/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/041013.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, October 13, 2004, Vol. 8, No. 222 Headlines AB DICK: Deadline to Compete with Presstek Bid is Oct. 27 AMERISERV FINANCIAL: Fitch Upgrades Rating from CCC+ to B- ARGENT SECURITIES: Fitch Puts BB+ Rating on Class M-11 Certs. ARMSTRONG HOLDINGS: Lowe's Reduces Laminate Flooring Purchases BANC OF AMERICA: Fitch Puts Low-B Rating on 14 Cert. Classes BOWATER INC: Will Release 2004 Third Quarter Results on Oct. 27 CALPINE CORP: S&P Junks $736 Million Unsecured Convertible Notes CHARTER COMMS: S&P Affirms Junk Ratings with Negative Outlook CHASE FUNDING: Fitch Assigns Low-B Ratings on B-4 & B-5 Certs. CITGO PETROLEUM: Moody's Places Ba2 Rating on $200M Senior Notes COLE NATIONAL: Lack of Info Cues S&P to Withdraw BB- Credit Rating COMMERCE ONE: Receives De-Listing Notice from Nasdaq CONSECO INC: Will Webcast 3rd Quarter Financial Results on Nov. 9 COPACK INTERNATIONAL: Case Summary & Largest Unsecured Creditors CREST 2004-1: S&P Assigns Low-B Ratings to Class G & H Notes CROWN CASTLE: Cash Tender Offers for Senior Notes Expire DB COMPANIES: Has Until Dec. 31 to Make Lease-Related Decisions DII/KBR: Halliburton to Hold Q3 2004 Conference Call on Oct. 26 DIVERSIFIED ASSET: S&P Puts Class B-1L's BB+ Rating on CreditWatch DOANE PET: S&P Puts B- & CCC Ratings on CreditWatch Positive ENRON: Judge Jones Remands Sierra Pacific Case to Bankr. Court EXIDE TECHNOLOGIES: CEO C.H. Muhlhauser Will Depart on April 1 FEDDERS CORP: S&P Slashes Corporate Credit Rating to CCC+ from B FISHER SCIENTIFIC: Officers Participate in Stock Trading Plans FORT WORTH OSTEOPATHIC: Closure Nixes 1,000 Jobs & 265 Beds GLOBAL CROSSING: Confirms Broadview Settlement Agreement GOOSE CREEK LLC: Case Summary & 1 Largest Unsecured Creditor GROSVENOR ORLANDO: Court Confirms Plan of Reorganization HAWK CORP: Moody's Puts B2 Rating on Planned $100M Unsecured Notes INTERSTATE BAKERIES: Hires Kurtzman Carson as Claims Agent KAISER ALUMINUM: Court Orders Counsel to File Rule 2019 Statements KAISER ALUMINUM: Agrees to Allow Performance & Volks' Claims KARA GROUP: Files for Bankruptcy Protection under CCAA MACOMB COUNTY: S&P Slices Revenue Bonds' Rating to BB from BBB- MAXIM CRANE: Can Continue Hiring Ordinary-Course Professionals METROPCS: Two Concerns Prompts S&P to Revise Outlook to Negative MILLENIUM ASSISTED: Creditors Must File Proofs of Claim by Oct. 18 ML CBO: Moody's Slices $172.8M Senior Secured Notes' Rating to Ca NATIONAL CENTURY: Trust Wants $2.1 Mil. Preferential Transfer Back NATIONAL IRANIAN: Case Summary & 10 Largest Unsecured Creditors NAVIGATOR CDO: S&P Assigns BB Ratings on Classes D-1 & D-2 NRG ENERGY: Inks Stipulation Resolving NCAT's & Reynolds' Claims OWENS CORNING: CSFB & Tort Lawyers Debate Rule 2019 Compliance PACIFIC BIOMETRICS: Inks New $1.7 Million Clinical Research Pact PACIFIC COAST: Moody's Junks Class C-1 & C-2 Secured Notes PACIFIC GAS: Trustee Objects to Dynegy Power's $1M Admin. Claim PACIFIC GAS: Declares Preferred Stock Dividends PARMALAT: Committee Has Until Nov. 15 to Dispute Citibank's Claim PERKINELMER INC: Moody's Affirms Low-B Ratings PILLOWTEX: Selling Kannapolis Facility to Manchester for $4.5 Mil. POTLATCH CORP: Fitch Affirms Double-B Senior Debt Ratings PRIME HOSPITALITY: Acquisition Cues S&P to Withdraw Low-B Ratings RESOLUTION PERFORMANCE: S&P Shaves Corporate Credit Rating to B- SECURITY INDEMNITY: Notice to All Policyholders & Claimants SHOWCASE AUTO: Hires Felderstein Fitzgerald as Bankruptcy Counsel SOLUTIA INC: Wants Until March 11, 2005 to Remove Civil Actions SOLUTIA: Increases Saflex(R) PVB Price by 29c as Capacity Tightens STRATUS TECH: S&P Places B Corporate Credit Rating on CreditWatch TEXAS STATE: S&P's Rating on $5.4M Mortgage Bonds Tumbles to D THERMACLIME INC: S&P Places B Rating on $50 Million Secured Loan THORNBURG MORTGAGE: Moody's Puts Low-B Ratings on Classes B-4 & 5 UAL CORP: Names Lori Fox & Carol Fernandez Gov't. Affairs Managers UAL CORPORATION: Objects to James Burley's $50 Million Claim UAL CORPORATION: Court Approves Guilford Settlement UNITED DEFENSE: S&P Lifts Corporate Credit Rating to BB+ from BB URS CORPORATION: Wins $286 Million 10-Year U.S. Navy Contract US AIRWAYS: Has Until October 27 to File Schedules & Statements US AIRWAYS: Hires American Appraisal as Valuation Consultants US AIRWAYS: Gets Court Okay to Assume BofA Credit Card Agreement USEC INC: S&P Shaves Corporate Credit Rating One Notch to BB- USG CORP: Wants Until March 31, 2005 to Remove State Court Actions VLASIC: Campbell Present 5 More Witnesses in $250M Spin-Off Suit W.R. GRACE: Asks Court to Bless Honeywell Settlement Agreement WEIRTON STEEL: Paying Distributions to Allowed Claim Holders WORLDCOM INC: Balks at Teleserve Systems' Claims * Upcoming Meetings, Conferences and Seminars ********* AB DICK: Deadline to Compete with Presstek Bid is Oct. 27 --------------------------------------------------------- As previously reported in the Troubled Company Reporter, Presstek, Inc., has offered $40 million to purchase substantially all of the assets of A.B. Dick Company and its wholly owned subsidiaries. On Sept. 15, 2004, the United States Bankruptcy Court for the District of Delaware approved uniform bidding and auction procedures for the proposed disposition. The Debtors' Assets are to be sold free and clear of all liens, claims, encumbrances, and interests, save and except to the liens of the Debtors' prepetition and postpetition lenders. All interested bidders should read carefully the Auction and Bidding Procedures, copies of which may be obtained from: Counsel to the Debtors: H. Jeffrey Schwartz, Esq. Benesch, Friedlander, Coplan & Aronoff LLP 2300 BP Tower, 200 Public Square Cleveland, Ohio 44114-2378 - and - Frederick B. Rosner, Esq. Jaspan Schlesinger Hoffman LLP 1201 N. Orange Street, Suite 1001 Wilmington, Delaware 19801 Bids must be delivered in writing to: H. Jeffrey Schwartz, Esq. Benesch, Friedlander, Coplan & Aronoff LLP 2300 BP Tower, 200 Public Square Cleveland, Ohio 44114-2378 Tel. No. 216/363-4635 E-mail: jschwartz@bfca.com and received no later than Oct. 27, 2004, at 5:00 p.m., Eastern time. A public auction will be conducted at 10:00 a.m., Eastern time, on Oct. 29, 2004, at: Benesch, Friedlander, Coplan & Aronoff LLP 2300 BP Tower, 200 Public Square Cleveland, Ohio 44114-2378 Pursuant to the Auction and Bidding Procedures, the Debtors reserve the right, after consultation with specified parties, to: (i) determine and announce the highest and bid submitted at the Auction; (ii) cancel the Auction; (iii) extend the Bid Deadline; (iv) impose such other and additional terms and conditions or modify the terms and conditions hereof as the Debtors determine to be in their best interests; and (v) reject all Qualifying Bids as contrary to the best interest of the Debtors and their estates. The Debtors will have no obligation to accept or submit for Court approval any offer presented at the Auction. Any questions about the Debtors' businesses or Assets should be directed to: Debtors' Financial Advisor: Glenn C. Pollack Candlewood Partners, LLC 10 1/2 East Washington Street Chagrin Falls, Ohio 44022 Tel. No. 440/264-8004 Fax No. 440/247-3060 E-mail: gppollack@candlewoodpartners.com Headquartered in Niles, Illinois, A.B.Dick Company -- http://www.abdick.com/-- is a global supplier to the graphic arts and printing industry, manufacturing and marketing equipment and supplies for the global quick print and small commercial printing markets. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Del. Lead Case No. 04-12002) on July 13, 2004. Frederick B. Rosner, Esq., at Jaspen Schlesinger Hoffman, and H. Jeffrey Schwartz, Esq., at Benesch, Friedlander, Coplan & Aronoff LLP represent the Debtors in their restructuring efforts. Richard J. Mason, Esq., at McGuireWoods, LLP, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed over $10 million in estimated assets and over $100 million in estimated liabilities AMERISERV FINANCIAL: Fitch Upgrades Rating from CCC+ to B- ---------------------------------------------------------- Fitch Ratings revised the Rating Outlook of AmeriServ Financial, Inc. and AmeriServ Financial Bank to Positive from Negative. At the same time, Fitch has upgraded the rating of AmeriServ Capital Trust I to 'B-' from 'CCC+' with a Rating Outlook Positive. The rating for AmeriServ Capital has been removed from Rating Watch Negative where it was placed on April 17, 2003. The rating action is reflective of AmeriServ Financial's improved balance sheet structure following the completion of a $12.6 million private placement of common stock. The net proceeds of this offering will be used to support the prepayment of approximately $100 million of FHLB advances (6% interest rate and 2010 maturity) at AmeriServ Financial Bank, close the company's loss-making mortgage banking business (Standard Mortgage Corporation), redeem approximately $5.7 million of AmeriServ Financial's $34.5 million (8.45%) trust preferred securities and inject liquidity at the parent company level. Although these actions will result in a one-time after tax charge of approximately $8.8 million in fourth quarter 2004 and a loss for the full year 2004, Fitch believes that this balance sheet restructuring better positions the company for future improvements in its financial performance. The upgrade of AmeriServ Capital's rating is driven by the increased liquidity at the parent company level, combined with the reduction in outstanding trust preferred securities. These actions improve AmeriServ Financial's ability to service the trust preferred debt, thereby significantly reducing the likelihood of a deferral on the trust preferred dividend in the near term. Looking ahead, initiatives to make the company's debt service less onerous, including the closing of a second $13.2 million private placement of common stock planned for December 2004, and improved core earnings trends will determine progress on the ratings front. Ratings upgraded: AmeriServ Capital Trust I: -- Trust Preferred to 'B-' from 'CCC+'. Ratings Placed on Rating Outlook Positive: AmeriServ Financial, Inc.: -- Long-term 'B'; -- Short-term 'B' ; -- Individual 'D'; -- Support '5' ; Rating Outlook to Positive from Negative. AmeriServ Financial Bank: -- Long-term 'BB-'; -- Long-term deposits 'BB-'; -- Short-term 'B'; -- Short-term deposits 'B'; -- Individual 'D'; -- Support '5'; Rating Outlook to Positive from Negative. AmeriServ Capital Trust I: -- Trust Preferred 'B-'; Rating Outlook to Positive from Negative. ARGENT SECURITIES: Fitch Puts BB+ Rating on Class M-11 Certs. ------------------------------------------------------------- Argent Securities Inc. 2004-W11, is rated by Fitch: -- $1,381,500,000 classes A-1 to A-4 certificates 'AAA'; -- $49,500,000 class M-1 certificates 'AA+'; -- $55,800,000 class M-2 certificates 'AA+'; -- $53,100,000 class M-3 certificates 'AA'; -- $31,500,000 class M-4 certificates 'AA-'; -- $32,400,000 class M-5 certificates 'A+'; -- $26,100,000 class M-6 certificates 'A'; -- $25,200,000 class M-7 certificates 'A-'; -- $25,200,000 class M-8 certificates 'BBB+'; -- $22,500,000 class M-9 certificates 'BBB'; -- $18,000,000 class M-10 certificates 'BBB-'; -- $18,000,000 non-offered class M-11 certificates 'BB+'. Credit enhancement for the 'AAA' rated class A certificates reflects the 19.85% subordination provided by: * classes M-1 through M-11, * monthly excess interest, and * initial overcollateralization -- OC -- of 3.40%. Credit enhancement for the 'AA+' rated class M-1 certificates reflects the 17.10% subordination provided by: * classes M-2 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'AA+' rated class M-2 certificates reflects the 14% subordination provided by: * classes M-3 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'AA' rated class M-3 certificates reflects the 11.05% subordination provided by: * classes M-4 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'AA-' rated class M-4 certificates reflects the 9.30% subordination provided by: * class M-5 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'A+' rated class M-5 certificates reflects the 7.50% subordination provided by: * class M-6 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'A' rated class M-6 certificates reflects the 6.05% subordination provided by: * class M-7 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'A-' rated class M-7 certificates reflects the 4.65% subordination provided by: * class M-8 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'BBB+' rated class M-8 certificates reflects the 3.25% subordination provided by: * class M-9 to M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'BBB' rated class M-9 certificates reflects the 2% subordination provided by: * class M-10 and M-11, * monthly excess interest, and * initial OC. Credit enhancement for the 'BBB-' rated class M-10 certificates reflects the 1% subordination provided by: * class M-11, * monthly excess interest, and * initial OC. Credit enhancement for the privately offered 'BB+' rated class M- 11 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 rated 'RPS2' by Fitch. Deutsche Bank National Trust Company will act as Trustee. The mortgage pool consists of loan groups. Group I mortgage loans will consist of first lien subprime mortgage loans that conform to Freddie Mac and Fannie Mae loan limits. As of the Cut-Off date, Oct. 1, 2004, the mortgage loans have an aggregate balance of $1,025,563,649.68. The weighted average loan rate is approximately 7.526%. The weighted average remaining term to maturity -- WAM -- is 356 months. The average Cut-Off date principal balance of the mortgage loans is approximately $166,622.85. The weighted average original loan-to-value ratio -- OLTV -- is 83.54% and the weighted average Fair, Isaac & Co. score is 609. The properties are primarily located in: * California (23.31%), * Florida (9.35%), and * Illinois (8.87%). In addition, on or before the 90th day following the closing date, the trust will acquire $293,018,132 in subsequent mortgage loans to be included in the mortgage pool. Group II mortgage loans will consist of first lien subprime mortgage loans that may or may not conform to Freddie Mac and Fannie Mae loan limits. As of the Cut-Off date, Oct. 1, 2004, the mortgage loans have an aggregate balance of $374,436,407.21. The weighted average loan rate is approximately 7.283%. The WAM is 357 months. The average Cut-Off date principal balance of the mortgage loans is approximately $265,369.53. The weighted average OLTV is 83.22% and the weighted average Fair, Isaac & Co. score is 612. The properties are primarily located in: * California (46.52%), * New York (13.38%), and * Florida (6.17%). In addition, on or before the 90th day following the closing date, the trust will acquire $106,981,811 in subsequent mortgage loans to be included in the mortgage pool. The loans were originated or acquired by Argent Mortgage Company, LLC, and Olympus Mortgage Company. Both mortgage companies are subsidiaries of Ameriquest Mortgage Company which is a specialty finance company engaged in the business of originating, purchasing and selling retail and wholesale subprime mortgage loans. Both Argent and Olympus focus primarily on wholesale subprime mortgage loans. ARMSTRONG HOLDINGS: Lowe's Reduces Laminate Flooring Purchases -------------------------------------------------------------- Lowe's Companies, Inc., informed Armstrong Holdings, Inc. (OTC Bulletin Board: ACKHQ) of its decision to reduce its purchases of laminate flooring from the Company. Armstrong expects this decision to become effective starting in the first quarter of 2005. The anticipated annual impact of this change is to reduce sales by approximately $60 million, resulting in a material adverse impact to operating income in 2005. 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. BANC OF AMERICA: Fitch Puts Low-B Rating on 14 Cert. Classes ------------------------------------------------------------ Fitch Ratings affirms Banc of America Commercial Mortgage Inc., series 2003-2, commercial mortgage pass-through certificates: -- $128.4 million class A-1 'AAA'; -- $483.6 million class A-1A 'AAA'; -- $106.3 million class A-2 'AAA'; -- $168.1 million class A-3 'AAA'; -- $482.3 million class A-4 'AAA'; -- Interest-only class XC 'AAA'; -- Interest-only class XP 'AAA'; -- $56.7 million class B 'AA'; -- $21.0 million class C 'AA-'; -- $44.1 million class D 'A'; -- $23.1 million class E 'A-'; -- $21.0 million class F 'BBB+'; -- $23.1 million class G 'BBB'; -- $21.0 million class H 'BBB-'; -- $18.9 million class J 'BB+'; -- $10.5 million class K 'BB'; -- $10.5 million class L 'BB-'; -- $8.4 million class M 'B+'; -- $8.4 million class N 'B'; -- $4.2 million class O 'B-'; -- $2.7 million class BW-A 'BBB'; -- $1.2 million class BW-B 'BBB'; -- $8.8 million class BW-C 'BBB-'; -- $2.7 million class BW-D 'BB+'; -- $3.6 million class BW-E 'BB'; -- $3.2 million class BW-F 'BB'; -- $3.1 million class BW-G 'BB-'; -- $2.7 million class BW-H 'B+'; -- $2.7 million class BW-J 'B'; -- $2.1 million class BW-K 'B'; -- $3.5 million class BW-L 'B-'. Fitch does not rate the $27.3 million class P or classes HS-A, HS- B, HS-C, HS-D, or HS-E. The rating affirmations reflect the stable pool performance and minimal paydown since issuance. As of the September 2004 distribution date, the pool's aggregate certificate balance has decreased 0.69% to $1.75 billion from $1.77 billion at issuance. To date, there have been no loan payoffs or realized losses within the transaction. There are also no delinquent or specially serviced loans. Fitch has reviewed credit assessments of: * Hines-Sumitomo Portfolio (9.1%), * 1328 Broadway (7.7%), and * Newgate Mall (2.5%) loans. Based on their stable performance, the loans maintain investment- grade credit assessments. BOWATER INC: Will Release 2004 Third Quarter Results on Oct. 27 --------------------------------------------------------------- Bowater Incorporated (NYSE: BOW) will release third quarter 2004 financial results before the market opens on Wednesday, October 27, 2004. Bowater will hold a management conference call to discuss these financial results at 9:00 a.m. EDT, October 27, 2004. The conference call number is 800-762-4758 or 480-629-9027 (international). The call will also be broadcast via the Internet. Interested parties may connect to the Bowater website at http://www.bowater.com/,then follow the on-screen instructions for access to the call and related information. A replay of the call will be available from 1:30 p.m. EDT on Wednesday, October 27, through Wednesday, November 3, on the website or by dialing 800-475-6701 or 320-365-3844 (international) and using the access code 750463. Bowater Incorporated, headquartered in Greenville, South Carolina, is a leading producer of newsprint and coated groundwood papers. In addition, the company makes uncoated groundwood papers, bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 13 North American sawmills that produce softwood lumber. Bowater also operates two facilities that convert a groundwood base sheet to coated products. Bowater's operations are supported by approximately 1.4 million acres of timberlands owned or leased in the United States and Canada and 30 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange, the Pacific Exchange and the London Stock Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSE: BWX). * * * As reported in the Troubled Company Reporter on May 14, 2004, Standard & Poor's Ratings Services assigned its 'BB' bank loan rating to newsprint producer Bowater Inc.'s $435 million senior unsecured revolving credit facility due 2007. All other ratings were affirmed at 'BB'. The outlook is stable. The new facility, which consists of a $400 million U.S. tranche and a $35 million Canadian tranche, replaces two senior unsecured credit facilities totaling $600 million--a $500 million facility due to expire in April 2005 and a $100 million facility due to expire in October 2004. "The ratings reflect Bowater's high debt burden, caused by three years of weak earnings, elevated capital spending and near-term prospects for modest--although improving--cash-flow generation," said Standard & Poor's credit analyst Pamela Rice. These factors outweigh the company's leading market positions in cyclical newsprint, pulp, and coated groundwood paper, substantial operating leverage, and valuable timberland holdings. CALPINE CORP: S&P Junks $736 Million Unsecured Convertible Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to Calpine Corp.'s (B/Negative/--) $736 million unsecured convertible notes due 2014. The rating on the notes is the same as Calpine's existing unsecured debt and two notches lower than the corporate credit rating. The outlook is negative. The rating on Calpine, a San Jose, California-based company that develops, acquires, owns, and operates power generation facilities, reflects the company's weak credit statistics, increased business risks, and its limited opportunities to reduce its debt. These weaknesses are somewhat mitigated by Calpine's contractual revenue base, which offsets some of the cash flow volatility caused by merchant power sales. In addition, Calpine has proven its ability to efficiently operate its power plants, as well as manage and build multiple plants in a timely and efficient manner. Furthermore, highly efficient gas turbines increasingly make up a larger percentage of Calpine's fleet, which should ensure a higher level of dispatch compared with the older plants that Calpine's competitors have purchased for the past few years. "The negative outlook reflects Calpine's weak financial ratios. The ratings could be lowered if Calpine's funds from operations interest coverage remains substantially below 1x or if Calpine cannot refinance its high-tides securities in a timely manner," said Standard & Poor's credit analyst Jeffrey Wolinsky. Calpine's current operating portfolio, mainly in the U.S., consists of 91 operating projects with a net ownership interest in more than 26,000 MW. CHARTER COMMS: S&P Affirms Junk Ratings with Negative Outlook ------------------------------------------------------------- Standard & Poor's Ratings Services revised its ratings outlook on cable TV system operator Charter Communications Inc. and subsidiaries to negative from positive. At the same time, the 'CCC+' corporate credit ratings and all ratings on the companies were affirmed. Charter serves about 6.1 million basic cable TV subscribers and had $18.4 billion in debt outstanding as of June 30, 2004. "The outlook revision was based on concerns about higher-than- anticipated analog subscriber losses, insufficient revenue and EBITDA growth, recent senior management departures, and heightened uncertainty about Charter's ability to refinance its $588 million in 5.75% convertible notes maturing in October 2005," said Standard & Poor's credit analyst Eric Geil. On Oct. 7, 2004, Charter indicated that analog subscriber losses for the 2004 third quarter will be 55,000-60,000. This is a 2.6%- 2.7% decline from the year-earlier level (pro forma for system sales) and an increase in the rate of decline from levels experienced in early 2004 and late 2003. As with other cable operators, high-speed data subscriber growth is slowing because of rising penetration and increasing competitiveness of phone company digital subscriber line services, diminishing data's tempering effects on weak video revenue performance. Charter expects a 7.5% revenue increase in the third quarter compared with year-earlier pro forma results. Although this is slightly better than first- and second-quarter revenue growth, higher programming, customer care, and service costs are compressing profitability and constraining EBITDA, which the company indicated will be flat for the third quarter compared with the year-earlier pro forma level. The departure of Charter's chief operating officer effective Sept. 30, 2004, amplifies concern about the company's ability to achieve sustainable improvement. The ratings on Charter continue to reflect high financial risk from elevated leverage because of: (a) aggressive debt-financed acquisitions and capital expenditures, (b) intense competitive pressure from satellite TV providers, (c) near-term debt maturity pressure, (d) uncertain likelihood of discretionary cash flow generation, and (e) risk of debt restructuring actions. These factors are partly tempered by: (a) Charter's position as the still-dominant provider of pay TV services in its markets, (b) a degree of cash flow stability from largely subscription- based revenues, and good system asset values. The negative outlook reflects the possibility that video subscriber erosion and slowing data customer growth may limit the improvement in EBITDA that will be important in facilitating a refinancing of the upcoming convertible debt maturity on attractive terms. Based on current operating trends, Charter may be pressured into restructuring its balance sheet, which could result in a downgrade. CHASE FUNDING: Fitch Assigns Low-B Ratings on B-4 & B-5 Certs. ------------------------------------------------------------- Chase Funding mortgage loan asset-backed certificates, series 2004-AQ1, are rated by Fitch: --$524.46 million class A 'AAA'; --$31.34 million class M-1 'AA'; --$19.97 million class M-2 'A'; --$6.15 million class M-3 'A-'; --$4.61 million class B-1 'BBB+'; --$3.99 million class B-2 'BBB'; --$4.61 million class B-3 'BBB-'; --$5.22 million, non-offered, class B-4 'BB+'; --$3.07 million class B-5 'BB'. The 'AAA' rating on the senior certificates reflects the 14.65% initial subordination provided by: * the 5.10% class M-1, * the 3.25% class M-2, * the 1.00% class M-3, * the 0.75% class B-1, * the 0.65% class B-2, * the 0.75% class B-3, * the 0.85% class B-4, * the 0.50% class B-5, and * the initial overcollateralization -- OC -- of 1.80%. In addition, the ratings also reflect the quality of the loans, the soundness of the legal and financial structures, and the capabilities of Chase Manhattan Mortgage Corporation as servicer, which is rated 'RPS1' by Fitch. The collateral pool consists of fixed- and adjustable-rate collateral totaling $614 million as of the cut-off date. The weighted average OLTV is 86.73%, the average outstanding principal balance is $184,196, the weighted average coupon is 6.908%, and the weighted average remaining term is 353 months. The weighted average FICO score is 624. The loans are geographically concentrated in: * California (37.3%), * Illinois (6.8%), and * New York (6.2%). Chase Funding, Inc. will deposit the mortgage loans in the trust fund. The depositor is a New York corporation and a wholly owned, indirect subsidiary of JPMorgan Chase Bank, one of the underwriters. CITGO PETROLEUM: Moody's Places Ba2 Rating on $200M Senior Notes ---------------------------------------------------------------- Moody's Investors Service upgraded the long-term debt ratings of CITGO Petroleum Corporation to Ba2 from Ba3 and assigned a provisional Ba2 rating to the company's proposed $200 million senior note issue. The upgrade reflects the financial and liquidity benefits from the proposed issue and, more generally, CITGO's improving financial condition and operational flexibility. The rating outlook is positive. CITGO's proposed $200 million note offering will refinance a portion of the $550 million high coupon debt it incurred during the height of the Venezuelan strike and crude supply interruptions of 2002-2003. When combined with more than $300 million of cash on the balance sheet and other financing sources, the company will be able to redeem the entire high-coupon note issue, leading to reduced financial leverage. While the call premium will be expensive, the refinancing and debt reduction should reduce CITGO's annual fixed charges by more than $50 million pre-tax and will also eliminate restrictive indenture cash flow and liquidity tests. The Ba2 rating also factors in favorable industry refining margins, which have helped improve CITGO's earnings, free cash generation, and liquidity, and have supported some debt reduction, including the pay