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/raid1/www/Hosts/bankrupt/TCR_Public/040518.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, May 18, 2004, Vol. 8, No. 97 Headlines AFM HOSPITALITY: Expects to File Delayed Financial Reports by June AIR CANADA: Yohan Cherrier Wants Probe to Determine Liability AIR CANADA: Agrees with Financial Superintendent on Pension Relief AIR CANADA: Reaches Pact with Dispatchers on Cost Realignment AIR CANADA: Pilot Group Agrees to Labor Cost Realignment AIR CANADA: Machinists & Aero Workers Agree to Cost Realignment AMERICAN SKIING: Eliminates about $58.5 Mil. Of Real Estate Debt ANC RENTAL: Blank Rome And Fried Frank Withdraw As Counsel ANTARES PHARMA: $15MM Capital Infusion Strengthens Balance Sheet ATLAS COLD STORAGE: FY 2003 Net Loss Balloons to $40.3 Million BEACON POWER: Net Loss Drops to $2.1 Million in First Quarter 2004 BIOGAN INT'L: Files Plan and Disclosure Statement in Delaware BUDGET GROUP: Intends To Assume & Assign Veritas Contracts CHAMPIONSHIP AUTO: Unable to Beat Extended Report Filing Deadline CHOICE ONE: Stockholders' Deficit Widens to $684MM at March 31 COMDISCO: Releases Fiscal Second Quarter Financial Results CONCERT INDUSTRIES: Reports Improved First Quarter 2004 Results COUNSEL CORP: March 31 Shareholders' Deficit Climbs to $16.6 Mil. COVANTA ENERGY: Danielson Holding Launches Rights Offering DAVEL COMMS: Stockholders' Deficit Widens to $107.5MM at March 31 DISTRIBUTION DYNAMICS: Looks to Houlihan Lokey for Fin'l Advice EDISON FUNDING: Potential Tax Liability Prompts S&P's Neg. Outlook EL CAPITAN: Inks Joint Venture Agreement with US Canadian Minerals ENRON: Asks Court to Temporarily Stay Avoidance Action Discovery FARMLAND DAIRIES: Opts to Form Reorganization Plan with Creditors FEDERAL FORGE: Taps Donnelly Penman as Investment Bankers FEDERAL-MOGUL: Modifies Plan Classification & Treatment Of Claims FIVE STAR FOODS: Voluntary Chapter 11 Case Summary FLEMING COS: Scozio & Penn Want to End Facility Standby Agreements GENTEK: Court to Delay Closing of Chapter 11 Case Until Oct. 15 HARRY ORTLIP CO: Case Summary & 20 Largest Unsecured Creditors HEALTHSOUTH: 8.5% & 10.75% Noteholders Agree to Amend Indentures HEARTLAND PARTNERS: Looks for Buyer for Remaining Properties HEARTLAND PORK: Court Approves Sale of Hog Barn Assets to Sterling HOLLOWELL MERCANTILE: Case Summary & Largest Unsecured Creditors HORIZON PCS: Sprint Agrees to Buy Assets & Resolve Claim Disputes INDEPENDENCE I: S&P Junks $33.41MM (11.34%) of Collateral Assets INTEGRATED HEALTH: IHS Liquidating Wants More Time to File Report KEYSTONE CONSOLIDATED: Asks SEC to Modify Reporting Procedure KEYSTONE: Freezes Incentive Plan & Deregisters 100,000 Shares MAGELLAN: Asks Court to Nix 646 Employee Claims Totaling $4 Mil. MALAN REALTY: Q1 Net Assets in Liquidation Down to $27.4 Million MICROCELL TELECOMS: S&P Places B-/CCC+ Ratings On Watch Positive MIRANT CORP: U.S. Trustee Amends Creditors Committee Membership MORGAN STANLEY: S&P Rates 2004-HB1 Class D Notes at BB NATL ENERGY: King Street Urges Creditors to be Vigilant over Sales NETDRIVEN SOLUTIONS: March 31 Net Capital Deficit Drops to $221K NEW HEIGHTS: Asks Court to Approve $1 Million DIP Financing Pact NORTEL NETWORKS: Federal Grand Jury Subpoenas Documents NORTHWESTERN CORP: Montana Regulators Agree Not to Oppose Plan NQL DRILLING: Considers Sale & Taps Simmons to Evaluate Options NRG ENERGY: Remaining Debtors Ask To Extend Exclusive Periods ONLINE POWER: Files Chapter 11 Petition in Colorado Bankr. Court PARMALAT FINANZIARIA: Reports Key Actions in April 2004 PARMALAT USA: Creditor-Supported Farmland Plan in the Works PLAINS EXPLORATION: S&P Raises Corporate Credit Rating to BB PUBLICARD: Balance Sheet Insolvent by $3.4 Million at March 31 RURAL/METRO: March 31 Balance Sheet Upside Down by $209 Million SAFFRON FUND: Stockholders Back Liquidation & Dissolution Plan SENTRY TECHNOLOGY: Equity Deficit Widens to $195,000 at March 31 SIERRA HEALTH: S&P Affirms B+ Ratings & Shifts Outlook to Positive SLATER STEEL: Obtains Exemptions From Filing Financial Statements SOLUTIA INC: Proposes Key Employee Retention Program SPIEGEL GROUP: Retains Sheppard Mullin as Special Labor Counsel STILLWATER MINING CO: S&P Rates Proposed $180MM Bank Loan at BB STRUCTURED ASSET: Fitch Upgrades 11 Series 2001-C8 Classes TAHOE EDGELAKE: Case Summary & 20 Largest Unsecured Creditors TIMKEN CO: Plans to Close Canton Bearing Manufacturing Operations TRITON PCS: S&P Places Low-B Ratings on CreditWatch Negative TERPHANE HOLDING: S&P Rates $100MM Senior Secured Notes at B- THERMACLIME INC: S&P Rates Corporate & $90MM Senior Debt at B- TELUS CORP: Microcell Bid Prompts S&P's Negative Ratings Watch WEIRTON: IRS Presses for Payment of Employee Withholding Taxes WESTPOINT STEVENS: Wants To Assume Raymond Leasing Contracts WORLDCOM INC: Plans To Secure $1 Bil. Financing to Boost Liquidity * Judge Wolin Booted from Three of Five Delaware Asbestos Cases * Ryan Beck Bolsters Investment Research and Banking Capabilities * U.S. Sup. Ct. Says State-Backed Student Loans Can Be Discharged * Large Companies with Insolvent Balance Sheets ********* AFM HOSPITALITY: Expects to File Delayed Financial Reports by June ------------------------------------------------------------------ AFM Hospitality Corporation (TSX:AFM) announced that it will be late in filing its 2003 annual financial statements, management discussion and analysis, annual information form, in addition to the 2004 interim financial statements and management discussion and analysis for the quarter ended March 31, 2004. The 2003 statements are required to be filed no later than May 19 and the first quarter interim statements are required to be filed no later than May 17 under the new rules. Based on the work completed to- date, AFM anticipates that the 2003 annual statements will be filed in early-June and first quarter 2004 interim statements will be filed by late-June. In the event AFM does not file its annual statements by July 19 or its interim statements by July 17, the Securities Commission may impose an Issuer Cease Trade Order. AFM Hospitality intends to satisfy the provisions of the Alternative Information Guidelines during the period it remains in default of the financial statement requirement. AFM recently announced the appointment of James D. Meier as its new CFO on April 27, 2004. Mr. Meier, with the concurrence of Company's management and its board of directors, believes it is prudent to invest additional time to review AFM's books, records, and related disclosures in accordance with company guidelines and the new disclosure standards as AFM completed several complex transactions during 2003. AFM, in accordance with its expansion into the United States, will continue to focus on increasing participation in this broader market. As it moves towards geographic diversification, AFM recognizes the needs of shareholders in both Canada and the United States and is shifting its policies and procedures to be compliant with the strictest requirements of both jurisdictions. Additionally, as announced on March 1, 2004, AFM entered into an agreement to acquire the assets of Boutique Hotels & Resorts International(R) to a new subsidiary of AFM. A key strategic goal of AFM is to enhance its franchise and asset management leadership position with value-added acquisitions and industry alliances. AFM believes that achievement of this goal will help attract additional investment capital to facilitate future growth. About AFM Hospitality Corporation AFM Hospitality Corporation owns AFM Preferred Alliance Group Inc., AFM Asset Management Inc., AFM Hospitality (USA) Corporation, Northwest Lodging International (USA) Inc., Northwest Lodging International (Canada) Inc., AFM Asset Management Services, Inc., Trigild International, Inc., Special Asset Services, Inc. and Staffing Services International, Inc. It is the exclusive Canadian Master Franchisor for Aston, Best Inns, Hawthorn Suites, Howard Johnson, Knights Inn, La Quinta, Park Plaza, Park Inn, Traveller's Inn and Villager Lodge. AFM Hospitality Corporation operates or has open and/or executed franchise and management agreements with more than 300 hotels, restaurants and other nationally franchised service businesses throughout North America. The company's focus is to increase the number of hotels franchised by the respective brands, franchise new brands, build the portfolio of hotel management agreements, provide valuable resources and hospitality experience to help hotel owners grow their business, and to acquire other franchise businesses related to the hospitality industry, while making available property management services. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSX: AFM) and may be reached at http://www.afmcorp.com/ AIR CANADA: Yohan Cherrier Wants Probe to Determine Liability ------------------------------------------------------------- Yohan P. Cherrier asks the CCAA Court to determine whether certain organizations and individuals involved in Air Canada's insolvency proceedings are above or exempt of the Laws of Canada, and remove these individuals from their active role in the reorganization of Air Canada. Mr. Cherrier believes that these individuals and organizations have information with regard to the Air Canada fiasco, and bear some measure of scrutiny. Mr. Cherrier also wants a public inquiry initiated by methods and recourse of the Canadian judicial system to determine where the tens of billions of taxpayer dollars went in relation to a government handout given exclusively to "the then Crown Corporation known as 'Air Canada' in 1988 as part of the privatization of that Crown Corporation." Air Canada was forgiven CN$4,500,000,000 in debt. The airline was given 35 new Airbus A320s plus all of the other remaining aircraft, ground facilities and associated equipment. Mr. Cherrier is an Air Canada flight attendant and an elected member of the Airline Division of the Canadian Union of Public Employees Tabulating Committee. Mr. Cherrier worked as flight attendant for CP Air in 1986 before it merged with other airlines to form Canadian Airlines International, Inc., in 1988. CAIL merged with Air Canada in 1999. Mr. Cherrier also asks the Court to determine if a Quebec justice remains seized with a decision to limit the ownership of Air Canada by an individual or group of individuals or any organization, not more than 10% of the global size of Air Canada -- as was the case when CAIL, in association with its partners, made an offer to purchase Air Canada in 1999. Mr. Cherrier also wants the Court to appropriate the share in Air Canada that is due the employees of CAIL for their investments into the airline industry. This appropriation, Mr. Cherrier asserts, should be valued at not less than CN$200,000,000 and in all cases no less than, or of equal value to the new market value of the reorganized Air Canada. Upon learning that Mr. Justice Farley had earlier lifted the CCAA stay to allow the Federal Court of Appeal to release its judgment in the case Canadian Human Rights Commission v. Air Canada and Canadian Union of Public Employees (Airline Division), Mr. Cherrier wrote the Intake Officers of the Human Rights Commission to reopen his complaint file No. 20020463. In anticipation of possible decisions to be released by the Federal Court of Appeal, Mr. Cherrier also wrote Trinity Time Investments' Victor Li and Harold Gordon. Mr. Cherrier wanted to expose the wrong doings and collusion between Air Canada and the executives of the Air Canada component of CUPE. As a Tabulating Committee member of the Airline Division, Mr. Cherrier is privy to information with regard to dubious activity of an electoral nature on the part of the Air Canada component executives. According to Mr. Cherrier, this information had become common knowledge to the entire Tabulating Committee. 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. (Air Canada Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CANADA: Agrees with Financial Superintendent on Pension Relief ------------------------------------------------------------------ Air Canada announced that it has reached an agreement with the Office of the Superintendent of Financial Institutions in respect of pension funding relief. The agreement establishes a Protocol under which OSFI will recommend to the Federal government the adoption of a regulation which would allow Air Canada to extend the payment of pension plan solvency deficiencies over a period of 10 years as opposed to the current maximum of 5 years. The Protocol provides that the solvency deficiencies will be paid down in accordance with an agreed upon schedule of variable annual payments as opposed to the current regulatory requirement for equal annual payments. Air Canada has agreed to request court approval to remit approximately $34 million in special payments to certain pension plans immediately. In consideration of OSFI proposing a regulation allowing for the elimination of any deemed trust which may have arisen as a result of required solvency deficit payments prior to the execution of the Protocol, Air Canada and OSFI have agreed that upon Air Canada's emergence from CCAA proceedings, the pension plan trustees will receive subordinated secured promissory notes in the aggregate amount of $346.6 million with a second charge over the assets of Air Canada. The notes will be reduced as solvency payments are made in accordance with the agreed-upon schedule. The terms of the notes will not materially affect the aircraft and exit financing to be made available to Air Canada pursuant to the Global Restructuring Agreement with GECAS nor materially restrict any future secured or unsecured financing. The implementation of the Protocol is conditional upon (i) CCAA emergence on or prior to December 31, 2004; (ii) the amended regulations coming into effect, and (iii) consent being obtained from plan beneficiaries through the unions and court appointed representatives of non- unionized employees and retirees. The Protocol satisfies the funding relief condition in the Standby Purchase Agreement with Deutsche Bank, eliminating one of the two remaining conditions that must be satisfied by May 15, 2004. 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. AIR CANADA: Reaches Pact with Dispatchers on Cost Realignment ------------------------------------------------------------- Air Canada reaches tentative agreement with CALDA on labour cost realignment Air Canada announced that it has reached a tentative agreement on cost realignment with the Canadian Airline Dispatchers Association representing the mainline carrier's flight dispatchers. The agreement, subject to ratification by union membership, meets the target set for CALDA's share of the $200 million cost savings to be achieved in order to satisfy the labour condition in the Deutsche Bank Standby Purchase Agreement. "We commend CALDA's leadership for their contribution towards ensuring Air Canada's successful restructuring," said Rob Reid, Senior Vice President, Operations. Tentative agreements were reached earlier this morning with the Air Canada Pilots Association and the International Association of Aerospace Workers, and talks continue with Air Canada's other unions. 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. AIR CANADA: Pilot Group Agrees to Labor Cost Realignment -------------------------------------------------------- Air Canada announced that it has reached a tentative agreement on cost realignment with the Air Canada Pilots Association, representing approximately 3000 pilots at the mainline carrier. The agreement, subject to ratification by union membership, meets the target set for ACPA's share of the $200 million cost savings to be achieved in order to satisfy the labour condition in the Deutsche Bank Standby Purchase Agreement. The agreement, reached after two (2) weeks of intense negotiations, concludes a major part of the conditions set by Deutsche Bank. Representatives of ACPA are continuing to discuss other conditions of the Agreement including a provision dealing with the Associations grievances and claims arising from the restructuring. "Air Canada's pilots have repeatedly and significantly contributed throughout the CCAA process to ensure the airline's successful restructuring and we salute their Association leadership for their decisive action in reaching agreement on the cost savings necessary to keep our restructuring on track," said Rob Reid, Senior Vice President, Operations. "We have always said that Air Canada's pilots were committed to see our company emerge from the restructuring process as a stronger, more efficient airline, poised to be competitive in an increasingly difficult market," said Captain Don Johnson, President of the Air Canada Pilots Association. "This recent agreement further demonstrates this commitment". No further information on the tentative agreement will be released by ACPA until they inform the pilot membership of the details of the agreement. The agreement remains subject to a ratification vote by ACPA's membership expected to get underway in the near future. The Air Canada Pilots Association is Canada's largest professional pilots group, representing the 3300 pilots flying for Air Canada. 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. AIR CANADA: Machinists & Aero Workers Agree to Cost Realignment --------------------------------------------------------------- Air Canada announced that it has reached a tentative agreement on cost realignment with the International Association of Machinists and Aerospace Workers, representing 14,500 technical operations and airport ground service, finance, cargo and clerical personnel. The agreement, subject to ratification by union membership, meets the target set for the IAMAW's share of the $200 million cost savings to be achieved in order to satisfy the labour condition in the Deutsche Bank Standby Purchase Agreement. "I commend the IAMAW executive for their leadership role in ensuring our restructuring remains on track," said Paul Brotto, Executive Vice President, Planning and Cost Management. "Progress has been made and talks are ongoing with Air Canada's other unions." 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. AMERICAN SKIING: Eliminates about $58.5 Mil. Of Real Estate Debt ---------------------------------------------------------------- American Skiing Company announced the completion of its real estate debt restructuring. The Company's real estate development subsidiary, American Skiing Company Resort Properties, Inc., finalized the restructuring of its $73 million Real Estate Term Facility led by Fleet National Bank and eliminated approximately $58.5 million in real estate debt from the consolidated balance sheet of American Skiing Company. "The elimination of these defaults is critically important to the Company and allows us to continue to strengthen our relationship with our lenders and capital partners," said Betsy Wallace, Chief Financial Officer of American Skiing Company. "All of the debt of American Skiing Company and its subsidiaries, including our real estate subsidiaries, is in compliance with all applicable financial covenants. We are now solely focused on creating opportunities for the future." The restructuring creates a new partnership between the Company's Killington Resort and SP Land, an affiliate of Eiger, Inc., one of the lenders under the Real Estate Term Facility. "Completing this transaction allows for further design and planning associated with the Killington Village," said Allen Wilson, president of Killington Resort. "We believe that the new company has the real estate expertise and financial resources necessary to take the Village from a planning stage to fruition. This will enable Killington to maintain its position as one of the nation's premier destination resorts for decades to come." About American Skiing Company Headquartered in Park City, Utah, American Skiing Company (OTC: AESK) is one of the largest operators of alpine ski, snowboard and golf resorts in the United States. Its resorts include Killington and Mount Snow in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; Steamboat in Colorado; and The Canyons in Utah. More information is available on the Company's Web site, http://www.peaks.com/ ANC RENTAL: Blank Rome And Fried Frank Withdraw As Counsel ---------------------------------------------------------- Blank Rome, LLP, and Fried, Frank, Harris, Shriver & Jacobson, LLP, withdraw as the ANC Rental Corporation Debtors' counsel. The Debtors consented to the withdrawal and Gazes & Associates, LLP, and Stevens & Lee, PC, will serve as substitute counsel to represent the debtors' interests post-confirmation. Since the time the Plan was negotiated, all parties-in-interest sought to streamline the liquidation process and minimize the attorneys' fees and costs related to the liquidation. Consistent with that effort, it was contemplated that on confirmation, the Official Committee of Unsecured Creditors would be dissolved and its professionals released. It was also contemplated that neither Blank Rome nor Fried Frank would continue in their roles as counsel to the Debtors on a post-confirmation basis. Headquartered in Fort Lauderdale, Florida, ANC Rental Corporation, is the world's third-largest publicly traded car rental company. The Company filed for chapter 11 protection on November 13, 2001 (Bankr. Del. Case No. 01-11200). When the Company filed for protection from their creditors, they listed $6,497,541,000 in assets and $5,953,612,000 in liabilities. (ANC Rental Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945- 7000) ANTARES PHARMA: $15MM Capital Infusion Strengthens Balance Sheet ---------------------------------------------------------------- Antares Pharma, Inc. (OTC Bulletin Board: ANTR) reported that when comparing the first quarter 2003 to the first quarter 2004, revenues decreased 20% while gross margins increased from 44.8% to 52.4%, or 7.6 percentage points. In addition, operating expenses decreased 5%, net operating loss improved 5% and other expenses improved 93%. Net loss per share improved 73%, partially due to a decrease in net loss and partially due to a 144% increase in average common shares outstanding. The decrease in total revenue, year to year, resulted primarily from receiving a periodic licensing fee in 2003 as reflected in the following schedule of Reconciliation of Billings to Revenue. There was a significant improvement of 93% in other expense as the result of nonrecurring charges, in the first quarter of 2003, related to restructuring our convertible debentures. Five of our agreement partners contributed to revenues during this first quarter 2004. At the current stage of the company's development, quarterly revenues are entirely a function of the internal dynamics of these various agreements, may fluctuate from quarter to quarter and, therefore, do not necessarily reflect the progress we are making in working with all of our contracting partners to bring important new products to market. Dr. Roger G. Harrison, Chief Executive Officer and President of the Company stated, "We have had exceptional progress in this first quarter. Most importantly, we raised $15.1 million in additional capital, which gives us a much stronger financial position. In addition, we received two U.S. patents during this time period, one on our Easy Tec(TM) oral fast-melt technology and the other on our next generation needle-free device, named Valeo(TM), both of which further strengthen our intellectual property portfolio. We also announced that we completed a Phase I trial with oxybutynin gel, a topical treatment for overactive bladder, with very promising results; that we signed license and development agreements with ProSkelia and NPMG for topical gel products; and that our partner in Japan, JCR Pharmaceuticals Co. Ltd., has received approval for using our VISION(R) needle-free device to administer human growth hormone. These are all exciting milestones that serve to validate our business strategy and technology platforms." Balance Sheet Cash increased from $1.9 million to $15.1 million, total assets increased from $5.9 million to $19.1 million, and net shareholders' equity increased from $0.3 million to $13.5 million from December 31, 2003, to March 31, 2004, respectively, all due primarily to the $15.1 million private sale of common equity in February and March 2004. About Antares Pharma Antares Pharma develops specialty pharmaceutical products, including needle-free and mini-needle injector systems, transdermal gel technologies, and fast-melt oral tablet technology. These delivery systems are designed to improve both the efficiency of drug therapies and the patient's quality of life. The Company currently distributes its needle-free injector systems in more than 20 countries. In addition, Antares Pharma conducts research and development with transdermal gel products and currently has several products in clinical evaluation with partners in the U.S. and Europe. The Company is also conducting ongoing research to create new products that combine various elements of the Company's technology portfolio. Antares Pharma has established collaborations with 13 pharmaceutical and distribution companies for a number of indications and applications, including diabetes, growth disorders, obesity, female sexual dysfunction and other hormone therapy. Antares Pharma has corporate headquarters in Exton, Pennsylvania, with manufacturing and research facilities in Minneapolis, Minnesota, and research facilities in Basel, Switzerland. To learn more about Antares Pharma, visit its web site at http://www.antarespharma.com/ * * * In its Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission, Antares Pharma reports: "Effective July 1, 2003, the Company's securities were delisted from The Nasdaq SmallCap Market and began trading on the Over-the- Counter (OTC) Bulletin Board under the symbol "ANTR.OB," after the Nasdaq Listing Qualifications Panel determined to delist the Company's securities. "The delisting from The Nasdaq SmallCap Market constituted an event of default under the restructured 8% debentures. However, the Company obtained letters from the debenture holders in which they agreed to forbear from exercising their rights and remedies with respect to such event of default, indicating they did not intend to accelerate the payment and other obligations of the Company under the debentures. The debenture holders reserved the right at any time to discontinue the forbearance and, among other things, to accelerate the payment and other obligations of the Company under the 8% debentures. If the debenture holders had decided to discontinue their forbearance, the debentures would have become due and payable at 130% of the outstanding principal and accrued interest. Because the debenture holders retained the right to discontinue the forbearance and this option was outside the control of the Company, the Company was required to record an expense and a liability of $508,123 for the 30% penalty in future periods until the debentures were converted to common stock, at which time the liability was removed and offset against the loss on conversions of debt to equity. "On September 12, 2003, the holders of the Company's 8% Senior Secured Convertible Debentures and Amended and Restated 8% Senior Secured Convertible Debentures exchanged the outstanding $1,218,743 aggregate principal and accrued interest of the Debentures for 243,749 shares of the Company's Series D Convertible Preferred Stock. Each share of Series D Preferred is currently convertible into ten shares of the Company's Common Stock, resulting in an aggregate of 2,437,490 shares of Common Stock issuable upon conversion of the Series D Preferred. As a result, the Series D Preferred is convertible into the same number of shares of Common Stock as were the Debentures. In connection with the exchange of the Debentures for the Series D Preferred, the holders of the Debentures executed lien release letters terminating the security interest they held in the Company's assets. As consideration for the release of the security interest, the Company adjusted the exercise price of certain warrants issued to the holders of the Debentures on January 31, 2003 from $0.55 per share to $0.40 per share. These warrants are exercisable for an aggregate of 2,932,500 shares of Common Stock and are redeemable at the option of the Company upon the achievement of certain milestones set forth in the warrants. In connection with the exchange of the Debentures for the Series D Preferred and the reduction in the warrant exercise price, the Company recognized a loss on conversion of $6,017,346 during the quarter ended September 30, 2003. The loss consists of the fair value of the Series D Preferred plus the increase in fair value of the warrants due to the reduction in the exercise price, less the carrying value of the Debentures. The carrying value of the Debentures included the aggregate principal and accrued interest less unamortized discount and premium. "In February and March 2004 the Company received net proceeds of $13,853,400 in three private placements of its common stock. A total of 15,120,000 shares of common stock were sold at a price of $1.00 per share. The Company also issued five-year warrants to purchase an aggregate of 5,039,994 shares of common stock at an exercise price of $1.25 per share. "On December 30, 2003, when the availability of equity funds was unknown, the Company offered a 30% discount in the exercise price to holders of warrants with an exercise price of under $1.00. This offer expired on March 1, 2004, at which time the Company received proceeds of $821,100 from the exercise of warrants for 2,932,500 shares of common stock. "As a result of the debt to equity conversions in 2003 reducing future cash obligations and the private placement proceeds received in 2003 and 2004, management believes the Company is financially prepared to support operations until the Company achieves profitability and is able to generate its own working capital." ATLAS COLD STORAGE: FY 2003 Net Loss Balloons to $40.3 Million -------------------------------------------------------------- Atlas Cold Storage Income Trust announced financial results for the year ended December 31, 2003 and for the first quarter ended March 31, 2004. First Quarter 2004 Revenues declined 8% to $110.9 million from $120 million in the same period a year earlier, principally due to the strengthening of the Canadian dollar relative to the U.S. dollar. Earnings before property lease rental, interest, depreciation, amortization, write-downs and income taxes (EBITDAR) was $8.2 million versus $20.1 million in 2003. However, the quarter ending March 31 marks Atlas' third consecutive quarter of growth in EBITDAR before