/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/041215.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 15, 2004, Vol. 8, No. 276 Headlines AAL PROPERTIES INC: Case Summary & 20 Largest Unsecured Creditors ACCURATE WEB INC: Case Summary & 20 Largest Unsecured Creditors ADELPHIA COMMS: Selling Security Business to Innova for $38.2 Mil. ALERIS INTL: S&P Upgrades Ratings After Commonwealth Merger ALLIANCE IMAGING: S&P Places B+ Rating on $410 Million Term Loan ALPHARX INC: Auditors Raises Going Concern Doubt AMERISERV FINANCIAL: Shareholders Okay 2nd Sale of Common Stock AMES DEPARTMENT STORES: Who Gets What Under the Chapter 11 Plan AMES DEPARTMENT: Court Okays Rocky Hill Property Sale to T. Briggs ARCH COAL: S&P Rates Proposed $700M Revolving Facility at BB+ ATA AIRLINES: Wilmington Trust Asks Court for Adequate Protection ATHLETE'S FOOT: Hires Angel & Frankel as Bankruptcy Counsel ATHELETE'S FOOT: Look for Bankruptcy Schedules on Jan. 24 BIO-RAD LAB: Selling $200 Million of Senior Subordinated Notes BIO-RAD LAB: Moody's Rates $200M Sr. Unsec. Sub. Notes at Ba3 BIO-RAD LAB: S&P Rates Proposed $200M Subordinated Notes at BB- BOMBARDIER INC: S&P Places Ratings on CreditWatch Negative BROOKS FORD INC: Voluntary Chapter 11 Case Summary CANTERBURY CONSULTING: Nasdaq Will Delist Common Stock on Friday CATHOLIC CHURCH: Spokane Diocese Will Keep Victims' Names Secret CHESAPEAKE ENERGY: Gets Requisite Consents to Amend Indenture CITICORP MORTGAGE: Fitch Junks Series 1990-18 Class B Issue CONEXANT SYSTEMS: Expects $50-Mil Consumption in Channel Inventory CSFB HOME: S&P Affirms BB Rating on Series 2003-4 Class B-2 Certs. DAN RIVER: Selling Engineered Products Biz for $9.37 Million DATATEC SYSTEMS: Plans to Reorganize Under Chapter 11 DELPHI CORP: Fitch Downgrades Rating on Preferred Trust to BB+ DISTINCTIVE DEVICES: Losses & Deficit Raise Going Concern Doubts DPL INC: S&P Affirms Low-B Ratings After SEC Filing Compliance ENRON CORP: Objects to Banca Nazionale's Multi-Million Claims FEDERAL-MOGUL: Asbestos Property Damage Committee Objects to Plan FIRST HORIZON: S&P Places Low-B Ratings on 36 Certificate Classes GENERAL MILLS: Will Use Snack Ventures Deal Proceeds to Trim Debt GLOBAL CROSSING: Dist. Court Okays $325-Mil Securities Settlement GLOBALNET CORP: Independent Accountants Raises Going Concern Doubt GOODMAN GLOBAL: Moody's Junks $450M Senior Subordinated Notes GRACE INDUSTRIES: Wants Access to $1.4 Million of Cash Collateral GRACE INDUSTRIES: Section 341(a) Meeting Slated for January 3 GREEN TREE FINANCIAL: Moody's Junks Twelve Certificate Classes HANOVER DIRECT: Gets Delisting Notice from American Stock Exchange HAYES LEMMERZ: Wants to Correct Arithmetic Error in Modified Plan HUFFY CORP: Has Until Jan. 11 to Make Lease-Related Decisions HUFFY CORP: Committee Taps PwC Corporate Finance as Fin'l Advisor IMAX CORP: Settles Litigation with United Cinemas' Former Owners INN OF THE MOUNTAIN: 2nd Quarter Revenues Up 12.6% from Last Year INTL IMAGING: Losses & Deficits Raise Going Concern Doubts IWO ESCROW: S&P Junks $150M Senior Secured & $75M Discount Notes KAISER ALUMINUM: Selling Prospect Plains Lot to Prospect Crossing LAND O'LAKES: Moody's Affirms Ba2 Senior Implied Rating MARINER HEALTH: Subsidiary Plans to Prepay Mortgages to Omega MIRANT CORP: Failed to Make Scheduled Payment Despite Court Order MIRANT CORPORATION: Employs Piper Rudnick as Special Counsel MISSISSIPPI AUTO RENTAL: Voluntary Chapter 11 Case Summary NEW CENTURY: Extends 3.50% Convertible Sr. Debt Offer to Dec. 23 NRG ENERGY: Offering $400 Mil. Convertible Perpetual Pref. Stock NOVA CHEMICALS: Board Approves Rule 10b5-1 Stock Trading Plans OVERSEAS SHIPHOLDING: Moody's Reviewing Ratings & May Downgrade PARAMOUNT RESOURCES: S&P Places Ratings on CreditWatch Negative PIUTE PIPELINE: Wants to Hire Bennington as Bankruptcy Counsel PIUTE PIPELINE: Section 341(a) Meeting Slated for January 4 PREMIER PROPERTIES: Voluntary Chapter 11 Case Summary PRINTPACK HOLDINGS: S&P Revises Outlook on BB Ratings to Positive QUIK COMMISSIONS: Will Distribute Gibraltar Shares to Creditors RCN CORP: Court Allows $3 Million IBM Patent Infringement Claim RELIANCE GROUP: Creditors Committee Files Amended Plan for RFSC RHODES INC: Court Approves $88 Million DIP Credit Facility SOMERSET APTS: Case Summary & 3 Largest Unsecured Creditors SPHERIS INC: S&P Junks Proposed $125 Million Subordinated Notes SPIEGEL INC: Wants Court Nod on Lease Satisfaction Agreement TEMBEC INC: Will Temporarily Suspend Activities at Kapuskasing TERRA INDUSTRIES: Anglo American to Complete Sale of Common Stock TERRACE OF SHREVEPORT: Case Summary & Largest Unsecured Creditors TIAA CMBS: S&P Affirms Low-B Ratings on Six Certificate Classes TRIMAS CORP: High Debt Leverage Prompts S&P