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/raid1/www/Hosts/bankrupt/TCR_Public/040831.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, August 31, 2004, Vol. 8, No. 185 Headlines AINSWORTH LUMBER: Moody's Reviewing B1 Ratings & May Downgrade AMAZON.COM: Moody's May Upgrade Single-B & Junk Ratings ARMOR HOLDINGS: Wins 5-Year $52 Million Marine Corps Contract ARMSTRONG: Wants Exclusive Periods Extended into 2005 BREUNERS HOME: Employs Jenkens & Gilchrist as Special Counsel BUFFETS HOLDINGS: S&P's B Corporate Credit Rating on CreditWatch CARBIZ INC: Director Ross Quigley Discloses 14.3% Equity Stake CHATTEM: S&P Puts Single-B Credit & Debt Ratings on CreditWatch COLONIAL EXETER LLC: List of 20 Largest Unsecured Creditors CONSECO FINANCE: Moody's May Cut 54 Securitization Ratings CPKELCO APS: Planned Huber Acquisition Prompts Moody's Review CRIIMI MAE: S&P Affirms Single-B Ratings on 2 Certificate Classes CRYSTALIX GROUP: Auditors Express Going Concern Uncertainty CSFB MORTGAGE: Moody's Assigns Ba2 Rating to $4.124MM Class Cert. CSFB MORTGAGE: S&P Puts Low-B Ratings on Five Classes & Junks One DOCKSIDE REFRIGERATED: Objections & Ballots Should be in Tomorrow DONINI INC: Inks Security Purchase Agreement with Global Capital DT INDUSTRIES: Creditors Must File Proofs of Claim by Sept. 6 DUNES PLAZA: U.S. Trustee Meets with Creditors on September 20 ENERSYS: Common Stock Begins NYSE Trading Under ENS Symbol FAIRFAX FINANCIAL: Completes $95 Million 7-3/4% Senior Debt Issue FLYI INC: Moody's Puts Debt Ratings Under Review & May Downgrade FOOTMAXX HOLDINGS: June 30 Balance Sheet Upside-Down by $13.7 Mil. FRESNO ASSOCIATION: Fitch Places BB+ Rating on $4.9 Million Bonds GEO SPECIALTY: Creditors' Proofs of Claim Must be In by Thursday GREATER CINCINNATI: List of 20 Largest Unsecured Creditors GREENWICH CAPITAL: Moody's May Downgrade Ba2-Rated Class B-2 Certs HARRAH'S ENT.: Gets 2nd FTC Request for Caesars Acquisition Info. HIGH ROCK: Hires Hartman & Hartman as Bankruptcy Counsel HOME INSURANCE: Moody's Withdraws Six Junk Ratings After Downgrade IMC GLOBAL: S&P's B+ Rating on CreditWatch Pending Merger Outcome INTERSTATE BAKERIES: Hires Alvarez & Marsal as 9/26 Deadline Nears J.P. MORGAN: Fitch Puts Low-B Ratings on Privately Offered Classes JAFRA COSMETICS: Moody's Confirms Single-B Ratings After Merger JILLIAN'S ENT: Objections to Plan Must Be Filed By Sept. 30 KIVA CONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors LEISURE TIME: Trustee Sues Debtor's Counsel for Malpractice LEVI INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors LOMA COMPANY: Taps Two Firms as Bankruptcy Counsel MAILKEY CORP: Former Accountants Express Going Concern Doubt MARKLAND TECH: Wolf & Co. Replaces Marcum as Accountants MASTR: Fitch Assigns Low-B Ratings to Privately Offered Classes N-VIRO INT'L: Chancery Court Sets Oct. 14 for Settlement Hearing NATIONAL CENTURY: Deloitte Asks Court to Quash Rule 2004 Subpoena NEWFIELD EXPLORATION: Completes $575M Inland Resources Acquisition NEXPAK CORPORATION: Pays Critical Vendors' Prepetition Claims NORTEK INC: Calls Sr. Floating Rate Notes Due 2010 for Redemption NORTEK INC: Accepts Tendered 10% & 9.875% Notes for Purchase ONLINE POWER: OPS Power LLC Completes $400,000 Asset Purchase PARMALAT: Has Until Thursday to File Plan & Disclosure Statement PEABODY LANDSCAPE: Case Summary & 20 Largest Unsecured Creditors PEGASUS SATTELITE: Asks Court to Okay Key Employee Retention Plan POCONO INCREDIBLE: First Creditors' Meeting Slated for Sept. 24 POTLATCH CORP: Inks $125 Million Credit Facility with BofA POTLATCH CORPORATION: Fitch's Double-B Ratings on Watch Evolving RCN CORPORATION: Overview & Summary of Chapter 11 Plan RELIANT ENERGY: S&P Affirms B Credit Rating with Stable Outlook SAFFRON FUND: Makes $54.9 Million Initial Liquidating Distribution SEMGROUP: Moody's Assigns B1 Rating to SemCrude's $550M Facilities SENECA GAMING: Launches $300 Million 7-1/4% Senior Debt Offering SK GLOBAL: Wants Evans Industries to Pay $1,031,834 Plus Interest SUN TERRACE: Case Summary & 20 Largest Unsecured Creditors SYRATECH CORP: Likely Default Prompts Moody's Junk Ratings TITANIUM METALS: Extends Labor Contract to December 10, 2004 UNIFI INC: S&P Downgrades Corporate Credit & Debt Ratings to B- US AIRWAYS: Names Thomas R. Harter to Board of Directors WCI STEEL: MIC Capital Files $140 Mil. Reorganization Plan for WCI WESTPOINT STEVENS: Wants Court Nod to Assume Two Olin Sales Pacts WORLDCOM INC: Judge Gonzalez Rejects $1MM Moen Infringement Claim XPERIA CORP: Discloses $300,885 Equity Deficit for FY '04 1st Qtr. YELLOW ROADWAY: Moody's Puts Ba1 Rating on $500MM Credit Facility * Large Companies with Insolvent Balance Sheets ********* AINSWORTH LUMBER: Moody's Reviewing B1 Ratings & May Downgrade -------------------------------------------------------------- Moody's Investors Service placed the B1 ratings of Ainsworth Lumber Co. Ltd. on review for possible downgrade on news of the company's agreement to purchase Potlatch Corporation's oriented strandboard -- OSB -- assets for US$459.5 million in cash. Moody's anticipates that Ainsworth will use the proceeds of new debt plus some amount of cash on hand to fund the acquisition. Pending satisfaction of closing conditions, the transaction is expected to close in September. Moody's expects to complete its review concurrent with the completion of definitive financing arrangements. This is expected to occur prior to or approximately concurrent with closing. Ratings Placed on Review Outlook: Stable Senior Implied: B1 Issuer Rating: B1 US$320 million senior unsecured 6.75% Notes due March 15, 2014: B1 Ainsworth's existing B1 ratings reflect: * the company's relatively small size, * limited product and geographic diversity, * high level of debt, and * the extremely volatile pricing of its core OSB product line. Near term pricing for OSB is expected to remain strong until either or both of declining housing starts and new OSB capacity additions cause pricing to revert to more normalized levels. Consequently, while near term results are expected to remain exceptionally strong, mid-to-long results are expected to remain quite volatile with Ainsworth's cash generation expected to vary widely within relatively short periods of time. Moody's ratings also reflected the sound quality of the company's modern OSB mills (three of which are wholly-owned with a third being a 50% joint venture) together with solid fiber supply and liquidity arrangements. In addition to its impact on the above-noted factors, Moody's review will, among other things, consider: * the capital structure of the company following the acquisition, * the level of achievable synergies and the corresponding effect on margins, * the anticipated performance of the combined company over the intermediate term, and * plans for future strategic growth and plans for debt reduction. Ainsworth Lumber Co., Ltd., a British Columbia corporation headquartered in Vancouver, Canada, is a publicly traded integrated OSB producer that also manufactures specialty overlaid plywood and finger-jointed lumber. Post the Potlatch acquisition, Ainsworth will have a 13% market share in OSB, and OSB sales will represent approximately 97% of total revenues. AMAZON.COM: Moody's May Upgrade Single-B & Junk Ratings ------------------------------------------------------- Moody's Investors Service placed the long-term debt ratings of Amazon.com on review for possible upgrade and affirmed its speculative grade liquidity rating. The review was prompted by Amazon.com's consistent improvement in operating margins, reduction in funded debt levels, and strengthening operating cash flow. These ratings are placed under review: * Senior implied of B2, * Issuer rating of B3, * Various convertible subordinated notes issues maturing 2009 thru 2010 of Caa1, * Multiple shelf ratings of (P) B3, (P) Caa1, and (P) Caa2. This rating is affirmed: * Speculative grade liquidity rating of SGL-2. The review for upgrade will focus on the company's growth strategy as it continues to diversify its revenue base and the impact of the shifts in its business model on its revenues, operating margins, and working capital. The review will also focus on the expectations for segment performance, as well as the company's financial policies, including its plans for the significant cash balances that are continuing to build. Any upgrade as a result of this review will most likely be modest as it is Moody's expectation that the rating will continue to be constrained by the lack of committed financing and the uncertainties associated with a maturing business model. For the LTM period ended June 30, 2004, Amazon's EBIT margin improved to 6.4% from 5.1% for the FYE December 31, 2003. In addition, over the LTM period ending June 30, 2004, the company has reduced its funded debt levels by approximately $350 million. The combination of Amazon's continued top line revenue growth along with operating margin improvement and the funded debt level reduction has resulted in strengthening leverage metrics with adjusted debt/EBITDAR falling to 4.3x for LTM June 30, 2004 from 5.9x for the FYE December 31, 2003. Amazon.com's liquidity rating of SGL-2 represents good liquidity. The rating considers the company's ability to continue to finance its operations out of existing cash balances and positive cash flow from operations without resorting to an outside source of capital besides normal vendor relationships. The rating is constrained by: * Amazon's lack of alternate liquidity sources normally provided by a committed bank credit facility; * its net negative working capital position (after subtracting cash balances); and * its significant level of foreign based cash. At June 30, 2004 approximately 56% of the company's cash was located overseas and repatriation of these amounts to the U.S. could potentially result in a tax cost. Cash and short-term investments totaled $1.2 billion at June 30, 2004, of which $80 million was pledged as collateral for standby letters of credit that guarantee certain of its contractual obligations and real estate lease agreements. Additionally, the cash balances provide a useful cushion of financial flexibility that underpins the company's relationship with its vendors, including the significant vendor financing that they provide. Amazon.com generated about $410 million of cash from operations for the LTM period June 30, 2004. Moody's expects Amazon.com to be cash flow positive for the full year 2004 after meeting working capital needs and higher projected capital expenditures. This could change if Amazon announces new business initiatives or acquisitions which would require spending beyond levels of either of the last two years. Amazon.com, headquartered in Seattle, Washington, is the world's largest Internet-based retailer. Total revenues were approximately $5.3 billion for fiscal year ending December 31, 2003. ARMOR HOLDINGS: Wins 5-Year $52 Million Marine Corps Contract ------------------------------------------------------------- Armor Holdings, Inc. (NYSE: AH), a leading manufacturer and distributor of security products and vehicle armor systems, has been awarded a new 60-month Indefinite Delivery/Indefinite Quantity government contract by the United States Marine Corps Systems Command for ceramic body armor, which provides for an award of up to approximately $52 million at the government's option. The Company noted that it would announce specific orders under this contract award as appropriate. Robert Schiller, President and Chief Operating Officer of Armor Holdings, Inc. said, "We are pleased to add this significant program and to continue to support our Armed Forces. While our level of participation and that of any other company involved in this program has yet to be determined, we believe that our strong record of performance for past USMC SAPI programs will lead to meaningful delivery orders as funding becomes available to the Corps." About Armor Holdings, Inc. Armor Holdings, Inc. (NYSE: AH) is a diversified manufacturer of branded products for the military, law enforcement, and personnel safety markets. Additional information can be found at http://www.armorholdings.com/ * * * As reported in the Troubled Company Reporter's June 4, 2004 edition, Standard & Poor's Ratings Services revised its outlook on Armor Holdings Inc. to positive from stable. At the same time, Standard & Poor's affirmed its ratings, including the 'BB' corporate credit rating, on the security products supplier. "The outlook revision reflects Armor's improved financial flexibility from a proposed common stock offering and solid operating performance," said Standard & Poor's credit analyst Christopher DeNicolo. ARMSTRONG: Wants Exclusive Periods Extended into 2005 ----------------------------------------------------- Rebecca L. Booth, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, reminds the Bankruptcy Court that Armstrong World Industries, Inc.'s Fourth Amended Plan of Reorganization filed on May 23, 2003, was confirmed by Judge Newsome. The Company is waiting for the United States District Court for the District of Delaware to affirm the plan pursuant to 11 U.S.C. Sec. 524(g). On June 16, 2004, by designation order, AWI's Chapter 11 cases were assigned to District Court Judge Eduardo C. Robreno. Judge Robreno entered a case management order requiring AWI and other interested parties in AWI's Chapter 11 cases to submit status reports on pending matters. The reports were submitted on July 28, 2004. Following his review of those reports, Judge Robreno will set a date for a status conference before him to address the resolution of the pending matters before him, including the Plan's confirmation. Accordingly, the timing and terms of confirmation and implementation of the Plan and resolution of AWI's Chapter 11 cases remain uncertain. In view of the substantial progress that has been made to date in furtherance of the reorganization process and the unexpected circumstances that have delayed the Plan's confirmation, the Debtors believe that ample cause exists for the extension of their exclusive periods to file a Plan and to solicit acceptances for that Plan. Ms. Booth asserts that the Debtors have invested a substantial amount of time and effort to file and ultimately confirm the Plan. The filing of competing reorganization plans by other parties-in-interest will necessarily result in the disruption and dislocation of a plan process that is clearly well under way. The extension of the Exclusive Periods will avoid this disruption and dislocation, and will enable the Debtors to confirm the Plan in the manner contemplated by Chapter 11 of the Bankruptcy Code. Accordingly, the Debtors ask the U.S. Bankruptcy Court for the District of Delaware to further extend: -- their Exclusive Plan Proposal Period through and including April 4, 2005; and -- their Exclusive Solicitation Period through and including June 6, 2005. Ms. Booth also notes that the Debtors have made substantial progress in furtherance of their rehabilitation and reorganization efforts. AWI has reached a global settlement of its liability for asbestos property damage claims and held a confirmation hearing on the Plan in mid-November 2003. Debtors Nitram Liquidators, Inc., and Desseaux Corporation of North America, while not included in the Plan, also have made substantial progress in resolving the issues relating to their Chapter 11 cases. Desseaux's sole asset is its equity in Nitram, so a resolution of Nitram's liabilities is critical to determining whether Desseaux's estate has any value. Nitram's liabilities relate primarily to certain non- asbestos related personal injury actions that had been pending against it as of the Petition Date, as well as the breach of contract claims asserted by Southwest Recreational Industries -- the prepetition purchaser of Nitram's business. During the course of its case, Nitram has agreed to a modification of the stay to permit the personal injury actions to be adjudicated outside of the Bankruptcy Court. Some of these actions have been resolved, and Nitram hopes to resolve the others in due course. As to Southwest's claim, in June 2004, the parties submitted to the Bankruptcy Court an agreed order resolving their disputes over Southwest's breach of contract claims. Ms. Booth further points out that termination of the Exclusive Periods would expose the Debtors' estates to the uncertainty of multiple reorganization plans being proposed with the attendant confusion, dislocation and negative impact on their operations, asset values, and employee morale. No other party-in-interest in the Debtors' bankruptcy cases is in a position to file a reorganization plan that could be confirmed without costly, protracted litigation. Ms. Booth assures the Bankruptcy Court that an additional extension of the Exclusive Periods will neither prejudice nor put pressure on any party-in-interest. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., Weil, Gotshal & Manges LLP and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) BREUNERS HOME: Employs Jenkens & Gilchrist as Special Counsel ------------------------------------------------------------- Breuners Home Furnishings Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for authority to continue employing Jenkens & Gilchrist Parker Chaplin LLP as their special corporate and real estate counsel. Jenkens & Gilchrist has represented the Debtors on corporate and real estate matters since 1994. The Debtors point out that the firm holds a thorough knowledge of the Company's operations and legal issues. Jenkens & Gilchrist is expected to provide advice on corporate and real estate issues which may arise during the retailer's chapter 11 cases. Edward R. Mandell, Esq., leads the team of professionals in this engagement. Mr. Mandell discloses that the firm received a $25,000 retainer. The attorneys and paraprofessionals who will provide services to the Debtors and their hourly billing rates are: Professionals Billing Rate ------------- ------------ Edward R. Mandell $515 Lawrence D. Swift 465 David B. Horn 415 Stephen Johnson 220 Beth Friedman (paralegal) 170 To the best of the Debtors' knowledge, Jenkens & Gilchrist does not hold any interest adverse to the Debtors or their estates. Headquartered in Lancaster, Pennsylvania, Breuners Home -- http://www.bhfc.com/-- is one of the largest national furniture retailers focused on the middle to upper-end segment of the market. The Company, along with its debtor-affiliates, filed for chapter 11 protection on July 14, 2004 (Bankr. Del. Case No. 04- 12030). Great American Group, Gordon Brothers, Hilco Merchant Resources, and Zimmer-Hester) were brought on board within the first 30 days of the bankruptcy filing to conduct Going-Out-of- Business sales at the furniture retailer's 47 stores. Bruce Grohsgal, Esq. and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones represent the Debtors. The Company reported more than $100 million in assets and liabilities when it sought protection from its creditors. BUFFETS HOLDINGS: S&P's B Corporate Credit Rating on CreditWatch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on restaurant company Buffets Holdings Inc., including the 'B' corporate credit rating, on CreditWatch with negative implications. The CreditWatch placement follows the company's announcement that it is considering an initial public offering of income deposit securities -- IDSs, representing shares of Buffets Holdings' class A common stock and senior subordinated notes. Upon completion of the transaction, Standard & Poor's will either affirm or lower the ratings. "Although the company has not yet specified the use of proceeds, IDSs typically reduce financial flexibility, as most of the issuer's cash flow is used to pay debt service and a dividend on the new common shares," explained Standard & Poor's credit analyst Robert Lichtenstein. "As such, the structure limits Buffets' ability to withstand potential operating challenges, and also reduces the likelihood for future deleveraging." Another lesser risk of the new structure is that the subordinated debt portion of the securities may not be treated as debt for U.S. federal income tax purposes. If all or a portion of the subordinated notes are treated as equity rather than debt, the interest on the subordinated notes will not be tax deductible by the company. This could make the IDS securities uneconomic and expose Buffets to refinancing risk. Standard & Poor's will monitor the developments of the proposed offer. CARBIZ INC: Director Ross Quigley Discloses 14.3% Equity Stake -------------------------------------------------------------- Ross Quigley, a Carbiz, Inc. ("CZ" TSX:V) director, in accordance with s. 110 of the Securities Act (Ontario) and National Instrument 62-103 directly acquired 228,401 common shares in a private transaction with an arm's length party at a price of $0.27 per share on August 23, 2004. The acquisition brings Mr. Quigley's total shareholdings in Carbiz to 14.3 per cent of the company's issued and outstanding share capital. Mr. Quigley advises that the shares were acquired for investment purposes only and that he may acquire more securities of the company at any time in the future. Carbiz, Inc., is a publicly traded company on the TSX Venture Exchange, formerly the Canadian Venture Exchange. The Company was incorporated pursuant to the provisions of the Business Corporations Act of Ontario -- OBCA -- under the name "Data Gathering Capital Corp." on March 31, 1998. On September 1, 1999, the Company changed its name by articles of amendment under the OBCA to Carbiz.com Inc., and then changed its name again on July 15, 2003 to Carbiz, Inc. The Company is in the business of developing, marketing, distributing and supporting software and Internet products for the automotive sales finance industry. The Company also offers other after market car care products. As of April 30, 2004, Carbiz, Inc.'s balance sheet shows a $712,112 stockholders' deficit, compared to a $725,618 deficit at January 31, 2004. According to Carbiz, Inc.'s quarter filing ended April 31, 2004, it Company incurred significant losses in the current quarter and each of the past several years. In addition, the Company has a working capital deficiency as at April 30, 2004 and 2003. The Company's continued existence is dependent upon its ability to achieve profitable operations and to obtain additional financing. However, there can be no assurance that the Company will be able to achieve profitable operations, nor that financing efforts will be successful. CHATTEM: S&P Puts Single-B Credit & Debt Ratings on CreditWatch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on diversified consumer products manufacturer Chattem, Inc., on CreditWatch with positive implications, including the 'B+' corporate credit and senior unsecured debt ratings, and the 'B-' senior subordinated debt rating on the company. About $200 million of rated debt is affected by this action. The CreditWatch listing follows a court-approved final settlement of the class action lawsuit in the phenylpropanolamine -- PPA -- litigation relating to Chattem's Dexatrim brand. The company expects to record pretax charges totaling $10 million to $15 million, which is below the previous estimate of $20 million to $25 million. "While the distribution of proceeds related to the settlement may not be completed until fiscal 2005, Standard & Poor's believes the court approval of the settlement largely resolves the company's exposure to PPA litigation," said Standard & Poor's credit analyst Patrick Jeffrey. "Until now, Chattem's ratings have been constrained by the potential effects of the lawsuit." The CreditWatch listing is also based on Chattem's improving business trends, demonstrated by its expectation that third- quarter sales and earnings will exceed previous estimates. Standard & Poor's will meet with management in the near term to discuss these issues and the potential for a higher rating. Chattem, Inc., is a leading marketer and manufacturer of branded consumer products including Icy Hot, AsperCreme, Selsun Blue, Gold Bond, and Bull Frog. COLONIAL EXETER LLC: List of 20 Largest Unsecured Creditors ----------------------------------------------------------- Colonial Exeter, LLC released a list of its 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Able Roofing $61,700 Columbus City Treasurer $49,594 Geiger Southwest $22,300 Century Maintenance $15,284 Flooring Dist - Prop Management $13,902 Robinson Tree & Landscape $10,654 A&B Security Service Inc. $9,289 Smith's Detective & Security Inc $9,061 Better Workers Compensation $8,410 Corporate Processing Department Crown Flooring $8,000 Sears Commercial Credit $6,743 Wilmar Industries $6,605 Maintenance Warehouse $6,536 Management Maintenance $6,501 Havens Willis Law Firm LLC $3,610 For Rent Magazine $3,486 Whirlpool $3,086 Columbus Gas of Ohio $2,471 Watermaster America Inc. $2,370 Ohio Remcon Inc. $2,316 Headquartered in Phoenix, Arizona, Colonial Exeter, LLC, the Company filed for chapter 11 protection on August 17, 2004 (Bankr. D. Ariz. Case No. 04-14545). Dennis J. Wortman, Esq., at Dennis J. Wortman, P.C., represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of over $1 million. CONSECO FINANCE: Moody's May Cut 54 Securitization Ratings ---------------------------------------------------------- Moody's Investors Service is placing under review for possible downgrade the ratings on several senior, mezzanine and subordinate classes from Conseco Finance's manufactured housing securitizations. The ratings review is prompted by the continued performance deterioration of the pools, as reflected by the high levels of cumulative losses and repossessions and erosion of credit support. Green Tree Servicing, LLC, is servicing the loans in the underlying transactions. In June 2003, the sale of Conseco Finance Corporation's manufactured housing business to CFN Investment Holdings II, LLC, now known as Green Tree Investment Holdings II, LLC, was completed. The complete rating actions are as follows: Series 1999-6: * 7.36% Class A-1 Certificates, rated B2, on review for possible downgrade; * 7.96% Class M-1 Certificates, rated Caa1, on review for possible downgrade; Series 2000-1: * 7.62% Class A-4 Certificates, rated B2, on review for possible downgrade; * 8.06% Class A-5 Certificates, rated B2, on review for possible downgrade; and * 8.30% Class M-1 Certificates, rated Caa2, on review for possible downgrade. Series 2000-2: * 8.48% Class A-4 Certificates, rated B2, on review for possible downgrade; * 8.85% Class A-5 Certificates, rated B2, on review for possible downgrade; * 8.49% Class A-6 Certificates, rated B2, on review for possible downgrade; and * 9.08% Class M-1 Certificates, rated Caa2, on review for possible downgrade. Series 2000-3: * 8.26% Class A-1 Certificates, rated Ba2, on review for possible downgrade; and * 8.26% Class M-1 Certificates, rated Caa1, on review for possible downgrade. Series 2000-4: * 7.73% Class A-4 Certificates, rated B1, on review for possible downgrade; * 7.97% Class A-5 Certificates, rated B1, on review for possible downgrade; * 8.31% Class A-6 Certificates, rated B1, on review for possible downgrade; and * 8.73% Class M-1 Certificates, rated Caa2, on review for possible downgrade. Series 2000-5: * 7.70% Class A-5 Certificates, rated Ba2, on review for possible downgrade; * 7.96% Class A-6 Certificates, rated Ba2, on review for possible downgrade; * 8.20% Class A-7 Certificates, rated Ba2, on review for possible downgrade; and * 8.40% Class M-1 Certificates, rated B3, on review for possible downgrade. Series 2000-6: * 6.77% Class A-4 Certificates, rated A3, on review for possible downgrade; * 7.27% Class A-5 Certificates, rated A3, on review for possible downgrade; * 7.72% Class M-1 Certificates, rated Ba3, on review for possible downgrade; and * 8.20% Class M-2 Certificates, rated Caa2, on review for possible downgrade. Series 2001-1: * 2.50% Class IO Certificates, rated A3, on review for possible downgrade; * 6.21% Class A-4 Certificates, rated A3, on review for possible downgrade; * 6.99% Class A-5 Certificates, rated A3, on review for possible downgrade; * 7.54% Class M-1 Certificates, rated Ba2, on review for possible downgrade; and * 7.97% Class M-2 Certificates, rated B3, on review for possible downgrade. Series 2001-2: * 2.50% Class IO Certificates, rated A2, on review for possible downgrade; * 7.69% Class M-1 Certificates, rated Ba1, on review for possible downgrade; and * 8.13% Class M-2 Certificates, rated Ba3, on review for possible downgrade. Series 2001-3: * 2.50% Class IO Certificates, rated A3, on review for possible downgrade; * 5.79% Class A-3 Certificates, rated A3, on review for possible downgrade; * 6.91% Class A-4 Certificates, rated A3, on review for possible downgrade; * 7.15% Class M-1 Certificates, rated Ba1, on review for possible downgrade; * 7.44% Class M-2 Certificates, rated B3, on review for possible downgrade; and * 8.50% Class B-1 Certificates, rated Ca, on review for possible downgrade. Series 2001-4: * 2.50% Class IO Certificates, rated A2, on review for possible downgrade; * 6.09% Class A-3 Certificates, rated A2, on review for possible downgrade; * 7.36% Class A-4 Certificates, rated A2, on review for possible downgrade; * LIBOR + 1.75% Class M-1 Certificates, rated Baa2, on review for possible downgrade; * 8.59% Class M-2 Certificates, rated Ba1, on review for possible downgrade; and * 9.40% Class B-1 Certificates, rated B3, on review for possible downgrade. Series 2002-1: * LIBOR + 2.05% Class M-1-A Certificates, rated Baa2, on review for possible downgrade; * 7.95% Class M-1-F Certificates, rated Baa2, on review for possible downgrade; * 9.55% Class M-2 Certificates, rated Ba2, on review for possible downgrade; * 10.00% Class B-1 Certificates, rated B2, on review for possible downgrade; and * 9.86% Class B-2 Certificates, rated Ca, on review for possible downgrade. Series 2002-2: * 8.50% Class IO Certificates, rated A2, on review for possible downgrade; * 6.03% Class