unusual professional fees. During the quarter, pre-tax earnings were negatively affected by about $6.6 million of unusual professional fees and $1.9 million related to the increase in the value of the Canadian dollar. Including discontinued operations, the net loss in the first quarter was $5.3 million, compared with a net profit of $6.2 million in the corresponding period last year. Atlas has not yet utilized the $19.7 million line of credit made available under the Interim Agreement with its lenders. The full amount of this line remains available to Atlas under the terms of the agreement with our lenders. The distributable cash deficit from continuing operations was $0.4 million compared with positive cash generated in the corresponding 2003 period of $12.4 million. No distribution was made for the current quarter, while the Trust distributed $15.3 million or $0.25 per unit for the first quarter of 2003. "Our results in the first quarter do not reflect the Trust's ability to generate cash going forward," said David Williamson, President and CEO. "In particular, our earnings have been affected by costs directly related to a comprehensive process designed to re-establish the integrity of Atlas' governance and financial reporting processes. These are essential elements in allowing the Trust to move forward," said Mr. Williamson. "While we still have a number of hurdles ahead, Atlas can now focus on reducing these unusual expenses and pursuing the operational improvements we believe are available." "We continue to make progress in our efforts to restore investor confidence in Atlas," said Peter Dey, Chairman. "As planned, a new slate of trustees and directors will soon be proposed to unitholders. We are continuing discussions with our advisors, RBC Capital Markets, to effect a recapitalization of the Trust. With the appointment of David Williamson as President and CEO, and the release of the year end and first quarter results, the Trust is moving closer to where senior management and the board can focus more directly on operations and performance and less on extraordinary issues." Fiscal 2003 Revenues rose 84% to $489.9 million compared to 2002, while EBITDAR declined 1% to $60.6 million. The increase in revenues was primarily attributable to acquisitions completed in 2002. During the year, earnings were negatively affected by $7.2 million in costs associated with the investigation and restatement of Atlas' financial statements and $7.5 million related to the increase in the Canadian dollar. After adjusting for these two items, EBITDAR in 2003 was $75.3 million, up 23% from the prior year. The net loss in 2003, after tax recoveries and losses from discontinued items, was $40.3 million in 2003 compared to a net loss of $18.4 million in 2002. A significant cost item in both years was the write-down of goodwill, which amounted to $39.3 million in 2003 and $32.2 million in 2002. Distributable cash from continuing operations was $21.8 million in 2003 compared with $37.8 million in 2002. The Trust has not paid cash distributions since the second quarter of 2003. The timing and amount of any future distributions will depend upon, among other factors, the successful completion of the recapitalization and the Trust's financial condition, results of operations and capital requirements. Atlas Cold Storage is Canada's largest and North America's second largest integrated temperature-controlled distribution network. Its trust units and convertible debentures are listed on the Toronto Stock Exchange. * * * As reported in the Troubled Company Reporter's February 4, 2004 edition, Atlas is in the process of attempting to negotiate an agreement with its lenders under the Credit Agreement whereby the lenders will deal with the existing defaults under the Credit Agreement. The agreement being sought by Atlas will continue the cap on availability at amounts presently outstanding and impose additional reporting, financial and other covenants on Atlas. The agreement will also provide the terms upon which the credit facilities will remain in place until their scheduled maturity on July 24, 2004. The principal terms of the agreement are subject to continuing negotiation and it is not certain that an agreement will be reached. The failure to obtain such an agreement may have a material adverse impact on the Trust's financial position, results of operations and cash flows. BEACON POWER: Net Loss Drops to $2.1 Million in First Quarter 2004 ------------------------------------------------------------------ Beacon Power Corporation (Nasdaq: BCON), a development stage company that designs, develops, configures and offers for sale, sustainable energy storage and power conversion systems that provide highly reliable, high-quality, environmentally friendly, uninterruptible electric power, announced that it has filed its quarterly report on Form 10Q its financial results for the first quarter ended March 31, 2004 and an amended 2003 Form 10-K on Form 10-K/A with the Securities and Exchange Commission. For the first quarter of 2004, the Company reported revenue of $57,408 and a net loss of $2.1 million, or ($0.05) per share, compared with a net loss in the first quarter of 2003 of $2.2 million, or ($0.05) per share. During the first quarter of 2004, the Company incurred costs of $1.0 million in R&D, $1.1 million in SG&A and recorded depreciation of $46,587. At March 31, 2004 the Company had $7.1 million in cash and cash equivalents. The Company's working capital was $7.1 million. The Company also filed a Form 10-K/A to reflect accounting adjustments to its balance sheet. The balance sheets for the years ending December 31, 2003, 2002 and 2001 were adjusted. The adjustments did not affect the net losses reported on the Consolidated Statement of Operations and did not have a material affect on the balance sheet as a whole. At March 31, 2004, Beacon Power Corporation's balance sheet shows a decrease in stockholders' equity to $7,919,380 as compared to the $9,692,006 equity reported at December 31, 2003. "We are very pleased to report revenue for the first time on sales of our Smart Power M5 power conversion systems. We are optimistic about the continued and increasing sales prospects of this product as we continue our installer certification program along with expanded sales and marketing efforts," said Bill Capp, president and CEO. "We are also encouraged by the consistent record of trouble free installations and by repeat orders from distributors. "In addition to our photovoltaic products, we are excited by the positive reaction we are receiving to the Smart Energy Matrix product opportunity. Beacon Power recently became a member of the PJM Regional Transmission Organization as a step towards providing regulation services. Regulation services are critical to the stable operation of the North American electrical grid, and reached a record high market price in 2003. We believe that the Smart Energy Matrix, with its low operating costs and uniquely fast response can become an important participant in this critical and growing market." About Beacon Power Corporation Beacon Power Corporation designs and develops sustainable energy storage and power conversion solutions that provide reliable electric power for the renewable energy, telecommunications, distributed generation and UPS markets. Beacon's latest product is the Smart Power M5, a 5-kilowatt power conversion system for grid- connect solar power applications. The Smart Power M5 is a UL- approved, "all-in-one" power conversion system incorporating multiple high-performance components in one unit that delivers instantaneous power in the event of a grid outage. Beacon is also known for its advanced flywheel-based Smart Energy systems, designed to provide reliable, environmentally friendly power quality solutions for electric utility transmission and distribution and other applications. For more information, go to http://www.beaconpower.com/ * * * As reported in the Troubled Company Reporter's April 1, 2004 edition, Beacon states that while it had cash and cash equivalents of approximately $9.3 million at December 31, 2003, it continues to incur losses. Based on the Company's rate of expenditure of cash, and the additional expenditures expected in support of its business plan, the Company will require additional financing in early 2005 to continue as a going concern. Because there is no certainty of Beacon successfully completing the required financing, the Company's independent auditors inserted an explanatory paragraph related to a going concern uncertainty into the Company's most recent Form 10K. The Company is pursuing an equity investment to alleviate these concerns. "We have taken significant actions to reduce our cash expenditures while maintaining our technical capabilities and focused on identifying market opportunities. These efforts have resulted in the introduction of our Smart Power M5 inverter system and market interest in our Smart Energy Matrix flywheel systems for frequency regulation of the power grid," said Bill Capp, president and CEO of Beacon Power. "We will need to obtain an equity investment by early 2005 to continue to execute our business plan and based on the growing market interest in our products, I believe that we will raise the necessary funds to continue operations and implement our plan." BIOGAN INT'L: Files Plan and Disclosure Statement in Delaware ------------------------------------------------------------- Biogan International, Inc., filed its Disclosure Statement along with its Liquidating Chapter 11 Plan with the U.S. Bankruptcy Court for the District of Delaware. Full-text copies of the documents are available for a fee at: http://www.researcharchives.com/bin/download?id=040429033656 and http://www.researcharchives.com/bin/download?id=040429034122 The Plan is a plan of liquidation under chapter 11 that contemplates the complete liquidation of the assets of the Debtor and distribution of all proceeds, first to satisfy the Allowed Claims of administrative creditors and priority creditors, second to holders of Allowed Secured Claims, and then to the holders of Allowed Class 3 General Unsecured Claims in accordance with the scheme of priorities established under the Bankruptcy Code, and finally to all holders of Interests in the Debtor in Classes 4-8. The summary of the Classification and Treatment of Claims and Interests under the Plan is: Class Treatment ----- --------- 1 - Other Unimpaired; will be paid in full in Cash as Priority Claims soon as practicable after the later of (i) the Effective Date and (ii) the date on which such Claim becomes an Allowed Claim. 2 - Secured Unimpaired; will be paid in full in Cash Claims after the later of (i) the Effective Date and (ii) the date on which such Claim becomes an Allowed Claim. 3 - General Unimpaired; will be paid in full in Cash by Unsecured the Disbursement Agent after the later of Claims (i) the Effective Date and (ii) the date on which such Claim becomes an Allowed Claim. 4 - Interests Impaired; will receive 1 HMZ Common Share (Biogan Common for every 12 Biogan Common Shares it holds Shares) from the Disbursement Agent. 5 - Interests Impaired; will receive 1,000 HMZ Common (Series A Shares for every 1 Series A Preferred Share Preferred it holds from the Distribution Agent. Shares) 6 - Interests Impaired; will receive 8.33 HMZ Special (Series B Shares for every 1 Series B Preferred Share Preferred it holds from the Distribution Agent. Shares) 7 - Interests Impaired; will receive 1/12 of an HMZ Common (Series 1 Share for every 1 Series 1 Special Warrant Special it holds from the Distribution Agent. Warrants) 8 - Interests Impaired; will receive 1/12 of an HMZ Common Share and 1/24 of an HMZ Share Purchase Warrant for every 1 Series 2 Special Warrant it holds from the Distribution Agent. Headquartered in Toronto, Ontario, Canada, Biogan International, Inc., was a mineral products smelter and seller. 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. When the Company filed for protection from its creditors, it listed $9,038,612 in total assets and $8,280,792 in total debts. BUDGET GROUP: Intends To Assume & Assign Veritas Contracts ---------------------------------------------------------- The Budget Group Inc. Debtors notify the Court that they intend to assume and assign three contracts to BRAC Group, Inc.: (1) Indenture of lease made and entered into as of January 1, 2000 between Huber's, Inc., and Budget Rent-A-Car Systems, Inc., for property located at Plantside Drive, in Louisville, Kentucky; (2) Veritas Support and Software License Agreement, dated July 7, 2000, among VERITAS Software Global Corporation, Perot Systems and Ryder TRS, Inc.; and (3) Support Agreement, dated July 2000, among VERITAS Software Global Corporation, Perot Systems and Ryder TRS, Inc. The intended assumption of the Veritas contracts, and other related Veritas software agreements are contingent on the assignment of these contracts to Cherokee Acquisition Corporation pursuant to the Second Amended Plan. To the extent the assignment does not occur, the Debtors reserve the right to reject these contracts. Veritas Objects Veritas wants the Court to deny the assumption and assignment of the Veritas executory contracts as well as any other software license and support agreements, and maintenance and service agreements that may have been entered into between Veritas and the Debtors. Carl N. Kunz, III, Esq., at Morris, James, Hitchens & Williams, LLP, in Wilmington, Delaware, relates that Veritas is the owner of certain computer software used to back-up business records and the software is subject to copyrights pursuant to the Copyright Act. Because the Software is subject to copyright protection under the Act, Veritas' consent is required before the Software may be assigned or transferred. Typically, Veritas enters into both a Software License and Support Agreement and a Maintenance Agreement with a customer. Pursuant to the SLSA, Veritas grants a non-exclusive license to a customer that permits the customer to use the Software, reserves to Veritas all ownership rights in and to the Licensed Software, and prohibits a licensee from sub- licensing, assigning or otherwise transferring the License of the Licensed Software without the express consent of Veritas. In the event that the Court declines to deny the assumption and assignment of the Veritas Contracts without further hearing, Veritas asks the Court to direct the Debtors to file and serve: (1) an amended schedule to the Assumption Notice identifying the specific executory contracts that the Debtors desire to assume and assign, including the correct date of the contracts and the correct name of the individual Debtor who is a party to the contract; (2) copies of each and every executory contract that the Debtors believe are described by both the original Assumption Notice and the amended schedule requested; and (3) additional pleading setting forth its authority to assume and assign the SLSAs, including any License of any of Veritas' Licensed Software, without the express consent of Veritas and the payment of a transfer fee agreed upon by Veritas. Furthermore, to the extent that the SLSAs, License or other Veritas Contracts are not assumed and assigned with Veritas' consent, Veritas asks the Court to: (1) direct the Debtors to certify that all of the Veritas Licensed Software and any other intellectual property subject to the Veritas Contracts has been deleted from any and all assets sold, transferred or abandoned to any third party pursuant to the Plan or otherwise or that may be acquired pursuant to any further sales contemplated by the Plan; and (2) grant further and additional protection as may be necessary to assure that none of the Veritas' Licensed Software or copies of them are transferred as part of any Transferred Assets and that the Debtor has taken all actions necessary to delete all copies of the Licensed Software or other intellectual property subject to the Licenses from any Transferred Assets. Headquartered in Daytona Beach, Florida, Budget Group, Inc., operates under the Budget Rent a Car and Ryder names -- is the world's third largest car and truck rental company. The Company filed for chapter 11 protection on July 29, 2002 (Bankr. Del. Case No. 02-12152). Lawrence J. Nyhan, Esq., and James F. Conlan, Esq., at Sidley Austin Brown & Wood and Robert S. Brady, Esq., and Edward J. Kosmowski, Esq., at Young, Conaway, Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $4,047,207,133 in assets and $4,333,611,997 in liabilities. (Budget Group Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHAMPIONSHIP AUTO: Unable to Beat Extended Report Filing Deadline ----------------------------------------------------------------- Championship Auto Racing Teams, Inc. (OTC Bulletin Board: CPNTE) announced that it was unable to file its quarterly report for the three month-period ending March 31, 2004 by May 17, 2004. On March 30, 2004, the Company filed a Form 12b-25 with the SEC, which grants an automatic fifteen-day extension to the Form 10-K filing deadline in order to complete the audit of its financial statements for the year ended December 31, 2003. On April 14, 2004, the Company issued a press release which stated that it was unable to complete its financial statements for the year ended December 31, 2003 by March 30, 2004 due primarily to the fact that its operating subsidiary CART, Inc. filed for bankruptcy under the U. S. Bankruptcy Code in December 2003. The sale of substantially all the assets of CART, Inc., and certain other assets, was completed on February 13, 2004. The Company and its accountants have been working diligently to finalize the financial statements and the Form 10-K as quickly as possible. Until the Form 10-K is filed, the Form 10-Q cannot be completed. At this time, the Company is unable to predict when it will be in a position to file its Form 10-K and therefore the Form 10- Q. It is anticipated that the Form 10-Q will be filed along with or shortly after the Form 10-K. About Championship Auto Racing Teams, Inc. Championship Auto Racing Teams, Inc. previously owned and operated the Champ Car World Series. The Company has sold all of its operating assets and is in the process of winding up its affairs. * * * On November 11, 2003, in response to a request by the management of Championship Auto Racing Teams Inc., that Deloitte & Touche LLP, the Company's independent auditor, reissue its report on the Company's financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, and in connection with the filing by the Company of a proxy statement on November 13, 2003 relating to the pending transaction with Open Wheel Racing Series LLC, Deloitte & Touche informed management that its report on the Company's financial statements as of December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002 would include an explanatory paragraph indicating that developments during the nine-month period ended September 30, 2003 raise substantial doubt about the Company's ability to continue as a going concern. CHOICE ONE: Stockholders' Deficit Widens to $684MM at March 31 -------------------------------------------------------------- Choice One Communications (OTCBB: CWON), an Integrated Communications Provider offering facilities-based voice and data telecommunications services, including Internet solutions, to clients in 29 Northeast and Midwest markets, announced first quarter 2004 operating and financial results. "During the first quarter, we continued to grow our business, achieving continued strong sales of our bundled voice and data services and installing more than 12,000 net new lines," commented Steve Dubnik, Chairman and Chief Executive Officer. "The introduction of new products and services, such as Select Savings.free, our innovative bundled voice and data services offering introduced last August, is allowing Choice One to compete across a broader client segment, increase our average client size and increase our penetration of data services. During the first quarter, Select Savings.free accounted for nearly half of our net lines sold." First quarter revenue was $81.2 million, up slightly from first quarter 2003 revenue of $80.1 million. Network costs were $37.6 million, or 46.4% of revenue, compared with $40.5 million, or 50.6% of revenue for first quarter 2003. Selling, general and administrative (SG&A) expenses were $36.3 million for the first quarter, compared with $31.9 million a year ago as the company invested in programs intended to accelerate growth. EBITDA was $7.2 million, or 8.8% of revenue, compared with $7.7 million, or 9.6% of revenue for first quarter 2003. First quarter capital expenditures were $5.3 million, compared with $1.9 million a year ago. A significant portion of first-quarter 2004 capital expenditures related to integrated access devices (IADs) installed at client locations to support Select Savings.free and other bundled voice and data offerings. Cash flow from operations was $2.4 million for the quarter, a $10.5 million improvement from first quarter 2003. First quarter 2004 marks the third consecutive quarter in which Choice One had positive cash flow from operations. Cash interest expense (see Note 2) was $7.2 million in the first quarter, compared with $7.4 million for the first quarter of 2003. At March 31, 2004, the company had $13.1 million of cash on hand. Net loss applicable to common stockholders was $40.0 million, or $0.74 per share, in first quarter 2004 compared with $38.6 million, or $0.72 per share, in first quarter 2003. At March 31,2004, Choice One Communications' balance sheet shows a stockholders' deficit of $684,402,000 compared to the $644,995,000 deficit at December 31, 2003. Amendment to Credit Agreement On May 12, 2004, the company and its lenders entered into an amendment to the company's Senior Credit Facility. The amendment replaced the requirement that the company maintain an aggregate minimum amount of cash and committed financing of $10 million during the period from May 11, 2004 through June 30, 2004 with a requirement to maintain an aggregate minimum amount of cash and committed financing of $6 million during the period from May 11, 2004 through November 15, 2004. The amendment does not affect other financial covenants to maintain certain leverage, fixed charges and interest coverage ratios, which become effective on September 30, 2004. Sales, Marketing and Operations Choice One continues to focus on products and services designed to enable the company to compete across a broader client segment. In January, Choice One announced the introduction of residential voice services across its operating footprint in New York State. To capitalize on the market demand for data services and the company's sales success with Select Savings.free, Choice One continues to expand the availability of its bundled high-speed Internet services. During the quarter, Choice One added three new Select Savings.free voice and data bundles, which include enhanced data features, firewall, network address translation (NAT) and web hosting. Additionally, the company introduced a portfolio of new conference calling services specifically designed for business clients. In April, Choice One further expanded Select Savings.free with the introduction of Select Savings.free Unlimited, the company's portfolio of new unlimited calling plans. Select Savings.free Unlimited provides substantial value for high-volume users by combining the predictability of flat-rate calling plans with Choice One's free high-speed Internet access. The company also introduced competitively priced toll-free calling plans and expanded offerings for multi-location clients. At March 31, 2004, the company's market penetration was estimated at 8.7% of business access lines compared with 8.2% a year ago. The company's first quarter monthly attrition rate of 1.4% was consistent with prior quarters and, we believe, continues to be one of the lowest in the industry. Choice One's overall lines in service grew by 2.4% during the first quarter and data lines grew by 15%. The company continues to install an increasing percentage of its orders via integrated access technologies such as digital subscriber line (DSL) and T-1 circuits. This dramatically reduces the ongoing cost to provide service to clients. During the first quarter, approximately two- thirds of the company's new lines were installed via integrated access technologies. "During 2004, we will continue to explore access technologies, such as voice over IP (voice over Internet protocol) that will enable us to introduce new applications to our clients and drive greater network efficiencies," added Mr. Dubnik. "Our recent announcement to partner with Lucent Technologies to trial their Lucent Softswitch represents an important step forward in our evaluation of voice over IP technology. This will allow Choice One to begin working with the technology and begin developing new differentiated services, such as web collaboration and multimedia services to meet the growing demands of our clients." About Choice One Communications Headquartered in Rochester, New York, Choice One Communications Inc. (OTCBB: CWON) is a leading Integrated Communications Provider offering voice and data services including Internet solutions, to businesses in 29 metropolitan areas (markets) across 12 Northeast and Midwest states. Choice One reported $323 million of revenue in 2003, has more than 100,000 clients and employs approximately 1,400 colleagues. For further information, visit http://www.choiceonecom.com/ COMDISCO: Releases Fiscal Second Quarter Financial Results ---------------------------------------------------------- Comdisco Holding Company, Inc. (OTC:CDCO) reported financial results for its fiscal second quarter ended March 31, 2004. Comdisco emerged from Chapter 11 on August 12, 2002. Under its Plan of Reorganization, Comdisco's business purpose is limited to the orderly runoff or sale of its remaining assets. Operating Results: For the three months ended March 31, 2004, Comdisco Holding Company, Inc. reported net earnings of approximately $18 million, or $4.20 per common share (basic and diluted). The per share results for Comdisco Holding Company, Inc. are based on the 4.2 million shares of common stock outstanding as of March 31, 2004. For the six months ended March 31, 2004, total revenue decreased by 51 percent to $80 million and net cash provided by operating activities decreased by 83 percent to $125 million, compared to the six months ended March 31, 2003. The company expects its total revenue and net cash provided by operating activities to continue to decrease until the wind-down of its operations is complete. The company's total assets decreased by 23 percent to $287 million as of March 31, 2004 from $373 million as of September 30, 2003. The $287 million of total assets as of March 31, 2004 included over $206 million of cash. A portion of the cash balance was used to fund the aggregate dividend payment of $48.3 million or $11.50 per common share and the aggregate cash payment of $11.8 million or $.0781 per contingent distribution right ("CDR" OTC: CDCOR), both of which were paid on May 6, 2004. A significant portion of the remaining cash balance is being held by the company for the potential liability related to the CDRs. The outcome and timing of the resolution of the remaining disputed claims in the bankruptcy estate of Comdisco, Inc. will significantly impact the amount of the CDR liability and, therefore, the amount and timing of future dividends and CDR payments. As a result of bankruptcy restructuring transactions, adoption of fresh-start reporting and multiple asset sales, Comdisco Holding Company Inc.'s financial results are not comparable to those of its predecessor company, Comdisco, Inc. Please refer to the company's quarterly report on Form 10-Q filed on May 14, 2004 for complete financial statements and other important disclosures. About Comdisco Comdisco emerged from chapter 11 bankruptcy proceedings on August 12, 2002. The purpose of reorganized Comdisco is to sell, collect or otherwise reduce to money in an orderly manner the remaining assets of the corporation. Pursuant to Comdisco's plan of reorganization and restrictions contained in its certificate of incorporation, Comdisco is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose. Accordingly, within the next few years, it is anticipated that Comdisco will have reduced all of its assets to cash and made distributions of all available cash to holders of its common stock and contingent distribution rights in the manner and priorities set forth in the Plan. At that point, the company will cease operations and no further distributions will be made. CONCERT INDUSTRIES: Reports Improved First Quarter 2004 Results --------------------------------------------------------------- Concert Industries Ltd. (TSX:CNG) announced its financial results for the first quarter ended March 31, 2004. "The growth in our revenues and increase in our gross margin this quarter reflects, the improvement in the contribution of our North American operations as a result of the turnaround plan which we began implementing in September. Throughout this period the European operations have continued to perform strongly showing a 12.1% improvement in revenue over the comparable quarter," stated Raoul Heredia, President and CEO of Concert Industries Ltd. "Our efforts to improve efficiency have also contributed to an improvement in cash flow generation as witnessed by the increase in our cash from operating activities this quarter." Mr. Heredia also noted, "While we advance with the implementation of our turnaround plan, we continue our discussions with creditors and potential investors." First Quarter Highlights -- European operations revenues up 12.1% to $25.0 million, EBITDA up 16.7% to $4.2 million -- North American operations revenues up 23.2% to $17.5 million, achieved breakeven EBITDA -- Achieved breakeven consolidated earnings before reorganizing costs -- Gross margin increased by 36.2% to $9.4 million over comparable prior year quarter -- CCAA Order extended for North American operations to June 30, 2004 For financial presentation purposes, Concert ACI Inc. has been treated as discontinued operations. CCAA Update On August 5, 2003, the Company and certain of its North American subsidiaries obtained an order from the Quebec Superior Court of Justice providing creditor protection under CCAA Proceedings. The Company's European operations are excluded from the CCAA Proceedings. PricewaterhouseCoopers Inc. was appointed by the Court to act as a Monitor, and this order is currently in effect until June 30, 2004. A plan to turn the Company around was approved by the Board of Directors on September 23, 2003 and in this plan management anticipates that