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/raid1/www/Hosts/bankrupt/TCR_Public/040805.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, August 5, 2004, Vol. 8, No. 163 Headlines 19th & WEBBER: Case Summary & 20 Largest Unsecured Creditors ADELPHIA: Century Wants to Employ Lazard as Investment Banker ADVANCED X-RAY: Hires Macey Wilensky as Bankruptcy Counsel ALION SCIENCE: Closes $180 Million Term B Senior Credit Facility AMC ENT: New Marquee Securities Get S&P's Low-B & Junk Ratings AMERIDEBT: Taps Winthrop & Weinstine as Minn. Litigation Counsel AMERIDEBT INC: U.S. Trustee Wants a Chapter 11 Trustee Appointed ARCH COAL: Rising Costs Prompt S&P's BB Corporate Credit Rating AT&T CORPORATION: S&P Lowers Ratings to Non-Investment-Grade Level BANKATLANTIC INC: Fitch Affirms Junk and Low-B Ratings CATHOLIC CHURCH: Can Maintain Existing Bank Accounts at Key Bank CCC INFORMATION: Narrow Product Focus Prompts S&P's Low-B Ratings CENTENNIAL COMMS: Exercises Option to Purchase AT&T Spectrum CITIZEN COMMS: Expects 6.75% Reset Interest Rate on New Sr. Notes CORNELL COS: J. Nieser Sits as Interim CFO After Hendrix Resigns COVANTA ENERGY: Wants Plan Injunction Lifted to Liquidate 9 Claims CRESCENT REAL ESTATE: Reports $36.1 Million Half-Year Net Loss CROMPTON CORP: Prices $600 Million Offering of 9-7/8% Senior Notes DII/KBR: Halliburton Names Andrew Lane as KBR President & CEO DOMAN IND: Trading Under Western Forest WEF Symbol on TSX Begins DPL INC: S&P Maintains BB- Corporate Credit Ratings on CreditWatch EDEN BIOSCIENCE: Receives Delisting Notice from Nasdaq ELCOM INTERNATIONAL: Equity Deficit Narrows to $841K at June 30 ENERSYS: S&P Raises Corporate Credit Rating One Notch to BB ENRON: ECTRIC Demands $3.5 Million Payment from Louis Dreyfus LPG ENRON: Oregon PUC Staff Doesn't Like PGE Sale to Oregon Electric FISHERS OF MEN CHRISTIAN: Voluntary Chapter 11 Case Summary FLEMING COS: Court Nixes 30 Pension Claims Totaling $3.7 Million FOSTER WHEELER: 61% of 6.75% Noteholders Tender in Amended Offer GRANITE BROADCASTING: Delisted from Nasdaq SmallCap Market INT'L STEEL: Georgetown Facility Begins Wire Rod Production J.P. MORGAN: S&P Assigns Low-B Ratings to Six Certificate Classes KB HOME: Fitch Affirms BB Senior Unsecured Debt Rating KITCHEN ETC.: Taps DJM Asset Management to Dispose of 17 Stores MIRANT CORP: Committee Objects to James M. Donnell's Retention MIRANT: Walks from Bosque Agreement & Assumes Wharton Tolling Pact NANOGEN INC: Reports $12.3 Million 2nd Quarter Net Loss NEXPAK CORPORATION: Hires Jones Day as Bankruptcy Counsel OWENS CORNING: More Objections Raised Against Trustee Appointment OWENS CORNING: Creditor Panel Urges Appointment of Examiner PACIFIC GAS: Objects to Cal PX's $667,841 Claim for Legal Fees PARMALAT: Judge Drain Appoints James Garrity to Serve as Examiner PEGASUS SATELLITE: Retains Capital & Technology as Fin'l Advisor PG&E NATIONAL: USGen Committee Retains Blake as Expert Consultant PIEDMONT HAWTHORNE: S&P Assigns B+ Corporate Credit Rating PILLOWTEX: Seeks Court Nod on $3.4 Million Hanover Property Sale PINNACLE ENT: Fitch Puts B+ Rating on Proposed $350M Bank Facility QWEST COMMUNICATIONS: Equity Deficit Widens to $1.9B at June 30 RAINBOW MEDIA: S&P Junks Senior Unsecured & Subordinated Notes RCN CORP: Court Okays Trading Restriction to Preserve NOLs RS GROUP: Promotes Landlord Risk Specialty Insurance Products SOLUTIA INC: Court Okays New Executive Compensation Agreements SPHERION: Completes Divestiture of United Kingdom Operations SPIEGEL INC: Hires Staubach Midwest as Real Estate Broker SPX CORP: Weak Operating Results Spur S&P Negative Outlook THREE PROPERTIES: Case Summary & 20 Largest Unsecured Creditors THREE PROPERTIES: Hires Hohmann Taube as Bankruptcy Counsel TORPEDO SPORTS: Proposes to Merge with Interactive Games, Inc. UAL CORP: Inks Pact Modifying Stay on Cal. Statewide Secured Claim UNIVERSAL ACCESS: Files for Chapter 11 Reorganization in Illinois UNIVERSAL ACCESS: Voluntary Chapter 11 Case Summary UNIVERSAL ACCESS: PwC Resigns as Independent Accountants US AIRWAYS: Settles Bank of New York Aircraft Claims for $20.9 Mil WASTECORP INC: Disclosure Statement Hearing Set for August 24 VALCOM INC: Subsidiary Emerges From Chapter 11 Protection WATERFRONT WAREHOUSE: Sec. 341(a) Meeting Slated for August 31 WEIRTON STEEL: Wants Court to Nix Individual Bondholders' Claims WELLSFORD REAL: Posts $2,313,530 Net Loss in 2nd Quarter WESTPOINT STEVENS: Court Clears 5th Amendment to DIP Financing ********* 19th & WEBBER: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: 19th & Webber Associates, Inc. aka West Texas Canyon Amphitheater aka Canyon Amphitheater aka Nineteenth & Webber Associates aka Canyon Amphitheatre aka West Texas Parking, Inc. 1418 Texas Avenue Lubbock, Texas 79401 Bankruptcy Case No.: 04-50903 Chapter 11 Petition Date: August 3, 2004 Court: Northern District of Texas (Lubbock) Judge: Robert L. Jones Debtor's Counsel: Robert C. Heald, Esq. Price and Heald 2301 Broadway Lubbock, Texas 79401 Tel: 806-747-5000 Total Assets: $2,890,206 Total Debts: $1,857,086 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Davis Moore Electric, Inc. Initial Electrical $165,230 Zahn Paving, Inc. Agreed Judgment $100,000 against 19th & Webber Fastlane Concerts Rick Springfield $41,000 Concert Fees AEG Michael W. Smith $29,200 Concert Loss American State Bank Debt incurred by $23,131 Tanner Foster AEG Southwest George Jones $17,576 dba Lane Concerts Concert Loss SLS Partnership, Inc, Architectural Plans $15,260 Stone Concerts, Inc. Consulting $15,000 Pronote, Inc. Insurance $7,067 Willis E. Gresham, Jr. Attorney Fees $7,022 Caprock Waste Garbage service $6,004 Outer Wear USA Advertising $4,178 Tex Craft Construction $3,884 LP&L Utility $3,398 Doc's Wholesale Liquor Liquor $3,281 Texas Scenic Company Curtains $3,225 White Service Com Maintenance $2,245 KLBK/Channel 13/KAMC/ Advertising $1,500 Channel 28 Mayfield Paper Company Supplies $1,494 The Lamar Companies Outdoor Signs $1,035 ADELPHIA: Century Wants to Employ Lazard as Investment Banker ------------------------------------------------------------- Century Communications Corporation asks the Bankruptcy Court for authority to employ Lazard Freres & Co., LLC, as its sole investment banker to provide general restructuring advice in connection with a possible sale of Century/ML Cable Venture or any Century/ML interest or subsidiary division. Specifically, Lazard will: -- assist Century Communications in identifying and evaluating candidates for a potential Century/ML sale transaction; -- advise Century Communications in connection with negotiations; and -- assist in the consummation of the Century/ML Transaction. The Century/ML Transaction may take the form of a merger or a sale of assets or equity securities or other interests. Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, in New York, tells the Court that Century Communications requires knowledgeable investment bankers to render those essential professional services. Lazard, with its general restructuring experience, merger and acquisition expertise and its knowledge of the capital markets, fits the bill. Lazard also serves as investment banker to the ACOM Debtors. On December 12, 2003, the Court expanded the scope of Lazard's employment to include services related to any sale transaction involving any of the ACOM Debtors' non-core, non-cable domestic assets or its cable assets located outside the United States. Lazard and Century Communications agree to this compensation scheme: (a) In the event the Century/ML Transaction involves a sale of less than or equal to 55% of the equity in Century/ML, Lazard will be paid a $2,000,000 fee. (b) In the event that the Transaction involves a sale of more than 55% of Century/ML's equity, Lazard will be entitled to a fee equal to the applicable percentage of the aggregate consideration received in the transaction. (c) One-half of any fee payable to Lazard in connection with a Century/ML Transaction will be credited against any fees subsequently payable pursuant to the Engagement Letter between ACOM and Lazard dated June 1, 2002. (d) In addition to any fees that may be payable to Lazard and regardless of whether any transaction occurs, Century Communications will promptly reimburse Lazard for all: * reasonable out-of-pocket expenses, including travel and lodging, data processing and communications charges and courier services; and * other reasonable fees and expenses, including expenses of counsel, if any. The structure and amount of Lazard's contingent fee, Ms. Chapman asserts, is reasonable given the value of Lazard's services and the wealth of experience the firm brings to the table. M. Said Armutcuoglu, a managing director at Lazard, assures the Court that Lazard has not represented and has no relationship with Century Communications and its creditors and equity security holders; other parties-in-interest in Century Communications' case; their attorneys and accountants; and the United States Trustee or any person employed in the Office of the U.S. Trustee. Mr. Armutcuoglu further attests that Lazard does not hold or represent any interest adverse to Century Communications or its estate. The firm is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Adelphia Communications Corporation and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVANCED X-RAY: Hires Macey Wilensky as Bankruptcy Counsel ---------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia gave Advanced X-Ray, Inc., permission to hire the law firm of Macey, Wilensky, Cohen, Wittner & Kessler, LLP. The firm is expected to: a) give the Debtor advice with respect to its powers and duties as debtor-in-possession in the management of its property; b) prepare on behalf of the Debtor as debtor-in-possession necessary schedules, applications, motions, answers, orders, reports and other legal matters; c) assist in examination of the claims of creditors; d) assist in formulating and preparing of the disclosure statement reorganization and with the confirmation and consummation thereof; and e) perform all other legal services for the Debtor as debtor-in-possession which may be necessary herein. To the best of the Debtor's knowledge, the firm is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. Frank B. Wilensky, Esq., leads the engagement. Mr. Wilensky doesn't indicate the hourly rates lawyers at his firm bill for their services. Headquartered in Buford, Georgia, Advanced X-Ray -- http://www.advancedx-ray.com/-- offers a full line of X-ray systems, enclosures, and material handling systems to provide a complete, integrated inspection solution. The Company filed for chapter 11 protection on July 13, 2004 (Bankr. N.D. Ga. Case No. 04-71349). When the Company filed for protection from its creditors, it listed less than $1 million in total assets, and more than $1 million in total debts. ALION SCIENCE: Closes $180 Million Term B Senior Credit Facility ---------------------------------------------------------------- Alion Science and Technology Corporation closed on a Term B senior credit facility that will provide up to $180 million of financing for Alion. Credit Suisse First Boston acted as the lead administrative agent in connection with the financing, and LaSalle Bank National Association, the administrative agent of Alion's initial senior credit facility, participated in the syndication of the CSFB Term B senior credit facility. The CSFB financing provides Alion a term loan for up to $100 million. Alion drew $50 million of that amount on August 2, and Alion may draw the remainder over the 60 days following August 2's closing date. The CSFB financing also provides Alion revolving credit up to $30 million and an opportunity to obtain up to an additional $50 million in term loans, subject to certain conditions. Alion used the proceeds of the CSFB financing to retire Alion's previous senior credit facility administered by LaSalle. Alion intends to use future draws under the CSFB financing to pay down certain of its other existing debt obligations with funds obtained at lower interest rates. The CSFB financing will also provide Alion additional funds for future acquisitions. Bahman Atefi, Alion's Chairman and CEO, stated that the financing provides further growth opportunities for the company. "Alion has enjoyed successful growth since becoming an employee-owned company in 2002. This financing, coupled with the confidence that the market has placed in us as a research and technology firm, will help us pursue new opportunities through both organic growth and acquisitions," Dr. Atefi said. "We firmly appreciate the support of such a prestigious financial institution as CSFB." Dr. Atefi thanked the Alion Board, in particular Board Member Leslie Armitage of The Carlyle Group, for their invaluable assistance in connection with the transaction. He referred to Alion's Board of Directors as vital to the success of the company through their guidance and ability to bring together essential resources. Jack Hughes, Alion's CFO and Treasurer, added that the commitment of Alion's employee-owners has been the cornerstone of the company's growth. About Alion Alion Science and Technology is an employee-owned research and development company providing technology services to the Department of Defense, other government agencies, and commercial customers. Building on 68 years of experience, Alion employee- owners provide expertise in defense operations; modeling and simulation; information technology; wireless communication; industrial technology solutions; chemical, biological and explosive science; and nuclear engineering. Based in McLean, Virginia, Alion has more than 1,800 employees at major offices, customer sites and laboratories worldwide. For financial information about Alion, call 703.918.4480 or visit Alion online at http://www.alionscience.com/ * * * As reported in the Troubled Company Reporter, July 6, 2004 edition, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to McLean, Virginia-based Alion Science and Technology Corp. At the same time, Standard & Poor's assigned its 'B+' senior secured debt rating, with a recovery rating of '3', to Alion's proposed $130 million senior secured bank facility, which will consist of a $30 million revolving credit facility and a $100 million term loan, both due 2009. The 'B+' rating is the same as the corporate credit rating and the '3' recovery rating indicates that the senior secured debt holders can expect meaningful (50%-80%) recovery of principal in the event of a default. The proceeds from this facility will be used to refinance the majority of Alion's existing debt, fund modest acquisitions, and cover expenses associated with the transaction. The outlook is stable. "The ratings reflect Alion's relatively modest position (approximately $300 million in revenue) in the highly competitive and consolidating government IT services market, an acquisitive growth strategy, and high financial leverage," said Standard & Poor's credit analyst Ben Bubeck. A predictable revenue stream based upon a strong backlog and the expectation that government related business will remain solid over the intermediate term are partial offsets to these factors. AMC ENT: New Marquee Securities Get S&P's Low-B & Junk Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on AMC Entertainment Inc. to stable from positive, based on the increased leverage that will result from the pending sale and recapitalization of the company. At the same time, Standard & Poor's affirmed its ratings, including its 'B' corporate credit rating, on the company. In addition, Standard & Poor's assigned its 'B' corporate credit rating to Marquee Holdings Inc. and its subsidiary Marquee Inc. Upon completion of the sale of AMC, Marquee Inc. will be merged with AMC. All of these companies are analyzed on a consolidated basis. In addition, Standard & Poor's assigned 'B-' ratings to Marquee Inc.'s proposed $150 million in senior unsecured notes due 2012 and its proposed $305 million in senior unsecured floating rate notes due 2011, and a 'CCC+' rating to Marquee Holdings' proposed $170 million senior discount notes due 2014 (HoldCo notes). The senior unsecured notes will be supported by operating subsidiary guarantees and are rated one notch below the corporate credit rating due to the proportion of higher priority secured debt. The HoldCo notes are rated two notches below the corporate credit rating because they will be structurally subordinate to AMC's existing and proposed debt. Proceeds from the new debt issues, about $335 million in existing cash, the rollover of about $750 million in existing debt and capital leases, and a $785 million cash equity contribution will be used to fund the purchase of the Kansas City, Missouri-based movie exhibitor by funds controlled by J.P. Morgan Partners and Apollo Management LP. Pro forma as of July 1, 2004, AMC will have about $3.6 billion in consolidated lease-adjusted debt. "The ratings on AMC reflect its financial risk from its heavy reliance on expensive lease financing which results in high lease- adjusted leverage and fixed costs, its weak EBITDA margins, and its exposure to the mature and competitive U.S. motion picture exhibition industry," said Standard & Poor's credit analyst Steve Wilkinson. "The ratings also reflect AMC's modern theater circuit, positive discretionary cash flow, and more stable market conditions over the past few years." AMC Entertainment -- http://www.amctheatres.com/-- is the largest movie exhibitor in the U.S. based on revenue and the second- largest based on screen count. It has one of the industry's most modern theater circuits due to its rapid expansion and consistent disposition activity since 1995. AMERIDEBT: Taps Winthrop & Weinstine as Minn. Litigation Counsel ---------------------------------------------------------------- AmeriDebt, Inc., asks the U.S. Bankruptcy Court for the District of Maryland for permission to employ Winthrop & Weinstine, P.A., as its Special Litigation Counsel. When AmeriDebt filed for chapter 11 protection, it faced numerous lawsuits pending in various courts. One of those is in an action styled State of Minnesota, by its Attorney General, Mike Hatch vs. AmeriDebt, Inc., et al., Case No. MC 03-01838 (District Court for Hennepin County, Minnesota). The Minnesota Attorney General believes the automatic stay in AmeriDebt's bankruptcy case does not stay this lawsuit. Winthrop & Weinstine, a full-service Minneapolis, Minnesota-based law firm, represented AmeriDebt in the lawsuit prior to the Company's bankruptcy filing. AmeriDebt wants Winthrop & Weinstine to continue that representation in Minnesota State Court because of the firm's competent representation before the Petition Date. Winthrop & Weinstine will charge AmeriDebt its normal hourly rates: Designation Hourly Billing Rate ----------- ------------------- shareholders and senior attorneys $260 to $425 associates $160 to $240 paralegals $130 to $170 Robert R. Weinstine, Esq., leads the team of lawyers in this engagement, and he bills $425 per hour. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. Md. Case No. 04-23649). Stephen W. Nichols, Esq., at Deckelbaum Ogens & Raftery, Chartered, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. AMERIDEBT INC: U.S. Trustee Wants a Chapter 11 Trustee Appointed ---------------------------------------------------------------- W. Clarkson McDow, Jr., the United States Trustee for Region 4, asks the U.S. Bankruptcy Court for the District of Maryland to appoint a Chapter 11 Trustee in AmeriDebt, Inc.'s case pursuant to 11 U.S.C. Sec. 1104(a). Ameridebt was founded in 1996 as a non-profit credit counseling agency. AmeriDebt solicited consumers with debt management problems and negotiated with creditors to restructure repayment of consumers' debts under debt management plans. On June 1, 2003, AmeriDebt entered into a "Fulfillment Agreement" with The Ballenger Group, LLC, a for-profit corporation. Under the agreement, Ameridebt relinquished all control of its operations to Ballenger. On February 5, 2003, the Attorney General for the State of Illinois filed a complaint against AmeriDebt, charging the Company with: a. failing to clearly and conspicuously disclose its fees and charges; b. failing to clearly and conspicuously disclose to consumers that their first payment under AmeriDebt's Debt Management Plans is kept by AmeriDebt and not disbursed to the consumers' creditors; c. representing that AmeriDebt's debt management program will assist consumers in bringing accounts to a current status when, in fact, AmeriDebt does not make timely payments to consumers' creditors resulting in consumers incurring significant late and over-limit fees; d. representing that consumers' payments to AmeriDebt are "voluntary contributions" when in fact the payments are mandatory fees charged by AmeriDebt; e. failing to deliver debt management plan services as advertised and represented; f. representing that AmeriDebt is a not-for-profit organization when in fact the debt management work is done by a for-profit entity; g. failing to disclose to Illinois consumers that AmeriDebt is not licensed to conduct debt management services within Illinois; h. failing to disclose that initial fees charged by AmeriDebt are greatly in excess of the $50 maximum amount allowed to be charged in Illinois; i. failing to disclose that the monthly fees charged by AmeriDebt are in excess of the average maximum amount allowed to be charged under Illinois law. Similar cases alleging misrepresentation and deception were filed in Missouri, Texas and Minnesota. In Minnesota, the Attorney General alleges that AmeriDebt is conniving with Infinity Resources Group, Inc., which was solely operated by a convicted felon, Andris Pukke, who is also believed to hold 49% of shares of Ballenger Group Holding, LLC, parent of The Ballenger Group, LLC. In the States of Missouri and Texas, other names cropped up, including Andris' brother, Eriks, and Debtworks, Inc., the predecessor of The Ballenger Group. Four additional actions, including two class actions, have been brought against AmeriDebt in Arkansas, California, Illinois and Alabama. A report in March 2004 from the Permanent Subcommittee on Investigations of the United States Senate Committee on Governmental Affairs disclosed that AmeriDebt was formed by Pamela Pukke, wife of Andris, under the name Consumer Counseling Services, Inc. Andris was also the president of the company from 1997 to 1998. In 1999, Andris formed DebtWorks, Inc., to handle Debt Management Programs for Ameridebt. Ten other credit counseling agencies became clients of Debtworks and were founded by people who are either connected to Pukke or AmeriDebt. In 2002, The Ballenger Group took the place of DebtWorks. During the initial Debtor interview with the U.S. Trustee's office, AmeriDebt representatives were to explain what revenues were at any given point in time. The Company is said to be funded by trust accounts but tracing deposits from the trust accounts to the operating account is impossible. AmeriDebt representatives were also unable to explain where the consumers' original signed debt management plans were maintained and could only explain that these agreements were sent to Ballenger. The Office of the U.S. Trustee believes there's ample cause to warrant appointment of a chapter 11 trustee in AmeriDebt's case. The U.S. Trustee tells the Bankruptcy Court that: a) Management has abdicated total control to Ballenger; b) Management is guilty of gross mismanagement; and c) Management may be violating State laws. The United States Department of Justice, the State of Texas and the Federal Trade Commission join the U.S. Trustee's pitch for a Chapter 11 Trustee. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. Md. Case No. 04-23649). Stephen W. Nichols, Esq., at Deckelbaum Ogens & Raftery, Chartered, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. ARCH COAL: Rising Costs Prompt S&P's BB Corporate Credit Rating --------------------------------------------------------------- Standard & Poor's Rating Services lowered its corporate credit rating on Arch Coal Inc., the third-largest coal producer in the U.S., to 'BB' from 'BB+'. At the same time, Standard & Poor's also lowered its senior secured revolving credit facility rating to 'BB-' from 'BB', its preferred stock rating to 'B' from 'B+', and its senior secured note rating on Arch's subsidiary, Arch Western Finance LLC, to 'BB' from 'BB+'. The outlook is stable. Total outstanding debt as of June 30, 2004 was $700 million. "The downgrade reflects expectations that rising costs at the company's eastern mining operations and higher capital expenditures required to maintain production levels will offset the benefit of increased coal prices, resulting in negative free cash flow in 2004 and 2005 significantly below prior expectations," said Standard & Poor's credit analyst Dominick D'Ascoli. The ratings on St. Louis, Missouri-based Arch Coal reflect strong coal markets, the company's diversified base of coal reserves, its high percentage of low-sulfur coal deposits, offset by difficult operating conditions in the east, and an aggressive financial profile. Arch's operating performance has been weak over the past year because of high operating costs at its eastern operation, which accounts for about 25% of production. Average realized sales price per ton at its eastern operations increased 22% to $36.21 in the second quarter of 2004, from $29.66 a year earlier. By comparison, average total costs per ton rose 16% to $33.29 from $28.62. In general, eastern operating costs have risen because of the difficult operating environment in Central Appalachia. Standard & Poor's believes the trend of increasing eastern operating costs will continue. With about 100 million tons of coal produced during 2003, Arch is one of the top three U.S. coal producers, accounting for approximately 10% of U.S. coal production. The company operates numerous mines in the eastern and western coal producing regions of the U.S. AT&T CORPORATION: S&P Lowers Ratings to Non-Investment-Grade Level ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on AT&T Corp. to 'BB+' from 'BBB'. In addition, the short-term rating was lowered to 'B' from 'A-3'. The ratings were removed from CreditWatch, where they were placed with negative implications on April 28, 2004, due to (1) continued weakening in the company's business risk profile as reflected in first-quarter 2004 results and (2) the potential for steeper revenue declines and compressing operating margins. The outlook is negative. As of June 30, 2004, total debt outstanding was approximately $11.2 billion, unadjusted for operating leases and other postretirement employee benefits(OPEBs), or about $7.9 billion net of cash, restricted cash, and foreign currency fluctuation. "The ratings downgrade reflects the company's continued challenging business risk profile due to the telecom industry's transformation and the resultant long-term impact on the company's financial profile," explained Standard & Poor's credit analyst Rosemarie Kalinowski. "We anticipate that competition will intensify from other large long-distance carriers, the regional Bell operating companies (RBOCs), and cable TV companies in the near-to-intermediate term, further affecting AT&T's weak operating margins." These factors are mitigated somewhat in the short term by AT&T's solid balance sheet and liquidity position. Competitive pricing pressures, wireless substitution, and more conservative capital spending by corporate customers have led to AT&T's more challenging business risk environment. The company's operating efficiency, measured by its operating margin, has demonstrated the effects of these challenges despite cost- reduction initiatives. The consolidated operating margin in the second quarter of 2004 was 4.6%, below the 11.7% level for the second quarter of 2003. Although the rating is dominated by business risk pressure, AT&T has improved its balance sheet over the past two years via major asset sales and growth in free cash flow due to staff reductions, automation of system processes, and other cost-reduction measures. The company generated discretionary cash flow (after capital expenditures and dividends) of $1 billion in the first half of 2004 and $4.6 billion in fiscal 2003. Discretionary free cash flow is expected to be about $2 billion in 2004 and applied to debt reduction. BANKATLANTIC INC: Fitch Affirms Junk and Low-B Ratings ------------------------------------------------------ Fitch affirms the ratings of BankAtlantic Bancorp, Inc., (BBX; long-term senior 'BB+', short-term senior 'B') and its bank subsidiary, BankAtlantic FSB. Furthermore, Fitch withdraws its subordinated debt rating for BBX due to redemption. BBX's ratings reflect the company's solid capital, sound asset quality, and satisfactory core operating performance. They also reflect BBX's concentrated banking franchise, relatively high level of parental leverage, and volatile revenue generation at its broker/dealer, Ryan Beck & Co. Overall, the company's performance has improved due to enhanced revenue generation at Ryan Beck, which has benefited from its larger distribution platform and the overall expansion in the capital markets. Furthermore, earnings benefited from a one-time $22.8 million (first-quarter 2004) equity security litigation settlement gain. That said, BankAtlantic's earnings, although satisfactory, continue to be pressured by an elevated cost base, which has been inflated by the additional expenditures associated with deposit growth initiatives. The bank's asset quality remains sound and is attributable to solid underwriting standards and a buoyant Florida economy. BankAtlantic's regulatory capital levels are above 'well capitalized' as defined by the regulators, augmented by a considerable level of trust-preferred securities. The bank's deposit base has expanded over the past few years, spurred by the aforementioned deposit growth initiatives, which continue to reduce the bank's fairly high reliance on nondeposit funding sources. Finally, the spin-off of Levitt & Co. levered the parent's balance sheet to a high, yet manageable level. Ratings Affirmed BankAtlantic Bancorp, Inc. -- Long-term at 'BB+'; -- Short-term at 'B'; -- Individual at 'C'; -- Support at '5'; -- Rating Outlook Stable. BankAtlantic FSB -- Long-term deposits at 'BBB-'; -- Long-term debt at 'BB+'; -- Short-term deposits at 'F3'; -- Short-term debt at 'B'; -- Individual at 'C'; -- Support at '5'; -- Rating Outlook Stable. Rating Withdrawn BankAtlantic Bancorp, Inc -- Subordinated debt 'BB'. CATHOLIC CHURCH: Can Maintain Existing Bank Accounts at Key Bank ---------------------------------------------------------------- Judge Perris authorizes the Archdiocese of Portland in Oregon Debtor to continue using its Operational Bank Accounts and its Concentration Account located at Key Bank of Oregon, provided that the Bank posts a bond or provides collateral as specified in Section 345 of the Bankruptcy Code in an amount established by the United States Trustee. Any costs associated with the provision of the bond, including the payment of the premium, will be borne by the Debtor. The Debtor is not authorized to use the Victory Money Market Account except upon mutual agreement of Key Bank, the U.S. Trustee, and the Tort Claimants Committee, or after further Court order. A disgruntled creditor brought the question about the propriety of parking estate funds at Key Bank to Judge Perris because Key Bank is the Archdiocese's largest commercial creditor. The Court directs the Debtor to take all steps necessary to: -- have its accounts labeled debtor-in-possession accounts; -- issue checks on the accounts with the notation debtor-in- possession and the bankruptcy case number; -- issue postpetition checks with a significant gap in numbering from all prepetition checks; and -- issue stop payment orders, to prevent checks issued prepetition from being honored by the Bank. The Debtor's accounting records will clearly separate prepetition financial activities from postpetition financial activities. The Banks at which the Existing Accounts are located will have no liability whatsoever, to either the Debtor, the Debtor's estate, the payee of any check, the Debtor's employees, or any other person or entity, for any claims, damages, causes of action, rights or liabilities resulting from the Debtor's continued use of the Existing Accounts as a result of any of the Bank's unintentional, inadvertent, or negligent failure to dishonor any prepetition check written on the Existing Accounts. Judge Perris authorizes the Debtor's management personnel to continue: (i) exercising their judgment in the Debtor's day-to-day operations, or (ii) making necessary changes in the Debtor's operations, including, but not limited to, opening new accounts, closing existing accounts, and replacing or modifying any checks, business forms, or stationery, so long as the provisions regarding any new accounts or checks are complied with. Judge Perris clarifies that the Order does not constitute a finding, or in any way establish, that the Existing Accounts, or any of the funds in those accounts, or any other accounts, funds, or property, are or are not property of the Debtor or the estate. The Order also does not constitute a waiver of the rights of the Debtor, any creditor, or any other party-on-interest to assert that any of the Existing Accounts or the funds in those accounts, or any other accounts, funds, investments, or property of any nature, whether real or personal, held by the Debtor or by any other person, entity, or acquaintance of any kind, are or are not property of the Debtor or the estate, and these rights are preserved. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the debtor in its restructuring efforts. When the debtor filed for chapter 11 protection, it listed estimated assets of $10,000,000 to $50,000,000 and estimated debts of $25,000,000 to $50,000,000. (Catholic Church Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) CCC INFORMATION: Narrow Product Focus Prompts S&P's Low-B Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Chicago, Illinois-based CCC Information Services Inc. At the same time, Standard & Poor's assigned its 'B+' senior secured debt rating, with a recovery rating of '4', to the company's proposed $208 million senior secured bank facility, which will consist of a $30 million revolving credit facility (due 2009) and a $178 million term loan (due 2010). The 'B+' rating on the senior secured debt is the same as the corporate credit rating and the '4' recovery rating indicates that the first priority senior secured debt holders can expect marginal (25%-50%) recovery of principal in the event of a default. The proceeds from this facility, along with about $38 million of cash on hand, will be used to repurchase $210 million in CCC's common stock. The outlook is positive. Pro forma for the proposed bank facility, CCC had approximately $205 million in operating lease-adjusted debt as of June 2004. "The ratings reflect CCC's narrow product focus within a mature niche marketplace and leveraged balance sheet," said Standard & Poor's credit facility Ben Bubeck. "These are only partially offset by a largely recurring revenue base supported by intermediate-term customer contracts, high barriers to entry, and solid operating margins, allowing for modest free operating cash flow generation." CCC is the leading provider of software, information and workflow management systems to support activities within the automotive claims process, serving over 350 insurance carriers and 21,000 auto body shops. A fairly stable cash flow base, supported by intermediate-term customer contracts and limited capital expenditure requirements, should yield continued generation of modest levels of free operating cash flow. Given the cash flow sweep provision of the credit facility, CCC's debt burden should decline over the next two years, which should lead to an improved financial profile and may result in a ratings upgrade over the intermediate term. CENTENNIAL COMMS: Exercises Option to Purchase AT&T Spectrum ------------------------------------------------------------ Centennial Communications Corp. (Nasdaq: CYCL - News) has exercised its option to purchase 10 MHz of spectrum from AT&T Wireless covering an aggregate of approximately 4.1 million population equivalents (POPs) contiguous to its existing properties in Michigan and Indiana. The aggregate exercise price of the spectrum is approximately $19.5 million. In addition, the Company has entered into a definitive agreement to sell the Indianapolis and Lafayette, Indiana licenses that it will acquire from AT&T Wireless to Verizon Wireless for $24 million in cash. Pro forma for these transactions, Centennial will acquire an incremental approximately 2.2 million POPs and receive approximately $4.5 million in cash. Both transactions are subject to customary closing conditions, including regulatory approvals, and are expected to close before calendar year-end 2004. Centennial will acquire these licenses: BTA Market PCS Block MHz --- ------ --------- --- 15 Anderson, Ind.* E 10 115 Lansing, Mich.* A3 10 169 Grand Rapids, Mich.* A3 10 204 Indianapolis, Ind.** F 10 235 Lafayette, Ind.** F 10 309 Muncie, Ind.* E 10 310 Muskegan, Mich. A3 10 390 Saginaw-Bay City, Mich. A3 10 * Indicates partitioned BTA. ** Indicates markets being sold to Verizon Wireless. A map showing the location of the licenses being acquired and Centennial's existing footprint is available at: http://media.corporate-ir.net/media_files/NSD/CYCL/presentations/map.pdf The Company anticipates launching the Grand Rapids and Lansing, Michigan markets with GSM/GPRS technology by the end of calendar year 2005. These markets represent approximately 1.4 million POPs and bridge the gap in Centennial's Midwest cluster. There are no immediate plans to build-out the additional licenses. Centennial expects that start up adjusted operating income losses and capital expenditures relating to the new build will be approximately $10 million and $35 million, respectively, over the next two years. "This measured expansion substantially improves our footprint and competitive position in our Midwest cluster because many people in our existing territory travel regularly to Grand Rapids and Lansing. This new territory is an attractive growth opportunity in its own right and it enables us to better market our services to more of our existing footprint," said Michael J. Small, chief executive officer. "It represents the natural evolution of our successful efforts to improve our retail margins in a fashion that positions us for future growth." About Centennial Centennial is one of the largest independent wireless telecommunications service providers in the United States and the Caribbean with approximately 17.3 million Net Pops and approximately 1,027,500 wireless subscribers. Centennial's U.S. operations have approximately 6.1 million Net Pops in small cities and rural areas. Centennial's Caribbean integrated communications operation owns and operates wireless licenses for approximately 11.2 million Net Pops in Puerto Rico, the Dominican Republic and the U.S. Virgin Islands, and provides voice, data, video and Internet services on broadband networks in the region. Welsh, Carson Anderson & Stowe and an affiliate of the Blackstone Group are controlling shareholders of Centennial. For more information regarding Centennial, visit: * http://www.centennialwireless.com/ * http://www.centennialpr.com/and * http://www.centennialrd.com/ * * * At February 29, 2004, Centennial Communications Corp.'s balance sheet showed a $575,099,000 stockholder's deficit, compared to a $579,086,000 stockholder's deficit at May 31, 2003. CITIZEN COMMS: Expects 6.75% Reset Interest Rate on New Sr. Notes ----------------------------------------------------------------- Citizens Communications Company (NYSE: CZN) expects the reset interest rate on its 6.75% Senior Notes due 2006, which comprise a part of its 6.75% Equity Units will be equal to the minimum rate of 6.75%. The interest rate on the Notes is being reset pursuant to the contractual requirements of the Notes and will be effective on and after August 17, 2004 assuming a successful remarketing of the Notes on August 12, 2004. The securities affected by this announcement are as follows: -- 6.75% Senior Notes due 2006 (CUSIP No. 17453BAC5); and -- Equity Units (CUSIP No. 17453B200). Any holder that has sold its Equity Units on or prior to August 16, 2004 will not be entitled to receive excess proceeds, if any, from the remarketing, after deducting a remarketing fee to the remarketing agent. * * * As reported in the Troubled Company Reporter's July 23, 2004 edition, Standard & Poor's Ratings Services lowered its ratings on Citizens Communications Co. The corporate credit rating was lowered to 'BB+' from 'BBB'. All ratings are removed from CreditWatch, where they were placed with negative implications on Dec. 11, 2003, following Citizens' announcement of its decision to explore strategic alternatives. The outlook is negative. "The downgrade is based on the concern that Citizens' initiation of a substantial dividend, indicating a distinct shift toward a more shareholder-oriented financial policy, will limit further deleveraging and reduce the company's financial flexibility," explained Standard & Poor's credit analyst Eric Geil. "The smaller resulting financial cushion might hamper Citizens' ability to address rising competitive pressure on its mature local telephone operations." CORNELL COS: J. Nieser Sits as Interim CFO After Hendrix Resigns ---------------------------------------------------------------- Cornell Companies Inc. (NYSE:CRN) and John Hendrix, executive vice president and chief financial officer have mutually agreed that Hendrix will resign as CFO. Mr. Hendrix joined Cornell in September 1999 as vice president and chief financial officer, has served as executive vice president and CFO since June 2003, and will continue to assist Cornell in a consulting role. The Company also announced that John Nieser, treasurer, will serve as acting chief financial officer until the position is filled. Commenting on the Hendrix announcement, Harry J. Phillips, Jr., chairman and chief executive officer, said, "John's service here at Cornell has been appreciated and on behalf of our board of directors and employees, I wish to thank him for that service. John's integrity and hard work have been especially valued. We are pleased to have the continued benefit of his experience during a consulting period." The company is conducting a nationwide search to fill the position. Mr. Phillips added, "Our new CFO will be an integral part of the team that leads Cornell to our next level of growth." Mr. Nieser joined Cornell in April 2004 as treasurer, will serve as acting chief financial officer. "John is a very skilled and talented individual and we are fortunate to be able to rely on him during this interim period," Mr. Phillips said. Mr. Nieser, from Sugar Land, Texas, served as senior vice president, chief financial officer and treasurer of Guardian Savings and Loan Association and as controller for a number of organizations including GE Aero Energy Products prior to joining Cornell Companies. He is a CPA and began his professional career with Ernst & Young, LLP, where he served last as a senior audit manager. About the Company Cornell Companies, Inc. is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. Cornell -- http://www.cornellcompanies.com/-- has 65 facilities in 14 states and the District of Columbia and 5 facilities under development or construction, including a facility in one additional state. Cornell has a total service capacity of 16,644, including capacity for 2,726 individuals that will be available upon completion of facilities under development or construction. * * * As reported in the Troubled Company Reporter's June 8, 2004, edition, Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to corrections, treatment, and educational services provider Cornell Companies Inc. At the same time, Standard & Poor's assigned its 'B-' senior unsecured debt rating to the company's proposed $110 million senior notes due 2012. The ratings are based on preliminary offering statements and are subject to review upon final documentation. COVANTA ENERGY: Wants Plan Injunction Lifted to Liquidate 9 Claims ------------------------------------------------------------------ Covanta and its debtor-affiliates' confirmed Second Reorganization Plan provides that, on the Effective Date, each holder of a claim or equity interest against a Reorganized Debtor is deemed to have forever waived, released and discharged, pursuant to Section 1141 of the Bankruptcy Code, each of the Reorganized Debtors of and from any and all claims, equity interests, rights and liabilities that arose prior to the Confirmation Date. The Second Reorganization Plan also provides an injunction, explicitly precluding and enjoining, inter alia, all persons holding the claims or equity interests against the Reorganized Debtors from prosecuting or asserting any discharged claim or equity interest against any of the Reorganized Debtors. In motion papers filed with the Bankruptcy Court, the Reorganized Debtors ask the Court to modify the Plan Injunction with respect to nine claims: Claimant Claim No. Amount -------- --------- ------ Blakely, Christopher & Melinda 4055 $2,112,080 Brady, Mike & Elizabeth 4072 5,139,000 Conklin, Kenneth 4454 120,000 Cosner, Donald 4214 2,000,000 Kaylor, Thomas 4137 5,000,000 McCartney, David 4130 75,000 Melton, Justin 4079 250,000 Vasile, Samuel, et al. 4035 850,000 Wolfson, Michael, et al. 4165 unspecified Christine L. Childers, Esq., at Jenner & Block, in Chicago, Illinois, relates that the Claims represent unliquidated, disputed claims that have been asserted against at least one of the Covanta Debtors. The Covanta Debtors dispute the validity of the Claims. The Covanta Debtors want the Plan Injunction modified so that necessary steps may be taken to: (i) liquidate the Claims in the forum in which the underlying legal proceeding against the Covanta Debtors is pending, or (ii) commence litigation if it has not yet been commenced in an appropriate alternative forum, provided that: (a) the Plan Injunction will be modified solely to liquidate the Claims against the applicable Covanta Debtor, or to permit the Claimant to receive insurance proceeds as may be available to the Claimant with respect to the Claim; and (b) the Court will retain jurisdiction over the Claims to resolve any disputes that may arise between the Covanta Debtors and the Claimants regarding the liquidation of the Claims, and the distributions under the Second Reorganization Plan on account of the Claims. The Covanta Debtors further ask the Court to find that: (i) nothing will be deemed to limit or otherwise preclude the Covanta Debtors' ability to resolve any of the Claims by settlement; and (ii) to the extent that any of the Claims is resolved for a fixed amount, the payment of which comes exclusively from insurance, no further order or intervention by the Court is required. The Covanta Debtors reserve the right to: * further ask the Court to establish a mediation or alternative dispute resolution procedure for the liquidation of any of the Claims arising in those forums in which mediation or alternative dispute resolution procedures are not a mandatory element of the court process; and * seek an estimation of the amount of the Claims pursuant to Section 502(c) of the Bankruptcy Code. Any of the Claimants whose claim becomes liquidated by judgment or otherwise, will be required to file an application for distribution of its liquidated claim within 30 days of that liquidation. The 30 days begin to run after the judgment becomes final and non-appealable. The application filed with the Court must be served on: -- Jenner & Block, LLP One IBM Plaza Chicago, Illinois 60611 Attention: Vincent E. Lazar, Esq., and Christine L. Childers, Esq. -- Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: Deborah M. Buell, Esq., and James L. Bromley, Esq. The Covanta Debtors will have 30 days from the date of the filing and service of the application for distribution to file an objection to the application and serve the objection on the Claimant. If no objection is filed within the time required, then the liquidation amount will be treated as an Allowed Claim in the Class under the Second Reorganization Plan applicable to the Claim, subject to the terms and treatment provided in the Second Reorganization Plan. 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. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) CRESCENT REAL ESTATE: Reports $36.1 Million Half-Year Net Loss -------------------------------------------------------------- Crescent Real Estate Equities Company (NYSE:CEI) discloses results for the second quarter 2004. Funds from operations available to common shareholders before impairment charges related to real estate assets - diluted for the three months ended June 30, 2004 was $31.0 million. These compare to FFO of $36.4 million and equivalent unit, for the three months ended June 30, 2003. FFO for the six months ended June 30, 2004 was $58.6 million and equivalent unit. These compare to FFO of $77.9 million and equivalent unit, for the six months ended June 30, 2003. Net loss available to common shareholders for the three months ended June 30, 2004 was ($17.5) million. This compares to a net loss of ($6.1) million, for the three months ended June 30, 2003. Net loss available to common shareholders for the six months ended June 30, 2004 was ($36.1) million. This compares to a net loss of ($25.4) million, or for the six months ended June 30, 2003. Funds from operations is a supplemental non-GAAP financial measurement used in the real estate industry to measure and compare the operating performance of real estate companies, although these companies may calculate funds from operations in different ways. Crescent reports FFO before taking into account impairment charges required by GAAP, which are related to its real estate assets. A reconciliation of Crescent's FFO before and after such impairments to GAAP net income is included in the Company's financial statements accompanying this press release and in the "Second Quarter 2004 Supplemental Operating and Financial Data" located on the Company's website. FFO should not be considered an alternative to net income. According to John C. Goff, Vice Chairman and Chief Executive Officer, "Our second quarter FFO of $0.27 per share was in line with our expectations of $0.26 to $0.28 per share. Although our markets continue to be challenging, we still see 2004 as a year of stabilization, and we continue to actively manage and reposition our portfolio for improving fundamentals. "Strategically, we are adapting to the current real estate environment in which many investors are seeking direct real estate ownership. We continue to capitalize on this meaningful trend through joint ventures with institutional partners who seek the alignment of interests with our equity investments and who value our management platform. Additionally, we continue to sell non- core assets and expand our joint-venture program on our existing portfolio, as well as on new acquisitions. In the second quarter alone, we were successful in selling three office properties totaling 784,000 square feet that did not meet our long-term investment criteria. We are also under contract to acquire a high-quality Miami office property, The Alhambra, which will be a future candidate for joint venture." On July 15, 2004, Crescent announced that its Board of Trust Managers had declared cash dividends of $0.375 per share for Common, $0.421875 per share for Series A Convertible Preferred, and $0.59375 per share for Series B Redeemable Preferred. The dividends are payable August 13, 2004, to shareholders of record on July 30, 2004. Business Sector Review Office Sector (67% of Gross Book Value of Real Estate Assets as of June 30, 2004) Operating Results Office property same-store net operating income declined 2.9% for the three months ended June 30, 2004 from the same period in 2003 for the 26.0 million square feet of office property space owned during both periods, excluding properties held for sale. Average occupancy for these same-store properties for the three months ended June 30, 2004 was 86.1% compared to 85.7% for the same period in 2003. Crescent's overall office portfolio, excluding properties held for sale, was 88.1% leased and 87.0% occupied as of June 30, 2004. During the three months ended June 30, 2004 and 2003, Crescent received $5.9 million and $0.9 million, respectively, of lease termination fees. Crescent's policy is to exclude lease termination fees from its same-store NOI calculation. Office property same-store net operating income declined 3.5% for the six months ended June 30, 2004 from the same period in 2003 for the 26.0 million square feet of office property space owned during both periods, excluding properties held for sale. Average occupancy for these same-store properties for the six months ended June 30, 2004 was 85.8% compared to 85.7% for the same period in 2003. During the six months ended June 30, 2004 and 2003, Crescent received $7.2 million and $3.0 million, respectively, of lease termination fees. Crescent's policy is to exclude lease termination fees from its same-store NOI calculation. The Company leased 1.0 million net rentable square feet during the three months ended June 30, 2004, of which 509,000 square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 9.0% from the expiring rates for the leases of the renewed or re-leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.87 per square foot per year and leasing costs were $1.17 per square foot per year. The Company leased 2.3 million net rentable square feet during the six months ended June 30, 2004, of which 1.2 million square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 13.1% from the expiring rates for the leases of the renewed or re- leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.77 per square foot per year and leasing costs were $1.00 per square foot per year. Denny Alberts, President and Chief Operating Officer, commented, "We saw a modest rise in our office occupancy which ended the second quarter at 87.0%, up from 86.4% at the end of the first quarter, both excluding properties held for sale. We are still focused on achieving stabilized occupancy levels over the next 12 to 18 months and, upon stabilization, we expect to begin to see meaningful pricing power. "Today, our portfolio expirations continue to be manageable. At the beginning of 2004, we had 5.4 million gross square feet of leases scheduled to expire for the year. Of that, 90% has been addressed - 86% by signed leases and 4% by leases in negotiation. 2005 expirations represent approximately 10% of the portfolio, for which our leasing teams have already made progress." Acquisitions The pending acquisition of The Alhambra, a 318,000 square-foot Class A office property located in the Coral Gables submarket in Miami, is expected to close in August. The office property is currently 93% leased. On May 10, 2004, Crescent acquired the remaining office property within the Hughes Center office complex in Las Vegas for $18.3 million. This 86,000 square-foot office property was not a part of the original portfolio acquisition, as a third-party joint-venture partner expressed the desire to exercise its right of first refusal. However, this exercise option was later declined, at which time, Crescent agreed to purchase the property. Dispositions On July 29, 2004, Crescent sold 12404 Park Central, a 239,000 square-foot Class A office property located in the LBJ Freeway submarket of Dallas. The sale generated proceeds, net of selling costs, of approximately $9.3 million, which were used to pay down property-level secured debt. On July 2, 2004, Crescent sold 5050 Quorum, a 134,000 square-foot Class A office property located in the Quorum/Bent Tree submarket of Dallas. The sale generated proceeds, net of selling costs, of approximately $8.9 million, which were used to pay down debt on the Company's revolving credit facility. Crescent retained the management and leasing responsibilities for this property. On June 29, 2004, Crescent sold Addison Tower, a 146,000 square- foot Class A office property located in the Quorum/Bent Tree submarket of Dallas. The sale generated proceeds, net of selling costs, of approximately $8.8 million, which were used to pay down debt on the Company's revolving credit facility. On June 17, 2004, Crescent sold Ptarmigan Place, a 419,000 square- foot Class A office property located in the Cherry Creek submarket southeast of downtown Denver. The sale generated proceeds, net of selling costs, of $28.2 million, which were used to pay down property-level secured debt. On April 13, 2004, Crescent sold Liberty Plaza, a 219,000 square- foot Class A office property located in North Dallas. The sale generated proceeds, net of selling costs, to Crescent of approximately $10.8 million, which were used to pay down the Company's revolving credit facility. Other Announcements On May 17, 2004, Crescent announced that El Paso Corporation plans to move all personnel from Crescent's Greenway Plaza complex, located in the Buffalo Speedway submarket of Houston, to El Paso's existing headquarters in downtown Houston. The move is expected to be complete by year-end 2004. As of June 30, 2004, three El Paso subsidiaries leased a combined total of 912,000 square feet in Greenway Plaza, which, under current terms, translates into 4.6% of Crescent's total annual office revenue. The El Paso subsidiaries are current on their rental obligations to Crescent, and Crescent's management expects that they will uphold the terms of their respective leases in Greenway Plaza, the majority of which expires in 2014. Resort / Hotel Sector 12% of Gross Book Value of Real Estate Assets as of June 30, 2004 Destination Resort Properties Same-store NOI for Crescent's five resort properties declined 26% for the three months ended June 30, 2004 from the same period in 2003. The average daily rate increased 10% and revenue per available room increased 3% for the three months ended June 30, 2004, compared to7 the same period in 2003. Weighted average occupancy was 64% for the three months ended June 30, 2004, compared to 68% for the three months ended June 30, 2003. Same-store NOI for Crescent's five resort properties declined 11% for the six months ended June 30, 2004 from the same period in 2003. The average daily rate increased 7% and revenue per available room increased 2% for the six months ended June 30, 2004, compared to the same period in 2003. Weighted average occupancy was 66% for the six months ended June 30, 2004, compared to 69% for the six months ended June 30, 2003. The decline in NOI for the three months and six months ended June 30, 2004, as compared to the prior year, is primarily the result of lower occupancy at Fairmont Sonoma Mission Inn & Spa and Ventana Inn & Spa due to renovations requiring 43% and 19% of the resort rooms, respectively, to be out of service for a period of time. The Sonoma renovation began in November 2003 and was completed in July, while the Ventana renovation began in April 2004 and will be completed by the end of September 2004. Residential Development Sector 16% of Gross Book Value of Real Estate Assets as of June 30, 2004 Upscale Residential Development Properties Crescent's overall residential investment generated $5.2 million and $11.3 million in FFO for the three months and six months ended June 30, 2004, respectively. This compares to $5.7 million and $11.0 million in FFO generated for the three months and six months ended June 30, 2003, respectively. Temperature-Controlled Logistics Sector (5% of Gross Book Value of Real Estate Assets as of June 30, 2004) Temperature-Controlled Logistics Properties Crescent's investment in temperature-controlled logistics properties generated $3.1 million and $8.0 million in FFO for the three months and six months ended June 30, 2004, respectively. This compares to $5.1 million and $12.1 million of FFO generated for the three months and six months ended June 30, 2003, respectively. The decline in FFO is primarily due to an increase in interest expense associated with the $254 million financing with Morgan Stanley completed in February 2004 and a decrease in rental payments as a result of start-up costs incurred by the tenant in connection with its preparation of warehouse space for new customer business. Balance Sheet Review On June 28, 2004, the Company obtained a loan from an affiliate of Lehman Brothers Holding, Inc. in the amount of $90 million, which is secured by the Fountain Place(R) office property in downtown Dallas. The loan bears interest at LIBOR + 150 basis points and matures in March 2005. Subsequently, on June 28, the Company entered into a transaction with Lehman, allowing Crescent, for tax purposes, to take advantage of a reverse Section 1031 like-kind exchange, following the acquisition of the Hughes Center office portfolio in Las Vegas. Crescent sold its interest, subject to the $90 million financing mentioned above, in the Fountain Place office property in Dallas to Crescent FP Investors, L.P., an entity, which is owned 99.9% by an affiliate of Lehman and 0.1% by Crescent. The sale generated net proceeds of approximately $78.2 million. As part of the transaction, Lehman has an unconditional right to sell its interest to Crescent at any time prior to November 30, 2004, for an agreed upon fair value of $79.9 million. Because a contingency exists, the sale is accounted for as a financing transaction for GAAP purposes. Therefore, both the asset and related debt remain on the Company's consolidated balance sheet until the contingency is satisfied. Crescent has retained the management and leasing responsibilities for Fountain Place. Also, on June 28, the Company paid off the $220 million Deutsche Bank -- CMBS loan with approximately $168.2 million in proceeds from the aforementioned loan on Fountain Place and sale of interest to Lehman and $51.8 million in borrowings from the Company's revolving credit facility. Earnings Outlook Crescent addresses earnings guidance in its earnings conference calls and provides documentation in its quarterly supplemental operating and financial data reports. Refer to the following paragraphs for details about accessing today's conference call, presentation, and supplemental operating and financial data report. Changes In Statistical Reporting Methods Beginning in the first quarter of 2004, the Company implemented two changes in office segment statistical reporting methods. First, to more appropriately reflect occupancy trends in continuing operations, the Company now excludes properties held for sale from occupancy and same-store statistics as noted. In addition, the Company's same-store statistics now include 100% of operations for all consolidated and unconsolidated joint-venture properties, rather than the Company's pro rata share of joint- venture properties as in previous disclosures. In addition, beginning in the second quarter of 2004, the Company is no longer providing same-store statistics for its business- class hotel properties. Out of four hotels owned, two are now categorized as properties held for sale; therefore, same-store statistics for continuing operations are no longer considered useful. Supplemental Operating And Financial Data Crescent's "Second Quarter Supplemental Operating and Financial Data" is available on the Company's Website (www.crescent.com) on the Investor Relations page. To request a hard copy, please call the Company's investor relations department at (817) 321-2180. About the Company Celebrating its tenth year, Crescent Real Estate Equities Company (NYSE:CEI) is one of the largest publicly held real estate investment trusts in the nation. Through its subsidiaries and joint ventures, Crescent owns and manages a portfolio of 75 premier office buildings totaling 30 million square feet primarily located in the Southwestern United States, with major concentrations in Dallas, Houston, Austin, Denver, Miami and Las Vegas. In addition, Crescent has investments in world-class resorts and spas and upscale residential developments. For more information, visit the Company's website at http://www.crescent.com/ * * * As reported in the Troubled Company Reporter's July 2, 2004, edition, Standard & Poor's Ratings Services lowered its corporate credit ratings on Crescent Real Estate Equities Co. and its operating partnership, Crescent Real Estate Equities L.P., to 'BB-' from 'BB'. In addition, the rating on the company's senior unsecured notes is lowered to 'B' from 'B+', and the rating on the company's preferred stock is lowered to 'B-' from 'B'. The outlook is revised to stable from negative. "The lowered ratings reflect office market conditions that remain persistently weak, pressuring Crescent's highly concentrated portfolio," said Standard & Poor's credit analyst Elizabeth Campbell. "They also reflect tenant concentration concerns, an aggressive financial profile with weak coverage measures, limited financial flexibility, and a high dividend payout ratio." CROMPTON CORP: Prices $600 Million Offering of 9-7/8% Senior Notes ------------------------------------------------------------------ Crompton Corporation (NYSE:CK) priced its previously announced private offering of $600 million aggregate principal amount of senior notes. The new senior notes are a combination of: -- $375 million of 9-7/8% Senior Notes due 2012 (with a yield to maturity of 10.0%), and -- $225 million of Libor plus 5.75% Senior Floating Rate Notes due 2010 (interest rate reset quarterly). Closing of the senior notes offering is expected to occur Aug. 16, 2004, and is subject to customary closing conditions, and the Company entering into new credit facilities in a minimum principal amount of $200 million, the three year extension of the Company's domestic accounts receivable program, and the consummation of the Company's tender offer for any and all of its outstanding 8.50% Senior Notes due 2005 and 6.125% Senior Notes due 2006. The senior notes were offered in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the United States pursuant to Regulation S under the Securities Act. The notes have not been registered under the Securities Act and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements. * * * As reported in the Troubled Company Reporter's July 23, 2004, edition, Standard & Poor's Ratings Services lowered the ratings on the existing senior notes and debentures of Middlebury, Connecticut-based Crompton Corp. to 'B+' from 'BB-'. The 'BB-' corporate credit rating of this specialty chemicals and polymer products producer is affirmed and the outlook remains negative. The existing notes, which are assigned a recovery rating of '3' and will become secured upon the close of the new revolving credit facility, are now rated one notch lower than the corporate credit rating. The lower rating reflects the notes' disadvantaged position since lenders under the new credit facility retain a first-priority distribution on the collateral in an amount equal to 10% of the company's consolidated net tangible assets. Standard & Poor's also assigned a 'B' rating to proposed tranches of senior unsecured debt totaling $600 million with maturity dates of 2010, 2011, and 2014. The new unsecured notes are rated two notches lower than the corporate credit rating, reflecting the priority of secured debt as well as substantial subsidiary obligations relative to total assets. Standard & Poor's assigned a 'BB-' bank loan rating and its '2' recovery rating to a new secured $250 million revolving credit facility maturing in 2009. The 'BB-' rating is the same as the corporate credit rating; this and the '2' recovery rating indicate that bank lenders can expect a substantial recovery of principal in the event of default. "The ratings on Crompton reflect the vulnerability of its operating margins and earnings to competitive pricing pressures, raw materials costs, and the cyclicality of its markets; and weak cash flow protection measures," said Standard & Poor's credit analyst Wesley E. Chinn. DII/KBR: Halliburton Names Andrew Lane as KBR President & CEO ------------------------------------------------------------- Halliburton (NYSE: HAL) named Andrew (Andy) Lane, 45, president and chief executive officer of KBR, the engineering and construction subsidiary of Halliburton. Mr. Lane will succeed Randy Harl, 53, who will assume the role of chairman of KBR. "Randy has led KBR through a period of tremendous growth and has established strategies that will better position KBR for the future," said Dave Lesar, chairman, president and chief executive officer, Halliburton. "Andy has done an outstanding job of managing our regional organization and the Landmark division and I have great confidence