A-2 Certificates, rated A2, on review for possible downgrade; * 7.42% Class M-1 Certificates, rated Baa3, on review for possible downgrade; * 9.16% Class M-2 Certificates, rated Ba2, on review for possible downgrade; * 9.25% Class B-1 Certificates, rated B3, on review for possible downgrade; and * 9.25% Class B-2 Certificates, rated Caa2, on review for possible downgrade. CPKELCO APS: Planned Huber Acquisition Prompts Moody's Review ------------------------------------------------------------- Moody's Investors Service placed CPKelco Aps ratings under review for possible upgrade (senior implied at B3) following the announcement that Lehman Brothers Merchant Banking Partners II L.P and J.M. Huber Corporation entered into a definitive agreement for Huber to acquire CPKelco Aps from Lehman Brothers. Huber is a private company and does not have a relationship with Moody's. The terms of the agreement have not been disclosed but the transaction is expected to close at the end of September 2004. Notwithstanding incomplete information on Huber and the terms of the acquisition, two of three possible outcomes are likely to be favorable to CPKelco Aps' debtholders and, therefore, Moody's is putting CPK under review for possible upgrade in order to indicate the possible rating outcome of the pending transaction. The favorable outcomes are: (1) CPKelco Aps' debt is retired by Huber; or (2) CPKelco Aps' debt obligations are assumed or guaranteed by Huber and we believe that Huber is a stronger credit than CPKelco Aps. The third outcome is for CPKelco Aps' debt to continue to be supported solely by CPKelco Aps, in which case the existing ratings would be maintained. Moody's expects to complete its review in early October once the terms of the acquisition and the nature of the support, if any, provided by Huber to CPKelco Aps' existing debt holders are known. Ratings placed under review for possible upgrade: (i) B3 for the $50 million gtd. senior secured revolving credit facility, maturing 2006; (ii) B3 for the $87 million gtd. senior secured term loan A (comprised of USD $15 million, Euro 36 million, and Yen 3 billion), maturing 2006; (iii) B3 for the $90 million gtd. senior secured term loan B, maturing 2008; (iv) B3 for the $29 million gtd. senior secured term loan C, maturing 2008; (v) Ca for the $293 million senior subordinated notes (comprised of USD $287 million and Euro 5.2 million), due 2010; (vi) B3 for the company's senior implied rating; and (vii) Caa1 for the senior unsecured issuer rating. CP Kelco Aps, headquartered in Chicago, Illinois, is a global producer of hydrocolloid products (xanthan gum, pectin, and carrageenan) that are used as thickeners and stabilizers in foods and personal care products, industrial, and oil and gas applications. CRIIMI MAE: S&P Affirms Single-B Ratings on 2 Certificate Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on three classes of certificates from CRIIMI Mae Trust I's commercial mortgage bonds series 1996-C1. At the same time, ratings on two other classes from the same transaction are affirmed. The raised ratings reflect increased subordination, primarily due to the payoff of 12 certificates that served as collateral for the mortgage bonds. The affirmed ratings reflect credit enhancement levels that are appropriate for the current ratings. The Aug. 1, 2004, remittance report indicates that the collateral pool consists of 21 classes of CMBS that have an aggregate balance of $293.3 million, down from 35 classes and $449.1 million at issuance. This collateral represents eight distinct CMBS transactions issued between 1994 and 1996. The non-'D' rated certificates in these CMBS transactions have an average rating of 'BBB-'. More than 60.0% of the trust's collateral is concentrated in three transactions: * Merrill Lynch Mortgage Investors, Inc.'s series 1995-C3 (26.5%); * DLJ Mortgage Acceptance Corp.'s series 1995-CF2 (20.3%); and * Lehman Brothers Commercial Mortgage's series 1995-C2 (14.6%). The eight CMBS transactions are collateralized by 296 loans with an outstanding principal balance of $1.1 billion. This collateral is geographically diverse and Texas (16.7%), Michigan (8.1%), and Florida (6.3%) are the only states with more than 6.0% of asset concentration. The trust has property type concentrations, which collectively account for more than 70.0% of the underlying collateral: * multifamily (33.5%), * lodging (22.9%), and * retail (17.2%) assets, Because the collateral for the mortgage bonds are CMBS pass- through certificates rather than mortgage loans, there is not a direct relationship between real estate losses in the loan pools and losses realized by the series 1996-C1 transaction. Losses associated with the mortgage loans are first realized by the CMBS trusts that issued the pass-through certificates secured by the mortgage loans. The losses on the pass-through certificates balances are then allocated to the balances of the series 1996-C1 mortgage bonds. To mitigate the effect of losses on the rated mortgage bonds, the issuer retained a subordinated equity interest in the collateral securities. Losses realized on the collateral securities are first allocated to the issuer's equity. As of Aug. 1, 2004, the issuer's equity totaled $40.1 million, down from $100.1 million at issuance. The most recent remittance report shows that there are 18 loans with an aggregate outstanding balance of $114.5 million that are delinquent. REO assets and loans in foreclosure account for 49.1% of this amount and loans that are 90-plus days delinquent represent another 43.9% of this balance. Standard & Poor's evaluated the specially serviced loans, the delinquent loans, and other relevant information provided by CRIIMI in its surveillance review. The result of the analysis adequately supports the raised and affirmed ratings. Ratings Raised CRIIMI Mae Trust I Commercial Mortgage Bonds Series 1996-C1 Rating Class To From ----- -- ---- B AAA BBB+ C AAA BBB D A+ BB Ratings Affirmed CRIIMI Mae Trust I Commercial Mortgage Bonds Series 1996-C1 Class Rating ----- ------ E B F B- CRYSTALIX GROUP: Auditors Express Going Concern Uncertainty ----------------------------------------------------------- On May 10, 2004, the directors of Crystalix Group International Inc. approved the election of De Joya & Company to audit the financial statements for the fiscal year ended December 31, 2004. Also on May 10, 2004, the Company dismissed the former accountants Stonefield Josephson, Inc. The decision to change auditors was based upon financial considerations. The Company's Board of Directors recommended De Joya & Company. Stonefield Josephson, Inc. had audited the Company's financial statements for each of the last two fiscal years ended December 31, 2003. Stonefield Josephson, Inc.'s audit report on the financial statements of the Company as of, and for, the fiscal year ended December 31, 2003 contained a paragraph stating: The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a net loss of $7,433,341, used cash for operations of $1,166,873 in the year ended December 31, 2003, is a party to various litigation, has a stockholders' deficit of $3,382,628 as of December 31, 2003 and has a working capital deficit of $6,311,497 as of December 31, 2003. These conditions raise substantial doubt about the Company's ability to continue as a going concern. CSFB MORTGAGE: Moody's Assigns Ba2 Rating to $4.124MM Class Cert. ----------------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior certificates issued by Credit Suisse First Boston Mortgage Securities Corp. and ratings ranging from Aa1 to Ba2 to the mezzanine and subordinate certificates in the deal. The securitization is backed by adjustable-rate jumbo, conforming balance and Alt-A mortgage loans originated by various originators and acquired by DLJ Mortgage Capital, Inc. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, overcollateralization -- OC, and excess spread. The credit quality of the loan pool for Groups 1- 8 is above and Group 9 is slightly below the average ARM loan pool backing recent Alt-A securitizations. Fairbanks Capital Corp., GreenPoint Mortgage Funding, Inc., Washington Mutual Mortgage Securities Corp., and Wells Fargo Bank, N.A. will service the loans, and Wells Fargo Bank, N.A. will act as master servicer for all loans other than for the mortgage loans serviced by Washington Mutual Mortgage Securities Corp. Moody's has assigned Wells Fargo Bank, N.A. its top servicer quality rating (SQ1) as a primary servicer of prime loans. The complete rating actions are: CSFB Mortgage-Backed Pass-Through Certificates Series 2004-AR6 * Class 1-A-1, Adjustable Rate, $34,614,000, rated Aaa; * Class 2-A-1, Adjustable Rate, $191,240,000, rated Aaa; * Class 3-A-1, Adjustable Rate, $45,137,000, rated Aaa; * Class 4-A-1, Adjustable Rate, $37,807,000, rated Aaa; * Class 5-A-1, Adjustable Rate, $52,640,000, rated Aaa; * Class 5-A-2, Adjustable Rate, $1,140,000, rated Aa1; * Class 6-A-1, Adjustable Rate, $113,100,000, rated Aaa; * Class 7-A-1, Adjustable Rate, $167,970,000, rated Aaa; * Class 8-A-1, Adjustable Rate, $64,875,000, rated Aaa; * Class 9-A-1, Adjustable Rate, $100,720,000, rated Aaa; * Class 9-A-2, Adjustable Rate, $210,400,000, rated Aaa; * Class 9-A-3, Adjustable Rate, $60,000,000, rated Aaa; * Class 9-A-4, Adjustable Rate, $20,000,000, rated Aaa; * Class 9-M-1, Adjustable Rate, $12,450,000, rated Aa2; * Class 9-M-2, Adjustable Rate, $6,220,000, rated A1; * Class 9-M-3, Adjustable Rate, $5,196,333, rated A3; * Class C-B-1, Adjustable Rate, $14,245,000, rated Aa2; * Class C-B-2, Adjustable Rate, $11,246,000, rated A2; * Class C-B-3, Adjustable Rate, $5,248,000, rated Baa1; * Class C-B-1X, Interest Only, rated Aa2; and * Class C-B-4, Adjustable Rate, $4,124,000, rated Ba2 EZ. CSFB MORTGAGE: S&P Puts Low-B Ratings on Five Classes & Junks One ----------------------------------------------------------------- Standard & Poor's Ratings Service raised its ratings on seven classes of certificates from Credit Suisse First Boston Mortgage Securities Corp.'s commercial mortgage pass-through certificates series 2002-CKP-1. At the same time, all other ratings from the same transaction are affirmed. The raised and affirmed ratings reflect credit support levels that adequately support the raised and affirmed ratings under various stress scenarios. As of August 2004, the pool consisted of 160 fixed-rate mortgages with an aggregate principal balance of $965.3 million, down from $992.8 million at issuance. Midland Loan Services, Inc., the master servicer, provided interim and year-end 2003 net cash flow -- NCF -- data for 96.3% of the pool. Based on this information, Standard & Poor's calculated the outstanding debt service coverage -- DSC -- at 1.40x up from 1.37x at issuance. To date, realized losses have been experienced on one of the mortgage loans totaling $147,000, or 0.01% of the pool. The top 10 loans constitute 37.55% of the outstanding pool balance, with a weighted average DSC ratio of 1.46x, up from 1.37x, at issuance, based on interim and year-end 2003 financials. Two of the mortgages experienced DSC ratio declines. One of the mortgages, secured by 27 self-storage facilities in eight states, experienced a 0.4% decline, while the second mortgage, secured by a six office properties in Tennessee, experienced a 10% decline. The largest mortgage in the pool, totaling $63.9 million appears on the watchlist, and will be discussed in depth later in the press release. As of the August 2004 distribution date, there are six specially serviced mortgage ($16.5 million) loans with Lennar Partners, Inc., the special servicer. In addition to these six loans, there is an additional loan that is 60 days delinquent ($0.697 million). This loan will be transferred to the special servicer in the near future. Taken together, there are seven delinquent loans totaling $17.2 million (1.71% of the pool) categorized as follows: * one is in foreclosure ($3.0 million), * two are 90 plus days delinquent ($7.0 million), * two are 60 days delinquent ($1.5 million), * one is 30 days delinquent ($3.0 million), and * one is late but less than 30 days delinquent ($2.4 million). Three of the specially serviced loans, with an aggregate principal balance of $6.6 million, are secured by multifamily properties in Davenport, Iowa, and have the same sponsor but are not cross- collateralized or cross-defaulted. They were transferred to the special servicer during the second quarter of 2004 due to monetary default. Another mortgage in the pool has the same sponsor and is also secured by a multifamily property in Davenport. This loan is 60 days delinquent and will be transferred to the special servicer in the near future. 2003 financial data was not available for these loans. One of the loans is 90-plus days delinquent and is secured by a 96-unit property, built in 1974. One of the loans is 60 days delinquent. It is secured by a 34-unit property built in 1972. The remaining Davenport loan is secured by a 120-unit property built in 1977 and is 30 days delinquent. Property inspection reports noted the properties to be in good condition with the exception of the 96-unit property, which is in fair condition. Details concerning the three other specially serviced assets are as follows: -- The first asset is a 90-plus days delinquent loan with a balance of $4.4 million. It is secured by a 67,181-sq.-ft. retail center in Port Washington, Wisconsin. The anchor tenant, Sentry Foods, vacated its space in April 2004 after the guarantor, Fleming Foods, rejected the lease while in bankruptcy. A new tenant recently took over the anchor space. The loan was transferred to Lennar in June 2004. Lennar is currently negotiating a potential forbearance agreement with the borrower. The center's occupancy level as of July 2004 is 94%. A property inspection report dated May 27, 2004 notes the property to be in good condition. An appraisal amount is not available. -- The second asset is a $3 million mortgage secured by a 124- unit apartment building located 15 miles south of Kansas City, Missouri. A May 2004 property appraisal report values the property in excess of the loan balance. -- The third asset is a less-than-30-days delinquent loan with a balance of $2.4 million. It is secured by a 70,853-sq.- ft. storage facility, built in 1996, and located in Amissville, Virginia (60 miles southwest of Washington, D.C.). In March of 2004, the property was transferred to Lennar due to unapproved transfer of ownership. Lennar is evaluating the transfer. Midland reported 25 mortgages totaling $176.6 million (18.3% of the pool) on its watchlist. The watchlist includes the largest loan in the pool. The loan has a balance of $63.3 million (6.6%), and is secured by a 778,190-sq.-ft. power center in Plymouth Meeting, Pennsylvania, 18 miles from Philadelphia. Built in 2001, the complex is nestled in a suburban setting near a major highway. A property inspection report provided by Midland notes the property to be in excellent condition. The anchors include Target ('A+') and Lowe's ('A'), which own their own stores. The collateral for the loan consists of 477,461 sq. ft. of in-line space, with a tenant mix that includes Giant Foods, Seaman's Furniture, and Best Buy. Giant Food, which is owned by Ahold USA, represents 14% of the in-line space. The property appears on the watchlist due to news concerning an investigation into an Ahold earnings overstatement, which has since been closed. The center is 100% occupied as of April 2004 and has performed well. Full year 2003 NCF DSC was reported at 1.45x, up from 1.41x at issuance. Ahold's current credit rating is 'BB' with a positive outlook. Midland reported that the mortgage would be removed from the watchlist by the next pay period. The remaining loans appear on the watchlist due to a variety of reasons, many for changes in DSC or low DSC. The pool is geographically diverse, with properties located in 35 states. Concentrations in excess of 10% include: * Texas (18.4%), and * California (10.6%). Significant property concentrations include: * multifamily (29.5%), * retail (28.1%), and * office (24.1%). Standard & Poor's stressed the specially serviced watchlist and other loans in the pool that appeared to be underperforming. The resultant credit enhancement levels support the raised and affirmed ratings. Ratings Raised Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-thru certs series 2002-CKP-1 Rating Credit Class To From Support (%) ----- -- ---- ----------- B AAA AA 19.14 C AA+ AA- 17.73 D AA- A 15.03 E A+ A- 13.48 F A BBB+ 12.07 G BBB+ BBB 10.53 H BBB BBB- 8.98 Ratings Affirmed Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-thru certs series 2002-CKP-1 Credit Class Rating Support (%) ----- ------ ----------- A-1 AAA 23.26 A-2 AAA 23.26 A-3 AAA 23.26 A-x AAA - A-SP AAA - J-AD BBB- 7.60 K-Z BB+ 6.93 L BB 5.26 N B+ 3.58 O B 2.68 P B- 2.17 Q CCC 1.66 DOCKSIDE REFRIGERATED: Objections & Ballots Should be in Tomorrow ----------------------------------------------------------------- Objections, if any, to confirmation of the Amended Liquidating Plan of Reorganization of Dockside Refrigerated Warehouse, Inc., must be delivered by 4:00 p.m., Eastern Time, tomorrow, September 1, 2004, to the U.S. Bankruptcy Court for the District of Delaware. Objections must: (i) be in writing: (ii) comply with the Federal Rules of Bankruptcy Procedure, the Bankruptcy Code and the General Court Orders; (iii) set forth the name of the objector, the nature and amount of any claim or interest asserted by the objector against the Debtors' estates or properties; (iv) state with particularity the legal and factual basis for the objection; and (v) be filed with the Bankruptcy Court Clerk, together with proof of service, and served on: (a) Adelman Lavine Gold and Levin 919 North Market Street, Suite 710 Wilmington, Delaware 19801 Attn: Bradford J. Sandler, Esq. (b) Adelman Lavine Gold and Levin Four Penn Center, Suite 900 Philadelphia, Pennsylvania 19103 Attn: Alan I. Moldoff, Esq. (c) Office of the United States Trsutee J. Caleb Boggs Federal Building 844 King Street Wilmington, Delaware 19801 Attn: David Buchbinder, Esq. Those creditors entitled to vote to accept or reject the Plan must submit their ballots by tomorrow, September 1, 2004 at 5:00 p.m. Eastern Time. Ballots should be transmitted to: Adelman Lavine Gold and Levin Four Penn Center, Suite 900 Philadelphia, Pennsylvania 19103 Attn: Alan I. Moldoff, Esq. Judge Mary F. Walrath will consider confirmation of the Plan at a hearing on September 22, 2004. Dockside Refrigerated Warehouse, Inc, filed for chapter 11 protection (Bankr. Del. Case No. 01-00933) on March 21, 2001 before the Honorable Mary F. Walrath. Raymond H. Lemisch, Esq., Bradford J. Sandler, Esq., and Alan I. Moldoff, Esq., at Adelman Lavine Gold and Levin represent the debtor. DONINI INC: Inks Security Purchase Agreement with Global Capital ---------------------------------------------------------------- On June 7, 2004, Donini Inc. entered into a Security Purchase Agreement with Global Capital Funding Group, L.P., of Cumming, Georgia, whereby Global purchased a $1,500,000 convertible Note from the Company. The Note was purchased at 80% of par and has a three-year term. The Note is redeemable and convertible at a price to be determined at any time ninety (90) days after closing. The Note is secured by the Company's accounts receivable, general intangibles, inventory, fixed assets and equipment. The Company also issued a Warrant to purchase 500,000 shares of common stock exercisable at 110% of the closing bid price of the common stock on the day prior to closing. About the Company With its headquarters in Montreal, Quebec, Donini, Inc. is incorporated in the State of New Jersey and, through its wholly- owned subsidiary Pizza Donini Inc. and its subsidiaries, Pizado Foods (2001) Inc., Pizza Donini.Com Inc. and Doninico Inc., is the franchisor, manufacturer and distributor of frozen ready-made pizza, frozen and refrigerated sauces and pizza dough to franchise, retail and wholesale customers, and the operator of a call center for home delivery of pizza and other food products and operate company owned restaurants. The Company's franchise outlets in Quebec, Canada operate under the trade name "Pizza Donini", which name is also primarily used for the distribution of the Company's frozen pizza to the food service industry. Donini was delinquent in its Form 10-Q reporting obligations and did not file a notification with the Securities and Exchange Commission explaining the reason for its tardiness. The Company's February 29, 2004, balance sheet shows the company's liabilities exceed its assets by $1,030,904. DT INDUSTRIES: Creditors Must File Proofs of Claim by Sept. 6 ------------------------------------------------------------- The United States Bankruptcy Court for the Southern District of Ohio sets September 6, 2004 at 4:00 p.m., as the deadline for creditors to file their proofs of claim against DT Industries, Inc. and its debtor-affiliates. Creditors must file written proofs of claim on or before the September 6 Claims Bar Date and claim forms must be delivered to: Office of the Clerk United States Bankruptcy Court 120 West Third Street Dayton, Ohio 45402 The Bar Date applies to all non-governmental claims, whether the claims are secured or unsecured, matured or un-matured, disputed or undisputed, liquidated or un-liquidated, fixed or contingent and legal or equitable. For governmental units, the deadline to file claims is 4:00 p.m. on November 9, 2004. Headquartered in Dayton, Ohio, DT Industries, Inc. -- http://www.dtindustries.com/-- is an engineering-driven designer, manufacturer and integrator of automated systems and related equipment used to manufacture, assemble, test or package industrial and consumer products. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D. Ohio Lead Case No. 04-34091) on May 12, 2004. Ronald S. Pretekin, Esq., at Coolidge Wall Womsley & Lombard, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $150,593,000 in assets and $142,913,000 in liabilities. DUNES PLAZA: U.S. Trustee Meets with Creditors on September 20 -------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting with Dunes Plaza Associates' creditors at 2:30 p.m., on September 20, 2004, at 80 Broad Street, Second Floor, in Manhattan. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Dunes Plaza Associates and Sherwood Plaza Associates, Ltd., own, as tenants-in-common, a freestanding retail building in Brandon, Florida. Originally leased for $929,264 per year, Kmart occupied the store and then sublet it to Hechinger's and then to Burlington Coat Factory, the current tenant. Burlington pays $643,200 in annual rent, which is insufficient to service the Debtors' $24.8 million mortgage obligations. The Debtors filed for chapter 11 protection on August 18, 2004 (Bankr. S.D.N.Y. Case No. 04-15403). Ira S. Greene, Esq., at Hogan & Hartson, LLP, represents the Debtors in their restructuring. ENERSYS: Common Stock Begins NYSE Trading Under ENS Symbol ---------------------------------------------------------- EnerSys (NYSE: ENS) filed an Original Listing Application with respect to its common stock that was authorized for listing on the New York Stock Exchange on July 26, 2004. 12,500,000 shares of common stock began trading on the New York Stock Exchange under the ticker symbol ENS effective with the opening of trading on July 30, 2004. The listing requirements of the New York Stock Exchange require that EnerSys disclose that additional information is available upon which the New York Stock Exchange relied to list the company, and is included in the listing application it filed. Such information is available to the public upon request. For more information, please contact Richard Zuidema, Executive Vice President, EnerSys, P.O. Box 14145, Reading, PA 19612-4145. Tel: 800/538-3627; Web site: http://www.enersys.com/ EnerSys (f/k/a EnerSys Holdings, Inc.) is a world leader in stored energy solutions for industrial applications, manufactures and distributes reserve power and motive power batteries, chargers, power equipment, and battery accessories to customers worldwide. These include the datacom and telecom, financial and utility markets as well as the material handling and ground handling industries. The company also provides aftermarket and customer support services to its customers from over 100 countries through its sales and manufacturing locations around the world. * * * As reported in the Troubled Company Reporter on August 5, 2004, Standard & Poor's Ratings Services raised its corporate credit rating on industrial battery manufacturer EnerSys (formerly EnerSys Holdings Inc.) and its EnerSys Capital Inc. unit to 'BB' from 'BB-'. At the same time, Standard & Poor's raised its senior secured bank loan rating on EnerSys Capital's $480 million senior secured first-lien credit facility to 'BB' and affirmed its recovery rating of '4'. The bank facility consists of a $100 million revolving credit facility due 2009 and a $380 million term loan due 2011. All ratings were removed from CreditWatch, where they were placed on June 2, 2004. Standard & Poor's also withdrew its rating on the Reading-Pennsylvania-based company's $120 million senior second-lien term loan due 2012. The outlook is stable. "The upgrade reflects Standard & Poor's expectations of a sustained improvement in the company's debt leverage following the completion of an initial public offering of 12.5 million shares of common stock," said Standard & Poor's credit analyst Linli Chee. The IPO sold at $12.50 per share, yielding net proceeds of roughly $140 million. FAIRFAX FINANCIAL: Completes $95 Million 7-3/4% Senior Debt Issue ----------------------------------------------------------------- Fairfax Financial Holdings Limited (TSX:FFH) (NYSE:FFH) has completed its previously announced offering of $95 million of its 7-3/4% Senior Notes due 2012 at an issue price of 97.25%. As part of its ongoing deleveraging efforts, Fairfax has repurchased $15.5 million of its 7.375% Senior Notes due 2006. Fairfax intends to use the proceeds of the offering completed today to continue to purchase its outstanding debt from time to time, based on market conditions. To the extent Fairfax is unable to purchase its outstanding debt at prices it believes are reasonable, Fairfax will use the proceeds from the offering completed today for general corporate purposes. Pending such use, such proceeds are expected to be invested in short-term marketable securities. Banc of America Securities LLC acted as sole book-running manager for this offering. A copy of the final prospectus supplement and related base shelf prospectus may be obtained from Banc of America Securities LLC, Prospectus Department, 100 West 33rd Street, New York, NY 10001, Phone: (646) 733-4166. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. About the Company Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance, investment management and insurance claims management. * * * A.M. Best Co. assigned a debt rating of "bb+" to Fairfax Financial Holdings Limited's (NYSE: FFH, Toronto: FFH) 7.75% senior unsecured notes due 2012 issued as part of its debt exchange offer. The outlook for all debt ratings remains negative, A.M. Best says. Fairfax has exchanged a portion of the company's existing $275 million of 7.38% notes due 2006, $170 million of 6.88% notes due 2008 and wholly owned TIG Holdings, Inc. $97.7 million 8.125% notes due 2005 for a combination of cash and a specific amount of the new notes. The new notes have terms and covenants substantially similar to the existing securities. Fairfax has also announced that it intends to file a $750 million shelf registration that will allow the new 2012 notes exchanged for the TIG Holdings notes to be re-exchanged for similar 2012 notes that will be registered with the U.S. Securities and Exchange Commission. In addition, the shelf registration will allow Fairfax the opportunity to issue additional debt or equity over the next two years. A.M. Best views Fairfax's exchange offer as a long-term positive move given management's attempt to proactively de-lever the holding company and provide additional short-term financial flexibility over the next few years as the maturity profile of the company's debt is lengthened. The immediate negative impact will be the need to utilize existing holding company cash. However, despite this use of cash, Fairfax's liquidity is sufficient to meet its cash needs in 2004. The company's debt ratings reflect, in part, management's consistent proactive efforts to maintain sufficient holding company liquid assets to meet holding company obligations, as well as flexibility to provide capital support to subsidiaries if needed. A.M. Best believes that tax-sharing payments and stock dividends derived from quality earnings at Fairfax's investments in Odyssey Re and Northbridge, combined with dividend payments allowed by earnings at its wholly owned Crum & Forster operation, should provide sufficient cash flow to the holding company to meet its obligations. In addition, the expected release of Fairfax's shares of Odyssey Re currently held in trust will provide added financial flexibility in the second quarter. The trust was established with the California Department of Insurance to effect the restructuring of the TIG companies. The negative outlook reflects A.M. Best's concerns regarding continued negative loss reserve development at Fairfax's run-off operations, which could result in significant earnings volatility and potential disruption of dividends from wholly owned subsidiaries. In 2003, reserve development was offset by sizable realized gains. Despite a history to the contrary, expectations in 2004 are for a more modest level of realized gains. FLYI INC: Moody's Puts Debt Ratings Under Review & May Downgrade ---------------------------------------------------------------- Moody's Investors Service placed the debt ratings (Senior Implied Rating, B3) of FLYi, Inc., and its primary operating subsidiary Atlantic Coast Airlines, Inc., under review for possible downgrade. Ratings placed under review: FLYi, Inc. * $125 million of senior unsecured convertible notes: Caa3 Atlantic Coast Airlines, Inc. * Senior Implied Rating B3 * Issuer Rating Caa3 * Series 1997 Enhanced Equipment Trust Certificates * Class A Baa3, * Class B B1, * Class C B3 The review was prompted by the difficulties the company is experiencing during the initial stages of its transition from a fee for service carrier to a fully independent airline including lower than expected load factors and yields, higher than anticipated costs associated with the transition, and an earlier than expected termination of its fee for service contract with Delta Air Lines, Inc. The review will focus on the cash flow and liquidity implications of these factors and the likelihood that the company's current substantial cash balances will be sufficient to support operations until a financially stable business base can be built. Moody's will assess the ability and the length of time necessary for the company to increase currently low passenger load factors at fare levels sufficient to generate a profit. Moody's notes that the rapid expansion of capacity at Dulles International Airport (FLYi's primary hub) has been one of the primary factors in the under performance of these two metrics. Also included in the review will be an assessment of the impact on liquidity of the earlier than expected termination of the company's contract with Delta Air Lines, Inc., the cost of conversion of the remainder of the regional jet fleet to service as Independence Air, and the costs associated with disposing of aircraft that are or will be grounded by the company as a result of the cancellation of the United and Delta contracts. Moody's anticipates that cash will decline from current levels ($345 million at the end of June 2004) if current business pressures and high fuel prices persist. In addition, FLYi faces large aircraft lease payments in early 2005. An expectation that cash flows will be sufficient to enable the company to maintain adequate liquidity through the seasonally weak first calendar quarter would be supportive of the current ratings but any expectations of protracted weak cash flow and eroding liquidity would result in a downgrade. Moody's will also review the current values of the aircraft securing the company's Enhanced Equipment Trust Certificates. The aircraft securing these certificates include eight J-41 turboprops and six CRJ-200ER aircraft. Should the loan to value associated with the Class A certificates be determined, in Moody's opinion, to have deteriorated to a level substantially higher than 50%, a downgrade of these certificates may be deemed to be warranted. Junior debt classes will be adjusted accordingly. FLYi, Inc. and its primary subsidiary, Atlantic Coast Airlines, Inc. doing business as Independence Air and are headquartered in Dulles, Virginia. FOOTMAXX HOLDINGS: June 30 Balance Sheet Upside-Down by $13.7 Mil. ------------------------------------------------------------------ Footmaxx Holdings Inc., a Canadian owned company and one of North America's leading suppliers of corrective foot orthotics and diagnostic systems reported second quarter financial results. During the second quarter of 2004, the Company continued to face the challenges created by a strengthening Canadian dollar and a soft market demand for orthotics and associated orthotic ordering systems. As a result, final revenues were $3,519,058 or 6.0% below prior year revenues of $3,745,321. The Company successfully implemented cost reduction programs late in 2003 and early in 2004 to reduce the effects of the softer demand and the unfavorable foreign exchange situation. As a result Net Income for the second quarter was $20,059 versus a Net Loss of $285,447 for the second quarter of 2003. EBITDA for the second quarter improved by $308,079, from $268,201 in 2003 to $576,280 in 2004. Year to date revenues decreased from $7,533,639 in 2003 to $6,607,362 in 2004 for the first six months of the year. A softer demand and the negative impact of unfavorable foreign exchange was substantially offset by the cost reduction programs as EBITDA improved from $669,696 for the first two quarters of 2003 to $1,007,538 for the first two quarters of 2004. Net Loss for the first two quarters of 2004 improved by $360,031 from a net loss of $466,624 in 2003 to a net loss of $106,593 in 2004. Favorable effect of balance sheet exchange has contributed, however cost reduction programs for fixed expenses have been the main contributor to the improvement in profitability in 2004. Footmaxx Holdings Inc. For the Six Months Ended June 30, 2004 Management Discussion and Analysis Overall Performance During the second quarter of 2004, the Company continued to face the challenges created by a strengthening Canadian dollar and a soft market demand for orthotics and associated orthotic ordering systems. As a result, final revenues were $3,519,058 or 6.0% below prior year revenues of $3,745,321. The Company successfully implemented cost reduction programs late in 2003 and early in 2004 to reduce the effects of the softer demand and the unfavorable foreign exchange situation. As a result Net Income for the second quarter was $20,059 versus a Net Loss of $285,447 for the second quarter of 2003. EBITDA for the second quarter improved by $308,079, from $268,201 in 2003 to $576,280 in 2004. Year to date revenues decreased from $7,533,639 in 2003 to $6,607,362 in 2004 for the first six months of the year. The softer demand and the negative impact of unfavorable foreign exchange was substantially offset by the cost reduction programs as EBITDA improved from $669,696 for the first two quarters of 2003 to $1,007,538 for the first two quarters of 2004. Net Loss for the first two quarters of 2004 improved by $360,031 from net a loss of $466,624 in 2003 to a net loss of $106,593 in 2004. Favorable effect of balance sheet foreign exchange has contributed, however cost reduction programs for fixed expenses have been the main contributor to improved profitability in 2004. Results of Operations Revenues Revenues for the second quarter of 2004 decreased $226,263, from $3,745,321 in Q2 2003 to $3,519,058 in Q2 2004, a decrease of 6.1%. The decline in the value of the US dollar, the currency in which Footmaxx transacts a majority of its business cost the Company $84,600 or 2.3% of the decrease. The continued weak demand for orthotics in the North American market was responsible for a further 0.5% decrease in revenues and weak sales of the Company's orthotic ordering computer systems contributed another 3.3% decrease in revenues. Year to date revenues as at the end of the second quarter were $6,607,362 which is a $923,277 or 12.3% decrease in revenues from the same period of 2003. The stronger Canadian dollar contributed $373,200 of the decrease. Weak sales of the orthotic ordering computer systems decreased $340,000. The balance of the decrease was due to soft demand custom orthotic products. The revenues in Canada for Q2 2004 were 6.2% below revenues in Canada for Q2 2003. This decrease in revenues was caused by weak demand for orthotics and also weak sales of the company's orthotic ordering computer systems. The decrease in international business was 5.9% of which two thirds was caused by the unfavorable foreign exchange situation and the balance caused by weak sales of the orthotic ordering systems as the demand for orthotics remained constant versus the same period in 2003. Year to date revenues for Canada decreased by $312,774 or 10.1% mainly due to a weak demand for Orthotic products which contributed 75% of the decrease. The balance was the result of weak demand for the orthotic order computer systems. The international market revenue decreased by $613,503 or 13.8% with an unfavorable foreign exchange contributing 60% of the shortfall. Weak demand for orthotic ordering systems contributed that majority of the balance of the decrease. Gross Profit Gross Profit for the second quarter of 2004 decreased $79,266 or 3.8% from $2,109,480 in 2003 to $2,030,214 in the second quarter of 2004. The unfavorable net impact of the strengthening Canadian dollar on gross profit was approximately $58,400. The balance of the decrease was due to the volume decrease in orthotics and associated orthotic ordering systems. Year to date gross profit decreased $494,067 or 11.4% from $4,324,285 year to date at June 30,2003 to $3,830,218 at June 30,2004. Unfavorable foreign exchange impact accounted for $267,800 of the decrease. The decrease in volume of custom orthotics and orthotic order systems equally contributed to the balance of the decrease. Canadian gross profit for the second quarter increased slightly over the level of the second quarter of 2003. The decrease in revenues was more than offset by cost reduction efforts. Gross profit in the International business was impacted by $58,400 of unfavorable foreign exchange impact. The balance of the decrease was due to volume reduction in computer system revenues. Year to date gross profit in Canada decreased by $44,260 or 2.6% from $1,717,965 for the first six months of 2003 to $1,673,705 for the same period in 2004. Cost reduction efforts helped offset the impact of revenue reduction. International gross profit decreased $449,807 or 17.3% from $2,606,320 year to date Q2 203 to $2,156,513 for the same period of 2004. The net effect of the strengthening Canadian dollar contributed approximately $280,000 of the reduction. The balance was due to the reduced revenues in orthotic ordering systems. Operating Expenses Selling and administrative expenses decreased $378,117 or 23.7% during the second quarter of 2004. The favorable effect of the stronger Canadian dollar reduced US sales and administration expenses by approximately $140,000 including a favorable $110,000 balance sheet foreign exchange variance. The balance of the $378,000 reduction is related to cost reduction programs implemented in late 2003 and early 2004. In addition the company has paid lower commissions due to the lower than expected sales volume. Year to date selling and administration expenses decreased $802,689 or 25.4% from $3,155,430 for the first six months of 2003 to $2,352,741 for the same period in 2004. The strengthening Canadian dollar contributed approximately $270,000 of the decrease including a favorable $181,000 balance sheet exchange variance. The balance of the $803,000 decrease is related to cost reduction programs implemented in late 2003 and early 2004. In addition the company has paid lower commissions due to the lower than expected sales volume. Information technology expenses experienced a slight reduction on both the second quarter and year to date expense level due to improved cost control. Net Income (Loss) Net Income for the second quarter of 2004 was $20,059 which is an $305,506 improvement compared to the $285,447 loss for the second quarter of 2003. The $378,117 decrease in Selling and Administration expenses was more than enough to offset the $79,266 decrease in gross profit. The fixed expense decrease is the result of cost reduction programs implemented late in 2003 and early in 2004. Year to date Net Loss of $106,593 is a $360,031 improvement over the $466,624 shown for the first six months of 2003. The $494,067 decrease in gross profit was more than offset by the $802,689 decrease in selling and administration expenses. The major contributor to the fixed expense decrease is the cost reduction programs of late 2003 and early 2004. EBITDA Earnings before interest, taxes, depreciation and amortization for 2004 increased by $308,079 from $268,201 in Q2 2003 to $576,281 in the second quarter of 2004. Year to date EBITDA for the six months ended June 30,2004 increased $337,842 from $669,696 in 2003 to $1,007,538 in 2004. The decreases in gross profit has been more than offset by successful implementation of the cost reduction programs. EBITDA has been used by the Company historically to measure the cash flow profit generated by operations. EBITDA is also used in calculating some of the Company's debt covenants for the Royal Bank line of credit and the Penfund long term debt. Liquidity Working Capital deficiency The company has a working capital deficiency as reported by the classifications on the balance sheet. However, this includes the Penfund long term loan that has been classified as a current liability due to the fact the Company is in violation of one its financial covenants as at the end of the end of December 2003 and the first two quarters of 2004. However, it is most likely that the company will be in compliance of these covenants for the last two quarters of 2004 due to the improving profit picture and the reduced utilization of the royal Bank short term indebtedness. The company continues to meet all of its obligations in a timely manner. Cash Flow Cash flow for the second quarter of 2004 was positive $38,249. During the quarter, the Company maintained its bank debt, paid a $100,000 bonus interest payment and reduced its long term debt by $222,222. Year to date cash flow for the six months ended June 30,2004 was positive $72,723 with the company reducing its long term debt by $ 444,444 and paying the $100.000. The Company also reduced its bank indebtedness by $90,615. Management feels that the positive cash flow trend will continue and the Company will be able to meet all of its obligations in a timely manner, as it is currently doing. Collections of account receivable remained good with average days outstanding at 39 days at the end of the second quarter. Capital Expenditures The Company made investments in capital assets in the amount of $10,0376 during the second quarter that were related mainly to the equipment pool to meet demand from trial, loaner and rental systems customers. This brings the total investments in capital assets to $ 72,703 for the six months ended June 30,2004. These investments will support increases in the orthotic volumes. Debt Covenants During the second quarter of 2004, the Company achieved all of the Royal Bank covenants but was in violation one of the EBIT related Penfund covenants. Penfund has provided the Company with a letter of waiver. 2004 Financial Outlook The cost reduction programs that the Company implemented in late 2003 and also early 2004 has been very successful as the cost savings has been able to more than offset the decrease in revenues and mitigate the unfavorable foreign exchange situation. The company has introduced new product lines that should increase the volumes of custom orthotics, which should lead to improved financial results. Critical Accounting Estimates The presentation of the financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on management's best knowledge of current events and actions that the company may take in the future. Actual results could differ from those estimates. The following critical accounting policies are impacted by judgements, assumptions, and estimates used in the preparation of the 2003 and interim 2004 consolidate financial statements. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts related to amounts receivable that are considered to be non-collectible. The allowance is based in the Company's best knowledge of the financial condition of its customers, the aging of the receivables, the current business environment and customer and industry historical experience. A change in these factors could impact the estimated allowance and the provision for bad debts recorded in operating expenses. Inventory Valuation The Company values its inventory on a first-in, first-out basis, at the lower of cost or market cost for orthotic raw materials and computer hardware for resale. The company regularly adjusts its inventory valuation based on net realizable value, taking into consideration factors such as inventory aging and future demand for the inventory. A change in these assumptions could impact the valuation of inventory and have a resulting impact on margins. Transactions with Related Parties The company has had no related party transactions during 2004. Non-GAAP Measures In the MD&A and elsewhere, measures such a EBITDA and other terms that are not defined by generally accepted accounting principles are used. The use of these terms may not be consistent with the way these terms are used by others. Where possible, in particular for EBITDA, tables and other information are provided that enables readers to reconcile between such non-GAAP measures and standard GAAP measures. While these measures are not defined by or required by GAAP, this information is provided to readers to help them better understand significant measures. Oversight Role of the Audit Committee The Audit Committee reviews, with management, the Company's quarterly MD&A and related consolidated financial statements and approves the release to shareholders. Management also periodically presents to the Audit Committee a report of their assessment of the Company's internal controls and procedures for financial reporting. About the Company Footmaxx produces and globally markets high quality, state-of-the-art foot orthotics. Footmaxx's proprietary software uses advanced computer techniques to produce individually prescribed and technologically superior foot orthotics which reduce foot, knee, hip and lower back pain and enhance both the comfort and performance level of the wearer. For more information on Footmaxx visit http://www.footmaxx.com/ At June 30, 2004, Footmaxx Holdings' balance sheet showed a $13,784,057 stockholders' deficit, compared to a $13,677,462 deficit at December 31, 2003. FRESNO ASSOCIATION: Fitch Places BB+ Rating on $4.9 Million Bonds ----------------------------------------------------------------- Fitch Ratings affirms the 'BBB-' rating on $67,615,000 California State University Fresno Association, Inc.'s auxiliary organization event center revenue bonds, senior series 2002, and the 'BB+' rating on $4,935,000 California State University Fresno Association, Inc.'s auxiliary organization event center revenue bonds, subordinate series 2002. The Rating Outlooks are Stable. Bond proceeds were used to develop and construct a new sports arena, the Save Mart Center, on the California State University Fresno campus. Construction is complete and the Save Mart Center opened for operations in October 2003. Save Mart Center's primary anchor tenant is the Fresno State men's basketball team -- Bulldogs, while also housing other intercollegiate sport teams including women's basketball, women's volleyball, and wrestling. Additionally, the East Coast Hockey League's Fresno Falcons signed a five-year contract to play approximately 36 games per season in the Save Mart Center. It is projected that those games, combined with other athletic events, special programs, and family shows will result in over 120 annual events. The 'BBB-' and 'BB+' ratings reflect the transaction's strong link to Fresno State, the Bulldog Foundation (the Foundation), and the community. Fresno State was established in 1947 and is the only university within California's Central Valley with a division I-A sports program. Save Mart Center houses the university teams. Therefore, unlike most sports facility project finance transactions, little competition and no relocation risk exists. Since the Foundation's inception, over 70 years ago, fundraising levels and support for the Fresno State athletic department have remained strong. The Foundation provides additional bondholder security, in the form of annual cash transfers up to $1.375 million. Under the agreement, the Association returns the annual cash transfers after payment of senior and subordinate debt service and capital replacement account funding requirements. These payments provide additional liquidity and rolling coverage for debt service. Additional credit strengths include the high level of contractually obligated income -- COI -- securing the bonds and the length of these contracts. The debt is supported by COI contracts, including the naming rights agreement, sponsorship agreements, advertising contracts, luxury suite and other premium seat agreements, and private donations. More than 70% of the annual cash flow supporting the bond transaction is derived from these COI contacts. Most of these agreements extend for 10 years while the naming rights agreement runs through 2023. The base case cash flow assumes conservative renewal rates and no extension of the naming rights agreement. Fitch thinks the base case cash flow is realistic and conservative renewal assumptions provide bondholders with adequate coverage ratios. Operationally, Save Mart Center is forecast to derive a net event deficit throughout the term of the debt. However, during the first year of operations Save Mart Center exceeded projections with only a $220,000 net event-operating deficit as compared to $1 million projected in the original bond base case. More events than originally forecast, as well as parking revenues that were not assumed in the base case, contributed to the better than expected operating results. Although there were some increases in operating expenses such as personnel and benefits, building related expenses, and utilities, the additional operating revenues offset them. Fitch expects the net event-operating deficit to increase by 2005 and remain in line with the base case estimates. Fitch's rating concerns center around the transaction's relatively low projected debt service coverage and the concentrated renewal risk in year ten. Current estimates reflect FY 2004 debt service coverage of 2.68 times (x) as compared to the base case projections of 2.00x. Additional COI contracts, mainly a concessionaire agreement, additional sponsorship revenues and the aforementioned lower net operating deficit contributed to the higher than expect debt service coverage figures. However, Fitch expects future total debt service coverage to remain thin, at levels ranging from 1.30x to 1.40x. Senior debt service coverage levels are not expected to drop below 1.40x throughout the life of the bonds. The subordinate bonds, paid after senior debt service and capital replacement account requirements, are forecast to maintain sum sufficient coverage. As compared to other sports facility project finance transactions, debt service coverage is relatively low. Furthermore, the concentration of ten-year contacts creates significant marketing pressure in 2012 and could result in lower than expected coverage during renewal periods if forecasted renewal rates are not met. The debt's 30-year tenor is a credit concern. Renewal risk is a major credit issue in all sports related financings, which is exacerbated here by a long legal tenor. However, there are several factors that mitigate the renewal risk and long tenor. Fresno State has a strong established fan base, which should support contract renewals long term. In addition, the transaction benefits from high levels of COI and a long average term of pledged revenue contracts. In addition, after payment of debt service and funding of reserves, surplus revenues are available and retained. Fifty percent of those excess revenues will be transferred to a redemption account for early bond retirement. Also of concern are the NCAA sanctions imposed on the Fresno State Athletic Department and Men's Basketball team in 2003. The sanctions stem from a NCAA investigation into academic fraud and violations by the men's basketball team and, to a lesser extent, other Fresno State teams. Penalties assessed to Fresno State include four years of probation ending in December 4, 2006, reduced grants-in-aid in the men's basketball program for the 2004-05 and 2005-06 academic years, returning 90% of the prize moneys resulting from the university's appearance in the 2000 NCAA tournament, and annual reporting on the status of athletics. To the extent that the University faces future sanctions, credit quality may be impacted by stricter penalties imposed on the men's basketball program and the athletic department. These stricter penalties may cause a reduction of fan support and related revenues and ultimately a weakened financial profile and lower coverage levels. The Trustees of the California State University system own the project site, which is located next to the main campus and has entered into a long-term lease with the Association, which is the entity that issued the debt. The transaction's structure includes adequate reserve funds, an additional bonds test on a senior level, and a cash trap mechanism, which can be utilized to redeem debt prior to expected maturity. The cash trap has the potential of lowering overall debt service, buoying debt coverage, and shortening the term of the debt. GEO SPECIALTY: Creditors' Proofs of Claim Must be In by Thursday ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey directs creditors of GEO Specialty Chemicals, Inc. and GEO Specialty Limited to file their proofs of claim no later than 4:00 p.m. on Thursday, September 2, 2004. Proofs of claims must be received by The Trumbull Group, LLC, the official claims and noticing agent. Proof of claim forms must be delivered: (a) If by United States mail to: GEO Specialty Inc., et al. Claims Processing c/o The Trumbull Group, LLC P.O. Box 721 Windsor, Connecticut 06095-0721 -- or -- (b) If by courier service, overnight or hand delivery to: GEO Specialty Inc., et al. Claims Processing c/o The Trumbull Group, LLC 4 Griffin Road North Windsor, Connecticut 06095 A proof of claim is deemed filed pursuant to 11 U.S.C. Sec. 1111(a) for any claim that is listed in the schedules filed by the Debtors and not scheduled as disputed, contingent or unliquidated. The Schedules filed can be accessed at http://georeorg.com/ Creditors who hold claims already allowed by the Court need not file proofs of claim. Headquartered in Harrison, New Jersey, GEO Specialty Chemicals, Inc. -- http://www.geosc.com/-- develops, manufactures and markets a wide variety of specialty chemicals, including over 300 products sold to major industrial customers for various end-use applications including water treatment, wire and cable, industrial rubber, oil and gas production, coatings, construction, and electronics. The Company filed for chapter 11 protection on March 18, 2004 (Bankr. N.J. Case No. 04-19148). Alan Lepene, Esq., Robert Folland, Esq., and Sean A. Gordon, Esq., at Thompson Hine, LLP, and Brian L. Baker, Esq., Howard S. Greenberg, Esq., and Stephen Ravin, Esq., at Ravin Greenberg, PC, represent the Debtors in their restructuring efforts. On September 30, 2003, the Debtors listed total assets of $264,142,000 and total debts of $215,447,000 GREATER CINCINNATI: List of 20 Largest Unsecured Creditors ---------------------------------------------------------- Greater Cincinnati Historical Properties LP released a list of its 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ GMAC Commercial Value of Security: $1,671,152 Mortgage Corporation $1,342,619 312 Walnut Street Cincinnati, OH 45202 Jay Andress III Personal Loan to $43,000 Partnership Hamilton County Treasurer Real Property Taxes $35,154 Due for parcel # 0770001006100 Hamilton County Treasurer Real Estate Taxes $13,279 Due for parcel # 0770001005900 Jay Andress III Personal Loan to $3,500 Partnership for purchase of new water heater Cincinnati Enquirer Advertising $2,026 Cincinnati Bell $1,380 David Donnett, Esq. Legal Services $687 Evictions Berlage / Leann Shelton Security Deposit $215 Sara Tobias Security Deposit $200 CG&E $160 Ashley Ekstrom/Sondra Kurtz Security Deposit $99 Eric Ashinger Security Deposit $99 Esther Evans Security Deposit $99 George and Elizabeth Sloan Security Deposit $99 Kate Taylor Security Deposit $99 Mallisa Williams Security Deposit $99 Martin Mitchell Security Deposit $99 Melissa Colliers Security Deposit $99 Tim Hendrixson Security Deposit $99 Headquartered in Cincinnati, Ohio, Greater Cincinnati Historical Properties LP, the Company filed for chapter 11 protection on August 12, 2004 (Bankr. S.D. Ohio Case No. 04-16394). Donald J. Rafferty, Esq. and Monica V. Kindt, Esq., at Cohen, Todd, Kite & Stanford, LLC, represent the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed both estimated assets and debts of over $1 million. GREENWICH CAPITAL: Moody's May Downgrade Ba2-Rated Class B-2 Certs ------------------------------------------------------------------ Moody's Investors Service placed under review for possible downgrade the ratings on two subordinate certificates from Greenwich Capital Acpt MH 1995-BA1's manufactured housing securitization 1995-BA1. The senior and mezzanine certificates have not been placed on review as their credit enhancement, which consists of subordination, excess spread and interest subordination, is sufficient to support the ratings. The current review is prompted by the weaker-than expected performance of the pool. Delinquencies and repossessions have exceeded original expectations, leading to higher than expected cumulative losses. As of the July 31, 2004 remittance report, cumulative losses and cumulative repossessions were 11.50% and 17.69% respectively, with approximately 25% of the pool balance outstanding. Because interest payments are subordinated to principal payments for all classes, the class B certificates have realized significant interest shortfalls. Similar to other manufactured housing securitizations, the deteriorating performance is primarily due to manufactured housing sector problems, such as high unemployment levels in the manufacturing sector where many of these borrowers are employed and high loss severities due to lack of demand for used repossessed units. This has placed increased pressure on the industry, further magnifying repossessions and loss severities. The complete rating action is as follows: Issuer: Greenwich Capital Acceptance, Inc., Series 1995-BA1 * 7.40% Class B-1 Certificates, rated Baa2, on review for possible downgrade; and * 9.00% Class B-2 Certificates, rated Ba2, on review for possible downgrade. The loans were originated by BankAmerica