, customers and professionals consistent with the
requirements of the Bankruptcy Code. In connection with the
amended plan being confirmed by the Delaware Bankruptcy Court and
becoming effective on April 3, 2002, the credit facility was
converted into a new secured note. During fiscal 2003, Novo
provided additional funding of $0.5 million to the liquidating
trust. The current balance on the new secured note is
approximately $3.3 million which has been fully reserved due to
the uncertainty surrounding the collection of this note.
Liquidity and Capital Resources
At September 30, 2003, Novo Networks had consolidated current
assets of $4.3 million, including cash and cash equivalents of
approximately $3.7 million and net working capital of $2.9
million. Principal uses of cash have been to fund (i) operating
losses; (ii) acquisitions and strategic business opportunities;
(iii) working capital requirements and (iv) expenses related to
the bankruptcy plan administration process. Due to Novo's
financial performance, the lack of stability in the capital
markets and the economy's downturn, its only current source of
funding is expected to be cash on hand.
Assuming Novo completes a transaction within the next year, with
no current return on that transaction and given its current
obligations, Novo expects to have approximately $1.3 million of
cash available for funding potential business opportunities.
Current obligations include (i) funding working capital, (ii)
funding the liquidating trust and (iii) funding the Qwest
litigation. No assurance can be given that Novo will be able to
deploy any remaining cash assets, or that if deployed, can
continue as a going concern with the new business model.
Novo Networks currently anticipates that it will not generate any
revenue from operations in the near term based on (i) the
termination of the operations of its debtor subsidiaries, which
have historically provided all of Novo's significant revenues on a
consolidated basis, and (ii) the uncertainties surrounding other
potential business opportunities that the Company may consider, if
any. However, if it chooses to purchase a greater than 50%
interest in Paciugo (such as would be the result if it acquires
the Subsequent Interest), Novo would consolidate its revenues and
operations into its own consolidated financial statements at that
time. As previously discussed, Novo does not currently anticipate
exercising its option to acquire the Subsequent Interest. In the
meantime, the Company will continue to record other income from
the provision of the Support Services to Paciugo as agreed upon in
the Purchase Agreement. However, there can be no assurances as to
the continuation of these payments, as Paciugo has not made the
monthly payment since the month of August of 2003 due to
disagreements between the two companies regarding these monthly
payments.
As noted above, Novo does not believe that any of the traditional
funding sources will be available to it and that its only option
will likely be cash on hand. Consequently, the Company's failure
to (i) purchase the Subsequent Interest or any additional interest
in Paciugo (ii) implement a successful business plan for Paciugo
and (iii) identify other potential business opportunities, if any,
will jeopardize Novo's ability to continue as a going concern. Due
to these factors, the Company has indicated that it is unable to
determine whether current available financing will be sufficient
to meet the funding requirements of (x) its debtor subsidiaries
bankruptcy plan administration process and (y) its ongoing general
and administrative expenses. No assurances can be given that
adequate levels of financing will be available to Novo Networks on
acceptable terms, if at all.
NRG ENERGY: Plan Confirmation Hearing Begins Tomorrow in Manhattan
------------------------------------------------------------------
In its voting certification, NRG Energy, Inc. announced that all
necessary creditor classes of NRG Energy, Inc. have voted
overwhelmingly in favor of the proposed Plan of Reorganization.
Specifically, in excess of 99.9 percent of the voting creditors in
Class 5 (NRG Unsecured Claims) and in Class 6 (NRG-Power Marketing
Inc. Unsecured Claims) voted to accept the plan. The company filed
the final voting report late today with the United States
Bankruptcy Court for the Southern District of New York.
The filing said that The Reorganization Plan remains subject to
confirmation by the Bankruptcy Court and the Confirmation Hearing
is scheduled to begin November 21 before the Honorable Prudence
Carter Beatty.
NRG Energy, Inc. owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include competitive energy production and cogeneration
facilities, thermal energy production and energy resource recovery
facilities.
NRG ENERGY: Court Approves Claims Settlement Agreement with Shaw
----------------------------------------------------------------
The Shaw Group Inc. (NYSE:SGR) received approval from the U.S.
Bankruptcy Courts in the Southern District of New York on
November 6, 2003 and in Jackson, Mississippi on November 13, 2003
for the settlement of claims related to the cancellation of the
LSP-Pike Energy, LLC power plant project in Mississippi.
The Company also announced that its subsidiary, Stone & Webster
Construction, Inc., has entered into a five-year, $175 million
contract to perform supplemental maintenance, modification,
engineering, environmental, and related services for 26 electric
power generating facilities owned and operated by NRG Energy, Inc.
As the Company disclosed in a prior announcement, among
consideration received in the settlement is a fixed claim of $35
million, ownership of the Pike project materials and equipment,
excluding the turbines, as well as ownership of the project site.
In October, Shaw sold its fixed claim for net proceeds of $14.7
million.
Under the terms of the supplemental maintenance agreement, Shaw
will provide fleet-wide maintenance assessments and services, as
well as unit overhauls at NRG sites located in the Northeast,
Midwest, Mid-Atlantic, South Central and Western United States.
The Company recently completed a maintenance overhaul at Big Cajun
II, a three-unit coal-fired facility in New Roads, Louisiana.
"The successful outcome of what has been a very difficult
situation for both parties can be attributed to our creative
approach and cooperative negotiation to bring this to an amicable
resolution. We protected the interests of our shareholders and
also laid the groundwork for what we hope will be a profitable
long-term relationship with NRG Energy," stated J.M. Bernhard,
Jr., Chairman and Chief Executive Officer of The Shaw Group Inc.
"We have made a concentrated effort to further expand our
maintenance business, which has more than doubled its revenues
year over year, and this recent award heightens our confidence
that this business will continue to grow at a healthy pace,"
continued Mr. Bernhard. "Furthermore, our broadening maintenance
operations also present opportunities to expand the use of
additional Shaw services within our customer base across North
America and internationally."
NRG Energy, Inc. owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include competitive energy production and cogeneration
facilities, thermal energy production and energy resource recovery
facilities.
The Shaw Group Inc. is a leading provider of consulting,
engineering, construction, remediation and facilities management
services to government and private sector clients in the
environmental, infrastructure and homeland security markets. Shaw
is also a vertically integrated provider of comprehensive
engineering, consulting, procurement, pipe fabrication,
construction and maintenance services to the power and process
industries worldwide. The Company is headquartered in Baton Rouge,
Louisiana and employs approximately 14,800 people at its offices
and operations in North America, South America, Europe, the Middle
East and the Asia-Pacific region. Additional information on The
Shaw Group is available at http://www.shawgrp.com
NRG ENERGY: Court OKs Harris Geno as Committee's Special Counsel
----------------------------------------------------------------
In October 2002, Stone & Webster, Inc. and Shaw Constructors,
Inc., creditors of LSP-Pike Energy, LLC, an affiliate of the
Debtors, filed an involuntary petition against LSP before the
U.S. Bankruptcy Court for the Southern District of Mississippi,
Jackson Division. Stone and Shaw amended their involuntary
petition on November 8, 2002.
In June 2003, Stone and Shaw asked the Mississippi Court to stay
the Chapter 11 proceedings and to transfer venue of the
proceedings to the Mississippi Court. Subsequently, the NRG
Energy Debtors and Stone and Shaw commenced settlement discussions
in connection with the Mississippi Action and Stone and Shaw's
claim against the Debtors. On July 25, 2003, the Mississippi
Court suspended the Mississippi Action sine die pending
documentation of a potential settlement between the Debtors and
Stone and Shaw.
Accordingly, the Official Committee of Unsecured Creditors sought
and obtained the Court's authority to retain Harris, Geno &
Dunbar, P.A., nunc pro tunc to June 12, 2003, as special counsel
to perform the legal services that will be necessary during the
Debtors' Chapter 11 cases in connection with the Mississippi
Action.
Harris Geno will be:
(a) representing the Committee at hearings held before the
Mississippi Court and in the Committee's discussions with
the Debtors and other parties-in-interest, as well as
professionals retained by any of the parties, regarding
the Mississippi Action;
(b) reviewing and analyzing pleadings, orders, schedules and
other legal documents regarding the Mississippi Action;
(c) preparing, on behalf of the Committee, all necessary
pleadings, orders, reports and other legal documents
regarding the Mississippi Action; and
(d) performing all other legal services for the Committee in
connection with the Mississippi Action which may be
necessary and proper for the Committee to discharge its
duties in the Chapter 11 proceedings.
Harris Geno's current hourly rates are:
Craig M. Geno $250
Jeffery K. Tyree 200
Associates 150
Paralegals 85
Craig M. Geno, a member of Harris Geno, tells the Court that the
firm is a "disinterested person" as that phrase is defined in
Section 101(14) of the Bankruptcy Code. (NRG Energy Bankruptcy
News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
PACIFIC GAS: Lauds CPUC's Actions to Facilitate Chapter 11 Exit
---------------------------------------------------------------
PG&E Corporation (NYSE: PCG) and Pacific Gas and Electric Company
issued the following statement in response to the proposed
decision issued by a California Public Utilities Commission
administrative law judge and the two alternate decisions issued by
CPUC President Michael Peevey:
"In June, our company and the staff of the CPUC announced a
proposed settlement agreement that, in the words of U.S.
Bankruptcy Court Judge Randall Newsome who oversaw the
negotiations, 'unequivocally . . . is a fair deal for both sides
and a great benefit for all Californians.' This proposed
settlement will allow PG&E to exit Chapter 11 as an investment-
grade utility, pay in full or otherwise fully satisfy all valid
creditor claims with interest, and allow us to reduce our
customers' electric rates.
"PG&E appreciates the efforts of Judge Robert Barnett and
President Peevey to maintain the schedule for resolution of the
Chapter 11 case by releasing these proposed decisions [Tues]day.
"Most importantly, we are pleased that the proposed settlement is
fully reflected in President Peevey's Alternate Decision Number
One, and that the Commission will have the opportunity to vote on
the agreement we reached with the CPUC staff. We urge the
Commission to adopt this alternate decision."
The CPUC has scheduled oral arguments in the case for December 2,
with written comments by PG&E and others due to be filed with the
CPUC by December 8, 2003. The CPUC is scheduled to take up the
proposed settlement at its December 18th meeting.
PACIFIC GAS: Wants to Compromise Claims against El Paso Natural
---------------------------------------------------------------
Pacific Gas and Electric Company seeks the Court's authority to
compromise its claims against El Paso Natural Gas Company, El
Paso Merchant Energy-Gas, LP, and El Paso Merchant Energy Company
and to enter into agreements necessary to resolve the claims.
>From June 2000 to June 2001, the prices paid by California
citizens for natural gas and electricity rose to unprecedented
levels, creating a statewide emergency. Because gas is a key
cost-input in most electric generation, spot gas prices in the
Topock, Arizona spot market affected open market prices for
electric power during the California energy crisis. As a result,
California consumers paid $8,300,000,000 more than they expected
to pay for natural gas supplies and the natural gas component of
electrical energy supplies. PG&E and its ratepayers bore a
substantial portion of the massive overpayments.
On April 4, 2000, the California Public Utilities Commission
filed a complaint against El Paso before the Federal Energy
Regulatory Commission alleging that firm contracts held by El
Paso Merchant Energy-Gas and El Paso Merchant Energy Company for
transportation capacity on the El Paso Natural Gas system were
obtained in violation of the FERC's Standards of Conduct and
raising issues regarding the exercise of market power. Southern
California Edison and PG&E, among others, subsequently intervened
in the proceeding.
Since then, at least seven class action complaints have been
filed against El Paso and other defendants in California state
courts, alleging that El Paso and the other defendants committed
antitrust violations and engaged in unfair competition or unfair
business practices in the California gas and electric power
markets. The Attorneys General of the States of California and
Nevada, the cities of Long Beach and Los Angeles, and various
utility companies filed complaints before the state court and the
FERC alleging violations of laws and regulations by El Paso and
other power sellers with respect to the California energy crisis.
In September 2001, the Attorney General of the State of
California commenced an investigation into the facts relating to
El Paso's participation in the California gas and electric power
markets from 1998 to the present, which to date has resulted in
the production by El Paso of hundreds of thousands of pages of
documents and numerous investigative hearings. The Attorneys
General of Washington and Oregon have also been investigating the
facts relating to El Paso's direct and indirect participation in
the Oregon and Washington electric power and gas markets from
1998 to the present.
The California Attorney General, PG&E and Edison also filed
separate federal court actions before the United States District
Court for the Central District of California alleging that El
Paso's manipulation of the California energy market during the
energy crisis violated federal and state antitrust and unfair
competition laws. The complaints in the now-consolidated actions
are based, legally and factually, in large part, on investigation
and analysis undertaken by Edison, the CPUC and PG&E in the FERC
Natural Gas Proceeding.