to Review Ratings U.S. CAN: S&P Affirms B Corporate Credit Rating After Review UNITED AIRLINES: Cuts Compensation & Benefits to Save $12 Million UNITED AIRLINES: Pension Rep. Wants to Join in Sec. 1113 Discovery UNITED AIRLINES: Names David Wing Vice President & Controller USURF AMERICA: Names Craig Cook Vice President of Operations WAYLAND INVESTMENT: Revolver & Sr. Subordinated Notes Paid in Full WESCORP ENERGY: Accumulated Deficit Spurs Going Concern Doubt * Upcoming Meetings, Conferences and Seminars ********* AAL PROPERTIES INC: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: AAL Properties Inc. dba Bluegrass Senior Services 156 Haven Hill Road Shelbyville, Kentucky 40066 Bankruptcy Case No.: 04-31061 Type of Business: The Company operates a nursing home for senior citizens. Chapter 11 Petition Date: December 8, 2004 Court: Eastern District of Kentucky (Frankfort) Judge: William S. Howard Debtor's Counsel: Neil C. Bordy, Esq. Seiller & Handmaker LLP 2200 Meidinger Tower 462 South 4th Avenue Louisville, Kentucky 40202-3446 Tel: (502) 584-7400 Financial Condition as of December 7, 2004: Total Assets: $2,600,000 Total Debts: $2,266,327 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Southern Group $33,489 104 Waverely Drive Bardstown, Kentucky 40004 Internal Revenue Service $16,284 Attn Chief Special Procedures Function PO Box 1706 Stop 510 Louisville, Kentucky 40201 Premium Assignment $5,138 PO Box 3100 Tallahassee, Florida 32315 Kentucky Revenue Cabinet $3,040 Blackburn Hundley $2,600 F&S Pest Control $1,625 AIK Company $1,440 Kentucky Revenue Cabinet $1,247 Smith & Company $1,106 Shelbv County Revenue Community $664 Kentucky Utilities $623 Capital One Bank $493 Tyco $331 News Sentinel $323 BellSouth $294 Johnson Diversey $280 Water Company $246 Atom Energy $245 Jewish Hospital $245 Hardec's $209 ACCURATE WEB INC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Accurate Web, Inc. 32 Windsor Avenue Central Islip, New York 11722 Bankruptcy Case No.: 04-87841 Chapter 11 Petition Date: December 13, 2004 Court: Eastern District of New York (Central Islip) Debtor's Counsel: Richard F Artura, Esq. Reno & Artura 150 East Sunrise Highway Lindenhurst, New York 11757 Tel: (631) 226-5400 Fax: (631) 226-5498 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ GE Capital Corporation $1,200,000 44 Old Ridgebury Road Danbury, Connecticut 06810 Internal Revenue Service Trade Debt $225,000 10 Metro Tech Center 625 Fulton Street Brooklyn, New York 11207 North Fork Bank $150,000 245 Love Lane Mattituck, New York 11952 Reckson FS Limited Partnership $133,000 225 Broadhollow Road Melville, New York 11747 American Express $50,090 Sun Chemical Corporation $38,306 Athens Paper $32,474 Keyspan Energy Delivery $26,350 H.A. Metzger, Inc. $21,305 Three Dimensional Chemical $19,738 LIPA $13,599 Spiel Associates, Inc. $12,500 New York State Insurance Fund $12,218 Horizon Healthcare $11,757 Wallack Freight Lines, Inc. $11,200 Triumph Container Inc. $9,200 Wikoff Color Corporation $9,159 Basysprint $7,483 Berkshire-Westwood Graphic $6,086 MetLife $5,938 ADELPHIA COMMS: Selling Security Business to Innova for $38.2 Mil. ------------------------------------------------------------------ Adelphia Cable Partners, LP, and West Boca Acquisition Limited Partnership -- the Holding Company -- are the partners of Starpoint Limited Partnership. Adelphia Cable is the general partner while West Boca is the limited partner. Adelphia Cable and West Boca are indirect subsidiaries of Adelphia Communications' debtor-affiliate ACC Operations, Inc. Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher, in New York, relates that Starpoint and its three subsidiaries, Cable Sentry Corporation, Coral Security, Inc., and Westview Security, Inc. -- the Security Business Debtors -- run the residential and commercial security business of the ACOM Debtors in New York, Florida and Pennsylvania. As part of their efforts to exit non-core lines of business, the ACOM Debtors initiated a marketing and sale process for substantially all of the assets of the Security Business Debtors. In April 2004, the Debtors, with their financial advisor, Lazard Freres & Co. LLC, undertook a marketing effort to solicit interest in the Security Business. The Debtors and Lazard contacted 68 potential strategic and financial interested parties. Forty-one of the 68 parties executed confidentiality agreements and engaged in various levels of due diligence, of which 15 submitted written indications of interest. After receiving indications of interest, the Debtors engaged in preliminary discussions with a select number of bidders that had submitted the most attractive initial indications of interest. After evaluating and scrutinizing the indications of interest, the