Housing Services and Security Pacific Financial Services of California, Inc. The loans are currently being serviced by GreenPoint Credit, LLC. GreenPoint Credit, LLC, is a wholly owned subsidiary of GreenPoint Financial Corp. HARRAH'S ENT.: Gets 2nd FTC Request for Caesars Acquisition Info. ----------------------------------------------------------------- Harrah's Entertainment, Inc. (NYSE: HET) and Caesars Entertainment, Inc. (NYSE: CZR) have each received a request for additional information from the Federal Trade Commission in connection with Harrah's pending acquisition of Caesars. The companies intend to respond promptly to the information request, which was issued under notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The effect of the second request is to extend the waiting period imposed by the HSR Act until 30 days after Harrah's and Caesars have substantially complied with the request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC. Caesars Entertainment, Inc. is one of the world's leading gaming companies. With $4.5 billion in annual net revenue, 28 properties on four continents, 26,000 hotel rooms, two million square feet of casino space and 53,000 employees, the Caesars portfolio is among the strongest in the industry. Caesars casino resorts operate under the Caesars, Bally's, Flamingo, Grand Casinos, Hilton and Paris brand names. The company has its corporate headquarters in Las Vegas. Founded 66 years ago, Harrah's Entertainment, Inc. -- http://www.harrahs.com/-- owns or manages through various subsidiaries 28 casinos in the United States, primarily under the Harrah's brand name. Harrah's Entertainment is focused on building loyalty and value with its valued customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. * * * As reported in the Troubled Company Reporter's July 19, 2004 edition, Fitch Ratings has affirmed the following long-term debt ratings of Harrah's Entertainment and placed the long-term ratings of Caesars Entertainment on Rating Watch Positive. HET --Senior secured debt 'BBB-'; --Senior subordinated debt 'BB+'. CZR --Senior unsecured debt 'BB+'; --Senior subordinated debt 'BB-'. The action follows the July 15, 2004 announcement that HET has reached an agreement to purchase CZR for $9.44 billion comprised of $1.8 billion cash, 66.3 million shares of HET common stock ($3.3 billion), and the assumption of $4.3 billion in debt. This represents an 8.4 times (x) multiple of CZR's estimated 2004 EBITDA of $1.1 billion. One third of the purchase price will be paid in cash and two-thirds in stock. The combined entity will have the capacity to begin reducing debt from free cash flow and asset sales, with the pace of debt reduction contingent on the level of discretionary spending and timing of asset sales. Fitch's Positive Rating Watch of CZR is expected to be resolved by successful completion of the transaction. The rating(s)/ and of outlook would be adversely affected if HET is unable to reduce debt in a timely manner or chooses to pursue additional large- scale debt-financed acquisitions and/or growth projects. HIGH ROCK: Hires Hartman & Hartman as Bankruptcy Counsel -------------------------------------------------------- High Rock Holding, LLC, sought and obtained permission from the U.S. Bankruptcy Court for the District of Nevada to employ Hartman & Hartman as its bankruptcy counsel. Hartman is expected to: a) assist in the preparation and filing of the schedules and statements, monthly operating reports and other papers required in this case; b) assist the Debtor in the preparation of a disclosure statement and plan of reorganization or liquidation and will defend against motions for relief from the automatic stay and similar matters; c) assist the Debtor in all matters otherwise required in the prosecution of this case. Jeffrey L. Hartman, Esq., is primarily responsible for representing the Debtor. Mr. Hartman's hourly rate for his professional services is $290. Contract lawyers charge $185 per hour for their services, and legal assistants bill $75 per hour. Hartman does not hold any interest adverse to High Rock but discloses that it represented Empire Foods, LLC, one of High Rock's former creditors. Mr. Hartman also represented Rolland P. Weddell, HRH's managing member and a creditor of High Rock. Headquartered in Sparks, Nevada, High Rock owns and develops real estate. The Company filed for chapter 11 protection on July 15, 2004 (Bankr. D. Nev. Case No. 04-52135). When the Debtor filed for protection it listed $30 million in total assets and $14 million in total debts. HOME INSURANCE: Moody's Withdraws Six Junk Ratings After Downgrade ------------------------------------------------------------------ Moody's Investors Service lowered the insurance financial strength ratings of The Home Insurance Company and five of its affiliates, which have been merged into Home Insurance, to Ca from Caa1 and will withdraw the ratings. This action has been taken because Home Insurance has been, and remains, in liquidation under the regulatory supervision of the New Hampshire Department of Insurance. These ratings have been lowered and will be withdrawn: * The Home Insurance Company -- insurance financial strength to Ca from Caa1; * The Home Insurance Company of Wisconsin -- insurance financial strength to Ca from Caa1; * The Home Insurance Company of Indiana -- insurance financial strength to Ca from Caa1; * The Home Insurance Company of Illinois -- insurance financial strength to Ca from Caa1; * Home Indemnity Company -- insurance financial strength to Ca from Caa1; and * City Insurance Company -- insurance financial strength to Ca from Caa1. IMC GLOBAL: S&P's B+ Rating on CreditWatch Pending Merger Outcome ----------------------------------------------------------------- Standard & Poor's Ratings Services' ratings on fertilizer producer IMC Global Inc. (B+/Watch Pos/--) remain on CreditWatch with positive implications, where they were placed Jan. 27, 2004. Resolution of the CreditWatch listing awaits IMC Global's merger with Cargill Inc.'s Cargill Crop Nutrition business. Lake Forest, Illinois-based IMC Global is one of the largest global producers of phosphate and potash crop nutrients for the agricultural industry and has about $2.1 billion of debt outstanding. Upon completion of the merger with Cargill Crop Nutrition, the corporate credit rating of IMC will be raised to 'BB' from 'B+', the ratings on the existing senior unsecured notes with guarantees of subsidiaries will be raised to 'BB' from 'B+', and the ratings on the existing senior unsecured notes without guarantees of subsidiaries will be raised to 'B+' from 'B-'. The outlook will be stable. The proposed combination will result in a new, publicly traded company, named The Mosaic Co., with Cargill receiving 66.5% of the outstanding shares of Mosaic and IMC shareholders the remaining 33.5%. The merger is subject to regulatory approvals as well as IMC's shareholder approval. Mosaic will have sales of about $4.5 billion and total debt of about $2.3 billion. With the resolution of the CreditWatch, Standard & Poor's will assign a corporate credit rating of 'BB' to Mosaic. "The pending higher ratings on IMC Global would reflect the improvement to credit quality resulting from the merger with Cargill Crop Nutrition and Standard & Poor's expectation that management will adopt financial policies in line with the proposed ratings," said Standard & Poor's credit analyst Peter Kelly. The new ratings will reflect an aggressive financial profile resulting from high debt leverage at the outset of the proposed merger, somewhat offset by Mosaic's good business profile as a leading global fertilizer producer. The new company is expected to benefit from meaningful synergies, including a lower cost of capital and an enhanced platform for worldwide growth through the combination of IMC's domestic business with Cargill Crop Nutrition's more international franchise. Still, ratings will continue to recognize that strategic, bolt-on acquisitions are possible, and that the company will remain exposed to seasonal agricultural markets. During the next few years, management is expected to balance capital spending, integration and modest expansion efforts with debt reduction, thus strengthening key financial ratios to appropriate levels for the ratings. INTERSTATE BAKERIES: Hires Alvarez & Marsal as 9/26 Deadline Nears ------------------------------------------------------------------ Citing "the convergence of a number of recently identified interrelated circumstances," Interstate Bakeries Corporation (NYSE:IBC) said yesterday, it did not file its annual report on Form 10-K for its fiscal year ended May 29, 2004 with the Securities and Exchange Commission last Friday. The Company said it is seeking to resolve these matters promptly and will defer filing its fiscal 2004 Form 10-K until it has done so. IBC says the filing "will occur when the officers who must make the certification required by the Sarbanes Oxley Act in connection with such filing are in a position to do so." IBC had previously obtained an extension to last Friday for a timely filing of its Fiscal 2004 Form 10-K because of delays encountered in finalizing its audited financial statements for its 2004 fiscal year arising from its previously announced investigation of the Company's manner for setting its workers' compensation reserves and other reserves. The Company said that the delay in filing its Form 10-K, which was due last Friday, arose out of: * initial data entry and training deficiencies in the Company's newly implemented financial reporting systems, installed June 1, 2004; * uncertainty regarding anticipated Fiscal 2005 first quarter results, in part due to delayed information availability resulting from such deficiencies which has made it difficult to analyze the impact of negative sales trends during the first quarter of Fiscal 2005; * resulting uncertainty as to whether the Company may not be in compliance with covenants in its senior secured credit facility agreement during Fiscal 2005; and * the possibility, therefore, that the report of its independent auditors with respect to the Company's Fiscal 2004 financial statements might contain a paragraph to the effect that there may be substantial doubt about the Company's ability to continue as a going concern. The Company has begun to receive the delayed information and to use it to better develop and analyze fiscal 2005 first quarter results. While the effort is still ongoing, the Company considers its direction to be positive relative to the uncertainties and possibilities noted above, although no conclusions can yet be reached. Hires Alvarez & Marsal As part of its effort to aggressively deal with these matters and pursue an effective going forward business strategy, IBC has retained the firm of Alvarez & Marsal to assist the Company. The Company also is engaged in discussions with representatives of the agent bank under its senior secured credit facility and intends to also discuss these issues and potential responses with representatives of the purchasers of the Company's recently issued senior subordinated convertible notes. Sept. 26 Deadline The Company noted that although it is working diligently to resolve the foregoing issues, if certain circumstances were to develop, including if the auditor's report accompanying the Company's audited financial statements contains a going concern paragraph, or if it does not file its Fiscal 2004 Form 10-K by September 26, 2004, under the terms of the Company's senior secured credit facility this could result in IBC's inability to borrow under its senior secured credit facility and acceleration of outstanding indebtedness under the senior secured credit facility and, subject to certain conditions, the senior subordinated convertible notes as well. In the event of any such acceleration, there is no assurance that IBC would be able to obtain alternative financing. Chapter 11 Rumor "In the absence of appropriate agreements with its lenders to avoid such circumstances, the Company would need to consider alternative courses of action which are typically considered by companies in similar circumstances," the Company said yesterday. "The company might have to file for Chapter 11 bankruptcy protection," David Clothier at Bloomberg News reports, citing Credit Suisse First Boston research analyst David Nelson as his source. An IBC spokeswoman denied conjecture that the company would be filing for bankruptcy told in an interview with David Ng at Forbes yesterday. The spokeswoman told Mr. Ng that Interstate Bakeries is working through the issues it needs to address but "believes the directions of its efforts are positive." More than 6 million shares in IBC traded hands on the New York Stock Exchange yesterday. IBC shares lost more than a third of their value as the price dipped below $5 per share -- a new 52-week low. Interstate Bakeries Corporation is the nation's largest wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder, Hostess, Dolly Madison, Baker's Inn, Merita and Drake's. The Company, with 55 bread and cake bakeries located in strategic markets from coast- to-coast, is headquartered in Kansas City, Mo. J.P. MORGAN: Fitch Puts Low-B Ratings on Privately Offered Classes ------------------------------------------------------------------ J.P. Morgan Mortgage Trust mortgage pass-through certificates, series 2004-S1 is rated by Fitch as follows: -- $628.2 million classes 1-A-1, 1-A-2, 1-A-3, 1-A-4, 1-A-5, 1-A-6, 1-A-7, 1-A-8, 1-A-9, 1-A-P (the Group 1B senior certificates), 2-A-1, 2-A-P, 2-A-X, 3-A-1, 3-A-P, 3-A-X, 4-A-1, 4-A-P, 4-A-X, and A-R (the Group CB senior certificates) 'AAA'; -- Class 1-B-1 certificates ($2,344,800) and C-B-1 certificates (3,927,800) 'AA'; -- Class 1-B-2 certificates ($1,641,100) and C-B-2 certificates (1,658,300) 'A'; -- Class 1-B-3 certificates ($1,172,300) and C-B-3 certificates (1,047,400) 'BBB'; -- Privately offered class 1-B-4 certificates ($422,000) and privately offered class C-B-4 certificates ($611,000) 'BB'; -- Privately offered class 1-B-5 certificates ($281,300) and privately offered class C-B-5 certificates ($436,400) 'B'; -- Privately offered class 1-B-6 certificates ($703,374) and privately offered class C-B-6 certificates ($1,047,418) are not rated by Fitch. The 'AAA' rating on the Group 1 senior certificates for pool 1 reflects the 1.40% subordination provided by the 0.50% class 1-B-1, the 0.35% class 1-B-2, the 0.25% class 1-B-3, the 0.09% privately offered class 1-B-4, the 0.6% privately offered class 1-B-5 and the 0.15% privately offered class 1-B-6 certificates. The 'AAA' rating on the Group CB senior certificates for pools 2, 3 and 4 reflects the 5.00% subordination provided by the 2.25% class C-B-1, the 0.95% class C-B-2, the 0.60% class C-B-3, the 0.35% privately offered class C-B-4, the 0.25% privately offered class C-B-5 and the 0.60% privately offered class C-B-6 certificates. 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 also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, the primary servicing capabilities of Chase Manhattan Mortgage Corporation (rated 'RPS1' by Fitch), and the master servicing capabilities of Chase Manhattan Mortgage Corporation, which is rated 'RMS1' by Fitch. As of the cut-off date, August 1, 2004, the Group 1B Certificates are collateralized by one pool of 856 conventional, 15 year fixed rate mortgage loans secured by first liens on one-to-four family residential properties with an aggregate scheduled balance of $468,888,746.42. The average unpaid principal balance of the aggregate pool as of the cut-off date is $547,767. The weighted average original loan-to-value ratio -- LTV -- is 56.47%. The weighted average mortgage rate of the pool is 5.70%. The loans were originated by: * Chase Manhattan Mortgage Corporation (95.72%); and * Harris Trust and Savings Bank (4.28%). States with large concentrations of loans are: * California (25.71%), * New York (20.24%), and * Florida (16.75%). As of the cut-off date, August 1, 2004, the Group CB Certificates are collateralized by three pools (pool 2, 3 and 4) which consist of 994 conforming balance, 15 year and 30 year fixed rate mortgage loans secured by first liens on one-to-four family residential properties with an aggregate scheduled balance of $174,562,578. The average unpaid principal balance of the aggregate pool as of the cut-off date is $175,616. The weighted average original loan- to-value ratio is 75.62%. The weighted average mortgage note of the pool is 6.429%. The loans were originated entirely by Chase Manhattan Mortgage Corporation. States with large concentrations of loans are: * New York (20.64%), * Florida (19.92%), * California (9.26%), and * New Jersey (6.27%). 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, please 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/ Wachovia Bank, National Association will serve as trustee. J.P. Morgan Acceptance Corporation I, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, the trustee will elect to treat all or portion of the assets of the trust funds as comprising multiple real estate mortgage investment conduits. JAFRA COSMETICS: Moody's Confirms Single-B Ratings After Merger --------------------------------------------------------------- Moody's Investors Service confirmed Jafra Cosmetics International, Inc., and its affiliates B1 senior implied rating, B2 senior unsecured issuer rating, and B3 rating on its approximately $200 million senior subordinated notes following Moody's completion of its review of the company's merger with Vorwerk & Co. KG. The outlook remains positive. The confirmation reflects: * the company's robust business model in Mexico and its more streamlined focus on fewer markets, * offset by the limited history of operations under its new corporate parent, * limited debt pay down since its 2003 recapitalization, and * its heavy reliance for sales and profitability on its core Mexican operations. The company exhibits moderate leverage and good interest coverage. The ratings also reflect: * management's experience in implementing strategies to grow its consultant base, * improve productivity and a strong track record of product quality and innovation, and * the relatively recession resistant nature of its business. The ratings also reflect: * the competitive and operating challenges of a multi-level direct selling model, with the attendant risks of consultant turnover and productivity; * the foreign exchange risk of having significant dollar denominated debt service expenses; and * Jafra's relatively high inventory levels and its practice of extending credit terms to its consultants that result in ongoing working capital needs. The positive outlook reflects: * Jafra's good credit statistics for its rating category, with some weakness in the free cash flow metric, and * the expectation that debt will be paid down quickly out of operating cash flow. Jafra had debt/adjusted EBITDA of 3.4x, interest coverage (EBITDA- capex)/cash interest expense of 2.7x and free cash flow/total debt of 8.5% on a LTM basis as of June 30, 2004. The company projects that debt will decline to 3.1x by the end of 2004 and 2.4x by the end of 2005. EBITDA excludes gains/losses on foreign exchange. Risks to Jafra's ratings include a new corporate parent, Vorwerk, with a yet unknown impact on Jafra's business and operating strategy. There are restrictions on Vorwerk's ability to take dividends out of the company as follows: (i) dividends may total only 50% of consolidated accumulated net income commencing July 1, 2004; (ii) there must be $5 million of availability under the new $60 million revolver to permit dividends to be paid; and (iii) 50% of excess cash flow must be dedicated to debt pay down unless leverage (total debt/EBITDA) is less than 3x. Other risks include the heavy concentration of the company's business with 63% (2003) of sales and 78% (2003 after certain adjustments) of operating profit coming from Mexico. Operations in the U.S., Europe and other geographies lag significantly behind Mexico in performance. Jafra has exhibited limited debt pay down since its 2003 recapitalization and free cash flow generation/ total debt is somewhat weak for its rating category. Jafra has also exited a number of unprofitable countries in the last two years and further paring of its portfolio may be required; however, if Jafra, under Vorwerk's direction, enters new countries there is no assurance that this expansion will be successful. Jafra is well positioned in its rating category. Ratings could increase if Jafra's performance is such that Jafra's business risk does not increase and its credit metrics improve such that debt/adjusted EBITDA declines to approximately 3.0x or below and free cash flow/ funded debt is in the 12-15% range. Although it does not appear likely that ratings would decline, this could occur if Jafra's operating performance deteriorates or debt reduction does not proceed as planned. Ratings could be downgraded if leverage materially increases and FCF/funded debt deteriorates to the 5% range. In April 2004, Moody's had put the debt ratings of Jafra and its affiliates on review direction uncertain following the company's announcement that Vorwerk had entered into an agreement to acquire 100% of Jafra from Clayton, Dubilier and Rice and other shareholders. The transaction closed on May 27, 2004. On August 16, 2004, Jafra entered into a restated credit agreement with its banks to put in place a $60 million 4-year revolving credit facility. This new revolver, which is unrated by Moody's, also has an accordion feature which would permit an increase in size to $90 million. $20 million of interim financing provided by Vorwerk along with borrowings under the new revolver were used to retire Jafra's old revolver and term loan; Vorwek's interim loan is expected to be paid off by year end 2004. Jafra continues to have outstanding approximately $200 million of senior subordinated notes. The new $60 million 4-year senior secured revolving credit facility is the obligation of Jafra Cosmetics International, Inc., a Delaware corporation, and Distribuidora Comercial Jafra, S.A. de C.V., which is organized under the laws of Mexico. The full amount of the credit facilities is available to Jafra Cosmetics and 60% of the aggregate principal amount of the facilities is available to Distribuidora Comercial. In 2003, 78% of the company's operating profit (prior to loss making operations and corporate overhead) was generated in Mexico, creating a potential mismatch between earnings and U.S. dollar debt, and potentially exposing the company to exchange rate risk if it is not fully hedged. Jafra Worldwide Holdings, a Luxemburg corporation and a parent holding company, is the guarantor of the facility. Moody's notes that legal risks may arise because the obligors and guarantors reside in different jurisdictions. The borrowings and the related guarantees are secured by substantially all of the assets of Jafra Worldwide, Jafra Cosmetics, Distribuidora Comercial and each existing and subsequently acquired subsidiary of Jafra Cosmetics and Distribuidora Comercial. This includes a first priority pledge of all the capital stock of Jafra Cosmetics and Distribuidora Comercial and each existing and subsequently acquired subsidiary (which, in the case of a foreign subsidiary of Jafra Cosmetics, is limited to 65% of the capital stock of the foreign subsidiary) and perfected first priority security interests in, and mortgages on, substantially all tangible and intangible assets of Jafra Cosmetics and Distribuidora Comercial and each existing and subsequently acquired subsidiary of Jafra Cosmetics and Distribuidora Comercial. The revolving credit facility will require debt to be repaid with 50% of excess cash flow unless the ratio of total debt to EBITDA is less than 3x. The revolving credit facility may also be used to pay down the company's $200 million of senior subordinated notes. Covenants include maximum net total debt/EBITDA of 4x, minimum EBITDA/interest expense of 2.25x and maximum annual capital expenditures. The B1 senior implied rating for Jafra reflects the aggregate credit profile of the company. The unsecured issuer rating is rated one notch below the senior implied rating at B2. The B3 rating on the senior sub notes reflects their contractual and effective subordination to the senior secured revolving credit facility. These ratings were confirmed: * Distribuidora Comercial Jafra, S.A. de C.V. and Jafra Cosmetics International, Inc.: * $200 million senior subordinated notes due 2011, at B3. * Jafra Worldwide Holdings (Lux), S.aR.L: * Senior implied rating, at B1; * Senior unsecured issuer rating, at B2. Moody's has withdrawn its ratings on the following: * Distribuidora Comercial Jafra, S.A. de C.V. and Jafra Cosmetics International, Inc.: * $40 million senior secured revolving credit facility due 2008, at B1; * $50 million senior secured term loan due 2008, at B1. Headquartered in Westlake Village, California, Jafra sells skin and body care products, color cosmetics, fragrances and other personal care items through a network of over 400,000 self- employed consultants. Revenues for the fiscal year ended December 2003 totaled $384 million. Vorwerk, the new parent company, is a family-owned direct seller of household appliances that is based in Wuppertal, Germany. It expects its annual sales to grow from approximately $2 billion to $2.5 billion after the acquisition of Jafra. JILLIAN'S ENT: Objections to Plan Must Be Filed By Sept. 30 ----------------------------------------------------------- The Honorable David T. Stosberg of the U.S. Bankruptcy Court for the Western District of Kentucky, Louisville Division, set September 30, 2004, at 4:30 p.m., as the deadline for parties to file and serve any objections to Jillian's Entertainment Holdings, Inc. and its debtor-affiliates' First Amended Joint Liquidating Plan of Reorganization. All objections must: (i) state with particularity the legal and factual grounds for such objection; (ii) describe the nature and amount of the objector's claim; (iii) provide, where applicable, the specific text that the objecting party believes to be appropriate to insert into the Plan; and (iv) be in writing and served on: Co-Counsel to the Debtors and debtors-in-possession: James H.M. Sprayregen, PC James W. Kapp II, Esq. Ryan S. Nadick, Esq. Kirkland & Ellis LLP 200 East Randolph Drive Chicago, Illinois 60601 - and - Edward M. King, Esq. Frost Brown Todd LLC 400 West Market Street, 32nd Floor Louisville, Kentucky 40202-3363 - and - Ronald E. Gold, Esq. Frost Brown Todd LLC 2200 PNC Center 201 East Fifth Street Cincinnati, Ohio 45202 Debtor's Solicitation Agent: Jonathan Carson Christopher R. Schepper Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite I Los Angeles, California 90066 Counsel to the Committee: Eric D. Schwartz, Esq. Gregory Werkheiser, Esq. Morris, Nichols, Arsht & Tunnell 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899-1347 Counsel for the Agent to the Prepetition Lenders and debtor-in-possession lender: Vincenzo Paparo, Esq. Michael E. Foreman, Esq. Proskauer Rose LLP 1585 Broadway New York, New York 10036 United States Trustee: Joseph Golden, Esq. Office of the United States Trustee 512 Gene Snyder Courthouse 601 West Broadway Louisville, Kentucky 40202 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. KIVA CONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Kiva Construction & Engineering, Inc. dba Kiva Construction, Inc. 186 Zimmer Road Gibson, Louisiana 70356 Bankruptcy Case No.: 04-16559 Type of Business: The Debtor is engaged of construction services. Chapter 11 Petition Date: August 27, 2004 Court: Eastern District of Louisiana (New Orleans) Debtor's Counsel: Paul C. Miniclier, Esq. Law Office of Paul C. Miniclier 1305 Dublin Street New Orleans, LA 70118 Tel: 504-864-1276 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ U.S. Dept. of Treasury Government Payroll $1,146,365 Internal Revenue of Service Taxes P.O. Box 30803, AMC Memphis, TN 38130-0803 AJCCO, Inc. Trade Debt Insurance $189,823 Panaco, Inc. Trade Debt $179,495 Bankruptcy Claim Joseph B. McDermott Trade Debt Loans $128,000 Allied North America Corp. Trade Debt Insurance $100,661 Ricky Gaspard Personal Injury $100,000 Claim Kellogg Brown & Root, Inc. Trade Debt Property $77,621 Lease Wm. Rigg Co. Trade Debt Insurance $64,660 L-M Limited Partnership Trade Debt Property $30,000 Lease Dorsett Brothers Concrete, Trade Debt Materials $30,000 Inc. George Turner Trade Debt Equipment $27,500 Rental Law Office of Paul C. Trade Debt $24,294 Miniclier, PLC Professional Aetna US Healthcare, Inc. Trade Debt Insurance $14,665 McDonough Project Services, Trade Debt $13,606 JAM Distributing Co. Trade Debt Fuel $12,568 State of Texas, Comptroller Government Sales Tax $10,828 Chambers County Government Property $10,673 Taxes North Shore Supply Company, Trade Debt Materials $8,551 Inc. Texas Workforce Commission Trade Debt $7,860 Unemployment Kooney X-Ray, Inc. Trade Debt $7,804 Professional LEISURE TIME: Trustee Sues Debtor's Counsel for Malpractice ----------------------------------------------------------- Robert B. Silliman, the Chapter 7 Trustee overseeing the liquidation of Leisure Time Casinos & Resorts, Inc., sought and obtained permission to hire The Lefkowitz Firm, LLC, as his Special Litigation Counsel to prosecute a malpractice suit against the Debtor's former bankruptcy counsel. Bankruptcy History On March 16, 2001 Leisure Time Casinos & Resorts, Inc., and its wholly owned subsidiary, Leisure Time Technology, Inc. filed voluntary chapter 11 petitions (Bankr. N.D. Ga. Case No. 01-63483). On March 20, 2001, the Court approved joint administration of LTCR and LTT's bankruptcy cases. LTT confirmed its Second Amended Chapter 11 Plan of Reorganization on March 29, 2002, and the Court severed the joint administration of LTCR and LTT's bankruptcy cases on April 11, 2002. On April 11, 2002, the Court converted LTCR's bankruptcy case to a case under Chapter 7, and on