/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/040812.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 12, 2004, Vol. 8, No. 169 Headlines 4021-29 ELLIS CO-OP: Case Summary & Largest Unsecured Creditors ADELPHIA COMMS: Tele-Media Wants Independent Examiner Appointed ADVANCED X-RAY: Wants Court to Schedule "Open Outcry" Auction AIR CANADA: Resolves All Union Restructuring Claims AIR CANADA: Goodyear Wants Secured Status of Claim Confirmed ALBERTA STAR: TSX Venture & OTCBB Exchange Listings Will Continue ALBERTA STAR: SRK Engineers Completing Gold Resource Estimate ALDEAVISION INC: Completes $4.6 Million Debt Restructuring AVONDALE MILLS: S&P Lowers Credit Rating to B- & Junks Sub. Debt BELIZE MORTGAGE: Moody's Downgrades Class B Bonds to B2 from Ba3 BOX USA: Moody's Removes Low-B & Junk Ratings After Acquisition BURLINGTON IND: Claimants Respond to Trust's Objection to Claims CAPTEC FRANCHISE: Moody's Cuts Class A-2 Notes Two Notches to Ba3 CAR WASH AT SUNNY: Case Summary & 17 Largest Unsecured Creditors CENTURY ALUMINUM: Moody's Puts B1 Rating on Planned $250 Mil. Debt CHASE MORTGAGE: Fitch Upgrades Two Low-B Rated Certificate Classes COVANTA: Fitch Affirms & Withdraws B Ratings on Solid Waste Bonds CRDENTIA CORP: Details Strategic Expansion Plan for Amex Listing CRESCENT JEWELERS: Files Chapter 11 Petition in N.D. California CRESCENT JEWELERS: Voluntary Chapter 11 Case Summary DB COMPANIES: Committee Brings-In Whiteford Taylor as Attorneys DELTA AIR: Moody's Junks Senior Unsecured Debt & Bonds Ratings DEVLIEG BULLARD: US Trustee Names 5-Member Creditors' Committee DILLARD'S: Fitch Affirms BB Notes & B- Capital Securities Ratings DILLARD'S INC.: Moody's Affirms Low B-Ratings With Stable Outlook DJT PROPERTIES: Case Summary & 18 Largest Unsecured Creditors DYKESWILL: Told to File Plan & Disclosure Statement by Nov. 23 EL PASO: Provides Update on Restatement & Gets New Bank Extension ELANTIC TELECOM: Hires Tavenner & Beran as Bankruptcy Counsel ELANTIC TELECOM: Look for Bankruptcy Schedules Next Week EMPI CORP: S&P Gives B+ Corporate Credit & Senior Secured Ratings ENDEAVOUR GOLD: Now Known as Endeavour Silver to Reflect Biz Focus ENDEAVOUR GOLD: Reappoints Directors and Appoints 3 Key Officers ENRON CORP: Wants Court to Avoid $24.6 Million Transfers EXIDE TECHNOLOGIES: Releasing First Fiscal Quarter Results Today FIRST HORIZON: Credit Enhancement Prompts Fitch Rating Upgrade FLEMING COS: Inks Settlement Pact Resolving Employee Bonus Spat FMAC LOAN: Moody's Downgrades 2 Classes to Low-B and Junks 2 More FOG CUTTER: Bourne End Subsidiary Inks $50.4 Mil. Real Estate Sale FRONTIER LEASING: Moody's Assigns Low-B Ratings to Two Classes FUJITA CORPORATION: Case Summary & 11 Largest Unsecured Creditors GLOBAL CROSSING: Settles N.Y. City Tax Claims for $2.2 Million HANOVER DIRECT: Stockholders' Deficit Tops $46 Mil. at June 26 HASTINGS MFG: Continues Liquidation of Canadian Operations KAISER: Court Tells Debtors to Comply with Unistar Agreements KMART: Home Depot Buying Fewer Stores Than Previously Indicated LAIDLAW INC: Greyhound Lines Gets 2-Yr. Credit Facility Extension MADISON RIVER: Moody's Junks $200 Million 13-1/4% Senior Notes MARINER: National Sr. Care Merger Prompts Moody's Ratings Review MICROTEC ENTERPRISES: Lenders Balk at $15.5 Million Equity Offer MIRANT: Appellate Court Upholds Order Dismissing California Case MIRANT CORP: Wants Court to Approve Sullivan Settlement Agreement MUZAK HOLDINGS: Liquidity Concerns Prompt S&P B- Rating Downgrade NATIONAL CENTURY: Court Approves $4.5 Million Lincoln Clinic Sale NDCHEALTH: Low Income Expectation Incites S&P's Negative Outlook NDCHEALTH: Moody's Affirms Ba3 Senior Implied & B2 Sub. Ratings NEW WEATHERVANE: Retains Hilco as Real Estate Consultant NEWFIELD: S&P Gives BB- Rating to Proposed $300 Million Notes NORTEL NETWORKS: Filed Shareholder Complaint in N.Y. on July 30 NORTHWESTERN CORP: Identifies Seven New Directors OCEANVIEW: Fitch Places BB-Rated Class C Notes on Negative Watch OXFORD AUTOMOTIVE: S&P Junks Corporate Credit & Debt Ratings PALCAN FUEL: Changes Company Name to Palcan Power Systems Inc. PALCAN FUEL: Plans to Form Technical Group to Guide Product Dev't PARMALAT GROUP: Bondi Sues UBS in Parma Court to Recover EUR290M PILLOWTEX CORP: Wants to Employ Flanagan/Bilton as Tax Counsel PRESIDENT CASINOS: Penn Nat'l Buying St. Louis Unit for $28 Mil. PRUDENTIAL ASSURANCE: Objections to Sec. 304 Petition Due Aug. 22 PRUDENTIAL MORTGAGE: Fitch Affirms Low B-Ratings on 5 Certificates RCN CORP: Court Approves Committee's Bid to Retain Milbank Tweed SAN JOAQUIN LODGING: Case Summary & Largest Unsecured Creditors SCHLOTZSKY'S: Wants BWK Trinitiy to Serve as Financial Advisors SENECA GAMING: Reports $18.8 Million of Net Income in 2nd Qtr. SIMMONS BEDDING: Boasts $6.0 Million 2nd Quarter Net Income SIMMONS BEDDING: J. Messner Joins Board as Independent Director SINO-FOREST CORPORATION: Details US$300 Million Debt Offering SK GLOBAL AMERICA: Wants Until Sept. 30 to Solicit Votes on Plan SOLUTIA INC: European Subsidiary Retains Rothschild Firm STATER BROS: Posts $5.8 Million Thirteen-Week Loss in June Quarter TERREMARK WORLDWIDE: June 30 Balance Sheet Upside-Down by $2.7MM TIMMINCO LIMITED: Reports $2.6 Million Half-Year Net Loss TIMMINCO LIMITED: Plans to Acquire Becancour Silicon for $34 Mil. TIMMINCO LIMITED: Acquires 24% Fundo Wheels Equity for $4.6 Mil. UAL CORP: Wants Court Nod on Club DIP Facility's 8th Amendment UNIVERSAL ACCESS: Bankruptcy Triggers Nasdaq Delisting Notice VOEGELE MECHANICAL: Wants to Employ Klett Rooney as Attorney WORLDCOM INC: Court Denies State's Request to Unseal SEC Documents XEROX CORPORATION: Moody's Raises Senior Implied Ratings to Ba1 * Charlie Wang Joins Cadwalader as Capital Markets Partner ********* 4021-29 ELLIS CO-OP: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Debtor: 4021-29 Ellis Co-Op 4021-29 South Ellis Avenue Chicago, Illinois 60653 Bankruptcy Case No.: 04-29266 Type of Business: The Debtor owns a 36-unit brick building for lease to tenants. Chapter 11 Petition Date: August 6, 2004 Court: Northern District of Illinois (Chicago) Judge: Honorable Judge Jack B. Schmetterer Debtor's Counsel: Bruce Nash, Esq. Bruce Nash & Associates 3333 West Arthington Avenue, Suite 20 Chicago, Illinois 60624 Tel: 773-265-6000 Total Assets: $5,000,000 Total Debts: $65,000 Debtor's 2 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ People's Energy $40,000 City of Chicago $25,000 Department of Water ADELPHIA COMMS: Tele-Media Wants Independent Examiner Appointed --------------------------------------------------------------- Ann B. Brogan, Esq., at Marcus Santoro & Kozak, in Chesapeake, Virginia, relates that since 1992, Adelphia Communications Corp. entered into a variety of transactions with Tele-Media Corporation of Delaware and its affiliates. Through those transactions, ACOM financed, purchased or became an equity participant in several groups of cable joint venture operations owned and managed by Tele-Media. ACOM holds controlling interests in three Joint Ventures with Tele-Media, each of which has filed its own chapter 11 petition: Controlling Interest -------------------- Joint Venture ACOM Tele-Media ------------- ---- ---------- Tele-Media Company of Tri-States, LP 82% 18% TMC Holdings Corp. 75% 25% Tele-Media Investment, LP 75% 25% The Joint Ventures, through their subsidiaries, own and operate cable television systems in various market areas between Connecticut and Florida. As of the Petition Date, the JV Entities served about 146,000 subscribers, in Connecticut, Maryland, West Virginia, Virginia and Florida. Tele-Media Delaware is a creditor of most of the JV Entities and has numerous claims aggregating in millions of dollars against other ACOM Debtors. Tele-Media Delaware, TMC Holdings Shareholder Robert Tudek, and certain limited partners of Tele- Media Investment -- the Tele-Media Interests -- have filed claims against the ACOM Debtors based on the Debtors' breaches of duty arising out of the Debtors' ownership of interests in the Joint Ventures. According to Ms. Brogan, while ACOM's efforts to facilitate a reorganization are commendable, the Tele-Media Interests believe that ACOM is not discharging its fiduciary duties to each of the specific, discrete ACOM Debtors that are JV Entities. For this reason, the Tele-Media Interests ask the Court to appoint an independent examiner for the 10 JV Entities: -- Tele-Media Tri-States, -- CMA Cablevision Assoc. VII, LP, -- CMA Cablevision Associates XI, LP, -- TMC Holdings, -- Adelphia Company of Western Connecticut, -- TMC Holdings, -- Tele-Media Investment, -- Eastern Virginia Cablevision, LP, -- Tele-Media Company of Hopewell Prince George, and -- Eastern Virginia Cablevision Holdings, LLC Same Fiduciaries Represent Both Debtor & Creditor Ms. Brogan reminds Judge Gerber that each of the ACOM Debtors has separate, independent fiduciary duties. When a Debtor remains in possession in lieu of a trustee, in practice, these fiduciary responsibilities fall not on the inanimate corporation, but on the officers and managing employees who must conduct the Debtor's affairs under the surveillance of the Court. Likewise, the fiduciary responsibilities of each of the JV Entities fall on the directors or general partners and officers and managing employees of each of the JV Entities. Their fiduciary duties run to the creditors and equity interest holders of that specific entity. In the ACOM Debtors' cases, other Debtors may have claims against the JV Entities, and the JV Entities have potential claims against other ACOM Debtors. Regardless of the complexity or magnitude of the case, individuals acting as fiduciaries for one Debtor cannot also represent in a fiduciary capacity creditors of the same debtor. The Individual Fiduciaries for the JV Entities are essentially the same as ACOM's corporate officers, Ms. Brogan points out. There is no independence. The same people and professionals are acting as or on behalf of the debtor, creditor, officer and director in multiple cases. ACOM Fails to Discharge its Fiduciary Duties The JV Entities are not wholly owned subsidiaries of ACOM. The Tele-Media Interests own a substantial percentage of the equity within the Joint Ventures that have interests in each of the JV Entities and, thus, are entitled to have their equity interests recognized, reorganized, analyzed and protected by the fiduciaries in each specific case. ACOM, Ms. Brogan contends, is unable to satisfy this obligation. Since the filing of these cases, there has been no meaningful analysis of the value of the JV Entities. Mr. Brogan also notes that there has been no analysis or disclosure of significant intercompany claims, nor any attempt to reconcile those claims. Instead, ACOM proposed a "deemed" substantive consolidation as part of its reorganization plan that would cause Tele-Media's equity in the JV interests to evaporate without explanation. Ms. Brogan asserts that the elimination of the equity of the Tele-Media Interests creates benefits for other constituents of ACOM without regard to the legitimate claims of the Tele-Media Interests. Independent fiduciaries with a duty solely to the JV Entities, their creditors and shareholders, would not permit this to occur without fully analyzing and disclosing all relevant information leading to this result. Ms. Brogan relates that the Tele-Media Interests attempted to obtain information from ACOM to (i) enable them to determine the value of the JV Entities, as well as the amount of and basis for claims against their estates, and (ii) get an estimate of the equity value of the JV Entities. However, ACOM persistently remains unwilling or unable to provide adequate information. Independence is Vital Given the status of ACOM's pre-bankruptcy financial records, ACOM cannot make the objective determination as a fiduciary on behalf of itself, as well as the JV Entities, of what is owed by or to each Debtor. The necessary independence is sorely lacking, Ms. observes. Ms. Brogan clarifies that the request for an independent examiner is not an attack on the competence or integrity of ACOM, its officers, directors or professionals. "It is simply a statement of fact: one cannot be debtor and creditor in the same case and discharge an independent fiduciary duty." Given that the Tele- Media Interests are substantial equity-holders in the JV Entities, and that the JV Entities have not made accurate or adequate disclosure of assets and liabilities, it is imperative that an independent party be appointed to investigate these and other important points. An independent examiner will investigate and report to the Court the effect of the activities of the ACOM Debtors, their directors and management on the JV Entities' estates. Confidential Documents Certain allegations in the Tele-Media Interests' request refer to documents that may be "confidential material" as defined in a non-disclosure agreement the Tele-Media Interests entered into with ACOM on February 24, 2004. In compliance with their obligations under the Non-Disclosure Agreement, the Tele-Media Interests redacted from the Examiner Request any references to information that may be confidential. With the Court's permission, the Tele-Media Interests filed the complete version of the Examiner Request under seal. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company 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. 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVANCED X-RAY: Wants Court to Schedule "Open Outcry" Auction ------------------------------------------------------------- Advanced X-Ray, Inc., proposes to sell its property, free and clear of liens to, VJT Georgia, Inc., for $250,0000 plus 5% of orders received from customers in the 18 months following the sale's closing date. To encourage higher and better offers, Advanced X-Ray asks the U.S. Bankruptcy Court for the Northern District of Georgia, Atlanta Division, to schedule an "open outcry" auction in open court. Qualified bidders must deposit $40,000 with the Debtor's counsel no later than two days before the auction date. The minimum first bid must be $300,000 and the Debtor proposes $25,000 minimum bid increments. The Asset Purchase Agreement provides for a $25,000 breakup fee in the event VJT Georgia is outbid, plus reimbursement of VJT's reasonable costs and expenses not exceeding $30,000. The Debtor tells the Court the sale and auction are necessary to maximize the value of estate property. Headquartered in Buford, Georgia, Advanced X-Ray, Inc. -- 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 (Bankr. N.D. Ga. Case No. 04-71349) on July 13, 2004. Frank B. Wilensky, Esq., at Macey, Wilensky, Cohen, Wittner & Kessler, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed over $100,000 in estimated assets and over $1 million in estimated liabilities. AIR CANADA: Resolves All Union Restructuring Claims --------------------------------------------------- The last of the restructuring claims filed against Air Canada by its unions has now been resolved. In proceedings before the Superior Court of Justice on August 9, 2004, the Air Canada Pilots Association accepted the determination of the Claims Officer and agreed to withdraw their pending appeal. The Court also dismissed an appeal by the Canadian Union of Public Employees, representing the airline's flight attendants, of the determination of its claim by the Claims Officer. Ernst & Young Inc., the Monitor in the CCAA proceedings, has provided Air Canada with the following status report regarding outstanding and accepted claims in the CCAA process: Claims Accepted or Determined assuming no appeals from Court decisions are granted: $7,477,500,000 Total Disputed Claims: $1,460,500,000 Portion of Disputed Claims Allowed in Part: $519,900,000 million Minimum Potential Claims: $7,997,400,000 (Assumes all disputed claims resolved at amount allowed by Air Canada and the Monitor) Maximum Potential Claims: $8,937,900,000 (Assumes all disputed claims resolved at amount claimed by disputing creditors) It should be noted that the Total Disputed Claims amount reported does not include claims for approximately $2,244 million, which have been determined by final Court order to be $124 million and from which leave to appeal has been sought or where the time for seeking leave to appeal (21 days) has not yet expired. The Corporation intends to emerge from CCAA protection on September 30, 2004 following a creditor vote to be held on August 17, 2004. Air Canada will post a more detailed update on the status of claims on its website http://www.aircanada.ca/noticeand on the website of its counsel at http://www.stikeman.com/ac Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. AIR CANADA: Goodyear Wants Secured Status of Claim Confirmed ------------------------------------------------------------ In May 2003, The Goodyear Tire & Rubber Company obtained permission from the Ontario Superior Court of Justice to register a financing statement under the Ontario Personal Property Security Act, R.S.O. 1990, c. P.10, as amended, in respect of its security interest created under a January 1999 Cost Per Landing Agreement with Air Canada. Air Canada granted Goodyear a security interest in the tires that Goodyear supplied under the Agreement to Air Canada. In July 2003, Goodyear received permission from the CCAA Court to obtain from Air Canada a moveable hypothec with respect to the Security Interest to secure the payment and satisfaction of Air Canada's obligations to Goodyear arising under the Agreement from and after April 2, 2003. Goodyear was authorized to complete the registration of the hypothec, together with a notice of reservation of title contained in the Agreement, in and pursuant to the laws of the Province of Quebec. Air Canada delivered an executed hypothec on July 24, 2003. Goodyear effected the registration in the Province of Quebec. The July Court order provides that the execution and registration of the hypothec "shall not constitute a waiver or release by Air Canada of its rights to classify the prefiling claim of Goodyear in any future plan of arrangement, nor shall it constitute a waiver or release of the rights of Goodyear to contest or appeal any such classification." In November 2003, Goodyear filed a secured claim against Air Canada for CN$733,057. Ernst & Young, Inc., the Court-appointed Monitor, acknowledged receiving the claim on November 18. By letter dated December 12, 2003 to the Monitor, Goodyear's counsel requested written confirmation that the Claim was accepted as valid. No confirmation was received. On July 14, 2004, Goodyear's counsel followed up on the December 2003 letter. The Monitor confirmed to Goodyear's counsel on July 15 that the Claim had been accepted "without the right to priority." On July 20, 2004, Goodyear received a notice of revision or disallowance of its Claim from the Monitor. Goodyear objected to the Notice. On July 26, 2004, Air Canada's counsel advised Goodyear that the reasons for its objections to the Notice should be communicated to the Monitor through a Dispute Notice and that the dispute should be heard by a Claims Officer prior to being heard by the CCAA Court. Goodyear did as it was told. To date, Goodyear's counsel has not heard from either Air Canada's counsel or the Monitor regarding the arrangements, if any, that have been made for a hearing before a Claims Officer. In view of the Applicants' Plan of Compromise and Arrangement and the impending meeting of Affected Unsecured Creditors on August 17, 2004, Goodyear asks the CCAA Court to declare that it is not an "Affected Unsecured Creditor" as defined in the Plan. Goodyear also asks the Court to: (i) direct the Applicants to immediately execute and deliver to Goodyear a form of moveable hypothec to secure the payment and satisfaction of the Applicants' CN$2,800,000 obligation to Goodyear; and (ii) lift the CCAA stay so it may register the executed form. In the alternative, Goodyear asks Mr. Justice Farley to confirm that Claims, which are validly secured but not perfected as at the Implementation Date provided in the Plan, are in a class separate and apart from all other Claims -- to give effect of Goodyear's status vis-a-vis Air Canada as that of a secured creditor. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. (Air Canada Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALBERTA STAR: TSX Venture & OTCBB Exchange Listings Will Continue ----------------------------------------------------------------- Alberta Star Development Corporation has carried out its annual general meeting of shareholders held on Tuesday August 10, 2004. All resolutions proposed were passed unanimously. The company will remain inter-listed on the TSX Venture Exchange (ASX) and on the OTCBB (ASXSF) for wider market exposure. The company is currently quoted on the TSX Venture Exchange and on the US OTCBB under the symbol ASXSF. Alberta Star is a leading Canadian mineral exploration company that identifies, acquires, finances and develops advanced staged gold properties throughout North America. Alberta Star is primarily focused on the discovery of gold. It specializes on gold properties with strong data bases that are fully permitted and drill ready for purchase or option. Alberta Star's focus is to acquire properties where proper due diligence has indicated that there is a reasonable expectation of identifying and yielding a world-class deposit for its shareholders. The Company's financial statements as at 31 May 2004 and for each of the three-month and six-month periods then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $665,022 for the six-month period ended 31 May 2004 (31 May 2003 - $649,778) and has working capital of $733,975 at 31 May 2004 (31 May 2003 - $1,193,257, 30 November 2003 - $209,163). Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and equity capital. However, based on its prior demonstrated ability to raise capital, management believes that the Company's capital resources should be adequate to continue operating and maintain its business strategy during fiscal 2004. However, if the Company is unable to raise additional capital in the near future, due to the Company's liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and pursue other remedial measures. ALBERTA STAR: SRK Engineers Completing Gold Resource Estimate ------------------------------------------------------------- SRK Consulting Engineers & Scientists are currently on site at Dixie Lake Gold Project, in Ontario. SRK is completing a comprehensive NP #43-101 Technical Review and Preliminary resource estimate on the Dixie Lake Gold Project for Alberta Star. The report, which has been started is expected to be completed by Sept 15, 2004. Alberta Star has completed over 8,500 metres of deep drilling over the past 12 months with its partner Fronteer Development Group. Alberta Star has significantly upgraded the gold resource potential of the Dixie Lake Property, demonstrating that high grade gold mineralization is present over significant widths and that the shoot geometry is both predictable and continuous over a vertical range of at least 400 metres. The Dixie Lake Resource estimate will be prepared according to industry best practices, as defined by the CIMM. An appropriate geological model will be established in conjunction with developed economic parameters. Analysis will seek to establish the statistical and spatial character of the gold mineralization, in terms of grade, thickness variations, distribution of refractory vs. free gold, and the extent to which the "nugget effect" affects the mineralized sample population. The report will be comprehensive and will be the cornerstone of upcoming studies, evaluations, and strategic planning for the Company. Alberta Star plans to use its flow-through proceeds to commence Phase 4 drilling which is expected to begin upon completion and evaluation of the National Policy #43-101 resource report estimates. The company plans to start aggressively drill targeting additional high-grade gold shoots that have been identified, and testing new geochemical and geophysical targets that exist on the property. Over the past 12 months, Alberta Star, the funding partner, has significantly upgraded the resource potential of the Dixie Lake Gold Property, demonstrating that high grade gold mineralization is present over significant widths and that its geometry is both predictable and continuous over a vertical range of at least 400 metres. Dixie Lake Grade Gold Project Alberta Star has been granted an option to earn up to 50% interest on Fronteer's Dixie Lake Gold Property, situated 25 kilometres south of Placer Dome's Campbell mine and Goldcorp's Red Lake mine in the Red Lake Belt, Ontario. Alberta Star Development Corporation Alberta Star is a leading Canadian mineral exploration company that identifies, acquires, finances and develops advanced staged gold properties throughout North America. Alberta Star is primarily focused on the discovery of gold. It specializes on gold properties with strong data bases that are fully permitted and drill ready for purchase or option. Alberta Star's focus is to acquire properties where proper due diligence has indicated that there is a reasonable expectation of identifying and yielding a world-class deposit for its shareholders. The Company's financial statements as at 31 May 2004 and for each of the three-month and six-month periods then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $665,022 for the six-month period ended 31 May 2004 (31 May 2003 - $649,778) and has working capital of $733,975 at 31 May 2004 (31 May 2003 - $1,193,257, 30 November 2003 - $209,163). Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and equity capital. However, based on its prior demonstrated ability to raise capital, management believes that the Company's capital resources should be adequate to continue operating and maintain its business strategy during fiscal 2004. However, if the Company is unable to raise additional capital in the near future, due to the Company's liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and pursue other remedial measures. ALDEAVISION INC: Completes $4.6 Million Debt Restructuring ---------------------------------------------------------- AldeaVision Inc. (TSX-V:ALD) completed on June 30, 2004, the debt restructuring it announced last March. The proposed debt restructuring agreement reached in March 2004 between AldeaVision and Miralta Capital II Inc., acting on behalf of 16 beneficial holders of AldeaVision's $4.6 millions debenture due January 14, 2005 and acting as creditor for AldeaVision's $2 millions credit facility, contemplated that: (i) the debenture's term would be extended by one year to January 14, 2006; (ii) $430,000 of unpaid interest thereon would be capitalized and a further $100,494.72 of unpaid interest would be given; (iii) its conversion price would be lowered from $1.25 per share to $0.16 per share; and (iv) its forced conversion provision would be modified to allow for the forced conversion by AldeaVision if the market price of AldeaVision's common shares was at least $0.25 per share for twenty consecutive trading days. The debt restructuring agreement also contemplated that the $2 millions credit facility would be transformed into a convertible debenture in the principal amount of $2.5 millions on identical terms and conditions as the modified $4.6 millions debenture, including a conversion price of $0.16 per share. Each debenture hold period will expire on October 30, 2004. Montreal-based AldeaVision Inc. is an innovative provider of broadcast quality video networking services and solutions for the television, film and media industries. The AldeaVision Global Video Network uses digital facilities over broadband fiber networks and is designed to provide seamless end-to-end broadcast digital video connections among broadcasters, content producers, post-production and media companies. AldeaVision services are available in Miami, New York, Washington D.C., Los Angeles, Toronto, Montreal, Mexico City, Lima, Peru and Caracas, Venezuela. AVONDALE MILLS: S&P Lowers Credit Rating to B- & Junks Sub. Debt ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on textile manufacturer and marketer Avondale Mills Inc. to 'B-' from 'B'. At the same time, the subordinated debt rating on the company was lowered to 'CCC' from 'CCC+'. The outlook is negative. Monroe, Georgia-based Avondale Mills had about $163.3 million of total debt outstanding at May 28, 2004. "The downgrade reflects the company's poor operating results and its significant decline in credit protection measures, as well as Standard & Poor's continued concerns about challenging industry conditions and Avondale Mills' ability to continue to adjust its operating model in response to the current environment," said credit analyst Susan H. Ding. "The company's decline in sales and profitability, which continued in the latest quarter ended May 28, 2004, reflects the overall weak demand for textile and apparel products as well as the shift in demand to lower priced goods manufactured overseas." For the 12 months ended May 28, 2004, Avondale Mills' sales declined by 10.6%, while its operating margin eroded significantly, to 5.4% from 12.3% the previous year. Correspondingly, EBITDA interest coverage fell to 1.3x, compared with 4.2x in the previous period, while total debt to EBITDA increased to 5.8x from 2.2x as a result of the lower EBITDA base. Poor operating results were driven by continued unit volume declines as well as price deflation. Standard & Poor's expects the trend to continue in the intermediate term because of the imminent removal of trade quotas under the World Trade Organization's January 2005 deadline. The elimination of these quotas (which limit imported goods under certain categories to protect domestic production) will likely create further pricing pressures in the industry. BELIZE MORTGAGE: Moody's Downgrades Class B Bonds to B2 from Ba3 ---------------------------------------------------------------- Moody's has downgraded the rating of Belize Mortgage Company 2002-1 Class B Bonds to B2 from Ba3 as a result of the agency's downgrade of the Government of Belize's foreign currency rating to B2 from Ba3 on August 5, 2004. The rating action concludes the review for possible downgrade initiated on June 22, 2004. The securitized pool includes residential, agricultural and industrial loans originated by the Development Finance of Belize, a private company that provides credit for the productive sectors. The rating of the Class B bonds is based on guarantees provided by the Development Finance Corporation of Belize and by the Government of Belize. The Development Finance unconditionally and irrevocably guarantees the due and timely payment of the principal of, and any interest and other charges on, the bonds in US dollars. The Government of Belize unconditionally and irrevocably guarantees that the Development Finance will fulfill its obligations. Therefore, the rating of the Class B bonds depends upon the ability and willingness of the Government of Belize to pay under its guarantee. BOX USA: Moody's Removes Low-B & Junk Ratings After Acquisition --------------------------------------------------------------- Moody's Investors Service withdrew its ratings of Box USA, Inc.: Ratings withdrawn: * Senior implied rated B3; * Senior unsecured issuer rating rated Caa1; and * $170 million, 12% guaranteed senior secured notes, due June 1, 2006, rated B3. The ratings withdrawal was prompted by the completion of the acquisition of Box USA by International Paper, Inc., and the subsequent repayment of all Box USA debt obligations by International Paper as of July 30, 2004. BURLINGTON IND: Claimants Respond to Trust's Objection to Claims ---------------------------------------------------------------- As previously reported, the BII Distribution Trust determined that 45 claims assert liabilities in excess of the amount due with respect to the underlying obligations. As a result, the amounts asserted in the Overstated Claims include amounts that are not liabilities of the Reorganized BII Debtors' Estates. Accordingly, the Trust asks the Court to reclassify the Claims as general unsecured non-priority claims to ensure that the Claimants do not receive a disproportionately large distribution on account of the asserted liabilities. No Liability Claims The Trust observes that certain claims filed against the Debtors do not present valid obligations of the Debtors' estates. Upon review of the Reorganized Debtors' books and records and analysis of the underlying liabilities, the Trust determined that: (a) Three claims are for worker's compensation, which are covered by the Debtors' workers' compensation insurance program and are being processed without interruption in the ordinary course of business: Claimant Claim No. Claim Amount -------- --------- ------------ Camden, Melissa 1542 $100,000 Cantley, Walter N. 1235 1,000,000 1236 1,000,000 (b) Electric Sales & Services Company's Claim No. 243 for $14,552 is for disallowed interest; (c) Ten Claims represent obligations that are not valid liabilities of the Estates or otherwise not due and owing: Claimant Claim No. Claim Amount -------- --------- ------------ Computer Associates Int'l, Inc. 1559 $137,551 CSX Transportation 5 9,721 De Lage Landen Financial Services 1229 6,101 Dupont Flooring Systems, Inc. 570 35,100 J C Viramontes International, Inc. 1021 Unliquidated Martelli Lavorazioni Tessili, SpA 195 Unliquidated Phoenix Software International 1193 10,620 Reliance Insurance 1368 2,043,193 Smith, Brenda D. 963 150,000 Travelers Casualty & Surety Co. 59 Unliquidated (d) Two Claims relate to obligations arising under the Debtors' employee retirement benefits program or certain other employee benefit programs, which were assumed or continued by the buyer of the Debtors' assets: Claimant Claim No. Claim Amount -------- --------- ------------ Cantley, Walter N. 1235 $1,000,000 Cantley, Walter N. 1236 1,000,000 (e) Twelve Claims are on account of an obligation assumed by the Buyer: Claimant Claim No. Claim Amount -------- --------- ------------ AT&T Corporation 144 $344,348 Boehme Filatex, Inc. 871 20,569 1394 1,628 Computer Associates Int'l, Inc. 1559 137,551 Drake Extrusion, Inc. 1076 717,904 Duke Energy 140 477,870 Dupont Flooring Systems, Inc. 570 35,100 Phoenix Software Int'l 1193 10,620 Powerware 589 275 QRS Corporation 688 72,075 Reliance Insurance Co. 1368 2,043,193 Waste Management of Carolinas 646 2,031 The Trust asks the Court to disallow and expunge the No Liability Claims. Responses (1) Melissa Camden Robert A. Simon, Esq., at Barlow Garsek & Simon, LLP, in Forth Worth, Texas, asserts that the BII Distribution Trust's Objection to Ms. Camden's Claim is a mere formal objection, and does not state a sufficient reason to disallow it. Ms. Camden never received any "benefits" from Burlington Industries, Inc., and has no idea what "benefits" the Objection refers to. In addition, the Objection failed to deny any of the facts stated in Ms. Camden's Claim and does not offer any legal defenses. Mr. Simon explains that Ms. Camden is the daughter of Ellen Camden, who died of mesothelioma or cancer of the pleural lining around the lung on November 2, 2000, at the age of 57. As the daughter and the personal representative of Ellen Camden's estate, Ms. Camden asserts a claim under the Texas Wrongful Death Act. Ellen Camden's father, Charles Lewis was a lifelong Burlington employee. From 1940 to 1986, Mr. Lewis worked as a fireman helper, fireman, repairman, and supervisor at a Burlington plant in Virginia. Mr. Lewis' job included servicing and repairing boilers. The boilers Mr. Lewis worked on were insulated with asbestos-containing refractory material. Moreover, the steam pipes that emanated from the boilers were insulated with asbestos-containing pipe insulation. After a day's work, Mr. Lewis' clothes often would be covered with asbestos dust. As Mr. Lewis' daughter, Ellen Camden was given the chore of shaking out and washing her father's asbestos- covered working clothes. While doing so for several years as a child and as an adolescent, Ellen Camden inhaled a lethal amount of the asbestos fibers. In December 1999, Ellen Camden was diagnosed with mesothelioma and died less than one year later. Mr. Simon explains that, unlike pulmonary carcinoma or lung cancer, which can be caused by asbestos exposure, tobacco usage, or a combination of both, mesothelioma is only caused by exposure to asbestos fibers. As a child and an adolescent, Ellen Camden did not know that the dust on her father's clothing was a lethal carcinogenic. However, Mr. Simon contends that the dangers of exposure to asbestos fibers were well known to Burlington, as they were well known to other companies that used asbestos. Burlington had a duty to its employees and their families to maintain a safe workplace and to protect its workers and their families against exposure to friable asbestos located in its plant. Burlington's negligent or grossly negligent failure to protect Mr. Lewis from exposure to harmful asbestos fibers caused Ellen Camden to be exposed on a regular basis to asbestos fibers, which proximately caused her untimely death. Ellen Camden's death left her children, including Melissa, without a mother at relatively young ages. Pursuant to the Texas Wrongful Death Act, Ellen Camden's children are entitled to compensatory and exemplary damages for the loss of their relationship with their mother. Ms. Camden filed her claim for $100,000, which was intended to be a good faith estimate, and not a judicial admission. The $100,000 figure was chosen to factor in the risks, expenses, and delays inherent in litigation, and does not state the full amount of damages Ms. Camden has suffered. If forced to litigate her claim with the Trust in the United States District Court or State Court, Ms. Camden would seek to prove the full amount of her common law damages for the wrongful death of her mother, with damages far exceeding $100,000. Accordingly, Ms. Camden asks the Court to overrule the Trust's Objection. (2) Duke Energy Corporation Duke Energy Corporation, doing business as Duke Power Company, timely filed a proof of claim for $477,870, relating to prepetition electric utility service it provided to the BII Debtors under various agreements: -- $86,507 is for prepetition amounts owing under an Electric Service Agreement between the Debtors and Duke, executed as of June 27, 2001, to provide electric service to the Debtors' facility known as the "Pioneer Plant"; -- $83,343 is for prepetition amounts owing under an Electric Service Agreement between the Debtors and Duke, executed as of April 12, 2001, to provide electric service to the Debtors' facility known as the "Reidsville Weaving Plant"; and -- $308,020 relates to various other agreements and arrangements between the Debtors and Duke. Because the Pioneer Plant and the Reidsville Plant Contracts provided large annual savings to the Debtors, the parties agreed that the Debtors would assume the Contracts and pay a cure amount equal to 40% of the outstanding prepetition debt for each Contract. Robert C. Fariole, Director of Corporate Engineering of Burlington Industries, Inc., confirmed that the Debtors would pay $34,603 to assume the Pioneer Plant Contract and $33,347 to assume the Reidsville Plant Contract. According to John D. Demmy, Esq., at Stevens & Lee, PC, in Wilmington, Delaware, Duke's claim constitutes prima facie evidence of the validity and the amount of Duke's unsecured prepetition claim against the Debtors. Thus, the Debtors have the burden to overcome the prima facie validity of the Proof of Claim before shifting the burden of production on to Duke. Mr. Demmy adds that the Pioneer Plant and Reidsville Plant Contracts have not been assumed because the agreed cure amounts have not yet been paid. Pursuant to Section 365(b)(1) of the Bankruptcy Code, the Debtors cannot assume any of the Contracts without first paying the agreed cure amounts. Furthermore, the remaining $308,020 included in Duke's claim that is unrelated to the Pioneer Plant Contract, the Reidsville Contract or the Williamsburg Lot Lease has not been paid. The Debtors, Mr. Demmy says, have not even purported to assume any of the agreements under which these amounts are owing. Accordingly, Duke Energy asks the Court to: (1) overrule the Claim Objection as it relates to Duke's Claim; (2) allow Duke Energy's Proof of Claim as an unsecured claim for $477,870; and (3) require the Debtors to pay Duke Energy the agreed cure amounts as a condition to the Debtors' assumption of the Pioneer Plant and Reidsville Plant Contracts. Headquartered in Greensboro, North Carolina, Burlington Industries, Inc. -- http://www.burlington-ind.com/-- is one of the world's largest and most diversified manufacturers of soft goods for apparel and interior furnishings. The Company filed for chapter 11 protection in November 15, 2001 (Bankr. Del. Case No. 01-11282). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger One Rodney Square, and David G. Heiman, Esq., and Richard M. Cieri, Esq., at Jones, Day, Reaves & Pogue North Point represent the Debtors in their restructuring efforts. Burlington Reorganization Plan confirmed on October 30, 2003 was declared effective on November 10, 2003. (Burlington Bankruptcy News, Issue No. 52; Bankruptcy Creditors' Service, Inc., 215/945-7000) CAPTEC FRANCHISE: Moody's Cuts Class A-2 Notes Two Notches to Ba3 ----------------------------------------------------------------- Moody's Investors Service downgrades five classes of notes issued by Captec Franchise Trust 2000-1. The downgrades of the Class A-2, B, C, D and A-IO ratings are due to the continued deterioration in collateral performance of the pools. In addition, the rating on the Class A-1 Notes was confirmed due to the substantial credit support protecting the class. The complete ratings actions were as follows: Rating Action Captec Grantor Trusts 2000-1 Franchise Receivable Trust Certificates * $70.96 million Class A-1 Notes, rating confirmed at A3; * $40.6 million Class A-2 Notes, rating downgraded to Ba3 from A3; * $8.7 million Class B Notes, rating downgraded to Caa1 from Ba2; * $7.7 million Class C Notes, rating downgraded to Ca from B2; * $6.8 million Class D Notes, rating downgraded to C from Caa1; * Class A-IO, rating downgraded to A3 from Aaa. As of the July 2004 distribution date, the total subordination protection for the Class A-2 notes was 22%; 16% for Class B; 10.7% for Class C; 6% for Class D; and 3.3% for Class E Notes. The notes will likely experience substantial writedowns given the July 2004 delinquency rate of 21%, with most of the loans severely delinquent. The downgrades reflect expected recoveries on current problem loans and resulting writedowns on the notes, in addition to projected future defaults. Captec Financial Group, Inc. based in Ann Arbor, Michigan, is a specialized commercial finance company that focused on the casual dining and fast food restaurant sectors. The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. CAR WASH AT SUNNY: Case Summary & 17 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Car Wash at Sunny Hills Inc. 5603-1/2 Seashore Drive Newport Beach, California 92663 Bankruptcy Case No.: 04-14948 Chapter 11 Petition Date: August 6, 2004 Court: Central District of California (Santa Ana) Judge: John E. Ryan Debtor's Counsel: Jeffrey W. Broker, Esq. Broker & Associates, PA 18191 Von Karman Avenue, Suite 470 Irvine, CA 92612-7114 Tel: 949-222-2000 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 17 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Todd C. Danly and Kathkeen Danly $723,966 c/o Michael S. Magnsuon, Esq. 13215 E. Penn St., Ste. 205 Whittier, CA 90602-1722 W. Michael Scott $500,000 5603-1/2 Seashore Drive Newport Beach, CA 92663 W. Michael Scott $486,000 5603-1/2 Seashore Drive Newport Beach, CA 92663 Brocom, LLC c/o Robert Johnson, Esq. $450,000 Friedman Peterson Stroffe & Gerard 19800 MacArthur Blvd., Suite 1100 Irvine, CA 92612-2425 W. Michael Scott $437,845 5603-1/2 Seashore Drive Newport Beach, CA 92663 Delight Danley $139,925 Douglas Nitta, M.D. $133,000 W. Michael Scott $125,000 David Vatani $80,000 CIT Technology Finance Service $50,000 G.E. Capital Finance Corp. $35,871 Napa Auto Parts $16,414 Katone Brothers Car Wash Servicing $5,833 Car Aroma Supplies, Inc. $2,883 Rodriguez Bros. Auto Parts $2,315 Orange County Clerk $1,500 Greetings Gift and Extras $1,406 CENTURY ALUMINUM: Moody's Puts B1 Rating on Planned $250 Mil. Debt ------------------------------------------------------------------ Moody's Investors Service assigned a B1 rating to Century Aluminum Company's proposed $250 million of guaranteed senior unsecured notes due 2014. The combined proceeds from the unsecured notes and a $175 million issue of non-guaranteed convertible senior notes due 2024 (unrated) will be used to finance the tender offer for Century's existing first mortgage notes and to pay related premiums, accrued interest and other expenses of approximately $64 million. The convertible senior notes are not guaranteed and effectively subordinated to the other debt of Century. Moody's affirmed the existing ratings of Century but changed its rating outlook to positive from stable. Moody's will withdraw the ratings on the first mortgage notes if Century's tender offer is successful. The following rating actions were taken: * Assigned a B1 rating to the proposed $250 million of senior unsecured notes due 2014; * Affirmed the Ba3 rating for Century's $100 million senior secured revolving credit facility; * Affirmed its B1 senior implied rating; and * Affirmed its B3 senior unsecured issuer rating. Century's ratings continue to reflect its relatively high leverage, exposure to a single commodity-priced product, a higher cost base compared to many of its integrated competitors, the risks associated with alumina and electrical power supply arrangements, and concentration of sales among four customers. Additionally, the ratings reflect the company's increased debt level following its acquisition of Nordural Aluminum hf, Iceland, and the additional borrowings and equity contributions required to complete the $330 million Nordural expansion over the next two years. Positive factors supporting the ratings include the stability provided by Century's business model, which uses long-term supply and sales contracts to minimize mismatches between alumina and aluminum prices and capture a sales premium above the London Metal Exchange aluminum price. This -- along with aluminum hedging -- enabled the company to generate free cash flow in each of the last three fiscal years, when London Metal Exchange prices were often below $0.65/pound. Also, while the company's debt has risen with the acquisition of Nordural, the new financings extend the company's debt maturity profile and lower its average cost. In addition, Moody's ratings and the positive rating outlook recognize the increased earnings base and lower cost of operations provided by the acquisition of Nordural, and the limited completion and operating risk related to its planned expansion. Finally, the current favorable aluminum pricing environment is expected to continue for several quarters and generate greater operating cash flow, which should reduce the amount of additional debt required to finance the Icelandic smelter expansion. The current London Metal Exchange aluminum price is approximately 75c/pound, well above the 68c/pound 10-year average price. Given the anticipated deficit of global aluminum supply expected over the near-term, we expect that pricing will continue to be favorable through at least 2005, when additional global capacity is expected to come on line. Factors that would improve the rating include a successful completion of the Nordural expansion without an appreciable increase in total debt above the pro forma $617 million, maintenance of current operating rates and costs, and a combination of off-take agreements and hedge positions that continue to ensure a 4-6c/pound premium over London Metal Exchange prices. Conversely, delays in the Nordural expansion combined with cost increases and an extended period of aluminum prices below the long-term historical average (~68c/pound) could result in a lowering of the rating and/or outlook. Although Moody's maintains a relatively stable outlook for the aluminum industry at the present time, the longer term fundamentals of the industry remain cyclical and subject to fluctuating prices based on global supply and demand. In this marketplace, Century competes against larger, lower-cost integrated aluminum producers with captive bauxite, alumina, rolling and fabrication facilities. Century, operating as the holding company for its four primary aluminum production facilities, three of which are located in the U.S., and its fourth and newest facility in Iceland, has no downstream operations and, therefore, is primarily focused on the maintenance of acceptable margins between its alumina supply relationships and primary aluminum sales. Moody's notes that Century's physical and financial aluminum hedges provide price protection through 2005, which is somewhat shorter than in the past. Moody's views Century's supply agreements for alumina and electricity as major considerations in the rating, and these agreements must be replaced or extended on similar terms in order to maintain stable costs and production. We note that various affiliates of Glencore International AG, Century's largest shareholder, supply approximately 53% (535,000 metric tonnes) of Century's domestic alumina needs under long term contracts. However, the contracts for 435,000 tonnes expire at the end of 2006. The importance of stable alumina supply was recently demonstrated when Century entered into an agreement to purchase a 50% interest in the Gramercy, Louisiana alumina refinery from Kaiser Aluminum, following its bankruptcy filing. Gramercy is the sole supplier of alumina to Century's Hawesville smelter and a relatively high-cost plant. Upon closing the acquisition, the Hawesville alumina contract will be revised from a contract based on a percentage of London Metal Exchange pricing to a cost-based contract, which increases the potential for reduced smelter margins. Similarly, Century's electrical power agreements are generally long term, although the Ravenswood agreement expires at the end of 2005. Moody's believes the acquisition of Nordural, for approximately $365 million, is fundamentally positive and in line with the company's strategy to be a larger and more diversified upstream aluminum producer. Nordural is a new and relatively low cost facility with a secure source of electrical power. The Nordural smelter produces aluminum from alumina provided by third parties and receives a tolling fee based on a percentage of the London Metal Exchange price. BHP Billiton (rated A2) has a tolling contract for the current capacity, approximately 198 million pounds of primary aluminum, through 2013. Glencore (rated Baa3) and Century have a similar 10-year agreement for the additional volume associated with the expansion, to 397 million pounds. These contracts should allow Nordural to operate profitably over the course of the contracts. The $330 million expansion, scheduled for completion in mid-2006, will be financed with the proceeds from a proposed $310 million secured term loan (unrated) and cash from Nordural and Century. The initial drawdown under tranche A of the facility will be used to repay approximately $180 million of existing debt at Nordural. We note the borrower under the term loan will be Nordural hf and all borrowings will be non- recourse to Century. Although Century's total debt levels will increase following the refinancing, we expect an improvement in interest coverage ratios, reflecting the reduced interest expense as a result of the first mortgage note redemption. Nevertheless, leverage will remain high. Pro-forma for recent financings and Nordural, Moody's estimates that Century's $617 million of debt represents about 4 times LTM EBITDA (through June 30, 2004). We expect that debt will increase as Century draws down on the Nordural term loan facility to complete the expansion. Moody's expects peak borrowings under the term loan facility will be in 2005, when Century's total debt is expected to be around $700 million, although this depends on aluminum prices over the next year. We note that the proposed term facility expires in December 2005, although Century has the option to extend the maturity on an annual basis until 2009. Following the refinancing, the only secured debt Century will have will be the Nordural facility and an $8 million IRB. Non-guarantor subsidiaries will have $275 million of outstanding liabilities, including trade payables. Century's liquidity is provided by its $100 million revolving credit facility expiring in 2006, which it has seldom used in the past. Although the revolver has no financial covenants, availability is limited by a $30 million reserve account and a borrowing base based on eligible receivables and inventory. Considered in the rating is the likelihood that Century will attempt to minimize drawings under the term facility and use pro forma cash balances ($119 million at June 30) and free cash flow from domestic subsidiaries to partly fund the Nordural expansion. Headquartered in Monterey, California, Century Aluminum Company has ownership interests in four aluminum production facilities with an annual capacity of 1.4 billion pounds of primary aluminum. Century had revenues of $883 million in 2003, pro forma for Nordural. CHASE MORTGAGE: Fitch Upgrades Two Low-B Rated Certificate Classes ------------------------------------------------------------------ Fitch Ratings has taken rating actions on the following Chase Mortgage Finance Trust issue: Series 2002-S8: -- Classes IA, IIA affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B1 upgraded to 'AA+' from 'AA'; -- Class B2 upgraded to 'A+' from 'A'; -- Class B3 upgraded to 'BBB-' from 'BB-'; -- Class B4 upgraded to 'BB' from 'B'. The upgrades are being taken as a result of low delinquencies and losses, as well as increased credit support. The affirmations on the above classes reflect credit enhancement consistent with future loss expectations. COVANTA: Fitch Affirms & Withdraws B Ratings on Solid Waste Bonds ----------------------------------------------------------------- Fitch Ratings affirms and simultaneously withdraws the underlying 'B' ratings on the municipal solid waste project bonds associated with Covanta Energy Corporation. Fitch will no longer provide underlying ratings or analytical coverage of these issuers: -- Bristol Resource Recovery Facility Operating Committee, CT solid waste revenue bonds (Ogden Martin Systems of Bristol, Inc. Project), 1995 series. -- Massachusetts Industrial Finance Agency and Massachusetts Development Finance Agency resource recovery revenue bonds (Ogden Haverhill Project). -- Suffolk County Industrial Development Agency, NY solid waste disposal facility revenue bonds (Ogden Martin Systems of Huntington Limited Partnership Recovery Facility), series 1999 (insured: Ambac). -- Union County Utilities Authority, NJ solid waste landfill taxable revenue bonds, series 1998 (insured: Ambac). -- Union County Utilities Authority, NJ solid waste facility senior lease revenue bonds, series 1998 A & B (Ogden Martin Systems of Union, Inc. Lessee). -- Union County Utilities Authority, NJ solid waste facility senior lease revenue bonds (Ogden Martin Systems of Union, Inc. Lessee) series 1998A (insured: Ambac); and -- Union County Utilities Authority, NJ solid waste facilities subordinate lease revenue bonds, series 1998A (Ogden Martin Systems of Union, Inc. Lessee) (insured: Ambac). CRDENTIA CORP: Details Strategic Expansion Plan for Amex Listing ---------------------------------------------------------------- Crdentia Corp. (OTC Bulletin Board: CRDE), a leading U.S. provider of healthcare staffing services, reported its long-term strategic expansion plan, including its acquisition strategy and competitive differentiation in the medical staffing marketplace. The announcement corresponds to the Company's efforts to move its common stock listing to the American Stock Exchange later this year. Crdentia's business model addresses the growing shortage of qualified nurses nationwide through the development of a national network providing temporary medical staffing services to hospitals, clinics and for private, in home care. A healthcare staffing consolidator, Crdentia targets privately held companies that need alternative access to capital, improved distribution networks and new products and services to address the industry's shortage of qualified healthcare workers. The Company's multidimensional approach to temporary staffing which includes per diem staffing, travel nursing, international recruitment, contractual and private duty healthcare, differentiates it from other major providers that predominantly specialize in a single area of staffing. Founded in August 2002 by Chairman and Chief Executive Officer James D. Durham, Crdentia successfully integrated four acquisitions in 2003 and now staffs approximately 250 nurses through five domestic offices and one office in the Philippines. Crdentia already ranks among the 10 largest healthcare staffing providers in the U.S. market. "The vast $12 billion temporary medical staffing industry is highly fragmented and prime for consolidation," said James D. Durham, CEO and Chairman of Crdentia. "The ten largest healthcare staffing firms account for less than 25% of projected industry revenue while the remaining firms are primarily local and small regional operations. These thousands of small existing medical staffing agencies throughout the U.S. are restricted from maximizing potential growth due to relatively small capitalizations. "Our objective is to consolidate many of the industry's premium private companies into our larger public entity, thereby increasing the number of qualified nurses and licensed professional staff to serve our diversified client base. Our multidimensional approach emphasizes product line multiplicity, clearly differentiating Crdentia at both the local and national level," Mr. Durham explained. Acquisition Strategy and Business Model Crdentia's consolidation strategy to fund new growth and product expansion for acquired companies capitalizes on immense market opportunity within the medical staffing industry. With an anticipated annual growth of 15% to 20%, the projected market size for temporary medical staffing will be approximately $46 billion by 2010 according to Health Resources and Services Administration of the U.S. Department of Health and Human Services. Meanwhile, there is a shrinking supply of qualified nurses and healthcare workers. A recent study in The Journal of the American Medical Association indicates that by 2020 the nation's registered workforce will be nearly 20% below projected requirements. Crdentia plans to grow its business by targeting acquisitions of well-run agencies with established customer bases in strategic markets nationwide. Crdentia's unique business model incorporates a combination of per diem staffing, travel nursing and private duty home care to capitalize on the operational and top line synergies of the various staffing models while also broadening the universe of potential acquisitions. After acquiring a base of operations (per-diem registry or a specialized staffing firm) in a given market, Crdentia augments local staff with the addition of travel nurses and foreign recruits, and provides additional services through its other divisions. This strategy is aimed at building the Company's available supply of nurses and other licensed personnel to service its diversified client base in its target markets. Organic growth through acquisition is accelerated through the deployment of additional products and services such as private duty home care in an acquired operating market. "Today's immense healthcare staffing market provides a vast universe of potential acquisition targets for the right buyer," said Pamela Atherton, President of Crdentia. "We are just the right size and have sufficient resources to facilitate successful acquisitions and integrations that will create value for our shareholders. Nearly all of the players in the healthcare staffing arena are either too large for such transactions to be efficient and materially beneficial, or too small in terms of the bandwidth and capital required to effect an acquisition. Therefore, competition from other industry consolidators is minimal." Ms. Atherton noted that Crdentia's typical acquisition candidate is characterized by the following primary criteria: * Annual revenues of $5 to $10 million * Geographic focus -- serving large, metropolitan markets with critical masses of temporary medical staff and affluent, aging populations with strong demand for healthcare services * Single, specialized staffing service focus -- proven expertise in select staffing segments * Strong market reputation and leadership -- stable, proven management * Substantial contract base -- minimum of 50% of revenue from strong hospital client base * Transaction immediately accretive Operational Objectives and Successful Track Record Through its successful integration of four acquisitions in 2003, Crdentia currently provides healthcare staffing in 27 states and has contracts with approximately 350 healthcare facility clients. Based primarily on favorable recent trends including an increasing number of travel nurses under contract with Crdentia and an increasing number of hospital contracts, the Company expects that significant improvements in monthly cash flow will drive positive cash flow from operations during the second half of 2004. Additional operational objectives for Crdentia include: * Aggressive new business development -- Quarterly net increases in both healthcare facility and private duty contracts. * Geographic expansion -- Service contracts in 40 states by year-end through ongoing acquisition strategy. * High level of staff retention -- Quarterly net increases in qualified nurses and licensed medical staff on contract. * Improving operating performance -- Leverage existing infrastructure over a greater asset base to enhance profitability. "The compelling supply and demand dynamics in the healthcare staffing marketplace strongly substantiate both our acquisition strategy and our diversified services approach. Our healthcare clients can achieve 'one-stop shopping' for qualified staffers, and our employees, who we view as our ultimate customers, benefit from a variety of temporary assignment options. From a competitive standpoint, our unconventional business model not only exploits the nation's shortage of skilled staff, but also drives increased loyalty among our contracted nurses through flexibility of choice and highly competitive benefits," Ms. Atherton concluded. Liquidity Concerns In its Form 10-KSB for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission, Crdentia Corp. reports: "The audit report for the year ended December 31, 2002 contained an opinion that was qualified as to the Company's ability to sustain itself as a going concern without securing additional funding. During 2003 the Company was able to secure additional funding to fund its operations as it began executing its business plan to acquire and grow companies involved in healthcare staffing. Although the Company ended 2003 with negative working capital of $1,220,865, the following are considered to be mitigating factors: (i) in February 2004 the Company raised an additional $1 million of Series A Convertible Preferred Stock, and (ii) of the $910,000 convertible debt outstanding, the Company believes that the holders of a majority of this debt will convert to equity in 2004. The Company believes that these two factors, coupled with its cash on hand at December 31, 2003 and its anticipated cash flow from operations in 2004, will be sufficient to service its debt and fund its operations for the foreseeable future. Crdentia posted a $2.2 million net loss in the quarter ending March 31, 2004, eroding shareholder equity to $3.4 million -- a 26% drop from Dec. 31, 2003. About Crdentia Corp. Crdentia Corp. is one of the nation's leading providers of healthcare staffing services. Crdentia seeks to capitalize on an opportunity that currently exists in the healthcare industry by targeting the critical nursing shortage issue. There are many small, private companies that are addressing the rapidly expanding needs of the healthcare industry. Unfortunately, due to their relatively small capitalization, they are unable to maximize their potential, obtain outside capital or expand. By consolidating well-run small private companies into a larger public entity, Crdentia intends to facilitate access to capital, the acquisition of technology, and expanded distribution that, in turn, drive internal growth. For more information, visit http://www.crdentia.com/ CRESCENT JEWELERS: Files Chapter 11 Petition in N.D. California --------------------------------------------------------------- Crescent Jewelers, the largest retail jewelry chain in the state of California, has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in the Northern District of California to reorganize the company and restructure its debt as part of its ongoing turnaround effort. The Company intends to continue to conduct business as usual. Customers will continue to receive superior service without interruption. As in all operating Chapter 11 cases, post-petition obligations to vendors, employees and others will be honored and satisfied in the normal course of business. Crescent intends to use the Chapter 11 process to restructure the indebtedness incurred over the prior five operating years and to position the Company for continued growth and increased profitability. Over the past six months, Crescent had made significant operational improvements, working with turnaround specialist Alvarez & Marsal. A&M personnel will continue to serve as key officers of the Company during the Chapter 11 case. Randy Poe, President and COO of Crescent said, "This filing is a necessary step that will permit the Company to complete its efforts to improve operations and profitability and to fix its balance sheet. Our efforts have already resulted in improved sales and cash flow, higher customer satisfaction and retention rates, and improved associate productivity. We believe that when we emerge from these proceedings, our new capital structure, combined with the commitment of our management team and employees to execute our strategy, will finally be able to unlock Crescent's tremendous potential." Mr. Poe continued, "This is an industry with remarkable growth opportunities. At the same time, the debt burden incurred in the past has seriously limited Crescent's ability to move forward to capture increased market share. After careful consideration of the various strategic alternatives available to the Company, we determined that the decision to pursue restructuring of our debt through Chapter 11 is a necessary solution, given current economic conditions and the current state of equity and debt markets. Restructuring our debt burden will provide the resources to continue to rapidly improve market share and customer count and to further enhance our product offering. It will also give us access to the operating capital to complete all phases of the turnaround." Background on Chapter 11 Chapter 11 of the U.S. Bankruptcy Code allows a fundamentally viable Company, like Crescent, to continue to operate its business and manage its assets in the ordinary course of business. Congress enacted Chapter 11 to avoid the negative effects of liquidation proceedings and to enable a debtor business to preserve its going concern value and its operations, as well as to provide its employees with jobs and to satisfy creditor claims based upon the value of the reorganized Company. About Crescent Jewelers Crescent Jewelers was founded in 1936 in Oakland, California. With over 160 stores in six western states, Crescent is the largest jewelry retailer on the West Coast. For more information, please visit http://www.crescentonline.com/ CRESCENT JEWELERS: Voluntary Chapter 11 Case Summary ---------------------------------------------------- Debtor: Crescent Jewelers aka J. Burton Jewelers 315 11th Street Oakland, California 94607 Bankruptcy Case No.: 04-44416 Type of Business: The Debtor is a retail jewelry chain that operates about 175 stores in Arizona, California, Nevada, New Mexico, Oregon, Texas, and Washington. Chapter 11 Petition Date: August 11, 2004 Court: Northern District of California (Oakland) Judge: Edward D. Jellen Debtor's Counsel: Lee R. Bogdanoff, Esq. Klee, Tuchin, Bogdanoff and Stern Fox Plaza 2121 Avenue of the Stars 33rd Floor Los Angeles, CA 90067 Tel: 310-407-4070 DB COMPANIES: Committee Brings-In Whiteford Taylor as Attorneys --------------------------------------------------------------- The Official Unsecured Creditors Committee in DB Companies, Inc.'s chapter 11 cases asks the U.S. Bankruptcy Court for the District of Delaware for permission to hire Whiteford, Taylor & Preston LLP as its attorneys. The Committee relates that it selected Whiteford Taylor because the Firm has considerable experience in insolvency and bankruptcy matters, including representation of creditors' committees in Chapter 11 cases. Specifically, Whiteford Taylor will: a. advise the Committee with respect to its powers and duties; b. prepare any necessary applications, orders, reports and other legal papers, and appearing on the Committee's behalf in proceedings instituted by or against the Debtors; c. assist the Committee in the investigation of the acts, liabilities and financial condition of the Debtors, the operation of the Debtors' businesses and the desirability and profitability of continuing such businesses, and any other matter relevant to these cases including the formulation of a plan of reorganization or a plan of liquidation; d. assist the Committee in evaluating the necessity of seeking the appointment of a trustee or examiner, and requesting such appointment, if deemed appropriate; and e. perform all of the legal services for the Committee which may be necessary or desirable in the interest of the Debtors' unsecured creditors. Brent C. Strickland, Esq., will lead the team in this engagement. Mr. Strickland reports that Whiteford Taylor professionals currently bill: Position Billing Rate -------- ------------ Partners $450 per hour Associates $175 per hour Paralegals $140 per hour Headquartered in Pawtucket, Rhode Island, DB Companies, Inc. -- http://www.dbmarts.com/-- operates and franchises a regional Chain of DB Mart convenience stores in Connecticut, Massachusetts, Rhode Island, and the Hudson Valley region of New York. The Company filed for chapter 11 protection on June 2, 2004 (Bankr. Del. Case No. 04-11618). William E. Chipman Jr., Esq., at Greenberg Traurig, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they estimated assets of over $50 million and debts of approximately $65 million. DELTA AIR: Moody's Junks Senior Unsecured Debt & Bonds Ratings -------------------------------------------------------------- Moody's Investors Service downgraded the senior unsecured debt ratings of Delta Air Lines, Inc., one notch and downgraded the company's Speculative Grade Liquidity Rating to SGL-4 from SGL-3. Other ratings remain unchanged. The downgrade of the senior unsecured ratings reflects continued deterioration in the company's financial performance and expectations of increased loss severity. The downgrade of the Speculative Grade Liquidity Rating to SGL-4 rating reflects deterioration in the company's liquidity as evidenced by declining cash balances stemming from continued cash losses, capital expenditures, debt maturities and pension obligations, and limited access to external sources of cash. The Caa1 Senior Implied Rating remains unchanged and the ratings outlook remains Negative. Ratings affected by the action include: Delta Air Lines, Inc. * Senior Unsecured Notes and Debentures to Ca from Caa3; * MTN program to Ca from Caa3; * Industrial Revenue Bonds to Ca from Caa3; and C from Ca respectively; and * Speculative Grade Liquidity Rating to SGL-4 from SGL-3. Delta's ability to generate positive operating cash flow is highly dependent on successful renegotiation of the company's labor agreement with its pilots. A rapid resolution of these negotiations is not expected in the near future. Moody's last rating action on June 23, 2004, incorporated the assumption that Delta would achieve positive operating cash flow during each of its seasonally strong second and third quarters. However, high fuel costs and intense competitive pressure on yields resulted in a disappointing $57 million of operating cash flow for the second quarter. Moody's anticipates that these conditions will also result in weak operating cash flow in the third quarter. The current ratings actions reflect second quarter cash flow performance together with Moody's expectation that a meaningful recovery in cash flow will not occur before 2005. The SGL-4 rating reflects the airline's rapidly deteriorating cash position, difficulties in achieving cost savings necessary to achieve profitability, and expectation of cash consumption at rates seen in the first half of the year. The SGL-4 rating also reflects the lack of significant external sources of capital to replenish liquidity as well as large cash obligations that the company faces in 2005. These obligations include approximately $1.2 billion of debt maturities and cash pension funding obligations that are anticipated to be greater than the $460 million of funding in 2004. In the company's first quarter 2004 SEC Form 10-Q, Delta indicated that it expected to meet its obligations as they come due but further indicated that the company did not expect to be able to complete any significant new financing transactions for the foreseeable future. In more recent filings, the company strengthened its warning and indicated that if it cannot make substantial progress in the near-term toward achieving a competitive cost structure sufficient to permit sustained profitability and access to capital markets on acceptable terms, the company would need to seek to restructure under Chapter 11 of the U.S. Bankruptcy Code. Delta currently has limited immediately available sources of cash beyond that on its balance sheet. Unencumbered cash and short- term investments were $1,966 million as of June 30, 2004. This represents a $200 million decline from March 30th and occurred during the company's traditionally strong second calendar quarter. Unencumbered cash and short-term investments have declined $700 million from December 31, 2003. The primary factors in the decline have been cash losses, pension contributions and debt maturities. Cash flow from operations for the first six months of the year was reported as a negative $224 million. Although aircraft related capital spending is supported by financial commitments, non-aircraft capital spending is not supported by financial commitments and is estimated at $300 million for the second-half of 2004. Pension funding for the remainder of 2004 is expected to be approximately $50 million and for 2005 is expected to be substantially greater than the $460 million cash contributions made in 2004. Debt maturities ($226 million for the remainder of 2004) increase sharply in 2005 to $1.2 billion. Delta currently has limited immediately available sources of cash. The company has indicated that financing is not available to it on acceptable terms. Modest levels of Section 1110 eligible aircraft remain unencumbered as do a somewhat larger base of older models. Although these assets could provide some support for borrowings, their questionable value in a liquidation would constrain their monetizable value. The company's 100% ownership in its regional jet subsidiaries, Comair and ASA, could potentially be monetized given sufficient lead time but the value of these companies whose sole customer is Delta, is questionable. Cash flow from operations is expected to continue to be extremely weak until the company's costs can be meaningfully reduced. The primary source of the company's poor financial performance is the combination of constrained revenues as a result of intense competition in the majority of its domestic US markets and the highest cost structure of any US passenger airline. Moody's does not anticipate a near term change in the competitive environment as low cost carriers continue to use their cost advantage to keep fares low in an attempt to gain market share from Delta and others. Efforts at Delta to implement cost reductions have been under way for some time. The company reports savings over the last eighteen months of $1.8 billion. However, these savings have been significantly offset by the increased cost of jet fuel. Delta's fuel consumption is currently unhedged. Cost reductions are currently focused on the renegotiation of the company's generous contract with its pilots and attempts to gain concessions from lessors and suppliers. A request for a reduction of $1 billion in wages and benefits has been made to the pilots' union. The union has proposed a plan that is intended to generate $705 million in cost savings. Negotiations are continuing. The success of the company's cost reduction efforts and even the future direction of the company remain uncertain. The outcome of negotiations with the pilots' union is difficult to predict and Delta's management has stated that $1 billion in requested pilot labor cost concessions is not sufficient, by itself, to achieve financial stability. Management has indicated that additional cost savings from all key stakeholders will be necessary. Such savings will include requests for amendments of the terms of certain debt and lease obligations. Uncertainty also surrounds the company's long-term business model. The company has initiated a strategic review that is expected to be completed this month. The financial and cash flow implications of this review are as yet unknown. Delta Air Lines, Inc., is headquartered in Atlanta, Georgia. DEVLIEG BULLARD: US Trustee Names 5-Member Creditors' Committee --------------------------------------------------------------- The United States Trustee for Region 3 appointed five creditors to serve on an Official Committee of Unsecured Creditors in DeVlieg Bullard II, Inc.'s Chapter 11 case: 1. Lancam, Inc. Attn: Larry A. Myers 5406 Forrest Hills Ct. Lovers Park, Illinois 61111 Phone: 815-633-5145, Fax: 815-633-4009; 2. Reorganized DeVlieg-Bullard, Inc. Attn: G. Christopher Meyer, Esq. Squire, Sanders & Dempsey 127 Public Square, Suite H4900 Cleveland, Ohio 44114 Phone: 216-479-8500, Fax: 216-479-8776; 3. Corporate Property Associates 6 Attn: Nels B. Merrill, Assistant Treasurer 50 Rockefeller Plaza, 2nd Floor New York, New York 10020 Phone: 212-492-8984, Fax: 212-492-8922; 4. Oakleaf II Company Attn: Katherine Geis 10020 Aurora Hudson Road Streetsboro, Ohio 44241 Phone: 330-528-3500, Fax: 330-528-0008; and 5. Ka-Wood Gear & Machine Co. Attn: Donald L. Carlson 32500 Industrial Drive Madison Heights, Michigan 48071 Phone: 248-585-8870, Fax: 248-585-3011. Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Machesney Park, Illinois, Devlieg Bullard -- http://www.devliegbullard.com/-- provides a comprehensive portfolio of proprietary machine tools, aftermarket replacement parts, field service and premium workholding products. The Debtor filed for Chapter 11 protection on July 21, 2004 (Bankr. Del. Case No. 04-12097). James E. Huggett, Esq., at Flaster Greenberg, represents the Company in its restructuring efforts. When the Company filed for protection from its creditors, it listed both estimated debts and assets of more than $10 million. DILLARD'S: Fitch Affirms BB Notes & B- Capital Securities Ratings ----------------------------------------------------------------- Fitch Ratings has affirmed a 'BB-' rating of the senior unsecured notes of Dillard's, Inc. and its 'B-' rating of the company's capital securities. The affirmations follow Dillard's announcement that it has agreed to sell its credit business to GE Consumer Finance for approximately $1.25 billion, including the assumption of $400 million of securitization liabilities. Dillard's had $2.2 billion of debt and hybrid securities outstanding as of May 1, 2004. The Rating Outlook is Negative. The affirmations reflect the improvement to Dillard's balance sheet that will result from this transaction, offset by uncertainty as to the use of proceeds and the company's ongoing operating weakness. The ratings also consider Dillard's broad market presence in growing regions of the country and a significant real estate ownership position. The Negative Rating Outlook reflects Fitch's expectation that soft operating results could persist over the near to medium term. The transaction will result in improved liquidity for the company and should lead to lower financial leverage. Dillard's has indicated that the net pretax proceeds from the transaction of approximately $850 million will be used for a combination of debt reduction, share repurchases, and general corporate purposes. Dillard's has not disclosed the proportion of the proceeds to be used for debt reduction, though it has already repaid $332 million of hybrid preferred securities and $163 million of maturing senior notes year-to-date in 2004. This debt repayment, together with the assumption by GE of the securitization liabilities, would strengthen adjusted debt/EBITDAR to a range of 3.5 times (x)-4.0x at the end of 2004, from 5.3x at year-end 2003. Nonetheless, Dillard's continues to post weak operating results, with its comparable store sales down 1% in the six months ended July 2004, and its operating margin declining to 3.6% in the 12 months ended May 1, 2004 from 4.7% in 2002. Weak operations reflect a less developed private brand effort and a less aggressive promotional posture relative to other department store chains. Looking ahead, softer economic growth in the second quarter of 2004 and higher oil prices create some uncertainty as to the strength of the retail environment in the second half of the year. DILLARD'S INC.: Moody's Affirms Low B-Ratings With Stable Outlook ----------------------------------------------------------------- Moody's Investors Service affirmed Dillard's, Inc., long term debt ratings with a stable outlook following the announcement that Dillard's has entered into a definitive agreement to sell its private label credit card business to a subsidiary of GE for approximately $1.25 billion, including the assumption of $400 million of securitized debt. The affirmation reflects Moody's opinion that, although the sale is an overall positive, Dillard's still faces significant challenges in turning around its department store franchise, including the reversal of negative comparable store sales growth and improvement in its weak operating margin. The transaction will provide the company with significant additional liquidity with cash proceeds of approximately $850 million, remove some of Dillard's nearer term debt maturities, eliminate certain OCC requirements, and allow Dillard's to focus on its core retail business. In addition, it is expected that this transaction will be accretive to earnings. The affirmation also assumes that Dillard's will use the proceeds in a prudent and disciplined manner and that any return of value to shareholders will be balanced. Dillard's ratings reflect its weak operating performance as evidenced by its negative comparable store sales and low operating margins, concerns about the value of the company's franchise over the longer term, and uncertainty over whether Dillard's performance will recover to levels that will be consistent with its peers. The ratings are supported by the company's good liquidity and the value of the company's unencumbered tangible assets. Dillard's owns approximately 80% of its 329 department stores, which are largely unencumbered. The value of this real estate portfolio provides strong asset coverage for the debt holders and additional financial flexibility for the company. The stable outlook reflects the ample cushion provided by the current leverage metrics for the rating category, as well as the expectation that Dillard's will be able to fund working capital and capital expenditures from cash from operations. It also reflects the expectation that Dillard's will use the proceeds generated from credit card sale in a disciplined approach that will balance any return to shareholders with debt holders' interests. An upgrade would require Dillard's to demonstrate an improvement in its operating performance by achieving and sustaining operating margins above 4%, as well as consistently generating a modest same store sales increase. Ratings could move downward should Dillard's liquidity deteriorate or if there were erosion in the level of unencumbered assets. The following ratings are affirmed: Dillard's, Inc. * Senior implied of B1; * Issuer rating of B2; * Senior unsecured debt ratings of B2; * Subordinated debt ratings of B3; * Shelf ratings for Dillard's debt and preferred stock of (P) B2, (P) B3, (P) Caa1; Dillard's Capital Trust I * Subordinated debt at B3; Dillard's Capital Trust II, III, IV * Shelf ratings of (P)B2, (P)B3 and (P)Caa1 for senior unsecured debt, subordinated debt and preferred stock, respectively. Dillard's, Inc., headquartered in Little Rock, Arkansas, operates approximately 329 department stores in 29 U.S. states. Total revenue was approximately $7.9 billion for the fiscal year ended January 31, 2004. DJT PROPERTIES: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: DJT Properties LLC dba Clearwater Creek Convenience Center 51 Southwood Drive Vadnais Heights, Minnesota 55127-4123 Bankruptcy Case No.: 04-34649 Type of Business: The Debtor operates a gas station, convenience store and car wash. Chapter 11 Petition Date: August 9, 2004 Court: District of Minnesota (St. Paul) Judge: Gregory F. Kishel Debtor's Counsel: Michael Mcgrath, Esq. Ravich, Meyer, Kirkman, McGrath & Nauman, PA 4545 IDS Center 80 South Eighth Street Minneapolis, Minnesota 55402 Telephone (612) 332-8511 Total Assets: $2,040,210 Total Debts: $2,316,771 Debtor's 18 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Cherokee State Bank Loan $122,581 Kroona, David Loan $52,260 Amcon Distributing Company Goods & Services $14,408 Main Street Bank CREDIT LINE $9,200 Coremark Minneapolis Goods & Services $5,513 North Suburban Inc Goods & Services $2,000 Ecolab Vehicle Care Goods & Services $1,306 Division American Bottling Goods & Services $1,054 King Distributors Goods & Services $731 Anytime Ice Company Goods & Services $500 Cintas Goods & Services $476 Trader Publishing Goods & Services $368 Filter Fresh Goods & Services $320 Seaver Companies Goods & Services $312 Twin City Greetings Inc Goods & Services $229 Charles Levy Circulating Goods & Services $186 Danish Pastry Shop Goods & Services $173 M & D Distributing Inc Goods & Services $173 DYKESWILL: Told to File Plan & Disclosure Statement by Nov. 23 -------------------------------------------------------------- The United States Bankruptcy Court for the Southern District of Texas ordered Dykeswill, Ltd., to file its Chapter 11 Reorganization Plan and a Disclosure Statement explaining that plan by November 23, 2004. A status hearing is scheduled for 9:00 a.m. on December 6, 2004 on the 2nd Floor of the United States Bankruptcy Court at 1133 Shoreline Boulevard in Corpus Christi, Texas. At the Hearing, the Court says, it intends to provide further orders to effectuate a plan of reorganization. Headquartered in Corpus Christi, Texas, Dykeswill Ltd., filed for Chapter 11 protection on July 26, 2004 (Bankr. S.D. Tex. Case No. 04-20974). Harlin C. Womble, Jr., Esq., at Jordan, Hyden Womble and Culbreth, P.C., represents the Debtor in its restructuring efforts. When the company filed for protection from its creditors, it listed over $10 million in assets and debts of more than $1 million. EL PASO: Provides Update on Restatement & Gets New Bank Extension ----------------------------------------------------------------- El Paso Corporation (NYSE: EP) expects to file its 2003 Form 10-K and the Form 10-Ks of its subsidiaries El Paso Production Holding Company and El Paso CGP Company before the end of the third quarter of 2004. The company also received additional waivers on its $3-billion revolving credit facility and certain other financings. These waivers provide El Paso with an extension until September 30, 2004 to file its 2003 Form 10-K and until November 30, 2004 to file its first and second quarter 2004 Form 10-Qs. Restatement Update On May 3, 2004, El Paso reported that an independent investigation initiated by the Audit Committee of the board of directors determined that the downward revision to its natural gas and oil reserves that had been announced on February 17, 2004 would require a restatement of the financial statements for El Paso Corporation and its subsidiaries El Paso Production Holding Company and El Paso CGP Company for the periods from 1999 through 2003. Since that time, El Paso has been working with its independent auditor and its independent reserve engineer regarding the restatement of its financial statements. This process, which is essentially complete, will be further discussed in the company's upcoming conference call and detailed in the company's Form 10-K filing. The restatement procedures have included a comprehensive review of the company's accounting during the periods from 1999 through 2003 by both the company and its independent auditor. As part of this internal process and an ongoing investigation of wash trade transactions by the U.S. Attorney's office, the company and its auditor have examined the accounting for natural gas hedges which involved offsetting transactions in the company's merchant energy segment. The company believes that the basis for concluding that those transactions qualified under hedge accounting guidelines is no longer applicable and its financial statements will likely need to be further restated. The elimination of hedge accounting for these transactions is expected to result in the following: -- Increases and decreases in the company's quarterly earnings within the merchant energy and production segments from 1999 through 2003 due to the elimination of the hedges; -- Incremental ceiling test charges, primarily during a period of very low natural gas prices in 2001, as a result of the elimination of the hedges from the ceiling test calculation; -- A lower DD&A rate for the company's production business for certain prior periods and for future periods because of the additional ceiling test charges in prior periods; -- The impact of the restatement to segment earnings on stockholder's equity should largely be offset by changes in other comprehensive income; however, stockholder's equity will be reduced by the after-tax impact of ceiling test charges, net of lower DD&A; -- Natural gas sales for prior and future periods will be reported at market prices and not impacted by any restated hedges; and -- No change in cash flow. The company expects any required financial restatement from the production hedge transactions would be included in the 1999 to 2003 financial statements that are currently being restated to reflect the reserve revision. The new bank waivers were structured to address any likely restatement impact of this issue. The company does not expect this restatement for hedge accounting to impact El Paso Production Holding Company or El Paso CGP Company. As announced earlier, investors should not rely on previously filed reports for El Paso Corporation and the subsidiaries named above. Amendments to $3.0-Billion Revolving Credit Facility In connection with the waivers referred to above, El Paso amended its $3.0-billion revolving credit facility to: (i) limit the company's ability and that of its consolidated subsidiaries to repay indebtedness that is not scheduled to occur before June 30, 2005 (the maturity date under such revolving credit facility) and (ii) modify one of the events of default under the credit facility. Copies of the full amendment will be filed today by Form 8-K. Webcast Scheduled El Paso will host a webcast at 10:00 a.m. Eastern Daylight Time on Monday, August 23, 2004, to further discuss the impact of the restatement and to provide a financial and operational update on the company. The webcast may be accessed online through the company's Web site at http://www.elpaso.com/in the Investors section. The presentation slides will also be available for downloading at the same location 45 minutes before the webcast begins. A limited number of telephone lines will also be available to participants by dialing (973) 935-8507 ten minutes prior to the start of the webcast. The company requests that those who do not intend to ask questions use the webcast option. A replay of the webcast will be available online through El Paso's Web site in the Investors section. A telephone audio replay will be also available through August 30, 2004, by dialing (973) 341- 3080 (access code 5043240). If you have any questions regarding this procedure, please contact Margie Fox at (713) 420-2903. About the Company El Paso Corporation provides natural gas and related energy products in a safe, efficient, dependable manner. The company owns North America's largest natural gas pipeline system and one of North America's largest independent natural gas producers. For more information, visit http://www.elpaso.com/ El Paso's latest balance sheet shows $43 billion in assets and $35 billion in liabilities. In the past four quarters, El Paso's reported losses topping $3 billion. ELANTIC TELECOM: Hires Tavenner & Beran as Bankruptcy Counsel ------------------------------------------------------------- Elantic Telecom, Inc., asks the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, for permission to employ Tavenner & Beran, PLC as its bankruptcy counsel. Tavenner & Beran is expected to: a) give the Debtor advice of its rights, powers and duties as Debtor and Debtor-in-Possession continuing to operate and manage its business and property under this chapter 11 case; b) prepare on behalf of the Debtor all necessary and appropriate applications, motions, draft orders, other pleadings, notices, schedules and other documents, and review all financial and other reports to be filed; c) give the Debtor advice and prepare responses to, applications, motions, other pleadings, notices and other papers that may be filed and served; d) give the Debtor advice and assistance in the negotiation and documentation of, financing agreements, debt and cash collateral orders and related transactions; e) review the nature and validity of any liens asserted against the Debtor's property and advise the Debtor concerning the enforceability of such liens; f) give the Debtor advice regarding its ability to initiate actions to collect and recover property for the benefit of the estate; g) counsel the Debtor in connection with the formulation, negotiation and promulgation of a plan of reorganization and related documents; h) give the Debtor advice and assistance in connection with any potential property dispositions; i) give the Debtor advice concerning executory contracts and unexpired lease assumptions, assignments and rejections and lease restructurings and recharacterizations; j) assist the Debtor in reviewing, estimating and resolving claims asserted against the Debtor's estate; k) commence and conduct any and all litigation necessary or appropriate to assert rights held by the Debtor, protect assets of the Debtor's Chapter 11 estate or otherwise further the goal of completing the Debtor's successful reorganization; l) provide general corporate, litigation and other non- bankruptcy services for the Debtor as requested by the Debtor; and m) perform all other necessary or appropriate legal services in connection with this case for or on behalf of the Debtor. The professionals currently expected to have primary responsibility for providing services to the Debtor and their current hourly rates are: Professional Position Billing Rate ------------ -------- ------------ Lynn L. Tavenner Partner $250 per hour Paula S. Beran Partner $240 per hour Shannon D. Franklin Associate $160 per hour Debra K. Weekley Paralegal $95 per hour To the best of the Debtor's knowledge, Tavenner & Beran is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Richmond, Virginia, Elantic Telecom, Inc. -- http://www.elantictelecom.com/-- provides wholesale fiber bandwidth and carrier services to long-distance, international wireless carriers and competitive local exchange carriers across its fiber optic network. The Company filed for chapter 11 protection (Bankr. E.D. Va. Case No. 04-36897) on July 19, 2004. When the Debtor filed for protection from its creditors, it listed $19,844,000 in assets and $24,372,000 in liabilities. ELANTIC TELECOM: Look for Bankruptcy Schedules Next Week -------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Virginia, gave Elantic Telecom, Inc., more time to file its schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtor has until August 18, 2004, to prepare and deliver these financial disclosure documents. Headquartered in Richmond, Virginia, Elantic Telecom, Inc. -- http://www.elantictelecom.com/-- provides wholesale fiber bandwidth and carrier services to long-distance, international wireless carriers and competitive local exchange carriers across its fiber optic network. The Company filed for chapter 11 protection (Bankr. E.D. Va. Case No. 04-36897) on July 19, 2004. Lynn L. Tavenner, Esq., and Paula S. Beran, Esq., at Tavenner & Beran, PLC, represent the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $19,844,000 in assets and $24,372,000 in liabilities. EMPI CORP: S&P Gives B+ Corporate Credit & Senior Secured Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit rating and its 'B+' senior secured rating on St. Paul, Minnesota-based orthopedic rehabilitation products manufacturer Empi Corporation on CreditWatch with negative implications. The action reflects Standard & Poor's belief that after the proposed acquisition of Empi Corporation by Encore Medical, Inc., the new entity will have significantly increased its debt relative to its EBITDA. Currently, Empi's total lease-adjusted debt to EBITDA ratio is under 4x; Standard & Poor's estimates that the new firm will have a total lease-adjusted debt to EBITDA ratio in the mid- 5x area. Empi is a leading provider of non-operative medical devices and accessories for pain management, orthopedic rehabilitation, and physical therapy. The company has leading positions in both transcutaneous electric nerve stimulation used for pain relief and iontophoretic drug delivery (made through the skin). Empi also manufactures spring-loaded orthotic braces, used to restore range of motion to injured ligaments and tendons, and distributes physical therapy equipment through its rehab medical equipment catalog. Empi derives a measure of revenue predictability from its relationships with physicians and physical therapists and also enjoys a reputation for quality and a recurring consumable revenue stream. Encore also manufactures medical devices and related products for the orthopedic industry. Under the terms of the agreement, Encore will purchase Empi for approximately $360 million, paying about $325 million in cash and financing the balance with eight million shares of its own common stock. As part of the transaction, all of Empi's outstanding debt will be refinanced. The new company should have approximately $57 million of annual EBITDA. "If the transaction is completed as proposed, Standard & Poor's will withdraw its ratings and outlook on Empi and its debt," said Standard & Poor's credit analyst Jesse Juliano. Standard & Poor's will resolve the CreditWatch listing after confirming the business and financial positions of the combined companies. ENDEAVOUR GOLD: Now Known as Endeavour Silver to Reflect Biz Focus ------------------------------------------------------------------ Endeavour Gold Corporation (EDR:TSX-V) reports that a name change to Endeavour Silver Corporation was approved at the Annual and Extraordinary Shareholder Meetings held August 5, 2004. The name change will become effective upon approval by the regulatory authorities. The trading symbol, EDR, is expected to remain the same. The change of name to Endeavour Silver Corporation more accurately reflects the Company's strategic focus on silver, and the recent acquisition of the operating Santa Cruz silver mine and Guanacevi mill in Durango, Mexico. Endeavour holds an option to acquire a 100% interest in the Santa Cruz mine and Guanacevi mill by paying US $7 million over a 4-year period. Endeavour can earn an initial 51% interest by January 2005 by paying US $3 million (US $1 million already paid) and spending US $1 million on mine exploration. Endeavour's Board of Directors has also approved a strategic program of purchasing dore silver bars produced by the Guanacevi process plant, effective immediately. Management is of the opinion that accumulating silver inventory at this time should generate additional returns to shareholders for the following reasons: 1) Silver entered into a new secular bull market last year due to declining inventories, increasing financial demand and the depreciation of the US dollar. Although the silver price experienced an abrupt correction this year, the long- term trend is up and Endeavour wishes to take advantage of this buying opportunity; 2) Since Endeavour does not participate in the operations and cashflows of the mine and plant until January 2005, acquiring some of the dore silver bars produced each month gives Endeavour immediate exposure to the silver market. 3) Because the Company is purchasing dore silver bars produced by the mine and plant, there are no handling fees, the cost of warehousing is minor, and the bars can be readily sold locally for refining. 4) Endeavour currently earns only 2 to 3% annual interest on its CA $7.5 million cash holdings, so investing some cash in silver should enhance the Company's return on cash. Endeavour Gold Corp. (EDR: TSX-V) is a small-cap exploration and mining company focused on aggressively expanding its portfolio of high grade silver-gold properties, reserves and production in Mexico. Canarc Resource Corp. holds a minority shareholding in the company and helps manage the affairs of Endeavour. The Company's financial statements for the fiscal year ending February 29, 2004, and the fiscal quarter ending May 31, 2004 indicate they were prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. KPMG LLP observes that Company has incurred significant operating losses and currently has no significant source of revenue. The Company has financed its activities principally by the sale of equity securities. The Company's ability to continue as a going concern is dependent on continued financial support from its shareholders and other related parties, the ability of the Company to raise equity financing, and the attainment of profitable operations to fund its operations. Failure to continue as a going concern, KPMG cautions, would require that the Company's assets and liabilities be restated on a liquidation basis, which would differ significantly from the going concern basis. ENDEAVOUR GOLD: Reappoints Directors and Appoints 3 Key Officers ---------------------------------------------------------------- Endeavour Gold Corporation's shareholders approved all of the resolutions brought forward at the Annual and Extraordinary Shareholder Meetings held August 5, 2004. Specifically, the Board of Directors including Bradford Cooke, Godfrey Walton, Leonard Harris and Mario Szotlender was re-elected; the annual financial statements, amendments to the Company Articles, increase to unlimited share capital, and employee stock option plan were approved; and KPMG was re-appointed as auditor. The directors re-appointed: * Bradford Cooke as President; * Godfrey Walton as Vice President; * Stewart Lockwood as Secretary; and * made three key appointments to the management team. Mr. Philip Yee, M.B.A., C.P.A., C.M.C., was appointed Controller and Finance Manager. Philip has 16 years experience in all aspects of accounting, regulatory and management functions for both private and public companies, including 6 years in the mining industry. Mr. Yee previously held accounting and controller positions with Augusta Group, Can-Chi Group and other companies. Mr. James Moors, B.Sc., P.Geo., was appointed Exploration Manager. James also works for Canarc Resource Corp., having acted as Project Geologist on the New Polaris property in the early 1990's, before leaving to work with Homestake Minerals and the BC-Yukon Chamber of Mines. Mr. Moors has over 16 years experience in the mining industry, specializing in exploration for gold and silver deposits. Mr. Miguel A. Ordaz R., Ing., was appointed Projects Director, and legal representative of Endeavour's subsidiary company in Mexico. Miguel has 30 years experience in mineral exploration and mine management in Mexico, including 4 years as Director of COFEMI, a Mexican government organization, facilitating mining activities in the Guanacevi district, Durango. Mr. Ordaz was instrumental this year in introducing Endeavour to the Santa Cruz mine/Guanacevi plant acquisition. Endeavour Gold Corp. (EDR: TSX-V) is a small-cap exploration and mining company focused on aggressively expanding its portfolio of high grade silver-gold properties, reserves and production in Mexico. Canarc Resource Corp. holds a minority shareholding in the company and helps manage the affairs of Endeavour. The Company's financial statements for the fiscal year ending February 29, 2004, and the fiscal quarter ending May 31, 2004 indicate they were prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. KPMG LLP observes that Company has incurred significant operating losses and currently has no significant source of revenue. The Company has financed its activities principally by the sale of equity securities. The Company's ability to continue as a going concern is dependent on continued financial support from its shareholders and other related parties, the ability of the Company to raise equity financing, and the attainment of profitable operations to fund its operations. Failure to continue as a going concern, KPMG cautions, would require that the Company's assets and liabilities be restated on a liquidation basis, which would differ significantly from the going concern basis. ENRON CORP: Wants Court to Avoid $24.6 Million Transfers -------------------------------------------------------- On or within 90 days before the Petition Date, Enron and its debtor-affiliates made, or caused to be made, transfers to 33 creditors: Creditor Amount -------- ------ Anderson Water Systems Ltd. $477,344 Ansaldo Coemsa Sa 318,810 Anthony Thompson 20,000 Connelly AbbottDunn & Monroe Archi 26,125 Consolidated Electrical 50,525 Constantin Walsh-Lowe, LLC 147,522 Contech Technical Services Co. 106,687 Control Air Conditioning Srvc Corporation 30,126 Control Building Services, Inc. 1,171,599 Gartner & Associates 107,442 Gattman Construction 54,311 GEA Integrated Cooling Tech 29,746 Gensler 259,557 Geological Services Corporation 32,056 G.R.G. Vanderweil Eng., Inc. 44,855 Lynn Mechanical, Inc. 25,720 M & I Electric Industries, Inc. 58,819 Magnolia Steel 29,729 Maritime Health Services 20,800 Matrix Service Mid-Continent, Inc. 75,773 Mattsco 99,318 McCoy, Inc. 129,942 Mchale & Associates, Inc. 113,770 MCSI 1,130,999 Memphis Fence Co., Inc. 25,801 Methuen Construction Co., Inc. 254,195 Metropolitan Transit Authority 256,187 Mid South Fire Protection, Inc. 57,879 Mid-Atlantic Mechanical 100,800 MMC Materials, Inc. 76,510 MMR Group, Inc. 284,353 Morgan Stanley 19,020,670 Participant Properties Limited 37,000 ------------- TOTAL $24,674,970 ============= Neil Berger, Esq., at Togut, Segal & Segal, LLP, in New York, relates that: (a) the Transfers constitute transfers of interest of the Debtors' property; (b) the Debtors made, or caused to be made, the Transfers to, or for the benefit of, the Creditors; (c) the Debtors made, or caused to be made, the Transfers for, or on account of, antecedent debts owed to the Creditors prior to the dates on which the Transfers were made; (d) the Debtors were insolvent when the Transfers were made; and (e) the Transfers enabled the Creditors to receive more than they would have received if: -- Enron's cases were administered under Chapter 7 of the Bankruptcy Code; -- the Transfers had not been made; and -- the Creditors had received payment of the debt to the extent provided by the Bankruptcy Code. Thus, Mr. Berger contends that the Transfers constitute avoidable preferential transfers pursuant to Section 547(b) of the Bankruptcy Code. In accordance with Section 550(a), the Debtors may recover from the Creditors the amount of the Transfers, plus interest. In the alternative, Mr. Berger asserts that the Transfers are avoidable fraudulent transfers under Section 548(a)(1)(B) since: (a) the Transfers constitute transfers of interest in the Debtors' property; (b) the Transfers were to or for the benefit of the Creditors; (c) the Debtors received less than reasonable equivalent value in exchange for some or all of the Transfers; (d) the Debtors were insolvent, or became insolvent, or had unreasonably small capital in relation to their businesses or their transactions at the time or as a result of the Transfers; and (e) the Transfers were made within one year before the Petition Date. Accordingly, the Debtors ask the Court to: (i) avoid and set aside the Transfers pursuant to Section 547(b); (ii) in the alternative, avoid and set aside the Transfers pursuant to Section 548(a)(1)(B); (iii) direct the Creditors to immediately pay them an amount equal to the Transfers pursuant to Section 550(a), together with interest from the date of the Transfers; and (iv) award them attorney's fees, costs and other expenses incurred. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. The Company filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No.: 01- 16033) Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 120; Bankruptcy Creditors' Service, Inc., 215/945-7000) EXIDE TECHNOLOGIES: Releasing First Fiscal Quarter Results Today ------------------------------------------------------------- Exide Technologies (NASDAQ:XIDE), a global leader in stored electrical energy solutions, said it will release financial results for the first fiscal quarter 2005 ended June 30, 2004, before the market opens today, August 12, 2004. Craig H. Muhlhauser, Exide's President and Chief Executive Officer, and other Company executives will host a conference call for members of the investment community to discuss the Company's financial results and general business operations at 2:00 PM Eastern Time on Thursday, August 12, 2004. The conference call will include a brief question-and-answer session with senior management. Domestic Dial-In Number: 800-231-5571 International Dial-In Number: 973-582-2703 For individuals unable to participate in the conference call, a telephone replay will be available from 5:00 PM on August 12, 2004 until midnight on August 20, 2004 at: Domestic Replay Number: 877-519-4471 International Replay Number: 973-341-3080 Passcode: 5024212 An audio webcast of the conference call can also be accessed via http://www.exide.com/and will be available for one week. RealPlayer or Windows Media Player will be required in order to access the webcast. Headquartered in Princeton, New Jersey, Exide Technologies is the world-wide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on April 14, 2002 (Bankr. Del. Case No. 02-11125) and emerged from chapter 11 under a confirmed plan on May 5, 2004. Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Shares in Reorganized Exide have tumbled nearly 30% in the past 60 days. FIRST HORIZON: Credit Enhancement Prompts Fitch Rating Upgrade -------------------------------------------------------------- Fitch Ratings has upgraded five classes and affirmed one class from First Horizon Home Loan Corporation's mortgage pass-through certificates, series 2003-1. First Horizon Mortgage Home Loan Corporation, mortgage pass-through certificates, series 2003-1 -- Class A affirmed at 'AAA'; -- Class B-1 upgraded to 'AAA' from 'AA'; -- Class B-2 upgraded to 'AA' from 'A'; -- Class B-3 upgraded to 'A' from 'BBB'; -- Class B-4 upgraded to 'BBB' from 'BB'; -- Class B-5 upgraded to 'BB' from 'B'. The upgrades reflect an increase in credit enhancement relative to future loss expectations and the affirmations on the above classes reflect credit enhancement consistent with future loss expectations. FLEMING COS: Inks Settlement Pact Resolving Employee Bonus Spat --------------------------------------------------------------- Kevin Darcy, Gary C. Jennings, Junior A. Jones, Milton H. Milam, David E. Smith and Charles M. Terry were employed by the Wholesale Division of Fleming Companies, Inc. After the Petition Date, Fleming advised the Employees, except for Mr. Terry, of their potential eligibility for a stay bonus of 16.67% of their annual salary pursuant to the terms of the Wholesale Employee Stay Program and Stay Bonus Wholesale Participation Agreement. Messrs. Jennings, Milam and Smith signed a Stay Bonus Agreement. However, Fleming maintains that the Employees did not qualify for a Stay Bonus upon severance of their employment relationship with Fleming. Christopher J. Lhulier, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, in Wilmington, Delaware, relates that on January 15, 2004, the Employees each filed a proof of claim asserting an administrative claim for an allegedly owed Stay Bonus in an undetermined amount. Mr. Milam also asserted an administrative claim for severance benefits. On February 26, 2004, the Employees asked the Court to compel Fleming and its debtor-affiliates to pay their Administrative Priority Claims allegedly under the Stay Bonus Agreement. The Employees claimed that they are owed $718,500 in Stay Bonuses. Mr. Milam also asserts a claim for $370,000 for severance. The Parties agreed to resolve all outstanding amounts owing to the Employees on these terms: (a) Fleming will pay the Employees $120,366, which constitutes 16.67% of Mr. Milam's and Mr. Smith's annual salaries and 14% of Mr. Darcy's, Mr. Jenning's, Mr. Jones' and Mr. Terry's annual salaries, in full and final satisfaction of the Stay Bonuses and the Milam Severance; (b) The Employees will withdraw with prejudice the Employee Motion and all claims filed against the Debtors; and (c) The parties will exchange releases from all claims or causes of action arising under, or in connection with the Debtors' cases or any business dealings between the parties. However, Fleming does not release Mr. Darcy from any claim for damages, indemnification or contribution that Fleming may have against Mr. Darcy arising out of or relating to the facts that give rise to the action known as "Associated Grocers Acquisition Company, et al. v. The International Alliance, Inc., et al." in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. Mr. Lhulier argues that the Settlement is reasonable because litigating the dispute would be more costly than paying the agreed amounts. Accordingly, the Debtors ask the Court to approve the Settlement Agreement and authorize them to pay the Settlement Amounts. 