that the direction he will provide will continue to position KBR as one of the leading engineering and construction companies in the world." Prior to his appointment, Mr. Lane, a more than 20-year industry veteran, was senior vice president of Halliburton's Energy Services Group's regional organization, after serving as president and CEO of Landmark Graphics since 2002. Until then, he held a number of management, director and vice presidential positions, all of which were focused on Halliburton's global well completions and production enhancement. From 1999 to 2000, Mr. Lane held the position of global vice president for Production Enhancement, the Energy Services Group's largest product service line. Mr. Lane joined Halliburton in 1984 as a design engineer, specializing in well completion products. "I'm excited to work with the engineering and construction unit to continue building the company's global operations while improving its financial performance," said Andy Lane, president and chief executive officer, KBR. Mr. Lane's career in the oil and gas industry began as a field engineer for Gulf Oil. He holds a bachelor's degree in mechanical engineering from Southern Methodist University. Mr. Lane is a registered professional mechanical engineer in the state of Texas and a member of the Society of Petroleum Engineers and the Society of Exploration Geophysicists. He recently joined the executive board of Southern Methodist University's School of Engineering. * * * In a regulatory filing with the Securities and Exchange Commission, Mr. Lane discloses that he acquired 20,000 shares of Halliburton Company common stock. The shares were awarded pursuant to the Halliburton Company Stock and Incentive Plan. The Plan provides for the surrender of common stock to the Company to satisfy withholding tax obligations. On July 23, 2004, the closing price of Halliburton Company Common Stock on the New York Stock Exchange was $30.55 per share. Mr. Lane now beneficially owns 56,706 shares of Halliburton Company common stock. Mr. Lane also beneficially owns options to buy common stock: Exercise Date Expiration Number Price Exercisable Date of Shares -------- ----------- ---------- --------- $44.9375 06/02/1998 06/02/2008 2,000 20.0625 02/17/1999 02/17/2009 4,500 39.5000 12/02/1999 12/02/2009 9,000 34.7500 12/06/2000 12/06/2010 10,500 31.5500 07/19/2001 07/19/2011 5,175 28.8600 03/16/2004 03/16/2014 8,020 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. (DII & KBR Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) DOMAN IND: Trading Under Western Forest WEF Symbol on TSX Begins ---------------------------------------------------------------- Doman Industries' (n/k/a Western Forest Products, Inc.) common shares commenced trading on August 3, 2004, on the Toronto Stock Exchange under the symbol WEF. About Western Forest Western Forest is an integrated Canadian forest products company and the second largest coastal woodland operator in British Columbia. It is the successor business to Doman Industries Limited. Principal activities conducted by Western Forest and its subsidiaries include timber harvesting, reforestation, sawmilling logs into lumber and wood chips, value-added remanufacturing and producing NBSK pulp. All of Western Forest's operations, employees and corporate facilities are located in the coastal region of British Columbia and its products are sold in 30 countries worldwide. This press release contains statements that are forward-looking in nature. Such statements involve known and unknown risks and uncertainties that may cause the actual results of Doman or Western Forest to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among others: general economic and business conditions, product selling prices, raw material and operating costs, changes in foreign-currency exchange rates and other factors referenced herein and in Doman's annual information form and annual report. About Doman Following implementation of the Plan, Doman will no longer carry on any active business or hold any material assets. * * * As reported in the Troubled Company Reporter, July 29, 2004, edition, Doman Industries Limited and Western Forest Products Inc. reported that, in connection with the Plan of Compromise and Arrangement in respect of Doman and certain of its subsidiaries under the Companies' Creditors Arrangement Act, the transactions contemplated by the Plan were completed on July 27, 2004 and the Plan was implemented. The stay of proceedings under the CCAA was lifted on July 28, 2004, at 11:59 p.m. Under the Plan, Western Forest became the successor business to Doman. A total of 25,635,931 Common Shares of Western Forest and US$221 million principal amount of Secured Bonds of Western Forest (issued at a price of US$950 per US$1,000 principal amount) were distributed under the Plan to former creditors of Doman and certain standby purchasers. A total of 19,226,931 Common Shares were distributed to the group of former unsecured noteholders and trade creditors of Doman and certain of its subsidiaries. A total of 2,890,053 Common Shares and US$99,657,000 principal amount of Secured Bonds were issued upon the exercise of Class A and B Warrants of Western Forest distributed by Western Forest on June 29, 2004 to that group. As noted in Doman's press release issued on July 19, 2004, in excess of 90% of the Class A and B Warrants were exercised. Certain standby purchasers were required under a standby commitment to subscribe for and take up the Common Shares and Secured Bonds not acquired pursuant to the exercise of the Class A and B Warrants. A total of 3,518,947 Common Shares and US$121,343,000 principal amount of Secured Bonds were issued to the standby purchasers pursuant to that commitment and a concurrent private placement. The proceeds received from the exercise of the warrants, the standby commitment and the private placement were used by Doman primarily to repay US$160,000,000 of 12% series A and series B secured notes and related costs and to fund its CCAA exist costs. The Plan did not provide for any distributions to Doman shareholders other than Class C Warrants of Western Forest. Certificates for the Class C Warrant are expected to be mailed to Doman shareholders shortly, although due to the requirement to round down all fractional Class C Warrants Doman shareholders holding fewer than 67 shares will not receive any Class C Warrants. Each Class C Warrant entitles the holder to purchase one common share of Western Forest, is non-transferable and has a five-year term, subject to certain early termination provisions. The Class C Warrants will not be listed. The holders of Class A and B Shares of Doman are entitled to receive on a pro rata basis, in the aggregate, 45% of the Class C Warrants. The holders of the Class A Preferred Shares of Doman are entitled to receive on a pro rata basis, in the aggregate, 55% of the Class C Warrants. The Class C Warrants are to be issued effective today in three tranches exercisable for an aggregate of up to 569,630, 854,446 and 1,424,076 Common Shares at exercise prices of Cdn$16.28, Cdn$26.03 and Cdn$33.83. Western Forest has adopted an incentive stock option plan for its directors, officers, employees and consultants and has reserved 2,500,000 Common Shares for issuance thereunder. Finally, Western Forest and certain of its post-Plan implementation subsidiaries entered into a credit agreement with CIT Business Credit Canada, Inc. That credit pact provides CDN$100 million of working capital to Western Forest to replace an existing working capital facility between CIT and Doman. DPL INC: S&P Maintains BB- Corporate Credit Ratings on CreditWatch ------------------------------------------------------------------ Standard & Poor's Ratings Services's 'BB-' corporate credit ratings on utility holding company DPL Inc. and its utility subsidiary, Dayton Power & Light Co. (DP&L), remain on CreditWatch with negative implications. This CreditWatch update follows DPL's announcement that it was unable to file its 2003 Form 10-K by July 31, 2004 and that it can not provide a firm date for the filing of its 2003 Form 10-K and its Form 10-Q for the first and second quarters of 2004 at this time. As a result of the delay in filing the financial statements by July 31, 2004, and in accordance with the terms on its $175 million 8% senior notes due 2009, DPL will pay an additional 1% interest on the notes until the Form 10-K is filed, and an additional 0.5% interest on the notes until a registration statement relating to the notes is filed with the SEC. DPL and DP&L are based in Dayton, Ohio. The company has about $2.5 billion of total debt outstanding. "The further delay and the 1% interest step up on its $175 million 8% notes in and of itself do not have any immediate impact on DPL's credit quality," said Standard & Poor's credit analyst Brian Janiak. "However, DPL's continued delay, with no specified firm date on the filing of its 2003 Form 10-K or 2004 first and second quarter Forms 10-Q with the SEC, severely heightens our credit concerns," continued Mr. Janiak. Standard & Poor's is particularly concerned about the company's current liquidity position, its financial and operational strategy going forward, and the corporate governance policies and procedures the company plans to implement in order to improve its overall corporate governance and better protect the interest of its bond and stakeholders. Resolution of the CreditWatch listing is dependent on DPL's filing of its form 2003 10-K and demonstrated performance by the firm's new management team and board of directors. EDEN BIOSCIENCE: Receives Delisting Notice from Nasdaq ------------------------------------------------------ Eden Bioscience Corporation (NASDAQ: EDEN) has received a delisting warning letter from the Nasdaq Stock Market notifying it that the closing price per share for the Company's common stock was below the $1.00 minimum bid price for 30 consecutive trading days and that, as a result, the Company no longer meets Nasdaq's continued listing criteria. Nasdaq has provided the Company with 180 calendar days, or until January 26, 2005, to regain compliance. To regain compliance with the minimum bid price requirement, the closing bid price of the Company's common stock must remain above $1.00 for a minimum of ten consecutive trading days. If the Company does not regain compliance by January 26, 2005, and is not eligible for an additional compliance period, Eden Bioscience's common stock will be delisted from The Nasdaq National Market. Eden Bioscience management and Board of Directors are considering various alternatives to address this issue. About Eden Bioscience Eden Bioscience is a plant technology company focused on developing, manufacturing and marketing innovative, natural protein-based products for agriculture. We believe that our technology and products provide growers with new tools to improve crop production and plant protection. Our products are based on naturally occurring proteins called "harpins," which activate a plant's intrinsic ability to protect itself through growth and stress-defense responses. These responses enhance overall plant health, improve plant vigor and stamina, and result in improved crop quality, yield, and/or shelf life. Our headquarters are at 3830 Monte Villa Parkway, Suite 100, Bothell, WA 98021-7266, 425- 806-7300; http://www.edenbio.com/ * * * Liquidity Concerns In its Form 10-Q for the quarterly period ended March 31, 2004, filed with the Securities and Exchange Commission, Eden Bioscience reports: "The Company's operating expenditures have been significant since its inception. The Company currently anticipates that its operating expenses will significantly exceed net product sales and that net losses and working capital requirements will consume a material amount of its cash resources. If net product sales do not significantly increase in the near term, the Company will have to further reduce its operating expenses. The Company's future capital requirements will depend on the success of its operations. Management of the Company believes that the balance of its cash and cash equivalents at March 31, 2004 will be sufficient to meet its anticipated cash needs for net losses, working capital and capital expenditures for more than the next 12 months, although there can be no assurance in that regard. "In the future, the Company may require additional funds to support its working capital requirements or for other purposes and may seek to raise such additional funds through public or private equity financing or through other sources, such as credit facilities. The Company may be unable to obtain adequate or favorable financing at that time or at all. The sale of additional equity securities could result in dilution to the Company's shareholders." ELCOM INTERNATIONAL: Equity Deficit Narrows to $841K at June 30 --------------------------------------------------------------- Elcom International, Inc. (OTC Bulletin Board: ELCO and AIM: ELC and ELCS), reported its operating results for its second quarter ended June 30, 2004. Net sales for the quarter ended June 30, 2004 increased to $598,000 from $531,000 in the same period of 2003, an increase of $67,000, or 13%. Professional services revenue increased primarily due an increase in implementation activities in the U.K. related to the Scottish Executive's eProcurement Scotland program. Licenses and associated fees decreased primarily as a result of reduced licensing activity in the U.S. in 2004 versus 2003. The decrease in licenses and associated fees was more than offset by the increase in Professional services revenue. Selling, general and administrative expenses -- SG&A -- for the quarter ended June 30, 2004 were $1,465,000 compared to $2,457,000 in the 2003 quarter, a decrease of $992,000 or 40%. Throughout the first three quarters of 2003, the Company implemented cost containment measures designed to align its SG&A expenses with lower than anticipated revenues. Those measures included personnel reductions throughout most functional and corporate areas. Reductions in personnel resulted in a decrease in personnel expense in the second quarter of 2004 of approximately $333,000 when compared to the second quarter of 2003. In March 2004, the Company began hiring several support services staff in the U.K. and U.S. in order to service the expanding demand in the municipal market in the U.K. and in anticipation of the funding of the Company via the sale of Regulation S Shares. The remaining decrease in SG&A from the 2003 quarter to the 2004 quarter is due largely to a reduction in depreciation and amortization expense, as various Company assets have been fully depreciated/amortized, as well as credits negotiated with two service providers which resulted in one-time credits of $196,000 in the 2004 quarter. The Company reported a $1,020,000 operating loss from continuing operations for the quarter ended June 30, 2004 compared to a loss of $2,129,000 reported in the comparable quarter of 2003, a decrease in the reported loss of $1,109,000, or 52%. This smaller operating loss from continuing operations in the first quarter of 2004 compared to the 2003 quarter was due to both the reduction in SG&A and the increase in net sales. The Company's net loss from continuing operations for the quarter ended June 30, 2004 was $1,072,000, a decrease of $1,114,000 or 51% from the comparable quarterly loss in 2003 of $2,186,000, as a result of the factors discussed. Net sales for the six months ended June 30, 2004 increased to $2,307,000 from $1,200,000 in the same period of 2003, an increase of $1,107,000. Licenses and associated fees increased primarily due to recording the fourth and final lump sum license payment from Capgemini UK Plc -- formerly, Cap Gemini Ernst and Young UK Plc -- of $1,142,000 which was earned upon signing the thirteenth customer of the eProcurement Scotland program in the first quarter of 2004 (this license fee is non-recurring). Professional services fees increased by $114,000, from $505,000 in 2003 to $619,000 in 2004, reflecting more implementation work and other professional services activities than were recorded in the first six months of 2003. SG&A for the six months ended June 30, 2004 was $3,138,000 compared to $4,807,000 in the first half of 2003, a decrease of $1,669,000 or 35%. Throughout the first three quarters of 2003, the Company implemented cost containment measures designed to align its SG&A expenses with lower than anticipated revenues. Those measures included personnel reductions throughout most functional and corporate areas. Reductions in personnel resulted in a decrease in personnel expense in the first six months of 2004 of approximately $861,000 when compared to the first six months of 2003. In March 2004, the Company began hiring several support services staff in the U.K. and U.S. in order to service the expanding demand in the municipal market in the U.K. and in anticipation of the funding of the Company via the sale of Regulation S Shares. The remaining decrease in SG&A from the first half of 2003 to the first half of 2004 is due largely to a reduction in depreciation and amortization expense, as various Company assets have been fully depreciated/amortized, as well as credits negotiated with two service providers which resulted in one-time credits of $196,000 in the 2004 period. In the first half of 2003 the Company's SG&A expenses were reduced by the reversal of a franchise tax accrual of $506,000, as payment was no longer deemed probable. The Company reported an operating loss from continuing operations of $1,090,000 for the six months ended June 30, 2004 compared to a loss of $4,063,000 reported in the comparable six months of 2003, a decrease in the reported loss of 73%, or $2,973,000. This smaller operating loss from continuing operations in the first six months of 2004 compared to the first half of 2003 was due to both the reduction in SG&A and the increase in license and associated fees revenue in the first quarter of 2004. The Company's net loss from continuing operations for the six months ended June 30, 2004 was $1,245,000, a decrease of $2,386,000 from the $3,631,000 loss reported in the first half of 2003, as a result of the factors discussed. Robert J. Crowell, the Company's Chairman and CEO, stated, "Our second quarter 2004 earnings do not yet reflect the full anticipated increase in activity under our agreement with Capgemini associated with the Scottish Executive, which began late last year. Our 2004 six-month results were substantially enhanced by the recognition of our final lump sum payment from Capgemini associated with the Scottish Executive. Elcom's sales pipeline is still strong but has slowed a bit during the summer months; however the Company is in the process of responding to several tender requests and anticipates activity to accelerate after the summer. I expect to see more activity with our channel partners and additional opportunities in the municipal market in the U.K." At June 30, 2004, stockholders' deficit narrows to $841,000 compared to a $2,778,000 deficit at March 31, 2004. Factors Affecting Future Performance A significant portion of the Company's revenues from continuing operations in the first quarter of 2004 (approximately $1,142,000 after currency conversions) are from recognition of the final lump sum license fee from Capgemini related to the eProcurement Scotland program. The eProcurement Scotland program is expected to be an ongoing source of revenues for the Company; however, because this was the final lump sum payment and is a non-recurring fee, it is anticipated the Company's revenues from this source will be lower in the remaining quarters of 2004. These forward-looking statements involve a number of risks and uncertainties, which would cause the Company's future results to differ materially from those anticipated, including: (i) the Company's history of ongoing operating losses; (ii) the overall marketplace and client's acceptance and usage of eCommerce software systems, specifically the Company's PECOS eProcurement and eMarketplace systems and demand thereof by public sector organizations in the U.K., both under the Company's contract with Capgemini plc (U.K.) associated with the Scottish Executive and by municipalities in England, the impact of competitive technologies, products and pricing, particularly given the substantially larger size and scale of certain competitors and potential competitors, and control of expenses, revenue growth, corporate demand for eProcurement and eMarketplace solutions; (iii) the consequent results of operations given the aforementioned factors; and (iv) the possibility that the Company's revenues may not reach the level necessary to support positive cash flow during 2005 and if so, the Company's need to raise additional working capital to fund operations in the future; and (v) the availability and terms of any such funding to the Company, if available, and other risks detailed from time to time in the Company's Annual Report on Form 10-K, as amended, filed on May 10, 2004, in its Forms 10-QSB for the first and second quarters of 2004, and its other SEC reports and statements. Elcom International, Inc. (Nasdaq: ELCO), operates two wholly- owned subsidiaries: elcom, inc., a leading international provider of remotely-hosted eProcurement and Private eMarketplace solutions and Elcom Services Group, Inc., which is managing the transition of the recent sale of certain of its assets and customer base. elcom, inc.'s innovative remotely- hosted technology establishes the next standard of value and enables enterprises of all sizes to realize the many benefits of eProcurement without the burden of significant infrastructure investment and ongoing content and system management. PECOS Internet Procurement Manager, elcom, inc.'s remotely hosted eProcurement and eMarketplace enabling platform was the first "live" remotely-hosted eProcurement system in the world. ENERSYS: S&P Raises Corporate Credit Rating One Notch to BB ----------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on industrial battery manufacturer EnerSys (formerly EnerSys Holdings Inc.) and its EnerSys Capital Inc. unit to 'BB' from 'BB-'. At the same time, Standard & Poor's raised its senior secured bank loan rating on EnerSys Capital's $480 million senior secured first-lien credit facility to 'BB' and affirmed its recovery rating of '4'. The bank facility consists of a $100 million revolving credit facility due 2009 and a $380 million term loan due 2011. All ratings were removed from CreditWatch, where they were placed on June 2, 2004. Standard & Poor's also withdrew its rating on the Reading-Pennsylvania-based company's $120 million senior second-lien term loan due 2012. The outlook is stable. "The upgrade reflects Standard & Poor's expectations of a sustained improvement in the company's debt leverage following the completion of an initial public offering of 12.5 million shares of common stock," said Standard & Poor's credit analyst Linli Chee. The IPO sold at $12.50 per share, yielding net proceeds of roughly $140 million. Underwriters also have the option to purchase an additional 1.88 million shares of common stock to cover over-allotments. Proceeds will be used to prepay the principal on the company's $120 million senior second-lien term loan due 2012 and to prepay $17.9 million of its $380 million senior secured term loan B due 2011. As a result, pro forma total debt outstanding (adjusted for operating leases) at March 31, 2004, will decline to about $393.8 million versus $531.7 million in the prior year. The ratings also take into account the niche nature of the industrial battery market, exposure to increasing lead costs and cyclical end-user markets, and risks associated with the ongoing ability to use the Exide trademark (representing 12% of net 2004 sales). These risk factors are partially offset by the company's leading market share, recognized brand names, expected healthy intermediate-term demand prospects in several key markets, and greater access to capital. ENRON: ECTRIC Demands $3.5 Million Payment from Louis Dreyfus LPG ----------------------------------------------------------------- Under a transaction agreement, dated June 1, 2001, between Enron Capital & Trade Resources International Corporation and Louis Dreyfus LPG Services, Ltd., ECTRIC agreed to sell, and Dreyfus LPG agreed to buy, propane at a specified price and for a fixed period of time. To this end, in November 2001, ECTRIC delivered propane to Dreyfus LPG and Dreyfus LPG accepted the propane, for which it owed ECTRIC $3,576,564. On November 13, 2001, ECTRIC sent an invoice to Dreyfus LPG for the delivered propane and demanded payment by December 20, 2001. However, Dreyfus LPG ignored the demand and refused to pay ECTRIC for the delivered propane. On August 26, 2003, ECTRIC again sent a letter to Dreyfus LPG demanding payment for the delivered propane. Dreyfus LPG continued to ignore the demand. Jonathan D. Polkes, Esq., at Cadwalader, Wickersham & Taft, in New York, reports that Dreyfus LPG has also refused to pay ECTRIC amounts owed under certain swap agreements. The Swap Agreements entered into between ECTRIC and Dreyfus LPG in 2001 were financial transactions involving a "fixed-for-floating" propane price swap. Under the Swap Agreements, if a party's conduct causes an Event of Default, the non-defaulting party may designate an Early Termination Date, whereby all outstanding Transactions become terminated, and one party would have to pay the other an "Early Termination Payment." Mr. Polkes explains that the Early Termination Payment is largely a function of movements in the market price of the particular commodity during the term of an underlying Transaction. Importantly, the Swap Agreements provide that the Early Termination Payment must be paid to whomever it is owed, regardless of which party is the Defaulting Party. This provision is commonly referred to as a "full two-way payment" clause. On January 11, 2002, Dreyfus LPG informed ECTRIC that, as a result of ECTRIC's alleged refusal to pay Dreyfus LPG some unspecified amount of money under the Swap Agreements, ECTRIC was in default and, thus, Dreyfus LPG was designating that date as the Early Termination Date. Under the Swap Agreements, Dreyfus LPG was required to calculate an Early Termination Payment and to notify ECTRIC of the Early Termination Payment amount and to whom it was owed. However, Dreyfus LPG failed and refused to comply with this contractual obligation. With Dreyfus LPG's failure to calculate an Early Termination Payment, ECTRIC made its own calculation and determined that Dreyfus LPG owed ECTRIC an Early Termination Payment in the amount of at least $1,602,495, plus interest at the applicable rate. On August 26, 2003, ECTRIC notified Dreyfus LPG of the calculation and demanded that Dreyfus LPG pay the Early Termination Payment. To date, Dreyfus LPG has failed and refused to provide the Early Termination Payment to ECTRIC. Accordingly, ECTRIC asks the Bankruptcy Court for a judgment: (a) declaring that Dreyfus LPG has wrongfully exercised control over ECTRIC estate's property; (b) declaring that Dreyfus LPG breached its contractual obligations by failing to pay ECTRIC: -- $3,576,564, plus interest, for propane delivered by ECTRIC, as required under the clear and express terms of a Transaction Agreement; and -- $1,602,495, plus interest, as required under the clear and express terms of Swap Confirmation Agreements; (c) to the extent Dreyfus LPG or any of its affiliates attempt to enforce the non-mutual setoff provision found within the General Terms and Conditions of Confirmation Agreement, which was incorporated by reference in each of the Swap Confirmation Agreements, declaring that the non-mutual setoff provision is invalid, unenforceable and avoidable under Section 553 of the Bankruptcy Code; (d) declaring that Dreyfus LPG has violated the automatic stay; (e) declaring that the choice of forum provision within the Swap Agreements should not be enforced; and (f) awarding ECTRIC damages due to Dreyfus LPG's failure to pay the owed amounts and Dreyfus LPG's unjust enrichment, and interest, attorney's fees and other expenses. Broad Ramifications The Swap Agreements contain a choice of forum provision providing for all disputes arising from the Swap Agreements to be submitted to the exclusive jurisdiction of the High Court of Justice, England. Despite the existence of this choice of forum provision, however, it is imperative that the Court resolve the core bankruptcy issues raised in the Complaint, Mr. Polkes says. According to Mr. Polkes, the issues to be addressed in the adversary proceeding are not unique to Dreyfus LPG. Rather, the issues will be involved in the adjudication of the claims of numerous trading counterparties. The Debtors are parties to thousands of contracts for the physical delivery of electricity, power, natural gas and other commodities. The Debtors are also parties to thousands of financial contracts that are referenced to various commodity prices or other indexes. The substantial majority of these physical and financial trading contracts contain choice of forum provisions as well as arbitration provisions. In addition, virtually all of these trading contracts contain netting and setoff provisions, termination provisions, or provisions related to final settlement payments upon termination that implicate core bankruptcy issues. The counterparties to the various trading contracts owe billions of dollars in accounts receivable and termination payments to the Debtors. Thus, the decision on the core bankruptcy issues implicated by all those trading agreements will directly affect the claims of literally hundreds, perhaps thousands, of creditors. "Equally important, the decision of these issues will have dramatic impact on the distribution of assets by the Debtors to all their creditors," Mr. Polkes notes. The accounts receivable and settlement or termination payments represent either the largest or one of the largest remaining assets of the Debtors' estates. The success or failure of the reorganization effort and the extent of the recoveries for all creditors depends on a uniform, consistent application of the core bankruptcy issues to the claims. The significant core bankruptcy issues implicated by the adjudication of the agreements, many of which will be cases of first impression, should be resolved by the Bankruptcy Court and not by different arbitrators or courts in different jurisdictions, Mr. Polkes assserts. Dreyfus LPG Responds Bruce Paulsen, Esq., at Seward & Kissel, LLP, in New York, contends that: (1) The Complaint fails to state a claim on which protection may be granted; (2) The Trade Confirmation and the Swap Agreements require that any dispute arising under the Contracts will be submitted to the courts of England, which will have exclusive jurisdiction over all disputes; (3) The Trade Confirmation and the Swap Agreements state that the contracts will be governed and construed by, and the relations between the parties determined in accordance with, the law of England; (4) Pursuant to the terms of the Swap Agreements, Dreyfus LPG, as the non-defaulting party, at its option and in its discretion, is entitled to set off against any amounts owed to ECTRIC any amounts payable by ECTRIC to Dreyfus LPG under the Swap Agreements or any other agreements, instruments and undertakings between the parties; (5) The Trade Confirmation requires Dreyfus LPG to make payments only against presentation of a commercial invoice, full set of original clean bills of lading or a letter of indemnity. To date, ECTRIC has failed to provide adequate demand; (6) Pursuant to the terms of the Swap Agreements, Dreyfus LPG, as the non-defaulting party, at its option and in its discretion, is entitled to set-off against any amounts owed ECTRIC any amounts payable by ECTRIC to LPG or any of its affiliates under the Swap Agreements or any other agreements, instruments or undertakings between ECTRIC and LPG or any of its affiliates. ECTRIC did not include in the Complaint the amounts owed by ECTRIC and its affiliates to Dreyfus LPG and its affiliates, including but not limited to Enron, ENA, EGLI, LDC, CETRAGPA and LDES. Thus, ECTRIC has failed to name indispensable parties to the litigation without which complete protection cannot be accorded to Dreyfus LPG; (7) By reason of its own acts or omissions, ECTRIC is barred from recovering from Dreyfus LPG by one or more of the doctrines of waiver, laches, unclean hands or estoppel; (8) ECTRIC is barred from recovering from Dreyfus LPG because it has made all payments due to ECTRIC; (9) ECTRIC cannot recover under a claim for unjust enrichment because it has asserted that Dreyfus LPG breached a written contract between the parties; (10) ECTRIC has repudiated the agreements, and therefore cannot recover from Dreyfus LPG under the agreements; and (11) ECTRIC's claims are barred by the statute of frauds. Under the laws of England, Dreyfus LPG is entitled to set off any amounts owed by ECTRIC or its affiliates to Dreyfus LPG or its affiliates. Applying the amounts owed by ECTRIC to Dreyfus against the amount claimed by ECTRIC in the Complaint results in a net amount due to Dreyfus. As stated in the proofs of claim filed by Louis Dreyfus Corporation, Louis Dreyfus Energy Service, LP and CETRAGPA, Dreyfus LPG is entitled to set off: (a) $1,957,672 owed to LDC by Enron Corporation; (b) $1,957,672 owed to LDC by Enron North America Corp.; (c) $6,433,551 owed to CETRAGPA by ECTRIC; (d) $182,987 owed to LDES by ECTRIC; (e) $2,795,015 owed to LDES by Enron Gas Liquids, Inc.; (f) $1,045,856 owed to LDES by ENA; and (g) $1,045,856 owed to LDES by Enron. Accordingly, Dreyfus LPG asks the Court to dismiss the Complaint in its entirety and award it its costs and disbursements. (Enron Bankruptcy News, Issue No. 119; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENRON: Oregon PUC Staff Doesn't Like PGE Sale to Oregon Electric ---------------------------------------------------------------- The Staff of the Oregon Public Utility Commission made its initial recommendation to the Commission that the sale of Portland General Electric (PGE), a subsidiary of Enron, to Oregon Electric Utility Company (OEUC), not be approved. The OPUC Staff "has concluded that the proposal, as it stands on July 21, 2004, falls short of demonstrating net benefits for customers," Bryan Conway, PUC staff case manager said. "The Commission is requiring a two-step assessment," focused on whether the proposed sale will: (1) provide a net benefit to the utility's customers, and (2) impose 'no harm' to the public at large?" The OPUC Staff says due to many unanswered questions about relevant issues, and risks these entail for customers, it has not been able to fully assess the downside risk to customers of the transaction. "We look forward to hearing from OEUC how it intends to mitigate a number of our concerns as well as those raised by other parties in this case," Mr. Conway added. On March 8, 2004, Oregon Electric Utility Company submitted its application to purchase Portland General Electric. OEUC would be a Limited Liability Company of which Texas Pacific Group, a private equity firm headquartered in Fort Worth, Texas would provide the bulk of the financial backing. Summary of Staff's testimony: * At this time, Staff recommends the Commission not approve OEUC's application; * Meaningful rate credits are the clearest method to offset the risks of the transaction; * Staff will have a recommendation on how to treat taxes by the conclusion of the case; * There are concerns regarding OEUC's ability to buy PGE without negative financial implications, cost-cutting plans, possibility of cross-subsidies and inter- jurisdictional cost shifts; * There is a potential need for an additional service quality measure that tracks issues such as billing accuracy; and * Staff continues to analyze the proposal. This is a preliminary recommendation from Staff. The applicants, OEUC, will have an opportunity to respond to the initial round of comments with its rebuttal testimony that is due by Monday, August 16, 2004. The other parties in the case, along with Staff, will continue to raise issues and participate in additional discovery and settlement discussions as the case progresses. At this time settlement conferences are scheduled for July 21, July 29, August 23, and September 27, 2004. A final decision by the Commission is expected by the end of the year. PGE serves approximately 741,000 customers in Oregon. (Enron Bankruptcy News, Issue No. 119; Bankruptcy Creditors' Service, Inc., 215/945-7000) FISHERS OF MEN CHRISTIAN: Voluntary Chapter 11 Case Summary ----------------------------------------------------------- Debtor: Fishers of Men Christian Fellowship Church 8623 Hemlock Hill Drive Houston, Texas 77083 Bankruptcy Case No.: 04-41043 Chapter 11 Petition Date: August 2, 2004 Court: Southern District of Texas (Houston) Judge: Letitia Z. Clark Debtor's Counsel: James B. Jameson, Esq. 2211 Norfolk, Suite 800 Houston, TX 77098-4044 Tel: 713-807-1705 Total Assets: $6,900,000 Total Debts: $5,370,467 The Debtor did not file a list of its 20-largest creditors. FLEMING COS: Court Nixes 30 Pension Claims Totaling $3.7 Million ---------------------------------------------------------------- In response to claim objections filed by Fleming Companies, Inc., Judge Walrath disallows 30 Pension Claims totaling $3,733,290. Certain Pension Plan Participants , including: Claimant Claim Amount -------- ------------ Lloyd R. Lee $60,720.00 John Martin 87,060.00 Raymond McCall 109,000.00 Llewellyn McIntyre 185,880.00 Frank P. Molnar 87,000.00 Sylvester Moser 72,085.68 Edward Moss 85,616.91 Richard F. Schuppler 48,000.00 Robert M. Streeter 152,864.00 Robert Williams 50,157.18 Theodore Williams 215,555.34 filed proofs of claim that assumed a termination of the Debtors' pension plan and a resulting loss of benefits. Fleming contested these contingent Claims and asked Judge Walrath to disallow and expunge them in their entirety. 