May 1, 2002, the Court appointed Mr. Silliman as the Chapter 7 Trustee. Suing the Lawyers Prior to the Trustee's appointment in LTCR's bankruptcy case, Macey, Wilensky, Cohen, Wittner & Kessler, LLP, served as counsel to LTCR and LTT in connection with their respective bankruptcy cases. In the course of the Trustee's duties, it became apparent that Macey Wilensky was not disinterested as to LTCR during the period in which it represented both LTCR and LTT and subsequently, when it represented Vision Gaming, Inc., LTT's successor, against LTCR. Upon discovery of Macey Wilensky's conflict, the Trustee contacted The Lefkowitz Firm and another law firm. In order to comply with the applicable statute of limitations under Georgia law, prosecution of the Claims demanded prompt attention and, at the Trustee's request, his lawyers began to provide necessary and essential services even though the exact fee structure had not been worked out in September 2003. In October 2003, the Trustee filed suit against Macey Wilensky in the Superior Court of Fulton County, State of Georgia in Civil Action File No. 2003CV75869, styled Silliman v. Macey, Wilensky, Cohen, Wittner & Kessler, LLP, et al., to beat a statute of limitation deadline. At the request of the Trustee, his lawyers dismissed the lawsuit without prejudice earlier this year. Relying on a provision of Georgia law that preserved the claims against Macey Wilensky for 180 days thereafter, the Trustee refiled the suit. The Trustee sought and obtained approval of The Lefkowitz Firm's employment nunc pro tunc to September 26, 2003, to prosecute the malpractice suit against Macey Wilensky. The Trustee tells Judge Diehl that The Lefkowitz Firm has substantial experience and expertise in the litigation of claims of the nature. In fact, the Trustee relates, The Lefkowitz Firm has successfully prosecuted numerous claims like these. In the Trustee's best judgment, his employment of The Lefkowitz Firm to prosecute the lawsuit on behalf of the estate will increase the likelihood of success and will enhance the opportunity for greater recoveries on the estate's claims. The Fee Agreement The Trustee agrees to pay The Lefkowitz Firm for its services in three ways: (a) Hourly Investigation and Suit Fee. The Lefkowitz Firm will be entitled to compensation for services rendered from September 26, 2003 through the earlier of the settlement of the Malpractice Claims or the filing of an Answer by Macey Wilensky after the Litigation is refiled based on its standard hourly rates. The attorney who has primarily handled the Litigation is David N. Lefkowitz, Esq., whose standard hourly rate is $340.00 per hour. The hourly fee, based on the Lefkowitz Firm's standard hourly rates, will be allowed as a Chapter 7 administrative claim, pursuant to 11 U.S.C. Secs. 330 and 331. (b) Contingency Litigation Fee. In addition to the Hourly Investigation and Suit Fee, in the event that the Malpractice claims are not settled prior to the filing of an Answer by Macey Wilensky, The Lefkowitz Firm will also be entitled to a 40% contingency fee based on any gross recoveries. All amounts payable with regard to the fees will be payable only from the total amounts recovered from prosecution of the Malpractice Claims. (c) Costs and Expenses. The estate will pay all of Lefkowitz's costs and expenses as they are incurred. Gregory D. Ellis, Esq., and Robert B. Campos, Esq., at Lamberth, Cifelli, Stokes & Stout, P.A., represent the Chapter 7 Trustee. Leisure Time Casinos & Resorts, Inc., developed, manufactured and sold video gaming machine. The Company's Pot O Gold video gaming machine featured poker, blackjack, keno, slots and bingo. LEVI INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Levi Industrial Group, Inc. dba Levi Tool & Mold Corporation 122 Continuum Drive Fletcher North Carolina 28732 Bankruptcy Case No.: 04-11032 Type of Business: The Debtor manufactures steel fabrications, assemblies, tools, signs, fixtures, small and large capacity. See http://www.levitool.com/ Chapter 11 Petition Date: August 25, 2004 Court: Western District of North Carolina (Asheville) Judge: George R. Hodges Debtor's Counsel: David G. Gray, Esq. Westall, Gray, Connolly & Davis, P.A. 81 Central Avenue Asheville, NC 28801 Tel: 828-254-6315 Total Assets: $1,237,694 Total Debts: $1,570,885 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Volvo Construction Company $15,253 BB&T Visa $12,652 Cargotainer $10,962 Alston & Bird $9,580 IBE-USA $9,000 S & J Machine Corporation $8,099 Springs, Inc. $7,693 Western Machine Mgt. Inc. $7,470 Wirtz Wire EDM, Inc. $7,455 Siskin Steel $7,157 Motion Industries, Inc. $6,782 Thomas Regional Directory $6,238 Shoptech Industrial Software $5,260 Van Winkle Law Firm $4,885 MSC Industrial Supply $4,797 Southern Copper & Supply Co. $4,111 Benco Steel, Inc. $3,893 Blue Ridge Bearing & P.T. $3,856 Linquist Steel $3,730 Blue Ridge Plating Co., Inc. $3,343 LOMA COMPANY: Taps Two Firms as Bankruptcy Counsel -------------------------------------------------- The Loma Company, LLC, asks the U.S. Bankruptcy Court for the Western District of Louisiana for permission to employ John Haas Weinstein APLC and Young, Hoychick, and Aguillard as its bankruptcy attorneys. John Weinstein, Esq., and Tom St. Germain, Esq., are associated with John Haas Weinstein and H. Kent Aguillard, Esq., is associated with Young Hoychick. The attorneys will: a) provide the Debtor legal advice with respect to its powers and duties as a debtor-in-possession and in the continued operation of its business and management of its estate; b) perform all legal services for the debtor-in-possession which may be necessary in connection with this case. Each firm received a $15,000 retainer from the Debtor. The attorneys will be paid an hourly rate of $225 for their postpetition services. The Debtor explains that the three attorneys will be given separate assignments unless a task is complicated or requires more than one professional. The three lawyers assure the Court they hold or represent no interest adverse to the Debtor. Headquartered in Carencro, Louisiana, The Loma Company, filed for a chapter 11 protection on August 11, 2004 (Bankr. W.D. La. Case No. 04-51957). When the Company filed for protection, it listed $8,946,703 in total assets and $19,842,342 in total debts. MAILKEY CORP: Former Accountants Express Going Concern Doubt ------------------------------------------------------------ On July 6, 2004, the Board of Directors of MailKey Corporation dismissed Spicer, Jeffries & Co., LLP as the Company's independent accountant. Spicer Jeffries' report regarding the Company's financial statements for the fiscal year ended March 31, 2003 (Spicer Jeffries did not conduct an audit of the Company's financial statements for the fiscal year ended March 31, 2004) did not contain any adverse opinion or disclaimer of opinion and were not modified as to uncertainty, audit scope or accounting principles, except that such report was modified to express substantial doubt about the Company's ability to continue as a going concern. On July 6, 2004, the Board of Directors of the Company engaged L J Soldinger Associates, LLC as its independent accountant. MARKLAND TECH: Wolf & Co. Replaces Marcum as Accountants -------------------------------------------------------- On July 7, 2004, Markland Technologies Inc.'s Board of Directors determined not to retain Marcum & Kliegman LLP as the independent registered public accounting firm for the Company. The audit reports of Marcum & Kliegman LLP on the Company's consolidated financial statement for fiscal year ended June 30, 2003 and during the subsequent interim period through July 7, 2004 included an explanatory paragraph wherein Marcum & Kliegman LLP expressed substantial doubt about Markland's ability to continue as a going concern. On July 7, 2004, the Company engaged Wolf & Company, P.C., an independent registered public accounting firm. MASTR: Fitch Assigns Low-B Ratings to Privately Offered Classes --------------------------------------------------------------- MASTR Adjustable-Rate Mortgage Trust, series 2004-8, is rated by Fitch Ratings as follows: -- $413,500,000 classes 1-A-1, 2-A-1, 3-A-1, 4-A-1, 5-A-1, 6-A-1, 7-A-1, 8-A-1, 8-A-X, A-LR and A-R senior certificates 'AAA'; -- $10,751,000 class B-1 'AA'; -- $4,388,000 class B-2 'A'; -- $3,511,000 class B-3 'BBB'; -- $2,633,000 privately offered class B-4 'BB'; -- $1,974,000 privately offered class B-5 'B'. The 'AAA' rating on the senior certificates reflects the 5.75% subordination provided by the 2.45% class B-1, 1% class B-2, 0.80% class B-3, 0.60% privately offered class B-4, 0.45% privately offered class B-5 and 0.45% privately offered class B-6 certificates. The ratings on the class B-1, B-2, B-3, B-4 and B-5 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 also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Wells Fargo Bank Minnesota, N.A. (rated 'RMS1' by Fitch). The mortgage loans are separated into eight cross-collateralized mortgage loan groups. Each group's senior certificates will receive interest and principal from its respective mortgage loan group. In certain very limited circumstances when a pool experiences either rapid prepayments or disproportionately high realized losses, principal and interest collected from the other pools may be applied to pay principal or interest, or both, to the senior certificates of the pool that is experiencing such conditions. The subordinate certificates will support all eight groups and will receive interest and/or principal from available funds collected in the aggregate from all mortgage pools. The eight groups in aggregate contain 1387 conventional, fully amortizing 30-year short term and hybrid adjustable-rate mortgage loans secured by first liens on one to four-family residential properties with an aggregate scheduled principal balance of $438,815,757. The average unpaid principal balance of the aggregate pool as of the cut-off date (Aug. 1, 2004) is $316,378. The weighted average original loan-to-value ratio -- LTV -- is 73.91%. The weighted average credit score of the borrowers is 719. Approximately 42.10% of the pool was originated under a reduced (non Full/Alternative) documentation program. Investor properties comprise 7.20% of the loans. The weighted average mortgage interest rate is 4.895% and the weighted average remaining term to maturity is 358 months. The states that represent the largest portion of the aggregate mortgage loans are: * California (41.94%), * Georgia (8.91%), * Virginia (7.18%). All other states represent less than 5% of the pool balance as of the cut-off date. 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, please 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/ MASTR, a special purpose corporation, deposited the loans into the trust, which issued the certificates. JPMorgan Chase Bank will act as trustee. For federal income tax purposes, elections will be made to treat the trust fund as multiple real estate mortgage investment conduits. N-VIRO INT'L: Chancery Court Sets Oct. 14 for Settlement Hearing ---------------------------------------------------------------- N-Viro International Corp. (OTC Bulletin Board: NVIC.OB) has been notified by the Delaware Chancery Court on August 25, 2004 that a date of October 14, 2004 has been set to hold a hearing on the Company's proposed settlement of a derivative action filed June 11, 2003 by Strategic Asset Management, Inc., and to enter judgment on the settlement terms. A Notice of Settlement Hearing and the Scheduling Order will be mailed within seven days to all stockholders of record on August 25, 2004. N-Viro International Corporation develops and licenses its technology to municipalities and private companies. N-Viro's patented processes use lime and/or mineral-rich, combustion byproducts to treat, pasteurize, immobilize and convert wastewater sludge and other bio-organic wastes into biomineral agricultural and soil-enrichment products with real market value. More information about N-Viro International can be obtained by contacting the office or on the Internet at http://www.nviro.com/ or by e-mail inquiry to info@nviro.com * * * In its Form 10-QSB for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commmission, N-Viro International Corporation reports: "The Company has in the past sustained operating and net losses. In addition, the Company has used substantial amounts of working capital in its operations which has reduced the Company's iquidity to a low level. At June 30, 2004, current liabilities exceed current assets by $981,745. These matters raise substantial doubt about the Company's ability to continue as a going concern." NATIONAL CENTURY: Deloitte Asks Court to Quash Rule 2004 Subpoena ----------------------------------------------------------------- Deloitte & Touche, LLP, asks the U.S. Bankruptcy Court for the Southern District of Ohio to quash the Rule 2004 subpoena of Unencumbered Asset Trust, the successor-in-interest to certain rights and assets of National Century Financial Enterprises, Inc., and its debtor-affiliates, for the oral examination of a Civil Rule 30(b)(6) corporate representative of Deloitte. Robert J. Sidman, Esq., at Vorys, Sater, Seymour & Pease, LLP, in Columbus, Ohio, relates that Gibbs & Bruns, LLP, represents certain plaintiffs who allegedly own $1.6 billion in outstanding notes issued by National Century Financial Enterprises' affiliates -- the Arizona Noteholders. The Arizona Noteholders have filed three lawsuits that are now consolidated with several other lawsuits in a multidistrict litigation proceeding pending before Judge Graham in the U.S. District Court for the Southern District of Ohio. The Judicial Panel on the MDL decided to consolidate the Arizona Noteholders and other NCFE-related cases into an MDL proceeding to "eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel, and the judiciary." Judge Graham has stayed all substantive discovery in the MDL pending resolution of the motions to dismiss. Although it has been unable to engage in discovery in the MDL proceedings, Mr. Sidman relates that Gibbs & Bruns has taken every opportunity to do so under the auspices of Rule 2004 of the Federal Rules of Bankruptcy Procedure. Gibbs & Bruns sought documents from 38 individuals and entities, including Deloitte. Pursuant to Bankruptcy Rule 2004 and the terms of the Agreed Protective Order, Deloitte produced over 30,000 pages of documents to Gibbs & Bruns in January 2004. Six days after the Court authorized the Rule 2004 depositions, Gibbs & Bruns did exactly what Deloitte and the other discovery targets predicted it would do with Rule 2004 discovery. On May 10, 2004, Gibbs & Bruns used its Rule 2004 discovery to seek to amend the Arizona Noteholders' complaint in the MDL proceeding. On August 2, 2004, three months after the Court authorized Gibbs & Bruns to take the deposition of Deloitte, Gibbs & Bruns served Deloitte with a subpoena. Far from "reasonable and focused," the Subpoena includes a designation of 28 overbroad topics, not including many sub-topics. On August 10, 2004, Deloitte sent a letter to Gibbs & Bruns suggesting a more efficient way to approach the Trust's deposition. Deloitte, like other discovery targets, suggested that the deposition be coordinated with deposition discovery in the MDL proceeding. Deloitte's letter further requested that G&B narrow the scope of the Subpoena. Finally, Deloitte offered to enter into a tolling agreement with the Trust as an attempt to alleviate any purported timing concerns that the Trust would face if its deposition of Deloitte were delayed and consolidated with discovery in the MDL proceeding. Without explanation, Gibbs & Bruns rejected Deloitte's proposal. Mr. Sidman asserts that the Subpoena should be quashed because: A. The Subpoena is nothing more than a veiled attempt to obtain further support for claims filed by Noteholders in the MDL litigation where discovery is currently stayed. Gibbs & Bruns has repeatedly denied to the Court that it is using Rule 2004 discovery for this purpose. Its subsequent conduct, however, demonstrates otherwise. Gibbs & Bruns has gone so far as to deliberately violate an Agreed Protective Order that prohibits the use of Deloitte's documents outside of the Debtors' bankruptcy proceedings. B. If the Trust is permitted to pursue the post-confirmation Rule 2004 examination now, duplicative, inefficient, and unfair discovery of Deloitte will result. Duplicative discovery is inevitable because the proposed 28 designated topics are based on the same allegations made by the Arizona Noteholders in the MDL proceeding. The subject matter of every topic can be traced to the complaints already filed by Gibbs & Bruns on behalf of the Arizona Noteholders in the MDL proceeding. C. The Trust has no legitimate need for the Rule 2004 deposition because the confirmed Plan already identifies the Trust's potential cause of action against Deloitte, and any claims not identified are barred under Browning v. Levy, 283 F.3d 761, 774-75 (6th Cir. 2002). Even if the Trust has a legitimate need for the deposition, it will suffer no prejudice if that deposition is consolidated with depositions in the MDL. If the Court is not inclined to quash the Trust's overbroad Subpoena in its entirety, at a minimum, Deloitte asks the Court to require the Trust to narrow the scope of the Subpoena so that it comports with Rule 30(b)(6) of the Federal Rules of Civil Procedure and the Court's previous directive that the subpoena be "reasonable and focused." 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. (National Century Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEWFIELD EXPLORATION: Completes $575M Inland Resources Acquisition ------------------------------------------------------------------ Newfield Exploration Company (NYSE: NFX) closed its previously announced $575 million acquisition of Inland Resources. The acquisition establishes a new Rocky Mountain focus area for Newfield. The purchase price was funded through recent concurrent offerings of Newfield common stock and debt. Newfield issued 5.4 million shares at a price to the public of $52.85 per share and $325 million of 6-5/8% senior subordinated notes due September 1, 2014. Inland Resources is a privately held company based in Denver, Colorado. Inland's major asset is the 110,000-acre Monument Butte Field, located in the Uinta Basin of Northeast Utah. Inland operates the Monument Butte Field and has an average working interest of about 80%. Newfield estimates that the giant Monument Butte Field has oil in place of more than two billion barrels. Through this transaction, Newfield acquired an internally estimated 326 billion cubic feet equivalent of proved reserves and 439 Bcfe of probable reserves. The reserves are 85% oil and are 70% proved undeveloped. Current net production is approximately 7,000 barrels of oil equivalent per day. Newfield expects to double production by the end of 2006. Production is expected to be 10,500 BOEPD in 2005 and 14,000 BOEPD in 2006. Three rigs are currently drilling in the field. Newfield's proved reserves are now approximately 1.7 trillion cubic feet equivalent, of which 77% are proved developed and 70% are natural gas. The transaction lengthens Newfield's reserve life by nearly 20% to approximately seven years. In conjunction with the acquisition of Inland Resources, Newfield has hedged a significant portion of the expected crude production from 2005 through 2010. The table below details the new hedges that have been added to date and volume weighted average prices of the positions. Newfield continues to hedge production associated with this transaction. A complete listing of all of Newfield's hedges can be found in @NFX, an electronic publication on Newfield's web site http://www.newfld.com/ Swaps 3-Way Collars Volume Short Long Short (BOPD) Fixed Floor Floor Ceiling ------ ----- ----- ----- ------- 2005 Swaps 3,000 $39.00 3-Way Collars 1,000 $30.00 $36.00 $49.00 Total Hedged 4,000 2006 Swaps 2,000 $37.00 3-Way Collars 2,750 $30.00 $35.27 $51.73 Total Hedged 4,750 2007 3-Way Collars 7,000 $26.29 $32.86 $50.97 Total Hedged 7,000 2008 - 2010 2008 3-Way Collars 7,000 $26.29 $32.86 $50.38 2009 3-Way Collars 6,000 $26.33 $32.83 $50.93 2010 3-Way Collars 4,000 $25.75 $32.50 $50.25 About the Company Newfield Exploration Company is an independent crude oil and natural gas exploration and production company. The Company relies on a proven growth strategy that includes balancing acquisitions with drill bit opportunities. Newfield's areas of operation include the Gulf of Mexico, the U.S. onshore Gulf Coast, the Anadarko and Arkoma Basins, the Uinta Basin of the Rocky Mountains and select international ventures. * * * As reported in the Troubled Company Reporter on August 12, 2004, Standard & Poor's Ratings Services affirmed its ratings on Newfield Exploration Co. (BB+/Stable/--) and assigned its 'BB-' subordinated rating to Newfield's proposed $300 million subordinated notes due 2014. The rating actions follow a review of the recently announced acquisition of Inland Resources, Inc., The outlook remains stable. Houston, Texas-based Newfield has roughly $1.1 billion of debt, pro forma its recent acquisition. "Standard & Poor's views the acquisition of Inland Resources as neutral to Newfield's credit quality," said Standard & Poor's credit analyst Paul B. Harvey. "The transaction will strengthen Newfield's business position by providing operational diversification and extending Newfield's reserve life to about seven years from a very short five years," he continued. NEXPAK CORPORATION: Pays Critical Vendors' Prepetition Claims ------------------------------------------------------------- The Honorable Judge Russ Kendig gave his stamp of approval to NexPak Corporation and its debtor-affiliates' request to pay their critical vendors' prepetition claims. Ryan T. Routh, Esq., at Jones Day, stresses the need to preserve the Debtors' business relationships and avoid disruptions in operations that would impair their ability to reorganize and thereby undermine the value available for all stakeholders. Without identifying any specific Critical Vendor, the Debtors tell the Court they intend to pay: $365,000 to Single Source Vendor Claims which the Debtors are highly dependent on these vendors to provide raw materials, components, machinery and equipment; $400,000 to providers of finished goods which are made to meet the Company's exact specifications; $210,000 for "AMARAY" license fees in the Company's DVD and video game cases; and $260,000 to Freight and Warehouse providers; $5,000 for Repair Claims; and $100,000 for Custom Claims. ---------- $1,340,000 Total Critical Vendor Payments ========== Mr. Routh says that NexPak has no viable alternatives to obtain substitute goods or services from other suppliers. The Debtors believe that without payment, the Critical Vendors would stop shipping for a period of time, causing production delays that would negatively affect the Debtors' business. Mr. Routh adds that failure to pay the vendors would create a long-term adverse impact and might cause these vendors not to provide high levels of service to the Debtor, including regular accommodations to address pressing, unscheduled production demands, regular machinery and equipment repairs and services. Headquartered in Uniontown, Ohio, NexPak Corporation, manufactures and supplies standard and custom packaging for DVD, CD, video, audio, and professional media formats. The Company filed for chapter 11 protection on July 18, 2004 (Bankr. N.D. Ohio Case No. 04-63816). Ryan Routh, Esq., and Shana F. Klein, Esq., at Jones Day represent the Company in its restructuring efforts. When the Company filed for protection from its creditors it reported approximately $101 million in total assets and total debts approximating $209 million. NORTEK INC: Calls Sr. Floating Rate Notes Due 2010 for Redemption ----------------------------------------------------------------- Nortek, Inc., a leading international designer, manufacturer and marketer of high-quality brand name building products, has called for redemption all of its outstanding Senior Floating Rate Notes due 2010. The redemption date will be September 1, 2004. The redemption price for the Floating Rate Notes will be 103.00% of the principal amount thereof plus accrued and unpaid interest to, but not including, the Redemption Date. Interest will cease to accrue on the Redemption Date. U.S. Bank National Association is the paying agent for the redemption. Nortek, Inc., a wholly owned subsidiary of Nortek Holdings, Inc., is a leading international manufacturer and distributor of high- quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets. Nortek offers a broad array of products for improving the environments where people live and work. Its products currently include: range hoods and other spot ventilation products; heating and air conditioning systems; indoor air quality systems; and specialty electronic products. * * * As reported in the Troubled Company Reporter on August 4, 2004, Standard & Poor's Ratings Services affirmed the 'B+' corporate credit ratings of Providence, Rhode Island-based Nortek Holdings, Inc., and its Nortek, Inc., subsidiary, and removed the ratings from CreditWatch where they were placed in June 2004. The outlook is negative. The affirmation anticipates that the substantially increased debt load as a result of the sale of Nortek Holdings to Thomas H. Lee Partners L.P. will be steadily reduced during the next several years through discretionary cash flows. "Leverage measures are stretched for the current ratings and contain little flexibility for any slowdown in debt reduction during the next several years," said Standard & Poor's credit analyst Wesley E. Chinn. Standard & Poor's also assigned its 'B+' bank loan rating and its recovery rating of '3' to Nortek Inc.'s $100 million revolving credit facility due 2010 and $700 million amortizing term loan due 2011, based on preliminary terms and conditions. The '3' recovery rating indicates that bank lenders can expect a meaningful (50%- 80%) recovery of principal in the event of a default. A 'B-' rating was also assigned to a planned offering of $625 million of senior subordinated notes due 2014 to be issued under rule 144A with registration rights. Proceeds from the term loan and subordinated notes issuance and cash on hand will be used to help finance the acquisition consideration and redemption of all existing rated debt issues. Following the acquisition of Nortek Holdings by THL, Nortek Holdings will be merged into Nortek Inc., which will become the borrower under the secured credit facilities and senior subordinated notes. The ratings reflect the consolidated entity's competitive, cyclical markets, the niche characteristic of certain products, and poor leverage measures due to the very aggressive use of debt. This is partially mitigated by a somewhat diversified portfolio of building products (annual sales of roughly $1.7 billion) with significant market shares, relatively stable cash flows, and a manageable debt maturity schedule. Although debt was reduced earlier this year using $450 million of after-tax proceeds from the February 2004 sale of the windows, doors, and siding business, the divestiture slightly diminished the overall business profile and reduced the earnings base. NORTEK INC: Accepts Tendered 10% & 9.875% Notes for Purchase ------------------------------------------------------------ Nortek Holdings has accepted for purchase all of its 10% Senior Discount Notes due 2011 that were validly tendered and not withdrawn pursuant to its previously announced tender offer to purchase for cash all of its outstanding Discount Notes. The Company's wholly-owned subsidiary, Nortek, Inc., has accepted for purchase all of its 9.875% Senior Subordinated Notes due June 15, 2011 and Senior Floating Rate Notes due 2010 that were validly tendered and not withdrawn pursuant to its previously announced tender offers to purchase for cash all of its outstanding 9.875% Notes and Floating Rate Notes. The tender offers expired at 9:00 a.m., New York City time, Friday. According to U.S. Bank National Association, the depositary for the tender offers, all of the outstanding Discount Notes ($515.0 million in aggregate principal amount at maturity), approximately $240.0 million in aggregate principal amount of the 9.875% Notes, and $199.0 million in aggregate principal amount of the Floating Rate Notes were validly tendered and not withdrawn in the tender offers. Following the purchase by Nortek Holdings and Nortek of the notes accepted in the tender offers, approximately $10.0 million in aggregate principal amount of the 9.875% Notes and $1.0 million in aggregate principal amount of the Floating Rate Notes remain outstanding. Holders of Discount Notes who tendered their notes in the tender offers received $842.44 per $1,000 principal amount at maturity, of which $20.00 represents a consent payment, for such notes. The aggregate cost to purchase the Discount Notes tendered in the tender offers was approximately $433.9 million. Holders of 9.875% Notes who tendered their notes prior to the consent expiration date received $1,163.59 per $1,000 principal amount for such notes, plus accrued and unpaid interest to, but not including, Friday's date. Holders who tendered 9.875% Notes after the consent expiration date, received $1,143.59 per $1,000 principal amount at maturity for such notes, plus accrued and unpaid interest to, but not including, Friday's date. The aggregate cost to purchase the 9.875% Notes tendered in the tender offers was approximately $283.9 million. Holders of Floating Rate Notes who tendered their notes in the tender offers received $1,031.25 per $1,000 principal amount, of which $20.00 represents a consent payment, for such notes, plus accrued and unpaid interest to, but not including, Friday's date. The aggregate cost to purchase the Floating Rate Notes tendered in the tender offers was approximately $206.8 million. UBS