/raid1/www/Hosts/bankrupt/TCR_Public/041208.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, December 8, 2004, Vol. 8, No. 270
Headlines
ADVOCARE OF NORTH: Case Summary & 20 Largest Unsecured Creditors
AIR CANADA: Court Permanently Seals Four Confidential Agreements
AIRGAS INC: Buys Watt Welding in Ore. & DC Welding in Sacramento
AMAZON.COM: Moody's Upgrades Ratings & Assigns Positive Outlook
AMCAST INDUSTRIAL: Look for Bankruptcy Schedules by January 14
AMERICAN TOWER: Sells $200 Million of 7.125% Senior Notes
APPTIS INC: S&P Rates Planned $130M Senior Secured Facility at B+
ATLAS AIR: Inks $60 Mil. Revolving Credit Facility with Congress
ATRIUM COMPANIES: Moody's Puts Low-B Ratings on Senior Sec. Debts
BERMITE RECOVERY: U.S. Trustee Unable to Form Creditors Committee
BIOVAIL: Names Dr. M. Yeomans Senior VP for Global Biz Development
BLEECKER STRUCTURED: Fitch Junks Class B & C Notes
CHESAPEAKE CORPORATION: Prices $85 Million of 7.20% Debentures
CITIGROUP COMMERCIAL: S&P Puts Low-B Ratings on Six Cert. Classes
COINSTAR INC: Offering 3 Million Common Shares in Public Offering
COMMERCE ONE: Sells 7 Web Service Patents to JGR for $15.5 Mil.
COMMUNITY HEALTH: Moody's Puts B3 Rating on $250M Sr. Sub. Notes
COOPER-STANDARD: S&P Rates Planned $475M Sr. Sec. Facility at BB-
DELHAIZE AMERICA: Moody's Ratings Outlook Turns Positive
DII INDUSTRIES: Bankr. Court Approves Lumbermens Settlement Pact
DLJ COMMERCIAL: Moody's Junks Three Certificate Classes
DUKE FUNDING: Moody's Reviewing Ratings & May Downgrade
FEDERAL-MOGUL: Has Until April 1 to Make Lease-Related Decisions
FOXHOLLOW TECH: Sept. 30 Balance Sheet Upside-Down by $59.2 Mil.
GREYHOUND LINES: S&P Raises Corporate Credit Rating to CCC+
H-LINES FINANCE: Moody's Junks Planned $110M Senior Discount Notes
HBC BARGE LLC: Voluntary Chapter 11 Case Summary
HERBALIFE INTL: Discloses Consideration to Be Paid in Debt Offer
HORIZON LINES: S&P Junks Planned $110M Senior Unsecured Notes
JULIAN'S RESTAURANT: Case Summary & 6 Largest Unsecured Creditors
LAIDLAW INTL: Selling Healthcare Companies to Onex for $820 Mil.
LEHMAN ABS: Moody's Pares Ratings on Classes B-1 & B-2 to Low-B
LEHMAN ABS: S&P Places Ratings on CreditWatch Negative
LYONDELL CHEMICAL: Moody's Holds Low-B Ratings with Stable Outlook
MAAX CORP: Moody's Junks $100 Million Senior Discount Notes
MANUFACTURED HOUSING: S&P Puts Default Rating on Class B-1 Certs.
MARINER HEALTH: Shareholders Okay National Senior Care Merger Plan
MIRANT CORPORATION: Asks Court to Extend Exclusive Periods
MIRANT CORP: Key Employment Retention Program Deadline is Dec. 31
NATIONAL ENERGY: Has Until Jan. 31 to File Chapter 11 Plan
NETWORK INSTALLATION: Highlights Strategic Initiatives for 2005
NEXTWAVE TELECOM: Files Plan of Reorganization in S.D. New York
NOVA CHEMICALS: Janice Rennie Resigns from Board of Directors
NRG ENERGY: Judge Beatty Dismisses Nelson Units' Chapter 11 Cases
NYLIM STRATFORD: Moody's Junks $16K Cumulative Preferred Shares
OBN HOLDINGS: Losses & Deficits Trigger Going Concern Doubt
OMEGA HEALTHCARE: Launching Public Offering of 3.5MM Common Shares
OMNI FACILITY: Court Convenes Sale Hearing for Remco Assets
OMNI FACILITY: Has Exclusive Right to File Plan Through Jan. 14
OWENS CORNING: Wants OC Canada to Invest $5 Mil. in Korean Newco
OXFORD AUTOMOTIVE: Files Chapter 11 Petition in E.D. Michigan
PEGASUS COMMS: Nasdaq Extends SEC Reports Deadline to Dec. 17
PERFORMANCE LOGISTICS: S&P Junks Transportation's $35 Million Loan
PERFORMANCE TRANSPORTATION: Moody's Rates Sr. Sec. Debts at B2
PINNACLE ENT: Says Approx. $96.6 Million of Notes are Tendered
PIUTE PIPELINE: Case Summary & 2 Largest Unsecured Creditors
PLAYBOY ENTTERPRISES: Projects Improved 2005 Financial Results
PLIANT: Low Earnings Prompt S&P to Pare Corp. Credit Rating to B
PURVI PETROLEUM: U.S. Trustee Meets Creditors on January 7
QUINTUS CORPORATION: Settles Securities Lawsuits for $13 Million
QWEST COMMS: Inks $10 Million Pact with City & County of Denver
RCN CORP: Wants to Assume 33 Executory Contracts & Renew Policies
RECYCLED PAPERBOARD: Section 341(a) Meeting Slated for Dec. 29
SBA COMMUNICATIONS: Moody's Junks $250 Million Senior Notes
SCIENTIFIC GAMES: S&P Rates Planned $300M Sr. Sec. Facility at BB
SGP ACQUISITION: Wants to Hire Benesch Friedlander as Co-Counsel
SGP ACQUISITION: Wants to Use Provident Bank's Cash Collateral
SHAW GROUP: S&P Slices Corporate Credit Rating to BB- from BB
TCW HIGH: Fitch Upgrades Ratings on $17.7M Preferred Shares to B
TCW HIGH: Fitch Affirms BB Rating on $9.5M Class IV Notes
TOWER AUTOMOTIVE: Defers Payment of Trust Preferred Dividend
TOWER AUTOMOTIVE: Hires Rothschild to Assist in Lender Talks
TRW AUTOMOTIVE: Moody's Rates Planned $1.9B Sr. Sec. Debt at Ba2
UNOVA INC: Moody's Reviewing Junk Rating & May Upgrade
US AIRWAYS: Gets Court Nod to Walk Away from 28 Aircraft Leases
US AIRWAYS: 286 Entities Object to Bargaining Pacts Rejection
VARICK STRUCTURED: Fitch Junks Three Classes of Notes
VENOCO INC: S&P Junks $150 Million Senior Unsecured Notes
VERILINK CORP: Names Timothy R. Anderson Chief Financial Officer
VIATICAL LIQUIDITY: Creditors Must File Proofs of Claim by Dec. 20
VLASIC: Proposes Findings of Fact in $250M Campbell Spin-Off Suit
W.R. GRACE: Wants Exclusive Plan-Filing Period Extended to May
WORLD ASSOCIATES: Liquidity Problem Raises Going Concern Doubt
* Foley & Lardner Has New Address in Detroit
* Upcoming Meetings, Conferences and Seminars
*********
ADVOCARE OF NORTH: Case Summary & 20 Largest Unsecured Creditors
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Debtor: AdvoCare of North Carolina, Inc.
dba Magnolia Gardens
5935 Mount Sinai Road
Durham, North Carolina 27705
Bankruptcy Case No.: 04-83632
Type of Business: The Debtor operates a 140-bed nursing home
facility.
Chapter 11 Petition Date: December 6, 2004
Court: Middle District of North Carolina (Durham)
Debtor's Counsel: Charles M. Ivey, III, Esq.
Ivey, McClellan, Gatton & Talcott, LLP
P.O. Box 3324
121 South Elm Street
Greensboro, NC 27402
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Heritage Healthcare, Inc. $209,743
536 Old Howell Road
Greenville, SC 29615
Epic Group, LP $112,604
5005 North Ocean Blvd.
Myrtle Beach, SC 29577
Neil Medical Group $98,735
Pharmacy Division
2545 Jetport Road
Kinston, NC 28504
Nightingale Nursing Service $80,000
Gulf South Medical Supply $43,110
Francis Messer $40,639
Zenith Insurance Company $40,266
Nurse Care of North Carolina $35,766
Florence Nursing Services, Inc. $25,736
Grove Medical, Inc. $19,619
U.S. Food Service $9,912
Jones Insurance $9,800
Neil Medical Group $8,000
Hill-Rom $6,766
Durham County EMS $6,541
Western Medical/New Horizons $5,483
Smith, Inc. $5,040
Eastern Medical Supply $4,829
C.T.E., Inc. $3,643
Durham Regional Hospital $3,187
AIR CANADA: Court Permanently Seals Four Confidential Agreements
----------------------------------------------------------------
Mr. Justice Farley of the Ontario Superior Court of Justice finds
that these four documents contain extremely sensitive information,
which if publicly disclosed, could cause irreparable harm to the
legitimate business interests of the parties:
(1) The agreement between Air Canada and Canadian Imperial
Bank of Commerce relating to the parties' co-branded
credit card program;
(2) The agreements among Air Canada, Aeroplan and AMEX Bank of
Canada with respect to the creation and issuance of
co-branded charge card products and AMEX's Membership
Rewards Program;
(3) The Canada-Germany Cooperation Agreement between Air
Canada and Deutsche Lufthansa AG governing the terms of
their joint venture regarding Canada-Germany routes; and
(4) The appendices to the Amended and Restated Commercial
Participation and Services Agreement dated June 9, 2004,
between Air Canada and Aeroplan governing the management
of the Air Canada Tier Program, the development and
management of the Aeroplan Program, and the provision of
loyalty management services to Air Canada.
Mr. Justice Farley holds that "the salutary effects of the sealing
arrangements outweigh the deleterious effects." In the normal
course outside insolvency proceedings, Mr. Justice Farley explains
that similar financial and operative agreements would be kept
strictly confidential and would not find their way in public
domain.
Mr. Justice Farley notes that restructurings may involve new
business arrangements involving commercially sensitive
information. The mere fact that the court has an overall
supervisory role should not subject a restructuring corporation to
a competitive disadvantage when the revelation of the commercially
sensitive information does not form the basis of a true dispute
between the parties as one would have in traditional opposite
party -- in the nature of plaintiff and defendant -- proceedings.
"The court's approval in a CCAA proceeding of specific commercial
contracts is not done in having a historical record available
without restriction to the public so that the public could
determine the basis on which a court determined which litigant's
right was to prevail," Mr. Justice Farley says.
"Rather the court in a CCAA proceeding is concerned with ensuring
the fairness of the agreement to the CCAA applicant debtor company
and its stakeholders is appropriately examined.
Mr. Justice Farley also holds that the protocol established among
the parties to the Confidential Agreements ensured the greatest
level of public access while allowing the parties to protect their
economically sensitive information. At the same time, the
protocol limited any deleterious effect not only to the parties
but the public with a legitimate interest.
Air Canada filed for CCAA protection on April 1, 2003 (Ontario
Superior Court of Justice, Case No. 03-4932) and filed a Section
304 petition in the U.S. Bankruptcy Court for the Southern
District of New York (Case No. 03-11971). Mr. Justice Farley
sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004.
Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman
Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier.
Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie
Farr & Gallagher serve as the Debtors' U.S. Counsel. When the
Debtors filed for protection from its creditors, they listed
C$7,816,000,000 in assets and C$9,704,000,000 in liabilities.
On September 30, 2004, Air Canada successfully completed its
restructuring process and implemented its Plan of Arrangement.
The airline exited from CCAA protection raising $1.1 billion of
new equity capital and, as of September 30, has approximately
$1.9 billion of cash on hand. (Air Canada Bankruptcy News, Issue
No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AIRGAS INC: Buys Watt Welding in Ore. & DC Welding in Sacramento
----------------------------------------------------------------
Airgas, Inc. (NYSE:ARG), completed its tenth and eleventh
acquisitions of the fiscal year beginning April 1, 2004. The
nation's largest distributor of packaged gases and related
supplies acquired the assets and operations of Watt Welding
Supply, Inc., an industrial gas and welding supply distributor
with three locations south of Portland, Oregon, and DC Welding in
Sacramento, California.
A total of 17 WWS employees working at a cylinder fill plant in
Tigard, Oregon, and two nearby retail locations in McMinnville and
Newberg have joined Airgas Nor Pac, one of 13 regional companies
within Airgas.
"We are pleased to welcome Steve Watt and his colleagues to
Airgas," said Mark Clemens, president of Airgas Nor Pac, which is
based in Portland, Ore. and operates 45 other locations in Oregon,
Washington, Alaska, Northern Idaho and western Canada. "The fill
plant in Tigard and two retail locations will help us better serve
customers south of Portland."
Steve Carpenter, one of the owners of DC Welding, and five others
employees have joined Airgas Northern California & Nevada, which
is based in Sacramento and operates 42 locations in the region.
DC Welding operated from a single location in Sacramento.
"Airgas NCN is pleased to welcome Steve Carpenter and the other DC
Welding employees to our team," said Jim McCarthy, president of
Airgas NCN. "Steve has an outstanding reputation within our
industry and within the Sacramento business community."
The two acquisitions, which closed November 30, 2004, were among
11 completed so far this fiscal year, including Airgas' largest
acquisition to date of BOC's U.S. packaged gas operations on
July 30. In total, the year's acquisitions have added $260
million in acquired sales.
"Our business development team continues to see a full pipeline of
acquisition opportunities," said Airgas Chairman and CEO Peter
McCausland. "These kinds of acquisitions are a core competency
for our regional companies. We are excited to welcome new
locations and new employees to our strong regional company
network."
About Airgas, Inc.
Airgas, Inc. (NYSE:ARG) -- http://www.airgas.com/-- distributes
industrial, medical and specialty gases, welding, safety and
related products. Its integrated network of about 900 locations
includes branches, retail stores, gas fill plants, specialty gas
labs, production facilities and distribution centers. Airgas also
distributes its products and services through eBusiness, catalog
and telesales channels. Its national scale and strong local
presence offer a competitive edge to its diversified customer
base.
* * *
As reported in the Troubled Company Reporter on Nov. 08, 2004,
Standard & Poor's Ratings Services raised its ratings on Airgas
Inc. The corporate credit rating was raised to 'BB+' from 'BB'.
The outlook is stable on this Radnor, Pennsylvania-based
industrial gas distributor.
The upgrade reflects the likelihood that credit quality will be
sustained at improved levels, despite periodic moderate-size
acquisitions.
AMAZON.COM: Moody's Upgrades Ratings & Assigns Positive Outlook
---------------------------------------------------------------
Moody's Investors Service upgraded the long-term debt ratings of
Amazon.com and assigned a positive rating outlook as a result of
the company's consistent improvement in operating margins,
reduction in funded debt levels, and strengthening operating cash
flow.
These ratings are upgraded:
* Senior implied of B1,
* Issuer rating of B2,
* Various convertible subordinated notes issues maturing 2009
thru 2010 of B3,
* Multiple shelf ratings of (P) B2, (P) B3, and (P) Caa1.
This rating is affirmed:
* Speculative grade liquidity rating of SGL-2.
The long-term ratings reflect the company's solid liquidity
reflected in its SGL-2 rating, strengthening operating cash flow,
reduction in funded debt levels, and its dominant position in on-
line retailing. In addition, the ratings also reflect the value
of the Amazon.com franchise and the long-term nature of its
capital structure with the nearest term debt maturity being in
2009. The ratings are constrained by the uncertainty presented by
Amazon.com's evolving business strategy, and the company's ability
to balance its rapid growth and low cost environment with ensuring
the appropriate business policies and controls are in place, as
well as the possible impact on financial policy and controls of
the lack of finance or accounting related experience on the audit
committee. Given the importance of the company's growth strategy,
the ratings are impacted by lack of retail and supply-chain
management or distribution experience on the Board of Directors,
as well as by the fact, that only one board member has run a large
public company.
Amazon.com's rating outlook is positive reflecting the improvement
in the company's financial flexibility and Moody's expectation of
further improvement in operating performance. The company has
continued to improve its financial flexibility as a result of a
buildup in cash, strengthening operating cash flow, and reduction
in funded debt. Moody's expects Amazon.com's credit quality will
continue to benefit from the growth of third-party operations and
growth abroad. Both of these enable Amazon.com to leverage its
investment in facilities and technology, as well as its selling,
general, and administrative expenses. Moody's expects spending on
technology and capex will continue to decline as a percentage of
sales, although it will grow in absolute terms.
Ratings could rise if Moody's become comfortable that Amazon.com
is developing business policies and controls appropriate to its
size and rapid growth and if it continues to increase its
operating income, improve its credit metrics, and further reduces
funded leverage such that adjusted debt to EBITDAR falls below
2.5x and EBIT margins (before technology and development) are
sustained above 10%. In addition, the company obtaining committed
bank financing, as well as reducing the uncertainty around its
business strategy would further strengthen the upward rating
pressure.
Given the positive outlook, a downgrade is highly unlikely.
However, the outlook could stabilize or ratings fall if the
company experiences a decline in profitability, begins to fund its
growth with debt, or uses debt to finance acquisitions, capital
expenditures, or to return value to shareholders. The outlook
could return to stable should adjusted debt to EBITDAR increase
above 3.5X or EBIT margins (before technology and development
costs) deteriorate below 8%. The long term ratings, as well as
the speculative grade liquidity rating could fall should cash
balances fall below $1 billion without the company having
committed bank facilities in place.
The ratings on the subordinated notes are notched two below the
senior implied reflecting their subordinated position as well as
the lack of tangible asset coverage. The issuer rating is notched
down by one from the senior implied rating because the majority of
the company's operations and assets are located at subsidiaries
and the issuer rating represents unsecured debt of the holding
company that does not have the guarantees of subsidiaries.
Amazon.com, headquartered in Seattle, Washington, is the world's
largest Internet-based retailer. Total revenues were
approximately $5.3 billion for fiscal year ending Dec. 31, 2003.
AMCAST INDUSTRIAL: Look for Bankruptcy Schedules by January 14
--------------------------------------------------------------
Amcast Industrial Corporation and its debtor-affiliates sought and
obtained an extension from the U.S. Bankruptcy Court for the
Southern District of Ohio to file their Schedules and Statements
pursuant to Section 521 of the Bankruptcy Code until
January 14, 2005.
The Debtors explained that due to the number and diversity of
their respective creditors and the limited staffing available to
perform the required internal review of their accounts and
affairs, they were unable to collect all the necessary information
to complete the Schedules and Statements.
Headquartered in Dayton, Ohio, Amcast Industrial Corporation --
http://www.amcast.com/-- is a manufacturer and distributor of
technology-intensive metal products to end-users and supplier in
the automotive and plumbing industry. The Company and its debtor-
affiliates filed for chapter 11 protection on Nov. 30, 2004
(Bankr. S.D. Ohio Case No. 04-40504). Jennifer L. Maffett, Esq.,
at Thompson Hine LLP, represents the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed total assets of $104,968,000 and
total debts of $165,221,000.
AMERICAN TOWER: Sells $200 Million of 7.125% Senior Notes
---------------------------------------------------------
American Tower Corporation (NYSE: AMT) announced closed its
previously announced sale of 7.125% senior notes due 2012. The
Company sold a total of $200.0 million principal amount of notes,
which resulted in net proceeds to the Company of approximately
$199.8 million. The Company intends to use all of the net
proceeds of the offering to repurchase and redeem a portion of its
outstanding 9-3/8% senior notes due 2009.
The Company used a portion of the net proceeds of the offering to
repurchase approximately $85.2 million of its outstanding 9-3/8%
senior notes for an aggregate of approximately $90.1 million. The
Company intends to use the balance of the net proceeds of the
offering plus an additional $30.1 million in cash on hand to
redeem $133.0 million principal amount of its 9-3/8% senior notes.
The Company also announced the call for redemption of
$133.0 million principal amount of its 9-3/8% senior notes. The
redemption date has been set for January 5, 2005 at a redemption
price equal to the principal amount of the notes plus an
applicable premium. In addition, the Company will pay accrued and
unpaid interest on the redeemed notes up to the redemption date.
As a result of this repurchase and partial redemption of its
9-3/8% senior notes, the Company expects to record in the fourth
quarter of 2004 and first quarter of 2005 an aggregate pre-tax
loss on retirement of long-term obligations of approximately
$15.6 million, consisting of approximately $11.7 million paid in
excess of carrying value and approximately $3.9 million in the
write-off of related deferred financing fees. The Company expects
this issuance of its 7.125% senior notes and this repurchase and
partial redemption of its outstanding 9-3/8% senior notes will
result in savings of approximately $6.2 million in annualized net
interest expense.
Headquartered in Boston, American Tower Corporation is an
independent owner and operator of wireless communications and
broadcast towers in the U.S., Mexico, and Brazil with last twelve
months revenue of $758 million.
* * *
As reported in the Troubled Company Reporter on Oct. 14, 2004,
Fitch Ratings initiated coverage of American Tower Corporation and
assigned a 'B+' rating to its unsecured notes. Additionally,
Fitch assigns a 'BB-' rating to American Towers, Inc., senior
subordinated debt and a 'BB' rating to American Towers' senior
secured credit facility. The Rating Outlook for all ratings is
Positive. Approximately $3.2 billion of debt securities are
affected by these actions.
The rating and Outlook reflect the risks associated with the high
leverage and Fitch's expectations that American Tower will
continue to meaningfully improve its credit profile over the next
18 months. The improvement in free cash flow will be driven by
organic revenue growth relating to healthy wireless industry
demand and reduced interest expense through debt
reduction/refinancings.
APPTIS INC: S&P Rates Planned $130M Senior Secured Facility at B+
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' corporate
credit rating to Chantilly, Virginia-based Apptis, Inc. At the
same time, Standard & Poor's assigned its 'B+' senior secured debt
rating, with a recovery rating of '3', to Apptis' proposed
$130 million senior secured bank facility, which will consist of a
$30 million revolving credit facility and a $100 million term
loan, both due 2009. The senior secured bank loan rating, which
is the same as the corporate credit rating, along with the
recovery rating, reflect Standard & Poor's expectation of
meaningful (50% to 80%) recovery of principal by lenders in the
event of a default or bankruptcy. The proceeds from this
facility, along with an equity contribution, will be used to
finance the purchase of SETA Corporation and to refinance existing
debt. The outlook is negative.
"The ratings reflect Apptis' relatively modest position in the
highly competitive and consolidating government IT services
market, an acquisitive growth strategy, and high financial
leverage," said Standard & Poor's credit analyst Ben Bubeck. A
predictable revenue stream based upon a strong backlog and the
expectation that government-related services business will remain
solid over the intermediate term are partial offsets to these
factors.
Apptis provides IT services and communications solutions primarily
to the federal government. The company also generates a
significant portion of operating income from its hardware
business, although revenue from this business has lower margins
than on the services side. Pro forma for the proposed credit
facility, Apptis will have approximately $220 million in operating
lease-adjusted debt as of December 2004, including approximately
$54 million of pay-in-kind notes.
ATLAS AIR: Inks $60 Mil. Revolving Credit Facility with Congress
----------------------------------------------------------------
Atlas Air Worldwide Holdings, Inc. (OTC:AAWWV.PK), and certain of
its subsidiaries, including:
-- Atlas Air, Inc.,
-- Polar Air Cargo, Inc., and
-- Airline Acquisition Corp I,
entered into a revolving credit facility with Congress Financial
Corporation, as agent for the lenders, and Wachovia Bank, National
Association, as lead arranger. The new facility was contemplated
as part of the companies' emergence from Chapter 11 bankruptcy
proceedings in July 2004.
Both Atlas and Polar will be borrowers under the terms of the
facility, which is dated November 30, 2004, and both AAWW and
Acquisition will be guarantors.
The revolving credit facility provides the borrowers with
revolving loans of up to $60 million, including up to $10 million
of letter of credit accommodations. Availability under the
facility will be based on a borrowing base, which will be
calculated as a percentage of certain eligible accounts
receivable. The revolving credit facility has an initial four-
year term, after which the parties can agree to enter into
additional one-year renewal periods.
Borrowings under the revolving credit facility bear interest at
varying rates based on either the prime rate of Wachovia Bank,
National Association, or a rate based on the rate at which
Congress Financial Corporation is offered deposits of U.S. dollars
in the London interbank market -- the Adjusted Eurodollar Rate.
Interest on outstanding borrowings is determined by adding a
margin to either the Prime Rate or the Adjusted Eurodollar Rate,
as applicable, in effect at the interest calculation date. The
margins are arranged in three pricing levels, based on the excess
availability under the revolving credit facility, that range from
0.25% below to 0.75% above the Prime Rate and 1.75% to 2.75% above
the Adjusted Eurodollar Rate.
The revolving credit facility contains usual and customary
covenants for transactions of this kind. In addition, the
revolving credit facility contains various conditions precedent to
funding that must be satisfied in order for borrowings to be
available to the borrowers. The borrowers are in the process of
satisfying certain of these conditions precedent, which they
anticipate will be met in the near future.
The obligations under the Revolving Credit Facility are secured by
each Borrower's and Guarantor's present and future assets and all
products and proceeds thereof other than (i) real property, (ii)
aircraft, flight simulators, spare aircraft engines and related
assets that are subject to security interests of other creditors
and (iii) some or all of the capital stock of certain of Holdings'
subsidiaries.
Changes to Other Financing Agreements
* ACF Amendments
On November 30, 2004, Holdings and Atlas entered into amendments
to the Fifth Amended and Restated Credit Agreement dated as of
July 27, 2004, by and among Atlas, the lenders party thereto and
Deutsche Bank Trust Company Americas, as administrative agent for
the lenders party thereto, and the Collateral Documents. The ACF
Credit Agreement is a term loan with approximately $40.6 million
in principal outstanding and is secured by three aircraft. The
ACF Amendments (i) increased the capital expenditure limitations
included in the ACF Credit Agreement and (ii) clarified that the
Revolving Credit Facility is permitted under the terms thereof.
Holdings consented to the ACF Amendments.
* AFL III Credit Amendment
On November 30, 2004, Atlas Freighter Leasing III, Inc., a
subsidiary of Holdings ("AFL III"), entered into an amendment (the
"AFL III Amendment") to the Amended and Restated Credit Agreement
dated as of July 27, 2004 (the "AFL III Credit Agreement") by and
among AFL III, the lenders party thereto and Deutsche Bank Trust
Company Americas, as administrative agent for the lenders party
thereto. The AFL III Credit Agreement is a term loan with
approximately $158.2 million in principal outstanding and is
secured by 13 aircraft and two engine pools. The AFL III Amendment
(i) increased the capital expenditure limitations included in the
AFL III Credit Agreement and (ii) clarified that the Revolving
Credit Facility is permitted under the terms thereof. Fifteen
leases relating to the 13 aircraft and two engine pools from AFL
III to Atlas pursuant to the AFL III Credit Agreement were also
amended to comply with the AFL III Amendments. Holdings consented
to the lease amendments.
* Amendment to Hypo Bank Security Agreement
Atlas is party to an Amended and Restated Credit Agreement
(N537MC) dated as of May 11, 2000, with the lenders named therein
and HypoVereinsbank Luxembourg Societe Anonyme, as security
trustee. The Hypo Bank Credit Agreement is a term loan with
approximately $3.4 million in principal outstanding and is secured
by one aircraft. On November 30, 2004, the Security Agreement and
Chattel Mortgage relating to such aircraft was amended to modify
the definition of Collateral in order to clarify that the
Revolving Credit Facility is permitted under the terms thereof.
* Enhanced Equipment Trust Certificates Agreements
Amendments to Atlas' EETC agreements, as described in the
Company's Second Amended Disclosure Statement Under 11 U.S.C. Sec.
1125 in Support of the Debtors' Chapter 11 Plan and Second Amended
Joint Plan of Reorganization (filed as exhibits to the company's
Form 8-K dated July 26, 2004), became effective on November 30,
2004.
About Atlas Air Worldwide Holdings
Atlas Air Worldwide Holdings, Inc. -- http://www.atlasair.com/--
is a worldwide all-cargo carriers that operate fleets of Boeing
747 freighters. The Company filed for chapter 11 protection
(Bankr. Fla. Case No. 04-10794) on January 30, 2004. The
Honorable Robert A. Mark presided over Atlas' restructuring
proceeding. Jordi Guso, Esq., at Berger Singerman, represents the
debtor. Atlas Air emerged from bankruptcy on July 27, 2004.
ATRIUM COMPANIES: Moody's Puts Low-B Ratings on Senior Sec. Debts
-----------------------------------------------------------------
Moody's Investors Services assigned a B1 rating to the new senior
secured bank credit facilities of Atrium Companies, Inc., and a B3
rating to the senior discount notes issued by Atrium Corporation.
The ratings outlook remains stable but would deteriorate with even
a modest increase in leverage.
Moody's assigned these ratings
* Atrium Companies, Inc:
-- $50 million 5 year revolver at B1;
-- $325 million 7 year term loan B at B1.
* Atrium Corporation:
-- $125 million senior discount notes due 2012 at B3;
-- Senior implied at B1;
-- Issuer rating at B3.
The outlook remains stable.
Moody's is withdrawing these ratings
* Atrium Companies, Inc.:
-- $198 million Term Loan B at B1;
-- $225 million 10.5% Senior Subordinated Notes due 2009 at
B3;
-- Senior Implied at B1;
-- Issuer rating at B2.
The new $375 million senior secured credit facilities are
comprised of a $50 million 5 year revolver and a $325 million
7-year term loan B and are being issued by Atrium Companies, Inc.
-- OpCo. The parent holding company, Atrium Corporation -- HoldCo
-- is issuing the $125 million in senior discount notes due in
2009 notes. These senior unsecured notes will be payment-in-kind
-- PIK -- for the first three years reverting to semi-annual cash
interest payments thereafter.
Proceeds are being used to fund the tender for $225 million of
currently outstanding 10.5% senior subordinated notes due 2009 and
to refinance the existing Term Loan B. The transaction is
expected to result in lower borrowing costs overall due to the
lower interest rate environment but the aggregate debt amounts on
a consolidated basis will remain unchanged; however, since the new
HoldCo senior discount notes are partially refinancing and
reducing debt that was at the operating company, the operating
company's leverage improves.
The ratings reflect the company's good revenue growth and modest
free cash flow generation. The ratings also benefit from the
company's position as the largest non-wood window manufacturer in
the USA, the growing demand for impact resistant windows, and
ongoing need for replacement windows due to normal wear and tear.
The recent hurricanes in Florida should stimulate greater demand
for shutter systems and for impact resistant windows. The company
primarily sells directly to builders who seem to have a
made-to-order mentality. Currently, the company's typical
shipping of finished product is under 10 days. Hence, as long as
the made-to-order mentality remains in place Atrium should remain
somewhat insulated from foreign competition. The company is
increasing its focus on the non-cyclical replacement window
market.
The ratings are constrained by the company's high leverage for the
ratings category and its history of acquisitions thereby
suggesting that aggressive debt pay-down is unlikely. The
company's operating margins, as well as others in the industry,
have recently come under pressure due to higher raw material
costs. Atrium's ability to pass on these higher raw material
costs is a concern. The ratings are also constrained by the
company's decision to not pay-down a greater amount of debt during
this latest strong housing market. Although management has become
very experienced in taking the company through 17 acquisitions
since 1996, rarely do all acquisitions perform to levels as
anticipated. Given the company's continued high leverage, the
possibility of a significant miscalculation by management in the
acquisition arena or potential integration risks remains a
concern. While the company's guidelines limit the largest
possible acquisition to no more than $50 million, that amount is
significant given the company's expected 2004 EBITDA is likely to
be below $95 million.
The new term loan B facility to be issued by Atrium Companies is
scheduled to amortize at 1% annually for the first six years with
the remaining 94% due at maturity. Mandatory prepayments include
100% of asset sales, 100% of proceeds from debt issuances, and 50%
of proceeds from equity issuance. There will be a 50% excess cash
flow sweep. Financial covenants include a total leverage covenant
that begins at 4.25 times and includes various step-downs, and
interest coverage covenant that begins at 2.5 times and includes
various step-ups, a fixed charge covenant of 1.5 times for the
life of the facilities, and a maximum capital expenditure covenant
that begins at $27 million in 2005 and increases over time to
$33 million in 2011.
The senior discount notes at Atrium Corporation will be senior
unsecured obligations of the holding company. The notes are
distributed through rule 144a. The B3 rating reflects their
structural subordination to the senior secured debt at the
operating company plus they will not benefit from any of the
upstream guarantees from OpCo's subsidiaries. If additional debt
is to be issued at the operating company, the new senior discount
notes at Atrium Corp. would, most likely, be downgraded one notch.
The ratings and or outlook may decline if leverage were to
increase even modestly, or if the company was unable to generate
sufficient free cash flow to meaningfully pay-down debt over the
next twelve months. Debt financed acquisitions would likely
result in a ratings downgrade depending on the cash flow
generation of the target. The rating may also deteriorate if
competition increases resulting in further reduction in operating
cash flow. Market share loss to foreign manufacturers, while
currently not visible, would also likely pressure the rating. A
change in outlook to negative may also occur if the housing market
were to weaken substantially since Atrium primarily sells into the
new home construction market and interest rates are currently on
the rise.
Leverage is high for the rating category. Total debt is expected
to be around $484 million for FYE 2004 with the majority of the
debt comprised of the $325 million term loan B at the operating
company and the $125 million senior discount notes at the holding
company. Total debt to EBITDA for FYE 2004 is expected to be
around 5.5 times while EBITDA to total interest is low at
2.9 times. Pro forma interest coverage of cash interest increases
coverage to 5.2 times based on 2004's EBITDA estimates. This
estimated annual cash benefit of $12 to $14 million for the next
three years clearly provides additional financial flexibility and
an opportunity to accelerate the repayment of debt.
Headquartered in Dallas, Texas, Atrium Companies, Inc., is one of
the largest window manufacturers in the United States.
BERMITE RECOVERY: U.S. Trustee Unable to Form Creditors Committee
-----------------------------------------------------------------
Ilene J. Lashinsky, the United States Trustee for Region 14
reports to the U.S. Bankruptcy Court for the District of Arizona
that no Official Committee of Unsecured Creditors has been formed
in Bermite Recovery, L.L.C.'s chapter 11 case.
Ms. Lashinsky explains that at the first meeting of creditors held
on November 9, 2004, there was insufficient creditor interest as
required under Section 1102(b)(1) of the Bankruptcy Code to allow
her to appoint a committee of unsecured creditors pursuant to
Section 1102(a) of the Bankruptcy Code.
Ms. Lashinsky adds that despite all her efforts to contact other
eligible unsecured creditors after the meeting, there still isn't
a sufficient number of creditors interested to serve as a member
of a creditors committee.
