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/raid1/www/Hosts/bankrupt/TCR_Public/040312.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, March 12, 2004, Vol. 8, No. 51 Headlines 3D SYSTEMS: Remedies Covenant Defaults Under Wells Fargo Agreement ADELPHIA BUSINESS: Wants Court Nod for ACOM Settlement Pacts ADELPHIA COMMS: US Trustee Amends Unsecured Creditors' Committee AMERICA WEST: Files Shelf Registration Statement with SEC ANC RENTAL: Deutsche Bank Demands Payment of $5.25M Admin. Claim AQUILA INC: Posts Net Losses Reflecting Continued Restructuring CALPINE: Completes Tender Offer for 4% Convertible Senior Notes CALUMET DISTRIBUTION: Case Summary & Largest Unsecured Creditors CHYPS CBO: Fitch Affirms & Downgrades 1999-1 Note Classes COMM 2001-FL5: Fitch Takes Rating Actions on Various Notes Classes CORRPRO COS.: Institutional Shareholder Backs Refinancing Plan COVANTA: New Covanta Lake II Creditors Obtain April 3 Bar Date COVANTA ENERGY: Exits Bankruptcy After Danielson Acquisition DESERT HOT SPRINGS: Tranzon to Help City Ease Financial Woes DILLARD'S INC: BB-Rated Retailer Releases Fourth Quarter Results DR. BARNES' EYECENTER: Case Summary & Largest Unsecured Creditors DYNAMIC TOURS: Case Summary & 20 Largest Unsecured Creditors DYNEGY INC: Ranks No. 5 in Zacks' List of Stocks to Sell Now EMAGIN CORPORATION: Susan Jones Discloses 5.73% Equity Stake ENRON: Inks Stipulations Allowing Direct Solicitation of Votes ENRON: Registers with SEC as Public Utility Holding Company ENRON: SEC Gives Formal Stamp of Approval to Chapter 11 Plan ENRON: Secures SEC Nod to Allow Northern Border's Distributions FREESTAR TECHNOLOGY: Delays Filing of December Quarter Results GARDEN RIDGE: Turns to Jefferies & Company for Financial Advice GLIMCHER REALTY: Board Declares Q1 Dividends Payable on April 15 GLOBAL CROSSING: Publishes Fourth Quarter & Year-End 2003 Results GMAC COMM'L: S&P Cuts Series 2001-C1 Notes to Low-B & Junk Levels GMAC COMM'L: Fitch Takes Rating Actions on Series 2000-C2 Notes GOLDMAN SACHS: S&P Affirms Rating on Class B Notes at B- GRANDE COMMS: S&P Rates $136 Million Senior Secured Notes at CCC+ GREY WOLF: S&P Affirms BB- Rating & Revises Outlook to Negative HEALTHSOUTH: Names Diane Munson as Outpatient Rehab Unit President HOST MARRIOTT: S&P Assigns Low-B Rating to Proposed Sr. Debentures HUGHES ELEC.: GM Investment Funds Panel Reports 19.7% Equity Stake INTEGRATED HEALTH: IHS Liquidating Avoids Wind-Up Obligations J.L. FRENCH: December 2003 Stockholders' Deficit Widens to $418MM KANSAS CITY: S&P Assigns BB+ Rating to $250 Mill. Credit Facility KENNEDY MANUFACTURING: Retains Taft Stettinius as Attorneys KMART CORP: Asks Court to Disallow Amended and Superseded Claims LES BOUTIQUES: Closes Sale of Victoire & Moments Lingerie Shops LIVING WORD FAITH: Case Summary & 2 Largest Unsecured Creditors LTV: Administrative Panel Gets Okay to Tap Deloitte's Services LUCENT TECH: S&P Raises Corporate Credit Rating to B After Review MEDICAL PROFESSIONAL: S&P Drops Counterparty Credit Rating to BBpi MERIT SECURITIES: Fitch Ratchets Class B-1 Notes Rating to BB- METALS USA: Brandywine Asset Management Has 5.83% Equity Stake MIRANT CORP: Brings-In PricewaterhouseCoopers as Audit Consultant MITEC: Underwriters Exercise Option to Buy $2.1 Mil. in Stock NATIONAL BENEVOLENT: Gets Nod to Tap Weil Gotshal as Attorney NATIONAL ENERGY: Debtor Restates Operating Revenues and Expenses NET PERCEPTIONS: Board Rejects Revised Obsidian Exchange Offer NEW CONSTRUCTION: Employing Gary & Goodman as Bankruptcy Counsel NORSKE SKOG: Caps Price on $250 Million Senior Debt Offering OAKWOOD HOMES: Creditors' Ballots are Due by 4:00 p.m. Today OMEGA HEALTHCARE: Re-Leases 5 Nursing Facilities & Sells Iowa Unit OWENS: Committee Retains Dehay & Elliston as Asbestos Counsel PARMALAT GROUP: Gets Go-Signal to Honor U.S. Milk Supplier Claims PARMALAT GROUP: Obtains Court Nod to Pay U.S. Employee Obligations PEABODY ENERGY: Launches Common Stock & Senior Debt Offering PETRACOM MEDIA: Case Summary & 48 Largest Unsecured Creditors PHARMA SERVICES: S&P Rates $125 Million Senior Discount Notes at B PHELPS DODGE: Completes Tender Offers & $150MM Senior Debt Issue PLANVISTA CORP: NCR Pension Trust Owns 5.67% Equity Stake REEVES COUNTY: Fitch Places Junk Certificates Rating on Watch Pos. ROBERTS DEVELOPMENT: Case Summary & 6 Largest Unsecured Creditors ROYAL OLYMPIC: Olympia Explorer & Olympia Voyager to Be Auctioned SEMCO ENERGY: Names George Schreiber, Jr. as President and CEO SLMSOFT INC: Infocorp Completes Conversion of Debt to Equity SMTC CORP: December Balance Sheet Upside Down by $21.3 Million SMTC CORPORATION: Appoints J.E. Caldwell as New Board Chairman SPEIZMAN: Lonati & SouthTrust Agree to Forbear Until May 7, 2004 SPHERION CORP: Looks for New CEO as Cinda A. Hallman Retires SPIEGEL GROUP: Court Clears New Donnelley Service Agreement SOUTHWEST RECREATIONAL: Gets Nod to Tap Trumbull as Claims Agent SUN HEALTHCARE: Auditors Remove Going Concern Qualification TECH DATA: Fourth-Quarter 2004 Results Swing to Positive Zone TOYS R US: S&P Lowers Debt Ratings to BB Following Interim Review TRINITY INDUSTRIES: Completes Debt Financing Transactions UAL CORP: Flight Attendants Staging Protests in 3 Airports Today UNION ACCEPTANCE: Says $65MM Confirmed Debt Not Likely to be Paid UNITED AIRLINES: Has Until April 7, 2004 to File Chapter 11 Plan UNIVERSAL HEALTH: Ranks No. 5 in Zacks' List of Stocks to Sell Now US AIRWAYS: Resolves Connecticut Revenue Department's Tax Claims V-NET BEVERAGE: Bankruptcy Case Dismissed & Retires 240 Mil Shares WADDINGTON NORTH AMERICA: S&P Assigns B Corporate Credit Rating WARNACO GROUP: Names Robert Mazzoli as CK Chief Creative Officer WEIRTON STEEL: Pushing for Approval of $6.3 Million Break-Up Fee * Penn. Gov. Rendell Urges Senate to Reinstate Waste Clean Up Fund * London Meeting to Draw Insurance Executives from 50 Countries * BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles and Other Disasters ********* 3D SYSTEMS: Remedies Covenant Defaults Under Wells Fargo Agreement ------------------------------------------------------------------ 3D Systems Corporation (Nasdaq:TDSC) announced that its revenues grew 10% to $35.2 million in the fourth quarter of 2003 compared to the 2002 period, reversing five previous quarters of year-over- year revenue declines. Product revenues were essentially flat in the fourth quarter of 2003 while service revenues increased by $2.9 million, or 36.5%. Gross profit as a percentage of revenue rose modestly to 42.7% in the fourth quarter of 2003 from 42.5% in the prior-year period. Loss from operations was $4.0 million in the fourth quarter of 2003 compared to $2.7 million in the prior-year period. Loss from operations in the 2003 period included $5.8 million of costs arising from the following items: -- Cost of sales included $0.3 million attributable to a change in accounting principle related to the discontinuance of the unit- of-production method of amortization for one of the Company's patent licenses. -- Selling, general and administrative expenses included $4.7 million of additional legal fees arising from the Company's change in accounting principle to expense rather than capitalize legal fees incurred in defense of its patent rights. -- Selling, general and administrative expenses also included $0.8 million of expenses arising from the write-down of some of the intangible assets of OptoForm Sarl, which the Company had acquired in 2001. Net loss available to common shareholders for the quarter was $12 million, or $0.93 per fully diluted share, compared with $15.7 million, or $1.24 per fully diluted share, in the prior-year period. In addition to the costs mentioned above, the Company's net loss included a $7 million, net of taxes, non-cash charge arising from the cumulative effect of the two changes in accounting principles discussed above. Net loss available to common shareholders before the cumulative effect of the changes in accounting principles discussed above was $4.6 million or $0.38 per fully diluted share. Operating results improved before giving effect to the items discussed above. Consolidated revenues for the full year of 2003 were $110 million, a decrease of 5.1% compared to $116 million in 2002. The decrease in revenue in 2003 was primarily the result of an $8.3 million decrease in systems revenue, partially offset by a $2.0 million increase in service revenue and a $0.4 million increase in materials revenue. Revenues in 2003 included a favorable effect of $3.4 million in foreign currency translation. Gross profit as a percentage of revenue was 39.2% in 2003 versus 40.2% in 2002. Operating loss for 2003 declined 30.1% to $15.0 million, including the $5.8 million of costs discussed above. Net loss available to common shareholders was $26.9 million or $2.10 per fully diluted share compared to $14.9 million or $1.16 per fully diluted share in the prior year. Net loss available to common shareholders before the cumulative effect of the changes in accounting principles discussed above was $19.0 million or $1.55 per fully diluted share. "In the fourth quarter of 2003, 3D Systems delivered solid operating improvements," said Abe Reichental, 3D Systems' Chief Executive Officer. "Among these were a return to sales growth, positive operating cash flow and a significantly strengthened balance sheet, which included a $24.0 million cash balance at year-end. Additionally, during the past several months, we have settled a number of lawsuits thus enabling us to focus more closely on our business. "Going into the new year, we are positioning the Company for long- term sustained performance with renewed emphasis on improving our customers' bottom lines," continued Reichental. "To ensure that we execute against our strategic priorities, we have realigned and strengthened our management team and launched numerous growth initiatives and cost-reduction programs. During the fourth quarter, we successfully introduced the InVisionT 3-D printer, our new economically priced third-generation MJM printer for concept modeling and design communication applications. Net sales of the InVision 3-D printer as well as several other new products introduced in the fourth quarter were not material to our operating results. "In connection with our year-end audit, we decided to change two accounting principles to more preferable methods, and recorded an asset impairment of certain intangibles related to an earlier acquisition. We believe we are building momentum on several fronts for an improved 2004," concluded Reichental. Fourth Quarter business highlights: -- As part of the Company's strategic initiatives, four new products were introduced in the latter part of 2003: Amethyst SL material, primarily for jewelry manufacturers for direct investment casting in precious metals; the InVision 3-D printer, the Company's new economically priced third-generation MJM printer using hot-melt ink-jet technology; LaserForm A6 material for producing steel-tool products; and hardware and software upgrades that enable customers of our Vanguard systems to increase the output of their systems. Net sales of these new products were not material to the Company's results of operations in the year ended December 31, 2003. The Company also announced the planned introduction of its Bluestone SL engineered composite material for exceptional stiffness and strength. Plans to introduce other products under development have been accelerated. -- Several outstanding lawsuits have been settled. Most notably, the litigation between the Company and EOS GmbH was settled early in February 2004. Under the terms of that settlement, the Company and EOS waived all claims for damages with respect to their pending disputes and litigation and licensed various patents to each other. As part of that settlement, EOS is to pay the Company certain royalties for its patent license, and the Company expects to begin selling under its own brand certain laser sintering equipment and related products under an OEM supply agreement with EOS. In addition, the Company settled its lawsuits with Regent Pacific Management Corporation and E. James Selzer, former 3D Systems' Chief Financial Officer. -- The company was recently able to remedy certain covenant defaults under an agreement with Wells Fargo Bank relating to a letter of credit that supports the industrial development bonds on our Grand Junction Colorado facility. On March 4, 2004, we entered into an amendment to the reimbursement agreement relating to the letter of credit with Wells Fargo which states that the company is no longer in default of its financial covenants and is no longer required to replace the Wells Fargo letter of credit or to retire the $1.2 million of the industrial development bonds. As part of this agreement the Company and Wells Fargo agreed to amend certain criteria used to measure compliance with these covenants. 3D Systems' Complete Suite Of Customer Solutions Includes: -- Multi-Jet Modeling technology ("MJM") or 3-D printing uses hot- melt jetting technology to print three-dimensional physical parts by accumulating proprietary solid imaging materials ("SIMs"), in successive layers, dispensed by a print head comprising large numbers of jets oriented in linear arrays. MJM technology is the basis of our affordable three-dimensional solutions for printing any three-dimensional part from digital data. -- Stereolithography or SLA systems use an ultraviolet laser to convert liquid photosensitive resins into solid cross-sections, layer by layer, until the desired objects are complete. Our SLA systems are capable of making multiple parts at the same time and are designed to produce prototype or end use parts that have a wide range of sizes and shapes. An SLA system can make scale models in a single build session or, alternatively, are able to produce full-scale portions of large objects in successive build sessions, which are then joined together. -- Selective Laser Sintering or SLS systems use heat from a carbon dioxide laser to melt and fuse, or sinter, powdered materials into solid cross-sections, layer-by-layer, until the desired parts are complete. SLS systems can create parts from a variety of plastic and metal powders and are capable of processing multiple parts in a single build session. While the maximum part size from a single build is currently limited by the size of the equipment models, customers routinely create larger parts by joining together multiple sections. -- Materials. As part of our integrated systems approach to our customers, we blend, market and distribute consumable material products under a variety of brand names that we sell for use in all of our solid imaging systems. These products include proprietary resin materials used in our stereolithography and multi-jet modeling product line, engineered wax-based plastics used in our multi-jet modeling line, and specialty powders used in our selective laser sintering product line. The family of engineered products are designed for use with our systems and processes to produce high-quality models, prototypes and parts. We market our stereolithography products under the Accura brand, our selective laser sintering products under the DuraForm, LaserForm and CastForm brands, and our multi-jet modeling products under the ThermoJet and VisiJet brands. -- Software. To deliver total system integration, we provide to our customers part-preparation software for personal computers and engineering workstations. This unique package is designed to enhance the interface between digital data and our solid imaging systems. Digital data, such as solid CAD/CAM, is converted within the software utility. Depending on the specific software package, the object can be viewed, rotated, scaled and model structures added. Our proprietary software package generates the information to be used by the SLS system, SLA system or MJM system to create the solid images. In addition, we team up with other software companies, where appropriate, to develop complementary software for our systems. -- Services. We provide on a global basis a comprehensive suite of services and field support to our customers ranging from applications development to installation, warranty and maintenance services. Broad applications and End-Uses -- Concept modeling, three-dimensional printing: Solid imaging solutions are used for concept-modeling and three-dimensional printing applications, to produce three-dimensional shapes, primarily for visualizing and communicating mechanical design applications as well as for other applications including supply- chain management, architecture, art, surgical medicine, marketing and entertainment. -- Rapid prototyping: Solid imaging solutions are used for rapid prototyping applications, in among other ways, to generate product concept models, functional prototypes and master-casting and tooling patterns that are often used as an efficient, cost- effective means of evaluating product designs. -- Instant manufacturing: Solid imaging solutions are used for instant manufacturing applications to manufacture end-use parts. Directly from a digital image, our instant manufacturing customers produce end-use parts without the need for expensive tooling or molds and without lengthy set-ups resulting in significant flexibility and mass customization capabilities. About 3D Systems (Nasdaq:TDSC) Founded in 1986, 3D Systems, the solid imaging company(SM), provides solid imaging products and systems solutions that reduce the time and cost of designing products and facilitate direct and indirect manufacturing. Its systems utilize patented proprietary technologies to create physical objects from digital input that can be used in design communication, prototyping, and as functional end-use parts. ADELPHIA BUSINESS: Wants Court Nod for ACOM Settlement Pacts ------------------------------------------------------------ The Adelphia Business Debtors and the Adelphia Communications Debtors ask the Court to approve two settlement agreements, which will resolve all but one of the outstanding issues between their estates, eliminate the remaining obstacle to the ABIZ Debtors' successful emergence from Chapter 11, and help clear the path for the ACOM Debtors' own exit from Chapter 11, unhindered by costly and protracted litigation with the ABIZ Debtors' estates, the first phase of which has already commenced. The two settlement agreements consist of: (1) a Master Reciprocal and Operational Settlement Agreement and its accompanying annex agreements entered into on December 3, 2003; and (2) a Global Settlement Agreement and its accompanying annex agreements entered into on February 21, 2004. Together, these two agreements effect both: (a) the operational separation of various shared assets and services between the parties via the Master Settlement Agreement; and (b) a global settlement of claims of the ABIZ Debtors against the ACOM Debtors, and claims of the ACOM Debtors against the ABIZ Debtors via the Global Settlement Agreement. As of January 11, 2002, Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher LLP, in New York, relates that ACOM owned about 78.4% of the outstanding stock of ABIZ and held about 96% of the total voting power in ABIZ. On January 11, 2002, ACOM distributed to the holders of its Class A and Class B common stock, in the form of a dividend, all of the shares of ABIZ common stock owned by ACOM -- the Spin-Off. Prior to the Spin-Off, ABIZ and ACOM shared various assets and services and engaged in mutually beneficial projects, including the construction of fiber optic cable networks and facilities, necessary for the construction and operation of a telecommunications network and a cable network. At that time, members of the Rigas family served as directors and officers of both entities. Because of the absence of sufficient legal documentation delineating each entity's ownership, or other rights and obligations with regard to certain of the assets and services, substantial disputes exist as to the ownership of various assets and the liability, as between the ABIZ Debtors and the ACOM Debtors, for the obligations arising from the use of these shared assets and services. At the time of the Spin-Off, Mr. Shalhoub says that the contractual arrangements necessary to facilitate the separation of the various assets, interests, liabilities and contractual rights and obligations of each party were not completely identified or implemented. To further complicate matters, certain contractual commitments for one or more ABIZ entities provide benefits for both ABIZ entities and ACOM entities or solely ACOM entities. Similarly, certain contractual commitments for one or more ACOM entities provide benefits for both ACOM entities and ABIZ entities or solely ABIZ entities. As a consequence, the ABIZ Debtors and ACOM Debtors expended significant time and effort delineating which assets and liabilities reside with the ABIZ Debtors or ACOM Debtors with respect to the shared assets and services. In addition to the lack of complete clarity at the time of the Spin-Off, Mr. Shalhoub tells Judge Gerber, the joint control of the ABIZ Debtors and ACOM Debtors by the Rigas family gave rise to numerous claims between and among the estates. The nature of these claims is well-known to the Court, and includes claims by the ABIZ Debtors to: (1) "pierce the corporate veil" of ACOM, which the ABIZ Debtors contend could result in the creditors of the ABIZ Debtors -- holding more than $1,000,000,000 in claims -- effectively having direct claims against the ACOM Debtors and their assets; (2) recover alleged preferences and fraudulent conveyances from the ACOM Debtors in excess of $200,000,000; and (3) recover damages for breach of contract from the ACOM Debtors -- notably, due to ACOM's alleged failure to satisfy its obligations under the DIP postpetition loan it made to ABIZ -- and other tortious conduct allegedly committed by ACOM. Similarly, ACOM asserted substantial claims against the ABIZ Debtors sounding in both breach of contract and tort, which claims aggregate more than $770,000,000 in prepetition claims and at least $71,000,000 of asserted postpetition claims. While each of the ABIZ Debtors and the ACOM Debtors believe that they possess meritorious defenses to the various claims, it is self- evident that an adverse litigation result as to any one of the many potential causes of action could have a substantial negative effect on the unsuccessful party. The sheer enormity of ACOM's alleged administrative claim placed the confirmation of ABIZ's plan of reorganization in jeopardy. ABIZ did not have a spare $71,000,000 and could neither pay ACOM's asserted postpetition claim nor any amount approaching the claim nor reserve for it pending the outcome of the litigation. Thus, the ABIZ Debtors, together with their Official Committee of Unsecured Creditors and the ad hoc committee of holders of 12 1/4% notes issued by ABIZ, jointly asked the Court to estimate the asserted administrative claim for feasibility purposes pursuant to Section 1129(a)(11) of the Bankruptcy Code. Following a two-day evidentiary hearing conducted on December 8 and December 9, 2003, the Court: (1) concluded that the ABIZ Debtors' plan was feasible; and (2) estimated ACOM's administrative claim at $2,740,000 for feasibility purposes only. The Court also found that ACOM was entitled to at least one, if not two, additional plenary hearings to determine with finality but subject to appeal the actual amount of its administrative claim for distribution purposes. The hearing with respect to ACOM's asserted administrative claims has been scheduled to commence within the month. If ACOM's administrative claim is allowed in the full amount asserted or in any amount approaching the asserted amount, the ABIZ Debtors' confirmed Plan cannot go effective without ACOM's consent. Mr. Shalhoub reports that in anticipation of the plenary hearing to resolve ACOM's administrative claim, ABIZ served on ACOM a 38- part request for documents, and ACOM served on ABIZ an 87-part request. Anticipated compliance with these demands would likely involve the production of documents that would fill several large rooms and electronic files that would fill the hard drives of several computers. Full-tilt discovery of this kind undoubtedly will place a heavy burden on both parties, and would likely require several weeks of Herculean efforts by the parties to amass, followed by several more weeks for the parties to digest the produced documents. If the litigation were to proceed, the parties expect to depose dozens of fact witnesses to prepare for the plenary hearing, including witnesses likely to be called to testify at the trial of the Rigas family before the United States District Court of the Southern District of New York, rendering them virtually unavailable for the immediate future. Simply stated, the scheduled plenary hearing on the ACOM administrative claim would be both complex and burdensome, with an inherently uncertain outcome. It is single-handedly delaying the ABIZ Debtors' successful emergence from Chapter 11 and clouding ACOM's own objectives of resolving a significant claims litigation. Structure of the Master Settlement Agreement Following months of discussions and negotiations, on November 13, 2003, the Debtors reached an agreement in principle on the terms of their operational settlement. The definitive documentation comprising the Master Settlement Agreement and embodying the settlement was executed on December 3, 2003. Mr. Shalhoub explains that the assets that are the subject of the Master Settlement Agreement are predominantly long-haul fibers and related components -- including the fiber network, conduit, overlash rights, land usage, collocation space, power and network maintenance services -- of regional systems that provide service between local systems, and in some cases, local network systems that are integrated into existing network assets. The Debtors' intent in entering into the Master Settlement Agreement is to memorialize and validate the ownership of and obligations related to these assets. The Master Settlement Agreement is divided into two parts: -- the MSA, which provides the general terms and conditions for the operational separation agreement; and -- six accompanying MSA Annexes, which lay out the specifics of the overall agreement. The salient provisions of the Master Settlement Agreement are: A. Consideration The consideration for each party's entry into the MSA will be the mutual benefit to the parties derived from the Asset Reconciliation pursuant to the Asset Reconciliation Agreement, the reciprocal exchange of the Acquired Assets, the reciprocal assignment and assumption of the Assumed Contracts and the reciprocal assumption of the Assumed Liabilities pursuant to the Conveyance Agreement, and the concurrent execution of the IRU Agreement, Maintenance Agreement, Sheathing/Overlash Agreement, and Collocation Agreement. B. Acquired Assets and Assumed Contracts ABIZ will pay any cure costs to be listed on Schedule 2.4 to Annex II -- the Reciprocal Conveyance Agreement -- on the contracts that ABIZ is assuming and assigning to ACOM, and ACOM will in turn pay any cure costs to be listed on Schedule 3.4 to Annex II for any contracts that ACOM will be assuming and assigning to ABIZ. C. Payment of Transfer Taxes and Tax Filings Each party requests that the Bankruptcy Court exempt the transactions contemplated in the MSA and the Annexes from payment of Transfer Taxes. If the Bankruptcy Court denies the request, all transfer taxes arising out of the transfer of assets contemplated under the MSA and Annexes will be equally borne by ACOM and ABIZ. D. Disclosure Exhibits and Schedules ACOM and ABIZ acknowledge that the Exhibits to the MSA and the Schedules to the MSA Annexes are incomplete and that the parties did not complete their due diligence in connection therewith. The parties will in good faith use their commercially reasonable best efforts to complete their due diligence and the preparation of the Exhibits to the MSA and the Schedules to the MSA Annexes in a timely fashion. E. Closing Deliveries At the closing, ABIZ will deliver to ACOM and ACOM will deliver to ABIZ certain documents including, but not limited to, the Annexes. F. Dispute Resolutions/Arbitration Any dispute, if not settled by the parties within 10 days from the date the dispute or claim arises, will be considered a dispute and either party may elect, by written notice to the other party, to have the Dispute referred to a senior executive of each ACOM and ABIZ. If the Dispute is not settled by the executives within 20 days, then either party may, by written notice to the other party, demand binding arbitration in accordance with Section 9.10 of the MSA. Annexes to the Master Settlement Agreement While the Master Settlement Agreement provides the basic framework for the asset separation, the six accompanying MSA Annexes set forth the manner in which each asset type will be separated or validated: (1) MSA Annex I - the Reciprocal Asset Reconciliation Agreement provides for the reconciliation and validation of the ownership of various assets, including third party contracts, between ACOM and ABIZ. MSA Annex I will be fully performed upon the Closing Date and there will be no ongoing obligations of either party upon Closing as it relates to MSA Annex I; (2) MSA Annex II - the Reciprocal Conveyance Agreement provides the terms and conditions surrounding the exchange of certain fiber assets between ABIZ and ACOM. As part of the overall asset validation and separation effort, the parties are conveying, assigning and transferring certain assets to each other in furtherance of the overall settlement; (3) MSA Annex III - the Reciprocal IRU Agreement grants a longterm IRU in certain fiber assets. The IRU generally covers: (a) situations in which one party has been using a fiber asset with no IRU in place; and (b) situations in which a party is conveying an asset pursuant to MSA Annex II and receiving an IRU back for some portion of the conveyed fibers. There are no ongoing fees paid by or to either party for the actual use of the assets covered by MSA Annex III. Rather, this annex memorializes each party's right to continue to use certain fiber assets by way of an IRU; (4) MSA Annex IV - the Reciprocal Sheathing and Overlash Agreement grants a right for either party to overlash its fiber to the suspension strand owned by the other party. In many cases, the fibers owned both by ACOM and ABIZ are either contained in the same cable sheath, or one party's fiber optic cable is overlashed to a suspension strand owned by the other party. MSA Annex IV memorializes each party's right to share a common sheath or to be overlashed to the strand of the other party. There are no payments associated with the overlash grant contemplated in MSA Annex IV; (5) MSA Annex V - the Reciprocal Maintenance Agreement clarifies whether ACOM or ABIZ will perform maintenance for a particular fiber route granted by way of an IRU. MSA Annex V addresses, for each fiber route, whom the responsible party is for routine fiber maintenance, fiber cuts, and fiber relocations, among other things. There will be ongoing costs associated with these activities; and (6) MSA Annex VI - the Reciprocal Collocation Agreement will memorialize the rights of ABIZ and ACOM to collocate its equipment in certain sites where one of the parties has cable or telecommunications equipment collocated in the other party's owned or leased site. The Global Settlement Agreement Following the execution of the Master Settlement Agreement, and while simultaneously preparing for the plenary hearing to resolve ACOM's asserted administrative claim, the parties negotiated a comprehensive Global Settlement Agreement, which resolves nearly all outstanding issues remaining between the parties. Similar to the Master Settlement Agreement, the Global Settlement Agreement is also divided into two parts: -- the GSA, which provides the general terms and conditions for the global settlement; and -- eleven accompanying GSA Annexes, which provide the specifics for the overall agreement. The salient provisions of the Global Settlement Agreement are: A. Cash Consideration ACOM and its affiliates will pay to ABIZ $60,000,000, plus an additional cash payment of up to $2,500,000 with respect to outstanding undisputed invoices for telecommunication services provided. B. Business Commitment Pursuant to the Commercial Agreement -- GSA Annex II -- ACOM will purchase various services from ABIZ in an aggregate amount of $7,800,000 per year for a five-year period. C. Third Party Agreements The parties agreed to resolve pending disputes between the estates regarding responsibility for certain rejection and other claims, and cure amounts and administrative costs, associated largely with certain executory contracts and unexpired leases, as identified in the eight schedules. D. IP Transport Pursuant to the IP Transport Agreement -- GSA Annex III -- ACOM agreed to provide ABIZ with one gigabit per second of Internet protocol transport capacity per month for a five-year period. E. IT Licenses Pursuant to the IT License Transfer Agreement -- GSA Annex IV -- ACOM agreed to transfer to ABIZ, and ABIZ agreed to transfer to ACOM, free of charge, and free of all claims, liens and encumbrances, licenses to use certain information technology software and related equipment. F. MSA Amendment Pursuant to the MSA Amendment -- GSA Annex V -- the MSA will be amended to eliminate certain indemnification provisions. G. Property Transfer ACOM agreed to transfer to ABIZ title to a certain parking garage located adjacent to ABIZ's headquarters in Coudersport, Pennsylvania and title to 47 vehicles used by ABIZ and its employees. By separate agreement, ACOM will transfer legal title to ABIZ the real property where ABIZ's network operation control center is located, also located at ABIZ's Coudersport headquarters, and ABIZ will transfer legal title to ACOM to certain real properties located in the County of Arapahoe, State of Colorado. H. CLEC Market Assets ACOM will transfer to ABIZ free and clear of all liens, claims and encumbrances the economic benefits and burdens of the CLEC Market Assets -- comprised of certain telecommunication assets in certain markets, including Albany, New York; Connecticut; Rhode Island; New Hampshire; and Maine; and an indefeasible right to use certain telecommunication assets in certain markets, including Charlottesville, Virginia; Buffalo, New York; Richmond, Virginia; and the Shenandoah Valley -- pending receipt of required regulatory approvals for the transfer of licenses, franchises and permits necessary for the ownership and operation thereof. I. Virginia Fibers ACOM agreed to transfer to ABIZ title to four fibers located in the western half of a ring of fiber located in Virginia. J. Mutual Release Pursuant to the Mutual Release Agreement -- GSA Annex I -- ACOM and its affiliates agreed to a release of ABIZ and its affiliates for any and all outstanding claims, including, but not limited to, the filed prepetition claim for $770,931,458, as well as the filed administrative claim in an amount no less than $71,000,000. ABIZ and its affiliates agreed to release ACOM and its affiliates for any and all outstanding claims, including claims for "piercing the corporate veil," fraudulent conveyance and preference. Specifically exempted from the mutual release is the pending litigation regarding the appropriate allocation of existing directors and officers insurance. The Debtors, after months of protracted negotiations, believe the terms of the Master Settlement Agreement are fair and equitable, and do not fall below the lowest point in the range of reasonableness. The ABIZ Debtors discussed the terms of the proposed settlement with their Creditors' Committee and Secured Noteholders Committee, which indicated that they have no objection to the proposed operational separation settlement with ACOM. Similarly, the ACOM Debtors discussed the terms of the proposed settlement with their Creditors Committee, which indicated that it fully supports the proposed operational separation settlement. In addition, the ACOM Debtors discussed the terms of the proposed operational separation settlement with their official equity committee, which indicated that it has no objection to the proposed operational separation settlement with ABIZ. The transfer of property under the Master Settlement Agreement and the Global Settlement Agreement is necessary to the consummation of a Chapter 11 plan in both the ABIZ and ACOM cases and, therefore, should be deemed to be "under a plan." Section 12.9 of the ABIZ Debtors' confirmed joint plan of reorganization already provides for an exemption from certain transfer taxes, like those contemplated in these settlements, pursuant to Section 1146(c) of the Bankruptcy Code. Accordingly, the Debtors submit that the asset transfers contemplated by the Master Settlement Agreement and the Global Settlement Agreement fall within the scope of the exemption provided for under Section 1146(c) of the Bankruptcy Code. Assumption and Assignment of Contracts Pursuant to Section 365 of the Bankruptcy Code, Section 2.5 of the Global Settlement Agreement and certain MSA Annexes, the ABIZ Debtors seek the Court's authority to assume 144 executory contracts or unexpired leases and to assume and assign four executory contracts and unexpired leases to ACOM. On the other hand, the ACOM Debtors also seek to assume and assign 42 executory contracts to ABIZ. Rejection of Contracts and Leases The Debtors determined that 242 executory contracts and leases that are no longer necessary to the operation of their businesses and have become burdensome to their estates. Pursuant to the GSA, the ABIZ Debtors agreed to be responsible for the payment of any allowed claims resulting from the rejections. Headquartered in Coudersport, Pennsylvania, Adelphia Business Solutions, Inc. -- http://www.adelphia-abs.com/-- is a leading provider of facilities-based integrated communications services to businesses, governmental customers, educational end users and other communications services providers throughout the United States. The Company filed for Chapter 11 protection on March March 27, 2002 (Bankr. S.D.N.Y. Case No. 02-11389). Harvey R. Miller, Esq., Judy G.Z. Liu, Esq., Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $ 2,126,334,000 in assets and $1,654,343,000 in debts. (Adelphia Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: US Trustee Amends Unsecured Creditors' Committee ---------------------------------------------------------------- Deirdre A. Martini, United States Trustee for Region 2, amends the membership of the Official Committee of Unsecured Creditors of Adelphia Communications, to reflect the resignations of Franklin Advisers, Inc., Fidelity Management & Research Company and The Blackstone Group, L.P. The Committee is now composed of: 1. Appaloosa Management, LP 26 Main Street, Chatham, NJ 07928 Attn: James Bolin Phone: (973) 701-7000 Fax: (973) 701-7309 Counsel: Akin Gump Strauss Hauer & Feld, L.L.P. 590 Madison Avenue, New York, New York 10022 Attn: Daniel Golden, Esq. Phone: (212) 872-8010 2. W. R. Huff Asset Management Co., L.L.C. 67 Park Place, Morristown, NJ 07960 Attn: Edwin M. Banks, Senior Portfolio Manager Phone: (973) 984-1233 Fax: (973) 984-5818 Counsel: Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway, New York, New York 10019-6799 Phone: (212) 506-1700 Fax: (212) 506-1800 Klee Tuchin & Bogdanoff & Stern LLP 1880 Century Park East, Los Angeles, CA 90067-1698 Phone: (310) 407-4000 Fax: (310) 407-9090 3. MacKay Shields LLC 9 West 57TH Street, New York, New York 10019 Attn: Ben Renshaw, Associate Director Phone: (212) 230-3836 Fax: (212) 754-9187 4. Law Debenture Trust Company of New York 767 Third Avenue, 31st Floor, New York, New York 10017 Attn: Daniel R. Fisher, Senior Vice President Phone: (212) 750-6474 Fax: (212) 750-1361 Counsel: Seward & Kissel LLP One Battery Park Plaza New York, New York 10004 Attn: Ronald L. Cohen, Esq. Phone: (212) 575-1515 5. U.S. Bank National Association, as Indenture Trustee 1420 Fifth Avenue, 7th Floor, Seattle, WA 98101 Attn: Diana Jacobs, Vice President Phone: (206) 344-4680 Fax: (206) 344-4632 Counsel: Sheppard, Mullin, Richter & Hampton LLP 333 South Hope Street, Los Angeles, CA 90071-1448 Attn: David J. McCarty, Esq. T. William Opdyke, Esq. Phone: (213) 617-1780 Fax: (213) 620-1398 6. Home Box Office 1100 Avenue of the Americas, New York, New York 10036 Attn: Stephen L. Sapienza Phone: (212) 512-1680 Fax: (212) 512-1986 Counsel: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas, New York 10019 Attn: Steve Shimshak, Esq. Phone: (212) 373-3133 Fax: (212) 373-2136 7. Viacom 1515 Broadway, New York, New York 10036 Attn: J. Kenneth Hill, Vice President, Ass't. Treasurer Phone: (212) 258-6000 Counsel: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas, New York 10019 Attn: Brendan D. O'Neill, Esq. Phone: (212) 373-3125 8. Sierra Liquidity Fund, LLC 2699 White Road, Suite 255 Irvine, CA 92614 Attn: Jim Riley, Esq. Phone: (949) 660-1144, ext. 16 Fax: (949) 660-0632 (Adelphia Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICA WEST: Files Shelf Registration Statement with SEC --------------------------------------------------------- America West Holdings Corporation (NYSE: AWA), the parent company of America West Airlines, Inc., announced that the Company has filed a Form S-3 registration statement with the Securities and Exchange Commission. The shelf registration allows the Company to issue various types of securities, including Holdings' debt securities, preferred stock, common stock and securities warrants, either separately or in units, and Airlines' debt securities, from time to time in one or more offerings up to a total dollar amount of $500 million. Once declared effective by the SEC, the shelf registration statement would enable the Company to raise funds from the offering of any individual security covered by the shelf registration statement as well as any combination thereof, subject to market conditions and the Company's capital needs. The registration statement on Form S-3 relating to these securities has been filed with the SEC, but is not yet effective. America West Holdings Corporation is an aviation and travel services company. Wholly owned subsidiary America West Airlines, Inc. is a low-fare airline and its 13,000 employees serve nearly 55,000 customers a day in 93 destinations in the U.S., Canada, Mexico and Costa Rica. * * * As previously reported, Fitch Ratings initiated coverage of America West Airlines, Inc., a subsidiary of America West Holdings Corp., and assigned a rating of 'CCC' to the company's senior unsecured debt. The Rating Outlook for America West is Stable. ANC RENTAL: Deutsche Bank Demands Payment of $5.25M Admin. Claim ---------------------------------------------------------------- Deutsche Bank Securities, Inc. filed a $5,250,000 administrative claim against the ANC Rental Corporation Debtors pursuant to various Court orders that approved, inter alia, a series of securitization transactions. In April 2002, the Court approved a Letter Agreement between ANC Rental Corporation and Deutsche Bank, which enabled ANC to obtain vital funding from Deutsche Bank through the securitization transactions proposed, and benefit from Deutsche Bank's expertise in structuring and placing rental car fleet securitization. The Letter Agreement provided that in the event "the Company elects to terminate [the Letter] Agreement for any reason, then the Company shall promptly pay DB .50% of the MTN Notional Amount." By a May 7, 2003 Order, the Court authorized, inter alia, an increase in the medium term note notional amount. The May 2003 Order provides, in part, that the MTN Notional Amount is $1,050,000. Pursuant to the Debtors' Joint Chapter 11 Liquidating Plan, the Debtors are terminating all business operations and transferring their assets to a liquidating trust. Deutsche Bank asserts that this event constitutes a termination of the Letter Agreement by the Debtors. This termination triggers the obligation to pay the Termination Fee amounting to $5,250,000. In the alternative, that action constitutes a breach of