/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/040503.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, May 3, 2004, Vol. 8, No. 86 Headlines ADELPHIA COMM: Ten Litigants Want Stay Listed to Pursue Actions AIR CANADA: GE Capital Extends Exit Financing Pact to Sept. 30 AQUILA NETWORKS: Alberta Energy Board Okays Asset Sale to Fortis ARCAP 2004-1: Fitch Sets Class J & K Ratings at Low-B Levels ARMSTRONG: Shareholder Deficit Tops $1.3B at March 31, 2004 ASIAN SECURITIZATION: S&P Withdraws BB Financial Strength Rating AURORA FOODS: Houlihan Lokey Wants to Collect $3MM+ Unpaid Fee BALLY TOTAL: Fitch Downgrades Low-B Ratings and Halts Coverage BIOGAN INTERNATIONAL: Appoints BSI as Claims and Notice Agent CENDANT MORTGAGE: Fitch Assigns Low-B Ratings to Class B-4 & B-5 COPAMEX: Fitch Removes BB- Ratings from CreditWatch Negative COMPANIA MEGA: S&P Removes Junk Ratings from CreditWatch COMMERCIAL CAPITAL: Fitch Affirms Low-B Ratings on Classes F & G CONTINENTAL AIRLINES: Fitch Junks $323.5MM Revenue Bond Rating COVANTA: CIT & WBH Press for $1,652,711 Admin. Expense Payment CREST EXETER: Fitch Rates Classes E-1 & E-2 at BB CWMBS INC: Fitch Assigns Low-B Ratings to 2 Series 2004-5 Classes CWMBS INC: Fitch Rates Series 2004-9 Classes B-3 & B-4 at BB/B DOMAN INDUSTRIES: CCAA Monitor Files April 2004 Report DOMAN INDUSTRIES: Western Pulp Unit to Raise Kraft Pulp Price ENRON CORP: Stay Modified Allowing Siemens to Pursue $1.8M Claim EAPI ENTERTAINMENT: Requires More Financing to Continue Operations EQI FINANCING: Fitch Affirms $10MM Class C Bond Rating at BB FINOVA GROUP: Will Hold Annual Shareholders' Meeting on May 12 FLEMING COS: BFL Parties to Pay $625,000 in Dispute Settlement FREESTAR TECHNOLOGY: May Cease Operations If Unable to Raise Funds GENERAL MEDIA: Agrees to License Penthouse Trademark to VCG Clubs GENESIS: Neighborcare Settles Missing Inventory Issue with the DEA GLIMCHER REALTY: First Quarter 2004 Net Income Down to $760,000 GLOBAL CROSSING: Inks Stipulation Resolving Verizon Claim Dispute GOLDEN PATRIOT: Working Capital Insufficient to Fund Business Plan GUNDLE/SLT ENVIRONMENTAL: S&P Assigns B+ Corporate Credit Rating HEALTHSOUTH: Offers Senior Noteholders 37.5% Higher Consent Fee HERCULES INC: First Quarter 2004 Results Swing to Positive Zone INTERNATIONAL STEEL: Reports Increased Sales & Net Income for Q1 KAISER ALUMINUM: Working with Lenders to Amend DIP Facility KSAT SATELLITE: Intends to Delist Stock from TSX Venture Exchange LIBERATE TECHNOLOGIES: Files Chapter 11 Petition in Delaware LOEWEN GROUP: Agrees to Settle Eight of Ten IRS Tax Claims MAGELLAN HEALTH: Reports Improved First Quarter Financial Results MALAN REALTY: Raises $8.7 Million from Sale of Three Properties MEDIABAY INC: New Senior Debt Facility Extends Debt Maturities MIRANT: Canadian Debtors Ask Court to Approve Plan of Arrangement NATIONAL ENERGY: TransCanada Wins Bid for Gas Transmission Unit NORTEL: S&P Lowers Lease Pass-Through Trust 2001-1 Rating to B- OMEGA HEALTHCARE: Will Present at Deutsche Bank's May 4 Conference ONESOURCE TECHNOLOGIES: Posts $884,338 Deficit at Dec. 31, 2003 OPRYLAND HOTEL: Fitch Affirms BB Rating on Class E Series 2001 PARMALAT GROUP: BofA Reports $120 Million 1st Quarter Exposure PENN OCTANE: Planned Asset Spin-Off May Hurt Equity Value PIVOTAL SELF-SERVICE: Going Concern Ability is in Doubt PRIMUS: Balance Sheet Insolvency Widens to $105M at March 31, 2004 ROANOKE TECH: May Need More Capital to Continue as a Going Concern ROTECH HEALTHCARE: Posts Declining Q1 2004 Revenues of $134 Mil. SIGNATURE EYEWEAR: Auditors Remove Going Concern Qualification SOLUTIA INC: Wants Lease Decision Deadline Moved to August 16 STELCO INC: Releases Report on Restructuring's Economic Impact STILLWATER MINING: Delivers Positive 2004 First Quarter Results STORAGE ENGINE: Amper Politziner Resigns as Auditors TECNET: Hires Kessler & Collins as Bankruptcy Counsel TRANSWESTERN PIPELINE: S&P Rates $550 Million Bank Loan at BB TRENCH ELECTRIC: S&P Places B/CCC+ Ratings on CreditWatch Positive UGS PLM: S&P Assigns B+ Corporate Debt Rating with Stable Outlook UNITED AIRLINES: First Quarter Operating Loss Narrows to $211 Mil. UNITED AIRLINES: Trade Creditors Sell Claims Exceeding $36 Million US ONCOLOGY: Low-B Rated Cancer-Care Provider Releases Q1 Results VENTURE HOLDINGS: Debtor & Committee Sue Larry Winget for $300 Mil WELLMAN INC: Reports Improved First Quarter 2004 Results WELLS FARGO: Fitch Rates Classes B-4 & B-5 Certificates at BB/B WHITING PETROLEUM: S&P Assigns B+ Rating to Corporate Debt WINSTAR COMMS: Chapter 7 Trustee Awarded $763,161 Fee Compensation WOMEN FIRST: Files for Chapter 11 Protection in Delaware WORLDCOM/MCI: Files Audited Financial Statements for 2003 WORLDCOM/MCI: Updates 2004 Earnings Guidance & Shares Tumble WORLD TRANSPORT: Strained Liquidity Triggers Going Concern Doubt ZIFF DAVIS: Balance Sheet Insolvent by $888MM at March 31, 2004 * Gordon Brothers Acquires Insolvency Firm SHM Smith Hodgkinson * BOND PRICING: For the week of May 3 - 7, 2004 ********* ADELPHIA COMM: Ten Litigants Want Stay Listed to Pursue Actions --------------------------------------------------------------- Ten parties ask the Court to lift the automatic stay in the Adelphia Communications Debtors' Chapter 11 cases: Party Reason ----- ------ Pacific Bell Telephone Company To permit Pacific to get payment from insurance proceeds Rudolph J. Bersani, et al. To permit the defendants of a New York District Court action to service ACOM a subpoena Tele-Guia Talking Yellow To permit Tele-Guia to Pages, Inc. proceed with its patent infringement action in the U.S. District Court of Puerto Rico Carol Sabatini To permit Ms. Sabatini to commence and liquidate a prepetition personal injury tort action against ACOM Christopher Ardiente To permit Mr. Ardiente to pursue his personal injury claims against ACOM West Coast Communications To permit West Coast to enforce its mechanics' lien on certain real property in Riverside County, California against ACOM Debtor Century- TCI of California Communications, LP Joey L. Commisso, Jr. and To permit the Commissos to Patti Commisso pursue their personal injury action in Lawrence County, Pennsylvania Robena Corbett To permit Ms. Corbett to commence a civil proceeding against ACOM Debtor Global Cablevision II, Inc., for personal injuries Susan White To permit Ms. White to pursue her personal injury action in Torrance, California against Century-TCI of California Communications, LP Personalized Media To permit Personalized Media Communications, LLC to serve subpoena duces tecum on ACOM and to obtain ACOM's compliance ACOM Debtors and Ms. Corbett Stipulate Robena Corbett was injured at Adelphia Communications Corporation's business premises. At the time of the injury, ACOM was covered under an insurance policy issued by American Home Assurance Company and an umbrella policy issued by National Union Fire Insurance Company. The automatic stay prohibited Ms. Corbett from pursuing her claim against ACOM. In a Court-approved Stipulation, the parties agreed that the automatic stay will be partially modified to permit Ms. Corbett to pursue her claim, provided that any recovery will be limited to the proceeds available under available Insurance Policies. (Adelphia Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CANADA: GE Capital Extends Exit Financing Pact to Sept. 30 -------------------------------------------------------------- GE Capital Aviation Services (GECAS) announced an extension of the terms of its Global Restructuring Agreement (GRA) with Air Canada from April 30, 2004 to September 30, 2004, subject to the successful completion of certain conditions. The agreement extends GECAS' commitment to provide exit financing and other financial support subject to five milestones: - Court approval of an agreement between Air Canada and Deutsche Bank by May 7, 2004 - Satisfactory resolution of contingencies set forth in that agreement by May 15, 2004 - Circulation of a Restructuring Plan to Air Canada's creditors by June 30, 2004 - Creditor approval of the Restructuring Plan through a vote of the relevant parties by August 15, 2004 - Emergence of Air Canada from Companies' Creditors Arrangement Act (CCAA) bankruptcy protection on or before September 30, 2004 "Our priority continues to be the successful emergence of Air Canada from CCAA bankruptcy protection and experience tells us speed is absolutely critical to success," said Henry Hubschman, president of GECAS. "In this very competitive and dynamic market, speed and clarity of purpose are paramount. All stakeholders must understand the need for Air Canada to emerge as quickly as possible and for its vision to be clear to customers, employees, owners and creditors. We are extending our agreement with Air Canada subject to certain 'tollgates' designed to encourage swift and steady progress. "Air Canada has made good progress on a number of difficult issues thus far and we remain committed to working with the airline's senior management team and other stakeholders going forward," Hubschman said. "The most important thing for the airline at this time is stability, and prolonging the process beyond the summer months will only serve to weaken the airline. A quick exit gives Air Canada the stability to focus its full energy on running an airline in today's environment." The GRA between Air Canada and GECAS was signed on September 11, 2003 and addresses leases and other obligations on approximately 100 aircraft; outlines the terms of US$585 million in financing provided by GE upon exit from CCAA bankruptcy protection and contemplates up to US$950 million in financing provided by GE for regional jet aircraft. GECAS is a unit of GE Commercial Finance, which offers businesses around the globe an array of financial products and services, has assets of more than US$220 billion and is headquartered in Stamford, Connecticut, USA. General Electric (NYSE: GE) is a diversified technology and services company dedicated to creating products that make life better. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. AQUILA NETWORKS: Alberta Energy Board Okays Asset Sale to Fortis ---------------------------------------------------------------- Aquila Networks Canada received approval from the Alberta Energy and Utilities Board (AEUB) for the sale of its Alberta operations to Fortis, Inc. - a diversified, international electric utility based in Newfoundland. Approval by the AEUB is one of the final steps in the overall sale process. The sale transaction also requires approval from the British Columbia Utilities Commission (BCUC) and the Kansas Corporation Commission (KCC), in addition to the completion of other usual closing conditions. The KCC has indicated it will review Aquila Inc.'s application once the Canadian regulators have granted their approval. "The approval by the AEUB is a critical step in the sale process," said Fauzia Lalani, CEO, Aquila Networks Canada. She added that until all sale conditions have been met, Aquila, Inc. will remain owner and operator of the Alberta and British Columbia operations. Consequently, during this transition period, customers and other stakeholders will continue to be served by the existing Aquila operation in both British Columbia and Alberta. Once all three regulatory approvals are granted, the sale can proceed to close. It is expected the legal closing process may require three to four weeks once the necessary regulatory approvals are obtained. Aquila Networks Canada is an investor-owned electricity utility with more than 525,000 customers in British Columbia and Alberta. Aquila, Inc. is Aquila Networks Canada's parent company, which operates electricity and natural gas distribution networks in seven states in the U.S. and in Canada. As reported in the Troubled Company Reporter's April 13, 2004 edition, Standard & Poor's Rating Services lowered its corporate credit rating on Aquila Inc. to 'B-' from 'B'. The outlook is negative. "The downgrade reflects continued uncertainty regarding Aquila's ability to restructure its gas prepay contracts and the expectation that credit measures will remain pressured despite management's efforts to stem its deteriorating credit profile," said Standard & Poor's credit analyst Rajeev Sharma. Standard & Poor's also said that the negative outlook reflects that the ratings could be lowered if Aquila is unable to significantly reduce debt leverage, stabilize credit measures, and maintain sufficient liquidity for the rating level. Further rating action will be predicated on Aquila's ability to restructure the gas prepay contracts. ARCAP 2004-1: Fitch Sets Class J & K Ratings at Low-B Levels ------------------------------------------------------------ Fitch Ratings assigns the following ratings to ARCap 2004-1 Resecuritization, Inc.: --$57,100,000 class A certificate due April 2024 'AAA'; -- $30,600,000 class B certificates due April 2039 'AA'; --$26,500,000 class C certificates due April 2039 'A'; --$8,500,000 class D certificates due April 2039 'A-'; --$30,700,000 class E certificates due April 2039 'BBB+'; --$13,600,000 class F certificates due April 2039 'BBB'; --$36,000,000 class G certificates due April 2039 'BBB'; --$13,000,000 class H certificates due April 2039 'BBB-'; --$31,500,000 class J certificates due April 2039 'BB'; --$20,500,000 class K certificates due April 2039 'B'. The ratings on the class A and B certificates address the likelihood that investors will receive timely payment of interest and ultimate payment of principal by the stated maturity date. The ratings on the class C through K certificates address the ultimate payment of scheduled and compensated interest and principal. Periodic interest payments on the certificates will be paid monthly beginning in May 2004. The ratings are based on the capital structure of the transaction, the quality of the collateral, the overcollateralization and interest coverage tests provided for within the structure, and the experience of ARCap REIT, Inc., as the collateral administrator. ARCap 2004-1 is a bankruptcy-remote special-purpose corporation. The proceeds of the notes will be used to purchase a diversified portfolio of commercial mortgage-backed securities (CMBS). The Fitch weighted average rating factor (WARF) is 21.45. There is an overcollateralization (OC) test and an interest coverage (IC) test after payment of interest to the class H notes. Cash trapped through any OC or IC test failure will be used to pay down the most senior notes outstanding. ARCap REIT, Inc., is a privately held real estate investment trust (REIT) which owns and manages CMBS with a face value in excess of $1.9 billion, representing interest in greater than 35 transactions consisting of more than 5,500 commercial mortgage loans. ARMSTRONG: Shareholder Deficit Tops $1.3B at March 31, 2004 ----------------------------------------------------------- Armstrong Holdings, Inc. (OTC Bulletin Board: ACKHQ) reported first quarter 2004 net sales of $845.0 million, a 9.0% increase over first quarter net sales of $774.9 million in 2003. Excluding the favorable effects of foreign exchange rates of $34.6 million, consolidated net sales increased by 4.4%. The increase in sales was primarily driven by strong demand for our products in the North American residential and commercial markets. Also contributing to the improvement in sales was the impact of price increases initiated in 2003. Operating income of $39.8 million was recorded for the first quarter of 2004 compared to operating income of $11.3 million in the first quarter of 2003. During 2003 and continuing in the first quarter of 2004, Armstrong implemented several manufacturing and organizational changes to improve our cost structure. The improvements from these initiatives are reflected in lower selling, general and administrative (SG&A) expense as well as lower manufacturing overhead costs in the first quarter of 2004. These cost improvements, together with the benefits of the increased sales volume and selling prices, were partially offset by higher raw material costs. The expense associated with the cost-reduction initiatives was $3.0 million in the first quarter of 2004 and $4.7 million in the first quarter of 2003. At March 31, 2004, Armstrong's balance sheet shows a shareholders' deficit of $1,314,800,000 Segment Highlights for the First Quarter 2004 Resilient Flooring net sales of $304.1 million in the first quarter of 2004 increased from net sales of $286.7 million in 2003. First quarter sales compared to 2003 were favorably impacted by $11.1 million from the translation effect of the changes in foreign exchange rates. Operating income of $15.5 million in the quarter declined by $2.1 million from the operating income in 2003 of $17.6 million. The decline in operating income was primarily due to lower sales volume in Western Europe, increased costs to purchase PVC, wage and salary inflation and certain European manufacturing inefficiencies. Wood Flooring net sales of $197.4 million in the first quarter of 2004 increased 18.1% from $167.2 million in the prior year. This increase was primarily due to improved pricing and increased volume to the strong U.S. new home construction market. Operating income of $10.3 million was recorded in the quarter compared to operating income of $2.2 million in the same period last year. The increase in operating income was primarily due to the sales volume gains and lower manufacturing overhead costs resulting from the cost- reduction initiatives. In the first quarter of 2004, higher lumber costs offset substantially all of the benefits realized from higher selling prices. Textiles and Sports Flooring net sales of $62.3 million increased in the first quarter compared to $62.0 million in the first quarter of 2003. Excluding the translation effect of the changes in foreign exchange rates of $10.5 million, net sales decreased 14.1% due to weak European markets. An operating loss of $1.9 million for the quarter decreased by $4.1 million from the operating loss of $6.0 million recorded for the same period last year, primarily due to reduced manufacturing overhead and SG&A costs resulting from the 2003 cost-reduction initiatives. 2003 results include restructuring expense of $2.3 million while 2004 results had a net reversal of $0.1 million for restructuring activities. Building Products net sales of $230 million in the first quarter of 2004 increased from $207.1 million in the prior year. Excluding the translation effect of the changes in foreign exchange rates of $12.9 million, sales increased by 4.5%, primarily due to strong growth in the U.S. commercial markets and improved pricing in the U.S. commercial and residential markets. Operating income for the quarter increased to $27.2 million from operating income of $17.8 million in 2003. This increase resulted from improved sales activity in the U.S., favorable production efficiencies and higher equity in earnings. Partially offsetting these gains were charges associated with cost- reduction initiatives in The Netherlands and increased energy costs. Cabinets net sales in 2004 of $51.2 million decreased from first quarter 2003 sales of $51.9 million primarily due to reductions in volume. Operating income of $0.6 million for the quarter compared to an operating loss of $3.6 million in the prior year. The improvement in operating income was predominantly due to selling price increases and lower manufacturing overhead and SG&A costs, partially offset by sales volume declines. Armstrong Holdings, Inc. is the parent company of Armstrong World Industries, Inc., a global leader in the design and manufacture of flooring, ceilings and cabinets. Headquartered in Lancaster, Pennsylvania, Armstrong World filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., Weil, Gotshal & Manges LLP and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. ASIAN SECURITIZATION: S&P Withdraws BB Financial Strength Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'BB' financial strength and counterparty credit ratings on Asian Securitization & Infrastructure Assurance (PTE) Ltd (ASIA Ltd) at management's request. ASIA Ltd has transferred its entire insured portfolio to MBIA Insurance Corp., and ASIA Ltd will shortly be placed in voluntary liquidation by its shareholders. ASIA Ltd's insured portfolio totaled $356.1 million as of March 5, 2004, of which $331.7 million represented exposure ceded to ASIA Ltd by Capital Markets Assurance Corp. (CapMAC, acquired by MBIA in 1998) under a reinsurance agreement in 1996. The assumption of this book of business will not affect MBIA's capital adequacy, as MBIA did not receive any credit for these cessions in Standard & Poor's capital adequacy test. Currently, all transactions in the CapMAC book of business are rated investment grade. The remaining $24.4 million of exposure assumed by MBIA represents three transactions written on a direct basis by ASIA Ltd. All are of non-investment grade credit quality. The agreements relating to these three transactions have been amended, assigning the rights and obligation to MBIA. On Jan. 15, 1998, the financial strength rating of ASIA Ltd was lowered to 'BB' after the failure of the owners group to effect a fast and sizable capital infusion. The additional capital would have offset a significant reduction in the credit quality of the insured book of business in the wake of severe economic stress throughout many of the developing countries in Asia. As a result of the downgrade, the company ceased writing new and renewal business. AURORA FOODS: Houlihan Lokey Wants to Collect $3MM+ Unpaid Fee -------------------------------------------------------------- Houlihan Lokey Howard & Zukin Capital asks Judge Walrath to: (a) approve $3,364,791 in fees and $2,986 in reimbursable actual and necessary expenses for services rendered from December 8, 2003 through March 19, 2004; and (b) direct the Aurora Foods, Inc. Debtors to pay them $3,102,986, representing 100% of the accrued but unpaid fees and 100% of the incurred but unreimbursed expenses during the Final Period, after application of the Retainer to the fees and expenses. Houlihan Lokey is the financial advisor to the Official Committee of Unsecured Creditors. Pursuant to the terms of the Engagement Letter, Houlihan Lokey received payment in respect of its $150,000 December 2003 Monthly Fee prior to the Petition Date. Of that amount, $116,129 may be allocable on a ratable basis to postpetition services rendered by Houlihan Lokey. Accordingly, Houlihan Lokey seeks allowance of, but not payment of, the December 2003 Monthly Fee, to the extent that the amount is deemed to have accrued postpetition. Of the requested compensation, $72,581 in fees and $274 in actual and necessary expenses accrued during the Gap Period. Houlihan Lokey's Managing Director David R. Hilty relates that four professionals have performed substantial services to the Committee: Professsional Title ------------- ----- David R. Hilty Managing Director Tanja I. Aalto Senior Vice President Agnes K. Tang Associate Emelie L. Fisher Associate During the Final Period, Houlihan Lokey's work on behalf of the Committee involved four general project categories: A. Strategic Discussions, Planning and Review These involve major activities like: (1) Advising the Committee with respect to the Plan and Disclosure Statement and subsequent modifications; (2) Advising the Committee with respect to the Merger Agreement, the related Voting Trust Agreement, and subsequent modifications; (3) Advising the Committee and other Senior Subordinated Noteholders with respect to calculating the Senior Subordinated Noteholders' trust units in regards to the merger of the Debtors and Pinnacle Foods; (4) Advising the Committee on the Debtors' ongoing financial condition; and (5) Conducting conferences and meetings among Houlihan Lokey professionals and Debevoise & Plimpton professionals to facilitate strategy sessions and recommendations to the Committee, including general tactics related to the case and pending legal deadlines. B. Analyzing and Reviewing the Debtors' Financial Statements and Operational Performance During the Final Period, Houlihan Lokey evaluated the Debtors' 13-week cash flow forecasts weekly in order to analyze trends in cash receipts and cash disbursements. Houlihan Lokey also participated in frequent calls with the Debtors to evaluate current financial and operational performance, and subsequently reported to the Committee on major trends and business developments, including the Debtors' plan to increase spending by $5 million, the extension of the management retention agreement, and the net debt adjustment. C. Correspondence, Meetings, and Discussions with Parties-in- Interest Houlihan Lokey engaged in extensive correspondence and preparation for meetings with the Committee, the Debtors, the Debtors' advisors and various parties-in-interest in these Chapter 11 cases. Houlihan Lokey expended significant time and effort meeting the due diligence requirements of the Committee. In addition, Houlihan Lokey conducted numerous meetings via conference call with parties-in-interest to provide situational updates. D. Case Administration This category includes retention matters, addressing questions of individual members of the Committee, Chapter 11 procedures, communications and administrative functions. The total fees are: Billing Period Monthly Fees Fees Paid Fees Owed -------------- ------------ --------- --------- 12/8-31/2003 $116,129 $116,129 $0 01/1-31/2004 150,000 0 150,000 02/1-29/2004 150,000 0 150,000 03/1-19/2004 91,935 0 91,935 ------------ --------- --------- Total Monthly Fees 508,064 116,129 391,935 Less: Retainer 0 148,662 (148,662) ------------ --------- --------- Net Monthly Fees 508,064 264,791 243,273 Transaction Fee 2,856,726 0 2,856,726 Sub Total 3,364,791 264,791 3,100,000 Out-of-pocket exp. 2,986 0 2,986 ------------ --------- --------- $3,367,777 $264,791 $3,102,986 ============ ========= ========= The out-of-pocket expenses total $2,986: Billing Period Expense Incurred -------------- ---------------- 12/8-31/2003 $711 01/1-31/2004 1,563 02/1-29/2004 556 03/1-19/2004 156 ---------------- TOTAL $2,986 ================ According to Mr. Hilty, it is Houlihan Lokey's policy to pass along to its clients its expenses incurred on behalf of the clients, without mark-up or interest charges. The expenses include airfare, taxi or other airport transportation, hotel charges, travel and working meals, computer research, messenger charges, overnight delivery, internal and external photocopying expense, postage, telecopy expenses, long distance telephone charges, and other travel-related expenses. Aurora Foods Inc. -- http://www.aurorafoods.com/-- based in St. Louis, Missouri, produces and markets leading food brands, including Duncan Hines(R) baking mixes; Log Cabin(R), Mrs. Butterworth's(R) and Country Kitchen(R) syrups; Lender's(R) bagels; Van de Kamp's(R) and Mrs. Paul's(R) frozen seafood; Aunt Jemima(R) frozen breakfast products; Celeste(R) frozen pizza; and Chef's Choice(R) skillet meals. With $1.2 billion in reported assets, Aurora Foods, Inc., and Sea Coast Foods, Inc., filed for chapter 11 protection on December 8, 2003 (Bankr. D. Del. Case No. 03-13744), to complete a pre-negotiated sale of the company to J.P. Morgan Partners LLC, J.W. Childs Equity Partners III, L.P., and C. Dean Metropoulos and Co. Judge Walrath confirmed the Debtors' pre-packaged plan on Feb. 20, 2004. Sally McDonald Henry, Esq., and J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP provide Aurora with legal counsel, and David Y. Ying at Miller Buckfire Lewis Ying & Co., LLP provides financial advisory services. (Aurora Foods Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) BALLY TOTAL: Fitch Downgrades Low-B Ratings and Halts Coverage -------------------------------------------------------------- Fitch has lowered the ratings of Bally Total Fitness Holding Corp. as follows: --Secured bank credit facility to 'B+' from 'BB-'; --Senior notes to 'B-' from 'B'; --Senior subordinated notes to 'CCC' from 'B-'. The downgrade reflects Bally's ongoing weak operating performance and recent write-down of its receivables. Further, on March 30 Bally announced that its auditors resigned and the company just disclosed that the Securities and Exchange Commission (SEC) is investigating Bally's recent change in accounting for its memberships. Simultaneously, Fitch is withdrawing all ratings and will no longer provide analytical coverage of this issuer. BIOGAN INTERNATIONAL: Appoints BSI as Claims and Notice Agent ------------------------------------------------------------- Biogan International, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to employ Bankruptcy Services LLC as the official noticing and claims agent in its on-going chapter 11 restructuring. BSI is expected to: a) relieve the Clerk's Office of all noticing under any applicable rule of bankruptcy procedure; b) file with the Clerk's Office a certificate of service, within 5 days after each service, which includes a copy of the notice, a list of persons to whom it was mailed (in alphabetical order), and the date mailed; c) maintain an up-to-date mailing list for all entities that have requested service of pleadings in this case, which list shall be available upon request of the Clerk's Office; d) comply with applicable state, municipal and local laws and rules, orders, regulations and requirements of Federal Government Departments and Bureaus; e) relieve the Clerk's Office of all noticing under any applicable rule of bankruptcy procedure relating to the institution of a claims bar date and processing of claims; f) at any time, upon request, satisfy the Court that the Claims Agent has the capability to efficiently and effectively notice, docket and maintain proofs of claim; g) furnish a notice of the bar date approved by the Court for the filing of a proof of claim (including the coordination of publication, if necessary) and a form for filing a proof of claim to each creditor notified of the filing; h) maintain all filed proofs of claim; i) maintain an official claims register by docketing all proof's of claim on a register containing certain information, including, but not limited to: (i) the name and address of claimant and agent, if agent filed proof of claim; (ii) the date received; (iii) the claim number assigned; (iv) the amount and classification asserted; (v) the comparative, scheduled amount of the creditor's claim (if applicable); and (vi) pertinent comments concerning disposition of claims; j) maintain the original proofs of claim in correct claim number order, in an environmentally secure area, and protecting the integrity of these original documents from theft and/or alteration; k) transmit to the Clerk's Office an official copy of the claims register on a monthly basis, unless requested in writing by the Clerk's Office on a more/less frequent basis; l) maintain an up-to-date mailing list for all entities that have filed a proof of claim, which list shall be available upon request of a party in interest or the Clerk's Office; m) be open to the public for examination of the original proofs of claim without charge during regular business hours; n) record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and provide notice of the transfer as required by Bankruptcy Rule 3001(e); o) record court orders concerning claims resolution; p) assist with voting and balloting, including the printing and mailing of ballots; q) make all original documents available to the Clerk's Office on an expedited, immediate basis; and r) promptly comply with such further conditions and requirements as the Clerk's Office may hereafter prescribe. BSI's professional hourly fees are: Professional Billing Rate ------------ ------------ Kathy Gerber $210 per hour Senior Consultants $185 per hour Programmer $130 to $160 per hour Associate $135 per hour Data Entry/Clerical $40 to $60 per hour Schedule Preparation $225 per hour Headquartered in Toronto, Ontario, Canada, Biogan International, Inc., explores, selects, smelts and sells mineral products and by- products. The Company filed for chapter 11 protection on April 15, 2004 (Bankr. Del. Case No. 04-11156). Michael R. Nestor, Esq., at Young Conaway Stargatt & Taylor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $9,038,612 in total assets and $8,280,792 in total debts. CENDANT MORTGAGE: Fitch Assigns Low-B Ratings to Class B-4 & B-5 ---------------------------------------------------------------- Cendant Mortgage Capital LLC's (CDMC) mortgage pass-through certificates, series 2004-2, are rated by Fitch Ratings as follows: --$96.8 million classes A-1 - A-6, R-I and R-II 'AAA'; --$4.4 million class B-1 'AA'; --$721,008 class B-2 'A'; --$412,004 class B-3 'BBB'; --$206,002 privately class B-4 'BB'; --$206,002 privately offered class B-5 'B'. The 'AAA' rating on the senior certificates reflects the 6% subordination provided by the 4.30% class B-1, 0.70% class B-2, 0.40% class B-3, 0.20% privately offered class B-4, 0.20% privately offered class B-5 and 0.20% privately offered class B-6 (not rated by Fitch). Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the servicing capabilities of Cendant Mortgage Corporation (rated 'RPS1' by Fitch). The certificates represent ownership in a trust fund, which consists primarily of 202 one- to four-family conventional, primarily 30-year fixed-rate mortgage loans secured by first liens on residential mortgage properties. As of the cut-off date (April 1, 2004), the mortgage pool has an aggregate principal balance of approximately $103,001,118, a weighted average original loan-to-value ratio (OLTV) of 70.86%, a weighted average coupon (WAC) of 5.793%, a weighted average remaining term (WAM) of 358 months and an average balance of $509,907. The loans are primarily located in California (28.33%), New Jersey (12.32%) and New York (11.47%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. All of the mortgage loans were either originated or acquired in accordance with the underwriting guidelines established by Cendant Mortgage Corporation. Any mortgage loan with an OLTV in excess of 80% is required to have a primary mortgage insurance policy. Approximately 2.18% of the mortgage loans are pledged asset loans. These loans, also referred to as 'Additional Collateral Loans', are secured by a security interest, normally in securities owned by the borrower, which generally does not exceed 30% of the loan amount. Ambac Assurance Corporation provides a limited purpose surety bond, which guarantees that the Trust receives certain shortfalls and proceeds realized from the liquidation of the additional collateral, up to 30% of the original principal amount of that Additional Collateral Loan. Citibank N.A. will serve as Trustee. For federal income tax purposes, an election will be made to treat the trust fund as a real estate mortgage investment conduit (REMIC). COPAMEX: Fitch Removes BB- Ratings from CreditWatch Negative ------------------------------------------------------------ Fitch Ratings has removed Copamex, S.A. de C.V.'s senior unsecured foreign and local currency ratings as well as the rating on the senior notes 11.375% due April 30, 2004 from Rating Watch Negative. Fitch has affirmed these ratings at 'BB-'. Fitch has also affirmed Copamex's national scale rating at 'A-' (mex), and the short term rating at 'F2' (mex) and has assigned 'A' (mex) to the local 'certificados' issuances of Copamex 01, Copamex 02 and Copamex 02-2, which incorporates a 15% partial guarantee of the principal by the FMO. The Rating Outlook for all of the above is Stable. The rating action is the result of the successful completion of Copamex's financial plan to reduce debt and refinance the senior notes. The plan included a credit facility totaling US$175 million from the International Finance Corporation (IFC) consisting of a US$50 million 'A' loan directly from the IFC, a US$100 million 'B' loan syndicated among a group of banks and a US$25 million quasi- equity 'C' loan structure directly from the IFC. The plan also included the sale for US$100 million of a 49.99% stake in Copamex's consumer products division to SCA Hygiene Products AB (SCA), a Swedish company and Copamex's partner in feminine hygiene products. Proceeds from these transactions have all been collected into an escrow account, and payment on the US$146 million outstanding on the senior notes is expected tomorrow as scheduled. The refinancing plan also included the replacement of certain warranties issued by Copamex's subsidiaries with a partial guaranty from the IFC on 15% of the principal outstanding on Copamex's local notes (certificados). Total proceeds from these transactions of US$275 million will be used as follows: US$146 million for the repayment of the senior notes and most of the remaining for the reduction of debt. Copamex expects to bring total debt down from US$459 million at Dec. 31, 2003 to approximately US$320 million by the end of May. On a pro forma basis with 2003 results, Fitch estimates an improvement in the EBITDA to total debt ratio to 3.5 times (x) from 5x in 2003 and in the interest coverage ratio to 2.8x from 1.7x in 2003. Copamex is one of Mexico's largest producers of paper-based consumer and industrial products, with revenues of US$763 million in 2003. The company participates in three major paper-product segments: packaging (kraft paper, corrugated boxes and specialty paper), printing and writing paper (bond and copy paper) and consumer products (tissue, feminine hygiene and diapers). COMPANIA MEGA: S&P Removes Junk Ratings from CreditWatch -------------------------------------------------------- Standard & Poor's Ratings Services said that the 'CCC+' ratings on Argentina-based gas separation project Compa��a Mega S.A.'s (Mega) $120.9 million secured floating-rate notes series D, $102.0 million secured floating-rate notes series E, and $169.7 million secured fixed-rate notes series G were removed from CreditWatch with positive implications where they were placed on Jan. 20, 2004, given expectations of better credit quality after the announcement of the extension of the guarantees on the company's financial obligations until Dec. 31, 2005. The ratings are affirmed. The outlook is stable. As expected by Standard & Poor's, parent support has significantly increased after the extension of the guarantees on Mega's notes provided by the sponsor's parents in January 2004. In addition, ethane sales and natural gas purchase contracts were successfully renegotiated and the company continued to show strong operating and financial performance. "However, the ratings will not be upgraded at this point, as anticipated in January 2004, given the current natural gas crisis in Argentina that poses uncertainties regarding the natural gas availability for the company and the increasing uncertainties for the sector," said credit analyst Pablo Lutereau. "In Standard & Poor's opinion the company's strong operating and financial performance and higher degree of parent support would be enough to mitigate the uncertainties caused by the natural gas crisis and the potential government intervention," he added. The ratings on Mega reflect the risks associated with operating in the country's unsettled economic and social environment, particularly the potential risks of higher governmental intervention in light of the current natural gas crisis in Argentina. The ratings also reflect the company's exposure to market price volatility. However, those risks are partially offset by the fact that more than 60% of Mega's revenues are expected to come from exports and, therefore, remain U.S. dollar-denominated. Mega is an operating project involving a natural gas separation plant, a pipeline, and a gas fractionation facility devoted to the separation of natural gas into ethane, butane, natural gasoline, and liquefied petroleum gas (LPG). YPF S.A. (foreign currency: BB/Stable/--) (38%), Petrobras Energia S.A. (B-/Stable/--) (34%), and Dow Quimica Argentina (28%) own Mega. Mega commenced its operations in 2001. COMMERCIAL CAPITAL: Fitch Affirms Low-B Ratings on Classes F & G ---------------------------------------------------------------- Commercial Capital Access One, Inc.'s commercial mortgage bonds, series 3, are affirmed by Fitch Ratings as follows: --$39.5 million class A1 'AAA'; --$200.6 million class A2 'AAA'; --$100,000 class X 'AAA'; --$43.4 million class B 'AA'; --$43.4 million class C 'A'; --$19.5 million class D 'BBB'; --$6.5 million class E 'BBB-'; --$10.8 million class F 'BB'; --$17.3 million class G 'B'. Fitch does not rate class H. The affirmations are attributed to the stable pool performance. Although the pool has paid down 10.21% since issuance, to $389.4 million from $433.7 million, and only one loan is in special servicing, performance of the portfolio is difficult to monitor. Bank of New York, as master servicer, does not prepare a watchlist for the portfolio and the transaction has historically not reported operating statements for a significant number of loans. Only 76 % of loans reported year end 2002 operating data. The transaction consists of 107 mortgage loans secured by commercial and multifamily properties. As of April 2004 distribution date, the pool's aggregate certificate balance has decreased by 10.21% since issuance. 