/raid1/www/Hosts/bankrupt/TCR_Public/040520.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, May 20, 2004, Vol. 8, No. 99
Headlines
ADELPHIA COMM: Century/ML Cable Update & Vaughn's $625 Mil. Offer
AEGIS ASSESSMENTS: Addresses Unauthorized Berlin Stock Listing
AIR CANADA: Flight Attendants Agree to Labor Cost Realignment
ALASKA AIR: Chairman Provides Plan Update at Shareholders' Meeting
ALESTRA: Fitch Affirms B- Ratings on Foreign & Local Debts
AMERICAN CANADIAN: Case Summary & 12 Largest Unsecured Creditors
AMERICAN COMPUTER: Look for Schedules & Statements by May 28
ANTIQUELAND USA INC: Voluntary Chapter 11 Case Summary
APPLETON PAPERS: S&P Rates Proposed $375 Million Bank Loan at BB
ARGO-TECH: S&P Assigns BB Rating to $45M Secured Credit Facility
ATLANTIC COUNTY: Fitch Affirms B Rating on $64.6MM Revenue Bonds
AUTOCAM CORP: S&P Rates Corporate & Senior Secured Debt at B+
ATS LIQUIDATING: Selling Anginera(TM) to Iken Tissue for $200K+
BDR CORPORATION: Case Summary & 8 Largest Unsecured Creditors
BEAR STEARNS: Fitch Takes Rating Actions on 2001-7 Certificates
BETTER MINERALS: 13% Senior Noteholders Agree to Amend Indenture
CABLETEL COMMS: Agrees to Sell Remaining Business to Dynaflex
CNET NETWORKS: S&P Rates $125MM Convertible Senior Notes at B-
COMMERCIAL MORTGAGE: Fitch Upgrades Series 1998-C2 Certificates
COVANTA TAMPA: Plan Provides Liquidation Valuation Analysis
CREDIT SUISSE: S&P Assigns Low-B Ratings to 6 2004-C2 Classes
CWMBS INC: Fitch Takes Rating Actions on 4 RMB Note Series
DISTRIBUTION DYNAMICS: Committee Taps Faegre & Benson as Counsel
DLJ COMMERCIAL: Fitch Assigns Low-B Ratings to 5 1999-CG2 Classes
DOLE FOOD: Planned Wood Holdings Merger Spurs S&P's Rating Cuts
EMPIRE FINANCIAL: Net Losses & Deficit Trigger Going Concern Doubt
ENRON CORP: Four Taxing Authorities Object to Plan Confirmation
ENTERPRISE PRODUCTS: S&P Downgrades Corporate Credit Rating to BB+
ERN LLC: U.S. Trustee to Meet with Creditors on May 26, 2004
FIRST UNION: Fitch Assigns Low-B/Junk Ratings to 6 1999-C4 Classes
FLEMING COMPANIES: Summary & Overview of Third Amended Plan
FLINTKOTE COMPANY: Sidley Austin Serves as Bankruptcy Attorneys
FOOTSTAR INC: Selling 27 Shoe Zone Stores to Novus for $5.5MM Cash
FOURNAS COUNTY: U.S. Trustee Names 5-Member Creditors' Committee
GENTEK INC: Settles U.S. Government's Environmental Claim Dispute
GENTEK INC: Completes $294MM+ Sale of KRONE Communications to ADC
GLOBAL CROSSING: Resolves $2MM Claim Dispute with NTC Creditors
GMAC COMMERCIAL: Fitch Junks Rating on $20MM 1999-C1 Class J Notes
GULFTERRA ENERGY: S&P Keeps Negative Watch on Low-B Ratings
HALSEY DRUG: Stockholders' Deficit Narrows to $39MM at March 31
HEALTHSOUTH: Bondholder Panel Aggrieved by 'Strong-Arm Tactics'
HERITAGE ORGANIZATION: Case Summary & Largest Unsecured Creditors
IMMUNE RESPONSE: D. Mitchell Named Director -- Regulatory Affairs
INFOUSA INC: S&P Rates $250MM Senior Secured Debt at BB
DII/KBR: Working with Government to Resolve Billing Issues
LAKE CEDAR PARK: Case Summary & 7 Largest Unsecured Creditors
LONG GROVE CLO: S&P Assigns BB Rating to $11MM Class D Notes
MADISON RIVER: Fitch Gives B Rating to $200MM 13.25% Senior Notes
MAGSTAR TECHNOLOGIES: March 31 Balance Sheet Insolvent by $9.2 Mil
MARINER HEALTH: Plans to Develop $32.9 Million IT Infrastructure
MEDIABAY INC: Financial Restructuring Improves Balance Sheet
METROMEDIA INTL: Late Q1 Reporting May Trigger Senior Note Default
MIRANT CORPORATION: Proposes Claims Omnibus Objection Protocol
MORGAN STANLEY: Fitch Assigns Low Ratings to 6 1998-HF2 Classes
NRG ENERGY: Selects New Jersey as New Headquarters Site
OSE USA: Net Capital Deficit Tops $45.5 Million at March 28, 2004
OWENS CORNING: Asks Court to Approve $5MM OC China Loan Agreement
PARMALAT: Austrian Unit to Sell NOM AG Shares for EUR37.6 Million
PENTON MEDIA: Equity Deficit Increases to $155MM at March 31, 2004
PG&E NATIONAL: Court Allows ET Power's $82MM Claim Against USGen
PNC COMMERCIAL: Fitch Lowers 2000-C1 Class M Rating to CCC from B-
PREFERRED RIVERWALK: Case Summary & Largest Unsecured Creditors
RIGGS NATIONAL: Fitch Cuts Low-B Ratings & Keeps Negative Watch
SAFFRON FUND: Board Declares Liquidation Plan Effective
SEQUOIA MORTGAGE: Fitch Affirms 28 Class Ratings From 5 Trusts
SIMMONS: S&P Maintains Positive Watch over Planned Stock Offering
SKYTERRA: Equity Deficit Balloons to $2.8 Mil. at March 31, 2004
SMTC CORP: Balance Sheet Insolvency Tops $21 Million at April 4
SOLUTIA INC: Cuts a Deal to Reduce Letter of Credit Costs
SPIEGEL GROUP: John R. Steele Steps Down From Board
TEEKAY SHIPPING: S&P Affirms BB+ Corp Rating with Negative Outlook
TELTRONICS INC: March 31 Equity Deficit Stands at $6.3 Million
TENNECO AUTOMOTIVE: Fitch Places Debt Ratings on Watch Positive
TOWER AUTOMOTIVE: S&P Rates 5.75% Convertible Senior Debt at B-
USG CORPORATION: Wants to Continue Retention & Severance Plans
VALOR TELECOMMS: S&P Places B+ Corporate Rating on Watch Negative
VITAL BASICS: Gets Court OK to Hire Moon Moss as Special Counsel
WELCOME BREAK: Fitch Lowers Ratings & Removes Negative Watch
WISER OIL: Weak Liquidity Prompts S&P's Neg. Outlook on B- Rating
WEIRTON STEEL: International Steel Completes $253MM Asset Purchase
WEIRTON: International Steel Assumes Cliffs' Pellet Sales Contract
WILSONS THE LEATHER: Reports First Quarter 2004 Losses
XECHEM: Ceptor Subsidiary Secures $1.1 Mil. Bridge Loan Financing
* Judge Wolin Criticizes Third Cir. Panel & Vulture Investors
* Michael Dugan Joins Blackstone Group's Corporate Advisory Group
*********
ADELPHIA COMM: Century/ML Cable Update & Vaughn's $625 Mil. Offer
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Century/ML Cable Venture is the New York joint venture of Century
Communications Corporation, a wholly owned indirect subsidiary of
Adelphia Communications Corporation (ACOM), and ML Media Partners,
LP. Century/ML holds the cable franchise in Levittown, Puerto
Rico.
ML Media's 2000 Lawsuit
On March 24, 2000, ML Media filed a Verified Complaint in the
Supreme Court of New York against Arahova Communications, Inc.,
Century and ACOM. In the nine-count Complaint, ML Media alleged
that it entered into a joint venture agreement with Century,
which agreement, as subsequently modified, governed the
ownership, operation and disposition of the Venture.
The Complaint also alleged that ACOM and its affiliates took over
Century's interest in the Venture on October 1, 1999, and
breached their judiciary obligations to the Venture and violated
certain provisions of the Agreement. The Complaint further
alleged that ML Media required that Century elect to:
(a) purchase ML Media's interest in the Venture at an
appraised fair value, or
(b) seek to sell the cable systems to one or more third
parties.
Century elected to pursue the sale of the cable systems and
evaluated whether an affiliate would make an offer for the cable
systems. The Complaint alleged that Century or its affiliate's
potential participation in the sale process was improper. The
Complaint sought the dissolution of Century/ML and the
appointment of a receiver to effect its prompt sale.
On April 24, 2000, the Defendants denied the material allegations
of the Complaint and Century asserted three counterclaims against
ML Media by reason of ML Media's alleged failure to cooperate in
Century's efforts to sell the cable systems.
On May 15, 2000, ML Media denied the material allegations of
Century's counterclaims.
The Settlement and the Recap Agreement
On December 13, 2001, the parties reached a settlement. In
connection with the settlement, ACOM, Century, Century/ML, ML
Media and Highland Holdings, L.P. -- a general partnership owned
and controlled by members of the Rigas Family -- entered into an
agreement pursuant to which Century/ML agreed to redeem ML
Media's 50% interest in Century/ML on or before September 30,
2002 for a purchase price of $275,000 to $279,800. Among other
things, the Recap Agreement provided that Highland would:
-- arrange debt financing for the Redemption;
-- guarantee debt service on and after the closing; and
-- acquire a 60% ownership interest in the recapitalized
Company.
If the Redemption did not occur, ACOM agreed to purchase ML
Media's 50% interest in Century/ML under similar terms.
Century's 50% interest in the venture has been purportedly been
pledged to ML Media as collateral for ACOM's obligations under
the Recap Agreement. On December 18, 2001, $10,000 was placed on
deposit as earnest funds for the transaction. Simultaneously
with the execution of the settlement agreement, ML Media,
Adelphia and certain of its subsidiaries entered into a
Stipulation of Settlement, pursuant to which the litigation
between them was stayed pending the Redemption.
Recap Agreement Disputes
On May 28, 2002, ML Media notified Century/ML, ACOM, Century and
Highland that, by virtue of a change in the control of ACOM, the
Redemption's closing date under the Recap Agreement had been
accelerated from September 30, 2002 to:
-- June 7, 2002 in the case of Century/ML; and
-- June 10, 2002, in the case of ACOM.
ACOM notified ML Media that no change of control transactions as
contemplated by the Recap Agreement occurred. On June 10, 2002,
ACOM and Century sought remedies under the Recap Agreement. The
court denied issuance of a temporary restraining order. Century
filed a voluntary Chapter 11 bankruptcy petition on June 10,
2002. Two days later, ML Media sought a temporary restraining
order and preliminary injunction enjoining ACOM from preventing
ML Media's assumption of management of the Venture, which request
the Court denied. On June 13, 2002, Century removed the action
to the United States Bankruptcy Court for the Southern District
of New York.
On June 17, 2002, Century and ACOM sought a temporary restraining
order and preliminary injunction prohibiting ML Media from taking
possession of the Deposit. The Court denied Century and ACOM's
request. On June 21, 2002, ML Media took possession of the
Deposit.
ML Media Amends Complaint
On July 3, 2002, ML Media amended its Complaint. The Amended
Complaint alleged that the closing date under the Recap Agreement
was accelerated to either June 7, 2002, by reason of a change of
control of ACOM, or July 1, 2002, by reason of ACOM's defaults
under certain of ACOM's indebtedness and that the defendants had
failed to effect the Redemption. The Amended Complaint further
alleged that Century had diverted from Century/ML at least $3,500
in excessive management fees. The Amended Complaint set forth
seven purported causes of action, alleging, inter alia, that:
(1) Century/ML breached the Recap Agreement by reason of its
failure to perform the Redemption;
(2) ACOM breached the Recap Agreement by reason of its failure
to perform the Redemption, its failure to turn over
management of Century/ML to ML Media, and its failure to
indemnify ML Media;
(3) Century breached the Recap Agreement by reason of its
failure to turn over management of Century/ML to ML Media,
and its failure to indemnify ML Media;
(4) Highland breached the Recap Agreement by reason of its
failure to indemnify ML Media, its failure to obtain
financing for the Redemption, and its failure to reimburse
ML Media for certain fees;
(5) ACOM and Century breached their fiduciary duty to ML
Media;
(6) ML Media is entitled to specific performance of the Recap
Agreement so that it may manage Century/ML; and
(7) ML Media is entitled to an injunction prohibiting ACOM and
Century from failing to turn over management of the
Venture to ML Media.
On July 3, 2002, ML Media sought to sever its claims against
Century/ML and Highland and remand them to state court. All of
the defendants opposed the request, which the Court denied.
On July 30, 2002, Highland asked the Court to dismiss the
Complaint on the grounds that it constituted:
-- an attempt to enforce an executory contract against ACOM
and Century; and
-- an attempt to exercise control over estate property.
On August 7, 2002, ACOM and Century sought to dismiss the
complaint by reason of its failure to allege the closing of a
change of control transaction or, in the alternative, summary
judgment with respect to the claimed acceleration. Century/ML
joined in ACOM and Century's request.
ML Media opposed the requests. ML Media moved for summary
judgment on its claims against Century/ML and Highland.
The Defendants opposed ML Media's summary judgment request and
asserted that acceleration had not occurred and that the Recap
Agreement constituted a fraudulent conveyance, citing, inter
alia:
-- the conflicts of interest held by those executing the
agreement;
-- the absence of value received by Century/ML in exchange for
its obligation to pay ML Media $275,000; and
-- the transfer to Highland of a 60% interest in the Venture.
A hearing was held on September 24, 2002.
Bankruptcy Petition and Opposition
On September 30, 2002, Century filed a voluntary petition to
reorganize the Venture under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of
New York.
On October 11, 2002, ML Media sought to dismiss the petition,
inter alia, on the grounds that:
(1) under the applicable law and the Joint Venture Agreement,
Century lacked the authority to file the petition without
the consent of ML Media; and
(2) the Court could not treat the petition as involuntarily
filed because the Venture was paying its debts as they
came due and the $279,800 sought by ML Media from the
Venture was the subject of a bona fide dispute.
Century and the Venture opposed the request. On April 21, 2003,
the Court denied ML Media's motion to dismiss the Century/ML
bankruptcy petition, rejecting ML Media's claim that Century
improperly filed the petition without ML Media's consent.
Administration of Chapter 11 Case
The Bankruptcy Court allowed Century/ML to pay the prepetition
wages, salaries and other compensations including medical and
similar benefits to its employees.
The Court also allowed Century/ML to continue using its existing
Cash Management System and to:
-- designate, maintain, and use all bank accounts with same
account numbers;
-- treat Century/ML's bank accounts as accounts of Century/ML
as a debtor-in-possession;
-- use existing business forms and other documents and stock
until depleted;
-- modify existing Bank Accounts or open new bank accounts
during the pendency of the case and in the ordinary course
of its business.
Judge Gerber also permitted Century/ML to:
(a) employ Bankruptcy Services, LLC, as claims and noticing
agent;
(b) pay prepetition amounts owing in respect of sales and use
taxes; and
(e) honor or pay certain prepetition obligations to customers
in accordance with its Existing Customer Programs and
Practices.
Employment of Professionals
Century/ML employed three professionals to assist them in the
administration of its Chapter 11 case:
Firm Role
---- ----
Willkie Farr & Gallagher, LLP Bankruptcy Counsel
Morgan, Lewis & Bockius, LLP General Counsel
Daniel J. Aaron, P.C. Special Litigation Counsel
Exclusive Periods
Century/ML's exclusive period to file a reorganization plan
expires on July 6, 2004. Its exclusive period to solicit
acceptances for that plan expires on September 7, 2004.
Schedules of Assets & Liabilities
Christopher T. Dunstan, Century Communication's Vice President
and Treasurer and Century/ML's Manager, reports in the Statement
of Assets and Liabilities that Century/ML's assets total
$126,650,721, with its Real Property valued at $191,082 and its
Personal Property equal to $126,459,639. Century/ML's
liabilities total $305,050,955, with Unsecured Priority Claims at
$1,253,132 and Unsecured Non-Priority Claims totaling
$303,797,823.
Postpetition Development of ML Media Litigation
The Court rendered a decision on January 17, 2003 denying all of
the parties' pending motions for summary judgment; except that
the Court found "as a matter of law, that, assuming that the
Recap Agreement is enforceable, payment by the Venture was due on
September 30, 2002 and payment by [ACOM], Century and Highland
was due on October 1, 2002, one day later, and that, having
failed to make payment, each of [ACOM], Century and Highland is
now in default."
On January 27, 2003, Century/ML served and filed an answer to the
Complaint denying the substantive allegations and asserting a
defense of fraudulent conveyance. ACOM and Century also denied
the substantive allegations and asserted counterclaims against ML
Media based on various theories including fraudulent conveyance.
On March 26, 2003, ML Media moved for summary judgment on ACOM
and Century's counterclaims.
Highland served and filed an answer to the Complaint on March 28,
2003, denying the substantive allegations and asserted
counterclaims against ML Media for breach of contract and unjust
enrichment, based on ML Media's withdrawal of the escrow funds,
and for rescission of the Recap Agreement, based on Highland's
inability to receive a 60% interest in Century/ML.
In a decision and order dated March 31, 2003, the Bankruptcy
Court denied ML Media's request to become manager of Century/ML's
cable systems.
On April 18, 2003, ML Media filed an answer to Highland's
counterclaims denying the substantive allegations.
Century/ML amended its answer on April 30, 2003, and asserted
counterclaims against ML Media based on various theories
including fraudulent conveyance.
On May 12, 2003, the Court directed ML Media, Century, Adelphia
and Highland to enter into mediation to resolve the dispute.
On June 27, 2003, ML Media moved to dismiss Century/ML's
counterclaim for lack of standing or, in the alternative, for
failure to state a claim.
A hearing was held on September 5, 2003, to determine whether ML
Media's requests for dismissal and for summary judgment should be
granted.
ACOM and Century rejected the Recap Agreement on September 17,
2003.
The Bankruptcy Court has not yet issued written decisions on the
pending requests, but at a status conference held on April 15,
2004, the Court indicated that it would be issuing a decision in
which it would:
(a) dismiss all of the counterclaims of ACOM and Century
except for aiding and abetting of a breach of fiduciary
duties; and
(b) dismiss all of the Venture's counterclaims except for
constructive fraudulent conveyance.
Vaughn Group Wants to Buy Century/ML
On March 17, 2004, ML Media presented a non-binding written
indication of interest for the acquisition of 100% of Century/ML
by an investor group led by James C. Vaughn. The Vaughn
Indication of Interest contemplates a $625,000,000 purchase
price, subject to adjustments as a result of due diligence, plus
the amount of Century/ML's working capital at closing, less the
remaining cost of the pending rebuild of Century/ML's cable
systems. Century was not involved in the negotiation of the
Vaughn Indication of Interest and is not bound by it.
On April 13, 2004, Century and the Vaughn Group entered into a
confidentiality agreement with respect to the delivery of due
diligence materials. At a status conference on April 15, 2004,
the Court instructed Century to deliver due diligence materials
to the Vaughn Group prior to a subsequent decision as to whether
due diligence materials should be made concurrently available to
other parties in connection with other potential transaction
relating to Century/ML. (Adelphia Bankruptcy News, Issue No. 59;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
AEGIS ASSESSMENTS: Addresses Unauthorized Berlin Stock Listing
--------------------------------------------------------------
Aegis Assessments Inc. (OTCBB:AGSI), a provider of wireless
security solutions to public safety agencies and commercial
security companies for homeland security and life safety
applications, learned that it was one of more than 200 U.S.
publicly traded companies listed by the German brokerage firm
Berliner Freiverkehr on the Berlin Stock Exchange without the
company's knowledge or authorization. The company has demanded
immediate delisting and plans to pursue appropriate remedies
against the domestic and foreign brokerage firms responsible for
the unauthorized listing.
Part of a scandal that the financial media has dubbed "StockGate,"
the listings appear to be part of an effort by domestic and
foreign brokers to circumvent the recent NASD and SEC restrictions
against "naked short selling." Short selling is a trading practice
whereby investors borrow stock from a broker to sell with the hope
that the stock price will decline before they have to return the
shares back or cover their position. However, naked shorting
involves groups of people working together to manipulate the
market by selling fictitious shares of stock in an effort to force
a company's share price to go down. By listing the company's
common stock on the Berlin Stock Exchange, market manipulators
sought the benefit of an "arbitrage" loophole that none of the
present regulations was designed to close.
Eric Johnson, chairman and CEO of Aegis Assessments, stated: "Like
hundreds of other companies, we are truly shocked and, frankly,
appalled to learn that our stock could be listed on a foreign
exchange without our consent or knowledge. We are extremely
concerned that this scheme was perpetrated by naked short sellers
using manipulative tactics to affect downward pressure on our
stock price, forcing our unsuspecting shareholders to sell their
stock early, thereby perpetuating the downward pressure and
playing into the hands of these short sellers." During the past
several weeks the company's share price has traded significantly
downward. Management believes that the persistent pressure on its
share price, in the face of positive corporate developments, is
related to this unauthorized listing on the Berlin Stock Exchange.
"Anyone attempting to manipulate our stock value through naked
short selling is in for a rude awakening," Johnson said, because
the Berlin Stock Exchange has suspended this unauthorized listing
and naked short sellers won't be able to hide their short
position. Aegis has joined other companies listed on the Berlin
Stock Exchange without authorization in demanding both delisting
and evidence of who was ultimately behind the unauthorized
listings. Johnson added that investors looking to purchase shares
of Aegis Assessments should only purchase their shares from the
NASDAQ Over The Counter: Bulletin Board (OTCBB) under the symbol
AGSI, as shares traded on the Berlin Stock Exchange or any other
foreign exchange are not currently recognized by Aegis
Assessments.
Last year, over a hundred besieged public companies sought refuge
from the market manipulation of short-sellers by seeking to take
various actions, either alone or in concert with other companies,
to oppose manipulative trading in the form of illegal naked short
selling. These actions included lawsuits to withdrawals, or
threatened withdrawals, from the Depository Trust and Clearing
Corp. (DTCC), a registered clearing agency with the SEC, which
maintains a "stock borrowing" program which critics claim fosters
lengthy delivery failures and reuse of the same shares for
lending, which, according to a recent lawsuit filed by Nanopierce
Technologies (OTCBB:NPCT), is akin to "stock-kiting." Companies
seeking relief from naked short selling include Federal
Agricultural Mortgage/Farmer Mac, Allied Capital, Ameri-Dream,
Dobson Communications Corp., Freddie Mac, eResearch Technologies
Inc. and MBIA. In addition to Aegis Assessments, among the most
recent companies demanding delisting from the Berlin Stock
Exchange include BGR Corp., Advanced ID Corp., Whistler Investment
and Datascension Inc.
About Aegis Assessments Inc.
Through the SafetyNet(TM) line of products, Aegis -- whose January
31, 2004 balance sheet shows a stockholders' deficit of $104,069 -
- provides wireless security solutions to public safety agencies
and commercial security companies for homeland security and life
safety applications. Integrating emergency and life safety systems
available to the public and private sectors is the new challenge
in homeland security that the company's products and technologies
address.
AIR CANADA: Flight Attendants Agree to Labor Cost Realignment
-------------------------------------------------------------
Air Canada announced that it has reached a tentative agreement on
cost realignment with CUPE, representing approximately 5800 flight
attendants at the mainline carrier. The agreement, subject to
ratification by union membership, meets the target set for CUPE'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 applaud the leadership of CUPE for the determination and
resolve they demonstrated to keep our restructuring on track and
get us on the road to competitiveness, growth and profitability,"
said Robert Milton, President and CEO of Air Canada. "CUPE, along
with ACPA, the IAMAW, CALDA, and the Jazz unions, ALPA, the
Teamsters, and CALDA have demonstrated the toughest kind of
leadership in making very difficult decisions on behalf of their
members.
Agreements have now been reached with all unions at Air Canada and
Air Canada Jazz with the exception of the CAW Airline Division
which represents approximately 5000 customer sales and service
agents and crew schedulers at Air Canada and approximately 1400
employees at Air Canada Jazz comprised of customer service agents,
maintenance and engineering staff and crew schedulers.
On May 14, 2004, Air Canada and The Office of the Superintendent
of Financial Institutions reached an agreement which satisfies the
pension funding relief condition in the Deutsche Bank Standby
Purchase Agreement, eliminating one of the two remaining
conditions that must be satisfied.
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.
ALASKA AIR: Chairman Provides Plan Update at Shareholders' Meeting
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Emphasizing Alaska Airlines' and Horizon Air's work to
"weatherproof" themselves from economic downturns and instability,
Chairman and CEO Bill Ayer told shareholders at the Alaska Air
Group annual meeting that considerable progress has been made to
streamline costs, enhance value to customers and improve
operational performance.
Mr. Ayer tempered his remarks to the audience at Seattle's Museum
of Flight by saying "This is a work-in-progress -- we have a way
to go to ensure long-term security and prosperity for our
employees and shareholders."
The initiatives necessary to get there are outlined in "Alaska
2010," a plan Mr. Ayer unveiled nearly a year ago to secure
$307 million in permanent, annual savings from Alaska's cost
structure. The savings would result from a combination of
improvements: in efficiency and effectiveness, product changes,
and market-based adjustments in wages, benefits and work rules.
Alaska is more than a third of the way there already and remains
on course to achieve annual savings of $150 million by year-end.
Achieving the full amount will reduce Alaska's non-fuel unit cost
to 7.25 cents per available seat mile -- more than a full cent
lower than where Alaska concluded 2003 and a level Mr. Ayer says
will allow Alaska to fly profitably to almost any major market in
the nation.
"With that cost structure, we could comfortably grow 8-to-10
percent per year," he said. "At that point, success becomes self-
reinforcing, because consistent profitability allows you to grow
and growth helps keep costs down."
Despite the airline industry's travails and the challenges facing
both Alaska and Horizon, Ayer said, "We have the right plan. Our
commitment is strong. Our people are caring and resourceful with a
record of excellence. They are definitely up to the challenge."
In other news, Ron Cosgrave, Alaska CEO from 1972-79, retired from
the board of directors after 33 years of outstanding service.
Cosgrave led the rescue of the airline from near-bankruptcy and
built the foundation for the national prominence that the airline
enjoys today.
In addition, shareholders re-elected four board members to new
three-year terms: Ayer; Dennis F. Madsen, president and CEO of
Recreational Equipment Inc; R. Marc Langland, president of
Anchorage-based Northrim Bank; and, John V. Rindlaub, CEO of Wells
Fargo Bank's Pacific Northwest region.
Seattle-based Alaska Air Group is the parent company of Alaska
Airlines and Horizon Air Industries. The company and its sister
carrier, Horizon Air, together serve 80 cities in Alaska, the
Lower 48, Canada and Mexico.
As previously reported, Standard & Poor's Ratings Services lowered
its ratings on Alaska Air Group Inc. and subsidiary Alaska
Airlines Inc., including lowering the corporate credit rating on
both to 'BB-' from 'BB.' Ratings were removed from CreditWatch,
where they were placed March 18, 2003. The outlook is negative.
ALESTRA: Fitch Affirms B- Ratings on Foreign & Local Debts
----------------------------------------------------------
Fitch Ratings has affirmed its ratings of 'B-' to the foreign and
local currency debt obligations of Alestra, S.A. de R.L. de C.V.
The ratings apply to $387 million in outstanding securities,
including $304 million senior notes due 2010, $46 million senior
notes due 2009 and $37 million senior notes due 2006. The Rating
Outlook for all these ratings is Stable.
The ratings reflect Alestra's business position as a niche
provider of long distance, data and local service catering to the
Mexican corporate sector and an improved financial profile
following the recapitalization and debt restructuring completed
during November 2003. The new lower debt levels, cost of debt and
associated debt-service requirements better match Alestra's cash
flow generation to its debt-servicing needs.
Alestra's business strategy is to increasingly focus on the data
and local service segments to offset slower growth in the long
distance business. Data services, which include Internet, frame
relay, private lines and direct access, offer significant long
term growth opportunities due to their low penetration in Mexico.
Data services accounted for 20% of revenues during 2003 compared
to 14% in 2001, and are expected to continue increasing as a
percentage of revenues. Alestra is also growing its local service
business by targeting existing customers of its other services.
Alestra began offering local services in the three largest
metropolitan areas during 2001 and has since increased coverage to
smaller cities. Local services accounted for 4% of revenues during
2003, up from 1% in 2001.
In recent years, Alestra's profitability has been negatively
affected by declining long distance tariffs. The possible
elimination of the proportionate return rule for incoming
international long-distance calls could further pressure tariffs
and is incorporated into the ratings, although lower tariffs may
lead to modest improvements in long-distance traffic. Long
distance accounted for 76% of revenues during 2003, down from 85%
in 2001. In addition, Alestra continues to face competitive
challenges posed by telecommunications operator, Telefonos de
Mexico, S.A. de C.V., which controls more than 90% of the local
service sector, 70% of the long distance sector and a substantial
share of the data sector.
The restructuring completed in November 2003 reduced the company's
debt levels by approximately one-third to $400 million from $582
million, decreased the average financing cost on the debt to about
8% from more than 12% and lengthened the average debt maturity to
around seven years from 4.5 years. The restructuring will
significantly improve Alestra's credit ratios going forward.
EBITDA/interest should improve to 2.5 times (x)-3.0x compared to
less than 1.0x in 2002, and total debt/EBITDA should improve to
approximately 4.0x compared to 7.8x in 2002.
Alestra has approximately $400 million of debt, composed of newly
issued $304 million senior notes due 2010, $37 million 12.125%
senior notes due 2006 (not tendered in the debt restructuring),
$46 million 12.625% senior notes due 2009 (not tendered in the
debt restructuring) and $13 million of other debt. All of the debt
is dollar denominated and unsecured. Alestra has little short-term
refinancing risk, as the majority of its debt is long term.
Alestra provides long-distance services in Mexico since 1997. Long
distance accounted for 76% of revenues during 2003, although the
company's strategy is to diversify its revenue mix. Alestra also
provides data services and local services. Alestra is 49% owned by
AT&T and 51% owned by Onexa. The company brands its services under
the AT&T name.
AMERICAN CANADIAN: Case Summary & 12 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: American Canadian Investments, Inc.
aka ACI, Inc.
205 South East Street, Suite B
Culpeper, Virginia 22701
Bankruptcy Case No.: 04-12034
Chapter 11 Petition Date: May 5, 2004
Court: Eastern District of Virginia (Alexandria)
Judge: Stephen S. Mitchell
Debtor's Counsel: Steven B. Ramsdell, Esq.
Tyler, Bartl, Gorman & Ramsdell, P.L.C.
206 North Washington Street, Suite 200
Alexandria, VA 22314
Tel: 703-549-5000
Fax: 703-549-5011
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 12 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Comptroller of Maryland Sales & use taxes $52,890
Realty 121 USA Inc. Money loaned $50,000
American Commercial Money loaned $50,000
Investment
Adil Khan Money loaned and $32,000
Potential
contribution claim
in unknown amount
Dept. of Labor, $24,005
Licensing/Reg.
Uzma Khan Money loaned and $18,000
Potential
contribution claim in
unknown amount
City of Baltimore Water and $13,957
miscellaneous bills
BGE $4,280
State of Maryland $3,212
City of Baltimore Multiple family $3,080
dwelling license
Internal Revenue Service $2,159
Abdul Q. Khan & Salma Khan Potential Unknown
contribution claim
AMERICAN COMPUTER: Look for Schedules & Statements by May 28
------------------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California,
Los Angeles Division, gave American Computer and Digital
Components, Inc., more time to file its schedules of assets and
liabilities, statements of financial affairs and lists of
executory contracts and unexpired leases required under 11 U.S.C.