Headquartered in Phoenix, Arizona, Bermite Recovery, L.L.C., filed
for chapter 11 protection on September 30, 2004 (Bankr. D. Ariz.
Case No. 04-17294). Alisa C. Lacey, Esq., at Stinson Morrison
Hecker LLP, represents the Debtor in its restructuring efforts.
When the Company filed for protection from its creditors, it
estimated more than $10 million in assets and debts.
BIOVAIL: Names Dr. M. Yeomans Senior VP for Global Biz Development
------------------------------------------------------------------
Biovail Corporation (NYSE:BVF)(TSX:BVF) appointed veteran
pharmaceutical industry executive Dr. Michael Yeomans Senior
Vice-President, Global Business Development.
Dr. Yeomans will be based at the company's offices in Bridgewater,
New Jersey, and will be responsible for identifying and initiating
new business-development activities -- including product licensing
deals, patent licenses, strategic alliances, joint-ventures, and
the acquisition of drug-delivery technologies. His mandate will
also include aligning the activities of Biovail's global business-
development group with the company's current and emerging
strategic direction.
"Biovail is actively exploring many new product-development and
business opportunities," said Doug Squires, Chief Executive
Officer of Biovail Corporation. "Dr. Yeomans brings more than 30
years of industry knowledge to Biovail. His expertise and
experience with the business-development and licensing operation
of a global pharmaceutical company, combined with his research and
clinical development experience, fits well with Biovail's current
and emerging requirements as we continue to identify opportunities
to enhance shareholder value."
Most recently, Dr. Yeomans was Senior Vice-President, Head of
Global Business Development for Aventis Pharma. During his
tenure, he was responsible for all business-development and
licensing activities for Aventis -- from early-stage compounds to
marketed products. More specifically, the scope of his mandate
included product in-licensing and out-licensing; joint ventures;
strategic alliances; technology acquisitions; and evaluation of
new business opportunities.
Before joining Aventis in 2000, Dr. Yeomans spent more than
27 years with the Hoechst Group, where he held a series of
progressively responsible senior positions in the United States
and Germany, including Vice-President, Licensing and Alliances;
Executive Director, Head, Pharma Business Development Group;
Director, Licensing, Strategic Planning and Business Development;
and Corporate Directorate Manager, Pharmaceutical Affairs.
Dr. Yeomans spent the earlier part of his career in clinical
research and drug development. From 1981-1986, he was a Project
Manager and Registration Co-Ordinator in Hoechst's clinical
research department based in Frankfurt, where he planned and
implemented worldwide clinical-trial and registration programs.
Previously, he spent four years working as a project team leader
in the company's drug-discovery department in the United Kingdom.
He spent his first four years at Hoechst as a member of the
company's preclinical drug-development group in the U.K.
Dr. Yeomans earned his Ph.D. in Organic Chemistry and a B.Sc.
Honors degree in Chemistry from the University of London.
Biovail Corporation is an international full-service
pharmaceutical company, engaged in the formulation, clinical
testing, registration, manufacture, sale and promotion of
pharmaceutical products utilizing advanced drug-delivery
technologies. For more information about Biovail, visit the
company's Web site at http://www.biovail.com/
* * *
As reported in the Troubled Company Reporter on March 11, 2004,
Standard & Poor's Ratings Services revised its outlook on the
pharmaceutical company to negative from stable. At the same time,
S&P affirmed its ratings on Mississauga, Ontario-based Biovail,
including the 'BB+' long-term corporate credit rating. The action
was in response to the company's lower 2004 earnings guidance.
BLEECKER STRUCTURED: Fitch Junks Class B & C Notes
--------------------------------------------------
Fitch Ratings downgrades three classes of notes issued by Bleecker
Structured Asset Fund, Ltd., and removes all classes from Rating
Watch Negative. These rating actions are effective immediately:
-- $18,166,848 class A-1 notes to 'BBB' from 'A-';
-- $127,167,935 class A-2 notes to 'BBB' from 'A-';
-- $40,460,087 class B notes to 'CC' from 'B-';
-- $40,297,470 class C notes remains at 'C'.
Bleecker is a collateralized debt obligation managed by Clinton
Group, Inc. The deal was established in March 2000 to issue
$457 million in notes and equity. The portfolio supporting the
CDO is comprised of a diversified portfolio of asset-backed
securities -- ABS, residential mortgage-backed securities -- RMBS,
and commercial mortgage-backed securities -- CMBS.
The rating actions are a result of continued deterioration in the
credit quality of Bleecker CBO's collateral pool and the continued
negative impact of its interest rate hedge. Since the last rating
action the class A overcollateralization ratio decreased to 109.0%
as of the most recent trustee report dated Oct. 31, 2004, from
109.7% as reported on June 27, 2004. The class A OC continues to
pass versus the trigger of 106.5% despite the continued
deterioration in the collateral pool. This is a result of the
delevering of the liability structure resulting from the class B
OC ratio failure, which has decreased to 85.2% from 86.6% and
continues to fail versus the trigger of 110.50%. Assets rated
'BBB-' or lower represented approximately 48.9%, excluding
defaults. In addition nine collateral positions have had
downgrades indicating additional further credit deterioration in
the portfolio since Fitch's previous rating action.
Bleecker is considerably over-hedged and continues to suffer from
the low interest rate environment. There was an insufficient
amount of interest proceeds available on the July 1, 2004, and
Oct. 1, 2004, distribution dates to pay current class A-1 and
class A-2 note interest from the interest waterfall. Principal
proceeds in the amount of $626,371 and $719,397 were used to
remedy this shortfall. Additionally, on the July 1, 2004, and
Oct. 1, 2004, distribution dates there was insufficient interest
or principal collections to pay current interest on the class B
and class C notes.
As a result of this analysis, Fitch has determined that the
current ratings assigned to the class A-1, class A-2, and class B
notes no longer reflect the current risk to noteholders.
The rating of the class A-1, class A-2 and class B notes addresses
the likelihood that investors will receive full and timely
payments of interest, as per the governing documents, as well as
the stated balance of principal by the legal final maturity date.
The ratings of the class C notes address the likelihood that
investors will receive ultimate and compensating interest
payments, as per the governing documents, as well as the stated
balance of principal by the legal final maturity date.
Fitch will continue to monitor and review this transaction for
future rating adjustments.
CHESAPEAKE CORPORATION: Prices $85 Million of 7.20% Debentures
--------------------------------------------------------------
Chesapeake Corporation (NYSE: CSK) disclosed the pricing terms for
its previously announced cash tender offer to purchase any and all
of its outstanding $85 million aggregate principal amount of 7.20%
Debentures due March 15, 2005, (CUSIP #165159AF1) and solicitation
of consents to proposed amendments to the indenture governing the
debentures.
The consideration offered for each $1,000 principal amount of
debentures that were validly tendered and not withdrawn prior to
5:00 p.m., New York City time, on Dec. 2, 2004, shall be an amount
equal to:
(a) the present value on the initial payment date for the
offer of $1,000 (the amount payable on March 15, 2005,
which is the date that the debentures mature) plus the
present value of the interest that would be payable on,
or accrue from, the last interest payment date until the
maturity date, determined on the basis of a yield to the
maturity date equal to the sum of:
(x) the bid-side yield on the 1.500% U.S. Treasury Note
due February 28, 2005, calculated as of 2:00 p.m.,
New York City time, on December 6, 2004 plus
(y) 50 basis points, minus
(b) accrued and unpaid interest from the last interest
payment date to, but not including, the initial payment
date.
The consideration payable to holders that tendered on or prior to
the Consent Payment Deadline includes a consent payment of $10.00
per $1,000 principal amount of debentures. The consideration
offered for debentures that are validly tendered and not withdrawn
after the Consent Payment Deadline but before the expiration of
the offer will equal the forgoing consideration, minus the consent
payment.
As of the Price Determination Date, the bid-side yield on the
1.500% U.S. Treasury Note due February 28, 2005 was 2.176% and the
tender offer yield was 2.676%. The total consideration per $1,000
principal amount of debentures validly tendered prior to the
Consent Payment Deadline is $1,011.98, of which $10.00 is the
consent payment. Holders tendering their debentures after the
Consent Payment Deadline but on or prior to the expiration date
will receive the tender offer consideration of $1,001.98 per
$1,000 principal amount of debentures validly tendered, which does
not include the $10.00 consent payment.
In addition, holders whose debentures are validly tendered and
accepted for purchase will receive accrued and unpaid interest
from the last interest payment date to but not including the
applicable payment date. Holders who validly tendered their
debentures by the Consent Payment Deadline will receive payment on
the initial payment date, which is expected to be today,
Dec. 8, 2004.
The tender offer is being made pursuant to an Offer to Purchase
and Consent Solicitation Statement and a related Consent and
Letter of Transmittal, dated November 18, 2004. The tender offer
is scheduled to expire at 5:00 p.m., New York City time, on
December 20, 2004, unless extended or earlier terminated.
Chesapeake intends to pay amounts due in connection with the
tender offer and consent solicitation, together with related fees
and expenses, with the net proceeds from the previously announced
offering of euro 100 million principal amount of 7% Senior
Subordinated Notes due 2014. The offer is subject to the
satisfaction of certain conditions, including the company having
entered into arrangements satisfactory to it with respect to
financing sufficient to complete the tender offer, and other
customary conditions.
The exact terms and conditions of the tender offer and consent
solicitation are specified in, and qualified in their entirety by,
the Offer to Purchase and Consent Solicitation Statement and
related materials that have been distributed to holders of the
debentures, copies of which may be obtained from Global Bondholder
Services Corporation, the information agent for the offer, at
866-873-6300 (U.S. toll free) and 212-430-3774 (collect).
Chesapeake has engaged Banc of America Securities LLC to act as
the exclusive dealer manager and solicitation agent in connection
with the tender offer and consent solicitation. Questions
regarding the Offer may be directed to:
Banc of America Securities LLC
High Yield Special Products
888-292-0070 (U.S. toll-free)
704-388-9217 (collect)
About the Company
Chesapeake Corporation is a leading international supplier of
value-added specialty paperboard and plastic packaging with
headquarters in Richmond, Virginia. The company is one of
Europe's premier suppliers of folding cartons, leaflets and
labels, as well as plastic packaging for niche markets.
Chesapeake has more than 50 locations in Europe, North America,
Africa and Asia and employs approximately 6,100 people worldwide.
* * *
As reported in the Troubled Company Reporter on Dec. 3, 2004,
Moody's Investors Service rated Chesapeake Corporation's new
EUR100 million Senior Subordinated Notes B2. Chesapeake intends to
use the net proceeds from this issue to fund a tender offer of its
$85.0 million 7.2% senior unsecured debentures due March 15, 2005,
with the balance available for general corporate purposes which
may include funding near term debt maturities. Should the tender
offer be successful, Moody's will withdraw the applicable rating.
Moody's also affirmed Chesapeake's Ba3 senior implied and B1
senior unsecured and issuer ratings. The outlook remains stable.
CITIGROUP COMMERCIAL: S&P Puts Low-B Ratings on Six Cert. Classes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Citigroup Commercial Mortgage Trust 2004-C2's
$1.0 billion commercial mortgage pass-through certificates series
2004-C2.
The preliminary ratings are based on information as of
Dec. 6, 2004. Subsequent information may result in the assignment
of final ratings that differ from the preliminary ratings.
The preliminary ratings reflect the credit support provided by the
subordinate classes of certificates, the liquidity provided by the
trustee, the economics of the underlying mortgage loans, and the
geographic and property type diversity of the loans. Classes A-1,
A-2, A-3, A-4, A-5, A-1A, A-J, B, C, and D are currently being
offered publicly. The remaining classes will be offered
privately. Standard & Poor's analysis of the portfolio determined
that, on a weighted average basis, the pool has a debt service
coverage of 1.36x, a beginning LTV of 99.2%, and an ending LTV of
85.4%.
A copy of Standard & Poor's complete presale report for this
transaction can be found on RatingsDirect, Standard & Poor's
Web-based credit analysis system, at http://www.ratingsdirect.com/
The presale can also be found on the Standard & Poor's Web site at
http://www.standardandpoors.com/ Select Credit Ratings, and then
find the article under Presale Credit Reports.
Preliminary Ratings Assigned
Citigroup Commercial Mortgage Trust 2004-C2
Class Rating Amount ($)
A-1 AAA 44,979,000
A-2 AAA 110,215,000
A-3 AAA 65,639,000
A-4 AAA 32,298,000
A-5 AAA 440,496,000
A-1A AAA 130,764,000
A-J AAA 45,084,000
B AA 34,779,000
C AA- 10,304,000
D A 18,034,000
E A- 12,881,000
F BBB+ 12,881,000
G BBB 10,305,000
H BBB- 14,169,000
J BB+ 6,441,000
K BB 6,441,000
L BB- 5,152,000
M B+ 5,152,000
N B 3,865,000
O B- 3,864,000
P N.R. 16,746,931
R* N.R. N/A
Y* N.R. N/A
X-C** AAA 1,030,489,931
X-C** AAA 965,496,000
* Residual certificates
** Interest-only class with a notional dollar amount
N.R. - Not rated
COINSTAR INC: Offering 3 Million Common Shares in Public Offering
-----------------------------------------------------------------
Coinstar, Inc., (NASDAQ:CSTR) plans to offer 3,000,000 shares of
its common stock in an underwritten public offering.
J.P. Morgan Securities, Inc., and Banc of America Securities, LLC,
are acting as the representatives of the underwriters for the
offering. Coinstar, Inc. expects to grant the underwriters an
option to purchase 450,000 shares of common stock to cover
over-allotments.
A registration statement relating to these securities was filed
with the Securities and Exchange Commission on November 16, 2004,
and has since been declared effective. This offering will be made
pursuant to a prospectus supplement to the registration statement.
Copies of the preliminary prospectus relating to this offering of
common stock, when available, may be obtained from :
J.P. Morgan Securities, Inc.
Prospectus Department
One Chase Manhattan Plaza, Floor 5B
New York, NY 10081
Telephone: 212-552-5164
-- and --
Banc of America Securities LLC
Attn: Prospectus Department
100 West 33rd Street
New York, NY 10001
Telephone: 646-733-4166
Email: DL-ProspectusDistribution@bofasecurities.com
About the Company
Coinstar, Inc., (NASDAQ:CSTR) is a multi-national company offering
a range of coin counting, entertainment and electronic payment
services.
* * *
As reported in the Troubled Company Reporter on June 15, 2004,
Standard & Poor's Ratings Services assigned its 'BB-' corporate
credit rating to Coinstar Inc. The outlook is stable.
At the same time, Standard & Poor's assigned its 'BB-' bank loan
rating, as well as a recovery rating of '4', to Coinstar's
proposed $300 million senior secured credit facilities, comprising
a $250 million seven-year term loan due 2011 and a $50 million
five-year revolving credit facility due 2009. The '4' recovery
rating indicates the expectation for a marginal recovery of
principal (25%-50%) in the event of a default.
COMMERCE ONE: Sells 7 Web Service Patents to JGR for $15.5 Mil.
---------------------------------------------------------------
Commerce One, Inc., sought and obtained permission from the U.S.
Bankruptcy Court for the Northern District of California, San
Francisco Division, to sell seven patents relating to Web services
to JGR Acquisition, Inc., for $15.5 million.
JGR Acquisition, a newly formed subsidiary of Commerce One's
secured creditors Com Vest Investment Partners II LLC and DCC
Ventures, LLC, outbid eight other bidders.
Web services are programmatic interfaces that can seamlessly
travel among diverse networks and diverse applications and
languages. Web services provide a standard way to interoperate
among diverse software applications that run on diverse platforms.
According to Wintergreen Research, in 2003, the Web services
market, excluding portals, accounted for $208 million in revenue
and could have a compound average growth rate of as much as 52%
from 2003 through 2008.
The Company developed an important patent portfolio for the
emerging Web services market. This portfolio includes seven
issued U.S. patents and 30 U.S. patent applications. United
States Patent and Trademark Office records show that five of
Commerce One's patents are:
Patent No. Title
---------- -----
6,751,600 Method for automatic categorization of items
6,591,260 Method of retrieving schemas for interpreting
documents in an electronic commerce system
6,542,912 Tool for building documents for commerce in
trading partner networks and interface definitions
based on the documents
6,226,675 Participant server which process documents for
commerce in trading partner networks
6,125,391 Market makers using documents for commerce in
trading partner networks
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 its wholly owned subsidiary, Commerce One
Operations, Inc., filed for chapter 11 protection on
Oct. 6, 2004 (Bankr. N.D. Calif. Case Nos. 04-32820 and 04-32821).
Doris A. Kaelin, Esq., and Lovee Sarenas, Esq., at the Murray and
Murray, represent the Debtors. When the Debtors filed for
bankruptcy, they listed $14,531,000 in total assets and
$12,442,000 in total debts. As of December 2, 2004, Commerce One
estimates that its liabilities owed to creditors total
approximately $9.7 million, including approximately $5.1 million
owed to ComVest. The company expects that total liabilities will
continue to increase over time.
COMMUNITY HEALTH: Moody's Puts B3 Rating on $250M Sr. Sub. Notes
----------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to Community Health
Systems' new $250 million senior subordinated notes due 2012,
issued at the parent holding company, Community Health Systems,
Inc. The debt issuance will be used to pay down the $240 million
balance on its revolving credit facility that the company drew
down following a repurchase and retirement of approximately half
of the 23.1 million shares sold by affiliates of Forstmann Little
& Co. on September 21, 2004. Forstmann Little, which had been
Community Health's principal stockholders since 1996, sold all of
its beneficial ownership in the company at that time.
Ratings assigned:
-- Community Health Systems, Inc. (Parent Holding Co)
* $250 million Senior Subordinated Notes due 2012 -- rated
B3
Ratings Affirmed:
-- CHS/Community Health Systems, Inc. (Intermediate Holding Co)
* $1.2 Billion Senior Secured Term Loan B due 2011 -- rated
Ba3
* $425 Million Senior Secured Revolver due 2009 -- rated Ba3
-- Community Health Systems, Inc. (Parent Holding Co)
* $287.5 Million 4.25% Convertible Subordinated Notes due
2008, rated B3
* Senior Implied Rating -- Ba3
* Senior Unsecured Issuer Rating -- B2
* Outlook -- stable
The ratings reflect:
(1) high leverage following the transaction;
(2) the company's acquisitive nature and its tendency to
acquire under-performing facilities;
(3) the company's aggressive attitude toward shareholder
initiatives, specifically the recent retirement of
approximately 12 million shares following Forstmann
Little's sale of its stake;
(4) increasing bad debt expense and softening utilization
trends across the industry;
(5) the possibility that reimbursement rates will come under
pressure; and
(6) the increasing cost of expenses (malpractice and labor).
The ratings also reflect:
(1) Community Health's favorable operating history and its
ability to turn around operating margins at acquired
facilities;
(2) the company's diverse portfolio;
(3) limited competition (sole provider status in 85% of its
markets); and
(4) stable credit metrics despite an increase in absolute debt.
The stable outlook anticipates continued favorable performance at
the company. Moody's expects the company's revenues, operating
profits and cash flow to continue to exhibit solid growth,
although at a slower rate because of the company's larger size and
lower expected contribution from acquisition activity. The
company should continue to generate strong cash flow and good free
cash flow. However, free cash flow will likely be insufficient to
fund the company's acquisition program. As a result, Moody's does
not expect Community Health to deleverage over the near term.
Given this expectation, Moody's believes that there will likely be
limited upward momentum for the ratings.
If the company's credit profile improves more than we anticipate,
Moody's may consider upgrading the ratings. Specifically, Moody's
notes that Community Health will need to generate sustained
adjusted free cash flow coverage of adjusted debt (adjusted for
operating leases) of 10-15%. Moody's will also consider the level
of risk associated with the company's strategy, especially with
respect to the aggressiveness of the company's acquisition
program, in determining whether to upgrade the ratings.
Moody's may consider downgrading the company's outlook or ratings
if the company's credit metrics deteriorate as a result of a
combination of several factors, including a decline in admission
trends, a continued increase in bad debt expense, and aggressive
acquisition activity.
Pro forma for the new subordinated notes, the company would have
had moderate cash flow coverage of debt for the last twelve-month
period ended September 30, 2004. Adjusted cash flow from
operations to adjusted debt would have been approximately 15%.
With capital expenditures (including routine and replacement
capex) at approximately 5% of net revenue, adjusted free cash flow
coverage of debt would have been approximately 8%. Interest
coverage (EBIT to interest) for the pro forma twelve months ended
September 30, 2004 would have been strong at 3.5 times. EBITDA
coverage of interest would have been 5.2 times. Leverage
(adjusted debt to EBITDAR) would have been high for the Ba3
category at 4.3 times. Moody's notes that the use of EBITDA and
related EBITDA ratios as a single measure of cash flow without
consideration of other factors can be misleading.
Moody's affirms Community Health's speculative grade liquidity
rating at SGL-2. Moody's projects that over the next twelve
months ending December 31, 2005, the company will generate strong
cash flow from internal sources, with adjusted cash flow from
operations to adjusted debt in the 15% range and adjusted free
cash flow to adjusted debt of approximately 8%.
Internal cash flow is expected to fund all working capital and
maintenance capital expenditures; however it is not expected to
cover acquisitions. Moody's projects that the company will have
cash flow from operations of approximately $335 million for the
fiscal year ending December 31, 2005. Moody's expects maintenance
capital expenditures to remain at the historical level of
approximately 5% of net revenue, resulting in free cash flow of
approximately $150 million. Moody's projects approximately
$200 million in acquisition activity over the next twelve months.
Therefore, it is possible that the company will draw down on its
$425 million revolving credit facility.
However, taking into account access to the revolver, free cash
flow and available cash, the company will have very good liquidity
over the next twelve months, culminating in over $500 million
available at December 31, 2005. Moody's projects Community Health
will have an adequate cushion against the financial covenants in
the company's bank credit facility, and therefore the covenants
will not strain the liquidity position of the company.
The senior subordinated notes are three notches below the senior
implied, due to structural subordination, a lack of guarantees and
the unsecured nature of the bonds. The rating remains subject to
Moody's final review of documentation.
Community Health Systems, Inc., headquartered in Brentwood,
Tennessee, is a leading non-urban provider of general hospital
healthcare services in the U.S. At September 30, 2004, the
company operated 72 facilities across 22 states. For the LTM
period ended September 30, 2004, the company reported net revenues
of $3.3 billion.
COOPER-STANDARD: S&P Rates Planned $475M Sr. Sec. Facility at BB-
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB-' corporate
credit rating to Cooper-Standard Automotive, Inc. Standard &
Poor's also assigned its 'BB-' rating to Cooper-Standard's
proposed $475 million senior secured credit facility and a
recovery rating of '2', indicating the likelihood of substantial
recovery of principal (80%-100%) in event of default or
bankruptcy.
At the same time, Standard & Poor's assigned its 'B' rating to
Cooper-Standard's proposed $200 million senior unsecured notes
because of the substantial amount of priority liabilities in the
company's capital structure. Standard & Poor's assigned its 'B'
debt rating to the proposed $350 million senior subordinated notes
because of their contractual subordination. The outlook on Novi,
Michigan-based Cooper-Standard is stable.
"High leverage and exposure to the cyclical and competitive
automotive original equipment market restrict upside ratings
potential," said Standard & Poor's credit analyst Nancy Messer.
"Downside risk is limited by Cooper-Standard's leading market
positions, free cash flow generation, and our expectation that
acquisitions will be modest and financed in a manner consistent
with the existing ratings."
Cooper-Standard is a global manufacturer of fluid-handling
systems, body-sealing systems, and active and passive vibration
control systems for the automotive industry.
The senior credit facilities consist of:
-- $125 million revolving credit facilities due 2010,
consisting of a $25 million multi-currency facility
denominated in U.S. and Canadian dollars and a
US$100 million facility.
-- C$50 million term loan A due 2010.
-- US$115 million term loan B due 2011.
-- US$185 million term loan C.
The borrowers are Cooper-Standard Automotive, Inc., and
Cooper-Standard Automotive Canada Ltd. Proceeds from the
transaction will be used, in part, to finance the acquisition of
Cooper-Standard by unrated GS Capital Partners 2000 LP -- GSCP --
and Cypress Group LLC from by Cooper Tire & Rubber Co. (BBB/Watch
Neg/A-2). GSCP and Cypress, combined, will invest $318 million of
cash common equity. Pro forma total debt outstanding at close of
the transaction will be about $911 million.
DELHAIZE AMERICA: Moody's Ratings Outlook Turns Positive
--------------------------------------------------------
Moody's Investors Service affirmed the Ba1 senior implied and
other ratings of Delhaize America, Inc., but changed the rating
outlook to positive from stable.
The outlook change is based on:
(1) Moody's expectations that the company will be able to
sustain its solid comparable store sales increases;
(2) that revenues, profitability and cash flow could further
improve as a result of operating and investment
initiatives; and
(3) that a conservative financial policy characterized by ample
liquidity will be maintained.
Ratings affirmed:
* Senior implied at Ba1
* Senior unsecured and Medium Term Notes at Ba1
* Senior unsecured shelf at (P)Ba1.
* Issuer rating at Ba2.
* Speculative Grade Liquidity Rating at SGL-1.
The long-term ratings of Delhaize America, Inc., reflect the
company's extensive East Coast franchise, solid free cash flow,
and the benefits of initiatives to grow revenues and profitability
while some southeastern competitors are constrained in their
ability to react. They also incorporate Delhaize America's very
good liquidity as evidenced by its SGL-1 rating. The ratings also
reflect the intense competition in all of the Delhaize America's
major trade areas, the impact on consolidated performance of the
slow demographic growth in the Northeast, and event risk from both
acquisition opportunities and the potential cash demands of a
foreign parent.
Strongly positive comparable store sales increases, further
improvement in profit margins and solid performance at the Kash n'
Karry subsidiary would put upward pressure on the ratings. An
upgrade would also require adjusted debt to EBITDAR below 3 times
(versus nearly 4 times at fiscal year end 2003 and 3.54 times for
12 months ended October 2004), fixed charge coverage of at least
3.75 times (3.1 and 3.5 respectively) and retained cash flow plus
2/3rd rent to adjusted debt of at least 20% (15.6% and 18%
respectively). Given the change in outlook, a ratings downgrade
is unlikely. Over the longer term, ratings could be lowered if
comparable store sales become severely negative or margins erode
materially. Ratings could also be downgraded if fixed charge
coverage falls below 2 times, if adjusted debt to EBITDAR rises
above 4.25 times or if retained cash flow plus 2/3rd rent to
adjusted debt is less than 13%.
Delhaize America, a wholly owned subsidiary of Belgium's Delhaize
Group, operates about 1494 supermarkets along the populous Eastern
seaboard. Operations are concentrated in the Carolinas and
Virginia in the Food Lion format (81.3% of total stores), in
Florida with the Kash n' Karry -- KNK -- low cost banner (6.9%)
and in Hannaford's large store format in New England (8.2%). The
October 2003 acquisition of Harvey's 54 stores (3.6%) greatly
increased DZA's coverage of the important Georgia market. The
purchase of Victory Super Markets (19 stores) in Massachusetts and
New Hampshire and the recently announced agreement to acquire
10 Winn-Dixie stores in North Carolina and Virginia will increase
penetration in important trade areas. Delhaize America's
Northeastern operations are in generally over-stored markets, and
its Southeastern stores compete against Wal-Mart and some superior
operators such as Publix. Nonetheless, Delhaize America's
comparable store sales increases have exceeded those of most major
supermarket chains in the last several quarters, an especially
noteworthy achievement given that Delhaize America's stores do not
sell gasoline. (Fuel has been a material contributor to anemic
comparable store sales gains at far larger and more diversified
supermarkets.) Certainly, the company's remodeling efforts,
Hannaford's prominent position, and the challenges facing some
Southeastern competitors like Winn-Dixie have all contributed to
Delhaize America's solid comparable store sales performance.
However, competition is expected to remain fierce for the
foreseeable future in all of the company's major markets, and will
continue to pressure Delhaize America's ability to maintain
healthy revenues and operating margins.
A number of strategic initiatives, especially at Delhaize
America's largest division, are being implemented to boost sales
and profitability at the expense of some less well capitalized
contenders. Food Lion's Market Renewal program remodels all of
the stores in an entire trade area at the same time to maximize
customer reaction. Two markets have been renewed, and a third is
in progress. Cost reductions at Food Lion of $100 million in
2003, from the closing of 44 underperforming stores, have funded
investment in lower retail prices to spur revenue growth. In
addition, Food Lion and KNK have adopted Hannaford's inventory
system that allows for better margin analysis, shrink control and
inventory management. Underperformer KNK launched a new strategy
in 2003 to improve its merchandise and execution. Its initiatives
include offering only the best fresh products, adding a natural
and organic department to its stores, and broadening the deli
offerings. All KNK stores will be re-branded as Sweetbay
Supermarket over the next three years to underscore this new
strategy. In early 2004, DZA also closed 34 KNK stores, exiting
eastern Florida. Hannaford, a consistently strong performer, has
fine-tuned its appeal with a "Festival" initiative, a better
assortment of products in a pleasing shopping environment. All
these efforts are strategically sound, but could take time to
yield desired results.
Comparable store sales rose only 0.6% in fiscal 2003. 'Comps'
become stronger in fiscal 2004 -- up 2.5% in the first quarter,
1.4% in the second, and 1.7% in the third -- as the company's
numerous 2003 initiatives gained traction. The apparent decline
in margins in fiscal 2003 is due primarily to the charge of $87.3
million (56 basis points of sales) in cost of goods sold related
to the change in inventory valuation methods. When the charge is
excluded, margins for fiscal 2003 were predominantly unchanged
from fiscal 2002. Profit margins were up for the 12 months ending
October 2, 2004, despite the promotional activities of
competitors. Delhaize America, because of Hannaford, has one of
the highest margins in the supermarket industry. As a
consequence, operations generate cash well in excess of aggressive
capital expenditures and acquisitions, allowing Delhaize America
to remain very liquid. Cash balances of $725 million at the end
of the recent third fiscal quarter can easily fund the company's
next material debt payment ($600 million in April 2006). Moody's
anticipates that shareholder enhancement, if any, will be moderate
and that acquisitions will be manageable in terms of consideration
and integration challenges.
Delhaize America is a holding company, with operations conducted
in its wholly owned subsidiaries Food Lion, Kash n' Karry,
Hannaford, and Harvey's. Funded debt is and will continue to be
concentrated at the holding company. Each material subsidiary
guarantees both Delhaize America's public debt and its unrated
bank agreement. The $350 million bank revolving credit agreement
expires in July 2005 and is secured by the inventory of certain
subsidiaries. There were no borrowings under this facility in
fiscal 2003 or in fiscal 2004 to date. Moody's expects that the
company will renew this facility well in advance of expiration.
Headquartered in Salisbury, North Carolina, Delhaize America,
Inc., operates about 1494 supermarkets under the Food Lion,
Hannaford, Kash n' Karry and Harvey's banners along the East Coast
of the United States.
DII INDUSTRIES: Bankr. Court Approves Lumbermens Settlement Pact
----------------------------------------------------------------
At DII Industries, LLC and its debtor-affiliates' request, the
United States Bankruptcy Court for the Western District of
Pennsylvania approves a settlement agreement between the Debtors
and Halliburton Company, on one hand, and Lumbermens Mutual
Casualty Company, on the other hand.
The Settlement Agreement releases and terminates all rights,
obligations, and liabilities that Lumbermens Mutual may owe the
Debtors or Halliburton concerning certain insurance policies
issued by Lumbermens in consideration of a $1,400,000 buy-out
payment from Lumbermens to DII Industries, LLC.
Because Lumbermens believes that its policies presented unique
issues that were not adequately addressed by the settlement
agreement between Halliburton, DII, KBR, Inc., and a group of more
than 50 insurance companies, a separate Buy-out Payment was
negotiated with Lumbermens, Jeffrey N. Rich, Esq., at Kirkpatrick
& Lockhart, LLP, in New York, explains.
In return for the Buy-out Payment -- which will be paid on the
same date that the first wave of carrier payments are due to DII
under the final version of the Domestic Settlement Agreement --
all matters as to Halliburton, DII, KBR, and Lumbermens will
proceed and be determined and governed precisely as if Lumbermens
had been another carrier signatory to the Domestic Settlement
Agreement. The Lumbermens Settlement Agreement incorporates by
reference the final terms of the Domestic Settlement Agreement.
This includes, without limitation, a "policy buyback" of the
Lumbermens Policies to the extent that they qualify as "Buyback
Policies".
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. 22;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
DLJ COMMERCIAL: Moody's Junks Three Certificate Classes
-------------------------------------------------------
Moody's Investors Service upgraded the ratings of six classes,
affirmed the ratings of five classes and downgraded the ratings of
three classes of DLJ Commercial Mortgage Corp., Commercial
Mortgage Pass-Through Certificates, Series 1999-CG3 as follows:
-- Class A-1A, $77,504,698, Fixed, affirmed at Aaa
-- Class A-1B, $509,118,000, Fixed, affirmed at Aaa
-- Class S, Notional, affirmed at Aaa
-- Class A-1C, $17,716,000, Fixed, upgraded to Aaa from Aa1
-- Class A-2, $25,000,000, Fixed, upgraded to Aaa from Aa2
-- Class A-3, $49,461,000, Fixed, upgraded to A1 from A2
-- Class A-4, $13,489,000, Fixed, upgraded to A2 from A3
-- Class A-5, $15,738,000, Fixed, upgraded to A3 from Baa1
-- Class B-1, $17,986,000 WAC, upgraded to Baa1 from Baa2
-- Class B-2, $15,737,000, WAC, affirmed at Baa3
-- Class B-4, $13,489,000, Fixed, affirmed at Ba2
-- Class B-7, $8,993,000, Fixed, downgraded to Caa1 from B2
-- Class B-8, $8,993,000, Fixed, downgraded to Caa2 from B3
-- Class C, $4,497,000, Fixed, downgraded to Ca from Caa2
As of the November 10, 2004 distribution date, the transaction's
aggregate balance has decreased by approximately 7.3% to
$834.0 million from $899.3 million at securitization. The
Certificates are collateralized by 154 mortgage loans secured by
commercial and multifamily properties. The pool includes two
shadow rated loans, representing 9.1% of the pool, and a conduit
component, representing 90.9% of the pool. The conduit loans
range in size from less than 1.0% of the pool to 5.6%, with the
top 10 conduit loans representing 35.5% of the outstanding
balance. Six loans, representing 7.3% of the pool, have defeased
and have been replaced with U.S. Government securities. The
largest defeasance is the Alliance Portfolio Loan ($36.6 million
-- 4.4%), the pool's third largest loan. Three loans have been
liquidated from the pool, resulting in aggregate realized losses
of approximately $2.1 million.
Six loans, representing 3.1% of the pool, are in special
servicing. Moody's has estimated aggregate losses of
approximately $8.5 million for all of the specially serviced
loans.