operational improvements and other financial arrangements will result in improved operating performance by the Company. First Quarter Results Results for the first quarter of 2004 showed a net loss of $2.1 million (or $0.08 per share) compared to a net loss of $2.6 million (or $0.09 per share) for the same period last year. For continuing operations, the Company recorded a net loss of $2.1 million (or $0.08 per share) compared to a net loss of $1.9 million (or $0.07 per share) in the prior year. Included in the net loss for the first quarter of 2004 are $1.2 million of reorganizing expenses, whereas there were no such charges in last year's results, prior to entering the CCAA Proceedings. Reorganizing expenses were incurred as a result of the CCAA Proceedings and primarily consisted of professional fees. Revenues increased by $5.9 million to $42.5 million or 16.1% compared to the first quarter in 2003, due to higher volumes in both North America and Europe. Gross margin was up by $2.5 million to $9.4 million, or 36.2%. This increase in gross margin was a result of increased volumes, improved productivity and reduced waste in both market segments. As a percentage of revenue, the gross margin increased to 22.1% from 18.9%, compared to the first quarter of 2003. Fixed expenses remained at the same level as last year, $5.2 million, as cost reductions offset cost increases. Cost reductions in the areas of administration, selling and marketing reflect the effects of the Turnaround Plan, which included the relocation of the corporate office to Gatineau. Increases in fixed manufacturing, product development and overhead cost were incurred to support efforts to improve productivity and reduce waste. Cash Flow/Financial Position Cash from operating activities was $3.5 million including $3.3 million in changes in working capital. Cash used in investing activities was $1.9 million. Part of the remaining excess cash was used to reduce debt outstanding by $0.6 million. As at March 31, 2004, the Company had net borrowings under the DIP financing of $4.9 million, and had drawn $1.5 million under its German bank line of credit. Subsequent Event Melvyn Rowles, a director since November 1999, resigned May 14 for personal reasons. "We thank Mel for his dedication and service to the Company through a turbulent period," stated Mr. Heredia. About the Company Concert Industries Ltd. is a company specializing in the manufacture of cellulose fiber based non-woven fabrics using airlaid manufacturing technology. Concert's products have superior absorbency capability and are key components in a wide range of personal care consumer products, including feminine hygiene and adult incontinence products. Other applications include pre- moistened baby wipes, disposable medical and filtration applications and tabletop products. The Company has manufacturing facilities in Canada, in Gatineau and Thurso, Quebec, and in Germany, in Falkenhagen, Brandenburg. The Company's web site is at http://www.concert.ca/ COUNSEL CORP: March 31 Shareholders' Deficit Climbs to $16.6 Mil. ----------------------------------------------------------------- Counsel Corporation (TSX:CXS) (NASDAQ:CXSN) reported its financial results for the three months ended March 31, 2004. All amounts are stated in US dollars. Consolidated revenues from continuing operations for the first three months of 2004 increased 11% to $35.8 million from $32.2 million in the first three months of 2003 primarily due to the inclusion of $4.7 million in non-recurring revenue in its communications business, Acceris Communications Inc. The Company incurred a loss from continuing operations of $2.5 million, or $0.05 per share, basic and diluted, in the first three months of 2004, compared with a loss of $14.3 million, or $0.70 per share, in the first three months of 2003. Including discontinued operations, the Company incurred a net loss of $2.5 million or $0.05 per share, basic and diluted, for the three months ended March 31, 2004, compared with a loss of $15.3 million, or $0.75 per share, for the three months ended March 31, 2003. "As a result of the bold decisions and actions taken in 2003, Counsel Corporation is experiencing positive momentum. We are pleased with our progress," said Allan Silber, Chief Executive Officer of Counsel Corporation. At March 31, 2004, Counsel Corporation's balance sheet reported a stockholders' deficit of $16,648,000 compared to a $14,150,000 deficit at December 31, 2003. About Counsel Corporation Counsel Corporation (TSX: CXS)(NASDAQ:CXSN) is a diversified company focused on acquiring and building businesses using its financial and operational expertise in two specific sectors: communications and real estate. Counsel's communications platform is focused on building upon its existing communications investment, Acceris Communications Inc. (OTCBB: ACRS), through organic growth and by acquiring additional customer revenues. Counsel's real estate platform has a focused strategy of investing in and developing income producing commercial properties, primarily retail shopping centers. For further information, visit Counsel's website at http://www.counselcorp.com/ COVANTA ENERGY: Danielson Holding Launches Rights Offering ---------------------------------------------------------- Danielson Holding Corporation (Amex: DHC) announced that it anticipates launching its previously announced rights offering on or about May 18, 2004 once filings are made with the Securities and Exchange Commission. The Danielson Board of Directors set May 17, 2004 as the record date for the rights offering. Under the terms of the rights offering, holders of Danielson common stock will be issued at no charge one non-transferable warrant for each share of stock held by such holder at the opening of business on May 17, 2004. Each warrant will entitle the holder to purchase 0.75 shares of common stock for every warrant held at an exercise price of $1.53 per share. In addition, in the event all the warrants are not exercised, each warrant holder may also subscribe for additional shares of stock at the same exercise price pursuant to the oversubscription privilege. The warrants will trade along with the underlying shares of Danielson common stock and are not transferable separate from the underlying common stock. The warrants will expire if they are not exercised by 5:00 p.m. Eastern time on June 9, 2004, unless extended by Danielson in its sole discretion. In order to exercise the warrants, holders will be required to deliver to the warrant agent common stock representing at least the warrants to be exercised in addition to any other required exercise documents. Such stock will be held in escrow by the warrant agent until after the expiration of the offering. The complete terms of the rights offering and the instructions for participation by stockholders will be contained in a prospectus supplement to be filed with the Securities and Exchange Commission and mailed to stockholders of record on the record date. Danielson will use the proceeds from the rights offering to repay the $40 million principal amount of bridge financing used for the Company's acquisition of Covanta Energy Corporation and the remaining proceeds, if any, will be available for general corporate purposes. If all of the warrants are exercised in the rights offering, gross proceeds to Danielson from the purchase of common stock in the rights offering will be approximately $42 million. Immediately following the completion of the rights offering, assuming all warrants are exercised, Danielson will have approximately 64.0 million shares of common stock outstanding. In addition, Danielson will sell up to 8.75 million shares of its common stock to D.E. Shaw Laminar Portfolios, L.L.C. at $1.53 per share pursuant to the terms of the agreement Danielson entered into in December 2003 with its bridge lenders in connection with the closing of the rights offering. Finally, as previously announced, Danielson will subsequently offer up to 3.0 million shares at $1.53 per share to a class of creditors of Covanta Energy Corporation under an agreement reached with those creditors in connection with Covanta's emergence from bankruptcy proceedings earlier this year. Danielson Holding Corporation is an American Stock Exchange listed company, engaging in the energy, financial services and specialty insurance business through its subsidiaries. Danielson's charter contains restrictions that prohibit parties from acquiring 5% or more of Danielson's common stock without its prior consent. Danielson recently acquired Covanta Energy Corporation, an internationally recognized owner and operator of power generation projects. Covanta's waste- to-energy facilities convert municipal solid waste into energy for numerous communities, predominantly in the United States. Covanta also operates water and wastewater treatment facilities. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- 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. DAVEL COMMS: Stockholders' Deficit Widens to $107.5MM at March 31 ----------------------------------------------------------------- Davel Communications, Inc. (OTCBB:DAVL) announced financial results for the quarter ended March 31, 2004. The net loss for the quarter was $5.0 million, or $0.01 per common share, compared to a net loss of $4.7 million, or $0.01 per common share, in 2003. The reported net loss for both periods include adjustments to dial-around revenues of $1.2 million and $3.9 million in the quarters ended March 31, 2004 and 2003, respectively. These adjustments represent the recovery of prior years' dial-around compensation relating to a mandatory industry- wide reconciliation among long-distance carriers and payphone providers resulting from retroactive rate changes ordered by the FCC. Without these adjustments, the Company's net loss would have declined by $2.4 million, or 27.9%. Total revenues for the first quarter of 2004 were $13.2 million compared to $22.9 million in the same period of 2003. A portion of the decline in total revenues relates to the dial-around compensation adjustments described above. Without these adjustments total revenues decreased $7.0 million, or 36.8%, primarily due to a reduction in the average number of payphones in service as well as a 7% decline in average revenues per phone. The decline in revenues per phone is attributable to the decline in payphone usage arising from the impact of wireless communications, which prompted the Company to aggressively pursue its previously announced strategy to remove low revenue payphones during 2003. Total operating expenses declined by $9.4 million, or 36.0%, due to the decrease in the average number of payphones in service during the first quarter of 2004 and the cost saving measures initiated by the Company during 2003 and 2004. The Company expects further cost savings during 2004 as a result of its efforts to reduce telephone charges by utilizing competitive local exchange and alternate carriers, by outsourcing certain payphone collection and maintenance activities and other operating expense reductions. The Company's first quarter losses from operations, which include the dial-around compensation adjustments described above, increased from $3.2 million in 2003 to $3.5 million in 2004. Without these adjustments, the Company's loss from operations would have declined by $2.4 million or 33.8%. The Company has continued discussions with its lenders regarding the possible restructuring of its $125.7 million secured debt. Any such restructuring could potentially include a debt-for-equity exchange that may substantially dilute the interests of the Company's existing non-lender shareholders. There can be no assurance that the Company's lenders, who own more than 95% of the Company's common stock, will be willing to negotiate a reduction in the outstanding balance due under the secured credit agreement. At March 31, 2004, Davel Communications' balance sheet shows a stockholders' deficit of $107,533,000 compared to the $102,501,000 deficit at December 31, 2003. About Davel Communications Founded in 1979, Davel is the largest independent provider of pay telephones and related services in the United States with operations in 46 states and the District of Columbia. Davel serves a wide array of customers operating principally in the shopping center, hospitality, health care, convenience store, university, service station, retail and restaurant industries. DISTRIBUTION DYNAMICS: Looks to Houlihan Lokey for Fin'l Advice --------------------------------------------------------------- Distribution Dynamics, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Minnesota for permission to employ Houlihan Lokey Howard & Zukin Capital as their financial advisors. Houlihan Lokey was engaged by the Debtors in March 2004 to provide financial advisory services in connection with a possible sale of the companies' assets in a going-concern. As a result, Houlihan Lokey developed extensive knowledge of the Debtors' operations, business, assets and financial structure. The Debtors expect Houlihan Lokey to: a. assist the Debtors in the creation, organization and maintenance of data rooms for use by prospective buyers of the Debtors' assets; b. develop a comprehensive list of potential strategic and financial acquirers of the Debtors' assets; c. seek to interest such potential acquirers in the acquisition of the Debtors' business; d. discuss the Debtors' operations, a potential sale and the process associated therewith with potential acquirers; e. facilitate and assist in due diligence by potential buyers; f. conduct negotiations with prospective bidders; and e. assist the Debtors, and coordinate with their other professionals, in the activities necessary to ensure a successful auction process and the maximization of the value of the Debtors' assets through their sale as a going-concern. Houlihan Lokey agrees to provide its services in exchange for a: a. $25,000 Monthly Fee; b. Success Fee equal to: (i) $450,000 for the first $20 million of sale transaction value; plus (ii) 5% of sale transaction value in excess of $20 million. Headquartered in Eden Prairie, Minnesota, Distribution Dynamics, Inc. -- http://www.distributiondynamics.com/-- helps companies improve bottom-line results by providing fasteners and Class 'C' commodities. The Company filed for chapter 11 protection on April 26, 2004 (Bankr. Minn. Case No. 04-32489). Mark J. Kalla, Esq., at Dorsey & Whitney LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed both estimated debts and assets of over $10 million. EDISON FUNDING: Potential Tax Liability Prompts S&P's Neg. Outlook ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on its ratings on Irvine, California-based Edison Funding Co., including Edison's 'BB+' long-term counterparty credit rating, to negative from stable. All ratings on Edison are affirmed. "The outlook revision reflects the potential tax liability that could arise from pending examinations by the IRS, which is challenging Edison's treatment of two lease contracts on the 1994 through 1996 tax returns of its ultimate parent, Edison International (EIX)," said Standard & Poor's credit analyst Steven Picarillo. "Additionally, Edison expects that the IRS may challenge several of its other leveraged leases, based on a revenue ruling addressing Lease In/Lease Out transactions." The rating and outlook on EIX are unaffected by the revision of the outlook on Edison Funding to negative because EIX continues to maintain a strong liquidity position. Should liquidity be eroded, Standard & Poor's will reassess whether the IRS investigations could potentially affect EIX's credit quality. Edison has indicated that it is prepared to defend itself against all expected challenges. While it may take several years to resolve these tax issues, should the IRS prevail, Edison's future cash flow and profitability will be negatively affected. Moreover, the burden of a significant tax liability could impede the company's ability to fund new investments. The rating affirmation is based on Edison's improved cash flow achieved during the past two years as a result of the cash received from EIX for Federal and State tax benefits utilized in EIX tax returns. The outlook reflects the potential tax liability resulting from the ongoing IRS tax reviews and the negative effect that this may have on cash flow and profitability, should the IRS prevail. EL CAPITAN: Inks Joint Venture Agreement with US Canadian Minerals ------------------------------------------------------------------ El Capitan Precious Metals, Inc. (OTCBB:ECPN) announced that it has executed a joint venture agreement with U.S. Canadian Minerals, Inc. (OTCBB:UCAD) to put into production the recovery of gold and silver from the tailings of the COD mine located near Kingman, Arizona. The joint venture agreement calls for UCAD to acquire an 80% interest in the COD mine in exchange for 720,000 shares of UCAD common stock. Shares of UCAD closed at $3.03 per share on May 12, 2004. In addition, UCAD has agreed to contribute 90 days operating capital to provide for at least three workers, fuel, necessary equipment agreed upon by the parties, and equipment repair and maintenance. Net profits from the operations will be split equally among El Capitan and UCAD. "We believe based upon preliminary tests that the COD mine tailings show potential for recoverable amounts of gold and silver," stated El Capitan President, Chuck Mottley. "We are hopeful this joint venture will allow us to realize the full potential of these tailings to provide some working capital in the next few months." In addition to the joint venture agreement, El Capitan also agreed to retain UCAD as a consultant for a period of two years to provide services pertaining to, among other things, identifying, studying and evaluating merger, acquisition, joint venture, strategic alliance and other proposals as well as implementation of financial public relations programs for the Company. In exchange for its services, UCAD will be issued a one year warrant to acquire up to 1,000,000 shares of El Capitan common stock exercisable at $0.43 per share. El Capitan Precious Metals, Inc. -- whose December 31, 2003 balance sheet shows a total stockholders' deficit of $749,298 -- is a nominally capitalized development stage company that owns a 40% interest in the El Capitan mine located near Capitan, New Mexico, as well as 13 mining claims and other assets known as the COD Property located near Kingman, Arizona. ENRON: Asks Court to Temporarily Stay Avoidance Action Discovery ---------------------------------------------------------------- The Enron Corporation Debtors and the Creditors Committee are working together to formulate uniform procedures to govern discovery in the Avoidance Actions, and intend to include other interested parties in those discussions at the appropriate time. Part of those discussions focus on evaluating whether efficiency dictates an attempt to create an electronic document depository into which documents responsive to anticipated discovery requests could be placed. An additional focus on these discussions is on consideration of uniform procedures for interrogatories, requests for production, requests for admissions and depositions in connection with the Avoidance Actions. The Debtors and the Committee believe that through the establishment of uniform discovery mechanisms and procedures, efficiency will be brought to the anticipated Avoidance Action discovery by allowing coordination of responses to discovery requests in each of the Avoidance Actions and providing reasonable procedures and limitations on the scope and form the discovery may take. The Debtors and the Committee intend to have the procedures finalized and implemented as soon as possible. However, due to the overwhelming number of Avoidance Actions currently pending and the broad scope of anticipated discovery in those actions, it will take at least 90 days to develop, prepare and file the proposed discovery procedures. Moreover, due to the sheer number of Avoidance Actions that have been filed, summonses for the Avoidance Actions continue to be issued and service has not been completed on about 348 of the Avoidance Action defendants. Accordingly, the Debtors and the Committee jointly ask the Court to temporarily stay discovery in the Avoidance Actions to prevent the wasteful expenditure of estate resources that would occur should the estates be required to immediately respond to individual discovery requests prior to the establishment of Avoidance Action Discovery Procedures. (Enron Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., 215/945-7000) FARMLAND DAIRIES: Opts to Form Reorganization Plan with Creditors ----------------------------------------------------------------- Farmland Dairies, LLC has announced that it intends to work with its creditors to develop a plan to reorganize and restructure the business. Management believes this plan will provide the necessary long-term financial and operational stability required to ensure that Farmland could continue to successfully operate its dairy business in the United States. Since Farmland began its Chapter 11 case on February 24, 2004, management has thoroughly reviewed the business. Based on that review, it was concluded that the best course of action is to develop a plan of reorganization to allow Farmland to emerge from Chapter 11 with a new capital structure in place, and to make operational improvements to achieve the long-term financial and operational stability the business requires to succeed. The post- petition lenders have decided to move forward on this plan. To this end, it was determined not to pursue a sale of assets at this time, and the post-petition lending agreement will be modified to remove all deadlines relating to a sale of assets. "The development of this plan is recognition of the intrinsic value of the Farmland business and its future profitability," said Jim Mesterharm, Principal, AlixPartners. "While Farmland's original DIP financing package continues to provide the liquidity necessary for operations in the shorter term, the company is now in a position to be able to work with post-petition lenders and other creditors to secure longer-term financing that, when in place, would allow Farmland to develop and implement a standalone restructuring plan around the Company's core businesses." This plan will include assets of Parmalat USA Corp. and Farmland Dairies, LLC. Farmland is also in the process of initiating a search process with the goal of hiring a CEO to lead the business in the future. Farmland's bankruptcy case has been assigned to the Honorable Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York. Further information can be obtained via the Internet at http://www.nysb.uscourts.gov/ FEDERAL FORGE: Taps Donnelly Penman as Investment Bankers --------------------------------------------------------- Federal Forge, Inc., is asking for approval from the U.S. Bankruptcy Court for the Western District of Michigan to employ Donnelly Penman Partners, LLC as its investment banker. The Debtor agrees to pay Donnelly Penman an initial $35,000 advisory fee upon the Court's approval in its retention and $7,500 per month thereafter. At the closing of a Transaction, the firm will be paid a cash fee equal to: (i) 1.0% for the first $5,000,000 of Consideration paid or received; plus (ii) 4% of Consideration paid or received in excess of $5,000,000. The Debtor believes that Donnelly Penman is well qualified to serve as its investment banker in this case. The Firm has extensive experience in assisting with the sale of companies such as the Debtor, both in the automotive industry and other industries. The Debtor believes that the employment of Donnelly Penman as its investment banker is necessary and critical to its efforts to sell its business as a going concern. Headquartered in Lansing, Michigan, Federal Forge, Inc. -- http://www.durgam.com/-- is a supplier specializing in nonsymetrical forgings. The Company filed for chapter 11 protection on February 19, 2004 (Bankr. Mich. Case No. 04-01738). Lawrence A. Lichtman, Esq., at Carson Fischer, PLC represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million. FEDERAL-MOGUL: Modifies Plan Classification & Treatment Of Claims ----------------------------------------------------------------- The treatment of some claims in Federal-Mogul Corporation's Second Amended Joint Plan was modified to include these recoveries: Class Description Recovery Under the Plan ----- ----------- ----------------------- N/A Administration In the event that Federal-Mogul Corporation bids and purchases some or all of the assets or businesses of the U.K. Debtors, then Federal-Mogul Corporation will pay to the relevant U.K. Debtors only that portion of the bid that is to be distributed to holders of Claims against the U.K. Debtors other than holders of Asbestos Personal Injury Claims against the U.K. Debtors. Holders of Allowed Administration Claims against the U.K. Debtors will receive no distributions under the Plan, but instead will receive any and all distributions on account of their Allowed Administration Claims pursuant to the U.K, administration proceedings in accordance with U.K. insolvency laws. Estimated Percentage Recovery: 100%, subject to the terms of the Plan in the case of Allowed Administration Claims 6A-20A Priority Claims Unimpaired. 34A & Preferential In the event that Federal-Mogul 40A-157A Liabilities Corporation bids and purchases Against U.K. some or all of the assets or Debtors businesses of the U.K. Debtors, then Federal-Mogul Corporation will pay to the relevant U.K. Debtors only that portion of the bid that is to be distributed to holders of Claims against the U.K. Debtors other than holders of Asbestos Personal Injury Claims against the U.K. Debtors. Holders of Allowed Preferential Claims against the U.K. Debtors will receive no distributions under the Plan, but instead will receive any and all distributions on account of their Allowed Preferential Claims pursuant to the U.K. administration proceedings in accordance with U.K. insolvency laws. Estimated Percentage Recovery: 100%, subject to the terms of the Plan in the case of Allowed Preferential Claims. 1B-5B Secured Bank Impaired. 21B-22B Claims On the Effective date, Claims 24B-34B arising under the Bank Credit Agreement will be deemed fully secured and allowed for $1,646,681,464, including certain letter of credit obligations and as adjusted on the Effective Date to convert foreign currencies to U.S. dollars and to take account of certain hedge obligations. The Reorganized Debtors will: (a) enter into the Reorganized Federal-Mogul Secured Term Loan Agreement, which will provide for term Loans for: * $1,303,897,118, plus; * the amount of any draws before the Effective Date on letters of credit outstanding under the Bank Credit Agreement; and * the amounts, if any, required to be included in the loan agreement pursuant to the Plan; (b) replace with the Exit Facilities any letters of credit not drawn as of the Effective Date; (c) issue $300,000,000 in Junior Secured PIK Notes to the holders of Allowed Secured Bank Claims; and (d) cause those subsidiaries, which guaranteed the Bank Claims, to also guarantee the payment of the Reorganized Federal-Mogul Secured Term Loan Agreement and the Junior Secured PIK Notes. Estimated Percentage Recovery: Variable 1C-5C Secured Surety Impaired. 21C Claims Estimated Percentage Recovery: 22C Variable 24C-34C 1D-5D Noteholder Impaired. 21D Claims Estimated Percentage Recovery: 22D 38-47% (prior to enforcement of 24D-34D the subordination provisions of the indenture for the Convertible Subordinated Debentures) 1G-5G On-Site Unimpaired. 11G Environmental Each holder of an Allowed Claim 12G Claims will retain unaltered the legal 17G equitable and contractual rights 31G to which the Allowed Claim 33G entitles the holder. 6H-20H Unsecured Claims Impaired. 40H-157H Against U.K. Estimated Percentage Recovery: Debtors other Under the T&N Distribution: than F-M U.K. * T&N Distribution Ratio 1: 7.2% Holding Limited * T*N Distribution Ratio 2: 3.8 to 6.0% * Company Specific Distribution Ratio * Small Company Specific Distribution Ratio 6I Non-Priority Estimated Percentage Recovery: 8I-19I Pension Plan 7.2% 41I, 42I Benefit Claims 43I, 55I Against T&N 60I, 109I Limited & 131I, 135I Participating 149I, 152I Employers in the T&N Limited Pension Plan 7I Non-Priority Estimated Percentage Recovery: Pension Plan 7.2% Employee Benefit Claims Against Federal-Mogul Ignition (UK) Limited 1L-5L Affiliate Claims Estimated Percentage Recovery: 21L-39L Against U.S. Variable Debtors and F-M U.K. Holding Limited 6L-20L Affiliate Claims Estimated Percentage Recovery: 40L-157L Against U.K. Variable Debtors other than F-M U.K. Holding Limited 1M F-M Corporation Holders of Federal-Mogul Preferred Stock Corporation preferred stock will receive Warrants. The value of each Warrant is estimated to be between $5.50 and $7.97. 1N Subordinated Holders of Class1N Subordinated 2N Securities Securities Claims will receive Claims Warrants. The value of the Against warrant is estimated to be Federal-Mogul between $5.50 and $7.97. Corp & FMPRI Estimated Percentage Recovery: 0% 1O Federal-Mogul Holders of Federal-Mogul common Corp. Common stock will receive Warrants. The Stock value of each Warrant is estimated to be between $5.50 and $7.97. 