down of secured and high coupon debt. In maintaining a positive rating outlook, Moody's will consider a number of factors that could result in an upgrade in the future, including: (i) CITGO's fundamental performance and ability to fund an aggressive capital program, and (ii) the evolving political and economic conditions in Venezuela, which could affect its ultimate parent, Petroleos de Venezuela (B2 foreign currency issuer rating). The outlook also incorporates the continuation for the foreseeable future of advantageous crude oil supply contracts with its parent, and expected prudent dividend management. While dividends are likely to be paid on a regular basis, they will be subject both to board discretion and covenant restrictions. Dividend management will be an important component of financial flexibility in light of refining margin volatility and heavy planned capital investment to expand the Lake Charles refinery and comply with environmental regulations. CITGO Petroleum Corporation recently moved its headquarters to Houston, Texas. It is a wholly owned subsidiary of Petroleos de Venezuela, the state oil company of Venezuela, headquartered in Caracas, Venezuela. COLE NATIONAL: Lack of Info Cues S&P to Withdraw BB- Credit Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its ratings on Cole National Group Inc., including its 'BB-' corporate credit rating. These ratings were placed on CreditWatch with developing implications April 19, 2004, following the announcement that the company received an unsolicited acquisition offer by an unaffiliated party to acquire Cole National Corp., the parent company. Following the completion of Cole National's acquisition by Luxottica S.p.A., Standard & Poor's has been unable to obtain adequate financial and operating information based on the new ownership structure to rate Cole National's debt. Therefore, the ratings have been withdrawn. COMMERCE ONE: Receives De-Listing Notice from Nasdaq ---------------------------------------------------- Commerce One, Inc., (NASDAQ: CMRCQ) reported that on Oct. 8, 2004, the Nasdaq National Market notified them that they fail to comply with Nasdaq's requirements for the continued listing of Commerce One's common stock in light of its recent bankruptcy filing. As of the opening of business on October 12, 2004, a "Q" was appended to the Company's trading symbol "CMRC." Unless the Company appeals, its common stock will be de-listed from The Nasdaq Stock Market at the opening of business on October 19, 2004. In the notice, Nasdaq advised that it had made their determination after considering the Company's bankruptcy petition on October 6, 2004. In light of the bankruptcy filing, the staff cited Marketplace Rules 4300 and 4450(f) specifically, public interest concerns generally, as well as concern regarding the residual equity interest of our existing securities holders as grounds for our non-compliance. Additionally, the staff voiced concern over the Company's ability to come back into compliance with the $1 minimum bid price requirement of Marketplace Rule 4450(b)(4); as previously disclosed, the staff initially notified the Company of the non-compliance with this rule on July 15, 2004. In light of the Company's efforts to wind up the Company's affairs under the United States Bankruptcy Code, it currently do not intend to exercise its right to appeal Nasdaq's determination. If the Company do not appeal Nasdaq's determination, its common stock will be de-listed from The Nasdaq Stock Market and will not be eligible for listing on the Nasdaq SmallCap market or the OTC Bulletin Board. De-listing will make the stock more difficult to trade, likely reduce its trading volume, and likely further depress our stock price. If the Company's stock is de-listed, the holders of shares of our Series B preferred stock will have the right to require the Company to redeem their stock. The aggregate redemption price of these shares was approximately $7.9 million as of June 30, 2004. The Company do not currently have sufficient capital resources to redeem these shares. Headquartered in San Francisco, California, Commerce One, Inc. -- http://www.commerceone.com/-- provides software services that enable businesses to conduct commerce over the internet. Commerce One, Inc., and Commerce One Operations, Inc. filed for chapter 11 protection on October 6, 2004 (Bankr. N.D. Calif. Case Nos.: 04-32820 & 04-32821). Doris A. Kaelin, Esq., and Lovee Sarenas, Esq., at the Law Offices of Murray and Murray, in Cupertino, California, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy petition they declared assets amounting to $14,531,000 and debts amounting to $12,442,000. CONSECO INC: Will Webcast 3rd Quarter Financial Results on Nov. 9 ----------------------------------------------------------------- Conseco, Inc., (NYSE:CNO) will report results for the third quarter of 2004 before the market opens on Monday, November 8. The company will host a conference call to discuss results later that morning, and expects to file its Form 10-Q on Tuesday, November 9. Management's conference call will begin at 10:00 a.m. Eastern Time on Monday, November 8. The webcast can be accessed through the Investors section of the company's website as follows: http://www.conseco.com/conseco/selfservice/about/investors/index.jhtml?cat=i nvest/ Listeners should go to the website at least 15 minutes before the event to register, download and install any necessary audio software. Conseco, Inc.'s insurance companies help protect working American families and seniors from financial adversity: Medicare supplement, long-term care, cancer, heart/stroke and accident policies protect people against major unplanned expenses; annuities and life insurance products help people plan for their financial futures. Conseco, Inc., and Conseco Finance Corp. filed for chapter 11 protection on December 17, 2002 (Bankr. N.D. Ill. Case Nos. 02-49671 through 02-49676, inclusive) (Doyle, J.). Conseco, Inc., emerged from chapter 11 protection on Sept. 10, 2003, under the terms of a confirmed plan of reorganization. CFC liquidated its consumer finance business under the terms of a plan of liquidation confirmed on Sept. 9, 2003. * * * As reported in the Troubled Company Reporter on Aug. 20, 2004, Standard & Poor's Ratings Services said that in light of the resignation of Conseco, Inc., (BB-/Stable/--) (OTC BB:CNCEQ) CEO William Shea, Standard & Poor's planned to meet with Conseco's new CEO, William Kirsch, and the new Executive Chairman of Conseco's board of directors, Glenn Hilliard, to discuss their strategic plans for the company. Standard & Poor's had had concerns about whether Shea's resignation was a portent of previously unannounced problems with the company. "After discussions with Conseco's new CEO and new Executive Chairman of Conseco's board of directors, we do not believe the recent resignation of former CEO William Shea is an indication of underlying problems with the company," said Standard & Poor's credit analyst Jon Reichert. "Standard & Poor's expects Kirsch will continue to execute the strategy put in place during Shea's tenure with Conseco." As a result, Standard & Poor's is not taking any rating action on Conseco at this time. COPACK INTERNATIONAL: Case Summary & Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Copack International, Inc. 429 Taconic Road Greenwich, Connecticut 06831 Bankruptcy Case No.: 04-51194 Chapter 11 Petition Date: October 8, 2004 Court: District of Connecticut (Bridgeport) Judge: Alan H.W. Shiff Debtor's Counsel: Peter L. Ressler, Esq. Groob Ressler & Mulqueen 123 York Street, Suite 1B New Haven, CT 06511 Tel: 203-777-5741 Total Assets: $522,170 Total Debts: $3,138,187 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Cynthia L. Gould Machinery S 5000 $785,600 429 Taconic Road Greenwich, CT 06831 Peter J. Gould $745,761 429 Taconic Road Greenwich, CT 06831 Peter J. Gould Misc. $744,950 429 Taconic Road Greenwich, CT 06831 Aldine Tech. Indust. Inc. Machinery & $287,346 585 Industrial Road Inventory Carlstadt, NJ 07072 Lucille Q. Gould Misc. $182,873 Lucille Q. Gould Circle Package 1+# $182,873 Z-Support Sys. Union Paper & Union Ind. Misc. $77,900 Cherry Hill Development Misc. $35,314 LPS Industries Misc. $17,121 PSE&G Misc. $12,700 Progressive Packing Misc. $10,140 2120 Group Misc. $8,955 Hayssen Mfg. Company Misc. $6,541 Packaging Progressions Misc. $5,200 Logotech Inc. Misc. $5,045 Smurfit-Stone Con. Corp. Misc. $4,900 Overnight Label Co. Misc. $4,800 Chubb Group of Ins. Com. Misc. $3,027 United Parcel Service Misc. $2,700 A.J. Schrafel Misc. $2,335 CREST 2004-1: S&P Assigns Low-B Ratings to Class G & H Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to Crest 2004-1 Ltd./Crest 2004-1 Corp.'s $351 million fixed- and floating-rate notes due 2020 and 2040. The preliminary ratings are based on information as of October 11, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- the expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes and by the preference shares; -- the excess spread and overcollateralization provided by the assets; -- the cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- the experience of the collateral administrator and disposition consultant; and -- the legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. Preliminary Ratings Assigned Crest 2004-1 Ltd./Crest 2004-1 Corp. Class Rating Amount (mil. $) ----- ------ --------------- A AAA 198.000 B AA 54.000 C A+ 27.000 D A 18.000 E BBB+ 27.000 F BBB 5.625 G BB 12.375 H BB 9.000 Preferred shares N.R. 99.000 N.R. - Not rated CROWN CASTLE: Cash Tender Offers for Senior Notes Expire -------------------------------------------------------- Crown Castle International Corp.'s (NYSE: CCI) announced the expiration of its cash tender offers for up to: -- $205,574,000 of its outstanding 9-3/8% Senior Notes due 2011, -- $216,412,000 of its outstanding 10-3/4% Senior Notes due 2011, -- $151,445,000 of its outstanding 7.5% Senior Notes due 2013, and -- $151,445,000 of its outstanding 7.5% Series B Senior Notes due 2013. As of 5:00 p.m. (EDT) on Oct. 8, 2004, the scheduled expiration date: -- $7,000 in aggregate principal amount of the 9-3/8% Senior Notes due 2011, -- $415,000 in aggregate principal amount of the 10 3/4% Senior Notes due 2011, -- $5,000 in aggregate principal amount of the 7.5% Senior Notes due 2013, and -- $38,000 in aggregate principal amount of the 7.5% Series B Senior Notes due 2013 had been validly tendered pursuant to the Offer to Purchase dated Sept. 10, 2004. Crown Castle accepted for payment all Notes validly tendered in the offers. Payment will be made on the validly tendered Notes as provided in the Offer to Purchase. The Bank of New York acted as depositary and MacKenzie Partners, Inc. acted as the information agent for the offers. Questions regarding the tender offers may be directed to The Bank of New York, the Depositary, at (212) 815-5920, or in writing to The Bank of New York, Reorganization Unit, 101 Barclay Street -- 7 East, New York, New York 10286, Attention: Carolle Montreuil. About the Company Crown Castle International Corp. -- http://www.crowncastle.com/-- is among the largest wireless tower operators in the industry, with about 13,000 sites mostly in the U.S. and U.K. Through Crown Atlantic Joint Venture (Crown Atlantic), a joint venture between Crown Castle (62.8% stake) and Verizon Communications Inc. (37.2% stake), the company operates approximately another 2,000 towers. Crown Castle predominantly derives its revenues from the tower leasing business and the remainder from network services. The tower industry enjoys significant competitive barriers (e.g., real estate zoning, high customer switching costs, and long-term leasing contracts with provisions for annual rent escalation), strong operating leverage (given that towers have mostly fixed costs), and little risk of technology substitution. * * * As reported in the Troubled Company Reporter on June 30,2004, Standard & Poor's Ratings Services placed its ratings of Houston, Texas-based wireless tower operator Crown Castle International Corp. (including the 'B-' corporate credit rating) and operating company Crown Castle Operating Co. on CreditWatch with positive implications. Approximately $4 billion of leased-adjusted debt is outstanding. The CreditWatch placement follows Crown Castle's announcement of a definitive agreement to sell its U.K. tower subsidiary for about $2 billion. The prior positive outlook had recognized the potential for meaningful reduction in debt leverage, and the earmarking of $1.3 billion of proceeds from the announced disposition could accelerate the deleveraging process. However, a key factor in the rating analysis will be the use of the approximate $740 million balance of net sale proceeds. The company notes that these monies will be used either for further debt reduction or for expansion of its U.S. portfolio. To the extent that Crown Castle opts not to apply the bulk of the $740 million to debt reduction, Standard & Poor's will review management's expansion plans, including the potential cash flow from newly built and/or purchased towers. "If Crown Castle purchases extant towers, factors that will be considered in evaluating the credit impact will include the quality of existing tenants per tower, contract terms applicable to purchased tenants, the potential for new tenants, and tenant diversity," said Standard & Poor's credit analyst Michael Tsao. DB COMPANIES: Has Until Dec. 31 to Make Lease-Related Decisions --------------------------------------------------------------- The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware extended, until December 31, 2004, the period within which DB Companies, Inc., and its debtor-affiliates can elect to assume, assume and assign, or reject their unexpired nonresidential property leases. The Debtors tell the Court that they are currently soliciting bids for the proposed sale of their convenience stores and gas stations businesses and they are parties to 86 unexpired leases where the stores and gas stations are located. As part of the proposed sale, the Debtors intend to assume and assign their rights under the leases to the purchasers of the convenience stores and gas stations where the Debtors are the lessees. The Debtors explain that their assumption and assignment for any particular lease will only become effective on the closing sale to the purchaser of the convenience stores or gas stations covered under the leases. Pending the Court's approval of the Debtors' proposed sale and closings of approved sale transactions of their convenience stores and gas stations, the Debtors will continue to operate their businesses at the leased premises in order to maintain the value of the Debtors' assets and the viability of the sale process. The Debtors add that the extension period will give them more time to substantially complete the proposed sale by November 2004, and they anticipate that they will have either assumed, assumed and assigned, or file a motion to reject, all or most of the 86 leases on or before the December 31 deadline. The Debtors assure Judge Walsh that the extension will not prejudice any lessors under the leases because they are current in all their postpetition obligations pursuant to Section 365(d)(3) of the Bankruptcy Code. Headquartered in Pawtucket, Rhode Island, DB Companies, Inc. -- http://www.dbmarts.com/-- operates and franchises a regional chain of DB Mart convenience stores in Connecticut, Massachusetts, Rhode Island, and the Hudson Valley region of New York. The Company filed for chapter 11 protection on June 2, 2004 (Bankr. Del. Case No. 04-11618). William E. Chipman Jr., Esq., at Greenberg Traurig, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of over $50 million and debts of approximately $65 million. DII/KBR: Halliburton to Hold Q3 2004 Conference Call on Oct. 26 --------------------------------------------------------------- Halliburton (NYSE:HAL) will host a conference call on Tuesday, October 26, 2004, to discuss third quarter financial results. The call will begin at 9:00 AM Central Time (10:00 AM Eastern Time). The results will be released that morning before the market opens. The press release concerning the 2004 third quarter earnings will be posted on the Halliburton Web Site: http://www.halliburton.com/ Visit the Web Site to listen to the call live via webcast. A replay will be available on our Web Site for seven days following the event. In addition, you may participate in the call by telephone at (913) 981-5591. Headquartered in Houston, Texas, DII Industries, LLC, is the direct or indirect parent of BPM Minerals, LLC, Kellogg Brown & Root, Inc., Mid-Valley, Inc., KBR Technical Services, Inc., Kellogg Brown & Root Engineering Corporation, Kellogg Brown & Root International, Inc., (Delaware), and Kellogg Brown & Root International, Inc., (Panama). KBR and its subsidiaries provide a wide range of services to energy and industrial customers and government entities in over 100 countries. DII has no business operations. DII and its debtor-affiliates filed a prepackaged chapter 11 petition on December 16, 2003 (Bankr. W.D. Pa. Case No. 02-12152). Jeffrey N. Rich, Esq., Michael G. Zanic, Esq., and Eric T. Moser, Esq., at Kirkpatrick & Lockhart LLP, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $6.255 billion in total assets and $5.295 billion in total liabilities. (DII & KBR Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) DIVERSIFIED ASSET: S&P Puts Class B-1L's BB+ Rating on CreditWatch ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on the class A-1L, A-2, A-3L, and B-1L notes issued by Diversified Asset Securitization Holdings III L.P., a CDO backed by ABS and other structured securities and managed by TCW Capital, on CreditWatch with negative implications. The CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the notes. These factors include par erosion of the collateral pool securing the rated notes and a negative migration in the credit quality of the performing assets in the pool. Standard & Poor's will be reviewing the results of current cash flow runs generated for Diversified Asset Securitization Holdings III L.P. to determine the level of future defaults the rated classes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available. Ratings Placed On Creditwatch Negative Diversified Asset Securitization Holdings III L.P. Rating Current Class To From Balance (mil. $) ----- -- ---- --------------- A-1L AA/Watch Neg AA 203.90 A-2 AA/Watch Neg AA 66.39 A-3L A-/Watch Neg A- 30.00 B-1L BB+/Watch Neg BB+ 18.50 Transaction Information Issuer: Diversified Asset Securitization Holdings III L.P. Co-issuer: DASH III Funding Corp. Current manager: TCW Capital Underwriter: Bear Stearns Cos. Inc. Trustee: La Salle Bank N.A. Transaction type: CDO of ABS Tranche Last Current Information Rating Action ----------- ------ ------- Date (MM/YYYY) 04/2003 10/2004 Cl. A-1L notes rtg. AA AA/Watch Neg Cl. A-1L notes bal. $215.00mm $203.93mm Cl. A-2 notes rtg. AA AA/Watch Neg Cl. A-2 notes bal. $70.00mm $66.39mm Cl. A-3L notes rtg. A- A-/Watch Neg Cl. A-3L notes bal. $30.00mm $30.00mm Cl. A O/C ratio (min. 105%) 110.98 % 101.48% Cl. B-1L notes rtg. BB+ BB+/Watch Neg Cl. B-1 notes bal. $18.5mm $18.5mm Cl. B O/C ratio (min. 101.5%) 104.65% 95.68% Portfolio Benchmarks Current -------------------- ------- S&P wtd. avg. rtg.(excl. defaulted) BBB S&P default measure (excl. defaulted) .7% S&P variability measure (excl. defaulted) 1.78% S&P Correlation Measure (excl. defaulted) 1.75% Wtd. avg. coupon (excl. defaulted) 7.65% Wtd. avg. spread (excl. defaulted) 3.14% Oblig. rtd. 'BBB-' and above 65.82% Oblig. rtd. 'BB-' and above 81.39% Oblig. rtd. 'B-' and above 90.18% Oblig. rtd. in 'CCC' range 9.82% Oblig. rtd. 'CC', 'SD', or 'D' 4.53% Obligors on Watch Neg (excl. defaulted) 0.09% S&P Rated Current O/C (ROC) Rating Action --------- ------------- Cl. A-1L notes 96.41% Cl. A-2 notes 96.41% Cl. A-3L notes 97.74% Cl. B-1 notes 98.19% 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. DOANE PET: S&P Puts B- & CCC Ratings on CreditWatch Positive ------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B-' corporate credit and 'CCC' senior unsecured debt and subordinated debt ratings on Doane Pet Care Co. on CreditWatch with positive implications following the company's announcement of plans to refinance its existing credit facilities, of which about $142 million is due in 2005. The Brentwood, Tennessee-based pet food manufacturer has about $569 million in debt. "Upon successful completion of the proposed refinancing, we will raise the corporate credit rating to 'B', as the new credit facility will address Doane's near-term refinancing risk, as well as provide relief from its existing tight bank covenants," said Standard & Poor's credit analyst Jean Stout. Additionally, during 2004, Doane addressed some of its commodity cost issues by reaching a cost-sharing agreement with one of its major customers, which limits the effect of potential future commodity cost swings. Doane's existing 'B-' senior secured debt rating is not on CreditWatch because it will be withdrawn upon closing of the transaction. Standard & Poor's also assigned its 'B+' bank loan rating and a recovery rating of '1' to Doane's proposed $230 million senior secured credit facility, indicating the expectation of high (100%) recovery of principal in the event of default. The proposed $230 million, five-year senior secured credit facility is due 2009, or 91 days prior to the March 15, 2007, maturity of the senior subordinated notes, if these notes have not been refinanced. The new bank loan is rated one notch higher than the pending upgraded corporate credit rating, because in a distressed scenario, Standard & Poor's believes that lenders could expect high recovery of principal. The ratings are based on preliminary terms and are subject to review upon final documentation. ENRON: Judge Jones Remands Sierra Pacific Case to Bankr. Court -------------------------------------------------------------- The U.S. District Court for the Southern District of New York has vacated a prior summary judgment by the U.S. Bankruptcy Court for the Southern District of New York that called for Sierra Pacific Resources' (NYSE: SRP) electric utilities to pay Enron Power Marketing Inc. a total of approximately $336 million for terminated contracts. In the ruling issued Sunday, Oct. 10, District Court Judge Barbara Jones remanded the case back to the Bankruptcy Court to rehear facts, issues and arguments of the case. Walter Higgins, chairman and chief executive officer of Sierra Pacific Resources said, "We are very pleased with this favorable ruling. Our company will have no further comment until we have had an opportunity to fully review the judge's order." Headquartered in Nevada, Sierra Pacific Resources is a holding company whose principal subsidiaries are Nevada Power Company, the electric utility for most of southern Nevada, and Sierra Pacific Power Company, the electric utility for most of northern Nevada and the Lake Tahoe area of California. Sierra Pacific Power Company also distributes natural gas in the Reno-Sparks area of northern Nevada. Other subsidiaries include the Tuscarora Gas Pipeline Company, which owns 50 percent interest in an interstate natural gas transmission partnership and several unregulated energy services companies. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. EXIDE TECHNOLOGIES: CEO C.H. Muhlhauser Will Depart on April 1 -------------------------------------------------------------- Exide Technologies (NASDAQ: XIDE, www.exide.com), reported that Craig H. Muhlhauser, its President and Chief Executive Officer, will leave the Company on or prior to April 1, 2005. Concurrently, the Company announced that its Board of Directors has created an Executive Committee, consisting of Eugene Davis and Michael Ressner, which will, among other things, work with Mr. Muhlhauser and approve material decisions of the Company until a permanent replacement for Mr. Muhlhauser is identified. Mr. Muhlhauser stated: "It has been my great pleasure serving as Exide's CEO over the past three years. The Company is well positioned to expand its global presence in the marketplace, aided in large part by its successful emergence from Chapter 11 bankruptcy proceedings in May. With the Chapter 11 proceeding behind us, and a new Board of Directors in place, it is time for me to pursue new opportunities. I look forward to working with the Executive Committee and the full Board over the next few months to ensure a proper transition." "Craig has served Exide well during his tenure, playing a critical role in building Exide into one of the world's largest manufacturers of lead acid batteries," said John P. Reilly, the Chairman of the Company's Board of Directors. Mr. Reilly continued, "The Board deeply appreciates Craig's contributions to Exide and his commitment to continue with the Company until his successor is identified. We wish him well in his future endeavors." The Company's Board of Directors initiated an active search for Mr. Muhlhauser's replacement and has retained a nationally recognized executive search firm to assist it in identifying appropriate candidates. About Exide Technologies Headquartered in Princeton, New Jersey, Exide Technologies, with operations in 89 countries, is one of the world's largest producers and recyclers of lead-acid batteries. The Company's two global business groups - transportation and industrial energy - provide a comprehensive range of stored electrical energy products and services for industrial and transportation applications. Exide filed for chapter 11 protection on April 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. FEDDERS CORP: S&P Slashes Corporate Credit Rating to CCC+ from B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on air treatment products manufacturer Fedders Corp. and Fedders North America Inc., including its corporate credit ratings to 'CCC+' from 'B'. The outlook is negative. The Liberty Corner, New Jersey-based company's total debt outstanding at June 30, 2004, was about $197 million. "The downgrade and negative outlook reflect the significant erosion in Fedders' profitability, cash flows and credit protection measures," said Standard & Poor's credit analyst Jean Stout. Fedders' EBITDA for the first half of 2004 declined 45%, despite a 2% rise in sales. Moreover, the company's inventory levels grew 35% over the same period in 2003. This increase is due to not only the cooler than normal weather conditions in North America during the spring and summer seasons but also is a result of a build-up of inventory to support the company's expansion of central air conditioner sales and other products (specific for the Asian markets). Standard & Poor's is very concerned about the company's ability to reverse these negative operating trends and strengthen its financial profile in the near term, given the seasonality of its business. (Fedders typically reports a loss during the second half of the calendar year, as a majority of shipments and revenue is historically derived during the first six months of the calendar year.) As a result, Standard & Poor's is also concerned that Fedders liquidity will become constrained in the near term. FISHER SCIENTIFIC: Officers Participate in Stock Trading Plans -------------------------------------------------------------- Fisher Scientific International Inc.'s (NYSE: FSH) Chairman and Chief Executive Officer, Paul M. Montrone, and its Vice Chairman, Paul M. Meister, are each participating in a pre-arranged stock trading plan to facilitate the orderly liquidation of shares subject to stock options expiring in January 2008. The stock options were awarded to Messrs. Montrone and Meister in January 1998 as long-term incentives. The stock sale plans were established in accordance with the Securities and Exchange Commission Rule 10b5-1. Rule 10b5-1 provides directors and officers of public companies with a systematic method of obtaining liquidity in their securities holdings, while minimizing potential disruption to the financial markets by spreading stock sales over a defined period of