T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, August 18, 2004, Vol. 8, No. 174 Headlines ADELPHIA BUSINESS: Has Until October 6 to Object to Claims ALL STAR GAS: Emerging from Bankruptcy as Court Approves Plan AMERICAN TOWER: Raising $300 Million to Refinance 9-3/8% Sr. Debt AMERICAS MINING: S&P Raises Corporate Credit Rating to B- AMERICAN UNITED: Inks Letter of Intent with Southern Gas Company AMERICREDIT CORP: Prices $800 Million Asset-Backed Securitization AMPHENOL CORP: Moody's Upgrades Credit Facility Rating to Ba1 APPLIED EXTRUSION: Reports FY 2004 3rd Quarter $18.6MM Net Loss ASTROPOWER: Proposes Plan Solicitation & Voting Procedures BELL CANADA: Union Ratifies Collective Bargaining Agreement BRIDGE TECH: U.S. Trustee Appoints 4-Member Creditors Committee CALPINE: Inks Pact to Sell Canadian Assets to PrimeWest for $625MM CANDESCENT TECHNOLOGIES: Steve Berson Moves to Kilpatrick Stockton CATHOLIC CHURCH: Can't Prepare Monthly Operating Reports on Time CATHOLIC CHURCH: Abuse Claimants Want to Use Fictitious Names CCC INFORMATION: Insurers Will Pay $4.75 Million Settlement CHEM PORT LLC: Case Summary & 22 Largest Unsecured Creditors CITADEL HILL: Fitch Affirms $15MM Class B-2L Notes' BB- Rating COVANTA ENERGY: Affiliates' Claims Objection Deadline Extended CROMPTON CORP: Completes $945 Million Refinancing Program D'LISI FOOD SYSTEMS: Case Summary & Largest Unsecured Creditors DEAN FOODS: Fitch Upgrades Senior Unsecured Debt Rating to BB DENNINGHOUSE INC: Files for CCAA Protection & RSM is the Monitor DENNY'S CORPORATION: Moody's Junks $379 Million Senior Notes DENNY'S CORP: S&P Junks $100MM Second-Lien Loan & $220MM Notes ELANTIC TELECOM: Wants Ordinary Course Professionals to Continue ENRON: Oregon Electric Guarantees PGE Customers $15MM Rate Credit ENRON CORP: Objects to PBGC's Remaining $320 Million Claims ENRON CORP: Affiliate Asks Court to Okay Liston Brick Settlement ENTERPRISE PRODS: GulfTerra Noteholders Agree to Scrap Covenants EQUISTAR CHEM: Retains S&P's B+ Credit Rating & Stable Outlook EVERGREEN CARDIOLOGY: Case Summary & Largest Unsecured Creditors FACTORY 2-U: Selling All Assets to National Stores Affiliate FALCON HOSPITALITY: Files Plan and Disclosure Statement in Nevada FEDERAL-MOGUL: Wants Until December 1 to Decide on Leases FIRST UNION-LEHMAN: S&P Affirms Class J Junk Rating FLEMING COMPANIES: Wants to Hold 14 Leases Until August 31 FLEMING COMPANIES: Sells Five Real Estate Parcels for $392,000 FORTRESS CBO: Moody's Affirms $17.5MM Preferred Certs. B2 Rating FOSTER WHEELER: Subsidiary Wins PMB Contract for Petronas Plant FUJITA CORPORATION: Creditors Must File Claims by September 15 FURNACE & TUBE: Case Summary & 18 Largest Unsecured Creditors GENERAL MEDIA: Penthouse Intents to Stall Bankruptcy Emergence GLOBAL CROSSING: Sells Global Marine Systems to Bridgehouse Marine HAYES LEMMERZ: Trust Settles 25 Avoidance Claims for $894,230 IPCS INC: Reorganized Company's Balance Sheet Insolvent by $200MM INDUSTRIAL DEV'T: Lawsuit Prompts Moody's Ba1 Bond Rating INDUSTRIAL WHOLESALE: First Creditors Meeting Slated for Sept. 13 LAIDLAW INT'L: Discusses Post-Confirmation Safety-Kleen Exposure LEAP WIRELESS: Emerges from Chapter 11 with New Board of Directors LEAP WIRELESS: Acquires Wireless Spectrum in Fresno for $27.1 Mil. LIFEPOINT HOSPITALS: S&P Puts BB Credit Rating on Negative Watch MOONEY AEROSPACE: Arent Fox to Represent Unsecured Creditors NETWORK INSTALLATION: Gets $40,000 S.F. Bay Area IT Contract NEXTWAVE TELECOM: Wants Exclusivity Extended through October 12 NORCROSS SAFETY: S&P Affirms B+ Credit Rating With Stable Outlook LOMA COMPANY: Section 341(a) Meeting Slated for September 21 MID-STATE RACEWAY: Hires Harris Beach as Bankruptcy Counsel MIRANT CORP: Judge Lynn Gives Examiner More Responsibilities MERITAGE MORTGAGE: Fitch Assigns BB+ Rating on $12.6MM Class M-10 NORTEL NETWORKS: Canadian Police to Start Criminal Investigation OMNI FACILITY: Has Until Sept. 10 to File Bankruptcy Schedules RCN CORP: Discloses $71.6 Million Net Loss for 2004 Second Quarter RCN: Gets Court Nod to Employ Winston & Strawn as Special Counsel RELIANCE INSURANCE: Court Approves $450,000 King County Land Sale RIO ALTO RESOURCES: Shareholders Approve Plan of Arrangement RIO ALTO: Reports $19.7MM Book Loss in Argentina Assets Write Down RS GROUP: Reports $11 Million in Revenue from CIL Acquisition SK GLOBAL: Transfers 13 Claims Totaling $265MM+ to SK Networks SOLUTIA: Wants Remediation Pact with Inquip & Monsanto Approved SPIEGEL: Asks Court for Permission to Reject 53 Newport Contracts STONE MACHINE: Case Summary & 17 Largest Unsecured Creditors SUNRISE CDO: S&P Places B- Rated Class C Notes on Negative Watch TRANSWESTERN PUBLISHING: Moody's Puts B1 Rating on First-Lien Loan UNIFLEX, INC.: Committee Hires Lowenstein Sandler as Counsel UNITED AIRLINES: Aircraft N379UA Holds Allowed $8,160,355 Claim US AIRWAYS: Asks IRS to Stretch Pension Contributions Over 5 Years US AIRWAYS: Negotiates Waiver of Credit Rating Triggers VIATICAL LIQUIDITY: Hires Sparber Rudolph as Bankruptcy Counsel VIVENTIA BIOTECH: Equity Deficit Tops $13 Million at June 30 W.R. GRACE: Separation Group Acquires Alltech Int'l Holdings WASTE SERVICES: Discloses $29.3 Million Half-Year Net Loss WASTE SERVICES: Fails to Meet Covenants in Senior Credit Agreement WESTLAKE CHEMICAL: S&P Raises Credit Rating to BB after IPO WILSONS LEATHER: Pays $8.6 Million 11-1/4% Sr. Notes at Maturity WILSONS LEATHER: Appoints Executives to New Leadership Roles WORLDCOM INC: Asks Court for Summary Judgment on Acosta's Claim XO COMMS: Appoints Heather Burnett Gold Government Relations VP * Upcoming Meetings, Conferences and Seminars ********* ADELPHIA BUSINESS: Has Until October 6 to Object to Claims ---------------------------------------------------------- Judge Gerber of the U.S. Bankruptcy Court for the Southern District of New York gave Adelphia Business Solutions, Inc., and its debtor-affiliates until October 6, 2004 to object to claims in their chapter 11 cases. Headquartered in Coudersport, Pa., Adelphia Business Solutions, Inc., now known as TelCove -- http://www.adelphia-abs.com/-- is a leading provider of facilities-based integrated communications services to businesses, governmental customers, educational end users and other communications services providers throughout the United States. The Company filed for Chapter 11 protection on March 27, 2002 (Bankr. S.D.N.Y. Case No. 02-11389) and emerged under a chapter 11 plan on April 7, 2004. Judy G.Z. Liu, Esq., at Weil, Gotshal & Manges LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $2,126,334,000 in assets and $1,654,343,000 in debts. The Company emerged from bankruptcy on April 7, 2004. (Adelphia Bankruptcy News, Issue No. 65 and 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALL STAR GAS: Emerging from Bankruptcy as Court Approves Plan ------------------------------------------------------------- All Star Gas and its affiliates are scheduled to emerge from the protection of Chapter 11 following a federal bankruptcy court's approval of the company's plan of reorganization. The company's board retained on a permanent basis John R. Gordon, who had served as the company's chief executive during the Chapter 11 case. The bankruptcy court action followed approval of the plan of reorganization by the company's senior lenders and unsecured creditors. Under the plan, the senior secured Noteholders will exchange more than $60 million of debt for 100 percent of the stock of the company. Most other secured lenders will be paid in full over five years, and unsecured creditors will, depending on their class, receive distributions of up to 7.5 percent, for most unsecured creditors or, in other cases, up to 45 percent. "All of us are happy to get court approval for the plan of reorganization and are optimistic about what the future holds for All Star Gas and its customers," said John Gordon, chief executive officer of All Star Gas. "We appreciate the support from our customers and the community while we restructured the company's obligations," Gordon added. Gordon was appointed chief executive in April 2003, and led the company's restructuring efforts. He is a partner of Corporate Revitalization Partners, a Dallas-based turnaround management firm. The plan was the product of extensive negotiations among All Star Gas, the Official Committee of Unsecured Creditors appointed in its Chapter 11 case, and the company's senior secured Noteholders. "This has been a textbook chapter 11 case," stated Tom Patterson of Klee, Tuchin, Bogdanoff & Stern LLP, bankruptcy counsel for All Star. "The case had its moments of contention, but John Gordon and his management team built successfully on the company's traditional strengths to create a solid business, winning the confidence of key creditor groups and ultimately enabling the company to reorganize on a largely consensual basis." All Star Gas filed for Chapter 11 reorganization protection on July 21, 2003, and filed its Plan of Reorganization with the U.S. Bankruptcy Court on Dec. 31, 2003. For more than 30 years, All Star Gas has provided dependable, affordable propane to residential and business customers. The company and its subsidiaries currently supply approximately 48,000 customers in Arkansas, Arizona, Colorado, Missouri, Oklahoma and Wyoming. Further information on All Star Gas is accessible at http://www.allstargas.com/ AMERICAN TOWER: Raising $300 Million to Refinance 9-3/8% Sr. Debt ----------------------------------------------------------------- American Tower Corporation (NYSE: AMT) is seeking to raise approximately $300 million through an institutional private placement of convertible notes due 2012. In addition, the company is expected to grant the initial purchasers of the notes an option to purchase up to an additional $45.0 million principal amount of the notes. The closing of the offering is expected to occur in late August, subject to market conditions. The company intends to use all of the net proceeds of the offering to refinance a portion of its outstanding 9-3/8% senior notes due 2009 either through redemption or repurchase. This announcement is neither an offer to sell nor a solicitation of an offer to buy any of the notes. The notes and the Class A common stock issuable upon conversion of the notes have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and are being offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act. Unless so registered, the notes may not be offered or sold in the United States except pursuant to an exemption from registration requirements of the Securities Act and applicable state securities laws. American Tower is the leading independent owner, operator and developer of broadcast and wireless communications sites in North America. American Tower operates approximately 15,000 sites in the United States, Mexico, and Brazil, including approximately 300 broadcast tower sites. For more information about American Tower Corporation, visit http://www.americantower.com/ * * * Liquidity Concerns In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commission, American Tower Corporation reports: "As of June 30, 2004, our annual consolidated cash debt service obligations (principal and interest) for the remainder of 2004 and for each of the next four years and thereafter are approximately: $96.0 million, $193.0 million, $214.5 million, $507.2 million, $942.9 million and $2.6 billion, respectively. If we are unable to refinance our subsidiary debt or renegotiate the terms of such debt, we may not be able to meet