3P-157P Equity Interests Estimated Percentage Recovery: in Subsidiaries Not Applicable Headquartered in Southfield, Michigan, Federal-Mogul Corporation - - http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $ 10.15 billion in assets and $ 8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIVE STAR FOODS: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: Five Star Foods, Inc. 4754 Highway 377 South Fort Worth, Texas 76116 Bankruptcy Case No.: 04-44935 Chapter 11 Petition Date: May 16, 2004 Court: Northern District of Texas (Ft. Worth) Judge: Barbara J. Houser Debtor's Counsel: J. Robert Forshey, Esq. Forshey and Prostok 777 Main Street, Suite 1290 Fort Worth, TX 76102 Tel: 817-877-8855 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-largest creditors. FLEMING COS: Scozio & Penn Want to End Facility Standby Agreements ------------------------------------------------------------------ Scozio's Wexford Foods, LLC, Scozio's Peters Two Foods, LLC, Penn Supermarkets, LLC, ask the Court to lift the automatic stay so they may terminate their facility standby agreements with the Fleming Companies, Inc. Debtors. In the alternative, Scozio and Penn Supermarkets ask the Court to compel the Debtors to immediately reject the FSAs. The FSAs provide that Scozio and Penn Supermarkets will buy from Fleming the greater of $8,000,000 per 12-month period, or 50% of all retail sales -- referred to in the FSAs as a "Teamwork Score". Scozio and Penn Supermarkets must pay a "Facility Standby Fee" equal to 2% of the amount by which their purchases during a 12-month period are less than the amount of purchases necessary to maintain the minimum Teamwork Score. Fleming defaults under each FSA if it fails to perform in any material respect its obligations under the FSA. In each case, Scozio or Penn Supermarkets has the right to immediately terminate the FSA and seek damages. Daniel J. DeFranceschi, Esq., at Richards Layton & Finger in Wilmington, Delaware, tells the Court that Scozio and Penn Supermarkets have used Fleming as their primary grocery wholesales since 1998, and have each signed separate FSAs with Fleming. These family-run grocery businesses have been in operation since 1971. Since the Petition Date, however, Fleming's performance under the FSAs has so greatly deteriorated that Scozio and Penn Supermarkets are unable to supply their stores through their FSAs with Fleming. Fleming's failure to perform has resulted in grossly insufficient goods on Scozio's and Penn Supermarkets' store shelves, widespread customer dissatisfaction, and substantial loss of customer loyalty. Scozio and Penn Supermarkets are also forced to pay increased costs to obtain groceries from temporary suppliers. The closure of Fleming's Memphis supply center, which provided specialty foods and health and beauty care products, dealt a crippling blow to Scozio. These goods represent more than $2.5 million in gross sales for Scozio, a significant sum for the family-owned retail enterprise. Contemporaneous with the execution of the FSAs, Scozio and Penn Supermarkets signed and gave to Fleming a promissory note: Store Balance as of August 2003 ----- ------------------------- Scozio's Wexford $508,545 Scozio's Peters 901,144 Penn Supermarkets 367,380 The Penn note provides for five annual payments of 1/5 of the principal amount, while the two Scozio notes provide for seven annual payments of 1/7 of the principal amount. All three FSAs allow for complete forgiveness of the annual amount owed based on Scozio's reaching minimum purchase targets. Scozio and Penn Supermarkets expect to meet these sales requirements and obtain complete forgiveness of the amounts owed, and absent Fleming's defaults, had achieved all requisite minimum purchase targets. In addition to forgiveness of the notes, Fleming also agreed to contribute to an advertising fund for Scozio and Penn Supermarkets based on a formula of sales combined with Scozio's and Penn Supermarkets' Teamwork Score. These types of supplier advertising funds are critical to small and medium stores such as those owned by Scozio and Penn Supermarkets, and the loss of these advertising funds, which normally come from supply agreements, cannot be made up from the temporary "cover" purchases that Scozio and Penn Supermarkets must make to "shore up the inadequate supplies from Fleming." To remain in business, Scozio and Penn Supermarkets must immediately terminate the Fleming contracts and obtain another grocery supplier acceptable to them. Fleming's breaches of the FSAs have resulted in a reduction of net income from sales of at least 12%. A small business like those of Scozio and Penn Supermarkets cannot survive such drastic decrease in net income. Debtors Respond The Debtors offer to assume the three FSAs and assign them to SuperValu. The Debtors assure the Court that SuperValu is creditworthy, has already been approved by the Court as a prospective assignee, and that there are no defaults under these franchise agreements to be cured, or if there are, the defaults have already been cured. Scotta E. McFarland, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub PC in Wilmington, Delaware, advises the Court that the Debtors and SuperValu are in "extended discussions" with Scozio and Penn Supermarkets regarding a consensual resolution of the issues raised. In any event, lifting the stay to terminate the FSAs is inappropriate. Scozio and Penn Supermarkets are nothing more than unsecured parties to executory contracts and are, therefore, limited to the remedies provided to them of assumption, assumption and assignment, or rejection, at the Debtors' option. Lifting the stay to Scozio and Penn Supermarkets would effectively destroy the Debtors' statutory options. Scozio and Penn Supermarkets may have a right to compel the Debtors to make a decision, but they can't compel the Debtors to make the decision Scozio and Penn Supermarkets want. The Official Committee of Unsecured Creditors supports the Debtors' arguments, and urges the Court to approve the assumption and assignment of the FSAs. Scozio Objects Scozio declines the Debtors' offer. SuperValu has informed Scozio that SuperValu will not permit Scozio to ever open any new Festival Foods franchise stores as part of SuperValu's assumption of the existing FSAs connected with Scozio's Festival Foods franchises. For a number of years, Scozio has operated four grocery stores using the Festival Foods banner under franchise agreements with Fleming. If this assumption and assignment is permitted, Scozio knows that SuperValu has already refused to even consider a recent application by Scozio to open a new Festival Foods store in New Stanton, Pennsylvania. Worse still, Scozio believes that SuperValu intends to grant the New Stanton franchise to one of Scozio's competitors without even accepting or considering Scozio's application. Assignment of Scozio's Festival Foods franchises to SuperValu would put SuperValu, the potential franchise supplier to Scozio, in the anti-competitive position of being able to limit the growth of the same retail grocer that it is required by each franchise agreement to assist. Scozio also objects to the assignment of the franchise agreements because Supervalu is the franchiser of its direct competitors in the Pittsburgh area market, such as Stop 'n Save, Foodlands, and County Market. As its franchiser, SuperValu would service Scozio from the same Pittsburgh warehouse center, and use the same buyers, product managers, and pricing information that are used by its competitors. The result of an assignment to SuperValu would be a direct and irreconcilable conflict of interest on the part of SuperValu, and would impose a very substantial competitive disadvantage on Scozio that did not exist when it signed the FSAs with Fleming. SuperValu has threatened that it will open competing Festival Foods stores in close proximity to existing Scozio stores. While this may be technically permissible under the Festival Foods franchise agreements, this hostile and threatening gesture is contrary to the previous business relationship that existed between Scozio and Fleming. Therefore, this assignment cannot be approved, and the stay should be lifted. 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. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) GENTEK: Court to Delay Closing of Chapter 11 Case Until Oct. 15 --------------------------------------------------------------- Rule 5009-1(a) of the Local Rules of Bankruptcy Practice and Procedures of the United States Bankruptcy Court for the District of Delaware provides that "[a]t the expiration of 180 days after entry of an order confirming a chapter 11 plan, the Court shall enter a final decree closing the case unless a party in interest files a motion to delay the entry of a final decree." Much work remains to be done in GenTek, Inc.'s Chapter 11 case. To prevent GenTek's Chapter 11 case from being prematurely closed, at the Reorganized Debtors' request, the Court will delay the entry of a final decree closing the jointly administered case, GenTek, Inc., Case No. 02-12986, until October 15, 2004. According to Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in Wilmington, Delaware, the remaining matters in GenTek's Chapter 11 case relate primarily to the reconciliation of claims, distributions with respect to allowed claims, and potential preference or other avoidance actions. Mr. Chehi assures the Court that the Reorganized Debtors' claims reconciliation effort is nearing completion. The Reorganized Debtors filed their final omnibus claim objections on March 9, 2004, and continue to reconcile and settle the remaining disputed claims, including a number of previously filed objections that remain pending before the Court. Contested proceedings before the Court may be necessary to the extent that any pending claim objection cannot be resolved between the parties. The plan distribution process will be substantially complete in the near future. On November 10, 2003 and within the time periods contemplated by the Plan, the Reorganized Debtors: -- made required payments to holders of allowed administrative, priority and secured claims; and -- issued a combination of cash and new debt and equity securities to the secured lenders, and new common stock and warrants to the bondholders. Mr. Chehi relates that the payment of certain disputed administrative, priority and secured claims will be made as the claims are allowed. Initial distributions to holders of allowed unsecured claims were due on May 10, 2004. Subsequent distributions may be made thereafter with respect to amounts reserved for disputed claims that are allowed or disallowed at a later date. Additionally, the statutory two-year period within which avoidance actions may be pursued in the Chapter 11 case will not expire until October 2004. Pending the expiration, the Reorganized Debtors have the right to commence avoidance actions. Under the confirmed Plan, a Preference Claim Litigation Trust was created to pursue actions with respect to Preference Rights against certain creditors. The Preference Claim Litigation Trust will have the right to commence actions with respect to Preference Rights until the expiration of the statutory period. (GenTek Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) HARRY ORTLIP CO: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Harry F. Ortlip Company 780 Lancaster Avenue Bryn Mawr, Pennsylvania 19010-1512 Bankruptcy Case No.: 04-15862 Type of Business: The Debtor is one of the country's major electrical contractors. See http://www.harryfortlip.com/ Chapter 11 Petition Date: April 28, 2004 Court: Eastern District of Pennsylvania (Philadelphia) Judge: Stephen Raslavich Debtor's Counsel: Aris J. Karalis, Esq. Ciardi, Maschmeyer & Karalis, P.C. 1900 Spruce Street Philadelphia, PA 19103 Tel: 215-546-4500 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Citizens Bank of Pennsylvania $3,250,000 3025 Chemical Road Plymouth Meeting, PA 19462 PNC Bank, National Association $3,249,900 1600 Market Street Philadelphia, PA 19103 Colonial Electric Supply $277,829 485 South Henderson Road King of Prussia, PA 19406 Welfare Fund Dept L-98 $217,993 Rumsey Electric Company $120,272 Manna & Rumsey Electric $92,704 Ransome Engine Power $92,293 Franklin Electric Company $57,928 Deloitte & Touche $53,865 Manna & Colonial Electric $49,365 Delaware Valley Liebert $41,692 Liebert Corporation $18,492 Communications Sup Corp. $17,550 Billows Electric Supply $17,473 Ransome Engine $17,458 N E B F $16,660 Controlled Access, LLC $16,421 Honeywell $10,831 HEALTHSOUTH: 8.5% & 10.75% Noteholders Agree to Amend Indentures ---------------------------------------------------------------- HealthSouth Corp. (OTC Pink Sheets: HLSH) announced that it has completed another important step in its plan to strengthen its balance sheet and provide the Company with a sound capital structure. A majority in principal amount of the holders of its 8.500% Senior Notes due 2008 and 10.750% Senior Subordinated Notes due 2008 have delivered consents under those indentures, representing a sufficient number of consents to approve proposed amendments to, and waivers under, the indentures governing those Notes. The Company received consents from approximately 89.21% in principal amount of the holders of its 10.750% Senior Subordinated Notes due 2008 and approximately 90.98% in principal amount of the holders of its 8.500% Senior Notes due 2008. The two issues for which the Company has gained consent represent $662,260,000, or more than 25%, of the Company's total Senior and Senior Subordinated debt for which the Company was seeking consents. HealthSouth believes that, as demonstrated by the success of the 8.500% and 10.750% consent solicitations, the market is validating its offer as commercially reasonable. While the Company remains in negotiations with the holders of its other senior note issues, it is encouraged by the significant and positive response received thus far under its consent solicitations. Terms of Consent Solicitations The Company will pay $13.75 per $1,000 principal amount to holders of its 10.750% Senior Subordinated Notes due 2008 and its 8.500% Senior Notes due 2008 who delivered valid and unrevoked consents prior to the expiration of the consent solicitation on May 13, 2004 at 11:59 p.m., New York City Time. The Company has extended its consent solicitation for its 6.875% Senior Notes due 2005, 7.375% Senior Notes due 2006, 7.000% Senior Notes due 2008, 8.375% Senior Notes due 2011 and 7.625% Senior Notes due 2012 to 11:59 p.m., New York City Time on May 20, 2004. The Company will pay $13.75 per $1,000 principal amount to holders of its 6.875% Senior Notes due 2005, 7.375% Senior Notes due 2006, 7.000% Senior Notes due 2008, 8.375% Senior Notes due 2011 and 7.625% Senior Notes due 2012 who deliver valid and unrevoked consents prior to the expiration of the consent solicitations, subject to the proposed amendments to the indentures becoming operative. Holders who previously delivered valid consents and do not revoke those consents will receive the consent fee if the conditions to their consent solicitation are satisfied or waived. HealthSouth is also amending the consent solicitations for its 6.875% Senior Notes due 2005, 7.375% Senior Notes due 2006, 7.000% Senior Notes due 2008 and 8.375% Senior Notes due 2011 to eliminate the condition to each of these solicitations relating to the successful completion of any other consent solicitation. As amended, each of these consent solicitations is independent of the consent solicitation for any other issue of Senior 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. 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. 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/ * * * As reported in Troubled Company Reporter's December 26, 2003 edition, Standard & Poor's Ratings Services withdrew its ratings on HEALTHSOUTH Corp. due to insufficient information about the company's operating performance, including a lack of audited financial statements. Standard & Poor's does not expect the company to be able to provide restated historical financial statements, or to be able to generate current-period financial statements, until at least the second half of 2004. The company has not filed audited financial statements since Sept. 30, 2002. On April 2, 2003, Standard & Poor's lowered its ratings on HEALTHSOUTH Corp. to 'D' after the company failed to make required principal and interest payments on a subordinated convertible bond issue that matured on April 1, 2003. HEALTHSOUTH is currently embroiled in extensive litigation over several years of allegedly fraudulent financial statements and is understood to be in discussions with its creditors about restructuring its debt. Nearly all members of senior management have left the company, and most of the important corporate functions have been assumed by professional advisors. Although HEALTHSOUTH continues to operate its business, neither its operations nor its financial performance can be assessed by Standard & Poor's with confidence until the company can generate audited financial statements. HEARTLAND PARTNERS: Looks for Buyer for Remaining Properties ------------------------------------------------------------ Heartland Partners, L.P. (Amex: HTL), reported first-quarter net income of $937,000 compared with $5.6 million a year earlier. Class A units were allocated $880,000 of the net income, or $0.42 per Class A Unit, compared with $5.5 million, or $2.61 per Class A Unit, in the 2003 first quarter. The balance of the net income in both periods was allocated to the Class B and General Partner Interests under the partnership agreement. Net income declined primarily because property sales were lower in 2004. The company closed a $9.8 million sale of Kinzie Station property in the first quarter of 2003. About $3 million in sales have closed to date in 2004. Operating expenses were essentially unchanged in both periods, with a decrease in sales and marketing expense offset by an increase in environmental expenses and other charges. "We are continuing to sell our major properties, with the remaining three parcels in Kinzie Station scheduled to close this year," said Lawrence Adelson, chief executive officer. "The aggregate amount of the Kinzie Station sales is about $10 million. We are still seeking a buyer for our 19-acre site in Glendale, Wisconsin." Adelson said the company is trying to find a single buyer for the remaining properties, consisting of about 13,000 acres. These are primarily smaller parcels -- former railroad right of way. Portions of the property are also being sold as opportunities arise. Company Sues Milwaukee Authorities Heartland Partners has filed suit against the Redevelopment Authority of the City of Milwaukee seeking additional compensation for the condemnation of its Menomonee Valley property in 2003. The case is likely to go to trial in 2005. The city paid $3.5 million for the property, but the company has had it appraised as high as $10 million. "As we wind down operations, our goals are to control costs and resolve liabilities," Adelson said. "The amount and timing of further cash distributions will depend on progress on each of these fronts." He said possible strategies for reducing operating costs include taking Heartland private through a reverse stock split or using a liquidation trust to dissolve it. "Either option would have implications for unitholders," Adelson said, "primarily the loss of the liquidity provided by public trading of the Class A units, to be weighed against the cost savings. The largest contingent liabilities are the employment contract lawsuit by Edwin Jacobson, former president and chief executive officer, and environmental claims. The Jacobson lawsuit is unlikely to be tried until 2005. The company's environmental liabilities arise primarily out of operations of former tenants or the Milwaukee Road railroad on property Heartland owns. "The cost and timing to resolve them are uncertain and difficult to control," Adelson said. "The company has engaged Marsh to seek a combination of environmental insurance and contractual liability assumption by an outside vendor as a way to bring some finality to the environmental liabilities. It is not yet clear whether this will be the practical solution we hope it will be." About Heartland Heartland Partners is a Chicago-based real estate partnership with properties in 14 states, primarily in the upper Midwest and northern United States. CMC Heartland is a subsidiary of Heartland Partners, L.P. CMC is the successor to the Milwaukee Road Railroad, founded in 1847. HEARTLAND PORK: Court Approves Sale of Hog Barn Assets to Sterling ------------------------------------------------------------------ The Saskatchewan Court of Queen's Bench has approved the sale of substantially all of the assets of Heartland Pork Management Services and seven related hog operations currently under the protection of the Companies' Creditors Arrangement Act to Sterling Pork Farm, a subsidiary of Stomp Pork Farm Ltd. Heartland and the seven related operations sought temporary protection under the CCAA on April 13, 2004. Since that time, the court-appointed monitor has received expressions of interest from potential purchasers. The offer to purchase was filed with the Court on May 7. Under the terms of the offer, rural-based employees working in the hog barns will be retained by Stomp. Stomp currently owns 7,500 sows and operates nine facilities located near Leroy, Saskatchewan. The sale is scheduled to close on May 21. Earlier this week, the Court extended the stay of proceedings under the CCAA Initial Order to June 30. The businesses will continue to operate as usual while the sale is concluded. Saskatchewan Wheat Pool, the majority shareholder in these operations, has been providing interim financing to the hog operations through the court protection process. Saskatchewan Wheat Pool is a publicly traded agribusiness co- operative headquartered in Regina, Saskatchewan. Anchored by a prairie-wide grain handling and agri-products marketing network, the Pool channels prairie production to end-use markets in North America and around the world. These operations are complemented by value-added businesses and strategic alliances, which allow the Pool to leverage its pivotal position between prairie farmers and destination customers. HOLLOWELL MERCANTILE: Case Summary & Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Hollowell Mercantile Inc. P.O. Box 5517 Greenville, Mississippi 38704 Bankruptcy Case No.: 04-12713 Type of Business: The Debtor is a Furniture Retailer. See http://www.hollfurn.com/ Chapter 11 Petition Date: April 30, 2004 Court: Northern District of Mississippi (Aberdeen) Judge: David W. Houston III Debtor's Counsel: Susan C. Smith, Esq. P.O. Box 1251 Greenville, MS 38702 Tel: 662-378-2558 Total Assets: $3,897,441 Total Debts: $2,784,555 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service Payroll taxes $281,253 Main and Poplar Greenville, MS 38701 Central Insurance Services $41,974 LMI Studios $41,765 A. Harvey Tackett, Jr. CPA $39,808 Masten Furniture Co. $32,003 MS State Tax Commission Sales & Use Tax $30,690 George F. Hollowell, Jr. $30,098 Universal Bedroom Furniture Outstanding balance $22,382 Fraenkel Company $20,095 Washington County Tax Property taxes $20,080 Collector Washington County Tax $17,734 Collector F.A. Hulett $17,175 State Tax Commission $16,732 Phelps Dunbar $16,638 W. L. Roberts $17,392 Washington County Tax 2003 $16,013 Ja-Boo-Be $15,750 Towne House Furnishing $12,252 Nancy J. Haven, Tax 2001 $9,869 Collector Woodson & Bozeman $9,560 HORIZON PCS: Sprint Agrees to Buy Assets & Resolve Claim Disputes ----------------------------------------------------------------- Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC, subsidiaries of Horizon PCS, Inc. announced that it has executed definitive and binding agreements with Sprint (NYSE: FON), which will result in the sale of certain Horizon PCS assets to Sprint, the termination of the parties' contractual relationship in West Virginia and western Virginia and the settlement of litigation and all billing disputes between the two companies. The agreements will become effective upon approval of the United States Bankruptcy Court for the Southern District of Ohio, Eastern Division, which holds jurisdiction over Horizon PCS' Chapter 11 proceedings. Under the Asset Purchase agreement, Sprint will pay Horizon PCS approximately $38 million to acquire its economic interests in approximately 97,000 subscribers and certain retail store assets in portions of its service area in West Virginia and western Virginia. Sprint will assume responsibility for the marketing, sales and distribution of Sprint PCS products and services in those territories. The companies also executed a related Settlement Agreement and Mutual Release, which will result in the dismissal of the litigation brought by Horizon PCS against Sprint in August, 2003, and the settlement of billing disputes. Under the Settlement Agreement, Sprint will release its claims for all pre-petition and post-petition payment disputes in return for a payment by Horizon of $4 million. "These two Agreements represent a critical step forward for Horizon PCS," said Bill McKell, president and CEO. "The asset sale will significantly improve the company's financial status, and allow us to focus on more profitable territories within our portfolio. The settlement of the litigation will enable us to refocus our attention on value creation for our investors." About Horizon PCS Horizon PCS is one of the largest PCS Affiliates of Sprint, based on its exclusive right to market Sprint wireless mobility communications network products and services to a total population of over 10.2 million in portions of 12 contiguous states. Its markets are located between Sprint's Chicago, New York and Raleigh/Durham markets and connect or are adjacent to 15 major Sprint markets that have a total population of over 59 million. As a PCS Affiliate of Sprint, Horizon markets wireless mobile communications network products and services under the Sprint and Sprint PCS brand names. Visit http://www.horizonpcs.com/for more information. INDEPENDENCE I: S&P Junks $33.41MM (11.34%) of Collateral Assets ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its rating on the class A notes issued by Independence I CDO Ltd., a CDO backed by ABS and other structured securities, on CreditWatch with negative implications. The CreditWatch placement reflects factors that have negatively affected the credit enhancement available to support the notes since the transaction closed in December 2000, primarily a negative migration in the credit quality of the assets within the collateral pool. Standard & Poor's noted that $33.41 million (approximately 11.34%) of the underlying assets in the collateral pool are rated 'CCC+' and below, and approximately 60% come from bonds issued in ABS manufactured housing transactions. Standard & Poor's will be reviewing the results of current cash flow runs generated for Independence I CDO Ltd. to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the rating currently assigned to the class A notes remains consistent with the credit enhancement available. Rating Placed On Creditwatch Negative Rating Class To From A notes AAA/Watch Neg AAA INTEGRATED HEALTH: IHS Liquidating Wants More Time to File Report ----------------------------------------------------------------- Since September 9, 2003, IHS Liquidating, LLC, has been reviewing certain of the Integrated Health Services, Inc. Debtors' claim objections that have not been fully prosecuted. Currently, IHS Liquidating is also reviewing certain claims to determine whether to file additional objections. Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor, in Wilmington, Delaware, tells the Court that the resolution of the many remaining disputed claims may require numerous hearings and substantial preparation from IHS Liquidating. Accordingly, IHS Liquidating asks the Court to further: (a) delay the entry of a final decree closing the IHS Debtors' Chapter 11 cases until December 8, 2004; and (b) extend the deadline to file the final report and accounting in all of the IHS Debtors' cases to October 5, 2004. Mr. Barry explains that delaying the entry of a final decree will ensure that IHS Liquidating will have the full opportunity to continue prosecuting the pending claim objections and other matters. Extending the deadline for filing the final report and accounting is warranted since the Court's jurisdiction may still be necessary while the claims administration process is ongoing. The Court will convene a hearing on May 26, 2004 to consider IHS Liquidating's request. By application of Del.Bankr.LR 9006-2, the deadline for filing a final report and accounting is automatically extended through the conclusion of that hearing. Headquartered in Owings Mills, Maryland, Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- IHS operates local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the Debtors in their restructuring efforts. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) KEYSTONE CONSOLIDATED: Asks SEC to Modify Reporting Procedure ------------------------------------------------------------- On February 26, 2004, Keystone Consolidated Industries, Inc., together with five of its direct and indirect subsidiaries (FV Steel and Wire Company, DeSoto Environmental Management, Inc., J.L. Prescott Company, Sherman Wire Company F/K/A DeSoto, Inc. and Sherman Wire of Caldwell, Inc.), filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Eastern District of Wisconsin in Milwaukee. The Company filed a Current Report on Form 8-K on February 27 2004 with the SEC, announcing the filing with the Bankruptcy Court. On March 18, 2004, the Company transmitted a letter to the staff of the Securities and Exchange Commission requesting confirmation from the SEC that it would not recommend an enforcement action against the Company if the Company files with the SEC under cover of Form 8-K, copies of each monthly report provided to the Office of the United States Trustee within 15 calendar days following the date on which the said report is filed with the United States Trustee and also promptly files reports on Form 8-K to disclose any material events related to its bankruptcy case and its reorganization efforts. This modified reporting procedure would replace the periodic reports on Form 10-K and 10-Q required under the Securities Exchange Act of 1934. Should the Securities and Exchange Commission grant the requested relief, the Company does not intend to file periodic reports on Form 10-K or 10-Q until the reorganization or liquidation of the Company is complete. As of March 30, 2004, the SEC had not responded to the Company's request for no-action relief. The Form 10-K containing the Company's financial information for the fiscal year ended December 31, 2003 could not be filed within the prescribed period because of the limitations on staffing, the Company's severely limited financial resources and the significant additional burdens that the Company's Chapter 11 case under the Bankruptcy Code has imposed on the Company's available human and financial resources. Accordingly, such inability could not have been eliminated by the Company without unreasonable effort or expense. KEYSTONE: Freezes Incentive Plan & Deregisters 100,000 Shares ------------------------------------------------------------- Keystone Consolidated Industries, Inc. initially registered, in the aggregate, the sale of 100,000 shares of its common stock, par value $1.00 per share, to be offered and purchased pursuant to the Keystone Consolidated Industries, Inc. Deferred Incentive Plan. The Company registered such shares of common stock pursuant to the Plan in contemplation of implementing a provision in the Plan that would have permitted employees to invest a portion of their employee contributions to the Plan in shares of common stock. However, the Company never implemented this provision of the Plan, employees have never been permitted to invest a portion of their employee contributions to the Plan in shares of common stock, and the Company has decided not to implement such provision in the future. Accordingly, the Company has deregistered all 100,000 shares of common stock registered pursuant to a prior registration statement, because such shares will never be offered or purchased under the Plan. Headquartered in Dallas, Texas, Keystone Consolidated Industries, Inc., makes carbon steel rod, fabricated wire products, including fencing, barbed wire, welded wire and woven wire mesh for the agricultural, construction and do-it-yourself markets. The Company filed for chapter 11 protection on February 26, 2004 (Bankr. E.D. Wisc. Case No. 04-22422). Daryl L. Diesing, Esq., at Whyte Hirschboeck Dudek S.C., and David L. Eaton, Esq., at Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $196,953,000 in total assets and $365,312,000 in total debts. MAGELLAN: Asks Court to Nix 646 Employee Claims Totaling $4 Mil. ---------------------------------------------------------------- Debra A. Dandeneau, Esq., at Weil, Gotshal & Manges, in New York, relates that on March 11, 2003, the Court authorized the payment of wages, compensation and employee benefits and directed financial institutions to honor and process checks and transfers related to the obligations. The Employee Order permitted the Magellan Health Services, Inc. Debtors to make payments to employees on account of prepetition wages, salaries, commissions, payroll taxes, social security taxes, Medicare taxes, health and welfare benefit plans, retirement plans, paid time off benefits, severance benefits, tuition reimbursements, business expense reimbursements, obligations in respect of temporary employees and all obligations with respect to related insurance policies and coverage. On April 23, 2003, the Debtors filed their schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs with the Court. The Debtors listed various outstanding Employee Obligations in the Schedules. In accordance with the Employee Order, from the Petition Date to the Effective Date, the Debtors continued to honor Employee Obligations in the ordinary course of their businesses. In addition, pursuant to the Plan, Employee Obligations have survived confirmation, remain unaffected, and have not been discharged. Consistent with the Plan, the Reorganized Debtors continued to honor all Employee Obligations since the Effective Date. Accordingly, the Reorganized Debtors ask the Court to disallow and expunge 646 Employee Claims, totaling $4,199,012. Some of the biggest Employee Claims are: Claimant Claim Amount -------- ------------ Arndt, Kenneth $103,106 Harbin, Henry 168,171 Messina, Daniel 174,197 Segal, Stuart 420,000 Segal, Stuart 451,712 Various Employees of Magellan Behavioral Health 281,760 Various Taxing Authorities & Benefit Providers 161,068 Ms. Dandeneau asserts that all of the Employee Claims either have been or will be paid in the ordinary course of the Debtors' and Reorganized Debtors' businesses. The Reorganized Debtors have not styled their request as an objection to the Employee Claims because the actual allowance of Employee Claims likewise will be determined in the ordinary course of the Reorganized Debtors' business. Instead, a formal Court order disallowing and expunging the Employee Claims will simply enable the Reorganized Debtors to maintain an accurate register of claims that are receiving distributions under the Plan and assure that the Employee Claims are not inadvertently paid under the Plan. 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. (Magellan Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000) MALAN REALTY: Q1 Net Assets in Liquidation Down to $27.4 Million --------------------------------------------------------------- Malan Realty Investors, Inc. (NYSE: MAL), a self-administered real estate investment trust (REIT), announced that net assets in liquidation for the first quarter ended March 31, 2004, decreased by $506,000 from the fourth quarter ended December 31, 2003, to $27.4 million. The estimated fair value on the remaining properties held for sale decreased approximately $224,000 based on updated analysis. The reserve for estimated liquidation costs increased approximated $337,000, primarily due to increases in actual other professional fees over what was previously projected and an increase in the estimated cost for insurance during the liquidation period. These decreases were offset by net operating income from the properties of approximately $1.6 million during the period. A distribution of $1.5 million was made to shareholders on January 26, 2004. As a result of the approval of a plan of complete liquidation by its shareholders, the company adopted the liquidation basis of accounting for all periods beginning after September 30, 2002. On September 30, 2002, in accordance with the liquidation basis of accounting, assets were adjusted to estimated net realizable value and liabilities were adjusted to estimated settlement amounts, including estimated costs associated with carrying out the liquidation. Accordingly, Malan no longer reports net income or funds from operations. Malan closed on the sales of three properties and a vacant land parcel during the quarter and three additional properties subsequent to March 31, 2004, at contract prices totaling $18.5 million. The company currently has 14 operating properties under contract. "The year to date has been very successful, with proceeds from property sales of approximately $18 million and the final redemption of the convertible subordinated debentures scheduled for next month," said Jeffrey Lewis, president and chief executive officer of Malan Realty Investors. "A majority of our properties are currently under contract for sale, which will allow us to reduce debt further and meet our principal obligations." The company also announced during the quarter that it would complete the redemption of its convertible subordinated debentures on June 1, 2004. The aggregate principal balance of its 9.5 percent Convertible Subordinated Debentures due July 15, 2004, is currently $7.1 million. Malan Realty Investors, Inc. is continuing to liquidate its assets and currently expects that no later than August 28, 2004, any then remaining assets and liabilities will be transferred to a liquidating trust. Each shareholder of Malan will automatically become the holder of one unit of beneficial interest in the trust for each share of Malan common stock, and all outstanding shares of Malan common stock will automatically be deemed cancelled. Malan Realty Investors, Inc. will seek relief for the trust from registering the units under Section 12(g) of the Securities Exchange Act of 1934, as amended, and its obligation to file periodic reports. Subject to limited exceptions related to transfer by will, intestate succession or operation of law, the units will not be transferable nor will a unit holder have authority, opportunity or power to sell or in any other manner dispose of any units. As a result, the beneficial interests in the liquidating trust will not be listed on any securities exchange or quoted on any automated quotation system of a registered securities association. Shareholders who may need or wish liquidity with respect to their company common stock before the liquidating trust makes liquidating distributions should look into selling their shares while the common stock is still traded on an established market. 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. MICROCELL TELECOMS: S&P Places B-/CCC+ Ratings On Watch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'CCC+' long-term corporate credit ratings and the 'B-' senior secured debt rating, on Microcell Telecommunications Inc. on CreditWatch with positive implications following Telus Corp.'s announced cash bid for 100% of the shares of Microcell. At the same time, the ratings on the company's subsidiary, Microcell Solutions Inc., were also placed on CreditWatch with positive implications. "Should the bid be successful, Microcell's existing debt would likely be redeemed in its entirety," said Standard & Poor's credit analyst Joe Morin. Microcell currently has about C$400 million in senior secured bank debt outstanding. Under the credit facility covenants, a change of control in Microcell could result in an acceleration of the debt, which can be exercised at the option of lenders. In addition, the debt can be voluntarily prepaid at any time. Standard & Poor's assumes that if the debt is not accelerated by creditors, Telus would prepay the debt given the facility's higher interest rates and collateral features. MIRANT CORP: U.S. Trustee Amends Creditors Committee Membership --------------------------------------------------------------- George F. McElreath, Assistant United States Trustee for Region VI, reports that Wachovia Securities and HSBC Bank USA replaced their representatives in the Official Committee of Mirant Corp. Unsecured Creditors, and that Bank of America is no longer a member of the Mirant Creditors Committee. John Dorans of Citibank, N.A., sits as the Chairman of the Mirant Creditors Committee. As of May 5, 2004, the members of the Mirant Unsecured Creditors Committee are: John Dorans, Chairman Citibank, N.A. 250 West Street, 8th Floor New York, NY 10013 Telephone (212) 723-3104 Fax (212) 723-3899 john.dorans@citigroup.com Lori Ann Curnyn Hypovereins Bank 150 East 42nd Street New York, NY 10017-4679 Telephone (212) 672-5935 Fax (212) 672-5908 loriann_curnyn@hvbcrediTadvisors.com Ronald Goldstein Appaloosa Management, LP 26 Main Street, 1st Floor Chatham, NJ 07928 Telephone (973) 701-7000 Fax (973) 701-7055 R.Goldstein@amlp.com Mark B. Cohen Deutsche Bank AG 60 Wall Street New York, NY 10019 Telephone (212) 250-6038 Fax (212) 797-5695 mark.b.cohen@db.com Tom Bohrer Wachovia Securities 1339 Chestnut Street The Widener Bldg., 4th Floor, PA4810 Philadelphia, PA 19107 Telephone (267) 321-6663 Fax (267) 321-6903 tom.bohrer@wachovia.com Sandi Horwitz HSBC Bank USA 452 Fifth Avenue New York, NY 10018 Telephone (212) 525-1324 Fax (212) 525-1366 Sandra.e.horwitz@us.hsbc.com 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. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) MORGAN STANLEY: S&P Rates 2004-HB1 Class D Notes at BB ------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to Morgan Stanley Auto Loan Trust 2004-HB1's asset-backed notes. The rating on the class A notes reflects 8.25% subordination and an overcollateralization target amount of 12.0% of the current pool balance. The rating on the class B notes reflects 5.2% subordination and an overcollateralization target amount of 7.5%. The rating on the class C notes reflects 1.70% subordination and an overcollateralization target amount of 5.5%. The rating on the class D notes is based on an overcollateralization target amount of 2.0% of the current pool balance with a floor of 1.0% of the initial pool balance, and annual excess spread of approximately 2.8%. In addition, the ratings on all classes of notes are based on the credit quality of the underlying pool of automobile loans originated by Huntington National Bank, which will continue to service the loans, and a sound legal structure. This transaction incorporates a number of structural features. The payment waterfall begins as a sequential payment structure. The payment structure may begin to make pro rata principal distributions if certain target overcollateralization amounts are achieved. The payment structure also allows for the reprioritization of subordinate interest to pay senior principal as additional loss coverage for senior classes. In addition, there are loan performance triggers built into the structure that cause the payment priority to switch back to sequential from pro rata if loan performance deteriorates beyond certain levels. Due to the reduction in excess spread, this transaction did not use the premium proceeds feature that was used in the Morgan Stanley Auto Loan Trust 2003-HB1 transaction. Ratings Assigned Morgan Stanley Auto Loan Trust 2004-HB1 Class Rating Amount (mil. $) A-1 AAA 225.300 A-2 AAA 165.450 A-3 AAA 174.400 A-4 AAA 187.285 B A+ 25.000 C BBB 28.710 D BB 13.940 NATL ENERGY: King Street Urges Creditors to be Vigilant over Sales ------------------------------------------------------------------ King Street Capital, L.P. and King Street Capital, Ltd. hold significant amounts of bank debt and bonds of National Energy & Gas Transmission, Inc. (NEGT), which are Class 3 Unsecured Claims under NEGT's Third Amended Plan of Reorganization. King Street objected to NEGT's Motion for Order Authorizing and Approving Sale of Shares of Gas Transmission Northwest Corporation to TransCanada American Investments Ltd. on the ground that the substantial risks of unprotected tax gain arising from the Pipeline Sale and from other proposed asset sales weigh heavily against proceeding with the Pipeline Sale at this time. On May 12, 2004, the Honorable Paul Mannes, Bankruptcy Judge for the United States Bankruptcy Court for the District of Maryland, held a hearing on the Sale Approval Motion, which lasted approximately 6 hours. The Court granted the Sale Approval Motion regarding the Pipeline, over King Street's objection, but in its oral ruling from the bench, the Court stated that: -- "King Street points out the risks inherent to producing the tax losses to offset the gain because of possible actions by debtor's corporate parent . . . "; -- "In short, there are weighty and substantial reasons for rejecting the sale, of that there is no question"; and -- "From what the Court has heard, there were numerous reasons advanced to cause the Court to believe that the sale may not produce what it has promised." King Street strongly believes that: -- NEGT's Disclosure Statement for the Plan failed to adequately disclose the potential risk of unsheltered tax gains arising from the proposed Pipeline Sale and from other proposed asset sales; -- King Street's reluctant path to litigation resulted from its inability to obtain sufficient comfort on the critical tax questions regarding such asset sales; and -- All NEGT creditors should be concerned about their potential recoveries and should remain vigilant and alert as the Pipeline Sale and any other proposed asset sales move forward. NETDRIVEN SOLUTIONS: March 31 Net Capital Deficit Drops to $221K ---------------------------------------------------------------- NetDriven Solutions Inc. (NDS: TSE) announced unaudited financial results for the six months ended March 31, 2004 and 2003. Overview During the second quarter, NDS entered into an amalgamation agreement dated March 26, 2004, with Cervus Financial Group Inc. The Amalgamation Agreement remains subject to shareholder and regulatory approval and the approval of the TSX. The purpose of the amalgamation is to conclude a transaction that will result in Cervus obtaining access to public funding to be used to develop its mortgage lending and financial services business and to provide NetDriven shareholders with increased liquidity in their holdings. The amalgamation will also permit NetDriven shareholders to participate in any growth of Cervus. For further details please refer to the Information Circular dated March 31, 2004, that can be found at http://www.SEDAR.com/ Results of Operations Continuing operations in the second quarter of fiscal 2004 reflect the efforts of NetDriven to finalize restructuring activities and enter into the proposed Amalgamation Agreement with Cervus. In the second quarter of fiscal 2004, NetDriven had a net loss of $134,554. It should be noted that results from operations in the prior fiscal 2003 comparative period ended March 31, 2004, includes operations which were discontinued. At March 31, 2004, NetDriven Solutions' balance sheet shows a decrease of stockholders' deficit to $221,423 compared to the $1,073,178 deficit reported at March 31, 2003. Revenue NetDriven had no revenue in the six-month period ended March 31, 2004. The sole focus of activities in the period was to complete the restructuring and to further the amalgamation process with Cervus. Operating Expenses The Company had no selling, operations, product development or production costs in the second quarter of fiscal 2004. General and administrative expenses of $206,208 consist primarily of contracts with individuals and organizations aiding in the restructuring of the business, office occupancy costs and professional fees. The Company continues to control these expenses to minimize costs incurred during restructuring as it takes the necessary action to complete the amalgamation with Cervus. Liquidity and Capital Resources As of March 31, 2004, the Company had cash on hand of $31,048 and, as the result of restructuring efforts in the first quarter and in fiscal 2003, no long-term debt. Restructuring The restructuring plan also included negotiating settlements with various creditors. Pursuant to agreements dated September 19, 2003, NetDriven entered into settlement agreements with various creditors to settle outstanding debts and liabilities totalling $1,532,223. The settlements involved partial payments in cash of $229,188 and the issuance of 13,099,701 NetDriven Shares for the balance of the debt. The shares were issued on March 19, 2004. Shareholder approval was obtained at the Annual and Special General Meeting held on January 19, 2004. Included in the debt settlement was indebtedness of $150,000 for management restructuring fees to be settled through issuance of 10,000,000 common shares and payment of $10,500 in cash. Except for payment of the cash component of $10,500 associated with settlement of indebtedness for management restructuring fees, the cash consideration of the various creditor settlement agreements have been paid. Creditors included a director and an insider of NetDriven. Private Placement The Company issued 14,000,000 NetDriven Shares at a deemed price of $.02 per share pursuant to a private placement. NetDriven has received proceeds of $280,000 from the placement. The proceeds were used for settlement of the cash portion of the restructured indebtedness, payment of reorganization costs and general working capital. Outlook NetDriven has completed the restructuring of its operations. The Company has entered in to the Amalgamation Agreement with Cervus, which remains subject to various approvals. Risks and Opportunities Although the Company's restructuring is complete, the success in repositioning NetDriven to move forward is dependent upon the successful completion of the amalgamation with Cervus. There are various conditions to be satisfied prior to the completion of the amalgamation with Cervus. NEW HEIGHTS: Asks Court to Approve $1 Million DIP Financing Pact ---------------------------------------------------------------- New Heights Recovery is asking permission from the U.S. Bankruptcy Court for the District of Delaware for permission to obtain $1 million of Postpetition Financing from Grace Brothers, Ltd., and Casella Waste Systems, Inc., to finance the ongoing operation of its business while under chapter 11 protection. The DIP Credit Agreement provides that Grace will loan to the Debtor up to $500,000 and Casella will loan the other $500,000. The DIP Lenders are the controlling interest holders and are significant creditors of the Debtors. Grace Brothers has a $2.265 million prepetition secured claim, along with its affiliates Grace Funding Partners LP holds claims aggregating to $13.83 million. Casella Waste holds prepetition unsecured claims of $6.11 million, and is an indirect beneficiary in a $8.26 million prepetition unsecured claims held by KTI, Inc., and Recovery Technologies Operations, LLC. The proceeds of the DIP Financing will be used to pay for: a) all operating expenses of the Debtor; b) the removal of tires from the Debtor's Chicago Facility; and c) all postpetition fees and costs of the Debtor, including fees and expenses of professionals and fees due to the Office of the United State Trustee. The DIP Financing will terminates on the earliest of: a) July 31, 2004; b) the date of a sale of all or substantially all of the Debtor's assets under Section 363 of the Bankruptcy Code; c) effective date of any plan of reorganization; or d) the date the Lenders demand payment after any event of default. The Debtor's obligation to the Lenders will bear interest at the rate of 5% per annum and, should an event of default occur that is not cured or waives, Default Interest is an additional 3% per annum. The Lenders will also receive a $40,000 Facility Fee at the Termination Date from the Debtors. The Lenders, as security to the loan extended to the Debtors, will be granted a superpriority administrative expense claim and a first priority lien on the DIP Collateral. The Debtor reports that it was unable to obtain unsecured credit pursuant to Sections 503(b)(1) and 364(b) of the Bankruptcy Code. The Debtor submits that the DIP Financing is necessary to preserve its assets and that the terms of the transaction are fair, reasonable and adequate. Headquartered in Ford Heights, Illinois, New Heights Recovery & Power, LLC -- http://www.tires2power.com/-- is the owner and operator of the Tire Combustion Facility and other tire rubber processing facilities. The Company filed for chapter 11 protection on April 29, 2004 (Bankr. Del. Case No. 04-11277). Eric Lopez Schnabel, Esq., at Klett Rooney Lieber & Schorling represents the Debtor in its restructuring efforts. When the Company filed for chapter 11 protection, it listed both its estimated debts and assets of over $10 million. NORTEL NETWORKS: Federal Grand Jury Subpoenas Documents ------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT) announced that Nortel Networks has received a Federal Grand Jury Subpoena for the production of certain documents, including financial statements and corporate, personnel and accounting records, prepared during the period Jan. 1, 2000 to date. The Company has been advised that the materials sought are pertinent to an ongoing criminal investigation being conducted by the U.S. Attorney's Office for the Northern District of Texas, Dallas Division. The Company will fully cooperate with the authorities in this matter. Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com/ * * * As reported in the troubled Company Reporter's April 30, 2004 edition, Standard & Poor's Rating Services lowered its 'B' long- term corporate credit rating and other long-term ratings on Nortel Networks Corp. and Nortel Networks Ltd. to 'B-'. The CreditWatch implications are revised to developing from negative. The short- term corporate credit and commercial paper ratings are unchanged, and remain on CreditWatch with negative implications. "The actions reflect an increased possibility that holders of Brampton, Ontario-based Nortel Networks' securities could provide notice of noncompliance to Nortel Networks, following its announcement of major changes to its senior executive team, in addition to an expansion of the existing investigation into its accounting for fiscal years 2001 through 2003," said Standard & Poor's credit analyst Bruce Hyman. As a result of the previously announced delayed filing of its 2003 Form 10-K beyond March 30, 2004, Nortel Networks is not in compliance with obligations under its indentures on $3.6 billion in public debt. No notice of noncompliance has been provided by holders of its securities as a result of that delayed filing, although holders have had the right to do so since March 29, 2004. If holders of at least 25% of the outstanding amount of any debt securities were to provide such notice of noncompliance to Nortel Networks, and if the company were then to fail to file the 10-K within a further 90 days, the holders would have the right to accelerate the maturity of its securities. The ongoing review means the filing of the 2003 Form 10-K and first quarter 2004 financial reports will continue to be delayed. Nortel Networks' cash balances at March 31, 2004, were $3.6 billion, approximately equal to the outstanding debt, while the company has no other sources of liquidity; cash balances had declined by about $400 million since December 31, 2003. As a result of the work to date by the independent audit review, Nortel Networks will have to further restate 2001 and 2002 financial statements and revise previously reported 2003 results. Net earnings for 2003 are expected to be reduced by about 50%, and will be reported in prior periods, resulting in a decrease in losses reported in 2002 and 2001. NORTHWESTERN CORP: Montana Regulators Agree Not to Oppose Plan -------------------------------------------------------------- NorthWestern Corporation (Pink Sheets: NTHWQ) announced that it has reached a preliminary agreement with the Montana Public Service Commission (MPSC) and Montana Consumer Counsel (MCC) on the Company's plan of reorganization and disclosure statement which is currently before the U.S. Bankruptcy Court for the District of Delaware. The preliminary agreement was approved by the MPSC by a 5-0 vote during a public meeting held on May 14, 2004. A final agreement will be completed and submitted for approval by the bankruptcy court. "We are pleased that we have been able to work with Montana regulators on issues that are important both for our utility customers and for the future of our Company," said Gary G. Drook, President and Chief Executive Officer of NorthWestern. "This agreement builds upon the good business practices that the Company has been implementing during our reorganization and establishes a shared vision of good governance and fiscal responsibility for NorthWestern as we move toward our goal of emerging from bankruptcy by the end of 2004." Under the preliminary agreement, the Montana Public Service Commission and Montana Consumer Counsel will not oppose NorthWestern's plan of reorganization in the bankruptcy court. In addition, the MPSC/MCC agreed to a settlement of the pending financial investigation docket. Furthermore, the MPSC/MCC will not oppose NorthWestern's effort to refinance all or some of its secured debt including its debtor-in-possession financing as long as the terms of such financing are comparable to or better than the indebtedness being financed. The preliminary agreement provides for the following actions: -- NorthWestern will "ring fence" its public utility assets at the parent level. Debt at the parent company will consist only of public utility debt, and proceeds of all parent company debt will be used solely to fund activities of the public utility. -- NorthWestern will file complete documents complying with the minimum electric and gas rate case filing standards provided under Montana law, whether or not the Company applies for an adjustment in rates, no later than Sept. 30, 2006, based on a 2005 test year. It is further agreed, that the burden of proof in a new rate case filing will fall on any party that is seeking to change rates from currently approved levels. -- NorthWestern has engaged an independent consulting firm to evaluate its utility transmission and distribution infrastructure and maintenance practices, and the Company will work with the MPSC/MCC in implementing appropriate recommendations. -- NorthWestern will provide notice of any material transfer, merger, sale, lease or other disposition transaction involving public utility assets. -- NorthWestern will not provide financial support to its nonutility subsidiaries unless the Company's consolidated book equity as a ratio to consolidated total assets is at least 40 percent. Under those circumstances, the Company will be permitted to provide limited financial assistance to its subsidiaries based on the Company's credit ratings. -- NorthWestern will maintain separate accounting records for each subsidiary and the public utility. Universal Service Benefit collections will continue to be collected in a separate bank account. -- NorthWestern will have a new, independent Board of Directors and will use reasonable efforts to attract and retain directors with utility or energy expertise. -- NorthWestern will provide evidence of minimum cash or available credit of not less than $75 million prior to its confirmation hearing on its plan of reorganization. -- NorthWestern agreed to pay the fees and out-of-pocket expenses of MPSC and MCC professionals. NorthWestern will make appropriate modifications to its proposed plan of reorganization and disclosure statement to reflect the final agreement with the MPSC/MCC for submittal to the bankruptcy court, along with a request of the bankruptcy court to approve the agreement. The bankruptcy court will conduct a hearing on May 17, 2004, regarding the disclosure statement. About NorthWestern NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 608,000 customers in Montana, South Dakota and Nebraska. NQL DRILLING: Considers Sale & Taps Simmons to Evaluate Options --------------------------------------------------------------- NQL Drilling Tools Inc. (TSX - NQL.A) announced its financial results for the first quarter as well as the status of its strategic process. Update On Strategic Process As previously announced, NQL has formed a special committee of the Board of Directors to consider various options that may be available to the Company to enhance shareholder value. The special committee has retained Simmons & Company International, a Houston based investment banking firm specializing in the energy industry, to assist the Board of Directors in considering and evaluating strategic alternatives. At this time NQL is continuing to investigate options available to it, including a possible sale of the Company. To that end, NQL has entered into confidentiality agreements with several interested parties in advance of possible discussions concerning a transaction. The Company expects that should a sale or other transaction be pursued, any such transaction would be publicly announced at some point in the next 90 days. First Quarter Highlights Highlights for the quarter include: - Closed previously announced sale of Ackerman International for total proceeds of US$1.4 million; - Negotiated sale of the Company's RTI casing exit tool for total proceeds of US$0.6 million. Closing of this transaction occurred in April; - Completed the merger of the Company's Tool and Bit divisions under one marketing umbrella to take advantage of the Company's worldwide sales infrastructure and to increase marketing focus on the expanding performance drilling market. NQL is uniquely positioned to offer performance drilling systems which involve the provision of a downhole mud motor paired with a fit-for-purpose drill bit; - Completed a refinancing of the Company's long-term debt and other credit facilities; and - Implemented the preliminary steps in a cost rationalization program. Management's Discussion And Analysis First Quarter Operations Review First quarter revenue declined in 2004 versus 