time. A 10b5-1 plan may only be adopted when the company is outside of a blackout period and when the individual is not in possession of material non-public information. Under the 1998 Equity and Incentive Plan, Mr. Montrone and Mr. Meister have 1.6 million and 0.8 million options outstanding, respectively. According to the terms of their respective 10b5-1 plans, up to 0.6 million shares of the company's common stock may be sold on Mr. Montrone's behalf at a rate of up to 50,000 shares per week, beginning the week of Oct. 11; up to 0.8 million shares of the company's common stock may be sold on Mr. Meister's behalf at a rate of up to 20,000 shares per month, beginning the week of Oct. 18. If all of the shares related to the options expiring in January 2008 are sold, Messrs. Montrone and Meister will continue to be two of the largest individual holders of Fisher Scientific's common stock. Mr. Montrone will own approximately 2.5 million shares and options, or 1.9 percent of the company's total shares and options, and Mr. Meister will own approximately 1.6 million shares and options, or 1.2 percent. All transactions will be subject to certain price restrictions established under the plans and may be terminated at any time. The transactions will be disclosed publicly through Form 144 and Form 4 filings with the SEC. About Fisher Scientific International Inc. Fisher Scientific International Inc. (NYSE: FSH) -- http://www.fisherscientific.com/ -- offers more than 600,000 products and services to more than 350,000 customers located in approximately 145 countries. Fisher's customers include pharmaceutical and biotech companies; colleges and universities; medical-research institutions; hospitals and reference labs; quality-control, process-control and R&D labs in various industries; as well as government and first responders. As a result of its broad product offering, electronic-commerce capabilities and integrated global logistics network, Fisher serves as a one-stop source of products, services and global solutions for its customers. The company primarily serves the scientific-research and clinical-laboratory markets. * * * As reported in the Troubled Company Reporter on Aug. 9, 2004, Moody's Investors Service upgraded Fisher Scientific International, Inc.'s senior implied rating to Ba2 from Ba3 and its issuer rating to Ba2 from B1. The upgrades were assigned as the merger with Apogent Technologies, Inc., has been completed. The rating agency also rated Fisher's new senior secured bank facilities Ba2 and its new senior subordinated notes due 2014 at Ba3. The new senior subordinated notes were used primarily to tender for Apogent's 6.5% Senior Subordinated Notes due 2013. Fisher's existing ratings were raised as suggested in previous press releases. The outlook for Fisher's ratings is positive. At the same time, Moody's lowered to Ba2 the ratings on Apogent's existing debt securities and left them under review for possible downgrade. Apogent's 6.5% Senior Subordinated Notes due 2013 were lowered to Ba3. Apogent's senior implied and issuer ratings were lowered to Ba2 and will be withdrawn. The ultimate structure for the Apogent securities remains unclear but it is unlikely that any security would be rated higher than Fisher's prospective Ba2 senior implied rating. Moody's review of Apogent's ratings will also consider the extent to which Apogent's operations will be merged into Fisher's organizational structure, the position of Apogent's debt in the new capital structure, and an evaluation of any support mechanisms related to Apogent's debt. For these reasons Apogent's ratings will not be decided until more details are known. Moody's ratings actions recognize Fisher's material use of equity in its most recent large acquisitions and this demonstration of financial prudence was a key factor in the ratings upgrade. The prudently levered nature of these acquisitions improves the likelihood that enhanced cash flow generation will allow for substantial debt reduction in the medium term. Moody's believes that despite risks associated with integrating the companies, the combined company should generate significant cash flow that would allow for significant debt reduction in the first 12-24 months. By merging with Apogent, Fisher will increase sales from proprietary products, which carry better margins, to approximately 60% and significantly enhance its position in life-sciences. In time, Moody's expects that the combined company will be able to reduce costs, by as much as $100 million, by eliminating redundant functions, consolidating manufacturing capabilities, and streamlining its distribution facilities. Further supporting its performance is Fisher's base of recurring revenues; approximately 80% of revenues are derived from consumables. FORT WORTH OSTEOPATHIC: Closure Nixes 1,000 Jobs & 265 Beds ----------------------------------------------------------- Fort Worth Osteopathic Hospital closed Friday, October 8, 2004. The Houston Chronicle reports that the 265-bed facility's closure results in 1,000 job losses and leaves "more than 100 patients in limbo." Interim chief executive Justin Doheny told reporters that the hospital defaulted on $82 million in bonds after failing to make $580,000 payments due in August and September. The Associated Press relates that the hospital had financial problems since the late 1990s. About a year ago, the board decided to try to partner with a hospital system. Eighteen organizations initially expressed interest, but the field dwindled to three in the last several weeks, Mr. Doheny told the AP. After negotiations with the final interested party fell through Thursday, the board voted unanimously to shutter the hospital. No decision has been made on whether it will file for bankruptcy. "We turned over every rock," Mr. Doheny told the AP. "There is nothing more we could have done." Unlike large hospital systems, the Osteopathic Medical Center of Texas was too small to have much leverage to negotiate higher payments from managed-care organizations, so it routinely was paid less than it needed to operate, Mr. Doheny added. MBIA, Inc., insured three series of bonds for the hospital between 1993 and 1997. MBIA disclosed Friday that its "third quarter will reflect a case loss reserve of approximately $50 million resulting from its $70 million net par exposure to Fort Worth Osteopathic Hospital." Doing business Osteopathic Medical Center of Texas, Fort Worth Osteopathic Hospital consist of more than 400 physicians, 8 neighborhood family medicine clinics, a 265-bed regional referral hospital and a full complement of allied health services. As reported in the Troubled Company Reporter on Oct. 4, 2004, Moody's Investors Service downgraded Fort Worth Osteopathic Hospital's dba Osteopathic Medical Center of Texas underlying ratings to B3 and anticipated a further downgrade. Moody's indicates that $7 million of the Series 1993, Series 1996 and Series 1997 bonds issued through the Tarrant County Health Facilities Development Corporation are uninsured. GLOBAL CROSSING: Confirms Broadview Settlement Agreement -------------------------------------------------------- Broadview Networks Holdings, Inc., on behalf of itself and its affiliates, including Broadview Networks, Inc., and Broadview NP Acquisition Corp., provides a variety of telecommunications services to the GX Debtors and their reorganized debtor subsidiaries, including but not limited to, originating and terminating calls on Broadview Networks' telecommunications network. On March 22, 2002, Broadview Networks also purchased certain claims and receivables against Global Crossing from Network Plus Corp. and Network Plus, Inc., in their Chapter 11 bankruptcy proceedings. On September 30, 2002, Broadview Networks timely filed a $2,201,757 proof of claim against the Debtors with respect to both the claims it purchased and its own claims for prepetition services provided to the Debtors. Broadview Networks also contends that the Debtors owe approximately $555,968 for postpetition services as of January 31, 2004. The Debtors provide a variety of telecommunications services to Broadview Networks, including but not limited to, long distance telecommunications services. The Debtors contend that Broadview Networks owes them $1,585,909 on account of these telecommunications services. Broadview Networks disputes all but $489,689 of that amount, asserting it has a valid right to offset for the difference with certain of its prepetition claims against the Debtors. After extensive arm's-length negotiations, the Debtors and Broadview Networks have reached a settlement which, among other things: (i) resolves the disputes between the Parties; (ii) provides for Broadview Networks' payment to Global Crossing of $785,897 -- of which $435,897 has already been paid; (iii) releases or offsets other claims between the Parties; (iv) establishes guidelines for the resolution of certain postpetition disputes; and (v) withdraws all of Broadview Networks' prepetition claims against the Debtors in their Chapter 11 cases. A free copy of the Settlement Agreement is available at: http://bankrupt.com/misc/Broadview_Settlement_Agreement.pdf Subsequently, the parties entered into a stipulation confirming the provisions of the Settlement Agreement. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) GOOSE CREEK LLC: Case Summary & 1 Largest Unsecured Creditor ------------------------------------------------------------ Debtor: Goose Creek, LLC 3411 Oakwood Terrace, North West Washington, District of Columbia 20010 Bankruptcy Case No.: 04-01480 Chapter 11 Petition Date: October 1, 2004 Court: District of Columbia (Washington, D.C.) Judge: S. Martin Teel, Jr. Debtor's Counsel: Richard B. Rosenblatt, Esq. Law Offices of Richard B. Rosenblatt, PC 30 Courthouse Square, Suite 302 Rockville, MD 20850 Tel: 301-838-0098 Estimated Assets: $1 Million to $10 Million Estimated Debts: $100,000 to $500,000 Debtor's 1 Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Ralph Kaiser Co. 1/5 interest in the Unknown c/o David Roll, receiver real property and Ritzert & Leyton, PC improvements located 4084 University Dr. Ste. 100 at 2300 Champlain St. Fairfax, VA 22030 Washington, D.C. GROSVENOR ORLANDO: Court Confirms Plan of Reorganization --------------------------------------------------------- The Honorable Arthur B. Briskman of the U.S. Bankruptcy Court for the Middle District of Florida, Orlando Division, entered an order confirming the Amended Plan of Reorganization filed by Grosvenor Orlando Associates dba Grosvenor Resort. The Court is satisfied with the Debtor's cash flow projections demonstrate a reasonable likelihood that the Reorganized Debtor will be able to make all payments under the Plan and sustain itself as a viable operating entity. The Plan provides that each holder of an allowed Priority Tax Claim will be paid in full, together with 6% annual interest, over six years from the date of assessment. Claims for wages, vacation and benefits will be paid in full. ORIX USA Corporation, the largest secured creditor of Grosvenor Resort, holds a $50 million claim, which will be reinstated at the same interest rate, and an appropriate control agreement will be entered into by the two parties to allow ORIX to have a perfected priority lien on Grosvenor's cash and operating account. Holders of General Unsecured Claims will receive promissory notes for 100% of what they're owed. Those notes will accrue interest at 5% per year and amortize over 60 months starting March 1, 2005 (or the date a claim becomes an allowed claim). Judge Briskman finds that each holder of an impaired claim that has not accepted the Plan will receive or retain under the Plan, property of a value that is not less than the amount that the holder will receive or retain if the estate was liquidated. Accordingly, the Plan meets the standard for confirmation set forth in 11 U.S.C. Sec. 1129(b) and all equity interest holders will retain their ownership in the reorganized Debtor. Headquartered in Orlando, Florida, Grosvenor Orlando Associates, a California Limited Corporation, owns a full service resort complex and is located on 13 beautifully landscaped, lakeside acres offering two heated swimming pools, a hot tub, lighted tennis courts, basketball, volleyball, shuffle board, electronic game room and fitness center. The Company filed for chapter 11 protection on February 3, 2004 (Bankr. M.D. Fla. Case No. 04-01085). R. Scott Shuker, Esq., at Gronek & Latham, LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of over $10 million and estimated debts of over $50 million. HAWK CORP: Moody's Puts B2 Rating on Planned $100M Unsecured Notes ------------------------------------------------------------------ Moody's Investors Service took these rating actions in conjunction with Hawk Corporation's proposed refinancing transactions and improving operating prospects: -- Improved Hawk's rating outlook to positive, from negative; -- Assigned a B2 rating for Hawk's proposed $100 million guaranteed senior unsecured notes due October 2014, to be issued under Rule 144A with registration rights; -- Confirmed Hawk's B2 senior implied rating; -- Downgraded Hawk's senior unsecured issuer rating to B3, from B2, (recognizing that this corporate-level rating presumes no subsidiary guarantees to ameliorate structural subordination associated with Hawk's holding company legal structure) Hawk additionally proposes to execute a new five-year $30 million asset-based revolving credit facility, which has not been rated by Moody's. The net proceeds of the proposed guaranteed senior unsecured notes offering will be utilized to repay the approximately $66 million principal plus accrued interest remaining under Hawk's existing 12% guaranteed senior unsecured notes due December 2006, all outstandings under Hawk's $53 million of existing guaranteed senior secured credit facilities due October 2006, and all fees and expenses incurred in connection with these transactions. Hawk has tendered for all of the remaining 12% senior notes due 2006, at a price equal to 100% plus a nominal consent fee. Any notes that are not validly tendered will likely then be called once the call premium drops to par on December 1, 2004. The proposed revolving credit facility will be available to cover any funds shortfall on the closing date, and will additionally support ongoing working capital, general corporate purposes, and letter of credit needs. The ratings of the existing notes and credit facilities will be withdrawn upon completion of the proposed transactions. The ratings negatively reflect that while Hawk's business prospects appear to be improving, the company's operations are expected to generate negative free cash flow in 2004 -- and potentially only nominal free cash flow in 2005. Hawk faces significant near-term demands on its liquidity as it manages significant revenue growth, launches of several material new contracts, rising raw materials costs, and costs to move a friction plant to Oklahoma from Ohio. To maintain a competitive advantage within its core business niches, Hawk is also making significant strategic investment to extend product lines, expand the range of markets served (most notably the independent aftermarket and several new geographic markets), open plants in China, and obtain high tonnage powdered metal presses. Hawk's management indicates that the company has been successful at imposing steel surcharges on its customers in order to recoup a high potion of the increased commodity cost, but that a meaningful lag period will transpire until these surcharges are actually realized. The company furthermore had to overstock certain components of inventory during 2004 in order to complete the transition of the friction plant to Oklahoma without delaying deliveries to customers and also to minimize disruption of production lines associated with delayed steel deliveries. Hawk's operations additionally remains vulnerable given its small absolute size relative to many customers and competitors, as well as the cyclicality of its end markets. The company is currently pursuing strategies to lower its high 48% effective tax rate. The ratings and the change in Hawk's rating outlook to positive more favorably reflect that the proposed refinancing transactions will improve the company's debt maturity profile, reduce the average cost of debt, and increased externally available liquidity. In addition, Hawk is benefiting from significantly rising demand across several of the company's meaningful business segments as the overall economy bounces back from recession -- most notably within the construction, truck, and agricultural markets. Market consensus is that the increased demand within these critical end markets should be sustainable over the near-to- intermediate term given that these markets have only recently risen from prolonged troughs. Since Hawk's focus is primarily non-automotive and associated with high dollar value equipment, the majority of programs on which the company has content typically have long average lives. The end markets that Hawk serves are unusually diversified relative to the size of the company, which should further enable the company to achieve greater stability. It is also notable that Hawk's largest customer -- Caterpillar -- accounts for less that than 9% of revenues and its second largest customer -- Eaton -- accounts for less than 5.5% of revenues. Hawk's exposure to the volatile aerospace segment has been significantly reduced since September 11, 2001 down to about 10% of revenues. Only about 5% of Hawk's revenues are driven by the highly competitive automotive sector. The company has also reclassified its motor segment as a discontinued operation and stemmed the losses that these operations were generating. Hawk's two operating plants established in China (the second of which recently became operational) are anticipated to play an important role in the company's ability to lower its cost structure and serve global markets. Hawk is generating new business opportunities across many of its product lines, and is in the process of launching several new programs -- most notably the Caterpillar mining truck program, the new Eaton friction program, and the new PEP Boys independent aftermarket performance brake line. Hawk expects to realize higher-margin powdered metal business and to develop a broader product line with more end-user applications once the four new high-tonnage presses the company invested in during 2004 are operational. Hawk anticipates that rate of substitution of powdered metal for forging and stampings will continue to increase as the powdered metal density, size capabilities, and other qualities improve and the cost continues to decline. Powdered metal parts are notably also near net-shaped and require minimal machining. Future events that would be expected to have negative implications for Hawk's ratings or outlook include: (i) an inability of the company to generate positive free cash flow by 2005, (ii) insufficient liquidity, (iii) an inability to recoup sufficient raw materials price increases through surcharges or increased pricing, (iv) lack of availability of critical raw materials, (v) an unexpected fall-off in end market demand, (vi) unanticipated complications resulting from aggressive global expansion, (vii) ongoing losses and an inability to sell the motor division, or (viii) a material acquisition. Future events that would be expected to have favorable rating implications include: (i) positive free cash flow generation evidencing that the company's business strategies and resource management are on target, (ii) achievement of meaningful debt reduction, (iii) realization of additional new business awards (including within China and other international markets), (iv) continued improvement of the company's fixed cost structure, and (v) reduction of inventory balances. Hawk's proposed guaranteed senior secured asset-based revolving credit facility will be secured by all assets, excluding machinery and equipment and real estate (on which negative pledges will be provided). The facility will additionally be supported by pledges of 100% of the stock of wholly owned domestic subsidiaries and 66 2/3% of foreign subsidiaries. Advances against the facility will be subject to a borrowing base consisting of: (1) the sum of 85% of eligible accounts receivable, plus (2) 60% of eligible raw materials and finished goods inventory, plus (3) 25% of eligible work in process inventory. Advances against inventory will be limited to a maximum of $17.5 million. The credit agreement will be guaranteed by all subsidiaries of Hawk, subject to certain exclusions. The company estimates that the borrowing base calculation at closing will exceed the $30 million commitment, and that about $20 million of the facility will be unused after accounting for loans and letters of credit. Hawk's working capital requirements typically reach a highpoint during the third and fourth quarters of each year, which has been exacerbated during 2004 as a result of the repaid revenue growth that the company is realizing and the stockpiling of certain inventory for reasons noted. The credit agreement will only be subject to a minimum equity covenant, unless availability falls below $10 million. At that point a minimum fixed charge coverage ratio would also become effective. The B2 rating of the proposed guaranteed senior unsecured notes reflects their effective subordination to the proposed senior secured debt. The notes will be guaranteed on a senior unsecured basis by all existing and future domestic restricted subsidiaries. These notes have the same rating as the senior implied rating due to the preponderance of the notes relative to Hawk's total pro forma debt. The indenture will contain a 35% clawback for equity offerings until 2008 and will be redeemable after 2009 at established redemption prices. Proceeds from certain asset sales may also be used to repurchase a portion of the notes. The notes will contain change of control provisions and a 30-day grace period for non-payment of interest. For the last twelve months ended June 30, 2004 Hawk's total debt/EBITDA leverage was 3.6x and 4.0x, before and after adjusting for the present value of operating leases and letters of credit. EBIT coverage of cash interest approximated 1.7x. While these measures are relatively strong compared to other issuers within the B2 senior implied rating category, free cash flow after capital expenditures approximated negative $5.2 million and is expected to decline further within the third quarter. This is primarily as a result of working capital expansion to support the company's rapid revenue growth. Hawk Corporation, headquartered in Cleveland, Ohio, is a leading supplier of friction products and powdered metal precision components for industrial, agricultural, powersports and aerospace applications. Friction products include parts for brakes, clutches, and transmissions. Powdered metal precision components include components in pumps, motors, transmissions and other equipment. Annual revenues approximate $220 million. INTERSTATE BAKERIES: Hires Kurtzman Carson as Claims Agent ---------------------------------------------------------- Interstate Bakeries Corporation has hundreds of thousands of creditors, potential creditors and parties-in-interest to whom certain notices, including notice of their Chapter 11 cases, must be sent. The size of the creditor body makes it impracticable for the Debtors or the Court to, without assistance, undertake the task of sending notices to creditors and other parties-in- interest. The Debtors believe that the most effective and efficient manner by which to provide notice and solicitation in their bankruptcy cases is to engage an independent third party to act as an agent of the Court. Accordingly, the Debtors seek the Court's authority to employ Kurtzman Carson Consultants, LLC, as their claims, noticing and balloting agent. Kurtzman is a data processing firm that specializes in Chapter 11 administration, consulting and analysis, including noticing, claims processing, voting and other administrative tasks in Chapter 11 cases. The Debtors are confident that Kurtzman's assistance will expedite service of notices, streamline the claims administration process and permit the Debtors to focus on their reorganization efforts. The Debtors reviewed proposals of several potential claims and noticing agents and determined that Kurtzman's fee structure is at least as favorable as any of the firm's competitors. The Debtors also believe that Kurtzman is well-qualified to provide the necessary services, expertise, consultation and assistance because the firm has assisted and advised numerous Chapter 11 debtors in connection with noticing, claims administration and reconciliation and administration of plan votes. At the request of the Debtors or the Bankruptcy Court Clerk's Office, Kurtzman will: (A) assist the Debtors in the preparation and filing of their Schedules of Assets and Liabilities and Statement of Financial Affairs; (B) prepare and serve required notices in the Debtors' Chapter 11 cases, including: (i) A notice of commencement of the bankruptcy cases and the initial meeting of creditors under Section 341(a) of the Bankruptcy Code; (ii) A notice of the claims bar date; (iii) Notices of objections to claims; (iv) Notices of any hearings on a disclosure statement and confirmation of a reorganization plan; (v) Other miscellaneous notices as the Debtors or the Court may deem necessary or appropriate for an orderly administration of these Chapter 11 cases; and (vi) Assist with the publication of required notices, as necessary; (C) within five business days after the service of a particular notice, prepare for filing with the Clerk's Office an affidavit of service that includes: (i) A copy of the notice served; (ii) An alphabetical list of persons on whom the notice was served, along with their addresses; and (iii) The date and manner of service; (D) maintain copies of all proofs of claim and proofs of interest filed; (E) maintain official claims registers by docketing all proofs of claim and proofs of interest in a claims database that includes these information for each claim or interest asserted: (i) The name and address of the claimant or interest holder and any agent, if the proof of claim or proof of interest was filed by an agent; (ii) The date the proof of claim or proof of interest was received by Kurtzman and the Court; (iii) The claim number assigned to the proof of claim or proof of interest; and (iv) The asserted amount and classification of the claim; (F) implement necessary security measures to ensure the completeness and integrity of the claims registers; (G) transmit to the Clerk's Office a copy of the claims registers on a weekly basis, unless requested by the Clerk's Office on a more or less frequent basis; (H) maintain a current mailing list for all entities that have filed proofs of claim or proofs of interest, and make the list available to the Clerk's Office or any party-in- interest by request; (I) provide access to the public for examination of copies of the proofs of claim or proofs of interest filed, without charge during regular business hours; (J) create and maintain a public access website setting forth pertinent case information and allowing access to certain documents filed in the Debtors' Chapter 11 cases; (K) record all transfers of claims pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure and provide notice of these transfers as required by Rule 3001(e); (L) assist the Debtors in the reconciliation and resolution of claims; (M) comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; (N) provide temporary employees to process claims, as necessary; (O) promptly comply with further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; (P) provide balloting and solicitation services, including producing personalized ballots and tabulating creditor ballots on a daily basis; and (Q) provide other claims processing, noticing, balloting and related administrative services as may be requested from time to time by the Debtors. Kurtzman will also serve as the Debtors' solicitation and disbursing agent in connection with their Chapter 11 plan process. The Debtors will compensate and reimburse Kurtzman in accordance with the payment terms, procedures and conditions set forth in the employment agreement for services rendered and expenses incurred. If any dispute arises between the parties with respect to fees and expenses, this dispute will be presented to the Court for resolution. The Debtors ask the Court to treat Kurtzman's fees and expenses as an administrative expense of the Debtors' Chapter 11 estates, which will be paid in the ordinary course of business. As part of the overall compensation payable to Kurtzman, the Debtors have agreed to certain limitations of liability and indemnification obligations. Both parties believe that the provisions are customary and reasonable for restructuring advisory engagements, both out-of-court and in Chapter 11. Before the Petition Date, Kurtzman performed certain consulting and other administrative services for the Debtors. The Debtors do not owe the firm any amount for services performed or expenses incurred before the Petition Date. Moreover, before the Petition Date, the Debtors paid Kurtzman a $75,000 evergreen retainer. Eric S. Kurtzman, Chief Executive Officer of Kurtzman, assures the Court that the firm: (a) does not have any adverse connection with the Debtors, the Debtors' creditors, any other party-in-interest, or the United States Trustee; (b) does not hold or represent an interest adverse to the Debtors' estates; and (c) is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code. The firm's members and employees: * are not creditors, equity security holders or insiders of the Debtors; * are not and were not investment bankers for any outstanding security of the Debtors; * have not been, within three years before the Petition Date: -- investment bankers for a security of the Debtors; or -- an attorney for the investment banker in connection with the offer, sale, or issuance of a security of the Debtors; and (d) were not, within two years before the Petition Date, a director, officer, or employee of the Debtors or of any investment banker. Mr. Kurtzman attests that the firm: * is not and will not be employed by the United Sates government or any federal agency, and will not seek any compensation from the Government; * by accepting employment in the Debtors' Chapter 11 cases, waives any right to receive compensation from the Government; * is not an agent of the Government and is not acting on behalf of the Government; * will not misrepresent any fact to the public; and * will not employ any past or present employees of the Debtors for work involving their Chapter 11 cases. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014 on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Court Orders Counsel to File Rule 2019 Statements ------------------------------------------------------------------ Judge Fitzgerald entered an order on August 25, 2004, and an amendatory order on August 27, 2004, in the Chapter 11 cases concerning, among others: * W.R. Grace & Co., * USG Corp., * Kaiser Aluminum Corporation, Inc., and * 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. Exhibits to the Rule 2019 statements will be available from the Clerk of Court through Parcels, Inc., 1-800-343-1742. The counsel's disclosure obligation is continuing and, therefore, supplemental statements setting forth any material changes in the facts contained in the Rule 2019 statements must be submitted 30 days after the end of each 60-day period. The initial supplemental filing date will be February 1, 2005, covering the period from the date the first 2019 statement is filed through December 31, 2004. Baron & Budd and Silber Pearlman Want Order Amended Baron & Budd, P.C., and Silber Pearlman, LLP, represent thousands of tort victims asserting personal injury claims against the Debtors. Kathleen M. Miller, Esq., at Smith, Katzenstein & Furlow, LLP, in Wilmington, Delaware, tells Judge Fitzgerald that Baron & Budd and Silber Pearlman generally use standard retention agreements for their clients. These contain the agreement between the client and the law firm whereby the law firm is empowered to act on the client's behalf. It also contains privileged and confidential information, including case strategy and the financial terms of the law firm's retention. Because they are standard agreements, the completed and executed agreements vary only by the name of the client and sometimes by the financial terms of the law firm's employment. Ms. Miller argues that literal compliance with Rule 2019 is difficult, burdensome, and very expensive for Baron & Budd, Silber Pearlman and other affected firms since they represent thousands of Tort Victims. However, Baron & Budd and Silber Pearlman do not seek to be excused from filing a Rule 2019 statement. Instead, the Firms ask the Court to slightly amend its Orders to ease the difficulty of compliance while preserving the intentions of Rule 2019. Specifically, Baron & Budd and Silber Pearlman ask the Court to: (a) clarify that exemplars of the documents by which the Firms are empowered to act on the claimants' behalf may be attached to any Rule 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) allow the Firms to file redacted document to exclude other information not required by Rule 2019, especially privileged and confidential information; (c) exclude statement describing how the Firms "became involved with the claimant." It is not a requirement of Rule 2019 and invades the attorney-client relationship; (d) require the first four digits of the Social Security number of the Tort Victims instead of the last four digits to avoid theft and invasion of privacy; (e) exclude statement of the amount and time of acquisition of the claim, which is not proper in a mass tort case; and (f) allow for the address of the claimants to be in care of counsel. Insurers Object to Baron & Budd and Silber Pearlman's Request On behalf of various insurers of the Debtors, Kristi J. Doughty, Esq., at Whittington & Aulgur, in Odessa, Delaware, asks the Court to enforce Rule 2019 of the Federal Rules of Bankruptcy Procedure and its prior orders by requiring all counsel representing more than one creditor to comply with the Amendatory 2019 Order fully and forthwith. The Insurers include: (1) Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies, (2) Columbia Casualty Insurance Company, (3) Transcontinental Insurance Company, (4) Harbor Insurance Company, (5) Continental Insurance Company, (6) Century Indemnity Company, (7) ACE Property & Casualty Company, (8) Pacific Employers Insurance Company, (9) Industrial Underwriters Insurance Company, and (10) Central National Insurance Company of Omaha The Insurers argue that: (a) reconsideration is allowed only to correct manifest errors of law or fact to present newly discovered evidence. Baron & Budd and Silber Pearlman's request presents none of these grounds, therefore, it must be denied; (b) requiring all law firms representing multiple claimants to comply with Rule 2019 is not manifest error but manifestly correct; (c) the arguments presented by Baron & Budd and Silber Pearlman have already been rejected in this and other asbestos bankruptcy cases by attorneys evading their mandatory disclosure obligations under Rule 2019. No previously unavailable evidence is presented to warrant reconsideration; (d) Baron & Budd and Silber Pearlman failed to satisfy the procedural requirements for reconsideration by failing to show manifest error or supply any newly discovered evidence; (e) disclosures contained in the retention agreement are not unduly burdensome and are required of every law firm that represents multiple creditors in bankruptcy; (f) without full compliance with Rule 2019, it would be difficult if not impossible for the Court to determine whether any of the claims being submitted and voted are invalid for that or other reasons. Rule 2019 disclosures in other cases strongly suggest that some claimants are asserting multiple claims through multiple law firms; and (g) the Firms' request fails on both procedural and substantive grounds, therefore, must be denied. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Agrees to Allow Performance & Volks' Claims ------------------------------------------------------------ Performance Contractors, Inc., and AKM, LLC, Volks Constructors Division, are contractors that provided services to Kaiser Aluminum & Chemical Corporation before the Petition Date when its alumina refinery in Gramercy, Louisiana, was rebuilt after an explosion that occurred in July 1999. Performance filed Claim No. 1513 for $1,175,425, while Volks filed Claim No. 1514 for $94,518, including interest and attorneys' fees. Both Claims assert secured status based on liens that were perfected with respect to the Gramercy Refinery for work Performance and Volks rendered before the Petition Date. Performance and Volks objected to the sale of the Gramercy Refinery. Both Contractors asserted that they had valid and perfected liens with respect to the Refinery, and requested immediate payment on their liens from the sale proceeds. The Debtors disputed the validity of the liens. Specifically, the Debtors asserted that the liens were invalid and unenforceable due to existing defects, including: (a) a lien waiver provision whereby Performance allegedly waived a majority of its lien rights; and (b) Volk's alleged failure to comply with a mandatory condition of the Louisiana Private Works Act. Performance argued that based on conflicting provisions in its contract with KACC, and the course of dealing between the parties, it had not waived any lien rights. Performance and Volks continued to assert that their liens had been perfected and that they were entitled to payment in full from the sale proceeds. On July 19, 2004, the United States Bankruptcy Court for the District of Delaware approved the sale. The Sale Order required KACC to place in escrow: (a) $1,250,000 for the amount of any allowed secured claim of Performance, until the Claim is established by the Court; and (b) $110,000 for the amount of any allowed secured claim of Volks, until the Claim is established by the Court. Following negotiations, KACC, Performance, and Volks agree to resolve the Claims under these terms: -- Claim No. 1513 will be allowed as: (a) a secured claim against KACC for $650,000; and (b) a general non-priority unsecured claim against KACC for $525,425; -- Claim No. 1514 will be allowed as: (a) a secured claim against KACC and in favor of Volks for $75,000; and (b) a general non-priority unsecured claim against KACC and in favor of Volks for $19,518; -- The secured portion of Claim Nos. 1513 and 1514 will be paid either: (a) from the sale proceeds within two business days after the closing of the sale; or (b) immediately upon approval of the Stipulation from the applicable escrow account established at the closing of the sale, whichever occurs later; and -- The general, non-priority unsecured portion of the Claims will be satisfied in accordance with a reorganization plan. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) KARA GROUP: Files for Bankruptcy Protection under CCAA ------------------------------------------------------ Kara Group, a 22-store retail jewellery chain, made a voluntary assignment in bankruptcy. All assets of Kara Group including inventory, equipment and leaseholds, will be sold through all existing store locations under the direction of Shiner Kideckel Zweig Inc., Receiver Manager, Trustee in Bankruptcy. The Kara Group originated in 1939 and was one of Canada's largest independently owned and operated retail jewellery chains. The company operated across Ontario under the names, Kara Jewellers, Kara Jewellers Outlet and Griffin Jewellery Design. MACOMB COUNTY: S&P Slices Revenue Bonds' Rating to BB from BBB- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating two notches to 'BB' from 'BBB-' on Macomb County Hospital Finance Authority, Michigan's hospital revenue bonds, series 2003B, issued for Mount Clemens General Hospital. The outlook is stable. "The downgrade reflects a large operating loss for fiscal 2003 (unaudited) and a recently settled nursing strike that is further pressuring operating results in fiscal 2004," said Standard & Poor's credit analyst Brian Williamson. These factors are coupled with a balance sheet that reflects a non-investment-grade rating. Offsetting factors continue to include: (a) a good business position in a competitive area, north of Detroit, Michgan; (b) a change in senior financial management in fiscal 2003; and (c) about $27 million of adjustments for the year that Mount Clemens General Hospital made after completing internal reviews, as suggested by its auditors. Mount Clemens General Hospital violated its debt service coverage ratio covenant for fiscal 2003. As of July 31, 2004, Mount Clemens General Hospital had coverage of 1.0x. Before the end of 2003, Mount Clemens General Hospital engaged Cap Gemini as its consultant. For the seven months ended July 31, 2004, Mount Clemens General Hospital was on target with Cap Gemini's recommendations. However, this is expected to change due to the 35-day nursing strike. Mount Clemens General Hospital is a 288-bed osteopathic teaching hospital located in Macomb County, Michigan. The city of Mount Clemens is located about 22 miles north of Detroit. The key services provided by Mount Clemens General Hospital include: * cardiovascular care (300-400 open-heart procedures a year), * women's and children's services, * emergency services, and * surgical services. Mount Clemens General Hospital also operates: * Personal Home Care Skilled Service, Inc., a Medicare- certified home care agency; * Personal Home Care Services, a private duty home care agency; and * the MCG Foundation. The outlook is currently stable. Although the construction project for Mount Clemens General Hospital is currently on time and on budget, management still has to continue to address its cost-saving initiative that has been put into place with the help of the consultant. Even though the 35-day nursing strike will have a negative effect on operations for fiscal 2004, it is expected that management will be able to operate in a positive manner for the remainder of the year. Management is continuing to explore long-range strategies. However, the balance sheet has little room for unexpected issues that could negatively affect Mount Clemens General Hospital. MAXIM CRANE: Can Continue Hiring Ordinary-Course Professionals -------------------------------------------------------------- The Honorable M. Bruce McCullough of the U.S. Bankruptcy Court for the Western District of Pennsylvania gave his stamp of approval to Maxim Crane Works LLC and its debtor-affiliates' motion to continually retain professionals they turn to in the ordinary course of their businesses without bringing formal employment applications to the Court every time. In the day-to-day performance of their duties, the Debtors regularly call upon various professionals, including attorneys, accountants, actuaries and consultants carrying out their assigned responsibilities. Because of the nature of the Debtors' businesses, it would be costly, time-consuming and administratively cumbersome to require each Ordinary Course Professional to file and prosecute separate employment and compensation applications. The Debtors submit that the uninterrupted service of the Ordinary Course Professionals is vital to their ability to reorganize. The Debtors assure the Court that no payment to an ordinary course professional will exceed $15,000 per month during the next three months. Although some of these Ordinary Course Professionals may hold minor amounts of unsecured claims, the Debtors do not believe that any of them have an interest materially adverse to the Debtors, their creditors or other parties in interest. Headquartered in Pittsburgh, Pennsylvania, Maxim Crane Works, LLC -- http://www.maximcrane.com/-- is a full service crane rental company. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. W.D. Pa. Case No. 04-27861) on June 14, 2004. Douglas Anthony Campbell, Esq., at Campbell & Levine, LLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated debts and assets of over $100 million. METROPCS: Two Concerns Prompts S&P to Revise Outlook to Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Dallas, Texas-based wireless service provider MetroPCS Inc. to negative from positive. The outlook revision reflects two concerns. "First, the company is rapidly approaching the Nov. 8, 2004, deadline for filing its second-quarter SEC Form 10-Q in order to avoid triggering a technical default, which could result in acceleration in repayment of about $150 million of 10.75% senior notes due 2011. Such acceleration could lead to a liquidity issue in the near term," said Standard & Poor's credit analyst Michael Tsao. The delay in filing was caused by an ongoing internal investigation into understatement of revenues and net income for the quarter ended March 2004 (the accounting problem also caused the withdrawal of a plan for an IPO). Second, the accounting problem may be wider in scope than initially expected by Standard & Poor's, given that the company recently fired its principal accounting officer and announced that previously issued financial statements for the years ended in December 2002 and 2003 and subsequent interim period should not be relied upon. The accounting problem and any associated internal control issue could lead to regulatory ramifications. The ratings reflect substantial business risk because of strong competition from better-capitalized wireless carriers and uncertainty over the longer-term viability of the company's differentiated business model. With national wireless penetration already exceeding 55% and the advent of wireless number portability, competitive pressure in the wireless industry is likely to further intensify. National wireless carriers have a number of competitive advantages over the company, which effectively has been in operation for over two years. These include significantly greater financial resources, access to capital markets, network reach, negotiating power against vendors, brand awareness, and operating experience. The longer-term viability of MetroPCS's differentiated business model remains somewhat uncertain. The traditional business model for the wireless industry has been one based on heavy upfront customer acquisition costs, a myriad of regional and national calling plans, national network coverage, monthly billing for services, and contracts with a tenor of one to two years. MetroPCS, by contrast, provides primarily for unlimited local calling in four densely populated markets (i.e., the greater San Francisco, Miami, Atlanta, and Sacramento metropolitan areas) on a prepaid fixed-fee basis with no contracts and minimal handset subsidies. These factors give the company the ability to operate with less support infrastructure and tolerate a higher customer churn rate than competitors using the traditional model. However, the sustainability of MetroPCS's business model remains uncertain for two reasons. First, in the event data and push-to-talk services that other carriers offer become critical competitive elements, it is not clear whether the company's limited network coverage and narrow service offering will allow it to compete effectively. Second, technological advancements or additional spectrum could enable other carriers to offer significantly more peak-time minutes, thereby weakening the case for unlimited local minutes. As reported in the Troubled Company Reporter on Sept. 17, 2003, Standard & Poor's Ratings Services assigned its 'CCC+' corporate credit rating to MetroPCS Inc. Also, a 'CCC+' rating was assigned to the company's proposed $150 million senior unsecured notes due 2011 issued under Rule 144A with full registration rights. The outlook is positive. MILLENIUM ASSISTED: Creditors Must File Proofs of Claim by Oct. 18 ------------------------------------------------------------------ The United States Bankruptcy Court for the District of New Jersey set October 18, 2004, as the deadline for all creditors owed money by Millenium Assisted Living Residence at Freehold, LLC, on account of claims arising prior to June 7, 2004, to file their proofs of claim. Creditors must file their written proofs of claim on or before the October 18 Claims Bar Date, and those forms must be delivered to: Clerk of the Bankruptcy Court District of New Jersey 402 East State Street Trenton, New Jersey 08608 Headquartered in Freehold, New Jersey, Millenium Assisted Living Residence at Freehold, LLC, filed for chapter 11 protection on June 7, 2004 (Bankr. N.J. Case No. 04-29097). Larry Lesnik, Esq., and Sheryll S. Tahiri, Esq., at Ravin Greenberg PC, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated over $10 million in debts and assets. ML CBO: Moody's Slices $172.8M Senior Secured Notes' Rating to Ca ----------------------------------------------------------------- Moody's Investors Service downgraded the rating of one class of Notes issued by ML CBO VI, Series 1996-C-2. The Class A Notes of ML CBO VI, Series 1996-C-2 have been downgraded to Ca from Caa1 on watch for possible downgrade. Continuing deterioration in par and credit quality of the underlying portfolio prompted the current action. Moody's notes that the Class A Overcollateralization Ratio is 49.2% as of the September 10, 2004 noteholder report. The failure of overcollateralization coverage tests has led to substantial redemptions of the Class A Notes. Although Moody's expects the deal to continue delevering, this will not be sufficient to preserve the credit rating, prior to today's rating action, of the Notes. Rating Action: Downgrade Issuer: ML CBO VI, Series 1996-C-2 Tranche description: US$172,800,000 ($19,797,570.85) Class A Floating Rate Senior Secured Notes Due 2006 Previous Rating: Caa1 on watch for possible downgrade New Rating: Ca NATIONAL CENTURY: Trust Wants $2.1 Mil. Preferential Transfer Back ------------------------------------------------------------------ On March 12, 1993, NPF IV, Inc. -- a predecessor to NPF VI, Inc., and NPF XII, Inc., National Century Financial Enterprises, Inc. debtor-affiliates -- and Lincoln Hospital Medical Center, Inc., entered into a sale and subservicing agreement. Mary E. Tait, Esq., at Jones Day, in Columbus, Ohio, relates that the Debtors provided financing to Lincoln and Community Healthcare Specialists Medical Group, Inc., an affiliate of Lincoln. Community Healthcare provided medical services at the clinics owned and operated by Lincoln's sole shareholder, MediManager, Inc. In 1996, a dispute developed between the parties, and Lincoln sought alternate financing arrangements with DFS Secured Healthcare Receivables Trust. On May 3, 1996, Lincoln and DFS entered into a Healthcare Accounts Receivable Purchase Agreement, pursuant to which Lincoln agreed to sell its accounts receivable to DFS. From May 3, 1996, through July 1996, Lincoln sold its accounts receivable to DFS, including many accounts receivable generated prior to May 3, 1996. Subsequently, DFS ceased purchasing accounts receivable from Lincoln. On August 7, 1996, NPF IX, Inc., a predecessor of NPF XII, entered into a new sale and subservicing agreement with Lincoln. The security interests granted to NPF IX under the Subservicing Agreement were perfected by two UCC-1 Financing Statements filed with the California Secretary of State on August 13, 1996, which financing statements were timely continued and assigned. From August 1996, through October 2, 2002, NPF IX and its successors purchased all of Lincoln's eligible accounts receivable. The DFS Lawsuits On December 18, 1998, DFS filed a lawsuit in the California Superior Court for Marin County against Lincoln, Community Healthcare and MediManager, alleging breach of contract, fraud, conspiracy and failure by Lincoln to remit the proceeds of accounts receivable. Neither NCFE nor any of its subsidiaries were defendants or otherwise parties to the First DFS Lawsuit. On April 4, 2001, the Marin Superior Court entered a $2,419,513 judgment in the First DFS Lawsuit in favor of DFS and against Lincoln. A $2,767,188 judgment was also entered against Community Healthcare. MediManager had been previously dismissed from the litigation, without prejudice. On April 8, 2002, DFS filed a judgment lien against Lincoln. On July 27, 2000, NPF IX and NPF VI filed a lawsuit in the Marin Superior Court against DFS, alleging intentional interference with contract. On September 25, 2000, DFS filed a cross-complaint against NPF VI, National Physicians Funding II, Inc., and MediManager, seeking indemnification and apportionment of fault for the debts of Lincoln and Community Healthcare, and alleging fraud and conspiracy. The entire action was dismissed with prejudice on July 15, 2002. On February 14, 2002, DFS levied its judgment against Lincoln in the First DFS Lawsuit upon four checks payable to Lincoln. On February 21, 2002, NPF XII, as the assignee of NPF IX's rights and interests under the Subservicing Agreement, filed a Verified Third Party Claim of Ownership in the First DFS Lawsuit, asserting a senior right to the proceeds of Lincoln's accounts receivable subject to the DFS levy. On May 6, 2002, the Marin Superior Court concluded that NPF XII's ownership and security interest in Lincoln's accounts receivable, arising out of the Subservicing Agreement, "take priority over the April 4, 2001 judgment" of DFS. DFS asked the Marin Superior Court to reconsider the First Priority Order. The Marin Superior Court, however, reaffirmed its ruling in an amended order dated June 4, 2002. On April 12, 2002, DFS filed a second lawsuit against MediManager in the Marin Superior Court, seeking to recover on an alleged guaranty given by MediManager of Community Healthcare's liabilities. Settlement Agreement On August 21, 2002, DFS, DFS Credit Corp., DynaCorp Financial Strategies, Inc., NCFE, NPF XII, and MediManager agreed that: (a) MediManager and NCFE will pay DFS $1,500,000; (b) MediManager will provide DFS with a promissory note for $1,000,000, with interest to accrue at a rate of 10% per annum. The Note was payable in four installments. NCFE guaranteed MediManager's obligations under the Note; and (c) In the event of a default, DFS's exclusive remedy is either specific performance of the Settlement Agreement or to re-file the Second DFS Lawsuit, to which NCFE and its subsidiaries were not parties. $2.1 Million Transfer On August 23, 2002, NCFE paid DFS $1,500,000 as the initial payment under the Settlement Agreement. On October 1, 2002, NCFE sent a $416,667 check to DFS as first installment payment under the Note. On October 29, 2002, NCFE wired an additional $203,222 to DFS as second installment payment under the Note. In sum, NCFE transferred $2,119,889 to DFS under the Settlement Agreement. The DFS Claim On April 21, 2003, DFS filed Claim No. 313 against the Debtors, asserting a $1,910,891 claim allegedly secured by accounts receivable and its proceeds. The DFS Claim attaches: * a statement of amounts due; * an unfiled complaint asserting counts for damages for conversion, claim and delivery of accounts receivable, foreclosure of Lincoln assets and injunctive relief to enjoin transfers of Lincoln accounts receivable; and * notices of liens against Lincoln. DFS has not provided evidence of any filed UCC-1 financing statements or any other documentation of security interests against the Debtors. Ms. Tait reminds the Court that DFS did not sell goods or render services to the Debtors prepetition. Rather, DFS asserts that it purchased accounts receivable from a third party, Lincoln, which accounts receivable DFS never received. The Sun Segregated Amounts On November 18, 2002, Lincoln commenced its Chapter 11 case. On December 2, 2002, the United States Bankruptcy Court for the Central District of California, Los Angeles Division, entered an interim order approving the use of cash collateral and a replacement factoring arrangement between Lincoln and Sun Capital Healthcare, Inc. The