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/raid1/www/Hosts/bankrupt/TCR_Public/040922.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, September 22, 2004, Vol. 8, No. 204 Headlines ACCESS WORLDWIDE: Appoints Stedman Stevens as President & CEO ADAHI INC: Hires Belding Harris as Bankruptcy Counsel ADAHI: Creditors Must File Proofs of Claim by Jan. 25 ADELPHIA COMMS: Formally Launches Sale of Seven Strategic Clusters ADESA INC: ALLETE Completes Distribution of Shares to Stockholders AINSWORTH: Inks Pact on Private Placement of $450M Senior Notes AIRLEASE LTD: Will End Partnership & Make Final Cash Distribution AMERIQUEST MORTGAGE: Fitch Puts BB+ Rating on $2.3M Certificates ANTARES PHARMA: Common Stock Begins Trading on AMEX Tomorrow ARMSTRONG: Inks Delta Energy Natural Gas Purchase & Sale Accord BEAR STEARNS: Fitch Pares Class BV's Rating to BB from BBB- CHESAPEAKE ENERGY: Declares Quarterly Stock Dividends CHIQUITA BRANDS: S&P Raises Corporate Credit Rating to B+ from B COEUR D'ALENE: Wheaton Clarifies the Process for Rejecting Offer CRYSTAL US: S&P Assigns B- Rating to $513M Senior Discount Notes DEX MEDIA: Automating Production & Cutting 6% of Workforce DIGITAL LIGHTWAVE: Inks Pacts to Restructure Optel Debts ECHOSTAR DBS: S&P Assigns BB- Rating to $1 Billion Senior Notes FAIRFAX FINANCIAL: Repurchases $60.3 Million Senior Notes FLOW INTERNATIONAL: Will Release 2005 First Quarter Results Today FRANK'S NURSERY: Hires Proskauer Rose as Bankruptcy Counsel G-STAR 2002: Fitch Affirms $8.078M Class D Notes' BB- Rating GLOBAL CROSSING: Expects to File SEC Reports by Oct. 8 GOING HOME PIZZA: Case Summary & 20 Largest Unsecured Creditors HANOVER DIRECT: 1-for-10 Reverse Stock Split Takes Effect Today HYPERFEED: Elects to Voluntarily Delist Stock from Nasdaq SmallCap INTEGRATED HEALTH: Chancery Rules on Committee Suit Against IHS INTERMET CORP: Potential Default Prompts S&P to Junk Ratings IPSCO INC: Raises Third Quarter Earnings Expectations by 40% JARDEN CORP: S&P Places B+ Credit Rating on CreditWatch Negative JOSTENS INC: Offers to Pay 11.9% More for 12-3/4% Sr. Sub. Notes KEY ENERGY: Discloses Selected Financial Data LENTEK: American Biophysics Wins Mosquito Trap Infringement Suit MCI INC.: Fitch Puts B Rating on $5.665B Senior Unsecured Notes MICROCELL TELECOM: Inks Cash Take-Over Bid Agreement with Rogers MIRANT CORPORATION: Court Approves Transcanada Compromise NATIONAL BENEVOLENT: Moody's Affirms Junk Long-Term Debt Rating NATIONAL CENTURY: Trust Wants HCA Claim Reduced to $1,992,756 NATIONAL MARINE: Court Dismisses Bankruptcy Case in One Day NOMURA CBO: S&P Places Junk Ratings on CreditWatch Positive PARMALAT USA: Has Until September 30 to File Chapter 11 Plan PEGASUS SATTELITE: Plans to Pay Prepetition Loan Obligations PLIANT CORPORATION: Names James Ide as New Chief Financial Officer PROVELL INCORPORATED: Court Formally Closes 2002 Bankruptcy Case QUANTA SERVICES: First Reserve Offering 20 Million Shares for Sale REFCO GROUP: Inks MOU Allowing Hantec Use of RefcoFX Trader System SCHLOTZSKY'S INC: Pursues Process to Put Company in New Hands SEMCO ENERGY: Names Peter Clark Vice President & General Counsel SK GLOBAL: Court Appoints Moon Ho Kim as Creditor Trustee SOUTHWEST HOSPITAL: Hires Hunton & Williams as Special Counsel SPX CORP: Fitch Places Double-B rating on Debt with Stable Outlook TANGER FACTORY: S&P Lifts Corporate Credit Rating to BBB- TCW LINC: S&P Puts Class A-2's B+ Ratings on CreditWatch Negative TECO ENERGY: Will Webcast Financial Update on Monday TEKNI-PLEX: Moody's Junks Notes & Puts B3 Rating on Facilities THERMACLIME INC: S&P Affirms & Removes B- Corporate Credit Rating TRICO MARINE: Receives Notice of Default and Guarantee Demand US AIRWAYS: Hires Seabury Aviation as Restructuring Advisor US AIRWAYS: Gets Court Approval to Continue Fuel Supply Agreements US AIRWAYS: Gets Dispatchers' Support on Plans to Lower Cost USG CORPORATION: Wants Until March 1, 2005, to Decide on Leases USG CORPORATION: Baron & Budd Asks Court to Ease Rule 2019 Order VLASIC: 6 More Witnesses Take the Stand in $250M Suit vs. Campbell WET SEAL: Lerach Coughlin Commences Securities Class Action Suit WORLDCOM INC: Browning & Pinkston Balks at Barring Trespass Cases * Former Aetna Executive L.E. Shaw Joins Gibson Dunn as Counsel * AssetLink LP Establishes Office in Denver * Upcoming Meetings, Conferences and Seminars ********* ACCESS WORLDWIDE: Appoints Stedman Stevens as President & CEO ------------------------------------------------------------- Access Worldwide Communications, Inc., (OTC Bulletin Board: AWWC), reported the addition of J. Stedman Stevens as President and Chief Executive Officer of Access Worldwide's AM Media Communications Group, effective September 10, 2004. AM Medica is Access Worldwide's strategic medical education business located in New York City. In the position, Mr. Stevens, age 46, oversees budgeting, business development, operations and client relations for the medical education business. He reports directly to Access Worldwide's Chairman and Chief Executive Officer, Shawkat Raslan. Mr. Stevens has more than twenty years of experience in the pharmaceutical, physician marketing and consumer product sectors. Most recently, he was President and Chief Operating Officer of Pharmaceutical Research Plus, a patient recruitment and clinical trial support company. Earlier, he was Chief Executive Officer and President of Blitz Research, a healthcare marketing company. Mr. Raslan commented, "We are delighted that Stedman has accepted to join our team. His addition will complete our reorganization effort at AM Medica." "I am excited by the opportunities facing Access Worldwide and AM Medica," remarked Mr. Stevens. "AM Medica has in place the management team, skills, experience and vision to continue expanding in the medical education industry. My role as President and CEO of AM Medica will be to expand our sales initiatives and diversify our product offerings." Founded in 1983, Access Worldwide -- whose June 30, 2004 balance sheet shows a stockholders' deficit of $3,498,275 compared to a deficit of $3,749,674 at December 31, 2003 -- provides a variety of sales, marketing and medical education services. Among other things, the company reaches physicians, pharmacists and patients on behalf of pharmaceutical clients, educating them on new drugs, prescribing indications, medical procedures and disease management programs. Services include product stocking, medical education, database management, clinical trial recruitment and teleservices. For clients in the telecommunications, financial services, insurance and consumer products industries, the company reaches the established mainstream and growing multicultural markets with multilingual teleservices. Access Worldwide is headquartered in Boca Raton, Florida and has over 1,000 employees in offices throughout the United States. More information is available at http://www.awwc.com/ ADAHI INC: Hires Belding Harris as Bankruptcy Counsel ----------------------------------------------------- The U.S. Bankruptcy Court for the District of Nevada gave its permission for Adahi, Inc., to employ Belding, Harris & Petroni, Ltd., as its bankruptcy counsel. Belding Harris will: a) prepare and file Chapter 11 petitions, lists of secured and unsecured creditors; b) prepare and file schedules and statements of financial affairs; c) attend and be responsible for hearings, pretrial conferences, and trials arising from the bankruptcy filing (specifically excluding any representation in state court and federal court, unless previously agreed) or any related litigations; d) prepare, file and present to the Bankruptcy Court of any pleadings necessary to protect the legal interests of the Debtor, including sales of real and personal property, injunctive relief requests under section 105 and any appropriate adversary actions; e) prepare, file and present to the Bankruptcy Court a disclosure statement and plan of reorganization under Chapter 11 of Title 11 of the United States Code; f) review all claims made by creditors and interested parties, and of any objections to claims which are disputed; and g) prepare and present a report of implementation of the plan of reorganization and request for final decree closing the Chapter 11 case. Stephen R. Harris, Esq., Chris D. Nichols, Esq., and Gloria M. Petroni, Esq., will be the lead attorneys in this proceeding. Mr. Harris discloses that the Debtor paid a $10,000 retainer. Mr. Harris will bill the Debtor an hourly rate of $325, Mr. Nichols will charge at $275 per hour, and Ms. Petroni will charge at $325 per hour. Paraprofessionals who will provide assistance will charge the Debtor from $30 to $100 per hour. Belding Harris does not have any interest adverse to the Debtor or its estate. Headquartered in Incline Village, Nevada, Adahi Inc. filed for chapter 11 protection on September 13, 2004 (Bankr. D. Nev. Case No. 04-52718). When the Debtor filed for protection from its creditors, it estimated more than $10 million in debts and assets. ADAHI: Creditors Must File Proofs of Claim by Jan. 25 ----------------------------------------------------- The United States Bankruptcy Court for the District of Nevada set January 25, 2005, as the deadline for all creditors owed money by Adahi, Inc., on account of claims arising prior to Sept. 13, 2004, to file their proofs of claim. Creditors must file written proofs of claim on or before the January 25 Claims Bar Date and those forms must be delivered to: Patricia Gray Clerk of the Bankruptcy Court 300 Booth Street Reno, Nevada 89509 The Claims Bar Date applies to all claims except for governmental units. Headquartered in Incline Village, Nevada, Adahi, Inc., filed for chapter 11 protection on September 13, 2004 (Bankr. D. Nev. Case No. 04-52718). Stephen R. Harris, Esq., at Belding, Harris & Petroni, Ltd., represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of over $10 million. ADELPHIA COMMS: Formally Launches Sale of Seven Strategic Clusters ------------------------------------------------------------------ As part of its continuing effort to maximize value for all of its constituents, Adelphia Communications Corporation (OTC: ADELQ) formally launched its sale process. As part of that process, Adelphia will allow interested parties to bid on any or all of seven strategic clusters of cable systems, organized principally by geography and ability to operate as standalone entities. The clusters are: * Northern New England/Eastern New York; * Cleveland/Greater Ohio Valley; * Florida/Southeast; * California/Western; * Virginia/Maryland/Colorado Springs/Kentucky; * Pennsylvania; and * Western New York & Connecticut. "By dividing the company into seven distinct strategic clusters, we believe we can maximize value for Adelphia's wide range of creditors and other stakeholders," said Bill Schleyer, chairman and CEO. "Our goal in grouping the clusters is to produce a robust sale process by offering maximum flexibility for all interested parties including strategic and financial buyers. We have already signed confidentiality agreements with many parties and are pleased with the level of preliminary interest." Final bids for the assets are expected by year-end. UBS Investment Bank and Allen & Company LLC are financial advisors for the Adelphia sale process. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. ADESA INC: ALLETE Completes Distribution of Shares to Stockholders ------------------------------------------------------------------ ADESA, Inc. (NYSE: KAR) reported that its majority stockholder, ALLETE, Inc., completed the distribution of a stock dividend to all ALLETE stockholders. All ADESA shares previously owned by ALLETE were distributed. As anticipated, one share of ADESA common stock was distributed to stockholders of record as of September 13, 2004 for each share of ALLETE common stock outstanding, resulting in a total distribution of 88.6 million shares of ADESA. The distribution was structured to qualify as a tax-free stock dividend to ALLETE shareholders and was done in book-entry form. David Gartzke, Chairman of ADESA, commented, "We are excited to have completed the full separation of ADESA from ALLETE. I believe ADESA is well positioned as a stand-alone company and I expect that the market will now better reflect the value of ADESA." Mr. Gartzke stepped down as Chairman of ALLETE in conjunction with the distribution and now serves as ADESA's Chairman, CEO and President. Refer to ADESA's Registration Statement on Form S-1 as declared effective on June 15, 2004 for further discussion of this distribution, including the terms and conditions to which the distribution was subject. About ADESA, Inc. ADESA, Inc., -- http://www.adesainc.com-- headquartered in Carmel, Indiana, completed its initial public offering of 6.25 million primary shares in June, 2004. ADESA's holdings include 53 ADESA used vehicle auctions, 28 Impact salvage auctions and 81 AFC loan production offices across North America. * * * As reported in the Troubled Company Reporter on June 4, 2004, Standard & Poor's Rating Services assigned its 'B+' rating to ADESA Inc.'s proposed $125 million senior subordinated notes due 2012, and affirmed its 'BB' corporate credit and senior secured ratings on the Carmel, Indiana-based operator of wholesale used- vehicle auctions and provider of used-vehicle floorplan financing. The outlook is stable. AINSWORTH: Inks Pact on Private Placement of $450M Senior Notes --------------------------------------------------------------- Ainsworth Lumber Co. Ltd. entered into a purchase agreement in connection with the Rule 144A private placement of US$275 million aggregate principal amount of 7.25% senior unsecured notes due October 1, 2012 and US$175 million aggregate principal amount of floating rate senior unsecured notes due October 1, 2010. Ainsworth intends to use the net proceeds of the offering of the Senior Notes, together with cash on hand, to fund its previously announced acquisition from Potlatch Corporation of three OSB facilities located in northern Minnesota. The acquisition is expected to close this week. 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. * * * As reported in the Troubled Company Reporter on Sept. 16, 2004, Moody's Investors Service assigned a B2 rating to Ainsworth Lumber Co. Ltd.'s proposed US$450 million new note issues. The new notes are being issued to fund Ainsworth's US$457.5 million purchase of Potlatch Corporation's oriented strandboard -- OSB -- assets, and will rank equally with Ainsworth's existing senior unsecured notes. Accordingly, the ratings on the existing notes, as well as Ainsworth's senior implied and issuer ratings, were downgraded to B2. The ratings outlook is stable. Standard & Poor's Ratings Services also affirmed its 'B+' long- term corporate credit and senior unsecured debt ratings on Vancouver, B.C.-based Ainsworth Lumber Co. Ltd. At the same time, the ratings were removed from CreditWatch, where they had been placed on Aug. 26, 2004, following the company's announcement to purchase all of Potlatch Corp.'s oriented strandboard -- OSB -- manufacturing and related facilities for about US$457.5 million. Ainsworth's proposed new issues of US$300 million of fixed senior unsecured notes due 2012 and US$150 million of floating variable- rate senior notes due 2010 were also assigned 'B+' ratings. The outlook is stable. AIRLEASE LTD: Will End Partnership & Make Final Cash Distribution ----------------------------------------------------------------- Airlease Ltd., (OTC Bulletin Board: AIRL), reported that its Board of Directors of its General Partner approved the termination of the Partnership as of September 30, 2004. As part of terminating the Partnership and completing the dissolution, winding up and liquidation of Airlease, the Board of Directors approved a final cash distribution of 8.5 cents per unit. The distribution will be paid on October 15, 2004, to holders of record as of the close of business on September 30, 2004. As a result of the termination of Airlease, trading in the units will cease after September 30, 2004. Airlease Ltd., A California Limited Partnership has been engaged in the business of acquiring, either directly or through joint ventures, commercial jet aircraft, and leasing such aircraft or parts thereof to domestic and foreign airlines, freight carriers and charter companies. The general partner of the Partnership is Airlease Management Services, Inc. AMERIQUEST MORTGAGE: Fitch Puts BB+ Rating on $2.3M Certificates ---------------------------------------------------------------- Ameriquest Mortgage securities, Inc., 2004-IA1 is rated by Fitch: -- $250.5 million class A-1, A-2 and A-3 certificates 'AAA'; -- $11.3 million class M-1 certificates 'AA+'; -- $10.6 million class M-2 certificates 'AA'; -- $3.3 million class M-3 certificates 'AA-'; -- $6.9 million class M-4 certificates 'A'; -- $2.8 million class M-5 certificates 'A-'; -- $2.7 million class M-6 certificates 'BBB+'; -- $2.1 million class M-7 certificates 'BBB'; -- $3.2 million class M-8 certificates 'BBB-'; -- $2.3 million non-offered class M-9 certificates 'BB+'. Credit enhancement for the 'AAA' rated class A certificates reflects the 15.05% subordination provided by classes M-1 through M-9, monthly excess interest and initial overcollateralization of 1.45%. Credit enhancement for the 'AA+' rated class M-1 certificates reflects the 11.30% subordination provided by classes M-2 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'AA' rated class M-2 certificates reflects the 7.75% subordination provided by classes M-3 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'AA-' rated class M-3 certificates reflects the 6.65% subordination provided by classes M-4 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'A' rated class M-4 certificates reflects the 4.35% subordination provided by classes M-5 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'A-' rated class M-5 certificates reflects the 3.40% subordination provided by classes M-6 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'BBB+' rated class M-6 certificates reflects the 2.50% subordination provided by classes M-7 through M-9, monthly excess interest and initial OC. Credit enhancement for the 'BBB' rated class M-7 certificates reflects the 1.80% subordination provided by classes M-8 and M-9, monthly excess interest and initial OC. Credit enhancement for the 'BBB-' rated class M-8 certificates reflects the 0.75% subordination provided by class M-9, monthly excess interest and initial OC. Credit enhancement for the non-offered 'BB+' class M-9 certificates reflects the monthly excess interest and initial OC. In addition, the ratings reflect the integrity of the transaction's legal structure as well as the capabilities of Ameriquest Mortgage Company as Master Servicer. Deutsche Bank National Trust Company will act as Trustee. As of the Cut-off date, the mortgage loans have an aggregate balance of $300,006,187. The weighted average loan rate is approximately 7.079%. The weighted average remaining term to maturity is 353 months. The average Cut-off date principal balance of the mortgage loans is approximately $146,131. The weighted average original loan-to-value ratio is 77.01% and the weighted average Fair, Isaac & Co. -- FICO -- score was 632. The properties are primarily located in: * California (32.60%), * Florida (11.49%) and * Maryland (7.88%). The mortgage loans were originated or acquired by Ameriquest Mortgage Company. Ameriquest Mortgage Company is a specialty finance company engaged in the business of originating, purchasing and selling retail and wholesale subprime mortgage loans. ANTARES PHARMA: Common Stock Begins Trading on AMEX Tomorrow ------------------------------------------------------------ Antares Pharma, Inc.'s (OTC Bulletin Board: ANTR), common stock has been approved, subject to being in compliance with all applicable listing standards on the date trading begins, for listing on the American Stock Exchange (Amex(R)). Antares Pharma's common stock is expected to begin trading on Amex(R) under the symbol "AIS" tomorrow, September 23, 2004. Commenting on the listing, Jack E. Stover, Antares Pharma's Chief Executive Officer and President, said, "Our listing on Amex(R), one of the premiere exchanges, is a significant milestone and we anticipate that it will provide greater visibility and broader exposure of Antares Pharma's stock. We also believe our Amex(R) listing will expand our shareholder base by facilitating participation in our stock by brokers and institutional investors, resulting in increased liquidity and value for all of our shareholders." September 22, 2004, is expected to be the last trading date for Antares Pharma common stock on the Over-the-Counter Bulletin Board. About Antares Pharma Antares Pharma is an emerging specialty pharmaceutical company leveraging its experience in drug delivery systems to enhance product performance of established and developing drugs. The Company's current technology platforms include transdermal (Advanced Transdermal Delivery ATD(TM)) gels, disposable mini- needle injection systems (Vibex(TM)), reusable needle-free injection systems (VISION(R) and Valeo(TM)), and fast-melt oral (Easy Tec(TM)) tablets. The Company currently has active partnering programs with several pharmaceutical and distribution companies for a number of indications and applications, including diabetes, growth disorders, obesity, female sexual dysfunction and other hormone therapy. Antares Pharma currently distributes its needle-free injector systems in more than 20 countries and markets the same technology for use with human growth hormone through licensees in most major regions of the world. Licensees also market an ibuprofen gel using Antares Pharma's ATD(TM) technology in several major European countries. In addition, Antares Pharma is undertaking development or is conducting research on several product opportunities that will form the basis of its specialty pharma program. Antares Pharma's corporate headquarters is in Exton, Pennsylvania, with subsidiaries performing research, development, manufacturing and product commercialization activities in Minneapolis, Minnesota and Basel, Switzerland. * * * In its Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission, Antares Pharma reports: "Effective July 1, 2003, the Company's securities were delisted from The Nasdaq SmallCap Market and began trading on the Over-the- Counter (OTC) Bulletin Board under the symbol "ANTR.OB," after the Nasdaq Listing Qualifications Panel determined to delist the Company's securities. "The delisting from The Nasdaq SmallCap Market constituted an event of default under the restructured 8% debentures. However, the Company obtained letters from the debenture holders in which they agreed to forbear from exercising their rights and remedies with respect to such event of default, indicating they did not intend to accelerate the payment and other obligations of the Company under the debentures. The debenture holders reserved the right at any time to discontinue the forbearance and, among other things, to accelerate the payment and other obligations of the Company under the 8% debentures. If the debenture holders had decided to discontinue their forbearance, the debentures would have become due and payable at 130% of the outstanding principal and accrued interest. Because the debenture holders retained the right to discontinue the forbearance and this option was outside the control of the Company, the Company was required to record an expense and a liability of $508,123 for the 30% penalty in future periods until the debentures were converted to common stock, at which time the liability was removed and offset against the loss on conversions of debt to equity." ARMSTRONG: Inks Delta Energy Natural Gas Purchase & Sale Accord --------------------------------------------------------------- Armstrong World Industries, Inc., sought and obtained the permission of the U.S. Bankruptcy Court for the District of Delaware to enter into a Natural Gas Purchase and Sale Contract with Delta Energy, LLC, and perform all obligations under that agreement. The terms and conditions of the Contract are: (1) Quantities Delta Energy agrees to sell to AWI, and AWI agrees to purchase from Delta Energy, the volumes of natural gas set forth in the quantity provision of the agreement. Unless indicated otherwise, the quantities will be stated in dry dekatherms per day. The parties will insure that the quality dispatched is delivered and received at a relatively constant rate similar to nominations and previous usage patterns. (2) Non-performance The party failing to perform under a firm agreement, unless due to a force majeure event, will keep the non-failing party economically whole for any and all differences to replace the non-performed purchase or sale, plus the cost of any unused firm transportation demand charges resulting directly from the non-performance. In any event, the non-failing party will use all reasonable efforts in securing alternative supplies or market. In no event will either party be liable under this agreement whether in contract, in tort -- including negligence and strict liability -- or for incidental, consequential, special or punitive damages. (3) Transportation Delta Energy will arrange and bear the costs associated with the natural gas shipments to the Delivery Point and AWI will arrange and bear the costs associated with the natural gas shipments. (4) Price During the Contract's term, AWI will pay for all quantities of natural gas delivered by Delta Energy at the agreed price or appropriate confirmation communication. (5) Scheduling and Imbalance Penalties The parties will work together to ensure that actual deliveries fall within the transporting pipeline's operating tolerance for assessing scheduling and imbalanced penalties. The party causing or having notice of any change in the dispatched quantity will immediately notify the other. If an imbalance penalty is assessed to either party as result of the other party's failure to adjust deliveries or purchases after notice of a pipeline notification requiring the adjustment to the extent that the requirements are applicable to the transaction, then the other party will be responsible for the penalty not reasonably avoidable by prudent actions. (6) Quality and Measurement Measurement and quality of the volume and the healing value of the natural gas purchased will be made at the Delivery Points in accordance with the transporting pipeline's specifications. (7) Billings and Payments Delta Energy will invoice AWI on or before the 15th day of each month for actual volumes delivered by Delta Energy to the Delivery Points in the prior month. If actual volumes are not available by the invoice date, payment will be based on nomination and then adjusted accordingly once actual volumes are known. AWI will pay Delta Energy on or before the 25th day of the month, or within 10 days after receipt of Delta Energy's invoice. Interest at an annual rate equivalent to the then current Chase Manhattan Bank of New York prime interest plus 2% will accrue on all amounts not paid within 30 days after the due date, provided, however, that in no event will the provision authorize the charge or interest collection in excess of the maximum lawful rate. The parties will have the right to set off obligations owing between the parties, whether arising under the contract or otherwise. Payments may be netted accordingly. (8) Warranties and Limitations of Liabilities Delta Energy warrants that it will have the right to sell the natural gas delivered and that the gas will be free from liens and adverse claims of any kind. Delta Energy will save and hold AWI harmless from all loss, damage and expense due to adverse claims against Delta Energy for the gas delivered as related to its right to sell the gas delivered. In any event, Delta Energy will pay or cause to be paid all royalties, existing taxes and other sums due on production and transportation of the natural gas to the Delivery Points. (9) Force Majeure Neither party is liable to the other for any failure to perform -- except AWI's obligation to pay for natural gas dispatched and delivered -- if the failure is caused by or results directly or indirectly from Force Majeure, which will include, but not be limited to: * physical events like landslides, earthquakes, fires or storms; * weather-related events affecting an entire geographic region, like freezing causing failure of wells and pipelines; * curtailment of firm transportation or storage by transporters; * acts of others, like strikes lockouts or industrial disturbances; and * governmental actions or regulation promulgated by a governmental authority having jurisdiction. (10) Financial Responsibility When reasonable grounds for insecurity or payment, or title to the gas arise, either party may demand adequate assurance of performance. Adequate assurance will mean sufficient security in the form and for the term reasonably specified by the party demanding assurance, including, but not limited to, a standby irrevocable letter of credit or a pre-payment. In the event either party fails to comply, the other party will have the right to either withhold or suspend deliveries or payment, or terminate the agreement. In the event a forward fixed price has been secured, either physical or financial, the non-failing party reserves the right to liquidate any fixed prices held on the failing party's behalf. Should this action result in financial damages, the failing party will keep the non-failing party economically whole for any and all differences. AWI is entering into the Natural Gas Contract in the ordinary course of its business. AWI asserts that it has the ability to enter into the Agreement and to perform all obligations under it without the Court's approval. In the event of a default or failure to perform by AWI, the automatic stay provisions of Section 362 of the Bankruptcy Code would not apply to prevent Delta Energy from exercising any right or remedy provided under the Natural Gas Contract. Judge Fitzgerald also modifies the automatic stay so that in the event of a default by AWI under the Natural Gas Contract, Delta Energy is authorized to: (a) terminate the Natural Gas Contract and any pending related transactions; (b) exercise its right to setoff; and (c) exercise its other remedies available under the Natural Gas Contract, without the need to obtain relief from the automatic stay or other Bankruptcy Court approval. 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. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) BEAR STEARNS: Fitch Pares Class BV's Rating to BB from BBB- ----------------------------------------------------------- Fitch Ratings has taken action on these classes of Bear Stearns Asset Backed Securities, series 1999-2: Series 1999-2 group 1: -- Classes AF-1, AF-2 affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 downgraded to 'BBB' from 'A'; -- Class BF downgraded to 'B' from 'BBB-' is removed from Rating Watch Negative. Series 1999-2 group 2: -- Classes AV-1, AV-2 affirmed at 'AAA'; -- Class MV-1 affirmed at 'AAA'; -- Class MV-2 affirmed at 'A'; -- Class BV downgraded to 'BB' from 'BBB-'. The downgrades of the junior-most classes (affecting $9,762,981.33 of outstanding certificates) are taken due to the worse than expected performance of the underlying collateral in these deals and its potential negative impact on the most subordinate classes of debt. The affirmations on the remaining classes ($29,639,643.19 in outstanding certificates) reflect credit enhancement deemed adequate given future loss expectations. The underlying trust is backed by two collateral loan groups: group 1 (fixed-rate) and group 2 (adjustable-rate) originated by Conseco Finance Corporation (69.17%) and Amresco Residential Mtge. Corporation (20.92%). EMC Mortgage Corporation, rated 'RPS1' by Fitch, is the master servicer. The group 1 and group 2 mortgage pools are not cross- collateralized. However, there is limited cross-collateralization in the form of excess spread. Monthly excess interest generated from group 1 is available to offset losses in group 2. The high level of losses incurred has resulted in the decline of overcollateralization on both groups 1 and 2. As of the August 2004 distribution date, group 1 and group 2 have $860,110.24 and $866,364.64 of OC, compared with their respective OC target of $2,354,711.24 and $924,629.98. Monthly excess spread generated within the transaction is generally decreasing over time. As of the August 2004 distribution, monthly excess spread was approximately $37,489.00. The three-month average monthly loss for group 1 is approximately $306,571.67 and approximately $13,738.33 for group 2. In addition, six-month average of 90 plus delinquencies (including bankruptcies, foreclosures, and real estate owned) stand at 24.47% and 30.28% for group 1 and group 2, respectively. The pool factor (outstanding loan principal as a percentage of the initial loan pool) currently stands at 23.28% for group 1 and 12.12% for group 2. Fitch will continue to closely monitor this deal. CHESAPEAKE ENERGY: Declares Quarterly Stock Dividends ----------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) Board of Directors declared a $0.045 per share quarterly dividend that will be paid on October 15, 2004 to common shareholders of record on October 1, 2004. Chesapeake has approximately 267 million common shares outstanding. Chesapeake's Board has also declared a quarterly cash dividend on Chesapeake's 4.125% Cumulative Convertible Preferred Stock, par value $0.01. The dividend for the 4.125% preferred stock is payable on December 15, 2004 to preferred shareholders of record on December 1, 2004 at the quarterly rate of $10.3125 per share. Chesapeake has 313,250 shares of 4.125% preferred stock outstanding with a liquidation value of $313.3 million. Chesapeake's has also declared a quarterly cash dividend on Chesapeake's 6.75% Cumulative Convertible Preferred Stock, par value $0.01. The dividend for the 6.75% preferred stock is payable on November 15, 2004 to preferred shareholders of record on November 1, 2004 at the quarterly rate of $0.84375 per share. Chesapeake has 2.714 million shares of 6.75% preferred stock outstanding with a liquidation value of $150 million. Chesapeake's Board also declared a quarterly cash dividend on Chesapeake's 5.0% Cumulative Convertible Preferred Stock, par value $0.01. The dividend for the 5.0% preferred stock is payable on November 15, 2004 to preferred shareholders of record on November 1, 2004 at the quarterly rate of $1.25 per share. Chesapeake has 1.725 million shares of 5.0% preferred stock outstanding with a liquidation value of $172.5 million. Chesapeake's Board declared a quarterly cash dividend on Chesapeake's 6.0% Cumulative Convertible Preferred Stock, par value $0.01. The dividend for the 6.0% preferred stock is payable on December 15, 2004 to preferred shareholders of record on December 1, 2004 at the quarterly rate of $0.75 per share. Chesapeake has 4.6 million shares of 6% preferred stock outstanding with a liquidation value of $230 million. Chesapeake Energy Corporation is one of the five largest independent producers of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States. The company's Internet address is http://www.chkenergy.com/ * * * As reported in the Troubled Company Reporter on July 29,2004, Fitch Ratings maintains its rating of Chesapeake Energy's senior unsecured notes at 'BB', its senior secured bank facility rating at 'BBB-', and its convertible preferred stock rating at 'B+' following the announcement that Chesapeake has entered into three transactions to purchase assets valued at approximately $591.5 million. The Rating Outlook for Chesapeake remains Stable. In addition to Chesapeake's recent growth performance, the rating is based on the company's low risk reserve profile and the conservative funding strategy employed to finance the growth. Its 4.1 tcfe of reserves have a reserve life of nearly 12 years. Approximately 71% of its reserves are proven developed producing -- PDP -- with a reserve life of more than eight years. Approximately 80% of its reserves are in the very familiar Mid- Continent region and 10% are in the Permian Basin. Furthermore, 74% of Chesapeake's reserves were externally prepared by third party engineers, mitigating the potential for aggressive reserve bookings. While the latest acquisitions are predominantly proven undeveloped -- PUD, the overall reserve profile for Chesapeake remains relatively low risk. Standard & Poor's Ratings Services also assigned its 'BB-' rating to oil and gas exploration company Chesapeake Energy Corp.'s (BB-/Positive/--) $300 million senior unsecured notes maturing 2014. The issue is a Rule 144A private placement with registration rights. The outlook is positive. "The acquisitions are consistent with Chesapeake's stated policy to fund its growth program in a balanced manner," said Standard & Poor's credit analyst Kimberly Stokes. "Furthermore, we expect the company to continue the balanced funding of its acquisition program in the future." The positive outlook on Chesapeake is supported in large part by the company's extensive hedging program. Management must consistently demonstrate both the ability and willingness to apply excess cash flow to meaningfully reduce debt. CHIQUITA BRANDS: S&P Raises Corporate Credit Rating to B+ from B ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on fresh fruit and vegetable producer and distributor Chiquita Brands International, Inc., to 'B+' from 'B'. In addition, Standard & Poor's assigned a 'B' rating to the proposed $250 million senior notes due 2014. The rating is based on preliminary documentation. Proceeds from the note issue will be used to refinance the company's existing $250 million 10.56% senior notes due 2009. The notes are rated one notch lower than the corporate credit rating as they are they structurally subordinated to the liabilities of Chiquita's subsidiaries. As of June 30, 2004, these subsidiaries had about $700 million in liabilities, about $122 million of which was debt. The outlook is stable. The Cincinnati, Ohio-based Chiquita has about $473 million in lease-adjusted total debt outstanding as of Sept. 20, 2004. "The upgrade acknowledges a strengthening of the company's financial profile through extensive cost restructuring in recent years, its ability to regain access to the European market, and modestly lower debt leverage," said Standard & Poor's credit analyst Ronald Neysmith. The stable outlook incorporates Standard & Poor's expectation that Chiquita will sustain credit measures above those expected for its rating category to compensate for high business risks. COEUR D'ALENE: Wheaton Clarifies the Process for Rejecting Offer ---------------------------------------------------------------- Wheaton River Minerals Ltd. (AMEX:WHT) (TSX:WRM) clarified the process for rejecting the unsolicited offer made by Coeur d'Alene Mines Corporation for its common shares. Wheaton shareholders do not need to take any action to reject the offer from Coeur. Wheaton shares will not be tendered unless you provide specific instruction to your broker or financial intermediary. If you have received information to the contrary from your broker or financial intermediary, you should contact your broker or financial intermediary and advise them to NOT TENDER your Wheaton shares. The default option under the Coeur offer is only applicable if you have tendered your Wheaton shares, it does NOT mean that if you take no action your shares will be deposited by default. To obtain advice or assistance in withdrawing tendered Wheaton shares, contact Kingsdale Shareholder Services Inc., toll free at 1-866-749-5464. The Board of Directors of Wheaton unanimously recommends that Wheaton shareholders REJECT the offer to purchase all of the outstanding Wheaton shares made by Coeur and its affiliates on August 23, 2004 and that shareholders NOT TENDER their Wheaton shares to the Coeur offer. The Board decision followed receipt of a recommendation by the Special Committee of the Board. The Board and the Special Committee also relied upon, among other things, the opinion of Orion Securities, Inc., that states, subject to the assumptions and limitations contained therein, that the consideration Coeur is offering is inadequate from a financial point of view to Wheaton shareholders. The Board's recommendation, the Special Committee's assessment of the Coeur offer, and its reasons for the recommendation that shareholders REJECT the Coeur offer, was set out in a Directors' Circular mailed to Wheaton shareholders. The Directors' Circular is available at http://www.wheatonriver.com/ As reported in the Troubled Company Reporter on September 7, 2004, the principal reasons for the conclusion and recommendation of the Special Committee and the Board are as follows: -- There are no financial or strategic benefits to Wheaton or the Wheaton shareholders under the Coeur offer and a business combination with Coeur is not in the best interests of the Wheaton shareholders. -- The Coeur offer is financially inadequate and highly dilutive. -- Coeur has a lengthy history of significant net losses and has experienced negative cash flow from operating activities over the past five and one-half years. -- Coeur has not had sufficient earnings to cover its fixed charges (i.e. interest and preferred stock dividends) in each of the last five years. -- Coeur's development properties are subject to significant risks and its existing mines are nearing the end of their mine life. -- The pro-forma debt-to-equity ratio of the combined Coeur/Wheaton company proposed by Coeur will present an increased financial risk and a riskier capital structure than Wheaton and peer group companies. -- Coeur has financed its operations through the use of convertible debt resulting in significant potential dilution. -- The Coeur offer requires Coeur shareholder approval and is highly conditional. -- The technical reports Coeur has filed prior to the date hereof relating to the San Bartolome project fail to provide important information. -- The value of the Coeur offer is not Cdn$5.47 per share. The value of the Coeur offer (based on the Coeur share closing price on September 1, 2004) for Wheaton shareholders who elect the "all share" option is Cdn$3.84 per Wheaton share, Cdn$4.13 per Wheaton share if all Wheaton shareholders elect the "cash and share" option, and Cdn$4.06 per Wheaton share if the "in-the-money" options and warrants are taken into account. The cash portion of the Coeur offer is less than Cdn$5.47 per share and could be significantly less than Cdn$1.00 per share. -- The Board and the Special Committee have serious reservations about the ability of the management of Coeur and do not recommend that Wheaton shareholders become shareholders of the combined Coeur/Wheaton company that would be controlled by the management of Coeur. Ian Telfer, Chairman and CEO of Wheaton stated, "I have recently met with or spoken to our largest shareholders, our office has taken calls from shareholders over the last several months, Kingsdale Shareholder Services has been calling all Wheaton shareholders, and we still see no significant support for the Coeur offer." Wheaton is a leading gold producer and expects 2006 production from all of its mines to increase to approximately 900,000 gold equivalent ounces at a total cash cost of less than US$100 per ounce. Current production exceeds 500,000 gold equivalent ounces (over 400,000 ounces of gold and 7 million ounces of silver) at a total cash cost of less than US$50 per ounce. Coeur d'Alene Mines Corporation is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile and Bolivia. * * * As reported in the Troubled Company Reporter on June 3, 2004, Standard & Poor's Ratings Services placed its B- corporate credit and senior unsecured debt ratings on Coeur D'Alene Mines Corp. on CreditWatch with positive implications following the company's announcement that it intends to acquire precious metals mining company Wheaton River Minerals Ltd. in a stock and cash transaction valued at approximately $1.8 billion. "The CreditWatch action reflects what is likely to be a meaningful improvement in Coeur's business and financial profile upon the successful acquisition of lower-cost producer Wheaton," said Standard & Poor's credit analyst Paul Vastola. Standard & Poor's expects that its ratings on Coeur would likely be raised several notches. Standard & Poor's will continue to monitor the transaction for any potential revisions to the deal. The deal remains subject to several conditions and is expected to close by Sept. 30, 2004. CRYSTAL US: S&P Assigns B- Rating to $513M Senior Discount Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to $513 million of senior discount notes due 2014 issued by Crystal US Holdings 3 L.L.C. and Crystal US Sub 3 Corp. Standard & Poor's also affirmed its 'B+' corporate credit ratings on BCP Caylux Holdings Luxembourg S.C.A. and its Frankfurt, Germany-based subsidiary, Celanese AG. The outlook is stable. Crystal US Holdings, through its wholly owned subsidiary BCP Caylux, currently owns 84% of the shares of Celanese AG. Proceeds from the issuance of the notes will be used to make a dividend to Blackstone Crystal Holdings Capital Partners (Cayman) IV Ltd., the parent company. "The dividend payment is consistent with the very aggressive financial policies of the equity sponsors. Standard & Poor's factored the risk of dividend payments into the 'B+' ratings, although the size of the proposed transaction is large enough so that very little capacity for operational shortfalls or other negative credit actions remains at the current ratings," said Standard & Poor's credit analyst Wesley E. Chinn. BCP Caylux's credit quality incorporates the increase in debt to fund the planned dividend as well as the already considerable debt burden resulting from a sharp increase in borrowings to fund the Blackstone Group's tender offer for the shares of Celanese--a transaction valued at about $3.4 billion--and very aggressive financial policies of the equity sponsor. The dividend transaction results in credit statistics that are aggressive for the ratings. These weaknesses are only partially offset by the company's solid business profile as an integrated producer of diverse commodity and industrial chemicals, prospects for improving cash flow generation, and reasonable liquidity. Significant product market shares and competitive cost structures support good competitive positions in its major products, and a diverse product portfolio that includes a balance of commodity, intermediate, and more specialized industrial chemical products serving a wide range of end markets. With annual revenue of approximately $4.9 billion, Celanese ranks among the larger and more diversified global chemical businesses. DEX MEDIA: Automating Production & Cutting 6% of Workforce ---------------------------------------------------------- Dex Media, Inc., (NYSE: DEX) reported that a reduction of approximately 6 percent in its workforce, which will be implemented over the next four months. The reduction is part of the company's initiative to replace legacy technology with an automated production system, based on a platform from Amdocs, which is significantly reducing the need for manual processing. The reduction will involve approximately 160 positions, primarily from the company's Operations organization, in 17 cities across the region. "Moving to this new system will automate much of the manual work we perform today," said George Burnett, president and CEO of Dex Media. "For our customers, this will mean more responsive service, improved accuracy and the flexibility to innovate from a product and pricing perspective. For our shareholders, it will mean greater operating efficiency and improved reporting capabilities." The transition to the new production system, which is built on the industry-leading Amdocs platform, is taking place in phases this year. The company has planned for the new system, including workforce reductions, for the past two years and has already been able to reduce its workforce by more than 170 positions through managed attrition. With the announcement, the total reduction exceeds 330 positions, consistent with the company's plans and previous communications. No offices will be closed as a result of the restructure. "We continue to have a strong commitment to do business where our customers do business," said Mr. Burnett. "We believe our customers are best served when we live and work in the local community." The Dex workforce was notified about the overall plan for the Operations restructure in April. Employees who are affected by the force reduction have the opportunity to apply for open positions within the company. Occupational employees who leave the business are eligible for a severance package that is part of their collective bargaining agreement. Management employees who are involuntarily separated are eligible for the company's management severance package. About Dex Media, Inc. Dex Media, Inc., (NYSE: DEX), the largest publicly traded incumbent directory company in the United States, provides local and national advertisers with industry-leading print and online directory solutions. In 2003, the company generated revenues of approximately $1.6 billion. As the exclusive publisher of the official White and Yellow Pages directories for Qwest Communications International Inc., the company published 259 directories in 2003 in 14 western and Midwestern states. Dex Media printed and distributed approximately 43 million print directories and CD-ROMs and served more than 400,000 local and 4,000 national advertiser accounts in 2003. The company's leading Internet-based directory, DexOnline.com, is the most used Internet Yellow Pages in the states Dex Media serves, according to market research firm comScore. * * * As reported in the Troubled Company Reporter on June 18, 2004, Fitch Ratings affirmed these ratings on Dex Media's subsidiaries, Dex Media East LLC (DXME) and Dex Media West LLC (DXMW): DXME -- $1.1 billion senior secured credit facility 'BB-'; -- $450 million senior unsecured notes due 2009 'B'; -- $525 million senior subordinated notes due 2012 'B-'. DXMW -- $2.1 billion senior secured credit facility 'BB-'; -- $385 million senior unsecured notes due 2010 'B'; -- $780 million senior subordinated notes due 2013 'B-'. In addition, Fitch has assigned a 'CCC+' rating to the holding company's, Dex Media Inc., $500 million 8% notes due 2013 and its $750 million 9% aggregate principal discount notes due 2013, which has a current accreted value of $512 million. Approximately $6.3 billion of debt is affected by Fitch's actions. The Rating Outlook is Stable. DIGITAL LIGHTWAVE: Inks Pacts to Restructure Optel Debts -------------------------------------------------------- Digital Lightwave, Inc. (Nasdaq:DIGL) and Optel Capital, LLC executed definitive financing agreements to restructure the outstanding debt owed by Digital Lightwave to Optel Capital, LLC and Optel, LLC. The transaction was approved by the board of directors on September 15, 2004, upon the recommendation of the special committee of the board. The special committee is composed solely of independent directors. Upon execution of the agreements, Optel advanced to the Company an additional $1.35 million, bringing the total amount of the debt owed by the Company to Optel to $27.0 million, plus accrued interest of approximately $2.0 million. All of the outstanding debt is secured by a first priority security interest in substantially all of the assets of the Company. Pursuant to a loan and restructuring agreement, Optel extended the maturity of the principal amount owed to it by the Company until December 31, 2005. The maturity of the outstanding accrued interest, plus additional interest that accrues in the future, has been extended to September 16, 2005. Previously, and as of July 31, 2004, all of the outstanding principal and accrued interest owed to Optel had matured and became due and payable upon demand by Optel at any time. In conjunction with the financing agreements, the Company has agreed to make the entire outstanding debt convertible into common stock of the Company at the option of Optel. The conversion can be completed at any time prior to the extended maturity date at a conversion price based on the average trading price of the stock during the five-day period preceding the date of any conversion. The Company has agreed to file a registration statement covering the resale by Optel of the shares of common stock issuable upon conversion of the outstanding debt. The Company and Optel made it a condition to the outstanding debt becoming convertible, that the conversion feature be approved by the holders of a majority of the outstanding shares of common stock of the Company who are not affiliated with Optel or any of its affiliates. In the event the holders of a majority of such outstanding shares of common stock do not approve such feature, the outstanding debt and accrued interest would immediately become due and payable in full upon demand by Optel at any time after the stockholders' meeting. Optel is controlled by Dr. Bryan J. Zwan, the Company's majority stockholder and chairman of the board of directors. Jim Green, President and CEO of the Company, stated that, "We are pleased with the completion of this financing and debt restructuring transaction, and appreciative of the ongoing support and commitment from Optel. The time and attention of the management team is now squarely focused on continuing the progress of the first half of this fiscal year. We look forward to building on that progress as we strive for the continued success of the Company." About Digital Lightwave, Inc. Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. The Company's customers -- companies that deploy networks, develop networking equipment, and manage networks -- rely on its offerings to optimize network performance and ensure service reliability. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. Network operators and telecommunications service providers use fiber optics to provide increased network bandwidth to transmit voice and other non-voice traffic such as Internet, data and multimedia video transmissions. The Company provides telecommunications service providers and equipment manufacturers with product capabilities to cost-effectively deploy and manage fiber optic networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. At June 30, 2004, Digital Lightwave, Inc.'s balance sheet showed a $20,478,000 stockholders' deficit, compared to a $21,140,000 deficit at December 31, 2003. ECHOSTAR DBS: S&P Assigns BB- Rating to $1 Billion Senior Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to the proposed $1 billion senior notes due 2014 of EchoStar DBS Corp., a wholly owned subsidiary of satellite direct-to-home -- DTH -- TV operator EchoStar Communications Corp. The notes will be issued under Rule 144A with registration rights. Proceeds will be used for general corporate purposes, which could include the company's planned Oct. 2004 redemption of its $1 billion 10.375% notes due 2007. All existing ratings on EchoStar, including the 'BB-' corporate credit rating, were affirmed. The outlook is stable. As of June 30, 2004, total debt outstanding was about $5.5 billion, including convertible debt. "The ratings on EchoStar reflect intense industry competition between the company, cable operators, and larger DTH rival The DIRECTV Group Inc.," said Standard & Poor's credit analyst Eric Geil. "Other concerns include rising subscriber acquisition costs needed to support growth, satellite TV's limited ability to provide two-way services available from cable TV companies, satellite capacity constraints, and a slowing rate of credit improvement because of share repurchases, as well as business and financial risk from potential acquisitions and investments. Mitigating factors include scale advantages from EchoStar's position as the second-largest satellite TV operator and the fourth-largest provider of multichannel TV services, strong subscriber growth, modest churn, and good liquidity from free cash flow and a healthy, uncommitted cash balance." EchoStar's DISH Network serves about 10.1 million subscribers and is delivering strong customer and revenue gains, largely due to expanding availability of satellite-delivered local broadcast TV signals. As of June 30, 2004, local channels were available in about 140 markets, representing household reach of more than 90%, up from about 75% a year ago. Increased penetration of multiple set installations, premium channel packages, and advanced set-top boxes that include digital video recorder -- DVR -- functionality are also positive revenue factors. In addition, the company has a joint marketing deal with local telephone company SBC Communications, Inc., which provides additional sales outlets and enables EchoStar to better compete with cable TV's bundled video, data, and voice offerings. Satellite TV continues to take market share from cable TV, which contributed to strong year-over-year subscriber growth for EchoStar of 15.1% in the 12 months ended June 30, 2004, up from 14.7% as of March 31, 2004, but below DIRECTV's 16.5% rate. Nevertheless, growth will eventually slow due to increasing company size and industry penetration. Opportunities from expanding local broadcast signal availability will diminish given the smaller size of each additional market. Cable companies are competing with better two-way capability and more capacity to offer high-definition channels, and are beginning to launch voice over Internet protocol -- VOIP -- telephone services. DIRECTV has significantly increased subscriber acquisition spending and may pose a greater competitive threat under News Corp. control. FAIRFAX FINANCIAL: Repurchases $60.3 Million Senior Notes --------------------------------------------------------- Fairfax Financial Holdings Limited reported that it has to date repurchased US$60.3 million of outstanding Senior Notes maturing in 2005 and 2006 with the proceeds of its recently completed issuance of US$95 million of 7.75% Senior Notes due 2012. The cost of these repurchases (including accrued interest) has utilized US$65.1 million of the approximately US$91.5 million net proceeds of that issuance of 2012 notes. In pursuit of its objective to reduce its near-term debt maturities, Fairfax is continuing to attempt to purchase outstanding Senior Notes maturing in 2005, 2006 and 2008, based on market conditions. Since Fairfax began repurchasing outstanding 2005, 2006 and 2008 Senior Notes earlier this year, it has issued US$266 million of its 2012 Senior Notes and has reduced the principal amount of 2005, 2006 and 2008 Senior Notes outstanding as follows: Outstanding Prior to Repurchases Currently Outstanding -------------------- --------------------- (US$ millions) TIG 8.125% Senior Notes due 2005 $ 97.7 $ 38.6 Fairfax 7.375% Senior Notes due 2006 $275.0 $130.3 Fairfax 6.875% Senior Notes due 2008 $170.0 $ 99.0 ------ ------ $542.7 $267.9 ====== ====== * * * As reported in the Troubled Company Reporter on Sept. 2, 2004, Fitch Ratings placed the ratings of Fairfax Financial Holdings Limited and its rated subsidiaries and affiliates on Ratings Watch Negative. The ratings previously had a Negative Outlook. This action largely reflects Fitch's concerns as to increasing liquidity pressures at Fairfax, as well as a continued decline in transparency of management's public disclosures, which make it increasingly difficult for third parties to judge Fairfax's creditworthiness. Fairfax Financial Holdings Limited -- Long-term issuer 'B+'/Rating Watch Negative; -- Senior debt 'B+'/Rating Watch Negative. FLOW INTERNATIONAL: Will Release 2005 First Quarter Results Today ----------------------------------------------------------------- Flow International Corporation (Nasdaq: FLOW) plans to announce preliminary results for the first fiscal 2005 quarter ended July 31, 2004 today, September 22, 2004. The company plans to release its selected financial information before the start of regular market trading and hold a conference call at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time) to discuss the selected financial results. A live Webcast of the conference call may be found at: http://www.flowcorp.com/newsite/Investor_Center/investor_center_index.htm A Webcast replay of the call will also be available for two weeks. Selected financial results are considered preliminary while the Company completes reconciliations of historical inter-company account balances and ensures that foreign currency exchange gains and losses on inter-company accounts are properly recorded for both current and prior periods. The foreign currency issue is whether certain gains and losses recorded directly to Other Comprehensive Income in Shareholders' Equity should have been recorded in the Statement of Operations as a component of Other Income (Expense). It is expected that the Company will restate its fiscal years ended April 30, 2004, 2003 and 2002 to include non-cash positive and negative adjustments to net earnings related to foreign exchange gains and losses on inter-company accounts. The amounts of such adjustments have not yet been determined. In addition to the expected restatements, the Company has determined it will restate its April 30, 2002 results to record an additional charge to Cost of Goods Sold for $609,000 to reflect a required adjustment noted during its reconciliation of historical inter-company balances. The restatements will further delay the filing of the Company's Form 10-Q for the fiscal 2005 first quarter. About Flow International Flow International Corporation -- http://www.flowcorp.com/-- provides total system solutions for various industries, including automotive, aerospace, paper, job shop, surface preparation, and food production. As of April 30, 2004, Flow International's stockholders' deficit widened to $9,077,000, compared to a $5,109,000 deficit at January 31, 2004. FRANK'S NURSERY: Hires Proskauer Rose as Bankruptcy Counsel ----------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Frank's Nursery & Crafts, Inc., permission to employ the services of Proskauer Rose LLP, as its bankruptcy and reorganization counsel until October 8, 2004. Proskauer Rose will: a) advise the Debtor with respect to its powers and duties as a debtor-in-possession; b) assist the Debtor in the preparation of financial statements, schedules of assets and liabilities, statements of financial affairs and other reports and documentation required pursuant to the Bankruptcy Code and the Bankruptcy Rules; c) represent the Debtor at all hearings on matters pertaining to its affairs as a debtor-in-possession; d) prosecute and defend litigated matters that may arise during this Chapter 11 case; e) counsel and represent the Debtor in connection with the administration of claims and numerous other bankruptcy- related matters arising from this Chapter 11 case; f) counsel the Debtor with respect to any general legal matters relating to this Chapter 11 case; g) assist the Debtor in obtaining confirmation of a plan of reorganization, approval of a disclosure statement and all matters related to it; and h) perform all other legal services that are necessary and desirable for the efficient and economic administration of the Debtor's Chapter 11 case. Alan B Hyman, Esq., is the lead attorney in Frank's restructuring. Mr. Hyman discloses that the Debtor paid a $115,000 retainer. Mr. Hyman reports Proskauer Rose's professionals bill: Designation Hourly Rate ----------- ----------- Partner $485 - 695 Senior Counsel 435 - 590 Associates 250 - 445 Paraprofessionals 135 - 210 Proskauer Rose does not have any interest adverse to the Debtor or its estate. Headquartered in Troy, Michigan, Frank's Nursery & Crafts, Inc. -- http://www.franks.com/-- specializes in nursery products, lawn and garden hardlines, floral decor, custom bows & floral arrangements, and Christmas merchandise. Frank's Nursery and its parent company, FNC Holdings, Inc., each filed a voluntary chapter 11 petition in the U.S. Bankruptcy Court for the District of Maryland on February 19, 2001. The companies emerged under a confirmed chapter 11 plan in May 2002. Frank's Nursery filed another chapter 11 petition on September 8, 2004 (Bankr. S.D.N.Y. Case No. 04-15826). In the company's second bankruptcy filing, it listed $123,829,000 in total assets and $140,460,000 in total debts. G-STAR 2002: Fitch Affirms $8.078M Class D Notes' BB- Rating ------------------------------------------------------------ Fitch Ratings affirms six classes of notes issued by G-Star 2002-1 Ltd./G-Star 2002-1 Corp. These affirmations are the result of Fitch's annual review process. These rating actions are effective immediately: -- $157,996,308 class A-1MM notes affirmed at 'AAA/F1+'; -- $71,083,877 class A-2 notes affirmed at 'AAA'; -- $23,000,000 class BFL notes affirmed at 'A-'; -- $27,300,000 class BFX notes affirmed at 'A-'; -- $16,250,000 class C notes affirmed at 'BB+'; -- $8,078,020 class D notes affirmed at 'BB-'. Since the last rating action in December of 2003, the collateral has continued to perform as expected as evidenced by performance measures including WARF and OC. According to the most recent trustee report dated August 18, 2004, the class A, B, and C overcollateralization ratios were 137.2%, 112.5%, and 106.3%, respectively, compared to triggers of 122.8%, 108.2% and 104.5%, respectively. Defaulted assets represented 3.8% of the $318 million of total collateral and eligible investments and there were no other assets rated 'CCC+' or lower. The Fitch WARF remains at 'BBB-/BB+'. The rating of the class A-1MM and A-2 notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. In addition, the class A-1MM note short term rating addresses the noteholders' ability to put the notes back to the put provider on its next applicable remarketing date, which will be no later than six months from its prior remarketing date. The ratings of the class B and class C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class D notes address the likelihood that investors will receive ultimate the stated balance of principal by the legal final maturity date. The class D notes have paid approximately $2,121,980 of the initial $10,200,000 balance since closing G-Star 2002-1 is a collateralized debt obligation -- CDO -- managed by GMAC Institutional Advisors, which closed April 25, 2002. G-Star 2002-1 is backed by a static pool of commercial mortgage backed securities (CMBS 51.4%) and senior unsecured real estate investment trust (REIT 48.6%) securities. Included in this review, Fitch Ratings discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch Ratings conducted cash flow modeling utilizing various default timing and interest rate scenarios. GMAC Institutional Advisors' ABS group is currently rated 'CAM1'by Fitch. Fitch Ratings will continue to monitor G-Star 2002-1 closely to ensure accurate ratings. Fitch will continue to monitor and review this transaction for future rating adjustments. GLOBAL CROSSING: Expects to File SEC Reports by Oct. 8 ------------------------------------------------------ Global Crossing (Nasdaq: GLBCE) expects to be able to return to compliance with SEC reporting requirements by October 8, 2004. "We have established a path forward to quickly regain compliance with SEC reporting and NASDAQ listing requirements," stated John Legere, Global Crossing's CEO. "Global Crossing employees will continue to deliver the industry leading products and services our customers have come to expect, as we bring closure to our cost of access issues." Grant Thornton LLP informed Global Crossing's Audit Committee that it currently anticipates it will be in a position to reissue its audit reports on the company's 2001 and 2002 financial statements and the company's restated 2003 financial statements, subject to its satisfaction with the results of certain additional procedures and management representations. In this regard, Grant Thornton has advised the Audit Committee that it can no longer rely on representations made by a senior officer in the company's finance department. The officer has been reassigned to a position outside of the company's financial reporting function. Global Crossing has engaged FTI Consulting Inc., an independent authority on accounting matters, to assist the company in performing additional procedures and providing additional support for management's representations to Grant Thornton. The company expects that these actions will be completed by October 8, 2004. As a result, the company has requested an additional extension until October 8, 2004 from the NASDAQ Listing Qualifications Panel for returning to compliance with NASDAQ listing requirements. Global Crossing's common stock will continue to trade on the NASDAQ National Market while the Panel considers Global Crossing's request. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02- 40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003. GOING HOME PIZZA: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Going Home Pizza, LLC dba Papa John's Pizza PO Box 7061 Paducah, Kentucky 42002-7061 Bankruptcy Case No.: 04-51347 Type of Business: Papa John's pizza chain franchisee. Papa John's has nearly 3,000 restaurants in 49 states and 15 international markets. Papa John's also owns or franchises more than 100 Perfect Pizza restaurants in the United Kingdom. See http://www.papajohns.com/ Chapter 11 Petition Date: September 20, 2004 Court: Western District of Kentucky (Paducah) Debtor's Counsel: Todd A. Farmer, Esq. Stout & Farmer 2008 Broadway, PO Box 8167 Paducah, Kentucky 42002-8167 Tel: 270-443-4431 Fax: 270-443-4631 Total Assets: $188,211 Total Debts: $1,191,276 Debtor's 20 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ GE Capital Equipment $395,947 17207 North Perimeter Furniture & Fixtures Scottsdale, Arizona 85255 Value of Security: $69,429 Internal Revenue Service 940 & 941 - June $184,584 July, August 2004 GE Capital $149,773 Republic Bank & Trust $134,068 Commonwealth of Kentucky Sales Tax $105,324 Revenue Cabinet Capital Deliver, Ltd $103,589 PJ Food Services $21,395 Melissa Hammond Loan $19,000 Churchwell Homes $12,500 Papa John's International Ad Fund or Royalty $9,078 Coca-Cola Enterprises $8,385 Commonwealth of Kentucky Unemployment $8,180 Division of Unemployment Taxes Cinergy Communications $5,727 Papa John's International Royalties $5,125 Papa John's International Print Promotions $4,845 Easter Seals Front Workshop Advertising $4,498 Berry Network Judgment $2,860 Executive Inn Advertising $2,713 City of Paducah 2003 Payroll Taxes $2,506 Followthru, Inc. Advertising $1,902 HANOVER DIRECT: 1-for-10 Reverse Stock Split Takes Effect Today --------------------------------------------------------------- Hanover Direct, Inc. (Amex: HNV) anticipates that the amendment to the Company's Amended and Restated Certificate of Incorporation to effect the one-for-ten reverse stock split of the Company's common stock, par value $0.66-2/3 per share, and the reduction of the authorized number of shares of Common Stock from 300,000,000 to 30,000,000, and certain related amendments will be effected at the close of business today, September 22, 2004. At the Annual Meeting of Stockholders of the Company held on August 12, 2004, the Company's shareholders approved the Reverse Split as well as amendments to the Company's Certificate of Incorporation to: (1) reduce the par value of each share of Common Stock from $0.66-2/3 per share to $0.01 per share and reclassify the outstanding shares of Common Stock into such lower par value shares; (2) increase the number of shares of Additional Preferred Stock, which the Company would have authority to issue from 5,000,000 shares to 15,000,000 shares and make a corresponding change to the aggregate number of shares of all classes of stock in the aggregate which the Company would have authority to issue; and (3) after giving effect to the Reverse Split, increase the number of shares of Common Stock which the Company would have authority to issue from 30,000,000 shares to 50,000,000 shares and make a corresponding change to the aggregate number of shares of all classes of stock in the aggregate which the Company would have authority to issue. All of amendments to the Company's Certificate of Incorporation are anticipated to take effect with the Reverse Split at the close of business today, September 22, 2004 following the filing of a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. Shareholders will be receiving a letter of transmittal and related instructions from American Stock Transfer and Trust Company, the Company's transfer agent, shortly regarding the actions they need to take with respect to the Reverse Split. Stockholders with questions concerning the Reverse Split should contact Shareholder Relations at American Stock Transfer and Trust Company at 800-937- 5449. About Hanover Direct, Inc. Hanover Direct, Inc., (Amex: HNV) -- http://www.hanoverdirect.com/ -- and its business units provide quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers, as well as a comprehensive range of Internet, e- commerce, and fulfillment services to businesses. The Company's catalog and Internet portfolio of home fashions, apparel and gift brands include Domestications, The Company Store, Company Kids, Silhouettes, International Mall, Scandia Down, and Gump's By Mail. The Company owns Gump's, a retail store based in San Francisco. Each brand can be accessed on the Internet individually by name. Keystone Internet Services, LLC -- http://www.keystoneinternet.com/--, the Company's third party fulfillment operation, also provides the logistical, IT and fulfillment needs of the Company's catalogs and web sites. At June 26, 2004, Hanover Direct's balance sheet showed a $46,503,000 stockholders' deficit, compared to a $47,629,000 deficit at December 27, 2003. HYPERFEED: Elects to Voluntarily Delist Stock from Nasdaq SmallCap ------------------------------------------------------------------ HyperFeed Technologies, Inc. (Nasdaq:HYPR), a provider of managed services, financial information and ticker plant technologies to financial institutions, exchanges, value-added distributors and trading professionals, determined to delist voluntarily the listing of its securities from the Nasdaq SmallCap Market and to move them to the OTC Bulletin Board. The Company arrived at this conclusion subsequent to and in light of the recent delisting notification from the Nasdaq Listing Qualifications staff stating that the Company was not in compliance with the stockholders' equity/market value of listed securities/net income continued listing requirement set forth in NASD Marketplace Rule 4310(c)(2)(B). Nasdaq informed HyperFeed that if the Company did not appeal the Nasdaq staff's decision, its common stock would be de-listed from the Nasdaq SmallCap Market effective at the open of business on September 23, 2004. Having considered various business, legal and compliance aspects of this matter, the Company determined not to appeal the Nasdaq staff's determination and, instead, to move the listing of the company's common stock to the OTC Bulletin Board. Both the Board of Directors and Management of HyperFeed agreed that at this time when significant progress is being made in adding new revenue, the ongoing cost and distraction of an appeal process are unwarranted. Ron Langley, Chairman of HyperFeed and PICO Holdings, HyperFeed's parent company, was quoted, "This year management has established HyperFeed as the market leader for ticker-plant technologies introducing products that enable clients to manage their data more creatively and efficiently for both revenue generation and cost reduction. Growth by capitalizing on the advantages created by our disruptive technology is how HyperFeed will create shareholder value. This must be our entire focus at this time." Mr. Langley further stated that, "according to various traders we spoke with, there is no apparent diminution in liquidity on the OTC Bulletin Board or access to information by shareholders." HyperFeed's common stock is expected to trade under the same symbol on the OTC Bulletin Board effective on September 23, 2004. About HyperFeed Technologies, Inc. HyperFeed Technologies, Inc., -- http://www.hyperfeed.com/-- provides high-performance software and services to handle real- time market data. HyperFeed's market-leading software technology serves as a corporate-wide ticker plant, for financial institutions and content publishers. HyperFeed's HTPX platform, comprising of HVAULT and HBOX products, is specifically designed to support real-time market data. HyperFeed provides hosted and fully managed ticker plant services from its fully redundant ticker plant systems. As of June 30, 3004, stockholders' equity narrowed to $1,821,154 form a $5,680,709 equity at December 31, 2004. The Company burns an average of $1,500,000 per quarter. INTEGRATED HEALTH: Chancery Rules on Committee Suit Against IHS --------------------------------------------------------------- As previously reported, the Official Committee of Unsecured Creditors appointed in the chapter 11 cases of Integrated Health Services, Inc., and its debtor-affiliates initiated a suit against current or former members of the IHS Board of Directors before the U.S. Bankruptcy Court for the District of Delaware in connection with various compensation arrangements the Directors approved. The IHS Directors are: * Lawrence P. Cirka, * Edwin M. Crawford, * Kenneth M. Mazik, * Robert A. Mitchell, * Charles W. Newhall III, * Timothy F. Nicholson, * John L. Silverman, * George H. Strong, and * Robert N. Elkins The Bankruptcy Court, however, abstained from hearing the fiduciary duty dispute. Judge Walrath determined that the Creditors Committee's complaint is a non-core matter. Accordingly, the Creditors Committee brought the suit before the Delaware Court of Chancery in and for New Castle County. Vice Chancellor John W. Noble presides over the case. Creditors Committee's Complaint The Creditors Committee alleges that Mr. Elkins breached his fiduciary duties of loyalty and good faith to IHS by: -- obtaining certain compensation arrangements without regard to the best interests of IHS; -- using his various positions at IHS to exert improper influence over other members of the Board and the Board's compensation consultant, Joseph Bachelder, in connection with his compensation arrangements; -- causing IHS to loan him money before the approval by the IHS Board's Compensation and Stock Option Committee; and -- entrenching himself in office by insisting on unconscionable compensation arrangements In addition, the Creditors Committee alleges that the other Defendants breached their duties of loyalty and good faith by: -- subordinating the best interests of IHS to their allegiance to Mr. Elkins; -- failing to exercise independent judgment with respect to certain compensation arrangements; -- failing to select an independent compensation consultant to address Mr. Elkins' compensation arrangements on IHS' behalf; -- failing to rely on Mr. Bachelder's advice; and -- participating in Mr. Elkin's breaches of fiduciary duty by approving or ratifying his actions. The Creditors Committee also alleges that each of the Defendants breached their fiduciary duty of due care by: -- approving or ratifying certain compensation arrangements without adequate information, consideration, or deliberation; -- failing to exercise reasonable care in selecting and in overseeing Mr. Bachelder's work and thus, at times, relying on a conflicted compensation consultant's advice; -- not acting in accordance with Mr. Bachelder's advice in regard to certain compensation arrangements; and -- failing to monitor how the proceeds of company loans were utilized. The Creditors Committee asserts that the Defendants' actions were performed in bad faith. The Defendants also wasted corporate assets by approving compensation agreements and failing to assure that proceeds from loans to executive officers for the purchase of stocks in IHS were, in fact, used to purchase IHS stock. Defendants Respond The non-Elkins Defendants sought to dismiss the Creditors Committee's action pursuant to Court of Chancery Rule 12(b)(6), arguing that: (1) the Creditors Committee failed to plead facts demonstrating that the challenged compensation arrangements were not approved by an independent and disinterested majority of IHS directors at the time of the approval of any compensation agreement; (2) the non-Elkins Defendants are entitled to the protections of the exculpatory clause incorporated into IHS' charter in accordance with 8 Del. C. Section 102(b)(7); (3) the Complaint fails to allege that the non-Elkins Defendants were grossly negligent in making compensation decisions; and (4) the Complaint does not provide facts that would sustain a waste claim. Furthermore, the non-Elkins Defendants argue that claims based on any compensation matters arising before January 31, 1997, are barred by the applicable statute of limitations. Mr. Elkins adopted the non-Elkins Defendants' position and submitted to the Chancery Court a supplemental request to dismiss the Complaint. Mr. Elkins argues that to the extent that duty of loyalty claims are asserted against him, as opposed to the non- Elkins Defendants, the claims should be dismissed because all of the challenged transactions were approved by a majority of disinterested, independent members of IHS' Board or the Compensation Committee. Mr. Elkins also argues that his January 3, 2001 separation agreement with IHS, which was approved by the Bankruptcy Court, bars the Creditors Committee from prosecuting claims not arising from "wrongful" acts. To the extent that claims within the Complaint are for "wrongful" acts, Mr. Elkins asked the Chancery Court to find that the Agreement with IHS limits his liability exposure to claims paid by IHS' directors' and officers' liability insurance policy. The Challenged Transactions (A) 1996 Bonus Mr. Elkins' Employment Agreement included a performance-based bonus. On July 16, 1996, Mr. Elkins sent a letter to the Compensation Committee instructing them to "determine" the amount of bonuses for 1996. The Creditors Committee alleges that Mr. Elkins was present at a July 24, 1996 Board Meeting, and discussed with the Board bonuses both for himself and for Mr. Cirka. At the meeting, the Board considered two studies prepared by outside consultants and awarded bonuses of $5,000,000 to Mr. Elkins and $1,666,667 to Mr. Cirka. These awards were made despite the fact that IHS had not met the objectives prescribed for a bonus under the Employment Agreement. The Complaint alleges that before the Board meeting, Mr. Elkins approached each of the voting directors individually to discuss his bonus. (B) 1996 Loans In 1996, Mr. Elkins and Mr. Cirka caused IHS to disburse a loan to them, wherein Mr. Elkins received $705,527 and Mr. Cirka received $880,630. At that time, the disbursements were not authorized by the Board and neither Mr. Elkins nor Mr. Cirka provided a note or other loan documentation to IHS. At an April 29, 1997 meeting, the Compensation Committee approved the loan ex post. The approval was ratified by the full Board the next day. (C) 1997 Option Grant On May 27, 1997, Mr. Elkins sent a letter to the Compensation Committee requesting signatures on unanimous consents to grant him an option to purchase 700,000 share of IHS stock. This action was taken by the Compensation Committee and ratified within a few days. Subsequently, Mr. Bachelder compiled a report, which was sponsored by Taylor Piclett, IHS' Chief Financial Officer, and presented to the Compensation Committee at its September 29, 1997 meeting. Mr. Bachelder did not attend the meeting. Mr. Bachelder's September Report recommended that certain employee's options be accelerated and that IHS institute a loan program to allow those employees to exercise their now- accelerated options. The convertible debenture included a loan forgiveness component, which was tied to a "Change-in- Control" event. At its September 29, 1997 meeting, the Compensation Committee instituted a loan program, which authorized loans of up to $16,000,000 to enable IHS' officers to acquire or to hold IHS' common stock, but did not set up any mechanisms to monitor how the proceeds of the loan would be spent. At the same meeting, the Compensation Committee granted Mr. Elkins a loan of up to $14,000,000 to exercise previously awarded options, as well as additional options to purchase up to 400,000 shares of IHS stock. That same day, Mr. Elkins executed a Promissory Note to IHS for $13,447,000. The terms of the note provided loan forgiveness under three circumstances: -- A "Change-in-Control," as defined in the Employment Agreement; -- Termination of Mr. Elkins without cause; and -- Mr. Elkins' departure from IHS for good cause. (D) 1997 Compensation Revisions (a) July 1997 Revision At Mr. Elkin's request, the Compensation Committee conducted a review of the compensation arrangements of Mr. Elkins and other IHS officers in early 1997. Mr. Bachelder was retained as a compensation consultant. On July 24, 1997, Mr. Bachelder made recommendations relating to Mr. Elkins' compensation, including amending Mr. Elkins' Key Employee Supplemental Deferred Compensation Plan, granting Mr. Elkins options to purchase 1,700,000 shares of IHS stock and amending Mr. Elkins' Employment Agreement. The Compensation Committee and the Board approved all of Mr. Bachelder's recommendations. Mr. Bachelder was not present at the Board meeting and the Board was not given copies of Mr. Bachelder's report. (b) November 1997 Revisions and the Bonus Forgiveness Term At an October 19, 1997 meeting among Mr. Bachelder, Mr. Elkins, and Marshall Elkins, IHS' General Counsel and Mr. Elkins' brother, additional changes to the Employment Agreement were discussed. Mr. Elkins wanted to add another forgiveness term to both the $13,500,000 Loan and a previous $4,700,000 loan. The forgiveness term would establish an annual bonus program under which Mr. Elkins would be entitled to receive bonuses once a year beginning 1998 and ending in 2002. These bonuses would be in an amount that would enable Mr. Elkins to repay the principal and interest on each loan covered by the Bonus Forgiveness Term. Although Mr. Elkins wanted the Bonus Forgiveness Term to apply to both the $13,500,000 Loan and the $4,700,000 Loan, Mr. Bachelder would only recommend the Bonus Forgiveness Term with respect to the larger loan. If the forgiveness terms were to apply to both loans, Mr. Bachelder reported, the total forgiveness amount would be too large. The Compensation Committee approved amendments to Mr. Elkins' Employment Agreement, including the Bonus Forgiveness Term for the $13,500,000 Loan, on November 18, 1997. The $4,700,000 Loan was subject only to a Change-in-Control Forgiveness Term. Board approval was obtained the same day. An amended employment agreement, which included the new loan forgiveness term and the recommendations approved in July 1997, was signed on November 18, 1997. (E) Forgiveness for Amount Due on $4,700,000 Loan Mr. Elkins did not pay the amount due on his $4,700,000 Loan for 1997. On March 19, 1998, he sent backdated unanimous written consents to the Compensation Committee, which would ex post approve a 1997 forgiveness bonus to cover the amount due on the loan. This had the effect of essentially applying a one-time Bonus Forgiveness Term to the $4,700,000 Loan. The consents were signed and sent to Mr. Elkins. The Board subsequently ratified the Compensation Committee's actions. (F) The $2,088,000 Loan On January 28, 1998, Mr. Elkins caused IHS to provide to him $2,088,000 in the form of a loan. The disbursement of funds was initially undertaken without approval from the Compensation Committee or the Board. In a March 19, 1998 letter, Mr. Elkins sent to the Compensation Committee loan documents and backdated unanimous written consents approving the loan ex post, which the Compensation Committee duly signed. (G) The $4,200,000 Loan & Bonus Forgiveness Term Extension to the $2,088,000 Loan On September 30, 1998, Leslie Glew, then associate corporate counsel of IHS and assistant secretary to the Board, sent unanimous written consents to the Compensation Committee on Mr. Elkins' behalf. The consents would: -- consolidate the $13,500,000 and $2,088,000 Loans; -- extend the Bonus Forgiveness Term to cover the $2,088,000 Loan; and -- provide a new $4,000,000 loan to Mr. Elkins. The new loan would be issued to allow Mr. Elkins to pay taxes on profits he realized through exercising options. The Compensation Committee executed the unanimous written consents that same day. The consents were later ratified by the Board. Although Mr. Bachelder was never consulted by the Compensation Committee regarding the requests, Ms. Glew's cover letter included a reference to Mr. Bachelder's previous reports. As a result, Mr. Elkins executed two promissory notes: (1) The first note for $15,535,000, which represents the consolidated $13,500,000 and $2,088,000 loans; and (2) The second note, which stemmed from the authorization of the new $4,000,000 loan. However, the total proceeds from the loan exceeded the authorized $4,000,000 by $250,000. Therefore, Mr. Elkins executed a $4,300,000 note to IHS on October 12, 1998. (H) The $4,500,000 Loan In November 1998, Mr. Elkins received funds from a $4,500,000 loan. As with the $2,088,000 Loan, the disbursement of funds was not authorized when taken. The $4,500,000 loan was approved and ratified by the Compensation Committee on November 19, 1998. The action was ratified by the Board. Mr. Elkins then executed a promissory note to IHS reflecting the loan. (I) 1999 Loan Program By 1999, the effects of the Balanced Budget Act of 1997 were beginning to be felt. As of March 19, 1999, IHS' stock was trading at $6.81 per share. In light of this, Mr. Elkins and Mr. Pickett believed that Citibank would seek to amend IHS' credit agreement so as to eliminate IHS' ability to use the credit agreement for loans to employees. On March 18, 1999, the Board was sent unanimous written consents, which would establish a $25,000,000 loan program for IHS officers. Under the program, each beneficiary would execute a promissory note to IHS. The note would contain both a Change-in-Control Forgiveness Term and a Five-Year Forgiveness Term. The Five-Year Forgiveness Term provided that 20% of the amount of the loan, and any interest, would automatically be forgiven on each anniversary of the loan if the beneficiary was still employed at IHS. The Board approved the program on March 19, 1999, without consultation with Mr. Bachelder. As of March 31, 1999, IHS loaned $11,500,000 to Mr. Elkins and $12,900,000 to other IHS officers. (J) Extension of the Five-Year Forgiveness Term By mid-1999, Mr. Elkins had over $40,000,000 in total outstanding loans, almost $30,000,000 of which were not subject to the Five-Year Forgiveness Provisions. On July 8, 1999, in a meeting attended by Mr. Elkins, the Compensation Committee extended the application of the Five- Year Forgiveness Provisions to all of Mr. Elkins' loans. The Compensation Committee further: -- extended the time for repayment of the $4,700,000 Loan by five years; -- removed selling restrictions on the IHS stock Mr. Elkins purchased in connection with the $15,500,000 Loan; and -- consolidated the $4,300,000 and $4,500,000 Loans into one loan totaling $8,750,000. The Board approved the action. (K) The Elkins "Poison Pill" In January 2000, IHS amended the employment agreement of officers having outstanding loans from IHS to allow for forgiveness of about $16,000,000 in loans if Mr. Elkins were to depart from IHS. When Mr. Elkins left IHS in January 2000, IHS forgave $16,000,000 in loans to other IHS officers as well as the $40,000,000 in loans to Mr. Elkins. The Creditors Committee calls this move a "Poison Pill." Chancery Court's Decision Vice Chancellor Noble finds that the Creditors Committee failed to raise any doubt that a majority of the Directors approving the transactions questioned by the Committee were independent and disinterested. Vice Chancellor Noble also finds that certain of the Committee's pleadings allege sufficient facts to maintain an action alleging breach of fiduciary duty. The Committee also alleged, in a manner to withstand the requests for dismissal, that Mr. Elkins breached his fiduciary duties to IHS. The Committee, however, has not alleged sufficient facts to support a waste claim. Vice Chancellor Noble grants the non-Elkins Defendants request and dismisses the Committee's waste claim and fiduciary duty claims against non-Elkins Defendants with respect to the 1996 Bonus, 1997 Option Grant, 1997 Loan Program, and 1997 Compensation Revisions. The Committee's fiduciary duty claim with respect to the $2,088,000 Loan is dismissed as to all non-Elkins Defendants except for Messrs. Mazik and Newhall. The non-Elkins Defendants' request to dismiss is granted for Cirka as to the $4,200,000 Loan, the Extension of the Bonus Forgiveness Term to the $2,088,000 Loan, the $4,500,000 Loan, the 1999 Loan Program, the Extension of the Five-Year Forgiveness Term and the Elkins "Poison Pill." Vice Chancellor Noble grants the non-Elkins Defendants' request to dismiss Messrs. Crawford and Strong as to the Elkins "Poison Pill." The non-Elkins Defendants' request to dismiss the Committee's other claims is denied. Vice Chancellor Noble dismisses the Committee's waste claim against Mr. Elkins. To the extent the Committee's claims reach Mr. Elkins as a Board member, Vice Chancellor Noble dismisses those claims. Mr. Elkins' request to dismiss the Committee's breach of fiduciary duty claims made against him individually and in a capacity apart from his role as a director is denied. A full-text copy of the Chancery Court's 52-page Memorandum Opinion is available for free at: http://bankrupt.com/misc/IHS_Committee_vs._elkins.pdf Headquartered in Owings Mills, Maryland, Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- IHS operates local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the Debtors in their restructuring efforts. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 81; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERMET CORP: Potential Default Prompts S&P to Junk Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit and senior secured bank loan credit ratings on Troy, Michigan- based Intermet Corp. to 'CCC' from 'B+' and its senior unsecured debt rating to 'CCC-' from 'B'. At the same time, Standard & Poor's placed the ratings on CreditWatch with negative implications. The rating actions follow Intermet's announcement of its potential to default on its financial covenants at the end of its third fiscal quarter and, hence, have no access to its revolving credit facility. The casting company's total outstanding debt was about $372 million (including the present value of operating leases) at June 30, 2004. "The ratings downgrade reflects heightened concerns over Intermet's prospects of operating as an ongoing concern given its inability to absorb the impact of raw material price increases," said Standard & Poor's credit analyst Heather Henyon. The company has announced a projected net loss for the nine months ended Sept. 30, 2004, ranging between $33 million and $38 million due to a raw material costs increase of $24 million higher than the prior year. As a result of these losses, Intermet will not be in compliance with its financial covenants at Sept. 30, 2004, and is in the process of seeking a waiver from its lenders. If the company is not granted a waiver and does not receive access to its revolving credit facility, the company could enter into bankruptcy proceedings or a financial restructuring. Total debt (adjusted for $35 million restricted cash) to EBITDA increased to 5.8x for the last 12 months ending June 30, 2004, exceeding Standard & Poor's expectations of 4x-5x in the intermediate term. Standard & Poor's will continue to monitor Intermet's ability to secure a waiver from its lenders, access its revolving credit facility, and potential for financial restructuring. If the company is not granted a waiver and defaults on its credit agreement, then ratings will be lowered to 'D'. IPSCO INC: Raises Third Quarter Earnings Expectations by 40% ------------------------------------------------------------ IPSCO, Inc., (NYSE; TSX: IPS) expects third quarter earnings will exceed $2.00 per diluted share, which is above the analyst consensus of $1.43 per share by more than 40%. Favorable results this quarter have been driven by continued strength in the market with strong product demand, resulting in higher margins. IPSCO's Steelworks in Mobile, Alabama, was shut down as a precautionary measure and to allow employees and their families to evacuate prior to the landfall of Hurricane Ivan. The facility was safely up and running only three days after the hurricane passed. The manufacturing facility sustained no damage and is operating efficiently. "Our employees in Mobile did an outstanding job of minimizing the effects of Hurricane Ivan," said David Sutherland, President and Chief Executive Officer. "The plant was well protected and production was returned on a very timely basis through the fortitude and dedication of our employees." IPSCO's employees, as well as logistics in the region, have been affected by the destruction of the storm, which will temporarily slow the shipping of products. The impact of Hurricane Ivan has been factored into the revised estimate for the quarter. IPSCO, Inc., -- http://www.ipsco.com/-- is a publicly traded corporation with operations spanning the U.S. and Canada. The Company was incorporated in 1956 under the name of Prairie Pipe Ltd. At that time pipemaking facilities were installed at the Regina, Saskatchewan, Canada site. Over the years the Company expanded on both the Regina site and elsewhere through new construction as well as acquisition. In 1984, the Company changed its name to IPSCO Inc., adopting the acronym by which it was generally known, as its full name. * * * As reported in the Troubled Company Reporter on February 26, 2004, Standard & Poor's Ratings Services lowered its ratings on steel producer IPSCO Inc., including the long-term corporate credit rating, which was lowered to 'BB' from 'BB+'. At the same time, Standard & Poor's lowered its rating on the company's 5.5% cumulative redeemable first preferred shares to 'B' from 'B+'. The downgrade affects about US$425 million in unsecured debt. The outlook is stable. The downgrade is the result of the company's persistently weak profitability and cash flow, as well as its aggressive capital structure amid difficult operating conditions in the North American steel minimill sector. Although the company's revenues are expected to increase with the general improvement in steel market conditions, higher input costs stemming from currently tight scrap steel supplies could limit profit and cash flow growth. JARDEN CORP: S&P Places B+ Credit Rating on CreditWatch Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on houseware manufacturer Jarden Corp., including its 'B+' corporate credit rating, on CreditWatch with negative implications. Total debt outstanding at June 30, 2004, was $499.3 million. The CreditWatch placement follows Jarden's announcement today that it had entered into a definitive agreement to acquire American Household Inc., the parent of The Coleman Co. and Sunbeam Products Inc., for $745.6 million plus assumption of debt. The company produces small appliances, camping equipment, and other products under the Coleman, Mr. Coffee, Oster, and Sunbeam brands, among others. Warbug Pincus, a private equity firm, will likely invest $350 million in equity and preferred equity in Jarden to facilitate the transaction. Rye, New York-based Jarden markets the FoodSaver brand of home preservation appliances as well as home canning jars and supplies under the Ball name and other brands. "Although we believe that the planned, partially debt-financed acquisition would broaden Jarden's narrow niche oriented product portfolio, the firm will be challenged to successfully integrate such a large acquisition of a company operating in a highly competitive markets," said Standard & Poor's credit analyst Martin Kounitz. To resolve the CreditWatch listing, Standard & Poor's will meet with Jarden management to discuss business and financial strategies. JOSTENS INC: Offers to Pay 11.9% More for 12-3/4% Sr. Sub. Notes ---------------------------------------------------------------- Jostens, Inc., determined the price for its previously announced tender offer and consent solicitation for its 12-3/4% Senior Subordinated Notes Due 2010. The Notes are being tendered pursuant to an Offer to Purchase and Consent Solicitation Statement dated August 19, 2004, which more fully sets forth the terms and conditions of the cash tender offer to purchase any and all of the $203,985,000 outstanding principal amount of the Notes and the consent solicitation to eliminate substantially all of the restrictive and reporting covenants, certain events of default and certain other provisions contained in the indenture governing the Notes. If the Tender Offer expires at the expiration date and time as currently scheduled (5:00 p.m., New York City time on October 4, 2004, unless extended), the Total Consideration will be $1,119.29 for each $1,000 principal amount of Notes tendered and accepted for payment in accordance with the terms of the Offer to Purchase. The Total Consideration includes a consent payment of $20.00 for each $1,000 principal amount of Notes. All holders who validly tender their Notes pursuant to the Offer to Purchase and prior to the expiration time will receive the Total Consideration. In addition, each holder of Notes will be paid accrued and unpaid interest, if any, from the last interest payment date up to, but not including, the payment date. The payment date for Notes validly tendered and accepted for payment is expected to be Tuesday, October 5, 2004, unless the Tender Offer is extended or earlier terminated. The Tender Offer Consideration for the Notes was determined by reference to a fixed spread of 75 basis points over the bid side yield to maturity on the 6.500% U.S. Treasury Note due May 15, 2005 (as quoted on the Bloomberg Government Pricing Monitor on page PX3 at 10:00 a.m., New York City time, on September 20, 2004). The Company reserves the right to extend the expiration date and time of the Tender Offer at any time subject to applicable law. In the event that the Tender Offer is extended for any period of time longer than three business days from the currently scheduled expiration date, a new price determination date will be established that will be the tenth business day immediately preceding the expiration date as extended. The obligation of the Company to accept the Notes for purchase and to pay the Total Consideration is conditioned on, among other things, the satisfaction or waiver of the conditions to the closing of previously announced transactions involving affiliates of Kohlberg Kravis Roberts & Co. and DLJ Merchant Banking Partners. Credit Suisse First Boston LLC is acting as dealer manager and solicitation agent for the Tender Offer and Consent Solicitation. The information agent is MacKenzie Partners, Inc., and the Depositary is The Bank of New York. Questions regarding the Tender Offer and Consent Solicitation may be directed to: Credit Suisse First Boston LLC Telephone: (800) 820-1653 (toll free) (212) 538-0652 (call collect) Requests for copies of the Offers to Purchase and related documents may be directed to: MacKenzie Partners, Inc., Telephone: (800) 322-2885 (toll free) (212) 929-5500 (call collect) Email: proxy@mackenziepartners.com. Jostens is a leading provider of school-related affinity products and services in three major product categories: yearbooks, class rings and graduation products, which includes diplomas and graduation regalia, such as caps, gowns and announcements. Jostens also provides school photography products and services in Canada. Jostens has a 107-year history of providing quality products, which has enabled it to develop long-standing relationships with school administrators throughout the country. This announcement is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of consent with respect to any securities. The tender offers and consent solicitations are being made solely by the Offer to Purchase and Consent Solicitation Statements dated August 19, 2004. * * * As reported in the Troubled Company Reporter on Sept. 10, 2004, Moody's Investors Service has assigned a B1 rating to Jostens IH Corp.'s proposed $1.270 billion senior secured credit facility. Details of the rating action are as follows: Ratings assigned: Jostens IH Corp. * $250 million senior secured revolving credit facility, due 2009 -- B1; * $150 million senior secured term loan A, due 2010 -- B1; * $870 million senior secured term loan B, due 2011 -- B1; and * $500 million senior subordinated notes, due 2012 -- B3. Ratings affirmed: Jostens Holding Corp. * $163 million senior discount notes, due 2013 -- Caa2; * Senior Implied - B1 * Issuer rating Caa2 Ratings affirmed, subject to withdrawal at closing: Jostens Inc. * $150 million senior secured revolving credit facility, due 2010 - Ba3; * $475 million senior secured term loan, due 2010 - Ba3; * $221 million 12.75% senior subordinated notes, due 2010 - B3; and * $60 million 14% PIK preferred stock, due 2011 - Caa2. AKI Holding Corp.: * $50 million senior discount notes, due 2009 - Caa1. AKI, Inc.: * $115 million 10.5% senior notes, due 2008 - B2; * Senior Implied rating - B2; and * Issuer rating - B2. Von Hoffman Corp.: * $90 million senior secured revolving credit facility, due 2006 - Ba3; * $275 million 10.25% senior unsecured notes, due 2009 - B2; * $100 million 10.375% senior subordinated notes, due 2007 - B3; * Senior Implied - B1; and * Issuer rating - B2. The outlook is stable. The ratings reflect: (i) Jostens' high pro-forma leverage, (ii) low top line growth, (iii) competitive pricing pressure, and (iv) the lack of junior capital to provide meaningful protection to debtholders. Ratings are supported by: (i) the reputation of Jostens' products, (ii) the diversification of its product range, (iii) the maintenance of its yearbook, (iv) textbook printing (Von Hoffmann) and school ring market shares, (v) an expected pick-up in textbook spending commencing early 2005, and (vi) the experience of its management team. KEY ENERGY: Discloses Selected Financial Data --------------------------------------------- Key Energy Services, Inc., (NYSE: KEG) reported select financial data for the month ended July 31, 2004. The Company is providing this information to investors as part of the consent from the holders of the Company's 6-3/8% senior notes due 2013 and its 8-3/8% senior notes due 2008: Total revenues $89,502,000 Total current assets $231,568,000 Total current liabilities $140,464,000 Long-term debt, less current portion $455,978,000 Activity Update Activity levels remain strong as the Company's weekly rig hours average approximately 52,000 per week, excluding holiday weeks. Additionally, the Company recently extended the Egypt contract for four of the five Egypt rigs through March 31, 2005, with month-to- month extensions possible after that. The contract on the fifth rig is set to expire in February 2005; however, the Company will seek to extend the contract through March 31, 2005 as well. The Company completed its equipment review and physical inventory count (not including valuation or matching to financial records) and now turned over the inventory list to its auditors for their review and inspection. At this time, the Company is not able to determine when the auditors will be able to complete their review or whether or not they will agree with the results of the Company's inventory count. Although the Company has provided its inventory list to its auditors, it cannot predict when it will complete the restatement process and issue its audited financial statements for the year ended December 31, 2003 and prior periods. The Company has several other steps it must complete in order to file its financial statements, such as determining the asset valuation and proper periods in which the write-offs must occur. Key Energy Services, Inc., is the world's largest rig-based, onshore well service company. The Company provides diversified energy operations including well servicing, contract drilling, pressure pumping, fishing and rental tool services and other oilfield services. The Company has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Argentina, Canada and Egypt. * * * As reported in the Troubled Company Reporter on August 19, 2004, Standard & Poor's Ratings Services' 'B' corporate credit rating on Key Energy Services Inc. remains on CreditWatch with developing implications. Midland, Texas-based Key had about $485 million of total debt outstanding as of June 30, 2004. S&P's CreditWatch update follows the company's recent announcement that it is seeking extensions from its senior bank lenders to file restatements of its 2003 and 2004 financial results because it will miss the Sept. 30 deadline. "The CreditWatch with developing implications addresses the conflicting potential resolutions of the company's current situation," said Standard & Poor's credit analyst Brian Janiak. "Failure to receive waivers and extensions on its $175 million credit facility would cause the company to be in default." "Conversely, the likelihood of Key receiving consent waivers from its senior secured lenders would provide the company with more time to resolve its financial predicament, and the timely completion of the 10-K filing would likely result in higher ratings," Mr. Janiak continued. LENTEK: American Biophysics Wins Mosquito Trap Infringement Suit ---------------------------------------------------------------- The United States Bankruptcy Court, Middle District Florida, Orlando Division, recently awarded American Biophysics Corporation, manufacturer of the Mosquito Magnet(R) Advanced Mosquito Defense System(TM) -- http://www.mosquitomagnet.com--, all of the intellectual property rights, including all trademark and patent rights, for Orlando, Florida-based Lentek International, Inc.'s carbon dioxide-generating "Mosquito Traps." Lentek filed for bankruptcy on July 11, 2003 and was liquidated by court order on June 17, 2004. The bankruptcy court ruling in favor of American Biophysics is the result of an investigation American Biophysics initiated with the United States International Trade Commission against Lentek in November 2003, alleging a violation under Section 337 of the Tariff Act of 1930 as amended (19 U.S.C. Sec. 1337). American Biophysics accused Lentek of violating its patent rights relating to methods and devices for trapping insects -- including its patented Counterflow(TM) and propane combustion technology -- by Lentek's manufacture and distribution of their insect trapping devices, known as the Protector Mosquito Trap or the Mosquito Killing Machine. The ITC Administrative Law Judge issued an order on April 19, 2004, finding Lentek in default for failing to appear and participate in the ITC suit. After the default was entered by the ITC, American Biophysics filed a claim for damages for the alleged patent infringement with the U.S. Bankruptcy Court in Florida. The bankruptcy judge awarded ABC American Biophysics an administrative claim in the amount of $50,000 and ordered the transfer of all of Lentek's patents, patent applications, trademarks, trademark registrations, and trademark applications relating to carbon dioxide-generating insect traps (including models MK01 through MK11) to American Biophysics. In addition, the bankruptcy court awarded Lentek's entire existing inventory of carbon dioxide-generating traps to ABC. Lentek's complete supply of Mosquito Traps, totaling approximately 2,400 traps, was transferred to American Biophysics; the company destroyed the entire stock of traps earlier this month. "We vigorously defend our intellectual property rights and will pursue any company infringing on our patents and trademarks," said Raymond Iannetta, president and CEO, American Biophysics Corp. "This most recent ruling is evidence that the legal actions we initiate have important consequences to businesses that manufacture or sell products that infringe on our Mosquito Magnet(R) carbon dioxide-based traps." Previously, American Biophysics successfully asserted its pioneering patents against a number of companies, including Biting Insect Technologies, Inc. and Blue Rhino Corporation, a division of Ferrellgas Partners, L.P. (NYSE: FGP). The latter resulted in a recent ITC consent order against Blue Rhino to stop the importation and sale of its SV1000 model insect traps. ABC is also pursuing litigation against Blue Rhino before the ITC for its newer 2004 model products. American Biophysics Corp., founded in 1991 and headquartered in North Kingstown, Rhode Island, is a biotechnology company that uses science and innovation to develop and manufacture practical applications for new technologies that address biting insect problems around the world. Ranked America's fastest growing private company by Inc. magazine, ABC is the creator and manufacturer of the Mosquito Magnet(R) product line, the world's original and only scientifically proven Advanced Mosquito Defense SystemT. The technology behind the Mosquito Magnet(R) insect trap is backed by more than 13 years of research performed in coordination with multiple government agencies. The trap mimics a large mammal's breath by catalytically producing the proper amount of carbon dioxide, heat and humidity from propane gas. The machine then emits a warm, moist carbon dioxide plume, which attracts the blood-seeking insects. As they approach the source, they are vacuumed into the machine's net where they dehydrate and die. The traps are designed to operate 24-hours a day, virtually eliminating mosquito problems by disrupting their breeding cycles. American Biophysics is the only commercial company, and one of only a handful of scientific institutions in the world that has the technology to probe mosquitoes down to a single neuron to determine their reactions to various compounds. The company has isolated more than 330 compounds emitted from human skin and is now scanning, separating, and introducing these compounds to mosquitoes for positive and negative reactions to develop powerful attractants to lure and catch biting insects. In 2004, the company launched Lurex(TM), the first-ever, EPA-registered attractant designed specifically for the Asian Tiger mosquito, a non-indigenous, aggressive species that is a potential carrier of several mosquito-borne diseases including West Nile virus. Pillsbury Winthrop -- http://www.pillsburywinthrop.com-- represented American Biophysics in the case against Lentek. Pillsbury Winthrop counsel includes partners George Sirilla, Adam Hess, and Kevin Kramer of the firm's Northern Virginia office. Pillsbury Winthrop is an international law firm with core practice areas in: litigation, technology and intellectual property, energy, capital markets and finance. The firm has 17 offices worldwide. MCI INC.: Fitch Puts B Rating on $5.665B Senior Unsecured Notes --------------------------------------------------------------- Fitch Ratings has assigned an initial rating of 'B' to MCI Inc.'s, $5.665 billion outstanding of senior unsecured notes. The senior unsecured notes were issued in conjunction with MCI's emergence from bankruptcy on April 20, 2004. The notes are guaranteed by all existing and future restricted subsidiaries of MCI. The Rating Outlook is Negative. Fitch's 'B' rating and Negative Rating Outlook incorporate: * the highly speculative nature of MCI's credit profile as evidenced by the continued declines in revenue and operating cash flow from its long distance business, * the negative outlook for the intensely competitive long distance sector, * the lack of diversification with respect to its revenue stream and the unknowns surrounding the claims filed by certain states regarding WorldCom, Inc.'s state income tax filings. Owing to the trends in the business, Fitch anticipates reductions in MCI's future financial flexibility. During 2005, Fitch expects net cash from operating activities to exceed the estimated $1.5 billion in annual capital spending and common stock dividends. In 2006, net cash from operations is forecast to approximate the $1.5 billion assumed for capital spending and dividends. Due to declining EBITDA stemming from lower margins and lower revenues, debt-to-EBITDA is forecast to approximate 5.5 times (x) by 2006. It should be noted MCI operates with a high degree of leased facilities, and based on the $897 million in rent expense in 2003 for the predecessor company, annualized adjusted debt-to-EBITDAR was 6.5 times (x) in the first half of 2004, compared to annualized debt-to-EBITDA of 3.4x during the same period. The negative issues are partly offset by current credit protection metrics that are strong for the current rating and the strong near-term liquidity provided by its $5.4 billion in cash at June 30, 2004. The 'B' rating also incorporates the potential collateralization of senior secured facilities, as MCI has disclosed that it is seeking revolving credit facilities in the range of $750 million to $1 billion. The rating could also be revisited in the event revenue erosion accelerates beyond Fitch's forecast assumptions, or if there are event risk scenarios that come to pass, such as potential the outcome of lingering state tax issues and merger and acquisition activity. The fundamentals of the long distance industry are very negative for the traditional long distance carriers and are not expected to improve in the foreseeable future. Characteristics of the industry include: * a high degree of price competition, * overcapacity, * technological substitution, * weak demand for high-end business and related information technology services, and * the entrance over the past few years of the better capitalized Regional Bell Operating Companies into certain sectors of the long distance market. The severe price competition in the industry has been due in part to pricing actions by the leading carriers, MCI and AT&T Corp., as well as by smaller operators. In particular, in late 2003 AT&T shifted to a more aggressive pricing strategy. In the near-term, pricing pressures are not expected to abate, owing to overcapacity in the industry provided by a number of national network operators. Clearly, rationalization in the industry is needed, but when this will occur is uncertain. Technological substitution has also occurred from wireless services, primarily in the consumer segment, and from e-mail and the Internet. Finally, as a pure-play long distance operator, MCI suffers from a lack of growth opportunities in its core business. In Fitch's view a strategy based on cost reductions is not viable in the longer term, and therefore there is the risk acquisitions could be made in the future that target growth areas. The 'B' rating incorporates Fitch's concerns regarding intermediate term liquidity in the 2006-2007 time frame. MCI's near-term liquidity is good, with more than $5 billion in cash and cash equivalents at June 30, 2004. Over the 2004 to 2006 time frame, MCI's cash and cash flow from operations should be sufficient to fund the company's remaining $1 billion in obligations resulting from the emergence from the bankruptcy process, a Fitch-estimated $1 billion annual capital spending program, and to fund its approximately $500 million per year annual dividend. MCI also plans on obtaining a revolving credit facility in the amount of $750 million to $1 billion, which will provide additional liquidity. In 2007, $2.0 billion of the senior notes become due. Given the trends and volatility of its operations, there is some risk that MCI may not have sufficient cash or access to the capital markets to retire or refinance this debt. Fitch's rating also incorporates the uncertainty posed by state tax issues regarding its predecessor company's tax strategies. State claims pertaining to these tax obligations total $2.75 billion, including a claim by the state of Mississippi of $2 billion. MCI has confirmed in the press that settlement discussions with the states regarding these tax issues have occurred. Fitch cannot predict the potential outcomes of such discussions, and has no information regarding the potential settlement amounts. However, assuming such tax settlements may approximate the recovery on the predecessor company's senior unsecured debt, such settlements could thus approximate $1 billion and have been assumed in the rating. Even with payments totaling $1 billion, Fitch estimates MCI's cash balances would exceed $4 billion over the next two years. Fitch would review its rating if the settlement process (or if a settlement is not reached, litigation) resulting in payments exceeding $1 billion. The rating is based on existing public information and is provided as a service to investors. MICROCELL TELECOM: Inks Cash Take-Over Bid Agreement with Rogers ---------------------------------------------------------------- Rogers Wireless Communications, Inc., Rogers Communications, Inc., and Microcell Telecommunications, Inc., entered into an agreement under which Rogers Wireless will make an all cash take-over bid for Microcell's securities. In light of this development, TELUS Corporation (TSX: T, T.A; NYSE: TU) extended its all-cash offers to purchase all of the issued and outstanding publicly traded shares (TSX: MT.A, MT.B) and warrants (TSX: MT.WT.A, MT.WT.B) of Microcell with a view to evaluating the terms and conditions of the Rogers bid and the likelihood of that bid being completed. TELUS will continue to assess its options with respect to any further extensions and amendments to its bid once the Rogers bid is available. The TELUS offers, as extended, will be open for acceptance until 9 p.m., Toronto time, on October 12, 2004, unless further extended or withdrawn. The TELUS offers were previously scheduled to expire at 9 p.m., Toronto time, on September 20, 2004. The TELUS offers are otherwise unchanged, and continue to be for Cdn.$29 per Class A restricted voting share and Class B non-voting share, Cdn.$9.67 per Warrant 2005 and Cdn.$8.89 per Warrant 2008. A Notice of Extension will be mailed to the security holders of Microcell as soon as is practicable. As of the close of business on September 20, 2004, 837 class A restricted voting shares, 172,311 class B non-voting shares, 91,166 Warrants 2005 and 91,398 Warrants 2008 of Microcell had been deposited to the offers and not withdrawn from the offers. About the Offers TELUS retained RBC Capital Markets to act as its financial advisor in connection with the offers. RBC Dominion Securities, Inc., and RBC Capital Markets Corporation are acting in Canada and the United States, respectively, as dealer managers in connection with the offers. Questions and requests for assistance may be directed to: RBC Dominion Securities, Inc. Telephone: 416-842-7519 Toll free: 1-888-720-1216 -- or -- RBC Capital Markets Corporation Telephone: 415-633-8513 Toll free: 1-888-720-1216 -- or -- Depositary for the Offers Computershare Trust Company of Canada Toll free: 1-866-982-8786 Additional copies of the Offers to Purchase and Circular dated May 17, 2004, the accompanying Letters of Acceptance and Transmittal and Notices of Guaranteed Delivery, the Notice of Extension and Variation dated June 22, 2004, the Notice of Extension dated July 22, 2004, the Notice of Extension dated August 20, 2004, and the Notice of Extension dated September 20, 2004, may be obtained without charge on request from the Dealer Managers or the Depositary. About TELUS TELUS is Canada's second largest telecommunications company with more than Cdn$7 billion of annual revenue, more than 4.8 million network access lines and more than 3.6 million wireless subscribers. The company provides subscribers across Canada with a full range of telecommunications products and services utilizing next-generation Internet-based technologies, including data and voice services through TELUS Communications, Inc., and wireless services through TELUS Mobility. Microcell Telecommunications, Inc., is a major provider, through its subsidiaries, of telecommunications services in Canada dedicated solely to wireless. Microcell offers a wide range of voice and high-speed data communications products and services to over 1.2 million customers. Microcell operates a GSM network across Canada and markets Personal Communications Services -- PCS -- and General Packet Radio Service -- GPRS -- under the Fido(R) brand name. Microcell has been a public company since October 15, 1997, and is listed on the Toronto Stock Exchange. * * * As reported in the Troubled Company Reporter on May 18, 2004, Standard & Poor's Ratings Services placed its 'CCC+' long-term corporate credit ratings and the 'B-' senior secured debt rating, on Microcell Telecommunications, Inc., on CreditWatch with positive implications following Telus Corp.'s announced cash bid for 100% of the shares of Microcell. At the same time, the ratings on the company's subsidiary, Microcell Solutions, Inc., were also placed on CreditWatch with positive implications. "Should the bid be successful, Microcell's existing debt would likely be redeemed in its entirety," said Standard & Poor's credit analyst Joe Morin. Microcell currently has about C$400 million in senior secured bank debt outstanding. Under the credit facility covenants, a change of control in Microcell could result in an acceleration of the debt, which can be exercised at the option of lenders. In addition, the debt can be voluntarily prepaid at any time. Standard & Poor's assumes that if the debt is not accelerated by creditors, Telus would prepay the debt given the facility's higher interest rates and collateral features. MIRANT CORPORATION: Court Approves Transcanada Compromise --------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas approves the Settlement Agreement between TransCanada PipeLines Limited, TransCanada Energy Ltd., and TransCanada Gas Service, Inc., on one hand and Mirant Canada Energy Marketing, Ltd., and Mirant Canada Energy Marketing Investments, Inc., Mirant Corporation Canadian debtor-affiliates on the other hand. As reported in the Troubled Company Reporter on August 13, 2004, an important goal of Mirant Corporation and its debtor-affiliates as been to resolve the issues, claims, and debts in the Canadian insolvency proceedings of Mirant Canada Energy Marketing, Ltd., and Mirant Canada Energy Marketing Investments, Inc., under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended. The material claims in the Canadian Proceeding were resolved in a settlement agreement that the Court approved on April 21, 2004. Although the Global Settlement Agreement resolved nearly all the major creditors' issues relating to the Debtors' Canadian assets, Michelle C. Campbell, Esq., at White & Case, LLP, in Miami, Florida, notes that the claims of TransCanada PipeLines Limited, TransCanada Energy Ltd., and TransCanada Gas Service, Inc., relating to certain contracts were not resolved, but rather, reserved for determination at a later date. The TransCanada Transactions On October 10, 2001, MCEM, MAEMII and the TransCanada Entities entered into a Purchase and Sale Agreement (Margin Business) under which MCEM acquired certain TransCanada Energy assets and MAEMII acquired certain assets of TransCanada Gas. MCEM purchased from TransCanada Energy a financial AECO basis swap of 5,000 MMBtu's per day for NYMEX last day minus $0.34 USD/MMBtu, ending in October 2004. The counterparty of the Basis Swap is Engage Energy Canada, LP. Engage would not consent to a novation of MCEM for TransCanada Energy under the Basis Swap. Thus, TransCanada Energy continues to be in contractual privity with Engage under the Basis Swap. To date, MCEM has performed under the Basis Swap. Ms. Campbell reports that MAEM assumed the obligations of MAEMII under the PSA pursuant to that certain Agreement Relating to Purchase and Sale Agreement (Margin) dated November 30, 2001 by and among MAEM, MAEMII and TransCanada Gas. Under a Contribution, Assignment and Assumption Agreement (Margin) and General Conveyance (Margin) dated December 1, 2001 between MAEM and MAEMII, MAEMII transferred the TransCanada Gas Assets to MAEM. MAEMII and MCEM are jointly and severally liable to the TransCanada Entities under the PSA and MAEM is liable to the TransCanada Entities for MAEMII's obligations under the PSA by virtue of the ARPSA. Moreover, Mirant Corp. guaranteed the obligations of the Mirant Entities under the PSA under a Guaranty dated October 10, 2001. Mirant Corp., on MCEM's behalf, posted a $3,356,785 letter of credit to TransCanada PipeLines to support MCEM's overall transaction activity with TransCanada PipeLines. The Letter of Credit expires on September 30, 2004. The Mirant Canada Liquidation On October 2, 2003, Mirant Canada engaged in a sales process designed to sell its Canadian trading business. To that end, in March 2004, Mirant Canada assigned to Tenaska Marketing Canada certain gas transportation-related contracts identified in the PSA, with these exceptions: (a) The Firm Service Capacity Release to Androscoggin Energy, LLC, under Gas Transportation Contract for Firm Transportation Service starting November 10, 1999 and ending November 1, 2018 for 11,000 mmbtu/day at primary delivery point Draicut; (b) The Gas Transportation Contract for First Transportation Service starting March 9, 1999 and ending October 31, 2018 between TransCanada Gas and Portland Gas Transmission for 4,000 mmbtu/day at primarily delivery point Draicut; and (c) The Gas Transportation Contract for Firm Transportation Service starting November 1, 2018 and ending March 9, 2019 between TransCanada Gas and Portland Gas Transmission for 15,000 mmbtu/day at primary delivery point Draicut. Substantially all of Mirant Canada's assets were liquidated in the Canadian Proceeding thereby leaving more than $80,000,000 in cash. At the time of the Global Settlement Agreement, it was believed that the TransCanada Entities would assert a claim against Mirant Canada for about $13,500,000 for the anticipated rejection of the Portland Contracts. Consequently, an escrow account was established with $10,800,000 for the benefit of the TransCanada Entities, pending resolution of the Portland Contracts. PricewaterhouseCoopers, as monitor in the Canadian Proceedings, is holding the Funds in the escrow account, which are earning interest. The TransCanada Claims On December 15, 2003, the TransCanada Entities filed two proofs of claim against Mirant Corp.: (a) Claim No. 6512 for $103,465,841; and (b) Claim No. 6511 for $151,404. In May 2004, MAEM and MAEMII sought and obtained the Court's permission to reject the Portland Contracts and the Androscoggin Contract. The Debtors subsequently entered into discussions with TransCanada to resolve issues related to the rejected Contracts and with respect to the Engage Basis Swap. The Settlement Agreement The Mirant Entities and the TransCanada Entities have reached an agreement wherein TransCanada Energy will receive $14,327,292 in this manner: (a) On or before the second business day after the Court approves the Settlement agreement, the TransCanada Entities will take all steps necessary to draw the full amount of the Letter of Credit. The Letter of Credit proceeds will be converted to Canadian dollars at the rate of $1 = CN$1.3929, which was the exchange rate as of July 15, 2003. Thus, the Letter of Credit proceeds will have a value of CN$4,675,666; (b) MCEM will instruct PwC to transfer CN$9,251,626 to TransCanada Energy from the Funds; (c) PwC has agreed to make the transfer immediately upon receipt of a written instruction from MCEM, and PwC agreed to immediately instruct its bank to convert the Funds to Canadian Dollars sufficient to pay CN$9,251,626 on the date that it receives the written instruction from MCEM. If the Letter of Credit proceeds is less than the anticipated CN$4,675,666, then MCEM is obligated to instruct PwC to transfer additional funds from the Funds until TransCanada Energy receives CN$13,927,292; (d) TransCanada Energy will be entitled to earn interest on CN$12,787,292 at a rate per annum equal to the rate earned by PwC on the Funds for any amount required to be paid, but not paid, from June 15, 2004 until the Effective Date; (e) No portion of the payments are to be paid from any of the Debtors' bankruptcy estates; (f) The Agreement provides that CN$1,140,000 of the CN$13,927,292 required to be paid under the Agreement represents any liability TransCanada Energy may owe to Engage under the Engage Basis Swap. MCEM intends to continue to perform the Basis Swap or assign the Basis Swap to a creditworthy entity. The Basis Swap terminates on October 25, 2004. Consequently, the Agreement provides for a periodic return of the Basis Swap Funds on these dates and amounts: -- CN$395,000 on August 25, 2004; -- CN$383,000 on September 27, 2004; and -- CN$362,000 on October 25, 2004. If MCEM assigns the Basis Swap to a creditworthy entity prior to termination of that agreement, TransCanada Energy is required to return the then-balance of the Basis Swap Funds to the Mirant Entities with accrued interest; (g) The TransCanada Entities will also be allowed a general unsecured claim for $2,450,000 against Mirant Corp. in its bankruptcy case and will not be required to take any further action to substantiate or prove the Unsecured Claim; and (h) The Mirant Entities and the TransCanada Entities mutually release each other from Claims related to damages incurred by the TransCanada Entities in connection with MAEM and MAEMII's rejection of the Portland Contracts or any aspect of the parties' prior business relationship. Excluded from the mutual release are: -- claims to rights and remedies under the Agreement; -- the obligations of the parties under the Agreement; -- the obligations of the parties under the Androscoggin Contract; and -- with respect to Mirant Corp. and MAEM, the debt evidenced by the Unsecured Claim. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. The Company filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03- 46590). Thomas E. Lauria, Esq., at White & Case LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL BENEVOLENT: Moody's Affirms Junk Long-Term Debt Rating --------------------------------------------------------------- Moody's Investors Service affirmed the Ca rating assigned to National Benevolent Association's long term debt but revised the outlook to positive from negative. Approximately $153 million of rated debt is affected. On September 10, 2004, the bond trustee reported that National Benevolent received an offer to purchase 11 of its senior care facilities for $210 million. While this would not likely be sufficient to repay public bondholders 100% of their outstanding principal and interest (NBA had total liabilities of $293 million as of December 31, 2003, some of which are likely to be assumed by the purchaser), it is likely to result in a repayment that is considerably greater than what we had anticipated when we downgraded the rating to Ca on December 9, 2003. On September 3, 2004, National Benevolent's board approved an Asset Purchase Agreement with Fortress NBA Acquisition, LLC, guaranteed by Fortress Investment Fund II, LLC, to purchase 11 of National Benevolent's senior living facilities for $210 million. Fortress' bid is not subject to due diligence or its ability to obtain financing, though it is subject to adjustment for customary accrued and unpaid expenses and a cure of claims brought by certain residents who claim overcharges for certain monthly service fees. Fortress would also receive certain segregated or escrowed cash accounts relating to future liabilities for entrance fee refunds. This bid would establish the minimum price and the sale terms of the facilities under an auction process that is scheduled to be heard, and hopefully approved, by the bankruptcy court on October 5, 2004. It is expected that an auction will be conducted approximately 45-60 days after court approval and that a hearing to approve the auction results will take place within a few days of the auction. Once the results of the auction are approved, it is anticipated that a closing of the sale will occur within approximately 90 days. The APA may be terminated if, among other reasons, the bankruptcy court has not approved the bidding process by October 31, 2004, the court has not approved the sale by February 15, 2005, or the closing has not occurred by March 31, 2005. The transaction is also subject to other regulatory approvals. As of December 31, 2003, National Benevolent's unaudited financial statements reflected total long-term debt of approximately $220 million, including approximately $153 million owed to public bondholders and $63 million owed to KBC Bank for amounts honored under its letters of credit. An additional $15 million of short- term liabilities, $21 million of long term liabilities and $38 million of unearned entrance fees existed as of Dec. 31, 2003. As of this same date, NBA had unrestricted cash and investments of $69 million, bond proceeds held by trustee of $15 million and restricted investments of $45 million (a portion of the latter of which we believe Fortress is likely to receive). We expect that National Benevolent incurred significant expenses since December 31, 2003, related to legal and consulting fees, as well as general operations, that have reduced liquid balances. Nevertheless, based on these amounts, we estimate that if Fortress is the successful bidder, bondholders will receive a significant amount of their outstanding principal and interest. At this time, it is not known whether National Benevolent would continue to operate its remaining properties and continue to service any remaining bond obligations. Outlook Moody's revised the outlook on the Ca rating to positive from negative. On September 10, 2004, the bond trustee announced that NBA had received an offer to purchase 11 of its senior care facilities for $210 million. While this would not likely be sufficient to repay public bondholders 100% of their outstanding principal and interest (National Benevolent had total liabilities of $293 million as of December 31, 2003, some of which are likely to be assumed by the purchaser), it is likely to result in a repayment that is considerably greater than what we had anticipated when we downgraded the rating to Ca on Dec. 9, 2003. NATIONAL CENTURY: Trust Wants HCA Claim Reduced to $1,992,756 ------------------------------------------------------------- David A. Beck, Esq., at Jones Day, in Chicago, Illinois, relates that in the Summer of 1998, Medshares Consolidated, Inc., entered into an agreement to purchase certain home health agencies from Columbia/HCA, now known as HCA, Inc. As part of the Asset Purchase Agreement, Medshares agreed to purchase assets of certain home healthcare agencies owned by HCA and certain subsidiaries and joint ventures, which assets included accounts receivable outstanding at the time of closing. At the time of the sale transaction between Medshares and HCA, the valuation of the purchase accounts receivable was uncertain. Under the Medshares Purchase Agreement, Medshares agreed to purchase the "Threshold Amount" of the accounts receivable. If more than the Threshold Amount was collected, the excess funds would be returned to HCA. To facilitate the collection of the accounts receivable, Debtor National Century Financial Enterprises, Inc., Medshares and HCA entered into a Collection Agreement pursuant to which NCFE was to receive payments on the accounts receivable. The collections were then remitted to HCA to the extent they exceeded the Threshold Amount. The Collection Agreement defines the Threshold Amount as "sixty percent (60%) of the Value of the Receivables." The Value of the Receivables is defined as "the amount of the book value of the Receivables, determined based upon a 150 day bad debt reserve policy, adjusted by those reserves or assets which have the nature of being a reserve or asset for a cost report purpose." The Collection Agreement required NCFE to pay HCA money only if and as the collections exceeded the Threshold Amount. The Collection Agreement was to be in effect for a period of six months. On February 2, 1999, HCA made a demand on NCFE for payment under the Collection Agreement. Subsequently, Greg Gerkin, Assistant Vice President of HCA, contacted NCFE to discuss HCA's demand for payment. Mr. Gerkin asserted that NCFE owed HCA more than $1 million and that HCA would sue NCFE if NCFE did not pay HCA approximately $1.3 million. Because NCFE had not yet received all of the patient-specific data regarding the accounts receivable, which presumably was in HCA's possession, NCFE was unable to perform a complete accounting of the collections in its possession at that time. Nevertheless, on March 5, 1999, NCFE remitted $1,305,137 to HCA. Notwithstanding the payment, HCA sued NCFE in Tennessee state court in a case styled Columbia Healthcare Corp. v. Medshares Consolidated, Inc., et al. After the remittance of the $1,305,137 payment, NCFE received the patient-specific data regarding the purchased accounts receivable and then was in a position to complete a comprehensive accounting of the collections received. In that accounting, NCFE determined that the Threshold Amount had not been exceeded at that time and that the $1,305,137 had been paid to HCA in error. On May 4, 1999, NCFE made a demand on HCA for the return of the $1,305,137. HCA has never returned the money. NCFE filed counterclaims in the Tennessee Litigation to recover the $1,305,137 amount. HCA asserted Claim No. 121 for $10,611,222, broken into three categories: (a) The deposits that can be definitely linked to pre- acquisition services This component of the HCA Claim consists of accounts receivable with definitive pre-acquisition dates of service that were deposited into the NCFE lockboxes. HCA asserts that it has a $2,368,113 claim for Definitive Pre- Acquisition Receivables. However, NCFE collected only $206,479, after the $1,305,137 payment is taken into account, in Definitive Pre-Acquisition Receivables. Accordingly, the HCA Claim with respect to the category should be reduced to $206,479. (b) The deposits for which documentation has not been produced HCA asserts that there is insufficient documentation to identify $5.17 million in NCFE lockbox collections as pre- or post-acquisition accounts receivable. HCA proposes to divide the Unidentified Lockbox Collections between pre- and post-acquisition accounts receivable by a procedure conducted by Ernst & Young based on an estimation of the allocation of pre- and post-acquisition accounts receivable, resulting in an allocation of $2,765,275 to pre-acquisition accounts receivable payable to HCA. In addition, HCA asserts a claim for another $1,682,948 of pre-sale accounts receivable received by NCFE through "some mechanism other than the lockbox accounts." Mr. Beck argues that HCA's $2,765,275 claim for Unidentified Lockbox Collections greatly overstates the amount that actually represents pre-acquisition receivables. NCFE's analysis indicates that the actual amount allocable to pre-acquisition accounts receivable is $1,786,277. Accordingly, the portion of the HCA Claim relating to the Unidentified Lockbox Collections should be reduced to $1,786,277. With respect to HCA's $1,682,948 claim for Unidentified Collections, HCA does not provide any evidence that these funds were received by NCFE. NCFE's books and records also do not indicate the receipt of any of those funds. Indeed, these amounts may have been paid directly to Medshares, in which case HCA may have a claim against Medshares. Because it did not receive these funds, Mr. Beck contends that NCFE is under no obligation to pay the Unidentified Collections to HCA. (c) The post-sale periodic interim payments After the sale transaction between HCA and Medshares, Medshares continued to receive periodic interim payments from Medicare under HCA's provider number. The Post-Sale interim payments were then remitted to NCFE, which in turn credited Medshares and advanced substantial funds to Medshares to purchase additional accounts receivable. HCA asserts a claim for $1,913,543 with respect to the post-Sale interim payments. However, HCA provides no basis for why the post-Sale interim payments give rise to a claim against the Debtors' estates. Whether or not HCA was or may be required to reimburse Medicare for these funds, NCFE is not liable to HCA under the Collection Agreement or otherwise with respect to these amounts. HCA also asserted a claim for $1,881,343 in interest on the amounts it alleges it is owed from the Debtors. HCA has not provided any basis for asserting a claim for interest against the Debtors. Thus, the only portions of the HCA Claim that should be allowed are reduced amounts for the Definitive Pre-Acquisition Receivables for $206,479, and for the Unidentified Lockbox Collection for $1,786,277. Accordingly, the Unencumbered Assets Trust, the successor-in- interest to certain rights and assets of National Century Financial Enterprises, Inc., and its debtor-affiliates, asks the U.S. Bankruptcy Court for the Southern District of Ohio to reduce the HCA Claim from $10,611,222 to $1,992,756. 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. (National Century Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL MARINE: Court Dismisses Bankruptcy Case in One Day ----------------------------------------------------------- On September 17, 2004, the Honorable Kay Woods of the U.S. Bankruptcy Court for the Northern District of Ohio dismissed the bankruptcy case filed by National Marine, Inc., on September 16, 2004. The Home Savings & Loan Company of Youngstown, Ohio, National Marine's largest secured creditor moved the Court to dismiss the case on the ground that it was "improvidently filed." Home Savings holds specific lien interests in used boats and, in conjunction with another creditor -- KeyBank, holds a security interest in all of the Debtor's used boat inventory as well as the new and used boat trailer inventory. As a result, there is no equity in the Debtor's property available for a reorganization. Prior to the filing of the chapter 11 case, Home Savings obtained a $5 million judgment in the Court of Common Pleas of Trumbull County, Ohio. The judgment was obtained following the Debtor's monetary default on its obligations to Home Savings. Subsequently, by special court order, Home Savings executed and levied on all of the Debtor's personal property. A Receiver was appointed on August 19, 2004. On its own accord, Home Savings conducted an investigation and found: a) the Debtor's insurance was canceled on August 24, 2004, for non-payment; b) the Debtor's office rent is two months in arrears; c) Mr. William Hionas, President of National Marine, did not resist the Bank's motion to appoint a Receiver; d) at the Debtor's Vienna facility, the office trailers were being disassembled and there was a danger that the Debtor's records and personal property would be lost; e) numerous other creditors have been moving against the Debtor's chattels and were attempting and seeking to obtain possession of boats; f) National Marine was selling new boats and then taking a trade where National Marine could make payments on the trade-in loan for a six month period of time; as a result, with no cash available, those payments on the customers' trade-in loans weren't made, and numerous banks and customers are now trying to repossess the boats. Headquartered in Vienna, Ohio, National Marine Inc. sells stocked performance boats. The Company filed for chapter 11 protection on September 16, 2004 (Bankr. N.D. Ohio Case No. 04-44552). Irene K. Makridis, Esq., in Warren, Ohio represents the Debtor. When the Debtor filed for protection from its creditors, it listed $10,852,000 in total assets and $11,911,451 in total debts. NOMURA CBO: S&P Places Junk Ratings on CreditWatch Positive ----------------------------------------------------------- Standard & Poor's Ratings Services placed its rating on the class A-2 notes issued by Nomura CBO 1997-1 Ltd., a high-yield arbitrage CBO, on CreditWatch with positive implications. The rating on the class A-2 notes was previously lowered June 2002, May 2003, and November 2003. The CreditWatch placement reflects factors that have positively affected the credit enhancement available to support the class A notes since the last rating action in November 2003. The primary factor was an increase in the level of overcollateralization available to support the notes. Since the last rating action, the transaction paid down $107.786 million (approximately 44.38%) to the class A-2 notes, $74.83 million of which was paid on the May 15, 2004 payment date. Standard & Poor's noted that since the last rating action, the class A-2 overcollateralization test has increased to 114.67% from 104.89%. Standard & Poor's will be reviewing the results of the current cash flow runs generated for Nomura CBO 1997-1 Ltd. to determine the level of future defaults the rated class can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the rating currently assigned to the notes remains consistent with the credit enhancement available. Rating Placed On Creditwatch Positive Nomura CBO 1997-1 Ltd. Rating Class To From ---- -- ---- A-2 CCC+/Watch Pos CCC+ Transaction Information Issuer: Nomura CBO 1997-1 Ltd. Co-issuer: Nomura CBO 1997-1 Corp. Collateral manager: Nomura Corporate Research and Management Underwriter: Bear Stearns Cos. Inc. Trustee: JPMorganChase Bank Transaction type: Cash flow arbitrage high-yield CBO Tranche Initial Last Current Information Report Action Action ----------- ------- ------ ------- Date (MM/YYYY) 6/1997 11/2003 10/2004 Class A-2 note rtg. A- CCC+ CCC+/Watch Pos Class A-2 OC ratio 120% 104.89% 114.67% Class A-2 OC ratio min. 114% 135% 150% Class A-2 note bal. $291.50mm $242.871 $135.084mm Portfolio Benchmarks Current -------------------- ------- S&P Wtd. Avg. Rtg.(excl. defaulted) B+ S&P Default Measure(excl. defaulted) 4.89% S&P Variability Measure (excl. defaulted) 2.87% S&P Correlation Measure (excl. defaulted) 1.14 Oblig. Rtd. 'BB+' and above 8.02% Oblig. Rtd. 'BB-' and above 27.54% Oblig. Rtd. 'B-' and above 73.37% Oblig. Rtd. in 'CCC' range 12.94% Oblig. Rtd. 'CC', 'SD' or 'D' 13.69% S&P Rated Prior Current OC (ROC) Rating Action Rating Action --------- ------------- ------------- Class A notes 99.99% (CCC+) 104.53%(CCC+/Watch Pos) Class B notes N.A. (CC) N.A. (CC) For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization Statistic, see "ROC Report September 2004," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Fixed Income," under "Browse by Sector" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired articles. PARMALAT USA: Has Until September 30 to File Chapter 11 Plan ------------------------------------------------------------ Parmalat USA Corporation and its U.S. debtor-affiliates, General Electric Capital Corporation, as agent and lender, Citibank, N.A., and the Official Committee of Unsecured Creditors agree to another round of amendments to the Final DIP Order. As sanctioned by the Court, the parties stipulate that, unless the maintenance of the existing $35,000,000 availability is authorized by the DIP Lenders, the U.S. Debtors' authority to borrow and re- borrow funds will be reduced dollar for dollar by the amount of any proceeds received by: -- Farmland on account of its equity interest in Milk Products or any intercompany loan made by Milk Products to Farmland; or -- GE Capital on account of the sale of substantially all of the assets of Milk Products. Use of Cash Collateral The U.S. Debtors are authorized to borrow money, use Cash Collateral and spend money solely to pay: -- Farmland's and Milk Products' operating expenses; -- the obligations due to Citibank under the Receivables Purchase Agreement; and -- the Permitted Fee Expenses, excluding: (1) the Permitted Fee Expenses incurred on Parmalat USA's behalf in excess of $25,000; and (2) any Permitted Fee Expenses to investigate or prosecute claims or causes of action on Parmalat USA's behalf. The U.S. Debtors will not permit the amount outstanding under the DIP Loans to exceed the amount of the DIP Loans budgeted in the Budget most recently approved by GE Capital by more than 10% on a cumulative basis from September 17, 2004, to the end of each week in the Budget, as measured at the end of each that week. Use of Sale Proceeds GE Capital will apply all proceeds of the sale, collection or other disposition of the Postpetition Collateral -- which neither constitutes Prepetition Collateral nor is subject to the Second Mortgages -- to reduce the DIP Loans. If the proceeds from the sale, collection or other disposition of Postpetition Collateral exceed the DIP Loans, the amount by which the proceeds exceed, will be available for use by the Debtors as Cash Collateral in accordance with the Budget GE Capital approved. GE Capital will hold the Postpetition Commitment Reserve as additional Postpetition Collateral. If, after the commitment to make DIP Loans has been terminated and after application of the proceeds of Postpetition Collateral, there remains Postpetition Collateral or proceeds after repayment of the DIP Loans, and the Prepetition Indebtedness to the extent of the Adequate Protection Liens and the Section 507(b) Claim, the Postpetition Collateral and the proceeds will be retained by the Debtors, subject to further Court order. Restructuring Timeline The Lenders require the U.S. Debtors by: September 30, 2004 to file a plan of reorganization and disclosure statement; October 15, 2004 to close the sale of Milk Products of Alabama; November 15, 2004 to obtain court approval for the Disclosure Statement; and December 31, 2004 to confirm the Plan The Debtors' non-compliance will constitute an event of default under the DIP Financing Facility. The DIP Lenders extend the maturity date of the DIP Facility until October 6, 2004. Professional Fees Budget The U.S. Debtors will provide GE Capital with a detailed budget for professional fees by September 23, 2004. The Professional Fees Budget will cover the period from October 1, 2004, to January 31, 2005. Thereafter, on or before the 25th day of each month, the Debtors will update the Professional Fees Budget, and will consult with GE Capital in good faith with respect the level of professional fees and the projects or activities on which professional fees are being expended. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATTELITE: Plans to Pay Prepetition Loan Obligations ------------------------------------------------------------ Pegasus Satellite Communications, Inc., and its debtor-affiliates ask the United States Bankruptcy Court for the District of Maine: (a) to allow prepetition liens or prepetition loan obligations to the extent, after proper notice, no party-in-interest has filed a claim or defense to the Prepetition Obligations, and the Claim or Defense is not overruled by the Court; (b) for authority to pay the uncontested Prepetition Obligations, exclusive of claims, if any, in respect of the prepayment penalties or fees, the payment of Base Rate interest with respect to the LIBOR Loans, as defined in the Prepetition Financing Documents, and default rates of interest on the Debtors' obligations under the Prepetition Financing Documents; and (c) to shorten the period by which the Official Committee of Unsecured Creditors or any other person or entity with legal standing is required to assert any Claims or Defenses with respect to the Prepetition Obligations. The Debtors estimate that the amount owed on account of the uncontested Prepetition Obligations as of September 15, 2004, inclusive of principal, and accrued and unpaid interest is $519,180,834. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, relates that before the Petition Date, Pegasus Media & Communications, Inc., and its direct parent, Pegasus Satellite Communications, Inc., were borrowers under these Loan Agreements: Secured Debt Date Entered Borrower Agent ------------ ------------ -------- ----- Senior 10/22/03 PM&C Bank of America, N.A. Term Loan Deutsche Bank and Agreement Trust Company Prepetition 12/19/03 PM&C Madeleine, LLC Revolving Credit Agreement Junior Term 08/01/03 PSC Wilmington Trust Loan Agreement Company As of the Petition Date, the status of the Debtors' Prepetition Secured Debt is: Principal Amount Accrued Secured Debt Outstanding Interest Other Fees ------------ ---------------- -------- ---------- Senior $391,766,856 $2,950,150 undisclosed Term Loan Agreement Prepetition 18,000,000 275,410 $10,417 Revolving Credit Agreement Junior Term 104,402,897 2,246,374 undisclosed Loan Agreement At the closing of the sale of the Debtors' Direct Broadcast Satellite Business on August 27, 2004, the Debtors' estates received in excess of $900,000,000 in cash consideration. Pursuant to the Cash Collateral Order, the Debtors deposited the Sale Proceeds into three separate, interest-bearing accounts pending the allowance and distribution on the claims of the Prepetition Secured Parties. The Debtors calculate that interest is accruing on the Prepetition Obligations at $1,000,000 per week. The amount of interest that the Debtors pay, on a current basis, on account of the Prepetition Obligations is significantly greater than the interest the Debtors will earn in respect of the DBS Sale Proceeds. Thus, the Debtors believe that paying the Prepetition Obligations from the Proceeds without delay will result in savings to the Debtors and their estates of several millions of dollars in interest. These saving could be used to pay the claims of the Debtors' unsecured creditors. The Committee has advised the Debtors that it will not raise any Challenge or Defense with respect to the Prepetition Obligations or the Prepetition Liens, except for claims, if any, in respect of prepayment penalties or fees. The Debtors and the Committee both agree that at this juncture in the Chapter 11 cases the allowance and distribution of the uncontested amounts owing under the Prepetition Obligations is a modest and appropriate modification to the Cash Collateral Order that is amply justified by the significant savings to the Debtors and their estates that will inure to the benefit of the Debtors' unsecured creditors. The Committee and the Debtors further agree that shortening the Challenge Period is appropriate to ensure that parties-in-interest have notice and an opportunity to assert any Claims or Defenses to the Prepetition Obligations or the Prepetition Liens pursuant to the terms of the Cash Collateral Order. * * * In a Court-approved Stipulation, the Debtors, the Committee, and the lenders to the Debtors' Secured Debt agree that: (a) The Debtors will pay the lenders to the Senior Term Loan Agreement $393,609,123, plus non-default interest of $103,473 per diem for each day after September 17, 2004, until the allowed claim for principal and non-default accrued interest under the Senior Term Loan Agreement is paid: Outstanding Accrued Interest as of September 17, 2004 Per Diem -------- Tranche D Loans at Base Rate plus 6% (10.5%) $1,370,164 $85,635 Incremental Term Loans at Base Rate plus 2.5% (7%) 53,969 3,373 Initial Term Loans at Base Rate plus 2.5% (7%) 231,438 14,465 ---------- ---------- Subtotal of Accrued Non-Default Interest (09/01/04 - 09/17/04) $1,655,571 ========== Per diem for non-default interest (Per Diem assumes no change to the prime rate of Bank of America) $103,473 ======== Principal Amount of Term Loans Principal Amount Tranche D Term Loan $298,500,000 Principal Amount Incremental Term Loan 17,636,334 Principal Amount Initial Term Loan 75,630,521 ------------ Subtotal 391,766,856 Other Fees and Expenses: Admin Agency Fee due July 22, 2004 $37,500 Expenses through September 17, 2004: Paul Weiss 129,311 Moore & Van Allen 6,019 Chanin 3,000 Drummond Woodsum 10,866 ------------ Subtotal of Fees and Expenses $186,697 ------------ Total Principal Amount & Fees and Expenses $393,609,123 ============ (b) The Debtors will pay the lenders to the Prepetition Revolving Credit Agreement $18,087,787, plus non-default interest of $5,164 per diem for each day after September 17, 2004, until the allowed claim for principal and non-default accrued interest under the Prepetition Revolving Credit Agreement is paid: 09/17/04 Principal Balance $18,000,000 09/01/04-09/17/04 Accrued and Unpaid Interest at 10.5% (Base Rate of 4.5% plus 6% Applicable Margin) 87,787 Per Diem Interest Commencing 09/18/04 $5,164 Fees and Costs 0 (c) The Debtors will pay the lenders to the Junior Term Loan Agreement $107,842,759 -- comprised of principal, non-default cash and PIK interest and accrued costs and fees -- plus non-default interest of $33,415 per diem for each day after September 17, 2004, until the allowed claim for principal and non-default accrued interest under the Junior Term Loan Agreement is paid; and (d) The Secured Lenders have asserted that they are entitled to a prepayment premium, payment of interest at the Base Rate for all loans, and payments of default interest under the Secured Debts. Accordingly, the Secured Lenders will file a request by October 5, 2004, to seek payment of the Prepayment Premium and Default Interest. The Court's hearing on the Premium Motions will be held on November 8, 2004. 