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. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) FMAC LOAN: Moody's Downgrades 2 Classes to Low-B and Junks 2 More ----------------------------------------------------------------- Moody's Investors Service downgrades four classes of notes issued by FMAC Loan Receivables Trust 1998-C. The ratings action affects the A-2, A-3, B, and C notes. Moody's did not rate the Class E and F notes, along with the certificates. The action is due to the continued deterioration in credit performance of the pool. The complete ratings actions are as follows: Rating Action Issuer: FMAC Loan Receivable Trust 1998-C * $174,020,000 Class A-2 Notes, downgraded to Ba3 from Baa2; * $12,200,000 Class A-3 Notes, downgraded to Caa1 from Ba2; * $20,570,000 Class B Notes, downgraded to C from Caa1; * $20,570,000 Class C Notes, downgraded to C from Ca. As of the June 2004 distribution date, 27% of the pool by principal balance was delinquent or defaulted. Two of the loans are large borrowers in the gas and convenience sector, which will likely experience low recoveries. The downgrades consider expected recoveries on the problem borrowers in addition to projected future defaults. The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. FOG CUTTER: Bourne End Subsidiary Inks $50.4 Mil. Real Estate Sale ------------------------------------------------------------------ Fog Cutter Capital Group Inc. (Nasdaq:FCCG), reports that Bourne End Properties PLC has sold the Victoria Plaza Shopping Centre, a 335,000 square foot shopping center located in Southend-on-Sea, England. The sales price for the Southend property was approximately GBP 28.0 million ($50.4 million). Fog Cutter will recognize a gain on the sale (net of UK taxes) of approximately $2.7 million during the third quarter. In December, 2000, Fog Cutter Capital Group organized and led a group of investors to purchase all of the outstanding capital stock of Bourne End, a specialist investor in retail property. The Company made its investment through its wholly owned subsidiary, BEP Islands Limited, along with partners Merrill Lynch (Jersey) Holdings Limited (a subsidiary of Merrill Lynch & Co., Inc.) and Greenbau Estuary Limited (an affiliate of Catalyst Capital LLP, formerly known as The Greenwich Group International). At the time of the acquisition, Bourne End had approximately GBP 169.6 million ($245.1 million) of assets and GBP 123.1 million ($177.9 million) of debt. The real estate assets consisted of 1.7 million square feet in fifteen shopping centers. Bourne End has now sold fourteen of its fifteen properties since the acquisition by Fog Cutter and its partners. The sales have each generated profits and have been consistent with the group's strategy to reposition each of the centers, including new capital expenditures on existing space and new development on excess or adjoining land, with the goal of reselling the properties. The last remaining shopping center is approximately 74,000 square feet and is expected to be sold in the next 12 months. The business strategy of Fog Cutter Capital Group consists of developing, strengthening and expanding its restaurant and commercial real estate mortgage brokerage operations and continuing to identify and acquire real estate investments with favorable risk-adjusted returns. The Company also seeks to identify and acquire controlling interests in other operating businesses in which it can add value. The Company's operating segments consist of (i) restaurant operations conducted through Fatburger Holdings, Inc., (ii) commercial real estate mortgage brokerage activities conducted through George Elkins Mortgage Banking Company and (iii) real estate, merchant banking and financing activities. * * * Liquidity and Capital Resources In its Form 10-K/A for the year ended December 31, 2003, filed with the Securities and Exchange Commission, Fog Cutter Capital Group reports: "Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations and acquisitions, engage in loan acquisition and lending activities, meet collateral calls and for other general business purposes. The primary sources of funds for liquidity during the year ended December 31, 2003 consisted of net cash provided by investing activities, including cash repayments related to our mortgage-backed securities portfolio, cash distributions from BEP and the sale of mortgage-backed securities. "If our existing liquidity position were to prove insufficient, and we were unable to fund additional collateral requirements or to repay, renew or replace maturing indebtedness on terms reasonably satisfactory to us, we may be required to sell (potentially on short notice) a portion of our assets, and could incur losses as a result. Furthermore, since from time to time there is extremely limited liquidity in the market for subordinated and residual interests in mortgage-related securities, there can be no assurance that we will be able to dispose of such securities promptly for fair value in such situations. "We consider the sale of assets to be a normal, recurring part of our operations and we are currently generating positive cash flow as a result of these transactions. However, excluding the sale of assets from time to time, we are currently operating with negative cash flow, since many of our assets do not generate current cash flows sufficient to cover current operating expenses. We believe that our existing sources of funds will be adequate for purposes of meeting our liquidity needs; however, there can be no assurance that this will be the case. Material increases in interest expense from variable-rate funding sources, collateral calls, or material decreases in monthly cash receipts, generally would negatively impact our liquidity. On the other hand, material decreases in interest expense from variable-rate funding sources or an increase in market value of our mark-to-market financial assets generally would positively affect our liquidity." FRONTIER LEASING: Moody's Assigns Low-B Ratings to Two Classes -------------------------------------------------------------- Moody's Investors Service assigned ratings on three classes of certificates issued in Frontier Leasing Corporation's fourth equipment lease securitization. The ratings are based on the quality of the underlying leases, the servicing provided by Frontier with servicing oversight by Portfolio Financial Servicing Company and Wells Fargo. The complete rating actions are as follows: Issuer: Frontier Equipment Receivables Trust 2004-1 * $40,557,706 Class A Receivables-Backed Certificates, rated Baa2; * $4,397,824 Class B Receivables-Backed Certificates, rated Ba2; * $1,465,941 Class C Receivables-Backed Certificates, rated B1; Frontier was formed in 1999. A major risk factor in the transaction is performance volatility resulting from Frontier's limited operating history. To mitigate this risk, Portfolio Financial and Wells Fargo provide servicing oversight; Portfolio Financial will take over the day-to-day servicing responsibilities if Frontier is unable to service the portfolio. Wells Fargo is the backup servicer. Furthermore, principals at Frontier are experienced in the leasing industry and performance of their portfolios at previous firms serve as a proxy for Frontier performance. Credit support protecting the Class A certificates consists of approximately 17% subordination and a reserve account with a target of 1% of the original pool balance plus 1% of the current pool balance. The Class B certificates have the benefit of 8% subordination and the reserve account, while the Class C certificates are protected by the 5% overcollateralization, the reserve account, and a 1% dedicated reserve account exclusively for the benefit of Class C investors. The securitized portfolio consists of approximately 1,500 small ticket equipment leases. Equipment concentrations include laundry, car wash and restaurant equipment. The pool is fairly diversified with limited lessee concentrations or state concentrations. Frontier was founded in April of 1999 to originate and service equipment leases to a broad range of small-and medium sized businesses on a national level. The firm focuses primarily on the small-ticket sector of the equipment leasing market. Most leases range from $5,000 to $250,000, with an average transaction size of $40,000. The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. RiviereJenison Securities Ltd. acted as Initial Purchaser. Quadrant Financial Group, LLC was financial advisor to Frontier. FUJITA CORPORATION: Case Summary & 11 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Fujita Corporation USA 6167 Bristol Parkway, Suite 390 Culver City, California 90230 Bankruptcy Case No.: 04-27072 Type of Business: The Debtor owns various real estate investment properties in the United States. Chapter 11 Petition Date: August 5, 2004 Court: Central District of California (Los Angeles) Judge: Erithe A. Smith Debtor's Counsel: Glenn Walter, Esq. Skadden, Arps, Slate, Meagher, LLP 300 South Grand Avenue, Suite 3400 Los Angeles, CA 90071 Tel: 213-687-5000 Total Assets: $4,469,212 Total Debts: $111,484,468 Debtor's 11 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Sumitomo Mitsui Banking Notes $66,669,067 Corporation Americas Division 777 S. Figueroa St., Ste 2600 Los Angeles, CA 90017 UFJ, Ltd. Notes $43,750,525 Los Angeles Branch 601 S. Figueroa St., 5th Fl. Los Angeles, CA 90017 Ernst & Young LLP Trade $54,963 Arden Realty Finance Commercial Lease $7,186 Partnership Williams Records Management Trade $802 Cingular Wireless, LLC Trade $800 SBC Trade $500 Volvo Car Finance North Auto Lease $356 America Cypress Communications Trade $189 Verizon California Trade $80 Mr. Ken Smotrys Employee Disputed Unknown Severance GLOBAL CROSSING: Settles N.Y. City Tax Claims for $2.2 Million -------------------------------------------------------------- The New York City Department of Finance filed five claims for prepetition priority taxes against the GX Debtors: * Claim No. 413 against Global Crossing Telecommunications, Inc., for $220,000, consisting of asserted Commercial Rent Tax for the period June 6, 1998 to January 28, 2002 and asserted General Corporation Tax for the period January 1, 1999 to January 28, 2002; * Claim No. 415 against IXNet, Inc., for $27,280, consisting of asserted CRT for the period June 1, 1998 to January 28, 2002 and asserted GCT for the period January 1, 1995 to January 28, 2002; * Claim No. 424 against Global Crossing, Ltd., for $1,971,416, consisting of asserted CRT for the period June 1, 1998 to January 28, 2002, asserted GCT for the period October 1, 1994 to January 28, 2002, and asserted Unincorporated Business Tax for the period January 1, 1998 to January 28, 2002; * Claim No. 1266 against Global Crossing, Ltd., et al., for $14,942,075, consisting of: -- asserted CRT for the period June 1, 1994 to December 20, 2001 and June 1, 1998 to January 28, 2002; -- asserted GCT for the period January 1, 1999 to January 28, 2002, October 1, 1994 to September 30, 1999 and October 1, 1999 to December 20, 2001; -- asserted UBT for the period January 1, 1998 to January 28, 2002; and -- asserted Utility Tax for the period January 1, 1990 to December 31, 2001; and * Claim No. 1267 against Global Crossing North American Holdings, Inc., for $628,100 consisting of asserted CRT for the period June 1, 1996 to January 28, 2002 and asserted GCT for the period October 1, 1997 to January 28, 2002. Claim No. 1266 includes asserted CRT and asserted GCT with respect to IPC Information Systems, Inc., now known as IPC Information Systems, LLC, and the Finance Department has issued an assessment dated August 1, 2002 with respect to IPC for the asserted GCT. The Finance Department's Priority Tax Claims and the IPC Assessment reflect asserted deficiencies of tax, plus penalties and interest against the GX Debtors and their predecessors and IPC. The Priority Tax Claims were timely filed prior to the Bar Dates and were not objected to by the GX Debtors prior to the Effective Date. However, pursuant to the Plan and the Confirmation Order, objections to claims must be filed and served by Global Crossing and the Reorganized Subsidiary Debtors 120 days after the Effective Date or at a later date as may be fixed by the Court. On July 19, 2001 GX filed certain Real Property Transfer Tax returns with the Department of Finance, which returns claimed that no RPTT was due as a result of the sale of the stock of Global Crossing Global Center to Einstein Acquisition Corp., which sale took place on June 20, 2001, prior to the Petition Date. The Finance Department has reviewed the RPTT Returns and agrees that no RPTT was due on the June 20, 2001 Transfer. On March 10, 2004, Global Crossing paid the special franchise taxes for $56,157, as reflected in a delinquency notice dated February 27, 2004 for Manhattan, Block 70000, Lot 2360, and the Finance Department agrees that no special franchise taxes or other real property taxes are outstanding for all periods up to and including December 31, 2001. Pursuant to their Plan, the GX Debtors were to establish an Administrative Expense and Priority Claims Reserve for certain claims, including the Finance Department's Priority Tax Claims. Global Crossing and the Reorganized Subsidiary Debtors have elected to assume certain claims, including the Priority Tax Claims, which were to be reserved for in the Reserve, in place of establishing the Reserve. Accordingly, to avoid the uncertainty and expense of further litigation relating to the Priority Tax Claims, the IPC Assessment or any other taxes referred to, Global Crossing, the Reorganized Subsidiary Debtors and IPC, and the Finance Department stipulate and agree that: (a) In complete and final resolution and settlement of * the Finance Department's Priority Tax Claims; * the IPC Assessment; and * these Taxes: Type Period Entity ---- ------ ------ CRT 06/01/98-01/28/02 GX Telecommunications GCT 01/01/99-01/28/02 GX Telecommunications CRT 06/01/98-01/28/02 IXNet GCT 01/01/95-01/28/02 IXNet CRT 06/01/98-01/28/02 GX GCT 10/01/94-01/28/02 GX UBT 01/01/98-01/28/02 GX CRT 06/01/94-12/20/01 GX and all Debtors CRT 06/01/98-01/28/02 GX and all Debtors GCT 01/01/99-01/28/02 GX and all Debtors GCT 10/01/94-09/30/99 GX and all Debtors GCT 10/01/99-12/20/01 GX and all Debtors UBT 01/01/98-01/28/02 GX and all Debtors UT 01/01/90-12/31/01 GX and all Debtors CRT 06/01/96-01/28/02 GX North American Holdings GCT 10/01/97-01/28/02 GX North American Holdings CRT 06/01/94-12/20/01 IPC GCT 10/01/94-12/20/01 IPC Global Crossing, the Reorganized Subsidiary Debtors, and IPC agree to pay the Finance Department $2,200,000 in cash. (b) The Settlement Amount will be paid immediately after the Court's approval of the Stipulation by check made payable to the New York City Department of Finance and delivered to: Gabriela P. Cacuci, Esq. N.Y.C. Law Department 100 Church Street, Room 5-223, New York, New York 10007. (c) The Settlement Amount, to the extent paid by Global Crossing and the Reorganized Debtors, will constitute the Finance Department's Allowed Amount on account of the Priority Tax Claims and, to the extent paid by IPC, will be deemed paid in the ordinary course of IPC's business and financial affairs according to IPC's ordinary business terms. (d) Nothing contained in the Stipulation, Agreement and Order will constitute a waiver of the Bar Date by GX or the Reorganized Subsidiary Debtors with respect to any tax claim regardless of the nature of the tax or the period involved or the basis on which the tax is asserted. (e) The Settlement Amount is deemed to constitute a principal of tax with no portion representing interest or penalties and, on the payment, the Priority Tax Claims will be deemed withdrawn and the IPC Assessment will be cancelled. (f) Global Crossing, the Reorganized Subsidiary Debtors and IPC release the Finance Department from, and covenant not to assert against the Finance Department, any claims pertaining to: * the Priority Tax Claims; * the IPC Assessment; and * the Taxes. The release will include, without limitation, any claims that Global Crossing, the Reorganized Subsidiary Debtors or any successors, trustee or liquidator, whether in state court or federal court, in Chapter 11 or Chapter 7, may attempt to challenge in any way the payment made to the Finance Department pursuant to the Agreement. The Finance Department releases Global Crossing, the Reorganized Subsidiary Debtors and IPC from, and covenants not to assert against them, any claims pertaining to the Priority Tax Claims, the IPC Assessment and the Taxes. (g) The Finance Department agrees that Global Crossing and the Reorganized Subsidiary Debtors do not owe any RPTT, special franchise taxes or real property taxes for all periods up to and including December 31, 2001. Judge Gerber approves the Stipulation in all respects. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02- 40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News, Issue No. 63; Bankruptcy Creditors' Service, Inc., 215/945-7000) HANOVER DIRECT: Stockholders' Deficit Tops $46 Mil. at June 26 -------------------------------------------------------------- Hanover Direct, Inc. reported net income for the 13 and 26 weeks ended June 26, 2004 of $0.6 million and $1.0 million, respectively. This represents the third consecutive quarter that the Company has recorded net income. During the second quarter of 2004, the Company identified a revenue recognition cut-off issue that resulted in revenue being recorded in advance of the actual shipment of merchandise to the customer. The practice was stopped immediately and the Company implemented procedures to ensure that this issue does not recur. For the 13- weeks ended June 26, 2004, the Company reported net income applicable to common shareholders of $0.6 million compared with a net loss of $3.6 million for the comparable period in 2003. These amounts were calculated after deducting Series B Participating Preferred Stock dividends and accretion of $4.3 million for the 13- weeks ended June 28, 2003. Net revenues decreased $9.4 million (8.9%) for the 13-week period ended June 26, 2004 to $96.5 million from $105.9 million for the comparable period in 2003. This decrease resulted primarily from lower inventory levels caused by the Company's reduced liquidity that resulted from lower borrowing availability and tighter vendor credit at that time. Also, related declines in initial product fill rates and higher backorders and cancellations as well as reduced circulation in Domestications contributed to the sales decline. As previously announced, on July 8, 2004, the Company closed and funded a $20 million Term Loan Facility with Chelsey Finance, LLC and amended its existing senior credit facility with Congress increasing the Company's liquidity by approximately $25 million in the aggregate. These transactions were consummated to address the liquidity issuing facing the Company. The Company's Internet sales continued to grow, despite the negative impact of low inventory levels, comprising 31.1% of combined Internet and catalog revenues for the 13- weeks ended June 26, 2004 compared with 27.5% for the comparable period in 2003. Internet sales have increased by approximately $0.8 million, or 2.9%, to $28.3 million for the 13-week period ended June 26, 2004 from $27.5 million for the comparable period in 2003. "It was a difficult quarter reflecting the impact that our tight liquidity position had on all of our businesses," stated Wayne Garten, the Company's President and Chief Executive Officer. Mr. Garten added, "On the positive side, the Company still was able to report its third consecutive profitable quarter primarily as a result of The Company Store's continued strong performance. In addition, our new financing arrangements provide the Company with adequate liquidity to support its business." The Company reported net income applicable to common shareholders of $1.0 million for the 26- weeks ended June 26, 2004 compared with a net loss applicable to common shareholders of $7.2 million for the comparable period in 2003. These amounts were calculated after deducting Series B Participating Preferred Stock dividends and accretion of $7.9 million for the 26- weeks ended June 28, 2003. The weighted average number of shares used in the calculation for basic and diluted net income per common share was 220,173,633 and 220,455,326, respectively, for the 26-week period ended June 26, 2004. The weighted average number of shares used in the calculation for both basic and diluted net loss per common share was 138,315,800 for the 26-week period ended June 28, 2003. The increase in weighted average shares was primarily the result of the Recapitalization Agreement with Chelsey Direct, LLC consummated on November 30, 2003. Net revenues decreased $15.5 million (7.5%) for the 26-week period ended June 26, 2004 to $191.9 million from $207.4 million for the comparable period in 2003. This decrease resulted from lower inventory levels caused by the Company's reduced borrowing availability, tighter vendor credit and a decline in initial product fill rates and increases in backorders and cancellations. As planned, there was a continued reduction in circulation for the Domestications brand in order to limit the investment in catalog production costs and working capital necessary to maintain its inventory. The Company's Internet sales continued to grow, despite the negative impact of low inventory levels, comprising 31.6% of combined Internet and catalog revenues for the 26- weeks ended June 26, 2004 compared with 27.1% for the comparable period in 2003. Internet sales have increased by approximately $3.9 million, or 7.3%, to $57.0 million for the 26-week period ended June 26, 2004 from $53.1 million for the comparable fiscal period in 2003. The Hanover Direct, Inc. 2004 Annual Meeting of Stockholders has been scheduled today, August 12, 2004 at 9:30 a.m., local time. The meeting will be held at the Sheraton Meadowlands Hotel and Conference Center, 2 Meadowlands Plaza, East Rutherford, New Jersey. The record date for voting at the annual meeting is July 9, 2004. About Hanover Direct, Inc. Hanover Direct, Inc. (Amex: HNV) and its business units provide quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers, as well as a comprehensive range of Internet, e-commerce, and fulfillment services to businesses. The Company's catalog and Internet portfolio of home fashions, apparel and gift brands include Domestications, The Company Store, Company Kids, Silhouettes, International Male, Scandia Down, and Gump's By Mail. The Company owns Gump's, a retail store based in San Francisco. Each brand can be accessed on the Internet individually by name. Keystone Internet Services, LLC -- http://www.keystoneinternet.com/-- the Company's third party fulfillment operation, also provides the logistical, IT and fulfillment needs of the Company's catalogs and web sites. Information on Hanover Direct, including each of its subsidiaries, can be accessed on the Internet at http://www.hanoverdirect.com/ At June 26, 2004, Hanover Direct's balance sheet showed a $46,503,000 stockholders' deficit, compared to a $47,629,000 deficit at December 27, 2003. HASTINGS MFG: Continues Liquidation of Canadian Operations ---------------------------------------------------------- Hastings Manufacturing Company (Pink Sheets: HGMG) reported the results of its annual shareholder meeting held August 10, 2004 at the Company's headquarters in Hastings, Mich. Mark Johnson, chairman and chief executive officer of the piston ring manufacturer and engine products specialist, discussed the year and recent events at Hastings Manufacturing, specifically the Company's decision to close its Canadian operations in May 2004. Mr. Johnson also reported that consolidated financial statements for the year ended December 31, 2003 have not been finalized due to the continuing Canadian liquidation. "We made the difficult decision to close our Canadian operation after it struggled for the past year since we acquired its predecessor company Ertel in 2003," said Mr. Johnson. "Due to softness in the Canadian aftermarket and significant issues integrating inventory control systems, we decided to liquidate the assets of the Canadian entity and use the proceeds to eliminate our Canadian debt. We are serving Canadian customers through a network of commercial warehouses across the country." In addition to discussing issues related to the liquidation of the Canadian operations, Johnson updated shareholders on several other developments: -- In February 2004, Hastings signed a five-year contract with UAW Local 138. Mr. Johnson said the contract is very fair to both parties and will allow Hastings to make continued progress on productivity, as well as to revisit terms if the Company does not meet its efficiency targets. -- Hastings is putting more resources behind lean manufacturing efforts, which along with changes and cost reductions in its operations and administration, are expected to reduce costs by $2 million at Hastings when fully realized. -- Though the domestic aftermarket is still quite soft, the Company has seen increases in export, OEM, and private label sales and is focusing on developing these areas and providing additional sales support. "Although 2003 was a difficult year, we feel that we have taken the necessary actions to accomplish a turnaround in 2004. This improvement is expected to continue into 2005 as our cost reductions and operating improvements take hold and we are able to better concentrate on growing our domestic operations," said Mr. Johnson. Hastings Manufacturing Co. serves the automotive parts market with a complete line of internal engine products including piston rings and pistons sold under the HASTINGS(R) brand name. Hastings also markets engine additives sold under the CASITE(R) brand through The Casite Company, a joint venture that markets both directly and through independent representatives. KAISER: Court Tells Debtors to Comply with Unistar Agreements ------------------------------------------------------------- In September 2002, the Kaiser Aluminum Corporation Debtors engaged in discussions with Unistar Holdings, Inc., relating to the supply to Unistar, as a distributor, of 105,000 metric tons of alumina in 2003, 2004 and 2005. Unistar would resell the alumina to Guangdong Metal Material Corporation. In January 2003, the Debtors also concluded discussions with Unistar relating to the supply of 1,100,000 metric tons of alumina produced at Alumina Partners of Jamaica -- a partnership in which Alpart Jamaica, Inc., and Kaiser Jamaica Corporation collectively own a 65% interest. The alumina was to be delivered at intervals beginning in 2003 and terminating at the end of 2007. Unistar would resell the alumina to China Minmetals Nonferrous Co., Ltd. According to Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, PA, in Wilmington, Delaware, although there were oral and written communications between the Debtors and Unistar regarding the supply of alumina, no written contract was ever executed. However, Unistar executed written contracts with China Minmetals and Guangdong, for the supply of alumina. The Debtors signed the two written contracts as third-party beneficiary. The Debtors delivered alumina under the China Minmetals and Guangdong Metal Supply Agreements in 2003. To resolve all pending disputes between Kaiser and its debtor- affiliates, Guangdong Metal Material Corporation and Yunnan Aluminium Company, Ltd., Judge Fitzgerald authorizes the Debtors to enter into and comply with the terms of 11 agreements, dated as of April 1, 2004: (a) an Alumina Purchase Agreement between Kaiser Aluminum International, Inc., and Unistar Alumina, Ltd., for alumina to be supplied to Guangdong; (b) a Guaranty executed by Kaiser Aluminum & Chemical Corporation regarding performance under the Guangdong Contract; (c) an Alumina Purchase Agreement between Unistar Alumina and Guangdong for alumina to be supplied to Guangdong by Unistar Alumina; (d) a Guaranty executed by Unistar Holdings, Inc., regarding performance under the Unistar Alumina/Guangdong Contract; (e) an Alumina Purchase Agreement between KAII and Unistar Alumina, for alumina to be supplied to Yunnan; (f) a Guaranty executed by KACC regarding performance under the Yunnan Contract; (g) an Alumina Purchase Agreement between Unistar Alumina and Yunnan regarding the supply of alumina to Yunnan by Unistar Alumina; (h) a Guaranty executed by Unistar Holdings regarding performance under the Unistar Alumina/Yunnan Contract; (i) a separate Alumina Supply Agreement between KAII and Unistar Alumina, regarding the sale of one shipment of alumina to Unistar Alumina; (j) a Guaranty executed by KACC regarding performance under the Unistar Alumina Spot Contract; and (k) the Mutual Release Agreement among KAII, Unistar Holdings, Guangdong, and Yunnan. Furthermore, Judge Fitzgerald grants Unistar Holdings, Unistar Alumina, Yunnan, and Guangdong administrative expense claims against the estates of KAII and KACC with respect to any claims against the Debtors arising under the Settlement Agreements involving the parties. Moreover, the rights of Unistar Holdings, Unistar Alumina, Yunnan, and Guangdong to seek a priority for any administrative claim ahead of any postpetition intercompany claims are expressly preserved. Other than with respect to performance under the Settlement Agreements, all parties claiming through or on behalf of the Debtors' estates will be barred from making any claim with respect to the execution and performance by Unistar Holdings, Guangdong, and Yunnan under the Debtors' motion to cease supplying alumina to Unistar Holdings in respect of its contracts with Guangdong and Yunnan. Judge Fitzgerald rules that any motion or request seeking a stay pending appeal of the Order will be subject to the posting of a bond equal to the purchase of alumina set forth in the alumina purchase agreements and other applicable damages pending the outcome of the appeal. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On September 30, 2001, the Company listed $3,364,300,000 in assets and $3,129,400,000 in debts. (Kaiser Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART: Home Depot Buying Fewer Stores Than Previously Indicated ------------------------------------------------------------ Rather than buying up to 24 stores for up to $365 million, Kmart Holding Corporation (Nasdaq: KMRT) said this week that The Home Depot Inc. (NYSE:HD) will buy no fewer than 13 stores for $173 million in cash, and no more than 19 stores for $288.5 million. The deal continues to be an all cash transaction. Additionally, Kmart has been granted an option to sell certain stores which, if exercised by Kmart, would increase the minimum number of stores sold to 15 and the minimum cash to be received to $214 million. The revision of the transaction was the result of certain closing conditions not being satisfied with respect to certain of the stores. The sale with respect to 4 of the stores has already been completed and cash proceeds of $59 million have been received from The Home Depot. The sale of an additional nine stores will be completed and cash proceeds received into escrow within the next five days, with such funds to be released to Kmart upon the transfer of occupancy thereof. Kmart will commence store-closing sales at those stores sold to The Home Depot promptly upon the consummation of the property sales, and will receive proceeds from the store inventory and fixtures in addition to the sale proceeds from The Home Depot referred to above. Kmart said it will announce Second Quarter 2004 earnings on Monday, August 16, 2004. Headquartered in Troy, Michigan, Kmart Corporation -- http://www.bluelight.com/-- Kmart Corporation is the nation's second-largest discount retailer and the third-largest merchandise retailer. Kmart Corporation currently operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represents the Debtors in their restructuring efforts. LAIDLAW INC: Greyhound Lines Gets 2-Yr. Credit Facility Extension ----------------------------------------------------------------- In July 2004, Greyhound Lines, Inc., amended its revolving credit facility to: * extend the maturity date two years to October 24, 2006; * reset certain financial covenants; * modify rates of interest on borrowings and letter of credit fees; and * provide for a prepayment premium should Greyhound Lines terminate the facility before October 24, 2006. The Amendment also allows Greyhound Lines to elect to extend the maturity date for an additional year, to October 24, 2007, provided that Greyhound Lines meet certain terms and conditions. In a recent regulatory filing with the Securities and Exchange Commission, Douglas A. Carty, Senior Vice-President and Chief Financial Officer of Laidlaw International, Inc., explains that under the Amended Greyhound Facility, borrowings after the quarterly period ending September 30, 2004, are available at a rate, determined by reference to a leverage ratio calculated quarterly, equal to Wells Fargo Bank's prime rate plus 0.375% to 2.25% or LIBOR plus 2.375% to 4.25%. Letter of credit fees are based on the then applicable LIBOR margin. Prior to the quarterly period ending September 30, 2004, borrowings remain available at a rate equal to Wells Fargo Bank's prime rate plus 1.5% or LIBOR plus 3.5%, and letter of credit fees at 3.5% per annum. A 1% prepayment premium is payable should Greyhound Lines terminate the facility before October 25, 2005, 0.5% if terminated between October 25, 2005 and October 23, 2006, and no premium if after October 23, 2006. The Amendment further requires Greyhound Lines to maintain a minimum cash flow to interest expense ratio, maximum indebtedness to cash flow ratio and minimum cash flow at levels that are the same as, or more restrictive than, previous levels. The new covenant levels were set at 15% to 20% less than the levels projected in financial forecasts delivered to the agent by Greyhound Lines. As a result of the extension of the maturity date and recent business improvements that have allowed Greyhound Lines to meet its financial covenants, Greyhound Lines' management believes that there is no longer a going concern risk in the near term. However, Mr. Carty relates that substantial needs for capital expenditures and debt service requirements in the future compel Greyhound Lines to continue to significantly improve operations and financial results. Additionally, unforeseen events or changes in assumptions may occur and result in material differences between Greyhound Lines' future financial results or forecasts and the current financial forecast. Those differences could result in the management concluding in the future that Greyhound Lines may not be able to continue as a going concern based on the new information. (Laidlaw Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 215/945-7000) MADISON RIVER: Moody's Junks $200 Million 13-1/4% Senior Notes -------------------------------------------------------------- Moody's Investors Service has upgraded the senior implied rating for Madison River Capital LLC to B2 from B3, and the rating for Madison River's $200 million 13-1/4% senior unsecured notes to Caa1 from Caa2. The rating outlook is stable. The following summarizes Moody's ratings for Madison River, along with today's rating actions: * Senior Implied rating -- to B2 from B3; * Senior Unsecured Issuer rating -- to Caa1 from Caa2 * $200 million 13-1/4% Senior Notes due 2010 -- to Caa1 from Caa2. The rating upgrades acknowledge Madison River's improving financial performance and operating cash flow generation, which has exceeded Moody's previous expectations. EBITDA margins have improved from around 47% at year-end 2002 to around 53% presently and this, along with capital spending reductions, has significantly improved free cash flow generation. As a result, leverage metrics have improved substantially with net debt-to- EBITDA below 6.0x and now in line with other leveraged RLECs rated B2 and higher. Moody's also believes the company has addressed previous liquidity concerns with the amendment to the Rural Telephone Finance Cooperative term and revolving credit facilities, which have effectively improved liquidity by $170 million over the next 6 years and greatly reduced downward rating pressure. The stable outlook reflects Moody's view that Madison River's improved free cash flow capacity is sustainable and that operational challenges stemming from network quality, regulatory changes or cable competition will be slow to develop. The B2 senior implied rating remains constrained, however, by relatively high leverage, which implies a slim level of asset coverage of total debt obligations, as well as the company's reliance on refinancing since free cash flow is not sufficient to repay present debt obligations as scheduled by maturity. Nonetheless, the rating incorporates Moody's belief that Madison River will continue to generate strong and predictable operating cash flow, benefit from a favorable regulatory environment and substantial barriers to competition, and maintain a close relationship with the Cooperative. The company's senior unsecured notes are rated two notches below the B2 senior implied rating to reflect their structural subordination to the fully secured Cooperative credit facilities and all obligations of the company's operating subsidiaries given the absence of upstream guarantees from the same, and the correspondingly increased likelihood of impairment resulting from their lower priority of claim on the company's assets. Moody's believes further rating improvement would require that the company signficantly reduce its present debt load. Moody's does not believe the company has the ability to significantly reduce its debt load through free cash flow generation in the near to medium term and, therefore, does not expect the ratings to improve over this time frame. Conversely, the ratings are not likely to fall again unless there is a fundamental shift in the competitive or regulatory environment, or if the company changes its financial policy in a way that directly or indirectly (i.e. increased