Debtors continue to hold claims aggregating tens of millions of dollars against Lincoln. Upon information and belief, Sun is holding the proceeds of certain Lincoln accounts receivable purchased by NPF XII prior to October 2, 2002, but collected by Sun after November 18, 2002, in a segregated account. Sun is holding $236,000 in the Sun Segregated Account, pending resolution of the parties' disputes over competent jurisdiction. Ms. Tait asserts that the funds in the Sun Segregated Account are the proceeds of accounts receivable purchased by NPF XII and are not subject to any lien prior to the lien of the VI/XII Collateral Trusts, as successor to NPF XII, which lien was perfected in August 1996. Any judgment lien of DFS was released and discharged by DFS when it entered into the Settlement Agreement. Moreover, the priority of NPF XII's lien over DFS's lien has been resolved res judicata by the Marin Superior Court, which conclusively ruled in the Ownership and Priority Orders that NPF XII's lien has priority over DFS's lien. Avoidance Action Ms. Tait asserts that Transfers constitute avoidable preferential transfers under Section 547 of the Bankruptcy Code. The Debtors also made the Transfers with actual intent to hinder, delay or defraud their creditors. Ms. Tait further points out that the Transfers were made by the Debtors for DFS's benefit for no consideration to the Debtors. DFS retained the Transfers for its own use and has not in any way reimbursed the Debtors. Clearly, the Transfers have unjustly enriched DFS to the detriment of the Debtors' estates and creditors. "DFS's conduct is inequitable, has given it an unfair advantage and has resulted in injury to all other competing classes of creditors," Ms. Tait adds. Thus, the Unencumbered Assets Trust and the VI/XII Collateral Trust, as successors to and transferees of the Debtors, ask Judge Calhoun to: (a) declare that the Transfers represent preferential transfers and are avoided; (b) declare that the incurrence of the obligation to make the Transfers or the Transfers themselves, or both, are fraudulent transfers that are avoided under applicable law; (c) award a money judgment in favor of the Unencumbered Assets Trust against DFS, Dynacorp Financial, et al., in an amount equal to the aggregate amount of the Transfers; (d) award judgment in favor of the Unencumbered Assets Trust and against DFS, Dynacorp Financial, et al., in the amount that DFS, Dynacorp Financial, et al., were unjustly enriched, presently estimated to be $2,119,889, plus all fees and costs awarded and interest; (e) reclassify the DFS Claim as an unsecured, non-priority claim under the Plan; (f) disallow the DFS Claim in its entirety; and (g) enter a judgment in favor of the VI/XII Collateral Trust resolving all disputes between the Debtors and DFS and determine that the VI/XII Collateral Trust, as successor in interest to and transferee of the assets of NPF XII, is the rightful owner of the funds in the Sun Segregated Account. Headquartered in Dublin, Ohio, National Century Financial Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB Claims Trust, the Litigation Trust, the VI/XII Collateral Trust, and the Unencumbered Assets Trust, is in the midst of liquidating estate assets. The Company filed for Chapter 11 protection on November 18, 2002 (Bankr. D. Ohio Case No. 02-65235). The Court confirmed the Debtors' Fourth Amended Plan of Liquidation on April 16, 2004. Paul E. Harner, Esq., at Jones Day, represents the Debtors in their restructuring efforts. (National Century Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL IRANIAN: Case Summary & 10 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: National Iranian Television News Inc. 21050 Erwin Street Woodland Hills, California 91367 Bankruptcy Case No.: 04-16582 Type of Business: The Debtor is a television station. Chapter 11 Petition Date: October 7, 2004 Court: Central District of California (San Fernando Valley) Judge: Kathleen T. Lax Debtor's Counsel: C. Richard Dodson, Esq. 4089 Long Beach Boulevard Long Beach, CA 90807 Tel: 562-595-8771 Total Assets: $158,702 Total Debts: $6,381,490 Debtor's 10 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Audio-Visual Supply Trade Debt $4,130,000 4575 Ruffner St. San Diego, CA 92112 Irdetu Access Trade Debt $500,000 P.O. Box 3047 2130 KA Hoofdorf, Netherlands ABS CBN International $20,000 NetSat Express, Inc. Trade Debt $19,500 Williams Communication Trade $9,811 Providian Processing Center Trade Debt $6,066 SBC Payment Center Trade Debt $4,153 Los Angeles DWP Trade Debt $2,668 Shadi Movahed Labor $2,500 Globecase North America Trade $1,566 NAVIGATOR CDO: S&P Assigns BB Ratings on Classes D-1 & D-2 ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Navigator CDO 2004 Ltd./Navigator CDO 2004 Corp.'s $470.5 million floating- and fixed-rate notes due 2016. The preliminary ratings are based on information as of October 11, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The credit enhancement provided to each class of notes through the subordination of cash flows to junior classes; -- The transaction's cash flow structure, which has been subjected to various stresses as requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, including the bankruptcy remoteness of the issuer. Preliminary Ratings Assigned Navigator CDO 2004 Ltd./Navigator CDO 2004 Corp. Class Rating Amount (mil. $) ----- ------ -------------- A-1A AAA 50.0 A-1B AAA 262.5 A-2 AAA 54.0 A-3A AA 31.0 A-3B AA 2.0 B-1 A 22.5 B-2 A 7.5 C-1 BBB 16.5 C-2 BBB 12.5 D-1 BB 6.0 D-2 BB 6.0 Preference shares N.R. 40.5 N.R. - Not rated NRG ENERGY: Inks Stipulation Resolving NCAT's & Reynolds' Claims ---------------------------------------------------------------- Under a Credit Agreement dated May 8, 2001, by and among NRG Finance Company I, LLC, Credit Suisse First Boston, as administrative agent, and other financial institutions, Debtors NRG Nelson Turbines, LLC, and LSP-Nelson Energy, LLC, are currently indebted to the Lenders for $673,072,591. North Central Antenna Technologies, Inc., and Reynolds, Inc., are contractor parties that have performed construction services for the benefit of the Nelson Debtors and have asserted liens and related claims against the Nelson Debtors. Furthermore, in a litigation pending in Lee County, Illinois, NCAT and Reynolds asserted that their liens on the Nelson Debtors' real and personal property have priority over the mortgage lien recorded against the same property by CSFB, as Agent on the Lenders' behalf. To resolve the priority of the Nelson Claims without further costs of litigation and associated risks, the Nelson Debtors, NCAT, Reynolds, CSFB, and PCL Industrial Construction, Inc., stipulate that: (a) Reynolds will have an allowed secured claim for $288,437, with distribution priority over the Lenders' Claims, but not over payment of the first $2,950,000 of the Allowed Nelson Superpriority Claim; (b) NCAT will have an allowed secured claim for $21,060, with distribution priority over the Lenders' Claims, but not over payment of the first $2,950,000 of the Allowed Nelson Superpriority Claim; (c) The issue of priority among Reynolds, NCAT and PCL is reserved until further notice; (d) Reynolds will waive and dismiss, with prejudice, any and all claims against the Nelson Debtors in excess of $288,437; (e) NCAT will waive and dismiss any and all claims against the Nelson Debtors in excess of $21,061; and (f) NCAT and Reynolds will release and dismiss, with prejudice, any and all claims asserted against CSFB, as Agent and on its own behalf, and against the Lenders, in connection with the Nelson Debtors, including any and all claims asserted in the litigation pending in Lee County, Illinois. NRG Energy, Inc. owns and operates a diverse portfolio of power- generating facilities, primarily in the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. The company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-13024) on May 14, 2003. The Company emerged from chapter 11 on December 5, 2003, under the terms of its confirmed Second Amended Plan. James H.M. Sprayregen, P.C., Matthew A. Cantor, Esq., and Robbin L. Itkin, Esq. at Kirkland & Ellis, represented NRG Energy in its $10 billion restructuring. (NRG Energy Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: CSFB & Tort Lawyers Debate Rule 2019 Compliance -------------------------------------------------------------- In connection with Judge Fitzgerald's order on August 25, 2004 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, as reported in the Troubled Company Reporter on September 29, 2004, tort firms asks for leeway in compliance of the order. As reported in the Troubled Company Reporter on September 22, 2004, Baron & Budd and Silber Pearlman admitted 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." Campbell Cherry and Brayton Purcell Responds Campbell, Cherry, Harrison, Davis & Dove, PC, and Brayton Purcell also represent numerous tort victims asserting personal injury claims against the Debtors. Therefore, Campbell Cherry and Brayton Purcell support Baron & Budd and Silber Pearlman's request. They ask Judge Fitzgerald to modify the disclosure required of law firms in the Debtors' cases under Rule 2019 of the Federal Rules of Bankruptcy Procedure. United States Trustee Wants Some Safeguards Roberta A. DeAngelis, the Acting United States Trustee for Region 3, agrees that the disclosure of exemplar retention agreements will reduce the burden on the complying parties as well as the Court by substantially diminishing the bulk of the document and accompanying exhibits. However, the relief should be granted with appropriate safeguards: (a) Each "exemplar" should be a copy of an actual retention agreement executed by a client, rather than an unsigned "form" or "draft" agreement that may not reflect fully the terms of any actual agreement with any claimant; (b) Any diversions from the exemplar for particular claimants should be attached for each claimant; and (c) If there are multiple exemplars, lists of the names of the claimants whose agreements follow each of the forms should be attached. To permit clear identification of the claimants and prevent duplicate claims, the addresses and Social Security numbers of the claimants should be disclosed. Frank J. Perch, III, Esq., Assistant United States Trustee, suggests that positive identifiers will permit the various firms' lists to be cross-checked to eliminate duplicate claims and prevent duplicate plan voting. The disclosure of addresses will also facilitate improved noticing. In the early stages of virtually all asbestos cases, Mr. Perch notes that debtors file a motion seeking leave to serve various required notices on counsel for personal injury claimants rather than the claimants themselves, averring that debtors do not have all of the actual addresses of the claimants in their records. At the U.S. Trustee's request in many cases, the orders approving the motions expressly provide that the order will not apply to and will be without prejudice regarding the form and manner of notice to be given for any claims bar date or for plan solicitation and plan voting. By requiring the address information to be provided, Mr. Perch explains, the Orders will facilitate noticing of key events like bar dates and plan voting to be provided directly to the affected claimants as well as to the attorneys. The U.S. Trustee does not object to having portions of any Rule 2019 disclosure containing address and Social Security number data for individual personal injury claimants redacted from the public docket and filed under seal, provided full disclosure is made to: * the Debtors, * all official committees, * the Debtors' noticing agents, and * the U.S. Trustee The Notice Parties will not disclose any of the information to the public without further leave of Court. Any affidavit of service or similar subsequent document that would contain the protected information would similarly be filed under seal and appear on the public docket in redacted form. Debtors Nitpicks on SS Numbers The Debtors insist that in the event social security numbers are required for asbestos claimants, the last four digits should be required as provided in the Amendatory Order, rather than the first four digits. Norman L. Pernick, Esq., at Saul Ewing, LLP, in Wilmington, Delaware, explains that the first three digits of a social security number are a geographic locator, based on the state of initial registration with the Social Security Administration. Thus, all claimants from a particular state are disproportionately likely to have the same first three digits of their social security numbers. Mr. Pernick also notes that the claimants should not be required to disclose the first four digits of their social security numbers now and the last four digits later. The Debtors take no position as to whether the amount and time of acquisition of a tort claim should be disclosed. Tort claims typically are unliquidated and difficult to ascribe to a specific date. The Debtors, however, believe that this requirement should apply to all non-tort claims because the claims do not implicate the concerns highlighted in the Tort Firms' request. The Debtors support the proposed compliance with Rule 2019(a)(3) of the Federal Rules of Bankruptcy Procedure as stated in the Court's "Notes Re: Information To Be Submitted in Pittsburgh, NARCO and GIT Regarding Amending the Amendatory Order Requiring Rule 2019 Statements." CSFB Insists on Rule 2019 Compliance Baron & Budd and Silber Pearlman should be required to comply with the Rule 2019 disclosure requirements, Credit Suisse First Boston insists. Rebecca L. Butcher, Esq., at Landis, Rath & Cobb, in Wilmington, Delaware, asserts that Rule 2019 is mandatory. The Tort Firms concede to this mandatory nature, although they urge the Court to be "flexible" and not "overly wooden" in determining the level of compliance with the rule. Ms. Butcher notes that Baron & Budd and Silber Pearlman have not alleged that compliance with the express mandate of Rule 2019 and the express terms of the Rule 2019 Order would be impossible. The Firms simply reason that compliance would be "difficult, burdensome and very expensive." Presumably, the Tort Firms know who their clients are. Moreover, other than their own conclusory statements, however, the Firms do not explain the alleged difficulty, burden or expense that compliance would require. The Tort Firms have not cited to a single reported decision that would dispatch with the Rule 2019 requirements simply because a law firm would have to expend resources in order to comply. Rule 2019 and Rule 2019 order could not be clearer in requiring the production of all powers of attorney or other authorizing instruments, Ms. Butcher tells Judge Fitzgerald. The expense and burden of compliance is not as great as the Tort Firms suggest. Many states, including New York where many of the claims would have been filed absent the Chapter 11 filing, require the filing of the very type of statement that the Tort Firms allege to be too expensive and burdensome to file. The Tort Firms cite In re Mid-Valley, Inc., Case No. (03-35592 (JKF) (Bankr. W.D. Pa.), in support of their contention that exemplars may be filed. According to Ms. Butcher, the Mid-Valley case is different. Mid-Valley was a prepackaged Chapter 11 and Owens Corning is not. There is more time in the Debtors' cases than in Mid-Valley case to compel compliance. Rule 2019 requires the disclosure of "pertinent facts and circumstances in connection with employment." Ms. Butcher enumerates the pertinent facts in connection with the employment of an attorney: (a) Identity of the client; (b) The terms of compensation; and (c) The circumstances of how the attorney became involved in the representation. Consistent with Rule 2019 Order, the Tort Firms should disclose all three categories of information, Ms. Butcher insists. Moreover, the Tort Firms failed to demonstrate that any of the information is privileged. Ms. Butcher contends that the reason for the failure is because the information is not subject to any privilege. The information is often required when filing a personal injury case in state court. Moreover, it is well settled that fee arrangements are not privileged as held in Montgomery County v. Microvote Corp., 175 F.3d 296, 304 (3d Cir. 1999). In addition, Social Security numbers and addresses should be disclosed as well as the amount and time of acquisition of the claims. Rule 2019(a)(1) expressly requires disclosure of addresses of claimants. The disclosure will eliminate duplicate claims. Based on these assertions, CSFB asks the Court to deny the Reconsideration Motion filed by the Tort Firms. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At June 30, 2004, the Company's balance sheet shows $7.3 billion in assets and a $4.3 billion stockholders' deficit. (Owens Corning Bankruptcy News, Issue No. 85, Bankruptcy Creditors' Service, Inc., 215/945-7000) PACIFIC BIOMETRICS: Inks New $1.7 Million Clinical Research Pact ---------------------------------------------------------------- Pacific Biometrics, Inc. (OTCBB:PBME) signed a contract worth approximately $1.7 million with a major U.S. Sponsor. The study will address an innovative approach for the prevention and treatment of dyslipidemia and coronary heart disease. PBI will provide the Sponsor with cholesterol, lipid, and inflammatory marker testing on samples collected to support the Sponsor's clinical development program, eventually expected to result in a New Drug Application filing with the FDA and equivalent filings with regulatory agencies in other jurisdictions. The testing will commence during the first quarter of 2005, and is anticipated to be completed in 9 months. Ron Helm, Chief Executive Officer of Pacific Biometrics, commented, "We are delighted to have the opportunity to work with this innovative Sponsor to test for improvements in lipid profiles in patients at risk for atherosclerosis and coronary heart disease. The Sponsor's endpoints of improving the cholesterol and inflammatory marker profile required a central laboratory that has expertise in biomarkers for both lipids and cardiovascular risk, and PBI is well positioned to deliver the highest quality results in both of these areas. Winning this highly competitive bid represents an important milestone for Pacific Biometrics. Our reputation for providing accurate, reliable analyses and responsive services continues to strengthen our prospects for future business." Mr. Helm continued, "As this contract indicates, our expertise across multiple categories of biomarkers offers Pacific Biometrics a competitive advantage that will enable us to pursue a growing number of opportunities going forward. The size and timeline for completion of this project will not only strengthen our relationship with this Sponsor, but will also improve our outlook for the second and third quarter. As we indicated in the past, we will likely see variability in our revenue and profitability on an interim basis in the early stages of our new marketing efforts, but are confident that our core capabilities and marketing initiatives will drive revenue in the second half of 2004 and in 2005. I am very encouraged by our recent success in signing this new contract and look forward to continued success in winning additional business." About Pacific Biometrics, Inc. Established in 1989, PBI provides specialized central laboratory services to support pharmaceutical and diagnostic manufacturers conducting human clinical trial research. The company provides expert services in the areas of cardiovascular disease, cholesterol and lipid abnormalities, diabetes, obesity, metabolic syndrome, osteoporosis, and arthritis. The PBI laboratory is accredited by the College of American Pathologists and is one of only three U.S.-based laboratories approved and accredited by the Centers for Disease Control (CDC) as a member of the Cholesterol Reference Method Laboratory Network. PBI's clients include many of the world's largest pharmaceutical, biotech, and diagnostic companies. Pacific Biometrics also owns several patented and patent-pending technologies, including molecular diagnostic and noninvasive device technologies, relevant to its areas of specialty expertise. * * * Going Concern Doubt Grant Thornton LLP expressed substantial doubt on Pacific Biometrics, Inc.'s ability to continue as a going concern, after it audited the Company's financial statements as of June 30, 2004 and 2003. The Company has experienced significant net operating losses for the fiscal year ended June 30, 2004, and revenues for fiscal 2004 were significantly lower than those in the comparable prior fiscal year. While the Company currently has a positive working capital position, it has significant amounts of notes payable and other liabilities, and minimal stockholders' equity. Historically, the Company has had deficiencies in working capital and stockholders' equity and has had significant amounts of current and past due debt. PACIFIC COAST: Moody's Junks Class C-1 & C-2 Secured Notes ---------------------------------------------------------- Moody's Investors Service took action on the Classes of Notes issued by Pacific Coast CDO, Ltd. The rating on the Class A Notes will not be affected by this rating action. In addition, Moody's is withdrawing its rating on the $6,700,000 Class 1 Pass-Through Notes due 2036 since the Pass-Through Notes have been split into its component tranches. The downgrade is due to a continued deterioration in the portfolio. As of the August 31, 2004 trustee report, the transaction was failing its Class A/B and Class C Overcollateralization and Interest Coverage tests and the Moody's Maximum Rating Distribution Test was reported as 1063. Issuer: PACIFIC COAST CDO, LTD. Description: $96,000,000 Class B Second Priority Senior Secured Floating Rate Notes due 2036 Current Rating: A2 Prior Rating: Aa3 on watch for possible downgrade Description: $21,000,000 Class C-1 Mezzanine Secured Floating Rate Notes due 2036 Current Rating: Caa2 Prior Rating: Ba3 on watch for possible downgrade Description: $9,000,000 Class C-2 Mezzanine Secured Floating Rate Notes due 2036 Current Rating: Caa2 Prior Rating: Ba3 on watch for possible downgrade PACIFIC GAS: Trustee Objects to Dynegy Power's $1M Admin. Claim --------------------------------------------------------------- Shortly after the Petition Date, the Office of the United States Trustee nominated Dynegy Power Marketing, Inc., to serve as a member of the Official Committee of Unsecured Creditors in Pacific Gas and Electric Company's Chapter 11 case. Dynegy Power accepted its nomination, and at all times served actively as a member of the Creditors Committee. Philip S. Warden, Esq., at Pillsbury Winthrop, LLP, in San Francisco, California, recounts that before PG&E's reorganization plan was confirmed, two competing plans were filed with the Court -- one proposed by PG&E and the other proposed by the California Public Utilities Commission. The competing plans had polarized and intractable differences in their basic structures. As a result, the extreme animosity between the plan proponents threatened to cause a lengthy delay in the confirmation process, threatened distributions to creditors, and substantially increased the costs borne by ratepayers each additional day that PG&E remained under Chapter 11 protection. Dynegy Power and other members of the Creditors Committee knew that PG&E and CPUC appeared unable to reach a compromise. Accordingly, the Creditors Committee attempted without success to broker a settlement between PG&E and CPUC. However, with Judge Newsome's assistance, Dynegy Power and the Creditors Committee's efforts in brokering a settlement resulted in the drafting and confirmation of the Plan. While Dynegy Power was certainly not alone on the Creditors Committee in its efforts to broker the settlement, Mr. Warden recounts some of Dynegy Power's specific efforts: (a) Dynegy Power's counsel suggested and lobbied for the Creditors Committee to urge PG&E and the CPUC into mediation. Spurred by Dynegy Power's efforts, the Creditors Committee agreed with the mediation approach and convinced the Court to order the parties into mediation. The mediation before Judge Newsome resulted in a settlement between the CPUC and PG&E and served as the basis for the structure of the Confirmed Plan. The mediation was the turning point in the case, and brought PG&E out of Chapter 11 resulting in immense savings to PG&E and the ratepayers. (b) Dynegy Power brokered numerous agreements with PG&E, including, without limitation: -- Order authorizing PG&E to incur postpetition secured debt to certain gas suppliers under the gas supplier security agreement, filed on July 30, 2001; -- Stipulation modifying the Plan regarding Class 6 claims, filed on August 6, 2002; -- Stipulation resolving objections to PG&E's Plan of Reorganization filed by Class 6 creditors, filed on November 13, 2003; -- Order resolving PG&E's objections to numerous administrative claims filed by Class 6 claimants, filed on November 21, 2003; and -- Class 6 Escrow Agreement pursuant to court order dated March 5, 2004. (c) Dynegy Power and its counsel met regularly with PG&E's professionals to negotiate and draft provisions that ultimately became part of the Confirmed Plan. (d) As a leading member of the Creditors Committee and a Class 6 member, Dynegy Power actively negotiated with other class members to support the Confirmed Plan. (e) Dynegy Power provided significant assistance in drafting a memorandum that the Creditors Committee sent to all general unsecured creditors urging the parties to vote in favor of the Confirmed Plan. (f) Dynegy Power has now settled its claims with PG&E, the Federal Energy Regulatory Commission, the California Attorney General and other entities -- creating a template for other Class 6 Claimants to settle and recover their various disputes with those parties, thereby easing the burden on PG&E and its estate in litigating the issue with the other Class 6 Claimants. Mr. Warden points out that in light of the substantial contributions Dynegy Power has made on PG&E's Chapter 11 case, Dynegy Power is entitled to reimbursement of all of its "actual necessary expenses," pursuant to Section 503(b)(3)(D) of the Bankruptcy Code. Since Dynegy Power is entitled to recover certain of its actual and necessary expenses incurred pursuant to Section 503(b)(4), Mr. Warden asserts that Dynegy Power is also entitled to seek reimbursement for "reasonable compensation" incurred by its counsel based on "the time, the nature, the extent, the value of such services and the cost of comparable services" other than in a case under title 11. Courts have typically interpreted Section 503(b)(4) as requiring further that only those fees incurred in relation to the activity that qualified the entry for administrative expense treatment under Section 503(b)(3) are subject to reimbursement under Section 503(b)(4). Through Dynegy Power's counsel's extensive experience and familiarity to the local rules, procedures, and practices, Dynegy Power was able to provide the Creditors Committee with a tremendous resource as to local issues which was essential because the Creditors Committee's counsel was based in Los Angeles and did not have the same familiarity or insights with respect to the particularities of San Francisco, or with Judge Newsome, which can only be gained by years of practice. Mr. Warden points out that PG&E's Chapter 11 case would have gone for at least another year absent the mediation. With cumulative professional fees averaging $250,000,000 the first three years of the case, professional fees would have easily been over $100,000,000 for the additional year. Accordingly, Dynegy Power asks the Court to compel PG&E to pay $1,000,000 for its superior performance and substantial contributions to the Chapter 11 case. The amount reflects a modest 1% of the estimated savings in professional fees that would have otherwise been borne by the estate absent Dynegy Power's efforts. It is in lieu of the hourly rate for which Pillsbury Winthrop, LLP, charged Dynegy Power for its