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October 25, 2002
NII Holdings Gets More Time from Court for Turnaround Plan
NII Holdings Inc. received more time from a bankruptcy court to develop
a reorganization plan and solicit its acceptance from creditors, Dow
Jones reported. The ruling on Oct. 17 from the U.S. Bankruptcy Court in
Wilmington, Del., gives NII Holdings up to Nov. 20 to file a plan and
until Feb. 18, 2003, to gain creditor approval. As reported, the
company's plan wasn't confirmed during a hearing on Tuesday. Judge Mary
F. Walrath said the plan is in violation of certain provisions of the
Bankruptcy Code. Judge Walrath said the company must resolve these
problems before it can hope to win plan confirmation, the newswire
reported. The company is slated to submit resolutions to the problems on
Friday, and a hearing to consider confirmation is scheduled for Monday
if necessary. NII Holdings is an international wireless communications
services provider. The company filed for chapter 11 protection May 24.
Its petition listed assets of $1.24 billion and liabilities of $3.26
billion as of Dec. 31, 2001.
Judge Rules for Armstrong in Asbestos Property Damage Case
Armstrong Holdings Inc. said a bankruptcy judge sided with the company,
determining that some of the asbestos claims filed against the flooring
and ceiling concern are based on unscientific methods, Dow Jones
reported. In a press release on Thursday, the company said that the
court agreed with Armstrong's motion to exclude evidence presented by
the plaintiffs' expert witnesses. The Asbestos Property Damage Committee
allege that asbestos-containing floor tile presents a health risk, the
newswire reported. The committee asked the court to approve 'settled
dust sampling' as the appropriate measure of how much asbestos from the
floor is being released into the air. Armstrong argued that settled dust
sampling produces inflated and unreliable results. Armstrong, along with
its Nitram Liquidators Inc. and Desseaux Corp. of North America units,
filed for chapter 11 protection in December 2000. Prior to filing
chapter 11, Armstrong had only six unresolved property damage claims
pending based on asbestos in floor products. Since filing chapter 11,
Armstrong now faces about 600 individual property damage claims, filed
mostly by a handful of law firms. On July 2, the bankruptcy judge denied
the plaintiffs' request to file a class action lawsuit.
NQL Inc. Unit Completes a Sale of Its Assets
NQL Inc. sold all of the assets of its Delta Computec Inc. unit to a
unit of ViewCast.com Inc. for $1 million cash, 150,000 shares of stock
and ViewCast's assumption of $2.6 million debt, Dow Jones reported. In a
press release on Thursday, NQL said the U.S. Bankruptcy Court for the
District of New Jersey approved the sale. NQL filed for bankruptcy on
Feb. 15. NQL received $500,000 cash on the Oct. 11 closing date, and
will receive $250,000 more in six months, and another $250,000 in 12
months. The ViewCast shares are valued at $1.5 million.
Globalstar Gets More Time to Solicit Turnaround-plan Votes
Globalstar LP on Thursday won a 30-day extension of its exclusive period
to solicit votes for its proposed chapter 11 reorganization plan, Dow
Jones reported. The debtor company also rescheduled a hearing to
consider the adequacy of its disclosure statement. The hearing will take
place on Dec. 30 before Chief Judge Peter J. Walsh of the U.S.
Bankruptcy Court in Wilmington. Globalstar obtained the extension of its
exclusive solicitation period to coincide with the new hearing date. The
debtor company now has the sole right to obtain votes for its plan
through Nov. 13. Globalstar said the size and complexity of its case
warrants the extension. Globalstar's committee of unsecured creditors
consented to the 30-day extension of the vote-solicitation period.
Globalstar is a general partner of Globalstar Telecommunications Ltd.,
which is not under bankruptcy protection. Globalstar L.P., of San Jose,
which operates a worldwide, low-Earth orbit satellite-based digital
telecommunications system, filed for bankruptcy on Feb. 15. The company
listed assets of $573.4 million and liabilities of $3.34 billion in its
chapter 11 petition.