our debt service requirements in the future. In addition, as a holding company, we depend on distributions or dividends from our subsidiaries, or funds raised through debt and equity offerings, to fund our debt obligations. Although the agreements governing the terms of our credit facility and senior subordinated notes permit our subsidiaries to make distributions to us to permit us to meet our debt service obligations, such terms also significantly limit their ability to distribute cash to us under certain circumstances. Accordingly, if we do not receive sufficient funds from our subsidiaries to meet our debt service obligations, we may be required to refinance or renegotiate the terms of our debt, and there is no assurance we will succeed in such efforts." AMERICAS MINING: S&P Raises Corporate Credit Rating to B- --------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Americas Mining, Corp., and its three mining subsidiaries: (1) Minera Mexico S.A. de C.V.; (2) ASARCO, Inc.; and (3) Southern Peru Copper Corp., to 'B-' from 'CCC+'. The ratings were removed from Creditwatch, where they were placed on June 23, 2004. The outlook is positive. "The upgrade on [Americas Mining] and its subsidiaries reflects the company's improved cash flow and ability to significantly reduce leverage," said Standard & Poor's credit analyst Juan P. Becerra. "This in turn was due to higher-than-expected metals prices and the dedication of excess cash flow to repay debt (as required by Minera Mexico debt covenants)." The rating on Americas Mining and its subsidiaries reflects the company's still-aggressive debt profile, volatile metal prices, average cost position, and lack of product and geographic diversification. In addition, Americas Mining has very limited liquidity at the holding company level and a high dependence on volatile dividends from Southern Peru, given the current effective cash trap at the Minera Mexico level and negative cash flow at Asarco. These factors are balanced by Americas Mining's position as the third-largest copper producer in the world, including particularly low-cost mines at Southern Peru, its vertical integration, and its realized and expected debt reduction. The positive outlook reflects Standard & Poor's expectations that Americas Mining could continue to reduce debt at the holding level, but more significantly at Minera Mexico's level as long as the current high copper prices are sustained. It also contemplates Southern Peru 's ability to continue funding Americas Mining's cash shortfalls through its dividends. The outlook could return to stable if debt reduction is lower than expected. AMERICAN UNITED: Inks Letter of Intent with Southern Gas Company ---------------------------------------------------------------- American United Global, Inc. (Pink Sheets:AUGB) has entered into a non-binding Memorandum of Understanding with Southern Gas Company, a limited liability company incorporated in Russia and based in Moscow. Through its subsidiaries and affiliates, Southern Gas owns 100% of a company that operates a 3.5 mile gas pipeline between Rostov, Russia and the Ukraine, 100% of a well extraction equipment supply company, and a minority interest in an extraction company in Russia. Southern Gas advises that it controls approximately 17.5 billion cubic meters of natural gas reserves and currently operates thirteen income producing gas wells and that annual revenues are approximately $35,000,000. The MOU contemplates a reverse acquisition under the terms of which American United will issue approximately 33.0 million shares of its common stock (to represent not less than 70% of the fully- diluted American United common stock) to the equity owners of Southern Gas in consideration for 100% of the equity in Southern Gas and subsidiaries. Assuming the issuance of 33.0 million American United shares to the Southern Gas equity owners, the holders of American United securities prior to the transaction will effectively retain on the closing date not more than 14.0 million common shares on a fully diluted basis. It is the intention of the parties to enter into a definitive purchase agreement and consummate the transaction by December 31, 2004. Consummation of the transaction is subject to a number of conditions, including: -- Southern Gas acquiring the balance of the ownership of the extraction company so that it will be the sole shareholder of that entity at the closing; -- completion of a satisfactory due diligence investigation by both parties; -- delivery of audited consolidated financial statements of Southern Gas for the two years ended December 31, 2003 and the nine months ended September 30, 2004; -- total debt and contingent liabilities of American United, excluding any liabilities that may be indemnified against in a manner satisfactory to Southern Gas, shall not exceed $100,000; and -- approval by the American United stockholders. In a related transaction, American United established a special purpose joint venture acquisition company with Vertex Capital Corporation to acquire the equity of Southern Gas. American United owns 78.6% and Vertex owns 21.4% of the equity of the new joint venture entity, with either party having the right to cause the Vertex equity to be exchanged for 3.5 million American United shares upon completion of the Southern Gas acquisition. Principals of Vertex have made the introductions and are facilitating the Southern Gas transaction, including payment of certain transaction expenses. American United has re-applied to relist its common stock on the Over the Counter Bulletin Board and anticipates that its common stock will resume trading there in September. At March 31, 2004, American United Global's balance sheet showed a $4,307,000 stockholders' deficit, compared to a $3,658,000 deficit at December 31, 2003. AMERICREDIT CORP: Prices $800 Million Asset-Backed Securitization ----------------------------------------------------------------- AmeriCredit Corp. (NYSE:ACF) priced an $800 million offering of automobile receivables-backed securities through lead managers Deutsche Bank Securities and Wachovia Securities. Co-managers are JPMorgan, Lehman Brothers and UBS Investment Bank. AmeriCredit uses net proceeds from securitization transactions to provide long-term financing of its receivables. The securities will be issued via an owner trust, AmeriCredit Automobile Receivables Trust 2004-C-A, in four classes of Notes: Note Class Amount Average Life Price Interest Rate ---------- ------ ------------ ----- ------------- A-1 $161,000,000 0.27 years 100.00000 1.765% A-2 $228,000,000 0.95 years 99.99524 2.39% A-3 $205,000,000 2.05 years 99.98977 3.00% A-4 $206,000,000 3.34 years 99.96976 3.61% ------------ $800,000,000 ============ The weighted average coupon is 3.2%. The Note Classes are rated by Standard & Poor's, Moody's Investors Service and Fitch Ratings. The ratings by Note Class are: Note Class Standard & Poor's Moody's Fitch ---------- ----------------- ------- ----- A-1 A-1+ Prime-1 F1+ A-2 AAA Aaa AAA A-3 AAA Aaa AAA A-4 AAA Aaa AAA This transaction represents AmeriCredit's first securitization in which Ambac Assurance Corporation is providing bond insurance. Initial credit enhancement will total 10.5% of the original receivable pool balance building to the total required enhancement level of 18.5% of the then outstanding receivable pool balance. The initial 10.5% enhancement will consist of 2.0% cash and 8.5% overcollateralization. This transaction represents AmeriCredit's 45th securitization of automobile receivables in which a total of more than $34 billion of automobile receivables-backed securities has been issued. Copies of the prospectus relating to this offering of receivables- backed securities may be obtained from the managers and co- managers. AmeriCredit Corp. is a leading independent auto finance company. Using its branch network and strategic alliances with auto groups and banks, the Company purchases retail installment contracts entered into by auto dealers with consumers who are typically unable to obtain financing from traditional sources. AmeriCredit has more than one million customers and nearly $12 billion in managed auto receivables. The Company was founded in 1992 and is headquartered in Fort Worth, Texas. For more information, visit http://www.americredit.com/ * * * As reported in the Troubled Company Reporter on February 3, 2004, Standard & Poor's Ratings Services revised its outlook on AmeriCredit Corp. to stable from negative, and affirmed its ratings, including its 'B' long-term counterparty credit rating, on the company. The outlook revision reflects the improvement in the company's financial performance and stabilization of its asset quality measures. "The ratings also reflect the company's significant capital base of $1.96 billion, which provides a significant cushion given the high level of charge-offs that the company has been experiencing. The company has also successfully been able to access the securitization market, albeit at higher credit enhancement levels," said Standard & Poor's credit analyst Lisa J. Archinow, CFA. AMPHENOL CORP: Moody's Upgrades Credit Facility Rating to Ba1 -------------------------------------------------------------- Moody's upgraded Amphenol Corporation's ratings to reflect the company's improved credit statistics and strong free cash flow. Amphenol's credit quality has improved primarily due to management's focus on debt reduction and due to its strong operating performance in recent quarters. This rating action concludes the review of the company's ratings for possible upgrade initiated on April 23, 2004. The ratings outlook is stable. Moody's upgraded these rating: * $125 million senior secured revolver, due May 6, 2008, upgraded to Ba1 from Ba2; * $125 million ($38 million outstanding) senior secured Term Loan A, due May 6, 2008, upgraded to Ba1 from Ba2; * $500 million ($400 million outstanding) senior secured Term Loan B, due May 6, 2010, upgraded to Ba1 from Ba2; * Senior Implied, upgraded to Ba1 from Ba2; * Senior Unsecured Issuer, upgraded to Ba2 from Ba3. Moody's confirmed these rating: * Speculative Grade Liquidity rating; rated SGL-1. Moody's notes that Amphenol's financial performance has been very strong in recent quarters with a 27% increase in sales for the second quarter of 2004 and for the first half of the year. The company's operating margins for the first six months of 2004 increased to 17.6% from 16.2% for the same period in 2003. Amphenol's operating margins have benefited from: -- increased operating leverage; -- higher margins on its application specific connector products; and -- continuing programs of cost control. Furthermore, the company's revenues are derived from a broad customer and geographic base. Cash flows should continue to benefit from the company's efficiency focus. These factors, combined with a conservative acquisition strategy, suggest that the company's balance sheet should continue to improve. The company's total debt has decreased to $476.7 million at the end of the second quarter of 2004 from $644 million at the end of 2002. Amphenol's revenues are expected to be affected by GDP growth, and in particular in demand for electronics, as this leads to growth in the connector market. Hence, a slowdown in global economic growth would likely have an adverse effect on demand for the company's products. The confirmation of the SGL-1 rating reflects expectations for a good projected liquidity profile over the next twelve months. The rating reflects expectations for significant