January 272003

SEC To Unveil Credit-rating Agency Rules This Year

Dow Jones Newswires reported that regulators will propose rules this
year to increase oversight and promote competition among credit-rating
agencies, according to the Securities and Exchange Commission (SEC). The
SEC said it will probe claims of unfair practices by rating agencies and
look for ways to bring more competition to an industry dominated by
three firms—Fitch Ratings, Moody's Investors Service and Standard
& Poor's, according to the newswire. Dow Jones reported that direct
oversight of rating agencies may be under consideration as well, along
with changes to address potential conflicts of interest and improve
disclosure within the industry, the SEC said.

Congress ordered the SEC to study rating agencies, which now receive
little direct oversight, amid complaints that credit analysts failed to
uncover problems at Enron Corp., the newswire reported. In its own
report provided to Congress late Friday, the SEC said it will unveil
ideas within 60 days to address concerns about credit-rating agencies
and propose new rules after getting feedback on its approach, according
to Dow Jones.

KMART

Kmart Files Reorganization Plan

Bloomberg News reported that Kmart Corp. on Friday filed its plan to
emerge from chapter 11 bankruptcy protection with the U.S. Bankruptcy
Court in Chicago. No details of the content of the filing were
immediately available, the newswire reported. The restructuring plan is
expected to include last week's announcement to close 326 stores and
fire as many as 37,000 workers. Julian Day was named chief executive,
replacing James Adamson, according to Bloomberg.

Pre-petition Claimants to Receive New Stock

'Substantially all' of Troy, Mich.-based Kmart's creditors will receive
shares of newly issued stock as payment for their claims, Chief
Executive Julian Day said in a written statement Friday, Dow Jones
reported. The company said it intends to cancel its current stock and
will reissue 500 million shares of common stock at a penny each and 20
million shares of preferred stock to be issued at the board of
directors' discretion, the newswire reported. Kmart's Friday
announcement quelled recent fears that at least one major investor in
the company was shrinking from a commitment to the reorganization plan,
Dow Jones reported.

Connecticut-based ESL Investments Inc., along with the New York-based
Third Avenue Trust, will invest at least $293.4 million in exchange for
stock in the reorganized retailer, Kmart said Friday, according to Dow
Jones. The reorganization plan includes guidelines for the selection of
a new board to replace the current nine-member panel. The reorganization
plan, which calls for Kmart to emerge from bankruptcy by April 30, is
subject to bankruptcy court approval, and a hearing is scheduled for
Feb. 25. Kmart's pre-petition lenders, who hold $1.08 billion of Kmart's
bank debt, will receive 40 percent of their claims in cash, $140 million
of which will be provided by ESL and Third Avenue, the newswire
reported.

Kmart Creditors Disputing Ownership, Value of New
Equity

As Kmart Corp. struggles to file a reorganization plan by late Friday,
it faces disputes among creditors not only over ownership in the
reorganized company, but also over how much it's worth, Dow Jones
reported. The Troy, Mich.-based discount retailer said earlier this
month that it plans to reemerge from chapter 11 bankruptcy by April 30,
earlier than its previous goal of July. Kmart said the plan, which
sources say could be filed as late as Sunday amid continuing creditor
disputes, will cancel the company's current equity shares and issue new
stock to pay off creditors. In the wake of a bankruptcy filing last
January that has since destroyed $6.9 billion in shareholder equity,
however, plenty of questions are circulating about what the value of any
new shares in the company will be. To read the full article, point your
browser to www.wsj.com.

Laidlaw Wins Judge's Approval to Seek Creditor Support for
Plan

Laidlaw Inc., North America's biggest bus company, won a U.S. bankruptcy
judge's approval to seek creditor support of its reorganization plan,
putting the owner of Greyhound Lines Inc. a step closer to emerging from
chapter 11, Bloomberg News reported. U.S. Bankruptcy Judge Michael J.
Kaplan in Buffalo, N.Y., approved the disclosures in Laidlaw's
reorganization plan at a hearing on Thursday, said James D. Wareham, the
company's lawyer. With Kaplan's approval, Burlington, Ontario-based
Laidlaw can send the plan to creditors for a vote, reported the
newswire.