Court Approves Impsat Fiber Disclosure Statement to Plan
A bankruptcy court on Wednesday approved the disclosure statement to
Impsat Fiber Networks Inc.'s chapter 11 reorganization plan, under which
the company could give some of its existing noteholders up to 98 percent
of new common stock, Dow Jones reported. U.S. Bankruptcy Judge Robert
E. Gerber signed an order authorizing the adequacy of the disclosure
statement as well as the form of ballots for eligible voting classes. A
hearing to consider confirmation of the plan is slated for Dec. 11
before the U.S. Bankruptcy Court in Manhattan. The order set Dec. 3 as
the deadline for classes of creditors voting on the plan to submit their
ballots. Under the plan, the company would cancel its $125 million of
12.125 percent senior guaranteed notes due 2003 as well as the roughly
$14.1 million in interest on the notes. The proposed plan calls for
Impsat Fiber to issue 10 million shares of new common stock, with a
total value of $100 million, and $118,034,000 in principal of new
guaranteed senior notes.
StarBand Communications Gets More Time for Turnaround Plan
A bankruptcy court has given StarBand Communications Inc. more time to
work on a reorganization plan, Dow Jones reported. An Oct. 16 order from
the U.S. Bankruptcy Court in Wilmington, Del., gives the company until
Jan. 26, 2003, to file a plan and until March 27, 2003, to get creditor
approval. In StarBand's motion asking for the extension, it said the
request should be granted because the company has made good faith
efforts to stabilize its business and streamline costs and operations.
StarBand faced a significant dispute with EchoStar Communications Corp.
that threatened to stifle the company's operations.
StarBand negotiated and obtained court approval for a settlement with
EchoStar during the first month of its reorganization case. Court papers
said the settlement brought immediate cash to the estate and removed
various controls that EchoStar had over the company's business, making
it attractive to potential investors. StarBand has streamlined its
business since it filed for chapter 11 on May 31 and has reduced costs
through workforce reductions. The company has also negotiated and
obtained court approval for an amendment to its supply contract with
Gilat Satellite Networks Ltd., which benefits the estate by reducing the
company's up-front inventory costs. Based in McLean, Va., the company's
petition listed liabilities of more than $229 million against assets of
$58 million.
Ames Department Stores Wins Final OK to Borrow under New Loan
The court handling Ames Department Stores Inc.'s chapter 11 case has
given the company final approval to borrow under a new $100 million
debtor-in-possession loan, Dow Jones reported. Judge Robert
Gerber of the U.S. Bankruptcy Court in Manhattan approved the
liquidating discount retailer's new loan in an order signed on
Wednesday, the newswire reported. The loan is being provided by Kimco
Funding LLC, which supported Ames with a $55 million term loan earlier
in its chapter 11 case. Ames said in court papers that it needs the new
loan to successfully finish winding down operations. Ames filed for
chapter 11 for the second time in a decade in August 2001. The company
closed some of its unprofitable stores while in bankruptcy, but last
month it decided to close all 327 of its remaining locations after sales
dropped and merchandise became harder to get.
Ames said it needs the new DIP funds to pay real estate carrying costs,
including rent, taxes and maintenance. It said the critical element of
its creditors' recovery lies in the value of its real estate, so it must
pay the related carrying costs. Ames will also use the new funds to pay
amounts due under the original Kimco DIP loan, other operating costs and
amounts payable under its employee severance, retention and performance
incentive program. The two-year loan is subject to a borrowing base
equal to 80 percent of the fair market value of certain real property
assets. The new $100 million DIP loan requires the discharge of all
obligations under the company's existing DIP loan agreements. In
addition to the original Kimco DIP loan, General Electric Capital Corp.
had agreed to provide Ames with up to $700 million in DIP financing. As
of Oct. 1, all amounts had been paid, excluding some escrows the company
expected to fund later, the newswire reported.
Inviva Completes Acquisition of Conseco Variable Insurance
Conseco Inc. said it completed the sale of its Conseco Variable
Insurance Co. unit to Inviva Inc., a holding company for American Life
Insurance Co. of New York, for about $160 million, consisting of cash
and $35 million in preferred stock, Dow Jones reported. In a separate
release, Inviva estimated the total purchase price, including advisory
fees, at about $90 million. Officials at Inviva could not immediately be
reached to elaborate on the price of the deal. In a press release on
Thursday, Conseco said its insurance units continue to operate their
fixed annuity and equity indexed annuity businesses, which in 2001
accounted for more than $1.2 billion in collected premiums. Inviva said
funding for the deal was raised through a combination of equity and debt
from a group including existing equity investor Trimaran Capital
Partners and a new, unnamed investor. Goldman Sachs & Co. was
Inviva's financial adviser. Conseco Inc. and creditors are discussing a
restructuring plan. The company has not filed for chapter 11
protection.