contract entitling Deutsche Bank to damages in the same amount as the Termination Fee. Since the Letter Agreement was a postpetition contract, any amounts due under it or any damages resulting from a breach of contract or rejection by the Debtors results in an administrative claim in accordance with Section 503(b)(1) of the Bankruptcy Code. Based on the provisions described in the Letter Agreement, the Debtors are obligated to pay Deutsche Bank the Termination Fee as a postpetition expense of the Debtors and their estates. The Termination Fee, expressed as 0.50% of the MTN Notional Amount, equals $5,250,000. Debtors and Committee Object On October 9, 2003, the Court heard arguments on -- and ultimately denied -- Deutsche Bank Securities, Inc.'s request for allowance and payment of administrative claim. Less than three months later, Deutsche Bank returns to the Court with the same request. Bonnie Glantz Fatell, Esq., at Blank Rome LLP, in Wilmington, Delaware, asserts that contrary to Deutsche Bank's hollow assertions, the DB Claim should be disallowed in its entirety, because: (1) as the Court previously recognized at the initial hearing, the Termination Fee is in effect an unenforceable penalty; (2) as the Court previously found, ANC did not terminate the Letter Agreement, and indeed, the Plan -- when confirmed -- will not affect a termination of the Letter Agreement; and (3) even if ANC is deemed to elect to terminate the Letter Agreement, the Debtors dispute the calculation of damages due and owing as a Termination Fee. Lehman Also Wants the Claim Expunged Lehman Brothers, Inc. and Lehman Commercial Paper, Inc. join the Debtors and the Committee in their objection to Deutsche Bank's claim. William P. Bowden, Esq., at Ashby & Geddes, in Wilmington, Delaware, complains that Deutsche Bank failed to demonstrate that the Letter Agreement has actually been terminated. The Letter Agreement does not define "termination" to encompass the type of constructive termination that Deutsche Bank implies has occurred by virtue of the Debtors' inaction. Neither the Debtors' failure to engage in a financing pursuant to the Letter Agreement, the filing of their liquidating plan or the consummation of the Sale constitutes a "termination" of the Letter Agreement in accordance with the plain meaning of the term. The Termination Fee will only become due and payable if the Debtors elected to enter into a financing arrangement with another financial institution contrary to the Letter Agreement's terms. Mr. Bowden argues that Deutsche Bank's efforts to characterize the Termination Fee as "in essence a commitment, which was back ended in the contract" are unpersuasive and must fail, given the plain language of the Letter Agreement. Nothing in the Letter Agreement suggests that the Termination Fee was or could be earned at any time prior to the actual termination of the Letter Agreement. Even if this is what Deutsche Bank intended, this was actually not the Debtors' intent, nor was any such intent disclosed to or approved by the Court. In fact, the Letter Agreement is clear that the Debtors are not required to enter into any new financings with Deutsche Bank, should they so choose. Moreover, Mr. Bowden adds, the Debtors put various financings in place after the Letter Agreement was entered into and Deutsche Bank never claimed that these alternative financings somehow triggered the Termination Fee. Apparently, even Deutsche Bank realized that the Termination Fee is only triggered if the Debtors actually terminate the Letter Agreement, or if the Debtors enter into a financing of the type described in the Letter Agreement with a financial institution other than Deutsche Bank. Contrary to Deutsche Bank's assertions, as the Court is aware, the prospect of a sale of the Debtors' businesses was always a substantial likelihood in these cases, yet the parties elected not to include any language in the Letter Agreement providing that a sale of the Debtors' assets constituted a termination event. Clearly, the parties' intent was that a sale of the Debtors' assets would not trigger the Termination Fee. Accordingly, the DB Claim must be expunged, Mr. Bowden asserts. Headquartered in Fort Lauderdale, Florida, ANC Rental Corporation, is the world's third-largest publicly traded car rental company. The Company filed for chapter 11 protection on November 13, 2001 (Bankr. Del. Case No. 01-11200). Brad Eric Scheler, Esq., and Matthew Gluck, Esq., at Fried, Frank, Harris, Shriver & Jacobson, represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $6,497,541,000 in assets and $5,953,612,000 in liabilities. (ANC Rental Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 215/945-7000) AQUILA INC: Posts Net Losses Reflecting Continued Restructuring --------------------------------------------------------------- Aquila, Inc. (NYSE:ILA) reported a fully diluted loss of $.18 per share for the fourth quarter of 2003, or a net loss of $34 million. Sales totaled $461.8 million for the quarter. The quarterly loss is primarily due to costs in Capacity Services and higher interest expense. In the fourth quarter of 2002, Aquila had a loss of $5.22 per fully diluted share, or a net loss of $977.9 million, and sales of $321.8 million. Discontinued operations had earnings of $2.7 million in the 2003 quarter and a loss of $214.8 million a year earlier. The company reported a fully diluted loss of $1.73 per share for full year 2003, or a net loss of $336.4 million. Sales were $1.7 billion. The year's net loss was primarily due to restructuring charges, impairment charges and net loss on sale of assets, margin losses incurred during the wind-down of Aquila's merchant trading portfolio, the recent $26.5 million settlement with the Commodity Futures Trading Commission and higher interest costs. In 2002, Aquila reported a fully diluted loss of $12.83 per share, or $2.1 billion, with sales of $2.0 billion. Most of the charges and margin losses in 2003 were related to execution of Aquila's ongoing plan to refocus on its core utility operations. During the year, Aquila continued to sell non-core assets, including all its remaining international investments, and wind down its merchant trading portfolio. Discontinued operations recorded a profit of $14.2 million, or $.07 per fully diluted share, for 2003 compared to a loss of $326.1 million, or $2.02 per share, in 2002. "Our core domestic utility business remains sound," said Richard C. Green, Aquila chairman and chief executive officer. "We're concentrating now on taking it to the next level in terms of customer service, efficiency and effectiveness." Several significant steps must still be successfully completed to continue to take the company toward financial recovery, Green said. These include: completing the pending sales of its interests in 12 independent power projects and its Canadian operations; restructuring or settling remaining tolling agreements; continuing to wind down the company's energy trading portfolio and recovering related collateral; paying down debt and improving liquidity to strengthen the balance sheet; and obtaining utility rate relief. Impairment Charges and Net Loss on Sale of Assets Aquila recorded impairment charges and net loss on sale of assets of $194.7 million in 2003 and $1,571.5 million in 2002. Most of the 2003 amount was in Capacity Services, reflecting the exit from the Acadia tolling agreement and the pending sale of interests in independent power plants. Discontinued Operations The results of operations of Aquila's Canadian networks, which are in the process of being sold, were moved to discontinued operations in 2003, as were the results from two consolidated independent power plants which are expected to be sold in March 2004. In connection with the 2002 sales of its natural gas storage facilities, gas gathering and pipeline assets, merchant loan portfolio and coal terminal, Aquila reported the results of these businesses as discontinued operations in its consolidated income statements for the three years ended December 31, 2003. Liquidity Since reporting significant net losses and negative cash flows from operations in 2002, Aquila has had to operate with non- investment grade credit ratings. This affected the company's ability to raise capital through traditional financial markets. Aquila has therefore relied primarily on its existing cash position and proceeds from asset sales to meet its capital needs. Aquila expects to continue relying on these sources during the remainder of its restructuring process. On February 27, 2004, Aquila paid approximately $78 million to retire the note which had been used as part of the purchase of Midlands Electricity in 2002. Retiring this note eliminated the five remaining annual payments of $19 million. Aquila plans to address its short-term obligations with cash on hand and pending asset sale proceeds. The remaining liquidity, after the pending asset sales close and the short-term obligations are satisfied, will be used for future working capital requirements and discretionary liability reductions. Liability reductions would most likely be in the form of reduction of debt and contractual liabilities, including tolling contracts and long- term gas contracts. Capital Expenditures In 2003, Aquila had capital expenditures for property, plant and equipment of $164.8 million, not including the Canadian businesses. The capital budget for continuing operations in 2004 is $167.7 million, most of which is for maintaining and upgrading domestic utility facilities. Domestic Networks Domestic Networks reported earnings before interest and taxes of $168.2 million in 2003, compared to a loss before interest and taxes of $829.6 million for 2002. The 2002 results included $932.7 million of impairment charges and net losses on sales of telecommunications assets and Quanta Services investments, as well as $21.3 million of restructuring charges resulting from the realignment of Aquila's domestic utility businesses. Results for 2003 include $2.1 million of restructuring charges. Gross profit from regulated electric utilities was $7.7 million higher for 2003 compared to 2002. A Colorado rate increase effective in July 2003 contributed $9.5 million, and customer growth and favorable weather provided $7.7 million in additional margin. These increases were offset by a net $4.5 million decrease in margin from off-system sales and a net $5.3 million increase in the cost of natural gas used to fuel Aquila's power plants and power purchased for customer needs. Regulated natural gas utilities contributed a $29.5 million increase in gross profit in 2003. The improvement was primarily due to rate increases in Michigan, Iowa and Nebraska that added $14.1 million in revenue, $6.3 million of reserves released upon conclusion of multi-year gas cost recovery filings in various states, and $2.4 million from growth in the number of customers served. Gross profit of non-regulated gas operations declined by $24.6 million in 2003, largely reflecting the sale of non-regulated retail gas operations at the close of the 2002 third quarter. Gross profit for other non-regulated operations was $8.1 million higher in 2003, primarily due to an increase in the number of customers served by Everest Connections. Operating and maintenance costs declined by $29.6 million in 2003, primarily due to three factors. Labor and other costs decreased by $15.6 million following the 2002 restructuring of the company's domestic utilities; restructuring Everest Connections brought savings of $6.5 million in 2003; and the Quanta proxy contest resulted in costs of $5.5 million in 2002 but none in 2003. International Networks International Networks reported earnings before interest and taxes of $12.9 million for 2003 compared to a loss before interest and taxes of $140.1 million in 2002. Impairment charges and net loss on sale of assets were $5.8 million in 2003, but $371.7 million in 2002. Equity in earnings of investments decreased $95.9 million in 2003 compared to 2002, primarily due to the sale of New Zealand assets in October 2002 and Australian assets in July 2003. New Zealand networks contributed equity earnings of $30.9 million in 2002, and Australian investments contributed equity earnings of $39.2 million in 2002 compared to $16.1 million in 2003. Also, Aquila did not record any equity earnings in 2003 from its interest in Midlands Electricity in the United Kingdom due to regulatory limitations on cash payments by Midlands to its owners. During 2002, the company recorded equity earnings of $41.9 million related to the Midlands investment. Other income increased $11.7 million in 2003 compared to 2002, primarily due to $12.3 million of foreign currency gains recognized in the 2003 second quarter. Capacity Services Capacity Services reported a loss before interest and taxes of $314.5 million for 2003 compared to a loss of $113.4 million for 2002. This loss resulted primarily from $189.1 million of impairment charges and net loss on sales of assets and $23.1 million of restructuring charges. Gross profit in this segment decreased $69.9 million in 2003, primarily because higher natural gas prices and a lack of profitable contracted sales agreements made it uneconomical to operate non-contracted merchant generating assets. Also, Capacity Services recorded $30.5 million of mark-to-market losses mainly related to unfavorable gas hedges and a long-term power supply transaction. Wholesale Services Wholesale Services reported a loss before interest and taxes of $92.2 million in 2003 compared to a loss of $566.0 million in 2002. This business had impairment charges of $182.1 million in 2002, but none in 2003. Restructuring charges were $173.8 million in 2002, but only $1.6 million in 2003. When Aquila began to exit wholesale energy trading in 2002, it stopped adding new or speculative positions to its trading portfolio and thus limited the earnings opportunities of that business. Wholesale Services had a gross loss of $49.7 million in 2003 compared to $99.7 million in 2002. The loss in 2003 included about $25.6 million of non-cash losses related to the sale of capacity under certain long-term gas transportation agreements at substantially less than Aquila's future commitments, and $11.1 million related to termination of additional trading contracts. Also included in the $49.7 million loss in 2003 was approximately $37.0 million of non-cash earnings arising from the discounting of the trading portfolio related to Aquila's long-term gas contracts. The remaining 2003 losses at Wholesale Services mainly stem from $45.9 million of margin losses related to long-term gas contracts. Corporate and Other Earnings before interest and taxes for Corporate and other were $6.4 million in 2003 compared to a loss before interest and taxes of $37.7 million in 2002. The improvement in 2003 reflects foreign currency gains and lower restructuring charges. Income Tax Benefit Aquila's income tax benefit decreased by $51.7 million in 2003 compared to 2002, primarily as a result of lower losses before income taxes in 2003 compared to 2002, and also because in 2002 the company no longer elected to classify its Australian or Canadian investments as permanent. Certain tax benefits were not recognized on a significant amount of the 2002 losses as a result of valuation allowances being provided and certain 2002 expenses not being deductible for income tax purposes. Based in Kansas City, Missouri, Aquila (S&P, B+ Credit Facility Rating, Negative) operates electricity and natural gas distribution networks serving customers in seven states and in two Canadian provinces. The company also owns and operates power generation assets. At December 31, 2003, Aquila had total assets of $7.7 billion. Go to http://www.aquila.com/for more information. CALPINE: Completes Tender Offer for 4% Convertible Senior Notes --------------------------------------------------------------- Calpine Corporation (NYSE: CPN) accepted for payment $409,434,000 aggregate principal amount of its 4% Convertible Senior Notes Due December 26, 2006, pursuant to its cash tender offer. Each holder who tendered Notes at or before 5:00 p.m., New York City time, on March 9, 2004, the expiration date of the tender offer, will receive approximately $1,008.22 for each $1,000 principal amount of tendered Notes, representing 100% of the principal amount thereof plus accrued but unpaid interest to, but not including, March 10, 2004. Calpine will pay an aggregate of $412,800,457 for the tendered Notes. Notes in the aggregate principal amount of $73,625,000 remain outstanding. Calpine Corporation (S&P, CCC+ Senior Unsecured Convertible Note and B Second Priority Senior Secured Note Ratings, Negative Outlook), celebrating its 20th year in power in 2004, is a leading North American power company dedicated to providing electric power to wholesale and industrial customers from clean, efficient, natural gas-fired and geothermal power facilities. The company generates power at plants it owns or leases in 21 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and owns or has access to approximately one trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit http://www.calpine.com/ CALUMET DISTRIBUTION: Case Summary & Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Calumet Distribution Group, Inc. 2100 East 15th Avenue Gary, Indiana 46402 Bankruptcy Case No.: 04-60772 Type of Business: The Debtor is an integrated supplier of Maintenance, Repair and Operating products to American integrated steel producers. See http://www.protoolsdirect.com/ Chapter 11 Petition Date: February 27, 2004 Court: Northern District of Indiana (Hammond Division) Judge: J. Philip Klingeberger Debtor's Counsel: Lawrence A. Kalina, Esq. Spangler, Jennings & Dougherty, P.C. 8396 Mississippi Street Merrillville, IN 46410 Tel: 219-769-2323 Fax: 219-769-5007 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Keep-Fill, Inc. $175,153 Stauffer Glove & Safety $109,958 Norton Bonded Division $84,122 Hilti, Inc. $81,182 Morton Industries $75,517 Strong Tool Co. $69,532 Ingersoll-Rand Company $56,709 Oklahoma Rig & Supply Co. $54,066 A & A Bolt $38,217 Catching Fluidpower $37,330 Lift All $35,823 Brunner & Lay, Inc. $31,821 Starrett Company $25,944 MSC Industrial Supply Co. $25,086 Air Filter Maintenance $24,664 Stanley-Proto (Proto) Tools $23,208 Valenite Inc. $17,864 Rogers Tools Works, Inc. $16,849 Sherwin-Williams (MD) $15,678 Ames True Temper $15,447 CHYPS CBO: Fitch Affirms & Downgrades 1999-1 Note Classes --------------------------------------------------------- Fitch Ratings has affirmed 4 classes of notes and downgraded one class of notes issued by CHYPS CBO 1999-1, Ltd. The following rating actions are effective immediately: -- $83,000,000 Class A-1 Notes affirmed at 'AAA'; -- $97,000,000 Class A-2 Notes affirmed at 'AAA'; -- $55,851,485 Class A-3 Notes downgraded to 'CCC' from 'B-'; -- $13,000,000 Class B-1 Notes affirmed at 'C'; -- $18,000,000 Class B-2 Notes affirmed at 'C'. CHYPS CBO 1999-1, Ltd. is a collateralized bond obligation managed by Delaware Investment Advisors which closed January 7, 1999. CHYPS CBO 1999-1 is composed of predominantly high yield bonds. CHYPS CBO is in its amortization period whereby trading is restricted to the sale of defaulted and credit risk securities. The sale of credit risk securities is limited to 10% per annum of the total collateral balance. The class A-1 and A-2 notes are insured for interest and principal by Financial Security Assurance Inc. (FSA). Included in this review, Fitch Ratings discussed the current state of the portfolio with the asset manager. In mid- 2000, Delaware Investment Advisors experienced complete turnover in their fixed income team. The current management group has been restricted from actively trading the portfolio due to significant deterioration of the assets. In addition, Fitch Ratings conducted cash flow modeling utilizing various default timing and interest rate scenarios. Since the last rating action on January 28, 2002, the collateral has continued to deteriorate. The weighted average rating factor has decreased from approximately 'CCC+' to 'CCC'. The class A overcollateralization ratio has decreased from 98.2% as of January 28, 2002 to 75.6% as of the most recent trustee report dated February 4, 2004. In addition, defaulted assets represented 26.1% of the $201,000,000 of total collateral and eligible investments. Assets rated 'CCC+' or lower represented approximately 49.5%, excluding defaults. Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the 'B-' rating assigned to the class A-3 notes no longer reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. COMM 2001-FL5: Fitch Takes Rating Actions on Various Notes Classes ------------------------------------------------------------------ Fitch Ratings has upgraded two, downgraded two and affirmed ten classes of COMM 2001-FL5's commercial mortgage pass-through certificates as follows: Upgrades: --$21.6 million class C to 'AAA' from 'AA+'; --$59.1 million class D to 'AA' from 'AA-'; Downgrades: --$1.9 million class K-HH to 'B+' from 'BB-'; --$1.4 million class L-HH to 'B-' from 'B'. Affirmations: --$178.2 million class A-2 'AAA'; --Interest-only class X-2 'AAA'; --$67.3 million class B 'AAA'; --$27.5 million class E 'A+'; --$26.5 million class F 'A-'; --$4.3 million class K-CP 'BBB+'; --$1.7 million class K-GB 'BBB+'; --$4.3 million class L-CP 'BBB'; --$1.5 million class L-GB 'BBB'; --$19 million class G 'BB'; --$3.3 million class M-HH 'B-'. Fitch does not rate classes K-LG, L-LG, and M-LG. The following classes have been paid in full: A-1, X-1, K-NB, K-FF, L-FF, M-FF, N-FF, K-AA, L-AA, M-AA, and N-AA. The upgrades are based on increased subordination levels to the senior classes due to repayment in December 2003 of the $120 million Daily News Building loan (19% of the then outstanding transaction balance) and release in January 2004 of the Rosedale Mall (62.9% of the then current Lend Lease Portfolio loan) upon payment of 110% of its allocated loan amount ($86.8 million). The downgrades are due to the declines in performance of the Hyatt Regency hotel in Houston, TX (16.8% of the transaction's current principal balance). The K-HH, L-HH, and M-HH classes directly reflect the performance of the B-note on the Hyatt Regency hotel loan. The performance of the Houston Hyatt continued to decline in 2003. This hotel property is located in a downtown office sub-market that has experienced significant softening. The hotel reports the lowest occupancy among hotels in its competitive set. As of year- end 2003, the Hyatt's revenue per available room (Repair) was down 33% from issuance. The Hyatt, with 977 rooms, had a YE 2003 Fitch stressed debt service coverage ratio (DSCR) of 0.67 times compared to 1.74x at issuance. Based on this performance, and considering that three new hotels aggregating 1,558 rooms were added to the competitive set in December 2003 and January 2004, Fitch has downgraded two of the rake classes. In February 2004, Texaco announced its plans to consolidate most of its Houston operations and staff into an empty 1.2 million-square-foot office building adjacent to the Hyatt. This is likely to have a positive effect on the performance of the hotel. Fitch will closely monitor the hotel's performance over the next several months up to the loan's maturity in July 2004. The transaction has a rake structure and currently consists of six floating-rate loans secured by nine assets. Each first mortgage loan is split into an A/B note or an A/B/C note structure. Each A note and B note has been contributed to form the trust mortgage asset. While the A notes are pooled, the B and C notes provide credit enhancement only to the loan to which they relate. As part of its review, Fitch analyzed the performance of each loan and the underlying collateral. Fitch compared each loan's DSCR at issuance to the YE 2003 DSCR. DSCRs are based on a Fitch stressed net cash flow (NCF) and debt service based on a Fitch stressed constant and the TMA loan balance. An all-in DSCR was also calculated to take into account the debt service on the C note in order to fully reflect the entire stress on the loan. The current overall Fitch stressed weighted average DSCR for the TMA was 1.59x compared to 1.81x at issuance for the six loans remaining in the pool. The current all-in weighted average DSCR (including the C notes) was 1.35x compared to 1.57x at issuance for the six loans, of which only three have C notes. All loans mature in 2004. This near-term refinance risk is mitigated because all of the loans have extension options available. Of the remaining loans, 76% have investment-grade credit assessments based on the amount of the TMA loan proceeds. In addition to the Houston Hyatt, the pool has exposure to two additional hotel loans. Performance improved since the last review at the Irvine Marriott (7.2%), a 485-room hotel in Irvine, CA. The YE 2003 Fitch stressed DSCR was 1.65x compared to 1.58x at YE 2002, although this was a decrease from 2.12x at issuance. The third hotel loan in the pool is the Loews Miami Beach hotel (12.2%). The Fitch stressed DSCR remains strong at 2.49x as of YE 2003, compared to 2.79x at issuance. NCF at YE 2003 increased 10% over YE 2002. This hotel loan has an investment-grade credit assessment. The remaining loans in the pool consist of two office loans (53.4%) and one retail loan (10.4%). The Crescent Portfolio (39%), the largest loan in the pool, is collateralized by three office buildings in Houston and Dallas, TX. Although average occupancy improved to 91% as of January 2004, Fitch stressed DSCR at YE 2003 declined to 1.42x, compared to 1.60x at issuance. A major tenant occupying 10% of the net rentable area renewed its leases in 2004 at a lower rent. Fitch is concerned with the weak office markets in Houston and Dallas, and the fact that additional major tenant leases expire in 2004 and 2006. However, the trust's loan exposure per unit is relatively low, at $52.58 per square foot. The Greensboro Executive Center loan (14.4%) consists of two office buildings built in 2001 in the Tyson's Corner market of suburban Washington, DC. The borrower is expected to repay the loan at its maturity in April 2004. The Lend Lease Mall Portfolio (10.4%) was originally collateralized by three regional malls. Two properties, the Westland Mall and Rosedale Mall, have been released. The remaining Fox Run Mall in Newington, NH is performing well, with a 6% in- line vacancy. Comparable sales in YE 2003 were up 2.2% and total sales were up 3.7% over YE 2002. Fitch's YE 2003 stressed DSCR increased to 2.19x, from 1.50x at issuance, due to the strong performance of the mall and the paydown of the loan due to the release premiums. Fitch will continue to monitor this transaction, as surveillance is ongoing. CORRPRO COS.: Institutional Shareholder Backs Refinancing Plan -------------------------------------------------------------- Corrpro Companies, Inc. (Amex: CO), announced that Institutional Shareholder Services (ISS), recognized worldwide as an independent authority on public company shareholder matters and corporate governance, has issued a formal recommendation to its institutional clients holding shares in Corrpro to vote in favor of the proposals of management relating to Corrpro's plan of refinancing and recapitalization. ISS is the leading provider of proxy voting and corporate governance services for institutional and corporate clients worldwide. The proposed refinancing and recapitalization plan is being submitted to Corrpro's shareholders for approval at a March 16, 2004 special shareholders' meeting. It consists of a number of interdependent proposals, including approval of a $13 million cash investment by an entity controlled by Wingate Partners III, L.P. in return for the issuance of $13 million of a new issue of preferred stock, together with the issuance of warrants to the Wingate affiliate to acquire 40% of the fully-diluted common stock of the Company at a nominal exercise price. As part of the refinancing plan, once approved, CapitalSource Finance LLC, a subsidiary of CapitalSource Inc. (NYSE: CSE), has agreed to provide to the Company a $40 million senior secured credit facility, subject to the satisfaction of certain customary closing conditions, consisting of a revolving credit line, a term loan with a five-year maturity and a letter of credit sub- facility. In addition, American Capital Strategies Ltd. (Nasdaq: ACAS) has agreed to provide $14 million of secured subordinated debt to the Company, subject to the satisfaction of certain customary closing conditions. Shareholders are also being asked to approve the issuance to American Capital of warrants to acquire 13% of the fully diluted common stock of the Company at a nominal exercise price in connection with the refinancing. The proceeds of the refinancing will be used to repay by March 31, 2004 the debt owed its current senior lenders, a lending group led by Bank One N.A., and The Prudential Insurance Company of America. The Company has filed with the Securities and Exchange Commission and mailed to its shareholders a definitive proxy statement in connection with the proposals to be considered and voted upon at the special meeting. "The ISS recommendation confirms management's belief in the importance of the approval of this plan for the future of our Company. It is essential that our shareholders recognize that this refinancing plan, which is the culmination of a rigorous process under which hundreds of potential sources of capital were contacted, represents the best alternative available for both the Company's shareholders and the Company," commented Joseph W. Rog, Chairman, CEO and President. "Failure to complete the refinancing transaction on a timely basis would likely result in the issuance of default notices and the commencement of foreclosure proceedings by the Company's current lenders. In such case, there is no currently foreseeable alternative available to the Company other than filing for protection under applicable bankruptcy laws." The Company urges its shareholders to read the proxy statement carefully, as the proxy statement contains important information regarding the proposals to be considered and voted upon at the special meeting. If the refinancing and recapitalization plan is not approved by the requisite majority of shareholders, the Company will be obligated to pay substantial breakup fees as described in the proxy statement. The Company and its directors and officers may be deemed to be participants in the solicitation of proxies with respect to the proposals to be considered and voted upon at the special meeting. Information regarding the ownership interests of the Company's directors and executive officers is contained in the Company's special meeting proxy statement and its Annual Report on Form 10-K for the fiscal year ended March 31, 2003. Corrpro, headquartered in Medina, Ohio, with offices worldwide, is a leading provider of corrosion control engineering services, systems and equipment to the infrastructure, environmental and energy markets around the world. Corrpro is the leading provider of cathodic protection systems and engineering services, as well as a leading supplier of corrosion protection services relating to coatings, pipeline integrity and reinforced concrete structures. Wingate Partners III, L.P., headquartered in Dallas, Texas, is a private investment firm focused on making equity investments in businesses going through significant transition. COVANTA: New Covanta Lake II Creditors Obtain April 3 Bar Date -------------------------------------------------------------- On February 11, 2004, the Court approved a transaction pursuant to which Covanta Lake, Inc. would merge with a newly formed subsidiary of Danielson Holding Corporation, creating a post- merger entity, known as Covanta Lake II, Inc. Covanta Lake II is the successor-in-interest to Covanta Lake, an original Debtor, with the same assets, liabilities, and operations. The creditors of and claims against Covanta Lake II are identical to those of Covanta Lake. Thus, James L. Bromley, Esq., at Cleary Gottlieb Steen & Hamilton, in New York, asserts that it is fully appropriate for the Court to waive the adoption of a new bar date for Covanta Lake II. Accordingly, the Debtors ask the Court to waive the setting of a new bar date for Covanta Lake II and instead adopt the August 9, 2002 bar date previously assigned to Covanta Lake in Case No. 02-4093. * * * Judge Blackshear emphasizes that only the New Covanta Lake II Creditors are entitled to file new proofs of claim against Covanta Lake II. New Covanta Lake II Creditors refer to entities that have or assert any prepetition Claims arising on or before April 1, 2002, against Covanta Lake II, that: (a) have not previously filed a proof of claim against Covanta Lake; and (b) were not served with: -- a Bar Date Notice pursuant to any of the orders establishing bar dates in these Chapter 11 cases; or -- amended schedules of Covanta Lake. The Court sets April 3, 2004, as the last day for the New Covanta Lake II Creditors to file a proof of claim. The August 9, 2002, Bar Date, originally assigned to Covanta Lake, is adopted for Covanta Lake II only for entities other than the New Covanta Lake II Creditors. Judge Blackshear waives the setting of a bar date pursuant to Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure for all entities other than the New Covanta Lake II Creditors. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. (Covanta Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) COVANTA ENERGY: Exits Bankruptcy After Danielson Acquisition ------------------------------------------------------------ Danielson Holding Corporation (Amex: DHC) and Covanta Energy Corporation announced that Danielson has completed its previously announced acquisition of Covanta's energy and water business allowing Covanta to emerge from bankruptcy. Covanta's plan of reorganization was approved by the Bankruptcy Court for the Southern District of New York pursuant to an order entered on March 5, 2004, allowing Covanta to emerge from bankruptcy. Covanta will remain headquartered in Fairfield, New Jersey. Anthony J. Orlando will continue to serve as the company's Chief Executive Officer and the company's existing management structure will stay in place. "We are very pleased to have concluded Covanta's reorganization and are now focused on the continued success of our waste-to- energy business," commented Orlando. He added, "The plan approved by the court maximizes creditor recovery and affords the company a solid capital structure. In addition, it enables us to embark on a dynamic partnership with the Danielson team. By combining our complementary skill sets, we will position Covanta to do what it does best - provide our clients with world class, reliable service." "The Covanta management team has performed an excellent job in meeting their client community needs throughout this lengthy reorganization process," said Sam Zell, Danielson's Chairman and Chief Executive Officer. "We look forward to working with them to build on their solid foundation in the energy business." Pursuant to a definitive investment and purchase agreement executed on December 2, 2003, Danielson has acquired 100% of Covanta's equity for approximately $30 million in cash. In addition, Danielson arranged a new $118 million letter of credit facility for Covanta, secured by a second lien on Covanta's domestic assets. With respect to Covanta's domestic operations, Covanta has obtained a new $138 million first lien secured letter of credit facility and has issued $205 million of senior secured notes accreting to $230 million by 2011, and up to $50 million face amount of unsecured notes. As a result of these transactions and the bankruptcy court's order, Covanta emerged from bankruptcy with over $50 million in cash and revolving credit facility availability. Covanta's international operations also issued $95 million of secured 3-year term notes to certain of Covanta's creditors. As previously disclosed, Danielson did not purchase Covanta's geothermal assets, which were sold in December, 2003 to Ormat Nevada, Inc., the winning bidder following the auction of those assets. The financing necessary for Danielson's acquisition of Covanta was provided by three of Danielson's shareholders: SZ Investments, L.L.C., Third Avenue Trust, on behalf of Third Avenue Value Fund, and D. E. Shaw Laminar Portfolios, L.L.C. In addition, Laminar has arranged for the provision of a $10 million secured revolving loan facility to Covanta's international operations. In connection with the financing by such shareholders, Danielson issued notes that have an aggregate principal balance of $40 million and, if not repaid, are convertible into shares of Danielson common stock at a price of $1.53 per share. The proceeds from this financing remaining after payment of the purchase price will be used to pay certain transaction expenses and for general corporate purposes. Danielson expects to refinance these convertible notes through a pro rata rights offering to its shareholders. Under the terms of its agreement with SZ Investments, Third Avenue and Laminar, Danielson is required to commence the rights offering within 75 days of the closing of its acquisition of Covanta. As previously announced, under this rights offering Danielson intends to issue rights to purchase 0.75 shares of common stock for each outstanding share of Danielson common stock at an exercise price of $1.53 per share. If Danielson does not refinance all of the notes, the remaining principal balance and unpaid interest of the notes would be convertible into shares of Danielson common stock at the rights offering price of $1.53 per share. In addition, Laminar has agreed to purchase up to an additional 8.75 million shares of Danielson common stock at $1.53 per share based upon the levels of public participation in the rights offering. The convertible note financing and other related party transactions were approved by a special committee of independent directors of Danielson. Danielson anticipates that it will issue rights to acquire approximately 27 million shares of its common stock. Assuming exercise of all rights and the purchase of 8.75 million shares by Laminar, Danielson estimates that it will have approximately 71 million shares outstanding following the rights offering. In addition, following completion of the rights offering and sale of shares to Laminar, Danielson has agreed to offer to sell up to 3 million shares of its common stock to certain creditors of Covanta at a purchase price of $1.53 per share. Covanta Energy Corporation is an internationally recognized owner and operator of waste to energy and power generation projects. Its waste-to- energy facilities convert municipal solid waste into energy for numerous communities, predominantly in the United States. The Company also operates water and wastewater treatment facilities. Danielson Holding Corporation is an American Stock Exchange listed company, engaging in the financial services and specialty insurance business through its subsidiaries. Danielson's charter contains restrictions that prohibit parties from acquiring 5% or more of Danielson's common stock without its prior consent. DESERT HOT SPRINGS: Tranzon to Help City Ease Financial Woes ------------------------------------------------------------ The City of Desert Hot Springs, in a step towards resolving its bankruptcy issues, has selected California-based Tranzon Asset Strategies (TAS) to conduct an auction of 26 parcels of land and excess facilities equipment that are owned by the city. TAS is part of Tranzon, LLC, a nationwide auction and accelerated marketing firm with 11 member companies and 22 offices coast-to- coast. The City is in Chapter 9 Bankruptcy. As part of the reorganization and debt payoff plan, certain non-liquid assets will be liquidated with the assistance of Tranzon. The auction is scheduled for Saturday, March 20th at 12:00 p.m. in the city council chambers at the Carl May Center, and is open to the public. Twenty-six (26) residential and commercial real estate lots, all located within the city, will be offered at auction. On-line bidding will also be offered for potential purchasers who are unable to attend the live auction. The city filed for Bankruptcy in 2001, as a result of a 10-year- old lawsuit by a developer. Despite the Bankruptcy, the City is very optimistic about its future. Located in the foothills overlooking the floor of the Coachella Valley, Desert Hot Springs is one of eight cities that make up the Palm Springs Desert Resorts. Known for its therapeutic hot mineral water and spa resorts, the city was also recently distinguished as having the nation's best, untreated natural water. A mecca for vacationers looking to soak in the springs, the area is now in the midst of a housing and retail boom that is unparalleled. Some estimates place new construction growth in Desert Hot Springs up 250 per cent from last year, a trend that is evident throughout the Coachella Valley. In addition to numerous new residential developments, retail giants Wal-Mart and Target are currently under construction along Highway 111. An increase in tourism is also fueling the economic upswing, helped by the Coachella Valley's five Indian casinos and plans to renovate the Palm Springs Convention Center. All of this recent development bodes well for the continued future growth and development of Desert Hot Springs. Headquartered in Richmond, VA, Tranzon, LLC combines a national network of experts with the local expertise and presence demanded by those seeking its services: bankruptcy and estate attorneys, special assets managers at banking institutions, corporations and individuals. For more information on the auction, contact Tranzon Asset Strategies at (888) 314-1314 or go to http://www.tranzon.com/ DILLARD'S INC: BB-Rated Retailer Releases Fourth Quarter Results ---------------------------------------------------------------- Dillard's, Inc. (NYSE:DDS)(S&P, BB Corporate Credit Rating, Negative) announced operating results for its fourth quarter ended January 31, 2004. Net income for the 13 weeks ended January 31, 2004 was $51.2 million ($0.61 per fully diluted share) compared to a net income of $72.3 million ($0.85 per fully diluted share) for the 13 weeks ended February 1, 2003. Included in net income for the 13 weeks ended January 31, 2004 were after-tax net charges of $11.3 million ($0.13 per fully diluted share) resulting from after-tax charges totaling $16.8 million ($0.20 per fully diluted share) consisting of asset impairment and store closing charges, partially offset by an after-tax gain of $5.5 million ($0.07 per fully diluted share) relating to the sale of three store properties. Included in net income for the 13 weeks ended February 1, 2003 was an after-tax net gain of $7.1 million ($0.08 per fully diluted share) resulting from an after-tax gain of $41.1 million ($0.48 per fully diluted share) pertaining to the Company's sale of its interest in FlatIron Crossing, a Broomfield, Colorado shopping center, partially offset by after-tax charges totaling $34.0 million ($0.40 per fully diluted share) consisting of asset impairment and store closing charges. Highlights of the fourth quarter and fiscal year ended January 31, 2004 include the following. -- During the 13 weeks ended January 31, 2004, Dillard's achieved improved gross margin improvement of 20 basis points of sales. -- The Company effectively reduced advertising, selling, administrative and general expenses $10.3 million and $66.1 million, respectively, during the 13 and 52-week periods ended January 31, 2004. -- The Company further strengthened its balance sheet through reducing indebtedness during the 52 weeks ended January 31, 2004 by $261.3 million. The Company announced its intention to redeem its $331.6 million Preferred Securities on February 2, 2004. -- Dillard's continued expansion of its exclusive brand merchandise as a means to provide customers with superior fashion and value choices, while driving differentiation in the marketplace. Sales penetration of exclusive brand merchandise increased storewide from 18.2% to 20.9% during the 52 weeks ended January 