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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLIANT CORPORATION: Names James Ide as New Chief Financial Officer ------------------------------------------------------------------ Harold Bevis, President and CEO of Pliant Corporation, reported that James Ide has joined the company as Executive Vice President and Chief Financial Officer, effective immediately. Jim was most recently Chief Financial Officer and Treasurer of Next Level Communications, Inc., a publicly traded provider of telecommunications equipment, which was acquired by Motorola, Inc. in 2003. Jim spent the majority of his 18-year career at Motorola in audit and financial roles of increasing responsibility. He lived in China for over three years during the greenfield startup of Motorola's mobile handset operations in the early 1990s, during which time the business grew to over $1 billion in sales. Jim began his career at Arthur Andersen & Co. in Chicago. He holds a Masters of International Management from Thunderbird and a B.B.Ad in Accounting and Spanish from Gonzaga University. He is proficient in Mandarin Chinese and Spanish. "It is an honor and a great advancement for Pliant to have a leader with Jim's skills and experience on the team. Under his leadership, we will continue to focus crisply on the drivers of our performance in operational excellence, cost drivers, profit drivers and cashflow," said Harold Bevis, "as well as the continued implementation of sustainable, contemporary financial processes that are systematized, repeatable and common across Pliant." Jim fills the opening created when Brian Johnson accepted the position of Executive Vice President of Strategy and Business Development in May, and has held both this new and CFO role since then. Jim Ide also joins Pliant's Leadership Team as one of the most senior members. Pliant stays focused on organic growth programs and leading the industry in operational excellence and supply chain performance. Jim has a broad knowledge base in all of these topic areas and will play a key role in leading the achievement of Pliant's goals in the coming years. Jim and his family already reside in the Chicago area close to Pliant's headquarters location, and he will start this position immediately. Pliant Corporation produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Company operates 25 manufacturing and research and development facilities around the world, and employs approximately 3,015 people. As of June 30, 2004, Pliant Corporation's stockholders' deficit widened to $458,548,000 compared to a $436,432,000 deficit at March 31, 2004. PROVELL INCORPORATED: Court Formally Closes 2002 Bankruptcy Case ---------------------------------------------------------------- The Honorable Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York closed the bankruptcy cases filed by Provell, Inc., and its debtor-affiliates on May 9, 2002. On December 12, 2002, the Debtors filed their Joint Plan of Reorganization. The Plan was confirmed on January 31, 2003 and no notice of appeal was filed. Since the confirmation date, the Plan has been substantially consummated. On February 19, 2003, the Plan's Effective Date, the Reorganized Debtors made all payments and distributions required under the Plan. Section 350 of the Bankruptcy Code provides that a case will be closed provided that the estate has been fully administered. The Debtors satisfy the requirements in fully administering their estate based on: a) the Confirmation Order has become final and unappealable; b) the Plan has been substantially consummated and the Effective Date has occurred; c) no significant property transfers remain unexecuted under the Plan; d) the Reorganized Debtors have assumed the business and management of the property dealt with by the Plan; e) payments under the Plan have commenced; and f) no motions or contested matters remain unresolved in these cases. Headquartered in Minneapolis, Minnesota, Provell, Inc., develops, markets and manages an extensive portfolio of membership and customer relationship management programs that provide discounts and other benefits to members in the areas of shopping, travel, hospitality, entertainment, health/fitness, finance, cooking and home improvement. The Company and its debtor-affiliate filed for chapter 11 protection on May 9, 2002 (Bankr. S.D.N.Y. Case No. 02-12232). Alan Barry Hyman, Esq., Jeffrey W. Levitan, Esq., David A. Levin, Esq. at Proskauer Rose LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from creditors, they listed $40,574,000 in total assets and $82,964,000 in total debts. QUANTA SERVICES: First Reserve Offering 20 Million Shares for Sale ------------------------------------------------------------------ Quanta Services, Inc. (NYSE: PWR) announced a secondary offering of 20,000,000 shares of its common stock. First Reserve Fund IX, L.P., a private investment fund managed by First Reserve Corporation, is offering all of the shares and Quanta will not receive any of the proceeds of the offering. JPMorgan and Credit Suisse First Boston will act as joint book-running managers for the offering. In addition, Banc of America Securities LLC has been named as joint lead underwriter and First Albany Capital has been named as co-managing underwriter. First Reserve will grant the underwriters an option to purchase up to 3,000,000 additional shares to cover over-allotments, if any. Upon completion of the offering, assuming no exercise of the underwriters' over-allotment option, First Reserve will own approximately 16.4% of Quanta Services' common stock. The shares are being offered pursuant to effective shelf registration statements that were previously filed with the Securities and Exchange Commission. A prospectus supplement relating to these securities has been filed with the Securities and Exchange Commission. 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 state in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. A copy of the preliminary prospectus supplement relating to this offering may be obtained from the offices of: J.P. Morgan Securities Inc. Prospectus Department One Chase Manhattan Plaza, Floor 5B New York, NY 10081 Telephone no.: 212-552-5164 -- or -- Credit Suisse First Boston LLC Prospectus Department One Madison Avenue New York, NY 10010 Telephone no. 212-325-2580 Quanta Services, Inc., is a leading provider of specialized contracting services, delivering end-to-end network solutions for the electric power, gas, telecommunications and cable television industries. The company's comprehensive services include designing, installing, repairing and maintaining network infrastructure nationwide. First Reserve Corporation -- http://www.firstreserve.com-- based in Greenwich, Connecticut, is the largest and oldest private equity firm specializing in the energy industry with $4.7 billion under management across four active funds. Throughout its 20-year history, First Reserve has developed a strong franchise of investing exclusively in the energy industry, utilizing its broad base of specialized industry knowledge. First Reserve has funded more than 80 principal transactions and completed more than 200 add-on acquisitions with its core companies. * * * As reported in the Troubled Company Reporter on November 3, 2003, Standard & Poor's Ratings Services assigned a 'BB-' corporate credit rating to Quanta Services Inc. At the same time, Standard & Poor's assigned a 'BB-' to Quanta's proposed $200 million senior secured credit facilities, and a 'B' rating to the $270 million convertible subordinated debentures recently issued under SEC Rule 144A. Proceeds from these transactions are being used to refinance debt and to collateralize letters of credit. The rating outlook is stable. "The ratings reflect Quanta's highly leveraged financial profile, aggressive financial policies, and fair liquidity, tempered by its leading positions in large, cyclical end markets," said Standard & Poor's credit analyst Heather Henyon. Because of declining telecom and cable market conditions and soft energy markets, Quanta has shifted its business focus from telecom and cable (21% of revenue in 2003, from 58% in 2000) to electric power and gas (62% of revenue in 2003, from 28% in 2000). Standard & Poor's expects limited growth in the energy infrastructure sector in the near term, although over time, gradual improvement should occur from transmission and distribution work and from outsourcing trends. REFCO GROUP: Inks MOU Allowing Hantec Use of RefcoFX Trader System ------------------------------------------------------------------ Refco Group Ltd., LLC, disclosed that Refco Forex Limited has signed a memorandum of understanding with Hantec Investment Holdings Limited, whose shares are listed on The Stock Exchange of Hong Kong Limited. The financial terms of the transaction were not disclosed; however, the deal, which is subject to a definitive agreement and other approvals, contemplates Refco providing Hantec with use of the RefcoFX Trader system for its Asian client base. Refco is one of the largest global execution and clearing firms for derivatives as well as a provider of prime brokerage services in the fixed income and foreign exchange markets. The RefcoFX Trader system is used by thousands of global clients and has become a leading trading platform in the retail foreign exchange market. Hantec Investment Holdings Limited provides leveraged foreign trading services in Hong Kong, including spot and forward foreign exchange dealing and over-the-counter foreign currency option trading in major freely convertible currencies. Hantec also provides securities broking, commodities and futures broking, corporate advisory, asset management, and other related services. Phillip R. Bennett, President and Chief Executive Officer of Refco Group Ltd., LLC, said, "Our proposed arrangement with Hantec is indicative of our continuing commitment to China and the Asian marketplace in general. We believe that the opportunity for accelerated growth among customers in the region is great, and we intend to be a major participant in this market. Hantec has established a substantial foothold in Hong Kong and mainland China and we are delighted that Refco will partner with Hantec to capitalize on the growth potential." In addition to the RefcoFX Trader system, Hantec will consider offering other products and services in the Refco suite; including futures and equity-based trading platforms. Y. L. Tang, Founder and Chairman of Hantec Investment Holdings Limited, said, "We are extremely happy to have Refco as a major shareholder in Hantec. This transaction constitutes the beginning of a partnership that, we believe, will be long lasting and mutually beneficial. The breadth and depth of Refco's products and services is outstanding and will surely be attractive to our existing clients and prospects. We share Refco's vision about the growth potential of our marketplace and are delighted to a have a global firm of Refco's stature as our partner." About Refco Group Ltd., LLC Refco Group Ltd., LLC -- http://www.refco.com-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco Group's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London, Frankfurt, Paris and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. * * * As reported in the Troubled Company Reporter on July 14, 2004, Standard & Poor's Ratings Services assigned its 'BB-' long-term counterparty credit rating to Refco Group Ltd., its 'BB-' rating to the firm's $800 million senior secured bank term loan and $75 million senior secured revolving credit facility, and its 'B' rating to the firm's $600 million senior subordinated notes due 2012. The outlook is stable. The proceeds from the note issuance and the senior secured bank loan, with the addition of an equity investment from Thomas H. Lee Partners L.P., will be used to recapitalize the firm, including the buyout of certain shareholders. "The ratings are based on Refco's strong and well-established franchise as one of the leading firms in futures and options brokerage, prime brokerage, U.S. Treasury, and foreign exchange markets," said Standard & Poor's credit analyst Tom Foley. The firm also has a strong and well-seasoned management team and a good earnings track record. Offsetting these strengths is the weak capitalization, pro forma for the recapitalization, with respect to tangible equity. SCHLOTZSKY'S INC: Pursues Process to Put Company in New Hands ------------------------------------------------------------- After receiving inquiries from more than 50 parties, Schlotzsky's, Inc., (OTC: BUNZQ) confirmed that a process is underway which could result in financial restructuring and eventual new ownership for the Company. Schlotzsky's, through its investment banker Trinity Capital LLC, solicited and received more than ten preliminary indications of interest in late August. Subsequently, the Board of Directors and management selected certain of these potential investors to participate in further discussions and due diligence with the Company based on the terms of their indications of interest and their ability to help Schlotzsky's emerge from Chapter 11 as a stronger entity. Upon completion of the ongoing due diligence and discussions, the remaining potential investors will have the opportunity to submit a final proposal describing their plans to invest in and restructure the Company. The Company is diligently pursuing a goal of identifying a final lead investor and submitting a plan to the Bankruptcy Court by early December 2004. Any plan submitted will be subject to review by Schlotzsky's creditors and shareholders and to approval by the Court. "We are very pleased with the number of offers we received and can credit the high level of preliminary interest in Schlotzsky's to the strength of our brand, our quality products, our outstanding franchisees, our customer base and our position within the market," said Sam Coats, President and CEO of Schlotzsky's, Inc. "We hope to receive a final bid by mid-October and then move forward with emerging from Chapter 11 and becoming a stronger company. Schlotzsky's continues to make the world's best sandwich and to rely on and appreciate the ongoing support of our customers and franchisees." In United States Bankruptcy Court for the Western District of Texas, San Antonio Division, U.S. Bankruptcy Judge Leif Clark approved Schlotzsky's retention of Trinity Capital to provide restructuring, corporate finance and other advisory services and the retention of Hilco Real Estate, LLC to provide consultation services on Schlotzsky's real estate portfolio, including the sale of certain Company-owned properties. The Court denied the formation of a separate franchisee committee at this time. Headquartered in Austin, Texas, Schlotzsky, Inc. -- http://www.schlotzskys.com/-- is a franchisor and operator of restaurants. The Debtors filed for chapter 11 protection on August 3, 2004 (Bankr. W.D. Tex. Case No. 04-54504). Amy Michelle Walters, Esq. and Eric Terry, Esq., at Haynes & Boone, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $111,692,000 in total assets and $71,312,000 in total debts. SEMCO ENERGY: Names Peter Clark Vice President & General Counsel ---------------------------------------------------------------- SEMCO ENERGY, Inc. (NYSE: SEN) appointed Peter F. Clark as Senior Vice President and General Counsel effective immediately. Mr. Clark brings more than 20 years of corporate, transactional, regulatory, merger and acquisition, and other energy-related experience to the SEMCO ENERGY management team. He most recently served as Vice President, General Counsel and Secretary of Conectiv, an energy-holding company with revenues of $2 billion. The Wilmington, Delaware-based company, owned by Pepco Holdings, Inc., includes Delmarva Power & Light Company and Atlantic City Electric Company. "I am pleased Peter is joining the SEMCO team. He brings valuable energy-and regulated-business knowledge and leadership. His experience and expertise will make an important contribution as we grow our regulated gas businesses," said SEMCO ENERGY President and Chief Executive Officer George A. Schreiber, Jr. Mark T. Prendeville remains with the Company as Vice President and Deputy General Counsel. Mr. Clark was named General Counsel of Conectiv shortly after it was formed in 1998. His appointment was preceded by more than a decade of service with Delmarva Power & Light Company, where he served as Senior Counsel and then as Assistant General Counsel. Earlier, Mr. Clark was in private practice in the Labor and Employment section of Hunton & Williams of Richmond, Virginia. He holds a law degree from Vanderbilt University School of Law, Nashville, Tennessee, and was a Magna Cum Laude graduate of Davidson College, Davidson North Carolina with a Bachelor of Arts degree in History. He is admitted to practice in Delaware and Virginia. He is a member of the Energy Bar Association and the Association of Corporate Counsel (Delaware Valley Chapter). SEMCO ENERGY, Inc. (S&P, BB- Corporate Credit Rating, Negative) is a diversified energy and infrastructure company that distributes natural gas to approximately 391,000 customers in Michigan and Alaska. It owns and operates businesses involved in natural gas pipeline construction services, propane distribution and intrastate pipelines and natural gas storage in several regions in the United States. In addition, SEMCO provides information technology, specializing in serving mid-sized companies in various sectors. SK GLOBAL: Court Appoints Moon Ho Kim as Creditor Trustee --------------------------------------------------------- Since July 2003, Moon Ho Kim has served as SK Global America, Inc.'s Treasurer. Mr. Kim also served as the Debtor's President beginning May 2004. Mr. Kim worked as part of the Debtor's accounting team from October 2002 to June 2003. Prior to October 2002, Mr. Kim worked in the tax and accounting departments of the Debtor's parent -- SK Networks Co., Ltd., then known as SK Global Co., Ltd. For the purposes of pension and other employee benefits, Mr. Kim remains as an employee of SK Networks, but does not receive any remuneration from SK Networks. Based on his relevant experience and familiarity with the Debtor's books and records and business dealings before and during the Debtor's bankruptcy case, the Debtor, SK Networks and SK Corporation appoint Mr. Kim as the initial Creditor Trustee to serve under the Creditor Trust Agreement on the effective date of the Plan. The parties believe that the selection of Mr. Kim as Creditor Trustee will facilitate and expedite the liquidation of the Debtor's remaining assets, to the benefit of the beneficiaries of the Creditor Trust. The Court approves the appointment of Mr. Kim as Creditor Trustee. 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. The Court confirms the Chapter 11 Plan of Liquidation on September 15, 2004. SOUTHWEST HOSPITAL: Hires Hunton & Williams as Special Counsel -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia gave its permission for Southwest Hospital and Medical Center, Inc., to employ the services of Hunton & Williams, LLP, as special counsel for the Debtor. Hunton & Williams will: a) represent and assist the Debtor in connection with matters pertaining to compliance with federal and state health regulatory laws; b) coordinate communications between employees of the Debtor and general bankruptcy counsel regarding regulatory matters and provide assistance to the Debtor's board of trustees regarding compliance with strategies relating to federal and state laws; c) assist the Debtor's general bankruptcy counsel in representing the Debtor in connection with sale transactions, including those requiring Court approval, and including, but not limited to, (i) the negotiation of terms relating to the preparation of purchase and sale agreements and related papers, (ii) the preparation of transfer and closing documents, and (iii) the provision of advice in connection with any applicable state or federal laws governing the sale of health care facilities. Jon Neiditz, Esq., is the lead attorney in the hospital's restructuring. Mr. Neiditz will bill the Debtor $350 per hour. Mr. Neiditz discloses that Hunton & Williams will not act as general bankruptcy counsel and avoid duplication of services. Hunton & Williams does not have any interest adverse to the Debtor or its estate. Headquartered in Atlanta, Georgia, Southwest Hospital and Medical Center, Inc., operates a hospital. The Company filed for protection on September 9, 2004 (Bankr. N.D. Ga. Case No. 04-74967). When the Debtor filed for protection from its creditors, it listed $10 million in assets and more than $10 million in debts. SPX CORP: Fitch Places Double-B rating on Debt with Stable Outlook ------------------------------------------------------------------ Fitch Ratings initiated ratings on SPX Corporation's senior secured bank debt and senior unsecured debt at 'BB+' and 'BB'. The Rating Outlook is Stable. The ratings consider: * SPX's diverse portfolio of businesses across a wide variety of niche markets, * the company's financial flexibility, and * modest capital requirements. Concerns include: * an uncertain outlook for margins related to competitive pressure and operating challenges in a number of businesses, * seasonal variability in operating cash flow, management turnover, and * financial policies that emphasize returns to shareholders. The company has consistently focused on strengthening productivity across all of its segments through ongoing restructuring, integrating acquired businesses, and selling assets that are unlikely to meet return requirements. Operating performance has lagged recently, raising concerns about the degree of operating leverage that will be realized in a stronger economy. As a result of weak operating results in certain businesses during the first half of 2004, SPX may focus on restructuring and divestures during the near term, but there has been no fundamental change in management's long-term strategy for making bolt-on acquisitions. Capital expenditures have been modest but could reasonably be expected to eventually increase toward historical levels. The continued return of cash to shareholders appears likely in the form of share repurchases and dividends (dividends were initiated in 2004 for the first time since 1997) but, due to restrictions under financial covenants, share repurchases may be more constrained than in the past until operating results improve. As of June 30, 2004 total adjusted debt/EBITDAR (including the effect of operating leases and securitizations) of 4.5 times (x) for the last twelve months was at the upper end of historical levels. Fitch anticipates free cash flow will be used for modest debt reduction as SPX's Consolidated Leverage Ratio, as defined in the company's bank agreement, is slightly above the company's target range of 2.0x-2.5x (2.74x at June 30, 2004; restricted to 3.25x or less by the bank agreement). SPX has a manageable debt structure; although it could potentially be required to purchase approximately $663 million of its February LYONs in 2006, it has the financial flexibility to replace such debt given its operating cash flow, ample cash balances, and current availability under its bank facilities. The ratings incorporate a normal return to seasonally stronger operating cash flow in the second half, stabilization in SPX's margins and the allocation of free cash flow to sufficient debt reduction to maintain leverage within its target range. Free cash flow in the first half of 2004 was substantially below the year earlier period, due in large part to higher working capital requirements attributable to a combination of higher sales, the start-up of a Dock Products facility, the timing of payments for interest and taxes as well as accounts payable, and supplier payments related to an acquisition. Cash flow typically benefits from seasonally stronger results during the second half of the year in SPX's Technical Products and Flow Technology segments. Although not anticipated by Fitch, a significant shortfall in second half cash flow in 2004 compared to the second half of 2003 (excluding the effect of A/R sales) could result in a further review of the ratings. Organic revenue growth in the second quarter of 2004 was over 6%, excluding the effect of foreign exchange rates. Every segment reported revenue growth but margins have been a different story. Compared to other multi-industry companies that have generally seen margins benefit from the economic expansion in 2004, every segment at SPX has reported weaker margins since the beginning of 2003. Part of the trend in 2004 can be attributed to an increase in non-cash expenses for stock compensation and pension accruals but operating difficulties, as well as higher restructuring and raw material costs, were also to blame. In response to margin declines, SPX has addressed operating problems in certain businesses including the Valves and Controls and Broadcast Communications platforms. In the second half of 2004, normal seasonality in the Technical Products and Flow Technology segments is expected to help boost profitability although, depending on SPX's progress in addressing its operating issues, overall margins may not reach year-earlier levels. Given the outlook for improving revenue across most businesses and a halt in the negative working capital trend in the first half, SPX's forecast for cash flow from operations (defined by Fitch to exclude the effect of accounts receivable sales) in the second half of 2004 appears attainable at roughly $400 million, similar to the second half of 2003 (excluding approximately $60 million of pretax cash proceeds in 2003 from the Microsoft settlement). However, full year cash flow from operations in 2004 would remain below the previous three years, reflecting the impact from negative cash flow in the first half of the year. These ratings are based on existing public information and are provided as a service to investors. TANGER FACTORY: S&P Lifts Corporate Credit Rating to BBB- --------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit ratings on Tanger Factory Outlet Centers Inc. and Tanger Properties L.P. to 'BBB-' from 'BB+'. Additionally, the company's senior unsecured rating is affirmed at 'BB+' due to notching, since Standard & Poor's expects that in the near- to medium-term, more than 50% of the company's fully consolidated net operating income will be encumbered by mortgage debt. Tanger currently has $148 million in rated senior unsecured notes outstanding. The outlook is stable. "The raised corporate credit rating acknowledges the company's improved competitive position in the factory outlet center industry following the year-end 2003 acquisition of the nine- center Charter Oak Partners' portfolio in joint venture with un- rated Blackstone Real Estate Advisors," said Standard & Poor's credit analyst Beth Campbell. "The acquisition geographically complemented Tanger's existing portfolio, and Tanger has since begun to better leverage its current operating platform. Additionally, Tanger raised common equity to finance its portion of the acquisition, improving both its balance sheet and market capitalization. Despite a currently highly encumbered portfolio, coverage of total obligations (including the common dividend) remains above average." Tanger management has improved the portfolio's asset quality and consistency through the acquisition, disposition, development, and repositioning of assets over the prior year. Integration of the Charter Oak acquisition has gone smoothly, and Tanger's ability to operationally leverage its existing corporate infrastructure has begun to have a beneficial effect on operating margins and debt protection measures. Management is expected to gradually unencumber the consolidated portfolio, which could eventually prompt the collapse of the current notching or distinction between Tanger's unsecured debt and corporate credit ratings. TCW LINC: S&P Puts Class A-2's B+ Ratings on CreditWatch Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class A-1F and A-1 notes issued by TCW LINC III CBO Ltd., an arbitrage CBO transaction originated in July 1999, on CreditWatch with positive implications. At the same time, Standard & Poor's placed its ratings on the class A-2L and A-2 notes from the same transaction on CreditWatch with negative implications. The A-1F and A-1 notes had a partial paydown of $3.12 million and $19.20 million, respectively, on the July 30, 2004 payment date (mandated by the failure of the overcollateralization and interest-coverage tests). This improved the credit enhancement available to support the A-1F and A-1 notes. However, the overall class A overcollateralization ratio declined to 83.59% in August 2004 from 91.40% in October 2003 (time of last rating action), indicating a weakening in the credit enhancement available to support the remaining class A notes (see transaction data). Standard & Poor's will be reviewing the results of current cash flow runs generated for TCW LINC III CBO Ltd. to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared to the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the amount of credit enhancement available. Ratings Placed On Creditwatch Positive TCW LINC III CBO Ltd. Rating Class To From ----- -- ---- A-1F A/Watch Pos A A-1 A/Watch Pos A Ratings Placed On Creditwatch Negative TCW LINC III CBO Ltd. Rating Class To From ----- -- ---- A-2L B+/Watch Neg B+ A-2 B+/Watch Neg B+ Transaction Information Issuer: TCW LINC III CBO Ltd. Manager/Servicer: TCW Investment Management Co. Underwriter: Bear Stearns Cos. Inc. (The) Trustee: Bank of New York Transaction type: Cash flow arbitrage CBO Tranche Initial Last Current Information Report Action Action ----------- ------- ------ ------- Date (MM/YYYY) 08/1999 10/2003 09/2004 Cl. A-1F note rtg. AAA A A/Watch Pos Cl. A-1F note bal. $15.00mm $15.00mm $11.87mm Cl. A-1 note rtg. AAA A A/Watch Pos Cl. A-1 note bal. $96.00mm $96.00mm $76.00mm Cl. A-2L note rtg. AAA B+ B+/Watch Neg Cl. A-2L note bal. $21.50mm $21.50mm $21.50mm Cl. A-2 note rtg. AAA B+ B+/Watch Neg Cl. A-2 note bal. $82.00mm $82.00mm $82.00mm Cl. A O/C ratio 119.00% 91.40% 83.59% Cl. A O/C ratio min. 110.00% 110.00% 110.00% Portfolio Benchmarks Current -------------------- ------- S&P wtd. avg. rtg. (excl. defaulted) B S&P default measure (excl. defaulted) 5.58% S&P variability measure (excl. defaulted) 3.09% S&P correlation measure (excl. defaulted) 1.19 Wtd. avg. coupon (excl. defaulted) 9.47% Wtd. avg. spread (excl. defaulted) 0.00% Oblig. rtd. 'BBB-' and above 1.48% Oblig. rtd. 'BB-' and above 18.76% Oblig. rtd. 'B-' and above 67.27% Oblig. rtd. in 'CCC' range 19.56% Oblig. rtd. 