Motive Communications Sues Peregrine Systems to Stop Asset
Transfer
Motive Communications Inc. on Wednesday sued Peregrine Systems Inc. and
one of its units to prevent the assets that Motive Communications had
sold to the companies from being transferred as part of the unit's sale,
Dow Jones reported. As an alternative, if Peregrine Systems ultimately
sells the Motive Communications assets with its Peregrine Remedy Inc.
subsidiary, the plaintiff is asking the court to create a constructive
trust through which some proceeds of the sale would be earmarked for
Motive Communications. Peregrine Systems is seeking court approval to
sell Peregrine Remedy to BMC Software Inc. for $350 million, subject to
higher offers.
Motive Communications makes software that allows the technical support
staff to diagnose a user's problem remotely over the network and then
reconfigure the user's computer. Peregrine Systems and Peregrine Remedy
also develop and market software for companies to use in their technical
support and other information technology management operations. Motive
Communications software, however, performs functions and solves problems
that Peregrine Systems' products didn't, according to the complaint. As
a result, Peregrine Systems expressed interest in gaining access to the
Motive Communications software. San Diego-based Peregrine Systems filed
for chapter 11 bankruptcy protection on Sept. 22 amid investigations
into its accounting practices.
Kmart CFO Says Company Finally Winning Back Customers
Having struggled in vain for months in the wake of a January bankruptcy
filing, Kmart Corp. is finally managing to lure customers back into its
stores, Dow Jones reported. The Troy, Mich., discount retailer said this
week that its sales in September rose to $2.09 billion, from $1.97
billion in August. And while sales at stores open at least a year fell
6.9 percent, management emphasized that that was a less ugly number than
what Kmart had posted in previous months, including the 11.9 percent
same-store-sales plunge it recorded in August. Customers have continued
to return to Kmart in October, and after several false starts earlier
this year, the company appears at last to be hitting a solid rhythm with
improved advertising and shelves that are better-stocked than ever,
Chief Financial Officer Al Koch said. The success of the promotions can
be attributed in part to a new policy that allows store managers greater
freedom to order and replenish high-volume merchandise, the newswire
reported. Stores in Chicago and Detroit that participated in test runs
of the new policy saw sales about 10 percent to 12 percent more than the
company average in September, with better inventory turns and profit
margins. The policy has since been rolled out to all of Kmart's stores,
which number about 1,800 nationwide.
Kellstrom Industries Gets OK to Pay $250,000 Fee to
Adviser
Kellstrom Industries Inc. on Thursday won authority to pay a $250,000
success fee to its financial adviser for assisting the debtor in
executing a sale of its assets to KIAC Inc., Dow Jones reported. The
order signed by Judge Mary F. Walrath of the U.S. Bankruptcy Court in
Wilmington authorizes Kellstrom to pay the fee to Phoenix Management
Industries. Under a retention agreement, Phoenix Management was to be
paid a fee if the court confirmed a plan of reorganization or approved a
sale of the debtor company's assets. Kellstrom said Phoenix Management
played a critical role in the sale auction and a key role in ensuring a
deal is closed. In the four months prior to Kellstrom's Feb. 20
bankruptcy filing, Phoenix Management worked with Kellstrom, its secured
lenders, subordinated debt holders and convertible bond holders to work
out a reorganization plan. Sunrise, Fla.-based Kellstrom has been under
chapter 11 protection since Feb. 20. When it filed its petition, it
listed assets of $371.2 million and liabilities of $402.4 million. The
company buys, markets, resells and leases aviation equipment.