Sec. 521(1). The Debtor has until May 28, 2004, to file these
financial disclosure documents.
Headquartered in Baldwin Park, California, American Computer &
Digital Co., filed for chapter 11 protection on April 22, 2004
(Bankr. C.D. Calif. Case No. 04-19259). Robert P. Goe, Esq., at
Goe & Forsythe LLP represents the Debtor in its restructuring
efforts. When the Company filed for protection from its creditors,
it listed both estimated debts and assets of over $10 million.
ANTIQUELAND USA INC: Voluntary Chapter 11 Case Summary
------------------------------------------------------
Lead Debtor: AntiqueLand USA, Inc.
aka Consolidated Capital Financial, Inc.
8911 Capital of Texas Highway, Suite 4260
Austin, Texas 78759
Bankruptcy Case No.: 04-35563
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
AntiqueLand of Texas, LP 04-35562
AntiqueLand Holdings, Inc. 04-35564
AntiqueLand Properties, Inc. 04-35565
AntiqueLand, Inc. 04-35566
Creations of the Midwest, Inc. 04-35567
AntiqueLand of California, L.P. 04-35568
AntiqueLand of Florida, Ltd. 04-35569
AntiqueLand of Indiana, L.P. 04-35570
AntiqueLand of Kansas, L.P. 04-35571
AntiqueLand of Ohio, L.P. 04-35573
AntiqueLand of Oklahoma, L.P. 04-35575
Type of Business: The Debtor operates antique and craft malls
nationwide. See http://www.antiquelandusa.com/
Chapter 11 Petition Date: May 17, 2004
Court: Northern District of Texas (Dallas)
Judge: Harlin DeWayne Hale
Debtors' Counsels: Mark A. Castillo, Esq.
Stephanie Diane Curtis, Esq.
The Curtis Law Firm, PLLC
901 Main Street, Suite 6515
Dallas, TX 75202
Tel: 214-752-2222
Fax: 214-752-0709
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.
APPLETON PAPERS: S&P Rates Proposed $375 Million Bank Loan at BB
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' bank loan
rating and its recovery rating of '3' to specialty paper producer
Appleton Papers Inc.'s proposed $375 million senior secured credit
facility. The rating is the same as the corporate credit rating;
this and the '3' recovery rating indicate that bank lenders can
expect meaningful recovery of principal (50% to 80%) in the event
of a default.
At the same time, Standard & Poor's assigned its 'BB-' senior
unsecured debt rating to the company's $150 million senior
unsecured notes due 2011, and its 'B+' subordinated debt rating to
the company's $200 million subordinated notes due 2014, both to be
issued under Rule 144a with registration rights. All of these
newly assigned ratings are based on preliminary terms and
conditions. All other ratings, including Appleton's 'BB' corporate
credit rating, were affirmed. The outlook is stable.
"The ratings reflect Appleton Papers' aggressive financial
profile, declining carbonless paper volumes, expectations for
lower operating margins due to a shifting product mix, and
potential acquisition risks," said Standard & Poor's credit
analyst Pamela Rice. These factors are partially offset by leading
market shares in certain specialty paper markets, diverse end
uses, and relatively stable earnings and cash flows at the
Appleton, Wisconsin-based company.
The new credit facility consists of a $125 million five-year
revolving credit facility and a $250 million term loan B due in
2010. Proceeds from the term loan and the new debt issues will be
used to refinance $145 million of bank debt, $200 million of 12.5%
subordinated notes, plus a $40 million tender offer premium, a
$177 million 10% deferred payment obligation, and fees and
expenses.
Pro forma for the refinancing, debt will rise by $78 million to
$612.5 million. Nonetheless, Standard & Poor's believes Appleton
will continue to generate solid levels of free cash flow and
maintain credit measures in line with the ratings. Although cash
interest will increase because the deferred payment obligation was
payment-in-kind, total interest expense will decline due to lower
rates. In addition, Appleton's debt maturity schedule will
improve.
Appleton manufactures high valued-added coated papers, flexible
film packaging products, and printed security products. The
company is the world's largest manufacturer of carbonless paper,
which is used in multipart forms such as invoices, credit-card
receipts, and packing slips.
ARGO-TECH: S&P Assigns BB Rating to $45M Secured Credit Facility
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' rating and
'1' recovery rating to Argo-Tech Corp.'s proposed $45 million
secured credit facility, indicating a high expectation of a full
recovery of principal in a default scenario. In addition, the
company's proposed $250 million senior unsecured notes due 2011,
which are to be sold under SEC Rule 144A with registration rights,
were assigned a 'B' rating by Standard & Poor's. At the same time,
Standard & Poor's affirmed its ratings, including the 'B+'
corporate credit rating, on the aerospace supplier. The outlook
remains negative.
"The affirmation reflects improved liquidity after the proposed
refinancing and signs that the commercial aerospace aftermarket is
beginning to recover, although the higher leverage will result in
a weaker overall financial profile," said Standard & Poor's credit
analyst Christopher DeNicolo. Argo-Tech plans to use the proceeds
from the unsecured notes, a new $15 million term loan, and $5
million draw on the new $30 million revolver, as well as cash on
hand to refinance existing bank debt, tender for its outstanding
subordinated notes, and to redeem preferred stock, plus accrued
dividends, of the company's parent AT Holdings. The new credit
facility has only minimal amortization until 2009 and increases
Argo-Tech's revolver to $30 million from $20 million,
approximately $21 million of which will be available for
borrowings at close. Redeeming the preferred stock eliminates the
payment of cash dividends, which were likely to begin in 2004.
However, balance sheet debt will increase $55 million and total
debt to EBITDA in 2004 will likely be above 6x.
The ratings on Cleveland, Ohio-based Argo-Tech reflect
participation in the cyclical commercial aerospace industry and
high financial risk due to a sizable debt load. Those factors
overshadow the company's established positions in niche markets
and solid profit margins. The firm is the world's largest supplier
of main engine fuel pumps, which are used in approximately two-
thirds of large commercial aircraft in service. Argo-Tech has also
leading positions in commercial and military airframe fuel pumps
and valves, aerial refueling components installed on U.S. military
aircraft, and components for ground fueling systems for major
commercial airports. In addition, the company provides cryogenic
pumps and other components to the liquefied natural gas industry.
Increased debt from the proposed refinancing will result in a
weaker financial profile and delay recovery in most credit
measures. A failure to improve as expected, due most likely to
decline or slow return of the aftermarket, could result in a
downgrade.
ATLANTIC COUNTY: Fitch Affirms B Rating on $64.6MM Revenue Bonds
----------------------------------------------------------------
Fitch Ratings affirms its 'B' rating on approximately
$64.6 million Atlantic County Utilities Authority (ACUA), New
Jersey outstanding solid waste system revenue bonds, series 1992.
The rating is removed from Rating Watch Evolving status, and the
Rating Outlook is now Stable.
The underlying rating reflects concerns relating to the potential
depletion of the bond-funded debt service reserve fund (DSRF); the
solid waste system's lack of financial flexibility highlighted by
its heavy debt burden and continual reliance on State support for
debt service; and uncertainties surrounding prolonged litigations.
Credit concerns are somewhat balanced by the system's generally
satisfactory financial operations. After a $5.4 million draw on
the DSRF to meet scheduled debt service payment in March 2002, to
date the DSRF remains underfunded. In March 2003, the State again
provided subsidy to ACUA for both principal and interest payments,
and the March 2004 principal and interest payments were serviced
by State subsidy and ACUA's own resources, respectively. While
management has taken credible steps to improve financial
operations and to ensure compliance of requirements to receive
State support, the solid waste system's lack of financial
flexibility is evidenced by its high debt service cost and
continual reliance on the State subsidy for debt service payments.
AUTOCAM CORP: S&P Rates Corporate & Senior Secured Debt at B+
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' corporate
credit rating to Kentwood, Michigan-based Autocam Corp. At the
same time, Standard & Poor's assigned its 'B+' senior secured bank
loan rating and '4' recovery rating to Autocam's proposed $167.5
million of senior secured credit facilities. The debt rating and
recovery rating indicate the likelihood of a marginal recovery of
principal (25%-50%) in a default or bankruptcy, based on an
assessment of the company's enterprise value.
The senior credit facilities consist of a $50 million multi-
currency revolving credit facility due 2009, a $75 million euro-
denominated term loan due 2011, and a $42.5 million U.S. term loan
due 2011. The borrowers are Autocam Corp. (U.S.) and Autocam
France SARL. Standard & Poor's also assigned its 'B-' debt rating
to Autocam's proposed $140 million unsecured senior subordinated
notes due 2014.
Proceeds from the transaction will be used, in part, to finance
the acquisition of Autocam by unrated GS Capital Partners 2000 LP
and Transportation Resource Partners LP. The proceeds also will be
used to refinance or retire virtually all existing debt and redeem
all preferred stock, to provide working capital financing, and
general corporate purposes. Pro forma total debt outstanding at
close of the transaction will be about $266 million.
"Upside rating potential is limited by the company's high debt
leverage in combination with its relatively narrow scope of
business in a highly competitive and cyclical industry," said
Standard & Poor's credit analyst Nancy Messer. "Downside rating
movement is limited by the company's stable operating margins and
our expectation that free cash flow generation will support debt
reduction in the intermediate term."
The credit facilities will be secured by a first-priority security
interest in substantially all the assets of Autocam and its
domestic and foreign subsidiaries (foreign operating subsidiaries
are not pledging assets directly). In addition, the senior
facilities will be secured by a first-priority security interest
in 100% of the capital stock of Autocam and each domestic
subsidiary, 65% of the capital stock of each foreign subsidiary,
and all inter-company debt. Guarantors are each of the U.S.
borrower's existing and subsequently acquired or organized
domestic material subsidiaries and any parent holding companies of
the U.S. borrower. There is no borrowing base to limit
availability.
Because the French assets are not being pledged directly as
security, an inter-company loan from the French holding company to
the French operating subsidiaries will be established, with this
loan secured by the assets of the two subsidiaries. The inter-
company loan will be pledged to the benefit of the U.S. credit
facility lenders. Upstream guaranties are not available from the
French entity to the U.S. parent. At Dec. 31, 2003, Autocam's
assets were distributed as follows: 45% France, 51% U.S., and 4%
South America.
ATS LIQUIDATING: Selling Anginera(TM) to Iken Tissue for $200K+
---------------------------------------------------------------
The Trustee of the ATS Liquidating Trust (Pink Sheets:ATISZ)
announced he has entered into an agreement to sell the Trust's
Anginera(TM) intellectual property to Iken Tissue Therapeutics,
Inc. of San Francisco. Anginera is a human fibroblast-based,
tissue-engineered, epicardial patch.
Under the agreement, Iken will pay the ATS Liquidating Trust
$200,000 at closing in addition to future milestone and royalty
payments. Potential future payments include a $300,000 milestone
payment upon successful conclusion of the first Phase I/II
Anginera human clinical trial, which is expected to occur by
December 31, 2005. A $500,000 milestone would be payable at the
successful conclusion of the Phase III Anginera human clinical
trial which is expected to occur by March 31, 2008.
Approval for the marketing of Anginera by the U.S. Food and Drug
Administration would result in a $600,000 milestone payment. The
agreement also specifies royalties of three per cent of product
net sales for five years after the first sale following FDA
approval.
The sale is subject to bankruptcy court approval as part of the
ATS Chapter 11 Liquidating Plan of Reorganization. The Trustee has
also filed a motion with the bankruptcy court seeking an order
approving the sale to Iken or a qualified overbidder. The
bankruptcy court hearing where the court will hear the Trustee's
motion to approve the sale is scheduled for 10:00 a.m. June 17,
2004 in San Diego. Further details of the transaction and
information regarding the overbid process may be obtained from the
motion filed with the bankruptcy court seeking approval of the
above transaction.
In March, 2004, the Trust announced that results of a pivotal
preclinical trial demonstrated the safety of Anginera.
Furthermore, the efficacy data within that study supported
previous findings and published results from prior animal studies
on the ability of Anginera to positively influence left
ventricular function of compromised hearts.
ATS previously announced that Anginera improved overall function
of damaged heart tissue in mice while no negative effects on the
function of normal heart tissue were observed. Prior to that, the
company published research showing Anginera's ability to cause
mature new blood vessels to form in infarcted cardiac tissues of
mice. This work was published in the October 23, 2001 issue of
Circulation, the peer-reviewed journal of the American Heart
Association.
BDR CORPORATION: Case Summary & 8 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: BDR Corporation
P.O. Box 510
Veradale, Washington 99037
Bankruptcy Case No.: 04-03639
Chapter 11 Petition Date: May 5, 2004
Court: Eastern District of Washington (Spokane)
Judge: Patricia C. Williams
Debtor's Counsel: John F. Bury, Esq.
Murphy, Bantz & Bury, P.S.
818 West Riverside 631 Lincoln Building
Spokane, WA 99201-0989
Tel: 509-838-4458
Total Assets: $6,919,609
Total Debts: $6,925,123
Debtor's 8 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Spokane County Treasurer $94,209
William E. Lentes $62,010
Dellen Wood Products $59,896
Richard B. Lentes $39,961
Randal S. Lentes $39,925
Ells Wright $13,321
Inland Empire Fire Protect $4,980
Cad. Of Spokane, LLC $2,730
BEAR STEARNS: Fitch Takes Rating Actions on 2001-7 Certificates
---------------------------------------------------------------
Fitch Ratings has upgraded four and affirmed five classes of Bear
Stearns ARM Trust mortgage-backed certificates, series 2001-7.
Bear Stearns ARM Trust mortgage pass-through certificates, series
2001-7 Group 1:
--Class IA affirmed at 'AAA';
--Class B-1 affirmed at 'AAA';
--Class B-2 upgraded to 'AA+' from 'AA';
--Class B-3 upgraded to 'A+' from 'A';
--Class B-4 upgraded to 'BB+' from 'BB';
--Class B-5 upgraded to 'B+' from 'B'.
Bear Stearns ARM Trust mortgage pass-through certificates, series
2001-7 Group 2:
--Class IIA affirmed at 'AAA'.
Bear Stearns ARM Trust mortgage pass-through certificates, series
2001-7 Group 3:
--Class IIIA affirmed at 'AAA'.
Bear Stearns ARM Trust mortgage pass-through certificates, Series
2001-7 Group 4:
--Class IVA affirmed at 'AAA'.
The upgrades are being taken as a result of low delinquencies and
losses, as well as increased credit support. The affirmations on
the above classes reflect credit enhancement consistent with
future loss expectations.
BETTER MINERALS: 13% Senior Noteholders Agree to Amend Indenture
----------------------------------------------------------------
Better Minerals & Aggregates Company (BMAC) announced that it has
received the requisite tenders and consents from holders of its
13% Senior Subordinated Notes due 2009 (CUSIP No. 087714 AC 5) to
amend the related indenture.
On May 4, 2004, BMAC commenced a cash tender offer and consent
solicitation relating to any and all of the notes. The consent
solicitation expired at 5:00 p.m., New York City time, on Monday,
May 17, 2004. Prior to expiration of the consent solicitation,
holders of approximately 89% of the outstanding principal amount
of the notes had tendered their notes and consented to the
proposed amendments to the related indenture.
As a result of obtaining the requisite consents, BMAC and the
subsidiary guarantors intend to execute a supplemental indenture
to effect the proposed amendments. The proposed amendments will
not become operative, however, unless and until the notes are
accepted and paid for pursuant to the terms of the tender offer
and consent solicitation. When the proposed amendments become
operative, holders of all the notes then outstanding will be bound
thereby. The proposed amendments will eliminate substantially all
of the restrictive covenants and certain events of default in the
indenture and the notes. At this time, tendered notes may not be
withdrawn and delivered consents may not be revoked.
The tender offer for the notes will expire at 12:00 midnight, New
York City time, on Tuesday, June 1, 2004, unless extended or
earlier terminated. The closing of the tender offer is subject to
several conditions, including the closing of a new $125 million
senior secured credit facility, an amendment to BMAC's existing
$30 million revolving credit agreement and other customary
conditions.
The dealer manager for the tender offer and solicitation agent for
the consent solicitation is Jefferies & Company, Inc.
* * *
As reported in Troubled Company Reporter's May 11, 2004
edition, Standard & Poor's Rating Services lowered its corporate
credit rating on Better Minerals & Aggregates Co. to 'CC' from
'CCC'. At the same time, Standard & Poor's lowered its rating on
the Berkeley Springs, West Virginia-based company's $150 million
13% senior subordinated notes due 2009 to 'CC' from 'CCC-'. The
outlook is negative.
"The downgrade follows the company's announcement that it has
commenced a tender offer for its 13% senior subordinated notes due
2009 for less than par," said Standard & Poor's credit analyst
Dominick D'Ascoli. Standard & Poor's views this tender offer as
coercive, as bondholders will most likely face a bankruptcy
scenario if they do not tender their bonds.
CABLETEL COMMS: Agrees to Sell Remaining Business to Dynaflex
-------------------------------------------------------------
Cabletel Communications Corp. (AMEX: TTV) (TSX: TTV), announced
that it has agreed upon terms for the sale of its Manufacturing
segment to Dynaflex, Inc. The sale is subject to a number of
closing conditions, including completion of due diligence, the
execution of definitive documentation and court approval in
Ontario. If consummated, the sale will result in the disposition
by the Company of its last remaining operating business. Although
the sale price was not disclosed, the Company did announce that it
does not expect the proceeds from such sale to exceed the amount
it currently owes to its creditors. Accordingly, following the
sale, the Company does not expect any of the proceeds therefrom to
be available to the holders of the Company's common stock.
On March 31, 2004, the Company announced the sale of its
Distribution and Technology segment and its intention to focus on
completing its on-going restructuring efforts, with the goal of
reorganizing the Company around its existing Manufacturing
segment. Since that date, the Company has been in discussions with
its creditors and has been exploring alternatives for a
satisfactory resolution of its previously announced liquidity
issues. After reviewing the Company's strategic alternatives, the
Company has concluded that the best option currently available to
its stakeholders is to sell its remaining business unit and
attempt to restructure the corporate shell for a possible sale.
Hence, following the sale of the Manufacturing segment, the
Company hopes to achieve a consensual resolution of all creditor
claims. To obtain a final resolution, the Company may be required
to file for protection under applicable bankruptcy laws as a means
of resolving outstanding claims of its creditors.
About Dynaflex, Inc.
Headquartered in Indianapolis, Indiana, Dynaflex, Inc., a
privately owned company, is a supplier of infrastructure products
for the voice, data and video markets.
About Cabletel Communications
Cabletel Communications offers a wide variety of products to the
Canadian television and telecommunications industries required to
construct, build, maintain and upgrade systems. The Company's
engineering division offers technical advice and integration
support to customers. Stirling Connectors, Cabletel's
manufacturing division supplies national and international
clients with proprietary products for deployment in cable, DBS
and other wireless distribution systems. More information about
Cabletel can be found at http://www.cabletelgroup.com/
CNET NETWORKS: S&P Rates $125MM Convertible Senior Notes at B-
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B-' rating to
online publisher CNET Networks Inc.'s $125 million 0.75%
convertible senior notes due 2024. Net proceeds will be used to
redeem existing 5% convertible subordinated notes and for general
corporate purposes.
At the same time, Standard & Poor's revised its rating outlook on
CNET to stable from negative, reflecting the positive impact of
the broad upturn in online advertising and the company's improving
financial measures. In addition, the 'B-' corporate credit rating
on San Francisco, California-based CNET was affirmed. As of March
31, 2004, total debt outstanding was $118 million.
The company is benefiting from the online advertising sector
recovery, which was evidenced by about 20% industry growth in
2003, based on Interactive Advertising Bureau estimates. By
contrast, CNET's year-over-year total revenue grew by 6.3%, with
its Internet revenue growing at about 15%, partly offset by a
decline in publishing revenue. CNET's Internet revenue growth was
slightly below industry average, because online advertising growth
was concentrated among the top three Internet properties: America
Online, Google, and Yahoo!. Publishing revenue is likely to remain
weak as the custom publishing business slowly declines. The
improving online advertising environment is also reflected by the
company's higher, revised 2004 revenue and EBITDA guidance. "Given
the current strength and pace of online advertising, we believe
the company is likely to achieve its 2004 targets," said Standard
& Poor's credit analyst Andy Liu.
For more than two years, management has been cutting costs to
address its sluggish revenue trends. These efforts included
headcount reductions and the lowering of sales and marketing
expenses, which in the past had represented more than 50% of
revenues. Given the improving revenue environment, CNET could
marginally increase spending on marketing and capital equipment.
However, Standard & Poor's expects the company to exercise some
restraint. For the 12 months ended March 31, 2004, the EBITDA
margin was 5%, compared to EBITDA losses for most of 2003. Over
the same period, lease adjusted EBITDA coverage of interest and
lease adjusted total debt to EBITDA were 1.32x and 9.54x,
respectively. The company continues to generate negative
discretionary cash flow, although deficits are narrowing. Positive
discretionary cash flow generation is a possibility over the
medium term. Ratings on CNET are primarily supported by its $130
million in cash and marketable securities, together with its good
niche market positions and prospects for a gradual turnaround in
its core business.
COMMERCIAL MORTGAGE: Fitch Upgrades Series 1998-C2 Certificates
---------------------------------------------------------------
Fitch Ratings upgrades Commercial Mortgage Acceptance Corp.'s
(CMAC) commercial mortgage pass-through certificates, series 1998-
C2, as follows:
--$173.5 million class C to 'AAA' from 'AA-';
--$173.5 million class D to 'A+' from 'BBB+';
--$43.4 million class E to 'A-; from 'BBB-';
--$21.7 million class G to 'BB+' from 'BB'.
The following classes are affirmed by Fitch:
--$125.7 million class A-1 'AAA';
--$837.8 million class A-2 'AAA';
--$671.1 million class A-3 'AAA';
--Interest-only class X 'AAA';
--$144.6 million class B 'AAA';
--$36.1 million class H 'BB-';
--$65.1 million class J 'B':
--$21.7 million class K 'B-'.
Fitch additionally removes classes J and K from Rating Watch
Negative. The $21.7 million class L remains at 'CCC'.
Fitch does not rate the $122.9 million class F or the $24.4
million class M certificates.
The upgrades reflect improved credit enhancement levels resulting
from loan payoffs and amortization combined with the defeasance of
the third largest loan, the Sheraton Chicago Hotel (5.7%) in
December 2003. Since issuance, the pool balance has been reduced
by 13% to $2.48 billion from $2.89 billion at issuance. The second
largest loan in the pool, One Liberty Plaza (10%), was defeased in
2001.
Classes J and K are removed from Rating Watch Negative as the
interest shortfalls on these classes have been paid in full.
As of the April 2004 distribution date, fourteen loans (14.4%)
were in special servicing, including six 90+ days delinquent loans
(3.2%). The largest specially serviced loan, 330 South Warminster
Road (1%), is collateralized by an office property in Hatboro, PA
and is over 90 days delinquent. The loan became delinquent after
the two major tenants vacated 58% of the space and the resulting
cash flow was insufficient to meet debt service obligations. The
property is now 91% occupied. The special servicer is evaluating
workout options. The second largest specially serviced loan, Bell
Atlantic Building (0.9%), is collateralized by an office property
in Newark, NJ and is over 90 days delinquent. The property is 100%
vacant after Verizon, the largest tenant (94% of the overall
space), vacated in January 2003. The special servicer is
evaluating workout options. The next specially serviced loan, Omni
Richardson Hotel (0.9%), is collateralized by a full service hotel
in Richardson, TX and is also over 90 days delinquent. The
property is under contract for sale with a partial assumption of
the modified and restructured loan.
Realized losses in the pool total $19 million, or 0.66% of the
pool's original principal balance.
COVANTA TAMPA: Plan Provides Liquidation Valuation Analysis
-----------------------------------------------------------
The Covanta Tampa Debtors will demonstrate at the Confirmation
Hearing that the distributions creditors receive under the Plan
are superior to what creditors would get in the event of a
Chapter 7 liquidation. This demonstration is what's meant by the
so-called "best interests" test under the Bankruptcy Code.
The Covanta Tampa Debtors have prepared a liquidation valuation
analysis that reflects the projected outcome of a hypothetical,
orderly Chapter 7 liquidation. The Analysis indicates that the
liquidation proceeds to each Class is less than or equal to the
estimated recoveries under the Covanta Tampa Joint Plan of
Reorganization.
Estimated Proceeds Available for Distribution
Low High
----------- -----------
Gross Proceeds $0 $0
Cash on hand as of July 31, 2004 0 0
Less:
Taxes Payable N/A N/A
Liquidation Costs N/A N/A
DIP Financing Facility Claims
(March 10, 2004 to July 2004) (400,000) (600,000)
Covanta Admin. Expense Claim
(October 2003 to March 10, 2004) (4,100,00) (4,500,000)
Other Admin. Expense Claims (210,000) (210,000)
Compensation and Reimbursement Claims (175,000) (175,000)
----------- -----------
Net Proceeds for Secured and
Unsecured Claims ($4,885,000) ($5,485,000)
=========== ===========
Ave. Estimated Estimated Estimated
Allowed Claims Allowed Claims Recovery Amt. Recovery %
-------------- ---------- ---------- ----------
Priority
Non-Tax Claims $0 $0 0
Secured Claims $282,362 $0 0
Unsecured Claims $12,817,542 $0 0
The Covanta Tampa Debtors assume that any Secured Claim will be
satisfied, if at all, from any retainage due to them. Any
Secured Claim not satisfied from the retainage will constitute
Unsecured Claims and increase the Unsecured Claims by a
corresponding amount. Unsecured Claims include $12,711,794 in
prepetition Intercompany Claims.
Liquidation Analysis Assumptions
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered by
management, are inherently subject to economic, competitive,
litigation and other contingencies beyond the control of the
Covanta Tampa Debtors and their management. The major
assumptions made are:
(a) The Chapter 7 Trustee will not actively operate the
Project, but rather will abandon operation of the Project
to Tampa Bay Water.
(b) The liquidation of assets commences on August 1, 2004 and
is completed by December 31, 2004. Because the Covanta
Tampa Debtors have no assets other than the assets related
to the Project, there will be no meaningful liquidation of
assets.
(c) The liquidation of assets produces taxable income and the
related taxes are deducted from the gross proceeds to
arrive at the net liquidation proceeds available to
creditors. Because the Covanta Tampa Debtors have no
assets other than the assets related to the Project, there
will be no taxable income or related taxes.
(d) During the liquidation process, the Covanta Tampa Debtors
cease operating their businesses as a going concern.
(e) The Covanta Tampa Debtors are liquidated under the
direction of a trustee appointed by the Bankruptcy Court
who will be entitled to 3% of the gross liquidation
proceeds as fees. Because the Covanta Tampa Debtors have
no assets other than the assets related to the Project,
there will be no fees due to the Trustee.
(f) Any cash generated by the Covanta Tampa Debtors during the
liquidation process is assumed to be consumed by operating
expenses, capital expenditures and other similar expenses.
Because the Covanta Tampa Debtors have no assets other
than the assets related to the Project, there will be no
cash generated.
(g) Proceeds from asset sales are calculated assuming that:
* all assets are sold through an auction as a going-
concern; and
* all executory contracts and unexpired leases that have
not been rejected or terminated by the Covanta Tampa
Debtors are assigned to the purchaser.
As a result, all cure costs related to these executory
contracts and unexpired leases are paid out of the gross
liquidation proceeds. Because the Covanta Tampa Debtors
have no assets other than the assets related to the
Project, there will be no asset sales.
(h) There will be substantial increases in claims, which would
be satisfied on a priority basis or on parity with
creditors in the Chapter 11 Cases.
(i) There will be no agreement by Covanta Energy Corporation
to voluntarily reduce the amount of the Covanta
Administrative Expense Claim as provided in the Plan.
(j) There will be no agreement by the Intercompany
Claim Holders to voluntarily subordinate their Claims to
other Unsecured Claims to the extent necessary to ensure
full payment of other Unsecured Claims as provided in
the Plan.
(k) The Covanta Tampa Debtors will not receive the benefits of
the TBW Settlement Agreement under a Chapter 7
liquidation.
(l) Because the TBW Settlement Agreement is contingent on the
confirmation of the Plan and the Covanta Tampa Debtors
will cease operating the Project, the residual value of
the Covanta Tampa Debtors' rights in their contracts with
TBW in a liquidation scenario, if any, are too speculative
to include in the Liquidating Analysis.
Headquartered in Fairfield, New Jersey, Covanta Energy Corporation
-- http://www.covantaenergy.com/-- is a publicly traded holding
company whose subsidiaries develop, own or operate power
generation facilities and water and wastewater facilities in the
United States and abroad. The Company filed for Chapter 11
protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826).
Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary,
Gottlieb, Steen & Hamilton represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
its creditors, they listed $3,280,378,000 in assets and
$3,031,462,000 in liabilities. (Covanta Bankruptcy News, Issue No.
56; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CREDIT SUISSE: S&P Assigns Low-B Ratings to 6 2004-C2 Classes
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Credit Suisse First Boston Mortgage Securities Corp.
2004-C2's $975 million commercial mortgage pass-through
certificates 2004-C2.
The preliminary ratings are based on information as of May 18,
2004. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect the credit support provided by the
subordinate classes of certificates, the liquidity provided by the
trustee, the economics of the underlying loans, and the geographic
and property type diversity of the loans. Classes A-1, A-2, B, C,
D, and E are currently being offered publicly. Standard & Poor's
analysis determined that, on a weighted average basis, the conduit
portion of the pool (not including co-op loans) has a debt service
coverage of 1.51x, a beginning LTV of 87.6%, and an ending LTV of
72.9%.
Preliminary Ratings Assigned
Credit Suisse First Boston Mortgage Securities Corp. 2004-C2
Class Rating Amount ($)
A-1 AAA 195,525,000
A-2 AAA 391,665,000
B AA 26,813,000
C AA- 10,969,000
D A 20,720,000
E A- 9,751,000
A-1-A AAA 253,784,000
F BBB+ 9,750,000
G BBB 9,750,000
H BBB- 10,970,000
J BB+ 6,094,000
K BB 3,656,000
L BB- 3,656,000
M B+ 6,094,000
N B 2,438,000
O B- 1,219,000
P N.R. 12,188,374
A-X* AAA N/A
A-SP* AAA N/A
*Interest-only class. N.R.-Not rated. N/A-Not applicable.
CWMBS INC: Fitch Takes Rating Actions on 4 RMB Note Series
----------------------------------------------------------
Fitch Ratings has taken rating actions on the following CWMBS
(Countrywide Home Loans), Inc. residential mortgage-backed
certificates:
CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through
certificates, series 2002-3 Group 1
--Class A affirmed at 'AAA';
--Class M `upgraded to 'AAA' to 'AA';
--Class B1 upgraded to 'AA' from 'A';
--Class B2 upgraded to 'BBB+' from 'BBB';
--Class B3 affirmed at 'BB';
--Class B4 affirmed at 'B'.
CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through
certificates, series 2002-3 Groups 2 & 3
--Class A affirmed at 'AAA';
--Class M upgraded to 'AAA' to 'AA';
--Class B1 upgraded to 'AAA' from 'A';
--Class B2 upgraded to 'BBB+' from 'BBB';
--Class B3 affirmed at 'BB';
--Class B4 affirmed at 'B'.
CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through
certificates, series 2002-12
--Class A affirmed at 'AAA';
--Class M upgraded to 'AAA' to 'AA';
--Class B1 upgraded to 'AA+' from 'A';
--Class B2 upgraded to 'A+' from 'BBB';
--Class B3 upgraded to 'BBB+' from 'BB';
--Class B4 upgraded to 'B+' from 'B'.
CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through
certificates, series 2002-16
--Class A affirmed at 'AAA';
--Class M upgraded to 'AAA' to 'AA';
--Class B1 upgraded to 'AA' from 'A';
--Class B2 upgraded to 'A' from 'BBB';
--Class B3 upgraded to 'BBB' from 'BB';
--Class B4 upgraded to 'B+' from 'B'.
CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through
certificates, series 2002-22
--Class A affirmed at 'AAA';
--Class M upgraded to 'AAA' to 'AA';
--Class B1 upgraded to 'A+' from 'A';
--Class B2 upgraded to 'BBB+ from 'BBB';
--Class B3 upgraded to 'BB+' from 'BB';
--Class B4 affirmed at 'B'.
The upgrades are being taken as a result of low delinquencies and
losses, as well as increased credit support. The affirmations on
the above classes reflect credit enhancement consistent with
future loss expectations.
DISTRIBUTION DYNAMICS: Committee Taps Faegre & Benson as Counsel
----------------------------------------------------------------
The Official Unsecured Creditors Committee appointed in
Distribution Dynamics, Inc.'s chapter 11 cases, ask the U.S.
Bankruptcy Court for the District of Minnesota for permission to
employ Faegre & Benson LLP as it counsel.
The Committee seeks to retain Faegre & Benson as counsel because
the firm and its attorneys have substantial expertise in
restructuring matters and representation of creditor
constituencies under the Bankruptcy Code.
Faegre & Benson will:
a. render advice to the Committee with respect to its powers
and duties in these Cases;
b. assist the Committee in its investigation of the acts,
conduct, assets, liabilities and financial condition of
the Debtors, the operation of the Debtors' businesses and
any other matter relevant to the Debtors' jointly-
administered Cases;
c. assist the Committee in its investigation of potential
claims against the Debtors' lenders as required under the
cash collateral stipulation with such lenders;
d. participate in negotiations with the Debtors and other
parties-in-interest with respect to the administration of
the Debtors' estates, plan of reorganization and
disclosure statement, and otherwise protect and promote
the interests of the general unsecured creditors of the
Debtors;
e. prepare all necessary applications, motions, responses to
motions, answers, reports and papers on behalf of the
Committee, and appear on behalf of the Committee at court
hearings as necessary and appropriate in connection with
these Cases;
f. render advice and perform general legal services in
connection with the foregoing; and
g. perform all other necessary legal services as directed by
the Committee consistent with its duties under
Section 1103 of the Bankruptcy Code.
The current hourly rates for the primary attorneys who will
represent the Committee in these cases are:
Professionals Designation Billing Rate
------------- ----------- ------------
Michael B. Fisco Partner $410 per hour
James D. H. Loushin Associate $220 per hour
Abby E. Wilkinson Associate $200 per hour
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.
DLJ COMMERCIAL: Fitch Assigns Low-B Ratings to 5 1999-CG2 Classes
-----------------------------------------------------------------
DLJ Commercial Mortgage Corp's pass-through certificates, series
1999-CG2, are upgraded by Fitch Ratings as follows:
--$69.8 million class A-2 to 'AAA' from 'AA';
--$81.4 million class A-3 to AA+' from 'A';
--$19.4 million class A-4 to 'AA' from 'A-';
--$58.1 million class B-1 to 'A' from 'BBB';
--$23.3 million class B-2 to 'BBB+' from 'BBB-';
--$38.8 million class B-3 to 'BBB-' from 'BB+';
--$31 million class B-4 to 'BB+' from 'BB'.
In addition Fitch affirms the following classes:
--$136.2 million class A-1A 'AAA';
--$890.2 million class A-1B 'AAA';
--Interest-only class S 'AAA';
--$15.5 million class B-5 'BB-';
--$19.4 million class B-6 'B+';
--$15.5 million class B-7 'B';
--$15.5 million class B-8 'B-'.
The $28.6 million class C certificates are not rated by Fitch.
The ratings upgrades are due to an increase in credit enhancement
since issuance and levels which are in line with the subordination
levels of deals issued today having similar characteristics. As of
the May 2004 distribution report, the pool's aggregate certificate
balance has been reduced by 6.65% to $1.44 billion from $1.55
billion at issuance.
There are currently nine loans (4.36%) in special servicing. The
largest specially serviced loan (1.4%) is a multifamily property
located in Marietta, GA and is currently real estate owned (REO).
The trust took title to the property through a deed-in-lieu of
foreclosure structured as a purchase and sale agreement. The
property suffered from structural deterioration and deferred
maintenance. The property will be marked for sale once the
necessary renovations have been completed and value has been
reassessed.
The second largest specially serviced loan (0.72%) is an office
property located in King of Prussia, PA and is currently 60 days
delinquent. The loan transferred to special servicing due a
monetary default when the property's largest tenant terminated its
lease. The Borrower has indicated they will no longer provide
equity to the property and have requested a deed in lieu of
foreclosure. Recent appraised values indicate the potential for
significant losses upon liquidation.
DOLE FOOD: Planned Wood Holdings Merger Spurs S&P's Rating Cuts
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on fresh
fruit and vegetable producer and marketer Dole Food Co., including
its corporate credit rating to 'BB-' from 'BB'.
In addition, all ratings were removed from CreditWatch, where they
were placed on April 30, 2004.
At the same time, Standard & Poor's assigned a 'BB' rating to
Dole's proposed $175 million term loan E. Standard & Poor's also
assigned a recovery rating of '1' to Dole's $175 million senior
secured term loan E and the company's existing $300 million
revolving credit facility and $295 million term loan D. The 'BB-'
bank loan ratings and the '1' recovery rating indicate that
lenders can expect full recovery of principal in the event of a
default. The outlook is negative. Westlake Village, California-
based Dole Foods has about $2.2 billion of lease-adjusted debt
outstanding as of March 27, 2004.
"The downgrade is indicative of Dole's high debt levels adjusted
for the proposed acquisition of J.R. Wood Inc. and the financing
of a new venture that includes a wellness-oriented hotel and
conference center," said Standard & Poor's credit analyst Ronald
Neysmith. "Moreover, we have concerns relating to recent senior
management turnover and future succession plans at Dole."
On April 30, 2004, Dole announced a merger agreement to acquire
Wood Holdings Inc., for $162.5 million in cash plus certain
transaction costs. Wood Holdings is the parent of J.R. Wood, a
grower, processor, and wholesaler of frozen fruit products. J.R.
Wood has about $140 million in revenue and EBITDA of about $22
million. The transaction is expected to close within Dole's second
quarter of 2004.
Dole's financial profile is very aggressive and because of the
commodity nature of many of Dole's products, Standard & Poor's
would expect, on average, higher credit measures relative to its
rating category peers. Standard & Poor's expects Dole to improve
credit measures over time through reduced debt using proceeds from
asset divestitures along with operating cash flow. The rating does
not factor in any additional large acquisitions.
EMPIRE FINANCIAL: Net Losses & Deficit Trigger Going Concern Doubt
------------------------------------------------------------------
Empire Financial Holding Company (Amex: EFH), a financial
brokerage services firm serving retail and institutional clients,
announced financial results for the first quarter ended March 31,
2004. First quarter 2004 financial results included a revenue
increase of 74% year-over-year and a return to profitability with
net income of $0.01 per basic and diluted share.
Chief Executive Officer Kevin Gagne stated, "Our first quarter
results indicate that our strategic plan is beginning to work. Our
74% revenue increase was attributable to the addition of
approximately 71 independent registered representatives, the
addition of both market making and order execution services to our
business lines and improved market conditions. Consistent with our
strategic plan and looking forward, we are continuing to focus on
growing our revenues while managing expenses in today's heightened
competitive environment."
Financial Results
Total revenues for the three months ended March 31, 2004 were $5.4
million, an increase of $2.3 million, or 74%, over $3.1 million
for the same period in 2003. The revenue growth was primarily the
result of a 43% increase in commissions and fee revenues
associated with an increase in retail trading volume and the
processing of more securities transactions by affiliated
independent registered representatives, including by newly
affiliated representatives. In addition, the establishment of
market-making and trading operations during the third quarter of
2003 resulted in a contribution of 17% of total revenues for the
first quarter of 2004.
Total operating expenses for the three months ended March 31, 2004
were $5.4 million compared to total operating expenses of $3.2
million for the same period in 2003. The increase was primarily
due to higher commissions and clearing costs associated with
higher transaction volumes and higher legal and accounting
expenses related to ongoing regulatory investigations and
litigation.
For the three months ended March 31, 2004, the Company reported
net income of $32,417, or $.01 per basic and diluted share,
compared to a net loss of $(399,278), or $(0.08) per basic and
diluted share for the same period in 2003. As a result of the
Company's completion of the sale of its correspondent clearing
business, Advantage Trading Group, Inc. in November 2003, results
for fiscal 2003 have been restated to separate continuing
operations from discontinued operations. Therefore, the 2003 net
loss applicable to common stockholders included a loss from
discontinued operations of $382,501, or $0.08 per basic and
diluted share.
Financial Condition
At March 31, 2004, the Company had total assets of $1.8 million
the majority of which consisted of cash and cash equivalents and
receivables from brokers, dealers and clearing brokers arising
from customer-related securities transactions. Stockholders'
deficit was $643,110 at March 31, 2004, representing a decrease of
$158,073 from a stockholders' deficit of $801,183 at December 31,
2003, primarily due to earnings and variable stock options credit.
The audit report contained in the Company's Annual Report on Form
10-K for the year ended December 31, 2003 contains an explanatory
paragraph that raises doubt about the Company's ability to
continue as going concern because the Company has had net losses
from continuing operations in 2003 and 2002, a stockholders'
deficit and has uncertainties relating to regulatory
investigations.
At March 31, 2004, Empire Financial Holding Co.'s balance sheet
shows a stockholders' deficit of $643,110 compared to the $801,183
deficit at December 31, 2003.
About Empire Financial Holding Company
Empire Financial Holding Company, through its wholly owned
subsidiary, Empire Financial Group, Inc., provides full-service
retail brokerage services through its network of independently
owned and operated offices and discount retail securities
brokerage via both the telephone and the Internet. Through its
market-making and trading division, the Company offers securities
order execution services for unaffiliated broker dealers and makes
markets in domestic and international securities. Empire Financial
also provides turn-key fee based investment advisory and
registered investment advisor custodial services through its
wholly owned subsidiary, Empire Investment Advisors, Inc.
ENRON CORP: Four Taxing Authorities Object to Plan Confirmation
---------------------------------------------------------------
Four groups of taxing authorities ask the Court not to confirm
the Enron Corporation Debtors' Plan of Reorganization for various
reasons:
1. Missouri Department of Revenue
The Plan provides that Administrative Expense Claims will be paid
on the later of "(a) the Effective Date and (b) the date on which
an Administrative Expense Claim shall become an Allowed Claim."
According to the "Effective Date" definition, the earliest date
that Administrative Expense Claims will be paid is December 31,
2004.
Chad A. Kelsch, Special Assistant Attorney General of the
Missouri Department of Revenue, in Jefferson City, Missouri,
relates that the Revenue Department filed an Administrative
Expense Claim on March 10, 2004 for $65,779, with interest
calculated up to March 10, 2004.
Accordingly, the Revenue Department asks the Court to compel the
Debtors to pay interest on the Allowed Priority Tax Claims at the
statutory rate of 5%. If the Debtors fail to provide the
requested changes in either the Amended Plan or Confirmation
Order, the Court should not confirm the Plan.
2. Mississippi State Tax Commission
The Mississippi Tax Commission filed a priority claim against the
Debtors for $10,626,336 and a general unsecured claim for
$9,904,601.
The Mississippi Tax Commission objects to the treatment of
priority tax claims under the Plan. The Mississippi Tax
Commission maintains that its priority claim should be paid in
full with the annual legal statutory interest rate of 12%, in
equal monthly installments over a period of 72 months from the
date of assessment or in full at plan confirmation.
3. Texas Ad Valorem Taxing Authorities
Lawrence P. Eagel, Esq., at Bragar Wexler Eagel & Morgenstern,
LLP, in New York, relates that the Texas Ad Valorem Taxing
Authorities -- Ben Bolt-Palito Blanco Independent School
District, Bremond Independent School District, Brooks County,
Caldwell CAD, City of Calvert, Calvert Independent School
District, Cameron County, City of Edinburg, Falls County,
Franklin Independent School District, Hays CISD, Hearne
Independent School District, Lee County, Limestone County, Live
Oak CAD, City of McAllen, McLennan County, Nueces County, Pharr-
San Juan-Alamo Independent School District, Rio Grande City CISD,
Robertson County, San Marcos CISD, Victoria County, Webb CISD,
Zapata County, Jefferson County, Cherokee CAD, City of Coppell,
Coppell Independent School District, Dallas County, City of
Desoto, Ellis County, Jack CAD, Northwest Independent School
District, Parker CAD, Tarrant County, Wise CAD, Austin CAD,
Cypress-Fairbanks Independent School District, Deer Park
Independent School District, Harris County/City of Houston,
Houston Downtown Management District, Houston Independent School
District, Humble Independent School District, City of Jersey
Village, Montgomery County, North Forest Independent School
District, Orange Country, Polk Country, Bexar County, Buena Vista
Independent School District, Culberson CAD, Culberson County,
Frio CAD, Gonzalez County, Pecos-Barstow-Toyah Independent School
District, Pecos County, Reeves County, Ward County, Wilson
County, Wink-Loving Independent School District and Winkler
County -- are fully secured ad valorem tax creditors of the
Debtors, holding prior perfected liens against the Debtors'
estate property.
The Texas Ad Valorem Taxing Authorities complain that:
(a) The Plan is unclear under which class the Debtors seek to
treat and classify prepetition secured claims. Even if
claims are classified under Priority or Secured Claims,
the treatment offered to the Texas Ad Valorem Taxing
Authorities must comply with the provisions and
requirements of Section 1129(b)(2)(A) of the Bankruptcy
Code;
(b) The amount provided in the Plan is inadequate to the
extent that the claims of any claimant are not paid on
the Effective Date, they are entitled to post-
confirmation interest;
(c) To the extent the claims are not promptly paid or
addressed, these claimants should be entitled to the
establishment of a reserve identified to their claims;
(d) The Plan does not adequately provide postpetition
interest on their secured claims. The Texas Ad Valorem
Taxing Authorities aver that they are entitled to
postpetition interest at 12% per annum accruing from the
Petition Date until paid, as provided for in Section
32.01(a) of the Texas Property Tax Code;
(e) The claims are identified as unimpaired, unless the
Debtors' intention is that these claims receive full
statutory interest, as well as penalties, and retain their
full legal rights under the Plan with the entitlement to
exercise those rights upon confirmation; and
(f) The Plan fails to recognize and provide for the taxes for
the year 2004, which are entitled to classification and
treatment as an administrative expense under Section
503(b) of the Bankruptcy Code.
4. County of Anderson, et al.
County of Anderson, County of Brazos, City of Bryan, City of
College Station, College Station ISD, Bryan ISD, Brazos County
Rural Fire Prevention District #4, County of Calhoun, Barbers
Hill ISD, County of Crockett, Crockett County Consolidated Common
School District, Emerald Underground Water Conservation District,
Road District, County of Eastland, Santa Fe ISD, County of
Guadalupe, City of Seguin, Seguin ISD, Schertz-Cibolo-Universal
City ISD, Navarro ISD, Lateral Roads, York Creek Water Control &
Improvement District, County of Hardin, County of Harrison,
Karnack ISD, Rochester County Line ISD, County of Hays, South
Hays County Emergency Service District, Hays County Rural Fire
District #5, Special Road District, County of Hill, Hill Junior
College District, Hill Fire Prevention District, Lateral Road
District, Malone ISD, County of Kent, Jayton-Girard ISD, Lateral
Road, County of Knox, Leon ISD, County of Liberty, County of
Lynn, Lynn County Hospital District, High Plains Underground
Water Cons. Dist. #1, City of Waco, City of Lacy-Lakeview, La
Vega ISD, Hallsburg ISD, City of Midland, Midland County Hospital
District, Midland ISD, Midland Central Appraisal District,
Midland County Junior College District, County of Newton, Newton
County Rural Fire District #2 (Kirbyville), Lateral Road
District, Iraan-Sheffield ISD, and Wellman ISD have claims that
are included in the Class 2 Secured Claims under the Plan. The
secured claims of the County of Anderson, et al. are impaired
under the Plan and they have not accepted the Plan within the
time fixed to do so.
Michael Reed, Esq., at McCreary, Veselka, Bragg & Allen, P.C., in
Austin, Texas, contends that the Plan failed to provide a fair
and equitable treatment of the secured claims as required by
Sections 1129(b)(1) and (2)(A) in that:
(a) The secured claims are entitled to express retention of
all property tax liens, including those for postpetition
taxes, until all taxes, penalties and interest protected
by those liens have been paid;
(b) The Plan fails to provide for interim interest as
required by Section 506(b) of the Bankruptcy Code;
(c) The amount provided in the Plan is inadequate and to the
extent the claims are not paid on the Effective Date,
they are entitled to post-confirmation interest;
(d) To the extent that their claims are not addressed
promptly and paid promptly, they are entitled to the
establishment of a reserve identified to their claims; and
(e) Taxes for the 2004 taxes year are entitled to
classification and treatment as administrative expenses
under Section 503(b); but should be expressly designated
as post-confirmation debts, to be timely paid when
otherwise due, or be subject to state court collection
without further Court recourse. (Enron Bankruptcy News,
Issue No. 107; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
ENTERPRISE PRODUCTS: S&P Downgrades Corporate Credit Rating to BB+
------------------------------------------------------------------
Standard & Poor's Rating Services lowered its corporate credit
ratings on Enterprise Products Partners L.P. and Enterprise
Products Operating L.P. to 'BB+' from 'BBB-' and removed the
ratings from CreditWatch with negative implications. The outlook
is stable.
The ratings were originally placed on CreditWatch on Dec. 15, 2003
as a result of the announcement of the merger between Enterprise
Products and GulfTerra Energy Partners L.P. (BB+/Watch Neg/--).
The Houston, Texas-based Enterprise Products is a master limited
partnership with $2.2 billion of debt outstanding as of March
2004.
The rating action is based upon an assessment that the credit
rating on Enterprise Products will be 'BB+' whether or not the
proposed merger with GulfTerra takes place.
"On a stand-alone basis, Enterprise Products' creditworthiness has
deteriorated over the past year," said Standard & Poor's credit
analyst Peter Otersen.
Standard & Poor's said that it expects that the company's
performance has reached a plateau due to a rebound in demand for
natural gas liquids, but does not expect the company's performance
to materially improve.
"The merger with GulfTerra provides Enterprise Products with the
potential to reduce its exposure to petrochemical industry cycles
and realize cost savings. However, this potential will need to be
demonstrated before we reflect it in the company's credit
ratings," said Mr. Otersen.
Enterprise Products is a midstream energy service provider with
regulated NGL pipelines, nonregulated NGL fractionation, and
natural gas processing services.
ERN LLC: U.S. Trustee to Meet with Creditors on May 26, 2004
------------------------------------------------------------
The United States Trustee will convene a meeting of ERN, LLC's
creditors at 9:00 a.m., on May 26, 2004 at 300 W. Pratt, #375,
Baltimore, Maryland 21201. This is the first meeting of creditors
required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Headquartered in Baltimore, Maryland, ERN, LLC
-- http://www.ern-llc.com/-- provides point of sale check
guaranty and credit card servicing to merchants. The Company
filed for chapter 11 protection on April 28, 2004 (Bankr. Md. Case
No. 04-20521). Carrie Weinfeld, Esq., James A. Vidmar, Jr., Esq.,
and Rebecca S. Beste, Esq., at Linowes and Blocher, LLP represent
the Debtor in its restructuring efforts. When the Company filed
for protection from its creditors, it listed $1,159,361 in total
assets and $12,878,478 in total debts.
FIRST UNION: Fitch Assigns Low-B/Junk Ratings to 6 1999-C4 Classes
------------------------------------------------------------------
Fitch Ratings upgrades First Union National Bank Commercial
Mortgage Trust's commercial mortgage pass-through certificates,
series 1999-C4 as follows:
--$46.5 million class B to 'AAA' from 'AA';
--$42.1 million class C to 'AA-' from 'A';
--$13.3 million class D to 'A+' from 'A-';
--$28.8 million class E to 'BBB+' from 'BBB'.
In addition, Fitch affirms the following certificates:
--$142.3 million class A-1 'AAA';
--$447.2 million class A-2 'AAA';
--Interest only class IO 'AAA';
--$13.3 million class F 'BBB-';
--$33.2 million class G 'BB+';
--$11.1 million class H 'BB';
--$2.2 million class J 'BB-';
--$6.6 million class K 'B+';
--$8.9 million class L 'B';
--$8.9 million class M 'CCC'.
The $16.4 million class N is not rated by Fitch.
The upgrades reflect improved credit enhancement levels resulting
from loan payoffs and amortization. As of the May 2004
distribution date, the pool's aggregate certificate balance has
been reduced by 7.3% to $820.8 million from $885.7 million at
issuance. Seven loans (6.5%) have been defeased.
Currently, five loans (3.8%) are in special servicing. The largest
specially serviced loan (1.5%) is secured by a retail property in
Federal Way, WA and is currently over 90 days delinquent. The
borrower filed bankruptcy and the special servicer has a receiver
in place that was able to lease 22% of the vacant space bringing
occupancy to 94%. The foreclosure sale date is set for June 30,
2004.
The next largest specially serviced loan, Grand Court Denver
(1.3%), is real estate owned (REO). The independent living
facility that secures the loan has a receiver in place, which made
capital improvements to the property and is currently marketing
the vacancies.
FLEMING COMPANIES: Summary & Overview of Third Amended Plan
-----------------------------------------------------------
On May 11, 2004, the Fleming Companies, Inc. Debtors delivered to
the Court their Third Amended Plan and Disclosure Statement, which
embodied the settlement the Debtors reached with the Official
Committee of Reclamation Creditors. With the settlement, the
Reclamation Creditors Committee now supports the Plan.
The Debtors anticipate emerging from Chapter 11 by July 31, 2004.
Pursuant to the Third Amended Plan, the Debtors will restructure
around their Convenience Store Wholesale Distribution Business
through the formation of Core-Mark Newco. The Debtors' remaining
assets and liabilities will be transferred to:
(1) a Post-Confirmation Trust, the trust that will be
created pursuant to the Plan and the PCT Agreement,
which will have responsibility for liquidating those
assets, pursuing causes of action, and reconciling and
paying claims; and
(2) a Reclamation Creditors Trust, the trust that will be
created pursuant to the Plan and the RCT Agreement,
which will have rights and responsibilities only as to
Reclamation Creditors.
Core-Mark Holdings III
On the Effective Date, two newly formed, wholly owned
subsidiaries of Core-Mark Newco -- Core-Mark Holdings I and Core-
Mark Holdings II -- will each own 50% of another newly formed
subsidiary, Core-Mark Holdings III. Fleming will transfer the
stock of the Reorganized Debtors to Core-Mark Holdings III. In
exchange for the stock, Fleming will receive stock of Core-Mark
Newco.
Fleming will then transfer to Core-Mark Holdings III a portion of
Core-Mark Newco's stock to satisfy Disputed Claims. Core-Mark
Holdings III will hold the stock, not for its own account, but
rather in trust in its role as fiduciary for the benefit of the
holders of Disputed Claims in Class 6. Fleming will distribute
the Core-Mark Newco stock received from Core-Mark Holdings III
and not transferred to Core-Mark Holdings III to its creditors in
accordance with the Third Amended Plan. Core-Mark Holdings III,
as fiduciary for the holders of Class 6 Disputed Claims, will
transfer the Core-Mark Newco stock to the holders of Class 6
General Unsecured Claims, as these claims are resolved.
Once these transactions have occurred, on a fully-diluted basis,
Core-Mark Newco will be owned:
87% by the Debtors' General Unsecured Creditors;
11% by participants in the new Management Incentive Plan; and
2% by the Sankaty Funds in exchange for new financing.
Creation of PCT and RCT
The creation and funding of the PCT and RCT permits the formation
of Core-Mark Newco, which will be free of the claims, which are
automatically transferred to these two trusts.
The assets placed in the RCT are to benefit the holders of
reclamation Claims, including the holders of deficiency claims.
These claims are described in the Third Amended Plan as TLV
Reclamation Claims and are designated in Class 3B under the Plan.
"TLV Reclamation Claim" means a Claim the Holder of which:
(i) participated in the Trade Credit Program as outlined
in the Final DIP Order; and
(ii) asserts that all, or any portion, of the Claim is
entitled to be granted priority or to be secured by a
lien in accordance with Section 546(c)(2) of the
Bankruptcy Code.
Other creditors alleging Reclamation Claims that did not
participate in the Debtors' Trade Credit Program are the holders
of Non-TLV Reclamation Claims, designated as Class 5 Claims under
the Third Amended Plan.
The Holders of Class 3B Claims have a junior security interest in
the assets of the Debtors. The Third Amended Plan replaces the
lien currently held by Class 3B Claimants with a first-priority
lien on the RCT Assets. In addition, Core-Mark Newco will
provide a secured guarantee of the RCT's obligation to the Class
3B creditors as Class 3B Preferred Interests to assure the
Claimants in this Class that their claims will be paid in full.
The Debtors estimate that, as of the Plan's Effective Date, the
aggregate amount of the Class 3B Claims is in the range of $43
million to $60 million, prior to giving effect to any deductions
owed the Debtors related to prepetition transitions.
PCT Assets
On the Effective Date, the Reorganized Debtors, and Core-Mark
Newco will transfer Assets to the PCT consisting of:
(1) Cash balances sufficient to pay the estimated
Administrative Claims that are the responsibility
of the PCT;
(2) Trade accounts receivable, including credits for
postpetition deductions, other than the prepetition
and postpetition trade accounts receivable and
postpetition deductions of the continuing Fleming
Convenience business;
(3) Royalty payments owing to the Debtors related to
the sale of the Fleming wholesale operations;
(4) Litigation Claims, consisting primarily of vendor-
related receivables -- primarily for uncollected
promotional allowances; e.g., rebates, discounts,
price reductions -- unreimbursed funds related to
military receivables and funds wired in advance
for inventory for which invoices were not processed
and inventory not shipped, but not including vendor
deductions incurred in the ordinary course of
business of the Fleming Convenience business;
(5) Avoidance Actions, especially preference actions;
(6) Restricted cash, including the PACA account and the
FSA Reserves;
(7) All other claims and causes of action of the Debtors,
other than causes of action related to the fire loss
at the Denver warehouse in December 2002 -- retained
by Core-Mark Newco -- and other claims and causes of
Action waived, exculpated or released under the Plan;
(8) Any assets of the RCT referred or assigned to the PCT,
whether vendor deductions, preference claims or
otherwise, on terms mutually agreed upon by the RCT
and the PCT;
(9) Any cash proceeds of settlements for customer accounts
receivable, vendor deductions, over-wires and
preferences -- exclusive of those related to either
Fleming Convenience or the Reclamation Assets -- in
excess of $9 million collected by the Debtors from
April 1, 2004, to the Effective Date, which are being
held in an escrow account;
(10) $3 million in cash for the administration of the PCT;
and
(11) All of the remaining assets of the Debtors, other than
the assets of the Reorganized Debtors and of the
Fleming Convenience, which will have been transferred
to Core-Mark Newco and the Reorganized Debtors.
The PCT will administer the directors and officers insurance
policies, and all proceeds of those policies will benefit the D&O
Releasees and the prepetition directors and officers of the
Debtors who are covered by those policies, as well as the PCT to
the extent the PCT or any other party has a valid claim against a
D&O Releasee, or a prepetition director or officer of the Debtors
covered by these policies.
The Debtors will file the Schedule of excluded Releasees before
the Disclosure Statement hearing.
The PCT Assets do not include:
(a) any of the Reclamation Assets;
(b) any of the assets of the continuing Fleming
Convenience business, which are to be transferred to
Core-Mark Newco and the Reorganized Debtors;
(c) the stock of Core-Mark Newco and the stock of the
Reorganized Debtors; and
(d) the Professional Fee Escrow Account.
The estimated assets transferred to the PCT are:
Cash & equivalents $55,000
Restricted cash
PACA $8,762
Other 725
FSA Reserve 16,156
--------
Total restricted cash 25,643
Trade A/R & royalty, net
A/R 15,000
Royalties due 3,000
--------
18,000
Litigation recovery
Vendor deductions 15,000
Pref & other 28,000
--------
Total litigation recovery 43,000
Total assets transferred 141,643
========
The estimated accounts payable and accrued liabilities to be
transferred to the PCT are:
General A/R 3,000
PACA and other 9,487
Priority & property tax claims 20,250
Health & welfare benefits 5,000
FSA damage claims 16,156
Severance & stay program 27,000
Convenience claims 1,000
Non-tax priority claims 6,000
Other administrative claims 17,000
Other secured claims 1,000
--------
Total liabilities transferred 105,893
========
The excess of assets over liabilities transferred to the PCT is
estimated to be $35.75 million. This excess is available to pay
the operating expenses of the PCT and accrue to the benefit of
the beneficiaries of the PCT.
RCT Assets
The RCT assets are to benefit the holders of Reclamation Claims,
including holders of deficiency Claims. The assets transferred
to the RCT are composed of cash and the recovery from various
litigation.
The value of the estimated assets transferred to the RCT are:
Cash & equivalents $6,000
Litigation claims recovery
Vendor deduction collections 94,000
Preference & other 40,000
--------
134,000
--------
Total assets transferred $140,000
========
The cash is comprised of $3 million for the administration of the
RCT and $3 million transferred from certain vendor collections
after March 23, 2004, which are to be held for the benefit of the
RCT.
The estimated accounts payable and accrued liabilities to be
transferred to the RCT are:
TLV Reclamation Claims (Class 3B) $50,000
Non-TLV Reclamation Claims (Class 5) 70,000
--------
Total liabilities transferred $120,000
========
The excess of assets over liabilities transferred to the RCT is
estimated by the plan proponents to be $20 million. This excess
is available to pay the operating expenses of the RCT, estimated
to approximate $8.9 million from the Effective Date through 2006.
In the event there is a surplus after satisfaction of all
Reclamation Claims, the additional proceeds will be applied to:
(1) Core-Mark Newco for any advances under the TLV or
Non-TLV Guaranty;
(2) the Prepetition Non-TLV Reclamation Claim
Reduction;
(3) Core-Mark Newco for any advances under the
Administrative Claim Guaranty;
(4) any amount of "Ad Hoc Committee" professional
fees that have not been reimbursed by allowance of
an administrative claim; and
(5) the PCT.
Creditors Committee's Valuation
With the assistance of AP Services, LLC, the Debtors determined
the estimated reorganized enterprise value for Core-Mark Newco to
be $275,000,000 to $325,000,000, with $300,000,000 as the
midpoint estimate. The professionals employed by the Official
Committee of Unsecured Creditors do not agree with this
valuation. The Committee's professionals value Core-Mark Newco
between $310 million to $360 million, with a midpoint of $335
million.
A full-text copy of Fleming's Third Amended Plan is available for
free at:
http://www.sec.gov/Archives/edgar/data/352949/000095013404007775/d15570exv99w1.txt
A full-text copy of Fleming's Third Amended Disclosure Statement
is available for free at:
http://www.sec.gov/Archives/edgar/data/352949/000095013404007775/d15570exv99w2.txt
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. 33; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
FLINTKOTE COMPANY: Sidley Austin Serves as Bankruptcy Attorneys
---------------------------------------------------------------
The Flintkote Company wants to retain Sidley Austin Brown & Wood
LLP as its attorneys in its chapter 11 proceeding. The Debtors
tells the U.S. Bankruptcy Court for the District of Delaware that
Sidley Austin's professional services are necessary to enable the
Debtor to faithfully and competently execute its duties as debtor
in possession.