31, 2004. Sales Sales for the 13 weeks ended January 31, 2004 were $2.299 billion compared to sales for the 13 weeks ended February 1, 2003 of $2.388 billion, a decrease of 4%. Sales in comparable stores for the 13-week period decreased 4%. Sales for the 52 weeks ended January 31, 2004 were $7.599 billion compared to sales for the 52 weeks ended February 1, 2003 of $7.911 billion, a decrease of 4%. Sales in comparable stores for the 52-week period decreased 4%. Gross Margin/Merchandise Initiatives Gross margin performance for the 13 weeks ended January 31, 2004 increased 20 basis points as a percentage of sales. Inventory position at January 31, 2004 in comparable stores increased 1% compared to inventory position at February 1, 2003. Dillard's management reiterates their strong belief that merchandise differentiation by the Company is crucial to its future success in the marketplace. Dillard's will continue its strategy of refining its merchandise mix to feature a greater selection of exclusive brand merchandise while presenting new and unique presentations of assortments from national vendor sources, with a special emphasis on presenting new product in the "better" (more upscale) categories. The Company will seek to build exclusive relationships with promising vendors and designers where appropriate. Gross margins of Dillard's exclusive brand merchandise exceeded gross margins of national brand merchandise during the 26 and 52 weeks ended January 31, 2004. During those periods, Dillard's achieved particularly strong exclusive brand gross margin performances (in comparison to national brand performance) in the Juniors', Shoes and Home areas. During the 52 weeks ended January 31, 2004, Dillard's continued its strategy of expanding its exclusive brand merchandise portfolio, with the ongoing objective of building Dillard's brands as nationally recognized and revered destination brands. Each new merchandise line has been developed specifically to meet the demands of targeted demographics of discerning Dillard's shoppers. Dillard's continues its efforts to improve and expand its Internet website at http://www.dillards.com/not only as a means to offer customers the convenience of online shopping, but also as an effective way to create excitement about Dillard's and to drive traffic into the Company's 328 Dillard's locations. During fiscal 2003, Dillard's launched brand-specific websites to promote recognition and online shopping of its exclusive Antonio Melani, Gianni Bini and Michelle D merchandise lines under the names http://www.antoniomelani.com/, http://www.giannibini.com/and http://www.michelled.com/ Other brand-specific website locations are being developed for other exclusive brand names and will be launched in fiscal 2004. Advertising, Selling, Administrative and General Expenses Advertising, selling, administrative and general ("SG&A") expenses declined $10.3 million to $563.3 million for the 13 weeks ended January 31, 2004 from $573.6 million for the comparable period ended February 1, 2003. The Company noted improvement in bad debt expense ($15.3 million) related to the Company's proprietary credit card partially offset by small increases in other expense areas. Management is pleased with the progress regarding the quality of its accounts receivable portfolio and with the resulting reduction in bad debt expense during the 13 weeks ended January 31, 2004. The Company believes the improvement in the accounts receivable portfolio resulted primarily from its implementation of certain new initiatives in credit granting operations. Debt/Interest Expense Interest and debt expense declined to $41 million during thirteen weeks ended January 31, 2004 from $46.4 million for the thirteen weeks ended February 1, 2003. During the thirteen weeks ended January 31, 2004, the Company retired the remaining $130.0 million 6.13% notes maturing Saturday, November 1, 2003. At January 31, 2004, the Company had $50 million outstanding in short-term borrowings under its accounts receivable conduit facilities. Peak borrowings under the Company's accounts receivable facility during the thirteen weeks ended January 31, 2004 were $381.5 million. Remaining available short-term borrowings under these conduit facilities at January 31, 2004 were $450.0 million. In December 2003, the Company amended and extended its senior secured revolving credit facility. The amendments included an increase in the amount of the facility from $400 million to $1 billion. In addition, the facility was extended to a five-year maturity and now expires in December 2008. There are no financial covenant requirements under the amended credit facility provided that availability under the agreement exceeds $100 million. At January 31, 2004, letters of credit totaling $75.5 million were outstanding under this facility. There was no funded debt outstanding under the revolving credit agreement at January 31, 2004. In December 2003, the Company announced its intention to redeem its $331.6 million Preferred Securities included in Guaranteed Preferred Beneficial Interests in the Company's Subordinated Debentures anticipating that such redemption would occur on February 2, 2004. Accordingly, $331.6 million of Guaranteed Preferred Beneficial Interests in the Company's Subordinated Debentures is included in current liabilities on the Company's consolidated balance sheet at January 31, 2004. The Company redeemed the $331.6 million Preferred Securities on February 2, 2004 as planned, with $100 million borrowed under its amended revolving credit facility and the balance borrowed under the Company's accounts receivable securitization conduit facilities. Short-term borrowings under both the credit facility and accounts receivable securitization conduit facilities were $376.5 million at February 2, 2004. Subsequently, the Company has paid down substantially all of these borrowings from cash from operations during the first quarter of 2004. As of March 9, 2004, total short-term borrowings under both the revolving credit facility and accounts receivable conduit facilities were $40.0 million. Dillard's expects to fund its ongoing cyclical working capital needs through short-term borrowings from its accounts receivable securitization conduit facilities. Income - 52 Weeks Net income for the 52 weeks ended January 31, 2004 was $9.3 million ($0.11 per fully diluted share) compared to a net loss of $398.4 million ($4.67 per fully diluted share) for the 52 weeks ended February 1, 2003. Included in net income for the 52 weeks ended January 31, 2004 were after-tax net charges of $12.9 million ($0.15 per fully diluted share) resulting from after-tax charges totaling $38.9 million ($0.46 per fully diluted share) partially offset by after- tax gains totaling $26.0 million ($0.31 per fully diluted share). The charges for the year consisted of asset impairment and store closing charges and call premiums related to early debt reduction. The gains for the year consisted of gains on sale of certain properties, a credit recorded due to resolution of certain liabilities and a credit received from the Internal Revenue Service. Included in net income for the 52 weeks ended February 1, 2003 were after-tax net charges of $1.2 million ($0.02 per fully diluted share) resulting from after-tax charges totaling $44.3 million ($0.52 per fully diluted share) partially offset by after- tax gains totaling $43.1 million ($0.50 per fully diluted share). The charges for the year consisted of asset impairment and store closing charges and call premiums paid related to early debt reduction and amortization of accounts receivable securitization gains. The gains consisted of a gain on sale of a mall property and a distribution received related to an investee partnership. Share Repurchase The Company's board of directors authorized a stock repurchase program in May of 2000. During the 52 weeks ended January 31, 2004, the Company repurchased approximately 1.5 million shares of Class A common stock for $18.9 million. Approximately $56 million in share repurchase authorization remained under this open-ended plan at January 31, 2004. Store Openings/Closings - 2003 During the fourth quarter of 2003, the Company completed the closure of its Pinellas Parkside location in Pinellas Park, Florida and its Coliseum Mall location in Hampton, Virginia. During the 52 weeks ended January 31, 2004, Dillard's opened five new locations in Olmstead, Ohio; Davenport, Iowa; Richmond, Virginia (2) and Houston, Texas (replacement store). During the 52 weeks ended January 31, 2004, the Company closed nine Dillard's locations. Since announcing its policy in late 2000 to close under-performing stores as conditions permit, the Company has closed 36 Dillard's stores. Store Opening Schedule - 2004 Scheduled store openings for the year ended January 29, 2005: Open Dillard's at: City Month Sq. Feet ------------------- ------------------------------------- -------- The Shoppes at East Chase(a) Montgomery, Alabama March 155,000 Coastal Grand Myrtle Beach, South Carolina March 155,000 Colonial University Village(a) Auburn, Alabama April 126,000 Greenbrier Mall(a) Chesapeake, Virginia April 160,000 Jordan Creek Town Center West Des Moines, Iowa August 200,000 Yuma Palms(a) Yuma, Arizona October 98,000 South Park Mall Moline, Illinois October 127,000 Eastern Shore(a) Spanish Fort, Alabama October 126,000 (a) Replacement store At January 31, 2004, the Company operated 328 stores spanning 29 states - all operating with one name - Dillard's. Sales by Category During the thirteen weeks ended January 31, 2004, sales in accessories, shoes, lingerie and cosmetics were strongest and exceeded the Company's average sales performance for the period. Sales in the home categories were in line with the average performance. Sales in women's and juniors and men's categories were slightly below trend. Sales in the children's area were significantly below trend. Sales by Region During the thirteen weeks ended January 31, 2004, sales in the Western region of the Company were significantly stronger that the Company's average sales performance for the period. Sales in the Eastern region were in line with Company trend. Sales in the Central region of the Company were slightly below trend. Estimates for 2004 The Company is updating the following estimates for certain income statement items for the fiscal year ended January 29, 2005 based upon current conditions. Actual results may differ significantly from these estimates as conditions and factors change In Millions 2004 2003 Estimated Actual Depreciation and amortization $ 290 $ 291 Rental expense 64 64 Interest and debt expense 155 181 Capital expenditures 240 227 The company is a Little Rock, Ark.-based department store retailer. DR. BARNES' EYECENTER: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Dr. Barnes' Eyecenter, Inc. 2110 Hutton Drive, Suite 100 Carrollton, Texas 75006 Bankruptcy Case No.: 04-10784 Type of Business: The Debtor operated seven optical retail stores in various municipalities within the Commonwealth of Puerto Rico. Chapter 11 Petition Date: March 9, 2004 Court: District of Delaware Judge: Mary F. Walrath Debtor's Counsels: Ian Connor Bifferato, Esq. Joseph K. Koury, Esq. Bifferato, Bifferato & Gentilotti 1308 Delaware Ave., P.O. Box 2165 Wilmington, DE 19899-2165 Tel: 302-429-1900 Fax: 302-429-8600 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Plaza Las Americas, Inc. $1,877,962 Renta De Plaza (189A) P.O. Box 363268 San Juan, PR 00936-3268 Plaza Del Caribe, S.E. $859,970 Renta De Ponce (204) P.O. Box 363268 San Juan, PR 00936-3268 Essilor of America $88,479 Vision Ease $16,783 Lens Vision Outlet $16,354 Vistakon $16,344 Polycore $13,896 Bird Bird Hestres $13,178 CIBA Vision $11,634 Bausch & Lomb CLD $6,902 Omar Reyes Architect $6,825 Oakley $6,422 Younger Optics $5,431 Ocular Sciences $5,400 United Parcel Service $4,443 Smartlab $3,942 LBI $3,282 Premier Optical Machinery & Repair $3,248 Latham & Phillips $2,932 Nanofilm Ltd. $2,592 DYNAMIC TOURS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Dynamic Tours & Transportation, Inc. 175 Thorpe Road Orlando, Florida 32824 Bankruptcy Case No.: 04-02009 Type of Business: The Debtor provides luxury transportation for a variety of needs, including convention and conference groups, weddings and receptions, recreational tours, airport transportation, concerts, sporting events, family reunions, and real estate tours. See http://www.dynamiccoaches.com/ Chapter 11 Petition Date: February 25, 2004 Court: Middle District of Florida (Orlando) Judge: Arthur B. Briskman Debtor's Counsel: Kevin E. Mangum, Esq. Mangum & Associates PA 5100 Highway 17-92, Suite 200 Casselberry, Florida 32707 Tel: 407-478-1555 Total Assets: $5,679,555 Total Debts: $7,722,379 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Conseco Finance Leasing Trust Value of Collateral: $659,880 50 Washington St, 12th Fl $577,500 South Norwalk, CT 06854 Conseco Finance Leasing Trust Value of Collateral: $536,490 50 Washington St, 12th Fl $450,000 South Norwalk, CT 06854 GE Capital Value of Collateral: $464,078 11010 Prairie Lakes Dr. $320,000 55344 MCII Funding II, Inc. Value of Collateral: $448,366 P.O. Box 972299 $225,000 Dallas, TX 75397-2299 MCII Funding II, Inc. Value of Collateral: $443,404 P.O. Box 972299 $225,000 Dallas, TX 75397-2299 Financial Federal Credit, Value of Collateral: $421,820 Inc. $350,000 P.O. Box 201478 Houston, TX 77216-1478 GE Capital Value of Collateral: $362,507 11010 Prairie Lakes Dr. $200,000 55344 GE Capital Value of Collateral: $351,924 11010 Prairie Lakes Dr. $210,000 55344 Rodes-Roper-Love $312,069 158 N. Harbor City Blvd. Melbourne, FL 32935 GE Capital Value of Collateral: $289,461 11010 Prairie Lakes Dr. $190,000 55344 GE Capital Value of Collateral: $287,282 11010 Prairie Lakes Dr. $190,000 55344 GE Capital Value of Collateral: $281,925 11010 Prairie Lakes Dr. $190,000 55344 GE Capital Value of Collateral: $255,680 11010 Prairie Lakes Dr. $150,000 55344 T & W Funding Company VIII, $250,000 LLC GE Capital Value of Collateral: $172,179 $145,000 GE Capital Value of Collateral: $164,979 $80,000 SunCoast Resources, Inc. $115,086 Associated Industries $111,611 Insurance Co. MCII Funding II, Inc. Value of Collateral: $70,926 $25,000 The Goodyear Tire & Rubber $55,103 Company DYNEGY INC: Ranks No. 5 in Zacks' List of Stocks to Sell Now ------------------------------------------------------------ Zacks.com currently rates Dynegy Inc. stock with a 'Strong Sell' (Rank #5) recommendation. Zacks.com from time to time releases details on a group of stocks that are part of their exclusive list of Stocks to Sell Now. Since inception in 1988 the S&P 500 has outperformed the Zacks #5 Ranked Strong Sells by 170.3% annually (12.1% vs. 4.5% respectively). "While the rest of Wall Street continued to tout stocks during the market declines of the last few years, we were telling our customers which stocks to sell in order to save themselves the misery of unrelenting losses," according to Zacks.com. To see the full Zacks #5 Ranked list of Stocks to Sell Now then visit: http://at.zacks.com/?id=92 Here is a synopsis of why Dynegy stocks have a Zacks Rank of 5 (Strong Sell) and should most likely be sold or avoided for the next 1 to 3 months. Note that a #5/Strong Sell rating is applied to 5% of all the stocks the company ranks: Dynegy Inc. (NYSE:DYN) is a provider of energy products and services. Earnings estimates for the year ending December 2004 have moved from a profit to a loss for Dynegy over the past two months. Late January saw the company report a fourth quarter loss that was narrower than the consensus, but analysts still appear to be wary of boosting the company's earnings estimates at the moment. Furthermore, some of them expected more from the company's conservative operating cash flow guidance for 2004. Dynegy went on to say that it expects continued restructuring in 2004, though not at last year's level. However, Dynegy is a company on the move, and made much progress in its restructuring efforts in 2003, including reducing its debt, decreasing its collateral postings, and maintaining a strong liquidity position, among others. The company believes that such moves provide a solid foundation for the future. But for now, investors may want to hold off on opening or deepening a position until its earnings estimates gain more upside momentum. About the Zacks Rank For over 15 years the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988 the #1 Ranked stocks have generated an average annual return of +33.7% compared to the (a)S&P 500 return of only +12.1%. Plus this exclusive stock list has generated total gains of +100.3% since January 2000 as the market suffered its worst downturn in 60 years. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). And since 1988 the S&P 500 has outperformed the Zacks #5 Ranked Strong Sells by 170.3% annually (12.1% vs. 4.5% respectively). Thus, the Zacks Rank system can truly be used to effectively manage the trading in your portfolio. For continuous coverage of Zacks #1 and #5 Ranked stocks, then get your free subscription to "Profit from the Pros" e-mail newsletter where we highlight stocks to buy and sell using our time tested stock evaluation model. http://at.zacks.com/?id=94 The Zacks Rank, and all of its recommendations, is created by Zacks & Co., member NASD. Zacks.com displays the Zacks Rank with permission from Zacks & Co. on its web site for individual investors. About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 to compile, analyze, and distribute investment research to both institutional and individual investors. The guiding principle behind our work is the belief that investment experts, such as brokerage analysts and investment newsletter writers, have superior knowledge about how to invest successfully. Our goal is to unlock their profitable insights for our customers. And there is no better way to enjoy this investment success, than with a FREE subscription to "Profit from the Pros" weekly e-mail newsletter. For your free newsletter, visit http://at.zacks.com/?id=95 Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. About Dynegy Dynegy Inc. (S&P, B Corporate Credit Rating, Negative) provides electricity, natural gas and natural gas liquids to wholesale customers in the United States and to retail customers in the state of Illinois. The company owns and operates a diverse portfolio of energy assets, including power plants totaling approximately 13,00 megawatts of net generating capacity, gas processing plants that process more than 2 billion cubic feet of natural gas per day and approximately 40,000 miles of electric transmission and distribution lines. EMAGIN CORPORATION: Susan Jones Discloses 5.73% Equity Stake ------------------------------------------------------------ Susan K. Jones beneficially owns 3,264,721 shares of the common stock of eMagin Corporation. The amount held includes options to purchase up to 1,676,949 shares of eMagin's common stock. Ms. Jones holds sole voting and dispositive powers over the stock. 3,264,721 shares represents 5.73% of the outstanding common stock of eMagin based on a total outstanding of 56,945,256 shares of common stock, assuming the exercise of outstanding options beneficially owned by Ms. Jones. eMagin is a developer and manufacturer of optical systems and microdisplays for use in the electronics industry. eMagin's wholly-owned subsidiary, Virtual Vision Inc., develops and markets microdisplay systems and optics technology for commercial, industrial and military applications. At June 30, 2003, eMagin's balance sheet shows a total shareholders' equity deficit of about $6 million. ENRON: Inks Stipulations Allowing Direct Solicitation of Votes -------------------------------------------------------------- Eight entities are Fiduciaries to various Indentures and financing transactions: (a) The Bank of New York, as successor Indenture Trustee pursuant to the Supplemental Indenture, dated as of July 19, 2001, among Marlin Water Trust II and Marlin Water Capital Corp. II, United States Trust Company of New York, and Deutsche Bank AG London; (b) The Bank of New York for the holders of the Osprey Notes in the Whitewing Financing Transactions; (c) Credit Suisse First Boston for the E-Next Financing Transaction; (d) JP Morgan Chase Bank for the Choctaw, Zephyrus and Sequoia Financing Transactions; (e) National Westminister Bank Plc for the ETOL Financing Transactions; (f) Deutsche Trustee Company Limited for the holders of certain notes due 2008; (g) The Bank of New York for the five trusts and one special purpose entity in the Yosemite and Credit Linked Notes financing transactions; and (h) The Bank of New York for the Noteholders of European Power Limited Company, a business trust involved in the Margaux Financing Transaction. The Fiduciaries filed proofs of claim against the Enron Corp. Debtors on behalf of the beneficial holders of the Indentures and Financing Transactions. With Judge Gonzalez's permission, the Debtors enter into Stipulations with the Fiduciaries on these terms: A. The Beneficial Holders of the various Indenture Claims on record as of January 6, 2004, will be solicited directly to vote for or against the Plan based on their pro rata share of the Claim, using procedures, ballots and voting instructions set forth in the Solicitation Procedures Order; B. Solicitation Packages will be mailed to the Beneficial Holders of the Claims on or before: -- February 20, 2004 with respect to the Supplemental Indenture Claim; and -- February 24, 2004 with respect to the Whitewing Financing Transactions Claim, the E-Next Financing Transaction Claims the CZS Financing Transaction Claim, the ETOL Financing Transactions Claim, the 2008 Notes Claim; C. The Debtors and the Creditors Committee reserve all rights to challenge the tabulation of votes authorized to be solicited directly pursuant to the Stipulation as individual votes for or against the Plan; and D. If it is later determined that the votes should not be counted as individual votes for or against the Plan, then (1) the votes will be deemed Beneficial Holder votes to instruct the applicable Fiduciary as to how to vote the Fiduciary Claim and (2) the manner and method for tabulating these votes for purposes of determining how the Fiduciary will vote on the Plan will be determined at the Confirmation Hearing. (Enron Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENRON: Registers with SEC as Public Utility Holding Company ----------------------------------------------------------- On March 9, 2004, Enron Corp. registered with the U.S. Securities and Exchange Commission making it a registered holding company under the Public Utility Holding Company Act of 1935. As a registered holding company, Enron and its subsidiaries became subject to the Commission's jurisdiction under the Public Utility Holding Company Act of 1935. ENRON: SEC Gives Formal Stamp of Approval to Chapter 11 Plan ------------------------------------------------------------ Following Enron Corp.'s formal registration under the Public Utility Holding Company Act of 1935, the Securities and Exchange Commission approved three orders regarding Enron and its subsidiaries: * One order, Holding Company Act Release Number 35-27810, approves their plan of reorganization under Chapter 11 of the Bankruptcy Code. * The second order, Holding Company Act Release Number 35- 27809, authorizes Enron and its subsidiaries to engage in certain business transactions through July 31, 2005. * The third order, Holding Company Act Release Number 35-27811, grants Enron's motion for leave to withdraw a previously filed application for exemption under the Public Utility Holding Company Act of 1935 and to dismiss the administrative proceeding the Commission had instituted with regard to that application. The order authorizing the plan of reorganization also permits Enron to solicit in the Bankruptcy Court the votes of Enron's creditors for acceptances or rejections of the plan. As a registered holding company, any sale or other disposition by Enron of Portland General Electric Company, a public utility subsidiary of Enron under the Public Utility Holding Company Act, will be subject to the approval of the Commission. ENRON: Secures SEC Nod to Allow Northern Border's Distributions --------------------------------------------------------------- Northern Border Partners, L.P. (NYSE:NBP) announced that the Securities and Exchange Commission (SEC) granted Enron's request on behalf of NBP to allow NBP to declare and pay distributions. NBP also will be able to invest as much as an additional $1 billion in energy assets, and to issue and sell debt and equity securities without further authorization from the SEC. The approval is part of an SEC order, after Enron registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). The authorizations are effective until the earlier of the deregistration of Enron under PUHCA or July 31, 2005. "This SEC action minimizes the potential for Northern Border's business to be adversely impacted by Enron's regulation under PUHCA," said Bill Cordes, chairman and chief executive officer of Northern Border Partners. Northern Border Partners, L.P. is a publicly traded partnership formed to own, operate and acquire a diversified portfolio of energy assets. The Partnership owns and manages natural gas pipelines and is engaged in the gathering and processing of natural gas. More information can be found at http://www.northernborderpartners.com/ FREESTAR TECHNOLOGY: Delays Filing of December Quarter Results -------------------------------------------------------------- FreeStar Technology Corporation (formerly Freestar Technologies Inc.) is in the process of compiling information for the quarterly period ended December 31, 2003, all of which information has not yet been received. For this reason the Company has informed the SEC that it's filing of financial information will be delayed. The Company expects to report a larger loss in its results of operations for the three months ended December 31, 2003 than it did in the three months ended December 31, 2002, primarily due to an increase in the compensation paid to outside consultants through the issuance of common stock, and options and warrants. The Company also expects revenue to be higher for the three months ended December 31, 2003 as compared to the three months ended December 31, 2002 due to the acquisition of Rahaxi Processing Oy during fiscal year ended June 30, 2003. Because of the complexities involved in the consolidation of the its accounts, Freestar states that it is impractical to provide accurate estimates of the revenue and loss at this time. FreeStar Technology Corporation, was formed on November 17, 1999 as a Nevada corporation. Its principal offices are in Santo Domingo, Dominican Republic. FreeStar has developed software- enabling e-commerce transactions over the Internet, using credit, debit, ATM (with PIN), or smart cards. * * * As reported in the January 27, 2004, issue of the Troubled Company Reporter, the Company cannot be certain that anticipated revenues from operations will be sufficient to satisfy its ongoing capital requirements. Management's belief is based on the Company's operating plan, which in turn is based on assumptions that may prove to be incorrect. If the Company's financial resources are insufficient the Company may require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations. Management plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue as a going concern. Management intends to raise financing through the sale of its stock both on the public market and in private placements to individual investors. Management believes that with this financing, the Company will be able to generate additional revenues that will allow the Company to continue as a going concern. This will be accomplished by hiring additional personnel and focusing sales and marketing efforts on the distribution of product through key marketing channels currently being developed by the Company. The Company also intends to pursue the acquisition of certain strategic industry partners where appropriate. GARDEN RIDGE: Turns to Jefferies & Company for Financial Advice --------------------------------------------------------------- Garden Ridge Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to retain Jefferies & Company, Inc., as their financial advisors. Jefferies provides a broad range of corporate advisory services to its clients including, without limitation, services pertaining to: (i) general financial advice, (ii) mergers, acquisitions, and divestitures, (iii) special committee assignments, (iv) capital raising, and (v) corporate restructurings. The Debtors want Jefferies to: a) become familiar, to the extent Jefferies deems appropriate, with and analyze the business, operations, properties, financial condition and prospects of the Debtors; b) advise the Debtors on the current state of the "restructuring market"; c) assist and advise the Company in developing a general strategy for accomplishing restructuring their businesses; d) assist and advise the Debtors in implementing a plan or plans of restructuring on behalf of the Debtors; e) assist and advise the Debtors in evaluating and analyzing a restructuring including the value of the securities, if any, that may be issued to certain creditors under any restructuring plan or plans; and f) render such other financial advisory services as may from time to time be agreed upon by the Debtors and Jefferies. William Q. Derough, Managing Director from Jefferies reports that the Debtors will pay the firm with: i) $85,000 Monthly Fee; and ii) $1,000,000 Transaction Fee. Headquartered in Houston, Texas, Garden Ridge Corporation -- http://gardenridge.com/-- is a megastore home decor retailer that offers decorating accessories like baskets, candles, crafts, home accents, housewares, party supplies, pictures and frames, pottery, seasonal items, and silk and dried flowers. The company filed for chapter 11 protection on February 2, 2004 (Bankr. Del. Case No. 04-10324). Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million each. GLIMCHER REALTY: Board Declares Q1 Dividends Payable on April 15 ---------------------------------------------------------------- Glimcher Realty Trust (NYSE: GRT) announced that the Company's Board of Trustees has declared a cash dividend of $0.4808 per common share for the first quarter of 2004. The cash dividend is payable on April 15, 2004 to shareholders of record on March 31, 2004. On an annualized basis, this is the equivalent of $1.9232 per share. In addition, the Company declared a cash dividend of $0.5469 per Series F preferred share of beneficial interest for the first quarter of 2004. The cash dividend is payable on April 15, 2004, to shareholders of record on March 31, 2004. On an annualized basis, this is the equivalent of $2.1876 per preferred share. Finally, the Company declared a cash dividend of $0.2088 per Series G preferred share of beneficial interest prorated for the first quarter of 2004. The cash dividend is payable on April 15, 2004, to shareholders of record on March 31, 2004. On an annualized basis, this is the equivalent of $2.0312 per preferred share. About the Company Glimcher Realty Trust, a real estate investment trust, is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust's Series F and Series G preferred shares are listed on the New York Stock Exchange under the symbols "GRT-F" and "GRT-G," respectively. Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. * * * As reported in the January 27, 2004 edition of The Troubled Company Reporter, Standard & Poor's Ratings Services assigned its 'B' rating to Glimcher Realty Trust's $150 million 8.125% series G preferred stock issuance. At the same time, Standard & Poor's affirmed its 'BB' corporate credit rating on Glimcher and its 'B' preferred stock rating. The affirmation impacts $188 million of preferred stock outstanding. The outlook is stable. "The assigned rating acknowledges Glimcher 's below-average business position and its relatively aggressive financial profile," said credit analyst Elizabeth Campbell. "The ratings are supported by a relatively well-occupied and profitable (but comparatively smaller) portfolio, which generates stable, predictable cash flow from a diverse and moderately creditworthy tenant base. Glimcher management has been successful in buying out its joint venture partners' interests in seven mall properties, which helps leverage the company's existing operating platform and reduce complexity. The company now wholly-owns all of its 25 mall properties. However, these strengths are offset by generally higher leverage and historically high bank line usage, a mostly encumbered portfolio and weak coverage of total obligations (including the common dividend), and vacancy issues in its non- core community center portfolio." GLOBAL CROSSING: Publishes Fourth Quarter & Year-End 2003 Results ----------------------------------------------------------------- Global Crossing (Nasdaq: GLBC) reported its preliminary financial results for the fourth quarter and year ended December 31, 2003. In addition, the company announced several key milestones in 2003 and offered an outlook for 2004. "Today Global Crossing is a company with a clean balance sheet, minimal debt, strong corporate governance and a seasoned management team that will steer the company into a leadership position within the telecommunications industry," said John Legere, Global Crossing's chief executive officer. "We expect these achievements, combined with the growth potential in the markets we are pursuing, to position the company for a strong future." 2003 Milestones Global Crossing announced that it reached several significant milestones throughout 2003, including the completion of its financial reorganization on December 9, 2003 after 22 months of operating under bankruptcy protection. Other highlights include: * Consummating a $250 million investment from Singapore Technologies Telemedia for a 61.5 percent equity stake in the company; * Establishing a new board of directors, comprised of leaders with distinguished backgrounds in industry and government; * Completing one of the most extensive Network Security Agreements ever with the U.S. Government, setting a new security standard for the industry; * Signing more than 4,000 new and renewal customer contracts in 2003 totaling $1 billion in revenue over the current terms of the contracts, including agreements with Vonage and the UK's Immigration and Nationality Directorate; * Maintaining average network availability at 99.999 percent, the highest industry standard, for the second year in a row; * Growing IP traffic by more than 130 percent, from more than 29 Gbps to 68 Gbps; and * Carrying a total of 18 billion minutes on its VoIP (Voice over IP) platform, one of the largest in the world, up from 8 billion in 2002. 2003 Year-End Financial Results Revenue Global Crossing's results for 2003 principally reflect the operations of the company prior to completion of its restructuring. Results for the fourth quarter include 22 days of operations following emergence from bankruptcy. "Global Crossing was able to largely maintain the revenue base by focusing on customer retention, rather than acquisition, during our restructuring," noted Legere. "Now that we have emerged, we expect to grow our business by both adding new customers and enhancing services for existing customers." For the year ended December 31, 2003, Global Crossing reported total revenue of $2.932 billion, a six percent decrease from the $3.116 billion reported for the prior year. Revenue for the year was impacted by the company's extended period in bankruptcy as well as continued pricing pressure in the marketplace. Total revenue consisted of telecom services revenue of $2.763 billion and Global Marine revenue of $169 million. Of the total telecom services revenue reported for 2003, commercial services accounted for 38 percent compared to 43 percent in 2002, carrier services for 61 percent compared to 55 percent in 2002, and consumer services for one percent compared to two percent in 2002. The shift towards carrier services in year- over-year business mix was due in part to carrier customers' greater willingness to utilize services from providers undergoing restructuring. Of the commercial services revenue in 2003, 53 percent was attributable to voice services compared to 54 percent in 2002, and 47 percent was attributable to data services compared to 46 percent in 2002. Of the carrier services revenue in 2003, 83 percent was attributable to voice services compared to 80 percent in 2002, and 17 percent was attributable to data services compared to 20 percent in 2002. While data volume grew throughout Global Crossing's Chapter 11 proceedings, revenue was pressured by price competition. Cost Management "We continued to make strides in controlling operating expenses throughout 2003, while maintaining a high level of customer satisfaction and network reliability," continued Legere. "Moreover, we continued the implementation of our industry-leading VoIP network, which we expect to carry more than 40 percent of our overall voice traffic by the end of 2004." Cost of access declined six percent to $1.915 billion for 2003 (representing 69 percent of telecom services revenue), compared to $2.047 billion for 2002 (representing 71 percent of telecom services revenue). Consolidated third party maintenance costs were $112 million in 2003, compared to $158 million in 2002. Consolidated operating expenses for 2003 were $908 million, compared to $1.208 billion in 2002. Telecom services operating expenses were $741 million in 2003, compared to $967 million in 2002. Global Marine operating expenses were $167 million for 2003, compared to $241 million in 2002. Global Crossing's operating expense reductions reflected a substantial decrease in employee and facility-related expenses. In addition to cost savings, these measures improved productivity and efficiency in the operation of the company's network. Earnings Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) for 2003 were $12 million, compared to a loss of $297 million for 2002. Global Marine EBITDA was $30 million, compared to $29 million in 2002. Telecom EBITDA for 2003 was a loss of $18 million, compared to a loss of $326 million in 2002. Net income in 2003 was $24.730 billion, which included a net gain of $24.842 billion related to the reorganization. This net reorganization gain in income resulted from the accounting impact of recording the company's new debt and equity structure, the write down of pre-petition liabilities and deferred revenues from prior period Indefeasible Rights of Use (IRU) sales, vendor settlements, restructuring costs, retention plan costs and professional fees related to the bankruptcy. Pursuant to Regulation G, a reconciliation of EBITDA to the company's net income for the relevant periods is included in the attached financial statements. Capital Expenditures For 2003, cash capital expenditures totaled $152 million compared to $281 million for 2002. With a core network that was substantially completed in June 2001 and as the company's focus has evolved from network construction to service capabilities, capital expenditures in 2003 were comprised mostly of success- based capital spending, which is spending that is tied directly to revenue. This includes capital spending on edge equipment and customer premise equipment. Fourth Quarter 2003 Financial Results Revenue For the fourth quarter of 2003, total revenue was $719 million compared to $765 million for the same period in 2002. The decrease in total revenue was primarily attributable to the company's delayed emergence from Chapter 11 and continued pricing pressures resulting from a competitive market, partially offset by growth in the company's carrier business segment. Total revenue consisted of telecom services revenue of $679 million and Global Marine revenue of $40 million. Of the total telecom services revenue reported for the fourth quarter of 2003, 36 percent was attributable to commercial services, 63 percent to carrier services, and one percent to consumer services. The mix of voice and data was comparable to that of the full year 2003. Cost Management For the fourth quarter of 2003, cost of access declined 12 percent to $471 million (representing 69 percent of telecom services revenue) compared to $534 million (representing 75 percent of telecom services revenue) for the same period in 2002 as a result of the company's continued initiatives to reduce access costs. Consolidated third party maintenance costs for the fourth quarter were $27 million compared to $28 million in the fourth quarter of 2002. Consolidated operating expenses for the fourth quarter of 2003 were $208 million compared to $265 million for the same period in 2002. Telecom services operating expenses declined 12 percent to $178 million, compared to $203 million in the same period of 2002, as a result of the company's effort to streamline global operations and a one-time benefit from a UK property tax rebate of $13 million, partially offset by the hiring of additional salespeople. Global Marine's operating expenses were $30 million, a 52 percent decline from $62 million in 2002, resulting primarily from restructuring efforts, which significantly reduced vessel costs, personnel and overhead expenses between the two periods, as well as reduced project costs. Earnings For the fourth quarter of 2003, EBITDA improved to $13 million as compared to a loss of $62 million for the same period in 2002. Global Marine EBITDA was $13 million for the fourth quarter of 2003 compared to a loss of $5 million for the same period in 2002. Telecom EBITDA was break-even in the fourth quarter of 2003 compared to a loss of $57 million for the same period in 2002. Net income in the fourth quarter of 2003 was $24.879 billion, which included $24.882 billion in reorganization-related gains described above. Capital Expenditures For the fourth quarter of 2003, cash capital expenditures totaled $33 million, compared to $91 million for the fourth quarter of 2002, driven by the need to deploy success-based capital to meet customer needs. Key Notes to Evaluate Future Financial Performance As a result of Global Crossing's emergence from bankruptcy, certain factors impacted the comparability of results for the periods prior to December 9, 2003 with results for periods after that date. While in bankruptcy, the company reported certain costs, including vendor settlements, bonus and other retention plan costs, restructuring costs, and fresh start adjustments as reorganization items, below operating income in accordance with bankruptcy accounting standards under U.S. Generally Accepted Accounting Principles (GAAP). Some of these costs will no longer exist in future periods, while others will continue to exist but will directly impact operating income. In addition, upon emergence from bankruptcy, Global Crossing adopted fresh start accounting provisions, which required the company to adjust the carrying value of its assets and liabilities to their estimated fair value. The reorganization also resulted in a new debt and equity structure as well as a significant reduction in ongoing contractual commitments. The principal factors impacting the comparability of pre-emergence results with post-emergence results are as follows: * Elimination of $8 billion in liabilities as a result of the reorganization; * Recapitalization of the business, which included the elimination of $16 billion in common and preferred equity, and $25 billion in accumulated losses as of the emergence date; * Elimination of the majority of the $1.4 billion liability representing deferred revenue from prior period IRU sales. While a non-cash event, this will reduce future revenue and EBITDA by about $20 million per quarter starting in the first quarter of 2004; * Substantial completion of the company's restructuring resulting in elimination of most associated costs. Pre- emergence, significant restructuring costs were recorded as reorganization costs, where they did not impact EBITDA; * One-time rebate on UK property taxes of $13 million recorded in the fourth quarter of 2003; and * Accrual of normal operating expenses such as incentive cash compensation, which was recorded as reorganization costs prior to emergence and are expected to be in the range of $8-12 million per quarter in 2004. On December 9, 2003, the company issued employee stock options of approximately 2.2 million shares. On March 8, 2004, the company issued additional awards of approximately 1.2 million shares of restricted stock units. Upon emergence from bankruptcy, the company elected to adopt fair value basis of accounting for stock and stock options under SFAS No. 123 as opposed to the predecessor entity's policy of the intrinsic method under APB No. 25. This will result in stock compensation expense in 2004 and future periods that was not present in historical periods. Stock compensation expense is estimated to be $7 million to $8 million per quarter in 2004. 