legal services, Mr. Warden says. Objections (A) U.S. Trustee Patricia A. Cutler, Assistant United States Trustee for the Northern District of California, states that in In re Cellular 101, Inc., 377 F.3d 1092, 1096 (9th Cir. (Cal.) 2004), the test of substantial contributions is "the extent of benefit to the estate." Additionally, in In re Cellular 101, the Ninth Circuit held that the creditor seeking payment of its expenses on a priority basis as an administrative expense of the estate under Section 503(b)(3)(D) did substantially contribute to the debtor's estate by "developing the only plan that was presented to the bankruptcy court and by waiving its prepetition claim." According to Ms. Cutler, Dynegy Power's efforts may have benefited the estate, but the differences in extent of the benefit conferred on the estate, when measured against the contributions of the creditor in In re Cellular 101, are striking. While Dynegy Power's efforts may have been contributed to PG&E's successful reorganization, the extent those efforts benefited the estate is not enough to amount to a substantial contribution under Section 503(b)(3)(D). Rather, the conduct for which Dynegy Power seeks the enhancement fee was conduct expected of a committee member and fiduciary to the unsecured creditor body. With respect to Dynegy Power's assertion that its most important role was that of the initial proponent of mediation, Ms. Cutler states that it should be common knowledge in PG&E's Chapter 11 case that Judge Montali, at a hearing on March 4, 2003, ruled that the parties, consisting of PG&E and CPUC, and attorneys and representatives should meet behind closed doors to determine if they should try to reach a settlement on their competing restructuring plans. Judge Newsome presided over these closed- door meetings, which eventually resulted in a joint plan of reorganization being filed on July 31, 2003. It was this plan that was ultimately confirmed. On September 14, 2004, the U.S. Trustee also took the deposition of PG&E's Senior Vice President and Chief Financial Officer, Kent Harvey. The deposition was taken in connection with a fee application filed by Rothschild, Inc., the investment banker and financial advisor hired by PG&E in August 2001. During the examination, the U.S. Trustee asked Mr. Harvey who would he consider to have played a pivotal role or instrumental role during the time frame from March 2003 through the end of July 2003, during the negotiations, that ultimately resulted in the formulation of a joint plan that was ultimately confirmed. Mr. Harvey testified that the Lehman Brothers -- the investment banker and financial advisor for the parent company PG&E Corporation -- and UBS, on behalf of the CPUC staff, were active participants in the process. Dynegy Power's name did not come up anywhere during the course of the examination. With or without Dynegy Power's suggestion, Ms. Cutler maintains that mediation is usually the next phase for parties to take when they reach an impasse. Dynegy Power's suggestion should not be considered an earthshaking development to warrant a $1,000,000 enhancement fee. An incidental benefit is not a sufficient basis to grant an administrative priority. Moreover, Ms. Cutler contends that Dynegy Power's request should be denied because it has failed to substantiate its fee request. In the absence of detailed time frame records, it is impossible to determine whether the efforts of Dynegy Power's counsel amount to a substantial contribution. The integrity of Section 503(b) can only be maintained by strictly limiting compensation to extraordinary creditor actions, which lead directly to significant and tangible benefits to the creditors, debtors, or the estate. While Section 503 was enacted to encourage meaningful creditor participation, it should not become a vehicle for reimbursing every creditor who elects to hire an attorney, Ms. Cutler says. (B) PG&E "There is simply no basis in law or logic for awarding Dynegy an 'enhancement' or 'bonus' of $1 million (or any amount) where Dynegy has not disclosed to or placed before the Court and interested parties the expenses it incurred, including its counsel fees and costs, in the activities it claims made a 'substantial contribution' to the case," Janet A. Nexon, Esq., at Howard Rice Nemerovski Canady Falk & Rabkin, in San Francisco, California, asserts. Ms. Nexon explains that a bonus or enhancement cannot be considered or awarded in the abstract, but rather must be based on an analysis that begins with the Court's understanding of the fees and costs actually expended by the applicant on the activities that are claimed to constitute a "substantial contribution" in the case. PG&E also disputes the assertion that Dynegy Power's efforts in the Chapter 11 case meets the "substantial contribution" standard of Section 503(b)(3)(D). Since Dynegy Power is a holder of a Class 6 Claim in PG&E's Chapter 11 case, PG&E believes that many of Dynegy Power's efforts and activities were undertaken for its own benefit and were focused on its narrow pecuniary interests as a Class 6 Creditor. The remainder of Dynegy Power's activities and efforts were undertaken as a member of the Creditors Committee and do not come within the narrow band of "special contributions" as a Creditors Committee member to justify unique compensation. PG&E respects and does not question Dynegy Power's right to have appeared and participated in the Chapter 11 case as it deemed appropriate to look after its interests as a Class 6 Claimant, even where that entailed pleadings and appearances that were redundant of those made separately by the Creditors Committee and other Class 6 creditors. PG&E also respects and does not question Dynegy Power's right to have chosen to serve on the Creditors Committee and undertake fiduciary responsibilities in connection with it. PG&E contends that Dynegy Power, like the vast majority of creditors and other parties-in-interest that appeared in the PG&E case, must bear its own fees and expenses in connection with its decisions to appear and participate in the case, inasmuch as there is no sound basis for awarding the special enhancement compensation it seeks. Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. Pacific Gas and Electric emerged from chapter 11 protection on April 12, 2004, paying all creditors 100 cents-on- the-dollar plus post-petition interest. (Pacific Gas Bankruptcy News, Issue No. 84; Bankruptcy Creditors' Service, Inc., 215/945-7000) PACIFIC GAS: Declares Preferred Stock Dividends ----------------------------------------------- Pacific Gas and Electric Company declared dividends on all outstanding series of the company's preferred stock for the three months ending October 31, 2004. The dividends will be payable on Nov. 15, 2004, to shareholders of record on Oct. 29, 2004. Pacific Gas and Electric Company will pay dividends on its 11 series of preferred stock. The amount to be paid per series per share will be: Preferred Stock, Quarterly Dividend $25 Par Value to be Paid per Share Redeemable --------------- -------------------- 7.04% $0.4400000 6.57% $0.4106250 6.30% $0.3937500 5.00% $0.3125000 5.00% Series A $0.3125000 4.80% $0.3000000 4.50% $0.2812500 4.36% $0.2725000 Non-Redeemable 6.00% $0.3750000 5.50% $0.3437500 5.00% $0.3125000 Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. Pacific Gas and Electric emerged from chapter 11 protection on April 12, 2004, paying all creditors 100 cents-on-the-dollar plus post-petition interest. PARMALAT: Committee Has Until Nov. 15 to Dispute Citibank's Claim ----------------------------------------------------------------- Citibank, N.A., London Branch, and Citibank, N.A., agree to extend until November 15, 2004, the Official Committee of Unsecured Creditors' deadline to: (i) file an adversary proceeding or contested matter challenging the amount, validity, enforceability, perfection or priority of Citibank London's rights under and in connection with the Parmalat Receivables Purchase Agreement dated November 2, 2000; or (ii) otherwise assert any claims or causes of action or other rights and defenses against Citibank London. 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. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) PERKINELMER INC: Moody's Affirms Low-B Ratings ---------------------------------------------- Moody's Investors Service affirmed PerkinElmer, Inc.'s debt ratings, adjusted the issuer rating to Ba3 from Ba2, and changed the rating outlook to positive from stable. The affirmation of existing debt ratings and change to a positive outlook reflects Moody's view that PerkinElmer has made solid progress expanding margins and strengthening free cash flow generation, which has enabled the company to reduce debt and improve overall credit metrics. The outlook also incorporates the expectation that the company will benefit from mid-single digit organic growth as its end markets continue to gain footing from the capital spending rebound. Organic growth, combined with new product introductions and ongoing benefits from cost-cutting initiatives, should result in a stronger financial performance for the remainder of 2004 and 2005. Moody's adds that sustained improvements in credit metrics could warrant a ratings upgrade in the intermediate term. More specifically, continued margin expansion, a return on assets in the high-single digit range and free cash flow (cash from operations less capital expenditures and dividends but excluding the impact from the accounts receivable securitization program) generation in excess of $120 million would result in credit metrics more indicative of a higher rating. PerkinElmer, with operations divided into Life & Analytical Sciences, Optoelectronics and Fluid Sciences, is experiencing positive trends in all three segments. Key drivers for top line growth include: (i) a rebound in large pharmaceutical companies' capital spending, (ii) global expansion of prenatal/genetic screening, and (iii) growing importance and applications for digital imaging, namely digital photography and camera phones. In addition, PerkinElmer benefits from a high quality, diverse customer base that generates a recurring revenue stream approaching 50% of total revenues. Accordingly, PerkinElmer's revenues have been relatively stable over the past few years despite the sluggish end markets in 2001 and 2002. Based on published financial results for the trailing twelve months ended June 27, 2004, organic revenue growth and expanding margins (EBIT margin of 9.3%) led to free cash flow of $132.5 million excluding the impact of the accounts receivable securitization program. Debt-to-EBITDA improved to 2.13x compared to 2.65x at the end of 2003. Return on assets strengthened to 5.8% from 4.7% and free cash flow-to-adjusted debt excluding the underfunded pension position rose to 17.4% from 11.7%. Balance sheet debt levels were reduced to $489 million with cash on hand rising to almost $197 million. With attractive growth opportunities emerging in all three operating segments, Moody's anticipates further improvement in credit metrics for the remainder of 2004 and 2005. The Ba2 issuer rating was adjusted to Ba3 to reflect notching down from the senior implied rating to clarify that the issuer rating is predicated on PKI issuing debt without subsidiary guarantees. Ratings affirmed with a positive outlook include: -- PerkinElmer, Inc. * Ba1 for the senior secured revolving credit facility and secured term loan; * Ba2 for the senior implied rating; * Ba2 for the senior unsecured notes; * Ba3 for the senior subordinated notes; and * (P)Ba2/(P)Ba3/(P)B1 for securities to be issued pursuant to a 415 shelf registration. Rating lowered with a positive outlook: -- PerkinElmer, Inc. * Issuer rating to Ba3 from Ba2. PerkinElmer, Inc. headquartered in Wellesley, Massachusettes, is a $1.6 billion diversified high-technology company operating in three business segments -- Optoelectronics, Life and Analytical Sciences, and Fluid Sciences. PILLOWTEX: Selling Kannapolis Facility to Manchester for $4.5 Mil. ------------------------------------------------------------------ Pillowtex Corporation entered into a letter of intent with Manchester Real Estate & Construction, LLC for the acquisition of Pillowtex's Plant 1 complex and waste water treatment facility located in Kannapolis, North Carolina. The proposal includes a purchase price of $3.0 million in cash plus a convertible promissory note in the principal amount of $1.5 million. According to the terms of the letter of intent, Pillowtex will sell the Kannapolis facility to a limited liability company formed by Manchester. The promissory note received by Pillowtex will be converted for no cost into a one-third interest in the newly formed joint venture limited liability company. The letter of intent also requires Pillowtex to use its reasonable best efforts to file a plan of reorganization that provides for the issuance of all shares of common stock of Pillowtex, as reorganized, to Pillowtex's unsecured creditors, subject to certain adjustments. John Sterling, vice president and general counsel of Pillowtex, said, "The agreement reached with Manchester is the culmination of many months of marketing efforts for the sale of the Kannapolis facility, during which Pillowtex worked very closely with representatives of its unsecured creditors' committee. We believe that the agreement with Manchester represents the best value to the Pillowtex estate and its creditors." Chip Stein, vice president of Stein Fibers, Ltd. and co- chairperson of the unsecured creditors committee, added that "the Manchester agreement is particularly attractive to the creditors' committee in that Pillowtex's ownership interest in the joint venture going forward allows for Pillowtex and its creditors, many of whom reside and work in the Kannapolis area, to share in the potential upside of any redevelopment project at the site." Pillowtex has filed a motion with the Bankruptcy Court to approve certain bid protections in the letter of intent and to establish bidding procedures for the property. Assuming the Court approves the motion, which is scheduled to be heard on October 19, 2004, the property will go to auction and other qualified interested parties will have the chance to outbid Manchester for the property. Pillowtex expects the auction to be held on or about December 10, 2004. In the meantime, Pillowtex will work with Manchester to finalize the definitive documents for the sale and related transactions. Parties interested in obtaining additional information on the Kannapolis property and participating in the upcoming auction should contact Pillowtex's broker: Scott Peterman, Hilco Real Estate Telephone: 847-504-2472 Email: speterman@hilcorealestate.com A copy of the motion filed by Pillowtex with the Bankruptcy Court, which includes a complete copy of the letter of intent, can be obtained on Hilco's Web site -- http://www.hilcorealestate.com/ Headquartered in Dallas, Texas, Pillowtex Corporation -- http://www.pillowtex.com/-- sold top-of-the-bed products to virtually every major retailer in the U.S. and Canada. The Company filed for Chapter 11 protection on November 14, 2000 (Bankr. Del. Case No. 00-4211), emerged from bankruptcy under a chapter 11 plan, and filed a second time on July 30, 2003 (Bankr. Del. Case No. 03-12339). The second chapter 11 filing triggered sales of substantially all of the Company's assets. David G. Heiman, Esq., at Jones Day, and William H. Sudell, Jr., Esq., at Morris Nichols Arsht & Tunnel, represent the Debtors. On July 30, 2003, the Company listed $548,003,000 in assets and $475,859,000 in debts. POTLATCH CORP: Fitch Affirms Double-B Senior Debt Ratings --------------------------------------------------------- Fitch Ratings removed Potlatch Corporation from Rating Watch Evolving and affirmed the company's senior unsecured debt ratings at 'BB+' and the senior subordinated ratings at 'BB'. The Rating Outlook is revised to Stable. Approximately $600 million in outstanding debt securities are affected. Potlatch's ratings reflect the company's competitive position as a mid-sized integrated producer of wood and paper products. Potlatch sold its oriented strand board -- OSB -- business to Ainsworth Lumber for $458 million on September 22 and is using a portion of the proceeds to tender for the company's 10% senior subordinated notes ($250 million) due 2011. Another $58 million will be contributed to the company's pension plan and another $150 million or so is earmarked for equity holders if the tender is successful. This will leave Potlatch with near $358 million in debt and Fitch estimates better than $200 million in cash at year-end. For the current year, Fitch estimates that EBITDA/interest coverage could approach 3.5 times (x). Without the OSB business, Potlatch's main earnings drivers will be Resources (the company's timberland operations) and the remainder of Wood Products (principally five sawmills, a plywood plant, and a particleboard plant). Operating profits from the latter are expected to slightly more than compensate for unallocated corporate expenses at recent lumber prices. Paperboard and consumer tissue have not been significant earnings contributors, and there is a potential for annual free cash flow to fall to half its level before the sale. Potlatch may not yet be finished focusing its business profile, and further asset sales would eliminate net debt altogether if cash is not distributed to shareholders. Longer term, the company is studying converting to a real estate investment trust, which could further change the company's capital structure, as well as financial disciplines. Fitch believes that the company is heading in a better direction but, with so many potentially moving parts, finds it difficult to give credit to a better financial profile that may be intermediate. Potlatch is a mid-sized, integrated forester and manufacturer of wood- and pulp-based products. The company owns and operates about 1.5 million acres of timberland in Idaho, Arkansas, and Minnesota. Its timberlands provide the majority of raw materials for the company's wood products. Potlatch also makes pulp, paperboard, and tissue and is a leading producer of retail private-label tissue products. PRIME HOSPITALITY: Acquisition Cues S&P to Withdraw Low-B Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'BB-' corporate credit and 'B' senior subordinated ratings on hotel operator Prime Hospitality Corp. These ratings had been placed on CreditWatch with negative implications on Aug. 19, 2004. The rating withdrawal reflects the acquisition of Prime by the Blackstone Group and Prime's purchase of more than 96% of its outstanding $178 million 8.375% senior subordinated notes due 2012. Stockholders of Prime approved the acquisition of the company by Blackstone on October 6. Based in Fairfield, New Jersey, Prime operates more than 250 hotels under the brands of AmeriSuites, Wellesley Inn & Suites, and Prime Hotels and Resorts. RESOLUTION PERFORMANCE: S&P Shaves Corporate Credit Rating to B- ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Resolution Performance Products LLC to 'B-' from 'B', citing continued weak earnings and a subpar financial profile. At the same time, Standard & Poor's lowered its senior subordinated debt ratings to 'CCC' from 'CCC+' and its senior secured bank loan rating to 'B+' from 'BB-'. Standard & Poor's also lowered the ratings on the company's senior secured notes to 'B' from 'B+'. The outlook is negative. Houston, Texas-based Resolution is a leading producer of epoxy resins and has more than $800 million of debt outstanding, including payment-in-kind notes at a holding company level. "The downgrade reflects weakness in the company's operating results and deterioration in credit protection measures, as well as concerns that high raw-material costs will further delay the expected improvement in the company's financial profile," said Standard & Poor's credit analyst Peter Kelly. Profitability and cash flow have been negatively affected by the high cost of commodity raw materials such as phenol and acetone that have so far outpaced the company's efforts to increase sales prices despite a rebound in demand. Consequently, Resolution's financial profile will likely remain subpar longer than had been expected. Standard & Poor's ratings on privately held Resolution continue to reflect high financial risk and difficult conditions in key product areas, which more than offset the company's decent business position as a leading producer of epoxy resins. SECURITY INDEMNITY: Notice to All Policyholders & Claimants ----------------------------------------------------------- Notice to All Policyholders, Claimants and Other Persons Having an Interest in Security Indemnity Insurance Company In the matter of the Rehabilitation of Security Indemnity Insurance Company Superior Court of New Jersey Chancery Division, Mercer County NOTICE is given that on June 30, 2004, the Superior Court of New Jersey, Chancery Division-Mercer County (the "Court"), entered an Order ("the Liquidation Order") in the matter of the Rehabilitation of SECURITY INDEMNITY INSURANCE COMPANY, Docket No. MER-C-62-03, pursuant to which Security Indemnity was placed in liquidation and the Commissioner of Banking and Insurance ("Commissioner") was named as Liquidator. The Court found, pursuant to N.J.S.A. 17:30C-1 et seq., the Company to be insolvent and in a hazardous financial condition. The Liquidation Order directs the Commissioner to perform all acts necessary and appropriate for the accomplishment of the Company's liquidation and sets forth certain powers and duties of the Liquidator and outlines procedures to be used in determining what, if any, claims exist against the Company. There shall be no further claim payments by Security Indemnity and all persons and entities are permanently enjoined from pursuing litigation against the Company and from interfering with the Commissioner's efforts to liquidation Security Indemnity. All claims against the Company must be asserted no later than one year from the date of the Order of Liquidation, in the filing form established by the Commissioner, or such claims will be forever barred. Claimants must file a Proof of Claim form, with proper proof of loss, with Security Indemnity, for any actual or potential claim(s) which they may have with or against the Company, including both known claims and circumstances within their knowledge which can reasonably be expected to give rise to claims. Claimants who do not know or have the reason to know of the existence of actual or potential claims should be nonetheless submit a Proof of Claim form to preserve their right to assert claims against the Company in the future. Proof of Claim forms will be mailed during the latter part of September 2004, to all known claimants as indicated by the records of Security Indemnity. Requests for a Proof of Claim form must be submitted, in writing, to: Security Indemnity Insurance Company in Liquidation P.O. Box 554 Cedar Knolls, New Jersey 07927 A copy of the Order of Liquidation is available for public inspection during reasonable business hours at: New Jersey Department of Banking and Insurance Office of Solvency Regulation 20 West State Street, 8th floor Trenton, N.J. 08625 Mercer County Court House Chancery Division-General Equity 210 South Broad Street Trenton, N.J. 08650 * * * Security Indemnity wrote primarily commercial and private passenger auto business at the time of the rehabilitation order. In February 2003, under an order of consensual administrative supervision, Security Indemnity was prevented from writing new business, with the expectation that its financial condition would improve. In June 2003, the Department ordered the company to stop renewing existing customers. Since then, the Deputy Rehabilitator has been attempting to fix what was financially wrong with the company through direct investment or the sale of company assets. These efforts were not successful, prompting the Department's action in January 2004 to preserve the assets of the estate for the benefit of policyholders. The Department reported in January 2004 that insurer had obligations under 6,532 policies. In addition to New Jersey, Security Indemnity wrote business in New York, Pennsylvania, Connecticut, Florida, Maryland, Minnesota and Missouri. SHOWCASE AUTO: Hires Felderstein Fitzgerald as Bankruptcy Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of California gave Showcase Auto Plaza permission to employ Felderstein Fitzgerald Willoughby & Pascuzzi LLP as its bankruptcy counsel. Felderstein Fitzgerald will: a) advise and represent the Debtor with respect to all matters and proceedings in its chapter 11 case; b) assist the Debtor in obtaining the use of cash collateral and other bankruptcy issues which may arise in the operation of the Debtor's business; and c) assist the Debtor with the preparation and confirmation of a plan of reorganization. Donald W. Fitzgerald, Esq., a Partner at Felderstein Fitzgerald, is the lead attorney in Showcase Auto's restructuring. Mr. Fitzgerald will bill the Debtor $350 per hour for his services. Mr. Fitzgerald reports Felderstein Fitzgerald's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Steven H. Felderstein Partner $425 Thomas A. Willoughby Partner 325 Paul J. Pascuzzi Partner 295 Christa K. McKimmy Associate 225 Karen L. Widder Legal Assistant 150 Headquartered in Modesto, California, Showcase Auto Plaza -- http://www.showcaseautoplaza.com/-- sells automobiles and provides auto service and repair. The Company filed for chapter 11 protection on July 15, 2004 (Bankr. E.D. Calif. Case No. 04-92709). Donald W. Fitzgerald, Esq., at Felderstein Fitzgerald Willoughby & Pascuzzi LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of more than $10 million. SOLUTIA INC: Wants Until March 11, 2005 to Remove Civil Actions --------------------------------------------------------------- Solutia, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to further extend the deadline to remove actions through and including March 11, 2005. The Debtors are parties to numerous Civil Actions and are represented by many different law firms in each of them. During the first nine months of their Chapter 11 cases, the Debtors and their professional restructuring advisors have been focused primarily on stabilizing and maintaining day-to-day operations, developing and implementing an overall business plan to serve as the basis for a reorganization plan, analyzing complex contracts and relationships in connection with the implementation of the business plan, preparing and amending the Debtors' schedules of assets and liabilities and statements of financial affairs, and addressing certain litigation matters that are critical to the reorganization. The Debtors believe that the extension will afford them additional time to make fully informed decisions concerning the removal of the Civil Actions and will assure that their valuable rights pursuant to Section 1452 of the Bankruptcy Code can be exercised in the appropriate manner. The Debtors' decision concerning whether to seek removal of any particular Civil Action will depend on a number of factors, including: (a) the importance of the proceeding to the expeditious resolution of the Debtors' Chapter 11 cases; (b) the time it would take to complete the proceeding in its current venue; (c) the presence of federal questions in the proceeding that increase the likelihood that one or more aspects thereof will be heard by a federal court; (d) the relationship between the proceeding and matters to be considered in connection with the plan, the claims allowance process and the assumption or rejection of executory contracts; and (e) the progress made to date in the proceeding. To make the appropriate determination, the Debtors must analyze each Civil Action in light of these factors. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA: Increases Saflex(R) PVB Price by 29c as Capacity Tightens ------------------------------------------------------------------ Solutia, Inc., (OTC Bulletin Board: SOLUQ), confirmed that the continued growth in demand for polyvinyl butyral (PVB) interlayer accelerated the need to invest in new capacity in order to meet its customers' future needs and assure supply reliability. To support those investments, the company is in the process of implementing a 29 cent per square meter price increase for its full range of Saflex(R) brand PVB products. At the same time as the need for investment in new capacity, the prices of key raw materials (PVOH, VAM, etc.) used in the production of PVB products have continued to rise while simultaneously supplies of these same materials have become increasingly tight. Saflex PVB is used in the production of high quality laminated glazing for automotive, architectural and specialty applications. "Solutia remains strongly committed to the announced price increase as a means of maintaining the most reliable service and certainty of supply for our customers. Customers' demand for PVB products has dramatically increased year on year. The announced price increase allows Solutia to reinvest in capacity to meet these new volume challenges," said Mitch Pulwer, General Manager, Solutia Laminated Glazing Interlayers. Mr. Pulwer further commented that: "Raw material costs have dramatically increased. Adding new capacity and keeping up with raw material price increases will continue to be challenges into the foreseeable future. Solutia is very encouraged by the positive response that we have had so far in completing new contracts reflecting the announced increase in price. This illustrates that our customers are sensitive to market and industry needs." Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. STRATUS TECH: S&P Places B Corporate Credit Rating on CreditWatch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' corporate credit rating on Maynard, Massachusetts-based Stratus Technologies Inc. on CreditWatch with negative implications, following the company's announcement that it is postponing the release of financial results for its second quarter ended August 29, 2004. "The release of earnings has been postponed while the company completes a review of revenue recognition practices for certain customer transactions," said Standard & Poor's credit analyst Martha Toll-Reed. Stratus previously announced that the revenue recognition review could lead to a financial restatement for fiscal 2004 and the first quarter of fiscal 2005. Stratus also indicated that the accounting issues identified relate to the timing of the recording of revenue, not whether the transactions can be recorded as revenue, and are not expected to result in changes to historical cash flow. An extended delay could violate the financial reporting covenant in Stratus' bond indenture. Total debt outstanding as of May 31, 2004, was $182 million. Privately owned Stratus is a provider of "fault tolerant" computers and related services for mission-critical applications. Based on initially reported results (currently subject to restatement), over the past 18 months Stratus stabilized revenues and profitability through introducing new products and reducing costs. However, given relatively modest EBITDA levels, a revenue restatement has the potential to impact historical profitability levels. Stratus had total cash balances of $27.8 million as of May 31, 2004. Standard & Poor's will monitor the timing and scope of the revenue restatement. If statements are released within the next month or two, and if the revenue restatement is modest in scale and limited in scope, the outlook could be revised to stable. However, a prolonged release delay or more extensive restatement could lead to a downgrade. TEXAS STATE: S&P's Rating on $5.4M Mortgage Bonds Tumbles to D -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Texas State Affordable Housing Corp.'s $5.4 million multifamily mortgage revenue bonds (NHT/GTEX Apartment Portfolio) series 2001B to 'D' from 'CC'. Standard & Poor's also lowered its rating on the corporation's $3.2 million multifamily mortgage revenue bonds series 2001C to 'D' from 'C'. The outlook is negative. The downgrades reflect an event of default due to full debt service not being paid on the series 2001B and 2001C bonds; the full depletion of the debt service reserve funds -- DSRF -- for both series; and debt service coverage of 0.96x maximum annual debt service coverage on the senior bonds, 0.84x on the subordinate bonds, and 0.79x on the junior subordinate bonds, based on unaudited June 30, 2004, year-to-date financial statements. Series 2001B and 2001C bonds are not credit enhanced. The trustee informed Standard & Poor's that an event of default exists for series 2001B and 2001C because full principal and interest for the Oct. 1, 2004, debt service payment date was not paid. For series 2001B, principal and interest due Oct. 1, 2004, was approximately $302,000. A payment of approximately $139,000 was made from the bond fund and monies in the DSRF, fully depleting it. Approximately $112,000 was not paid. For series 2001C, principal and interest due was approximately $166,000. A payment of $11,000 was made from the DSRF, and approximately $155,000 was not paid. The DSRF for this series has also been fully depleted. The NHT/GTEX portfolio contains a total of 1,764 units in seven cross-collateralized properties. Four properties are in the Houston metropolitan statistical area representing a total of 1,232 units, which represents approximately 70% of the total units in the pool, and three are in the Dallas metropolitan statistical area representing 532 units. Lower occupancy rates at the GTEX properties have been a contributing factor to its poor performance. The physical vacancy rate for the portfolio based on year-to-date June 30, 2004, operating statements was approximately 9%, but economic vacancy was approximately 20%, due to high levels of concessions, which are commonplace in these markets. This economic vacancy rate has remained relatively constant since 2003. THERMACLIME INC: S&P Places B Rating on $50 Million Secured Loan ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' bank loan rating and '2' recovery rating to chemicals and climate control products manufacturer ThermaClime Inc.'s $50 million secured term loan due 2009. At the same time, Standard & Poor's affirmed its corporate credit rating on the Oklahoma City, Oklahoma-based company. The 'B-' rating is the same as the corporate credit rating; this and the '2' recovery rating indicate that bank lenders can expect substantial (80% to 100%) recovery of principal in the event of a default. "The ratings on ThermaClime reflect its very aggressive financial profile characterized by high debt leverage, an aggressive financial policy, thin free cash flow, and limited liquidity," said Standard & Poor's credit analyst Paul Vastola. "The 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. THORNBURG MORTGAGE: Moody's Puts Low-B Ratings on Classes B-4 & 5 ----------------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior certificates issued by Thornburg Mortgage Security Trust 2004-3. Moody's also assigned ratings of Aa2 through B2 to the subordinate certificates of the same transaction. Tamara Zaliznyak, a Moody's analyst, said the ratings are based on the credit support provided through subordination, the integrity of the cash flows, and the legal structure of the transaction. The securitization is backed by hybrid and adjustable-rate jumbo mortgage loans, which were mostly originated or acquired by Thornburg Mortgage Home Loans, Inc., in accordance with their underwriting guidelines. The credit quality of the loan pool is in line with the average ARM loan pool backing recent jumbo securitizations. The pool has weighted average FICO score of 739 and weighted average LTV of 69%. The pool has average loan balance of approximately $483,237. Thornburg Mortgage Home Loans and First Republic Bank will service approximately 94% of the loans and Wells Fargo Bank, N.A. will act as master servicer. Thornburg Mortgage Securities Trust 2004-3 Mortgage Loan Pass-Through Certificates, Series 2004-3 Class Amount Ratings ----- ------ ------- A $1,216,370,000 Aaa A-X Interest Only Aaa R 100 Aaa B1 16,327,000 Aa2 B2 9,419,000 A2 B3 4,395,000 Baa2 B4 3,767,000 Ba2 B5 1,883,000 B2 UAL CORP: Names Lori Fox & Carol Fernandez Gov't. Affairs Managers ------------------------------------------------------------------ UAL Corporation (OTC Bulletin Board: UALAQ), parent of United Airlines, named Lori Fox and Carol Fernandez to manage its government affairs for its Mountain Region & Eastern Region, respectively. Ms. Fox is responsible for state and local government relations for United in Colorado, as well as United's locations in neighboring mountain states while Ms. Fernandez is responsible for state and local government relations for United in Virginia, as well as most East Coast United locations. Ms. Fox most recently served as senior associate at GBSM in Denver, where she provided high-level strategic counsel and planning to Fortune 500 companies, government entities and non- profit organizations. In addition, Ms. Fox has worked in Washington, D.C., for the Vice President of the United States, the Secretary of Transportation and the Secretary of Energy. In 2003, she was elected to the Regional Transportation District Board of Directors and served on the City of Denver Mayor's Aviation Transition Committee. Ms. Fox is based in Denver and reports to Margaret Houlihan, director of state and local governmental affairs, who is based in Chicago, Illinois. "Lori brings to the United team a wealth of knowledge and experience in government relations, public affairs and public relations, as well as a vast network of regional contacts," said Ms. Houlihan. "She has achieved a dynamic and well-rounded career that also includes community relations and consulting. Lori has a proven record of building relationships and collaborating on high- level projects. We are delighted to welcome her to United." Ms. Fernandez, a 26-year veteran at United, most recently served as United's general manager of customer service at Ronald Reagan National Airport and as project manager at Washington Dulles International Airport in the areas of customer service, facilities management and airport security processes. She has also served as a United manager at Baltimore Washington International Airport and as manager in reservations, both in the U.S. and internationally. Ms. Fernandez is based in Washington, D.C., and reports to Margaret Houlihan, director of state and local governmental affairs, who is based in Chicago, Illinois. "Carol's vast experience with United and its East Coast operations gives her the necessary background to inform government officials on the company's policies, positions and goals in this important market," said Ms. Houlihan. "Over the years, she has developed strong relationships with aviation agencies and local officials, enabling her to make a smooth transition into her new role. As an influential member of the airport community, Carol is well-suited to join the United governmental affairs team." Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. UAL CORPORATION: Objects to James Burley's $50 Million Claim ------------------------------------------------------------ UAL Corporation and its debtor-affiliates object to Claim No. 37275, for $50,000,000, which was filed by James R. Burley of Redondo Beach, California. For 17 years, Mr. Burley worked for the Debtors as a mechanic at Los Angeles International Airport. Mr. Burley alleges that during his employment, he conceived of a way for a smaller aircraft to share a larger taxi lane originally built for larger aircraft. On July 14, 2000, Mr. Burley, assisted by the Debtors, filed Patent Application No. 09/615,292, entitled "Convertible Dual Taxilane," with the United States Patent and Trademark Office. The USPTO rejected the application. Mr. Burley then filed Patent Application No. 10/153,465 with the same title. The USPTO has not ruled on this Application yet. In 2000, Mr. Burley asked the Debtors for monetary compensation for use of his invention, but the Debtors refused. On February 17, 2004, Mr. Burley assigned the rights of the Patent Application to the Debtors. Subsequently, Mr. Burley asserted that the Debtors engaged in duplicitous behavior and demanded a legal resolution. According to Mr. Burley, the Debtors are using his invention as disclosed in the Patent Application without providing monetary compensation. The Burley Claim is based on three causes of action: (1) patent infringement; (2) breach of contract; and (3) fraud. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, says that Mr. Burley's causes of action are without merit and Claim No. 37275 should be dismissed. Mr. Burley is not entitled to any compensation because the USPTO has not granted the Patent Application, so there cannot be infringement. Also, the Debtors' use of the invention is not unauthorized because Mr. Burley signed away the rights in February 2004. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORPORATION: Court Approves Guilford Settlement --------------------------------------------------- The United States Bankruptcy Court for the Northern District of Illinois approved the settlement entered into by UAL Corporation and its debtor-affiliates, and Guilford Transportation Industries. As reported in the Troubled Company Reporter on Oct. 6, 2004, the Debtors frequently buy and sell aircraft. In 2002, the Debtors, Guilford Transportation Industries, Inc., and Griffin Title & Escrow, Inc., entered into an Aircraft and Simulators Purchase and Sale Agreement, under which the Debtors would sell Guilford 24 used Boeing 727-222A Aircraft with related auxiliary power units, used engines and other parts, plus three used 727 flight simulators. In 2002, Guilford took delivery and paid for the first 22 Aircraft. However, Guilford refused delivery of, and did not pay for, the Remaining two Aircraft. In response, on December 11, 2003, the Debtors filed Adversary Proceeding No. 03-A-04753, captioned United Air Lines, Inc. v. Guilford Transportation Industries, Inc., et al. The Debtors alleged that Guilford breached the Agreement by refusing to take delivery and pay for the Remaining Aircraft. The Debtors sought $1,300,000 in damages based on the contract price for the Remaining Aircraft. Guilford denied the allegations and filed a Counterclaim. Guilford argued that the Debtors failed to provide necessary documents to secure Federal Aviation Administration certification for the Aircraft. Due to this oversight, the Aircraft remain grounded. Also, Guilford alleged that the Debtors' employees tampered with the simulators prior to delivery. Guilford asked the Debtors to pay more than $200,000 in compensation. Since the beginning of this dispute, the parties have been in negotiations to settle out of court. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, told the Court that both sides have reached a settlement that will allow the Debtors to recover a dollar amount similar to what the Debtors would have claimed as damages at trial. The Settlement removes all trial risk, reducing costs that would be incurred by continued prosecution of the Adversary Complaint. Under the Settlement, Guilford will also pay the Debtors $300,000 in cash. Guilford will release $310,000 to the Debtors, which is in an escrow account that previously held the $3,240,000 initial down payment for the transaction. The Debtors will provide Guilford with assistance in securing FAA certification for the Aircraft, including providing personnel to meet with regulatory officials or other entities. Guilford relinquishes and waives any and all rights to the two Remaining Aircraft. The Debtors will voluntarily dismiss the Adversary Proceeding and Guilford will dismiss its Counterclaim. Guilford will pay the Debtors $300,000 and will direct $310,000 held in an escrow account, via wire transfer, to the Debtors' account at: Bank One 1 Bank One Plaza Chicago, IL 60670 ABA Number 071000013 Account Number 51-67795 United Airlines Special Account Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945- 7000) UNITED DEFENSE: S&P Lifts Corporate Credit Rating to BB+ from BB ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings, including the corporate credit rating to 'BB+' from 'BB', on United Defense Industries Inc. The outlook is stable. The defense contractor has around $550 million in debt. "The upgrade reflects improved, but still somewhat limited, program diversity, participation on key defense systems now in development, and a satisfactory financial profile," said Standard & Poor's credit analyst Christopher DeNicolo. The ratings on Arlington, Virginia-based United Defense reflect: (a) fairly narrow product lines, (b) vulnerability to program cancellation or stretch-out, (c) the potential for share repurchases and acquisitions, (d) satisfactory financial ratios and strong niche positions in tracked, (e) armored combat vehicles, (f) naval weapon systems, and (g) ship maintenance and modification. Funded backlog was a healthy $2.2 billion as of June 30, 2004, approximately one year's revenues. The firm serves as prime contractor on a few well-supported military programs with incumbency spanning decades. United Defense had historically been primarily a supplier to the U.S. Army but diversification has been improved by the debt-financed acquisition of United States Marine Repair in 2002, a provider of ship maintenance and modernization services for non-nuclear ships for the U.S. Navy. The acquisition resulted in a better balance of revenues from Army and Navy programs and increased the proportion of the U.S. defense budget that United Defense is able to bid for. Revenues and profits are likely to grow only modestly in the intermediate term. The company's already satisfactory financial ratios are expected to be maintained despite possible share repurchases and acquisitions. URS CORPORATION: Wins $286 Million 10-Year U.S. Navy Contract ------------------------------------------------------------- URS Corporation's (NYSE:URS) EG&G Division has been awarded an indefinite delivery/ indefinite quantity contract by the U.S. Navy to provide engineering, technical and logistics services at the Navy's Fleet Technical Support Center, Atlantic in Hampton Roads, Virginia. Under the terms of the contract, as the Navy issues specific task orders, EG&G will provide mechanical and electrical engineering support; logistics, industrial and installation services; assessment and maintenance of shipboard systems and equipment; and training services. The 10-year contract has a maximum value to URS of $286 million. Commenting on the contract win, Martin M. Koffel, Chairman and Chief Executive Officer of URS, said: "This is another significant win for our EG&G Division, which underscores our leading position in providing sophisticated engineering, technical and logistics services to the U.S. military. We look forward to working with the Navy on this important assignment." About the Company URS Corporation -- http://www.urscorp.com/-- offers a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for surface transportation, air transportation, rail transportation, industrial process, facilities and logistics support, water/wastewater treatment, hazardous waste management and military platforms support. Headquartered in San Francisco, the Company operates in more than 20 countries with approximately 27,000 employees providing engineering and technical services to federal, state and local governmental agencies as well as private clients in the chemical, manufacturing, pharmaceutical, forest products, mining, oil and gas, and utilities industries. * * * As reported in the Troubled Company Reporter on August 20, 2004, Moody's upgraded URS Corporation's ratings to reflect the company's reduced debt balances, improved credit metrics, and expectations that revenues and margins will support further improvement in the company's cash flows. The company's rating outlook has been changed from positive to stable. Moody's has upgraded these ratings: * $225 million senior secured revolving credit facility, due 2007, upgraded to Ba2 from Ba3; * $84 million senior secured term loan A, due 2007, upgraded to Ba2 from Ba3; * $270 million senior secured term loan B, due 2008, upgraded to Ba2 from Ba3; * $130 million 11.5% senior unsecured notes, due 2009, upgraded to Ba3 from B1; * $20 million 12.25% senior subordinated notes, due 2009, upgraded to B1 from B2; * Senior Implied, upgraded to Ba2 from Ba3; * Senior Unsecured Issuer, upgraded to Ba3 from B1; * Speculative Grade Liquidity Rating, upgraded to SGL-1 from SGL-2. The ratings upgrade: (1) reflects the company's improved balance sheet; (2) strong operating performance; and (3) the expectation that the company's services will continue to enjoy stable demand. In its third fiscal quarter, URS used the net proceeds of an equity offering, cash on hand and additional borrowings under its credit facility to redeem $70 million of its 11.5% senior notes and $180 million of its 12.25% senior subordinated notes. As a result of these redemptions, the company's overall debt balance decreased by over $180 million to about $594 million. This is a significant improvement over the $955 million debt balance at October 31, 2002. The company's ratings also benefit from: (1) a stable customer base; (2) recurring revenues; (3) a $3.9 billion backlog at April 30, 2004; and (4) expected increases in defense and homeland security spending. The ratings are constrained by the challenges the company faces in growing its state and local revenues due to state budget deficits and delays in funding of state and local infrastructure projects. Revenues from the company's private clients are also under pressure due to reduced levels of capital spending and cost- cutting measures by the company's private clients. In 2002, URS purchased EG&G for $500 million for a purchase multiple that equates to just under 10 times its fiscal 2003's EBITDA. This acquisition transformed URS as EG&G represents around 32% of total revenues. Going forward, Moody's does not expect the company to make large debt-financed acquisitions as URS has publicly stated that it wants to maintain a debt to capitalization ratio below 40%. A change in policy due to an acquisition or other transaction, however, would pressure the ratings. A decrease in the company's revenues, operating margins and free cash flow generation would also pressure the rating. US AIRWAYS: Has Until October 27 to File Schedules & Statements --------------------------------------------------------------- Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure, each Chapter 11 debtor is required, within 15 days of the Petition, to file with the bankruptcy court: (i) a list of the debtor's equity security holders, and (ii) schedules of the debtor's assets and liabilities, its current income and expenditures, its executory contracts and unexpired leases, and a statement of its financial affairs. Brian P. Leitch, Esq., at Arnold & Porter, tells Judge Mitchell that due to the size and complexity of the operations of US Airways, Inc., and its debtor-affiliates and the time that will be required to compile the information for the Lists, Schedules, and Statements, an extension is necessary and appropriate. The Debtors have tens of thousands of creditors and other parties-in- interest and the operations are currently stretched. There are myriad critical matters that the Debtors' limited staff of accounting and legal personnel must address in the initial days of these bankruptcy cases. Additionally, certain prepetition invoices have not been received or entered into the Debtors' financial systems. As a result, the Debtors have not gathered the necessary information to prepare and file their Lists, Schedules, and Statements. At the Debtors' request, the Court extends the deadline to file the Lists, Schedules and Statements until October 27, 2004, without prejudice to the Debtors' right to seek further extensions. 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. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Hires American Appraisal as Valuation Consultants ------------------------------------------------------------- US Airways, Inc., and its debtor-affiliates sought and obtained the Court's authority to employ American Appraisal Associates, Inc., as expert valuation consultants for certain assets of their estates. According to Bruce R. Lakefield, President and Chief Executive Officer of US Airways, American Appraisal Associates has a wealth of experience in providing consulting and valuation services to a wide cross-section of industries and institutions around the world. American Appraisal Associates is well qualified and able to represent the Debtors in a cost-effective, efficient and timely manner. American Appraisal Associates will prepare independent valuations of various categories of the Debtors' assets. American Appraisal Associates will also provide expert testimony in the bankruptcy proceedings. Pursuant to an Engagement Agreement dated August 10, 2004, American Appraisal Associates will provide its services in two phases. In Phase I, American Appraisal Associates will review a series of seven appraisal reports, dated Match 12, 2004, which were prepared for US Airways by BACK Aviation Solutions. This report reflected valuations as of December 31, 2003. American Appraisal Associates will prepare independent valuations of these assets as of August 30, 2004, on both a fair market value and distressed sale basis. In Phase II, American Appraisal Associates will compile a comprehensive summary appraisal report of the analysis and conclusions of Phase I. American Appraisal Associates will be paid $125,000 for Phase I and $30,000 for Phase II. American Appraisal Associates will apply to the Court for allowances of compensation and reimbursement of expenses for consulting services. The customary hourly rates charged by American Appraisal Associates' professionals anticipated to be assigned to the Debtors' cases are $400 per hour for Anthony J. Wells and $300 per hour for Linda Sweet. Mr. Lakefield relates that American Appraisal Associates received a $125,000 initial retainer. This amount represented the agreed upon fee for American Appraisal Associates' prepetition appraisal services. American Appraisal Associates' invoice for services performed before the Petition Date were credited against that retainer. American Appraisal Associates received a $5,000 additional retainer on September 11, 2004, to cover its services in preparing for and consulting with the Debtors' counsel on testimony at first day hearings. Related fees and expenses incurred will be credited against the retainer. American Appraisal Associates will request an additional retainer for any other services. According to American Appraisal Associates' books and records, during the 90-day period before the Petition Date, American Appraisal Associates received $130,000 from the Debtors for professional services performed and expenses. American Appraisal Associates will conduct an ongoing review to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new facts or circumstances are discovered, American Appraisal Associates will supplement its disclosure to the Court. American Appraisal Associates has informed the Debtors that it: (i) has no connection with the Debtors, its creditors or other parties in interest in these cases, (ii) does not hold any interest adverse to the Debtors' estates; and (iii) is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. 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. 