To resolve the numerous claims in a manner the would provide
prompt and effective relief to the people of the states of
California, Nevada, Oregon and Washington without the burden,
expense and uncertainty of continued litigation, PG&E, the other
selling Claimants and El Paso negotiated a settlement. The terms
of the Settlement are set forth in a Master Settlement Agreement,
which resolves claims against El Paso in both state and federal
court, as well as the FERC.
To implement the payment of consideration under the Master
Settlement Agreement, the Settling Claimants entered into an
Allocation Agreement, and a Designation Representative Agreement,
and will soon enter into an Escrow Agreement. The Allocation
Agreement was entered into between the Settling Claimants and
sets forth the terms under which the settlement proceeds are to
be allocated and administered. The Designation Representative
Agreement designates the Office of the California Attorney
General as the Designated Representative of the Settling
Claimants and governs how and when the California Attorney
General is to act on the Settling Claimants' behalf. The
Allocation Agreement and the Designation Representative Agreement
were executed simultaneously with the Master Settlement
Agreement. The Escrow Agreement will govern the escrow account
in which the settlement funds will be held until disbursed and is
still being negotiated and drafted. PG&E expects the Escrow
Agreement to be finalized and the escrow account to be
established.
In particular, the principal terms of each agreement are:
A. The Master Settlement Agreement
El Paso will provide, inter alia, $1,550,000,000 in settlement
consideration, valued in nominal dollars, in three principal
forms:
(a) Up-front Payments
Under the Master Settlement Agreement, the $550,000,000 in
up-front payments consists of:
-- El Paso will deposit $78,590,071 into escrow on the
later of the execution of the Master Settlement
Agreement or the date on which all parties and an
acceptable escrow agent execute an escrow agreement
-- Escrow Effective Date;
-- El Paso will deposit $243,229,464 into escrow by
December 22, 2003;
-- El Paso Corporation will sell 26,371,308 shares of its
common stock, worth $227,000,000 when the Master
Settlement Agreement was executed, at the direction of
the Settling Claimants after a shelf registration
statement authorizing issuance of the shares become
effective. The proceeds of that stock sale will be
deposited into escrow; and
-- El Paso will deposit into escrow before the date when
all conditions precedent have been satisfied --
Effective Date -- $2,000,000, from a bonus pool for El
Paso officers. The conditions precedent include the
San Diego Superior Court's approval of the class action
settlement, the FERC's approval of the Settlement and
the dismissal of the FERC proceedings against El Paso,
the Bankruptcy Court's approval of the Settlement as to
PG&E, and the entry of a stipulated judgment in the
Federal District Court encompassing the structural
relief the parties agreed.
(b) The Deferred Payments
Beginning on the later of the Effective Date or July 1,
2004, El Paso will begin making deferred payments
totaling $875,000,000 in 40 semi-annual installments over
a 20-year period. El Paso may prepay its deferred payment
obligation, in full or in part, before or after the
Effective Date. If El Paso regains an investment grade
credit rating for a period of six months or longer, the
remaining payments are accelerated so that the
obligation is paid off within 15 instead of 20 years.
Under a 20-year amortization schedule, each semi-annual
payment will be $21,890,651. If the amortization schedule
is accelerated to fifteen years, the amount of each
payment will increase, although the precise amount of the
increase will depend on when the acceleration takes place.
The amortization schedule will not revert to 20 years
if El Paso thereafter becomes non-investment grade.
El Paso will secure the Deferred Payments with oil and gas
reserves with a value equal to 130% -- a coverage ratio of
1.3 to 1 -- of the net present value of the outstanding
Deferred Payments, measured as of the close of each
calendar quarter. El Paso will deliver letters of credit
or other collateral acceptable to the Settling Claimants
and to any applicable rating agency -- if the obligations
have been monetized;
(c) The Contract Concession to California Department of Water
Resources
As of the Effective Date, El Paso will amend the
Master Power Purchase and Sale Agreement dated as of
February 9, 2001, between El Paso Merchant LP and
California Department of Water Resources to reduce the
price of the contract by $125,000,000 over the remaining
two and half years of the term of the contract. Under the
Allocation Agreement, California Department of Water
Resources has committed to use all consideration allocated
to it to reduce its annual revenue requirement;
(d) Structural Remedies
El Paso agrees to certain "structural remedies" to prevent
any future manipulation of the California gas market,
including guarantees to make physically available the
capacity to deliver 3,290 MMcf/day of gas to California
and clarification of the procedure whereby northern
California shippers may recall Block II capacity to serve
customers in PG&E's service area, as set forth in a
FERC-approved settlement on April 16, 1997. With the
exception of issues that are within the exclusive
jurisdiction of the FERC, the structural remedies are to
be enforced in Federal District Court through a special
master;
(e) Release of Claims by PG&E and El Paso
Pursuant to the Master Settlement Agreement, PG&E will
release all claims against El Paso related to, inter
alia, the exercise of market power, manipulation or
misreporting of gas or electric power prices, and
reduction of the supply of natural gas, electric power or
gas pipeline capacity for the period September 1, 1996
through March 20, 2003. In return, El Paso agrees to
release all claims against PG&E related to, inter alia,
the price or supply of natural gas, electric power or gas
pipeline capacity for the period through March 20, 2003,
including El Paso's bankruptcy claim against PG&E for
$57,500,000, the amount PG&E owes for sales of power to
PG&E through the California Independent System Operator
and the California Power Exchange. The release does not
cover claims asserted by PG&E against other parties in
various regulatory proceedings, such as the FERC Refund
Proceeding and the 390 QF Proceeding at the CPUC, where
PG&E is seeking refunds of excessive energy payments made
to Qualifying Facilities during the energy crisis --
including El Paso owned or controlled QFs;
B. The Allocation Agreement
The Settling Claimants agree on the allocation of and
administration of the settlement proceeds. The key elements of
the Allocation Agreement, which was entered into between the
Settling Claimants, are:
(a) The consideration is being divided pro rata based on
calculation of the "damages" suffered by each party. The
percentages can only be estimated at this time because,
depending on the final allocation of consideration to
municipal claimants, the allocation percentages of other
Settling Claimants may change to some extent;
(b) PG&E will receive 6%, currently estimated at $81,000,000,
of the total consideration for damages incurred as a
result of core gas purchases and 16%, currently estimated
at $217,000,000, of the total consideration for damages as
a result of electricity purchases;
(c) In a rulemaking proceeding initiated pursuant to a recent
Order Instituting Rulemaking, the CPUC will determine how
the El Paso settlement proceeds paid to PG&E should be
allocated among various classes of customers and will
designate the refund and accounting mechanisms for PG&E's
portion of the proceeds. The California Department of
Water Resources is allocated 33%, estimated to be equal to
$461,000,000, for damages as a result of electricity
purchases, which include the reduced price of its
contracts with El Paso. All consideration receive by the
California Department of Water Resources will be used to
reduce their revenue requirement, and the allocation of
the reduction among utilities will be determined by the
CPUC.
William J. Lafferty, Esq., at Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, states that the Settlement is monumental in scope
and complexity, it resolves the complex and various claims
against El Paso of over 20 parties who differed in their
willingness to settle. Without the approval of the Settlement,
each of the Settling Claimants would presumably continue
litigating in particular claims at great expense and
inconvenience to PG&E and El Paso and the courts.
CalPX Objects
Reorganized California Power Exchange Corporation filed Claim
No. 13282 for $1,778,979,543, which amends an earlier Claim
No. 7411, against Pacific Gas and Electric Company. In
accordance with the tariff approved by the Federal Energy
Regulatory Commission for CalPX, the Claim includes all amounts
PG&E owes to CalPX on account of PG&E's unpaid prepetition
purchases in CalPX's electricity markets from other participants
in CalPX's markets, including El Paso Merchant Energy LP. Due to
the ongoing refund proceedings before the FERC, the amount of the
CalPX Claim may be subject to adjustment by the FERC.
CalPX objects to the proposed settlement to the extent the
release of El Paso's Claim No. 8837 attempts to reduce the amount
of or otherwise impact the CalPX Claim. CalPX wants PG&E to
clarify that the release of El Paso's Claim does not in any way
impact its Claim. (Pacific Gas Bankruptcy News, Issue No. 65;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
PERRY ELLIS: Inks License Agreement for John Henry Neckwear
-----------------------------------------------------------
Perry Ellis International Inc. (Nasdaq:PERY) has entered into a
license agreement with Randa Corp. for the manufacture and
distribution of John Henry(R) brand neckwear.
"John Henry(R)'s versatile look and contemporary styling keeps the
brand among the most popular in our portfolio," said Oscar
Feldenkreis, president and chief operating officer. "Randa's
neckwear design will sustain the brand's image as the modern
business casual lifestyle brand."
"We are thrilled to enhance our association with a great company
like Perry Ellis International by adding another one of their
compelling brands to our portfolio," said Paul F. Rosengard,
executive vice president of Randa Corp. "John Henry(R) is a
nationally recognized brand, synonymous with modern classic style,
quality and value."
Perry Ellis International, Inc. (S&P, B+ Corporate Credit Rating,
Stable) is a leading designer, distributor and licensor of a broad
line of high quality men's sportswear, including causal and dress
casual shirts, golf sportswear, sweaters, dress casual pants and
shorts, jeans wear, active wear and men's and women's swimwear to
all major levels of retail distribution. The company's portfolio
of brands includes 18 of the leading names in fashion such as
Perry Ellis(R), Jantzen(R), Munsingwear(R), John Henry(R), Grand
Slam(R), Natural Issue(R), Penguin Sport(R), the Havanera Co.(TM),
Axis(R), and Tricots St. Raphael(R). The Company licenses the
Nike(R), Tommy Hilfiger(R), PING(R), Ocean Pacific(R) and
NAUTICA(R) brands. Additional information on PEI is available at
http://www.perryelliscorporate.com
PHICO INSURANCE: Settles Claim Dispute with Penna. Insurance Dept.
------------------------------------------------------------------
Pennsylvania Insurance Commissioner M. Diane Koken announced that
the Insurance Department will recover $10 million in its legal
complaint against a number of former officers and directors of the
now-defunct PHICO Insurance Company.
"This is a tremendous victory for PHICO's former policyholders,"
Commissioner Koken said. "The settlement will be used to cover
losses that the policyholders suffered as a result of the
company's insolvency."
In November 2001, the Insurance Department filed a lawsuit in
Commonwealth Court against 15 former directors and officers of
PHICO, asserting that they breached in their fiduciary duties
while serving in positions with the company.
In March 2003, the parties reached a settlement that was then
approved by the Commonwealth Court in June 2003.
"With the final approval from the United States Bankruptcy Court,
we will be able to secure the $10 million in proceeds from PHICO's
directors and officers insurance policy," Koken said. "This is
part of our ongoing effort to marshal assets to pay policyholder
claims and to hold responsible parties accountable for their
actions. We fully expect to receive the settlement money by the
end of this year."
PHICO's primary business was writing medical malpractice insurance
for health systems, hospitals and physicians. In addition, PHICO
wrote workers' compensation. The last financial report indicated
the company's capital and surplus was approximately $250 million
in the negative.
Questions from policyholders concerning claims or non-claim
matters may call 1-800-382-1378 or 717-766-1122. Proof of claim
documents can be obtained by logging onto
http://www.insurance.state.pa.usand clicking on "PHICO."
PORTOLA PACKAGING: Aug. 31 Net Capital Deficit Reaches $26 Mill.
----------------------------------------------------------------
Portola Packaging, Inc., reported results for its fourth quarter
and fiscal year ended August 31, 2003.
Sales for the fourth quarter were $58.5 million compared to $55.6
million for the same quarter of the prior year, an increase of
5.2%. For fiscal year 2003, sales were $215.3 million compared to
$210.7 million for fiscal year 2002, an increase of 2.2%. The
Company had operating income of $6.6 million for the fourth
quarter of fiscal 2003 compared to operating income of $7.6
million for the fourth quarter of fiscal 2002, a decrease of
13.2%. For the full fiscal year 2003, the Company had operating
income of $13.1 million compared to operating income of $18.1
million for fiscal year 2002. The Company reported net income of
$1.0 million for the fourth quarter of fiscal 2003 compared to net
income of $4.4 million for the same period of fiscal year 2002 and
a net loss of $1.7 million for the fiscal year 2003 compared to
net income of $4.6 million for the fiscal year 2002.