dividends) increases leverage. The company's cost containment efforts have improved operating performance, as noted in the aforementioned margin growth, which came largely on the heels of the reductions of CLEC-related operating expenses and capital investments. Madison River has achieved positive free cash flow (FCF, or cash flow from operations less capex and dividends) after several years of negative cash flow. FCF for 2003 was $31.5 million and $27.6 million for the TTM (trailing twelve months) ended 2Q'04. While still high, total leverage has improved to 5.8x (TTM ending 2Q'04) from 7.3x in 2002 and 10.9x in 2001. Since the rationalization of the CLEC (i.e. Edge-Out Services or EOS) operations, Madison River's operations reflect those of a mature RLEC, with stable and defensible revenues and cash flows. The EOS operations, formerly a significant cash flow drain, now generate positive, though nominal, free cash flow. In 2003, the company's CLEC operations generated $3.2 million in EBITDA compared to EBITDA losses of $3.1 million and $24.2 million in 2002 and 2001, respectively. Although the company has faced limited threats from wireless and technology substitution, cable, and VoIP services to date, Moody's believes these will present increasing challenges to Madison River over time. As a result, we expect continued secondary access line losses (total access lines have been declining at roughly 2% per year) and slow margin erosion, as the company's bundled "No Limits" offering and its position as the rural incumbent carrier moderates some of the competitive challenges. A first priority lien and pledge of all the RLEC assets secure the Cooperative loans. The remaining unencumbered assets include Madison River's fiber and CLEC assets, neither of which Moody's believes has substantial economic value on a standalone basis. The senior notes' Caa1 rating reflects our expectation that senior unsecured note holders would receive less than full recovery in a debt restructuring. Madison River Capital, LLC, is a rural local exchange carrier headquartered in Mebane, North Carolina. MARINER: National Sr. Care Merger Prompts Moody's Ratings Review ---------------------------------------------------------------- Moody's Investors Service placed the ratings of Mariner Health Care, Inc. under review for possible downgrade following the announcement that Mariner Health has agreed to be purchased by National Senior Care for $30 in cash for each of Mariner Health's outstanding common share plus the assumption or satisfaction of Mariner Health's existing debt by National Senior Care. The following ratings were placed under review: * $85 million senior secured revolving credit facility due 2007, rated Ba3; * $135 million senior secured term loan due 2009, rated Ba3; * B1 senior implied rating; * B2 senior unsecured issuer rating; and * $175 million 8.25% senior subordinated notes due 2013, rated B3. According to Moody's, the rating review will focus primarily on whether the debt securities are assumed by National Senior Care, whether they remain outstanding, or whether the debt securities are repaid in full and all commitments canceled. If the facilities are assumed or remain outstanding, Moody's review will focus on the financial and operating strength of National Senior Care, and whether National Senior Care has the ability and willingness to provide explicit support to the creditors of Mariner Health. Moody's would expect to complete its review concurrent with the closing of the proposed transaction during the fourth quarter of 2004. (Mariner Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) MICROTEC ENTERPRISES: Lenders Balk at $15.5 Million Equity Offer ---------------------------------------------------------------- Microtec has pursued for many months various initiatives to reduce its debt and once again have the necessary leeway to maintain sustained growth. Last week, the company received a $15.5 million equity offer which, in the management opinion, was meeting the main initial objectives. This proposal was presented to Microtec's lenders but didn't received their unanimous support. Microtec's management is also looking at an alternative proposal. Microtec's bank credits having matured on August 5th, the overall debt of Microtec is now payable. The company pursues discussions with its lenders for a delay in the repayment of its credits in order to be able to conclude its recapitalization. There can be no assurance as to the final outcome of these negotiations and the company's ability to implement this new capital structure. At March 31, 2004, borrowings under the Company's revolving term loan and swing line facilities was $50,358,000. The Company indicated that its ability to continue as a going concern is dependent on, amongst other things, the successful completion of negotiations towards the completion of the refinancing plan and the continued financial support of existing secured creditors during the contemplated refinancing operation. Solidly established in Canada, Microtec Enterprises Inc. provides a wide range of security and home automation services that ensure the protection and well-being of its residential and commercial customers. The Company is building on its strong position in the industry by developing new products and services, expanding its subscriber base, and creating strategic alliances. MIRANT: Appellate Court Upholds Order Dismissing California Case ---------------------------------------------------------------- The State of California claimed that electricity producers fraudulently sold energy on the spot market from reserve capacity that the producers had contracted to hold in reserve. California claimed that although the producers received payment for their commitment to reserve capacity, they were often unable to respond to ISO dispatch orders when called to remedy market imbalances. The ISO was forced to find alternative energy sources during the shortage periods. According to this theory, the producers' unauthorized sale of ancillary services energy threatened the stability of the grid system and left the California residents vulnerable to blackouts and other disruptions. The Lawsuits Thus, the Attorney General of California filed lawsuits in San Francisco County Superior Court, seeking injunctions, restitutions, disgorgement and civil penalties against multiple companies, including the Dynegy Entities, Reliant Energy Entities and the Mirant Entities, for double-selling reserve generation capacity. The Reliant Energy Entities: -- Reliant Energy, Inc.; -- Reliant Energy Services, Inc.; -- Reliant Energy Power Generation, Inc.; -- Reliant Resources, Inc.; -- Reliant Energy Coolwater, Inc.; -- Reliant Energy Ellwood, Inc.; -- Reliant Energy Etiwanda, Inc.; -- Reliant Energy Mandalay, Inc.; and -- Reliant Energy Ormond Beach, Inc. The Dynegy Entities are: -- Dynegy, Inc.; -- Dynegy Power Marketing, Inc.; -- West Coast Power, LLC; -- Cabrillo Power I, LLC; -- Cabrillo Power II, LLC; -- El Segundo Power, LLC; and -- Long Beach Generation, LLC The Mirant Entities are: -- Mirant Corporation; -- Mirant California, LLC; -- Mirant Delta, LLC; -- Mirant Potrero, LLC; -- Mirant Americas Energy Marketing, LP; -- Mirant California Investments, Inc.; -- Mirant Americas, Inc.; and -- Southern Energy Gold States Holdings, Inc. The Companies removed the cases to the United States District Court for the Northern District of California. California then moved to remand, reasoning that the District Court lacked subject matter jurisdiction and that California enjoyed sovereign immunity under the Eleventh Amendment. With the Companies' objection, the District Court denied the remand motions on August 6, 2002. California appealed and moved to stay the District Court proceedings. In turn, the Companies asked the District Court to certify the interlocutory appeals as frivolous. The District Court granted the Companies' request and denied the Stay Motion. California then filed a second Stay Motion in the Court of Appeals to prevent the District Court from ruling on the pending motions to dismiss. A motions panel denied the Stay Motions. Consequently, the Companies sought the dismissal of the interlocutory appeals for lack of appellate jurisdiction, or alternatively, to strike part of the opening brief. A motions panel denied the motion to dismiss without prejudice and referred the motion to strike to the merits panel. Several collateral claims were also settled and dismissed voluntarily. The motions panel set an expedited schedule for briefing and hearing of the interlocutory appeals. On March 25, 2003, the District Court granted the Companies' motion to dismiss and directed entry of a final judgment on the merits. California timely appealed and also moved to stay the interlocutory appeals, to consolidate them with the appeal from the District Court's final judgment on the merits, and to expedite briefing and hearing of the appeals. On April 9, 2003, a motions panel granted the motion in its entirety, and the consolidated appeals were duly set for expedited argument before Circuit Judges Cynthia Holcomb Hall, Diarmuid F. O'Scannlain and Edward Leavy. Judge O'Scannlain relates that they must evaluate two orders: 1. the District Court's denial of remand to state court; and 2. the District Court's dismissal of California's unfair competition claims on the merits. The Remand Appeal California contends that the District Court lacked jurisdiction under Section 1331 of the Judiciary Code and Section 825p of the Conservation Code. California also argues that the Eleventh Amendment bars removal. Judge O'Scannlain notes that in denying California's Remand Motion, the District Court reasoned that the Complaint presented no independent state law claim. It was, in effect, an attempt to enforce federal tariffs. The claims were necessarily federal in character, and the conduct the state sought to condemn was expressly governed by the ISO tariffs. The Judges determine that the tariff defines the companies' contractual obligation with respect to the conduct at issue. Absent a violation of the FERC-filed tariff, no state law liability could survive. Though the State is a plaintiff rather than a defendant, California contends that principles of sovereign immunity are violated when a plaintiff state, voluntarily prosecuting a claim, is forced without its consent into a federal forum by operation of the federal removal statute. "The relationship between the Eleventh Amendment and state sovereign immunity is not as simple as it may sound," Judge O'Scannlain opines. Judge O'Scannlain relates that the Supreme Court has emphasized that "the sovereign immunity reflected in (rather than created by) the Eleventh Amendment transcends the narrow text of the Amendment itself." Thus, the Judges have long understood that "the States' immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today . . . except as altered by the plan of the Convention or certain constitutional Amendments." The Eleventh Amendment provides: "The Judicial power of the United States shall not be construed to extent to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." Indisputably, the Amendment limits the reach of federal judicial power to suits "commenced or prosecuted against one of the United States." Nevertheless, California urges that sovereign immunity extends even more broadly to litigation commenced by states -- as plaintiffs, not defendants -- when the suits are removed to federal court without the plaintiff state's consent. Judge O'Scannlain notes that history gives little indication that sovereign immunity was ever intended to protect plaintiff states. Rather, it plainly understands sovereign immunity as protection from being sued. Nonetheless, California contends that removal forces a state to appear against its will in the court of another sovereign, and that sovereign immunity broadly protects "the states' litigation choices." While California's hope was to avoid the federal forum, it voluntarily appeared in state court to press its claims against the Companies, who predictably sought removal to what they perceived to be a more favorable forum for the adjudication of claims involving federal law. According to Judge O'Scannlain, waiver by litigation conduct "rests upon the Amendment's presumed recognition of the judicial need to avoid inconsistency, anomaly, and unfairness, and not upon a State's actual preference or desire, which might, after all, favor selective use of 'immunity' to achieve litigation advantages." Thus, the Judges conclude that a state that voluntarily brings suits as a plaintiff in state court cannot invoke the Eleventh Amendment when the defendant seeks removal to a federal court of competent jurisdiction. "California's conception of sovereign immunity as a sword rather than a shield in unavailing," Judge O'Scannlain remarks. The Claims Dismissal Appeal California does not contest FERC's exclusive jurisdiction over interstate wholesale power rates; rather, it urges that that authority does not extend over every aspect of the wholesale market. The FERC does not, according to California, have the requisite tools and institutional expertise of the State in policing fraudulent business practices. To the extent that California's enforcement of its unfair business practices law may affect rates, this effect, California asserts, is merely an indirect consequence of state regulation whose purpose is to deter fraudulent and unfair conduct, not to regulate interstate wholesale power rates. In support of its view that the FPA does not preempt state regulation, California points to Section 824a(f) of the Conservation Code, which reserves for states regulatory authority to the extent that it "does not conflict with the exercise of the Commission's powers under or relating to subsection (e) of this section." The Judges cannot agree with California's theory that the State has regulatory authority over the specific tariff-governed conduct alleged in this case. Cases specifying the nature and scope of exclusive FERC jurisdiction make clear that the interstate "transmission" or "sale" of wholesale energy pursuant to a federal tariff -- not merely the "rates" -- falls within FERC's exclusive jurisdiction. States do, of course, have jurisdiction over certain sales, but we have enunciated a bright- line distinction between wholesale sales, which fall within FERC's plenary jurisdiction, and retail sales, over which the states exercise jurisdiction California's unfair competition claims are based on the Companies' agreement to provide ancillary services, the terms of which are embodied in, and governed by, the ISO tariff, including its remedial provisions. Accordingly, the Court of Appeals conclude that the California claims are preempted because they encroach on the substantive provisions of the tariff, an area reserved exclusively to FERC, both to enforce and to seek remedy. The Filed Rate Doctrine "At its most basic, the filed rate doctrine provides that state law, and some federal law . . . may not be used to invalidate a filed rate nor to assume a rate would be charged other than the rate adopted by the federal agency in question." TANC, 295 F.3D 929. However, the filed rate doctrine is "not limited to rates per se." Nantahala Power, 476 U.S. at 966. "[T]he filed rate doctrine's purpose is to ensure that the filed rates are the exclusive source of the terms and conditions by which the [regulated entity] provides . . . the services covered by the tariff." To the extent that California is seeking to enforce the penalty provisions of the tariff, or to have them expanded, this conflicts with the filed rate doctrine and the exclusive authority conferred to FERC to enforce its tariff. Accordingly, the Court of Appeals affirms the District Court's denial of the Remand Motions and its dismissal of the substantive claims on summary judgment. 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) MIRANT CORP: Wants Court to Approve Sullivan Settlement Agreement ----------------------------------------------------------------- Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, Mirant Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court to approve a Settlement Agreement, dated July 28, 2004, among: * Mirant New York, Inc., on behalf of itself and Mirant NY-Gen, LLC; * the Town of Bethel, the Town of Forestburgh, the Town of Lumberland; * the Monticello Central School District and the Eldred Central School District; * the Assessor for each of the Towns; * the Board of Assessment Review of each of the Towns; and * Sullivan County. Ian T. Peck, Esq., at Haynes and Boone, LLP, in Dallas, Texas, relates that in July 1999, the Debtors purchased the Bethel Power Plant, the Forestburgh Power Plant and the Lumberland Power Plant, along with other power plants in New York State, from O&R and Consolidated Edison Company of New York, Inc. Of the $475,000,000 paid for the assets, the Debtors allocated $15,321,594 to the Sullivan Power Plants. The Sullivan Power Plants are capable of generating a combined 26 megawatts of electricity at peak operations. Because the Sullivan Power Plants are located in the Towns, they are subject to yearly ad valorem taxes by the Sullivan Tax Authorities. After the Debtors' purchase, the Sullivan Power Plants have been taxed on these equalized assessments of value: Year Bethel Forestburgh Lumberland ---- ------ ----------- ---------- 2000 $8,137,572 $18,357,364 $39,173,060 2001 8,487,425 18,823,930 39,378,901 2002 8,659,612 22,409,729 55,537,408 2003 8,400,745 23,385,212 40,395,709 Mr. Peck informs Judge Lynn that there were no capital improvements on any of the Sullivan Power Plants between 2000 and 2003. For each year from 2000 to 2003, the Sullivan Tax Authorities levied real property taxes against the Sullivan Power Plants in excess of $2,000,000. In 2003, those taxes accounted for 58% of the Sullivan Power Plants' combined operating expenses. For what the Debtors saw to be an enormous disparity between the $15,321,594 aggregate book value of the Sullivan Power Plants in 1999 and the aggregate assessed value in subsequent years, Mirant NY timely commenced tax certiorari proceedings in New York state court to challenge the valuation by the Sullivan Tax Authorities. In the Sullivan State Proceedings, Mirant NY claimed a reduction in the assessed values of the Sullivan Power Plants, which would result in refunds of about $5,512,526. According to Mr. Peck, the Sullivan State Proceedings did not materially progress in state court. Indeed, from 2000-2002, the Sullivan State Proceedings were not assigned to a judge, no discovery had taken place and no motions were filed. Also, the Sullivan State Proceedings were essentially suspended while Mirant and the Town of Haverstraw, New York negotiated and executed a settlement agreement presumably resolving a similar real property tax dispute. Mirant believed that the Haverstraw Settlement would serve as a model settlement for the Sullivan State Proceedings. However, Haverstraw reneged within a week of signing the Haverstraw Settlement. Mirant sought to enforce the Haverstraw Settlement, but in April 2003, the New York Appellate Division reversed the trial court decision and refused to enforce the Haverstraw Settlement. To ensure the efficient administration of the Debtors' bankruptcy estates and to provide accelerated visibility to the ongoing financial viability of their generation assets in New York, the Debtors asked the Bankruptcy Court to determine their correct New York real property tax liabilities related to the New York Power Plants, including the Sullivan Power Plants. The Sullivan Tax Authorities opposed the Court's exercise of jurisdiction over the 505 Motion. On January 8, 2004, the Court established its jurisdiction over the 505 Motion, and ruled that it would exercise that jurisdiction. The January 8 Order was crafted to allow the Sullivan State Proceedings to proceed to trial in New York provided, among other things, that they could be timely adjudicated. In any event, the Court ensured a timely adjudication of the Debtors' tax disputes with the Towns under the 505 Motion by scheduling a trial beginning on September 20, 2004. To preserve its rights under the Bankruptcy Code, including its setoff rights under Section 558 of the Bankruptcy Code, Mirant NY did not pay its 2003 tax bills of $2,223,404 issued by the Sullivan Tax Authorities: (a) County/Town tax bills issued for the tax period January 1, 2003 to December 31, 2003, totaling $921,119; and (b) School District tax bills issued for the tax period July 1, 2003 to June 30, 2004, totaling $1,232,285. On April 1, 2004, the County paid the $2,223,404 of Unpaid 2003- 2004 Sullivan Taxes to the Towns and the School Districts. Absent the Settlement Agreement, Mirant NY could eventually owe the County $2,223,404 for the assessment year 2003 plus applicable penalties and interest at a 12% annual statutory rate. Under the January 8 Order, the dispute between the Debtors and the Sullivan Tax Authorities are to be tried either by the Bankruptcy Court or the New York Court no later than September 2004. Given the Court's directive, the Debtors immediately began to prepare for trial in state court. The Debtors sought to depose Forestburgh's and Lumberland's assessors concerning the value of the Forestburgh Power Plant and the Lumberland Power Plant by notices of deposition dated May 14, 2004. Despite Forestburgh and Lumberland's protest, on June 23, 2004, the Court authorized the Debtors to depose the Forestburgh and Lumberland assessors for a limited time and scope. The Sullivan Tax Authorities proposed adjourning the depositions to discuss settlement of the Sullivan State Proceedings, which the Debtors agreed. The settlement discussions resulted in the parties' entry of a settlement agreement, which: (a) resolves the pending 2000, 2001, 2002 and 2003 real property tax disputes; (b) establishes a value for real property tax purposes for the Sullivan Power Plants through 2006, the maximum look- forward permitted by law; (c) reduces the equalized assessed value for the Bethel Power Plant by more than 66%, from $8,400,744 to $2,800,248; (d) reduces the equalized assessed value for the Forestburgh Power Plant by more than 66%, from $23,385,211 to $7,795,058; (e) reduces the equalized assessed value for the Lumberland Power Plant by more than 60%, from $40,395,709 to $16,058,700; and (f) reduces the tax assessments of the Sullivan Power Plants based on the "Original Assessments" as they appear on the New York tax assessment rolls by about 66% for 2002 to 2004 Assessment and 33% for 2001 Assessment. The Settlement Agreement does not change the Original Assessments for 2000. The Sullivan Tax Authorities owe Mirant NY $2,186,604 in refunds for the years 2000, 2001 and 2002. The Settlement Agreement further provides that: (1) The Sullivan Tax Authorities will waive all penalties and interests resulting from Mirant NY's non-payment of 2003 taxes, provided Mirant NY makes payment, by way of offset, no later than January 31, 2005; (2) The Sullivan Tax Authority Entities will release the Mirant Entities from the filed proofs of claim and any tax, penalty, interest or charge levied prior to 2004 on the Sullivan Power Plants, including the Unpaid 2003-2004 Sullivan Taxes; (3) The Mirant Entities will release the Sullivan Tax Authority Entities from all claims in the Sullivan State Proceedings and the 505 Action; and (4) The parties will use their best efforts to obtain timely entry of a New York State Court order dismissing the Sullivan State Proceedings with prejudice by executing a stipulation of discontinuance. Mr. Peck contends that the Settlement Agreement is favorable to the Debtors because: (i) it provides the Debtors with refunds for past years and an 83% tax reduction for current and future years; (ii) it provides a means by which to avoid the litigation costs associated with the tax disputes concerning the Sullivan Power Plants, which are not inconsiderable; (iii) Mirant NY will be able to close its books on all pre-2004 real property taxes relating to the Sullivan Power Plants without penalties and interests on the Unpaid 2003-2004 Sullivan Taxes; (iv) the Debtors avoid the risk of an adverse ruling on the valuation method applied; (v) the Debtors will have additional annual cash flow of about $4,555,806 for 2004 through 2006 based on the reduction of real property taxes; and (vi) it avoids additional cost in litigating the dispute. 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. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) MUZAK HOLDINGS: Liquidity Concerns Prompt S&P B- Rating Downgrade ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on Muzak Holdings LLC and Muzak LLC, which are analyzed on a consolidated basis, to 'B-' from 'B'. At the same time, Standard & Poor's lowered all of Muzak's issue ratings one notch, and placed all of the company's ratings on CreditWatch with negative implications. The Fort Mill, South Carolina-based provider of business music services had about $424 million in consolidated debt and $150 million in debt-like preferred stock at June 30, 2004. "The downgrade and CreditWatch listing are the result of Muzak's continued earnings underperformance and significant concerns about its liquidity," according to Standard & Poor's credit analyst Steve Wilkinson. He added, "Muzak's EBITDA growth has been weak, despite higher sales, because of various expense increases and a shift in equipment sales to lower-margin products. This is precluding the EBITDA growth needed to maintain compliance with its bank financial covenants in future quarters, and is hampering its ability to improve its negative discretionary cash flow." Second quarter EBITDA, adjusted for restructuring expenses, was up just 1.9% on a 4.5% increase in sales. Key credit measures are strained with lease-adjusted debt plus the liquidation value of preferred stock of about 8x and lease-adjusted EBITDA coverage of interest plus pay-in-kind dividends of only about 1.1x. Coverage excluding the non-cash dividends is better at about 1.7x, but discretionary cash flow remains negative due to large capital outlays for new customer accounts. Muzak announced a major restructuring program to centralize operations to reduce costs and improve control and efficiency, but these efforts are not expected to materially improve near-term profitability or cash flow. The company expects to be in violation of its bank financial covenants at the end of the third quarter due, in part, to expected cash restructuring costs. As a result, Muzak will need to further amend the bank financial covenants that were loosened in May to avoid a covenant default and preserve revolving credit borrowing access, which is critical given its cash flow deficit and lack of other sources of liquidity. Resolution of the CreditWatch listing will depend on Muzak's success in alleviating bank covenant pressure and ensuring sufficient liquidity for its near-term needs. Failure to adequately address these issues could lead to further downgrades. NATIONAL CENTURY: Court Approves $4.5 Million Lincoln Clinic Sale ----------------------------------------------------------------- Judge Calhoun authorizes the Unencumbered Assets Trust, as successor-in-interest to Debtor Memorial Drive Office Complex, LLC, and Mark Aprahamian or his designee to consummate the sale of the Lincoln Hospital Medical Clinic for $4,525,000 and otherwise on the terms of Mr. Aprahamian's bid at the Auction and the Bidding Procedures Order. As previously reported in the Troubled Company Reporter's July 21, 2004 edition, Michael S. Kogan, Esq., at Ervin, Cohen & Jessup, in Beverly Hills, California, reminded the U.S. Bankruptcy Court for the District of Ohio that at the auction for the sale of the Lincoln Hospital Property, Mark Aprahamian offered the second- highest bid at $4,525,00. Mr. Aprahamian was a Qualified Bidder under the Bid Procedures Order and timely submitted the requisite $25,000 deposit and other information to participate in the Auction. Apparently, Liberty National will not close the sale of the Lincoln Hospital Property because of potential environmental issues. Therefore, Mr. Aprahamian asks the Court to: (a) approve the sale of the property to him; (b) direct MDOC to prepare and execute a purchase agreement with him; (c) determine that he is a good faith purchaser. Trust Amends Purchase Agreement David A. Beck, Esq., at Jones Day Reavis & Pogue, in Chicago, Illinois, reports that since the National Century Financial Enterprises, Inc. Debtors' emergence from bankruptcy, the Unencumbered Assets Trust and Liberty National Enterprise, L.P., have engaged in discussions regarding the sale of the Lincoln Hospital Property. Liberty National has raised concerns and potential claims regarding the environmental condition of the Lincoln Hospital Property, and other issues regarding the parties' rights and obligations under the Purchase Agreement. To resolve their disputes, the Trust, Liberty National and Platnum Properties L.P., as Liberty National's assignee under the Purchase Agreement, have agreed in principle to amend the Purchase Agreement on these terms: A. Modification of Purchase Price The purchase price for the Lincoln Hospital Property would be reduced to $4,530,000. B. Environmental Issues Platnum would agree that it has received a copy of the Limited Subsurface Soil Sampling and Testing Report for the Property Located at 115-129 East Washington Boulevard, Los Angeles, California, dated June 18, 2004, by Environmental Managers & Auditors, Inc. -- the Phase II Report. Platnum would further agree that its purchase of the Lincoln Hospital Property is based solely on its review of the Phase II Report and its own expertise and not on any representations made by MDOC, the Trust or their officers, directors, employees, agents or attorneys. Platnum and Liberty National also would release MDOC, the Trust and their officers, directors, employees, agents, attorneys and other professionals from any and all claims relating to the condition of the Lincoln Hospital Property, including any environmental claims. C. Resolution of Disputes Relating to Lincoln Hospital Liberty National would agree to take all steps necessary to dismiss its appeal of the Court Order vacating the April 16, 2004 Sale Order. On the dismissal of the Appeal, the Trust will return to Liberty National the $25,000 deposit made in connection with the auction of the Lincoln Hospital Property. Upon the return of the Deposit, MDOC, the Trust, Liberty National and Platnum would be deemed to have released each other and their officers, directors, employees, agents, attorneys and other professionals from any and all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities relating to the asset purchase agreement for the Lincoln Hospital, the marketing and auction of the Lincoln Hospital or the Vacating Order. The Trust believes that the transaction is wholly consistent with the Bidding Procedures Order and the Plan Confirmation Order. Moreover, the Plan provides that the Debtors and the Trust are authorized to settle and compromise claim disputes without Court approval. Headquartered in Dublin, Ohio, National Century Financial Enterprises, Inc. -- http://www.ncfe.com/-- is the market leader in healthcare finance focused on providing medical accounts receivable financing to middle market healthcare providers. The Company filed for Chapter 11 protection on November 18, 2002 (Bankr. D. Ohio Case No. 02-65235). Paul E. Harner, Esq., Jones, Day, Reavis & Pogue represents the Debtors in their restructuring efforts. (National Century Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000) NDCHEALTH: Low Income Expectation Incites S&P's Negative Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Atlanta, Georgia-based NDCHealth Corporation to negative from stable. The 'BB-' corporate credit and senior secured bank loan ratings, and the 'B' subordinated debt rating, were affirmed. "The outlook revision reflects the expectation NDCHealth likely will experience relatively lower operating profitability levels over the near term," said Standard & Poor's credit analyst Emile Courtney. While sales declined by a modest 3%, to $111 million in the May 2004 quarter, EBITDA margins fell to approximately 20% in the May 2004 quarter, from about 30% in most quarters over the past two years. NDCHealth faces a number of challenges across several business units, which together are expected to lower profitability. These include: -- Challenging market conditions in the company's Information Management business; -- Uncertain sales growth rates for new pharmacy systems; -- Consolidation among pharmacy customers; -- Lower revenues related to the conversion to cash-only sales to value-added resellers in the company's physician systems unit; and -- Higher expense levels related to new product releases and enhanced functionality of new systems. While total debt to EBITDA was about 3x at May 2004, total debt to EBITDA could rise to the 4x range over the intermediate term. The ratings continue to reflect a narrow product offering and a leveraged financial profile, offset somewhat by the company's good pharmacy market position and recurring revenue streams. Total lease-adjusted debt was about $355 million as of May 2004. NDCHealth's below-average business profile reflects its highly fragmented and competitive health care information technology (IT) marketplace. In addition, although the overall health care market is large, NDCHealth's product focus is narrow, and the company has increased its acquisition activity, spending $240 million in the past two years, adding to its product portfolio. Despite its narrow focus, NDCHealth's business profile is supported by its leading position in the pharmacy market, where it is connected to more than 90% of U.S. pharmacies and processes about 60% of claims. NDCHealth provides its transaction processing products to the health care industry via its proprietary network, its point-of- service systems, and its information management services. Products include electronic claims processing, adjudication, and payment systems, as well as database information on prescription drug sales and pharmacy operations. NDCHEALTH: Moody's Affirms Ba3 Senior Implied & B2 Sub. Ratings --------------------------------------------------------------- Moody's Investors Service has affirmed NDCHealth Corporation's Ba3 senior implied rating and B2 senior subordinated rating on news of its weak financial performance for its fiscal fourth quarter ended May 28, 2004. The rating outlook remains negative. The negative outlook reflects the company's lengthened rollout schedule of T-Rex One Enterprise software, reduced demand for its legacy software offerings, a weak spending environment in the pharmaceutical industry, and the near-term negative impact associated with the company's change to selling Physician software to value added resellers (VARs) on a cash basis instead of with credit terms. Collectively, these factors have contributed to an 18% year over year operating profit decline to operating income of $75 million for its fiscal year ended May 28, 2004. To the extent that the company returns to profitable revenue growth beginning in its second fiscal quarter ending November 2004 and achieves meaningful debt reduction, the ratings may stabilize. If fundamental financial performance continues to weaken or flexibility under the financial covenants of its bank credit facilities continues to erode, the ratings would likely come under downward rating pressure in the near term. The company was in compliance with the financial covenants of existing bank facilities as of fiscal fourth quarter ended May 28, 2004. NDCHealth's Ba3 senior implied and B2 convertible subordinated debt ratings reflect moderate financial leverage, as measured by debt to revenues, debt to EBITDA, and free cash flow to debt, as well as the growing demand for pharmacy management software. NDCHealth, headquartered in Atlanta, Georgia, is a network-based health information company. NEW WEATHERVANE: Retains Hilco as Real Estate Consultant -------------------------------------------------------- New Weathervane Retail Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to retain Hilco Real Estate, LLC, as their real estate consultant. The Debtors tell the Court that they need the services of a real estate consultant to assist them in marketing their leases and fee-owned property. Hilco Real Estate is well-recognized and extremely well-qualified to perform the services needed. The Debtors submit that Hilco's retention as a real estate consultant is in the bests interests of the estates and their creditors. Hilco Real Estate agrees to provide consulting and advisory services in connection with successfully negotiating advantageous assumption and assignment agreements and claims reduction agreements with respect to the Leases. These services will include: a) meeting with Company to ascertain Company's goals, objectives and financial parameters; b) developing and designing a marketing program for the sale and assignment of the Leases; c) at Company's direction and on Company's behalf, negotiating the terms of such agreements with the landlords under the Leases; d) where appropriate and in conjunction with the Company, coordinating and organizing the bidding procedures and sale process in order to maximize the attendance of all interested bidders for the sale and assignment of the Leases; e) at Company's direction and on Company's behalf, negotiating the terms of the agreements for the assignment of the Leases and claim reduction agreements; and f) reporting periodically to Company regarding the status of negotiations. Hilco Real Estate will receive: (i) 2% of all Gross Proceeds less than $200,000, plus (ii) 3% of all Gross Proceeds equal to or greater than $200,000, but less than $400,000, plus (iii) 6% of all Gross Lease Proceeds equal to or greater than $400,000, but less than $600,000, plus (iv) 4% of all Gross Proceeds equal to or greater than $600,000. Headquartered in New Britain, Connecticut, New Weathervane Retail Corporation -- http://www.wvane.com/-- is a Women's specialty retailer. The Company filed for chapter 11 protection on June 3, 2004 (Bankr. Del. Case No. 04-11649). William R. Firth, III, Esq., at Pepper Hamilton LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $28,710,000 in total assets and $24,576,000 in total debts. NEWFIELD: S&P Gives