Moody's was provided with year-end 2003 borrower financials for
95.7% of the pool's performing loans. Moody's loan to value ratio
-- LTV -- for the conduit portion is 86.9%, compared to 87.7% at
securitization. The upgrade of Classes A-1C, A-2, A-3, A-4, A-5
and B-1 is due to increased subordination levels, stable pool
performance and a relatively high percentage of defeased loans.
The downgrade of Classes B-7, B-8 and C is due to realized and
expected losses from the specially serviced loans and LTV
dispersion. Based on Moody's analysis, 13.5% of the conduit pool
has a LTV greater than 100.0%, compared to 1.0% at securitization.
The largest shadow rated loan is the LaSalle Hotel Portfolio Loan
($42.7 million -- 5.1%), which consists of two cross
collateralized loans secured by hotel properties. The largest
property is the Sheraton Bloomington Hotel (formerly the Radisson
South), a 565-room convention hotel located in Bloomington,
Minnesota. The hotel's performance has declined since
securitization due to decreased revenue and increased expenses.
RevPAR for year-to-date period ending August 2004 is $56.82,
compared to $66.60 at securitization. The second property is the
Westin City Center Hotel (formerly Le Meridien Hotel), a 407-room
full service hotel located in Dallas, Texas. The hotel's
performance has declined slightly since securitization. RevPAR
for the year-to-date period ending August 2004 is $76.02, compared
to $78.08 at securitization. The aggregate net cash flow for the
two properties has declined by 13.0% since securitization.
Moody's current shadow rating is Ba2, compared to Ba1 at
securitization.
The second shadow rated loan is the Westin Resort Hilton Head
Island Loan ($33.2 million -- 4.0%), which is secured by a 412-
room luxury resort located in Hilton Head, South Carolina. RevPAR
for the year-to-date period ending June 2004 is $110.54, compared
to $109.32 at securitization. Although revenue has been fairly
stable since securitization, the hotel's performance has been
impacted by a significant increase in operating expenses. The
property's net cash flow has declined more than 25.0% since
securitization. Moody's current shadow rating is Baa3, compared
to A2 at securitization.
The top three conduit loans represent 13.5% of the pool. The
largest conduit loan is the 45 Broadway Loan ($47.0 million
-- 5.6%), which is secured by a 365,000 square foot Class B+
office building located in the lower Manhattan. The property is
largely occupied by small and medium sized tenants with the
largest tenant occupying 7.0% of the property. Occupancy has
declined since securitization to 88.0% from 98.0%, but this
decline has been offset by increased rents. Moody's LTV is 88.4%,
compared to 89.1% at securitization.
The second largest conduit loan is the South Shore Beach and
Tennis Club Loan ($35.3 million -- 4.0%), which is secured by a
450-unit multifamily project located in Alameda, California. The
property has maintained a stable occupancy since securitization,
at approximately 96.0%, and has benefited from increased rental
rates. Moody's LTV is 71.4%, compared to 82.5% at securitization.
The third largest conduit loan is the Two Penn Center Plaza Loan
($32.1 million -- 3.9%), which is secured by a 500,000 square foot
Class B office building located in Center City Philadelphia. The
property is occupied by small and medium sized tenants with the
largest tenant occupying 5.0% of the property. Occupancy as of
June 2004 is 77.0%, compared to 89.0% at securitization. The
decline in occupancy has been largely offset by increased rental
rates. Moody's LTV is 89.4%, compared to 88.9% at securitization.
The pool collateral is a mix of:
* multifamily (32.9%),
* office (20.9%),
* retail (20.7%),
* hotel (11.4%),
* U.S. Government securities (7.3%),
* mixed use (3.5%), and
* industrial and self storage (3.3%).
The collateral properties are located in 37 states plus the
District of Columbia. The top five state concentrations are:
* California (18.5%),
* Texas (11.0%),
* New York (10.6%),
* Illinois (5.3%), and
* Pennsylvania (4.8%).
All of the loans are fixed rate.
DUKE FUNDING: Moody's Reviewing Ratings & May Downgrade
-------------------------------------------------------
Moody's Investors Service reported that as part of the rating
monitoring process it has placed these Classes of Notes and
Preference Shares issued by Duke Funding II, Ltd., a
collateralized debt obligation issuance, on the Moody's watchlist
for possible downgrade:
* $6,000,000 Class C-1 Mezzanine Secured Floating Rate Notes
due 2036 currently rated Baa2.
* $8,000,000 Class C-2 Mezzanine Secured Fixed Rate Notes due
2036 currently rated Baa2.
* $4,000,000 Class D Subordinate Secured Fixed Rate Notes due
2036 currently rated Ba3.
* $5,000,000 Class 1 Pass-Through Notes due 2036 currently
rated Ba3 (as to the ultimate receipt of payments on the
Class 1 Rated Balance calculated using a discount factor of 5
per cent per annum).
* 9,600 Preference Shares U.S. ($9,600,000 Aggregate
Liquidation Preference) currently rated Ba3 (as to the
payment of the liquidation preference).
Moody's noted that the transaction, which closed in October of
2001, is currently failing the Moody's Maximum Rating Distribution
Test and has experienced loss of overcollateralization in the past
several months. Moody's explained that placement on the watchlist
is designed to inform investors that in Moody's opinion the credit
quality of the Class C Notes, the Class D Notes, the Pass-Through
Notes and Preference Shares may be deteriorating.
Rating Action: Placement on Moody's Watchlist for possible
downgrade
Issuer: Duke Funding II, Ltd.
The ratings of these Classes of Notes and Preference Shares have
been placed on the Moody's Watchlist for possible downgrade:
Class Description: U.S. $6,000,000 Class C-1 Mezzanine Secured
Floating Rate Notes due 2036 rated Baa2.
U.S. $8,000,000 Class C-2 Mezzanine Secured
Floating Rate Notes due 2036 rated Baa2.
U.S. $4,000,000 Class D Subordinate Secured
Fixed Rate Notes due 2036 rated Ba3.
U.S. $5,000,000 Class 1 Pass-Through Notes due
2036 rated Ba3 (as to the ultimate receipt of
payments on the Class 1 Rated Balance
calculated using a discount factor of 5 per
cent per annum).
9,600 Preference Shares (U.S. $9,600,000
Aggregate Liquidation Preference) rated Ba3 (as
to the payment of the liquidation preference).
FEDERAL-MOGUL: Has Until April 1 to Make Lease-Related Decisions
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extended
the time within which Federal-Mogul Corporation and its debtor-
affiliates may elect to assume, assume and assign, or reject
non-residential real property leases, through and including the
earlier of:
(a) the Effective Date of their Third Amended Joint Plan of
Reorganization; or
(b) April 1, 2005.
James E. O'Neill, Esq., at Pachulski Stang Ziehl Young Jones &
Weintraub, in Wilmington, Delaware, asserted that the requested
extension will preserve the Debtors' maximum flexibility in
restructuring their business. Circumstances may arise during the
pendency of the Debtors' Chapter 11 cases that will cause the
Debtors to rethink the need to continue leasing a particular
facility or their decision to reject a given Real Property Lease.
Mr. O'Neill assured the Court that there should be no prejudice to
the lessors under the Real Property Leases as a result of the
requested extension. Pending their election to assume or reject
the Real Property Leases, the Debtors will perform all of their
obligations arising from and after the Petition Date in a timely
fashion, including payment of postpetition rent due, as required
by Section 365(d)(3) of the Bankruptcy Code.
Headquartered in Southfield, Michigan, Federal-Mogul Corporation
-- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some
$6 billion. The Company filed for chapter 11 protection on
October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J.
Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at
Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at
Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $10.15 billion in
assets and $8.86 billion in liabilities. (Federal-Mogul
Bankruptcy News, Issue No. 68; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
FOXHOLLOW TECH: Sept. 30 Balance Sheet Upside-Down by $59.2 Mil.
----------------------------------------------------------------
FoxHollow Technologies, Inc. (Nasdaq: FOXH), reported financial
results for the third quarter and the nine-month period ended
September 30, 2004. The Company also announced the filing of its
Quarterly Report with the Securities and Exchange Commission on
Form 10-Q.
Net revenue in the third quarter of 2004 was $11.6 million, a 55%
increase over the $7.5 million reported for the second quarter of
2004. For the third quarter of last year, net revenue was
$650,000. Net revenue is derived from sales of the Company's
SilverHawk(TM) Plaque Excision System, a minimally invasive device
for the treatment of peripheral artery disease -- PAD.
The Company reported a net loss of $7.4 million, or $6.83 per
share, in the third quarter of 2004, compared with a net loss of
$8.8 million for the second quarter of 2004 and $3.2 million for
the third quarter of 2003. Included in these results are
non-cash, stock-based compensation expenses of $1.8 million for
the third quarter of 2004, $1.2 million for the second quarter of
2004 and $385,000 for the third quarter of 2003.
Robert Thomas, President and Chief Executive Officer, stated, "We
are very pleased with FoxHollow's accomplishments during the third
quarter. In addition to the continued robust growth in SilverHawk
sales, we also saw significant increases in our gross margin and
manufacturing capacity."
"Six-month follow up data from TALON, a national outcomes study,
was presented for the first time and showed a clinical
reintervention rate among the 162 lesions treated with the
SilverHawk of 11%, a very compelling outcome compared to
traditional treatments for PAD. This data, along with favorable
reimbursement and procedural ease, will further accelerate market
penetration," he added.
For the nine months ended September 30, 2004, FoxHollow's net
revenue was $23.9 million, compared with $876,000 recorded in the
same period last year. The Company's net loss for the nine months
ended September 30, 2004 was $22.4 million, compared with
$9.3 million for the corresponding period in the prior year.
Included in these results are non-cash, stock-based compensation
expenses of $4.0 million for the first nine months of 2004 and
$939,000 for the corresponding period of 2003.
As of September 30, 2004 the Company's cash, cash equivalents and
short-term investments balance was $12.6 million. On
October 28, 2004, the Company sold 4.5 million shares of its
common stock at $14.00 per share in its initial public offering.
Additionally, on October 29, 2004, the underwriters exercised
their over-allotment option to purchase 675,000 shares at $14.00
per share. Proceeds from the offering after deducting
underwriting discounts and commissions but before expenses were
$67.4 million.
At Sept. 30, 2004, FoxHollow Tech's balance sheet showed a
$59,241,000 stockholders' deficit, compared to a $41,109,000
deficit at Dec. 31, 2003.
About the Company
FoxHollow Technologies, Inc. -- http://www.foxhollowtech.com/--
develops and markets minimally invasive plaque excision devices
for the treatment of peripheral artery disease. An estimated
12 million people in the U.S. are thought to suffer from PAD with
2.5 million patients currently diagnosed. PAD results from plaque
that accumulates in the arteries and blocks blood flow in the
legs. These blockages can result in severe pain for patients and
very limited physical mobility. The SilverHawk System is a
minimally invasive method of removing the obstructive plaque and
restoring blood flow to the legs and feet.
GREYHOUND LINES: S&P Raises Corporate Credit Rating to CCC+
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on Greyhound Lines, Inc., to 'CCC+' from 'CCC' and removed
it from CreditWatch, where it was placed July 13, 2004. The
senior unsecured debt rating was raised to 'CCC-' from 'CC', and
also removed from CreditWatch. The outlook is now developing.
The Dallas, Texas-based intercity bus company has about $395
million of lease-adjusted debt.
"The rating actions reflect positive developments at the company
over the past few quarters, including the ratification of new
labor contracts, the successful renegotiation of Greyhound's
credit facility, and improved operating performance," said
Standard & Poor's credit analyst Lisa Jenkins. "However, the scope
of the upgrade was limited by continuing concerns regarding
competitive pressures, high debt leverage, and the potential for
adverse financial consequences related to a recently disclosed
default judgment rendered against the company." Greyhound is
owned by Laidlaw International, Inc. (BB/Stable/--). Laidlaw does
not guarantee Greyhound's debt and its financial support of
Greyhound is limited to just $15 million.
Greyhound, the nation's largest intercity bus company, provides
service to more than 2,200 destinations, with a fleet of
approximately 2,800 buses. It faces intense competition from
airlines offering low fares, automobile travel and, in certain
markets, trains and lower-cost regional bus lines. Management
acknowledges the need to improve the financial performance of the
company, which has been quite weak for the past few years. It has
increased its focus on yields and reduced passenger miles in
long-haul markets. In July 2004, management announced a
long-range strategy to improve operating performance. Full
implementation of the strategy will likely take two to three
years. The first phase, which began in August 2004, involves the
establishment of a smaller, simpler network of routes in the
northwestern region of the U.S.
Greyhound recently announced that it has become aware of
proceedings seeking to enforce a default garnishment judgment. The
garnishment alleges that Greyhound is liable in an underlying
default judgment in the amount of over $15 million. Greyhound has
stated that it intends to vigorously defend its interests in the
litigation. Unless it is declared void, stayed, bonded, or paid,
the default judgment could be deemed an event of default under the
revolving credit facility. To date, Greyhound's lenders have
indicated that they do not wish to claim a default and have not
given any notice of default or accelerated repayment. Any
accelerated repayment could trigger defaults under Greyhound's
other debt agreements.
If Greyhound successfully resolves the default judgment issue
without jeopardizing its financial strength and continues to
benefit financially from restructuring actions, ratings could be
reviewed for a modest upgrade. If Greyhound were to lose access
to funding as a result of the default judgment or if financial
performance were to come under renewed pressure, ratings could be
reviewed for a downgrade.
H-LINES FINANCE: Moody's Junks Planned $110M Senior Discount Notes
------------------------------------------------------------------
Moody's Investors Service has assigned a Caa2 rating to H-Lines
Finance Holding Corp.'s proposed $110 million in aggregate gross
proceeds senior discount notes -- Hold Co Notes, due 2012. The
purpose of the proposed notes is to finance a $51 million capital
distribution to all shareholders and satisfy a $50 million bridge
loan, which the primary equity sponsor, Castle Harlan Partners IV,
L.P., has kept in place since its acquisition of the company in
July 2004. On close of the transaction, the company will have
about $76 million of equity in its capital structure (11% of total
capital). Also, Moody's has assigned a B2 senior implied and a
Caa2 senior unsecured issuer rating to H-Lines Finance, while
withdrawing the senior implied and issuer ratings from H-Lines
Finance's principal operating company Horizon Lines, LLC. In
addition, the rating agency has affirmed currently rated financial
securities issued by Horizon Lines, LLC, as follows:
* $25 million senior secured revolving credit facilities due
2009 of B2
* $250 million senior secured term loan B due 2011 of B2, and
* $250 million senior unsecured notes due 2012 of B3
The ratings outlook is stable.
The stable outlook reflects Moody's expectations that leverage
will remain high over the next few years, although a stable
operating environment is expected to result in a modest amount of
free cash flow generation that could be applied to reduce debt
balances over time. Ratings could be subject to downward revision
if competitive pressures increase in any of Horizon Lines' core
shipping markets, decreasing revenues and margins, or if the
company were to substantially further increase debt levels to
expand or renew its vessel fleet, such that lease-adjusted debt
were to exceed 7x EBITDAR, or if EBIT coverage of interest expense
were to fall below 1.5x. Conversely, the rating outlook could
improve if stronger than expected operating performance were to
allow the company to repay debt more quickly than expected,
reducing leverage (lease-adjusted debt/EBITDAR) to below 5x for a
sustained period.
Upon close of the proposed transaction, H-Lines Finance will be a
heavily levered company. With total debt of $611 million, this
represents about 5.3x pro forma LTM September 2004 EBITDA.
However, as the company operates with a considerable level of long
term operating leases (five of the company's 16 vessels are
leased), Moody's estimates H-Lines Finance's lease-adjusted
debt/EBITDAR is over 6x. Because the new Hold Co Notes accrue
interest rather than pay cash for the next three years, the
company's liquidity and cash generation profile will initially be
unaffected by this transaction. LTM EBIT represents about 2x pro
forma cash interest expense, and free cash flow for the same
period represents about 7% of total debt, both of which are
appropriate for this rating category. Still, as Hold Co Notes
accrete interest, the company's debt levels will likely increase
over the next few years unless Horizon Lines' free cash generation
were sufficient to pre-pay the operating subsidiary's debt to
offset the Hold Co Notes accretion. Moody's would be particularly
concerned if, considering the age of Horizon Lines' fleet, the
operating company's CAPEX or drydock expenditures were to increase
to a point where the company would need to raise additional debt,
or if H-Lines Finance were to use leverage to make additional
distributions to the equity sponsor.
The ratings continue to be supported by the reliable revenue base
and stable operating margins that Horizon should continue to enjoy
due to its protected niche market position in the U.S.-flag
shipping sector. Jones Act restrictions on foreign-owned tonnage
effectively eliminate competition from non-U.S. operators in the
company's main Puerto Rico, Alaska, and Hawaii/Guam trade routes.
Moreover, Horizon management has shown positive results from cost-
reduction measures recently implemented, which should further
support margin stability and improvement.
The Caa2 rating assigned to H-Lines Finance's proposed
$110 million notes, three notches below the senior implied rating
and two notches below the existing Horizon Lines senior unsecured
notes, reflects the structural subordination of these notes to
$501 million of committed debt issue by H-Lines Finance's
principal operating company, Horizon Lines, LLC. The existing
Horizon Lines debt is guaranteed by all of the company's
subsidiaries, while the new Hold Co notes will not be guaranteed
by any of the company's subsidiaries. Moreover, none of H-Lines
Finance's subsidiaries, including Horizon Lines, LLC, are required
to make payments to the parent company to support these notes,
while restricted payment provisions in the existing Horizon Lines
notes' indenture could potentially hinder the distribution of
required funds to the parent company for cash payment of interest
on Hold Co notes if operating performance were to fall short of
specified levels.
H-Lines Finance Holding Corp is based in Charlotte, North
Carolina. Through its wholly owned operating subsidiary, Horizon
Lines, LLC, the company employs a fleet of 16 U.S.-flag container
ships providing liner service between the continental U.S. and
Alaska, Hawaii, Guam, and Puerto Rico. H-Lines Finance's
subsidiaries had LTM September 2004 revenues of $876 million.
HBC BARGE LLC: Voluntary Chapter 11 Case Summary
------------------------------------------------
Debtor: HBC Barge, LLC
1800 Paul Thomas Boulevard
Brownsville, Pennsylvania 15417
Bankruptcy Case No.: 04-35947
Type of Business: The Debtor is a retailer of marine equipment
and supplies.
Chapter 11 Petition Date: December 3, 2004
Court: Western District of Pennsylvania (Pittsburgh)
Judge: Judith K. Fitzgerald
Debtor's Counsel: John P. Lacher, Esq.
960 Penn Avenue, Suite 1200
Pittsburgh, PA 15222
Tel: 412-392-0330
Fax: 412-392-0335
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20-Largest Creditors.
HERBALIFE INTL: Discloses Consideration to Be Paid in Debt Offer
----------------------------------------------------------------
Herbalife International, Inc., disclosed the total consideration
and tender consideration to be paid in connection with the tender
offer and related consent solicitation for the $160 million
outstanding principal amount of its 11-3/4% Series B Senior
Subordinated Notes due 2010.
Subject to the terms and conditions of the tender offer and
consent solicitation, the Total Consideration to be paid for each
$1,000 principal amount of Notes validly tendered and not validly
revoked as of 5:00 p.m., New York City time, on Nov. 24, 2004,
including the consent payment of $40 per $1,000 principal amount
of Notes, is $1,234.46. Subject to the terms and conditions of
the Tender Offer and Consent Solicitation, the Tender
Consideration to be paid for each $1,000 principal amount of Notes
validly tendered and not validly revoked after the Consent Date,
but on or prior to midnight, New York City time, on Dec. 20, 2004,
is $1,194.46, and does not include the Consent Payment.
Pursuant to the procedures set forth in the Offer to Purchase and
Consent Solicitation Statement dated Nov. 10, 2004, the
consideration for each $1,000 principal amount of Notes tendered
and accepted for payment under the Tender Offer was calculated by
taking:
(i) the sum of the present values as of the anticipated
settlement date of December 21, 2004 of:
(a) $1,058.75, which is the redemption price applicable
to the Notes if redeemed on July 15, 2006, the
first date on which the Notes may be redeemed, and
(b) all remaining payments of interest for the Notes
from (but not including) the Settlement Date up to
the Earliest Redemption Date, determined on the
basis of a yield from the Settlement Date to the
Earliest Redemption Date equal to the sum of:
(x) the yield to maturity on the 7% U.S. Treasury
Note due July 15, 2006, which, as calculated
by Morgan Stanley and Merrill Lynch & Co. in
their capacities as the Dealer Managers for
the Tender Offer as of 2:00 p.m., New York
City time, on Dec. 6, 2004, was 2.812% plus
(y) a fixed spread of 50 basis points, and
subtracting
(ii) the Consent Payment.
"Tender Consideration" is the Total Consideration minus the
Consent Payment. The Total Consideration and the Tender
Consideration include accrued and unpaid interest up to, but not
including, the Settlement Date.
The Tender Offer expires on the Expiration Date. Notes tendered
may not be withdrawn and the related consents may not be revoked
at any time after the Consent Date, except in limited
circumstances. Payment of the Total Consideration or the Tender
Consideration, as applicable, for Notes validly tendered and
accepted for purchase shall be made on the Settlement Date. The
obligation to accept for purchase and pay for Notes tendered is
subject to the satisfaction of certain conditions, including the
consummation of the initial public offering by Herbalife's
indirect parent and the closing of Herbalife's new senior credit
facility. As previously announced, Herbalife has received
consents necessary to adopt the amendments to the indenture under
which the Notes were issued that were proposed in connection with
the Tender Offer and Consent Solicitation, and has satisfied the
requisite consents condition and requisite tender condition of the
Tender Offer and Consent Solicitation. The Tender Offer and
Consent Solicitation are being made solely pursuant to, and are
subject to the terms and conditions set forth in, the Offer to
Purchase and the related Letter of Transmittal dated
Nov. 10, 2004.
Herbalife has engaged Morgan Stanley and Merrill Lynch & Co. to
act as Dealer Managers for the Tender Offer and as Solicitation
Agents for the Consent Solicitation. Questions regarding the
Tender Offer or the Consent Solicitation should be directed to:
Morgan Stanley
Toll-Free: 800-624-1808
Collect: 212-761-1457
Attn: Riccardo Cumerlato
-- or --
Merrill Lynch & Co.
(888) ML4-TNDR
Collect: (212) 449-4914
Requests for documents should be directed to the Information
Agent:
MacKenzie Partners, Inc.
Tel. No. 212-929-5500
The depositary for the Tender Offer is The Bank of New York.
This press release is for informational purposes only and is not
an offer to purchase, a solicitation of an offer to purchase or a
solicitation of a consent with respect to any of the Notes.
About the Company
Herbalife is a global network marketing company offering a range
of science-based weight management products, nutritional
supplements and personal care products intended to support weight
loss and a healthy lifestyle. Additional information is available
at http://www.herbalife.com/
* * *
As reported in the Troubled Company Reporter on Nov. 11, 2004,
Standard & Poor's Ratings Services assigned its 'BB-' bank loan
rating to Herbalife International Inc.'s proposed $225 million
credit facility. A recovery rating of '2' was also assigned to
the loan, indicating an expectation for a substantial (80%-100%)
recovery of principal in the event of a default.
Subsequently, all ratings on Herbalife and parent WH Holdings
Ltd., including the 'BB-' corporate credit rating, were placed on
CreditWatch with positive implications. The CreditWatch placement
is based on Herbalife's proposed recapitalization, which is
expected to result in a strengthened financial profile. Upon
completion of the proposed recap transactions, Standard & Poor's
expects to raise the company's corporate credit rating by one
notch to 'BB' with a stable outlook.
HORIZON LINES: S&P Junks Planned $110M Senior Unsecured Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on Horizon
Lines Holding Corp. and subsidiary Horizon Lines LLC, including
lowering the corporate credit ratings to 'B' from 'B+'. At the
same time, Standard & Poor's assigned its 'CCC+' debt rating to
the company's proposed $110 million senior unsecured note offering
due 2012. Net proceeds from the bond offering will be used to
refinance $53 million of convertible notes and distribute
$50 million to equity holders. Pro forma for the notes offering,
lease-adjusted debt to capital will increase to a very high 92%,
with debt to EBITDA at 6.1x, compared with 79.5% and 5.3x,
respectively, at Sept. 30, 2004. The rating outlook is stable.
"The downgrade reflects higher leverage and a more aggressive
financial policy. The increase in debt shortly following the
highly leveraged acquisition by Castle Harlan and use of debt to
reward shareholders will delay previously anticipated improvements
in credit protection measures," said Standard & Poor's credit
analyst Kenneth L. Farer.
Ratings on Horizon Lines Holding Corp. and its primary subsidiary,
Horizon Lines LLC, reflect its high debt leverage, participation
in the capital-intensive and competitive shipping industry, and
aging fleet. Positive credit factors include barriers to entry
afforded by the Jones Act (which applies to intra-U.S. shipping)
and stable demand from the company's diverse customer base across
the company's various markets. In July 2004, Castle Harlan, Inc.,
completed the acquisition of Horizon Lines from The Carlyle Group,
another private equity firm, for $650 million.
Charlotte, North Carolina-based Horizon Lines is the largest Jones
Act cargo shipping company and transports goods between the
continental U.S. and Alaska, Puerto Rico, Hawaii, and Guam. The
Jones Act requires shipments between U.S. ports to be carried on
U.S.-built vessels registered in the U.S. and crewed by U.S.
citizens, thereby prohibiting direct competition from
foreign-flagged vessels. Customers include major manufacturing
and consumer products companies that provide food and other
staples to Alaska, Puerto Rico, Hawaii, and Guam. Competition
from other modes of transportation is limited because of cost and
geographic considerations.
Horizon Lines' credit ratios are expected to improve modestly over
the near-to-intermediate term because of increasing freight
volumes, improved mix, and cost management. However, upside
ratings potential is limited by the company's high debt leverage
and participation in the capital-intensive and competitive
shipping industry.
JULIAN'S RESTAURANT: Case Summary & 6 Largest Unsecured Creditors
-----------------------------------------------------------------
Debtor: Julian's Restaurant, Inc.
dba Julian's
2617 West Broad Street
Richmond, Virginia 23220
Bankruptcy Case No.: 04-41127
Type of Business: The Debtor operates an Italian restaurant.
See http://www.juliansrestaurant.com/
Chapter 11 Petition Date: December 2, 2004
Court: Eastern District of Virginia (Richmond)
Judge: Douglas O. Tice Jr.
Debtor's Counsel: David K. Spiro, Esq.
Cantor Arkema, P.C.
Post Office Box 561
Richmond, VA 23218
Tel: 804-644-1400
Fax: 804-225-8706
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 6 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Virginia Food Service Group Trade debt $29,000
7422 Ranco Road
Richmond, VA 23228
Beigier and Associates Trade debt $5,165
5501 Patterson Ave., Ste. 100
Richmond, VA 23226
D&I Seafood Trade debt $4,800
1500 Brook Road
Richmond, VA 23220
Richmond Restaurant Trade debt $2,200
Spinella Owings and Shala Trade debt $2,157
National Linen Trade debt $1,800
LAIDLAW INTL: Selling Healthcare Companies to Onex for $820 Mil.
----------------------------------------------------------------
Laidlaw International, Inc., (NYSE:LI) entered into definitive
agreements to sell both of its healthcare companies, American
Medical Response and EmCare, to Onex Partners LP, an affiliate of
Onex Corporation (TSX:OCX.SV), for $820 million. Net cash
proceeds to Laidlaw are expected to be approximately $775 million
after debt assumed by the buyer and payment of transaction costs.
While Laidlaw will realize a substantial gain on sale, there will
be no cash tax obligation as a result of the transactions.
Proceeds from the transactions will be used in part to retire
approximately $579 million of outstanding borrowings under the
company's Term B senior secured term facility.
"The sale of AMR and EmCare demonstrates our commitment to
maximize returns for our shareholders," said Kevin Benson,
President and Chief Executive Officer of Laidlaw International.
Mr. Benson added, "The financial performance of these businesses
coupled with strong interest from investors made this an optimum
time to monetize these assets. The sale of the two companies will
allow us to retire cumbersome and costly debt that originated from
the reorganization, substantially de-lever our balance sheet and
allow us to focus on improving the performance of our
transportation businesses."
"These businesses are excellent growth platforms in dynamic
sectors of the healthcare industry," said Robert Le Blanc, an Onex
Managing Director. "We look forward to working with their strong
management teams to achieve that growth."
Completion of the transactions is anticipated by the end of
March 2005, and is subject to normal and customary closing
conditions.
Morgan Stanley served as the exclusive financial advisor to
Laidlaw International, Inc., and Latham & Watkins LLP acted as its
legal advisor.
Kaye Scholer LLP acted as legal advisor to Onex. Bank of America,
N.A. and certain of its affiliates and JPMorgan are the financing
sources for Onex' acquisition and working capital needs in
conjunction with the transactions.
Headquartered in Arlington, Texas, Laidlaw, Inc., now known as
Laidlaw International, Inc., -- http://www.laidlaw.com/-- is
North America's #1 bus operator. Laidlaw's school buses transport
more than 2 million students daily, and its Transit and Tour
Services division provides daily city transportation through more
than 200 contracts in the US and Canada. Laidlaw filed for
chapter 11 protection on June 28, 2001 (Bankr. W.D.N.Y. Case No.
01-14099). Garry M. Graber, Esq., at Hodgson Russ LLP, represents
the Debtors. Laidlaw International emerged from bankruptcy on
June 23, 2003.
LEHMAN ABS: Moody's Pares Ratings on Classes B-1 & B-2 to Low-B
---------------------------------------------------------------
Moody's Investors Service downgraded the M-2 through B-2
subordinate certificates of Lehman ABS Manufactured Housing
Contract Trust 2002-A securitization and confirmed the rating on
the M-1 certificate. The rating action concludes Moody's rating
review, which began on September 1, 2004.
The rating action is prompted by the weaker-than-anticipated
performance of the manufactured housing collateral originated by
GreenPoint and purchased by Lehman. Delinquencies and
repossessions have exceeded original expectations, leading to
higher than expected cumulative losses. As of the Oct. 31, 2004,
remittance report, cumulative losses and cumulative repossessions
were 3.36% and 6.53%; respectively, with 71.63% of the pool
balance outstanding. Loss severities were slightly higher than
60%.
The complete rating action is as follows:
Securities: Lehman ABS Manufactured Housing Contract
Senior/Subordinate Asset Backed Certificates, Series
2002-A
-- 1 Month LIBOR+1.25% Class M-1 Certificates,
confirmed at Aa2
-- 1 Month LIBOR+2.25% Class M-2 Certificates,
downgraded from A2 to Baa1
-- 1 Month LIBOR+4.00% Class B-1 Certificates,
downgraded from Baa2 to Ba2
-- 1 Month LIBOR+7.25% Class B-2 Certificates,
downgraded from Ba3 to B2
The loans were originated by GreenPoint Financial Corp and are
currently serviced by Green Tree Servicing (formerly GreenPoint
Credit LLC). Wells Fargo Bank Minnesota, National Association is
the backup servicer for the securitization.
LEHMAN ABS: S&P Places Ratings on CreditWatch Negative
------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on nine
classes from Lehman ABS Manufactured Housing Contract
Senior/Subordinate Asset-Backed Series 2001-B on CreditWatch with
negative implications. The rating on class A-7 from this
transaction is not affected, as it benefits from an insurance
policy issued by Ambac Assurance Corp.
The CreditWatch placements reflect the worse-than-expected
performance trends displayed by the underlying pool of
manufactured housing contracts, which were originated by CIT
Group/Sales Financing Inc., and the resulting deterioration of
credit enhancement.
The performance trends associated with the pool of manufacturing
housing contracts, which support the rated certificates, have
continued to deteriorate since Standard & Poor's last rating
actions in April 2004. With a pool factor of approximately 67%,
the trust has experienced cumulative net losses of 5.83% after 37
months of performance. In addition, repossession inventory (as a
percentage of the current pool balance) is significant at 4.41%.
Furthermore, the percentage of the collateral pool that comprises
receivables that are 30 or more days delinquent (excluding
accounts already in repossession inventory) is 11.60%, and 6.32%
of the collateral pool consists of loans that are 90 or more days
delinquent. The recovery rate is healthy relative to other
manufactured housing transactions, with a 12-month average of
approximately 30%. However, the high level of monthly losses and
insufficient excess spread has caused overcollateralization to
reduce substantially over the course of the past 24 months,
declining from its highest level of 2.77% (of the initial
collateral balance) in November 2002 to its current level of 0.79%
of the original collateral balance.
On April 6, 2004, Standard & Poor's lowered its ratings on classes
M-1, M-2, and B-1 from Lehman ABS Manufactured Housing Contract
Senior/Subordinate Asset-Backed Series 2001-B and removed them
from CreditWatch negative, where they were placed Jan. 26, 2004.
At the same, the 'AAA' ratings on the class A certificates were
affirmed.
Standard & Poor's expects to complete a detailed review of the
credit performance of the transactions relative to the remaining
credit support within the next three months. The magnitudes of
the downgrades are expected to be within one rating category on
all classes.
Ratings Placed on CreditWatch Negative
Lehman ABS Manufactured Housing Contract
Senior/Subordinate Asset-Backed Series 2001-B
Rating
Class To From
----- -- ----
A-1 AAA/Watch Neg AAA
A-2 AAA/Watch Neg AAA
A-3 AAA/Watch Neg AAA
A-4 AAA/Watch Neg AAA
A-5 AAA/Watch Neg AAA
A-6 AAA/Watch Neg AAA
M-1 AA-/Watch Neg AA-
M-2 BBB+/Watch Neg BBB+
B-1 BB/Watch Neg BB
LYONDELL CHEMICAL: Moody's Holds Low-B Ratings with Stable Outlook
------------------------------------------------------------------
Moody's Investors Service confirmed the ratings on the debt of
Millennium Chemicals, Inc. (senior unsecured convertibles at B1),
and Millennium Americas, Inc. (guaranteed senior unsecured notes
and debenture at B1). Moody's also withdrew the senior implied
and issuer ratings of Millennium Chemicals, Inc., and Equistar
Chemical Company now that they are both wholly owned subsidiaries
of Lyondell Chemical Company. Additionally, Moody's affirmed
Lyondell's and Equistar's long term debt ratings and raised the
speculative grade liquidity rating of Equistar to SGL-1 and
Lyondell to SGL-2.
Ratings confirmed:
-- Millennium Chemicals Inc.
* Senior unsecured convertible debt; $150 million -- B1
-- Millennium Americas Inc.