Debtors preliminarily concluded, in an exercise of their business judgment, that Innova Security Solutions, LLC's offer for the Security Business was the highest and otherwise best offer. To facilitate further negotiations with Innova, the Debtors asked the Court to approve an expense reimbursement letter on October 4, 2004. The Letter provided for the reimbursement of Innova's expenses in connection with the negotiation of a definitive sale agreement with the Debtors under certain circumstances. The Court approved the Expense Letter on October 22, 2004. Both the Expense Letter and Court Order are filed under seal. Negotiations with Innova ultimately resulted in the parties' entry into a stalking horse agreement on November 19, 2004. The ACOM Debtors now ask the Court to approve the sale of the Security Business to Innova pursuant to the terms of the Stalking Horse Agreement or alternatively to a Successful Bidder, free and clear of liens, claims, encumbrances and interests. A full-text copy of the Asset Purchase Agreement is available for free at: http://bankrupt.com/misc/InnovaSecurityPurchaseAgreement.pdf The salient terms of the Asset Purchase Agreement are: A. Consideration The consideration for the Security Business is the Purchase Price and the assumption of the Assumed Liabilities. The Purchase Price is estimated at about $38,200,000, and will equal: (i) the product of 34 multiplied by the Performing Recurring Monthly Revenue as of the Closing Date; plus (ii) the product of 18 multiplied by the Third Party Monitoring RMR as of the Closing Date; plus (iii) Net Non-Cash Working Capital as of the Closing Date if the same is a positive number; or minus (iv) the absolute value of Net Non-Cash Working Capital as of the Closing Date if the same is a negative number. The Purchase Price is subject to limited adjustment 90 days after the Closing. On account of the Purchase Price, Innova delivered a $3,820,244 deposit. B. Purchased Assets The Purchased Assets will include: -- Bulk and Commercial Agreements; -- Individual Customer Agreements; -- Inventory; -- Owned Equipment, excluding Excluded Software; -- Leased Equipment; -- Real Property Agreements; -- Vendor Agreements; -- Prepaid Expenses and other assets; -- security deposits; -- Work in Progress; -- Third Party Monitoring Agreements; -- intangible rights and property; -- all licenses and permits for the Security Business; and -- other specified assets except the Excluded Assets. C. Assumed Liabilities As of the Closing Date, Innova will assume these liabilities: -- any liability relating to actions or omissions take or not taken by Innova at any time after the Closing in connection with the ownership or use of the Purchased Assets; -- the Current Liabilities incurred by the Debtors in the ordinary course of business relating to the Purchased Assets that remain unpaid at and are current under the Generally Accepted Accounting Principles as of the Closing Date, excluding the Debtors' obligation to cure under any assumed agreements; -- any liability to the Debtors' customers they incurred in ordinary course for non-delinquent orders outstanding as of the Closing Date; -- any liability arising after the Closing Date under the Assumed Agreements; -- any liability to the Debtors' regular employees on the Closing Date, and the M&A Qualified Beneficiaries in accordance with the Stalking Horse Agreement; and -- 50% of any taxes attributable to the transactions contemplated by the Transaction Agreements and any taxes accruing after the Closing Date with respect to Innova's ownership of the Purchased Assets or operation of the Business after the Closing Date. D. Closing The Closing is scheduled 30 days after the date as of which the Sale Order is entered or at another time and place as the parties may agree. E. Termination The Stalking Horse Agreement may be terminated prior to the Closing: (i) by mutual consent of the parties; (ii) by either party, if the Court has not entered the Bidding Procedures Order by December 18, 2004, and the Sale Order by February 15, 2005; (iii) by either party, upon 30 days' written notice, if the non-terminating party is in material breach of the Stalking Horse Agreement and does not cure the breach within the 30 days; (iv) by either party, if the Closing will have not occurred within 30 Business Days of the entry of the Sale Order because any of the conditions to Closing are not satisfied or waived; and (v) by the Security Business Debtors, in the event a Competing Bid is accepted that is a higher or otherwise better offer in accordance with the Bidding Procedures Order. F. Indemnification The Security Business Debtors agree, jointly and severally, to indemnify Innova and defend and reimburse Innova in connection with: (i) any