Securities LLC and Credit Suisse First Boston LLC acted as dealer managers and solicitation agents, MacKenzie Partners, Inc. acted as the information agent and U.S. National Bank acted as the depositary for the tender offers and the related consent solicitations. UBS Securities LLC and Credit Suisse First Boston LLC can be contacted at (888) 722-9555 extension 4210 and (800) 820-1653, respectively. The information agent can be contacted at (800) 322-2885. Nortek, Inc., a wholly owned subsidiary of Nortek Holdings, Inc., is a leading international manufacturer and distributor of high- quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets. Nortek offers a broad array of products for improving the environments where people live and work. Its products currently include: range hoods and other spot ventilation products; heating and air conditioning systems; indoor air quality systems; and specialty electronic products. * * * As reported in the Troubled Company Reporter on August 4, 2004, Standard & Poor's Ratings Services affirmed the 'B+' corporate credit ratings of Providence, Rhode Island-based Nortek Holdings, Inc., and its Nortek, Inc., subsidiary, and removed the ratings from CreditWatch where they were placed in June 2004. The outlook is negative. The affirmation anticipates that the substantially increased debt load as a result of the sale of Nortek Holdings to Thomas H. Lee Partners L.P. will be steadily reduced during the next several years through discretionary cash flows. "Leverage measures are stretched for the current ratings and contain little flexibility for any slowdown in debt reduction during the next several years," said Standard & Poor's credit analyst Wesley E. Chinn. Standard & Poor's also assigned its 'B+' bank loan rating and its recovery rating of '3' to Nortek Inc.'s $100 million revolving credit facility due 2010 and $700 million amortizing term loan due 2011, based on preliminary terms and conditions. The '3' recovery rating indicates that bank lenders can expect a meaningful (50%- 80%) recovery of principal in the event of a default. A 'B-' rating was also assigned to a planned offering of $625 million of senior subordinated notes due 2014 to be issued under rule 144A with registration rights. Proceeds from the term loan and subordinated notes issuance and cash on hand will be used to help finance the acquisition consideration and redemption of all existing rated debt issues. Following the acquisition of Nortek Holdings by THL, Nortek Holdings will be merged into Nortek Inc., which will become the borrower under the secured credit facilities and senior subordinated notes. The ratings reflect the consolidated entity's competitive, cyclical markets, the niche characteristic of certain products, and poor leverage measures due to the very aggressive use of debt. This is partially mitigated by a somewhat diversified portfolio of building products (annual sales of roughly $1.7 billion) with significant market shares, relatively stable cash flows, and a manageable debt maturity schedule. Although debt was reduced earlier this year using $450 million of after-tax proceeds from the February 2004 sale of the windows, doors, and siding business, the divestiture slightly diminished the overall business profile and reduced the earnings base. ONLINE POWER: OPS Power LLC Completes $400,000 Asset Purchase ------------------------------------------------------------- On August 20, 2004, the United States Bankruptcy Court for the District of Colorado in the Chapter 11 case of OnLine Power Supply, Inc. approved the sale of certain of the company's assets to OPS Power LLC. The purchase price is $400,000. The company plans to convert the case to a Chapter 7 liquidation on September 30, 2004. Thereafter, the administration of the case, including the liquidation and distribution of the company's remaining assets, will be conducted by a Chapter 7 trustee. At the present time, the company does not expect there will be any distributions to the company's shareholders. Headquartered in Centennial, Colorado, OnLine Power Supply, Inc. - - http://www.powersupply.com/-- designs and manufactures high efficiency, compact AC to DC power supplies for servers, industrial, medical, and telecom equipment. The Company filed for chapter 11 protection (Bankr. D. Colo. Case No. 04-20467) on May 14, 2004. John B. Wasserman, Esq., and Bonnie Bell Bond, Esq., at Sender & Wasserman, P.C., represent the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $562,279 in assets and $2,484,806 in liabilities. PARMALAT: Has Until Thursday to File Plan & Disclosure Statement ---------------------------------------------------------------- In a stipulation approved by the U.S. Bankruptcy Court for the Southern District of New York, Parmalat USA Corporation and its United States debtor-affiliates and subsidiaries, General Electric Capital Corporation as agent and lender, Citibank, N.A., and the Official Committee of Unsecured Creditors agree to modify the termination provisions under the DIP Financing Agreement and the Final DIP Order. The Lenders agree to allow the Debtors to file a plan of reorganization and the accompanying disclosure statement, on or before September 2, 2004. The Debtors' failure to comply will constitute a Termination Event under the DIP Financing Agreement. The parties also agree that all obligations and commitments of Citibank, GE Capital and the DIP Lenders, and the U.S. Debtors' authorization to use the Cash Collateral, will terminate at the earliest of: (i) September 2, 2004; (ii) the effective date of any reorganization plan; (iii) the entry of a Court order converting any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code or dismissing any of the cases; or (iv) the termination of the DIP Financing Agreement or the Debtors' Receivables Purchase Agreement with Citibank. The Final DIP Order remains in full force and effect in all other respects. 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) PEABODY LANDSCAPE: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Peabody Landscape Construction, Inc. dba Peabody Landscape Group dba Peabody Landscape Management 2253 Dublin Road Columbus, Ohio 43228 Bankruptcy Case No.: 04-63565 Type of Business: The Debtor is primarily known as a design-build landscaping firm with five divisions: commercial landscape construction, residential design build, commercial site management, residential gardening, and irrigation & lighting services. Chapter 11 Petition Date: August 27, 2004 Court: Southern District of Ohio (Columbus) Judge: Barbara J. Sellers Debtor's Counsel: Thomas R Allen, Esq. Allen, Kuehnle & Stovall LLP 21 West Broad Street, Suite 400 Columbus, Ohio 43215-4100 Tel: (614) 221-8500 Fax: (614) 221-5988 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service $1,854,525 District Director-Insolvency Section PO Box 1579 Cincinnati, Ohio 45201 State of Ohio $687,205 Department of Taxation PO Box 347 Columbus, Ohio 43216 The Huntington National Bank $100,000 Wellnitz Landscape Products $62,763 Century Equipment $55,808 Your Lawn, Inc. $32,996 Thompson Hine LLP $28,602 Oberfield's, Inc. $28,428 Beach Construction $27,563 American Express $25,600 Acorn Farms $24,697 Precision Mulching, Inc. $24,690 Earhart Petroleum Inc. $22,804 The Huntington National Bank $15,031 Grange Mutual Casualty Company $14,968 Foertmeyer & Sons Greenhouse $13,341 David Carothers $12,925 Coffman Stone $12,835 Hoffman's Power Equipment $12,736 Lesco Service Center # 431 $12,371 PEGASUS SATTELITE: Asks Court to Okay Key Employee Retention Plan ----------------------------------------------------------------- Almost immediately after Pegasus Satellite Communications, Inc. and its debtor-affiliates filed their request to adopt the Initial Key Employee Retention Plan, the Debtors and the Official Committee of Unsecured Creditors began negotiations and were able to reach an agreement on a scaled-back version of the KERP that: (i) covered only the Junior Management for retention award and severance components; and (ii) reduced the amounts payable under the monthly award component. The terms of the agreement were reflected in a July 9, 2004 Court Order. The final hearing on the Initial KERP Motion was adjourned several times while the Debtors continued their negotiations with the Creditors Committee and other parties-in-interest regarding the KERP's remaining components for the Junior Management, as well as all KERP components for the Senior Management that were not addressed in the First KERP Order. In connection with the Debtors' global settlement with DIRECTV, Inc., and the National Rural Telecommunications Cooperative, the Debtors and Committee were able to reach agreement on the KERP with respect to: (1) the Junior Management; and (2) seven of the nine members of Senior Management. The agreement is reflected in an August 3, 2004 Court Order. The remaining components of the Initial KERP Motion that have not been addressed in either the First KERP Order or the Second KERP Order relate to: (1) Marshall W. Pagon, Chairman and CEO of Pegasus Communications Corporation and its subsidiaries; and (2) Ted S. Lodge, President and Chief Operating Officer of Pegasus Communications Corporation and its subsidiaries. By this motion, the Debtors seek the Court's authority to implement and make payments as appropriate under a Supplemental Retention Plan solely with respect to Mr. Lodge, pursuant to Sections 363(b) and 105(a) of the Bankruptcy Code. Mr. Lodge is currently the President, Chief Operating Officer and Counsel for each of the Debtors. Mr. Lodge is responsible for all of the Debtors' operations, including satellite television and broadcast television. Mr. Lodge previously served as Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary of Pegasus Satellite Communications from 1996 to December 2001. In addition, Mr. Lodge serves as a Director of Debtors PSC, Pegasus Media & Communications, Inc., Argos Support Services Company, and Portland Broadcasting, Inc. Mr. Lodge is employed pursuant to the terms of an Executive Employment Agreement dated July 21, 2002. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, tells the Court that Mr. Lodge's experience and extensive knowledge of the Debtors were a critical component to the Debtors' ability to successfully negotiate the Global Settlement, and are vital to the consummation of the sale of the Satellite Assets, including the transition of services and subscribers to DIRECTV, and the consummation of a Chapter 11 plan or plans for the Debtors. The Supplemental Retention Plan is designed to induce Mr. Lodge to continue in his current position with the Debtors through the consummation of a Chapter 11 plan or plans, and reward Mr. Lodge for his successful efforts in bringing significant value to the Debtors' estates through negotiation, approval and consummation of the Global Settlement, Asset Purchase Agreement and the Cooperation Agreement. The Supplemental Retention Plan consists of three components: (a) A $1,000,000 payment payable on the closing of the sale of the Satellite Assets; (b) A $400,000 payment payable on the consummation of a Chapter 11 plan or plans for the Debtors; and (c) Family coverage benefits under the healthcare continuation coverage in accordance with the requirements of Part 6 of Title I of the Employee Retirement Income Security Act and Section 4980B of the Internal Revenue Code. Each of the three components was agreed to in principle by the Creditors Committee on July 30, 2004, in connection with the Global Settlement. The Debtors propose to pay the Closing Payment and the Plan Payment on an administrative expense basis. The Debtors will pay for Mr. Lodge's Consolidated Omnibus Budget Reduction Act Benefits, if necessary, up to a maximum amount of $21,600. The payments would be fully allocated to the Debtors. The Closing Payment and the Plan Payment would constitute offsets against any payments that Mr. Lodge may be allowed under the Employment Agreement. The Debtors and the Committee believe that the costs associated with the implementation of the Supplemental Retention Plan for Mr. Lodge are more than justified by the benefits that the Debtors have and will realize for their estates and all parties- in-interest. By implementing a retention plan for Mr. Lodge, the Debtors believe that their Chapter 11 cases will have the best possible chance to reach a successful resolution and preserve and maximize the value of their business. The Supplemental Retention Plan enables the Debtors to retain the knowledge, experience and loyalty of Mr. Lodge, who is crucial to the task at hand. 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) POCONO INCREDIBLE: First Creditors' Meeting Slated for Sept. 24 --------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of Pocono Incredible, Inn, Inc.'s creditors at 1:00 p.m., on September 24, 2004, at 181 Church Street in Poughkeepsie, New York. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Fort Montgomery, New York, Pocono Incredible, operates a resort on a 60 acres of naturally wooded countryside beside Lake Tammany. The Company filed for chapter 11 protection on August 23, 2004 (Bankr. S.D. NY. Case No. 04-37012). John A. Poka, Esq., of Milford, Pennsylvania represents the Company in its restructuring efforts. When the Debtor filed for protection, it listed more than $100 million in estimated assets and debts. POTLATCH CORP: Inks $125 Million Credit Facility with BofA ---------------------------------------------------------- On June 29, 2004, Potlatch Corporation entered into a new unsecured bank credit facility with Bank of America, N.A., as Administrative Agent, and several lenders party thereto, which replaced a bank credit facility that expired by its terms on June 28, 2004. The new credit facility provides a revolving line of credit of up to $125 million, including a $35 million subfacility for letters of credit and a $10 million subfacility for swing line loans. Usage under either or both subfacilities reduces availability under the revolving line of credit. Although no borrowings have been made under the new credit facility, the letter of credit subfacility is being used to support several outstanding letters of credit. Potlatch Corporation is a mid-sized forest products company. It owns and operates about 1.5 million acres of timberland in Idaho, Arkansas, and Minnesota. Its timberlands provide the majority of raw materials for the company's wood products including strand board, plywood, particleboard, and lumber. Potlatch also makes coated printing paper, bleached kraft pulp, paperboard, and tissues and is a leading producer of retail private-label and store-brand paper products. The company is also developing a 22,000-acre hybrid poplar (fast growing trees) farm in Oregon. * * * In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commission, Potlatch Corp. reports: "As of June 30, 2004, Standard & Poor's Ratings Services rated our senior unsecured debt at BB+, with a stable outlook, and our senior secured bank loan rating at BBB-. The ratings have remained unchanged since January 30, 2003. Since the first quarter of 2003, Fitch, Inc. has rated our senior unsecured debt at BB+ and our senior secured bank loan rating at BBB-. In March 2004, Fitch reaffirmed our ratings, but upgraded its outlook on the company from negative to stable. Moody's Investors Service Inc.'s rating of our debt is currently Baa3 with a negative outlook. " POTLATCH CORPORATION: Fitch's Double-B Ratings on Watch Evolving ---------------------------------------------------------------- Fitch Ratings placed Potlatch Corp.'s ratings on Watch Evolving. Fitch rates Potlatch's senior unsecured debt 'BB+' and its senior subordinated notes 'BB'. The commercial paper ratings and senior secured ratings are withdrawn as the company no longer uses commercial paper and has renegotiated its principal bank facility, which is now unsecured. Potlatch intends to sell its three oriented strand board plants to Ainsworth Lumber, Co., for approximately $458 million. On closing, the company's cash balance will increase to something in excess of its outstanding debt ($618 million at last quarter's end). It also means that Potlatch will be losing a major portion of its earnings stream, albeit a volatile one. Of the remaining business lines, tissue products have been in the red but should benefit from recent price increases, as well as pulp and paperboard, which has nominally been in the black. Potlatch's timberlands (1.5 million acres) will be the company's main earning's driver with wood products reduced to around 800 million board feet or so of lumber per year and a small amount of plywood and particleboard. With this business configuration and recent history, Potlatch is at greater risk of losing money in the short term. Yet to be seen is the strategic direction the company will take. Prospectively, noteholders could benefit if cash is isolated or dedicated to debt repayment. Potlatch will be highly liquid between its cash balance and the market value of its timberlands (which also exceed the company's outstanding debt). However, the financial risk from Potlatch's ongoing operations needs to be considered, if indeed the company elects to hold onto these assets. Reinvestment of sales proceeds also cannot be wholly discounted. Potlatch's ratings will likely remain unchanged until noteholder risk can be further defined and evaluated. RCN CORPORATION: Overview & Summary of Chapter 11 Plan ------------------------------------------------------ According to RCN Corporation's Chairman and Chief Executive Officer, David McCourt, the primary purpose of the Chapter 11 Plan is to effectuate a restructuring of the Debtors' capital structure to align their capital structure with their present and future operating prospects. Presently, the funds expected to be generated by the Debtors will not be sufficient to meet their working capital, debt service and capital expenditure requirements nor satisfy their debt obligations unless the restructuring transactions contemplated by the Plan is consummated. The Restructuring will reduce significantly the principal amount of outstanding indebtedness by converting $1,200,000,000 in the aggregate principal and accrued interest amount of Senior Notes into New Common Stock of Reorganized RCN. The Debtors' bank debts will be repaid in full in cash. Their debts under the Evergreen Credit Agreement will be reinstated and modified in accordance with the provisions of a New Evergreen Credit Agreement. Debtors' Unaudited Projected Balance Sheet Assuming a September 30, 2004 Effective Date (Amounts in Thousands) Pre-Emergence Post-Emergence ------------- -------------- ASSETS Current Assets: Cash & temporary cash investments $177,643 $166,890 Escrowed cash from lender - - Accounts receivable from related parties 6,130 6,130 Accounts receivable, net 47,246 47,246 Unbilled revenues 1,032 1,032 Interest receivable 3,125 3,125 Prepayments & other current assets 18,125 18,125 Short-term restricted investments 33,000 33,000 ------------- -------------- Total current assets 286,301 275,548 Property, plant & equip, net 849,025 809,763 Investments in joint ventures 215,000 215,000 Intangibles, net 1,503 - Goodwill, net 6,130 - Deferred charges and other assets - 25,579 ------------- -------------- Total assets $1,357,959 $1,325,890 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY / (DEFICIT) Current Liabilities: Accounts payable $19,880 $19,880 Advance billings and customer deposits 22,280 22,280 Accrued expenses 17,771 17,771 Accrued interest - - Accrued cost of sales 37,935 37,935 Accrued employee compensation and related expenses 20,699 20,699 Deferred income taxes 18 18 ------------- -------------- Total current liabilities 118,584 118,584 Term Loan A 91,612 - Term Loan B 316,352 - Evergreen Facility 30,249 33,500 New Term Loan - 285,000 New Second Lien Facility - 150,000 Capital Leases 11,083 11,083 Other deferred credits 7,307 7,307 Commitments and contingencies Preferred stock, Series A 346,538 - Preferred stock, Series B 1,458,203 - Liabilities subject to compromise 1,252,524 - Total shareholders' (deficit)/ equity (2,274,492) 720,417 ------------- -------------- Total liabilities, redeemable preferred stock and shareholders' equity/(deficit) $1,357,959 $1,325,890 ============= ============== The Plan consists of separate plans of reorganization for each of these eight Debtors: * RCN Corporation, * TEC Air, Inc., * RLH Property Corporation, * RCN Finance, LLC, * Hot Spots Productions, Inc., * RCN Telecom Services of Virginia, Inc., * RCN Entertainment, Inc., and * ON TV, Inc. RCN Cable TV of Chicago, Inc., and 21st Century Telecom Services, Inc., are not included as proponents of the Plan. Both will continue as debtors-in-possession in their jointly administered Chapter 11 cases. For voting and distribution purposes, the Plan contemplates separate sub-Classes for each of the eight Debtors. Votes will be tabulated separately for each of the Debtors with respect to each Debtor's Plan. Certain unclassified Claims, including Administrative Claims, Priority Tax Claims, and certain Other Priority Claims, will receive payment in Cash either on the Distribution Date, as the claims are liquidated, or in installments over time, as permitted by the Bankruptcy Code, or as agreed with the holders of the Claims. All other Claims and all Interests are classified into separate Classes and will receive the distributions and recoveries, if any. Estimated Claim amounts are based on the Debtors' books and records as of July 31, 2004. $460,000,000 Exit Financing On or before the Effective Date, Reorganized RCN will enter into a $460,000,000 exit facility with Deutsche Bank to obtain funds necessary to make distributions under the Plan and conduct its post-reorganization businesses. The Exit Facility will consist of: (i) a senior first-lien secured credit facility; and (ii) $150,000,000 of second-lien floating rate notes. The Senior First-Lien Financing will consist of $285,000,000 of term loans and a $25,000,000 letter of credit facility. New Evergreen Credit Agreement On June 9, 2003, RCN Corporation entered into the Evergreen Credit Agreement, the net proceeds of which were to be used directly or indirectly to retire outstanding Senior Notes. Pursuant to the Plan, the Debtors propose to modify the Evergreen Credit Agreement on the Effective Date. The modifications will supersede any contrary provisions in the Evergreen Credit Agreement. The modifications will include: -- Maturity will be 7-3/4 years from the Effective Date; -- Interest will be 12.5%, payable quarterly; -- Interest will be payable in kind through maturity; -- Mandatory prepayment provisions modified to the extent necessary so that they are no more favorable to Evergreen than similar provisions in the Exit Facility; -- Obligations and liens will be subordinated to the Exit Facility obligations on terms substantially similar to those currently set forth in the Evergreen Credit Agreement; -- Representations, warranties, covenants, and events of default will be modified as necessary so that the terms of the New Evergreen Credit Agreement are no more restrictive to the Debtors and their subsidiaries than the terms of the Exit Facility; and -- Covenants will be modified to permit the incurrence of the obligations in respect of the Exit Facility. The Debtors will present the New Evergreen Credit Agreement to the Court at a later date. Issuance of New Securities Pursuant to the Plan, Reorganized RCN will issue New Common Stock and New Warrants for distribution to creditors. On the Effective Date, the certificates constituting the Existing Securities will evidence solely the right to receive the distribution of the consideration, if any, set forth under the Plan. All Interests, other than Subsidiary Common Stock Interests, are cancelled. The principal terms of the shares of New Common Stock to be issued under the Plan will be: Authorization: 100,000,000 shares Initial Issuance: 36,020,850 shares Par Value: $0.01 per share Voting Rights: One vote per share Preemptive Rights: None Dividends: Payable at the discretion of the board of directors of Reorganized RCN The principal terms of the New Warrants to be issued by Reorganized RCN under the Plan will be: Authorization: 735,119 warrants, each representing the right to purchase one share of New Common Stock, equal to 2% of the New Common Stock subject to dilution by the Management Incentive Options Total Issued: 2% of the New Common Stock Vesting: Upon Reorganized RCN attaining an enterprise valuation of $1,660,000,000 Term: Two years from the date of consummation Strike Price: $34.16 Anti-Dilution Rights: Strike price and number of shares of common stock of Reorganized RCN issuable upon exercise will be adjusted for stock splits, dividends, recapitalization and similar events. Reorganized RCN will enter into a Registration Rights Agreement with the holders of shares of 5% or more of the New Common Stock on or before the Effective Date. Pursuant to the Registration Rights Agreement, Reorganized RCN will, among other things: (a) within 90 days after the Effective Date, prepare and file, and have declared effective as soon as possible, a registration statement or registration statements under the Securities Act -- the Shelf Registration -- for the offering, on a continuous basis pursuant to Rule 415 of the Securities Act, certain shares of New Common Stock held by certain "underwriters" or "affiliates"; (b) keep the Shelf Registration effective for a period ending on the earlier of: -- the date on which all covered securities have been sold pursuant to the Shelf Registration or pursuant to Rule 144 under the Securities Act; -- except as otherwise provided in the Registration Rights Agreement, the date that is the three-year anniversary of the date on which the Shelf Registration statement is declared effective by the Securities and Exchange Commission; and -- the date when there are no remaining Registrable Securities outstanding; and (c) use its reasonable best efforts to cause the New Common Stock to be quoted in the national market system of the National Association of Securities Dealers' Automated Quotation System. Disbursing Agent A disbursing agent will be appointed to make all the required distributions under the Plan. The Disbursing Agent will make all Cash distributions from the Reorganized Debtors' available Cash. Any distribution under the Plan of property, other than Cash, will be made by the Disbursing Agent or the Indenture Trustee in accordance with the terms of the Plan. If the Disbursing Agent is an independent third party designated by Reorganized RCN, subject to approval by the Official Committee of Unsecured Creditors to serve in that capacity, the Disbursing Agent will receive, without further Bankruptcy Court approval, reasonable compensation for its services and reimbursement of reasonable out-of-pocket expenses from the Reorganized Debtors. No Disbursing Agent will be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court. If otherwise so ordered, the Reorganized Debtors will pay all costs and expenses of procuring any bond. At the close of business on the first date distributions are made to the holders of claims arising from the Debtors' Senior Notes: (a) the claims register or transfer ledgers for the Senior Notes will be closed; (b) the transfer book and records of the Senior Notes as maintained by the Indenture Trustee or its agent will be closed; and (c) any transfer of any Senior Notes Claim will be prohibited. There will be no further changes in the record holders of any securities. Reorganized RCN or the Disbursing Agent, if any, will have no obligation to recognize any transfer of any securities occurring after the Senior Notes Distribution Date and will be entitled, instead, to recognize and deal for all purposes under the Plan with only those holders of record stated on the transfer ledgers or the claims register as of the close of business on the Senior Notes Distribution Date. The Disbursing Agent will, to the extent applicable, comply with all tax withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all distributions will be subject to any withholding and reporting requirements. The Disbursing Agent will be authorized to take all actions necessary or appropriate to comply with the withholding and reporting requirements. Continued Corporate Existence Reorganized RCN and each of the Reorganized Debtors will continue to exist after the Effective Date as separate corporate entities. On the Effective Date, the certificate of incorporation and by- laws of each Reorganized Debtor will be amended as necessary to satisfy the provisions of the Plan and the Bankruptcy Code. The Amendment will include, among other things, a provision prohibiting the issuance of non-voting equity securities. The Reorganized RCN Certificate of Incorporation and By-laws will include a provision authorizing the issuance of the New Common Stock. Revesting of Assets The property of each Debtor's Estate, together with any property of each Debtor that is not property of its Estate and that is not specifically disposed of pursuant to the Plan, will revest in the applicable Reorganized Debtor on the Effective Date. After that, the Reorganized Debtors may operate their businesses and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules, and the Bankruptcy Court. As of the Effective Date, all of the Reorganized Debtors' property will be free and clear of all Claims, encumbrances, Interests, charges and liens, except as specifically provided in the Plan or Confirmation Order. Corporate Transactions On or after the Effective Date, the applicable Reorganized Debtors may enter into transactions and may take actions as may be necessary or appropriate to: -- effect a corporate restructuring of their businesses; -- simplify otherwise their overall corporate structure; -- reincorporate certain of the Debtors under the laws of jurisdictions other than the laws of which the applicable Debtors are presently