* Guaranteed senior secured credit facility; $150 million
-- Ba2
* Guaranteed senior unsecured notes and debenture;
$1.2 billion -- B1
Ratings affirmed:
-- Lyondell Chemical Company
* Senior implied -- B1
* Senior secured credit facility; $350 million -- B1
* Senior secured notes and debentures; $3.55 billion -- B1
* Issuer rating -- B2
* Senior subordinated notes due 2009; $500 million -- B3
-- Equistar Chemical Company
* Senior implied at B1
* Senior unsecured notes and debentures; $2.3 billion -- B2
Ratings raised:
-- Equistar Chemical Company
* Liquidity rating to SGL-1 from SGL-2
-- Lyondell Chemical Company
* Liquidity rating to SGL-2 from SGL-3
Ratings withdrawn:
-- Equistar Chemical Company
* Senior implied
* Issuer rating
-- Millennium Chemicals Inc.
* Senior implied
* Issuer rating
The confirmation of the ratings for Millennium Chemicals, Inc.,
and Millennium America, Inc., reflect a greater than anticipated
cash balance and the expectation that free cash flow and dividends
from Equistar will cause cash balances to rise closer to
$400 million in 2004 and upwards of $500 million in 2005.
Additionally, due to the restrictive payments clause in its bond
indentures, Millennium will likely be able to repay the vast
majority of their $500 million debt maturity in 2006 with cash.
In July, Millennium obtained an amendment to its revolver so that
it can continue to operate subsequent to the acquisition by
Lyondell; this revolver matures in 2006.
The stable outlook reflects Moody's belief that Millennium's
credit profile will continue to improve due to the cyclical
recovery in its commodity chemical operations and those of
Equistar. Additionally, the anticipated repayment of the
$500 million maturity in 2006 will significantly improve the
company's credit profile. However, Millennium also has another
$475 million debt maturity in 2008 that will require refinancing
unless there is an extended peak in the commodity chemicals cycle.
As of September 30, 2004, Millennium's balance sheet remained
levered with a ratio of total debt to EBITDA, including dividends
from Equistar, at 6.0 times (6.9 times excluding the Equistar
dividend) and an EBITDA to interest coverage ratio of 2.3 times
(2 times excluding Equistar dividends). However, due to the
cyclical recovery, Moody's anticipates that these ratios will
improve to less than 4 times and over 3.5 times, (5 times and
2.9 times excluding dividends from Equistar), respectively, by the
middle of 2005.
The affirmation of Lyondell's and Equistar's ratings reflects the
use of equity to fund the transaction and the expected improvement
in financial metrics in 2004 to levels that are more supportive of
the current ratings. It also reflects Moody's expectation for a
significant improvement in credit metrics and free cash flow in
2005. While Lyondell's IC&D business is expected to improve, the
impact on credit metrics should be minimal. A continued high
level of dividends from LCR (more than $300 million) along with
increasing dividends from Equistar will account for the vast
majority of improvement in 2005. Lyondell will become
increasingly reliant on these dividends to fund interest expenses
and a rising dividend due to equity transactions with Millennium
and Occidental. Moody's remains concerned that Lyondell will not
be able to maintain its current dividend though the next trough in
the cycle when cash dividends will be in excess of $225 million
per year, unless the company is able to repay a substantial amount
of its debt in the current upcycle. Additionally, Moody's is
concerned that combined entity of Lyondell, Equistar and
Millennium will face over $4.5 billion of debt maturities in
2007-2009. Moody's currently believes that the combined company
will have to refinance a majority of this debt prior to the next
downturn; and hence, that it would be difficult to raise the
company's ratings more than one notch without a clear resolution
to this issue.
The acquisition of Millennium's business is seen as a net positive
for Lyondell's creditors due to the significant increase in equity
and assets that will result from the transaction. Additionally,
Millennium's titanium dioxide business is a meaningful
diversification away from Lyondell's commodity petrochemical
operations and should exhibit less volatility through the cycle.
However, Moody's believes that Millennium's wholly owned
businesses have limited synergies with Lyondell's existing
operations. The identified synergies primarily relate to
administrative overheads, and not from the integration of
operations.
Lyondell's liquidity rating has been raised to SGL-2 due to its
elevated cash balance and the rising dividend stream from Equistar
and LCR which should cover all fixed costs and allow for
$400-500 million of debt reduction in 2005. The SGL-2 also
reflects that financial performance should remain substantially
higher than the financial covenants in its $350 million senior
secured bank agreement, which remains undrawn but availability is
reduced by roughly $60 million of letters of credit. The SGL-2
rating also reflects Lyondell's access to an upsized $150 million
accounts receivable program. Lyondell is in the process of
replacing its credit facility, which should modestly improve the
company's liquidity.
Equistar's liquidity rating has been raised to SGL-1 reflecting a
large cash balance of over $100 million plus the expectation for
substantial free cash flow generation in the fourth quarter of
2004 and the second through fourth quarter of 2005. The SGL-1
rating also reflects Equistar's access to $700 million in
asset-based credit facilities ($450 million accounts receivable
and $250 million inventory) with only $120 million of outstandings
as of September 30, 2004. Utilization of this facility will likely
increase in the first quarter of 2005 to fund the seasonal working
capital build. Despite unusually good liquidity, Equistar's
rating is tempered by its position as a wholly owned subsidiary of
Lyondell, and the lack of any substantial covenants in its bank
agreements or bond indentures that would prevent dividends to
Lyondell. Furthermore, Moody's believes that the vast majority of
Equistar's free cash flow will be distributed to Lyondell and not
used for debt reduction over the intermediate-term.
Headquartered in Houston, Texas, Lyondell Chemical Company
manufactures propylene oxide, MTBE and toluene di-isocyanate, as
well as co-product styrene. Both Equistar Chemicals LP and
Millennium Chemicals, Inc., are wholly owned subsidiaries of
Lyondell. Lyondell also participated in a refinery joint venture
with CITGO Petroleum Corporation -- Lyondell-CITGO Refining
Company Ltd. Equistar is a leading North American producer of
commodity petrochemicals and plastics. Millennium Chemicals is
among the largest global producers of titanium dioxide pigments
and acetyls. Lyondell-CITGO Refining Company (58.75% owned by
Lyondell) is a refiner that has the unique ability to process 100%
heavy sour crude oil from Venezuela. These combined entities
reported revenues of nearly $20 billion for the LTM dated
September 30, 2004.
MAAX CORP: Moody's Junks $100 Million Senior Discount Notes
-----------------------------------------------------------
Moody's Investors Service lowered the senior implied of MAAX
Corporation to B2 from B1 and the issuer rating to Caa1 from B2
and re-assigned both ratings to MAAX Holdings, Inc., from MAAX
Corporation. Moody's also assigned a Caa1 rating to MAAX's
US$110 million senior discount notes, due 2012, and affirmed the
B1 senior secured and B3 senior subordinated ratings of MAAX
Corporation. At the same time, Moody's also assigned an SGL-2
speculative grade liquidity rating to MAAX and withdrew the B1
senior implied, B2 issuer rating, and SGL-2 speculative grade
liquidity rating of MAAX Corporation. The outlook is stable.
MAAX will use the proceeds from the discount notes, net of
transaction fees, to fund a special dividend to the firms' equity
investors, including J.W. Childs, Borealis, OMERS, and management.
The dividend will represent approximately 75% of the equity
sponsor's initial investment of US$136 million, including
management's roll over, at the time of the leveraged buyout in
June 2004.
The downgrade of the senior implied rating to B2 from B1 reflects
Moody's view that the additional US$110 million of debt associated
with the transaction results in consolidated credit statistics
inconsistent with a B1 rating and significantly leverages MAAX's
balance sheet without any incremental benefit to operating
earnings or asset values. In addition, Moody's believes the rapid
accretion of the discount notes will challenge MAAX's ability to
meaningfully improve consolidated credit statistics over the
medium-term. Pro forma for the transaction, leverage increases
significantly to approximately 6.7 times from 5.2 times (on a debt
to unadjusted EBITDA basis) and EBITDA coverage of gross interest,
including PIK interest, decreases to about 1.8 times from over 2.6
times.
The ratings also recognize a high degree of customer
concentration, significant competition, and the potential for debt
financed acquisitions and additional dividends to equity sponsors.
For fiscal year 2004, approximately 25% of gross sales were to a
single customer, Home Depot, with the top ten customers
representing over 41% of total sales. MAAX's operations are also
relatively modest in size when compared to others in the industry,
such as American Standard (Baa3 senior unsecured) and MASCO
Corporation (Baa1 senior unsecured), both of which are larger and
possess greater financial flexibility.
The ratings are supported by MAAX's position as the second largest
competitor in North America in its core bath and shower enclosure
market, its purchasing power with a number of its suppliers, and
its variable cost structure that enables it maintain margins by
aligning production costs with actual demand. MAAX also invested
in robotic equipment to minimize manufacturing costs and
implemented SAP reporting systems to improve working capital
management. Additionally, Moody's ratings recognize that MAAX's
research and development efforts maintain a pipeline of innovative
designs and styles to foster demand and command higher margins,
also that its "One-Stop-Shop" service facilitates customer sales
by providing the enhanced convenience of delivery of MAAX's
products, along with other bath suite fixtures and fittings, on
one purchase order.
The stable outlook reflects our expectations that operating
performance will continue to improve, that the company will use
free cash flow to reduce debt, and acquisitions, if they occur,
will be smaller tuck-ins that are accretive to earning and
financed in a manner that would not result in a deterioration in
credit metrics. Moreover, the outlook anticipates that
consolidated leverage will moderate towards the 5.0 times level
over the near term and that retained cash flow and free cash flow
to consolidated debt will stay in excess of 10% and 5%,
respectively, and that liquidity will remain reasonable. The
outlook also reflects our expectation that additional cash
distributions will be forestalled until cash flow is applied to
meaningful debt reduction. Factors that would negatively impact
the ratings and outlook would be an inability to bring credit
metrics, particularly leverage, back in-line with the proposed
rating due to poor operating performance, acquisitions, or
dividends.
The Caa1 rating on the US$110 million senior discount notes at
MAAX reflects their structural subordination to approximately
US$438 million of liabilities at MAAX Corporation, of which
US$360 million is debt. In addition, the discount notes do not
benefit from any type of guarantees. The Caa1 issuer rating also
reflects the risk of a senior unsecured lender at MAAX without any
benefit from guarantees.
The affirmation of the B1 senior secured rating and B3 senior
subordinated rating at MAAX Corporation reflect the benefit the
secured lenders derive from a first priority security interest in
all tangible and intangible assets of MAAX Corporation and its
subsidiaries, whereas, even though subordinated lenders are
effectively subordinated to secured lenders, they are structurally
senior to the discount notes at MAAX. In addition, both the
secured and subordinated lenders at MAAX Corporation benefit from
joint and several guarantees from all domestic subsidiaries.
The SGL-2 rating reflects MAAX's good liquidity as operating cash
flow has remained relatively strong and the fact that the discount
notes will not impact cash flows over the near term. The discount
notes do not become cash pay until December 2008 with the first
cash interest payment to be made in June 2009. The rating also
incorporates Moody's view that over the next twelve months MAAX
will likely meet its obligations through internal sources, and
access to their revolving credit bank facility will be reasonable.
However, the rating incorporates Moody's view that alternate
sources of liquidity will be limited.
The notes issues will be sold in a privately negotiated
transaction without registration under the Securities Act of 1933
under circumstances reasonably designed to preclude a distribution
in violation of the Act. The issuance has been designed to permit
resale under Rule 144A and for the notes to be exchanged for
registered notes within the next six months.
MAAX Corporation, headquartered in Quebec, Canada, is a
manufacturer of gel coated and acrylic bath products, cabinetry,
and spa products, and operates 23 manufacturing facilities
throughout North America.
MANUFACTURED HOUSING: S&P Puts Default Rating on Class B-1 Certs.
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the
subordinate B-1 class from Manufactured Housing Contract Sr/Sub
Pass-Thru Cert Series 2000-5 to 'D' from 'CC'.
The lowered rating reflects the reduced likelihood that investors
will receive timely interest and the ultimate repayment of their
original principal investment. This transaction reported an
outstanding liquidation loss interest shortfall for its B-1 class
on the December 2004 payment date. Standard & Poor's believes
that interest shortfalls for this transaction will continue to be
prevalent in the future, given the adverse performance trends
displayed by the underlying pool of collateral as well as the
location of the class B-1 write-down interest at the bottom of the
transaction payment priorities (after distributions of senior
principal).
Standard & Poor's will continue to monitor the outstanding ratings
associated with this transaction in anticipation of future
defaults.
MARINER HEALTH: Shareholders Okay National Senior Care Merger Plan
-----------------------------------------------------------------
Mariner Health Care, Inc., (OTC Bulletin Board: MHCA) reported
that its shareholders approved Mariner's proposed merger with
NCARE Acquisition Corp., a wholly owned subsidiary of National
Senior Care, Inc. Under the terms of the merger, Mariner
shareholders will receive $30 for each share of Mariner common
stock they own. Mariner and NSC continue to work towards the
satisfaction of the various conditions precedent to the
consummation of the merger prior to the December 31, 2004,
deadline set forth in the Agreement and Plan of Merger by and
among Mariner, NCARE and NSC.
At the Mariner Annual Meeting, shareholders also amended
Mariner's Bylaws to set the size of the Board of Directors at five
to nine directors and elected Victor L. Lund, C. Christian Winkle,
Philip L. Maslowe, Mohsin Meghji and Earl P. Holland as directors.
Mariner is headquartered in Atlanta, Georgia and certain of its
subsidiaries and affiliates own and operate approximately
252 skilled nursing and two assisted living facilities as well as
12 long-term acute care hospitals representing approximately
32,000 beds across the country.
Mariner Post-Acute Network, Inc., Mariner Health Group, Inc., and
scores of debtor-affiliates filed for chapter 11 protection on
January 18, 2000 (Bankr. D. Del. Case Nos. 00-113 through 00-301).
Mark D. Collins, Esq., at Richards, Layton & Finger, P.A.,
represents the Reorganized Debtors, which emerged from bankruptcy
under the terms of their Second Amended Joint Plan of
Reorganization declared effective on May 13, 2002. (Mariner
Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
MIRANT CORPORATION: Asks Court to Extend Exclusive Periods
----------------------------------------------------------
Mirant Corporation (Pink Sheets: MIRKQ) issued the following
statement from M. Michele Burns, the company's chief financial
officer and chief restructuring officer, addressing Mirant's
request to extend its current period of exclusivity, which will
expire on December 31, 2004.
The period of exclusivity grants Mirant the sole right to file a
plan of reorganization that puts forth how the claims of each
class of creditors and interest holders will be settled in its
Chapter 11 case.
"We have made substantial progress in negotiating a plan of
reorganization with our bankruptcy committees. The aim is to
achieve a plan that has as much committee support as possible
prior to filing it with the Court.
"However, our case is very complex. It involves 83 debtors and
hundreds of thousands of stakeholders. In light of these facts,
negotiations take time.
"To enable discussions to progress further, Mirant filed a request
with the U.S. Bankruptcy Court on December 6 to extend its period
of exclusivity by 90 days. This type of request is a common,
precautionary step in Chapter 11 cases. We have requested two
previous extensions and both were approved by the Court.
"It is still our intention to file a plan of reorganization by
December 31. We recognize, however, that a delay could occur to
push us past that date. The extension would allow for this
possibility, enable us to retain control of the bankruptcy
process, and ultimately speed our emergence from Chapter 11 by
letting constructive negotiations continue.
"As previously stated, Mirant plans to emerge from Chapter 11 mid-
year 2005."
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- together with its direct and indirect
subsidiaries, generate, sell and deliver electricity in North
America, the Philippines and the Caribbean. Mirant Corporation
filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex.
03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed
$20,574,000,000 in assets and $11,401,000,000 in debts.
MIRANT CORP: Key Employment Retention Program Deadline is Dec. 31
-----------------------------------------------------------------
Phase II of the Key Employee Retention Program of Mirant
Corporation and its debtor-affiliates involves the implementation
of a performance-based bonus designed to encourage improved
performance of 15 senior employees who are in positions to make a
direct impact on the Debtors' ability to meet their reorganization
goals.
One of the performance metrics on which the Performance Bonus is
based is the filing of a proposed reorganization plan by a certain
date. With the passing of each month after the Filing Deadline
for which a plan is not filed, the total Performance Bonus
percentage for which each employee is eligible is reduced by 10%.
Although the Debtors initially proposed a Filing Deadline of
December 31, 2004, as part of a compromise with the official
committees, Phase II of the KERP was ultimately implemented with
November 22, 2004, established as the Filing Deadline.
However, the Court expressed concerns that linking the
Performance Bonus to plan filing deadline might result in the
premature filing of a plan that either was not confirmable as a
matter of law or, if confirmed, would be followed by a need for
further reorganization or liquidation. In particular, Judge Lynn
stated:
"If debtors' employees ask for added time and they have
a good reason, I will hear them and rule accordingly.
I will expect a plan to be filed when we can have a
plan that is one that will not be followed by a need
for further reorganization, or liquidation. And I also
reserve the right, as I have throughout this case, at
the time that a plan is confirmed to recognize those
who played a role in achieving a good confirmed plan."
The initial establishment of November 22, 2004, as a Filing
Deadline has helped advance substantially the plan process.
Indeed, since the hearing in respect of Phase II of the KERP, the
Debtors have made significant progress in formulating a viable
plan and have engaged in extensive, good faith discussions with
each of the Official Committees in an effort to reach a consensus
regarding a plan. The discussions have naturally added an element
of delay to the process, and while the filing of a plan by
November 22 was certainly a laudable goal when established, the
Debtors have found that the Filing Deadline was impossible to
meet.
Accordingly, at the Debtors' request, the Court extends the
Filing Deadline to December 31, 2004. The Extended Filing
Deadline will serve to maintain the focus of the Key Employees
entitled to participate in Phase II of the KERP on the filing of
a plan by year-end and appropriately reward those Key Employees
for participating in and fostering negotiations between the key
constituencies.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- together with its direct and indirect
subsidiaries, generate, sell and deliver electricity in North
America, the Philippines and the Caribbean. Mirant Corporation
filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex.
03-46590). Thomas E. Lauria, Esq., at White & Case LLP,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant
Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
NATIONAL ENERGY: Has Until Jan. 31 to File Chapter 11 Plan
----------------------------------------------------------
As reported in the Troubled Company Reporter on Nov. 15, 2004,
USGen New England, Inc., asked Judge Mannes of the U.S. Bankruptcy
Court for the District of Maryland to extend its Exclusive Periods
to:
-- file a plan through and including March 1, 2005, and
-- solicit acceptances of that plan through May 1, 2005.
NEGT & NEG Committee Respond
For nearly 18 months, National Energy & Gas Transmission, Inc.,
has stood by in quiet support of its subsidiary, USGen New
England, Inc. NEGT provided management and professional support
when requested without unnecessarily interfering with USGen's
fiduciary obligation to creditors and role as a debtor-in-
possession.
Now, as a result of the imminent sales of:
(i) its Brayton Point Station, Salem Harbor Station and
Manchester Street Station; and
(ii) its two hydroelectric systems -- one spanning the
Connecticut River and one spanning the Deerfield River,
there is a high degree of certainty that USGen is solvent.
Unexpectedly, NEGT has become not only an important constituent
in the Debtor's case, but in many respects the only significant
party-in-interest with real risk and exposure to unnecessary
administrative costs and delays.
To protect its important interest, NEGT believes it is imperative
that the Debtor be permitted to complete its sales process and
negotiate the limited open plan issues without the threat of
another entity filing a plan of reorganization. To allow
exclusivity to expire would subject this estate to escalating
administrative costs and competing plans all to be paid by NEGT,
and its new owners -- its prepetition creditors.
The Official Committee of Unsecured Creditors of NEGT supports an
extension of the exclusive periods because USGen is in the best
position to file a successful reorganization plan that will
maximize value for its estate. The focus of USGen's management
should be on completing the Sales without the distraction of
finalizing plan negotiations.
* * *
Judge Mannes extends USGen's Exclusive Plan Proposal Period
through and including January 31, 2005, and Exclusive
Solicitation Period through and including March 31, 2005.
In the event USGen files a plan by January 31, 2005, or at a
later date as USGen and the Official Committee of Unsecured
Creditors of USGen may agree, which plan does not have the
written support of the USGen Committee, then and in that event:
(a) the USGen Committee will have 10 days from USGen's filing
of a plan to file a motion with the Court to modify
USGen's Exclusivity solely in order to file its own
competing plan;
(b) USGen reserves all rights to object to the USGen
Committee's Motion and to notice and proceed with a
hearing on the adequacy of its disclosure statement; and
(c) if USGen determines not to solicit acceptances or the
Court directs USGen not to solicit acceptances to USGen's
filed plan during the period beginning from the date of
filing of the USGen Committee Motion through the date on
which that Motion is determined by the Court, then USGen's
solicitation period will be automatically extended beyond
March 31, 2005, by the number of days equal to the length
of the Determination Period or to a further date as the
Court directs.
Furthermore, Judge Mannes rules that in the event that USGen's
estate is solvent, any plan filed by USGen and any plan filed by
the USGen Committee with leave of the Court will provide for
interest to be paid on allowed general unsecured claims at a rate
either agreed upon by USGen and the USGen Committee, or, absent
an agreement, at a rate to be determined by the Court at
confirmation.
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company and
its debtor-affiliates filed for Chapter 11 protection on
July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A.
Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G.
Callari, Esq., at Willkie Farr & Gallagher, and Paul M. Nussbaum,
Esq., and Martin T. Fletcher, Esq., at Whiteford, Taylor &
Preston, L.L.P., represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $7,613,000,000 in assets and $9,062,000,000
in debts. NEGT received bankruptcy court approval of its
reorganization plan in May 2004, and that plan took effect on
Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 31;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
NETWORK INSTALLATION: Highlights Strategic Initiatives for 2005
---------------------------------------------------------------
Network Installation Corp. (OTC Bulletin Board: NWKI) reports
significant achievements of the past year and outlines the
Company's strategic initiatives for 2005.
Network Installation CEO Michael Cummings stated, "Over the past
year, our successful penetration into the wireless communications
market was demonstrated with the winning of numerous WLAN, Wi-Fi
and VoIP projects. The acquisition of Del Mar Systems provided us
with an additional core competency and installed base of clients
within the telecommunications solutions marketplace. Business in
this sector has been revitalized by the transition from
traditional PBX technology to IP telephony."
He added, "Our optimism for continued growth through 2005 and
beyond is predicated upon our recent accomplishments and
continuing robust demand for wireless communications solutions."
Key achievements and events during 2004 include:
-- Attained our stated goal of winning project orders outside
of California including Wi-Fi, VoIP and Telecom Solutions
projects in Arizona, New Mexico, Washington and Rhode
Island.
-- The acquisition of San Diego-based Del Mar Systems
International Inc., a provider of integrated
telecommunications solutions including VoIP applications.
-- Record revenue of $2,000,762 vs. $1,119,680 for the nine
month period ending September 30, 2004 vs. September 30,
2003.
-- Retirement of two million shares of the Company's common
stock by CEO Michael Cummings.
-- 2 for 1 forward split of Network Installation common stock.
Strategic initiatives for 2005:
-- Continued focus on the nationwide growth of high margin Wi-
Fi, Wi-Max and VoIP projects.
-- The continued expansion internally as well as through
strategic acquisitions.
-- Aggressive pursuit of a related technology with commercial
applications within the networking and communications
solutions sector.
About the Company
Network Installation Corp. provides communications solutions to
the Fortune 1000, Government Agencies, Municipalities, K-12 and
Universities and Multiple Property Owners. These solutions
include the design, installation and deployment of data, voice and
video networks as well as wireless networks including Wi-Fi and
Wi-Max applications and integrated telecommunications solutions
including Voice over Internet Protocol applications.
To find out more about Network Installation Corp. (OTC Bulletin
Board: NWKI), visit http://www.networkinstallationcorp.net/or
http://www.delmarsystems.com/ The Company's public financial
information and filings can be viewed at http://www.sec.gov/
At September 30, 2004, Network Installation's balance sheet showed
a $213,146 equity deficit.
NEXTWAVE TELECOM: Files Plan of Reorganization in S.D. New York
---------------------------------------------------------------
NextWave Telecom, Inc., filed a plan of reorganization with U.S.
Bankruptcy Court for the Southern District of New York yesterday,
December 7. The Plan provides for the payment of 100% of allowed
creditor claims, plus interest, and a distribution of cash to
equity holders, along with an option for those holders to elect to
receive either an additional cash distribution or, subject to
certain limitations, an equity interest in a new operating company
that will be spun-out to shareholders to pursue broadband wireless
market opportunities.
"After successfully defending the interests of our creditors and
shareholders for over six years, NextWave is now poised to emerge
from Chapter 11," said Allen Salmasi, NextWave's Chairman and CEO.
"The plan is a testament to the Company's resolve and
determination to pay its debts in full, to create significant
value for shareholders, and to continue in its efforts to become a
leading developer and provider of innovative broadband wireless
services."
Key elements of the Plan include:
* Verizon Wireless will acquire the shares of NextWave Telecom,
Inc., and its existing PCS licensing subsidiaries, which will
have no liabilities and no assets other than the Company's
PCS licenses, free and clear of all encumbrances. Aggregate
consideration of $3 billion will be paid at closing, net of:
(i) $71,875,000 which will be paid to the FCC,
(ii) $165 million which will be deferred and placed into an
escrow, to be distributed in whole or in part to either
VZW or to Reorganized NWI, subject to the FCC's right
to receive a Sharing Payment, and
(iii) certain other amounts which may be required to be
placed into the Escrow under the Acquisition Agreement.
* An internal corporate restructuring will consolidate nearly
all of the Company's liabilities and remaining assets --
including MMDS spectrum holdings, ITFS spectrum leases --
into a newly formed operating company named NextWave
Broadband, Inc., -- NBI, through which NextWave intends to
develop, build and operate broadband wireless networks
designed to provide both high-speed fixed/mobile Internet
access and VoIP services.
* Pursuant to the restructuring, the Company's existing
operating company, NextWave Wireless, Inc., -- NWI, will be
converted into a Limited Liability Company, and it will hold
cash and all the stock of NBI. Tele*Code, an existing non-
debtor subsidiary, will become a wholly owned subsidiary of
NBI.
The Company plans to pursue a dual-use network strategy by making
its network available to government users for public safety
services at the same time it offers commercial broadband wireless
services. The Company is working towards the launch of commercial
operations in Las Vegas, Nevada during 2005, and is in the process
of acquiring additional spectrum in other markets. The Company
believes that new and emerging IP-based 4th generation wireless
technologies will provide it with cost advantages and the ability
to offer a unique range of services that cannot be offered over
existing wireless networks, and plans to further invest in the
development of some of these emerging technologies in order to
customize their features and benefits and to accelerate the
Company's time-to-market entry.
A hearing on the Disclosure Statement accompanying NextWave's Plan
is scheduled to be held before the Honorable Adlai S. Hardin, Jr.,
United States Bankruptcy Judge, United States Bankruptcy Court for
the Southern District of New York, in White Plains, New York, on
January 5, 2005, at 10:30 AM, Eastern Time. A hearing on
confirmation of the Plan is scheduled to be held before Judge
Hardin on February 15, 2005, at 10:30 AM, Eastern Time. The
effectiveness of the Plan is subject to various contingencies,
including confirmation of the Plan, FCC regulatory approval of
NextWave's proposed transaction with Verizon Wireless, and
antitrust review.
Copies of the Plan and the Disclosure Statement may be downloaded
from the Company's web site at http://www.nextwavetel.com/
Hawthorne, New York, NextWave Telecom, Inc., was organized in 1995
to provide high-speed wireless Internet access and voice
communications services to consumer and business markets on a
nationwide basis. NextWave is currently constructing a third-
generation CDMA2000 1X network in all of its 95 PCS markets whose
geographic scope covers more than 168 million POPs coast to coast,
including all top 10 U.S. markets, 28 of the top 30 markets, and
40 of the top 50 markets. NextWave's "carriers' carrier" strategy
allows existing carriers and new service providers to market
NextWave's network services through innovative airtime
arrangements. The company filed for chapter 11 protection (Bankr.
S.D.N.Y. Case No. 98-23303) on December 23, 1998. Deborah Lynn
Schrier-Rape, Esq. of Andrews & Kurth, LLP represents the Debtor.
NOVA CHEMICALS: Janice Rennie Resigns from Board of Directors
-------------------------------------------------------------
NOVA Chemicals Corporation (NYSE:NCX)(TSX:NCX) accepted the
resignation of Janice Rennie as a member of NOVA Chemicals' Board
of Directors. Ms. Rennie, a director of NOVA Chemicals and its
predecessors since 1991, served on the Board's Audit, Finance and
Risk Committee, as well as the Public Policy and Responsible Care
Committee. Ms. Rennie recently joined EPCOR Utilities, Inc., as
Senior Vice President, Human Resources and Organizational
Effectiveness, and cited the increased demands on her time, as a
result of her new responsibilities, as the reason for her
immediate departure from the Board.
J.E. Newall, Chairman of NOVA Chemicals' Board of Directors,
noted, "Janice's contributions to the stewardship of NOVA
Chemicals during the past 14 years have been considerable. She
will be missed, and we wish her every success in her future
endeavors."
With Ms. Rennie's resignation, NOVA Chemicals' Board of Directors
will consist of eleven members.
NOVA Chemicals (S&P, BB+ Long-Term Corporate Credit Rating,
Positive) produces ethylene, polyethylene, styrene monomer and
styrenic polymers, which are used in a wide range of consumer and
industrial goods. NOVA Chemicals manufactures its products at 18
operating facilities located in the United States, Canada, France,
the Netherlands and the United Kingdom. The company also has five
technology centers that support research and development
initiatives. NOVA Chemicals Corporation shares trade on the
Toronto and New York stock exchanges under the trading symbol NCX.
Visit NOVA Chemicals on the Web at http://www.novachemicals.com/
NRG ENERGY: Judge Beatty Dismisses Nelson Units' Chapter 11 Cases
-----------------------------------------------------------------
As reported in the Troubled Company Reporter on Nov. 02, 2004,
Debtors LSP-Nelson Energy, LLC, and NRG Nelson Turbines, LLC, do
not operate any businesses or hold any assets other than the
Nelson Sale Proceeds. The Court approved the sale of the Nelson
Assets to Invenergy Investment Company for $19,500,000. At the
closing of the Sale on August 30, 2004, Invenergy deposited the
$19,500,000 in the Nelson Debtors' escrow account.
Once the Nelson Sale Proceeds are distributed, the Nelson
Debtors' estates will be fully administered. Samuel S. Kohn,
Esq., Kirkland & Ellis, LLP, New York, asserts that the interests
of creditors and the Nelson Debtors would be better served by the
dismissal of the Nelson Debtors' Chapter 11 cases in accordance
with Sections 305(a) and 1112(b) of the Bankruptcy Code.
Bankruptcy courts are specifically empowered to dismiss a case for
cause where there is an "absence of a reasonable likelihood of
rehabilitation," or for "inability to effectuate a plan."
Moreover, the aggregate amount of allowed secured claims in the
Nelson Debtors' Chapter 11 cases far exceed the undistributed
amount of the Nelson Sale Proceeds. Consequently, there is no
recovery available from the Nelson Sale Proceeds to satisfy any
outstanding administrative expense claims, priority claims, or any
other general unsecured claims. Therefore, Mr. Kohn notes, if the
Nelson Debtors were to propose a Chapter 11 plan of liquidation,
Section 1129(a)(9) of the Bankruptcy Code would remain
unsatisfied. Thus, that plan could not be confirmed.
Alternatively, a case may be dismissed pursuant to Section
305(a)(1) of the Bankruptcy Code if the interests of creditors and
the debtor would be better served by the dismissal.
* * *
Robert G. Burns, Esq., at Kirkland & Ellis, LLP, in New York, on
behalf of Debtors LSP-Nelson Energy, LLC, and NRG Nelson
Turbines, LLC, informs the Court that:
(a) the distribution of the Nelson Sale Proceeds have been
completed; and
(b) there are no outstanding fees owed to the Office of the
U.S. Trustee.
Accordingly, Judge Beatty dismisses LSP-Nelson Energy and NRG
Nelson Turbines' Chapter 11 cases, effective as of Nov. 30, 2004.
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, Esq., 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. 37; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
NYLIM STRATFORD: Moody's Junks $16K Cumulative Preferred Shares
---------------------------------------------------------------
Moody's Investors Service has taken these downgrade actions on two
classes of securities issued by NYLIM Stratford CDO 2001-1 Ltd.:
* the U.S.$32,000,000 Class C Fixed Rate Notes Due 2036,
previously rated Baa3 on watch for possible downgrade, are
now rated B1; and
* the U.S.$16,000,000 Stated Amount of 1% Cumulative Preferred
Shares, previously rated Ba3 on watch for possible downgrade,
are now rated Ca.
The Moody's rating of the Preferred Shares only addresses the
ultimate receipt of the "Stated Amount" (originally
U.S.$16,000,000, and as reduced by all distributions in excess of
a 1% dividend) plus required dividends on the amount.
According to Moody's, the action results from the deterioration in
the credit quality of the collateral pool supporting the issuer's
liabilities and the unfavorable hedge position. Moody's noted
that, the current weighted average rating factor of this
originally investment grade rated collateral pool is in excess of
814(indenture limit is 540), the current weighted average coupon
is approximately 7.631% (the indenture limit is 7.65%) and the
class C O/C test is still in violation at 99.502% (the indenture
limit is 100.25%). In addition, Moody's expects that there will
not be sufficient proceeds to preserve the credit ratings of the
subordinated notes owning in part to substantial cash outflows
related to hedge payments due to the Hedge Counterparty.
Moody's noted that this investment grade asset-backed
resecuritization closed on April 11, 2001, and is managed by New
York Life Investment Management LLC.
Rating Action: Downgrade
Issuer: NYLIM Stratford CDO 2001-1 Ltd.
Class Description: US$32,000,000 Class C Fixed Rate Notes Due 2036
Prior Rating: Baa3
Current Rating: B1
Class Description: U.S.$16,000 Stated Amount of 1% Cumulative
Preferred Shares
Prior Rating: Ba3
Current Rating: Ca
OBN HOLDINGS: Losses & Deficits Trigger Going Concern Doubt
-----------------------------------------------------------
OBN Holdings Inc.'s incurred a net loss of $271,097 during the
three month period ended September 30, 2004. It has a cash
balance of $3,381 at September 30, 2004. In addition, at
September 30, 2004, the Company's accumulated deficit was
$4,701,956 and the Company had negative working capital of
$2,272,170. These factors, among others, raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans include obtaining additional capital through
equity or debt financing sources, or the extension of existing
debt. However, no assurance can be given that additional capital,
if needed, will be available when required or upon terms
acceptable to the Company, or that the Company will be successful
in its efforts to negotiate the extension of its existing debt.
Management anticipates that unless OBN is able to raise funds from
the sale of OBN shares or generate revenues of at least $2,000,000
within the next six months, although operations will continue, the
Company will be unable to fully execute its business plan, which
will result in the Company not growing at its desired rate.
Should this situation occur, management is committed to operating
on a smaller scale until generated revenues can support expansion.