'CC', 'SD', or 'D' 13.16% S&P Rated Current O/C (ROC) Rating Action --------- ------------- Cl. A-1F 116.74% (A/Watch Pos) Cl. A-1 116.74% (A/Watch Pos) Cl. A-2L 99.21% (B+/Watch Neg) Cl. A-2 99.21% (B+/Watch Neg) For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization Statistic, see "ROC Report September 2004," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Fixed Income," under "Browse by Sector" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired articles. TECO ENERGY: Will Webcast Financial Update on Monday ---------------------------------------------------- TECO Energy, Inc., (NYSE: TE) plans to webcast a financial update on Monday, September 27, 2004 at 3:30 P.M. (Eastern). The webcast will be concurrent with a presentation to financial analysts. The update, to be delivered by Chairman and CEO Sherrill Hudson, President and COO John Ramil and Executive Vice President and CFO Gordon Gillette, will include a discussion of the company's overall strategy, the general outlook for 2004 and beyond, the business factors driving the outlook and the company's financial position and outlook. The webcast will be accessible through a link on TECO Energy's home page at http://www.tecoenergy.com/or on the investor relations page of TECO Energy's web site. TECO Energy, Inc. (NYSE: TE) is an integrated energy-related holding company with core businesses in the utility sector, complemented by a family of unregulated businesses. Its principal subsidiary, Tampa Electric Company, is a regulated utility with both electric and gas divisions (Tampa Electric and Peoples Gas System). Other subsidiaries are engaged in waterborne transportation, coal and synthetic fuel production and independent power. * * * As reported in the Troubled Company Reporter on July 22, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on TECO Energy Inc. to 'BB' from 'BBB-'. Standard & Poor's also lowered its senior unsecured debt rating on the company to 'BB' from 'BB+'. The outlook is stable. In addition, Standard & Poor's affirmed its 'BBB-/A-3' corporate credit rating on utility subsidiary Tampa Electric Co. and revised the outlook on the company to stable from negative. Tampa, Florida-based TECO Energy has about $3.7 billion of total debt outstanding. "The drop in ratings at the parent holding company is due to a combination of lower expected financial performance at TECO Energy and less support accorded to TECO Energy from its Tampa Electric utility subsidiary," said Standard & Poor's credit analyst Todd Shipman. "In making the ratings distinction between the utility and its parent company, Standard & Poor's is acknowledging the wide differential in the stand-alone credit profiles of the two companies, which have diverged as TECO Energy has foundered in its unregulated merchant energy operations," continued Mr. Shipman. TEKNI-PLEX: Moody's Junks Notes & Puts B3 Rating on Facilities -------------------------------------------------------------- Consistent with the credit concerns cited in past press releases and underscored by the negative ratings outlook (assigned in November 2003), Moody's Investors Service downgraded the ratings of Tekni-Plex, Inc. The downgrades incorporate the company's recent announcement that it expects to report a net loss for its fiscal year ended July 2004 (10K not yet filed) and, as a result, is not in compliance with existing bank covenants. Moody's downgraded these ratings: * $315 million 12.75% senior subordinated notes, due 2010, to Caa2 from B3; * $275 million 8.75% second lien senior notes, due 2013, to Caa1 from B2; * Senior secured first lien credit facilities to B3 from B1; * Senior implied rating to B3 from B1; * Senior unsecured issuer rating (non-guaranteed exposure) to Caa2 from B3; The ratings outlook remains negative. The ratings reflect Moody's revised expectations of reduced run- rate financials throughout the intermediate term, which are well below original expectations. Persistently high resin and energy costs for which there is sizable lag time passing through to customers and the cumulative effects of less than optimal weather affecting sales in Tekni-Plex's seasonal garden hose business during fiscal 2004 and fiscal 2003 are the primary drivers of the negative variance. Maintaining a negative ratings outlook reflects ongoing concerns about the magnitude of operating shortfalls as well as weak liquidity, despite current efforts at renegotiations with the company's banking syndicate. In Moody's opinion, the shortfall in cash flow relative to original expectations is likely to be significant. Concerns center on: (i) deficit free cash flow, (ii) underlying product demand - notably in food products, heightened margin pressure, and (iii) increased concern about the levels of capital spending and working capital requirements. The two notch downgrades of the debt ratings reflect a material increase in the severity of loss given Moody's estimation of the erosion in Tekni-Plex's enterprise value. The ratings remain highly sensitive to: (i) further decline in financial performance (specifically, any increase in financial leverage, which is already very high), increases in business risk, and (ii) any deterioration in the quality of assets. The ratings could be lowered further should the company not adequately address its liquidity profile in the near term. Headquartered in Somerville, New Jersey, Tekni-Plex is a diversified manufacturer of packaging products and materials for the consumer products, healthcare, and food industries. THERMACLIME INC: S&P Affirms & Removes B- Corporate Credit Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed and removed its 'B-' corporate credit rating on chemicals and climate control products manufacturer ThermaClime, Inc., from CreditWatch where it was originally placed on June 21, 2004. The rating was placed on CreditWatch as a result of heightened refinancing risk following the termination of a proposed $80 million notes offering. The outlook is stable. "The rating action follows the company's announcement that it closed on a $50 million secured term loan due 2009," said Standard & Poor's credit analyst Dominick D'Ascoli. Proceeds from the loan were used to repay about $35 million of 16% senior notes, repurchase a portion of the 10.75% bonds due in 2007, and provide additional working capital. The transaction eliminates the company's refinancing risk associated with the 16% senior notes maturing in June 2005. The rating on Oklahoma City, Oklahoma-based ThermaClime reflects: * its very aggressive financial profile characterized by high debt leverage, * an aggressive financial policy, * thin free cash flow, and * limited liquidity. Rating also reflects: * a well-below-average business position that includes exposure to highly cyclical end markets, * volatile raw-material costs,customer concentration risk, and * a modest financial base. ThermaClime, which is owned by LSB Industries, Inc., a public company, operates two distinct business segments--chemicals and climate control, which account for about 62% and 38% of 2003 sales, respectively. The chemicals business produces nitrogen- based products, including industrial acids, industrial-grade ammonium nitrate, and fertilizers, while the climate control business manufactures hydronic fan coils, water source heat pumps, and custom air handlers. TRICO MARINE: Receives Notice of Default and Guarantee Demand ------------------------------------------------------------- Trico Marine Services, Inc., (Nasdaq: TMAR) reported the issuance of a notice of default and guarantee demand by Bear Stearns Corporate Lending, Inc. Bear Stearns is an administrative agent under the $55 million term loan issued by a group of bank lenders to Trico's two primary domestic subsidiaries in February 2004. The Company is a guarantor of its subsidiaries' obligations under certain provisions of the Term Loan. Bear Stearns' notice of default and guarantee demand was issued on the basis of an earlier default arising from the Company's non-payment of interest due on its $250 million 8.875% Senior Notes due 2012 in June 2004. Trico Marine Services, Inc., -- http://www.tricomarine.com-- provides a broad range of marine support services to the oil and gas industry, primarily in the Gulf of Mexico, the North Sea, Latin America, and West Africa. The services provided by the Company's diversified fleet of vessels include the marine transportation of drilling materials, supplies and crews, and support for the construction, installation, maintenance and removal of offshore facilities. Trico has principal offices in Houma, Louisiana, and Houston, Texas. * * * As reported in the Troubled Company Reporter on August 19, 2004, Trico Marine Services, Inc.'s independent registered public accounting firm reissued its report on the Company's financial statements for the year ended December 31, 2003 with a going concern explanatory paragraph in the Company's amendment to its Form 10-K for the fiscal year ended December 31, 2003. The Company originally filed its 2003 Form 10-K on March 15, 2004 and filed the Form 10-K amendment on August 9, 2004 in order to respond to comments received from the staff of the Securities and Exchange Commission regarding the classification of indebtedness under the Company's Norwegian revolving credit facility. Due to the Company's 10-K amendment, the Company's independent registered public accounting firm was required to reissue its 2003 audit report. As previously announced, during the second quarter of 2004, the Company defaulted under its $250 million senior unsecured notes indenture and, due to cross-default provisions, its $55 million secured term loan facility. Although neither the maturity of the senior unsecured notes nor that of the secured term loan facility has been accelerated as of the date of this announcement, in the opinion of the Company's independent registered public accounting firm, these events raised substantial doubt about the Company's ability to continue as a going concern. US AIRWAYS: Hires Seabury Aviation as Restructuring Advisor ----------------------------------------------------------- US Airways, Inc., and its debtor-affiliates and subsidiaries ask the U.S. Bankruptcy Court for the Eastern District of Virginia for permission to employ Seabury Aviation Advisors LLC, as their financial and restructuring advisor and consultant. Bruce R. Lakefield, US Airways President and Chief Executive Officer, explains that Seabury has extensive experience working with financially troubled companies in complex financial restructurings. Seabury has been involved as advisors on financial restructurings, new capital raising, aircraft advisory services and other advisory assignments, to numerous airlines including Chapter 11 cases. Seabury's affiliates have provided advisory services to the Debtors or their predecessors since March 2002. Seabury is familiar with the Debtors' books, records, financial affairs and other data and is well qualified to continue those services to the Debtors. Retaining Seabury is an efficient and cost effective way for the Debtors to obtain financial advisory and consulting services. Seabury's resources, capabilities and experience are crucial to the Debtors' successful restructuring. Experienced financial advisors and consultants like Seabury, fulfill a critical service that complements the services provided by other restructuring professionals. Seabury will concentrate on formulating strategic alternatives and assisting the Debtors on a restructuring, financing or sale. Neither law firms nor accounting firms have the expertise or resources to do this kind of work. Seabury will perform these services: (1) Restructuring Assignment: Seabury will assist the Debtors' management and Board of Directors in evaluating and undertaking a bankruptcy reorganization and restructuring. Seabury will provide strategic and restructuring advisory services, and help conceive and implement a financial restructuring, including serving as principal liaison for the non-legal aspects of the restructuring with these stakeholders: (a) Air Transportation Stabilization Board; (b) all aircraft lessors and secured lenders; (c) airframe and engine manufacturers; (d) financial advisors to the company's organized labor groups, and (e) the Official Committee of Unsecured Creditors when formed and sanctioned by the Court. (2) M&A Transaction: Seabury will evaluate and facilitate one or more transactions to sell all or a portion of the company's mainline operations, a merger with, or acquisition of another entity, including, soliciting parties, evaluating alternative transactions, and structuring, negotiating and assisting in documenting one or more transactions. Seabury will also assist management in preparation of business plans, financial projections, pro forma financial statements, cash flow analyses, valuation analyses, and other documents. (3) ATSB Loan Amendments or Restructuring: Seabury will assist in evaluating and renegotiating provisions of the secured Air Transport Stabilization Board Loan including, renegotiating financial covenants, required prepayments from asset sales, or obtaining waivers. Seabury will assist the company in retaining a portion of the cash collateral pledged under the ATSB Loan for use during the Chapter 11 proceedings, and in reinstating or restructuring the ATSB Loan as a component of emergence from a Chapter 11 proceeding. (4) Opinion Letters: Seabury will provide opinion letters as requested by US Airways and its Board of Directors. (5) Fleet Sales/Aircraft Financings: Seabury will (i) assist the company in describing its regional jet purchase agreements to third-party purchasers; (ii) assist the company in describing its regional jet financing agreements to third parties; (iii) negotiate with regional jet buyers on the terms and conditions of any transaction; (iv) assist in obtaining all required consents to effectuate a regional jet transaction; (v) assist in maintaining an orderly process for maintaining the delivery of the RJs; and (vi) to the extent that buyers assume US Airways' obligations to Seabury under the Seabury Aircraft Advisory Agreement, serving the Buyers' needs on a "turn-key basis" to assist in all regional jet deliveries and the acquisition financing; (6) Equity Transactions: Seabury will advise on any transaction raising equity, including valuation advice, analytical support, and advisory assistance in securing equity. (7) Debt Transactions: Seabury will assist in evaluating and pursuing a restructuring of the existing ATSB Loan, a refinancing of the ATSB Loan, or arranging other forms of debt financing. (8) DIP Loan Transaction: Seabury will assist in evaluating and structuring and arranging any DIP Loan Facility to replace the ATSB Loan. (9) Supplemental Services: Seabury will make available to the company supplemental services on a discounted hourly billing basis. The Debtors will pay Seabury a restructuring retainer fee of $175,000 per month. These payments are in addition to $850,000 that the Debtors paid Seabury from May through early August 2004 under predecessor agreements. Seabury will be entitled to receive a $3,500,000 restructuring success fee plus 0.375% of the value of any reduction in the Debtors' Obligations that are converted into equity, capped at $2,500,000. If the Restructuring involves an Asset Sale Transaction or M&A Transaction, the Seabury transaction success fees will be based on the greater of (i) the aggregate of all Asset Sale or M&A Fees earned by Seabury, or (ii) the aggregate of all Restructuring Fees earned by Seabury, but not both. At the closing of any M&A Transaction, Seabury will receive 65% the M&A Success Fee: Aggregate M&A Transaction Value M&A Fee ----------------- ------- $0 - $2,000M $3,000,000 $2,100M - $3,000M $3.0M plus 0.25% over $2,000M $3,001M - $5,000M $5.5M plus 0.15% over $3,000M $5,001M or more $8.5M plus 0.10% over $5,000M US Airways will pay Seabury $50,000 for each Opinion Letter, regardless of the opinion expressed. US Airways will pay Seabury a DIP Financing Success Fee of 0.375% of any commitment for evaluating, assisting, structuring and arranging any potential DIP Loan. For Exit Debt Financing, the Debtors will pay Seabury the greater of $1,250,000 or 20 basis points of the principal amount of the credit facility. The Debtors will also reimburse Seabury for reasonable out-of-pocket expenses. Before the Petition Date, the Debtors paid a $1,500,000 Filing Retainer that Seabury will be allowed to hold in its treasury until final settlement of all fees and expenses. During the pendency of the Chapter 11 case, in no event will the Debtors be obligated, subject to certain excluded fees, to pay in excess of $12,000,000 in retainer fees success fees and certain Supplemental Services -- subject to only the first $2,000,000 in fees for certain Supplemental Services being credited against the Chapter 11 Fee Cap. The Excluded Fees relate to: (i) fees payable to Seabury under the Seabury Aircraft Advisory Engagement; (ii) any fees for services related to provision or support of IT systems, including an existing contract with Seabury Solutions, LLC; (iii) any fees for services agreed to in writing by the Debtors related to "supply chain management" and "business optimization" projects; and (iv) expense reimbursements. John E. Luth, Seabury President and Chief Executive Officer, discloses that the Firm received $4,100,000 from the Debtors in fees and reimbursement of expenses in the 12-month period immediately before the Petition Date, inclusive of: $1,500,000 as Filing Retainers; $1,100,000 for consulting work related to business optimization and supply chain management; $500,000 in aircraft advisory fees for services related to the delivery of new regional jets; and $500,000 for certain other consulting services One or more affiliates of Seabury also received $7,900,000 from the Debtors in fees and reimbursement of expenses in the 12-month period before the Petition Date, inclusive of: $5,200,000 in aircraft advisory fees for services related to the delivery of new regional jets; $1,700,000 for certain consulting work related to business optimization, supply chain management and certain other consulting services; and $600,000 for IT support consulting fees. All invoices have been paid and Seabury and its affiliates are not currently creditors of the Debtors. Mr. Luth assures Judge Mitchell that nobody in Seabury is related to any officer, director employee, shareholder or creditor of the Debtors. Seabury, its principals, and the employees are "disinterested persons" as the term is defined in Section 101(14) of the Bankruptcy Code. * * * Judge Mitchell approves the Application on a conditional basis. Any party-in-interest may object to the Application until September 24, 2004. The U.S. Trustee and any statutory committee appointed in the Debtors' cases have until September 29, 2004, or 10 days after the appointment of the committee, whichever is later, to object. Headquartered in Arlington, Virginia, 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. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq. at Arnold & Porter LLP, and Lawrence E. Rifken, Esq. and Douglas M. Foley, Esq. at McGuireWoods LLP represent the Debtors in its restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000)5:48 PM 9/21/04 US AIRWAYS: Gets Court Approval to Continue Fuel Supply Agreements ------------------------------------------------------------------ Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, relates that US Airways, Inc., and its debtor-affiliates and subsidiaries purchase aviation jet fuel from fuel suppliers pursuant to fuel supply contracts or fuel purchase orders. Ninety-nine percent of the Debtors' fuel purchases are made by wire transfer advance payments to 48 fuel suppliers on the day prior to the beginning of the week during which the jet fuel "liftings" will occur. The price is variable on a weekly basis and is normally based upon a moving average of a commonly used pricing index like the Platt's jet fuel quotation for the applicable geographic location, plus a negotiated per-gallon premium, called a "differential." The remaining fuel purchases are made on account and paid to other fuel suppliers in arrears. Pricing terms are about the same and payments are made within a specified time after the Debtors' receipt of an invoice from the other Fuel Supplier. The Debtors utilize regional pipelines and terminal tankage systems to transport fuel from the point of purchase and store the fuel in proximity to several major airport storage systems. The pricing terms for these services include both invoiced and pre-pay arrangements. Mr. Leitch explains that disruption of these services would be a significant hindrance to the Debtors' operations and would likely result in higher prices for fuel and regional transport and storage. The Debtors have reviewed disbursements to the Fuel Suppliers and Pipeline and Terminal Providers. The total average monthly payments during this period were $120,000,000. Airport Fuel and Storage Delivery Systems The Debtors are participants in 34 "Fuel Consortiums". Fuel Consortiums are fuel storage and delivery facilities located at or near airports in which several carriers own or lease into- plane, storage and delivery systems. By using the Fuel Consortiums, the carriers store their fuel in one or more commingled "communal" fuel tanks and are able to withdraw the allotted portion of fuel at any time. The Fuel Consortiums are managed by third-party vendors who maintain and operate the system, and also maintain an inventory of the amount of the fuel stored by each carrier. In exchange, the participating carriers pay a fee to the third-party vendors for their services in connection with the Fuel Consortiums. These consortiums are set up, most often on a local or airport level, by airlines to minimize and share the cost of local storage and into-plane services. Some of these consortiums are organized as separate corporations of which the Debtors are an equal-share owner with the other members. The Debtors pay the third-party vendors that operate the consortiums for services, including maintenance and operation of the system and all necessary accounting functions required to allocate costs to individual users. The Debtors' participation in these arrangements leads to significant cost savings that would be unattainable if the Debtors were not able to make all payments as due and generally maintain their existing relationships in the ordinary course of business. Into-Plane Fuel Contracts The Debtors are also parties to certain Into-Plane fuel contracts pursuant to which fuel service providers transport the Debtors' fuel from fueling stations or other storage facilities to the Debtors' aircraft. Approximately 45% of the Debtors' obligations under the Into-Plane Contracts are prepaid. Means of local fuel transport include local pipelines, also known as "hydrant systems," and mobile and stationary vehicles. Other Fuel Service Arrangements The Debtors are parties to other arrangements by which services relating to into-aircraft delivery are provided by various third parties. These services are all necessary to the continued operations of the Debtors. It is critical that the Debtors be able to maintain these arrangements in the ordinary course of business. The Debtors have reviewed disbursements to the Into-Plane Contracts, Fuel Consortia and Other Fuel Service Arrangements, and the recent monthly average of these payments is approximately $5,000,000. Mr. Leitch maintains that while it is hard to estimate the obligations outstanding at any given moment, the outstanding prepetition obligations related to the Fuel Suppliers, Pipeline and Terminal Providers, Into-Plane Contracts, Fuel Consortiums and Other Fuel Service Arrangements do not exceed $2,000,000 as of the Petition Date. Mr. Leitch contends that the Debtors' sophisticated fuel purchase, distribution and storage relationships are essential to the continued performance of the Debtors' integrated efforts to manage their fuel supply and fuel costs. Otherwise, the Debtors' fuel purchase, distribution and storage system could be disrupted, thereby stranding the Debtors' aircraft, passengers and employees. Such a result would prevent the Debtors from operating their business at the most fundamental level, causing severe disruption in the Debtors' flight schedules and seriously damaging the Debtors' credibility in the marketplace. At the Debtors' behest, Judge Mitchell authorizes the Prepaid Fuel Suppliers to apply or credit any prepayments made or credits existing before the Petition Date to or against the prepetition or postpetition liftings of aviation fuel or the provision of transportation services to the Debtors. To the extent that any prepayments may be construed as deposits by any Prepaid Fuel Suppliers, the Court authorizes the Prepaid Fuel Suppliers to use those amounts to pay any outstanding prepetition obligations and to apply all remaining amounts to postpetition jet fuel liftings or transport services. The Debtors are authorized, but not directed, in their business judgment, to continue honoring, performing, and exercising their rights and obligations in accordance with any contracts with the Fuel Suppliers or those Pipeline and Terminal Providers who are paid in arrears, and the Other Fuel Service Arrangements. The Court also authorizes the Debtors to continue participating in the Fuel Consortia in accordance with established practice in the ordinary course of business. Headquartered in Arlington, Virginia, 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. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq. at Arnold & Porter LLP, and Lawrence E. Rifken, Esq. and Douglas M. Foley, Esq. at McGuireWoods LLP represent the Debtors in its restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000)5:48 PM 9/21/04 US AIRWAYS: Gets Dispatchers' Support on Plans to Lower Cost ------------------------------------------------------------ US Airways and the Transport Workers Union Local 545, representing approximately 150 dispatchers, reached a tentative agreement on a new contract that supports US Airways' transformation to a low- cost carrier. Details of the agreement were not disclosed, pending the TWU's communication of the agreement to its members, but the company said that the pact meets the cost-savings targets established for the work group, and represents a fair balance of productivity and work rule, pay and benefit changes. "This was not an easy decision to make and one that will require great personal sacrifice, however, we believe it is essential to the long-term survivability of our company and in the best interests of our members," said Don Wright, president of TWU Dispatchers Local 545. "We appreciate the leadership that the dispatchers have shown in stepping up and reaching an agreement," said Jerrold A. Glass, US Airways senior vice president of employee relations. "From the earliest discussions about our Transformation Plan, the TWU dispatchers have consistently acknowledged the structural and permanent changes in the airline industry, and are doing their part to help return US Airways to profitability. In particular, the work the dispatchers have been doing in the fuel conservation area has been very beneficial to the company." The ratification is expected to be completed within two weeks and requires approval by the bankruptcy court. Mr. Glass said that meetings with the Air Line Pilots Association -- ALPA, the Association of Flight Attendants -- AFA, the Communications Workers of America -- CWA, the International Association of Machinists -- IAM -- and two other TWU groups continue. He stressed that the company's Chapter 11 filing on Sept. 12 makes it all the more imperative to reach agreements quickly with all groups. "The ATSB, our creditors and our financial partners all want to see more than progress, they want to see results that show we will achieve the labor cost reductions that are necessary." Headquartered in Arlington, Virginia, 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. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq. at Arnold & Porter LLP, and Lawrence E. Rifken, Esq. and Douglas M. Foley, Esq. at McGuireWoods LLP represent the Debtors in its restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. USG CORPORATION: Wants Until March 1, 2005, to Decide on Leases --------------------------------------------------------------- USG Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend the period during which they may elect to assume, assume and assign, or reject any prepetition unexpired non-residential real property leases through and including March 1, 2005. Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that the Debtors have approximately 185 real property leases. Given the importance of these leases to their ongoing operations and the number of leases to be reviewed, the Debtors assert that an extension is necessary for them to decide whether to assume or reject their leases. The Debtors assure the Court that pending their election to assume or reject the real property leases, they will perform all their obligations arising from and after the Petition Date in a timely fashion, including payment of postpetition rent due, as required by Section 365(d)(3) of the Bankruptcy Code. As a result, there should be little or no prejudice to the landlords under the real property leases as a result of the extension. Moreover, the aggregate amount of prepetition arrearages under the leases is relatively small, as rent under many of the leases was paid in advance. Therefore, as of the Petition Date, there was only a minimal amount of accrued but unpaid rent under the leases. The Court will convene a hearing on October 25, 2004, to consider the Debtors' Request. By application of Del.Bankr.LR 9006-2, the deadline is automatically extended through the conclusion of that hearing. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORPORATION: Baron & Budd Asks Court to Ease Rule 2019 Order ---------------------------------------------------------------- Judge Fitzgerald entered an order on August 25, 2004, in the Chapter 11 cases concerning, among others: * USG Corp. * W.R. Grace & Co. * Armstrong World Industries * Kaiser Aluminum Corporation, Inc. * Owens Corning, directing all counsel representing more than one creditor or equity security holder to electronically file and serve the statement required by Rule 2019 of the Federal Rules of Bankruptcy Procedure before October 25, 2004. Baron & Budd and Silber Pearlman Want Rule 2019 Order Altered Baron & Budd, P.C., and Silber Pearlman, LLP, represent thousands of tort victims asserting personal injury claims in the Chapter 11 cases of: * Owens Corning, * Armstrong World Industries, * W.R. Grace & Co., * USG Corporation, * United States Mineral Products Company, * The Flintkote Company, * Flintkote Mines Limited, and * ACandS, Inc. Baron & Budd and Silber Pearlman admit that their literal compliance with the Rule 2019 Order would be difficult, burdensome and very expensive. The Firms do not, however, seek to be excused from filing a Rule 2019 statement. Instead, the Firms ask Judge Fitzgerald to amend the Order "slightly to ease the difficulty of compliance, while still preserving the intentions of Rule 2019." Baron & Budd and Silber Pearlman contend that mass tort cases call for flexibility in the application of Rule 2019. The purpose and spirit of Rule 2019 can be served by applying the rule flexibly in situations where the possible literal application of the Rule would cause unintended harm to already physically injured tort victims. Courts have applied the Rule pragmatically in other cases to assure that justice is done. The goal of the Rule is disclosure, and this goal can be fully realized without excessive burden and with minimal intrusion into the attorney-client relationship. Baron & Budd and Silber Pearlman believe that these goals can be achieved with the amendments and clarifications to the Rule 2019 Order: (a) Contained within Baron & Budd's and Silber Pearlman's retention agreements is a power of attorney or other authorization empowering the Firms to act on the Tort Victim's behalf. Submitting separate copies of each and every retention agreement would be burdensome and very expensive, and would serve no valid purpose. The Firms ask the Court to amend the Order to clarify that exemplars of the documents by which the Firms are empowered to act on the claimants' behalf may be attached to any 2019 Statement, with a verified statement that all Tort Victims have signed a similar agreement. If materially different authorizing documents were used at different times, exemplars of each form of agreement will be attached; (b) The retention agreements or other authorizing documents contain privileged communications between attorneys and clients, as well as privileged and confidential information relating to the financial terms of Baron & Budd's and Silber Pearlman's retention. Disclosure of these information, which is not required by Rule 2019, is not only purposeless, but could substantially invade the attorney-client relationships of the Tort Victims and would amount to disclosure of the Firms' work product. If an instrument is contained within another document that contains information not required by Rule 2019, the document should be redacted to exclude the other information that does not relate to creditors' empowerment of the attorney to appear in the bankruptcy case -- especially where the other information is privileged and confidential; (c) The Rule 2019 Order should be amended to exclude statement describing how Baron & Budd or Silber Pearlman "became involved with the claimant." Rule 2019 does not require such statement. In addition, the requirement invades the attorney-client relationship unnecessarily. In the context of a mass tort case where Baron & Budd and Silber Pearlman represent thousands of creditors, requiring each Firm to describe how it became involved with every client is also impracticable, if not impossible. The Firms note that Rule 2019 already includes a requirement that the statement contains "a recital of the pertinent facts and circumstances" in connection with the Firms' employment. Compliance with the provision is sufficient to further the disclosure purposes of Rule 2019; (d) Rule 2019 does not require the disclosure of the last four digits of the Social Security Number of any creditor. The last four digits of an individual's Social Security number are often used as an identifier in certain credit transactions and their disclosure would facilitate identity theft and invasion of privacy. Baron & Budd and Silber Pearlman ask the Court to delete this disclosure requirement from the Rule 2019 Order. The Firms propose that the first four digits of the Social Security number of the Tort Victims be required instead; (e) The Tort Victims' claims are by their nature generally unliquidated. In a mass tort bankruptcy case the values of the claims are generally determined in the plan process. Unlike a creditor holding a bond or note, the Tort Victims do not have a liquidated amount readily obtainable that they can recite on a 2019 statement -- except in those cases where claimants have liquidated their claims prepetition through settlement or judgment. In addition, the Tort Victims cannot state with specificity the exact date that they sustained their injury or contracted their disease because it is a continuous process over time. The Firms assert that these Rule 2019 requirements need not be applied in "a literal but inappropriate fashion so as to work an injustice to individual claimants in a mass tort case." In situations were it is impracticable or impossible to provide information under Rule 2019, the Firms point out that the court in Wilson v. Valley Elec. Membership Corp., 141 B. R. 309 (Bankr. D. La. 1992), declined to require strict compliance with the rule; and (f) The Tort Victims have entrusted their counsel with the handling of their personal injury cases. Although Rule 2019 does require the disclosure of the address of the creditor, it does not state whether the address must be the home address, or whether it can be a work or other address where the creditor receives his or her mail. Baron & Budd and Silber Pearlman receive correspondence on their clients' behalf. The Firms tell Judge Fitzgerald that disclosing the home addresses of thousands of elderly claimants is unnecessary and could provide the means for unnecessary harassment by salesmen or other unscrupulous individuals. The Firms ask the Court to clarify the Rule 2019 Order to allow for the address of the claimants to be in care of counsel. The amendment will still allow compliance with Rule 2019 without unnecessarily invading the claimants' privacy. Baron & Budd and Silber Pearlman also seek an extension of the deadline to file 2019 statements. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) VLASIC: 6 More Witnesses Take the Stand in $250M Suit vs. Campbell ------------------------------------------------------------------ Six more witnesses took the witness stand in the lawsuit commenced by VFB, LLC, against Campbell Soup Company before the United States District Court for the District of Delaware: A. Mark McCallum Mr. McCallum worked for Campbell under three positions: -- Vice President for the Prepared Foods Group, which included the Open Pit Sauce line; -- General Manager for the fresh mushroom business; and -- General Manager for Sanwa Ramen noodle business. Mr. McCallum remained the mushroom business' General Manager through the spin-off. He also took on responsibility for the Vlasic pickle business for VFI after James Dorsch was let go in May 1998. When he came in January 1997, Mr. McCallum observes that the mushroom business was in trouble. "It was missing its targets in terms of earnings and missing its targets in terms of costs." According to Mr. McCallum it was through Bob Miller's briefings that he was able to conclude the troubled state of the business. Mr. Miller was the most senior executive within the mushroom business at that time. John A. Lee, Esq., at Andrews & Kurth, in Houston, Texas, representing VFB LLC, draws Mr. McCallum's attention to the results of a March 1997 Campbell internal audit. Mr. McCallum notes that internal audit results show that Campbell's fresh mushroom consolidated earnings before income taxes as of December 1996 was $2.5 million lower than budget primarily due to: -- overly aggressive earnings growth targets; -- unrealized cost reductions at certain farms; and -- higher than expected costs with the Dublin and Hillsboro Farm re-entry into the later market. The internal audit also showed that the existing information systems do not provide management with the ability to effectively collect, analyze and report the operating and financial data needed to properly plan and monitor business performance. Having participated in the preparation of the Campbell Fresh Operating Plan, Mr. McCallum recalls being asked to hit a $6- million earnings target for Fiscal 1998, which would be a 75% increase in the 1997 projection. At the time the Fiscal 1998 Plan was being prepared, Mr. McCallum however finds out that Campbell was not prepared to allocate capital investments that farms needed to get back in shape. "The farm infrastructures were in various conditions, generally poor. . . ." With that, Mr. McCallum believes that it is only through increasing sales and decreasing costs that they could hit the target. When Mr. Lee brought up Open Pit, Mr. McCallum relates that "[i]t was a declining business then. It was a declining business after Campbell purchased the brand and it was declining when I arrived in fiscal 1998. The prospects were pretty grim for Open Pit but we were of the view that we could turn that around." Mr. McCallum cites the problems and difficulties that VFI experienced during and after the transition from Campbell: -- the tools for full transparency were not there making it difficult for VFI to understand how the different businesses were performing; -- VFI was given very little time to install the IT systems; -- price increase in manufacturing at Campbell's Listowell plants; -- VFI had to set up its own office for Swanson Canada's operation, which cost $500,000 per year after the spin-off; -- certain data that VFI needed are imbedded with Campbell's larger systems, thus getting those data was difficult and impossible; and -- falling to a record low of Vlasic's sale for the fourth quarter of 1998. By the end of 1999, Mr. McCallum was accountable for all businesses in the North American continent -- Vlasic, Open Pit and Swanson Canada. On why these businesses could not achieve the historic earnings that they had shown on Campbell's books for fiscal 1997, Mr. McCallum explains that there were great ideas but the resources to invest behind them were not there at that time. "We were already in deep trouble." B. Karl Henecka Karl Henecka was the managing director of Kattus and Skandi when they were merged, through the spin-off, and until now. At the time of the merge, 100% of LaCroix sales were through Kattus. Kattus was one of the nine companies spun into VFI and was later sold. Lacroix was not part of the nine companies. As he understood it to be, Mr. Henecka says, the decision made to have an interim and then a long-term contract was because the spin-off was coming. Mr. Henecka states that he would have preferred that during the spin-off, final agreements would be signed so that the Kattus wouldn't suffer uncertainties and it would know what to expect in the future. "Every short-term agreement is something which has a shadow over the company's future." The longer-term agreement, Mr. Henecka asserts, changed substantially the pre-existing relationship with Campbell. According to Mr. Henecka, VFI agreed to a three-year agreement that would not cover their costs because they had "no choice". "VFI wanted to sell Kattus and it can only sell [it] if there are agreements in place." Mr. Henecka also relates that another issue that heavily impacted Kattus was the BPCS implementation of a Campbell- based IT system. "BPCS is an IT system for a production company and Kattus is a trading distribution company, which there was no fit." When they turned live in August 1996, Mr. Henecka remembers it as a disaster. "[W]e weren't able to ship for weeks, for a month. We weren't able to control our inventories for weeks, for months. We weren't able to invoice our customers. . . ." By March of 1997, Kattus had fixed most of the problems in the system but Mr. Henecka points out "one problem you just can't fix is [the] lost reputation to the trade because Kattus was not selling product, but sold a service to the trade." As a consequence of their "really crappy service," Kattus lost a lot of listings at the trade. In connection with its sale, Kattus books and records were checked. It was through this review that Kattus found out that certain things didn't get laid out and therefore not accrued at three-year contracts with the trade. Kattus only paid one year instead of three years. "That was basically the consequence of [the BPCS problem] that hit suit in a couple of years later," Mr. Henecka says. C. Phillip Seitz Phillip Seitz has been Campbell's lawyer since October 1996. He was a procurist for Kattus. A procurist represents a company externally. Mr. Lee brought out the sale agreement between Eugen LaCroix Real Estate Company and Kattus, wherein Lacroix is conveying to Kattus a warehouse located at Ratingen City in Germany. Campbell-hired Oppenhoff & Radler drafted the Sale Agreement. In connection with the spin-off, Mr. Seitz says that Kattus' keeping the warehouse was important so that it can operate the distribution of the product to the German retailers at a good location. Mr. Seitz denies having any legal issues in the Agreement that he deemed important to address prior to its execution. "It's a normal standard sale and purchase agreement." Ratingen City has the right of first refusal to the sale of the property. After the Agreement was executed, the City did in fact exercise its preemptive right. As a result, the City took some portion of the land that was conveyed in the Agreement. Prior to the spin-off, Mr. Seitz admits not having advised among others, Mr. Henecka and VFI general counsel Norma Carter that under German Law, the City could exercise its preemptive right that could affect the sale transaction. Mr. Seitz explains that he did not do anything to help Kattus about the problem with the City because he was not its in- house counsel any more at that time. Kattus ultimately settled with the City, giving part of the land to the City but in return was reimbursed for costs to change the warehouse and the operations of the warehouse, Mr. Seitz recounts. Mr. Seitz cannot remember how much money the City paid Kattus. Mr. Lee asked Mr. Seitz about a service agreement with Delacre. Kattus drafted the Service Agreement to distribute Delacre products wherein Kattus expected to receive a monthly fee that annualized about $5.7 million. However, sometime in the middle of 1998, Campbell sold Delacre to United Biscuit. Mr. Seitz says that he was not told that Campbell signed a letter of intent to sell Delacre. As a result of the sale, the Service Agreement was terminated. D. Charles White Campbell IT professional Charles White led the data software migration project. Mr. White relates that because Campbell lost certain data, VFI had to hand-key certain of those data back. Mr. White notes that in VFI, "the business processes were being developed in concert with the software decision, and the implementation was reduced to more of a lining those processes with the actual software that was going to be used and working very hard to make sure that the software enabled those processes. The whole idea of cultural change, re-engineering was incredibly minimized through VFI implementation and was a huge part of the CIMIS implementation." E. David Walls David Walls was an Assistant Controller in the Campbell Controller's Offices. Mr. Walls testified to some payments that were not related to the spin-off. F. Ruth Davies After the spin-off, Ruth Davies was in charge of VFI's Customer Service. According to Ms. Davies, one of the ways that companies get customers to buy more than what they need of a product, which is what loading is, is getting them to buy early by offering them a lot of promotional deals. "So promotional spending goes way up during times of loading. And so there was concern, I think, about the amount of open charge backs that we would be dealing with as a consequence." WET SEAL: Lerach Coughlin Commences Securities Class Action Suit ---------------------------------------------------------------- Lerach Coughlin Stoia Geller Rudman & Robbins LLP reported that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of The Wet Seal, Inc., (NASDAQ:WTSLA) publicly traded securities during the period between January 9, 2003 and August 19, 2004. Any party who wish to serve as lead plaintiff must move the Court no later October 24, 2004. Any party who wish to discuss this action or have any questions concerning this notice or your rights or interests can contact plaintiff's counsel, William Lerach or Darren Robbins of Lerach Coughlin at 800-449-4900 or wsl@lerachlaw.com via e-mail. A member of this class can view a copy of the complaint as filed or join this class action online at: http://www.lerachlaw.com/cases/wetseal/ Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. The complaint charges Wet Seal and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Wet Seal is a specialty retailer operating stores selling fashionable and contemporary apparel and accessory items designed for female customers. The complaint alleges that during the Class Period defendants made false and misleading statements regarding the Company's business and prospects. The true facts which were known by each of the defendants, but concealed from the investing public during the Class Period, were: (a) the Company was hemorrhaging cash at a material rate requiring that the Company liquidate its stores, close stores or file for protection under the United States bankruptcy laws; (b) the Company's balance sheet was not "strong" as defendants claimed, but rather overstated; (c) the Company's gross margins were declining at a rate of nearly 200 basis points per month; (d) the Company's inventory was grossly overvalued and the Company's new product line had received disastrous reviews which defendants knew would result in declining margins and revenues in current and future quarters and/or bankruptcy for the Company; (e) the Company's point of sale operations transparently showed to defendants that their projections were grossly inflated and that the Company was teetering on the edge of bankruptcy unless it began to liquidate stores (as opposed to growing stores); (f) the Company's top creative personnel and merchants had fled the Company, leaving the Company in a state of decay; (g) the Company's liability exposure was far greater than defendants claimed because the Company had lease obligations which were well above market rates; (h) the Company had hidden for months the fact that the "carrying value" of its stores was materially impaired; (i) the Company's stated liabilities for Q1-Q3 2003 were understated by at least $1 million relating to the Company's failure to pay its employees overtime wages; and (j) the Company's earnings guidance of ($.53) to ($.57) was grossly understated for the Company's Q2 2004, and, in fact, the Company would ultimately reveal that its reported loss for Q2, alone, would be ($3.20) per share. As a result of the defendants' false statements, Wet Seal's stock price traded at inflated levels during the Class Period, increasing to as high as $12.99 on July 8, 2003, whereby the Company's major shareholders, top officers and directors sold more than $40 million worth of their own shares and obtained a new "last minute" $50 million credit facility as the Company was teetering on the edge of bankruptcy. Plaintiff seeks to recover damages on behalf of all purchasers of West Seal publicly traded securities during the Class Period (the "Class"). The plaintiff is represented by Lerach Coughlin, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud. Lerach Coughlin -- http://www.lerachlaw.com--, a 140-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Houston, Philadelphia and Seattle, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. Lerach Coughlin lawyers have been responsible for more than $20 billion in aggregate recoveries. Headquartered in Foothill Ranch, California, The Wet Seal, Inc. is a specialty retailer of fashionable and contemporary apparel and accessory items. The company currently operates a total of 582 stores in 49 states, the District of Columbia and Puerto Rico, including 475 Wet Seal stores and 101 Arden B. stores. The company's products can also be purchased online at http://www.wetseal.comor http://www.ardenb.com. Eight Quarters of Continuous Declines The Wet Seal, Inc.'s July 31, 2004, balance sheet shows that the retailer is liquid, with $92 million in current assets and $62 million in liabilities maturing within the next year. The company is solvent, with $71.7 million in shareholder equity. In the quarter ending July 31, the company posted a $102 million net loss on $105 million in sales. The second quarter of fiscal year 2004 was Wet Seal's eighth consecutive quarter reflecting negative comparable store sales and operating losses. Wet Seal reported a 10.9% decline in comparable store sales during the second quarter of fiscal year 2004. WORLDCOM INC: Browning & Pinkston Balks at Barring Trespass Cases ----------------------------------------------------------------- WorldCom, Inc., and its debtor-affiliates ask Judge Gonzalez to bar the prosecution of two putative class action lawsuits raising trespass claims concerning fiber optic cable that the Debtors installed many years before the Petition Date: (1) A lawsuit brought by Oscar Pinkston and a putative class of similarly situated landowners in Alabama, pending in the U.S. District Court for the Middle District of Alabama as Civil Action No. 04-523 (MEF-SRW); and (2) A lawsuit brought by Victor O. Browning and a putative class of similarly situated landowners in Kansas, Arkansas, Indiana, Kentucky, Missouri, Nebraska and Nevada, pending in the U.S. District Court for the Northern District of Oklahoma as Civil Action No. 02-604-H. The Debtors also ask Judge Gonzalez to: -- confirm that the claims asserted by Messrs. Pinkston and Browning, as well as any claims by any putative class members in their actions, were discharged; and -- bar the Pinkston and Browning plaintiffs from taking further action to prosecute their lawsuits to recover on their claims. Objections (a) Victor Browning Barry J. Dichter, Esq., at Cadwalader, Wickersham & Taft, LLP, in New York, asserts that barring the prosecution of Victor O. Browning's claims would be a clear legal error. Mr. Browning's claims are solely postpetition causes of action for the Debtors' postpetition tort conduct. Claims that arise from postpetition conduct simply do not exist prepetition so as to be subject to a bankruptcy court's injunctive powers. Mr. Dichter explains that lawsuits for a continuing series of tortious acts commenced before the filing of a bankruptcy petition and renewed afterward are neither barred nor discharged, if the actions are limited to the postpetition conduct. To rule in the Debtors' favor and bar Mr. Browning's action would be to erroneously re-interpret the substantive tort law of the State of Kansas and every other State, in absentia. Kansas, the state in which Mr. Browning's land is located and where the trespasses and damages are occurring, recognizes the tort of continuing trespass and differentiates between intrusions by tortfeasors in the form of structures versus additional intrusions to use those structures. Mr. Dichter emphasizes that the continuing use of the fiber to transmit signal pulses -- as opposed to the original installation and the presence of the below ground facilities -- is the gist of Mr. Browning's postpetition Kansas action against MCI. Kansas law holds that this transmission of pulses through a fiber optic cable is a continuing trespass. The court in City of Shawnee, Kansas v. AT&T Corp., 910 F. Supp. 1546 (D. Kan. 1995) made a clear and careful point of recognizing a difference between the physical cable installation and its use to transmit signals. The court concluded, without any difficulty, that Kansas law distinguished the two and would treat the transmission of signals as requiring a different legal treatment from the facilities. The Bankruptcy Court should not limit Mr. Browning's claims as long as Mr. Browning does not attempt to collect damages for or force remediation of prepetition conduct. The Debtors' request for injunction should be denied and Mr. Browning should be permitted to amend his state court pleadings to limit his claims to damages and other remedies for postpetition trespasses. Mr. Dichter maintains that the Debtors are grossly overreaching to block future lawsuits that probably should have been addressed in their Chapter 11 Plan by creating a fund for them, or by the Debtors agreeing to certify a class to address the merits of those claims in the Bankruptcy Court. The Debtors did neither. The Bankruptcy Court has no power to rewrite the substantive law of states to discharge liabilities that under the law of those states did not exist at Petition Date. As long as Mr. Browning restricts his lawsuit to postpetition conduct, the bankruptcy proceedings are not implicated. (b) Oscar Pinkston Clinton C. Carter, Esq., at Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., in Montgomery, Alabama, tells Judge Gonzalez that the Bankruptcy Court lacks jurisdiction over the Pinkston case and should allow Mr. Pinkston to pursue his class action against the Debtors in state court in Alabama. The Pinkston class action arises from the Debtors' postpetition conduct of burying, leasing, operating and running fiber optic cable under and across the Plaintiffs' land without permission or rights-of-way. The Complaint has two causes of action -- trespass and unjust enrichment -- solely under Alabama law. Mr. Pinkston does not seek benefit from any federal law. Furthermore, the Pinkston class members have limited the amount in controversy to $74,999 for all claims per individual class member. Trespass and unjust enrichment are continuing in nature because the offending structures or the fiber optic cables remain on the Plaintiffs' land. Mr. Carter asserts that because the transmission of pulses through a fiber optic cable is a successive and reoccurring event, the doctrine of continuing trespass allows the Pinkston class members to seek protection for the Debtors' post-discharge conduct. Debtors Respond to Browning Objection According to Adam P. Strochak, Esq., at Weil, Gotshal & Manges, LLP, in New York, Victor Browning in his Objection conceded that: -- he failed to file a claim in the Debtors' bankruptcy proceeding; -- even assuming that his claim could qualify as a continuing trespass, he nevertheless could have elected to sue once for value of a perpetual appropriation; -- the going forward resolution of the Debtors' future liability might have been possible in their Chapter 11 proceeding save for the fact that it wasn't attempted; and -- the liability for claimants like Mr. Browning probably should have been addressed in the Debtors' Plan. Based on these concessions, Mr. Browning admits that his entire lawsuit is founded on a pre-bankruptcy "claim." By admitting that he had the right to "elect" to sue before the Petition Date for the value of the Debtors' alleged appropriation of his land, Mr. Browning acknowledges that he could have brought his claim to the Bankruptcy Court. Failing to do that, Mr. Browning loses the right to pursue the claim after confirmation of the Plan, which is what the discharge injunction is all about. Mr. Browning intends to modify his state court action so that it is based "only on the unauthorized and uncompensated transmissions." Mr. Strochak contends that the lightwave transmissions -- which Mr. Browning will never see or otherwise perceive, will never cause him any harm and will never damage his property interest to the slightest degree -- simply cannot constitute as the basis for a trespass claim. The "intangible" invasions cannot constitute a trespass unless they are accompanied by actual physical damage to the property. 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. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Former Aetna Executive L.E. Shaw Joins Gibson Dunn as Counsel --------------------------------------------------------------- Gibson, Dunn & Crutcher LLP reported that the former Executive Vice President and General Counsel of Aetna, L. Edward Shaw, Jr., has joined the firm's New York office as Counsel. A member of the firm's Corporate Transactions and Securities Practice Group, Shaw will counsel clients on corporate governance, risk management and regulatory compliance matters. "Given today's regulatory environment, Ed's broad experience with a wide range of governance issues will be a valuable resource for our clients," said Ken Doran, Managing Partner of Gibson Dunn. "We have a strong group of lawyers who advise corporations, corporate boards and board committees on governance issues, internal investigations and special committee assignments. I expect Ed will be working closely with those who lead that practice, including Randy Mastro, Barbara Becker and Peter Beshar in New York and John Olson, Brian Lane, Amy Goodman and Joe Warin in Washington, D.C." Prior to joining the firm, Shaw was at Aetna, Inc., from 1999 to 2003, where in addition to serving as general counsel, he served as a member of the Office of the Chairman. From 1996 to 1999, he worked for National Westminster Bank as Chief Corporate Officer for North America, and from 1983 to 1996, he worked for Chase Manhattan Corp. as Executive Vice President and General Counsel. He was also a partner and member of the Executive Committee at Milbank, Tweed, Hadley & McCloy LLP, where he practiced from 1969 to 1983. Shaw is currently serving as Independent Consultant to the Board of Directors of the New York Stock Exchange, reviewing the Exchange's surveillance, examination and enforcement activities relating to specialist firms. In addition, he is a director of Mine Safety Appliances Co. and New York-based Covenant House, which is the country's largest privately funded provider of crisis care to children. Shaw earned his law degree in 1969 from Yale Law School. In 1966, he earned his Bachelor of Arts degree magna cum laude from Georgetown University. About the Firm Gibson, Dunn & Crutcher LLP is a leading international law firm. Consistently ranking among the world's top law firms in industry surveys and major publications, Gibson Dunn is distinctively positioned in today's global marketplace with more than 800 lawyers and 13 offices, including Los Angeles, New York, Washington, D.C., San Francisco, Palo Alto, London, Paris, Munich, Brussels, Orange County, Century City, Dallas and Denver. * AssetLink LP Establishes Office in Denver ------------------------------------------- AssetLink LP, a Pittsburgh-based REO -- Real Estate Owned -- services company that specializes in selling bank-owned properties acquired through mortgage foreclosures, has established an office in Denver, Colorado. AssetLink is a wholly owned subsidiary of ServiceLink LP of Pittsburgh, the largest centralized closing management company in the nation. According to AssetLink President, Ken Westfall, the Denver office will give AssetLink an East Coast-West Coast presence in what is generally regarded as the nation's center for companies that deal with the management of REO properties. In making the announcement, Westfall noted that he is no stranger to Denver. He is a native of Colorado and spent 25 years working there in the REO industry before moving to Pittsburgh earlier this year. Before joining AssetLink, he was Chairman and Chief Executive of Denver-based Westfall & Company, a company he sold in 1998 to Chicago Title, which now operates as Fidelity National Asset Management. "Locating an office in Denver gives us a strategic presence that will allow us to build on our national status in the REO market. It's also an opportunity for me to return to my roots, both professionally and personally," he said. Commenting on the establishment of the Denver office, Jeff Coury, Chief Executive Officer of ServiceLink LP, AssetLink's parent company, said, "Establishing this new office in Denver further demonstrates our commitment to the REO market. This presence along with Ken's leadership and the proven ServiceLink model, strategically positions AssetLink in the market." About Assetlink LP AssetLink LP is a national REO company that has pioneered a new direction in the management and marketing of bank-owned properties. By capitalizing on the proven technology of its parent company, ServiceLink LP, AssetLink is in the final development stage of building a nationwide web-based REO system. Its system will allow clients, asset managers, brokers, attorneys, and closing agents to easily manage the liquidation process through one data source. AssetLink's motto is: "Consider It Sold." About Servicelink LP ServiceLink LP is the largest centralized closing management company in the nation. Headquartered in Hopewell Township, Pennsylvania, it pioneered what has become the industry standard for a "start-to-finish" system that allows the company's work teams to control the mortgage closing process from beginning to end, earning the company recognition by lenders throughout the country as the number one closing specialist in terms of quality and customer satisfaction. ServiceLink's motto is: "Consider It Done." About Ken Westfall Ken Westfall is a 25-year veteran of the asset management and disposition industry. He pioneered Broker Price Options -- BPOs -- and Real Estate Owned -- REO -- outsourcing, which are now considered industry standards. He serves as AssetLink's President. Westfall is skilled at all levels of Mortgage Default Solutions, including REO outsourcing, BPOs, single and multi- family property value reconciliation, and appraisal review. He once served as Director of the Colorado Foreclosure Prevention Task Force under the Governor's office, and also sat on a federal Housing and Urban Development -- HUD -- panel regarding the disposition of REO properties. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- October 9-10, 2004 INTERNATIONAL WOMEN'S INSOLVENCY & RESTRUCTURING CONFEDERATION IWIRC Annual Fall Conference Nashville, Tennessee Contact: 1-703-449-1316 or http://www.iwirc.com/ October 10-13, 2004 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Seventh Annual Meeting Nashville, Tennessee Contact: http://www.ncbj.org/ October 15-18, 2004 TURNAROUND MANAGEMENT ASSOCIATION 2004 Annual Convention Marriott Marquis, New York City Contact: 312-578-6900 or http://www.turnaround.org/ November 29-30, 2004 BEARD GROUP & RENAISSANCE AMERICAN MANAGEMENT The Eleventh Annual Conference on Distressed Investing Maximizing Profits in the Distressed Debt Market The Plaza Hotel - New York City Contact: 1-800-726-2524; 903-592-5168; or dhenderson@renaissanceamerican.com December 2-4, 2004 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Marriott's Camelback Inn, Scottsdale, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org/ March 9-12, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Spring Conference JW Marriott Desert Ridge, Phoenix, Arizona Contact: 312-578-6900 or http://www.turnaround.org/ April 28- May 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriot, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ June 2-4, 2005 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities and Bankruptcy Omni Hotel, San Francisco Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ July 14 -17, 2005 AMERICAN BANKRUPTCY INSTITUTE Ocean Edge Resort, Brewster, Massachusetts Contact: 1-703-739-0800 or http://www.abiworld.org/ July 27- 30, 2005 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Kiawah Island Resort and Spa, Kiawah Island, S.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ October 19-23, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Annual Convention Chicago Hilton & Towers, Chicago Contact: 312-578-6900 or http://www.turnaround.org/ November 2-5, 2005 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Eighth Annual Meeting San Antonio, Texas Contact: http://www.ncbj.org/ December 1-3, 2005 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Grand Champions Resort, Indian Wells, Calif. Contact: 1-703-739-0800 or http://www.abiworld.org/ The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***