availability under its $125 million revolving credit facility ($117 million at June 30, 2004), and improving flexibility under bank financial covenants despite a small step down in the total leverage covenant in the first quarter of 2004 to 3.75 times from 3.8 times and then down to 3.5 times in the first quarter of 2005. The company's liquidity benefits from a lack of upcoming debt maturities in 2004 as amortization payments for both the Term Loan A and Term Loan B have been prepaid through 2007. The company's acquisition program is expected to focus on smaller, niche candidates that should require only limited short-term revolver usage. Moody's believes the company has few, if any, non-core assets that could be tapped for liquidity without affecting the company's core business offerings. Furthermore, the company has an $85 million accounts receivable securitization facility of which $68 million of receivables were sold as of June 30, 2004. Amphenol's SGL-1 rating will be sensitive to the company's ability to sustain its level of free cash flow, to changes in the company's business climate, and other risk factors. For the last twelve months ended June 30, 2004 the company's cash flow from operations totaled $175 million versus total debt of $476.7 million. Debt to EBITDA was approximately 1.7 times. Adjusted for the off-balance sheet accounts receivable securitization and $103 million of pension liabilities, adjusted debt to EBITDA was in the area of 2.3 times. EBITDA coverage of interest for the last twelve months ended June 30, 2004, was strong at 11.1 times and EBITDA less capital expenditures coverage of interest was 9.6 times. The use of EBITDA and related EBITDA ratios as a single measure of cash flow without consideration of other factors can be misleading. Headquartered in Wallingford, Connecticut, Amphenol Corporation manufactures and markets electrical, electronic and fiber optic connectors, interconnect systems and coaxial and flat-ribbon cable. Revenue for the last twelve months ended June 30, 2004, was approximately $1.4 billion. APPLIED EXTRUSION: Reports FY 2004 3rd Quarter $18.6MM Net Loss --------------------------------------------------------------- Applied Extrusion Technologies, Inc. (NASDAQ NMS:AETC) reported financial results for its third fiscal quarter ended June 30, 2004. Third Quarter 2004 Results Sales for the third quarter of fiscal 2004 of $69.2 million were $2.2 million, or 3%, higher compared with the third quarter of fiscal 2003. The 3% increase in sales was driven by a 9% increase in unit volume, which was offset by a 5% decrease in average selling price. The decline in average selling price reflects a significant increase in the volume of lower price films, which was in part caused by the company's inventory reduction initiatives. Gross profit for the third quarter of $7.5 million was $4.8 million, or 39%, lower than the third quarter of fiscal 2003. Gross margin of 10.8% in the third fiscal quarter of 2004 was 7.5 percentage points lower as compared to gross margin of 18.3% during the same period in fiscal 2003. The decline in gross margin resulted principally from the impact of lower average selling prices, as indicated above, and substantially higher raw material cost. Selling, general and administrative expenses were $5.1 million, or 7.4% of sales, for the third quarter of fiscal 2004 compared with $4.6 million, or 6.9% of sales, for the same period in fiscal 2003. Research and development expense was $1.7 million, or 2.5 percent of sales, for the third quarter of fiscal 2004, compared with $1.5 million, or 2.2 percent of sales, for the same period in fiscal 2003. Restructuring expenses of $0.7 million incurred in the third quarter of fiscal 2004 were comprised primarily of professional fees paid in conjunction with the recapitalization of the Company's senior notes. A goodwill impairment charge of $9.9 million was also recognized in the third quarter of fiscal 2004. Interest expense of $8.7 million in the third fiscal quarter of 2004 was $1.3 million higher than the third quarter of fiscal 2003. This is due to a higher average debt balance and lower capitalized interest. The net loss for the third quarter of fiscal 2004 was $18.6 million compared with a net loss of $1.3 million for the third quarter of fiscal 2003. The effective income tax rate for the third quarter of fiscal 2004 and the third quarter of fiscal 2003 was zero. For the three months ended June 30, 2004, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $7.5 million compared with EBITDA of $12.0 million for the third quarter of fiscal 2003. Nine Months 2004 Results Sales for the first nine months of fiscal 2004 of $197.1 million were $7.9 million, or 4%, higher compared with the first nine months of fiscal 2003. The 4% increase in sales was driven by a 7% increase in unit volume, which was offset by a 3% decrease in average selling price. The decline in average selling price principally reflects a significant increase in the volume of lower price films, which was in part caused by the company's inventory reduction initiatives. Gross profit for the first nine months of $27.0 million was $10.2 million, or 27%, lower than the first nine months of fiscal 2003. Gross margin of 13.7% in the first nine months of 2004 was 5.9 percentage points lower as compared to gross margin of 19.6% during the same period in fiscal 2003. The decline in gross margin resulted principally from the impact of lower average selling prices, and substantially higher raw material cost. Selling, general and administrative expenses were $16.4 million, or 8.3% of sales, for the first nine months of fiscal 2004 compared with $16.9, or 8.9% of sales, for the same period in fiscal 2003. Research and development expense was $5.1 million, or 2.6% of sales, for the first nine months of fiscal 2004, compared with $5.4 million, or 2.9% of sales, for the same period in fiscal 2003. Restructuring expenses of $0.7 million incurred in the third quarter of fiscal 2004 were comprised primarily of professional fees paid in conjunction with the recapitalization of the Company's senior notes. A goodwill impairment charge of $9.9 million was also recognized in the third quarter of fiscal 2004. Interest expense of $27.8 million in the first nine months of fiscal 2004 was $5.3 million higher than the first nine months of fiscal 2003. This increase reflects approximately $2.2 million of nonrecurring expenses, principally the write-off of deferred financing charges associated with the Company's prior credit facility, which was refinanced with GE Capital Finance on October 3, 2003. The remaining increase of $3.1 million is due to a higher average debt balance and lower capitalized interest. The net loss for the first nine months of fiscal 2004 was $32.9 million compared with a net loss of $7.6 million for the same period of fiscal 2003. The effective income tax rate for the first nine months of fiscal 2004 and the first nine months of fiscal 2003 was zero. For the nine months ended June 30, 2004, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $25.9 million compared with EBITDA of $32.2 million for the same period of fiscal 2003. Balance Sheet, Cash Flow and Liquidity The Company used $15.5 million of cash in the first nine months. This was principally due to a $10.7 million increase in accounts receivable as a result of the significant increase in sales during the period, and a $5.0 million increase in inventories. Finished goods and raw materials inventories increased by $4.1 million and $0.9 million, respectively, due primarily to increased resin costs. The unit volume of finished goods inventories were reduced by approximately 2 million pounds, or 3%, during the first nine months. During the third quarter, finished goods were reduced by approximately 3 million pounds. However, this reduction in unit volume was largely offset by an increase in the average cost of finished goods, due primarily to increased raw material costs. Additionally, raw material inventories decreased by approximately $2.6 million, due to a reduction in the volume of polymer inventories offset, in part, by higher resin costs. As a result, total inventories were reduced by approximately $3.1 million during the quarter. The Company amended its credit facility with GE Commercial Finance on March 23, 2004. This amendment increased the Company's revolving line of credit by $10 million to $60 million, and reduced the EBITDA covenant through the third quarter of fiscal 2005. On June 16, 2004, the Company announced that it had lowered its earnings expectations for the second half of it its fiscal year 2004. The lower earnings expectations were due primarily to a lower than expected volume of shipments and an unexpected significant increase in the cost of polypropylene resin, the Company's primary raw material. While recent price increases have offset a portion of these additional costs, market demand has not been sufficient to enable all of the cost increases to be passed on to the Company's customers. GE Capital Finance agreed to an amendment to the credit facility on June 30, 2004, to among other things, restate the Company's minimum EBITDA covenant for the third fiscal quarter 2004 from approximately $35.0 million to $30.0 million. GE Capital Finance subsequently agreed to another amendment to the credit facility on July 30, 2004 to, among other things, waive any event of default with respect to the non-payment of interest on its senior notes through September 1, 2004, which date may be extended by the lenders. At June 30, 2004, the Company had borrowings of $41.3 million pursuant to its revolving line of credit. Unused availability under this revolving credit facility at the end of the third fiscal quarter 2004 was approximately $7.0 million. Net debt (total debt less cash) at June 30, 2004 was $358.8 million, representing 99% of total capitalization. Future Operations The Company has reached an agreement in principle with six bondholders holding over 70% in aggregate outstanding principal amount of the Company's 10 3/4% senior notes to recapitalize the senior notes. Pursuant to the agreement in principle, the Company will not pay the interest on the senior notes that became due on July 1, 2004. The recapitalization will be accomplished through a prepackaged chapter 11 plan of reorganization and is expected to be completed within the timetable set out in the Company's press release of July 30th. Additionally, the Company received notice from the NASDAQ Listing Qualifications Staff that the Company's common stock has not maintained a minimum market value of publicly held shares of $5.0 million as required for continued inclusion under Marketplace Rule 4450(e)(1). If the Company cannot demonstrate compliance with the minimum market value rule or meet certain other requirements on or before November 11, 2004, the NASDAQ Listing Qualifications Staff will provide written notice that the Company's common stock will be delisted. The Company may apply to transfer its securities to The NASDAQ SmallCap Market. To transfer, the Company must satisfy the continued inclusion requirements for that market. Applied Extrusion Technologies, Inc. is a leading North American developer and manufacturer of specialized oriented polypropylene (OPP) films used primarily in consumer products labeling and flexible packaging applications. * * * As reported in the Troubled Company Reporter on July 5, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Applied Extrusion Technologies, Inc., to 'D' from 'CCC'. Standard & Poor's also lowered its rating on the company's $275 million 10.75% senior notes due 2011 to 'D' from 'CC'. The downgrade follows the New Castle, Delaware-based company's failure to make the $14.8 million interest payment due July 1, 2004, on its $275 million senior notes. "In light of very weak operating results, the company obtained an amendment to financial covenants under its credit agreement for the third fiscal quarter of 2004. However, the amendment restricts the company from paying interest due on July 1, 2004, on its senior notes unless it has excess availability under its current credit facility of $20 million after giving effect to the interest payment. Currently, the company would not have the excess availability required under the amendment to make the interest payment," said Standard & Poor's credit analyst Liley Mehta. ASTROPOWER: Proposes Plan Solicitation & Voting Procedures ---------------------------------------------------------- AstroPower, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to approve uniform solicitation and voting procedures for tabulating creditors' votes to accept or reject the Chapter 11 Liquidating Plan. As previously reported in the Troubled Company Reporter on August 13, 2004, AstroPower and the Official Unsecured Creditors filed a joint Chapter 11 Liquidating Plan. Donlin Recano & Company, Inc., the Debtor's Notice and Balloting Agent, will assist the Debtor in (a) mailing solicitation packages to creditors, (b) distributing ballots, (c) receiving creditors' ballots, and (d) tabulating the results. The Debtor anticipates commencing the Plan solicitation process no later than 5 days after the Court approves the Disclosure Statement. To be counted, ballots must be property executed, completed and delivered to Donlin Recano either by: (a) mail in the return envelope provided with each Ballot, or (b) personal delivery to Donlin Recano by 4:00 p.m. five days before the Confirmation Hearing. The Debtor submits that a solicitation period allowing at least 25 days will provide sufficient time for creditors to make informed decisions about whether to accept or reject the Plan and timely submit their Ballots. The Debtor further requests that the Court schedule the Confirmation Hearing on a date amendable to the Court. All written objections to the Confirmation of the Plan are due 5 days before the Confirmation Hearing and must be filed with the Court with copies served on the Notice Parties. Headquartered in Wilmington, Delaware, AstroPower Inc., produced the world's largest solar electric (photovoltaic) cells and a full line of solar modules. The Company filed for chapter 11 protection on February 1, 2004 (Bankr. Del. Case No. 04-10322). Derek C. Abbott, Esq. at Morris, Nichols, Arsht & Tunnell, represents the Debtor. When the Company filed for protection from its creditors, it estimated debts and assets of more than $100 million. As of Aug. 4, 2004, the Company sold substantially all of its assets and its non-debtor subsidiaries. BELL CANADA: Union Ratifies Collective Bargaining Agreement ----------------------------------------------------------- Bell Canada's more than 7,000 technicians, represented by the Communications, Energy and Paperworkers' Union of Canada -- CEP, voted to accept a new four-year agreement. The vote in favour of ratification was 85.4 per cent, the participation rate 81 per cent. "This vote to accept reflects the fact that the last company offer, which came following our strike deadline, was much improved," said CEP Ontario administrative vice president Joel Carr. "Those improvements included the withdrawal by the company of concession demands, 12.1 % wage increase over four years, the potential to negotiate further pension improvements during the life of the collective agreement, the guarantee of a defined benefit pension for existing employees, the reclassification of hundreds of employees and 200 new job openings and new hires," Mr. Carr said. "We are pleased to have reached an agreement with our technicians through the collective bargaining process," said Ellen Malcolmson, Senior Vice-President - Operations, Bell Canada. "[The] result recognizes the solid offer we placed on the table. The offer balances the needs of our employees and the company in a highly competitive environment." "We can now all continue to focus on serving customers - working together, building a stronger company to compete in an industry that is changing dramatically," added Ms. Malcolmson. Bell Canada -- http://www.bci.ca/-- provides connectivity to residential and business customers through wired and wireless voice and data communications, local and long distance phone services, high speed and wireless Internet access, IP-broadband services, e-business solutions and satellite television services. Bell Canada is wholly owned by BCE Inc. Bell Canada is operating under a court supervised Plan of Arrangement, pursuant to which it intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the company. Bell Canada is listed on the Toronto Stock Exchange under the symbol BI. BRIDGE TECH: U.S. Trustee Appoints 4-Member Creditors Committee --------------------------------------------------------------- The United States Trustee for Region 16 appointed four creditors to serve on an Official Committee of Unsecured Creditors in Bridge Technology, Inc.'s Chapter 11 case: 1. James Djen 111 Hillcrest Irvine, California 92603 Phone: 949-422-8954, Fax: 949-854-8149 2. Frontier Electronics Attn: Ron Monitz, Esq. Zimmerman Walker & Monitz LLP 23975 Park Sorrento, Suite 210 Calabasas, California 91302-4011 Phone: 818-222-9889, Fax: 818-222-9780 3. Karen Chiu 15 Harcourt Newport Coast, California 92657 Phone: 949-718-0718, Fax: 949-718-0718, Cell: 949-413-0803 4. Squar, Milner, Reehl & Williamson, LLP Attn: Deborah S. Slack 4100 Newport Place, 3rd Floor Newport Beach, California 92660 Phone: 949-222-2999, Fax: 949-222-2989 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 Garden Grove, California, Bridge Technology Inc. -- http://www.bridgeus.com/-- develops, markets, and sells computer peripherals and computer system enhancement products. The Company filed for chapter 11 protection on June 21, 2004 (Bankr. C.D. Calif. Case No. 04-13988). Herbert N. Niermann, Esq., in Irvine, Calif., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $19,498,905 in total assets and $13,067,848 in total debts. CALPINE: Inks Pact to Sell Canadian Assets to PrimeWest for $625MM ------------------------------------------------------------------ Calpine Corporation (NYSE: CPN) entered into an agreement to sell all of its Canadian natural gas reserves and petroleum assets to PrimeWest Energy Trust for a total purchase price of $Cdn825 million, or approximately $US625 million, less adjustments to reflect a July 1, 2004, effective date. These assets currently represent approximately 221 billion cubic feet equivalent (bcfe) of proved reserves, producing approximately 61 million cubic feet equivalent of net gas per day (mmcfed). Also included in this sale is Calpine's 25 percent interest in approximately 80 bcfe of proved reserves (net of royalties) and 32 net mmcfed owned by the Calpine Natural Gas Trust. Calpine expects to close the sale in early September 2004, pending regulatory approval and other conditions of closing. "This is an excellent opportunity for Calpine to capture significant value for our natural gas assets during attractive market conditions," stated Calpine Chief Financial Officer Bob Kelly. "And it puts us well on our way toward achieving our goal of having $3 billion of cash and liquidity on hand by year-end." Net proceeds from this sale will be used to repay the amount outstanding under the existing $500 million first lien indebtedness, with remaining proceeds to be used in accordance with the asset sale provisions of Calpine's existing bond indentures. Following the repayment of its existing first lien indebtedness, Calpine expects to issue up to approximately $700 million of new first lien debt. Calpine retained Waterous & Co. as its advisor for the sale. About Calpine Calpine Corporation (S&P, CCC+ Senior Unsecured Convertible Note and B Second Priority Senior Secured Note Ratings, Negative Outlook), celebrating its 20th year in power in 2004, is a leading North American power company dedicated to providing electric power to customers from clean, efficient, natural gas-fired and geothermal power facilities. The company generates power at plants it owns or leases in 21 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and owns or controls approximately one trillion cubic feet equivalent of proved natural gas reserves in the United States and Canada. For more information about Calpine, visit http://www.calpine.com/ CANDESCENT TECHNOLOGIES: Steve Berson Moves to Kilpatrick Stockton ------------------------------------------------------------------ Candescent Technologies Corporation and Candescent Technologies International, Ltd., ask the U.S. Bankruptcy Court for the Northern District of California, San Jose Division, for approval to employ Kilpatrick Stockton LLP as their special corporate counsel. The Debtors report that Steven L. Berson, Esq., was formerly a partner in Wilson Sonsini Goodrich & Rosati PC, their primary corporate counsel. Mr. Berson was one of the attorneys at Wilson Sonsini who was primarily responsible for providing services to the Debtors. Mr. Berson's historical knowledge and familiarity with the Company's business operation prompt the Debtors to hire Kilpatrick Stockton -- Mr. Berson's new firm. The firm is presently holding a $42,370 retainer for costs and services rendered in the Debtors' cases. The Debtors will pay Mr. Berson his current $450 hourly billing rate. Headquartered in Los Gatos, California, Candescent Technologies Corp. -- http://www.candescent.com/-- supplies flat panel displays for notebook computers, communications and consumer products. The Company, along with its affiliate, filed for chapter 11 protection on June 16, 2004 (Bankr. N.D. Calif. Case No. 04-53803). Ramon Naguiat, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated debts and assets of more than $100 million. CATHOLIC CHURCH: Can't Prepare Monthly Operating Reports on Time ---------------------------------------------------------------- Subsection A of Rule 2015-2 of the Local Rules of the United States Bankruptcy Court for the District of Oregon requires the Archdiocese of Portland in Oregon to file its monthly financial reports "no later than the 15th day" of the month following the month being reported. Thomas W. Stilley, Esq., at Sussman Shank, LLP, in Portland, Oregon, tells Judge Perris that on a consistent basis, the majority of the Debtor's statements for 140 investment accounts are not received until mid-month. The Debtor cannot prepare accurate reports until these statements are received and reconciled. For this reason, the Debtor asks the Court to modify Local Rule 2015-2 to allow it to file its monthly financial reports on the last business day of the month following the month being reported. Mr. Stilley explains that providing reports on the last business day of the month following the month reported will allow a more accurate assessment of the Debtor's receipts and expenses, especially investment income. The Debtor will also be able to provide better information than would be provided were the Debtor attempt to prepare and file reports every 15th of the month. The Official Committee of Tort Claimants and the U.S. Trustee support the Debtor's request. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the debtor in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Abuse Claimants Want to Use Fictitious Names ------------------------------------------------------------- Seventeen victims of severe and frequent sexual molestation by Catholic priests seek the permission of the U.S. Bankruptcy Court for the District of Ohio to proceed under fictitious names throughout the Archdiocese of Portland in Oregon's Chapter 11 case, in adversary proceedings, and in contested matter proceedings or otherwise, including requests for protection from the automatic stay and for the presentation and contest of proofs of claim. Neil T. Jorgenson, Esq., representing 17 Priest Abuse Claimants, reminds the Court that the erring priests were under the jurisdiction and control of the Archdiocese of Portland. The Debtor is aware of, or will be promptly made aware of, the identities of all the Priest Abuse Claimants. Therefore, the Debtor will not be prejudiced by the use of the fictitious names. Mr. Jorgenson explains that the Priest Abuse Claimants' claims are sensitive and private in nature. Proceeding under fictitious names will minimize additional fear, embarrassment, humiliation and possible retaliation from third parties that public disclosure of their identities might otherwise generate. The Priest Abuse Claimants will go by the names SNB, JC, AGY and REC, JCM, John Doe 1, John Smith, LD, DM, FM, HS, MM, GM, RM, CM, BG and MJ. Mr. Jorgenson also notes that the Priest Abuse Claimants who have filed lawsuits before the Oregon Circuit Court have sought and obtained the Oregon Circuit Court's approval to use fictitious names in those cases. The Claimants, hence, propose to use the same fictitious names in the Bankruptcy Court. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the debtor in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) CCC INFORMATION: Insurers Will Pay $4.75 Million Settlement ----------------------------------------------------------- CCC Information Services Group, Inc., (Nasdaq:CCCG) settled a dispute that had been pending between the company and certain of its insurers which had issued insurance policies to the company over the past several years. Under the terms of the settlement, signed on August 16, 2004, the insurers will pay the company approximately $4.75 million, and the parties have agreed to dismiss the legal proceedings relating to this matter and to provide mutual releases. The settlement involved a lawsuit filed by the company's insurers involving coverage in connection with the litigation involving the company's vehicle valuation product now known as CCC Valuescope(R) Claim Services. The company expects to use this settlement, along with previously accrued charges and other available insurance proceeds, for defense costs and settlements related to certain litigation involving CCC Valuescope(R) Claim Services. The company cannot predict at this time, however, whether total defense costs and/or settlements for this litigation will be more or less than the aggregate amount of the current recovery, previously accrued charges and other insurance proceeds. The company also cannot predict at this time whether any other insurance proceeds will be available for the defense and/or settlement of CCC Valuescope(R) litigation. About CCC CCC Information Services Group, Inc., (Nasdaq:CCCG), headquartered in Chicago, is a leading supplier of advanced software, communications systems, Internet and wireless-enabled technology solutions to the automotive claims and collision repair industries. Its technology-based products and services optimize efficiency throughout the entire claims management supply chain and facilitate communication among approximately 21,000 collision repair facilities, 350 insurance companies, and a range of industry participants. For more information about CCC Information Services, visit CCC's Web site at http://www.cccis.com/ * * * As reported in the Troubled Company Reporter on August 5, 2004, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Chicago, Illinois-based CCC Information Services Inc. At the same time, Standard & Poor's assigned its 'B+' senior secured debt rating, with a recovery rating of '4', to the company's proposed $208 million senior secured bank facility, which will consist of a $30 million revolving credit facility (due 2009) and a $178 million term loan (due 2010). The 'B+' rating on the senior secured debt is the same as the corporate credit rating and the '4' recovery rating indicates that the first priority senior secured debt holders can expect marginal (25%-50%) recovery of principal in the event of a default. The proceeds from this facility, along with about $38 million of cash on hand, will be used to repurchase $210 million in CCC's common stock. The outlook is positive. Pro forma for the proposed bank facility, CCC had approximately $205 million in operating lease-adjusted debt as of June 2004. "The ratings reflect CCC's narrow product focus within a mature niche marketplace and leveraged balance sheet," said Standard & Poor's credit facility Ben Bubeck. "These are only partially offset by a largely recurring revenue base supported by intermediate-term customer contracts, high barriers to entry, and solid operating margins, allowing for modest free operating cash flow generation." CHEM PORT LLC: Case Summary & 22 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: Chem Port, LLC 55 West Port Plaza Drive, Suite 575 Saint Louis, Missouri 63146 Bankruptcy Case No.: 04-50368 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- RMC Energy Technology, LLC 04-50370 Chapter 11 Petition Date: August 16, 2004 Court: Eastern District of Missouri (St. Louis) Debtors' Counsel: Teresa A. Generous, Esq. Mathis, Marifian, Richter & Grandy, Ltd. 7751 Carondelet, Suite 500 St. Louis, MO 63105 Tel: 314-421-2325 Estimated Assets Estimated Debts ---------------- --------------- Chem Port, LLC $0 to $50,000 $1 M to $10 M RMC Energy Technology, LLC $0 to $50,000 $100,000-$500,000 A. Chem Port, LLC's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Ronald O. Parsons $350,000 2820 Sugarloaf Club Drive Duluth, GA 30097 Robert & Nancy Koopman $175,000 Mark A. Fitzgerald $160,000 Theodore A. Guebert $160,000 Roger A. Guebert $130,000 Robert C. Chan $70,000 Richard & Melinda Trokey $50,000 Robert & Cheryn Sutton $50,000 GTA Technologies, Inc. $40,000 Bryan Cave, LLP $32,000 World Energy, LLC $25,000 Marie Schliemann $10,000 WPP Holdings, LLC $8,000 Don Hackman $6,500 Baker & Hostetler, LLP $4,500 Harrah's Casino $1,500 Southwestern Bell Telephone $1,000 Birch Telecom $500 Cingular $500 Federal Express $500 B. RMC Energy Technology's 2 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ RMC - China $180,000 Chem Port, LLC $130,000 CITADEL HILL: Fitch Affirms $15MM Class B-2L Notes' BB- Rating -------------------------------------------------------------- Fitch Ratings affirms six classes of notes issued by Citadel Hill 2000, Ltd. These affirmations are the result of Fitch's review process. These rating actions are effective immediately: -- $352,733,794 class A-1L notes affirmed at 'AAA'; -- $45,000,000 class A-2L notes affirmed at 'AA-'; -- $35,000,000 class A-3L notes affirmed at 'A-'; -- $17,500,000 class B-1L notes affirmed at 'BBB'; -- $7,500,000 class B-1C notes affirmed at 'BBB'; -- $15,000,000 class B-2L notes affirmed at 'BB-'. Citadel Hill is a collateralized debt obligation -- CDO -- managed by Citadel Hill Advisors which closed December 20, 2000. Citadel Hill is composed of more than 82% High Yield Loans, 5.5% High Yield Bonds and 2.5% of ABS. Included in this review, Fitch Ratings discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. Since the last rating action, the collateral has continued to perform. The weighted average rating factor has stayed the same at 'B+'. The senior class A overcollateralization ratio has increased from 121.46% as of May 17, 2003 to 122.63% as of the most recent trustee report dated July 17, 2004, the class A overcollateralization ratio has increased from 111.57% to 112.66%, the class B overcollateralization ratio has increased from 102.02% to 103.01%. As of the most recent trustee report available, Citadel Hill defaulted assets represented 0% of the $438.0 million of eligible investments. Assets rated 'CCC+' or lower represented approximately 1.03%, excluding defaults. As of the July 17, 2004 distribution date, there is currently $46.6 million balance in the principal collection account, which has been received through prepayment, tenders and calls of eligible investments. The manager has indicated that they are currently in the process of selecting suitable investments to reduce the cash balance of the portfolio. The rating of the class A-1L, class A-2L, and class A-3L notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class B-1L, class B-1C and class B-2L notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. Fitch will continue to monitor and review this transaction for future rating adjustments. COVANTA ENERGY: Affiliates' Claims Objection Deadline Extended -------------------------------------------------------------- U.S. Bankruptcy Court for the Southern District of New York gave Covanta Tampa Bay, Inc., until Dec. 4, 2004 -- 120 days after the Effective Date of its chapter 11 plan -- to object to claims. The deadline for these Covanta affiliates to object to claims is extended until 120 days following the Effective Date of their to- be-prepared Chapter 11 Plans: -- Covanta Lake II, Inc., -- Covanta Tampa Construction, Inc., -- Covanta Warren Resource Co., LP, -- Covanta Warren Holdings I, Inc., and -- Covanta Warren Holdings II, Inc. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. (Covanta Bankruptcy News, Issue Nos. 62 and 63; Bankruptcy Creditors' Service, Inc., 215/945-7000) CROMPTON CORP: Completes $945 Million Refinancing Program --------------------------------------------------------- Crompton Corporation (NYSE:CK) completed a multipart refinancing program totaling $945 million. The components of the refinancing are: -- $600 million aggregate principal amount of privately offered senior notes. The new senior notes are a combination of $375 million of 9 7/8% Senior Notes due 2012 (with a yield to maturity of 10.0%), and $225 million of Libor plus 5.75% Senior Floating Rate Notes due 2010 (interest rate reset quarterly); -- $220 million in new credit facilities consisting of a $120 million revolving credit facility and a $100 million pre- funded letter of credit facility; and -- A three-year extension of the company's domestic accounts receivable program, giving Crompton the ability to sell up to $125 million in domestic accounts receivable (an increase of $10 million to the current facility). "This is a major step in securing Crompton's financial future," said Robert L. Wood, chairman, president and chief executive officer. "We accomplished our key objective, which was to push out maturities in order to give management the opportunity to reinvigorate some very good businesses. We are continuing to focus intensely on pricing discipline and are attacking the cost side of the equation in numerous ways, including our previously announced $50 million restructuring initiative, which is designed to streamline the organization and its work processes." Crompton received proceeds of approximately $8.7 million from its senior note offering, net of the underwriter's discount and expenses. Approximately $462.0 million of proceeds were used to repay outstanding