breach of a representation, warranty or covenant; and (ii) the Circle Arbitration. The indemnification obligation is limited to the Closing Holdback Deposit minus certain payments except as set forth in the Stalking Horse Agreement. The indemnification obligations terminate on the six-month anniversary of the Closing Date. The decision to sell the Security Business is based on the Debtors' sound business judgment and must be approved, Mr. Shalhoub says. While in the process of identifying and exiting non-core lines of business, the Debtors determined that the Security Business is not critical to their reorganization because the Business' nature is well outside the scope of the Debtors' core business. The Debtors also believe that the sale of the Security Business will provide a greater return to stakeholders than a reorganization involving, or other administration of, the Security Business. The Debtors believe that the consideration to be paid by Innova, or if applicable, a Successful Bidder, is fair and reasonable. Mr. Shalhoub explains that the Purchase Price was the subject of extensive negotiations and represents that highest offer after a thorough marketing process. Moreover, the auction process will dispel any doubt as to the reasonableness of the consideration. Mr. Shalhoub contends that it is appropriate that the Security Business be sold free and clear of encumbrances pursuant to Section 363(f) of the Bankruptcy Code, except for Permitted Liens and the Assumed Liabilities expressly assumed by a Successful Bidder, with any of the liens, claims, encumbrances or interests to attach to the net sale proceeds of the Security Business. The Debtors are not aware of any valid encumbrances on any property being sold under the Stalking Horse Agreement. Therefore, the sale of the Security Business satisfies Section 363(f)(3) of the Bankruptcy Code, Mr. Shalhoub concludes. Additionally, each of the parties purportedly holding an encumbrance on the Security Business could be compelled to accept monetary satisfaction of the interests satisfying Section 363(f)(5). Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALERIS INTL: S&P Upgrades Ratings After Commonwealth Merger ----------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Cleveland, Ohio-based Aleris International, Inc., (formerly IMCO Recycling Inc.) to 'B+' from 'B'. It also raised its rating on the company's senior secured debt to 'B' from 'B-' and removed both ratings from CreditWatch where they were placed with positive implications on June 17, 2004. The outlook is stable. At the same time, Standard & Poor's affirmed its 'B-' rating on Aleris' $125 million senior unsecured notes due 2014. Standard & Poor's also withdrew its ratings on Commonwealth Industries, Inc. All debt at Commonwealth has been repaid. These actions follow the announcement that IMCO and Commonwealth have completed their previously announced merger. The combined company is now called Aleris International, Inc. "The upgrade of Aleris' ratings reflects the improvement in the company's business and financial profiles due to its merger with Commonwealth," said Standard & Poor's credit analyst Paul Vastola. Ratings on Aleris take into account its below-average business profile due to its exposure to highly cyclical and competitive industries, volatile commodity pricing, and thin margins. The financial profile is also aggressive. With aluminum metal recycling capabilities, Aleris is a vertically integrated manufacturer of aluminum sheet for distributors and the transportation, construction, and consumer durables end-use markets. International operations generate about 15% of revenues. The company is expected to achieve annual cost synergies of approximately $25 million within 18 to 24 months from procurement savings, the integration of complementary operations, selling, general and administrative cost reductions, and the application of best practices at plant operations. ALLIANCE IMAGING: S&P Places B+ Rating on $410 Million Term Loan ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B+' debt rating and '3' recovery rating to Alliance Imaging Inc.'s $410 million term loan C due 2011. The debt rating is the same as the company's 'B+' corporate credit rating; this, and the '3' recovery rating indicate that investors should expect meaningful recovery of principal (50%-80%) in the event of a bankruptcy. The proceeds of this loan combined with the proceeds of a $150 million senior subordinated note issuance will be used to repay the company's existing $256 million term loan C and retire $260 million of outstanding 10 3/8% senior subordinated notes due 2011, which were tendered on Nov. 30. Because of a premium on the tendered debt and issuance fees, the transaction will add $44 million of incremental debt for total pro forma debt of $595 million (including about $10 million in leases). "Alliance Imaging Inc.'s ratings reflect the highly fragmented and competitive nature of the medical imaging industry, the company's concentration in mobile MRI facilities, and the risk of changes to reimbursement," said Standard & Poor's credit analyst Cheryl Richer. These concerns overshadow favorable industry demographics, the company's national presence, and its industry reputation for quality. The rating is also supported by the company's positive free cash flow generation and strong financial metrics. With 481 diagnostic imaging systems (including 362 MRI systems and 53 PET or PET/CT systems) and more than 1,000 customers in 43 states, Anaheim, California-based Alliance is the largest U.S. mobile scan provider, offering MRI scan services to hospitals based on the number of scans or the length of use. It also offers PET services to large hospitals with oncology practices. The company's competitors include InSight Health Service Corp., MedQuest, Inc., and Radiologix, Inc. While mobile operations provide higher margins, they add risk to the portfolio; about one-third of contracts renew annually, and competition centers largely on price. Over the past couple of years, contract renewals have been even more uncertain as attractive vendor-finance arrangements have increased the likelihood that higher volume customers will acquire their own imaging equipment. Alliance has grown through small acquisitions and contract-linked equipment purchases. The company is rationalizing its mobile fleet in an attempt to reduce its revenue gap, which it defines as (annualized) contractual revenues lost net of (annualized) contractual revenues gained. In addition, the company has begun to diversify into fixed-site centers, and plans to add between 12-15 new sites per year. Its strategy is to partner with hospitals that offer a known and relatively secure level of patient throughput. The fixed-site initiative also effectively replaces riskier contract-based relationships with ones in which both parties are invested in the success of the venture. In addition, Alliance is adding PET/CT facilities to capitalize on the expanding number of indications reimbursed by third parties; the average number of PET systems in its fleet grew to 50 in the third quarter of 2004 from 41 in the third quarter of 2003. Alliance receives about 88% of revenues from wholesale (hospital and health care) providers. Although its sales profile minimizes its direct exposure to Medicare and provides a measure of revenue visibility, future reductions in pricing are possible given ongoing pressures on health care costs. In November 2004, the Center for Medicare and Medicaid Studies announced a 21% reduction in PET hospital reimbursement rates effective Jan. 1, 2005. ALPHARX INC: Auditors Raises Going Concern Doubt ------------------------------------------------ AlphaRx Inc.'s net losses for the year ended September 30, 2004, increased to $1,772,840 from $1,414,597 for the comparable period ended September 30, 2003, an increase of $358,243 or 25%. This increase in net losses is principally attributed to an increase in the marketing activities for the product Flexogan when compared to the prior year. As of September 30, 2004, the Company had working capital of $2,183,913 compared to a working capital deficiency of $556,784 at September 30, 2003. The independent auditors' report for the year ended Sept. 30, 2004, includes an explanatory paragraph stating that our recurring losses from operations and working capital levels raise substantial doubt about our ability to continue as a going concern. Since inception, AlphaRx has financed operations primarily from the issuance of common stock and promissory notes and expects to continue this practice to fund its ongoing activities. AlphaRx currently does not have sufficient resources to complete the commercialization of all of its proposed products or to carry out its business strategy. Therefore, it will likely need to raise additional capital to fund its operations sometime in the future. There is no assurance that any financing will be available when needed. Any additional equity financings may be dilutive to the Company's existing shareholders, and debt financing, if available, may involve restrictive covenants on the Company's business. AlphaRx, Inc., is a drug delivery company specializing in the development of innovative therapeutic products for the pharmaceutical and consumer health care market. Its core competence is in the development of novel drug formulations for therapeutic molecules or compounds that have exhibited poor G.I. absorption due to poor solubility or have yet be administerable