During fiscal 2003, the Company incurred pretax restructuring
charges of $0.4 million. Gross profit increased $0.3 million to
$15.6 million for the fourth quarter of fiscal 2003 as compared to
$15.3 million for the same quarter of the prior year. For the full
fiscal year 2003, gross profit was $48.6 million compared to $53.6
million for the same period in fiscal 2002. As a percentage of
sales, gross profit decreased to 22.6% for the full fiscal 2003
compared to 25.4% for the same period in fiscal 2002.
EBITDA decreased 16.5% to $11.6 million in the fourth quarter of
fiscal 2003 compared to $13.9 million in the fourth quarter of
fiscal 2002 and decreased 18.7% to $31.7 million for the full
fiscal year 2003 from $39.0 million for fiscal year 2002. Adjusted
EBITDA, which excludes the effect of restructuring charges,
warrant interest (income) expense and (gains) losses on foreign
exchange, decreased 5.6% to $11.7 million in the fourth quarter of
fiscal 2003 compared to $12.4 million in the fourth quarter of
2002 and decreased 15.1% to $32.0 million for the full fiscal 2003
from $37.7 million for the same period in fiscal 2002.
On September 19, 2003, the Company acquired the stock and related
assets of Tech Industries, Inc. located in Woonsocket, Rhode
Island for approximately $35.7 million. Tech Industries Inc. is a
leading manufacturer of plastic closures and containers for the
personal care and cosmetic industries and had sales of
approximately $30.5 million in fiscal year ended December 29,
2002. To finance the acquisition in part, the Company entered into
an amendment to its senior credit facility. The amended agreement
increased the senior secured revolving credit facility from $50.0
million to $54.0 million, subject to a borrowing base of eligible
receivables and inventory, plus net property and equipment.
At August 31, 2003, the Company's balance sheet shows a total
shareholders' equity deficit of about $26 million.
Portola Packaging is a leading designer, manufacturer and marketer
of tamper evident plastic closures used in dairy, fruit juice,
bottled water, sports drinks, institutional food products and
other non-carbonated beverage products. The Company also produces
a wide variety of plastic bottles for use in the dairy, water and
juice industries, including various sized high-density bottles, as
well as five-gallon polycarbonate water bottles. In addition, the
Company designs, manufactures and markets capping equipment for
use in high-speed bottling, filling and packaging production lines
as well as manufactures and markets customized five-gallon water
capping and filling systems. The Company is also engaged in the
manufacture and sale of tooling and molds used in the blow molding
industry. For more information about Portola Packaging, visit the
Company's Web site at http://www.portpack.com
Tech Industries, Inc. is a leading manufacturer and marketer of
plastic packaging components to the cosmetic, fragrance and
toiletries industry. The company's capabilities include injection
and compression molding, thermal and ultraviolet metallizing,
ultraviolet one coat spray technologies, silk screening, hot
stamping, lining and multiple component assembly. In addition to
offering the largest stock line of closures in the industry, with
over 450 styles and sizes, the company has a complementary line of
heavy wall PETG and polypropylene jars. For more information about
Tech Industries, Inc., visit the company's Web site at
http://www.techindustries.com
PRIME RETAIL: Shareholders Okay Sale of Co. to Lightstone Unit
--------------------------------------------------------------
Prime Retail, Inc.'s (OTC Bulletin Board: PMRE, PMREP, PMREO)
stockholders approved the acquisition of the Company by
Prime Outlets Acquisition Company, LLC, a Delaware limited
liability company, for aggregate consideration of $115.5 million,
plus assumed debt. The Buyer is an affiliate of The Lightstone
Group, LLC, a New Jersey-based real estate company.
At Tuesday's special meeting of stockholders, the final vote on
the Acquisition was as follows:
Final Voting Results For Against Abstain
-------------------- ------ ------- -------
Series A Preferred Stock 70.07 % 25.24 % 0.26 %
Series B Preferred Stock 79.57 % 0.94 % 0.26 %
Common Stock 58.42 % 10.19 % 0.48 %
The Acquisition, which is expected to close within the next 30
days, remains subject to satisfaction of certain customary closing
conditions. Accordingly, there can be no assurances as to the
timing, terms or completion of the Acquisition.
The Acquisition will result in aggregate consideration of $115.5
million payable to the Company's stockholders and unit holders and
the assumption of approximately $511 million of debt by the Buyer.
Under the terms of the definitive agreement, each holder of the
Company Series A preferred stock will receive cash in the amount
of $18.40 per share, each holder of the Company Series B preferred
stock will receive cash in the amount of $8.169 per share, and
each holder of the Company common stock will receive cash in the
amount of $0.17 per share.
Concurrent with the consummation of the Acquisition, the agreement
of limited partnership of Prime Retail, L.P., the operating
partnership through which the Company conducts substantially all
of its business, will be amended and restated and, as a result of
elections made by a majority of the existing limited partners in
the Operating Partnership, the existing common units in the
Operating Partnership (other than common units held by the
Company) will be exchanged for a like number of preferred units in
the Operating Partnership. Each holder of Preferred Units will be
entitled to require the Operating Partnership to redeem all of
such holder's Preferred Units for an amount per unit equal to
$0.17 (the consideration paid for a share of common stock of the
Company in the Acquisition) plus accrued and unpaid distributions
at the rate of 6% per annum.
Prime Retail is a self-administered, self-managed real estate
investment trust engaged in the ownership, leasing, marketing and
management of outlet centers throughout the United States. Prime
Retail currently owns and/or manages 36 outlet centers totaling
approximately 10.2 million square feet of GLA. Prime Retail also
owns 154,000 square feet of office space. Prime Retail has been
an owner, operator and a developer of outlet centers since 1988.
For additional information, visit Prime Retail's Web site at
http://www.primeretail.com
Founded in 1988, The Lightstone Group has become one of the
largest, private real estate companies in the industry. The
Company owns/manages a diversified portfolio of 16,000 apartments
as well as office, industrial and retail properties totaling more
than 9.1 million square feet of space in 18 states and Puerto
Rico. Headquartered in Lakewood, New Jersey, The Lightstone Group
employs over 400 professionals and maintains offices in New York,
Maryland, Virginia, and California. The Lightstone Group is
currently embarked on an aggressive acquisition and expansion
program throughout the United States. For more information on The
Lightstone Group, contact the company's Lakewood, New Jersey
headquarters at 800-347-4078 or visit their Web site at
http://www.lightstonegroup.com
* * *
As reported in the Troubled Company Reporter's August 18, 2003
edition, the Company's liquidity depends on cash provided by
operations and potential capital raising activities such as funds
obtained through borrowings, particularly refinancing of existing
debt, and cash generated through asset sales. Although the Company
believes that estimated cash flows from operations and potential
capital raising activities will be sufficient to satisfy its
scheduled debt service and other obligations and sustain its
operations for the next year, there can be no assurance that it
will be successful in obtaining the required amount of funds for
these items or that the terms of the potential capital raising
activities, if they should occur, will be as favorable as the
Company has experienced in prior periods.
During 2003, the Company's first mortgage and expansion loan (the
"Mega Deal Loan") is anticipated to mature with an optional
prepayment date on November 11, 2003. The Mega Deal Loan, which is
secured by a 13 property collateral pool, had an outstanding
principal balance of approximately $262.1 million as of June 30,
2003 and will require a balloon payment of $260.7 million at the
anticipated maturity date. If the Mega Deal Loan is not satisfied
on the optional prepayment date, its interest rate will increase
by 5.0% to 12.782% and all excess cash flow from the 13 property
collateral pool will be retained by the lender and applied to
principal after payment of interest. Certain restrictions have
been placed upon the Company with respect to refinancing the Mega
Deal Loan in the short term. If the Mega Deal Loan is not
refinanced, the loss of cash flow from the 13 property collateral
pool would eventually have severe consequences on the Company's
ability to fund its operations.
Based on the Company's discussions with various prospective
lenders, it believes a potential shortfall will likely occur with
respect to refinancing the Mega Deal Loan as the Company does not
currently intend to refinance all of the 13 assets. Nevertheless,
the Company believes this shortfall can be alleviated through
potential asset sales and/or other capital raising activities,
including the placement of mezzanine level debt and mortgage debt
on at least one of the assets the Company does not currently plan
on refinancing. The Company cautions that its assumptions are
based on current market conditions and, therefore, are subject to
various risks and uncertainties, including changes in economic
conditions which may adversely impact its ability to refinance the
Mega Deal Loan at favorable rates or in a timely and orderly
fashion and which may adversely impact the Company's ability to
consummate various asset sales or other capital raising
activities.
As previously announced, on July 8, 2003 an affiliate of The
Lightstone Group, LLC, a New Jersey-based real estate company, and
the Company entered into a merger agreement. In connection with
the execution of the Merger Agreement, certain restrictions were
placed on the Company with respect to the refinancing of the Mega
Deal Loan. Specifically, the Company is restricted from
negotiating or discussing the refinancing of the properties
securing the Mega Deal Loan with any lenders until September 15,
2003, at which time the Company is only able to enter into
refinancing discussions with certain enumerated lenders. After
November 11, 2003, the Company may seek refinancing from other
lenders. In addition, the Company is precluded from closing any
loans relating to the Mega Deal Loan until November 11, 2003. This
November 11, 2003 date may be extended until January 11, 2004, at
the election of Lightstone, if Lightstone elects prior to
September 15, 2003 to (i) pay (A) one-half of the additional
interest incurred by the Company between November 11, 2003 and
December 31, 2003, and (B) all of the additional interest incurred
by the Company between January 1, 2004 and January 11, 2004, if so
extended, in respect of the Mega Deal Loan and (ii) loan the
Company any shortfall in cash flow that results from the excess
cash flow restrictions (all excess cash flow from the 13 property
collateral pool will be retained by the lender and applied to
principal after payment of interest) under the Mega Deal Loan that
become effective on November 11, 2003 and thereafter until the
Mega Deal Loan is paid in full.
In addition to the restrictions with respect to the refinancing of
the Mega Deal Loan, pursuant to the terms of the Merger Agreement,
the Company has also agreed to certain conditions pending the
closing of the proposed transaction. These conditions provide for
certain restrictions with respect to the Company's operating and
refinancing activities. These restrictions could adversely affect
the Company's liquidity in addition to its ability to refinance
the Mega Deal Loan in a timely and orderly fashion.
If the Merger Agreement is terminated under certain circumstances,
the Company would be required to make payments to Lightstone
ranging from $3.5 million to $6.0 million which could adversely
affect the Company's liquidity.
In connection with the completion of the sale of six outlet
centers in July 2002, the Company guaranteed to FRIT PRT Bridge
Acquisition LLC (i) a 13% return on its $17.2 million of invested
capital, and (ii) the full return of its invested capital by
December 31, 2003. As of June 30, 2003, the Mandatory Redemption
Obligation was approximately $14.9 million.
The Company continues to seek to generate additional liquidity to
repay the Mandatory Redemption Obligation through (i) the sale of
FRIT's ownership interest in the Bridge Properties and/or (ii) the
placement of additional indebtedness on the Bridge Properties.
There can be no assurance that the Company will be able to
complete such capital raising activities by December 31, 2003 or
that such capital raising activities, if they should occur, will
generate sufficient proceeds to repay the Mandatory Redemption
Obligation in full. Failure to repay the Mandatory Redemption
Obligation by December 31, 2003 would constitute a default, which
would enable FRIT to exercise its rights with respect to the
collateral pledged as security to the guarantee, including some of
the Company's partnership interests in the 13 property collateral
pool under the aforementioned Mega Deal Loan. Because the
Mandatory Redemption Obligation is secured by some of the
Company's partnership interests in the 13 property collateral pool
under the Mega Deal Loan, the Company may be required to repay the
Mandatory Redemption Obligation before, or in connection with, the
refinancing of the Mega Deal Loan. Additionally, any change in
control with respect to the Company accelerates the Mandatory
Redemption Obligation.
In connection with the execution of the Merger Agreement,
Lightstone has agreed to provide sufficient financing, if
necessary, to repay the Mandatory Redemption Obligation in full at
its maturity. The new financing would be at substantially similar
economic terms and conditions as those currently in place for the
Mandatory Redemption Obligation and would have a one-year term.