BB- Rating to Proposed $300 Million Notes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Newfield Exploration Co. (BB+/Stable/--) and assigned its 'BB-' subordinated rating to Newfield's proposed $300 million subordinated notes due 2014. The rating actions follow a review of the recently announced acquisition of Inland Resources, Inc., The outlook remains stable. Houston, Texas-based Newfield has roughly $1.1 billion of debt, pro forma its recent acquisition. "Standard & Poor's views the acquisition of Inland Resources as neutral to Newfield's credit quality," said Standard & Poor's credit analyst Paul B. Harvey. "The transaction will strengthen Newfield's business position by providing operational diversification and extending Newfield's reserve life to about seven years from a very short five years," he continued. Inland Resources has substantial proved undeveloped reserves that if commercialized, would provide Newfield with an avenue for future reserve and production growth. Risks associated with fluctuating oil prices also have been tempered through price hedges. Newfield has added to existing Inland Resources hedges bringing total hedged production to roughly 70%, ensuring solid margins in the near to medium term. A significant portion of Newfield's cash flow remains tied to the Gulf of Mexico, which (pro forma for the recent Denbury Resources, Inc., (BB-/Positive/--) and Inland acquisitions) contains about 33% of the company's reserves and 40% of its production. This concentration in a fiercely competitive, mature region contributes to a worse-than-normal, companywide cost structure with estimated all-in costs (including financing charges) of around $3.30 per thousand cubic feet equivalent (mcfe) of production (versus Standard & Poor's expected long-term gas price of about $3.75 per mcfe). The stable outlook expects continuing moderate financial policies while Newfield maintains its aggressive growth strategy. Debt leverage is expected to improve in the near term, with any future acquisitions funded in a balanced manner that does not hinder expected debt repayment. NORTEL NETWORKS: Filed Shareholder Complaint in N.Y. on July 30 --------------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT) and its principal operating subsidiary, Nortel Networks Limited, provided a status update pursuant to the alternative information guidelines of the Ontario Securities Commission. These guidelines contemplate that the Company and NNL will normally provide bi-weekly updates on their affairs until such time as they are current with their filing obligations under Canadian securities laws. The Company and NNL reported that there have been no material developments in the matters reported in their status updates of June 2, 2004, June 29, 2004, July 13, 2004, and July 27, 2004, with the exception of the matters described in this press release. The Company and NNL continue to dedicate significant resources to the process to complete their financial statements as soon as practicable. As previously announced, the Company and NNL continue to work on the restatement of their financial results for each fiscal quarter in 2003 and for earlier periods including 2002 and 2001, and the preparation of their financial statements for the full year 2003 and the first and second quarters of 2004. The Company expects to be in a position to announce estimated limited preliminary unaudited results for the first and second quarters of 2004, and to provide an update on the restatement impacts, on August 19, 2004. These estimated results will be subject to change and to the limitations outlined. The final unaudited results for the first and second quarters of 2004 will be available upon the filing of the quarterly reports for such periods which the Company expects to file by the end of the third quarter of 2004. The Company will hold a conference call at 8:30 a.m. ET on August 19, 2004 to discuss the announcements. The Company expects to file, by the end of the third quarter of 2004, financial statements for the year 2003 and the first and second quarters of 2004 and related periodic reports, and follow thereafter, as soon as practicable, with any required amendments to periodic reports for prior periods. The Company's expectations as to the timing of events, including the availability of estimated limited preliminary unaudited results for the first and second quarters of 2004 and the filing of financial statements, are subject to change and are subject to a number of limitations. Specifically, these limitations include the completion of the Company's work (including the final determination of the impacts of adjustments arising from events subsequent to year end 2003 on the Company's results of operations or financial position), the related audits and reviews of results by the Company's and NNL's independent auditors, and the completion and results of the previously announced independent review being undertaken by the Nortel Networks Audit Committee. Status of Civil Proceedings On July 12, 2004, the Company received a letter purporting to be on behalf of certain shareholders of Nortel Networks. The letter claimed that certain directors and officers, and certain former directors and officers, of Nortel Networks breached fiduciary duties owed to the Company during the period from 2000 to 2003 including by: (i) causing the Company to engage in unlawful conduct or failing to prevent such conduct; (ii) causing the Company to issue false statements; and (iii) violating the law. The letter required that the Company seek to recover its damages arising from the alleged breaches. The letter demanded that the Company commence a proposed action against the listed individuals within 14 days or the shareholders would do so. By return letter dated July 20, 2004, Nortel Networks confirmed that its Board of Directors would carefully consider the matters that had been raised. However, given the nature and extent of the allegations, the Company stated that it was not realistic for a response to be provided within the 14-day deadline. The Company's Board of Directors have appointed a Special Committee to investigate, review and evaluate the facts and circumstances surrounding the allegations made in the letter. A complaint, substantially in the same form as the complaint that accompanied the earlier letter, was filed on July 30, 2004 in the United States District Court for the Southern District of New York. Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com/ or http://www.nortelnetworks.com/media_center NORTHWESTERN CORP: Identifies Seven New Directors ------------------------------------------------- NorthWestern Corporation (Pink Sheets: NTHWQ) filed a notice of designation of new members to the reorganized Company's board of directors with the U.S. Bankruptcy Court for the District of Delaware. The notice is required to be filed 15 days prior to the Company's confirmation hearing which is scheduled for Aug. 25, 2004. The new board will consist of six independent directors and one inside director. The designees include: Dr. Ernest Linn Draper, Jr. -- Dr. Draper recently retired as Chairman, President and Chief Executive Officer of American Electric Power Co., Inc. (AEP), one of the nation's largest public utility holding companies, based in Columbus, Ohio. Dr. Draper led AEP from 1993 until his retirement as Chairman of the Board on Feb. 24, 2004. Prior to leading AEP, Dr. Draper served as Chairman of the Board, President and Chief Executive Officer of Gulf States Utilities Company, Beaumont, Texas. -- Dr. Draper also serves on the board of directors of Sprint, Temple-Inland and Borden Chemicals and Plastics, LP. -- Dr. Draper currently splits his time between Ohio and Texas. He holds a bachelor's and master's degree in chemical engineering from Rice University and a PhD in nuclear science and engineering from Cornell University. Corbin A. McNeill, Jr. -- Mr. McNeill is the retired Chairman and Co-Chief Executive Officer of Exelon Corporation, one of the nation's largest public utility companies, based in Chicago. The company was formed following the October 2000 merger of PECO Energy Company and Unicom Corporation. Prior to the merger, Mr. McNeill was Chairman, President and Chief Executive Officer of PECO Energy, Philadephia, Pa. He also served in key executive operating roles at Public Service Electric and Gas Company and the New York Power Authority. -- Mr. McNeill currently serves on the board of directors of the proposed reorganized Enron Corporation having been recruited to the board in 2002 as part of the company's bankruptcy reorganization. He also serves as nonexecutive Chairman of CrossCountry Energy, LLC, which is part of the Enron reorganization. In addition, he serves on the boards of Associated Electric & Gas Insurance Services Ltd. (AEGIS), an insurance and risk management service provider to utilities. -- A resident of Jackson, Wyo., Mr. McNeill has a bachelor's degree in marine engineering from the U.S. Naval Academy and completed Stanford University's executive development program. Stephen P. Adik -- Mr. Adik recently retired as Vice Chairman of NiSource, Inc., a Merrillville, Ind.-based electric and natural gas production, transmission and distribution company. Mr. Adik has held a number of executive positions including Chief Financial Officer with NiSource and its predecessor Northern Indiana Public Service Company. Prior to joining NIPSCO, Mr. Adik held financial executive positions for American Natural Resources Company and three railroad companies. -- Mr. Adik resides in Valparaiso, Ind., and serves on NiSource's board of directors. -- Mr. Adik holds a bachelor's degree in mechanical engineering from Steven Institute of Technology and an MBA from Northwestern University. Julia L. Johnson -- Ms. Johnson is President of NetCommunications, LLC, a strategy consulting firm specializing in the energy, telecommunications and information technology public policy arenas. Ms. Johnson was previously Chairperson of the Florida Public Service Commission which is responsible for the economic regulation of Florida's $16.8 billion investor- owned utility companies including intrastate operation of telecommunications, electric, gas, water and wastewater. She served on the Florida PSC from January 1993 through January 1999 before returning to the private sector. -- Ms. Johnson holds a bachelor's degree in business administration and a law degree from the University of Florida and is a member of the National Bar Association and the Florida Bar Association. She resides in Clermont, Fla., and serves on the board of directors of Alleghany Energy, a large Mid-Atlantic investor-owned electric and natural gas utility; Mastec, Inc., a NYSE-traded international communications company; and GridOne LLC, a regional electric transmission operating company. Jon S. Fossel -- Mr. Fossel is the retired Chairman, President and Chief Executive Officer of the Oppenheimer Management Corporation. In addition, he held executive positions with Alliance Capital Management Corporation and Citicorp. -- Residing in Ennis, Mont., Mr. Fossel is Chairman of the Rocky Mountain Elk Foundation and is actively involved in wildlife preservation activities. He also serves on the board of directors of UnumProvident Corporation, a large NYSE-traded insurance company, and serves as a trustee of 41 of OpenheimerFunds' mutual funds. -- Mr. Fossel has a bachelor's degree in economics and a master's degree in finance from Tufts University. Philip L. Maslowe -- Mr. Maslowe currently serves as the nonexecutive Chairman of the Board of Directors of AMF Bowling Worldwide, Inc., the largest operators of bowling centers and provider of sporting goods. He also currently serves on the Board of Directors of Mariner Health Inc. -- From 1997 through 2002, Mr. Maslowe was Executive Vice President and Chief Financial Officer of The Wackenhut Corporation, a security, staffing and privatized prisons corporation. He also served as CFO with KinderCare Learning Centers, Thrifty Corporation and The VONS Companies, Inc. -- Mr. Maslowe resides in Palm Beach Gardens, Fla., and holds a bachelor's degree from Loyola University and a master's degree from Northwestern University. Gary G. Drook -- Mr. Drook was elected President and Chief Executive Officer of NorthWestern in August 2003, after joining the company as Chief Executive Officer in January 2003. -- Prior to joining NorthWestern, Mr. Drook served for six years as President and Chief Executive Officer of AFFINA, Inc., a Peoria, Ill., provider of customer relationship management programs. In addition, Mr. Drook has 26 years of professional experience with Ameritech and was President of Network Services at his retirement in 1995. Also while at Ameritech, he served as President of Ameritech Publishing, Senior Vice President of Business Development and President of Ameritech's Enhanced Business Services, along with other executive positions. -- A resident of Sioux Falls, S.D., Mr. Drook holds a bachelor's degree in business from Indiana University and completed the executive development program at Dartmouth College. He currently serves on the board of NorthWestern and AFFINA. "We are extremely pleased with the group of very distinguished people that have agreed to help lead NorthWestern in the future. The new board designees possess the kind of specific experience and expertise that will be extremely valuable to the Company. We are looking forward to working with them after we successfully complete our restructuring in the fourth quarter of 2004," Mr. Drook said. About NorthWestern Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation -- http://www.northwestern.com/-- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872) (Walsh, J.). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. OCEANVIEW: Fitch Places BB-Rated Class C Notes on Negative Watch ---------------------------------------------------------------- Fitch Ratings places four classes of notes issued by Oceanview CBO I Ltd. (Oceanview) on Rating Watch Negative: -- $28,000,000 class A-2 notes rated 'AA'; -- $10,000,000 class B-F notes rated 'BBB'; -- $5,000,000 class B-V notes rated 'BBB'; -- $2,523,893 class C notes rated 'BB'. Oceanview is a collateralized debt obligation (CDO) managed by Deerfield Capital Management, which closed June 27, 2002. Oceanview is composed of 53.7% residential mortgage-backed securities (RMBS), 13.6% CDOs, 11.4% commercial mortgage-backed securities (CMBS), 11.2% asset-backed securities (ABS), 10.0% corporate debt and 0.2% real estate investment trusts (REITs). Since the completion of the ramp up period, the collateral has deteriorated. The class A1 overcollateralization (OC) ratio, class A2 OC ratio and class B OC ratio have decreased from 115.9%, 107.2% and 103.0%, respectively, to 113.1%, 104.6% and 100.6% as of the most recent trustee report dated June 30, 2004. All OC ratios continue to pass their respective test levels. The Fitch weighted average rating factor has also deteriorated from 11.3 ('BBB+'/'BBB') at closing to 14.9 ('BBB'/'BBB-') with a trigger of 17. The deteriorating credit quality of the portfolio has increased the credit risk of this transaction to the point the risk may no longer be consistent with the ratings. Fitch will review this transaction and take appropriate rating action upon completion of its analysis. OXFORD AUTOMOTIVE: S&P Junks Corporate Credit & Debt Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Troy, Michigan-based Oxford Automotive Inc. to 'CCC-' from 'B-'. In addition, Standard & Poor's lowered its rating on the company's second-lien senior secured debt to 'C' from 'CCC'. Ratings remain on CreditWatch with negative implications, where they were placed on Feb. 23, 2004. Oxford, a supplier of specialized metal-formed systems, modules, and assemblies to the automotive industry, had balance sheet debt of $288 million at Dec. 31, 2003, the latest reported date. Financial sponsor MatlinPatterson owns privately held Oxford. "The downgrade reflects our ongoing concerns over Oxford's liquidity," said Standard & Poor's credit analyst Nancy Messer. As previously indicated, Oxford's liquidity is very constrained while the company prepares for the December 2004 launch of the Mercedes M-class program at its new McCalla, Ala. facility. "The ratings would be lowered further if the company's liquidity is insufficient to successfully complete the McCalla launch activity without impairing creditors. We expect to resolve the CreditWatch listing after Oxford discloses its latest financial statements and liquidity situation," Ms. Messer said. Oxford's financials have not yet been disclosed for the fiscal year ended March 31, 2004, or for the June 30 first quarter of fiscal 2005. PALCAN FUEL: Changes Company Name to Palcan Power Systems Inc. -------------------------------------------------------------- Palcan Fuel Cells Ltd. (TSX-V:PC) changed its name to Palcan Power Systems Inc., subject to formal approval of the TSX Venture Exchange. This change of name was approved by the Company's shareholders at the Annual Meeting of Shareholders that was held on June 8, 2004. The Company's trading symbol on the TSX Venture Exchange will remain unchanged as "PC" Its CUSIP number for common shares will also remain unchanged as 696263102. "This change in Palcan's name clearly emphasizes the significant addition to our business of our metal hydride based, hydrogen storage products," said Palcan's Chairman and CEO John Shen. "Today we are much more than a fuel cell company. We have an opportunity to significantly advance the packaged hydrogen infrastructure that all smaller fuel cell products must rely upon as well as address market opportunities for bulk storage and transportation of hydrogen. Our new name encompasses both our fuel cell products business and the large hydrogen storage product opportunities that will become Palcan's primary business focus as we move forward," he added. Since Palcan issued its Annual Report in May, it has made significant strides in its objective of becoming a sustainable commercial business. In the Annual Report, six key goals for the Company were laid out for completion by the end of the year. Important progress on all of these goals has been made to date. One of these goals, the completion of the engineering concept fuel cell uninterruptible power supply, has been completed. This device showcases Palcan's expertise in both the fuel cell power module area as well as the practicality of Palcan's metal hydride hydrogen storage canisters for this type of application. It was shown to shareholders at the Company's Annual Meeting as well as traveling to the 15th World Hydrogen Conference held in Tokyo, Japan. The Company has also filed its first US patent in the metal hydride canister area for a new concept of valve that matches the needs of this product. About Palcan Palcan Fuel Cells Ltd. is a leading developer and manufacturer of metal hydride hydrogen storage products and proton exchange membrane (PEM) fuel cell systems under 5 kilowatts. The Company's proprietary and patent pending technologies form the core of the PalPac(TM) Power Products. A unique and integrated fuel cell power system aimed directly at low output applications where batteries and smaller internal combustion engines (ICE) are the power source. These include stationary, marine, military and portable power applications. The Company's manufacturing, research and development facilities are located in Burnaby, British Columbia and Jiaxing, China. The Company trades on the TSX Venture Exchange under the symbol "PC". At December 31, 2003, Palcan's balance sheet shows that its stockholders' deficit widened to $936,693 from $129,888 a year earlier. PALCAN FUEL: Plans to Form Technical Group to Guide Product Dev't ----------------------------------------------------------------- Palcan Fuel Cells Ltd. (TSX-V:PC) now known as Palcan Power Systems Inc., significantly strengthened Palcan's Board of Directors. Dr. Edwin Levy joined the Board at the Annual Shareholders' Meeting. Dr. Levy is retired from a successful career at QLT Inc. with experience in regulatory process, business development and strategic partnering. Mr. David Demers, CEO of Westport Innovations was appointed to the Board in August. He has extensive experience in early stage companies as well as experience and knowledge of hydrogen infrastructure issues and of doing business in China. Dr. William Saywell, former President of Simon Fraser University, has also agreed to join our Board, pending formal appointment. Dr. Saywell played a key role in the growth and success of Simon Fraser University for almost a decade and has an in depth knowledge and understanding of China and Asia which is a geographical focus for Palcan. These additions to the Board of Directors are all made with the goal of ensuring that we have the experience and expertise at the Board level to provide the appropriate guidance, council, and oversight to Management and the Company as it becomes a commercially oriented business. They are in the process of forming a Technical Advisory Group -- TAG -- to assist and guide the Company's technical and product development activities. The TAG will consist of noted technical experts in the fuel cell and metal hydride areas. About Palcan Palcan Fuel Cells Ltd. is a leading developer and manufacturer of metal hydride hydrogen storage products and proton exchange membrane (PEM) fuel cell systems under 5 kilowatts. The Company's proprietary and patent pending technologies form the core of the PalPac(TM) Power Products. A unique and integrated fuel cell power system aimed directly at low output applications where batteries and smaller internal combustion engines (ICE) are the power source. These include stationary, marine, military and portable power applications. The Company's manufacturing, research and development facilities are located in Burnaby, British Columbia and Jiaxing, China. The Company trades on the TSX Venture Exchange under the symbol "PC". At December 31, 2003, Palcan's balance sheet shows that its stockholders' deficit widened to $936,693 from $129,888 a year earlier. PARMALAT GROUP: Bondi Sues UBS in Parma Court to Recover EUR290M ---------------------------------------------------------------- Parmalat Finanziaria SpA in Extraordinary Administration communicates that Dr. Enrico Bondi, in his role as Extraordinary Commissioner of Parmalat Finance Corporation BV has filed a claim with the Court of Parma against UBS Limited, in the form of a revocatory action under article 67 of the Italian bankruptcy law in connection with the transaction carried out in July 2003 which saw the issue of two bonds for a total nominal value of EUR420 million in the context of which Parmalat BV acquired from UBS EUR290 million in bonds from Banco Totta & A?ores S.A. The latter were Credit Linked Notes that were underwritten by UBS by way of protection against a default risk of the Parmalat Group. The amount being sought under this revocatory action is EUR290 million plus interest. Further, the Extraordinary Commissioner has reserved the right to act separately to recover damages from UBS. 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. 27; Bankruptcy Creditors' Service, Inc., 215/945-7000) PILLOWTEX CORP: Wants to Employ Flanagan/Bilton as Tax Counsel ------------------------------------------------------------- Pillowtex Corporation and its debtor-affiliates sought and obtained Bankruptcy Court authority to employ Flanagan/Bilton to represent them in Property Tax Disputes relating to property located outside of North Carolina -- specifically, Illinois, Georgia, Texas, Virginia, Pennsylvania, California, Alabama, Mississippi and South Carolina, and in the province of Ontario, Canada. Flanagan is a law firm with offices located at 200 E. Randolph Drive, Suite 6900 in Chicago, Illinois. Flanagan has particular expertise in the field of municipal, county and state property taxation. Throughout the United States of America and in Ontario, Canada, Flanagan has been representing property owners in ad valorem taxes. According to Gilbert R. Saydah, Jr., Esq., at Morris Nichols Arsht & Tunnel, in Wilmington, Delaware, Flanagan will represent the Debtors in connection with revaluation of real and personal property by local and state taxing authorities, and the appeal of certain tax assessments in respect of state and local ad valorem taxes. Flanagan will also represent the Debtors in property tax negotiations and at any related hearings and proceedings and promptly inform the Debtors of any development in these matters including offers of any settlement. Flanagan will be paid on a contingency fee basis plus costs incurred in connection with its property tax services: * A contingency fee equal to 25% of the tax savings, refunds or credits realized by the Debtors as a result of negotiated settlements, administrative actions, state appeal board actions, or court proceedings. * Reimbursement for ordinary and necessary costs and expenses including third-party expert fees, appraisal fees, and out- of-pocket costs and disbursements. Flanagan partner Dean H. Bilton, Esq., assures the Court that the firm had not been retained to assist any entity or person other than the Debtors on matters relating to, or in connection with these Chapter 11 cases. Mr. Bilton contends that Flanagan is "disinterested" as defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). Flanagan represents no interest adverse to the Debtors. Headquartered in Dallas, Texas, Pillowtex Corporation -- http://www.pillowtex.com/-- sold 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), emerged from bankruptcy under a chapter 11 plan, and filed a second time on July 30, 2003 (Bankr. Del. Case No. 03-12339). The second chapter 11 filing triggered sales of substantially all of the Company's assets. David G. Heiman, Esq., at Jones Day, and William H. Sudell, Jr., Esq., at Morris Nichols Arsht & Tunnel, represent the Debtors. On July 30, 2003, the Company listed $548,003,000 in assets and $475,859,000 in debts. (Pillowtex Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) PRESIDENT CASINOS: Penn Nat'l Buying St. Louis Unit for $28 Mil. ---------------------------------------------------------------- President Casinos, Inc. (OTC:PREZQ.OB) has entered into an agreement with Penn National Gaming, Inc. Under the terms of the agreement, the stock of its St. Louis subsidiary, President Riverboat Casino-Missouri, Inc., will be sold for approximately $28.0 million, subject to working capital adjustments. The agreement will be submitted to the United States Bankruptcy Court for the Eastern District of Missouri and will be subject to a potential overbid. Contingent upon licensing by the Missouri Gaming Commission, the closing is anticipated to occur in the Spring of 2005. It is anticipated that the operation will continue in St. Louis with the new owners. Libra Securities, LLC acted as advisor to President Casinos, Inc. in this transaction. About Penn National Penn National Gaming (S&P, BB- Corporate Credit Rating, Stable) owns and operates: three Hollywood Casino properties located in Aurora, Illinois, Tunica, Mississippi and Shreveport, Louisiana; Charles Town Races & Slots(TM) in Charles Town, West Virginia; two Mississippi casinos, the Casino Magic - Bay St. Louis hotel, casino, golf resort and marina in Bay St. Louis and the Boomtown Biloxi casino in Biloxi; the Casino Rouge, a riverboat gaming facility in Baton Rouge, Louisiana and the Bullwhackers casino properties in Black Hawk, Colorado. Penn National also owns two racetracks and eleven off-track wagering facilities in Pennsylvania; the racetrack at Charles Town Races & Slots in West Virginia; a 50% interest in the Pennwood Racing Inc. joint venture which owns and operates Freehold Raceway in New Jersey; and operates Casino Rama, a gaming facility located approximately 90 miles north of Toronto, Canada, pursuant to a management contract. About President Casinos President Casinos, Inc. owns and operates dockside gaming facilities in Biloxi, Mississippi and downtown St. Louis, Missouri, north of the Gateway Arch. At May 31, 2004, President Casinos, Inc.'s balance sheet shows a stockholders' deficit of $52,899,000 compared to a deficit of $52,349,000 at February 29, 2004. PRUDENTIAL ASSURANCE: Objections to Sec. 304 Petition Due Aug. 22 ----------------------------------------------------------------- Omni Whittington Insurance Services Limited, as Foreign Representative of The Prudential Assurance Company Limited, Pearl Assurance PLC, Elders Insurance Company Limited, Hiscox Insurance Limited, and The World Marine and General Insurance PLC, asks the U.S. Bankruptcy Court for the Southern District of New York to enter an order giving full force and effect in the United States to identical schemes of arrangement for each of these insurers sanctioned by the High Court of England and Wales in London, England, on July 9, 2004. The Foreign Representative filed Petitions under Section 304 of the U.S. Bankruptcy Code together with a motion for an order binding all U.S. creditors to the schemes of arrangement. The Honorable Allen L. Gropper directs all creditors and policyholders objecting to the Foreign Representative's request to submit an answer to the Petition or file an objection to the Motion, file that answer or objection with the Bankruptcy Clerk in Manhattan no later than August 22, 2004, and serve a copy of the pleading on the Foreign Representative's counsel: Karen Ostad, Esq. Dina Gielchinsky, Esq. Lovells 900 Third Avenue New York, New York 10022 If objections or answers are filed to the relief requested in the 304 Petitions and Motion, Judge Gropper will convene a hearing on September 8, 2004 at 9:30 a.m. Headquartered in London, England, Prudental Assurance -- http://www.prudential.co.uk/-- is an insurance company authorized to conduct general business within U.K. Omni Whittington Insurance Services Limited, as Foreign Representative of The Prudential Assurance Company Limited, Pearl Assurance PLC, Elders Insurance Company Limited, Hiscox Insurance Limited, and The World Marine and General Insurance PLC, filed a Section 304 Petition on July 22, 2004 (Bankr. S.D.N.Y. Case Nos. 04-14884 through 04-14888, inclusive). Karen Ostad, Esq., and Dina Gielchinsky, Esq., at Lovells represent the Foreign Representative. The Section 304 Petitions indicate that the insurers have more than $100 million in assets and debts. PRUDENTIAL MORTGAGE: Fitch Affirms Low B-Ratings on 5 Certificates ------------------------------------------------------------------ Fitch upgrades Prudential's ROCK commercial mortgage pass-through certificates, series 2001-C1, as follows: -- $27.2 million class B to 'AAA' from 'AA'; -- $38.6 million class C to 'A+' from 'A'; -- $9.1 million class D to 'A' from 'A-'; -- $11.4 million class E to 'A-' from 'BBB+'; -- $15.9 million class F to 'BBB+' from 'BBB'; -- $13.6 million class G to 'BBB' from 'BBB-'. In addition, Fitch affirms the following classes: -- $135.1 million class A-1 at 'AAA'; -- $536.1 million class A-2 at 'AAA'; -- $542.1 million class X-1 at 'AAA'; -- $897.7 million class X-2 at 'AAA'; -- $13.6 million class H at 'BB+'; -- $22.7 million class J at 'BB'; -- $6.8 million class K at 'BB-'; -- $4.5 million class L at 'B+'; -- $9.1 million class M at 'B'. The $4.5 million class N remains at 'CCC'. Fitch does not rate the $7.6 million class O. The upgrades reflect the strong pool performance and paydown since issuance. As of the July 2004 distribution date, the transaction's aggregate principal balance has decreased 5.8% to $855.8 million from $908.2 million at closing. There are currently no delinquent or specially serviced loans. The master servicer, Prudential Asset Resources, collected 99% of year-end (YE) 2003 financials. The overall weighted average debt service coverage ratio (DSCR) improved to 1.88 times (x) for YE 2003, an increase from 1.82x at issuance. The top five loans, representing 27% of the pool, also saw improved performance over the past year with the weighted average DSCR increasing to 2.77x for YE 2003 versus the 2.62x reported at issuance. One loan, the RREEF America II Portfolio, representing approximately 11% of the pool, has been given an investment-grade credit assessment by Fitch. The $155.4 million loan is split into an A and B note. The $91 million A note is included in the transaction and the $64.4 million B note is held outside the trust. The loan is secured by a diverse portfolio of industrial, retail, office, and multifamily properties located in Delaware, Texas, California, Florida, Georgia, and Arizona. There is approximately 3.7 million square feet of commercial space and 176 multifamily units. The Fitch-stressed DSCR for the loan is calculated using servicer-provided net operating income less reserves divided by the Fitch-stressed debt service payment. The stressed DSCR for YE 2003 was 2.65x compared with 2.68x as of YE 2002 and 2.63x at issuance. This number is based upon the A note balance only. Given the stable to improved performance, the loan maintains an investment-grade credit assessment. RCN CORP: Court Approves Committee's Bid to Retain Milbank Tweed ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of RCN Corporation needs bankruptcy lawyers to represent and prosecute the interests of unsecured creditors in the Debtors' Chapter 11 cases. Eric L. Eddin, Co-Chairman of the Creditors Committee, tells Judge Drain of the U.S. Bankruptcy Court for the Southern District of New York that the Committee chose Milbank, Tweed, Hadley & McCoy, LLP, as legal counsel due to its vast experience in representing a number of creditors' committees in large Chapter 11 cases and other debt- restructuring scenarios. Milbank possesses extensive knowledge and expertise in the areas of law relevant to the Debtors' cases, and is well qualified to represent the Creditors Committee. The Court authorizes Milbank, Tweed, Hadley & McCoy, LLP, to apply the amounts the firm presently held as a retainer to pay any fees, charges and disbursements relating to services it rendered to the ad hoc committee of holders of certain notes of RCN Corporation prior to the Petition Date that remain unpaid as of that date. Milbank is also authorized to hold the balance as a postpetition retainer to be applied towards unpaid fees, expenses and disbursements approved by the Court in connection with the firm's final fee application in the Debtors' cases. 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. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) SAN JOAQUIN LODGING: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Debtor: San Joaquin Lodging, Inc. dba San Joaquin All Suites Hotel 1309 West Shaw Avenue Fresno, California 93711 Bankruptcy Case No.: 04-16777 Type of Business: The Debtor operates a hotel. Chapter 11 Petition Date: August 6, 2004 Court: Eastern District Of California (Fresno) Judge: Whitney Rimel Debtor's Counsel: John P. Eleazarian, Esq. 7489 North 1st Street #104 Fresno, CA 93720-2823 Tel: 559-261-9110 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 2 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ P. G. & E. $32,501 IRS $6,500 SCHLOTZSKY'S: Wants BWK Trinitiy to Serve as Financial Advisors --------------------------------------------------------------- Schlotzsky's, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Western District of Texas for permission to employ BWK Trinity Capital Securities LLC as their financial advisors. BWK Trinity specializes in recapitalizations, bankruptcy representation and informal workouts with significant experience in the restaurant industry. BWK Trinity is expected to: a) assist the Debtors in the evaluation and implementation of strategic restructuring options; b) assist the Debtors in preparing for these chapter 11 proceedings; c) assist the Debtors in complying with reporting and other requirements of the Bankruptcy Code including the preparation of schedules of assets and liabilities, statements of financial affairs, monthly operating reports, a disclosure statement, and a plan of reorganization; d) assist in preparing and developing information necessary to accomplish the Debtors' restructuring goals, including responding to informational requests from their creditors and other parties-in-interest; and e) assist the Debtors in identifying and securing capital from one or more sources, assistance that may include but not be limited to: i) providing information as to the value of Debtors under a variety of circumstances as may be requested by Schlotzsky's; ii) identifying and evaluating Potential Transaction Partners of the Debtors; iii) pursuing key decision makers at, and arranging meetings with, Potential Transaction Partners; iv) receiving and responding to inquiries from Potential Transaction partners; assistance in conducting due diligence on Potential Transaction Partners; vi) communication as requested by the Debtors, or as may be required, in connection with a proposed transaction with independent public accountants, consultants and tax and legal counsel; vii) assistance in preparing materials to be utilized in discussions with Potential Transaction Partners which will describe the Company in such detail as may be appropriate under the circumstances; viii) assist the Debtors in determining the values to be realized in any Proposed Transaction; ix) advice and assist the debtors in making presentations to the Debtors' Board of Directors about any Proposed Transactions; x) advise the Debtors concerning the structure, form, terms and conditions with respect to a Proposed Transaction; xi) assist in managing the process of documenting any Proposed Transaction including interfacing, as appropriate, with the Debtors' attorneys; and f) provide any other assistance as may be requested by the Debtors. The Debtors will pay BWK Trinity: A) a $90,000 Monthly Fee; and B) a Success Fee equal to the greater of: i) $1,000,000, or ii) 2.0% of the aggregate consideration. Headquartered in Austin, Texas, Schlotzsky, Inc. -- -- http://www.schlotzskys.com/-- is a franchisor and operator of restaurants. The Debtors filed for chapter 11 protection on August 3, 2004 (Bankr. W.D. Tex. Case No. 04-54504). Amy Michelle Walters, Esq. and Eric Terry, Esq., at Haynes & Boone, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $111,692,000 in total assets and $71,312,000 in total debts. SENECA GAMING: Reports $18.8 Million of Net Income in 2nd Qtr. -------------------------------------------------------------- Seneca Gaming Corporation (SGC) disclosed increased revenues and EBITDA for the three and nine months ended June 30, 2004, and expansion plans for its gaming facility in Salamanca, New York. SGC is the tribally chartered corporation of the Seneca Nation of Indians that operates the Nation's casinos in Western New York. SGC through its subsidiaries, Seneca Niagara Falls Gaming Corporation (SNFGC) and Seneca Territory Gaming Corporation (STGC), operates two casinos located in Niagara Falls, New York -- Seneca Niagara Casino -- and Salamanca, New York -- Seneca Allegany Casino, respectively. SGC opened its first casino, Seneca Niagara Casino, on December 31, 2002, and its second casino, Seneca Allegany Casino, on May 1, 2004. The comparisons discussed between the three and nine months ended June 30, 2004 and 2003 are not directly comparable due to the preceding fact, and that Seneca Niagara Casino did not commence paying its $1.0 million monthly head lease payment to the Nation for the land upon which it operates the casino until July 1, 2003. Three Months Ended June 30, 2004 Operating Results For the quarter ended June 30, 2004, SGC reported consolidated gaming revenues of $88.8 million compared to $62.0 million for the quarter ended June 30, 2003, an increase of $26.8 million, or 43%. Seneca Niagara Casino had gaming revenues of $71.8 million in the quarter ended June 30, 2004 compared to $62.0 million for the comparable 2003 quarter, an increase of $9.8 million, or 16%. Seneca Allegany Casino opened May 1, 2004 and had gaming revenues of $17.0 million. Management attributes the growth in gaming revenues at Seneca Niagara Casino and the successful opening of Seneca Allegany Casino to the continued growth in membership in the Seneca Link Player's Card, now over 530,000, effective targeted promotional marketing and continued capital investment. Consolidated EBITDA was $33.8 million for the quarter ended June 30, 2004 compared to $28.8 million in the comparable 2003 quarter, an increase of $5.0 million, or 17%. Seneca Niagara Casino had third quarter EBITDA of $30.8 million, compared to $28.8 million in the comparable 2003 quarter, an increase of $2.0 million, or 7%. During the three months ended June 30, 2004, Seneca Niagara Casino made lease payments of $3.0 million to the Nation for the use of the land upon which it operates the casino. There were no such lease payments in the comparable 2003 period. For the three months ended June 30, 2004, Seneca Allegany Casino had EBITDA of $3.3 million and had pre-opening expenses of $2.7 million. Seneca Allegany Casino had $6.0 million of EBITDA in its first two months of operation. SGC incurred other operating expenses not related to the operation of either Seneca Niagara Casino or Seneca Allegany Casino of $300,000. Consolidated net income for SGC for the quarter ended June 30, 2004 was $18.8 million compared to $20.3 million in the comparable 2003 quarter, a decrease of $1.5 million, or 7%. The decrease in net income is attributable to the higher interest costs associated with the April 2004 offering of $300 million 7 1/4% Senior Notes, and the borrowing of the remaining $22.7 million available under SNFGC's existing term loan. Nine Months Ended June 30, 2004 Operating Results For the nine months ended June 30, 2004, SGC's consolidated gaming revenues were $230.7 million compared to $113.4 million in the comparable 2003 period, an increase of $117.3 million, or 103%. EBITDA for the nine months ended June 30, 2004 was $93.1 million compared to $42.3 million in the comparable 2003 period, an increase of $50.8 million, or 120%. Seneca Niagara Casino contributed $91.3 million and Seneca Allegany Casino contributed $2.3 million of EBITDA during the nine months ended June 30, 2004. The total pre-opening expenses associated with the development and opening of Seneca Allegany Casino was $3.7 million. Net income for the nine months ended June 30, 2004 was $61.6 million compared to $25.9 million in the comparable 2003 period, an increase of $35.7 million, or 138%. G. Michael Brown, President and CEO of SGC stated, "We are extremely pleased with the operating performance of both of our casinos. Seneca Niagara Casino continued its excellent performance with a nine-month EBITDA margin of 38%. In addition, the opening of new competition in Ontario, Canada has not materially affected our operating performance to date. The May 1, 2004 opening of Seneca Allegany Casino was favorably received by the gaming public, and over 50% of Seneca Allegany Casino's patrons are from outside New York State. During the first two months of operation, we generated $6.0 million of EBITDA, which was in line with our expectations. We expect improved operating performance as the property matures." Capital Expenditures During the nine months ended June 30, 2004, SGC made substantial investments in its facilities. During this period, SGC spent $112.1 million in construction and equipment purchases. Of that amount, $71.4 million was expended related to the construction and equipping of Seneca Allegany Casino, which opened May 1, 2004. In addition, Seneca Niagara Casino made capital investments of $40.7 million related to the completion of the 2,400-space parking garage and new bus lobby, the opening of a steakhouse restaurant, the renovation of the mezzanine level that added 250 slot machines and a banquet area with seating for up to 350 guests, and the opening of a poker area with sixteen tables. Cyrus Schindler, SGC's Chairman of the Board of Directors, commented: "We are committed to offering our patrons a world class gaming environment, and the amenities associated with such operations. The Boards of Directors of SGC and its subsidiaries, along with the Nation's government, are well aware of the need to reinvest and expand our properties to ensure we maintain an inviting atmosphere to our patrons, one that is conducive to repeat visits." Expansions In May 2004, Seneca Niagara Casino commenced construction of its 600-room luxury hotel. By the fall of 2005 management expects to open the public area, including 35,000 square feet of gaming space offering 950 additional slot machines, a full-service spa and salon, a 25,200 square foot multi-purpose room, three restaurants, and 300 hotel rooms. Completion of this project is expected in the spring of 2006. This project is expected to cost approximately $200 million. In June 2004, Seneca Allegany Casino commenced construction on a 1,500-space parking garage. Recently SGC and STGC's Boards of Directors approved the addition of a 225-room hotel. The total cost of these projects is expected to be between $162 and $167 million and will be funded by cash flow from operations and advances from SGC. It is anticipated that the garage will open in December 2004 and the hotel by the spring of 2006. Rickey Armstrong, President of the Seneca Nation of Indians, stated: "The expansions at both our Niagara Falls and Allegany casinos are clear indications of the Nation's commitment to invest in our properties. While we are both proud and encouraged by the operating performances and the favorable reception of our patrons to our properties, these expansions will provide expanded gaming, entertainment, dining, hotel and other amenities to our guests. We intend to continue to be the leading gaming entertainment operator in our region." Other SGC expects to amend and file its Registration Statement on Form S-4 with the Securities and Exchange Commission on or prior to August 16, 2004. The amended Form S-4 shall include its three and nine-month financial statements for the periods ended June 30, 2004 and 2003, and our Management's Discussion and Analysis of Financial Condition and Results of Operations for these periods. Non-GAAP Financial Measurement SGC defines EBITDA as earnings before interest, taxes, depreciation, and amortization. SGC's calculation of EBITDA may be different from the calculation used by other companies and therefore comparisons of EBITDA may be limited. EBITDA should not be construed as a substitute for operating income or net income, as they are determined in accordance with generally accepted accounting principles. Conference Call Management will hold an investors conference call on Friday, August 13, 2004 at 10:00 AM, Eastern Standard Time, to discuss our three and nine-month operating results and our outlook for the remainder of the fiscal year ended September 30, 2004. We will also provide an update regarding our expansion projects. Investors in our bonds are encouraged to participate. The call can be accessed live by calling 888-273-9887. Request the Seneca Gaming Corporation Investors Conference Call. Replays can be accessed through August 20, 2004 until 5:00 PM Eastern Standard Time by calling 800-475-6701 and using the access number 742117. * * * As reported in the Troubled Company Reporter's April 23, 2004, edition, Standard & Poor's Ratings Services assigned its 'BB-' rating to the Seneca Gaming Corporation's (SGC) proposed $225 million senior unsecured notes due 2012. Proceeds from the proposed note issue, along with expected cash from operations and existing cash balances, will be used to help fund SGC's planned expansion project, make a $25 million distribution to the Seneca Nation of Indians, and for fees and expenses. In addition, a 'BB-' corporate credit rating was assigned to the Niagara Falls, New York-based company. The outlook is stable. Pro forma for the new notes, total debt outstanding at March 31, 2004, was approximately $320 million. SGC was created by the Nation to manage and operate three Class III gaming facilities in western New York. The Nation consists of approximately 7,300 members and is one of several federally recognized Native American tribes in New York. The Nation entered into its compact with the State of New York in 2002, which was subsequently approved by the Bureau of Indian Affairs. The compact expires in 2016 with a renewal option to 2023, and requires a payment based on a percentage of slot win to the state. "The ratings reflect SGC's current reliance on the Seneca Niagara Casino, construction risks associated with the planned expansion project, challenges in managing a larger gaming operation, and an evolving competitive landscape, which includes the June 2004 opening of a large-scale casino within a few miles of the Seneca Niagara Casino on the Canadian side of Niagara Falls and the addition of video lottery terminals at nearby racetracks," said Standard & Poor's credit analyst Peggy Hwan. "These factors are mitigated by favorable demographics in its surrounding market, strong operating performance of SNC since opening, and good financial profile for the rating." SIMMONS BEDDING: Boasts $6.0 Million 2nd Quarter Net Income ----------------------------------------------------------- Simmons Bedding Company, a leading manufacturer of premium branded bedding products, disclosed its operating results for the second quarter ended June 26, 2004, posting increased net income on increased second quarter sales. For the second quarter of 2004, net sales increased 1.3% to $201.8 million, as compared to $199.3 million in the same period one year ago. Wholesale bedding net sales increased 2.0% to $187.7 million in the second quarter. In comparison to the prior year, Simmons' wholesale bedding average unit selling price in the second quarter increased 4.8% while wholesale bedding unit shipments decreased 1.3%. The Company's retail store net sales in the second quarter of 2004 decreased $4.2 million, or 17.9%, to $19.2 million from $23.4 million in the second quarter of 2003, due to the sale of the Company's Mattress Gallery retail operations on May 1, 2004. The Company had net income of $6.0 million in the second quarter of 2004 compared to $3.5 million in the same period one year ago. The increase in net income was due principally to a 60% increase in operating income, offset in part by increased interest expense that resulted from the December 19, 2003 acquisition of Simmons by affiliates of Thomas H. Lee Partners. Adjusted EBITDA for the second quarter of 2004 decreased by $1.3 million, or 4.2%, to $28.9 million from $30.2 million in the second quarter of 2003. Simmons' Chairman and Chief Executive Officer, Charlie Eitel, said, "We are very pleased with our second quarter results when considering the timing of this year's fiscal quarter end in relation to the fourth of July holiday and in comparison to the prior year second quarter, during which we had a significantly higher growth rate as compared to the industry. During the quarter we achieved record sales, opened a new manufacturing facility in Hazleton, Pennsylvania, continued construction on another new facility in Waycross, Georgia which began production earlier this week, finalized the sale of our Mattress Gallery retail operations, and increased our operating cash flows." For the first six months of 2004, net sales increased 10.2% to $425.1 million, as compared to $385.9 million in the same period one year ago. Wholesale bedding net sales increased 10.9% to $394.8 million for the first six months of 2004. Simmons' wholesale bedding unit shipments and wholesale bedding average unit selling price increased 3.5% and 7.1%, respectively, in the first six months of 2004 versus the prior year. The Company's retail store net sales in the first six months of 2004 decreased $1.3 million, or 2.9%, to $44.3 million from $45.7 million in the first six months of 2003. The Company had net income of $9.9 million in the first six months of 2004 compared to $11.0 million in the same period one year ago. The decrease in net income was due principally to increased interest expense, intangible amortization expense, and non- recurring expenses, all of which are related to the December 19, 2003 acquisition of Simmons by Thomas H. Lee. Adjusted EBITDA for the first six months of 2004 increased by $6.9 million, or 11.7 %, to $66.2 million from $59.3 million in the first six months of 2003. Mr. Eitel added, "While our operating earnings and net income in the second quarter of 2004 improved compared to a year ago, our results were negatively impacted by increases in the cost of raw materials, primarily steel, wood and foam; increased fuel costs; non-recurring costs associated with the closing of one manufacturing facility; and start-up costs for our two new manufacturing facilities. We expect these new facilities to generate cost savings for us by the end of 2004." Net debt (total debt less cash) totaled $728.2 million as of June 26, 2004, a decline of $28.9 million during the second quarter. For the first six months of 2004, net debt decreased by $38.4 million as a result of increased cash flow from operations. The Company also announced that to enhance the balance of independent directors on the Simmons Board, Robert W. Hellyer and William S. Creekmuir President and Executive Vice President and Chief Financial Officer of the Company, respectively, had relinquished their Board positions. Mr. Eitel concluded, "We are very pleased with our financial performance for the first six months of 2004, and are excited about our new product lines which will be introduced in October at the International Home Furnishings Market, and the acquisition of the crib mattress business of Simmons Juvenile Products Company, Inc., which we anticipate will be finalized during the third quarter. And while we are encouraged by industry sales in recent months, as reported by the International Sleep Products Association, and our own sales to date for our third quarter, there is some concern about the impact of rising raw material costs and fuel prices. We remain cautiously optimistic about the balance of 2004." The Company will webcast its second quarter and first six months of 2004 financial results via a conference call on Monday, August 16, 2004 beginning at 11:00 a.m. Eastern Daylight Time. It will be available at the Company's website http://www.simmons.com/.The webcast will also be available for replay through August 30, 2004. Atlanta-based Simmons Bedding Company (S&P, B+ corporate credit and senior secured debt ratings, 'B-' subordinated and senior unsecured debt ratings) is one of the world's largest mattress manufacturers, manufacturing and marketing a broad range of products including Beautyrest(R), BackCare(R), BackCare Kids(R), Olympic(R) Queen, Deep Sleep(R) and sang(TM). The Company operates 18 plants across the United States and Puerto Rico. Simmons is committed to helping consumers attain a higher quality of sleep and supports its mission through a Better Sleep Through Science(R) philosophy, which includes developing superior mattresses and promoting a sound, smart sleep routine. For more information, consumers and customers can visit the Company's website at http://www.simmons.com/ SIMMONS BEDDING: J. Messner Joins Board as Independent Director --------------------------------------------------------------- Aug. 10 /PRNewswire/ Simmons Bedding Company, reports that B. Joseph Messner has joined the Board of Directors of Simmons as the Company's fourth independent director. Joe is a seasoned chief executive who is currently CEO of Bushnell Performance Optics, developer and marketer of Bushnell, Tasco, Bolle and Serengeti brands of sports optics. Prior to being named CEO of Bushnell Performance Optics, Mr. Messner was President and CEO of First Alert, Inc., a leading manufacturer and marketer of residential safety products. The Board of Directors also includes independent directors David A. Jones, Chairman and Chief Executive Officer of Rayovac Corporation and Albert L. Prillaman, Chairman of Stanley Furniture Company, Inc., both of whom were elected to the Board in connection with Thomas H. Lee Partners' purchase of Simmons in December 2003, and William P. Carmichael, Chairman of the Nations Funds (Bank of America advised mutual funds), who was elected in May of this year. Atlanta-based Simmons Bedding Company (S&P, B+ corporate credit and senior secured debt ratings, 'B-' subordinated and senior unsecured debt ratings) is one of the world's largest mattress manufacturers, manufacturing and marketing a broad range of products including Beautyrest(R), BackCare(R), BackCare Kids(R), Olympic(R) Queen, Deep Sleep(R) and sang(TM). The Company operates 18 plants across the United States and Puerto Rico. Simmons is committed to helping consumers attain a higher quality of sleep and supports its mission through a Better Sleep Through Science(R) philosophy, which includes developing superior mattresses and promoting a sound, smart sleep routine. For more information, consumers and customers can visit the Company's website at http://www.simmons.com/ SINO-FOREST CORPORATION: Details US$300 Million Debt Offering ------------------------------------------------------------- Sino-Forest Corporation (TSX: TRE.A) discloses the details of its previously announced note offering. The Company has entered into an underwriting agreement with Morgan Stanley & Co. Incorporated whereby the Company has agreed to sell, subject to customary conditions, US$300 million of non-convertible guaranteed senior notes in the international markets. The notes shall bear interest at a rate of 9-1/8% per annum, payable semi-annually, and shall have a maturity date of seven years from the date of issuance. Morgan Stanley is the sole underwriter in connection with this offering. The Company intends to use the net proceeds of the offering to repay approximately US$92 million of existing indebtedness, to acquire mature pine tree plantations in Heyuan, Guangdong Province and to use the balance of the net proceeds for general working capital purposes. A copy of the final offering memorandum being delivered to investors will be available on http://www.sedar.com/ It is expected that the closing of the note offering will take place on or about August 17, 2004. The Company has received approval in principle from the Singapore Exchange Securities Trading Limited for the listing and quotation of the notes on the official list of the SGX-ST. The notes have been given a Ba2 (stable) rating by Moody's Investors Services and a BB- (stable) rating by Standard & Poor's Rating Services. SK GLOBAL AMERICA: Wants Until Sept. 30 to Solicit Votes on Plan ---------------------------------------------------------------- Pursuant to Section 1121(d) of the Bankruptcy Code, SK Global America, Inc., asks the Court to further extend its exclusive period to solicit acceptances of its Liquidation Plan to September 30, 2004, without prejudice to its right to seek additional extensions. Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, in New York, relates that the Debtor has made significant progress in its Chapter 11 case. Specifically, the Debtor has negotiated and promulgated its Liquidation Plan, which is supported by its largest creditors. The Court also approved the Debtor's Disclosure Statement on August 4, 2004. On September 15, 2004 at 10:00 a.m., Judge Blackshear will consider confirmation of the Liquidation Plan. Mr. Ratner asserts that an extension of the Solicitation Period will not harm or prejudice the Debtor's creditors, and will instead allow for the orderly and efficient prosecution of confirmation of the Plan, thereby benefiting the Debtor and its creditors. "The Debtor is seeking an extension of the Solicitation Period to continue the confirmation process without the destabilizing effects of competing plans that could be interposed," Mr. Ratner explains. Extending the Solicitation Period will afford the Debtor and all other parties-in-interest an opportunity to focus their attention and efforts toward attaining a consensual plan confirmation, while minimizing the need for lengthy and expensive litigation over competing plans. While extending exclusivity will facilitate the orderly process toward confirmation of the Plan, allowing the Solicitation Period to expire may cause the spending of estate resources on needless and protracted plan litigation rather than confirmation of the Plan already on file. On August 4, 2004, Judge Blackshear approved SK Global America, Inc.'s Disclosure Statement. Voting on the Plan is scheduled to end at 5:00 p.m. on September 8, 2004, and the Court is scheduled to consider confirmation of the plan at 10:00 a.m. on Sept. 15. Headquartered in Fort Lee, New Jersey, SK Global America, Inc., is a subsidiary of SK Global Co., Ltd., one of the world's leading trading companies. The Debtors file for chapter 11 protection on July 21, 2003 (Bankr. S.D.N.Y. Case No. 03-14625). Albert Togut, Esq., and Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, represent the Debtors in their restructuring efforts. When they filed for bankruptcy, the Debtors reported $3,268,611,000 in assets and $3,167,800,000 of liabilities. (SK Global Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA INC: European Subsidiary Retains Rothschild Firm -------------------------------------------------------- Solutia Europe SA/NV, a subsidiary of Solutia, Inc., has retained the investment banking firm of Rothschild, Inc., to explore strategic options for its Pharmaceutical Services business, which accounts for approximately 2% of the annual revenue of Solutia, Inc., according to Solutia Secretary Rosemary Klein in a regulatory filing with the Securities and Exchange Commission on July 12, 2004. "These options include a potential sale of the Pharmaceutical Services business, which includes the businesses now conducted by two Swiss subsidiaries of Solutia Europe SA/NV. For any sale to occur, Solutia Europe SA/NV would need to obtain the consent of its Euro Note bondholders as further provided in the definitive documentation for the Euro Notes. There is no assurance that any such sale will occur." 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 Debtors 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) STATER BROS: Posts $5.8 Million Thirteen-Week Loss in June Quarter ------------------------------------------------------------------ Stater Bros. Holdings, Inc., disclosed financial results for the thirteen week third quarter and thirty-nine week year-to-date period ended on June 27, 2004. Sales for the thirteen weeks ended June 27, 2004 increased 23.24% to $848.0 million compared to $688.1 million for the thirteen weeks ended June 29, 2003. Total sales for the thirty-nine weeks ended June 27, 2004, increased 39.93% and amounted to $2.864 billion compared to $2.047 billion for the same period in the prior year. Like store sales increased 17.13% and 36.15% for the thirteen week and thirty-nine week periods ended June 27, 2004, respectively. The Company reported a net loss for the thirteen weeks ended June 27, 2004 of $5.8 million after taking $25.5 million of pre- tax interest expense ($15.1 million after tax) related to the purchase of $397.8 million of the Company's 10.75% Senior Notes due August 2006, the early retirement of the $20.0 million 5.0% Subordinated Note due 2007, and the redemption of Santee Diaries Notes. Net income was $769,000 for the thirteen weeks ended June 29, 2003. Net income for the fiscal year-to-date period amounted to $59.1 million in 2004 and $7.5 million in 2003. The current year's results include $34.0 million of pre-tax interest expense ($20.2 million after tax) related to purchase of $397.8 million of the Company's 10.75% Senior Notes due August 2006, the early retirement of the $20.0 million 5.0% Subordinated Note due 2007 and redemption of Santee Dairies Notes. The year-to-date results for 2004 include a $13.1 million after tax gain from litigation settlement. The settlement transferred the remaining 50% ownership interest in Santee Dairies, Inc. to the Company. Santee's financial information after the settlement date, February 6, 2004, are consolidated in the Company's results. On June 17, 2004, the Company issued $525.0 million of 8.125% Senior Notes due June 15, 2012 and $175.0 million of Floating Rate Senior Notes due June 15, 2010. Both issues are unregistered as of this date. Brown said; "Our quarter and year-to-date results reflect our Stater Bros. Family members continuing effort and dedication to retain as many of our new "Valued Customers" as possible. We remain committed to providing a friendly and satisfying shopping experience to all our "Valued Customers" on every one of their visits to our supermarkets." Stater Bros. Holdings Inc. is the largest privately held Supermarket Chain in Southern California and operates 159 supermarkets through its wholly owned subsidiary, Stater Bros. Markets. The Company's new store program is on schedule with four (4) new stores scheduled to open in the next 12 months. Stater Bros. Markets owns and operates Santee Dairies, Inc. For information contact: Jack H. Brown, Chairman, President and Chief Executive Officer at (909) 783-5000. Stater Bros. Markets currently operates 159 Full Service Supermarket locations, with 47 in San Bernardino County, 43 in Riverside County, 30 in Orange County, 27 in Los Angeles County, 10 in Northern San Diego County, and 2 in Kern County. There are over 14,500 members of the Stater Bros. "Family" of Employees. Headquartered in Colton, California, Stater Bros. has been serving Southern California customers since 1936. Stater Bros. has announced plans to build new Full Service Supermarkets in the Southern California communities of Adelanto, Beaumont, Wildomar (Bear Creek), and Fontana. * * * As reported in the Troubled Company Reporter's June 1, 2004 edition, Standard & Poor's Rating Services raised the corporate credit rating on Stater Bros. Holdings Inc. to 'BB-' from 'B+' and raised the rating on the company's 10.75% senior unsecured notes due 2006 to 'B' from 'B-'. "The upgrade reflects the leading Southern California supermarket chain's significantly improved credit protection measures," said Standard & Poor's credit analyst Gerald Hirschberg. A major labor dispute involving three of Stater's principal competitors had a materially positive effect on the company's operations. While this resulted in windfall sales and earnings during the period of the strike (Oct. 11, 2003 through Feb. 28, 2004), sales following the strike have continued to be substantially higher. TERREMARK WORLDWIDE: June 30 Balance Sheet Upside-Down by $2.7MM ---------------------------------------------------------------- Terremark Worldwide, Inc. (AMEX:TWW), a leading operator of integrated Tier-1 Internet exchanges and best-in-class network services, reported its results for the quarter ended June 30, 2004. Terremark's consolidated revenue for the quarter ended June 30, 2004 was $7.9 million compared to $5.9 million for the quarter ended March 31, 2004, an increase of 34%. Data Center revenue generated primarily by the NAP of the Americas increased 37% to approximately $7.1 million for the quarter ended June 30, 2004 from $5.2 million the quarter ended March 31, 2004. The increase in revenue was primarily the result of ramp-up in revenue from recent customer wins. Loss from operations decreased by $0.8 million to $4.4 million for the quarter ended June 30, 2004 compared to a loss of $5.2 million for the quarter ended March 31, 2004. The improvement in the operating loss for the quarter ended June 30, 2004 was primarily attributable to revenue growth during the June 30, 2004 quarter. EBITDA, as adjusted, improved by $0.7 million to $3.1 million for the quarter ended June 30, 2004 from a loss of $3.8 million for the quarter ended March 31, 2004. EBITDA, as adjusted, is defined as loss from operations less depreciation, amortization and stock based compensation. EBITDA should be considered in addition to, but not in lieu of loss from operations reported under GAAP. As of June 30, 2004, the Company's cash balance was $33.2 million. Utilization of total net colocation space increased to 14% from 13% as of June 30, 2004 and March 31, 2004, respectively. Cross connects billed to customers increased by 15% to 1,628 from 1,417 as of June 30, 2004 and March 31, 2004, respectively. Additional information regarding the Company's financial performance as of and for the quarter ended June 30, 2004 and a comparison to the quarter ended June 30, 2003 can be found on the attached balance sheet and statement of operations and in the Company's Quarterly Report on Form 10-Q. Highlights of this quarter include: -- Completing the sale of $86.25 million of a 9.0% Senior Convertible Notes to qualified institutional buyers. Terremark used a portion of the net proceeds from this offering to repay the majority of its outstanding debt. -- Renewing and expanding public sector contracts. -- Expanding additional services to existing customers, including Comsat Argentina, Diveo, Emergia, Global Crossing, HomeXperts, Navega.com. and QoS Labs. -- Being selected to the Russell 2000(R) Index. -- Presenting at leading financial conferences such as AeA's High-Tech 'Micro Cap' Financial Conference. Further, as of July 31, 2004, the Company surpassed the 165 customers mark under contract at the NAP of the Americas, including contracts with telecommunications carriers and service providers such as Akamai, Instituto Costaricense de Electricidad (ICE), Telemar and MetroRed Mexico. A representative list of the NAP of the Americas customers is available at http://www.terremark.com/ "We are pleased with our first quarter revenue growth and expect this increase to continue over the next several quarters," said Manuel D. Medina, Chairman and CEO of Terremark Worldwide, Inc. "With our significantly improved liquidity, a diverse and growing public and private sector customer base, the continued expansion of existing customers, the strong interest of institutional investors in our Company and a solid visibility for growth, we continue to validate the uniqueness of our business model." Business Outlook As previously reported, for the fiscal year ending March 31, 2005, revenues are expected to be in the range of $60 million to $65 million, income from operations will range from $0.5 million to $3 million and EBITDA, as adjusted, will range from $5 million to $8 million. Based on anticipated increase in revenues during fiscal year 2005, the Company expects that, for the month ending March 31, 2005, its revenue will range from $6.5 million to $7 million, income from operations will range from $1.6 million to $2 million and EBITDA, as adjusted, will range from $2.1 million to $2.6 million. About Terremark Worldwide, Inc. Terremark Worldwide Inc. (AMEX:TWW) is a leading operator of integrated Tier-1 Internet exchanges and best-in-class network services, creating technology marketplaces in strategic global locations. Terremark is the owner and operator of the NAP of the Americas, the model for its carrier-neutral Internet exchanges the company has in Santa Clara, California (NAP of the Americas/West), in Sao Paulo, Brazil (NAP do Brasil) and in Madrid, Spain (NAP de las Americas - Madrid). The carrier-neutral NAP of the Americas is a state-of-the-art facility that provides exchange point, collocation and managed services to carriers, Internet service providers, network service providers, government entities, multi- national enterprises and other end users. The NAP, which connects fiber networks in Latin America, Europe, Asia and Africa to those in the U.S., enables customers to freely choose among the many carriers available at the TerreNAP Centers to do business. Terremark is headquartered at 2601 S. Bayshore Drive, 9th Floor, Miami, Florida USA, (305) 856-3200. More information about Terremark Worldwide can be found at http://www.terremark.com/ At June 30, 2004, Terremark Worldwide, Inc.'s balance sheet showed a $2,728,982 stockholders' deficit, compared to a deficit ten- times that amount at March 31, 2004. TIMMINCO LIMITED: Reports $2.6 Million Half-Year Net Loss --------------------------------------------------------- Timminco Limited (TSX: TIM) discloses its financial results for the second quarter of 2004 ended June 30, 2004. The difficult business conditions faced by the Company continued during the second quarter of 2004. The high price of inputs, specifically purchased magnesium, ferrosilicon and natural gas, depressed margins and led to a loss for the quarter. "The high costs of raw material inputs and adverse foreign exchange movements continue to depress earnings to unacceptable levels," noted Tim Pretzer, President and Chief Operating Officer of Timminco Limited. "The Company is currently implementing aggressive pricing actions to offset these factors and improve profitability in the second half of the year." Highlights -- The net loss was $1.5 million or 4 cents per share in the quarter ending June 30, 2004, compared with net income of $1.8 million or 6 cents per share in the corresponding quarter of 2003. Year to date, the net loss was $2.6 million or 7 cents a share compared with a net income of $5.0 million or 18 cents a share for the six months in 2003; -- Sales for the quarter were $26.4 million compared with $27.0 million in 2003. The decline is due to the weakened US dollar vis a vis the Canadian dollar; -- Bank debt at $17.7 million at June 30, 2004 was down from $18.5 million at June 30, 2003; Results Of Operations For the second quarter of 2004, the net loss was $1.5 million or 4 cents per share, compared with net income of $1.8 million or 6 cents per share in the second quarter of 2003. For the six months ended June 30, 2004, the net loss was $2.6 million or 7 cents a share compared with a net income of $5.0 million or 18 cents a share in the same period in 2003. Sales for the second quarter of 2004 were 2% below the corresponding period last year. Sales volume by weight decreased 1.5% compared with the second quarter of 2003. Sales of concrete tools continued strongly in the quarter, while sales of anodes were weaker. The Company exports about 90% of its sales and the majority of these exports are denominated in US dollars, which declined in value relative to the Canadian dollar. For the second quarter of 2004 and the six months ended June 30, 2004, gross profit was $3.5 million and $7.0 million, respectively. In the second quarter, gross profit as a percentage of sales was 13.3% compared with 19.2% in the second quarter of 2003. The price of purchased magnesium that the company uses in most of its products has increased 32% when comparing average cost per pound paid in the second quarter of 2004 with the second quarter of 2003. Furthermore, the increase in the price of natural gas, ferrosilicon as well as several non-recurring manufacturing difficulties, have depressed margins. Selling and administrative expenses in the second quarter of $2.9 million were up $0.6 million from the second quarter of 2003. The increase was planned as the Company expanded its marketing efforts in Europe and Asia and started a satellite facility in Mexico. As well, there were certain one-time legal expenses in the quarter that increased expenses. Amortization of capital assets was $1.1 million in the second quarter of 2004 down from $1.6 million in the second quarter 2003. The absence of major expansion projects in 2004 and 2003 and the asset impairment recognized in the fourth quarter of 2003 account for the decrease. Re-organization expenses in the quarter were $0.2 million and relate to employee moving and severance costs. Manufacturing at Westmeath, Ontario ceased in April 2004. Liquidity and Capital Resources Timminco's operations generated positive cash flows of $1.2 million in the second quarter of 2004 compared with $5.8 million in the second quarter of 2003. Despite the net loss in the quarter, the Company generated cash flow from operations through lower working capital. When compared with December 31, 2003, accounts receivable increased $2.6 million due to stronger sales late in the second quarter of 2004. Inventories were essentially at December 2003 levels in spite of the fact that the Company increased feedstock inventories during June in preparation for the summer production shutdown at its Haley facility. Accounts payable increased from year-end partially due to a high level of purchased magnesium delivered during the month of June 2004. Prepaid expenses and deposits increased $0.4 million predominantly due to the payment of annual insurance premiums in May 2004. Long-term receivables increased $0.6 million due to two employee relocation loans. As at June 30, 2004, Timminco's net bank indebtedness was $17.7 million, compared with $16.9 million as at December 31, 2003 