/raid1/www/Hosts/bankrupt/TCR_Public/040826.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, August 26, 2004, Vol. 8, No. 181
Headlines
ADELPHIA BUSINESS: Completes Va. & N.Y. Asset Transfer to ACOM
ADELPHIA COMMS: Sells Excess Assets to Four Buyers for $253,885
AEGIS COMMS: Stockholders' Deficit Narrows to $9.3MM at June 30
AIR CANADA: Court Extends Ernst & Young's Appointment as Monitor
AIR CANADA: TSX Halts Trading in Carrier's Shares
ALLEGHENY REBAR: Voluntary Chapter 11 Case Summary
ALLIED HOLDINGS: Expected Full-Year Loss Prompts S&P's Junk Rating
AMERICAN BUSINESS: Creditors Swap Old Notes for New Debt & Equity
AMKOR TECH: Acquires 93% Unitive & 60% UST Interests for $48 Mil.
AMWEST INSURANCE: Creditors Must File Claims by November 15
APPLIED EXTRUSION: Six Big Bondholders Like Chapter 11 Prepack
ARCHIBALD CANDY: Paragon Capital Completes Laura Secord Asset Sale
ARROW ELECTRONICS: Fitch Affirms BB Senior Secured Debt Rating
AVOTUS CORP: Stockholders' Deficit Narrows to C$1MM at June 30
BIODELIVERY SCIENCES: Inks New Credit Pact with Hopkins Capital
BIODELIVERY SCIENCES: Closes Arius Pharmaceuticals Acquisition
BURLINGTON: BII Trust Wants to Amend Distribution Trust Agreement
C2 MEDIA: Confirmation Hearing Scheduled for Tomorrow
CATHOLIC CHURCH: Releases Statement of Financial Affairs
CHAMPIONSHIP AUTO: Files Delayed Form 10-K for FY 2003 with SEC
CONSECO INC: Board Appoints William Kirsch President & CEO
CROWN CASTLE: Expects to Complete UK Subsidiary Sale on August 31
DELTA AIR: Bingham McCutchen's Clients Want to Do Due Diligence
DIVERSIFIED ASSET: Moody's Reviews B3 Rating on $27 Million Debt
ELECTRONICAST CORP: Voluntary Chapter 11 Case Summary
ENRON CORP: Wants Court to Approve Trust Letter Pact for BASF Sale
ENRON: Asks Court to Okay Sale of Nigerian Assets to Eton Energy
EZLINKS GOLF: Voluntary Chapter 11 Case Summary
FEDERAL-MOGUL: Property Damage Claimants Hire Weil as Counsel
FEDERAL-MOGUL: Expands China Operations with Shanghai Facility
FLEMING COMPANIES: Court Approves Bay 4 Capital Settlement Pact
FOUNDERS MORTGAGE: Voluntary Chapter 7 Case Summary
GALEY & LORD: Needs Until October 18 to File Schedules
GMAC MORTGAGE: Fitch Rates Privately Offered Classes at Low-Bs
GREATER CINCINNATI: Case Summary & 20 Largest Unsecured Creditors
HOLLINGER INC: Director General Richard Rohmer Retires
HOLLINGER INC: Investigation Hearing Moved to Aug. 30 & 31
HORIZON NATURAL: WL Ross $786M Sale Hearing Set for Aug. 31
INTEGRATED ELEC'L: Schatz & Nobel Files Class Action in Texas
JILLIAN'S ENTERTAINMENT: Creditors Must File Claims by August 31
JTI-MACDONALD: Parent Will Pursue R.J. Reynolds Indemnification
KAISER ALUMINUM: Silica Representative Retains Dr. James Dertouzos
LB-UBS COMMERCIAL: Fitch Gives Double-B Ratings to Three Classes
LUBZ INC: Case Summary & 9 Largest Unsecured Creditors
MEDIA GROUP: Can Access $200K of Marquette's Cash Collateral
METROMEDIA INT'L: June 30 Balance Sheet Upside-Down by $11.4 Mil.
MIRANT CORP: Gets Conditional Court Nod to Implement KERP Phase II
MORGAN STANLEY: Fitch Assigns Low-B Ratings to Six Cert. Classes
NATIONAL CENTURY: Gets Court Nod to Obtain Docs. from 14 Firms
NRG ENERGY: Complete Energy Closes Batesville Plant Acquisition
NORTHWEST AIR: Working to Reduce Net Domestic Distribution Costs
OMNI FACILITY: Inks Pact to Sell Landscape Assets to ValleyCrest
ORIGEN FINANCIAL: Fitch Cuts Class M-2 Ratings to CCC
OWENS CORNING: Judge Fullam Gets Substantive Consolidation Briefs
OWENS CORNING: Expands Toronto Facility Capacity to Meet Demand
PARMALAT: Summary of Dr. Bondi's $10B Suit Against the Auditors
PEGASUS SATELLITE: Asks Court OK on LEC Asset Purchase Agreement
PG&E NATIONAL: Inks Settlement Agreement with Mirant Americas
POOLED PENSION FUND: Case Summary & Largest Unsecured Creditors
PROVIDENT CBO: Moody's Raises Senior Notes' Ratings Ba1 & Ba2
RELIANCE: Court Reschedules Confirmation Hearing to September 27
SALTIRE INDUSTRIAL: Hires Garden City as Claims & Noticing Agent
SANTA BARBARA: Case Summary & 20 Largest Unsecured Creditors
SCHLOTZSKY'S: Asks Court for Permission to Use Cash Collateral
SOLECTRON CORP: Releasing FY 2004 Earnings on Sept. 28
SOLUTIA INC: Wants Court to Allow Greif's $250,479 Unsecured Claim
SOVEREIGN BANCORP: Redeems $500 Million 10.50% Senior Notes
STEEL DYNAMICS: Appoints Glenn Pushis VP & Bar Products Manager
TALON FUNDING: Moody's Rates Class C Floating Rate Notes at Ca
UNITED AIRLINES: Reaches Agreement with Heathrow Ground Employees
UNOVA INC: Fitch Affirms B- Debt Rating & Says Outlook Positive
WATERMAN INDUSTRIES: Wants to Hire Dennis D. Bean as Accountant
WEIRTON STEEL: United Bank Wants Plan Amended to Address ESOPs
WELLS FARGO: Fitch Assigns Bb Rating to $2.373M Certificate Class
WESPOINT STEVENS: Strengthens Global Distribution in Middle East
WHITEHAWK CDO: Moody's Puts Ba3 Rating on Preference Shares
* Dorsey & Whitney Partner Joint Market Regulation Services' Board
* EPIQ Offers More Specialty Balloting & Voting Support Services
*********
ADELPHIA BUSINESS: Completes Va. & N.Y. Asset Transfer to ACOM
--------------------------------------------------------------
Adelphia Business Solutions, Inc., now known as TelCove, a leading
provider of business critical telecommunications services to
enterprise customers and carriers, announced it has finalized the
transfer of ownership of network assets and customers from
Adelphia Communications Corporation in ten markets in Virginia and
New York.
An agreement was reached in February between TelCove and ACC,
which anticipated this transfer of network assets from ACC to
TelCove, including local operations in Richmond and
Charlottesville, Virginia, and Buffalo, New York. With regulatory
approvals now complete, the agreement has been finalized and the
markets have been formally transferred.
"TelCove is extremely pleased that the return of these CLEC
operating markets is complete," stated Bob Guth, president and CEO
of TelCove. "These markets serve a strong and growing base of
customers. They have consistently demonstrated solid financial
performance, and they are a terrific complement to the TelCove
network footprint. We committed to a seamless transition for the
customers in these cities, and we're happy to deliver on that.
Additionally, we're excited about the roll out of our latest
products to these markets, including our Metropolitan Area
Ethernet product line."
With this transfer of assets, TelCove adds ten markets to its
network infrastructure throughout the eastern half of the United
States: Charlottesville, Richmond, Lynchburg, Danville, Roanoke,
Harrisonburg, Winchester, and Staunton, Virginia, along with
Albany and Buffalo, New York.
Headquartered in Coudersport, Pa., Adelphia Business Solutions,
Inc., now known as TelCove -- http://www.adelphia-abs.com/-- is a
leading provider of facilities-based integrated communications
services to businesses, governmental customers, educational end
users and other communications services providers throughout the
United States. The Company filed for Chapter 11 protection on
March 27, 2002 (Bankr. S.D.N.Y. Case No. 02-11389) and emerged
under a chapter 11 plan on April 7, 2004. Judy G.Z. Liu, Esq., at
Weil, Gotshal & Manges LLP represents the Debtors in their
restructuring efforts. When the Company filed for protection from
its creditors, it listed $2,126,334,000 in assets and
$1,654,343,000 in debts. The Company emerged from bankruptcy on
April 7, 2004.
ADELPHIA COMMS: Sells Excess Assets to Four Buyers for $253,885
---------------------------------------------------------------
Pursuant to the Excess Assets Sale Procedures approved by the U.S.
Bankruptcy Court for the Southern District of New York, Adelphia
Communications Corp. and its debtor-affiliates inform the Court
that they will sell these assets to:
1. Property: 82 vehicles
Purchaser: The Asset Disposal Group
Agent: None
Amount: $101,051
Deposit: None
Appraised Value: No appraisal was conducted
2. Property: 94 vehicles
Purchaser: State Line Auto Auction
Agent: None
Amount: $110,464
Deposit: None
Appraised Value: No appraisal was conducted
3. Property: 49 vehicles
Purchaser: The Asset Disposal Group
Agent: None
Amount: $16,250
Deposit: None
Appraised Value: No appraisal was conducted
4. Property: 51 vehicles
Purchaser: E-Z Auto
Agent: None
Amount: $16,120
Deposit: None
Appraised Value: No appraisal was conducted
5. Property: 45 vehicles
Purchaser: E-Z Auto
Agent: None
Amount: $9,000
Deposit: None
Appraised Value: No appraisal was conducted
6. Property: Restaurant liquor license known as
PA Liquor License No. R-1009
Purchaser: Scott Major and Harry Deutschlander
Agent: Acker & Larson, PC
Amount: $1,000
Deposit: None
Appraised Value: No appraisal was conducted.
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than 200
affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No.
67; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AEGIS COMMS: Stockholders' Deficit Narrows to $9.3MM at June 30
---------------------------------------------------------------
Aegis Communications Group, Inc. (OTC Bulletin Board: AGIS), a
marketing services company that enables clients to make customer
contact efforts more profitable, reported its results for the
second quarter of 2004.
Revenues
Second quarter 2004 revenues were $26.3 million as compared to
$36.6 million for the same period last year, a decrease of $10.3
million, or 28.2%. For the six months ended June 30, 2004 revenues
were $55.9 million, 27.5% lower than the $77.0 million of revenue
generated during the prior year comparable period. The decline in
revenues for the three and six months ended June 30, 2004 versus
the prior year same period is primarily the result of an inbound
contract with a cable services provider that expired in the fourth
quarter of 2003 and was not renewed by the client as they made a
decision to consolidate their customer service into available in-
house capacity.
The impact on the Company's revenues accounted for approximately
49% of our total decrease quarter over quarter and 55% of our
total decrease for the six months ended June 30. Additionally, one
of its telecommunications clients (who is one of our two largest
clients) reduced transaction volumes and a client in the
membership services industry ramped down a campaign in the first
quarter of 2004.
Operating Loss
Operating loss for the second quarter of 2004 was $8.0 million as
compared to operating losses of $1.5 million in the prior year
second quarter. For the six months ended June 30, 2004 the Company
generated an operating loss of $11.8 million as compared to an
operating loss of $3.5 million for the six months ended June 30,
2003. The increase in net loss for the three and six months ended
June 30, 2004 versus the prior year same periods is primarily due
to the decline in revenues experienced during the period and the
recording of restructuring charges associated with the realignment
of the management team and the closing of four client service
centers.
Scot Brunke, President and CFO of Aegis commented, "While
disappointed with our second quarter operating results, we have
set in motion a number of strategic objectives to attain our goal
of returning the Company to profitability. During the second
quarter of 2004, we completed a number of significant strategic
objectives at Aegis. First, we completed the reorganization of our
management team and set a new direction for the Company. The
remaining severance expense of the former management team was
recognized during the quarter. Secondly, we took steps to right
size our capacity in our best markets. This was costly from an
asset write-off perspective, which is reflected in our results. We
believe that these moves will allow us to reduce expenses going
forward. Thirdly, and most importantly, we took steps to reduce
our reliance on certain outbound telemarketing campaigns. We will
see a significant decline in our outbound revenues related to
changes in legislation associated with marketing long distance
services. Aegis has historically relied on these services for a
significant part of its revenues. In the third quarter, as
previously announced, we lost over two million dollars per month
of revenue in this area. We believe the steps we have taken will
allow us to rely less on the outbound business and focus more on
strategic relationships to deliver a stronger product base to our
clients."
Net Loss
The Company incurred a net loss applicable to common shareholders
of approximately $8.4 million for the quarter ended June 30, 2004.
During the prior year comparable quarter, the Company incurred a
net loss applicable to common shareholders of approximately $5.0
million. For the six months ended June 30, 2004 the Company
generated a net loss available to common shareholders of $14.3
million as compared to $9.9 million for the six months ended June
30, 2003. The increase in net loss applicable to common
shareholders for the period ended June 30, 2004 versus the second
quarter of 2003 is due to the decline in revenues experienced
during the period, charges recorded in association with the
restructuring of the Company's management team, the impairment of
long-lived assets related to the closing of four client service
centers and the increase in non-cash interest expense due to the
additional amortization of the discount on notes payable.
Revenue Mix. Together, inbound customer relationship management
and non-voice & other revenues represented 67.7% of the Company's
revenues in the second quarter of 2004 versus 75.0% in the first
quarter of 2003. Outbound CRM revenues accounted for 32.3% of
total revenues for the three months ended June 30, 2004 as
compared to 25.0% in the comparable prior year period. The
increase in outbound CRM revenues for the first and second
quarters of 2004 is due to additional volume for an existing
client program.
Cost of Services. Costs of services vary substantially with
changes in revenue. For the quarter ended June 30, 2004, cost of
services decreased by approximately $6.2 million, to $19.4 million
versus the quarter ended June 30, 2003. Cost of services as a
percentage of services for the quarter ended June 30, 2004
increased to 73.9%, from 69.9% for the prior year comparable
period. For the six months ended June 30, 2004, cost of services
decreased $13.7 million to $40.6 million compared to the first six
months of 2003. As a percentage of sales, cost of services rose
over the same period, from 70.6% to 72.7%. The total decrease in
cost of sales experienced during the three and six months ended
June 30, 2004 is due to the reduction in revenue for the
comparable period.
Selling, General and Administrative. Selling, general and
administrative expenses, which include certain payroll costs,
employee benefits, rent expense and maintenance charges, among
other expenses, were reduced to $8.8 million in the quarter ended
June 30, 2004 versus $9.6 million the prior year quarter. As a
percentage of revenue, selling, general and administrative
expenses for the quarter ended June 30, 2004 were 33.7% as
compared to 26.2% for the prior year period. For the six months
ended June 30, 2004, selling, general and administrative expenses
were $17.8 million or 32.0% of revenues versus $20.1 million or
26.1% of revenues for the six months ended June 30, 2004. The
reduction in selling, general and administrative expenses over the
three and six months ended June 30, 2004 is primarily attributable
to the elimination of overhead costs due to the reduction of
headcount as well as improved management of our self-insured
workers compensation plan during the same period. The increase as
a percentage of revenue is primarily due to the decrease in
revenue period over period.
Non-cash Interest Expense. Non-cash interest expense decreased to
$0.3 million in the quarter ended June 30, 2004, from $0.4 million
in the quarter ended June 30, 2003. For the six months ended June
30, 2004 and 2003, non-cash interest expense was $2.1 and $0.9
million, respectively. Non-cash interest for the three and six
months ended June 30, 2004, represents interest expense incurred
on the Deutsche Bank and Essar notes and the $2.0 million in
amortization of the discount on notes payable. On both of the
notes, the unpaid interest is added to the principal of the
balance of the notes quarterly. For the three and six months ended
June 30, 2003, non-cash interest expense represents interest
expense incurred on two subordinated notes. In accordance with the
terms of the November 5, 2003, agreement with Deutsche Bank and
Essar, the Company was required to repay or otherwise retire its
obligations to various lenders from the proceeds of this
transaction (and, to the extent the subordinated debt was not paid
off, the holders of the subordinated debt discharged the debt and
released the Company from any further liability under their
promissory notes).
Restructuring Charges. During the quarter ended March 31 2004, the
Company approved a plan to restructure the management team. The
restructuring plan was designed to bring the Company's
infrastructure in-line with the current volume and business
environment. Related to these actions, the Company recorded $0.7
million in severance costs during the first quarter of 2004 and an
additional $0.3 million in severance costs during the quarter
ending June 30, 2004. Additionally, during the quarter ended June
30, 2004, the Company recorded $3.6 million in severance and
impairment charges as part of a plan to close four client service
centers. The impairment charge of $3.3 million was recorded for
the amount by which the carrying amount of the property and
equipment at these client service centers exceeded fair value.
Severance in the amount of $0.05 million was accrued and $0.04
million paid during the quarter as a result of the restructuring
plan. The Company plans to sell certain of the equipment to a
third party for $0.2 million. These assets have been have been
classified as held-for-sale in the accompanying consolidated
balance sheet. The Company anticipates recording additional
restructuring charges associated with the closing of the client
service centers in the quarter ending September 30, 2004.
Depreciation and Amortization. Depreciation and amortization
expenses decreased $0.6 million, in the quarter ended June 30,
2004 as compared to the quarter ended June 30, 2003. As a
percentage of revenue, depreciation and amortization expenses were
9.0% in the quarter ended June 30, 2004 versus 8.1% in the quarter
ended June 30, 2003, primarily due to the decrease in revenue. For
the six months ended June 30, 2004 and June 30, 2003 depreciation
and amortization expenses were $4.9 million or 8.7% of revenues
and $6.1 million or 7.9% of revenues, respectively. The reduction
in depreciation expense is due to the effects of reduced capital
spending coupled with more mature assets becoming fully
depreciated.
Income Tax Provision. The Company has not provided an income tax
benefit for the operating losses incurred during the first and
second quarters of 2003 and 2004, as such benefit would exceed the
projected realizable deferred tax asset.
Cash and liquidity. Cash and cash equivalents (excluding
restricted cash) were $0.06 million at June 30, 2004 and $1.7
million at December 31, 2003. Working capital totaled a deficit of
$3.2 million and a surplus of $5.7 million at the end of the same
periods. The change in working capital is primarily attributable
to the decrease in accounts receivable and the decrease in
restricted cash from December 31, 2003 to June 30, 2004.
Restricted cash at December 31, 2003, was composed of two cash
collateralized outstanding irrevocable letters of credit. These
letters totaled approximately $4.6 million in value and were
maintained as security for the Company's self- insured portion of
its workers compensation insurance program and to support
licensing requirements related to certain contractual obligations
entered into by the Company. The Company has subsequently replaced
all but $0.4 million of the letters under the new Loan Agreement.
Cash at December 31, 2003 was used to pay down the notes payable
owed to Deutsche Bank and Essar.
On January 26, 2004, the Company entered into a new credit
agreement with Wells Fargo Foothill that will allow the Company to
borrow up to $25.0 million, with a maturity date of January 26,
2007. The Company was not in compliance with covenants under the
new credit agreement for the two-month period ended February 29,
2004. On March 30, 2004, the Company entered into an amended
agreement, waiving all defaults and revising covenants. The
maturity date of the amended agreement has remained unchanged.
Outstanding bank borrowings under the line of credit at June 30,
2004 were $4.4 million.
The Company was not in compliance with the amended EBITDA
covenants common to the Loan Agreement and amended Notes for the
periods ending April 30, May 31, and June 30, 2004. As such, it
represented a default under these agreements and additionally, a
cross default under the Loan Agreement. On August 23, 2004, the
Company executed amended agreements with revised EBITDA and
capital expenditure covenants and received waivers from Foothill,
Deutsche Bank and Essar for all defaults in the Loan Agreement and
amended Notes. Without the waivers and amended agreements dated
August 23, 2004, the Company would not have been in compliance
with the revised EBITDA and capital expenditure covenants for the
Loan Agreement and the Notes at July 31, 2004. With the waivers
and amended agreements dated August 23, 2004, the Company was in
compliance with all covenants.
About Aegis
Aegis Communications Group, Inc. is a marketing services company
that enables clients to make customer contact efforts more
profitable. Aegis' services are provided to a blue chip,
multinational client portfolio through a network of client service
centers employing approximately 2,600 people and utilizing
approximately 3,600 production workstations. Further information
regarding Aegis and its services can be found on its website at
http://www.aegiscomgroup.com/
At June 30, 2004, Aegis Communications' balance sheet showed a
$9,383,000 stockholders' deficit, compared to a $26,449,000
deficit at December 31, 2003.
AIR CANADA: Court Extends Ernst & Young's Appointment as Monitor
----------------------------------------------------------------
Mr. Justice Farley rules that the appointment of Ernst &
Young, Inc., as Monitor and as an officer of the CCAA Court:
(1) will not expire or terminate on the Plan Implementation
Date (slated for September 29 or 30, 2004); and
(2) will continue for the purposes of and to be effective until
the completion by the Monitor of:
(a) all of its duties as Disbursing Agent;
(b) all of its duties in relation to the claims procedure
and all related matters as set out in the Claims
Procedure Orders; and
(c) all other matters for which it is responsible in the
Applicants' restructuring and pursuant to the CCAA
Court's orders issued from time to time.
The Monitor will not be liable for any act or omission on its
part, including with respect to any reliance thereon, including
without limitation, any act or omission pertaining to the
discharge of its duties under the Plan or the Sanction Order as
Disbursing Agent or with respect to any other duties or
obligations in respect of the implementation of the Plan, save and
except for gross negligence or willful misconduct on its part.
The Monitor will be discharged of its duties and obligations
pursuant to the Plan, the Sanction Order, the Initial CCAA Order,
the Claims Procedure Orders and other orders made in the
Applicants' proceeding from time to time, upon the filing with the
CCAA Court of a certificate confirming that all of the Monitor's
duties are completed.
The indemnity established by the Initial CCAA Order with respect
to the Monitor and its counsel will continue in full force and
effect until the certificate is filed with the CCAA Court.
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. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AIR CANADA: TSX Halts Trading in Carrier's Shares
-------------------------------------------------
The common shares (Symbol: AC) and the Class A Non-Voting Shares
(Symbol: AC.A) of Air Canada was suspended from trading effective
at 5:01 p.m. on Wednesday, August 25, 2004 for failure to meet the
continued listing requirements of Toronto Stock Exchange.
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.
ALLEGHENY REBAR: Voluntary Chapter 11 Case Summary
--------------------------------------------------
Debtor: Allegheny Rebar, Inc.
#10 Allegheny Square
Glassport, Pennsylvania 15045
Bankruptcy Case No.: 04-31042
Chapter 11 Petition Date: August 20, 2004
Court: Western District of Pennsylvania (Pittsburgh)
Judge: Bernard Markovitz
Debtor's Counsel: Joseph Peter Nigro, Esq.
Nigro & Associates LLC
Two Gateway Center, 17th Floor
Pittsburgh, PA 15222
Tel: 412-471-8118
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20-largest creditors.
ALLIED HOLDINGS: Expected Full-Year Loss Prompts S&P's Junk Rating
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its senior unsecured
debt rating on Allied Holdings, Inc., to 'CCC+' from 'B-'. At the
same time, Standard & Poor's affirmed its 'B' corporate credit
rating on the company and revised the rating outlook to negative
from stable. The Decatur, Georgia-based automobile hauling
company has about $300 million of lease-adjusted debt.
"The downgrade of the company's $150 million senior unsecured
notes and outlook change reflect Allied's poor financial
performance during the first half of 2004 and management's
expectation of a full-year loss. These factors have resulted in
additional borrowings under its secured bank facility and a
gradual increase in the proportion of secured debt and other
secured claims, such as letters of credit drawn under the
company's bank facility, that would rank ahead of senior unsecured
creditors in the event of bankruptcy," said Standard & Poor's
credit analyst Kenneth L. Farer. The rating actions are not
related to the company's announcement last week that it would
delay filing its second-quarter 2004 10Q report.
During the first half of 2004, the company reported higher
operating costs associated with fuel prices, employee and retiree
benefits, higher-than-expected maintenance costs, and increased
insurance reserves. These higher costs resulted in operating
income of only $3.2 million for the first half of 2004, compared
with $5.8 million for the same period of 2003, and a reduction in
key credit measures including EBITDA interest coverage of 1.9x and
funds from operations to debt of 14%. Year-over-year costs during
the second half of 2004 will be negatively affected by higher fuel
prices and the contractual increase in benefit contributions.
Ratings on Allied Holdings reflect its:
* weak financial flexibility,
* aggressively leveraged capital structure,
* concentrated end-customer base, and
* participation in the capital-intensive trucking industry.
Allied's dominant position as the largest North American motor
carrier of new vehicles partially offsets these negative credit
aspects. Although Allied's specialized fleet delivers
approximately 60% of new vehicles in North America, it faces
competition from other specialty carriers for short-distance trips
and major railroads for long-distance trips. The company also
faces continued pricing pressure from the large auto
manufacturers, which represent over 85% of the company's revenues.
Ratings could be lowered if credit measures deteriorate further
due to revenue pressures from decreased automobile production
volumes or continued high operating costs and if liquidity becomes
further constrained.
AMERICAN BUSINESS: Creditors Swap Old Notes for New Debt & Equity
-----------------------------------------------------------------
American Business Financial Services, Inc. (ABFS; NASDAQ:ABFI)
exchanged approximately $90.9 million of its investment notes for
approximately $43.4 million of senior collateralized subordinated
notes and approximately 47.5 million shares of Series A
convertible preferred stock, which began on May 14, 2004 and ended
on August 23, 2004.
From August 1, 2004 to August 23, 2004, the Company exchanged
approximately $5.0 million of its investment notes for
approximately $2.5 million of senior collateralized subordinated
notes and approximately 2.5 million shares of Series A convertible
preferred stock.
In total, during the Company's two exchange offers (ending
February 6, 2004 and August 23, 2004 respectively), approximately
$208.1 million of its investment notes were exchanged for
approximately $98.8 million of senior collateralized subordinated
notes and approximately 109.3 million shares of Series A
convertible preferred stock.
American Business Financial Services, Inc. is a diversified
financial services organization operating mainly in the eastern
and central portions of the United States. Recent expansion has
positioned the Company to increase its operations in the western
portion of the United States, especially California and Texas.
Through its principal direct and indirect subsidiaries, the
Company currently originates, sells and services home equity loans
through a combination of channels, including a national processing
center located at its centralized operating office in
Philadelphia, Pennsylvania. The Company also processes and
purchases home equity loans from other financial institutions
through its Bank Alliance Services program.
In the nine-month period ending March 31, 2004, American Business
Financial Services, Inc., reported heavy losses -- an $84 million
net loss on $72 million of revenues -- causing 75% of shareholder
to evaporate.
AMKOR TECH: Acquires 93% Unitive & 60% UST Interests for $48 Mil.
-----------------------------------------------------------------
Amkor Technology, Inc. (Nasdaq: AMKR) has completed the
acquisition of North Carolina-based Unitive, Inc. together with a
majority interest in Unitive Semiconductor Taiwan Corporation for
$48 million, the assumption of approximately $23 million in debt
and performance based earn-outs of up to $57 million.
At closing, Amkor acquired approximately 60% of UST and
approximately 93% of Unitive, the remaining 7% of Unitive to be
acquired in a subsequent restructuring already included in the
above purchase price. Unitive and UST are among the world's
leading providers of wafer level technologies and services for
flip chip and wafer level packaging applications. Unitive and UST
will operate as subsidiaries of Amkor.
With these acquisitions, Amkor gains industry-leading technology
for electroplated wafer bumping and turnkey wafer level "chip
scale" packaging, together with installed and operationally
qualified, high volume 200mm and 300mm electroplated wafer bumping
and wafer level packaging manufacturing operations.
Amkor made an initial payment of $32 million and will pay the $16
million balance in one year. In addition, Amkor has a call option
to acquire the remaining interest of approximately 40% of UST at
any time over the next 18 months for NT$611 million, or
approximately $18 million. As previously announced, the
transaction provides for performance based earn-outs that are
estimated at an aggregate of $57 million payable one year from
closing, a maximum of $55 million of which is payable in cash or
stock at Amkor's discretion and approximately $2 million of which
is payable in cash.
"We are excited about the growth opportunities in flip chip and
wafer level packaging and look forward to integrating Unitive's
and UST's technology and production capabilities with those of
Amkor," said Oleg Khaykin, Amkor's executive vice president,
corporate development.
The current Unitive and UST management teams in North Carolina and
Taiwan will remain in place. Unitive will continue to focus on
development of advanced wafer level processing technologies and
will offer turnkey wafer bumping and wafer level packaging
services. UST will provide electroplated wafer bumping and,
through integration with Amkor's operations, a complete suite of
wafer level processing, assembly and test services.
About Unitive
Unitive is a leading independent developer of electroplated wafer
bumping technology and earlier this year announced the industry's
first electroplated lead-free wafer bumping process. Unitive also
operates the industry's most advanced turnkey capability for wafer
level chip packaging, providing an integrated suite of services,
including design, wafer bumping, multi-layer redistribution,
backgrind, dicing, probe, tape & reel, backside laminate &
metallization and laser marking. In 2003 Unitive introduced the
world's first independent 300mm electroplated wafer bumping
production line at its Hsinchu, Taiwan manufacturing facility.
About Amkor
Amkor Technology, Inc. (Nasdaq: AMKR) is a leading provider of
contract semiconductor assembly and test services. The company
offers semiconductor companies and electronics OEMs a complete set
of microelectronic design, manufacturing and support services.
More information on Amkor is available from the company's SEC
filings and on Amkor's web site: http://www.amkor.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, Amkor
Technology, Inc. reports:
"Our ongoing primary cash needs are for debt service (principally
interest), equipment purchases and working capital. Our cash and
cash equivalents balance as of June 30, 2004 was $294.6 million,
and we had $28.4 million available under our $30.0 million senior
secured credit facility. The amount available under our senior
secured credit facility at June 30, 2004 was reduced by $1.6
million related to outstanding letters of credit. We believe that
our existing cash balances, available credit lines, cash flow from
operations and available equipment lease financing will be
sufficient to meet our projected capital expenditures, debt
service and working capital requirements for at least the next
twelve months. Although it is not our current intention to do so,
in the event we decide to consummate additional business
combinations, we may require additional cash and we cannot assure
that additional financing will be available when we need it or, if
available, that it will be available on satisfactory terms. In
addition, the terms of the senior notes and senior subordinated
notes significantly reduce our ability to incur additional debt.
Failure to obtain any such required additional financing could
have a material adverse effect on us."
AMWEST INSURANCE: Creditors Must File Claims by November 15
-----------------------------------------------------------
The Chapter 7 Trustee overseeing the liquidation of Amwest
Insurance Group, Inc., thinks sufficient assets may become
available for a distribution to unsecured creditors from the
Debtor's estate. In accordance with Rule 3002(c)(5), the United
States Bankruptcy Court for the Central District of California
tells Amwest's creditors to file written proofs of claim on or
before November 15, 2004, if they want to receive any
distribution.
Proof of Claim forms must be delivered to:
United States Bankruptcy Court
Central District of California
21041 Burbank Boulevard
Woodland Hills, CA 91367
Amwest Insurance Group, Inc., filed for chapter 11 protection on
July 24, 2001 (Bankr. C.D. Calif. Case No. 01-17081) and the case
subsequently converted to a chapter 7 liquidation. Jose A.
Velasco, Esq., at Malhotra, Malhotra & Velasco, represents
Amwest. When the company filed for bankruptcy protection, it
reported $8,388,914 in assets available to satisfy liabilities
totaling $18,041,915.
APPLIED EXTRUSION: Six Big Bondholders Like Chapter 11 Prepack
--------------------------------------------------------------
Six bondholders holding over 70% in aggregate outstanding
principal amount of the Company's 10-3/4% senior notes have
executed a voting agreement, which requires them and any of their
subsequent transferees to vote in favor of Applied Extrusion
Technologies, Inc.'s (NASDAQ NMS:AETC) prepackaged plan of
reorganization, provided that the prepackaged plan is consistent
with the terms of the agreement in principle reached with the
Company at the end of July and other conditions set forth in the
voting agreement are met.
The voting agreement also requires the Company to effectuate the
prepackaged plan of reorganization, subject to the conditions set
forth in the voting agreement. The Company had executed proposals
with GE Commercial Finance to provide financing during the
prepackaged chapter 11 case and upon consummation of the
recapitalization plan.