2004 Outlook Global Crossing offered the following 2004 outlook: * The company is bringing to market an advanced suite of IP and data products. These service offerings meet the requirements for high performance IP data networking, VoIP, IP Video and other mission-critical business applications for both enterprise and carrier customers. * Global Crossing is reformulating its marketing strategy to promote aggressive customer acquisition. Specific target markets include regional and multi-national enterprises, federal government agencies, international and domestic carriers, ISP's and wireless providers. The company's distribution system has been realigned to target these customers using both direct and indirect channels, including partnerships with systems integrators to reach the large enterprise and government segments. * The company anticipates that its customer segmentation strategy and ability to migrate customers to advanced IP services will support a shift in the revenue mix towards higher margin services and customers. * Global Crossing's carrier business is an important part of its heritage and is expected to remain key to its business going forward throughout the execution of the company's segmentation strategy. Further, the company anticipates that the carrier market will enhance revenue and margin, as a result of increased network utilization, which leads to greater economies of scale. * Global Crossing's ability to provide voice services over a network optimized for IP provides unit cost efficiencies that drive higher commercial penetration. * The company continues to pursue a number of key cost of access initiatives including strategic purchasing agreements, shifting of suppliers and network optimization. These initiatives are expected to promote margin improvement. In addition, Global Crossing continues to review its lines of business and address volatile and low margin services, particularly in the international long distance reseller market, by tightening the terms for pricing and payment. Management anticipates that these initiatives will improve cash flow, but will reduce revenue for these services by approximately $75 to $125 million annually. Finally, in an effort to further sharpen its strategic focus, Global Crossing has retained Citigroup Global Markets Inc. as its financial advisor to assist it in exploring strategic alternatives regarding its Global Marine installation and maintenance services business, including the potential sale of that business. Any strategic transaction involving Global Marine would require approval of Global Crossing's Board of Directors. Global Marine expects maintenance revenue to decline in early 2004 due in large part to the expiration of a large maintenance contract. Global Marine expects to see some recovery in installation revenue in the second half of 2004 by applying its acknowledged market leadership into new areas of marine-activity beyond telecommunications cable engineering. Financing and Liquidity As of December 31, 2003, cash and cash equivalents were reported at approximately $311 million. As a result of the restructuring, total debt as December 31, 2003 was $200 million. As disclosed in its filings with the Securities and Exchange Commission in December 2003, Global Crossing will require up to $100 million in additional financing to execute its business plan through the end of 2004. The company is in active discussions with financial institutions and is confident it will be able to raise $100 million or more of new financing in 2004. ABOUT GLOBAL CROSSING Global Crossing (Nasdaq: GLBC) provides telecommunications solutions over the world's first integrated global IP-based network. Its core network connects more than 200 cities and 27 countries worldwide, and delivers services to more than 500 major cities, 50 countries and 5 continents around the globe. The company's global sales and support model matches the network footprint and, like the network, delivers a consistent customer experience worldwide. Global Crossing IP services are global in scale, linking the world's enterprises, governments and carriers with customers, employees and partners worldwide in a secure environment that is ideally suited for IP-based business applications, allowing e- commerce to thrive. The company offers a full range of managed data and voice products including Global Crossing IP VPN Service, Global Crossing Managed Services and Global Crossing VoIP services, to more than 40 percent of the Fortune 500, as well as 700 carriers, mobile operators and ISPs. For more information, visit http://www.globalcrossing.com/ GMAC COMM'L: S&P Cuts Series 2001-C1 Notes to Low-B & Junk Levels ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on seven classes of GMAC Commercial Mortgage Securities Inc.'s series 2001- C1. At the same time, ratings are affirmed on the remaining classes from the same series. The lowered ratings result from concerns relating to the specially serviced assets and deteriorating credit fundamentals. The deteriorating fundamentals are evidenced by the sizeable watchlist and the number of assets reporting debt service coverage (DSC) of less than 1.0x. Fifteen percent of the pool by balance has DSC below 1.0x. The affirmed ratings reflect credit support levels that adequately support the existing ratings under various stress scenarios. As of February 2004 distribution date, there are four specially serviced assets totaling $54.0 million (or 6.4% of the pool). One of the assets is REO with a balance of $14.0 million, and three are identified as 90-plus days delinquent (totaling $40.0 million). All other assets in the pool are current, with the exception of two loans totaling $16.6 million, which were reported as 30-days delinquent. The two assets are likely to become specially serviced in the near term. The REO asset is a 198,374-sq.-ft.-office property with a total exposure of $15.2 million located in Dallas, Texas. It has been REO since December of 2002. Occupancy at the property was 43.3% in December 2003, at which time two significant tenants vacated 46,430 sq. ft. of the space. Market occupancy is at 69%, as reported by the servicer, GMAC Commercial Mortgage Corp. (GMACCM). An appraisal reduction amount (ARA amount) of $5.2 million is in place, based on a November 2002 appraisal, which valued the property at $9.0 million ($45 per sq. ft.). GMACCM has retained a broker, who is marketing the property for sale. The July 2003 property inspection ranked the property as fair. Two of the 90-day delinquent mortgages are secured by multifamily properties, while the third is secured by an office property. One of the multifamily loans, with a $30.6 million balance, is the fifth-largest loan in the pool. It is secured by a 716-unit multifamily property located in Norcross, Georgia. The property was transferred to the special servicer in December 2003 and a receiver was put in place as of December 2003. According to the borrower, the cash flow shortages resulted from efforts to replace polybutylene pipes in 20 out of 35 buildings. Mold has also been discovered at the property. GMACCM has ordered Phase I mold remediation reports and property condition reports. As of January 2004, the property was 82% occupied, slightly under market occupancy levels of 85%. The property reported a low DSC of 0.93x at October 2003, down from 1.28x at issuance. The other $6.5 million multifamily mortgage is secured by a 160-unit apartment building in Concur, N.C. (near Charlotte). Occupancy levels are 83% in what is currently a soft market, driven by unemployment levels of 10.4%. Year-end 2003 DSC was 0.82x, down from 1.36x at issuance. After the February 2004 remittance report date, the borrower paid the mortgage through Feb. 1, 2004. The office mortgage is secured by a 45,900-sq.-ft. property in Hauppauge, N.Y., and is encumbered by a $2.9 million mortgage. GMACCM has filed for foreclosure and the appointment of a receiver due to a difficult borrower who has consistently shorted tax and insurance escrows. Reported occupancy and DSC are 83% and 1.50x (YTD September 2003), respectively, down from 100% and 1.67x at issuance. The September 2002 inspection report ranks the property as good. The two mortgages reported as 30-days delinquent are both secured by multifamily properties, with balances of $10.6 million and $6.0 million. Limited details regarding these properties are available at this time. The $10.6 million loan, which is secured by a 375-unit property in Texas, reported a 1.08x DSC at year-end 2002, while the $6.0 million mortgage is secured by a 200-unit property in Nevada, and reported a DSC of 0.60x, also at year-end 2002. GMACCM reported 25 mortgages totaling $207.1 million (or 23.9% of the pool) on its watchlist. The loans are on the watchlist for a variety of reasons. Many appear due to deteriorating occupancy levels. Notable assets include the second- and sixth-largest loans in the pool. The second-largest loan, The Peaks at Papago, has a balance of $39.7 million, and is secured by a 768-unit multifamily property in Phoenix, Arizona. The property appears on the list due to low DSC (0.96 at September 2003). The borrower expects improved financial performance because occupancy levels have increased to 91.8% in September 2003 from 86% in February 2003 (86%) and from 73.5% in June 2002 (73.5%). The property inspection ranks the site as excellent. The sixth-largest loan is secured by a Residence Inn by Marriott in Los Angeles, California. The loan has a current balance of $23.9 million and was recently added to the watchlist due to low DSC (1.0x at June 2003). GMACCM reports deteriorating performance for the hotel with an occupancy level of 82.2%, ADR $110.21 and RevPAR $90.63, when compared to at issuance figures of 80%, ADR $129.72 and RevPAR of $104.20. The slight increase in occupancy is attributed to a decline in the average room rate. As of February 2004, the pool consisted of 101 fixed-rate mortgages loans, with an aggregate principal balance of $842.4 million, down from $864.1 million at issuance. GMACCM, as master servicer, provided year-end 2002 NCF for 91.8% of the pool. Based on this information, Standard & Poor's calculated the weighted average DSC of the pool to be 1.29x, down from 1.31x at issuance. The weighted average DSC of the top 10 loans, which comprise 35% of the pool, declined to 1.23x from 1.28x at issuance. The second-, fifth-, and sixth-largest loans, which are either on the watchlist or being specially serviced, have experienced DSC declines of 20% or more since issuance. Property types in excess of 10% included multifamily (28.5%), retail (27.4%), office (22.4%), and industrial (6.2%). The pool is geographically diverse, with properties located in 28 states. The only state with a concentration in excess of 10% is California (17.3%). To date, the pool has experienced no realized losses. Standard & Poor's stressed various loans in its analysis and the resultant credit enhancement levels adequately support the rating actions. RATINGS LOWERED GMAC Commercial Mortgage Securities Inc. Mortgage pass-through certificates series 2001-C1 Rating Class To From Credit Support H BB BB+ 6.15% J BB- BB 5.39% K B+ BB- 4.62% L B B+ 3.08% M B- B 2.57% N CCC+ B- 2.05% O CCC- CCC 1.54% RATINGS AFFIRMED GMAC Commercial Mortgage Securities Inc. Mrtgage pass-through certificates series 2001-C1 Class Rating Credit Support A-1 AAA 24.6% A-2 AAA 24.6% X-1 AAA - X-2 AAA - B AA 19.8% C A 15.9% D A- 14.4% E BBB+ 12.3% F BBB 10.8% G BBB- 9.23% GMAC COMM'L: Fitch Takes Rating Actions on Series 2000-C2 Notes --------------------------------------------------------------- Fitch Ratings affirms GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2000-C2 as follows: --$92.8 million class A-1 'AAA'; --$485.5 million class A-2 'AAA'; --Interest only classes X 'AAA'; --$31 million class B 'AA'; --$28 million class C 'A'; --$10.6 million class D 'A-'; --$19.3 million class E 'BBB'; --$9.7 million class F 'BBB-'; --$4.8 million class M 'C'; --$4.1 million class N 'D'. Fitch does not rate classes G, H, J, K, L, and O certificates. The rating affirmations reflect the consistent loan performance and scheduled amortization of the pool's collateral balances. The certificates are collateralized by 127 mortgage loans and an $88.1 million Freddie Mac guaranteed multifamily gold mortgage participation certificate secured by two loans (12%) on five multifamily properties, considered to be 'AAA' in Fitch's analysis. The 2002 weighted average debt service coverage ratio (DSCR), for 94.7% of the pool that reported is 1.44 times (x), compared to 1.36x at issuance for the same loans. Currently, seven loans (5.7%) are in special servicing. The largest is secured by a retail property in Sterling Heights, MI (1.2%) and is currently 60 days delinquent. The loan initially transferred to special servicing when the borrower requested lender consent for the substitution of the General Partner. In addition, the largest tenant, Farmer Jack (40%), has vacated their space but continues to pay rent. The remaining anchor is a CVS Drugstore. The second largest loan in special servicing is secured by a retail property in Meriden, CT. Ames, the property's anchor tenant, rejected its lease after filing for Bankruptcy, which significantly reduced occupancy to 47%. The special servicer has commenced foreclosure procedures while workout discussions are ongoing. Fitch will closely monitor the resolution of this loan. As of the February 2004 distribution date, the pool's aggregate certificate balance has been reduced by 16.32% since issuance, to $735.2 million from $773.7 million. GOLDMAN SACHS: S&P Affirms Rating on Class B Notes at B- -------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on the class A notes issued by Goldman Sachs Asset Management CBO Ltd., a high- yield arbitrage CBO, and removed it from CreditWatch with positive implications, where it was placed Feb. 24, 2004. At the same time, the rating on the class B notes is affirmed. The rating on the class A notes was previously lowered Jan. 28, 2003 and July 7, 2003; the rating on the class B notes was previously lowered May 16, 2002, Jan. 28, 2003, and July 7, 2003. The raised rating reflects factors that have positively affected the credit enhancement available to support the class A notes since the July 7, 2003 rating action. The primary factor was an increase in the level of overcollateralization available to support the notes (see transaction information). Since the July 7, 2003 rating action, the transaction has paid down a total of $33.187 million to the class A notes, $20.898 million of which was paid on the January 2004 payment date. Standard & Poor's also noted that enhanced recovery valuations on both performing and defaulted collateral currently held in Goldman Sachs Asset Management CBO Ltd. contributed to the increase in the amount of credit enhancement available to support the class A notes. RATING RAISED AND REMOVED FROM CREDITWATCH POSITIVE Goldman Sachs Asset Management CBO Ltd. Rating Class To From A AA- A+/Watch Pos RATING AFFIRMED Goldman Sachs Asset Management CBO Ltd. Class Rating B B- TRANSACTION INFORMATION Issuer: Goldman Sachs Asset Management CBO Ltd. Co-issuer: Goldman Sachs Asset Management CBO Corp. Collateral manager: Goldman Sachs Asset Management Underwriter: Goldman Sachs Trustee: JPMorganChase Bank Transaction type: Cash flow arbitrage high-yield CBO TRANCHE INITIAL LAST CURRENT INFORMATION REPORT ACTION ACTION Date (MM/YYYY) 6/1999 7/2003 3/2004 Class A note rtg. AAA A+ AA- Class A OC ratio 140.5% 119.55% 129.08% Class A OC ratio min. 123.0% 123.0% 123.0% Class A note bal. $276.00mm $245.42mm $212.235mm Class B note rtg. A- B- B- Class B OC ratio 122.7% 102.8% 108.61% Class B OC ratio min. 110.3% 110.3% 110.3% Class B note bal. $40.00mm $40.00mm $40.00mm PORTFOLIO BENCHMARKS CURRENT S&P Wtd. Avg. Rtg. (excl. defaulted) B+ S&P Default Measure (excl. defaulted) 4.18% S&P Variability Measure (excl. defaulted) 2.37 S&P Correlation Measure (excl. defaulted) 1.23% Oblig. Rtd. 'BBB-' and above 3.92% Oblig. Rtd. 'BB-' and above 21.81% Oblig. Rtd. 'B-' and above 85.83% Oblig. Rtd. in 'CCC' range 9.95% Oblig. Rtd. 'CC', 'SD' or 'D' 4.22% Obligors on Watch Neg (excl. defaulted) 7.72% Obligors on Watch Pos excl. defaulted) 2.94% S&P RATED LAST ACTION CURRENT OC (ROC) RATING RATING ACTION Class A notes 113.63% (A+/Watch Pos) 112.18% (AA-) Class B notes 113.42% (B-) 113.30% (B-) GRANDE COMMS: S&P Rates $136 Million Senior Secured Notes at CCC+ ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to San Marco, Texas-based integrated telecommunications and cable TV provider Grande Communications Holdings Inc.'s $136 million senior secured notes due 2011, issued under Rule 144A with registration rights. The notes were sold in conjunction with common stock warrants. The notes are guaranteed on a senior secured basis by all of the company's restricted subsidiaries, which represent its operating subsidiaries. Proceeds will be used to repay bank debt, capital expenditures, working capital, and operating expenses. The 'CCC+' corporate credit rating on Grande Communications was affirmed. The outlook is developing. The notes are rated at the same level as the corporate credit rating, as they have a first-priority lien on substantially all the assets of Grande, including its plant, property, and equipment. The rating on the earlier proposed $125 million senior unsecured notes due 2014, which have been replaced by the new secured notes, was withdrawn. "The ratings reflect the high degree of business risk facing Grande as an integrated telecommunications and cable TV provider operating as (1) an over-builder to the existing incumbent cable operator and (2) a competitive local exchange carrier (CLEC) entity competing primarily with integrated telephone provider SBC Communications Inc.," said Standard & Poor's credit analyst Catherine Cosentino. In most of the company's six Texas markets, Time Warner Cable is the incumbent cable provider. Grande has been able to achieve customer penetration of marketable homes and small businesses passed of about 35%. However, further gains could be stifled if Time Warner becomes more aggressive in its win-back efforts, or if these properties are ever sold to another cable operator. Cable companies such as Time Warner Cable are also expected to expand their offerings of inexpensive telephony with the adoption of voice over Internet protocol (VoIP) technology in their networks. The company's ability to continue to grow related services, such as consumer broadband and telephony, would likewise be adversely affected by more aggressive marketing and customer service efforts by the incumbent local telephone companies serving these areas. SBC also represents a formidable competitor, given its large scale and substantial financial resources. Business risk is also adversely affected by Grande's small scale relative to that of the incumbent cable TV companies. Given its lack of bargaining power, the company's ability to contain programming cost increases is limited, and its ability to extend its network to additional customers will be somewhat constrained by the high fixed costs of such an endeavor. Given its smaller size, the company probably also pays more for equipment relative to its larger MSO peers. Despite these challenges, Grande has been able to establish a combined customer base of about 103,000 cable TV and telephony subscribers. The company has also been successful in selling bundled services to its cable customers through significant discounting relative to the incumbent telephone and cable TV providers. The vast majority of cable subscribers take at least two services. Grande's CLEC operations, which consist of carrier, data, broadband transport, and managed services, provided about 63% of the company's overall revenues for 2003, but only about 54% of its gross profits, due to severe price competition in the carrier services business. This business has been adversely affected by the loss of a major switched termination contract with MCI, which voided the contract in its bankruptcy proceedings. This represents a significant portion of the CLEC's combined revenues, and the loss will constrain overall revenues from this business over the next few years. GREY WOLF: S&P Affirms BB- Rating & Revises Outlook to Negative --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit and senior unsecured ratings on Grey Wolf Inc., and revised its outlook to negative following a review of Grey Wolf's proposed acquisition of New Patriot Drilling Corp. Houston, Texas-based Grey Wolf has about $235 million worth of debt. "The acquisition of New Patriot Drilling Corp. for about $51 million dollars, $30 million of which will be funded with cash, will result in reduced liquidity for Grey Wolf at a time of diminished cash flow and a still-weak deep drilling market," noted Standard & Poor's credit analyst Paul B. Harvey. "Since the June 2003 refinancing of its 8.875% $165 million notes, liquidity (cash and available borrowing capacity) has decreased by nearly 40% including the New Patriot acquisition, with cash on hand dropping by nearly $60 million," he continued. Anticipated improvement in Grey Wolf's key deep drilling market has not reached expected levels, resulting in weakened cash flows and profitability. Although the acquisition of New Patriot will help Grey Wolf increase its position in the growing Rocky Mountain market, Standard & Poor's expected a greater equity component to this acquisition. The ratings on Grey Wolf, the second-largest U.S. onshore contract drilling company in intermediate and deep drilling markets after Nabors Industries Inc., reflect the company's participation in an intensely competitive, volatile, and cyclical industry and its aggressive debt leverage. Mitigating factors include Grey Wolf's strong liquidity and a favorable intermediate term outlook for the onshore contract drilling industry. The negative outlook reflects the reduced liquidity resulting from the New Patriot acquisition at a time of continuing weak industry conditions and cash flow for Grey Wolf. If significant liquidity erosion continues while industry conditions fail to improve, negative rating actions are likely. HEALTHSOUTH: Names Diane Munson as Outpatient Rehab Unit President ------------------------------------------------------------------ HealthSouth Corporation (OTC Pink Sheets: HLSH) has named Diane L. Munson as President of its Outpatient Rehabilitation Division, effective March 15, 2004. Munson will lead HealthSouth's Outpatient Rehabilitation Division, which includes a nationwide network of approximately 900 facilities located in 44 states. "We're delighted to welcome Diane to the HealthSouth team," said Bob May, HealthSouth's Interim Chief Executive Officer who also has been serving as Interim President of the Outpatient Rehabilitation Division. "Diane's extensive industry experience and proven track record of improving operations under her management make her an ideal choice to lead HealthSouth's Outpatient Division." Munson has more than 25 years of general management experience in healthcare operations. Most recently, she served as Vice President and General Manager for Beverly Enterprises, Inc. She also has served as President and Chief Executive Officer of Fluidsense Inc., and has held senior executive positions with Baxter International Inc. and Caremark International Inc. About HEALTHSOUTH HealthSouth is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations nationwide and abroad. HealthSouth can be found at http://www.healthsouth.com/ * * * As reported in Troubled Company Reporter's December 26, 2003 edition, Standard & Poor's Ratings Services withdrew its ratings on HEALTHSOUTH Corp. due to insufficient information about the company's operating performance, including a lack of audited financial statements. Standard & Poor's does not expect the company to be able to provide restated historical financial statements, or to be able to generate current-period financial statements, until at least the second half of 2004. The company has not filed audited financial statements since Sept. 30, 2002. On April 2, 2003, Standard & Poor's lowered its ratings on HEALTHSOUTH Corp. to 'D' after the company failed to make required principal and interest payments on a subordinated convertible bond issue that matured on April 1, 2003. HEALTHSOUTH is currently embroiled in extensive litigation over several years of allegedly fraudulent financial statements and is understood to be in discussions with its creditors about restructuring its debt. Nearly all members of senior management have left the company, and most of the important corporate functions have been assumed by professional advisors. Although HEALTHSOUTH continues to operate its business, neither its operations nor its financial performance can be assessed by Standard & Poor's with confidence until the company can generate audited financial statements. HOST MARRIOTT: S&P Assigns Low-B Rating to Proposed Sr. Debentures ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' rating to Host Marriott LP's proposed $375 million cash pay exchangeable senior debentures due 2024. Proceeds from the notes will be used to redeem a portion of Host Marriott LP's existing $1.2 billion 7.875% series B senior notes due 2008 and to pay fees and expenses. Concurrently, Standard & Poor's affirmed its ratings, including its 'B+' corporate credit rating, on Host Marriot Corp. The outlook is stable. Bethesda, Md.-based Host is an upscale hotel owner and operator. Approximately $5.5 billion in debt was outstanding on Dec. 31, 2003. Host Marriott LP is a limited partnership whose sole general partner is Host Marriott Corp. (jointly Host) The proposed convertible debt will be a senior obligation of Host Marriott L.P., ranking pari passu in right of payment with of its other outstanding or future unsubordinated indebtedness, including its existing senior notes and its credit facility. The proposed notes will be secured by a pledge of capital stock of those subsidiaries; this pledge is shared equally with Host Marriott L.P.'s existing senior notes and credit facility. "The ratings for Host reflect its very high debt leverage and the expectation that credit measures will remain weak for the ratings for several quarters, given Standard & Poor's expectation for a gradual lodging industry recovery," said Standard & Poor's credit analyst Sherry Cai. "These factors are partially offset by the high quality of Host's hotels, the geographic diversity of its portfolio, and its experienced management team. Moreover, the company's good liquidity position and historically good access to both debt and equity capital markets are viewed favorably," added Ms. Cai. HUGHES ELEC.: GM Investment Funds Panel Reports 19.7% Equity Stake ------------------------------------------------------------------ Investment Funds Committee of the Board of General Motors Corporation, as a Fiduciary of Certain Pension Funds beneficially owns 272,321,309 shares of the common stock of Hughes Electronic Corporation, which represents 19.7% of the outstanding common stock of Hughes Electronic. The Committee holds shared voting and dispositive powers over the stocks. Subject to the discussion below, as of December 31, 2003, the Committee may be deemed the beneficial owner, on behalf of the Hourly Plan, the VEBA and the Salaried Plan, for purposes of Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended, of a total of 272,321,309 shares of common stock (141,428,538 shares on behalf of the Hourly Plan, 50,876,159 shares on behalf of the VEBA, and 80,016,612 shares on behalf of the Salaried Plan), as to all of which shares the Committee may be deemed to share the power to direct the voting or disposition thereof, representing approximately 19.7% of the shares of common stock outstanding (10.2% on behalf of the Hourly Plan, 3.7% on behalf of the VEBA, and 5.8% on behalf of the Salaried Plan) (based on 1,383,590,449 shares outstanding). The Committee is a named fiduciary (in accordance with ERISA) of the Hourly Plan, the VEBA and the Salaried Plan and in such capacities has and exercises the power to appoint, and terminate the appointment of, investment managers for holdings of securities or other property contributed to the Plan, the VEBA and the Salaried Plan by GM. The Committee, as a named fiduciary for the Hourly Plan, the VEBA and the Salaried Plan, has also retained General Motors Investment Management Corporation ("GMIMCo"), a wholly-owned subsidiary of GM that is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended, to perform certain investment management and administrative functions for the Hourly Plan, the VEBA and the Salaried Plan, including to appoint independent investment managers for all other holdings of the Hourly Plan, the VEBA and the Salaried Plan. GMIMCo has appointed various independent investment managers for the Hourly Plan, the VEBA, and the Salaried Plan, some of whom have authority to cause the Hourly Plan, the VEBA and the Salaried Plan to acquire publicly traded equity securities, which may include shares of common stock. Pursuant to appointment by the Committee, at December 31, 2003, (i) United States Trust Company of New York, as trustee and investment manager, held and had the power to vote and dispose of 141,428,538 shares of common stock owned by the Hourly Plan, 50,792,438 shares of common stock owned by the VEBA, and 80,016,612 shares of common stock owned by the Salaried Plan (together, 272,237,588 shares), representing approximately 10.2%, 3.7%, and 5.8% respectively, (together 19.7%) of the outstanding shares of common stock and (ii) State Street Bank and Trust Company, as trustee and investment manager, held and had the power to vote and dispose of 83,721 shares of common stock owned by the VEBA. Neither the Committee nor GMIMCo has directed U.S. Trust or State Street with respect to the voting or the disposition or continued ownership by the Hourly Plan, the VEBA or the Salaried Plan of any shares of common stock over which they had management. Although the Committee does not exercise voting or dispositive powers with respect to any shares of common stock owned by the Hourly Plan, the VEBA or the Salaried Plan, it may be deemed to be a beneficial owner, on behalf of the Hourly Plan, the VEBA and the Salaried Plan, for purposes of Sections 13(d) and 13(g) of the Act of the shares of common stock held in trust and managed for the Hourly Plan, the VEBA and the Salaried Plan by U.S. Trust or State Street because it has the power under certain circumstances to terminate within 60 days the appointment of U.S. Trust and State Street as trustees and investment managers for the Hourly Plan, the VEBA or the Salaried Plan, as the case may be, with respect to such shares. Notwithstanding the foregoing, the filing of the ownership statement is not an admission that the Committee is, for the purposes of Section 13(d) or 13(g) of the Act, a beneficial owner of any of the securities covered by the statement and such beneficial ownership is disclaimed. * * * As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services revised its CreditWatch listing on Hughes Electronics Corp. and related entities to positive from developing following the company's announcement that News Corp. Ltd., (BBB- /Stable/--) will acquire 34% of the company. The ratings had been on CreditWatch developing, reflecting uncertainty regarding Hughes' future ownership. Following a review of Hughes' operating and financial prospects under its new ownership structure, a ratings upgrade could occur once the deal is completed. However, the magnitude of a potential upgrade may be constrained in light of News Corp.'s minority stake. Ratings List: To From Hughes Electronics Corp. Corporate credit B+/Watch Pos/-- B+/Watch Dev/-- DirecTV Holdings LLC Senior secured debt BB-/Watch Pos/-- Senior unsecured debt B/Watch Pos/-- PanAmSat Corp. Corporate credit B+/Watch Pos/-- B+/Watch Dev/-- Senior secured debt BB-/Watch Pos/-- BB-/Watch Dev/-- Senior unsecured debt B-/Watch Pos/-- B-/Watch Dev- INTEGRATED HEALTH: IHS Liquidating Avoids Wind-Up Obligations ------------------------------------------------------------- IHS Liquidating LLC asks the Court to: (a) absolve it of responsibility or liability associated with the wind-up and dissolution of Integrated Health Services, Inc., including the disposition of the capital stock of IHS Acquisition No. 100, Inc.; or (b) in the alternative, empower it to take action as may be necessary to wind-up the affairs of IHS and dissolve it under applicable law, including disposition of the IHS 100 Stock. The confirmed IHS Plan provided for the implementation of a Stock Purchase Agreement dated January 28, 2003 between IHS and Abe Briarwood Corp. Pursuant to the Plan and the SPA, all the Debtors' assets and liabilities, other than certain excluded assets and excluded liabilities, would become the assets and liabilities of Briarwood. However, Alfred Villoch, III, Esq., at Young Conaway Stargatt & Taylor, in Wilmington, Delaware, relates, various disputes arose between IHS and Briarwood in connection with the consummation of the transactions contemplated in the SPA. One dispute relate to the Debtors' interest in a skilled nursing facility in Oklahoma, known as the Integrated Health Services at Bryant Nursing Center, Facility No. 20685. Briarwood was supposed to acquire the Oklahoma Facility and obtain the regulatory licenses and approvals necessary for the transition of the Debtors' interests in the Oklahoma Facility to Briarwood or its designee. Briarwood contracted with an affiliate of Trans Health Care, Inc. to operate the Oklahoma Facility and various other facilities from the relevant Debtors. In July 2003, IHS was informed that Briarwood was not likely to obtain the required regulatory and licensing approval to transfer the Oklahoma Facility prior to July 31, 2003. To avoid a delay in the Closing, IHS and Briarwood entered into a stipulation on July 21, 2003, which the Court approved. The parties agreed that: -- subject to certain conditions, the Closing Date under the SPA would be extended to August 31, 2003; and -- if THI was unable to obtain a Certificate of Need from the State of Oklahoma by the Closing Date, IHS would proceed with all other aspects of the Closing. For a temporary period after the Closing, IHS would retain ownership of the IHS 100 Stock until the earlier of the date on which THI obtained the CON and 120 days after the Closing, at which point IHS would deliver the IHS 100 Stock to Briarwood. The Closing occurred on August 29, 2003, upon which IHS retained the IHS 100 Stock and transferred: -- all assets and liabilities to the Purchased Subsidiaries other than the Excluded Assets, the Excluded Liabilities and the IHS 100 Stock; -- the Purchased Subsidiaries to Briarwood; and -- the Excluded Assets and the Excluded Liabilities to IHS Liquidating. In early December 2003, the State of Oklahoma denied THI's CON application. THI subsequently appealed. However, it became evident that Briarwood would not have the regulatory approvals in place required by the State of Oklahoma by December 26, 2003 -- the last date on which IHS was obligated to hold the IHS 100 Stock. On December 24, 2003, Briarwood requested an extension of the delivery of the IHS 100 Stock to Briarwood from December 26, 2003 to June 30, 2004. Mr. Villoch informs the Court that as of March 4, 2004: (a) IHS still holds the IHS 100 Stock; (b) THI is appealing the denial of its CON application; and (c) Briarwood has not identified another third party to which the IHS 100 Stock will be delivered. IHS Liquidating believes that Briarwood has not developed a plan to rectify the current untenable situation regarding the transfer of the IHS 100 Stock and the transition of the Facility. Under the Plan, IHS Liquidating's powers and duties clearly does not grant it the authority to either cause the windup and dissolution of IHS or cause IHS to transfer the IHS 100 Stock to Briarwood. IHS Liquidating believes that since the matter has remained in limbo for a much longer period than anticipated, the time has come for it to be discharged of any responsibility relating to the circumstance or for it to be given the authority to rectify the situation. Hence, IHS Liquidating wants to: -- ensure that no liability inures to it as a result of failure of the transfer to occur; and -- close the IHS estate and avoid any liability of IHS Liquidating as a result of IHS' continued corporate existence. Mr. Villoch assures the Court that IHS Liquidating is prepared to abstain from interfering with whatever actions or omissions Briarwood and THI choose to make with respect to the Oklahoma Facility and the IHS 100 Stock, as long as the Court agrees that IHS Liquidating has no exposure for the failure of these events to occur. In the event that any party objects to its request, IHS Liquidating asks the Court to fashion a remedy that would empower it to take steps necessary to cause IHS to dispose of the IHS 100 Stock and the Oklahoma Facility, and dissolve under applicable law. Headquartered in Owings Mills, Maryland, Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- IHS operates local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the Debtors in their restructuring efforts. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) J.L. FRENCH: December 2003 Stockholders' Deficit Widens to $418MM ----------------------------------------------------------------- J.L. French Automotive Castings, Inc., reported fourth-quarter revenues for the period ended December 31, 2003 of $130.3 million compared to $136.7 million in the 2002 period. Operating income before the impact of restructuring and impairment charges, loss on sale of business and loss on early retirement of debt was $15.5 million versus $14.7 million in the prior-year quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) before restructuring and impairment charges, loss on sale of business assets, loss on early retirement of debt and loss contract reserve reversals was $26.5 million, or 20.4 percent of sales, in the fourth quarter of 2003 compared to $25.4 million, or 18.6 percent of sales, in the 2002 period. Cash interest expense was $16.1 million, up from $12.7 million in the fourth quarter of 2002 as a result of higher weighted average interest rates and debt levels in the 2003 period. During the fourth quarter of 2003, the company recorded restructuring and impairment charges of $1.8 million, which primarily represents expenses associated with the Grandville, MI., facility, which was closed in the second quarter of 2003 and certain charges of $0.8 million related to the restructuring of its United Kingdom operations. In the fourth quarter of 2002, the company recorded a restructuring charge of $21.3 million related to the closure of the Grandville, MI, facility. "We continued to be affected by lower automotive production levels during the fourth quarter of 2003," said Jack Falcon, president and chief executive officer. "These lower production levels have accelerated our cost reduction and productivity improvement efforts. Our previously announced restructuring of our UK operations reduce our costs, and we have added key top management to our leadership team who will help us achieve our profitability goals." For the year ended December 31, 2003, revenues were $521.1 million, a decrease of $29.4 million compared to 2002. EBITDA before the impact of restructuring and impairment charges, loss on sale of business assets, loss on early retirement of debt and loss contract reserve reversals decreased to $93.6 million, or 18.0 percent of sales, in 2003 compared to $95.0 million, or 17.3 percent of sales, in 2002. As a result of the higher weighted average interest rates and debt levels in 2003, cash interest expense increased to $60.2 million versus $48.9 million for 2002. During 2003, the company recorded non-cash income of $0.6 million related to exchange rate fluctuations on debt denominated in foreign currencies. Restructuring and impairment charges for the year ended December 31, 2003 totaled $106.4 million and consisted of $96.0 million write-off of goodwill related to the Sheboygan and Spain reporting units in the third quarter, $4.9 million write-down of assets at the Saltillo, Mexico facility, $2.2 million write-down of assets of the UK operations, and $3.3 million in restructuring costs. At December 31, 2003, J.L. French Automotive's balance sheet shows a total stockholders' deficit of $418,341,000 compared to $294,511,000 the previous year. About J.L. French Automotive Castings, Inc. J.L. French Automotive Castings, Inc., a privately held automotive supplier, is a leading global designer and manufacturer of highly engineered aluminum die cast automotive parts including oil pans, engine front covers and transmission cases. The company has manufacturing facilities in Sheboygan, WI; Glasgow, KY; Benton Harbor, MI; San Andres de Echevarria, Spain; Saltillo, Mexico; as well as five plants in the United Kingdom. The company is based in Sheboygan, WI, and has its corporate office in Minneapolis, MN. KANSAS CITY: S&P Assigns BB+ Rating to $250 Mill. Credit Facility ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' rating and its recovery rating of '1' to Kansas City Southern Railway Co.'s new $250 million credit facility, consisting of a $150 million term loan B facility due 2008 and a $100 million revolving credit facility due 2007. Ratings on the company's existing credit facility are withdrawn. The debt is guaranteed by parent Kansas City Southern and certain subsidiaries. The 'BB-' corporate credit ratings for both KCSR and Kansas City Southern are affirmed. The new credit facilities are rated 'BB+', two notches above the corporate credit rating, indicating high expectation of full recovery of principal in the event of default. The outlook is negative. The Kansas City, Mo.