to the human body with an acceptable delivery method. Its drug delivery system is versatile and offers significant flexibility in the development of suitable dosage formulations (i.e. oral, topical or parenteral) to meet the requirements of specific drug molecules. During 2003 the Company also started to focus on commercialization of its products commencing with sales of Flexogan in the Canadian market. It acquired the worldwide exclusive commercialization rights of VT-1 from Select Therapeutics, Inc., in January 2003. AMERISERV FINANCIAL: Shareholders Okay 2nd Sale of Common Stock --------------------------------------------------------------- AmeriServ Financial, Inc., (Nasdaq: ASRV) received shareholder approval to close a second tranche of a private offering of common stock that will result in an additional $13.2 million in new capital. The first tranche -- totaling $12.6 million -- was completed on Oct. 8. The combined $25.8 million in capital raised through the two-tranche private placement of common stock will be used to strengthen AmeriServ's balance sheet. Lehman Brothers, Inc., acted as exclusive placement agent for the financing. Shareholders approved the second closing during a specially assembled meeting held in Johnstown on Dec. 10. The vote was necessary because of the size of the demand for AmeriServ stock after the initial opening of the private offering. Under NASDAQ rules, the issuance of more than 20 percent of outstanding stock in a private placement requires shareholder approval. The approval for the second sale -- representing the amount above 20 percent -- was received during the Dec. 10 meeting. The vote by AmeriServ shareholders is a vote of confidence in AmeriServ's direction, according to President and CEO Allan R. Dennison. "Leading investors have demonstrated their confidence in AmeriServ's future through their commitment of significant funds," said Mr. Dennison. "With this vote our shareholders agree that the new capital will accelerate AmeriServ's turnaround progress by eliminating or reducing structural impediments to our growth." AmeriServ will use the net proceeds of the private placement to significantly strengthen its balance sheet. The specific actions include: -- a $125 million reduction in the level of high-cost long-term borrowings from the Federal Home Loan Bank -- FHLB -- of Pittsburgh, -- a $15.5 million redemption of the AmeriServ Trust Preferred Stock, and -- an exit from lines of business which are typically not associated with a community bank. These actions will result in a one-time after tax charge of approximately $10 million during the current quarter. While the restructuring will create a loss for the fourth quarter and for the full year 2004, AmeriServ expects to return to a significantly improved level of profitability in the first quarter of 2005, according to Dennison. "We remain committed to returning to our community bank roots," AmeriServ Chairman Craig G. Ford told shareholders at the Dec. 10 meeting. "This successful private placement makes AmeriServ a stronger community bank for our region, our employees and our shareholders." About the Company AmeriServ Financial, Inc., is the parent of AmeriServ Financial Bank and AmeriServ Trust & Financial Services Company in Johnstown, AmeriServ Associates of State College, and AmeriServ Life Insurance Company. * * * As reported in the Troubled Company Reporter on Oct. 13, 2004, Fitch Ratings revised the Rating Outlook of AmeriServ Financial, Inc., and AmeriServ Financial Bank to Positive from Negative. At the same time, Fitch has upgraded the rating of AmeriServ Capital Trust I to 'B-' from 'CCC+' with a Rating Outlook Positive. AMES DEPARTMENT STORES: Who Gets What Under the Chapter 11 Plan --------------------------------------------------------------- The Chapter 11 Plan of Ames Department Stores, Inc., and its debtor-affiliates groups claims against and equity interests in the Debtors into four classes: Class Description Treatment Under the Plan ----- ----------- ------------------------ N/A Administrative Paid in full, in cash Expense Claims Recovery: 100% Estimated Allowed Amount: $85,570,988 N/A Priority Tax Paid in full, in cash Claims Recovery: 100% Estimated Allowed Amount: $10,000,000 1 Secured Claims On the Effective Date, or as soon thereafter as is reasonably practicable, each holder of an Allowed Secured Claim will receive, at the option of the Plan Implementation Party: (1) Cash in an amount equal to 100% of the unpaid amount of the Allowed Secured Claim; (2) the proceeds of the sale or disposition of the Collateral securing the Allowed Secured claim to the extent of the value of the holder's secured interest in the Allowed Secured Claim, net of the costs of disposition of that