Equity-for-Debt Swap
As previously disclosed, the recapitalization will be accomplished
through a prepackaged chapter 11 plan of reorganization and will
involve the exchange of the 10-3/4% senior notes by the
bondholders for 100% of the common equity of the reorganized
Company and new senior notes to be issued by the reorganized
Company. Under the prepackaged chapter 11 plan, the Company will
pay its trade creditors in full on a current basis.
Additionally, beneficial holders of senior notes whose holdings
fall below a certain threshold aggregate principal amount will
receive, in exchange for their senior notes, cash payments equal
to the value of the new common equity and new senior notes to be
distributed to the larger beneficial holders of senior notes,
subject to certain conditions being satisfied. All of the
Company's existing stock will be canceled and the existing
stockholders will receive a ratable portion of $2.5 million in
cash, subject to certain conditions being satisfied.
As reported in the Troubled Company Reporter on August 2, 2004,
Applied Extrusion Technologies, Inc. did not pay the interest on
the senior notes that became due on July 1, 2004.
Additional Votes Required
To confirm a plan of reorganization, Sec. 1126(c) of the
Bankruptcy Code requires the Plan Proponent to obtain acceptances,
on a class-by-class basis, from creditors that hold as least two-
thirds in amount and more than one-half in number of the claims in
each class. The 70% acceptance based on dollar amount satisfies
the first part of this two-prong test. Six bondholder
acceptances, if there are more than a dozen record holders,
doesn't satisfy the numerosity test.
The Company expects to commence the solicitation of votes from the
beneficial holders of its senior notes by the middle of September,
and the prepackaged chapter 11 plan to be confirmed by the
bankruptcy court and consummated in mid- to late-fall of this
year.
Trade Creditors Unaffected
Under the prepackaged chapter 11 plan, the Company will pay its
trade creditors in full on a current basis.
In addition, the reorganized Company is expected to become a non-
reporting company pursuant to the U.S. securities laws; as a
result, it is anticipated that there will be restrictions on
trading the securities of the reorganized Company.
The Company expects to commence the solicitation of votes from the
holders of its senior notes before the end of August. If
sufficient votes for a prepackaged chapter 11 plan are obtained
from the holders of its senior notes, the Company will file a
chapter 11 petition and seek to have the plan confirmed by the
bankruptcy court. The Company does not anticipate being subject to
the bankruptcy for more than sixty days. Under U.S. bankruptcy
law, at least one-half in number and two-thirds in principal
amount of an impaired class entitled to vote on a chapter 11 plan,
in both cases counting only those claims actually voting on the
plan, must vote in favor of the plan. Although the holders of at
least 70% of the aggregate outstanding principal amount of the
senior notes have indicated that they would agree to vote in favor
of the plan, there can be no assurance that sufficient votes of
holders of senior notes, with respect to both the number and
principal amount requirements, will be obtained to confirm a
prepackaged chapter 11 plan. In addition, consummation of the
recapitalization is subject to the completion of definitive
documentation and the satisfaction of customary conditions. The
Company expects the prepackaged chapter 11 plan to be confirmed by
the bankruptcy court and consummated in mid- to late-fall of this
year.
The Company has received financing proposals from various lenders,
including GE Commercial Finance, for financing during the chapter
11 case and for exit financing. The Company expects to have
commitments with respect to such financings prior to the time it
commences the solicitation of votes on its plan from the holders
of its senior notes. In addition, the Company's bank group, led by
GE Commercial Finance, has agreed to waive any event of default
arising under its current credit facility with respect to the non-
payment of interest on its senior notes through September 1, 2004,
which date may be extended by the lenders.
Amin J. Khoury, Chairman and Chief Executive Officer of the
Company commented: "We are very pleased that we have been able to
reach agreement with holders of a substantial majority of our
senior notes. This recapitalization will significantly reduce debt
and restore the long-term financial stability of the Company."
Applied Extrusion Technologies, Inc. is a leading North American
developer and manufacturer of specialized oriented polypropylene
(OPP) films used primarily in consumer products labeling and
flexible packaging applications.
ARCHIBALD CANDY: Paragon Capital Completes Laura Secord Asset Sale
------------------------------------------------------------------
Paragon Capital Partners, a merchant banking firm advising
Archibald Candy Corporation on its bankruptcy and divestiture
transactions, has completed the sale of Laura Secord to Gordon
Brothers Group, LLC.
Pursuant to a dramatic and spirited bidding process, Gordon
Brothers emerged as the winning bidder, topping a stalking-horse
bid previously submitted by M&M Meat Shops, Canada's largest
retailer of specialty frozen foods. Michael Levy, a partner with
Paragon in New York City, noted, "Gordon Brothers' expertise,
resources and vision will enable it to capitalize on Laura
Secord's core strengths as it pursues several exciting and
significant growth opportunities. We congratulate the Gordon
Brothers team, and expect them to be highly successful in building
Canada's leading marketer and retailer of boxed chocolates and
scooped ice cream."
According to Rick Anglin, Archibald Candy's Chief Financial
Officer, "The sale of Laura Secord for more than 18.7x FY2003
EBITDA marks Paragon's second tremendous success in a row for
Archibald's creditors. In April 2004, Paragon surpassed all
valuation expectations with the sale of Fannie May and Fanny
Farmer for more than twice the initial stalking horse bid.
Paragon's dynamic approach to maximizing value has enabled our
senior lenders to recover 100% of their outstanding debt, and will
enable Archibald's bondholders to recover dramatically higher
proceeds as compared to initial expectations." Archibald's major
bondholders include affiliates of Delaware Street Capital, CS
First Boston, Royal Bank of Canada, Putnam Investments and Sankaty
Advisors.
"We have been exceptionally impressed by Paragon's capabilities
and commitment to these transactions," said Andy Bluhm, head of
Delaware Street Capital which is Archibald's largest bondholder.
"Paragon's skills, deal instincts and intense focus enabled the
bondholder group to achieve a great recovery."
Earlier in the year, Paragon conducted another highly competitive
sale process for Archibald which culminated in the divestiture of
Chicago-based Fannie May and Fanny Farmer to Alpine Confections,
Inc. for approximately $38.9 million. This final purchase price
compared to the initial stalking horse bid of $18 million.
Including proceeds generated from the sale of Laura Secord,
Archibald's bondholders will receive nearly twice the proceeds
initially expected when the company commenced Chapter 11
bankruptcy proceedings on January 28, 2004.
Neal White, lead M&A counsel for Archibald from McDermott, Will &
Emery LLP, remarked, "Paragon proactively managed every step of
each transaction in order to keep potential buyers on parallel
tracks, enabling Archibald to engage in simultaneous negotiations
with multiple parties. In addition to conducting a highly
organized sale process, Paragon was able to anticipate issues
while facilitating coordination among Archibald's internal
constituencies, enabling the transaction team to stay steps ahead
of potential bidders."
Mark Thomas, Archibald's lead bankruptcy counsel from Jenner &
Block, added, "Paragon used its experience with large and complex
M&A transactions to develop some innovative techniques for
maximizing value in a bankruptcy context. Each of the Archibald
divestitures culminated in a competitive, in-person auction where
bidders used both price and contract terms to improve their
offers. Bankruptcy auctions are often impeded when material
contractual provisions must be considered. Paragon's development
of a real-time bid analysis, projected on a screen to all
competing bidders, represented a major breakthrough which
stimulated bidding. The ability to provide instantaneous valuation
updates to bidders, reflecting changes in terms as well as price,
provided transparency and eliminated complexities that often chill
a bidding process. Vigorous bidding led to the elimination of
representations, warranties, and closing conditions, resulting in
the best possible outcome for Archibald's creditors."
Michael Levy remarked, "The sale of Laura Secord concludes our
engagement with Archibald's bankruptcy, restructuring, and
divestiture transactions. We are pleased that we were able to
orchestrate a favorable result in each of Archibald's divestiture
transactions, achieving high valuations relative to industry
precedents as well as the expectations of Archibald's
bondholders."
About Paragon
Founded by David Adler and Michael Levy, Paragon Capital Partners,
LLC is a merchant bank based in New York City that provides
strategic and financial advice in connection with mergers,
acquisitions, exclusive sales, divestitures, takeover defense,
financings, recapitalizations, restructurings, and bankruptcy
related transactions. Paragon advises public and private
companies, divisions of Fortune 500 companies, family-owned
companies, private equity firms, leading investors, boards of
directors, special committees and bondholder/creditor committees.
In addition, through its Strategic Insight Fund, Paragon invests
in public and private securities in targeted industry sectors
where it identifies - or can facilitate - potential catalysts for
value creation.
About Gordon Brothers
Founded in 1903, Gordon Brothers Group, LLC --
http://www.gordonbrothers.com/-- provides global advisory,
operating and financial services to companies at times of growth
or restructuring. Through its GB Palladin Capital division, Gordon
Brothers takes a hands-on approach to investing, using its
capital, industry knowledge and expertise to help companies and
managers achieve their goals. The principals of Gordon Brothers
and GB Palladin have served as active investors, directors and
executives in numerous public and private corporations. As such,
they are in a unique position to work with managers on growth or
brand repositioning through improved merchandising and marketing,
more efficient operations and financial management.
About Laura Secord
Founded in 1913, Laura Secord operates 160 retail shops,
distributes its products in more than 2,000 third party retail
outlets across Canada and has 1,600 employees. Laura Secord's
business is conducted by Archibald Candy (Canada) Corporation, a
wholly owned subsidiary of Laura Secord Holdings Corporation,
which is a wholly owned subsidiary of Archibald U.S. Archibald
Candy (Canada) Corporation is not a direct party to Archibald
U.S.'s bankruptcy proceeding. Additional information on Laura
Secord can be found at http://www.laurasecord.ca/
ARROW ELECTRONICS: Fitch Affirms BB Senior Secured Debt Rating
--------------------------------------------------------------
Fitch Ratings has affirmed the 'BB' ratings on Arrow Electronics,
Inc.'s senior unsecured debt. The Rating Outlook is revised to
Positive from Stable. Approximately $1.5 billion of public debt
securities are affected by Fitch's action.
The Rating Outlook revision reflects Arrow's:
* improving credit protection measures and strengthened balance
sheet from greater than expected debt reduction;
* operating margin expansion, driven by higher utilization
rates and cost savings related to ongoing restructuring
activities, and
* an overall improved operating environment led by strong
semiconductor demand.
The ratings continue to consider Arrow's exposure to semiconductor
demand, which is characterized by cyclicality and volatile cash
flows, the ongoing challenges information technology distributors
face in meaningfully expanding operating margins, and the
company's historical appetite for debt financed acquisitions
(albeit few potential acquisition targets remain). Positively,
Fitch's ratings reflect Arrow's leading industry position,
focusing primarily on a diversified small- to medium- size
customer base, its global footprint, including a strong presence
in Asia-Pacific, a region providing above average growth
prospects. Arrow's adequate liquidity position with respect to
upcoming maturities and cash required to operate within the
context of a rational demand environment also support the rating.
Credit protection measures have improved over the past year,
mainly as a result of repaying approximately $800 million in debt,
consisting primarily of approximately $250 million of 8.7% senior
notes due 2005 and approximately $260 million in accreted value of
zero coupon convertible debentures due 2021, but putable in 2006,
during the first half of fiscal-year 2004. Debt reduction was
funded partially with cash on the balance sheet with the remainder
funded from proceeds resulting from the $310 million equity
issuance completed in Feb-04. Fitch estimates total leverage
(total debt-to-EBITDA) decreased to 3.7 times(x) as of June 30,
2004, from 9.1x for the previous year, while interest coverage
(EBITDA-to-interest incurred) increased to 3.9x from 2.5x over the
same period.
Arrow's liquidity is adequate with approximately $260 million in
cash and cash equivalents, which is also supported by a
$450 million senior unsecured revolving bank credit facility and a
$550 million A/R securitization facility, both of which expire in
2006 and were completely undrawn as of June 30, 2004. Arrow has
generated positive annual free cash flow since FY 2001, primarily
from lower working capital requirements, and free cash flow was
approximately $75 million for the LTM ended June 30, 2004. Fitch
believes Arrow will be free cash flow neutral to modestly negative
for FY 2004 despite using approximately $171 million of cash in
the first half of 2004 to support revenue growth. Total debt was
approximately $1.6 billion as of June 30, 2004. While Fitch
believes Arrow's maturities are manageable, approximately
$360 million of the aforementioned zero-coupon convertible
debentures due 2021 are putable in 2006 and approximately
$200 million 7% senior notes are due in 2007. Subsequent
maturities include approximately $200 million 9.15% senior
debentures due 2010, $350 million 6.875% notes due 2013,
approximately $200 million 6.875% senior debentures due 2018, and
approximately $200 million 7.5% senior debentures due 2027.
AVOTUS CORP: Stockholders' Deficit Narrows to C$1MM at June 30
--------------------------------------------------------------
Avotus Corporation (TSX Venture: AVS) reported its financial
results for the second quarter of fiscal 2004. Note that all
results are reported in Canadian dollars unless otherwise noted.
For the second quarter of 2004 revenue was $8.3 million compared
to $8.7 million for the same period last year. EBITDA(1) was
$551,000 vs. $465,000 for the same period in 2003, and the net
income was $71,000 vs. a net loss of ($20.5 million) in 2003. In
accordance with Canadian GAAP, because the company was in a loss
position for the second quarter of 2003 the loss per share of
($1.30) for 2003 does not take into account the effect of
conversion of the options and warrants into common shares.
Included in net income and EBITDA for the second quarter of 2004
is $241,000 of expense related to the adoption on January 1, 2004
of the new accounting standard requiring expensing of all stock-
based compensation to employees. There was no stock-based
compensation expense recorded in 2003. With the exclusion of the
stock-based compensation charges, EBITDA for the second quarter of
2004 would have been $792,000, a 70% increase from the same
quarter in the prior year.
Revenue for the second quarter of 2003 included $1.6 million of
non-recurring revenue related to fees paid by a technology partner
for the license rights to certain software embedded in its
products that was developed by Avotus. The loss for 2003 also
included a goodwill impairment charge of $18.6 million and
approximately $2.0 million of interest on convertible debentures.
Revenues from normal business operations increased 17% to $8.3
million in 2004 vs. $7.1 million in 2003, excluding the $1.6
million of non-recurring revenue earned in 2003. The increase in
revenue described above was primarily attributable to strong
second quarter license, service and maintenance revenue from the
Company's telecom expense management operation, which was obtained
through the business acquisition in February 2004.
Expressed in U.S. dollars, the second quarter of 2004 revenue was
US$6.2 million as compared to US$6.5 million in the prior year.
EBITDA was US$413,000 vs. US$345,000 in 2003, and the net income
was US$53,000 or US$0.00 per share compared with a net loss of
(US$15.2 million) or (US$0.96) per share in 2003.
In addition, the Company has established a US$4.0 million bank
operating facility with Silicon Valley Bank. SVB is headquartered
in Santa Clara, California, has 26 regional offices in the United
States and is a member of global banking alliances which allows it
to provide international financial services.
Key accomplishments in the second quarter for Avotus included the
following:
-- Launched telecom expense management solutions to North
American markets through the Company's field sales
organization;
-- Rolled out Web-based and field-based seminar programs;
-- Increased orders in the second quarter of 2004 by 27% over
the orders booked in the first quarter of 2004 including
telecom expense management orders with several major US
financial institutions, valued at $1.4 million; and
-- Developed enhanced versions of industry-leading ICM Expense
Management solutions including support for international
telecommunications operations as well as multiple currency
support within a single, integrated platform.
"We are delighted to report positive EBITDA and a 17% increase in
ordinary business revenues excluding the 2003 non-recurring
revenue," stated Fred Lizza, president and CEO of Avotus. "Late
last year, we brought our 'Intelligent Communications Management'
(ICM) integrated solutions to the market, and have been working
aggressively to launch products and services, build pipeline, and
solidify our competitive advantage with ICM. This quarter's
results show we are making solid progress in all those efforts."
Avotus' consolidated financial statements for the three and six-
month period ended June 30, 2004 are available at
http://www.avotus.com/
About Avotus
Avotus provides solutions that dramatically reduce the cost and
complexity of enterprise communications. Intelligent
Communications Management is Avotus' unique model for a single,
actionable environment that enables any company to bring together
decision-critical information about communications expense
management, procurement and systems usage for wired, wireless and
VoIP systems. Deployed as an onsite or hosted application, or as a
completely outsourced value-added solution, Avotus enables
dramatic savings while improving productivity and efficiency.
Avotus is empowering Fortune 500 companies as well as thousands of
other organizations worldwide to gain insight into and control
over their communications environment. Its solutions are strongly
supported and endorsed by industry-leading partners such as Avaya,
Cisco, and Nortel. For more information, visit http://www.avotus.com/
At June 30, 2004, Avotus Corporation's balance sheet showed a
C$1,311,511 stockholders' deficit, compared to a C$16,881,103
deficit at December 31, 2003.
BIODELIVERY SCIENCES: Inks New Credit Pact with Hopkins Capital
---------------------------------------------------------------
BioDelivery Sciences International (Nasdaq:BDSI) (Nasdaq:BDSIW)
has terminated the previously announced Facility Credit Agreement,
dated August 2, 2004, for up to $4 million with the Hopkins
Capital Group II, LLC, an affiliated entity of BDSI, which is
controlled and partially-owned by Dr. Francis E. O'Donnell, Jr.,
BDSI's Chairman and CEO, and has entered into a binding,
enforceable letter of intent with HCG for an Equity Line of Credit
Agreement to replace the Facility.
The letter of intent is fully binding on HCG, and the parties have
agreed to enter into further appropriate documentation to
memorialize their agreement by September 3, 2004. The Equity Line
Agreement has been approved by BDSI's board of directors.
Pursuant to the Equity Line Agreement, HCG will agree, as
requested by BDSI, to invest up to $4,000,000 in BDSI from August
23, 2004 through March 31, 2006 in consideration of shares of a
newly created class of Series B Convertible Preferred Stock of
BDSI. The holders of the Series B Preferred will be entitled to
receive a 4.5% annual cumulative dividend. In addition, the Series
B Preferred will be convertible at any time as of or after April
1, 2006 at a price equal to $4.25. The Series B Preferred will
rank senior to shares of BDSI's common stock and BDSI's Series A
Non-Voting Convertible Preferred Stock, will have registration
rights, dividend and liquidation preferences and certain other
privileges. The Series B Preferred cannot be redeemed at the
election of HCG, but BDSI has the right, in its discretion at any
time, to redeem the shares of Series B Preferred stock for cash
equal to the face value of the amount invested under the Equity
Line Agreement plus accrued dividends thereon.
BDSI also announced that $1,250,000 was drawn down under the
Equity Line Agreement as of August 24, 2004, the proceeds of which
have been used by the company in connection with the closing of
its acquisition of Arius Pharmaceuticals.
Chairman and CEO Dr. Francis E. O'Donnell, Jr., who is also
Managing Partner of The Hopkins Capital Group, stated,
"Circumstances have required that HCG and BDSI restructure their
recent additional financing arrangement. However, it must be
stressed that both HCG and BDSI believe that the terms of the
Equity Line Agreement are economically similar to the previous
debt facility, if not more favorable to BDSI, and that the
restructuring, although necessary, will still enable BDSI to
accomplish all of the same goals as the prior arrangement."
Dr. O'Donnell continued, "HCG remains committed to its investment
in BDSI, as evidenced by the fact that the new Series B Preferred
Stock is convertible only at the $4.25 level, which was the price
of BDSI's initial public offering. As such, this equity financing
maintains BDSI's access to cash to finance operations that existed
under the debt facility, but has the added benefit of
strengthening BDSI's balance sheet while at the same time not
causing dilution to BDSI's stockholders."
Separately, BDSI announced that as of the quarter ended March 31,
2004, it was out of compliance with the cash to total liabilities
ratio covenant contained in its $1 million Loan Agreement with
Gold Bank. Such loan was entered into by BDSI in April 2003 and
has been used to finance equipment at BDSI's formulation facility
in Newark, New Jersey. There is presently approximately $800,000
due under this facility, which is secured by BDSI's equipment in
Newark. BDSI also announced that since May 14, 2004 it has been
operating under a Limited Waiver and Forbearance Agreement with
Gold Bank pursuant to which Gold Bank agreed, in consideration of
a $10,000 fee payment, to waive compliance with the cash to
liabilities covenant through June 30, which forbearance period has
been extended to September 30, 2004 by the payment of subsequent
$5,000 monthly payments. As previously announced in its Form 10-
QSB for the quarter ended June 30, 2004, BDSI is actively seeking
ways to refinance and repay the Gold Bank debt.
Gold Bank has recently expressed concerns about the previous
structure of the HCG debt financing and the potential that such
financing would impair certain of their rights under the loan
documents. Dr. O'Donnell explained, "BDSI has responded to the
concerns of our equipment lender by terminating the previously
announced debt arrangement and obtaining HCG's contemporaneous
agreement to restructure such financing commitment into an equity
line in the same amount so as to cure a possible default. We were
pleased to offer this accommodation in a new structure which we
believe benefits BDSI, and we will continue our pursuit of
opportunities to refinance the Gold Bank debt."
Also, Gold Bank has expressed its belief that BDSI's acquisition
of Arius Pharmaceuticals requires the bank's consent. BDSI
believes that it has structured such transaction with its counsel
to be in compliance with the terms and conditions of the loan
documentation relating only to BDSI's acquisitions of
complimentary businesses and that Gold Bank's consent is not
required with respect to an acquisition of this kind.
About HCG
The Hopkins Capital Group, LLC is a leading private equity fund
specializing in healthcare investing. The founder and managing
partner, Frank E. O'Donnell, Jr., M.D. is a graduate of the
accelerated M.D. program and the Wilmer Institute at Johns Hopkins
University. HCG specializes in early-stage investments in
disruptive innovations in healthcare. Unlike institutional venture
capital funds, HCG provides capital with a timeline expectation of
typically five to 10 years. The group typically acquires a
controlling interest and leverages its experience, human
resources, technology access in other portfolio companies, and
commercialization assets to enhance the likelihood of success.
About BioDelivery Sciences
BioDelivery Sciences International, Inc. is a biotechnology
company that is developing and seeking to commercialize patented
and licensed delivery technologies for pharmaceuticals, vaccines,
over-the-counter drugs, nutraceuticals and micronutrients. The
company's technologies include: (i) the patented Bioral(TM)
nanocochleate technology, designed for a potentially broad base of
applications, and (ii) the patented BEMA(TM) (buccal or mouth)
drug delivery technology being developed by the company's Arius
Pharmaceuticals subsidiary with a focus on "acute" treatment
opportunities for surgical and oncology patients.
* * *
Liquidity and Capital Resources
In its Form 10-QSB for the quarterly period ended June 30, 2004,
filed with the Securities and Exchange Commission, BioDelivery
Sciences International, Inc. reports:
"Since inception, we have financed our operations primarily from
the sale of our securities. From inception through June 30, 2004,
we raised approximately $14.1 million, net of issuance costs,
through these issuances. At June 30, 2004 we had cash and cash
equivalents of $428,000. At December 31, 2003, we had cash and
investments totaling approximately $2.5 million. At June 30, 2003,
we had approximately $5.0 million cash and (equivalents)
investments.
"We believe that our existing cash and investments, our $4 million
line of credit with Hopkins Capital Group and the proceeds from
the recent exercise of director options and will be sufficient to
finance our planned operations and capital expenditures through at
least the next 12 months and likely longer if the acquisition of
Arius is not consummated.
"In addition, we believe that the cash which may be generated from
the Royalty Acquisition, together with a contemplated equipment
financing, pending and potential license agreements, and the net
proceeds of potential equity or debt financings will allow us to
potentially continue the financing of our operations. However,
none of these transactions have been consummated as of the date of
this Report and no assurances can be given that any such
transactions will ever occur.
"As a result, we may consume available resources more rapidly than
currently anticipated, resulting in the need for additional
funding. Accordingly, we may be required to raise additional
capital through a variety of sources, including:
-- the public equity market;
-- private equity financing;
-- collaborative arrangements;
-- grants;
-- public or private debt; and
-- redemption and exercise of warrants
"There can be no assurance that additional capital will be
available on favorable terms, if at all. If adequate funds are not
available, we may be required to significantly reduce or refocus
our operations or to obtain funds through arrangements that may
require us to relinquish rights to certain of our drugs,
technologies or potential markets, either of which could have a
material adverse effect on our business, financial condition and
results of operations. To the extent that additional capital is
raised through the sale of equity or convertible debt securities,
the issuance of such securities would result in ownership dilution
to our existing stockholders."
BIODELIVERY SCIENCES: Closes Arius Pharmaceuticals Acquisition
--------------------------------------------------------------
BioDelivery Sciences International, Inc. (Nasdaq:BDSI) has closed
the previously announced acquisition of Arius Pharmaceuticals,
Inc., a Delaware corporation.
As result of the consummation of this transaction, Arius has been
reorganized with and into a newly formed, wholly owned subsidiary
of BDSI. As part of the transaction, BDSI has issued to the former
stockholders of Arius consideration comprised of an aggregate of
1,647,059 shares of a newly designated, non-voting and non-
interest bearing, series of convertible preferred stock. The
newly-created preferred stock is convertible (upon the
satisfaction of certain conditions) into shares of BDSI common
stock on a one for one basis. The preferred stock is eligible for
conversion upon the earlier to occur of:
(i) FDA approval of Arius' first product or
(ii) five years from the closing date.
The preferred stock enjoys certain other rights and privileges.
As part of the closing, Dr. Mark A. Sirgo, a founder and the
President and CEO of Arius, has entered into an employment
agreement with BDSI and has been named Senior Vice President of
Commercialization and Corporate Development of BDSI. Dr. Andrew
Finn, also a founder and the Chief Operating Officer of Arius, has
also entered into an employment agreement with BDSI and has been
named Senior Vice President of Product Development at BDSI. Drs.
Sirgo and Finn have previously held senior positions at Glaxo-
Wellcome. Drs. Sirgo and Finn will operate Arius out of its
present base in the Research Triangle Park area of North Carolina.
They will report directly to BDSI's CEO and will also work closely
with Dr. Raphael Mannino, BDSI's Executive Vice President and
Chief Scientific Officer, who is based in BDSI's formulation
facility in Newark, New Jersey.
Arius is a specialty drug delivery company whose portfolio of
potential products will be focused on "acute" treatment
opportunities for surgical and oncology patients. In 2004, Arius
acquired an exclusive worldwide license to the BEMA(TM) (buccal or
mouth) delivery technology developed by Atrix Laboratories, Inc.
(Nasdaq:ATRX). In connection with the closing, BDSI made available
to Arius $1 million for payment by Arius of a license fee to Atrix
as required under the Arius/Atrix agreement.
BDSI Chairman, President and CEO, Dr. Francis E. O'Donnell, Jr.,
stated, "We are pleased to have consummated this transaction as
scheduled and in a manner which we believe is not dilutive to our
stockholders. We are looking forward to capitalizing on the
combined synergies of the people and the products of our two
companies."
Dr. Mark Sirgo, President and CEO of Arius, stated, "Dr. Finn and
I look forward to executing the combined company's business plan,
and we welcome the opportunity to use this new platform not only
to further Arius' development but also to take a leadership
position in assisting our new colleagues with BDSI's technologies
and their various applications."
Separately, Gold Bank has indicated to the company its belief that
the acquisition of Arius and associated transactions requires
their consent. BDSI believes that it has structured the
transaction with its counsel to be in compliance with the terms
and conditions of the loan documentation relating only to BDSI's
acquisitions of complimentary businesses and that Gold Bank's
consent is not required with respect to an acquisition of this
kind.
Dr. O'Donnell explained, "We believe the specific provisions in
question require consent, in the first instance, when BDSI itself
is being sold, consolidated or liquidated. That is not the case
with the Arius acquisition. In the second instance, we believe
that Gold Bank's consent is required if BDSI makes an acquisition
which changes its line of business. Since both BDSI and Arius are
drug delivery technology companies, BDSI believes that it is not
out of compliance with this covenant by not obtaining the bank's
consent. We therefore have proceeded with the acquisition and look
forward to continuing our discussions with Gold Bank."
In response to its position, Gold Bank has reviewed the publicly
announced proposed structure of the Arius transaction and has
indicated that there may be other covenants that it will interpret
to be in default as a result of the closing of the Arius
transaction and that it has reserved its rights under the loan
agreement. Gold Bank has also indicated to the company its belief
that its consent is required for BDSI's announced credit facility
with Hopkins Capital Group. Hopkins Capital and BDSI have
terminated such facility and entered into an equity line of credit
in a structure that BDSI believes benefits the company but does
not require the bank's consent.
About BioDelivery Sciences
BioDelivery Sciences International, Inc. is a biotechnology
company that is developing and seeking to commercialize patented
and licensed delivery technologies for pharmaceuticals, vaccines,
over-the-counter drugs, nutraceuticals and micronutrients. The
company's technologies include: (i) the patented Bioral(TM)
nanocochleate technology, designed for a potentially broad base of
applications, and (ii) the patented BEMA(TM) (buccal or mouth)
drug delivery technology being developed by the company's Arius
Pharmaceuticals subsidiary with a focus on "acute" treatment
opportunities for surgical and oncology patients.
* * *
Liquidity and Capital Resources
In its Form 10-QSB for the quarterly period ended June 30, 2004,
filed with the Securities and Exchange Commission, BioDelivery
Sciences International, Inc. reports:
"Since inception, we have financed our operations primarily from
the sale of our securities. From inception through June 30, 2004,
we raised approximately $14.1 million, net of issuance costs,
through these issuances. At June 30, 2004 we had cash and cash
equivalents of $428,000. At December 31, 2003, we had cash and
investments totaling approximately $2.5 million. At June 30, 2003,
we had approximately $5.0 million cash and (equivalents)
investments.
"We believe that our existing cash and investments, our $4 million
line of credit with Hopkins Capital Group and the proceeds from
the recent exercise of director options and will be sufficient to
finance our planned operations and capital expenditures through at
least the next 12 months and likely longer if the acquisition of
Arius is not consummated.
"In addition, we believe that the cash which may be generated from
the Royalty Acquisition, together with a contemplated equipment
financing, pending and potential license agreements, and the net
proceeds of potential equity or debt financings will allow us to
potentially continue the financing of our operations. However,
none of these transactions have been consummated as of the date of
this Report and no assurances can be given that any such
transactions will ever occur.
"As a result, we may consume available resources more rapidly than
currently anticipated, resulting in the need for additional
funding. Accordingly, we may be required to raise additional
capital through a variety of sources, including:
-- the public equity market;
-- private equity financing;
-- collaborative arrangements;
-- grants;
-- public or private debt; and
-- redemption and exercise of warrants
"There can be no assurance that additional capital will be
available on favorable terms, if at all. If adequate funds are not
available, we may be required to significantly reduce or refocus
our operations or to obtain funds through arrangements that may
require us to relinquish rights to certain of our drugs,
technologies or potential markets, either of which could have a
material adverse effect on our business, financial condition and
results of operations. To the extent that additional capital is
raised through the sale of equity or convertible debt securities,
the issuance of such securities would result in ownership dilution
to our existing stockholders."
BURLINGTON: BII Trust Wants to Amend Distribution Trust Agreement
-----------------------------------------------------------------
On October 30, 2003, Judge Newsome confirmed the First Amended
Joint Plan of Reorganization for Burlington Industries, Inc., and
its debtor-affiliates. The Court also overruled any objections or
responses to the confirmation of the Plan and reservations of
rights that have not been withdrawn, waived or settled.
Furthermore, Judge Newsome approved:
(a) the modifications to the Plan;
(b) the settlements under the Plan in all respects;
(c) the Plan Releases in their entirety;
(d) the Plan discharge provision and the termination of
interests;
(e) the release and discharge of Liens provisions;
(f) the implementation of the WLR Purchase Agreement;
(g) the creation and implementation of the BII Distribution
Trust, the execution and terms of the BII Distribution
Trust Agreement, and the appointment and authority of the
Distribution Trust Representative;
(h) the provisions regarding Executory Contracts and Unexpired
Leases; and
(i) the substantive consolidation of the Debtors solely for
the purpose of implementing the Plan.
Pursuant to Section 3.7(a) of the BII Distribution Trust
Agreement, the Trust Advisory Committee will consist of no less
than six members. At the Plan Confirmation Hearing, the number
was reduced to five because Pension Benefit Guaranty Corporation
did not want to participate in the Trust Advisory Committee.
Furthermore, the Trust Agreement does not provide any
remuneration to the Committee members.
By this motion, the Trust, as representative of the Chapter 11
estates of Burlington Industries, Inc., seeks the Court's
permission to modify Section 3.7(a) and (c) of the Trust
Agreement to reflect these changes:
(a) The Trust Advisory Committee will consist of no less than
three and no more than five Committee Members; and
(b) Section 3.7(c) of the Trust Agreement will include this
language:
"In order to compensate Committee Members for the time
spent in overseeing the Distribution Trust, the
Distribution Trust Representative may, in its sole
discretion, compensate Committee Members with an annual
stipend not to exceed $25,000 per Committee Member per
annum."