OBN Holdings, Inc., is an entertainment company engaged in
television broadcasting, feature film and television production,
music production and distribution, and merchandising. The
Company's wholly owned subsidiaries consist of Omni Broadcasting
Network, Inc., Products on Demand Channel, Inc., All Sports
Television Network, Inc., and Eclectic Entertainment, Inc., with
Eclectic's wholly owned subsidiaries consisting of Adventures of
Unit 28, L.A. Food Scene and Mini Movie Hour.
OMEGA HEALTHCARE: Launching Public Offering of 3.5MM Common Shares
------------------------------------------------------------------
Omega Healthcare Investors, Inc., (NYSE:OHI) plans to publicly
offer 3,500,000 shares of its common stock in an offering made
from its shelf registration statement that became effective on
August 27, 2004. Also, the Company intends to grant the
underwriters a 30-day option to purchase up to an additional
525,000 shares of common stock to cover over-allotments, if any.
The common stock is being offered by the Company and represents a
new financing.
UBS Investment Bank is acting as sole book-running manager for the
offering. Banc of America Securities LLC, Deutsche Bank
Securities and Legg Mason Wood Walker, Incorporated are acting as
co-managers for the offering.
A preliminary prospectus supplement relating to these securities
has been filed with the Securities and Exchange Commission. The
prospectus supplement and related prospectus may be obtained from:
UBS Investment Bank, ECMG Syndicate
299 Park Avenue
New York, N.Y. 10171
About the Company
Omega is a Real Estate Investment Trust investing in and providing
financing to the long-term care industry. At September 30, 2004,
the Company owned or held mortgages on 205 skilled nursing and
assisted living facilities with approximately 21,900 beds located
in 29 states and operated by 39 third-party healthcare operating
companies.
* * *
As reported in the Troubled Company Reporter on Sept. 14, 2004,
Fitch Ratings upgraded its ratings on approximately $300 million
of senior unsecured notes issued by Omega Healthcare Investors,
Inc.'s to 'BB-' from 'B'. Additionally, Fitch upgraded its
preferred stock rating to 'B' from 'CCC+' on Omega's two series of
outstanding preferred securities. This includes the
$118.5 million of 8.375% series D cumulative redeemable preferred
securities issued in the first quarter of 2004. In all,
approximately $168 million of preferred securities are affected by
this upgrade. Fitch has revised the Rating Outlook
OMNI FACILITY: Court Convenes Sale Hearing for Remco Assets
-----------------------------------------------------------
The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for
the Southern District of New York will convene a hearing at 10:00
a.m., tomorrow, December 9, 2004, to consider approval of the
successful bid or bids from the December 1, 2004, auction of the
assets of Omni Facility Services, Inc.'s affiliate, Remco
Maintenance Corporation.
Judge Lifland will also be asked to approve the sale of Remco
Maintenance's assets, free and clear of liens, claims, interests
and encumbrances, to the high bidder.
The Debtors entered into an Asset Purchase Agreement with Temco
Service Industries, Inc., on November 10, 2004. That sale
agreement included Temco's agreement to purchase Remco
Maintenance's assets and Remco's agreement to assume and assign
appropriate executory contracts and leases.
On Nov. 18, 2004, the Bankruptcy Court approved auction and
overbid procedures to test Temco's bid and entertain any higher
and better offers. Those bidding procedures provided that Temco
would receive a $100,000 break-up fee if its bid were topped by a
competitor.
Bankruptcy Court records don't indicate that any competing offer
for Remco's assets emerged at the Dec. 1 auction.
Headquartered in South Plainfield, New Jersey, Omni Facility
Services, Inc. -- http://www.omnifacility.com/-- provides
architectural, janitorial, landscaping, and electrical services.
The Company filed for chapter 11 protection on June 9, 2004
(Bankr. S.D.N.Y. Case No. 04-13972). Frank A. Oswald, Esq., at
Togut, Segal & Segal LLP, represents the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $80,334,886 in total assets and
$100,285,820 in total debts.
OMNI FACILITY: Has Exclusive Right to File Plan Through Jan. 14
---------------------------------------------------------------
The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for
the Southern District of New York extended the period, within
which Omni Facility Services, Inc., and its debtor-affiliates can
file a chapter 11 plan through and including January 14, 2005.
The Debtors have until March 21, 2005, to solicit acceptances of
that plan from their creditors.
The Debtors gave the Court four reasons militating in favor of the
extension of their exclusive periods:
a) since their bankruptcy petition date, the Debtors have
successfully closed the sale of the assets of four of their
five Business Groups, and the Court will convene a sale
hearing for the asset sale of their fifth business group,
Remco Maintenance Corporation, on December 9, 2004.
b) the Debtors' postpetition obligations have been paid as
they become due, and accrued obligation are fully provided
for in their budget;
c) the Debtors' Official Committee of Unsecured Creditors,
their Prepetition Lenders and their DIP Financing Lenders
have recently reached an agreement under which funding will
be made available for a chapter 11 plan; and
d) this is only the second extension of exclusivity that the
Debtors have sought since the Petition Date and the
extension is in the best interest of the Debtors' estate and
their creditors.
Headquartered in South Plainfield, New Jersey, Omni Facility
Services, Inc. -- http://www.omnifacility.com/-- provides
architectural, janitorial, landscaping, and electrical services.
The Company filed for chapter 11 protection on June 9, 2004
(Bankr. S.D.N.Y. Case No. 04-13972). Frank A. Oswald, Esq., at
Togut, Segal & Segal LLP, represents the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $80,334,886 in total assets and
$100,285,820 in total debts.
OWENS CORNING: Wants OC Canada to Invest $5 Mil. in Korean Newco
----------------------------------------------------------------
Owens Corning and its affiliates have identified growing markets
for their products in Korea and Japan for their asphalt roofing
shingle products. The Debtors believe that Korea and Japan have
significant opportunities for expansion. Demand in Korea for
asphalt roofing shingles has increased by 14% over the past five
years. Demand in the Korean market over the next 10 years is
expected to increase at an average rate of 4% to 5% per year.
Demand in the Japanese market over the next 10 years is expected
to increase at an average rate of 10% per year.
The Debtors want to take advantage of these opportunities. Hence,
the Debtors ask the Court to allow Owens-Corning Canada to:
(a) make capital contributions aggregating $5 million to a
non-debtor subsidiary, Newco/Korea Shingle, to be
organized and created under Korean law; and
(b) lend to Newco/Korea Shingle $2.9 million on an unsecured
basis.
Owens Corning also seeks permission to enter into license
agreements with Newco/Korea Shingle.
J. Kate Stickles, Esq., at Saul Ewing, in Wilmington, Delaware,
relates that Newco/Korea Shingle will be a wholly owned, direct
subsidiary of OC Canada, which is a wholly owned subsidiary of
Owens Corning NRO, Inc. Owens Corning NRO is a wholly owned
subsidiary of IPM, Inc., which in turn is wholly owned by Owens
Corning.
OC Canada will invest, through one or more capital contributions,
$5 million in Newco/Korea Shingle. In addition, OC Canada will
lend to Newco/Korea Shingle $900,000 for initial capital needs and
$2.0 million for working capital. The funds would be used to
purchase machinery and equipment for certain infrastructure
expenditures, including construction of a manufacturing facility,
and for working capital necessary for the production of asphalt
roofing shingles.
The key components of the contemplated transaction are:
(a) Newco/Korea Shingle's facility will be located near Seoul.
Two potential sites have been selected -- Munmak
Industrial Complex and Inju Industrial Complex. Both
complexes are being developed by the Provincial
Government, which is willing to provide long-term land
lease arrangements. The region in which the complexes are
located meets all designated criteria, in terms of
proximity to customers, transportation costs, availability
of lease arrangement or land cost, availability of utility
services, and availability of local incentives. It is
expected that the actual site will be selected and
acquired by December 2004 and that the land lease
arrangement will require annual lease payments of
approximately $21,000 to $31,000 per year;
(b) The physical plant to be constructed would be a turn-key
plant to be equipped with a German Reiser shingle line and
certain ancillary process equipment to be provided by
Korean or Chinese contractors. The cost of the turn-key
plant is anticipated to be $2 million for the Reiser
equipment, $900,000 for the ancillary equipment and
installation, and $3 million for the building, civil
work, engineering, lighting and related construction
costs;
(c) Newco/Korea Shingle will bear the costs of all raw
material purchases. Asphalt will be obtained locally in
Korea, and prime granule and glass mat will be obtained in
the United States initially and in China shortly after
completion of the plant. Non-key raw materials will be
obtained locally in Korea; and
(d) Newco/Korea Shingle will obtain certain technology, know-
how and other intellectual property necessary to
manufacture, sell and market shingle products in Korea
through a technology license agreement and a trademark
license agreement with Owens Corning.
The principal terms of the License Agreements are:
(1) The Intellectual Property will remain the property of
Owens Corning;
(2) The License Agreements will require Newco/Korea Shingle to
pay Owens Corning royalties at fair market rates. The
License Agreements will be non-exclusive and non-
transferable;
(3) The License Agreements initially will permit Newco/Korea
Shingle to export, use, market and sell shingle products
in Korea and Japan;
(4) The License Agreements will provide for Owens Corning to
assist Newco/Korea Shingle in the effective use of the
Intellectual Property, through the provision of technical
services. Owens Corning will charge Newco/Korea Shingle a
fee for the services, at the standard rates charged by
Owens Corning to its subsidiaries; and
(5) The terms of the License Agreements will be 10 years,
subject to termination, renewal and extension.
Asphalt shingle products manufactured by Newco/Korea Shingle
generally will be marketed, re-sold and distributed to end
customers by a few key distributors. The distributors will be
responsible for all sales, marketing and customer-related issues,
except for sales made directly by Newco/Korea Shingle to key
account customers.
It is anticipated that the Newco/Korea Shingle facility will be
ready for testing by August 2005 and fully operational for
manufacturing purposes by September 2005.
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
Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in
assets and a $4.2 billion stockholders' deficit. The company
reported $132 million of net income in the nine-month period
ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No.
89; Bankruptcy Creditors' Service, Inc., 215/945-7000)
OXFORD AUTOMOTIVE: Files Chapter 11 Petition in E.D. Michigan
-------------------------------------------------------------
Oxford Automotive and its U.S. subsidiaries filed voluntary
chapter 11 petitions with the U.S. Bankruptcy Court in the Eastern
District of Michigan as a first step towards the formal
implementation of its consensual restructuring plan.
Simultaneously with the filing of its petitions, Oxford and its
filing subsidiaries also filed a Chapter 11 plan and related
disclosure statement.
To ensure continued liquidity through the reorganization period,
Oxford has negotiated a debtor-in-possession financing package
with certain lenders.
"The decision to file is necessary to protect Oxford's customers,
suppliers and employees in the United States," said David
Treadwell, CEO of Oxford. "We expect manufacturing operations to
continue without interruption throughout the reorganization
process, which includes the sale of some or all of our assets. We
are committed to maximizing the value of Oxford for the benefit of
all constituencies and protecting as many jobs as possible. We
believe this comprehensive plan allows us to move in that
direction."
Restructuring Plan
Oxford Automotive disclosed a comprehensive fully funded
restructuring plan for both its U.S. and European operations. The
goal of this restructuring plan is to maximize the value of its
U.S. operations while enabling Oxford to continue to focus on its
successful European operations, which have exhibited strong
profitability over the last several years and have a solid book of
business. European operations, headed by Herve Guillaume, consist
of stamping and assembly operations in France and Germany, and
mechanisms operations in France and Turkey.
"Oxford's European operations have performed admirably despite
difficult economic times," said Mr. Treadwell. "We are intent on
growing that business."
Oxford's restructuring plan is based on discussions and an
agreement-in- principle reached among Oxford, the ad hoc committee
of its secured bondholders (holding over a majority of the face
value of Oxford's secured bonds) and its equity holder. Pursuant
to the consensual restructuring plan, Oxford's secured bondholders
will receive the majority of the equity of a new holding company
for the European entities. In addition, to facilitate a
consensual and orderly restructuring, the plan will also provide
Oxford's unsecured creditors with the opportunity to share in the
equity of the new holding company or receive cash. No
distributions will be made to the current equity holders. The
restructuring plan also contemplates the sale of some or all of
Oxford's North American assets. "Oxford is very pleased to have
the support of our capital base," said Mr. Treadwell. "This new
structure will allow Oxford Europe to continue to be a strong
participant in the European supplier business."
McCalla, Alabama Facility
Consistent with its restructuring plan, Oxford has closed on the
sale of the McCalla, Alabama facility to Madrid-based Gestamp
Corporation. The purchase price was not disclosed. Gestamp
currently supplies several DaimlerChrysler commercial programs in
Europe. This is Gestamp's first operation in the U.S. Gestamp
will establish an executive office in Troy, Michigan to support
its North American activities.
The 382,000-square-foot plant, which opened earlier this year,
will supply complete underbody assemblies for the next-generation
Mercedes M-class SUV, due this month, and the Grand Sports Tourer
scheduled for mid-2005.
Proceeds from the sale were used to repay in full Oxford's senior
lending facility. Terms of the sale included an escrow and other
provisions that reduced the net cash at closing.
Northern U.S. Subsidiaries
In furtherance of its restructuring plan and as contemplated by
Oxford's proposed Chapter 11 plan, Oxford is in negotiations
relating to the sale of five of its northern U.S. plants. The
potential sale relates to Oxford plants located in:
* Corydon, Indiana;
* Greencastle, Indiana;
* Lapeer, Michigan;
* Prudenville, Michigan; and
* Canton, Mississippi.
Oxford anticipates selling these plants during Oxford's Chapter 11
cases through a 363-sale process to ensure that Oxford receives
the highest and best offer for the plants.
About Gestamp
Gestamp Corporation -- http://www.gestamp.com/--
is a European Union multinational in the steel industry,
automotive components and logistics. Its three large industrial
divisions are Gonvarri, Gestamp Automocion, and Esmena. Gestamp
has facilities in 12 countries located in the EU and Mercosur. In
2003, Gestamp sales were over 2,100 million euros and it employed
more than 10,000 people.
About Oxford
Headquartered in Troy, Michigan, Oxford -- http://www.oxauto.com/
-- is a Tier 1 supplier of specialized metal-formed systems,
modules, assemblies, components and related services for the
automotive industry. Oxford's primary products include structural
modules and systems, exposed closure panels, suspension systems
and vehicle opening systems, many of which are critical to the
structural integrity and design of the vehicle. For more
information,
PEGASUS COMMS: Nasdaq Extends SEC Reports Deadline to Dec. 17
-------------------------------------------------------------
Pegasus Communications Corporation (NASDAQ: PGTVE) reported that
The Nasdaq Listing Qualifications Panel notified the Company that
it has decided that, pursuant to the Company's November 30, 2004,
request, the Company's Class A common stock would continue to be
listed on the Nasdaq National Market through December 17, 2004.
If the Company files on or before December 17, 2004, its second
quarter 2004 Form 10-Q with financial statements that have been
fully reviewed by its independent accountants in accordance with
Statement on Auditing Standards No. 100, Interim Financial
Information and any related statements, the extension would be
further extended through December 24, 2004, to permit the Company
to file its third quarter 2004 Form 10-Q. The Panel had
previously granted the Company a November 30, 2004, extension to
file these reports with the Securities and Exchange Commission.
The Company reported that it has not finished its overall
assessment of the investment underlying its limited partnership
interest in Pegasus PCS Partners, L.P. After the assessment, the
company will need to amend its Form 10-K for the year ended Dec.
31, 2003, its quarterly reports on Form 10-Q for the quarters
ended March 31, 2004, and June 30, 2004, and if necessary, the
interim and annual reports for periods prior to and including
Dec. 31, 2003. Once the assessment is concluded, the company will
be able to finalize and file its Form 10-Q for the quarter ended
September 30, 2004.
About Pegasus Communications
Pegasus Communications Corporation is the parent company of:
* Pegasus Satellite Communications, Inc.;
* Pegasus Development Corporation, which holds Ka band
satellite licenses granted by the FCC and intellectual
property rights licensed from Personalized Media
Communications L.L.C.;
* Pegasus Guard Band LLC, which holds FCC licenses to provide
terrestrial communications services in the 700 MHZ spectrum
covering areas of the United States including approximately
180 million people -- POPS; and
* Pegasus Rural Broadband LLC, which provides wireless
broadband Internet access in rural areas.
Pegasus Communications Corporation provides digital satellite
television to rural households throughout the United States. It
is are the 10th largest pay television company in the United
States and the only publicly traded cable or satellite company
exclusively focused on service to rural and underserved areas.
Pegasus owns and operates television stations affiliated with
CBS, FOX, UPN and The WB networks.
At June 30, 2004, Pegasus Communications Corporation's balance
sheet showed $400,618,000 in total common stockholders' equity.
PERFORMANCE LOGISTICS: S&P Junks Transportation's $35 Million Loan
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' corporate
credit rating to Performance Logistics Group, Inc. -- PLG. The
rating outlook is stable. At the same time, Standard & Poor's
assigned its 'B' senior secured debt rating, the same as the
corporate credit rating, to subsidiary Performance Transportation
Services Inc.'s -- PTS -- proposed $20 million revolving credit
facility and $80 million first-lien term loan, with a recovery
rating of '3', indicating that lenders can expect a meaningful
recovery of principal (50% to 80%) in the event of a default or
bankruptcy. Standard & Poor's also assigned its 'CCC+' secured
debt rating, two notches below the corporate credit rating, to
PTS's proposed $35 million second-lien term loan, with a recovery
rating of '5', indicating that lenders can expect a negligible
recovery of principal (0% to 25%) in the event of default.
Proceeds from the term loans will be used to refinance the
company's existing debt obligations, purchase $18.3 million of
assets currently leased, and distribute $12.5 million to
shareholders.
"Ratings on PLG and its primary operating subsidiary, PTS, reflect
the company's modest size, concentrated end-customer base,
aggressively leveraged capital structure, and limited financial
flexibility," said Standard & Poor's credit analyst Kenneth L.
Farer. "Positive credit factors include PLG's long-term
relationships with vehicle manufacturers and high barriers to
entry due to the extensive terminal network required for national
operations."
Wayne, Michigan-based PLG, through PTS, is the second-largest
North American motor carrier of automobiles and light trucks. The
company was formed with the acquisition of Hadley Auto Transport
in 1999 and subsequent purchase of E. & L. Transport Company LLC
in 2000. The company delivers almost 4 million vehicles annually
to dealership locations from rail terminals, port facilities, and
assembly plants. The largest provider of these services in North
America is Allied Holdings, Inc., which has annual revenues of
approximately $900 million, roughly three times larger than PLG,
and approximately 130 terminals, more than four times PLG's total.
PLG faces competition from other specialty carriers for short-
distance vehicle transportation and from major railroads for long-
distance trips.
The car hauling industry faces continued pricing pressure from the
large auto manufacturers, which represent a majority of the
company's revenues. Generally, revenues for the industry trend
closely with North American vehicle production figures.
Additional consolidation is possible in this segment of the
trucking industry as larger networks provide back-haul
opportunities and economies of scale. New entrants are not
expected due to the substantial capital required for trucks,
car-hauling trailers, and terminals.
PLG's recent acquisition of LAC Holding Corp., and its primary
subsidiary, Leaseway Auto Carriers, from Penske Truck Leasing Co.
has provided favorable cost reductions and increased scale of
operations that should enable the company to maintain a credit
profile consistent with current ratings. The current level of
North American automobile production levels and its variability,
the company's high leverage, and its concentrated customer base
will likely constrain ratings upside.
PERFORMANCE TRANSPORTATION: Moody's Rates Sr. Sec. Debts at B2
--------------------------------------------------------------
Moody's Investors Service assigned first-time ratings for
Performance Transportation Services, Inc., in conjunction with the
company's proposed transaction to refinance and recapitalize its
balance sheet. Performance Transportation is the primary
subsidiary of Performance Logistics Group, Inc. -- PLG. The
rating outlook is stable.
The proposed facilities detailed below will be utilized to
refinance approximately $39.6 million of existing debt, refinance
$35.5 million of sponsor obligations incurred to bridge the March
2004 acquisition of Leaseway Auto Carriers, retire existing fleet
leases at a cost of $18.6 million, pay a $12.5 million dividend to
common shareholders, and pay transaction fees and expenses. The
revolving credit facility will be undrawn at close and available
to support ongoing working capital and general purpose liquidity
requirements.
* B2 rating for Performance Transportation's proposed first-
lien guaranteed senior secured credit facilities consisting
of:
-- $20 million revolving credit facility due December 2009;
-- $45 million synthetic letter of credit facility due
December 2009;
-- $80 million term loan B due December 2011;
-- B3 rating for Performance Transportation's proposed
$35 million second-lien guaranteed senior secured term
loan due June 2012;
-- B2 senior implied rating;
-- Caa1 senior unsecured issuer rating
The rating assignments reflect Performance Transportation's high
pro forma leverage, adequate pro forma liquidity, and anticipated
payment of a $12.5 million dividend to existing equity holders
upon closing the proposed debt refinancing. The rating
assignments furthermore reflect Performance Transportation's
material exposure to potentially weakening and volatile North
American vehicle production levels as well as to declining market
shares of the domestic Big 3 OEM's, possible risks with regard to
the composition of the company's customer and platform mix, and
high annual cash requirements associated with the maintenance
costs and capital spending levels necessary to support the
company's fleet of rigs used for transporting new vehicles to
dealers. Ford and General Motors, which are Performance
Transportation's largest and most longstanding customers, have
continued to endure market share declines and rising dealer
inventory levels. Model changeovers, delayed launches, or
unanticipated plant shutdowns also stand to negatively impact the
company's performance. Since 2002 when the OEM's brought in
third-party contractors to enhance efficiency levels, the OEM's
have required their logistics providers across the industry to
steadily shorten delivery times and otherwise relinquish some
degree of control over their own operating flexibility and
productivity. Moody's additionally notes that while Performance
Transportation is now the #2 competitor within the automotive
logistics market, Allied Holdings, Inc., remains the definitive
industry leader. Performance Transportation's current revenue
base still remains less than half the size of Allied, and
Performance Transportation's broad regional coverage today still
falls short of Allied's truly national US coverage.
Performance Transportation is notably undergoing a major
transition as the company continues to integrate its March 2004
acquisition of Leaseway, previously a division of Penske Truck
Leasing -- Penske. This acquisition nearly doubled the revenue
base of Performance Transportation. Performance Transportation's
base case projections incorporate a highly material level of
anticipated annualized cost savings approximating $13.6 million
that would meaningfully improve the company's free cash flow
profile. The savings are expected from a combination of
restructuring initiatives and productivity and business practice
improvements within the core business, as well as merger synergies
associated with the Leaseway acquisition. While management has
provided detailed back-up supporting the projected improvements to
Performance Transportation's business that have either already
been effected or are actively in progress, the results of these
actions are not substantially evident in the company's financial
statements reported through September 30, 2004. Moody's
additionally notes that Performance Transportation (which has
provided at least three years of historical audits to Moody's) has
not yet undergone an audit subsequent to the Leaseway acquisition.
Financial performance for Leaseway while it was under Penske's
ownership is only being validated on a third party basis through a
limited-scope audit covering only one full year of performance.
The Leaseway audit report for 2003 (currently still in draft form)
excludes PLG's opening 2003 balance sheet and its 2003 cash flow
statement, and additionally does not opine on the closing 2003 net
assets balance. This was attributed by the management team,
equity sponsors, and accounting firm to the difficulty of
reconstructing historical results for a division that had been
commingled with other parts of Penske's business. All of
Leaseway's fiscal year end December 2003 assets and liabilities
are notably being fully audited.
Performance Transportation's pro forma liquidity is adequate. The
company expects to have the full $20 million revolving credit
facility unused and available at closing, as well as some
additional letter of credit capacity under the synthetic facility.
Performance Transportation estimates its base level of operating
cash at $6 million. The company anticipates improving its overall
liquidity position over time through free cash flow generation and
corresponding debt reduction.
The ratings and stable outlook more favorably reflect that
Performance Transportation's acquisition of Leaseway served to
establish Performance Transportation as a major competitor to
Allied by almost doubling Performance Transportation's revenue
base, diversifying the company's customer mix and geographic
reach, and providing access to Penske's valuable purchasing power
(since Penske now has a substantial equity position in PLG).
Toyota is now a significant new customer of Performance
Transportation, which along with the addition of certain Korean
manufacturers will help allay the impact of lost market share by
the Big 3. Allied and Performance Transportation together now
control 70% of US automotive logistics volume, with all other
competitors consisting of considerably smaller
family-owned businesses that are not national in scope.
Performance Transportation and all of the other unionized
competitors (which generate about 90% of industry revenues) are
subject to the same terms from the Teamsters. The company's labor
costs remain highly variable under the terms of the Teamsters
contract, since union drivers are paid based upon individual
productivity and the company has the ability to impose daily
layoffs as needed. Performance Transportation expects that future
growth will most likely be realized from business taken over from
non-union carriers and from rail providers that lack sufficient
automotive capacity. Non-union carriers generally offer lower
wages and fringe benefits and, as a result, typically have driver
bases that are less skilled and more likely to exhibit higher
turnover rates. OEM's are, in fact, often willing to pay a
premium for union drivers, as they tend to incur less damage to
the new vehicles being delivered and engender greater dealer
satisfaction. The company additionally believes that its focus on
service quality (including just-in-time delivery of vehicles, low
damage claims, and proprietary vehicle tracking and yard
management software technologies) will distinguish it from
competitors. Substantial barriers to entry will likely discourage
new entrants to the industry. These barriers most notably include
the high up-front capital investment in the fleet that would be
required and the difficulty of winning business awards away from
established industry players with broader geographic scopes and
more experienced driver bases.
Under the direction of a new chief executive who joined
Performance Transportation in July 2003 the company is making
significant strides to restructure its operations and improve its
cost structure, operating efficiency, asset utilization, and new
business generation. As a result of the Leaseway acquisition,
Performance Transportation has identified an additional
$7.5 million of annual merger synergies which management is highly
confident will almost all be in place during the first quarter of
2005. These merger synergies relate to the elimination of
duplicate overhead personnel following consolidation into one
strategically-located headquarters in Michigan, purchasing savings
resulting from the company's larger critical mass and the ability
to access Penske's purchasing power, logistics and network
improvements, elimination of certain terminal overhead, and
termination effective December 31, 2004 of the Hidden Creek (Onex
affiliate) and Penske management fees which aggregated about
$2.2 million annually. While diesel fuel prices have escalated at
an alarming pace, Performance Transportation's fuel surcharges in
place with most customers are proving to be an effective hedge.
The proposed refinancing transaction will serve to improve the
company's liquidity, debt maturity profile, cash interest
coverage, and financial flexibility.
Future events that would likely result in a lowering of
Performance Transportation's outlook or ratings could include
sharply lowered North American light vehicle production levels,
evidence that the company's restructuring efforts and anticipated
synergies are not being realized, material increases in diesel
fuel costs that are not effectively hedged, the loss of material
customer contracts, fleet maintenance costs and capital
expenditures meaningfully in excess of plan, stepped-up price
compression from the OEM's, a decision to return additional
capital to shareholders, and a decision by Penske to sell off its
ownership interest in PLG (which could eliminate planned
purchasing benefits).
Future events that would likely improve Performance
Transportation's outlook or ratings could include substantially
full realization of projected annualized cost reductions along
with corresponding debt reduction, publication of an unqualified
full-scope audit report for 2003 including the Leaseway
acquisition that demonstrates results consistent with management's
current expectations, significant new business awards at favorable
price points, and Moody's assessment that future spending levels
for fleet maintenance and replacement are appropriately estimated.
The B2 ratings for the proposed $145 million of first-lien
guaranteed senior secured credit facilities reflects the benefits
and limitation of the proposed collateral and guarantee package.
Collateral will consist of perfected first-priority security
interests in substantially all tangible and intangible assets of
Performance Transportation, PLG and all existing or subsequently
acquired or organized domestic subsidiaries of Performance
Transportation. In addition, 100% of the voting stock of
Performance Transportation and its domestic subsidiaries and 65%
of the voting stock of foreign subsidiaries will be pledged.
Unconditional guarantees will be provided by PLG and all of the
domestics subsidiaries of Performance Transportation. Scheduled
amortization of the term loan B will be 1% of principal each year,
with the balance payable on the seventh anniversary of the closing
date. Excess cash flow recapture is initially proposed at 50%,
with future reductions to be permitted based upon leverage.
Voluntary prepayments may be made at any time without penalty.
The B3 rating for the proposed $35 million second-lien term loan
facility reflects the subordinated nature of the security liens
and guarantees versus those for the first-lien facilities.
Covenants will be established to mirror those within the
first-lien credit agreement, but will be less restrictive in most
cases. Voluntary prepayments will be subject to a premium during
the first three years according to a sliding scale of 3%, 2%, and
1%, respectively.
An intercreditor agreement will be entered into between the
first-lien and second-lien lenders in order to establish the
silent nature of the second-lien interests under most
circumstances, until the expiration of designated blockage periods
following an event of default. Exceptions to the silent nature of
the second liens would only incorporate proposals for fundamental
changes to facility maturities, applicable rates, collateral, or
commitment amounts.
Pro forma results are presented for the last twelve months ended
September 30, 2004, assuming that Leaseway was acquired and the
proposed refinancing was executed on October 1, 2003 (to reflect a
full year of Leaseway results and projected annualized cost
savings), and also that all rigs were acquired through outright
purchases rather than under operating leases (as will be
Performance Transportation's policy going forward). Pro forma
total debt/EBITDAR leverage (including letters of credit and the
present value of operating leases as debt) approximates 4.1x.
Actual leverage will be slightly higher in 2005 due to the fact
that the full annualized run rate of savings will not be realized
until 2006. Pro forma EBIT coverage of interest exceeds 2.5x.
Performance Transportation, headquartered in Wayne, Michigan, is a
provider of new automobile logistics distribution for original
equipment manufacturers in the United States and Canada.
Performance Transportation is the second largest competitor in the
industry with an estimated market share of approximately 23%,
second only to industry leader Allied. Performance Transportation
manages the distribution of over 3.8 million new vehicles each
year, with annual revenues presently approximating $350 million.
The company is currently owned by:
* Penske (40%),
* Onex Corporation and Affiliates (29%),
* Norwest (15%),
* current management (8%), and
* others (8%).
PINNACLE ENT: Says Approx. $96.6 Million of Notes are Tendered
--------------------------------------------------------------
Pinnacle Entertainment, Inc., (NYSE: PNK) reported the current
status of its previously announced cash tender offer for up to
$97 million aggregate principal amount of its 9.25% Senior
Subordinated Notes due 2007, which is set to expire at 8:00 a.m.,
New York City time, on Monday, Dec. 20, 2004, unless extended or
earlier terminated.
The Company also disclosed that any holders who submit tenders by
the expiration date will continue to be eligible to receive the
early tender premium. To date, approximately $96.6 million in
aggregate principal amount of the Notes had been tendered to the
Company. The Company has offered to purchase up to $97 million
aggregate principal amount of Notes from tendering holders on a
pro rata basis pursuant to the tender offer.
The financing condition of the tender offer has been satisfied and
all other conditions of the tender offer are deemed satisfied or
waived, including the general conditions described in the
Company's Offer to Purchase dated Nov. 16, 2004. Tendered Notes
may no longer be withdrawn.
Bear, Stearns & Co. Inc. and Lehman Brothers Inc. are the dealer
managers for the tender offer. Questions concerning the terms of
the tender offer should be directed to:
Bear, Stearns & Co. Inc.
Global Liability Management Group
Tel. No. (877) 696-2327
-- or --
Lehman Brothers Inc.
Liability Management Group
Tel. No. (800) 438-3242 or (212) 528-7581
The Bank of New York is the depositary in connection with the
tender offer. D.F. King & Co., Inc., is the information agent for
the tender offer. Requests for copies of the Offer to Purchase
and Letter of Transmittal should be directed to the information
agent at (800) 859-8511.
The complete terms and conditions of the tender offer are set
forth in the Offer to Purchase and Letter of Transmittal that have
been mailed to holders of the Notes. Holders of the Notes are
urged to read the tender offer documents carefully because they
contain important information.
About Pinnacle Entertainment
Pinnacle Entertainment owns and operates casinos in Nevada,
Mississippi, Louisiana, Indiana and Argentina, and receives lease
income from two card club casinos, both in the Los Angeles
metropolitan area. The Company is currently building a major
casino resort in Lake Charles, Louisiana and has been selected for
two casino development projects in the St. Louis, Missouri area.
Each of these development projects is dependent upon final
approval by the Louisiana Gaming Control Board and the Missouri
Gaming Commission, respectively.
* * *
As reported in the Troubled Company Reporter on Aug. 5, 2004,
Fitch Ratings has assigned a rating of 'B+' to the proposed
$350 million senior secured bank facility of Pinnacle
Entertainment (NYSE: PNK) due 2008. The facility, which consists
of a $100 million senior secured revolver due 2008, a $125 million
senior secured term loan due 2010, and a $125 million senior
secured delayed draw term loan due 2010, replaces the existing
$300 million senior secured credit facility established in
December 2003. Refinancing of the bank facility provides
additional liquidity to accommodate a $40 million increase in
budget to $365 million for PNK's L'Auberge du Lac Casino & Resort
development in Lake Charles, Louisiana. Extension of the delayed
draw portion should better accommodate the timing of funding
needs, and reduce funded debt and interest expense. The Outlook
is Stable.
PIUTE PIPELINE: Case Summary & 2 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Piute Pipeline, LLC
9535 Forest Lane
Dallas, Texas 75243
Bankruptcy Case No.: 04-36283
Chapter 11 Petition Date: December 3, 2004
Court: District of Colorado (Denver)
Judge: A. Bruce Campbell
Debtor's Counsel: Deanna L. Westfall, Esq.
Bennington Johnson Biermann & Craigmile, LLC
3500 Republic Plaza
370 17th Street
Denver, CO 80202
Tel: 303-629-5200
Fax: 303-629-5718
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 2 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Gunnison Energy Corporation Notice $110,788
1601 Forum Place, Ste. 1400
West Palm Beach, FL 33401
JW Operating Company Credit $19,846
P.O. Box 970490
Dallas, TX 75397
PLAYBOY ENTTERPRISES: Projects Improved 2005 Financial Results
--------------------------------------------------------------
Playboy Enterprises, Inc., (PEI) (NYSE: PLA, PLAA) projected that
in 2005 it will report earnings per share, excluding the potential
impact of recognizing stock option expense, of $0.40 to $0.45,
significantly higher than anticipated 2004 EPS results. Revenues
are expected to increase approximately 6% in 2005.
Speaking at the Credit Suisse First Boston Media and Telecom Week
conference in New York, PEI Chairman and Chief Executive Officer
Christie Hefner said that the expected gains will be driven
primarily by continued double-digit increases in revenues and
profitability in the company's higher margin international
television, online subscription and e-commerce, and licensing
businesses. The company will also benefit from its 2004 debt
reduction efforts, which will reduce non-operating expense going
forward.