34% of the loans in the pool are subject to a limited guaranty provided by Sun America. The guaranty provides a first loss piece to these loans. The pool continues to benefit from fully amortizing loans. Currently, there is one loan (2.11%) in special servicing. The loan is secured by a 230-room limited-service hotel located in Richmond, VA. This loan transferred to special servicer due to monetary default. Recent appraisals indicate a potential loss which is expected to be fully absorbed by the unrated class H. CONTINENTAL AIRLINES: Fitch Junks $323.5MM Revenue Bond Rating -------------------------------------------------------------- Fitch Ratings downgrades the rating on $323.5 million City of Houston, Texas, airport system special facilities revenue bonds (Continental Airlines, Inc. Terminal E Project) series 2001 to 'CCC+' from 'B-'. A Fitch 'CCC' category rating indicates that the potential for default is a real possibility. Special facilities rent, paid by Continental Airlines Inc. (CAL) secures the bonds and this transaction includes no access to liquidity or structural enhancements to avoid default if CAL fails to provide timely debt service payments. On Oct. 30, 2002, Fitch lowered the debt rating on CAL's senior unsecured debt obligations to 'CCC+' from 'B-', yet maintained the 'B-' rating on the special facilities bonds because of various terminal demand related issues. Due to the subsequent events in the aviation industry including: continuing airline bankruptcies, litigation, and the continued weak demand for air travel, the one- notch distinction is no longer warranted. Furthermore, as uncertainly remains prevalent in the aviation industry, Fitch continues to enhance its rating methodology on special facilities debt offerings. The series 2001 special facilities bonds were issued to finance construction and development of the Terminal E project, which CAL intends to use as its primary international terminal at HAS's George Bush Intercontinental Airport (IAH) and as a gateway to Latin American. Phase-one of the project is complete and twenty- three gates are operational. Current terminal E utilization is in line with the projections and greater than overall airport and industry averages. Renovation in terminal C has caused some shift in traffic to terminal E, but CAL is incentivized to maximize the terminal E utilization, because they retain all concession profits and are entirely responsible for debt service. Both the City of Houston and CAL have certified substantial completion of phase- one. Therefore, CAL's unsecured guarantee for phase-one is effective. Key credit factors include the lack of available landside space at IAH, solid local passenger demand, the airport's geographical location serving to facilitate strong connecting and international traffic to Mexico. Also, CAL's IAH route structure is quite profitable and lacks significant competition. Lastly, the lease with the city provides airport management with the ability to re- let Terminal E post-default and direct all revenues obtained to the bondholders. Credit concerns include the viability of the lessee, CAL, whose senior unsecured debt is rated 'CCC+' deeply non-investment grade. CAL's rating reflects the ongoing concerns regarding the company's ability to deliver substantial improvements in its credit profile in the face of a heavy debt and lease burden, significant cash obligations related to upcoming debt maturities, and a relatively constrained liquidity position. With the series 2001 bonds, the potential for timing issues exists, as principal and interest payments are due to the trustee the day distributions are made to bondholders and the transaction does not include a debt service revenue account. COVANTA: CIT & WBH Press for $1,652,711 Admin. Expense Payment -------------------------------------------------------------- CIT Group/Equipment Financing, Inc., through its ownership of its subsidiary, WBH Generating Company, LLC, is the sole beneficiary of a trust administered by The Bank of Oklahoma, Tulsa, N.A., as the successor owner trustee to Meridian Trust Company. Irena Goldstein, Esq., at Dewey Ballantine, in New York, relates that pursuant to certain agreements, Debtor Covanta Tulsa, Inc., sold to and leased back from The Bank of Oklahoma the Walter B. Hall Resource Recovery Facility and certain equipment and properties located in Tulsa, Oklahoma. Debtor Covanta Energy Corporation guaranteed Covanta Tulsa's obligations to The Bank of Oklahoma and CIT. On September 29, 2003, Covanta Tulsa asked the Court to reject the Facility lease effective on the date it turns over the Facility to CIT or its designee. On October 15, the Court approved the lease rejection and Covanta Tulsa turned over the Facility to WBH, as CIT's designee. At the Debtors' request, the Court further approved the assumption and assignment to WBH of certain agreements with third parties relating to the Facility's operations. In connection with the Debtors' assumption and assignment request, CIT, WBH and the Debtors agreed that CIT and WBH would: -- not file an administrative claim against the Debtors for certain amounts owing to CIT and WBH under the project documents; and -- pay to Covanta $125,000 in connection with the Debtors' assumption and assignment to WBH of the Steam Purchase Agreement between Covanta Tulsa and Sun Refining & Marketing Co., dated March 8, 1982. The parties later agreed that the Assumption Amount would be off set against the total administrative claim of CIT or WBH against the Debtors. Ms. Goldstein tells the Court that the Debtors owe CIT and WBH for the postpetition period: Unpaid Rent $1,003,142 Taxes 167,981 Facility Repair 606,588 Assumption Amount (125,000) --------- Total Amount Owed to CIT/WBH $1,652,711 ========= Pursuant to Section 503 of the Bankruptcy Code, CIT and WBH ask the Court to compel the Debtors to immediately pay the $1,652,711 as administrative expenses. 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. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) CREST EXETER: Fitch Rates Classes E-1 & E-2 at BB ------------------------------------------------- Fitch Ratings assigns the following ratings to CREST Exeter Street Solar 2004-1, Ltd. and CREST Exeter Street Solar 2004-1, Corp: --$213,000,000 class A-1 senior secured floating-rate term notes due 2019 'AAA'; --$53,000,000 class A-2 senior secured fixed-rate term notes due 2019 'AAA'; --$10,000,000 class B-1 second priority floating-rate term notes due 2039 'AA+'; --$11,000,000 class B-2 second priority fixed-rate term notes due 2039 'AA+'; --$2,000,000 class C-1 third priority floating-rate term notes due 2039 'A+'; --$16,425,000 class C-2 third priority fixed-rate term notes due 2039 'A+'; --$6,000,000 class D-1 fourth priority floating-rate term notes due 2039 'BBB+'; --$13,575,000 class D-2 fourth priority fixed-rate term notes due 2039 'BBB+'; --$4,500,000 class E-1 fifth priority floating-rate term notes due 2039 'BB'; --$6,500,000 class E-2 fifth priority fixed-rate term notes due 2039 'BB'. The ratings of the class A-1, A-2, B-1 and B-2 notes address the likelihood that investors will receive timely payments of interest and the ultimate repayment of principal. The ratings of the class C-1, C-2, D-1, D-2, E-1 and E-2 notes address the likelihood that investors will receive ultimate payment of scheduled and compensating interest and the ultimate repayment of principal. Quarterly payments on the notes will begin on June 28, 2004. The ratings are based on the capital structure of the transaction, the quality of the collateral, the overcollateralization and interest coverage provided for within the indenture, as well as the strength and experience of MFS Investment Management (MFS) as the collateral manager. The net proceeds from the issuance of the notes will be used to purchase a static, high-grade portfolio consisting of approximately 79% in commercial mortgage-backed securities (CMBS), 19% in real-estate investment trusts (REIT), and 2% in real-estate collateralized debt obligations (CDOs). The collateral supporting the structure will have a maximum Fitch weighted average rating factor (WARF) of 10.00 ('BB+/BB') and is fully ramped up at closing. CREST Exeter Street Solar 2004-1, Ltd. is a special purpose company, incorporated under the laws of the Cayman Islands. CREST Exeter Street Solar 2004-1, Corp. is a limited purpose company, incorporated under the laws of the State of Delaware. CWMBS INC: Fitch Assigns Low-B Ratings to 2 Series 2004-5 Classes ----------------------------------------------------------------- CWMBS, Inc.'s CHL Mortgage Pass-Through Trust 2004-5 mortgage pass-through certificates are rated by Fitch Ratings as follows: --$727,873,906 classes 1-A-1 through 1-A-7, 2-A-1 through 2-A-26, PO and A-R senior certificates 'AAA'; --$10,876,000 class M 'AA'; --$4,500,000 class B-1 'A'; --$2,625,000 class B-2 'BBB'; --$1,500,000 privately offered class B-3 'BB'; --$1,125,000 privately offered class B-4 'B'. The 'AAA' rating on the senior certificates reflects the 2.95% subordination provided by the 1.45% class M, 0.60% class B-1, 0.35% class B-2, 0.20% privately offered class B-3, 0.15% privately offered class B-4 and 0.20% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B' based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP (Countrywide Servicing), rated 'RMS2+' by Fitch and a direct wholly owned subsidiary of Countrywide Home Loans, Inc. (CHL). The Group 1 senior certificates are collateralized by a pool of conventional, fully amortizing, 25- to 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. As of the cut-off date (April 1, 2004), the mortgage pool demonstrates an approximate weighted-average original loan- to-value (OLTV) ratio of 71.64%. Approximately 58.7% of the loans were originated under a reduced documentation (non-full/alternate) program. The weighted-average FICO credit score is approximately 737. Cash-out and rate/term refinance loans represent 14.01% and 40.95% of the mortgage pool, respectively. Second homes account for 4.46% of the pool. The average loan balance is $495,252. The three states that represent the largest portion of mortgage loans are California (55.65%), New Jersey (5.23%) and Maryland (3.20%). The Group 2 senior certificates are collateralized by a pool of conventional, fully amortizing, 25- to 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. As of the cut-off date, the mortgage pool demonstrates an approximate weighted-average OLTV of 71.31%. Approximately 50.7% of the loans were originated under a reduced documentation (non-full/alternate) program. The weighted-average FICO credit score is approximately 737. Cash-out and rate/term refinance loans represent 15.07% and 41.51% of the mortgage pool, respectively. Second homes account for 4.49% of the pool. The average loan balance is $507,948. The three states that represent the largest portion of mortgage loans are California (45.30%), Florida (4.45%) and New Jersey (4.35%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Approximately 95.99% and 4.01% of the mortgage loans were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as a real estate mortgage investment conduit (REMIC). CWMBS INC: Fitch Rates Series 2004-9 Classes B-3 & B-4 at BB/B -------------------------------------------------------------- CWMBS, Inc.'s CHL Mortgage Pass-Through Trust 2004-9 mortgage pass-through certificates are rated by Fitch Ratings as follows: --$388,199,977 classes A-1 - A-7, PO and A-R senior certificates 'AAA'; --$6,200,000 class M 'AA'; --$2,200,000 class B-1 'A'; --$1,400,000 class B-2 'BBB'; --$800,000 privately offered class B-3 'BB'; --$600,000 privately offered class B-4 'B'. The 'AAA' rating on the senior certificates reflects the 2.95% subordination provided by the 1.55% class M, 0.55% class B-1, 0.35% class B-2, 0.20% privately offered class B-3, 0.15% privately offered class B-4 and 0.15% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B' based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP (Countrywide Servicing), rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. (CHL). The certificates represent an ownership interest in a pool of conventional, fully amortizing, 30-year fixed-rate mortgage loans, secured by first liens on one- to four-family residential properties. As of the cutoff date (April 1, 2004), the mortgage pool demonstrates an approximate weighted-average loan-to-value (OLTV) ratio of 70.45%. Approximately 54.2% of the loans were originated under a reduced documentation program. The weighted- average FICO credit score is approximately 742. Cash-out refinance loans represent 13.28% of the mortgage pool and second homes 3.34%. The average loan balance is $519,255. The three states that represent the largest portion of mortgage loans are California (53.05%), Illinois (4.47%) and New Jersey (3.96%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Approximately 98.48% and 1.52% of the mortgage loans were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as a real estate mortgage investment conduit (REMIC). DOMAN INDUSTRIES: CCAA Monitor Files April 2004 Report ------------------------------------------------------ Doman Industries Limited announces that KPMG Inc., the Monitor appointed by the Supreme Court of British Columbia under the Companies Creditors Arrangement Act has filed with the Court its report for the period ended April 28, 2004. The Monitor's report, a copy of which may be obtained by accessing the Company's website -- http://www.domans.com/-- or the Monitor's website -- http://www.kpmg.ca/doman/-- contains selected unaudited financial information and includes preliminary information for the first quarter of 2004. DOMAN INDUSTRIES: Western Pulp Unit to Raise Kraft Pulp Price ------------------------------------------------------------- Western Pulp Inc., a wholly-owned subsidiary of Doman Industries Limited, announced that it will be raising its price for northern bleached softwood kraft pulp in Europe and the United States. In the United States, prices are being raised, effective June 1, 2004 until further notice, by $30.00/tonne from $650 to $680/tonne. In Europe, prices will move up $40.00/tonne from $640 to $680/tonne on June 1, 2004. These increases follow a $20.00/tonne improvement in prices in Europe and $30.00/tonne increase in the United States in April. About Western Pulp Inc. Western Pulp Inc. is a wholly owned subsidiary of Doman Industries Limited. Doman is an integrated Canadian forest products company and the second largest coastal woodland operator in British Columbia. ENRON CORP: Stay Modified Allowing Siemens to Pursue $1.8M Claim ---------------------------------------------------------------- On August 30, 2001, Enron Equipment Procurement Company commenced a lawsuit against Siemens Westinghouse Power Corporation in the United States District Court of Harris County, Texas, 113th Judicial District. Siemens filed counterclaims against Enron Equipment. Enron Equipment denied all liability for the Counterclaims. On November 25, 2003, Siemens filed Claim No. 24495, asserting an unliquidated claim against Enron Equipment in excess of $1,800,000 for any and all amounts Enron Equipment owed to Siemens, including the Counterclaims in the State Court Action. In a Court-approved Stipulation, Enron Equipment and Siemens agree that the automatic stay imposed by Section 362 of the Bankruptcy Code is modified to permit the continuation of the State Court Action. The parties reserve all of their rights regarding the Proof of Claim. A judgment awarded to Siemens, if any, is subject to the distributions of prepetition general unsecured creditors holding allowed claims against Enron Equipment under a confirmed Chapter 11 Plan. (Enron Bankruptcy News, Issue No. 105; Bankruptcy Creditors' Service, Inc., 215/945- 7000) EAPI ENTERTAINMENT: Requires More Financing to Continue Operations ------------------------------------------------------------------ EAPI Entertainment, Inc. is currently undertaking the reorganization of its corporate affairs in connection with the determination of the Board of Directors to pursue business opportunities in the areas of electronic entertainment and education. The Company plans to develop video game products for the entertainment industry and on-line education software programs for the education industry. The Company also plans on identifying and pursuing other business opportunities in the electronic entertainment industry. To date, the Company has not completed the development of any video game products or on-line education software programs and has not generated any revenues. The Company remains in the development stage. The ability of the Company to pursue its business plan and generate revenues is subject to the ability of the Company to achieve additional financing, of which there is no assurance. The Company had cash of $38,995 as of September 30, 2003 compared to negative cash of $1,262 as of September 30, 2002. The Company had a working capital deficit of $3,602,886 as of September 30, 2003 compared to a working capital deficit of $1,947,607 as of September 30, 2002. As of September 30, 2003, the Company had a net stockholders' deficit of $3,620,941, with accumulated losses during the development stage of $8,419,410 including a loss of $1,329,862 during the current year. Due to the Company's substantial working capital deficit and its current inability to generate revenues, there is no assurance that the Company will be able to continue as a going concern or achieve material revenues or profitable operations. In addition, there can be no guarantee that financing adequate to carry out the Company's business plan will be available on terms acceptable to the Company, or at all. The Company owed the following amounts to related parties: ---------------------------- ------------------------- CREDITOR AS OF SEPTEMBER 30, 2002 2003 ---------------------------- ------------------------- Brampton Holdings Ltd. $ 304,886 $ 554,168 ---------------------------- ------------------------- Sanclair Holdings Ltd. $ 307,512 $ 585,458 ---------------------------- ------------------------- Pacific Ocean Resources $ 273,305 $ 847,674 Corporation ---------------------------- ------------------------- 529473 B.C. Ltd. $ 173,944 $ 150,790 ---------------------------- ------------------------- Earthscape Maintenance Ltd. $ 575,342 $ 759,387 ---------------------------- ------------------------- TOTAL: $ 1,634,989 $ 2,897,477 ---------------------------- ------------------------ EAPI Entertainment will require additional financing in order to enable it to proceed with its plan of operations. The Company anticipates that it will require approximately $2,500,000 over the next twelve months to finance its stated plan of operations. These cash requirements are in excess of the Company's current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations. The Company plans to complete an equity financing or equity financing's through a private placement of the Company's common stock in order to raise the funds necessary to enable the Company to proceed with its plan of operations. The Company has no arrangements in place for any additional financing and there is no assurance that the Company will achieve the required additional funding. There is no assurance that any party will advance additional funds to the Company in order to enable it to sustain its plan of operations. EQI FINANCING: Fitch Affirms $10MM Class C Bond Rating at BB ------------------------------------------------------------ Fitch Ratings affirms EQI Financing Partnership I, L.P. commercial mortgage bonds, series 1997-1, as follows: --$47.8 million class B bonds 'A-'; --$10 million class C bonds 'BB'. The class A bonds paid in full as of the February 2004 distribution report. The affirmations are due to the continued amortization, from scheduled mortgage payments as well as the principal paydown from the prepayment and release of five hotel properties, and improved operating performance over the past year. Fitch stressed debt service coverage ratio (DSCR) for year end (YE) 2003 has increased to 1.65 times (x) compared to 1.38x based on trailing twelve month (TTM) June 30, 2003 financials. While the previous prepayment and release of five properties, at a prepayment price of 125% of the allocated loan balances, and amortization have benefited the class B certificates, the weak operating performance compared to issuance levels and potential adverse selection continues to stress the lower rated class. The bonds are secured by cross-collateralized and cross-defaulted first mortgages on eighteen hotel properties (23 properties at issuance) consisting of fourteen Hampton Inns, two Holiday Inns, one Residence Inn and one Comfort Inn. As of the April 2004 distribution date, the overall deal balance had been reduced by 34% to $57.8 million from $88.0 million at issuance. The properties are owned by the issuer, a bankruptcy remote special- purpose entity (SPE) and a wholly owned subsidiary of Equity Inns, Inc., a publicly traded real estate investment trust (REIT). FINOVA GROUP: Will Hold Annual Shareholders' Meeting on May 12 -------------------------------------------------------------- The FINOVA Group, Inc., will hold its annual meeting of shareholders on Wednesday, May 12, 2004 at 1:00 p.m., Eastern Daylight Savings Time, at the offices of Credit Suisse First Boston, 11 Madison Avenue, Level 2B Auditorium, in New York. The purpose of the meeting is to: 1. elect 7 directors; and 2. consider any other matters that properly come before the meeting and any adjournments. Only shareholders of record of common stock at the opening of business, 8:00 a.m., EST, on March 15, 2003 are entitled to receive notice of and to vote at the meeting. (Finova Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945- 7000) FLEMING COS: BFL Parties to Pay $625,000 in Dispute Settlement -------------------------------------------------------------- BFL-44, Inc., and its affiliates owe the Fleming Companies, Inc. Debtors $870,159.83 in accounts receivables under facility standby or grocery supply agreements. As part of the sale of the Debtors' Wholesale Distribution Business, the Debtors sold substantially all of their promissory notes and forgiveness notes. As a result, C&S Acquisition, LLC, holds nine promissory notes owing from the BFL Parties aggregating $6,060,944.97. The Debtors, C&S and the BFL Parties agree to a global settlement to resolve all outstanding amounts owed to the Debtors. The primary terms of Settlement include: (1) The BFL Parties will pay the Debtors $625,000 of the A/R Balance, whereupon the Debtors agree to release all personal property of the BFL Parties that is encumbered by a lien held by the Debtors; (2) The BFL Parties agree to the rejection and termination of the FSAs, and waive all claims, which might result from that rejection; and (3) The parties exchange mutual releases. The BFL affiliates are: * BFL-Hefener, Inc., * BFL-N.W. Expressway, Inc., * BFLX-15, Inc., * BFL-Portland, LLC, * BFL-MacArthur, LLC, * BFL-Penn, Inc., * BFL-MGMT, Inc., * FS-63, Inc., * BFL-Yukon, LLC, * BFL-Council, LLC, and * Henry J. Binkowski Headquartered in Lewisville, Texas, Fleming Companies, Inc. -- http://www.fleming.com/-- is the largest multi-tier distributor of consumer package goods in the United States. The Company filed for chapter 11 protection on April 1, 2003 (Bankr. Del. Case No. 03-10945). Richard L. Wynne, Esq., Bennett L. Spiegel, Esq., Shirley Cho, Esq., and Marjon Ghasemi, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $4,220,500,000 in assets and $3,547,900,000 in liabilities. (Fleming Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) FREESTAR TECHNOLOGY: May Cease Operations If Unable to Raise Funds ------------------------------------------------------------------ Through December 31, 2003, Freestar Technology Corporation has not been able to generate significant revenue from its operations to cover its costs and operating expenses. Although the Company has been able to issue its common stock or other financing for a significant portion of its expenses, it is not known whether the Company will be able to continue this practice, or if its revenue will increase significantly to be able to meet its cash operating expenses. This, in turn, raises substantial doubt about the Company's ability to continue as a going concern. Management believes that the Company will be able to raise additional funds through an offering of its common stock or alternative sources of financing. However, no assurances can be given as to the success of these plans. The Company recorded a net loss of $1,268,958 for the three months ended December 31, 2003, an improvement of $3,702,035, or approximately 75%, compared to the net loss of $4,970,993 realized during the three months ended December 31, 2002. Additionally, the Company recorded a net loss of $3,674,886 for the six months ended December 31, 2003, an improvement of $1,990,693, or approximately 35%, compared to the net loss of $5,665,579 realized during the six months ended December 31, 2002. The Company had a working capital deficit of $1,109,432 as of December 31, 2003, which is an increase of $206,228, or approximately 23%, from a working capital deficit of $903,204 as of December 31, 2002, and a decrease of $130,960, or approximately 11%, compared to a working capital deficit of $1,240,392 at June 30, 2003. Freestar Technology has needed to continually raise capital through private offerings to fund its operations. Freestar recognizes the need for the infusion of cash during fiscal 2004 and is pursuing various financing options. However, there can be no assurance that it will be able to raise additional funds on favorable terms or at all. The Company relies heavily upon the market liquidity of its stock as traded on the Over the Counter Bulletin Board for its ability to raise funds, for its ability to consummate acquisitions, and for the use of non-cash compensation for many of the company's consultants. Should the Company experience a weakening in the market for its common stock, both its short-term liquidity and its ability to achieve its long- term strategy could be adversely affected. Freestar's continued operations, as well as the implementation of its business plan, will depend upon its ability to raise additional funds through bank borrowings, equity or debt financing. Management estimates that it will need to raise approximately $5,000,000 over the next twelve months for such purposes. However, adequate funds may not be available when needed or may not be available on favorable terms. The ability to continue as a going concern is dependent on additional sources of capital and the success of the Company's business plan. Regardless of whether the Company's cash assets prove to be inadequate to meet its operational needs, the Company might seek to compensate providers of services by issuance of stock in lieu of cash. The notes to the Company's condensed consolidated financial statements, as well as the audited consolidated financial statements for the year ended June 30, 2003, include substantial doubt paragraphs regarding the Company's ability to continue as a going concern. Management believes it currently has adequate cash to fund anticipated cash needs for at least the next three months. If funding is insufficient at any time in the future, Freestar Technology may not be able to take advantage of business opportunities or respond to competitive pressures, any of which could have a negative impact on business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on its financial condition, which could require it to: - curtail operations significantly; - sell significant assets; - seek arrangements with strategic partners or other parties that may require it to relinquish significant rights to products, technologies or markets; or - explore other strategic alternatives including a merger or sale of the Company. In addition, if additional shares were issued to obtain financing, or compensate service providers, existing stockholders may suffer a dilutive effect on their percentage of stock ownership. GENERAL MEDIA: Agrees to License Penthouse Trademark to VCG Clubs ----------------------------------------------------------------- Penthouse International (OTCBB:PHSL) (OTCBB:PHSLE) (FWB:PHSL.FK), a diversified holding company with operating subsidiaries in adult entertainment, Internet transaction processing and real estate, announced that its 99.5% subsidiary, General Media, has agreed to license the Penthouse trademark for use on several existing adult night clubs owned by VCG Holding Corporation (OTCBB:VCGH). General Media will be paid monthly licensing fees based on a percentage of gross revenue of the Penthouse Clubs. Capital expenditures to convert the clubs will be born by VCG. VCG operates PT's Showclubs, which is a well known name in adult entertainment. VCG Chairman, Troy Lowrie has been in the adult night club business for over 22 years with over eighteen clubs. Under the agreement, VCG has exclusive territorial rights to use the Penthouse name for the metropolitan areas of Denver, Colorado, Phoenix, Arizona and St. Louis, Missouri. PT's Gold Club in the Denver area has recently reopened as the Penthouse Club. VCG has also converted existing clubs in Honolulu. VCG currently owns and/or operates five high line adult nightclubs located in Indianapolis, Memphis, St. Louis, Denver and Honolulu. "The relationship with Troy Lowrie and VCG is a win-win where Penthouse aligns with a proven operator and VCG is able to increase the performance of its business with the Penthouse trademarks," said Claude Bertin. "With 40 years in adult entertainment, the Penthouse trademark is a recognized brand that has a great many untapped commercial uses where our company can earn high margin royalty revenue." "This is a great alliance between VCGH and Penthouse," Troy Lowrie, Chairman and CEO, continued, "This agreement will help achieve each others' goals of creating the nationwide branding of the Penthouse name." As previously announced in August 2003 General Media and subsidiaries filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The Bankruptcy Court for the Southern District of New York has approved the licensing agreements with VCG. In a related development, General Media has set June 10, 2004 as the date for the confirmation hearing on its Second Amended Plan of Reorganization; after which General Media is expected to emerge from Chapter 11 reorganization with its equity continued to be controlled by Penthouse International. As previously announced, Penthouse International expects to file its Form 10K on or before May 15, 2004 at which time the 'E' designation will be removed from the Company's stock ticker symbol. Based on the current status of the auditing process, the Company anticipates no further delays. Penthouse is an entertainment company with concentrations in publishing, licensing, digital commerce and real estate. Historically, Penthouse revenues have been derived principally from the PENTHOUSE related publishing business that was founded in 1965 by Robert C. Guccione and is currently conducted by General Media and its subsidiaries. In March 2004, Penthouse acquired Internet Billing Company LLC, an e-commerce company specializing in online transactions. The PENTHOUSE brand is one of the most recognized consumer brands in the world and is widely identified with premium entertainment for adult audiences. General Media caters to men's interests through various trademarked publications, movies, the Internet, location-based live entertainment clubs and consumer product licenses. General Media also licenses the PENTHOUSE trademarks to third parties worldwide in exchange for recurring royalty payments. GENESIS: Neighborcare Settles Missing Inventory Issue with the DEA ------------------------------------------------------------------ In August 2001 and March 2002, NeighborCare, Inc.'s pharmacy located in Colorado reported missing inventory and potential diversion to the Drug Enforcement Administration, the local police and the Colorado Board of Pharmacy. As a result of the pharmacy reporting these incidents, the DEA commenced an audit of the pharmacy's operations. Under the Controlled Substance Act, the government may seek the potential value of the inventory diverted as well as other damages. The Colorado facility cooperated with all requests for information, including making its personnel and documents available to the government. On January 6, 2004, NeighborCare settled this matter with the United States government by paying a $625,000 civil penalty without admitting any liability. This amount was fully accrued in fiscal 2003, NeighborCare reported in a recent filing with the Securities and Exchange Commission. NeighborCare, Inc., is formerly known as Genesis Health Ventures, Inc., which, along with its affiliates, filed for chapter 11 protection (Bankr. Del. Case No. 00-02692-JHW) on June 22, 2000. On October 2, 2001, the Debtors' Joint Plan of Reorganization, confirmed on September 12, 2001, became effective. On December 2, 2003, Genesis began doing business as NeighborCare, Inc. (Genesis/Multicare Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) GLIMCHER REALTY: First Quarter 2004 Net Income Down to $760,000 --------------------------------------------------------------- Glimcher Realty Trust, (NYSE: GRT), announced financial results for the first quarter ended March 31, 2004. Net income available to common shareholders in the first quarter of 2004 was $760,000, or $0.02 per share, compared to $2.6 million, or $0.08 per share, in the first quarter of 2003. Funds From Operations (FFO) in the first quarter of 2004 was $18.2 million, compared to $21.2 million in the first