Specifically, Sidley Austin will:
a. provide legal advice with respect to the Debtor's powers
and duties as debtor in possession in the continued
operation of its business;
b. take all necessary action to protect and preserve the
Debtor's estate, including prosecuting actions on behalf
of the Debtor, negotiating any and all litigation in which
the Debtor is involved, and objecting to claims filed
against the Debtor's estate;
c. prepare on behalf of the Debtor all necessary motions,
answers, orders, reports and other legal papers in
connection with the administration of the Debtor's estate;
d. attend meetings and negotiating with representatives of
creditors and other parties in interest, attending court
hearings and advising the Debtor on the conduct of the
case;
e. perform any and all other legal services for the Debtor in
connection with this chapter 11 case and with the
formulation and implementation of the Debtor's plan;
f. advise and assist the Debtor regarding all aspects of the
plan confirmation process, including, but not limited to,
securing the approval of a disclosure statement by the
Bankruptcy Court and the confirmation of a plan at the
earliest possible date;
g. provide legal advice and performing legal services with
respect to general corporate matters, and advice and
representation with respect to obligations of the Debtor
and its Board of Directors and officers;
h. provide legal advice and perform legal services with
respect to matters involving the negotiation of the terns
and the issuance of corporate securities, matters relating
to corporate governance and the interpretation,
application or amendment of the Debtor's corporate
documents, including its Certificate of Incorporation, by-
laws, material contracts, and matters involving
stockholders and the Debtor's legal duties toward them;
i. provide legal advice and legal services with respect to
litigation, tax and other general non-bankruptcy legal
issues for the Debtor to the extent requested by the
Debtor; and
j. render such other services as may be in the best interests
of the Debtor in connection with any of the foregoing and
all other necessary or appropriate legal services in
connection with this chapter 11 case, as agreed upon by
Sidley Austin and the Debtor.
Kevin T. Lantry, Esq., reports that Sidley Austin's billing rates
currently range from:
Designation Billing Rate
----------- ------------
partners and senior counsel $435 to $685 per hour
associates $170 to $410 per hour
paraprofessionals $75 to $190 per hour
Headquartered in San Francisco, California, The Flintkote Company
is engaged in the business of manufacturing, processing and
distributing building materials. The Company filed for chapter 11
protection on April 30, 2004 (Bankr. Del. Case No. 04-11300).
Attorneys at Sidley Austin Brown & Wood LLP serve as lead counsel
to the Company. James E. O'Neill, Esq., Laura Davis Jones, Esq.,
and Sandra G. McLamb, Esq., at Pachulski, Stang, Ziehl, Young &
Jones serve as local counsel to the Debtor in its restructuring
efforts. When the Company filed for protection from its
creditors, it listed both estimated debts and assets of more than
$100 million.
FOOTSTAR INC: Selling 27 Shoe Zone Stores to Novus for $5.5MM Cash
------------------------------------------------------------------
Footstar, Inc. announced that it has entered into an agreement for
the sale of its 27 Shoe Zone stores in Puerto Rico to Novus, Inc.
for $5.5 million in cash, subject to closing adjustments and
conditions including approval of the Bankruptcy Court. The
agreement continues Footstar's progress in refocusing on its
profitable Meldisco operations.
Novus is a leading footwear retailer in Puerto Rico, operating 64
stores through five distinct retail concepts including Novus, La
Favorita, Bakers, Wild Pair and Metro.
Dale W. Hilpert, Chairman, President and Chief Executive Officer,
commented, "Shoe Zone is a retail concept targeting Hispanic
customers that Meldisco has been incubating over the past two
years. While Shoe Zone has shown promising initial results, our
focus at this time must be on strengthening our profitable core
operations and positioning the Company for emergence from Chapter
11. We believe that Novus, as a leader in the Puerto Rican
footwear market, has the expertise to take Shoe Zone to the next
level."
Carlos Castellon, President of Novus, Inc., added, "We look
forward to building on our strong market position through the
addition of these 27 Shoe Zone stores, which we will continue to
operate under the Shoe Zone banner. We look forward to working
with Footstar on the transition of this business. In particular,
we plan to partner with Footstar to continue to provide many of
the same great styles that the Shoe Zone customer has come to
expect, especially the Thom McAn brand."
The transaction is expected to close by the middle of summer.
About Footstar, Inc.
Footstar, Inc., which filed for Chapter 11 bankruptcy protection
(Bankr. S.D.N.Y. Case No.: 04-22350) on March 3, 2004, is a
leading footwear retailer. As of May 1, 2004, the Company operates
2,498 Meldisco licensed footwear departments nationwide and 36
Shoe Zone stores. The Company also distributes its own Thom McAn
brand of quality leather footwear through Kmart, Wal-Mart and Shoe
Zone stores.
FOURNAS COUNTY: U.S. Trustee Names 5-Member Creditors' Committee
----------------------------------------------------------------
The United States Trustee for Region 13 appointed 5 creditors to
serve on an Official Committee of Unsecured Creditors in Fournas
County Farms' Chapter 11 cases:
1. Land O' Lakes Farmland Feed LLC
Attn: Dan Oberstadt, Credit Manager
P.O. Box 64089
St. Paul, Minnesota 55164
Tel: (651) 355-4950
Fax: (651) 355-5514
Email: ddoberstadt@cnxlol.com
2. Genetiporc USA
Attn: Mark Biesterfeld, Controller
606 3rd Avenue West
Alexandria, Minnesota 56308
Tel: (320) 759-1550
Fax: (320) 759-1932
Email: mbiesterfeld@genetiporc.com
3. Verings Feed Service, Inc.
Attn: Russell J. Vering, President
P.O. Box 396
Howells, Nebraska 68641
Tel: (402) 986-1400
Fax: (402) 986-1243
Email: verfeed@megavision.com
4. Hamel Repair
Attn: Kurt Hamel, Owner
41476 Rd. 724
Holbrook, Nebraska 68948
Tel: (308) 493-5699
Fax: (308) 493-5693
Email: chamel@swnebr.net
5. Triple D Service
Attn: Darrell D. Davis, Owner
P.O. Box 481
Cambridge, Nebraska 69022
Tel: (308) 697-3161
Official creditors' committees have the right to employ legal and
accounting professionals and financial advisors, at the Debtors'
expense. They may investigate the Debtors' business and financial
affairs. Importantly, official committees serve as fiduciaries to
the general population of creditors they represent. Those
committees will also attempt to negotiate the terms of a
consensual chapter 11 plan -- almost always subject to the terms
of strict confidentiality agreements with the Debtors and other
core parties-in-interest. If negotiations break down, the
Committee may ask the Bankruptcy Court to replace management with
an independent trustee. If the Committee concludes reorganization
of the Debtors is impossible, the Committee will urge the
Bankruptcy Court to convert the Chapter 11 cases to a liquidation
proceeding.
Headquartered in Columbus, Nebraska, Furnas County Farms is
engaged in owning, leasing, operating and managing swine
operations. The Company, along with 4 of its debtor-affiliates
filed for chapter 11 protection on May 3, 2004 (Bankr. D. Nebr.
Case No. 04-81489). James Overcash, Esq., and Joseph H. Badami,
Esq., at Woods & Aitken, LLP represent the Debtors in their
restructuring efforts. When the Company filed for protection from
their creditors, they listed both estimated debts and assets of
over $50 million.
GENTEK INC: Settles U.S. Government's Environmental Claim Dispute
-----------------------------------------------------------------
On April 10, 2003, the United States Government filed Claim No.
2878 against the Reorganized GenTek Inc. Debtors for:
-- response costs incurred or to be incurred on account of
hazardous substances at various sites; and
-- civil penalties for alleged violations of environmental
regulations.
To resolve the issues relating to Claim No. 2878, the Reorganized
Debtors and the U.S. Government entered into a settlement
agreement. By this motion, the Reorganized Debtors ask the Court
to approve the Agreement in its entirety.
The salient terms the Settlement Agreement are:
A. The U.S. Government will be allowed a $352,437 general
unsecured claim in settlement and satisfaction of its claim
based on the Comprehensive Environmental Response,
Compensation, and Liability Act, for unreimbursed response
costs through June 27, 2003 at the partially liquidated site,
Allied Chemical Corporation Work Site in Front Royal,
Virginia;
B. The Government will withdraw its claim for response costs
at the Solvents Recovery Services of New England Superfund
Site;
C. The Reorganized Debtors' obligations under the Unilateral
Orders will not be impaired in any way by their Chapter
11 cases, confirmation of the Plan, or the Settlement
Agreement; and
D. These claims of, or obligations to, the Government will not
be discharged under Section 1141 of the Bankruptcy Code, by
the confirmation of the Plan or the Chapter 11 cases:
-- With respect to any Debtor-owned sites:
(a) Claims for recovery of response costs incurred
postpetition with respect to response action taken at a
Debtor-owned site;
(b) Actions seeking to compel the performance of a
removal action, remedial action, corrective action,
closure, or any other cleanup action at a Debtor-owned
site;
(c) Claims for recovery of natural resource damages
arising as a result of postpetition releases or ongoing
releases of hazardous substances; or
(d) Claims for recovery of civil penalties for violations
of law resulting from the Reorganized Debtors'
postpetition conduct; and
-- With respect to any additional site:
(a) Claims arising as a result of the Reorganized Debtors'
postpetition conduct, which would give rise to
liability;
(b) With respect to all Additional Sites, all liabilities
and obligations of the Reorganized Debtors to the
Government arising from prepetition acts, omissions
or conduct of the Reorganized Debtors or their
predecessors, will be discharged under Section 1141 by
the confirmation of the Plan. The Government will
receive no distributions in the Chapter 11 cases with
respect to those liabilities and obligations, but the
applicable Reorganized Debtor may be required to pay
the Government, or another party, as the Government may
designate, the amounts as provided in these Settlement
terms. The liabilities and obligations will be treated
and liquidated as unsecured claims, receiving
substantially the same pro rata recovery as General
Unsecured Claims in the Plan, but on the compromise
terms provided;
(c) In the event any claim is liquidated pursuant to the
process for Additional Sites by settlement or judgment
to a determined amount, the applicable Reorganized
Debtor with which the settlement is made or against
which the judgment is entered, will satisfy the Claim
by providing the holder with the Distribution Amount,
that includes:
(i) an amount equal to 8.4% of the Determined
Amount, adjusted appropriately and paid in the
time period provided; and
(ii) an amount equal to the pro rata share -- based
on the Determined Amount -- of 25% of any
Preference Claim Litigation Trust Proceeds
available for distribution to the holders of
General Unsecured Claims, pursuant to the Plan;
(d) The Government will retain the right to pursue certain
enforcement actions or proceedings under applicable law
with respect to the Claims and obligations of the
Reorganized Debtors;
(e) The Reorganized Debtors will reserve the right to
assert any and all defenses and counterclaims available
to them under applicable law with respect to certain of
their claims and obligations to the Government, except
for any alleged defense of discharge of liabilities
provided under the Bankruptcy Code, any reorganization
plan or confirmation order;
(f) In settlement and satisfaction of the Government's
Claim for civil penalties for the failure of General
Chemical Corporation to comply with notice requirements
under the Emergency Planning and Community Right-to-
Know Act, 42 U.S.C. Section 11004, following the
release of sulfur trioxide on January 19, 2000, at the
Delaware Valley Works in Claymont, Delaware, the
Reorganized Debtors consent to an Allowed General
Unsecured Claim for $36,000 in the Government's favor;
(g) Any Allowed General Unsecured Claims under or pursuant
to the terms of the Settlement Agreement, regardless of
the holder of those Claims, will:
(i) receive the same treatment under the Plan as
other Allowed General Unsecured Claims with all
attendant rights provided by the Bankruptcy Code
and other applicable law; and
(ii) not be entitled to any priority in distribution.
The General Unsecured Claims allowed pursuant to the
Settlement Agreement will not be subordinated to any
other Claims;
(h) The cash distributions to the Government, and
confirmation of the distributions will be made pursuant
to these Settlement terms;
(i) The Government covenants not to:
(i) file a civil action against the Reorganized
Debtors for response costs the Government paid
up to and including June 27, 2003 at the Allied
Chemical Work Site; and
(ii) bring an administrative action or civil action
for civil penalties, with respect to the release
of sulfur trioxide on June 19, 2000 at the
DVW Plant; and
(j) The Reorganized Debtors covenants not to sue or assert
any claims or causes of action against the Government
with respect to unreimbursed costs the Government paid
at the Allied Chemical Work Site up to and including
June 27, 2003. (GenTek Bankruptcy News, Issue No. 32;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
GENTEK INC: Completes $294MM+ Sale of KRONE Communications to ADC
-----------------------------------------------------------------
GenTek Inc. (OTC Bulletin Board: GETI) announced that it has
completed the sale of its KRONE communications business to ADC
Telecommunications, Inc. (NASDAQ: ADCT). The agreement to sell
KRONE to ADC was announced on March 25, 2004.
The final purchase price included $294 million in cash, subject to
post-closing adjustments, and the assumption of approximately $56
million of pension- and employee-related liabilities by ADC.
The net proceeds from this transaction will be used primarily to
repay the company's senior term notes as well as amounts
outstanding under the company's revolving credit facility. Upon
repayment of the senior term notes and amounts drawn under the
revolving credit facility, payment of transaction fees, taxes,
distributions to holders of the company's tranche A warrants and
other required amounts, as well as giving effect to excess cash
repatriated from the KRONE business, GenTek expects to have
approximately $25 million to $35 million of cash on hand and less
than $2 million of debt outstanding.
GenTek expects to file an 8-K within 15 days providing additional
information on the transaction, including pro forma results for
2003 reflecting the removal of the KRONE business.
The payment to holders of tranche A warrants triggered by the sale
totals $8.4 million ($7.13 per warrant). The payment will be made
within 60 days to holders of record as of today and, in accordance
with the warrant agreement, the tranche A warrants will expire at
the time of such payment.
"The completion of this transaction provides GenTek with
significant financial strength and flexibility," said Richard R.
Russell, GenTek's president and chief executive officer. "We will
continue to sharpen our focus on growing the core businesses
within the manufacturing and performance-products segments. We
will also continue to seek opportunities to further rationalize
our cost structure to ensure that it is in line with our
portfolio."
KRONE employs more than 2,000 people worldwide, primarily located
in the United States, Mexico, Germany, the United Kingdom and
Australia.
About GenTek Inc.
GenTek Inc. is a manufacturer of industrial components and
performance chemicals. Additional information about the company is
available on GenTek's Web site at http://www.gentek-global.com/
About ADC Telecommunications, Inc.
ADC offers high-quality, value-added solutions of network
equipment, software and systems integration services that enable
communications service providers to deliver high-speed Internet,
data, video and voice services to consumers and businesses
worldwide. ADC has sales into more than 90 countries. Learn more
about ADC Telecommunications, Inc. at http://www.adc.com/
GLOBAL CROSSING: Resolves $2MM Claim Dispute with NTC Creditors
---------------------------------------------------------------
The Global Crossing Estate Representative informs the Court that
it has resolved Claim No. 3353 filed by the Official Committee of
Unsecured Creditors of National Telecommunications, Inc.,
asserting $2,046,190.
Pursuant to a certain compromise, release and settlement of
claims between Edward P. Bond, as Trustee of the NTC Creditor
Trust and the GX Representative, the GX Representative has agreed
that the Claimant will be deemed to hold an allowed general
unsecured claim for $500,000 in the Debtors' Chapter 11 cases in
full satisfaction of the Claimant's claims against the Debtors.
The Parties also agreed that the Claimant will immediately
dismiss the adversary proceeding -- No. 01-3130, Official
Committee of Unsecured Creditors v. Frontier Advanced Service --
which is currently pending in the United States Bankruptcy Court
for the District of New Jersey in National Telecommunication's
Chapter 11 proceedings.
In addition, the GX Representative tells the Court that it has
resolved ProNet Communications, Inc.'s claim for $50,000.
ProNet and the GX Representative agreed that ProNet will
withdraw, with prejudice, Claim No. 10957 and that the GX
Representative will withdraw the omnibus objection as it pertains
to ProNet.
Headquartered in Florham Park, New Jersey, Global Crossing Ltd.
-- http://www.globalcrossing.com/-- provides telecommunications
solutions over the world's first integrated global IP-based
network, which reaches 27 countries and more than 200 major cities
around the globe. Global Crossing serves many of the world's
largest corporations, providing a full range of managed data and
voice products and services. The Company filed for chapter 11
protection on January 28, 2002 (Bankr. S.D.N.Y. Case No.
02-40188). When the Debtors filed for protection from their
creditors, they listed $25,511,000,000 in total assets and
$15,467,000,000 in total debts. Global Crossing emerged from
chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News,
Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000)
GMAC COMMERCIAL: Fitch Junks Rating on $20MM 1999-C1 Class J Notes
------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through
certificates, series 1999-C1, are downgraded by Fitch Ratings as
follows:
--$20 million class J to 'CCC' from 'B-'.
In addition, Fitch upgrades the following classes:
--$66.7 million class C to 'AAA' from 'AA';
--$86.7 million class D to 'A' from 'BBB+';
--$20 million class E to 'A-' from 'BBB'.
Fitch also affirms the following classes:
--$111 million class A-1 'AAA';
--$680.7 million class A-2 'AAA';
--Interest only class X 'AAA';
--$66.7 million class B 'AAA';
--$83.4 million class F 'BB';
--$13.3 million class G 'BB-';
--$26.7 million class H 'B'.
The $20.2 million class K-1 is not rated by Fitch.
The downgrade of class J is the result of expected losses of
certain specially serviced loans which will negatively impact the
credit support available to this class. The upgrades and
affirmations are the result stable portfolio performance and
paydown which has increased credit support.
As of the May 2004 distribution date, the transaction's aggregate
principal balance has decreased 10.40%, to $1.2 billion from $1.3
billion at issuance. In addition, eight loans (2.34%) are
defeased.
Currently, ten loans (4.62%) are in special servicing, of which
six are over 90 days delinquent. The largest specially serviced
loan (1.46%) is secured by a multifamily property in Chesterfield,
MO and is current. The loan transferred to the special servicer in
April 2004 due to imminent default. The servicer is negotiating
with the borrower and evaluating various workout scenarios.
The second largest specially serviced loan (.68%) is an office
property located in Pontiac, MI and is 90+ days delinquent.
Occupancy at the property has declined significantly and the
borrower was unable to meet debt service obligations. A discounted
payoff or note sale is a possible workout option. Losses are
expected once the loan is liquidated.
GULFTERRA ENERGY: S&P Keeps Negative Watch on Low-B Ratings
-----------------------------------------------------------
Standard & Poor's Ratings Services announced that GulfTerra Energy
Partners L.P. (BB+/Watch Neg/--) remains on CreditWatch with
negative implications despite the resolution of the CreditWatch
listing of its proposed merger partner Enterprise Products
Partners L.P. (BB+/Stable/--). If the merger is ultimately
completed, Standard & Poor's will affirm its 'BB+' rating on
GulfTerra , consistent with the rating on Enterprise. The
continuation of the negative CreditWatch designation for GulfTerra
is tied to the need to re-evaluate the company's credit profile if
the merger is not accomplished. In that case, the ratings of
GulfTerra would likely be affirmed but could be lowered.
HALSEY DRUG: Stockholders' Deficit Narrows to $39MM at March 31
---------------------------------------------------------------
Halsey Drug Co., Inc. (OTC.BB:HDGC) announced net income of
$680,000 for the quarter ended March 31, 2004 compared to a net
loss of $(10,575,000) for the same period in 2003. During the
first quarter of 2004 the Company recorded product revenues of
$628,000, and gains of $12,401,000 from debt restructuring and
$1,754,000 from the divestment of certain non-revenue generating
assets. Expenses for the first quarter of 2004 included, among
other things, amortization of debt discount and private offering
costs of $10,843,000 compared to $5,767,000 for the same period in
2003.
Basic and diluted earnings per share for the first quarter of 2004
were $0.03 and $ 0.00 per share, respectively, compared to a loss
per share of $(0.50) for the same period in 2003.
Commenting, Andy Reddick, President and CEO said, "In the first
quarter of 2004 we completed the Company's restructuring plan
announced in the fourth quarter of 2003. We have eliminated the
negative cash flow associated with our generic product
manufacturing operations in Congers, New York and also eliminated
all cash interest payments relating to our outstanding notes and
debentures. We are focusing the majority of our resources on
developing the Company's proprietary opioid abuse deterrent
formulation technology and our novel opioid active pharmaceutical
ingredient synthesis technologies."
At March 31, 2004, Halsey Drug Co.'s balance sheet reflects a
stockholders' deficit of $39,074,000 compared to a deficit of
$52,067,000 at December 31, 2003.
Halsey Drug Co., Inc., -- http://www.halseydrug.com/-- together
with its subsidiaries, is an emerging pharmaceutical technology
development company specializing in proprietary drug formulation
and active pharmaceutical ingredient manufacturing process
development.
HEALTHSOUTH: Bondholder Panel Aggrieved by 'Strong-Arm Tactics'
---------------------------------------------------------------
The Unofficial Committee of holders of HealthSouth's senior notes
announced that while it hopes to resume discussions with
HealthSouth about substantially increasing the compensation to be
paid by HealthSouth to its bondholders to waive all defaults under
the indentures for its senior notes and for the other indenture
amendments being sought by HealthSouth, HealthSouth appears
determined to circumvent all of the efforts by the Unofficial
Committee to obtain fair compensation.
On Thursday, May 13, 2004 and Friday, May 14, 2004, HealthSouth
announced that a majority of the holders of its 8-1/2% senior
notes due 2008 and its 10-3/4% subordinated notes due 2008 had
executed consents waiving defaults under those indentures, and
HealthSouth extended the deadline with respect to the Company's
consent solicitation for its five remaining bond issues through
May 20, 2004. Once again, HealthSouth amended its clearly
insufficient and, in the view of the Unofficial Committee, flawed
consent offer. This latest amendment, which deleted the
requirement that for a consent with respect to one series of notes
to be effective, sufficient consents must be received from holders
of other series of notes issued under the same indenture, is
designed to further HealthSouth's coercive efforts.
Notwithstanding HealthSouth's failure to negotiate and its use of
high pressure and coercive tactics which undermine HealthSouth's
public pronouncements about wanting to embrace good faith
negotiations with the Unofficial Committee, the Unofficial
Committee, while reserving, and subject to, all rights, remedies
and recourse of bondholders, remains committed to its effort to
reach a consensual resolution on a further increased amount of
compensation necessary to resolve all existing defaults under the
Company's indentures for the five series of notes as to which
HealthSouth remains in default.
Brad Eric Scheler of Fried, Frank, Harris, Shriver & Jacobson LLP,
counsel to the Unofficial Committee of Bondholders, commented
that, "The compensation being offered to bondholders is
significantly less than what the Company should be offering and
all bondholders are urged not to provide their consent unless the
Company increases the compensation. HealthSouth is determined to
avoid paying fair compensation to bondholders by championing
consents from a small minority that has either been coerced or
which gave their consents to accommodate such consenting
bondholders' other objectives. Unstated by HealthSouth is, of the
consents obtained for the lone series of consenting senior notes
and from holders of the subordinated notes, how many consents were
obtained from bondholders who are also large equity holders or who
are motivated by other noncreditor objectives. All holders of bond
issues are urged to withhold consent or withdraw previously
delivered consents because holders who consent now will
undoubtedly receive less compensation than bondholders in other
bond issues that do not consent at this time."
Mr. Scheler further noted that, "In the view of the Unofficial
Committee, the Company's characterization that the consents it
received from holders of the 8-1/2% senior notes and the 10-3/4%
subordinated notes evidenced the market's acceptance of the
proposed consent fee is baseless. Holders of five of HealthSouth's
six senior note issuances, representing approximately $2 billion
of the Company's $2.3 billion of senior notes have not consented.
By withholding consents, bondholders have sent a strong message to
HealthSouth that significantly more compensation must be offered
to waive the serious existing defaults and to make the significant
amendments to the indentures being sought by HealthSouth. This
message is further evidenced by the reaction of the market to the
consent solicitation and the fact that the 8-1/2% senior notes and
the 10-3/4% subordinated notes traded down significantly following
HealthSouth's announcement that holders of a majority in aggregate
principal amount of each series of notes had consented. Under
these circumstances, it makes no economic sense for any bondholder
to consent or succumb to HealthSouth's inappropriate strong-arm
tactics."
HealthSouth has been in default under its indentures since March
2003, when it announced that the public could no longer rely upon
HealthSouth's financial statements.
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/
HERITAGE ORGANIZATION: Case Summary & Largest Unsecured Creditors
-----------------------------------------------------------------
Debtor: The Heritage Organization, L.L.C.
5001 Spring Valley Road, Suite 800 East
Dallas, Texas 75244
Bankruptcy Case No.: 04-35574
Chapter 11 Petition Date: May 17, 2004
Court: Northern District of Texas (Dallas)
Judge: Steven A. Felsenthal
Debtor's Counsel: Cynthia Williams Cole, Esq.
Neligan Tarpley Andrews & Foley, L.L.P.
1700 Pacific Avenue, Suite 2600
Dallas, TX 75201
Tel: 214-840-5319
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 6 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
W.R. Canada, Jr. $6,161,270
3765 Waterford
Addison, TX 75001
Steadfast Investments, LP $850,000
P.O. Box 247
Pleasant View, TN 37146
Brian L. Czerwinski $190,000
Timothy W. Seaberg $135,000
Collin R. Moore $65,000
Brian A. Turchi $25,000
IMMUNE RESPONSE: D. Mitchell Named Director -- Regulatory Affairs
-----------------------------------------------------------------
The Immune Response Corporation (Nasdaq: IMNR), a
biopharmaceutical company developing immune- based therapies (IBT)
for HIV and multiple sclerosis (MS), announced that David C.
Mitchell has joined the company as Executive Director, Regulatory
Affairs. Mr. Mitchell assumes a new company position and will be
responsible for all aspects of regulatory affairs including those
related to the world-wide clinical development programs for both
HIV and MS, licensing and marketing registration.
"The combination of David's experience in biologics as well as FDA
negotiation and submission is a tremendous asset to The Immune
Response Corporation," said John N. Bonfiglio Ph.D., Chief
Executive Officer of The Immune Response Corporation. "We are
delighted that David is joining us at this time as we embark on an
expanded clinical program for both HIV and MS and move towards
commercialization. He will be a great value to the Company as we
move forward."
He joins from Biogen Idec, Inc. (Nasdaq: BIIB) where he was
Director of Regulatory Affairs. He provided leadership in the
development and implementation of innovative and compliant
regulatory strategies in support of drug candidates and marketed
products, including the successful launch of Zevalin(R) for the
treatment of non-Hodgkin's lymphoma. Prior to Biogen Idec, Mr.
Mitchell served as Director, Regulatory Affairs and QA/QC at Maxia
Pharmaceuticals, Inc. where he had full responsibility for
regulatory and quality functions in the development of four
product candidates in oncologic and metabolic indications. Mr.
Mitchell has also held regulatory positions with Anergen, Inc.
(now a part of Corixa), Biometric Research Institute, Inc.,
Upjohn, Bayer and Solvay Pharmaceuticals.
"David's employment at The Immune Response Corporation is the
latest step in building a world-class organization capable of
handling multiple products in a highly regulated environment. We
expect that this addition will help us to meet all of our
regulatory and clinical goals in the next several years,"
concluded Dr. Bonfiglio.
Mr. Mitchell graduated with a Bachelor of Science degree in
chemistry from Mississippi College in Clinton, MS. He is a member
of the American Chemical Society (ACS), the Drug Information
Association (DIA) and the Regulatory Affairs Professionals Society
(RAPS).
About The Immune Response Corporation
The Immune Response Corporation (Nasdaq: IMNR) --
http://www.imnr.com/-- is developing immune-based therapies (IBT)
for HIV and select other diseases. The Company's HIV products are
based on its patented whole-killed virus technology, co-invented
by Company founder, Dr. Jonas Salk, to stimulate HIV immune
responses. REMUNE(R), currently in Phase II, is being developed as
a treatment for people with HIV. The Company has initiated
development of a new IBT, IR103, which incorporates a second-
generation immunostimulatory oligonucleotide adjuvant.
The Immune Response Corporation is also developing an IBT for
multiple sclerosis (MS), NeuroVax(TM), which is currently in Phase
II and has shown potential therapeutic value for this difficult-
to-treat disease.
* * *
As reported in the Troubled Company reporter's April 7, 2004
edition, Immune Response Corporation (Nasdaq: IMNR) announced that
in its 2003 financial statements included in the Company's Form
10-K filed with the Securities and Exchange Commission, the audit
opinion of BDO Seidman, LLP contained a going-concern
qualification.
INFOUSA INC: S&P Rates $250MM Senior Secured Debt at BB
-------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' ratings and
recovery ratings of '4' to infoUSA Inc.'s $250 million of senior
secured credit facilities, indicating a marginal recovery (25%-
50%) of principal in the event of a default.
These facilities consist of an existing $50 million revolving
credit facility due March 2007 and $120 million term credit
facility due March 2009 (term loan A) that were closed in March
2004, as well as the company's planned $80 million six-year term
credit facility (term loan B).
Proceeds from the existing $170 million credit facilities were
used to refinance infoUSA's former credit facilities in March 2004
and the remaining $30 million balance of its 9.625% subordinated
notes in April. Proceeds from the new term loan B will be used to
help fund the acquisition of OneSource Information Services Inc.
for about $105 million that was announced in April and is expected
to be completed in early June.
In addition, Standard & Poor's affirmed its 'BB' corporate credit
rating on the Omaha, Nebraska-headquartered company. The outlook
is stable. infoUSA will have about $230 million of debt
outstanding following the transaction.
"The ratings on infoUSA Inc. reflect the company's meaningful pro
forma debt levels, moderate-size operating cash flow base and
competitive market conditions, including competition from
companies that have greater financial resources," said Standard &
Poor's credit analyst Donald Wong. "These factors are tempered by
infoUSA's historical operating cash flow margins in the mid-to
high-20% range, free operating cash flow generation, strong niche
market positions, a broad product and service offering distributed
through numerous channels to a diverse base of businesses, and
a significant portion of sales derived from existing or former
customers."
DII/KBR: Working with Government to Resolve Billing Issues
----------------------------------------------------------
Halliburton (NYSE: HAL) announced that its KBR subsidiary would
like to set the record straight regarding misleading and
inaccurate reports on billing issues related to dining facilities
in Iraq and Kuwait. KBR is working with the U.S. Army Field
Support Command (AFSC) to resolve outstanding issues regarding
invoices submitted by KBR's dining facility subcontractors in Iraq
and Kuwait. At this time, no final decision has been made.
As announced on May 17, 2004, the Defense Contract Audit Agency
(DCAA) has recommended the suspension, pending further review, of
$159.5 million of KBR's billings for dining facility costs in
Iraq. This is a reduction in the amount of dining facilities costs
that had previously been suspended of $177 million. This previous
amount included $35.8 million of costs suspended by DCAA, plus
$140.7 million of dining facilities billings that were voluntarily
deferred by KBR. After a thorough review, KBR concluded that the
entire $140.7 million of dining facility costs was fully
justified, and this amount was included in a billing at the end of
April under KBR's LOGCAP III project.
Although the DCAA's action in recommending the suspense of the
$159.5 million was not unexpected based on the DCAA's prior
actions, KBR is disappointed that the DCAA continues to ignore the
fact that KBR is contractually required to feed and support a
minimum level of troops. It is necessary for KBR to contract based
on a minimum number of troops so that the dining facility can be
sized and equipped accordingly, and this is the basis for the
subcontractor billings to KBR which KBR in turn bills to the
military. At times this contractual minimum has been greater than
the actual recorded headcount for meals at the dining facilities.
In working with the DCAA, KBR prepared an analysis of the
difference between how many people entered the dining facilities
and the amount KBR billed to the government under the terms of the
contract, yielding a 19.4% difference. KBR did this analysis to
support DCAA while clearly stating that this basis of calculation,
while interesting, was not the basis for the subcontracts nor the
basis for billings to the government. The DCAA has apparently used
this 19.4% difference to calculate the $159.5 million in its
recommended suspension of dining facility cost. The DCAA audit
opinion is preliminary and only a recommendation. KBR strongly
believes DCAA's view is not supported by the contract. The
ultimate decision regarding the payment of these costs will be
made by KBR's customer, the Army Material Command (AMC).