Daniel D. DeFranceschi, Esq., at Richards Layton & Finger, PA, in
Wilmington, Delaware, asserts that the modifications are
necessary because the Trust needs to retain Committee Members, if
necessary, over the life of the Trust.
Mr. DeFranceschi reports that:
(a) From the Effective Date, the Trust has paid about
$9,500,000 to allowed administrative, priority and secured
claims;
(b) Since the Effective Date, the Trust has made distributions
to about 1,600 convenience class claims;
(c) On August 2, 2004, the Trust distributed about $84,300,000
to over 800 creditors with Allowed Class 4 Claims, which
is about 63% of the Trust's cash balance as of June 30,
2004; and
(d) The Trust resolved over 3,600 Claims and allowed, expunged
or caused to be withdrawn about 90% of the Claims against
the estate within eight months since the Effective Date.
The Trust anticipates that its remaining cash balance will be
distributed, as soon as practicable, after the resolution of the
remaining Claims. Nonetheless, the Trust will be required to:
-- resolve any remaining claims;
-- liquidate assets which have not been sold; and
-- complete various wind down tasks.
Without some remuneration for the Committee Members' time, it is
difficult to incentivize creditors to serve as Committee Members
once the Claims have been allowed and distributions have
occurred, Mr. DeFranceschi says. The remuneration is commonly
provided in connection with liquidating trust advisory
committees. Mr. DeFrancheschi emphasizes that the proposed
modifications are in the Trust beneficiaries' interest because it
ensures that the Trust will continue to maintain persons to serve
as Committee Members.
Headquartered in Greensboro, North Carolina, Burlington
Industries, Inc. -- http://www.burlington-ind.com/-- is one of
the world's largest and most diversified manufacturers of soft
goods for apparel and interior furnishings. The Company filed for
chapter 11 protection in November 15, 2001 (Bankr. Del. Case No.
01-11282). Daniel J. DeFranceschi, Esq., at Richards, Layton &
Finger One Rodney Square, and David G. Heiman, Esq., and Richard
M. Cieri, Esq., at Jones, Day, Reaves & Pogue North Point
represent the Debtors in their restructuring efforts. Burlington
Reorganization Plan confirmed on October 30, 2003 was declared
effective on November 10, 2003. (Burlington Bankruptcy News, Issue
No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000)
C2 MEDIA: Confirmation Hearing Scheduled for Tomorrow
-----------------------------------------------------
A hearing to consider confirmation of the Amended Reorganization
Plan of C2 Media, LLC, and its debtor-affiliates is scheduled for
tomorrow, August 27, 2004, in the U.S. Bankruptcy Court in
Manhattan at 9:00 a.m. Eastern Time.
C2 Media -- http://www.c2media.com/-- supplies professional media
graphics solutions. The Debtor filed for chapter 11 protection on
October 10, 2001 (Bankr. S.D.N.Y. Case No. 01-15256). At that
time, C2 owed J.P. Morgan Chase $34 million under a pre-petition
credit agreement. Jon Yard Arnason, Esq., at Vedder, Price,
Kaufman & Kammholz, PC, represents the Debtors; Robert K. Malone,
Esq., at Drinker Biddle & Reath, LLP, represents the Official
Committee of Unsecured Creditors; and Scott D. Talmadge, Esq., at
Clifford Chance US, LLP, represents JP Morgan Chase.
CATHOLIC CHURCH: Releases Statement of Financial Affairs
--------------------------------------------------------
Leonard E. Vuylsteke, the Canonical Finance Director of the
Archdiocese of Portland in Oregon, reports that the Archdiocese
earned income from sources other than employment or operation of
business during the two years immediately preceding the Petition
Date:
Amount Period
------ ------
$15,913,752 2003 - 2004
16,593,342 2002 - 2003
Within the 90-day period before the Petition Date, the
Archdiocese paid $2,689,126 to creditors on account of loans,
installment purchases of goods or services, and other debts.
The Archdiocese is a party to 72 lawsuits commenced within the
year immediately before the Petition Date. The lawsuits assert
charges against the Archdiocese for:
* sexual abuse;
* unemployment benefit, contract and wage;
* inverse condemnation, negligence and nuisance;
* violation of city ordinance;
* defamation;
* foreclosure of statutory or construction lien; and
* breach of warranty and contract.
The Archdiocese made various charitable contributions and gifts
totaling $81,005 for the past year.
The Archdiocese paid $237,396, including a $200,000 retainer, to
Sussman Shank, LLP, for debt-counseling and bankruptcy-related
services from July 16, 2003 to July 6, 2004.
Within one year before the Petition Date, the Archdiocese settled
tort claims asserted by 63 claimants. The Archdiocese entered
into agreements to keep the settlement amounts as well as the
claimants' identity confidential.
Between July 6, 2003 and July 6, 2004, the Archdiocese paid claims
related to these insurance programs:
Type of Claim Amount
------------- ------
Automobile $18,653
General Liability Less than 10,000
Property 259,137
Workers Compensation 311,846
The Archdiocese, as a religious and charitable institution,
receives donations of real property and personal property to be
used for various of its ministries. Mr. Vuylsteke discloses that
the real property located on 221 SW 1st Ave., #1822, in Portland,
Oregon, was bequeathed to "the Archdiocese of Portland in Oregon
Catholic Endowment Fund, Elementary School Tuition Assistance
Program." The property was sold and transferred to a third party
for $359,400.
Mr. Vuylsteke reports the financial accounts and instruments held
in the name of the Archdiocese or for the benefit of the
Archdiocese, which were closed, sold or otherwise transferred
within one year immediately preceding the Petition Date:
Bank Type of Account Final Balance
---- --------------- -------------
Umpqua Bank Ultra-Rate Fund $275,257
Fixed rate jumbo CD 525,000
Union Bank of California Investment Account 13
Investment Account 134
The Archdiocese possesses $82,754,654 of personal property owned
by another person.
The Archdiocese also holds bare legal title to certain real
properties for the benefit of parishes, schools, cemeteries, and
other entities. The Archdiocese has no equitable or beneficial
interest in the properties. The Archdiocese also does not know
the value of any of the properties. According to Mr. Vuylsteke,
the Tax Assessors have provided valuations on the properties:
Property Valuation
-------- ---------
Parish Facilities $358,392,532
School Facilities 29,457,729
Cemeteries 12,936,737
Other real properties 4,885,169
The Archdiocese, however, expresses no opinion and does not adopt
the values placed on the properties by the Tax Assessors.
Archbishop John G. Vlazny, as sole director, is deemed to own,
control, or hold 5% or more of the voting or equity securities of
the Archdiocese.
Within one year before the Petition Date, Archbishop Vlazny
withdrew funds or transferred property for these purposes:
Purpose of Withdrawal Amount
--------------------- ------
Salary $22,757
Housing 30,000
Health Insurance 5,825
Clergy Retirement 3,237
Worker's compensation 653
------
Total $62,472
======
Rebecca L. Graham of KPMG, LLP, audits the Archdiocese's books of
accounts and records, or prepares its financial statements.
The Archdiocese of Portland in Oregon filed for chapter 11
protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas
W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP
represent the debtor in its restructuring efforts. In its
Schedules of Assets and Liabilities filed with the Court on July
30, 2004, the Portland Archdiocese reports $19,251,558 in assets
and $373,015,566 in liabilities. (Catholic Church Bankruptcy
News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
CHAMPIONSHIP AUTO: Files Delayed Form 10-K for FY 2003 with SEC
---------------------------------------------------------------
Championship Auto Racing Teams, Inc. (OTC Bulletin Board: CPNT)
has filed its Annual Report on Form 10-K for the year ended
December 31, 2003 as well as its 10-Q for the three-month period
ended March 31, 2004.
The Company had delayed the filing of these reports because of the
bankruptcy of its operating subsidiary CART, Inc. The Company has
sold all of its operating assets and is in the process of winding
up its affairs. Investors should note that the Form 10-K provides
largely historical information, since it relates to the year 2003
when the Company was actively engaged in business. The Form 10-Q
for the first quarter of 2004 reflects the Company's position as
it continues to wind up its affairs. The Company anticipates
filing its 10-Q for the quarter-ended June 30, 2004 in the near
future.
The quarterly information for the year 2004 is not comparable to
the quarterly information for 2003.
About Championship Auto Racing Teams, Inc.
Championship Auto Racing Teams, Inc. previously owned and operated
the Champ Car World Series. The Company has sold all of its
operating assets and is in the process of winding up its affairs.
The Company's intention is to assist in completing the bankruptcy
of its subsidiary CART, Inc. and to propose to the shareholders a
plan of liquidation and dissolution of the Company. The Company
currently intends to commence this process in 2004 with a
distribution to shareholders, if possible, in early 2005. The
amount of any distribution would be based on a number of factors
and it is not possible for the Company to make any reasonable
predictions at this point in time as to what any ultimate
distribution, if any, will be to its shareholders.
* * *
On November 11, 2003, in response to a request by the management
of Championship Auto Racing Teams, Inc., that Deloitte & Touche
LLP, the Company's independent auditor, reissue its report on the
Company's financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, and in
connection with the filing by the Company of a proxy statement on
November 13, 2003, relating to the pending transaction with Open
Wheel Racing Series LLC, Deloitte & Touche informed management
that its report on the Company's financial statements as of
December 31, 2002 and 2001, and for each of the three years in the
period ended December 31, 2002 would include an explanatory
paragraph indicating that developments during the nine-month
period ended September 30, 2003 raise substantial doubt about the
Company's ability to continue as a going concern.
CONSECO INC: Board Appoints William Kirsch President & CEO
----------------------------------------------------------
Conseco, Inc.'s (NYSE:CNO) board of directors appointed William S.
Kirsch, the company's president and CEO, to fill the board vacancy
resulting from the recent resignation of William J. Shea. Kirsch's
term expires at next year's annual meeting.
"Conseco has an active and engaged board of directors, with nearly
100 years of collective experience in the insurance industry, as
well as other complementary expertise," said R. Glenn Hilliard,
executive chairman. "With Bill Kirsch as president and CEO, backed
by an experienced executive team, the board is confident that
Conseco has the right management to continue its progress in
returning the company to a position of leadership in the
industry."
The newly re-elected directors are:
-- Debra J. Perry, a former senior managing director of
Moody's Investors Service with a background in investment
and commercial banking. She has served as a director since
June 2004.
-- Philip R. Roberts, an investment management consultant, who
formerly served in chief investment officer roles at Mellon
Financial, and, during his 26-year insurance career, at
Aetna Life & Casualty. He has been a director since
September 2003.
-- Michael T. Tokarz, a corporate director and venture
capitalist, and former general partner of Kohlberg Kravis
Roberts, a leading private equity firm. He joined Conseco's
board in September 2003.
The terms of Conseco's four other directors - R. Glenn Hilliard,
Neal C. Schneider, Michael S. Shannon and John G. Turner - began
in September 2003 and expire at the 2005 annual meeting.
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.
CROWN CASTLE: Expects to Complete UK Subsidiary Sale on August 31
-----------------------------------------------------------------
Crown Castle International Corp. (NYSE: CCI) reported that all
conditions precedent necessary for the completion of the
previously announced sale of Crown Castle's UK subsidiary have
been satisfied. Crown Castle expects to complete the sale on
August 31, 2004.
Pro forma for the sale of Crown Castle UK, Crown Castle
International Corp. engineers, deploys, owns and operates
technologically advanced shared wireless infrastructure, including
extensive networks of towers. Crown Castle offers significant
wireless communications coverage to 68 of the top 100 United
States markets and to substantially all of the Australian
population.
Crown Castle -- http://www.crowncastle.com/-- is among the
largest wireless tower operators in the industry, with about
13,000 sites mostly in the U.S. and U.K. Through Crown Atlantic
Joint Venture (Crown Atlantic), a joint venture between Crown
Castle (62.8% stake) and Verizon Communications Inc. (37.2%
stake), the company operates approximately another 2,000 towers.
Crown Castle predominantly derives its revenues from the tower
leasing business and the remainder from network services. The
tower industry enjoys significant competitive barriers (e.g., real
estate zoning, high customer switching costs, and long-term
leasing contracts with provisions for annual rent escalation),
strong operating leverage (given that towers have mostly fixed
costs), and little risk of technology substitution.
As reported in the Troubled Company Reporter on June 30,2004,
Standard & Poor's Ratings Services placed its ratings of Houston,
Texas-based wireless tower operator Crown Castle International
Corp. (including the 'B-' corporate credit rating) and operating
company Crown Castle Operating Co. on CreditWatch with positive
implications. Approximately $4 billion of leased-adjusted debt is
outstanding.
The CreditWatch placement follows Crown Castle's announcement of a
definitive agreement to sell its U.K. tower subsidiary for about
$2 billion. The prior positive outlook had recognized the
potential for meaningful reduction in debt leverage, and the
earmarking of $1.3 billion of proceeds from the announced
disposition could accelerate the deleveraging process. However, a
key factor in the rating analysis will be the use of the
approximate $740 million balance of net sale proceeds. The
company notes that these monies will be used either for further
debt reduction or for expansion of its U.S. portfolio. To the
extent that Crown Castle opts not to apply the bulk of the
$740 million to debt reduction, Standard & Poor's will review
management's expansion plans, including the potential cash flow
from newly built and/or purchased towers. "If Crown Castle
purchases extant towers, factors that will be considered in
evaluating the credit impact will include the quality of existing
tenants per tower, contract terms applicable to purchased tenants,
the potential for new tenants, and tenant diversity," said
Standard & Poor's credit analyst Michael Tsao.
DELTA AIR: Bingham McCutchen's Clients Want to Do Due Diligence
---------------------------------------------------------------
Following Delta Air Lines, Inc.'s issuance of consent
solicitations on August 18, 2004, a Committee of 34 financial
institutions, holding approximately $1.3 billion of senior secured
debt, has informed Delta that its members will not respond to the
solicitations before Delta's current August 31, 2004 deadline, and
has requested that Delta extend the solicitation period in order
to provide an opportunity for the Committee to conduct substantial
due diligence. The Committee, comprised of insurance companies,
pension funds, bond funds, and money managers, is represented by
Bingham McCutchen LLP.
The Committee, with substantial interests in 169 of Delta's
aircraft, was formed in July 2004 as a Committee of Senior Secured
Aircraft Creditors to monitor Delta's financial condition and
restructuring efforts. Members of the Committee hold public and
private debt on aircraft in various senior lien financing
facilities of Delta, including facilities known as Equipment Trust
Certificates, Pass Through Certificates, Enhanced Equipment Trust
Certificates, and various Private Placement Note issues. Last
week, Delta announced and launched consent solicitations asking
some of these creditors to waive contractual restrictions that
limit Delta's ability to buy, pledge or hold these instruments as
part of a possible debt restructuring. The Committee anticipates
that other creditors, including those holding private placements
of debt, also may be contacted by Delta in connection with
possible restructuring discussions.
The Committee believes that the consent solicitations are likely a
first step in a possible debt restructuring, and that it would be
imprudent, from its point of view, to respond without
understanding the entirety of Delta's restructuring plan.
Consequently, the Committee informed Delta that it would require
substantial due diligence on Delta's business plan, financial
condition, and restructuring plan before it can reply to the
solicitation requests, or consider any debt restructuring
proposals of Delta's public or private debt.
The Committee anticipates that other similarly situated
noteholders will follow suit and join the Committee in its due
diligence request.
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 23, 2004,
Standard & Poor's Ratings Services lowered its ratings on Delta
Air Lines, Inc., including lowering the corporate credit rating to
'CCC' from 'CCC+', reflecting an increasing risk of an out-of-
court restructuring of debt. The outlook is negative.
Delta announced a consent solicitation seeking permission from
holders of many equipment trust certificates and pass-through
certificates (but not enhanced equipment trust certificates) to
lift limitations on the airline's ability to buy and hold the
certificates in order "to provide Delta with greater flexibility
to effect a successful out-of-court restructuring." Restructuring
of bond payments or a coercive exchange would be considered a
default and cause the company's corporate credit rating to be
lowered to 'D' -- default -- or 'SD' -- selective default.
Ratings of equipment trust certificates and pass-through
certificates were lowered two notches, to 'CCC', the same level as
the revised corporate credit rating. Ratings of most senior
classes of enhanced equipment trust certificates, which are
considered more difficult to restructure outside of bankruptcy,
were not lowered.
"Delta's consent solicitation provides the clearest signal yet
that the company will seek to restructure selected debt
obligations outside of bankruptcy," said Standard & Poor's credit
analyst Philip Baggaley. The changes sought would make possible
certain types of debt restructuring, such as a tender offer or
exchange offer, if certificate-holders agree.
DIVERSIFIED ASSET: Moody's Reviews B3 Rating on $27 Million Debt
----------------------------------------------------------------
Moody's Investors Service placed under review for downgrade two
classes of notes issued by Diversified Asset Securitization
Holdings I LP:
(1) the U.S.$263,000,000 Class A Senior Secured Notes Due 2034
-- Consisting of Class A-1 Floating Rate Senior Secured
Term Notes Due 2034 and Class A-2 Fixed Rate Senior Secured
Term Notes Due 2034, both currently rated Aa1; and
(2) the U.S.$27,000,000 Class B Fixed Rate Senior Subordinated
Secured Notes Due 2034, currently rated B3.
This transaction closed on December 2, 1999.
According to Moody's, its rating action results primarily from:
-- significant deterioration in the weighted average rating
factor of the collateral pool;
-- breach of the Class B Overcollateralization Test;
-- the Class B Interest Coverage Test;
-- Moody's Diversity Correlation Test; and
-- the Weighted Average Coupon Test.
Moody's noted that, as of the most recent monthly report on the
transaction, the weighted average rating factor of the collateral
pool was 2414 (500 limit) and that approximately 18.11% of the
collateral pool currently had a Moody's rating of Ba1 and lower --
10% limit. The Class B Overcollateralization Test was 101.4% --
103% min, the Class B Interest Coverage Test was 26.2% --
109% min, Moody's Diversity Correlation Test was 18.91 --
20 min, and the Weighted Average Coupon Test was 7.541% -- 8.5%
min.
Rating Action: Review For Downgrade
Issuer: Diversified Asset Securitization Holdings I, LP
Class Description: U.S.$263,000,000 Class A Senior Secured Notes
Due 2034 (Consisting of Class A-1 Floating Rate
Senior Secured Term Notes Due 2034 and Class A-
2 Fixed Rate Senior Secured Term Notes Due
2034)
Prior Rating: Aa1
Current Rating: Aa1 (under review for downgrade)
Class Description: U.S.$27,000,000 Class B Fixed Rate Senior
Subordinated Secured Notes Due 2034
Prior Rating: B3
Current Rating: B3 (under review for downgrade)
ELECTRONICAST CORP: Voluntary Chapter 11 Case Summary
-----------------------------------------------------
Debtor: ElectroniCast Corporation
1923 Bayview Avenue
Belmont, California 94002
Bankruptcy Case No.: 04-32370
Type of Business: The Debtor specializes in forecasting
technology and global market trends in
fiber-optics, network communications and
advanced photonics.
See http://www.electronicast.com/
Chapter 11 Petition Date: August 19, 2004
Court: Northern District of California (San Francisco)
Judge: Dennis Montali
Debtor's Counsel: Charles B. Greene, Esq.
Law Offices of Charles B. Greene
84 West Santa Clara Street #770
San Jose, CA 95113
Tel: 408-279-3518
Estimated Assets: $0 to $50,000
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20-Largest Creditors.
ENRON CORP: Wants Court to Approve Trust Letter Pact for BASF Sale
------------------------------------------------------------------
On August 11, 2004, Enron and its debtor-affiliates, Reliance
Trust Company (the Trustee under relevant financing pacts), and
BASF Corporation entered into a Purchase and Sale Agreement for an
existing synthetic lease facility guaranteed by Enron Corporation
covering, in relevant part, the property located at 4403 La Porte
Freeway, Pasadena, in Harris County, Texas.
The sale of the methanol plant situated on approximately 23.9259
acres of land requires the consent of certain parties.
To facilitate the sale of the Property:
-- the Debtors;
-- Reliance Trust Company as Trustee of the 1991 Enron/NGL
Trust and as Collateral Trustee;
-- Barclays Bank PLC as a B-Note Purchaser and as a
Certificate Holder;
-- Credit Suisse First Boston as a B-Note Purchaser and as a
Certificate Holder;
-- Citibank, N.A., as an A-Note Purchaser and as Agent;
-- The Bank of Nova Scotia as an A-Note Purchaser; and
-- the Bank of Tokyo-Mitsubishi, Ltd., as an A-Note Purchaser,
engaged in extensive, arm's-length and good faith negotiations
and discussions. The parties entered into a Letter Agreement to
record:
(1) their agreement to the formula to be used to calculate,
without allowing, the deficiency claims in connection with
the transactions set forth in a Participation Agreement
and other Operative Documents -- the JT Holdings
Transaction; and
(2) the approval and authorization of the Note Purchasers and
the Certificate Holders for the Trustee, the Collateral
Trustee and the Co-Trustee to execute, deliver and
consummate the transactions contemplated by the Purchase
Agreement among the Debtors, the Trustee and BASF
Corporation, and related documents.
The deficiency calculation-related provisions of the Letter
Agreement are:
(a) Calculation of Enron Deficiency Claim. The Letter
Agreement Parties agree that the deficiency claim against
Enron under the Enron Guaranty and the Parent Purchase
Agreement -- the Enron JT Holdings Claim -- will be
calculated as:
(1) the $74,290,471 Enron JT Holdings Claim pursuant to
the Enron Guaranty and the Parent Purchase Agreement
minus
(2) the net distributable proceeds of the Auction Sale
actually distributed to the Trustee on behalf of the
Note Purchasers and the Certificate Purchasers, net
of the reasonable expenses of the Trustee.
The net distributable proceeds will be the gross proceeds
of the Auction Sale, net of real estate taxes due in
connection with the Property, and other costs and
expenses associated with the Auction Sale;
(b) Calculation of EVC Deficiency Claim. The Letter
Agreement Parties agree that the deficiency claim against
EVC under the Participation Agreement and the Lease --
the EVC JT Holdings Claim -- will be calculated as:
(1) the $75,853,105 EVC JT Holdings Claim pursuant to the
Participation Agreement and the Lease, minus
(2) the net distributable proceeds of the Auction Sale.
The net distributable proceeds will be the gross proceeds
of the Auction Sale related to the sale of the Property,
net of real estate taxes due in connection with the
Property, and other costs and expenses associated with
the Auction Sale;
(c) Non-Allowance; Reservation of Rights. Notwithstanding
any other provision of the Letter Agreement, neither the
Letter Agreement nor any order entered by the Bankruptcy
Court approving the Letter Agreement or any motion made
by Enron or EVC seeking an order will be construed as
the allowance of any administrative or other claim of the
Agent, the Trustee, the Co-Trustee, the Note Purchasers
or the Certificate Holders -- the Bank Parties --
including, without limitation, the Enron JT Holdings
Claim and the EVC JT Holdings Claim, in the Cases for
any claims under the Participation Agreement or other
Operative Documents, or any deficiency claim related to
the Property. Nothing in the Letter Agreement or any
Court order approving the Letter Agreement or any motion
made by Enron or EVC seeking an order will be construed
as the disallowance of any administrative or other claim
of the Bank Parties or to prejudice the Bank Parties'
right or ability to assert and pursue the allowance of
any claim at any later date, or to assert all available
defenses and responses to any action by Enron or EVC to
disallow, limit or reduce the claim, including, without
limitation, any responses or defenses with respect to the
fraudulent conveyance cause of action asserted in
Adversary Proceeding No. 01-16034(AJG) with respect to
the Enron Guaranty. Enron and EVC expressly retain the
right to object to any proofs of claim filed by any of
the Bank Parties and the Bank Parties expressly retain
the right to oppose any objection or challenge and retain
all defenses to any objection or challenge; provided
however, that Enron and EVC will not permit any of their
affiliates to, object to or challenge (i) the amount of
the Enron JT Holdings Claim or the EVC JT Holdings Claim
as calculated in accordance with the formula set forth in
the Letter Agreement or (ii) the adequacy of the proceeds
received from the Auction Sale of the Property conducted
in accordance with the procedures set forth in the Bidding
Procedures Order.
The Letter Agreement also provides that:
(1) The Agent, the Note Purchasers and the Certificate
Holders authorize the Trustee, the Co-Trustee and the
Collateral Trustee to execute, deliver and consummate the
transactions contemplated by the proposed Purchase
Agreement. Under the terms of the Operative Documents,
the Agent and the A-Note Purchasers are not required to
consent to the sale authorization. Nonetheless, by their
signatures to the Letter Agreement, the Agent and the
A-Note Purchasers consent to the extent of their
interest, if any, in the Property to the transactions
contemplated by the Purchase Agreement, provided that by
doing so the Agent and the A-Note Purchasers will not be
subject to any liability;
(2) The B-Notes Purchasers and Certificate Holders will agree
to indemnify the Trustee, the Co-Trustee and the
Collateral Trustee against any and all losses, costs,
claims, damages, liabilities and expenses, including any
claims arising under Environmental Laws and all costs
related to the Auction Sale, incurred by the Indemnified
Parties as a result of compliance with the Letter
Agreement and the sale of the Property, and not the
result of the Trustee's, the Co-Trustee's or Collateral
Trustee's own gross negligence or willful misconduct.
The Agent and the A-Note Purchaser will not be subject to
any liability to any Indemnified Party or to any of the
other Parties as a result of the indemnification;
(3) To the extent any Losses are not paid directly by the
B-Note Purchasers and Certificate Holders, the Trustee,
the Co-Trustee and the Collateral Trustee will have a
first lien on the proceeds from the Auction Sale received
by the Trustee for payment of Losses and any other
amounts due and owing to the Trustee, the Co-Trustee and
the Collateral Trustee in accordance with the terms of
the Declaration of Trust and the Participation Agreement,
prior to payment of any amounts to the B-Note Purchasers
and Certificate Holders; and
(d) Proceeds of the Auction Sale received by the Trustee will
be applied first to pay any and all Losses and other
amounts due and owing to the Trustee, the Co-Trustee and
the Collateral Trustee.
Martin A. Sosland, Esq., at Weil, Gotshal & Manges, LLP, in New
York, contends that the Letter Agreement is a favorable
development as it facilitates the sale of the Property. Absent
the approval of the Letter Agreement, the Debtors would be
required to expend considerable time and expense to litigate the
JT Holdings Claims to the detriment of the Debtors.
Thus, the Debtors ask the Court to approve the Letter Agreement
and authorize them to perform their obligations under, and
implement the Letter Agreement pursuant to Rule 9019 of the
Federal Rules of Bankruptcy Procedure.
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. 122;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
ENRON: Asks Court to Okay Sale of Nigerian Assets to Eton Energy
----------------------------------------------------------------
Enron Asia Pacific/Africa/China, LLC, seeks the U.S. Bankruptcy
Court's permission to:
(a) sell all of the equity interest of Enron Nigeria Power
Holdings, Ltd., to Eton Energy Corporation, free and clear
of all liens, encumbrances, rights of setoff, recoupment,
netting and deduction pursuant to a Share Purchase
Agreement between APACHI and Eton, effective as of
August 10, 2004; and
(b) pay $8,900 of intercompany obligations owed by Enron
Nigeria to Debtor Enron Development Funding, Ltd.
The Enron Nigeria Structure
Martin A. Sosland, Esq., at Weil, Gotshal & Manges, LLP, in New
York, relates that APACHI owns all of the outstanding equity
interest of Enron Nigeria, a Cayman Islands limited liability
company. Enron Nigeria owns all of the outstanding equity
interests in Enron Nigeria IPP Holding, Ltd., and Enron Nigeria
Pipeline Holding, Ltd.
ENIPP owns all of the outstanding equity interest in Enron
Nigeria Power Limited. ENPHL owns all of the outstanding equity
interest in Enron Nigeria Pipeline Limited.
________________
| |
| Enron Corp. |
| Oregon |
| 011 |
|________________|
|
|
100%
|
_______|________
| |
| Atlantic |
| Commercial |
| Finance, Inc. |
| Delaware |
| 063 |
|________________|
|
|
100%
|
________V_________
| |
| Enron Asia |
| Pacific/Africa/ |
| China LLC |
| Delaware |
| 67N |
|__________________|
|
|
100%
|
_______V________
| |
| Enron Nigeria |
| Power Holding |
| Ltd. |
| Cayman Isl. |
| 63H |
|________________|
|
|______________ 100%__________
| |
100% |
| |
| |
_______V________ _______V________
| | | |
| Enron Nigeria | | Enron Nigeria |
| IPP Holding | | Pipeline |
| Ltd. | | Holding, Ltd. |
| Cayman Isl. | | Cayman Isl. |
| 67V | | 63Y |
|________________| |________________|
| |
| |
100% 100%
| |
| |
_______V________ _______V________
| | | |
| Enron Nigeria | | Enron Nigeria |
| Power Limited | | Pipeline |
| Nigeria | | Limited |
| 71F | | Nigeria |
|________________| | 71E |
|________________|
The Enron Nigeria Power Purchase Agreement
On December 6, 1999, Mr. Sosland informs the Court that Enron
Nigeria signed a power purchase agreement with Lagos State
government, the Ministry of Power & Steel, and National Electric
Power Authority. The PPA is for the construction and operation
of an emergency power project to be located on a barge located
off shore of Lagos, Nigeria, and the construction and operation
of a 548 MW gas-fired simple cycle, combustion turbine land-based
power plant located in Lagos, Nigeria. In addition to the Power
Projects, the PPA included the right for Enron Nigeria to build a
240 km pipeline to supply gas to power the IPP Project. In June
2000, APACHI entered into an amended PPA concerning only the
Barge Project.
Mr. Sosland reports that periodic negotiations to amend the
original PPA as to the IPP Project took place throughout 2001.
No amendment was successfully negotiated. Enron Nigeria believes
that the Nigerian Government will no longer honor the terms of
the PPA unless a variety of terms are amended.
In 2003, the Nigerian government elections were held and, as a
result, a new Minister of Power and Steel was appointed. The
Nigerian Government renewed its dedication to improve power
generating capacity in Nigeria, which sparked interest by
potential purchasers for the purchase of Enron Nigeria and,
accordingly, the IPP Project.
The Marketing Efforts
During the first half of 2003, APACHI extensively marketed the
Enron Nigeria Equity Interest. APACHI contacted numerous parties
as potential buyers for the Equity Interest. However, given the
political climate in Nigeria, the universe of potential bidders
was extremely restricted and limited to Nigerian entities and
those that currently hold or have held investments in Nigeria.
APACHI received five bids. In late 2003, APACHI determined that
Eton submitted the best bid for the Equity Interest and
negotiations commenced.
The Purchase Agreement
APACHI and Eton subsequently executed the Purchase Agreement.
Pursuant to the Purchase Agreement, Eton agreed to purchase the
Equity Interest from APACHI for $750,000. In addition, Eton is
obligated to pay $4,500,000 to APACHI upon the earlier of:
(a) the execution of a renegotiated PPA for the IPP Project;
or
(b) the commencement of construction of the IPP Project.
Intercompany Accounting Issues
Enron Nigeria holds a $16,189,883 receivable from APACHI. Enron
Nigeria's books and records also reflect a $16,025,708 capital
contribution by APACHI and $154,247 retained earnings.
In addition, Enron Nigeria and ENPHL each have debt obligations
to EDF for $3,513 and $5,416.
The Debtors want to resolve all intercompany accounts among the
Debtors, on one hand, and APACHI and the Enron Nigeria
Subsidiaries, on the other hand, prior to the sale of the Equity
Interests. Accordingly, APACHI proposes to pay $8,929 to EDF to
satisfy the Enron Nigeria Payables. Prior to the Closing of the
Sale Transaction, APACHI will record the payment on its books and
records as a loan to Enron Nigeria and payment of the loan will
be effected by a corresponding reduction of the Receivable.
Then, Enron Nigeria will transfer substantially all of the
resulting net balance of the Receivables to APACHI. The transfer
will constitute a dividend to APACHI equal to the sum of Enron
Nigeria's retained earnings and return of capital amounting to
$16,025,780, thereby reducing APACHI's capital contribution to
Enron Nigeria to $1,000.
The Sale is Equitable
The Debtors have concluded that the interests in Enron Nigeria
are not integral to or are contemplated to be part of their
reorganization. After exploring the alternatives, the Debtors
concluded that the proposed sale of the Equity Interest to Eton
is preferable to the continued ownership of Enron Nigeria. Mr.