Collateral; (3) the Collateral securing the Allowed Secured Claim; (4) the treatment that leaves unaltered the legal, equitable, and contractual rights to which the holder of the Allowed Secured Claim is entitled; or (5) other distribution as necessary to satisfy the requirements of the Bankruptcy Code. Impaired Recovery: 100% Estimated Allowed Amount: $0 2 Priority Non-Tax On Effective Date or as soon Claims thereafter as is reasonably practicable, the full amount will be distributed. Impaired Recovery: 100% Estimated Allowed Amount: $0 3 General Unsecured Claimants, subject to Section Claims 6.3(a) of the Plan, will receive their Pro Rata Share of Available Cash, but not to exceed the full amount of the Allowed Claim. Impaired Recovery: pro rata distribution of all liquidation proceeds, including collections realized on the settlement or resolution of Avoidance Actions. Estimated Allowed Amount: $802,000,000 4 Equity Interests On the Effective Date, all Equity Interests of Ames will be canceled, and one new share of Ames' common stock will be issued to a custodian designated by Ames. Subject to Section 6.3(a) of the Plan, each holder of an Equity Interest will not receive any recovery. All common stock of Ames will be cancelled on the date Ames is dissolved. Recovery: 0% Impaired Ames Department Stores filed for chapter 11 protection on August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMES DEPARTMENT: Court Okays Rocky Hill Property Sale to T. Briggs ------------------------------------------------------------------ Ames Department Stores received no competing bids for the real property with a corporate office building located at 2418 Main Street in Rocky Hill, Connecticut. As reported in the Troubled Company Reporter on October 14, 2004, the Debtors inks an agreement to sell the Rocky Hill Property to Thomas Briggs for $3.7 million subject to higher and better offers. Since there were no competing bids, the Debtors declared the offer from Thomas Briggs as the highest and best bid for the Property. At the Sale Hearing, Judge Gerber approves the Debtors' Purchase Agreement with Mr. Briggs and authorizes the Debtors to consummate the sale of the Rocky Hill Property to Mr. Briggs for $3.7 million, free and clear of any liens. Ames Department Stores filed for chapter 11 protection on August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their reditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARCH COAL: S&P Rates Proposed $700M Revolving Facility at BB+ ------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'BB+' bank loan rating and '1' recovery rating to Arch Coal Inc.'s proposed $700 million revolving credit facility maturing in 2009. The 'BB+' bank loan rating is one notch above the corporate credit rating; this and the '1' recovery rating indicate a high expectation of full recovery of principal in the event of a default. The new credit facility will replace Arch Coal's existing $350 million revolving credit facility that matures in 2007. Standard & Poor's also affirmed its existing ratings on Arch Coal and subsidiary Arch Western Finance LLC. The outlook is stable. "The ratings on Arch Coal reflect the company's vast and diversified base of coal reserves and strong industry conditions, offset by difficult operating conditions, particularly in the east, and a very aggressive financial profile," said Standard & Poor's credit analyst Dominick D'Ascoli. St. Louis, Missouri-based Arch Coal is one of the top U.S. coal producers, with 2003 production of around 126 million tons, pro forma for the recent acquisition of the Triton Coal Co.'s North Rochelle, Powder River Basin mine in Wyoming, and the remaining 35% interest in Canyon Fuel Co. With these acquisitions, Arch Coal accounted for approximately 12% of total 2003 U.S. coal production. The company operates numerous mines in the eastern and western coal producing regions of the U.S. ATA AIRLINES: Wilmington Trust Asks Court for Adequate Protection ----------------------------------------------------------------- Prior to its bankruptcy petition date, ATA Holding Corporation financed the acquisition or lease of airframes, aircraft engines and related parts through a number of transactions involving Enhanced Equipment Trust Certificate programs. Wilmington Trust Company acted as loan trustee and as subordination agent with regard to the 2002-1, 2001-1, 1996-1 and 1997-1 series of ATA EETC programs. Wilmington Trust holds interests in 21 aircrafts presently used and held by ATA Airlines and its debtor-affiliates pursuant to the EETC programs: Model Quantity EETC series ----- -------- ----------- Boeing 737-832 9 2002-1 Boeing 757-200 4 2001-1 Boeing 757-23N 3 2001-1 Boeing 757-23N 3 1997-1 Boeing 757-23N 2 1996-1 Pursuant to various