incorporated. According to Mr. McCourt, the Restructuring may include one or more mergers, consolidations, restructures, dispositions, liquidations, or dissolutions, as may be determined by the Debtors or the Reorganized Debtors to be necessary or appropriate. Directors and Officers The term of RCN's current board of directors will expire on the Effective Date. The Plan provides that, from and after the Effective Date, the initial board of directors of Reorganized RCN will consist of seven members selected by the Creditors Committee. The individuals proposed to serve as Reorganized RCN's directors, as well as any proposed changes to the existing management, will be identified before or at the Confirmation Hearing. Reorganized RCN's Board will have the responsibility for the management, control, and operation of Reorganized RCN on and after the Effective Date. Before or at the Confirmation Hearing, the Creditors Committee will also identify the individuals proposed to serve as directors of each of the Subsidiary Debtors, as well as any proposed changes to the Subsidiary Debtors' existing senior management. Unless otherwise provided before or at the Confirmation Hearing, the existing officers of each of the Debtors will serve initially in their current capacities for the Reorganized Debtors. Management Incentive Options Subsequent to the Effective Date, Reorganized RCN will adopt a Management Incentive Plan that is intended to provide incentives to senior management to continue their efforts to: -- foster and promote the long-term growth and performance of Reorganized RCN; and -- to increase the market price for the New Common Stock. Reorganized RCN will earmark 7.5% to 10% of the New Common Stock, on a fully diluted basis, for the award of options to the Management Incentive Plan Participants to purchase shares of Reorganized RCN common stock. Creditors Committee On the Effective Date, the duties of the Creditors Committee will terminate. However, the Committee will continue in existence after the Effective Date to: (1) continue in the prosecution, including appeals, of any matter in which the Committee has joined issue; (2) review, and, if necessary, interpose and prosecute objections to claims filed by bankruptcy professionals; and (3) file applications for Professional Claims. The Committee will be entitled to obtain reimbursement for the reasonable fees and expenses of its members and Professionals relating to the foregoing. Retention of Exclusivity The Debtors retain the exclusive right to amend or modify the Plan and solicit acceptances of any amendments to or modifications of the Plan, through and until the Effective Date. A full-text copy of RCN Corp.'s Disclosure Statement is available for free at: http://bankrupt.com/misc/RCN_Disclosure_Statement.pdf A full-text copy of RCN Corp.'s Reorganization Plan is available for free at: http://bankrupt.com/misc/RCN_Reorg_Plan.pdf Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- provides bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945- 7000) RELIANT ENERGY: S&P Affirms B Credit Rating with Stable Outlook --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the corporate credit ratings on Reliant Energy, Inc., and two of its wholly owned subsidiaries, Reliant Energy Mid-Atlantic Power Holdings, LLC, and Orion Power Holdings, Inc., to Stable from Negative. At the same time, Standard & Poor's affirmed its 'B' corporate credit ratings on the three entities. The rating action follows Standard & Poor's continuing analysis of the financial consequences for Reliant following the criminal indictment of the company on April 8, 2004 for alleged market manipulation practices in 2000. On further analysis, Standard & Poor's believes that any monetary penalties and potentially adverse business outcomes likely would not pressure the current rating. In addition, Reliant has taken several steps to stabilize its financial profile by reducing both financial leverage and operating costs. Standard & Poor's revised the outlook based on its reduced concerns that civil cases might be filed against the company. The negative outlook was driven by the potential for civil cases to "piggy back" on the criminal proceedings with potentially extensive penalties that could result. No civil cases have been filed based on the alleged market manipulation practices in 2000 since the conduct was made public more than 18 months ago. "The stable outlook reflects Standard & Poor's expectation that Reliant's financial ratios will continue to improve in 2004 and beyond as a result of debt reduction and cost savings," said credit analyst Arleen Spangler. Standard & Poor's bases its ratings on Reliant and on those of its major subsidiaries on the consolidated credit profile of the corporation, which incorporates the credit quality of Reliant's wholesale and retail businesses. Reliant provides electricity and energy services to more than 1.8 million retail customers in Texas, serves commercial and industrial customers in the PJM Interconnection region, and provides electricity to wholesale customers in a number of regions of the U.S. through a portfolio of about 19,000 MW. Reliant's financial profile remains in line with the rating level due to low margins in the wholesale business, higher interest costs, high leverage, and restrictive covenants at its large Orion subsidiaries. As of June 30, 2004, Reliant's debt to total capital ratio was about 58% and funds from operation -- FFO -- to total interest expense was about 2.4x. Going forward, Standard & Poor's expects holding company FFO interest coverage to be in line with the rating level until cash traps at Orion are eliminated. Ongoing annual capital expenditures, which the company expects to average about $150 million over the next five years, will be funded at the operating levels through cash flow from operations. Although Standard & Poor's believes that Reliant's financial risk has stabilized, any significant, sustained reduction in cash flow from operations from adverse business conditions may cause Standard & Poor's to lower the rating. SAFFRON FUND: Makes $54.9 Million Initial Liquidating Distribution ------------------------------------------------------------------ Pursuant to the Plan of Liquidation adopted by the stockholders of Saffron Fund, Inc. (NYSE: SZF) at the Annual General Meeting on May 13, 2004, the Fund is making an initial liquidating distribution of $54,904,240.64, or approximately 97% of the assets of the Fund, in the aggregate to its stockholders of record as of August 20, 2004. Each such stockholder will receive $9.372 per share. Based on information available at this time, the Fund estimates that the entire amount of this initial liquidating distribution will be characterized as a return of capital for U.S. federal income tax purposes; the Fund will report the tax treatment to each stockholder in January 2005 on Form 1099-DIV. The Fund is retaining assets for the payment of remaining expenses and any claims and other obligations. The Fund expects to make a second liquidating distribution to stockholders after all expenses relating to the liquidation and dissolution have been paid. EquiServe Trust Company, N.A. acted as paying agent with respect to the distribution. The Fund is also taking other steps to wind up its affairs pursuant to the Plan of Liquidation. The Fund is filing Articles of Dissolution with the Maryland State Department of Assessments and Taxation to dissolve the Fund, at which time all of the Fund's outstanding shares will be cancelled. The Fund is also filing with the Securities and Exchange Commission to deregister its common shares under the Securities Exchange Act of 1934 and to deregister the Fund itself under the Investment Company Act of 1940. Saffron Fund, Inc. is a closed-end, non-diversified management investment company. SEMGROUP: Moody's Assigns B1 Rating to SemCrude's $550M Facilities ------------------------------------------------------------------ Moody's assigned a B1 senior implied rating to SemGroup, L.P., and rated wholly owned SemCrude, L.P.'s three tranche $550 million senior secured bank and institutional credit facilities. One loan agreement governs the loan facilities, which are joint and severally guaranteed by SemGroup, its domestic subsidiaries, and foreign subsidiaries (to the extent it does not trigger adverse tax consequences). The facilities will repay $90 million of revolver borrowings, just over $50 million of working capital borrowings, and support the issuance of an existing $156 million of letters of credit. The rating outlook is stable but sensitive to leveraged acquisitions, avoidance of material deterioration in marketing and trading results and controls, and to maintaining sound overall cash flow trends. SemCrude is wholly owned by privately held SemGroup, L.P. (formerly Seminole Group, L.P.), a U.S. mid-continent and lower Midwest firm engaged in midstream gathering, aggregating, storage, marketing, and merchant trading of crude oil (through SemCrude) and natural gas liquids; as well as a marketer of refined petroleum products and propane to jobbers, wholesalers, industrial consumers, and cogeneration plants. SemGroup operates gathering, transportation, and storage assets along the central U.S. corridor spanning from the Gulf Coast, through the Mid-continent, and into the Midwest. Natural gas marketing is conducted in Canada. SemGroup's daily physical movements include 480,000 barrels per day of crude oil, 120,000 barrels per day of refined products, 104,000 barrels per day of natural gas liquids, and 1,000,000 mmbtu's of natural gas. Physical positions are hedged by offsetting physical positions or in the options, futures, and/or over the counter hedging markets. Moody's assigned these ratings: i) A Ba3 rated $400 million 4-year revolving working capital facility, with a $200 million sub-limit for letters of credit and contango borrowings, first secured by SemCrude's working capital assets and junior secured by each guarantor's fixed assets. ii) A B1 rated $50 million 4 year revolving secured credit facility, first secured by SemCrude's fixed assets and junior secured by SemCrude's working capital assets. iii) A B1 rated $100 million 6 year Term Loan B that will be fully drawn at the closing, first secured by SemCrude's fixed assets and junior secured by SemCrude's working capital assets. iv) B1 Senior Implied Rating. v) B2 Senior Unsecured Non-guaranteed Issuer Rating. The stable rating outlook is sensitive to: * SemGroup's ability to increase its proportion of durable cash flow from tariff and fee based activity (without significantly increasing its leverage) relative to its cash flow from higher risk, more volatile, thin margin marketing, trading; and * vendor risk management activities. The outlook is also sensitive to: * SemGroup's effective adherence to its risk management policies; * ability to successfully market, trade, and hedge its activities through volatile spot and forward hydrocarbon markets, and execute profitable marketing business in both backwardated and contango markets, to avoid negative margin and cash flow trend in marketing and trading; and * to the agent bank and bank group's enforcement of loan agreement borrowing base and covenant disciplines. The ratings generally benefit from: * acceptable leverage relative to the ratings; * the considerable control provided by the borrowing base, covenants, and banks seasoned in the midstream business; * the fact that the borrowing base has tended to cover combined working capital debt, letters of credit, and permanent debt, with added protection for Term Loan B and the acquisition revolver provided by first security in fixed assets; and * the partial strategic hedge (against the secular decline in U.S. oil production) provided by SemGroup's 4.8 million barrels of crude oil storage capacity (2.8 million barrels of storage capacity strategically connected to the Cushing, Oklahoma hub and another 1 million barrels of capacity being built by SemCrude) and terminaling assets that allow SemGroup to participate in rising imported crude oil volumes. The ratings also benefit from sector-seasoned management and SemGroup's logistical fixed asset and marketing positions in the core central U.S. crude oil production, refining, transportation, and consumption corridor spanning the Gulf Coast, through the mid- Continent, and into the Midwest. SemGroup's diversification across several hydrocarbon commodities, midstream activities, and regions also may provide greater market opportunity, information, and risk diversification. Conversely, this span of activity also exposes small SemGroup's management and resources to powerful forces in multiple world and regional commodity markets impacting its marketing and trading activity generating roughly 45% of its EBITDA. The ratings are generally restrained by: * a comparatively small fixed asset scale, * heavy and volatile working capital needs, * modest size, exposure to leveraged acquisitions (though acquisitions over $15 million require bank consent), and * SemGroup's large, volatile, thin margin marketing, trading, and vendor hedging business. While the bank credit agreements restrict the company to run only fully covered positions, its activity still can expose it to degrees of basis risk, commodity price differentials, and time differentials. Also, while its policies do permit it to write un- covered options, the company reports it does not do such transactions and, in any case, is prohibited from doing so by the loan agreements. Borrowing levels under the Ba3 rated $400 million working capital facility are governed by a borrowing base determined by specified advance rates against eligible receivables and inventory, net of crude oil payables. The facility is supported by an annual third party audit and twice monthly borrowing base reports provided by SemGroup. The facility permits up to $200 million of borrowing base availability to fund hedged crude oil and refined product storage positions taken during contango markets. The eligible borrowing base was recently estimated by the agent banks to approximate $298 million, distilled from $185 million of eligible accounts receivables, $128 million of eligible inventory, $42 million of unused letters of credit and brokers' equity, and offset by $57 million of crude oil purchase commitments. Pro-forma debt approximates $160 million. Based partly on the sale earlier this year of 49% of SemGroup's private common equity for $65 million, we estimate SemGroup's going concern value to be in the range of $250 million to $350 million. Pro-forma for the financings, pro-forma last twelve months, and based on pre-mark- to-market EBITDA, EBITDA/Interest would be in the range of 5.0x, Debt/EBITDA would be in the range of 2.2x, and Debt/Capital would be in the range of 66%. Pro-forma for the financings, as of May 2004, SemGroup's total debt would be $151.6 million and partners' capital would approximate $78 million. Its capital structure would have included approximately: * $52 million of working capital facility borrowings; * $100 million of Term Loan B obligations; * $3.6 million of capital lease obligations; and * $10.5 million of subordinated convertible notes. More specifically, the ratings and rating outlook are restrained by: * SemGroup's proportionately high working capital funding needs (as of June 30, 2004: $837 million of accounts receivable, $140 million of inventory, and $72 million of derivative assets, funded largely by $867 million of accounts payable and $95 million of derivatives liabilities) which also rise sharply with spikes in crude oil, refined product, and natural gas prices; a corollary high level of thin margin, market confidence-sensitive marketing and merchant energy trading activity requiring precision back office controls, hedging, adherence to risk management policy, and bank borrowing base control; * a modest level of fixed asset value coverage of Term Loan B and only roughly 55% of cash flow generated by stable tariff- based activity; * the relatively brief four years of SemGroup operating history; and * transaction and leveraging risk embedded SemGroup's acquisition appetite. The ratings are also supported by: * a material scale of operations encompassing established crude oil, natural gas liquids, and refined product infrastructure; * and customer relationships located in the heart of the crude oil and refined product flows between the Gulf of Mexico and Midwest regions. The ratings also benefit from comparatively firm leverage tests and use of proceeds controls provided by the loan agreements; a maximum $15 million acquisition scale permitted by the banks without requiring further bank consent Nevertheless, Moody's also notes: * intense competition for declining domestically produced crude oil throughput and imported crude oil volumes; * a highly acquisitive growth plan with attendant funding needs; and * private ownership which heightens the odds that acquisitions would be debt funded. To improve the ratings, SemGroup will need to perform consistently and amply pro-actively fund significant acquisitions with adequate equity. To date, the firm has adequately funded acquisitions relative to the rating. SemGroup's cash flow from operations increased from net cash used in operations of $8.1 million in 2002 to net cash provided by operations of $47.2 million in 2003. Cash flow in the first five months of 2004 was $30 million. Gross margin increased from $68.3 million in 2002 to $158 million in 2003. Gross margin the first five months of 2003 was $73 million. Moody's will also track how SemGroup's business performs if crude oil markets face significant corrections involving: * pronounced transitions to either higher or lower prices; * transitions from backwardation to contango or contango to backwardation; or * if oil markets transition to markedly reduced price volatility or relative stability, with each environment being of particular interest. SemGroup, L.P. is headquartered in Tulsa, Oklahoma. SENECA GAMING: Launches $300 Million 7-1/4% Senior Debt Offering ---------------------------------------------------------------- Seneca Gaming Corporation is offering $300,000,000 principal amount of its 7-1/4% Senior Notes due 2012 in exchange for $300,000,000 principal amount of its 7-1/4% Senior Secured Notes due 2012. The offering, pursuant to a Registration Statement which was declared effective on August 27, 2004, commenced Friday. SGC will accept for exchange any and all Old Notes validly tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange Offer expires, which will be September 28, 2004, unless the Exchange Offer is extended by SGC. Copies of the Prospectus and transmittal materials governing the Exchange Offer may be obtained from the Exchange Agent, Wells Fargo Bank, N.A., at the following address and telephone number: Wells Fargo Bank, N.A 608 Second Avenue South Corporate Trust Operations, 12th Floor Minneapolis, MN 55402 800-344-5128 Seneca Gaming Corporation owns and operates the Seneca Niagara Casino in Niagara Falls. * * * As reported in the Troubled Company Reporter's April 23, 2004, edition, Standard & Poor's Ratings Services assigned its 'BB-' rating to the Seneca Gaming Corporation's proposed $225 million senior unsecured notes due 2012. Proceeds from the proposed note issue, along with expected cash from operations and existing cash balances, will be used to help fund SGC's planned expansion project, make a $25 million distribution to the Seneca Nation of Indians, and for fees and expenses. In addition, a 'BB-' corporate credit rating was assigned to the Niagara Falls, New York-based company. The outlook is stable. Pro forma for the new notes, total debt outstanding at March 31, 2004, was approximately $320 million. SGC was created by the Nation to manage and operate three Class III gaming facilities in western New York. The Nation consists of approximately 7,300 members and is one of several federally recognized Native American tribes in New York. The Nation entered into its compact with the State of New York in 2002, which was subsequently approved by the Bureau of Indian Affairs. The compact expires in 2016 with a renewal option to 2023, and requires a payment based on a percentage of slot win to the state. "The ratings reflect SGC's current reliance on the Seneca Niagara Casino, construction risks associated with the planned expansion project, challenges in managing a larger gaming operation, and an evolving competitive landscape, which includes the June 2004 opening of a large-scale casino within a few miles of the Seneca Niagara Casino on the Canadian side of Niagara Falls and the addition of video lottery terminals at nearby racetracks," said Standard & Poor's credit analyst Peggy Hwan. "These factors are mitigated by favorable demographics in its surrounding market, strong operating performance of SNC since opening, and good financial profile for the rating." SK GLOBAL: Wants Evans Industries to Pay $1,031,834 Plus Interest ----------------------------------------------------------------- Before the Petition Date, SK Global America, Inc., sold certain cold rolled steel sheet in coil products to Evans Industries, Inc. Subsequent to the delivery of the Goods, the Debtor issued to Evans three invoices with due dates of June 15, 2001, July 1, 2001, and August 4, 2001, seeking payment of $2,483,862 for the Goods. Evans failed to fully pay the invoices. Consequently, Evans entered into a Payment Rescheduling Agreement dated October 30, 2001, with the Debtor. Pursuant to the Rescheduling Agreement, Evans acknowledged that it was in default of its payments for $2,103,514, the first overdue amount. Evans also acknowledged all interest that accrued on the debt without any defense, counterclaim, set-off or protest. The Rescheduling Agreement: -- contained a payment schedule whereby Evans agreed to make payments until the Receivables were fully paid; -- provided for Evans to pay interest. The interest rate was tied to the timeliness of the payments pursuant to the First Schedule. Evans made certain payments due in accordance with the First Schedule but ultimately ceased making the required payments before it had satisfied its obligations to the Debtor. Due to Evans' inability to comply with its payment obligations under the Rescheduling Agreement, the Debtor agreed to enter into two separate addenda, each dated as of March 26, 2002, which amended the Agreement by modifying the First Schedule. The Addenda provided for Evans to pay interest, with the interest rate again tied to the timeliness of the payments pursuant to the Second Schedules. The Addenda further provided that in the event Evans defaulted: (a) Evans will pay an 18% interest per annum; and (b) The Debtor could declare the amounts outstanding and all accrued interest, immediately due and payable. Evans made certain payments due in accordance with the Second Schedules, but it ultimately ceased making the required payments in July 2003. Evans presently owes the Debtor $1,031,834. Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, in New York, asserts that the Receivables are property of the Debtor's estate. The Debtor made several demands on Evans requesting the immediate payment of the Receivables but Evans has refused to turn over the payment plus interest. Pursuant to Section 542(a) and (b) of the Bankruptcy Code, the Debtor asks the U.S. Bankruptcy Court for the Southern District of New York to compel Evans to make the required payments with interest from July 7, 2004, until full payment is made. Headquartered in Fort Lee, New Jersey, SK Global America, Inc., is a subsidiary of SK Global Co., Ltd., one of the world's leading trading companies. The Debtors file for chapter 11 protection on July 21, 2003 (Bankr. S.D.N.Y. Case No. 03-14625). Albert Togut, Esq., and Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, represent the Debtors in their restructuring efforts. When they filed for bankruptcy, the Debtors reported $3,268,611,000 in assets and $3,167,800,000 of liabilities. (SK Global Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SUN TERRACE: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Sun Terrace Associates LP c/o Security Properties, Inc. 1201 Third Avenue, Suite 5400 Seattle, Washington 98101-3031 Bankruptcy Case No.: 04-15013 Type of Business: The Debtor operates a 192-unit retirement apartment complex. Chapter 11 Petition Date: August 24, 2004 Court: District of Arizona (Phoenix) Judge: Chief Judge Sarah Sharer Curley Debtor's Counsel: Mary B. Artigue, Esq. Gammage & Burnham, P.L.C. Two North Central Avenue 18th Floor Phoenix, Arizona 85004 Tel: 602-256-4419 Fax: 602-256-4475 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Security Properties '76 Advance by $1,043,787 1201 Third Avenue, #5400 General Partner Seattle, WA 98101-3031 FSAL Management Corp. Unpaid Management Fees $321,340 1201 E. Thomas Road Phoenix, AZ 85014 FSAL Development Corp. Advance by former $243,000 General Partner FSAL Development Corp. Advance by former $120,859 General Partner Ray Morrison Deferred Developer Fees $119,000 Maricopa County Treasurer 2003 Real Property Taxes $71,905 Maricopa County Treasurer 2002 Real Property Taxes $39,969 FloodPro, LLC Water Damage $19,266 Restoration Services Shamrock Foods Trade Debt $4,995 Deloitte & Touche Contingency Fee for $3,815 Tax Appeal Cox Communication Trade Debt $1,372 Catholic Sun Trade Debt $696 Roadrunner Fire & Safety Trade Debt $564 Equipment, Inc. Allegiance Telecom Trade Debt $470 Company Worldwide Farmer Bros. Coffee Trade Debt $229 AGS Utility Management, Inc. Trade Debt $225 Burns Pest Elimination, Inc. Trade Debt $209 Western Water Trade Debt $160 Technologies, Inc. Marlin Leasing Trade Debt $128 Desert-Isle Beverages Trade Debt $94 SYRATECH CORP: Likely Default Prompts Moody's Junk Ratings ---------------------------------------------------------- Moody's Investors Service downgraded the debt ratings of Syratech Corporation with a senior implied rating of Caa3, a senior unsecured issuer rating of Ca and a senior notes rating of Ca. The outlook remains stable. The downgrade follows the company's announcement through public filings that it does not expect to be in compliance with its bank covenants as of December 31, 2004 and has hired Peter J. Solomon Company, L.P. to assist in negotiations with the company's lenders and other debt holders in connection with the company's exploration of financing and other alternatives. The downgrade reflects the company's excessive leverage, its weak operating and credit metrics, and its limited liquidity, as well as Moody's expectation of modest recovery rates in a restructuring scenario. The following ratings were downgraded: * Senior implied rating, B3 to Caa3; * Senior unsecured issuer rating, Caa1 to Ca; * $118.3 million senior notes due 2007, Caa1 to Ca. Syratech has a $70 million revolving credit facility due March 2006 (with a $30 million sub limit for LOCs) secured by a first priority lien on the inventory and receivables of the company as well as certain guarantees. The revolver is not rated by Moody's. Although the company is currently in compliance with its covenants under its revolving credit facility, the company has notified lenders that it does not expect to meet its minimum EBITDA covenant at December 31, 2004 and does not expect to have minimum borrowing availability of $20 million at December 31, 2004 as required under the facility. The company has indicated that it is currently negotiating an amendment to the terms of the facility to allow the company access to the facility; if it is not successful in doing so, it will not have sufficient funds to fund its operations after December 31, 2004. At June 30, 2004, there was $13.5 million outstanding under the revolving credit facility. Availability under the facility, net of outstanding LOCs and minimum availability requirements, was approximately $10.8 million. In addition to the revolver, the company has outstanding $118.3 million of senior notes due 2007. The ratings downgrade reflects the likelihood and proximity of a financial restructuring and the expectation that recovery values on the senior notes would be low in such a scenario. The ratings reflect the company's weak credit metrics including high leverage, low interest coverage and negative retained cash flow/debt as well as poor liquidity. The markets that the company competes in are generally highly competitive and fragmented, with a wide range of domestic manufacturers as well as foreign imports competing in a variety of channels and at a variety of price points. Weak economic conditions have also had a negative impact on the types of discretionary consumer items that Syratech designs, manufactures, imports and markets. The company's ratings benefit from the company's well-known brand names such as Wallace, Towle and International Silver as well as its licensing arrangements with companies such as Vera Wang, Cuisinart and Spode. Ratings also benefit from: * the company's broad and diverse retail customer base; * its diversity of product offerings and price points; and * its sourcing of two-thirds of its products from over 500 foreign manufacturers as well as its off-shore manufacturing in Puerto Rico. Although the bulk of the company's markets are highly fragmented, the company is one of five major U.S. manufacturers of sterling silver flatware. The ratings outlook is stable reflecting the expectation that current ratings levels reflect Moody's expectation for limited recovery rates in a restructuring scenario. The Caa3 senior implied rating for Syratech reflects the high likelihood of default for the company and the high potential for significant principal loss in the event of default. The revolving credit facility, which is unrated by Moody's, is secured by the company's account receivables and inventories. The senior notes, which constitute the bulk of the company's debt, are rated at the Ca rating level reflecting limited expected recovery values. Tangible asset coverage of the