/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/040820.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, August 20, 2004, Vol. 8, No. 176 Headlines A.B. DICK: First Creditors' Meeting Slated for August 23 ADELPHIA: RCM Technologies Assignees Hold a $1,251,086 Claim ADELPHIA BUSINESS: Attacks Four Overstated Lease Rejection Claims AESP INC: Stock Trades on OTCBB Following Nasdaq Delisting AIR CANADA: Bell Canada Wants to Set Off its CN$1.245M+ Claim ALLIED PRINTING: Hires Slott & Barker as Bankruptcy Counsel AQUILA INC: Raises Credit Rating to B- with Negative Outlook BCI DEVELOPMENT: Case Summary & 10 Largest Unsecured Creditors BELL CANADA: Gets Ericsson's Help to Lower Operating Costs CAPTEC FRANCHISE: Moody's Cuts Restaurant Franchise Trust Ratings CEC INDUSTRIES: Completes Major Corporate Restructuring COLONIAL EXETER: Section 341(a) Meeting Scheduled on Sept. 28 COMPRESSION POLYMERS: S&P Puts B Rating on Planned $23MM Term Loan CONSECO INC: S&P Says CEO Resignation Won't Affect BB- Ratings CONTIMORTGAGE: S&P's Class B Rating Dives to D from CC COUNSEL CORP: Delisted from Nasdaq SmallCap Market Yesterday DELTA AIR: Asks Certificate Holders to Modify Contracts DII IND: Asks Court to Extend DIP Financing to December 31 DLJ COMMERCIAL: Fitch Affirms Low-B Ratings on Six Classes ENRON CORP: Examiner Asks Court to Extend Term Beyond Emergence ENVIRONMENTAL LAND: Asks to Use Cash Collateral to Pay Expenses EPIC DATA: Inks $1.3 Million P3-MMS Pact with Bell Helicopter FELCOR LODGING: S&P Junks $50 Million Convertible Preferred Stock FLEMING COMPANIES: Asks Court to Approve Local 205 Settlement Pact FRESH CHOICE: Committee Signs-Up SulmeyerKupetz as Counsel GALEY & LORD: Files Voluntary Chapter 11 Petition in N.D. Georgia GALEY & LORD INC: Case Summary & 20 Largest Unsecured Creditors GLIMCHER REALTY: Moody's Lowers Preferred Stock Rating to B1 GLOBAL CROSSING: Summary of New Jersey Class Action Lawsuit GLOBALNET INT'L: Seeks Open-Ended Lease Decision Period HI-RISE RECYCLING: Asks Nod to Hire Bruner-Cox as Accountants HOLLINGER INC: Retractable Shares Priced at $7.25 Per Share HOLLINGER INT'L: Ink Pact to Sell Telegraph Group for $1.21BB HOLLINGER INT'L: Updates Commission as Financial Reports Not Ready INFOUSA: Prepays Additional $5 Million of Bank Debt INSIGHT HEALTH: S&P's B+ Credit Rating Still on Watch Negative INTELEFILM CORP: Making Initial Liquidation Payment on Aug. 31 INTERPOOL INC: Discloses $41.2 Mil. Net Income in 2003 INTERSTATE HOTELS: Gets B Corporate Credit Rating from S&P DUNES PLAZA: Case Summary & 6 Largest Unsecured Creditors EL CALLAO: Implements Plan of Arrangement After Getting Court Okay ELC LTD: Fitch Junks Four Classes & Rates Two Classes BB- JUNIPER CBO: Standard & Poor's Junks Classes A-4, A-4L & B-2 KIDS WORLD: Case Summary & 6 Largest Unsecured Creditors KMART CORPORATION: BofA & Fleet Back New $200 Million L/C Facility KNOLL INC: S&P Cuts Corporate Credit & Bank Loan Ratings to BB- KNOLL INC: Moody's Assigns Ba3 Rating to Bank Facilities LEHMAN MFD: Fitch Cuts Ratings on Two Classes Five Notches to B LEUCADIA NATIONAL: Investment Style Prompts S&P's BB Credit Rating LINREAL CORP: Gets Okay to Use Cash Collateral until Sept. 8 LSP BATESVILLE: S&P Raises Rating on $326MM of Senior Bonds to B- MAJESTIC STAR: COO Michael Kelly Won't Renew Employment Contract MEDIA GROUP: Brings-In Neubert Pepe as Bankruptcy Counsel MILLENIUM ASSISTED: Judge Lyons Rejects Roseland Financing Pact MILLENIUM ASSISTED: Three-Member Creditors' Committee Appointed MIRANT CORP: Asks Court to Nix 7 Calif. Utility Commission Claims MORGAN STANLEY: S&P Affirms Low-B Ratings on Classes HYB1 B-4 & 5 MORGAN STANLEY: Fitch Puts BB Rating on Class E Auto Loan Notes NORTEL NETWORKS: Declares Preferred Share Dividends OCEANLAKE COMMERCE: Steven Moya Replaces Steve Koskie as CEO OCEANLAKE COMMERCE: Secures $2 Million Loan Due April 2005 OMNI FACILITY: Committee Hires Kramer Levin as Counsel PARKER DRILLING: S&P Assigns B- Rating to Proposed $150MM Notes PEGASUS SATELLITE: Asks Court to Approve DirectTV & NRTC Accord PEMSTAR INC: Taps Grant Thornton LLP as New Independent Auditors PG&E NATIONAL: Deanli Offers $558 Million for IPP Portfolio PJ REALTY INC: Case Summary & 9 Largest Unsecured Creditors POLO BUILDERS: Turns to Steven Holowicki for Financial Advice PRIME HOSPITALITY: Blackstone Offers $790 Mil. to Buy Company QWEST: Inks 2-Yr. Communications Services Pact with Spirit Cruises RS GROUP: Inks $36 Million Value Guaranteed Vacations Acquisition SECURUS TECH: Moody's Assigns B2 Rating to $150MM Senior Notes SER CORPORATION: Case Summary & 27 Largest Unsecured Creditors SOLUTIA INC: Increase Price on Ascend & Vydyne Products by 10% STRATUS TECH: Extends Amended 10.375% Debt Offering to Sept. 1 THOMAS GROUP: Inks $5.5 Million Credit Facility with BofA TRANSPORTATION TECH: S&P Awaits IPO & Puts B Ratings on Watch UNIFLEX: Committee Hires Young Conaway as Bankruptcy Co-Counsel UNITED AIRLINES: Extends Starbucks Relationship in 3-Year Pact URS CORP: Moody's Upgrades Senior Credit Facility Rating to Ba2 US AIRWAYS: Katz's $1.147M Patent Infringement Claim Still Hanging VERITAS CLO: S&P Assigns BB Rating to Class E $8MM Secured Notes VHJ ENERGY: Hires Moulton Bellingham as Special Counsel VIATICAL LIQUIDITY: Asks to Hire Alan Myers as Accountant VITRO: Moody's Junks $388 Million of Senior Notes WASTE SERVICES: Bank Facility & Sub. Debt Get Moody's Junk Ratings WASTE SERVICES: S&P Cuts Bank Loan Rating to B- & Junks Sub. Debt WILTEL COMMS: Moody's Puts B2 & Caa1 Ratings on New Credit Pacts WORLDCOM: Shareholders Have Until Sept. 1 to Opt-Out of Settlement * BOOK REVIEW: The Rise of the Community Builders ********* A.B. DICK: First Creditors' Meeting Slated for August 23 -------------------------------------------------------- The United States Trustee for Region 3 will convene a meeting of A.B. Dick Company and its debtor-affiliates' creditors at 10:00 a.m., on August 23, 2004, in Room 2112 at the J. Caleb Boggs Federal Building, 2nd Floor, 844 King Street, Wilmington, Delaware. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Niles, Illinois, A.B. Dick Company -- http://www.abdick.com/-- is presently a leading global supplier to the graphic arts and printing industry, manufacturing and marketing equipment and supplies for the global quick print and small commercial printing markets. The Company, along with its affiliates, filed for chapter 11 protection on July 13, 2004 (Bankr. Del. Case No. 04-12002). Frederick B. Rosner, Esq., at Jaspen Schlesinger Hoffman and Jami B. Nimeroff, Esq., at Buchanan Ingersoll P.C., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, they listed over $10 million in estimated assets and estimated debts in over more than $100 million. ADELPHIA: RCM Technologies Assignees Hold a $1,251,086 Claim ------------------------------------------------------------ Larry Hart, Carol Hart, Christopher Hart and Danielle Hart, as assignees of RCM Technologies, Inc., simultaneously filed identical proofs of claim against Adelphia Communications Corporation and Adelphia Business Solutions, Inc. Each of the Claims asserts a $1,381,121 general unsecured claim for information technology related services allegedly performed by RCM on behalf of Adelphia. The Harts assert that the ACOM Debtors must pay them the Claims because ACOM managed and directed the IT services that RCM performed. Adelphia contest the Claims and the Harts' assertions. Adelphia Cablevision, LLC, scheduled $202,561 as payable to RCM on its schedules of liabilities. Adelphia Cablevision of NY, Inc., and ACOM each scheduled "Undetermined" amounts as payable to RCM on their schedules of liabilities. Prior to the Petition Date, the ACOM Debtors paid RCM $142,464 of the $1,381,121 allegedly owed to the Harts. On June 24, 2004, the ACOM Debtors commenced an avoidance action against RCM seeking to recover $195,445 of prepetition payments made to RCM in April 2002, including the Prepetition Payment that satisfied invoices assigned to the Harts. To resolve all claims filed by the Harts against Adelphia, the ACOM Debtors' scheduled amounts related to the Claims, and the Avoidance Action, the parties stipulate and agree that: (a) The Harts' Claim No. 11341 against Cablevision for $1,381,121, will be reduced and allowed in Cablevision's case as a $370,000 general unsecured claim; (b) The Harts' Claim No. 725 for $1,381,121 against ABIZ will be reduced and allowed as a general unsecured claim for $881,086; (c) All remaining Claims filed by the Harts against the ACOM Debtors will be disallowed and expunged; (d) Each of the Scheduled Amounts, and any other amounts related to the Harts' Claims as assignees of RCM that may have been scheduled by Adelphia, if any, will be expunged; (e) The ACOM Debtors will cause the RCM Action to be voluntarily dismissed with prejudice; and (f) The parties exchange mutual releases. 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. Headquartered in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA BUSINESS: Attacks Four Overstated Lease Rejection Claims ----------------------------------------------------------------- In the process of resolving proofs of claims filed in their chapter 11 cases, Reorganized Adelphia Business Solutions, Inc., now known as Telcove, Inc., and certain of its subsidiaries, discovered claims filed by four landlords that far exceed what's owed by a debtor when it walks away from a lease agreement in a bankruptcy case. Judy G. Z. Liu, Esq., at Weil Gotshal & Manges, in New York, tells the Bankruptcy Court in Manhattan that Lease Rejection Claim calculations are governed by Section 502(b)(6) of the Bankruptcy Code. Section 502(b)(6) limits a lessor's claim for damages resulting from the rejection of a lease to the "rent reserved" by the lease, without acceleration, for the greater of (a) one year or (b) 15% of the remaining term of the lease; but not to exceed three years, from the commencement date. To the extent that the four Lease Rejection Claims fail to comply with the requirements of Section 502(b)(6), allowance of the claims is impermissible, Ms. Liu asserts. ABIZ, therefore, asks the Court to reduce the four Lease Rejection Claims to amounts no greater than their correctly calculated amounts: Claim Asserted Correct Claimant No. Amount Amount -------- ----- -------- ------- 75 Broad LLC 4130 $438,039 $231,089 E-L Allison Pointe LLC 1107 2,073,208 491,519 Depot Properties 3290 513,050 295,819 Pro Player Stadium 1126 951,230 222,255 ABIZ further asks Judge Gerber to reduce the Asserted Amounts based on the four Claimants' failure to prove their efforts to mitigate lease rejection damages. Ms. Liu notes that the four Claimants failed to support their claims with any writing as required by Rule 3001(c) of the Federal Rules of Bankruptcy Procedure. Accordingly, the Claims are not entitled to a presumption of validity or amount. ABIZ recognizes that ordinarily, a claimant in violation of Bankruptcy Rule 3001(c) must be given the opportunity to correct its error by amending the claim to include necessary writing supporting the claim. To the extent that the four Claimants disagree with ABIZ's calculation, the Claimants should submit additional documentation supporting their calculations, taking into account their attempts to mitigate damages. 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. (Adelphia Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) AESP INC: Stock Trades on OTCBB Following Nasdaq Delisting ---------------------------------------------------------- AESP, Inc.'s (Nasdaq: AESP) common stock was delisted from The Nasdaq SmallCap Market as of the opening of business yesterday, August 19, 2004. AESP's common stock immediately became eligible to trade on the Over the Counter Bulletin Board (OTCBB) effective with the opening of business yesterday. The Company had received a letter from the Nasdaq Listing Qualifications Staff notifying the Company that based upon the Staff's review, the Company's common stock would be delisted on June 4, 2004. The Company had appealed the decision of the staff, thereby staying the delisting decision, and a hearing was held with respect to the Company's appeal on July 8, 2004 before a Nasdaq Listing Qualifications Panel. On August 17, 2004, the Company received a notice from Nasdaq advising it that the Listing Qualifications Panel had rejected the Company's appeal and determined to delist the Company's securities from the Nasdaq SmallCap Market effective Thursday, August 19, 2004. The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for over 3,300 securities. OTCBB securities are traded by a community of market makers that enter quotes and trade reports through a computer network. Additional information regarding the OTCBB can be found at http://www.otcbb.com/Investors should contact their broker for more information about executing trades in AESP's common stock on the OTCBB. As previously reported, the Company commented that in their audit report on the Company's 2003 financial statements, the Company's auditors had included an explanatory paragraph in their report with respect to the Company's ability to continue as a going concern. AESP, Inc., designs, manufactures, markets and distributes network connectivity products under the brand name Signamax as well as customized solutions for original equipment manufacturers worldwide. For additional Company information, visit our websites, <http://www.aesp.com/>and <http://www.Signamax.de/> AIR CANADA: Bell Canada Wants to Set Off its CN$1.245M+ Claim ------------------------------------------------------------- Bell Canada provides business and residential customers with a variety of voice, Internet and data transmission services and telecommunication solutions. Bell Canada provides a wide array of services to Air Canada pursuant to a variety of agreements, including a Telecommunication Services Agreement dated November 1, 2000 between Air Canada and BCE Nexxia, Inc., and a Services Agreement effective as of July 8, 2001, between Air Canada and Nexxia. Bell Canada directly provides worldwide data transmission services to Air Canada in Ontario and Quebec. Outside of Ontario and Quebec, however, the data services are provided by a third party. In Alberta and British Columbia, the services are provided by Telus Corporation or its affiliates. Outside of Canada, the services are provided by Societe International de Telecommunications Aeronautiques. Air Canada directly pays Telus and SITA for certain specific types of data transmission services known as "legacy services." Pursuant to the Services Agreement, Bell Canada reimburses Air Canada for the Third Party Payments. The Bell Contracts give rise to a number of setoff obligations between Bell Canada and Air Canada. Bell Canada's Claim Bell Canada filed a claim for CN$54,692,053 against Air Canada, which was comprised of: -- a CN$10,057,085 prepetition accounts receivable; and -- a CN$44,634,967 restructuring claim. The Claim was based on set off of CN$3,005,481, which was comprised of: -- Bell Canada's prepetition obligations to Air Canada under the Services Agreement aggregating CN$1,760,413; and -- Bell Canada's postpetition obligations to Air Canada totaling CN$1,245,068. There are two components to Bell Canada's CN$1,245,068 postpetition obligations to Air Canada: * CN$265,068 relates to the services provided by SITA from April 3, 2003 to September 3, 2003; and * CN$980,000 relates to the services provided by Telus from April 3, 2003 to October 3, 2003. Bell Canada estimated both components because, despite repeated requests for billing, Air Canada still has not invoiced Bell Canada for the amounts the airline paid to Telus and SITA during the relevant period. Talks to Settle Bell Canada's Claims In May 2004, Ernst & Young, Inc., the Monitor appointed in Applicants' cases, issued a Notice of Revision reducing Bell Canada's Claim to CN$24,436,081. The Monitor slashed Bell Canada's prepetition claim to CN$7,564,275 and the restructuring claim to CN$16,871,806. Bell Canada disputed the Notice. Bell Canada, Air Canada and the Monitor held discussions to finalize the amount of Bell Canada's Claim. Consequently, the parties agree to fix Bell Canada's prepetition claim at CN$9,679,458 and Bell Canada's restructuring claim at CN$23,090,245. The parties also agree to fix the prepetition set- off amount at CN$1,760,413, thus reducing Bell Canada's prepetition claim to CN$8,168,767. The parties continue to dispute the CN$1,245,068 postpetition obligation Bell Canada estimated it owed to Air Canada. Bell Canada Wants to Exercise Set-Off Bell Canada asks Mr. Justice Farley to lift the CCAA stay so it may set off the CN$1,245,068 it owed to Air Canada against its CN$8,168,767 prepetition claim. Kevin R. Aalto, Esq., at Gowling Lafleur Henderson, LLP, in Toronto, Ontario, contends that Section 18.1 of the Companies' Creditors Arrangement Act expressly preserves creditors' rights of set-off. Section 18.1 provides that: "The law of set-off applies to all claims against a debtor company and to all actions instituted by it for the recovery of debts due to the company in the same manner and to the same extent as if the company were plaintiff or defendant, as the case may be." Air Canada's filing under the CCAA does not terminate the mutuality necessary for set-off rights to be asserted. Thus, neither the Initial CCAA Order nor the CCAA prevents Bell Canada from exercising its set-off rights. Mr. Aalto also points out that a number of other courts across Canada have recognized the applicability of the law of set-off to postpetition claims by a debtor company engaged in a restructuring: (1) The Court of Appeal for Alberta in In re Blue Range Resource Corp., [2000] CarswellAlta 731 (C.A.) said that "[t]he fact that the damages owed to Duke and Engage arise after the stay order is not relevant when the obligations arise out of the same contracts; (2) In In Re Canadian Airlines Corp., [2001] A.J. No. 226 (Alta. Q.B.), Madam Justice Papery expressly recognized the right of the British Columbia Government to set off its tax rebate obligations, arising both before and after the making of the Initial Order, against tax arrears owed to it, on the basis of both legal and equitable set-off; and (3) The Ontario Superior Court of Justice and the Court of Appeal for Ontario in Algoma Steel v. Union Gas, [2003] Casselton. 115 (C.A.) permitted Union Gas to set off against Algoma's prepetition debt to Union Gas certain amounts that could only be determined sometime after the making of the Initial Order. Air Canada Objects Ashley John Taylor, Esq., at Stikeman Elliott, LLP, in Toronto, Ontario, observes that Bell Canada inappropriately used the term "set-off" as it is actually asking the CCAA Court to allow it to "withhold" funds from Air Canada until it can realize 100% of its prepetition claim, in priority to Air Canada's other creditors. A party can only resort to set-off as a defense, not as a right, Mr. Taylor reminds Mr. Justice Farley. Mr. Taylor explains that the British Columbia Court of Appeal was faced with a similar situation in Quintette Coal, Ltd., v. Nippon Steel Corp. (1990), 2 C.B.R. (3d) 303 (C.A.), where a creditor incurred postpetition debt and tried to set off the amounts against the prepetition amounts owed. The Court of Appeals determined that set-off is only available as a defense and held that: "The word 'withholding' has been used throughout these reasons so as to distinguish from the concept of 'set-off'. The Japanese companies put their case forward on appeal primarily on the ground that what they were engaged in was set-off and that set-off was not a proceeding. With respect, the argument failed to recognize the difference between set-off in the colloquial sense and set-off in terms of the legal lexicon. Set-off in law is only available as a defense. It has been described as 'a shield and not a sword'. In respect of the payments due for ongoing coal deliveries Quintette has not sued for the amounts withheld. The Japanese companies have not therefore been put into a position where they could raise the set-off shield. On the contrary, they have had, and wish to continue to have, recourse to set-off, in the colloquial sense, as a sword to achieve a species of extra judicial execution. The sword is being, and is intended to be, wielded 'against the company'." Mr. Taylor notes that Bell Canada is seeking to misappropriate the law to "achieve a species of extra judicial execution. Under the contract, it is Air Canada who provides payment for services and the true nature of what Bell Canada seeks is in effect an order preventing Air Canada from claiming the credits to which the airline is entitled against the postpetition invoices that it pays. If there is a set-off right, it belongs to Air Canada not Bell Canada. Air Canada, therefore, asks Mr. Justice Farley to dismiss Bell Canada's request. The proper forum for the request is before a Claims Officer. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. (Air Canada Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED PRINTING: Hires Slott & Barker as Bankruptcy Counsel ----------------------------------------------------------- Allied Printing, Inc., asks the U.S. Bankruptcy Court for the Middle District of Florida for permission to employ Slott & Barker as its bankruptcy counsel. Earl M. Barker, Jr., Esq., will lead the team in this engagement. Slott & Barker will: a) provide legal advice to the Debtor-in-possession with respect to its powers and duties in the continued operation of its businesses and management of its property; b) prepare all necessary applications, answers, orders, reports and legal papers on behalf of the Debtor-in- possession, including but not limited to motions for sale of assets, acceptance of executory contracts and leases, and the chapter 11 plan and disclosure statement; and c) perform all other legal services for the Debtor-in- possession that are necessary or advisable in this case and that require the services of an attorney. Mr. Barker will charge the Debtor his $250 hourly rate. Hollyn J. Foster, Esq., who charges $100 per hour, will assist Mr. Barker. Headquartered in Jacksonville, Florida, Allied Printing -- http://www.alliedgraphics.net/-- provides printing services specializing in high quality color lithography. The company filed for chapter 11 protection on July 2, 2004 (Bankr. M.D. Fla. Case No. 04-06812). When the Debtor filed for protection from its creditors, it listed $3,373,230 in total assets and $6,099,485 in total debts. AQUILA INC: Raises Credit Rating to B- with Negative Outlook ------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on energy provider Aquila, Inc., to 'B-' from 'CCC+' and removed the rating from CreditWatch, where it was placed with developing implications on July 21, 2004. The outlook is negative. Kansas City, Missouri-based Aquila has about $2.5 billion of debt. The rating action is based on Aquila's termination of a long-term, prepaid natural gas supply contract with the Municipal Gas Authority of Mississippi -- MGAM -- and an agreement with the American Public Energy Agency -- APEA -- to terminate two long- term natural gas supply contracts on Sept. 30, 2004. "The termination allows the company to regain access to a substantial portion of its liquidity and alleviates credit concerns associated with the onerous impact of the gas prepay transactions on the company's financial profile," said Standard & Poor's credit analyst Rajeev Sharma. "Furthermore, these contracts represent 75% of Aquila's prepaid natural gas supply contract obligations, which have been a major rating concern," added Mr. Sharma. As of June 30, 2004, the total obligation of the gas prepay contracts to be terminated was $574 million. The elimination of these prepaid gas contracts to municipal utilities in Nebraska and Mississippi allows Aquila to move closer to fully exiting the energy merchant business and focus on its domestic utility operations. Standard & Poor's also said that although Aquila has made significant progress toward repositioning itself as a domestic utility business, concerns remain over the company's burdensome debt level and lack of cash flow generation. Rating stabilization is predicated on Aquila's ability to achieve further debt reduction, successful rate increases, and cost reductions. BCI DEVELOPMENT: Case Summary & 10 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: BCI Development, L.P. 711 South Central Avenue Baltimore, Maryland 21202 Bankruptcy Case No.: 04-29041 Chapter 11 Petition Date: August 13, 2004 Court: District of Maryland (Baltimore) Judge: E. Stephen Derby Debtor's Counsel: Alan M. Grochal, Esq. Tydings & Rosenberg, LLP 100 East Pratt Street Baltimore, MD 21202 Tel: 410-752-9715 Total Assets: $5,000,000 Total Debts: $2,883,087 Debtor's 10 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Mace Electric $418,066 4001 Coolidge Avenue Baltimore, MD 21229 Universal Contractors, Inc. $90,000 C.F. Masonry $54,784 Maryland Septic $17,007 Vision Concepts, Inc. $7,974 Partitions Plus $4,945 Alliance Roofing & Sheet Metal, Inc. $4,678 Landtech Corporation $4,500 A&B Flooring $4,210 Design Plus $2,623 BELL CANADA: Gets Ericsson's Help to Lower Operating Costs ---------------------------------------------------------- Bell Canada will deploy one of the largest fixed wireless broadband networks in North America. The company teamed up with Ericsson, end-to-end provider of mobile and broadband Internet solutions, to expand its Alberta network by deploying more than 300 point-to-multipoint (PTMP) wireless links. "Bell is proud to deliver another landmark network initiative in the West," explained Paul Healey, President of Western Canada for Bell. "Fixed wireless enables Bell to deliver on our promise of efficiently providing business customers with access to Internet Protocol (IP) connectivity as well as new voice and data services." As Bell migrates to a next generation Voice over IP (VoIP) network, customers will continue to benefit from the largest and most reliable national network in the country, years of voice experience and the expertise of a highly skilled team of people that will ensure a seamless transition into an IP world for its customers. Fixed wireless will be part of that transition and this leading-edge technology allows Bell to quickly and cost effectively expand its network. "Bell chose Ericsson's MINI-LINK because it delivers improved transmission flexibility, lower operating costs and greater scope for service differentiation," said Mark Henderson, President and CEO, Ericsson Canada, Inc., "We're proud to be able to provide Bell with the scalability and flexibility it needs to maintain its competitive edge and meet its customers communication needs." The contract includes a complete MINI-LINK network including point-to-multipoint systems, network management and services. The system is complemented by a point-to-point MINI-LINK High Capacity OC-3 equivalent solution, providing high-speed data rates of up to 155 Mbps. Implementation has begun on the network, which will cover a footprint of several thousand kilometers across Alberta. About Ericsson MINI-LINK Ericsson's MINI-LINK portfolio has been acknowledged by operators as the most complete microwave access transmission solution for a number of years. More than 600,000 MINI-LINK units have already been deployed in more than 125 countries, giving Ericsson a global market share of more than 40 per cent - over twice the size of its closest competitor. Ericsson's commitment to open standards is carried through into its microwave portfolio, making it fully compatible with networks from other suppliers. For more information on Ericsson's MINI-LINK solution, visit http://www.ericsson.com/products/transmission/ About Bell Canada 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. CAPTEC FRANCHISE: Moody's Cuts Restaurant Franchise Trust Ratings ----------------------------------------------------------------- Moody's Investors Service downgrades three classes of notes issued by Franchise Loan Trust 1998-I and five classes of notes issued by Captec Franchise Trust 1999-1. The Franchise Loan Trust transaction was a joint securitization of franchise loans originated by Captec Financial Group and Convenience Store Finance Company LLC. Convenience Store Finance is an affiliate of Credit Suisse First Boston Mortgage Capital. Loans contributed to Captec Franchise Trust 1999-1 were loans to franchise restaurant operators originated by Captec. Rating Action: Franchise Loan Trust 1998-I Franchise Loan Notes -- $161 million Class A-3 Notes, downgraded to Ba2 from Baa3; -- $12.8 million Class B Notes, downgraded to Caa1 from B3; and -- Class A-X IO, downgraded to A3 from Aaa. Captec Franchise Trust 1999-1 Franchise Receivable Notes -- $58.0 million Class A-2 Notes, downgraded to Ba1 from Baa2; -- $4.3 million Class B Notes, downgraded to B3 from B1; -- $7.2 million Class C Notes, downgraded to Ca from Caa1; -- $7.2 million Class D Notes, downgraded to C from Ca; and -- Class A-X IO, downgraded to Ba1 from Baa2. The downgrades are due to the continued deterioration in collateral performance of the pools and the anticipated erosion of credit support. As of the July 2004 distribution date, the delinquency rate for Franchise Loan Trust 1998-I was 25.6%. Total writedowns on the 1998-I transaction have totaled $40.75 million, which is 11.1% of the original principal balance. In the 1998-I deal, subordination protecting the: * Class A-3 securities is 24.9%; * 19.5% for Class B; 6.2% for Class C; and * 1.5% for Class D. The July 2004 delinquency rate for 1999-1 was 18.7%. The 1999-1 securitization has experienced writedowns of $12.1 million or 8.4% of the original principal balance. In Captec 1999-1, Class A-2 has 25% subordination protection followed by 19.8% for Class B; 11.3% for Class C; and 2.7% for Class D. The review action focused on potential recoveries on currently distressed borrowers and the potential for future defaults. Although delinquencies have leveled off with few new problem borrowers, future problem loans could be significant as both transactions have a high percentage of borrowers with a low fixed charge coverage ratio -- FCCR. In 1998-I, 36.6% of the loans by principal balance have a FCCR less than 1.25 while the 1999-1 deal has nearly 36% of the loan balance with a FCCR less than 1.2. Captec Financial Group, Inc., based in Ann Arbor, Michigan, is a specialized commercial finance company. Convenience Store Finance Company, LLC, was formed for the purpose of originating fixed rate loans to the owners of franchised, licensed, and branded convenience stores, gas stations, and auto plazas/truck stops. The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. CEC INDUSTRIES: Completes Major Corporate Restructuring ------------------------------------------------------- CEC Industries Corp. (OTC Pink Sheets: CECC) completed a major corporate restructuring, including: * the resignation of its former officers and directors, * the establishment of a new Board of Directors and * the appointment of new senior management. Additionally: * the Company's corporate offices have been relocated from Las Vegas to Miami, and * it is anticipated the Company will soon change its name to reflect its new corporate direction. As part of its restructuring, the Company shed a majority of its ownership interest in Pay Card Solutions, Inc., a subsidiary of the Company acquired in November of 2003. By not providing a required audit, Pay Card was in breach of its agreement and, as a result, CECC unilaterally cancelled the issuance of 3 million shares of its common stock to its principals. The Company also entered into an Asset Purchase Agreement with CEC Asset Reclamation Corp. to sell the balance of its remaining assets for a total purchase price of 20 percent of the net proceeds in the liquidation of these assets. "We are acutely aware that CECC Industries has gone through a number of transitions since its inception," said recently appointed CEO Jeffrey Sternberg. "Our initial, primary goal will be to secure financing that will enable us to purse attractive business opportunities that will create long- term shareholder value." Sternberg, who was appointed Executive Vice President and as a member of the Board of Directors in March of this year, was recently appointed President, Chief Operating Officer and Chief Financial Officer. He has served as a managing member of Phoenix Capital Partners, LLC, a financial investment firm based in Hollywood, Fla. Sternberg, who worked for Ft. Lauderdale-based Atico International, has more than two decades of experience working with mass merchandisers, drug chains and specialty stores. Also recently named to the Board of Directors was Craig Press. Press is the Vice President and head of operations for Georal International, Corp., and AJR International, Ltd., both located in Whitestone, New York. A highly respected security consultant for anti-terrorism perimeter security, employee entrance and egress, fire, building and safety code, he is responsible for day-to-day operations of the company's New York and California locations. About the Company C.E.C. Industries, Corp., is a Nevada Corporation which has recently entered into a Memorandum of Proposed Terms to acquire the majority of a company that provides a suite of cash-based debit cards and stored value cards for ATM and debit "point of sale" transactions. At June 30, 2004, C.E.C. Industries Corp.'s balance sheet showed a $477,977 stockholders' deficit, compared to an $831,034 deficit at March 31, 2004. COLONIAL EXETER: Section 341(a) Meeting Scheduled on Sept. 28 ------------------------------------------------------------- The United States Trustee for Region 14 will convene a meeting of Colonial Exeter, LLC's creditors at 1:30 p.m., on September 28, 2004, in Room 230 at North First Avenue in Phoenix, Arizona. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Phoenix, Arizona, Colonial Exeter filed for chapter 11 protection on August 17, 2004 (Bankr. Ariz. Case No. 04-14545). Dennis J. Wortman, Esq., in Phoenix, Arizona represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed above $10 million in total assets and debts. COMPRESSION POLYMERS: S&P Puts B Rating on Planned $23MM Term Loan ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on Moosic, Pennsylvania-based Compression Polymers Holdings, LLC, following the company's announcement of plans for a $23 million add-on to its existing first-lien term loan to finance a $23 million dividend to shareholders. The outlook is stable. The $23 million add-on to the first-lien term loan is rated 'B', same as the corporate credit rating, with a '4' recovery rating. "The ratings incorporated the possibility of another dividend to shareholders, although the timing of this cash distribution so soon after the initial assignment of ratings this past February highlights the very aggressive financial policies of the equity sponsors," said Standard & Poor's credit analyst Wesley E. Chinn. Nevertheless, earnings and cash flow have been relatively strong and are expected to remain so during the coming quarters. This should enable the company to reduce elevated debt levels and return credit ratios to levels appropriate for the ratings within the next year. Compression Polymers' credit quality reflects: * the modest sales bases of its principal product lines; * the relatively short operating record of the key trimboard product; * very aggressive debt leverage, exposure to volatile raw- material costs; * the cyclicality of end markets, and vulnerability to rising interest rates. These negatives overshadow the company's solid position in residential and light commercial exterior building products and toilet partition markets, the trend toward plastic products with their lower life-cycle costs, and healthy operating margins. Compression Polymers' plastic products, which generate annual sales of more than $160 million, are used for decorative, synthetic wood trim, high-use institutional toilet compartments, and a variety of other applications. CONSECO INC: S&P Says CEO Resignation Won't Affect BB- Ratings -------------------------------------------------------------- On August 13, 2004, Standard & Poor's Ratings Services said that in light of the resignation of Conseco, Inc., (BB-/Stable/--) (OTC BB:CNCEQ) CEO William Shea, Standard & Poor's planned to meet with Conseco's new CEO, William Kirsch, and the new Executive Chairman of Conseco's board of directors, Glenn Hilliard, to discuss their strategic plans for the company. Standard & Poor's had had concerns about whether Shea's resignation was a portent of previously unannounced problems with the company. "After discussions with Conseco's new CEO and new Executive Chairman of Conseco's board of directors, we do not believe the recent resignation of former CEO William Shea is an indication of underlying problems with the company," said Standard & Poor's credit analyst Jon Reichert. "Standard & Poor's expects Kirsch will continue to execute the strategy put in place during Shea's tenure with Conseco." As a result, Standard & Poor's is not taking any rating action on Conseco at this time. Standard & Poor's will continue to review Conseco's operating performance as well as progress made in regaining sales momentum through the independent agent channel since its emergence from bankruptcy in September 2003. About Conseco Conseco, Inc.'s insurance companies help protect working American families and seniors from financial adversity: Medicare supplement, long-term care, cancer, heart/stroke and accident policies protect people against major unplanned expenses; annuities and life insurance products help people plan for their financial futures. Conseco, Inc., and Conseco Finance Corp. filed for chapter 11 protection on December 17, 2002 (Bankr. N.D. Ill. Case Nos. 02-49671 through 02-49676, inclusive) (Doyle, J.). Conseco, Inc., emerged from chapter 11 protection on Sept. 10, 2003, under the terms of a confirmed plan of reorganization. CFC liquidated its consumer finance business under the terms of a plan of liquidation confirmed on Sept. 9, 2003. CONTIMORTGAGE: S&P's Class B Rating Dives to D from CC ------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on class B from ContiMortgage Home Equity Loan Trust 1999-3 to 'D' from 'CC'. Simultaneously, ratings are affirmed on the remaining three classes from this transaction. The lowered rating on class B reflects a decrease in credit support to the subordinate classes due to net losses that consistently exceed excess interest, resulting in an erosion of overcollateralization and losses being allocated to the certificates. Based on the current performance, it is not likely that the principal loss will be recoverable. The affirmations on the classes reflect adequate remaining credit support percentages for the senior classes. Credit support for the transaction is provided by subordination, excess interest, and overcollateralization. Additional credit support for the senior classes is provided by bond insurance issued by Ambac Assurance Corp. As of the July 2004 distribution date, total delinquencies were 32.41%, serious delinquencies were 20.02%, and cumulative losses were 6.83%. The transaction is backed by fixed- and adjustable-rate subprime home equity mortgage loans secured by first and second liens on owner-occupied one- to four-family residences. Rating Lowered ContiMortgage Home Equity Loan Trust 1999-3 Pass-thru certs Rating Class To From ----- -- ---- B D CC Ratings Affirmed ContiMortgage Home Equity Loan Trust 1999-3 Pass-thru certs Class Rating ----- ------ A-6, A-7, A-8 AAA COUNSEL CORP: Delisted from Nasdaq SmallCap Market Yesterday ------------------------------------------------------------ Counsel Corporation (TSX:CXS / NASDAQ:CXSN) received a Nasdaq Listing Qualifications Panel determination denying Counsel's request for continued inclusion on The Nasdaq SmallCap Market pursuant to an exception to the shareholders' equity/market value of listed securities/net income and bid price requirements. Consequently, Counsel's Common Stock was delisted from The Nasdaq SmallCap Market effective with the open of business on Thursday, August 19, 2004. Counsel's Common Stock will be immediately eligible to trade on the Over the Counter Bulletin Board effective with the open of business on August 19, 2004. About Counsel Corporation Headquartered in Toronto, Ontario, Counsel Corporation (TSX:CXS / NASDAQ:CXSN) is a diversified company focused on acquiring and building businesses using its financial and operational expertise in two specific sectors: communications and real estate. Counsel's communications platform is focused on building upon its existing communications businesses through organic growth and by acquiring substantial additional customer revenues. Counsel's real estate platform has a focused strategy of investing in and developing income producing commercial properties, primarily retail shopping centres. For further information, visit Counsel's website at http://www.counselcorp.com/ DELTA AIR: Asks Certificate Holders to Modify Contracts ------------------------------------------------------- Delta Air Lines (NYSE: DAL) began soliciting consents from holders of certain equipment trust certificates and pass through certificates to remove any contractual restrictions on Delta's ability to purchase or hold those securities. These certificates were issued by trusts that lease various aircraft to Delta to assist in financing the cost of such aircraft. Delta is seeking consents to provide Delta with greater flexibility to effect a successful out-of-court restructuring. The record date for the determination of holders entitled to give consents is 5:00 p.m., New York City time, on August 18, 2004. The consent solicitations will expire at 5:00 p.m., New York City time, on August 31, 2004, unless otherwise extended. Merrill Lynch & Co., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated are the solicitation agents for the consent process. Global Bondholder Services Corporation is the information agent. Persons with questions regarding the terms of the consent solicitations or needing copies of the consent solicitation materials should contact Global Bondholder Services Corporation at (212) 430-3774 or (866) 470-3700. Equipment Trust Certificates CUSIP ISIN Securities Number Number ---------- ------ ------ 1988 Equipment Trust 247361EY0 US247361EY06 Certificates, Series A 247361FK9 US247361FK92 247361FS2 US247361FS29 247361FV5 US247361FV57 247361GC6 US247361GC67 1988 Equipment Trust 247361EZ7 US247361EZ70 Certificates, Series B 247361FL7 US247361FL75 247361FT0 US247361FT02 247361FW3 US247361FW31 247361GD4 US247361GD41 1988 Equipment Trust 247361FA1 US247361FA11 Certificates, Series C 247361FM5 US247361FM58 247361FU7 US247361FU74 247361FX1 US247361FX14 247361GE2 US247361GE24 1989 Equipment Trust 247361NR5 US247361NR53 Certificates, Series A 247361PL6 US247361PL65 247361PW2 US247361PW21 247361QD3 US247361QD31 247361QH4 US247361QH45 1989 Equipment Trust 247361PM4 US247361PM49 Certificates, Series B 247361PX0 US247361PX04 247361QE1 US247361QE14 247361QJ0 US247361QJ01 247361QM3 US247361QM30 1989 Equipment Trust 247361NS3 US247361NS37 Certificates, Series C 247361PA0 US247361PA01 247361PC6 US247361PC66 247361PN2 US247361PN22 247361PY8 US247361PY86 247361QF8 US247361QF88 247361QK7 US247361QK73 1989 Equipment Trust 247361NT1 US247361NT10 Certificates, Series D 247361PB8 US247361PB83 247361PD4 US247361PD40 247361PP7 US247361PP79 247361PZ5 US247361PZ51 247361QG6 US247361QG61 247361QL5 US247361QL56 1989 Equipment Trust 247361NN4 US247361NN40 Certificates, Series E 247361NX2 US247361NX22 247361PH5 US247361PH53 247361PT9 US247361PT91 1989 Equipment Trust 247361NP9 US247361NP97 Certificates, Series F 247361NY0 US247361NY05 247361PJ1 US247361PJ10 247361PU6 US247361PU64 1989 Equipment Trust 247361NQ7 US247361NQ70 Certificates, Series G 247361NZ7 US247361NZ79 247361PK9 US247361PK82 247361PV4 US247361PV48 1989 Equipment Trust 247361NK0 US247361NK01 Certificates, Series H 247361NU8 US247361NU82 247361PE2 US247361PE23 247361PQ5 US247361PQ52 247361QA9 US247361QA91 1989 Equipment Trust 247361NL8 US247361NL83 Certificates, Series I 247361NV6 US247361NV65 247361PF9 US247361PF97 247361PR3 US247361PR36 247361QB7 US247361QB74 1989 Equipment Trust 247361NM6 US247361NM66 Certificates, Series J 247361NW4 US247361NW49 247361PG7 US247361PG70 247361PS1 US247361PS19 247361QC5 US247361QC57 1990 Equipment Trust 247361VA3 US247361VA37 Certificates, Series A 247361VH8 US247361VH89 247361VT2 US247361VT28 1990 Equipment Trust 247361VB1 US247361VB10 Certificates, Series B 247361VJ4 US247361VJ46 247361VU9 US247361VU90 1990 Equipment Trust 247361VC9 US247361VC92 Certificates, Series C 247361VK1 US247361VK19 247361VV7 US247361VV73 1990 Equipment Trust 247361VD7 US247361VD75 Certificates, Series D 247361VL9 US247361VL91 247361VW5 US247361VW56 1990 Equipment Trust 247361VE5 US247361VE58 Certificates, Series E 247361VM7 US247361VM74 247361VX3 US247361VX30 1990 Equipment Trust 247361VZ8 US247361VZ87 Certificates, Series F 247361VN5 US247361VN57 247361VY1 US247361VY13 1990 Equipment Trust 247361VF2 US247361VF24 Certificates, Series G 247361VP0 US247361VP06 247361VR6 US247361VR61 1990 Equipment Trust 247361VG0 US247361VG07 Certificates, Series H 247361VQ8 US247361VQ88 247361VS4 US247361VS45 1990 Equipment Trust 247361WD6 US247361WD66 Certificates, Series I 1990 Equipment Trust 247361WE4 US247361WE40 Certificates, Series J 1990 Equipment Trust 247361WF1 US247361WF15 Certificates, Series K 1991 Equipment Trust 247361WJ3 US247361WJ37 Certificates, Series A 247361WR5 US247361WR52 1991 Equipment Trust 247361WK0 US247361WK00 Certificates, Series B 247361WS3 US247361WS36 1991 Equipment Trust 247361WL8 US247361WL82 Certificates, Series C 247361WP9 US247361WP96 1991 Equipment Trust 247361WM6 US247361WM65 Certificates, Series D 247361WQ7 US247361WQ79 1991 Equipment Trust 247361WN4 US247361WN49 Certificates, Series E 247361WT1 US247361WT19 1991 Equipment Trust 247361WV6 US247361WV64 Certificates, Series F 247361XD5 US247361XD57 1991 Equipment Trust 247361XB9 US247361XB91 Certificates, Series G 247361XE3 US247361XE31 1991 Equipment Trust 247361WW4 US247361WW48 Certificates, Series H 247361XC7 US247361XC74 1991 Equipment Trust 247361WX2 US247361WX21 Certificates, Series I 247361XF0 US247361XF06 1991 Equipment Trust 247361WY0 US247361WY04 Certificates, Series J 247361XG8 US247361XG88 1991 Equipment Trust 247361WZ7 US247361WZ78 Certificates, Series K 247361XH6 US247361XH61 1991 Equipment Trust 247361XA1 US247361XA19 Certificates, Series L 247361XJ2 US247361XJ28 1992 Equipment Trust 247361XK9 US247361XK90 Certificates, Series A 247361XR4 US247361XR44 1992 Equipment Trust 247361XL7 US247361XL73 Certificates, Series B 247361XS2 US247361XS27 1992 Equipment Trust 247361XM5 US247361XM56 Certificates, Series C 247361XT0 US247361XT00 1992 Equipment Trust 247361XN3 US247361XN30 Certificates, Series D 247361XU7 US247361XU72 1992 Equipment Trust 247361XP8 US247361XP87 Certificates, Series E 247361XV5 US247361XV55 1992 Equipment Trust 247361XQ6 US247361XQ60 Certificates, Series F 247361XW3 US247361XW39 Pass Through Certificates CUSIP ISIN Securities Number Number 1992 Pass Through 247367AA3 US247367AA36 Certificates, Series A1 1992 Pass Through 247367AB1 US247367AB19 Certificates, Series A2 1992 Pass Through 247367AC9 US247367AC91 Certificates, Series B1 1992 Pass Through 247367AD7 US247367AD74 Certificates, Series B2 1993 Pass Through 247367AE5 US247367AE57 Certificates, Series A1 1993 Pass Through 247367AF2 US247367AF23 Certificates, Series A2 1996 Pass Through 247367AL9 US247367AL90 Certificates, Series A1 1996 Pass Through 247367AM7 US247367AM73 Certificates, Series A2 About Delta Air Lines Delta is the third largest U.S. airline in terms of revenue passenger miles flown. Delta operates domestic hubs at Atlanta, Cincinnati, Dallas-Fort Worth, and Salt Lake City. International gateways are located at Atlanta and New York's JFK International Airport. Wholly owned regional airlines Comair and Atlantic Southeast Airlines, together with contract carriers, feed traffic into Delta's hubs through short-haul regional jet and turboprop operations. * * * As reported in the Troubled Company Reporter on August 17, 2004, Fitch Ratings downgrades Delta Airlines European Enhanced Equipment pass-through certificates, series 2001-2 (2001-2): -- Class A downgraded to 'BBB-' from 'AA'; -- Class B downgraded to 'CCC' from 'BB+'. The rating actions reflect Fitch's downgrade of Delta Airlines, Inc.'s unsecured debt to 'CC' from 'CCC+' as well as Fitch's concern that the value of some of the aircraft supporting the 2001-2 transaction could be subject to impairment in the event that Delta files for Chapter 11 bankruptcy. The unsecured debt downgrade 'follows the recent exchange of contract proposals between Delta management and the Air Line Pilots Association -- ALPA -- and the heightened risk that a stalemate in pilot cost restructuring negotiations may ultimately force the carrier into a Chapter 11 filing.' The aircraft collateral that supports the 2001-2 transaction comprises 19 Boeing aircraft that include 11 737-800s, four 767- 300ERs, and four 777-200ERs all delivered new between 1998 and 2001. While it is likely most of the aircraft would continue to be essential flight assets for Delta, it is also possible that some of the leases associated with the aircraft might be renegotiated or rejected in the event that Delta files for Chapter 11. Although the EETC transaction was completed post-Sept. 11 (December 2001), Fitch believes that the leases associated with the aircraft may be at rates in excess of the current market. Fitch's EETC rating criteria relies on the quality of the collateral backstopping the transaction and the credit quality of the underlying obligor. EETC ratings are linked to the underlying obligor's credit quality. DII IND: Asks Court to Extend DIP Financing to December 31 ---------------------------------------------------------- Michael G. Zanic, Esq., at Kirkpatrick & Lockhart, LLP, in Pittsburgh, Pennsylvania, relates that on January 13, 2004, the U.S. Bankruptcy Court for the Western District of Pennsylvania approved, on a final basis, the $350,000,000 DIP Financing Agreement of DII Industries, LLC, and its debtor-affiliates with Halliburton Energy Services, Inc., and Halliburton Company. Under the terms of the DIP Financing Agreement, the contractual obligation of Halliburton and HESI to extend financing to the Debtors expired on June 30, 2004. Mr. Zanic tells Judge Fitzgerald that pending the occurrence of the Effective Date, the Debtors require a reliable source of financing for their business operations. The Debtors have determined that extending the DIP Financing Agreement is the most practical and cost-effective way to meet this ongoing need for credit. Accordingly, the parties have agreed to extend the Date of Termination under the DIP Financing Agreement to December 31, 2004, unless the DIP Financing Agreement is earlier terminated due to the occurrence of an Event of Default. No additional consideration will be paid to Halliburton or HESI for the extension, and the terms and conditions applicable to extensions of credit will remain unchanged. The Debtors believe that this brief extension of the DIP Financing Agreement should be sufficient to permit them to bring their Chapter 11 cases to an orderly conclusion by ensuring adequate financing for their continued operations through the Effective Date of the Plan. While Halliburton and HESI have voluntarily continued to extend loans and other financial accommodations to them, the Debtors deem it best to confirm the terms and conditions applicable to the continuing extensions of credit by obtaining the Court's authority for a formal extension of the DIP Financing Agreement. Thus, the Debtors seek the Court's authority to extend the term of the DIP Financing Agreement to December 31, 2004. The Court will convene a hearing to consider the Debtors' request on September 21, 2004 at 9:00 a.m. Objections to the extension of the DIP Financing Agreement must be filed by September 2. Headquartered in Houston, Texas, Kellogg, Brown & Root is engaged in the engineering and construction business, providing a wide range of services to energy and industrial customers and government entities in over 100 countries. DII has no business operations. The Company filed for chapter 11 protection on December 16, 2003 (Bankr. W.D. Pa. Case No. 02-12152). Jeffrey N. Rich, Esq., Michael G. Zanic, Esq., and Eric T. Moser, Esq., at Kirkpatrick & Lockhart LLP, represent the Debtors in their restructuring efforts. (DII & KBR Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) DLJ COMMERCIAL: Fitch Affirms Low-B Ratings on Six Classes ---------------------------------------------------------- Fitch Ratings upgrades DLJ Commercial Mortgage Corp.'s commercial mortgage pass through certificates, series 1998-CF2 as follows: -- $55.4 million class A-2 to 'AAA' from 'AA'; -- $60.9 million class A-3 to 'A+' from 'A'; -- $13.8 million class A-4 to 'A' from 'A-'. Fitch affirms and removes the following classes from Rating Watch Negative: -- $22.2 million class B-5 'B'; and -- $13.8 million class B-6 'B-'. Fitch also affirms these certificates: -- $86.2 million class A-1A 'AAA'; -- $579.5 class A-1B 'AAA'; -- Interest-only class S 'AAA'; -- $41.5 million class B-1 'BBB'; -- $16.6 million class B-2 'BBB-'; -- $52.6 million class B-3 'BB'; -- $11.1 million class B-4 'BB-'; -- $22.2 million class B-5 'B'; -- $13.8 million class B-6 'B-'. Fitch does not rate the $16.8 million class C certificates. The upgrades reflect the increased credit enhancement levels from loan payoffs and amortization and the subordination levels of deals with similar characteristics issued today. The transaction has paid down 12% since issuance to $970.5 million as of August 2004 from $1.1 billion at issuance. In addition, eight loans (4.6%) are defeased. ORIX Capital Markets, LLC, the master servicer, collected year-end 2003 operating statements for 90% of the pool by balance. The weighted average debt service coverage ratio -- DSCR -- for year- end 2003 was 1.64 times (x). Eight loans (0.76%), secured by convenience stores and gas stations, are specially serviced and in foreclosure. The loans are cross-collateralized and cross-defaulted and expected to result in losses. At this time all losses are expected to be absorbed by the most subordinate class C. Fitch is also concerned about a high percentage of loans with a DSCR less than 1.00x (10%). The Chanin Building loan (7%) is currently on ORIX's watchlist. The loan is current; however, litigation filed by the special servicer due to ownership changes surrounding the death of a principal resulted in legal fees causing interest shortfalls. The litigation has been settled and the fees (over $1 million) have been passed through the trust. According to ORIX, interest shortfalls to classes B-5 and B-6 due to these fees are expected to be repaid in six and 11 months, respectively. Therefore, Fitch is removing these classes from Rating Watch Negative. ENRON CORP: Examiner Asks Court to Extend Term Beyond Emergence --------------------------------------------------------------- Enron North America Corporation Examiner, Harrison J. Goldin, asks the U.S. Bankruptcy Court for the Southern District of New York to extend the powers and duties afforded to him pursuant to the Plan through the post-Effective Date period until the earlier to occur of: (a) a final order closing Enron's cases; or (b) a final order determining that his services are no longer needed because all or substantially all issues affecting ENA have been resolved and substantially all distributions to ENA creditors have been made. Arthur Steinberg, Esq., at Kaye Scholer, LLP, in New York, notes that although the confirmed Plan estimates that the Effective Date would occur at around year-end, it now appears that the Effective Date could be much earlier. The Plan confirmation and the occurrence of the Effective Date are significant milestones in perhaps the most complicated and expensive Chapter 11 cases ever filed. However, as the Debtors recognized during the confirmation hearing, "[t]he effective date, whether it were a year earlier or whether it were not or whether it is six months from now, is not going to determine what creditors get. It is the date [the filed and unliquidated] claims are whittled down to the amount that people believe are the right amount so that final distributions can be made and the interim partial distributions." The Debtors also made this observation during the status conference held on April 1, 2004, wherein they acknowledge that no significant distributions could be made to creditors until the Court resolves the mega complaints, which is scheduled for trial in February 2007. These statements highlight the single most important factor weighing in favor of Mr. Goldin's request -- much still needs to be done in these cases prior to meaningful distributions being made to creditors, especially since substantial assets are still being converted to cash and there remains $130 billion of filed claims plus 4,000 to 7,000 of unliquidated claims. ENA Examiner's Appointment Mr. Steinberg notes that in the early phase of these cases, ENA creditors sought the appointment of the ENA Examiner because they believe that the Debtors and the Creditors Committee could not adequately represent ENA's sole interest with respect to many issues. Among other duties, the ENA Examiner was appointed to be a "watchdog" for the ENA Estates to ensure that ENA's assets and liabilities were adequately preserved for the benefit of ENA creditors. The Creditors Committee's reaction to the watchdog role was that the oversight function should be the Committee's role exclusively and that the Committee could effectively discharge its fiduciary responsibility on behalf of ENA even though: (i) a significant number of its members would end up being sued by the Debtors based on prepetition conduct; (ii) the overwhelming majority of its members hold a majority of their claim against Enron as contrasted to ENA; and (iii) there were and continue to be a number of significant inter-Debtor issues that require resolution and the Creditors Committee could not adequately represent both sides of the dispute. The Debtors' reaction to the ENA Examiner's watchdog role was similar to that of the Creditors Committee. The Debtors believed that they could effectively discharge their fiduciary responsibility on behalf of ENA without the need of any additional oversight beyond that given by the Creditors Committee. Not surprisingly, after having "butted heads" with the ENA Examiner on a number of issues and especially during the negotiations over the global compromise, the Debtors and the Creditors Committee want to return to an earlier status quo -- before the appointment of the ENA Examiner. Should the ENA Examiner Remain? Mr. Steinberg relates that the essential question for the Court is whether a compelling reason exists to modify the status quo and eliminate the oversight function now performed by the ENA Examiner in a situation where: (i) inter-Debtor estate issues remain to be resolved; (ii) substantial asset and liability issues, which could meaningfully impact creditor distributions from both an amount and timing perspective, are yet to be resolved; and (iii) by virtue of the Confirmed Plan, there is less judicial oversight as to the essentially liquidating ENA Estates. As the Debtors acknowledged, the post-Effective Date period will be critical; it will be the time when, inter alia: (a) all remaining important issues respecting assets and liabilities are negotiated, settled or otherwise resolved; (b) the allocation of sales and settlement proceeds, as well as overhead expenses, are determined; and (c) interim and final distributions are calculated and recalculated. According to Mr. Steinberg, these tasks clearly implicate certain of the ENA Examiner's original duties -- the "watchdog" component on behalf of ENA creditors. Mr. Steinberg contends that without the continuation of the ENA Examiner, the post-Effective Date governance structure contained in the Plan will suffer from the same infirmity that existed when the ENA Examiner was first appointed. There will be no fiduciary acting with staff support functioning solely on ENA's behalf. Moreover, Mr. Steinberg asserts that given the magnitude of the issues that remain to be resolved, the fact that those issues profoundly affect the ENA estates and creditors, that the remaining fiduciaries and professionals owe duties to all of the Debtors' estates and creditors, and the reduced Court oversight be virtue of the confirmed Plan, it is even more compelling than before that ENA continue to have its existing fiduciary safeguard and protect its interests during the post-Effective Date period. Mr. Steinberg points out that the global compromise did reduce the number of issues that caused dissension between ENA creditors, and the Debtors and the Creditors Committees. It did not, however, resolve all the inter-estate issues that can and will arise post- Effective Date. The vulnerabilities and exposures that lie ahead for ENA creditors include: (a) the appropriateness of settlements; (b) the allocation of sale and settlement proceeds among Debtor estates; (c) which claims are entitled to the benefit of subordination provisions in certain debentures and other instruments; (d) issues associated with post-confirmation allocation of expenses; and (e) implementation of the Distribution Model. Furthermore, recent examples illustrate how the ENA Examiner's role continues to protect the interests of the ENA Estates; they involve events which occurred after the consensus respecting the global compromise was reached. Mr. Steinberg argues that continuing the role of the ENA Examiner post-Effective Date will help ensure an orderly and less contentious wind-down process; the ENA creditors will continue to have a voice in these proceedings and the reassurance that a fiduciary is looking out solely for their interests. Mr. Steinberg reminds Judge Gonzalez that the ENA Examiner provided considerable assistance in facilitating a Chapter 11 Plan for ENA, as well as for all the Debtors. It is self-evident that the ENA Examiner's presence ameliorated considerably the contentious and litigious atmosphere that was spiraling out of control during the first few months of these cases. 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 Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENVIRONMENTAL LAND: Asks to Use Cash Collateral to Pay Expenses --------------------------------------------------------------- Environmental Land Technology, Ltd., asks the U.S. Bankruptcy Court for the District of Columbia for authority to use its secured creditors' cash collateral to pay postpetition operating expenses. The Debtor proposes to grant adequate protection to its lenders for any diminution in the value of their collateral. Before Environmental Land Technology sought chapter 11 protection, certain creditors loaned and invested money in the Debtor. Their interests are secured by, among other things, the Debtors assets and property including its real property. The aggregate amount loaned by the Creditors was $41,500,000. Currently, the value of the Collateral -- primarily certain real estate in Washington County, Utah -- is about $70,000,000 The Debtor points out that the Creditors are oversecured because the value of the Collateral well exceeds the amount of the Creditors' claims. If the Debtor is unable to use cash collateral, it would be forced to liquidate, and that would cause the value of the assets to decline sharply. Allowing the Company to dip into the lenders' Cash Collateral will avoid immediate and irreparable harm to the estate. Any claims of secured creditors arising from the use of Cash Collateral will have priority under Sections 364(c)(1) and (2) of the Bankruptcy Code over all administrative expenses. As additional adequate protection, the Debtor wants to grant the Creditors administrative expense priority claims with priority over all other costs and expenses, junior only to a Carve-Out for: (i) expenses, disbursements and other charges, including fees and expenses of the professionals retained by the Debtor and any statutory committee of creditors appointed in this case, in an amount not to exceed $500,000; (ii) excess Expenditures comprised of fees, disbursements and other charges; (iii) a carve-out of an additional $500,000 in the aggregate for professional fees, expenses, disbursements and other charges of the retained professionals and any appointed statutory committee of creditors; and (iv) the quarterly fees pursuant to 29 U.S.C. Section 1930 and any fees payable to the Clerk of the Bankruptcy Court. The Debtor points out that it intends to preserve its collateral through a successful reorganization of its business through a sale. The likely result, the Debtor says, will be the payment of allowed claims in full. Headquartered in Washington, District of Columbia, Environmental Land Technology, Ltd. filed for chapter 11 protection (Bankr. D.C. Case No. 04-00926) on June 8, 2004. Donald A. Workman, Esq., at Foley & Lardner, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed over $10 Million in estimated assets and over $50 Million in estimated liabilities. EPIC DATA: Inks $1.3 Million P3-MMS Pact with Bell Helicopter ------------------------------------------------------------- Bell Helicopter, a Textron Company and leading supplier of military and commercial helicopters headquartered in Fort Worth, Texas, selected Epic Data International Inc.'s (TSX:EKD) P3 Materials Management System (P3-MMS) to manage the movement of parts throughout their manufacturing facilities. This contract, valued at $1.3 million, will supply Bell Helicopter with Epic Data's P3-MMS at Bell's 8 manufacturing plants throughout the United States by the end of 2004. P3-MMS will enable Bell Helicopter to reduce work-in-process inventory by achieving greater accuracy in parts accountability and visibility of materials movement throughout their manufacturing supply chain. This high level of visibility and accuracy will be a result of the tracking system designed within MMS. This solution will include the MMS Advanced Authorization Server that allows suppliers to log in and receive pre-authorization for materials orders before they are shipped, provides advanced shipment notifications and ensures that proper certification documentation is included with deliveries. "Bell Helicopter is pleased to add another Epic Data solution to our shop floor. We've been able to significantly improve operations with Epic's data capture system. Now, we're anticipating even further results with the implementation of MMS", stated Ronnie Branscome, Director, Logistics / Distribution at Bell Helicopter. "As a long time data-capture solution provider for Bell Helicopter, we are delighted to see Bell Helicopter take the next step to improving their manufacturing operations", said Peter Murphy, President & CEO of Epic Data. With nearly 30 years of data capture industry experience, Epic Data's manufacturing customers include Bombardier, CAE, Flextronics, General Dynamics Electric Boat, Komatsu, Lockheed Martin Aerospace, Siemens, Volvo and many others. Epic Data helps manufacturing customers improve quality, reduce costs and increase manufacturing velocity. About P3-CME P3-MMS is available as a stand-alone product or as part of Epic Data's P3 Collaborative Manufacturing Execution Suite (P3-CME). P3-CME creates a common, bottom-up view of information flow that provides managers with the visibility needed to synchronize and adjust production with real-time demands. It provides complete production process traceability and supports continuous improvement efforts in mass customization, outsourcing and lean manufacturing. Designed specifically for discrete manufacturing operations, P3- CME supports advanced auto-identification and capture, including all standard barcode types, magnetic stripe and radio frequency identification. About Bell Helicopter Bell Helicopter, a Textron Company, makes commercial and military helicopters and tiltrotors (including the V-22 Osprey, which Bell manufactures with Boeing). Bell manufactures seven commercial helicopter models. Military models include the venerable UH-1Y "Huey," a utility helicopter, the AH-1Z Super Cobra, the Eagle Eye unmanned Aerial Vehicle and the aforementioned V-22 Osprey tiltrotor. Bell also provides repair, maintenance overhaul services. About Epic Data International Inc. Epic Data has been a leader in automatic identification and data capture solutions for almost 30 years. Epic Data's solutions are used by hundreds of leading manufacturers across the globe in aerospace, automotive, high technology and heavy machinery industries to increase productivity and accelerate continuous improvement. Epic Data's enterprise mobility solutions for parking enforcement and route management increase productivity while improving customer service and worker safety by connecting mobile personnel to central offices in real time. People and technology make Epic Data the global leader in automated data capture solutions for the extended enterprise. At June 30, 2004, Epic Data's balance sheet shows a stockholders' deficit of $54,614,000 compared to a deficit of $49,511,000 at September 30, 2003. FELCOR LODGING: S&P Junks $50 Million Convertible Preferred Stock ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC' rating to FelCor Lodging Trust, Inc.'s planned $50 million add-on to the $107 million series A cumulative convertible preferred stock. These securities will be a draw down from the company's shelf registration. Proceeds will be used by FelCor Lodging L.P. (sole general partner and owner of more than 95% of its partnership interest is FelCor Lodging Trust) to redeem a portion of its 9.5% senior notes due 2008. At the same time, Standard & Poor's affirmed its ratings on FelCor Lodging Trust and FelCor Lodging, L.P., including its 'B' corporate credit ratings. The outlook is stable. Approximately $1.9 billion in debt was outstanding on June 30, 2004. The stable outlook reflects FelCor's sizable and good quality hotel portfolio. "Despite continuous asset sales, credit measures are not expected to improve materially in the near term," said Standard & Poor's credit analyst Sherry Cai. "However, the outlook incorporates the expectation that credit measures will strengthen gradually as revenue growth continues in the lodging industry in the coming periods." FLEMING COMPANIES: Asks Court to Approve Local 205 Settlement Pact ------------------------------------------------------------------ The Confectionary, Tobacco Workers and Grain Millers Union, Local 205, represents certain former employees who were employed at the bakery operations in Wisconsin of Fleming Companies, Inc., and its debtor-affiliates. Prior to the bankruptcy petition date, Fleming and Local 205 entered into a Collective Bargaining Agreement, dated May 1, 2001, terminating April 30, 2003. The CBA established the parties' rights and obligations with respect to the terms of employment of 112 Former Employees. Scotta E. McFarland, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, in Wilmington, Delaware, relates that the Debtors sold the bakery facilities to C&S Wholesale Grocers, Inc., and C&S Acquisition, LLC. Majority of the Former Employees became C&S employees. Local 205 filed one claim on behalf of the Former Employees. The Local 205 Claim is an administrative claim for $278,374, based on an alleged breach of the CBA for failure to pay severance. Two Former Employees filed proofs of claim totaling $18,060: -- $350 administrative claim for unpaid vacation pay; and -- $17,710 priority claim for unpaid vacation pay and pension benefits. The Debtors dispute the factual and legal bases of the Local 205 Claim. The Debtors allege that no severance is due because the Former Employees were offered employment by C&S. Moreover, even if severance is due, it must be allocated under non-priority unsecured, priority and administrative claim classifications. Local 205 disputes these positions. However, the Debtors and Local 205 have no dispute as to the Former Employee Claims. To settle the Local 205 Claim and the Former Employee Claims, the parties enter into a Settlement Agreement wherein: (a) the Debtors agree to pay $24,483 cash to Local 205 in full and complete satisfaction of the Administrative Portions and Priority Portions of the Local 205 Claim and Former Employee Claims. Local 205 will determine the distribution of the settlement proceeds to the Former Employees; (b) the Debtors agree to allow a non-priority general unsecured claim for $267,717 as the General Unsecured Portions of the Local 205 Claim and Former Employee Claims; and (c) the Debtors and Local 205 agree to release each other from all claims and causes of action arising out of or related to the CBA. However, Local 205 is not releasing any workers compensation claims or Civil Rights Claims. Ms. McFarland tells the U.S. Bankruptcy Court for the District of Delaware that the Settlement Agreement avoids further litigation regarding, and fully resolves, the Settled Claims. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to approve the Settlement Agreement with Local 205. Headquartered in Lewisville, Texas, Fleming Companies, Inc. -- http://www.fleming.com/-- is the largest multi-tier distributor of consumer package goods in the United States. The Company filed for chapter 11 protection on April 1, 2003 (Bankr. Del. Case No. 03-10945). Judge Walrath confirmed Fleming's Third Amended Plan on July 26, 2004, under which Core-Mark Holding Company, Inc., will emerge as a rehabilitated company and be owned by Fleming's unsecured creditors. Richard L. Wynne, Esq., Bennett L. Spiegel, Esq., Shirley Cho, Esq., and Marjon Ghasemi, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,220,500,000 in assets and $3,547,900,000 in liabilities. (Fleming Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) FRESH CHOICE: Committee Signs-Up SulmeyerKupetz as Counsel ---------------------------------------------------------- The Official Unsecured Creditors Committee appointed in Fresh Choice, Inc.'s chapter 11 case, seeks authority from the U.S. Bankruptcy Court for the Northern District of California to hire SulmeyerKupetz as its bankruptcy counsel. The Committee selected SulmeyerKupetz because the firm's attorneys are skilled counsel in bankruptcy and insolvency proceedings and have special knowledge that will enable them to perform services of particular benefit to the Committee. Specifically, SulmeyerKupetz will: a) give the Committee legal advice with respect to its powers and duties; b) give the Committee advice regarding the administration of the Debtor's estate; c) give legal advice concerning the Committee's investigation of the acts, conduct, assets and liabilities, and financial condition of the Debtor; d) give legal advice relating to bankruptcy, commercial and corporate law issues arising in connection with this bankruptcy case; e) give legal advice concerning the operation of the Debtor's businesses and the desirability and probability of continuing and/or modifying such businesses; f) give legal advice to the Committee with respect to all matters relating to any proposed disposition of assets or any plan of reorganization, including negotiation of a plan and possible formulation and proposal of a plan; g) assist the Committee in its negotiations with the Debtor and creditors concerning matters in this case, including the terms of any proposed plan; h) assist the Committee in making reports to creditors holding unsecured claims regarding the progress of this case; i) give legal advice to the Committee with respect to applications for relief sought by the Debtor and other parties in interest; j) appear on behalf of the Committee to support its position on various matters in this case and any contested matters or adversary proceedings filed therein, including the preparation of all necessary applications, motions, answers, complaints, orders, reports and other legal papers and participation in discovery and other litigation activity where necessary or appropriate to protect the interests of the unsecured creditors; k) give legal advice regarding any possible merger, acquisition or other transaction involving the Debtor; l) coordinate with other professionals retained by the Committee with respect to those matters that require legal and economic, business, market or other related expertise; and m) perform all other appropriate legal services for the Committee. The attorneys at SulmeyerKupetz and their current hourly rates are: Attorneys Hourly Rates --------- ------------ Abrams, Janis G. $375 Alliotts, Christoper 375 Baumann, Richard G. 500 Davis, Jay R. 400 Ehrenberg, Howard M. 495 Gordon, Ronald E. 500 Horoupian, Mark S. 400 Kupetz, Arnold L. 575 Kupetz, David S. 495 Lev, Dan A. 425 Madris, Howard N. 395 Miller, Elissa D. 400 Pomerance, Jeffrey M. 400 Rallis, Dean G. 450 Sahn, Victor A. 495 Saperstein, Israel 425 Shaham, Yaron 250 Simons, Larry D. 325 Stanfield, Diane C. 400 Sulmeyer, Irving 600 Tippie, Alan G. 495 Tompkins, Marcus A. 275 Waines, Steve R. 450 Walden, Leslie A. 325 Zerunyan, Frank V. 375 Kennedy, Robert G. 160 To the best of the Committee's knowledge, SulmeyerKupetz is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Morgan Hill, California, Fresh Choice -- http://www.freshchoice.com/-- owns and operates a chain of more than 40 salad bar eateries, mostly located in California. The company filed for chapter 11 protection on July 12, 2004 (Bankr. N.D. Calif. Case No. 04-54318). Debra I. Grassgreen, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub represents the Debtor in its restructuring efforts. When the Debtor filed for protection it listed $29,651,000 in total assets and $14,348,000 in total debts. GALEY & LORD: Files Voluntary Chapter 11 Petition in N.D. Georgia ----------------------------------------------------------------- Seeking to move forward with its efforts to be acquired, Galey & Lord, a leading global supplier of denim, khaki and corduroy fabrics for the fashion apparel and uniform markets, filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Northern District of Georgia. The company has entered into a definitive asset purchase agreement with Patriarch Partners, LLC, whose funds have $4 billion under management, to acquire the company pursuant to section 363 of the U.S. Bankruptcy Code. The agreement amends the proposal Patriarch made last month, the terms of which were not disclosed. Galey & Lord has secured an $80 million postpetition financing agreement with GE Capital, which will enable the company to continue normal business operations, including providing wages and benefits to employees, maintaining bank accounts and cash management systems, and meeting new obligations to customers, suppliers and others. The company is seeking expedited Bankruptcy Court approval of the financing agreement. Under the terms of the Patriarch agreement, which is subject to Bankruptcy Court approval and other acquisition offers, if any, Patriarch would pay $45 million for the company's term debt and pay off, replace or assume up to $85 million in other secured debt plus the outstanding letters of credit. Patriarch also would assume up to $58 million in trade, utility, tax, and employee pay and benefit obligations. The agreement excludes certain legacy liabilities such as those obligations insured by the federal Pension Benefit Guarantee Corporation. The transaction is expected to close by early November 2004. In July, Galey & Lord's board agreed to an out-of-court acquisition offer by Patriarch. The proposal did not win the unanimous approval of the term lenders required for the acquisition to go forward. "Our board of directors and many of our lenders have concluded that an acquisition by Patriarch presents the greatest opportunity to secure a bright future for Galey & Lord and is in the best interests of our customers, employees, vendors, suppliers and stakeholders," said John J. Heldrich, president & CEO of Galey & Lord. "While we are disappointed that our lenders were unable to reach unanimous agreement to proceed with the original plan, we are confident that this course will allow us to continue on a positive track and give us the means of achieving our long-term goals. "As this process unfolds, we will continue to work to preserve jobs, protect value and provide the highest level of service to our customers," he added. "We expect business to continue as usual, with little, if any, impact on our employees, partners or business operations. Patriarch believes in these same responsible business practices. "In modifying its proposal for bankruptcy court consideration, Patriarch has reiterated its commitment to working with management to help this company achieve stability and provide the resources necessary for us to achieve long-term success," he continued. "Patriarch is a highly-regarded investor with a long track record of working with companies in our industry. We are grateful for its staunch support and are committed to an open, fair and expedited sale process that benefits all of our stakeholders." The company has retained Dechert LLP and Alston & Bird as bankruptcy counsel and Houlihan Lokey Howard & Zukin as investment banking advisors. Galey & Lord, Inc., which is privately held following its emergence from bankruptcy protection in March of 2004, operates domestically and in Canada under two divisions, Swift Denim and Galey & Lord Apparel, and internationally through joint ventures in Europe, North Africa, Asia and Mexico. Its customers include: VF, Gap, Old Navy, Banana Republic, Polo Ralph Lauren, Abercrombie & Fitch, Levi's, Tommy Hilfiger, L.L. Bean, Nautica, Eddie Bauer, Liz Claiborne, Haggar, Land's End, and Tropical Sportswear / Savane, among others. Galey & Lord Apparel is a leading producer of innovative woven sportswear fabrics as a result of its expertise in sophisticated fabric finishing and close design partnerships with its customers. Swift Denim is a leading producer of differentiated and value- added denim products supplying top designers and retailers around the world. Galey & Lord and its joint venture interests operate in the U.S., Canada, Mexico, Asia, Europe and North Africa. Headquartered in Atlanta, Ga., Galey & Lord manufactures textiles for sportswear, including denim, cotton casuals, and corduroy. It operates domestically and in Canada under two divisions, Swift Denim and Galey & Lord Apparel, and internationally through joint ventures in Europe, North Africa, Asia and Mexico. The Debtors filed for chapter 11 protection on February 19, 2002. On February 9, 2004, the Bankruptcy Court confirmed its Plan of Reorganization allowing the company to emerge from bankruptcy protection in March 2004. The Debtors filed its second voluntary chapter 11 petition on August 19, 2004. Joel H. Levitin, Esq., Henry P. Baer, Jr., Esq., and Anna C. Palazzolo, Esq., at Dechert, LLP, represent the Debtors. When the Company filed for protection from their creditors, they listed $533,576,000 in total assets and $438,035,000 in total debts. GALEY & LORD INC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: Galey & Lord, Inc. Five Concourse Parkway, Suite 2300 Atlanta, Georgia 30328-5350 Bankruptcy Case No.: 04-43098 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Galey & Lord Industries, Inc. 04-43097 Galey & Lord Properties, Inc. 04-43099 Swift Textiles, Inc. 04-43100 Society Hill Finishing LLC 04-43101 McDowell Weaving LLC 04-43102 Greensboro Textile Administration LLC 04-43103 Swift Denim Properties, Inc. 04-43104 Flint Spinning LLC 04-43105 Brighton Weaving LLC 04-43106 Type of Business: The Debtor manufactures textiles for sportswear, including denim, cotton casuals, and corduroy. It operates domestically and in Canada under two divisions, Swift Denim and Galey & Lord Apparel, and internationally through joint ventures in Europe, North Africa, Asia and Mexico. Chapter 11 Petition Date: August 19, 2004 Court: Northern District of Georgia (Rome) Judge: Mary Grace Diehl Debtors' Counsels: Jason H. Watson, Esq. John C. Weitnauer, Esq. Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309-3424 Tel: 404-881-4796 Fax: 404-881-7777 -- and -- Joel H. Levitin, Esq. Dechert LLP 30 Rockefeller Plaza New York, NY 10112 Tel: 212-698-3500 Total Assets as of December 27, 2003: $533,576,000 Total Debts as of December 27, 2003: $438,035,000 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Parkdale Mills, Inc. $4,794,955 P.O. Box 75077 Charlotte, NC 28275 Greenwood Mills $368,309 P.O. Box 930945 Atlanta, GA 31193-0945 Invista S.A.R.L. $343,556 P.O. Box 905430 Charlotte, NC 28290-5430 Daikin America, Inc. $264,480 P.O. Box 7777 W0502020 Philadelphia, PA 19175-2020 Ramtex, Inc. $250,708 P.O. Box 307 Ramseur, NC 27316 Ernst & Young LLP $220,149 Montgomery Industries $149,911 Chemtrade Performance Chemicals US LLC $116,092 Wellstone Mills, Inc. $110,530 Staple Cotton Cooperative $109,765 Cognis Corporation $86,209 Omnova Solutions Inc. $78,643 Nano-Tex, LLC $76,626 Genesis Consulting Company, LLC $75,501 Dystar LP $62,114 Terminal Trucking Company Inc. $59,538 Sunbelt Corporation $57,645 Stroock & Stroock & Lavan $52,966 Fenn-Vac, Inc. $49,379 GTP Greenville, Inc. $46,583 GLIMCHER REALTY: Moody's Lowers Preferred Stock Rating to B1 ------------------------------------------------------------ Moody's Investors Service lowered the ratings of Glimcher Realty Trust (preferred stock to B1) after completing its review following the resignation of PricewaterhouseCoopers LLP, Glimcher's auditors, on June 1, 2004. The REIT's rating outlook is stable. Moody's stated that the downgrade reflects Glimcher's continuing deterioration in credit metrics, particularly increased leverage and reduced fixed charge coverage. In addition, Moody's is concerned about management controls at the REIT, as well as the fact that the new accounting firm, BDO Seidman, will not have the opportunity to fully review Glimcher's financial reports and procedures until the new auditors have completed the year-end 2004 audit and released these financials in March 2005. Moody's cites Glimcher's credit metrics, which have been continuously deteriorating for a few quarters. Its effective leverage grew from 62% of gross assets in 2002 to 66% in 2003 and 69% at the end of 2Q04. This statistic makes Glimcher the highest leveraged REIT among its peer group. Glimcher has a low fixed charge coverage at 1.53x (including amortization and capitalized interest). Secured debt has also been rising, from 56% of gross assets in 2002 to 60% at 2Q04. Offsetting these negative factors are Glimcher's success in: (1) eliminating all of its joint ventures; (2) divesting the remainder of its shopping center portfolio with its announced sale of 25 centers; (3) maintaining a laddered debt maturity schedule, and reducing its variable rate debt exposure to 15% of total debt from 46% in 2000. A rating upgrade would be conditioned on BDO Seidman completing the Sarbanes-Oxley 404 procedures and its full annual audit without discovering any errors or omissions, Glimcher increasing its fixed charge coverage closer to the 1.9x range, reducing effective leverage below 60%, and decreasing secured leverage below 50%. The rating could be further downgraded if any restatements are required as a result of the completion of BDO Seidman's 404 review or audit, and upon additional deterioration in the fixed charge coverage below 1.5x, increases in effective leverage above 70% of gross assets, and a rise in secured debt above 65% of gross assets. These securities have been downgraded: * Glimcher Realty Trust -- Series F and G Cumulative Redeemable Preferred Stock to B1, from Ba3. Glimcher Realty Trust [NYSE:GRT], headquartered in Columbus, Ohio, USA is a fully integrated, self-administered and self-managed real estate investment trust that owns, manages, acquires and develops enclosed regional and super-regional malls and community shopping centers. Glimcher owns and operates 67 properties located in 22 states throughout the Midwestern and Eastern USA. Glimcher Realty Trust had assets of $2.0 billion and equity of $531 million at June 30, 2004. GLOBAL CROSSING: Summary of New Jersey Class Action Lawsuit ----------------------------------------------------------- On April 27, 2004, Global Crossing, Ltd., announced that it is conducting a review of its previously reported financial statements for the years ended December 31, 2003 and 2002, including their interim periods. In the course of preparing the Company's financial statements for the first quarter of 2004, the Global Crossing management became concerned with the adequacy of the company's accrued cost of access liability. Global Crossing said that it plans to restate results for 2003 because it understated costs by at least $50 million to $80 million. Global Crossing, which is reviewing accounting for 2003 and 2002, said expenses for using other carriers' networks, known as cost of access liabilities and cost of access expenses, were a combined $2.1 billion in 2003. Global Crossing also said that its previously reported results for 2002 and 2003, and its 2004 forecasts should be disregarded pending the outcome of its review. Global Crossing said that it is assessing the internal control of issues presented and, in light of the expected restatement, currently believes that these issues constitute a material weakness in its internal controls. The company is undertaking steps to address the internal control issues. The market's reaction to Global Crossing's disclosures was swift and severe. Following the disclosures, shares tumbled in the Nasdaq Stock market composite trading. Shares of Global Crossing have dropped 62% since the company emerged from bankruptcy on December 10, 2003. During the period from January 22, 2004 through April 26, 2004, Harold Silverstein purchased common stock of Global Crossing, Ltd. Lodewijk Christian Van Wachen, Peter Seah Lim Huat, and John Legere were Global Crossing's principal officers who controlled the company and its public disclosures. Because of Messrs. Van Wachen, Lim Huat and Legere's positions with the company, they had access to the adverse undisclosed information about its business, operations, products, operational trends, financial statements, markets, and present and future business prospects via access to internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and Board of Directors meetings and committees, and via reports and other information provided to them. Mr. Silverstein alleges that Messrs. Van Wachen, Lim Huat and Legere each made false and misleading statements and failed to disclose material adverse information concerning Global Crossing during the Class Period. Thus, Messrs. Van Wachen, Lim Huat and Legere are each liable as a participant in a wrongful scheme and course of business that operated as a fraud or deceit on those who purchased or acquired Global Crossing common stock by disseminating materially false and misleading statements or concealing material adverse facts. The scheme deceived the investing public regarding Global Crossing's business and operations and the intrinsic value of the company's common stock and caused the members of the Class to purchase Global Crossing common stock at artificially inflated prices. More specifically, Messrs. Van Wachen, Lim Huat and Legere failed to disclose that: (a) Global Crossing understated between $50 million to $80 million of accrued cost of access liability at year end 2003; (b) Global Crossing had inadequate internal controls; and (c) Global Crossing's financial results were materially inflated at all relevant times. Therefore, Mr. Silverstein asks the U.S. District Court for the District of New Jersey to declare his action against Global Crossing and Messrs. Van Wachen, Lim Huat and Legere as a proper class action and to deem him class representative under Rule 23 of the Federal Rules of Civil Procedure. Mr. Silverstein states that the members of the Class are dispersed throughout the United States and are so numerous that joinder of all Class members is impracticable. Mr. Silverstein's claims are typical of the claims asserted by the Class members who are similarly affected by Global Crossing's actionable conduct in violation of federal law. Mr. Silverstein assures the New Jersey District Court that he will fairly and adequately protect the interests of the Class and that he has retained counsel competent and experienced in class action litigation. Mr. Silverstein attests that he has no interests in conflict with the Class whom he wishes to represent. A class action is superior to other available methods for the fair and efficient adjudication of the asserted claims. Furthermore, because the damages suffered by individual members of the Class may be relatively small, the expense and burden of individual litigation make it virtually impossible for class members to redress the wrongs done to them. The likelihood of individual class members prosecuting separate claims is remote. The questions of law and fact common to the Class members predominate over any questions affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) Whether the federal securities laws were violated by Global Crossing's alleged acts and omissions; (b) Whether Global Crossing's Class Period public statements and filings misrepresented and omitted material facts; (c) Whether Global Crossing acted with knowledge or with reckless disregard for the truth in misrepresenting and omitting material facts; (d) Whether Global Crossing participated in and pursued the common course of conduct complained; (e) Whether the market price of Global Crossing securities was inflated artificially as a result of Global Crossing's material misrepresentations and omissions during the Class Period; and (f) To what extent the members of the Class have sustained damages and the proper measure of damages. Mr. Silverstein also asks the New Jersey District Court to award compensatory damages, including interest, in his favor and that of the other Class members against Global Crossing and Messrs. Van Wachen, Lim Huat and Legere resulting from their wrongdoing. He further asks the New Jersey District Court to award him and the Class of reasonable costs and expenses incurred in the action, including counsel fees, expert fees, and other disbursements. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02- 40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News, Issue No. 63; Bankruptcy Creditors' Service, Inc., 215/945-7000) GLOBALNET INT'L: Seeks Open-Ended Lease Decision Period ------------------------------------------------------- Globalnet International, LLC, asks the U.S. Bankruptcy Court for the Southern District of New York to extend its time period to determine whether to assume, assume and assign, or reject its unexpired nonresidential real property leases. The Debtor wants an open-ended extension of the deadline imposed under 11 U.S.C. Sec. 365(d)(4) through confirmation of a plan of reorganization. Currently, the Debtor has three non-residential leases in Illinois, Texas and Florida. The Debtor assures the Court that it is current on all postpetition rent under the Leases. The Debtor states that the Leases are necessary for the reorganization process. The Debtor's operations center is located in Texas while the financial staff is located in Illinois. If the Debtor is forced to assume the Leases, the landlords will have a very large administration claim in relation to the size of the case in the event the Company defaults and breaches the Leases. The Debtor submits that granting a lease decision extension will be in the best interest of the estates and the creditors. Headquartered in New York, New York, Globalstar Telecommunications -- http://www.globalstar.com/-- provides global mobile and fixed wireless voice and data services. The Company filed for chapter 11 protection on June 30, 2004 (Bankr. S.D.N.Y. Case No. 04-14480). Robert R. Leinwand, Esq., at Robinson Brog Leinwand Greene Genovese & Gluck P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection, it did not disclose its assets but listed $1,823,799,468 in total debts. HI-RISE RECYCLING: Asks Nod to Hire Bruner-Cox as Accountants ------------------------------------------------------------- Hi-Rise Recycling Companies, Inc., asks the U.S. Bankruptcy Court for the Northern District of Ohio for permission to employ Bruner- Cox LLP as its accountants, nunc pro tunc to August 10, 2004. Bruner-Cox is expected to: a) provide accounting advice with respect to the Debtor's powers and duties as a debtor-in-possession in the continued operation of its business and the management of its property; b) review and analyze the Debtor's assets, liabilities and the operating and financial strategies of the Debtor; c) assist the Debtor in preparing the budgets and financial schedules as they may become necessary throughout this case; d) assist the Debtor in preparing for and filing one or more disclosure statements in accordance with Section 1125 of the Bankruptcy Code; e) assist the Debtor in preparing for and filing one or more plans of reorganization at the earliest possible date; f) perform any and all other accounting services for the Debtor in connection with this case; g) advise and attend hearings as necessary; and h) perform such accounting services as the Debtor may request with respect to any matter, including, but not limited to, valuation, employee benefits, debt restructuring, creditors' rights, tax planning, tax representation and audit matters. The current hourly rates of the professionals expected to provide services to the Debtor are: Professional Hourly Rate ------------ ----------- Ronald J. Manse $185 Steven O. Pittman 185 Dane J. Mayle 152 Staff Accountant 125 Headquartered in Wooster, Ohio, Hi-Rise Recycling manufactures and distributes industrial recycling and waste handling equipment in North America. The company filed for chapter 11 protection on August 16, 2004 (Bankr. N.D. Oh. Case No. 04-64352). Lawrence E. Oscar, Esq., and Warren Goldenberg, Esq., at Hahn Loeser & Parks LLP, represent Hi-Rise. When the Debtor filed for protection from its creditors, it listed more than $1 million in estimated assets and more than $10 million in estimated debts. HOLLINGER INC: Retractable Shares Priced at $7.25 Per Share ----------------------------------------------------------- Hollinger, Inc., (TSX: HLG.C) reported that the Retraction Price of the retractable common shares of the Corporation as of yesterday, August 19, 2004, is $7.25 per share. Hollinger's principal asset is its approximately 68.0% voting and 18.2% equity interest in Hollinger International. Hollinger International is an international newspaper publisher with English-language newspapers in the United States and Israel. Its assets include the Chicago Sun-Times and a large number of community newspapers in the Chicago area, The Jerusalem Post and The International Jerusalem Post in Israel, a portfolio of new media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 16, 2004 Hollinger's 2003 annual financial statements cannot be completed and audited until Hollinger International's 2003 annual financial statements are completed. Hollinger International has advised Hollinger that it believes that it needs to review the final report of the Special Committee established by Hollinger International before it can complete its 2003 annual financial statements. Hollinger understands that the work of the Special Committee is ongoing and its final report has not yet been issued. As a result of the delay in the completion and audit of its annual financial statements for the year ended December 31, 2003, Hollinger will not be in a position to file its second quarter interim financial statements (and related interim Management's Discussion & Analysis) for the six month period ended June 30, 2004 by the required filing date under applicable Canadian securities laws. As a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. US$78 million principal amount of Notes are outstanding under the Indenture. On July 16, 2004, Hollinger received a notice of default from the trustee under the Indenture dated July 8, 2004 notifying Hollinger of its failure to file and deliver its 2003 Form 20-F in accordance with the terms of the Indenture and indicating that if the default continued unremedied for a period 30 days after receipt of the notice (being on or about August 15, 2004), an event of default would occur under the Indenture. As a result of the delay in the completion and audit of its 2003 annual financial statements, Hollinger was not in a position to file and deliver its 2003 Form 20-F yesterday, August 15, 2004. As a result, an event of default occurred under the Indenture and the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will then have the right to accelerate the maturity of the Notes. Hollinger is actively exploring alternatives with a number of parties in connection with modifying the terms of, or refinancing, the Notes in order that Hollinger's debt obligations reflect the company's current circumstances and the improved security available to noteholders since the original issue date in March 2003. HOLLINGER INT'L: Ink Pact to Sell Telegraph Group for $1.21BB ------------------------------------------------------------- Hollinger International, Inc., discloses that during the second quarter of 2004, it entered into a definitive agreement to sell the assets of its U.K. Newspaper Group, the Telegraph Group, to Press Acquisitions Limited -- PAL. This Group includes the Daily Telegraph, the Sunday Telegraph and The Spectator. The transaction closed on July 30, 2004 with a purchase price of approximately $1.21 billion based on an exchange rate of US$1.8196 to (pound). As a result, the Company may classify the results of the U.K. operations as discontinued operations commencing with the reporting of its June 30, 2004 results of operations and restate prior periods similarly. The disclosure was part of an update made pursuant to Ontario Securities Commission Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements. Certain management and other insiders of the Company are currently subject to a cease trade order in respect of securities of the Company issued by the Securities Commission on June 1, 2004. The cease trade order results from the delay in filing the Company's annual financial statements for the year ended December 31, 2003, its interim financial statements for the three months ended March 31, 2004 and its Annual Information Form -- AIF - by the required filing dates. The cease trade order will remain in place until two business days following receipt by the Securities Commission of all filings that the Company is required to make pursuant to Ontario securities laws. On July 20, 2004, the Company did not anticipate that it would be in a position to file its interim financial statements for the six-month period ended June 30, 2004 by the filing date required by applicable Canadian securities legislation, since it was not expected that the final report of the Special Committee would be available sufficiently in advance of that time. The Company confirms that those interim financial statements have not been so filed. The Company believes that it needs to review the final report of the Special Committee established by the Company before it can complete and file the financial statements and the AIF in question. The work of the Special Committee is ongoing and its final report has not yet been issued. The Company will continue to provide bi-weekly updates, as contemplated by the OSC Policy, until the financial statements and AIF have been filed. Hollinger International, Inc., owns English-language newspapers in the United States, United Kingdom, and Israel. Its assets include The Telegraph Group Limited in Britain, the Chicago Sun- Times, the Jerusalem Post, a large number of community newspapers in the Chicago area, a portfolio of new media investments, and a variety of other assets. HOLLINGER INT'L: Updates Commission as Financial Reports Not Ready ------------------------------------------------------------------ Hollinger International, Inc., provided an update in accordance with Ontario Securities Commission Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements. Certain management and other insiders of the Company are currently subject to a cease trade order in respect of securities of the Company issued by the Securities Commission on June 1, 2004. The cease trade order results from the delay in filing the Company's annual financial statements for the year ended December 31, 2003, its interim financial statements for the three months ended March 31, 2004 and its Annual Information Form -- AIF - by the required filing dates. The cease trade order will remain in place until two business days following receipt by the Securities Commission of all filings that the Company is required to make pursuant to Ontario securities laws. On July 20, 2004, the Company did not anticipate that it would be in a position to file its interim financial statements for the six-month period ended June 30, 2004 by the filing date required by applicable Canadian securities legislation, since it was not expected that the final report of the Special Committee would be available sufficiently in advance of that time. The Company confirms that those interim financial statements have not been so filed. The Company believes that it needs to review the final report of the Special Committee established by the Company before it can complete and file the financial statements and the AIF in question. The work of the Special Committee is ongoing and its final report has not yet been issued. The Company will continue to provide bi-weekly updates, as contemplated by the OSC Policy, until the financial statements and AIF have been filed. On August 11, 2004, The Honourable Justice Farley of the Ontario Superior Court of Justice dismissed a motion by Ravelston Corporation Limited and Ravelston Management, Inc., for an anti- suit injunction seeking to restrain the Company and certain of its affiliates from bringing or initiating any claim related to the management of the Hollinger group of companies in any jurisdiction outside Ontario. Ravelston's counterclaim in the Ontario Courts, which seeks payment of management fees allegedly owed by the Company, was stayed on a temporary basis pending final disposition of the Illinois and Delaware court proceedings involving Ravelston, Conrad Black, the Hollinger group and others. A Notice of Appeal seeking to have the order staying this counterclaim set aside