KBR believes that it will ultimately be reimbursed for these costs
because its contractual position is strong. KBR's actions were
consistent with its prime contract with the AMC, and KBR continues
to work with its customer to achieve resolution on this issue.
If these costs are not paid by the Government, KBR will withhold
payment from subcontractors. KBR does not believe this will have a
significant or sustained impact on its liquidity.
KBR has a contract with the government in which it is required to
provide a turn-key, fully operational and independent, quality
dining facility for a minimum number of Government personnel in a
war zone. In fact, the Army required KBR to provide 27 of these
facilities throughout Iraq to support over 120,000 troops -- in
less than 3 weeks.
"KBR has been working with AFSC to develop a standardized process
for resolution of issues which arise throughout the contract. We
believe that our efforts to establish these types of check and
balance review processes early on in the program are just a part
of the way the military and private contractors will be working
together in the future," said Randy Harl, KBR president and CEO.
"KBR is committed to continuing to work cooperatively with the
Army to resolve this issue," said Harl. "In general, we have found
that the subcontractors are properly billing on the basis provided
in the subcontracts, and in a manner than conforms to the LOGCAP
prime contract. We are operating in a remote, hostile and ever-
changing environment in Iraq. In such an environment, there are
bound to be challenges. However, what is most important here is
that the soldiers are being fed well. Any issues related to
billings will not only be resolved quickly and responsibly, but
also resolved in such a way that it will not affect any services
provided to our soldiers."
KBR employees have had a significant and positive impact on the
quality of life for troops and are risking their lives everyday.
Civilian contractors work side-by-side with the military and Iraqi
people. KBR's work is difficult and in a dangerous environment,
and Halliburton and its subcontractors have lost 35 personnel
while performing services under our contracts in the Kuwait- Iraq
region.
About Halliburton
Halliburton, founded in 1919, is one of the world's largest
providers of products and services to the petroleum and energy
industries. The company serves its customers with a broad range of
products and services through its Energy Services and Engineering
and Construction Groups. The company's World Wide Web site can be
accessed at http://www.halliburton.com/
About KBR
Headquartered in Houston, Texas, Kellogg, Brown & Root is engaged
in the engineering and construction business, providing a wide
range of services to energy and industrial customers and
government entities in over 100 countries. DII has no business
operations. The Company filed for chapter 11 protection on
December 16, 2003 (Bankr. W.D. Pa. Case No. 02-12152). Jeffrey N.
Rich, Esq., Michael G. Zanic, Esq., and Eric T. Moser, Esq., at
Kirkpatrick & Lockhart LLP, represent the Debtors in their
restructuring efforts.
LAKE CEDAR PARK: Case Summary & 7 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: Lake Cedar Park, Ltd.
c/o Management Unlimited, Inc.
13809 North Research Boulevard, Suite 1000
Austin, Texas 78750-1200
Bankruptcy Case No.: 04-12476
Chapter 11 Petition Date: May 3, 2004
Court: Western District of Texas (Austin)
Judge: Frank R. Monroe
Debtor's Counsel: Joseph D. Martinec, Esq.
Martinec, Winn, Vickers & McElroy, P.C.
919 Congress Avenue, Suite 1500
Austin, TX 78701
Tel: 512-476-0750
Fax: 512-476-0753
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 7 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Austin Admin. & Property Services $5,000
McGraw, Alan M., Attorney $2,759
Powell, Vance $2,500
Management Unlimited, Inc. $1,069
Rash Chapman Schreiber Porter LLP $169
Early Services, Inc. $129
Accugraphics $24
LONG GROVE CLO: S&P Assigns BB Rating to $11MM Class D Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Long Grove CLO Ltd./ Long Grove CLO Corp.'s
$415 million floating-rate notes due 2016.
The preliminary ratings are based on information as of May 17,
2004. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The expected commensurate level of credit support in the
form of subordination to be provided by the notes junior
to the respective classes;
-- The cash flow structure, which is subject to various
stresses requested by Standard & Poor's;
-- The experience of the collateral manager;
-- The ability to use hedge coverage of interest rate risks
through hedge agreements; and
-- The legal structure of the transaction, which includes the
bankruptcy remoteness of the issuer.
Preliminary Ratings Assigned
Long Grove CLO Ltd./Long Grove CLO Corp.
Class Rating Amount (mil. $)
A-1 AAA 319.4
B A 29.0
C BBB 17.8
D BB 11.0
Preferred
equity
certificates Not Rated 37.8
MADISON RIVER: Fitch Gives B Rating to $200MM 13.25% Senior Notes
-----------------------------------------------------------------
Fitch Ratings has assigned an initial rating of 'B' to Madison
River Capital, LLC's $200 million outstanding of 13.25% senior
unsecured notes due March 2010. The Rating Outlook is Stable.
The rating reflects the stability of the company's rural local
exchange operations, including moderate revenue growth prospects,
opportunity for free cash flow and solid expense controls. The
rating also recognizes Madison River's relatively high leverage
for a local exchange carrier, potential for higher levels of
competition and technological substitution, as well as its
exposure to growing regulatory risk.
Madison River's revenues grew 1.2% in 2003, and Fitch expects
revenue growth to be in a 1%-2% range for 2004. The company is
experiencing a moderate level of access line losses-approximating
2%--with losses primarily attributed to second line loss, as well
as primary line losses in its Gallatin River property stemming
from a weak local economy. Offsetting the line losses has been the
moderate growth in penetration of its long distance services and
the strong revenue growth associated with the successful marketing
of its high-speed digital subscriber line (DSL) product. Notably,
the company has reached a penetration rate of nearly 24% of
primary residential lines with its DSL offering, a relatively high
rate compared to other DSL operators as well as cable modem
providers. Free cash flow, which was approximately $25 million in
2003, is expected to exceed $20 million in 2004. Madison River's
capital expenditures, which were approximately 7% of revenues in
2003, are relatively low for local exchange carriers, but
appropriately reflect the slow growth in its service territory and
high degree of DSL availability (approximately 90%). Liquidity is
very good, with $15.2 million in cash on hand at March 31, 2004,
and $41 million on two undrawn lines of credit.
In 2003, total debt to EBITDA was approximately 6.8 times (x).
Leverage was moderately lower, at 6.3x, when the subordinated
capital certificates (SCCs) issued by Madison River's lender, the
Rural Telephone Finance Cooperative (RTFC), are netted against
debt. Madison River is required to purchase SCCs from the RTFC in
the amount of 10% of funds borrowed from the RTFC and the SCCs are
redeemed when Madison River makes principal payments on its
borrowings. The SCCs are a legal obligation of the RTFC.
At the current time, Fitch believes the competitive threats faced
by Madison River are moderate compared to urban-based local
exchange carriers. Competition from wireless carriers is expected
to increase, but remain below levels faced in urban areas. Cable
operators pose a threat with voice telephony, particularly as they
roll out Voice over Internet Protocol (VOIP) services. Madison
River's strong DSL penetration rate, if sustained, acts as a
counter to this threat. Lastly, there is virtually no competition
from operators employing the unbundled network elements platform
and Fitch believes the company is not likely to face a significant
threat from this source. Regulatory risk is relatively high for
rural operators as regulations evolve regarding universal service,
VOIP and intercarrier compensation (access charges). These issues
are very interrelated, and outcomes uncertain, but Fitch does not
expect material adverse outcomes as federal regulators and
legislators have voiced strong support for the rural industry over
the past couple of years. Fitch notes that Madison River is less
exposed to changes in the high cost federal universal service
funds, as these funds were approximately 1.2% of revenues in 2003.
In addition, the rating of the senior unsecured notes reflects the
subordination of the notes to $426.6 million of senior secured
borrowings from the RTFC issued by Madison River's subsidiary,
Madison River LTD Funding (MRLTDF). MRLTDF is a holding company
for three rural telephone subsidiaries: Mebtel, Gulf Coast
Services and Coastal Communications. A fourth telephone
subsidiary, Gallatin River Holdings, LLC, has provided a guaranty
to the RTFC and its operating assets and revenues are subject to a
first mortgage lien in favor of the RTFC.
Fitch believes that over the next few years the event risk posed
by additional acquisitions by Madison River is relatively
moderate, given the company's limited financial flexibility. Small
acquisitions are possible, and it appears management would have an
interest in larger acquisitions, but Fitch believes larger
acquisitions may have to be financed outside of the rated entity.
Fitch also notes that certain of Madison River Telephone's
investors (Madison River's parent) have a put right to require
Madison River Telephone to acquire their interests beginning in
January 2006. Exercise of the put would cause the principal of the
existing senior unsecured debt to become due immediately, thus
somewhat reducing the likelihood of the exercise of the put given
the company's current limited financial flexibility.
Other small, rural carriers in the industry have filed to issue a
new form of security, known as an income deposit securities, and
management has indicated it is monitoring developments with
respect to these securities. The income deposit securities
effectively distribute nearly all the free cash flows produced by
companies operating in relatively stable, mature businesses.
Issuance of such securities by Madison River, as well as
acquisitions proposed by Madison River, would necessitate a review
of the existing rating by Fitch.
MAGSTAR TECHNOLOGIES: March 31 Balance Sheet Insolvent by $9.2 Mil
------------------------------------------------------------------
The Company's net sales of $1,904,923 for the first quarter ended
March 31, 2004 increased by approximately 33% or $471,390 from
$1,433,533 for the same period in 2003. Gross profit was $144,108
or 8% in the first quarter of 2004, compared to $25,923 or 2% for
the same period in 2003. The net loss for the first quarter of
2004 was $193,662 or $0.02 per basic and diluted share, compared
to a net loss of $141,197 or $0.02 per basic and diluted share for
the first quarter of 2003.
First quarter sales were greater than in the same period of 2003,
with improvement in operating results. The net loss for the first
quarter of 2004 compared to the loss in 2003 reflects increased
sales and the results of significant cost restructuring. The
results also show the impact of the sale and leaseback of the
equipment and building and the cancellation of senior debt. Having
completed major financial and operating restructuring in 2003,
management turned more attention to strategic growth and
development in the first quarter of 2004. This is demonstrated by
the production of a new, detailed, and execution-oriented sales
and marketing plan. Management feels this plan is partially
responsible for the growth in sales in 2004.
At March 31, 2004, MagStar Technologies, Inc.'s balance sheet
shows a stockholders' deficit of $9,227,577 compared to a deficit
of $9,033,914 at December 31, 2003.
About MagStar Technologies
MagStar is a publicly owned company that trades under the symbol
"MGST" on the Over The Counter Bulletin Board market. MagStar
divides sales into the following core competencies: Medical,
Magnets, Industrial, Contract Manufacturing, and Conveyors/Factory
Automation. For over 10 years, ISO- certified MagStar
Technologies, Inc. (OTC Bulletin Board: MGST) has been a trusted
medical device supplier, using its expertise in centrifuge and
medical device design and manufacturing, by partnering its
engineers and salespeople with well-known, national OEM's. MagStar
has over 10 years of history designing, engineering, and
manufacturing magnet assemblies to meet the exacting requirements
of our customers. MagStar's expertise in oil centrifuges, labeled
Industrial Sales, includes manufacturing for internationally
prominent engine OEMs with 12 years of history designing,
engineering, and manufacturing oil centrifuges to meet market and
emissions requirements. MagStar's expertise in factory automation
and conveyors includes serving national and international based
high-tech OEMs. MagStar has 15 years of experience designing and
manufacturing conveyance devices for factory automation.
Industries served include high tech, medical, automotive,
packaging, and testing. MagStar has a standard product line
designed for competitive, timely, and simplified integration. All
products incorporate low-profile features for a reduced footprint,
desirable in highly priced real estate. MagStar has successfully
established business with OEMs providing customized products from
design to production for integration into standard lines. MagStar
has a patented product line that evolves with industry
requirements, including the recent introduction of a patented
clean room conveyor. MagStar has over 40 years of history as an
integral supplier of manufactured assemblies. The Company also
contract manufactures biometric identification assemblies,
spindles, precision slides and complex magnetic assemblies.
MARINER HEALTH: Plans to Develop $32.9 Million IT Infrastructure
----------------------------------------------------------------
Mariner Health Care, Inc., is in the process of developing and
implementing a new information technology infrastructure to
improve customer service, enhance operating efficiencies and
provide for more effective management of business operations.
This will include a new centralized clinical billing function and
enhancements to other accounting and human resource systems.
In a Form 10-Q filing with the Securities and Exchange Commission
dated May 10, 2004, C. Christian Winkle, Mariner President and
Chief Executive Officer, relates that the implementation of the
new systems and software carries risks like cost overruns,
project delays and business interruptions. If Mariner
experiences a material business interruption as a result of the
implementation of the future information technology
infrastructure, or is unable to obtain the projected benefits of
this new infrastructure, Mr. Winkle says, it could have a
material impact on the company's liquidity and cash flows, as
well as potentially result in an impairment of the related
information technology assets.
The capitalized software costs not yet placed into service at
March 31, 2004 were $32.9 million. Mariner recorded a $1.3
million increase in costs associated with the implementation of
the new information technology infrastructure and systems, as
well as the new centralized back office support services center
business model. (Mariner Bankruptcy News, Issue No. 58; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
MEDIABAY INC: Financial Restructuring Improves Balance Sheet
------------------------------------------------------------
MediaBay, Inc. (Nasdaq: MBAY), a leading spoken audio media
marketing company, announced financial results for the first
quarter ended March 31, 2004.
First quarter sales were $5.7 million compared to $10.7 million in
the first quarter of 2003. Net loss for the current quarter was
$1.2 million, or $0.09 per diluted common share, compared to $1.5
million, or $0.11 per diluted common share, in the first quarter
of 2003.
MediaBay CEO Jeffery Dittus stated, "The most important milestones
to date in 2004 were two new financings and the related extensions
of debt and conversions of debt to equity. The completed
transactions have already dramatically improved our balance sheet
and increased our equity, giving us flexibility and needed working
capital to begin new marketing programs. We also extended the
maturity of our debt to 2007, which gives us the needed time to
restructure our operations and return the Company to
profitability. We are awaiting the receipt of a fairness opinion
by an investment bank, which, if received, will result in the
automatic conversion of an additional approximately $4.4 million
of debt for equity, further decreasing our debt and improving our
balance sheet.
"Our strategy to digitize MediaBay is in place and we have a solid
platform for future growth. We are building our download
infrastructure for our existing library of spoken word products
and integrating our direct response syndicated radio show, which
airs nationally to 230 stations across the country. We intend to
aggressively use our radio time to cross-promote our products and
drive web traffic and Internet sales. Today only 15% of our sales
are on the Internet and we believe we can move this metric to 50%
over time. If achieved, the positive impact of this change on our
business would be enormous," continued Mr. Dittus.
Audio Book Club sales were $3.7 million in the first quarter of
2004 compared to $8.1 million in the first quarter of 2003,
principally due to a decrease in club membership as a result of a
reduction in advertising expenditures for new members during 2003
and the first quarter of 2004. The Audio Book Club spent $0.2
million to attract new members in the first quarter of 2004, down
nearly 70% from the $0.8 million spent in to attract new members
in the first quarter of 2003.
First quarter sales at the Company's old-time radio division,
Radio Spirits decreased to $1.9 million from $2.6 million in the
first quarter of 2003. Advertising expenditures at Radio Spirits
declined to $0.2 million from $0.9 million in the first quarter of
2003.
The Company's bad debt expenses declined $0.6 million to $0.4
million from $1.0 million in the first quarter of 2003. While the
drop is principally due to the decline in sales, bad debt expense
as a percentage of sales declined to 7.0% from 9.4% in the first
quarter of 2003.
"We are pleased by the trend in bad debt expense as a percentage
of sales and hope to see this metric continue to improve as we
improve credit card usage and enhance our targeted marketing
efforts," stated Mr. Dittus.
General and administrative expenses were $0.9 million lower in the
first quarter of 2004 as compared to the first quarter of 2004.
This decrease was principally due to reductions in personnel, as a
result of a restructuring, which occurred in September 2003, a
reduction in accounting fees due principally to a change in our
auditors and reduction in legal expenses.
As previously reported, on January 29, 2004, the Company completed
a $4.0 million financing. On April 12, the conversion of the
$4.0 million in convertible subordinated notes to equity was
approved at a Special Meeting of Shareholders.
On April 28, 2004, the Company undertook a material refinancing
and restructuring of its balance sheet. The Company received
$8.6 million of funds upon closing a new senior debt facility of
$9.5 million and concurrently extended approximately $7.4 million
of current debt into long-term obligations. MediaBay used a
portion of the proceeds from the new senior debt facility to pay
off approximately $4.2 million in current debt, and has
approximately $4.1 million in additional working capital, after
payment of the costs of the financing. In addition, the conversion
of another approximately $4.4 million in debt and accrued expenses
to equity has been agreed to with the holders pending receipt by
the Company's Board of Directors of a fairness opinion from an
independent investment banking firm.
"Overall, we have achieved a much stronger financial position and
provided the Company with significant additional working capital
to execute our growth strategy," added Mr. Dittus. "We are
enthusiastic about MediaBay's business opportunities and believe
we are positioned to leverage the strength of our direct marketing
channels and content library to drive future growth."
About MediaBay, Inc.
MediaBay, Inc. (Nasdaq: MBAY) is a multi-channel, media marketing
company specializing in the $800 million audiobook industry and
old-time radio distribution. MediaBay's industry-leading content
library includes over 60,000 classic radio programs, 3,500 film
and television programs and thousands of audiobooks. MediaBay
distributes content through more than 20 million direct mail
catalogs; streaming and downloadable audio over the Internet; over
7,000 retail outlets; and a 260 station syndicated radio show. For
more information on MediaBay, visit http://www.MediaBay.com/
METROMEDIA INTL: Late Q1 Reporting May Trigger Senior Note Default
------------------------------------------------------------------
Metromedia International Group, Inc. (MIG) (currently traded as:
OTCPK:MTRM - Common Stock and OTCPK:MTRMP - Preferred Stock), the
owner of interests in various communications and media businesses
in Russia and the Republic of Georgia, announced the following in
regards to its Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2004:
-- The Company has not completed in a timely manner the
preparation of the Current Quarterly Report;
-- The Company will not file a Form 12b-25, Notification of
Late Filing, with the United States Securities and Exchange
Commission (SEC), since it cannot predict with certainty at
this time when it will file its Current Quarterly Report;
and
-- The Company also announced that, in view of the delay in
filing its Current Quarterly Report, the trustee of its
Series A and B 10-1/2% Senior Discount Notes Due 2007, has
issued a notice that the Company is not in compliance with
requirements of the indenture governing these Senior Notes
and that the Company must resolve this compliance matter no
later than July 16, 2004, the sixtieth day following the
receipt of the trustee's letter in order to avoid an event
of default. The Company presently expects that it will file
the Current Quarterly Report within the 60-day period
required for compliance with the Indenture.
Furthermore, as previously announced on April 5, 2004, the Company
received notification from the trustee of its Senior Notes that
the Company was not in compliance with requirements of the
Indenture underlying the Senior Notes since it has not yet filed
its 2003 Annual Report on Form 10-K with the SEC and delivered to
the trustee the compliance certificates pursuant to Section 4.4
(a) of the Indenture. The Company has until June 1, 2004, the
sixtieth day following the receipt of the trustee's letter, to
file its Current Annual Report with the SEC and deliver the
requisite compliance certificates to the trustee in order to avoid
an event of default. Although no assurances can be given, the
Company expects that it will complete these items on or prior to
the June 1, 2004 deadline.
About Metromedia International Group
Through its wholly owned subsidiaries, the Company owns
communications and media businesses in Russia, Europe and the
Republic of Georgia. These include mobile and fixed line telephony
businesses, wireless and wired cable television networks and radio
broadcast stations. The Company has focused its principal
attentions on continued development of its core telephony
businesses in Russia and the Republic of Georgia, while
undertaking a program of gradual divestiture of its non-core media
businesses. The Company's core telephony businesses include
PeterStar, the leading competitive local exchange carrier in St.
Petersburg, Russia, and Magticom, the leading mobile telephony
operator in the Republic of Georgia. The Company's remaining non-
core media businesses consist of eighteen radio businesses
operating in Finland, Hungary, Bulgaria, Estonia, and the Czech
Republic and one cable television network in Lithuania.
MIRANT CORPORATION: Proposes Claims Omnibus Objection Protocol
--------------------------------------------------------------
The Mirant Corp. Debtors ask the Court to establish procedures for
filing omnibus objections to proofs of claim.
Michelle C. Campbell, Esq., at White & Case, LLP, in Miami,
Florida, reports that about 7,850 proofs of claim have been filed
against the Debtors, asserting at least $242,000,000,000. Of
that amount, about $221,000,000,000 constitutes claims that were
filed against multiple entities; $6,500,000,000 constitutes
claims that are either duplicative of another claim of have been
amended; and $34,500,000 constitutes claims based on equity
interests.
The Debtors' initial analyses indicate that the total amount of
substantive claims filed against their estates is
$15,500,000,000. The Debtors' Schedules reflect that their
liabilities total approximately $9,300,000,000. Accordingly,
through the claims objection process, the Debtors will focus on:
(1) expunging the procedurally objectionable claims from the
claims register; and
(2) narrowing the $6,500,000,000 gap between what they believe
are their liabilities and what creditors have asserted
against their estates.
Prior to the Petition Date, the Debtors maintained, in the
ordinary course of business, books and records that reflect their
liabilities and the amounts owed to their creditors. According
to Ms. Campbell, the Debtors are in the process of conducting a
comprehensive review and reconciliation of the Proofs of Claim
filed and the Books and Records to determine the validity of the
claims. The purpose of the Claims Reconciliation Process, Ms.
Campbell explains, is to identify particular categories of Proofs
of Claim that may be targeted for disallowance and expungement,
reduction and allowance, or reclassification and allowance
through objections.
Ms. Campbell informs Judge Lynn that on April 2, 2004, the
Debtors filed and served the "Status Report Concerning Proposed
Procedures to Omnibus Objections to Proofs of Claim." The Status
Report included the proposed Objection Procedures and a broad
discussion of the Debtors' justifications for categorizing
Objections into four tiers.
On April 14, 2004, the Status Report was discussed at the
Debtors' regularly scheduled status conference. After
discussions with several parties-in-interest, certain changes
were made to the original Objection Procedures that are now
reflected in the proposed Objection Procedures.
Proposed Objection Procedures
1. Objection Categories
The Debtors will divide the Objection into four categories or
tiers:
Tier I: Objections to two or more Proofs of Claim asserting
the same liability against the same Debtor or a
Proof of Clam that was amended or superseded by a
later filed Proof of Claim. The Debtors estimate
that about 168 Proofs of Claim will fall within
Tier I.
Tier II: Objections to Proofs of Claim based on ownership of
equity securities. The Debtors estimate that about
4,800 Proofs of Claim fall within the Tier II Equity
Objections.
Tier III: These objections fall within two subcategories:
* Tier III(A) includes objections that seek to:
(a) disallow a Proof of Claim based on the
claimant's failure to attach any documentation
providing a basis for the claim asserted;
(b) reclassify the priority of a Proof of Claim
where the Claimant failed to provide any
documentation providing a basis for the
asserted priority;
(c) identify the Debtor allegedly liable for the
claim asserted in the Proof of Claim; and
(d) disallow late-filed Proofs of Claim.
It is too early in the Claims Reconciliation
Process to estimate the number of Proofs of Claim
that may fall within the Tier III(A) Objections.
* Tier III(B) includes objections that seek to:
(a) reduce the amount of a Proof of Claim; and
(b) resolve claims that are the subject of
disputes between the Debtors' Books and
Records and the supporting documentation
attached to the Proof of Claim.
It is too early in the Claims Reconciliation
Process to estimate the number of Proofs of Claim
that may fall within the Tier III(B) Objections.
Tier IV: Includes substantive objections that do not fall
within one of the other tiers. It is too early in
the Claims Reconciliation Process to estimate the
number of Proofs of Claim that may fall within the
Tier IV Objections.
2. Treatment of the Categories
These procedures will apply to Tier I Objections:
(a) The Debtors may object to no more than 50 Proofs of Claim
per pleading, but are authorized to file all of the Tier
I Objections at the same time to be heard during a single
hearing;
(b) The Objection Notice indicates that the copies of the
Proofs of Claim can be downloaded from the Internet on
http://www.alixpartners.com/cmsor can be obtained from
the Claims Agent directly;
(c) The Objection Notice is issued by the Court and informs
Claimants that their claims may be disallowed or expunged
and encourages them to read the Tier I Objection
carefully;
(d) The Objection Notice and Tier I Objection will be served
on the party whose name appears in the signature block on
the Proof of Claim;
(e) The Objection Notice and Tier I Objection will also be
served on counsel of the Committees, the Office of the
U.S. Trustee any party who made an appearance in these
cases on behalf of any Claimant to which the Debtors are
objecting;
(f) A timely response to the Objection must be filed with the
Court within 30 calendar days after service of the
Notice and Tier I Objection;
(g) A hearing on the Tier I Objections will take place during
the regularly scheduled hearing date that is at least 40
days after service of the Tier I Objection. The Debtors
are permitted to file a reply to any Response to a Tier I
Objection until three days before the Hearing Date; and
(h) At the hearing, the Debtors may submit to the Court a
form of order sustaining each Tier I Objection to which
the Debtors do not receive a timely, written Response.
The Debtors will serve each order to the affected
claimants and the Limited Service List within three
business days after entry of the order.
The Debtors will follow these procedures for Tier II Equity
Objections:
(a) The Debtors will file a motion requesting the Court to
convert Claims Based on Equity Interest to Proofs of
Interest;
(b) Due to the size of the Proof of Interest Motion and the
Equity Exhibit, the Proof of Interest Motion and Equity
Exhibit will not be served on the parties who filed
Claims Based on Equity Interests. Instead, the Equity
Notice indicates that the Equity Exhibit is available at
http://www.alixpartners.com/cmsor can be obtained from
the Claims Agent directly;
(c) The Equity Notice is tailored to the specific interests of
the parties who filed Claims Based on Equity Interests and
clearly states that the interests of parties who filed
Claims Based on Equity Interests will continue to exist
despite expungement of the Claims Based on Equity
Interests from the claims register;
(d) The Equity Notice and the Proof of Interest Motion will be
served on the party whose name appears in the signature
block on the Proof of Claim;
(e) The Equity Notice and the Proof of Interest Motion will
also be served on counsel for the Committees, the Office
of the U.S. Trustee and any party who made an appearance
in these cases on behalf of any Claimant who filed a
Claim Based on Equity Interest. The Equity Exhibit will
be served on counsel for the Equity Committee only;
(f) A timely response must be filed with the Court within 30
calendar days after service of the Equity Notice or
Proof of Interest Motion;
(g) A hearing on the Proof of Interest Motion will take place
during the regularly scheduled hearing date that is at
least 40 days after service of the Equity Notice and
Proof of Interest Motion. The Debtors are permitted to
file a reply to any Response to a Proof of Interest
Motion until three days before the Hearing Date; and
(h) At the hearing, the Debtors may submit to the Court a
form of order converting each Proof of Claim to a Proof
of Interest without any further notice to the Claimants.
For those who filed a response, if the Debtors and the
Responding Party are unable to reach a consensual
resolution, the Court will resolve the matter during the
hearing.
These procedures will apply to Tier III Objections:
(a) The Debtors may object to no more than 50 Proofs of Claim
per pleading. The Court will hear no more than three
Tier III Objections during a single hearing;
(b) An exhibit will be attached to each Tier III Objection.
In addition to including the name of claimant, claim
number and the claim amount, the exhibit will include the
basis for the objection;
(c) The Objection Notice is issued by the Court and indicates
that copies of the Proofs of Claim can be downloaded from
the Internet at http://www.alixpartners.com/cmsor can be
obtained from the Claims Agent directly;
(d) The Objection Notice is tailored to inform the Claimants
that their claims may be disallowed or expunged and
to encourage the Claimants to read the Tier III Objection
carefully. The Objection Notice provides contact
information of a Debtor representative whom the Claimant
may contact to discuss or resolve the Tier III Objection
prior to the hearing;
(e) The Notice and Tier III Objection will be served on the
party whose name appears in the signature block on the
Proof of Claim;
(f) The Objection Notice and the Tier III Objection will be
served on counsel for the Committees, the Office of the
United States Trustee, and any party who made an
appearance in these cases on behalf of the Claimant who
filed a Proof of Claim to which the Debtors are objecting;
(g) A timely Response must be filed with the Court and
received by the Debtors within 30 calendar days after
service of the Objection Notice and the Tier III
Objection;
(h) A hearing on each Tier III Objection will be held at
least 40 days after service of the Tier III Objection.
The Debtors are permitted to file a reply to any Response
until three days before the hearing;
(i) Upon receipt of a timely Response, if the Debtors
determine that discovery is necessary in advance of a
trial on the matter, the Debtors will serve notice on the
Affected Claimant, counsel for the Committees and the
Office of the U.S. Trustee, that the scheduled hearing
will be converted to a status conference during which the
parties will ask the Court to issue a scheduling order to
facilitate resolution of the litigation; and
(j) At the hearing on each Tier III Objection, the Debtors
may submit to the Court a form of order sustaining each
Tier III Objection to which the Debtors do not receive a
timely, written Response. The Debtors will serve each
order to all affected claimants the Limited Service List
within three days after the entry of the order.
The Tier IV Objections are excluded from the Objection
Procedures with these exceptions:
(a) The Debtors will attach to each Tier IV Objection a
detailed notice summarizing the grounds for the
Objection. The Notice will furnish contact information
of a Debtor representative whom the Claimant may contact
to discuss and resolve the Tier IV Objection;
(b) The Notice and Tier IV Objection will be served on the
party whose name appears in the signature block on the
Proof of Claim;
(c) The Notice and Tier IV Objection will also be served on
all persons on the Limited Service List, which includes
counsel for the Committees and the Office of the U.S.
Trustee;
(d) A status conference on a Tier IV Objection will be held
at least 30 calendar days after service of that Tier IV
Objection. Any Claimant desiring to contest the Tier IV
Objection must appear at the status conference;
(e) The Debtors and the Claimant are required to meet or
confer within 15 days after service of the notice and the
Tier IV Objection to discuss the preparation of an agreed
scheduling order. Assuming both parties can agree to a
scheduling order, the scheduling order will be presented
to the Court at the status conference. If no agreed
scheduling order is reached, the Court will set the
scheduling deadlines; and
(f) If a Claimant fails to comply with the meet and confer
requirements and appears at the status conference, the
Debtors may submit to the Court a form of order
sustaining the Tier IV Objection.
3. Settlement of Claims
To consensually resolve an objectionable Proof of Claim, the
Debtors may file a motion under Rule 9019 of the Federal
Rules of Bankruptcy Procedure for approval of stipulations
setting forth the terms of the compromise. If a settlement
is for less than $100,000, a "negative notice" period of
seven calendar days is applicable. If the settlement is for
more than $100,000 but less than $250,000, a "negative
notice" period of 14 calendar days is applicable. If the
settlement exceeds $250,000, a "negative notice" of 21
calendar days is applicable.
The Debtors may seek approval of multiple, but not to exceed
15, stipulations of a similar monetary amount in any given
9019 Motion. The Debtors may also file a 9019 Motion seeking
approval of the settlement of a Proof of Claim that is not
subject to a formal Objection filed with the Court.
An objection to a 9019 Motion must be served on the Debtors'
counsel before the expiration of the applicable "negative
notice" period. If there are no objections to a 9019 Motion
before the expiration of the applicable negative notice
period, the Debtors may submit to the Court separate orders
approving the settlements subject to the 9019 Motion.