2003 primarily due to continued slow activity levels in the Gulf of Mexico that reduced sales for the Company's Bit Division. NQL's Bi-Center Bit product line in particular is dependant upon offshore drilling activity in areas such as the Gulf of Mexico. Ignoring the impact from one individual motor sale in 2003, revenue from the Company's Tool Division was up year-over-year, while the Fishing Division continued to post strong results in response to high drilling rig counts in Canada and the continued growth of its business in the United States. Revenue Revenue during the first quarter of 2004 included $15.8 million (2003 - $16.2 million) from the Tool Division, $5.2 million (2003 - $7.6 million) from the Bit Division and $6.5 million (2003 - $6.0 million) from the Fishing Division. Geographically, revenue during the first quarter of 2004 in the Tool Division was broken down between $4.8 million (2003 - $6.3 million) in Canada, $7.2 million (2003 - $6.5 million) in the United States and $3.8 million (2003 - $3.4 million) from various international locations, the largest of which were Venezuela at $1.2 million (2003 - $0.2 million) and Holland at $1.2 million (2003 - $0.9 million). Revenue from the Tool Division in Canada during the first quarter of 2003 included a large motor sale that was not replicated during the first quarter of 2004 and accounted for the largest portion of the year-over-year decline in Canadian Tool revenue. Expenses and Margins Gross margins for the first quarter of 2004 were 42 percent compared to 48 percent in the comparable period of 2003. Margins declined in 2004 when compared to 2003 as a result of poor results in Argentina and Mexico where revenue levels declined dramatically in a market where the cost structure is largely fixed. In addition, effective January 1, 2004, the Company determined that certain engineering and support costs related to its EM-MWD product line should be treated as direct costs as opposed to general and administrative costs. This change is consistent with the shift in strategic focus for this product line from a rental/leasing model to a system sale model. G&A Administrative costs for the first quarter declined from $9.5 million in 2003 to $8.4 million in 2004. This decline was the result of cost cutting initiatives implemented in early 2004, as well as the impact of the reclassification of certain expenses related to the Company's EM-MWD system from general and administrative to direct expenses to reflect the changing strategic focus of the Company related to this tool. Amortization Amortization expense declined from $3.7 million during the first quarter of 2003 to $2.9 million in the comparable 2004 period. This decline is primarily a result of the requirements under Canadian GAAP to cease depreciating assets once they are classified as being held for sale. During the fourth quarter of 2003, the Company announced its intention to dispose of several business units and capital assets in conjunction with its overall restructuring efforts at which time a significant dollar value of capital assets were reclassified as being held for sale. These assets are carried at the lower of their carrying amount and fair value net of estimated disposition costs. Interest Interest expense during the first quarter was $0.8 million, a significant decline from the $1.9 million recorded in the same period of 2003. The reduction in interest expense was primarily due to a significant decrease in debt levels resulting from the proceeds of two equity issues in late 2003. In addition, during early 2003 the Company was incurring punitive interest costs and fees charged by its then existing lenders as a result of the financial difficulties the Company was experiencing at that time. Stock Based Compensation Effective January 1, 2004, the Company adopted the revisions to CICA Handbook Section 3870 "Stock-Based Compensation and Other Stock-Based Payments". The revised section 3870 requires that the fair value of common share purchase options, calculated at the date of grant, are to be recorded in the income statement over the vesting period of those grants. As the Company has retroactively applied this standard without restatement of prior periods, there is no corresponding expense for the three months ended March 31, 2003. Discontinued Operations During the fourth quarter of 2003, management and the Board conducted an internal analysis of all aspects of the Company and concluded that certain of its assets and operations were no longer central to the longer-term strategy of the Company. Discontinued operations during the first quarter included the Company's tool operations in Bolivia. In 2003 discontinued operations included Ackerman International and the Company's tool operations in Bolivia. Net Loss and Loss per share Overall, the Company recorded a net loss of $0.9 million ($0.02/share) during the first quarter of 2004 that compares to a loss of $1.2 million ($0.04/share in 2003). The first quarter 2004 after tax loss included $0.6 million of non-cash expenses related to stock based compensation, $0.2 million of foreign exchange losses primarily related to Venezuela associated with a devaluation of that country's currency, and $0.7 million of negative earnings in Mexico and Argentina. Excluding the impact of these items, NQL would have posted a small profit during the first quarter of 2004. The amount of the per share loss in 2004 was impacted by the significant increase in the weighted average number of common shares outstanding resulting from the significant number of shares issued in late 2003 in conjunction with the financial restructuring of the Company. Capital Resources, Liquidity and Share Capital As at March 31, 2004, the Company had a working capital surplus of $26.4 million, unchanged from December 31, 2003. As a result of a build in accounts receivable during the quarter, cash flow from continuing operations was negative $2.2 million and was financed primarily by a corresponding increase in the Company's operating line of credit. At this time the Company has sufficient availability in its operating lines of credit to meet the ongoing obligations of the Company. At May 14, 2004, the Company had 42.6 million common shares, 3.4 million stock options (1.2 million exercisable) and 0.1 million warrants (0.1 million exercisable), virtually unchanged from December 31, 2003. Outlook Land drilling activity levels in Canada and the United States are expected to remain very strong for the remainder of 2004. In addition, management is beginning to see the benefits of the strategy to merge the tool and bit divisions of the Company to serve the growing performance drilling market. However, until offshore drilling activity improves in areas such as the Gulf of Mexico, the Company expects demand for its Bi-Center drill bits to continue to be weak. Although the Company did post a loss in the first quarter, management believes that the initiatives undertaken to date, together with a strong focus on optimizing ongoing operations, will allow NQL to return to profitability during 2004. About the Company NQL Drilling Tools Inc. is an industry leader in providing downhole tools, technology and services used primarily in drilling applications in the oil and gas, environmental and utility industries on a worldwide basis. NQL trades on the Toronto Stock Exchange under the symbol NQL.A. NRG ENERGY: Remaining Debtors Ask To Extend Exclusive Periods ------------------------------------------------------------- Debtors NRG McClain, LLC, LSP-Nelson Energy, LLC, and NRG Nelson Turbines, LLC, ask the Court to extend their Exclusive Periods for: (a) filing a Chapter 11 plan through September 8, 2004; and (b) obtaining acceptances through November 8, 2004. Samuel S. Kohn, Esq., at Kirkland & Ellis, in New York, tells the Court that the Remaining Debtors are making great strides with respect to their Chapter 11 cases. Accordingly, an extension of the Exclusive Periods is both necessary and appropriate to allow the Remaining Debtors to commence and consummate the next stage in the administration of their estates. Since the NRG McClain Petition Date, NRG McClain has been diligently working on one goal -- to consummate the Sale of NRG McClain's assets to Oklahoma Gas and Electric Company. This can only occur subsequent to the approval by the Federal Energy Regulatory Commission of the Sale. Additional time is required to obtain the FERC approval, effectuate the closing of the Sale, and formulate a Chapter 11 plan or other disposition of the Chapter 11 case. On the other hand, Thomassen Amcot International, LLC, has identified over 60 potential interested parties for the purchase of the Nelson Entities' assets. Thomassen is in the process of working with those parties who respond with interest to get them information necessary to make a bid on the Nelson Entities' assets. The delay of filing a plan is not occasioned by any fault of NRG McClain but rather by the lengthy regulatory approval process. Furthermore, NRG McClain has diligently worked together with the prepetition lenders and Oklahoma Gas to take all actions necessary to move the process forward. The Remaining Debtors need additional time to concentrate on the remaining elements that are critical to the development and implementation of a plan of reorganization or other deposition of their Chapter 11 cases. Terminating the Debtors' Exclusive Periods at this critical juncture, would be a significant setback and could cause uncertainty at this critical point of time in the bankruptcy process. (NRG Energy Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 215/945-7000) ONLINE POWER: Files Chapter 11 Petition in Colorado Bankr. Court ---------------------------------------------------------------- OPS, OnLine Power Supply, Inc. (OTC:OPWR) announced that on May 14, 2004, the company filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Colorado. A motion to Approve Debtor in Possession (DIP) financing has been filed with the court. As part of that motion, OPS has requested authority to borrow up to $125,000.00 from Saturn Electronics & Engineering, Inc. to provide operating capital during the pendency of the Chapter 11. OPS and Saturn have also proposed to enter into an asset purchase agreement. The agreement calls for Saturn, subject to Bankruptcy Court approval, to purchase substantially all of OPS' assets for $400,000. That amount includes a credit for the outstanding balance due to Saturn for the DIP financing. The Saturn offer is also subject to higher and better offers which will be entertained at an auction which is expected to occur in August 2004. This proposed sale and the auction procedures and dates for the sale are the subject of other motions which have been filed with the Bankruptcy Court. Parties interested in purchasing OPS' assets should contact the company for more information. OPS holds a U.S. patent for the process of producing AC to DC power supplies that provide efficiencies of up to 97 percent, extended operating temperature ranges and above average power densities, all with no magnetic thermal deration. This innovation is called Distributed Power Magnetics (DPM) and is the first significant breakthrough in power supply technology in over 23 years. The sophisticated DPM products also boast impressive MTBF statistics, all in the lightest and smallest footprint available for their particular configurations. Benefited industries include telecommunications, data communications, networking and industrial. Company Web site is at http://www.powersupply.com/ PARMALAT FINANZIARIA: Reports Key Actions in April 2004 ------------------------------------------------------- Parmalat Finanziaria SpA in Extraordinary Administration intends to begin a process of periodic communication of the actions undertaken by the Group while in Extraordinary Administration. To this end at the mid-point and at the end of each month a press release will be issued summarizing the key actions undertaken over the previous two-week period. This first release summarizes the actions of the month of April. The company will continue to communicate to the market in the normal way any actions or issues of a "price sensitive" nature. (1) As at 30 April the companies in Extraordinary Administration have not taken on any new financial debt. In particular Parmalat SpA in Extraordinary Administration has cash resources of EUR23 million. To date no use has been made of the line of credit of EUR105 million extended by a pool of banks on 4 March 2004. (2) During the course of the month the following companies have been declared insolvent and therefore brought under the umbrella of the Extraordinary Administration: * ELIAIR SRL (aircraft), * NEWCO SRL (plant), * PANNA ELENA C.P.C. SRL, * CENTRO LATTE CENTALLO SRL, * TAUROLAT SRL, * G.F.A. SRL, * SAF SRL, * PARMA ASSOCIAZIONE CALCIO SPA Taurolat S.r.l., G.F.A. S.r.l. and SAF S.r.l. are three holding companies to which 32 concessionary companies involved in the distribution of Parmalat products refer. The complete list of companies in Extraordinary Administration is available for inspection [at] http://web.ltt.it/tribunale/home.htm (3) The following activities have been sold: Nicaragua Parmalat Nicaragua SA signed an agreement with Grupo Financiero y Corporativo LAFISE, that foresees the transfer of all of the assets and liabilities of Parmalat Nicaragua SA to a newly formed company 51% of which will continue to be owned by Parmalat Nicaragua SA, while 49% will be transferred to LAFISE. In return the latter will repay the company's entire bank debt of $5.4 million. Thailand Parmalat SpA in Extraordinary Administration sold to Campina International Holding B.V. its holding of 89.79% of the share capital of Parmalat Thailand, Ltd. The Thai company was sold along with its debt with banks of EUR2.8 million for a symbolic value of $1; the transaction entailed a capital loss for the Group of EUR4.1 million. NOM Parmalat Austria GmbH signed with Raiffeisen-Holding Niederosterreich-Wien reg.Gen.m.b.H., an agreement for the sale of its participation of 25% plus one share of the share capital of the Austrian company NOM AG. The sale will become effective with: (i) the lifting of the sequestration order relating to NOM shares; (ii) the conclusion of an agreement relating to the supposed right of collateral claimed by Raiffeisen Zentralbank Osterreich AG over NOM shares; (iii) the waiver by NOM of all claims for damages against Parmalat SpA in Extraordinary Administration; and (iv) the non-exercise by Parmalat Austria GmbH or Parmalat SpA in Extraordinary Administration of the option right over 50% of the share capital of NOM. The closing of the transaction is expected to take place no later than 15 December 2004. The sale consideration of EUR37.6 million has been deposited with a notary who will free the funds to one of the parties depending on whether closing takes place or no agreement is reached. From the beginning of the Administration until 30 April 2004 disposals have raised EUR21 million and financial debt has been reduced by EUR7 million. (4) AT Kearney has completed is review of the Group's industrial plan. The relevant Comfort Letter is expected to be received during the early days of May. (5) At the end of the month meetings took place in Collecchio (Parma) with managers from the Group's principal companies in order to provide more detail for the Industrial Plan. AT Kearney and PricewaterhouseCoopers (PWC) took part in these meetings. (6) PWC completed the 2004 budget and the 2005/2006 plan for the Group's principal units. Their final report is expected to be received in early May. 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. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) PARMALAT USA: Creditor-Supported Farmland Plan in the Works ----------------------------------------------------------- Farmland Dairies, LLC intends to work with its creditors to develop a plan to reorganize and restructure its business. This plan will include assets of Parmalat USA Corp. and Farmland Dairies, LLC. Farmland Management believes this plan will provide the necessary long-term financial and operational stability required to ensure that Farmland could continue to successfully operate its dairy business in the United States. Since Farmland began its Chapter 11 case on February 24, 2004, management has thoroughly reviewed the business. Based on that review, it was concluded that the best course of action is to develop a plan of reorganization to allow Farmland to emerge from Chapter 11 with a new capital structure in place, and to make operational improvements to achieve the long-term financial and operational stability the business requires to succeed. The post- petition lenders have decided to move forward on this plan. To this end, it was determined not to pursue a sale of assets at this time, and the post-petition lending agreement will be modified to remove all deadlines relating to a sale of assets. "The development of this plan is recognition of the intrinsic value of the Farmland business and its future profitability," said Jim Mesterharm, Principal, AlixPartners. "While Farmland's original DIP financing package continues to provide the liquidity necessary for operations in the shorter term, the company is now in a position to be able to work with post-petition lenders and other creditors to secure longer-term financing that, when in place, would allow Farmland to develop and implement a standalone restructuring plan around the Company's core businesses." Farmland is also in the process of initiating a search process with the goal of hiring a CEO to lead the business in the future. Farmland's bankruptcy case has been assigned to the Honorable Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York. Further information can be obtained via the Internet at http://www.nysb.uscourts.gov/ PLAINS EXPLORATION: S&P Raises Corporate Credit Rating to BB ------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on independent oil and gas companies Plains Exploration & Production Co. (PXP) and Nuevo Energy Co. (NEV) to 'BB' from 'BB-' and removed the ratings from CreditWatch, where they were placed on Feb. 12, 2004. Standard & Poor's also raised its senior subordinate debt rating on PXP and NEV to 'B+' and raised NEV's preferred stock rating to 'B'. The outlook is stable. The combined PXP and NEV entity will have about $825 million of debt, pro forma for this transaction and recent asset sales. "The rating actions follow today's announcement that PXP and NEV stockholders have approved the stock-for-stock acquisition of NEV, which is valued at about $945 million," noted Standard & Poor's credit analyst Steven K. Nocar. "Although PXP will not initially guarantee NEV's debt and NEV will merge into PXP as an unrestricted subsidiary, Standard & Poor's believes that PXP will likely collapse this structure and refinance outstanding NEV debt in the near term," he continued. As such, Standard & Poor's has harmonized the two ratings. The ratings on the combined entity reflect its participation in a volatile, competitive, and highly capital-intensive industry and the challenging economics associated with the reserve base. These weaknesses are somewhat offset by a high percent of long-lived, company-operated properties and a strategy of reducing operating cash flow volatility though an extensive hedging program. The stable outlook reflects the significant cash flow protection enjoyed through attractively priced commodity hedges and expectations that the company will use free cash flow to reduce debt. Standard & Poor's expects that potential acquisitions will be financed in a balanced manner. PUBLICARD: Balance Sheet Insolvent by $3.4 Million at March 31 -------------------------------------------------------------- PubliCARD, Inc. (OTCBB:CARD) reported its financial results for the quarter ended March 31, 2004. Sales for the first quarter of 2004 declined to $828,000, compared to $1,413,000 a year ago. The Company experienced substantially reduced volume in its direct sales channel in the United Kingdom as well as a decline in revenues through its U.S. distribution partners. The Company reported a net loss for the quarter ended March 31, 2004 of $503,000, or $0.02 per share, compared with net income of $1,000,000, or $0.04 per share, a year ago. The 2004 and 2003 results include gains of $477,000 and $1,707,000, respectively, relating to various insurance settlements. As of March 31, 2004, cash and short-term investments totaled $2,871,000. In February 2004, the Company entered into a binding agreement to assign to a third party certain insurance claims against a group of historic insurers. The claims involve several historic general liability policies of insurance issued to the Company. After allowance for associated expenses and offsetting adjustments, the Company received net proceeds of approximately $477,000 in May 2004. At March 31, 2004, PubliCARD Inc.'s balance sheet shows a total shareholders' deficit of $3,433,000 compared to a deficit of $2,928,000 at December 31, 2003 About PubliCARD, Inc. Headquartered in New York, NY, PubliCARD, through its Infineer Ltd. subsidiary, designs smart card solutions for educational and corporate sites. The Company's future plans revolve around a potential acquisition strategy that would focus on businesses in areas outside the high technology sector while continuing to support the expansion of the Infineer business. However, the Company will not be able to implement such plans unless it is successful in obtaining additional funding, as to which no assurance can be given. More information about PubliCARD can be found on its web site http://www.publicard.com/ RURAL/METRO: March 31 Balance Sheet Upside Down by $209 Million --------------------------------------------------------------- Rural/Metro Corporation (Nasdaq: RURLC), a leading national provider of medical transportation and fire protection services, announced the results for its fiscal 2004 third quarter ended March 31, 2004. Net revenue for the three months ended March 31, 2004 was $136.8 million, compared to $123.7 million for the same quarter of the prior year, representing an increase of 10.6%. For the nine months ended March 31, 2004, net revenue was $401.0 million, compared to $368.0 million for the same period of the prior year, representing an increase of 9.0%. Medical transportation and related service revenue increased $12.1 million, or 11.5%, from $105.7 million for the three months ended March 31, 2003 to $117.8 million for the three months ended March 31, 2004. These overall results reflect the Company's continued focus on same-service-area growth, improved billing and collections, rate increases, and operational efficiencies. On a same-service-area basis, medical transportation and related service revenue for the three months ended March 31, 2004 increased $9.7 million, or 9.1% over the same period of the prior year. Additionally, there was a $1.9 million increase in revenue related to new contracts. Fire and other revenue increased approximately $1.0 million, or 5.6%, from $18.0 million for the three months ended March 31, 2003 to $19.0 million for the three months ended March 31, 2004. The increase is primarily due to an increase in fire subscription revenue of $0.8 million primarily as a result of increased subscription rates. Income from continuing operations for the three months ended March 31, 2004 was $2.2 million, compared to a loss from continuing operations of $(11,000) in the same period of fiscal 2003. For the first nine months of fiscal 2004, the company reported income from continuing operations of $5.1 million, compared to a loss from continuing operations of $(2.0) million for the same period in fiscal 2003. Jack Brucker, President and Chief Executive Officer, said, "We are pleased to generate consistent growth in revenue and income, as we execute on our strategic plan to increase market share in existing service areas. Our commitment to this plan has resulted in consistent improvement in financial and operating performance." For the three months ended March 31, 2004, medical transport volume increased by approximately 6.0%, representing 15,600 additional transports over the same period of the prior year. Approximately 4,400 of the additional transports provided in the three-month period were attributed to new contract activity. For the nine months ended March 31, 2004, medical transport volume increased by 5.2%, representing an additional 39,400 transports over the same period of the prior year. Approximately 13,000 of the additional transports provided in the nine-month period were attributed to new contract activity. For the three months ended March 31, 2004, the company reported $12.3 million in earnings before interest, taxes, depreciation and amortization (EBITDA), compared to $11.1 million for the same period of the prior year. For the first nine months of fiscal 2004, the company reported EBITDA of $36.7 million, compared with $43.7 million for the same period of the prior year. Excluding a $12.5 million, non-cash gain for the disposal of the company's Latin American operations, EBITDA for the nine months ended March 31, 2003 would have been $31.2 million. Cash collections for the three months ended March 31, 2004 totaled $115.7 million, compared to $110.0 million for the same period in fiscal 2003. For the nine months ended March 31, 2004, cash collections totaled $340.3 million, compared to $330.8 million for the same period in fiscal 2003. Brucker continued, "While we are diligent in our ongoing efforts to create consistent growth, we also remain intently focused on sustaining strong cash-flow performance." Daily cash deposits for the three months ended March 31, 2004 averaged $1.9 million, compared to an average of $1.8 million daily for the three months ended March 31, 2003. Contract activities during the quarter included the award of long- term, exclusive medical transportation renewal contracts in two Arizona communities and one aircraft rescue and fire fighting (ARFF) renewal contract at a municipal airport in North Dakota. The medical transportation contract renewals were awarded for continuing service to the Town of Gilbert, Arizona, and the City of Apache Junction, Arizona. Each contained terms of up to nine years. The ARFF contract provided for a two-year renewal to continue providing airport fire and safety services to the Bismarck Municipal Airport in North Dakota. "We are very pleased to continue serving each of these customers," Brucker said, adding, "Our ability to continuously renew contract relationships illustrates the high level of confidence and satisfaction that our customers have in the quality of our services." At March 31, 2004, Rural/Metro Cororation's balance sheet shows a stockholders' deficit of about $209 million compared to a $210 million deficit at June 30, 2003. About Rural/Metro Rural/Metro Corporation provides emergency and non-emergency medical transportation, fire protection, and other safety services in 24 states and more than 400 communities throughout the United States. For more information, visit the company's web site at http://www.ruralmetro.com/ SAFFRON FUND: Stockholders Back Liquidation & Dissolution Plan -------------------------------------------------------------- The stockholders of Saffron Fund, Inc. (NYSE:SZF) voted to approve a Plan of Liquidation and Dissolution at the Annual General Meeting in New York. The Board of Directors of the Fund intends to meet next week to consider the implementation of the Plan. The Plan will become effective only upon the finding by the Board, in its sole discretion, that any and all possible claims pending against the Fund, the Board and each Director have been resolved in a satisfactory manner. Saffron Fund, Inc. is a closed-end, non-diversified management investment company. SENTRY TECHNOLOGY: Equity Deficit Widens to $195,000 at March 31 ---------------------------------------------------------------- Sentry Technology Corporation (OTC Bulletin Board: SKVY) reported financial results for the Company's first quarter ended March 31, 2004. Revenues for the first quarter were $2,946,000, compared to revenues of $3,574,000 reported in the first quarter of the prior year. While sales of the Company's SmartTrack systems nearly doubled in the first quarter of 2004 over the same period in 2003, the reduction in total revenues was primarily attributable to lower sales of conventional CCTV products to two of the Company's major customers. Despite lower revenue levels, as a result of its restructuring efforts, Sentry was able to reduce its net loss to $192,000, or $(0.00) per share in the first quarter of 2004, compared to a net loss of $494,000, or $(0.01) per share, in the first quarter of last year. The reported results do not include the impact of the $2 million Brascan Technology Fund financing or the acquisition of ID Systems Canada Inc. and ID Systems USA, Inc., which were completed after the end of the first quarter. "During the first quarter, we expended significant management time and energy to complete a much needed financing with Brascan Technology Fund and to acquire ID Systems, both of which closed on April 30th," said Peter Murdoch, President and CEO of Sentry Technology Corporation. "Even with this distraction, we were able to accomplish a great deal to prepare our Company for growth in anticipation of receiving new working capital including: the hiring of an experienced US Dealer Sales Manager, who has contracted and trained leading manufacturer sales rep firms in the United States; the introduction of SentryVision(R) Server, a new digital video server offering value added performance for our primary SmartTrack traveling camera system; and most importantly, making continued efforts to satisfy our customers who are among the world's largest companies." Mr. Murdoch continued, "During the first quarter, we shipped SmartTrack systems to the world's largest company, the world's top three retail home centers, Europe's largest retailer and America's second largest retailer. New customers have been developed including IKEA in Spain and the first order for SmartTrack in Brazil. SmartTrack sales where up 97% over first quarter 2003. We are confident that the decision to concentrate efforts on our proprietary SmartTrack system, while developing complementary products and stronger sales channels will ensure success." At March 31, 2004, Sentry Technology's balance sheet shows a stockholders' deficit of $195,000 compared to a deficit of $125,000 at December 31, 2003. About Sentry Technology Sentry Technology Corporation designs, manufactures, sells and installs a complete line of Radio Frequency (RF) and Electro- Magnetic (EM) EAS systems and Closed Circuit Television (CCTV) solutions. The