has been served. The Company's results of operations, as reflected in its earnings statements for the second quarter of 2004, are expected to be significantly different from the second quarter of 2003 as a result of, among other things, the issues noted. Any expected results noted for the second quarter of 2004 are not final and are subject to revisions prior to the filing of the Company's interim financial statements: (i) Costs of approximately $7.0 million were incurred in the second quarter of 2004 consisting of legal fees and other costs associated with the Special Committee's investigation. No such charges were incurred in the comparable period in 2003. (ii) Net foreign currency gains of $30.6 million were recognized in the second quarter of 2003, reflecting principally a strengthening of the Canadian dollar against the US dollar during that period. During the second quarter of 2004, the Canadian dollar weakened, which may give rise to a foreign currency loss, which has not yet been quantified. (iii) During the second quarter of 2004, the average and period-end rates of exchange for foreign currencies and US dollars changed substantially from the prior year. As a significant portion of the Company's operations are undertaken in foreign currencies, in particular in pounds sterling and Canadian dollars, individual categories of revenues and expenses will reflect the significant changes in foreign exchange rates. (iv) The Company expects that restatements and other charges and adjustments may result from the conclusion of the Special Committee's investigation. Since the Special Committee's investigation is still ongoing, the nature, timing and amount of any restatements and other charges and adjustments cannot be determined at this time. (v) During the Company's second fiscal quarter of 2004, the Company exercised its option to sell its interest in a real estate joint venture established for the development of the site upon which the Chicago Sun-Times headquarters are located. The expected cash proceeds of the transaction are $73.0 million. Of the total proceeds, $4.0 million has been received, with the balance to be received on closing, generating an estimated pre-tax gain of approximately $37.5 million. The closing is expected to take place during October 2004. (vi) In June of 2004, the Company's Audit Committee of the Board of Directors initiated an internal review into practices that have resulted in the overstatement of circulation figures at the Chicago Sun-Times over the past several years. The financial impact of the overstatement, if any, has not been quantified pending completion of the review. (vii) In June of 2004, the Company issued a tender offer and consent solicitation to retire all of its subsidiary's, Hollinger International Publishing Inc., 9% Senior Notes due 2010. The Company amended this offer in July of 2004. The offer expired on July 30, 2004. Approximately 97% of the outstanding Senior Notes were tendered for retirement. The estimated cost of the early retirement of the Senior Notes is approximately $50.8 million, consisting of a premium for early retirement and related fees, and is expected to be incurred during the third quarter of 2004. (viii) Subsequent to the close of the Company's second fiscal quarter in 2004, and concurrent with the closing of the above transaction with PAL, the Company repaid, in full, all amounts outstanding under its Senior Credit Facility and terminated all derivatives related to that facility. The Company expects to incur charges in the third fiscal quarter of approximately $2.1 million for premiums and fees related to the early repayment of the facility and $1.0 million related to the early termination of the derivative contracts. Hollinger International, Inc., owns English-language newspapers in the United States, United Kingdom, and Israel. Its assets include The Telegraph Group Limited in Britain, the Chicago Sun- Times, the Jerusalem Post, a large number of community newspapers in the Chicago area, a portfolio of new media investments, and a variety of other assets. INFOUSA: Prepays Additional $5 Million of Bank Debt --------------------------------------------------- infoUSA(R) (Nasdaq:IUSA), the leading provider of proprietary business and consumer databases and sales leads, prepaid $5 million of principal debt obligation under its Revolving Credit Facility in addition to the $5 million debt prepayment that was announced on August 9, 2004. Based on the company's strong internal cash flow, infoUSA expects to be able to use the majority of its free cash flow to pay down debt. Vin Gupta, Chairman and CEO, infoUSA, commented, "In addition to continued revenue growth and expense reduction, we anticipate that this reduction in our leverage will better enable us to maximize shareholder value." About infoUSA infoUSA -- http://www.infoUSA.com/-- founded in 1972, is the leading provider of business and consumer information products, database marketing services, data processing services and sales and marketing solutions. Content is the essential ingredient in every marketing program, and infoUSA has the most comprehensive data in the industry, and is the only company to own a proprietary database of 250 million consumers and 14 million businesses under one roof. The infoUSA database powers the directory services of the top Internet traffic-generating sites. Nearly 3 million customers use infoUSA's products and services to find new customers, grow their sales, and for other direct marketing, telemarketing, customer analysis and credit reference purposes. infoUSA headquarters are located at 5711 S. 86th Circle, Omaha, Nebraska 68127 and can be contacted at (402) 593-4500. * * * As reported in the Troubled Company Reporter on May 20, 2004, Standard & Poor's Ratings Services assigned its 'BB' ratings and recovery ratings of '4' to infoUSA Inc.'s $250 million of senior secured credit facilities, indicating a marginal recovery (25%-50%) of principal in the event of a default. In addition, Standard & Poor's affirmed its 'BB' corporate credit rating on the Omaha, Nebraska-headquartered company. The outlook is stable. "The ratings on infoUSA, Inc., reflect the company's meaningful pro forma debt levels, moderate-size operating cash flow base and competitive market conditions, including competition from companies that have greater financial resources," said Standard & Poor's credit analyst Donald Wong. "These factors are tempered by infoUSA's historical operating cash flow margins in the mid- to high-20% range, free operating cash flow generation, strong niche market positions, a broad product and service offering distributed through numerous channels to a diverse base of businesses, and a significant portion of sales derived from existing or former customers." INSIGHT HEALTH: S&P's B+ Credit Rating Still on Watch Negative -------------------------------------------------------------- Standard & Poor's Ratings Services' ratings on InSight Health Services Corp., including the company's 'B+' corporate credit rating, remain on CreditWatch with negative implications. InSight remains on CreditWatch, despite its Aug. 13, 2004, announcement that it has filed an application with the SEC to withdraw the registration statement for its proposed initial public offering of income deposit securities -- IDS -- and a related public offering of senior subordinated notes (a statement originally filed on June 23, 2004). Although the IDS filing prompted the CreditWatch placement on June 23, Standard & Poor's views the intention to use this structure as evidence of an aggressive financial posture. InSight is retreating from the IDS issuance because current market conditions for public offerings are unfavorable. "We are concerned about the acquisitive and debt-burdened company's exposure to heightened competition in the industry, particularly in the mobile imaging segment, which represented about 40% of its revenue for the nine months ended March 31, 2004," said Standard & Poor's credit analyst Cheryl Richer. "Given the recent management changes, including the major sponsor's appointment of a new chief executive officer, Standard & Poor's will need to review management's business and financial strategies before resolving the CreditWatch listing." Lake Forest, California-based InSight provides diagnostic imaging and information, treatment, and related management services through a large network of 114 fixed-site facilities and 119 mobile facilities, located mainly in California, Arizona, New England, the Carolinas, Florida, and the Mid-Atlantic states. The company is the operating subsidiary of InSight Health Services Holdings Corp., which is privately owned. The ratings assume no additional financial support from sponsors J.W. Childs Associates and Halifax Group PLC, but these entities are expected to participate in growth and spending decisions. INTELEFILM CORP: Making Initial Liquidation Payment on Aug. 31 -------------------------------------------------------------- iNTELEFILM Corporation (OTCBB:FILM) declared an initial liquidation payment to shareholders of $0.32 per common share to be paid on August 31, 2004. The liquidation payment is being made pursuant to the plan of liquidation that was confirmed on April 22, 2003 by the U.S. Bankruptcy Court for the District of Minnesota, Case No. 02-32788. The payment will be made to shareholders of record as of April 30, 2003. Share sales that have occurred after this date will result in payment of the distribution to the buyer of the shares so long as the buyer has properly notified the Company of the purchase transaction. This is the first of two liquidation payments called for under the liquidation plan. The timing of the second liquidation payment is uncertain and will be made at the time when management is confident that all corporate matters have properly been resolved. After this initial distribution, the Company's remaining assets are approximately $500,000 in cash and a note receivable with a remaining principal balance of $198,000. Headquartered in Eden Prairie, Minnesotta, iNTELEFILM Corporation (f/k/a Children's Broadcasting Corporation) provides products and services designed to protect and leverage rich media assets, images, audio, video-online. The Company filed for chapter 11 protection on August 5, 2002 (Bankr. D. Minn. Case No. 02-32788). Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath & Nauman represents the debtor in its chapter 11 case. When the Company filed for protection from their creditors, they listed $10,516,867 in total assets and $7,929,375 in total debts. INTERPOOL INC: Discloses $41.2 Mil. Net Income in 2003 ------------------------------------------------------ Interpool, Inc. (IPLI.PK) has filed its Annual Report on Form 10-K for 2003 with the Securities and Exchange Commission. The company has now completed all of its filings for 2003 and is in the process of preparing its filing for the first quarter of 2004. In its 2003 Form 10-K, Interpool reported that, for the year ended December 31, 2003, total revenues were $375.6 million compared to $326.6 million for the year ended December 31, 2002. Net income was $41.2 million for 2003 compared with $4.4 million for 2002. Net income for 2003 was affected unfavorably by $12.9 million in after tax administrative costs associated with the investigation by its audit committee and restatement of its earnings for years prior to 2003. A portion of these costs will continue in 2004. In addition, net income for 2003 was affected positively by $2.8 million resulting from favorable credit loss experience in the off-balance sheet qualified special purpose entity related to the company's container securitization financing facility which was consolidated effective October 1, 2003. Interpool also stated that its 2003 Form 10-K reflects positive adjustments to net income of $0.9 million, $1.2 million and $0.4 million for the quarters ended March 31, June 30 and September 30, 2003, respectively. These adjustments were primarily the result of deficiencies in the processing and accounting for repairs related to damaged equipment and in the recognition of impairment on certain chassis. These adjustments were discovered by management as part of their preparation for the 2003 Form 10-K. Interpool stated that it is addressing the deficiencies that led to these adjustments by implementing additional internal controls and hiring new personnel. Martin Tuchman, Chairman and Chief Executive Officer, said, "Our business continues to be strong, and we are making good progress both from an operational and administrative perspective. The final 2003 results show that Interpool is a company with solid fundamentals: strong revenues, significant cash flow from operations, and, most importantly, continued customer demand for our products and services. We are in the process of preparing our 2004 SEC filings, and we look forward to keeping investors apprised of our progress." Interpool also reported in its Form 10-K that the company has settled a lawsuit involving an insurance claim under policies covering the 2001 lease default and subsequent bankruptcy of a major South Korean customer. The settlement is for a total cash payment of $26.4 million, which the insurers have paid in full during June and July, 2004. The company will hold a conference call on Tuesday, August 24, 2004 at 3:00 PM Eastern Daylight Time. Interested investors should call 1-888-841-5035 ten minutes prior to the time of the conference call. Callers from outside North America CAN call 1-973-582-2830 and hold for a live operator. Identify yourself and your company and inform the operator that you are participating in the Interpool 2003 Year End Results Conference Call. If you are unable to access the Conference Call at 3:00 PM, call 1-973-341-3080 to access the taped digital replay. To access the replay, call and enter the digital pin #5081333. This replay will first be available at 5:00 PM on August 24th and will be available until Thursday, August 31st at 11:59 PM Eastern Daylight Time. Investors will also have the opportunity to listen to the Conference Call live at the company's web site http://www.interpool.com/ To listen to the live call via the Internet, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live web cast, a replay will be available two hours after the call is completed and will remain available for one week. About Interpool Inc. Interpool is one of the world's leading suppliers of equipment and services to the transportation industry. The company is the world's largest lessor of intermodal container chassis and a world-leading lessor of cargo containers used in international trade. * * * As reported in the Troubled Company Reporter on July 13, 2004, Fitch Ratings affirms Interpool, Inc.'s senior secured, senior unsecured, and preferred stock ratings at 'BB-', 'B', and 'CCC+', respectively. The ratings are removed from Rating Watch Negative where they were placed on Oct. 10, 2003. The Rating Outlook is Positive. Approximately $322 million of debt and trust-preferred securities are affected by Fitch's action. The Rating Watch Negative was removed as Interpool has completed its financial restatement for fiscal years 2000, 2001, and 2002 with a negligible impact to credit fundamentals. While the company is not yet current with its Securities and Exchange Commission financial statement filings, Fitch has gained confidence that the company is ahead of the schedule announced in November 2003 to be in compliance with SEC financial statement reporting deadlines by the end of 2004. Interpool has also been successful at maintaining an acceptable liquidity position through sourcing new secured financing and consistent retention of meaningful unrestricted cash balances. The Positive Rating Outlook reflects Fitch's view that Interpool will continue its progress at becoming a timely SEC filer and also considers an expected strengthening of the company's information technology, accounting, and legal infrastructure resulting from the implementation of recommendations from Morrison and Foerster, LLP's forensic review of the company's operations. These improvements, when completed, will enable the company to better monitor, manage, and track equipment as well as improve the efficiency and integrity of its billing and cash management systems. INTERSTATE HOTELS: Gets B Corporate Credit Rating from S&P ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to hotel management company Interstate Hotels & Resorts, Inc. At the same time, Standard & Poor's assigned its 'B' rating and a recovery rating of '4' to Interstate Operating Company L.P.'s proposed $135 million senior secured bank facility, indicating Standard & Poor's expectation of marginal (25%-50%) recovery of principal in the event of default. The facility is expected to consist of a $60 million revolving credit facility due in 2006 and a $75 million Term Loan B due in 2009. Interstate Operating Company is a wholly owned subsidiary of Interstate Hotels & Resorts, based in Arlington, Virginia. The outlook is stable. Pro forma for the transaction as of June 30, 2004, about $90 million in debt is expected to be outstanding. Proceeds from the bank facility will be used to redeem $43 million outstanding under Interstate's $113 million senior secured credit facility, $40 million in subordinated debt owed to Lehman Brothers, and to pay transaction related fees and expenses. About $10 million - $15 million are expected to be initially drawn under the revolver once the transaction is complete. "Ratings reflect Interstate's niche position in the lodging industry as an independent hotel management company, generally less favorable management contract terms than for major brand owners, exposure to highly leveraged MeriStar Hospitality Corp. that owns about 30% of the hotels managed by Interstate, its small scale, and an anticipated active growth strategy," said Standard & Poor's credit analyst Sherry Cai. "These factors are somewhat offset by geographic and brand diversity of its hotel portfolio under management, and adequate credit measures and liquidity position." DUNES PLAZA: Case Summary & 6 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Dunes Plaza Associates 545 Madison Avenue 16th Floor New York, New York 10022 Bankruptcy Case No.: 04-15403 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Sherwood Plaza Associates, Ltd. 04-15402 Type of Business: The Debtors are owners as tenants-in-common of a freestanding retail building in Brandon, Florida. Originally leased for $929,264 per year, Kmart occupied the store and then sublet it to Hechinger's and then to Burlington Coat Factory, the current tenant. Burlington pays $643,200 in annual rent, which is insufficient to service the Debtors' $24.8 million mortgage obligations. Chapter 11 Petition Date: August 18, 2004 Court: Southern District of New York (Manhattan) Judge: Allan L. Gropper Debtor's Counsel: Ira S. Greene, Esq. Hogan & Hartson, LLP 875 Third Avenue New York, New York 10022 Tel: (212) 918-3000 Fax: (212) 918-3100 Total Assets: Unknown Total Debts: $25,093,233 Debtors' 6 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Holland & Knight LLP Legal Fees Unknown Tri Realty Management Trade Debt $162,575 Stuart S. Golding Co. Trade Debt $25,000 Brand Sonnenschine LLP Accounting Fees $6,500 Joel Roth, CPA Accounting Fees $3,500 Florida Department of Sales Tax $3,000 Revenue EL CALLAO: Implements Plan of Arrangement After Getting Court Okay ------------------------------------------------------------------ El Callao Mining Corp. (ECM: TSXV) received final court approval for a plan of arrangement pursuant to which El Callao will become a wholly owned subsidiary of Crystallex International Corporation (KRY: TSX and AMEX). All conditions to the implementation of the plan of arrangement have now been satisfied and the arrangement will be implemented today, August 20, 2004. El Callao Mining Corp. is engaged in the mining of gold and related activities including acquisition, evaluation and development of mineral properties. These activities are conducted in Venezuela. Any gold produced from the Company's ore is processed at the Revemin Mill, owned and operated by a related party, under common control. The Company was owned by Crystallex International Corporation, of Toronto, Canada (79.4%) and by other investors (20.6%). Crystallex provided management, financing, administrative and technical services, including all geological assessments to the Company. Accordingly, the Company is economically dependent on Crystallex. At March 3,1 2004, El Callao's stockholders' deficit widened to $43,465,625 compared to a $42,301,812 deficit at December 31, 2003. ELC LTD: Fitch Junks Four Classes & Rates Two Classes BB- --------------------------------------------------------- Fitch Ratings affirms all tranches of ELC (Cayman) Ltd. 1999-II as follows: -- $118,014,993 class A-1 notes affirmed at 'AAA'; -- $202,011,429 class A-2 notes affirmed at 'AAA'; -- $36,750,000 class A-3 notes affirmed at 'AAA'; -- $11,250,000 class A-4 notes affirmed at 'AAA'; -- $11,000,000 class B-1 notes affirmed at 'A-'; -- $11,000,000 class B-2 notes affirmed at 'A-'; -- $19,000,000 class C-1 notes affirmed at 'BB-'; -- $25,000,000 class C-2 notes affirmed at 'BB-'; -- $3,100,000 class D-1 notes affirmed at 'CCC'; -- $13,675,000 class D-2 notes affirmed at 'CCC'; -- $25,250,000 class E notes affirmed at 'CC'; -- $25,250,000 preferred shares affirmed at 'C'. ELC (Cayman) Ltd. 1999-II is a collateralized debt obligation (CDO) managed by Babson Capital Management LLC. The CDO was established in August 1999, to issue $562 million in debt and preference shares. Payments are made semi-annual in March and September and the reinvestment period ends in September 2004. In conjunction with the review, Fitch Ratings discussed the current state of the portfolio with the asset manager and their portfolio management strategy. In addition, Fitch Ratings conducted cash flow modeling utilizing various default timing and interest rate scenarios. Fitch Ratings has reviewed the credit quality of the individual assets comprising the portfolio. Since Fitch's last rating action in September 2002, the portfolio has experienced stable performance and minimal change to the weighted average rating factor -- WARF. The portfolio has remained stable along with a reduction in impaired and defaulted assets within the portfolio. Accordingly, as a result of our analysis, Fitch has determined that the current ratings assigned to all rated notes reflect the current risk to noteholders. The ratings assigned to the class A, B, C and D notes address the timely payment of interest and ultimate payment of principal. The ratings assigned to the class E and preference shares addresses the ultimate receipt of the stated principal amount by the final maturity date. Fitch will continue to monitor and review this transaction for future rating adjustments as needed. JUNIPER CBO: Standard & Poor's Junks Classes A-4, A-4L & B-2 ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on the class A-3 and A-3L notes issued by Juniper CBO 2000-1 Ltd., an arbitrage CBO transaction originated in April 2000 and managed by Wellington Management Co., on CreditWatch with positive implications. At the same time, the ratings assigned to the class A-1L, A-2L, A-4L, and A-4 notes are affirmed. The CreditWatch placements reflect factors that have positively impacted the credit enhancement available to support the notes since the transaction was last reviewed in September 2003. These factors include a paydown of approximately $27.040 million on the A-1L notes, including approximately $19.761 million on the most recent payment date of April 15, 2004. Standard & Poor's will be reviewing the results of current cash flow runs generated for Juniper CBO 2000-1 to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available. Ratings Placed On Creditwatch Positive Juniper CBO 2000-1 Ltd. Rating Class To From ----- -- ---- A-3 BBB-/Watch Pos BBB- A-3L BBB-/Watch Pos BBB- Ratings Affirmed Juniper CBO 2000-1 Ltd. Class Rating ----- ------ A-1L AAA A-2L AAA A-4 CCC- A-4L CCC- Other Outstanding Rating Juniper CBO 2000-1 Ltd. Class Rating ----- ------ B-2 CC Transaction Information Issuer: Juniper CBO 2000-1 Ltd. Co-issuer: Juniper CBO 2000-1 (Delaware) Corp. Manager: Wellington Management Co. LLP Underwriter: Bear Stearns Trustee: JPMorganChase Bank Transaction type: High-yield CBO Tranche Initial Last Current Information Report Action Action ----------- ------- ------ ------- Date (MM/YYYY) 06/2000 09/2003 08/2004 Cl. A-1L notes rtg. AAA AAA AAA Cl. A-1L notes bal. $76.000mm $51.681mm $24.641mm Cl. A-2L notes rtg. AAA AAA AAA Cl. A-2L notes bal. $90.000mm $90.000mm $90.000mm Cl. A-3L notes rtg. AAA BBB- BBB-/WatchPos Cl. A-3L notes bal. $20.000mm $20.000mm $20.000mm Cl. A-3 notes rtg. AAA BBB- BBB-/WatchPos Cl. A-3 notes bal. $30.000mm $30.000mm $30.000mm Sr. Cl. A OC ratio 143.4% 122.5% 128.9% Sr. Cl. A OC ratio min. 120.0% 120.0% 120.0% Cl. A-4L notes rtg A- CCC- CCC- Cl. A-4L notes bal. $15.000mm $15.000mm $15.000mm Cl. A-4 notes rtg A- CCC- CCC- Cl. A-4 notes bal. $20.000mm $20.000mm $20.000mm Cl. A OC ratio 122.8% 101.9% 104.4% Cl. A OC ratio min. 110.0% 110.0% 110.8% Cl. B-2 notes rtg BB- CC CC Cl. B-2 notes bal. $7.000mm $7.000mm $7.000mm Cl. B OC ratio 112.4% 91.0% 91.6% Cl. B OC ratio min. 103.0% 103.0%% 103.0% Portfolio Benchmarks Current -------------------- ------- S&P Wtd. Avg. Rtg.(excl. defaulted) B+ S&P Default Measure(excl. defaulted) 3.50% S&P Variability Measure (excl. defaulted) 2.25% S&P Correlation Measure (excl. defaulted) 1.21 Wtd. Avg. Coupon (excl. defaulted) 9.12% Oblig. Rtd. 'BBB-' and above 6.88% Oblig. Rtd. 'BB-' and above 39.25% Oblig. Rtd. 'B-' and above 85.00% S&P Rated Last Current OC (ROC) Rating Action Rating Action --------- ------------- ------------- Cl. A-1L 127.65% (AAA) 194.28% (AAA) Cl. A-2L 110.42% (AAA) 118.94% (AAA) Cl. A-3 108.26% (BBB-) 112.05% (BBB-/Watch Pos) Cl. A-3L 108.26% (BBB-) 112.05% (BBB-/Watch Pos) Cl. A-4 101.29% (CCC-) 101.64% (CCC-) Cl. A-4L 101.29% (CCC-) 101.64% (CCC-) KIDS WORLD: Case Summary & 6 Largest Unsecured Creditors -------------------------------------------------------- Debtor: Kids World of America Inc. 12601 Townepark Way, Suite 200 Louisville, Kentucky 40243-2302 Bankruptcy Case No.: 04-35242 Chapter 11 Petition Date: August 17, 2004 Court: Western District of Kentucky (Louisville) Judge: Thomas H. Fulton Debtor's Counsel: David M. Cantor, Esq. Seiller & Handmaker, LLP 462 South 4th Avenue, Suite 2200 Louisville, KY 40202 Tel: 584-7400 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 6 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service Past due taxes $573,862 Attn. Chief Special interest & penalties Procedures Function POB 1706 Stop 510 Louisville, KY 40201 OM Enterprises of Past due rental & $409,300 Louisville Inc. taxes P.O. Box 43130 Louisville, KY 40253 Windham Investments Inc. Past due rental & $182,445 taxes Louis L Huntley Enterprises Past due rental $50,000 Inc. Community Place LP Past due rental $10,000 Kentucky Revenue Cabinet Past due taxes $8,000 Division of Unemployment interest & penalties Insurance KMART CORPORATION: BofA & Fleet Back New $200 Million L/C Facility ------------------------------------------------------------------ On August 13, 2004, Kmart Corporation entered into a letter of credit agreement with a commitment amount of up to $200 million through January 7, 2005 and increasing to $600 million thereafter. The Issuing Banks are Bank of America, N.A., and Fleet National Bank. The standby letters of credit issued under the LC Agreement bear interest at 0.20% per annum. The LC Agreement is subject to a pledge and security agreement pursuant to which, after January 7, 2005, the Company must post as collateral cash in an amount equal to 100.5% of the face value of the letters of credit outstanding under the LC Agreement. Prior to January 7, 2005, the collateral posted by the Company is a leasehold mortgage on certain properties leased by the Company. A full-text copy of the Letter of Credit Agreement is available for free at: http://sec.gov/Archives/edgar/data/1229206/000095012404003850/k86812exv10w3. txt Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- is the nation's second largest discount retailer and the third largest merchandise retailer. Kmart Corporation currently operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. (Kmart Bankruptcy News, Issue No. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) KNOLL INC: S&P Cuts Corporate Credit & Bank Loan Ratings to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and bank loan ratings on office furniture manufacturer Knoll Inc. to 'BB-' from 'BB', following Knoll's proposal of a debt refinancing and a shareholder dividend. At the same time, a 'BB-' senior secured bank loan rating and a recovery rating of '4' were assigned to the proposed $500 million bank facility that is part of the refinancing. The 'BB-' bank loan rating is the same as Knoll's corporate credit rating; this and the '4' recovery rating indicate that lenders can expect marginal (25%-50%) recovery of principal in the event of a default. The outlook is stable. Total debt outstanding, pro forma for the transaction, is expected to be about $450 million. "The downgrade reflects the company's recent weak operating results as well as the higher debt levels that are associated with the refinancing and dividend payment," said Standard & Poor's credit analyst Martin S. Kounitz. The ratings on East Greenville, Pennsylvania-based Knoll reflect its high pro forma debt leverage, recently lower profitability, and the volatile nature of the office furniture industry. These factors are mitigated by Knoll's defendable industry position, given its large installed base, as well as by the company's variable cost structure and strong reputation for design. While orders for the first half of 2004 ended June 30 were up modestly versus 2003, EBITDA declined on lower sales volume. During the industry contraction from 2001 to 2003, Knoll's variable cost structure and low overhead allowed it to outperform many of its peers. However, because the company's sales are concentrated in systems (workstations), Knoll's recovery from the contraction has lagged that of its peers, many of whom have greater sales in seating, a category with faster growth. KNOLL INC: Moody's Assigns Ba3 Rating to Bank Facilities -------------------------------------------------------- Moody's Investors Service downgraded Knoll, Inc.'s senior implied rating to Ba3 and senior unsecured issuer rating to B1 and rated the company's new senior secured bank facilities Ba3 following the company's announcement of a leveraged recapitalization. The outlook remains stable. The downgrade reflects Knoll's increased leverage and reduced interest coverage following the company's decision to pay a dividend to shareholders in the context of uncertainty as to the extent of the recovery in the commercial furniture business. Ratings assigned: * $75 million revolving credit facility due 2009, Ba3; and * $425 million senior secured term loan due 2011, Ba3. Ratings downgraded: * Senior implied rating, Ba2 to Ba3; and * Senior unsecured issuer rating, Ba3 to B1. Knoll is undertaking a leveraged recapitalization in order to pay a special dividend to shareholders. As part of this recapitalization transaction, Knoll has refinanced its $481.25 million existing bank facilities prior to their November 2005 maturity. Outstanding debt will increase by $45 million as a result of the recapitalization, increasing pro forma leverage (as measured by adjusted debt/adjusted EBITDAR) to 4.8x as of June 30, 2004, up from 3.6x as of year end 2003. Although leverage could decline relatively quickly if the nascent recovery in the commercial furniture market takes firm hold, in Moody's view the timing and extent of a sustainable rebound in sales and profitability remain uncertain. As a result, Moody's believes significant deleveraging may occur more slowly than the company expects. The new debt financing has limited required amortization and will also extend the maturity of the company's debt significantly. The lack of notching of Knoll's senior secured credit facilities over the senior implied rating reflects the preponderance of this class of debt in the capital structure. These facilities are secured by: (1) substantially all of the company's tangible and intangible assets; (2) perfected first priority pledges of the company's direct; and (3) indirect domestic subsidiaries, and 65% of the capital stock of the company's foreign subsidiaries. All borrowings are jointly and severally unconditionally guaranteed by the company's existing and future direct and indirect domestic subsidiaries. 