Sosland assures the Court that the terms of the Purchase
Agreement were negotiated at arm's length and represent fair
market value for the Equity Interest.
Except as set forth in the Purchase Agreement, APACHI is not
aware of any liens, claims, encumbrances, rights of setoff,
netting, deduction, recoupment or any other interest in the
Equity Interest. Nevertheless, if an Interest exists, the
Debtors propose to attach that Interest to the sale proceeds.
Given the limited number of potential buyers of Nigerian-related
assets, Mr. Sosland contends that the contemplated Sale should be
approved as a private sale.
Moreover, Mr. Sosland asserts that the payment of the Enron
Nigeria Payable should be authorized because:
(a) the amount is de minimis in comparison to the amount
APACHI will receive as proceeds from the Sale
Transaction; and
(b) the amount will be paid to another Debtor, for the
benefit of all creditors who will receive distributions
pursuant to the Plan.
As the sale of the Equity Interest is in furtherance of the Plan,
APACHI requests that it be exempt from transfer taxes.
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. 122;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
EZLINKS GOLF: Voluntary Chapter 11 Case Summary
-----------------------------------------------
Debtor: EZLinks Golf Limited Liability Company
303 - 16th Street, Suite 012
Denver, Colorado 80202
Bankruptcy Case No.: 04-28150
Chapter 11 Petition Date: August 20, 2004
Court: District of Colorado (Denver)
Judge: Sidney B. Brooks
Debtor's Counsel: James T. Markus, Esq.
Block Markus & Williams LLC
1700 Lincoln Street, Suite 4000
Denver, CO 80203
Tel: 303-830-0800
Fax: 303-830-0809
Estimated Assets: $0 to $50,000
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20-Largest Creditors.
FEDERAL-MOGUL: Property Damage Claimants Hire Weil as Counsel
-------------------------------------------------------------
Judge Lyons of the U.S. Bankruptcy Court for the District of
Delaware authorized the Official Committee of Property Damage
Claimants to retain Weil, Gotshal & Manges, LLP, as its counsel,
nunc pro tunc to June 1, 2004, subject to certain terms and
conditions. The Court authorizes Weil Gotshal to:
(a) assist and counsel the PD Committee with respect to:
-- its organization;
-- the conduct of its business and meetings;
-- the dissemination of information to its
constituency; and
-- other matters as are reasonably deemed necessary to
facilitate the administrative activities of the PD
Committee;
(b) attend the meetings of the PD Committee;
(c) represent and advise the PD Committee in connection with
any plan of reorganization, scheme of arrangement, company
voluntary arrangement, or any related matters;
(d) confer with the Debtors, the other official committees
appointed in the Debtors' cases, and their counsel and
other professionals, as well as other professionals
engaged by the PD Committee;
(e) confer with the Administrators in the U.K. Administrative
Proceedings;
(f) review the Debtors' activities and matters concerning
the treatment of asbestos property damage claims, whether
the activities and matters are by motion, adversary
proceeding, or otherwise in the Debtors' Chapter 11 cases
or the U.K. Administrative Proceedings, and advise the PD
Committee in respect of these issues;
(g) attend to the property damage claimants' inquiries
concerning the Debtors' cases or the U.K. Administrative
Proceedings;
(h) appear on the PD Committee's behalf before the U.S.
Bankruptcy Court and in the U.K. Administrative
Proceedings; and
(i) represent the PD Committee in any matter or proceeding in
the Debtors' cases or in the U.K. Administrative
Proceedings affecting or concerning:
-- the treatment of asbestos property damage claims,
whether under a plan of reorganization or otherwise;
-- the powers and duties of the PD Committee; and
-- the application for and payment of the expenses
incurred by members of the PD Committee, as well as
the fees and expenses of other professionals engaged
by the PD Committee.
Judge Lyons rules that the "treatment of asbestos property damage
claims" will not include the allowance or disallowance of
individual asbestos property damage claims, but will include the
establishment of procedures concerning generally the allowance or
disallowance of asbestos property damage claims.
Judge Lyons directs Weil Gotshal to use its best efforts to avoid
any duplication of services being provided by the Official
Committee of Unsecured Creditors or by the Fee Auditor appointed
in the Debtors' cases.
Judge Lyons further rules that the Debtors and their estates will
not be burdened with the fees and costs relating to the transition
and change of attorneys for the PD Committee. The Fee Auditor, in
reviewing Weil Gotshal's fee applications, is directed to
determine the extent of Weil Gotshal's application, whether the
fees for services applied for comprised of transition or learning
curve services. The Fee Auditor will recommend what fees and
costs should not be allowed and paid by the Debtors and their
estates.
As reported in the Troubled Company Reporter on July 16, 2004,
Weil Gotshal will be compensated for its services at these rates:
Professional Hourly Rate
------------ -----------
Partners and Counsel $500 - 775
Associates 240 - 505
Paralegals 125 - 225
Headquartered in Southfield, Michigan, Federal-Mogul Corporation
-- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some
$6 billion. The Company filed for chapter 11 protection on
Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan,
Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley
Austin Brown & Wood and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from its creditors, they listed $10.15 billion in
assets and $8.86 billion in liabilities.
FEDERAL-MOGUL: Expands China Operations with Shanghai Facility
--------------------------------------------------------------
Federal-Mogul (OTCBB:FDMLQ) is expanding its presence in China
with the opening of a 1,800 square-meter distribution facility in
Shanghai. This new growth is an important step for Federal-Mogul
in the flourishing China market.
"This new center is like a seed. It has been planted, and it will
grow as our business grows," said Qingping Zhu, managing director,
China. "To us, it is more than just a distribution center. It is a
reflection of what Federal-Mogul wants to achieve in China and the
region, in general."
Besides acting as a distribution center for China, the facility
will serve many other roles. For example:
-- Components from overseas facilities will be imported, packed
and stored for local distribution or export
-- Products will be assembled into components - for example,
pistons, pins, rings and liners will be assembled into
engine sets
-- Locally manufactured products will be packed and re-
distributed
-- Products will be exported to Asia, Europe and North America
Some time ago, Federal-Mogul set specific goals for what it wanted
to achieve in China and the surrounding region, said Steve Martin,
marketing director, Asia, during a speech at the opening ceremony.
"Our vision for China includes world-class manufacturing
facilities for all of Federal-Mogul's major components, utilizing
our leading-edge technologies," Mr. Martin said. "It also includes
having a strong regional office in Shanghai, research facilities
and a distribution center. But these are just physical entities,
they are the things that make a vision come alive. The real goal
is for Federal-Mogul to meet our customers' needs and requirements
with the right products and the best service."
The new distribution center is Federal-Mogul's seventh facility in
China. The other facilities are located in Anqing, Guangzhou,
Nanchang, Qingdao, Wuhan and Shanghai.
According to Zhu, Federal-Mogul's objective in China is to become
the market leader in all of the company's major product areas -
from engine and friction parts to brake materials and windshield
wipers.
"The new Shanghai distribution center represents an important step
in executing an Aftermarket growth strategy in Asia," said Joseph
Felicelli, senior vice president, worldwide Aftermarket
operations. "Local availability of product for consistent,
regular, on-time delivery to customers is the cornerstone of a
successful customer support program. Federal-Mogul, delivering
value-added products and services to customers, is now 'on the
ground' in Asia."
Headquartered in Southfield, Michigan, Federal-Mogul Corporation
-- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some
$6 billion. The Company filed for chapter 11 protection on
Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan,
Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley
Austin Brown & Wood and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from its creditors, they listed $10.15 billion in
assets and $8.86 billion in liabilities.
FLEMING COMPANIES: Court Approves Bay 4 Capital Settlement Pact
---------------------------------------------------------------
Comdisco, Inc., and Fleming Companies, Inc. debtors entered into a
master equipment lease agreement and related schedules, wherein
Comdisco leased certain equipment to the Debtors. Comdisco later
assigned all of its rights and interest in the Agreement and the
Leased Equipment to Bay 4 Capital.
The Debtors rejected the Agreement by a Court order effective
December 31, 2003.
The Debtors have not made any rental or real estate payments
pursuant to the Agreement from September 1, 2003 through and
including December 31, 2003 -- aggregating $379,956. The Debtors
admit that they have utilized the Leased Equipment postpetition.
To resolve Bay 4's claims against the Debtors' estate, the parties
stipulate and agree that:
(a) The Debtors will immediately pay, by check, Bay 4
$379,956; and
(b) Bay 4's unsecured claim will be fixed and allowed for
$885,704, representing the outstanding balance under the
Agreement, and the fixed claim will be deemed to have
amended and replaced any proofs of claim Bay 4 filed
related to the Agreement.
Judge Walrath of the U.S. Bankruptcy Court for the District of
Delaware approves the parties' agreement.
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.,
emerged as a rehabilitated company owned by Fleming's unsecured
creditors on August 23, 2004. 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.
FOUNDERS MORTGAGE: Voluntary Chapter 7 Case Summary
---------------------------------------------------
Debtor: Founders Mortgage USA, LLC
568 Cambridge Road
Turnersville, New Jersey 08012
Bankruptcy Case No.: 04-37150
Type of Business: The Debtor is a mortgage lender.
Chapter 11 Petition Date: August 18, 2004
Court: District of New Jersey (Camden)
Judge: Gloria M. Burns
Debtor's Counsel: William E. Throne, IV, Esq.
Goldman, Levy, Zolotorofe & Corcoran, PC
341 Broad Street
Clifton, NJ 07013
Tel: 973-247-9000
Fax: 973-247-9211
Estimated Assets: $100,000 to $500,000
Estimated Debts: $500,000 to $1 Million
GALEY & LORD: Needs Until October 18 to File Schedules
------------------------------------------------------
Galey & Lord, Inc. and its debtor-affiliates, ask the U.S.
Bankruptcy Court of Northern Georgia, for an extension of the
deadline imposed under Rule 1007 of the Federal Rules of
Bankruptcy Procedure to file their schedules of assets and
liabilities, schedules of executory contracts and unexpired leases
and statement of financial affairs as required by Section 521 of
the Bankruptcy Code. The Debtors ask for an extension until
October 18, 2004
The Debtors explain that they haven't had sufficient time to
collect and assemble all of the requisite financial data and other
information and to prepare all of the Schedules and Statements
required.
They add, that the information and documents will be gathered from
various locations. And upon gathering all the necessary data, the
Debtors and the financial advisors must review those information
and verify the Schedules and Statements.
Headquartered in Atlanta, Georgia, Galey & Lord, a leading global
manufacturer of textiles for sportswear, including denim, cotton
casuals and corduroy, filed along with its debtor-affiliates for
chapter 11 protection on August 19, 2004 (Bankr. N.D. Ga. Case No.
04-43098). Jason H. Watson, Esq. and John C. Weitnauer, Esq., at
Alston & Bird LLP, and Joel H. Levitin, Esq., at Dechert LLP,
represent the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$533,576,000 in total assets and $438,035,000 in total debts.
GMAC MORTGAGE: Fitch Rates Privately Offered Classes at Low-Bs
--------------------------------------------------------------
Fitch rates GMACM's $599.2 million mortgage pass-through
certificates, series 2004-J4, as follows:
-- $583,600,000 classes A-1 - A-8, PO, IO, R-I and R-II 'AAA';
-- $8,402,000 class M-1 'AA';
-- $3,300,000 class M-2 'A';
-- $1,800,000 class M-3 'BBB';
-- $1,200,000 privately offered class B-1 'BB';
-- $900,000 privately offered class B-2 'B'.
The privately offered class B-3 certificates are not rated by
Fitch.
The 'AAA' rating on the senior certificates reflects the 2.75%
subordination provided by the 1.40% class M-1 certificate, 0.55%
class M-2 certificate, 0.30% class M-3 certificate, 0.20%
privately offered class B-1 certificate, 0.15% privately offered
class B-2 certificate and 0.15% privately offered class B-3
certificate. The ratings on the class M-1, M-2, M-3, B-1 and B-2
certificates are based on their respective subordination.
Fitch believes the above credit enhancement will be adequate to
support mortgagor defaults as well as bankruptcy, fraud and
special hazard losses in limited amounts. In addition, the
ratings reflect the quality of the mortgage collateral and the
strength of the legal and financial structures and GMAC Mortgage
Corporation's (rated 'RPS1' by Fitch) capabilities as servicer.
As of the cut-off date -- Aug. 1, 2004, the trust consists of one
group of 1,278 conventional, fully amortizing 30-year fixed-rate,
mortgage loans secured by first liens on one- to four-family
residential properties, with an aggregate principal balance of
$600,119,492. The average unpaid principal balance as of the cut-
off date is $469,577. The weighted average original loan-to-value
ratio (OLTV) is 69.86%. The weighted average FICO score for the
pool is 740. Rate/Term and Cash-out refinance loans represent
33.90% and 19.12% of the loan pool, respectively. The states that
represent the largest portion of the mortgage loans are:
* California (24.54%),
* Massachusetts (16.82%),
* New Jersey (9.03%),
* Illinois (6.05%), and
* Virginia (5.26%).
All other states represent less than 5% concentration of the total
mortgage pool.
None of the mortgage loans are 'high cost' loans as defined under
any local, state or federal laws. For additional information on
Fitch's rating criteria regarding predatory lending legislation,
see the press release issued May 1, 2003 entitled 'Fitch Revises
Rating Criteria in Wake of Predatory Lending Legislation',
available on the Fitch Ratings web site at
http://www.fitchratings.com/
The loans were sold by GMAC Mortgage Corporation to Residential
Asset Mortgage Products, the depositor. The depositor, a special
purpose corporation, deposited the loans in the trust, which then
issued the certificates. For federal income tax purposes,
elections will be made to treat the trust fund as two real estate
mortgage investment conduits.
GREATER CINCINNATI: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Greater Cincinnati Historical Properties LP
5349 Tompkins Avenue
Cincinnati, Ohio 45227
Bankruptcy Case No.: 04-16394
Type of Business:
Chapter 11 Petition Date: August 12, 2004
Court: Southern District of Ohio (Cincinnati)
Judge: Burton Perlman
Debtor's Counsel: Donald J. Rafferty, Esq.
Monica V. Kindt, Esq.
Cohen, Todd, Kite & Stanford, LLC
250 East Fifth Street
Suite 1200
Cincinnati, Ohio 45202-4139
Tel: (513) 333-5243
Fax: (513) 241-4495
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20 largest creditors.
HOLLINGER INC: Director General Richard Rohmer Retires
------------------------------------------------------
Hollinger, Inc., (TSX:HLG.C; HLG.PR.B) reported the retirement of
its director General Richard Rohmer, O.C., Q.C. Following the
retirement of General Rohmer, Hollinger Inc. has three independent
directors: Paul A. Carroll, Q.C., Donald M.J. Vale and Hon. Gordon
W. Walker, Q.C.
General Rohmer said, "While I have full confidence in the company
and its board, I have decided for personal reasons to retire from
the Board at this time. I reached this decision as a result of
the significant and persistent workload associated with my service
on the Board, which I did not anticipate when I joined the Board
in January for what I thought would be a limited time because of a
then-pending significant transaction. I have enjoyed thoroughly
working with the other directors and executives of Hollinger,
Inc., and wish them all well."
Peter G. White, Co-Chief Operating Officer of Hollinger, said,
"General Rohmer joined the board at the start of the year when
there were no independent directors, and has rendered invaluable
service in the refinancing and stabilization of the company. The
continuing directors of Hollinger, Inc., are grateful to General
Rohmer for his selfless contribution to the company in difficult
times."
The company will continue to take appropriate measures to adapt to
its current unusual and temporary circumstances.
General Rohmer, age 80, is Canada's most decorated citizen. A
former RCAF fighter-reconnaissance pilot, he concluded his career
in the Armed Forces after serving as Chief of Reserves. He is
Counsel to the law firm of Rohmer & Fenn, a best-selling author,
and has twice served as chancellor of the University of Windsor.
He has served as a director of Standard Broadcasting Limited,
Mediacom, Inc., Southam, Inc., and Ontario Development
Corporation.
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 INC: Investigation Hearing Moved to Aug. 30 & 31
----------------------------------------------------------
Hollinger, Inc., (TSX:HLG.C; HLG.PR.B) reported that the hearing
in respect of the application to the Ontario Superior Court of
Justice commenced by Catalyst Fund General Partner I, Inc.,
seeking an order directing an investigation under the Canada
Business Corporations Act has been rescheduled to take place on
August 30 and 31, 2004.
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.
HORIZON NATURAL: WL Ross $786M Sale Hearing Set for Aug. 31
-----------------------------------------------------------
A hearing to ratify and approve the sale of substantially all of
the assets of Horizon Natural Resources Company is scheduled
before Honorable William S. Howard on August 31, 2004, at 10:00
a.m., Eastern Time, at:
U.S. Bankruptcy Court for the Eastern District of Kentucky
100 East Vine Street, 3rd Floor Courtroom
Lexington, Kentucky 40507
As reported in the Troubled Company Reporter on August 19, 2004,
Wilbur Ross's Newcoal, LLC, and Oldcoal, LLC, in partnership with
A.T. Massey Coal Company, was the successful bidder at Horizon
Natural Resources Company's bankruptcy auction with a cash bid of
up to $304 million plus credit bidding of $482 million of second
lien notes, or a total of $786 million and the assumption of
liabilities.
Scott Tepper, Chief Executive Officer of Horizon, said: "The
auction was a tremendous success for Horizon and all of its
constituents. By selling all of Horizon's operations in one
package, we were able to maximize value for all of our creditors
while preserving jobs for the vast majority of our employees."
Mr. Ross added: "We are pleased to turn our attention to the coal
business instead of the bankruptcy process and we look forward to
providing secure jobs for the hourly and salaried employees whose
livelihood has been at risk for the past 20 months."
As reported in the Troubled Company Reporter on June 17, 2004,
Horizon Natural Resources Company announced that the United States
Bankruptcy Court has approved procedures for soliciting competing
bids and conducting an auction for the sale of a substantial
portion of Horizon's assets in connection with its proposed
chapter 11 reorganization plan.
Pursuant to the asset purchase agreement filed with the
Bankruptcy Court on June 2, 2004, Newcoal, LLC, a company formed
by Wilbur L. Ross and four other investors who collectively own a
majority of Horizon's Second Tier Secured Notes, has agreed to
acquire a significant portion of the operating assets of Horizon.
The agreement includes a cash purchase price of up to $255
million, payment of up to $5 million of cure costs, a guarantee
that proceeds of at least $17 million will be collected for
certain accounts receivable and inventory that are not part of the
purchased assets, and the assumption of certain liabilities.
Newcoal, LLC, was approved as the stalking horse bidder by the
Bankruptcy Court.
If approved by the Bankruptcy Court as the highest and best bidder
after an auction, Mr. Ross will assume operational and management
control of Newcoal, LLC. The five investors will backstop an
equity rights offering to all of Horizon's Second Tier
Noteholders, and upon consummation Mr. Ross will own at least 10%
of Newcoal LLC. His final ownership position will be determined by
the extent to which other holders subscribe.
Headquartered in Ashland, Kentucky, Horizon Natural Resources
(f/k/a AEI Resources Holding, is one of the United States' largest
producers of steam (bituminous) coal. The Company filed for
chapter 11 protection on February 28, 2002 (Bankr. E.D. Ky. Case
No. 02-14261). Ronald E. Gold, Esq., at Frost Brown Todd LLC,
represents the Debtor in its restructuring efforts. When the
Company filed for protection from its creditors, it listed over
$100 million in total assets and total debts.
INTEGRATED ELEC'L: Schatz & Nobel Files Class Action in Texas
-------------------------------------------------------------
The law firm of Schatz & Nobel, P.C., which has significant
experience representing investors in prosecuting claims of
securities fraud, reported that a lawsuit seeking class action
status has been filed in the United States District Court for the
Southern District of Texas on behalf of all persons who purchased
the publicly traded securities of Integrated Electrical Services,
Inc., (NYSE: IES) between November 10, 2003 and August 13, 2004 --
the Class Period.
The complaint alleges that during the Class Period, defendants
caused Integrated Electrical shares to trade at artificially
inflated levels through the issuance of false and misleading
statements. Specifically, the complaint alleges:
(1) that Integrated Electrical failed to timely make
appropriate adjustments for a series of large contracts
that were accounted for on a percentage of completion basis
in which the actual costs expected to be incurred already
exceeded the original projected costs;
(2) that Integrated Electrical had improperly accounted for
general and administrative costs in a particular contract
for costs that did not relate to that contract;
(3) that Integrated Electrical had improperly recognized
revenue on a particular contract; and
(4) that Integrated Electrical lacked adequate internal
controls and was therefore unable to ascertain its true
financial condition.
On August 13, 2004, Integrated Electrical announced that it would
not be able to file its fiscal 2004 Third Quarter Report on Form
10-Q in a timely manner and that the delay in filing may result in
a default under the terms of its outstanding debt and could affect
IES's ability to secure surety bonds. Integrated Electrical
further announced that its independent auditors had identified two
material weaknesses in its internal controls, that it was
withdrawing its previously announced earnings estimates for the
fourth quarter of fiscal 2004, and that Integrated Electrical may
have to restate its previously reported financial results.
Following this announcement, shares of Integrated Electrical
common stock fell $2.65 per share, or 40%, to close at $3.93 per
share on extremely high trading volume.
A member of the class, may, no later than October 19, 2004,
request that the Court appoint him or her as lead plaintiff of the
class. A lead plaintiff is a class member that acts on behalf of
other class members in directing the litigation. Although his or
her ability to share in any recovery is not affected by the
decision whether or not to seek appointment as a lead plaintiff,
lead plaintiffs make important decisions which could affect the
overall recovery for class members, including decisions concerning
settlement. The securities laws require the Court to consider the
class member(s) with the largest financial interest as
presumptively the most adequate lead plaintiff(s).
For more information about the case, its claims, and your rights,
contact:
Wayne T. Boulton
Schatz & Nobel
Telephone (800) 797-5499
http://www.snlaw.net
sn06106@aol.com
* * *
As reported in the Troubled Company Reporter on August 19, 2004,
Standard & Poor's Ratings Services lowered its corporate credit
and senior secured bank loan ratings on Houston, Texas-based
Integrated Electrical Services, Inc., to 'BB-' from 'BB', and its
subordinated debt rating to 'B' from 'B+'.
The ratings remain on CreditWatch with negative implications,
where they were placed on June 23, 2004.
"We are maintaining the CreditWatch listing because the company
recently announced that it will not be able to file its June 30
fiscal third quarter 10-Q on time and that it has withdrawn its
earnings expectations for fiscal 2004," said Standard & Poor's
credit analyst Heather Henyon. "As a result, it is unlikely that
Integrated Electrical will be able to meet our prior expectations
of funds from operations to total debt of around 20% or total debt
to EBITDA in the 3x-3.5x range for several quarters. Furthermore,
the delay in filing could cause a default under the company's debt
agreements."
An internal investigation has uncovered internal control and
financial reporting issues at two subsidiaries on a couple of
complex projects. Integrated Electrical' external auditors will
do further testing to see if these issues were isolated incidents
or if there is a systemic problem, which could have an adverse
effect on the credit profile.
Standard & Poor's will meet with management to discuss the
controls, organizational reporting lines, policies and training
that Integrated Electrical is putting in place to improve its
accounting and reporting procedures. In addition, Standard &
Poor's will review any potential amendment or waiver needed by
Integrated Electrical, as well as the company's prospects in the
near to intermediate term.
JILLIAN'S ENTERTAINMENT: Creditors Must File Claims by August 31
----------------------------------------------------------------
Creditors of Jillian's Entertainment Holding, Inc., and its
debtor-affiliates holding prepetition claims must file their
proofs of their claim those claim forms must be received on or
before August 31, 2004, 4:00 p.m. by:
Jillian's Entertainment Holding, Inc.
c/o Kutzman Carson Consultants, LLC
12910 Culver Blvd, Suite I
Los Angeles, California, 90066
Headquartered in Louisville, Kentucky, Jillian's Entertainment
Holdings, Inc. -- http://www.jillians.com/-- operates more than
40 restaurant and entertainment complexes in about 20 US states.
The Company filed for chapter 11 protection on May 23, 2004
(Bankr. W.D. Ky. Case No. 04-33192). Edward M. King, Esq., at
Frost Brown Todd LLC, and James H.M. Sprayregen, Esq., at Kirkland
& Ellis LLP, represent the Debtors in their restructuring efforts.
When the Company filed for protection from their creditors, they
listed estimated assets of more than $100 million and estimated
debts of over $50 million.
JTI-MACDONALD: Parent Will Pursue R.J. Reynolds Indemnification
---------------------------------------------------------------
Japan Tobacco Inc. (TSE: 2914) acknowledged that its Canadian
subsidiary, JTI-Macdonald Corp. (JTI-MC), this month received a
Notice of Assessment from the Quebec Ministry of Revenue (QMR)
demanding payment of approximately CAD1.36 billion in duties,
penalties and interest in relation to being accused of conducting
contraband activities from 1990 to 1998, when the company was
called RJR-Macdonald, before it was purchased by JT in 1999.
Totally Unexpected
This Notice of Assessment from the QMR was totally unexpected,
issued without any supporting facts, and is extraordinary given
that the Ministry demanded almost immediate payment. Considering
this, we are disappointed by this action and it is simply not
acceptable. This Notice of Assessment would have allowed the QMR
to confiscate JTI-MC assets if the full amount was not paid by the
August 23 deadline. This possibility would make it difficult to
continue business operations as usual. Therefore, in order to
ensure business continuity, suspending payment for the Notice of
Assessment and avoiding confiscation of JTI-MC assets, JTI-MC
filed for the Companies Creditors Arrangement Act - CCAA on August
24 (August 24 Japan time) before the Ontario Superior Court of
Justice. Filing the CCAA makes it possible for JTI-MC to continue
business operations as usual while its assets are safeguarded.
Denies Liability
It is important to note, Japan Tobacco Inc. says, that by filing
the CCAA, JTI-MC is by no means acknowledging responsibility for
these accusations. JTI-MC filed the CCAA as its best possible
choice at this time. In addition, JTI-MC intends to continue
taking all possible measures, including legal action to protect
its businesses.
Will Pursue RJR Indemnification
Pursuant to the 1999 Purchase Agreement between JT and R.J.
Reynolds Tobacco Co. and RJR Nabisco Inc., JT's view is that it
will be entitled to seek indemnification from RJR and any
successors thereof for any and all damages and expenses incurred
or suffered by JT and/or its affiliates, including JTI-MC, arising
out of this matter. JT will be exercising that right.
Japan Tobacco Inc. is the world's third largest international
manufacturer of tobacco products. The company manufactures
internationally recognized cigarette brands including Camel,
Winston, Mild Seven and Salem. Since its privatization in 1985, JT
has actively diversified its operations into pharmaceuticals and
foods. The company's net sales were JPY4.625 trillion in the
fiscal year ended March 31, 2004.
Supplemental Material
About the Companies' Creditors Arrangement Act (CCAA)
The "Companies' Creditors Arrangement Act (CCAA)" is a Canadian
law, which companies incorporated or conducting business in Canada
can apply for when an entity suffers considerable difficulties in
its financial position and thus cannot continue its daily business
as usual. The CCAA aims to give the company opportunities to
restructure and reorganize its business while allowing it to
continue day-to-day operations, and thus it does not mean that the
company is expecting to go under. There are a number of strong
organizations currently reorganizing its business under the CCAA.
Under the CCAA:
-- The company will take various measures to reorganize the
business where a Monitor will be appointed to monitor the
company and report back to the court and to creditors.
-- Various actions, including legal proceedings, against the
company will be stayed, and the company is allowed to
continue its normal business during its reorganization
process.
-- Once the plan of arrangement is approved by the required
majority of creditors in terms of dollar value and number of
creditors, the plan will be binding on all classes of
creditors with the sanction of the court.
Development of Events (Canadian Time)
* August 11: JTI-Macdonald was served with a Notice of
Assessment on August 10, issued by the QMR, which
demanded the company to pay a total of
approximately 1.36 billion Canadian dollars for
transactions that occurred between January 1, 1990
and December 31, 1998, when Macdonald was owned by
R.J. Reynolds. The due date for payment was
September 10. Prior to this notice, the company
had not been given notification of the assessment
from the Ministry.
* August 11: On the same day, the QMR issued "third party
demands" to various wholesalers for JTI-Macdonald,
ordering them to pay the Ministry all sums of
money payable to JTI-Macdonald.
* August 13: Alleging that JTI-Macdonald may evade tax
payments, the QMR obtained a judgement from the
Superior Court in Montreal and ordered JTI-
Macdonald to pay the sum by August 23.
* August 24: JTI-Macdonald filed for protection under the
Company's Creditors Arrangement Act (CCAA) before
the Ontario Superior Court of Justice.
About JTI-Macdonald
Company name: JTI-Macdonald Corp.
President & CEO: Michael A. Poirier
Headquarters: Toronto, Province of Ontario, Canada
Business area: Manufacturing and distribution of tobacco
products (cigarettes, RYO, cigars etc.)
Sales volume: 5.281 billion cigarettes (for the year 2003)
Sales including tax: 798 million Canadian dollars (for the year
2003)
Sales excluding tax: 424 million Canadian dollars (for the year
2003)
Operating income: 123 million Canadian dollars (for the year
2003)
Established in: 1999
No. of employees: 508 (as of September 2003)
Capital: 125 million Canadian dollars
(as of December 31, 2003)
Factory location: Montreal, Province of Quebec,
Canada Major brands: Export A, Camel, Winston etc.
Company history: * 1858: Founded as Macdonald Tobacco
* 1928: Launched "Export A" brand cigarettes
* 1974: Acquired by R.J. Reynolds, then
renamed RJR Macdonald Corp.
* 1999: Renamed JTI-Macdonald Corp.,
following JT's acquisition of
RJR International
KAISER ALUMINUM: Silica Representative Retains Dr. James Dertouzos
------------------------------------------------------------------
Future Silica Claimants' Representative, Anne M. Ferazzi, sought
and obtained the authority of United States Bankruptcy Court for
the District of Delaware to retain James N. Dertouzos,
Ph.D. to research and analyze future silica-related claims
against the Kaiser Aluminum Corporation and its debtor-affiliates,
effective as of May 20, 2004.
Dr. Dertouzos is expected to:
(a) provide thorough and detailed analysis of the number, type
and value of potential silica-related personal injury
claims against the estates;
(b) avail himself for discovery relating to any aspect of the
cases; and
(c) appear in Court to provide testimony regarding the results
of his research and analysis.
Ms. Ferazzi selected Dr. Dertouzos for his educational and
professional background in economics and his extensive consulting
experience in a wide diversity of industries. Since receiving
his doctorate in economics from Stanford University in 1979, Dr.
Dertouzos has provided independent consulting services to a broad
set of private and public sector organizations, industry
associations, and attorneys related to regulatory, anti-trust,
and other legal issues. Dr. Dertouzos has appeared before the
Congress of the United States of America on more than one
occasion to provide testimony on anti-trust and other legal
issues, and has been a visiting lecturer and professor at various
universities throughout the United States. Since 1987, Dr.
Dertouzos was affiliated with the RAND Corporation in Santa
Monica, California, as a senior economist.
Dr. Dertouzos will be compensated based on his $450 hourly rate,
subject to periodic adjustments to reflect economic and other
conditions. Dr. Dertouzos' compensation and reimbursement for
actual and necessary expenses will be payable in accordance to
standard procedures for compensation and reimbursement of
expenses of professionals.
Dr. Dertouzos assures the Court that he does not have any
connection of any kind or nature with the Debtors, the Official
Committee of Unsecured Creditors, the Official Committee of
Asbestos Claimants, the Legal Representative for Future
Asbestos Claimants, the Future Silica Claimants' Representative,
and other parties-in-interest, which is or would be adverse to
the interests of the Debtors' creditors and estates.
Headquartered in Houston, Texas, Kaiser Aluminum Corporation --
http://www.kaiseral.com/-- operates in all principal aspects of
the aluminum industry, including mining bauxite; refining bauxite
into alumina; production of primary aluminum from alumina; and
manufacturing fabricated and semi-fabricated aluminum products.