National Century Bondholders to Get $1.2 Billion at Most, CEO
Says

Credit Suisse First Boston, Pacific Investment Management Co. and other
bond investors that are owed $3.3 billion by National Century Financial
Enterprises Inc. will divide about $1.2 billion of assets at most, said
David Coles, chief executive of the collapsed health care finance
company, Bloomberg News reported. National Century will cease operations
by May, six months after it filed for chapter 11 bankruptcy protection,
said Coles, a managing director at turnaround firm Alvarez & Marsal
Inc. who has been running the company since October, Bloomberg
reported.

Health Care REIT Sees Failed Client Hurting

Health Care REIT Inc. warned on Friday that it may post
lower-than-expected funds from operations in 2003, citing the bankruptcy
filing of a private health-care management company and its subsidiaries,
Dow Jones reported. Health Care, a real-estate investment trust that
invests in health-care facilities, said if it doesn't receive and
recognize interest from Doctors Community Healthcare Corp. this year,
its estimated 2003 funds from operations would decline by about six
cents a share to $2.78-$2.83 a share. National Century's bankruptcy
caused the health-care financier to halt payments to health-care
providers, like Doctors Community Healthcare—which received
mortgage financing from Health Care REIT, reported the newswire.

Fewer Companies May See Debt-rating Cuts in 2003, Moody's
Says

The number of companies under review for a ratings cut declined in the
fourth quarter compared with the previous one, suggesting ratings
reductions may decline in 2003, Moody's Investors Service said,
Bloomberg News reported. While most industries face pressure as the
economy struggles to grow, 'a handful of industries is driving what
could be perceived as a broad-based credit deterioration,' said Richard
Cantor, managing director of Moody's ratings research and analysis.

Telecommunications companies and utilities make up about a third of
all ratings reductions in the fourth quarter, and constitute more than a
third of companies now on review for a cut. Rating cuts in other
industries may be subsiding, he said. The report also showed that the
airlines industry faces the highest rate of negative ratings actions,
reported the newswire.

Alterra Healthcare Wins Interim OK Of $ 6.5 Million DIP
Loan

Alterra Healthcare Corp. won interim approval Friday of a $6.5 million
debtor-in-possession loan the company said is critical to its
restructuring efforts, Dow Jones reported. The order signed by Judge
Mary F. Walrath of the U.S. Bankruptcy Court in Wilmington, Del.,
schedules a final hearing to consider approval of a $15 million DIP loan
on Feb. 18. Alterra Healthcare filed for chapter 11 bankruptcy
protection on Wednesday. Its petition listed assets of $735.8 million
and liabilities of $1.17 billion as of Sept. 30, 2002. Its filing is the
latest in a wave of recent chapter 11 filings by health-care
companies.

Also on Friday, Judge Walrath authorized Alterra Healthcare to make
up to $5 million in payments to vendors it deems critical to its
operations. The vendors include medical suppliers, food service
companies, and nurse and care-giver providers, the newswire
reported.

Microsoft Sues Peregrine Systems Over Unlawful Software
Use

Microsoft Corp. filed a complaint in bankruptcy court against Peregrine
Systems Inc., alleging Peregrine Systems infringed on Microsoft's
software copyrights by using unlicensed software, Dow Jones reported.
The suit said the precise amount owed to Microsoft by the software firm
isn't currently known and can't be determined without 'a detailed
accounting of the full extent of Peregrine Systems' unlawful and
infringing use' of the Microsoft software. The suit was filed late on
Thursday in the U.S. Bankruptcy Court in Wilmington, Del., reported Dow
Jones.

Focal Communications Wins Final OK to Tap Bank Cash
Collateral

Focal Communications Corp. on Friday won final authority to use the cash
collateral of its secured lenders to fund operations and costs
associated with its chapter 11 case, Dow Jones reported. Judge Kevin
J. Carey of the U.S. Bankruptcy Court in Wilmington, Del., signed
the order after the debtor company and its lenders made several
revisions to their agreement. The revised document said Focal
Communications's committee of unsecured creditors is free to pursue any
legal action it sees fit against the company's subordinated lenders. The
order also mandates that the creditor panel receive weekly financial
reports on Focal Communications's performance under a budget. Finally,
the revisions place a limit on the amount the company can alter or
extend its budget before having to obtain further court approval,
reported Dow Jones.