CCTV product line features the SentryVision(R) SmartTrack system, a proprietary, patented traveling Surveillance System. The Company's products are used by retailers to deter shoplifting and internal theft and by industrial and institutional customers to protect assets and people. The recent acquisition of ID Systems expands the Company's product offering to include proximity Access Control and Radio Frequency Identification (RFID) solutions. For further information, please visit our Web site at http://www.sentrytechnology.com/ SIERRA HEALTH: S&P Affirms B+ Ratings & Shifts Outlook to Positive ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Sierra Health Services Inc. (NYSE:SIE) to positive from stable. At the same time, Standard & Poor's affirmed its 'B+' counterparty credit rating on Sierra and its 'B+' issue credit rating on Sierra's $115 million 2.25% senior convertible notes due March 2023. "The revised outlook reflects Sierra's improved profitability, strengthened capital adequacy, and more focused market profile, offset by its geographic concentration, narrow product scope, and contingency exposure to its recently divested workers' compensation business," explained Standard & Poor's credit analyst Joseph Marinucci. In 2004, Sierra's overall market scope will become less diversified and more concentrated due to divestiture of its workers' compensation business and expiration of its contract with the Department of Defense to administer the TRICARE program in the northeastern U.S. Standard & Poor's expects Sierra's Managed Healthcare Division (excludes TRICARE) member base to grow moderately in 2004 and range from 550,000-575,000 members. Furthermore, Sierra's core HMO member base is expected to achieve stronger growth to 315,000- 325,000 members. Operating performance is expected to remain very strong in 2004, with no special charges anticipated. If Sierra were to achieve Standard & Poor's earnings expectations in 2004, pretax income would likely range from $140 million-$160 million. Debt leverage and interest coverage would be 30%-40% and exceed 25x, respectively, which is considered very conservative for the rating. In 2004, Standard & Poor's expects cash inflow to the parent company to increase moderately as the holding company derives significant cash inflows from management from regulated subsidiaries. An upgrade will depend on Sierra meeting the above referenced metrics and not being subject to any surprises in connection with the run-off of its divested workers' compensation business (contingency exposure) since a material deviation could impair the company's earnings-to-cash-flow profile and result in a lower quality of capital. SLATER STEEL: Obtains Exemptions From Filing Financial Statements ----------------------------------------------------------------- Slater Steel Inc. announced that it has received exemptions from each of the securities regulatory authorities in the provinces of Ontario, Alberta, British Columbia, Quebec, Saskatchewan, Nova Scotia and Newfoundland and Labrador with respect to the requirements to file (i) comparative financial statements for the financial year ended December 31, 2003, and to deliver such statements to shareholders, within 140 days of the financial year end and (ii) interim financial statements for the period ended March 31, 2004, and to deliver such statements to shareholders, within 45 days of the end of such period. In addition, the securities regulatory authorities of each of Ontario, Quebec and Saskatchewan granted Slater exemptions from the requirement to file an annual information form for the financial year ended December 31, 2003 and to file Management's Discussion and Analysis relating to the financial year ended December 31, 2003 and deliver such Management's Discussion and Analysis to shareholders within 140 days of the financial year end. These exemptions have been granted on the condition that Slater issues a press release disclosing the details of the granting of such relief and that Slater files on SEDAR all reports that it or PricewaterhouseCoopers Inc., the monitor appointed in respect of Slater's insolvency proceedings, files with the Ontario Superior Court of Justice within 10 days of the date of any such filing. The exemptions will no longer apply in the event that Slater emerges from creditor protection under the Companies' Creditors Arrangement Act or in the event that Slater implements a proposal under the Bankruptcy and Insolvency Act. The Company and its subsidiaries sought creditor protection under applicable Canadian and U.S. legislation on June 2, 2003 and have announced either the wind down and orderly realization or the sale of its remaining assets. Slater once again stated that it does not expect that shareholders will receive any value from the insolvency proceedings. Slater Steel U.S., Inc. is a mini mill producer of specialty steel products. The Company filed for Chapter 11 Protection under the U.S. Bankurptcy Code (Bankr. Del. Case No.: 03-11639) on June 2, 2003 before the Honorable Mary F. Walrath. The Debtors' counsel are Daniel J. DeFranceschi, Esq. and Paul Noble Heath, Esq. of Richards Layton & Finger. SOLUTIA INC: Proposes Key Employee Retention Program ---------------------------------------------------- As part of their workforce of approximately 6,350 employees world-wide, the Solutia, Inc. Debtors and their wholly owned foreign non-debtor subsidiaries have identified a core group of approximately 190 employees consisting of senior level personnel, critical managers and technical personnel who provide them with essential management and other necessary services. Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher, LLP, in New York, tells the Court that the Key Employees are indispensable to the Debtors' business operations and contribute specialized knowledge and skill in their individual areas of responsibility. The Key Executive Agreements Solutia, Inc., is in the process of restructuring its senior management. On May 4, 2004, the board of directors of Solutia made significant changes to the executive management team. The recent changes in management structure were made in consultation with the Official Committee of Unsecured Creditors and the changes have the support of key constituencies in these Chapter 11 cases. The Debtors are confident that the new team can capably lead Solutia toward execution of its new business plan and development of a reorganization plan. Mr. Reilly relates that it is critically important that the Debtors implement a retention plan that will ensure the continued employment of Solutia's senior leadership and will provide appropriate incentives to encourage a strengthening of Solutia's business lines, implementation of necessary cost-cutting and other measures and emergence from Chapter 11 as quickly and efficiently as practicable. The Debtors and the Creditors Committee agree that incentives for senior management must be revised to address the recent management change and related shifts in leadership structure and responsibilities. Thus, Solutia and the Creditors Committee are continuing to discuss retention agreement terms with certain of the Debtors' senior executives. When finalized, the agreements will provide for compensation commensurate with the new responsibilities being undertaken by the executives, with a significant emphasis on performance-based pay and will provide for retention or success transaction bonuses to incentivize retention and performance. In addition, Solutia has executed separation agreements with its departing executives that provide separation pay. The separation pay will be paid by allowing the draw down and effective termination of certain letters of credit that had secured Solutia's obligations to those executives. The Debtors intend to file the finalized agreements with their executive employees as soon as possible. The Key Employee Retention Program To alleviate the concerns of all of the other Key Employees about their future prospects with the Debtors and to retain them during these Chapter 11 cases, the Debtors have worked extensively with their professionals to develop their proposed key employee retention program. The Debtors' compensation consultants from Mercer Human Resource Consulting performed a comprehensive analysis of the Debtors' compensation structure, retention needs, competitive practices within the Debtors' industry, and retention programs in similar Chapter 11 cases. Based on the analysis, Mercer assisted the Debtors in developing a KERP that provides incentives for the Debtors to employ their core management team and other Key Employees. Most of the work was done before the Debtors even filed for bankruptcy and at that time the Debtors discussed the various KERP proposals with professionals for the prepetition unofficial ad hoc committee of bondholders. Mr. Reilly states that the proposed KERP is designed to provide the Key Employees with competitive financial incentives to: -- remain employees of the Debtors throughout the critical stages of these Chapter 11 cases; and -- assume the additional administrative and operational burdens imposed on the Debtors resulting from the commencement of these Chapter 11 cases. In December 2003, to ease the concerns of their Key Employees, the Debtors distributed the proposed terms of the KERP to the proposed participants in the form of a retention agreement. The agreements were expressly made subject to the Court's approval and they state that they "shall be retroactively null and void if such approval is not obtained." Since the Petition Date, Mr. Reilly reports, the Debtors have engaged in extensive negotiations with the Creditors Committee concerning the terms of the various employee initiatives, including the KERP. Based on those negotiations, the Debtors have agreed to make some changes to the provisions concerning the timing of the proposed payouts on the KERP, with all other provisions remaining essentially as originally proposed. The Debtors propose to re-circulate to certain employees revised KERP agreements modified to include the agreed changes concerning the timing of payments. The prior KERP agreements will be null and void, and only the new, modified agreements will be binding on Solutia. As modified, this is the new KERP's basic outline: * The KERP agreements provide for a cash retention award calculated as a multiple (25%, 50%, 75% and 100%, depending on the employee) of the Key Employee's base annual salary; * Twenty-five percent of the total cash retention award will be paid out on June 30, 2004, 25% will be paid out on December 31, 2004 and the remaining 50% will be paid out on these schedules: (a) 1/2 of the remaining 50% will be paid on the Debtors' emergence; and (b) the final 1/2 of the remaining 50% will be paid six months after the Emergence Date; * The retention payments will only be made if the Key Employee has fulfilled his or her employment obligations and: (a) is continuously employed by Solutia; (b) was involuntarily terminated without "cause" after the date of the agreement; or (c) has died or suffered total and permanent disability or disability for any occupation; * If the Key Employee is not actively employed for the entire installment period due to disability, sick leave, family leave or other approved leave of absence, but is otherwise eligible for the retention award, the payment will be pro- rated as specified in the agreement; * Nothing in the KERP is intended to supercede the terms of any prior agreements between the participating Key Employees and Solutia, or the ability of Solutia or the Key Employees to terminate their employment relationship; and * There are approximately 150 participants in the United States and approximately 190 worldwide. Approximately 60% of them are in the "professional" or middle management grades, and the remainder is in the senior leadership or "executive" grades. According to Mr. Reilly, the anticipated total cost under the KERP and the senior executive retention agreements is expected to be roughly $15 million worldwide. The programs have been tailored specifically for the Debtors and to meet their unique business needs, with the overarching objective of ensuring their retention of the Key Employees to the maximum extent possible, at the lowest possible cost. The Debtors believe that the retention programs meet the dual goals of providing incentives necessary to retain the Key Employees while taking into account the financial constraints and obligations to their creditors. The retention programs are also well within the Court-approved ranges of similar retention programs for similarly situated Chapter 11 debtors. "The Debtors' ability to successfully reorganize depends on the continued employment, active participation and dedication of the Key Employees who possess the knowledge, experience and skills necessary to support the Debtors' business operations," Mr. Reilly says. "By virtue of their prior employment with the Debtors, the Key Employees are intimately familiar with the Debtors' businesses and have the experience and knowledge to maintain and enhance the Debtors' performance and profitability going forward." Mr. Reilly is concerned that if the Debtors are unable to retain the services of the Key Employees, their ability to stabilize and preserve their businesses will be substantially hindered. In 2003, Mr. Reilly notes, voluntary turnover in the Debtors' exempt positions dramatically increased to 12.5%. This was almost double the 2002 experience and puts the Debtors in the 75th percentile when benchmarking turnover for similar positions. While voluntary turnover increased for all positions, it was especially disproportionate at the highest levels. In grades 82 and above, which is comprised of senior level managers, the 2003 turnover rate was a disconcerting 30%. The Debtors' current circumstances leave them even more vulnerable to the loss of their Key Employees. The commencement of a Chapter 11 case by any company naturally engenders anxiety among the company's employees, including its key executives and other employees with valuable and marketable skills. The Debtors believe that the uncertain nature of the Chapter 11 process may raise concerns with the Key Employees regarding job security, compensation and the viability of the Debtors. The freeze of future benefits for non-union employees under the pension plan and the fact that the Debtors' business plan calls for aggressive cost cutting and paring of employee costs and benefits, will likely heighten employee concerns. The Key Employees will also be required to assume additional responsibilities related to these Chapter 11 cases. The Key Employees may view their continued employment by the Debtors as less attractive than employment with a company that is not operating in Chapter 11. Mr. Reilly maintains that without measures to address those concerns, the Chapter 11 filing may lead to increased levels of Key Employee attrition. The Key Employees have anxiously been awaiting the filing of the request to approve the terms of the KERP agreements. Finding suitable replacements for any departing Key Employees may be difficult and costly because the Debtors anticipate that they would have to pay executive search firm fees, above-market salaries, relocation expenses and bonuses to induce qualified candidates to accept employment. In addition, the loss of certain persons in key positions could create further stability concerns, potentially leading to additional departures and creating a momentum of attrition and a loss of workforce morale that may be difficult to counteract. To discourage resignations among the Key Employees, dispel the perceived risk of working for the Debtors notwithstanding their Chapter 11 cases and reduce or eliminate the direct and indirect costs attendant to replacing any Key Employees, the Debtors worked closely with their human resource consulting professionals to develop the terms of the senior executive retention agreements and the KERP. The Debtors believe that their execution of the senior executive retention agreements, when finalized, and implementation of the KERP, as modified, will send a positive message to the Key Employees that they are a valuable resource and that their continued employment with the Debtors is essential to their future operations. Furthermore, the payments proposed to be made under the senior executive retention agreements and the KERP will serve as an incentive for the Key Employees to remain with the Debtors during these Chapter 11 cases and to work diligently toward a successful reorganization. Therefore, the Debtors decided that the execution of certain senior executive retention agreements, and adoption and implementation of the KERP are necessary to maintain the morale and continued dedication of the Key Employees. The Debtors' implementation of the proposed retention programs is essential to the preservation and enhancement of their business operations, which will inure to the benefit of all parties-in-interest and help facilitate a successful reorganization. The Other Employee Initiatives As a result of the recent three-year decline of the equity markets, Solutia's qualified pension plan is significantly under funded and ongoing obligations to that plan will place a significant financial burden on the Debtors over the next several years. In consultation with its creditors, Solutia has considered all alternatives to alleviate this problem, including termination of the qualified pension plan. Solutia believes that terminating the qualified pension plan would have disastrous consequences for the Chapter 11 estate -- by creating a large claim in favor of the Pension Benefit Guaranty Corporation and by incurring a substantial risk of insolvency proceedings for Solutia's overseas subsidiaries. Solutia's investigation has led to two actions that will greatly relieve the burdens of the pension plan on the estate. First, Solutia intends to freeze future benefit accruals under its qualified pension plan for non- union employees effective July 1, 2004. Second, Solutia intends to seek Court approval to make a voluntary contribution of approximately $11 million to the pension plan this year. These actions will: (1) save the Debtors about $40 million in pension expense for each of the next several years; (2) reduce overall pension funding requirements over the next five years by $110 million; and (3) defer the next required contribution to the pension plan to September 2006. Mr. Reilly points out that while these actions will place the pension plan on more solid financial footing and reduce the likelihood of a distress termination of the plan, damage to employee retention, motivation and recruitment may result from the pension freeze. To reduce the negative impacts, the Debtors have identified several other employee-related retention initiatives that they believe will be beneficial in their efforts to attract, retain and motive their employee workforce. These initiatives, which will apply to a broad group of eligible employees, include: (a) increasing the percentage of base pay contributed by an employee to the Savings and Investment Plan that the Debtors will match; (b) making certain special recognition retention bonus payments benchmarked to the 2003 Annual Incentive Plan; (c) implementing a 2004 Annual Incentive Plan; and (d) re-implementing a Separation Pay Plan, including by assuming eight special severance agreements. By presenting these initiatives to their employees as a package, the Debtors hope to demonstrate that the employees are valued and important and that employment with Solutia remains desirable despite the pendency of these Chapter 11 cases and the changes to the pension plan. Director Compensation and Expense Reimbursement Prior to the Petition Date, certain directors incurred unreimbursed out-of-pocket expenses for travel and other items, totaling about $7,000. In addition, the directors are still owed a pro-rata share of their directors' fees for the prepetition date portion of December 2003, totaling about $8,000. Solutia certainly wants to encourage its board members to continue their service, and it may need to attract new board members in the future. By this motion, the Debtors seek the Court's authority to: (a) execute and perform under retention agreements and separation agreements with certain of their senior executives; (b) perform under the proposed KERP; (c) adopt and implement the other employee initiatives; and (d) pay their directors any as yet unreimbursed expenses and unpaid directors' fees. 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. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPIEGEL GROUP: Retains Sheppard Mullin as Special Labor Counsel --------------------------------------------------------------- Sheppard, Mullin, Richter & Hampton, LLP, is a law firm that is comprised of approximately 400 lawyers and has been in existence for over 75 years. The Spiegel Group Debtors believe that Sheppard Mullin is qualified to act as their special counsel because of its expertise in many areas of commercial law including employment and labor law. Sheppard Mullin has provided employment and labor advice to the Debtors since July 2003 pursuant to the Court Order authorizing them to employ Ordinary Course Professionals. The OCP Order authorizes the Debtors to compensate each of their Ordinary Course Professionals up to $30,000 per month and $250,000 in the aggregate in any given month. The Debtors asked Sheppard Mullin to continue to provide them with employment and labor advice and Sheppard Mullin has agreed to do so. However, the Debtors are concerned that Sheppard Mullin is going to exceed the Monthly Fee Cap in March 2004 and the following months. Accordingly, the Debtors sought and obtained the Court's authority to employ Sheppard Mullin as special counsel, nunc pro tunc to March 1, 2004, pursuant to Section 327(e) of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure. In consideration for the services to be rendered to the Debtors, the professionals of Sheppard Mullin will be compensated according to their regular hourly rates: Professional Position Hourly Rate ------------ -------- ----------- Julie Dunne Partner $370 William Whelan Partner 370 Andrew Peterson Associate 260 Daniel McQueen Associate 260 Sheppard Mullin will also be reimbursed for all necessary out-of- pocket expenses incurred. Julie A. Dunne, Esq., a partner at Sheppard Mullin, assures the Court that the firm has no connection with any of the Debtors' creditors or any other parties-in-interest or their attorneys. In addition, Sheppard Mullin does not hold or represent any interest adverse to the Debtors or to their estates in the matters with respect to which it is engaged by the Debtors. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and 1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 215/945-7000) STILLWATER MINING CO: S&P Rates Proposed $180MM Bank Loan at BB --------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'BB' bank loan rating and its '1' recovery rating to Stillwater Mining Co.'s proposed $180 million senior secured credit facility and placed them on CreditWatch with negative implications. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating and all other ratings on Columbus, Mont.- based Stillwater. The outlook is stable. "The CreditWatch action on the bank loan rating reflects uncertainty over the final terms and conditions of the proposed credit facility," said Standard & Poor's credit analyst Dominick D'Ascoli. As the proposed facility has not yet been fully syndicated, Standard & Poor's is concerned about language requiring that a portion of the proceeds from the sale of palladium, received as part of payment from Russia-based MMC Norilsk Nickel for acquiring ownership of Stillwater, could be removed or altered, thus affecting recovery prospects and the assigned facility ratings. The 'BB' bank loan rating, which is one notch above the corporate credit rating, and the '1' recovery rating indicate the likelihood of a full recovery of principal in the event of a default. Stillwater intends to use the proposed credit facility to refinance existing debt. The ratings on Stillwater reflect its majority ownership by Norilsk Nickel, limited mine diversity, volatile metal prices, and a high cost profile tempered by favorable supply contracts. Stillwater, with revenue of $240 million in 2003, produces palladium and platinum from two mines in Montana. Approximately 98% of 2003 revenue was generated from supply contracts with three customers, General Motors Corp., Ford Motor Co., and Mitsubishi Corp., which require palladium and platinum for use in automobile emission converters. STRUCTURED ASSET: Fitch Upgrades 11 Series 2001-C8 Classes ---------------------------------------------------------- Fitch Ratings upgrades Structured Asset Securities Corp.'s (SASCO) pass-through certificates, series 2001-C8, as follows: --$19.2 million class H to 'AAA' from 'A-'; --$25.6 million class J to 'AAA' from 'BBB+'; --$21.9 million class K to 'AAA' from 'BBB'; --$36.6 million class L to 'AAA' from 'BBB-'; --$15.8 million class M to 'A' from 'BB+'; --$15.8 million class N to 'A-' from 'BB'; --$11.5 million class O to 'BBB+' from 'BB-'; --$11.5 million class P to 'BBB+' from 'B+'; --$11.5 million class Q to 'BB+' from 'B'; --$10 million class S to 'BB' from 'B-'; --$14.6 million class T to 'B' from 'CCC'. Fitch does not rate class U. Classes A, B, C, D, E, F and G have paid off in full. The upgrades reflect improved credit enhancement levels resulting from loan payoffs and amortization. Since issuance, the pool has paid down 62.9% to $250.7 million from $731.5 million. Of the original 51 loans in the pool, 23 remain outstanding. There are currently no delinquent loans or specially serviced loans in the pool. There are seven loans (70.46%) in the portfolio that mature in 2004 that have no additional extensions options. The remaining 16 loans in the transaction matured in 2003 and exercised their extension options. These borrowers may exercise their final extension option, extending the loan maturity to 2005. The pool is concentrated by property type with office, hotel and retail loans representing 56.2%, 28.5% and 15.32% respectively. The pool is geographically concentrated with Texas representing 29.6% of the pool. The average loan balance is $11.8 million and the top 5 loans represent 66% of the outstanding portfolio. TAHOE EDGELAKE: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Tahoe Edgelake Beach Club, Inc. 3850 Plumas Street Reno, Nevada 89509 Bankruptcy Case No.: 04-51482 Chapter 11 Petition Date: May 14, 2004 Court: District of Nevada (Reno) Judge: Gregg W. Zive Debtor's Counsel: Sallie B. Armstrong, Esq. 427 West Plumb Lane Reno, NV 89509 Tel: 775-329-5900 Total Assets: $2,880,285 Total Debts: $2,521,422 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Michael Hansen Claim for damages $1,043,222 600 Jupiter Hill Road Reno, NV 89509 H. W. Shopherd, Jr. Claim for indemnity $1,000,000 3850 Plumas St. Reno, NV 89509 Porter Simon Law Office Attorney Fees $275,000 40200 Truckee Airport Road Truckee, CA 96161 Sparks, Keith F., Arbitrator Arbitrator Fees $40,000 TEBC Homeowners Association Accruing dues on $30,000 remaining interval weeks to be sold Miller Family 1991 Trust $7,200 of which is $14,400 contract amount; $7,200 damage claim Shepherd Family Trust $7,200 of which is $14,400 contract amount; $7,200 damage claim Wedow Family Trust $7,200 of which is $14,400 contract amount; $7,200 damage claim Beulach M. Juneau $5,200 of which is $10,400 contract amount; $5,200 damage claim Beulach M. Juneau $5,200 of which is $10,400 contract amount; $5,200 damage claim Gary H. Lemke $5,200 of which is $10,400 contract amount; $5,200 damage claim Drene R. Nash $3,600 of which is $7,200 contract amount; $3,600 damage claim Giles E. Vanderhoof $3,600 of which is $7,200 contract amount; $3,600 damage claim Jerold E. Pepple $3,600 of which is $7,200 contract amount; $3,600 damage claim Michael W. Wedow $3,600 of which is $7,200 contract amount; $3,600 damage claim Philip E. Pepple $3,600 of which is $7,200 contract amount; $3,600 damage claim C.D. Jackson-Miller, $2,600 of which is $5,200 D.D.S., Inc. contract amount; $2,600 damage claim Jackson Family Trust $2,600 of which is $5,200 contract amount; $2,600 damage claim William Sievers $2,600 of which is $5,200 contract amount; $2,600 damage claim TIMKEN CO: Plans to Close Canton Bearing Manufacturing Operations ----------------------------------------------------------------- The Timken Company (NYSE: TKR) announced a plan to begin closing the Canton bearing manufacturing operations. The company expects most of the production to be shifted to its other U.S. plants. Current employment at the three Canton bearing plants is 1,300 people. Timken employs 4,800 in Stark County, Ohio and approximately 26,000 worldwide. The Canton-based steel operations are unaffected by this decision. "We have been meeting with the union for more than eight months to discuss how to make our bearing operations competitive in our changing global marketplace," said James W. Griffith, president and CEO. "We are disappointed that our talks with the union did not lead to the changes necessary to make these facilities viable. Therefore, we will begin moving the products to plants where they can be manufactured competitively." "We continue to take a close look at our manufacturing network to create focused factories that are globally competitive and better serve our customers," said Mr. Griffith. "The acquisition of The Torrington Company has provided more options that allow us to produce these products competitively. We expect no disruption of supply during this transition." The company will now meet with the union about this decision. More specific information will not be available until after those discussions, including: the timing of the closure; the impact on employment; and the magnitude of the savings and charges for restructuring and implementation, which could be material. In September 2003, the company began a series of meetings with the union and associates in the Canton bearing operations to discuss what needed to be done to make the plants competitive. At that time, the company made it clear that the Canton bearing operations could not continue to operate in their current form. The company indicated it was willing to make the investments necessary to create a focused, competitive operation in the Canton bearing plants if these investments were accompanied by contract modifications. Since then, the company and the union have been unable to agree on the necessary changes. Production at the Canton bearing plants has declined 27 percent over the last five years as the cost structure of the operations made it