The Company has fixed rate tax-exempt revenue bonds collateralized
by properties located in Chattanooga, Tennessee which contain (i)
certain covenants, including a minimum debt-service coverage ratio
financial covenant and (ii) cross-default provisions with respect
to certain of its other credit agreements. Based on the operations
of the collateral properties, the Company was not in compliance
with the Financial Covenant for the quarters ended June 30,
September 30 and December 31, 2002. In the event of non-compliance
with the Financial Covenant or default, the holders of the
Chattanooga Bonds had the ability to put such obligations to the
Company at a price equal to par plus accrued interest. On January
31, 2003, the Company entered into an agreement with the
Bondholders. The Forbearance Agreement provides amendments to the
underlying loan and other agreements that enable the Company to be
in compliance with various financial covenants, including the
Financial Covenant. So long as the Company continues to comply
with the provisions of the Forbearance Agreement and is not
otherwise in default of the underlying loan and other documents
through December 31, 2004, the revised financial covenants will
govern. Additionally, certain quarterly tested financial covenants
and other covenants become effective June 30, 2004. Pursuant to
the terms of the Forbearance Agreement, the Company was required
to fund $1.0 million into an escrow account to be used for
conversion of certain of the retail space in the collateral
properties to office space and agreed that an event of default
with respect to the other debt obligations related to the property
would also constitute a default under the Chattanooga Bonds. The
Company funded this required escrow in February 2003. The
outstanding balance of the Chattanooga Bonds was approximately
$17.9 million as of June 30, 2003.
With respect to the Chattanooga Bonds, based on the Company's
current projections, it believes it will not be compliance with
certain quarterly tested financial covenants when they become
effective on June 30, 2004 which would enable the Bondholders to
elect to put the Chattanooga Bonds to the Company at their par
amount plus accrued interest. The Company continues to explore
opportunities to (i) obtain alternative financing from other
financial institutions, (ii) sell the properties securing the
Chattanooga Bonds and (iii) explore other possible capital
transactions in order to generate cash to repay the Chattanooga
Bonds. There can be no assurance that the Company will be able to
complete any such activity sufficient to repay the amount
outstanding under the Chattanooga Bonds in the event the
Bondholders are able and elect to exercise their put rights.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
PROTECTION ONE: S&P Maintains Negative Watch on Junk Ratings
------------------------------------------------------------
On Nov. 18, 2003, Standard & Poor's Ratings Services said it
lowered its corporate credit and senior unsecured ratings on
Protection One Alarm Monitoring Inc. to 'CCC-' from 'B' and
lowered its subordinated debt rating to 'C' from 'CCC+'. The
ratings remain on CreditWatch with negative implications, where
they had been placed on Jan. 15, 2003. The rating action reflects
increased default risk associated with the sale of Protection One,
because of significantly lower expected proceeds.
Based on revenues, Topeka, Kansas-based Protection One is the
third-largest security alarm monitoring company in the nation and
is 88%-owned by Westar Industries Inc., which is the financing arm
and a wholly owned subsidiary of Westar Energy Inc.
(BB+/Developing/--). Protection One has relied on Westar
Industries to provide funds through its senior credit facility as
a primary source of liquidity. As of September 2003, Protection
One had about $547 million of total debt outstanding, excluding
operating lease adjustments.
Westar Energy recently advised Protection One that it was
considering possible bids for Westar Industries' 88% interest in
Protection One and the debt owed to Westar Industries under the
senior credit facility, rather than bids for Protection One in its
entirety. At the same time, Westar Energy said that the aggregate
consideration in these bids was less than the $215.5 million
outstanding principal balance under the senior credit facility. In
its September 2003 10-Q SEC filing, Westar Energy reduced its
estimated proceeds from a sale of its interests in Protection One
by $165.6 million and stated that there was a substantial risk
Westar Energy might not recover the outstanding balance of the
senior credit facility. Westar Energy has indicated it hopes to
complete the sale of Protection One late this year or early next
year.
"In light of Westar Energy's recent disclosures, we believe there
is an increased potential for a future purchaser of Protection One
to restructure Protection One's other debt obligations," said
Standard & Poor's credit analyst Edward O'Brien.
As of Sept. 30, 2003, Protection One was in compliance with all
financial debt covenants and it had access to $12.9 million under
the senior credit facility, about $16 million in cash balances,
and was owed $31.7 million under its tax-sharing agreement with
Westar Energy. However, Protection One lacks the funds necessary
to repay its senior credit facility or repurchase its debt
securities, which may become due upon the sale of Protection One.
RACE POINT CLO: Fitch Affirms Low-B Rating of Class D Notes
-----------------------------------------------------------
Fitch Ratings affirms five classes of notes issued by Race Point
CLO, Ltd. These affirmations are the result of Fitch's annual
review process. The following rating actions are effective
immediately:
-- $327,000,000 Class A-1 Senior Secured Notes affirmed at 'AAA';
-- $71,000,000 Class A-2 Senior Secured Notes affirmed at 'AA-';
-- $22,000,000 Class B Senior Secured Notes affirmed at 'A-';
-- $20,000,000 Class C Senior Secured Notes affirmed at 'BBB';
-- $21,000,000 Class D Senior Secured Notes affirmed at 'BB-'.
Race Point is a collateralized loan obligation managed by Sankaty
Advisors LLC., The CLO was issued November 20, 2001 and is
comprised of approximately 80% senior secured loans and 20% high
yield bonds. Fitch has reviewed in detail the portfolio
performance of Race Point. In conjunction with this review, Fitch
discussed the current state of the portfolio with the asset
manager.
The Race Point portfolio has exceeded the target par amount
established by the governing documents of $497 million with
current collateral plus cash totaling $507 million as of the
trustee report dated September 30, 2003. The higher par balance
can be attributed to trading gains on the portfolio. The current
portfolio has only one defaulted asset with a par amount of less
than $1 million and four current pay obligations totaling $9.8
million. The 'CCC+' and below rated assets, including the
defaulted and current pay assets, that are trading below $0.70
represent less than 1% of the total collateral balance. Sankaty
has been successfully managing this portfolio and as a result, the
issuer is currently passing all of its performance tests. As a
result of this analysis, Fitch has determined that the original
ratings assigned to the notes still reflect the current risk to
noteholders.
Fitch will continue to monitor and review this transaction for
future rating adjustments.
RACE POINT: Fitch Takes Rating Actions on Series 2001-RZ2 Notes
---------------------------------------------------------------
Fitch Ratings has taken rating actions on the following
Residential Asset Mortgage Products, Inc. issue:
RAMP Home Equity Mortgage Asset-Backed Pass-Through Certificates,
Series 2001-RZ2 Groups I & II:
-- Class A-I-5 affirmed at 'AAA';
-- Class A-IO affirmed at 'AAA';
-- Class M-1 upgraded to 'AA+' from 'AA';
-- Class M-2 affirmed at 'A';
-- Class M-3 affirmed at 'BBB';
-- Class B, rated 'BB', is placed on Rating Watch Negative.
The affirmations of these classes reflect credit enhancement
consistent with future loss expectations. The positive rating
action is due to the amount of credit enhancement available,
relative to future loss expectations.
The Rating Watch Negative action on the class B certificate is due
to the decline in the overcollateralization currently at $296,935,
which represents the sole support of credit enhancement for this
class. It is anticipated that the O/C will begin to be replenished
in the next month or two when the 'AAA' class A-IO certificate
matures in November 2003 and interest starts building the O/C to
its target of $1,075,010. Fitch will continue to monitor the
situation closely.
REALTY INCOME CORP: S&P Upgrades Low-B Preferred Share Rating
-------------------------------------------------------------
Realty Income Corp., The Monthly Dividend Company(R) (NYSE:O),
announced that Standard & Poor's upgraded the company's senior
unsecured debt rating to BBB from BBB- and its preferred stock
ratings to BBB- from BB+ with a stable outlook.
Realty Income's Chief Executive Officer, Tom A. Lewis, stated, "We
are very pleased with Standard & Poor's rating action and believe
the upgrade reflects the company's solid financial position, the
increased diversification of our portfolio of retail properties
and the consistent growth of the company in recent years."
Standard & Poor's issued the following press release on Nov. 18,
2003:
"On Nov. 18, 2003, Standard & Poor's Ratings Services raised its
corporate credit rating on Realty Income Corp. to 'BBB' from
'BBB-'. In addition, ratings are raised on the company's senior
unsecured debt and preferred stock, which total approximately $430
million. The outlook is revised to stable from positive.
The upgrade acknowledges the company's consistent track record of
stable operating performance, good underwriting standards, and
above-average financial profile. Mitigating these strengths is the
lower credit quality of the tenant base, and less fungible nature
of single tenant retail properties.
Realty Income's business strategy focuses on investing in net-
leased retail properties tenanted primarily by middle-market
retailers that generally require capital to expand but have
limited access to capital. Recent acquisitions reflect a shift
toward larger sale/leaseback transactions that provide tenant
operators with a portion of their financing for larger
acquisition/consolidation transactions versus historical smaller
one-off transactions. The recent acquisition of 114 Golden Gallon
convenience stores operated by The Pantry ('B+'/Stable) reflects
this type of investment.
Realty Income's focus on the often unrated middle-market retailer
exposes the company's portfolio to weaker credit tenants and
potentially greater default frequency. Supporting this riskier
investment strategy, however, is the company's strong
underwriting, which has produced a consistent history of rent
collections and strong occupancy. Added portfolio stability is
derived through size (1,254 assets), industry (28 retail
segments), tenant (84 retail chains), and geographic (48 states)
diversification. Portfolio occupancy was more than 98.9% at Sept.
30, 2003, and has averaged more than 98% during the past 10 years.
Acquisition activity from 1995 to present has resulted in a
larger, more diversified portfolio, in part by reducing its
concentration in child care and restaurants from more than 70% of
rents in 1994 to less than 30%. The recent Golden Gallon
transaction increases exposure to The Pantry and the convenience
store segment to more than 7% and 17%, respectively.
Realty Income's underwriting standards have been tested from 1996
to the present with a handful of tenant bankruptcies and normal
lease rollovers to manage through. The company has generally fared
well in its tenant bankruptcies, recovering 99% of the original
rent, and 92% of in-place rent at lease rollover during that time
period, which speaks to good up-front underwriting. Scheduled
lease rollover appears manageable during the next five years, with
4% to 8% of annual rents expiring in each year; 2004 represents
the high end of that range, led by La Petite Academy Inc.
('CCC'/Negative), Children's World Learning Centers, and Golden
Corral.
Realty Income has consistently maintained a conservative capital
structure to support its somewhat riskier investment niche.
Leverage is modest, at just 37% of total book capitalization, and
46% on a debt plus preferred-to-book capitalization basis.
Coverage measures are strong for the rating category at 5.1x debt
service and 3.7x fixed-charge coverage. Standard & Poor's believes
it is appropriate to maintain above-average FCC measures (more
than 3.0x) to compensate for the company's riskier tenant base.
Stressing coverage for the weaker tenant credit quality and
greater risk of default, the loss of all rent from any one of its
top three tenants (7% to 9% of rent) would negatively impact FCC;
however, Standard & Poor's estimates that coverage would still
remain above 3.0x. Total coverage of dividends of 1.1x, could dip
close to 1.0x under the above stress scenario, but should not
materially impact Realty Income's credit profile.
Liquidity
Realty Income has had good access to capital, tapping both the
debt and equity markets in 2003, and accessing a range of capital
sources since going public in 1994. Realty Income also has no
secured debt encumbering any of its properties. Refinancing risk
is minimal with the credit facility maturing in October 2005, and
no senior unsecured debt maturing until 2007. Beyond its access to
the capital markets, the company has more than $150 million
available under its $250 million unsecured line of credit (with a
$50 million accordion feature) to help fund acquisitions.
Additional liquidity is derived from modest asset sales and
internal cash flow (after dividends and modest cap-ex) of
approximately, roughly $25 million to $30 million.
OUTLOOK: Stable
Above-average financial measures provide support for the company's
somewhat riskier, but improved business profile. Portfolio
operating stability provides additional support for the current
rating. Standard & Poor's expects the company to continue to
pursue its acquisition activity in a prudent manner, by
maintaining its conservative underwriting standards as it shifts
toward investing in larger transactions.
Ratings List
Realty Income Corp.
Corporate credit BBB/Stable BBB-/Positive
Senior unsecured BBB BBB-
Preferred stock BBB- BB+"
Realty Income is The Monthly Dividend Company(R), a New York Stock
Exchange real estate company dedicated to providing shareholders
with dependable monthly income. To date the company has paid 400
consecutive monthly dividend payments throughout its 33-year
operating history. The monthly income is supported by the cash
flow from over 1,300 retail properties owned under long-term lease
agreements with leading regional and national retail chains. The
company is an active buyer of net-leased retail properties
nationwide.
ROYAL CARIBBEAN: Prices Public Offering of 6.875% Senior Notes
--------------------------------------------------------------
Royal Caribbean Cruises Ltd. (NYSE:RCL) (OSE:RCL) announced the
pricing of a public offering of $350 million of its 6.875 percent
Senior Notes due 2013. Citigroup Global Markets, Inc., Credit
Suisse First Boston, Goldman, Sachs & Co. and Morgan Stanley are
joint-bookrunning lead managers for the offering, with BNP Paribas
and ABN AMRO Incorporated as co-managers.