quarter of 2003. On a per share basis, FFO for the first quarter was $0.46 compared to the 2003 first quarter of $0.56 per share. During the first quarter of 2004, the Company recorded $4.9 million of costs associated with the redemption of its Series B Preferred Shares. Excluding these one-time non-cash costs, which are approximately $0.12 per share, FFO per share for the first quarter 2004 was $0.58, an increase of 3.6% from the first quarter of 2003. "We are very pleased with the first quarter financial performance," stated Michael P. Glimcher, President. "Total revenue increased 14.9% over the first quarter of 2003, and FFO per share increased 3.6% after adjusting for the non- recurring charge related to the redemption of our Series B Preferred Shares." Highlights -- Revenues in the first quarter of 2004 were $88.8 million compared with revenues of $77.3 million in the first quarter of 2003. The 14.9% increase included $10.3 million from joint venture properties the Company has acquired since the first quarter of 2003 and $7.2 million from the acquisitions of WestShore Plaza in August 2003 and Eastland Mall (Ohio) in December 2003. A decrease in lease termination fees of $5.0 million was the other significant change in revenue during the quarter. -- FFO for the quarter decreased from $21.2 million in the first quarter of 2003 to $18.2 million in the first quarter of 2004 on an as reported basis. The current quarter FFO includes a $4.9 million one-time non-cash charge for the issuance costs of the Series B Preferred Shares, which were issued in 1997 and redeemed in February of 2004. Adjusting for this item, FFO for the first quarter would be $23.1 million which represents a 9.0% increase over the first quarter of 2003. On a per share basis, FFO for the quarter was $0.46 as reported and $0.58 after adjustment for the one-time charge compared to $0.56 in the first quarter of 2003. -- Occupancy for mall stores at March 31, 2004 was 87.7% compared to 89.4% at March 31, 2003. Excluding the 2003 acquisitions of WestShore Plaza and Eastland Mall (Ohio), comparable mall store occupancy was 87.6% at March 31, 2004. -- Mall store average rents increased to $24.02 per square foot at March 31, 2004, an increase of 4.2% from the $23.05 per square foot at March 31, 2003. Excluding the 2003 acquisitions of WestShore Plaza and Eastland Mall (Ohio), comparable mall store average rents per square foot increased 2.1% to $23.53 on a year-over-year basis. -- Same mall net operating income improved in the first quarter of 2004 by 2.0% over net operating income for the first quarter of 2003. Same store mall revenue decreased 1.8% in the first quarter of 2004 over same store mall revenue for the first quarter of 2003. The same store revenue decrease reflects a decline in the tenant reimbursements recovery ratio from 88.7% in the first quarter of 2003 to 86.1% in the first quarter of 2004. -- In the first quarter of 2004 the Company sold three community centers for $8.3 million and recognized a gain of $3.2 million. The cash proceeds from these sales were used to pay down debt. During the first quarter of 2003 the Company sold one community center for $9.3 million and recognized a loss of $2.1 million. -- Debt-to-total-market capitalization strengthened at March 31, 2004 to 54.3% compared to 55.5% at December 31, 2003 and 57.3% at March 31, 2003. -- Fixed rate debt represented 85.1% of total Company debt at March 31, 2004. The average interest rate on fixed rate debt was 6.5% and the average maturity was 6.6 years. Floating rate debt represented 14.9% of total debt, had an average interest rate of 3.7% and an average maturity at 1.8 years. Acquisitions On January 5, 2004, the Company acquired for $56.5 million the remaining joint venture interests in Polaris Fashion Place, an approximately 1.6 million square foot upscale mall, and in Polaris Towne Center, an approximately 443,165 square foot community center, both located in Columbus, Ohio. The purchase was funded with a new $36.5 million loan secured by the equity interests in Polaris Fashion Place, the issuance of 594,342 operating partnership units valued at approximately $13.6 million and approximately $6.6 million in additional borrowings on the Company's credit facility. The new debt matures in one year and bears interest at a rate of LIBOR plus 3.00% per annum. With the acquisition of these two joint ventures, the Company fully owns all of its properties. Preferred Stock Issuance On February 23, 2004, the Company completed a $150 million public offering of 6,000,000 shares of 8.125% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest at a price of $25.00 per share. The proceeds were used to redeem all of its outstanding 9.25% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest and to pay down $16.9 million on the Company's credit facility which had been drawn down on February 9 to repay $17.0 million in mortgage debt relating to the Company's Great Mall of the Great Plains located in Olathe, Kansas. Outlook For the full year of 2004, the Company continues to expect that FFO per share will be in the range of $2.28 to $2.34 per share and earnings per share to be in the range of $0.42 to $0.48 per share. This range incorporates the Company's January 2004 acquisitions, the issuance of Series G Preferred Shares and the full redemption of Series B Preferred Shares, discussed earlier. Also included in this guidance are asset sales aggregating $35.0 million for the full year of 2004 and no additional acquisitions. During the second quarter the Company also expects to refinance the $162.4 million mortgage on Jersey Gardens with a new fixed rate ten-year loan and to refinance its maturing $25.0 million variable rate mortgage on Great Mall of the Great Plains with a new two-year variable rate loan. Funds From Operations and Net Operating Income Funds from Operations is used by industry analysts and investors as a supplemental operating performance measure of an equity real estate investment trust ("REIT"). The Company uses FFO in addition to net income to report operating results. FFO is an industry standard for evaluating operating performance defined as net income, plus real estate depreciation, less gains or losses from sales of depreciable property, extraordinary items and the cumulative effect of accounting changes. Reconciliations of non- GAAP financial measures to net income available to common shareholders are included in the Operating Results table found on page 4, attached. Net Operating Income (NOI) is used by industry analysts, investors and Company management to measure operating performance of the Company's properties. NOI represents total property revenues less property operating and maintenance expenses. Accordingly, NOI excludes certain expenses included in the determination of net income such as property management and other indirect operating expenses, interest expense and depreciation and amortization expense. These items are excluded from NOI in order to provide results that are more closely related to a property's results of operations. In addition, the Company's computation of same mall NOI excludes property bad debt expense and lease termination income. Certain items, such as interest expense, while included in FFO and net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level. As a result, management uses only those income and expense items that are incurred at the property level to evaluate a property's performance. Real estate asset depreciation and amortization is excluded from NOI for the same reasons that it is excluded from FFO pursuant to NAREIT's definition. 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: Inks Stipulation Resolving Verizon Claim Dispute ----------------------------------------------------------------- Cellco Partnership, doing business as Verizon Wireless, provides a variety of telecommunications services to the Global Crossing Ltd. Debtors, including originating and terminating calls on Verizon's network for the Debtors' customers pursuant to certain agreements between Verizon and the Debtors titled "Cellular Equal Access Program" and "Access Contract for Toll Providers." According to Michael F. Walsh, Esq., at Weil, Gotshal & Manges, LLP, in New York, Verizon has asserted that the Debtors owe it in excess of $8.7 million as an administrative expense of the Debtors' Chapter 11 cases for origination and termination charges from the Petition Date through the billing period ended September 25, 2003. The Debtors dispute the Administrative Claim contending, among other things, that those charges are not actual and necessary expenses of their estates. On September 26, 2003, the Debtors sought to reject the Original Access Agreements. Verizon then filed a response to the Debtors' Rejection Motion. The Court approved the Debtors' motion to reject the Original Access Agreements. Verizon's response included a Cross Motion for authority to arbitrate any disputes arising under or in connection with the original Access Agreements, including the Administrative Claim. The Debtors objected to Verizon's Cross Motion and asked the Court to determine that the Administrative Claim: (i) could be resolved by the Court as part of the Debtors' claims allowance process, without arbitration; and (ii) is not an actual and necessary expense of the Debtors' estates. At a hearing on October 29, 2003, the Court granted in part and denied in part Verizon's Cross Motion. Verizon also contends that it is owed additional amounts for the origination and termination of calls since the Debtors' rejection of the Original Access Agreements, which claim the Debtors dispute. Mr. Walsh relates that on various dates, Verizon filed prepetition and administrative claims against the Debtors alleging prepetition and postpetition entitlements arising from the Original Access Agreements. After extensive arm's-length negotiations, the Parties have reached a settlement which, among other things: (i) resolves the disputes between the Parties; (ii) resolves Verizon's claims relating to the Original Access Agreements; (iii) releases all claims between the Parties arising from or based on the Original Access Agreements; and (iv) provides for the Debtors to enter into a new access agreement with Verizon for future services. In a Court-approved Stipulation, the parties agree that: (1) Allowance of Administrative Expense Claim As full and final settlement of the Access Agreement Administrative Expense Claims and any post-rejection Access Administrative Claim billed by Verizon Wireless to the Debtors for the billing cycle ending November 24, 2003, Verizon will have an Allowed Administrative Expense Claim under the Plan for $3,000,000. (2) Payment of Allowed Administrative Expense Claim The Debtors will pay, in immediately available funds, the Allowed Administrative Expense Claim to Verizon, without any right of offset, deduction, defense or counterclaim: -- $750,000, without further delay; -- $375,000 in equal monthly installments for six consecutive months, payable on the first day of each month, commencing on February 1, 2004. Interest will accrue on any overdue portion of the Allowed Administrative Expense Claim at the rate of 12% per annum from and after 10 days after a payment is due. Interest will continue to accrue at the Default Interest Rate and will expressly apply post-judgment until Verizon is indefeasibly paid and satisfied for all amounts owing. (3) New Access Agreement Simultaneously with the execution of the Settlement Agreement, Global Crossing Telecommunications, Inc., will execute an agreement entitled "Verizon Wireless Access Agreement for Access Customers" with Verizon, which Agreement will be effective as of February 1, 2004. (4) Release in Favor of Verizon Entities Saving and excepting performance under the New Access Agreement, the Debtors discharge and release Verizon from all claims relating to or arising out of the Original Access Agreements. (5) Release in Favor of the Debtors Verizon discharges and releases the Debtors from all claims relating to or arising out of the Original Access Agreements. Upon payment of the Allowed Administrative Expense Claim, Verizon will be deemed to have withdrawn all claims relating to the Original Access Agreements including: -- the Access Agreement Administrative Expense Claims and the Post-Rejection Access Administrative Claim; -- the general unsecured rejection damage claim relating to the rejection of the Original Access Agreements filed by Verizon on November 1, 2003 for $2,237,953; -- the general unsecured proof of claim related to the Original Access Agreements filed by Verizon on September 30, 2002 for $894,426; -- the general unsecured claim filed by Verizon on September 30, 2002 for $318,863; -- the general unsecured claim filed by Verizon on September 30, 2002 for $312,573; and -- the general unsecured claim filed by Verizon on September 30, 2002 for $402,226. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) GOLDEN PATRIOT: Working Capital Insufficient to Fund Business Plan ------------------------------------------------------------------ The auditors for Golden Patriot Corporation have recently stated: "The financial statements have been prepared using generally accepted accounting principles in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As at January 31, 2004, the Company had a working capital deficiency of $49,684 which is not sufficient to meet its planned business objectives or to fund its mineral properties acquisitions, exploration and development expenditures and ongoing operations. The Company has accumulated losses of $1,964,385 since its commencement. Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. These factors raise substantial doubt that the Company will be able to continue as a going concern." The Company has not received revenue from operations during the nine months ended January 31, 2004. As of January 31, 2004, it had cash reserves of $34,139 and prepaid fees of $125,000. Management believes that these cash reserves will not satisfy the Company's cash requirements in order to continue as a going concern for twelve months following the filing of its financial information with the SEC on March 19, 2004. Management indicates that it cannot estimate when the Company will begin to realize any revenue. In order to satisfy the requisite budget, the Company has held and will continue to conduct negotiations with various investors. Management cannot predict whether these negotiations will result in capital being available to Golden Patriot. There can be no assurance that funding for its operations will be available under favorable terms, if at all. Golden Patriot has been financing operations primarily from related-party cash advances and through private equity subscriptions. On October 27, 2003, it entered into an agreement whereby $204,000 was advanced to the Company. These funds are an interest bearing loan with a twenty-four month term. The money is being used to fund ongoing operating costs, to participate in the exploration and development of mineral properties, to make option payments, and to generally meet future corporate obligations. Golden Patriot's Plan of Operations For Next 12 Months The Company has a 100% interest in 13 unpatented mining claims and three mining lease agreements on Nevada mineral exploration properties that cover the core of the Dun Glen Mining Property, which it acquired from Scoonover Exploration LLC. The 13 unpatented mining claims cover approximately 269 acres. E. L. Hunsaker III is a director and principal of Scoonover as well as being one of the Company's directors. The Marbourg et al Lease consists of two patented lode mining claims covering approximately 27 acres. The definitive agreement gives Golden Patriot lease rights to a 100% interest (with Marbourg et al retaining a 4% net smelter royalty in the property contingent upon annual advance royalty payments being made to Marbourg et al. The Heckman Lease consists of five unpatented lode mining claims covering approximately 103 acres. The definitive agreement gives Golden Patriot lease rights to a 100% interest (with Heckman retaining a 3% NSR) in the property, contingent upon annual advance royalty payments being made to Heckman. The Painter Lease consists of eight unpatented lode mining claims covering approximately 165 acres. The definitive agreement gives Golden Patriot lease rights to a 100% interest (with Painter retaining a 3% NSR) in the property, contingent upon annual advance royalty payments being made to Painter. The Company has a 100% interest in 30 mineral claims within the Sierra Mining District of the East Range, southwest of Winnemucca. The claims form a buffer around existing properties that comprise the Dun Glen Project. The Sierra Claims possess significant potential for gold resources additional to those postulated for the Dun Glen. Numerous gold-mineralized, quartz veins cutting lithologies identical to those of the Dun Glen Project imply that bonanza-grade gold deposits may occur in the Sierra Claims. The cost to maintain the Dun Glen Project over the next twelve months is $21,000 in lease and claim fees and the Company has sufficient capital on hand to make these payments. The Company intends to explore and develop the Dun Glen Project, which includes the Sierra Mining District, in one comprehensive work program, however its ability to do so is contingent on finding a joint venture partner who would aid the Company in meeting future cash calls. Golden Patriot's geologist is expecting this work program to cost up to $450,000 over the next twelve months. The exploration work on the Dun Glen Property is intended to occur over the next twelve months in two phases. The first is a "Scientific Investigations" phase consisting of the current geochemical plus geophysical and alteration studies necessary to target the best areas for future drilling. The purpose of the first phase is to gain the necessary approvals for conducting ground work on-site at Dun Glen and to determine the best drill targets for future core drilling. The second phase comprises of the core drilling program. Starting dates for the drilling is anticipated to be mid-May, depending on weather and ground conditions as well as rig availability. The Company has also entered into a quitclaim deed with Scoonover whereby it acquired a 100% interest in 16 mineral claims covering 320 acres in north central Nevada, known as the Debut. The Debut property is located 96 miles south east of Elko, Nevada on the west flank of the West Buttes Range in the Delker Mining District Elko County, Nevada. The property is due north and on trend from Placer Domes Bald Mountain deposit. The Debut Prospect is an intrusive related sediment-hosted gold-copper system that holds potential for shallow, economic gold mineralization. The cost to maintain the Debut Prospect over the next twelve months is $1,700 in claim fees; the Company has sufficient capital on hand to make these payments. It intends to explore and develop this property in a comprehensive work program along with Megastar Development Corp., a TSX Venture Exchange listed company, who has acquired a 50% interest in this property. Megastar will incur $1,000,000 in work exploration and development expenditures within the next five years on the Debut Prospect. Golden Patriot's geologist is expecting this work program to cost up to $366,000 over the next twelve months. The Company has also entered into an acquisition agreement with Scoonover whereby it acquired a 100% ownership in the Goldview project. This acquisition consists of seventy-six mineral claims in the Battle Mountain-Eureka Trend, adjacent to the Placer Dome Inc.'s recent Cortez Hills discovery. This discovery currently hosts 5.5 million ounces of gold. The Goldview claims are on trend, lying 8 miles east of the recent Mill Canyon discovery by Victoria Resources Corporation, which has identified four high- grade Carlin-type gold zones. The cost to maintain the Goldview Project over the next 12 months is $8,000. A course of work is currently being planned to develop and advance this project. "We also acquired a 2% NSR from Scoonover retained on 20 mineral claims covering the SMH gold property and a 2% NSR retained on eight claims covering the Roxy Silver property. These properties are wholly owned by McNab Creek Gold Company. "We are currently actively seeking out a potential joint venture partner to develop and explore our existing properties. Risks Associated with Operations and Expansion "We intend to enter into arrangements whereby we will acquire equity interests in mineral properties. However, there are certain risks associated with the mining exploration and development business, including, but not limited to, severe fluctuations in commodity prices, strict regulatory requirements, uncertainty of commodity reserves and severe market fluctuations. Such risks may have a material adverse effect on our business, results of operations and financial condition. "We do not anticipate any significant research and development within the next 12 months, nor do we anticipate that we will lease or purchase any significant equipment within the next 12 months. We do not anticipate a significant change in the number of our employees within the next 12 months." GUNDLE/SLT ENVIRONMENTAL: S&P Assigns B+ Corporate Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Houston, Texas-based Gundle/SLT Environmental Inc. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and a recovery rating of '2' to the company's proposed $65 million senior secured credit facilities, based on preliminary terms and conditions. The bank loan rating is the same as the corporate credit rating; this and the '2' recovery rating indicate the expectation of a substantial (80%-100%) recovery of principal in the event of default. In addition, Standard & Poor's assigned a 'B-' rating to the company's proposed $150 million senior unsecured notes due 2012, to be issued under Rule 144A with registration rights. The rating on the senior unsecured notes is two notches below the corporate credit rating, because the substantial amount of priority debt in relation to total assets meaningfully weakens the noteholders' prospects for recovery of principal in the event of a default. The outlook is stable. Pro forma for the transaction, total debt will be about $180 million. "The financing plan follows the announcement that GEO Holding Corp., a limited liability company formed by affiliates of Code Hennessy & Simmons PLC, entered into an agreement to convert all public shares of Gundle/SLT Environmental Inc. into cash," said Standard & Poor's credit analyst Paul Blake. The plan includes $65 million of senior secured credit facilities, $150 million of senior unsecured notes due 2012, and an equity investment of $60 million by Code Hennessy & Simmons and management. Proceeds are expected to be used primarily to purchase Gundle equity and to refinance existing debt. Gundle has been publicly traded since 1986. The ratings on Gundle reflect the narrow scope of the company's operations, the commodity nature of products, some vulnerability to fluctuating raw material prices, and a very aggressive financial profile. Partially offsetting factors include a below- average business profile as the largest manufacturer of geomembrane liners, global manufacturing and distribution capabilities, and stable end markets. With annual sales of $275 million, Gundle is one of the largest players in the estimated $1.1 billion U.S. geosynthetics market. The company competes primarily in the geomembrane sub-segment where the vast majority of sales are to the environmental waste services industry; this market is price competitive, and has moderate barriers to entry including strong customer relationships and established service capabilities associated with the installation of products. Gundle's competitors include regional as well as multinational firms, however, the company benefits from its well-entrenched leadership positions in the global and North American markets. Gundle's nearest competitor is approximately a fourth of its size. HEALTHSOUTH: Offers Senior Noteholders 37.5% Higher Consent Fee --------------------------------------------------------------- HEALTHSOUTH Corp. (OTC Pink Sheets: HLSH) announced that it is extending until 11:59 p.m., New York City Time, on May 13, 2004, its solicitation of consents from holders of its 6.875% Senior Notes due 2005, 7.375% Senior Notes due 2006, 7.000% Senior Notes due 2008, 8.500% Senior Notes due 2008, 8.375% Senior Notes due 2011, 7.625% Senior Notes due 2012 and 10.750% Senior Subordinated Notes due 2008. The consent solicitations, which commenced on March 16, 2004, were previously scheduled to expire at 11:59 p.m., New York City Time, on April 28, 2004. HEALTHSOUTH also announced that it is increasing the consent fee that it will pay to holders who deliver valid and unrevoked consents prior to the expiration of the consent solicitations to $13.75 per $1,000 principal amount of notes for which consents have been delivered, which represents an increase of $3.75 per $1,000 from the amount originally offered. The payment of the consent fee remains conditioned upon the proposed amendments to the indentures becoming operative. Holders who previously delivered valid consents and do not revoke those consents will receive the increased consent fee if the conditions to their consent solicitation are satisfied or waived. HEALTHSOUTH said that it continues to be encouraged by the significant positive response that it has received in the consent solicitations. However, the Company continues to believe that it is in the best interest of its stakeholders to minimize the extent of litigation over this matter and is increasing the consent fee in order to consensually resolve the matters in the litigation on a fair and commercially reasonable basis in order to facilitate its continuing restructuring efforts. Other Terms HEALTHSOUTH is also modifying certain of the terms of the proposed amendments that it is seeking to the indentures governing its Senior Notes and Senior Subordinated Notes. Each holder of notes who consents to the proposed amendments will also be waiving all alleged and potential defaults under the indentures arising out of events occurring on or prior to the effectiveness of the proposed amendments. The proposed amendments will become effective only upon satisfaction or waiver by HEALTHSOUTH of certain conditions which include receipt of valid and unrevoked consents from holders representing not less than a majority in aggregate principal amount of outstanding notes for a series. Consents for any series of notes may be revoked at any time prior to the date on which the trustee under the indenture for that series receives evidence that the requisite consents have been obtained. In order to provide holders with sufficient time to consider the proposed amendments, as modified today, HEALTHSOUTH will not provide to the trustee evidence that requisite consents for any series of notes have been obtained prior to May 6, 2004. HEALTHSOUTH continues to be engaged in litigation with holders, the trustees and persons claiming to be beneficial owners of our Senior Notes and Senior Subordinated Notes seeking to prevent the acceleration of the indebtedness outstanding under such notes. At an April 23, 2004 status conference, the Court scheduled a hearing for HEALTHSOUTH's motion for partial summary judgment for June 30, 2004. At that hearing HEALTHSOUTH will argue that the noteholders' purported default notices were invalid and that HEALTHSOUTH is not required to pay a "make-whole premium" to holders of its Senior Notes and Senior Subordinated Notes upon acceleration of the notes. The Court stated that if any issues remain unresolved after that hearing, the Court will schedule a trial. The Court also noted that if holders take action prior to that time, and the Court determines that the persons doing so were not entitled to do so, those persons face serious liability exposure. 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 on the Web at http://www.healthsouth.com/ HERCULES INC: First Quarter 2004 Results Swing to Positive Zone --------------------------------------------------------------- Hercules Incorporated (NYSE:HPC) reported net income for the quarter ended March 31, 2004 of $28 million, or $0.26 per diluted share, compared with a net loss of $14 million, or a loss of $0.13 per diluted share, for the same period of 2003. First quarter 2004 net income included a $26 million after-tax gain on the sale of the Company's minority interest in CP Kelco. Partially offsetting the gain were after-tax charges of $17 million that included a $4 million non-cash charge for asset impairments, $4 million related to a litigation settlement, and $5 million for debt repurchases. Earnings from ongoing operations for the first quarter of 2004, utilizing a 36% income tax rate for ongoing operations, were $18 million or $0.17 per diluted share. This compares to earnings on the same basis of $15 million or $0.14 per diluted share in the first quarter of 2003 (please refer to Table 2 for a reconciliation of earnings from ongoing operations to reported net income). Net sales in the first quarter were $475 million, an increase of 6% from the same period last year. Compared with the first quarter of 2003, the sales increase was driven by favorable impacts of 7% from rate of exchange and 4% from volume, offset in part by an unfavorable impact of 5% from product mix. First quarter 2004 net sales, as compared to the same period in 2003, increased in all regions of the world except North America. Net sales declined 3% in North America and increased 13% in Europe, 23% in Asia Pacific and 20% in Latin America. Reported profit from operations in the first quarter of 2004 was $49 million, compared with $61 million for the same period in 2003. Profit from ongoing operations(2) in the first quarter of 2004 was $61 million, compared with $60 million in the first quarter of 2003. "Overall, the first quarter was a continuation of the conditions we saw throughout 2003," said Craig Rogerson, President and Chief Executive Officer. "Aqualon continues to deliver solid results across its portfolio of products and markets. Pulp and Paper results were on par with both the first and fourth quarter of 2003 with the North American containerboard market showing signs of recovery and other markets remaining challenging. FiberVisions' earnings were down due to continuing volume losses resulting from substitution in diaper coverstock applications and due to high polypropylene costs. Pinova delivered improved volumes but margins were negatively impacted by higher raw material and non-cash pension costs and lower tolling credits. All of our businesses are challenged by higher non-cash pension expenses, which have increased by approximately $20 million for the year 2004 versus 2003, and persistently high raw material, energy and freight costs. In spite of these challenges, we expect to continue to deliver improved results." Interest and debt expense, which includes preferred securities distributions, was $30 million in the first quarter of 2004, down $4 million compared with the first quarter of 2003, reflecting lower outstanding debt balances. Total debt, including the preferred securities, was $1.309 billion at the end of the first quarter 2004, a decrease of $39 million from year-end 2003. Capital spending was $10 million in the first quarter. Cash outflows for severance were $1 million. The Company contributed $40 million to its U.S. pension fund in the quarter. On April 8, 2004, the Company closed the refinancing of its senior bank credit facility with a new $400 million term loan and a $150 million revolving credit facility and a $250 million private offering of 6 3/4% senior subordinated notes due 2029. The proceeds of the bank refinancing and the note offering will be used to refinance the existing bank credit facility, redeem the 9.42% trust preferred junior subordinated interest debentures due 2029 and for general corporate purposes. The refinancing will result in a non-cash write-off of approximately $14 million of unamortized debt issuance costs in the second quarter of 2004, but is expected to yield annual cash interest savings of approximately $10 million. Segment Results -- Reported Basis In the Performance Products segment (Aqualon, Pulp and Paper), net sales in the first quarter grew 8%, while profit from operations declined 7% compared with the same quarter in 2003. In the Pulp and Paper Division, net sales in the first quarter grew 6% and profit from operations decreased 14% compared with the first quarter of 2003. Growth in sales compared with the first quarter of 2003 was driven by a 7% positive impact from rate of exchange and a 3% increase in volume, partially offset by 4% of unfavorable product mix. Prices in the aggregate were flat. Profit from operations was negatively impacted by a charge for asset impairments and severance (approximately $4 million) related to the further consolidation of manufacturing facilities and higher non-cash pension expenses, offset in part by favorable rate of currency exchange. The facilities consolidation, which is scheduled to occur this year, will result in approximately $1 to $2 million of annual cost savings. Aqualon's net sales in the first quarter increased 12% while profit from operations declined 3% compared with the first quarter of 2003. Growth in sales compared with the first quarter of 2003 was driven by an 11% positive impact from volume and a 7% benefit from rate of exchange, offset in part by a 6% negative impact from product mix. Prices in the aggregate were flat. Profit from operations was negatively impacted by an asset impairment (approximately $4 million) and higher non-cash pension expenses partially offset by improved volumes and rate of exchange benefits. The unit operation that was impaired will be taken out of service later this year with the facility procuring the materials from a third party source. This outsourcing will result in annual savings of approximately $1 million. In the Engineered Materials and Additives segment (FiberVisions, Pinova), net sales in the first quarter decreased 2% compared with the first quarter of 2003. Profit from operations decreased $4 million compared with the first quarter of 2003. First quarter 2004 net sales in FiberVisions decreased 6% compared with the same period in 2003. Profit from operations declined by $2 million compared with the first quarter of 2003. The net sales decline was driven by 14% lower volume, partially offset by a 6% benefit from rate of exchange and a 2% increase in prices. Fibers used in diaper coverstock declined at a faster rate than replacement volume from the growing disposable wipes market. In addition to the effect of lower volumes, profit from operations was negatively impacted by the continued run up of polypropylene costs. Pinova's net sales in the first quarter increased 9% compared to the first quarter 2003. Results of operations were a $2 million loss in the first quarter of 2004 versus breakeven in the prior year. The net sales increase was driven by a 19% positive impact of higher volume, offset in part by 7% of negative product mix and a 3% negative impact from lower prices. Profit from operations was negatively impacted by higher raw material and non-cash pension costs and lower tolling credits. Outlook "We are committed to our targets of double-digit earnings per share growth and significantly higher free cash flows in 2004 compared to 2003," said Mr. Rogerson. "We remain focused on our strategy of bringing value to our customers, increasing our competitive advantage, improving productivity and strengthening our balance sheet to deliver significant value to our investors." Capital expenditures are expected to be $70 million for 2004, approximately equal to depreciation. The Company will maintain its practice of not providing quarterly earnings guidance. Hercules manufactures and markets chemical specialties globally for making a variety of products for home, office and industrial markets. For more information, visit the Hercules website at http://www.herc.com/ * * * As reported in the Troubled Company Reporter's March 24, 2004 edition, Standard & Poor's Ratings Services revised the outlook on Hercules Inc. to stable from positive. The outstanding ratings including the 'BB' corporate credit rating on this Wilmington, Del.