"During 2004, we expect to return to net profitability as well as
benefit from the completion of a number of important deals and the
reduction in our interest and dividend expense," Ms. Hefner said.
"We end this year in a stronger position financially than we've
enjoyed in nearly a decade.
"Looking ahead, we see substantial opportunities to drive earnings
growth," Ms. Hefner said. "It's clear that the Playboy brand
continues to enjoy unprecedented and growing popularity around the
world and we are monetizing that in more ways and in more markets
than ever before. As a part of that, changing technologies are
enabling us to create new platforms for distribution of our
content, which we are well positioned to do as a result of the
consolidation of our television, DVD, online and wireless
businesses. We believe that these dynamics will result in higher
revenues, operating and net income in 2005."
The company noted that stock option expense could total
approximately $3.5 million, or $0.10 per share in 2005.
About the Company
Playboy Enterprises is a brand-driven, international multimedia
entertainment company that publishes editions of Playboy magazine
around the world; operates Playboy and Spice television networks
and distributes programming via home video and DVD globally;
licenses the Playboy and Spice trademarks internationally for a
range of consumer products and services; and operates a network of
Websites including Playboy.com, a leading men's lifestyle and
entertainment Web site.
* * *
As reported in the Troubled Company Reporter on June 10, 2004,
Standard & Poor's Ratings Services revised its outlook on adult
entertainment company Playboy Enterprises Inc. to positive from
stable. The outlook revision reflects the company's plan to use
proceeds from its secondary share offering to reduce total debt
outstanding and the resulting improvement in financial
flexibility.
At the same time, Standard & Poor's affirmed its 'B' corporate
credit rating on Chicago, Illinois-based Playboy. Total debt
outstanding at March 31, 2004, was $150.5 million, including
$35.5 million in Califa Entertainment Group Inc. and Playboy TV
International LLC acquisition liabilities, but excludes
$16.7 million in Series A convertible preferred stock owned by
founder Hugh Hefner.
PLIANT: Low Earnings Prompt S&P to Pare Corp. Credit Rating to B
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Pliant Corp. to 'B' from 'B+' and removed all ratings
from CreditWatch.
On Oct. 5, 2004, Standard & Poor's placed the ratings on
CreditWatch with negative implications reflecting concerns about
the company's ability to improve earnings and operating cash flows
sufficiently to support the debt reduction necessary at the
previous ratings. The outlook is negative.
Schaumburg, Illinois-based Pliant had total debt outstanding of
about $806 million at Sept 30, 2004.
"The downgrade incorporates the company's recently lowered
earnings and cash flow guidance for 2004," said Standard & Poor's
credit analyst Liley Mehta. "Increasing costs for raw materials
(namely plastic resins) arising from an elevated oil and natural
gas price environment have pressured Pliant's liquidity and
operating performance, and resulted in further deterioration of an
already stretched financial profile."
Without a reversal of recent operating trends, elevated
raw-material costs could further pressure liquidity and operating
cash flows in 2005.
The ratings reflect Pliant's very aggressive debt leverage, weak
credit measures, and limited liquidity, which overshadow its
below-average business position in plastic film and flexible-
packaging segments. With annual revenues of about $954 million,
Pliant is a domestic producer of extruded film and flexible-
packaging products for food, personal care, medical, industrial,
and agricultural markets. The films and flexible packaging
industry is highly fragmented and competition is intense, stemming
from direct competitors, customer in-sourcing, and substitute
products. About 50% of the company's sales are under contracts
with customers. These contracts allow for pass through of
fluctuations in raw material prices, typically with some time lag.
Given the company's onerous debt burden and weak credit measures,
management's ability to successfully improve Pliant's cost
structure, and achieve improved pricing and volume growth is key
to improving operating margins and preserving sufficient
liquidity. If the company's liquidity weakens, or if prospects
for improved operating results and sufficient cash flow generation
(to meet internal working capital and capital spending needs) are
not greatly improved, ratings could be lowered again in the near
to intermediate term.
PURVI PETROLEUM: U.S. Trustee Meets Creditors on January 7
----------------------------------------------------------
The United States Trustee for Region 8 will convene a meeting of
Purvi Petroleum III, LLC's creditors at 10:00 a.m., on
Jan. 7, 2005, Room 100 of the Customs House located at 701
Broadway in Nashville, Tennessee. This is the first meeting of
creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy
cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Headquartered in La Vergne, Tennessee, Purvi Petroleum III, LLC,
filed for chapter 11 protection on Nov. 30, 2004 (Bankr. M.D.
Tenn. Case No. 04-14423). Steven L. Lefkovitz, Esq., at Lefkovitz
& Lefkovitz, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it did
not disclose its assets and listed $16 million in debts.
QUINTUS CORPORATION: Settles Securities Lawsuits for $13 Million
----------------------------------------------------------------
Quintus Corporation reached a settlement in connection with all of
the securities litigation involving Quintus and its former
officers and directors. This litigation includes a class action
suit pending in the federal district court for the Northern
District of California, state court lawsuits in California and
Texas and suits and claims in the United States Bankruptcy Court
for the District of Delaware.
Under the terms of the settlement, the various plaintiff groups
will be paid a total of $13 million. Quintus will contribute
$1 million of this amount from existing cash, while the remaining
$12 million will be paid by certain insurers and Quintus' former
auditors. The settling parties will exchange releases. The
settlement is subject to court approval by both the federal court
in California and the Delaware Bankruptcy Court. The settlement
funds will only be disbursed after the required court approval.
Terms of the settlement also include the reacquisition or
subordination of certain shares of Quintus stock held by its
former Chief Executive Officer and its former Chief Financial
Officer.
Kurt F. Gwynne, the Chapter 11 Trustee for Quintus, stated, "This
settlement clears the way for a plan to be filed in the bankruptcy
case providing for distribution of Quintus' cash assets."
Headquartered in Dublin, California, Quintus Corporation,
develops and provides comprehensive electronic customer
relationship management (eCRM) software, applications and
services. The Company and its affilicates filed for chapter 11
protection on February 22, 2001 (Bankr. D. Del. Case Nos. 01-00501
through 01-00503). When the Debtors filed for bankruptcy, the
Debtors reported a consolidated total assets amounting to
$72,809,000 and consolidated total liabilities amounting to
$31,090,000. Quintus previously sold substantially all of its
assets to Avaya, Inc., in 2001.
QWEST COMMS: Inks $10 Million Pact with City & County of Denver
---------------------------------------------------------------
Qwest Communications International, Inc., (NYSE: Q) formed a
three-year, $10 million agreement to be the exclusive provider of
voice and data services to the city and county of Denver. By
having Qwest as the exclusive single-source provider, the city and
county will save more than $800,000 annually on its total
communications spend.
Qwest will provide Denver with local voice services as well as
high-speed broadband capabilities to nearly 300 locations around
the area. In addition, other independent organizations such as
Denver Public Schools and Denver Health and Hospitals will also
utilize services under this contract agreement, bringing total
savings to over $1.2 million a year.
"We're thrilled to have extended and expanded our agreement with
the city and county of Denver," said Cliff Holtz, executive vice
president, business markets group for Qwest. "We have a
relationship with Denver that goes back more than 50 years and we
attribute that to the Spirit of Service we provide our customers
every day."
"We're looking forward to having one, single source provider for
all our communications needs," said Luis Colon, manager of general
services, city and county of Denver. "We evaluated several
service providers, and eventually selected Qwest because of its
unwavering commitment to serving our needs as the city evolves
into a more efficient entity offering top-notch services to our
citizens."
About the Company
Qwest Communications International, Inc., (NYSE: Q) is a leading
provider of voice, video and data services. With more than 40,000
employees, Qwest is committed to the "Spirit of Service" and
providing world-class services that exceed customers' expectations
for quality, value and reliability. For more information, please
visit the Qwest Web site at http://www.qwest.com/
At Sept. 30, 2004, Qwest's balance sheet showed a $2,477,000,000
stockholders' deficit, compared to a $1,016,000,000 deficit at
Dec. 31, 2003.
RCN CORP: Wants to Assume 33 Executory Contracts & Renew Policies
-----------------------------------------------------------------
RCN Corporation and its debtor-affiliates ask the U.S. Bankruptcy
Court for the Southern District of New York for authority to
assume 33 executory contracts.
To the extent required, the Debtors also seek authority to renew
71 existing insurance programs, or enter into similar insurance
programs with other insurance carriers, on terms reasonably
similar to those currently in existence.
Insurance Policies
D. Jansing Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom,
LLP, in New York, relates that the Debtors are parties to 71
insurance policies. The Debtors' insurance policies provide the
Debtors and their affiliates with necessary, and in some cases
statutorily required, insurance coverage, including workers'
compensation, general liability, general automobile, director and
officer and other types of insurance coverage.
Mr. Baker asserts that the Debtors and their affiliates require
the continuation of these policies to comply with certain state
laws mandating insurance coverage, preserve their current
insurance scheme, and manage their risk. The Debtors also need
to renew their existing insurance programs, upon similar terms,
to maintain the coverage going forward.
Equipment Lease Agreement
The Debtors are party to an equipment lease guaranty agreement
with General Electric Corp. The Debtors guarantee certain
obligations of RCN Telecom Services, Inc., a non-Debtor
subsidiary of RCN Corp. The Debtors want to assume this
agreement to ensure that RCN Telecom remains in compliance with
the underlying lease agreement.
Production-Related Agreements
Debtors RCN Entertainment, Inc., and ON TV, Inc., are parties to
agreements relating to the production of certain television
programming. RCN Entertainment and ON TV create, develop,
produce and distribute family programming.
Before the Petition Date, the Debtors and their affiliates
executed separation agreements with two of RCN Entertainment's
then principals, one of whom continues to be employed by a
non-Debtor affiliate of RCN Corp. Pursuant to the Separation
Agreements, the RCN Companies assigned to the principals
substantially all of the RCN Companies' interest in their
intellectual property related to certain television programming,
including Miracle's Boys and Zack Files. One of the principals
is also the principal of On Screen Entertainment, LLC. On Screen
subsequently executed a production services agreement with RCN
Entertainment whereby RCN Entertainment agreed to produce certain
Miracle's Boys programming.
Under the On Screen Production Services Agreement, RCN
Entertainment receives milestone payments upon the occurrence of
certain events, including a final payment upon delivery of the
finished programming product to On Screen. RCN Entertainment
also executed a production services agreement with Great Plains
Instructional TV Library to produce certain episodes of Reading
Rainbow. Both of the Miracle's Boys and Reading Rainbow
productions are nearing completion.
In connection with producing certain programming, including
Miracle's Boys and Reading Rainbow, RCN Entertainment and ON TV
executed various agreements. These agreements include collective
bargaining agreements with various industry guilds, location
agreements, music agreements, appearance releases and other
production-related agreements.
"It is typical in the television and motion picture industry to
keep the agreements in full force and effect pending completion
of a production, and then deliver the Production-Related
Agreements to the ultimate purchaser of the property upon
completion," Mr. Baker says.
In connection with the completion of Miracle's Boys and Reading
Rainbow, the Debtors seek to assume 32 Production-Related
Agreements to complete their production responsibilities, deliver
the Agreements to the ultimate purchaser of the productions, and
receive future milestone payments aggregating $600,000.
Mr. Baker informs Judge Drain that some or all of the Contracts,
including the insurance polices, may not be "executory contracts"
under Section 365 of the Bankruptcy Code. But since the Debtors'
proposed plan of reorganization provides that all executory
contracts not expressly assumed or subject to a motion to assume
will be rejected, the Debtors, out of an abundance of caution,
are listing any agreements beneficial to the estates that are
arguably executory as Contracts to be assumed, without conceding
that the agreements are executory.
A complete list of the contracts and insurance policies is
available for free at:
http://bankrupt.com/misc/contracts.pdf
Headquartered in Princeton, New Jersey, RCN Corporation --
http://www.rcn.com/-- provides bundled Telecommunications
services. The Company, along with its affiliates, filed for
chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on
May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman,
Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $1,486,782,000 in
assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy
News, Issue No. 15; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
RECYCLED PAPERBOARD: Section 341(a) Meeting Slated for Dec. 29
--------------------------------------------------------------
The United States Trustee for Region 3 will convene a meeting of
Recycled Paperboard Inc. of Clifton's creditors at 10:00 a.m., on
Dec. 29, 2004, at the Office of the U.S. Trustee One Newark
Center, Suite 1401 (located on Raymond Boulevard) in Newark, New
Jersey. This is the first meeting of creditors required under 11
U.S.C. Sec. 341(a) in all bankruptcy cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Headquartered in Clifton, New Jersey, Recycled Paperboard Inc. of
Clifton, manufactures recycled mixed paper and newspaper to make
index, tag & bristol, and blanks. The Company filed for chapter
11 protection on Nov. 29, 2004 (Bankr. D. N.J. Case No. 04-47475).
David L. Bruck, Esq., at Greenbaum, Rowe, Smith & Davis LLP,
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it listed
$17,800,000 in total assets and $41,316,455 in total debts.
SBA COMMUNICATIONS: Moody's Junks $250 Million Senior Notes
-----------------------------------------------------------
Moody's Investors Service assigned a Caa1 rating to the recently
issued $250 million 8.5% Senior Notes due 2012 of SBA
Communications Corp. Moody's also upgraded the ratings of SBA
Communications and its subsidiaries, as outlined below, based upon
the improved free cash flow profile of the company from cash flow
growth and the benefits of its recent financing activities.
The affected ratings are:
-- SBA Communications Corporation
* Senior Implied Rating -- B2 (upgraded from B3)
* Issuer Rating -- Caa1 (upgraded from Caa2)
* 8.5% Senior Notes due 2012 -- Caa1 (assigned)
* 10.25% Senior Notes due 2009 -- rating withdrawn
-- SBA Telecommunications, Inc.
* 9.75% Senior Discount Notes due 2011 -- B3 (upgraded from
Caa1)
-- SBA Senior Finance, Inc.
* $75 million senior secured revolving credit facility
expiring 2008 -- B1 (upgraded from B2)
* $325 million senior secured term loan maturing 2008 -- B1
(upgraded from B2)
The B2 senior implied rating reflects the positive free cash flow
profile of the company as SBA generated $14.1 million of cash from
operations in the first nine months of 2004, and spent
$5.5 million on capital expenditures and acquisitions. Going
forward cash from operations should continue to grow as revenues
increase and interest costs decline from the company's financing
activities during the year. Moody's expects capital spending to
grow as SBA resumes its tower construction activities. The
ratings also reflect the high leverage of the company as the level
of free cash flow is still quite modest in relation to its total
debt burden.
The rating outlook is stable, as Moody's does not expect the
ratings to change over the next twelve to eighteen months.
Factors that could drive the ratings higher include Moody's
confidence that free cash flow will exceed 5% of total debt and
that the majority of free cash flow will be used to reduce debt.
The ratings are likely to be negatively affected if free cash flow
growth stalls, or the company begins to divert free cash flows
from debt reduction.
The B1 rating on the senior secured credit facilities of SBA
Finance reflects their priority position in the company's capital
structure with upstream guarantees from all the company's
operating subsidiaries and good collateral coverage. The B3
rating on the senior unsecured obligations of SBA
Telecommunications reflects their structural subordination behind
the liabilities of all the company's subsidiaries, including the
above mentioned credit facilities. The Caa1 rating on the senior
unsecured debt of the ultimate parent holding company reflects the
even deeper subordination of these obligations.
Based in Boca Raton, Florida, SBA Communications is an independent
owner and operator of over 3,000 wireless communications towers in
the U.S., with LTM revenues of $217.4 million.
SCIENTIFIC GAMES: S&P Rates Planned $300M Sr. Sec. Facility at BB
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings for
Scientific Games Corp., including raising its corporate credit and
senior secured debt ratings to 'BB' from 'BB-' and its
subordinated debt rating to 'B+' from 'B', and removed them from
CreditWatch, where they were placed on Nov. 30, 2004.
At the same time, Standard & Poor's assigned its 'BB' rating to
Scientific Games' proposed $300 million senior secured credit
facility due 2009 and a 'B+' rating to the company's proposed
$200 million senior subordinated notes due 2012. The proposed
$200 million in notes is expected to be sold pursuant to Rule 144A
of the U.S. Securities Act of 1933. Standard & Poor's also
assigned a recovery rating of '2' to the proposed bank facility,
indicating Standard & Poor's expectation that the lenders would
realize a substantial recovery of principal (80%-100%) in the
event of default. Given this recovery expectation, the bank loan
rating is the same as the corporate credit rating. The outlook is
stable.
Proceeds from the proposed bank facility and note issue, in
addition to the recently completed $250 million 0.75% convertible
senior subordinated debentures due 2024, will be used to refinance
the company's existing debt and to meet fees and expenses. Pro
forma total debt outstanding at Sept. 30, 2004, was approximately
$585 million. Standard & Poor's expects to withdraw its ratings
on Scientific Games' outstanding bank debt and 12.5% subordinated
notes due 2010 once the new bank facility and notes are funded and
the existing debt is refinanced.
"The upgrade reflects Scientific Games' continued solid operating
results, resulting in credit measures that are in line with the
new rating," said Standard & Poor's credit analyst Michael Scerbo.
Also, with positive industry fundamentals likely to continue over
the intermediate term, the company is expected to maintain good
credit measures at these improved levels. This expectation comes
despite a difficult comparison period expected in 2005 as to 2004,
given the loss of the company's Florida online lottery contract
and a one-time equipment sale that occurred during 2004. Still,
the company's good credit measures provide some cushion within its
new rating to accomplish its growth objectives, including modest
acquisitions.
The ratings on Scientific Games Corp. reflect the competitive
market conditions in the lottery and pari-mutuel industries, the
mature nature and capital intensity of the online lottery
industry, the cash flow concentration from the company's lottery
segment, and the existence of a much larger and well-established
competitor in the online lottery segment, GTECH Holdings Corp.
Still, the company maintains a leadership position in the
pari-mutuel gaming and instant-ticket lottery industries,
long-term customer contracts, and a diversified customer base.
The stable outlook reflects Standard & Poor's expectation that
Scientific Games' established position in the pari-mutuel and
instant-ticket lottery segments will continue to provide a
reliable source of cash flow over the intermediate term. As a
result of the steady operating results and management's relatively
conservative posture toward balance sheet strength, the company's
overall financial profile is expected to remain in line with its
rating. While Standard & Poor's expects the company will continue
to pursue new lottery contracts and seek out other strategic
growth opportunities, this strategy is expected to be financed in
a way consistent with the new ratings.
New York, New York-headquartered Scientific Games is the leading
U.S. supplier of instant tickets, systems, and services to
lotteries, and is the leading U.S. supplier of wagering systems
and services to pari-mutuel operators. It is also a licensed
pari-mutuel gaming operator in Connecticut and the Netherlands,
and a major worldwide supplier of prepaid phone cards to cellular
telephone companies.
SGP ACQUISITION: Wants to Hire Benesch Friedlander as Co-Counsel
----------------------------------------------------------------
SGP Acquisition, LLC, asks the U.S. Bankruptcy Court for the
District of Delaware for permission to employ Benesch,
Friedlander, Coplan & Aronoff LLP as its bankruptcy co-counsel.
Benesch Friedlander is expected to:
a) advise the Debtor of its rights, powers, and duties as a
debtor in possession and in the continued operation and
management of its business;
b) attend meetings and negotiate with representatives of the
Debtor's creditors and other parties in interest;
c) prepare on behalf of the Debtor all necessary and
appropriate applications, motions, pleadings, draft orders,
notices, schedules, and other documents, and review all
financial and other reports to be filed with the Court in
the Debtor's chapter 11 case;
d) advise the Debtor in preparing responses to applications,
motions, pleadings, notices, and other papers that may be
filed and served in the Debtor's chapter 11 case;
e) advise the Debtor in assisting in the negotiation and
documentation of refinancing or sale of its assets, debt and
lease restructuring, executory contracts and unexpired lease
assumptions, assignments or rejections, and related
transactions;
f) review the nature and validity of liens asserted against the
Debtor's property and advise the Debtor concerning the
enforceability of those liens;
g) advise the Debtor concerning the actions that it might take
to collect and recover property for the benefit of its
estate;
h) provide the Debtor with counseling in connection with the
formulation, negotiation and confirmation of a plan of
reorganization and its related documents; and
i) perform other legal services on behalf of the Debtor as may
be necessary and appropriate, including advising and
assisting with respect to debt restructuring, corporate
governance issues related to debt restructuring, stock or
asset dispositions and general business and litigation
matters.
H. Jeffrey Schwartz, Esq., a Partner at Benesch Friedlander,
discloses that the Firm received a $37,500 retainer. For his
professional services, Mr. Schwartz will bill the Debtor $545 per
hour.
Mr. Schwartz reports Benesch Friedlander's professionals bill:
Professional Designation
------------ -----------
Michael D. Zaverton $290
Robert C. Cross 275
David M. Neumann 210
Stuart A. Laven, Jr. 190
J. Allen Jones, III 180
Karen L. Koozer 145
Lisa M. Behra 130
Benesch Friedlander assures the Court that it does not represent
any interest adverse to the Debtor or it estate.
Headquartered in Greenville, South Carolina, SGP Acquisition, LLC,
-- http://www.slazengergolf.com/-- markets a wide array of
premium golf apparel, golf balls, and related accessories. The
Company filed for chapter 11 protection on November 30, 2004
(Bankr. D. Del. Case No. 04-13382). When the Debtor filed for
protection from its creditors, it listed estimated assets and
debts of $10 million to $50 million.
SGP ACQUISITION: Wants to Use Provident Bank's Cash Collateral
--------------------------------------------------------------
SGP Acquisition, LLC, asks the U.S. Bankruptcy Court for the
District of Delaware for permission on an interim basis, to use
cash collateral securing repayment of prepetition obligations to
its primary lender, The Provident Bank, and to incur postpetition
financing from Provident Bank.
The Debtor needs access to the cash collateral as it's only source
of operating capital available at the present time to pay for
ongoing operating expenses, including payroll and utilities
expenses and to continue in operating its business.
The Debtor owes Provident Bank approximately $9 million under a
prepetition Credit Facility. The Debtor explains to the Court
that Provident Bank has agreed to provide it with postpetition
financing and allow continued use of its cash collateral.
Under the Debtor's Postpetition Credit Agreement with Provident
Bank, Provident will permit the Debtor to use its cash collateral
and extend to it a $600,000 postpetition Credit Facility to
provide additional borrowings in the event that the cash
collateral is insufficient to fund its operations.
The Debtor's use of the cash collateral and Provident Bank's
Credit Facility is in accordance with a budget for a six-month
period approved by Provident and commencing from December 2004 up
to May 2005. The Debtor's motion for an interim order to use its
cash collateral is covers the period from December 2004 through
March 31, 2005, pending the Court's entry of a final order on its
motion.
A full text copy of the Cash Collateral Budget is available for a
fee at:
http://www.researcharchives.com/download?id=040812020022
To adequately protect Provident Bank's interest, the Debtor has
agreed to grant Provident a continuing, valid, binding,
enforceable and perfected postpetition replacement security
interests and other liens on substantially all of its assets.
Headquartered in Greenville, South Carolina, SGP Acquisition, LLC,
-- http://www.slazengergolf.com/-- markets a wide array of
premium golf apparel, golf balls, and related accessories. The
Company filed for chapter 11 protection on November 30, 2004
(Bankr. D. Del. Case No. 04-13382). Frederick B. Rosner, Esq., at
Jaspan Schlesinger Hoffman and H. Jeffrey Schwartz, Esq., at
Benesch, Friedlander, Coplan & Aronoff LLP represent the Debtor in
its restructuring. When the Debtor filed for protection from its
creditors, it listed estimated assets and debts of $10 million to
$50 million.
SHAW GROUP: S&P Slices Corporate Credit Rating to BB- from BB
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on The Shaw Group to 'BB-' from 'BB.' Other ratings were
also lowered one notch. The outlook is negative. At
Aug. 31, 2004, the Baton Rouge, Louisiana-based engineering and
construction services provider had about $476 million total debt
outstanding (including present value of operating leases).
"The ratings downgrade reflects weak earnings quality and cash
flow generation that is more consistent with the lower rating,"
said Standard & Poor's credit analyst Paul Kurias. "Ratings may
be lowered further if liquidity were to decline meaningfully,
which might occur if operations underperform expectations or if
challenged projects require greater-than-expected resources to
complete."
The Shaw Group is a leading global provider of engineering and
construction -- E&C -- services, mainly to the power, process, and
environmental and infrastructure sectors. The company also has a
modest-size manufacturing and distribution unit, which is the
leading fabricator of piping systems.
The speculative-grade ratings on Shaw reflect the company's highly
leveraged financial profile, its fair liquidity, and its
below-average business position, with leading positions in markets
with above-average risks. The ratings also incorporate the
expectation that, in the near term, Shaw will pursue a mostly
internal growth strategy, with an emphasis on new contract awards,
continued focus on reducing its cost structure, and disposing of
noncore assets. As a result, Standard & Poor's expects some
recovery of operating margin in the intermediate term.
The aggressive financial risk profile reflects Shaw's aggressively
leveraged capital structure and subpar profitability. Since
Shaw's business mix in the near-to-intermediate term will
emphasize its environmental and operations and maintenance units,
cash generation should improve.
TCW HIGH: Fitch Upgrades Ratings on $17.7M Preferred Shares to B
----------------------------------------------------------------
Fitch Ratings upgrades one class and affirms seven classes of
notes issued by TCW High Income Partners Ltd. These affirmations
are the result of Fitch's review process. These rating actions
are effective immediately:
Fitch upgraded this rating:
-- $17,730,458 Preferred Shares Upgrade to 'B' from 'B-'.
Fitch affirmed these ratings:
-- $202,000,000 class I senior notes 'AAA';
-- $25,000,000 class II-A senior notes 'AA-';
-- $31,000,000 class II-B senior notes 'AA-';
-- $10,000,000 class III-A mezzanine notes 'BBB';
-- $23,000,000 class III-B mezzanine notes 'BBB';
-- $18,000,000 class IV-mezzanine notes 'BB-';
-- $6,000,000 class Q combination securities 'BB+'.
TCW HIP is a collateralized debt obligation managed by TCW Asset
Management Company, which closed Aug. 16, 2001. TCW HIP is
composed primarily of corporate high yield bonds. Included in
this review, Fitch Ratings discussed the current state of the
portfolio with the asset manager and portfolio management strategy
going forward.
Since the ratings were affirmed on Nov. 20, 2003, the collateral
has continued to perform within expectations. The weighted
average rating has decreased slightly but remains at approximately
'B-'. All overcollateralization and interest coverage tests
continue to pass with cushion as of the most recent trustee report
dated Oct. 18, 2004. The senior, class III and junior par
coverage tests have remained stable at 130.73%, 115.91%, and
108.78%, with triggers of 120.25%, 112.50%, and 107.50%,
respectively. As of the most recent trustee report available,
there were no defaulted assets in the $325 million of total
collateral excluding eligible investments. Assets rated 'CCC+' or
lower represented approximately 23% of the portfolio.
The ratings of the class I and II notes address the likelihood
that investors will receive full and timely payments of interest
as well as the stated balance of principal by the legal final
maturity date. The ratings of the class III and class IV notes
address the likelihood that investors will receive ultimate and
compensating interest payments as well as the stated balance of
principal by the legal final maturity date. The ratings of the
preferred share notes address the likelihood that investors will
receive their stated balance of principal by the legal final
maturity date. The ratings of the combination notes address the
return of the stated balance of principal by the legal final
maturity date, as well as an internal rate of return -- IRR -- of
6.904%.
As of Aug. 24, 2004, the preferred shares have received
$25.5 million in residual distribution for a paydown of
approximately 60%. The rated balance of the preference shares is
$17.7 million and is upgraded to 'B' from 'B-'. Fitch has
determined that the current ratings assigned to the class I, II-A,
II-B, III-A, III-B, IV, and combination note classes still reflect
the current risk to noteholders.
Fitch will continue to monitor and review this transaction for
future rating adjustments. For more information on the Fitch
VECTOR Model, see 'Global Rating Criteria for Collateralised Debt
Obligations,' dated Sept. 13, 2004, and also available at
http://www.fitchratings.com/
TCW HIGH: Fitch Affirms BB Rating on $9.5M Class IV Notes
---------------------------------------------------------
Fitch Ratings affirms five classes of notes issued by TCW High
Income Partners II, Ltd. These affirmations are the result of
Fitch's review process. These rating actions are effective
immediately:
-- $110,000,000 class I senior notes affirmed at 'AAA';
-- $20,000,000 class II-A senior notes affirmed at 'AA-';
-- $10,000,000 class II-B senior notes affirmed at 'AA-';
-- $18,000,000 class III mezzanine notes affirmed at 'BBB';
-- $9,500,000 class IV mezzanine notes affirmed at 'BB-'.
This class of notes has been paid in full:
-- $18,000,000 preferred shares.
TCW HIP II is a collateralized debt obligation managed by TCW
Asset Management Company, which closed Dec. 5, 2001. TCW HIP II
is composed primarily of corporate high yield bonds. Included in
this review, Fitch discussed the current state of the portfolio
with the asset manager and their portfolio management strategy.
Since the ratings were affirmed on Nov. 20, 2003, the collateral
has continued to perform within expectations. The weighted
average rating has decreased slightly but remains at approximately
'B-'. All overcollateralization and interest coverage tests
continue to pass with a cushion as of the most recent trustee
report dated Oct. 25, 2004. The senior, class III, and junior par
coverage tests have remained stable at 130.70%, 115.81%, and
109.24%, respectively, with triggers of 119.75%, 112.50%, and
107.25%, respectively. As of the most recent trustee report
available, there are no defaulted assets in the $179 million of
total collateral excluding eligible investments. Assets rated
'CCC+' or lower represented approximately 23%.
The rating of the class I and II notes addresses the likelihood
that investors will receive full and timely payments of interest,
as well as the stated balance of principal by the legal final
maturity date. The ratings of the class III and class IV notes
address the likelihood that investors will receive ultimate and
compensating interest payments, as well as the stated balance of
principal by the legal final maturity date. The ratings of the
preferred share notes address the likelihood that investors will
receive their stated balance of principal by the legal final
maturity date.
As of the Dec. 2, 2004, payment date, the preference shares have
received more than the original $18 million invested amount. At
this time, the preference shares have met the rating obligation
and are paid in full. Fitch has determined that the current
ratings assigned to the class I, II-A, II-B, III, and IV note
classes still reflect the current risk to noteholders.
Fitch will continue to monitor and review this transaction for
future rating adjustments.
TOWER AUTOMOTIVE: Defers Payment of Trust Preferred Dividend
------------------------------------------------------------
Tower Automotive, Inc. (NYSE: TWR) won't pay the December 31
dividend on the 6-3/4% trust convertible preferred securities
issued by the Tower Automotive Capital Trust. The trust
convertible preferred securities are traded on the Over-the-
Counter Bulletin Board under the symbol TWRCP.OB. The terms of the
Trust and the underlying 6-3/4% convertible subordinated
debentures held by the Trust permits the deferral of dividends and
the underlying interest payments for up to 20 consecutive
quarters. A full-text copy of the Prospectus governing the
preferred securities is available at no charge at:
http://www.sec.gov/Archives/edgar/data/1069730/0001047469-98-039802.txt
The deferral of the dividend on the trust preferred securities of
approximately $4.4 million improves the company's short-term
liquidity position. "Decisions on any future deferrals will be
reviewed quarterly," the company says.
The Trust issued 5,175,000 shares of preferred stock in 1998, and
used the proceeds to purchase 6-3/4% Convertible Subordinated
Debentures due
June 30, 2018, from Tower Automotive, Inc. Tower Automotive,
Inc., used the proceeds from the sale of those Debentures to repay
some bank debt.
Dennis M. Myers, Esq., at Kirkland & Ellis, provided legal advice
to Tower when the trust securities were issued.
Labeling the deferral "tantamount to a default," Standard & Poors
cut its rating on the trust securities to D.
Tower Automotive, Inc. is a global designer and producer of
vehicle structural components and assemblies used by every major
automotive original equipment manufacturer, including BMW,
DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures and
assemblies, lower vehicle frames and structures, chassis modules
and systems, and suspension components. Additional company
information is available at http://www.towerautomotive.com/
TOWER AUTOMOTIVE: Hires Rothschild to Assist in Lender Talks
------------------------------------------------------------
Tower Automotive, Inc. (NYSE: TWR) has retained the services of
Rothschild, Inc. to support the company in the negotiations for
the credit agreement amendment. Rothschild brings significant
capital markets experience, strong banking relationships, and
global mergers and acquisition breadth as Tower Automotive works
to improve the capital structure, de-lever the balance sheet, and
enhance liquidity options over the next months.
Tower Automotive has a significant amount of indebtedness --
nearly $1.5 billion at September 30, 2004. Cash interest expense
for the nine months ended September 30, 2004 was $92.3 million.
At September 30, 2004, the Company had no availability to borrow
additional amounts under its revolving loan facility. That
facility is a CREDIT AGREEMENT dated as of May 24, 2004, among
R.J. TOWER CORPORATION, as the Borrower, TOWER AUTOMOTIVE, INC.,
as the Parent Guarantor, a consortium of Lenders, comprised, as of
May 24, 2004, of:
* J.P. MORGAN SECURITIES, INC.,
* GENERAL ELECTRIC CAPITAL CORPORATION,
* STANDARD FEDERAL BANK, and
* COMERICA BANK,
MORGAN STANLEY SENIOR FUNDING, INC., as the Administrative Agent
for the Lenders, JPMORGAN CHASE BANK, as the Syndication Agent for
the Lenders, and STANDARD FEDERAL BANK, as the Collateral Agent
and Documentation Agent for the Lenders, and MORGAN STANLEY SENIOR
FUNDING, INC., and J.P MORGAN SECURITIES INC., as Joint Lead
Arrangers and Joint Book Runners.
"Our ability to satisfy our liquidity requirements with cash flows
from operations has been negatively impacted by a decline in our
operating performance," the Company said in its latest quarterly
report delivered to the Securities and Exchange Commission.
"During the third quarter of 2004, certain of the Company's
customers notified the Company that they were terminating their
accelerated payment programs for all of their suppliers," Tower
reported, adding that it is in discussions with these customers as
to the timing of such terminations and believes, based on such
discussions, that most programs will be terminated by the end of
2005. "The termination of these programs will have a material
adverse impact on the Company's liquidity position," the company
said.
To offset this negative impact, Tower initiated talks with third
parties to establish an accounts receivable securitization
facility. The Credit Agreement allows Tower to securitize up to
$50 million of accounts receivable, which will offset a portion
(but not all) of the reduced liquidity as a result of the
termination of the accelerated payment programs. The Company is
also asking the Lenders to amend the credit agreement to increase
the amount of the accounts receivable securitization to $200
million. Tower submitted a proposed amendment to its lenders for
approval but withdrew it after receiving notice that more than 50%
of the second lien lenders opposed it as written. The Company is
currently making structural changes to the amendment in order to
gain the lenders' consent.