The Company filed for chapter 11 protection on February 12, 2002
(Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones,
Day, Reavis & Pogue, represent the Debtors in their restructuring
efforts. On September 30, 2001, the Company listed $3,364,300,000
in assets and $3,129,400,000 in debts. (Kaiser Bankruptcy News,
Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000)
LB-UBS COMMERCIAL: Fitch Gives Double-B Ratings to Three Classes
----------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, series 2004-C6, commercial
mortgage pass-through certificates are rated by Fitch Ratings as
follows:
-- $78,000,000 class A-1 'AAA';
-- $222,000,000 class A-2 'AAA';
-- $109,000,000 class A-3 'AAA';
-- $60,000,000 class A-4 'AAA';
-- $54,000,000 class A-5 'AAA';
-- $470,130,000 class A-6 'AAA';
-- $188,441,000 class A-1A 'AAA';
-- $13,465,000 class B 'AA+';
-- $23,564,000 class C 'AA';
-- $15,148,000 class D 'AA-';
-- $13,466,000 class E 'A+';
-- $15,148,000 class F 'A';
-- $1,346,519,865 class X-CL* 'AAA';
-- $1,228,397,000 class X-CP* 'AAA';
-- $11,782,000 class G 'A-';
-- $11,782,000 class H 'BBB+';
-- $8,416,000 class J 'BBB';
-- $16,831,000 class K 'BBB-';
-- $1,683,000 class L 'BB+';
-- $6,733,000 class M 'BB';
-- $5,049,000 class N 'BB-';
-- $3,367,000 class P 'NR';
-- $1,683,000 class Q 'NR';
-- $1,683,000 class S 'NR';
-- $15,148,865 class T 'NR'.
* Notional Amount and Interest Only.
Classes P, Q, S, and T are not rated by Fitch. Classes A-1, A-2,
A-3, A-4, A-5, A-6, A-1A, B, C, D, E, and F are offered publicly,
while classes X-CL, X-CP, G, H, J, K, L, M, N, P, Q, S, and T are
privately placed pursuant to rule 144A of the Securities Act of
1933. The certificates represent beneficial ownership interest in
the trust, primary assets of which are 94 fixed-rate loans having
an aggregate principal balance of approximately $1,346,519,865, as
of the cutoff date.
For a detailed description of Fitch's rating analysis, please see
the report titled 'LB-UBS Commercial Mortgage Trust 2004-C6',
dated Aug. 4, 2004 available on the Fitch Ratings web site at
http://www.fitchratings.com/
LUBZ INC: Case Summary & 9 Largest Unsecured Creditors
------------------------------------------------------
Debtor: Lubz Inc.
3053 Rancho Vista Block #H Box 304
Palmdale, California 93551
Bankruptcy Case No.: 04-15581
Chapter 11 Petition Date: August 20, 2004
Court: Central District of California (San Fernando Valley)
Judge: Geraldine Mund
Debtor's Counsel: Christopher C. Gautschi, Esq.
204 Via Cordova
Newport Beach, CA 92663
Tel: 562-818-6315
Total Assets: $197,000
Total Debts: $1,834,058
Debtor's 9 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Citicapital loan secured by $320,000
450 Mamaroneck Ave. 3rd Fl. business
Harrison, NJ 10528
Zarin Investment Grp. LLC Sep. 10, 2000 $251,872
c/o Vince Stefano Jr. promissory note
101 S. First St. # 402
Burbank, CA 91502
Mizar, Inc., Zarin IG business services $24,549
Business Financial Services business services $24,549
2002-2004
Honeywell Consumer Prod. 2003 judgment $14,000
Group
First Equity Card Corp. 2002-2004 financial $9,500
services
ADVO, Inc. bus. services $7,504
2002-2004
TopcoAccurate Equipment 2002-2004 accurate $6,177
equipment
Bank of America 2004 judgment $956
MEDIA GROUP: Can Access $200K of Marquette's Cash Collateral
------------------------------------------------------------
The Honorable Alan H. W. Shiff, of the U.S. Bankruptcy Court for
the District of Connecticut, gave his approval to The Media Group,
Inc. and its debtor-affiliates' request to use $200,000 of its
secured creditor's cash collateral to pay postpetition business
expenses necessary to avoid irreparable harm to the estate.
Marquette Commercial Finance, Inc., is Media Group's secured
creditor.
The Debtors submit that without authority to use the proceeds of
accounts receivable and cash received from the sale of the assets,
inventory or otherwise after the petition date, they will be
forced to terminate operations and abort any chance for a
successful reorganization.
The Debtors will use the Cash Collateral in accordance with a
budget through September 30, 2004, projecting:
American
Media Direct Int'l
Group, Inc. Marketing Media Total
----------- --------- ------- --------
Net Sales $645,000 $23,000 $30,000 $698,000
Disbursements 625,250 20,000 5,226 650,476
----------- --------- ------- --------
$19,750 $3,000 $24,774 $47,524
To protect Marquette Commercial's security interests, replacement
liens upon post-petition assets were granted which are of the same
extent, validity, priority and enforceability with that of the
pre-petition liens.
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 and 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.
METROMEDIA INT'L: June 30 Balance Sheet Upside-Down by $11.4 Mil.
-----------------------------------------------------------------
Metromedia International Group, Inc. (currently traded as:
OTCBB:MTRM.OB - Common Stock and OTCPK:MTRMP - Preferred Stock),
the owner of interests in various communications and media
businesses in Russia and the Republic of Georgia, reported
financial results for the second quarter ended June 30, 2004.
Highlights for the three months ended June 30, 2004 vs. the three
months ended June 30, 2003:
-- Consolidated revenues of $19.3 million vs. $17.8 million -
improvement of 8%
-- Consolidated gross margin as a percentage of revenues of
70.3% vs. 67.5%
-- Consolidated operating loss of $(0.8) million vs. $(4.3)
million - improvement of $3.5 million
* Corporate overhead of $3.2 million vs. $7.5 million -
improvement of $4.3 million
-- Consolidated adjusted EBITDA(1) of $9.4 million vs. $3.5
million - improvement of $5.9 million
Highlights for the six months ended June 30, 2004 vs. the six
months ended June 30, 2003:
-- Consolidated revenues of $37.9 million vs. $34.5 million -
improvement of 10%
-- Consolidated gross margin as a percentage of revenues of
69.0% vs. 68.8%
-- Consolidated operating loss of $(1.2) million vs. $(11.8)
million - improvement of $10.6 million
* Corporate overhead of $6.3 million vs. $17.4 million -
improvement of $11.1 million
-- Consolidated adjusted EBITDA(1) of $16.2 million vs. $0.9
million - improvement of $15.3 million
The improvement in both consolidated revenues and gross margins,
on a year-over-year basis, is primarily attributable to the
financial performance of our PeterStar business venture.
The improvement in consolidated adjusted EBITDA(1), on a year-
over-year basis, principally reflects the significant reduction in
corporate overhead expenses that the Company has realized in 2004
along with the favorable financial performance of our Magticom
business venture and to a lesser extent the financial performance
of our PeterStar business venture.
Financial Performance of Principal Core Businesses
Joint Stock Company PeterStar - Consolidated Business Venture
PeterStar, the leading competitive local exchange carrier in St.
Petersburg, Russia, in which the Company presently has a 71%
ownership interest, provides telecommunications services in the
northwest region of Russia. PeterStar operates a digital, fiber
optic telecommunication network that is interconnected with
incumbent St. Petersburg and Moscow public telephony operators and
with various mobile telephone, long distance and domestic and
international IP-Service operators. PeterStar also offers business
and residential end users a suite of voice telephony, data
communications and IP-based services, in addition to providing
traffic termination and transport services for other carriers.
PeterStar's revenues increased by 8% and 10% for the three and six
months ended June 30, 2004, respectively, as compared to the same
periods in 2003, due principally to revenue growth in the Data and
Internet, Business Fixed and Regulated (Pskov and Vasilievsky
Island) service products, partially offset by a reduction in
transit carrier revenues. PeterStar's 2004 focus on the fast-
growing Data and Internet services market is reflected in the
significant increases in both revenues and subscribers for these
promising new services. The growth in Regulated services revenues
was principally attributable to the inclusion of Pskov City
Telephone Network revenues, as PeterStar acquired PGTS in April
2004.
The increase in gross margin as a percent of revenues in both the
three and six month periods ended June 30, 2004, as compared to
the same periods in 2003, is primarily due to better utilization
of the PeterStar telecommunications network and the reduction of
lower margin transit carrier revenues on a year-over-year basis.
In addition, Regulated services gross margins increased as PGTS
gross margins are higher than those historically recognized at
PeterStar. The growth in operating expenses is principally due to
the overall growth in the business and the acquisitions during the
quarter.
Magticom GSM - Equity Method Business Venture
Magticom, in which the Company presently owns a 34.5% ownership
interest, operates a wireless communications network and markets
mobile voice communication services to private and commercial
users nationwide in the Republic of Georgia. Magticom's network
offers services using GSM standards in both the 900 MHz and 1800
MHz spectrum range.
Magticom revenues grew by 37% and 40% for the three and six months
ended June 30, 2004, respectively, as compared to the same periods
in 2003, due principally to strong customer demand. Magticom
presently enjoys a significant lead in subscribers over its
nearest competitor in the Republic of Georgia and Magticom
anticipates further increases in its subscriber base as it
continues to penetrate a market that currently has low telephone
density rates. Furthermore, positively contributing to Magticom
revenue growth on a year-over-year basis is the effect of a
favorable movement in the exchange rate between the Lari and US
Dollar.
The increase in the gross margin as a percentage of revenues, in
2004 as compared to 2003, is attributable to higher network
utilization and as a result Magticom's overall fixed costs of
services as a percentage of revenue has decreased. The reduction
in capital expenditures in 2004 as compared to 2003 is principally
due to the extensive expansion of the network in 2003 and the
build out of Magticom's administrative facilities in 2003.
Liquidity Issues and Recent Developments
Corporate Liquidity
As of June 30, 2004 and July 31, 2004, the Company had
approximately $31.4 million and $29.8 million, respectively, of
unrestricted corporate cash on hand. In addition, as of June 30,
2004, the Company's consolidated business ventures held $0.9
million of cash. Furthermore, as of June 30, 2004, the Company's
unconsolidated business ventures had $13.6 million of cash on hand
which is held in banks in the Republic of Georgia.
The Company projects that its current corporate cash reserves,
anticipated cash proceeds of non-core media business sales and
anticipated continuing dividends from core business operations
will be sufficient for the Company to meet, on a timely basis, its
future corporate overhead requirements and debt service
obligations. However, the Company cannot assure that dividends
from core businesses will be declared and paid nor can it assure
that it will be successful in completing the sale of its remaining
non-core media businesses or that the realized cash proceeds, if
any, will be sufficient to meet short-term liquidity requirements.
The Company also is subject to legal and contractual restrictions,
including those under the indenture for the Senior Notes, on its
use of any cash proceeds from the sale of its assets or those of
its business ventures.
Separately, the Company projects that it has sufficient corporate
cash on hand to support the Company's planned operating, investing
and financing cash flows through the end of 2004, including the
Company's $8.0 million semi-annual interest payment obligation due
on September 30, 2004, associated with its $152.0 million
aggregate principal amount (fully accreted) 10 1/2% Senior
Discount Notes, due 2007. This projection does not include cash
inflows that might reasonably arise from cash proceeds realized
from the sale of the Company's non-core media businesses or
operating business venture dividend distributions which would
further strengthen our current liquidity position.
However, the Company does not believe that it has sufficient
corporate cash on hand today to support the Company's planned
operating, investing and financing cash flows through March 31,
2005, including the Company's $8.0 million semi-annual interest
payment that is due on March 31, 2005 associated with its Senior
Notes.
If the Company is not able to satisfactorily address the liquidity
issues described above, the Company may have to resort to certain
other measures, including ultimately seeking the protection
afforded under the U.S. Bankruptcy Code. The Company cannot
provide assurances at this time that it will be successful in
avoiding such measures. Additionally, the Company has a
stockholders deficit and has suffered recurring operating losses
and net operating cash deficiencies.
Asset Sales
The Company currently anticipates that the pending sale, as
previously announced on July 9, 2004, of seventeen of the
Company's remaining eighteen Radio businesses will close in early
September 2004, and as such, the Company anticipates the receipt
of additional cash proceeds of $13.04 million on the date of
closing.
Capital Restructuring and Other Strategic Alternatives
Opportunities to restructure the Company's balance sheet as well
as other strategic alternatives are being pursued and evaluated,
but present Company plans presume the continued service of the
Senior Notes on current terms and the continued deferral of the
payment of dividends on the Company's outstanding preferred stock.
The Company cannot provide assurances at this time that a capital
restructuring or other strategic alternative will be consummated
or, if consummated, that such effort would produce a material
improvement in short-run cash flows or equity valuations.
Activities related to Equity Securities
On September 24, 2003, the Company's equity securities were
removed from quotation on the OTC Bulletin Board trading system
because the Company was not then in compliance with NASD Rule
6530. As a result, the Company's Common Stock and Preferred Stock
were then quoted on the Pink Sheets. The Company filed its March
31, 2004 Form 10-Q on June 18, 2004, thus regaining compliance
with OTCBB trading eligibility requirements.
On August 6, 2004, the Company's Common Stock (OTCBB:MTRM.OB)
began trading on the OTC Bulletin Board. The Company's Preferred
Stock (OTCPK:MTRMP) remains quoted on the Pink Sheets.
About Metromedia International Group
Through its wholly owned subsidiaries, the Company owns interests
in communications and media businesses in Russia and the Republic
of Georgia. These include mobile and fixed line telephony
businesses and wireless and wired cable television networks. The
Company has focused its principal attentions on continued
development of its core telephony businesses in Northwest Russia
and the Republic of Georgia, and has substantially completed a
program of gradual divestiture of its non-core media businesses.
The Company's core telephony businesses include PeterStar, the
leading competitive local exchange carrier in St. Petersburg,
Russia, and Magticom, the leading mobile telephony operator in the
Republic of Georgia.
Balance Sheet Insolvency
At June 30, 2004, Metromedia International Group's balance sheet
showed an $11,469,000 stockholders' deficit, compared to a
$13,155,000 deficit at December 31, 2003.
MIRANT CORP: Gets Conditional Court Nod to Implement KERP Phase II
------------------------------------------------------------------
Judge Lynn of the U.S. Bankruptcy Court for the Northern District
of Texas authorized Mirant Corporation and its debtor-affiliates
to make the Performance Bonus payments under Phase II of the KERP
on the proposed payment schedule, given that the Plan is filed by
November 22, 2004. With the passing of each month after November
22, 2004 for which a plan of reorganization is not filed, the
Total Performance Percentage each employee is eligible to is
reduced by 10%.
Management Council employees who are terminated other than for
cause before November 22, 2004, will receive the pro rata portion
of the total Performance Bonus award for which they are eligible,
based on time worked between August 11, 2004 and the employee's
date of termination. Management Council employees who are
terminated other than for cause after November 22, 2004, are
entitled to the total Performance Bonus award for which they are
eligible.
The Performance Bonus payments will be paid in cash to employees
entitled to participate in the Performance Bonus according to this
schedule:
Schedule of Payments Percentage of Bonus
Tier (if Plan is filed by 11/22/04) Base Salary Award
---- ------------------------------ ------------- -----
I Filing of plan of reorganization 18.75% 125%
Plan confirmation 43.75%
Plan Effective Date 62.50%
II Filing of plan of reorganization 15.00% 100%
Plan confirmation 35.00%
Plan Effective Date 50.00%
III Filing of plan of reorganization 9.60% 64%
Plan confirmation 22.40%
Plan Effective Date 32.00%
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 Nos. 39 & 42; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
MORGAN STANLEY: Fitch Assigns Low-B Ratings to Six Cert. Classes
----------------------------------------------------------------
Morgan Stanley Capital I Trust's commercial mortgage pass-through
certificates, series 2004-IQ8, are rated by Fitch Ratings as
follows:
-- $10,000,000 class A-1 'AAA';
-- $61,500,000 class A-2 'AAA';
-- $119,000,000 class A-3 'AAA';
-- $123,500,000 class A-4 'AAA';
-- $354,129,000 class A-5 'AAA';
-- $18,981,000 class B 'AA';
-- $21,828,000 class C 'A';
-- $7,592,000 class D 'A-';
-- $759,237,960 class X-1* 'AAA';
-- $715,341,000 class X-2* 'AAA';
-- $8,542,000 class E 'BBB+';
-- $4,745,000 class F 'BBB';
-- $6,643,000 class G 'BBB-';
-- $5,695,000 class H 'BB+';
-- $2,847,000 class J 'BB';
-- $3,796,000 class K 'BB-';
-- $2,847,000 class L 'B+';
-- $949,000 class M 'B';
-- $949,000 class N 'B-';
-- $5,694,960 class 0 'NR'.
* Notional Amount and Interest Only.
Class O is not rated by Fitch. Classes A-1, A-2, A-3, A-4, A-5,
B, C, and D are offered publicly, while classes X-1, X-2, E, F, G,
H, J, K, L, M, N, and O are privately placed pursuant to rule 144A
of the Securities Act of 1933. The certificates represent
beneficial ownership interest in the trust, primary assets of
which are 100 fixed-rate loans having an aggregate principal
balance of approximately $759,237,960, as of the cutoff date.
For a detailed description of Fitch's rating analysis, please see
the report titled 'Morgan Stanley Capital I Trust 2004-IQ8', dated
Aug. 2, 2004 available on the Fitch Ratings web site at
http://www.fitchratings.com
NATIONAL CENTURY: Gets Court Nod to Obtain Docs. from 14 Firms
--------------------------------------------------------------
The Plan contemplates that, post-confirmation, the Unencumbered
Assets Trust will be the successor-in-interest to certain rights
and assets of National Century Financial Enterprises, Inc., and
its debtor-affiliates including the potential causes of action
being sought to be investigated.
Pursuant to Rule 2004 of the Federal Rules of Bankruptcy
Procedure, the Trust sought and obtained the permission of the
U.S. Bankruptcy Court for the Southern District of Ohio to obtain
documents from 14 entities:
(1) Brown Brothers Harriman,
(2) California Bank & Trust,
(3) Cede & Co.,
(4) Depository Trust Company,
(5) Donaldson, Lufkin & Jenrette Securities Corp.,
(6) First Interstate,
(7) GE Capital,
(8) Huntington National Bank
(9) Mellon Bank,
(10) PNC Merchant Services,
(11) PaineWebber,
(12) Summit Bank,
(13) Suntrust, and
(14) Wells Fargo
As reported in the Troubled Company Reporter on June 25, 2004, the
documents that the Trust will obtain concerns:
-- the Debtors' properties, assets, liabilities and financial
condition;
-- matters that may affect the continued administration of the
Debtors' estate; and
-- the identification and prosecution of certain potential
claims against third parties by a representative of the
Debtors' estates.
The Trust will also depose Kathy Wilson, a witness who has
knowledge of the subject matters. Ms. Wilson is an employee of
Home Medical of America and Homecare Concepts of America, which
were entities both owned by the Debtors' Founders and funded by
the Debtors' healthcare receivable program.
Sydney Ballesteros, Esq., at Gibbs & Bruns, in Houston, Texas,
relates that the discovery is essential for the Trust to discharge
properly its duties to the creditors it represents.
Headquartered in Dublin, Ohio, National Century Financial
Enterprises, Inc. -- http://www.ncfe.com/-- is the market leader
in healthcare finance focused on providing medical accounts
receivable financing to middle market healthcare providers. The
Company filed for Chapter 11 protection on November 18, 2002
(Bankr. S.D. Ohio Case No. 02-65235). The healthcare finance
company prosecuted its Fourth Amended Plan of Liquidation to
confirmation on April 16, 2004. Paul E. Harner, Esq., at Jones Day
represents the Debtors in their restructuring efforts.
NRG ENERGY: Complete Energy Closes Batesville Plant Acquisition
---------------------------------------------------------------
Complete Energy Holdings, LLC successfully completed its
acquisition of the Batesville Electric Generating Facility from
NRG Energy Inc. The Batesville facility is an 837-megawatt natural
gas-fired generating facility located in Batesville, Mississippi.
As reported in the Troubled Company Reporter on May 24, 2004, NRG
Energy, Inc. has reached an agreement to sell its 100 percent
interest in an 837-megawatt generating plant in Batesville,
Mississippi to Complete Energy Partners, LLC. NRG will realize
cash proceeds of $26.5 million, subject to certain purchase price
adjustments and transaction costs, and Complete Energy Partners
will assume approximately $304 million of outstanding project
debt.
In addition, the transaction will result in the elimination of
approximately $292 million in consolidated debt from NRG's
March 31, 2004 balance sheet. This amount reflects a valuation
adjustment that was recorded against the level of assumed debt as
a result of Fresh Start accounting that NRG adopted on
December 5, 2003. The transaction is expected to close during
the third quarter of 2004, subject to certain conditions
precedent including receipt of regulatory approvals.
"We are very pleased with the execution of the Batesville
purchase, and we are energized about the possibilities that lie
ahead for this facility and for Complete Energy. The Batesville
plant will serve as a valued foundation for Complete Energy, as we
pursue future acquisitions of both contracted and merchant power
generation assets," said Milton Scott, managing director of
Complete Energy.
The Batesville facility will be operated by Complete Energy and
will continue to serve Virginia Electric and Power Company and
Aquila Energy Marketing Corporation, under existing long-term
power purchase contracts.
About Complete Energy
Complete Energy is an acquirer, owner and operator of power
generation assets, with offices in Houston, and Pittsburgh. It is
led by industry veterans Lori Cuervo, Peter Dailey, Milton Scott
and Hugh Tarpley. Complete Energy is actively acquiring other
merchant and contracted power plants currently being divested by
utilities, independent power producers, and financial
institutions. Complete Energy is allied with Power Plant
Professionals, LLC, an experienced operations and maintenance
provider headquartered near Charlotte, N.C., and Fulcrum Power
Services, LP, a leading commercial energy services company
headquartered in Houston.
About NRG Energy
NRG Energy, Inc. owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter 11
on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, P.C., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring.
NORTHWEST AIR: Working to Reduce Net Domestic Distribution Costs
----------------------------------------------------------------
Northwest Airlines (Nasdaq: NWAC) reported steps to reduce its net
domestic distribution costs by aligning them with those of the
low-cost carriers it increasingly is competing with for customers.
Northwest will offer travel agent and consumers varied options
that allow them to choose the level of service they desire when
issuing or purchasing domestic tickets.
The initiative is the carrier's latest effort to reduce further
its non-labor costs in order to remain competitive.
Notwithstanding that announcement, Northwest Airlines said that
contrary to assertions made in a news release by Sabre Travel
Network (NYSE: TSG), the airline's initiatives do not violate "the
spirit or the letter" of the direct connect availability (DCA 3)
ticket distribution agreements it signed with Sabre in July of
2003.
The airline said that it carefully reviewed its agreements with
all of the global distribution services -- GDSs -- through which
it distributes its product prior to announcing its distribution
cost reduction initiatives.
"We remain convinced that the GDS initiatives we announced are in
full compliance with both the letter and the spirit of the Sabre
agreement," said Al Lenza, vice president of distribution and e-
commerce.
Sabre announced that they intend to institute measures that will
make it more difficult for travel agents and consumers to view
Northwest flights and purchase Northwest tickets. Sabre also
announced that it plans to increase the fees that Northwest must
pay Sabre.
Lenza continued, "The fact that Sabre took these actions prior to
the implementation of any of these initiatives makes clear that
Sabre's purpose is to prevent Northwest from making these much-
needed changes."
Northwest Airlines is the world's fifth largest airline with hubs
at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam,
and approximately 1,500 daily departures. Northwest and its
travel partners serve nearly 750 cities in almost 120 countries on
six continents.
* * *
As reported in the Troubled Company Reporter on July 30, 2004,
Standard & Poor's lowered its ratings on Northwest Airlines Corp.
and its Northwest Airlines Inc. subsidiary, including lowering the
corporate credit rating to 'B' from 'B+'. The 'B+' bank loan
rating was not lowered, and a recovery rating of '1' assigned,
reflecting strong collateral protection for that facility. Some
enhanced equipment trust certificates were lowered by more than
one notch, reflecting evaluation of collateral coverage and other
protections for individual securities.
"The downgrade of Northwest's corporate credit rating is due to
concerns that the airline's ongoing efforts to lower its labor
costs, while likely to achieve some savings, may nonetheless leave
it at a competitive labor cost disadvantage over the long term,"
said Standard & Poor's credit analyst Philip Baggaley. "In
addition, Northwest, like other U.S. airlines, is under pressure
from high fuel prices and rising price competition in the domestic
market, which have delayed and weakened an anticipated recovery in
earnings and cash flow," the credit analyst continued. The
revised ratings reflect a weak airline industry revenue
environment, substantial debt and pension obligations, and a need
to lower its relatively high labor costs. However, the airline's
credit profile benefits from substantial liquidity, with
$2.9 billion of unrestricted cash, and ongoing cost-cutting
efforts. Northwest's management is seeking to negotiate
concessions from the airline's labor groups, but faces a challenge
in persuading unions to accept needed cost-saving changes, given
the company's ample near-term liquidity. The pilot union is
considered to be most receptive to these proposals, and has
already made an offer to cut compensation, though not to the
extent sought by management.
The $975 million credit facility available to Northwest Airlines,
Corp., and Northwest Airlines, Inc., is rated one notch higher
than the corporate credit rating. The recovery rating is '1',
indicating a high expectation of full recovery of principal in the
event of bankruptcy. The facility, which consists of a
$725 million revolving credit facility due October 2005 and a
$250 million 364-day revolving credit facility expiring October
2004 (renewable annually, but any amounts outstanding upon
nonrenewal would be due October 2005), is secured by Northwest
Airlines, Inc.'s Pacific routes and certain aircraft. The routes,
which include valuable rights to serve restricted markets such as
Japan and China, and routes that are for cargo flying, should be
attractive to other U.S. airlines. Standard & Poor's discounted
the appraised values of these routes in its simulated default
scenario to replicate the conditions under which these routes
might be repossessed and sold. The credit facility is secured
also by certain aircraft, but their value is believed to be
minimal. Even after the discounts applied in a simulated default
scenario, amounts drawn under the credit facility should be
repaid.
The long-term rating outlook is negative. Ratings could be
lowered if the company does not make significant progress in
lowering its high labor costs and renewing its $975 million of
bank credit facilities. Pressure on operating results due to
industrywide factors such as high fuel prices or renewed terrorist
attacks could also prompt a downgrade.
OMNI FACILITY: Inks Pact to Sell Landscape Assets to ValleyCrest
----------------------------------------------------------------
ValleyCrest Companies, a privately held national landscape and
horticultural services company based in Calabasas, California,
signed an agreement on Friday, August 20, 2004, to purchase the
landscape assets of Omni Facility Services, Inc. Omni Facility
Services filed for Chapter 11 bankruptcy protection on
June 9, 2004. The Omni Landscape Group, which employs 640, has
annual revenues of approximately $50 million.
ValleyCrest Companies President, Richard A. Sperber, said, "we are
very excited about the people of Omni Landscape Group joining the
ValleyCrest family and look forward to welcoming them to
ValleyCrest. This acquisition will help us continue to grow and
develop our landscape maintenance business, strengthen our
position in several east coast markets and deepen our penetration
in Atlanta and the Mid-Atlantic region. We look forward to
working with the people of Omni and serving their customers for
years to come."
Omni Landscape Group provides landscape services in:
* the Atlanta area,
* the greater Washington D.C. area,
* the Philadelphia area,
* Destin, Florida, and
* Birmingham, Alabama.
During the late 1990s, Omni Landscape Group acquired former
landscape companies:
* Morrell Group in Atlanta, Georgia,
* Heyser Landscaping, Inc., of Norristown, Pennsylvania, and
* Spring Gardens in Maryland.
The acquisition will go through the process and approval required
by the U.S. Bankruptcy Court. If approved, the deal is expected
to close within 45 days.
Prior acquisitions by ValleyCrest Companies include the purchase
of:
* The Impact Group, Delray Beach, Florida in 2003;
* the landscape construction operations of TruGreen LandCare, a
division of ServiceMaster, in 2001;
* North Haven Gardens, Dallas, Texas; and
* STM Landscape Services, Oakton, Virginia in 2000.
About ValleyCrest Companies
Founded in 1949, ValleyCrest Companies is the nation's leading
provider of landscape development and maintenance services, and a
major supplier of trees. ValleyCrest Companies offers an
integrated approach to landscape contracting, managing landscape
projects from inception through extended maintenance. ValleyCrest
Companies has been awarded some of the most prestigious landscape
projects in the country, including the Gardens at The Getty
Center, the Bellagio Hotel, Green Valley Station Ranch & Casino,
Disney's Animal Kingdom, Invesco Field at Mile High Stadium, and
Pelican Hill Golf Club, and hundreds of master-planned
communities, resorts, theme parks, golf courses, shopping malls,
corporate facilities, private estates, and urban parks throughout
the U.S.
ValleyCrest Companies is privately held, with a workforce of more
than 8,000 people nationwide and annual revenue of approximately
$700 million. ValleyCrest Companies has four businesses:
ValleyCrest Landscape Development, the nation's largest landscape
construction company, ValleyCrest Landscape Maintenance, the
nation's leading landscape maintenance provider, ValleyCrest Golf
Course Maintenance, the nation's premier provider of golf course
maintenance services, and, Valley Crest Tree Company, the largest
mover and producer of containerized specimen trees in the western
United States with over 800 acres of growing grounds and a
supplier of garden art pottery and foliage. In addition, U.S.
Lawns, a landscape maintenance franchise is a wholly owned
subsidiary of ValleyCrest Companies.
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.
ORIGEN FINANCIAL: Fitch Cuts Class M-2 Ratings to CCC
-----------------------------------------------------
Fitch Ratings performed a review of Origen Financial, Inc.,
Manufactured Housing contracts, series 2001-A. Based on the
review, Fitch took these rating actions:
-- Class A-4 affirmed at 'AAA';
-- Class A-5 affirmed at 'AA';
-- Classes A-6 and A-7 are affirmed at 'A';
-- Class M-1 is affirmed at 'BB';
-- Class M-2 is downgraded to 'CCC' from 'B-'.
Origen Financial, Inc., is a privately held company owned by a
number of qualified institutional buyers and accredited investors.
Sun Communities, rated 'BBB' by Fitch, owns approximately 33% of
the outstanding shares of the company. Origen has been providing
financing to borrowers for the purchase of manufactured housing
since 1996. Origen, formerly named Dynex Financial, originated
$188 million in 2003 and has a servicing portfolio of
approximately $1.3 billion. Origen has a national servicing
center in Ft. Worth, Texas. Their chattel lending operations and
corporate headquarters are located in Southfield, Michigan.
Origen has completed seven public securitizations, five under the
Merit Securities name, and two under the Origen name. Vanderbilt
Mortgage and Finance acted as the back-up servicer on both Origen
transactions.
Loss severity on Origen's liquidated loans have been better than
the industry average due to the company's dealer relationships and
ability to provide financing for purchasers of repossessed units.
Despite this advantage, problems in the manufactured housing
sector have caused loss severities to be higher than Fitch's
initial expectations. This, coupled with higher default rates,
has reduced the relationship between expected losses and credit
enhancement.
OWENS CORNING: Judge Fullam Gets Substantive Consolidation Briefs
-----------------------------------------------------------------
Owens Corning and Credit Suisse First Boston delivered brief
Briefs to the Honorable John P. Fullam, Sr., the U.S. District
Court judge overseeing parts of Owens Corning's chapter 11
proceeding, to help him decide whether Owens Corning and its
debtor-affiliates should be rolled into one, with all creditors
being treated equally, or whether claims will be paid on a debtor-
by-debtor basis starting at the lowest level in the corporate
structure. The answer to the question shifts hundreds of millions
of dollars of value between unsecured bank lenders and other
creditor constituencies.
Norman L. Pernick, Esq., at Saul Ewing, LLP, in Wilmington,
Delaware, counsel for Owens Corning and its debtor-affiliates
asserts that the Debtors' enterprise is a single, integrated whole
whose substantial identity is manifested by the integrated manner
in which the Debtors owned, planned, managed, controlled,
marketed, accounted for, and funded its business without regard to
legal entities.
Mr. Pernick explains that the subsidiaries whose substantive
consolidation is sought were largely paper entities:
* Owens Corning Fiberglass Technology, Inc.,
* IPM, Inc.,
* Integrex, Inc., and
* Exterior Systems, Inc.
OCFT, the intellectual property holding company, and IPM, a
Delaware passive investment holding company, which holds the stock
of most of the Debtors' foreign entities, were created to reduce
the Debtors' state income taxes. Integrex, the asbestos claims
processing entity, was created to help generate a large capital
loss for federal tax purposes. ESI was created to separate its
possibly asbestos-tainted assets from the Debtors. While wholly
owned by Fibreboard, ESI is not operated by Fibreboard, but
instead integrated within the Debtors' Exterior Systems business
line.
There is a complete identity of ownership and control among the
Debtors, OCFT, IPM, Integrex and ESI. The Debtors controlled all
aspects of management, assets, and operation of OCFT, IPM, and
Integrex. The Debtors also manage and control ESI's operations.
Mr. Pernick adds that the Debtors have at all relevant times owned
all the stock of OCFT, IPM, and ESI, and virtually all of the
stock of Integrex.