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. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) FOSTER WHEELER: 61% of 6.75% Noteholders Tender in Amended Offer ---------------------------------------------------------------- On July 30, 2004, the Securities and Exchange Commission declared effective the registration statement for Foster Wheeler's (OTCBB:FWLRF) amended equity-for-debt exchange offer. Significant numbers of institutional investors have also agreed to tender their securities in the amended exchange offer. The company is in the process of distributing revised offering materials related to the amended exchange offer, which has been extended through August 30, 2004, subject to further extension. Institutional investors holding: -- 61.0% of the 6.75% Senior Notes due 2005, -- 85.0% of the 6.50% Convertible Subordinated Notes due 2007, -- 92.6% of the Robbins Series C and D Bonds due 2009, and -- 22.2% of the 9.00% Preferred Securities have agreed to tender their securities in the amended exchange offer. As previously announced, assuming the amended exchange offer is completed as proposed and at the minimum required participation levels, it would reduce Foster Wheeler's existing debt by approximately $410 million, extend the maturities on $135 million of debt to 2011, reduce interest expense by approximately $22 million per year, and, when combined with the sale of new notes to retire funded bank debt, eliminate substantially all material scheduled corporate debt maturities prior to 2011. "This is a significant milestone as we move toward the completion of our balance sheet restructuring, which we expect to complete in the third quarter," said Raymond J. Milchovich, chairman, president and chief executive officer. "We appreciate the hard work and commitment of the investors who have executed lock-up agreements, as well as the confidence in Foster Wheeler of those who will accept equity in the newly capitalized company in exchange for debt. The completion of the amended exchange as proposed will improve our financial position and provide important financial flexibility for all of our operating companies." The amended exchange offer modifies certain terms and conditions for the proposed exchange of: (i) 6.75% Senior Notes for a combination of equity and new senior secured notes due 2011; (ii) 6.50% Convertible Subordinated Notes and Robbins Bonds for equity; and (iii) 9.00% Preferred Securities for equity and warrants. The completion of the amended exchange offer is subject to, among other things, attaining certain minimum participation thresholds. A description of the differences in terms and conditions between the original and the amended exchange offer is set forth in the prospectus for the exchange. A copy of the prospectus relating to these securities and other related documents may be obtained from the information agent. The information agent for this exchange offer and consent solicitation is: Georgeson Shareholder Communications Inc. 17 State Street, 10th Floor New York, New York 10014 Georgeson's telephone number for bankers and brokers is 212-440-9800 and for all other security holders is 800-891-3214. Individuals holding their securities through brokers are urged to contact their brokers to receive a copy of the prospectus and to tender their securities. The dealer manager for the exchange offer and consent solicitation is: Rothschild Inc. 1251 Avenue of the Americas, 51st Floor New York, New York 10020 Contact Rothschild at 212-403-3784 with any questions on the exchange offer. As previously announced, Foster Wheeler will pay a soliciting brokers' fee to registered broker/dealers for soliciting qualifying tenders of trust preferred securities pursuant to this exchange offer. This fee will be equal to 50 cents per 9.00% Preferred Security (liquidation amount $25) which the registered broker/dealers tender on behalf of their customers and which Foster Wheeler accepts for exchange, subject to certain limitations. Investors and security holders are urged to read the following documents filed with the SEC, as amended from time to time, relating to the proposed exchange offer because they contain important information: (1) the registration statements on Form S-4 (File No. 333-107054 and File No. 333-117244) and (2) the Schedule TO (File No. 005-79124). These and any other documents relating to the proposed exchange offer, when they are filed with the SEC, may be obtained free at the SEC's Web site at http://www.sec.gov/or from the information agent as noted above. The foregoing reference to the exchange offer and any other related transactions shall not constitute an offer to buy or exchange securities or constitute the solicitation of an offer to sell or exchange any securities in Foster Wheeler Ltd. or any of its subsidiaries. GRANITE BROADCASTING: Delisted from Nasdaq SmallCap Market ---------------------------------------------------------- Granite Broadcasting Corporation reports that the Company's Common Stock (Nonvoting) will be delisted from the Nasdaq SmallCap Market effective with the opening of business today, August 5, 2004. Granite's Common Stock (Nonvoting) will be immediately eligible to trade on the Over the Counter Bulletin Board (OTCBB) effective with the opening of business today, August 5, 2004 under the symbol GBTVK. Granite had been notified by NASDAQ that the Company fails to comply with the market value of listed shares requirement for continued listing on the Nasdaq SmallCap Market. This matter was addressed at a hearing before a Nasdaq Listing Qualifications Panel on June 17, 2004, and August 3, 2004, the Panel informed the company of its decision to delist Granite's Common Stock (Nonvoting). The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for over 3,300 securities. OTCBB securities are traded by a community of market makers that enter quotes and trade reports through a computer network. Additional information regarding the OTCBB can be found at http://www.otcbb.com/ Investors should contact their broker for more information about executing trades in Granite's Common Stock (Nonvoting) on the OTCBB. Granite Broadcasting Corporation (NASDAQ: GBTVK) (S&P, CCC Long- Term Corporate Credit Rating, Negative) operates eight television stations in geographically diverse markets reaching over 6% of the nation's television households. Three stations are affiliated with the NBC Television Network (NBC), two with the ABC Television Network (ABC), one with the CBS Television Network (CBS), and two with the Warner Brothers Television Network (WB). The NBC affiliates are KSEE-TV, Fresno-Visalia, California, WEEK-TV, Peoria-Bloomington, Illinois, and KBJR-TV, Duluth, Minnesota and Superior, Wisconsin. The ABC affiliates are WKBW-TV, Buffalo, New York, and WPTA-TV, Fort Wayne, Indiana. The CBS affiliate is WTVH- TV, Syracuse, New York. The WB affiliates are KBWB-TV, San Francisco-Oakland-San Jose, California, and WDWB- TV, Detroit, Michigan. On April 23, 2004 Granite announced its intention to enter into a strategic arrangement with Malara Broadcasting under which Granite will provide advertising sales, promotion and administrative services and selected programming to Malara-owned stations in Fort Wayne, Indiana and Duluth, Minnesota-Superior, Wisconsin. INT'L STEEL: Georgetown Facility Begins Wire Rod Production ----------------------------------------------------------- International Steel Group Inc.'s ISG Georgetown Inc. subsidiary has begun producing wire rod at its facility in Georgetown, South Carolina. ISG acquired the facility in June 2004 from the Georgetown Steel Company. The plant has annual steelmaking capacity of 1 million tons and rolling capacity of 800,000 tons, along with the capacity to produce 500,000 tons annually of Direct Reduced Iron (DRI), a scrap substitute. The facility had been idle since Georgetown Steel filed for Chapter 11 bankruptcy in October 2003. "We made a commitment to the employees and the community of Georgetown to resume operations at the facility, and thanks to the support and hard work of everyone involved, we have done so," said Rodney B. Mott, ISG's President and Chief Executive Officer. The Georgetown plant will produce high-quality wire rod products, which are used to make low-carbon fine wire drawing, wire rope, tire cord, high-carbon machinery, and upholstery springs. About International Steel Group Inc. International Steel Group Inc. is one of the largest steel producers in North America. It produces a variety of steel products including hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, rail products and semi- finished shapes to serve the automotive, construction, pipe and tube, appliance, container and machinery markets. For additional information on ISG, visit http://www.intlsteel.com/ * * * As reported in the Troubled Company Reporter's April 6, 2004 edition, Standard & Poor's Ratings Services assigned its 'BB' rating to Richfield, Ohio-based steel manufacturer International Steel Group Inc.'s (ISG) proposed $600 million senior unsecured notes due 2014. Standard & Poor's at the same time affirmed its 'BB' corporate credit rating and 'BB+' senior secured bank loan rating on the company. The outlook is positive. The ratings on ISG reflect its leading market position in the highly cyclical and competitive North American steel industry, its competitive cost position, and moderate financial policies. ISG was formed through the acquisitions of bankrupt steel companies LTV, Acme, and Bethlehem Steel. Unlike some other unionized steel producers, ISG does not have burdensome legacy costs, or the high number of employees it had before these acquisitions. ISG is expected to fully realize its estimated annual cost savings of $250 million in 2004, because it has reduced headcount at Bethlehem by 3,100. These combined savings provide a meaningful cost advantage compared with competing unionized steel companies in the U.S. that are facing rising labor and legacy costs. ISG's management uses a mini-mill strategy, such as establishing flexible work rules and profit sharing. ISG plans to implement a similar strategy with Weirton, and already has an agreement for a new contract with Weirton's unions similar to its existing contracts, including reducing labor by about one-third, and establishing more flexible work rules and benefits. Nevertheless, although some of its costs have become more variable, this remains a business with a high degree of operating leverage, and requires the company to operate at high levels of capacity utilization to remain profitable. J.P. MORGAN: S&P Assigns Low-B Ratings to Six Certificate Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to J.P. Morgan Chase Commercial Mortgage Securities Corp.'s $1.25 billion commercial mortgage pass-through certificates series 2004-LN2. The preliminary ratings are based on information as of Aug. 3, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying mortgage loans, and the geographic and property type diversity of the loans. Classes A-1, A-2, A-3, A-4, B, C, and D are currently being offered publicly. Standard & Poor's analysis of the portfolio determined that, on a weighted average basis, the pool (excluding residential cooperative (co-op) properties, which represent 0.7% of the pool) has a debt service coverage (DSC) of 1.43x, a beginning LTV of 91.9%, and an ending LTV of 76.6%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned J.P. Morgan Chase Commercial Mortgage Securities Corp. Class Rating Amount ($) ----- ------ ---------- A-1 AAA 224,063,000 A-2 AAA 434,913,000 A-1A AAA 420,653,000 B AA 29,772,000 C AA- 12,535,000 D A 23,505,000 E A- 9,401,000 F BBB+ 17,237,000 G BBB 12,535,000 H BBB- 17,237,000 J BB+ 6,268,000 K BB 6,267,000 L BB- 4,701,000 M B+ 4,701,000 N B 4,701,000 P B- 7,835,000 NR N.R. 17,236,678 X-1* AAA 1,253,560,678** X-2* AAA 1,207,988,000** * Interest-only class. ** Notional amount. N.R. -- Not rated. KB HOME: Fitch Affirms BB Senior Unsecured Debt Rating ------------------------------------------------------ Fitch Ratings affirms KB Home's (KBH) 'BB+' senior unsecured debt and 'BB-' senior subordinated debt ratings. The Rating Outlook is Positive. The ratings reflect KB Home's solid, consistent profit performance in recent years and the expectation that the company's credit profile will continue to improve as it executes its business model and embarks on a new period of growth. The ratings also take into account the company's primary focus on entry-level and first-step trade-up housing (the deepest segments of the market), its conservative building practices, and effective utilization of return on invested capital criteria as a key element of its operating model. Over recent years the company has improved its capital structure and increased its geographic diversity and has better positioned itself to withstand a meaningful housing downturn. Fitch also has taken note of KB Home's role as an active consolidator within the industry. Risk factors also include the cyclical nature of the homebuilding industry. Fitch expects leverage (excluding financial services) to remain comfortably within KB Home's stated debt-to-capital target of 45%- 55%. The company has expanded EBITDA margins over the past several years on steady price increases, volume improvements and reductions in SG&A expenses. Also, KB Home has produced record levels of home closings, orders and backlog as the housing cycle extended its upward momentum. KB Home realizes a significant portion of its revenue from California, a region that has proved volatile in past cycles. But the company has reduced this exposure as it has implemented its growth strategy and currently sources 17% of its deliveries from California, compared with 69% in fiscal 1995 and 88% in fiscal 1993. Over recent years KB Home shifted toward a presale strategy, producing a higher backlog/delivery ratio and reducing the risk of excess inventory and debt accumulation in the event of a slowdown in new orders. The strategy has also served to enhance margins. The company maintains a 4.6 year supply of lots (based on deliveries projected for 2004), 50% of which are owned and the balance controlled through options. Inventory turnover has been consistently at or above 1.5 times (x) during the past seven and a half years. Balance sheet liquidity has continued to improve as a result of efforts to reduce long-dated inventories, quicken inventory turns and improve returns on capital. Progress in these areas has allowed the company to accelerate deliveries without excessively burdening the balance sheet. As the housing cycle progresses, creditors should benefit from KB Home's solid financial flexibility supported by $65.6 million in cash and equivalents and $480.5 million available under its $1 billion domestic unsecured credit facility, net of $174.5 million of outstanding letters of credit, as of 5/31/04. In addition, liquid, primarily pre-sold work-in-process inventory totaling $2.8 billion provides comfortable coverage for construction debt of $1.7 billion. $175 million in senior notes mature in 2004, but the balance of debt is well laddered and the revolving credit facility matures in October 2007. Management's share repurchase strategy has been aggressive at times, but has not impaired the company's financial flexibility. KB Home repurchased $81.9 million of stock in fiscal 1999, $169.2 million in 2000, $190.8 million in 2002, $108.3 million (2 million shares) in fiscal 2003 and $66.1 million (1 million shares) so far in fiscal 2004. At the end of May 2004, 1 million shares remained under the board of directors' repurchase authorization. Notwithstanding these repurchases, book equity has increased $1,040.2 million since the end of 1999, while construction debt grew $763.1 million. KBH has lowered its dependence on the state of California, but it is still the company's largest market in terms of investment. Operations are dispersed within multiple California markets in the north and in the south. During the 1990s the company entered various major Western metropolitan markets, including Phoenix, Denver, Dallas, Austin and San Antonio, and has risen to a top 5 ranking in each market except Dallas (number 10 ranking). In an effort to further broaden and enhance its growth prospects it has established operations (greenfield and by acquisition) in the southeastern U.S., including various markets in Florida, Atlanta and the Carolinas. Most recently, the company has entered the Midwest (Chicago and Indianapolis) via acquisition. Fitch recognizes the company as a consolidator in the industry, but expects future acquisitions will be moderate in size and largely funded through cash flow. KB Home ranked as fifth largest homebuilder in the U.S. in 2001, 2002 and 2003. Its average home selling price through the first six months of fiscal 2004 is $215,900. It is on pace to construct more than 32,000 homes in fiscal 2004. The company operates homebuilding operations within the U.S. and France (57% ownership of Kaufman and Broad S.A.). Kaufman and Broad S.A. also does commercial construction in France and KB Home operates KB Home Mortgage Company domestically. Year-to-date the Western region (CA) accounts for 17.0% of corporate orders, the Southwest (AZ, NV, NM) represents 23.4% of orders, the Central region (CO, IL, IN, TX) accounts for 28.8% of orders, the Southeast (FL, GA, NC, SC) contributes 18.0% of orders and France represents 12.8% of total net new orders. KITCHEN ETC.: Taps DJM Asset Management to Dispose of 17 Stores --------------------------------------------------------------- DJM Asset Management of Melville, New York has been authorized, subject to Bankruptcy Court approval, to dispose of all 17 Kitchen Etc. stores throughout New England, New York, Delaware, Pennsylvania, Maryland and Virginia. The disposition is in response to Kitchen Etc.'s filing for Chapter 11 Bankruptcy protection in June 2004. Based in Melville, New York, DJM Asset Management, LLC, appraises properties, disposes of and/or mitigates lease liabilities and acquires retail, commercial and industrial real estate that does not fit into our strategic partner's long-term goals. During the past three years, DJM has conducted evaluations on over 9,000 locations and restructured or disposed of over 120,000,000 s/f of space and over 4,000 properties. "The stores are in freestanding, strip center and mall locations and range in size from 13,500 to 31,600 square feet," stated Andy Graiser, Co-CEO of DJM. "Since many of the stores are in prime locations, we expect a large number of preliminary bids by our due date of Thursday, September 2nd." "The locations are available individually or in packages of two or more," Graiser continued, "with all bids subject to bankruptcy court approval." The locations are expected to operate into September 2004. New tenants will be able to take possession, in most instances, on October 1st. Stores are located at Middlesex Commons in Burlington, Massachusetts; Fresh Pond SC in Cambridge, Massachusetts; Providence Highway in Dedham, Massachusetts; The Hanover Mall in Hanover, Massachusetts; The Northshore Mall in Peabody, Massachusetts; Redstone SC in Stoneham, Massachusetts; The Mall of New Hampshire in Manchester, New Hampshire; Daniel Webster Plaza in Nashua, New Hampshire; The Crossing at Fox Run in Newington, New Hampshire; The Connecticut Post Mall in Milford, Connecticut, Bishop's Corner SC in West Hartford, Connecticut; The Summit Square Plaza in Warwick, Rhode Island; Jay Scutti Plaza in Henrietta, New York; Kirkwood Plaza in Wilmington, Delaware; Airport Square SC in Montgomeryville, Pennsylvania; The Mid-Pike Plaza in Rockville, Maryland; and The Potomac Run Plaza in Sterling, Virgnia. Any person who would like to obtain copies of one or more leases that you might have an interest in or need any additional information can contact James Avallone, DJM Managing Director, at (631) 752-1100 (x224) or visit the DJM website at http://www.djmasset.com/ Headquartered in Exeter, New Hampshire, Kitchen Etc., Inc. -- http://www.kitchenetc.com/-- was a leading multi-channel retailer of household cooking and dining products. The Company filed for chapter 11 protection (Bankr. D. Dela. Case No. 04-11701) on June 8, 2004. Bradford J. Sandler, Esq., at Adelman Lavine Gold and Levin, PC, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $32,276,000 in assets and $33,268,000 in liabilities. MIRANT CORP: Committee Objects to James M. Donnell's Retention ------------------------------------------------------------- As previously reported, the Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, sought and obtained, on an interim basis, the Court's authority to retain James M. Donnell as its energy industry consultant effective June 1, 2004. Pursuant to a Letter Agreement, dated June 11, 2004, Mr. Donnell will: (a) provide the MAGi Committee with strategic advice and information regarding the energy industry and in particular, the assets and business of MAGi and its subsidiaries, and the various alternatives available to the MAGi Committee to maximize value for the benefit of MAGi's creditors; (b) review, analyze and advise on the operational, personnel, regulatory, financial and other issues related to a sale or other disposition of MAGi and its subsidiaries, and a severance of their stock ownership and other relationships with Mirant and its other subsidiaries; (c) assist in the preparation of a business plan to sever MAGi and its subsidiaries from ownership and other relationships with Mirant and its other subsidiaries, and for the operation of MAGi and its subsidiaries post- emergence from Chapter 11; (d) provide advice to the MAGi Committee on other strategic alternatives relating to MAGi's business and assets; (e) assist and advice the MAGi Committee on other matters as it may request; and (f) testify in Court on the MAGi Committee's behalf. Charles Greer, Co-Chair of the MAGi Committee, tells the Court that the MAGi Committee intends to retain Mr. Donnell to obtain the benefit of his substantial experience leading merchant energy companies similar to MAGi. Mr. Donnell was previously president and chief executive officer of Duke Energy North America. In that position, Mr. Donnell was responsible for a merchant energy operation of 1,400 employees and annual revenues of $3,300,000,000. Hence, Mr. Donnell has in-depth knowledge of all aspects of the power generation business. The MAGi Committee believes that the services and advice to be provided by Mr. Donnell will benefit MAGi and its creditors. Mr. Donnell's focus will be the development of an operational business plan to sever MAGi's assets from the other Mirant Debtors, so that MAGi may be run on a stand-alone basis. This will entail developing the management and other infrastructure necessary for MAGi to run independently. Mr. Greer assures the Court that the services Mr. Donnell will provide are distinct from the other presently retained professionals. Nevertheless, to ensure that there is no overlap or duplication of services, Mr. Donnell will coordinate carefully with the MAGi Committee's other professionals in developing a work plan that will provide distinct tasks for each retained professional. For his services, Mr. Donnell will be paid a $100,000 monthly fee for the first three months of the engagement and $75,000 per month for the remaining terms of this retention. Mr. Donnell will be reimbursed for out-of-pocket expenses incurred in relation to the engagement. Mr. Donnell tells the Court that he is not related to nor connection with, and neither holds nor represents any interest adverse to the Debtors, their estates, creditors or any other party-in-interest or their attorneys or the United States Trustee or anyone employed in the Office of the U.S. Trustee, in the matters for which he is proposed to be retained. Thus, Mr. Donnell is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Debtors Object Michelle C. Campbell, Esq., at White & Case, LLP, in Miami, Florida, argues that some of the services James M. Donnell will provide are not warranted or advisable at this time since they are designed to dismember Mirant Corporation and its debtor- affiliates' assets through development of a stand-alone business plan and plan of reorganization. Ms. Campbell points out that the proposed scope of Mr. Donnell's employment is ambiguous and difficult to determine which items relate to the development of a stand alone business plan or plan of reorganization for the Mirant Americas Generation family of Debtors. The Debtors do not object to the retention of Mr. Donnell to render services as an energy consultant, on the same terms and conditions as the Mirant Corporation Committee retained PA Consulting Group, Inc. "The scope of [Mr.] Donnell's employment should be substantially similar to the scope of PA's employment," Ms. Campbell says. According to Ms. Campbell, it will be difficult to monitor whether Mr. Donnell is rendering those services given that it has proposed to be paid a flat monthly fee and will not record any time entries. Thus, Donnell should also be required to comply with the fee procedures approved in the Debtors' cases. The reduced scope of services should result in a concomitant reduction of fees. Mirant Committee Doesn't Like It Either The Mirant Committee contends that the MAGi Committee's retention of Mr. Donnell is neither necessary nor reasonable. Jason S. Brookner, Esq., at Andrews Kurth, LLP, in Dallas, Texas, points out that there is no plan for "MAGi separateness" as the MAGi Committee stands. In addition, the Debtors never suggested the separation or spin-off of MAGi from the rest of the unified corporate family. In fact, every written and oral representation the Debtors made to the Court has underscored the integrated and inextricably intertwined nature of the Debtors' business enterprise. Mr. Brookner relates that the facts at this juncture would point towards substantive consolidation -- the exact opposite result of severing MAGi from the rest of the corporate body or outwardly selling or disposing of MAGi or any portion of it. More importantly, absent substantive consolidation, there is no authority for a unified and integrated business to play separation games when the purpose for doing so is to attempt to enhance the MAGi Committee's "leverage" in the Debtors' cases. Mr. Brookner reports that plan negotiations have recently begun in earnest. However, it does not change the fact that the Debtors have exclusivity to file a plan for over five months. It is extremely unlike that the MAGi Committee will be split off from the corporate family. Spending $100,000 on a consultant for three months and then $75,000 per month for an unrestricted period thereafter would be a waste of estate assets. Furthermore, Mr. Brookner asserts that it is extremely difficult, if not impossible, to see how Mr. Donnell's services will not overlap with, and be duplicative of, the services provided by the other MAGi Committee professionals, especially its energy consultants, E3 Consulting and New Energy Associates, LLC, and financial advisors, Houlihan Lokey Howard & Zukin. Even if it were appropriate to retain Mr. Donnell, Mr. Brookner contends that the proposed compensation scheme is objectionable on its face, given not only the history and precedent in the Debtors' cases with reference to the various financial advisors already hired by three Committees and the Debtors, but also of the strict reading of Section 328(a) in the Fifth Circuit. Advance approval of the terms and conditions of compensation under Section 328(a) would divest the Court of discretion to lower or disallow any portion of compensation in the event it is later determined that the services performed were unreasonable, overpriced, duplicative or the like, unless the Court finds that "such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions." Accordingly, the Mirant Committee asks the Court to deny Mr. Donnell's retention. 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. 39; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT: Walks from Bosque Agreement & Assumes Wharton Tolling Pact ------------------------------------------------------------------ Prior to the Petition Date and in the ordinary course of its business, Mirant Americas Energy Marketing, LP, acquired "tolling rights" to two of the four generating units located at a combustion turbine facility in Bosque County, Texas, owned by Mirant Texas, LP. After careful analysis, MAEM determined that from May 2004 through June 30, 2005, the Original Tolling Agreement is about $10,600,000 "out of the money" as to MAEM. Accordingly, MAEM sought to reject the Bosque Tolling Agreement. Michelle Campbell, Esq., at Haynes and Boone, LLP, in Dallas, Texas, notes that on June 2, 2004, the Court determined that: (a) the rejection and the rejection damages claim would be left open to allow the parties time to negotiate an amicable resolution; (b) if the parties were unable to resolve their differences regarding the rejection and the rejection claim, the Court will issue an opinion on the matter; and (c) the parties were relieved of their obligations under the Original Tolling Agreement to allow the Debtors to pursue a new agreement with a third party. Ms. Campbell reports that to date, no amicable resolution has been reached. Proposed Wharton Tolling Agreement Furthering Mirant and its debtor-affiliates' desire to maximize the value of their estates and in their reasonable business judgment, the Debtors located a purchaser for the capacity of the entire Bosque Facility, who would enter into a tolling agreement directly with Mirant Texas. Accordingly, Mirant Texas entered into a Tolling Agreement with Wharton County Power Partners, LP, that entitled Wharton to all of the capacity output generated by the Bosque Facility. Under the Wharton Tolling Agreement, Mirant Texas would sell to Wharton the entire capacity of the Bosque Facility through December 31, 2006 and cause MAEM to assume and assign to Wharton certain gas transportation contracts with Gulfterra Texas Pipeline, LP, which supply gas to the Bosque Facility. Wharton would make payments comprised of amounts for the demonstrated capacity of the Bosque Facility as well as certain variable costs for start-up and run-hour charges. Mirant Texas would provide a guarantee of minimal capacity levels during "summer" (May 15 to September 15) and "non-summer" (January 1 to May 14 and September 16 to December 31) portions of the year. The Wharton Tolling Agreement contains terms for bonus payments to Mirant Texas when capacity is greater than the guaranteed amounts. Under certain circumstances, Wharton is only liable for the amount of the capacity that is actually available by the Bosque Facility. The Wharton Tolling Agreement also contains these provisions: A. Indemnification Mirant Texas agreed to indemnify Wharton from and against: -- claims, demands, liabilities arising out of gross negligence or intentional misconduct of Mirant Texas; -- damages arising from claims of third parties relating to the power to be delivered by Mirant Texas under the Wharton Tolling Agreement until the power has been delivered to Wharton; and -- damages arising from claims relating to personal injury, property damages and environmental laws arising from the ownership or operation of the Facility by Mirant Texas, except to the extent caused by Wharton in breach of the agreement. Wharton also agrees to indemnify Mirant Texas in similar, and other instances. B. Letter of Credit To secure obligations under the Wharton Tolling Agreement, Wharton is obligated to obtain a $12,000,000 letter of credit in favor of Mirant Texas. Mirant Texas is obligated to obtain a $5,000,000 letter of credit in favor of Wharton. If a party fails to deliver timely to the other party the Letter of Credit, the receiving party may terminate the Wharton Tolling Agreement. C. Assignment The assignment of the Wharton Tolling Agreement by a party requires the prior written consent of the other party. However, a party may, without the need for consent from the other Party: (a) transfer, sell, pledge, encumber or assign the Wharton Tolling Agreement in connection with any financing or other financial arrangements; or (b) transfer or assign the Agreement to an affiliate in certain instances. D. Transfer of the Bosque Facility Provided Mirant Texas is not in default, it retains the right to transfer the Bosque Facility to certain "qualified persons": -- who meet certain standards of creditworthiness and certain operating and maintenance experience set forth in the Wharton Tolling Agreement; and -- who simultaneously receive an assignment of the Wharton Tolling Agreement and assume Mirant Texas' obligations and liabilities under the agreement. The Gulfterra Contracts MAEM is a party to four prepetition contracts with Gulfterra for the transportation of gas to the Bosque Facility: 1. Firm Gas Transportation Agreement for Intrastate Services; 2. Firm Gas Transportation Agreement for NGPA Section 311 Service; 3. Parking and Lending Agreement for Intrastate Service dated August 1, 2002; and 4. Parking and Lending Agreement for NGPA Section 311 Service dated August 1, 2002. According to Ms. Campbell, the Gulfterra Contracts provide for the provision and transportation of gas to the Bosque Facility for plant operation. Under the Gulfterra Contracts, MAEM is liable for fixed demand charges through September 2004, which would total about $289,750. Upon assignment of the Gulfterra Contracts to Wharton, Wharton will be liable for the Demand Charges that accrue post- assignment. However, Mirant Texas will reimburse Wharton for a portion of the Demand Charges on a monthly basis: (a) $79,050 in August 2004; and (b) $56,610 in September 2004. In addition, since Wharton will assume MAEM's obligations under the Gulfterra Contracts, MAEM will be able to terminate a postpetition letter of credit amounting to $1,516,500, which was originally posted as collateral for the Gulfterra Contracts. Marketing Efforts Ms. Campbell reports that the Debtors engaged in a thorough marketing effort and discussed tolling the Bosque Facility with more than a dozen different entities. After the negotiations, Mirant Texas and MAEM concluded that the decision to enter into the Wharton Tolling Agreement and to work with Wharton was sound and economically beneficial to the Debtors and their estates. Ms. Campbell explains that under the Wharton Tolling Agreement, Mirant Texas is able to hedge its output generation for the term of the agreement and MAEM minimizes its obligations to Gulfterra under the Gulfterra Contracts. Ms. Campbell assures the Court that the Wharton Tolling Agreement was negotiated at arm's length and in good faith, and the property interests transferred to Gulfterra are free and clear of liens, claims and encumbrances. Also, no cure amount is currently owing under the Gulfterra Contracts. Accordingly, pursuant to Section 363 of the Bankruptcy Code, the Debtors ask the Court to: (a) approve the Wharton Tolling Agreement; (b) authorize Mirant Texas to enter into and perform under the Wharton Tolling Agreement; and (c) authorized MAEM to assume its obligations under the Gulfterra Contracts and assign them to Wharton. Furthermore, the Debtors ask Judge Lynn to provide that: -- Gulfterra is barred and estopped from asserting claims against the Debtors or Wharton for any cure amounts; -- Wharton is entitled to the automatic stay protection to enforce its rights and remedies in the event of a default under the Wharton Tolling Agreement; -- any claim for damages caused by Mirant Texas incurred by Wharton under the Wharton Tolling Agreement will be afforded administrative claim treatment under Section 503 of the Bankruptcy Code; and -- any Chapter 11 plan or sale, settlement or other transaction into which the Debtors enter will not be consistent with the Wharton Tolling Agreement or interfere with Wharton's rights and remedies. 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. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) NANOGEN INC: Reports $12.3 Million 2nd Quarter Net Loss ------------------------------------------------------- Nanogen, Inc. (Nasdaq: NGEN), a developer of molecular and point- of-care diagnostic products, reported its financial results for the second quarter ended June 30, 2004. Nanogen's second quarter results include approximately two months of activity related to SynX Pharma Inc., which was acquired on April 21, 2004. Total revenues for the second quarter of 2004 were $1.1 million compared to $1.7 million for the same period in 2003 and $2.2 million in the first quarter of 2004. Product revenues for the second quarter were $477,000 versus $662,000 for the same period in 2003 and were $1.1 million in the first quarter of 2004. Nanogen's consolidated cash, cash equivalents and short-term investments balance at the end of the second quarter of 2004 was $60.3 million, approximately $2.7 million less than the previous quarter of $63.0 million. This compares to the company's cash, cash equivalents and short-term investments balance of $29.1 million at December 31, 2003. During the second quarter of 2004, Nanogen received approximately $7.4 million in net proceeds from the sale of common stock. Nanogen's research and development, and selling, general and administrative operating expenses for the second quarter of 2004 were $7.7 million, as compared to $8.6 million in the second quarter of 2003 and $7.9 million in the first quarter of 2004. For the second quarter of 2004, Nanogen reported a net loss of $12.3 million, or $0.38 per share, which compares with a net loss of $6.9 million, or $0.32 per share, for the prior year's second quarter. The net loss for the first quarter of 2004 was $5.4 million, or $0.20 per share. The second quarter loss includes an acquired in-process R&D write off of $3.8 million related to the SynX acquisition and inventory reserve charges of $1.5 million reflecting reduced product revenues anticipated from clinical laboratories. The 2004 first quarter loss included a $1.2 million foreign currency gain, which was recognized in conjunction with the closure of Recognomics, Nanogen's joint venture with Aventis, which concluded operations. "We are continuing to put the foundation in place to become a leader in advanced diagnostics. Our SynX acquisition, our new product development efforts and our capital raising activities are all directed at accomplishing that objective," said Howard C. Birndorf, chairman of the board and chief executive officer of Nanogen. "Going forward, we will continue to identify and develop opportunities to increase our critical mass of products and resources." Financial Guidance Based on the second quarter results and on the expectation of reduced revenues from clinical laboratories, Nanogen does not expect a significant revenue increase in 2004 versus 2003. Estimated revenue growth rates are dependent on a number of factors including the timing and success of new product introductions, the schedules for which continue to be difficult to estimate. The company continues to expect total costs and expenses, excluding cost of products sold and acquisition related expenses, to run approximately 20% less than the 2003 total year spending. Nanogen expects its cash position at the end of the year will be approximately $50 million. About Nanogen Nanogen, Inc. develops and commercializes products for the molecular and point-of-care diagnostics markets. The company seeks to establish the unique, open-architecture NanoChip(R) Molecular Biology Workstation and NanoChip(R) Cartridge as the standard platform for the prediction, diagnosis and treatment of genetic and infectious diseases. Nanogen offers Analyte Specific Reagents and related products to research and clinical reference labs for the development of tests for the detection of genetic mutations associated with a variety of diseases, such as cystic fibrosis, Alzheimer's disease, and cardiovascular disease. The company's ten years of research involving nanotechnology may also have future applications in medical diagnostics, biowarfare and other industries. Nanogen's business unit, SynX Pharma, leverages proteomic and biomarker research to offer a line of point-of-care diagnostic tests. For additional information, visit Nanogen's website at http://www.nanogen.com/ * * * Liquidity Concerns In its Form 10-K For the fiscal year ended December 31, 2003, Nanogen Inc, reports: "We expect that our existing capital resources, combined with $33.7 million in gross proceeds from the sale of the Company's common stock in March 2004, and anticipated revenues from potential product sales, reagent rentals, leases or other types of acquisition programs for the NanoChip System, sponsored research agreements, contracts and grants will be sufficient to support our planned operations, including an estimated investment of approximately $6-8 million related to the pending acquisition of SynX and wind down costs related to our joint venture, Nanogen Recognomics, through at least the next eighteen months. This estimate of the period for which we expect our available sources of liquidity to be sufficient to meet our capital requirements is a forward-looking statement that involves risks and uncertainties, and actual results may differ materially. "Our future liquidity and capital funding requirements will depend on numerous factors including, but not limited to, commercial success of our products, or lack thereof, the extent to which our products under development are successfully developed and gain market acceptance, the timing of regulatory actions regarding our potential products, the costs and timing of expansion of sales, marketing and manufacturing activities, prosecution and enforcement of patents important to our business and any litigation related thereto, the results of clinical trials, competitive developments, and our ability to maintain existing collaborations and to enter into additional collaborative arrangements. "We have incurred negative cash flow from operations since inception and do not expect to generate positive cash flow to fund our operations for at least the next several years. We may need to raise additional capital to fund our research and development programs, to scale-up manufacturing activities and expand our sales and marketing efforts to support the commercialization of our products under development. Additional capital may not be available on terms acceptable to us, or at all. If adequate funds are not available, we may be required to curtail our operations significantly or to obtain funds through entering into collaborative agreements or other arrangements on unfavorable terms. Our failure to raise capital on acceptable terms when needed could have a material adverse effect on our business, financial condition or results of operations." NEXPAK CORPORATION: Hires Jones Day as Bankruptcy Counsel --------------------------------------------------------- NexPak Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Ohio for permission to hire Jones Day as their bankruptcy counsel. Jones Day is expected to: a) give the debtor advice on their rights, power and duties while continuing to operate and manage their respective businesses and properties; b) prepare on behalf of or to assist the debtor in preparing, all necessary applications, motions, draft orders, other pleadings, notices, schedules and other documents and review all financial and other reports to be filed; c) give advice and prepare responses concerning applications, motions, other pleadings, notices and other papers that may be filed and served against the debtor; d) give advice with respect to, and assist in the negotiation and documentation of, financing agreements and related transactions; e) review the nature and validity of any liens asserted against the Debtor's property and give advice concerning the enforceability of such liens; f) give the debtor advice regarding their ability to initiate actions to collect and recover property for the benefit of their estates; g) give advice and assistance concerning any potential property dispositions; h) give the debtor advice regarding executory contract and unexpired lease assumptions, assignments and rejections, lease restructurings and recharacterizations and other contract issues (including intellectual property licenses); i) give the debtor advice in connection with the pursuit of confirmation and implementation of the Plan or any other plan of reorganization and assist in the completion of an associated disclosure statement and other necessary documents; j) give the debtor assistance in reviewing, estimating and resolving claims asserted against the Debtor's estates; k) commence and conduct any and all litigation necessary or appropriate to assert rights held by the Debtor, protect assets of the Debtor's estates or otherwise further the goals of preserving and maximizing the value of the Debtor's estates; l) provide corporate, employee benefits, environmental, finance, intellectual property, labor and employment, litigation, real estate, tax and other general non- bankruptcy services for the Debtor to the extent requested by the Debtor; and m) perform for or on behalf of the Debtor all other necessary or appropriate legal services in connection with the case. To the best of the Debtor's knowledge, Jones Day is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ryan T. Routh, Esq., in Jones Day's Cleveland office, will be principally responsible in this engagement. Mr. Routh's current billing rate is $285 per hour. Headquartered in Uniontown, Ohio, NexPak Corporation -- http://www.nexpak.com/-- manufactures and supplies standard and custom packaging for DVD, CD, video, audio, and professional media formats. The Debtor, together with five of its affiliates filed for chapter 11 protection on July 18, 2004 (Bankr. N.D. Oh. Case No. 04-63816). On March 30, 2004, the Debtors listed assets of about $101 million and debts of up to $209 million. OWENS CORNING: More Objections Raised Against Trustee Appointment ----------------------------------------------------------------- As directed by the Court at the May 18, 2004, omnibus hearing, the Official Committee of Unsecured Creditors, representing the prepetition bank lenders, bondholders, and trade creditors of Owens Corning, informs the Court of the recent developments that, it thinks, makes the appointment of a Chapter 11 Trustee all the more appropriate. Sean P. Haney, Esq., at Morris, Nichols, Arsht & Tunnel, in Wilmington, Delaware, relates that since the Committee filed its original Trustee Motion in October 2003, the Debtors' continuing conduct and the discovery of previously undisclosed facts confirmed the need for the appointment of a neutral trustee to honor and enforce Owens Corning's fiduciary duty to act for the benefit of all its creditors and to restore the integrity of the tarnished plan process in its Chapter 11 cases. According to Mr. Haney, the Debtors continue to support a reorganization plan containing a wildly inflated asbestos claim valuation of $16,000,000,000. The $16 billion amount is nearly three times the Debtors' own most recent estimates on file with the Securities and Exchange Commission and disclosed to the public only a few months before proposing the Plan. It is also nearly five times the estimates the Debtors filed with the SEC only months before that. The Debtors have tried to distance themselves from the indefensible $16,000,000,000 asbestos figure, suggesting at the May 18, 2004 omnibus hearing that it is "merely" a condition to confirmation and "not our number." By making that valuation a condition, the Debtors threaten the Court with failure of the Plan unless it blesses the tort claimants' outlandish demand. More Objections (1) Futures Representative and Asbestos Committee James J. McMonagle, the legal representative for future asbestos claimants, and the Official Committee of Asbestos Claimants want the Commercial Committee's request denied because: -- it is based principally on the same tired, erroneous and unsupportable allegations made by Credit Suisse First Boston, as agent, Kensington International Limited, Springfield Associates, LLC, and Angelo Gordon, in their request for the appointment of an examiner; -- the term sheet recently negotiated among the Debtors, the Asbestos Committee, the Futures Representative and the Designated Members of the Commercial Committee demonstrates unequivocally that the allegations of the Commercial Committee concerning the Debtors' alleged breach of their fiduciary duty are untrue; and -- the Commercial Committee's argument that the Debtors can ignore future asbestos claimants and forego any protections afforded by Section 524(g) of the Bankruptcy Code is not only baseless, but has already been found by the Court to be a confirmation issue. Mr. McMonagle contends that there is no need for the appointment of a trustee, as the Commercial Committee is free to litigate any issue. (2) Debtors Norman L. Pernick, Esq., at Saul Ewing, LLP, in Wilmington, Delaware, observes that the Commercial Committee repeats the same tired complaints that the Court has heard and rejected many times before. "Neither of these complaints is true; nor does either justify the appointment of a trustee," Mr. Pernick asserts. Mr. Pernick argues that: (a) the request no longer has the majority support of the Creditors Committee and should be dismissed; (b) the Debtors have successfully negotiated a plan with the representatives of all creditor constituencies other than the bank debt holders; (c) the Creditors Committee's Complaints regarding asbestos claim discovery are unwarranted, considering that the Debtors have cooperated in claims estimation discovery and the District Court will estimate the Debtors' asbestos claims liability in connection with plan confirmation; and (d) the appointment of a trustee would jeopardize the Debtors' economic success without any benefit to the estate. Creditors Committee Seeks Discovery The Creditors Committee served Amended Interrogatories and Amended Requests on Owens Corning, which generally seek discovery of information related to either: (1) the process, including all discussions and negotiations, by which the draft and filed plans of reorganization were created; (2) the contacts between the parties and Judge Wolin or his former advisors, including Frances McGovern, the court- appointed mediator, during the period prior to Judge Wolin's recusal; (3) asbestos valuation and the process and means by which asbestos valuation should be determined, including the decision to oppose an asbestos bar date and claims objection process; and (4) the acts underlying the alleged claims against certain law firms concerning payments made under the National Settlement Program that the Court has either stayed or which are the subject of tolling agreements authorized by the Court. Discovery is a Waste, Debtors Say The Debtors complain that all the requested discovery is inappropriate, threatens to waste the assets of the Owens Corning bankruptcy estate, and seeks to circumvent the process by which the Court has determined issues in Owens Corning's case should be resolved. Mr. Pernick asserts that: (1) The Creditors Committee lacks standing and authority to prosecute the Trustee Motion or to pursue discovery relating to the Trustee Motion; (2) Discovery should be deferred pending the resolution of the Examiner Motion; (3) The Creditors Committee seeks discovery of the terms of proposed Plan of Reorganization that is now obsolete; (4) The Creditors Committee has failed to allege a prima facie case for the appointment of a Chapter 11 trustee; (5) The Amended Interrogatories and Amended Requests are not reasonably designed to lead to the discovery of admissible evidence related to the Trustee Motion; (6) The Amended Requests and Amended Interrogatories impermissibly seek discovery of confidential settlement and mediation communications; and (7) The Amended Interrogatories and Amended requests improperly seek to circumvent the Court's stay of the NSP Cases. Century Backs Creditors Committee Linda M. Carmichael, Esq., at White and Williams, LLP, in Wilmington, Delaware, represents Century Indemnity Company, as successor-in-interest to CCI Insurance Company, as successor-in- interest to Insurance Company of North America and Central National Insurance Company. According to Ms. Carmichael, Century has an interest in the Trustee Motion both as an entity to whom Debtors have stated they will look for payment of asbestos claims, and as a creditor. Century has a monetary claim under terms of specific contractual provisions of the Wellington Agreement. "As an entity that is currently being asked to pay for a portion of this alleged asbestos liability, Century has a right to expect that the Debtors will resist efforts to pay compensation for liability that it does not truly have and will not simply surrender to the demands of asbestos claimants," Ms. Carmichael says. To the extent the Creditors Committee's allegations are true, then the Debtors and their management are acting in a manner that detrimentally impacts the interests of Century. "As a creditor of this estate whose recovery will be affected by whether a disproportionate share of the estate's assets are directed to the asbestos claimants, Century also has an interest in seeing that the Debtors and their management handle claims against the company appropriately," Ms. Carmichael explains. For these reasons, Century joins in the concern expressed by Mt. McKinley and others over allegations that the Debtors' officers and directors "have essentially acted in this case as servants of the asbestos firms." Reasonably or unreasonably, Ms. Carmichael notes, the Debtors' current management suffers from a "crisis of confidence" on the part of key constituencies in the case. Far from causing delay or disruption, the appointment of a trustee will clear the air and help create a more positive environment in which the case may move forward. Thus, Ms. Carmichael asserts, a trustee should be appointed. Bondholders Withdraw Support Anderson Kill & Olick, P.C., special counsel to the Official Committee of Unsecured Creditors, and Monzack & Monaco, P.A., special local counsel to the Committee, on behalf of the Committee members representing the interests of the bondholders and the trade creditors of Owens Corning, present the Court with a statement withdrawing, without prejudice, their support for the Committee's request for the appointment of a Chapter 11 Trustee. The Designated Members -- Committee members who represent the interests of the bondholders and the trade creditors -- are PPM America, Inc. and John Hancock Life Insurance Company. According to Joseph J. Bodnar, Esq., at Monzack & Monaco, P.A., in Wilmington Delaware, two new events occurred which have caused the bondholder and trade creditor representatives to reassess their position with respect to the Trustee Motion. To recall, on June 7, 2004, the bondholder and trade creditor representatives reached an agreement with the proponents of the Debtors' current reorganization plan on the terms of a further revised plan of reorganization, which the Plan Proponents have agreed to file with the Court. The revised plan would expressly provide for a substantially increased distribution of value to all of the Committee's constituencies and it would also imply a substantially lower aggregate level of asbestos claim liability for the Debtors than does the current filed plan. The terms of the revised plan are also expressly conditioned on total substantive consolidation of the Debtors to the extent now provided for in the Debtors' current Fourth Amended Plan of Reorganization. "It goes without saying that the bondholder and trade creditor representatives would not support the revised reorganization plan terms if they believed that valid grounds exist to grant the relief sought in the Trustee Motion. They, accordingly, cannot continue to support the Trustee Motion at this time," Mr. Bodnar says. Subsequent to the filing of the Initial Trustee Motion, the Debtors' bank group asked the Court to appoint a Chapter 11 examiner and other parties-in-interest, including the Office of the United States Trustee, have since expressed their support for the Examiner Motion. Among other things, Mr. Bodnar notes, the Examiner Motion contemplates that the examiner would investigate and make a recommendation as to whether or not a trustee should be appointed in these cases. Mr. Bodnar tells the Court that the bondholder and trade creditor representative members of the Committee have also determined to support the appointment of an examiner in these Cases. "Notwithstanding their belief that grounds for the appointment of a trustee do not exist, there can be no question that recent developments have raised a storm of controversy surrounding these Cases which needs to be resolved. The bondholder and trade representatives accordingly believe that it will be in the best interest of all parties for an examiner to be appointed in order to clear the air and thereby best facilitate confirmation of the further amended plan of reorganization which the bondholder and trade representatives support." But Mr. Bodnar clarifies that the change in position of the bondholder and trade creditor representatives is made without prejudice to their right to change their position yet again, assuming without presuming that an examiner will be appointed, if some aspect of the examiner's work unexpectedly should give them a reason for doing so. CSFB Will Continue Prosecution While Credit Suisse First Boston, as agent for the prepetition bank lenders, as well as the Designated Members of the Creditors Committee, executed the Trustee Motion, that pleading was denominated as filed on the Creditors Committee's behalf. In view of the split between the Banks and the Bondholders on the Committee, the withdrawal of the Bondholder support effectively has disabled the Committee, in that it cannot continue to prosecute the Trustee Motion. Accordingly, to avoid any misunderstanding, CSFB formally adopts and joins the request for the appointment of a trustee and related discovery. CSFB will prosecute the Trustee Motion alone, without participation of the Committee's counsel. (Owens Corning Bankruptcy News, Issue No. 80 Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Creditor Panel Urges Appointment of Examiner ---------------------------------------------------------- The Official Committee of Unsecured Creditors wants an examiner appointed in Owens Corning's Chapter 11 cases in accordance with Section 1104 of the Bankruptcy Code. As reported in the Troubled Company Reporter's June 8, 2004, edition, Credit Suisse First Boston, as agent for the prepetition bank lenders to Owens Corning and some of its subsidiaries pursuant to a June 26, 1997 Credit Agreement, and Kensington International Limited, Springfield Associates, LLC, and Angelo Gordon, as holders of more than $500,000,000 in aggregate principal amount of bank debt, ask the Court to appoint an examiner to investigate the substantial evidence of: (1) breaches of fiduciary duty by the Debtors' management; (2) the Debtors' abdication of control of the plan process and the tort claims estimation process to the Futures Representative and the plaintiffs' attorneys who dominate the Asbestos Creditors Committee in Owens Corning's bankruptcy cases and virtually every significant asbestos bankruptcy case pending in the United States; (3) a multitude of significant but inadequately disclosed or undisclosed connections between the asbestos plaintiffs' interest and each of: (a) Mediator/Advisor Francis McGovern, who played a key role in Owens Corning's plan process; and (b) Analysis Research Planning Corporation, the Debtors' asbestos claims estimation firm; and (4) improper conduct that has cast a cloud over the very integrity of the plan process in Owens Corning's cases. To the extent the members of the Commercial Committee hold differing views concerning the specific scope of the examiner's charge, those views will be presented to the Bankruptcy Court in independent submissions or statements, the Committee advises. 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. 80 Bankruptcy Creditors' Service, Inc., 215/945-7000) PACIFIC GAS: Objects to Cal PX's $667,841 Claim for Legal Fees -------------------------------------------------------------- On behalf of Pacific Gas and Electric Company, Gary M. Kaplan, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin, in San Francisco, California, asks the Court to deny the $667,841 administrative claim filed by the California Power Exchange Corporation for attorney's fees. The Claim is a prepetition claim based on PG&E's alleged obligations under certain tariffs generally governing participation in wholesale electric markets previously operated by the PX before the Petition Date, notwithstanding that the amounts for which recovery is sought were allegedly incurred postpetition. Mr. Kaplan also contends that the PX's Administrative Claim fails to provide support, let alone establish, that it is entitled to administrative expense treatment under Section 503(b)(1) of the Bankruptcy Code. Additionally, Mr. Kaplan asserts that under controlling law, the Administrative Claim should not be allowed to the extent it seeks recovery of attorney's fees and expenses incurred with respect to purely bankruptcy issues. The Administrative Claim fails to include any breakdown or explanation of the matters as to which the expenses were allegedly incurred. The PX merely stated that the legal expenses were incurred "in connection with PG&E's Chapter 11 bankruptcy case." Mr. Kaplan also points out that $625,000 of the alleged legal expenses was incurred by the Participants Committee, rather than the PX. Mr. Kaplan notes that since PG&E has, pursuant to its confirmed Plan, rejected the participation agreements with the PX on which the Administrative Claim is based, under the express provisions of the Bankruptcy Code, the PX's claim based on PG&E's breach of the agreement gives rise to a prepetition claim, rather than an administrative claim. Furthermore, not only have the professionals whose fees and costs comprise the Administrative Claim already been fully paid by the PX -- as the PX's request acknowledges -- but the PX has already been authorized by the Federal Energy Regulatory Commission to recover the amounts for its participants, pursuant to a methodology making PG&E liable for the vast majority of the amounts. Mr. Kaplan points out that if the PX's request is granted, PG&E will potentially be subject to duplicate liability, which the PX will reap a windfall. The Administrative Claim also seeks to recover from PG&E expenses that FERC has ruled cannot be assessed against PG&E, Mr. Kaplan adds. Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. (Pacific Gas Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) PARMALAT: Judge Drain Appoints James Garrity to Serve as Examiner ----------------------------------------------------------------- Pursuant to the Bankruptcy Court's directive, Deirdre A. Martini, the United States Trustee for Region 2, consulted three parties- in-interest regarding the appointment of an examiner in Parmalat USA Corporation's Chapter 11 case: (1) Weil Gotshal & Manges LLP Attorneys for Debtors; (2) Chadbourne & Parke LLP Attorneys for the Official Committee of Unsecured Creditors; and (3) Phillips Lytle LLP Attorneys for Friendship Dairies, Inc., and Perry's Ice Cream Company, Inc. After the consultation, the U.S. Trustee selected James L. Garrity, Jr., a member of Shearman & Sterling, LLP, as Parmalat USA's examiner. Mr. Garrity assures the Court that he does not personally represent any entities in connection with the U.S. Debtors' cases. He, however, admits that other members, counsel and associates of Shearman provide services to certain claimants. Shearman represents Societe Generale in its capacity as a participant in a Master Lease Financing Agreement between GE Capital Public Finance, Inc., for itself and as Agent for certain participants, lessors, and Farmland Dairies, LLC, as lessee. Before the Petition Date, Shearman also represented Citibank, N.A., Corporate Asset Funding, Inc., Eureka Securitisation, plc, and affiliates, in establishing certain receivables securitization arrangements with Farmland, Milk Products of Alabama, LLC, and certain non-Debtor affiliates. Mr. Garrity, however, notes that Shearman does not currently represent Citibank in the U.S. Debtors' cases. Mr. Garrity further attests that he: -- filed income tax returns for the three tax years preceding his appointment as examiner; -- does not owe delinquent tax obligations to any taxing authority; -- has never been convicted of a felony; -- is not addicted to any drug, narcotic or alcohol; -- is not named as a defendant in any lawsuit pending at this time; and -- is not delinquent in repaying any outstanding student loan obligations. Accordingly, Judge Drain appoints Mr. Garrity as Parmalat USA's examiner. 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. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATELLITE: Retains Capital & Technology as Fin'l Advisor ---------------------------------------------------------------- The Official Committee of Unsecured Creditors sought and obtained the Court's authority to retain Capital & Technology Advisors, LLC, as its financial advisor, nunc pro tunc to June 14, 2004. The Committee believes that a financial advisor is crucial to its ability to: (i) evaluate and analyze Pegasus Satellite and its debtor- affiliates' activities; and (ii) work with the Debtors in maximizing the value of the their businesses and assets. The Committee chose Capital & Technology because it has specific industry experience relating to the telecommunications and satellite services sectors, which are highly technical in nature at an operational level. Capital & Technology, a Delaware limited liability company, is a restructuring advisory boutique specializing in the telecommunications sector. According to Marion Stratakos, Chairperson of the Creditors' Committee, Capital & Technology and its affiliated entity Communication Technology Advisors, LLC, have provided and are providing financial, technical and operational advisory services to debtors and to creditor committees in Chapter 11 cases, including RCN Corporation, Allegiance Telecom, Inc., Leap Wireless International and Cricket Communications, Inc., Focal Communications, Inc., Motient Corporation, Globix Corporation and Neon Communications, Inc. Capital & Technology also provides post-restructuring consulting services, including operational and merger and acquisition advice. Capital & Technology's senior staff is comprised of proven business leaders from several leading domestic and international telecommunications companies. As financial advisor, Capital & Technology will: (a) analyze the Debtors' operations, service delivery and technological capabilities, each as it applies to their current financial condition and its prospects for the Debtors' future performance; (b) conduct a detailed review of the Debtors' recent financial performance, business plan, marketing plan, revenue forecasts, capital program, management and competitive environment; (c) review and advise the Committee with respect to operating cash flow risks and opportunities. Capital & Technology will review current network architecture and broadcasting arrangements, market channel and product profitability, regulatory matters as they affect current and future operations. Capital & Technology will evaluate the potential free cash flow generators and associated timing; (d) assist and advise the Committee in connection with the Debtors' current contracts, both from a market level evaluation, and overall usefulness of the contracts in a restructured company; (e) provide input and overall evaluation of the Debtors' revised financial plan to be included in the Debtors' reorganization plan; (f) assist and advise the Committee in the preparation and negotiation of any reorganization plan proposed by the Debtors or developed by the Committee and other creditor constituencies of the Debtors; and (g) provide other advice and assistance as may reasonably be requested by the Committee from time to time. Capital & Technology will be compensated with: (1) a $150,000 Monthly Fee; and (2) upon the closing or consummation of a restructuring, a Transaction Fee equal to: (A) the sum of: (i) 75 basis points multiplied by the amount of the Aggregate Consideration between $400,000,000 and $500,000,000, plus (ii) 150 basis points multiplied by the amount of the Aggregate Consideration in excess of $500,000,000; less (B) an amount equal to 50% of the Monthly Advisory Fees in excess of $1,350,000 received by Capital & Technology. The Debtors will also reimburse Capital & Technology for all reasonable out-of-pocket expenses. Judge Haines makes it clear that the firm will be compensated in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules and the Court's orders. Wayne Barr, Jr., Managing Director of Capital & Technology, assures Judge Haines that the firm and its affiliates, professionals and employees have no materially adverse interest to the Debtors' estates or creditors in the Chapter 11 cases. Mr. Barr maintains that Capital & Technology is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Lead Case No. 04-20889) on June 2, 2004. Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) PG&E NATIONAL: USGen Committee Retains Blake as Expert Consultant ----------------------------------------------------------------- The Official Committee of Unsecured Creditors for USGen New England, Inc., sought and obtained the Court's authority to retain Thomas Blake, CPA, as an expert consultant to the Committee's counsel Reed Smith, LLP, effective as of July 6, 2004. Mr. Blake is a certified public accountant with more than 20 years as a partner in the national accounting firm of Ernst & Young, and with extensive experience in the energy industry. Specifically, Mr. Blake will: * perform a solvency analysis of the assets and liabilities of USGen; * review the contractual arrangements, transfers and other transactions between and among USGen and related entities; * review executory contracts; * review cash flow forecasts, capital expenditure requirements and other related issues; * provide the specific valuation or other financial analysis as Reed Smith may require; * prepare expert reports and related documents; * provide testimony in Court as necessary; and * provide any other services that Reed Smith and Mr. Blake may deem necessary. Compensation Mr. Blake is entitled to receive non-refundable professional fees based on the actual hours incurred each month on matters pertinent to USGen's Chapter 11 case at the hourly rate of $500. Identifiable out-of-pocket items including travel, lodging, outside research, and outside copying are billed at a "pass through" rate. Mr. Blake will also be reimbursed for his reasonable out-of-pocket expenses on the same terms as those that apply to work that he performs for other non-bankruptcy clients. Term of Retention The engagement letter between Reed Smith and Mr. Blake is terminable, without cause, upon 30 days' written notice by any of the parties, or terminable for cause at any time. Any termination without cause will not affect USGen's liability for payment of fees and expenses accrued through the date of termination or USGen's obligations to indemnify Mr. Blake. Indemnifications As part of the overall compensation payable to him under the terms of the Engagement Letter, Mr. Blake will receive indemnification and contribution guarantees. The Indemnification provisions are customary and reasonable for financial advisory engagements, in Chapter 11 or out-of-court. The Indemnification provisions are: (a) USGen will indemnify Mr. Blake for any claim arising from, related to, or in connection with the services provided for, in the Engagement Letter, but not for any claim arising from, related to, or in connection with Mr. Blake's postpetition performance of any other services unless those services are approved by the Court; (b) USGen will have no obligation to indemnify Mr. Blake or provide contribution or reimbursement to Mr. Blake to the extent that any claim or expense is: (i) judicially determined to have arisen from Mr. Blake's: -- bad faith; -- gross negligence; -- willful misconduct; -- breach of duty of loyalty, if any, which includes conflicts of interest and disinterestedness; -- failure to render advice in good faith based on assessments of the facts known and the circumstances presented to Mr. Blake at the time of rendering that advice; or -- breach of express contractual duties, including breach of duty to perform services; or (ii) settled by the parties and the Court, after notice and hearing, determines that the claim is one for which Mr. Blake should not receive indemnity, contribution or reimbursement because it constitutes bad faith and breach of duties. Mr. Blake's liability will be limited to $1,000,000. Moreover, Mr. Blake will immediately notify the Court, the U.S. Trustee and USGen should he obtain additional insurance coverage, at which time the Court may reconsider lifting the limitation on liability. Additionally, USGen will indemnify Mr. Blake and provide contribution and reimbursement to him to the extent that any claim or expense is judicially determined to have arisen from Blake's negligence; and (c) Before the earlier of an order confirming a Chapter 11 plan in USGen's case -- that order having become a final order no longer subject to appeal -- and the entry of an order closing USGen's Chapter 11 case, if Mr. Blake believes that he is entitled to the payment of any amounts by USGen on account of the indemnification, contribution or reimbursement obligations under the Engagement Letter, including without limitation the advancement of defense costs, then Mr. Blake must file an application in the Court, and USGen may not pay any amounts to Mr. Blake before the Court approves the payment. The Indemnification provisions will terminate upon Mr. Blake's association with a firm. Mr. Blake neither holds nor represents any adverse interest in connection with USGen's Chapter 11 case. 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. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) PIEDMONT HAWTHORNE: S&P Assigns B+ Corporate Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to aviation services provider Piedmont Hawthorne Holdings Inc. The outlook is stable. At the same time, Standard & Poor's assigned 'B+/B-' ratings to the proposed $287 million secured credit facility available to Piedmont's wholly owned subsidiary, MRO Acquisition Corp., and guaranteed by Piedmont. MRO Acquisition's first-lien revolver and term loan are rated 'B+', the same as the corporate credit rating, with a recovery rating of '2', indicating Standard & Poor's expectation that the lenders would realize a substantial recovery of principal (80%-100%) in the event of default. The second-lien term loan is rated 'B-', two notches below the corporate credit rating, with a recovery rating of '5', indicating expectations of a negligible recovery of principal (0%-25%) in the event of default. "The ratings on Piedmont reflect a highly leveraged balance sheet and weak financial profile after the proposed transaction and the competitive and cyclical nature of the general aviation services market, offset somewhat by the company's leading positions in markets served," said Standard & Poor's credit analyst Christopher DeNicolo. Piedmont is owned by The Carlyle Group, a private equity firm. MRO Acquisition Corp., Piedmont's subsidiary, will be acquiring Garrett Aviation Services from General Electric Co. Simultaneously, Piedmont will be recapitalized and sold by one Carlyle investment fund to another. MRO Acquisition Corp. will be the parent of the Garrett and Piedmont operating companies. The combined transactions will be financed with proceeds from the new $287 million credit facility and a $95 million equity contribution from Carlyle. Leverage will be high, with debt to EBITDA around 5x and debt to capital of 75%. Piedmont is the second-largest fixed base operator (FBO) in North America, and following the Garrett acquisition will be a leading provider of maintenance, repair, and overhaul (MRO) of engines for general aviation aircraft, largely business jets. The company will have three operating segments: MRO services (58% of pro forma revenues in the 12 months ending March 31, 2004), airport services (26%), and aircraft completion and modification (16%). The business jet market, for both new aircraft and aftermarket services, has been depressed for the past three years due to the weak economy and the aftermath of the Sept. 11, 2001, terrorist attacks, but recently has begun to recover. In the MRO segment, Piedmont is the exclusive factory-sponsored service center for Honeywell engines, which are on a third of all business jets. In addition, the company is factory authorized to perform airframe maintenance on Dassault, Raytheon, and Bombardier business jets. This unit also performs avionics installations, which are largely driven by FAA-mandated upgrades. MRO business, especially for engines, is highly correlated with the number of hours flown, which have been steadily increasing since declining in 2001. The company also has contracts to provide Honeywell engine MRO services for the three largest fractional business jet fleet owners. Piedmont's leading position in FBO and engine MRO services and the recovery in the business aviation market should generate free cash flow sufficient to reduce the company's initial high debt leverage, resulting in an overall credit profile that is consistent with current ratings. PILLOWTEX: Seeks Court Nod on $3.4 Million Hanover Property Sale ---------------------------------------------------------------- Pillowtex Corporation seeks Bankruptcy Court authority to sell its Hanover Property, free and clear of liens, claims and interests, to New Horizons Partnership, LLC, subject to receipt of higher or better offers from other parties. According to William H. Sudell, Jr., Esq., at Morris Nichols Arsht & Tunnel, in Wilmington, Delaware, the Property consists of about 22.5 acres located at 401 Moulstown Road in Hanover, Pennsylvania, and includes a 275,000 square-foot manufacturing plant. Prior to the Petition Date, the Property was used in connection with the Debtors' manufacture and sale of pillow and pad products. The Property was put up in the market for sale in mid-December 2003. With broker Hilco Real Estate LLC's marketing efforts, about 50 parties expressed interest in the Property. After discussions with the interested parties, the Debtors received four formal offers from potential purchasers. The Debtors, after considering the purchase prices and other material terms of the offers, entered into negotiations with New Horizons regarding definitive documentation for the sale of the Property. At the time of the negotiations, the Debtors determined that New Horizons' offer was the highest and otherwise best offer. On July 28, 2004, the Debtors and New Horizons entered into a Real Estate Purchase Contract. The salient terms of the Purchase Contract are: * Purchase Price New Horizons will pay the Debtors $3,400,000 in cash including a $340,000 earnest deposit already set aside in escrow with the Debtors' Escrow Agent, Capital Abstract Corporation. * Condition of Property The sale is on an "as is" basis and the Debtors are not making any representation or warranty as to the condition of the Property. At the Closing, the Debtors will deliver the Property to New Horizons "broom clean" and vacant, and otherwise in materially the same condition as existed on July 28, 2004, ordinary wear and tear excepted. * Defects in Title Title to the Property will be transferred to New Horizons free and clear of all liens, claims and interests pursuant to a Court final order from which no appeal has been taken. The Debtors will convey fee title in the Property by special warranty deed subject to certain permitted exceptions. * Personal Property Escrow Amount In the event that the Debtors' personal property is not removed from the Property by the closing date, $50,000 of the Purchase Price will be held in an interest-bearing account by the Escrow Agent. The Personal Property Escrow Amount will be delivered to the Debtors upon the removal of all their personal property. If the Debtors fail to remove all their personal property by October 31, 2004, New Horizons may remove any remaining personal property, with actual, reasonable, documented removal costs incurred, to be reimbursed from the Personal Property Escrow Amount. Promptly after the removal, the remainder of the Personal Property Escrow Amount will be delivered to the Debtors. * Broker Fee If the sale of the Property is consummated under the terms contemplated in the Purchase Contract, the Debtors estimate that the Broker will be entitled to $136,000. The Debtors will pay the Broker Fee upon the closing of the sale of the Property. * Closing If New Horizons is the successful bidder at an auction for the Property, or the Debtors do not receive any qualified competing bid and determine that the Contract is the successful bid; the Closing will occur by mail or at the offices of New Horizons' attorney in Harrisburg, Pennsylvania, on a date agreed to by the parties within five business days after the date the Court's order authorizing the consummation of the sale becomes final, but not later than October 31, 2004. * Property Taxes and Transaction Costs Ad valorem and similar taxes assessed against the Property will be prorated between the Debtors and New Horizons at Closing on a calendar year basis of a 365-day year. The Debtors will be responsible for the cost of preparing the deed. New Horizons will pay the cost of conducting its due diligence studies, the Title Policy, the transfer taxes, sales taxes, recording fees, and the escrow charges imposed by the Escrow Agent. Each party will pay its own attorney's, broker's and consultant's fees. * Termination Provided that New Horizons is not in default, the Contract will terminate and the Deposit will be refunded to New Horizons in the event that: -- the Court will not have approved the Break-Up Fee on or before August 13, 2004; -- the Court will not have approved the sale to New Horizons on or before September 6, 2004; -- New Horizons is neither the successful bidder nor the second highest bidder at the conclusion of the auction; -- the Debtors consummate a sale of the Property with a entity other than New Horizons; or -- the closing does not occur on or prior to October 31, 2004. Since Hilco marketed the Property for more than six months to an extensive range of potential buyers through various sale methods, the Debtors believe that the Purchase Price in the Contract represents fair and reasonable consideration. Mr. Sudell also notes that market comparables compiled by Hilco suggest that the Purchase Price is consistent with existing market conditions for sales of assets similar to the Property. Mr. Sudell assures the Court that the Contract is the product of good faith, arms'-length negotiations between the parties. New Horizons is not an "insider" of the Debtors, as that term is defined in Section 101(31) of the Bankruptcy Code. As contemplated in the Contract, the Debtors does not anticipate that the sale will require the assumption of any leases or executory contracts to which the Debtors are parties, or the assignment of any agreements to New Horizons. The Debtors however reserve the right to file other pleadings as may be necessary to assume and assign to the prevailing purchaser any leases and contracts, if necessary to further effectuate the transactions contemplated by the Purchase Contract or other approved agreement. Headquartered in Dallas, Texas, Pillowtex Corporation -- http://www.pillowtex.com/-- sells top-of-the-bed products to virtually every major retailer in the U.S. and Canada. The Company filed for Chapter 11 protection on November 14, 2000 (Bankr. Del. Case No. 00-4211). David G. Heiman, Esq., at Jones, Day, Reavis & Poque represents the Debtors in their restructuring efforts. On July 30, 2003, the Company listed $548,003,000 in assets and $475,859,000 in debts. PINNACLE ENT: Fitch Puts B+ Rating on Proposed $350M Bank Facility ------------------------------------------------------------------ Fitch Ratings has assigned a rating of 'B+' to the proposed $350 million senior secured bank facility of Pinnacle Entertainment (NYSE: PNK) due 2008. The facility, which consists of a $100 million senior secured revolver due 2008, a $125 million senior secured term loan due 2010, and a $125 million senior secured delayed draw term loan due 2010, replaces the existing $300 million senior secured credit facility established in December 2003. Refinancing of the bank facility provides additional liquidity to accommodate a $40 million increase in budget to $365 million for PNK's L'Auberge du Lac Casino & Resort development in Lake Charles, Louisiana. Extension of the delayed draw portion should better accommodate the timing of funding needs, and reduce funded debt and interest expense. The Outlook is Stable. To date, PNK has spent just $100 million of its final $365 million budget in Lake Charles. However, the vast majority of project costs remaining are subject to fixed price or guaranteed maximum price contracts, limiting the risk of additional budget increases. Project contingency remains consistent at roughly 6% as of June 30, 2004 despite the diminishing need for excess contingency. The $40 million budget increase at Lake Charles includes scope changes totaling $20 million for additional guestrooms, slot machines, and transportation equipment, among other items. Despite scope changes, the project remains on schedule for a Spring 2005 opening. PNK ratings reflect the company's heavy capital investment schedule through 2008 and uncertainty regarding the ultimate returns on those investments. These investments include the $365 million Lake Charles development, and two potential casino projects in St. Louis -- a $208 million property in downtown St. Louis which is expected to open in late 2006, and a $300 million project in St Louis County which is expected to open in late 2007 -- for which final approval from the Missouri Gaming Commission is required. The investments are significant in relation to the company's operating profile (with LTM EBITDA of approximately $93 million), and free cash flow will be negative over the next several years as a result. Nonetheless, the company retains a high level of liquidity, which is sufficient to fund near term projects. Pro forma for the new credit facilities and a $33 million land sale in May 2004, total liquidity exceeds $566 million, including roughly $341 million in cash on hand and $225 million in borrowing capacity. PNK benefits from a somewhat diversified portfolio of assets (albeit in a number of competitive markets such as Reno, NV and Biloxi, MS), which provides stability to operating results. Since new management assumed control in early 2002, operating results have improved markedly with same-store LTM March 31, 2004 EBITDA 40.1% higher than FYE 2001 EBITDA. This primarily reflects a particularly strong turnaround at Belterra in Vevay, Indiana and improved margin performance due to focused cost-cutting efforts. Given its dependence on overnight visitation, future results at Belterra should benefit from the $37 million hotel expansion completed in May 2004. Pro forma for the new credit facilities and May land sale, Fitch estimates net leverage stood at 3.6 times (x) at March 31, 2004. Net debt/EBITDA is expected to peak at approximately 6.0x early 2005, prior to the projected spring 2005 opening of the Lake Charles property. Leverage is then projected to drop by fiscal year-end 2005, followed by modest external borrowings required to complete the second St. Louis project. Timing of PNK's major capital investments is prudently sequenced so that financing for the St. Louis projects benefit from cash flows provided by completed projects. Over the long-term, leverage will primarily decline through incremental new store EBITDA, as debt reduction will be precluded by heavy investment spending through 2008. Failure to achieve adequate returns on the company's three projects would limit the company's capacity to reduce leverage and long-term access to new capital or refinancing requirements. Further support is derived from the relatively marketable nature of the assets underlying the debt. PNK's five U.S. casino properties provide substantial over-collateralization of senior secured debt, and more than adequate support for subordinated debt when factoring in PNK's assets under development. PNK would also have the option of bringing in equity partners for its development properties if conditions warranted. Subordinated debtholders are further subordinated as a result of this refinancing, but remain reasonably positioned behind the relatively large tranche of bank debt. Pinnacle Entertainment (NYSE: PNK) -- http://www.pnkinc.com/-- is a diversified gaming and hospitality company with casinos in Indiana, Louisiana, Mississippi, Nevada and Argentina. The Company, formerly Hollywood Park, also leases two card clubs in the Los Angeles metropolitan area. Future developments include a new casino resort in Lake Charles, Louisiana, the replacement of the existing casino facility in Neuquen, Argentina, and two major casino properties in the St. Louis, Missouri region, pending approval of the Missouri Gaming Commission. QWEST COMMUNICATIONS: Equity Deficit Widens to $1.9B at June 30 --------------------------------------------------------------- Qwest Communications International Inc. (NYSE:Q) reported a second quarter 2004 net loss of $776 million including special items. The net effect of the special items was an incremental charge against the current quarter's results of $487 million. "We continued to make significant progress on our key objectives, which will drive growth and increase our financial flexibility," said Richard C. Notebaert, Qwest chairman and CEO. "While our momentum was somewhat impacted by seasonality and some competitive pressures, especially in our enterprise business, we were pleased with the continuing strength across our key growth services." Financial Results Revenue for the quarter was $3.44 billion, a 4.3 percent decrease from the second quarter of 2003, and a sequential decline of approximately one percent. Revenue in the second quarter continued to benefit from strong momentum in key growth services including long-distance, DSL, bundles, and, as of the second quarter, in wireless. These benefits were more than offset by heightened competitive pressures in the enterprise market and continuing, although stabilizing, access line loss. The company saw continued success in capturing market share within its local service area as revenue for long-distance services increased six percent over last year. Data and Internet revenue increased approximately three percent, both sequentially and compared to last year, as a result of continued expansion of certain data and Internet services, including DSL and hosting. Wireless revenue increased sequentially, reversing a trend of declining revenues since the de-emphasis of standalone wireless service in 2002. Cost of sales plus selling, general and administrative (SG&A) expenses totaled $2.84 billion in the quarter, an increase of $231 million from the year ago period and $250 million sequentially, which included several special items. Excluding the impact of these items, the company saw cost improvement of $35 million over last year and $16 million sequentially. See the Special Items below. During the quarter, key cost initiatives launched earlier in 2004 began to drive improvements in facility cost, network operations and SG&A. Additional initiatives were implemented in the second quarter to bolster these efforts and to continue improving the operating leverage relating to information technology consolidation, as well as increased productivity within the network and overhead functions. Since the launch of these initiatives, the staffing levels within these organizations have been rebalanced by 1,550. "Our operating leverage is beginning to take hold," said Qwest Vice Chairman and CFO Oren G. Shaffer. "Everyone at Qwest is focused on initiatives to drive revenue growth and achieve cost saving goals, with the objective of using the improvement in operating efficiency to neutralize the impact of competitive pressures in the enterprise market." Cash capital expenditures for the second quarter totaled $486 million, versus $505 million in the second quarter of 2003. The decrease in capital expenditures was largely the result of a reduction in information technology projects, which was partially offset by the deployment of additional DSL facilities. Interest expense totaled $394 million for the second quarter. Qwest continues to expect annual interest expense savings of approximately $250 million in 2004, as compared to 2003. Cash capital expenditures of $486 million in the quarter exceeded the cash generated from operations of $284 million by $202 million. The cash generated from operations less capital expenditures were impacted sequentially by higher capital spending and increased cash payments for interest and payroll-related items. The company expects to grow the cash from operations in excess of capital expenditures in 2004 at a rate similar to 2003 levels. Operational Trends The rate of access line losses year-over-year remained relatively stable at four percent. Seasonal and increased competitive pressures accelerated the sequential line losses to 1.3 percent, compared to approximately one percent in each of the previous three quarters. The company remains focused on improving retention through the quality-of-service initiatives embedded in the company's Spirit of Service approach. Recent JD Power and Associates consumer local survey results confirm that Qwest is making significant improvements on these metrics. For the second year in a row, Qwest improved in all 37 measured attributes, as well as the six major components of customer satisfaction. The company saw significant improvements in bundle penetration, defined as customers with a main line and either DSL or long- distance. Bundle penetration increased to 36 percent, compared to 32 percent at the end of the first quarter. Qwest also plans to expand bundle sales with the introduction of new feature-rich offerings in the third quarter. During the quarter, the company significantly improved the trends in wireless subscriber growth following the full launch of national wireless services. Nearly two thousand net subscriber additions in the consumer market fully reversed the trend of net losses posted in the first quarter. Qwest continues to expand its wireless service offering, as well as sales and service support. Advanced wireless data services launched earlier in the quarter added enhanced features such as Web browsing and camera-phone capabilities. In addition to increasing the available wireless features, the company is expanding its dedicated sales and service centers to support continued growth. Based on the success of Qwest's retail operations, the company is doubling the number of kiosks and in- line stores it plans to open by the end of the year to 68 from the previously announced 34. The company continued its record DSL growth adding 109,000 subscribers in the second quarter to end with 853,000 DSL subscribers. In addition, the company deployed approximately two thousand remote terminals during the period, expanding the footprint to over six million households. The company is on track to achieve approximately one million subscribers by year-end and to make DSL services available to about 65 percent of households within its operating region. Additionally, Qwest has partnered with Best Buy to make DSL services available at 82 of its retail locations in the 14-state local service area. Qwest continued its strong progress in the sales of in-region long-distance with the addition of 733,000 lines in the second quarter, taking total lines to 4.1 million. Long-distance penetration of total retail lines increased to nearly 30 percent, as compared to 24 percent at the end of the first quarter. In response to changing industry dynamics, Qwest plans to launch targeted initiatives throughout the remainder of 2004 aimed at driving long-distance, DSL, wireless and bundle penetration and furthering revenue growth. The company determined that the number of previously reported long-distance lines in the fourth quarter of 2003 was overstated by approximately 133,000 lines. Accordingly, the total line count as of the fourth quarter of 2003 and the first quarter of 2004 have been adjusted to 2.2 million and 3.4 million, respectively. This change had no effect on revenue. In the third quarter, Qwest launched its business class Voice over Internet Protocol (VoIP) services in four markets. This marks a significant milestone in advancing the adoption of VoIP services. The company remains on track to complete the rollout of business and consumer VoIP services by the end of the year to all major metropolitan markets within the local service area, as well as to businesses in select out-of-market areas, by the end of the year. Wireless Asset Sale Update The company has agreed to sell its PCS licenses and related wireless network assets to Verizon Wireless for $418 million in cash. This transaction is subject to regulatory approval and remains on track to close by the end of the year or early in 2005. The sale of these assets is consistent with Qwest's strategy of rationalizing the operations of the business while driving improvements in financial flexibility. Balance Sheet Update In June, two rating agencies recognized the improvement in the company's credit profile by upgrading all of the company's credit ratings, including the ratings of Qwest Corporation a significant three notches to BB and BB-. Qwest continued to improve its balance sheet during the quarter by reducing debt $297 million to $17.2 billion. During the quarter, the company exchanged $126 million in Qwest Capital Funding, Inc. notes for common stock in private transactions at an average effective per share price of $4.64. Additionally, Qwest redeemed $100 million principal amount of Qwest Corporation's (QC's) 5.65 percent notes due November 2004 and $41 million principal amount of QC's 5.5 percent debentures due June 1, 2005. Qwest will continue to pursue opportunities to reduce debt and improve liquidity. Insolvency Deepens Qwest's June 30, 2004, balance sheet shows a stockholders' deficit totaling $1,909,000,000 -- swelling 53% from the $1,251,000,000 shareholder deficit reported at March 31, 2004. Special Items In the second quarter of 2004 the company incurred special items that net to an incremental charge of $487 million, or $0.27 per share. These items include: -- An impairment charge of $43 million, or $0.02 per share, relating to the payphone business and certain network supplies. -- Costs associated with the planned workforce reductions resulted in a charge of $127 million, or $0.07 per share. In addition, the results for the second quarter of 2003 included a charge of $17 million, or $0.01 per share. -- A charge of $18 million, or $0.01 per share, in SG&A for a legal contingency. -- A benefit of approximately $52 million, or $0.03 per share, relating to favorable customer bankruptcy settlements to SG&A. Also as a result of these bankruptcy settlements, gains of approximately $70 million, $0.04 per share, to other income, relating to termination of certain long-term agreements. -- A charge of $300 million, or $0.17 per share, in SG&A for higher litigation reserves. This charge reflects an