-based company were affirmed. Standard & Poor's also assigned its 'B+' rating to Hercules' proposed $250 million senior subordinated notes due 2034. At the same time, Standard & Poor's assigned its 'BB' senior secured bank loan rating and its recovery rating of '2' to the company's proposed $150 million revolving credit facility due 2007 and $400 million term loan due 2010, based on preliminary terms and conditions. The 'BB' rating is the same as the corporate credit rating; this and the '2' recovery rating indicate that bank lenders can expect substantial (80%-100%) recovery of principal in the event of a default. The outlook revision reflects a slower-than-expected strengthening of the financial profile given higher potential asbestos-related obligations and the replacement of preferred securities, which had some equity-like characteristics, with debt. The ratings reflect Hercules' sizable debt burden and some exposure to asbestos litigation. These weaknesses are partially offset by Hercules' position as one of the larger specialty chemical companies in North America with annual revenues of approximately $1.8 billion, respectable operating margins, and prospects for improving cash flow generation. INTERNATIONAL STEEL: Reports Increased Sales & Net Income for Q1 ---------------------------------------------------------------- International Steel Group Inc. (NYSE: ISG) reported first-quarter 2004 net income of $70.9 million, or $0.68 per diluted share. For the first quarter of 2003, the Company reported a net loss of $2.3 million. However, comparisons to that quarter are not meaningful because the acquisition of Bethlehem Steel Corporation's assets in May 2003 more than doubled the size of ISG and significantly improved its product and customer mix. Net income in the first quarter of 2004 improved significantly compared with fourth-quarter 2003 net income of $24.9 million. The Company reported a loss of $0.57 per diluted share in the fourth quarter of 2003 after a "deemed dividend" related to its initial public offering. Net sales increased 25% in the first quarter to $1.8 billion from $1.4 billion in the previous quarter. Operating income improved 63% over the same period to $86.5 million. Shipments increased about 10% from the fourth quarter of 2003 as demand from all markets continued strong. The average net sales per ton shipped was $458 for the first quarter compared with $405 in the fourth quarter. Prices have risen as a result of strong demand and surcharges to recover increased raw material costs. The Company's product mix also continues to improve as value-added cold-rolled and coated shipments increased to 42% of total shipments in the first quarter of 2004 from 38% in the fourth quarter of 2003. ISG's Chief Executive Officer Rodney B. Mott said, "We saw excellent market strength in the first quarter as increased demand, higher selling prices and improved product mix more than offset the rise in raw material costs. We continue to see the positive impact of the Bethlehem integration that will enable us to take advantage of the strong market going forward to improve our bottom line." Inventory Valuation Cost of sales for the first quarter of 2004 and the fourth quarter of 2003 was about 90% of sales. Effective January 1, 2004, ISG adopted the last-in, first-out (LIFO) cost method of accounting for substantially all inventories not previously accounted for on the LIFO method, including moving from LIFO pools for each operation to a single LIFO pool. The LIFO provision for the first quarter of 2004 was approximately $103 million, principally for higher costs of coke, iron ore, steel scrap and coal. Financing Expense Financing expense in the first quarter declined from the previous quarter following the payoff of certain debt with proceeds from ISG's December 2003 initial public equity offering. The fourth quarter of 2003 also included writing off deferred financing fees related to that debt. Estimated Effective Tax Rate The estimated effective tax rate for 2004 is about 7% of pretax income. The Company provided a full valuation allowance on its net deferred tax asset in 2003. As a result, going forward, the provision for income taxes will typically reflect only what the Company expects to pay until the valuation allowance is reduced. The estimated effective income tax rate for 2004 is lower than the expected rate of about 40% for federal and state income taxes because the Company can recognize some of that deferred tax asset based on current and projected 2004 results. Liquidity and Cash Flow At March 31, 2004, ISG's liquidity, defined as its cash position and remaining availability under its revolving credit facility, was $405.2 million. This consisted of $201.0 million of cash and available borrowing capacity of $204.2 million. As of December 31, 2003, the Company's liquidity was $432.7 million. Cash provided by operating activities for the first quarter 2004 was $46.8 million. Receivables were higher as a result of higher sales in the current period. Inventory quantities declined during the first quarter of 2004 and the higher unit costs were included in cost of sales as a result of adopting the LIFO method of accounting for substantially all inventories. The Company also made advances to secure certain coke in the international market, which increased prepaid and other current assets during the quarter. Higher prices for raw materials also resulted in higher accounts payable at the end of the quarter. During the quarter, the Company also made certain required contributions to the United Steelworkers of America (USWA) pension plan and continued to make payments under the transition assistance program with the USWA. Capital expenditures were $27.5 million in the first quarter of 2004. The Company anticipates capital expenditures to total about $300 million for the full year, of which about $100 million is for strategic purposes excluding any potential acquisitions. Proceeds from asset sales were $5.8 million in the first quarter. The Company expects proceeds of about $50 million in the remainder of 2004 from sales of surplus assets. In April 2004, ISG issued $600 million aggregate principal amount of 6.5% Senior Notes due 2014 that were sold at 99.096% of par resulting in an effective yield to maturity of 6.625%. Certain proceeds were used to repay outstanding debt totaling $323.1 million. The remaining funds will be used to pay down other debt, for strategic investments and for general corporate purposes. The Company is currently in discussions with lenders to replace its current credit facilities with a new arrangement that provides more liquidity and fewer covenants. These discussions are expected to be completed by the third quarter of this year. Weirton Steel Acquisition On April 22, ISG's bid to acquire the assets of Weirton Steel Corporation was approved by the U.S. Bankruptcy Court. The acquisition was previously approved by both companies' boards of directors. Following completion of the Weirton acquisition, which is expected to close in the second quarter of 2004, ISG believes it will be the largest integrated steel producer in North America. "This acquisition is consistent with ISG's strategy to be a leader in consolidating steel assets on a basis that will enhance stockholder value," Mott said. "As with our previous acquisitions, we will move swiftly to integrate the Weirton employees and operations into the ISG culture." The acquisition price is approximately $255 million, including ISG's assumption of certain liabilities. ISG has the ability to finance the cash portion of the acquisition from existing cash and credit arrangements. Outlook for the Second Quarter Production is expected to increase in the second quarter of 2004, however, shipments are expected to remain relatively unchanged due to a significant reduction in inventory that occurred in the first quarter 2004. Realized selling prices are expected to increase by approximately $50 per ton over the first quarter of 2004. The Company also believes there will be adequate availability of coke supplies. Although the full impact of the current spot coke prices will increase ISG's production costs in the second quarter of 2004, the Company expects that the positive trends on realized selling prices due to previously announced price increases should more than offset the expected production cost increase. Therefore, the outlook remains positive, with income from operations expected to rise significantly in the second quarter of 2004. About International Steel Group Inc. International Steel Group Inc. is the second largest integrated steel producer in North America, based on steelmaking capacity. The Company has the capacity to cast more than 18 million tons of steel products annually. It ships a variety of steel products from 11 major steel producing and finishing facilities in six states, including hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, rail products and semi-finished shapes serving the automotive, construction, pipe and tube, appliance, container and machinery markets. As reported in the Troubled Company Reporter's April 6, 2004 edition, Standard & Poor's Ratings Services assigned its 'BB' rating to Richfield, Ohio-based steel manufacturer International Steel Group Inc.'s (ISG) proposed $600 million senior unsecured notes due 2014. Standard & Poor's at the same time affirmed its 'BB' corporate credit rating and 'BB+' senior secured bank loan rating on the company. The outlook is positive. The ratings on ISG reflect its leading market position in the highly cyclical and competitive North American steel industry, its competitive cost position, and moderate financial policies. ISG was formed through the acquisitions of bankrupt steel companies LTV, Acme, and Bethlehem Steel. Unlike some other unionized steel producers, ISG does not have burdensome legacy costs, or the high number of employees it had before these acquisitions. ISG is expected to fully realize its estimated annual cost savings of $250 million in 2004, because it has reduced headcount at Bethlehem by 3,100. These combined savings provide a meaningful cost advantage compared with competing unionized steel companies in the U.S. that are facing rising labor and legacy costs. ISG's management uses a mini-mill strategy, such as establishing flexible work rules and profit sharing. ISG plans to implement a similar strategy with Weirton, and already has an agreement for a new contract with Weirton's unions similar to its existing contracts, including reducing labor by about one-third, and establishing more flexible work rules and benefits. Nevertheless, although some of its costs have become more variable, this remains a business with a high degree of operating leverage, and requires the company to operate at high levels of capacity utilization to remain profitable. KAISER ALUMINUM: Working with Lenders to Amend DIP Facility ----------------------------------------------------------- In a Form 10-K filed with the Securities and Exchange Commission, Kaiser Aluminum and Chemical Corporation President and CEO, Jack A. Hockema, discloses that at February 29, 2004, the Debtors had $13.6 million in cash and cash equivalents and $172.2 million of available credit under the DIP Facility's borrowing base formula. Mr. Hockema relates that in March 2004, the Debtors received a waiver from the DIP Facility lenders in respect of a financial covenant, for the quarter ended December 31, 2003, and measurement periods through May 31, 2004. Pursuant to the waiver, the Debtors agreed to reduce the available amount of the borrowing base by $25 million. The Debtors are currently working with the DIP Facility lenders to complete an amendment that is anticipated to: (a) reset the financial covenant based on more recent forecasts; (b) authorize, within certain parameters, the sale of the Debtors' interests in and related to: (i) Alumina Partners of Jamaica; (ii) Queensland Alumina Limited; (iii) the alumina refinery in Gramercy, Louisiana and Kaiser Jamaica Bauxite Company; and (iv) Volta Aluminum Company Limited; and (c) reduce the availability of the fixed asset subcomponent to a level that, by emergence, will be based on advances solely in respect of machinery and equipment at the fabricated products facilities. While the effect of the amendment will be to reduce overall availability, assuming the commodity assets are sold, the Debtors anticipate that once amended, availability under the DIP Facility will likely be in the $50 million to $100 million range and that amount should be adequate for the fabricated products operations. The Debtors' belief is based on the fact that it was the commodities' assets and operations that subjected them to the most variability and exposure both from a price risk basis as well as from an operating perspective. The Debtors anticipate that they will be successful in completing an amendment to the DIP Facility in time to bring it to the Bankruptcy Court for approval at the May 2004 Omnibus Hearing. Headquartered in Houston, Texas, Kaiser Aluminum Corporation operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On September 30, 2001, the Company listed $3,364,300,000 in assets and $3,129,400,000 in debts. (Kaiser Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) KSAT SATELLITE: Intends to Delist Stock from TSX Venture Exchange ----------------------------------------------------------------- KSAT Satellite Networks Inc. announced that on April 29, 2004 the directors of KSAT passed a resolution authorizing KSAT to delist its shares from the NEX board of the TSX Venture Exchange, where they currently trade under the trading symbol "KSA.H". Notwithstanding the failure to obtain the approval of a majority of the minority of the shareholders of KSAT to the delisting resolution proposed at the Annual and Special Meeting held on June 20, 2003, KSAT has been advised by the TSX Venture Exchange that it will not object to KSAT's delisting in the circumstances. The shares of KSAT will not be delisted from the NEX board of the TSX Venture Exchange until 10 business days after an Exchange bulletin is issued announcing the delisting. KSAT is in the course of winding up and dissolving under the Business Corporations Act (Yukon), as approved by a special resolution of the shareholders of KSAT at the Annual and Special Meeting held on June 20, 2003. The distribution of KSAT's assets pursuant to the dissolution proceedings is subject to a settlement agreement with KSAT's two largest shareholders and secured creditors, and as the proceeds of liquidation will not exceed the amounts owed to them, KSAT does not expect other shareholders to receive any value as a result of the dissolution. Due to the onerous requirements of maintaining reporting issuer status and complying with disclosure obligations, the directors of KSAT are of the view that it is in the best interests of KSAT to delist its shares from the NEX board of the TSX Venture Exchange so that KSAT is then able to make an application to the British Columbia Securities Commission and the Alberta Securities Commission for an order that KSAT be deemed to have ceased to be a reporting issuer, in accordance with the resolution approved by the shareholders of KSAT at the Annual and Special Meeting held on June 20, 2003, the Securities Act (British Columbia) and the Securities Act (Alberta). This will enable KSAT to complete its dissolution proceedings in a more timely and cost-efficient manner, without further depletion of the assets that would otherwise be distributed to KSAT's creditors. Prior to commencing dissolution proceedings, KSAT was in the satellite telecommunications business in China. LIBERATE TECHNOLOGIES: Files Chapter 11 Petition in Delaware ------------------------------------------------------------ Liberate Technologies (Pink Sheets: LBRT), a leading provider of software for digital cable systems, announced it had filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code to resolve certain outstanding liabilities, reduce costs and strengthen its financial position. Liberate intends to promptly file a Plan of Reorganization in the U.S. Bankruptcy Court in Delaware providing for the payment of 100% of valid creditor claims. Stockholder interests will not be impacted by the Plan. Liberate hopes to emerge from bankruptcy within a period of 4-6 months. During the bankruptcy process, Liberate expects to operate its business in the normal course, including continued compliance with active customer and vendor contracts, and service and support of its cable customers and their subscribers. As of February 29, 2004, Liberate had cash and short-term investments of $222.3 million and $10.9 million in restricted cash held as security for office leases. "We believe this filing is in the best interests of our stockholders, employees and customers," said David Lockwood, Chairman and CEO of Liberate. "During the reorganization process, we will continue to execute on our business plan, investing in the development of our technology platform and delivering our products and services to existing customers. In addition, we will continue to aggressively market our software to new customers in order to grow revenues." About Liberate Technologies Liberate Technologies is a leading provider of software for digital cable systems. Based on industry standards, Liberate's software enables cable operators to run multiple services -- including High-Definition Television, Video on Demand, and Personal Video Recorders -- on multiple platforms. Headquartered in San Mateo, California, Liberate has offices in Ontario, Canada and the United Kingdom. LOEWEN GROUP: Agrees to Settle Eight of Ten IRS Tax Claims ---------------------------------------------------------- During the pendency of the Loewen Group Debtors' chapter 11 cases, the Internal Revenue Service filed certain proofs of claim against the Debtors' estates, including: Debtor Claim Amount ------ ------------ Blalock-Coleman Funeral Home, Inc. $7,153.30 BLH Management, Inc. 135,664.87 The Center for Pre-Arranged Funeral Planning 35,386.41 Dudley M. Hughes Funeral Home, Inc. 9,015.95 Kingston Memorial Gardens 3,200.00 Ourso Funeral Home, Airline Gonzales, Inc. 2,843.07 Roselawn Operations, Inc. 21,051.42 Spring Hill Cemetery Company 129,650.53 Each of these claims asserts taxes and related interest and penalty amounts. In 2001 and 2002, the Debtors objected to the allowance of each of these claims, and those objections remain pending. Rather than continue litigating the dispute, the parties agree to a settlement according to these terms: (1) The IRS withdraws its claim against Kingston Memorial Gardens, with prejudice; (2) The claims against each of the remaining Debtors are allowed as unsecured claims entitled to priority; (3) The claims against each of Blalock-Coleman, Hughes Funeral Home, and Ourso are allowed in the amounts filed; (4) The claim against Roselawn Operations is allowed but reduced to $10,382.44; (5) The claim against Spring Hill Cemetery is allowed but reduced to $6,708.59; (6) The claim against The Center for Pre-Arranged Funeral Planning is allowed but reduced to $256.88; (7) The claim against BLH Management is allowed but reduced to $13,600.98 against BLH's Chapter 11 estate and classified in Class 11 under the Plan, and paid under the terms of the Plan; (8) Any further claims, other than two unresolved claims, asserted by the IRS in these cases will be disallowed; and (9) The Reorganized Debtors will fully satisfy the Allowed Priority Claims by paying the IRS $36,360.23. The Unresolved Claims are: -- $56,374.38 against Valley of the Temples Mortuary; and -- $59,942.28 against Care Memorial Society. The parties reserve their rights against each other as to these claims. (Loewen Bankruptcy News, Issue No. 84; Bankruptcy Creditors' Service, Inc., 215/945-7000) MAGELLAN HEALTH: Reports Improved First Quarter Financial Results ----------------------------------------------------------------- Magellan Health Services, Inc., (Nasdaq:MGLN), reported operating results for the first quarter of fiscal year 2004. The Company also reiterated the financial guidance it had provided at its recent investor conference. Financial Results For the quarter ended March 31, 2004, Magellan reported net revenues of $440.2 million and net income of $12.9 million, or $0.35 per diluted common share, compared with net revenues of $409.0 million and a net loss of $12.4 million, or $(0.46) per diluted common share, for the prior year quarter. The Company's segment profit (net revenue less salaries, cost of care and other operating expenses plus equity in earnings of unconsolidated subsidiaries) for the current year quarter was $48.1 million versus $40.8 million for the prior year quarter. Steven J. Shulman, chairman and CEO, said, "I am very pleased that, as we had anticipated, Magellan turned in excellent results in the first quarter that continue to demonstrate the Company's good financial health. As focused as we are on our short-term financial results, however, we are just as focused on developing the long-term potential of the business. As such, throughout the remainder of 2004, we expect to make significant investments in product development and other initiatives, which we believe will enhance Magellan's prospects for future growth over the long term." The Company ended the quarter with $242.2 million in unrestricted cash and cash equivalents. Cash flow from operations for the current year quarter was $(3.7) million compared to $35.2 million in the prior year quarter. Cash flow from operations for the current year quarter includes net payments of $61.1 million for liabilities related to the Company's Chapter 11 proceedings. Excluding the impact from Chapter 11, cash flow from operations was $57.4 million. There are currently no loans outstanding on the Company's $50.0 million revolving credit facility. Outlook As previously announced at its April 14 investor conference in New York City, the Company expects to generate net income of $36 million to $56 million and segment profit in the range of $160 million to $180 million for fiscal year 2004. Mark S. Demilio, chief financial officer, said, "The results for the quarter were in line with our expectations as reflected in our financial guidance for the year. Furthermore, the financial results for subsequent quarters will be affected by known contract terminations, the impact of product development and other investments by the Company and other factors. Therefore, we remain comfortable with the financial guidance we provided earlier this month." Shulman added, "Magellan's financial health - strong operating results and a strong balance sheet - allows management to position the Company for growth over the next three to five years. As we build a successful future for Magellan, we plan to execute on three main goals in 2004 - focus on maintaining our core business; continue efforts to improve efficiency and manage expenses; and identify innovative products to position the Company for future growth. I am very pleased that we continue to make progress in all three areas and I am excited by the opportunities before us." Magellan Health Services is headquartered in Columbia, Maryland, and is the leading behavioral managed healthcare organization in the United States. Its customers include health plans, corporations and government agencies. The Company filed for chapter 11 protection on March 11, 2003, and confirmed its Third Amended Plan on October 8, 2003. Under the Third Amended Plan, nearly $600 million of debt dropped from the Company's balance sheet and Onex Corporation invested more than $100 million in new equity. MALAN REALTY: Raises $8.7 Million from Sale of Three Properties --------------------------------------------------------------- Malan Realty Investors, Inc. (NYSE: MAL), a self-administered real estate investment trust (REIT), announced it has completed the sale of three properties totaling 392,736 square feet. Net proceeds from the sales were $8.7 million. Broadway Center, at 101 W. Lincoln Highway in Merrillville, Indiana is a 177,692 square-foot property anchored by Kmart. It was sold to Kmart. A 106,084 square-foot Kmart property at 151 E. Riverside Boulevard in Loves Park, Illinois, was sold to an individual. A Topeka, Kansas property, located at 240 E. 29th Street, houses a Harbor Freight Tools store and consists of 108,960 square feet of space. It was acquired by KDL, Inc. Malan also announced it is calling the balance of its 9.5% Convertible Subordinated Debentures due July 15, 2004 for redemption on June 1, 2004. The Debentures will be redeemed at par, plus accrued but unpaid interest, and retired. The aggregate principal balance of the Debentures is currently $7.1 million. "We are pleased to complete the redemption of the convertible subordinated debentures well in advance of their due date," said Jeffery Lewis, chief executive officer of Malan Realty Investors. "This is an important landmark in our strategy to de-leverage the company and create liquidity for the stockholders. Property sales are also progressing well, and we are pleased with our progress to date and the prospects for selling additional properties in the future." The Debentures currently trade on the New York Stock Exchange under the CUSIP number 561063-AA-6001. Prior to 5:00 p.m., Eastern Time, on June 1, 2004, holders of Debentures may convert their Debentures into shares of Malan common stock at a price of $17.00 per share, or approximately 58.82 shares per $1,000 principal amount of Debentures. Cash will be paid in lieu of fractional shares. On April 29, 2004, the closing price of Malan common stock on the New York Stock Exchange was $4.93 per share. Holders of Debentures who do not convert their Debentures into Malan common stock will have such Debentures redeemed on June 1, 2004. Upon redemption, they will receive $1,035.89 per $1,000 principal amount of Notes (consisting of the redemption price of $1,000 plus accrued and unpaid interest thereon from January 15, 2004 up to but not including June 1, 2004 of $35.89). No further interest will accrue thereafter on Debentures called for redemption. A notice of redemption is being mailed to all registered holders of the Debentures. Copies of the notice of redemption may be obtained from The Bank of New York, the paying agent and conversion agent, by calling Roxane Ellwanger at (312) 827-8574. The address of The Bank of New York is 2 N. LaSalle Street, Suite 1020, Chicago, Illinois 60602. Malan Realty Investors, Inc. owns and manages properties that are leased primarily to national and regional retail companies. In August 2002, the company's shareholders approved a plan of complete liquidation. The company owns a portfolio of 21 properties located in seven states that contains an aggregate of approximately 1.5 million square feet of gross leasable area. MEDIABAY INC: New Senior Debt Facility Extends Debt Maturities -------------------------------------------------------------- MediaBay, Inc. (Nasdaq: MBAY), a leading audio media marketing company, announced the conclusion of a material refinancing and restructuring of its balance sheet. The Company received $8.6 million of funds upon closing a new senior debt facility of $9.5 million and concurrently extended approximately $7.4 million of current debt into long-term obligations. MediaBay will use a portion of the proceeds from the new senior debt facility to pay off approximately $4.2 million in current debt, and will then have approximately $4.4 million in additional working capital. In addition, the conversion of another approximately $4.4 million in debt and accrued expenses to equity has been agreed to with the holders pending receipt by the Company's Board of Directors of a fairness opinion from an independent investment banking firm. "The conclusion of our balance sheet restructuring and the pending conversion of debt to equity are two significant benchmarks in our turnaround efforts," stated MediaBay CEO Jeffrey Dittus. "We believe that when these transactions are completed, the resulting improvements to the Company's balance sheet will adequately address the concerns which gave rise to our auditors' going concern opinion." Commenting on the Company's accomplishments during 2004, Mr. Dittus said, "The completion of these transactions will add to the growing list of achievements to date in 2004: We will have raised more than $12.6 million in gross proceeds from new debt and equity. We will have extended the terms on approximately $7.4 million of subordinated debt and increased our equity by approximately $8.0 million. Moreover, we have significantly reduced our payables and accrued expenses and provided the Company with significant additional working capital. "Going forward we now have greater financial flexibility to invest in new Internet-based information technology systems and enhance our download capability, expand our marketing programs and build out our direct response 'Radio Classics' radio network." MediaBay, Inc. (Nasdaq: MBAY) is a multi-channel, media marketing company specializing in the $800 million audiobook industry and old-time radio distribution. MediaBay's industry-leading content library includes over 60,000 classic radio programs, 3,500 film and television programs and thousands of audiobooks. MediaBay distributes content through more than 20 million direct mail catalogs; streaming and downloadable audio over the Internet; over 7,000 retail outlets; and a 260 station syndicated radio show. For more information on MediaBay, visit http://www.MediaBay.com/ MIRANT: Canadian Debtors Ask Court to Approve Plan of Arrangement ----------------------------------------------------------------- Mirant Canada Energy Marketing, Ltd., and Mirant Canada Energy Marketing Investments, Inc., ask Madam Justice Kent to approve and sanction their Plan of Compromise and Arrangement pursuant to the provisions of the Companies' Creditors Arrangement Act, as amended. Frank R. Dearlove, Esq., at Bennett Jones, LLP, in Calgary, Alberta, informs the CCAA Court that on April 16, 2004, a meeting of Affected Creditors was held at the offices of Bennett Jones, LLP, in Calgary to vote on the Plan. PricewaterhouseCoopers, Inc., chaired the meeting. The Monitor reports that during the April 16 meeting, 28 Affected Creditors, which represent $89,845,944 of the $90,334,967 total proven Affected Claims, unanimously voted to approve the Plan of Arrangement. The Canadian Debtors intend to distribute payment pursuant to the Plan on May 3, 2004 prior to the expiry of the appeal period. Any party wishing to appeal any Order sanctioning the Plan must obtain a stay of proceedings prior to May 3, 2004. Rod Pocza, President of the Canadian Debtors, believes that the Plan of Arrangement is fair, reasonable and is in the best interest of the Canadian Debtors and their creditors. All of the statutory requirements have been met for approval of the Plan, Mr. Pocza says. * * * The CCAA Court rules that, without limiting the provisions of the Claims Procedure: (a) an Affected Creditor that did not receive a Notice of Claim or file a Proof of Claim is forever barred from making any Claim against the Petitioners and will not be entitled to any distribution under the Plan, and that the Affected Creditor's Claim is forever extinguished; and (b) an Affected Creditor that did not receive a Notice of Claim and did not file a Notice of Dispute of Claim is forever barred from proving an Affected Claim except for the Affected Creditor's Claim set out in that Notice of Claim. Madam Justice Kent declares that: -- the Plan is sanctioned pursuant to section 6 of the CCAA; -- the Plan Implementation Date and the Plan is and will be binding on all Affected Creditors and the Canadian Debtors are authorized to take all necessary actions to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents, if any, to be created in connection with the Plan. Furthermore, the Court directs Enron Canada Corporation, as soon as possible after its receipt of payment of the Dividend Amount, to withdraw the Bankruptcy Petition without costs. The CCAA Order will constitute a good and sufficient basis for the withdrawal. Enron will have leave pursuant to Section 43(14) of the Bankruptcy and Insolvency Act to withdraw the Petition. Madam Justice Kent also orders that: -- The substantive consolidation of the Canadian Debtors in the Plan is only for purposes of treating Affected Claims under the Plan and will not affect their legal and corporate structures or cause any of them to be liable for any claim for which it otherwise is not liable and the liability of any Canadian Debtor for any claim will not be affected by the substantive consolidation; -- As of the Distribution Date, all the Affected Claims of Affected Creditors will be permanently stayed and without recourse as against the Canadian Debtors and any Affected Claim of an Affected Creditor which has been made through a proceeding in the CCAA Court is discontinued without costs against the Canadian Debtors and the Order may be filed in any proceedings to effect the dismissal; -- Any and all Persons will be and are stayed from commencing, taking, applying for or issuing or continuing any and all steps or proceedings; -- Except as otherwise compromised or affected by the terms of the Plan, all obligations or agreements to which any of the Canadian Debtors is a party and have not be otherwise terminated by the Canadian Debtors will be and remain in full force and effect unamended as of the Effected Date; -- From and after the Plan Implementation Date, all Persons will be deemed to have waived any and all defaults then existing or previously committed by any of the Canadian Debtors; -- The Administrative Charges will be terminated, discharged and releases as against the Canadian Debtors and their Property upon the later of: (a) expiry of the stay; (b) payment in full of all amounts secured by the charge; or (c) the Plan Implementation Date; -- The Canadian Debtors will not be released from their obligation to pay the fees and expenses of the Monitor, its counsel and the Canadian Debtors' counsel; -- The Monitor has satisfied all of its obligations required pursuant to the CCAA and it has not liability in respect of any information disclosed in the CCAA Proceedings; -- Upon the Monitor's filing of Report confirming payment in compliance with the terms of the Plan, PricewaterhouseCoopers, Inc., will be discharged from its duties as Monitor, effective on the later of the Plan Implementation Date or the expiry of the Stay Period; -- Effective on the Distribution Date, any and claims against the Monitor, in connection with the performance of its duties as Monitor up to and including the Distribution Date, will be stayed, extinguished and forever barred; -- The Order will not affect or limit the ability of Brian Chrumka to advance the claims made by motion dated March 18, 2004 and the claims will not be prejudiced by the Order. Mr. Chrumka's claim will be determined in accordance with the approved Claims procedure and other Court orders; -- No claims of the U.S. Proceedings Debtors will be deemed to have been compromised, affected, released or made without recourse as against the Canadian Debtors; -- The Affected Creditors' ability to pursue further rights and remedies, if any, for deficiencies against any of the U.S. Proceedings Debtors in respect of any and all guarantees will not be compromised; -- From and after the Distribution Date, the Canadian Debtors are not required to maintain the records as required by the Initial Order; and -- On the Distribution Date, each of the Canadian Debtors and the Monitor's Released Party will be released and discharged from any and all demands, claims, actions, or any liabilities any Person may be entitled to assert in connection with Affected Claims, the business affairs of any of the Canadian Debtors, the issue of any securities by any one of the Canadian Debtors, the Plan, the CCAA Proceedings and the U.S. Proceedings. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: TransCanada Wins Bid for Gas Transmission Unit --------------------------------------------------------------- National Energy & Gas Transmission, Inc. (NEGT) announced that it has accepted TransCanada Corporation's bid to acquire NEGT's subsidiary, Gas Transmission Northwest Corporation. The purchase price is $1.703 billion, which includes $500 million of assumed debt. The period established by the bankruptcy court for the submission of competing bids has recently terminated. A hearing before the bankruptcy court to approve the sale will be held on May 12. Pending an affirmative order by the bankruptcy court, NEGT anticipates the sale will be completed during this quarter or early next quarter. GTN is a natural gas pipeline company that owns and operates two pipeline systems -- the Gas Transmission Northwest pipeline and North Baja pipeline. The sale of the North Baja pipeline is subject to a right of first refusal. The Gas Transmission Northwest pipeline system consists of more than 1,350 miles of pipeline extending from a point near Kingsgate, British Columbia, on the British Columbia-Idaho border, to a point near Malin, Oregon on the Oregon-California border. The natural gas transported on this pipeline originates primarily from supplies in Canada for customers located in the Pacific Northwest, Nevada and California. The North Baja pipeline is an 80-mile system. It extends from a point near Ehrenberg, Arizona to a point near Ogilby, California on the California- Baja California, Mexico border. The natural gas transported on this system comes primarily from supplies in the southwestern United States for markets in Northern Baja California, Mexico. On Wednesday, a bankruptcy court hearing was held on NEGT's Plan of Reorganization. The company anticipates that an order will be signed shortly approving the plan. NEGT expects that it will satisfy the other conditions to its emergence from bankruptcy in late May or early June. Headquartered in Bethesda, Md., NEGT's other subsidiaries own more than 4,700 megawatts of electric generating facilities across the country and a 5.2 percent ownership in the Iroquois Gas Transmission System. NORTEL: S&P Lowers Lease Pass-Through Trust 2001-1 Rating to B- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Nortel Networks Lease Pass-Through Trust series 2001-1 to 'B-' from 'B'. At the same time, the CreditWatch status is revised to developing from negative. The rating was originally placed on CreditWatch negative on March 11, 2004. The rating on Nortel Networks Lease Pass-Through Trust is dependent on the corporate credit rating of Nortel Networks Ltd. (Nortel), which was lowered to 'B-' from 'B' on April 28, 2004. Concurrently, the CreditWatch status of the rating on Nortel was revised to developing from negative. The rating on the pass-through trust certificates reflects security interests in five single-tenant, office/research and development buildings leased to Nortel. Nortel guarantees the payment and performance of all obligations of the tenant under the leases. OMEGA HEALTHCARE: Will Present at Deutsche Bank's May 4 Conference ------------------------------------------------------------------ Omega Healthcare Investors, Inc. (NYSE:OHI) announced that it will be making a presentation at the 29th Annual Health Care Conference hosted by Deutsche Bank Securities, Inc. on Tuesday, May 4, 2004 at 3:00 p.m., in Baltimore, Maryland. Those interested in hearing a live webcast of the presentation can log onto the Company's website at http://www.omegahealthcare.com/ where a direct link to the live webcast and slide presentation will be available. Replays of the webcast, as well as the slide presentation, will be available for 30 days after the conference and can be accessed via link from the Company's website. Omega is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At March 31, 2004, the Company owned or held mortgages on 209 skilled nursing and assisted living facilities with approximately 21,400 beds located in 28 states and operated by 40 third-party healthcare operating companies. Standard & Poor's Ratings Services assigned its 'BB-' rating to Omega Healthcare Investors Inc.'s issued $200 million 7% senior notes due April 2014. Concurrently, the senior unsecured debt rating is raised to 'BB-' from 'B' and removed from CreditWatch positive, where it was placed March 5, 2004. Additionally, the rating on the preferred stock is raised to 'B' from 'B-' and removed from CreditWatch positive, where it was also placed March 5, 2004. The rating actions affect $526 million of rated securities. The outlook is stable. ONESOURCE TECHNOLOGIES: Posts $884,338 Deficit at Dec. 31, 2003 --------------------------------------------------------------- OneSource Technologies, Inc., (OTCBB:OSRC) reported consolidated revenues of $3.08 million for the year ended December 31, 2003, a 4% increase over year-end 2002 revenues of $2.9 million. Operating Profit of $52 thousand (less than $0.00 per share) and Net Loss of $433 thousand ($0.01 per share) were also reported for the year- ended December 31, 2003 compared to Operating Income and Net Income of $192 thousand (less than $0.00 per share) and $16 thousand (less than $0.00 per share) respectively for the year ended December 31, 2002. "2003 operating results reflect the Company's break from the past with the inclusion of one-time charges against income for settlement of all outstanding legacy litigation matters and the discontinuance of the Company's toner remanufacturing operations," said Michael Hirschey, CEO of the Company. "A number of disputes arising in prior years related to certain shareholder matters were resolved during the year so the Company could move forward unimpeded with its strategic plans," continued Hirschey. "As part of the new management team's analysis of the Company's operations, we found that the remanufactured toner products industry had matured and is now represented by fewer well capitalized mega-remanufactures. Consequently, management and the board determined the Company should discontinue its remanufacturing efforts and their associated costs, and focus instead on sales and marketing of toner products on behalf of one or more of these large, well positioned suppliers. Accordingly, the Company discontinued its toner remanufacturing operations as of year-end and wrote off its investment in facilities and equipment related thereto but retained its toner sales and marketing capabilities," continued Hirschey. "While these charges to income negatively impacted earnings, management is confident that by disposing of the disputes and focusing on toner product sales the Company's future operating results will be significantly enhanced," concluded Hirschey. At December 31, 2003, OneSource Technologies' balance sheet shows a total stockholders' deficit of $884,338. Liquidity and Capital Resources While operationally things have improved since 2002, liquidity and financing continued to be a challenge during 2003. To improve overall cash flow the Company has entered into an Agreement with a financing institution to provide advance payments on certain outstanding accounts receivable. At December 31, 2003 the Company owed $132,000 to this institution. In March 2001, the Company and holders of four of the Company's notes payable that were due in March and September of 2001 entered into Note Deferral and Extension Agreements wherein each note holder agreed to defer all principal payments until July 15, 2001. The Company agreed to make a twenty-five percent (25%) principal payment to each note holder on July 15, 2001. The notes' due dates were subsequently extend to July 15, 2002, but by that date the Company was unable to make the scheduled partial principal payments or commence making level monthly principal and interests payments over the remaining twelve-month period of the notes. As part of the agreement, the Company also agreed to increase the interest rates of the notes from their stated twelve to fourteen percent (12% to 14%) to eighteen percent (18%). The Company has continued to make timely monthly interest payments to the note holders. Further, the Company is in communication with the note holders and believes it will be able to restructure or renegotiate the terms in a manner that will not adversely impact the Company's continuing operations. The Company is also engaged in negotiations with other lenders and investors for the acquisition of outside financing in case it is not able to satisfactorily restructure the debt of the present note holders. At December 31, 2003, the Company had accrued approximately $48,000 of unpaid payroll taxes, interest and penalties due the IRS. At the end of June 2002, the Company submitted required documentation in support of its "Offer In Compromise" previously filed in 2001 to the IRS. Management believes the Company will be able to successfully liquidate this liability and that the ultimate outcome will not have an adverse impact on the Company's financial position or results of operations. Information has been provided, the Company is continuing to fully cooperate, and resolution of this issue should be forthcoming. About OneSource OneSource is engaged in two closely related and complementary lines of IT and business equipment support services and products, 1) equipment maintenance services, 2) value added equipment supplies distribution. OneSource is in the technology equipment maintenance and service industry and is the inventor of the unique OneSource Flat-Rate Blanket Maintenance System(tm). This unique program provides customers with a Single Source for all general office, computer and peripheral and industry specific equipment technology maintenance and installation services. OneSource's Cartridge Care division provides remanufactured toner cartridges in the south and mountain west and is the supplier of choice for a number of Fortune 2000 companies in those regions. OneSource has realigned this division as an outsourced product sales representative and/or broker on behalf of toner remanufactures that nationally serve the Fortune 2000 market segment. OPRYLAND HOTEL: Fitch Affirms BB Rating on Class E Series 2001 -------------------------------------------------------------- Fitch Ratings affirms Opryland Hotel Trust's commercial mortgage pass-through certificates, series 2001-OPRY, as follows: --$78.7 million class A-2 'AAA'; --$18.5 million class B 'AA'; --$39.3 million class C 'A-'; --$10 million class E 'BB'. The class A-1 certificates have been paid in full. The $50.7 million class D certificates are not rated by Fitch. The borrower has exercised the first of two one-year extension options resulting in a maturity date of March 31, 2005. Fitch's underwritten net cash flow (NCF), based upon year-end 2003 financial statements, reflects an improvement of 18% from year-end 2002. However, overall NCF remains approximately 30% below issuance levels. The loan benefits from a cash-trap reserve that is employed when the trailing twelve-month (TTM) debt service coverage ratio (DSCR) falls below 1.25 times (x). Due to a cash- trap event the borrower paid down the mortgage loan from excess cash flow until the DSCR was equal to 1.25x. As a result of the cash-trap event, the mortgage balance has been reduced by over $54 million. The loan is now performing above the cash-trap requirements. As of the April 2004 distribution date, the transaction balance has been reduced by 28.3% to $197.2 million, which equates to a current loan per room of $68,370. The overall decline in the hotel's performance has been partly mitigated by the partial prepayment of the mortgage loan due to the cash-trap event, the improved NCF compared to year-end 2002, and the mezzanine loan being paid in full. The certificates represent the beneficial ownership interest in the trust, which consists of the fee interest in the 2,883-room full-service Opryland Hotel/Convention Center, located in Nashville, Tennessee. PARMALAT GROUP: BofA Reports $120 Million 1st Quarter Exposure -------------------------------------------------------------- In a conference call on April 14, 2004, James H. Hance, Jr., Vice Chairman and Chief Financial Officer for Bank of America Corporation, said that at March 31, 2004, the bank's remaining exposure to Parmalat was $120,000,000 of loans and derivatives carried as non-performing, including $105,000,000 supported by credit insurance. BofA's Global Corporate and Investment Banking division charged off $106,000,000 in loans to Parmalat and wrote down $29,000,000 of derivative exposure during the first quarter of 2004. The $106,000,000 Parmalat charge-off was not secured by insurance. 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. 14; Bankruptcy Creditors' Service, Inc., 215/945-7000) PENN OCTANE: Planned Asset Spin-Off May Hurt Equity Value --------------------------------------------------------- Penn Octane Corporation was incorporated in Delaware in August 1992. The Company has been principally engaged in the purchase, transportation and sale of liquefied petroleum gas (LPG). The Company owns and operates a terminal facility on leased property in Brownsville, Texas (Brownsville Terminal Facility) and owns a LPG terminal facility in Matamoros, Tamaulipas, Mexico (Matamoros Terminal Facility) and approximately 23 miles of pipelines (US - Mexico Pipelines) which connect the Brownsville Terminal Facility to the Matamoros Terminal Facility. The Company has a long-term lease agreement for approximately 132 miles of pipeline (Leased Pipeline) which connects ExxonMobil Corporation's King Ranch Gas Plant in Kleberg County, Texas and Duke Energy's La Gloria Gas Plant in Jim Wells County, Texas, to the Company's Brownsville Terminal Facility. In addition, the Company has access to a twelve-inch pipeline which connects Exxon's Viola valve station in Nueces County, Texas to the inlet of the King Ranch Gas Plant as well as existing and other potential propane pipeline suppliers which have the ability to access the ECCPL. In connection with the Company's lease agreement for the Leased Pipeline, the Company may access up to 21,000,000 gallons of storage located in Markham, Texas (Markham Storage), as well as other potential propane pipeline suppliers, via approximately 155 miles of pipeline located between Markham, Texas and the Exxon King Ranch Gas Plant. The Company sells LPG primarily to P.M.I. Trading Limited (PMI). PMI is the exclusive importer of LPG into Mexico. PMI is a subsidiary of Petroleos Mexicanos, the state-owned Mexican oil company (PEMEX). The LPG purchased from the Company by PMI is generally destined for consumption in the northeastern region of Mexico. The Company has had an accumulated deficit since its inception and has historically had a deficit in working capital. In addition, significantly all of the Company's assets are pledged or committed to be pledged as collateral on existing debt in connection with the Restructured Notes, the $280,000 Note and the RZB Credit Facility. The RZB Credit Facility was to be reduced from $15.0 million to $12.0 million after January 31, 2004. However, the RZB Credit Facility has remained at $15.0 million pursuant to month-to-month extensions. The Company and RZB are currently in negotiations to maintain the credit facility at $15.0 million for a longer term than month-to-month. The Company may need to increase its credit facility for increases in quantities of LPG purchased and/or to finance future price increases of LPG. The Company depends heavily on sales to one major customer. On December 29, 2003, the Company received notice from PMI that it was terminating the Contract effective March 31, 2004. The Company's sources of liquidity and capital resources historically have been provided by sales of LPG, proceeds from the issuance of short-term and long-term debt, revolving credit facilities and credit arrangements, sale or issuance of preferred and common stock of the Company and proceeds from the exercise of warrants to purchase shares of the Company's common stock. In addition to the above, the Company intends to Spin-Off a major portion of its assets to its stockholders. As a result of the Spin-Off, the Company's stockholders' equity will be reduced by the amount of the Spin-Off which may result in a deficit in stockholders' equity and a portion of the Company's current cash flow from operations will be shifted to the Partnership. Therefore, the Company's remaining cash flow may not be sufficient to allow the Company to pay its federal income tax liability resulting from the Spin-Off, if any, and other liabilities and obligations when due. The Partnership will be liable as guarantor on the Company's collateralized debt discussed in the preceding paragraph and will continue to pledge all of its assets as collateral. In addition, the Partnership has agreed to indemnify the Company for a period of three years from the fiscal year end that includes the date of the Spin-Off for any federal income tax liabilities resulting from the Spin-Off in excess of $2.5 million. If the Company's cash flow from operations is not adequate to satisfy such payment of liabilities and obligations and/or tax liabilities when due and the Partnership is unable to satisfy its guarantees and/or tax agreement, the Company may be required to pursue additional debt and/or equity financing. In such event, the Company's management does not believe that the Company would be able to obtain such financing from traditional commercial lenders. In addition, there can be no assurance that such additional financing will be available on terms attractive to the Company or at all. If additional financing is available through the sale of the Company's equity and/or other securities convertible into equity securities through public or private financings, substantial and immediate dilution to existing stockholders may occur. There is no assurance that the Company would be able to raise any additional capital if needed. If additional financing cannot be accomplished and the Company is unable to pay its liabilities and obligations when due or to restructure certain of its liabilities and obligations, the Company may suffer material adverse consequences to its business, financial condition and results of operations. PIVOTAL SELF-SERVICE: Going Concern Ability is in Doubt ------------------------------------------------------- Pivotal Self-Service Technologies Inc.'s balance sheet shows an accumulated deficit of $9,259,788. at December 31, 2003. As a result, Mintz & Partners, LLP in Toronto, the company's auditing firm, says, "substantial doubt exists about the Company's ability to continue to fund future operations using its existing resources." In order to ensure the success of the new business, the Company is dependent upon the ability to realize substantial value from its investment in "available for sale" securities. The business of Pivotal Self-Service Technologies Inc. (formerly known as Wireless Ventures Inc. and Hycomp, Inc.) is conducted through its wholly-owned Canadian subsidiary Prime Battery Products Limited. On December 31, 2002, Pivotal, through a newly incorporated wholly-owned subsidiary named Prime Battery completed the acquisition of certain business assets of DCS Battery Sales Ltd. Prime Battery distributes value priced batteries and other ancillary products to dollar stores in North America. The Company disposed of the Prime Wireless subsidiary and received, net 750,000, common shares of a publicly traded entity called Wireless Age Communications, Inc. (OTCBB:WLSA). The securities held by the Company represent a 3.7% ownership position in Wireless Age. During the three month period ended September 30, 2003 the Company changed the classification of these securities from held to maturity to "available for sale". The Company plans to dispose of these securities over the next twelve months in order to finance the growth of the battery business. These securities are currently restricted however the Company believes it will have the ability to dispose of all of the shares under regulatory rules within twelve months. The Company recorded a net loss for the three month period ended September 30, 2003 of $215,203 compared to net income of $14,339 during the comparative period in the prior year. The net loss from continuing operations during the three month period ended September 30, 2003 was $215,203 compared to a net loss of $33,581 in the prior year period. Earnings from discontinued operations was $47,920 during the three month period ended September 30, 2002. The year over year increase in loss is primarily the result of the Company's battery business not yet achieving breakeven results. Management has taken steps in order to move toward profitability such as; 1) sublicensed the distribution of Canadian sales to a related entity thereby significantly reducing fixed costs, 2) developed a marketing strategy for distributing batteries in the United States through regional sales rep groups, and 3) renegotiated a joint venture with a third party to distribute licensed battery products. In addition, the Company has been successful in raising capital through private placements of its common shares. Although, this type of financing continues to be dilutive to the existing common shareholders, it may be necessary to continue to do so in the interim before certain resale restrictions on its marketable securities lapse. The Company does not have any material sources of liquidity of off balance sheet arrangements or transactions with unconsolidated entities. Auditors Replaced Last Year On February 27, 2003, the Board of Directors dismissed Pannell Kerr Forster PC of New York, New York as its principal accountants. PKF's reports on the financial statements of the company for the past two years did not contain an adverse opinion or disclaimer of opinion, and were not modified as to uncertainty, audit scope or accounting principles. PKF's reports dated April 9, 2002, and April 5, 2001 both contained a paragraph expressing substantial doubt about the Company's ability to continue as a going concern. Through the date of change in accountants, there were no disagreements with PKF on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PKF, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. On February 27, 2003, the Company retained Mintz & Partners LLP, of Toronto, Ontario, Canada, as its independent accountants to conduct an audit of the Registrant's financial statements for the fiscal years ending December 31, 2002 and 2003. PRIMUS: Balance Sheet Insolvency Widens to $105M at March 31, 2004 ------------------------------------------------------------------ PRIMUS Telecommunications Group, Incorporated (Nasdaq:PRTL), a global telecommunications services provider offering bundled voice, data, Internet, digital subscriber line (DSL), voice-over- Internet protocol (VOIP), Web hosting, enhanced virtual private network (VPN) applications and other value added services, announced results for the first quarter 2004 and reaffirmed its financial goals for the full year 2004. "In an industry strained by pricing and competitive pressures, PRIMUS continues to hold its own," commented K. Paul Singh, Chairman and Chief Executive Officer of PRIMUS. "In absolute terms, our revenue growth, both sequentially and year-over-year is impressive; and even in relative terms, after taking into account the impact of foreign exchange rates, our revenues have been stable. This result was all the more significant given the fact that during the first quarter our revenue and margin growth were constrained by actions taken by former monopoly carriers in two of our major markets. "In Canada, the incumbent local provider continues to drive long distance rates lower in an effort to maintain and increase its customer base. Our response is to continue to focus on expanding our local services, both through wireline and VOIP products, that will be bundled with our long distance and Internet products. In Australia, Telstra substantially reduced its pricing for DSL services while keeping wholesale rates above its own retail rate. While the Australian regulatory body is currently seeking to penalize Telstra for anticompetitive conduct, PRIMUS plans to accelerate the expansion of our own DSL network in Australia, a project already contemplated in our capital budget, that will allow us to become more independent of Telstra's local and DSL services. "Nevertheless, based on first quarter results and encouraging results from our recent acquisitions, we maintain our goal of 12%- 15% annual revenue growth in 2004 over the prior year, assuming foreign currencies are stable from year-end 2003 levels. "We are also encouraged by the preliminary results of our recent VOIP and wireless initiatives," Singh noted. "During the first quarter, we were the first company to launch a retail VOIP product in Canada. We now have several thousand customers and are expanding the rollout to other cities within Canada. The early indications are that our business models are being borne out in terms of customer additions, increased average revenue per customer, and bundling prospects, particularly with local services. "Similarly, we have begun the implementation of our strategy to become a Virtual Mobile Network Operator (VMNO) with the introduction of PRIMUS-branded 'intelligent' cellular phone handsets and services in the UK market, and we are now targeting other European and Asian countries, including India, in which to sell our phones and services. "Our global VOIP reseller product was also launched in the first quarter and is gaining customers. By mid-year, we plan to launch our retail VOIP products in the United States. "While we plan to grow our existing wireline business organically and through acquisitions, we believe that our new businesses-- local, wireless and VOIP broadband--represent major revenue and profit growth opportunities for the future," Singh stated. "During the first quarter we also successfully concluded a $240 million offering of senior notes due 2014 at an interest rate of 8.0%, which reflected the improved operating performance of the Company. We retired $181 million principal amount of senior notes that had higher coupons and shorter maturities, thereby reducing our future interest expense and extending our debt maturity profile. We will continue to explore opportunities to further strengthen our balance sheet and improve liquidity," Singh commented. After adjusting for expenses related to the early retirement of debt and foreign currency transaction losses, PRIMUS recorded Adjusted Net Income of $6 million (including $3 million of interest expense on debt retired during the first quarter) and Adjusted Diluted Income Per Common Share of $0.07 in the first quarter of 2004. First Quarter Financial Results PRIMUS's net revenue in the first quarter of 2004 was $348 million compared to $300 million in the first quarter of 2003, a growth of 16%, and $339 million for the fourth quarter of 2003, a growth of 3%. "The increase in net revenue, both year-over-year and sequentially, reflects growth in all three of our products: voice, data/Internet, and VOIP. Our net revenue growth, both year-over- year and sequentially, was favorably impacted by the continued weakening of the US dollar, while our sequential net revenue growth was negatively impacted by seasonality in Australia and having one less day than the fourth quarter of 2003," stated Neil L. Hazard, Chief Operating Officer. Data/Internet and VOIP net revenue for the first quarter was a record high $60 million, representing over 17% of net revenue, as compared to $45 million and 15% in the first quarter of 2003, and $55 million and 16% in the fourth quarter of 2003. Net revenue for the first quarter on a geographic basis remained well balanced: 39% from North America, 30% from Europe and 31% from Asia-Pacific. The mix of net revenue by customer type in the first quarter was 81% retail (56% residential and 25% business) and 19% carrier compared with sequentially prior quarter figures of 80% retail (55% residential and 25% business) and 20% carrier. Selling, general and administrative (SG&A) expenses for the first quarter of 2004 were $94 million or 27.1% of net revenue, as compared to $78 million or 25.8% of net revenue for the first quarter of 2003 and $88 million or 26.0% of net revenue in the prior quarter. The increase in SG&A expenses primarily reflects additional spending on the new VOIP, local and wireless initiatives. Income from operations was $21 million in the first quarter of 2004, as compared to $12 million in the first quarter of 2003 and $21 million in the fourth quarter of 2003. Adjusted EBITDA, as reconciled in the attached schedules, was $44 million for the first quarter 2004, as compared to $33 million in the first quarter of 2003 and $47 million in the prior quarter. The sequential decrease in Adjusted EBITDA reflects the increased SG&A spending on our new product initiatives. Interest expense was $15 million for the first quarter of 2004 and included $1 million of early debt termination fees as well as $3 million of interest on the debt retired during the quarter. Quarterly interest expense on the long-term obligations existing as of March 31, 2004 is expected to be approximately $12 million in future quarters. PRIMUS's net loss for the first quarter of 2004 was ($10) million (including $16 million in losses from the early extinguishment of debt and foreign currency transactions) compared to net income of $11 million (including $17 million in gains from the early extinguishment of debt and foreign currency transactions) in the first quarter of 2003 and net income of $18 million (including $14 million in gains from the early extinguishment of debt and foreign currency transactions) in the prior quarter. Adjusted Net Income for the first quarter of 2004 was $6 million (which included $3 million of expense on debt retired during the quarter) compared to a loss of ($5) million in the first quarter of 2003 and $7 million in the prior quarter. Basic and diluted loss per common share were ($0.11) and ($0.11), respectively, for the first quarter 2004, compared to $0.13 and $0.13, respectively, for the first quarter of 2003, and basic and diluted income per common share of $0.20 and $0.18, respectively, in the fourth quarter of 2003. Basic and diluted weighted average common shares outstanding for the first quarter 2004 were 89 million. Adjusted Diluted Income Per Common Share was $0.07 for the first quarter 2004, compared to an Adjusted Diluted Loss Per Common Share of ($0.06) for the first quarter of 2003 and Adjusted Diluted Income Per Common Share of $0.08 for the fourth quarter of 2003. Liquidity and Capital Resources PRIMUS ended the first quarter of 2004 with restricted and unrestricted cash of $88 million. During the first quarter of 2004 PRIMUS generated $13 million in cash from operating activities, inclusive of improving working capital by $23 million. PRIMUS spent $10 million on capital expenditures and $18 million on the acquisition of AOL/7 in Australia. In January 2004, a subsidiary of the Company issued $240 million of 8.0% senior notes, generating $233 million in net proceeds. PRIMUS utilized $165 million of the net proceeds to satisfy and discharge the Company's 9.875% and 11.25% senior notes, including call premiums. During the first quarter of 2004 the Company repurchased $24 million principal amount of its 12.75% Senior Notes, paid $3 million in call premiums on these notes, and repaid in full a $10 million balance on a financing agreement. Additionally, in April 2004 the Company's Canadian subsidiary established a Canadian $42 million term loan facility, which is currently not drawn upon. PRIMUS's long-term debt obligations as of March 31, 2004 were $587 million. The Company will continue to pursue opportunities to strengthen the balance sheet through debt reduction and refinancing initiatives and enhance liquidity through reducing its carrying costs of debt and extending its debt maturity profile. The Company has an effective shelf registration statement on file with the SEC for issuance of up to an aggregate of $200 million of securities. At March 31, 2004, PRIMUS Telecom's balance sheet shows a total shareholders' equity deficit of $105,020,000. At December 31, 2003, total shareholders' equity deficit topped $96 million. 2004 Goals Reaffirmed The Company reaffirms its previously stated 2004 goals including year-over-year revenue growth in the range of 12% to 15%, assuming currencies are stable from year-end 2003 levels, and net income in the range of $35 million to $40 million (exclusive of costs associated with the early extinguishment of debt and related interest expense.) The Company and/or its subsidiaries will evaluate and determine on a continuing basis, depending upon market conditions and the outcome of events, the most efficient use of the Company's capital, including investment in the Company's network and systems, lines of business, potential acquisitions, purchasing, refinancing, exchanging or retiring certain of the Company's outstanding debt securities in privately negotiated transactions, open market transactions or by other direct or indirect means to the extent permitted by its existing covenants. PRIMUS Telecommunications Group, Incorporated (Nasdaq:PRTL) is a global telecommunications services provider offering bundled voice, data, Internet, DSL, VOIP, Web hosting, enhanced VPN applications and other value added services. PRIMUS owns and operates an extensive global backbone network of owned and leased transmission facilities, including VOIP connections to over 150 countries and over 550 points-of-presence (POPs) throughout the world, ownership interests in 23 undersea fiber optic cable systems, 18 international gateway and domestic switches, and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global broadband fiber optic ATM+IP network and operates data centers to offer customers Internet, data, hosting and e-commerce services. Founded in 1994 and based in McLean, Virginia, PRIMUS serves corporate, small- and medium-sized businesses, residential and data, ISP and telecommunication carrier customers primarily located in the North America, Europe and Asia-Pacific regions of the world. News and information are available at PRIMUS's Web site at http://www.primustel.com/ ROANOKE TECH: May Need More Capital to Continue as a Going Concern ------------------------------------------------------------------ Roanoke Technology Corporation has suffered losses from operations and may require additional capital to continue as a going concern as the Company develops its new markets. Management believes the Company will continue as a going concern in its current market and is actively marketing its services which would enable the Company to meet its obligations and provide additional funds for continued new service development. In addition, management is currently negotiating several additional contracts for its services. Management is also embarking on other strategic initiatives to expand its business opportunities. However, there can be no assurance these activities will be successful. There is also uncertainty with regard to managements projected revenue being in excess of its operating expenditures for the fiscal year ending October 31, 2004. Items of uncertainty include the Company's liabilities with regard to its payroll tax liability in excess of $700,000 and its Small Business Administration loan with a principal balance of $270,807 plus accrued interest. The Company has been in default of these liabilities and has had negotiations regarding resolution of these matters. The outcome of these negotiations was uncertain as of October 31, 2003. If the Company is not successful in these negotiations or payment, there is substantial doubt as to the ability of the Company to continue as a going concern. On December 25, 2003 the Company negotiated an installment agreement with the Internal Revenue Service with regard to its payroll tax liability. The agreement calls for payments of $5,000 per month for 48 months with a balloon payment for the balance owed at the end of that period. The Company's President, Dave Smith, signed for personal liability of the Trust Fund portion in the amount of $321,840 plus penalties and interest should the Company default on these payments. Should the Company default on these payments and any other current tax compliance, the Company's property can be taken to satisfy the liability. During the year ended October 31, 2003, the Company often remained current with its monthly payment for its Small Business Administration loan. OF the $270,807 balance owed, the Company has a past due balance of $131,150. The lender holds the Company's furniture and equipment as collateral for this loan. ROTECH HEALTHCARE: Posts Declining Q1 2004 Revenues of $134 Mil. ---------------------------------------------------------------- Rotech Healthcare Inc. (Pink Sheets:ROHI) reported net revenues for the first quarter ended March 31, 2004, were $134 million, versus net revenues of $152.6 million for the same period last year. The Company reported net earnings of $9.0 million for the first quarter as compared to net earnings of $5.0 million in the first quarter of 2003. Diluted earnings per share was $.35 for the quarter ended March 31, 2004 as compared to $.19 for the quarter ended March 31, 2003. The Company repaid $25 million in bank debt during the three months ended March 31, 2004. Respiratory therapy equipment and services revenues represented 86.6% of total revenue for the first quarter, versus 82.7% for the first quarter of last year. Durable medical equipment (DME) revenues represented 12.4% of total revenue in the first quarter, versus 15.6% for the same period last year. The Company views earnings from continuing operations before interest, income taxes, depreciation and amortization (EBITDA) as a commonly used analytic indicator within the health care industry, which serves as a measure of leverage capacity and debt service ability. These performance measures should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from this benchmark are significant components in understanding and assessing financial performance. EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Because EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, the benchmarks as presented may not be comparable to other similarly titled measures of other companies. EBITDA was $45.0 million for the quarter ended March 31, 2004, versus $36.7 million for the quarter ended March 31, 2003. Philip L. Carter, President and Chief Executive Officer, commented that, "First quarter revenues were down compared to 2003 as a result of planned discontinuance of unprofitable contracts and business lines as well as a reduction in reimbursement for Medicare Part B drugs." Mr. Carter added, "that the financial results represented a solid start to 2004 and prospects for quarterly growth through 2004 are good." About Rotech Healthcare Rotech Healthcare Inc. is a leading provider of home respiratory care and durable medical equipment and services to patients with breathing disorders such as chronic obstructive pulmonary diseases (COPD). The Company provides its equipment and services in 48 states through approximately 500 operating centers, located principally in non-urban markets. Rotech's local operating centers ensure that patients receive individualized care, while its nationwide coverage allows the Company to benefit from significant operating efficiencies. * * * As reported in the Troubled Company Reporter's December 16, 2003 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit, its 'BB' senior secured, and 'B+' subordinated debt ratings on home respiratory provider Rotech Healthcare Inc. on CreditWatch with negative implications. "The action reflects Orlando, Fla.