Mr. Pernick relates that in June 1990, as part of the enterprise-
wide tax minimization strategy, the Debtors' Tax Department head,
William Dent, recommended the formation of certain subsidiaries:
-- a corporation to hold the Debtors' domestic intellectual
property, which became OCFT; and
-- a Delaware passive holding company to hold the company's
investment in foreign subsidiaries, which became IPM.
After OCTF was incorporated, the Debtors assigned all of its
domestic intellectual property, including domestic patents,
trademarks and know-how, to OCFT, licensing back the IP from OCFT
pursuant to an exclusive licensing agreement. In return, the
Debtors agreed to pay royalties to OCFT for use of the IP. At the
same time, OCFT and the Debtors entered into a revolving loan
agreement, pursuant to which OCFT was authorized, but not
required, to lend the royalties back to the Debtors under short
and long-term loans. Mr. Pernick further relates that the
Debtors gave OCFT two principal assets -- the Debtors' domestic
IP and a small asphalt testing plant the Debtors operated in
Illinois to evaluate certain of their asphalt roofing products.
OCFT actually controlled neither asset.
To generate the initial tax benefit, Integrex, formerly a shell
company was resurrected in December 1997, as an asbestos liability
management company. The Debtors transferred $1.367 billion in
asbestos liability to Integrex, together with paper assets valued
at $1.4 billion.
ESI, according to Mr. Pernick, was created in 1999 through the
merger of three distinct entities, all wholly owned by Fibreboard
Corporation -- Norandex Corp., Fabwel Corp., and Amerimark
Building Products, Inc. ESI was part of the Debtors' Exterior
Systems business line, and was, thus, managed by the Debtors.
ESI has no distinct headquarters.
Advantages of Substantive Consolidation
Mr. Pernick emphasizes that substantive consolidation will:
(a) treat all creditors fairly and equitably so that they
realize, to the extent possible, the benefits of their
bargains;
(b) hasten the resolution of the Debtors' Chapter 11 cases to
permit faster payment to the Debtors' non-voluntary
creditors, the asbestos tort claimants;
(c) allow confirmation and consummation of a single Plan of
Reorganization rather than separate plans for every debtor
subsidiary; and
(d) obviate the pending fraudulent transfer litigation
regarding the bank guaranties, Owens Corning, et al. v.
Credit Suisse First Boston, et al., Adv. Proc. No. A-02-
5829, which complex litigation would otherwise require the
Court to determine:
(1) the value and solvency of the subsidiary guarantors,
Official Committee of Asbestos Personal Injury
Claimants v. Sealed Air Corp. (In re: W.R. Grace &
Co), 281 B.R. 952 (Bankr. D. Del. 2002) (Wolin,
U.S.D.J.);
(2) the value and solvency of the entities receiving the
benefit of the guaranties;
(3) whether reasonably equivalent value was given in
exchange for the guaranties;
(4) whether the guarantor issued its guaranty in
accordance with law;
(5) how and when the "savings clause" of the Credit
Facility, 1997 Credit Agreement Section 10.02
operates; and
(6) the effects of mergers, swaps, and corporate
terminations on guaranties.
Without substantive consolidation, Mr. Pernick notes, there will
be significant intercompany claims based on known intercompany
balances which will be time consuming and costly to resolve.
There is also an issue of the existence of other intercompany
claims yet to be discovered. Substantive consolidation would
avoid the enormous time and expense required reconciling these
accounts.
Furthermore, substantive consolidation will eliminate:
-- the risk that asbestos creditors will attempt to impose
successor liability on OCFT and IPM in post-Chapter 11
litigation; and
-- the prospect that, under the separate plans of
reorganization, different creditor groups will control the
Debtors' subsidiaries.
Substantive consolidation will protect the Debtors' ability to
retain control of its intellectual property assets and its foreign
subsidiaries and joint ventures that are critical to the ability
of the Debtors' enterprise to emerge successfully from bankruptcy.
Lack of Reliance
The hearing testimony and the terms of the Credit Agreement make
clear that Credit Suisse First Boston and the other banks were
relying on the consolidated ability of the Debtors' enterprise,
as a single unit, to repay the debt, not on the separate credit
of any subsidiary guarantor. Mr. Pernick asserts that CSFB did
not and could not overcome the presumption of non-reliance.
Thus, substantive consolidation should be granted.
Consolidation of IPM
The Court requested the parties to address the standard that
governs the substantive consolidation of non-debtors entities that
are part of the Debtors' enterprise -- in particular, IPM, the
only non-debtor subsidiary guarantor with significant assets.
Contrary to the Bank Claimants' argument that non-debtors cannot
be consolidated with debtors absent facts justifying a traditional
veil piercing or "alter ego" finding, the standard that should be
applied is the same Auto-Train substantive consolidation test that
applies to the Debtors and its debtor subsidiaries.
Under the test in In re Auto-Train Corp., the proponents of
substantive consolidation must demonstrate that:
(i) there is a "substantial identity" between the entities to
be substantively consolidated; and
(ii) substantive consolidation is necessary to avoid some harm
or to realize some benefit.
Thus, the Debtors ask the U.S. Bankruptcy Court for the District
of Delaware to overrule the Bank Claimants' objections to
substantive consolidation.
CSFB Objects
Credit Suisse First Boston, as agent for the prepetition bank
lenders to the Debtors under a Credit Agreement dated June 27,
1997, points out that the Debtors provide no legally accepted
reasons for which courts have historically imposed substantive
consolidation.
The Debtors' request violates the fundamental tenet that
substantive consolidation may not be used merely as a tool to
facilitate confirmation of a Chapter 11 plan, particularly one
that strips one set of creditors of basic rights to favor another.
Rebecca L. Butcher, Esq., at Landis Rath & Cobb, LLP, in
Wilmington, Delaware, contends that the only purpose for the
Debtors' consolidation request is to buy the support of the tort
creditor constituency that will likely control Debtors' business
post-reorganization and thereby determine the continuation and
compensation of the Debtors' managers.
According to Ms. Butcher, the Debtors' request for substantive
consolidation sets a dangerous precedent in several ways:
(a) The Debtors do not propose an actual consolidation, in
which corporate boundaries previously breached are finally
discarded altogether. Rather, the Debtors intend to
maintain its pre-existing corporate structure, and to
continue to reap all the benefits of that structure, while
simply disregarding it to effectuate the fictional pooling
of its assets to enrich other creditors at the Banks'
expense;
(b) The Debtors intend to "deem" even non-debtors to be
consolidated, thereby sweeping into the asset pot
dominated by tort claimants the significant value residing
in non-debtor IPM.
Since this is blatantly illegal, the Debtors say that they
will belatedly file IPM for bankruptcy protection if
necessary to effectuate the "deemed" consolidation. The
filing, according to Ms. Butcher, would be subject to
dismissal on grounds of bad faith; and
(c) Imposing substantive consolidation in the face of
bargained-for, fully documented guarantees would have
grievous policy consequences. It would put an end to
lending activity premised on structural seniority, causing
banks instead to lend on a fully secured basis and thereby
reducing the availability of credit and adding to its
cost.
Under the leading tests laid down by the Second Circuit in Union
Sav. Bank v. Augie/Restivo Baking Co., 860 F.2d 515 (2d Cir
1988), and the D.C. Circuit in Drabkin v. Midland-Ross Corp. (In
re Auto-Train Corp.), 810 F.2d 270 (D.C. Cir. 1987), the trial
record bars substantive consolidation:
(a) The Debtors cannot establish "substantial identity", as
an initial component of a prima facie case. In re Auto-
Train explains, citing the Second Circuit case, that those
standards require proof of commingling of assets,
disregard of the corporate form, or other irregularity --
not just that the company runs its business in a
coordinated fashion. Imposing consolidation on this
lesser showing would set a dangerous precedent that could
justify consolidation of virtually any large company;
(b) The Debtors cannot meet the second requirement of a prima
facie case by demonstrating a true necessity for
substantive consolidation. Mere administrative
convenience is insufficient to meet that standard in a
contested case. The Debtors introduced no evidence to
show that creditors were harmed by the way it did business
or would be unfairly prejudiced if substantive
consolidation were not imposed; and
(c) Even if the Debtors made out a prima facie case for
substantive consolidation, the undisputed evidence
establishes that:
(1) The Banks would be grievously harmed by losing the
guarantees for which they bargained as a condition of
making the loan and on which they clearly relied; and
(2) No other creditor was misled or had any other basis to
rely on having access to the assets of the guarantor
subsidiaries.
The Debtors' speculation that the Banks did not care about
structural seniority is legally irrelevant in any event, since the
Banks knew they were dealing with separate entities and parol
evidence cannot alter their clear prepetition rights. The
undisputed evidence establishes that the Banks and the Debtors
both understood that the guarantees gave the Banks exactly what
they had sought:
-- direct claims against the guarantor subsidiaries; and
-- seniority over the Debtors' unsecured creditors with
respect to the subsidiaries' assets.
Thus, the consolidation request should be denied, leaving the
parties free to craft a reorganization plan that allocates the
value of the Debtors' estates based on the actual prepetition
rights of their creditors, rather than capitulating to the "hue
and cry of the most vocal special interest groups."
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com/-- manufactures fiberglass
insulation, roofing materials, vinyl windows and siding, patio
doors, rain gutters and downspouts. The Company filed for chapter
11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom
represents the Debtors in their restructuring efforts. At
June 30, 2004, the Company's balance sheet shows $7.3 billion in
assets and a $4.3 billion stockholders' deficit.
OWENS CORNING: Expands Toronto Facility Capacity to Meet Demand
---------------------------------------------------------------
Owens Corning (OTC Bulletin Board: OWENQ) will expand fiberglass
light density and loose fill insulation capacity by another 20
percent at its Toronto, Canada, facility to meet increasing
customer demand in North America.
The multimillion-dollar expansion, which will be complete in early
2005, is the second in the plant in the past year. For the first
time, the company will implement new furnace technology, which
will improve efficiency, reduce costs and limit disruption to the
plant's current production during construction and start-up.
"As the leading supplier of fiberglass insulation in North America
since introducing the product 65 years ago, we've remained
steadfastly committed to meeting our customers' needs and growing
with them," said George Kiemle, president, Owens Corning
Insulating Systems Business. "We couldn't be more excited about
the expansion in Toronto, both for the continuing commitment it
shows to our customers' businesses, but also to our plant and our
employees there, which month-over-month, continue to operate at
some of the highest safety levels in our insulation business."
The Toronto expansion is the latest in a series of capacity
announcements by the company to ensure low-cost, capital-efficient
production and superior customer service for its North American
customers. Those announcements include upgrades in:
* Kansas City,
* Fairburn, Georgia,
* Newark, Ohio,
* Salt Lake City, Utah,
* Santa Clara, California, and
* the first Toronto expansion.
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com/-- manufactures fiberglass
insulation, roofing materials, vinyl windows and siding, patio
doors, rain gutters and downspouts. The Company filed for chapter
11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom
represents the Debtors in their restructuring efforts.
At June 30, 2004, the Company's balance sheet shows $7.3 billion
in assets and a $4.3 billion stockholders' deficit.
PARMALAT: Summary of Dr. Bondi's $10B Suit Against the Auditors
---------------------------------------------------------------
Parmalat Finanziaria SpA in Extraordinary Administration
communicates that Dr. Enrico Bondi, Parmalat's Extraordinary
Commissioner, filed an action in the Circuit Court of Cook County,
Illinois to recover damages from Parmalat's former outside
auditors Grant Thornton International and Deloitte Touche Tohmatsu
and their U.S. and Italian affiliates.
The action is part of a process through which the Extraordinary
Commissioner, following the approval of Parmalat's Industrial and
Financial Restructuring Plan, will seek recovery from third
parties believed to have played a role in Parmalat's collapse.
Parmalat's Industrial and Financial Restructuring Plan
contemplates the distribution to its future shareholders of an
amount equal to 50% of Parmalat's distributable earnings arising
from the next 15 years' annual results, including any eventual
proceeds derived from revocatory actions or actions for damages.
Crucial Roles
Representing Dr. Enrico Bondi, John R. McCambridge, Esq., at
Grippo & Elden, LLC, in Chicago, Illinois, tells the Cook County
Circuit Court that the Outside Auditors played crucial parts in
the theft and disappearance of over $14,000,000,000 from
Parmalat.
Grant Thornton SpA is the Italian member firm of Grant Thornton
International, an Illinois-based auditing firm. Mr. McCambridge
relates that Grant Thornton partners Lorenzo Penca and Maurizio
Bianchi were active conspirators with Parmalat's management in
setting up fictitious companies and structuring fake transactions
to siphon off billions of dollars of assets from Parmalat and its
subsidiaries.
Deloitte & Touche SpA, the Italian arm of the international
accounting giant Deloitte Touche Tohmatsu, became Parmalat's
principal outside auditor in 1999, with Grant Thornton continuing
to audit major business units of Parmalat. According to Mr.
McCambridge, various Deloitte entities that audited Parmalat:
(i) abdicated their responsibility to see that the
company's financial statements fairly stated its true
financial condition; and
(ii) ignored repeated, clear warnings from member firms
around the world of wholly unsubstantiated transactions
that bore all the hallmarks of fraud.
"Deloitte knew that billions of dollars in estimated assets were
supposedly parked in tax and financial havens -- including the
Cayman Islands, the Netherlands Antilles, Luxembourg, Malta and
the Isle of Man," Mr. McCambridge says. "Despite red flag after
red flag, Deloitte deliberately chose not to perform even a
fraction of the required auditing procedures to satisfy itself of
the legitimacy of these companies and the financial assets they
were supposed to have, but in reality were a fiction."
Both Grant Thornton's and Deloitte's audits of Parmalat:
(a) were conducted on an international scale, with close
cooperation and coordination across national and
international boundaries;
(b) involved an integrated undertaking of the two firms'
overall international parent organizations and member
firms in the United States and 32 other countries; and
(c) were both individually and collectively grossly inadequate
and willfully malfeasant under any accepted standard of
responsibility.
Mr. McCambridge also asserts that both Grant Thornton's and
Deloitte's international affiliations were an integral aspect of
Grant Thornton's and Deloitte's audits of Parmalat. Both held
themselves out to Parmalat, to the world, and to Parmalat's
creditors.
Parmalat anticipates that Deloitte will point to Grant Thornton,
and Grant Thornton will point to Deloitte, and each will try to
say either that the other was responsible or there were "holes" in
the system that allowed somewhere between $11,700,000,000 and
$16,300,000,000 to "disappear." But no matter how their
responsibilities are carved up, Mr. McCambridge points out that
under accepted auditing standards and principles, both Deloitte
and Grant Thornton, in their international as well as local
domestic capacities, are legally responsible for Parmalat's
losses.
Grant Thornton's Role in Looting Parmalat
(A) Curcastle, Zilpa and Dancent
Messrs. Penca and Bianchi assisted Parmalat's finance director,
Fausto Tonna, and Parmalat's CEO, Calisto Tanzi, in setting up and
using Curcastle N.V., Zilpa N.V., and Dancent N.V. -- Netherlands
Antilles companies -- to hide the losses of Parmalat SpA and
Parmalat's South American companies. In 1995 to 1996, the South
American companies were losing around 500,000,000,000 lire per
year -- roughly $320,000,000. Parmalat SpA was also incurring
annual losses of between 200,000,000,000 and 300,000,000,000 lire.
The Netherlands Antilles companies were also used to cover
enormous misappropriations by the Tanzi family. Parmalat's
"distributions" to the Tanzis' Holding Italiana Turismo SpA and
other Tanzi-owned or -controlled companies were recorded as
"loans." The loans stayed in Parmalat's balance sheets until
around 1997 or 1998 when they were transferred as "receivables" to
Curcastle and Zilpa. The receivables were then transferred to
Bonlat Financing, Ltd., in 1998.
The annual "diversions" through 1998 from Parmalat SpA to the
Tanzis' separate interests exceeded $320,000,000.
Mr. McCambridge contends that since Grant Thornton audited HIT, it
had a complete picture of where HIT's funds came from and where
they went -- the Tanzis' own accounts or their separate tourism,
soccer and other outside enterprises.
(B) Bonlat
Bonlat was first used as a conduit to book fictitious sales of
million of dollars of trademarks and other intellectual property
to companies like Findairy Corporation. In reality, none of these
transactions took place.
Findairy, a Delaware corporation, had the same telephone number as
Zini & Associates in New York, the law firm run by Gian Paolo
Zini, another culpable insider who played a key role in
orchestrating the frauds on Parmalat and its investors and
creditors.
Another Grant Thornton auditor, Arnaldo Airoldi, also knew about
the frauds. Airoldi subsequently was hired by the Tanzi family's
tourism companies.
From 1999 onwards, based on the advice of Messrs. Penca and
Bianchi, the "transactions" and accounting "adjustments" were made
directly through Bonlat. Bonlat, in turn, transferred the
supposed liabilities to Web Holdings, Inc., another entity
established by Mr. Zini and run out of his New York office.
In return, Web Holdings issued $300,000,000 to $350,000,000 in
promissory notes. Eventually more money was added, bringing the
total amount to around $400,000,000 to $500,000,000 by the end of
2002.
In the short time between 1999 and 2002, Bonlat jumped from
comprising 22% of Parmalat's assets to 40%. As a result of a
wholesale series of crudely constructed dummy transactions,
Parmalat's consolidated financial statements grossly understated
its debts and equally grossly overstated its net worth.
Non-existent Bonlat Account With Bank of America
At yearend 2002, Bonlat purported to have $4,900,000,000 in an
account with Bank of America. Grant Thornton supposedly drafted a
confirmation request dated December 20, 2002, requesting
verification of this amount from the bank. The letter was never
actually sent.
Instead, Grant Thornton accepted, directly from Parmalat, a forged
letter purporting to be from Bank of America dated March 6, 2003,
certifying the existence of the Bonlat account. Mr. McCambridge
relates that Gianfranco Bocchi, a member of Parmalat's Finance
Department, cut out Bank of America's logo, scanned it in a
computer, printed it out and passed it through a fax machine
several times. The letter bore the signature of a Bank of America
employee who worked as a data processor and lived in Brooklyn.
The signature was taken from old documents bearing the employee's
name.
Bonlat's Non-Existent Investment
In 2002, Grant Thornton's Bianchi suggested that Bonlat should be
closed down. He did not think that funds could continue to be
diverted from Parmalat SpA and Parmalat Capital Finance B.V. in
the Netherlands through Web Holdings to HIT. Parmalat's culpable
insiders still needed a way to keep diverting funds, and to hide
the enormous quantities of money that Parmalat was losing.
Mr. Zini came up with Epicurum Limited, a Cayman Islands
investment fund -- another shell entity operated out of Mr. Zini's
New York offices.
Epicurum was incorporated in September 2002, and promptly "given"
a $100,000,000 receivable from Boston Holding, Inc., another fake
company run by Mr. Zini in New York. In 2002, Web Holdings issued
EUR400,000,000 in promissory notes to obtain funds for the Tanzi
tourism companies through Bonlat. The EUR500,000,000 that was
supposedly in Epicurum at the time included EUR100,000,000 in
another illusory promissory note from Boston Holdings used to
fictitiously acquire Newlat and Carnini. Bonlat's books therefore
reflected a $625,000,000 "investment" in Epicurum.
In 2002, Grant Thornton accepted Messrs. Zini's, Tonna's and
Tanzi's oral assurances that Bonlat's purported $625,000,000
Epicurum investment was made on an arm's-length basis even though
Grant Thornton never attempted to speak with anyone at Epicurum
-- which did not exist and which Grant Thornton knew did not
exist. Grant Thornton "agreed" that this was an arm's-length
investment because, when the names of the directors of Epicurum
were read to Grant Thornton, they "did not sound Italian."
Grant Thornton received a letter from Epicurum dated
March 13, 2002, confirming that on December 31, 2002, Bonlat held
$544,000,000 and EUR123,000,000 in the Epicurum fund. The letter
gave no explanation of the nature of these accounts. The
"confirmation" consisted of a photocopy of a facsimile sent by
Epicurum to Grant Thornton. The confirmation contained only the
name of the company with no contact information.
Although Bonlat purportedly held this "investment" in the form of
promissory notes from Epicurum, there was nothing to show that:
-- they were collectible; or
-- the interest due on them had been paid.
Messrs. Tonna and Bocchi met with Messrs. Penca and Bianchi, who
pointed out that the lack of any interest payments called into
question the legitimacy of the promissory notes. They then came
up with a solution -- transform the promissory notes into an
equity investment. The result was that Parmalat's balance sheets
reflected a non-existent $625,000,000 "asset."
(C) "Sale" of Powdered Milk to Cuba
At yearend 1999, Bonlat claimed to have sold 300,000 tons of
powdered milk worth $620,000,000 to Empresa Cubana Importadora de
Alimentos, a Havana state-owned food importer, through a
Singapore-based company by the name of Camfield Pte., Ltd. The
receivable from the Cuban importer was carried on Bonlat's balance
sheet as an asset. No sale actually took place. Bonlat's, and in
turn Parmalat's, revenues and assets were therefore overstated by
$620,000,000 from the sham transaction.
According to Mr. McCambridge, the fraud was brutally simple. Mr.
Bocchi prepared the standard contract printouts, both for
purchases and sales. The contract was signed by Mr. Tonna on
behalf of Bonlat and by Mr. Tonna with a fake signature on behalf
of Camfield and for the Cuban company.
Although not listed in Parmalat's financial statements as an
affiliated company, Camfield was another sham Parmalat company,
set up with the knowing assistance of Grant Thornton. The
Singapore address and phone number for Camfield are the same as
Grant Thornton's Singapore affiliate -- and Camfield's auditors
-- Foo Kon Tan Grant Thornton.
Camfield's company secretary, Lawrence Kwan, is an employee of
Kon Choon Kooi, which is an affiliate of Grant Thornton's
Singapore affiliate.
Deloitte's Failure to Properly Audit Parmalat
(1) Parmalat's "Transactions" with Bonlat
Mr. McCambridge reports that Deloitte's audits never tried to look
below the surface to understand and verify the legitimacy of the
facially bogus transactions. Under the universally accepted
principles articulated in Statement on Auditing Standards 45 (SAS
45), "The Nature and Extent of Auditing Procedures for Examining
Related Party Transactions," Deloitte was required to take extra
care in how it assessed Bonlat's, and therefore Parmalat's,
overall financials state. Deloitte never:
-- considered the nature of Bonlat's related party
transactions with Parmalat Finance Corporation or Parmalat
Capital Finance, Ltd., a Cayman Island company which owns
100% of the interests in Bonlat;
-- put in place audit procedures to identify related-party
transactions; or
-- determined whether there were appropriate disclosures for
the related-party transactions that have been identified.
Deloitte "missed" $5,176,000,000 in debts that had been
"offloaded" to Bonlat as "intercompany debt," which then vanished
from Parmalat's consolidated financial statements.
"Profit" from a $7,000,000,000 "Loan"
In 2003, a Deloitte auditor in Malta, Edward Camilleri, approved
the accounts of Parmalat Capital Finance without questioning the
"profits" that reportedly were generated by its $7,000,000,000
"loan" to Bonlat. For 2002, Parmalat Capital Finance's reported
profit jumped more than eightfold to $28,700,000 because of
interest or fees from the $7,000,000,000 loan to Bonlat. The
$28,400,000 represented roughly 10% of the Parmalat Group's entire
profit for 2002 and should have drawn the scrutiny of the Deloitte
auditors in Malta and Italy, who audited the consolidated
accounts.
The $4,900,000,000 that Bonlat claimed to have in a Bank of
America account exactly matched the $4,900,000,000 increase in the
loan to Bonlat reported in the financial statements of Parmalat
Capital Finance audited by Deloitte. If Deloitte even casually
reviewed the $7,000,000,000 loan and the $28,400,000 in profits,
it would have determined that they were, at best, highly
questionable, requiring it to conduct additional audit inquiries.
Other Failures to Review Bonlat Loan
Mr. McCambridge tells the Circuit Court that Parmalat Capital
Finance's financial statements contained no preceding-year figures
for cash flows, an important item for financial regulators and
investors. Mr. Camilleri flagged that omission in his report,
qualifying the audit. When the consolidated financial statements
of the overall Parmalat Group were published, this omission was
nowhere mentioned.
Parmalat's financial statements also provide no indication of what
happened to the $7,000,000,000 raised from Parmalat bond sales
between January 1, 1998 and November 30, 2003. Deloitte failed to
mention this in the report.
As of November 30, 2003, Parmalat Capital Finance and Bonlat were
obligated to repay about 80% of the $6,000,000,000 in debt issued
by Parmalat Finance Corporation B.V. although they received no
cash from the bond sales. None of Deloitte's audits reflected
this fact.
(2) Transaction with Western Alps
On July 10, 2001, Parmalat Capital Finance booked an $18,126,584
"receivable" from Western Alps Foundation. It was increased to
$21,900,000 at the end of 2001 and rose to $28,853,000 on March 1,
2002. It then was "reversed" and disappeared from Parmalat
Capital Finance's books on March 15, 2002.
There is no documentation to support any of these transactions or
how they were accounted for. Had Deloitte looked into these
transactions and Western Alps itself, Deloitte would have learned
that between February 27 and June 26, 2002, Bonlat loaned Western
Alps $1,200,000,000, for which Bonlat booked currency exchange
rate profits of $83,603 -- at a time when Western Alps was no
longer an existing "entity," because it had been dissolved as of
September 25, 2001. Mr. McCambridge notes that the telephone and
address for Western Alps, a Delaware entity, are the same as those
for Zini & Associates in New York City.
(3) Transactions With Web Holdings
On June 23, 2000, Parmalat Capital Finance purchased $88,400,000
in bonds from Web Holdings, Inc. The supporting documentation
consists of an order from Parmalat Finance Corporation B.V., on
Parmalat Capital Finance's behalf, to transfer EUR95,000,000 --
equivalent to $89,400,000 -- in favor of Business and Leisure
S.A., a Tanzi-controlled company, into an account at the Caise
Centrale Raiffesen in Luxembourg.
There is no indication that Deloitte did anything to verify this
highly unusual transaction, involving a "purchase" by Parmalat
Capital Finance from one entity -- Web Holdings -- but with the
payment for the purchase going to a Luxembourg account of a Tanzi-
controlled entity. Web Holdings shares the same address with Zini
& Associates in New York City. Web Holdings reportedly controls
or is controlled by Western Alps.
(4) "Sale" of Powdered Milk to Cuba
Deloitte failed to verify the legitimacy of Bonlat's sale of
300,000 tons of powdered milk to Empresa Cuba. Had Deloitte done
so, it would have learned that:
(1) one of the parties to the transaction, Camfield, was a
bogus front, set up by Grant Thornton and Parmalat;
(2) Claudio Pessina, one of Camfield's directors and the one
who signed Camfield's most recent financial statements,
was a member of Parmalat's finance department. Mr.
Pessina was also a co-CEO of Parmalat SpA's Austrian unit,
Parmalat Austria Gmbh, which Deloitte also audited; and
(3) Camfield's CEO, Angelo Ugolotti, was a switchboard
operator at Parmalat's headquarters.
"Apart from the glaring fact that the powdered milk transactions
in which Camfield was purportedly involved were complete
fabrications, if Empresa Cuba had purchased the amount of milk
claimed by Parmalat, the small island nation of Cuba would have
been 'swimming in milk.' The 300,000 tons would produce the
equivalent of 735 million gallons -- enough to supply everyone in
Cuba with 260 quarts of milk a year," Mr. McCambridge says.
"More fundamentally, Deloitte never bothered to ask the most basic
question: Where did Bonlat -- a "financing" company -- get 300,000
tons of powdered milk? Why was this sale not done by one of
Parmalat's operating companies?" Mr. McCambridge continues.
The only documentation supporting the $620,000,000 "sale" were
invoices. There were no documents reflecting any transportation
of 300,000 tons of powdered milk that was supposed to have been
shipped from Singapore, not one of the world's recognized dairy
producers, to Cuba. There were no payment terms, or any details
on how the payments would be made.
(5) "Investment" in Epicurum
Deloitte did not attempt to verity the existence or status of the
Epicurum fund and the actual amount of money it held. The money
in the "fund" did not appear to have been deposited in an FDIC
financial institution, so this was a material item that required
further inquiry.
When Deloitte finally looked at Epicurum, it did not bother to
verify the fund's existence. Deloitte simply stated that it was
not "possible" to "provide exhaustive information."
Consob, the Italian equivalent of the United States Securities and
Exchange Commission, got wind of Epicurum and asked Deloitte to
investigate. Deloitte passed the buck to Grant Thornton. It was
up to Grant Thornton to detect any "irregularities," Deloitte
said.
Despite Consob's express inquiry, Deloitte still did not look
further.
(6) Tetra-Pak "Rebates"
Tetra-Pak, a Swedish-based drinks packaging company, was a major
Parmalat supplier. Tetra-Pak's sales to Parmalat averaged
$280,500,000 per year from 1995 to 2003.
Tetra-Pak provided discounts to Parmalat for buying its products
and advertising its brands. These discounts were made by direct
payments to various Parmalat-related entities.
Until 1995, the discount payments averaged around $5,000,000 to
$6,000,000 per year. For the period from 1995 to 2003, they
increased to an average of $15,250,000 per year. By the end of
2001, they were estimated to have reached around $29,000,000 or
$31,000,000 each year.
Until 2001, none of the Tetra-Pak reimbursements was actually paid
to Parmalat SpA, the company that had purchased the packaging.
Instead, they were treated as the Tanzi family's private property.
Over a seven-year period, the Tanzi family is estimated to have
received $62,000,000 in Tetra-Pak refunds, either directly or
indirectly. These sums were paid to various entities, including:
* Parmalat USA Corporation,
* Camfield,
* Carital Food Distribution Curacao -- a Tanzi family-
controlled off balance sheet Parmalat company,
* Parmalat Capital Finance, Ltd., and
* Parmalat Trading, Ltd.
Deloitte was instrumental in incorporating Parmalat Trading in
Malta, along with Parmalat Malta Holding, Ltd. The
"distributions" of the refunds from Parmalat Trading were
reflected on the books as transfers to Mr. Zini's escrow accounts
at Citibank in New York and London, made to the order of Mr. Zini.
Mr. Zini and the Grant Thornton auditors were well aware that the
funds going in and out of Mr. Zini's New York and London accounts
involved misappropriations of Parmalat funds for the benefit of
the Tanzi family.
Discounts and rebates from vendors are common in the retail
industry and can significantly affect a company's income and its
cost of goods sold. There is no indication that Deloitte made any
effort to determine whether Parmalat, one of the largest retail
sellers in Europe, was receiving any rebates or discounts from,
its major vendors and, if so, how they were treated. They appear
nowhere in Parmalat's financial statements.
(7) "Transfer" to Luca Sala of Bank of America
In November 2002, Bank of America, N.A., loaned an unknown amount
to CUR Holdings Limited, an off balance sheet Parmalat entity
incorporated in the Netherlands Antilles. In September or October
2003, $115,000,000 of this amount made its way to Parmalat Capital
Finance, which Bank of America agreed to substitute for CUR
Holdings.
Under the agreement, Parmalat Capital Finance paid $29,000,000 to
Capital Leben, a Liechtenstein financial institution. According
to Mr. McCambridge, current information indicates that the
$29,000,000 was channeled to an account owned or controlled by
Luca Sala of Bank of America, either to pay him off personally or
to make personal payments to others.
Mr. Sala has admitted that he misappropriated between $18,000,000
and $21,000,000 from Parmalat in the form of kickbacks from an
"insurance broker."
There is no indication that Deloitte, which was responsible for
auditing Parmalat Capital Finance, took any meaningful steps to
ascertain the nature of the transaction or to trace its proceeds.
(8) Newlat "Transaction"
In 1999, a major Italian company, Cirio, sold its dairy division,
Eurolat, to Parmalat -- at that time Cirio's rival and the leading
dairy company -- without obtaining approval from the Italian
Antitrust Authority. As a result, Parmalat had 35% of the market
for Ultra High Temperature milk and 30% of the market for fresh
milk.
The Italian Antitrust Authority subsequently ordered Parmalat to
divest itself of the Matese, Torreinpietra, Sole, Polenghi, Giglio
and Calabrialatte brands. However, Parmalat could not find a
legitimate buyer, so the insiders engineered a fake divestiture to
a Zini-controlled U.S. entity.
The companies were "sold" on November 16, 2000, to Newlat S.r.l.,
incorporated in Reggio Emilia, Italy. On December 18, 2000,
Nulait, Ltd., incorporated in the British Virgin Islands on
November 7, 2000, acquired Newlat S.r.l. for a supposed price of
$54,000,000.
The amount was never paid. Instead, two promissory notes were
issued and included in Parmalat's balance sheet as a receivable
from third parties.