US Airways, Squeezed by Rivals, Fights to Stay Aloft
US Airways, which filed a chapter 11 bankruptcy petition on Aug. 11,
spent 12.6 cents to fly each seat on its planes one mile during the
first half of 2002, Bloomberg News reported. That's about 2 cents more
than the revenue it generated -- and 5 cents more than Southwest
Airlines Co., which is a growing threat in US Airways' East Coast
strongholds like Washington. US Airways lost $534 million on revenue of
$3.6 billion
during the first half of 2002 after losing $202 million on revenue of
$4.7 billion in the year-earlier period. In a bankruptcy, creditors must
effectively approve a final
reorganization plan, which US Airways Group Inc. Chief Executive David
Siegel hopes to announce by year-end. Siegel has cut his workers' wages
7 percent to 27.3
percent and sliced his own $750,000 salary by 20 percent.
Three days after US Airways filed for bankruptcy in Alexandria, Va.,
then UAL Corp. Chief Executive Jack Creighton said the parent of United
Airlines, the world's second- biggest carrier, might have to do the same
thing. Other big airlines may follow, intensifying the pressure on
everybody to cut wages and jobs. 'I'm not so concerned about one
bankruptcy,'' says Fred Reid, president of Delta Air Lines Inc. 'I'm
concerned about multiple bankruptcies, which is three or more.'' To
survive, Siegel has negotiated $840 million in annual wage concessions,
the largest in U.S. airline history; he's trying to
get another $400 million in concessions from creditors and vendors.
The Wall Street Journal reported that US Airways Group Inc.,
signaling a step needed to emerge from bankruptcy-court protection, said
it must excise a further $100 million to $300 million a year from its
expenses. Those savings would be on top of an estimated $1.3 billion
already cut by the carrier, which sought protection under chapter 11 of
the Bankruptcy Code in August. The nation's seventh-largest airline said
it needs to tighten its belt more if it expects to regain profitability,
win a federal loan guarantee and receive further debtor-in-possession
funding. Earlier this week, the company told creditors rising fuel
prices and the industry's dismal outlook necessitate further trimming.
The cuts would likely help the company's bid for a $900 million federal
loan guarantee it needs to emerge from chapter 11 with a cash cushion.
The Air Transportation Stabilization Board, a federal panel
administering a program to aid airlines hurt by last year's terrorist
attacks, conditionally approved US Airways' application in July and
affirmed the decision after the company sought protection from its
creditors. The loan board has set numerous thresholds that must be met
before it will extend the assistance, which US Airways plans to use to
arrange a $1 billion secured loan.
Corporate Bond Defaults to Be Above Average Next Year, S&P
Says
Corporate bond default rates will stay above average levels until about
2004, Bloomberg News reported. Companies around the world with credit
ratings below BBB--
defaulted on their debt at rate of 1.39 percent in the third quarter,
said Brooks Brady, S&P's associate director for corporate default
research, who published a report on default rates yesterday. These
junk-rated companies posted a record default rate of 4.11
percent in the first quarter.'With the economy continuing to be sluggish
and credit
quality continuing to decline, we don't think we'll be out of the woods
until late 2003 or 2004,'' Brady said.
Judge Seeks More Info for Enron, Sierra Pacific Dispute
A federal bankruptcy judge on Thursday said Enron Corp. and Sierra
Pacific Resources must further argue their cases before he can make a
decision about a $307 million power-supply contract dispute, Dow Jones
reported. Judge Arthur Gonzalez, presiding over Enron's chapter
11 case in the Manhattan bankruptcy court, said an additional hearing,
scheduled for Nov. 8, would 'assist the court' in deciding whether
Sierra Pacific Resources should be required to hand over immediately the
payment sought by Enron, absent a final judgment on the merits of the
claim. Enron Power Marketing Inc., a division of the Houston energy
trader, in June sued two utilities owned by Sierra Pacific Resources,
asserting that Nevada Power Co. and Sierra Pacific Power Co. owe it $307
million as a result of a cancelled long-term electric supply contract.
Sierra Pacific and Nevada Power, meanwhile, have asked the bankruptcy
court to dismiss Enron's complaint, pending regulators' findings on
alleged price manipulation by Enron in western energy markets. The
contract dispute with Enron came at a time when Sierra Pacific
Resources, a Nevada utility holding company, already had been burdened
by liquidity problems. The company expects the Federal Energy Regulatory
Commission to issue by year's end an initial decision on its complaint
against Enron.
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