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Gets Court Okay to Assume BofA Credit Card Agreement ---------------------------------------------------------------- US Airways, Inc., and its debtor-affiliates purchase prepaid value cards from Bank of America, N.A., pursuant to a Prepaid Card Purchase Agreement dated July 24, 2002. The Debtors distribute the Cards to their employees to purchase goods and services incidental to the Debtors' business. As part of the Agreement, the Debtors maintain an account at BofA designated for use in purchasing new Cards and adding value to existing Cards. The current balance in the account is $1,000,000. Either the Debtors or BofA may terminate the Card Agreement by providing 30 days' notice. If the Card Agreement is terminated, BofA will pay the Debtors 60% of the account balance within five business days, 30% within 30 days and the final 10% by 60 days of termination. Brian P. Leitch, Esq., at Arnold & Porter, relates that by streamlining purchases and controlling disbursements, the Card Agreement inures to the benefit of the Debtors' estates, creditors and other parties-in-interest. The Cards eliminate the need for numerous petty cash allotments and provide a control mechanism to ensure that purchases of incidental goods and services are appropriate, authorized and properly recorded. Judge Mitchell agrees with the merits and allows the Debtors to assume the Card Agreement with BofA. 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. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) USEC INC: S&P Shaves Corporate Credit Rating One Notch to BB- ------------------------------------------------------------- Standard & Poor's Rating Services lowered USEC Inc.'s corporate credit rating to 'BB-' from 'BB'. The outlook is negative. Standard & Poor's also lowered its senior secured bank loan rating on USEC to 'BB+' from 'BBB-' and its senior unsecured debt rating to 'B' from 'BB-'. "The rating action reflects concerns about the company's cash flow generating ability in light of its depleting long-term uranium inventory, which historically has supplemented the company's weak cash flow, rising power costs that will offset much of the higher average contract realizations, and the continued efforts by Louisiana Energy Services to build a low-cost enrichment facility in the U.S.," said Standard & Poor's credit analyst Dominick D'Ascoli. The ratings on USEC Inc. reflect its: (a) poor cost profile, (b) limited cash flow generating ability, (c) aggressive competitors, and (d) lack of operating diversity. These weaknesses are somewhat offset by its leading market position in the low uranium enrichment industry and stable industry demand. With a 30% market share, USEC's ratings benefit from its position as the world's largest supplier of low enriched uranium, which is used in the production of nuclear fuel for nuclear reactors to produce electricity. Nuclear reactors supply base load electricity, which is fairly stable, resulting in stable demand for nuclear fuel. Half of the low enriched uranium supplied by USEC is produced at one facility and half is obtained (from one supplier) through USEC's role as executive agent under an agreement between the U.S. and Russia, whereby USEC purchases enriched uranium recovered from dismantled Russian nuclear weapons for resale to USEC customers. With a high-cost facility, operating diversity at USEC is weak. In addition, some customer concentration risk exists with two customers accounting for around 24% of 2003 revenue. USG CORP: Wants Until March 31, 2005 to Remove State Court Actions ------------------------------------------------------------------ Paul N. Heath, Esq., at Richards, Layton, & Finger, P.A., in Wilmington, Delaware, relates USG Corporation and its debtor- affiliates need to retain flexibility to remove products liability lawsuits relating to asbestos to the federal court as their Chapter 11 cases progress. The Debtors require time to determine which, if any, of the Proceedings should be removed and, if appropriate, transferred to the District of Delaware. Accordingly, the Debtors ask the Court to extend the time for them to file notices with respect to any proceedings that are subject to removal under Section 1452 of 28 U.S.C., through and including March 31, 2005. The extension would apply to any actions brought against U.S. Gypsum Company or any of the Debtors, whether asbestos-related or not. The Debtors further ask Judge Fitzgerald that the requested extension be without prejudice to: -- any position the Debtors may take regarding whether Section 362 of the Bankruptcy Code applies to stay any Proceedings; -- the Debtors' right to seek further extensions of time to remove any and all Proceedings; and -- any position the Debtors may take regarding the effect of the filing of a proof of claim on any Proceedings or any matters relating to these cases. The Court will convene a hearing on November 15, 2004, to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the Debtors' removal 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. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) VLASIC: Campbell Present 5 More Witnesses in $250M Spin-Off Suit ---------------------------------------------------------------- Campbell Soup Company called five more witnesses to testify before the United States District Court for the District of Delaware in the $250 million lawsuit commenced by VFB, LLC, attacking the spin-off of Vlasic Foods from Campbell: A. Richard Emmett Mr. Emmett is currently the Director of Strategic Planning and Corporate Development at Campbell Soup. In 1997, he was the Company's Assistant Treasurer. As Assistant Treasurer, Mr. Emmett was responsible for interest rate exposure management and for helping Anthony DiSilvestro manage the capital structure of Campbell Soup. He was also responsible for foreign exchange exposure management, and relationships with the banks, with the credit rating agencies, and with the investment banks as well. According to Mr. Emmett, Campbell Soup's strongest commercial banking relationships include JPMorgan, Bank of America, Chase, Wachovia, Bank of Montreal and several others. In 1997, Mr. Emmett became interested in joining the spinoff company -- which because Vlasic -- as its Treasurer. "I thought it had very good prospects. There were clearly some issues, but they were strong brands. And the management team was first rate, in my opinion. . . ." Mr. Emmett relates that Vlasic was being set up with a strong financial structure and it had a good strategic plan. It wasn't until late February 1998 that Mr. Emmett learned he wasn't going to get the job. He was told that there were already a lot of Campbell people in Vlasic and that management preferred to look outside of Campbell for a Treasurer. Mr. Emmett notes that the people that joined the Vlasic organization were among the best and the brightest at Campbell Soup Company. Mr. Emmett compiled a management projection put together with the Specialty Foods management team to go with the information memorandum sent to six credit banks invited to form the core of the credit syndicate for Vlasic. "Five of the six banks pitched strongly to play the administrative agent role." JPMorgan was eventually chosen for that role. JPMorgan believed that the credit could get a BBB rating. The banks committed up to $925,000,000. Mr. Emmett notes that the facility was oversubscribed, "which is an indication of the broad level of interest and the success of the process." Mr. Emmett believes that the credit facility was a great deal to Vlasic -- it was a fair agreement, the pricing was excellent, the terms and conditions he negotiated were excellent for Vlasic, and the covenants were relatively light. "It had maximum flexibility and maximum efficiency, and it would allow Bill Lewis [Campbell Soup Company Chief Financial Officer] and his team to put their own capital structure in place in any way they wanted after the spin." "So I was strongly supportive of going with a bank credit facility for the initial capitalization of the company. But the problem with that was that the bank facility was a floating rate borrowing and to have 100-percent floating rate debt I thought unnecessarily exposed Vlasic to increases -- potential increases in short-term interest rates. So I felt as if it was quite important to put a hedging program in place, to help shift some of that floating interest rate exposure to fixed interest rate exposure. And I made a recommendation to Mr. Lewis and to the Campbell team that we put such a program in place," Mr. Emmett says. According to Mr. Emmett, the program he suggested was approved. He put in place two tranches, totaling $150,000,000. After the spinoff, Mr. Emmett held his Vlasic shares. "I got what was to me a substantial amount of value in Vlasic shares arising from my holdings of Campbell Soup Company stock. I believed in the story. I believed in it after the spin. I thought these guys were going to make a success of this venture and I held my shares in Vlasic all the way to the end." Upon cross-examination, Mr. Emmett says, he believes that VFI shareholders were better off with $500,000,000 of debt as opposed to a lesser amount of debt on the date of the spin. Mr. Emmett asserts that the creditors at VFI had substantial equity cushion. "They had full knowledge of what the outlook was for the company. They were not in the dark at all as to the amount of debt that the company would have." B. Srini Sripada Mr. Sripada is currently the Marketing Director on Team WalMart. He has been with Campbell Soup Company for about 10 years. Between 1995 until the time of the spin, Mr. Sripada was the marketing manager on the Swanson Dinners business. Mr. Spirada talked about the different marketing efforts the Company made, researches conducted to find out whether the Company met consumers needs, brand reviews, among others. C. David W. Johnson Mr. Johnson was the former Chief Executive Officer and Chairman of the Campbell Soup Company. Basil Anderson, Campbell's Chief Financial Officer, headed the drive for strategic alternatives, for strategy within the company. Mr. Johnson acknowledged that Mr. Anderson presented to the Board that a spinoff would benefit Campbell and its shareholders by providing a tight and focused strategy for the remaining strategies and also benefit the divested businesses by enabling them to better focus on their operations and strategies. "That was absolutely the nub of what he was recommending and what we were trying to do. And I fully supported that," Mr. Johnson says. After months of deliberation, the Board approved the spinoff and appointed Robert Bernstock as the Chief Executive Officer of the new company. The Board also started recruiting other executives for the NewCo. Mr. Johnson does not believe that the Swanson and Vlasic business were milked. According to him, Swanson and Vlasic were supported with capital expenditures, advertising and promotion. "Swanson was a business that we were trying to spend cap on to tap into cost savings and increase productivity," Mr. Johnson says. As to the Vlasic business, Mr. Johnson relates that given that it had innovation, given that sandwich stackers had come along and that sandwich stackers have not only grown the Vlasic business but had grown the entire pickle market, there was a surge of excitement in the company and a desire to continue investing and innovating with pickles and building it. According to Mr. Johnson, the spun-off businesses were non- strategic. "The fact that you sell or that you put into a spin company is not necessarily a commentary that they are blighted. It is a commentary usually on assessments of brands that could be given greater value by being put into a different organization of management." "I think that the biggest miss and the biggest need was for a top-flight Chief Financial Officer -- a person who knew how to control costs, incent people, follow expenditures, and to meet budgets and be everywhere representing the Chief Executive, who would be looking how to build the business and helping to focus the Chief Executive on one of the key priorities," Mr. Johnson tells the District Court. "The fact that [VFI CFO William Lewis] spent really such a short period of time and then when he left was replaced with somebody who was a bright, intelligent person, but without experience at all, as far as I'm concerned, without any experience to be in charge of finance, was really one big blunder." Mr. Johnson says that he does not truly understand why Mr. Lewis wasn't with VFI. "But if he was to go, he should have been replaced with somebody of that nature in accord with the brief that was given to the search consultants at the end of '98, before the spin took place. I think that would be very, very key." D. James J. Spadaro, Jr. Mr. Spadaro was one of the partners at Dechert, Price & Rhoads -- now known as Dechert LLP -- who worked on the tax aspects of the transaction with Daniel P. Hays. Mr. Spadaro has been working for Dechert for 23 years. According to Mr. Spadaro, Mr. Hays called him up sometime in May 1997 and told him that the company was considering spinning off some business. "[Mr. Hays] wanted to come over to discuss with me and whomever else I thought was appropriate at the firm the tax aspects of that," Mr. Spadaro relates. Mr. Spadaro asked Richard Wild, who is a senior tax partner at Dechert, to join him. Together, they met with Mr. Hays and Sam Filippine. "We talked about some of the issues, and we were engaged to do the tax work and we carried that through all the way to the end of the transaction." Mr. Spadaro relates that there were two business purposes for the transaction -- the fit and focus business purpose and the cost savings business purpose. Mr. Spadaro explains that there is nothing in the tax rules that prohibits a company from having more than one business purpose for doing a qualified spinoff. "[T]he IRS guidance on the subject requires that you submit and inform the IRS about all your business purposes for engaging in a transaction." Mr. Spadaro refuted the assertion that Campbell employees were simply directed to fictionalize or make up cost savings. According to Mr. Spadaro, the IRS refused to issue a private letter ruling on the fit and focus business purpose because there were internal guidelines that would not permit them to give a fit and focus ruling to a company that had significant shareholders. "We told them that we respectfully disagreed with them. . . . We believed very strongly that the fit and focus business purpose fit our transaction like a glove." Mr. Spadaro explains that there is published guidance by the IRS in the form of Revenue Ruling 96-30 that stress that ordinarily, a fit and focus business purpose won't be entertained as the basis of a ruling for companies that have so-called significant shareholders; namely, 5% or more. "We knew, we had read the guidance, of course, we knew that when we made our pre-submission conference memo. We thought, though, that in this case -- the reason the IRS has that rule is that they say, if you took the extreme, like a solely owned business, that was run by the shareholder who owned it, a spinoff wouldn't accomplish -- on a fit and focus business purpose, wouldn't accomplish anything, because the individual would be running both businesses after. We said, that's not the Campbell situation at all, because the significant -- there are significant shareholders. That wasn't factually in dispute at all. But this was a very major company, very professionally run by professional management, not by shareholders . . . have a very excellent Board of Directors, of which only three of the members of the family were on. And we didn't think that a major public company like this -- that the rule was written to pick up a major public company like this. And we intended to try to convince the [IRS] of that, but they told us, basically, no." Mr. Spadaro tells the District Court that if the transaction were to not have been a tax-free spinoff, it would have been a dividend. And if it were a dividend, it would have been taxable to the shareholders. It would also give rise to a gain within the company doing the distribution, which would be Campbell Soup. E. Gerald Lord Mr. Lord was the Corporate Controller at Campbell at the time of the spinoff. His three most important accountabilities were: (1) to insure that all of the company's financial reporting, externally and internally, to the Board were in accordance with U.S. GAAP and SEC regulations; (2) to insure the company maintained a rigorous system of internal controls; and (3) to participate in and control the company's future plans, both strategic financial plans and operating plans. At the time of the Vlasic spinoff, Campbell's outside auditors were Pricewaterhouse. The spinoff raised one unique accounting issue related to asset valuation to be carried forward into the spun company. Mr. Lord relates that the FAS121 financial accounting standard basically considers two ways of looking at assets in the transaction: -- assets are held for continued use; and -- assets are being held for sale. "And advice we were given from our auditors was that FAS121 suggested that assets should be considered as held for continued use under a spinoff transaction, which at the time seemed fairly logical to me because we were basically splitting the company in two and giving the company to two, the same shareholders -- new spun company, the same shareholders. So there was continuous use and it seemed logical," Mr. Lord says. As a result, Mr. Lord continues, Campbell considered the assets were held for continued use. "We did the relevant impairment testing which requires that projected cash flows are modeled for the useful life of the assets concerned and that an undiscounted calculation is done of those projected cash flows. If the aggregate of those multiple years of undisclosed cash flows equals or exceeds net book value of the assets, then no action is required. And in the testing we did, that wasn't, no action was required, so the net book values were maintained at their historical rate." Mr. Lord also disputes the allegation that there was significant loading of Vlasic and Swanson during fiscal 1997. "I absolutely believe I would have known if anything was going on." The word loading typically means shipments timed to the end of a quarter to increase retailer inventories. (Vlasic Foods Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Asks Court to Bless Honeywell Settlement Agreement -------------------------------------------------------------- On September 20, 2004, W.R. Grace & Co., and its debtor-affiliates and subsidiaries entered into a settlement agreement with Honeywell International, Inc., concerning the contamination of a Grace-owned property at Route 440 in Jersey City. Under the terms of the settlement agreement, the Debtors will transfer the Route 440 property to Honeywell, and Honeywell will fully indemnify the Debtors and pay them $62.5 million. A full-text copy of the Settlement Agreement is available for free at: http://sec.gov/Archives/edgar/data/1045309/000095013604003047/file002.htm The Route 440 property, approximately 32 acres, was acquired by W.R. Grace & Co. in 1981. Unbeknownst to Grace at that time, the Route 440 property was contaminated with approximately 1.5 million tons of chromium waste from a chromium manufacturing facility -- owned by a Honeywell predecessor -- which had closed in 1954. Grace sued Honeywell in the United States District Court for the District of New Jersey for damages and for an injunction ordering Honeywell to remove the chrome waste and replace it with clean fill. The New Jersey District Court decided in Grace's favor. Honeywell appealed that decision. Shortly afterwards, the Third Circuit directed Honeywell, Interfaith Community Organization, and Grace to participate in the Third Circuit's Appellate Mediation Program. Judge Harold A. Ackerman, U.S.D.J., was assigned as the mediator. Even before Judge Ackerman scheduled the first mediation session, Honeywell and Grace, through their outside counsel, commenced settlement discussions. The private settlement discussions between Honeywell and Grace during 2003 proved unsuccessful. Judge Ackerman subsequently scheduled a first mediation session for early February 2004. While no progress was made in that session, Judge Ackerman directed the parties to schedule private meetings prior to the next court-scheduled mediation session. Grace and Honeywell again engaged in unsuccessful settlement discussions during March 2004. The following month, Judge Ackerman scheduled an additional mediation session at which time Grace determined that the parties were too far apart for meaningful discussions to proceed. Grace asked Judge Ackerman to remove the case from mediation and permit appellate briefing to proceed. During the course of the appellate briefing and motion practice, Honeywell and Grace continued to discuss settlement. In July 2004, the parties agreed that the central components of any settlement would include: (i) a transfer of the Route 440 Property to Honeywell; (ii) Honeywell fully indemnifying Grace; and (iii) Honeywell paying Grace a reasonable cash settlement. In July and August 2004, Honeywell and Grace made progress towards a settlement, but a final agreement was never achieved. In mid-August 2004, the parties agreed that senior officers of Honeywell and Grace would conduct discussions to see if the pecuniary terms of the settlement could be agreed on. The proposed Honeywell Settlement is the result of those discussions. The settlement will end Grace's involvement in any litigation related to the Route 440 property. Accordingly, the Debtors seek the Court's authority to enter into the Honeywell Settlement. The Honeywell Settlement would resolve the highly contested lawsuit, which has been pending among the parties for over nine years. The specific terms of the Honeywell Settlement are: (a) Honeywell will pay Grace $62,500,000. (b) Grace will transfer title to the Route 440 Property to Honeywell. (c) Honeywell will fully indemnify Grace for all third-party claims relating to the Site and certain other, adjacent property. (d) Honeywell and Grace will dismiss all claims they have against each other in all pending litigations, including appeals. (e) Honeywell will take responsibility for completing, at its costs, the petroleum remediation relating to the underground storage tanks formerly at the portion of the Route 440 Property, known as "NJDEP Site 157." (f) Honeywell and Grace will mutually release each other from all claims. (g) The District Court will have jurisdiction over enforcement of the Settlement Agreement, with the prevailing party paying attorneys' fees and costs. (h) Honeywell and Grace are permitted to make limited written public statements regarding the settlement. The Settlement Agreement would provide the Debtors with a net recovery that would exceed: (1) the specific damages awarded by the New Jersey District Court -- $9,000,000, including post-judgment interest; (2) the award of attorney's fees and expenses -- approximately $7,300,000; and (3) the value of the Route 440 Property in clean condition -- at trial estimated to be between $20,000,000 and $35,000,000. In addition, the Settlement Agreement provides for the Debtors to transfer the Route 440 Property to Honeywell, which would relieve the Debtors from potential, subsequent related liabilities. The Settlement Agreement also provides the Debtors with a right to indemnification, which is as broad, if not broader than the indemnification in the New Jersey District Court's final judgment. Furthermore, the Settlement will remove any risk attendant to the uncertainty of the pending appeal in the Third Circuit and will relieve Grace of the potential for having to expend additional amounts in litigation. Assuming approval by the Bankruptcy Court, Grace expects to receive net cash proceeds -- after legal expenses and transfer taxes -- of approximately $52 million and recognize a pre-tax gain of approximately $51 million during the fourth quarter of 2004. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Debtors filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No: 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl et al. represent the Debtors in their restructuring efforts. WEIRTON STEEL: Paying Distributions to Allowed Claim Holders ------------------------------------------------------------ On Aug. 24, 2004, the United States Bankruptcy Court for the Northern District of West Virginia confirmed the First Amended Plan of Liquidation dated July 9, 2004, as subsequently amended on Aug. 23, 2004 proposed by Weirton Steel Corporation. Pursuant to the terms of the Plan, distributions will be paid to holders of Allowed Claims in an amount in Cash equal to the Allowed amount of such Claims or in such other amounts as set forth in the Plan in accordance with the terms of the Plan. No distributions will be paid to parties whose claims have been disallowed by the Bankruptcy Court. As of the Effective Date of the Plan, all stock and equity interests in the Debtors will be canceled. Any party wishing to obtain a copy of the Plan or the Order confirming the Plan may do so by requesting a copy, at their own expense, by contacting counsel to the Debtor: James H. Joseph, Esq. McGuireWoods LLP Dominion Tower, 23rd Floor 625 Liberty Avenue Pittsburgh, Pennsylvania 1522 Headquartered in Weirton, West Virginia, Weirton Steel Corporation was a major integrated producer of flat rolled carbon steel with principal product lines consisting of tin mill products and sheet products. The company was the second largest domestic producer of tin mill products with approximately 25% of the domestic market share. The Company filed for chapter 11 protection on May 19, 2003 (Bankr. N.D. W. Va. Case No. 03-01802). Judge L. Edward Friend, II administers the Debtors cases. Robert G. Sable, Esq., Mark E. Freedlander, Esq., David I. Swan, Esq., James H. Joseph, Esq., at McGuireWoods LLP represent the Debtors in their liquidation. Weirton sold substantially all of its assets to Wilbur Ross' International Steel Group. WORLDCOM INC: Balks at Teleserve Systems' Claims ------------------------------------------------ Ross B. Bricker, Esq., at Jenner & Block, LLP, in Chicago, Illinois, contends that, under New York law, which governed the Arbitration Panel's interpretation of the Debtors' agreements with Teleserve Systems, Inc., Teleserve has the burden to prove by a preponderance of evidence every element of its breach of contract claim, including the extent of its injury and the amount of its legally recoverable damages. To recover breach of contract damages under New York law, Teleserve must: (1) demonstrate with certainty that its damages were caused by MCI's breach of the Agreements; (2) prove its alleged loss with reasonable certainty; and (3) demonstrate that the damages it sought were fairly within the contemplation of the parties at the time they executed the Agreements. Record reveals that the Arbitration Panel's July 1, 2002, and May 12, 2004, damages awards contravene New York law. The Panel awarded Teleserve with breach of contract damages that Teleserve failed to prove and to which Teleserve was not entitled. The Panel's miscalculation was identified by MCI and, critically, was acknowledged by both Teleserve and its damages expert witness. The Panel, however, rejected MCI's efforts to correct the Panel's damages miscalculation. The Debtors ask the Court to vacate the Arbitration Panel's damages decisions. Should the Court decide not to vacate the Panel's damage decisions, the Debtors want the Panel's award reduced to $1,570,645 plus interest. The Debtors also object to Claim Nos. 9449 and 9450 filed by Teleserve. The Debtors argue that: -- Claim No. 9450 is duplicative of Claim No. 9449; and -- Claim Nos. 9449 and 9450 were amended or superseded by Claim No. 36920. Claim No. 36920 stems from Teleserve's application for Class 6A MCI Pre-Merger Claim Status under the Debtors' Plan. Teleserve's Application was erroneously assigned an independent claim, that is Claim No. 36920. Claim No. 36920 seeks damages of the identical type and amount as those sought in Claim Nos. 9449 and 9450. The Debtors also want Claim No. 36920 disallowed in its entirety, without prejudice to Teleserve's right to pursue Class 6A treatment. 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. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Upcoming Meetings, Conferences and Seminars --------------------------------------------- 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 ***