Net proceeds from this offering will be used by the Company for
general corporate purposes, including capital expenditures, to
repay indebtedness outstanding under the Company's unsecured
revolving credit facility and to enhance the Company's overall
liquidity position. The securities are being offered as part of a
shelf registration statement previously filed and declared
effective with the Securities and Exchange Commission.
Copies of the prospectus relating to the offering can be obtained
from Citigroup Global Markets, Inc., 390 Greenwich Street, New
York, NY 10013, 212/723-6046.
Royal Caribbean Cruises Ltd. (S&P, BB+ Corporate Credit Rating,
Negative) is a global cruise vacation company that operates Royal
Caribbean International and Celebrity Cruises, with a combined
total of 25 ships in service and three under construction. The
company also offers unique land-tour vacations in Alaska, Canada
and Europe through its cruise-tour division. Additional
information can be found on http://www.royalcaribbean.com
http://www.celebrity.comor http://www.rclinvestor.com
ROYAL CARIBBEAN CRUISES: S&P Rates $350MM Senior Notes at BB+
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' rating to
Royal Caribbean Cruises Ltd.'s proposed $350 million senior notes
due 2013.
At the same time, Standard & Poor's affirmed its 'BB+' corporate
credit rating and other ratings on the world's second largest
cruise company. Proceeds from the sale of the proposed notes are
expected to be used for general corporate purposes, including
capital expenditures, to repay indebtedness outstanding under the
company's revolving credit facility, and to enhance the company's
overall liquidity position. The outlook is negative. About $5.5
billion of debt was outstanding as of Sept. 30, 2003.
Ratings for RCL reflect its high debt leverage for the rating,
challenges associated with the absorption of increased industry
capacity, particularly in the next 12 months, and the sensitivity
of the travel and leisure industry to economic cycles. These
factors are partially offset by RCL's position as the world's
second largest cruise company, its strong brands, a relatively
young and high-quality fleet of ships, and an experienced
management team.
Given relatively flat debt levels since the end of 2002, total
debt to EBITDA (adjusted for operating leases) remains unchanged
at about 6.4x, as of Sept. 30, 2003. "While this level remains
weak for the ratings, Standard & Poor's expects that RCL's credit
measures will improve significantly beyond the second quarter of
2004, when the company's fleet expansion program slows
meaningfully," said Standard & Poor's credit analyst Craig
Parmelee.
SAFETY-KLEEN: Earns Nod to Expand Connolly Bove's Engagement
------------------------------------------------------------
The Safety-Kleen Debtors obtained permission from U.S. Bankruptcy
Court Judge Walsh to further expand the scope of employment of
Connolly Bove Lodge & Hutz LLP as Special Counsel to the Debtors.
On June 24, 2002, the Court approved the Debtors' retention of
CBL&H as Special Litigation Counsel, nunc pro tunc to May 13,
2002, for the purposes of representing the Debtors relating to the
prosecution of certain avoidance actions. On October 7, 2002, the
Court approved the Debtors' expanded retention of CBL&H as Special
Litigation Counsel for the purposes of assisting the Debtors with
the investigation and possible prosecution of claims against
certain third party institutions.
Since its retention, CBL&H has represented the Debtors in
connection with the PwC Claims and the commencement and
prosecution of the Avoidance Actions, and has continued the
discovery process with regard to the Third Party Claims. Based
upon the present working relationship between CBL&H and the
Debtors, the Debtors seek to further expand the scope of CBL&H's
representation to include assisting the Debtors with the process
of claims administration.
CBL&H has not and will not perform services directly relating to
the Debtors' general restructuring efforts or other matters
involving the conduct of the Debtors' chapter 11 cases. This
retention is necessary because of potential conflicts of interest
perceived by Debtors' general bankruptcy counsel, Skadden, Arps,
Slate, Meagher & Flom LLP, relating to certain claims asserted and
to be asserted against the Debtors.
Professionals and Compensation
These attorneys and paralegals will be the primary professionals
at CBL&H involved in conducting the Claims Administration:
Professional Position Hourly Rate
------------ -------- -----------
Craig B. Young Attorney $345.00
Jeffrey C. Wisler Attorney $345.00
Michelle McMahon Attorney $210.00
Gregory Weinig Attorney $185.00
C. Todd Marks Attorney $175.00
Marc J. Phillips Law Clerk $165.00
Maria E. Whalen Paralegal $110.00
Other attorneys and paralegals may from time to time serve the
Debtors in connection with the Claims Administration.
Additionally, the Debtors may call upon the specialized knowledge
and skills of other attorneys at CBL&H to provide related
services, as necessary.
This Court has previously approved procedures for payment to CBL&H
in accordance with section 330(a) of the Bankruptcy Code.
Compensation will continue to be payable to CBL&H on an hourly
basis, plus reimbursement of actual, necessary expenses incurred
by CBL&H. The hourly rates currently being charged by CBL&H
represent standard hourly rates for work of this nature. These
rates are subject to periodic adjustment. (Safety-Kleen Bankruptcy
News, Issue No. 68; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
SATURN (SOLUTIONS): Fails to File First-Quarter Fin'l Results
-------------------------------------------------------------
Saturn (Solutions) Inc. announced that there has been no material
change in the information nor any failure on Saturn's part to
fulfill its stated intentions contained in the notice of default
filed by Saturn on October 21, 2003 with the provincial securities
commissions.
Saturn has not filed its financial statements for the first
quarter ended August 31, 2003 within the prescribed time limit nor
has the Company mailed such statements to its shareholders. All
other material information concerning the affairs of Saturn has
been generally disclosed.
As reported in Troubled Company Reporter's October 24, 2003
edition, Saturn (Solutions) Inc., did not file its financial
statements for the fiscal year ended May 31, 2003 within the
prescribed time limit or mailed such statements to its
shareholders.
Saturn's previously-announced assessment of strategic alternatives
available to the Company is continuing. These alternatives may
include an equity investment in Saturn, merger, partnership, joint
venture, sale, or a combination thereof. An announcement on the
outcome of the strategic review process will be made in due
course. However, Saturn undertakes no obligation to make any
announcement regarding its consideration of strategic alternatives
until an agreement, if any, has been signed or a decision not to
proceed with strategic alternatives is made.
Saturn further said that following Saturn's application, the
Irish courts have appointed a liquidator for Saturn Fulfilment
Services Limited, the Company's wholly-owned Irish subsidiary.
Saturn applied for the appointment of a liquidator in light of the
insolvency of its Irish subsidiary. Among the factors which led to
this development were: the departure from Ireland of several of
Saturn's major customers; a general decline in the Irish market; a
gain in strength of the Euro against the pound in late 2002 and
the first half of 2003, which undermined Saturn's efforts to
generate profitable new business in the United Kingdom; Saturn's
inability in July 2003 to resell inventory of a customer in
default to the Company; the loss of a major customer in August
2003; and an increase in rent at Saturn's main facilities in
Dublin. The financial impact on Saturn of the appointment of a
liquidator for Saturn Fulfilment Services cannot be determined at
this time.
SHOLODGE INC: Commences Cash Tender Offer for 7-1/2% Conv. Notes
----------------------------------------------------------------
ShoLodge, Inc. (Nasdaq: LODG) will commence a cash tender to
purchase up to $6.0 million aggregate principal amount of its
outstanding 7-1/2% Convertible Subordinated Notes, due 2004. The
tender will begin on November 18, 2003, and will expire at 5:00
P.M. Eastern Time, on December 19, 2003, unless extended or
earlier terminated. Tendered notes may be withdrawn at any time
prior to the expiration date.
ShoLodge is offering to purchase the notes for a cash price of
$640 per $1,000 principal amount. If the amount tendered exceeds
$6.0 million principal amount, ShoLodge will accept the tendered
notes on a prorated basis. Notes tendered but not purchased will
be returned to tendering holders.
The terms and conditions of the tender appear in ShoLodge's
Purchase Offer Statement, dated November 18, 2003, and the related
Letter of Transmittal. Copies of these and other related documents
will be mailed to all record holders of the notes. The tender is
not conditioned on a minimum amount of notes being tendered. The
consummation of the tender for the convertible debentures is
subject to certain other conditions described in the Purchase
Offer Statement. Subject to applicable law, ShoLodge may, in its
sole discretion, waive any condition applicable to the tender and
may extend, terminate, or otherwise amend the tender.
SunTrust Bank is the depositary for this offer. Holders of the
convertible debentures should read the Purchase Offer Statement,
Letter of Transmittal and related documents because they contain
important information about the tender. Copies of the Purchase
Offer Statement, Letter of Transmittal and related documents may
be obtained at no charge from ShoLodge at 130 Maple Drive, North,
Hendersonville, Tennessee 37075 or from the Securities and
Exchange Commission's Web site at http://www.sec.gov/ Additional
information concerning the terms of the tender, including all
questions relating to the mechanics of the tender, may be obtained
by contacting ShoLodge at (615) 264-8000.
ShoLodge (S&P, CCC Corporate Credit Rating) is primarily an owner,
franchisor, and operator of Shoney's Inns. The Shoney's Inn brand
consists of around 70 hotels operating in the limited service,
economy price segment. ShoLodge also constructs lodging facilities
for third parties and offers reservation system services to third
parties. At the end of 2001, ShoLodge's owned hotel portfolio,
consisting of 14 hotels in eight states.
SPIEGEL GROUP: Settles Spiegel and FCNB Bar Date Issue
------------------------------------------------------
By an interim agreement dated October 10, 2003, First Consumers
National Bank agreed that the Debtors would have up to October 22,
2003 to file a claim against FCNB with its liquidating agent. The
Court also extended the Spiegel Bar Date for FCNB's benefit to
October 24, 2003 at 4:00 p.m. To date, FCNB has not filed a proof
of claim against the Debtors in these Chapter 11 cases, and the
Debtors have not filed claims in FCNB's liquidation proceeding.
Spiegel, as the sole shareholder of FCNB, is entitled to all
liquidating dividends paid by FCNB, if any, at FCNB's voluntary
liquidation closing, following the satisfaction of claims
asserted by FCNB's creditors. Thus, as a practical and legal
matter, if FCNB can satisfy all its creditors, other than
Spiegel, from its current assets, FCNB would have no reason to
make a claim against Spiegel, because all amounts received from
the claim would only revert to Spiegel, as sole shareholder.
Likewise, Spiegel would have no reason to submit a claim to
FCNB's liquidating agent, because amounts remaining with FCNB
upon liquidation will eventually be transferred via dividend to
Spiegel. Thus, because FCNB's solvent liquidation would make any
claims between FCNB and Spiegel moot, the parties believe that an
agreement to extend the relevant claims periods will be mutually
beneficial.
In a Court-approved stipulation, the parties agree that:
(1) Spiegel will not, under any circumstances, file a claim
against FCNB with FCNB's liquidating agent, unless and until
FCNB files a proof of claim in Spiegel's Chapter 11 cases.
However, Spiegel will not be prevented from commencing an
action against FCNB in a court of competent jurisdiction in
which Spiegel does not seek relief or recovery from FCNB
which would:
-- require a monetary payment or the expenditure of funds by
FCNB; or
-- delay or interfere with FCNB's voluntary liquidation;
(2) The Bar Date Order does not apply to FCNB. But on 45 days'
written notice to FCNB by Spiegel or the Bankruptcy Court,
the Bar Date Order will apply to FCNB, with the new bar date
in respect of FCNB being at least 45 days after the date of
the notice;
(3) If, and only if, FCNB files a proof of claim against Spiegel,
Spiegel will have up to 30 days to file a claim against FCNB
with FCNB's liquidating agent, and if so filed, the claim
will be deemed to have been timely filed in FCNB's
liquidation;
(4) Nothing will prevent FCNB from satisfying any claim by a
certain creditor before any other claims in the course of its
liquidation, and Spiegel will not object to this, in its
capacity as a potential claimant against FCNB. Spiegel will
not seek in any way, in its capacity as a potential claimant
against FCNB, to reverse any payment or resolution of claims
by FCNB;
(5) The word "claim" includes all claims, causes of actions,
rights, counterclaims, third party claims, cross-claims, or
cross-complaints that either FCNB or Spiegel has, might have,
might assert, or otherwise would be entitled to present
against the other party of any nature whatsoever, whether
arising in law, equity or otherwise. "Claim" will also
include any defenses, affirmative or otherwise, that either
party has, might have, might assert, or otherwise would be
entitled to present against any claims, causes of action,
rights, counterclaims, third-party claims, cross-claims, or
cross-complaints of the other party; and
(6) The Stipulation is not and will not be taken or used as an
admission by either party of liability for, or the validity
or invalidity of, any claims, causes of actions, rights,
counterclaims, third party claims, cross-claims, cross-
complaints, or defenses of any nature which could or might be
asserted by a party against the other party. (Spiegel
Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
TELETECH HOLDINGS: Enters Multi-Year Agreement with Best Buy Co.