-based Class 1 railroad has about $850 million of lease-adjusted debt outstanding. "The ratings on Kansas City Southern reflect its aggressive financial profile and uncertainties related to its strategically important investment in TFM S.A. de C.V., somewhat offset by the favorable risk characteristics of the U.S. freight railroad industry and the company's strategically located (albeit limited in size) rail network," said Standard & Poor's credit analyst Lisa Jenkins. Kansas City Southern is a Class 1 (major) railroad, but it is significantly smaller and less diversified than its peers. Its core rail operations cover a 10-state region. Operating results have been depressed by the weak economy and increased cost pressures (especially fuel) over the past two years. Results in 2003 were also adversely affected by an adjustment in claims reserves and significantly reduced equity in earnings from the company's investment in Grupo Transportacion Ferroviaria Mexicana S.A. de C.V. (TFM), the main privatized Mexican railroad. In 2003, Kansas City Southern reported net income of $11.2 million versus $57.2 million in 2002. The new credit facility will consist of a $150 million term loan maturing in 2008 and a $100 million revolving credit facility maturing in 2007. The bank loan rating incorporates Standard & Poor's expectation that the collateral package will retain significant value in the event of a default or bankruptcy, and that there is a high expectation of full recovery of principal (100%), given the pledged collateral pool. Kansas City Southern's relationship with its affiliate, TFM, is strained at this time, and the status of its proposal to take control of TFM is uncertain. Ratings incorporate room for the company to pay its portion of the put option or for the company to complete the TFM transaction as originally proposed. However, if Kansas City Southern is forced to pay the full amount of the put, or if financial performance at Kansas City Southern or TFM weakens from expected levels, or if the TFM deal goes forward under more onerous terms, ratings could be reviewed for a downgrade. KENNEDY MANUFACTURING: Retains Taft Stettinius as Attorneys ----------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio, Western Division, gave its stamp of approval to Kennedy Manufacturing Company and its debtor-affiliates' application to employ Taft, Stettinius & Hollister, LLP as their bankruptcy attorneys. The Debtors chose to employ Taft Stettinius because of the firm's extensive experience and knowledge in the field of debtors and creditors' rights and business reorganizations. The Debtors report that Taft Stettinius will render all necessary and appropriate legal services requested by them in connection with these cases. Before the petition date, Taft Stettinius received a $40,000 retainer to prepare and file the Debtors' chapter 11 cases. Taft Stettinius will charge its services with its current and customary hourly rates. The professionals who will be primarily responsible in this engagement are: Professional Position Billing Rate ------------ -------- ------------ Timothy J. Hurley Member $325 per hour W. Timothy Miller Member $300 per hour Paige Leigh Ellerman Associate $185 per hour Richard L. Ferrel Associate $200 per hour Headquartered in Van Wert, Ohio, Kennedy Manufacturing Company -- http://www.kennedymfg.com/-- produces and markets industrial tool storage equipment worldwide, including steel tool chests, roller cabinets, stationary and mobile workbenches, modular storage cabinets and specialized tool storage. The Company, together with three of its affiliates, filed for chapter 11 protection on February 12, 2004 (Bankr. N.D. Oh. Case No. 04-30794). Richard L. Ferrell, Esq., Timothy J. Hurley, Esq., and W. Timothy Miller, Esq., at Taft Stettinius & Hollister LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, they listed both estimated debts and assets of over $10 million. KMART CORP: Asks Court to Disallow Amended and Superseded Claims ---------------------------------------------------------------- Kmart Corporation and its debtor-affiliates identified nine claims filed by Florida Tax Collectors that are redundant and duplicative, in that each has been subsequently amended or superseded by one or more separate and distinct claims. The Debtors ask Judge Sonderby to disallow the Amended and Superseded Claims and to allow the remaining claims: Objected Claim Remaining Claim ----------------- ----------------- Claimant Claim No. Amount Claim No. Amount -------- --------- ------ --------- ------ Citrus County Tax Collector 06164 $33,454 45820 $52,236 Hillsborough County 19007 15,697 46231 22,060 Miami-Dade County 41036 755,671 45622 780,531 Orange County Tax Collector 45792 21,793 46754 12,304 Orange County Tax Collector 45793 14,719 46572 14,335 Orange County Tax Collector 45789 14,678 46576 14,287 Palm Beach County 02086 34 02087 173,302 Santa Rosa County 26525 0 46023 19,594 Suwannee County Courthouse 25295 20,684 46988 22,053 (Kmart Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) LES BOUTIQUES: Closes Sale of Victoire & Moments Lingerie Shops --------------------------------------------------------------- Les Boutiques San Francisco Incorporees announces the closing of the sale of Victoire Delage and Moments Intimes lingerie shops to Boutiques Ace Style Inc., a wholly owned subsidiary of Ace Style International of Hong Kong. The conditions for the agreement, announced on February 11, have all been met. The transaction is for an amount of approximately $1.7 million and covers the 17 lingerie shops, including a portion of their inventory. Daniel Gendron, president of Boutiques Ace Style, has already said that he intends to continue to operate the stores with the 160 existing employees and to work closely with current suppliers. Les Boutiques San Francisco Incorporees obtained a court order in December under the Companies' Creditors Arrangement Act. The restructuring plan approved by the Court calls for the Corporation to concentrate its ongoing activities on the Les Ailes de la Mode banner and on its swimsuit division, including Bikini Village. LIVING WORD FAITH: Case Summary & 2 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Living Word Faith Center, Inc. 5090 Redan Road Stone Mountain, Georgia 30088 Bankruptcy Case No.: 04-91635 Type of Business: The Debtor operates a Church. Chapter 11 Petition Date: March 1, 2004 Court: Northern District of Georgia (Atlanta) Judge: Margaret Murphy Debtor's Counsel: Schuyler Elliott, Esq. The Mecca Building 2024 Beaver Ruin Road Norcross, GA 30071 Tel: 770-209-7999 Total Assets: $1,322,000 Total Debts: $1,189,899 Debtor's 2 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Fred Law Contract dispute $375,000 dba Concord Contractors 6297 Field Mill Road Stone Mountain, GA 30087 Viking Office Products Office supplies $500 LTV: Administrative Panel Gets Okay to Tap Deloitte's Services -------------------------------------------------------------- The Official Committee of Administrative Claimants of The LTV Debtors sought and obtained the Court's authority to retain Deloitte & Touche LLP as its financial advisors, effective January 14, 2004. Specifically, Deloitte will: (1) assist and advise the Administrative Committee concerning potential director and officer claims; (2) attend and participate in appearances before the Court; and (3) provide other services as requested by the Committee or its counsel and agreed to by Deloitte. Deloitte will charge its regular hourly rates in performing the services. The firm's hourly rates are: Hourly Range Professional Position ------------ --------------------- $285 to 650 Partners, principals and directors 225 to 510 Managers and senior managers 150 to 335 Consultants and senior consultants 75 to 100 Other paraprofessionals Headquartered in Cleveland, Ohio, The LTV Corporation is a manufacturer with interests in steel and steel-related businesses, employing some 17,650 workers and operating 53 plants in Europe and the Americas. The Company filed for chapter 11 protection on December 29, 2000 (Bankr. N.D. Ohio, Case No. 00-43866). Richard M. Cieri, Esq., and David G. Heiman, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On August 31, 2001, the Company listed $4,853,100,000 in assets and $4,823,200,000 in liabilities. (LTV Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) LUCENT TECH: S&P Raises Corporate Credit Rating to B After Review ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Murray Hill, New Jersey-based Lucent Technologies Inc. to 'B/Positive/--' from 'B-/Negative/--'. The action follows a Standard & Poor's review of the telecom equipment industry, as well as a review of Lucent's recent and anticipated performance. "Standard & Poor's believes industry revenues have stabilized in recent quarters, after declining steeply from their peak in 1999, while Lucent's cost reduction actions have enabled a return to moderate profitability in the past few quarters," said Standard & Poor's credit analyst Bruce Hyman. The ratings on Lucent reflect its high leverage, a dramatically smaller and more aggressive industry because of a substantial shift in service providers' buying patterns, and ongoing major changes in the industry's technology direction. These factors are only partly offset by Lucent's continued major role in that industry, its sufficient operational liquidity, and an appropriate expense structure for current business conditions after substantial restructurings. Lucent's sales of $8.5 billion in the fiscal year ended September 2003 were 22% of the fiscal 1999 peak, and growth from current levels likely will be muted. Following substantial downsizing, including a 70% staff reduction, the company recently returned to adequate levels of operating profitability, while free cash flows, although still negative, have abated. Still, the industry's decline appears to have been stemmed, and there are indications of modest near-term growth. Lucent's liquidity--$4.3 billion at Dec. 31, 2003--is sufficient to fund the company's operations over the intermediate term. MEDICAL PROFESSIONAL: S&P Drops Counterparty Credit Rating to BBpi ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Medical Professional Mutual Insurance Co. and its wholly owned subsidiary, ProSelect Insurance Co., to 'BBpi' from 'BBBpi'. The downgrades reflect a deterioration of operating performance and a decline in surplus in recent years. The ratings reflect weak operating performance and very high geographical and product line concentration, which are partly offset by adequate capitalization for the rating level. Based in Boston, Massachusetts, Medical Professional Mutual Insurance Co. writes professional liability and ancillary general liability coverages for physicians, dentists, and hospitals on both an occurrence and claims made basis. It markets its products directly and through an independent agency force. The company, which began operations in 1975, is licensed to operate only in Massachusetts. Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group. MERIT SECURITIES: Fitch Ratchets Class B-1 Notes Rating to BB- -------------------------------------------------------------- Fitch Ratings has taken the following rating actions on Merit Securities Corp. manufactured housing contract, Series 12-1. --Class A3 affirmed at 'AAA'; --Class M-1 downgraded to 'A' from 'AA'; --Class M-2 downgraded to 'BBB-' from 'A'; --Class B-1 downgraded to 'BB-' from 'BBB'. The rating actions reflect the poor performance of the collateral pool and are a result of both the losses incurred to date and the level of losses expected in the future. The collateral supporting Merit 12-1 was primarily originated by Origen Financial, previously under the name Dynex Financial, Inc. Origen currently services this transaction. Origen's outstanding servicing portfolio is $1.3 billion as of year-end 2003. The manufactured housing industry is experiencing its worst downturn ever. Relaxed credit standards, overbuilding by manufacturers, and the difficulties relating to servicing this unique asset have all contributed to poor performance of MH securities. Fitch believes the industry will continue to struggle for some time. Servicers must still contend with saturated repossession inventories, and Fitch does not expect recoveries on sold repossessions to improve in the near future. In addition, given the depreciating nature of the assets, as pools have seasoned, recoveries have generally declined. For these reasons, Fitch expects recovery rates to remain at low levels for some time. When forecasting transaction performance and assessing credit risk to the bonds, Fitch begins by determining an expected loss percentage for the remaining current pool balance. This figure is a product of default frequency and loss severity assumptions which Fitch feels are the most likely to occur. Fitch then uses stressed variations of these 'expected case' assumptions to determine loss expectations at the various rating categories. Finally, Fitch values the excess spread available to cover losses at each rating category to determine how much subordination is required for any bond to be assigned a given rating. A change in the expected case loss assumption affects loss assumptions at each rating category and consequently the amount of credit enhancement required at each rating category. The A3 has a current credit enhancement (excluding a collateral fund) of approximately 40%, compared with an initial credit enhancement of 28.25%. The class M1 has current enhancement of approximately 25.5%, compared with an initial credit enhancement of 19.25%. The class M2 has current enhancement of approximately 14%, compared with an initial credit enhancement of 12.25%. The class B-1 has current enhancement of approximately 5.75%, compared with an initial credit enhancement of 7.25%. In addition, the pool is experiencing a 12 month average constant default rate of 4.25%, and a 78% loss severity. Furthermore, the pool has experienced 9.76% in cumulative losses (this includes losses on both the underlying collateral pool and on the collateral fund). This transaction benefits from an additional enhancement feature. On the closing date, Merit deposited additional MH loans into a collateral fund with an original principal balance of $11.3 million ($5.8 million currently outstanding). The interest payments from this fund are available to cover interest payment to the senior bonds and losses on the pool. The principal payments are available to cover losses on the pool. While credit enhancement has grown for most of the bonds, current losses to date and Fitch's future loss expectations for the pool exceed Fitch's original loss expectations, causing the rating downgrades listed above. METALS USA: Brandywine Asset Management Has 5.83% Equity Stake -------------------------------------------------------------- Brandywine Asset Management, LLC, beneficially owns 1,175,400 shares of the common stock of Metals USA, Inc. with shared voting and dispositive powers. The amount of stock held represents 5.83% of the outstanding common stock of Metals USA. Various accounts managed by Brandywine Asset Management have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from, the sale of shares of Metals USA, Inc. No account owns more than 5% of the shares outstanding. Metals USA is a leading integrated metals processor and distributor in North America serving more than 45,000 customers with a diverse product line out of three business groups: the Plates and Shapes Group, the Flat Rolled Group and the Building Products Group. The Debtors filed for Chapter 11 relief on November 14, 2001 (Bankr. S.D. Tex. Case No. 01-42530) and emerged from Bankruptcy on Nov. 2002. Zack A. Clement, Esq. at Fulbright & Jaworski represents the Debtors. MIRANT CORP: Brings-In PricewaterhouseCoopers as Audit Consultant ----------------------------------------------------------------- Mirant Corp. and its debtor-affiliates seek the Court's authority to employ PricewaterhouseCoopers LLP as consultants under the terms of a February 2, 2004, Engagement Letter. As part of their on-going internal audit efforts, the Debtors began auditing certain business lines to address compliance and efficiency concerns. Ian T. Peck, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates that prior to the Petition Date, the Debtors conducted and completed an internal audit of their gas power businesses to analyze and evaluate internal controls and practices. As part of the Gas Project, Mirant Corporation engaged PwC to provide necessary outside industry expertise and to ascertain industry best practices. Having completed the Gas Project, the Debtors' internal audit team has shifted its focus to the Debtors' power asset activities, including power asset management and trading activities, as well as credit risk management activities, and has began an internal audit of these business lines on February 23, 2004. After carefully evaluating the various outside professionals available to assist the Debtors in completing the Power Audit, they selected PwC to serve as their outside consultant. Mr. Peck informs the Court that PwC is a well-known and recognized consulting firm with a worldwide clientele and extensive experience in helping clients tackle the types of challenges and issues raised by the magnitude of a project like this. The Debtors believe that PwC possesses all of the skills, qualifications and expertise necessary to assist them in an efficient and cost-effective manner, and with a high degree of quality and responsiveness. PwC will provide these consulting services to advise the Debtors in connection with the Power Audit: * Risk Identification: Identification of Mirant's objectives and strategies as well as risk attribution associated with power procurement and trading activities; * Infrastructure: Assessment of Mirant's ability to effectively identify, measure, monitor and report on key risk drivers in a comprehensive and consistent manner; * Process and Control: Assessment of existing processes to identify and evaluate the design of control activities resident within key processes; and * Credit Risk Management: Assessment of credit policies and procedures, risk reporting, collateral/margin management, credit reserving, problem credit management, approval process and authorities, system infrastructure, and documentation standards. Mr. Peck assures Judge Lynn that the consulting services to be rendered by PwC will not be duplicative of the services rendered by any other of the Debtors' professionals retained in these Chapter 11 cases. While the Debtors have already sought and obtained the Court's authorization to retain the accounting firms of Deloitte & Touche LLP and KPMG LLP, Mr. Peck explains that PwC's retention is necessary for the Debtors to carry out their duties as debtors-in-possession. The Debtors were required to retain PwC rather than KPMG because as the Debtors' external auditor, KPMG could not provide the required services without impairing its independence on its current retention. Similarly, the Debtors chose not to use Deloitte & Touche because of the amount of time and money the Debtors would have to spend in having Deloitte & Touche become familiar with the Debtors' internal controls, especially when taking into account the synergies PwC already possesses as a result of the prior services it rendered for the Debtors on the Gas Project, and that the Debtors have a very short time frame to complete this project because of its upcoming annual report for the 2003 period. Other salient terms of the Engagement Letter are: A. Term The services are scheduled to commence on January 5, 2004, and covers a period of nine to 10 weeks. However, either party may terminate the services to be provided pursuant to the Engagement Letter upon written notice to the other. In the event of termination, the Debtors' sole responsibility will be to pay the reasonable professional fees and related expenses that PwC earned or incurred through the Effective Date of termination. B. Fees PwC has estimated that the fees for the project will be $260,000 to $280,000 based on a blended hourly rate of $275 per hour, which represents a 30% discount from PwC's standard rates. PwC's fees will be based on the time spent by the individuals assigned to the engagement and the blended hourly billing rate established for those individuals that vary according to their skills and experience. In addition, PwC will be entitled to reimbursement of reasonable expenses incurred in connection with this retention. In the event PwC believes that its fees will exceed the above estimates, it has agreed not to undertake any additional work without first advising the Debtors. For purposes of this engagement, PwC will provide to the Debtors a monthly invoice containing a brief description of the services provided for each particular month, including a description of those professionals performing the services, as well as a description of its out-of-pocket expenses incurred. PwC has also agreed that its professionals will keep hourly time records, in summary format, setting forth a description of the services rendered by each professional and the amount of time spent on each date by each individual in rendering services on behalf of the Debtors, which will be provided in PwC's monthly billing statements. C. Miscellaneous PwC agreed to preserve the confidentiality of confidential information entrusted to it by the Debtors. Rich Reynolds, a partner at PricewaterhouseCoopers LLP, tells Judge Lynn that PwC is not owed any amounts for prepetition fees and expenses. PwC incurred travel expenses postpetition amounting to $7,467 in connection with various close-out meetings with the Debtors regarding the Gas Project. The amount is still owed to date. During the 12-month period prior to the Petition Date, Mr. Reynolds reports that PwC received $639,569 from the Debtors for professional services performed and expenses incurred in connection with various services provided to the Debtors. PwC agreed that the protections to be afforded to it in connection with its representations of the Debtors will be those provided to "Protected Professionals" set forth in the Protection Order dated September 29, 2003. Thus, PwC agreed to forego any indemnification provisions that would normally have been included as part of its engagement agreement. According to Mr. Reynolds, prior to the Petition Date, PwC or its affiliates in the past represented, or are currently representing, non-debtor affiliates of the Debtors in matters unrelated to these Chapter 11 cases, including Balargh Power Company Limited, Cleco Corporation, Greenhost, Inc., Kinder Morgan Power Company, Mirant Caribbean, Inc., Perryville Energy Partners LLC, Western Power Distribution Holdings, Ltd., Western Power Distribution Telecoms Limited, Western Power Generation Limited, WPD 1957 Limited, WPDF 1975 Limited, WPD Finance Limited, WPD Holdings UK and WPD Limited. PwC advised the Debtors that it has in the past and likely will continue representing creditors and other parties-in-interest of the Debtors in matters unrelated to these Chapter 11 cases. PwC further advised the Debtors that no services have been provided to these creditors or other parties-in-interest, which are materially adverse to the Debtors, nor would PwC's retention in these Chapter 11 cases compromise its ability to continue to render auditing, tax and consulting services to its clients. Accordingly, Mr. Reynolds believes that PwC is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. The Company filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03- 46590). Thomas E. Lauria, Esq., at White & Case LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) MITEC: Underwriters Exercise Option to Buy $2.1 Mil. in Stock ------------------------------------------------------------- Mitec Telecom Inc. (TSX: MTM) announced that the syndicate of underwriters in its recently announced bought deal financing have exercised their option to purchase an additional 746,264 common shares of the Company at $2.75 per Common Share for additional aggregate gross proceeds of approximately $2.1 million. With the exercise of the greenshoe option, the aggregate gross proceeds of the offering were approximately $32 million. The Syndicate of underwriters was led by Desjardins Securities Inc., and included Orion Securities Inc., BMO Nesbitt Burns Inc., and Research Capital Corporation. The Common Shares have not been registered under the United States Securities Act of 1933, as amended. 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. Headquartered in Montreal, Canada, the Company also operates facilities in the United States, the United Kingdom and China. Mitec Telecom Inc. is listed on the Toronto Stock Exchange under the symbol MTM. On-line information about Mitec is available at mitectelecom.com . * * * In it's latest Form 10-Q filing, the company reported that: GOING CONCERN UNCERTAINTY Mitec Telecom's consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Corporation will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. There is doubt about the appropriateness of the use of the going concern assumption because of the Corporation's recent losses, negative cash flows, deficiency in working capital and the violation of a number of its Canadian debt covenants as of April 30, 2003. As such, the realization of assets and the discharge of liabilities in the ordinary course of business are subject to significant uncertainty. The unaudited interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not appropriate for these unaudited interim consolidated financial statements, significant adjustments would be necessary in the carrying value of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. In the previous fiscal year, the Corporation issued common shares and warrants in the amount of $5,171,000, secured additional and special credit facilities up to a maximum of $5,000,000, commenced rationalization of a number of its operations and began the process of disposing of non-core assets. During the current year, the Corporation concluded the sale of Microwave Technology Company Limited, its subsidiary in Thailand, to the Thai management team on July 7, 2003. On August 29, 2003, the Corporation concluded the sale of selected assets (inventory and fixed assets) of Beve for an amount of 37 million SEK ($6.4 million CDN) to NOTE AB. The buyer, also assumed some capital leases. On October 9, 2003, the Corporation raised $8,219,130 in a private placement financing issuing 7,972,411 units (each unit comprised of 1 common share and 1/2 purchase warrant). On October 14, the Corporation concluded a sale-leaseback transaction of the building in Pointe-Claire for $3.3 million in cash and free rent for five years. This transaction enabled the Corporation to draw down the last tranche of the La Financiere loan and the special loan from CIBC. Management's on-going plans with respect to the uncertainties are as follows: 1. Continuing discussions with its lenders in respect to its debt covenants, waivers and/or modifications. Management was able to re-negociate the banking arrangement during the quarter and as of October 31, 2003, the Corporation met the bank covenants. 2. Pursuing the sale of certain of its non-core assets, primarily property and inventory. Management expects to realize on the real estate assets in Sweden and generate cash proceeds in excess of the related indebtedness. 3. Continuing to rationalize operations and reduce expenses. Management believes that with the above plans, sufficient funds will be generated to maintain the support of the Corporation's lenders and other creditors and to enable the Corporation to continue it's operations as a going concern. The third tranche from LaFinanciere ($1.25 million) and the special guaranteed loan ($0.4 million) are available to cover cash flow requirements. There can, however, be no assurance that the plans described above will result in sufficient funds being generated. The Corporation's continuation as a going concern is dependent upon, amongst other things: the continuing support of the Corporation's lenders, maintaining a satisfactory sales level, the support of its customers, the continued viability of the Corporation's significant customers, a return to profitable operations and the ability to generate sufficient cash from operations, financing arrangements and new capital to meet its obligations as they become due. These matters are dependent on a number of items outside of the Corporation's control and there is uncertainty about the Corporation's ability to successfully conclude on the matters. NATIONAL BENEVOLENT: Gets Nod to Tap Weil Gotshal as Attorney ------------------------------------------------------------- The National Benevolent Association of the Christian Church sought and obtained approval from the U.S. Bankruptcy Court for the Western District of Texas, San Antonio Division, to employ Weil, Gotshal & Manges LLP as their bankruptcy counsel. The Debtors assure the Court that Deryck A. Palmer, Esq., a member of Weil Gotshal, as well as other members of, counsel to, and associates of the firm who will be employed in these chapter 11 cases, are members in good standing of, among others, the Bar of the State of New York. The Debtors expect Weil Gotshal to: a. take all necessary actions to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; b. prepare on behalf of the Debtors, as debtors in possession, all necessary motions, applications, answers, orders, reports, and other papers in connection with the administration of the Debtors' estates and serve such papers on creditors; c. negotiate and prepare on behalf of the Debtors any plans of reorganization and all related documents; and d. perform all other necessary legal services in connection with the prosecution of these chapter 11 cases. Weil Gotshal's hourly rates range from: Position Billing Rate -------- ------------ members and counsel $500 to $775 per hour associates $240 to $505 per hour paraprofessionals $125 to $225 per hour The two primary partners assigned to this matter are: Partner's Name Billing Rate -------------- ------------ Deryck A. Palmer $735 per hour Alfredo R. Perez $670 per hour Headquartered in Saint Louis, Missouri, The National Benevolent Association of the Christian Church (Disciples of Christ) -- http://www.nbacares.org/-- manages more than 70 facilities financed by the Department of Housing and Urban Development (HUD) and owns and operates 18 other facilities, including 11 multi- level older adult communities, four children's facilities and three special-care facilities for people with disabilities. The Company filed for chapter 11 protection on February 16, 2004 (Bankr. W.D. Tex. Case No. 04-50948). Alfredo R. Perez, Esq., at Weil, Gotshal & Manges, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed more than $100 million in both estimated debts and assets. NATIONAL ENERGY: Debtor Restates Operating Revenues and Expenses ---------------------------------------------------------------- National Energy & Gas Transmission, Inc. (NEGT) announced a restatement of its 2002, 2001 and 2000 operating revenues and operating expenses. This restatement did not affect the company's consolidated operating income or net income, consolidated balance sheets or consolidated statement of cash flows. NEGT has determined that its historical financial reporting of hedging transactions has not been consistent. Certain types of hedging transactions have been reported on a net basis (whereby revenues have been offset by the related expense item), while other types of similar transactions have been reported on a gross basis. In order to correct the inconsistency and provide a more meaningful presentation of its trading and hedging transactions, NEGT has adopted a net presentation approach for all such transactions. NEGT believes that this method of presentation is preferable under the circumstances. Adopting this change reduced previously reported revenues and expenses from continuing operations by $843 million for the year ended December 31, 2002. In addition, NEGT has determined that its historical financial reporting contained errors related to certain Independent System Operator (ISO) transactions and the mechanical consolidation process that resulted primarily from the adoption of EITF 02-03 (which requires the net presentation of trading revenues and expenses). These corrections decreased previously reported revenues and expenses from continuing operations by $222 million, $1,081 million and $837 million for the years ended December 31, 2002, 2001 and 2000, respectively, and from discontinued operations by $448 million for the year ended December 31, 2002. On July 8, 2003, NEGT and certain of its subsidiaries filed voluntary petitions for relief under the provisions of Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Maryland, Greenbelt Division. NEGT and those subsidiaries retain control of their assets and are authorized to operate their businesses as debtors-in-possession while they are subject to the jurisdiction of the Bankruptcy Court. On September 24, 2003, NEGT filed a Form 15 with the Securities and Exchange Commission (SEC) which terminated its duty to file reports under Sections 13 and 15(d) of the Securities Exchange Act of 1934. Accordingly, to the extent of the restatements cited above, NEGT's previous filings with the SEC should not be relied upon. As a result of these restatements, NEGT has been informed by its auditors, Deloitte & Touche LLP, that its independent auditors' report on NEGT's 2000, 2001 and 2002 consolidated financial statements included in NEGT's 2002 Form 10-K should no longer be relied upon. NET PERCEPTIONS: Board Rejects Revised Obsidian Exchange Offer -------------------------------------------------------------- Net Perceptions, Inc. (Nasdaq:NETP) announced that after careful consideration, including a review with independent financial and legal advisors, its board of directors has unanimously determined that Obsidian Enterprises, Inc.'s revised exchange offer continues to be financially inadequate and not in the best interests of Net Perceptions' stockholders. Accordingly, the Net Perceptions' board of directors urges stockholders to reject Obsidian's revised offer and not tender their shares. In making its recommendation, Net Perceptions' board of directors considered, among other things: -- The financial analyses of Obsidian and the revised exchange offer prepared by Candlewood Partners, LLC, the Company's financial advisor, as compared to the likely timing and amount of cash distributions if the plan of liquidation is approved and adopted by stockholders at the special meeting scheduled for Friday, March 12, 2004, and thereafter promptly implemented; -- In the view of Candlewood, the large number of shares of Obsidian common stock that would be received by the Company's stockholders if the revised exchange offer and proposed subsequent merger were consummated, combined with the small average trading volume of Obsidian common stock, highlights the potential difficulty of selling the shares of Obsidian common stock that would be received in the revised exchange offer and subsequent merger; -- In the board's view, the substantial risks associated with Obsidian's businesses, filed by Obsidian with the SEC in connection with its exchange offer, and Obsidian's "liquidity and working capital issues" and its "high level of debt" which "creates liquidity issues" for Obsidian; -- The fact that, if the revised exchange offer and proposed merger were consummated, officers and directors of Obsidian would own approximately 70% of Obsidian's common stock, on a fully diluted basis, and thus the Company's stockholders would have little or no ability to influence or affect the future management or policies of Obsidian; and -- The fact that, based on Obsidian's public filings to date, its revised exchange offer continues to be subject to numerous conditions, including, as noted in the Company's Solicitation/Recommendation on Schedule 14D-9 originally filed with the SEC on December 31, 2003, conditions that could not be satisfied due to the Company's December 30th 2003 agreement to sell its patent portfolio to Thalveg Data Flow, LLC for $1.8 million, which results in significant uncertainty that the revised exchange offer will be consummated. A description of the board's decision and Candlewood's financial analyses of Obsidian and the revised exchange offer is contained in an amendment to the Company's Schedule 14D-9 filed with the SEC. The Company said that its board of directors continues to believe that implementing the plan of liquidation adopted by the board on October 21, 2003 is reasonably likely to provide higher realizable value to stockholders than Obsidian's revised exchange offer. The board reiterated its recommendation that stockholders vote FOR the plan of liquidation and urged stockholders, if they have not already done so, to promptly complete, sign, date and return, by means to enable delivery by the opening of business on March 12, 2004, the WHITE proxy card previously delivered to stockholders, and NOT to complete or return any blue proxy card which they may have received or receive in connection with Obsidian's opposing proxy solicitation. Finally, the Company announced that on March 8, 2004, the Blakstad lawsuit, which was filed on October 29, 2003 against the Company, its current directors and unnamed defendants in the District Court, Fourth Judicial District, of the State of Minnesota, County of Hennepin, and which sought, among other things, to enjoin the proposed liquidation of the Company and to recover reasonable attorneys' and experts' fees, was dismissed with prejudice. Tom Donnelly, the Company's President and Chief Financial Officer, stated "We are very pleased that the Company's motion to dismiss the Blakstad lawsuit has been granted and that the Company will not have to expend additional stockholder funds defending this meritless lawsuit." NEW CONSTRUCTION: Employing Gary & Goodman as Bankruptcy Counsel ---------------------------------------------------------------- New Construction, Inc., wants permission from the U.S. Bankruptcy Court for the Eastern District of Virginia, Alexandria Division, to retain and employ Gary & Goodman PLLC, as its counsel. The Debtor has determined the Gary & Goodman has considerable experience in matters of this nature and believes that the firm is well qualified to represent it in this proceeding. The Debtor reports that Gary & Goodman will assist it in the performance of its duties in this case, as well as provide advice and assistance. The attorneys who will primarily be responsible for this matter and their current billing rates are: Professional Name Billing Rate ----------------- ------------ Stuart H. Gary $400 per hour Linda D. Regenhardt $300 per hour Nancy D. Greene $200 per hour Harold Hancock $160 per hour Rachel Goldstein $140 per hour Headquartered in Manassas, Virginia, New Construction, Inc., provides site development, road construction and utilities services. The Company filed for chapter 11 protection on February 17, 2004 (Bankr. E.D. Va. Case No. 04-10657). Linda Dianne Regenhardt, Esq., at Gary & Goodman PLLC represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $6,470,124 in total assets and $21,018,941 in total debts. NORSKE SKOG: Caps Price on $250 Million Senior Debt Offering ------------------------------------------------------------ Norske Skog Canada Limited has priced US$250 million aggregate principal amount of 7-3/8% Senior Notes due March 1, 2014. The Senior Notes were offered at par and will result in net proceeds of approximately US$245 million. The Senior Notes are being offered within the United States pursuant to Rule 144A under the Securities Act of 1933, and in certain Canadian Provinces. The Senior Notes are guaranteed by all of the Company's material wholly-owned subsidiaries. The net proceeds of the offering of the Senior Notes will be used to purchase or redeem the Company's outstanding US$200 million 10% Senior Notes due 2009, including for payment of accrued interest and related fees and expenses. The Company intends to use the balance of the net proceeds of the offering for general corporate purposes. The Senior Notes have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. * * * Standard & Poor's Ratings Services assigned its 'BB' rating to pulp and paper producer Norske Skog Canada Ltd.'s proposed US$225 million senior unsecured notes due 2014. At the same time, the 'BB' long-term corporate credit rating and 'BB+' senior secured debt rating on Vancouver,B.C.-based NorskeCanada were affirmed. The outlook is negative. Proceeds from the issue are to be used to refinance the existing US$200 million 10% notes due 2009 issued formerly by Pacifica Papers Inc., and for general corporate purposes. The effect of the transaction on the company's credit parameters is expected to be minimal. "The ratings on NorskeCanada reflect the company's average cost position in groundwood papers and narrow revenue base, which expose the company to weak financial performance at the bottom of the cycle," said Standard & Poor's credit analyst Clement Ma. These risks are partially offset by the company's moderate financial policies. OAKWOOD HOMES: Creditors' Ballots are Due by 4:00 p.m. Today ------------------------------------------------------------ Oakwood Homes Corporation and its debtor-affiliates are soliciting creditors' acceptances for their Second Amended Chapter 11 Reorganization Plan. The U.S. Bankruptcy Court for the District of Delaware has fixed today, March 12, at 4:00 p.m. (Eastern Time) as the deadline for creditors to cast their ballots to accept or reject the Debtors' Plan. Ballots must be received at: Bankruptcy Services LLC Attn: Oakwood Processing Department 757 Third Avenue, Third Floor New York, NY 10017 The Honorable Peter J. Walsh will convene a hearing to consider confirmation of the Debtors' Plan on March 16, 2004, at 11:00 a.m., or soon thereafter as Counsel can be heard. Oakwood Homes Corporation and its subsidiaries are engaged in the production, sale, financing and insuring of manufactured housing throughout the U.S. The Debtors filed for chapter 11 protection on November 15, 2002 (Bankr. Del. Case No. 02-13396). Robert J. Dehney, Esq., Derek C. Abbott, Esq., at Morris, Nichols, Arsht & Tunnell and C. Richard Rayburn, Esq., and Alfred F. Durham, Esq., at Rayburn Cooper & Durham, P.A., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $842,085,000 in total assets and $705,441,000 in total debts. OMEGA HEALTHCARE: Re-Leases 5 Nursing Facilities & Sells Iowa Unit ------------------------------------------------------------------ Omega Healthcare Investors, Inc. (NYSE:OHI) announced it has re- leased five skilled nursing facilities and sold one closed facility. Effective March 8, 2004, the Company re-leased three SNFs formerly leased by Claremont Health Care Holdings, Inc., located in Florida and representing 360 beds, to an existing operator at an initial annual lease rate of $2.5 million. These facilities were added to an existing Master Lease, the initial term of which has been extended ten years to February, 2014. The aggregate annual lease rate under this Master Lease, inclusive of the $2.5 million, is $3.9 million. In addition, the Company re-leased two SNFs formerly leased by Sun Healthcare Group, Inc., located in California and representing 117 beds, to a new operator under a Master Lease, which has a ten-year term. The commencement date of the first re-lease is March 1, 2004 and has an initial annual lease rate of approximately $0.12 million. The commencement date of the second re-lease is expected to be April 1, 2004, subject to licensing, otherwise May 1, 2004, and has an initial annual lease rate of approximately $0.1 million. On March 8, 2004, the Company sold one closed facility located in Iowa for its approximate net book value. At this time, the Company has five closed facilities remaining with a total net book value of approximately $2.4 million. Omega (S&P, B+ Corporate Credit Rating, Stable) is a Real Estate Investment Trust investing in and providing financing to the long- term care industry. At December 31, 2003, the Company owned or held mortgages on 211 skilled nursing and assisted living facilities with approximately 21,500 beds located in 28 states and operated by 39 third-party healthcare operating companies. OWENS: Committee Retains Dehay & Elliston as Asbestos Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in the Chapter 11 cases of Owens Corning and its debtor-affiliates seeks the Court's authority to retain Gary D. Elliston, Esq. and R. Thomas Radcliffe, Jr., Esq., of Dehay & Elliston, LLP, as co- counsel to the Committee, advising on issues related to asbestos claims defense and estimation, nunc pro tunc to December 1, 2003. William H. Sudell, Jr., Esq., at Morris, Nichols, Arsht & Tunnel, in Wilmington, Delaware, informs the Court that the Committee selected Messrs. Elliston and Radcliffe because of their extensive and diverse experience, knowledge and reputation in the field of asbestos claims field generally and, in particular, in the defense of asbestos claims. Mr. Elliston's and Mr. Radcliffe's experience includes extensive trial experience in both state and federal courts throughout the United States in defense of asbestos liability claims, expertise in the coordination of mass tort litigation and, with respect to Mr. Radcliffe, service as an expert and consultant on asbestos claims issues for Congoleum Corporation. The Commercial Committee believes that Mr. Elliston's and Mr. Radcliffe's services are both necessary and appropriate, and will assist the Commercial Committee with developing and implementing a strategy to address the asbestos-related personal injury claims in these cases as well as formulating and developing an estimate of future asbestos claims. Messrs. Elliston and Radcliffe are to provide expert services regarding the defense of asbestos claims and asbestos claims estimation. Specifically, Messrs. Elliston and Radcliffe will be: (1) consulting and providing insight into the defense of asbestos claims and the asbestos claims estimation process; (2) assisting the Commercial Committee's counsel in preparing for expert depositions; (3) consulting with the Commercial Committee and its counsel regarding other asbestos claims related experts retained by the Commercial Committee or to be retained by the Commercial Committee; and (4) performing any other necessary services as the Commercial Committee of the Commercial Committee's counsel may request from time to time with respect to any asbestos- related issue. Messrs. Elliston and Radcliffe are willing to coordinate any of these services performed at the Commercial Committee's request with services of the Commercial Committee's other advisors and counsel, as appropriate, to avoid duplication of effort. According to Mr. Sudell, Messrs. Elliston and Radcliffe will be compensated on an hourly basis. Mr. Elliston's current hourly rate is $350 while Mr. Radcliffe's current hourly rate is $300. Messrs. Elliston and Radcliffe include in their hourly rates: (1) direct labor costs, (2) fringe benefits, (3) overhead, and (4) fees. The hourly rate does not include out-of-pocket expenses like travel, long distance telephone calls, messenger service, express mail, bulk mailing, photocopies, or entertainment. These expenses are billed at cost in addition to the hourly rate. This compensation arrangement is consistent with and typical of the arrangements entered into by Mr. Elliston and Mr. Radcliffe regarding the provision of similar services for clients like the Commercial Committee. Messrs. Elliston and Radcliffe assures the Court that: (1) they are "disinterested" persons within the meaning of Section 101(14) of the Bankruptcy Code and as required by Section 328 of the Bankruptcy Code, and hold no interest adverse to the Debtors and their estates for the matters for which they are to be employed; and (2) they have no connection to the Debtors, their creditors and their related parties. Messrs. Elliston and Radcliffe will conduct an ongoing review of their files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new facts or relationships are discovered, they will supplement their disclosure with the Court. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom represents the Debtors in their restructuring efforts. On Jun 30, 2001, the Debtors listed $6,875,000,000 in assets and $8,281,000,000 in debts. (Owens Corning Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) PARMALAT GROUP: Gets Go-Signal to Honor U.S. Milk Supplier Claims ----------------------------------------------------------------- The U.S. Parmalat Debtors sought and obtained the Court's authority to pay prepetition milk supplier claims, in their sole discretion. The U.S. Debtors are also authorized to issue postpetition checks, or effect postpetition fund transfer requests, in replacement of any checks or fund transfer requests with respect to Milk Supplier Claims dishonored or rejected as of the Petition Date. The U.S. Milk Suppliers In the ordinary course of business, the U.S. Debtors rely on two types of Milk Suppliers to provide them with raw milk -- dairy farmers and dairy co-operatives. The U.S. Debtors purchase 40% of their raw milk from Farmers and the remainder of their raw milk from Co-ops. The U.S. Debtors do not have supply agreements with their Milk Suppliers. Rather, the Milk Suppliers provide the Debtors with milk on customary business terms, typically on 22 days' credit. Recently, however, the Debtors' vendors began demanding strict payment terms, and many of the Co-ops are requiring prepayment, as a condition to the continued supply of raw milk. One of the U.S. Debtors' largest Milk Suppliers has refused to continue to supply raw milk under any terms. On January 1, 2004, the Dairy Farmers of America, which provides 14% of the U.S. Debtors' raw milk supply, stopped selling milk to the Debtors. The Debtors estimate that, as of the Petition Date, their prepetition obligations aggregate $2,300,000 to the Farmers and $4,600,000 to the Co-ops. The federal government establishes federal milk pricing guidelines that are enforced by market administrators. Pursuant to these guidelines, the price of raw milk is set according to its class, which is based on its ultimate use -- that is, whether it is used to produce milk, cream, ice cream, or others. As the ultimate use of the raw milk cannot be determined at the time of purchase, the U.S. Debtors pay the Milk Suppliers a blended price for the raw milk they receive. At the end of each month, the Market Administrator calculates a true-up amount based on the actual volume of each class of milk that the Debtors produced that month. These true-up payments are then redistributed to the Debtors' Milk Suppliers. The U.S. Debtors' next payment to the Market Administrator will be due on March 16, 2004, for milk shipments received in February 2004. Based on historical experience, the Debtors estimate that unpaid accrued obligations to the Market Administrator as of the Petition Date approximate $650,000 to $900,000. The Milk Bonds Certain of the states in which the Debtors operate require purchasers of raw milk products to post bonds or provide other security to guarantee their obligations to milk suppliers. To satisfy these requirements, the Debtors have posted bonds in New York, Pennsylvania, New Jersey, and Michigan in the aggregate amount of $9,350,000. Payment of Milk Supplier Claims is Necessary Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, asserts that it is critical to the U.S. Debtors' businesses that they have an uninterrupted supply of fresh milk. Absent such a supply, the Debtors will be unable to provide their customers with fresh milk and other dairy products. As the dairy business is extremely competitive, their customers will quickly find alternative suppliers if the Debtors fail to fulfill the customer orders. Ms. Goldstein notes that the U.S. Debtors have already lost a number of customers. Once a customer switches to a competitor, the Debtors may not regain that customer's business. Ms. Goldstein also points that the Farmers who supply milk to the U.S. Debtors are akin to employees in many respects. Most of them operate family farms on which they reside and sell their raw milk exclusively to the Debtors. The Debtors' bi-monthly "payroll" to the Farmers has been $8,000,000, an average of $8,800 per Farmer. Ms. Goldstein reports that 850 dairy farms provided milk to the U.S. Debtors as of January 18, 2004. But 350 Farmers stopped providing milk when, due to their liquidity crisis, the U.S. Debtors paid the Farmers one or two days late. The U.S. Debtors risk losing additional Farmers to their competitors or the Co-ops on a permanent basis. Ms. Goldstein observes that the community of dairy farmers is tight-knit. If the Debtors do not pay the prepetition claims of the Farmers, not only would they lose additional existing Farmers, but it is unlikely that other dairy farmers would be willing to fill the supply gap. Although the Debtors may be able to replace a portion of the lost milk supply by purchasing from the Co-ops, the cost of such milk is $0.06 to $0.08 more per gallon than the cost of milk provided by the Farmers, Ms. Goldstein says. The U.S. Debtors must also pay their prepetition obligations to the Co-ops. Absent the payment, the Co-ops may cease delivering raw milk to the Debtors. The Debtors do not believe that they could find replacement milk suppliers if the Co-ops terminate or suspend deliveries. As a result, the Debtors would be unable to fulfill their customer orders and would likely lose valuable customers. The U.S. Debtors' ability to operate could be jeopardized if they do not pay the Milk Supplier Claims, Ms. Goldstein continues. The Debtors require operating licenses from certain states to operate a dairy. Although the precise regulations differ from state to state, as a general rule, a dairy's license to receive, process, and deliver milk can be revoked if the dairy defaults on its payment obligations to a Farmer or Co-op, and: (i) that Milk Supplier calls the Milk Bond; or (ii) the state regulatory agency determines that the dairy producer will be unable to continue to meet its obligations. If the U.S. Debtors were not permitted to pay their prepetition obligations to their Milk Suppliers, the states would attempt to revoke the Debtors' licenses. If the licenses were revoked, the Debtors would be out of business and their going concern value lost, to the detriment of their creditors, employees, and other parties-in-interest. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04- 11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. (Parmalat Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) PARMALAT GROUP: Obtains Court Nod to Pay U.S. Employee Obligations ------------------------------------------------------------------ The U.S. Parmalat Debtors are authorized, but not required, to make all payments required under or related to their prepetition operating obligations, including prepetition wages, compensation, tax withholding obligations, and employee benefits claims, Judge Drain rules. The Debtors are also authorized, but not required, to continue to honor their prepetition practices, programs and policies with respect to their employees, contractors, and brokers. Prepetition Employee Obligations (A) Wages and Salaries In the ordinary course of business, the U.S. Debtors incur payroll obligations to their employees in the United States for the performance of services. The Debtors currently employ 1,272 employees, excluding temporary staff, substantially all of whom are full-time employees. Approximately 567 of the Employees are represented by unions as collective bargaining agents. The U.S. Debtors pay their union employees on a weekly basis and their office and non-union employees on a bi-weekly basis. Their average monthly gross payroll for all of their Employees is $4,900,000. The Debtors estimate that, as of the Petition Date, there is $2,336,000 of unpaid accrued obligations relating to wages, salary, and compensation. (B) Commission Obligations Certain Employees are entitled to receive commissions, in addition to base compensation, if they increase net revenues through the sale of the Debtors' products, customer development, or the retention of current customers. Commissions are paid to eligible Employees on a monthly basis. The Debtors estimate that, as of the Petition Date, $226,000 in commissions will be owed to 77 Employees for services rendered by those Employees in the prepetition period. (C) Payroll Tax Obligations The U.S. Debtors are required by law to withhold from an Employee's wages amounts related to federal, state, and local income taxes, and social security and Medicare taxes and remit these to the appropriate tax authorities. ADP, a payroll service, calculates the withholding taxes and remits them on both a weekly and bi-weekly basis to the appropriate Taxing Authorities. In New York, the U.S. Debtors and their drivers are each required to pay New York Highway Use Tax based on mileage driven in New York state. The Debtors generally withhold the drivers' portion of the Highway Use Tax from their paychecks and remit them to the appropriate Taxing Authority. Additionally, the U.S. Debtors are required to (i) match from their own funds the social security and Medicare taxes, and pay, based on a percentage of gross payroll, additional amounts for state and federal unemployment insurance and (ii) remit the Payroll Taxes to the Taxing Authorities. On a monthly basis, the Debtors remit $1,670,000 in Payroll Taxes of which $1,020,686 are Trust Fund Taxes. The Debtors estimate that, as of the Petition Date, the amount of unpaid Payroll Taxes approximates $480,521. (D) Temp Obligations The U.S. Debtors employ 45 temporary employees through a number of different "temp" agencies. The Agencies invoice the Debtors weekly for services provided by the Temporary Employees, with each Temporary Employee billed at a predetermined rate. The Debtors' average monthly expenses for the Temporary Employees are $20,000. The Debtors estimate that, as of the Petition Date, their unpaid accrued obligations to the Agencies aggregate $97,000. The Debtors have no payroll tax obligations with respect to the Temporary Employees. (E) Independent Contractor Obligations The U.S. Debtors use seven independent contractors throughout the United States to provide various services including security, information technology, accounting, and communications with farmers. The use of Independent Contractors provides the Debtors with a more cost effective method of obtaining these services and skills than hiring comparable employees on a full-time basis. Compensation of the Independent Contractors varies according to the terms of each Independent Contractor's agreement with the Debtors. The Debtors have no payroll tax obligations with respect to the Independent Contractors. The Debtors estimate that, as of the Petition Date, their unpaid accrued obligations to Independent Contractors aggregate $8,000. (F) Broker Obligations The Debtors also utilize the services of 26 companies to sell their products to customers as an extension of their own direct sales force. The use of Brokers provides the Debtors with a more cost effective method of obtaining sales services and skills than hiring comparable employees on a full-time basis. As each of the Brokers represent a numbers of food manufacturers, the Brokers can efficiently sell Parmalat products to customers that the Debtors could not economically service directly. Additionally, the Brokers can share the costs associated with attending various food shows on their clients' behalf amongst their many clients. The Brokers are specialists in their fields and are able to make informed recommendations for promotional planning, shelf- management, planograms, resets, new item presentation, category management, retail coverage, and order fulfillment. Their relationship within the industry also provides the Brokers with access to industry that is invaluable to the Debtors. The Brokers are compensated with commissions on net sales after customer deductions for promotions, advertisements, and unsaleable merchandise. The Debtors estimate that, as of the Petition Date, their unpaid accrued obligations to the Brokers aggregate $227,045. (G) Employee Benefits Obligations As is customary in most large companies, the U.S. Debtors have established various employee benefit plans and policies for their Employees. The benefit plans and policies can be divided into these categories: (i) vacation, personal days, sick time, and holiday pay; (ii) medical and health insurance, life insurance, and dental insurance; (iii) an automobile allowance plan; and (iv) 401(k) plan benefits. The Debtors deduct specified amounts from Employees' wages in connection with some Employee Benefits, like insurance and 401(k) Plan contributions. (i) Paid Time Off Plan Under the Debtors' PTO Plan, eligible Employees accrue paid time off, including vacation, personal or sick time: * Paid Holidays The Debtors allow for nine paid holidays throughout the year, including two personal days. * Sick Leave Active non-union employees are entitled to six sick days per calendar year as of January of each year. Employees who are hired after the calendar year has started will accrue 1/2 day per month. Unused sick days cannot be carried over into the next year. * Vacation -- After one calendar year Employees are entitled to 10 vacation days per calendar year. New hires vacation is prorated beginning in January at 0.833 days per month worked. -- After 5 to 10 years Employees are entitled to 15 vacation days per calendar year. -- After 11+ years Employees are entitled to 20 vacation days per calendar year. As of the Petition Date, the Debtors' outstanding, accrued obligations under the PTO Plan aggregate $2,945,101. (ii) Health and Welfare Plan The Debtors sponsor several Health and Welfare Plans including medical and dental insurance, flexible spending accounts, short- term and long-term disability insurance, life insurance, and accidental death and dismemberment insurance. The Debtors estimate that their aggregate monthly expenditures under the Health and Welfare Plans are $728,000. Because of the manner in which expenses are incurred and claims are processed under the Health and Welfare Plans, it is difficult for the Debtors to determine with certainty the accrued obligations under the Health and Welfare Plans at any particular time. Nevertheless, the Debtors estimate that, as of the Petition Date, their accrued unpaid obligations to their Employees under the Health and Welfare Plans aggregate $1,500,000. (iii) Allowance Plan The Debtors customarily provide certain of their Employees, like sales persons and managers, with a monthly car allowance as part of their employment packages. Allowances vary from $180 to $1,000 a month depending on the employee. The Debtors estimate that, as of the Petition Date, the accrued unpaid Allowance Plan Obligations aggregate $14,704. (iv) 401(k) Plan The Debtors withhold from the wages of participating Employees contributions towards the 401(k) Plan. In addition to the Withholding Contributions, starting on the first of the month following six months of full-time employment, the Debtors make matching contributions to each participating Employee's 401(k) Plan up to a maximum of 3% of the Employee's annual salary. The Matching Contributions vest 20% for each year of service with the Debtors, with Matching Contributions fully vesting after five years of service with the Debtors. The Debtors estimate that, as of the Petition Date, the obligations related to Withholding Contributions that have accrued but have not been paid to or on behalf of Employees under the 401(k) Plan aggregate $50,470 and the unpaid accrued obligations related to the Matching Contributions aggregate $26,106. (H) Reimbursement Obligations The Debtors reimburse Employees who incur business expenses in the ordinary course of performing their duties on the Debtors' behalf. The Reimbursement Obligations include travel and meal expenses incurred by the Employees through the use of their own funds or credit cards. Because the Employees do not always submit claims for reimbursement promptly, it is difficult for the Debtors to determine the exact amount of the Reimbursement Obligations outstanding at any particular time. Nevertheless, the Debtors estimate that, as of the Petition Date, there is $5,000 of accrued but outstanding Reimbursement Obligations. Payment of Employee Obligations is Necessary Gary T. Holtzer, Esq., at Weil, Gotshal & Manges LLP, in New York, points out that any delay in paying the Prepetition Employee Obligations will adversely impact the Debtors' relationship with their Employees and will irreparably impair the Employees' morale, dedication, confidence, and cooperation. Employee support for the Debtors' reorganization efforts is critical to the success of those efforts. The Debtors simply cannot risk such substantial damage to their businesses at this early stage. Mr. Holtzer notes that the payment of Payroll Taxes will not prejudice other creditors of the Debtors' estates, as the relevant Taxing Authorities generally would hold priority claims under Section 507(a)(8) of the Bankruptcy Code in respect of those obligations. Moreover, the portion of the Payroll Taxes withheld from an Employee's wages on behalf of the applicable Taxing Authority is held in trust by the Debtors. Hence, the Payroll Taxes are not property of the Debtors' estate under Section 541. The payment of the Temp Obligations and the Independent Contractor Obligations is equally essential. If the Debtors are unable to pay the Temp Obligations and Independent Contractor Obligations, they will be at great risk of losing their Temporary Employees and Independent Contractors, the majority of whom are employed in the Debtors' production facility. These employees have a comprehensive understanding of the Debtors' production process. If the Debtors were to lose their Temporary Employees and Independent Contractors, the Debtors would be compelled to devote substantial resources and incur large expenses to replace the lost Temporary Employees and Independent Contractors and train the new personnel. The costs to the Debtors would exceed the savings to the Debtors if the Temp Obligations and Independent Contractor Obligations are not paid. The payment of the Broker Obligations is similarly important. If the Debtors are unable to pay the Broker Obligations, they will be at great risk of losing the Brokers' services. Because of the Brokers' ability to leverage their relationships to obtain access to customers and industry information, the Brokers are very valuable to the Debtors. Loss of the Brokers' services would hurt the Debtors' overall sales and at the same time increase the Debtors' cost of sales. Unsecured Priority Status Sections 507(a)(3) and 507(a)(4) afford a debtor's employees' claims for "wages, salaries, or commission, including vacation, severance, and sick leave pay" earned within 90 days before the Petition Date as well as claims against the Debtors for contributions to employee benefit plans arising from services rendered within 180 days before the Petition Date unsecured priority status to the extent of $4,650 per employee. The Debtors believe that most of the Prepetition Employee Obligations constitute priority claims under Sections 507(a)(3) and (4). As priority claims, Mr. Holtzer says, the Prepetition Employee Obligations must be paid in full before any general unsecured obligations of the Debtors may be satisfied. The Debtors believe that sufficient assets exist to pay all priority Prepetition Employee Obligations in full under any reorganization plan that may ultimately be proposed and confirmed by the Court. Mr. Holtzer reports that only 14 Employees have claims for Prepetition Employee Obligations in excess of $4,650. However, none of the 14 Prepetition Employee Obligations exceeds $4,650 by more than $3,000. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04- 11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. (Parmalat Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEABODY ENERGY: Launches Common Stock & Senior Debt Offering ------------------------------------------------------------ Peabody Energy (NYSE: BTU) announced an offering to sell 6.5 million shares of common stock and $200 million of senior notes under a universal shelf registration statement that has been declared effective by the U.S. Securities and Exchange Commission. Proceeds that the company receives from the offerings will be used to fund the planned acquisition of coal operations from RAG Coal International AG and for general corporate purposes. Peabody management will not sell shares in the offering. Also through the common stock offering, Lehman Brothers Merchant Banking Partners II Fund and affiliates intend to reduce their ownership interest in Peabody through the sale of 9 million shares. The underwriters have been granted an over-allotment option to purchase an additional 2.3 million shares of primary and secondary equity. If the over-allotment option is exercised in full, the merchant banking fund and affiliates will sell the remainder of their shares and eliminate their ownership interest in the company. Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. are serving as joint book-running managers for the equity offering, and Morgan Stanley & Co. Incorporated and Credit Suisse First Boston are serving as joint book-running managers for the senior notes offering. Peabody Energy (NYSE: BTU) (Fitch, BB+ Credit Facility and BB Senior Unsecured Debt Ratings, Positive Outlook) is the world's largest private-sector coal company, with 2002 sales of 198 million tons of coal and $2.7 billion in revenues. Its coal products fuel more than 9 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity generation. PETRACOM MEDIA: Case Summary & 48 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: Petracom Media, LLC 1527 North Dale Mabry Highway, Suite 105 Lutz, Florida 33548 Bankruptcy Case No.: 04-02908 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Petracom of Texarkana, LLC 04-02906 Petracom of Show Low, LLC 04-02910 Type of Business: The Debtors collectively operate 18 radio stations representing a number of different program formats (i.e., talk, country and western, pop, etc.). Chapter 11 Petition Date: February 17, 2004 Court: Middle District of Florida (Tampa) Judge: Alexander L. Paskay Debtors' Counsel: Harley E. Riedel, Esq. Stichter, Riedel, Blain & Prosser 110 East Madison Street, #200 Tampa, FL 33602 Tel: 813-229-0144 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million A. Petracom Media, LLC's 17 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Greenberg Traurig, LLP $314,740 3290 Northside Parkway, Ste 400 Atlanta, GA 30327 Gardner, Carton & Douglas $136,854 Charlene Marsh $25,000 Deloitte & Touche LLP $21,660 Great West $15,129 Citibusiness Card $12,310 Frank L. Robertson $10,000 Brill Media Company, LP $10,000 National Assn of Broadcasters $3,500 Hartford, The $3,378 Lohnes and Culver $3,335 Turner, Reid, Duncan, et al. $1,466 Sam's Club/GECF $945 Verizon Wireless $448 Chevron Credit Bank NA $328 Office Depot Credit Plan $240 Progress Energy Florida Inc. $126 B. Petracom of Texarkana's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Broadcast Works! $30,961 Broadcast Music, Inc. $30,671 In Phase Broadcasting, Inc. $24,515 ASCAP $19,963 Katz Radio Sales $11,762 Sesac, Inc. $9,982 Bowie County Appraisal Dist. $5,242 Sam's Club $4,705 Federal Communications Comm $3,635 Radio Advertising Bureau $1,990 Texarcana Newspapers, Inc. $1,673 Econco $1,560 Red River Appraisal District $1,427 Weaver Electric $1,000 Wendy Wilde $800 Robert C. White $658 Lavender Business Products $541 Ark for 21st Century $489 Red River County Tax Office $476 Temporary Services Unlimited Inc. $442 C. Petracom of Show Low's 11 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ BMI Radio $35,966 ASCAP $19,692 Sesac, Inc. $8,781 Advanta Leasing Services $4,149 Federal Communications Comm $3,895 Arizona Dept. of Revenue $1,171 Yesco $450 Chaincast Networks $395 Cable One $258 Associated Press $244 Infosource Technologies $162 PHARMA SERVICES: S&P Rates $125 Million Senior Discount Notes at B ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' rating to Pharma Services Intermediate Holding Corp.'s $125 million senior discount notes due 2014. At the same time, Standard & Poor's affirmed its outstanding ratings, including the 'BB-' corporate credit rating, on Quintiles Transnational Corp., the only asset held by Pharma Services Intermediate Holding Corp. The outlook is stable. The proceeds of the senior discount notes issue will be used to retire a portion of the pay-in-kind preferred stock that represented the majority of the investment of the equity sponsors of Quintiles' September 2003 management-led buyout. As Standard & Poor's viewed the preferred as an ultimately debt-like obligation of Quintiles, this new issue has no effect on the Quintiles ratings. "The mid speculative-grade ratings on Quintiles reflect the large financial burden that the company has assumed to fund its management-led leveraged buyout, as well as customers' inconstant appetite for the company's services," said Standard & Poor's credit analyst David Lugg. "Somewhat mitigating these factors, however, is Quintiles' leading position as a service provider to wealthy pharmaceutical firms." Standard & Poor's recognizes the preferred stock held by equity investors as a potentially significant call on financial resources and includes the preferred as debt. Thus the largely debt-financed buyout weakened lease-adjusted credit measures dramatically. With this preferred stock included as debt, total debt to EBITDA is now 6.2x, and funds from operations to total debt is about 14%. Accordingly, the credit profile is dominated by financial concerns. Research Triangle Park, North Carolina-based Quintiles' role as the leading provider of contract research and sales services to mainly pharmaceutical customers remains undiminished. A slowdown in research productivity, however, has led to slackening new product launches, a sharply reduced demand for contract sales services, and a slowing in the growth of contract research services. Contract renewal risk, inherent in Quintiles' business model, is heightened given the company's strategic relationship with Aventis S.A. (A+/Positive/A-1), which contributes 11% of Quintiles' net service revenues. Still, longer-term prospects are promising. With an increasing number of drug candidates in the middle stages of development, it seems likely that demand for Quintiles' services will improve in the next few years. Moreover, the company appears to be well positioned to capitalize on changes in the Japanese marketplace. PHELPS DODGE: Completes Tender Offers & $150MM Senior Debt Issue ---------------------------------------------------------------- Phelps Dodge Corp. (NYSE: PD) announced the completion of previously announced tender offers for its 6-5/8 percent notes due in 2005 and for its 7-3/8 percent notes due in 2007. The tender offers expired March 8, 2004, at 5 p.m. Eastern Standard Time. Citigroup Global Markets Inc. acted as the dealer manager for the tender offers, and Global Bondholder Services Corp. acted as the information agent for the tender offers. Phelps Dodge expects to record a pretax charge of approximately $18 million related to the notes tendered. On March 4, Phelps Dodge completed the issuance of $150 million in 30-year senior notes pursuant to the company's $750 million universal shelf registration statement. The notes were issued at a coupon of 6-1/8 percent and sold at a price of 99.874 for a yield of 6.134 percent. Citigroup Global Markets Inc. was the sole underwriter for the notes. The proceeds of the offering are to be used to redeem the company's 8-3/8 percent debentures due in 2023 on March 31, 2004. Those debentures have a face value of approximately $148 million and will be redeemed for a total of approximately $153 million, plus accrued interest. A pretax charge of approximately $4 million is expected for the redemption of these bonds. Phelps Dodge also announced that on April 1, 2004, it will redeem its 7-1/4 percent Industrial Revenue Bonds and Pollution Control Revenue Bonds (Amax Nickel Refining Company, Inc.) Series 1979 due in 2009. These bonds have an aggregate face value of approximately $6 million and will be purchased at 100 percent of their face value, plus accrued interest. Phelps Dodge will pay the redemption price of its 7-1/4 percent Industrial Revenue Bonds and Pollution Control Revenue Bonds, as well as the total purchase price of the tender offers, using available cash. These actions were taken to lower the company's debt, reduce interest expense and manage the maturity profile of the company's long-term commitments. Phelps Dodge Corp. is the world's second-largest producer of copper, a world leader in the production of molybdenum, the largest producer of molybdenum-based chemicals and continuous-cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ more than 13,000 people in 27 countries. * * * As reported in the Troubled Company Reporter's December 15, 2003 edition, Fitch has changed the Rating Outlook on Phelps Dodge to Positive from Stable and affirmed the company's senior unsecured rating at 'BBB-', commercial paper at 'F3' and the company's mandatory convertible preferred at 'BB+'. In concert with the euphoric climb in copper prices, Phelps Dodge performance in this past third quarter bested Fitch's expectations and assuredly will do so again in the current quarter. The company is banking cash and looking for a means of retiring debt. No doubt copper prices have dashed ahead of the economic recovery in this country and owe their heady levels to activity in China and Japan and a loss in the purchasing power of the U.S. dollar. Prices could adjust downwards, but likely not returning to pre-June averages. At around $.80/lb. and higher Phelps Dodge should be cash positive after cash used for investing and finance, and if current prices are a prediction of 2004, Phelps Dodge should have an enjoyable year. One risk point is the sale of stockpiled inventories and/or the ramp-up of curtailed production. Fitch notes the discipline the industry has followed throughout this past recession, foretelling it unlikely that producers will throw copper at the market in response to higher prices. The measure of unwanted production coming on the market could significantly influence credit ratings. PLANVISTA CORP: NCR Pension Trust Owns 5.67% Equity Stake --------------------------------------------------------- NCR Pension Trust beneficially owns 964,000 shares of the common stock of PlanVista Corporation, representing 5.67% of the outstanding common stock of the Company. NCR Pension Trust holds shared voting and dispositive powers over the shares. PlanVista Corporation (together with its wholly owned subsidiaries) provides medical cost containment and business process outsourcing solutions for the medical insurance and managed care industries. Specifically, it provides integrated national preferred provider organization (sometimes called PPO) network access, electronic claims repricing, and network and data The company's June 30, 2003, balance sheet discloses a total stockholders' deficit of $127 million. REEVES COUNTY: Fitch Places Junk Certificates Rating on Watch Pos. ------------------------------------------------------------------ Fitch Ratings places on Rating Watch Positive its underlying rating of 'CCC' on approximately $89 million Reeves County, TX certificates of participation-lease rentals (Reeves County Detention Center [RCDC] Trust). The certificates are insured by various financial guarantors. The Rating Watch reflects the likelihood of positive rating action based on improving demand for the county's 3,000-bed prison, which now markets itself to federal and state agencies. 'CCC' ratings indicate high default risk. An upgrade to the 'B' category (highly speculative, significant credit risk) or the 'BB' category (speculative, possibility of credit risk) is possible. Based on demonstrated demand volatility, the likelihood of the underlying rating being upgraded by Fitch to 'BBB-' or higher is low. The review process will take several weeks, as submission of significant additional information, described below, is expected. The timeliness and content of disclosure related to these certificates has been a concern. A new customer, the State of Arizona, has agreed to pay to incarcerate offenders at RCDC. Via an annual contract with termination provisions, Arizona reportedly will fill the RCDC's recently completed third phase (R3). In addition, a renewed service agreement with the Federal Bureau of Prisons (BOP) appears favorable for RCDC. The unexpected refusal of federal agencies to use R3 for prisoner housing in 2003 led to the deterioration of Reeves County's credit, although $1.5 million in county general fund subsidies resulted in continued timely bond payments with no debt service reserve fund draws. The prior, close relationship of BOP and the county previously was a major strength of this credit. Taken together, the new BOP agreement and the new Arizona relationship reportedly will result in increased occupancy and revenues to cover RCDC's operating and debt service costs. Prisoner housing agreements generally are not long-term in nature, and these are no exception. Demand volatility may continue. As a result, Fitch expects that the bond rating may improve due to the rising strength of RCDC finances in the near term, but the rating is unlikely to rise to investment-grade. Before taking additional rating action, Fitch expects to wait for the receipt of additional information, including executed management agreements with RCDC's new private manager, The GEO Group (formerly Wackenhut Corrections Corp.), and new financial models. Representations of the county and its agents as to their content contribute to Fitch's opinion that positive rating action is possible. Fitch's review, expected to take several weeks, will consider, among other factors, the following: -- the strength of the new agreements with BOP and Arizona; -- the insulation of RCDC's legal and payment structure from the corporate credit of its new manager; -- the health of the relationship between BOP and project managers; -- the county's future expansion plans, if any, for RCDC; -- the corporate track record of the new manager in operating corrections facilities; and -- the county's credit health, which has always been a rating factor, considering substantial depletion of its fund balances to subsidize the prison. ROBERTS DEVELOPMENT: Case Summary & 6 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Roberts Development Associates, LLC dba 1st Class Express 3180 Mathieson Drive, North East, Suite 902 Atlanta, Georgia 30305 Bankruptcy Case No.: 04-63536 Chapter 11 Petition Date: March 1, 2004 Court: Northern District of Georgia (Atlanta) Judge: Joyce Bihary Debtor's Counsel: Herbert C. Broadfoot, II, Esq. Herbert C. Broadfoot II, P.C. 2400 International Tower 229 Peachtree Street Atlanta, GA 30303 Tel: 404-588-0500 Fax: 404-588-1125 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 6 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Selig Parking, Inc. dba AAA Parking Facility $297,382 376 Spring Street Management Agmt.- Atlanta, GA 30308 Operating Expense BAA-Indianapolis Rent per Land Lease $37,115 Agreement Indianapolis Airport Amounts due under $10,679 Authority Land Lease Agreement American Trans Air Advertising Contract $7,880 Receivable Mgmt. Corp. Printing for $5,030 (Hammer Graphics) advertisements Holt, Ney, Zatcoff & Legal Fees $3,682 Wasserman, LLP ROYAL OLYMPIC: Olympia Explorer & Olympia Voyager to Be Auctioned ----------------------------------------------------------------- Royal Olympic Cruises (Nasdaq: ROCLF) announced that the vessels OLYMPIA EXPLORER and OLYMPIA VOYAGER will be sold at judicial auction, on March 24 and March 26 respectively, under process initiated by creditor banks and pursuant to a settlement agreement between ROCL, the owners, and the banks. The owning companies of the ships (subsidiaries of ROCL) had filed for Chapter 11 reorganization in the U.S. Bankruptcy Court in Honolulu, Hawaii, following which the ships were placed under judicial arrest pursuant to the settlement agreement. The judicial auction of the OLYMPIA EXPLORER is scheduled to take place on March 24 in Long Beach California, and the auction of OLYMPIA VOYAGER will be held on March 26 in Miami, Florida. ROCL does not expect to receive any proceeds from the sales after payment to the creditors. SEMCO ENERGY: Names George Schreiber, Jr. as President and CEO -------------------------------------------------------------- SEMCO ENERGY, Inc. (NYSE: SEN) announced the appointment of George A. Schreiber, Jr. as President and Chief Executive Officer. Mr. Schreiber will also serve as a member of SEMCO ENERGY's Board of Directors. Mr. Schreiber (55) is a prominent banking and energy company executive who most recently served as Chairman of Credit Suisse First Boston's Global Energy Group. In this capacity, he headed CSFB's energy, power and utility businesses. He previously was President of Pinnacle West Capital Corporation, a $7 billion diversified holding company whose principal businesses are Arizona Public Service Company and Suncor Development Corp, its real estate development company. Mr. Schreiber's experience has covered the gamut of financial matters in the utility industry with extensive experience in corporate finance, M&A and restructuring activities. Additionally, Mr. Schreiber has testified before the U.S. Congress on various energy policy matters, and has been involved in various rate, tax, finance and operational regulatory issues before ten different state commissions. Mr. Schreiber received his Bachelor of Science degree in 1970 and his MBA in 1971, both from Arizona State University. Mr. Schreiber's appointment is effective immediately. Mr. John Hinton, a SEMCO ENERGY director since 2002 has been elected SEMCO's non-executive Chairman. Mr. Hinton said: "George Schreiber is a highly successful executive whose long professional involvement with the energy industry will be enormously helpful as we seek to return SEMCO to sound financial health and to build value for shareholders, customers and employees. On behalf of the entire Board of Directors, I want to personally welcome George to the SEMCO ENERGY Board and to its senior management. Mr. Schreiber has discussed with the Board SEMCO ENERGY'S recent history and current opportunities and challenges. He is focusing on strategies for increasing stakeholder value now and over the long term. "I also thank Gene Dubay for his dedicated service as interim President and CEO." Mr. Dubay, who has been serving as interim president and chief executive, has resumed his previous duties as a Vice President of the Company and as Senior Vice President and Chief Operating Officer of SEMCO ENERGY GAS COMPANY. SEMCO ENERGY, Inc. (S&P, BB- Corporate Credit Rating, Negative) is a diversified energy and infrastructure company that distributes natural gas to approximately 391,000 customers in Michigan and Alaska. It owns and operates businesses involved in natural gas pipeline construction services, propane distribution and intrastate pipelines and natural gas storage in several regions in the United States. In addition, SEMCO provides information technology, specializing in serving mid-sized companies in various sectors. SLMSOFT INC: Infocorp Completes Conversion of Debt to Equity ------------------------------------------------------------ Infocorp Computer Solutions Ltd. (TSX: INP), a leader in the design and delivery of point-of-service cashiering and multi- channel revenue management solutions for e-Government and integrated retail management solutions for retailers, has completed the conversion of the SLMsoft Inc. debt, including all principal and accrued interest as of conversion date, February 6, 2004, of $1,762,343, into 1,286,382 common shares. In aggregate, since May 2003, the Company has reduced its outstanding debt by $3.8 million by entering into debt settlement and debt-for-equity exchange transactions. As a result, the Company has reduced its annual interest expense by approximately $400,000. The Company may enter into similar transactions from time to time depending on market conditions and available terms, subject to regulatory approval. With the issuance of these shares to SLM, the Company today has 16,071,597 common shares issued and outstanding. Infocorp continues to operate as an independent company, of which SLM remains a major shareholder. * * * Pursuant to an order of the Honorable Justice Ground of the Ontario Superior Court of Justice made on October 31, 2003, Richter & Partners Inc., has been appointed Interim Receiver and Receiver and Manager over the assets, property and undertaking of SLMSoft Inc., and certain of its subsidiaries, SLM Networks Corporation, SLM Technologies Inc., GSA Consulting Group Inc. and FMR Systems Inc. SLM filed for protection under the Companies' Creditor Arrangement Act on May 27, 2003. As a result of SLM's inability to meet ongoing obligations and its continuing losses after the CCAA filing, the CCAA proceedings were terminated and Richters was appointed. SMTC CORP: December Balance Sheet Upside Down by $21.3 Million -------------------------------------------------------------- SMTC Corporation(1) (Nasdaq: SMTX, TSE: SMX), a global electronics manufacturing services provider, reported fourth quarter revenue of $76.9 million, compared to $109.1 million for the same quarter last year and $77.0 million in the third quarter of 2003. Net loss on a Generally Accepted Accounting Principles (GAAP) basis was $2.6 million, or $0.09 per share, compared to a net loss of $24.5 million, or $0.85 per share, for the same quarter last year and net income of $2.6 million or $0.09 per share in the third quarter of 2003. Gross profit on a GAAP basis for the fourth quarter of 2003 was $5.8 million, or 7.5% of revenue, compared to $8.4 million, or 7.7% of revenue, for the same period in the prior year and $8.1 million, or 10.6% of revenue, for the third quarter of 2003. The Company calculates adjusted net earnings (loss)(2) as net earnings (loss)(2) before discontinued operations, the effects of changes in accounting policies, restructuring and other one-time charges and the related income tax effect. Adjusted net loss(2) for the fourth quarter of 2003 of $1.6 million, or $0.06 per share, compares to adjusted net income(2) of $1.0 million, or $0.04 per share, for the same period last year and adjusted net income of $1.3 million, or $0.05 per share, for the third quarter of 2003. "Results for this fourth quarter, although unsatisfactory, met our expectations" stated John Caldwell, President and Chief Executive Officer. "Our financial performance reflects the stabilization of our key markets and the alignment of our cost structure with our revenue base but were adversely affected by vendor credit constraints arising from our burdensome debt position. This constraint resulted in additional freight and material costs and labor inefficiencies that lowered our margins in the quarter." Total debt at December 31, 2003 of $70.1 million, consisting of $63.2 million of revolver and $6.9 million of term debt, compared to total debt of $82.6 million exiting the fourth quarter of 2002 and $74.9 million exiting the third quarter of 2003. The Company generated approximately $4.5 million of cash from operations during the fourth quarter of 2003 compared to the use of cash from operations of $10.5 million for the third quarter of 2003. On March 4, 2004 the Company announced that it closed its previously announced private placement of 33,350,000 Special Warrants to qualified investors at a price of CDN $1.20 per Special Warrant, representing an aggregate amount of issue of CDN $40.0 million (approximately US $30.0 million at current exchange rates.) The sale of the Special Warrant is part of the previously announced refinancing of the Company which also includes a new three year $40.0 million credit facility, subject to certain borrowing base conditions and a transaction with the Company's current lenders to repay $40.0 million of debt at par, exchange $10.0 million debt for $10.0 million of the Company's equity on the same terms of the private placement and convert up to $27.5 million of debt into subordinated debt. The effect of this refinancing will be to lower the Company's overall indebtedness by approximately $37.0 million, extend the term of the majority of the remaining indebtedness and will provide the necessary liquidity to support our growth plan for the foreseeable future. The net proceeds from the private placement are being held in escrow pending receipt of all necessary shareholder, regulatory and stock exchange approvals for the refinancing and definitive agreements and other customary conditions. "The fourth quarter presented SMTC with many challenges that stemmed from our liquidity position and capital structure" said Marwan Kubursi, SMTC's Chief Financial Officer. "We are pleased with how the Company met the challenges but recognize that it is a very inefficient way to conduct our business. With our recently announced refinancing, we plan to return to more normalized terms with our suppliers and position our company for growth with our customers." For the fiscal year ended December 31, 2003, revenue was $306.1 million compared to $525.2 million for the same period last year. Net loss on a GAAP basis was $39.8 million, or $1.39 per share, compared to a net loss on a GAAP basis of $108.0 million, or $3.76 per share for the prior year. The net loss on a GAAP basis for fiscal year 2003 includes a loss from discontinued operations of $2.4 million, or $0.09 per share, related to the disposition of the manufacturing operations of the Appleton facility of $4.0 million or $0.14 per share, offset by a net gain of $1.6 million, or $0.05 per share, from the proceeds of the liquidation of the Company's former Cork, Ireland subsidiary. The net loss on a GAAP basis for fiscal year 2002 includes a loss from discontinued operations of $8.5 million or $0.30 per share related to earnings from the discontinued manufacturing operations of the Appleton facility of $1.7 million or $0.06 per share, offset by a loss of $10.2 million, or $0.36 per share, from the closure of the Company's former Cork, Ireland subsidiary. "SMTC has been through a difficult period in its history driven by weak end market demand, overcapacity and burdened by too much debt" stated John Caldwell. "We are very pleased to have announced the refinancing transaction for SMTC. This marks an important milestone for our Company. With an improved capital structure, increased availability to fund working capital, we are now in a position to fully support the growth of our customers as well as attracting new customers. With typical new program lead times, we would not expect additional revenue until the latter part of 2004." SMTC Corporation is a global provider of advanced electronic manufacturing services to the technology industry. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin, Boston, Massachusetts, San Jose, California, Toronto, Canada, and Chihuahua, Mexico. SMTC offers technology companies and electronics OEMs a full range of value- added services including product design, procurement, prototyping, printed circuit assembly, advanced cable and harness interconnect, high precision enclosures, system integration and test, comprehensive supply chain management, packaging, global distribution and after-sales support. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/,for more information about the Company. At December 31, 2003, the company reports a working capital deficit of about $55.1 million while total shareholders' equity tops $21.3 million. SMTC CORPORATION: Appoints J.E. Caldwell as New Board Chairman -------------------------------------------------------------- The Board of Directors of SMTC Corporation announced the appointment of Mr. J. E. Caldwell as Chair of the Board replacing Mr. William Brock. Mr. Brock will remain on the SMTC Board and continue as Chair of the Audit Committee. Mr. Caldwell also will continue as Interim President and Chief Executive Officer until a permanent replacement is announced. "I am very pleased with the progress of the Company and its recent successful refinancing" stated Mr. Brock. "It is timely to appoint a new Chair of the Board as part of SMTC's plan for renewal and growth." "Mr. Brock has made a very important contribution to SMTC as its Chair of the Board through the operational and financial restructuring phases. We are delighted Bill will remain as a valued member of our Board" stated John Caldwell. SMTC Corporation is a global provider of advanced electronic manufacturing services to the technology industry. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin, Boston, Massachusetts, San Jose, California, Toronto, Canada, and Chihuahua, Mexico. SMTC offers technology companies and electronics OEMs a full range of value- added services including product design, procurement, prototyping, printed circuit assembly, advanced cable and harness interconnect, high precision enclosures, system integration and test, comprehensive supply chain management, packaging, global distribution and after-sales support. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/, for more information about the Company. At December 31, 2003, the company reports a working capital deficit of about $55.1 million while total shareholders' equity tops $21.3 million. SPEIZMAN: Lonati & SouthTrust Agree to Forbear Until May 7, 2004 ---------------------------------------------------------------- Speizman Industries, Inc. (OTC Bulletin Board: SPZN) announced that Lonati, SpA, and its affiliated companies, Santoni SpA, Tecnopea Srl and SRA Srl, have each terminated their respective agreements with the Company due to breaches of these agreements by the Company. In addition, Lonati terminated its agreement to forbear with respect to the collection of $4.3 million owed to it by the Company and accelerated payment in full of this debt. The Company also announced that, subsequent to these events, it entered into a Distributorship and Forbearance Agreement with Lonati pursuant to which Lonati agreed to allow the Company to continue to serve as the exclusive distributor of Lonati sock- knitting machines in the United States and Canada, and agreed to forbear from enforcing any remedies with respect to the payment of the $4.3 million owed by the Company to Lonati, until May 7, 2004, subject to certain terms and conditions set forth therein. In consideration of this agreement by Lonati, the Company paid Lonati $197,101 on March 8, 2004 and agreed to pay $196,221 on April 1, 2004 against the Company's debt to Lonati. An event of default under this new agreement with Lonati is the Company's failure to enter into a new forbearance agreement with its lender, for a period at least through May 7, 2004. The Company also announced that it is negotiating new agreements with Tecnopea Srl, Santoni SpA and SRA Srl, extending the Company's exclusive right to distribute textile machines manufactured by these companies through May 7, 2004. Algon Capital, LLC has been retained by the special committee of the Company's board of directors (comprised of two independent directors) to advise it in evaluating the Company's strategic and financial alternatives. Algon Capital is a specialized investment banking firm that provides sophisticated financial advisory services to debtors and creditors in complex and challenging situations. The Company also announced that SouthTrust Bank has agreed to extend the Company's existing credit facility until May 7, 2004 to allow the Company time to consider Algon's recommendations and review them with the Bank. In conjunction with the extension, the Bank has indicated that the revised credit facility will be a $9,000,000 revolving line of credit (with availability subject to certain borrowing base calculations). The Bank has indicated that it will no longer issue new letters of credit on the Company's behalf. Speizman Industries is a leader in the sale and distribution of specialized industrial machinery, parts and equipment. The Company acts as exclusive distributor in the United States, Canada, and Mexico for leading Italian manufacturers of textile equipment and is a leading distributor in the United States of industrial laundry equipment representing several United States manufacturers. For additional information on Speizman Industries, visit the Company's web site at http://www.speizman.com/ SPHERION CORP: Looks for New CEO as Cinda A. Hallman Retires ------------------------------------------------------------ Spherion Corporation (NYSE:SFN) announced that Cinda A. Hallman, its chief executive officer who has been on a medical leave of absence since July 2003, will not resume the office of chief executive officer and will retire effective April 10, 2004. Hallman will also resign her position as a member of the board of directors at that time. Steven S. Elbaum, Spherion chairman, stated: "The Company is appreciative of Cinda's leadership since she assumed the position of chief executive officer in April 2001 and the work that has been accomplished to reposition the Company and improve its competitiveness during a challenging economic period. Cinda will continue to provide support and advice as the Company proceeds to fill the CEO position and completes the enterprise-wide information system implementation that was initiated under her leadership. "The board expects to name a new CEO in the next several months through a search process that had been planned as a contingency in light of Cinda's medical leave. We expect that our strong existing management team led by Roy Krause, president and chief operating officer, Byrne Mulrooney, president of the staffing services segment, Eric Archer, president of the professional services segment and Mark Smith, chief financial officer, will continue to effectively manage the business. The board has retained Korn/Ferry International to conduct the search. "As has been the practice at Spherion, particularly since the inception of Cinda's medical leave, the board will continue to provide oversight, support and governance." Hallman said: "I am proud of the Company's accomplishments during my tenure as CEO, including repositioning the Company for profitable growth and strengthening the management team. I am pleased to offer my counsel to the board and the current management team as the Company makes the transition to a new CEO. Business is a significant part of my life and I look forward to pursuing new opportunities in this arena." In an unrelated matter, the Company determined in first quarter 2004 to exit substantially all of its international staffing operations and a court reporting business in the United States. These businesses are non-core and do not meet the Company's growth and return requirements. During 2003, these operations had aggregate revenues of $302 million and a pre-tax loss of approximately $8 million. Spherion President Roy Krause said, "We will redeploy capital and shift senior management's focus away from these discontinued businesses in order to profitably grow our business and be a premier provider of staffing and recruitment-based services in North America." The Company will incur a pre-tax charge in first quarter 2004 of approximately $6 million, of which approximately $1 million is non-cash, as a result of the termination of Hallman's employment contract. The termination payments are payable to Hallman over a two-year period. Further, the Company will incur a pre-tax charge in first quarter 2004 of between $4 - $6 million for the estimated loss on disposal of its discontinued operations. Before giving effect to either of these charges and the reclassification of certain businesses as discontinued operations, management anticipates that based on current trends, first quarter 2004 results will be at the high end of the guidance range offered in the Company's February 2, 2004 press release. The Company does not currently anticipate any further restructuring or similar charges this year, other than those previously announced. About Spherion Spherion Corporation (S&P, B+ Corporate Credit Rating, Negative) is a leader in the staffing industry in North America, providing value-added staffing, recruiting and workforce solutions. Spherion has helped companies improve their bottom line by efficiently planning, acquiring and optimizing talent since 1946. To learn more, visit http://www.spherion.com/ SPIEGEL GROUP: Court Clears New Donnelley Service Agreement ----------------------------------------------------------- Marc B. Hankin, Esq., at Shearman & Sterling LLP, in New York, relates that each of The Spiegel Group Debtors' Merchant Division prints catalogs and other sales materials, and markets their merchandise through two or three distribution channels. The Debtors' three subsidiaries that publish Catalogs are Eddie Bauer, Inc., Spiegel Publishing, Inc. and Newport News, Inc. These Catalogs require gravure printing services, which are specialty printing services. The gravure printing process is primarily used for printing on lightweight paper because, in general, it provides the best quality and most consistent color throughout a press run. In addition, on long press runs such as over 1,000,000 impressions, it is the most cost-effective process. Rejection of the Prior Donnelley Agreement The Debtors understand that there are only three major gravure Catalog and magazine printing companies in the United States. The Debtors are currently party to agreements with two of these companies -- R.R. Donnelley & Sons Company and Quebecor World- USA, Inc. -- for gravure printing services for the Spiegel Group Members' Catalogs. The Debtors began to review their gravure printing contracts to determine whether they could restructure these contractual relationships so as to generate savings for their estates. After an in-depth financial analysis, the Debtors determined that consolidating all their gravure printing work into a single contractual relationship with one vendor would result in substantial savings to their estates. Since most of their gravure printing work was already consolidated at Donnelley, the Debtors determined that they should solicit bids from both of their printers, Donnelley and Quebecor World, to perform all of Spiegel Publishing's gravure printing work. After receiving and reviewing such bids, the Debtors determined to pursue negotiations with Donnelley to be the single gravure printing provider not only for Spiegel Publishing, but for all of the Spiegel Group Members. Following lengthy negotiations, the Debtors and Donnelley have agreed to restructure their current contractual relationship to provide for, among other things, better pricing to the Debtors with respect to their gravure printing requirements in exchange for Donnelley becoming their single provider of gravure printing services and certain settlements between the parties. Thus, the Debtors have determined to reject the Prior Donnelley Agreement. The Proposed Donnelley Printing Agreement The lengthy negotiations between the parties have culminated in the proposed printing and electronic publishing services agreement among Spiegel, Distribution Fulfillment Services, Inc., each of the Spiegel Group Members, and Donnelley. Under the new Donnelley Printing Agreement, Donnelley will be the sole provider of the gravure printing services to the Debtors. The Donnelley Printing Agreement thus obligates each of the Spiegel Group Members to utilize the services of only Donnelley to perform gravure printing services for their Catalogs, with certain limited exceptions. In addition to the reduced pricing that the Donnelley Printing Agreement will provide to the Debtors, it will also result in other benefits to the Debtors and their estates. Mr. Hankin tells the Court that by entering into one agreement with Donnelley, the Debtors will be ensuring that all of their printing work, which has experienced a significant increase in volume, by up to 250%, will be completed since Donnelley has agreed that it can complete up to an amount of work that is greater than the Debtors' requirements for volumes per title. Furthermore, consolidation of the Debtors' gravure printing work will also result in mailing efficiencies. By using a single printing plant for all of the Spiegel Group Members' Catalogs rather than using multiple plants, Catalogs of the same size but from different Spiegel Group Members can be packaged and mailed together from the same location. The Debtors believe that this will result in a reduction in postage for each Spiegel Group Member. The key terms and conditions contained in the proposed Donnelley Printing Agreement are: (A) Term The term is five years, beginning with the production of the 2003 Catalog cycle and ending at the completion and delivery of the last Catalog produced in the 2007 Catalog cycle for each of the Spiegel Group Members. (B) Financial The initial price schedule reduces current prices by 8% to 9%. The reduced pricing is retroactive to May 3, 2003. Thus, the Debtors will receive a $1,500,000 refund for the period from May 3, 2003 through January 30, 2004. (C) Prepetition Debt, Payment Allocation & Releases (1) Prepetition Amounts Owed Pursuant to the Donnelley Printing Agreement, the Debtors acknowledge and agree that Donnelley has prepetition claims totaling $6,807,679 against the Debtors and that the aggregate amount is comprised of these claims: (i) $2,767,782 against Eddie Bauer; (ii) $2,520,705 against Newport News; (iii) $1,519,192 against Spiegel Publishing; and (iv) a contingent guarantee claim totaling $6,807,679 against Spiegel. To ensure that the accounting records of Donnelley and the Spiegel Group Members were in agreement, a very detailed reconciliation process was performed by the Debtors together with Donnelley. (2) Payment Allocation The payment allocation schedules set forth the allocation of $5,301,722 in payments made by Spiegel to Donnelley. The parties agree that each of the payments were intended to be applied against the invoice. These payments are the subject of the proposed settlement between the parties pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure. (3) Releases Pursuant to the Donnelley Printing Agreement, the Spiegel Group and each of Spiegel, Newport News, Spiegel Publishing, Eddie Bauer and DFS agree to release Donnelley from and against any and all claims that the Debtors may have except for any claims arising from the Donnelley Printing Agreement. Likewise, Donnelley releases the Debtors from and against any and all claims that it may have against them, except for the Donnelley Claims. (D) Liquidated Damages There are three sections in the Donnelley Printing Agreement that could result in the Debtors owing liquidated damages if adequate notice is not provided to Donnelley or if certain levels of or the continuation of print services are not performed by Donnelley. The Debtors believe that given the totality of beneficial terms of the Donnelley Printing Agreement, including the significant cost savings, and given that the liquidated damages vary according to the length of the notice provided, they are reasonable and do not constitute taxes or unfair penalties on the Debtors' estates. (i) Substantial Decreases in Manufacturing Billings Under the Donnelley Printing Agreement, beginning in January 1, 2004, if a Spiegel Group Member's actual manufacturing billings decreases by more than a certain specified amount when compared to the annual forecast provided on January 1 for the upcoming year, then a one-time additional charge is applied against the actual billings incurred during the applicable forecasted period for which the decrease relates. This provision does not apply to any instance in which a Spiegel Group Member is liable to Donnelley for liquidated damages due to non- assignment during bankruptcy or discontinuation of publication. (ii) Non-Assignment During Bankruptcy If a Spiegel Group Member provides Donnelley with less than the requisite notice that the Donnelley Printing Agreement will not be assigned to, and assumed by, an acquirer of any publishing Spiegel Group Member, then such Spiegel Group Member would incur liquidated damages based on the length of the notice period. (iii) Discontinuance of Publication If any Spiegel Group Member gives less than the requisite notice set forth in the Donnelley Printing Agreement for it discontinuing all Catalog publishing, that Spiegel Group Member would incur liquidated damages based on the length of the notice period. (E) Volume Discount Each Spiegel Group Member is entitled to a volume discount on total print manufacturing. If the Spiegel Group Members meet certain conditions, then the volume discount will increase. (F) Liability of Spiegel In the event that a Spiegel Group Member does not pay its undisputed invoices, then Donnelley may invoice Spiegel for the value of the undisputed invoice. If a Spiegel Group Member is sold, Spiegel remains liable for any invoices, as well as any work in process or work completed prior to the sale date, or any liquidated damages or other expenses in connection with workforce reductions, in certain limited circumstances. Once a Spiegel Group Member is sold and any unpaid invoices and liquidated damages are satisfied, Spiegel will be released from these contingent liabilities and the Donnelley Printing Agreement will continue on the same terms and conditions for the remaining Spiegel Group Members. The Donnelley Printing Agreement contains certain terms and exhibits that set forth confidential information regarding commercial pricing information of Donnelley's services for the Spiegel Group Members and information regarding the number, titles, and quantities of, and method of producing, the Spiegel Group Members' Catalogs. This information is crucially confidential and consists of vital trade secrets to the Debtors. The Debtors believe that their business would suffer irreparable harm if these crucial marketing and operational methodologies became available to their competitors. Accordingly, the Debtors sought and obtained the Court's authority to file the Donnelley Printing Agreement under seal with the Clerk of the Court. The Settlement With Donnelley The Donnelley Printing Agreement also provides for the approval of the allocation of certain prepetition and postpetition payments made in the aggregate amount of $5,301,722. This amount is comprised of prepetition invoices for $2,939,912 and postpetition invoices for $2,361,809. Prepetition payments of $3,001,722 and postpetition payments of $2,300,000 were made by the Debtors, aggregating $5,301,722. Donnelly has been holding the $5,301,722 and subject to the approval of the Donnelley Printing Agreement will apply the entire amount against the Prepetition Invoices and the Postpetition Invoices, and the Indefeasible Payments in addition to any amounts received by Donnelley up to and including the Effective Date of the Donnelley Printing Agreement, will be deemed fully, finally, irrevocably and indefeasibly paid. Thus, at Debtors' request, the Court authorizes them to: * reject the Prior Donnelley Agreement; * execute and perform under the new Donnelley Printing Agreement for exclusive printing and electronic publishing services; and * enter into settlements with Donnelley. Mr. Hankin is confident that given the Debtors' critical need to print their Catalogs in a quality, efficient and cost-effective manner, the Donnelley Printing Agreement will accomplish a sound business purpose and substantially aid in the Debtors' reorganization. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and 1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOUTHWEST RECREATIONAL: Gets Nod to Tap Trumbull as Claims Agent ---------------------------------------------------------------- Southwest Recreational Industries, Inc., and its debtor-affiliates sought and obtained approval from the Northern District of Georgia, Rome Division, to appoint The Trumbull Group, LLC, as their claims, noticing and balloting agent in these Chapter 11 case. The numerous potential creditors and other parties in interest involved in the Debtors' Chapter 11 cases, which may well impose heavy administrative and other burdens on the Court and the Office of the Clerk of the Court. To relieve the Clerk's Office of these burdens, the Debtors engage Trumbull as their Claims, Noticing and Balloting Agent. The Debtors anticipate that Trumbull will: a) prepare and serve required notices in these Chapter 11 cases, including: i) a notice of the commencement of these Chapter 11 cases and the initial meeting of creditors under Section 341(a) of the Bankruptcy Code; ii) a notice of the claims bar date; iii) notices of objections to claims; iv) notices of any hearings on a disclosure statement and confirmation of a plan or plans of reorganization; and v) such other miscellaneous notices as the Debtor or Court may deem necessary or appropriate for an orderly administration of these Chapter 11 cases. b) within five business days after the service of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes; i) a copy of the notice served, ii) an alphabetical list of persons on whom the notice was served, along with their address, and iii) the date and manner of service; c) maintain copies of all proofs of claim and proofs of interest filed in these cases; d) maintain official claims registers in these cases by docketing all proofs of claim and proofs of interest in a claims database that includes the following information for each such claim or interest asserted: i) the name and address of the claimant or interest holder and any agent thereof, if the proof of claim or proof of interest was filed by an agent; ii) the date the proof of claim or proof of interest was received by Trumbull and/or the Court; iii) the claim number assigned to the proof of claim or proof of interest; and iv) the asserted amount and classification of the claim; e) implement necessary security measures to ensure the completeness and integrity of the claims registers; f) transmit to the Clerk's Office a copy of the claims registers on a weekly basis, unless requested by the Clerk's Office on a more or less frequent basis; g) maintain an up-to-date mailing list for all entities that have filed proofs of claim or proofs of interest and make such list available upon request to the Clerk's Office or any party in interest; h) provide access to the public for examination of the proofs of claim or proofs of interest filed in these cases without charge during regular business hours; i) record all transfers of claims pursuant to Fed. R. Bankr. P. 3001(e) and provide notice of such transfers as required by Rule 3001(e), if directed to do so by the Court; j) comply with applicable federal, state, municipal and local statues, ordinances, rules, regulations, orders and other requirements; k) provide temporary employees to process claims, as necessary; l) promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; and m) provide such other claims processing, noticing, balloting, and relating administrative services as may be requested from time to time by the Debtors. Lorenzo Mendizabal, President of Trumbull discloses that his firm's rates are: Claims Management $65 per hour Administrative Support $50 per hour Assistant Case Manager/ Data Specialist $65 - $80 per hour Case Manager $110 - $125 per hour Automation Consultant $140 - $160 per hour Sr. Automation Consultant $165 - $185 per hour Consultant $175 - $225 per hour Sr. Consultant $230 - $300 per hour Headquartered in Leander, Texas, Southwest Recreational Industries, Inc. -- http://www.srisports.com/-- designs, manufactures, builds and installs stadium and arena running tracks for schools, colleges, universities, and sport centers. The company filed for chapter 11 protection on February 13, 2004 (Bankr. N.D. Ga. Case No. 04-40656). Jennifer Meir Meyerowitz, Esq., Mark I. Duedall, Esq., and Matthew W. Levin, Esq., at Alston & Bird, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, they listed $101,919,000 in total assets and $88,052,000 in total debts. SUN HEALTHCARE: Auditors Remove Going Concern Qualification ----------------------------------------------------------- On Friday, March 5, 2004, Sun Healthcare Group, Inc. (NASDAQ: SUNH) filed its annual report to the Securities and Exchange Commission on Form 10-K. The operating results Sun reported included net income for the year ended Dec. 31, 2003 of $0.4 million. The report also included audited financial statements that no longer contain a going concern qualification from its independent auditors. On March 10, 2004, Sun's common stock commenced trading on the NASDAQ National Market under the symbol "SUNH." "We are pleased with our progress as a company in 2003," said Richard K. Matros, Sun's chairman and chief executive officer. "Improving the Company's financial condition and liquidity to allow our auditors to remove the 2002 going concern qualification represents an important step forward for the Company, its stockholders and other constituents." Matros continued, "Despite the improvement in the Company's finances and operations in 2003, we will not rest on those achievements. We will be focused on creating better operations company-wide while seeking opportunities for growth and enhanced profitability." For the year ended Dec. 31, 2003, Sun reported total net revenues of $834 million and a net income of $0.4 million, including net income on discontinued operations of $35.4 million resulting primarily from the sale of its pharmaceutical services operations in July 2003, compared with total net revenues of $980.9 million and a net loss of $451.0 million for the year ended Dec. 31, 2002, which included an impairment charge of $407.8 million and excluded the gain on extinguishment of debt of $1.5 billion recorded as a result of Sun's emergence from bankruptcy protection on Feb. 28, 2002. For the quarter ended Dec. 31, 2003, Sun reported total net revenues of $212.5 million and a net loss of $13.9 million, which included an impairment charge of $2.8 million and restructuring costs of $4.7 million, compared with total net revenues of $197.5 million and a net loss of $415.4 million for the three-month period ended Dec. 31, 2002, which included an impairment charge of $407.8 million, part of which is reclassified into Discontinued Operations. Net revenues from the long-term care and inpatient services operations, which comprised 68.7 percent of Sun's total revenue from continuing operations for the year ended Dec. 31, 2003, decreased $132.7 million, from $705.7 million for the year ended Dec. 31, 2002, to $573.0 million for the same period in 2003, due primarily to reclassification of discontinued operations. The net segment income, excluding any allocation of corporate overhead, before loss on asset impairment, restructuring costs, gain on sale of assets, income taxes and discontinued operations from the long- term care and inpatient services operations increased $18.8 million from a loss of $2.0 million for the year ended Dec. 31, 2002, to income of $16.8 million for the same period in 2003, primarily due to the restructuring efforts' impact on operating overhead and rent expense combined with the effect of the accounting treatment of operations for the two months of 2002 prior to emergence from bankruptcy. For the year ended Dec. 31, 2003, Sun's net revenues from its continuing ancillary business operations, comprised primarily of SunDance Rehabilitation Corporation, CareerStaff Unlimited and SunPlus Home Health Services, Inc., net of intersegment eliminations, decreased $14.0 million, from $275.0 million for the year ended Dec. 31, 2002, to $261.0 million for the same period in 2003. Adjusted for $32.8 million of revenues related to the pharmaceutical services operations for the two months ended Feb. 28, 2002, net revenues for 2003 for the ancillary business operations actually increased over the same period 2002 by $18.8 million. The net segment income, excluding any allocation of corporate overhead, before loss on asset impairment, restructuring costs, gain on sale of assets, income taxes and discontinued operations for those operations, decreased $18.2 million over the same period, from net income of $38.4 million to net income of $20.2 million. The decrease was the result of multiple factors, including a $10.0 million decrease in rehabilitation services income related to (i) loss of affiliated business from the divestitures within our inpatient services operations and (ii) Medicare Part B therapy caps, $2.7 million related to the divestiture of the pharmaceutical services operations and $3.3 million due to start up losses associated with our medical staffing services. In early 2003, Sun commenced a restructuring of its operations to divest its under-performing long-term care facilities, divest certain non-core business operations, and reduce its overhead expenses. During 2003, Sun reduced the number of its long-term care facilities from 237 facilities with 26,845 licensed beds on Dec. 31, 2002, to 110 facilities with 11,210 licensed beds on Dec. 31, 2003. The Company also sold its SunScript Pharmacy Corporation pharmaceutical operations and its Shared Healthcare Systems, Inc. software development operations during 2003. In Feb. 2004, Sun completed a private placement of $56.2 million of its securities to accredited and institutional investors, raising net proceeds of approximately $52.3 million. Although Sun intends to divest seven more facilities during 2004, Sun believes that its 2003 restructuring is substantially complete. The Company emerged from bankruptcy on Feb. 28, 2002, and adopted the provisions of fresh-start accounting effective March 1, 2002. Under these provisions, the terms of the Company's reorganization plan were implemented, assets and liabilities were adjusted to their estimated fair values, and a new entity was deemed created for financial reporting purposes. As a consequence, the financial results for the quarter and year ended Dec. 31, 2002, are generally not comparable to the financial results for the same periods in the prior year. Sun Healthcare Group, Inc., with executive offices located in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides high-quality therapy, home care and other ancillary services for the healthcare industry. Sun Healthcare Group Inc.'s December 31, 2003 balance sheet shows a stockholders' deficit of $166,398,000 compared to $186,938,000 the prior year. TECH DATA: Fourth-Quarter 2004 Results Swing to Positive Zone ------------------------------------------------------------- Tech Data Corporation (Nasdaq: TECD), a leading provider of IT products and logistics management services, announced results for the fourth quarter and fiscal year ended January 31, 2004. Net sales for the fourth quarter of fiscal 2004 were $4.9 billion, an increase of 22.6 percent from $4 billion in the fourth quarter of the prior year and an 11.9 percent increase from the third quarter of the current fiscal year. On a regional basis, net sales in Europe increased 40.8 percent (18.5 percent on a local currency basis) and in the Americas increased 2.1 percent over the comparable prior-year period. On a sequential basis, net sales in Europe increased 28.2 percent (19.7 percent on a local currency basis) and in the Americas decreased 6.6 percent compared to the third quarter of the current fiscal year. Both the third and fourth-quarter results in the current fiscal year include a full quarter of operations from the company's Azlan Group Limited acquired on March 31, 2003. Net income for the fourth quarter of fiscal 2004 totaled $38.9 million, or $.67 per diluted share, compared with a net loss of $303 million, or $5.37 per diluted share for the fourth quarter of fiscal 2003. Net income on a non- GAAP basis for the prior-year comparable quarter was $33.1 million or $.58 per diluted share. Non-GAAP net income for the prior-year quarter excludes a non- cash goodwill impairment charge of $328.9 million and net loss of $7.3 million related to the disposition of subsidiaries. "The Tech Data team again delivered strong results, with sales and earnings significantly exceeding our plan for the fourth quarter," commented Steven A. Raymund, Tech Data's chairman and chief executive officer. "We continued to manage our costs appropriately and exercise disciplined pricing practices to achieve our profit objectives. We remain encouraged by the improving market demand conditions that characterize our industry today. The IT infrastructure investments that we are making are building a platform to maximize our long-term growth potential." Financial Highlights * Fourth-quarter net sales were $4.9 billion, exceeding the company's forecast for the quarter and increasing both sequentially and on a year-over- year basis. * Net sales in Europe during the fourth quarter were $3.0 billion or 61 percent of worldwide sales, while sales in the Americas totaled $1.9 billion or 39 percent of worldwide sales. * Gross margin for the fourth quarter was 5.94 percent of sales, an increase from 5.58 percent in the third quarter of this year and an increase from 5.12 percent in the prior-year fourth quarter. Sequentially, the increase in gross margin was attributable to the adoption of EITF 02-16 combined with incremental vendor rebates earned in the fourth quarter and a modest improvement in the pricing environment. The year-over- year increase in gross margin is the result of the inclusion of results from the company's Azlan operations and the impact of the company's adoption of EITF 02-16, partially offset by a decrease in gross margin due to the competitive pricing environment. * Fourth-quarter SG&A expense was $230.5 million or 4.69 percent of sales, an increase from third-quarter SG&A of $203.5 million or 4.63 percent of sales. The sequential increase is due to the variable costs incurred as a result of the seasonally strong European sales volume experienced in the fourth quarter, the reclassification of vendor funding pursuant to EITF 02-16, and the effect of the strengthening of the Euro. Fourth-quarter SG&A includes approximately $6.3 million related to the upgrade of the company's European systems. * Results for the fourth quarter ended January 31, 2004 include a reclassification pursuant to Emerging Issues Task Force Issue No. 02-16 ("EITF 02-16") "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor." EITF 02-16 requires that, under certain circumstances, consideration received from vendors be treated as a reduction of cost of goods sold and not as a reduction of selling, general and administrative ("SG&A") expenses. As a result, $21.7 million was reclassified from SG&A with $19.7 million of this amount being recorded as a reduction of cost of goods sold and $2.0 million deferred pending the sale of the related inventory. Year to date, $51.6 million has been reclassified from SG&A with $45.3 million of this amount recorded as a reduction of cost of goods sold and $6.3 million deferred pending the sale of the related inventory. The company expects no further material adjustments as a result of the phase-in of this pronouncement. * Worldwide operating income for the fourth quarter was 1.25 percent of sales, an increase from 0.95 percent of sales when compared to third-quarter operating income and an increase from a loss of 6.84 percent of sales in the fourth quarter of the prior year. Operating income for the prior-year fourth quarter on a non-GAAP basis, which excludes a non-cash goodwill impairment charge of $328.9 million, was 1.36 percent of sales. Geographically, fourth- quarter operating income was 1.70 percent of sales in the Americas and .96 percent of sales in Europe. * The worldwide effective income tax rate for the fourth quarter and 2004 fiscal year was 31.0 percent. * Cash flow from operations for the quarter and year ended January 31, 2004 was $130.0 million and $303.2 million, respectively. * Total debt to total capital at January 31, 2004, was 19 percent compared to 27 percent at January 31, 2003. Fiscal Year 2004 Results Net sales for the fiscal year ended January 31, 2004, were $17.4 billion, increasing 10.6 percent over $15.7 billion in the prior year. Net sales in Europe represented 55 percent of sales and increased 29.3 percent (7.6 percent on a local currency basis) to $9.6 billion from $7.4 billion for the fiscal year ended January 31, 2003. Net sales in the Americas represented 45 percent of sales and decreased 6.0 percent to $7.8 billion from $8.3 billion in the prior fiscal year. The results for the fiscal year ended January 31, 2004 include ten months of results of operations from the company's Azlan Group Limited acquired on March 31, 2003. Gross margin for the fiscal year ended January 31, 2004, was 5.64 percent of sales, up from 5.28 percent of sales in the prior fiscal year. The increase in gross margin is the result of the impact of the reclassification due to EITF 02-16 and the impact of the company's Azlan operations, offset by declines in gross margin due to the competitive pricing environment. Operating income for the fiscal year ended January 31, 2004, was $165.6 million or .95 percent of sales compared with a loss of $109.8 million or (.70) percent of sales in the prior year. Non- GAAP operating income for the fiscal year ended January 31, 2004, which excludes the charges associated with closing the company's U.S. education