Ms. Campbell contends that approving the Objection Procedures is
an appropriate use of the Court's power under Section 105 of the
Bankruptcy Code. The Local Bankruptcy Rules for the Northern
District of Texas do not set forth any guidelines pursuant to
which a Chapter 11 debtor can file omnibus objections to proofs
of claim. Thus, it would be appropriate for the Court to
establish claim objection procedures in these cases due, in part,
to the high volume of redundant claims that will need to be
expunged from the claims register.
Ms. Campbell points out that the Objection Procedures enhance the
efficient administration of the Debtors' cases and thereby serve
to protect and preserve the value of the Debtors' estate for the
benefit of all creditors. Utilization of the proposed Objection
Procedures would prevent unnecessary costs and expenses that
would be incurred if the Debtors were required to prepare an
individual pleading for each of the Debtors' objections to the
Proofs of Claim. At the same time, the Objection Procedures are
designed to protect the due process rights of creditors and
provide all claimants with notice and an opportunity to be heard.
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: Fitch Assigns Low Ratings to 6 1998-HF2 Classes
---------------------------------------------------------------
Morgan Stanley's commercial mortgage pass-through certificates,
series 1998-HF2, are upgraded by Fitch Ratings as follows:
--$52.9 million class C to 'AAA' from 'AA';
--$58.2 million class D to 'A' from 'A-';
--$21.2 million class E to 'BBB+' from 'BBB';
--$23.8 million class F to 'BBB' from 'BBB-';
--$18.5 million class G to 'BB+' from 'BB';
--$10.6 million class H to 'BB' from 'BB-'.
Fitch affirms the following classes:
--$104.2 million class A-1 'AAA';
--$547.8 million class A-2 'AAA';
--Interest only class X 'AAA';
--$52.9 million class B 'AAA';
--$21.2 million class J 'B+';
--$10.6 million class K 'B';
--$15.9 million class L 'B-'.
The $10.6 million class M remains at 'CC'. The $10.6 million class
N is not rated by Fitch.
The rating upgrades are a result of continued pool performance and
additional credit enhancement provided by the reduction of the
collateral balance. As of the May 2004 distribution report, the
pool's aggregate certificate balance has been reduced 13.17% to
$919 million from $1.1 billion at issuance
There are currently six loans (2.47%) in special servicing. The
largest loan (1.02%) in special servicing is a 190-unit
multifamily property in Redmond, WA and is current. The loan
transferred as a result of litigation involving the principal of
the borrower and the borrower's subsequent bankruptcy filing. The
property has been sold with proceeds being held by a court
appointed trustee. Losses are not expected on this loan.
The second largest loan (.64%) in special servicing is a
healthcare property in Largo, FL and is 90+ days delinquent.
Declining market conditions have impacted property operations and
resulted in a monetary default. The special servicer is evaluating
workout options including a possible note sale or discounted pay
off. Losses are expected upon liquidation of the loan.
NRG ENERGY: Selects New Jersey as New Headquarters Site
-------------------------------------------------------
NRG Energy, Inc. (NYSE: NRG), a wholesale power generation company
announced that it has selected West Windsor, New Jersey, as the
Company's preferred site for its new corporate headquarters.
In March, the Company implemented a new regional business strategy
and outlined a corporate structure that called for moving its
headquarters to the northeast from Minnesota in order to be closer
to its primary power facilities and better serve the Company's
stakeholders. A substantial portion of NRG's assets [is] located
in the Northeast.
"While the decision to relocate our headquarters was not easy, it
is the right move for the long-term success of this Company," said
David Crane, NRG Energy President and Chief Executive Officer.
"We conducted a lengthy and thorough search of five states in the
Northeast region and ultimately determined that New Jerseys top-
notch transportation system, central location in the East,
excellent education system and competitive business incentive
programs made it our preferred choice for NRG's new home."
"We are delighted to have a distinguished employer such as NRG
join the ranks of the successful businesses that call New Jersey
home," said New Jersey Governor James E. McGreevey. "NRG's
decision to relocate to New Jersey is reflective of the state's
dedication and commitment to job creation and business investment
- and yet another proof that New Jersey's economy is on the right
track."
To help finance the transition, NRG will receive a Business
Employment Incentive grant that could total $7.5 million over 10
years from the New Jersey Economic Authority. The Company will
also benefit from a customized worker training program sponsored
by the State.
NRG's new corporate headquarters is scheduled to open officially
near the end of the third quarter. NRG's current office in
Minneapolis will remain open throughout the transition to the new
location.
NRG Energy, Inc. owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. (NRG Energy Bankruptcy News, Issue
No. 27; Bankruptcy Creditors' Service, Inc., 215/945-7000)
OSE USA: Net Capital Deficit Tops $45.5 Million at March 28, 2004
-----------------------------------------------------------------
OSE USA Inc. (OTC:OSEE), reported its results for the first
quarter and year ended March 28, 2004.
Revenues from the continuing operations were $1,023,000 and
$770,000 for the first quarter ended March 28, 2004 and March 30,
2003, respectively. The Company reported a net loss from
continuing operations applicable to common stockholders of
($308,000) or ($0.01) per diluted share, for the first quarter of
2004, compared with a net loss of ($778,000) or ($0.01) per
diluted share, for the first quarter of 2003.
Net loss applicable to common stockholders were ($308,000) or
($0.01) per diluted share, for the first quarter of 2004, compared
with a net loss of ($2,181,000) or ($0.04) for the first quarter
of 2003.
The Company sold the assets of its manufacturing segment in
September 2003 and currently operates in the distribution segment
only. Revenue and associated cost related to the manufacturing
segment have been included in the discontinued operations for the
three-month periods for years 2003 and 2004. Total revenues and
expenses for the years presented in the financial statements are
derived from the distribution segment and classified as continuing
operations.
Founded in 1992 and formerly known as Integrated Packaging
Assembly Corporation (IPAC), OSE USA, Inc. has been the nation's
leading onshore advanced technology IC packaging foundry. In May
1999 Orient Semiconductor Electronics Limited (OSE), one of
Taiwan's top IC assembly and packaging services companies,
acquired controlling interest in IPAC, boosting its US expansion
efforts.
After the closure of its US manufacturing operations, the Company
will focus on servicing its customers through its offshore
manufacturing affiliates. OSE USA's customers include IC design
houses, OEMs, and manufacturers.
At March 28, 2004, OSE USA's balance sheet shows a stockholders'
deficit of $45,519,000 compared to a deficit of $45,211,000 at
December 31, 2003.
About OSE USA
When it comes to packaging chips, OSE USA stops just short of
wrapping them up with a bow. OSE USA (formerly Integrated
Packaging Assembly Corporation) receives wafers from its
customers, cuts the wafers into individual chips, adds wire leads,
and encases each chip in protective plastic, ready for
installation into such products as PCs, cars, cameras, and
telecommunications equipment. Customers include Atmel (32% of
sales), Orbit Semiconductor, and Cirrus Logic. Taiwan-based chip
maker Orient Semiconductor Electronics owns three-quarters of OSE
USA.
OWENS CORNING: Asks Court to Approve $5MM OC China Loan Agreement
-----------------------------------------------------------------
The Owens Corning Debtors have identified a growing market for
fiberglass insulation products in China, which they believe has
significant opportunities for expansion. The Chinese market for
fiberglass insulation is expanding rapidly, with demand for
fiberglass insulation increasing by 37%, 34%, 27% and 34% over the
past four years. Demand over the next five years is expected to
increase at an average rate of 20% per year. Most particularly,
the upcoming 2008 summer Olympics, which will be hosted by China,
and the Shanghai 2010 World Expo, together with an ongoing Chinese
government initiative to revitalize China's industrial Northeast,
are expected to result in significant increases in construction
activity in the Northeastern regions of China.
To take advantage of these opportunities, the Debtors seek the
Court's authority to enter into a revolving loan agreement with
Owens Corning (China) Investment Company, Ltd., by which they
will lend to OC China on an unsecured basis, an amount not to
exceed at any time $5,000,000.
The Debtors also ask the Court to permit:
(1) OC China to make capital contributions to Newco/China
Fiberglass in the aggregate amount of $5,000,000; and
(2) Owens Corning to enter into a License Agreement with
Newco/China Fiberglass.
J. Kate Stickles, Esq., at Saul Ewing, LLP, in Wilmington,
Delaware, tells the Court that no net outlay of funds from Owens
Corning, other than the $1,500,000 held by Owens Corning's Hong
Kong division, will be required for it to make the loans
contemplated by the Revolving Loan Agreement. Rather, all funds
lent by Owens Corning to OC China under the Revolving Loan
Agreement would be obtained from these sources:
(1) Repayment of a $2,280,000 postpetition loan from Owens
Corning to OC China;
(2) Repayment of a $1,700,000 postpetition loan from Owens
Corning to Owens Corning (Nanjing) Foamular Board Co.,
Ltd.,; and
(3) $1,500,000 currently held by Owens Corning's Hong Kong
branch -- an unincorporated division of Owens Corning.
OC China will use its borrowings under the Revolving Loan
Agreement to invest, through one or more capital contributions,
up to $5,000,000 in Newco/China Fiberglass, which is a company to
be created and organized under the laws of China.
Newco/China Fiberglass will be a wholly owned, direct subsidiary
of OC China. In turn, OC China is a wholly owned subsidiary of
Owens Corning Cayman (China) Holdings, Inc., which is wholly
owned by Owens Corning.
The funds infused into Newco/China Fiberglass, as well as around
$2,000,000 which Newco/China Fiberglass will borrow from third
party sources, would be used to purchase machinery and equipment,
for certain infrastructure expenditures and for working capital
necessary for the production of fiberglass insulation.
The key components of the contemplated transaction include:
(1) Newco/China Fiberglass' facility will be located in
Tianjin -- a region in the northern portion of China --
which has the second largest metal building concentration
in China. A specific site will be selected and land use
rights will be acquired by June 2004, at a cost of around
$50,000;
(2) The equipment to be located on the Tianjin site will be
purchased by Newco/China Fiberglass from GCD International
Pty Ltd. for $3,000,000. The $3,000,000 includes
$2,700,000 for the relocation and installation of the
Equipment at the Tianjin site;
(3) The raw materials required to operate the Newco/China
Fiberglass facility will be obtained from a combination of
Owens Corning's current vendors and local suppliers.
Newco/China Fiberglass will bear the costs of all raw
material purchases;
(4) Newco/China Fiberglass will obtain the technology and
know-how necessary to manufacture fiberglass insulation in
China through a license agreement with Owens Corning.
The principal terms of the License Agreement are:
(1) The Technology will remain the property of Owens Corning;
(2) The License Agreement will require Newco/China Fiberglass
to pay Owens Corning royalties at fair market rates, and
is non-exclusive and non-transferable;
(3) The License Agreement will permit Newco/China Fiberglass
to export, use, market and sell fiberglass insulation
products in China, Japan and Korea, as well as throughout
the entire Asia region;
(4) The License Agreement provides for Owens Corning to assist
Newco/China Fiberglass in the effective use of the
Technology, through the provision of technical services.
Owens Corning will charge Newco/China Fiberglass a fee for
the services, at the standard rates charged by Owens
Corning to its subsidiaries; and
(5) The term of the License Agreement is 10 years, subject to
termination, renewal and extension.
Fiberglass insulation products manufactured by Newco/China
Fiberglass would be marketed, sold and distributed by OC China.
OC China would be responsible for all sales, marketing and
customer-related issues, and would serve as Newco/China
Fiberglass' central billing agent.
The Newco/China Fiberglass facility is anticipated to be ready
for testing by October 2004 and fully operational for
manufacturing purposes by December 2004.
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com-- manufactures fiberglass insulation,
roofing materials, vinyl windows and siding, patio doors, rain
gutters and downspouts. The Company filed for chapter 11
protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom
represents the Debtors in their restructuring efforts. On Jun 30,
2001, the Debtors listed $6,875,000,000 in assets and
$8,281,000,000 in debts. (Owens Corning Bankruptcy News, Issue No.
75; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PARMALAT: Austrian Unit to Sell NOM AG Shares for EUR37.6 Million
-----------------------------------------------------------------
Parmalat Finanziaria SpA, in | Parmalat Finanziaria SpA, in
Extraordinary Administration, | Amministrazione Straordinaria,
communicates that its | comunica che la societa
subsidiary company Parmalat | controllata Parmalat Austria
Austria GmbH has signed, with | GmbH ha firmato con la societa
Raiffeisen-Holding | Raiffeisen-Holding
Niederosterreich-Wien | Niederosterreich-Wien
reg.Gen.m.b.H., an agreement | reg.Gen.m.b.H., un accordo per
for the sale of its holding, | la cessione della
equal to 25% + 1 share in the | partecipazione, pari al 25%
share capital of the Austrian | piu una azione, del capitale
company NOM AG. | sociale della societa
| austriaca NOM AG.
|
The sale will become | La cessione diventera
effective: | effettiva con:
|
(i) with the lifting of the | (i) la revoca dell'ordine
sequestration order | di sequestro emesso
issued by the Vienna | dal Tribunale di Vienna
Court with regard to NOM | sulle azioni NOM;
shares; |
|
(ii) with the conclusion of | (ii) la conclusione di un
an agreement relating to | accordo circa il
the supposed right of | presunto diritto reale
collateral claimed by | di garanzia vantato da
Raiffeisen Zentralbank | Raiffeisen Zentralbank
Osterreich AG over NOM | Osterreich AG sulle
shares; | azioni NOM;
|
(iii) the waiver by NOM of all | (iii) la rinuncia da parte di
claims for damages | NOM ad ogni pretesa di
against Parmalat SpA in | risarcimento danno nei
Extraordinary | confronti di Parmalat
Administration; and | SpA in Amministrazione
| Straordinaria; e
|
(iv) the non-exercise by | (iv) il mancato esercizio da
Parmalat Austria GmbH or | parte di Parmalat
Parmalat SpA in | Austria GmbH o Parmalat
Extraordinary | SpA in Amministrazione
Administration of the | Straordinaria, del
option right over 50% of | diritto di opzione sul
the share capital of | 50% del capitale di
NOM. | NOM.
|
The closing of the | Il closing
transaction is expected to take | dell'operazione e previsto non
place no later than 15 December | oltre il 15 dicembre 2004.
2004. The sale consideration | Il prezzo di cessione e pari a
is equal to EUR37.6 million. | 37,6 milioni di euro. Il
The consideration has been | corrispettivo e stato
deposited with a notary who | depositato presso un notaio,
will free the funds to one of | che liberera i fondi a favore
the parties depending on | di una delle parti, a seconda
whether closing takes place or | dell'avvenuta esecuzione del
no agreement is reached. | closing oppure della
| risoluzione dell'accordo.
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)
PENTON MEDIA: Equity Deficit Increases to $155MM at March 31, 2004
------------------------------------------------------------------
Penton Media, Inc. (OTCBB:PTON), a diversified business-to-
business media company, reported its first-quarter 2004 net loss
was $5.2 million compared with a $5.1 million loss in the year-ago
quarter. Revenues were $54.5 million, up from $54.4 million in the
first quarter of 2003.
Adjusted EBITDA increased 18.7% to $11.1 million from $9.3 million
in 2003. First-quarter adjusted EBITDA margin expanded to 20.3%
from 17.1% in the year-ago quarter due to process improvements and
cost reduction initiatives.
First-quarter operating results were positively impacted by the
highly successful Natural Products Expo West show. This leading
event, which serves the natural products, organic foods and
alternative health care markets, experienced growth over last
year's event in attendance, number of exhibitors and number of
booths. The Company's media franchises serving the natural
products, hospitality, aviation, and construction markets all
experienced year-over-year growth in the quarter.
Quarterly results also were impacted by a $2.4 million charge for
executive separation costs, and a restructuring charge of $0.9
million primarily relating to staff reductions. Penton announced
on March 24 that Thomas L. Kemp, chairman and chief executive
officer, will be leaving the Company but will continue with his
responsibilities until a replacement is named. A search is under
way for his successor.
The first-quarter net loss applicable to common stockholders was
$10.4 million, or $0.31 per diluted share, compared with a loss of
$5.8 million, or $0.17 per diluted share, in the year-ago quarter.
The net loss included $5.2 million of amortization of deemed
dividend and accretion of preferred stock, compared with $0.7
million in the year-ago quarter.
At March 31, 2004, Penton Media, Inc.'s balance sheet shows a
stockholders' deficit of $154,902,000 compared to a deficit of
$144,929,000 at December 31, 2003.
Business Segment Results
The Company's Lifestyle segment experienced a 14.5% revenue
increase in the first quarter due to the strong performance of
Natural Products Expo (NPE) West, SupplyExpo and Nutracon, which
were co-located with NPE. Segment revenues were $17.2 million
compared with $15.0 million in the year-ago quarter. Adjusted
segment EBITDA increased 19.4% to $11.1 million.
Industry segment revenues were $18.4 million, a 5.0% decline
compared with the 2003 first quarter. Print advertising weakness,
primarily in certain manufacturing-related magazines, drove most
of the decline. Adjusted segment EBITDA declined $0.2 million, or
6.2%, to $3.1 million.
Technology segment revenues fell 6.1% to $14.3 million in the
quarter, due primarily to declines in print advertising for
publications serving enterprise IT markets. Revenues for online
media for the segment grew substantially, however, as technology
marketers continued to shift greater percentages of their
marketing expenditures to electronic channels. Adjusted segment
EBITDA increased to $1.0 million from $0.8 million in the year-ago
quarter.
Retail segment revenues were down 4.0% to $4.6 million and
adjusted segment EBITDA decreased to $0.5 million compared with
$0.7 million in the 2003 first quarter. Declines in the segment's
revenue and adjusted segment EBITDA were due primarily to the
shift in timing of the spring National Convenience Store Advisory
Group Convention, which took place in January of 2003 and was held
in April this year. Overall, the segment continued to perform
well, reflecting the underlying strength of foodservice and
hospitality markets served by its products.
(Adjusted segment EBITDA is defined as net income (loss) before
interest, taxes, depreciation and amortization, non-cash
compensation, impairment of assets, restructuring charges,
executive separation costs, provision for loan impairment, general
and administrative costs, and other non-operating items. General
and administrative costs include functions such as finance,
accounting, human resources, and information systems, which cannot
reasonably be allocated to each segment. A reconciliation of total
adjusted segment EBITDA to net income (loss) is included in the
supplemental information attached to this press release.)
Product Lines
Ongoing softness in advertising sales for a select group of the
Company's manufacturing magazines and its enterprise IT magazines
contributed to a 6.1% decline in Publishing revenues compared with
the first quarter of 2003.
Trade Shows and Conferences experienced a 10.6% increase in
revenues, due primarily to the record performance of Natural
Products Expo West.
Online Media continued to grow year over year, with revenues of
$3.8 million, up 24.7%. This product line remains solidly
profitable.
Business Outlook
Penton's business has shown recent signs of stabilization compared
with the past three years. While publishing results have not
demonstrated recovery across several markets that Penton serves,
many parts of the Company's publishing portfolio have begun to
show revenue growth. The trade show and conference component of
the Company's business is expected to show growth through the
year. Online media is expected to demonstrate strong growth over
2003.
Penton's operating teams have been accelerating the development
and marketing of electronic media products and fully integrated
marketing solutions that cross multiple media platforms in
response to customer demand for such products and services. Sales
of products such as sponsored educational road shows, specialized
electronic Web-based content, webcasts, e-books, sponsored e-
newsletters, and customer-sponsored newsletters and magazines
continue to gain momentum across most of the Company's market
groups.
"We believe that Penton is on track for improvement in adjusted
EBITDA and margins compared with last year, without the benefit of
any meaningful recovery in revenues," said Kemp. "We are
positioned for strong margin growth if the overall economy and the
markets that Penton serves, particularly technology and
manufacturing markets, experience sustained improvement."
About Penton Media
Penton Media -- http://www.penton.com/-- is a diversified
business-to-business media company that provides high-quality
content and integrated marketing solutions to the following
industries: aviation; design/engineering; electronics;
food/retail; government/compliance; business technology/enterprise
IT; leisure/hospitality; manufacturing; mechanical
systems/construction; health/nutrition and natural and organic
products; and supply chain. Founded in 1892, Penton produces
market-focused magazines, trade shows, conferences and online
media, and provides a broad range of custom media and direct
marketing solutions for business-to-business customers worldwide.
PG&E NATIONAL: Court Allows ET Power's $82MM Claim Against USGen
----------------------------------------------------------------
On August 1, 1998, USGen New England, Inc., and NEG Energy
Trading - Power, LP, entered into a master fuel agreement
pursuant to which USGen agreed to buy all of its coal from ET
Power. The Master Fuel Agreement presumed that the ET Debtors
would develop and maintain an active coal-trading desk, which it
did for several years. The ET Debtors bought coal from numerous
sources, using its own resources to provide collateral required
by the suppliers. In addition, the ET Debtors sold coal to other
end-users and third parties.
As of August 1, 1998, USGen and ET Power entered into a master
electric agreement, which provided that USGen would sell all of
its output to ET Power, and that ET Power would sell to USGen
whatever energy-related products USGen needed to satisfy its
obligations under its standard offer service contracts with
certain subsidiaries of New England Electric System and any other
electric contracts USGen had through New England Power Company.
The Master Electric Agreement also provided for pricing that was
equal to the pricing established by the New England Independent
System Operator through its bidding process.
USGen and ET Power also entered into a series of master contracts
pursuant to which the parties would buy and sell various
commodities, specifically:
(a) a Purchase and Sale Agreement, dated as of August 1, 1998;
(b) a Master Interruptible Purchase and Sale Agreement, dated
as of August 1, 1998; and
(c) the (ISDA) Master Agreement, dated as of April 1, 1999.
The Agreements, with the possible exception of the (ISDA) Master
Agreement, are forward contracts, which can be terminated
automatically upon a bankruptcy filing by one of the parties
notwithstanding Sections 362 and 365 of the Bankruptcy Code.
The Bankruptcy Code contain "safe harbor" provisions -- Sections
555, 556, 559 and 560 -- which address derivative contracts and
physical commodity contracts to which a debtor-in-possession is a
party. These provisions generally permit non-debtor
counterparties to exercise certain rights and remedies, like
terminating the contract, not generally available to other
contract counterparties in a bankruptcy case. Typically, the
non-debtor counterparties have the right to calculate damages
employing a methodology, which inures to the substantial benefit
of the non-debtor counterparty and to the substantial detriment
of the debtor.
Pursuant to the Agreements, intercompany claims are owed to ET
Power and due from USGen, and vice versa, with respect to 33,000
separate trades. Before the Petition Date, as market prices for
energy and fuel commodities rose, the hedges resulted in
significant amounts being owed by USGen to ET Power. The exact
amount of this liability is dependent on various factors,
including the timing and methodology by which the parties'
positions are calculated and liquidated.
In anticipation of their Chapter 11 filings, ET Power and USGen
entered into a mutual release on July 3, 2003. The Mutual
Release contemplated the orderly termination and liquidation of
all agreements between the parties and settlement on an equitable
basis. USGen's payment obligation to ET Power under the Mutual
Release, net of payments to be made by ET Power to USGen
thereunder, is $81,886,746. No payments under the Mutual Release
were made. Rather, the Mutual Release is merely a true-up amount
subject to creditor and Court review.
Because the Chapter 11 filings of ET Power and USGen were related
and occurred on the same day, the Debtors decided to amend the ET
Power-USGen Agreements to avoid having the timing and methodology
by which the parties would fix their claims against one another
be determined by the mere happenstance of which debtor filed
first. In connection with the Mutual Release, ET Power and USGen
decided to utilize the mid-price forward commodity curves current
as of the date the Mutual Release was executed. Both ET Power
and USGen determined that utilizing a mid-point price curve --
which ET Power and USGen had relied on for years -- in lieu of an
extreme price curve was a fair and equitable method of computing
a settlement amount between the parties.
By selecting and applying mid-price forward curves, the parties
chose a fair, economically neutral methodology, and have avoided
the prospect of protracted and expensive litigation to determine
the parties' claims against one another.
Based on the Mutual Release, and the mid-market forward curves,
ET Power and USGen now agree to fix the Intercompany Claims due
to ET Power by USGen at $81,886,746.
At the Debtors' behest, Judge Mannes grants ET Power an
$81,886,746 allowed general unsecured claim against USGen,
subject to any right of offset that USGen may have with respect
to any claims that it has against ET Power that do not fall
within the scope of the transactions covered by the Mutual
Releases. The allowance of ET Power's claim against USGen is
without prejudice to:
-- any additional claims that ET Power may have against USGen
that do not fall within the scope of the transactions
covered by the Mutual Release;
-- the right of USGen, or its Unsecured Creditors Committee to
the extent authorized by the Court, to assert any defenses
to ET Power's claim, or any additional claims of any type
or nature against ET Power, so long as these claims or
defenses do not fall within the scope of the transactions
covered by the Mutual Release; and
-- the right of the USGen Creditors Committee and USGen to
assert that the ET Power claim should be subordinated
pursuant to Section 510(c).
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- develops, builds, owns and operates
electric generating and natural gas pipeline facilities and
provides energy trading, marketing and risk-management services.
The Company filed for Chapter 11 protection on July 8, 2003
(Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq.,
Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at
Willkie Farr & Gallagher represent the Debtors in their
restructuring efforts. When the Company filed for protection from
its creditors, it listed $7,613,000,000 in assets and
$9,062,000,000 in debts. (PG&E National Bankruptcy News, Issue No.
21; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PNC COMMERCIAL: Fitch Lowers 2000-C1 Class M Rating to CCC from B-
------------------------------------------------------------------
Fitch Ratings upgrades PNC Commercial Mortgage Acceptance Corp.'s
commercial mortgage pass-through certificates, series 2000-C1, as
follows:
--$34 million class B to 'AAA' from 'AA';
--$34 million class C to 'AA-' from 'A';
--$10 million class D to 'A+' from 'A-';
--$26 million class E to 'BBB+' from 'BBB'.
Fitch has also downgraded the following class:
--$7 million class M to 'CCC' from 'B-'.
Additionally, the following certificates are affirmed by Fitch:
--$95.4 million class A-1 'AAA';
--$460.7 million class A-2 'AAA';
--Interest only class X 'AAA';
--$12 million class F 'BBB-';
--$12 million class G 'BB+';
--$18 million class H 'BB';
--$8 million class J 'BB-';
--$7 million class K 'B+';
--$8 million class L 'B';
--$4 million class N 'CCC'.
Fitch does not rate the $6.7 million class O.
The upgrades are due to an increase in credit enhancement since
issuance. The downgrade to class M is attributed to the
anticipated losses on several specially serviced loans.
Twelve loans (5%) are currently being specially serviced by GMAC
Commercial Mortgage Corp. (GMACCM), six (3.1%) of which Fitch
expects to result in losses to the certificates leaving minimal
credit support to class M, and which may possibly affect class N.
The largest specially serviced loan (1.4%), Candletree Apartments,
is secured by a multifamily property located in Omaha, NE. The
property is 70% occupied. GMACCM is currently working with the
borrower to determine workout options. The second largest
specially serviced loan (0.9%), Today's Man Oxford Valley, is
secured by a retail property located in Langhorne, PA. The special
servicer is currently pursing foreclosure.
As of the May 2004 distribution date, the pool's aggregate
principal balance has been reduced by 7% to $743.1 million from
$801.0 million at issuance.
PREFERRED RIVERWALK: Case Summary & Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Preferred Riverwalk, L.P.
dba Sheraton Four Points
c/o Steven A. Sinkin
105 West Woodlawn Avenue
San Antonio, Texas 78212
Bankruptcy Case No.: 04-52666
Type of Business: The Debtor owns a hotel located on the San
Antonio Riverwalk in San Antonio, Bexar County,
Texas. This hotel operates under the name of
Four Points Sheraton.
Chapter 11 Petition Date: May 4, 2004
Court: Western District of Texas (San Antonio)
Judge: Leif M. Clark
Debtor's Counsel: Keith M. Baker, Esq.
8918 Tesoro Drive, Suite 418
San Antonio, TX 78217
Tel: 210-822-1714
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 19 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Texas Occupancy $76,510
Starwood Hotels & Resorts WW, Inc. $49,026
San Antonio Occupancy $35,307
Sysco Food Service $14,804
Bexar County Occupancy $6,853
Lodgenet Entertainment Corp. $5,460
Office Communications Systems $3,756
National Flood Services $3,740
Sunshine Distributors $3,400
Gross Reciepts Liqour Tax $3,324
Presentation Services Southwest $2,550
Ecolab $2,114
JD Frigid Enterprises $1,844
Mission Linen & Uniform SVC $1,639
Pepsi-Cola $1,523
Oak Farms San Antonio $1,405
California Fruit Co., Inc. $1,332
Texas Sales & Use $1,297
M & M Metals $1,241
RIGGS NATIONAL: Fitch Cuts Low-B Ratings & Keeps Negative Watch
---------------------------------------------------------------
Fitch Ratings has lowered the ratings for Riggs National
Corporation and its Trust preferred subsidiaries, Riggs Capital
and Riggs Capital II. Fitch also maintains the Rating Watch
Negative status on RIGS and all subsidiaries.
The rating actions reflect Fitch's concern regarding recent
regulatory actions, which place further pressure on RIGS'
operating flexibility. Late last week, RIGS' entered into a new
consent order with the Office of the Comptroller of the Currency
(OCC) and was assessed a $25 million fine by the OCC and the
Financial Crimes Enforcement Network, which was related to
numerous violations of the Bank Secrecy Act (BSA). The fine will
effectively wipe out RIGS' 2004 earnings and places additional
pressure on the company's capital. As expected, the OCC placed a
number of additional requirements and restrictions on Riggs Bank
National Association, RIGS' primary bank subsidiary, many of which
related to compliance with the BSA.
As anticipated, the bank is restricted from upstreaming dividends
to the holding company without OCC approval. RIGS also entered
into a Cease and Desist Order with The Federal Reserve Bank of
Richmond (Fed), which regulates the holding company and Riggs
International Banking Corporation (its Edge Act Corporation). The
focus of the Cease and Desist order is also compliance with laws,
rules and regulations pertaining primarily to money laundering and
suspicious activity reporting. In addition, the Fed order contains
numerous other mandates including a requirement to hire an
independent consultant to review the functions and performance of
its Board of Directors and senior management to aid in the
development of an effective Board of Directors and management
structure plus an order to improve Board of Director oversight of
the management and operations of the consolidated organization.
Further the order requires that RIGS obtain approval from the Fed
prior to making distribution of interest and principal payments on
its trust preferred securities, declaring and paying common stock
dividends, and purchasing or redeeming its stock. Because RIGS has
historically managed to high capital levels and has maintained
significant cash and liquid assets at the holding company, it was
not reliant upon bank dividends for parent company debt service.
However, Fitch believes that the risk to trust preferred investors
is significantly increased as RIGS must now apply for and receive
permission from the Fed to make timely payment on those
obligations, although the current parent company liquidity
suggests that it remains quite possible regulators will grant
permission. At Dec. 31, 2004, the parent on a standalone basis
held $54 million in deposits and an additional $82 million in
securities available for sale. The next required payment on the
trust preferred securities is due June 30, 2004. The Negative
Rating Watch remains in place due to the uncertainties associated
with RIGS' ability to fulfill the terms of the regulatory orders
and potential negative ramifications on operating performance and
debt service capability that may result.
The following ratings have been downgraded and remain on Rating
Watch Negative by Fitch:
Riggs National Corporation
--Long-term senior to 'BB-' from 'BB';
--Subordinated debt to 'B+' from 'BB-'.
Riggs Capital
--Preferred stock to 'B' from 'BB-'.
Riggs Capital II
--Preferred stock to 'B' from 'BB-'.
The following ratings remain on Rating Watch Negative by Fitch:
Riggs National Corporation
--Short-term debt 'B';
--Individual 'D'
--Support '5';
Riggs Bank National Association
--Long-term senior 'BB';
--Short-term debt 'B';
--Long-term deposits 'BB+';
--Short-term deposits 'B';
--Individual 'D'.