On December 18, 2001, the day the two promissory notes used to
"purchase" Newlat were due to be paid, they were replaced by a
single $59,000,000 note, which included accrued interest, from
Findairy Corporation, a Delaware corporation whose address and
telephone number is the same as the office of Zini & Associates in
New York. The note itself was signed by Mr. Zini as the "attorney
in fact."
At the beginning of 2002, Nulait "sold" Newlat to Endeavour
Capital Management, LLC, through Bern Euro Italia Corporation. In
July 2003, Endeavour sold Newlat to Boston Holdings Corporation,
incorporated in Delaware by Mr. Zini on April 20, 2001. The
president of Boston Holdings is Stephen White, Mr. Zini's brother-
in-law.
According to Mr. McCambridge, Deloitte made no effort to:
(a) verify the legitimacy of the "assets"; or
(b) ascertain the legitimacy of the "divestitures."
On September 18, 2002, the $62,000,000 "asset" reported on
Parmalat's balance sheet was transferred to Bonlat, where it
ultimately disappeared.
(9) Carnini "Transaction"
In August 2000, Parmalat SpA acquired 70% of the stock of Carnini
SpA, another milk company. The Antitrust Authority declined to
approve the acquisition, and the purchase contract was modified so
that Parmalat acquired only 90 shares (15%) of Carnini, for
$4,760,000. The acquisition cost was recorded as $5,970,000,
including consultancy fees and other costs associated with the
purchase.
In April 2002, the 90 shares were transferred to Bonlat, and then
to Boston Holdings under a contract signed by Mr. Tanzi, on behalf
of Parmalat, and Giovanni Bonici, on behalf of Bonlat.
In May 2002, Bonlat "sold" the 90 shares to Boston Holdings for
$5,200,000. The contract reflected that Boston Holdings already
"owned" 333 shares of Carnini, comprising 55% of its total stock.
There is no record of how Boston Holdings did so.
There is also no indication that Parmalat ever received any of the
"proceeds" from these transactions, or that Deloitte ever even
looked at them.
(10) Other Transactions
Mr. McCambridge further relates that Deloitte failed to properly
account for other transactions where money disappeared from
Parmalat. In 2001, HIT drained $80,000,000 from Parmalat. In
2002, there were nine transfers to HIT, totaling over
$149,500,000.
In the space of a few years, from 1997 to 2003, Tanzi and the
other culpable insiders transferred $500,000,000 from Parmalat to
HIT. This was done by means of "loans" from Parmalat SpA to HIT.
Parmalat then assigned its receivables for these loans to Parmalat
Capital Finance and Bonlat. From there, they vanished from the
accounts receivable on the balance sheets and became "investments"
in affiliates audited by Grant Thornton and Deloitte.
Deloitte Presented Inaccurate Statements
Mr. McCambridge asserts that Deloitte knowingly presented
inaccurate Parmalat financial statements. Deloitte's audited
certifications also repeatedly ignored an $8,400,000,000 "999"
counterparty account that was used as a receptacle for false
revenues, assets and profits that Parmalat had accumulated over
the years. Deloitte knew of the existence of account "999" and
its function. Deloitte's own audit refers to it.
Mr. McCambridge explains that account "999" was supposed to
reflect intercompany "imbalances." For a company the size of
Parmalat, the end-of-the-year imbalance would be expected to be
minimal. But the $8,400,000,000 in account "999" was huge, and
Deloitte's audit certifications ignored it and the 62% of
Parmalat's total assets it represented.
Deloitte also failed to reconcile the net worth and operating
profit of the parent company and the consolidated net worth and
operating profit. According to Mr. McCambridge, the capital net
worth and the operating results in Parmalat's consolidated
financial statements are different from their values in the
company's statutory financial statements. The consolidated
financial statements of both Parmalat SpA and Parmalat Finanziaria
contain summary and aggregate reconciliation tables. They in no
way conform to the analytical requirements required by accepted
accounting principles. Instead of actually trying to reconcile
the two statements, Parmalat simply forced the two numbers to
match by dumping the difference into a "plug account." The account
held any unreconciled consolidated reserves and profit and loss
results of the consolidated companies, net of profit sharing and
corrections for consolidation.
In 2002, Hermes Pensions Management Limited, a United Kingdom fund
management group, wrote to Deloitte raising various concerns,
including the treatment of a number of Cayman Islands investments
in Parmalat's financial statements. Deloitte confirmed that it
did nothing in response to the inquiry. It merely said that "In
Italy, there is a defined process for shareholders to make
complaints to the Board of Statutory Auditors. In this case, we
understand the Board subsequently investigated the matter and
reported on it in the 2002 annual accounts."
Deloitte also failed to audit or ignored, among others:
-- an October 25, 2000 swap agreement between Bonlat and
Sumitomo Bank Financial Service, Inc. The
JPY90,000,000,000 swap agreement supposedly expires in
December 2005. The swap agreement, however, was terminated
only two months after it was entered into, giving Bonlat an
immediate $147,800,000 profit. The transactional documents
did not contain the usual ISDA terms attachment. There
were different Sumitomo signatures on the opening and
closing contracts, and the Sumitomo subsidiary that entered
into the transaction was based in Cayman Islands;
-- a December 1999 $300,000,000 "equity investment" in
Parmalat Brazil. Bank of America helped structure the
"investment," setting up two Cayman Island companies, Food
Holdings, Ltd., and Dairy Holdings, Ltd., both
subsidiaries of QSPV Limited, a Cayman Island charitable
trust, for the transaction; and
-- Parmalat's $133,000,000 "receivables" transactions from
Ifitalia, which was actually a disguised loan.
Deloitte also knowingly failed to include significant information
about Parmalat's affiliated companies in Parmalat's consolidated
financial statements.
Parmalat's Claims Against the Auditors
Parmalat lost billions of dollars and incurred other damages from
Grant Thornton's and Deloitte's acts and omissions.
"Something to the order of $10 billion dollars has gone out the
door and been stolen, squandered or wasted by the Parmalat
insiders," Mr. McCambridge says. "These losses would not have
occurred had the defendants properly done their accounting work."
Thus, Dr. Bondi asks the Circuit Court to find Grant Thornton and
Deloitte guilty of:
(1) professional malpractice;
(2) fraud;
(3) aiding and abetting fraud and constructive fraud;
(4) negligent misrepresentation;
(5) aiding and abetting breach of fiduciary duty;
(6) theft and diversion of corporate assets;
(7) converting or aiding in the conversion of funds, assets
and money belonging to Parmalat for the company insiders'
own uses and purposes;
(8) unjust enrichment;
(9) aiding and abetting fraudulent transfer;
(10) causing Parmalat to plunge into deepening insolvency.
The auditors failed to stop the looting and
misappropriations they knew or should have known was
going on; and
(11) conspiring with the Parmalat insiders in looting the
company.
Dr. Bondi seeks at least $10,000,000,000 in damages for the
losses Parmalat incurred as a result of the auditors' conduct and
to compensate the company for the general losses its
shareholders, bondholders, noteholders and lenders incurred. Dr.
Bondi also seeks the establishment of a constructive trust for
Parmalat's benefit to be placed on any identifiable funds and
assets that were stolen or fraudulently transferred from
Parmalat, as well as on any identified assets that those funds or
assets were used to acquire.
Responses
(1) Grant Thornton International
Grant Thornton International pointed out that it was the former
Grant Thornton International member firm in Italy, Grant Thornton
SpA and now named Italaudit SpA, which audited the accounts of
some of Parmalat's subsidiaries. The former Italian firm was
expelled from the Grant Thornton International network on 8
January 2004.
Grant Thornton International does not accept that this is a
legitimate action and will defend its position vigorously. The
member firms in the Grant Thornton International network are
entirely independent legal, financial and administrative entities.
The services provided to Parmalat were provided by the former
Grant Thornton International firm in Italy, now trading as
Italaudit SpA. All matters relating to Parmalat are therefore the
responsibility of Italaudit SpA and not Grant Thornton
International or Grant Thornton LLP.
Grant Thornton International is an international membership
organization, with each member firm independently owned and
operated. Services are delivered nationally by the member and
correspondent firms of Grant Thornton International, a network of
independent firms throughout the world. Grant Thornton
International is a non-practicing, non-trading international
umbrella organization and does not deliver accounting or auditing
services. Each member and correspondent firm in Grant Thornton
International is a separate independent national firm. These
firms are not members of one international partnership or
otherwise legal partners with each other, nor is any one firm
responsible for the services or activities of any other. Each
firm governs itself and handles its administrative matters on a
local basis. Although many of the firms now carry the Grant
Thornton name, either exclusively or in their national practice
names, there is no common ownership among the firms or by Grant
Thornton International.
(2) Deloitte Touche Tohmatsu, on Deloitte Italy's behalf
Parmalat is responsible for a fraud that, according to testimony
to date, pervaded its former executives and board of directors and
has now apparently sued Deloitte Italy on the theory that it
failed to catch Parmalat for its own fraudulent actions. Deloitte
Italy believes the lawsuit, which it has not yet seen, is entirely
unjustified and it will defend its position vigorously.
It was the actions of Deloitte Italy, which led to the fraud being
uncovered.
Deloitte Touche Tohmatsu is a Swiss Verein (membership
association) and provided no services of any kind to any Parmalat
entity.
(3) Deloitte Services, LLP
While Deloitte's U.S. firms have not yet seen the complaint, we
are unaware of any legitimate theory for naming us as defendants.
The US firms issued no audit reports on Parmalat and had nothing
to do with Parmalat's alleged misconduct. Any claims against
Deloitte's U.S. firms are frivolous, and we are confident we will
be successful in having them dismissed.
Headquartered in Wallington, New Jersey, Parmalat USA Corporation
-- http://www.parmalatusa.com/-- generates more than 7 billion
euros in annual revenue. The Parmalat Group's 40-some brand
product line includes milk, yogurt, cheese, butter, cakes and
cookies, breads, pizza, snack foods and vegetable sauces, soups
and juices and employs over 36,000 workers in 139 plants located
in 31 countries on six continents. The Company filed for chapter
11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No.
04- 11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at
Weil Gotshal & Manges LLP represent the Debtors in their
restructuring efforts. On June 30, 2003, the Debtors listed
EUR2,001,818,912 in assets and EUR1,061,786,417 in debts.
(Parmalat Bankruptcy News, Issue No. 28; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
PEGASUS SATELLITE: Asks Court OK on LEC Asset Purchase Agreement
----------------------------------------------------------------
Pegasus Satellite Communications reminds the U.S. Bankruptcy Court
that it's engaged in extensive litigation with DIRECTV, Inc., and
the National Rural Telecommunications Cooperative. Since late
June of 2004, the Debtors, Pegasus Communications Corporation and
other non-debtor affiliates, the Official Committee of Unsecured
Creditors, NRTC and DIRECTV engaged in extensive, arduous
negotiations, which culminated in a global settlement.
Along with the Global Settlement, the Debtors also seek Court
approval of an Asset Purchase Agreement, dated as of July 30,
2004, between Pegasus Satellite Television, Inc., Golden Sky
Systems, Inc., South Plains DBS, LP, and other sellers, on one
hand, and DIRECTV, on the other hand.
Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in
Portland, Maine, relates that the Asset Purchase Agreement
provides that the DIRECTV will purchase, acquire and accept from
the Sellers, and the Sellers will sell, transfer, assign, convey
and deliver to DIRECTV, free and clear of all Liens, other than
certain permitted exceptions, all of Sellers' right, title and
interest in, to and under the Satellite Assets.
"It is contemplated by the parties to the Global Settlement that
the Satellite Assets will include South Plains' assets, including
all of its Subscriber Information and that South Plains will
execute the releases that form an integral part of the Global
Settlement," Mr. Keach says.
South Plains Ownership Structure
Debtor South Plains is a Texas limited partnership engaged in
providing direct broadcast satellite service to subscribers in 22
counties in Texas. As of July 2004, South Plains had over 15,000
subscribers.
Pursuant to a certain Amended and Restated Agreement of Limited
Partnership of South Plains DBS Limited Partnership dated as of
January 1, 1998, the ownership structure of South Plains consists
of two general partners and one limited partner. The two general
partners are LEC Development, Inc., and Golden Sky. LEC holds a
23.75% ownership interest in South Plains and Golden Sky holds a
71.25% ownership interest in South Plains. Golden Sky is also
the sole limited partner, and holds an additional 5.0% ownership
interest in South Plains in its capacity as the limited partner.
The Partnership Agreement provides that "the sale of all or
substantially all of the assets" of South Plains can only be
achieved by a "Super Majority Vote" of the general partners. Under
the Partnership Agreement, a "Super Majority Vote" requires the
consent of "90% of the aggregate of the [g]eneral [p]artners'
[i]nterest." Thus, outside of a Section 363 sale in bankruptcy,
Golden Sky would be unable to sell the South Plains Assets
because its 71.25% general partnership interest does not provide
it with a Super Majority, and its ownership interest is
insufficient to cause the sale of the South Plains Assets.
Purchase Agreement
Although the Debtors believe that Section 363 of the Bankruptcy
Code provides them with the authority to transfer the South
Plains Assets, it is not entirely clear that the Debtors could
transfer the South Plains Assets to DIRECTV without the consent
of LEC. To avoid litigation over their authority to transfer all
of the South Plains Assets to DIRECTV, the Debtors engaged in
extensive, negotiations with LEC to purchase LEC's general
partnership interest in South Plains at fair value. On July 29,
2004, the Debtors and LEC came to an agreement, whereby LEC will
sell its general partnership interest in South Plains to Pegasus
Satellite Television for $2,750,000.
LEC acknowledges Golden Sky's authority to file the voluntary
Chapter 11 petition on behalf of South Plains and to take all
actions by Golden Sky on South Plains' behalf before the date of
the Partnership Purchase Agreement and ratifies all those
actions. LEC further authorizes and ratifies the execution,
delivery, and consummation of the transactions contemplated by,
the Global Settlement or another agreement to sell all or some of
the assets of South Plains, and agrees to cooperate with Pegasus
Satellite Television with respect to the consummation of those
transactions. Finally, upon closing of the Partnership Purchase
Agreement, LEC forever releases and discharges the Debtors,
Pegasus Communications Corporation and its directly or indirectly
owned non-Debtor affiliates, together with their officers,
directors, agents, successors and assigns from any and all claims
which arise out of, relate to, or are otherwise connected with
South Plains, including any claims arising under or related to
the South Plains' Chapter 11 case or the filing of South Plains'
Chapter 11 case. Finally, the Committee is fully informed of,
and supports, the proposed purchase.
By this motion, the Debtors ask the Court to authorize and
approve the Partnership Purchase Agreement.
With the purchase of LEC's General Partnership Interest by
Pegasus Satellite Television, the Debtors will hold a 100%
ownership interest in South Plains and will have the unfettered
ability to sell the South Plains Assets to DIRECTV in connection
with the Global Settlement and the Asset Purchase Agreement.
Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite
Communications, Inc. -- http://www.pgtv.com/-- is a leading
independent provider of direct broadcast satellite (DBS)
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)
PG&E NATIONAL: Inks Settlement Agreement with Mirant Americas
-------------------------------------------------------------
On September 1, 1998, NEGT Energy Trading - Gas Corporation and
Mirant Americas Energy Marketing, LP, entered into an ISDA Master
Agreement, which included and expressly incorporated by reference
a certain Schedule and Credit Support Annex. The parties entered
into various transactions pursuant to the ISDA Agreement for the
purchase, sale or exchange of physical commodities,
transportation rights, transportation capacity, transmission
rights, transmission capacity, goods, swaps, options,
derivatives, or any other security, contract rights, instrument
or item that is currently bought, sold, or exchanged in the
future.
The ISDA Agreement provides various rights and remedies to the
parties on the early termination of any of the Transactions.
Additionally, the ISDA Agreement provides, among other things,
that upon the default by one party under the Transactions, the
counterpart may declare an "Early Termination Date" and terminate
all then-outstanding transactions.
Upon the Early Termination Date, the ISDA Agreement, without
limitation, further provides for the liquidation of all
terminated transactions and the calculation of a termination
payment as a result of the liquidation.
Consequently, Mirant Americas declared an Early Termination Date
for its then-outstanding transactions with ET Gas under the ISDA
Agreement based on its belief that ET Gas had defaulted under a
Transaction.
ET Gas disputed the calculation of the Termination Payment
provided by Mirant Americas, as well as Mirant America's
authority to terminate the ISDA Agreement. ET Gas argued that
Mirant America's declaration of an Early Termination Date was a
breach of the ISDA Agreement. Hence, ET Gas declared its own
Early Termination Date.
As a result, a dispute arose between the parties regarding their
rights, remedies, and obligations under the ISDA Agreement and
the Transactions.
On July 30, 2004, ET Gas entered into a Settlement Agreement and
Release with Mirant Americas to resolve their disputes.
Pursuant to the Settlement Agreement and Release, Mirant Americas
will instruct the release of $9,138,106 from escrow to ET Gas in
full and final satisfaction of all claims arising out of the
Transactions. ET Gas and Mirant Americas are parties to an
Escrow Agreement, with U.S. Bank National Association as the
Escrow Agent.
The parties will also release each other from any liabilities
whatsoever arising out of the Transactions.
The consummation of the Settlement Agreement and Release is
advantageous to ET Gas since the Settlement Amount approximates
the maximum return that ET Gas could otherwise achieve through
litigation, without the attendant risks and costs.
Unless objections are received by August 27, 2004, the Settlement
Agreement and Release will become fully effective and will be
consummated by the parties.
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)
POOLED PENSION FUND: Case Summary & Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Pooled Pension Fund Management Corporation
9190 Interline Avenue
Baton Rouge, Louisiana 70809
Bankruptcy Case No.: 04-12756
Chapter 11 Petition Date: August 23, 2004
Court: Middle District of Louisiana (Baton Rouge)
Judge: Douglas D. Dodd
Debtor's Counsel: Barry W. Miller, Esq.
Barry W. Miller, P.L.C.
PO Box 86279
Baton Rouge, Louisiana 70879-6279
Tel: 225-296-0600
Estimated Assets: Unstated
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Norris & Mary Marchand $724,262
7628 Prairie Drive
Greenwell Springs, Louisiana 70739
Bertram Levey $705,155
119 Riverdale
Covington, Louisiana 70433
Roy & Cathy Hunt $561,872
17316 Highway 44
Prairieville, Louisiana 70769
Bernice Layman $359,480
13624 Timberridge Avenue
Baton Rouge, Louisiana 70817
Patricia Cheramie $356,917
17532 West Muirfield Avenue
Baton Rouge, Louisiana 70810
Hattie Lou Randall $289,150
c/o William Randall
1592 River Ridge
Governor's Land at Two Rivers
Williamsburg, Virginia 23185
John Desmond $264,009
1135 Carter Avenue
Baton Rouge, Louisiana 70806
Otto Rees $245,680
John Fridge $218,491
Stephanie Cave $190,341
Norman & Beth Ferachi $148,415
Clyde & Jean Shaw $129,847
Dave Humphries $113,004
Norman C. Ferachi & Associates $112,734
Quinnon Brady $110,655
Marian Drysdale-Levy $110,328
Ned Cole $109,166
Robin Brown $105,446
Rita Chambers $102,539
Janice Story $100,957
PROVIDENT CBO: Moody's Raises Senior Notes' Ratings Ba1 & Ba2
-------------------------------------------------------------
Moody's Investors Service has upgraded its ratings of these
Classes of Notes issued by Provident CBO, Limited, a
collateralized debt obligation issuance:
(1) $10,000,000 Class B-1 Senior Secured Fixed Rate Notes due
December 2010 from B1 on watch for possible upgrade to Ba1
no longer on watch for possible upgrade.
(2) $31,000,000 Class B-2 Senior Secured Fixed Rate Notes due
December 2010 from B2 on watch for possible upgrade to Ba2
no longer on watch for possible upgrade.
The rating actions reflect improvement in the credit quality of
the underlying collateral pool, which consists primarily of non-
investment grade corporate bonds. Also the transaction has
experienced improvement in the overcollateralization levels
throughout the transaction capital structure. The Class B-1 Notes
and Class B-2 Notes were placed on the Moody's Watchlist for
possible upgrade on July 27, 2004.
Moody's stated that as a result of the improvement in credit
quality of the collateral pool, the ratings assigned to the Class
B-1 Notes and to the Class B-2 Notes, prior to the rating actions
taken today, are no longer consistent with the credit risk posed
to investors.
Rating Action: Upgrade
Issuer: Provident CBO, Limited.
The ratings of the following Classes of Notes have been upgraded:
Class Description:
(1) U.S. $10,000,000 Class B-1 Senior Secured Fixed Rate Notes
due December 2010 from B1 on watch for possible upgrade to
Ba1 no longer on watch for possible upgrade.
(2) U.S. $31,000,000 Class B-2 Senior Secured Fixed Rate Notes
due December 2010 from B2 on watch for possible upgrade to
Ba2 no longer on watch for possible upgrade.
RELIANCE: Court Reschedules Confirmation Hearing to September 27
----------------------------------------------------------------
On July 6, 2004, the Official Unsecured Bank Committee delivered
to the Bankruptcy Court its Second Amended Plan of Reorganization
and First Amended Disclosure Statement for Reliance Financial
Services Corporation. The First Amended Disclosure Statement
explaining that Plan was approved by the Court on July 7.
The Second Amended Plan and Disclosure Statement relates that the
Section 847 Refund recoveries and other tax assets will not be
available if Reorganized RFSC liquidates. If the Chapter 11 Case
is converted to a Chapter 7, it is unlikely that there will be a
recovery by Reorganized RFSC from the Section 847 Refunds and
other tax assets.
To the extent that Claim Holders opt-out of assigning their
Litigation Claims to Reliance Group Holdings, Inc., they will not
be entitled to receive RFSC Litigation Proceeds. Members of
Classes 2 and 4a without Litigation Claims will share in any
distribution of the RFSC Litigation Proceeds, unless they have
elected to opt-out.
The Second Amended Plan notes that $461,479,986 in Class 4a
Claims has been asserted. However, the Bank Committee and the
Official Committee of Unsecured Creditors intend to object to all
4a Claims. As a result, the amount of General Unsecured Claims
allowed by the Court will likely be significantly less.
The Second Amended Plan clarifies the Release Provisions. The
Plan will not release a party from liability arising from willful
misconduct, gross negligence, intentional fraud or breach of
fiduciary duty that resulted in personal profit at the expense of
the estate. The Plan will not release any party for knowing
misuse of confidential information. The Plan will not limit the
liability of the Debtors', RGH's or the Committees' professionals
to their clients.
The releases do not cover former and current directors, officers
and executives of Reorganized RFSC and RGH from actions prior to
June 12, 2001. This includes events connected to the Reliance
D&O Action or other actions by M. Diane Koken, the Insurance
Commissioner of the Commonwealth of Pennsylvania, as Liquidator
of Reliance Insurance Company.
The Second Amended Plan prohibits any transfer of New RFSC Common
Stock amounting to over 50% that would cause an "ownership
change" for tax purposes. There will be no transfer of shares of
New RFSC Common Stock that would result in Reorganized RFSC
becoming a member of an affiliated group of corporations.
During the first 35 days after the first anniversary of the
Effective Date, shares of New RFSC Common Stock may only be
transferred pursuant to a tender offer by High River, LP, or its
affiliates. The tender offer will be extended to all holders of
New RFSC Common Stock to tender their shares, up to a maximum of
49.9% of the outstanding shares. If more than 49.9% of the New
RFSC Common Stock are tendered, the shares will be purchased on a
pro rata basis, based on the number of shares tendered by each
holder. If High River and its affiliates would own less than 80%
of New RFSC Common Stock, the tender offer will be withdrawn, all
tendered shares returned to their holders and no transfer will be
permitted.
The Holder of an Allowed Liquidator Claim is entitled to full
settlement in exchange for its Claim, the payments under the Tax
Sharing Agreement and the PA Settlement Agreement, which includes
50% of the Section 847 Refunds and the Liquidator D&O Litigation
Proceeds. To the extent payments are provided for under both
Agreements, the arrangement will not result in duplicate
payments.
After the Effective Date and as soon as the disposition of the
books and records of RFSC and Reorganized RFSC is legally
feasible, the CEO will seek to dispose of the books and records,
with notice to the Liquidator and other interested parties. If
the Liquidator requires the books and records or determines that
they should not be disposed of, the Liquidator will be allowed
the opportunity to take possession of the books and records.
Judge Gonzalez adjourns the hearing to confirm the Official
Unsecured Bank Committee's Second Amended Plan of Reorganization
for Reliance Financial Services Corporation to September 27,
2004, at 11:00 a.m.
Headquartered in New York, New York, Reliance Group Holdings, Inc.
-- http://www.rgh.com/-- is a holding company that owns 100% of
Reliance Financial Services Corporation. Reliance Financial, in
turn, owns 100% of Reliance Insurance Company. The holding and
intermediate finance companies filed for chapter 11 protection on
June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing
$12,598,054,000 in assets and $12,877,472,000 in debts. The
insurance unit is being liquidated by the Insurance Commissioner
of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News,
Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000)
SALTIRE INDUSTRIAL: Hires Garden City as Claims & Noticing Agent
----------------------------------------------------------------
Saltire Industrial, Inc., asks the U.S. Bankruptcy Court for the
Southern District of New York for permission to employ Garden City
Group, Inc., as the official claims and noticing agent in its
chapter 11 case.
The Debtor reports that it has about 1,000 creditors and the most
effective and efficient manner in which to accomplish the process
of notifying them as well as receiving, docketing, maintaining,
photocopying and transmitting proofs of claim is to engage a third
party.
In particular, Garden City will:
a) relieve the Clerk's office of all noticing under any
applicable bankruptcy rule and processing of claims;
b) at any time, upon request, satisfy the Court that it has
the capability to efficiently and effectively notice,
docket and maintain the proofs of claim;
c) notify all creditors of the filing of the bankruptcy
petition and of the setting of the first meeting of
creditors;
d) provide notice for filing of all proofs of claim;
e) maintain an up-to-date copy of the Debtor's schedules
which lists all creditors and amounts owed;
f) provide the creditor with the scheduled amount and
classification of its claim;
g) file with the Clerk a certificate of service within 10
days, which includes a copy of the notice, a list of
persons to whom it was mailed and the date mailed;
h) microfilm, or by some similar electronic means, reproduce
the first page of any proof of claim;
i) after reproducing, removed all proofs of claim from the
office of the Clerk to the outside claims agent;
j) maintain all proofs of claim filed;
k) maintain an official claims register by docketing all
proofs of claim on a claims register;
l) maintain all original proofs of claim in correct claim
number order, in an environmentally secure area and
protect the integrity of these original documents from
theft and/or alteration;
m) transmit to the Clerk an official copy of the claims
register on a weekly basis, unless authorized by the
Clerk on a more or less regular basis;
n) maintain an up-to-date official mailing list for all
entities which shall be available upon request of a party
in interest or the Clerk;
o) be open to the public for examination of the original
proofs of claim, without charge, during regular business
hours;
p) maintain a telephone staff to handle the inquiries as
related to procedures in filing proofs of claim;
q) make any necessary changes to the claims register
pursuant to Court order;
r) make all original documents available to the Clerk on an
expedited and immediate basis;
s) provide notices to any entities, not limited to
creditors, that the Debtor or the Court deem necessary
for an orderly administration of the bankruptcy case; and
t) at the close of the case, box and ship all original
documents in proper format, as provided by the Clerk's
office, to the Federal Archives and Record Administration
located at Central Plains Region, 200 Space Center Drive,
Lee's Summit, Missouri 64064.
Michael J. Sherin, chairman of Garden City discloses that the
Debtor paid them a $2,000 retainer. However, Mr. Sherin did not
disclose its hourly rates or transactional fees.
To the best of the Debtor's knowledge, Garden City is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in New York, New York, Saltire Industrial,
manufactures diverse consumer and industrial products sold under a
variety of brand names. The Company filed for protection on
August 17, 2004 (Bankr. S.D.N.Y. Case No. 04-15389). When the
Debtor filed for protection, it listed above $1 million in
estimated assets and above $10 million in estimated debts.
SANTA BARBARA: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Santa Barbara Promotions Inc.
P.O. Box 23643
Santa Barbara, California 93121-3643
Bankruptcy Case No.: 04-12089
Type of Business: The Debtor is engaged into marketing of retail
products.
Chapter 11 Petition Date: August 20, 2004
Court: Central District of California (Northern Division)
Judge: Robin Riblet
Debtor's Counsel: Thomas M. Hinshaw, Esq.
Michaelson, Susi & Michaelson
7 West Figueroa Street
Santa Barbara, CA 93101
Tel: 805-965-1011
Total Assets: $18,500
Total Debts: $1,730,704
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Lockard & Wechsler, Inc. $288,215
One Ridge St. Ste. 59
Irvington, NY 10533
RR Donnelley Receivables, Inc. $187,099
Sylmark, Inc. $187,000
Spectra Products, Inc. $150,000
Tristar Products $134,941
Diamond Web Printing, LLC $99,616
American Litho, Inc. $79,195
Service Web Offset Corp. $58,600
Thomson Consumer $46,178
Fitness Quest $45,629
California Creative Designs $36,539
Black and Decker, Inc. $32,699
Direct-A Marketing Services $26,013
Oregon Scientific, Inc. $24,746
Envelope Concept Inc. $24,372
Salton, Inc. $20,000
Coil Solutions, Inc. $14,452
The Wenzel Company $12,713
Fell, Marking, Arkin & Montgomery $12,624
AEC One Stop Group, Inc. $12,532
SCHLOTZSKY'S: Asks Court for Permission to Use Cash Collateral
--------------------------------------------------------------
Schlotzsky's, Inc., and its debtor-affiliates, ask the U.S.
Bankruptcy Court for the Western District of Texas, San Antonio
Division, for permission to use cash collateral pledged to secure
repayment of loans from Commercial National Bank, NS Associates I,
Ltd., and Jeff and John Wooley.
The Debtors submit that they need to use the Cash Collateral to
pay actual, ordinary and necessary operating expenses to prevent
immediate and irreparable harm to the estate.
The Secured Creditors assert liens on substantially all the
Debtors' assets, including royalties from franchisees and license
fees from third parties who manufacture and sell private label
products under Schlotzsky's name.
The Debtors tell the Court that the value of the Collateral is
unlikely to diminish and they expect their cash balances to build
over time.
The Debtors propose to protect their Secured Creditors' interests
by granting postpetition replacement liens and by using the cash
collateral to maintain the operation of Schlotzsky's franchise
system.
Headquartered in Austin, Texas, Schlotzky, Inc., operates a chain
of restaurants. The Debtors filed for chapter 11 protection on
August 3, 2004 (Bankr. W.D. Tex. Case No. 04-54504). Amy Michelle
Walters, Esq. and Eric Terry, Esq., at Haynes & Boone, LLP
represent the Debtors in their restructuring efforts. When the
Debtors filed for protection from its creditors, they listed
$111,692,000 in total assets and $71,312,000 in total debts.
SOLECTRON CORP: Releasing FY 2004 Earnings on Sept. 28
------------------------------------------------------
Solectron Corporation (NYSE:SLR), a leading provider of
electronics manufacturing and integrated supply chain services,
will announce its financial results for the fourth quarter and
fiscal 2004 shortly after 1 p.m. PDT/4 p.m. EDT Tuesday,
Sept. 28.
Note that the earnings release date has changed because of
scheduling considerations.
Interested parties are invited to listen to Solectron's regularly
scheduled conference call at 1:30 p.m. PDT/4:30 p.m. EDT, live on
the Internet.
The news release and market-specific information about the
company's earnings will be posted by 1:15 p.m. PDT/4:15 p.m. EDT
on the company's Web site at http://www.solectron.com/
To listen live over the Internet, log on via the Web address above
to access the Webcast. You may register for the call on this Web
site anytime prior to the start of the call.
The call will be archived at:
http://www.solectron.com/investor/events.htm
An audio replay will also be available from two hours after the
conclusion of the call through Oct. 8. To access the replay, call
(800) 642-1687 from within the United States, or (706) 645-9291
from outside the United States, and specify passcode 8711083.
About Solectron
Solectron -- http://www.solectron.com/-- provides a full range of
worldwide manufacturing and integrated supply chain services to
the world's premier high-tech electronics companies. Solectron's
offerings include new-product design and introduction services,
materials management, high-tech product manufacturing, and product
warranty and end-of-life support. The company is based in
Milpitas, California, and had sales from continuing operations of
$9.8 billion in fiscal 2003.
* * *
As reported in the Troubled Company Reporter on June 28, 2004,
Fitch Ratings has affirmed Solectron Corporation's 'BB-' senior
unsecured debt, 'BB+' senior secured bank credit facility, and the
remaining 'B' adjustable conversion rate equity security units.
The Rating Outlook is changed to Stable from Negative.
Approximately $1.2 billion of debt is affected by Fitch's action.