borrowings under its prior domestic revolving credit facility, and fund its concurrent tender offer and consent solicitation for its 8.50% Senior Notes due 2005 and 6.125% Senior Notes due 2006, which expired as scheduled. Crompton has received and accepted tenders for $261.3 million, or 74.7%, of the 8.50% Senior Notes due 2005 and $140.0 million, or 93.3%, of the 6.125% Senior Notes due 2006. Accordingly, the executed supplemental indentures amending the indentures relating to these notes have become operative. Approximately $100.0 million of proceeds are being used to redeem the balance of the outstanding 8.50% Senior Notes. Crompton Corporation, with annual sales of $2.2 billion, is a producer and marketer of specialty chemicals and polymer products and equipment. Additional information concerning Crompton Corporation is available at http://www.cromptoncorp.com/ * * * As reported in the Troubled Company Reporter's July 23, 2004, edition, Standard & Poor's Ratings Services lowered the ratings on the existing senior notes and debentures of Middlebury, Connecticut-based Crompton Corp. to 'B+' from 'BB-'. The 'BB-' corporate credit rating of this specialty chemicals and polymer products producer is affirmed and the outlook remains negative. The existing notes, which are assigned a recovery rating of '3' and will become secured upon the close of the new revolving credit facility, are now rated one notch lower than the corporate credit rating. The lower rating reflects the notes' disadvantaged position since lenders under the new credit facility retain a first-priority distribution on the collateral in an amount equal to 10% of the company's consolidated net tangible assets. Standard & Poor's also assigned a 'B' rating to proposed tranches of senior unsecured debt totaling $600 million with maturity dates of 2010, 2011, and 2014. The new unsecured notes are rated two notches lower than the corporate credit rating, reflecting the priority of secured debt as well as substantial subsidiary obligations relative to total assets. Standard & Poor's assigned a 'BB-' bank loan rating and its '2' recovery rating to a new secured $250 million revolving credit facility maturing in 2009. The 'BB-' rating is the same as the corporate credit rating; this and the '2' recovery rating indicate that bank lenders can expect a substantial recovery of principal in the event of default. "The ratings on Crompton reflect the vulnerability of its operating margins and earnings to competitive pricing pressures, raw materials costs, and the cyclicality of its markets; and weak cash flow protection measures," said Standard & Poor's credit analyst Wesley E. Chinn. D'LISI FOOD SYSTEMS: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Debtor: D'Lisi Food Systems, Inc. 10 White Street Rochester, New York 13608 Bankruptcy Case No.: 04-23515 Chapter 11 Petition Date: August 13, 2004 Court: Western District of New York (Rochester) Judge: John C. Ninfo II Debtor's Counsel: Lee E. Woodard, Esq. Harris, Beach LLP One Park Place 300 South State Street, Suite 400 Syracuse, NY 13202 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Unisource $320,908 7472 Collections Center Drive Chicago, IL 60693 Teeny Food Corporation $234,413 Ablest Staffing Services $155,105 Ablest Staffing Services $155,105 Winona Foods, Inc. $123,190 Da Vinci Food Products $115,085 Goglanian Bakeries $76,122 C & F Packing Co. $70,486 Leonard's Express $70,228 Private Label Foods $65,024 John W. Danforth Company $46,848 GCA Inc. $44,377 R.C. Daniel, Inc. $42,682 Jacobstein Food Service $41,662 URS Logistics Inc. $41,204 Richmond Group $35,991 UBF Food Solutions $34,204 Flower City Logistics $33,125 Durham Industries $31,530 Interstate Logistics, Inc. $31,353 DEAN FOODS: Fitch Upgrades Senior Unsecured Debt Rating to BB ------------------------------------------------------------- Fitch Ratings assigns a 'BBB-' rating to Dean Foods Company's new senior secured credit facility and upgrades its senior unsecured notes rating to 'BB' from 'BB-'. Simultaneously, Fitch withdraws its 'BB+' rating from Dean's previous senior secured facility which included a revolver and a Term A, B, and C loan maturing in 2007. The Rating Outlook is Positive. This rating action affects approximately $3.1 billion of Dean's outstanding debt. Fitch's 'BBB-' rating covers its new $1.5 billion senior secured revolver which expires August 2009 and its new $1.5 billion senior secured term loan A which matures August 2009. The security for these loans consists of all assets, excluding the capital stock of the legacy Dean's subsidiaries and the real property owned by the legacy Dean and its subsidiaries. Fitch's 'BB' rating covers approximately $661 million senior unsecured notes with maturities staggered between 2005 and 2017. The ratings upgrade and outlook consider the improvement in Dean's credit profile over the past several years, the company's leading and growing market share in the fluid and soy milk industry, and its proven management team. Dean's management has established a track record of effectively integrating acquisitions, extracting cost savings from its businesses, and successfully managing through difficult operating environments. Management's successful navigation through the current unprecedented class one raw milk price environment provides reassurance that a degree of operating income stability is obtainable even in the most difficult and volatile environments. For the latest 12 months ended June, 30 2004, Dean's total debt- to-EBITDA was 3.5 times (x) and Dean's EBITDA-to-interest incurred was 4.6x. Net cash flow from operations has increased approximately 40% since the 2001 merger of the legacy Dean Foods and Suiza Foods to over $400 million annually despite recent demands on working capital. Fitch expects the overall operating environment to improve going forward and Dean's working capital requirements to decline. As such, Fitch believes Dean is capable of sustaining a leverage ratio in the low 3.0x range for the foreseeable future. Dean Foods Company is the largest processor of milk and the third largest producer of ice cream in the United States. In addition, Dean is the leading producer, distributor and marketer of value- added dairy and non-dairy products and the largest processor of private label pickles in the United States. Dean also has several joint ventures and sells products under partnerships and licensed brands such as Land O' Lakes, Hershey's, and Folgers Jakada. Dean has operations in 39 states, Spain, and the U.K. DENNINGHOUSE INC: Files for CCAA Protection & RSM is the Monitor ---------------------------------------------------------------- Denninghouse Inc. (TSX: DEH), operator of 313 Buck or Two and Quebec-based Dollar Ou Deux stores, and certain of its subsidiaries has voluntarily sought and obtained protection pursuant to the Companies' Creditors Arrangement Act -- CCAA. RSM Richter, Inc., was appointed the CCAA Monitor. Denninghouse sought CCAA protection because it has been unable to secure sufficient new resources to meet its ongoing obligations. These obligations were caused, in large part, by the continuing and accelerating losses in the Company's corporate stores, including related overhead expenses and increasing franchise financial assistance. "[The] filing follows a strategic review of the Company's options by our Board of Directors, with the assistance of financial advisors from Richter," says Denninghouse Inc. President & C.O.O., Gregg Treadway. "We determined that seeking CCAA protection was in the best interest of all stakeholders, and in particular believed that it was the best alternative towards preserving the value of our franchise network." The restructuring contemplated will include a search for purchasers, led by Richter, and the Company remains optimistic that the franchise network will be an attractive business opportunity to a number of potential buyers or investors, and will provide a solid foundation of financial stability and opportunities for future profitability. As part of the ongoing restructuring process and in recognition of the expected significant reduction in corporate stores, Denninghouse has implemented a staff rationalization plan at the Company's corporate home office and has substantially reduced other operational expenses. "The present decision to close locations will affect company-owned stores," says Gregg Treadway. "During the coming days and weeks we will continue to focus on developing a plan that will protect and ensure the interests of our successful franchise locations." Market Regulation Services halted the trading of Denninghouse's shares at 9:20 Eastern Time on August 16, 2004. Denninghouse, Inc., operates franchised or company-owned stores in 10 provinces under the Buck or Two, Dollar Ou Deux banners. The stores sell thousands of items, generally at fixed price points of $2.00 or less with selective value items above $2.00, and offer wide categories of products and everyday items at value prices. Denninghouse, Inc., is listed on the Toronto Stock Exchange (TSX: DEH). DENNY'S CORPORATION: Moody's Junks $379 Million Senior Notes ------------------------------------------------------------ Moody's Investors Service rated: * the proposed first-lien bank loan of Denny's Corporation at (P)B2; * the proposed second-lien facility at (P)B3; and * the proposed senior notes at (P)Caa1, subject to review of final documentation. The review for upgrade reflects that senior implied and issuer ratings would be raised to B2 and Caa1, respectively, following successful implementation of the new capital structure, primarily the first and second-lien facilities. Together with $92 million from a previous equity placement, virtually all proceeds from the new debt will be used to completely repay the existing senior notes. Replacement of the company's current debt with a less burdensome capital structure and Moody's expectation for continued improvement in operating performance will support the higher ratings. However, limiting the ratings are the company's high financial leverage even after the proposed transaction and Moody's opinion that cash outflows for debt service and capital investment will remain substantial relative to operating cash flow. These ratings were assigned: * $275 million first-lien bank loan at (P)B2; * $100 million second-lien loan facility at (P)B3; and the * $220 million unsecured senior note issue at (P)Caa1. These ratings were placed under review for upgrade: * $120 million of 12.75% senior note (2007) rating of Caa1; * $379 million of 11.25% senior note (2008) rating of Caa3; * Senior Implied Rating of Caa1; and the * Issuer Rating of Caa3. Moody's will withdraw its ratings on the 2007 and 2008 notes following consummation of this contemplated transaction. The ratings recognize Moody's expectation that operating profit over the medium-term will remain modest relative to cash outflows for interest expense and capital investment, the high degree of financial leverage (especially when adjusted for operating lease obligations) even after the proposed transaction improves the balance sheet, and the history of underinvestment in Denny's store base (given that depreciation has substantially exceeded capital expenditures since the January 1998 reorganization). The intense competition within the family dining segment of the restaurant industry and our belief that many franchisees were adversely impacted during the recent period of declining sales also adversely impacts this credit opinion. However, benefiting the