business, was $168.7 million or .97 percent of sales compared to non-GAAP operating income in the prior year of $219.0 million or 1.39 percent of sales. Prior-year operating income on a non-GAAP basis excludes a non-cash goodwill impairment charge of $328.9 million. Net income for the fiscal year ended January 31, 2004, was $104.1 million or $1.81 per diluted share, increasing from a net loss of $199.8 million or $3.55 per diluted share in the prior year. Net income on a non-GAAP basis for the fiscal year ended January 31, 2004, which excludes the charges associated with closing the company's U.S. education business, was $106.1 million, or $1.85 per diluted share compared to non-GAAP net income in the prior year of $136.3 million or $2.35 per diluted share. Prior-year net income on a non- GAAP basis excludes a non-cash goodwill impairment charge of $328.9 million and net loss of $7.3 million related to the disposition of subsidiaries. About Tech Data Tech Data Corporation (Nasdaq: TECD) (Fitch, BB+ Senior Unsecured Debt & BB Conv. Subordinated Debt Ratings, Stable), founded in 1974, is a leading global provider of IT products, logistics management and other value-added services. Ranked 117th on the Fortune 500, the company and its subsidiaries serve more than 100,000 technology resellers in the United States, Canada, the Caribbean, Latin America, Europe and the Middle East. Tech Data's extensive service offering includes technical support, financing options and configuration services as well as a full range of electronic commerce solutions. The company generated sales of $17.4 billion for its most recent fiscal year, which ended January 31, 2004. TOYS R US: S&P Lowers Debt Ratings to BB Following Interim Review ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit, bank loan, and senior unsecured debt ratings on Toys "R" Us Inc. to 'BB' from 'BB+'. The ratings remain on CreditWatch with negative implications, where they were placed on Jan. 8, 2004. The rating action follows Standard & Poor's completion of an interim review of management's operating strategies and expectations for the business as it is currently configured. Toys "R" Us is undertaking a major strategic review to determine the optimal configuration and uses of resources for its assets and operations. After the company has announced its findings and its future plans, Standard & Poor's will reassess the appropriateness of the 'BB' rating. The downgrade is based on the significant drop in profitability at the company's U.S. toy division in 2003 and its inability to improve cash flow protection measures. In addition, Standard & Poor's believes that management faces significant challenges in turning around the performance of its U.S. toy business given the sizable market share Wal-Mart and Target have amassed and their strategies of using low prices on toys to generate traffic. "The ratings on Toys reflect the company's participation in the intensely competitive retail toy industry and its inability to find a differentiated niche within the industry," said Standard & Poor's credit analyst Diane Shand. "These risks are partially mitigated by the strength of its Babies "R" Us business, its geographically diverse U.S. and international store base, and its position as the leading specialty toy retailer in the U.S." Since the mid-1990s, Toys has faced intense competition from discount department stores and other retailers of toys and electronic games. In addition, traditional toys have decreased in importance, as children are turning to video games, computer software, sporting goods, and music for entertainment at younger ages. As a result, Toys' performance has been inconsistent despite its important position in the toy industry and management's repositioning efforts. TRINITY INDUSTRIES: Completes Debt Financing Transactions --------------------------------------------------------- Trinity Industries, Inc. (NYSE: TRN) has issued $300 million aggregate principal amount of 6-1/2% senior notes due 2014 in a private offering. Trinity has applied approximately $163 million of the net proceeds of the offering to repay all indebtedness outstanding under its existing credit facility and intends to use the remaining net proceeds for general corporate purposes, including, among others, to make capital expenditures in strategic manufacturing facilities and fund working capital requirements of its railcar manufacturing operations. In addition to the issuance of the senior notes, Trinity also extended its existing credit facility to provide for a three-year, $250 million senior secured revolving credit facility and to eliminate the existing term loan facility. The senior notes were offered in a private offering only to qualified institutional buyers under Rule 144A under the Securities Act of 1933 and to non-U.S. persons in reliance on Regulation S under the Securities Act of 1933. The notes have not been registered under the Securities Act of 1933 or any state securities laws. Unless so registered, the notes may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws. Trinity Industries, Inc., with headquarters in Dallas, Texas is one of the nation's leading diversified industrial companies. Trinity reports five principal business segments: the Rail Group, the Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group and the Industrial Products Group. Trinity's web site is at http://www.trin.net/ * * * As reported in the Troubled Company Repoorter's March 3, 2004 edition, Standard & Poor's Ratings Services assigned its 'BB+' senior secured bank loan rating and its '1' recovery rating, indicating a high expectation of full recovery of principal, to Dallas, Texas- based Trinity Industries Inc.'s $250 million senior secured revolving credit facility due 2007. At the same time, Standard & Poor's assigned its 'BB-' senior unsecured debt rating to the company's proposed $300 million senior unsecured notes due 2014, which is being issued under SEC Rule 144A with registration rights. Standard & Poor's also affirmed its 'BB' corporate credit rating on the company. The outlook remains stable. "Leading market positions and the expectation that the railcar market has bottomed limit downside ratings risk," said Standard & Poor's credit analyst Linli Chee. "However, volatile end-markets, an aggressive approach to developing the capital-intensive leasing unit, and greater exposure to raw material price increases restrain upside ratings potential." UAL CORP: Flight Attendants Staging Protests in 3 Airports Today ---------------------------------------------------------------- United Airlines flight attendants and retirees, represented by the Association of Flight Attendants-CWA, AFL-CIO, will picket and leaflet at San Francisco, Oakland and San Jose airports today, March 12, to protest United's plan to break its agreement with flight attendant retirees and change their health benefits. Picketing and leafleting will be held on March 12 at: * Oakland Airport -- In front of United ticket counters, from 4:30 a.m. to 4 p.m. Local contact: Cicina Norton, 510-390- 3011. * San Jose Airport -- Terminal C, from 10 a.m. to 2 p.m. Local contact: Ruthie Funk, 408-858-1765. * San Francisco Airport -- Domestic Terminal, Entrances 1-8, 9 a.m. to 1 p.m. Local contact, Stan Kiino, 415-902-5764. United management signed a letter of agreement in May 2003 to ensure that flight attendants retiring before July 1, 2003 would have access to health care benefits that were less costly and more comprehensive than those that would be in place for those who retire after that date. Based on that agreement, over 2,500 flight attendants retired before the July 1 deadline, only to find out just six months later that United intends to double-cross them and cut their benefits. These changes will force retirees to pay hundreds of dollars more per month of their modest pensions just to continue health insurance. An examiner has been appointed by the bankruptcy court to investigate United Airlines' scheme to intentionally mislead thousands of flight attendants into ending their careers or retiring early, defrauding them out of their retirement benefits. He will present his findings in bankruptcy court in Chicago on March 19. Retirees will be on hand at all of the airport events to tell their stories about how United's proposed changes will impact their lives, and current United employees will join in the fight to inform the public of United's bait and switch tactics. Some of these retirees will be attending events for the first time because cancer treatment prohibited their involvement until now. More than 46,000 flight attendants, including the 21,000 flight attendants at United, join together to form AFA, the world's largest flight attendant union. AFA is part of the 700,000 member strong Communications Workers of America, AFL-CIO. Visit http://www.unitedafa.org/ UNION ACCEPTANCE: Says $65MM Confirmed Debt Not Likely to be Paid ----------------------------------------------------------------- Union Acceptance Corporation (UAC) (Pink Sheets:UACA) released its balance sheet as of December 31, 2003 and outlined its current operations. Results for the Year Ended December 31, 2003 UAC released its un-audited balance sheet as of December 31, 2003. This balance sheet reflects the assets of the company as UAC continues to pay creditors from its Chapter 11 reorganization. UAC does not anticipate releasing any future income statements in relation to its current operations because any income reflected on such an income statement in accordance with Generally Accepted Accounting Principles (GAAP) will most likely be for the benefit of creditors and not for the benefit of common shareholders. Should UAC begin operations that are not exclusively for the benefit of creditors, then UAC will release an income statement for such activity. UAC did record an extraordinary gain of $65.0 million related to the reduction in the estimated debt payments outlined in the plan of reorganization. However, results during this period included a charge of $43.7 million for the revaluation of UAC's retained interest in its securitized assets. The majority of the revaluation is related to the impact of the higher than anticipated credit losses experienced by the portfolio following the servicing transition to Systems and Services Technologies, Inc. ("SST"), a subsidiary of JP Morgan Chase, Inc. In order to value the retained interest, a weighted average net credit loss assumption of 9.74% was used for the December 31, 2003 valuation, verses the 8.95% assumption used at December 31, 2002. At December 31, 2003, UAC's total portfolio was $1.0 billion compared to $2.4 billion at December 31, 2002. During the year ended December 31, 2003, UAC's expenses included approximately $9.4 million directly related to its bankruptcy case. These expenses include payments to professional bankruptcy advisors as well as payments related to UAC's Employee Retention Program. These expenses were partially offset by proceeds from the sale of the servicing platform and servicing rights to SST on April 18, 2003 for $8.0 million. Current Operations As previously reported, UAC sold its servicing rights to SST and in connection with this transaction, the majority of the portfolio servicing activities were transferred to SST. UAC has retained some functions related to its securitized portfolio including the collection of dealer reserve for charged off or prepaid receivables and assisting with certain third party collections efforts on deficiency balance accounts. Trilogy Capital Management LLC of San Diego, California is managing third party collection efforts on deficiency balance accounts. UAC intends to utilize the portion of collections from these activities not owed to securitization trusts to help fund its current operations and to pay its pre-bankruptcy obligations. UAC currently employs seven full-time employees. UAC also continues to evaluate opportunities for the Company to regain value for equity holders by developing new operations to generate income against which it may be able to utilize its significant accumulated net operating losses. Bankruptcy Plan Update As previously reported, on August 8, 2003, the U.S. Bankruptcy Court for the Southern District of Indiana confirmed UAC's Second Amended Plan of Reorganization. UAC emerged from bankruptcy on the effective date of the Plan, September 8, 2003. The confirmed Plan prescribes that available cash resources and cash flows released over time from the retained interest be used to repay creditors in their order of priority. Holders of senior and senior subordinated notes received new limited-recourse restructured notes reflecting these rights. For convenience, holders of smaller unsecured claims were entitled to elect a discounted repayment in exchange for early payout. As a result of the above-mentioned revaluation of retained interest and the associated impact on future cash flows, UAC has estimated that approximately $65 million of liabilities confirmed in the Plan will not likely be paid. The ultimate realization of the claims by UAC's creditors is currently based on assumptions that are subject to change. It should be noted that, although UAC has positive equity, the majority of which is cash in escrow accounts reserved to fund the future operations of the Company and to pay claim and litigation expenses, any future cash flows from remaining pre-petition assets subject to the Plan will be distributed to creditors according to the Plan and will not likely be available to equity holders. During the months of September, October, and November 2003 and January 2004, UAC distributed a total of $48.7 million under the provisions of the confirmed bankruptcy plan. Of that total, $46.7 million represented principal and interest payments to senior debt holders. After these distributions, the remaining principal balance of claims outstanding is $65 million. Of this $65 million outstanding, $9 million is owed to holders of senior debt. There have been no payments of principal or interest to holders of the subordinated debt. There are no material additional distributions anticipated at this time. UAC's future cash flows include potential distributions from the master trust account established to capture cash flows from, and support the obligations of, UAC's outstanding securitization trusts. Such future distributions, if any, are contingent on the future performance of the portfolio. Additional future sources of cash from pre-petition assets are proceeds from the principal and interest payments from customers of UAC owned receivables, collection of dealer reserves, and the collection of previously charged off deficiency balance accounts. In accordance with the Plan, revenues, if any, that may be generated in the future from new investment capital, borrowings, or newly developed or acquired operations will not be available to creditors under the Plan, but will instead be for the benefit of equity holders. Asset Backed Securities Servicer Certificate Availability Historically, the servicer certificates for UAC asset backed securities were available on the UAC corporate website. However, during UAC's Chapter 11 reorganization, UAC shut down its web site as a cost saving measure. Servicer certificates are now available at the JP Morgan Structured Finance Reporting website at: http://www.jpmorgan.com/sfr UNITED AIRLINES: Has Until April 7, 2004 to File Chapter 11 Plan ---------------------------------------------------------------- Judge Wedoff extends the United Airlines Inc. Debtors' Exclusive Period to file a plan through April 7, 2004 and the carrier's Exclusive Period to solicit acceptances of that plan through June 7, 2004. Judge Wedoff will convene another hearing on March 19, 2004, to consider further extensions of the Exclusive Periods. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. the Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at KIRKLAND & ELLIS represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNIVERSAL HEALTH: Ranks No. 5 in Zacks' List of Stocks to Sell Now ------------------------------------------------------------------ Zacks.com currently rates Universal Health Services, Inc. stock with a 'Strong Sell' (Rank #5) recommendation. Zacks.com from time to time releases details on a group of stocks that are part of their exclusive list of Stocks to Sell Now. Since inception in 1988 the S&P 500 has outperformed the Zacks #5 Ranked Strong Sells by 170.3% annually (12.1% vs. 4.5% respectively). "While the rest of Wall Street continued to tout stocks during the market declines of the last few years, we were telling our customers which stocks to sell in order to save themselves the misery of unrelenting losses," according to Zacks.com. To see the full Zacks #5 Ranked list of Stocks to Sell Now then visit: http://at.zacks.com/?id=92 Here is a synopsis of why Universal Health stock has a Zacks Rank of 5 (Strong Sell) and should most likely be sold or avoided for the next 1 to 3 months. Note that a #5/Strong Sell rating is applied to 5% of all the stocks the company ranks: Universal Health Services, Inc. (NYSE:UHS) is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals, ambulatory and radiation centers. Early this month, Universal Health Services stated that its earnings per diluted share for the quarter ending March 31, 2004, could be as much as -25% below the year-ago result. The company went on to say that, on a same facility basis, its acute care hospitals continued to experience a decline in inpatient admissions in the first two months of 2004. Also during the period, the company said that certain acute care facilities have been impacted by a negative shift in payor mix, a decline in intensity and an increase in length of stay. Over the past seven trading days, earnings estimates for the year ending December 2004 moved lower by about 34 cents, or -10%. Universal Health Services is addressing all the issues mentioned above, which should bode well for the company moving forward. Universal Health Services should get back on track in the future, but in the present investors may want to wait on a position for a rise in its earnings estimates. About the Zacks Rank For over 15 years the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988 the #1 Ranked stocks have generated an average annual return of +33.7% compared to the (a)S&P 500 return of only +12.1%. Plus this exclusive stock list has generated total gains of +100.3% since January 2000 as the market suffered its worst downturn in 60 years. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). And since 1988 the S&P 500 has outperformed the Zacks #5 Ranked Strong Sells by 170.3% annually (12.1% vs. 4.5% respectively). Thus, the Zacks Rank system can truly be used to effectively manage the trading in your portfolio. For continuous coverage of Zacks #1 and #5 Ranked stocks, then get your free subscription to "Profit from the Pros" e-mail newsletter where we highlight stocks to buy and sell using our time tested stock evaluation model. http://at.zacks.com/?id=94 The Zacks Rank, and all of its recommendations, is created by Zacks & Co., member NASD. Zacks.com displays the Zacks Rank with permission from Zacks & Co. on its web site for individual investors. About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 to compile, analyze, and distribute investment research to both institutional and individual investors. The guiding principle behind our work is the belief that investment experts, such as brokerage analysts and investment newsletter writers, have superior knowledge about how to invest successfully. Our goal is to unlock their profitable insights for our customers. And there is no better way to enjoy this investment success, than with a FREE subscription to "Profit from the Pros" weekly e-mail newsletter. For your free newsletter, visit http://at.zacks.com/?id=95 Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. About Universal Health Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals, ambulatory surgery and radiation centers nationwide, in Puerto Rico, and in France. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT). For additional information on the Company, visit http://www.uhsinc.com/ Universal Health Services' 0.426% bonds due 2020 are currently trading way below par at about 67 cents-on-the-dollar. US AIRWAYS: Resolves Connecticut Revenue Department's Tax Claims ---------------------------------------------------------------- The Connecticut Department of Revenue Services filed Claim No. 5228 asserting a $1,707,794 priority tax claim against U.S. Airways, Inc., which included certain estimated taxes. The Revenue Department also filed Claim No. 5229 against Piedmont Airlines, Inc., asserting a $825 priority tax claim secured by a $3,565 credit owing to the Reorganized Debtors and held by Connecticut. Claim No. 5229 also asserted estimated corporation taxes. Later, it was determined that the actual corporation tax owing by Piedmont Airlines was $250, which has been paid. In March 2003, the Connecticut Revenue Department amended Claim No. 5228, asserting that $318,991 was owing. The revised amount included estimated taxes. After negotiations, the Reorganized Debtors and the Revenue Department agree that Claim No. 5228 is reduced and allowed for $109,594 as a Priority Tax Claim against U.S. Airways. The Allowed Amount is divided into these components: (a) $9,183 for Business Use Taxes; and (b) $100,410 for income tax and interest. A $58,194 credit owing by the Connecticut Revenue Department to the Reorganized Debtors will be offset against the Gross Allowed Income Tax Amount, resulting in a net income tax owing of $42,217. The Net Allowed Income Tax Amount will be paid by the Reorganized Debtors over the next five years in equal quarterly installments with simple interest running from April 1, 2003 based on the 90-day Treasury Rate. The Amended Claim is withdrawn and disallowed. Claim No. 5229 is withdrawn as paid. The Connecticut Revenue Department will investigate whether a check that was issued to refund to the Reorganized Debtors the $3,565 credit that secured Claim No. 5229 was cashed, and if not -- or if no check was ever issued -- Connecticut will pay the Debtors the $3,565. All other claims for taxes for tax years 2002 or earlier asserted by the Revenue Department are withdrawn and disallowed. The payments are in full satisfaction of all taxes for 2002 and prior tax years. (US Airways Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 215/945-7000) V-NET BEVERAGE: Bankruptcy Case Dismissed & Retires 240 Mil Shares ----------------------------------------------------------------- V-Net Beverage, Inc. (Pink Sheets:VNTB) announced that its Chapter 11 Bankruptcy proceedings filed in January, 2004 in the Federal District Court of Northern Illinois has been dismissed. The Courts decision came late last week. In addition, V-Net announced it has retired 240 million shares owned by the company's former President Michael Brette. The retirement of shares, by mutual agreement, drastically reduces the total shares outstanding by 63% from approximately 380 million shares to about 140 million shares. "The Court's decision gives us the ability to begin immediately implementing our plans to increase shareholder value," said Robert Corr, the recently appointed President. V-Net Beverage is a niche beverage company that privately labels bottled water and specialty drinks for a variety of customers. WADDINGTON NORTH AMERICA: S&P Assigns B Corporate Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Covington, Kentucky-based Waddington North America Inc. At the same time, Standard & Poor's assigned its 'B' senior secured bank loan rating and a recovery rating of '4' to the company's proposed $155 million senior secured credit facilities, based on preliminary terms and conditions. The senior secured bank loan rating is the same as the corporate credit rating; this and the '4' recovery rating indicate the expectation of a marginal (25% to 50%) recovery of principal in the event of default. The outlook is stable. Pro forma for the transaction, total debt will be about $170 million. The proceeds from the transaction will be used primarily to refinance the company's existing debt and to fund a $48 million dividend to shareholders. "The ratings on WNA reflect a very limited scope of operations as the leading manufacturer in the small, upscale segment of the injection molded food-service tableware industry, some vulnerability to fluctuating raw-material costs, and very aggressive debt leverage," said Standard & Poor's credit analyst Franco DiMartino. However, the company's narrow business focus is partially offset by a favorable product mix in the domestic tableware segment, solid market positions in niche markets, well-diversified customer relationships, and stable operating margins. With annual revenues of about $170 million, WNA is a well- positioned competitor in the upscale injection molded food-service tableware segment of the North American food-service disposable products market. Due to favorable demographic trends and changing eating habits, the domestic food-service disposable market is growing by about 4% annually. In addition, both injection molded and thermoformed plastic products are growing at faster rates than paper, glass and metal ware. WNA focuses on certain upscale, niche segments of the plastic food-service market (where its products capture premium pricing) and typically does not participate in high-volume, commodity sectors. Key competitive factors include product quality, service, cost, printing and graphics quality, and distribution capabilities. WARNACO GROUP: Names Robert Mazzoli as CK Chief Creative Officer ---------------------------------------------------------------- The Warnaco Group, Inc. (NASDAQ: WRNC) announced that Robert G. Mazzoli has been named Chief Creative Officer for Warnaco's Calvin Klein Underwear brand. His appointment is effective March 8, 2004. In this role, Mr. Mazzoli will oversee all aspects of design, development, merchandising and marketing of the Calvin Klein Men's and Women's Underwear lines. Mr. Mazzoli, 46, returns to Warnaco from Sara Lee Corporation, where he served as Chief Creative Officer of Sara Lee Branded Apparel. Mr. Mazzoli is re-joining Warnaco and returning to the Calvin Klein Underwear brand, with which he was associated for almost 20 years prior to joining Sara Lee. Mr. Mazzoli worked on the launch of the Calvin Klein Underwear concept, and held numerous merchandising positions during his tenure with Warnaco. Mr. Mazzoli began his career in the Bloomingdale's Executive Training Program. He holds a Bachelor of Arts degree from Columbia University. Joe Gromek, President and Chief Executive Officer of Warnaco, said, "We are excited to have Bob back at Calvin Klein Underwear joining our current team of talented designers and merchandisers and look forward to his contributions to further build the brand. We believe the Calvin Klein Underwear brand has significant potential to expand its global leadership position in designer underwear, and we look forward to building on that momentum." The Warnaco Group, Inc. is a manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories. The Company filed for Chapter 11 protection on June 11, 2001 (Bankr. S.D.N.Y. Case No. 01-41643). Elizabeth McColm, Esq., and Kelley Ann Cornish, Esq., at Sidley, Austin Brown & Wood represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $2,372,705,638 in assets and $3,078,347,176 in debts. (Warnaco Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) WEIRTON STEEL: Pushing for Approval of $6.3 Million Break-Up Fee ---------------------------------------------------------------- In connection with a proposed sale of all of Weirton Steel Corporation and its debtor-affiliates' assets, the Debtors ask the Court to approve a $6,375,000 Break-Up Fee, payable to ISG Weirton, Inc: (a) at any closing of an Alternative Transaction if the ISG Agreement is terminated and the Debtors enter into an agreement to consummate the Alternative Transaction within one year after the termination, provided that ISG Weirton's right to payment of the Break-Up Fee will be subordinated to payment of the Senior Debt; or (b) at the closing of an Alternative Transaction from the proceeds thereof if the ISG Agreement first terminates pursuant to Section 8.1(j) of the Agreement. The Debtors also propose that if the ISG Agreement is terminated because the Debtors enter into an agreement to consummate an Alternative Transaction, or the ISU does not ratify a collective bargaining agreement with ISG Weirton, the Debtors will reimburse ISG Weirton for its actual documented out-of-pocket expenses incurred in connection with the transactions contemplated by the ISG Agreement, including expenses associated with obtaining financing necessary to consummate the transactions, not to exceed $500,000 in cash. Mark E. Freedlander, Esq., at McGuireWoods, in Pittsburgh, Pennsylvania, relates that the Break-Up Fee and the Expense Reimbursement are beneficial to the Debtors' estates and creditors in that they provide an incentive for a potential stalking horse bidder to agree to a higher stalking horse bid prior to the Auction than it might otherwise be prepared to do in the absence of such protections. (Weirton Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Penn. Gov. Rendell Urges Senate to Reinstate Waste Clean Up Fund ------------------------------------------------------------------ Pennsylvania Governor Edward G. Rendell urged the U.S. Senate to reinstate the federal Superfund tax that expired in 1995 to ensure the continued cleanup of some of the nation's worst hazardous waste sites, including priority spots in Pennsylvania. "Each cleanup that gets delayed because of funding constraints puts Commonwealth residents and the citizens of this nation in jeopardy," Governor Rendell said. "Without reauthorization, taxpayers are going to be stuck with the multi-billion dollar burden of cleaning up these abandoned and poisoned lands." Created by the Comprehensive Environmental Response Compensation Liability Act in the 1980s, the Superfund Trust Fund, financed with modest taxes on industries that handle the petroleum and hazardous chemicals most often found on polluted sites, helped to pay for the cleanup of contaminated sites when ownership was unknown or bankrupt. In 1995, when the Superfund was flush with cash, Congress allowed the taxes to expire and has yet to reauthorize them. Once a self- replenishing pot of $4 billion, the Superfund went bankrupt last fall, threatening efforts to address 1,240 sites, including 92 in Pennsylvania, that the U.S. Environmental Protection Agency has on its cleanup list. The fund currently has a $175 million shortfall. In letters to Pennsylvania Senators Arlen Specter and Rick Santorum, Governor Rendell urged their support of an amendment to the fiscal 2005 budget resolution (S. Con. Res. 95), which would reinstate the tax on polluters. A Senate vote could come as early as this week. "The viability of the Superfund is necessary to remove environmental harms and public health risks posed by some of the nation's worst hazardous waste sites," Governor Rendell said. "Given the mounting federal budget deficit, we cannot expect cleanups to be financed out of the general treasury, which is why the Superfund needs this dedicated funding. An empty Superfund means scaled back remedial activities and delays in listing sites that really need work." Sites continue to be added to the National Priority List for which there is no viable responsible party to undertake the cleanup. Just this week, EPA proposed listing the Ryeland Road Arsenic Site located in Heidelberg Township, Berks County. Contamination to this site resulted from the manufacture of pesticides, paints, varnishes and acids by long-defunct companies in operation between 1920 and 1940. Pennsylvania also awaits listing of the Safety Light site in Bloomsburg, Columbia County. That site scored more than 70 points on the Hazard Ranking System, well over the 28.5 points required for listing. Pennsylvania's Hazardous Sites Cleanup Act is comparable to the Superfund, dealing with a range of activities from spill prevention to the cleanup of contaminated sites. Since 1995, cleanups have been approved at more than 1,350 properties in 63 of Pennsylvania's 67 counties, creating and/or retaining 30,000 jobs. The Hazardous Sites Cleanup Fund, which is the primary funding source for the state's brownfields program, faces an uncertain fiscal future. The fund is drying up as the Legislature voted in 2002 to turn off the flow from the Capital Stock and Franchise Tax, the previously dedicated funding source for HSCA. Governor Rendell's budget will provide $40 million over four years to clean up brownfield sites in Pennsylvania. Without new revenue, the program will be bankrupt in the coming fiscal year. Governor Rendell's letter says: The Honorable Arlen Specter Dear Senator Specter: I write to encourage you to support an amendment to the fiscal 2005 budget resolution (S. Con. Res. 95) that would reinstate the federal Superfund tax that expired in 1995. The viability of the Superfund Trust Fund is absolutely essential if we are to continue to make progress on cleaning up the nation's worst hazardous waste sites. Although the federal Superfund program has been in existence for over 20 years, sites continue to be added to the National Priority List (NPL) for which there is no viable responsible party to undertake the cleanup. Indeed, just this week, the U. S. Environmental Protection Agency proposed the listing of the Ryeland Road Arsenic Site located in Heidelberg Township, Berks County. Contamination to this site resulted from the manufacture of pesticides, paints, varnishes and acids by long-defunct companies that operated on the site between 1920 and 1940. We also await the listing of the Safety Light site in Bloomsburg that scored over 70 points on the Hazard Ranking System, well over the 28.5 points required for listing. Given the mounting budget deficit, we cannot reasonably expect cleanups to be financed out of the general treasury. Each listing that gets deferred, each cleanup that gets delayed, puts the citizens of the Commonwealth and the nation in jeopardy. I urge you to support the amendment to secure the resources that will be necessary to continue the work of this vitally important environmental and public health program. Sincerely, Governor Edward G. Rendell * London Meeting to Draw Insurance Executives from 50 Countries --------------------------------------------------------------- Industry consolidation, regulatory scrutiny, and risk management strategies, all representing some of the major global issues facing the insurance world, will be discussed at a conference of senior insurance executives from around the world at a meeting in London, July 11-14. The meeting at the London Hilton and Inter-Continental Hilton is sponsored by the International Insurance Society, a non-profit organization of insurance executives. Keynote speakers participating in the meeting, which is expected to draw over 600 people globally, represent some of the world's most prominent insurance leaders, including among others: * Lord Peter Levene, Chairman, Lloyd's of London, UK * Brian O'Hara, President and CEO, XL Capital, Bermuda * John Coomber, CEO, Swiss Re, Switzerland * Don Shepard, Chairman and CEO, AEGON, N. V., Netherlands * Raymond Groves, Chairman and CEO, Marsh Inc., USA * David Strachan, Director, Insurance Firms Division, Financial Services Authority, UK * Chris Kloninger, President & CFO, AFLAC, USA * Wayne Upton, Director of Research, IASB, UK * Christopher Giles, Managing Director, Chubb UK, UK * David Prosser, Group Chief Executive, Legal & General, UK * Patrick Thiele, President and CEO, PartnerRe, Bermuda * Grahame Chilton, Chief Executive, Benfield Group, Ltd., UK * Ted Collins, Moody's Rating Services, USA * Robert W. Stein, Chairman, Global Financial Services Ernst & Young, USA "Benchmarks of Success" is the topic of the meeting and discussion subjects will range from the current roles and influence of rating agencies and regulators; how companies are responding to expansion opportunities or restructuring challenges; winning formulas for leveraging and protecting capital; and best practices in risk management and risk measurement. Heading up the organization of the meeting, with Patrick Kenny, President and Chief Executive Officer, International Insurance Society, New York, is Lord Peter Levene, Lloyd's of London. The International Insurance Society is a 40-year-old non-profit organization of leading insurance executives and academics from 80 countries and in addition to organizing meetings is involved in insurance research and awards programs. Registration information for the London meeting can be obtained on the Society's website http://www.IISonline.org/ * BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles and Other Disasters ----------------------------------------------------------- Author: Sallie Tisdale Publisher: BeardBooks Softcover: 270 pages List Price: $34.95 Review by Henry Berry Order your own personal copy at http://www.amazon.com/exec/obidos/ASIN/1587981645/internetbankrupt An earlier edition of "The Sorcerer's Apprentice" won an American Health Book Award in 1986. The book has been recognized as an outstanding book on popular science. Tisdale brings to her subject of the wide and engrossing field of health and illness the perspective, as well as the special sympathies and sensitivities, of a registered nurse. She is an exceptionally skilled writer. Again and again, her descriptions of ill individuals and images of illnesses such as cancer and meningitis make a lasting impression. Tisdale accomplishes the tricky business of bringing the reader to an understanding of what persons experience when they are ill; and in doing this, to understand more about the nature of illness as well. Her style and aim as a writer are like that of a medical or science journalist for leading major newspaper, say the "New York Times" or "Los Angeles Times." To this informative, readable style is added the probing interest and concern of the philosopher trying to shed some light on one of the central and most unsettling aspects of human existence. In this insightful, illuminating, probing exploration of the mystery of illness, Tisdale also outlines the limits of the effectiveness of treatments and cures, even with modern medicine's store of technology and drugs. These are often called "miracles" of modern medicine. But from this author's perspective, with the most serious, life-threatening, illnesses, doctors and other health- care professionals are like sorcerer's trying to work magic on them. They hope to bring improvement, but can never be sure what they do will bring it about. Tisdale's intent is not to debunk modern medicine, belittle its resources and ways, or suggest that the medical profession holds out false hopes. Her intent is do report on the mystery of serious illness as she has witnessed it and from this, imagined what it is like in her varied work as a registered nurse. She also writes from her own experiences in being chronically ill when she was younger and the pain and surgery going with this. She writes, "I want to get at the reasons for the strange state of amnesia we in the health professions find ourselves in. I want to find clues to my weird experiences, try to sense the nature of being sick." The amnesia of health professionals is their state of mind from the demands placed on them all the time by patients, employers, and society, as well as themselves, to cure illness, to save lives, to make sick people feel better. Doctors, surgeons, nurses, and other health-care professionals become primarily technicians applying the wonders of modern medicine. Because of the volume of patients, they do not get to spend much time with any one or a few of them. It's all they can do to apply the prescribed treatment, apply more of it if it doesn't work the first time, and try something else if this treatment doesn't seem to be effective. Added to this is keeping up with the new medical studies and treatments. But Tisdale stepped out of this problem- solving outlook, can-do, perfectionist mentality by opting to spend most of her time in nursing homes, where she would be among old persons she would see regularly, away from the high-charged atmosphere of a hospital with its "many medical students, technicians, administrators, and insurance review artists." To stay on her "medical toes," she balanced this with working occasional shifts in a nearby hospital. In her hospital work, she worked in a neonatal intensive care unit (NICU), intensive care unit (ICU), a burn center, and in a surgery room. From this combination of work with the infirm, ill, and the latest medical technology and procedures among highly-skilled professionals, Tisdale learned that "being sick is the strangest of states." This is not the lesson nearly all other health-care workers come away with. For them, sick persons are like something that has to be "fixed." They're focused on the practical, physical matter of treating a malady. Unlike this author, they're not focused consciously on the nature of pain and what the patient is experiencing. The pragmatic, results-oriented medical profession is focused on the effects of treatment. Tisdale brings into the picture of health care and seriously-ill patients all of what the medical profession in its amnesia, as she called it, overlooks. Simply in describing what she observes, Tisdale leads those in the medical profession as well as other interested readers to see what they normally overlook, what they normally do not see in the business and pressures of their work. She describes the beginning of a hip-replacement operation, the surgeon "takes the scalpel and cuts--the top of the hip to a third of the way down the thigh--and cuts again through the globular yellow fat, and deeper. The resident follows with a cautery, holding tiny spraying blood vessels and burning them shut with an electric current. One small, throbbing arteriole escapes, and his glasses and cheek are splattered." One learns more about what is actually going on in an operation from this and following passages than from seeing one of those glimpses of operations commonly shown on TV. The author explains the illness of meningitis, "The brain becomes swollen with blood and tissue fluid, its entire surface layered with pus...The pressure in the skull increases until the winding convolutions of the brain are flattened out...The spreading infection and pressure from the growing turbulent ocean sitting on top of the brain cause permanent weakness and paralysis, blindness, deafness...." This dramatic depiction of meningitis brings together medical facts, symptoms, and effects on the patient. Tisdale does this repeatedly to present illness and the persons whose lives revolve around it from patients and relatives to doctors and nurses in a light readers could never imagine, even those who are immersed in this world. Tisdale's main point is that the miracles of modern medicine do not unquestionably end the miseries of illness, or even unquestionably alleviate them. As much as they bring some relief to ill individuals and sometimes cure illness, in many cases they bring on other kinds of pains and sorrows. Tisdale reminds readers that the mystery of illness does, and always will, elude the miracle of medical technology, drugs, and practices. Part of the mystery of the paradoxes of treatment and the elusiveness of restored health for ill persons she focuses on is "simply the mystery of illness. Erosion, obviously, is natural. Our bodies are essentially entropic." This is what many persons, both among the public and medical professionals, tend to forget. "The Sorcerer's Apprentice" serves as a reminder that the faith and hope placed in modern medicine need to be balanced with an awareness of the mystery of illness which will always be a part of human life. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Rizande B. Delos Santos, Paulo Jose A. Solana, Aileen M. Quijano and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***