Ruling May Be Averted In LTV Securitization Challenge

On March 5, 2001, LTV filed a motion in Bankruptcy Court for an order approving debtor-in-possession ("DIP") financing which would resolve the litigation concerning the "true sale" issue. The new DIP financing will consist of (1) a "Replacement Facility" in the form of term loans and letters of credit in an aggregate amount of approximately $600 million and (2) a "Working Capital Facility" in the form of term loans and letters of credit in the aggregate amount of an additional $100 million.

As reported in our previous memoranda of January 29, 2001 and February 9, 2001, the Court in the LTV bankruptcy case entered an order (the "Interim Order") permitting LTV to use as cash collateral the proceeds of inventory and receivables that were transferred to special purpose corporations ("SPVs") as part of securitization transactions prior to the bankruptcy case, and a second order on February 5, 2001 (the "February 5^th Order") denying the motion of one of the securitization lenders, Abbey National Treasury Services plc, to modify the Interim Order. In the February 5^th Order, the Court made statements to the effect that LTV retains at least an equitable interest in the transferred inventory and receivables sufficient to be property of LTV’s bankruptcy estate.

As also previously reported, the Bankruptcy Judge set a final hearing on the "true sale" issue for March 7, 2001. On February 20, 2001, various parties submitted briefs on the issue. In addition, on February 12, 2001, Abbey National filed a notice of appeal with respect to the February 5^th Order.

The proceeds of the Replacement Facility will be used by LTV to repurchase the receivables and inventory transferred to the SPVs in the securitization transactions. The Replacement Facility will be funded by the securitization lenders with Chase Manhattan Bank and Abbey National as co-agents. The Working Capital Facility will be used to fund operating expenses and the costs of LTV’s bankruptcy case, and will be arranged by Ableco Finance llc.

The DIP financing is subject to final documentation and approval of the Bankruptcy Court. A hearing to approve the DIP financing is set for March 20, 2001. In view of the DIP financing, the hearing on March 7, 2001 has been continued to a later date.

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