ratings are substantial reductions in leverage and debt service following replacement of the 2007 and 2008 notes with incremental equity and debt that is lower cost and longer dated, consistent sales and profitability improvements over the past several quarters, and the potential liquidity from a meaningful real estate portfolio. Control of the well-known "Denny's" trade name and concentration of domestic restaurant count in economically expanding regions also potentially benefit the company. The review for upgrade reflects that ratings will improve following successful implementation of the proposed new capital structure, primarily the first and second-lien facilities. Over the longer term, Moody's expects that the company's financial profile will improve as it: (1) continues the recent pattern of growing average unit volume from both increased customer count and higher average check; (2) adjusts the pace of capital investment to avoid free cash flow deficits; and (3) improves leverage by using a portion of discretionary cash flow to amortize debt ahead of schedule. Ratings would be negatively impacted if the company and its franchisees prove unable to further improve average unit volume, constrained operating cash flow limits the company's ability to update its store base, or debt protection measures fail to improve from current levels (such as pro-forma lease adjusted leverage of 5.8 times and fixed charge coverage of 1.2 times). Ratings could eventually go up as higher average unit volume and store profitability leads to greater financial flexibility (such as lease adjusted leverage falling below 5 times and fixed charge coverage approaches 2 times) and the company achieves worthwhile returns on investment with the planned remodel and development program. The (P)B2 rating on the proposed five-year Bank Loan borrowed by Denny's, Inc., (to be comprised of a $75 million Revolving Credit Facility and a $200 million Term Loan B) considers that this debt enjoys the guarantees of the company's operating subsidiaries and is secured by a first-lien on substantially all assets. The collateral includes the real estate for about 240 stores. While Moody's believes that this first-lien bank loan is fully covered by sellable assets, the security on the collateral does not result in notching above the senior implied rating because of the significant proportion of this bank loan in the company's total debt structure. Over the life of the bank loan, Moody's expects that the company will utilize the Revolving Credit Facility only for temporary cash flow timing differences except Letters of Credit (currently about $35 million) that cover self-insurance commitments. The (P)B3 rating on the proposed $100 million six-year Loan Facility borrowed by Denny's, Inc., considers, in addition to the guarantees of the operating subsidiaries, that this debt is collateralized by a 2nd-Lien on virtually all of the company's tangible and intangible assets. This bank loan has a subordinate lien relative to the proposed 1st-Lien bank loan. In a hypothetical distressed scenario, Moody's expects that collateral value may fall short of the secured debt balance because of likely liquidation valuation for significant assets such as restaurant equipment, leasehold improvements, goodwill, and the Denny's trade name. The (P)Caa1 rating on the senior unsecured notes issued by the intermediate holding company Denny's Holdings, Inc., considers that this debt class is not guaranteed by the operating subsidiaries and is structurally subordinated to significant amounts of more senior obligations. These obligations include the $275 million first-lien secured bank facility, the $100 million second-lien loan facility, $34 million of capital leases and other secured debt, and $32 million of operating company trade accounts payable. Lease adjusted leverage improved to 5.8 times for the twelve months ending June 30, 2004 (pro-forma for the proposed debt issuances and the July 2004 equity infusion of $92 million) from 5.9 times and fixed charge coverage improved to 1.2 times from 0.8 times prior to the two balance sheet events. The meaningful improvement in fixed charge coverage comes from the expectation that the new debt will be materially cheaper than the retired debt so cash interest will decline by $25 million. Restaurant margin improved to 13.2% in the first half of 2004 compared to 10.8% in the same period of 2003 as effective promotions have allowed the company to leverage fixed operating costs over increased average unit volume. Following the proposed transaction, the company's immediate liquidity will consist of about $40 million of bank facility borrowing capacity and $19 million in cash. Pro-forma cash flow (as measured by EBITDA) for the twelve months ending June 2004 just covered cash interest expense, capital investment, and working capital changes. Moody's believes that free cash flow will remain small as the company uses most operating cash to remodel the existing store base and eventually to develop new stores. Denny's Corporation, headquartered in Spartanburg, South Carolina, operates and franchises 1,619 family dining restaurants. Revenue for the twelve months ending June 2004 was $959 million. DENNY'S CORP: S&P Junks $100MM Second-Lien Loan & $220MM Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its B rating to family dining restaurant operator Denny's Corp.'s proposed $275 million senior secured bank loan, comprising a $200 million term loan and a $75 million revolving credit facility. In addition, a '3' recovery rating was assigned to the loan, indicating an expectation for meaningful (50%-80%) recovery of principal in the event of a default. At the same time, a 'CCC+' rating was assigned to the company's proposed $100 million second-lien term loan. A recovery rating of '5' also was assigned to this loan, indicating an expectation for negligible (0%-25%) recovery of principal in the event of a default. In addition, a 'CCC+' rating was assigned to Denny's proposed $220 million senior unsecured note offering. Existing ratings on Denny's, including the 'CCC+' corporate credit rating, were affirmed. The outlook is developing. Proceeds from the proposed offerings will be used to redeem the company's 12.75% and 11.25% senior unsecured notes. The company already used proceeds from its recent equity investment to pay down its current bank loan. Upon completion of the $275 million bank loan, Standard & Poor's will raise the corporate credit rating to 'B' from 'CCC+'. The outlook will be stable. The upgrade will be based on the refinancing of the company's credit facility, which matures in December 2004, improved cash flow protection measures attributed to the lower interest rate on the bank loan compared with that on the existing senior notes, and lower leverage following the recent $92 million equity investment. Moreover, Denny's better financial profile is supported by its recently improving operating performance. "The ratings reflect the challenges of improving operating performance in the highly competitive restaurant industry, weak cash flow protection measures, and a significant debt burden," said Standard & Poor's credit analyst Robert Lichtenstein. Spartanburg, South Carolina-based Denny's operates 554 restaurants and franchises 1,062 others throughout the U.S., with concentrations in California (24%), Florida (11%), and Texas (10%). The company's historical performance is inconsistent due to poor execution and service, as well as a lack of investment in its restaurants. During the past two years, management has attempted to implement programs to revitalize the Denny's brand and improve the concept's profitability, although with limited success. ELANTIC TELECOM: Wants Ordinary Course Professionals to Continue ---------------------------------------------------------------- Elantic Telecom, Inc., asks the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, for permission to retain professionals it turns to in the ordinary course of its business without bringing formal employment applications to the Court every time. In the day-to-day performance of its duties, the Debtor regularly calls upon various professionals, including attorneys, consultants and other professionals, to assist in: (a) carrying out its assigned responsibilities; and (b) the operation of its business. Because of the nature of the Debtor's business, it would be costly, time-consuming and administratively cumbersome to require each Ordinary Course Professional to file and prosecute separate employment and compensation applications. The Debtor submits that the uninterrupted service of the Ordinary Course Professionals is vital to its ability to reorganize. The Debtor assures the Court that no payment to an ordinary course professional will exceed $25,000 per month during the next four months. 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 Debtor 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. ENRON: Oregon Electric Guarantees PGE Customers $15MM Rate Credit ----------------------------------------------------------------- Oregon Electric Utility Company states that Portland General Electric customers will receive an unconditional rate credit in the amount of $15 million if it receives Oregon Public Utility Commission approval to acquire PGE. "We have listened to the concerns of OPUC staff and various customer groups regarding the uncertain benefit of our previous offer to share PGE's profits over a 10.5 percent return with customers," said Kelvin Davis, a partner in an investor group backing Oregon Electric and a future PGE board member. "We are now responding by replacing this benefit with a firm dollar amount. Oregon Electric will now guarantee customers a $15 million total rate credit to be paid from 2007 through 2011 in a manner consistent with what customers may have received under our prior proposal." In Rebuttal Testimony filed Monday, Aug. 16, in response to the testimony of OPUC staff and intervenors in the approval proceeding, Oregon Electric also said that it will make PGE the sole beneficiary of the contractual protection against potentially material Enron-related liabilities that it had negotiated as part of the purchase agreement. "Not only will the approval of this acquisition put an end to the Enron era," Mr. Davis said, "It will also ensure that PGE gets the benefit of substantial protection against potentially material liabilities arising from Enron's bankruptcy. PGE currently faces these liabilities, and does not have the benefit of this protection today." In furtherance of its commitment to provide full transparency, and in response to requests by Citizens Utility Board, Industrial Customers of Northwest Utilities and others for assurances of disclosure of Oregon Electric's activities, Oregon Electric, a privately owned company, also agreed to file with OPUC and make available to all stakeholders annual and quarterly reports equivalent to SEC Forms 10Q and 10K which publicly owned companies are required to file. This complements Oregon Electric's prior agreement to make its books and records relating to PGE available to the OPUC. "Oregon Electric fully expects to provide disclosure," said Mr. Davis. "This commitment underscores that. Furthermore, we have been working hard to fully respond to staff and other intervenors' questions. To date, we have responded to almost 470 data requests and have provided almost 17,000 pages of information. We expect to continue to provide a frank and transparent exchange of information to ensure that we