and $18.5 million at June 30, 2003. At June 30, 2004, the Company had, subject to the bank's consent, additional available drawings under the credit agreement with its bank of approximately $6.2 million against maximum lines of credit of approximately $24.5 million measured at the exchange rate of Canadian/US $1.33. Canadian dollar borrowings bear interest at the Bank's prime rate plus 1.5% and US dollar borrowings bear interest at the Bank's base rate plus 1.5%, the premiums being dependent on meeting certain leverage thresholds and having a range of 1.5% to 2.5%. Bank debt is secured by all of the assets of the Company and its subsidiaries. As the Company's Credit Agreement expires in March 31, 2005, all of the bank debt is classified as current. Covenant Problems The Credit Agreement requires quarterly principal payments of $750,000. The first and second quarter 2004 payments of $750,000 have been made. The Company is current with all interest payments. Under the Credit Agreement, the Company is subject to certain covenants, conditions and reporting requirements. At June 30, 2004, the Company was not in compliance with certain of its covenants specified under the terms of the Credit Agreement. The bank has not demanded repayment of the bank debt and the Company is currently engaged in discussions with its banker in order to amend the Credit Agreement. The bank has also granted its consent to the proposed Becancour transaction. In the event that the non-compliance under the Credit Agreement is not cured or waived and the bank demands repayment, the Company may have to obtain replacement financing. Accordingly, the Company is in discussion with other lenders. Private Placement On March 12, 2004, the Company completed a private placement, the proceeds of which were primarily used by the Company to finance the first stage of an acquisition of Fundo Wheels AS and for general corporate purposes. The Company issued 6,750,000 Units at a price of $1.00 per Unit, resulting in aggregate gross proceeds to the Company of $6.75 million. Each Unit consists of one common share and one half of one common share purchase warrant. Each whole warrant is exercisable into one common share of the Company at a price of $1.50 per share for a period of 24 months from March 12, 2004. Under the terms of an Agent's option, the Company issued an additional 1,105,000 units on March 31, 2004 on the same terms and conditions as the initial sale of units, taking the gross proceeds of the private placement to $7,855,000. Gross proceeds were reduced by $0.8 million of expenses associated with the transaction. Certain officers and directors of the Company participated in the Private Placement. Collectively they purchased 505,000 units on the same terms and conditions as the other participants of the Private Placement. On March 15, 2004, Timminco, through its Norwegian subsidiary -- Nor-Wheels, acquired 24.4% of Fundo, which is an original equipment manufacturer of cast aluminum wheels for high-end European car manufacturers. Nor-Wheels also holds an option to acquire approximately 53% of Fundo from its controlling shareholder. This option expires at the end of 2006. Beginning January 1, 2006, Fundo's controlling shareholder may exercise a put option requiring Nor-Wheels to purchase its shares. Outlook For the past twelve months, the increase in the price of purchased magnesium, energy, ferrosilicon, and the decline of the US dollar, have made for a challenging operating environment. Within its existing business, the Company expects sales levels in 2004 to be similar to 2003. Cost improvements and price increases to certain products have been implemented and are expected to show benefits later in the year. As the majority of sales are denominated in US dollars, reported sales will be affected proportionally with changes in the exchange rate between the Canadian dollar and the US dollar. The ability to offset increases in the cost of purchased magnesium via timely price increases is the most significant risk and is a top priority towards achieving stable margins. At the end of June 2004, the cost of purchased magnesium was 32% higher than at the end of June 2003. The Company has initiated actions to reduce the level of capital tied up in inventories and is closely managing its receivables and accounts payable. Management is of the view that operating results on its existing magnesium business should improve before the end of 2004. Timminco is a leading global specialty and light metals company. Their customized magnesium, aluminum, calcium and strontium metal alloys are used to manufacture a variety of products used in a broad range of industries. Timminco facilities in Canada, the United States, Mexico and Australia serve a world-wide customer base. Timminco's common shares are traded on the Toronto Stock Exchange under the symbol TIM. TIMMINCO LIMITED: Plans to Acquire Becancour Silicon for $34 Mil. ----------------------------------------------------------------- Timminco Limited entered into an agreement to acquire all of the outstanding shareholder's capital of Becancour Silicon Inc., a Quebec based producer of high quality chemical and electronics grade silicon metal and specialty ferrosilicon. Becancour Silicon's products are used globally in the manufacture of many consumer and industrial products including silicone sealants, pigments, cosmetics, semiconductors and fiber optic cables. The combined Company will have greater operating scale and financial strength with total assets approximating $150 million and annual revenues of about $200 million. The aggregate purchase price, which the Company will pay to acquire Becancour Silicon is $34 million. The purchase price is to be satisfied by the Company issuing from treasury approximately 30.9 million common shares. At the time of closing of the transaction Becancour Silicon is also expected to have approximately $17 million of net bank indebtedness. The acquisition supports Timminco's strategy to create a larger, more diversified Company manufacturing and selling specialty and light metals. A broader mix of products, including magnesium, calcium, strontium, silicon metal and ferrosilicon, will be supplied to a wider range of customers and industries operating over a larger geographic area. This increased diversity is expected to reduce the volatility of sales and earnings for the combined Company. Building on both companies' strong engineering and management expertise relating to high end metallurgical products is expected to facilitate improvements in manufacturing operations and to enhance the combined Company's competitive position with customers. The increased size of the combined Company should also allow Timminco to access capital markets on more favourable terms. Becancour Silicon is owned indirectly by Safeguard International Fund L.P. Safeguard is also the controlling shareholder of the Company. Safeguard owns approximately 26% of Timminco's shares itself and votes a total of 50.3% under an agreement with the Company's second largest shareholder. The transaction will require the approval of the Company's shareholders other than Safeguard. Upon completion of the transaction Safeguard will own directly and indirectly approximately 59% of the Company's shares and will control the votes of approximately 72.4% of the Company's shares. An Independent Committee of the Board of Directors has reviewed the acquisition. RBC Capital Markets has delivered valuations and a fairness opinion, which concluded that the consideration to be paid by Timminco under the transaction is fair, from a financial point of view, to Timminco. The Timminco Board of Directors, on the recommendation of the Independent Committee, has approved the acquisition and recommends that shareholders vote in favour of the acquisition. Timminco anticipates that a special meeting of shareholders will be held in September which, assuming receipt of the required shareholder and regulatory approvals and consent from Becancour Silicon's lenders, will allow for the transaction to close by September 30, 2004. Timminco is a leading global specialty and light metals company. Their customized magnesium, aluminum, calcium and strontium metal alloys are used to manufacture a variety of products used in a broad range of industries. Timminco facilities in Canada, the United States, Mexico and Australia serve a world-wide customer base. Timminco's common shares are traded on the Toronto Stock Exchange under the symbol TIM. Covenant Problems The Company reclassified the bank debt to current as it is due March 2005. At June 30, 2004, the Company is not in compliance with certain of its covenants specified under the terms of its credit agreement with its bank. The bank has not demanded repayment of the bank debt and the Company is currently engaged in discussions with its banker. In the event that the non-compliance is not cured or waived and the bank demands repayment, the Company may have to obtain replacement financing. TIMMINCO LIMITED: Acquires 24% Fundo Wheels Equity for $4.6 Mil. ---------------------------------------------------------------- Timminco Limited entered into a Call Option and Fees agreement pursuant to which the Company was granted an option to indirectly acquire a 24% interest in the common shares of Fundo Wheels AS (formerly Fundamus AS). However, the Company had no rights or obligations under such agreement until the option was exercised and the exercise of the option was subject to approval by the Company's lenders and certain financing conditions. On March 15, 2004, the Company exercised the option, using the proceeds of a private placement completed on March 12, 2004 (Note 5) to indirectly acquire the 24% interest in Fundo. Fundo, located in Hoyanger, Norway, is an original equipment manufacturer of cast aluminum wheels for high end European car manufacturers. To complete the acquisition, Timminco acquired 100% of the shares of a Norwegian Company, Nor-Wheels AS, which holds 24% of the shares of Fundo. Nor-Wheels has become a subsidiary of Timminco and has assumed the Company's rights and obligations under the Call Option and Fees Agreement and other existing agreements with the controlling shareholder of Fundo, which is the Community of Hoyanger. Under these agreements, Nor- Wheels holds a call option to purchase the Community's Fundo shares before December 31, 2006 on the satisfaction of certain conditions. As at June 30, 2004, the Community owns approximately 53% of Fundo. Beginning January 1, 2006, the Community may exercise a put option requiring Nor-Wheels to purchase the Community's shares. The initial agreements with the Community and the investment in Fundo were negotiated by an unaffiliated corporation whose Chairman is also the Chairman and Chief Executive Officer of Timminco. The rights in these agreements were then transferred to a subsidiary of Safeguard International Fund, LP, the controlling shareholder of Timminco, so that Timminco could complete its review of the opportunity, obtain the consent of its lenders and arrange financing. On March 22, 2004, the transaction was completed. The purchase price for the 24% interest was US $4.6 million which included US $1.2 million for fees and expenses reimbursed to the unaffiliated Corporation. Nor-Wheels also agreed to pay additional fees up to a maximum of US $1.4 million depending on the amount of additional equity of Fundo indirectly acquired and the actual financial performance of Fundo. Timminco is a leading global specialty and light metals company. Their customized magnesium, aluminum, calcium and strontium metal alloys are used to manufacture a variety of products used in a broad range of industries. Timminco facilities in Canada, the United States, Mexico and Australia serve a world-wide customer base. Timminco's common shares are traded on the Toronto Stock Exchange under the symbol TIM. The Company's 2004 second quarter consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company reclassified the bank debt to current as it is due March 2005. At June 30, 2004, the Company is not in compliance with certain of its covenants specified under the terms of its credit agreement with its bank. The bank has not demanded repayment of the bank debt and the Company is currently engaged in discussions with its banker. In the event that the non-compliance is not cured or waived and the bank demands repayment, the Company may have to obtain replacement financing. UAL CORP: Wants Court Nod on Club DIP Facility's 8th Amendment -------------------------------------------------------------- James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells the Court that UAL Corp. and its debtor-affiliates negotiated an amendment to the Club DIP Facility in view of the Air Transportation Stabilization Board's rejection of the Debtors' loan guarantee application. The airline industry's harsher economic climate is also proving to be a headwind. As a result, the Debtors must embark on additional restructuring initiatives, including cost cutting and efficiency improvements, to attract financing to exit from bankruptcy on a non-ATSB-guaranteed basis. Mr. Sprayregen also reminds the Court that the Debtors previously utilized a $300,000,000 amortizing term loan issued by Bank One, N.A. The Debtors made their final payment under the Bank One DIP Facility on July 1, 2004, extinguishing this financing arrangement. According to Mr. Sprayregen, the Debtors are evaluating every aspect of their cost structure to develop cash flows and liquidity levels that will form the basis of a revised business plan that the capital markets will be willing to finance. Implementing additional restructuring initiatives, however, will take time. In the interim, the Debtors need additional DIP financing to meet their liquidity needs during the slower fall and winter season, and to provide a stable financial environment. Most importantly, the additional DIP financing will provide the Debtors' stakeholders with confidence that the Debtors will continue to conduct their operations. This stability will itself preserve cash because stakeholders will resist the temptation to tighten trade credit, demand augmented security deposits, or otherwise treat the Debtors as a credit risk. By this motion, the Debtors ask the Court to approve the DIP Amendments. The Debtors also seek permission to pay JPMorgan Chase Bank, Citicorp USA, CIT and GECC, as arrangers and underwriters, $6,750,000 in aggregate fees. DIP Amendments The Eighth Amendment provides for several meaningful changes to the Club DIP Facility. The Club DIP Lenders agreed to extend the Maturity Date of the Club DIP Facility to June 30, 2005, subject to an extension to September 30, 2005 by an affirmative vote of the Club DIP Lenders. The Club DIP Lenders will increase the term loan under the Club DIP Facility to $800,000,000, resulting in an aggregate increase of $500,000,000 over their present commitment, restoring the total commitment to $1,000,000,000. The Club DIP Lenders also permit a $300,000,000 "overadvance" on the borrowing base. The Club DIP Lenders also agree to increase the amount of debt that can be secured by liens or letters of credit in connection with fuel hedging or similar agreements to $125,000,000, plus the aggregate amount of cash received by United upon a sale or other disposition of any of the Borrower's ownership interests in certain subsidiaries. In turn, the Debtors have increased the total collateral available to the DIP Lenders and included three additional aircraft to the collateral pool. The Debtors and the Club DIP Lenders also revised certain covenants, including: (a) The minimum unrestricted cash and cash equivalents that is required to be on hand at any one time is increased to $600,000,000; (b) The cap on Capital Expenditures is increased consistent with the Club DIP Facility's longer term; (c) The EBITDAR covenants contained in the DIP Credit Facilities are adjusted and extended. The Debtors covenant with the Club DIP Lenders that they will not permit EBITDAR to fall below: Minimum For the Rolling 12-Month Cumulative Period Ending EBITDAR ------------------------ ---------- September 30, 2004 $1,377,000,000 October 31, 2004 1,373,000,000 November 30, 2004 1,281,000,000 December 31, 2004 1,224,000,000 January 31, 2005 1,206,000,000 February 28, 2005 1,169,000,000 March 31, 2005 1,200,000,000 April 30, 2005 1,200,000,000 May 31, 2005 1,200,000,000 (d) The proceeds sharing requirements in connection with the Debtors' disposition of certain assets is revised. The Club DIP Lenders have reduced the pricing of the Facility. As a result, the Debtors will receive a 50 basis point interest rate reduction, which includes current existing indebtedness under the Club DIP Facility. The Debtors will also receive a corresponding reduction in ABR priced loans and letter of credit fees. The Debtors will now pay LIBOR plus 500 basis points, with a 300 basis point LIBOR floor. The reduction in interest rates illustrates that the Debtors will be paying market rates under the amended Club DIP Facility. The Club DIP Lenders' commitment to close on the Eighth Amendment expires on August 31, 2004. Debtors Halt Pension Contributions In support of their request for additional financing and extension of the Maturity Date, the Debtors provided the Club DIP Agents with updated financial projections -- the Gershwin 4.5 -- setting forth the Debtors' projected sources and uses of cash and other collateral available to repay the Club DIP Facility. Recognizing that the Club DIP Lenders are relying on the Gershwin 4.5, the Debtors and the DIP Lenders agreed to a covenant that prohibits the Debtors from making any payments not materially consistent with the financial projections, unless the requisite Lenders otherwise consent to the payment based on a modified business plan submitted by the Debtors. The DIP Lenders agree that the Debtors' failure to satisfy the funding requirements under Section 302 of the ERISA and Section 412 of the Internal Revenue Code with respect to the funding on or before July 15, 2004, September 15, 2004, October 15, 2004, January 15, 2005 and April 15, 2005, will not constitute an Event of Default. Mr. Sprayregen relates that one of the modeling assumptions in the Gershwin 4.5 is that the Debtors will not make any further pension funding contributions prior to their exit from bankruptcy. Certain stakeholders have criticized the Debtors' entry into the Eighth Amendment as allegedly prohibiting the Debtors from funding their pension plans in violation of federal law. The International Association of Machinists and Aerospace Workers has even brought two lawsuits against certain of United's officers of breach of their fiduciary duties by negotiating the DIP Amendments. The Debtors believe that the lawsuits have no merit. There is no basis for any suggestion that the DIP Amendment is improper solely because it is based on the Debtors' financial projections that do not contemplate further pension contributions until exit. It is not unusual or uncommon for a DIP lender to require, as condition to providing financing, that a debtor materially adhere to its projected uses of cash during the term of the loan. The Debtors also believe that the deferral of the pension funding contributions until exit was based on good faith business judgment concerning the uses of cash during this critical phase in their restructuring. 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: Bankruptcy Triggers Nasdaq Delisting Notice ------------------------------------------------------------- Universal Access Global Holdings Inc. (Nasdaq: UAXS) received a Nasdaq Notice of Additional Concerns on August 4, 2004, in response to the Company and its U.S. subsidiaries filing voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The notice states that the Company fails to satisfy the requirements as set forth in Marketplace Rule 4450(f). Rule 4450(f) provides Nasdaq with the authority to suspend or terminate the securities of an issuer that has filed for bankruptcy. The Company previously announced on July 1, 2004 that it received a Nasdaq Staff Determination on June 28, 2004 indicating that the Company failed to satisfy the stockholder's equity, earnings or market value of publicly held shares requirements for continued listing set forth in Marketplace Rule 4310(c)(2)(B), and that its securities were, therefore, subject to delisting from the Nasdaq SmallCap Market. In response to the June 28, 2004 determination, the Company requested an oral hearing before a Nasdaq Listing Qualifications Panel to review the Staff's determination. A hearing was held on July 29, 2004 and the Company is awaiting the Staff's decision. In addition to the Company's information provided at the hearing, the Panel will also consider the Company's Chapter 11 filing in rendering its final decision. There can be no assurance the Panel will grant the Company's request for continued listing on the Nasdaq SmallCap Market. The Company will publicly announce the Panel's determination promptly following notification from the Panel. If the Panel determines to delist the Company's common stock, the Company will explore trading its common stock on the OTC Bulletin Board or the pink sheets. As a result of the Company filing for protection under the U.S. Bankruptcy Code, commencing Friday, August 6, 2004, a fifth character "Q" was added to the Company's trading symbol so that the Company's new trading symbol is "UAXSQ." Headquartered in Chicago, Illinois, Universal Access -- http://www.universalaccess.com/-- provides network infrastructure services and facilitates the buying and selling of capacity on communications networks. The company, and its affiliates, filed for a chapter 11 protection on August 4, 2004 (Bankr. N.D. Ill. Case No. 04-28747). John Collen, Esq., and Rosanne Ciambrone, Esq., at Duane Morris LLC, represent the Company. When the Debtor filed for protection from its creditors, it listed $22,047,000 in total assets and $24,054,000 in total debts. VOEGELE MECHANICAL: Wants to Employ Klett Rooney as Attorney ------------------------------------------------------------ Voegele Mechanical, Inc., asks the U.S. Bankruptcy Court for the Eastern District of Pennsylvania for permission to employ Klett Rooney Lieber & Schorling as its bankruptcy counsel. Klett Rooney is expected to: a) give the Debtor advice with respect to its rights, powers and duties as a debtor and debtor-in-possession, and take necessary action to protect and preserve the Debtor's estate, including prosecuting actions on the Debtor's behalf, defend any actions commenced against the Debtor, negotiate all disputes involving the Debtor, and prepare objections to claims filed against he Debtor's estate; b) prepare necessary pleadings, motions, applications, draft orders, notices, schedules and other documents, and review all financial and other reports to be filed in this Chapter 11 case, and advice and prepare responses to, applications, motions, other pleadings, notices and other papers that may be filed and served; c) review the nature and validity of any liens asserted against the Debtor's properties and advise the Debtor concerning the enforceability of such liens; d) counsel the Debtor in connection with the formulation, negotiation and promulgation of a plan of reorganization or liquidation and related documents, and take all further actions as may be required in connection with the Plan; e) advise and assist the Debtor in connection with any potential asset dispositions; f) advise the Debtor concerning executory contract and unexpired lease assumptions, assignments, rejections and lease restructurings and recharacterizations; and g) perform all other necessary legal services in connection with this Chapter 11 case. To the best of the Debtor's knowledge, Klett Rooney is a "disinterested person" as that phrase is defined in Section 101(14) of the Bankruptcy Code. Klett Rooney professional will bill the Debtor its current hourly rates: Professional Hourly Rate ------------ ----------- William H. Schorling $520 Jeffrey M. Carbino $295 Rhonda L. Thomas $220 Denise Adamucci $220 Zakarij O. Thomas $175 Frances Panchak $140 Headquartered in Philadelphia, Pennsylvania, Voegele Mechanical -- http://www.voegele.net/-- is a heating, air conditioning, refrigeration, plumbing and electricity contractor. The Company filed for chapter 11 protection on August 3, 2004 (Bankr. E.D. Pa. Case No. 04-30628). When the Debtor filed for protection it estimated its assets and debts at more than $10 million. WORLDCOM INC: Court Denies State's Request to Unseal SEC Documents ------------------------------------------------------------------ Thomas F. Reilly, Attorney General for the Commonwealth of Massachusetts, representing Alan LeBovidge, the Massachusetts Commissioner of Revenue, relates that WorldCom Inc. and its debtor-affiliates and KPMG, LLP, delivered to the United States Securities and Exchange Commission certain production documents, which became subject of in camera hearings. On June 14, 2004, Judge Gonzalez ordered the unsealing of all in camera materials. The Order also provided that "[n]othing in this Order shall affect the status of the SEC Production Documents, which shall remain restricted to in camera review unless and until the Court may order otherwise." The SEC Production Documents are being reviewed and relied on by the Court in its adjudication of the Disqualification Motion. "There is a strong presumption in favor of public access to these judicial documents, buttressed by the full disclosure principles of the Bankruptcy Code and Rules, and there is no countervailing interest that warrants non-disclosure of these documents," Mr. Reilly says. On behalf of the Commonwealths of Massachusetts, Kentucky and Pennsylvania, and the States of Alabama, Arkansas, Connecticut, Florida, Georgia, Iowa, Maryland, Michigan, Missouri, New Jersey, and Wisconsin, Mr. LeBovidge asks the Court to: (a) unseal all the SEC Production Documents; (b) make the SEC Production Documents available for public inspection; and (c) disclose the SEC Production Documents to the extent that a sufficiently strong countervailing interest in non- disclosure can be established for any specific document. Objections (A) KPMG Contrary to the States' assertions, the SEC Production Documents are not "judicial documents" and therefore are not subject to the common law presumption of public access, Patrick L. Hayden, Esq., at McGuireWoods, LLP, in New York, argues. To constitute a judicial document, "the item filed must be relevant to the performance of the judicial function and useful in the judicial process . . ." The U.S. Supreme Court in Press-Enterprise Co. v. Superior Court of California for the County of Riverside, 478 U.S. 1, 8 (1986) held that public access to documents that a court did not consider in adjudicating a matter would not "play a significant positive role in the functioning of the particular process in question." Mr. Hayden points out that the Bankruptcy Court was explicit in declaring that the SEC Production Documents were not necessary to the Bankruptcy Court's denial of the Disqualification Motion and that the Documents relate to an issue not before it. Mr. Hayden reminds Judge Gonzalez that in Anderson v. Cryovac, Inc., 805 F.2d 1, 13 (1st Cir.1986), the First Circuit held that documents, which were not used in the adjudicative process are not "judicial documents," and disclosure of the documents to the public is not appropriate. (B) Debtors The request to disclose the SEC Production Documents is merely an attempt by the States to gain an improper litigation advantage, Alfredo R. Perez, Esq., at Weil, Gotshal & Manges, LLP, in New York, observes. Mr. Perez contends that there is no basis to compel disclosure because the Documents were submitted in the context of a Chapter 11 case wherein a debtor often submits documents and confidential information to the Court and to other parties-in-interest. The Bankruptcy Code explicitly protects trade secrets and confidential research, development, or commercial information. The Debtors and KPMG complied fully with the SEC's requests for production of documents. "Consistent with the Freedom of Information Act, disclosure of information collected by government agencies for law enforcement purposes in many circumstances may be exempt," Mr. Perez says. The privacy interests of the Debtors and KPMG also weigh heavily against disclosure. The documents contained in the SEC Production contain confidential and sensitive information regarding the Debtors' tax planning and their internal assessment of potential tax liabilities. The Debtors and KPMG have a great interest in maintaining the confidentiality of the documents. There is no public interest in the Documents, Mr. Perez asserts. The public is not usually privy to the sensitive and confidential corporate documents maintained by a company and its independent auditor. * * * Judge Gonzalez denies the States' request to unseal the SEC Production Documents. (Worldcom Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) XEROX CORPORATION: Moody's Raises Senior Implied Ratings to Ba1 --------------------------------------------------------------- Moody's Investors Service raised the senior implied rating of Xerox Corporation and its financially supported subsidiaries to Ba1 from Ba3. The action reflects expectations that Xerox will continue its good operational execution and generate stable to improving profits and free cash flow, continue to reduce leverage, and maintain solid liquidity after meeting scheduled debt maturities. The outlook is stable. This concludes a review initiated June 29, 2004. Ratings raised include: Xerox Corporation: * Senior implied to Ba1 from Ba3; * Senior unsecured to Ba2 from B1; * Senior unsecured shelf registration (P) Ba2 and (P) B1; * Subordinated to Ba3 from B3; * Subordinated shelf registration to (P) Ba3 from (P) B3; * Preferred to B1 from Caa1 * Preferred shelf registration to (P) B1 from (P) Caa1 Xerox Credit Corporation: * Senior unsecured to Ba2 from B1 (support agreement from Xerox Corporation); * Xerox Capital (Europe) PLC; * Senior unsecured to Ba2 from B1 (guaranteed by Xerox Corporation); With a broad and solid product lineup, and expectations of consistent execution, we expect that Xerox equipment revenues (up on a constant currency basis over the last five quarters) should continue to show modest growth over the intermediate term. Even after considering the recent weakness in Latin America, this should set the stage for gradual post sale revenue growth beginning in 2005. Notwithstanding recently improved equipment revenues, Xerox total revenues are likely to be flat over the next year until the expected post sale activity materializes. Modest growth in its digital office and production segments (which include color) will be partially offset by the continued decline in post sale revenues related to legacy analog product, although this is becoming less of a drag as the size of analog (or light lens) diminishes (Moody's estimates about 7% of revenues in 2004). Going into 2005, subject to customer page volumes and continued competition from printers in the low and medium volume segments, we expect revenues to show modest improvement. A driver to this expected revenue growth includes color devices that now account for 25% of total revenues, 4% of page volumes, and an increasing amount of post sale revenue. Xerox's improved cost structure, product lineup, and good execution is demonstrated by its stable gross margins of about 41% over the last several quarters as well as its operating margins, which have improved from 8.6% in 2002 to 9.4% over the latest twelve months ended June 2004. While Xerox has made progress in reducing total SG&A costs, we believe that more is needed in order to further expand operating margins, particularly in a low revenue growth environment. While we expect that Xerox will continue to take actions on this front, we believe that restructuring related cash outlays will continue to diminish from the $345 million level expended in 2003. The rating action also reflects continued improvements in debt protection measures, including expectations that debt will decline further as Xerox applies its free cash flow toward debt reduction. Free cash flow measured $1.3 billion over the latest twelve months ended June 2004. Over the last year, Xerox has contributed $869 million of cash to its pension plans. Its U.S. defined benefit pension plan is fully funded on a current liability basis (although modest future funding is possible) while its non US plans will likely require modest statutory funding going forward. After adjusting for lower outflows related to pension funding and reduced sources related to finance receivables, we expect similar levels of free cash flow over the next twelve months. We expect total debt (including certain debt attribution to the company's capital trust and mandatorily convertible securities) to decline from $13 billion at December 2003 to about $11.5 billion in 2004. This includes Xerox's recent $500 million seven year senior unsecured issuance and excludes the potential conversion this December of the Xerox Capital Trust II securities whose conversion price of $9.13 compares to the current market price of over $13. Liquidity remains strong (Speculative Grade Liquidity rating of SGL-1), with cash balances of $2.5 billion at June 2004 (plus $500 million following the recent financing), full access to its $700 million secured revolving credit facility, for which covenant room is expected to remain ample, and significant availability under its various secured receivable lending arrangements with General Electric Capital Corporation. Combined with our expectations of stable free cash flow, Xerox is well positioned to meet scheduled debt maturities of approximately $1.1 billion in the second half of 2004 and about $1 billion in 2005 (excluding borrowings secured by finance receivables). For the three years thereafter, debt maturities total just $700 million, including its $300 million secured term bank facility that matures September 2008. Although uncertain as to timing and magnitude, the company might also need to contend with calls on cash over the medium term relating to outstanding litigation. After considering its current liquidity profile along with prospective free cash flow generation against the backdrop of the above public debt maturity profile, Moody's expects that Xerox should be well positioned to address these contingencies. The ratings could experience upwards rating pressure over time to the extent that management continues to deleverage the balance sheet, while maintaining consistent operational execution, including the achievement of sustained revenue growth coupled with consistent operational cash flow generation. Further enhancements to its credit profile would also include the diminished use of secured financing as well as the resolution of outstanding litigation. Xerox Corporation, headquartered in Stamford, Connecticut, develops, manufactures and markets document processing equipment and provides document facilities management services worldwide. * Charlie Wang Joins Cadwalader as Capital Markets Partner ---------------------------------------------------------- Charlie Wang has joined Cadwalader, Wickersham & Taft LLP as a partner in its Capital Markets Department, resident in the Washington, DC office. Mr. Wang, a former Chinese law professor and Chinese District Court Judge, has extensive experience in structured finance and capital markets. His practice will focus on emerging opportunities in securitization and other forms of finance in China. "Charlie is an outstanding addition to our firm and our capital markets practice. Charlie will help the firm capitalize on business opportunities in China, now considered one of the world's leading financial markets," said Cadwalader Chairman and Managing Partner Robert O. Link, Jr. "The combination of his legal background and contacts in the Chinese legal community, and the firm's preeminent reputation in securitization and other forms of finance, will enable Cadwalader to offer unprecedented service for clients with business interests in China." "I am seeing more and more complex deals emerge that involve Chinese and foreign interests," said Mr. Wang. "Along with this, as China continues to liberalize trade and investment three key opportunities are emerging: First, with a thriving private sector the need for outside capital is at an all time high. Second, with the adoption of western methods of securitization, the capital markets are ripe with opportunity. Third, with the restructure of a previously state-owned banking system the need to be competitive and compatible on a global scale is of utmost importance. I am delighted to rejoin Cadwalader at this exciting time. We have an unprecedented opportunity to apply Cadwalader's knowledge of the capital markets and leverage our relationships with leading financial institutions looking to do business with, and in, China." Mr. Wang, a native of mainland China, earned his LLB with honors from Xiangtan University in 1989. Prior to moving to the United States to continue his education, he served as a Judge in the Chinese District Court, Commercial Division. He has had professorial roles both as a Research Professor at Hunan University College of Law, and as a Visiting Professor at Xiangtan University College of Law in China. Mr. Wang earned his M.A. from Ohio University in 1994 and his J.D. and LLM from Duke University in 1999. He was previously an associate in the Capital Markets Department at Cadwalader. Most recently Mr. Wang, served as Of Counsel at Wiley Rein & Fielding in Washington Cadwalader, Wickersham & Taft, established in 1792, is one of the world's leading international law firms, with offices in New York, Charlotte, Washington and London. Cadwalader serves a diverse client base, including many of the world's top financial institutions, undertaking business in more than 50 countries in six continents. The firm offers legal expertise in securitization, structured finance, mergers and acquisitions, corporate finance, real estate, environmental, insolvency, litigation, health care, banking, project finance, insurance and reinsurance, tax, and private client matters. More information about Cadwalader can be found at http://www.cadwalader.com/ ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***