increase in the estimated minimum liability associated with certain investigations and securities actions in which the company is involved. -- A tax charge of $140 million, or $0.08 per share, relating to a change in the valuation allowance against deferred tax assets. -- A gain of approximately $19 million, or $0.01 per share, in other income associated with the retirement of debt. About Qwest Qwest Communications International Inc. (NYSE:Q) is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, visit the Qwest Web site at http://www.qwest.com/ RAINBOW MEDIA: S&P Junks Senior Unsecured & Subordinated Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Rainbow Media Enterprises Inc. and its national programming subsidiary, Rainbow National Services LLC. The outlook is negative. Rainbow Media consists of two main business segments: (1) a relatively weak start-up direct broadcast satellite (DBS) provider that requires ongoing funding; and (2) an established, profitable national programming entity that generates ongoing net free cash flow. These business segments are being spun off from cable operator Cablevision Systems Inc. At the same time, Standard & Poor's assigned its 'B+' bank loan rating to Rainbow National's $950 million in secured bank debt, along with a recovery rating of '1', indicating a high expectation for full recovery of principal in the event of a default. Also, a 'CCC+' rating was assigned to Rainbow National's $250 million senior unsecured notes due 2012 and $550 million senior subordinated notes due 2014, both to be issued under Rule 144A with no registration rights. The bank loan rating is based on a preliminary bank loan agreement, and is subject to Standard & Poor's review of the final bank loan documents. Proceeds from these debt issuances will be used to repay about $725 million in existing bank debt, as well as fund requirements of the DBS operation, including the consumer high definition television (HDTV) VOOM service rollout and development of HDTV content (VOOM 21). Upon completion of the spin-off and repayment of bank debt previously incurred by Rainbow Media Holdings LLC, the corporate credit rating and secured bank loan rating on this entity will be withdrawn. Notwithstanding the strength of Rainbow Media's national programming business, the rating is dominated by the extremely high business risk of the company's consumer video product, given its late introduction to the market relative to competitors EchoStar Communications Corp. (9.8 million subscribers) and The DIRECTV Group Inc. (11.1 million subscribers). Competition from incumbent cable TV operators also contributes to the high business risk. VOOM represents a start-up operation geared toward providing HDTV programming, including its own VOOM 21 programs. In contrast, EchoStar and DirecTV have more limited HDTV offerings. "The senior unsecured notes and subordinated notes are both rated two notches below the corporate credit rating due to the significant concentration of priority obligations relative to total asset value, which exceeds Standard & Poor's 30% threshold," explained Standard & Poor's credit analyst Catherine Cosentino. "Priority claims are substantial relative to the estimated $2.2 billion in asset value for Rainbow National, and include secured bank debt allowable under the bank loan financial covenant limitations." RCN CORP: Court Okays Trading Restriction to Preserve NOLs ---------------------------------------------------------- To protect and preserve RCN Corporation and its debtor-affiliates' net operating loss tax carryforwards and Built-In Losses, Judge Drain approved, on a final basis, the Debtors' request to establish notice and hearing procedures regarding the abandonment, trading, conversion or transfer of equity interests in RCN that must be complied with as a precondition to the effectiveness of any abandonment, trade or transfer. Any purchase, sale, abandonment or other transfer of equity interests in the Debtors in violation of these procedures, including notice requirements, will be null and void ab initio as an act in violation of the automatic stay: (a) Any person or entity who currently is or becomes a Substantial Equityholder, and who has not previously filed a notice of status pursuant to the Interim Order, will file with the Court, and serve on the Debtors and counsel to the Debtors, a notice of the status, on or before the later of: -- July 12, 2004; or -- 10 calendar days after becoming a Substantial Equityholder. "Substantial Equityholder" is any person or entity that has beneficial ownership of: (1) at least 5 million shares of RCN common stock; (2) at least 15,900 shares of RCN Series A Preferred Stock; or (3) at least 66,300 shares of RCN Series B Preferred Stock. (b) Before effectuating any transfer, conversion or abandonment of any equity interest which would result in either an increase or decrease in the amount of RCN equity interests, beneficially owned by a Substantial Equityholder or a person or entity becoming or ceasing to be a Substantial Equityholder, the Substantial Equityholder, person or entity will file with the Court, and serve on the Debtors and the counsel to the Debtors, advance written notice, of the intended transfer, conversion or abandonment of equity interests. (c) The Debtors will have 15 calendar days after receiving a Notice of Proposed Transfer to file with the Court and serve on the Substantial Equityholder an objection to any proposed transfer, conversion or abandonment of any equity interest on the grounds that these may adversely affect the Debtors' ability to utilize the Losses. If the Debtors file an objection, the transaction will not be effective unless approved by a final and nonappealable Court order. If the Debtors do not object within a 30-day period, the transaction may proceed solely as specifically set forth in the Notice. Further transactions of a type specified beyond the scope of the Notice of Proposed Transfer must be the subject of additional notices, with additional 30-day waiting periods. (d) The Debtors will serve a notice of the entry of the authorized procedures on: -- The Office of the U.S. Trustee for the Southern District of New York; -- Counsel for the Official Committee of Unsecured Creditors appointed in the Debtors' cases; -- Counsel for the Debtors' secured lenders, or their agents, as the case may be; -- All known record holders of RCN common or preferred stock; -- The transfer agent for any class or series of RCN common or preferred stock; -- The Securities and Exchange Commission; and -- The Internal Revenue Service. The Notice served will be via first class mail, postage prepaid. Additionally, the Debtors will publish the Notice in The Wall Street Journal. The Debtors are not required to serve further notice of entry of these provisions. (e) Any transfer agent for any class or series of RCN common or preferred stock having notice of these provisions will provide the Notice to all holders of the stock registered with the transfer agent. After that, the transfer agent will send additional copies of the Notice to all registered holders upon subsequent requests by the Debtors, provided that the Debtors will not make the requests more frequently than on a quarterly basis. Any registered holder will, in turn, provide the Notice to any holder for whose account the registered holder holds the stock, and so on down the chain of ownership. (f) Any person or entity, or broker or agent acting on behalf of person or entity, who sells an aggregate of at least 500,000 shares of RCN common stock, or any shares of RCN preferred stock -- or an option with respect to RCN common or preferred stock -- to another person or entity will provide a copy of these provisions to the purchaser of the stock, or to any broker or agent acting on the purchaser's behalf. As previously reported in the Troubled Company Reporter's June 10, 2004, edition, the consolidated group of corporations of which RCN Corporation is the parent and all of the Debtors are members presently has estimated net operating loss carryforwards in excess of $2,400,000,000 as a result of past losses. RCN also has significant future losses and depreciation and amortization deductions attributable to assets with a tax basis in excess of current fair market values. The Debtors currently expect that the existing NOLs will be reduced by the amount of cancellation of indebtedness income realized in the bankruptcy reorganization, and may also be reduced by certain interest deductions taken with respect to any debt converted to equity pursuant to any plan of reorganization. Even after reductions, the Debtors estimate that in excess of $1,000,000,000 of the group's consolidated current NOLs and all of its Built-In-Losses will remain. Accordingly, the NOLs remaining after the effect of a bankruptcy reorganization could translate into potential future tax savings in excess of $350,000,000, and significant additional taxes may be saved as a result of the Built-In-Losses in assets held by the members of the Debtors' consolidated group. Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- is a provider of bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) RS GROUP: Promotes Landlord Risk Specialty Insurance Products ------------------------------------------------------------- RS Group of Companies, Inc. (f/k/a Rent Shield Corp.)(OTCBB:RSGC), provides a unique pass-through risk specialty insurance and reinsurance products to protect cash flow for apartment building owners, along with a similar product in many different industries. Rent Shield's "pass through risk products," allow it to make a recurring profit on every product insured, translating to enormous income potential in a marketplace which includes over 38,000,000 rental units that generate over $300 billion in annual rents, that their cash flows can be secured. RS Group of Companies revenues for 2004 are expected to approach $25,000,000. Rent Shield focuses on selling it's products to large landlords, which insures significant monthly expansion of revenue, based on current goals of adding 2,000 units per month for it's products. The products guarantee six months rental income and $10,000 in damages for each unit, protecting the landlord's against surprise negative changes in occupancy. Tenants benefit as well, by no longer having to provide a last month rent payment and security deposit. RS Group of Companies, Inc. continues to develop strong strategic partnerships within the insurance industry, allowing it to bring these powerful products to the marketplace. Expectations for expanding revenue for 2005 run high, based on such partnerships and the company's aggressive tactics in reaching major landlords and other potential customers, offering them products which provide protection for the customers' revenues and profits, which never truly existed in the marketplace prior to RentShield(TM). Numerous contracts remain in constant negotiation, with the company optimistic on the closing of each and every deal. RentShield maintains an experienced and dynamic sales team, capable of making it the larger provider in this high-revenue potential niche of the insurance industry. John Hamilton, RS Group's founder and CEO, stated, "We take pride in being the wave of the future for a critical, but relatively new niche of the insurance industry. Our corporate team and our sales team provide a protection and a service that truly no landlord can really afford to be without in these volatile times. We welcome the leadership role and the challenge and know that our efforts will be rewarded with a dramatically rising revenue and profit curve to reward our company and it's shareholders." RS Group of Companies' core product, the RentShield(TM) Residential Rental Guarantee Program: -- Guarantees, without question, to automatically pay the landlord up to six months of rental income in the event of tenant default within 30 days of the due date. -- Pays the landlord up to $10,000 for willful damage by a tenant. -- Eliminates the landlord's legal, eviction, and administrative collection expenses. -- Pre-qualifies a prospective tenant through background and credit verification within 48 hours of their application. -- Eliminates the need for landlords requiring up-front payment of a security deposit and last month's rent. -- Provides property owners the online tools that help administer residential rental properties and access other RSGC products and services. -- Provides landlords and tenants online access to listings of vacant properties. About RS Group of Companies, Inc. RS Group of Companies, Inc. -- http://www.rentshieldcorp.com/-- has developed and is implementing a strategy to design, structure and sell a broad series of pass-through risk specialty insurance and reinsurance platforms throughout North America. * * * At December 31, 2003, RS Group's balance sheet recorded a stockholders' deficit of $966,088. SOLUTIA INC: Court Okays New Executive Compensation Agreements -------------------------------------------------------------- As previously reported, Solutia Inc. and its debtor-affiliates sought Bankruptcy Court approval of a Key Employee Retention Program on May 5, 2004. Since then, the Court has considered, and entered orders authorizing the Debtors to implement, nearly all of the employee-related retention programs and initiatives described in court filings requesting approval of the KERP. The only element of the KERP Motion remaining to be considered is the Debtors' request for authority to enter into compensation and retention agreements with their new senior management team. The Debtors have been working diligently with the Official Committee of Unsecured Creditors to finalize the terms of employment with their senior executives. Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher, LLP, in New York, relates that the Debtors have now reached an agreement with the Creditors Committee on the Executive Compensation Terms. Solutia, Inc., has prepared executive retention and compensation agreements with the members of its new executive management team: 1. Jeffry N. Quinn -- Chief Executive Officer and member of the Board of Directors * Annual Base Salary: $500,000, retroactive to May 5, 2004 * Target Annual Bonus Opportunity: 1.5x Annual Base Salary * Emergence Bonus: -- Emergence Bonus payable 6 months post-emergence; -- Total potential emergence bonus opportunity of $3.75 million; -- 25% allocation for performance in relation to target EBITDA for 12-month period ending six months post- emergence. Minimum threshold for bonus is achievement of 90% of EBITDA target, with bonus increasing as performance increases up to achievement of 120% of EBITDA target; -- 25% allocation for performance in relation to target Enterprise Value based on market value six months post- emergence. Minimum threshold for bonus is achievement of Enterprise Value of $1.3 billion, with bonus increasing as performance increases up to achievement of Enterprise Value of $2.5 billion; and -- 50% allocation for performance in relation to target Unsecured Creditor Recoveries based on trading prices six months post-emergence. Minimum threshold for bonus is achievement of Unsecured Creditor Recoveries of 45%, with bonus increasing as performance increases up to achievement of Unsecured Creditor Recoveries of 100%. * Severance: -- 1.25x Annual Salary if terminated without cause prior to emergence from Chapter 11; and -- Emergence Bonus if terminated without cause after emergence from Chapter 11. 2. James M. Sullivan -- Senior Vice President and Chief Financial Officer * Annual Base Salary: $275,000, retroactive to May 5, 2004 * Target Annual Bonus Opportunity: 0.75x Annual Base Salary * 2003 Bonus: $100,000 * Emergence Bonus: -- Total potential emergence bonus opportunity of $1.5 million; and -- Mechanics otherwise similar to Mr. Quinn's Emergence Bonus. * Severance: -- 1.25x Annual Base Salary if terminated without cause prior to emergence from Chapter 11; and -- Emergence Bonus if terminated without cause after emergence from Chapter 11. 3. Luc de Temmerman -- Senior Vice President and Chief Operating Officer * Annual Base Salary: $350,000, retroactive to May 5, 2004 * Target Annual Bonus Opportunity: 1.0x Annual Base Salary * 2003 Bonus: $240,000 * Emergence Bonus: -- Total potential emergence bonus opportunity of $2.25 million; and -- Mechanics otherwise similar to Mr. Quinn's Emergence Bonus. * Severance: -- 1.25x Annual Base Salary if terminated without cause prior to emergence from Chapter 11; and -- Emergence Bonus if terminated without cause after emergence from Chapter 11. 4. John F. Saucier -- President of the Integrated Nylon division * Annual Base Salary: $320,000, retroactive to May 5, 2004 * Target Annual Bonus Opportunity: 1.0x Annual Base Salary * Retention Payments: -- $600,000 paid in four equal installments, upon approval of agreement, on December 31, 2004, June 30, 2005 and December, 31 2005. * Severance: -- $400,000 upon emergence from Chapter 11, or sale of substantially all the assets of Integrated Nylon division, if, in either event, executive is not offered employment on substantially similar terms. 5. G. Bruce Greer -- President of the Pharma Services division * Annual Base Salary: $200,000 * Target Annual Bonus Opportunity: 0.50x Annual Base Salary * 2003 Bonus: $50,000 * Retention Payments: -- $200,000 paid in two equal installments on each of December 31, 2004 and June 30, 2005, or if a Pharma Sale occurs before the applicable installment payment date, the date of a Pharma Sale. * Transaction Bonus: -- Up to $200,001 depending on net proceeds of sale, if any, of all the stock or substantially all the assets of Amcis AG and Carbogen AG. * Severance: -- 1.0x Annual Base Salary if terminated without cause prior to Pharma Sale. 6. Bradley W. Hill -- Vice President, Sales and Marketing * Severance: -- 1.0x Annual Base Salary if terminated without cause on or before June 30, 2006. Because of the expertise and leadership abilities of these individuals, the Debtors are confident that the new team can capably lead Solutia toward execution of its new business plan and development of a reorganization plan. Mr. Reilly asserts that it is important that Solutia offers the new team with Executive Compensation Agreements with terms that help ensure their continued employment and provide appropriate incentives to encourage a strengthening of Solutia's business lines, implementation of necessary cost-cutting and other measures and emergence from Chapter 11 as quickly and efficiently as practicable. Each of the Executive Compensation Agreements has been approved by the Creditors Committee and Solutia's Board of Directors. Solutia believes that the terms of the Executive Compensation Agreements are consistent with: (a) compensation arrangements provided to senior executives of comparable companies; (b) retention incentive payments to senior executives of comparable Chapter 11 Debtors; and (c) the type and level of services being provided by the senior executives and the value of their knowledge and expertise in the Debtors' business operations and reorganization efforts. * * * Judge Beatty authorizes the Debtors to execute and perform under the Executive Compensation Agreements with the new executive management team members, and to make the required payments under the Agreements. With respect to Messrs. Quinn, Sullivan, de Temmerman, Saucier and Greer, Judge Beatty clarifies that the Executive Compensation Agreements supersede any previous employment, retention or change in control agreement. Mr. Hill's Executive Compensation Agreement supersedes all prior agreements with respect to his right, if any, to severance benefits upon the termination of his employment for the period commencing on the effective date of his Executive Compensation Agreement and ending June 30, 2006. 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. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPHERION: Completes Divestiture of United Kingdom Operations ------------------------------------------------------------ Spherion Corporation (NYSE:SFN) successfully completed the planned divestiture of its staffing and recruitment operations in the United Kingdom. The Company received $29 million of cash proceeds and will record the transaction in the third quarter of 2004. Roy Krause, Spherion president and chief operating officer commented, "In March we announced plans to focus our growth strategy on North America, the largest staffing market in the world. These plans included divestiture of several non-core businesses in Europe and Australia. The sale of our United Kingdom operations substantially completes our divestiture plans, strengthens our balance sheet and allows us to re-deploy capital and other resources to further strengthen our position as a premier provider of staffing and recruitment services in North America." About Spherion Spherion Corporation (S&P, B+ Corporate Credit Rating, Negative) is a leader in the staffing industry in North America, providing value-added staffing, recruiting and workforce solutions. Spherion has helped companies improve their bottom line by efficiently planning, acquiring and optimizing talent since 1946. To learn more, visit http://www.spherion.com/ SPIEGEL INC: Hires Staubach Midwest as Real Estate Broker --------------------------------------------------------- Spiegel Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for authority to employ Staubach Midwest, LLC, as their real estate broker in connection with the potential subletting or assignment of approximately 120,000 square feet of space on floors 1, 2, and LL, located at 3500 Lacey Road, in Downers Grove, Illinois for a term through December 1, 2006. Staubach Midwest's employment will be in accordance with the terms of a Sublease/Disposition Agency Agreement. Staubach is a worldwide real estate leader with a focus on representing users of office, retail, and industrial space. Staubach has over 50 offices in nine countries and has over 1,100 employees in the Americas. Staubach has particular expertise in real estate strategic planning, acquisition and disposition, lease administration and relocation services. Staubach will have the exclusive right to sublet or assign the Property for a period commencing July 29, 2004 and ending on the earlier of: (i) successfully subletting or assigning the Property; or (ii) January 31, 2005. Pursuant to the terms of the Broker Agreement, Staubach will conduct all aspects of promoting and advertising the Property and periodically reporting to the Debtors the progress made with regard to the sublease marketing effort. In consideration of Staubach's brokerage services for subletting or assigning the Property and the firm's agreement to use good faith efforts to effect the sublet or assignment, the Debtors will pay Staubach a total commission of $1.50 per square foot per year of the sublease. If however, there is no cooperating broker -- defined as any broker other than the Staubach brokers John Musgjerd and Fred Schuler -- involved in brokering the sublet agreement, the Debtors will only pay $1.00 per square foot per year. If Staubach successfully negotiates a buyout, recapture, or assumption of the Property by the landlord or a third party, then the Debtors will compensate Staubach $1.00 per square foot per year for the remainder of the lease term determined from the date the Debtors' lease obligation is extinguished. The Staubach Commission will be earned for services rendered if the Property is subleased or assigned during the Term of the Broker Agreement, whether or not the subtenant or assignee was procured by Staubach. The Commission will also be due to Staubach in the event that during the Term or within 90 days afterwards, the Debtors enter into an agreement with the Landlord to extinguish their lease obligation or any portion of that obligation. In addition, the Commission will be owed to Staubach in the event that during the Term or within 180 days afterwards, the Debtors commence negotiations that are ultimately successful with a "Sublease Prospect." A Sublease Prospect is defined as anyone -- including affiliates, partners, assigns, successors and predecessors -- who, during the Term, either: (i) submitted a letter of intent, term sheet or draft sublease or sublease to the Property; (ii) received a draft sublease for the Property from the Debtors; or (iii) whose name appears on a written list submitted by Staubach to the Debtors within 15 days of termination of the Broker Agreement and who during the term of the Broker Agreement, toured the Property, received proposals or expressed interest in the Property. The Debtors will also pay or reimburse Staubach for: * all costs and expenses relating to the design and development of all marketing and advertising materials; * all costs relating to broker incentive programs; and * all marketing costs related to brokerage receptions and open-houses. The Commission and the Marketing Costs will be paid to Staubach on execution of a sublease, an assignment, or a buyout. All amounts unpaid by the Debtors 45 days after the due date will bear a service charge equal to 1-1/2% per month of the unpaid balance. Notwithstanding anything in the Broker Agreement to the contrary, Staubach will not receive a commission if the Debtors' lease on the Property is: -- transferred as part of a sale of all or substantially all of the Debtors' assets pursuant to Section 363 of the Bankruptcy Code; or -- transferred pursuant to a plan of reorganization either: (i) to a third party in connection with the transfer of all or a substantial part of the Debtors' assets; or (ii) to a reorganized Debtor. Given the transactional nature of Staubach's engagement and the contingency arrangement, the firm should not be compelled to comply with the monthly and interim fee application requirements. Instead, Staubach and the Debtors will seek the Court's approval of the firm's fees, as provided for in the Broker Agreement, at the time of and in conjunction with seeking the approval for any sublease or assignment of the Property. Fred Schuler, Managing Principal of Staubach, assures the Court that the firm: (a) has no connection with the Debtors, their affiliates, their creditors or any other party-in-interest, or their attorneys and accountants; (b) is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b); and (c) does not hold or represent any interest adverse to the Debtors or their estates in the matters for which Staubach is proposed to be retained. Staubach has not rendered any compensated services to the Debtors during their Chapter 11 cases or during the year prior to the Petition Date. 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. 29; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPX CORP: Weak Operating Results Spur S&P Negative Outlook ---------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on SPX Corp. to negative from stable. At the same time, Standard & Poor's affirmed the 'BBB-' corporate credit and senior secured ratings and the 'BB+' senior unsecured debt rating on the Charlotte, North Carolina-based diversified industrial manufacturer. Based on preliminary figures, SPX had approximately $2.9 billion of total debt, including off-balance-sheet financings, as of June 30, 2004. "The outlook revision reflects disappointing operating performance within several operations, due in part to rising raw material costs, a difficult pricing environment, and manufacturing inefficiencies, which will likely make it difficult for SPX to meet our credit measure expectations in 2004," said Standard & Poor's credit analyst Joel Levington. Furthermore, both second-quarter and 2004 earnings quality are weaker than expected, because the company added its municipal valve business to discontinued operations during the second quarter, a favorable non-cash mark-to-market valuation of an interest rate swap, and a $33 million onetime tax benefit, and because a large portion of the company's cash generation will come from the sales of account receivables, which Standard & Poor's consider to be a financing activity. Over time, Standard & Poor's expects that the company will continue to divest assets viewed as non-core, although the timing, assets, size, and reallocation of potential proceeds are unknown. Acquisition activity is expected to decline in the near term; however transactions may include "bolt-on" targets that enhance existing platforms and technology. "We are somewhat skeptical that management's financial policy will be sufficiently disciplined to consistently meet our targeted credit measures," Mr. Levington said. "We expect SPX to emphasize debt reduction over shareholder-friendly initiatives until operating performance improves and credit protection measures strengthen. Should that not occur, or should it become apparent that the company's intermediate financial polices are inconsistent with our expectations, ratings could be lowered. If that happens, the senior unsecured debt would be rated at least one notch below the corporate credit rating, depending on the potential amount of secured debt and priority liabilities relative to adjusted tangible assets." SPX Corporation describes itself as a global provider of technical products and systems, industrial products and services, flow technology, cooling technologies and services, and service solutions. See http://www.spx.com/ THREE PROPERTIES: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Three Properties, Ltd. dba Oaks of Inwood/Inwood Greens dba Trails of Inwood P.O. Box 187 Prairie View, Texas 77446 Bankruptcy Case No.: 04-40811 Type of Business: The Debtor operates an apartment complex located in Houston, Texas. Chapter 11 Petition Date: August 2, 2004 Court: Southern District of Texas (Houston) Judge: Marvin Isgur Debtor's Counsel: Eric J. Taube, Esq. Hohmann, Taube & Summers, L.L.P. 100 Congress Ave, 18th Floor Austin, TX 78701 Tel: 512-472-5997 Fax: 512-472-5248 Estimated Assets: $0 to $50,000 Estimated Debts: $1 million to $10 million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ DSD Development, Inc. Loan $664,479 P.O. Box 187 Prairie View, TX 77446 Hollister Road Investments, Loan $495,932 Ltd. P.O. Box 187 Prairie View, TX 77446 Green Oak Village, Ltd. Loan $156,107 Aldine ISD Taxes $148,302 Paul Bettencourt Services $125,876 Harris County Tax Assessor- Taxes $125,876 Collector D.W. Sowell Development Ltd. Loan $109,124 Reliant Energy Services $34,773 Seril, Inc. Services $33,072 United Painting Co. Services $23,980 Don Sowell Interests Services $22,508 Fantastic Floors Inc. Services $21,951 Castillo's Painting Co. Services $17,995 Hughes Mro/Chad Houston Services $16,266 City of Houston Water Dept. Services $15,103 DSI-HP 2002, Ltd. Loan $14,500 Texas Commercial Agency Services $14,377 G.O. Plumbing Services, Inc. Services $13,342 City Ranger's Services $11,688 Bayou City Pstrol. Division Services $11,595 THREE PROPERTIES: Hires Hohmann Taube as Bankruptcy Counsel ----------------------------------------------------------- Three Properties, Ltd., wants permission from the U.S. Bankruptcy Court for the Southern District of Texas to employ Hohmann, Taube & Summers, L.L.P. as its bankruptcy counsel. The firm is expected to: a) advise the Debtor as to their rights and responsibilities; b) take all necessary action to protect and preserve the estate of the debtor including, if necessary, the prosecution of actions or adversary of other proceedings on the Debtor's behalf; c) develop, negotiate and promulgate the Chapter 11 plan for the Debtor and prepare the discharge statement in respect thereof; d) prepare on behalf of the Debtor all necessary applications, motions and other pleadings and papers in connection with the administration of the estate; and e) perform all other legal services required by the Debtor in connection with this case. Eric J. Taube, Esq., leads the engagement. Mr. Taube discloses that lawyers at his firm charge $175 to $375 per hour for their services. Headquartered in Prairie, Texas, Three Properties, operates an apartment complex. The Company filed for chapter 11 protection on August 2, 2004 (Bankr. S.D. Tex. Case No. 04-40811). When the Company filed for protection from its creditors, it listed less than $50,000 in assets and estimated its debts at more than $1 million. TORPEDO SPORTS: Proposes to Merge with Interactive Games, Inc. -------------------------------------------------------------- Interactive Games, Inc., a privately held company and a developer and licensor of interactive casino technologies and slot machine games to the rapidly growing Native American Class II, Class III and charitable gaming markets, says it will enter into a Definitive Merger Agreement with Torpedo Sports Inc. (OTC BB: TPDO). Completion of the Plan for Merger will take place over the next fourteen business days and remains subject to the conditions precedent in the merger agreement. Under the terms of the merger agreement, the holders of Interactive Games capital stock, warrants and options will have the right to receive Torpedo Sports capital stock, warrants and options as outlined within the Plan for Merger and upon completion of the Definitive Merger Agreement. About Interactive Games Inc. Interactive Games, Inc., http://www.interactivegamesinc.com/is a developer and licensor of interactive casino technologies and slot machine games to the rapidly growing Native American Class II, Class III and charitable gaming markets. Interactive Games' mission is to deliver to its customers gaming technology that produces a high return on investment by providing both software and gaming hardware that extend the earnings life of its innovative gaming platforms beyond the standard. Management and the development team for Interactive Games represents over forty years of combined experience and knowledge within the regulated casino gaming sector and have provided licensing, sales, service and gaming content to most major manufacturers in gaming. Situated in the Foreign Trade Zone in heart of Fort Lauderdale, Florida, Interactive Games occupies a 20,000 square foot corporate office and showroom ideally situated for shipment and storage of its products both domestically and internationally. Presently through the Company's strategic alliance with Spin Inc., the company will continue to provide slot machines and all forms of casino technologies to the cruise industry as well as most gaming destinations throughout the Caribbean. About Torpedo Sports Inc. Torpedo Sports USA, Inc. formerly operated through its wholly owned subsidiary, Torpedo Sports, Inc. of Quebec, Canada, as a manufacturer and distributor of outdoor recreational products for children. The Company recently announced its intention to liquidate its recreational products business and explore other business opportunities. * * * Torpedo Sports Inc.'s April 30, 2004, balance sheet shows a $3,512,598 stockholders' deficit. UAL CORP: Inks Pact Modifying Stay on Cal. Statewide Secured Claim ------------------------------------------------------------------ United Air Lines, Inc., and the California Statewide Communities Development Authority have reached a stipulation regarding Cal Statewide's motion to lift the automatic stay to exercise its remedies as a secured creditor by setting off the annual fees with the collateral. The automatic stay is modified to permit Cal Statewide to withdraw $286,161 from the Escrowed Funds. The amount will be applied to the Annual Fees the Debtors owe, which accrued through April 1, 2004. Cal Statewide releases its security interest in $286,161 of the Escrowed Funds, which will be paid to the Debtors. On each Payment Date, commencing on October 1, 2004, Cal Statewide will withdraw $92,897 from the Escrowed Funds in satisfaction of its Annual Fees. At the same time, Cal Statewide will release its security interest in $92,897 of the Escrowed Funds, which will be paid to the Debtors. The Stipulation will cease to be effective on the earliest of the effective date of a confirmed plan of reorganization or the conversion of the Debtors' proceedings to a Chapter 7. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. the Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at KIRKLAND & ELLIS represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNIVERSAL ACCESS: Files for Chapter 11 Reorganization in Illinois ----------------------------------------------------------------- Universal Access Global Holdings Inc. (Nasdaq: UAXS) and its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois. The filings will enable the Company and its U.S. subsidiaries to continue to conduct business without interruption while it implements its reorganization plan. The Company's non-U.S. subsidiaries are not included in the filing and will also continue to operate normally. "We believe that Chapter 11 is the best available solution for Universal Access," said Randy Lay, Chief Executive Officer and President of Universal Access. "It will permit us to create the greatest possible value for our creditors, and to continue to deliver high quality off-network private line circuits to our carrier, cable, and government customers. I want to stress that service will not be interrupted. We will continue to provide our customers with the same high levels of service they have come to expect from us." Mr. Lay added, "while in Chapter 11, we will continue to eliminate expenses that are not core to our current business, in order to position Universal Access for future long- term success." About Universal Access Universal Access (Nasdaq: UAXS) is a leading communications network integrator for carriers and service providers expanding into markets and areas beyond their own network presence. Founded in 1997, the company is a single, independent source of analysis, design, planning and provisioning (installing) of end-to-end data/voice circuits and networks. Universal Access provides network connectivity services, software and information products - - including the industry-leading Lattis(TM) tariff pricing software -- to over 200 U.S. and international telecom carriers, cable companies, system integrators, government and enterprise customers. Over the past seven years, Universal Access has created the industry's leading network infrastructure database, the Universal Information Exchange (UIX(R)). The UIX holds real-time information on the availability, location, and prices for thousands of data and voice circuit connections, and covers 145 million physical U.S. telecom locations collected from more than 400 carriers and other sources. For further information about Universal Access, visit the company's Web site at http://www.universalaccess.net/ UNIVERSAL ACCESS: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: Universal Access Global Holdings Inc. 233 South Wacker Drive, Suite 600 Chicago, Illinois 60606 Bankruptcy Case No.: 04-28747 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Universal Access Inc. 04-28752 Tri-Quad Enterprises Inc. 04-28755 Universal Access Communications Inc. 04-28762 Universal Access of Virginia Inc. 04-28768 Type of Business: The Debtor provides network infrastructure services and facilitates the buying and selling of capacity on communications networks. See http://www.universalaccess.com/ Chapter 11 Petition Date: August 4, 2004 Court: Northern District of Illinois (Chicago) Judge: Jack B. Schmetterer Debtors' Counsels: John Collen, Esq. Rosanne Ciambrone, Esq. Duane Morris LLC 227 West Monroe Street Suite 3400 Chicago, IL 60606 Tel: 312-499-6701 Total Assets: $22,047,000 Total Debts: $24,054,000 UNIVERSAL ACCESS: PwC Resigns as Independent Accountants -------------------------------------------------------- On August 2, 2004, Universal Access Global Holdings Inc. (Nasdaq: UAXS) received notice that, effective upon the Company's filing of its Form 10-Q for the quarter ended June 30, 2004, PricewaterhouseCoopers LLP will resign as the Company's independent accountants. During the two most recent fiscal years and through August 4, 2004, there have been no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make reference thereto in their reports on the financial statements for such years. The reports of PricewaterhouseCoopers LLP on the Company's consolidated financial statements as of and for the year ended December 31, 2003, included an explanatory paragraph disclosing that recurring losses from operations, negative cash flows from operating activities, decreasing revenues, and a net working capital deficiency raise substantial doubt about the Company's ability to continue as a going concern. The report of PricewaterhouseCoopers LLP for the Company's consolidated financial statements as of and for the year ended December 31, 2002, did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. The Company's Audit Committee is currently in the process of selecting a new independent registered public accounting firm. Upon making such selection, the Company will file with the Securities and Exchange Commission, a subsequent Current Report on Form 8-K in accordance with SEC requirements. About Universal Access Universal Access (Nasdaq: UAXS) is a leading communications network integrator for carriers and service providers expanding into markets and areas beyond their own network presence. Founded in 1997, the company is a single, independent source of analysis, design, planning and provisioning (installing) of end-to-end data/voice circuits and networks. Universal Access provides network connectivity services, software and information products - - including the industry-leading Lattis(TM) tariff pricing software -- to over 200 U.S. and international telecom carriers, cable companies, system integrators, government and enterprise customers. Over the past seven years, Universal Access has created the industry's leading network infrastructure database, the Universal Information Exchange (UIX(R)). The UIX holds real-time information on the availability, location, and prices for thousands of data and voice circuit connections, and covers 145 million physical U.S. telecom locations collected from more than 400 carriers and other sources. For further information about Universal Access, visit the company's Web site at http://www.universalaccess.net/ US AIRWAYS: Settles Bank of New York Aircraft Claims for $20.9 Mil ------------------------------------------------------------------ On November 4, 2002 and May 15, 2003, The Bank of New York, as Successor Trustee under a Trust Indenture between the Hillsborough County Aviation Authority and Barnett Banks Trust Company, N.A., filed Claim Nos. 2841 and 5723 aggregating $27,791,551 against US Airways, Inc. Pursuant to the Confirmation Order blessing the carrier's chapter 11 plan, The Bank of New York retains liens on its collateral and has an Allowed Secured Class USAI-1 Claim equal to the value of the interest in the estate of USAI in the collateral securing its Allowed Secured Claim. The Bank of New York and Reorganized U.S. Airways agree that Claim No. 5723 is reduced and allowed as a General Unsecured Class USAI-7 Claim for $20,941,551. Claim No. 2841 is allowed as a Secured Class USAI-1 Claim as set forth in the Confirmation Order. (US Airways Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) WASTECORP INC: Disclosure Statement Hearing Set for August 24 ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey further adjourned the hearing to consider the adequacy of the preliminary disclosure statement prepared by Wastecorp. International Investments, Inc., (TSX Venture: Stock Symbol "WII"). The hearing is now scheduled for August 24, 2004 at 2:00 p.m. As previously reported, on May 12, 2004, Wastecorp. filed a preliminary disclosure statement to explain its chapter 11 plan. ITT Industries, Inc., the Company's largest creditor, raised various objections. The Company has the exclusive right to solicit acceptances of its plan from creditors through September 28, 2004. Headquarted in Glen Rock, New Jersey, Wastecorp. Inc. -- http://www.wastecorp.com/-- is a waste management company specializing in wastewater sewage treatment with its Wastecorp. Marlow Plunger Pump line, medical waste disposal, with its reusable sharps container program and plastic and scrap tire recycling division. On April 7, 2003, Wastecorp. International Investments Inc., together with its subsidiary, Wastecorp. Inc., filed voluntary Chapter 11 petitions in the United States, Bankruptcy Court for the District of New Jersey. Wastecorp. is represented in Canada by the law firm of Borden, Ladner, Gervais, and in the United States by lawyers at Cole, Schotz, Meisel, Forman & Leonard. VALCOM INC: Subsidiary Emerges From Chapter 11 Protection --------------------------------------------------------- Valencia Entertainment International, a subsidiary of ValCom, Inc. (OTCBB:VACM)(Frankfurt XETRA:VAM), emerged from Chapter 11 protection. ValCom, Inc. has sold 6 of its 12 owned/operated Los Angeles studios for over $10 million and has paid off the Company's debt. The Company will continue to operate its 14 film and television production sound stages, both in Los Angeles and Las Vegas, with the primary focus being on its newly acquired studio facilities in the Las Vegas booming entertainment market. Vince Vellardita, Chairman and CEO, stated, "We are delighted that these proceedings have concluded favorably. We will now move forward with the recovery efforts and the significant opportunities we have developed in one of the world's largest markets -- the 'Entertainment' industry. Our past successes position ValCom to become one of the leading television and film studios and services companies in the Country. The partnerships we have solidified during the past 12 months will enhance our product offerings, increase our distribution channels, and accelerate our growth. We are relieved to have Valencia Entertainment back up and running. We are also very excited to have acquired the Las Vegas property, as this market is booming; and there are no other facilities capable of providing the needs of the fastest growing city in the US, and the entertainment capital of the world. With a presence both in Los Angeles and now in Las Vegas, the Company has the perfect opportunity to capitalize on this revenue stream." About ValCom, Inc. Based in Valencia, Calif., Valcom, Inc., with wholly owned subsidiary, Valcom Studios, Las Vegas, is a diversified and vertically integrated, independent entertainment company. ValCom, Inc., through its operating divisions and subsidiaries, creates and operates full service facilities that accommodate film, television and commercial productions with its four divisions that are comprised of: studio, film and television, camera/equipment rentals, and broadcast television ownership. The company offers its clients a full complement of animation services, broadcast facilities, recording studios and other related services for the entertainment industry. The Company owns/operates 13 acres of land and approximately 300,000 square feet of commercial building space with 14 film and television production sound stages. ValCom maintains long-term contracts with Paramount Pictures for their hit CBS series "JAG" and "NCIS." ValCom's equipment/camera and personnel rental business, Half-day Video, is a leading competitor in the Hollywood community. The Company and its partnership operate ValCom Broadcasting KVPS-TV Channel 8 in Palm Springs, Calif. For additional information, visit http://www.valcom.tv/or call Ms. Shari L. Edwards at 661-257-8000. WATERFRONT WAREHOUSE: Sec. 341(a) Meeting Slated for August 31 -------------------------------------------------------------- The United States Trustee for Region 17 will convene a meeting of Waterfront Warehouse, Inc.'s creditors at 11:00 a.m., on August 31, 2004, in Room 130 at 280 South First Street in San Jose, California. 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 San Jose, California, Waterfront Warehouse, owns a commercial building in which it leases retail and office space. The Company filed for chapter 11 protection on July 28, 2004 (Bankr. E.D. Calif. Case No. 04-92879). Michael W. Malter, Esq., at Binder & Malter, LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $8,025,700 in total assets and $6,690,752 in total debts. WEIRTON STEEL: Wants Court to Nix Individual Bondholders' Claims ---------------------------------------------------------------- Mark E. Freedlander, Esq., at McGuireWoods, in Pittsburgh, Pennsylvania, reminds the Court that as of the Petition Date, Weirton Steel Corporation issued: (a) $118,242,300 in Weirton Steel Corporation 10% Senior Secured Notes Due 2008; and (b) $27,348,000 in Secured Pollution Control Revenue Refunding Bonds Series 2002. As collateral for the Notes and the Bonds, the Weirton Corporation Debtor granted the Bondholders junior liens in certain of its fixed assets, including the hot strip mill, the No. 9 tandem mill and the tin assets. Also, pursuant to the Final DIP Order, the Debtor provided adequate protection to the Bondholders to the extent of diminution, if any, in value of the Bondholder Collateral in the form of: (a) junior replacement liens on and security interests in substantially all of the Debtor's assets; and (b) a superpriority administrative claim pursuant to Sections 503(b) and 507(b) of the Bankruptcy Code. Mr. Freedlander asserts that only J.P. Morgan Trust Company, N.A., as indenture trustee and collateral agent for the Bonds and Notes and acting for the benefit of the Bondholders, has standing to assert claims on the Bondholders' behalf. On October 16, 2003, JPMorgan Trust filed two proofs of claim asserting secured obligations that the Debtor owe them on the Notes and Bonds: (1) Claim No. 2408 for $118,242,300, plus interest, fees and expenses; and (2) Claim No. 01921 for $27,318,000, plus interest, fees and expenses. On April 9, 2004, JPMorgan Trust, on the Bondholders' behalf, asserted its Diminution Claim based on an alleged decline in value of the Bondholder Collateral since the Petition Date. On account of the asserted Diminution Claim, JPMorgan Trust asserted: -- its rights under the Final DIP Order to a Section 503(b) and 507(B) superpriority claim; and -- adequate protection of its replacement liens and security interests. On April 23, 2004, JPMorgan Trust, the Informal Committee of Senior Secured Noteholders, and Corsair Special Situations Fund, L.P., filed Notices of Appeal of the ISG Sale Order. On April 30, 2004, the United States District Court for the Northern District of West Virginia continued the stay of the ISG Sale Order through May 7, 2004, pending the documentation of a settlement in principle reached among Weirton Steel, Weirton Venture Holdings Corporation, F.W. Holdings, Inc., JPMorgan Trust, the Informal Committee and Corsair. On May 6, 2004, the Court approved the Settlement and Lock-Up Agreement, pursuant to which: (i) JPMorgan Trust was paid $30 million, for the Bondholders' benefit, at the closing of the ISG Sale; (ii) JPMorgan Trust is entitled to receive up to an additional $6 million, for the Bondholders' benefit, under Weirton's Liquidation Plan, which incorporates by reference the Settlement and Lockup Agreement; and (iii) JPMorgan Trust may receive additional sums for the benefit of the Bondholders as unsecured creditors under the Plan. Pursuant to the Final DIP Order, the Settlement Order and the Settlement and Lockup Agreement, Mr. Freedlander notes, JPMorgan Trust holds allowed claims representing the aggregate outstanding balances of the Notes and Bonds. Notwithstanding the filing of the Indenture Trustee Claims, the Debtor identified 489 Individual Bondholder Claims aggregating $9,545,277. Upon review, the Debtor found that the Bondholder Claims are duplicative of the allowed claims held by JPMorgan Trust. Mr. Freedlander notes that the Bondholder Claimholders will receive distributions on the Notes and Bonds from the Debtor through JPMorgan Trust. If the Bondholder Claims are allowed, then the claimholders would receive additional distributions, and, thus, improperly receive a greater recovery than other similarly situated creditors. Accordingly, the Debtor asks the Court to disallow the Bondholder Claims. Among the largest Bondholder Claims are: Claim Claim Claim Claimant Number Amount Classification -------- ------ ------ -------------- A. H. Kerr Foundation 1997 $206,001 unsecured Bogan, Barbara 276 125,000 priority Buffoni, Jeff 583 300,000 unsecured Fayerman Lauren 571 250,000 priority Glassman Jordan 1472 310,000 unsecured Gordon, Elliott R. [Est.] 1676 120,000 unsecured Gordon, Sybil D. 1677 110 000 unsecured Kerr, William A. 1998 110,565 unsecured Parrish, Kelly L./J.K. 1780 103,594 secured Parrish, Kelly L./J.K. 1746 285,096 secured Petersen Consultants 1522 100,000 secured Power, Roy/Elizabeth 20101 123,002 administrative Rashbaum, Lois Ann 1109 105,000 secured Zinberg, Sheldon S. 1248 100,000 secured (Weirton Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) WELLSFORD REAL: Posts $2,313,530 Net Loss in 2nd Quarter -------------------------------------------------------- Wellsford Real Properties, Inc. (AMEX: WRP) reported second quarter 2004 revenues of $8,540,073, and a net loss of $(2,313,530). For the comparable quarter in 2003, WRP reported revenues of $7,307,634 and net loss of $(1,032,439). For the six months ended June 30, 2004, Wellsford reported revenues of $14,706,807 and a net loss of $(9,832,463). For the corresponding 2003 period, WRP reported comparable revenues of $13,941,184 and a net loss of $(556,157). Second Quarter 2004 and Subsequent Activities Wellsford/Whitehall At June 30, 2004, Wellsford had a 32.59% ownership interest in Wellsford/Whitehall, a private joint venture that owned and operated 24 properties (including 16 office properties, five net- leased retail properties and three land parcels) aggregating approximately 2,664,000 square feet of improvements, primarily located in New Jersey and Massachusetts. In July 2004, Wellsford/Whitehall completed a transaction whereby it transferred six of its Massachusetts properties (aggregating 891,000 square feet), which were subject to mortgage debt of $64,252,000 -- Nomura Loan -- at June 30, 2004, along with related restricted cash balances aggregating $6,428,000, cash and certain other consideration to a newly formed partnership which includes the New England family that owned an aggregate 7.45% equity interest in Wellsford/Whitehall, in exchange for the Family's equity interests in Wellsford/Whitehall. The Family also agreed to eliminate an existing tax indemnity, which Wellsford/Whitehall had to the Family's members. As a result of this transaction, Wellsford/Whitehall expects to record a loss of approximately $5,000,000 during the three months ending September 30, 2004, of which Wellsford's share is approximately $1,600,000. As a result of the redemption, Wellsford's interest in Wellsford/Whitehall will increase to 35.21%. Debt Default Update Since March 2004, Wellsford/Whitehall had not made a portion of its scheduled monthly debt service payments on the Nomura Loan. The manager of Wellsford/Whitehall withheld these debt service payments and met with the special servicer to present and discuss various potential debt term alternatives. The portion of the scheduled payments not being made related to the amount by which the debt service due each month exceeded the aggregate rent receipts of the above mentioned six properties, which were payable directly into a lockbox with the lender and were insufficient as a result of low occupancy at these properties. The special servicer has agreed to waive default interest in connection with the nonpayment and restructured the Nomura Loan with the Family Partnership, which acquired the six properties. Wellsford/Whitehall executed an amended agreement, effective April 1, 2004, extending its existing $106,000,000 loan with General Electric Capital Corporation to December 31, 2006. The loan is collateralized by eight office properties in New Jersey and one in Massachusetts. The loan also provides, subject to certain conditions, for additional funding aggregating $16,000,000 through December 31, 2005 for certain capital improvements for the collateralized properties. Wellsford/Whitehall had total assets of $266,285,000 and debt of $194,201,000 at June 30, 2004. At December 31, 2003, total assets and debt were $277,120,000 and $201,659,000, respectively. The aggregate portfolio occupancy was 46% at June 30, 2004 based upon 2,664,000 gross leasable square feet. Considering the effect of the July 2004 transaction with the Family, portfolio occupancy would have been 51% at June 30, 2004 based upon 1,773,000 gross leasable square feet. Wellsford Capital Second Holding is a special purpose finance company in which WRP has an approximate 51% equity interest, or $23,011,000, at June 30, 2004. Second Holding had total investments of $1,465,796,000 at June 30, 2004, of which 94% were rated AAA or AA by Standard & Poor's. Second Holding recorded a $13,230,000 impairment charge related to the write-down of one of its investments during the first quarter of 2004 to its deemed fair value as a result of an other than temporary decline in the market value of bonds and underlying aircraft collateral. This investment was sold by Second Holding during May 2004 and Second Holding recorded a recovery of the impairment charge of $300,000 during the second quarter of 2004 (of which Wellsford's share was $153,000). The partners of Second Holding have agreed to cease making any distributions to all partners (including the partner who has a 35% income interest) until the impairment charge is recovered through future earnings. During the second quarter of 2004, the partner owning the 35% income interest informed management of Second Holding that it would not approve the purchase of any further investments, thereby under the terms of the partnership agreement, preventing any future acquisitions of investments. The partners are evaluating alternatives available to Second Holding in addition to holding existing assets through respective maturities and then paying down related debt. As a consequence, operating income, fees to be earned and cash flows to be received by Wellsford from Second Holding will be reduced in the future. During April 2004, WRP sold the 421 Chestnut Street property for net proceeds of approximately $2,700,000. This asset was the last remaining asset from Wellsford's 1998 acquisition of Value Property Trust. Wellsford reversed approximately $625,000 of previously recorded impairment reserves. At June 30, 2004, Wellsford recognized approximately $184,000 of the balance of the proceeds, which had been placed in escrow from the sale of its Keewaydin property in July 2003, as a result of the expiration of the contingency period. This amount and the reversal of the impairment reserve are reflected in income from discontinued operations during the three and six months ended June 30, 2004. In October 2000, Wellsford and Prudential Real Estate Investors, an affiliate of Prudential Life Insurance Company, organized Clairborne Fordham which provided an aggregate of $34,000,000 of mezzanine financing for the construction of Fordham Tower, a 50- story, 227 unit, luxury condominium apartment project to be built on Chicago's near northside -- Fordham Tower. Wellsford, which has a 10% interest in Clairborne Fordham, fully funded its $3,400,000 share of the loan. Wellsford and its partner in Clairborne Fordham are negotiating an agreement with the owners of Fordham Tower to take over ownership of the remaining 19 unsold units, as well as the 188 space parking garage and 12,000 square feet of retail space. It is the intention of Clairborne Fordham to complete the orderly sell-out of these components. Management of Wellsford believes that this transaction, if it happens, will not result in any loss to Clairborne Fordham or Wellsford. Wellsford Development At June 30, 2004, Wellsford had an 85.85% interest as managing owner in Palomino Park, a five phase, 1,800 unit multifamily residential development in Highlands Ranch, a south suburb of Denver, Colorado. Three phases aggregating 1,184 units are completed and operational as rental property. A 264 unit fourth phase has been converted into condominiums. Sales commenced in February 2001 and through June 30, 2004, Wellsford has sold 238 units. Wellsford is actively exploring the development and construction of a 259-unit condominium project on the land for the remaining fifth phase. Physical occupancy for the Blue Ridge, Red Canyon and Green River rental phases aggregated 96% and 88% at June 30, 2004 and December 31, 2003, respectively, however, significant rental concessions continue to be given to tenants. Wellsford sold 19 Silver Mesa condominium units for gross proceeds of $4,658,000 during the quarter ended June 30, 2004 and 11 units for gross proceeds of $2,461,000 in the comparable 2003 period. For the six months ended June 30, 2004, Wellsford sold 29 Silver Mesa units for gross proceeds of $6,944,000 and 16 units for gross proceeds of $3,657,000 for the comparable 2003 period. During June 2004, Wellsford purchased a 100 single-family home site in East Lyme, Connecticut for approximately $6,200,000. Wellsford is in the process of finalizing an agreement with a home builder who would construct and sell the homes on the site and who will have a 5% interest in the project and receive other consideration. Wellsford is in the process of obtaining financing for the project and is expecting to start construction during the fourth quarter of 2004. Corporate Commenting on the activities of the first quarter, Jeffrey H. Lynford, Chairman of the Board, stated, "We are persistent in our efforts to simplify the Company's balance sheet and have been working cooperatively with our several joint venture partners in this regard. Generally, properties and assets encumbered by complex partnership agreements are illiquid and this depresses value. Our recent redemption of the Saraceno Family partnership interests in the Wellsford/Whitehall venture is a fine example of a successful initiative. Meanwhile, the sales of condominiums at our Palomino project are closing on schedule and Lazard Freres & Co., LLC, continues its work to advise the Company's Board of Directors regarding its strategic business alternatives." Wellsford Real Properties, Inc. is a real estate merchant banking firm organized in 1997 and headquartered in New York City which acquires, develops, finances and operates real estate properties and organizes and invests in private and public real estate companies. WESTPOINT STEVENS: Court Clears 5th Amendment to DIP Financing -------------------------------------------------------------- WestPoint Stevens' DIP Credit Agreement was first amended on July 24, 2003, and was further amended on September 30, 2003. Because of the non-material nature of the First and Second Amendments, the Debtors did not seek Bankruptcy Court approval. The Bankruptcy Court approved a third amendment in November 2003. A fourth amendment to the DIP Credit Agreement was non-material and that did not require Bankruptcy Court approval. One More Modification John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, in New York, tells Judge Drain that the Debtors recently determined that they could realize about $20 million in cash by proceeding with a program of inventory rationalization. However, an inventory rationalization would result in a one-time hit to EBITDA that would potentially impact the EBITDA covenants in the DIP Credit Agreement. Thus, in April 2004, the Debtors initiated discussions with their DIP Lenders to adjust certain covenants in the DIP Credit Agreement to allow for the proposed inventory rationalization. The Fifth Amendment On July 2, 2004, the Debtors entered into the Fifth Amendment to the DIP Credit Agreement with Bank of America, N.A., as Administrative Agent; Wachovia Bank, N.A., as Syndication Agent; and certain lenders. Specifically, the Debtors and the DIP Lenders have agreed to these amendments: A. Definition of Inventory Liquidation Factor The Fifth Amendment provides for the addition of a new definition for Inventory Liquidation Factor: "Inventory Liquidation Factor" means the product obtained by multiplying: (a) the difference of: (i) the amount of inventory reported on the Borrowers' consolidated financial statements as of the last day of Borrowers' Fiscal Month December 2004, rounded down to the nearest $1,000,000, minus (ii) $330,000,000, by (b) 0.50; provided however, that in no event will the Inventory Liquidation Factor be less than zero. B. Minimum EBITDA The DIP Credit Agreement contains certain minimum EBITDA covenants, which the Debtors are obligated to meet. Pursuant to the Fifth Amendment, the Debtors will amend the dollar amounts of the existing Minimum EBITDA covenants. In accordance with the Debtors' plan for inventory rationalization, the Debtors expect that there will be a negative effect on the Debtors' ability to achieve the existing EBITDA levels as currently defined in the DIP Credit Agreement. The amended dollar amounts will afford the Debtors with a greater cushion to avoid potential defaults and breach of the covenants due to the inventory rationalization program. Current Minimum Amended Minimum Period EBITDA EBITDA ------ --------------- --------------- Four consecutive Fiscal $101,000,000 $95,000,000 Quarters ending on the last day of the Fiscal Month of June 2004 Four consecutive Fiscal 106,000,000 86,000,000 Quarters ending on the last day of the Fiscal Month of September 2004 Four consecutive Fiscal 104,000,000 80,000,000 Quarters ending on the last plus the day of the Fiscal Month of Inventory December 2004 Liquidation Factor Four consecutive Fiscal 104,000,000 80,000,000 Quarters ending on the last day of the Fiscal Month of March 2005 C. Minimum Availability Covenant The Debtors will add language to Section 7.24 of the DIP Credit Agreement with respect to the minimum availability covenant. Pursuant to the Fifth Amendment, the Debtors will maintain availability at all times of no less than $75,000,000, provided, however, that if no Default or Event of Default exists, the Debtors may maintain Minimum Availability of less than $75,000,000 but more than $60,000,000 for up to five business days in any one calendar month. In addition, the Fifth Amendment provides that in the event that EBITDA for the trailing 12 fiscal months falls below certain levels, the Debtors will be required to maintain certain levels of Minimum Availability. The corresponding thresholds are: Minimum Period EBITDA Availability ------ ------ ------------ 06/2004 $109,000,000 $75,000,000 07/2004 105,000,000 75,000,000 08/2004 104,000,000 75,000,000 09/2004 98,000,000 80,000,000 10/2004 94,000,000 80,000,000 11/2004 95,000,000 80,000,000 12/2004 90,000,000 (plus the Inventory Liquidation Factor) 01/2005 90,000,000 90,000,000 Each Month Thereafter 90,000,000 90,000,000 D. Amendment Fee In consideration of the Lenders' agreement to modify the existing DIP Credit Agreement, the Debtors will pay a $450,000 amendment fee. Mr. Rapisardi asserts that the inventory rationalization will provide significant cash for the benefit of the Debtors' operations. The Fifth Amendment is necessary in light of the current levels of the Minimum EBITDA covenants. The Debtors believe that it is critical to the viability of their businesses, as well as their reorganization efforts, to maintain their ability to obtain loans, letters of credit and other extensions of credit under the DIP Credit Agreement. Some Lenders Grumble Certain Prepetition Lenders indicated their intention to object to the Original Fifth Amendment. To resolve the objections, the Debtors and Bank of America, N.A., as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, and the Lenders, have agreed to amend and restate the Original Fifth Amendment. The Amended and Restated Fifth Amendment provides that in the event that EBITDA for the trailing 12 fiscal months falls below certain levels, the Debtors will be required to maintain certain levels of Minimum Availability. These new thresholds require: For the 12 Fiscal If EBITDA Then Availablility Months Ending is Less Than Must be Greater Than ----------------- ------------ -------------------- June 2004 $109,000,000 $75,000,000 July 2004 105,000,000 75,000,000 August 2004 104,000,000 75,000,000 September 2004 98,000,000 80,000,000 October 2004 94,000,000 80,000,000 November 2004 95,000,000 80,000,000 December 2004 90,000,000 90,000,000 January 2005 90,000,000 90,000,000 Each Month thereafter 90,000,000 90,000,000 The new definition of "inventory liquidation factor" was deleted. Accordingly, Judge Drain approves the Amended and Restated Fifth Amendment to DIP Credit Agreement -- a full-text copy of which is available for free at: http://bankrupt.com/misc/Amended_and_restated_Fifth_amendment.pdf (WestPoint Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) ********* 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. 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