--Support '5';
SAFFRON FUND: Board Declares Liquidation Plan Effective
-------------------------------------------------------
The Board of Directors of Saffron Fund, Inc. (NYSE:SZF) voted to
declare the Plan of Liquidation and Dissolution, which was
approved by stockholders at the Annual General Meeting on May 13,
2004, to be effective.
The Board of Directors of the Fund intends to promptly take all
actions necessary to liquidate the Fund in accordance with the
vote of the stockholders. The liquidation will not, however, be
conducted until the Fund is able to complete certain procedures
with the Indian tax authorities, and these procedures probably
will not be completed for at least 90 days. The transfer books for
the shares of the Fund were closed effective the end of business
on May 19, 2004, and trading in the shares of the Fund on the New
York Stock Exchange is expected to be suspended effective today,
May 20, 2004.
Saffron Fund, Inc. is a closed-end, non-diversified management
investment company.
SEQUOIA MORTGAGE: Fitch Affirms 28 Class Ratings From 5 Trusts
--------------------------------------------------------------
Fitch Ratings has affirmed 28 classes for the following Sequoia
Mortgage Trust, mortgage pass-through certificates:
Sequoia Mortgage Trust, Trust 5, mortgage pass-through
certificates
--Class A, AR 'AAA';
--Class B-1 'AA';
--Class B-2 'A';
--Class B-3 'BBB';
--Class B-4 'BB';
--Class B-5 'B'.
Sequoia Mortgage Trust, Trust 6, mortgage pass-through
certificates
--Class A, AR 'AAA';
--Class B-1 'AA';
--Class B-2 'A';
--Class B-3 'BBB';
Sequoia Mortgage Trust, Trust 7, mortgage pass-through
certificates
--Class A, AR 'AAA';
--Class B-1 'AA';
--Class B-2 'A';
--Class B-3 'BBB';
--Class B-4 'BB';
--Class B-5 'B'.
Sequoia Mortgage Trust, Trust 8, mortgage pass-through
certificates
--Class A, AR 'AAA';
--Class B-1 'AA';
--Class B-2 'A';
--Class B-3 'BBB';
--Class B-4 'BB';
--Class B-5 'B'.
Sequoia Mortgage Trust, Trust 9, mortgage pass-through
certificates
--Class A, AR 'AAA';
--Class B-1 'AA';
--Class B-2 'A';
--Class B-3 'BBB';
--Class B-4 'BB';
--Class B-5 'B';
The affirmations reflect credit enhancement consistent with future
loss expectations.
SIMMONS: S&P Maintains Positive Watch over Planned Stock Offering
-----------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on Simmons
Co. on CreditWatch with positive implications, including its 'B+'
corporate credit and senior secured debt ratings, as well as its
'B-' subordinated and senior unsecured debt ratings.
At March 27, 2004, the Atlanta, Georgia-based mattress
manufacturer had $757.9 million in debt outstanding.
"The CreditWatch placement follows Simmons' recent announcement
that its unrated parent company, THL Bedding Holding Company,
expects to file a registration statement for an initial public
offering of common stock in June," said Standard & Poor's credit
analyst Martin Kounitz. The completion of the IPO is subject to
market conditions and approvals. The size of the potential
offering has not been disclosed. THL Bedding intends to use the
net proceeds to repay debt and for working capital purposes. In
connection with the offering, THL Bedding plans to change its name
to Simmons Company. Additionally, current stockholders of the
privately held company may sell a portion of the shares. THL
Bedding would not receive proceeds from sales by the stockholders.
Standard & Poor's will resolve the CreditWatch listing following
the completion of the IPO and a meeting with management to
evaluate the company's business and financial strategies.
SKYTERRA: Equity Deficit Balloons to $2.8 Mil. at March 31, 2004
----------------------------------------------------------------
SkyTerra Communications, Inc. (OTC: SKYT) reported a loss from
operations for the first quarter ended March 31, 2004 of $(1.7)
million or $(0.11) per share, which compares to $(1.9) million or
$(0.12) per share for the first quarter of 2003. The Company
reported net income of $36,000 or less than $0.01 per share for
the first quarter of 2004, which compares to a net loss of $(0.3)
million or $(0.02) per share for the first quarter of 2003.
The Company reported a net loss available to common shareholders
of $(2.4) million or $(0.16) per share for the first quarter of
2004, which compares to a net loss of $(2.7) million or $(0.17)
per share for the first quarter of 2003. The net loss available to
common shareholders includes non-cash charges for dividends and
accretion related to the Company's preferred securities of $(0.16)
per share and $(0.15) per share in the first quarter of 2004 and
2003, respectively.
At March 31, 2004, SkyTerra Communications Inc.'s balance sheet
shows a stockholders' deficit of $2,773,000 compared to a deficit
of $616,000 at March 31, 2003.
SMTC CORP: Balance Sheet Insolvency Tops $21 Million at April 4
---------------------------------------------------------------
SMTC Corporation (Nasdaq: SMTX, TSX: SMX), a global electronics
manufacturing services provider, reported first quarter revenue of
$69.4 million, compared with $81.5 million for the same quarter
last year and $76.9 million in the fourth quarter of 2003. Net
loss on a Generally Accepted Accounting Principles (US GAAP) basis
was $47,000, rounding to $0.00 per share, compared with net income
of $32,000, also rounding to $0.00 per share, for the same quarter
last year and a net loss of $2.6 million, or $0.09 per share, in
the fourth quarter of 2003.
Gross profit for the first quarter of 2004 was $6.8 million, or
9.9% of revenue, compared with $7.9 million, or 9.7% of revenue,
for the same period in the prior year and $5.8 million, or 7.5% of
revenue, for the fourth quarter of 2003. Total debt at April 4,
2004 was $70.5 million, compared with total debt of $80.9 million
as at March 30, 2003 and $70.1 million at the end of the fourth
quarter of 2003.
"Results for the first quarter were in line with our plan," stated
John Caldwell, Chair and Interim President and Chief Executive
Officer. "While we are not satisfied with our current financial
performance, we made meaningful progress in the quarter in
executing our revitalization plan."
Highlights of this plan include:
- Improved (gross) margins, which validates the positive
effect of completing operational restructuring and cost
containment initiatives
- Stabilized debt position
- Added new customers
- Appointed Senior Vice President, Business Development and
Vice President Global Sales
- Closed the private placement of Special Warrants
On March 4, 2004 the Company announced it closed into escrow a
private placement of 33,350,000 Special Warrants to qualified
investors at a price of CDN $1.20 per Special Warrant,
representing an aggregate amount of issue of CDN $40 million. The
Special Warrant issue is part of a refinancing including a new
three year $40.0 million credit facility and a transaction with
the Company's current lenders to repay $40.0 million of debt at
par, exchange $10.0 million debt for $10.0 million of the
Company's equity on the same terms of the private placement and
convert up to $27.5 million of debt into subordinated debt. The
effect of this refinancing will be to lower the Company's overall
indebtedness by approximately $37.0 million, extend the term of
the majority of the remaining indebtedness and will provide the
necessary liquidity to support our plan for growth. The Company is
seeking shareholder approval of the refinancing transactions at
the Annual Meeting of Shareholders scheduled for 11:00 a.m., May
20, 2004 at the King Edward Hotel in Toronto. Subject to receipt
of shareholder approval, the transactions are expected to close by
the end of May after receipt of customary regulatory and stock
exchange approvals and finalizing all definitive agreements.
At April 4, 2004, SMTC Corporation reported a stockholders'
deficit of $21,352,000 compared to a $21,305,000 deficit at
December 31, 2003.
About the Company
SMTC Corporation is a global provider of advanced electronic
manufacturing services to the technology industry. The Company's
electronics manufacturing, technology and design centers are
located in Appleton, Wisconsin, Boston, Massachusetts, San Jose,
California, Toronto, Canada, and Chihuahua, Mexico. SMTC offers
technology companies and electronics OEMs a full range of value-
added services including product design, procurement, prototyping,
printed circuit assembly, advanced cable and harness interconnect,
high precision enclosures, system integration and test,
comprehensive supply chain management, packaging, global
distribution and after-sales support. SMTC supports the needs of a
growing, diversified OEM customer base primarily within the
industrial networking, communications and computing markets. SMTC
is a public company incorporated in Delaware with its shares
traded on the Nasdaq National Market System under the symbol SMTX
and on The Toronto Stock Exchange under the symbol SMX. Visit
SMTC's web site -- http://www.smtc.com/-- for more information
about the Company.
SOLUTIA INC: Cuts a Deal to Reduce Letter of Credit Costs
---------------------------------------------------------
In connection with their restructuring efforts, the Solutia, Inc.
Debtors have reviewed their business operations and developed a
new business plan. A significant goal of the new business plan is
to reduce costs and thereby increase profitability. M. Natasha
Labovitz, Esq., at Gibson, Dunn & Crutcher, LLP, in New York,
tells the Court that the Debtors are in the process of reviewing
all areas of their operations to identify expenses that can be
reduced or avoided and are taking appropriate actions to realize
savings.
As part of this exercise, the Debtors have reviewed their various
financial instruments and letters of credit and have identified
as one potential source of savings the replacement of an
expensive back-to-back letter of credit structure, which
ultimately serves to secure financial obligations to Bank of
America, N.A. Solutia, Inc., proposes to replace this structure
with a single letter of credit, thereby significantly reducing
the associated fees and improving liquidity.
Astaris, LLC, a 50/50 joint venture between Solutia and FMC
Corporation, manufactures and sells phosphorus chemicals,
phosphoric acid and phosphate salts, which are used in foods,
cleaners, water treatment and pharmaceuticals. Astaris had sales
of approximately $500,000,000 in 2002 and employs about 550
people at around 16 manufacturing facilities in the United States
and Brazil.
In connection with the formation of Astaris, Solutia and FMC
contractually agreed with Astaris' lenders to provide Astaris
with funding in the event the joint venture failed to meet
certain financial benchmarks in addition to guaranteeing Astaris'
direct financial obligations to its lenders. Due to Astaris'
earnings shortfalls versus original expectations, Solutia and FMC
were each required to make Keepwell Payments of $47,000,000
during the nine-month period ended September 30, 2003. The
maximum remaining required Keepwell Payments under the credit
facility were projected to be approximately $134,000,000, to be
shared equally between Solutia and FMC.
Ms. Labovitz relates that Solutia's Keepwell Payment obligations
were secured by liens in certain of its assets. In October 2003,
Astaris amended its credit agreement with its lenders to replace
those liens with a $67,000,000 letter of credit issued by Wells
Fargo Bank, N.A., to Bank of America. Bank of America acts as an
administrative agent under a Guaranty Agreement dated as of
September 14, 2000 among Solutia, Astaris and Bank of America in
connection with the Astaris credit facility, on behalf of
Solutia. The Wells Fargo Letter of Credit will be reduced dollar
for dollar as future Keepwell Payments are made by Solutia. The
effect of the October 2003 restructuring was to cap Solutia's
remaining secured liability to Bank of America in connection with
Astaris at about $67,000,000 and to provide security for that
liability in the form of the Wells Fargo Letter of Credit. The
Wells Fargo Letter of Credit was originally issued for
$66,637,500 as Letter of Credit No. 00499268. As a result of two
draws against the Wells Fargo Letter of Credit on account of
unpaid Keepwell Payments, $35,437,500 remains outstanding.
In connection with the Court-approved secured DIP Financing
Facility, Citibank, N.A., issued a postpetition letter of credit
on behalf of Solutia to Wells Fargo Foothill, Inc., to secure
Solutia's obligations to Wells Fargo under the Wells Fargo Letter
of Credit and one other outstanding letter of credit. This was
done in lieu of cash collateralizing or consensually replacing
the existing letters of credit in connection with the payoff of
the Debtors' first DIP lenders, because a consensual collateral
replacement or termination could not be accomplished in the time
necessary to put the current DIP facility into place. To secure
both the undrawn face amount of the letters of credit and the
related fees and interest, Citibank issued the Citibank Letter of
Credit No. 61609001, for $56,941,088, which represents
approximately 105% of the total letter of credit obligations of
Wells Fargo remaining at the time that the Citibank Letter of
Credit was issued plus one year's fee. Since the Citibank Letter
of Credit was issued, Wells Fargo has drawn against it once as a
result of one postpetition draw by Bank of America on the Wells
Fargo Letter of Credit. Thus, $41,091,088 remains outstanding
under the Citibank Letter of Credit.
Ms. Labovitz points out that a single letter of credit issued by
Citibank directly to Bank of America on Solutia's behalf would
accomplish the same result as the current back-to-back letter of
credit structure, but would result in a much lower cost to
Solutia's estate. If a Replacement Letter of Credit is put into
place, Solutia's obligations to Bank of America will be secured
by a letter of credit that is issued pursuant to the DIP Loan
Agreement, which is the ultimate effect of the current structure,
but without the intermediate presence of the Wells Fargo Letter
of Credit. The Wells Fargo Letter of Credit carries an annual
fee of 0.65% of the total outstanding amount, which, based on the
current outstanding balance of $35,437,500, is $79,000 per year.
In addition, Solutia must pay an annual fee of 2.25% of the
differential between the Wells Fargo Letter of Credit and the
Citibank Letter of Credit, which, based on the current
differential of $5,653,588, is $127,205 per year. Thus, if the
Replacement Letter of Credit is issued to replace the current
back-to-back structure, Solutia will realize significant savings
in connection with annual fees alone.
By this motion, Solutia seeks the Court's authority to use estate
property outside of the ordinary course of business and instruct
Citibank to issue the Replacement Letter of Credit to Bank of
America on its behalf.
Ms. Labovitz contends that if the Replacement Letter of Credit is
put into place, Solutia will realize significant savings in
connection with likely draws by Bank of America. Because Solutia
is prohibited as a result of its Chapter 11 filing from paying
the Keepwell Payments, Bank of America is likely to make regular
draws against its Wells Fargo Letter of Credit. The next draw is
likely to occur on June 7, 2004. Under the Wells Fargo Letter of
Credit, Solutia is charged with 0.25% on the amount of the draw.
The draw on June 7, 2004 will be approximately $25,000,000,
resulting in a fee of $62,500. Also, Wells Fargo will require
Solutia to make the upcoming annual payment, a payment of 6% on
the remaining balance of the Wells Fargo Letter of Credit, on
September 30, 2004. After the June 7th draw, the remaining
balance would be about $10,000,000, resulting in approximately
$600,000 in fees. All of these fees would be eliminated if the
Replacement Letter of Credit were issued to replace the current
Wells Fargo and Citibank Letters of Credit, which would result in
a total likely savings to Solutia's estate of more than $800,000.
In addition, the Replacement Letter of Credit need only be in the
amount of the outstanding Wells Fargo Letter of Credit and need
not include the premium represented by the Citibank Letter of
Credit. Solutia's estate will benefit from increased liquidity
for the approximately $5,600,000 differential between the old
Citibank Letter of Credit and the Replacement Letter of Credit.
To realize the cost savings associated with having a single
letter of credit, Solutia proposes to exchange the Replacement
Letter of Credit for the Wells Fargo and Citibank Letters of
Credit. Mechanically, Solutia proposes that Citibank would issue
the Replacement Letter of Credit to Bank of America for
$35,437,500. Contemporaneously, Bank of America would surrender
the Wells Fargo Letter of Credit to Wells Fargo with instructions
to cancel it. Once Wells Fargo was released from its letter of
credit obligations under the Wells Fargo Letter of Credit, Wells
Fargo would surrender the Citibank Letter of Credit to Citibank
with instructions to cancel it.
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: John R. Steele Steps Down From Board
---------------------------------------------------
John R. Steele resigned from the Board of Directors of Spiegel,
Inc. and from his position with the company as Senior Vice
President, Finance and Treasurer, effective as of March 26, 2004.
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)
TEEKAY SHIPPING: S&P Affirms BB+ Corp Rating with Negative Outlook
------------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Teekay
Shipping Corp., including the 'BB+' corporate credit rating, and
removed all ratings from CreditWatch, where they were placed on
March 18, 2004. The rating outlook is negative. At the same time,
Standard & Poor's assigned a 'BBB-' rating to Teekay's $180
million senior secured bank loan, with a recovery rating of '1',
indicating a high expectation of full recovery of principal in a
default scenario.
"The negative outlook is based on Teekay's increasingly aggressive
growth strategy, which, with the current high level of debt, could
delay anticipated improvements in credit measures," said Standard
& Poor's credit analyst Kenneth L. Farer. Teekay completed its
$810 million acquisition of Naviera F. Tapias S.A. on April 30,
2004. While the acquisition provides entrance to the attractive
liquefied natural gas (LNG) market, the company's total debt
burden and leverage have increased significantly. Pro forma for
the transaction, lease-adjusted debt is $3.6 billion, with debt to
capital of 65% at March 31, 2004.
Ratings on Teekay Shipping Corp. reflect the company's favorable
business position as the leading midsize Aframax crude-oil tanker
operator in the Indo-Pacific Basin and its strong market share in
the Atlantic-Aframax and North Sea shuttle tanker markets. Risks
include participation in the competitive, volatile, highly
fragmented, and fixed capital-intensive bulk ocean shipping
industry and an increasingly active and aggressive acquisition and
new vessel construction program. Bermuda-based Teekay Shipping
transports crude oil and petroleum products throughout the world.
In addition, the company provides ship management services to
third parties. Pro forma for the Tapias acquisition, the company
has approximately $3.6 billion in lease-adjusted debt. Several of
the company's directors supervise Resolute Investments Inc., which
controls about 40% of the company's common stock.
At March 31, 2004, Teekay's fleet consisted of 137 vessels, with a
carrying capacity of approximately 14 million deadweight tons. The
company's vessel replacement and growth program continues, with 15
ships under construction. The company's Aframax and shuttle tanker
fleets, comprised of 61 and 42 vessels, respectively, are
significantly larger than those of the next comparable
competitors. Teekay's investments during the second half of 2003
(the $65 million purchase of 50% of Skaugen PetroTrans and
acquisition of 2.9 million shares of A/S Dampskibsselskabet
TORM) expanded the company's reach to a broader portion of the
petroleum distribution channel. The Tapias acquisition further
expands the company's petroleum distribution network and provides
an entry into the LNG market. The transaction increases Teekay's
fleet to 145 vessels. The LNG carriers have long-term employment
contracts with high-quality charterers, which will provide stable
cash flow during the life of the contract. These contracts provide
a predictable revenue stream, which is viewed as positive from a
rating standpoint.
The current favorable tanker rate environment should allow Teekay
to maintain a credit profile consistent with the current rating.
However, ratings could be lowered if the company's aggressive
growth strategy delays the anticipated improvement in credit
measures.
TELTRONICS INC: March 31 Equity Deficit Stands at $6.3 Million
--------------------------------------------------------------
Teltronics, Inc. (OTC Bulletin Board: TELT) announced its
financial results for the three months ended March 31, 2004.
Sales for the three months ended March 31, 2004 were $11.3 million
as compared to $11.6 million reported for the same period in 2003.
Gross profit margin for the three months ended March 31, 2004
increased to 44.8% from 40.6% reported for the same period in
2003. Operating expenses for the three months ended March 31, 2004
were $4.7 million as compared to $5.1 million reported for the
same period in 2003.
The net loss for the three months ended March 31, 2004 was $67,000
as compared to a net loss of $794,000 reported for the same period
in 2003. The net loss available to common shareholders for the
three months ended March 31, 2004 was $220,000 as compared to
$945,000 reported for the same period in 2003. Our diluted net
loss per share for the three months ended March 31, 2004 was $0.03
as compared to a diluted net loss per share of $0.16 reported for
the same period in 2003.
"We are pleased that our net loss decreased over $700,000 as
compared to the same period in 2003," said Ewen Cameron,
Teltronics' President and Chief Executive Officer. "With our
continuous, cost-saving efforts and more focused strategic
direction, we witnessed a significant operating expense reduction
of approximately $430,000 as compared to the first quarter of
2003. We are also positive about the initial success of our new
products and more optimistic about where the telecom industry is
going in 2004," concluded Cameron.
At March 31, 2004, Teltronics Inc.'s balance sheet shows a
shareholders' deficit of $6,264,638 compared to a deficit of
$6,124,389 at December 31, 2003.
About Teltronics Inc.
Teltronics, Inc. is dedicated to excellence in the design,
development, and assembly of electronics equipment and software to
enhance the performance of telecommunications networks. The
Company manufactures telephone switching systems and software for
small-to-large size businesses, government, and 911 public safety
communications centers. Teltronics provides remote maintenance
hardware and software solutions to help large organizations and
regional telephone companies effectively monitor and maintain
their telecommunications systems. The Company also serves as an
electronic contract-manufacturing partner to customers in the U.S.
and overseas. Further information regarding Teltronics can be
found at their web site, http://www.teltronics.com/
TENNECO AUTOMOTIVE: Fitch Places Debt Ratings on Watch Positive
---------------------------------------------------------------
Fitch Ratings has placed the 'B+' senior secured bank, 'B' senior
secured notes and 'B-' senior subordinated notes debt ratings of
Tenneco Automotive Inc. on Rating Watch Positive based on the
company's plans to issue an estimated $150 million of equity and
use the proceeds to de-lever the balance sheet.
In conjunction with the S3 filing to issue equity, Tenneco also
has a tender offer outstanding for the $500 million 11 5/8% senior
subordinated notes due 2009. The company plans to pay down a pro-
rata portion of the senior subordinated debt with the equity
proceeds. The refinancing of the remaining balance of the 11 5/8%
senior subordinated notes is contingent on the outlook for the
debt capital markets.
Tenneco's balance sheet profile will improve with this pending
transaction. The equity issuance and de-leveraging of the capital
structure could result in a notch upgrade for all classes of debt.
And, depending on the terms and conditions of the refinancing
transaction, additional positive rating actions could be taken.
Operationally, Tenneco has shown solid performance with stability
in sales and profitability for the full year 2003 and into the
first quarter 2004. Despite flat to slightly weak build
environment in North America and in Europe during the first
quarter 2004, Tenneco has shown good gains in sales. Adjusted for
foreign currency translation and pass-through sales, Tenneco's
first quarter 2004 sales increased 6% to $786 million. Much of
this was due to a strong increase in European OE operation.
Overall EBIT increased to $33 million from $31 million.
Recent steel price spikes have not affected Tenneco's
profitability despite the company's large purchases of steel for
its manufacturing operations. Tenneco currently has in place
contracts which shield it from price volatility through 2005.
Tenneco also benefits from using its own scrap steel as a natural
buffer against the volatile steel markets of late.
European EBIT continued to lag in the quarter reflecting the
secular decline in aftermarket exhaust products and increases in
SG&E expenses. For the balance of the year, however, Fitch expects
the European EBIT contribution to improve on the strength of the
gaining OE operation.
For 2003, sales increased nominally to $3.8 billion from $3.5
billion. Adjusted for foreign currency translation and netting out
pass-through sales, however, sales were essentially flat. Tenneco
was able to overcome a 3% decline in North American light vehicle
build rate and also a softer European build environment in 2003
through its favorable platform exposure and program additions.
Greater light truck participation and increasing business with the
foreign transplant OEMs have helped North American original
equipment operations.
Strong growth in Tenneco's China operations (mostly through
majority owned JVs) also helped in consolidated sales stability
despite after markets sales which continued their decline in 2003.
EBIT performance in 2003 showed nominal gains to $176 million from
$169 million. Adjusted for $11 million gain on sale in 2002 EBIT,
the comparison would look better for 2003. The gains stem from
efficiencies derived from various cost saving activities,
including Project Genesis. The European operation which had been a
source of concern because of its lagging profitability, showed
stabilization. EBIT contributions from rest of the world increased
markedly.
Tenneco Automotive Inc., headquartered in Lake Forest, Illinois,
is a leading global producer of ride control and emissions/exhaust
components, modules and systems for both the OEM and the
aftermarket. About 75% of its revenues come from the OEM market
and 25% is derived from the aftermarket. Geographically, 50% of
revenue is from North America, 38% in Europe, 12% from rest of the
world.
TOWER AUTOMOTIVE: S&P Rates 5.75% Convertible Senior Debt at B-
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B-' rating to
Novi, Michigan-based Tower Automotive Inc.'s $110 million 5.75%
convertible senior debentures maturing in May 2024, to be issued
in accordance with SEC Rule 144A with registration rights.
Proceeds from the offering, together with a portion of a new
senior secured bank credit facility, will repay outstanding
indebtedness under Tower's existing bank credit facility and
redeem Tower's $200 million 5% convertible subordinated notes due
Aug. 1, 2004.
"The transactions will improve Tower's financial flexibility by
extending debt maturities and increasing available liquidity,"
said Standard & Poor's credit analyst Daniel DiSenso. "Ratings
could be lowered, though, should there be a delay in the timing of
benefits to be derived from actions to turn the business around,
resulting in the deterioration of credit statistics."
At the same time, Standard & Poor's affirmed its 'B+' corporate
credit rating on Tower, a leading supplier of vehicle structural
components and assemblies to the cyclical and intensely
competitive automotive supply industry. The outlook is negative.
At March 31, 2004, total outstanding debt, excluding $259 million
of inter-company debt owed to Tower Automotive Capital Trust in
connection with the issuance of trust convertible preferred
securities, stood at about $1.1 billion.
Tower's new management team is taking aggressive steps to reduce
costs and improve efficiencies including rationalizing North
American operations, creating a global purchasing/manufacturing
function, and strengthening its program launch and management
teams. Management is also performing a strategic assessment of the
company, including an evaluation of all assets and investments.
USG CORPORATION: Wants to Continue Retention & Severance Plans
--------------------------------------------------------------
The USG Corporation Debtors seek the Court's authority to continue
their current Key Employee Retention and Severance Programs.
The Current Programs and their Record of Success
Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in
Wilmington, Delaware, relates that soon after the Petition Date,
the Debtors sought and obtained the Court's approval of their key
employee retention and severance programs.
According to Mr. Heath, the Debtors developed the Current
Programs with the assistance of independent, outside benefits
experts. The main purpose of the Current Programs was twofold.
First, as in any Chapter 11 case, the Debtors' Chapter 11 filing
created concern among the Debtors' key employees as to their
future. As a result, the Debtors proposed a retention and
severance program that would motivate key employees to remain
with the Debtors notwithstanding their concerns. The retention
portion of the Current Programs essentially provided for periodic
cash payments to key employees at various times during the term
of the program as long as they remained with the Debtors through
that period. The severance portion of the Current Programs
essentially provided for a fixed, cash payment to key employees
in the event that they were terminated without cause during the
course of the plan.
Furthermore, the Debtors' key employees, like key employees in
most large corporations in the United States, historically had
received three forms of compensation -- base salary, yearly
bonuses and stock-based compensation. As a result of the
Debtors' Chapter 11 filing, most of the stock-based compensation
received by the Debtors' employees had become worthless. More
importantly, the Debtors could no longer compensate their key
employees with stock-based compensation given the Debtors'
bankruptcy. The retention payments under the Current Programs
helped to ensure that the total compensation paid to the Debtors'
key employees remained competitive with other comparable
companies. Absent these payments, the compensation paid to the
Debtors' key employees would have been significantly below
market. If the Debtors had been unable to offer competitive
compensation, especially given the uncertainties of the Chapter
11 filing, they would have run a material and unnecessary risk of
losing key employees to the detriment of the Debtors' operations
and their estates.
Mr. Heath notes that the Debtors developed the Current Programs
not only based on careful consideration, with expert assistance,
of competitive and market conditions, but also after extensive
discussions with their major creditor constituencies. The
Debtors commenced discussions regarding the Current Programs with
the Committees shortly after they were appointed in early July
2001 and provided a variety of information regarding the bases
for the proposed programs soon after. The Current Programs
incorporated many of the Committees' and their professionals'
suggestions and proposed changes to the programs.
Mr. Heath informs the Court that the Current Programs have been
very successful. The Debtors have lost few key employees since
the Petition Date. In addition, the Debtors' financial
performance has been excellent in the face of the Chapter 11
filing and the general downturn in the United States economy
since the Petition Date. Recently, the Debtors have been posting
record sales and strong profits and have been able to accumulate
to date almost $1 billion in cash, which will be available for
distribution under a reorganization plan.
Mr. Heath maintains that these financial results did not occur by
chance. Instead, they are the product of a hardworking and
talented management team. Important publications like Industry
Week have cited USG as one of the 100 best managed companies in
the world, and USG's Sheetrock(R) product has been cited by
Forbes Magazine as one of the most important inventions in the
20th century in the building products industry. As a result, USG
has become, and remains, the market leader and most dominant
player in the United States in the manufacture of wallboard,
joint compound, cement board and ceiling grid, and is also the
market leader in the distribution of building products generally.
Given this position in the marketplace, its managers and other
employees are targets by USG's competitors, who seek to gain
access to USG's employee know-how and experience, as well as
USG's strategic and operating plans. The Current Programs have
been instrumental in helping to ensure that USG's competitors do
not gain information or resources to the detriment of the
estates.
The Current Programs, however, are set to expire in the near
future. The retention portion of the Current Programs expires on
June 30, 2004, and the severance portion of the Current Programs
expires on December 31, 2004. To help ensure the continuation of
the Debtors' excellent financial performance and low employee
turnover, the Debtors need to continue, subject to certain
modifications:
(a) the retention portion of the Current Programs for up to an
additional 18-month period through the earlier of the
effective date of a plan of reorganization or December 31,
2005; and
(b) the severance portion of the Current Programs through the
effective date of a plan of reorganization.
Notwithstanding the Debtors' excellent financial performance,
they are not seeking benefits higher than those in the Current
Programs.
Since the Current Programs were originally designed approximately
three years ago, the Debtors have retained Hewitt Associates to
advise them as to whether the Current Programs continue to be
properly structured to motivate key employees to remain with the
Debtors and to provide those employees with market compensation.
Hewitt has completed its analysis of these issues, including an
extensive analysis of the Debtors' existing and historical
compensation structures and an extensive survey of compensation
practices in the Debtors' industry. As a result of these
efforts, Hewitt has advised the Debtors that the Current
Programs will continue to implement effectively the goals that
the Debtors are seeking to achieve in connection with the Current
Programs. Hewitt has also advised the Debtors that the Current
Programs provide the Debtors' executives with a total
compensation package that is in the middle of the range of
compensation offered by comparable companies. Without the
Current Programs, however, the compensation paid to the Debtors'
key employees would be significantly below market.
Hewitt's ultimate findings were originally presented to the
Compensation Committee of the Debtors' Board of Directors in
March 2004. Based on Hewitt's recommendation, the Compensation
Committee agreed to consider the proposed continuation of the
Current Programs. The Debtors then contacted each of the
Committees and the Futures Representative in April 2004 and
indicated that they would be seeking a continuation of the
Current Programs at the June hearing. In that respect, the
Debtors provided a variety of materials to the Committees
and the Futures Representative regarding, among other things, the
historical results and costs of the Current Programs, Hewitt's
analysis of the Current Programs and market compensation for
companies comparable to the Debtors. The Debtors' Board of
Directors ultimately approved the Current Programs in May 2004,
subject to any negotiations that the Debtors' management
might have with the Committees and the Futures Representative.
The Current Programs and the Proposed Modifications
The Current Programs include two separate components:
(a) a USG Corporation Key Employee Retention Plan; and
(b) a USG Corporation Management Severance Plan.
In connection with both the Retention and the Severance
Plans, as in the past, the Debtors would reserve the right to
include or exclude participants from the Current Programs to the
extent that those employees become eligible for the programs
through promotion or hire, or become ineligible through demotion
or termination.
Retention Plan
The Retention Plan entitles eligible employees to a semi-annual
cash payment equal to a specified percentage of their annual base
salary as of the first day of the six-month period. The KERP
Percentages range from 15% to 85% of annual base salary for each
semi-annual payment depending on the category in which an
employee is included.