-based Rotech's vulnerability to recently signed Medicare legislation that could hurt the company's reimbursement for both respiratory drugs and durable medical equipment," said Standard & Poor's credit analyst Jesse Juliano. SIGNATURE EYEWEAR: Auditors Remove Going Concern Qualification -------------------------------------------------------------- Signature Eyewear, Inc. designs, markets and distributes prescription eyeglass frames and sunglasses, primarily under exclusive licenses for Laura Ashley Eyewear, Eddie Bauer Eyewear, Hart Schaffner & Marx Eyewear, Nicole Miller Eyewear, bebe eyes and Dakota Smith, as well as its proprietary Signature line. The Company's best-selling product lines are Laura Ashley Eyewear and Eddie Bauer Eyewear. Frames in the Laura Ashley Eyewear line are feminine and classic, and are positioned in the medium to mid-high price range. The Eddie Bauer Eyewear collection offers men's and women's styles, and is positioned in the medium-price segment of the brand-name prescription eyewear market. Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear together accounted for 63% and 57% of the Company's net sales in fiscal 2002 and fiscal 2003, respectively. The Company distributes its products (1) to independent optical retailers in the United States, primarily through its national direct sales force and independent sales representatives, (2) internationally, primarily through exclusive distributors in foreign countries and a direct sales force in Western Europe; (3) through its own account managers to major optical retail chains, including EyeCare Centers of America, Cole Vision Corp. and its subsidiary Pearle Vision, LensCrafters, U.S. Vision and Dollond & Atchitson; and (4) through selected distributors in the United States. Net sales declined 26.3% in fiscal 2003 and 23.7% in fiscal 2002 due primarily to the general decline in the optical frame industry, the effects of the September 11, 2001 World Trade Center tragedy and the reluctance of retailers to purchase large inventories of the Company's products due to concerns about the Company's viability. In addition, net sales were adversely affected by the sale of the USA Optical product line in fiscal 2002. Net sales reflect gross sales less a reserve for product returns established by the Company. The Company's product returns for fiscal years 2001, 2002 and 2003 amounted to 23%, 22% and 22% of gross sales, respectively. Historically, returns have been higher from independent optical retailers in the United States and lower from optical retail chains and international customers. Gross profit was $15.9 million in fiscal 2003 compared to $17.7 million in fiscal 2002 and $21.9 million in fiscal 2001. These decreases were due primarily to lower net sales. The gross margin was 65.2% in fiscal 2003 compared to 53.3% in fiscal 2002 and 50.5% in fiscal 2001. The increase in fiscal 2003 was due to fewer close out sales and markdowns, a general firming of prices to independent optical retailers and the lack of discontinuation of any product lines in fiscal 2003. The increase in fiscal 2002 was due to fewer close out sales and lower nventory write-downs. The Company's long-term debt at October 31, 2003 included principally its credit facilities with HLIC and Bluebird and a commercial bank loan the proceeds of which were used to purchase its computer system and related equipment. In December 2003 the Company obtained an unsecured term loan in the amount of $350,000 from an unaffiliated third party. The loan bears interest at the rate of 3% per annum, is payable in monthly installments of $50,000 commencing April 2004 with the balance due and payable on October 29, 2004. In January 2004 the Company obtained an additional secured loan from HLIC in the amount of $153,000. This loan bears interest at a rate of 12% per annum and is due and payable on May 31, 2004. Of the Company's accounts payable at October 31, 2002 and October 31, 2003, $1.2 million and $1.1 million, respectively, were payable in foreign currency. To monitor risks associated with currency fluctuations, the Company on a weekly basis assesses the volatility of certain foreign currencies and reviews the amounts and expected payment dates of its purchase orders and accounts payable in those currencies. Based on those factors, the Company may from time to time mitigate some portion of that risk by purchasing forward commitments to deliver foreign currency to the Company. The Company held no forward commitments for foreign currencies at October 31, 2003. The Company's bad debt write-offs, net of recoveries, were $175,000, $403,000 and $33,000 in fiscal years 2001, 2002 and 2003, respectively. As part of the Company's management of its working capital, the Company performs most customer credit functions internally, including extensions of credit and collections. Historically, the Company has generated cash primarily through product sales in the ordinary course of business, its bank credit facility and sales of equity securities. Following the default on its bank credit facility in September 2000, and as a condition to numerous forbearances extended by its bank, the Company had to regularly reduce its aggregate borrowings under its bank credit facility, from $ 6.0 million at October 31, 2001 to $3.1 million when the facility was repaid in April 2003. This, coupled with declining sales and corresponding inability to raise equity capital, materially adversely affected the Company's liquidity and working capital. To address this problem, the Company reduced operating expenses through reduction in personnel and subletting office space, negotiated vendor discounts and deferred payments of trade payables, sold obsolete inventory at a deep discount, sold its USA Optical product line and completed a sale/license back of its Dakota Smith trademark and inventory. The recapitalization in April 2003 materially improved the Company's liquidity by replacing current obligations to its bank and a frame vendor with long-term indebtedness and through discounted payoffs of trade payables. At October 31, 2003, the Company had working capital of $0.6 million as compared to negative working capital of $9.4 million at October 31, 2002. Operating activities used $1.3 million during fiscal 2003, while investing activities provided $0.6 million, due to the $0.6 million gain on the sale of the Dakota Smith trademark and inventory. An additional $0.3 million was provided by financing activities. The Company believes that at least through fiscal 2004, assuming there are no unanticipated material adverse developments, no material decrease in revenues and continued compliance with its credit facilities, its cash flows from operations and through credit facilities will be sufficient to enable the Company to pay its debts and obligations as they mature. The Company will benefit in fiscal 2004 from expense reductions through reduced number of employees and other expenses undertaken in fiscal 2003 and the first quarter of fiscal 2004. However, the Company's current sources of funds are not sufficient to provide the working capital for material growth, and it would be required to obtain additional debt or equity financing to support such growth. Eddie Bauer Diversified Sales LLC, the licensor on the Eddie Bauer Eyewear license, and its parent Spiegel, Inc and other affiliates, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result, the licensor has the rights of a debtor under the Bankruptcy Code with respect to executory contracts such as the Eddie Bauer Eyewear license, including the right to assume or reject the license. The rejection of the license would have a material adverse affect on Signature Eyewear. The Company has received no indication or notice from the licensor regarding the licensor's intentions with respect to the license agreement. While the Company's auditors included a "going concern" paragraph in it's Auditor's Report to the Board of the Company in April 2002, no such paragraph was present in the most recent Auditors Report dated January 23, 2004, by the Company's independent auditing firm Singer, Lewak, Greenbaum & Goldstein LLP. SOLUTIA INC: Wants Lease Decision Deadline Moved to August 16 ------------------------------------------------------------- The Solutia, Inc. Debtors are currently lessees under more than 40 unexpired leases. The Debtors use the Unexpired Leases in connection with their business operations throughout the United States. Many of the Debtors' business offices are in spaces that are subject to the Unexpired Leases. The Unexpired Leases are thus valuable assets of the Debtors' estates and are integral to the continued operation of the Debtors' business. Though, upon review, the Debtors may determine that individual Unexpired Leases will be rejected at a later date. M. Natasha Labovitz, Esq., at Gibson, Dunn & Crutcher, LLP, in New York, relates that since the Petition Date, the Debtors have expended significant efforts and made considerable progress in developing an overall business plan, which was recently presented to the Creditors Committee, to serve as the basis for a Chapter 11 reorganization plan. As part of the next step in implementing the Business Plan, the Debtors are evaluating the Unexpired Leases to determine which Leases are beneficial to their business operations and which leases should be rejected to reduce costs. The Debtors have already rejected three Unexpired Leases and anticipate filing assumption and rejection motions in the near future. However, Ms. Labovitz informs the Court that the Debtors will not be able to finish the decision process with respect to all of the Unexpired Leases before the current deadline. Accordingly, the Debtors ask the Court to further extend the time within which they may assume or reject the Unexpired Leases through and including August 16, 2004, without prejudice to their ability to request a further extension of the time period. Ms. Labovitz assures the Court that the lessors under the Unexpired Leases will not be prejudiced by the extension of time the Debtors request because: (a) the Debtors have performed and will continue to perform in a timely manner their postpetition obligations under the Unexpired Leases; (b) no lessor will be damaged by the extension in a way that is not compensable under the Bankruptcy Code; and (c) any lessor may request the Court to fix an earlier date by which the Debtors must assume or reject its lease in accordance with Section 365(d)(4) of the Bankruptcy Code. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Company filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) STELCO INC: Releases Report on Restructuring's Economic Impact -------------------------------------------------------------- If Stelco Inc. (TSX:STE) fails to achieve a successful restructuring, the results could include the loss of thousands of jobs in Ontario and beyond, employment income in many regions, and tax revenue at all levels of government in Canada. A successful outcome, on the other hand, could pave the way for capital projects that would create additional jobs, employment income, and tax revenue for government programs and services. These are the findings of Estimating the Economic Impacts of Potential Major Changes at Stelco Inc., a study commissioned by the Company in the fall of 2003 and completed in March 2004. It was prepared by Dr. Stephen Tanny, the principal of Datametrics Consulting Inc. and a professor of mathematics at the University of Toronto. Dr. Tanny was assisted in the preparation of his report by the firm of Ernst & Young. According to the study, the closure of the Company's operations in Hamilton (including Stelwire Ltd.) and Haldimand County could cost 24,537 jobs (7,069 direct and 17,468 indirect) in those communities, elsewhere in Ontario, and across Canada. It would threaten $1.8885 billion ($520.8 million direct and $1.3 billion indirect) in salaries, wages, and other employment income. And it would reduce tax revenue by $1.083 billion at the municipal ($57.5 million), provincial ($510 million), and federal ($515.5 million) levels of government. Courtney Pratt, Stelco's President and Chief Executive Officer, said, "This study shows how Stelco's importance extends far beyond the communities in which it operates. It also demonstrates the widespread and devastating consequences that will result if the Company does not achieve a successful restructuring." On the other hand, the study concludes that a successful restructuring, and the resulting planned expenditure of $603 million on capital projects at the Hamilton and Lake Erie facilities, will create 8,574 person years of employment, generate $667.6 million in total employment income, and provide $477.4 million in tax revenue for government programs and services over a three-year period. Pratt added, "These findings show the importance and the benefits of a successful restructuring. We know the investments we need to make in order to improve our facilities, reduce the cost of production, and become a competitive steel producer. The study shows that the positive impact of these capital projects will be felt in many ways by many people in many parts of the country." Discussing the process going forward, Pratt noted, "That's why we hope that all interested groups will participate in the meaningful discussions that must begin soon. The process must proceed if we are to achieve the best available outcome for everyone who depends on Stelco in one way or another. Every group will have a role to play in the process and a say in the outcome. "No solution will be forced or imposed on anyone. The solution will emerge from everyone working together, or it will not emerge at all. The study released on April 29, 2004 indicates what can be gained - or lost - depending on the approach that various groups decide to take. We hope they will realize that their participation is the best way to preserve well-paying jobs for our employees, security for our retirees, plus economic and other benefits for the community." The economic impact study can be found on the Company's Web site at http://www.stelco.ca/ The study utilized Stelco data for 2002 and models from Statistics Canada and the University of Toronto. It examined the economic impact of three hypothetical outcomes: closure of the Hamilton facility and that portion of the Lake Erie operations that depend on its activity; closure of the entire integrated steel operations; and a successful restructuring. The study found that any of these outcomes would have a significant ripple effect not only in Hamilton and Haldimand County (home of the Lake Erie operations), but extending to the provincial and national levels as well. This impact would be felt in terms of employment (direct and indirect), employment income through direct and related economic activity, and taxes at each of the municipal (i.e., local property and business tax), provincial (i.e., personal income, corporate, retail sales and other taxes and levies) and federal (i.e., personal income, payroll and large corporation taxes, Employment Insurance premiums, GST, etc.) levels as a result of changing levels in employment and income under the three possible outcomes. Stelco Inc. is a large and diversified Canadian steel producer. It is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Stelco has a presence in six Canadian provinces and in two states of the United States. Consolidated net sales in 2002 were $2.8 billion. STILLWATER MINING: Delivers Positive 2004 First Quarter Results --------------------------------------------------------------- Stillwater Mining Company (NYSE: SWC) reported net income of $15.8 million or $0.17 per diluted share for the first quarter of 2004 on revenue of $100.7 million compared to a net loss of $1.8 million or $0.04 per diluted share on revenue of $64.2 million for the first quarter of 2003. This year's first quarter earnings benefited from commencement of sales of the palladium inventory received from Norilsk Nickel, higher PGM prices and increased volume in the Company's secondary business. First Quarter 2004 Highlights Compared to First Quarter 2003 * Net income of $15.8 million, compared to first quarter 2003 loss. * Combined average realized prices for mine production increase 18% to $484 per ounce. * Consolidated PGM production of 148,000 ounces; marginally better than 2003. * Stillwater mine production down 5% at 105,000 ounces; cash costs up 10%. * East Boulder mine production up 19% at 43,000 ounces; cash costs down 18%. * Deliveries of palladium inventory commenced under new two- year contracts. During the first quarter of 2004, the Company's mines produced approximately 148,000 ounces of palladium and platinum, which included 114,000 ounces of palladium and 34,000 ounces of platinum compared to approximately 146,000 ounces, which included 112,000 ounces of palladium and 34,000 ounces of platinum for the first quarter of 2003. PGM production at the Stillwater Mine was approximately 105,000 ounces, 5% less than it produced in the first quarter of 2003 while PGM production at the East Boulder Mine increased 19% to approximately 43,000 ounces in the first quarter of 2004, compared to approximately 36,000 ounces in the first quarter of 2003. The Company's realized prices per ounce for mine production in the first quarter 2004 were $378 for palladium, and $864 for platinum, compared to $363 and $580, respectively, in the first quarter of 2003. The Company's combined average realized price per ounce of mine production sold for the first quarter of 2004 was $484 compared to $411 last year. The combined average market price for the first quarter of 2004 was $378 compared to $336 last year. The Company's combined realized price per ounce exceeded the combined average market price for the first quarter of 2004 by $106 per ounce, and for the first quarter of 2003 by $75 per ounce, as a result of the benefit the Company received from floor prices for palladium under its long-term sales contracts, partially constrained by ceiling prices for platinum. Total cash costs on a consolidated basis for the first quarter of 2004 increased to $284 per ounce compared to $281 per ounce for the same period in 2003. The increase is a result of a $16 per ounce increase in royalties, taxes and insurance partially due to higher PGM prices offset by a $13 per ounce decrease in operating costs due to lower mining costs per ounce at the East Boulder Mine as a result of its higher production. Total consolidated production costs per ounce in the first quarter of 2004 increased $6 per ounce to $356 compared to the same period of 2003. The increase is due to increased total cash costs and higher depreciation and amortization costs of $3 per ounce. Results for the first quarter of 2004 include sales of 46,000 ounces of palladium out of the 877,000 ounces of inventory received from Norilsk Nickel, and 27,000 ounces of PGMs from secondary reprocessing of autocatalysts, including 8,000 ounces of palladium, 17,000 ounces of platinum and 2,000 ounces of rhodium all of which were sold at close to market prices. Corresponding sales from secondary reprocessing for the first quarter of 2003 were 2,000 ounces of PGMs, including 1,000 ounces of palladium, 800 ounces of platinum and 200 ounces of rhodium. Announcing the Company's results, Stillwater Chairman and Chief Executive Officer, Francis R. McAllister said, "Stillwater's improved capital structure and operations combined with improved markets and metal prices returned the Company to profitability in the First Quarter. Both the Stillwater Mine and the East Boulder Mine showed operating improvement from the fourth quarter of 2003. Total cash costs at the Stillwater Mine were higher in the first quarter of 2004 due to the effect of the higher metal prices on taxes and royalties. The East Boulder Mine had an excellent first quarter as it continues to improve on all metrics. It operated at 1,308 tons of ore per day for the first quarter of 2004 producing approximately 43,000 ounces of palladium and platinum, a 19% increase from last year's first quarter. Total cash costs decreased significantly at East Boulder from $372 per ounce in 2003's first quarter to $306 per ounce in this year's first quarter. Our goal is by year-end to have East Boulder operating at a 1,650 ton per day mining rate." McAllister continued, "Important developments are occurring in the palladium markets. We are seeing increased demand for palladium, as evidenced by the ease with which the Company could place the palladium it received in the Norilsk Nickel transaction. With the significant price differential between palladium and platinum, as well as palladium and gold, customers have switched to palladium for autocatalysts, and for dental and jewelry alloys. In fact, with the high price of platinum, it appears Chinese jewelry makers are buying palladium for producing palladium jewelry. We have also seen recent validation of market commentary in the Stillwater Annual Report that palladium will have a role in diesel emission control with the announcement from Umicore of Belgium regarding the use of palladium in diesel catalytic technology. Further we see increased demand for palladium in the important electronics industry with Yageo Corporation's, a major Taiwanese producer of resistor chips and multilayer ceramic capacitors (MLCC), announcement of increasing monthly production capacity of resistor chips to 14 billion units per month and MLCC production capacity to 2 billion units per month by June." Lastly McAllister reported, "The rebricking of the Company's smelting furnace, which we had announced earlier, in our year-end news release, is proceeding according to schedule. Mine production is being stockpiled and will be subsequently processed over the remainder of the year. Additionally, the stock purchase agreement provided that the parties intended to execute an agreement to buy from Norilsk Nickel at least one million ounces of palladium annually. The Company and Norilsk Nickel have recently decided to not pursue such an agreement at this time." Stillwater Mine At the Stillwater Mine PGM production in the first quarter of 2004 was 105,000 ounces compared to 110,000 ounces in the first quarter of 2003. During the quarter, total tons milled were 210,000 tons compared to 206,000 tons in the first quarter of 2003. The combined mill head grade in the first quarter of 2004 was 0.55 ounce per ton, compared to 0.59 ounce per ton for the same period last year. During the first quarter of 2004, the mining rate was approximately 2,132 tons of ore per day and the mine produced more tonnage from the lower-grade upper west area of the mine. During the latter half of the year mining will shift to produce more tonnage from the higher-grade offshaft area of the mine. Total cash costs per ounce for the first quarter of 2004 increased to $276 compared to $252 for the same period in 2003. The increase is a result of a $6 per ounce increase in operating costs and a $18 per ounce increase in royalties, taxes and insurance partially due to the higher commodity prices. Total production costs per ounce for the first quarter of 2004 increased to $341 compared to $311 for the same period in 2003 due to the higher cash costs and an increase in depreciation and amortization costs of $6 per ounce. For the year, the Company expects PGM production of approximately 430,000 ounces and total cash costs to be approximately $265 per ounce. During the first quarter of 2004 capital expenditures were $9.0 million of which $8.5 million were incurred in connection with capitalized mine development. East Boulder Mine During the first quarter of 2004, the East Boulder Mine produced 43,000 ounces of palladium and platinum from mining at an average of approximately 1,308 tons of ore per day compared to 36,000 ounces in the first quarter of 2003. A total of 119,000 tons were milled with a combined average grade of 0.40 ounce per ton in the first quarter of 2004. The mine continues to increase development and ramp up production to achieve its targeted operating level of 1,650 tons of ore per day by year-end. During the first quarter of 2004 capital expenditures were $4.1 million of which $3.8 million were incurred in connection with capitalized mine development. Total cash costs per ounce for the first quarter of 2004 decreased 18% to $306 compared to $372 for the same period in 2003. Total production costs per ounce for the first quarter of 2004 decreased $78 per ounce to $392 compared to $470 for the same period in 2003. The decreases are due to lower operating costs as a result of the higher production rate and lower depreciation and amortization costs of $12 per ounce. Finances Reported sales revenues were $100.7 million for the first quarter of 2004 compared with $64.2 million for the first quarter of 2003. The $36.5 million increase was driven by higher realized PGM prices overall, as well as by the sale of a portion of the 877,000 ounces of palladium inventory received from Norilsk Nickel as part of their acquisition in 2003 of 55.5% of the Company plus the inclusion of secondary processing revenues as a result of the new autocatalyst processing agreement. The sale of 46,000 ounces of the palladium inventory contributed $12 million to revenue for the quarter, while sales of 27,000 ounces from the secondary reprocessing provided $16 million of added revenue. Cash provided by operations before working capital changes for the quarter ended March 31, 2004 was $27.6 million compared to $9.2 million for the comparable period of 2003. This increase primarily reflects the cash benefit of the year-on-year earnings improvement. The three-month 2004 build in working capital of $12.5 million includes a $22.6 million increase in accounts receivable and an $8.6 million decrease in PGM inventory. The accounts receivable growth reflects initial sales under contracts for the 877,000 ounces received from Norilsk Nickel, a delayed receipt of a payment and higher overall prices for PGMs. The inventory decrease primarily reflects sales of the Norilsk Nickel ounces out of inventory. Net cash provided by operating activities was $15.1 million in the first quarter of 2004, compared to $23.3 million in the first quarter of last year. However, last year's first quarter cash from operations included a net draw of cash out of working capital of $14.1 million. Capital expenditures totaled $14.6 million in the first quarter of 2004, including $12.3 million incurred in connection with capitalized mine development activities, compared to a total of $14.5 million in the same period of 2003, which included $12.1 million capitalized mine development. During the first quarter of 2004, the Company made $0.4 million in principal payments on the Company's debt and as provided in the Company's credit agreement, offered $1.2 million of cash proceeds from sales of palladium received from Norilsk Nickel as a prepayment against the Term B facility. The offer was not accepted and so, according to the terms of the credit agreement, the net amount available under the Company's revolving credit facility has been reduced from $17.5 million to $16.3 million. Currently, the Company has $128.1 million outstanding under its term loan facilities and $7.5 million outstanding as letters of credit under the revolving credit facility. During the first quarter of 2004, as a result of lower production from its mine operations, the Company did not meet the rolling four-quarter average production covenant under the credit facility. The bank syndicate has granted a waiver of this covenant default that is effective for the first and second quarters of 2004. The Company believes it will be in compliance with its production covenant by the end of the third quarter of 2004. In addition, the Company currently is seeking to renegotiate, refinance or replace the credit facility and anticipates completion of this during the second quarter of 2004. The Company is in compliance with all other provisions of the credit facility as of March 31, 2004. At March 31, 2004, cash and cash equivalents were $47.6 million and $16.3 million was available to the Company under the revolving credit facility. The Company's net working capital at March 31, 2004 was $206.1 million, compared to $154.7 million at December 31, 2003. This increase reflects the higher accounts receivable balance, as discussed previously, and a reduction in the current portion of long-term debt, now that the Company has agreements in place to resell the palladium inventory received from Norilsk Nickel, which will be sold over a period of two years and not, as reflected at year-end, all in the current year. As a result, the prepayment offers against the long-term debt also will be spread over two years. The ratio of current assets to current liabilities was 3.9 at March 31, 2004, as compared to 2.4 at December 31, 2003. Metals Market During the first quarter of 2004, palladium averaged $242 per ounce trading as high as $288 per ounce and as low as $192 per ounce, while platinum traded as high as $917 per ounce and as low as $816 per ounce and averaged $867 per ounce. The combined average market price per ounce of palladium and platinum for the first quarter of 2004 was $378 compared to $336 for the first quarter of 2003. The PGM markets continued to strengthen in the first quarter of 2004, prices of palladium and platinum both hit their respective highs in late March. A weakening U.S. dollar and speculative buying helped push both metals higher. At quarter end, the palladium market got a boost from Umicore's announcement that it had developed a new technology that allowed palladium to be used instead of platinum in diesel catalytic technology. This important announcement pushed palladium to a high of $333 per ounce in mid- April. Stillwater Mining Company (S&P/BB+ Corporate Credit/Developing) is the only U.S. producer of palladium and platinum and is the largest primary producer of platinum group metals outside of South Africa. The Company's shares are traded on the New York Stock Exchange under the symbol SWC. The company's Web site is at http://www.stillwatermining.com/ STORAGE ENGINE: Amper Politziner Resigns as Auditors ---------------------------------------------------- On March 5, 2004, Amper, Politziner & Mattia, P.C., resigned as Storage Engine's independent auditors. The Company had engaged the services of Amper as its independent auditors effective December 30, 2003. Amper had not rendered any report on the Company's financial statements. Tinton Falls, New Jersey- based Storage Engine, Inc. -- http://www.storeengine.com/-- provides document imaging and fault- tolerant data storage solutions that store, protect and manage and replicate data in complex networks. The company filed for chapter 11 protection (Bankr. New Jersey Case No.: 04-16727) on March 1, 2004. Timothy P. Neumann, Esq. of Broege, Neumann, Fischer & Shaver represents the debtor in its restructuring efforts. When storage Engine filed for bankruptcy, it estimated assets and debts between $500,000 to $1 million TECNET: Hires Kessler & Collins as Bankruptcy Counsel ----------------------------------------------------- TECNET, Inc., asks the U.S. Bankruptcy Court for permission to employ Kessler & Collins, P.C., as its counsel in its chapter 11 restructuring. The Debtor tells the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, that the firm and its attorneys have extensive knowledge of its operations and vast experience in the area of bankruptcy law. Kessler & Collins is expected to: i) render legal advice with respect to the powers and duties of the Debtor that continues to operate its business and manage its properties as debtor in possession; ii) negotiate, prepare and file a plan or plans of reorganization and disclosure statements in connection with such plans, and otherwise promote the financial rehabilitation of the Debtor; iii) take all necessary action to protect and preserve the Debtor's estate, including the prosecution of actions against third parties on the Debtor's behalf under Chapter 5 of the Bankruptcy Code or applicable law, the defense of any actions commenced against the Debtor, negotiations concerning all litigation in which the Debtor is or becomes involved, and the evaluation and objection to claims filed against the estate; iv) prepare, on behalf of the Debtor, all necessary applications, motions, answers, orders, reports and papers in connection with the administration of the Debtor's estates, and appear on behalf of the Debtor at all Court hearings in connection with the Debtor's case; v) render legal advice and perform general legal services in connection with the foregoing; and vi) perform all other necessary legal services in connection with this chapter 11 case. The attorneys who are expected to provide services to the Debtor are: Professional Billing Rate ------------ ------------ Mark A. Weisbart $400 per hour James S. Brouner $300 per hour Other attorneys and support staff may provide services as well. The professional current hourly rates range from: Staff Designation Billing Rate ----------------- ------------ shareholder and counsel $250 to $300 per hour associates $120 to $225 per hour paralegals $65 to $120 per hour law clerks $50 to $120 per hour Headquartered in Garland, Texas, TECNET, Inc., provides telecommunication services, filed for chapter 11 protection on April 8, 2004 (Bankr. N.D. Tex. Case No. 04-34162). Mark A. Weisbart, Esq., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts of over $10 million and estimated debts of over $100 million. TRANSWESTERN PIPELINE: S&P Rates $550 Million Bank Loan at BB ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to natural gas pipeline company Transwestern Pipeline Co.'s (BB/Watch Pos/--) $550 million senior secured credit facility and placed the rating on CreditWatch with positive implications. The bank loan rating is equivalent to Transwestern's corporate credit rating based on the conclusion that the facility, comprising a $150 million four-year revolving credit facility and a $400 million five-year term loan, will eventually convert into an unsecured loan during its term. Consequently, Standard & Poor's did not assign a recovery rating to the bank loan. The collateral consists of substantially all of Transwestern's assets and equity. Houston, Texas-based Transwestern had about $460 million of debt as of Dec. 31, 2003. Proceeds from the new credit facility will be used to refinance all debt outstanding under Transwestern's $486 million senior secured credit facility, finance pipeline expansions, and for general corporate purposes. "The positive CreditWatch listing is based on the stand-alone credit profile of CrossCountry and the prospect that the company will emerge from under Enron's influence after the issues in the parent company's bankruptcy proceedings are closer to being resolved," said Standard & Poor's credit analyst Todd Shipman. "CrossCountry's business profile, comprising interests in several regulated pipeline companies, appears capable of supporting an investment-grade rating if the company is properly capitalized," added Mr. Shipman. Standard & Poor's also said that although CrossCountry will soon be an independent company, comfort that it is sufficiently disentangled from Enron depends on bankruptcy court approval of Enron's reorganization plan, which is expected by the end of 2004. Resolution of the CreditWatch leading to an investment-grade rating for Transwestern is likely close to or when that occurs. TRENCH ELECTRIC: S&P Places B/CCC+ Ratings on CreditWatch Positive ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B' long-term corporate credit and 'CCC+' subordinated debt ratings on high voltage component manufacturer, Trench Electric B.V., on CreditWatch with positive implications after it announced that Germany-based Siemens AG (AA-/Stable/A-1+) plans to acquire the company. "CVC Capital Partners, the company's majority shareholder and a leading European private equity firm, plans to sell 100% of the share capital in the parent, Trench Electric Holdings B.V. to Siemens for a total consideration of US$340 million," said Standard & Poor's credit analyst Michelle Aubin. The transaction is expected to be completed in the second half of 2004, subject to regulatory approval. On completion, Trench's US$151 million senior subordinated notes outstanding will be redeemed in full. The ratings on Trench will be withdrawn on closure of this transaction. UGS PLM: S&P Assigns B+ Corporate Debt Rating with Stable Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Plano, Texas-based UGS PLM Solutions Inc., and a 'B-' subordinated debt rating to the company's $550 million senior subordinated notes due 2012. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and a recovery rating of '3' to UGS PLM Solutions Inc.'s $625 million senior secured credit facility, reflecting expectations for meaningful (50%-80%) recovery of principal in a default or bankruptcy scenario. The secured credit facility consists of a $125 million revolving credit facility due 2010 and $500 million term loan facility due 2011. The outlook is stable. "The ratings reflect UGS PLM Solutions' high leverage, a narrow product focus relative to the overall software and services industry, and the company's limited track record operating as an independent company. These are somewhat offset by UGS PLM Solutions' entrenched customer relationships, recurring revenues stemming from long-term contracts, and good profitability and cash flow," said Standard & Poor's credit analyst Philip Schrank. UGS PLM Solutions is a provider of product lifecycle management (PLM) software and services to a diversified customer base that enable customers to reduce development and manufacturing costs, expedite time-to-market cycles, and enhance product quality and innovation. Although UGS PLM Solutions has a relatively narrow product portfolio and its markets remain competitive, the company has achieved a leading market position in a consolidated market. The company has performed well, even through a weak economy and the IT investment downturn, because of its low churn rate and high portion of professional services and maintenance, which represents more than 65% of its revenue base. UNITED AIRLINES: First Quarter Operating Loss Narrows to $211 Mil. ------------------------------------------------------------------ UAL Corporation (OTC Bulletin Board: UALAQ), the holding company whose primary subsidiary is United Airlines, reported its first- quarter 2004 financial results, which continue to demonstrate significant progress in the company's restructuring. UAL's first-quarter operating loss was $211 million, a strong improvement of $602 million over first-quarter results last year. This reflects the company's continuing efforts to restructure its business by lowering costs, increasing productivity and improving revenue performance. UAL reported a net loss of $459 million, or a loss per basic share of $4.17, which includes $143 million in special and reorganization items. The majority of reorganization charges resulted from non- cash items caused by the rejection of aircraft. Excluding the special and reorganization items, UAL's net loss for the first quarter totaled $316 million, or a loss per basic share of $2.89. "We are doing exactly what we said we would do to be able to succeed in the new revenue environment -- maintaining a relentless focus on reducing costs and improving efficiency," said Glenn Tilton, chairman, president and chief executive officer. "But, there is still a lot of work ahead of us. Like the rest of the industry, we are impacted by fuel prices. Unlike our peers, though, we have landmark, consensual six-year labor agreements that will differentiate us competitively in the years ahead." Tilton cited several of United's achievements in the first quarter: -- Cleared major issues on path to exit, including pension legislation that defers a portion of our 2004 and 2005 pension funding obligations to future years; a court ruling that our municipal bonds in Los Angeles, New York and San Francisco were pre-petition debt; and a recently approved transition agreement that ensures seamless service for United Express customers formerly served by Atlantic Coast Airlines; -- Increased passenger unit revenue 14% compared to last year, an improvement that outperformed the industry; -- Reduced mainline unit costs by 11%. Excluding fuel, unit costs dropped by 14%, an improvement that also outperformed the industry; -- Improved earnings from operations by $602 million over the same quarter a year ago; -- Introduced Ted's lower-fare service to leisure travel destinations across the country with a current daily total of about 120 flights to a number of leisure destinations from United's hubs in Denver, Washington Dulles, San Francisco and Los Angeles. For the month of March, Ted had 89 percent load factor and on-time arrivals :14 were at 88 percent. Booking growth on Ted flights continues to match or exceed capacity additions; -- Announced new international routes - United will begin Beijing-San Francisco and Chicago-Osaka service in June. United also announced this week that it will be the first U.S. commercial carrier to provide service to Vietnam, implementing daily San Francisco-Ho Chi Minh City service via Hong Kong as soon as the necessary regulatory procedures have been completed by the relevant Vietnamese and U.S. government agencies; and -- Introduced dynamic new aircraft livery and launched the "It's Time to Fly" print and TV advertising and brand campaign to further re-engage customers. Jake Brace, United's executive vice president and chief financial officer, said, "In the first quarter, United's financial performance was right on plan with the exception of fuel costs. Our revenue performance met our expectations in the seasonally weak first quarter, but, like the rest of the industry, United has been adversely impacted by historically high fuel prices. Looking ahead, we are encouraged by strong bookings as we move into the second and third quarters - our high demand season." Financial Results Continue Improvement The company recorded positive operating cash flow of over $4 million per day in the quarter. UAL ended the quarter with a strong cash balance of $2.6 billion, including $683 million in restricted cash. UAL's first-quarter 2004 operating revenues were $3.7 billion, up 17% compared to first quarter 2003. Load factor increased 3.6 points to 75.3% as traffic increased 5.8% on a 0.8% increase in capacity. In March, load factor reached a record 80.1%, up 6.4 points over March 2003. Passenger unit revenue was 14% higher on a 9% yield increase. Although year-over-year unit revenue improvement was aided by last year's weakness, our route and capacity adjustments, aggressive marketing and sales activities helped United outperform the industry by a wide margin. Total operating expenses for the quarter were $3.9 billion, down 1% from the year-ago quarter. Salaries and related costs decreased $287 million or 19% for the quarter. Productivity (available seat miles divided by manpower) was up 13% for the quarter year-over-year. Aircraft rent decreased $64 million or 32% compared to first quarter 2003. UAL is on track to achieve average annual cash savings of $900 million from the Section 1110 process. Average fuel price for the quarter was 107.4 cents per gallon, up 4% year- over-year. Aircraft maintenance, which includes primarily maintenance outsourcing and maintenance materials, increased $67 million or 57% year-over-year. The company had an effective tax rate of zero for the first quarter, which makes UAL's pre-tax loss the same as its net loss. Operational Performance Among the Best in UAL History The company continued to deliver outstanding operational performance for the first quarter 2004. Sixty-nine percent of United flights departed exactly on time during the quarter, nine percentage points better than the goal set by the company for its new employee incentive program. Customer satisfaction ratings were among the highest the company has received. Customer definite intent to repurchase and passenger ratings of reservations, check- in and comfort were at all-time highs for the quarter. Glenn Tilton said, "As we restructure our finances we are also changing the way we do business, shifting our company culture to concentrate on performance and accountability. United employees this week received their first payments as part of the company's Success Sharing program, which rewards employees for meeting the company's business objectives, including on-time performance and customer intent to repurchase. I want to congratulate all our employees on delivering a record for the quarter that we can be proud of and that demonstrates the kind of hard work and shared focus on our customers we need to compete effectively." Outlook Booked load factors for May & June are above last year. Domestic load factors are strong while international bookings and capacity are up significantly versus last year's depressed base. Capacity for 2004 is expected to be up about 5% compared to 2003. March Monthly Operating Report Includes Operating Profit UAL also filed with the United States Bankruptcy Court its Monthly Operating Report for March. The company posted a small operating profit for March. The cash balance increased $77 million during the month. In addition to meeting its DIP covenants for March 2004, the company made the first two of its five scheduled payments (of $60 million), to repay its DIP loan from Bank One in March and April. UNITED AIRLINES: Trade Creditors Sell Claims Exceeding $36 Million ------------------------------------------------------------------ Twenty-nine creditors sold their claims aggregating over $36 million to Stonehill Partners, Regen Capital, Itochu AirLease, Provident Bank, Debt Acquisition Company, and Diamond Lease (USA). Original Claimant Transferee Amount ----------------- ---------- ------ Aero Sky Debt Acquisition Co. $840 Aim Learning Group Debt Acquisition Co. 4,879 All American Paper Debt Acquisition Co. 978 All-Lock & Glass Service Debt Acquisition Co. 1,245 American Airporter Shuttle Debt Acquisition Co. 1,618 AmPro Debt Acquisition Co. 699 AP Enterprises Debt Acquisition Co. 1,660 AP Enterprises Debt Acquisition Co. 3,607 AT&T Regen Capital 5,320,149 Barnabey's Hotel Stonehill Partners 240,640 Berghoff Cafe Debt Acquisition Co. 3,021 Brody Chemical Debt Acquisition Co. 1,028 Capital Cup Coffee Debt Acquisition Co. 1,711 Choice Distribution Debt Acquisition Co. 1,567 Chuo Mitsui Trust Itochu AirLease 100 City Laundry & Cleaners Debt Acquisition Co. 2,383 Color-Imetry Debt Acquisition Co. 1,089 Colorado Steak Escape Debt Acquisition Co. 1,012 Concessions Management Debt Acquisition Co. 3,596 Dana Container Debt Acquisition Co. 1,200 DePaul University Debt Acquisition Co. 1,215 Diesel Injection Service Debt Acquisition Co. 2,368 Door to Door Airporter Debt Acquisition Co. 1,904 Earthwise Environmental Debt Acquisition Co. 2,252 Enterprise Oil Debt Acquisition Co. 2,869 European Bus & Truck Debt Acquisition Co. 2,637 Gerlick-Murphy Associates Stonehill Partners 32,376 The Bank of New York Provident Bank 6,862,330 U.S. Bank Diamond Lease (USA) 24,597,756 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. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000) US ONCOLOGY: Low-B Rated Cancer-Care Provider Releases Q1 Results ----------------------------------------------------------------- US Oncology, Inc. (Nasdaq: USON) reported results for the 2004 first quarter. The company recorded year-over-year increases in net operating revenue, earnings per share and net income for the first quarter 2004. US Oncology highlights for the first quarter of 2004 are detailed below: -- US Oncology's EBITDA(C) for the first quarter was $56.1 million, compared to $54.7 million for the fourth quarter of 2003 and $50.2 million in the first quarter of 2003. -- The company's percentage of Field EBITDA(C) for the first quarter was 33 percent, compared to its percentage of Field EBITDA of 34 percent for both the fourth quarter and first quarter of 2003. -- The company's affiliated practices' accounts receivable days outstanding were 47 at the end of the first quarter, compared to 46 at the end of 2003 and 50 at the end of the first quarter of 2003. -- 16.3 percent of US Oncology's first quarter revenue was generated by practices on the net revenue model as of the end of the first quarter. -- The company generated operating cash flow for the first quarter of 2004 of $43.5 million compared to $45.5 million for the fourth quarter of 2003. During the first quarter of 2003, operating cash flow was a net use of $1.1 million due to advance purchases of pharmaceuticals during the first quarter of 2003. As of April 26, 2004, US Oncology had approximately $183.0 million in cash and cash equivalents. -- The company reduced its corporate general and administrative expenses to $12.7 million for the first quarter of 2004, a decrease of 18.6 percent from the first quarter of 2003, as a result of a reduction in force during 2003 and other cost reduction measures. Medical Oncology Services First quarter medical oncology services net operating revenue was $562.7 million, a year-over-year increase of 17.1 percent and a decrease of 0.6 percent from the fourth quarter of 2003. The company's medical oncology services revenue during the first quarter of 2004 was $450.9 million, a year- over-year increase of 18.7 percent and an increase of 0.8 percent from the fourth quarter of 2003. Same practice medical oncology visits during the first quarter of 2004 increased by 0.6 percent over the same period in the prior year and decreased by 4.3 percent from the fourth quarter of 2003. The year-to-year increase is credited to growth in pharmaceutical revenue and the addition of medical oncologists, partially offset by the reduction in medical oncology visits from the fourth quarter. Pharmaceutical expenses as a percentage of net operating revenue increased to 46.7 percent for the first quarter of 2004, up from 43.0 percent for the first quarter of 2003. This increase is mainly attributable to pharmaceutical and service line revenue increasing as a percentage of total revenue. Medical oncology services income from operations during the first quarter of 2004 was $47.2 million, a decrease of 11.4 percent from the fourth quarter of 2003 and 0.2 percent increase over the first quarter of 2003. The decrease in income from operations compared to the fourth quarter of 2003 is attributable to the decrease in visits, as well as an increase in pharmaceutical costs as a result of the recognition by the company in the fourth quarter of certain performance based rebates. During the first quarter of 2004, the company affiliated with two practices comprising 3 physicians under its pharmaceutical service line model. In addition, since March 31, 2004, the company has affiliated with three practices comprising 8 physicians under the pharmaceutical service line model. Included in these affiliations during 2004 are the company's first market entries in Montana, Tennessee and Idaho. Cancer Center Services The Cancer Center Services segment of the company experienced growth in the first quarter. Net operating revenue for the first quarter of 2004 was $87.8 million, an increase of 10.8 percent over the first quarter of 2003 and 16.2 percent over the fourth quarter of 2003. Company revenue in the segment for the first quarter of 2004 was $61.0 million, an increase of 12.4 percent over the first quarter of 2003 and 11.2 percent over the fourth quarter of 2003. These increases were due to four additional cancer centers in operation at the end of the first quarter of 2003, as well as expansion of patient-care options, such as intensity modulated radiation therapy (IMRT), positron emission tomography (PET) and computerized tomography (CT), at many existing sites. For the first quarter of 2004, cancer center services segment EBITDA was $21.1 million, an increase of 22.0 percent over the first quarter of 2003 and 32.2 percent over the fourth quarter of 2003. Income from operations in the segment increased to $13.3 million for the first quarter of 2004, compared to $11.5 million for the first quarter of 2003 and $8.5 million for the fourth quarter of 2003. The increases in EBITDA and net income are attributable to increased revenues, exiting certain markets and increases in same facility treatments. For the first quarter of 2004, radiation treatments per day increased to 2,571 from the fourth quarter of 2003 treatments per day of 2,443, an increase of 5.2 percent. Radiation treatments per day for the first quarter of 2003 were 2,628. Same facility radiation treatments per day were 2,470 during the first quarter of 2004, a decrease of 0.8 percent from the first quarter of 2003. PET scans increased from 4,154 in the first quarter of 2003 to 6,581 in the first quarter of 2004, an increase of 58.4 percent. The company currently has 11 cancer centers and four PET systems in various stages of development for network practices. Update on Merger Transaction On March 20, 2004, US Oncology Holdings, Inc. (which was formerly known as Oiler Holding Corp.) and its wholly owned subsidiary, Oiler Acquisition Corp., entered into a merger agreement with US Oncology, Inc., pursuant to which Oiler Acquisition Corp. will be merged with and into US Oncology, Inc., with US Oncology, Inc. continuing as the surviving corporation. If the transaction is consummated, US Oncology, Inc. would become a private company owned by Holdings. Members of senior management of the company, including its Chairman and CEO, will continue as employees of the private entity, participate in the merger by purchasing equity securities in Holdings and be awarded equity securities in Holdings. Both Holdings and Oiler Acquisition Corp. are Delaware corporations that were formed by Welsh, Carson, Anderson & Stowe IX, L.P. for the purpose of completing the merger and related financing transactions. Currently, Welsh Carson directly owns approximately 14.5% of the company's outstanding common stock and, together with its co-investors and the directors and executive officers of US Oncology that participate in the merger, would own all the capital stock of Holdings when and if the merger is consummated. If the merger is completed, each issued and outstanding share of US Oncology common stock (other than shares owned by Welsh Carson, its co-investors and directors and executive officers of US Oncology that participate in the merger) will be converted into the right to receive $15.05 in cash, subject to the rights of dissenting stockholders who exercise and perfect their appraisal rights under Delaware law. Each outstanding option for US Oncology common stock will be canceled in exchange for (1) the excess, if any, of $15.05 over the per share exercise price of the option multiplied by (2) the number of shares of common stock subject to the option, net of any applicable withholding taxes. Outstanding rights to receive shares of common stock under existing delayed stock delivery agreements between US Oncology and certain physicians will be canceled in exchange for an amount in cash equal to (1) $15.05 multiplied by (2) the number of shares of common stock otherwise issuable under the delayed stock delivery agreements on the scheduled delivery dates, net of any applicable withholding taxes. US Oncology's Board of Directors approved the merger following the unanimous recommendation of a special committee composed of independent directors Boone Powell, Jr., Burton S. Schwartz, M.D. and Vicki H. Hitzhusen. The special committee and the Board received an opinion from Merrill Lynch & Co. as to the fairness, from a financial point of view, of the consideration to be received by US Oncology stockholders (other than Welsh Carson, its affiliates and members of US Oncology's board or management that participate in the merger) in the merger transaction. The closing of the merger is subject to various conditions contained in the merger agreement, including the approval by the holders of a majority of US Oncology's shares held by stockholders other than Welsh Carson, its co-investors and members of US Oncology's board or management that participate in the merger, in addition to majority stockholder approval statutorily required for a merger. Additional conditions include the closing of financing arrangements as set forth in bank commitment letters that have been received by Holdings, the tender of not less than a majority of the aggregate principal amount of US Oncology's outstanding 9 5/8% Senior Subordinated Notes due 2012, the expiration of the applicable waiting period under the Hart-Scott-Rodino Act and other customary conditions. As we have previously disclosed, several lawsuits naming the company and each of its directors as defendants have been filed in connection with the proposed merger. The company believes these suits are without merit and intends to vigorously defend itself. We have filed preliminary proxy materials with the SEC. Once the SEC has given clearance to these proxy materials, they will be sent to stockholders in connection with a special meeting called in connection with the merger. We have also filed under the Hart- Scott-Rodino Act. Depending on clearance of regulatory authorities and the satisfaction of other conditions precedent to the merger, we anticipate holding a meeting of stockholders to vote on the merger in late June or early July 2004. About US Oncology, Inc. US Oncology, headquartered in Houston, Texas, is America's premier cancer- care services company. The company provides comprehensive services to a network of affiliated practices comprising more than 875 affiliated physicians in over 470 sites, including 80 integrated cancer centers, in 32 states. US Oncology's mission is to enhance access to high-quality cancer care in America. The company's strategies to accomplish this mission include: (a) helping practices lower their pharmaceutical and administration costs, (b) providing the capital and expertise to expand and diversify into radiation oncology and diagnostic radiology, (c) providing sophisticated management services to enhance profitability, and (d) providing access to and managing clinical research trials. In addition, the company assists practices in negotiations with private payors, in implementing programs to enhance efficiencies with respect to drugs and in expanding service offerings such as positron emission tomography and intensity modulated radiation therapy. * * * As reported in the Troubled Company Reporter's March 24, 2004 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating, its 'BB+' senior secured rating, and its 'B+' subordinated debt rating on Houston, Texas-based cancer treatment service provider U.S. Oncology Inc. on CreditWatch with negative implications. "The action reflects Standard & Poor's belief that the company will significantly increase its debt leverage as part of its merger agreement with financial sponsor Welsh, Carson, Anderson & Stowe IX L.P. (WCAS)," said Standard & Poor's credit analyst Jesse Juliano. Standard & Poor's will resolve the CreditWatch listing as the financing details of the transaction and the prospects for its completion become more evident. VENTURE HOLDINGS: Debtor & Committee Sue Larry Winget for $300 Mil ------------------------------------------------------------------ Venture Holdings Company LLC, its debtor-affiliates and the company's Official Committee of Unsecured Creditors commenced a $300 million lawsuit against Larry J. Winget, Sr., the sole beneficiary of the Venture Holdings Trust (which owns all of the equity interests in Venture Holdings), some of his relatives other other entities owned or controlled by Mr. Winget. The Complaint asserts, among other things, that the Debtors entered into a series of related party transactions with various Winget-controlled affiliates and the Debtors received less than reasonably equivalent value in those pre-bankruptcy deals. The transactions, the plaintiffs argue, constitute classic preference payments and fraudulent transfers that should be unwound or set aside using the strong-arm powers available under chapter 5 of the Bankruptcy Code. The plaintiffs also say some of the debts the Winget-controlled entities claim due should be recharacterized as equity and that some of the Winget-related entities should be substantively consolidated. The Debtors and the Committee value their claims against the defendants at more than $300 million. Venture Holdings Company LLC is a worldwide, full-service supplier, systems integrator and manufacturer of interior and exterior plastic components, modules and systems used in North American, European and Japanese automotive industries. Venture filed for chapter 11 protection on March 28, 2003 (Bankr. E.D. Mich. Case No. 03-48949). Judy A. O'Neill, Esq., Laura J. Eisele, Esq., and David E. Barnes, Esq., at Dymena Gossett PLLC in Detroit represent the Company in its restructuring. WELLMAN INC: Reports Improved First Quarter 2004 Results -------------------------------------------------------- Wellman, Inc. (NYSE: WLM) announced its (1) First Quarter 2004 Results, (2) Historical Adjusted EBITDA and Post Financing Adjusted EBITDA, and (3) Factors Impacting 2004 Results. First Quarter 2004 Results Wellman reported a first quarter loss of $31.2 million, or $0.99 per diluted share, compared to the fourth quarter 2003 loss of $105.2 million, or $3.33 per diluted share. The overall first quarter 2004 results were an improvement over fourth quarter 2003 results. Net sales improved to $293.8 million from $273.9 million, an increase of approximately 7%. Gross Profit improved to $17.4 million from $10.6 million and the gross profit percentage improved to 5.9% from 3.9%. Operating Income (Loss) excluding Other Items improved to income of $2.9 million from a loss of $5.7 million. Tom Duff, Wellman's Chairman and Chief Executive Officer, stated, "NAFTA PET resin market conditions were extremely competitive in the second half of 2003, and our PET resin margins were at all time lows during the seasonally-weak fourth quarter. The results of our operations in the first quarter of 2004, compared to the fourth quarter of 2003, have improved as a result of improved PET resin margins, increased volumes in our fiber and resin businesses and reduced operating costs. We believe the results of our PET resins business will improve as industry capacity utilization in PET resins improves." Historical Adjusted EBITDA and Post Financing Adjusted EBITDA Keith Phillips, Wellman's Chief Financial Officer, commented, "We are pleased that we successfully completed major financings in February 2004 that significantly improved our capital structure. The financings simplify our capital structure, provide significant financial flexibility by extending substantially all of our debt maturities through at least 2009 and, we believe, provide us with the liquidity to finance our business plan for the next five years, including a low cost 300 million pound PET resins expansion at our Pearl River facility by early 2006. These financings changed our capital structure and these changes affect Adjusted EBITDA, overall debt, depreciation and interest expense. We have provided information on changes to Adjusted EBITDA as a result of the February financings ("Financing Adjustments") and have provided information to compare EBITDA on a comparable basis for the most recent five quarters ("Post Financing Adjusted EBITDA")." Wellman's assets and long-term debt increased because part of the financing included the purchase of PET resin assets located at our Palmetto Plant that were leased under a sale and leaseback transaction entered into in 1999, the purchase of accounts receivable previously sold under an asset securitization program and the prepayment of a raw material contract. Refinancing these contractual obligations also increased Adjusted EBITDA since the Company no longer has certain cash operating expenses associated with these obligations. Factors Impacting 2004 Results The Company expects its future earnings to be affected by the following major factors: -- Sales Volumes and Changes in Raw Material Margins -- Cash Operating Costs/Cost Reduction Programs -- Depreciation -- Financing Costs In the second half of 2003, raw material margins were at low levels. Margins in our PET resins business have improved from fourth quarter 2003 levels. In 2004, there have been announced selling price increases and increases in raw material costs in both our FRPG and PPG businesses. Wellman expects that PET resin demand will increase more than the increase in capacity over the next couple of years, leading to improved capacity utilization in the North American PET resins market and improved profitability. The Company has significant operating leverage; each penny per pound increase or decrease in the raw material margin for our US PET resin business changes operating income and cash flow by approximately $11 million per year. In 2003, Wellman announced cost reduction programs that would be implemented through 2005 that would reduce annual controllable costs by approximately $41-$46 million at the end of that period, compared to second quarter 2003 levels. Wellman is on target to achieve these results. Wellman reduced these controllable costs by $8 million in 2003 and expects to achieve an additional $27 million of savings in 2004. Approximately 80% of the severance costs associated with the headcount reductions were paid by the end of the first quarter 2004, leaving a $1.9 million liability that is expected to be paid during the remainder of 2004. The Company also expects future depreciation and amortization expense to increase as a result of acquiring certain assets in its recently completed financing. Specifically, Wellman will amortize the prepayment of the raw material contract over the remaining life of the contract (approximately 5 years) and will depreciate the reacquired PET resin equipment over its remaining expected useful life of 20 years. We expect depreciation and amortization will be approximately $19 million per quarter for the remainder of 2004. On March 31, 2004 the Company had $477 million in long term debt, net of cash. This was approximately $10 million lower than the comparable amount on February 10, 2004 when the Company completed its new financings. The Company expects its total interest cost to be slightly over $10 million per quarter for the remainder of 2004, which includes approximately $1 million of amortization of financing fees and original issue discount. Wellman, Inc. manufactures and markets high-quality polyester products, including PermaClear and EcoClear brand PET (polyethylene terephthalate) packaging resins and Fortrel brand polyester fibers. One of the world's largest PET plastic recyclers, Wellman utilizes a significant amount of recycled raw materials in its manufacturing operations. * * * As reported in the Troubled Company Reporter's February 6, 2004 edition, Standard & Poor's Ratings Services lowered its rating on Wellman Inc.'s proposed $185 million secured first-lien term loan due 2009 to 'B+' from 'BB-', following the company's indication that its pending financing plan was being revised to increase the size of the secured first-lien term loan to $185 million, from $125 million as originally proposed. At the same time, Standard & Poor's affirmed its other ratings on Shrewsbury, New Jersey-based Wellman, including the company's 'B+' corporate credit rating, which was lowered on Jan. 22, 2004, due to continued weaker-than-expected operating and financial performance. The outlook is negative. WELLS FARGO: Fitch Rates Classes B-4 & B-5 Certificates at BB/B --------------------------------------------------------------- Wells Fargo Mortgage Securities Corp.'s mortgage pass-through certificates, series 2004-4, are rated by Fitch Ratings as follows: --$340.6 million classes A-1 - A-9, A-PO, A-R, and A-LR senior certificates 'AAA'; --$4.6 million class B-1 'AA'; --$2.1 million class B-2 'A'; --$1.2 million class B-3 'BBB'; --$701,000 privately offered class B-4 'BB'; --$525,000 privately offered class B-5 'B'. The 'AAA' rating on the senior certificates reflects the 2.75% subordination provided by the 1.30% class B-1 certificates, 0.60% class B-2 certificates, 0.35% class B-3 certificates, 0.20% privately offered class B-4 certificates, privately offered 0.15% class B-5 certificates and 0.15% privately offered class B-6 certificates. Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral, the integrity of the legal and financial structures and the master servicing capabilities of Wells Fargo Bank Minnesota, N.A. (WFBM; rated 'RMS1' by Fitch). The mortgage pool consists of fully amortizing, one- to four- family, adjustable interest rate, first-lien mortgage loans, substantially all of which have original terms to maturity of approximately 30 years. The weighted average original loan to value ratio (OLTV) of the pool is approximately 66.72%. Approximately 2.19% of the mortgage loans have an OLTV greater than 80%. The weighted average coupon (WAC) of the mortgage loans in the pool is approximately 5.906%. The weighted average FICO is 730. The three states that represent the largest geographic concentrations are California (39.75%), New York (12.26%), and Virginia (4.77%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. All of the mortgage loans were originated in conformity with underwriting standards of Wells Fargo Home Mortgage, Inc. (WFHM). WFHM sold the loans to Wells Fargo Asset Securities Corporation (WFASC), a special purpose corporation, who deposited the loans into the trust. The trust issued the certificates in exchange for the mortgage loans. WFBM, an affiliate of WFHM, will act as master servicer and custodian, and Wachovia Bank, N.A. will act as trustee. An election will be made to treat the trust as two real estate mortgage investment conduits (REMICs) for federal income tax purposes. WHITING PETROLEUM: S&P Assigns B+ Rating to Corporate Debt ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to independent oil and gas exploration and production company Whiting Petroleum Corp. At the same time, Standard & Poor's assigned its 'B-' subordinated debt rating to Whiting's proposed $150 million senior subordinated notes due 2012. The outlook is positive. Denver, Colo.