----------------------------------------------------------------
TeleTech Holdings, Inc. (Nasdaq: TTEC), a global provider of
customer solutions, announced a multi-year agreement with Best Buy
Co., Inc., North America's leading specialty retailer of consumer
electronics, personal computers, entertainment software and
appliances, with more than 500 retail stores in 48 states.
Under terms of the agreement, TeleTech will manage product inquiry
and availability, order tracking and placement, and warranty and
delivery information for BestBuy.com, the second largest online
retailer in the world. Additionally, TeleTech will utilize its
state-of-the-art technology platform, reengineering processes and
operational best practices to enable Best Buy's strategic
consolidation and cost improvement initiatives, and to further
solidify its position as one of the world's premier online
retailers.
"Best Buy serves more than 300 million consumers each year," said
Julie Owen, Best Buy's vice president of business
operations/integration advertising. "As our largest store,
BestBuy.com reaches more customers than any physical Best Buy
store, and we needed a partner that could grow with us as we
continue to expand our customer base. We are confident that
TeleTech's global operating model, scalability and cost
improvement strategies will enable us to reach our strategic
goals, while providing exceptional support to our customers."
"Best Buy is one of the most recognized brands in the retail
industry," said James Kaufman, TeleTech's president and general
manager of commercial, financial services and government markets.
"TeleTech's goal is to provide clients with tailored customer
solutions that improve costs and revenue while enhancing customer
experiences. Our global enterprise enables us to deliver an
integrated service offering that provides a customized and cost-
effective solution for Best Buy."
TeleTech, a leading provider of integrated customer solutions,
partners with global clients to develop and execute relevant
solutions that enable them to build and grow profitable
relationships with their customers. TeleTech has built a global
capability supported by 62 customer management centers that
employ more than 31,000 professionals spanning North America,
Latin America, Asia-Pacific and Europe. For additional
information, visit http://www.teletech.com
* * *
LIQUIDITY AND CAPITAL RESOURCES
Historically, capital expenditures have been, and future capital
expenditures are anticipated to be, primarily for the development
of customer interaction centers, technology deployment and systems
integrations. The level of capital expenditures incurred in 2003
will be dependent upon new client contracts obtained by the
Company and the corresponding need for additional capacity. In
addition, if the Company's future growth is generated through
facilities management contracts, the anticipated level of capital
expenditures could be reduced. The Company currently expects total
capital expenditures in 2003 to be approximately $40.0 million to
$50.0 million, excluding the purchase of its corporate
headquarters building. The Company expects its capital
expenditures will be used primarily to open several new non-U.S.
customer interaction centers, maintenance capital for existing
centers and internal technology projects. Such expenditures are
expected to be financed with internally generated funds, existing
cash balances and borrowings under the Revolver.
The Company's Revolver is with a syndicate of five banks. Under
the terms of the Revolver, the Company may borrow up to $85.0
million with the ability to increase the borrowing limit by an
additional $50.0 million (subject to bank approval) within three
years from the closing date of the Revolver (October 2002). The
Revolver matures on December 28, 2006 at which time a balloon
payment for the principal amount is due, however, there is no
penalty for early prepayment. The Revolver bears interest at a
variable rate based on LIBOR. The interest rate will also vary
based on the Company leverage ratios (as defined in the
agreement). At June 30, 2003 the interest rate was 2.5% per annum.
The Revolver is unsecured but is guaranteed by all of the
Company's domestic subsidiaries. At June 30, 2003, $39.0 million
was drawn under the Revolver. A significant restrictive covenant
under the Revolver requires the Company to maintain a minimum
fixed charge coverage ratio as defined in the agreement.
The Company also has $75.0 million of Senior Notes which bear
interest at rates ranging from 7.0% to 7.4% per annum. Interest on
the Senior Notes is payable semi-annually and principal payments
commence in October 2004 with final maturity in October 2011. A
significant restrictive covenant under the Senior Notes requires
the Company to maintain a minimum fixed charge coverage ratio.
Additionally, in the event the Senior Notes were to be repaid in
full prior to maturity, the Company would have to remit a "make
whole" payment to the holders of the Senior Notes. As of June 30,
2003, the make whole payment is approximately $11.9 million.
During the second quarter of 2003, the Company was not in
compliance with the minimum fixed charge coverage ratio and
minimum consolidated net worth covenants under the Revolver and
the fixed charge coverage ratio and consolidated adjusted net
worth covenants under the Senior Notes. The Company has worked
with the lenders to successfully amend both agreements bringing
the Company back into compliance. While the Revolver and Senior
Notes had subsidiary guarantees, they were not secured by the
Company's assets. In connection with obtaining the amendments, the
Company has agreed to securitize the Revolver and Senior Notes
with a majority of the Company's domestic assets. As part of the
securitization process, the two lending groups need to execute an
intercreditor agreement. If an intercreditor agreement is not in
place by September 30, 2003, the lenders could declare the
Revolver and Senior Notes in default. The lenders and the Company
believe they will be able to execute the intercreditor agreement
by September 30, 2003. However, no assurance can be given that the
parties will be successful in these efforts. Additionally, the
interest rates that the Company pays under the Revolver and Senior
Notes will increase as well under the amended agreements. The
Company believes that annual interest expense will increase by
approximately $2.0 million a year from current levels under the
Revolver and Senior Notes as amended. The Company believes that
based on the amended agreements it will be able to maintain
compliance with the financial covenants. However, there is no
assurance that the Company will maintain compliance with financial
covenants in the future and, in the event of a default, no
assurance that the Company will be successful in obtaining waivers
or future amendments.
From time to time, the Company engages in discussions regarding
restructurings, dispositions, mergers, acquisitions and other
similar transactions. Any such transaction could include, among
other things, the transfer, sale or acquisition of significant
assets, businesses or interests, including joint ventures, or the
incurrence, assumption or refinancing of indebtedness, and could
be material to the financial condition and results of operations
of the Company. There is no assurance that any such discussions
will result in the consummation of any such transaction. Any
transaction that results in the Company entering into a sales
leaseback transaction on its corporate headquarters building would
result in the Company recognizing a loss on the sale of the
property (as management believes that the current fair market
value is less than book value) and would result in the settlement
of the related interest rate swap agreement (which would require a
cash payment and charge to operations of $5.4 million).
TERAFORCE: Cuts Debt by $1.7 Million via Debt-for-Equity Swap
-------------------------------------------------------------
TeraForce Technology Corporation (OTCBB:TERA) has reduced its
short-term debt obligations by approximately $1,700,000 by
exchanging these obligations for shares of its common stock.
Pursuant to the terms of a financing arrangement entered into in
March 2003, a group of private investors exercised their rights to
purchase 8,333,333 shares of TeraForce common stock for $1,000,000
cash. The proceeds from the sale of this stock were used to repay
amounts outstanding under a credit facility between the Company's
wholly owned subsidiary, DNA Computing Solutions, Inc. and
FirstCapital Bank. The group of private investors had provided
guarantees that secured this credit facility. Upon the
cancellation of the facility, which occurred concurrently with the
repayment of all outstanding amounts, the bank has released the
guarantees of the investors, as well as other security.
In an unrelated transaction, the Company has issued 2,800,000
shares of its common stock in satisfaction of outstanding
principal and accrued interest totaling approximately $700,000.
These amounts were outstanding under a promissory note issued by
the Company to a private investor in October 2002.
Herman Friestch, chairman and chief executive officer of TeraForce
commented, "These are important steps to reduce debt and improve
our balance sheet. In combination with our other recent financing
transaction, we have made significant progress in providing the
financing necessary for the growth we expect from our recently
announced business initiatives."
Based in Richardson, Texas, TeraForce Technology Corporation
(OTCBB:TERA) -- whose June 30, 2003 balance sheet shows a total
shareholders' equity deficit of about $5.4 million -- designs,
develops, produces and sells high-density embedded computing
platforms and digital signal processing products, primarily for
applications in the defense electronics industry. TeraForce's
primary operating unit is DNA Computing Solutions, Inc.,
www.dnacomputingsolutions.com
TYCO INTERNATIONAL: Repurchases $3.1 Billion of LYONS Due 2020
--------------------------------------------------------------
Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced
the results of its offer to repurchase its Liquid Yield Option(TM)
Notes due 2020 (Zero Coupon-Senior). The holders' option to
surrender their LYONs for repurchase expired at 5:00 p.m., New
York City time, on Monday, November 17, 2003.
Tyco has been advised by the trustee, U.S. Bank National
Association, that LYONs with an aggregate principal amount at
maturity of $3,196,711,000 were validly surrendered for repurchase
and not withdrawn, and Tyco has repurchased all of such LYONs.
The purchase price for the LYONs was $775.66 in cash per $1,000 in
principal amount at maturity. The aggregate purchase price for
all of the LYONs validly surrendered for repurchase and not
withdrawn was $2,479,560,854.26.
Tyco International Ltd. is a diversified manufacturing and service
company. Tyco is the world's largest manufacturer and servicer of
electrical and electronic components; the world's largest
manufacturer, installer and provider of fire protection systems
and electronic security services; and the world's largest
manufacturer of specialty valves. Tyco also holds strong
leadership positions in medical device products, and plastics and
adhesives. Tyco operates in more than 100 countries and had fiscal
2003 revenues from continuing operations of approximately $37
billion.
As previously reported, Fitch Ratings assigned a 'BB' rating to $1
billion of 10 year notes to be issued by Tyco International Group
S.A. and guaranteed by Tyco International Ltd. The Rating Outlook
is Stable.
In another report, Fitch Ratings affirmed its ratings on the
senior unsecured debt and commercial paper of Tyco International
Ltd., as well as the unconditionally guaranteed debt of its wholly
owned direct subsidiary Tyco International Group S. A., at
'BB'/'B', respectively. The Rating Outlook was changed to Stable
from Negative. The ratings affect approximately $21 billion of
debt securities.
UICI: Completes Sale of Academic Management Services Unit to SLM
----------------------------------------------------------------
UICI (NYSE: UCI) has completed the previously announced sale of
its Academic Management Services Corp. unit to SLM Corporation
(NYSE: SLM).
The sale of AMS to Sallie Mae generated net cash proceeds to UICI
of approximately $27.8 million. At closing, UICI also received
uninsured student loan assets formerly held by AMS' special
purpose financing subsidiaries with a face amount of approximately
$44.3 million (including accrued interest). The fair value of the
uninsured loans is expected to be significantly less than the face
amount of the loans.
As part of the transaction, Sallie Mae agreed to assume
responsibility for liquidating and terminating the remaining
special purpose financing facilities through which AMS previously
securitized student loans.
Reflecting the terms of the then-pending AMS transaction, UICI had
previously announced that it had recorded, in the three and nine
months ended September 30, 2003, a pre-tax loss (classified as a
loss from discontinued operation and consisting of an estimated
loss upon disposal of AMS and AMS' operating results in the
periods) in the amount of $77.5 million ($66.9 million net of tax,
or $1.40 per diluted share) and $75.3 million ($65.6 million net
of tax, or $1.37 per diluted share), respectively. The Company
classified AMS as a discontinued operation for financial reporting
purposes at the end of the third quarter.
UICI (headquartered in North Richland Hills, Texas) through its
subsidiaries offers insurance (primarily health and life) and
selected financial services to niche consumer and institutional
markets. Through its Self Employed Agency Division, UICI provides
to the self-employed market health insurance and related insurance
products, which are distributed primarily through the Company's
dedicated agency field forces, UGA-Association Field Services and
Cornerstone America. Through its Group Insurance Division, UICI
provides tailored health insurance programs for students enrolled
in universities, colleges and kindergarten through grade twelve
and markets, administers and underwrites limited benefit insurance
plans for entry level, high turnover, hourly employees. Through
its Life Insurance Division, UICI offers life insurance products
to selected markets. In 2002, UICI was added to the Standard &
Poor's Small Cap 600 Index. For more information, visit
http://www.uici.net
* * *
On July 21, 2003, UICI reported the discovery of a shortfall in
the type and amount of collateral supporting two of the
securitized student loan financing facilities entered into by
three special financing subsidiaries of AMS. The problems at one
of the financing facilities (the EFG-III LP commercial paper
conduit facility) are of three types: insufficient collateral, a
higher percentage of alternative loans (i.e., loans that are
privately guaranteed as opposed to loans that are guaranteed by
the federal government) included in the existing collateral than
permitted by the loan eligibility provisions of the financing
documents and failure to provide timely and accurate reporting.