The Company continues to pursue other alternatives permitted by
the Company's credit agreement to improve liquidity. These actions
include, but are not limited to, the lease of certain equipment
which will provide $40.0 million of additional liquidity; and an
accounts receivable factoring agreement in its European
operations, which will provide an additional $30.0 million of
liquidity. The Company believes that the combination of these
actions, plus the $50.0 million accounts receivable securitization
currently permitted by the Company's credit agreement, will
provide sufficient liquidity to replace the liquidity provided by
the accelerated payment programs terminated by the Company's
customers.
In addition, the Company currently has trade accounts payable
outstanding an average of 74 days. The Company's payment terms
with its vendors average 60 days for purchases of productive
material and other services. These amounts exclude amounts
outstanding for tooling and capital purchases which have payment
terms which are dependent on the tooling or capital meeting
certain technical and performance requirements and generally
require progress payments during construction. In the upcoming
quarters, the Company intends to reduce the average amount of
trade accounts payable outstanding from the 74 day average at
September 30, 2004 to the extent the Company has sufficient
liquidity to do so. The Company believes that such liquidity will
be available if it is successful in negotiating the increase in
its permitted accounts receivable securitization to $200.0 million
as well as completing the additional liquidity actions discussed
above. The Company can offer no assurances that these efforts will
be successful. The Company would be unable to meet its liquidity
needs if a substantial portion of its trade creditors ceased
extending credit to the Company.
The Company's new product launch activities will decline during
the first half of 2005. Accordingly, the significant capital
expenditures and new program launch costs incurred in 2004 will be
reduced in 2005, which is anticipated to improve the Company's
liquidity position as compared to 2004.
Tower Automotive, Inc. is a global designer and producer of
vehicle structural components and assemblies used by every major
automotive original equipment manufacturer, including BMW,
DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures and
assemblies, lower vehicle frames and structures, chassis modules
and systems, and suspension components. Additional company
information is available at http://www.towerautomotive.com/
TRW AUTOMOTIVE: Moody's Rates Planned $1.9B Sr. Sec. Debt at Ba2
----------------------------------------------------------------
Moody's Investors Service assigned Ba2 ratings for TRW Automotive
Inc.'s $1.9 billion of proposed guaranteed senior secured credit
facilities, which will be utilized to refinance approximately
$1.7 billion of the company's existing credit facilities and also
provide some additional liquidity. Moody's will withdraw the
ratings of any credit facilities that are refinanced upon TRW
Automotive's execution of an amended and restated credit
agreement. These specific ratings were assigned:
* Ba2 ratings for TRW Automotive's $1.9 billion of proposed new
guaranteed senior secured credit facilities, consisting of:
-- $425 million US revolving credit facility due December
2009;
-- $425 million global multi-currency revolving credit
facility due December 2009 (which will also have multiple
permitted foreign subsidiary borrowers);
-- $250 million term loan A due December 2009;
-- $800 million term loan B due June 2012
Moody's affirmed the Ba2 rating of TRW Automotive's existing
$300 million term loan E due October 2010, which is the only one
of the existing senior secured credit facilities that will remain
in effect following the proposed amendment and restatement of the
credit agreement. This term loan facility was only recently
obtained in November 2004 for the purpose of funding a portion of
the company's $493.5 million net cost to repurchase the Northrop
Grumman seller note.
Moody's additionally affirmed TRW Automotive's SGL-1 speculative
grade liquidity rating.
Moody's upgraded these ratings associated with TRW Automotive:
* Upgrade to Ba3, from B1, of the rating for TRW Automotive's
$825.4 million of 9 3/8% guaranteed senior unsecured notes
due February 2013;
* Upgrade to Ba3, from B1, of the rating for TRW Automotive's
Euro 178.5 million of 10 1/8% guaranteed senior unsecured
notes due February 2013;
* Upgrade to B1, from B2, of the rating for TRW Automotive's
$195 million of 11% guaranteed senior unsecured senior
subordinated notes due February 2013;
* Upgrade to B1, from B2, of the rating for TRW Automotive's
Euro 81.25 million of 11 3/4 % guaranteed senior unsecured
senior subordinated notes due February 2013;
* Upgrade to Ba2, from Ba3, of TRW Automotive's senior implied
rating;
* Upgrade to Ba3, from B1, of TRW Automotive's senior unsecured
issuer rating.
The rating upgrades reflect Moody's acknowledgment of the
company's achievement of positive operating momentum and
significant debt reduction in the face of increasingly difficult
industry conditions
The ratings of these guaranteed senior unsecured credit facilities
(approximating $1.7 billion in total commitments) will be
withdrawn once TRW Automotive's amended and restated credit
agreement is executed:
* Ba2 rating for TRW Automotive's $500 million guaranteed
senior secured revolving credit facility due February 2009;
* Ba2 rating for TRW Automotive's $350 million guaranteed
senior secured term loan A-1 due February 2009;
* Ba2 rating for TRW Automotive's $800 million guaranteed
senior secured term loan D-1 due February 2011;
* Ba2 rating for TRW Automotive's Euro 50 million guaranteed
senior secured term loan D-2 due February 2011;
* The rating outlook is stable.
The rating upgrades at this time reflect that the facilities under
the proposed amended and restated credit agreement will provide
TRW Automotive with an approximately $6 million pro forma
reduction in annual cash interest expense, approximately
$200 million of additional liquidity commitments, extended
principal maturities, and greater financial flexibility. A
portion of old term loan borrowings will be refinanced under the
enlarged revolving credit commitments, which will enable the
company to borrow and repay amounts on a regular basis and thereby
institute improved cash management procedures. The company's cash
management capabilities will be further enhanced by the increased
size of TRW Automotive's global multi-currency revolving credit
facility to $425 million. There will be no prepayment associated
with the new term loans. The existing collateral, guarantee, and
covenant provisions will continue in effect under the amended and
restated credit agreement.
Through the third quarter ended September 24, 2004, TRW Automotive
has continued its trend of favorable revenue growth, operating
cash flow performance, and new business generation at levels
superior to most peers. This has been achieved through the
company's extensive customer, product line, and geographic
diversification together with its success at reducing operating
costs to substantially offset the pressures of lower North
American light vehicle production levels and the rising cost of
commodities (including ferrous metals, resin, oil, and plastics).
However, margins are projected to modestly decline over the next
12 months given the expected persistence of difficult external
factors. European vehicle production levels, which directly
impact about half of the company's revenue base, have notably
continued on par with expectations.
The current regulatory environment favors TRW Automotive's
safety-oriented business lines, which is enabling the company to
grow revenues at a faster pace than overall industry production.
TRW Automotive most notably believes that it is well positioned to
benefit from the National Highway Traffic Safety Administration's
expected mandate that tire pressure monitoring systems be present
on 50% of all new models starting September 2005 and on all new
models as of September 2007. This will be a significant new
product line for the company, which promises to ramp up quickly.
The ratings of the guaranteed senior secured credit facilities
were notably not upgraded on a parallel basis with the company's
other obligations and are therefore now on par with TRW
Automotive's senior implied rating. This decision was based upon
the high proportionality of these obligations relative to TRW
Automotive's overall debt commitments, as well as the substantial
portion of asset collateral pledged under the accounts receivable
securitization facility or located at foreign subsidiaries.
The affirmation of TRW Automotive's good SGL-1 speculative grade
liquidity rating reflects that TRW Automotive continues to have
very good liquidity. The proposed credit facilities will increase
external liquidity commitments by about $200 million. Pro forma
for the refinancing, unused and available cash and external
liquidity is estimated at $1.3 billion. This consists of
approximately $250 million in cash, $625 million in undrawn
revolver commitments, and more than $400 million of undrawn
accounts receivable securitization facilities. The company's cash
balances and cash flow are expected to internally fund all
incremental cash needs over the next year, despite typically high
levels of budgeted capital spending. TRW Automotive has
substantial debt cushion under its credit agreement covenants, but
does face some eligibility restrictions under the accounts
receivable securitization that occasionally limit the ability to
draw down the full commitment. TRW Automotive is unaffected by
the pending termination of the OEM early pay receivables programs,
as it did not partake in these arrangements. However, some of TRW
Automotive's critical suppliers are being affected by these
program terminations. Working capital requirements do vary
seasonally.
For the last twelve months ended September 24, 2004, TRW
Automotive's consolidated total debt/EBITDAR leverage on a pro
forma basis for the repurchase of the Northrop Grumman seller note
was 3.3x and 3.1x, respectively, on a gross and net debt basis.
Letters of credit and the present value of operating leases were
included as debt. EBIT coverage of cash interest for the LTM
period ended September 24, 2004, was 2.9x on an actual basis and
2.5x on a pro forma basis (due to the replacement of $300 million
of PIK obligations with cash pay credit facilities).
Future events that would be likely to drive further improvement to
TRW Automotive's outlook or ratings could include:
(1) further debt and leverage reduction from free cash flow,
(2) additional secondary public equity offerings which serve to
further reduce the company's debt as well as monetize
Blackstone's controlling interest in the company,
(3) the realization of substantial new business awards,
(4) expansion into new markets, or
(5) maintenance of productivity and procurement savings at
levels, which fully offset customer price reductions and
increases in raw materials costs.
Future events that would be likely to lower TRW Automotive's
ratings or outlook could include:
(1) declining market share, weakening margins,
(2) concerns regarding the competitiveness of the company's
technology and product development efforts,
(3) product liability concerns given the safety-orientation of
the company's business lines,
(4) rising leverage, declining liquidity,
(5) a material acquisition which adds to leverage or is not
clearly accretive, or
(6) a releveraging of the company for the purpose of monetizing
Blackstone's investment.
TRW Automotive, headquartered in Livonia, Michigan, is among the
world's largest and most diversified suppliers of automotive
systems, modules, and components to global vehicle manufacturers
and related aftermarkets. The company has three operating
segments:
* Chassis Systems;
* Occupant Safety Systems; and
* Automotive Components.
The company's primary business lines encompass the design,
manufacture and sale of active and passive safety related
products. TRW Automotive's annual revenues approximate
$11.8 billion.
UNOVA INC: Moody's Reviewing Junk Rating & May Upgrade
------------------------------------------------------
Moody's Investors Services has placed the Caa1 senior unsecured
long-term debt rating of UNOVA, Inc., under review for possible
upgrade. This action reflects improved financial performance in
both of the company's businesses, the expectation of further
progress, as well as UNOVA's strong liquidity measures.
Moody's noted that its review would encompass, among other things,
(1) the sustainability of revenue, margin and cash flow
expansion for both businesses -- Automated Data Systems --
ADS -- and Industrial Automation Systems -- IAS,
(2) the ability of the company to generate positive cash flow
going forward, given current working capital investment,
(3) liquidity planning after the utilization of cash on hand to
satisfy its $100 million note maturity in March 2005, and
(4) strategic plans surrounding its IAS business particularly
incorporating its realigned cost structure, its breakeven
financial performance and declining backlog.
Ratings placed under review for possible upgrade include:
* UNOVA, Inc.
-- Caa1 for senior unsecured notes totaling $200 million; and
-- (P)Caa1/(P)Caa3/(P)C for securities to be issued under its
415 shelf registration in the amount of $400 million.
UNOVA, Inc., headquartered in Everett, Washington, specializes in
mobile information technology for supply-chain logistics and
provides design and integration of manufacturing systems for the
global automotive, diesel engine and aerospace industries.
US AIRWAYS: Gets Court Nod to Walk Away from 28 Aircraft Leases
---------------------------------------------------------------
Pursuant to Section 365 of the Bankruptcy Code, US Airways, Inc.,
and its debtor-affiliates seek the authority of the U.S.
Bankruptcy Court for the Eastern District of Virginia to reject
28 aircraft leases and unexecuted agreements for spare parts and
maintenance. The Debtors also ask that any rejection claims be
filed with the Court before the February 3, 2005 General Bar Date.
Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado,
explains that as part of the restructuring, the Debtors are
analyzing their flight schedules, aircraft and engine types, run
costs, projected demand for air travel, labor costs and other
business factors in conjunction with their fleet of aircraft. The
Debtors intend to maximize the fleet's utility at the lowest
possible cost. Based on this analysis, the Debtors have decided
to retire certain aircraft and engines from their fleet. The
Debtors have reduced their flight schedules and the aircraft and
engines selected for retirement are no longer being utilized.
Accordingly, the Debtors seek to eliminate the costs associated
with retaining the aircraft and engines.
The aircraft and engines to be retired are the subject of various
leases. The Leased Aircraft and Engines have been taken out of
service. Some of the Leased Aircraft and Engines were returned to
the Lessors before the Petition Date.
For all Leased Aircraft and Engines, the Debtors promise to
maintain the insurance coverage through 20 days after a Lessor
receives notice of rejection. The Debtors will maintain the
Leased Aircraft and Engines pursuant to the short-term storage
program of the manufacturer in accordance with FAA requirements.
By November 30, 2004, the Leased Aircraft and Equipment will be
taken out of service and the Lessors will be notified.
The Debtors propose to reject the Leases for these Aircraft:
Lessor Aircraft Tail No.
------ -------- --------
Wachovia Bank Boeing 737-300 N517AU
Viacom Boeing 737-300 N519AU
Boeing 737-300 N520AU
Boeing 737-300 N521AU
Boeing 737-300 N522AU
CIT Leasing Boeing 737-300 N524AU
U.S. Bank Boeing 737-300 N528US
Boeing 737-400 N436US
Boeing 767-200 N651US
Boeing 767-200 N652US
Itochu AirLease Boeing 767-200 N653US
Boeing 737-400 N437US
Boeing 737-200 N614AU
FC Lester Boeing 737-300 N574US
NCC Company Boeing 737-300 N576US
Boeing 737-300 N584US
Various Financiers Boeing 737-300 N586US
Boeing 737-300 N587US
GE Capital Boeing 737-400 N781AU
Boeing 737-400 N782AU
Boeing 737-400 N783AU
Boeing 737-400 N784AU
Boeing 737-400 N785AU
Q Aviation Boeing 757-200 N625VJ
Boeing 757-200 N628AU
Bombardier Services DH8-100 N980HA
DH8-100 N984HA
Bombardier Capital DH8-100 N840EX
Mr. Leitch notes that some of the Aircraft Leases may not be
rejected. The Debtors are currently in discussions with some of
the Lessors over the terms of stipulations, agreements or orders
pursuant to Section 1110 of the Bankruptcy Code. If the Debtors
and the Lessors are able to negotiate 1110 Agreements for certain
Leased Aircraft Equipment prior to the Rejection Date, the
Debtors will remove those Leased Aircraft and Equipment from the
Rejection List.
Objections
(1) Wachovia
Wachovia Bank, N.A., formerly known as First Union National Bank,
headquartered in Charlotte, North Carolina, is Indenture Trustee,
Equipment Trust Trustee or Loan Trustee for 31 leased aircraft and
engines, some of which the Debtors propose to reject. Wachovia
objects because the procedures proposed for the return of the
Aircraft and Engines are inconsistent with Section 1110 of the
Bankruptcy Code and the relevant Financing Documents.
Richard M. Kremen, Esq., at Piper Rudnick, in Baltimore,
Maryland, argues that the Debtors omit important facts. The
Debtors do not say where the Aircraft will be located at the time
of relinquishment. The Debtors do not indicate whether Engines
are installed on the Aircraft. The Debtors are mum on the
arrangements for using the Aircraft and Engines pending
"possession" by Wachovia. The Debtors say they will make
"commercially reasonable efforts" to turn over the records related
to the Aircraft, but the books and records should be turned over
within 24 hours of relinquishment of possession.
Before the Debtors effectively reject the Aircraft Leases, the
Court should require the Debtors to:
(a) assemble and make available the Aircraft and Engines,
with the proper engines installed and the maintenance logs
and records ready for return;
(b) provide Wachovia, at the Debtors' expense, with a lease
termination or FAA bill of sale that has been registered
with the Federal Aviation Administration plus any
other required documentation;
(c) provide all aircraft and maintenance records and documents
to Wachovia; and
(d) reimburse Wachovia for any charges other than obligations
contained in the aircraft Finance Documents.
Mr. Kremen tells Judge Mitchell that the Debtors have used the
Aircraft and Engines for over two months since the Petition Date
without compensating payments. Wachovia should be granted an
administrative claim for this postpetition usage of the rejected
leased Aircraft and Engines.
(2) FC Lester
FC Lester, Inc., is the Owner Participant and beneficial interest
holder pursuant to a Trust Agreement that owns a Boeing 737-300
Aircraft with Tail No. N574US and two CFM56-3B2 Engines.
Wilmington Trust Company acts as Trustee. US Airways, Inc.,
leased the Aircraft on November 2, 1987.
James H. Billingsley, Esq., at Hughes & Luce, in Dallas, Texas,
relates that the Debtors have informed FC Lester that its Aircraft
was withdrawn from the rejection list and that the Debtors
intended to retain possession of the Aircraft pursuant to Section
1110(a). However, in case the Debtors change their mind, FC
Lester wants to be sure its rights are retained.
FC Lester asks the Court to ensure that the Aircraft is returned
fully equipped with its Engines installed and all logs, manuals,
certificates and inspection records included. Any obligations
imposed upon FC Lester that are not set out in the return
conditions of the lease should be corrected.
* * *
Judge Mitchell grants the Debtors' request. The Leases are
rejected effective as of November 18, 2004. Judge Mitchell
directs the Debtors to make the records and documents relating to
the Aircraft Equipment available to the relevant Lessors. As of
November 18, 2004, the right to take possession of the Leased
Aircraft Equipment is relinquished to the Lessors. The Debtors
must continue the Aircraft's existing insurance coverage for
20 days and maintain the Aircraft Equipment pursuant to the
short-term requirements of the FAA-approved maintenance program.
Upon written request, the Debtors will provide the Lessors with a
lease termination document to file with the FAA, with the Lessors
responsible for the associated costs. The Lessors must file a
proof of claim against the Debtors by the General Bar Date.
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 their 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: 286 Entities Object to Bargaining Pacts Rejection
-------------------------------------------------------------
As reported in the Troubled Company Reporter on Nov. 17, 2004, US
Airways, Inc., and its debtor-affiliates asked Judge Mitchell of
the U.S. Bankruptcy Court for the Eastern District of Virginia for
authority to reject their Collective Bargaining Agreements with
the Association of Flight Attendants-Communications Workers of
America, the International Association of Machinists and Aerospace
Workers, and the Communications Workers of America.
The Debtors also sought authority to reduce benefit payments to
their retirees.
The Debtors further asked the Court to find that they satisfy the
requirements for a distress termination of:
-- the Pension Plan for Employees of US Airways, Inc. Who Are
Represented by the International Association of Machinists
and Aerospace Workers;
-- the Retirement Plan for Flight Attendants in the Service of
US Airways, Inc.; and
-- the Retirement Plan for Certain Employees of US Airways,
Inc.
Objections
Around 286 objections, mostly by individuals, were filed in
response to the Debtors' request to reject certain collective
bargaining agreements. Among the institutions that filed
objections are:
(1) The Association of Flight Attendants-CWA, AFL-CIO
Termination of the pension plan would violate the Association
of Flight Attendants' collective bargaining agreement,
according to Robert S. Clayman, Esq., at Guerrieri, Edmond &
Clayman, in Washington, D.C. The Debtors have failed to
establish that termination would permit them to pay their
debts pursuant to a plan of reorganization.
The AFA has been cooperating with the Debtors, obviating the
need for Court intervention at this point. Recognizing the
Debtors' financial posture, the AFA came to the bargaining
table in good faith and proposed substantial and painful
concessions, which provide enough financial savings and
operational flexibility for a successful reorganization.
Even though negotiations continue, the Debtors have rejected
the AFA's proposals and insist on asking the Court for
authority to reject the AFA contract and terminate the
pension plan. "This is inequitable and contrary to the
public interest," Mr. Clayman asserts.
The Debtors have not proceeded in good faith. Mr. Clayman
tells Judge Mitchell that the Debtors breached the AFA CBA by
failing to make required pension plan contributions from
September to November 2004, all the while escalating the
value of concessions sought from the AFA.
Mr. Clayman reminds the Court that on November 16, 2004, the
AFA's Board of Directors unanimously approved a resolution
calling for a nationwide strike of flight attendants if any
airline rejects an AFA contract through the bankruptcy
process, subject to membership ratification. The
ratification process will begin shortly among the AFA's
members at US Airways and the other Debtors.
(2) The International Association of Machinists and Aerospace
Workers
Sharon L. Levine, Esq., at Lowenstein Sandler, in Roseland,
New Jersey, says that however noble the intentions, the
Debtors' desire to improve their competitive position does
not give them carte blanche to discard their CBAs without
engaging in good faith negotiations. Sections 1113 and 1114
of the Bankruptcy Code require debtors to honor CBAs until
they either reach a deal for modification or demonstrate that
rejection is appropriate. Before taking this issue to a
court, debtors must present unions with a fair and equitable
proposal for modifying -- not terminating -- the CBAs, while
negotiating in good faith. The Debtors have done neither.
The Debtors want to rid themselves of union representation,
having demanded concessions from the IAM that are so extreme,
they constitute a de facto demand for termination of the
CBAs. For example, the Debtors want unfettered outsourcing
rights, which would jeopardize IAM members' job security. A
fundamental protection of a CBA is job security. Ms. Levine
says that under the modified CBA, the IAM's members would be
as vulnerable to losing their jobs through outsourcing as if
there were no CBA at all. The Debtors ask for draconian wage
and benefit concessions, which will lower the IAM members'
standards of living. This is a negation of the protections
afforded by collective bargaining.
"The Debtors are trying to cast their CBAs as insurmountable
obstacles to the transformation into a competitive, low cost
carrier. This is misleading because the Debtors cannot
renege on their promises embodied in the CBAs unless they
first bargain with employees in good faith. The Debtors do
not seek negotiation, they demand total capitulation from the
IAM," Ms. Levine says.
The Debtors are attempting "to break the IAM" and reduce
labor costs to below-market levels with the dream that US
Airways will become a low cost carrier that successfully
competes in the market place. In the process, Ms. Levine
says, the Debtors are destroying their human resources, which
is the very force that will lead the competitive charge
against low cost carriers and deliver an appealing product to
the public.
(3) The IAM National Pension Fund
On October 15, 2004, the Court reduced the amount of employer
contributions to the IAM National Pension Fund to a flat 3%.
The Debtors now want to make that relief permanent through a
reduction in the hourly contribution rate to 3% for full-time
Fleet Service employees and 1.5% for part-time Fleet Service
employees. This is not acceptable, Raymond R. Pring, Jr.,
Esq., at Vanderpool, Frostick & Nishanian, in Manassas,
Virginia, asserts.
The proposed relief reduces the Debtors' employer
contribution to a level below which the National Pension Plan
will accept the Debtors' participation. The contributions
will be insufficient to fund the benefits of the
participating employees. If permanent reductions are
granted, the Trustees will terminate the Debtors'
participation in the National Pension Plan.
Mr. Pring informs Judge Mitchell that the Debtors are
delinquent on their contributions for July 2004, August 2004,
and September 1 to 12, 2004. Since the Petition Date, the
Debtors have paid their contributions at the full rate for
September 12 to October 17, 2004, and at the reduced rates
for October 18 through October 24, 2004. The next payment is
due on December 20 for November 2004.
Mr. Pring explains that the IAM has good cause for rejecting
any proposal that reduces the hourly contract rate below the
rate in existence before the October 15, 2004, Interim Order.
The Trustees will terminate the Debtors' participation
effective October 15, 2004, unless the contribution rates are
restored to the pre-October 15 levels. If the Debtors want
to maintain their status as participating employers in the
National Pension Plan, they must not reduce their
contribution rate.
(4) Section 1114 Retiree Committee
Martin G. Bunin, Esq., at Thelen, Reid & Priest, in New York
City, notes that all parties want the Debtors to continue as
a going concern. If the Debtors are liquidated, all parties
lose. If the Debtors' proposals are implemented and the
airline survives, all parties, except the 1114 Retirees, will
benefit through continued employment, future wage increases
and profit sharing. "There is no upside for [the Retirees]
in the Debtors' proposal, yet they are being asked to give up
everything. This is not fair," Mr. Bunin says.
On November 2, 2004, when the Debtors delivered their Section
1114 proposals, the Retiree Committee was shocked. Not only
were the benefit cuts draconian, but also the Debtors
provided no relevant information other than a summary of
their business plan, a PowerPoint document and a savings
summary. Mr. Bunin says that this is troubling because the
Debtors are trying to sidestep the very reason the Committee
was formed. The Debtors, in defiance of their own schedule
and the Court's schedule, have not provided the relevant
information. This delay has made meaningful negotiations
impossible.
Mr. Bunin suggests that the Debtors should take from other
baskets and give to the Retirees. The amounts sought from
the Retirees are miniscule compared to cost reductions from
other employee groups. Therefore, marginal increases in
concessions from other groups -- all of which will benefit
from the upside of the Debtors' reorganization -- would
provide the needed savings while preserving the vital
components of existing health coverage for Retirees. For
example, the Debtors are asking Retirees for $20,700,000 out
of an annualized $1,300,000,000 in cost cuts sought. Mr.
Bunin says that the Debtors' success or failure in bankruptcy
will not be determined by $20,700,000.
The Debtors can easily pull $20,700,000 in savings from
another source and allow the Retirees their health care. For
example, the Debtors have a publicly stated goal of
$1,250,000,000 to $1,350,000,000 in cost savings. By
formulating this target with a $100,000,000 spread, the
$20,700,000 cut from Retiree health care is not a necessary
sacrifice for the Debtors' survival. The Debtors have stated
that they will be above target if they achieve all cost
savings sought. Any excess cost savings need not come from
the Retirees, and should be given back since they will not
participate in the Debtors' future. The Debtors have already
realized $225,000,000 in non-labor cost savings, above the
$165,000,000 target. This excess could easily fund the
Retirees' health care benefits.
(5) The Communications Workers of America
Daniel M. Katz, Esq., at Katz & Ranzman, in Washington, D.C.,
tells Judge Mitchell that the Communications Workers of
America, AFL-CIO, has tried to reach agreement on labor cost
sacrifices, but the Debtors have made inequitable and
unnecessary demands for below-market pay rates, frustrating
the CWA's good faith efforts.
In its application to reject the CBAs, the Debtors
erroneously claim that its labor costs are grossly in excess
of those at low cost carriers and that they must reach
competitive parity. Mr. Katz says that these claims are
demonstrably false because labor costs for CWA-represented
employees are already at or below the LCCs' in every category
-- pay, pensions, other benefits and productivity.
The Debtors state that the entry-level pay at LCCs justifies
their proposal to the CWA, which is the only employment
alternative for the passenger service employees. Mr. Katz
asserts that this contention is wrong because industry wage
scales are the appropriate starting point for determining the
market rate for experienced passenger service employees.
Plus, the Debtors' employees are above entry-level LCC
positions due to their "terrific set of knowledge, skills and
abilities" along with "their education, job experience and
professional capabilities." The Debtors' employees are
highly sought after and will do well in the airline industry
or any other industry of their choosing.
According to Mr. Katz, through intensive bargaining, the
parties have reached a point in negotiations where the
differences in their positions are minimal. The CWA has
agreed to meet the Debtor's overall cost reduction goal of
reducing passenger service employees' pay and benefits to the
levels of profitable LCCs. While the parties have
disagreements, the differences are immaterial, since the
Debtors concede that CWA's latest proposal satisfies its
goals for pay, pensions, other benefits and work rules.
Hence, CWA's good faith compromises have increased the
likelihood that the parties will arrive at a mutually
acceptable agreement without Court intervention.
Due to the parties' negotiating success, the Court does not
have to authorize the rejection of the CWA contract to ensure
that the Debtors' reorganization succeeds. The Court is not
faced with a choice between the existing CBA, on the one
hand, and the Debtors' unilateral imposition of terms, with
the Court's assistance, on the other. Since the CWA is
committed to delivering a contract that makes concessions to
help preserve USAir, the Court does not need to take the
extraordinary step of authorizing the rejection of the CWA
CBA.
(6) The Transport Workers Union
The Transport Workers Union of America, AFL-CIO, represents
three groups of employees -- (a) Dispatchers, (b) Flight
Instructors, and (c) Simulator Technicians -- which have
three different CBAs. Peter J. Leff, Esq., at O'Donnell,
Schwartz & Anderson, in Washington, D.C., recounts that the
TWU reached an agreement with the Debtors to modify all three
of its CBAs to provide the relief necessary to permit the
Debtors' reorganization.
The Debtors now seek to terminate certain defined benefit
pension plans, one of which covers the three TWU-represented
work groups. Mr. Leff asserts that the Plan is not presently
underfunded and no new payments will be due for several
years. Accordingly, termination of the defined benefit
pension plans is not necessary for a reorganization within
Section 1113.
The TWU has been deceived because it already ratified
modifications that met the statutory standard. The TWU never
agreed to a termination of the defined benefit plan covering
its members. Article 24(I) of the US Airways/TWU Dispatch
Agreement contains this provision concerning the defined
benefit plan:
The Defined Benefit Pension Plan will remain frozen and
appropriately funded by the Company in accordance with
applicable laws and regulations.
Regardless of any Court Order, Mr. Leff emphasizes, the
Debtors do not have authority to provide diminished annuities
to TWU-represented employees. The Debtors' request should be
denied because the Debtors did not proffer this concession as
part of a modification proposal to the CBAs. Mr. Leff
contends that the Debtors have not met either the procedural
or substantive requirements for relief from its CBAs with the
TWU. "Satisfaction of these requirements is mandatory before
relief can be granted."
(7) Pension Benefit Guaranty Corporation
James J. Keightley, Esq., General Counsel to PBGC, relates
that Congress placed constraints on employers who seek to
shift unfunded pension promises onto PBGC. ERISA imposes a
rigorous test of last resort, requiring an employer to prove
that it will be forced to liquidate if the pension plan is
not terminated. The employer must demonstrate that it has
exhausted all realistic measures to maintain the plan.
According to Mr. Keightley, the rigorous nature of the
distress test standard, coupled with the magnitude of the
liability the Debtors propose to shift onto PBGC -- about
$2,300,000,000 in unfunded benefit liabilities on top of the
$2,200,000,000 the agency absorbed from termination of the
Pilots Plan -- make it especially important that this matter
be decided on a fully developed record. "If the Debtors want
to terminate all of the Mainline Plans, they must demonstrate
a realistic and developed business plan based on detailed
financial projections. Thus far, the Debtors' business plan
has been a moving target, with critical financial gaps in the
Transformation Plan," Mr. Keightley says. The projections
that support the Transformation Plan make it difficult, if
not impossible, to ascertain whether there is enough free
cash flow to support one or more of the Mainline Plans. For
example, Mr. Keightley notes, the Debtors have not identified
a source for the $250,000,000 equity investment that is
central to emergence from Chapter 11. Likewise, it is
unknown if the Air Transportation Stabilization Board will
extend the use of cash collateral beyond January 14, 2005.
These questions must be answered, Mr. Keightley says.
The Debtors keep changing their estimations, which increases
uncertainty. In their current request, the Debtors represent
that maintenance of the Mainline Plans will cost hundreds of
millions of dollars more than they estimated 60 days ago in
their Motion to Pay Non-Ordinary Course Pension Obligations.
"It is unclear why these funding estimates have suddenly
increased," Mr. Keightley says. Nonetheless, even under the
Debtors' increased estimates, one of the Mainline Plans which
is already frozen, may have no minimum funding requirements
for the next few years and could be spared.
Creditors Committee Supports Debtors' Request
The Official Committee of Unsecured Creditors supports the
Debtors' efforts. Rejection of the CBAs and termination of
pension plans are difficult steps in the reorganization process.
USAir's bankruptcy has already been punctuated by painful
sacrifices. Each measure has been intended to preserve the
Debtors' viability and to reorganize as a healthier, competitive,
sustainable airline. The sacrifices continue to be made by many
parties, including, the general unsecured creditors with billions
of dollars in claims, the Debtors' aircraft lessors and financiers
and, importantly, the Debtors' labor force.
The Debtors have demonstrated a need for immediate and sizeable
cost savings from employees, Scott L. Hazan, Esq., at Otterbourg,
Steindler, Houston & Rosen, in New York City, points out. The
Debtors' survival and the preservation of 34,000 jobs depend on
cost cuts sharp enough to make USAir competitive with LCCs
encroaching on the Debtors' routes.
The Committee understands that it is painful for employees to make
sacrifices after having recently provided concessions in the
Debtors' prior bankruptcy and through the earlier Section 1113(e)
relief. However, Mr. Hazan says, absent an immediate reduction in
the Debtors' labor and pension costs, plus other cost reductions,
the Debtors will not survive.
The interim relief granted of the 1113(e) Order helped ensure the
Debtors' immediate survival through necessary short-term
liquidity. However, without long-term modifications to the cost
structure, it will be impossible for the Debtors to compete in
today's airline industry, provide sufficient comfort to the ATSB
lenders to allow for the continued use of cash collateral, or find
the capital to reorganize.
The Committee is hopeful that cost-savings can be achieved through
negotiation rather than court order. But if the Debtors are
unable to reach a consensual resolution with their other organized
labor forces and the Section 1114 Retiree Committee, the Committee
asks Judge Mitchell to grant the Debtors' request.
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 their 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.
VARICK STRUCTURED: Fitch Junks Three Classes of Notes
-----------------------------------------------------
Fitch Ratings downgrades four classes of notes issued by Varick
Structured Asset Fund, Ltd., and removes all classes from Rating
Watch Negative. These rating actions are effective immediately:
-- $37,014,128 class A-1 notes to 'BB' from 'BBB-';
-- $222,085,686 class A-2 notes to 'BB' from 'BBB-';
-- $25,682,165 class B-1 notes to 'CC' from 'CCC-';
-- $7,604,046 class B-2 notes to 'CC' from 'CCC-';
-- $8,294,492 class C notes remains at 'C'.
Varick is a collateralized debt obligation managed by Clinton
Group, Inc. The deal was established in September 2000 to issue
$404 million in notes and equity. The portfolio supporting the
CDO is comprised of a diversified portfolio of asset-backed
securities -- ABS, residential mortgage-backed securities -- RMBS,
and commercial mortgage-backed securities -- CMBS.
The rating actions are a result of continued deterioration in the
credit quality of Varick CBO's collateral pool and the continued
negative impact of its interest rate hedge. Since the last rating
action the class A overcollateralization ratio decreased to 102.7%
as of the most recent trustee report dated Oct. 28, 2004, from
105.4% as reported on Feb. 29, 2004, and continues to fail versus
the trigger of 109.5%, the class B OC ratio has decreased to
91.02% from 94.97% and also continues to fail versus the trigger
of 101.25%. Defaulted assets have increased to 5.3% of the total
collateral and eligible investments. Assets rated 'BBB-' or lower
represented approximately 44.1%, excluding defaults. In addition
eight collateral positions have had downgrades compared with one
upgrade, indicating additional further credit deterioration in the
portfolio since Fitch's previous rating action.