answer questions that have been raised." In the filing, Oregon Electric clearly sets out the reasons why its acquisition of PGE would result in a net benefit to PGE's customers and addressed questions and concerns expressed by some stakeholders. Oregon Electric explains why its acquisition financing plans will not affect PGE rates or customers, and agreed to a series of conditions similar to those required by the Commission in prior acquisitions of Oregon utilities that are designed to protect customers. Oregon Electric also provided an additional condition that assures dividends from PGE will be used to pay down debt of Oregon Electric for three years rather than being distributed to Oregon Electric's investors. "The OPUC Staff and intervenor testimony and subsequent settlement conferences have resulted in substantial progress, and I am pleased that we have been able to respond so constructively," said Peter O. Kohler, M.D., prospective chairman of Oregon Electric and PGE. "Monday's filing demonstrates that Oregon Electric is listening to the concerns of all constituents, and allowed us to further round out the benefits that Oregon Electric's proposal provides. I remain all the more confident that this transaction is in the best interests of customers and is a positive succession to Enron's ownership." Dr. Kohler noted that settlement conferences will continue for the next several weeks. "This is a collaborative process and I believe we have made great strides toward a settlement," he said. "The benefits we have articulated are a substantial improvement from PGE's current status. We will operate with transparency and have taken substantial steps to assure that Oregon Electric provides disclosure similar to that of other holding companies." Oregon Electric reiterated the other benefits that this transaction provides and the other commitments it has made, conditioned on approval of the transaction from the OPUC: -- An end to Enron: An immediate end to Enron's ownership of PGE, ensuring renewed stability and certainty backed by responsible shareholder support -- The creation of a new board with substantial local representation: Oregon Electric has announced seven leading Oregonians to the PGE board, including an Oregon chairman -- A $15 million rate credit: Customers will receive a total rate credit of $15 million, to be paid $3 million annually from 2007 to 2011 -- Protection against Enron-related liabilities: Oregon Electric will ensure that PGE is the sole beneficiary of contractual protections provided under the purchase contract against potentially material Enron-related liabilities -- Service quality: A commitment to reinforcing high quality service standards, including a 10-year extension of service quality measures that are currently in place -- Addressing customer concerns: Periodic access by customer organizations and other PGE stakeholder groups to the PGE Board of Directors, providing these constituencies with the opportunity to voice concerns directly to the board -- Capital reinvestment: Substantial future capital reinvestment in PGE, ensuring reliability and efficiency from existing assets and the acquisition and development of new resources -- Long-term efficiency and cost-effectiveness: A commitment to undertaking a comprehensive review of the company post- closing, with the goal of identifying efficiency and productivity gains that ensure customers receive safe and reliable electricity as cost-effectively as possible -- Local headquarters remain: PGE's headquarters will stay in Portland, jobs will stay in Oregon, and PGE will continue its charitable leadership in the community -- A significant Oregon taxpayer: Oregon Electric will be a substantial Oregon taxpayer and will not consolidate its returns with any out-of-state company, as happened in the Enron era -- More renewables: A commitment to vigorously pursue a target of using cost-effective renewable resources to fulfill 10 percent of PGE's peak capacity by 2012 -- Organizational accountability for environmental initiatives: The appointment of a manager within PGE with the appropriate responsibility and authority to work with the advocacy groups for renewable energy sources, sustainability, energy efficiency, and environmental matters -- Greater assistance to low-income customers: A doubling of cash contributions for the next 10 years that PGE currently makes to Oregon HEAT, a non-profit organization that assists low-income families in paying utility bills, which will be paid for with Oregon Electric shareholder (rather than customer) funds About Oregon Electric Utility Company Oregon Electric Utility Company is a new Oregon company formed for the sole purpose of investing in Portland General Electric. Oregon Electric's goal is to maintain PGE as an independent utility based in Oregon, serving local customers, and contributing to the health of the community and the growth of the regional economy. The company is backed by Texas Pacific Group, one of the leading private equity firms in the country. In addition, respected Northwest leaders and industry experts have committed to join the new PGE board upon approval of the transaction. They include: -- Peter Kohler, M.D., President of Oregon Health & Science University -- Kirby Dyess, former Corporate Vice President and Director of Operations at Intel Capital, and currently a Principal with Austin Capital Management, LLC -- Maria Eitel, Vice President and Senior Advisor for Corporate Responsibility, Nike, Inc., and President, Nike Foundation -- Gerald Grinstein, Principal, Madrona Investment Group LLC, and CEO, Delta Air Lines, Inc. -- Jerry Jackson, former Executive Vice President and Group President, Utility Operations, Entergy Corporation -- Duane McDougall, former President and CEO, Willamette Industries, Inc. -- Robert Miller, Chairman, Rite Aid Corp. and former CEO, Fred Meyer, Inc. -- M. Lee Pelton, Ph.D., President, Willamette University -- Tom Walsh, President, Tom Walsh & Co. -- In addition, Peggy Fowler, CEO of PGE, and David Bonderman and Kelvin Davis, partners of Texas Pacific Group, will also join the Board. On November 18, 2003, Oregon Electric Utility Company signed a binding agreement with Enron to acquire all of Portland General Electric for approximately $2.35 billion. The Oregon Electric proposal is now pending review and approval before the Oregon Public Utility Commission. As reported in the Troubled Company Reporter on August 5, 2004, the Staff of the Oregon Public Utility Commission made its initial recommendation to the Commission that the sale of Portland General Electric, a subsidiary of Enron, to Oregon Electric Utility Company, not be approved. The OPUC Staff "has concluded that the proposal, as it stands on July 21, 2004, falls short of demonstrating net benefits for customers," Bryan Conway, PUC staff case manager said. "The Commission is requiring a two-step assessment," focused on whether the proposed sale will: (1) provide a net benefit to the utility's customers, and (2) impose 'no harm' to the public at large?" The OPUC Staff says due to many unanswered questions about relevant issues, and risks these entail for customers, it has not been able to fully assess the downside risk to customers of the transaction. "We look forward to hearing from OEUC how it intends to mitigate a number of our concerns as well as those raised by other parties in this case," Mr. Conway added. About PGE Portland General Electric is an electric utility involved in the generation, puchase, transmission, distribution and sale of electricity in Oregon. The Company also sells energy to wholesale customers throughout the western United States. Portland General Electric is operated by Portland General Corporation, a diversified holding company. 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). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. ENRON CORP: Objects to PBGC's Remaining $320 Million Claims ----------------------------------------------------------- Pension Benefit Guaranty Corporation originally filed 31 proofs of claim in the chapter 11 cases of Enron Corporation and its debtor- affiliates. The Claims are in respect to: -- the Enron Corp. Cash Balance Plan; -- the Pension Plan of Portland General Corporation; -- the EFS Pension Plan; -- the Garden State Paper Pension Plan; and -- the San Juan Gas Company Pension Plan. Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, in New York, relates that PBGC's Claims fall into three categories: (1) contingent, unliquidated, priority claims for PBGC insurance premiums associated with the Pension Plans; (2) contingent, unliquidated, priority claims for due, but unpaid, minimum funding contributions under the Internal Revenue Code of 1986, as amended, and ERISA; and (3) contingent, liquidated, priority claims for unfunded benefit liabilities under the Pension Plans pursuant to Section 1362(b) of the Labor Code. Mr. Rosen notes that PBGC has withdrawn 16 of its Claims. The remaining 15 Claims include five Premium Claims, five Contribution Claims and five UBL Claims. The Premium Claims and the Contribution Claims remain contingent and unliquidated. PBGC has amended the UBL Claims several times. Originally for $305,500,000, the amended UBL Claims now aggregate $321,800,000: -- $240,200,000 in respect of the Enron Plan; -- $64,600,000 in respect of the PGE Plan; -- $15,400,000 in respect of the EFS Plan; -- $1,200,000 in respect of the Garden State Plan; and -- $400,000 in respect of the San Juan Plan. The PBGC Action On June 3, 2004, PBGC filed a complaint in the United States District Court for the Southern District of Texas, Houston Division. PBGC wants the District Court to: (a) rule that each of the Enron Plan, the EFS Plan, the Garden State Plan and the San Juan Plan is terminated as of June 2, 2004 based on PBGC's authority to commence involuntary termination actions pursuant to Section 1342 of the Labor Code; (b) appoint a PBGC trustee for each of the Terminating Plans; and (c) order the transfer of records, relating to the administration of the Terminating Plans. PBGC alleges that the Terminating Plans will be unable to pay benefits when due and the possible long-run loss to PBGC is reasonably expected to increase unreasonably if the Terminating Plans are not terminated. The Debtors wonder how PBGC believes it can support these allegations and claim they are anything other than an attempt to forum shop litigation associated with the Terminating Plans out of the Bankruptcy Court, where PBGC has not faired very well in its objection to the Plan and its failed attempt to gain overly broad voting rights. In fact, Mr. Rosen points out that the Court's Findings and Conclusions of Law with respect to the Plan support the fact that PBGC is essentially not at risk. The U.S. Bankruptcy Court for the Southern District of New York determines that the Debtors have the wherewithal to ensure the full funding of the Terminating Plans, and the Debtors will have established a reserve for the Claims in accordance with Article XXI of the Plan that, in the aggregate, will be a dollar-for-dollar reserve. Thus, PBGC should have little about which to complain, let alone support the continuation of the Plan termination action commenced by filing the Complaint. Accordingly, the Debtors object to each of the UBL Claims, Contribution Claims and Premium Claims. The Debtors ask the Court to reduce the UBL Claims to an amount to be established at a hearing on the Objection, and disallow and expunge the Contribution Claims and Premium Claims in their ent