To be eligible for the retention payment, an employee must be an
employee in good standing on the last day of the semi-annual
period. In the event that an eligible participant in the
Retention Plan dies, becomes disabled, retires or is discharged
without cause, that participant may be recommended for a pro
rated award for that semi-annual period based on the number of
full months worked. A participant whose employment is terminated
for any reason other death, disability, retirement or without
cause, including voluntary resignation, will not be eligible for
a pro rated award for the semi-annual period in which he or she
terminates employment. Since the current Retention Plan expires
on June 30, 2004, the Debtors are seeking to continue the
Retention Plan through the earlier of:
* December 31, 2005; and
* the effective date of a plan of reorganization for the
Debtors.
The first six-month payment under the continued Retention Plan
would occur on December 31, 2004.
The Debtors estimate that the Retention Plan will continue to
cover approximately 225 employees during its term with an annual
cost of approximately $19 to $20 million, which is approximately
0.5% of USG's annual consolidated revenues of approximately
$3.8 billion. The Debtors submit that the cost of the Retention
Plan is very modest considering the Debtors' status as an
industry leader, its strong operational performance and the
competitive nature of the Debtors' industry.
Severance Plan
Currently, the Severance Plan establishes severance benefits for
certain senior managers and other employees in the event of
involuntary termination without cause on or prior to December 31,
2004. The Debtors seek to extend the term of the Severance Plan
through the effective date of a plan of reorganization for the
Debtors for approximately 44 senior managers and approximately
296 managers.
The Severance Plan consists of three components:
(a) the USG Corporation Management Severance Plan;
(b) the USG Corporation Executive Severance Plan; and
(c) the USG Senior Executive Severance Plan.
Management Severance Plan
The Management Severance Plan establishes severance benefits for
non-senior management employees. Currently, the Debtors employ
296 Managers. The lump sum payment under the continued
Management Severance Plan would equal the sum of these periods,
not to exceed an amount equal to 24 months of base salary:
(a) 1-1/2 weeks of base salary for each full year of
continuous service with USG or any of its subsidiaries at
the rate in effect immediately prior to termination,
subject to a minimum of two months base salary;
(b) two weeks base salary, at the rate in effect immediately
prior to the termination date, for each full $15,000 of
annualized base salary;
(c) a lump sum cash payment equal to the cost of continuation
of the Manager's medical, vision and dental benefits for a
period equal to the total number of weeks provided; and
(d) career search assistance paid by USG.
Executive Severance Plan
The Executive Severance Plan establishes severance benefits for
those employees who either:
(i) on or after May 16, 2001 and before the Petition Date,
had an in-force, one-year employment agreement with USG
or a subsidiary; or
(ii) were hired or have been promoted since the Petition Date
to positions comparable to the foregoing employees.
Currently, the Debtors employ 28 Executives. These Executives
essentially are entitled to the amount of benefits that would
have otherwise been provided under the employment agreements
previously offered to Executives or under the Executive Severance
Plan, but not both.
Under the Executive Severance Plan, in the event an Executive
suffers an "employment loss," the Executive is entitled to elect
to receive one of these options:
Option 1: Base salary plus participation in most benefits in
which the Executive would normally be entitled, in
each case for a period of 12 months.
Option 2: The benefits provided under the Management Severance
Plan.
Senior Executive Severance Plan
The Senior Executive Severance Plan establishes severance
benefits for employees who either:
(i) on or after May 16, 2001 and before the Petition Date,
had an in-force, two-year employment agreement with USG;
or
(ii) were hired or have been promoted since the Petition Date
to positions comparable to the foregoing employees.
Currently, the Debtors employ 16 Senior Executives. These Senior
Executives essentially are entitled to the amount of benefits
that would have otherwise been provided under the employment
agreements previously offered to Senior Executives or under the
Senior Executive Severance Plan, but not both.
Under the Senior Executive Severance Plan, in the event a Senior
Executive suffers an "employment loss," the Senior Executive is
entitled to elect to receive one of these options:
Option 1: Base salary and target bonus, plus participation in
most benefits in which the Senior Executive would
normally be entitled, in each case for a period of
two years. The Senior Executive would also be
entitled to receive an amount equal to all legal
fees and expenses incurred by the Senior Executive
as result of any termination.
Option 2: The benefits provided under the Management Severance
Plan.
Debtors Can't Afford to Lose Key Employees
As the Debtors' industry is extremely competitive, and major
competitors aggressively recruit qualified candidates, the
Debtors believe that, without an adequate retention and severance
program in place, the Debtors' competitors and other prospective
employers in other industries will proactively target their most
qualified employees and offer them new career opportunities even
if those employees are not themselves proactively looking for
positions.
Neither the Debtors nor the Debtors' stakeholders can afford to
lose the key employees. Mr. Heath points out that the resulting
loss of the key employees' knowledge, experience and business
relationships would cause immediate damage to the Debtors and
their estates. Then, due to the uncertainty created by the
Debtors' Chapter 11 cases, recruiting replacements of the caliber
of employees who leave may be exceptionally difficult.
Furthermore, hiring new employees likely would require the
Debtors to pay significant signing bonuses, relocation expenses
and executive search fees. In addition, the process of
identifying replacement employees could be time-consuming,
resulting in key positions remaining unfilled for a significant
period of time. Operations also will likely suffer because the
departure of key employees could erode customer confidence in the
Debtors. The loss of key employees is likely to lead to
attrition as a result of either:
(a) employees following their colleagues to the same new
employer;
(b) the instability and impairment of morale engendered by the
departure of critical employees; or
(c) increased demands on other key employees while positions
remained unfilled.
Headquartered in Chicago, Illinois, USG Corporation --
http://www.usg.com/-- through its subsidiaries, is a leading
manufacturer and distributor of building materials producing a
wide range of products for use in new residential, new
nonresidential and repair and remodel construction, as well as
products used in certain industrial processes. The Company filed
for chapter 11 protection on June 25, 2001 (Bankr. Del. Case Nos.
01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at
Jones, Day, Reavis & Pogue represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $3,252,000,000 in assets and
$2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 65;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
VALOR TELECOMMS: S&P Places B+ Corporate Rating on Watch Negative
-----------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B+' corporate
credit rating for Irving, Texas-based Valor Telecommunications LLC
on CreditWatch with negative implications. The ratings for
subsidiary Valor Telecommunications Enterprises LLC are not placed
on CreditWatch because all of its rated debt will be retired
should Valor Telecom complete its proposed recapitalization.
The CreditWatch placement follows Valor Telecom's recent S-1
filing to register income deposit securities, which comprise class
A common stock and senior subordinated notes due in 2014. The
company is also expected to put in place a new senior secured
credit facility, issue class B common stock, and issue additional
senior subordinated notes that are separate from the IDSs.
Proceeds from all of the above are expected to refinance
essentially all existing bank debt and privately held subordinated
debt.
"Standard & Poor's believes that the IDS structure indicates a
more aggressive financial policy for Valor Telecom," explained
Standard & Poor's credit analyst Rosemarie Kalinowski. "Although
the amount of the consolidated company's debt outstanding is
expected to be relatively unchanged after the IDS offering, Valor
Telecom's financial flexibility could be meaningfully reduced by
the anticipated high dividend payout rate. Even though the common
dividend may be reduced or suspended at the company's discretion,
there is potential pressure to maintain the initially established
level since the IDSs are marketed as providing a specific yield.
As a result, the IDS structure could limit Valor's ability to
weather unforeseen regulatory, competitive, or acquisition-related
challenges in the longer term."
The CreditWatch listing will be resolved upon review of the
details of the IDSs, the new bank credit facility, and Valor
Telecom's new business plan. Factors that Standard & Poor's will
consider in the CreditWatch resolution include free cash flow
prospects after adjusting for the dividend and the terms of the
new bank agreement.
Valor Telecom is the incumbent telecommunications service provider
to more than 550,000 access lines in rural Texas, New Mexico,
Oklahoma, and Arkansas. Services offered include local voice, long
distance, and digital subscriber line. Markets served are
extremely rural, with an average of about 11 access lines per
square mile, and have median incomes below the national average.
The company launched operations in June 2000 by acquiring about
560,000 access lines from GTE Corp. in the states of Oklahoma,
Texas, and New Mexico for about $1.7 billion.
VITAL BASICS: Gets Court OK to Hire Moon Moss as Special Counsel
----------------------------------------------------------------
Vital Basics, Inc., sought and obtained approval from the U.S.
Bankruptcy Court for the District of Maine to employ Moon, Moss,
McGill & Shapiro, P.A. as its special corporate counsel.
Prior to the filing of the Chapter 11 Cases, Jonathan Shapiro,
Esq., at Moon Moss served as general corporate counsel to the
Debtor. In that capacity, Mr. Shapiro and the firm have acquired
considerable knowledge and expertise concerning the Debtor's
business and legal affairs, including knowledge and expertise
concerning the Debtor's corporate structure, its executory
contracts, its regulatory and compliance matters, its employment
and benefit matters, its contracts with significant customers, and
other similar matters typically within the scope of services
rendered by corporate counsel.
Moon Moss will continue to provide its services to the Debtor in
its Chapter 11 case as special counsel, because doing so will
enable the Debtor to take advantage of the extensive knowledge and
experience of the firm in various matters.
The legal services that Moon Moss will render will include advice
and services, as requested by Marcus, Clegg & Mistretta, P.A., the
Debtor's bankruptcy counsel, and concerning the matters in which
the firm has particular knowledge and expertise.
The rates for Moon Moss' attorneys and paraprofessional are:
Professionals Billing Rate
------------- ------------
paraprofessional $80 per hour
junior attorneys $160 per hour
senior attorneys $350 per hour
Headquartered in Portland, Maine, Vital Basics, Inc.
-- http://www.vitalbasics.com/-- is engaged in the business of
Sales, through direct consumer marketing and at retail, of
nutraceutical and related products throughout the United States
and Canada. The Company filed for chapter 11 protection along with
its debtor-affiliate, Vital Basics Media, Inc., on May 10, 2004
(Bankr. D. Maine Case No. 04-20734). George J. Marcus, Esq., at
Marcus, Clegg & Mistretta, P.A., represents the Debtor in its
restructuring efforts. When the Debtors filed for protection from
their creditors, Vital Basics, Inc., listed $6,291,356 in total
assets and $16,314,589 in total debts; Vital Basics Media, Inc.,
listed total assts of $378,308 and total debts of $179,242.
WELCOME BREAK: Fitch Lowers Ratings & Removes Negative Watch
------------------------------------------------------------
Fitch Ratings, the international rating agency, downgraded Welcome
Break Finance PLC's notes and removed them from Rating Watch
Negative as follows:
--GBP72 million Class A1 secured floating-rate notes due
2007 to 'B' from 'BB';
--GBP110m Class A2 secured floating-rate notes due 2011
to 'B' from 'BB';
--GBP127m Class A3 secured notes due 2015 to 'B' from
'BB'; and
--GBP67m Class B secured floating-rate notes due 2017 to
'C' from 'CC'.
The rating of the revolving facility has been withdrawn following
repayment in full.
Fitch no longer expects timely payments to be made on the Class A
notes; however, based on the limited information that has been
made available to the agency, Fitch believes that these notes are
likely to ultimately receive 100% recovery of principal and
accrued interest. This is reflected in the 'B' rating. Should this
view change as more information is made available, further
downgrades are possible. Fitch expects the Class B notes to
recover substantially less than 100% of principal and accrued
interest, and the 'C' rating signals the agency's view that a
default on these notes is imminent. Should interest not be paid on
these notes on 1 June, Fitch will downgrade these notes to 'D'.
Welcome Break Finance Plc, the issuer, and Welcome Break Group
Limited, the borrower, have not provided the agency with more
information than what is already available in the public domain.
Fitch understands an administrative receiver is likely to be
appointed over the issuer. The appointment will either be
triggered by the security trustee enforcing the security
unilaterally, or will be to prevent an administration, in the
event of a petition being made by the directors of the issuer to
appoint an administrator. An administrative receiver would seek to
obtain best value for the issuer's assets, being the intercompany
receivable owed by the borrower. Unless the borrower defaults,
there would not be any recourse to the operating company. The
enforcement of the security will enable the Class A noteholders to
direct the security trustee to accelerate, thereby preventing
payments to junior noteholders. One consequence of such action is
that the Class A notes will distribute any principal actually
received pari passu among them, rather than according to the
schedule. It is not clear on what basis unilateral action by the
security trustee could be taken, since, from the analysis of the
transactions' original documents undertaken by Fitch, no obvious
issuer event of default has yet occurred.
Investcorp S.A., the private equity firm behind the transaction,
had indicated that it would support the borrower, if the issuer
enters administration or administrative receivership. It is
therefore possible that the borrower could be supported, enabling
it to meet its obligations to the issuer, while further
refinancing negotiations are undertaken between the borrower and
the administrative receiver appointed over the issuer. The
borrower's (likely fully-drawn) GBP10m overdraft facility falls
due for renewal on 1 June 2004. Non-renewal may worsen the
borrower's cash flow position, requiring a more significant
immediate cash injection from Investcorp to support the borrower.
Should enforcement against the issuer occur, any refinancing
proposal would require the acceptance of only a simple majority of
the Class A noteholders, rather than the 75% of each Class
(including the Class B notes) required for previous proposals.
This may mean that a refinancing is more likely to be accepted,
especially one that enables Class A noteholders to achieve 100%
recovery. However, unless full value is obtained for the assets of
the issuer, there is a risk of litigation from junior noteholders
causing a delay to recoveries and potentially affecting the value
of such recoveries.
WISER OIL: Weak Liquidity Prompts S&P's Neg. Outlook on B- Rating
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered the corporate credit
ratings on independent oil and gas exploration and production
company Wiser Oil Co. to 'B-' from 'B' following a review of
recent financial and business results. The outlook remains
negative.
Dallas, Texas-based Wiser has about $160 million of debt as of
March 31, 2004.
"The negative rating action reflects the failure by Wiser to stem
the erosion of its reserves (down 10% over the past three years),
adequately improve its cost structure ($5.40 as of Dec. 31, 2003),
and improve liquidity despite record hydrocarbon prices," noted
Standard & Poor's credit analyst Paul B. Harvey.
Wiser is a small exploration and production company (year-end 2003
proved reserves of 191 billion cubic feet equivalent, 51% natural
gas; 85% proved developed), with producing properties primarily in
the Permian Basin and Alberta, Canada, as well as a growing
interest in the Gulf of Mexico. Although the company has limited
opportunity for meaningful internal growth, Wiser has commenced
drilling joint ventures in the Gulf of Mexico with Remington Oil &
Gas Corp. and Magnum Hunter Resources Inc., which have added
significant exposure to exploration activities.
The negative outlook reflects the continued weak liquidity brought
on by an aggressive capital-spending program and a continued high
cost structure that has limited cash flow for debt repayment. If
hydrocarbon prices retreat to historical averages, liquidity would
likely become impaired and ratings would be negatively affected.
WEIRTON STEEL: International Steel Completes $253MM Asset Purchase
------------------------------------------------------------------
International Steel Group Inc. (NYSE: ISG) announced that its
subsidiary, ISG Weirton Inc., has completed the acquisition of
substantially all of the assets of Weirton Steel Corporation based
in Weirton, West Virginia. The purchase price, which remains
subject to adjustment, was $253 million including the assumption
of certain liabilities.
Weirton Steel, formerly the fifth largest U.S. integrated steel
company and the nation's second largest producer of tin mill
products, filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code on May 19, 2003.
William McKenzie, former Vice President & General Manager of ISG
Plate Inc. in Coatesville, Pennsylvania, has been named Vice
President & General Manager of ISG Weirton Inc.
"The Weirton facilities bring us added strength in both the tin
and galvanized construction markets," said Rodney B. Mott, ISG's
President and Chief Executive Officer. "Our new workforce is both
outstanding and dedicated, and we could not have completed this
transaction without the support of the Independent Steelworkers
Union (ISU). We look forward to a quick and smooth integration as
we bring the former Weirton employees and facilities into the ISG
family and culture."
ISG and the ISU have already entered into a labor agreement that
was ratified by 90% of the voting ISU members. Consistent with
ISG's prior programs, the labor agreement provides for a
transition assistance program.
About International Steel Group Inc.
After the Weirton acquisition, International Steel Group Inc. is
the largest integrated steel producer in North America, based on
steelmaking capacity. The Company has the capacity to cast
approximately 21 million tons of steel products annually. It ships
a variety of steel products from 12 major steel producing and
finishing facilities in seven states, including hot- rolled, cold-
rolled and coated sheets, tin mill products, carbon and alloy
plates, rail products and semi-finished shapes serving the
automotive, construction, pipe and tube, appliance, container and
machinery markets. For additional information on ISG, visit
http://www.intlsteel.com/
WEIRTON: International Steel Assumes Cliffs' Pellet Sales Contract
------------------------------------------------------------------
Cleveland-Cliffs Inc (NYSE: CLF) announced that as part of the
acquisition of the assets of Weirton Steel by International Steel
Group (ISG), ISG has assumed Cliffs' pellet sales contract with
Weirton with some modifications. The contract term is for 15 years
with Cliffs supplying the majority of pellets required for the
ISG-Weirton facility in 2004 and 2005 and all of ISG-Weirton's
pellet requirements thereafter. Cliffs sold 2.8 million tons of
pellets to Weirton in 2003.
On May 19, 2003, Weirton filed for Chapter 11 bankruptcy
protection, and today finalized the sale of substantially all of
its assets to ISG. ISG was formed in April 2002, and currently
operates steel making assets acquired from LTV Steel, Acme Steel,
and Bethlehem Steel.
John S. Brinzo, Cliffs' chairman and chief executive officer,
said, "Weirton has been a valued customer of Cliffs for many
years, and we are very pleased that we will continue to supply
ISG-Weirton's pellet requirements. It's remarkable that in just
over two years, ISG has become one of North America's largest and
most progressive steel companies. We are proud to be ISG's primary
iron ore supplier, and we look forward to building on the alliance
we have established with them."
About Cleveland-Cliffs
Cleveland-Cliffs, headquartered in Cleveland, Ohio, is the largest
producer of iron ore pellets in North America, and sells the
majority of its pellets to integrated steel companies in North
America and Canada. The Company operates six iron ore mines
located in Michigan, Minnesota and Eastern Canada.
WILSONS THE LEATHER: Reports First Quarter 2004 Losses
------------------------------------------------------
Wilsons The Leather Experts Inc. (Nasdaq:WLSN) announced results
for the quarter ended May 1, 2004.
Net sales at Wilsons Leather stores for the first quarter
increased 2.6% to $97.8 million compared to $95.3 million for the
same period last year. Included in the sales for the first quarter
was approximately $20.8 million in liquidation sales resulting
from the transfer of inventory to an independent liquidator in
conjunction with the closing of approximately 111 stores. Year-to-
date comparable store sales decreased 2.0% compared to flat
comparable store sales for the same period last year. Comparable
store sales for the year to date do not include sales from the
stores that were liquidated.
The Company reported a net loss for the first quarter of $26.8
million, or $1.30 per fully diluted share. Included in the results
for the first quarter is an after-tax loss of $14.2 million, or
$0.69 per fully diluted share, primarily related to the transfer
of inventory to an independent liquidator in conjunction with the
closing of approximately 111 stores and accelerated depreciation
and lease termination costs related to store closings. Net
operating loss for the first quarter, when adjusted to remove the
$14.2 million in charges related to store closings, was $9.9
million, and compares to a net operating loss of $19.0 million in
the year-ago first quarter, a 47.9% improvement. The net loss for
the first quarter, when adjusted to remove the $14.2 million in
charges related to store closings, was $12.6 million, or $0.61 per
fully diluted share, and compares to a net loss of $12.7 million,
or $0.62 per fully diluted share, in the year-ago first quarter.
Joel Waller, Chairman and Chief Executive Officer, commented,
"During the first quarter we completed the liquidation sales in
the 111 stores that are now closed. In addition, we have made
positive progress with respect to our refinancing of the 11 1/4%
Senior Notes. While sales in our mall-based stores have been
negatively impacted during the quarter by reduced levels of new
and clearance merchandise, our margin rate was positively impacted
and gives us confidence that the structural changes we have made
in the business are beginning to take hold. We look forward to
continuing our efforts to drive our business forward."
Wilsons Leather updated guidance for the fiscal year ending
January 29, 2005. The Company continues to anticipate full year
net sales in the range of $410 to $430 million. For the full year
basic and fully diluted loss per share is now expected to be
between $1.23 and $1.58. This compares to our previous guidance of
between $1.33 and $1.68. Included in the fully diluted loss per
share are restructuring and other charges of $23 to $25 million or
$1.12 to $1.21 related to the store closures announced in the
fourth quarter of 2003. The improvement in loss per share is
reflective of reduced charges related to our restructuring
activities, which were previously anticipated to be between
$25 and $27 million. We have not reflected any changes related to
the effect of our announcement of a $35.0 million private
placement from either a per share basis or decreased interest
expense.
About Wilsons Leather
Wilsons Leather is the leading specialty retailer of leather
outerwear, accessories and apparel in the United States. As of May
1, 2004, Wilsons Leather operated 458 stores located in 45 states
and the District of Columbia, including 334 mall stores, 107
outlet stores and 17 airport stores. The Company, which regularly
supplements its permanent mall stores with seasonal stores during
its peak selling season from October through January, operated 229
seasonal stores in 2003.
As reported in the Troubled Company Reporter's April 20, 2004
edition, Wilsons The Leather Experts Inc. (Nasdaq:WLSN) announced
that it entered into an agreement to amend its revolving credit
facility.
The revolving credit facility, which is provided by GE Capital,
CIT, Wells Fargo, and LaSalle, has been amended to waive defaults
under previous EBITDA covenants, reset financial covenants for
future time periods and, remove the April 15, 2004 deadline to
amend, refund, renew, extend, or refinance its 11 1/4% Senior
Notes.
XECHEM: Ceptor Subsidiary Secures $1.1 Mil. Bridge Loan Financing
-----------------------------------------------------------------
Xechem International Inc. (OTC BB: XKEM) announced that its
subsidiary, Ceptor Corporation, has entered into an agreement with
a consortium of investors to provide $1,100,000 of six-month
bridge debt financing. Under the terms of the bridge loan
agreement, the bridge lenders will be entitled to approximately
6.4% of Ceptor's fully-diluted capitalization (inclusive of
Xechem's 52.4% share ownership). Ceptor expects to repay the
bridge loan with the proceeds of subsequent financing, although no
commitments have yet been obtained for such financing. Ceptor
retained Viewtrade Financial, an affiliate of Dawson James
Securities, in connection with the bridge loan financing.
As part of the financing, the prior holders of over 80% of
Ceptor's common stock agreed to waive their rights to receive any
milestone payments (in the form of Xechem stock) from Xechem,
which Xechem expects will be a substantial savings to Xechem. As
previously announced, should Ceptor receive subsequent equity
funding, it has agreed that Xechem will redeem Ceptor shares for
25% of the gross proceeds raised by Ceptor (based on the same
valuation at which those shares are issued), capped at $2,000,000
of funding to Xechem. The bridge loan agreement modified this
redemption arrangement from a fixed price per share to a valuation
on the redeemed shares equal to the valuation on which the funds
are raised by Ceptor in the equity financing, due to Xechem's
expectation that this would result in less dilution to Xechem. In
addition, Xechem has retained its right to a 2% royalty on sales
of all products by Ceptor using its current technology.
About Ceptor
Ceptor is a development stage drug company focusing on
neuromuscular and neurodegenerative diseases which include
therapeutics for muscular dystrophy, multiple sclerosis, ALS and
epilepsy. According to Ceptor's CEO, William Pursley, "We are
heartened by the significant interest we have received in the
funding of the bridge loan.
"This will enable Ceptor and its experienced management team to
continue executing on its business plan unabated. We are
encouraged by the prospects of Ceptor's developing and bringing to
market a series of products which would address a family of
devastating diseases."
According to Stephen Burg, one of Xechem's directors, "We are
excited about the bridge financing of Ceptor. It enables Ceptor to
continue its progress on development of its suite of products,
through an independent financing platform The program for
redemption of some of our Ceptor shares was put in place to
provide capital to Xechem on a basis that is nondilutive to
Xechem's shareholders, with Xechem continuing to hold a
substantial stake in Ceptor." Those funds should help us greatly
in bringing to market in Nigeria HEMOXIN(TM)/NICOSAN(TM), a
product designed for the treatment of sickle cell disease.
The bridge loan bears interest at 8% per annum. In the event of a
default, the holders of one-half of the loan ($550,000) will have
the option of seeking payment from Ceptor directly or converting
the unpaid amount into common stock of Xechem at a 25% discount to
the then-market price of Xechem's common stock (with Xechem
obligated to register the shares and to pay certain penalties,
subject to a put in favor of the holders if registration is not
effected within 180 days following default). The holders of the
other one-half of the loan will have the right to exchange their
loan for stock options presently owned by William Pursley in
Xechem, based on a value comparable to the indebtedness in
question. This latter conversion would not be dilutive to Xechem.
About Xechem
Xechem International, Inc. is a fully integrated biopharmaceutical
company focusing on phytopharmaceuticals and other proprietary
technologies for orphan diseases. Its principal product under
development is NICOSAN(TM)/HEMOXIN(TM), which has shown efficacy
in the treatment of sickle cell disease.
* * *
As previously reported, Xechem International, Inc. received a
letter, on October 4, 2003, from Wiss & Company, LLP, the
Company's independent public accountants, dated September 30,
2003. In the letter, Wiss informed the Company that it had decided
to discontinue providing audit services to SEC clients and was
exiting this practice area. However, Wiss also advised the Company
by letter dated November 10, 2003 that it would continue to
provide services to the Company through December 1, 2003, which
would include review of the Company's financial statements for the
three months ended September 30, 2003. The Company had engaged
Wiss on December 13, 2002.
In its letter, Wiss stated that its decision was based on a
variety of business factors, including the recent rash of
legislation changes enacted following the passing of the
Sarbanes-Oxley Act of 2002.
The Company has not yet selected replacement independent public
accountants for Wiss; however, it is presently interviewing
candidates.
Wiss' reports on the Company's consolidated financial statements
for the past year, which is the only year for which it provided
accounting services during its recent engagement, contained a
statement that there were doubts about the ability of the Company
to continue as a going concern.
* Judge Wolin Criticizes Third Cir. Panel & Vulture Investors
-------------------------------------------------------------
In response to the United States Court of Appeals for the Third
Circuit directing the Honorable Alfred M. Wolin to recuse himself
from all further proceedings in the chapter 11 cases involving
Owens Corning, W.R. Grace & Co., and USG Corp., Judge Wolin issued
a written statement criticizing the decision and firing a shot at
the vulture investors initiating the recusal proceeding:
"A panel of the Third Circuit Court of Appeals has decided by
a two-to-one vote that my joint administration of three major
chapter 11 asbestos cases should be terminated. These cases were
assigned to me by former Chief Judge of the Third Circuit Court of
Appeals Edward Becker. My responsibility was to take an
intractable litigation problem cloaked with a sense of urgency and
to dispose of it with dispatch.
"The Court of Appeals after a full examination of the record
has found that I did nothing wrong, unethical, or biased.
Moreover, their review has not revealed the slightest hint of any
actual boas or partisanship by me. On the contrary, they found
that throughout my stewardship over these asbestos cases, I
exhibited all of the judicial qualities, ethical conduct and
characteristics emblematic of the most experienced, competent and
distinguished Article III jurist.
"These cases presented diverse issues from a management point
of view and it was readily apparent that a single method of case
management would be unworkable. Moreover, it was recognized by
all concerned that in order to resolve these cases outside the
tort system and innovative approach to case management would have
to be adopted. The case management methodology implemented by me
focused on the gathering of information from a myriad of sources
in order to develop a plan of case management consistent with the
needs of each individual case. In doing so I abandoned strict
adherence to formulate principles that the Court of Appeals now
finds unacceptable, notwithstanding the fact that the abandonment
of these well-known principles remained unchallenged for
approximately twenty-two months. It is unnecessary to recount all
the issues that were presented to the Third Circuit Court of
Appeals over a protracted period of six months other than to
remark that the litigation was spirited, costly, and the
procedural path it traveled was unorthodox if not bizarre.
"The Court of Appeals gave lip service to the concept of
experts employed to advise a district judge, but held that such
confidential advice necessarily crosses the line into extra-
judicial or ex parte knowledge. It is unclear how experts are to
be used, if at all, following the Court of Appeal's opinion in
this case. The dissenting opinion criticizes that majority for
excusing the delay of almost two years before an objection was
filed to my management of these complex cases. The majority
refused to recognize the significance of the fact that attorneys
representing committees of creditors and indeed the entire
asbestos bar knew long ago of the supposed conflict of my
advisors.
"The Court of Appeal's focus on complete transparency and
actual notice to the exclusion of other considerations is an
unfortunate development in the jurisprudence of complex
litigation. These principles were developed in simpler times and
for cases with but a few parties. Here, where the parties number
in the hundreds of thousands, the decision in this case was
profoundly impractical. I am convinced that it will work to the
detriment of legitimate creditors -- injured persons, commercial
creditors, and debtors -- willing to play by the rules and avoid
the scorched earth tactics of a few distressed debt traders. The
trust the judiciary has earned over centuries of honorable service
is not wasted by the case management techniques I put in place.
On the contrary, that trust is put to its highest use, to solve
one of our society's most difficult and intractable problems.
"Nevertheless, I accept the appellate court's decision, not
because I agree with it, but because, from a pragmatic point of
view, I recognize that this type of internecine and peripheral
litigation is counter-productive to the resolution of these
important chapter 11 cases. Each and every day approximately 15
claimants exposed to asbestos fibers die. Further delay in the
processing of their claims is intolerable. The stark reality of
this statistic requires this Court to stand aside and permit these
cases to be reassigned to another judicial officer without delay,
and without recrimination."
* Michael Dugan Joins Blackstone Group's Corporate Advisory Group
-----------------------------------------------------------------
The Blackstone Group announced that Michael P. Dugan has joined
the firm's Corporate Advisory Group as a Senior Managing Director,
bringing with him over 20 years experience advising industrial
clients on strategic and capital structuring issues in both North
America and Europe.
Mr. Dugan, who will maintain offices in New York and London, has
been instrumental in the successful execution of some of the
largest industrial transactions, including the acquisition and
financing of Legrand, Europe's largest leveraged buyout.
Prior to joining Blackstone, Mr. Dugan was at CSFB where he was
Head of the London-based European Capital Goods Investment Banking
Group and Managing Director in the New York-based Mergers &
Acquisitions Group. Prior to CSFB, he was a Managing Director in
Donaldson Lufkin Jenrette's M&A group, previously President and
CEO of Metzler Corporation, and before that held senior positions
with Smith Barney and Bankers Trust Securities.
Hamilton E. James, Vice-Chairman of Blackstone, said; "We are
delighted to have someone of Michael's stature and experience in
our Corporate Advisory team. His track record advising major
corporations, his knowledge and experience of working with
European companies, and his wide range of high-level contacts are
invaluable in complementing our fast-growing Corporate Advisory
team."
Mr. Dugan added, "Joining Blackstone is a great opportunity for me
to add considerable value to my clients' strategic discussions.
The firm's sterling reputation, entrepreneurial approach,
financial resources, and lack of conflicts, combined with the
unique perspective afforded by the firm's principal capabilities,
will allow me to deliver objective and bespoke solutions to
clients. I am looking forward to working with such a capable group
of professionals across the firm's businesses, while focusing on
further developing the global advisory business."
About The Blackstone Group
The Blackstone Group, -- http://www.blackstone.com/-- a private
investment and advisory firm with offices in New York, Atlanta,
Boston, London and Hamburg, was founded in 1985. The firm has
raised a total of approximately $32 billion for alternative asset
investing since its formation. The Blackstone Group's six core
businesses are Private Equity Investing, Private Real Estate
Investing, Corporate Debt Investing, Marketable Alternative Asset
Management, Corporate Advisory, and Restructuring and
Reorganization Advisory.
*********
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 ***