Varick is considerably over-hedged and continues to suffer from
the low interest rate environment. There was an insufficient
amount of interest proceeds available on the Aug. 2, 2004, and
Nov. 1, 2004, distribution dates to pay current class A-1 and
class A-2 note interest from the interest waterfall. Principal
proceeds in the amount of $694,947 and $228,334 were used to
remedy this shortfall. Additionally, on the May 3, 2004, Aug. 2,
2004, and Nov. 1, 2004, distribution dates there was insufficient
interest or principal collections to pay current interest on the
class B-1, class B-2 and class C notes.
As a result of this analysis, Fitch has determined that the
current ratings assigned to the class A-1, class A-2, class B-1
and class B-2 notes no longer reflect the current risk to
noteholders.
The rating of the class A-1 and class A-2 notes addresses the
likelihood that investors will receive full and timely payments of
interest, as per the governing documents, as well as the stated
balance of principal by the legal final maturity date. The
ratings of the class B-1, class B-2 and class C notes address the
likelihood that investors will receive ultimate and compensating
interest payments, as per the governing documents, as well as the
stated balance of principal by the legal final maturity date.
Fitch will continue to monitor and review this transaction for
future rating adjustments.
VENOCO INC: S&P Junks $150 Million Senior Unsecured Notes
---------------------------------------------------------
Standard & Poor's Rating Services assigned its 'B-' corporate
credit rating to Venoco, Inc., and its 'CCC+' rating to the
company's $150 million 10-year senior unsecured notes. The
outlook is stable.
Pro forma for the notes, Carpinteria, California-based Venoco will
have approximately $150 million in long-term debt outstanding.
"The ratings on Venoco reflect its highly leveraged financial
profile, small geographically concentrated reserve base, an
ownership structure that may not be beneficial to bondholders, and
participation in the highly volatile exploration and production
segment of the oil and gas industry," said Standard & Poor's
credit analyst Jeffrey Morrison.
Standard & Poor's also said that the ratings to a lesser degree
reflect a somewhat challenging legal and regulatory environment in
California.
"Significant hedging of proved production volumes, a long reserve
life, and a high percentage of company operated properties do not
offset these concerns," said Mr. Morrison.
The proceeds from the issue will be used to repay borrowings under
the company's credit facility, acquire Marquez Energy, buy-out
remaining common shareholders, and to pay a dividend to
owner/cofounder Tim Marquez.
VERILINK CORP: Names Timothy R. Anderson Chief Financial Officer
----------------------------------------------------------------
December 6, 2004 / PR Newswire
Verilink Corporation (Nasdaq: VRLK) appointed Timothy R. Anderson
as Vice President and Chief Financial Officer.
Mr. Anderson is a Certified Management Accountant with
22 years of financial management experience. Prior to Verilink,
Anderson served from 2000 to 2004 as Chief Financial Officer for
Carrier Access Corporation, a publicly traded telecommunications
company he joined in 1996 as Corporate Controller. Prior to
Carrier Access, Mr. Anderson held various financial management
positions with private and technology start-up companies. He
began his career at Motorola in progressive financial management
roles. Mr. Anderson has a Masters in Business Administration and
a Bachelor of Science in Business Administration from the
University of Colorado at Boulder.
"I am delighted to add Tim to our senior management team and look
forward to his leadership in finance as we continue to execute on
our strategic plan," said Leigh S. Belden, President and CEO of
Verilink. "As Verilink is evolving into a larger, more global
player in broadband access, Tim's experience in the equipment
business and capital markets will be an asset in taking Verilink
to the next level as we continue to build value for our
shareholders."
Mr. Anderson assumed the roll of Chief Financial Officer effective
December 2nd. C.W. (Bill) Smith, who has served as CFO since
November 2001, will remain with the company as Vice President and
Corporate Controller. "Bill continues to be a tremendous asset to
our company, and I appreciate his contributions in getting
Verilink to this point," commented Belden. "I am pleased to have
Bill continue with us in his role as Corporate Controller, working
with Tim to prepare Verilink for the next stage of growth."
Verilink has agreed to grant Mr. Anderson options to purchase
200,000 shares of Verilink common stock as an inducement for Mr.
Anderson to join the company, subject to approval by Verilink's
Equity Incentive Sub-Committee of the Compensation Committee. It
is anticipated that these options will be granted without
stockholder approval as permitted under Nasdaq Marketplace Rule
4350(i)(1)(A)(iv) and will have the following terms: exercise
price equal to the fair market value per share on the grant date;
duration of ten years; and vesting over a four-year period at the
rate of 25% after one year from the date of hire and 1/48th of the
total options granted per month each month thereafter.
New Corporate Headquarters
In preparation for growth and to better serve the company's
expanded geographic footprint both domestic and international, the
company announced plans to move its corporate headquarters
effective December 2004 to Centennial, Colorado in the metro
Denver area, from its previous location in Madison, Alabama. In
addition to headquarters, the company's Professional Services
organization (formerly XEL) will be located in the Centennial
facility upon exiting the lease on the former XEL headquarters
building. The company's Madison facility will continue as the
company's primary manufacturing operation, with engineering,
operational support and various other functions also continuing to
reside in this location.
About Timothy R. Anderson
Mr. Anderson served as Treasurer, Chief Financial Officer of
Carrier Access Corporation from 2000 to 2004. He also served as
the Vice President of Finance at Carrier Access from 1999 to 2000
and previously held the position of Corporate Controller from 1996
to 1999. From 1994 to 1996, Mr. Anderson served as Controller for
RIK Medical, a privately held startup and manufacturer of medical
equipment. From 1990 to 1994, Mr. Anderson served as Vice
President and Chief Financial Officer of Alpen Incorporated, a
privately held manufacturer of insulated glass. Mr. Anderson
began his career in finance with Motorola from 1982 to 1990, where
he held progressive accounting and financial management positions.
Mr. Anderson received a Masters in Business Administration and a
Bachelor of Science in Business Administration from the University
of Colorado at Boulder. He is a Certified Management Accountant.
About Verilink Corporation
Verilink Corporation is a leading provider of next-generation
broadband access solutions for today's and tomorrow's networks.
The company develops, manufactures and markets a broad suite of
products that enable carriers (ILECs, CLECs, IXCs, and IOCs) and
enterprises to build converged access networks that enable the
cost-effective delivery of next-generation communications services
to their end customers. The company's products include a complete
line of VoIP and TDM-based integrated access devices (IADs),
optical access products, wire-speed routers, and bandwidth
aggregation solutions including CSU/DSUs, multiplexers and DACS.
Verilink also provides turnkey professional services to help
carriers plan, manage and accelerate the deployment of new
services. The company has operations in Madison, Alabama, Aurora,
Colorado and Newark, California with sales offices in the U.S.,
Europe and Asia. To learn more about Verilink, visit the
company's website at http://www.verilink.com/
* * *
As required under Nasdaq Rule 4350(b), the Company is providing
notice that the report of PricewaterhouseCoopers LLP, the
Company's registered independent public accounting firm, on the
Company's financial statements as of July 2, 2004, contains an
explanatory paragraph, which refers to uncertain revenue streams
and a low level of liquidity and notes that these matters raise
substantial doubt about the Company's ability to continue as a
going concern.
VIATICAL LIQUIDITY: Creditors Must File Proofs of Claim by Dec. 20
------------------------------------------------------------------
The U.S Bankruptcy Court for the Southern District of California
set December 20, 2004, as the deadline for all creditors owed
money by Viatical Liquidity, LLC, on account of claims arising
prior to June 18, 2004, to file their proofs of claim.
Creditors must file their written proofs of claim on or before the
December 20 Claims Bar Date, and those forms must be delivered to
the Clerk of the Bankruptcy Court:
Clerk of the Bankruptcy Court
Southern District of California
325 West "F" Street
San Diego, California 92101-6991
Copies of the proofs of claim must also be delivered to the
Debtor's counsel:
Gary B. Rudolph, Esq.
Sparber Rudolph Annen, APLC
701 B Street, Suite 1000
San Diego, California 92101
and Counsel of the Official Committee of Unsecured Creditors:
Robert Shenfeld, Esq.
Reed Smith LLP
355 South Grand Avenue
Los Angeles, California 90071
Headquartered in San Diego, California, Viatical Liquidity, LLC,
is engaged in the insurance industry. The Company filed for
chapter 11 protection on June 18, 2004 (Bankr. S.D. Calif. Case
No. 04-05472). Gary B. Rudolph, Esq., at Sparber Rudolph Annen,
represent the Debtor in its restructuring efforts. When the
Company filed for protection from its creditors, it listed
$119,083,608 in total assets and $47,538,071 in total debts.
VLASIC: Proposes Findings of Fact in $250M Campbell Spin-Off Suit
-----------------------------------------------------------------
VFB L.L.C., successor in bankruptcy to Vlasic Foods
International, presented to the District Court its proposed
findings of fact and conclusions of law in its $250 million
lawsuit commenced attacking the spin-off of Vlasic Foods from
Campbell Soup Company.
James J. Maron, Esq., at Maron & Marvel, P.A., in Wilmington,
Delaware, recounts that Campbell Soup Company spun off VFI, a
collection of underperforming businesses. Campbell received $646
million from VFI by:
-- borrowing $500 million from banks and then transferring to
VFI the obligation to repay, and
-- requiring VFI to pay another $75 million shortly after the
spin and to assume $71 million in Campbell liabilities.
"VFI had too much debt and not enough earnings to support it, so
it went bankrupt, leaving its unsecured creditors unpaid," Mr.
Maron says. The central conclusions are:
(1) VFI's value was hundreds of millions less than what
Campbell took in the spin;
(2) The spin rendered VFI insolvent, undercapitalized, and
unable to pay its debts; and
(3) Campbell intended to hinder, delay, and defraud VFI
creditors.
A copy of VFB's Proposed Findings of Fact and Conclusions of Law
is available for free at:
http://bankrupt.com/misc/VFB's_proposed_findings.pdf
Recovery of $544.1 Million
Mr. Maron asserts that VFB is entitled to recover $544.1 million
from Campbell.
Section 550(a)(1) of the Bankruptcy Code governs the measure of
VFB's recovery. Section 550 serves to restore the bankruptcy
estate to the financial condition it would have enjoyed if the
transfers had not occurred. The measure of recovery under
Section 550(a)(1), therefore, is the value of the transfers less
consideration received.
Accordingly, Mr. Maron contends, VFB is entitled to recover
$376.2 million from Campbell, the difference in the $646.2
million of VFI's transferred cash and assumed obligations to or
for Campbell's benefit and the $270 million value of
consideration VFI received.
"The Section 550(a) authorization for VFB to recover the 'value'
of property fraudulently conveyed gives discretion to award
interest on the recovery," Mr. Maron says. This means that
prejudgment interest should be awarded unless there is some sound
reason not to do so.
Because VFB's claims are based on New Jersey's UFTA, through
Bankruptcy Code Section 544, the New Jersey prejudgment interest
rate is used. New Jersey Rule 4:42-11(a)(ii) and (iii)
determines the rate, which refers to the rate each previous year
of the state Cash Management Fund plus 2%.
Prejudgment interest, following the majority rule, runs from
March 30, 1998 -- the Spin Date.
Prejudgment simple interest is:
* 7.5% -- April to December 1998,
* 7.5% -- 1999,
* 7.0% -- 2000,
* 7.5% -- 2001,
* 8.0% -- 2002,
* 5.0% -- 2003, and
* 4.0% -- 2004,
for a total through the end of 2004 of 44.625%, which yields
prejudgment interest on $376.2 million of $167.9 million.
Breach of Fiduciary Duty
Furthermore, Mr. Maron asserts, VFI's pre-Spin directors --
Gerald Lord, Linda Lipscomb, and Anthony DiSilvestro -- owed a
duty to VFI's foreseeable creditors. "They breached this duty by
causing VFI's insolvency to benefit Campbell, to the detriment of
VFI's creditors."
In FDIC v. Sea Pines Co., 692 F.2d 973, 977, the Fourth Circuit
ruled that a subsidiary director violates the duty to creditors
by using the corporation's "assets for the benefit of the parent
. . . and not for the subsidiary" and "manipulate[ing] the
assets, property and liabilities of the subsidiary."
In VFI's case, the duty was breached when Campbell directors of
VFI acted in ways that would either "render" VFI solvent or bring
it "to the brink of insolvency."
Mr. Maron notes that the pre-Spin VFI directors were Campbell
employees acting to achieve Best in Show for Campbell, within the
course and scope of their Campbell employment. Therefore,
Campbell is liable for their breach.
Mr. Maron asserts that the injury to VFI's foreseeable creditors'
pool is traceable to Campbell's conduct and includes the debts
VFI incurred because of Campbell's conduct, which was a
"substantial factor" in producing the damage. VFB has suffered
$284,117,806 in damages -- the amount unpaid to creditors (with
interest).
Punitive Damages
"Punitive damages may be awarded based on clear and convincing
evidence showing Campbell caused harm and had actual malice or a
wanton and willful disregard of those who foreseeably would be
harmed by its conduct and, in this case, may not exceed five
times compensatory damages," Mr. Maron says.
During the Spin process and for years afterwards, Campbell
repeatedly surpassed acceptable limits of responsible corporate
behavior. According to Mr. Maron, the continuing 8-year pattern
of misconduct involved:
-- earnings manipulation beginning in 1996,
-- heavy loading through the Spin,
-- concealment and fraud on the Internal Revenue Service,
Securities and Exchange Commission, stock market investors,
and banks,
-- years of post-Spin abuse,
-- the demand for a fraudulent transfer release on the eve of
bankruptcy, and
-- its incredible testimony at the 2004 trial.
Mr. Maron relates that Campbell's fraud resulted from the
coordinated action of senior executives in the organization,
including CEOs David Johnson and Dale Morrison, CFO Basil
Anderson, VP-Controller Gerry Lord, VP-Taxes Dan Hays, VP-
Treasurer Anthony DiSilvestro, and counsel Linda Lipscomb.
"To this day, Campbell refuses to accept responsibility for its
actions. Campbell witnesses testified they would execute the
Spin the same way again," Mr. Maron says.
Mr. Maron also considered Campbell's $724 million in FY99 net
earnings and $932 million in free cash flow, and Campbell's use
of the $646 million Spin proceeds for more than six years.
"Simply requiring Campbell to pay back the difference in value
would allow Campbell to benefit, in the end, from its
misconduct." Another factor, Mr. Maron adds, is the human cost
of the failure on VFI's employees.
Thus, Mr. Maron asserts, VFB is entitled to an award of punitive
damage. "Clear and convincing evidence shows Campbell caused
substantial harm and acted with actual malice or wanton and
willful disregard of the interests of those its conduct would
foreseeably harm."
Disallow Campbell's Claim
VFB asks the District Court to disallow or subordinate Campbell's
claims against VFI. "To the extent any Campbell entity's claims
arise from contracts or other obligations entered in the Spin,
they should be avoided and disallowed as a remedy for Campbell's
actual and constructive fraud in the Spin," Mr. Maron says. In
addition, Campbell and its co-defendants offered no evidence
establishing the validity of their claims against VFI.
Accordingly, Mr. Maron contends, Campbell and its co-defendants'
claims against VFI are disallowed.
Aside from Mr. Maron, VFB LLC is represented by John A. Lee,
Esq., Robin Russell, Esq., William S. Locher, Esq., and David
Griffith, Esq., at Andrews & Kurth, LLP, in Houston, Texas.
Campbell Tells a Different Story
Richard P. McElroy, Esq., at Blank Rome, LLP, in Philadelphia,
Pennsylvania, argues that VFB has failed to support its theories
with persuasive evidence, and both theories suffer fatal legal
defects as well. Mr. McElroy asserts that Campbell and its
management did not engage in a scheme to defraud, hinder or delay
VFI creditors. "The VFI businesses had stable, profitable
performance histories for years prior to the spin-off. The
various challenges facing the VFI businesses, which VFB now
characterizes as insurmountable problems, were known to VFI's
management, to the independent advisors to Campbell and VFI, and
to the debt and equity markets. All participants nonetheless
believed, and acted on the belief, that VFI's business was worth
far more than its debt and other obligations, and would grow in
value once VFI became an independent company with management
focused exclusively on exploiting its opportunities. No one
believed VFI would fall so far short of success as to leave its
creditors unpaid."
Moreover, Mr. McElroy continues, the evidence shows that there
was no constructive fraudulent transfer. By any reasonable
valuation criterion, the market-leading, historically profitable
businesses transferred to VFI had a value well in excess of any
amount that VFB contends should be used to determine reasonably
equivalent value and solvency. "VFI was adequately capitalized
and able to pay its debts on the Spin-off Date," Mr. McElroy
says.
A copy of Campbell's Proposed Findings of Fact and Conclusions of
Law is available for free at:
http://bankrupt.com/misc/Campbell's_proposed_findings.pdf
No Evidence to Prove Fraud
Mr. McElroy points out that VFB bears the burden of proving a
constructive fraudulent transfer by clear and convincing
evidence. "VFB has failed to meet its burden by even a
preponderance of the evidence, much less the higher clear and
convincing standard."
To establish that the spin-off constituted a constructive
fraudulent transfer, VFB must show both that:
(1) VFI did not receive "reasonably equivalent value" in the
spin-off for the money or other consideration it
transferred to Campbell in that transaction; and
(2) On the Spin-Off Date, VFI was insolvent, had inadequate
assets to conduct its future business, or would be unable
to pay its debts as they came due.
Since VFI received all of its businesses in the spin-off, Mr.
McElroy says, the reasonably equivalent value constitutes a
valuation of the businesses at the Spin-Off Date. The valuation
is guided by what the District Court has described as
"significant deference to marketplace values." In Peltz v.
Hatten, 279 B.R. at 738 (D. Del. 2002), the District Court
stated, "[w]hen sophisticated parties make reasoned judgments
about the value of assets that are supported by then prevailing
marketplace values by the reasonable perceptions about growth,
risks, and the market at the time, it is not the place of
fraudulent transfer law to re-evaluate or question those
transactions with the benefit of hindsight." As the Third
Circuit has held, benefits and opportunities reasonably likely at
the time of the transaction are elements of value received by
VFI, even if not ultimately realized.
Accordingly, Mr. McElroy says, VFI's value as reflected in
contemporaneous marketplace data like its stock market
capitalization, the conclusions of experienced bank lenders
following substantial due diligence, the views of outside
professional advisors, and the views of the management of VFI and
Campbell, all at or near the Spin-off Date, is immune to
hindsight and should control the analysis. The District Court
has previously recognized that litigation-driven retrospective
valuation opinions that contravene the contemporary market
evidence are to be viewed skeptically. "DCF studies that are
done after-the-fact and for the purpose of proving a point in an
adversarial proceeding are too subjective and too subject to
manipulation, and are not particularly probative of the way that
industry participants, including the parties in this case,
approached the valuation process in the period at issue."
Mr. McElroy notes that VFB failed to prove even by a
preponderance of the evidence standard that VFI received less
than reasonably equivalent value in the spin-off, particularly in
view of the Third Circuit's admonition that "the debtor need not
receive a dollar-for-dollar equivalent in order to receive
reasonably equivalent value." VFI's enterprise value at the
Spin-Off Date as reflected in the trading market and the
valuation methodologies on which Peltz and other decisions rely
greatly exceeded even the highest "implied purchase price"
sponsored by VFB's experts -- Hallman and Titman, $594 million;
Owsley, $646 million.
Moreover, Mr. McElroy adds, VFB has cited no authority to support
its experts' attempts to increase the "implied purchase price"
beyond the $500 million bank debt that VFI actually assumed in
exchange for the spin-off of the VFI businesses. VFB's experts
sought to lump together with the $500 million amount various
additional sums chiefly representing pre-existing intercompany
loans or future obligations for which the VFI businesses received
and retained independent consideration prior to and independent
of the spin-off. For example, the VFI businesses had separately
and independently received inventory and accounts receivable in
exchange for most of the $75 million payable, which arose from
ordinary, seasonal working capital loans made by Campbell to VFI
before the spin-off. VFB has identified no legal support for
these attempts to inflate the "implied purchase price," and
Campbell believes there is none.
Even if VFB had demonstrated a lack of reasonably equivalent
value, it was required also to show that at the time of the spin-
off, VFI was in dire financial condition in one of three ways.
VFI established none of the three.
(1) Insolvency
A debtor is "insolvent" if "the sum of the debtor's debts
is greater than all of the debtor's assets, at a fair
valuation." The standard of fair valuation requires
examination of the same contemporaneous market indicia of
value. Applying those criteria, VFB failed to prove that
VFI was insolvent or rendered insolvent in the spin-off.
To the contrary, VFI's businesses and assets on the Spin-
off Date, fairly valued, far exceeded the amount of its
debts.
Moreover, Mr. McElroy continues, only an unpaid creditor
with a claim pre-existing the spin-off may bring an
insolvency-based challenge to it. "Having identified no
such creditor, VFB lacks standing to invoke the insolvency
standard to challenge the spin-off."
(2) Inadequate Capitalization
A transfer lacking reasonably equivalent value may also be
avoided if the debtor was engaged or was about to engage
in a business or transaction for which the remaining
assets of the debtor were unreasonably small in relation
to the business. The "critical question" is whether the
debtor's cash flow projection at the time of the
transaction was reasonable at the time it was made, not
whether, with the benefit of hindsight, the projection
proved correct. Moody v. Sec. Pac. Bus. Credit, Inc., 971
F.2d 1056, 1073 (3d Cir. 1992); Peltz, 279 B.R. at 745-46.
VFI's 1999 operating plans were reasonable and prudent in
the contemporaneously expressed view of every
contemporaneous participant. Further, VFI's principal
contemporaneous creditors, the banks, based on full due
diligence, assigned VFI a credit rating of BB even after
it had failed to satisfy the original loan covenants.
That VFI was adequately capitalized is further
demonstrated by its ability, as a weaker credit operating
in more difficult credit conditions, to effect the $200
million subordinated, unsecured bond offering in June
1999.
(3) Intent to Incur Debts Beyond Ability to Repay
A plaintiff may also meet its "financial condition" burden
by establishing that, at the time of the transfer, a
debtor intended to incur, or believed or reasonably should
have believed it would incur, debts beyond its ability to
pay as they came due. Under Moody and Peltz, if VFI had
adequate capital to carry on its business, as it did, then
the challenged transaction also does not contravene the
equitable insolvency test. Moreover, VFB failed to
identify a single person involved in the spin-off who
actually believed or intended at or before the Spin-off
Date, that VFI would be unable to pay its debts as they
came due.
Equitable Defenses
Even if the spin-off had been a constructively fraudulent
transfer, which it was not, governing New Jersey law explicitly
preserves equitable defenses to that kind of claim, including
ratification. In re Best Prods. Co., 168 B.R. 35, 57 (Bankr.
S.D.N.Y. 1994), the New York Bankruptcy Court emphasized that
"[a] fraudulent transfer is not void, but voidable; thus, it can
be ratified by a creditor who is then estopped from seeking its
avoidance."
Mr. McElroy asserts that VFB has failed to identify any unpaid
unsecured creditor of VFI that lacked actual or constructive
notice of the spin-off transaction at the time it extended
unsecured credit to VFI. Virtually all of VFB's interest holders
derive their interests from the bond offering. The bond offering
constituted a ratification of the spin-off, i.e., the bond
purchasers freely and without constraint chose to extend credit
to VFI as a standalone company independent of Campbell 15 months
after the spin-off, upon full disclosure of the challenged
transaction. There is no basis to impose on Campbell what would
constitute a retroactive guarantee of the bond debt, which the
bondholders knew did not exist at the time they made their fully
informed decision to invest in VFI. Moreover, the lease
claimant, trade creditors and employee claimants that VFB sought
to adduce as creditors eligible to bring an avoiding claim also
extended credit to VFI with notice of the spin-off, and hence
ratified it.
VFB, therefore, lacks standing to assert its fraudulent transfer
claims, and is barred from recovering under the equitable
doctrines of waiver, estoppel, and ratification.
Statutory Credit
Moreover, Mr. McElroy continues, had there been a fraudulent
transfer, Campbell would be entitled to a credit for the full
value of the businesses transferred to VFB, as a good faith
transferee. Mr. McElroy points out that Campbell's good faith is
demonstrated by, inter alia, its reliance on independent experts
in every aspect of the spin-off, the stable operating histories
of the VFI businesses prior to the spin-off, and the care and
professionalism with which it planned, approved and executed the
spin-off.
Actual Intent Fraud Claim
According to Mr. McElroy, a transfer made by a debtor "is
fraudulent as to a creditor" if "the debtor made the transfer"
with "actual intent to hinder, delay, or defraud any creditor of
the debtor." Mr. McElroy notes that VFB was required to prove
actual intent to make a fraudulent transfer through clear and
convincing evidence. Actual intent to defraud, hinder or delay
creditors cannot be founded on an open and notorious transfer,
and creditors with knowledge of transfers cannot be regarded as
hindered, delayed or defrauded by those transfers. Mr. McElroy
tells the District Court that VFB has failed to prove, under even
a preponderance of the evidence standard, that VFI actually
intended to hinder, delay or defraud VFI's creditors. "Nor has
VFB proved under any standard that Campbell had such an intent,"
Mr. McElroy adds.
Campbell had no motive to attempt to defraud VFI's creditors, Mr.
McElroy asserts. No motive to defraud may be inferred from the
operation of executive compensation programs. No individual
actor in the spin-off transaction possessed the requisite
personal fraudulent intent necessary to impute that motive to VFI
or Campbell.
VFB presented no evidence of any complaining creditor to support
its assertion of fraud on creditors. Mr. McElroy notes that the
record is uncontradicted that no bank representative ever
complained to Campbell that Campbell or VFI had misled them, or
kept any information from them, in connection with the spin-off.
"No bondholder ever complained that it was defrauded in the bond
offering, much less by disclosures made by Campbell before the
spin-off 15 months earlier."
Mr. McElroy points out that no evidence was presented at trial
that any of the public statements about the spin-off by Campbell
or for which Campbell is responsible under the securities laws --
including in the Form 10 -- were knowingly false or made with
reckless indifference to their truth or falsity. Nor did
Campbell fraudulently or recklessly deprive creditors or the
markets of any material information about VFI.
Based on the totality of the evidence presented, Mr. McElroy
asserts, Campbell did not act with motive or intent to delay,
hinder or defraud VFI's creditors in connection with the spin-
off.
Illegal Dividend Claim
A New Jersey corporation may not make a "distribution" -- a
transfer of money or property to shareholders in respect of their
shares -- if, after giving effect to the distribution, the
corporation would be unable to pay its debts as they come due in
the ordinary course of its business, or the corporation's total
assets would be less than its total liabilities. VFB has failed
to establish a violation of this statute, Mr. McElroy says.
According to Mr. McElroy, VFB failed to prove that the incurrence
of debt by VFI was a "distribution" to Campbell, because the
evidence showed that the transfer to Campbell was made not on
account of Campbell's status as a VFI shareholder, but as part of
a commercial transaction in which value was exchanged by both
Campbell and VFI -- in the form of the spun-off businesses
retained by VFI and the loan proceeds retained by Campbell. In
addition, VFI's GAAP balance sheet demonstrated solvency
sufficient to satisfy the statutory safe harbor of N.J. Stat.
Ann. Section 14A:7-14.1(3). And in any event, VFB failed to
establish the existence of a creditor with an unpaid claim that
pre-existed the spin-off, which is required.
Breach of Fiduciary Duty Claim
VFB seeks to hold Campbell liable for aiding and abetting a
breach of fiduciary duty to creditors by the pre-spin-off
directors of VFI, which at the threshold requires VFB to
establish the existence of a fiduciary duty by those directors
owing to prospective stakeholders in VFI, and a breach thereof.
As a matter of law, Mr. McElroy says, those directors' sole
fiduciary duty ran to Campbell, to operate VFI in the best
interests of Campbell and its shareholders. Moreover, the
directors could have owed no duty to VFI's creditors unless VFI
was insolvent, which VFB failed to prove.
VFB also failed to prove that any pre-spin director of VFI acted
other than in a manner believed to be in the best interests of
Campbell and VFI, relying in good faith on financial records and
reports prepared by management. Therefore, Mr. McElroy contends,
the directors have no liability in any event under N.J. Stat.
Ann. Section 14A:6-14(2).
Alter Ego Claim
VFB seeks to hold Campbell liable for VFI's debts on an alter ego
theory. The evidence showed that VFI was established and
operated after the spin-off as a separate, independent public
corporation. Mr. McElroy asserts that VFB failed to prove
either: (i) that Campbell so dominated VFI following the spin-off
that VFI could be deemed a mere conduit; or (ii) that Campbell
abused the privilege of incorporation by using VFI to perpetrate
a fraud or injustice, or otherwise to circumvent the law, both of
which elements VFB had the burden of proving to recover under an
alter ego claim.
Equitable Subordination
Equitable subordination is not an unusual remedy that should be
applied only in limited circumstances. According to Mr. McElroy,
VFB failed to prove that Campbell engaged in inequitable conduct
or injured creditors so that its claims against VFI, or its
contingent interests in VFI, should be equitably subordinated.
Release and Indemnity in
Separation and Distribution Agreement
In a Separation and Distribution Agreement, VFI released Campbell
from any claims arising from acts or events on or before the
Spin-off Date, including "actions or decisions taken or omitted
to be taken in connection with, and the other activities relating
to, the structuring and implementation of" the spin-off. Mr.
McElroy asserts that the release is enforceable against VFB, as
successor to VFI, and bars VFI's claims.
Campbell's attorneys are Neal C. Belgam, Esq., and Dale R. Dube,
Esq., at Blank Rome, LLP, in Wilmington, Delaware; Richard P.
McElroy, Esq., and Mary Ann Mullaney, Esq., at Blank Rome, LLP,
in Philadelphia, Pennsylvania; and Michael W. Schwartz, Esq.,
David C. Bryan, Esq., and Forrest G. Alogna, Esq., at Wachtell,
Lipton, Rosen & Katz, in New York. (Vlasic Foods Bankruptcy News,
Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000)
W.R. GRACE: Wants Exclusive Plan-Filing Period Extended to May
--------------------------------------------------------------
W.R. Grace & Co. and its debtor-affiliates filed their Disclosure
Statement and Plan of Reorganization on November 13, 2004. While
not a joint plan, the Official Committee of Equity Holders has
indicated general support for the Plan. The Official Committee of
Unsecured Creditors has only one open issue of significance to be
resolved. However, the Asbestos Committees and the Future
Claimants Representative do not currently support the Plan.
The Plan is not a consensual plan. Thus, the Debtors, the
Asbestos Parties, the Equity Committee and the Creditors
Committee continue to discuss the potential for a consensual plan.
David W. Carickhoff, Esq., at Pachulski, Stang, Ziehl, Young,
Jones & Weintraub P.C., in Wilmington, Delaware, tells the U.S.
Bankruptcy Court for the District of Delaware that the Debtors
need an opportunity to complete the confirmation process, respond
to objections, and continue to negotiate with the asbestos parties
regarding Plan amendments, without the distraction of addressing
competing plans.
Accordingly, the Debtors ask the Court to extend:
* their exclusive period for filing a plan through and
including May 24, 2005; and
* their exclusive period to solicit votes on that plan through
and including July 24, 2005.
The Court will convene a hearing on January 24, 2005, to consider
the Debtors' request. By application of Del.Bankr.LR 9006-2, the
Exclusive Filing Deadline is automatically extended through the
conclusion of that hearing.
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 Company and its debtor-
affiliates 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, Young, Jones & Weintraub, represent the Debtors in
their restructuring efforts. (W.R. Grace Bankruptcy News, Issue
No. 76; Bankruptcy Creditors' Service, Inc., 215/945-7000)
WORLD ASSOCIATES: Liquidity Problem Raises Going Concern Doubt
--------------------------------------------------------------
World Associates Inc.'s condensed consolidated financial
statements show that the Company has a negative cash flow from
operating activities of $240,470 and a working capital deficiency
of $1,316,562. Excluding the one-time gain on settlement of
litigation of $4,632,230 the Company had a net loss of $912,436
for the months ended September 30, 2004. These matters raise
substantial doubt about the Company's ability to continue as a
going concern.
The Company anticipates selling its restricted common stock, its
preferred stock, or obtaining other financing from investors or
financial institutions. The Company has some homes on the market
that it anticipates selling together with a property it owns in
Yucca Valley, California that is also on the market for sale. The
Company has a current appraisal on the Yucca Valley for
$1,250,000. Finally, the Company anticipates refinancing the
Yucca Valley property to provide cash for operations. The Company
expects to be able to continue its operations with the expectation
of earning operating revenues and preserving its asset base, but
the timing of events is uncertain and the Company will face cash
flow issues until its sales revenue begins.
The real estate market in California has slowed during the last
several months. Although it is still showing excellent health, it
is not performing at the record breaking pace of a few months ago.
This has slowed the rate at which the Company can expect to sell
its homes putting pressure on cash flows.
The Company has been able to obtain the financing necessary to
provide for construction financing, land acquisition and operating
capital to date by selling its restricted common stock, entering
into joint ventures with investors and from construction and other
lenders to date, and they remain the best sources of financing
until operations generate sufficient income to cover operational
costs. Company employees and consultants also continue to
contribute by accruing some salary or fees rather than require
that they be paid currently.
The Company will consider other investments to complement
Superior's business in the future, but its current priority is
developing the real property. Superior acquired and is developing
factory-built homes on infill locations, the "Infill Housing
Program". The properties in the Infill Housing Program are joint
ventures. Other parcels of land acquired by Superior are being
processed with the local municipal officials to approve a plan of
development. The lots are located east of Los Angeles in the
Riverside County area and north of Los Angeles in the Los Angeles
County area.
World Associates, Inc., is engaged in the real estate business
through its wholly owned subsidiary, Superior Real Estate, Inc.
* Foley & Lardner Has New Address in Detroit
--------------------------------------------
Effective December 6, 2004, Foley & Lardner LLP relocated its
Detroit office to:
FOLEY & LARDNER LLP
One Detroit Center
500 Woodward Avenue, Suite 2700
Detroit, Michigan 48226
Telephone (313) 234-7100
Facsimile (313) 234-2800
Judy A. O'Neill, Esq., and Laura Eisele, Esq., currently represent
Venture Holdings Company LLC, in its chapter 11 restructuring
before the U.S. Bankruptcy Court for the Eastern District of
Michigan.
Foley & Lardner attorneys regularly counsel clients in the
negotiation and implementation of plans of reorganization, out-of-
court workouts and leveraged buyouts, collection matters, and the
assumption, assignment and performance of executory contracts.
They also assist creditors in obtaining early payment of claims,
handling fraudulent and preferential transfer issues, and
enforcement of security interests. For additional information
about the Firm, see http://www.foley.com/
* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
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.
*********
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*********
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.
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*** End of Transmission ***