The problems related to the second financing subsidiary (AMS-1
2002, LP) consist primarily of a higher percentage of alternative
loans included in the existing collateral than permitted by the
loan eligibility provisions of the financing documents, and the
failure to provide timely and accurate reporting. In addition, AMS
and the other four special financing subsidiaries of AMS have
failed to comply with their respective reporting obligations under
the financing documents.
As announced on July 24, 2003, AMS has obtained waivers and
releases from interested third parties, as described more fully
below, with respect to four of the six securitized student loan
financing facilities. The waiver and release agreements were
entered into with Bank of America and Fleet Bank (the providers of
a liquidity facility that supports the EFG-III, LP commercial
paper facility), Bank One (the trustee under the indentures that
govern the terms of the debt securities issued by each of AMS'
special financing subsidiaries) and MBIA Insurance Corporation
(the financial guaranty insurer of debt securities issued by four
of the seven AMS financing subsidiaries).
The waiver and release agreement for the EFG-III, LP (one of AMS'
special purpose financing subsidiaries) commercial paper
securitized student loan facility calls for UICI's contribution of
$48.25 million ($1.75 million on July 24, 2003, $36.5 million on
July 31, 2003 and $10.0 million on August 15, 2003) in cash to the
capital of AMS, all of which, as of July 31, 2003, UICI had
contributed to AMS.
The financial institutions agreed to waive all existing defaults
under the relevant financing documents with respect to EFG-III, LP
and EFG Funding (both of which are exclusively involved in the
commercial paper program) until January 1, 2004, which date will
be automatically extended for successive 90-day periods through
September 30, 2004 if the outstanding amount of commercial paper
is reduced to agreed-upon levels from its current outstanding
amount (approximately $440 million). As previously announced, AMS
has agreed to partially address the under-collateralization
problem by transferring to EFG-III, LP approximately $189 million
of federally-guaranteed student loan and other assets that meet
loan eligibility requirements under the financing documents and by
transferring approximately $34.4 million of uninsured student
loans that do not meet loan eligibility requirements under the
financing documents. In addition, AMS will contribute to EFG-III
LP $46.5 million of the $48.25 million in cash contributed to AMS
by UICI either in the form of cash or federally guaranteed student
loans. These various transfers by AMS will substantially eliminate
the shortfall in collateral amount with respect to the EFG-III LP
commercial paper conduit facility.
With respect to the AMS-1 2002, LP facility, as of July 24, 2003,
the interested parties agreed to waive, for a period of 90 days,
all defaults, amortization events and events of default based
solely on defaults arising prior to July 24, 2003 resulting from
non-federally insured student loans included in the collateral in
excess of the maximum percentage limit for such loans as set forth
in the documents governing the financing, which waiver is not
extendable. In addition, with respect to four other student loan
financing facilities, the interested parties agreed to waive, as
of July 24, 2003, all immaterial previously-existing defaults
resulting from inaccurate or untimely reporting or any other
reporting deficiency by the applicable issuer under each such
facility, AMS or any other affiliate of AMS, for a period of 90
days, which period is not extendable. Upon expiration of the 90-
day waiver period, all then uncured events of default shall be
reinstated and be in full force and effect.
UICI believes that it has no obligations with respect to the
indebtedness of AMS' special financing subsidiaries or with
respect to the obligations of AMS relating to such financings.
Nonetheless, in exchange for UICI's capital contribution to AMS as
described above, the financial institutions named above have
agreed to release UICI from any and all existing claims or suits
(other than claims for fraud at the UICI level) that could arise
relating to the AMS student loan financing facilities.
UNITED AIRLINES: Taps TPI as Appraisers for Stub Rent Valuations
----------------------------------------------------------------
James H.M. Sprayregen, Esq., at Kirkland & Ellis, relates that
The United Airlines Debtors previously sought approval to employ
Transportation Planning, Inc. to conduct valuations of certain
leaseholds at the Los Angeles International Airport and the San
Francisco International Airport. The Debtors were seeking
declaratory judgments from the Court that their obligations under
Section 354(d)(3) of the Bankruptcy Code do not include an
obligation to make debt service and principal payments on special
facility revenue bonds issued in connection with construction at
SFO and LAX. The Court approved the First Application on May 23,
2003. In August, the Court approved the Stub Rent Procedures,
necessitating that the Debtors conduct valuations of leaseholds
where the lessors have asserted a right to stub rent.
By this application, the Debtors seek the Court's permission to
employ TPI pursuant to Section 327(a) as appraisers for the Stub
Rent Valuations, nunc pro tunc to September 23, 2003. TPI may
also be called as an expert witness.
TPI and the Debtors have entered into an agreement to provide
Appraisal Services. TPI will provide an independent, third
party, objective opinion of the value of designated real and
personal property holdings for certain locations.
TPI will be paid an hourly consulting rate of $350, plus
reasonable out-of-pocket expenses. TPI will not be authorized to
complete services at any one site if the fees will exceed $5,000
without the Debtors' prior written consent.
David O. Stamey, principal at TPI, assures the Court that the
firm does not hold or represent any interest adverse to the
Debtors' estates. TPI will continue to represent clients in
matters unrelated to the Debtors' cases. (United Airlines
Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UNUMPROVIDENT: Fitch Deems Sale of Canadian Operations Positive
---------------------------------------------------------------
Fitch Ratings positively views UnumProvident Corp's announcement
that it has signed a definitive agreement to sell its Canadian
Operations to Royal Bank of Canada.
Fitch believes the transaction will enable UNM to focus on its
core U.S. life and disability operations, while strengthening its
risk-based capital position. The transaction is expected to close
in the first quarter of 2004. UNM's debt and financial strength
ratings have a Negative Rating Outlook. The ratings are listed
below.
Restoration of consolidated NAIC risk-based capital to 250% or
greater, as well as completion of other financial restructuring
intended to improve its core group LTD business will be important
factors contributing to the resolution of UNM's negative outlook.
As a result of the transaction, UNM expects to release capital in
excess of 500 million, which will be used to strengthen its
capital position. Fitch anticipates the sale and reserve release
will add approximately 25 basis points to UNM's consolidated risk-
based capital ratio.
UNM's disability business has been challenged under the current
economic conditions which tend to contribute to higher claims
incidence and lower recovery rates. The result has been lower
profitability levels in its group long term disability business.
Fitch expects the lower earnings levels in this line will likely
persist, at least through the first quarter of 2004, given the low
interest rate environment and continued weakness in the economy.
Entity/Issue Type/Rating/Outlook
UnumProvident Corp.
-- Senior debt/'BBB-'/ Negative.
Provident Financing Trust I
-- Preferred stock 'BB+'/ Negative.
UnumProvident Group members:
-- Insurer financial strength rating/'A-'/ Negative
Group members are: Unum Life Insurance Company of America
Provident Life & Accident Insurance Company
Provident Life and Casualty Insurance Company
The Paul Revere Life Insurance Company
First Unum Life Insurance Company
Colonial Life & Accident Insurance Company
Paul Revere Variable Annuity Insurance Co.
VAIL RESORTS: Appoints Jeffrey W. Jones as New SVP and CFO
----------------------------------------------------------
Vail Resorts, Inc. (NYSE: MTN) announced two senior officer
appointments, effective immediately.
Jeffrey W. Jones, currently senior vice president and chief
financial officer of Vail Resorts Development Company, will become
senior vice president and chief financial officer of Vail Resorts,
Inc. In this capacity, Jeff Jones will be responsible for all of
Vail Resorts' finance, accounting, purchasing, internal audit, and
investor relations functions, both for the parent, Vail Resorts,
and its various subsidiaries.
James P. Donohue, currently senior vice president and chief
financial officer of Vail Resorts, will instead become senior vice
president and chief information officer, a position that is
currently vacant. In his new capacity, Jim Donohue will be
responsible for the Company's information systems and
telecommunications.
Both executives will report directly to Adam Aron, Vail Resorts'
chairman of the board and chief executive officer.
Jones, 41, has a long career in finance and accounting. Before
joining Vail Resorts Development Company in September 2003 he was
EVP and chief financial officer of Chicago-based Clark Retail
Enterprises, Inc. from 1999-2003 and SVP and chief financial
officer of Boston-based Lids Corporation from 1998 to 1999. He
has also worked in a variety of senior finance and accounting
positions at Premcor and Dairy Mart Convenience Stores. Jones is
an accredited CPA, and a member of the American Institute of
Certified Public Accountants. In his early career, from 1984 to
1988, he was a member of the public accounting profession, serving
as an auditor for Arthur Andersen & Co. He graduated summa cum
laude from Mercyhurst College in Pennsylvania, with degrees in
both accounting and American studies. Jones is an avid skier and
grew up vacationing at the Company's ski resorts. He currently
resides with his family in the Vail Valley of Colorado.
Donohue, 63, joined Vail Resorts in November 1996 as chief
financial officer. Throughout his tenure, he has also had
extensive involvement with the Company's information systems,
programs and strategy.
In announcing these moves, Adam Aron, said, "Last week, I
reiterated publicly Vail Resorts' absolute commitment to take
whatever actions we could to ensure that Vail Resorts fulfills its
obligations to provide complete, accurate and timely financial
statements to the investing public. In light of the announcement
by Vail Resorts that it was restating prior year earnings, albeit
by a modest but nonetheless material amount, it seems only prudent
that we have fresh leadership in command of our finance and
accounting functions, and fresh eyes assessing and addressing our
financial processes."
Aron added, "We are thrilled that someone with Jeff Jones' talent
is already in position with our Company, so that he can
immediately step in to assume the important duties of CFO for Vail
Resorts. Jeff brings a wealth of intelligence and drive to his
new expanded role, and his background as a CPA should be
particularly invaluable. In the short time he has already been
with us, Jeff has impressed one and all with his professionalism,
enthusiasm and determination -- all of which should be immensely
helpful factors in his leadership of the finance and accounting
functions going forward."
Aron continued, "We are also similarly and genuinely pleased that
Jim Donohue will continue as one of our most senior officers, in
charge of our technology efforts in which he is well versed. We
are appreciative of Jim's extensive experience and loyal service
to Vail Resorts, and in particular we have the highest degree of
confidence in Jim's integrity and acumen. He has contributed
significantly to our Company over the past seven years, and we are
very fortunate we will be able to benefit from having his
continued counsel."
Vail Resorts, Inc. is the leading mountain resort operator in the
United States. The Company's subsidiaries operate the mountain
resorts of Vail, Beaver Creek, Breckenridge and Keystone in
Colorado, Heavenly in California and Nevada, and the Grand Teton
Lodge Company in Jackson Hole, Wyo. The Company also operates its
subsidiary, RockResorts, a luxury resort hotel company with 10
distinctive properties across the United States. Vail Resorts
Development Company is the real estate planning, development,
construction, retail leasing and management subsidiary of Vail
Resorts, Inc. The Vail Resorts company Web site is
http://www.vailresorts.comand consumer Web site
is http://www.snow.com
Vail Resorts, Inc. (S&P, BB- Corporate Credit Rating, Negative) is
a publicly held company traded on the New York Stock Exchange
(NYSE: MTN).
VICWEST: Ernst & Young Resigns and Deloitte & Touche Takes Over
---------------------------------------------------------------
Vicwest Corporation wishes to advise that Ernst & Young LLP has
resigned as the Company's auditor and Deloitte & Touche LLP has
been appointed as the Company's auditor, effective
October 27, 2003.
There were no reportable events between the Company and the former
auditor and there were no reservations contained in the former
auditor's report on the annual financial statements for the fiscal
year ended December 31, 2002.
The resignation of the former auditor was accepted by the
Company's Board of Directors and its audit committee. The notice
of change of auditor, the letter from the former auditor and the
letter from the successor auditor were reviewed by the Company's
audit committee and the Company's Board of Directors.
Vicwest Corporation, with corporate offices in Oakville, Ontario,
is Canada's leading manufacturer of metal roofing, siding and
other metal building products. Westeel Limited, the Corporation's
wholly-owned subsidiary based in Winnipeg, is Canada's foremost
manufacturer of steel containment products for the storage of
grain, fertilizer and petroleum products.
* * *
As reported in the Troubled Company Reporter's September 19, 2003
edition, Vicwest Corporation completed its restructuring under the
Companies' Creditors Arrangement Act.