Genuity Sale to Level 3 Approved; Company to Fire 800

Bankrupt Genuity Inc. said it plans to cut as many as 800 jobs as part
of its sale to rival Level 3 Communications Inc., reported Bloomberg
News. The U.S. Bankruptcy Court in New York approved the sale on Friday.
The Woburn, Mass.-based data-network company said it has about 2,300
employees. Level 3 agreed to buy most of Genuity's assets for as much as
$242 million in November when it filed for bankruptcy protection, the
newswire reported. Genuity defaulted on $3.15 billion in loans in July
after Verizon Communications Inc. decided not to buy back a controlling
stake.

U.S. Trustee Objects to Terms of Globalstar DIP Financing

The U.S. Trustee acting in San Jose-based Globalstar L.P.'s chapter 11
case has opposed the firm's request for $20 million in
debtor-in-possession financing from New Valley Corp., saying that the
terms of the motion appear designed to benefit New Valley more than
Globalstar's estate, Dow Jones reported. According to the objection, the
U.S. Trustee also said the proposed loan appears to leverage the chapter
11 process in New Valley's favor.

New Valley, an investment firm run by Bennett S. LeBow, would provide
Globalstar with $20 million in debtor-in-possession financing, which
would be part of a $55 million investment in the satellite telephone
system operator, according to the newswire. New Valley would provide the
remaining $35 million of the investment at the conclusion of
Globalstar's restructuring later this year, reported Dow Jones. The U.S.
Bankruptcy Court in Wilmington, Del., which is overseeing Globalstar's
chapter 11 case, will consider the debtor-in-possession funding at a
hearing next Thursday, reported the newswire.

Metawave Says It's Likely to File for Bankruptcy
Protection

Redmond, Wash.-based Metawave Communications Corp., a maker of antennas
for wireless networks, said it fired most of its employees as it begins
to shut down its operations, reported Bloomberg News. It will likely
file for chapter 11 bankruptcy protection because of a decline in
telecommunications spending. The company plans to sell most of its
assets, including its portfolio of patents and other intellectual
property, Metawave said in a statement, reported the newswire. It said
it will likely file for bankruptcy, and canceled its Feb. 4 conference
call. The company's shares fell 42 cents, or 19 percent, to 18 cents
before being halted in Nasdaq Stock Market trading. They have fallen 36
percent this year. The company had 160 employees as of April 15,
according to a filing with the U.S. Securities and Exchange Commission,
Bloomberg reported.

NHL Gives Hamister Fourth Extension to Purchase Buffalo
Sabres

Bloomberg News reported that the National Hockey League gave a group led
by Arena Football League team owner Mark Hamister its fourth extension
to complete a purchase of the team, which filed for bankruptcy
protection last week. Hamister and Chartwell Investments President Todd
Berman agreed in November to buy the Sabres for $33 million in cash and
assume $7.7 million of debt, the newswire reported. The sale is
contingent upon them getting another $33 million from the state of New
York, Erie County and the city of Buffalo, the newswire reported. The
league granted Hamister and Berman the extension until Feb. 3 to
complete the purchase agreement for the Sabres. Talks are continuing
with state, county and city officials, Hamister said, Bloomberg
reported.

Texas Bankruptcy Court Prepares for Move

The new home for the U.S. Bankruptcy Court for the Eastern District of
Texas won't be ready for some time because of renovations that could
take as much as nine months to complete, reported Tylerpaper.com. A
lease signed by the General Services Administration, the Fort
Worth-based federal body that handles agreements for the court, last
month secured a spot in the Plaza Tower, 110 N. College Ave., the online
newspaper reported. Some 23 employees, a judge and federal prosecutors
who also have offices in the building are expected to make the move,
reported Tylerpaper.com. However, construction for the new office space
and courtroom won't get started until possibly March, said Bankruptcy
Clerk Joseph Tokoph. It should take 6 to 9 months to complete the
project once it has begun, the online paper reported.

Bayou Steel Files for Bankruptcy Reorganization

Bayou Steel Corp., Louisiana's only major steelmaker, filed for
bankruptcy protection, joining the ranks of dozens of U.S. steel
companies that have been hit by cheap foreign imports and weak demand,
according to HeraldTribune.com. The company said it filed for bankruptcy
reorganization Wednesday in federal bankruptcy court in Dallas but plans
to continue operations, the online newspaper reported. Bayou Steel's top
official said the move will give the company time to stabilize its
finances and come up with a strategy that will return it to
profitability, according to HeraldTribune.com. About 30 U.S. steelmakers
have filed for chapter 11 bankruptcy since 1997.

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