difficult to win new business. The plan to close the Canton bearing operations is consistent with Timken's overall strategy to make the company more profitable, more customer- centric and better able to grow. About Timken Company The Timken Company (NYSE: TKR) (Moody's, Ba1 Senior Unsecured Debt, Senior Implied and Senior Unsecured Issuer Ratings) -- http://www.timken.com/-- is a leading global manufacturer of highly engineered bearings and alloy steels and a provider of related products and services with operations in 27 countries. A Fortune 500 company, Timken recorded 2003 sales of $3.8 billion and employed approximately 26,000 at year-end. TRITON PCS: S&P Places Low-B Ratings on CreditWatch Negative ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings for Triton PCS Inc., including the 'B+' corporate credit rating, on CreditWatch with negative implications. "The action is based on the decline in roaming revenue as reflected in first-quarter 2004 results, lower 2004 EBITDA guidance, and higher debt leverage than previously anticipated by Standard & Poor's for 2004," explained Standard & Poor's credit analyst Rosemarie Kalinowski. As of March 31, 2004, total debt outstanding was about $1.4 billion, unadjusted for operating leases. Including operating leases, total debt outstanding was about $1.6 billion. Triton PCS, an affiliate of AT&T Wireless Services Inc. (AWE), provides wireless services to about 920,000 subscribers in a contiguous geographic area encompassing portions of Virginia, North Carolina, South Carolina, Tennessee, Georgia, and Kentucky. The relationship with AWE is a material benefit to Triton PCS because, under the agreement, Triton PCS is the exclusive provider of facilities-based wireless mobility communications services using co-branding with AWE in its markets. This exclusivity agreement exists through 2009. In contrast to the Sprint PCS wireless affiliates, Triton PCS owns the licenses in the areas it serves. In February 2004, AWE announced that it was merging with Cingular Wireless LLC. AWE's exclusivity agreement with Triton PCS is expected to remain in effect through 2009 unless mutually revised. In addition, AWE's roaming agreement with Triton PCS would remain effective through 2018. In the first quarter of 2004, total revenues increased about 5% from the first quarter of 2003, primarily due to net subscriber additions of more than 25,000 and increased average revenue per user. However, roaming revenue (which comprises about 17% of total revenues) declined 21.5% due to decreased minutes of use (MOU) and reductions in roaming yield as specified under existing contracts with roaming partners. The decline in roaming MOU was primarily attributable to AWE, which had negative subscriber additions in the first quarter of 2004 and launched global system for mobile communications (GSM) plans that discouraged roaming. Although roaming traffic from a new contract with T-Mobile USA is expected by mid-year 2004, and AWE recently introduced GSM plans that include roaming, pressure on roaming yield is expected to continue. Consequently, 2004 EBITDA guidance was reduced to the $235 million-$245 million range, from the $245 million-$255 million range. As a result, Standard & Poor's expects total debt to EBITDA, unadjusted for operating leases, to be slightly over 6.0x for 2004, higher than previously anticipated. Adjusted for operating leases, this metric is expected to be in the 7.0x area. While liquidity is adequate, access to the $100 million secured credit facility is temporarily unavailable because the company was not in compliance with the debt leverage covenant in the first quarter of 2004. As of March 31, 2004, liquidity consisted of about $102 million of cash. There are no significant debt maturities until 2011. TERPHANE HOLDING: S&P Rates $100MM Senior Secured Notes at B- ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to Bloomfield, New York-based Terphane Holding Corp. At the same time, Standard & Poor's assigned its 'B-' rating to the company's proposed $100 million senior secured notes due 2009, based on preliminary terms and conditions. The notes, which are secured by a pledge of the stock of subsidiaries and certain property, plant and equipment located in Brazil and the U.S., are rated the same as the corporate credit rating. Standard & Poor's ratings are based on the understanding that Terphane will completely repay an export credit facility secured by receivables with a portion of the proceeds of the notes, and that a guarantee will be issued by Terphane Ltda., the company's main operating subsidiary in Brazil, in favor of the noteholders. The outlook is stable. Pro forma for the transaction, total debt will be about $100 million, but will increase to approximately $124 million once the company draws on its new equipment leasing facility. The proceeds from the proposed notes transaction will be used primarily to fund a $65 million dividend to shareholders and repay existing subsidiary debt. "The ratings on Terphane reflect an extremely limited scope of operations as the sole domestic manufacturer in the niche South American thin polyester film industry, significant reliance on one manufacturing facility, and very aggressive debt leverage," said Standard & Poor's credit analyst Franco DiMartino. However, the company's narrow business focus is partially offset by favorable industry growth prospects; regional import tariffs that protect the company's primary market; a low cost, integrated manufacturing structure; well-diversified customer relationships; and stable operating margins. With annual revenues of slightly more than $60 million, Terphane is the only domestic manufacturer in the South American market for thin polyester film. The company augments this position with sales to the North American market, which accounts for approximately 30% of total revenues. The company's products are primarily used in flexible packaging applications, including packaging for pasta, processed meats and cheeses, juices, mayonnaise, and lidding for yogurt trays, butter, cream and other products. Industrial applications, about 10% of sales, include wrapping for electrical cable, thermal ribbons for printers and faxes, and insulation. The primary end markets for Terphane's thin polyester film are expected to grow between 7% and 11% annually over the next five years based on strong demand from the flexible packaging industry. THERMACLIME INC: S&P Rates Corporate & $90MM Senior Debt at B- -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to ThermaClime Inc., an Oklahoma City, Oklahoma- based manufacturer of chemicals and climate control products. In addition, Standard & Poor's assigned its 'B-' rating to a proposed $90 million offering of senior secured notes due 2014, based on preliminary terms and conditions. The outlook is stable. "The ratings on ThermaClime reflect its very aggressive financial profile characterized by high debt leverage, an aggressive financial policy, thin free cash flow, and limited liquidity," said Standard & Poor's credit analyst Dominick D'Ascoli. Ratings also reflect a well-below-average business position that includes exposure to highly cyclical end markets, volatile raw-material costs, customer concentration risk, and a modest financial base. ThermaClime, which is owned by LSB Industries Inc., a public company, operates two distinct business segments--chemicals, and climate control, which account for about 62% and 38% of 2003 sales, respectively. The 'B-' rating on the senior secured notes reflects their secured position and the relatively small amount of advantaged liabilities ahead of the notes in the capital structure. The notes are secured by a first lien on property, plant, and equipment. Ahead of the notes is a proposed $15 million working capital facility--secured by a first priority perfected lien on all assets, except property, plant, and equipment--operating leases, and some letters of credit. The 'B-' rating could be lowered if there is an increase in the working capital facility or other advantaged liabilities. Proceeds from the notes will be used to refinance existing debt. The company's product diversity lends little support to credit quality because of the cyclical and competitive nature of the respective industries. Primarily as a result of its poor and volatile chemicals business, ThermaClime's historical profitability margin has been somewhat erratic despite the more- stable operating results of its climate control business. The operating margin for 2003 was lackluster at slightly above 5%. This could improve modestly in 2004 on the expectation that lodging markets rebound somewhat. Profitability should also benefit from improved nitrogen fertilizer market conditions. Still, credit protection measures are expected to remain weak. TELUS CORP: Microcell Bid Prompts S&P's Negative Ratings Watch -------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Telus Corp., and Telus Communications Inc. (TCI) on CreditWatch with negative implications following Telus' announced bid to acquire Microcell Telecommunications Inc. for about C$1.1 billion in cash. "The CreditWatch placement reflects the uncertainty with respect to final terms and conditions of a potential transaction," said Standard & Poor's credit analyst Joe Morin. Microcell is the sole Canadian wireless acquisition target and there could be additional interest in the company from other parties including the other two national wireless operators, Bell Canada and Rogers Wireless Inc. In addition, there are regulatory and other uncertainties, which could result in higher costs than those currently foreseen and translate into a greater negative effect on cash flows and leverage. "Should the level of incremental debt or costs associated with the acquisition, including future operating or capital costs, be materially greater than currently contemplated the ratings could be lowered," Mr. Morin added. Nevertheless, the ratings on Telus could be maintained should the bid price and corresponding incremental leverage be within the range of the original offer. In addition, Standard & Poor's does not foresee a situation whereby the ratings would be lowered by more than one notch. Once the acquisition price and clarification of the terms and conditions are finalized, Standard & Poor's will meet with Telus to resolve the CreditWatch status. The transaction will moderately weaken Telus' financial risk profile in the near term, but should have positive long-term consequences given the substantial C$1.6 billion in tax loss carryforwards that will be acquired, thereby materially reducing future cash taxes. Based on the bid price, the acquisition of Microcell could add about C$700 million to C$1 billion in incremental debt to Telus' balance sheet, depending on cash balances at Telus and Microcell at the time of closing. This acquisition would increase leverage (debt to EBITDA) from its current level of 2.8x to above 3x. Incremental debt could be higher, however, if Telus ultimately pays a higher acquisition price than its current offer, or if retention costs to entice Microcell's subscriber base to remain with Telus are material. A material risk facing Telus with respect to the proposed acquisition is the difference in technologies used by the two companies. Telus' wireless network is based on CDMA (Code Division Multiple Access) technology, whereas Microcell uses the GSM (Global System for Mobile Communications) standard: the two technologies and therefore customers' handsets are not compatible. The current proposal contemplates Standard & Poor's does not believe it is feasible for Telus to operate two separate networks in the long term and as such Microcell's customers will likely be ultimately migrated to the Telus network; the GSM network will ultimately have to be shut down. WEIRTON: IRS Presses for Payment of Employee Withholding Taxes -------------------------------------------------------------- On March 18, 2004, the Internal Revenue Service filed a request for payment, listing a balance due of $263,273 comprised of interest totaling $697 and penalty of $262,576 relating to employee withholding taxes -- the FICA Taxes -- due and payable to the IRS for the fourth quarter of 2003. On March 24, 2004, the Court granted IRS' request and required the Weirton Steel Corporation Debtors to pay the amount set forth in the IRS Request. The IRS Order also provided that the Debtors may request protection from the IRS Order for cause. Debtors Seek Protection from IRS Order Mark E. Freedlander, Esq., at McGuireWoods, in Pittsburgh, Pennsylvania, tells the Court that during the fourth quarter of 2003, the Debtors submitted two FICA tax reports to the IRS late. Each of the two FICA tax reports that were submitted late were submitted on an untimely basis due to confusion over legal holidays and their impact on FICA tax report filing deadlines. This confusion was due to the Debtors' significant administrative staff reductions and the new responsibilities undertaken by remaining administrative staff members. The IRS calculated penalties relating to the late FICA tax reports at $262,576. However, after the Debtors conferred with the IRS, the penalty amount was recalculated by the IRS at $70,022. As of March 17, 2004, the Debtors asked the IRS to abate the penalty for late-filed FICA tax reports. The Debtors assert that the late-filed FICA tax reports were due to administrative and clerical error and appropriately abated under the circumstances. Court Vacates IRS Order At the Debtors' request, the Court vacates its March 24, 2004 Order. In the event that the IRS determines not to honor the Debtors' abatement request dated March 17, 2004, the Debtors will timely pay to IRS penalties of $69,018, relating to late-filed fourth quarter 2003 FICA tax reports. IRS Amends Payment for Request On April 12, 2004, the IRS amended its request for payment. The IRS now seeks payment from the Debtors for $69,018, comprised of interest totaling $464 and penalty equal to $68,554. (Weirton Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) WESTPOINT STEVENS: Wants To Assume Raymond Leasing Contracts ------------------------------------------------------------ The WestPoint Stevens Inc. Debtors seek the Court's authority to assume certain contracts entered into with Raymond Leasing Corporation. West Point-Pepperell, Inc., predecessor-in-interest to WestPoint Stevens, Inc., entered into an Equipment Master Lease Agreement, dated June 3, 1993, with Carolina Handling, LLC, for the lease of 884 items, which are necessary for the Debtors' business operations. The items include fork-trucks, lift-trucks, and certain related equipment integral to the operation of the trucks like batteries and chargers. Soon after entry into the Master Lease, Carolina assigned its interest to Raymond. Incorporating the provisions of the Master Lease, certain Lease Schedules were entered into, which govern various groups of Equipment and set out the term of the lease, rental rate, and other specific provisions. The Debtors' current rental obligations under the Master Lease and Schedules total approximately $109,000 per month, with expiration of the term to occur anywhere from May 2004 through September 2008. To ensure that the Equipment remains in good working condition, the Debtors also entered into a related Comprehensive Fixed Price Maintenance Contracts to provide scheduled maintenance of the Equipment, as well as routine service, repairs, and replacement parts as needed. Repairs not covered by the Maintenance Agreements are billed on a per occurrence basis. The Debtors' obligations under the Maintenance Agreements total about $48,000 per month. According to John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, in New York, the Contracts are necessary for the continued operation of the Debtors' businesses by providing equipment critical to their manufacturing, warehousing, and transportation operations. Absent the Equipment, the Debtors would be unable to effectively and efficiently operate their businesses. Furthermore, the Debtors believe that it is unlikely that an alternative equipment lessor would be able to provide terms more favorable to the Debtors than those contained in the Contracts, as amended. In connection with the assumption of the Contracts, the Debtors engaged in extensive, arm's-length, good faith negotiations with Raymond and Carolina, and were able to obtain substantial cost- saving amendments as consideration for the assumption. Mr. Rapisardi reports that the Debtors obtained $530,000 in savings with respect to the Master Lease and Schedules and $30,000 in savings with respect to the Maintenance Agreements in exchange for extension and assumption of the Contracts. With respect to the Master Lease and Schedules, Raymond agreed to reduce total rental payments for the Equipment by an average of roughly 14%. The parties agreed to extensions of the lease of Equipment for an additional 9 to 18 months, depending on the condition of the Equipment. When compared to the costs associated with leasing new equipment at the end of the original term, the continuing lease of the Equipment with the cost reductions obtained by the amendments will result in an overall savings for the Debtors of about $530,000 through the extended lease term. With respect to the Maintenance Agreements, extension of leases beyond their original term typically results in higher costs because of the increased maintenance required to keep older equipment in good repair. However, the Debtors negotiated for, and obtained a continuation of, the current pricing levels for the services provided by the Maintenance Agreements over the term of the lease extensions. Accordingly, by maintaining current pricing, the Debtors' estimate savings of approximately $30,000 in maintenance costs over the extended lease term. Pursuant to Section 365(b) of the Bankruptcy Code, the Debtors estimate that the cure amount due on an assumption of the Contracts is $125,683 -- $17,326 with respect to the Master Lease and Schedules and $108,356 with respect to the Maintenance Agreements. As a result of the amendments to the Contracts, the Debtors estimate overall savings of approximately $560,000, which significantly outweighs the cure amount. (WestPoint Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WORLDCOM INC: Plans To Secure $1 Bil. Financing to Boost Liquidity ------------------------------------------------------------------ MCI, Inc., currently plans to arrange a revolving credit facility of between $750,000,000 and $1,000,000,000 as an additional source of liquidity, MCI Executive Vice-President and Chief Financial Officer, Robert T. Blakely, disclosed in a Form 10-Q filing with the Securities and Exchange Commission. During its bankruptcy, MCI entered into a Senior Secured Debtor- in-Possession Credit Facility. On March 31, 2004 and on the Emergence Date, there were no outstanding advances under the DIP Facility. MCI did have letters of credit outstanding under the DIP Facility. MCI had undrawn letters of credit that were issued under a $1,600,000,000 credit facility before its bankruptcy filing and Digex, Inc., had letters of credit under a separate credit facility. The aggregate amount of the outstanding letters of credit on March 31, 2004 was $100,000,000. Upon emergence from bankruptcy, MCI terminated the DIP Facility and approximately $100,000,000 in letters of credit were rolled over to new letter of credit facilities entered into with JPMorgan Chase Bank, Citibank, N.A., and Bank of America, N.A. The Letter of Credit Facilities provide for the issuance of letters of credit in an aggregate face amount of up to $150,000,000. MCI pays a facility fee under the Letter of Credit Facilities equal to 0.05% per annum of the amount of the Commitment, whether used or unused. If any fee or other amount payable under any Letter of Credit Facility is not paid when due, additional interest equal to 2% per annum plus the federal funds rate -- determined in accordance with that Letter of Credit Facility -- will be incurred on the overdue amount. The amounts outstanding under the Letter of Credit Facilities are cash collateralized. The Letter of Credit Facilities will mature in April 2005. MCI will use the $1,000,000,000 revolving credit facility to replace the Letter of Credit Facilities and support its letter of credit requirements. 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. 52; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Judge Wolin Booted from Three of Five Delaware Asbestos Cases --------------------------------------------------------------- The United States Court of Appeals for the Third Circuit released its Opinion yesterday saying that the perception of bias, rather than the existence of any actual bias, requires that Judge Wolin be disqualified from continuing to preside in the U.S. District Court over three of the Big Five Asbestos Cases pending before the U.S. Bankruptcy Court for the District of Delaware. In a 2-1 decision, the Third Circuit directs Judge Wolin to step aside in the on-going chapter 11 proceedings involving Owens Corning, W.R. Grace & Co., and USG Corp. "[A] reasonable person, knowing all of the relevant circumstances, would conclude that Judge Wolin's impartiality might reasonably be questioned in the Owens Corning, W.R. Grace & Co. and USG Corp. bankruptcies," Judge Garth writes for the majority. "Although the record does not demonstrate that Judge Wolin has done anything wrong or unethical or biased," the Third Circuit says, "he must be disqualified under 28 U.S.C. Sec. 455(a) from further presiding over those three bankruptcies. The Third Circuit says that it looks with disfavor upon both the extent to which, and manner in which, Judge Wolin engaged in ex parte communications with litigants and his special advisors. Whatever value the ex parte meetings may have had in moving the Five Asbestos Cases along or creating a settlement-friendly atmosphere was outweighed by the attendant risks and problems catalogued in detail in the appellate briefs. The Third Circuit's ruling yesterday does not apply to Armstrong World Industries, Inc. The Third Circuit says it will set a separate date to hear argument about how to deal with Armstrong's case at a later date. Yesterday's decision does not apply to Federal-Mogul Global, Inc., because nobody in Federal-Mogul's cases moved for Judge Wolin's recusal. A full-text copy of the Third Circuit's 54-page Opinion is available at no charge at: http://www.ca3.uscourts.gov/034212/034212p1.pdf * Ryan Beck Bolsters Investment Research and Banking Capabilities ----------------------------------------------------------------- Ryan Beck & Co., Inc. announced the appointment of three senior level investment research professionals and a seasoned investment banker, expanding the firm's coverage of emerging growth and middle market and emerging growth consumer and business services companies. The additions include: John J. Bolebruch as a Managing Director in the firm's investment banking division. Mr. Bolebruch will support the firm's coverage of emerging growth and middle market businesses, targeting companies with enterprise values ranging from $20 million to $1 billion. Mr. Bolebruch brings over 25 years of experience within the financial services industry to Ryan Beck, joining the Firm after having served as a Managing Director at well-respected firms such as Furman Selz - ING Barings; Merrill Lynch and First Boston. Most recently, he was Managing Partner at Veritas Capital Advisors, where he focused on M&A advisory and capital raising, primarily for small-cap public and private companies in business services and aerospace/defense sectors. Jim Janesky as Senior Vice President in the firm's research department, covering business services and outsourcing companies. Mr. Janesky has over ten years of research experience and his research coverage has focused on human resource services companies, healthcare-staffing organizations, and specialized professional and consulting services companies. Most recently, he was associated with Janney Montgomery Scott, and previously worked at Banc of America Securities/Montgomery, Stephens, Inc., and ABN AMRO/The Chicago Corporation. Margaret Whitfield as Senior Vice President in the firm's research department, covering specialty retail and consumer companies. Ms. Whitfield has almost 30 years of research experience and her recent research coverage has included baby boomer retailers, children's apparel companies and toy manufacturers. Most recently, she was associated with Brean Murray & Company, following eight years with Tucker Anthony. Prior to that, she worked at Eberstadt, FBW Investments, GEICO, and Legg Mason. Jackie Ganguly as Vice President and Supervisory Analyst in the firm's research department, responsible for ensuring the quality, consistency and timeliness of investment research across all coverage categories. Ms. Ganguly has over ten years of research experience and had most recently been associated with Bream Murray & Company, and previously had served as Associate Director of Research for Tucker Anthony. She also has worked at H.C. Wainwright and Advest. In announcing these new hires, Executive Vice President Lisa Schultz said that "the U.S. has become a consumer and services- dominated economy, and our clients -- both investor and corporate -- have shown us the growing need for an investment firm that is focused on the consumer and services sectors. Ryan Beck has traditionally focused on financial services and has been expanding its coverage to include many facets of specialty finance, and with the addition of these four new hires, we are also taking the first steps towards building an all-encompassing services-based boutique." About Ryan Beck & Co., Inc. Founded in 1946, Ryan Beck & Co., Inc. provides financial advice and innovative solutions to individuals, institutions and corporate clients through 34 offices in 13 states. For individual investors, the firm's Private Client Group provides a full range of financial services, including investment consulting, retirement plans, insurance and investment advisory services. Institutional clients benefit from the market making, underwriting and distribution activities of the firm's experienced Capital Markets Group, which encompasses equity and fixed income trading, fixed income products, institutional sales and research. Through its Investment Banking Groups, Ryan Beck provides assistance in the capital formation process and financial advisory services to corporate clients, primarily financial institutions and emerging growth and middle market companies. The Middle Market Investment Banking Group aligns with companies and management teams in evaluating alternatives and executing a broad range of strategic options, providing services such as capital raising, mergers & acquisitions and strategic and financial advisory services, including corporate divestiture; strategic partnering and joint venture agreements; due diligence; valuations and fairness opinions; financial restructuring, workouts and recapitalizations; hostile takeover defense; leveraged buyout support and strategic planning. * U.S. Sup. Ct. Says State-Backed Student Loans Can Be Discharged ----------------------------------------------------------------- To the extent repayment of an educational loan made, insured or guaranteed by one of the 50 States constitutes a hardship, the United States Supreme Court ruled yesterday, the debt can be compromised or discharged in bankruptcy. Yesterday's 7-2 ruling didn't reach the original question put before the High Court about whether a State's sovereign immunity conferred by the Eleventh Amendment to the United States Constitution prohibits suit against the State. Rather, because the discharge of a debt is an in rem proceeding, the Court says that doesn't infringe on a State's sovereign immunity. "No matter how difficult Congress has decided to make the discharge of student loan debt, the bankruptcy court's jurisdiction is premised on the res, not on the persona; that States were granted the presumptive benefit of nondischargeability does not alter the court's underlying authority. A debtor does not seek monetary damages or any affirmative relief from a State by seeking to discharge a debt; nor does he subject an unwilling State to a coercive judicial process. He seeks only a discharge of his debts," Chief Justice Rehnquist writes for the majority. The U.S. Supreme Court tells the parties to go back to the lower courts and sort out what fraction of the loan constitutes an undue hardship for the debtor to repay. If, in that process, the Bankruptcy Court exceeds its in rem jurisdiction, the High Court invites TSAC to appeal that issue. A full-text copy of the Slip Opinion (including Justices Thomas and Scalia's dissent) in Tennessee Student Assistance Corporation v. Hood, No. 02-1606 (May 17, 2004), is available at no charge at: http://www.supremecourtus.gov/opinions/03pdf/02-1606.pdf * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Airgate PCS Inc. PCSAD (293) 574 (364) Alliance Imaging AIQ (40) 683 44 Akamai Technologies AKAM (175) 279 140 Amazon.com AMZN (1,036) 2,162 568 Blount International BLT (397) 400 83 Caraco Pharm Lab CPD (5) 28 (1) Cell Therapeutic CTIC (83) 146 72 Centennial Comm CYCL (579) 1,447 (99) Choice Hotels CHH (118) 267 (42) Cincinnati Bell CBB (640) 2,073 (47) Cubist Pharmaceuticals CBST (18) 223 91 Delta Air Lines DAL (384) 26,356 (1,657) Deluxe Corp DLX (298) 563 (309) Diagnostic Imag DIAM 0 20 (3) Echostar Comm DISH (1,033) 7,585 1,601 Education Lending Group EDLG (2) 3,584 N.A. Graftech International GTI (97) 967 94 Imax Corporation IMAX (51) 246 (11) Imclone Systems IMCL (271) 382 (3) Internet Cap Group ICGED (45) 366 75 Kinetic Concepts KCI (246) 665 228 Lodgenet Entertainment LNET (129) 283 (6) Lucent Technologies LU (3,371) 15,765 2,818 Memberworks Inc. MBRS (20) 248 (89) Millennium Chem. MCH (46) 2,398 637 McDermott International MDR (363) 1,249 (24) McMoRan Exploration MMR (31) 72 5 Maxxam Inc. MXM (582) 1,107 133 Northwest Airlines NWAC (1,775) 14,154 (297) Nextel Partner NXTP (13) 1,889 277 ON Semiconductor ONNN (499) 1,161 213 Pinnacle Airline PNCL (48) 128 13 Primus Telecomm PRTL (96) 751 (26) Per-Se Tech Inc. PSTI (21) 171 (1) Qwest Communications Q (1,016) 26,216 (1,132) Revlon Inc. REV (1,726) 892 (32) Sepracor Inc SEPR (619) 1,020 256 St. John Knits Int'l SJKI (65) 234 69 I-Stat Corporation STAT 0 64 33 Syntroleum Corp. SYNM (2) 47 14 Triton PCS Holdings TPC (180) 1,519 52 UST Inc. UST (115) 1,726 727 Valence Tech VLNC (18) 36 4 Vector Group Ltd. VGR (3) 628 142 Western Wireless WWCA (224) 2,522 15 ********* 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, Jazel P. Laureno, 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 ***