Vicwest's Plan of Compromise and Reorganization pursuant to the
CCAA, which was approved by the Ontario Superior Court of Justice
on August 14, 2003, was implemented Wednesday, September 17. On
implementation all of the outstanding shares in the capital of
Vicwest were cancelled and all of the holders of Vicwest's senior
subordinated notes, formerly listed on the TSX Venture Exchange
under the symbol MGT.DB, and certain affected creditors were
issued new common shares of Vicwest.
WACKENHUT CORRECTIONS: Shareholders OK Name Change to Geo Group
---------------------------------------------------------------
Wackenhut Corrections Corporation (NYSE: WHC) announced that at a
special meeting held on November 18, 2003, its shareholders
approved a change in the corporate name of WCC from "Wackenhut
Corrections Corporation" to "The Geo Group, Inc."
The name change is required under the terms of a share purchase
agreement signed by WCC on April 30, 2003, pursuant to which WCC
repurchased all 12,000,000 shares of common stock held by Group 4
Falck A/S, its former majority shareholder. The share repurchase
was completed on July 9, 2003. Under the terms of the share
purchase agreement, WCC is required to cease using the name,
trademark and service mark "Wackenhut" by July 9, 2004.
George C. Zoley, Chairman and Chief Executive Officer of WCC,
said, "This is a very important milestone for our company. Our new
name symbolizes our company's position as a global provider of
diversified government services. The Geo Group, Inc. will continue
to strive for high quality, efficiency and innovation in the
delivery of outsourced government services around the world in the
same way that we have done under the name Wackenhut Corrections
Corporation for almost twenty years."
The name change will become effective upon the filing of an
amendment to the company's Articles of Incorporation with the
Secretary of State in the state of Florida where the company is
incorporated. WCC will implement the name change through a
branding initiative, which is expected to be completed over the
next several months.
WCC (S&P, BB- Corporate Credit Rating, Negative) is a world leader
in the delivery of correctional and detention management, health
and mental health services to federal, state and local government
agencies around the globe. WCC offers a turnkey approach that
includes design, construction, financing and operations. The
Company represents government clients in the United States,
Australia, South Africa, New Zealand, and Canada servicing 49
facilities with a total design capacity of approximately 36,000
beds.
WESTPOINT STEVENS: Laying-Off 200 Associates at Lanier Plant
------------------------------------------------------------
WestPoint Stevens (OTC Bulletin Board: WSPTE) --
http://www.westpointstevens.com-- will implement a layoff at its
Lanier Plant, Valley, Ala., curtailing operations there as the
Company aligns its capacity with other WestPoint Stevens
facilities better equipped to produce the sheeting styles
currently in demand.
The layoff will affect approximately 300 Lanier associates, who
will be placed on leave of absence or, where possible, offered
employment at other WestPoint Stevens facilities in the area as
the Company decides on a future course for the Lanier facility.
"Today's intense global competition forces us to be very proactive
in focusing our manufacturing on the most cost-efficient
production of the styles most in demand," said Vice President -
Bed Products Manufacturing Robert R. (Bobby) Lanier.
"Lanier Plant is an excellent facility that can possibly be well-
used for other purposes," Lanier explained, "but unfortunately it
is equipped to run styles that are no longer in demand. With the
more modern machinery that we have at other facilities, it makes
the most sense to focus our capacity on these plants."
Lanier Plant, opened in 1967, is one of two plants under the same
roof. Its sister plant, Carter, was converted from sheeting to
towel production in 2002.
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
WHEELING-PITTSBURGH STEEL: Files First Post-Confirmation Report
---------------------------------------------------------------
Andrew E. Rebholz, Vice President and Treasurer for Wheeling-
Pittsburgh Steel Corp., presents WPSC's Post-Confirmation Report
for the quarter ended September 30, 2003.
Wheeling-Pittsburgh Steel Corporation
Total Disbursements for Quarter
Ended September 30, 2003
Summary of Amounts Distributed Under the Plan:
Current Paid To
Quarter Date Balance Due
------- ------- -----------
A. Fees and Expenses:
Professionals $1,150,000 $1,150,000 $0
All expenses (UST) 20,998,864 20,998,864 0
B. Distributions:
Secured Creditors 18,262,810 18,262,810 0
Priority Creditors 492,788 492,788 0
Unsecured Creditors 5,000,000 5,000,000 0
Equity Holders 10,000 10,000 150,000,000
Other Payments:
EAF Escrow 112,000,000 112,000,000 0
Note Distribution 59,745,408 59,745,408 254,592
DIP Payoff 143,761,822 143,761,822 0
Other Loan Payment 7,688,495 7,688,495 0
----------- ----------- -----------
Total Plan Payments $369,110,187 $369,110,187 $150,254,592
=========== =========== ===========
Mr. Rebholz avers that the all plan payments are current,
including all quarterly fees due to the United States Trustee.
(Wheeling-Pittsburgh Bankruptcy News, Issue No. 49; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
WIND RIVER: Red Ink Continued to Flow in Third-Quarter 2004
-----------------------------------------------------------
Wind River Systems, Inc. (Nasdaq: WIND), the worldwide market
leader in embedded software and services, reported its third
quarter fiscal 2004 operating results for the period ended
October 31, 2003. Total revenues for the third quarter were $49.6
million, a 2% decrease compared to revenues of $50.4 million in
the second quarter of fiscal 2004, and a 15% decrease compared to
revenues of $58.3 million in the third quarter of fiscal 2003.
"We are pleased with our progress, both financially and in terms
of aligning our strategy with evolving market needs. The positive
cash flow reported during the quarter is a major step in putting
the company on a solid financial footing," said Naren Gupta,
interim president and chief executive officer. "We are excited
about the strategic initiatives, marketing programs, and products
that we are introducing to better serve our customers."
Following the end of the quarter, the company announced the
appointment of Kenneth R. Klein as chairman and chief executive
officer, effective January 5, 2004. "Ken is a tremendous leader
with a track record of successes in the software industry. The
company will benefit greatly from his unparalleled leadership,
vision, and operational excellence," added Gupta.
"Last year at this time, Wind River put a stake in the ground and
revolutionized the embedded market with the introduction of WIND
RIVER PLATFORMS and our subscription based business model. With
the introduction of our second generation PLATFORMS, Wind River
continues to deliver on this strategy," said Jerry Fiddler, co-
founder and chairman of Wind River. "By embracing innovative
technologies such as IPv6, IPsec, Linux, Web Services and WiFi,
the company is helping our customers drive to a connected world
where the enterprise, the desktop and device meet."
In accordance with generally accepted accounting principles
(GAAP), third quarter fiscal 2004 net loss was $6.9 million,
compared to a net loss of $9.3 million for the second quarter of
fiscal 2004 and $14.3 million for the third quarter of fiscal
2003. GAAP net loss per share was $0.09 for the third quarter of
fiscal 2004, compared to a net loss of $0.12 per share for the
second quarter of fiscal 2004 and $0.18 per share for the third
quarter of fiscal 2003. Company guidance entering the quarter was
for a GAAP net loss per share of $0.10 to $0.15.
Pro forma net loss for the third quarter of fiscal 2004 was $4.1
million, or a net loss of $0.05 per share, compared to a net loss
of $4.1 million, or $0.05 per share in the second quarter of
fiscal 2004 and a net loss of $7.4 million, or $0.09 per share,
reported for the third quarter of fiscal 2003.
Wind River provides pro forma data as a useful alternative for
understanding the company's operating results and ongoing business
trends. Pro forma data is not in accordance with, or an
alternative for, GAAP and may be materially different from pro
forma measures used by other companies. Pro forma net loss for the
three and nine months ended October 31, 2003 and 2002 was computed
by adjusting GAAP net loss to exclude amortization and impairment
of purchased intangibles, restructuring and other charges, gains
and losses on investments and technology, and stock compensation.
Pro forma net loss for the three and nine months ended October 31,
2002, also assumes that a tax benefit from losses will be
realized. Wind River provides a reconciliation of its GAAP and pro
forma net loss for the three and nine months ended October 31,
2003 and 2002 on page four of this release.
Other Financial Highlights
-- The company reported positive cash flow for the quarter with
cash and cash equivalents and total investments, including
restricted cash, up to $252.9 million at the end of the third
quarter FY 2004 as compared to $249.6 million at the end of the
second quarter FY 2004.
-- Deferred Revenue increased to $33.7 million at the end of the
third quarter FY 2004 as compared to $31.5 million at the end
of the second quarter FY 2004.
-- Days Sales Outstanding (DSOs) in accounts receivable at the end
of the third quarter FY 2004 were 69 days.
"Our continued focus on growing the WIND RIVER PLATFORMS business
and aggressively managing our costs had a very positive impact on
our financial results for the quarter," stated Mike Zellner, chief
financial officer and senior vice president of finance and
administration. "Momentum of our PLATFORMS business was on target.
The subscription nature of these licenses will improve visibility
in future quarters."
Outlook and Goals
Fourth Quarter Guidance:
-- Wind River expects revenue for Q4 FY 2004 to be in the range of
$50 million to $53 million.
-- GAAP net loss per share for Q4 FY 2004 is expected to be 4
cents to 8 cents per share.
-- Pro-forma net loss per share for Q4 FY 2004 is expected to be 2
cents to 6 cents per share.
-- The Company expects cash flow from operations, excluding
restructuring activities, to be positive for Q4 FY 2004.
Wind River (S&P, B Corporate Credit Rating, Stable Outlook) is the
worldwide leader in embedded software and services. It provides
market-specific embedded platforms that integrate real-time
operating systems, development tools and technologies. Wind
River's products and professional services are used in multiple
markets including aerospace and defense, automotive, digital
consumer, industrial, and network infrastructure. Wind River
provides high-integrity technology and expertise that enables its
customers to create superior products more efficiently. Companies
from around the world turn to Wind River to create the most
reliable products and to accelerate their time to market.
Founded in 1981, Wind River is headquartered in Alameda,
California, with operations worldwide. To learn more, visit Wind
River at http://www.windriver.com
WINFIELD CAPITAL: Co.'s Ability to Continue Operations Uncertain
----------------------------------------------------------------
On April 30, 2003, the SBA notified Winfield Capital Corporation
that it is no longer in compliance with the SBA's capital
impairment rules, as defined by regulation 107.1830 of the SBA
Regulations. Based on this non-compliance, the SBA has accelerated
the maturity date of the Company's debentures to a single demand
note including accrued interest. Interest payments are no longer
due on a semiannual basis, but interest continues to accrue. In
addition, the SBA has transferred the Company to the SBA's Office
of Liquidation where any new investments and material expenses are
subject to prior SBA approval. The SBA has the right to institute
proceedings for the appointment of the SBA or its designee as
receiver.
These matters raise substantial doubt about the Company's ability
to continue as a going concern. Management has submitted a plan to
the SBA providing for the liquidation of the Company over a three-
year period; however, to date, the SBA has not indicated whether
it will approve of the proposed plan. In addition, the Company
continues to pursue alternatives to cure its impairment under the
SBA regulations such as raising additional financing. The Company
cannot be certain that additional equity financing will be
available when required or, if available, that it can secure it on
terms satisfactory to the Company. As such, no assurance can be
made that the Company will be successful in its ability to
consummate or implement these, or any other, strategic
alternatives.
On April 11, 2003, the Company received notice from the Nasdaq
Stock Market, Inc. that effective April 15, 2003 the Company's
securities were delisted from the Nasdaq Smallcap Market. The
Company's securities are quoted on the OTC Bulletin Board
effective April 15, 2003 with the assigned symbol "WCAP".
The Company realized a $35,877 loss on the sales of its entire
positions in four portfolio companies and a portion of its
position in another portfolio company through the second quarter
of fiscal 2004. Through the second quarter of fiscal 2003, the
Company realized a $45,512 loss on the sale of its entire equity
position in one portfolio company.
At September 30, 2003, the Company held cash and short-term
marketable securities totaling $5,149,024.
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Federal-Mogul 7.5% due 2004 14.5 - 16.5 0.0
Finova Group 7.5% due 2009 43.5 - 44.5 +0.5
Freeport-McMoran 7.5% due 2006 102.5 - 103.5 0.0
Global Crossing Hldgs 9.5% due 2009 4.5 - 5.0 +0.25
Globalstar 11.375% due 2004 3.0 - 3.5 -0.5
Lucent Technologies 6.45% due 2029 68.25 - 69.25 -0.75
Polaroid Corporation 6.75% due 2002 11.0 - 12.0 0.0
Westpoint Stevens 7.875% due 2005 20.0 - 22.0 0.0
Xerox Corporation 8.0% due 2027 84.0 - 86.0 -1.5
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com
*********
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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,
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available at http://www.debttraders.com/
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For copies of court documents filed in the District of Delaware,
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*********
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.
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*** End of Transmission ***