senior notes is very low in a liquidation scenario. In a sale scenario, the notes could realize some recovery value due to the company's brand names and trademarks. The senior unsecured issuer rating is rated Ca, similar to the senior notes, which are general unsecured obligations of the company. Syratech, located in East Boston, Massachusetts, designs, manufactures, imports and markets a diverse portfolio of tabletop, giftware and products for home entertaining and decoration. The company had revenues of $195 million for the latest twelve months ended June 2004. TITANIUM METALS: Extends Labor Contract to December 10, 2004 ------------------------------------------------------------ Titanium Metals Corporation (NYSE: TIE) has entered into a two- month extension of the collective bargaining agreement covering the hourly production and maintenance workforce at its titanium sponge and melting facility in Henderson, Nevada. That group of approximately 300 employees is represented by the United Steelworkers of America (Local 4856). The agreement, entered into at the request of the USWA to address scheduling conflicts, extends the existing labor contract that was due to expire on October 2, 2004, through December 10, 2004. Headquartered in Denver, Colorado, Titanium Metals Corporation is an integrated producer of titanium sponge and mill products used primarily for applications in the highly cyclical and competitive aerospace industry. The titanium metals industry is extremely competitive worldwide, in part because excess industry capacity intensifies price competition during cyclical downturns. * * * As reported in the Troubled Company Reporter's May 21, 2004, edition, Standard & Poor's Rating Services said it raised its corporate credit rating on Titanium Metals Corp. to 'B' from 'B-'. The outlook is stable. At the same time, Standard & Poor's raised its preferred stock rating to 'CCC' from 'D' and assigned this rating to the company's proposed 6.75% Series A convertible preferred stock offering, which is being issued to tender the company's outstanding 6.625% convertible preferred securities, Beneficial unsecured convertible securities. Completion of the tender offer is expected to occur in the third quarter of 2004. "The corporate credit rating upgrade reflects Standard & Poor's assessment that aerospace demand for titanium has reached its nadir and should begin to improve in 2005," said Standard & Poor's credit analyst Dominick D'Ascoli. The preferred stock rating upgrade follows the company's payment of $22 million in accrued interest and its intention to resume quarterly interest payments beginning June 1, 2004. UNIFI INC: S&P Downgrades Corporate Credit & Debt Ratings to B- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on Unifi Inc., to 'B-' from 'B+'. In addition, the ratings on Unifi, a producer of texturized nylon and polyester yarns, have been removed from CreditWatch, where they were placed April 14, 2004. "The downgrade follows the company's very weak operating results, which reflect the continued difficult operating environment," said Standard & Poor's credit analyst Susan Ding. "Excess industry capacity has led to negative unit volume and pricing trends." The outlook is negative. Greensboro, North Carolina-based Unifi had about $267 million of debt outstanding on March 28, 2004. Unifi's operating results significantly deteriorated in the nine months ended March 28, 2004, in conjunction with changing industry fundamentals, which include rising foreign competition in the commodity polyester business and a shrinking domestic customer base. These factors have led to credit protection measures below Standard & Poor's expectations. In addition, there is uncertainty related to Unifi's recently announced initiatives, including a proposed joint venture in China, the closure of its Ireland operations, and the announced purchase of a facility in Kinston, North Carolina. The Chinese joint venture, which replaces a previously announced start-up greenfield endeavor, will require significant initial resources. In Ireland, Unifi will close its Letterkenny plant and relocate the servicing for its European accounts. The Ireland operations accounted for about $80 million in sales in fiscal 2004, and there is uncertainty regarding the level of sales that could be lost in this restructuring effort. Unifi is purchasing the Kinston facility from Invista, with whom it formerly managed the facility as a partner. (Invista, a part of Koch Industries, recently purchased DuPont's textile operations, including the Kinston facility.) At the same time, Invista and Unifi's alliance agreement will be terminated. The purchase price for the facility is $21 million and will be seller financed. With the termination of the alliance agreement, the arbitration claims and the put/call options on the manufacturing facility will be terminated as well. As a result of the termination, however, Unifi will lose the cost efficiencies of the alliance. While Unifi has aggressively restructured operations in the past several years, the ultimate impact of these initiatives on sales trends and profitability remains uncertain. US AIRWAYS: Names Thomas R. Harter to Board of Directors -------------------------------------------------------- US Airways Group, Inc., elected Thomas R. Harter to its board of directors effective immediately. He becomes one of four representatives of US Airways' labor groups on the board. Mr. Harter will fill the seat previously held by Perry Hayes and will serve as the board representative for US Airways' Association of Flight Attendants and Transport Workers Union members. Currently senior vice president and consultant at The Segal Company, based in Washington, D.C., Mr. Harter has a wide range of experience in working with large regional and national multi- employer pension and health trust funds. He represented labor organizations in negotiating contracts at the national level, dealing with the problems of escalating health care costs. "Tom brings a breadth of skills that we can utilize during this critical time for the company and the board members look forward to working with him," said US Airways Chairman Dr. David G. Bronner. "I also want to thank Perry for his time and contributions as a board member. He was an articulate advocate for the interests of our employees and has provided an important perspective during the company's transformation," said Dr. Bronner. Prior to joining The Segal Company in 1979, Mr. Harter worked as an independent consultant providing general business consulting and tax services to corporations, partnerships and sole proprietors. He also has experience as a systems and information manager with AARP, including duties as pension and health insurance benefits manager for a nationwide multiple-employers system composed of AARP and related taxable and tax-exempt corporations. Mr. Harter earned a bachelor of arts degree from Yale University in 1964 and has taken advanced courses in business management and pensions. He has served as an instructor in the Certified Employee Benefits Specialist programs sponsored by George Washington University and the George Meany Labor Institute. He also served as an officer in the U.S. Navy during the Vietnam war from 1964 to 1969, including two assignments as operations/communications officers in the war zone and one tour at the Pentagon. Mr. Harter resides in Falls Church, Virginia. Headquartered in Arlington, Virgina, US Airways' primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc. and Airways Assurance Limited, LLC. The Company filed for chapter 11 protection on August 11, 2002 (Bankr. E.D. Va. Case No. 02-83984). Alexander Williamson Powell Jr., Esq. and David E. Carney, Esq. at Skadden, Arps, Slate, Meagher & Flom and Lawrence E. Rifken, Esq. at McGuireWoods LLP represent the Debtors in their restructuring efforts. WCI STEEL: MIC Capital Files $140 Mil. Reorganization Plan for WCI ------------------------------------------------------------------ On Friday evening, August 27, 2004, MIC Capital Inc., in collaboration with D. E. Shaw Laminar Portfolios, L.L.C. filed a Plan of Reorganization for WCI Steel, Inc. in the United States Bankruptcy Court for the Northern District of Ohio. Alan Kestenbaum, the CEO of MIC Capital, an affiliate of Marco International Corp., stated, "We believe our plan provides a more favorable alternative for the employees and creditors of WCI than the separate plans proposed by the Debtors and the Noteholders. Among other things, our plan provides for better creditor recoveries than the Debtors' plan, and is predicated on a business plan that will increase that plant's output, thereby providing additional hiring opportunities." Unlike both the Debtors' Plan and the Noteholder Plan, the MIC Plan will be accompanied by a firm contract for coke, a critical raw material for the production of steel. This is important because, in May 2004, US Steel, WCI's current coke supplier, announced it would no longer supply coke to the open market, forcing companies that depended on coke from US Steel scrambling for very scarce coke supplies. Neither the Debtors' Plan nor the Noteholders' Plan suggests that they have secured a coke source to meet supply needs starting in December 2004. The MIC plan benefits employees through a strategic vision that includes an increase in production. The MIC plan proponents intend to work with company management, employees, and the local community to effectuate a timely emergence from bankruptcy. Details of the plan can be found in the documents filed with the Bankruptcy Court on Friday. The proposed disclosure statement for the MIC Plan has not yet been approved by the Bankruptcy Court, and there is no assurance that such approval will be obtained. Accordingly, nothing herein is intended to constitute nor should be construed to constitute a solicitation of acceptance of the referenced plan of reorganization. MIC Capital will only solicit creditor approval of its plan of reorganization if and when its accompanying disclosure statement is approved by the Bankruptcy Court. MIC Capital located in New York is an affiliate of Marco International Corp., a company specializing in manufacturing, finance, and trading of metal on a worldwide basis. D. E. Shaw Laminar Portfolios, L.L.C.'s activities include the deployment of capital in connection with the restructuring of companies that may currently be experiencing financial distress. D. E. Shaw Laminar Portfolios, L.L.C. is a member of the D. E. Shaw group, a New York-based investment and technology development firm. On Sept. 16, 2003, WCI filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code. WCI is an integrated steelmaker producing more than 185 grades of custom and commodity flat-rolled steel at its Warren, Ohio facility. WCI products are used by steel service centers, convertors and the automotive and construction markets. The company has approximately 1,700 employees. * * * As reported in the Troubled Company Reporter on May 14, 2004, WCI Steel, Inc. agreed to a stipulated order terminating its right of exclusivity to file a Plan of Reorganization. WCI filed its Plan of Reorganization on April 20 in the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division. Sponsored by The Renco Group, Inc., WCI's ultimate parent, the plan includes a recently negotiated labor agreement (subject to ratification) with the United Steelworkers of America. The plan is subject to approval by the bankruptcy court and a vote of creditors and other stakeholders. Edward R. Caine, WCI's vice chairman and chief restructuring officer, said that the company met its fiduciary duties in marketing the assets but stipulated to the termination order to underscore WCI's commitment to emerge from the Chapter 11 proceedings in the strongest financial position possible. "We believe WCI has presented the most viable reorganization plan possible, but we want any party interested in WCI to have ample opportunity to forward a competing plan," Mr. Caine said. WESTPOINT STEVENS: Wants Court Nod to Assume Two Olin Sales Pacts ----------------------------------------------------------------- WestPoint Stevens, Inc. and its debtor-affiliates seek the United States Bankruptcy Court for the Southern District of New York's authority to assume certain sales contracts with Olin Corporation, as modified. In the ordinary course of operating their businesses, the Debtors use various chemical compounds in their manufacturing processes. Sodium hydrosulfite solution and caustic soda is required to prepare raw material that has been woven into "greige cloth" for bleaching and dyeing prior to finishing the material into sheets or towels. Because the Debtors require high quantities of the Chemicals in their manufacturing operations, the Debtors entered into two contracts with Olin to ensure availability and obtain volume discounts for the Chemicals. The Debtors entered into a Sales Contract with Olin for the supply of a particular brand of SHS called Reductone. The Reductone Contract is a requirements contract, which provides 100% of the Debtors' yearly SHS needs. Under the Reductone Contract, Olin currently provides SHS to the Debtors at a below-market price of $54.80 per 1,000 pounds, with any price increases capped at $3.11 per 1,000 pounds for calendar year 2005 and $2.08 per 1,000 pounds for calendar year 2006. The Debtors also entered into a Sales Contract with Olin for the supply of Soda. The Soda Contract is also a requirements contract, which provides the Debtors with about half of their yearly Soda needs. The Soda Contract automatically renews year to year, with the pricing structure negotiated quarterly. For the quarter ending June 2004, Olin provided Soda to the Debtors at a below-market price of either $160 per ton or $175 per ton, depending on shipping costs. According to John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, in New York, the SHS and Soda markets can be extremely volatile. The Soda market recently experienced significant price increases of $95 per ton, resulting in a $300 per ton average market price. Because of the recent spike in prices for Soda, the Debtors were faced with a significant increase in costs to obtain Soda provided by Olin under the Soda Contract. The Debtors approached Olin to negotiate a more favorable long-term pricing structure under the Soda Contract. After extensive arm's-length, good faith negotiations, the Debtors were able to obtain, in exchange for assumption of the Contracts, very favorable long-term pricing under the Soda Contract. The Debtors obtained a limited $70 per ton increase in the price for Soda -- compared to the recent market increase of $95 per ton -- effective through June 30, 2006, with any subsequent quarterly increases or decreases capped at $40 per ton. Mr. Rapisardi discloses that the Debtors approached several Soda suppliers, but none could match Olin's terms and pricing structure. Olin is the sole source of the particular kind of SHS that performs best in the Debtors' manufacturing processes. Thus, alternative suppliers are unable to provide terms more favorable than those contained in the Contracts, which not only ensure availability of the Chemicals, but also provide long-term, discounted pricing. The $70 agreed upon price increase results in a $230 or $245 per ton price for Soda under the Soda Contract, depending on shipping costs, that is significantly lower than the current $300 per ton current market price, Mr. Rapisardi explains. The Debtors' estimate savings of $375,000 in costs over the next two years, as the Debtors expect to use 3,000 tons of Soda per year. Furthermore, by capping fluctuations in pricing under the Soda Contract to $40 per ton on a quarterly basis, the Debtors are insulated from the full effect of further price increases in the Soda market. The Debtors believe the cure amount due in assuming the Contracts is $293,000 -- $183,000 on account of the Reductone Contract and $110,000 on account of the Soda Contract. Olin has also asserted an additional claim in the Debtors' Chapter 11 cases for about $70,000, based on certain reclamation demands asserted in connection with Chemicals provided for under the Contracts. However, as consideration for the assumption of the Contracts, Olin has agreed to waive its Reclamation Claim and accept a reduced cure amount of $169,500, resulting in additional savings to the Debtors' estates of about $193,000. 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. (WestPoint Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Judge Gonzalez Rejects $1MM Moen Infringement Claim ----------------------------------------------------------------- On January 15, 2003, Moen Technologies filed Claim No. 12444 asserting a claim for patent infringement against WorldCom for an amount "believed in excess of $1,000,000." Adam P. Strochak, Esq., at Weil, Gotshal & Manges, LLP, in New York, points out that the Moen Claim does not identify any patent allegedly infringed by the Debtors nor does it identify any conduct, accused products, or even general business area or technology of its claim. In fact, the Moen Claim consists entirely of the one-page Proof of Claim form. According to Mr. Strochak, the Moen Claim fails to satisfy even the most minimal threshold of disclosure to put the Debtors on notice of the nature and facts underlying the Moen Claim. The claimed damages are improper and excessive. The asserted $1 million sum is wholly speculative and unsupported, Mr. Strochak says. At the Debtors' request, Judge Gonzalez expunges and disallows the Moen Claim. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (Worldcom Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) XPERIA CORP: Discloses $300,885 Equity Deficit for FY '04 1st Qtr. ------------------------------------------------------------------ Xperia Corp. reported its first quarter interim financial statements and the Management's Discussion and Analysis for the 3- month period ended June 30, 2004. As of June 30, 2004, stockholder's deficit widened to $300,885 compared to a $298,422 deficit at March 31, 2004. The Company has incurred losses and reports a cumulative shareholders' deficit of $12,446,640 as of June 30, 2004. There can be no assurance that profitable operations will be attained or that management will be successful in raising additional equity capital for the Company. Management continues to seek an operating company as a merger partner for the Company, which would provide a base of operations and additional capital. All intercompany accounts and transactions have been eliminated on consolidation. The Company remained inactive throughout the year. To date, the Company has not earned significant revenue. The Company's business strategy continues to involve seeking out and evaluating potential acquisition opportunities. Overall Performance The Company is a non-operating business and remained inactive for the twelve-month period ended March 31, 2004. The Company reported revenues of $7,944 in 2004 (2003: $2,877) representing royalty revenues from its passive interest in the film "Beethoven Lives Upstairs". The Company continued to pursue acquisition opportunities in order to become an operating company but was unsuccessful in finalizing any such transaction. Effective April 1, 2003, the Company adopted on a prospective basis, the Canadian Institute of Chartered Accountants' -- CICA -- handbook Section 3870, Stock Based Compensation and Other Stock- Based Payments, and began to expense the cost of all stock options granted since April 1, 2003 using the fair value method. This method of accounting uses an option-pricing model to determine the fair value of stock options granted and the amount is amortized over the period in which the related option vests. Proceeds arising from the exercise of the stock options are credited to contributed surplus. For all stock options granted prior to April 1, 2003, the Company has not recorded any compensation expense. The Company follows the new recommendations of CICA with respect to the computation of basic and diluted earnings (loss) per common share. Under the new standards, the treasury stock method is used in determining the dilutive effect of options and warrants. Previously, the imputed earnings approach was used. In each of the twelve-month periods ended March 31, 2004 and March 31, 2003, the calculation of diluted loss per share proved to be antidilutive. Xperia Corp. is a non-operating business with a passive interest in a film property and its intent is to acquire a suitable business venture and accordingly become an operating company. The consolidated financial statements of the Company include the accounts of its inactive wholly owned subsidiaries, as follows: a. Internet Processing Corp., a Canadian company. b. Flying Disc Entertainment Limited, a Canadian company. YELLOW ROADWAY: Moody's Puts Ba1 Rating on $500MM Credit Facility ----------------------------------------------------------------- Moody's Investors Service assigned a (P)Ba1 rating to Yellow Roadway Corporation's proposed $500 million, five-year unsecured bank credit facility and confirmed the company's other ratings: * $525 million senior secured bank facility at Baa3; * senior implied at Ba1, and * senior unsecured at Ba2. Moody's also changed the rating outlook to positive from stable. Yellow Roadway is currently renegotiating its bank credit agreement, and anticipates that the new facility will be unsecured. All of the company's existing rated debt benefits from cross guarantees and the existing bank facilities are secured by a lien on most of the assets of one of Yellow Roadway's subsidiaries, Yellow Transportation, but share security in the assets of another subsidiary, Roadway Express, with holders of existing notes issued by that subsidiary. The company's existing senior convertible notes do not share in the collateral package and their Ba2 rating reflects their effective subordination to the banks and Roadway noteholders. Under the terms of the Roadway Express notes, the security interest will fall away if the banks release collateral. Consequently, when the proposed new bank credit agreement becomes effective, all of the existing borrowings of the Yellow Roadway group will be unsecured and rank pari passu. Moody's will withdraw the Baa3 rating on the existing bank facility when the new facility becomes effective and, assuming all other conditions are as expected, could remove the notching distinction on the rating of the company's senior convertible notes and raise the rating to Ba1, equivalent to the company's other unsecured obligations. As part of its refinancing, Yellow Roadway is also increasing its Accounts Receivable facility (not rated) to $450 million and extending the maturity. Usage would be backed by certain of the Yellow Transportation and Roadway Express accounts receivable, and the facility provides additional liquidity. The change in outlook to positive reflects Moody's expectations that: (1) the financial results following the acquisition by Yellow Corp of Roadway to form Yellow Roadway will meet or exceed initial projections; (2) the absence of meaningful integration difficulties or loss of customer volumes as often attends trucking industry mergers will continue; (3) debt reduction from free cash flow will be more rapid than originally anticipated, facilitated by continuation of a strong shipping environment over the near term; (4) the run-rate of merger synergies will be at the high end of initial estimates; and (5) effective management of two separate brand carriers (Roadway and Yellow) in the market can be continued. The rating could be raised with: (1) at least $150 million of debt reduction from the FY 2003 level from free cash flow; (2) continued efficient operations throughout the upcoming high shipping season, with evidence that an operating ratio no higher than 96% is sustainable; (3) ongoing operating performance such that Adjusted Debt to EBITDAR is lower than 2.0x, and Adjusted Retained Cash Flow to Adjusted Debt is greater than 25%, with evidence that these metrics can be maintained over time; (4) financial policies consistent with an investment grade profile (including strong alternative liquidity, a modest dividend or share repurchase program, and manageable scheduled debt maturities); (5) a program for conservative investment of capital expenditures and acquisitions that would not materially change the company's business or financial risk; (6) evidence that the merger synergies can be sustained at the upper end of the target range; and (7) no disruption in operations from any new services, such as the proposed next-day delivery service. Yellow Roadway benefited considerably from the sharper than expected economic recovery. The company had indication of an upturn somewhat earlier than other carriers because of its exposure to manufacturing, and has already increased its earnings guidance for full year results twice this year. Also, Yellow Roadway has effectively managed the merger thus far. Programs to achieve merger synergies were implemented at the corporate level, through IT consolidation, purchasing and application of best practices of both carriers. The company did not implement any actions that could affect its customers or line haul operations. The company now expects synergies to be at the high end of $40 to 50 million target with an $80 to 100 million run rate by year-end, which we believe to be attainable. Relations with the Teamsters have remained cooperative. Also, there is no evidence of loss of revenue to other carriers, which can occur in trucking mergers when shippers seek to avoid concentration of their business at only one carrier. This revenue retention is due to the high demand for trucking services, but also a somewhat lower than anticipated overlap between the Yellow and Roadway customer base. Operations have been sound and the company has effectively managed the demand increase without adding fixed costs. Its next-day service, likely to be implemented later in 2004, is not expected to require incremental capital as it will use existing equipment and terminals. Management continues to be committed to maintaining two separate brands in the marketplace. This is practical in the near term, partly because of the high current demand in trucking, but also because of the industry's poor record in integrating two similarly sized truck operations. Longer-term, it remains to be seen how a full return on the capital costs of the merger could be achieved without some further integration of operations, in Moody's view. Also, Yellow Roadway anticipates achieving its publicly stated debt reduction program by early 2005. At that level of debt, however, the capital structure would still be somewhat leveraged given the cyclical, competitive and capital-intensive nature of the trucking industry, in Moody's opinion. Yellow Roadway's ultimate capital structure will depend on the duration of the economic expansion as well as the company's plans for investment of what could be substantial cash flow. The proposed $500 million Revolver is expected to mature in 2009, and will replace the existing $525 Secured Credit Agreement. Outstandings will be guaranteed by all material domestic subsidiaries of Yellow Roadway. Covenants will include: i) customary limitations on subsidiary debt, liens, and sale of assets; ii) minimum net worth; iii) minimum fixed charge coverage; and iv) maximum leverage (Debt to EBITDA). The company will need to represent that no material adverse change has occurred for each advance. The revolver will include a sublimit for Yellow Roadway's standby letter of credit requirements, as the company plans to replace its existing letter of credit facility with the new Revolver. Letters of credit outstanding are expected to be in the range of $250 million. Rating assigned: * Yellow Roadway Corporation $500 million Bank Credit Facility due 2009 at (P)Ba1. Ratings confirmed: * Roadway Corporation senior notes at Ba1; * Yellow Roadway Corporation senior secured bank agreement at Baa3; * Yellow Roadway senior implied at Ba1; * Yellow Roadway convertible notes and issuer rating at Ba2 Yellow Roadway Corporation owns four less than truckload trucking companies, Yellow Freight, Roadway Express, New Penn and Reimer. Yellow Roadway Corporation is based in Overland Park, Kansas. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Airgate PCS Inc. CSA (378) 291 13 Akamai Technologies AKAM (175) 279 140 Alliance Imaging AIQ (68) 628 20 Amazon.com AMZN (1,036) 2,162 568 Blount International BLT (397) 400 83 Cell Therapeutic CTIC (83) 146 72 Centennial Comm CYCL (579) 1,447 (99) Choice Hotels CHH (118) 267 (42) Cincinnati Bell CBB (640) 2,074 (47) Compass Minerals CMP (144) 687 106 Cubist Pharmacy CBST (18) 223 91 Delta Air Lines DAL (384) 26,356 (1,657) Deluxe Corp DLX (298) 563 (309) Denny's Corporation DNYY (313) 507 (160) Domino Pizza DPZ (718) 448 (1) Echostar Comm DISH (1,033) 7,585 1,601 Graftech International GTI (97) 967 94 Hawaian Holdings HA (143) 256 (114) Idenix Pharm IDIX (28) 67 30 Imax Corporation IMAX (52) 250 47 Kinetic Concepts KCI (246) 665 228 Lodgenet Entertainment LNET (129) 283 (6) Lucent Tech. Inc. LU (3,371) 15,765 2,818 Maxxam Inc. MXM (602) 1,061 127 Memberworks Inc. MBRS (20) 249 89 Millennium Chem. MCH (46) 2,398 637 McDermott Int'l MDR (363) 1,249 (24) McMoRan Exploration MMR (54) 169 83 Northwest Airlines NWAC (1,775) 14,154 (297) Nextel Partner NXTP (13) 1,889 277 ON Semiconductor ONNN (499) 1,161 213 Per-se Tech. Inc. PSTI (18) 172 41 Pinnacle Airline PNCL (48) 128 13 Rightnow Tech. RNOW (13) 29 (9) Sepracor Inc SEPR (619) 1,020 256 St. John Knits Int'l SJKI (65) 234 69 UST Inc. UST (115) 1,726 727 Vector Group Ltd. VGR (3) 628 142 WR Grace & Co. GRA (184) 2,874 658 Western Wireless WWCA (225) 2,522 15 ********* 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. 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For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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