The Stable Rating Outlook reflects Solectron's improved financial
performance, a more stable demand environment across key-end
markets, and the company's progress related to asset sales. The
company's ongoing asset divestiture program, announced during the
fourth fiscal quarter of 2003, represented approximately
$700 million of aggregate revenues and break-even cash flows. To
date the company has received approximately $405 million of pretax
cash proceeds, which is within range of Fitch's expectations, with
three businesses still to sell. In addition, the company's
refinancing risk has been reduced and financial flexibility
improved as a result of meeting the $950 million liquid yield
option notes put with cash in May 2004 and repurchasing
approximately 94% of the outstanding ACES units, mostly with
common stock, representing approximately $1.0 billion of debt.
Solectron's ratings continue to reflect relatively weak albeit
improving operating margins, driven by a continued competitive
pricing environment and less than optimal capacity utilization
rates, and a cash conversion cycle that lags those of its peers.
Positively, the ratings are supported by Solectron's top tier
position within the EMS industry, with significant scope and
global footprint of operations, a lower revenue break-even point
resulting from a combination of past restructuring and asset
divestitures, a solid liquidity profile, and a manageable maturity
schedule.
Solectron's credit protection measures meaningfully improved in
the third quarter, as a result of the aforementioned debt
repayments and a 100 basis points sequential improvement in
operating margins. Operating margins have improved in each of the
past four quarters, rising to 1.8% in the third quarter of 2004
from -1.1% one year ago. Leverage improved significantly to 3.8
times (x) for the LTM ended May 31, 2004 versus 6.3x and 11.8x for
the LTM periods ended May 30, 2003 and May 31, 2002, respectively.
Interest coverage was 2.9x for the LTM ended May 31, 2004 versus
0.3x for the twelve months ended May 31, 2003. Fitch expects
credit protection measures will remain stable and ultimately
improve over the next several quarters, driven by continued demand
strength in its key-end markets, especially communications and
consumer, profitability enhancement resulting from higher capacity
utilization rates, and incremental cost savings associated with
past restructuring programs and LEAN manufacturing initiatives, as
well as meaningfully lower debt service requirements.
Liquidity as of May 31, 2004 consisted of unrestricted cash of
$1.2 billion and an undrawn three-year $250 million secured
revolving facility, expiring February 2005. The company also has
various committed and uncommitted revolving lines of credit
related to its foreign subsidiaries, totaling approximately
$225 million. Free cash flow is likely to be modestly positive
over the next several quarters; however, Fitch believes that in a
rapidly accelerating demand environment profitability enhancement
could increase more slowly than working capital requirements
without continued reductions in cash conversion days.
Furthermore, Solectron expects approximately $100 million of
proceeds for the sale of the remaining three businesses in the
divestiture program, none of which have a meaningful impact on
cash flow. Total debt was $1.2 billion as of May 31, 2004,
consisting primarily of $150 million of 7.375% senior notes due
March 2006, $500 million of 9.625% senior notes due February 2009,
and $450 million of 0.5% convertible senior notes due February
2034. In addition, approximately $63 million of ACES remain and
are expected to be remarketed in August 2004 and mature in 2006.
SOLUTIA INC: Wants Court to Allow Greif's $250,479 Unsecured Claim
------------------------------------------------------------------
Solutia, Inc., uses packaging drums to package finished products
and to collect refuse. Before the bankruptcy petition date,
Greif, Inc., sold and delivered certain packaging drums on credit
to Solutia for $66,152. Solutia did not pay for the Goods prior
to the Petition Date. On December 18, 2003, Greif made a timely
written demand to reclaim the Goods worth $66,152 in accordance
with Section 546(c) of the Bankruptcy Code. Solutia has
determined that Greif holds a $265,479 general unsecured
prepetition claim for goods that Greif delivered to Solutia prior
to the Petition Date.
Although Solutia believes that it has strong defenses to the
Reclamation Claim, in light of the small amount involved, Solutia
believes that it is in its best interests to avoid the time and
expense that would be necessary to litigate the validity of the
Claim.
To resolve the Reclamation Claim, Solutia and Greif entered into a
stipulation, pursuant to which Solutia will grant Greif an allowed
administrative priority claim for $15,000 and a prepetition
general unsecured claim for $250,479. The Allowed Prepetition
Claim is equal to the General Unsecured Claim less the
Administrative Claim. In consideration for the Administrative
Claim and the Allowed Prepetition Claim, Greif agreed that the
Reclamation Claim will be deemed fully and finally resolved.
Greif also agreed to waive any further rights or claims related to
the Reclamation Claim.
The Debtors ask the U.S. Bankruptcy Court for the Southern
District of New York to approve the Stipulation.
Headquartered in St. Louis, Missouri, Solutia, Inc. --
http://www.solutia.com/-- with its subsidiaries, make and sell a
variety of high-performance chemical-based materials used in a
broad range of consumer and industrial applications. The Company
filed for chapter 11 protection on December 17, 2003 (Bankr.
S.D.N.Y. Case No. 03-17949). When the Debtors filed for
protection from their creditors, they listed $2,854,000,000 in
assets and $3,223,000,000 in debts. (Solutia Bankruptcy News,
Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000)
SOVEREIGN BANCORP: Redeems $500 Million 10.50% Senior Notes
-----------------------------------------------------------
Sovereign Bancorp, Inc. (NYSE: SOV), parent company of Sovereign
Bank, intends to call for redemption $500 million of outstanding
10.50% Senior Notes due November 2006 and issue $300 million of a
two-year floating rate Senior Note. The F/R Note will reset
quarterly to 3-month LIBOR + 33 basis points and mature on August
25, 2006.
Jay S. Sidhu, Chairman and CEO of Sovereign, said, "With this
redemption, we are reducing the amount of debt outstanding and are
removing one of the last pieces of high-cost debt financing we
incurred related to the Fleet/BankBoston branch acquisition. We
are replacing it with lower-cost, unsecured senior debt that is
much more reflective of the financial strength of our company
today. This transaction significantly increases Sovereign's
liquidity, expands our net interest margin approximately 5 basis
points, improves the quality of our balance sheet, and reduces
future cash needs at Sovereign."
Proceeds of the F/R Note issuance, along with existing cash at
Sovereign, will be used to fund the redemption of all outstanding
10.50% Notes. Sovereign expects this debt restructuring to be $.03
to $.05 accretive to 2005 earnings per share, an annual interest
expense savings of approximately $30 million. In connection with
this transaction, Sovereign will be recording a one-time charge of
approximately $43 million after-tax in the third quarter of 2004.
"Considering this transaction and potential accounting changes
that may arise with respect to convertible trust preferred
securities, management reaffirms previous 2005 earnings guidance
of $1.90 to $2.00 operating earnings per share, excluding one-time
charges of $.04 to $.06 per share for our pending acquisition of
Waypoint Financial Corp. In addition, Sovereign remains committed
to our previously communicated 2005 capital goals," commented
Sidhu.
The 10.50% Notes will be called for redemption on September 22,
2004 at a redemption price to be determined on September 15, 2004.
The redemption price will be equal to outstanding principal, plus
accrued interest, plus the applicable premium. Interest will cease
to accrue on such notes on and after such date. Existing
bondholders will receive notification through DTC. Questions
regarding the redemption may be directed to The Bank of New York
contact Daniel Donovan at 312-827-8547.
The joint-bookrunners for the F/R Note issuance were J.P. Morgan
Securities Inc. and Lehman Brothers Inc. Co-manager was Merrill
Lynch & Co., Inc.
Sovereign Bancorp, Inc. (NYSE: SOV), headquartered in
Philadelphia, Pennsylvania, is the parent company of Sovereign
Bank, a $55 billion financial institution with nearly 600
community banking offices and 1,000 ATMs and approximately 9,500
team members in Connecticut, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania and Rhode Island. In addition to
full-service retail banking, Sovereign offers a broad array of
financial services and products including business and corporate
banking, cash management, capital markets, trust and wealth
management and insurance. Pro forma for pending acquisitions,
Sovereign is one of the 20 largest U.S. Financial Institutions in
assets. For more information on Sovereign Bank, visit
http://www.sovereignbank.com/or call 1-877-SOV-BANK.
* * *
As reported in the Troubled Company Reporter on June 30, 2004,
Fitch Ratings assigned these expected ratings to Sovereign
Bancorp, Inc.'s $1 billion mixed-shelf registration:
Sovereign Bancorp, Inc.
--Long-term senior 'BBB-';
--Subordinated 'BB+';
Sovereign Capital Trust V
--Preferred stock 'BB'.
Sovereign Capital Trust VI
--Preferred Stock 'BB'.
Fitch added that SOV's ratings are based on its consistent
earnings, sound asset quality, and solid liquidity. While in the
midst of two acquisitions, concerns regarding integration risk
remain moderate as SOV has demonstrated the ability to integrate
past acquisitions with limited disruption. Capital levels are
adequate. Fitch would view further increases in core
capitalization levels from the shelf favorably. However,
significant additional financial leverage could put downward
pressure on the company's ratings.
STEEL DYNAMICS: Appoints Glenn Pushis VP & Bar Products Manager
---------------------------------------------------------------
Steel Dynamics, Inc., (Nasdaq: STLD) appointed Glenn Pushis to the
position of Vice President and General Manager of the Bar Products
Division. Mr. Pushis has served as general manager of that
division since it was formed in January of 2003.
"This appointment recognizes Glenn's significant contribution in
achieving the rapid success of SDI's newest business unit," said
Keith Busse, President and CEO of Steel Dynamics. "Glenn and his
team have made remarkable progress in modifying and restarting the
idled bar mill at Pittsboro, Indiana. Glenn's technical and
management skills enabled a very rapid start-up of the mill, which
has resulted in quicker and higher profitability than we had
expected when the project began. The mill produced its first
profit in April of this year, its fourth full month of operations,
and continues to make a strong contribution to the company's
financial success."
Prior to his assignment to lead the Bar Products Division, Mr.
Pushis had served since 1997 as Cold Mill Manager of the Flat
Rolled Division in Butler, Indiana. He had previously held
positions in maintenance and engineering for Nucor Corporation and
LTV Steel. Glenn received his Bachelor's degree in Mechanical
Engineering Technology from Purdue University in 1987.
Since its start-up in early 2004, SDI's Bar Products Division has
gained rapid acceptance as a supplier of steel rounds and SBQ bars
used in a variety of applications in the automotive, industrial
and construction equipment markets. The company has invested
about $80 million in improvements at the Pittsboro mill, including
installation of a finishing mill that also permits the facility to
produce reinforcing bar and light structural shapes. In ramping
up to its ultimate annual capacity of 500,000 to 600,000 tons, the
mill is expected to produce about 300,000 tons of steel in 2004.
Currently, the Bar Products Division employs about 280 people.
* * *
As reported in the Troubled Company Reporter on June 3, 2004,
Standard & Poor's Ratings Services revised its outlook on Steel
Dynamics Inc. to positive from stable.
At the same time, Standard & Poor's also affirmed all its ratings
on the Fort Wayne, Indiana-based company, including its 'BB-'
corporate credit rating. Steel Dynamics had approximately $600
million in total debt at March 31, 2004.
"The outlook revision reflects the prospects for a sustained
improvement in the company's financial profile, given that
currently strong industry conditions should continue through 2004
and potentially into 2005," said Standard & Poor's credit analyst
Paul Vastola. The combination of favorable industry conditions and
successful actions by SDI to enhance its product mix through
greenfield and acquisition initiatives should yield, at least in
the near term, strong financial performance and meaningful cash
flow generation that could result in an improved balance sheet and
sustained financial performance.
A ratings upgrade would be predicated on SDI's willingness and
ability to prudently balance its growth initiatives while
improving debt leverage in a cyclical and often-volatile industry.
The ratings on SDI reflect its aggressive growth initiatives and
debt leverage, highly competitive and cyclical end markets,
partially offset by its very low-cost position and successful
efforts to diversify its product lines. As a steel minimill
producer, the company benefits from a nonunionized workforce with
no retiree medical or pension obligations. The company also
benefits from strategic locations and has a good track record of
building new capacity at lower costs relative to its competition
-- factors that contribute to SDI's low-cost position.
TALON FUNDING: Moody's Rates Class C Floating Rate Notes at Ca
--------------------------------------------------------------
Moody's Investors Service had taken these rating actions on the
Moody's rated tranches of notes from Talon Funding I, Ltd.:
(i) the U.S. $402.5 million (current outstanding amount
approximately U.S. $357.5 million) Class A Senior Secured
Floating Rate Notes due June 2035, formerly rated Aa1 on
watch for possible downgrade, are now rated Aa3 no longer
on watch for possible downgrade;
(ii) the U.S. $31.25 million Class B Senior Secured Floating
Rate Notes due June 2035, formerly rated A2 on watch for
possible downgrade, are now rated Baa2 on watch for
possible downgrade; and
(iii) the U.S. $31.0 million Class C-1 Floating Rate Notes due
June 2035, and the U.S.$14.0 million Class C-2 9.39%
Fixed Rate Notes due June 2035, each formerly rated B2 on
watch for possible downgrade, are now each rated Ca no
longer on watch for possible downgrade.
The Issuer also issued U.S. $21.25 million in Class D and Class E
notes which were not rated by Moody's.
Moody's explained that these rating actions were taken to reflect
the fact that due to significant deterioration in the quality and
coverage of the underlying collateral, the risk presented to
investors in each of the affected classes of notes was no longer
consistent with their formerly outstanding ratings. According to
the June 7, 2004 Note Valuation Report, the Class C-1 and C-2
Notes were continuing to defer their interest payments.
Additionally, as of the July 29, 2004 Trustee Monthly Report, the
deal was failing a series of collateral quality tests including
the Class AB and Class C Overcollateralization Tests, the Weighted
Average Rating Factor Test and the Weighted Average Recovery Rate
Test.
Description of Affected Tranche:
-- U.S.$402.5 million (current outstanding amount approximately
$357 million) Class A Senior Secured Floating Rate Notes due
June 2035
Previous rating: Aa1 on watch for possible downgrade
New rating: Aa3 no longer on watch for possible
downgrade
-- U.S.$31.25 million Class B Senior Secured Floating Rate
Notes due June 2035
Previous rating: A2 on watch for possible downgrade
New rating: Baa2 on watch for possible downgrade
-- U.S.$31.0 million Class C-1 Floating Rate Notes due June 2035
Previous Rating: B2 on watch for possible downgrade
New Rating: Ca no longer on watch for possible
downgrade
-- U.S.$14.0 million Class C-2 9.39% Fixed Rate Notes due
June 2035
Previous Rating: B2 on watch for possible downgrade
New Rating: Ca no longer on watch for possible
downgrade
UNITED AIRLINES: Reaches Agreement with Heathrow Ground Employees
-----------------------------------------------------------------
Following negotiations with the Transport and General Workers'
Union, which represents some United Airlines (OTC Bulletin Board:
UALAQ) ground employee groups at London Heathrow, United confirms
that the carrier and the T&G have reached an agreement on pay, and
that the proposed strike action for Friday, August 27, has been
called off.
The T&G has agreed to recommend acceptance of United's latest
offer to its members in a ballot to be held next week.
"United is pleased to have reached a mutual agreement, through
active negotiation with the T&G, that will ensure for our
customers the continued, smooth operation of our flights in and
out of London Heathrow," said Larry De Shon, senior vice president
- airport operations, United.
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 Debtors filed for
protection from their creditors, they listed $24,190,000,000 in
assets and $22,787,000,000 in debts.
UNOVA INC: Fitch Affirms B- Debt Rating & Says Outlook Positive
---------------------------------------------------------------
Fitch Ratings affirmed the rating on UNOVA Inc.'s senior unsecured
debt at 'B-'. The Rating Outlook has been revised to Positive
from Stable.
The rating incorporates UNOVA's leading market positions, as well
as:
* improving overall operating performance and balance sheet,
offset by competitive markets;
* volatile yet predictable free cash flow, and continued
weakness; and
* uncertainty in the industrial automation systems -- IAS --
segment.
The Positive Outlook reflects a positive trend in the automated
data systems -- ADS -- segment, stabilization in the IAS segment,
and expectation of debt repayment in 2005. At June 30, 2004,
debt/latest 12 months (LTM) EBITDA and LTM EBITDA/LTM interest
were 2.7 times and 4.7x, respectively. The ratios were 2.9x and
3.8x, respectively, for the same period a year ago. On a pro
forma basis at June 30 after the debt repayment, debt/EBITDA was
less than 2x.
Intermec's sales, the ADS segment, excluding IP settlements, grew
more than 8% during 2003, and the positive trend is expected to
continue in 2004. The automated information and data collection
-- AIDC -- market is rapidly growing, attracting new competition,
and UNOVA continues to focus on technologies and bringing in new
products/platforms. To support the strong growth, the company is
expected to increase Intermec's research and development spending
in 2004 by approximately $15 million. Still, Fitch expects the
company to achieve a higher operating margin, benefiting from a
stronger operating environment. About 20% of Intermec's sales are
generated from aftermarket business, which provides a buffer to
revenue and margin stability.
The consolidated results have been hampered by weakness in the IAS
segment. While the IAS segment's backlog has begun to increase
and shows signs of stabilization, Fitch does not project the
segment to return to its historical levels in the near term.
UNOVA's free cash flow has been volatile despite the improvement
in overall performance, largely due to timing of the working
capital in the IAS segment. As the business began to pick up
after several years of declines, working capital has turned to a
net cash user. Cash was $191 million at June 30, 2004,
$238 million at Dec. 31, 2003, and $203 million at June 30, 2003.
Despite the volatility in free cash flow, UNA has managed to keep
its debt levels constant. Since the termination of the term loan
in January 2003, UNOVA's debt has been stable at $208.5 million,
of which $108.5 million ($100 million of public notes and
$8.5 million of industrial revenue bonds [IRBs]) will mature in
2005 and are expected to be paid off.
UNOVA has two secured credit facilities of $100 million and
GBP15 million. The $100 million credit facility due July 2004,
which was extended to October 2004, is expected to be replaced
with a new multiyear facility. There are currently no borrowings
from either facility. The credit facilities can back up working
capital requirements; however, Fitch expects the company to be
able to internally fund capital needs in the intermediate term.
UNA does not anticipate any large capital spending nor acquisition
activities in the near term, and cash on hand provides ample
liquidity in the near term. The company has made pension plan
contributions of $4.4 million ($1 million of payments for its
unfunded nonqualified U.S. plans and $3.4 million of contributions
to its foreign plans) during the first six months of 2004 and is
expected to make similar contributions in the second half of the
year. UNOVA is not required to make contributions to its
qualified U.S. pension plans, as they are in a surplus condition.
Over the long term, UNOVA will need to demonstrate sustainable
improvement to restore meaningful improvement in margins and free
cash flow in the competitive operating environment to enhance
financial flexibility.
WATERMAN INDUSTRIES: Wants to Hire Dennis D. Bean as Accountant
---------------------------------------------------------------
Waterman Industries, Inc., asks the U.S. Bankruptcy Court for the
Eastern District of California, Fresno Division, for authority to
engage Dennis D. Bean & Company as its accountants.
Dennis D. Bean is expected to:
a) prepare adjusting entries, working papers and
depreciation calculations in connection with preparing,
reporting on, or estimating financial statements,
financial reports, federal income and state tax returns
and/or tax liabilities and federal income and state tax
deposits;
b) review correspondence received, prepare correspondence in
response to and represent services as needed in connection
with federal, state and county taxing authorities; and
c) consult and litigate services as required by the Debtor.
The Debtor agrees to compensate Dennis D. Bean at the Firm's
standard and customary hourly rates. Those rates aren't disclosed
in the papers delivered to the Bankruptcy Court.
To the best of the Debtor's knowledge, Dennis D. Bean is a
"disinterested person" as the term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in Exeter, California, Waterman Industries --
http://www.watermanusa.com/-- provides water and irrigation
control. The Company filed for chapter 11 protection on
February 10, 2004 (Bankr. E.D. Calif. Case No. 04-11065).
Riley C. Walter, Esq. at Walter Law Group, represents the
Debtor in its restructuring efforts. When the Debtor filed
for protection from its creditors, it listed above $10 million
in estimated assets and debts.
WEIRTON STEEL: United Bank Wants Plan Amended to Address ESOPs
--------------------------------------------------------------
Julia A. Chincheck, Esq., at Bowles, Rice, McDavid, Graff & Love,
LLP, in Charleston, West Virginia, relates that United Bank,
Inc., successor to United National Bank, serves as the trustee
under:
* the Weirton Steel Corporation 1984 Employee Stock Ownership
Plan, and
* the Weirton Steel Corporation 1989 Employee Stock Ownership
Plan.
Both Ownership Plans were sponsored by Weirton Steel Corporation.
The 1984 ESOP consists of the Debtor's stock and certain
diversification accounts or investment funds representing the
invested proceeds received by plan participants from the sale of
the Debtor's common stock on Weirton's initial public offering.
The 1989 ESOP consists primarily of the Debtor's stock.
Ms. Chincheck points out that the Plan fails to address the
Debtor's ongoing responsibility with respect to the 1984 ESOP or
the 1989 ESOP or the ongoing status of these plans.
Thus, United Bank asks the Court to direct Weirton to amend its
Plan to address the 1984 and 1989 ESOPs.
WELLS FARGO: Fitch Assigns Bb Rating to $2.373M Certificate Class
-----------------------------------------------------------------
Wells Fargo Mortgage Securities Corp.'s mortgage pass-through
certificates, series 2004-Q, are rated by Fitch Ratings as
follows:
-- $657,632,100 classes I-A-1 - I-A-3, I-AR, I-A-LR, II-A-1
and II-A-2 senior certificates 'AAA';
-- $9,491,000 class B-1 'AA';
-- $4,068,000 class B-2 'A';
-- $2,034,000 class B-3 'BBB';
-- $2,373,000 class B-4 'BB'.
Classes B-5 and B-6 certificates are not rated by Fitch.
The 'AAA' rating on the senior certificates reflects the 3%
subordination provided by the 1.40% class B-1 certificates, 0.60%
class B-2 certificates, 0.30% class B-3 certificates, 0.35%
privately offered class B-4 certificates, 0.20% privately offered
class B-5 certificates and 0.15% privately offered class B-6.
Classes B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB' and
'BB', respectively, based on their respective subordination.
Fitch believes the amount of credit enhancement available will be
sufficient to cover credit losses. The ratings also reflect the
high quality of the underlying collateral, the integrity of the
legal and financial structures and the servicing capabilities of
Wells Fargo Bank Minnesota, N.A. (WFBM; rated 'RPS1' by Fitch).
The transaction is secured by two pools of mortgage loans, which
respectively collateralize the groups I and II certificates. The
two mortgage pools are cross-collateralized. The mortgage loans
consist of fully amortizing, one- to two-family, adjustable-rate
mortgage loans that provide for a fixed interest rate during an
initial period of approximately seven years. Thereafter, the
interest rate will adjust on an annual basis to the sum of the
weekly average yield on US Treasury Securities adjusted to a
constant maturity of one year and a gross margin. The mortgage
loan groups are aggregated for statistical purposes as represented
below.
The mortgage loans have an aggregate principal balance of
approximately $677,971,621 as of the cut-off date (Aug. 1, 2004),
an average balance of $444,572, a weighted average remaining term
to maturity (WAM) of 359 months, a weighted average original loan-
to-value ratio (OLTV) of 69.72% and a weighted average coupon
(WAC) of 5.235%. Rate/Term and cashout refinances account for
18.91% and 9.57% of the loans, respectively. The weighted average
FICO credit score for the group is 740. Owner occupied properties
and second homes comprise 95.98% and 4.02% of the loans,
respectively. The states that represent the largest geographic
concentration are California (36.02%), Virginia (7.85%), and New
York (5.49%). All other states represent less than 5% of the
outstanding balance of the mortgage loans.
None of the mortgage loans are 'high cost' loans as defined under
any local, state or federal laws.
All of the mortgage loans were generally originated in conformity
with underwriting standards of Wells Fargo Home Mortgage, Inc.
Wells Fargo Home sold the loans to Wells Fargo Asset Securities
Corporation, a special purpose corporation, who deposited the
loans into the trust. The trust issued the certificates in
exchange for the mortgage loans. Wells Fargo Asset, an affiliate
of Wells Fargo Home, will act as servicer, master servicer and
custodian, and Wachovia Bank, N.A. will act as trustee and paying
agent. For federal income tax purposes, elections will be made to
treat the trust as separate real estate mortgage investment
conduits.
WESPOINT STEVENS: Strengthens Global Distribution in Middle East
----------------------------------------------------------------
WestPoint Stevens Inc. (OTC Bulletin Board: WSPT) entered into a
sales and distribution agreement with American Business
Development, based in Germany, allowing the Company to undergo a
significant expansion of its famous brand names into Middle East
retail locations.
The new agreement, effective Oct. 1, strengthens global
distribution of the Company's brands and offers brand extension to
its current bed and bath home fashion assortments at retail in
Oman, the United Arab Emirates, Qatar, Bahrain, Kuwait, Iraq,
Jordan, Lebanon, Yemen, Saudi Arabia, Cyprus, Turkey, Greece,
Egypt, Libya, Tunis, Algeria Morocco and Sudan.
"This is a tremendous opportunity for our great brands,"
emphasized Bed and Bath Division President Robert B. (Bob) Dale.
"It will put our flagship Martex(R) brand, as well as Grand
Patrician(R), Utica(R), Lady Pepperell(R), Vellux(R) and several
others, into key retail outlets across the Middle East. These are
smart, savvy shoppers who appreciate quality and style; and our
brands already resonate with them. Being able to easily buy our
products in their stores will answer the many requests we've had
from consumers in that part of the world."
Products offered will include sheets, bedding ensembles, bedding
accessories, blankets and towels and bath accessories.
Another facet in this focus on extending the brands is the
development of a new licensing agreement with ABD for the
manufacture of bedding and bath products under the Company's
brands by carefully selected Middle East manufacturers -- putting
the supply near the demand.
"This has been a carefully developed strategy and one that
requires the international expertise of a partner such as American
Business Development. ABD has all the skills and appreciation of
cultural and geographic characteristics that are essential to
global marketing," Mr. Dale pointed out. "ABD is also acutely
conscious of WestPoint Stevens' commitment to protecting the
integrity of our brands and controlling the quality of our
products."
American Business Development owner Michael Yamout agrees with Mr.
Dale's assessment of the sales opportunities for WestPoint Stevens
products in the Middle East. "WestPoint is a company known
globally for product innovation and its premier position in the
industry. ABD is delighted to offer WestPoint's famous brands in
this part of the world. It should offer a real sales advantage to
both WestPoint and ABD with long-term penetration of our brands in
the marketplace."
Headquartered in West Point, Georgia, WestPoint Stevens, Inc., --
http://www.westpointstevens.com/-- is the #1 US maker of bed
linens and bath towels and also makes comforters, blankets,
pillows, table covers, and window trimmings. It makes the Martex,
Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux
brands, as well as the Martha Stewart bed and bath lines; other
licensed brands include Ralph Lauren, Disney, and Joe Boxer.
Department stores, mass retailers, and bed and bath stores are its
main customers. (Federated, J.C. Penney, Kmart, Sears, and Target
account for more than half of sales.) It also has nearly 60 outlet
stores. Chairman and CEO Holcombe Green controls 8% of WestPoint
Stevens. The Company filed for chapter 11 protection on June 1,
2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq.,
at Weil, Gotshal & Manges, LLP, represents the Debtors in their
restructuring efforts.
WHITEHAWK CDO: Moody's Puts Ba3 Rating on Preference Shares
-----------------------------------------------------------
Moody's Investors Service assigned these ratings to the issues of
Whitehawk CDO Funding, Ltd., and Whitehawk CDO Funding, LLC, the
Co-Issuer:
(i) Aaa to U.S. $870,000,000 Class A-1 Long Term Floating
Rating Notes Due 2039;
(ii) Aaa to U.S. $67,000,000 Class A-2 Floating Rate Notes Due
2039;
(iii) Aa2 to U.S. $35,000,000 Class B Floating Rate Notes Due
2039;
(iv) A2 to U.S.$6,000,000 Class C Floating Rate Deferrable
Interest Notes Due 2039;
(v) Baa2 to U.S.$7,000,000 Class D Floating Rate Deferrable
Interest Notes Due 2039; and
(vi) Ba3 to 15,000 Preference Shares with an aggregate
liquidation preference amount of U.S.$15,000,000.
In addition, Moody's also has assigned ratings of:
(i) Prime-1 to the Class A-1 MM Money Market Floating Rate
Notes, which is primarily based on the short-term rating
of Wachovia Bank, N.A., the Put Counterparty; and
(ii) Aa2 to the Class A-1 MT Medium Term Floating Rate Notes,
which is primarily based on the long-term rating of the
Put Counterparty.
Both Class A-1MM Notes and Class A-1 MT Notes are designated as
subclasses of the Class A-1 Notes.
The transaction is a cash flow CDO whose underlying assets consist
primarily of diversified structured finance securities, including,
but not limited to:
* asset-backed securities,
* residential mortgage-backed securities,
* collateralized debt obligations, and
* commercial mortgage-backed securities.
The transaction was brought to the market by Wachovia Capital
Markets, LLC. The transaction is managed by the WestLB AG, New
York Branch. The portfolio management team has been managing the
Blue Heron series since 2002. This is the third deal closed in
2004 under management.
* Dorsey & Whitney Partner Joint Market Regulation Services' Board
------------------------------------------------------------------
Market Regulation Services Inc., the independent regulation
services provider for Canadian equity markets, named D. Grant
Vingoe, a partner in the firm and head of Dorsey & Whitney LLP's
Toronto office, to RS' Board of Directors.
RS, a not-for-profit, self-regulatory organization, monitors the
day-to-day activities of securities markets. Its goal is to
maintain investor confidence and market integrity through the
administration, interpretation and enforcement of a common set of
market integrity principles.
During a distinguished legal career, Mr. Vingoe has been deeply
involved in regulatory policy matters for the Canadian securities
industry, pursuing securities laws that better reflect the
interests of clients and investors. His legal practice focuses on
cross-border securities transactions, financial services
regulation, derivative instruments, and the regulatory aspects of
investment management. With his appointment to RS's Board of
Directors, Mr. Vingoe joins a who's-who of prominent Canadians
including significant figures from the fields of banking, finance,
education and law.
Widely published and a recognized authority on securities law and
regulated transactions, Mr. Vingoe is a member of the bar in
Ontario and in New York. He is also a member of the Securities
Industry Association, Compliance and Legal Division, the Canadian
Affairs division of the Americas Society, and the Atlantic Council
of Canada, and was appointed in 1999 to a term with the Ontario
Securities Commission Securities Advisory Committee. Holder of two
advanced law degrees, Grant earned his LL.B at the Osgoode Hall
Law School at York University, Ontario, and his LL.M. at New York
University. He is also a member of Dorsey's Professional Personnel
Committee.
About Dorsey & Whitney
Clients have relied on Dorsey since 1912 as a valued, cutting-edge
business partner. With over 675 lawyers in 19 locations in the
United States, Canada, Europe and Asia, we provide an integrated,
proactive approach to our clients' legal and business needs.
Dorsey represents a number of the world's most successful Fortune
500 companies from a variety of disciplines including leaders in
the financial services, investment banking, life sciences,
securities, technology and energy sectors, as well as nonprofit
and government entities.
* EPIQ Offers More Specialty Balloting & Voting Support Services
----------------------------------------------------------------
EPIQ Systems, Inc. (NASDAQ:EPIQ) formed a new subsidiary,
Financial Balloting Group, to expand its product and service
offerings. Financial Balloting Group, which will be based in New
York, will offer specialty balloting and voting support services
for Chapter 11 reorganization plans. The company has recruited
initial staff members with leading industry expertise and
significant experience to launch the new business unit.
Tom W. Olofson, chairman and CEO of EPIQ Systems, and Christopher
E. Olofson, president and chief operating officer, said "Our move
into Chapter 11 voting and balloting services is a logical
complement to our existing bankruptcy offerings. The formation of
Financial Balloting Group provides access to new opportunities and
strengthens the depth of our presence in the market for fiduciary
management and claims administration solutions."
EPIQ Systems provides an advanced offering of integrated
technology-based products and services for fiduciary management
and claims administration applications. Our solutions enable
clients to optimize the administration of large and complex
bankruptcy, class action, mass tort, and other similar legal
proceedings. EPIQ Systems clients include corporations, attorneys,
trustees and administrative professionals who require
sophisticated case administration and document management
capabilities, extensive subject matter expertise and a high
service capacity. We provide clients a packaged offering of both
proprietary technology and value-added services that
comprehensively addresses their extensive business requirements.
For more information, see http://www.epiqsystems.com/
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania,
USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L.
Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B.
Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie
Sabijon and Peter A. Chapman, Editors.
Copyright 2004. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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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-
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*** End of Transmission ***