50% of excess cash flow will be applied to debt pay down at or near current leverage levels. The ratings reflect the severe market downturn in commercial furniture in general and commercial office systems in particular over the last few years which has led to significant erosion in sales, earnings, cash flow and credit metrics for commercial furniture manufacturers. Although orders appear to have rebounded in early spring, there is still limited evidence of this rebound in sales and profitability. Knoll's heavy reliance on office system sales, which have shown particular weakness and the company's moderate diversification into other areas of commercial furniture also impact ratings. Ratings are also restrained by: (1) the cyclical, competitive nature of the industry; (2) the moderately fixed cost nature of the industry; and (3) Knoll's historic dividend and capital structure decisions, which have previously included a special dividend (January 2001) and a leveraged recapitalization (November 1999). The ratings are supported by the company's historic emphasis on utilizing cash flow for debt reduction. The company also has a conservative track record with regard to capital spending and expansion, avoiding the need for significant restructuring during the severe 2000-2003 downturn, and appears to have strong cost control and efficiency measures. The ratings also reflect: (1) Knoll's strong brand name; (2) its diversified customer and distributor base; (3) its good market position in its core office systems business; and (4) its long-standing reputation for product quality, design and innovation. The ratings are also supported by: (1) the company's strong liquidity; (2) its $75 million revolver is expected to be undrawn and limited amortization of the term loan is required. Historically, the company has been a good cash flow generator, even during the industry downturn, due to a largely variable cost structure and its prudent spending on capital expenditures. The stable outlook reflects our expectation that the company will use most of its excess cash flow for debt pay down as it has done in the past, and that the commercial furniture sector will continue to improve with a positive impact on the company's earnings and cash flow. The outlook also reflects our expectation that the company will not undertake additional special dividend or other relevering transactions, make significant acquisitions, or aggressively spend on capital expenditures. The ratings could be upgraded if the commercial furniture industry shows evidence of a real and sustainable turnaround that positively impacts Knoll, and if Knoll utilizes its excess cash flow for debt reduction. Ratings could be upgraded if Knoll maintains prudent financial policies and Knoll's adjusted debt/adjusted EBITDAR falls to the 3.5x range and free cash flow (after dividends)/total adjusted debt is greater than 10%. Although Moody's currently views it as unlikely, ratings could be further downgraded if: (1) the commercial furniture industry dynamics do not improve; (2) Knoll's market position deteriorates; and (3) credit metrics continue to deteriorate with adjusted debt/adjusted EBITDAR increasing to over 5x. Knoll designs, manufactures and distributes a comprehensive portfolio of branded office furniture products, textiles and accessories. LEHMAN MFD: Fitch Cuts Ratings on Two Classes Five Notches to B --------------------------------------------------------------- These rating actions have been taken on Lehman Manufactured Housing 1998-1 by Fitch Ratings: Series 1998-1 Group I: -- Class I-A-1 is affirmed at 'AA'. Series 1998-1 Group II: -- Classes II-A-1 & II-A-2 downgraded to 'B' from 'BBB-'. The Lehman Manufactured Housing 1998-1 transaction is collateralized with classes from ten Green Tree manufactured housing transactions. Due to the lack of additional credit enhancement, the credit risk of the transaction is directly tied to the credit risk of the underlying Green Tree classes. The credit risk on some of the underlying classes has recently increased, as reflected in the negative rating actions taken on those classes last month as reported by the Troubled Company Reporter on July 22, 2004. The increased credit risk to the underlying classes has created the need for negative rating action on this transaction. LEUCADIA NATIONAL: Investment Style Prompts S&P's BB Credit Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its long-term counterparty credit rating on Leucadia National Corp. to 'BB' from 'BBB-' and removed the ratings from CreditWatch, where they had been placed on Aug. 12, 2004. The outlook is stable. The ratings action reflects Leucadia's increased investment appetite for high-risk telecommunications assets, with its existing position in WilTel Communications Group, Inc., which is estimated to be a significant 25% of shareholders equity at June 30, 2004, and its $245.9 million position in MCI, Inc., common stock. Approval by the Federal Trade Commission and the Department of Justice on Aug. 9, 2004, to acquire 50% or more of MCI's outstanding common stock, now paves the way for Leucadia to possibly take a control position in MCI, further magnifying these ratings concerns. These investments altogether increase Leucadia's exposure to a high-risk sector and the concentration risk within an investment class. "Leucadia's investment in WilTel and MCI also reflects a change in investment style, demonstrating a greater willingness on the part of the company to purchase, restructure, and control severely distressed companies of substantial size and with significant industry risk," said Standard & Poor's credit analyst Lisa J. Archinow, CFA. The telecommunications industry continues to suffer from overcapacity and price erosion, and its recovery prospects are questionable in the short term. Additionally, the ratings incorporate Leucadia's strong liquidity position and the uncertainty of how any future investments will be funded, low leverage of 0.79x at June 30, 2004, and strong investment track record. Leucadia, with total assets of $4.8 billion at June 30, 2004, is a Manhattan-based diversified holding company. Leucadia operates businesses in telecommunications, healthcare, banking and lending, manufacturing (plastic netting), winery operations, real estate activities, the development of a copper mine, and property and casualty reinsurance. It also invests in securities of both public and nonpublic companies. The current rating recognizes the high-risk nature of the company's business mix. Maintenance of a strong liquidity position and acceptable leverage must also continue to be acceptable in order to maintain the current rating. LINREAL CORP: Gets Okay to Use Cash Collateral until Sept. 8 ------------------------------------------------------------ The Honorable Michael J. Kaplan gave his stamp of approval to Linreal Corp. and Brylin Hospitals, Inc.'s request for authority to use their secured creditors' Cash Collateral to finance the ongoing postpetition operation of their businesses. Beal Bank and the Internal Revenue Service assert liens and security interests in cash collateral. Beal Bank and IRS have agreed to let the Debtors use their cash collateral through Sept. 8, 2004. Before the Debtors filed for bankruptcy protection, Linreal entered into various loan agreements with GMAC Commercial Mortgage, whereby GMAC provided $7,012,500 of HUD-guaranteed refinancing. As part of the refinancing, Brylin Hospitals executed a regulatory Agreement granting GMAC liens and security interests in substantially all of the Debtors' assets. Under the agreement, Brylin Hospitals is obligated to pay rent in the amount of all of Linreal's monthly obligations to GMAC. As of October 29, 2001, that included $43,178 in interest, $3,603 in principal and $29,514 for tax and insurance escrows and various required reserve accounts. Subsequently, the obligations and asserted liens and security interests were purchased by and assigned to Beal Bank. On an interim basis, Judge Kaplan grants Beal Bank and the IRS "rollover" replacement liens in the Debtors' postpetition assets. These new liens have the same relative priority and cover the same types and kinds of collateral as the prepetition liens. As additional protection to Beal, Brylin Hospitals will continue to pay to Beal Bank, on a monthly basis: a) $43,133 as interim adequate protection payments; and b) a monthly real estate tax escrow payment currently fixed at $11,585. Brylin Hospitals promises to keep the real property and personal property subject to Beal Bank's liens adequately insured and repaired. The IRS will also be paid $873 per week as interim adequate protection. Headquartered in Buffalo, New York, Linreal Corp., is a Real Estate Holding Company. Linreal's real estate is leased by Bryin Hospitals, Inc., an affiliated corporation with common ownership. The Debtors filed for chapter 11 protection (Bankr. W.D.N.Y. Case No. 04-14386) on June 10, 2004. Daniel F. Brown, Esq., at Damon & Morey, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $10,000,000 in assets and $8,000,000 in liabilities. LSP BATESVILLE: S&P Raises Rating on $326MM of Senior Bonds to B- ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on LSP Batesville Funding Corp./LSP Energy L.P.'s $326 million senior secured bonds to 'B-' from 'CCC+'. The outlook is negative. The rating action follows the upgrade of Aquila, Inc.'s credit rating to 'B-' from 'CCC+'. Aquila's rating outlook is also negative. Aquila is the off-taker of the project's capacity and electricity from the plant's Unit 3 for one-third (279 MW nominally) of its total output pursuant to a power purchase agreement -- PPA, and the project relies on payments from Aquila to service its debt. The project also has a PPA with Virginia Electric & Power Co. (VEPCO; A-/Stable/A-2) for the remaining two- thirds (570 MW) of its capacity and energy. In a worst-case scenario in which Aquila stopped making payments under the contract, the project would continue to collect fixed- capacity payments and energy payments under its VEPCO PPA for two- thirds of its capacity. Those revenues alone, however, only cover about 75% of the project's fixed costs and debt service obligations. Absent the PPA for its one-third capacity, the project would be required to generate roughly $15/kW-year to cover its debt service at 1.0x. Based on conservative price assumptions for gas and electricity in the Southeastern Electric Reliability Council -- SERC -- region by Standard & Poor's, the project would generate about $11 to $12/kW-year net revenues for merchant sales from Unit 3, which are insufficient to fully meet debt service. The additional liquidity in the project in the form of a six-month debt service reserve and some amount accumulated in the distribution suspense account would help the project for only a limited time. The project depends on revenues from Aquila to fully cover debt service. Therefore, the rating reflects Aquila's default risk. MAJESTIC STAR: COO Michael Kelly Won't Renew Employment Contract ---------------------------------------------------------------- Michael E. Kelly, Executive Vice President and Chief Operating Officer of The Majestic Star Casino, LLC, will not seek to extend or renew his employment contract. The Company and Mr. Kelly have agreed that his employment will cease on Wednesday, August 18, 2004. "Michael Kelly has been with us since we opened in 1996 and I want to thank Michael for his contributions to the Company during the past eight years and wish him much success in his future endeavors," said Don H. Barden, President and Chief Executive Officer of Majestic Star Casino. The Company will engage an executive search firm to assist with the recruitment of a new Chief Operating Officer and will begin interviewing potential candidates soon. About Majestic Star Casino, LLC The Majestic Star Casino, LLC, is a multi-jurisdictional gaming company that directly owns and operates one dockside gaming facility located in Gary, Indiana and, pursuant to a 2001 acquisition through its restricted subsidiary, Majestic Investor Holdings, LLC, owns and operates two Fitzgeralds brand casinos located in Tunica, Mississippi and Black Hawk, Colorado. For a fee, The Majestic Star Casino, LLC manages a Fitzgeralds brand casino in Las Vegas, Nevada, which is wholly owned by Barden Development, Inc., the parent of The Majestic Star Casino, LLC. For more information about us, please visit our web sites at http://www.majesticstar.com/or http://www.fitzgeralds.com/ At March 31, 2004, Majestic Star Casino's balance sheet reflects a $102,772,004 stockholders' deficit. MEDIA GROUP: Brings-In Neubert Pepe as Bankruptcy Counsel --------------------------------------------------------- The U.S. Bankruptcy Court for the District of Connecticut gave its nod of approval to The Media Group, Inc., and its debtor- affiliates' request to hire Neubert, Pepe & Monteith, P.C. as its counsel in its bankruptcy proceeding. Neubert Pepe will: a) advise the Debtors of their rights, powers and duties as debtors and debtors-in-possession while continuing to operate and manage the business and property; b) advise and assist the Debtors in the negotiation and documentation of financing agreements, debt restructuring and related transactions; c) review the nature and validity of any liens asserted against the property of the Debtors, and give advice concerning the enforceability of such liens; d) advise the Debtors concerning the actions that these might take to collect and to recover property for the benefit of the estates; e) prepare on behalf of the Debtors necessary and appropriate applications, motions, pleadings, draft orders, notices, schedules and other documents and review all financial and other reports to be filed in these cases; f) advise and prepare responses to applications, motions, pleadings, notices, and other papers which may be filed and served in these cases; g) counsel the Debtors in connection with the formulation, negotiation and prosecution of a plan of reorganization and related documents; and h) perform all other legal services for and on behalf of the Debtors which may be necessary or appropriate in the administration of these cases. Douglas S. Skalka, Esq., leading the engagement, discloses that Neubert Pepe received a $25,000 retainer from the Debtors. The Firm does not disclose its hourly billing rates in papers filed with the Bankruptcy Court. To the best of the Debtors knowledge, Neubert Pepe is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Stamford, Connecticut, The Media Group, distributes and markets automotive additives and general merchandise. The company filed for chapter 11 protection on July 9, 2004 (Bankr. Conn. Case No. 04-50845). Douglas S. Skalka, Esq., at Neubert Pepe & Monteith, represents the Debtor in its restructuring efforts. When the Debtor filed for protection, it listed $10,915,723 in total assets and $14,743,552 in total debts. MILLENIUM ASSISTED: Judge Lyons Rejects Roseland Financing Pact --------------------------------------------------------------- The Honorable Judge Raymond T. Lyons denied Millenium Assisted Living Residence at Freehold, LLC's request to obtain credit from Roseland Property on a secured basis. The Debtor related that is has been paying many of its vendors on a Cash On Delivery basis, and is concerned with its ability to cover all operating and overhead expenses on a timely basis while it awaits receipt of payments on its accounts receivables, or reimbursement from private insurers or governmental agencies. In anticipation of this impending cash flow shortage, the Debtor sought a source of postpetition financing. The Debtor relates that it was unable to locate any potential lender who will provide credit on an unsecured basis, but reached an agreement with Roseland Property Company, Inc. Leo Rosenson, the Debtor's principal, relates that Roseland agreed to extend a revolving credit line of up to $400,000 to the Debtor at an 8% interest rate. All advances by Roseland would be secured by a superpriority lien on the Debtor's assets with priority over, inter alia, the Debtor's secured indebtedness to the United States Department of Housing and Urban Development. The Debtor's assets are currently subject to a perfected lien held by the United States Department of Housing and Development in the amount of $25,000,000. The Debtor did not assert that there is an equity cushion with respect to HUD's secured claim, and, in fact, believes that the collateral securing such claim is worth millions of dollars less than the indebtedness itself. The Debtor is financing post-petition operations under the terms of a Second Cash Collateral Order that expires on August 30, 2004. Headquartered in Freehold, New Jersey, Millenium Assisted Living Residence at Freehold, LLC, filed for chapter 11 protection on June 7, 2004 (Bankr. N.J. Case No. 04-29097). Larry Lesnik, Esq., and Sheryll S. Tahiri, Esq., at Ravin Greenberg PC, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated over $10 million in debts and assets. MILLENIUM ASSISTED: Three-Member Creditors' Committee Appointed --------------------------------------------------------------- The United States Trustee for Region 3 appointed three creditors to serve on an Official Committee of Unsecured Creditors in Millenium Assisted Living Residence at Freehold, LLC's Chapter 11 case: 1. Yisroel Shapiro Shapiro's Bakery 315 Casanetta Drive Lakewood, New Jersey 08701 Tel: 732-961-0888 Fax: 732-961-0744 2. Philip A. Mann MS Consultants, LLC 6400 Sheridan Drive, Suite 230 Williamsville, New York 14221 Tel: 716-633-9840 Fax: 716-633-9469 3. James J. DeLuca J.J. DeLuca Company, Inc. 760 West Sproul Road, Suite 300 Springfield, Pennsylvania 19064 Tel: 610-995-9440 Fax: 610-995-2928 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 Freehold, New Jersey, Millenium Assisted Living Residence at Freehold, LLC, filed for chapter 11 protection on June 7, 2004, (Bankr. N.J. Case No. 04-29097). Larry Lesnik, Esq., and Sheryll S. Tahiri, Esq., at Ravin Greenberg PC represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated over $10 million in debts and assets. MIRANT CORP: Asks Court to Nix 7 Calif. Utility Commission Claims ----------------------------------------------------------------- Mirant Corporation, Mirant Potrero, LLC, Mirant Delta, LLC, Mirant California, LLC, Mirant Americas, Inc., Mirant Americas Generation, LLC, and Mirant Americas Energy Marketing, LP, object to seven proofs of claim filed by the California Public Utilities Commission -- Claim Nos. 7529, 7530, 7531, 7532, 7533, 7534 and 7535. The CPUC is an agency of the State of California that is tasked with regulating retail sales of energy to California consumers by California's three principal investor-owned utilities -- Pacific Gas & Electric Company, Southern California Edison and San Diego Gas & Electric Company. Importantly, Michelle C. Campbell, Esq., at White & Case, LLP, in Miami, Florida, notes that the CPUC has no authority to, and does not, regulate either: (i) any sale of electricity by the Debtors, which sell energy at wholesale, not retail; or (ii) the wholesale energy markets in which one or more of the Debtors may have operated. Sales of energy at wholesale are within the jurisdiction of the Federal Energy Regulatory Commission, not within the jurisdiction of individual state regulatory commissions, including the CPUC. The California Energy Restructuring In 1996, the California legislature passed a bill known as "AB 1890" to restructure California's energy industry by creating a competitive market for the sale of energy at wholesale. As part of the restructuring, PG&E, Edison and San Diego Gas were encouraged to sell some of their fossil fuel generation capacity to independent power producers and marketers to more quickly create a competitive energy wholesale market in California. California created three principal competitive markets for the sale of electricity at wholesale: 1. the "day-ahead" market; 2. the "day-of" market; and 3. the "real-time" market. A "block-forward" market was also created to permit market participants to hedge against price fluctuations in the Principal Markets. California Power Exchange Corporation administered the "day-ahead" market, the "day-of" market and the "block-forward" market. California Independent System Operation administered the "real-time" market. According to Ms. Campbell, MAEM sold energy into the California Energy markets. The Refund Claims As a result of the increase in electricity prices that occurred in 2000 and 2001, San Diego Gas, PG&E, Edison, the CAISO, the CalPX, the California Department of Water Resources, the Attorney General of the State of California and the CPUC pursued litigation at FERC, claiming that the prices charged by MAEM and other market participants in the California energy markets during 2000 and 2001 were excessive. The California Parties asserted in the FERC Refund Proceedings that FERC should "mitigate" market prices between January 1, 2000 and June 20, 2001. FERC rejected those claims and has preliminarily determined or indicated that it will "mitigate" the market prices charged by energy sellers, including MAEM, only from October 2, 2000 through June 20, 2001 -- the Refund Period. The amount of refunds that may be owed by sellers pursuant to the FERC Refund Proceedings has yet to be finally determined. At the conclusion of the FERC Refund Proceedings, subject to rights of rehearing and appeal, MAEM expects the FERC to determine the final amount of the Receivables due to MAEM and the final amount of the Refunds due from MAEM. MAEM also expects the FERC to determine how much PG&E and Edison must pay for their share of energy purchased from the California Energy Markets during the Refund Period and what amounts are to be distributed by the CalPX and the CAISO, as administrators of the California Energy Markets. Ultimately, the Receivables will be paid to MAEM by purchasers of energy on the California Energy Markets and the Refunds will be paid by MAEM to the purchasers. However, no Refunds will be paid to the CPUC, which was not a buyer of energy from the California Energy Markets. Ms. Campbell notes that PG&E, Edison, the DWR, the Attorney General, the CalPX and perhaps the CAISO, among others, have all filed duplicative claims concerning the Refunds and other amounts -- the FERC Claims. Some or all of the Objecting Debtors have filed adversary proceedings against one or more of the California Parties addressing the flaws in the FERC Claims. The DWR Contract Claims After January 17, 2001, the DWR commenced buying power on behalf of PG&E and Edison through the "real-time" market. The DWR also entered into several long-term bilateral power purchase agreements with energy wholesalers. MAEM and the DWR entered into a long- term power purchase agreement on May 22, 2001. The PPA provided for the sale by MAEM to the DWR of 500 MW of energy from time to time between June 1, 2001 and December 30, 2002. During the life of the PPA, the price of energy on California's "real-time" energy market decreased and eventually fell below the price of energy under the PPA. On February 22, 2002, the DWR commenced proceedings at the FERC attempting to abrogate all of its long-term bilateral power purchase agreements, including the PPA. Among other things, the DWR asserted that the contracts should be abrogated by the FERC because they were entered into at a time when the California energy markets were being manipulated by energy wholesalers. The DWR also asserted that sales of energy made under the power purchase agreements should be deemed to have been made at "mitigated" market prices, thereby requiring energy wholesalers, including MAEM, to pay refunds to the DWR. On June 26, 2003, the FERC denied the complaint as to MAEM and found that the PPA was fully enforceable and legal in all respects and that MAEM owed no refunds to the DWR. The FERC's ruling is currently on appeal with the Ninth Circuit. The DWR has filed an unliquidated claim against MAEM based on the claims that have already been rejected by the FERC in the DWR Proceedings. Reliability Must-Run As part of California's energy restructuring, PG&E, Edison and San Diego Gas were encouraged by the CPUC to, and did, divest their fossil fuel generation capability to more expeditiously create a wholesale energy market in California. The sale of generation assets to third parties meant that the output of the generation would no longer be regulated by the CPUC as it was for the integrated utilities. Accordingly, to ensure that the output of certain units that were needed for local reliability would still be available, the new plant owners entered into a form of cost-based agreement at which the CAISO could procure energy and ancillary services required to maintain grid reliability. Reliability Must-Run contracts were established to satisfy this need. Ms. Campbell says that a typical RMR contract requires the owner of an RMR generating unit to sell energy to the CAISO at a regulated price that has been approved by FERC at the CAISO's request. This assures that the CAISO can meet grid reliability standards by procuring energy from an RMR unit when necessary, and prevents an RMR owner from exercising market power for that energy by regulating its price. In addition, the CAISO Tariff requires the utility serving load (retail customers) in the area where the RMR unit is located to pay the CAISO for energy purchased by the CAISO under an RMR contract. These amounts are paid by the CAISO to the RMR owner pursuant to the applicable RMR contract. A Responsible Utility is a third-party beneficiary of the RMR contracts relating to RMR units within its territory. The RMR owners and the CAISO are direct parties to the RMR agreement. If a Responsible Utility fails to pay for RMR energy, the RMR owner looks to the CAISO to recover those payments from collateral held by the CAISO, and, in some instances, the RMR Owner may look to the Responsible Utility for payment. Potrero purchased a power plant located in the Potrero district of San Francisco from PG&E. Potrero assumed the existing RMR agreement previously held by PG&E when it acquired the plants in April 16, 1999. Delta purchased two power plants from PG&E, one located in Pittsburg, California, and one located in Antioch, California. Delta also assumed the prior PG&E RMR contracts with the CAISO when the plants were acquired. The first agreement covers the Pittsburg power plant, and the second covers the Antioch power plant. PG&E is the Responsible Utility in respect of the RMR Contracts. The RMR Contracts permit Delta and Potrero to operate under two pricing schemes known as "Condition One" and "Condition Two." Under Condition One, Delta and Potrero are entitled to recover a portion of their FERC-approved fixed costs from the CAISO. In addition, Delta and Potrero may sell the energy to third parties at market rates. Under Condition Two, Delta and Potrero are entitled to recover all of their FERC-approved fixed and variable costs but must credit back to the CAISO any revenues received by making sales of energy in the market. At the time that the RMR Contracts were first put into place, Ms. Campbell relates that the CAISO and RMR owners generally could not agree on the proper percentage of fixed costs to be paid to RMR owners under Condition One. Therefore, the parties stipulated that RMR owners would be entitled to collect 50% of their fixed costs, subject to refund, pending further negotiations by the parties or a FERC order fixing the proper percentage. Delta and Potrero properly collected from the CAISO (and PG&E) the amounts agreed to by the parties while operating under Condition One. Ms. Campbell reports that Delta and Potrero were unable to consensually agree on the proper percentage of fixed costs to be paid under Condition One with the CAISO (and PG&E), and the matter was submitted to the FERC for resolution. In June 2000, an administrative law judge ruled that the percentage of fixed costs payable under Condition One should be calculated pursuant to a methodology that would reduce the FOP from the provisionally stipulated 50% to approximately 3.5% on average. Delta and Potrero filed briefs on exception with the FERC, and, as a result, the ALJ's decision is purely advisory unless it is adopted by the FERC. To date, the FERC has not yet adopted the ALJ's decision. If the ALJ's decision is adopted by the FERC, Ms. Campbell tells the U.S. Bankruptcy Court for the Northern District of Texas that Delta and Potrero would be liable to the CAISO for the difference between the 50% FOP collected pursuant to the stipulation and the 3.5% FOP, on average, the ALJ found to be due and owing. Both PG&E and CAISO have filed duplicate claims in respect of the FOP liability against Delta and Potrero. The CPUC Claims Other than the name of the Objecting Debtor against whom each of the seven Claims is asserted, Ms. Campbell points out that the CPUC Claims are substantially identical. Each of the CPUC Claims asserts a claim on behalf of "California electric consumers" for an amount equal to "no less than $2,105,230,800," plus all accrued and unpaid interest and any and all related charges, fees and expenses incurred. The CPUC Claims can be grouped into three main categories: 1. The CPUC asserts claims against the Objecting Debtors in respect of Refunds and Other Amounts. The CPUC Refund Claims are duplicative of claims asserted by PG&E, Edison, DWR, the Attorney General, the CalPX, and perhaps the CAISO, among others, in respect of the Refunds and the Other Amounts; 2. The CPUC asserts claims related to the PPA. The CPUC DWR Claims are duplicative of the DWR Contract Claims filed by the DWR, and perhaps others; and 3. The CPUC asserts claims arising from the RMR Contracts on account of the alleged FOP liability. The CPUC RMR Claims are duplicative of the RMR Claims filed by PG&E and the CAISO. Ms. Campbell asserts that the CPUC is not a creditor of the Debtors and has no standing to file a proof of claim since: (a) it did not purchase energy on or have any regulatory oversight over the California Energy Markets; and (b) it was not a party to and did not have any regulatory oversight over the PPA or the RMR Contracts. Moreover, Ms. Campbell adds that the CPUC is not entitled to file a proof of claim under the doctrines of prudential standing because: (a) it cannot establish "legal injury" since it is not the legal or beneficial owner of the CPUC Claims; (b) there is no evidence that the CPUC and the other California Parties hold a "close relation" that would allow CPUC to act on behalf of the other California Parties; and (c) the other California Parties are capable of fully defending their own interests and have filed proofs of claim in their own right in order to do so. Accordingly, the Debtors ask the Court to disallow the CPUC Claims. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. The Company filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03- 46590). Thomas E. Lauria, Esq., at White & Case LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) MORGAN STANLEY: S&P Affirms Low-B Ratings on Classes HYB1 B-4 & 5 ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on five classes from three series of Morgan Stanley Dean Witter Capital I Trust mortgage pass-through certificates. Ratings are also affirmed on 129 other classes from 23 transactions from the same issuer. Approximately $4.77 billion in certificates are affected. The raised ratings are based on pool performances that have caused the credit support percentages to increase sufficiently to protect the classes at the new rating levels. The credit support percentages are at least 1.86x the loss coverage levels, and cumulative losses range from 0.0% to 1.72% of the original pool balances. Ninety-plus-day delinquencies, including REOs and foreclosures, range from 2.98% to 18.68% of the current pool balances. All of these transactions utilize subordination as credit support. In addition, these transactions, with the exception of 2003-HYB1 and 2002-WL1, also utilize overcollateralization and excess spread as credit support. Some classes also receive support from bond insurance policies provided by Financial Security Assurance Inc. ('AAA' insurer financial enhancement rating), MBIA Insurance Corp. ('AAA' insurer financial enhancement rating), or Ambac Assurance Corp. ('AAA' insurer financial enhancement rating). These classes are denoted below with an asterisk in the affirmed ratings section of the list. The affirmations on the nonbond insured ratings are based on credit support percentages that are sufficient to maintain the securities' current ratings. The affirmations on the bond insured ratings are based on the financial strength of the underlying insurer. The underlying collateral for these transactions are mostly fixed- rate, first-lien, 30-year mortgage loans on single-family homes. Ratings Raised Morgan Stanley Dean Witter Capital I Trust Mortgage pass-thru certs Rating Series Class To From ------ ----- -- ---- 2002-AM1 M-1 AA+ AA 2002-HE2 M-1 AA+ AA 2002-WL1 B-1 AAA AA 2002-WL1 B-2 AA A 2002-WL1 B-3 A BBB Ratings Affirmed Morgan Stanley Dean Witter Capital I Trust Mortgage pass-thru certs Series Class Rating ------ ----- ------ 2000-1 A-I* AAA 2000-1 A-II* AAA 2001-1 A-I AAA 2001-AM1 M-1 AA+ 2001-AM1 M-2 A 2001-AM1 B-1 BBB- 2001-NC2 A-1 AAA 2001-NC2 M-1 AA+ 2001-NC2 M-2 A 2001-NC2 B-1 BBB- 2001-NC3 M-1 AA 2001-NC3 M-2 A 2001-NC3 B-1 BBB- 2001-NC4 A-2* AAA 2001-NC4 M-1 AA 2001-NC4 M-2 A 2001-NC4 B-1 BBB- 2002-AM1 A-2 AAA 2002-AM1 M-2 A 2002-AM1 B-1 BBB- 2002-AM2 A-2 AAA 2002-AM2 M-1 AA 2002-AM2 M-2 A 2002-AM2 B-1, B-2 BBB- 2002-AM3 A-2*, A-3 AAA 2002-AM3 M-1 AA 2002-AM3 M-2 A 2002-AM3 B-1 BBB 2002-AM3 B-2 BBB- 2002-HE2 A-2 AAA 2002-HE2 M-2 A 2002-HE2 B-1 BBB 2002-HE2 B-2 BBB- 2002-NC4 A-2 AAA 2002-NC4 M-1 AA 2002-NC4 M-2 A 2002-NC4 B-1 BBB 2002-NC4 B-2 BBB- 2002-NC5 A-2*, A-3 AAA 2002-NC5 M-1 AA 2002-NC5 M-2 A+ 2002-NC5 M-3 A 2002-NC5 B-1 BBB 2002-NC5 B-2 BBB- 2002-NC3 A-2*, A-3 AAA 2002-NC3 M-1 AA 2002-NC3 M-2 A 2002-NC3 B-1 BBB 2002-NC3 B-2 BBB- 2002-NC1 A-2 AAA 2002-NC1 M-1 AA 2002-NC1 M-2 A 2002-NC1 B-1 BBB- 2002-NC2 A-2 AAA 2002-NC2 B-1 BBB- 2002-HE1 A-2 AAA 2002-HE1 M-1 AA 2002-HE1 M-2 A 2002-HE1 B-1 BBB 2002-HE1 B-2 BBB- 2002-OP1 A-2 AAA 2002-OP1 M-1 AA 2002-OP1 M-2 A 2002-OP1 B-1 BBB 2002-OP1 B-2 BBB- 2002-WL1 1-A-1, 1-A-2, 1-A-3 AAA 2002-WL1 1-A-4, 1-A-5 AAA 2002-WL1 1-A-6, 1-A-7, 2-A-1 AAA 2002-WL1 2-A-2, 2-A-3 AAA 2002-WL1 2-A-4, A-X-1, A-X-2 AAA 2002-WL1 A-X-3, A-P AAA 2002-WL1 A-R, A-LR AAA 2003-NC1 A-2, A-3 AAA 2003-NC1 M-1 AA 2003-NC1 M-2 A 2003-NC1 M-3 A- 2003-NC1 B-1 BBB 2003-NC1 B-2 BBB- 2003-NC2 A-2, A-3 AAA 2003-NC2 M-1 AA 2003-NC2 M-2 A 2003-NC2 M-3 A- 2003-NC2 B-1 BBB 2003-NC2 B-2 BBB- 2003-NC4 A-2, A-3, A-4 AAA 2003-NC4 M-1 AA 2003-NC4 M-2 A 2003-NC4 M-3 A- 2003-NC4 B-1 BBB+ 2003-NC4 B-2 BBB 2003-NC4 B-3 BBB- 2003-HYB1 A-1, A-2, A-3, A-4 AAA 2003-HYB1 A-X, A-R AAA 2003-HYB1 B-1 AA 2003-HYB1 B-2 A 2003-HYB1 B-3 BBB 2003-HYB1 B-4 BB 2003-HYB1 B-5 B 2003-NC3 A-2, A-3 AAA 2003-NC3 M-1 AA 2003-NC3 M-2 A 2003-NC3 M-3 A- 2003-NC3 B-1 BBB+ 2003-NC3 B-2 BBB 2003-NC3 B-3 BBB- * Bond insured class. MORGAN STANLEY: Fitch Puts BB Rating on Class E Auto Loan Notes --------------------------------------------------------------- Fitch Ratings issued a presale report on Morgan Stanley Auto Loan Trust 2004-HB2 discussing the rating analysis behind Fitch's expected 'AAA' ratings on the class A notes, 'A+' ratings on the class B notes, 'BBB+' ratings on the class C notes, 'BBB' ratings on the class D notes, and 'BB' on the class E notes. The securities are backed by a pool of prime retail installment sales contracts secured by new and used automobiles and light duty trucks from a diverse pool of manufacturers originated by The Huntington National Bank. The presale report is available to all investors on Fitch's corporate site http://www.fitchratings.com/ For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than twenty asset classes, contact product sales at +1-212-908-0800 or at webmaster@fitchratings.com NORTEL NETWORKS: Declares Preferred Share Dividends --------------------------------------------------- Nortel Networks Limited's board of directors declared a dividend on each of the outstanding Cumulative Redeemable Class A Preferred Shares Series 5 (TSX:NTL.PR.F) and the outstanding Non-cumulative Redeemable Class A Preferred Shares Series 7 (TSX:NTL.PR.G). The dividend amount for each series is calculated in accordance with the terms and conditions applicable to each respective series, as set out in the Company's articles. The annual dividend rate for each series floats in relation to changes in the average of the prime rate of Royal Bank of Canada and The Toronto-Dominion Bank during the preceding month and is adjusted upwards or downwards on a monthly basis by an adjustment factor which is based on the weighted average daily trading price of each of the series for the preceding month, respectively. The maximum monthly adjustment for changes in the weighted average daily trading price of each of the series will be plus or minus 4.0% of Prime. The annual floating dividend rate applicable for a month will in no event be less than 50% of Prime or greater than Prime. The dividend on each series is payable on October 12, 2004 to shareholders of record of such series at the close of business on September 30, 2004. About Nortel Networks Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com/ or http://www.nortelnetworks.com/media_center/ * * * As reported in the Troubled Company Reporter on August 18, 2004, the Integrated Market Enforcement Team of the Royal Canadian Mounted Police recently advised the Company that it will commence a criminal investigation into the Company's financial accounting situation. As reported in the Troubled Company Reporter on August 12, 2004, the Company's directors and officers, and certain former directors and officers are facing allegations from certain shareholders in the U.S. District Court for the Southern District of New York that the directors and officers breached fiduciary duties owed to the Company during the period from 2000 to 2003. OCEANLAKE COMMERCE: Steven Moya Replaces Steve Koskie as CEO ------------------------------------------------------------ OceanLake Commerce, Inc.'s (TSX-V:OLI) Board of Directors reported that Steve Koskie resigned his position as a Director and as Chairman & CEO of OceanLake effective immediately. The Board acknowledged Mr. Koskie's contributions