-based Whiting, which was spun off from Alliant Energy Corp. in November 2003, has about $182 million of debt outstanding, pro forma for the proposed transaction and recent acquisition of Equity Oil Co. The proceeds from the transaction will be used to repay outstanding debt under the company's bank credit facility, which will, in turn, provide liquidity for future growth initiatives such as property acquisitions. "The positive outlook on Whiting reflects the fact that a ratings upgrade could occur in the intermediate term as management demonstrates adherence to prudent financing of acquisitions and continues to improve credit measures," said Standard & Poor's credit analyst Kimberly Stokes. The ratings on Whiting reflect the company's participation in the intensely competitive and highly cyclical oil and gas industry, while facing the challenges of its small reserve base, above- average cost structure, and acquisitive growth strategy. These weaknesses are partially off set by Whiting's long-lived reserves, which in turn are expected to generate a significant inventory of development projects, coupled with the company's moderate financial policies. Whiting's 439 billion cubic feet equivalent reserve base is small compared with many of its exploration and production peers. The reserves are comprised of 53% natural gas, 75% proved developed, and have a reserve to production ratio of 11.8 years. WINSTAR COMMS: Chapter 7 Trustee Awarded $763,161 Fee Compensation ------------------------------------------------------------------ On November 12, 2003, the Court approved the expansion of the Carve-out under the Winstar Communications, Inc. Debtors' Second Amended and Restated Senior Secured Super-Priority DIP Credit Agreement dated as of July 6, 2001, to include, inter alia, these compensation for Christine C. Shubert, the Chapter 7 Trustee: -- 1% commission of the value of the 990,267 shares of Class B Common Stock of IDT Corporation received on December 19, 2001; -- 3% commission of the value of the 792,079 shares of IDT Class B Common Stock received on April 16, 2002; and -- 3% commission of all successful recoveries for the Debtors' estates for the duration of these cases. The DIP Lenders agreed that, for purposes of determining the Trustee's commission in respect of the IDT shares, the percentages will be applied to the market value of the IDT shares at the time of the distribution to the DIP Lenders. As of March 20, 2002, the Trustee held $55,749,675 on behalf of Winstar creditors. Since that date, the Trustee has collected $38,643,279 and disbursed $62,453,282.00 to Winstar creditors. In November 2003, the Court authorized the Trustee to make interim distributions to the DIP Lenders of the IDT Shares at approximately $32,000,000 in cash. Since the two groups of IDT Shares had values of $20,191,544 -- 990,267 shares at $20.39 per share -- and $16,150,491 -- 792,079 shares at $20.39 per share -- the Trustee's commission on the IDT Shares totals $686,430. Additionally, the Trustee has successfully recovered $3,956,686 for the Winstar creditors' benefit. In this regard, the Trustee is entitled to a 3% commission on a portion of those recoveries, which approximates $74,950. Accordingly, the total compensation due the Trustee for her commission on the IDT Shares and the successful recoveries since her last compensation is $761,606. The Trustee seeks payment of her compensation pursuant to the Carve-out Expansion Order. The Trustee believes that her interim compensation is appropriate in view of the fact that, of the aggregate amount of $94,486,299 she held since her appointment, she has made distribution totaling in excess of $62,546,627, including inter alia: -- $44,233,826 to the DIP Lenders on their superiority claim pursuant to the DIP Order, plus the IDT shares; -- $7,436,504 to the Chapter 11 administrative claimants covered by the Carve-out Expansion Order under the DIP Order; and -- $7,300,000 to the Chapter 7 professionals and employees pursuant to the Carve-out in connection with the administration of the Debtors' estates. The Trustee tells the Court that the amount of her interim compensation is reasonable and appropriate as she intends to make additional interim distributions to the Chapter 7 professionals authorized in the Carve-out Expansion Order as expenses in the administration of the Chapter 7 cases. After the distributions, the Trustee will still have in excess of $28,000,000 on hand for distribution to the creditors in due course. The Trustee maintains that her compensation is de minimis in light of the magnitude of the cases and the total amount of funds she is presently holding for the benefit of the Winstar creditors. She adds that her cumulative compensation is well within the limitations of Section 326 of the Bankruptcy Code as it represents less than 3% of the money disbursed to parties-in- interest since her appointment. Sheldon K. Rennie, Esq., Fox Rothschild, LLP, in Wilmington, Delaware, tells the Court that the Trustee has, indeed, performed necessary, valuable services, which have benefited the Debtors' estates. The Trustee's compensation is reasonable. According to Mr. Rennie, the Trustee has been instrumental in negotiations, which have culminated in settlements, the recovery and liquidation of assets of the Debtors' estates, which garnered cash for the estates in excess of $38,000,000 since her appointment. Moreover, the Trustee expended a considerable amount of time and incurred significant expense in connection with identifying, recovering and liquidating assets of the estates for the benefit of the Debtors' creditors. * * * Judge Rosenthal awards the Chapter 7 Trustee $761,606 as compensation plus $1,554 as reimbursement for her actual and necessary expenses. The Allowed Compensation will be paid out of the unrestricted funds held by the Trustee. (Winstar Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WOMEN FIRST: Files for Chapter 11 Protection in Delaware -------------------------------------------------------- Women First HealthCare, Inc., a specialty pharmaceutical company, announced that it filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. The voluntary petition was filed in the U.S. Bankruptcy Court for the District of Delaware. The Company also announced that it has entered into an agreement to sell its rights to the Company's Vaniqa (eflornithine hydrochloride) Cream product to SkinMedica, Inc. for a gross purchase price equal to $25 million, subject to specified purchase price adjustments. Completion of the sale of the Vaniqa assets is subject to Bankruptcy Court approval and SkinMedica's obtaining a satisfactory arrangement for supply of the Vaniqa product. The Company has reached an agreement, subject to Bankruptcy Court approval, for $3.0 million of debtor-in-possession financing to be provided by the holders of the Company's senior secured notes. The Company intends to use this financing to fund its efforts to seek an orderly sale of all of the Company's assets. The Company also has made an assignment for the benefit of creditors with respect to the Company's As We Change mail order catalog and Internet retail subsidiary. The Company does not expect that there will be any value available for distribution to the stockholders of Women First. The Company also announced that Edward F. Calesa has resigned as the Company's President, Chief Executive Officer and Chairman of the Board of Directors. Dr. Nathan Kase also resigned from the Board. The Board appointed Richard Vincent, Chief Financial Officer; Randi Crawford, Vice President; and Saundra Pelletier, Vice President, Pharmaceuticals, to fill vacancies on the Board, where they will serve with continuing Board member Patricia Nasshorn. The Company has received a notice of termination of the Supply Agreement between the Company and Bristol-Myers Squibb relating to supply of the Vaniqa Cream product on the basis of the Company's purported insolvency. out Vaniqa (eflornithine hydrochloride) Cream, 13.9% Vaniqa is indicated for the reduction of unwanted facial hair in women. Vaniqa has been shown to retard the rate of hair growth in non-clinical and clinical studies. Vaniqa has only been studied on the face and adjacent involved areas under the chin of affected individuals. Usage should be limited to these areas of involvement. In controlled trials, Vaniqa provided clinically meaningful and statistically significant improvement in the reduction of facial hair growth around the lips and under the chin for nearly 60% of women using Vaniqa. Vaniqa is not a hair remover but complements other current methods of hair removal such as electrolysis, shaving, depilatories, waxing, and tweezing. The patient should continue to use hair removal techniques as needed in conjunction with Vaniqa. Improvement in the condition may be noticed within four to eight weeks of starting therapy. Continued treatment may result in further improvement and is necessary to maintain beneficial effects. The condition may return to pre- treatment levels within eight weeks following discontinuation of treatment. The most frequent adverse events related to treatment with Vaniqar were skin-related adverse events. Women First HealthCare, Inc. Women First HealthCare Inc. is a San Diego-based specialty pharmaceutical company. Further information about Women First HealthCare can be found online at http://www.womenfirst.com/ WORLDCOM/MCI: Files Audited Financial Statements for 2003 --------------------------------------------------------- MCI, Inc. (MCIAV.PK) has filed its annual report on Form 10-K for the year ended December 31, 2003, as well as quarterly reports on Form 10-Q for the first three quarters of the fiscal year. The Company reported revenue for 2003 of $27.3 billion, compared to $32.2 billion in 2002. Results include revenue from Embratel Participacoes, S. A., a telecommunications provider in Brazil. When Embratel's revenue is excluded from both years, MCI's revenue declined 14.7 percent to $24.4 billion from $28.6 billion in 2002. MCI announced in March 2004 that it intends to sell its financial stake in Embratel. Operating income for 2003 totaled $908 million, compared to a loss of $4.2 billion in 2002. Excluding Embratel, operating income was $677 million in 2003, compared to an operating loss of $4.3 billion a year earlier. The operating loss in 2002 included impairment charges on property, plant and equipment of $4.6 billion, in addition to goodwill and intangible asset impairment charges of $400 million. Fresh Start Accounting On April 20, 2004, the Company emerged from bankruptcy. MCI implemented Fresh Start accounting to its financial statements effective December 31, 2003, in accordance with generally accepted accounting principles (GAAP). Accordingly, the company adjusted its balance sheet to a new basis of accounting. The most important mechanics of this process include adjusting asset values, liabilities and shareholders' equity for the effects of the Company's plan of reorganization. This process also impacted the 2003 income statement and resulted in a $22.1 billion gain on the line item "Reorganization Items, net." This gain is composed primarily of the discharge of debt obligations, offset partially by the amounts of new debt and stock issued to settle the claims of creditors, as well as other reorganization items. Among the reorganization expenses were $562 million of restructuring costs and $125 million of legal and accounting fees associated with the bankruptcy. Including these adjustments, net income was $22.2 billion in 2003, compared to a loss of $9.2 billion in 2002. MCI reported cash and equivalents of $6.2 billion and long term debt of $7.4 billion as of December 31, 2003, reflecting the issuance of new debt upon MCI's emergence from bankruptcy. Net of its Embratel interest, MCI's cash and debt on its December 31, 2003, balance sheet were $5.6 billion and $5.8 billion, respectively. "In 2003 we made tremendous strides in improving MCI's financial health and strengthening technological leadership," said Bob Blakely, executive vice president and Chief Financial Officer. "MCI is now current with our filings with the SEC, and we expect future filings to be made on a current basis." Operating Results In 2003, results continued to be affected by an adverse industry environment characterized by excess network capacity, rapid technological change and pricing pressure. In addition, the Company's bankruptcy filing and the events preceding it made it more difficult to attract new business customers and to expand existing business. Despite these challenges, MCI improved its leadership in service quality and maintained the highest levels of customer satisfaction and retention throughout the period. Business Markets revenue reflected the benefit of new products and services targeted toward global enterprise and government customers, offset by continuing price competition in the Small and Medium Business market. International revenue gains were driven by increased contributions from the Europe, Middle East and Africa region, and included the favorable effect of foreign currency exchange. Mass Markets' revenue decline was driven by the negative impact of "Do Not Call" legislation, as well as continuing wireless substitution and ongoing price competition. The reorganization process provided an opportunity to restructure and reduce operating expenses. The total of access costs, costs of services and products and selling, general and administrative expenses declined by 15 percent to $23.8 billion in 2003, compared to $28.1 billion in 2002, reflecting changes in volume as well as lower personnel costs. The change in operating expenses includes a 21 percent drop in selling, general and administrative expenses due to staffing reductions and improvements in bad debt expense that were partially offset by additional professional services fees incurred in support of MCI's financial restatement efforts. Restatement activities impacted depreciation and amortization expense. As a result of these adjustments, depreciation and amortization expense totaled $2.6 billion in 2003. About Worldcom/MCI Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI-- http://www.worldcom.com-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. On April 20, the company (WCOEQ, MCWEQ) formally emerged from U.S. Chapter 11 protection as MCI, Inc. This emergence signifies that MCI's plan of reorganization, confirmed on October 31, 2003, by the U. S. Bankruptcy Court for the Southern District of New York is now effective and the company has begun to distribute securities and cash to its creditors. (Worldcom Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM/MCI: Updates 2004 Earnings Guidance & Shares Tumble ------------------------------------------------------------ New shares issued by MCI, Inc. (MCIAV.PK) tumbled to $14.18 per share in trading Friday after the Reorganized Company as the market digested updated earnings guidance from the Company for 2004 following the filing of its 2003 Form 10-K. The changes in guidance, the Company explained, reflect the application of Fresh Start accounting, the anticipated sale of the Company's interest in Embratel Participacoes S.A., and continuing competitive industry fundamentals. MCI expects to generate revenue in 2004 at the lower end of previous guidance of $21 billion to $22 billion. In 2003, the Company reported revenue of $27.3 billion, which included $3.0 billion from Embratel. The Company announced in March 2004 its plans to sell its Embratel interest and, accordingly, will classify Embratel as a discontinued operation in the second quarter of 2004. Projections for 2004 discussed in this release exclude the operations of Embratel. MCI expects revenue from its global, high-end enterprise and government markets businesses to decline approximately 7 percent versus 2003, outperforming the overall Business Markets segment, which remains exposed to a challenging wholesale pricing environment. Overall Business Markets revenue is expected to decline 12 percent to 14 percent compared to 2003 revenue of $14.1 billion. International revenue is expected to decline 2 percent in 2004, reflecting stable volumes in the Europe, Middle East and Africa region (EMEA), new entries into emerging markets and an assumed favorable effect of foreign currency exchange. In 2003, International revenue (excluding Embratel) was $3.9 billion. MCI continues to operate the largest facilities-based network, with the highest number of Company-owned points-of-presence of any international carrier. The Company continues to expect Mass Markets revenue to decline 20 percent to 25 percent, reflecting the negative impact of Do Not Call legislation, increasing wireless substitution and ongoing pricing pressure. To offset these challenges, Mass Markets will continue to focus on U.S. local services and expects to launch a voice-over Internet protocol (VOIP) initiative this year. In 2003, Mass Markets revenue was $6.4 billion. "Our solid enterprise customer base, industry-leading IP strengths and ability to serve businesses globally positions us as a strong competitor in a fast-changing market," said Bob Blakely, MCI executive vice president and chief financial officer. "We believe our strong balance sheet and positive cash flow will allow us to weather the difficult environment that prevails in the telecommunications industry today." Operating income before depreciation, amortization and expenses associated with the early retirement of assets is estimated at $2.1 billion to $2.3 billion in 2004, compared to $3.0 billion in 2003, exclusive of Embratel, which contributed $552 million in 2003. The reduction reflects margin compression driven by continued pricing pressure and the anticipated unfavorable effect of regulatory changes on access costs. Selling, general and administrative expenses are expected to decline 8 percent to 10 percent in 2004. Depreciation and amortization expense will increase sharply to approximately $2.2 billion in 2004 from $1.7 billion contemplated in previous guidance, reflecting the adoption of Fresh Start accounting. In 2003, MCI recognized depreciation and amortization expense of $2.6 billion. The Company also anticipates that it will incur approximately $150 million to $200 million of non-cash expense related to the early retirement of assets. MCI expects to incur net interest expense of $415 million to $425 million in 2004. MCI estimated that costs associated with its reorganization will be approximately $100 million in 2004. Other non-operating costs are estimated at $50 million to $65 million. MCI projects a tax rate of approximately 39 percent for 2004. Although aggressive cost reductions and network consolidation initiatives are expected to return the Company to profitability in the second half of 2004, MCI currently expects to generate a net loss for the full year. The Company's cash position remains strong. On its December 31, 2003 balance sheet, the Company reported cash and equivalents of $6.2 billion, or $5.6 billion exclusive of Embratel. Of this total, approximately $2 billion will be disbursed to fulfill emergence claims. In 2004, cash flows provided by operating activities plus proceeds from the sale of non-core assets less capital expenditures is expected to exceed $800 million. The $2 billion expected to be disbursed for emergence claims is not included in the estimate of cash flows provided by operating activities. According to the assumptions included in the Company's plan of reorganization, MCI will issue approximately 326 million shares to meet reorganization claims. Capital Expenditures MCI has invested $38 billion in its network during the last six years, placing it in a strong position to benefit from the industry's move toward IP. Today, MCI's IP network can connect customers to more places, more directly than any other IP network in the world. Continuing to invest for the future remains a high priority, and the Company expects 2004 capital expenditures to equal approximately 5 percent of revenue. MCI is expanding its MPLS footprint that supports the convergence of voice and data, as well as investing in network security products and advanced applications features. Fresh Start Accounting On April 20, 2004 the Company emerged from bankruptcy. MCI implemented Fresh Start accounting to its financial statements effective December 31, 2003, in accordance with generally accepted accounting principles (GAAP). Accordingly, the company adjusted its balance sheet to a new basis of accounting. The most important mechanics of this process include adjusting assets values, liabilities and shareholders' equity for the effects of the Company's plan of reorganization. This process also impacted the 2003 income statement and resulted in a $22.1 billion gain on the line item "Reorganization Items, net." This gain is composed primarily of the discharge of debt obligations, offset partially by the amounts of new debt and stock issued to settle the claims of creditors, as well as other reorganization items. First Quarter Results MCI plans to release first quarter operating results on May 10, 2004. About Worldcom/MCI Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI-- http://www.worldcom.com-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. On April 20, the company (WCOEQ, MCWEQ) formally emerged from U.S. Chapter 11 protection as MCI, Inc. This emergence signifies that MCI's plan of reorganization, confirmed on October 31, 2003, by the U. S. Bankruptcy Court for the Southern District of New York is now effective and the company has begun to distribute securities and cash to its creditors. (Worldcom Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLD TRANSPORT: Strained Liquidity Triggers Going Concern Doubt ---------------------------------------------------------------- World Transport Authority, Inc. had a net loss of $144,676 and net cash used in operating activities of $52,006 for the six months ended December 31, 2003. In addition, the Company has a working capital deficit of $985,257 as of December 31, 2003 and is heavily reliant on proceeds from loans and sale of stock from/to officers and directors for its working capital needs. Management cannot determine whether the Company will become profitable, and whether operating activities will begin to generate cash. If operating activities continue to use substantial amounts of cash, the Company will need additional financing. These matters raise substantial doubt about the ability of the Company to continue as a going concern. Historically, the Company has funded its operations through sales of common stock to private investors and borrowings from a stockholder and directors. Management plans to obtain the funds needed to enable the Company to continue as a going concern through the private sales of common stock and sales of master licenses and manufacturing and distribution licenses. However, management cannot provide any assurance that the Company will be successful in consummating any private sales of common stock or generating sufficient license fee payments. If the Company is unable to raise additional capital or generate sales of licenses, it may be required to liquidate assets or take actions, which may not be favorable to the Company, in order to continue operations. As of December 31, 2003, the Company had $195 cash on hand and in the bank. The primary sources of cash and financing for the Company for the six months then ended were $52,637 from stock purchased by, or loans made from, directors of the Company. The primary uses of cash during the same period were $52,006 for the Company's operations. The Company currently maintains a positive cash balance through sales of common stock and loans from directors of the Company. ZIFF DAVIS: Balance Sheet Insolvent by $888MM at March 31, 2004 --------------------------------------------------------------- April 29, 2004 / PR Newswire Ziff Davis Holdings Inc., the ultimate parent company of Ziff Davis Media Inc., reported operating results for its first quarter ended March 31, 2004. The Company's consolidated revenues totaled $42.0 million, which were flat compared to revenues of $42.1 million for the first quarter ended March 31, 2003. The Company reported consolidated earnings before interest expense, provision for income taxes, depreciation, amortization and non-recurring items ("EBITDA") of $3.0 million for the quarter ended March 31, 2004, representing an 87.5% increase compared to consolidated EBITDA of $1.6 million for the prior year period. This increase in EBITDA occurred despite an investment of $2.1 million in funding start-up losses for new developing businesses launched in late 2003, which includes Sync magazine, 1UP.com and the Event Marketing Group. "The strength of our diversified business model continued to drive solid EBITDA gain over prior year's performance, particularly in the areas of our online brands, enterprise publications and conference business," said Robert F. Callahan, Chairman and CEO, Ziff Davis Media Inc. "Consolidated revenues were flat due to further softness in the videogame and consumer technology sectors, but we're pleased with the revenue increases of our new and developing products. We remain enthusiastic about market growth for the second half of 2004, as business and consumer spending forecasts continue to be positive. In the meantime, we'll continue to invest further in new products and services to create value for our customers, as well as find additional operating and cost efficiencies to improve our businesses." The Established Businesses segment is principally comprised of seven of the Company's publications. Revenue for the Established Businesses segment for the first quarter ended March 31, 2004 was $32.7 million, down $3.4 million or 9.4% compared to $36.1 million in the same period last year. The decrease was primarily due to the continued softness in the videogame and consumer technology magazine advertising markets which resulted in advertising page and average revenue per page declines for some of our publications. In addition, single copy circulation revenues in these two areas also continued to decline as consumer traffic and spending for mainline newsstands has remained sluggish for the past year or more. Lastly, the Company continues to see some further shifting of marketing budgets towards additional advertising on its publication- affiliated websites, and those advertising dollars are captured in the Developing Businesses segment. Cost of production for the Established Businesses segment for the first quarter ended March 31, 2004 was $12.3 million, down $2.2 million or 15.2%, compared to $14.5 million in the prior year period. The decrease primarily relates to manufacturing, paper and distribution cost savings achieved through the implementation of a number of new production and distribution initiatives across all of the Company's publications, the impact of more favorable third- party supplier contracts and certain revenue-variable cost savings. Selling, general and administrative (SG&A) expenses for the Established Businesses segment were $15.3 million for the first quarter ended March 31, 2004, down $1.6 million or 9.5% from $16.9 million in the same period last year. This decline was due to the Company's ongoing cost containment efforts and a change in the timing of certain magazine promotion and renewal campaigns which were executed during the first quarter of 2003 but will occur in different quarterly periods in 2004. Developing Businesses Segment (Ziff Davis Development Inc. and Ziff Davis Internet Inc.) The Developing Businesses segment is comprised of several emerging and new businesses in the magazine, Internet and event areas. The three magazines in this segment are Baseline and CIO Insight, which were launched in 2001, and Sync, the Company's new consumer lifestyle magazine focused on digital technology, which will debut in the summer of 2004. The Internet sites in this segment are primarily those affiliated with the Company's magazine brands but also include 1UP.com, the online destination for gaming enthusiasts, which was launched in October 2003, and ExtremeTech.com. This segment also includes the Company's Event Marketing Group and its two branded events: Business 4Site, a new strategic event program designed to meet the changing information needs of business technology decision-makers that will debut in June 2004; and DigitalLife, a new four-day special event that showcases the latest in digital technology, which will debut in October 2004. Revenue for the Developing Businesses segment for the first quarter ended March 31, 2004 was $9.3 million, compared to $6.0 million in the same period last year, reflecting a $3.3 million or 55.0% improvement. The increase is primarily related to higher advertising revenue for the Company's Internet operations and CIO Insight and substantially increased event revenues for Baseline and CIO Insight. The Internet Group's revenues increased by $2.1 million or 69.9% for the first quarter of 2004 versus the prior year period due to its continued strong growth in consumer traffic, page views and new advertisers. Cost of production for the Developing Businesses segment was $0.6 million for the first quarter ended March 31, 2004, down approximately $0.1 million from $0.7 million in the same prior year period. The decrease was primarily due to reduced Internet infrastructure and operating costs resulting from the Company's ongoing cost management initiatives and the impact of more favorable third-party supplier contracts. Selling, general and administrative (SG&A) expenses for the Developing Businesses segment were $10.7 million for the first quarter ended March 31, 2004, reflecting an increase of $2.3 million or 27.4% from $8.4 million in the same prior year period. The increase was primarily due to incremental costs associated with the Company's new business initiatives: Sync magazine; 1UP.com; and the Event Marketing Group, but also included increased Internet promotion, content and sales costs and higher Baseline and CIO Insight event costs due to higher sales volume in these areas. Improved Cash Position and Payment of Debt As of March 31, 2004, the Company had $45.4 million of cash and cash equivalents, representing a $1.9 million net use of cash in the first quarter 2004 versus the $47.3 million cash balance at December 31, 2003 and an $8.9 million net increase in cash versus the $36.5 million cash balance at March 31, 2003. The decrease versus December 31, 2003 primarily reflects the normal seasonal reduction in advertising billings and collections for the first quarter of 2004. The increase versus March 31, 2003 reflects the increased EBITDA and improved cash flow and working capital throughout 2003 and into first quarter 2004. Specifically, the Company continued improving its collection of advertising accounts receivable during the first quarter of 2004, which resulted in a decrease in Days Sales Outstanding ("DSO") at March 31, 2004 to 41 DSO compared to 45 DSO at March 31, 2003. In accordance with its Senior Credit Facility agreement, the Company made an "excess cash flow" payment for the year ended December 31, 2003 on April 14, 2004. This payment, representing 75.0% of "excess cash flow" as defined under the Senior Credit Facility, amounted to $6.4 million and along with our other scheduled principal payments of approximately $13.0 million payable within one year, is classified as Current portion of long- term debt on our unaudited Condensed Consolidated Balance Sheet at March 31, 2004. As a result of this payment, the Company's debt outstanding under the Senior Credit Facility has been reduced to $182.8 million as of April 14, 2004. At March 31, 2004, Ziff Davis' balance sheet shows a total stockholders' deficit of $888,057,000 compared to a deficit of $863,351,000 at December 31, 2003 Adoption of New Accounting Principle - SFAS 150 The Company adopted Statement of Financial Accounting Standards No. 150 "Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity" (SFAS 150), effective January 1, 2004. SFAS 150 requires the Company to record accrued dividends on mandatory, redeemable preferred stock as interest expense and to classify the preferred stock as a long- term liability on the Condensed Consolidated Balance Sheet. The adoption of this statement increased the Company's total liabilities by $757.4 million as of March 31, 2004 and increased the Company's consolidated interest expense by $17.8 million for the first quarter ended March 31, 2004. However, the adoption of SFAS 150 has no impact on the Company's cash flow, its Senior Credit Facility financial covenants or its ability to service its debt payments under the Senior Credit Facility in 2004. First Quarter Highlights and Milestones PC Magazine * Ranked #1 with a 56.1% market share * Launched the PC Magazine conference events program in 25 cities * Launched the PC Magazine SMB Summit * PCMag.com's unique visitor traffic increased 42.8% versus year ago Game Group * Ranked #1 with a 44.0% market share * Established a new section on 1UP.com titled "1UP Mobile Games" * Published a 2004 Game Guide for one of the leading retailers in the U.S. * Awarded the exclusive contract to publish the E3 Show Daily for 2004 Enterprise Group * The Enterprise Group increased its market share to 18.8% versus 17.3% year ago * eWEEK -- Completed the first quarter with a 19.5% market share versus 19.0% year ago -- Attracted hundreds of entries to its fourth annual Excellence Awards -- Launched eWEEK editorial events with a Security Summit, keynoted by Richard Clark, the former White House counter-terrorism advisor * Baseline -- Announced the Baseline 500, a special issue that will honor the top 500 publicly traded companies that deliver the best ROI for Enterprise IT projects implemented * CIO Insight -- Completed the first quarter with a 33.0% market share versus 26.8% year ago -- Announced its third annual Partners in Alignment Awards * Custom Conference Group -- Produced 52 conferences in the first quarter and tripled its revenue versus year ago Internet Group * Increased unique visitors by 48.3% for the first quarter versus prior year * Revenue increased 69.9% versus year ago * eSeminars(TM) held 27 events during the first quarter representing a 35.0% increase versus year ago * Commerce/business development revenue increased by 43.7% versus prior year Event Marketing Group * Business 4Site -- Signed Microsoft, IBM, HP, Intel, Toshiba and APC as exhibitors and sponsors -- Developed a strategic marketing partnership with The Los Angeles Times * DigitalLife -- Signed Best Buy as the official retail partner -- Developed a strategic marketing partnership with Cosmopolitan magazine -- New York City Mayor, Michael Bloomberg, officially endorsed DigitalLife and declared the third week in October 2004 "Digital Technology Week" in New York City Other * Launched the Serbian edition of PC Magazine * Increased licensing, rights and permissions revenue 12.3% in the first quarter versus year ago * Increased list rental revenue 22.9% in the first quarter versus prior year Business Outlook Reflecting the net impact of seasonally higher revenues offset by the Company's continued investment in its new developing business initiatives, the Company anticipates that consolidated EBITDA for the second quarter of 2004 for Ziff Davis Holdings Inc. will be in the range of $8.5 million to $9.5 million compared to $9.0 million of consolidated EBITDA for the second quarter ended June 30, 2003. The Company estimates that its investments in the three new developing business initiatives that were started in late 2003 will be in the range of $1.5 million to $2.0 million for the second quarter of 2004. About Ziff Davis Holdings Inc. Ziff Davis Holdings Inc. is the ultimate parent company of Ziff Davis Media Inc. Ziff Davis Media is a leading integrated media company focusing on the technology, videogame and consumer lifestyle markets. The Company is an information services provider of technology media including publications, websites, conferences, events, eSeminars, eNewsletters, custom publishing, list rentals, research and market intelligence. In the United States, the Company publishes 10 market-leading magazines including PC Magazine, Sync, eWEEK, CIO Insight, Baseline, Electronic Gaming Monthly, Computer Gaming World, Official U.S. PlayStation Magazine, Xbox Nation and GMR. The Company exports the power of its brands internationally, with publications in 41 countries and 20 languages. Ziff Davis leverages its content on the Internet with eight highly-targeted technology and gaming sites including PCMag.com, eWEEK.com, ExtremeTech.com and 1UP.com. The Company also produces highly-targeted b-to-b and consumer technology events including Business 4Site and DigitalLife. With its main headquarters and PC Magazine Labs based in New York, Ziff Davis Media also has offices and lab facilities in the San Francisco and Boston markets. Additional information is available at http://www.ziffdavis.com/ * Gordon Brothers Acquires Insolvency Firm SHM Smith Hodgkinson --------------------------------------------------------------- Gordon Brothers Group (GBG), LLC, through its European division, Gordon Brothers Limited, has acquired SHM Smith Hodgkinson Group (SHM), one of the United Kingdom's largest independent commercial and industrial fixed asset valuation and disposition firms. SHM, established in 1860, provides valuation and disposition services covering all business situations including insolvency and corporate recovery, plant and machinery and property appraisals for asset based lenders, valuations, litigation and insurance purposes, and corporate closure and asset dispositions. The firm has over 50 employees throughout the UK with offices in Manchester, Leeds, Birmingham and London, as well as offices in Bucharest, Belgrade, Bangkok and Kuala Lumpur. "This acquisition will enable Gordon Brothers, which has existing operations in the UK, Germany and France, to expand our product offerings and geographical reach to Eastern Europe and the Far East," stated Merv Weich, Chief Executive of GB Limited. "SHM's impeccable reputation in the appraisal and disposition of commercial and industrial assets and real estate made this a compelling transaction to Gordon Brothers." "There is a natural synergy between the companies with strategic benefits that will strengthen SHM's offerings," added Andrew Duckworth, Chief Executive of SHM. "It will enable the firm to continue to grow in the UK and encompass Gordon Brothers' core skills in the retail area. The firm will also be able to further develop its international appraisal and disposal business in Western Europe and the US." SHM directors Andrew Duckworth, Neil Duckworth and Richard Parkinson have all entered into long-term agreements to continue to manage and develop the business as part of Gordon Brothers Group. The business will be known as SHM Smith Hodgkinson, a Gordon Brothers Group Company. About SHM Smith Hodgkinson SHM Smith Hodgkinson -- http://www.shm-group.com/-- is the UK's leading independent commercial auctioneer, appraiser and valuer of business assets providing services to banks, asset-based lenders, corporate finance professionals, and insolvency practitioners. The firm regularly undertakes the disposition of company assets for insolvency, restructuring and corporate closures. SHM has held a number of high profile auctions including what is considered to be the world's largest when it sold the assets of the Amedeo Development Corporation in Brunei. SHM has four offices in the UK -- Manchester, Leeds, Birmingham and London -- and has a strong presence in South East Asia, Central and Eastern Europe with offices in Bucharest, Belgrade, Bangkok and Kuala Lumpur. About Gordon Brothers Group Founded in 1903, Gordon Brothers Group, LLC -- http://www.gordonbrothers.com/-- provides global financial, operating and advisory services to companies at times of growth or restructuring. Gordon Brothers delivers customized business solutions for companies that seek to maximize liquidity of under- performing inventory, real estate, commercial and industrial assets, accounts receivable and intellectual property; facilitates mergers and acquisitions; appraises assets and provides equity and debt capital. During the past three years, Gordon Brothers disposed of over $12 billion worth of inventory, mitigated $3 billion of leasehold obligations and conducted appraisals on over $100 billion of assets. In Europe the firm has undertaken projects for private equity firms such as Permira, major insolvency practitioners and retailers including BHS, Homebase, Littlewoods, What Everyone Wants, Castorama and Oviesse. * BOND PRICING: For the week of May 3 - 7, 2004 ----------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Comm 3.250% 05/01/21 55 Adelphia Comm 6.000% 02/15/06 55 American & Foreign Power 5.000% 03/01/30 69 Atlas Air 9.250% 04/15/08 50 Best Buy 0.684% 06/27/21 74 Burlington Northern 3.200% 01/01/45 54 Burlington Northern 3.800% 01/01/20 74 Calpine Corp. 7.750% 04/15/09 70 Calpine Corp. 7.875% 04/01/08 71 Calpine Corp. 8.500% 02/15/11 71 Calpine Corp. 8.625% 08/15/10 71 Coastal Corp. 7.420% 02/15/37 75 Comcast Corp. 2.000% 10/15/29 39 Cummins Engine 5.650% 03/01/98 74 Dan River 12.750% 04/15/09 26 Delta Air Lines 2.875% 02/18/24 68 Delta Air Lines 7.900% 12/15/09 58 Delta Air Lines 8.000% 06/03/23 66 Delta Air Lines 8.300% 12/15/29 51 Delta Air Lines 9.000% 05/15/16 55 Delta Air Lines 9.250% 03/15/22 55 Delta Air Lines 9.750% 05/15/21 56 Delta Air Lines 10.125% 05/15/10 60 Delta Air Lines 10.375% 02/01/11 62 Delta Air Lines 10.375% 12/15/22 58 Elwood Energy 8.159% 07/05/26 68 Exide Corp. 10.000% 04/15/05 20 Finova Group 7.500% 11/15/09 60 Foamex L.P. 9.875% 06/15/07 70 General Physics 6.000% 06/30/04 52 Goodyear Tire 7.000% 03/15/28 75 Inland Fiber 9.625% 11/15/07 52 Level 3 Communications 6.000% 09/15/09 52 Level 3 Communications 9.125% 05/01/08 72 Level 3 Communications 11.250% 03/15/10 73 Liberty Media 3.750% 02/15/30 68 Mirant Corp. 5.750% 07/15/07 59 Motorola Inc. 5.220% 10/01/97 73 National Steel Corp. 8.375% 08/01/06 5 Northern Pacific Railway 3.000% 01/01/47 52 Universal Health Services 0.426% 06/23/20 59 US West CAP 6.875% 07/15/28 75 ********* 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, 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 ***