over the past five-years. Mr. Koskie has been instrumental in directing OceanLake's leading technology solution and securing the investors and funding necessary to ride-out the wireless market challenges. "I have absolutely enjoyed the challenging build up of OceanLake, and now that we have tangible acceptance in the marketplace along with sustainable funding in the bank, I feel it makes sense to pass the reins to a new CEO." Mr. Koskie went on to say, "As a major shareholder of OceanLake stock, I look forward to watching the company grow and enhance returns to shareholders. Finally, I would like to thank the staff and the Board for their support during some very challenging years." This announcement comes on the heels of OceanLake signing its first major contract in South East Asia with a major financial services company, the terms which will be disclosed is a subsequent news release. The immediate revenue to OceanLake is expected to exceed revenue recorded in each of the last three years. As there are further potential contracts in advanced stages of discussions, Mr. Koskie felt this was the logical time to step aside and allow a natural transition to the senior management team he brought in earlier this year, to take OceanLake to the next level. Concurrent with the announcement, the Board of Directors appointed Steven Moya as CEO and to the Board of Directors of OceanLake. Over the last year Mr. Moya has worked closely with OceanLake's Asian investors to accelerate market penetration and sales opportunities in South East Asia. With extensive investment banking, financial and operating experience, the Board is confident Mr. Moya has the ability to manage the company and close deals in the near term. "I would like to thank Steve for his support and direction. I am very excited that we have a strong company foundation from which to build on" stated Mr. Moya. "Shareholders and investors are anxious to see improved results from OceanLake; therefore, I have tied my performance to the performance of the company." Additionally on June 25, 2004, in an effort to increase corporate governance and Board oversight, Paul Cloutier, a well-known businessman and entrepreneur residing in Toronto, Ontario, was appointed to the Board of Directors of OceanLake as an independent Board member. OceanLake's annual general meeting is scheduled to be held in early October 2004, where shareholders will have the opportunity to meet Mr. Moya and learn of recent sales activities in South East Asia. OceanLake provides the solution to help determine a company is ready for wireless - award-winning Mobile Gateway software. It's a free hosted service that allows anyone to wirelessly access a company's web site content from any PDA or browser-equipped cell phone. This service is perfect for evaluating wireless usage and device popularity. More importantly, it gives the information needed to build a business case for wireless. At December 31, 2003, Oceanlake's stockholder deficit narrowed to $5,074,314 from $7,238,946 a year earlier. OCEANLAKE COMMERCE: Secures $2 Million Loan Due April 2005 ---------------------------------------------------------- OceanLake Commerce, Inc.'s (TSX-V:OLI) secured US$2,000,000 financing under a loan arrangement with a significant shareholder. The loan carries interest at 5% per annum, payable quarterly, and is due on April 6, 2005. The loan is convertible to equity at any point during the term, subject to regulatory approval for the conversion, and is unsecured. OceanLake provides the solution to help determine a company is ready for wireless - award-winning Mobile Gateway software. It's a free hosted service that allows anyone to wirelessly access a company's web site content from any PDA or browser-equipped cell phone. This service is perfect for evaluating wireless usage and device popularity. More importantly, it gives the information needed to build a business case for wireless. At December 31, 2003, Oceanlake's stockholder deficit narrowed to $5,074,314 from $7,238,946 a year earlier. OMNI FACILITY: Committee Hires Kramer Levin as Counsel ------------------------------------------------------ The Official Committee of Unsecured Creditors in Omni Facility Resources, Inc., and its debtor-affiliates' chapter 11 cases seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to employ Kramer Levin Naftalis & Frankel LLP as its bankruptcy counsel. The Committee tells the Court that it selected Kramer Levin primarily because the firm's Bankruptcy Department has extensive experience in the fields of bankruptcy and creditors' rights and, in particular, has represented creditors' committees in some of the largest and most complex chapter 11 reorganization cases. Kramer Levin will: a. administer these cases and exercise oversight with respect to the Debtors' affairs including all issues arising from the Debtors, the Committee or these Chapter 11 Cases; b. prepare on behalf of the Committee of necessary applications, motions, memoranda, orders, reports and other legal papers; c. appear in Court and at statutory meetings of creditors to represent the interests of the Committee; d. negotiate, formulate, draft and confirm plan or plans of reorganization and matters related thereto; e. investigate, if any, as the Committee may desire concerning, among other things, the assets, liabilities, financial condition, sale of any of the Debtors' businesses, and operating issues concerning the Debtors that may be relevant to these Chapter 11 Cases; f. communicate with the Committee's constituents and others as the Committee may consider desirable in furtherance of its responsibilities; and g. perform all of the Committee's duties and powers under the Bankruptcy Code and the Bankruptcy Rules and the performance of such other services as are in the interests of those represented by the Committee. The principal attorneys expected to represent the Committee in this matter and their current hourly rates are: Professionals Billing Rate ------------- ------------ Robert T. Schmidt $540 per hour Matthew J. Williams 460 per hour Erin L. Eliasen 260 per hour Other attorneys and paraprofessionals may provide services to the Committee in these bankruptcy proceedings. The range of Kramer Levin's hourly rates for attorneys and legal assistants are: Designation Hourly Rate ----------- ----------- Partners $490 - 750 Counsel 505 - 800 Associates 260 - 490 Legal Assistants 170 - 195 Headquartered in South Plainfield, New Jersey, Omni Facility Services, Inc. -- http://www.omnifacility.com/-- provides architectural, janitorial, landscaping, and electrical services. The Company filed for chapter 11 protection on June 9, 2004, (Bankr. S.D.N.Y. Case No. 04-13972). Frank A. Oswald, Esq., at Togut, Segal & Segal LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $80,334,886 in total assets and $100,285,820 in total debts. PARKER DRILLING: S&P Assigns B- Rating to Proposed $150MM Notes --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Parker Drilling, Co., (B/Negative/--) and, at the same time, assigned its 'B-' rating to the company's proposed $150 million floating rate notes due 2010. Proceeds from the proposed note offering will be used to repay the $70 million outstanding under its existing term loans and, together with some cash on hand, partially repurchase about $80 million of aggregate principal amount of its 10.125% senior notes due 2009. The outlook is negative, with a downgrade possible if operating and financial results were to worsen. As of June 30, 2004, Houston-Texas based Parker had total debt of about $525.8 million. "The completion of the proposed financing will improve Parker's financial flexibility by extending debt maturities and modestly augmenting the company's cash balances," said Standard & Poor's credit analyst Brian Janiak. "In short, it will give Parker a greater ability to wait for an upcycle in its markets." Nevertheless, Standard & Poor's said that the outlook remains negative because of concerns about Parker's long-term ability to repay its obligations because of its burdensome debt leverage, only tepid improvement in financial performance despite multiple years of very strong oil and U.S. natural gas prices, emerging market exposure, and inability to smoothly execute planned asset sales. A downgrade could occur if the company does not improve its liquidity position or its weak operating and financial results, which largely hinges on uncertain drilling market conditions. PEGASUS SATELLITE: Asks Court to Approve DirectTV & NRTC Accord --------------------------------------------------------------- The Pegasus Satellite Communications, Inc. and its debtor- affiliates and the Official Committee of Unsecured Creditors have negotiated a comprehensive Settlement with Pegasus Communications Corporation and its non-Debtor subsidiaries, DIRECTV, Inc., and National Rural Telecommunications Cooperative. A copy of the Settlement Agreement is available at no charge at: http://bankrupt.com/misc/Pegasus_settlement_agreement.pdf Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, tells the Court that the centerpiece of the Settlement is DIRECTV's agreement to pay the Debtors about $938,000,000, subject to adjustments provided in an Asset Purchase Agreement, in consideration for: (i) a sale, transfer and conveyance of the Debtors' Satellite Assets to DIRECTV, free and clear of all liens claims, encumbrances and other interests pursuant to Sections 363(b) and 363(f) of the Bankruptcy Code; (ii) the Debtors' cooperation in effecting an orderly transition of the Satellite Assets to DIRECTV as provided in a Cooperation Agreement; (iii) a general release by the Debtors of all claims against DIRECTV and NRTC, including the claims asserted by the Debtors in the Adversary Proceeding, but excluding certain claims preserved under the Settlement; and (iv) a release by the Pegasus Non-Debtors of all claims against DIRECTV and NRTC related to the Debtors' DBS business. A copy of the Asset Purchase Agreement is available at no charge at: http://bankrupt.com/misc/Pegasus_asset_purchase_agreement.pdf Mr. Keach relates that each facet of the Settlement is both interrelated and interdependent. While DIRECTV required that the Pegasus Non-Debtors release certain claims against DIRECTV and NRTC, the Pegasus Non-Debtors were unwilling to release claims against DIRECTV and NRTC unless the Debtors released claims that the Debtors may have against the Pegasus Non-Debtors. The Committee, in turn, was unwilling to consent to a release of potential estate claims against the Pegasus Non-Debtors unless the Pegasus Non-Debtors supported the Settlement, issued the releases required by DIRECTV and agreed to waive prepetition claims against the Debtors held by the Pegasus Non-Debtors. By the express terms of the underlying agreements, the Settlement must be evaluated and approved as an integrated whole. The parties have taken a variety of steps to ensure certainty of closing, and realization of benefits, following Court approval and satisfaction or waiver of other conditions, including the posting by DIRECTV of an $875,000,000 letter of credit in favor of Pegasus Satellite Television. Pursuant to the terms of the Settlement, the Debtors will receive a total purchase price of $937,719,121, subject to adjustments in the Asset Purchase Agreement, from DIRECTV in exchange for substantially all of the Debtors' Satellite Assets. The purchase price will be: (a) reduced by about $63,000,000 to reflect the amount owed by the Debtors to DIRECTV on account of the judgment entered in favor of DIRECTV and against Pegasus in the Seamless Marketing Litigation; (b) increased by: * about $16,800,000, consisting of $10,800,000 of cash patronage distributions due to Pegasus for 2003 and an agreed amount for 2004 and an additional $6,000,000 credited by DIRECTV; and * amounts owed to the Debtors at closing under the Cooperation Agreement; and (c) increased or reduced by certain other adjustments specified in the Asset Purchase Agreement, including agreed working capital adjustments. The Debtors will receive from DIRECTV effective upon closing of the Settlement a general release of all claims. In addition, NRTC will waive any argument that the Debtors' patronage capital certificates amounting to $89 million are subject to forfeiture as a consequence NRTC's asserted termination of the Debtors as Associate Members of NRTC. Specifically, NRTC has agreed that the Debtors will retain their right to receive patronage distributions in respect of the Patronage Certificates, but only on the occurrence of a Trigger Event. A Trigger Event is "any distribution (i) that NRTC's Board of Directors, in its sole discretion may authorize, pursuant to NRTC's bylaws, in connection with the retirement, repayment or rotation generally of patronage capital certificates of the same class as the Patronage Certificates, or (ii) that results from the actual dissolution of NRTC." NRTC has also agreed that the Debtors' Patronage Certificates will not be subject to discriminatory treatment, subordination or distribution rights which are in any way inferior to other like patronage capital certificates held by other NRTC patrons, including by means of amendment to NRTC's Articles of Incorporation or bylaws. NRTC has also agreed to return to the Debtors the $59,000,000 letters of credit issued for the Debtors' account and delivered to NRTC that secures payment of amounts due under the Member Agreements. Finally, the Debtors will receive from the Pegasus Non-Debtors a general release of all claims, except for claims arising after the Petition Date including postpetition claims under the Support Services Agreement. These releases will include Pegasus Communications Corporation's prepetition claims for $28,100,000, due under a promissory note issued by Pegasus Satellite Communications and other inter-company receivables due from the Debtors. Satellite Assets The Debtors' Satellite Assets to be acquired by DIRECTV will include: (a) all Subscriber Information; (b) all DIRECTV equipment and any rights to bill and collect from Subscribers for non-return fees in connection with DIRECTV equipment; (c) all rights to bill and collect from Subscribers for early termination or disconnect fees; (d) documents as specified in the Asset Purchase Agreement; (e) the leases, if any, set forth in the Asset Purchase Agreement, together with all improvements, fixtures and other appurtenances to real property subject to the Purchased Facility Leases and rights in respect thereof; (f) the furniture and equipment; (g) the Member Agreements, the Seamless Agreement and the contracts set forth in the Asset Purchase Agreement; (h) all rights to receive cash patronage from NRTC in an amount up to the Patronage Amount, with respect to the periods commencing January 1, 2003 and ending on the Closing Date, whenever those amounts may be distributed by NRTC, excluding rights to Patronage Certificates or future cash distributions, if any, under Patronage Certificates; (i) all accounts receivable and unearned revenue of the selling Debtors as of the Closing Date that relate to the DBS business; (j) all rights under certain confidentiality agreements or under non-disclosure or confidentiality, non-compete or non-solicitation agreements with any employees that may be hired by DIRECTV; (k) to the extent transferable, all "1-800" telephone numbers owned or used by the Debtors in connection with the operation of the DBS business; and (l) any other asset, property or right existing on the closing date of the transactions contemplated by the Asset Purchase Agreement to the extent and in the amount that asset, property or right is included in calculating the Final Net Working Capital Amount. Cooperation Agreement In addition, Mr. Keach continues, the Debtors and DIRECTV have entered into a Cooperation Agreement, which prescribes: -- the manner in which the Debtors will cooperate and assist with the transition of subscribers to DIRECTV; -- the undertaking of DIRECTV to reimburse certain costs incurred by the Debtors in connection with the transition; and -- the terms under which DIRECTV will provide DBS services to the Debtors after August 31, 2004, if necessary, in the event that there is no closing of the Satellite Assets sale by that date. A copy of the Cooperation Agreement is available at no charge at: http://bankrupt.com/misc/Pegasus_Cooperation_Agreement.pdf The Debtors have agreed to dismiss all pending litigation involving DIRECTV and NRTC including the Adversary Proceeding, certain California litigation and the Seamless Marketing Litigation appeal. Furthermore, the Debtors will release DIRECTV and NRTC, and DIRECTV and NRTC will release the Debtors, from any and all claims arising at any time prior to the effective date of the Settlement, except for claims in respect of the Settlement and certain other retained claims. The Debtors have also agreed to pay the prepetition and postpetition amounts due DIRECTV and NRTC under the Seamless Agreement and the Member Agreements, respectively, at the closing of the Satellite Assets sale and as an adjustment to the purchase price pursuant to the Asset Purchase Agreement. The Debtors estimate that the amounts due to DIRECTV and NRTC under the Seamless Agreement will aggregate $17,500,000 and under the Member Agreements $146,000,000, as of August 31, 2004. Pegasus Non-Debtors Letter Agreement The Debtors cannot realize the benefits of the Settlement without the participation and support of the Pegasus Non-Debtors. As a condition to the Settlement, DIRECTV and NRTC have required a release of claims from all Pegasus entities including the Pegasus Non-Debtors. Moreover, without support services from the Pegasus Non-Debtors, the Debtors cannot meet their obligations to DIRECTV to maintain the integrity of the DBS business prior to closing and provide the cooperation and support envisioned by the Cooperation Agreement. Pegasus Communications Corporation and the Committee agreed on the terms on which the Pegasus Non-Debtors would join the Settlement and, concurrently with the Settlement Agreement, entered into the letter agreement. The Settlement Agreement and the Letter Agreement together embody a broad-based resolution of the Pegasus Non-Debtors' relationships with the Debtors, which includes: (1) Mutual Releases. The Pegasus Non-Debtors will release the Debtors from all claims excluding claims arising after the Petition Date. The Debtors will release the Pegasus Non- Debtors from all claims but excluding claims under the Support Services Agreement. In addition, certain members of the Committee will release the Pegasus Non-Debtors from all claims related to the Debtors, DIRECTV, and NRTC. (2) Support Services. The Committee has agreed not to object to the payment to Pegasus Communications Management Company for services provided or expenses incurred pursuant to the Cooperation Agreement or the allocation to the Debtors of liability for those payments in accordance with the Support Services Agreement. The Committee has also agreed to support an employee retention plan on the terms outlined in the Letter Agreement, which includes PCMC employees who provide services to the Debtors' DBS business. (3) Sale of the Broadcast Assets. The Committee and Pegasus Communications Corporation have agreed in principal on a sale to Pegasus Communications Corporation of the Debtors' broadcast television assets. The Letter Agreement provides for an all cash purchase price of $75,000,000 subject to higher and better offers, with no break up fee but reimbursement of out-of-pocket expenses, not to exceed $1,000,000. The agreement includes certain auction procedures and a timeline that contemplates completion of the auction and sale in October of this year. This agreement provides the Debtors a clear path to completion of a reorganization plan reasonably promptly following the sale of the DBS assets. Because Pegasus Communications Corporation is intimately familiar with these assets and has little timing risk on receiving required Federal Communications Commission approvals, it is well situated to provide the negotiated floor bid, subject to higher and better offers, which it has agreed to do without a break- up fee. A copy of the Letter Agreement is available at no charge at: http://bankrupt.com/misc/Pegasus_Letter_Agreement.pdf DIRECTV and NRTC cannot achieve a global settlement of claims related to the Debtors' DBS business without a release from the Pegasus Non-Debtors. Accordingly, DIRECTV and NRTC have required from the Pegasus Non-Debtors a release of all matters relating to the Debtors' DBS business and a commitment not to engage in any further litigation that would adversely affect the implementation of the Agreements. The Pegasus Non-Debtors are also required to support the Settlement. By joining the Settlement Agreement, the Pegasus Non-Debtors satisfy a necessary condition to the Settlement, and in that way provide a critical benefit to the Debtors. The terms on which they have agreed to do so provide additional benefits to the Debtors, including the release of $28,100,000 in prepetition claims. Settlement Should be Approved Without question, Mr. Keach says, the Settlement is the product of arm's-length negotiations among the parties, and DIRECTV is a good faith purchaser of the Satellite Assets and is entitled to protections under Section 363(m) of the Bankruptcy Code. The Debtors believe that the compromises embodied in the Settlement are fair and reasonable and constitute the best obtainable results. Accordingly, the Debtors seek the permission of the U.S. Bankruptcy Court for the District of Maine to enter into and perform the Settlement Agreement, the Asset Purchase Agreement and the Cooperation Agreement. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEMSTAR INC: Taps Grant Thornton LLP as New Independent Auditors ---------------------------------------------------------------- PEMSTAR, Inc., (Nasdaq:PMTR) a leading provider of global engineering, product design, manufacturing and fulfillment services to technology, industrial and medical companies, appointed Grant Thornton LLP, the fifth-largest United States accounting firm, as its independent audit firm. The new auditor replaces PEMSTAR's previous firm, Ernst & Young LLP. "We look forward to working with Grant Thornton, particularly because the firm brings such a wide range of national, international and industry-related experience," said Al Berning, chairman, president and CEO, PEMSTAR. "Our audit committee worked diligently to select Grant Thornton as our new audit firm and I am very confident in this new selection and look forward to an excellent working relationship." Grant Thornton will begin its new engagement starting with the review of PEMSTAR's quarterly results for the period ended September 30, 2004. About PEMSTAR PEMSTAR Inc. -- http://www.pemstar.com/-- provides a comprehensive range of engineering, product design, manufacturing and fulfillment services to customers on a global basis through facilities strategically located in the United States, Mexico, Asia, Europe and South America. The company's service offerings support customers' needs from product development and design, through manufacturing to worldwide distribution and aftermarket support. PEMSTAR has over one million square feet in 16 locations worldwide. * * * Liquidity and Capital Resources In its Form 10-Q for the period ended June 30, 2004, filed with the Securities and Exchange Commission, Pemstar, Inc. reports: "The Company has historically funded its operations from the proceeds of bank debt, private offerings of debt, private and public offerings of equity, cash generated from operations and lease financing of capital equipment. Our principal uses of cash have been to finance working capital, acquisitions, new operations, capital expenditures and to fulfill debt service requirements. We anticipate these uses will continue to be our principal uses of cash in the future. "Our continued viability depends on our ability to generate sufficient cash from operations or obtain additional sources of funds for working capital. Our ability to maintain sufficient liquidity depends, in part, on our achieving anticipated revenue targets and manage costs. We believe that as a result of: 1) actions planned in fiscal 2005 to reduce cash expenditures, 2) the efforts we continue to make to increase revenues from continuing customers, as well as efforts to generate new customers in various industry sectors, and 3) adjustments in fiscal 2004 and 2005 to our credit facilities, which provided additional borrowing capacity, we have sufficient cash flow to meet our needs for the remainder of fiscal 2005. "We may not achieve these targets or realize the intended expense reductions. If our operating goals are not met, we may be required to secure additional waivers of any resulting covenant violations under existing lending facilities, secure additional financing from lenders or sell additional securities. "We regularly review acquisition and additional facilities expansion or joint venture opportunities, as well as major new program opportunities with new or existing customers, any of which may require us to sell additional equity or secure additional financing in order to fund the requirement. The sale of additional equity could result in additional dilution to our shareholders. We cannot be assured that financing arrangements will be available in amounts or on terms acceptable to us." PG&E NATIONAL: Deanli Offers $558 Million for IPP Portfolio ----------------------------------------------------------- Paul M. Nussbaum, Esq., at Whiteford, Taylor & Preston, LLP, in Baltimore, Maryland, relates that one facet of National Energy & Gas Transmission, Inc.'s generation business segment is comprised of generating facilities that sell all or a majority of their electrical capacity and output to one or more third parties pursuant to long-term contracts and often to the electric utility company in whose service territory they are located. These plants are generally referred to as "independent power producers." According to Mr. Nussbaum, NEG holds interests in IPPs through three indirect wholly owned subsidiaries: * National Energy Power Company, LLC, * Plains End, LLC, and * Madison Windpower, LLC NEGT Power retains ownership of the subsidiaries, which hold interests in various IPPs and many of their related operations and maintenance and management contracts that support those assets. NEGT Power also indirectly holds a 5% interest in the Iroquois Gas Transmission System, an interstate gas pipeline. Madison is a merchant windpower facility in Madison County, New York, and Plains End is an intermediate/peaking facility near Denver, Colorado. The IPP Portfolio represents a net ownership interest of 1,243 megawatts of generating assets, the majority of which are operated under long-term power purchase contracts. When NEG first filed its reorganization plan, NEG contemplated that it would reorganize and continue to conduct its business as a holding company with its various subsidiaries remaining in the NEG corporate family and continuing to operate their businesses in the ordinary course. The original reorganization plan proposed satisfaction of the NEG creditors' claims through the cancellation of existing equity interests in NEG, and a ratable distribution of new debt and 100% of the equity in NEG to NEG's unsecured creditors. Subsequently, NEG, with the advice of its financial and legal advisers and after consultation with the Official Committee of Unsecured Creditors of NEG and the Official Noteholders Committee and their professionals, found it appropriate to assess whether a sale of NEG's primary businesses and assets -- specifically, NEG's ownership interests in its IPP Portfolio and its pipeline businesses -- would yield greater value to the creditors than that anticipated to be received had NEG remained a stand-alone business that continued to own these businesses and assets. The Marketing Process In November 2003, Lazard Freres & Co., NEG and NEGT Power's financial advisors, initiated a competitive sale process for NEG's Equity Interests in its IPP Portfolio. As part of the marketing process, a comprehensive confidential information memorandum was prepared and distributed to all potential bidders that executed a confidentiality agreement with NEG. NEG also established a data room that contained all relevant documents bearing on the transaction, and provided to the bidders an extensive amount of data room information on compact discs, so that interested parties could conduct comprehensive due diligence. NEG and Lazard contacted 65 strategic and financial buyers potentially interested in purchasing the Equity Interests. Of the 65 potential buyers, 31 executed confidentiality agreements and certain of the parties engaged in due diligence for purposes of formulating a proposal. As part of the due diligence process, NEG and its legal and financial advisers conducted, responded to, and addressed numerous due diligence meetings, questions and requests for additional information. NEG Takes Denali Power's Stalking Horse Bid On July 23, 2004, after nearly eight months of extensive arm's- length negotiations, NEG, NEGT Energy Company, LLC, entered into an Equity Purchase Agreement with Denali Power, LLC. Pursuant to the Purchase Agreement, Denali Power will purchase all of the issued and outstanding equity interests of NEG's IPP Portfolio for $558,000,000. The Purchase Price is inclusive of a $46,000,000 loan to Beale Generating Company, a newly formed limited liability company, wholly owned and directed by NEGT Power. Denali Power is a company formed by affiliates of ArcLight Capital Partners, LLC, and Caithness Energy, LLC, to acquire NEG's equity interests in 12 power plants located throughout the country, and a natural gas pipeline. The Equity Purchase Agreement The salient terms of the Equity Purchase Agreement are: (A) Equity Interests All of the issued and outstanding equity interests of NEGT Power, Plains End and Madison, free and clear of any Encumbrances. (B) Purchase Price The purchase price for the Equity Interests will be equal to $558,000,000, inclusive of the Beale Loan, and subject to certain purchase price adjustments, plus the assumption of all of NEGT Power's allocable portion of the outstanding long-term debt at the level of the projects. In addition, all working capital, amounting to $98,000,000 as of December 31, 2003, at NEGT Power, Power Services Company, a wholly owned subsidiary of NEGT Power, and other non-project subsidiaries of NEGT Power will be available to be swept to and retained by NEGT Power by the closing or consummation of the transaction. (C) Beale Loan Denali Power will make the Beale Loan at the Closing. The Beale Loan will be non-recourse to NEGT Power. In the event Beale and certain of its corporate subsidiaries are converted to limited liability companies within six months after the Closing, NEG and NEGT Power will be entitled to an additional $100,000,000 of cash consideration -- $46,000,000 of which will be used to repay the Beale Loan in full -- resulting in aggregate net proceeds to NEG and NEGT Power of $608,000,000, subject to certain purchase price adjustments. In the event Beale and its subsidiaries are not converted to LLCs within six months after the Closing, NEG and NEGT Power will be entitled to an additional $50,000,000 of cash consideration -- $46,000,000 of which will be used to repay the Beale Loan in full -- resulting in aggregate net proceeds to NEG and NEGT Power of $558,000,000, subject to certain purchase price adjustments. (D) Purchase Price Adjustment The Purchase Price is subject to reduction: (a) for distributions from the projects to NEGT Power and its upstream affiliates from January 1, 2004 to the Closing Date; (b) for payments required to be made to partners under Section 708 of the Internal Revenue Code; (c) to account for the sale of the equity interests of Larkspur Power Corporation, an indirect wholly owned subsidiary of NEG, in Hermiston Generating Company, LP; (d) for the $12,750 Per Diem Operation and Maintenance -- O&M -- Margin Amount -- from January 1, 2004 to the Closing Date; (e) to account for the transfer of NEGT Power's interests in Raptor Holdings Company; and (f) for certain costs associated with the replacement of a transformer at the Carneys Point cogeneration facility, including capital costs and lost energy margin. (E) Deposit Denali Power will deposit into an escrow account $15,000,000, which is equal to 2.7% of the Purchase Price. (F) Escrow At Closing, Denali Power will deposit a portion of the Purchase Price into the escrow account: (a) $5,000,000 will be deposited to cover adjustments, if any, to the Purchase Price; (b) These amounts will be deposited to cover NEGT Power's indemnification obligations: -- An amount not to exceed $5,000,000 in respect of certain specified employee claims involving former Power Services employees; -- $2,500,000 in respect of claims involving or against US Operating Services Holdings, Inc., or any of its subsidiaries arising after execution of the Equity Purchase Agreement; -- An amount to be determined at Closing representing all claims asserted by PG&E Corporation against any company being acquired by Denali Power relating to reimbursements for certain wages and employee benefits allegedly provided by PG&E Corp. on Power Services' behalf; and -- An amount determined within 45 days of the Closing representing Denali Power's estimate of possible future claims to be asserted by PG&E Corp., if any. However, if the amount of the Unasserted PG&E Corp. Claims Escrow Amount is estimated by Denali Power to be greater than $10,000,000, NEG and NEGT Power will have the right to terminate the Equity Purchase Agreement with no obligation to pay to Denali Power a $15,000,000 break-up fee or any expense reimbursement -- other than the initial $2,000,000 reimbursement already funded; and (c) An amount determined pursuant to a scheduled formula which has been agreed to between the parties in connection with the Carneys Point Costs, consisting of an Energy Escrow Amount and an EAF Escrow Amount. Each of the escrow amounts will be released or distributed, as applicable, in accordance with the terms of the Equity Purchase Agreement. (G) Hermiston Sale NEGT Power and Larkspur are negotiating a purchase agreement with Sumitomo Corporation, Sumitomo Corporation of America and Perennial Power Company, LLC, for the sale of Larkspur's interests in Hermiston. (a) In the event that the Hermiston Purchase Agreement is entered into by the parties and the contemplated transactions are consummated within 45 days before the Anticipated Closing Date under the Equity Purchase Agreement, the $558,000,000 Purchase Price will be reduced by $40,000,000. Hermiston and Larkspur will be removed from the Equity Purchase Agreement in all respects; and (b) In the event the transactions contemplated by the Hermiston Purchase Agreement are not consummated within 45 days before the Anticipated Closing Date, NEGT Power will not be entitled to consummate the transactions contemplated by the Hermiston Purchase Agreement until after the Closing Date. At the Closing, NEGT Power and Denali Power will enter into a call agreement pursuant to which NEGT Power can require Denali Power to sell to NEGT Power the Hermiston Interests acquired by Denali Power under the Equity Purchase Agreement for $40,000,000, subject to certain adjustments. NEGT Power may exercise the call option within 180 days after the Closing Date. (H) Raptor Transfer Within 45 days before the Anticipated Closing Date, NEGT Power may transfer its interests in Raptor to any entity not being acquired by Denali Power. If the Raptor Transfer is consummated within the required period: (a) the Base Purchase Price will be reduced by $18,500,000, subject to certain adjustments; (b) Raptor, Gray Hawk Power Corporation, NEGT Management Services Company, Cedar Bay Cogeneration, Inc., and Cedar Bay Generating Company, Limited Partnership will be removed from the Equity Purchase Agreement in all respects; and (c) At the Closing, NEGT Power and Denali Power will enter into a put agreement pursuant to which NEGT Power may require Denali Power to purchase all of the issued and outstanding capital stock of Raptor held directly or indirectly by NEGT Power or the Raptor assignee, for $18,500,000, subject to certain adjustments. NEGT Power may exercise the put option within 365 days after the Closing Date. (I) Conditions to Close Several various conditions specified in the Equity Purchase Agreement must be satisfied or waived for a party to agreement to be required to close. Mr. Nussbaum assures Judge Mannes that the sale of NEG's IPP Portfolio is supported by sound business justification. Denali Power's offer is fair and reasonable and was arrived at following extensive bidding process and arm's-length negotiation. The offer is currently the best available in the relevant market. Accordingly, NEG asks the U.S. Bankruptcy Court for the District of Maryland to support its business judgment and approve the IPP Portfolio sale to Denali Power, subject to higher or better offers. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. (PG&E National Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) PJ REALTY INC: Case Summary & 9 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: P.J. Realty, Inc. 46-52 Commercial Street Gloucester, Massachusetts 01930 Bankruptcy Case No.: 04-16763 Type of Business: The Debtor rents commercial space. Chapter 11 Petition Date: August 17, 2004 Court: District of Massachusetts (Boston) Judge: Carol J. Kenner Debtor's Counsel: Stephen K. Fischer, Esq. Metaxas, Norman & Pidgeon, LLP 900 Cummings Center, Suite 207T Beverly, MA 01915 Tel: 978-927-8000 Fax: 978-922-6464 Total Assets: $1,101,695 Total Debts: 1,137,103 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Business Loan Center, Inc. Mortgage (First) $40,000 Secured Value: $1,100,000 Atlantic Koam Trading Co. $20,000 D&B Bait, Inc. $18,000 John J. Conneely $18,000 Sullivan Construction $18,000 Company, Inc. D.F.C. International, Inc. $12,000 Mass Electric Judgment lien $5,100 Envirobusiness, Inc. Phase Assessment $2,050 KeySpan Energy/Boston Gas $1,863 POLO BUILDERS: Turns to Steven Holowicki for Financial Advice ------------------------------------------------------------- Polo Builders, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Illinois for permission to employ Steven Holowicki as their financial consultant in their chapter 11 cases. The Debtors report that Mr. Holowicki was an employee of Polo Builders and was previously engaged by the Company as an independent accounting, finance and management consultant. In this retention, Mr. Holowicki is expected to: a) assist in the preparation of the Debtors' schedules of assets and liabilities, statement of financial affairs, monthly operating reports to the U.S. Trustee, applications, motions, complaints, orders and other documents which are necessary in connection with the appropriate administration of the Debtors' cases; and b) perform any and all other financial services on behalf of the Debtors that may be required to aid in the proper administration of their estates. Mr. Holowicki will charge the Debtors $75 per hour for his services. If his employment's approved, Mr. Holowicki is willing to waive his $16,143 prepetition claim against the Debtors. Headquartered in Villa Park, Illinois, Polo Builders is a general contractor. Polo Builders and its debtor-affiliates filed for chapter 11 protection on June 23, 20004 (Bankr. N.D. Ill. Case No. 04-23758). Steven B. Towbin, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, it listed more than $10 million in assets and debts. PRIME HOSPITALITY: Blackstone Offers $790 Mil. to Buy Company ------------------------------------------------------------- Prime Hospitality Corp. (NYSE: PDQ) had signed a definitive agreement to be acquired by affiliates of The Blackstone Group for $12.25 per share, a 42% premium to the closing price on August 18, 2004. The total value of the transaction, including debt, is over $790 million. Prime Hospitality Corp. controls three hotel brands -- AmeriSuites, Wellesley Inns & Suites and Prime Hotels and Resorts -- operating and franchising 256 hotels with 33,605 rooms. Of these hotels, it owns 112 comprising 14,183 rooms. The Board of Directors of Prime approved the agreement in a special meeting today. The transaction is subject to shareholder approval and other customary conditions and is expected to be completed during the fourth quarter of 2004. Blackstone plans to maintain the headquarters operations of Prime Hospitality Corp. in Fairfield, New Jersey. In addition, Blackstone intends to convert 37 of the owned Wellesley Inns & Suites, which were originally built as moderate price extended stay hotels with kitchens, to one of its Extended Stay America brands. In making the announcement, Attilio Petrocelli, Chairman and Chief Executive Officer of Prime, commented, "The Board of Directors is pleased with the terms of this acquisition and believes it is in the best interests of the Company's shareholders. The Board is especially grateful to the excellent team of associates in this organization." Jonathan D. Gray, Senior Managing Director of The Blackstone Group, said, "We are excited to be acquiring Prime Hospitality. Prime has an outstanding collection of properties, brands and people. We look forward to working with the organization, its franchisees and owner/partners." A special shareholder meeting will be announced soon to obtain shareholder approval. In connection with the transaction, Prime will commence a tender offer and consent solicitation relating to its 8.375% Senior Subordinated Notes due 2012 ($178.7 million principal amount outstanding). Details with respect to this tender offer and consent solicitation will be set forth in tender offer documents, which will be furnished in due course to holders of the Notes. Bear, Stearns & Co., Inc., is serving as financial advisor to Prime and Banc of America Securities LLC is serving as financial advisor for Blackstone. Bank of America's CMBS Capital Markets Group is providing acquisition financing for the transaction. Olshan Grundman Frome Rosenzweig & Wolosky LLP and Simpson Thacher & Bartlett LLP acted as legal advisers to Prime and Blackstone, respectively. About The Blackstone Group The Blackstone Group, a private investment firm with offices in New York, London and Hamburg, was founded in 1985. Blackstone's Real Estate Group has raised five funds, representing over $6 billion in total equity, and has a long track record of investing in hotels and other commercial properties. In addition to Real Estate, The Blackstone Group's core businesses include, Private Equity, Corporate Debt Investing, Marketable Alternative Asset Management, Mergers and Acquisitions Advisory, and Restructuring and Reorganization Advisory. The Blackstone Group can be accessed on the Internet at http://www.blackstone.com/ About Prime Hospitality Corp. Prime Hospitality Corp., one of the nation's premiere lodging companies, owns, manages, develops and franchises more than 250 hotels throughout North America. The Company owns and operates three proprietary brands, AmeriSuites(R) (all suites), PRIME Hotels & Resorts(R) (full-service) and Wellesley Inns & Suites(R) (limited service). Also within Prime's portfolio are owned and/or managed hotels operated under franchise agreements with national hotel chains including Hilton, Sheraton, Hampton, and Holiday Inn. Prime can be accessed over the Internet at http://www.primehospitality.com/ * * * Liquidity and Capital Resources In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commission, Prime Hospitality Corp. reports: "The Company believes that the effect of inflation has not been material during the six month periods ended June 30, 2004 and 2003. "At June 30, 2004, we had cash and cash equivalents of $12.2 million. We may utilize any excess cash flow to grow our brands either through acquisitions or new construction, to retire debt and/or repurchase shares. "Our major sources of cash for the six months ended June 30, 2004 were operating cash flow of $9.9 million, borrowings of $5.0 million, asset sales of $2.0 million, and proceeds from the exercise of stock options of $2.0 million. Our major uses of cash during the period were debt payments of $11.0 million, and capital expenditures of $5.7 million. "As of June 30, 2004, we had borrowings of $30.0 million under our Credit Facility at LIBOR +2.50%, or approximately 3.7%. In July 2004, we paid down $10.0 million, reducing our borrowings to $20.0 million. The Credit Facility consists of a $125 million revolving line of credit which expires in 2006 and is secured by the equity interests of certain of Prime's subsidiaries. The Credit Facility contains loan covenants customary for a credit facility of this size and nature, including but not limited to, limitations on making capital expenditures, selling or transferring assets, making certain investments (including acquisitions), repurchasing shares and incurring liens. In addition, the Credit Facility requires that the Company must maintain a debt to EBITDA ratio of 4.25 times and an EBITDA to interest ratio of 2.50 times. As of June 30, 2004, our debt to last twelve months EBITDA ratio was 3.59 times, our EBITDA to interest ratio was 3.39 times and the Company was in compliance with these covenants. However, there can be no assurance that the Company will continue to be in compliance with these covenants." QWEST: Inks 2-Yr. Communications Services Pact with Spirit Cruises ------------------------------------------------------------------ Qwest Communications International, Inc., (NYSE: Q) entered a contract to provide Spirit Cruises, LLC with voice and data services. The two-year contract includes a Qwest private routed network, which will prepare Spirit Cruises to add voice over Internet protocol (VoIP) services, such as Qwest One Flex(TM), in the future. Spirit Cruises will use Qwest services to enhance its fleet and customer service operations. Operating lunch, dinner, sightseeing and cocktail cruises from six U.S. ports year-round, Spirit Cruises is committed to guest satisfaction by focusing on customer service and providing a high-quality dining and entertainment experience each and every time. "Spirit Cruises is committed to providing our customers with a memorable entertainment experience. By enhancing our company's communication services, customers will benefit from more reliable access to Spirit's sales teams and customer service representatives," said Steve Baskerville, director of information technology at Spirit Cruises. "Qwest is pleased to help Spirit Cruises plan for expanded VoIP communications by building a private routed network," said Clifford S. Holtz, executive vice president of Qwest's business markets group. "VoIP will help companies, such as Spirit Cruises, to deliver better customer service and improve operational performance." About Spirit Cruises Headquartered in Norfolk, Va., Spirit Cruises LLC is America's largest harbor cruise company operating a fleet of 13 ships in six port cities: Washington, D.C., Chicago, New York/New Jersey, Boston, Philadelphia and Norfolk, Va. In addition to its Spirit vessels, it operates Bateaux New York, the luxury glass dining yacht that was selected in 2003 as the reception location for the popular series, "Today Throws a Wedding" on NBC; Spirit Elite Yacht Cruises, which are private charter vessels; and the Annabel Lee, a replica paddlewheel showboat. For more information, visit Spirit Cruises online at http://www.spiritcruises.com/ About Qwest Private Routed Networks Qwest's Private Routed Network (PRN) solution consists of a secure, managed, fully interoperable and scalable suite of global IP-VPN services. It is based on high-performance platforms designed to minimize network management as well as operational and financial burdens imposed by other wide area networking (WAN) and security technologies. The service includes Private Routed Network ports, network layer features, Secure Remote Access, multi-link point-to-point protocol (MLPPP) services, integrated customer premises equipment (CPE) solutions, Network Management Services (NMS) and the Qwest Control(TM) Web-based management tool. The service is a network-based VPN solution utilizing Internet protocol security (IPSec) that is designed for intra- and/or inter-company communications. About Qwest Qwest Communications International, Inc., (NYSE:Q) is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, visit the Qwest Web site at http://www.qwest.com/ Qwest's June 30, 2004, balance sheet shows a stockholders' deficit totaling $1,909,000,000 -- swelling 53% from the $1,251,000,000 shareholder deficit reported at March 31, 2004. RS GROUP: Inks $36 Million Value Guaranteed Vacations Acquisition ----------------------------------------------------------------- RS Group of Companies, Inc. (f/k/a Rent Shield Corp.)(OTCBB:RSGC), a provider of pass-through risk specialty insurance and reinsurance products, has a signed letter of intent to acquire Value Guaranteed Vacations, Inc., a privately held provider of an innovative timeshare value protection program and a related person of RS Group of Companies, Inc. RS Group of Companies will acquire VGV for a total of $36 million in a combination of cash and stock. VGV is expected to generate no less than $3 million of fee income in the first 12 months subsequent to RSGC's intended acquisition of the company, and exceeding $8 million annually thereafter. The deal is expected to be completed by September 2004. VGV -- http://www.vgvinc.com/-- has launched the first-of-its- kind value guaranteed product through its VGV Club membership program, which offers protection against the depreciation of timeshare ownership interests. The VGV Club benefits include a buy-back guarantee, an affinity credit card program and related travel insurance products. The buy-back guarantee provides that 10 years after the date of purchasing a timeshare, the owner can elect to receive a full return of the acquisition cost of the timeshare including a return of the cost of the VGV guarantee in exchange for the owner's timeshare interest. Commenting on the announcement, John Hamilton, CEO of RS Group of Companies, stated, "We believe VGV's timeshare value protection program will revolutionize the sale and resale of timeshare interests worldwide. Upon closing, this acquisition will provide RS Group of Companies another opportunity to expand its global presence within the insurance and reinsurance industry." RS Group of Companies' core product, the RentShiel(TM) Residential Rental Guarantee Program: -- Guarantees, without question, to automatically pay the landlord up to six months of rental income in the event of tenant default within 30 days of the due date. -- Pays the landlord up to $10,000 for willful damage by a tenant. -- Eliminates the landlord's legal, eviction, and administrative collection expenses. -- Pre-qualifies a prospective tenant through background and credit verification within 48 hours of their application. -- Eliminates the need for landlords requiring up-front payment of a security deposit and last month's rent. -- Provides property owners the online tools that help administer residential rental properties and access other RSGC products and services. -- Provides landlords and tenants online access to listings of vacant properties. About RS Group of Companies, Inc. RS Group of Companies, Inc. -- http://www.rsgc.com/-- has developed and is implementing a strategy to design, structure and sell a broad series of pass-through risk specialty insurance and reinsurance platforms throughout North America. In November 2003, through its wholly owned subsidiaries, the Company introduced its core pass-through risk solution, RentShield(TM) -- http://www.rentshieldexpress.com/-- a Residential Rental Guarantee Program being offered to North America's $300 billion residential real estate rental market. It is estimated that there are over 38 million rental units in the United States and Canada. Rental Guarantee was first developed in Finland to provide surety to residential property developers and is being used as an extremely effective marketing tool in the United Kingdom for the buy-to-let market. It protects investments in the rental units by receiving a guaranteed income on a certain timeline. At December 31, 2003, RS Group's balance sheet showed a $966,088 stockholders' deficit. SECURUS TECH: Moody's Assigns B2 Rating to $150MM Senior Notes -------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the proposed issuance of $150 million of Second-Lien Senior Notes due 2011 by Securus Technologies, Inc., and confirmed the other various ratings assigned on July 29, 2004: * Senior implied rating B2; * Issuer rating Caa1; * Speculative grade liquidity rating SGL-2; * $190 million Senior Notes due 2012 rating withdrawn; and * $150 million Senior Notes due 2011 assigned B2. The rating on the newly proposed senior notes reflects the incremental enhancements made to this level of the capital structure from the originally proposed structure Moody's rated on July 29, 2004. In the current structure, the senior notes benefit from the introduction of a more junior layer of debt in the form of $40 million of 17% Senior Subordinated Notes due 2014 (unrated). Coupon payments on this subordinated debt can only be made from availability under the Restricted Payments clause in the indenture to the Senior Notes (basically 50% of net income). The addition of this subordinated debt behind the senior notes will increase the total debt burden of the company over time as these notes accrete, making deleveraging difficult and thus potentially retarding ratings improvement. Nonetheless, the imposition of subordinated debt into a first loss position in the capital structure improves the recovery prospects of the rated senior notes compared to the original structure, in Moody's opinion. Additionally, while the senior notes will continue to benefit from upstream guarantees from all the company's operating subsidiaries, they will now also benefit from a second-lien on all the company's assets (with the exception of accounts receivable and inventory), behind the first-lien securing a $30 million working capital facility (unrated). Taken together, the reduction in amount of the senior notes to $150 from $190 million, the introduction of $40 million of first- loss absorbing subordinated notes, and the granting of a second- lien security interest to the new senior notes, improve the credit profile of this layer of debt warranting a B2 rating for these $150 million of Senior Notes due 2011 compared to Moody's B3 rating on the originally proposed $190 million of Senior Notes due 2012. As total debt in the capital structure is not changing, nor the cash flow profile, Moody's is affirming our senior implied and other ratings. The ratings continue to reflect the large and stable market for inmate telecommunications services and Securus Technologies good market position as the largest independent provider of inmate calling services. The ratings also reflect the low margins and the highly leveraged capital structure of the company, pro forma for the transaction. The $150 million of senior notes, $40 million of subordinated debt along with a cash equity contribution of $11 million, will be issued to finance the merger of two inmate calling service providers, Evercom Systems and T-Netix. Based in Texas, Securus Technologies is an independent provider of inmate telecommunications services to correctional facilities in the US and Canada with LTM revenues of $353 million. SER CORPORATION: Case Summary & 27 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: SER Corporation dba Galileo Restaurant fka Laboratorio Del Galileo fka Osteria Del Galileo 1110 21st Street, NW Washington, DC 20036 Bankruptcy Case No.: 04-01249 Type of Business: The Debtor operates a restaurant. Chapter 11 Petition Date: August 16, 2004 Court: District of Columbia (Washington, D.C.) Judge: S. Martin Teel, Jr. Debtor's Counsel: Darrell W. Clark, Esq. Stinson, Morris & Hecker, LLP 1150 18th Street, NW, Suite 800 Washington, DC 20036-3816 Tel: 202-785-9100 Fax: 202-785-9163 Estimated Assets: $500,001 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 27 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ District of Columbia $111,280 Office of Tax and Revenue International Gourmet Foods $101,112 Sareen & Associates $44,070 Cananwill, Inc. $30,690 The Swedish Fish, Inc. $24,499 EuroGourmet $24,356 Clever Ideas, Inc. $23,338 American Express $20,661 D'Artagnan $20,489 Browne Trading $18,670 Grappoli Imports, Ltd $15,635 AM Briggs $15,355 MLS $15,010 Central Parking System $14,000 American Energy Restaurant Equip. $12,622 Internal Revenue Service Insolvency Unit $12,416 United Chairs, Inc. $12,234 PARS Heating, Air $7,272 Celink $7,038 Saforian $6,981 DanSources Technical Services, Inc. $3,000 North American Import & Export $2,812 Global Resources, Inc. $1,708 Verizon $376 T-Mobile $281 Broken Arrow $259 Renfrew Paper Supplies $188 SOLUTIA INC: Increase Price on Ascend & Vydyne Products by 10% -------------------------------------------------------------- Solutia, Inc., (OTC Bulletin Board: SOLUQ) implemented a ten percent price increase across all grades of Ascend(R) and Vydyne(R) product families since August 15, 2004. Sustained increases in raw materials, transportation and energy costs, have made this price increase necessary. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) STRATUS TECH: Extends Amended 10.375% Debt Offering to Sept. 1 -------------------------------------------------------------- Stratus Technologies, Inc., extended its offer to exchange an aggregate principal amount of $170,000,000 of its outstanding 10.375% Senior Notes due 2008 that were issued on November 18, 2003 for new 10.375% Senior Notes due 2008 that have been registered under the Securities Act of 1933, as amended. The current Exchange Offer, scheduled to expire at 5:00 p.m. EDT on August 18, 2004, has been extended until 5:00 p.m. EDT on September 1, 2004. Tenders with respect to $170,000,000 aggregate principal amount of the Old Notes, which represents 100% of the total outstanding principal amount of the Old Notes, have been received to date. In addition, the Company have identified and are currently reviewing certain customer transactions for which revenue was recognized and reported in the consolidated financial statements of Stratus Technologies International, S.a r.l. for fiscal 2004 and the first quarter of fiscal 2005. The accounting issues identified in these transactions relate to the timing of the recording of revenue, and not whether the sales can be recorded as revenue. For these transactions, the products for which it has recognized revenue have been delivered, are currently in use by its customers in their operations and have either been paid for or are expected to be paid for in the ordinary course. The Company is reassessing the appropriate periods in which the revenue for these transactions should be recognized. While it does not expect this review to result in changes to historical cash flow, it is likely that some or all of the revenue recorded for these transactions in previous financial periods could be deferred to future periods, thereby affecting the consolidated financial statements of Stratus Technologies International, S.a r.l. for fiscal 2004 and the first quarter of fiscal 2005 and resulting in a restatement for those periods. The Company is working with its internal auditors, Ernst & Young, and independent auditors, PricewaterhouseCoopers, on this detailed review of prior period revenue transactions, their potential impact on revenue, cost of goods sold and inventory and the Company's internal controls generally. At this time, it does not have an anticipated date for the completion of its review or the release of any appropriate restated financial results. Accordingly, pending completion of this review, the consolidated financial statements of Stratus Technologies International, S.a r.l. for fiscal 2004 and the first quarter of fiscal 2005 should not be relied upon as an accurate reflection of its financial results for these periods. This announcement is not an offer to exchange, or a solicitation of an offer to exchange, with respect to the Old Notes. The Exchange Offer is being made solely by a prospectus, dated July 7, 2004, and the Exchange Offer, as extended hereby, remains subject to the terms and conditions stated therein. About Stratus Technologies Stratus Technologies is a global provider of fault-tolerant computer servers, technologies and services, with more than 20 years of experience focused in the fault-tolerant server market. Stratus(R) servers provide high levels of reliability relative to the server industry, delivering 99.999% uptime or better. Stratus servers and support services are used by customers for their critical computer-based operations that are required to be continuously available for the proper functioning of their businesses. The company posted a $63.8 million stockholders' deficit at May 31, 2004 compared to a $58.9 million deficit at February 29, 2004. THOMAS GROUP: Inks $5.5 Million Credit Facility with BofA --------------------------------------------------------- Thomas Group, Inc., (OTCBB:TGIS) signed a new credit facility with Bank of America, N.A. This new facility replaces the Company's former senior lender, Comerica Bank. Significant terms of the new credit facility include: -- $5.5 million revolving line of credit -- Matures August 21, 2006 -- Interest at prime, or LIBOR+2.5% -- Advances based on a percentage of eligible accounts receivable Jim Taylor, President and Chief Executive Officer said, "This alliance with Bank of America culminates nineteen months of significant debt reduction for our Company. Since the end of 2002, we have reduced our bank debt over 70% and reduced all debt 60%. This new line of credit will enable us to fund more revenue growth and will give us the opportunity to pursue our business model of profitable growth with more confidence and flexibility. This flexibility will be particularly important as we expand existing business relationships and penetrate industry and governmental sectors not historically served by Thomas Group." About Thomas Group Thomas Group, Inc., is an international, publicly traded business consulting firm (OTCBB:TGIS). Thomas Group's unique brand of process improvement and performance management services enable businesses to enhance operations, improve productivity and quality, reduce costs, free up cash and drive to higher profitability. Known as The Results Company(SM), Thomas Group creates and implements customized improvement strategies for sustained performance improvements in all facets of the business enterprise. Thomas Group has offices in Dallas, Detroit, Zug, and Hong Kong. For additional information on Thomas Group, Inc., go to http://www.thomasgroup.com/ * * * Liquidity Concerns In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commission, Thomas Group, Inc., reports: "As a result of cash generated from operations, the Company reduced its senior debt by $4.5 million in 2003 and another $0.7 million through August 13, 2004. The Company's ability to reduce debt and generate cash from operations is due primarily to cost saving measures including staff reductions, downsizing and subleasing facilities and more aggressive collection policies. However, recent operating results and the uncertainty of future business development and growth strategies give rise to concerns about the Company's ability to generate cash flow from operations sufficient to make scheduled debt payments as they become due and to remain in compliance with its restrictive loan covenants. "The Company's need to raise additional equity or debt financing and its ability to generate cash flow from operations sufficient to make scheduled payments on its debts as they become due will depend on its future performance and in particular, its ability to successfully implement business and growth strategies. In addition, the Company is seeking financing alternatives to replace its current senior lender, as well as continuing the evaluation of the business on a daily basis to enhance its liquidity position. Such evaluation includes appropriate furlough of its unassigned workforce, staff reductions and the downsizing or subleasing of facilities when necessary. "The Company's performance will also be affected by prevailing economic conditions. Many of these factors are beyond the Company's control. The Company currently seeks business opportunities in the European, Asia/Pacific and North American regions and is affected by prevailing economic conditions in these regions. In addition, recent conflicts throughout the world involving the United States military could potentially have an adverse affect on the Company's liquidity due to the high concentration of United States government contracts, which could result in delays in program operations. If future cash flows and capital resources are insufficient to meet the Company's debt obligations and commitments, the Company may be forced to reduce or delay activities and capital expenditures, obtain additional equity capital or restructure or refinance its debt. In the event the Company is unable to do so, the Company may be left without sufficient liquidity and it may not be able to meet its debt service requirements. In such case, an event of default would occur under the credit facility and could result in all of the Company's indebtedness becoming immediately due and payable. As a result, the Company's senior lender would be able to foreclose on the Company's assets." TRANSPORTATION TECH: S&P Awaits IPO & Puts B Ratings on Watch ------------------------------------------------------------- Standard & Poor's Ratings Services' 'B' corporate credit and other ratings on Transportation Technologies Industries, Inc., remain on CreditWatch with positive implications. The ratings were placed on CreditWatch on May 5, 2004, following Transportation Technologies' announcement of plans for an IPO of common stock and the usage of proceeds to reduce debt and redeem preferred stock. At March 31, 2004, the Chicago, Illinois-based casting company had total debt (including the present value of operating leases) of $336 million. Transportation Technologies recently postponed its planned IPO due to unfavorable market conditions. The company expects to generate net proceeds from the IPO of about $121 million to be used, along with $23 million borrowed under the second-lien senior secured credit facility, to redeem about $53 million of preferred stock and about $92 million of senior subordinated exchange notes. Pro forma for the IPO, total debt is expected to decrease by about $60 million. As a result of the reduction in debt burden as well as a strong heavy-duty truck build rate, total debt to EBITDA is expected to be about 4x and EBITDA to interest coverage is expected to reach 2x in 2004, stronger than Standard & Poor's current expectations. "Upon consummation of the IPO and the reduction of debt, Standard & Poor's will raise Transportation Technologies' corporate credit and senior secured bank loan ratings to 'B+', and second-lien term loan and subordinated debt ratings to 'B-'," said Standard & Poor's credit analyst Heather Henyon. At the new rating, total debt to EBITDA is expected to average 4x-4.5x and EBITDA to interest coverage is expected to be about 2x through the business cycle. "However, if the IPO is not completed, Standard & Poor's would review Transportation Technologies' recent financial performance and likely affirm the 'B' corporate credit rating while removing the ratings from CreditWatch," the analyst continued. Transportation Technologies manufactures components for medium- and heavy-duty trucks, buses, and specialty vehicles. Products include wheel-end components, iron castings, truck body and chassis parts, seating systems and steerable drive axles, with leading market positions in their respective niches. However, the casting industry is fragmented, highly capital-intensive, and subject to volatile demand, customer pricing pressures, and fluctuations in raw material pricing. The company benefits from a competitive cost structure, full product offering, and long- standing customer relationships. UNIFLEX: Committee Hires Young Conaway as Bankruptcy Co-Counsel --------------------------------------------------------------- The Official Unsecured Creditors Committee appointed in Uniflex, Inc.'s chapter 11 case, asks the U.S. Bankruptcy Court for the District of Delaware for authority to employ Young Conaway Stargatt & Taylor, LLP, nunc pro tunc to July 1, 2004, as its co- counsel. Young Conaway will: a) advise and consult with the Committee concerning legal questions arising in the administration of the Debtor's estate and the Committee's rights and remedies in connection with this case; b) assist the Committee in preserving and protecting the Debtor's estate; c) consult with the Debtor on behalf of the Committee concerning the administration of the case; d) prepare any pleadings, motions, answers, notices, orders and any reports that are required for the protection of the Committee's interests and the orderly administration of the Debtor's estate; and e) perform any and all other legal services for the Committee which are necessary and appropriate to faithfully discharge its duties. Young Conaway will coordinate with Lowenstein Sandler, PC in order to avoid any duplication of services in representing the Committee. The attorneys designated to represent the Committee are: Professionals Billing Rate ------------- ------------ Michael R. Nester $385 per hour Joseph M. Barry $295 per hour To the best of the Committee's knowledge, Young Conaway is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Hicksville, New York, Uniflex, Inc. -- http://www.uniflexbags.com/-- makes custom-printed plastic bags and other plastic packaging for promotions and advertising. The Company filed for chapter 11 protection on June 24, 2004 (Bank. Del. Case No. 04-11852). Peter C. Hughes, Esq., at Dilworth Paxson LLP represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed both estimated debts and assets of over $10 million. UNITED AIRLINES: Extends Starbucks Relationship in 3-Year Pact -------------------------------------------------------------- Starbucks Coffee Company (Nasdaq: SBUX) and United Airlines extended their successful relationship with a new three-year supply and cooperative marketing agreement under which Starbucks(R) coffee will continue to be the exclusive coffee for United Airlines and Ted flights worldwide. The first collaboration under the new agreement will appear in September, when United presents a poignant in-flight entertainment program based on Ray Charles Genius Loves Company - a set of recordings jointly released by Starbucks, through its Hear Music brand, and Concord Records. The final recordings of Ray Charles' career, the performances feature Ray Charles singing with several of his favorite artists, including Natalie Cole, Elton John, Norah Jones, B.B. King, Gladys Knight, Diana Krall, Michael McDonald, Johnny Mathis, Van Morrison, Willie Nelson, Bonnie Raitt, and James Taylor. United's in-flight video entertainment will include a half-hour program that will virtually put passengers in the recording studio for the making of the album - allowing viewers to experience interviews and performances from the recording sessions. Additionally, United's audio entertainment in September will feature the entire CD interspersed with interviews by artists appearing on the recording. The CD will be available at participating Starbucks stores nationwide during September. "We are delighted to extend and expand our relationship with Starbucks, the premium coffee retailer in the world," said Glenn Tilton, Chairman, CEO and President of United. "Starbucks coffee and our excellent onboard service are two of the reasons why our customer satisfaction ratings are at historically high levels. It's time for this partnership to fly." "Since 1996, we've been proud to serve Starbucks coffee to millions of customers on United flights around the world, and we look forward to continuing and broadening our relationship by taking it to another level," said Howard Schultz, chairman of Starbucks. "By sharing this touching video of Ray Charles and the artists that performed with him in his final recording sessions, we hope to pay tribute to Mr. Charles' legacy and provide a glimpse of the innovative programs that will give travelers yet another reason to fly United." In the future, Starbucks and United will continue to develop co- marketing strategies and explore promotional opportunities that could include in-flight entertainment, new coffee lines onboard United flights, and promotion of Starbucks to United Mileage Plus members around the world. About Starbucks Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world, with more than 8,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering the highest quality coffee and the Starbucks Experience while conducting its business in ways that produce social, environmental and economic benefits for communities in which it does business. In addition to its retail operations, the Company produces and sells bottled Frappuccino(R) coffee drinks, Starbucks DoubleShot(TM) coffee drink, and a line of superpremium ice creams through its joint venture partnerships. The Company's brand portfolio provides a wide variety of consumer products. Tazo Tea's line of innovative premium teas and Hear Music's exceptional compact discs enhance the Starbucks Experience through best-of- class products. The Seattle's Best Coffee(R) and Torrefazione Italia(R) Coffee brands enable Starbucks to appeal to a broader consumer base by offering an alternative variety of coffee flavor profiles. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. URS CORP: Moody's Upgrades Senior Credit Facility Rating to Ba2 --------------------------------------------------------------- Moody's has upgraded URS Corporation's ratings to reflect the company's reduced debt balances, improved credit metrics, and expectations that revenues and margins will support further improvement in the company's cash flows. The company's rating outlook has been changed from positive to stable. Moody's has upgraded these ratings: * $225 million senior secured revolving credit facility, due 2007, upgraded to Ba2 from Ba3; * $84 million senior secured term loan A, due 2007, upgraded to Ba2 from Ba3; * $270 million senior secured term loan B, due 2008, upgraded to Ba2 from Ba3; * $130 million 11.5% senior unsecured notes, due 2009, upgraded to Ba3 from B1; * $20 million 12.25% senior subordinated notes, due 2009, upgraded to B1 from B2; * Senior Implied, upgraded to Ba2 from Ba3; * Senior Unsecured Issuer, upgraded to Ba3 from B1; * Speculative Grade Liquidity Rating, upgraded to SGL-1 from SGL-2. The ratings upgrade: (1) reflects the company's improved balance sheet; (2) strong operating performance; and (3) the expectation that the company's services will continue to enjoy stable demand. In its third fiscal quarter, URS used the net proceeds of an equity offering, cash on hand and additional borrowings under its credit facility to redeem $70 million of its 11.5% senior notes and $180 million of its 12.25% senior subordinated notes. As a result of these redemptions, the company's overall debt balance decreased by over $180 million to about $594 million. This is a significant improvement over the $955 million debt balance at October 31, 2002. The company's ratings also benefit from: (1) a stable customer base; (2) recurring revenues; (3) a $3.9 billion backlog at April 30, 2004; and (4) expected increases in defense and homeland security spending. The ratings are constrained by the challenges the company faces in growing its state and local revenues due to state budget deficits and delays in funding of state and local infrastructure projects. Revenues from the company's private clients are also under pressure due to reduced levels of capital spending and cost- cutting measures by the company's private clients. In 2002, URS purchased EG&G for $500 million for a purchase multiple that equates to just under 10 times its fiscal 2003's EBITDA. This acquisition transformed URS as EG&G represents around 32% of total revenues. Going forward, Moody's does not expect the company to make large debt-financed acquisitions as URS has publicly stated that it wants to maintain a debt to capitalization ratio below 40%. A change in policy due to an acquisition or other transaction, however, would pressure the ratings. A decrease in the company's revenues, operating margins and free cash flow generation would also pressure the rating. The stable ratings outlook reflects the expectation that the company will benefit from continued growth in federal defense and homeland security spending which will offset current weakness in revenues from the state and local and private sectors. A significant slowdown in the company's accounts receivable collection would likely pressure the company's rating outlook. The company's accounts receivable at the end of April 30, 2004 totaled $885 million. This compares with revenues of approximately $3.2 billion in 2003. An improvement in the accounts receivable collections, continued stability of revenues, and margin improvement will be important considerations in determining whether an improvement in ratings outlook is warranted. The upgrade of the company's speculative grade liquidity rating to SGL-1 reflects a strong projected liquidity profile over the next twelve months. The SGL-1 rating is based on the company's strong free cash flow generation and low projected revolver utilization. Moody's expects the company to have over $150 million of revolver availability over the next twelve months and cash flow from operations of over $100 million in 2005. Cash on hand and cash flows from operations should be sufficient to fund capital expenditures and debt amortization requirements under the company's bank facilities. URS is expected to be in compliance with its covenants during the remainder of 2004 and 2005. These covenants include a leverage ratio, fixed charge coverage ratio and current ratio requirement. As to its alternate liquidity, 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. The company's SGL-1 rating will be sensitive to the company's ability to sustain its level of free cash flow, ability to maintain adequate availability on its revolver and to changes in the business climate and other factors. For the last twelve months ended April 30, 2004 free cash flow to total debt was about 15% and total debt to EBITDA was approximately 3.4 times. Projected fiscal year ended 2004 total debt to EBITDA, excluding charges related to the debt redemptions, should improve to around 2.3 times due to the debt redemptions in the company's third fiscal quarter. EBITDA coverage of interest, excluding charges related to the debt redemptions in the third fiscal quarter of 2004, for the last twelve months ended April 30, 2004 was around 2.9 times, is expected to be around 3.9 times for the year ended 2004 and improve significantly in 2005 due to lower interest expense that is to result from lower debt balances. The use of EBITDA and related EBITDA ratios as a single measure of cash flow without consideration of other factors can be misleading. Based in San Francisco, California, URS Corporation is an engineering firm that provides a range of professional planning, design, program and construction management, and operations and maintenance services. Revenues for the last twelve months ended April 30, 2004 was approximately $3.3 billion. US AIRWAYS: Katz's $1.147M Patent Infringement Claim Still Hanging ------------------------------------------------------------------ On May 15, 2003, Ronald A. Katz Technology Licensing, LP, filed Claim No. 5639 in the chapter 11 cases of US Airways Group, Inc., and its debtor-affiliates for alleged patent infringement, asserting an administrative expense priority claim for $1,147,595. RAKTL filed Claim No. 5640, also for alleged patent infringement, asserting a general unsecured prepetition claim for $12,896,816. The Debtors assert that both Claims were unsubstantiated. The Debtors sought to expunge the Claims. To settle the dispute, Mr. Katz and the Reorganized Debtors agree that Claim No. 5640 is withdrawn. Mr. Katz acknowledges that he will not receive any distribution on account of Claim No. 5640. Claim No. 5639 is not affected by the Stipulation. (US Airways Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) VERITAS CLO: S&P Assigns BB Rating to Class E $8MM Secured Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Veritas CLO I Ltd./Veritas CLO I Inc.'s $282.5 million floating-rate secured notes due Sept. 5, 2016. The preliminary ratings are based on information as of Aug. 18, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- the expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- the cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- the experience of the collateral manager; and -- the legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. Preliminary Ratings Assigned Veritas CLO I Ltd./Veritas CLO I Inc. Class Rating Amount (mil. $) ----- ------ --------------- A AAA 229.00 B AA 19.00 C A 16.00 D BBB 10.50 E BB 8.00 Preference shares N.R. 25.25 N.R. - Not rated. VHJ ENERGY: Hires Moulton Bellingham as Special Counsel ------------------------------------------------------- VHJ Energy, LLC., sought and obtained approval from the U.S. Bankruptcy Court for the District of Wyoming to employ Moulton, Bellingham, Longo & Mather, P.C., as its special counsel. Moulton Bellingham will provide legal services to the Debtor in connection with the District Court Litigation before the Sixth Judicial District Court, Campbell County, Wyoming. The professionals who will be principally engaged in the State Court Litigation and their current hourly rates are: Professionals Billing Rate ------------- ------------ W.A. Forsyth $210 per hour Michael E. Begley 150 per hour Headquartered in Buffalo, Wyoming, VHJ Energy, is engaged in methane gas production. The Company filed for a chapter 11 protection on July 13, 2004, (Bankr. Wyo. Case No. 04-21360). Paul Hunter, Esq., in Cheyenne, Wyoming represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $239,745 in total assets and $7,402,469 in total debts. VIATICAL LIQUIDITY: Asks to Hire Alan Myers as Accountant --------------------------------------------------------- Viatical Liquidity, LLC asks the U.S. Bankruptcy Court for the Southern District of California for permission to employ Alan Myers as its accountant. Mr. Myers will: a. prepare the Debtor's Federal and California business income tax returs and informational returns as necessary; b. prepare the Debtor's mothly operating reports in this case; c. prepare any other tax or accounting services as may be needed throughout the administration of the estate; and e. provide tax research as necessary. Mr. Myers and his staff will bill the Debtor at their customary billing rates, which currently range from $110 to $175 per hour. Headquartered in San Diego, California, Viatical Liquidity, LLC, a company engaged in the insurance industry, filed for chapter 11 protection on June 18, 2004, (Bankr. S.D. Calif. Case No. 04-05472). Gary B. Rudolph, Esq., at Sparber Rudolph Annen, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $119,083,608 in total assets and $47,538,071 in total debts. VITRO: Moody's Junks $388 Million of Senior Notes ------------------------------------------------- Moody's Investors Service downgraded the ratings for Vitro, S.A. de C.V. reflecting the cumulative effects on Vitro's financial profile of prolonged economic malaise combined with high natural gas costs. The resulting deficit to modest amount of free cash flow relative to substantial total pension and securitization adjusted debt of over $1.5 billion are well short of Moody's expectations. The downgrades also incorporate the likely continued pressure on consolidated operating performance from macro-economic uncertainties, which include potentially adverse movements in currency (e.g. appreciation in the peso) and interest rates affecting exports and interest expense for the significant amount of floating rate consolidated indebtedness. Persistent softness in the performances of Glasswares and to a lesser extent Flat Glass have muted efforts to show sustained improvement in margins and free cash flow. Additionally, the ratings reflect Moody's assessment of run-rate financial performance and our view that expected loss in a default scenario at Vitro has increased pro-forma for the $170 million secured note issuance (rated B2) at its subsidiary, Vitro Envases NorteAmerica -- VENA, and related debt repayment. Despite the ratings adjustments, it will likely take time for the ratings outlook to become firmly stable given the aforementioned credit concerns. Over the intermediate term, the ratings outlook could benefit from significant improvement in free cash flow relative to debt. Conversely, decreases in profitability or increased financial leverage could trigger a negative ratings outlook. The value ascribed to Vitro's leading position in its domestic market and its strategic importance throughout Latin America, precluded lower ratings. The ratings also benefited from: (1) Vitro's steady commitment to focusing on core glass operations; (2) its proactive cost reduction efforts; and (3) improved fiscal management and transparency. Moody's downgraded these ratings: * $225 million 11.750% senior note, due 2013, to Caa1 from B2; * $163 million 11.375% senior note, due 2007, to Caa1 from B2 (original face value was $250 million before buy backs); * Senior implied lowered to B2 from B1; and * Senior unsecured issuer rating (non-guaranteed exposure) lowered to Caa1 from B2. The ratings outlook is changed to stable from negative for prior ratings. Lowering the rating of the senior notes to Caa1 from B2 reflects Moody's expectation of impairment in a distress scenario primarily driven by reduced enterprise value relative to its substantial consolidated total debt adjusted for receivables securitizations and pension liabilities at over $1.5 billion. The ratings of these non-guaranteed holding company notes are two notches below the B2 senior implied rating due to the structural and effective subordination to sizable amounts of debt at the operating companies. Vitro, S.A. de C.V., through its subsidiaries, is a leading global producer of glass serving multiple product markets including: -- construction and automotive lass; -- fiberglass; -- food and beverage; -- wine; -- liquor; -- cosmetics and pharmaceutical glass containers; and -- glassware for commercial, industrial and retail uses. At LTM June 30, 2004, consolidated revenue was approximately $2.2 billion, EBIT was approximately $160 million, and EBITDA was approximately $370 million. WASTE SERVICES: Bank Facility & Sub. Debt Get Moody's Junk Ratings ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of Waste Services, Inc. These ratings were affected: * $160 million guaranteed senior secured credit facility due 2011, downgraded to Caa1 from B1; * $160 million issuance of guaranteed senior subordinated notes due 2014, downgraded to Ca from Caa1; * Senior Implied Rating downgraded to Caa1 from B2; and * Senior Unsecured Issuer Rating downgraded to Caa3 from B3. The outlook was changed to negative from stable. The downgrade was prompted by: (i) the rapid decline over the last quarter in expected operating performance and cash generation; (ii) the company's impaired liquidity as evidenced by its technical default under its bank agreement; and (iii) doubts about the company's ability to support its high debt level given its negative free cash flow. In addition, the current annualized levels of pro forma EBITDA (of approximately $40 million) versus acquisition prices might suggest future asset impairment. Moody's continues to be concerned with the company's ability to achieve planned volume and price growth in disposal assets as well as the achievement of cost advantages to generate sufficient cash to fund interest and capital expenditures. Earnings have been hurt by the delayed timing of permit approvals and start-up dates for several facilities. As many assets are still in a ramp-up mode, Moody's believes there is further downside risk for cash generation. The ratings also reflect the market position of the Canadian subsidiary, Canadian Environmental Resource, Inc., as the second largest municipal solid waste company in Canada. The negative outlook incorporates a number of event risks including: (i) the achievement of the requested temporary waiver of the technical default from the bank group; (ii) the willingness of the banks to provide interim liquidity during the waiver period given the company's recent performance and in advance of receiving updated forecasts from the company; and (iii) whether the company will have sufficient liquidity to fund its October 15, 2004 interest payment on the subordinated notes of $7.6 million. Lack of progress in any of these areas could lead to an immediate downgrade. The Caa1 rating on the senior secured credit facility reflects the benefits and limitations of the security and guarantee package, which heavily rely on the newly acquired US assets for asset coverage and cash generation. The credit facility consists of a 5-year, $60 million revolving credit facility, which includes a US dollar tranche of $45 million and a Canadian dollar tranche of $15 million. There is also a 7-year $100 million term loan and the provision for an additional $50 million term facility for permitted acquisitions provided all compliance tests would be satisfied with the additional borrowings. The credit facilities are guaranteed by the pledge of the restricted subsidiaries of Waste Services as well as by pledge of sixty-five percent of the common shares of the first tier non-US subsidiaries. The Ca rating on the senior subordinated notes reflects the deep subordination of the issuer to the prior claim on assets from the senior debt of the company. The rating also incorporates the limited asset coverage from the guarantor assets in a distressed scenario. The notes are guaranteed by all US operating subsidiaries. The Canadian subsidiary, Capital Environmental Resource, Inc., and its Canadian subsidiaries are restricted, non- guarantor subsidiaries. The risk of further subordination of the notes from increased debt in Canada is somewhat mitigated by the terms of the indebtedness. The proposed credit facility will restrict permitted indebtedness at the foreign entities to the proposed $15 million Canadian revolver plus a $12 million basket for acquisitions. The bond indenture limits foreign permitted indebtedness to the $15 million proposed revolver plus a general basket of $30 million. Waste Services, Inc., based in Phoenix, Arizona, is a solid waste services company. The company's wholly owned subsidiary, Canadian Environmental Resource, Inc., operates in Canada and is the second largest service provider in that country by revenue (after Waste Management) with revenues in 2003 of $126 million. In 2003, the company initiated a disposal-based growth strategy to enter the United States via its then Delaware subsidiary, Waste Services, Inc. The company recently completed a corporate migration to the U.S. WASTE SERVICES: S&P Cuts Bank Loan Rating to B- & Junks Sub. Debt ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior secured bank loan ratings on Waste Services, Inc., to 'B-' from 'B+' and its senior subordinated debt rating to 'CCC' from 'B-'. At the same time, Standard & Poor's placed all these ratings on CreditWatch with negative implications. Scottsdale, Arizona-based Waste Services had approximately $320 million of total debt, including mandatorily redeemable preferred stock, outstanding at June 30, 2004. The downgrade and CreditWatch listing reflect concerns regarding Waste Services' weaker-than-anticipated financial performance and liquidity position, following the announcement that operating profits have fallen well short of expectations due to unforeseen operating challenges. "The shortfall in operating results is particularly significant to credit quality because the company is currently unable to access its revolving credit facility for near-term liquidity needs following a violation of the financial covenants in its bank credit agreement," said Standard & Poor's credit analyst Franco DiMartino. The company has initiated discussions with its bank lenders to obtain a waiver of the covenant violations that, if successful, would enable it to access funds from the revolver. Subsequently, Waste Services will seek to negotiate a permanent amendment to the financial covenants to address lower-than- initially anticipated profitability over the near to intermediate term, and the need for additional liquidity. The CreditWatch placement highlights the risk of another downgrade if Waste Services is unable to obtain a waiver or an amendment that would preserve sufficient access to the facility in the absence of improvement in operating profits. Access to the credit facility is a key rating consideration in light of the company's low cash balance, significant near-term operating challenges, and considerable capital spending and debt service requirements. Waste Services' operating profitability decline stems primarily from a material and previously undisclosed delay in commencing operations at three transfer stations in Florida that would enable the company to increase its internalization rate at its JED Landfill, a newly permitted municipal landfill in Osceola County, Florida that the company began operating in January 2004. WILTEL COMMS: Moody's Puts B2 & Caa1 Ratings on New Credit Pacts ---------------------------------------------------------------- Moody's Investors Service assigned B2 ratings for the proposed senior secured $25 million revolving bank credit facility due 2009 and $235 million first-priority lien term credit facility due 2010, and a Caa1 rating for the proposed senior secured $125 million second-priority lien term credit facility due 2011 of WilTel Communications, LLC (a wholly-owned subsidiary of WilTel Communications Group, Inc.). The ratings broadly reflect the company's high and growing business risk given eroding business fundamentals for the long- haul carrier industry, offset somewhat by comparatively moderate financial risk and very good near-term liquidity. The rating outlook is stable. WilTel Communications, LLC * Senior Implied Rating -- B3; * Issuer Rating -- Caa2; * $25 million Revolving Senior Secured Credit Facility due 2009 -- B2; * $235 million First-Priority Senior Secured Term Loan due 2010 -- B2; * $125 million Second-Priority Senior Secured Term Loan due 2011 -- Caa1; * Outlook -- Stable Moreover, the ratings reflect the highly competitive market in which WilTel operates, its relatively short post-bankruptcy operating history, and continued supply and demand imbalances for the foreseeable future. Other positive factors supporting the ratings, however, include: (i) the company's preferred provider relationship with SBC; (ii) its moderate leverage subsequent to the 2002 restructuring; (iii) improving financial metrics; and (iv) good liquidity in the form of excess cash balances. The stable outlook reflects Moody's expectation that the company will realize only nominal revenue growth and EBITDA margin improvement over the next several years. Free cash flow generation will depend largely on careful operating expense and capital investment management. Stronger than expected competitive pressures, resulting in accelerated pricing erosion, could pressure the ratings and be a cause for a negative rating outlook, although much of this risk is effectively factored into the current ratings. If WilTel were to exceed expectations with respect to free cash flow generation, in particular, and subsequently further delever its balance sheet, the outlook could improve to positive, indicating that ratings could improve over time as business fundamentals also improved. The revolver and the first-priority lien term credit facilities are secured by: (1) a first-priority lien and pledge of substantially all the assets of the borrower, the parent (WilTel Communications Group) and any subsidiary guarantor, including Vyvx; (2) all capital stock of the borrower and any subsidiary guarantor; and (3) a second-priority lien on the company's headquarters. WilTel Group and each domestic subsidiary unconditionally guarantee the facility. Additionally, Moody's understands that the terms and conditions subject the revolver and first-priority lien term facilities to a borrowing base of cash plus 80% of eligible receivables, and at WilTel's option, 50% of the appraised value of Vyvx. Moody's believes that the borrowing base significantly enhances the position of first-priority lien creditors vis-a-vis second- priority lien creditors. The proposed second-priority lien term credit facility is secured by a second-priority lien on the same assets that secure the revolver and the first-priority lien term credit facilities, as well as a third-priority lien on the company's headquarters. WilTel Group and each domestic subsidiary unconditionally guarantee the facility. The second-priority lien term credit facility is not subject to a borrowing base and matures six months following the maturity of the first-priority lien term facility. Additionally, Moody's notes that the second-priority lien term facility is not subject to mandatory amortization and that all mandatory prepayments are first applied to the first-priority lien term debt. The B2 ratings on the revolver and the first-priority lien term facility are notched up with respect to the B3 senior implied rating reflecting their superior position within the capital structure given their first-priority claims on effectively all the company's assets (excluding the company headquarters, which has a second-priority lien), and the credit enhancement provided by the borrowing base. The notching up also considers the meaningful amount of "junior capital" in the pro forma capital structure in the form of the $125 million second-priority lien term loan. Should the company issue additional rated debt junior in rank or structurally subordinated to the first-priority bank debt, Moody's would likely rate that debt below the senior implied rating. Moody's B3 senior implied rating assumes that in a distressed scenario, there is likely to be sufficient collateral coverage of the first-priority lien term loan and that Vyvx alone, a non-core business of WilTel, would likely garner roughly $210 million, estimated at seven times annualized EBITDA, if divested. On a pro forma basis, Moody's expects WilTel's liquidity to approximate $175-to-$200 million, comprised mostly of cash balances, but also of an undrawn $25 million revolver. Moody's projects reasonably assured compliance with the company's maintenance financial covenants contained in the proposed credit agreement, which should afford unfettered access to the revolver. Subsequent to the closing of the credit facilities, WilTel's assets will be largely encumbered, as is presently the case, although the company could presumably monetize certain non-core assets if it needed additional liquidity. A substantial debt burden, industry overcapacity, weaker than expected demand and macroeconomic malaise led to financial difficulty for WilTel (formerly Williams Communications) in 2001 and early 2002. Since filing a voluntary bankruptcy petition and subsequently emerging from bankruptcy in late 2002, the company has reined in costs by shedding over 50% of its workforce (currently 1,950 employees), rationalizing its network costs and exiting non-core businesses. While Chapter 11 enabled WilTel to restructure its balance sheet and dramatically lower its debt burden (from $5.9 billion to $573 million), many of the market challenges that encouraged the company to seek bankruptcy protection remain. Though the U.S. economy has improved in the past 2 years, demand for telecom services is generally more closely aligned with job growth, which has been weak. Additionally and most importantly, the dramatic imbalance between long haul supply and demand remains -- thereby exacerbating already fierce price competition, and contributing to continued margin erosion among all industry players. WilTel Communications is a long distance carrier headquartered in Tulsa, Oklahoma. WORLDCOM: Shareholders Have Until Sept. 1 to Opt-Out of Settlement ------------------------------------------------------------------ Parker & Waichman, LLP is reminding current and former MCI WorldCom (NasdaqNM:MCIP - News) shareholders and employees that only 31 days remain to opt-out of the proposed class action settlement. The deadline to opt-out of the class action settlement is September 1, 2004. Current and former shareholders who don't specifically opt-out of the class action settlement will automatically be included in the settlement. Parker & Waichman is offering free case evaluations at http://www.worldcomstockfraud.com/ It is estimated that shareholders lost in excess of $100 billion on MCI WorldCom securities. It is believed that the proposed settlement will provide shareholders with less than 2 cents for every dollar lost. Parker & Waichman believes this proposed settlement does not provide adequate compensation for MCI WorldCom shareholders. Parker & Waichman urges shareholders to determine whether they would be better served by opting out of the proposed settlement. Current and former WorldCom and MCI shareholders and employees can visit http://www.worldcomstockfraud.com/and http://www.worldcomclassaction.com/to view and download the WorldCom class action opt-out form entitled, "Notice of Class Action." Current and former shareholders who desire to opt-out of the WorldCom class action settlement must mail the opt-out form or required information before the September 1, 2004 opt-out deadline. This will permit them to pursue individual claims against the defendants, including Citigroup. Current and former WorldCom and MCI shareholders who do not specifically opt-out of the proposed class action settlement by filing the required form or information will automatically be included in the proposed settlement. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. On April 20, 2004, the company (WCOEQ, MCWEQ) formally emerged from U.S. Chapter 11 protection as MCI, Inc. This emergence signifies that MCI's plan of reorganization, confirmed on October 31, 2003, is now effective and the company has begun to distribute securities and cash to its creditors. (Worldcom Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) * BOOK REVIEW: The Rise of the Community Builders ------------------------------------------------- Author: Marc A. Weiss Publisher: Beard Books Hardcover: 228 pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/0231065043/internetbankrupt Review by Gail Owens Hoelscher This fascinating book covers the early period of American residential planning, from the 1890s to the 1940s. Author Marc Weiss defines "community building" as site planning and development of land patterns into which lots and houses are placed, and the relationship of those houses and lots to one another. A community builder, he says, "designs, engineers, finances, develops and sells an urban environment using as the primary raw material rural, undeveloped land." The idea of designating urban land for strictly residential purposes was fairly new at the end of the 19th century. Prior to that time, planning had been haphazard, with new owners of land generally permitted to build on it what they wished, whether a home, store or manufacturing site. The first of the community-building efforts resulted in high-income neighborhoods of houses built in a wide range of architectural designs and by various builders. At that time, land subdividers and homebuilders were generally separate entities. Homebuyers bought not only a house and lot, but also certainty in the future of their immediate surroundings. In the 1940s, the Levitts of Levittown conducted one of the first experiments in which one company carried out the entire process from planning and land improvement through to building and selling houses, along with parks and shopping centers. In this case, economies of scale were recognized in the housing industry, perhaps for the first time. In 1930, celebrated architect Clarence Stein commented, ".the house itself is of minor importance. Its relation to the community is what really counts.It is impossible to build homes according to the American standard as individual units for those of limited incomes. If they are to be soundly built and completely equipped with the essential utilities they must be planned and constructed as part of a larger group." The author recounts the crucial role of these pioneer community builders in developing subsequent public policy, calling it "private innovation preceding public action." He cites, among others, the concepts of street classification, lot size and shape, set-back lines and lot-coverage restrictions, easements, and design and placement of recreational amenities. In order to carry out their design visions, community builders relied heavily on a new legal concept: deed restrictions. In effect, homebuyers gave away certain private property rights by accepting limitations and mandates set out by the builders. These restrictions ranged from paint color and landscaping to, unfortunately, racial exclusion. Some of these voluntary restrictions led to land planning tools such as zoning laws, which regulated the use and size of structures, and subdivision regulations, which imposed standards in lot size, street width and other physical improvements in the subdividing of land for residential areas. The author recounts the development of all aspects of the American housing industry, including home insurance and mortgages. He devotes considerable time to the development of zoning controls and the up-and-down relationships between private real-estate developers and public policy makers. He shows how conflicts between the public and private sectors in the diverse elements of the real estate industry have affected real estate development as a whole, using examples mainly from California but from other states as well. The book is well documented and surely valuable for students of urban history, urban planning, and real estate development. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***