transactional documents, ATA is obligated to pay Wilmington Trust, insure the aircraft, maintain the aircraft, keep proper records of aircraft use and maintenance, and comply with the Federal Aviation Administration regulations. The interests and rights of Wilmington Trust have not been disputed or challenged. According Andrew I. Silfen, Esq., at Arent Fox, PLLC, in New York, the value of the Aircraft is dependent upon the Debtors' compliance with the non-payment obligations. The value of the Aircraft diminish with use. Each hour and cycle of operation causes wear and tear and brings the Aircraft and their components closer to their next maintenance events. The value of a commercial jet aircraft depends in material part on where the airframe, landing gear, Auxiliary Power Units, and engines are in the maintenance cycle. Section 363(e) of the Bankruptcy Code entitles Wilmington Trust to adequate protection of its interests to compensate for any depreciation, deterioration, or diminution in the value of the Aircraft. Under Section 361, adequate protection may be provided through cash payments, replacement lien or other relief. Wilmington Trust asks the United States Bankruptcy Court for the Southern District of Indiana to require the Debtors to comply with the terms of the Transactional Documents, retroactive to the Petition Date, including, but not limited to: (a) maintaining, operating, and using the Aircraft in compliance with the requirements and regulations of the FAA and any other laws with respect to the Aircraft; (b) maintaining, operating and using the Aircraft in compliance with all provisions of the Documents; (c) payment on a monthly basis of cash maintenance reserves including reserves for airframe, engine, landing gear, and APU maintenance at a rate to be determined at a hearing on Wilmington Trust's request; (d) periodic cash payments equal to the diminution in value of Wilmington Trust's interests in the Aircraft; (e) payment or satisfaction of all statutory or possessory liens against the Aircraft; (f) to the extent that the adequate protection provided by the Debtors is insufficient, the allowance of a superpriority administrative expense claim pursuant to Section 507(b) of the Bankruptcy Code for all amounts owed to Wilmington Trust; and (g) payment of all fees and expenses due under the Documents, including payment of: * postpetition interest on any owned Aircraft under the mortgage transactions; and * all fees and expenses of Wilmington Trust including the payment of all fees and expenses of Wilmington Trust, including the payment of all fees and expenses of its counsel and other professional advisors. Wilmington Trust also asks the Court to direct the Debtors to show that they can comply with any order granting adequate protection notwithstanding any lien or priority right of payment granted under any and all orders authorizing the Debtors to obtain postpetition financing. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATHLETE'S FOOT: Hires Angel & Frankel as Bankruptcy Counsel ----------------------------------------------------------- Athlete's Foot Stores, LLC and its debtor-affiliate, Delta Pace, LLC, ask the U.S. Bankruptcy for the Southern District of New York for permission to employ Angel & Frankel, P.C., as their general bankruptcy counsel. Angel & Frankel is expected to: (a) advise the Debtors with respect to their powers and duties in the continued operation of their businesses and management of their property as debtors and debtors-in- possession; (b) represent the Debtors before the Court, and any other court of competent jurisdiction, on matters pertaining to their affairs as debtors and debtors-in-possession, including prosecuting and defending litigated matters that may arise during the Debtors' chapter 11 cases; (c) advising and assisting the Debtors in the preparation and negotiation of a plan of reorganization with their creditors and other parties in interest; (d) prepare all necessary or appropriate applications, answers, orders, reports and other legal documents; and (e) perform all other legal services for the Debtors that may be desirable and necessary in their chapter 11 cases. John H. Drucker, Esq., and Bonnie Lynn Pollack, Esq., are the lead attorneys for the Debtors. Mr. Drucker discloses that Angel & Frankel received a $140,000 retainer. Mr. Drucker will bill the Debtors $495 per hour, and Ms. Pollack will charge $350 per hour. Mr. Drucker reports Angel & Frankel's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Joshua J. Angel Member $700.00 Laurence May Member 495.00 Jeffrey K. Cymbler Member 400.00 Neil Y. Siegel Associate 350.00 Leonard H. Gerson Associate 350.00 Rick A. Steinberg Associate 330.00 Rochelle R. Weisburg Associate 295.00 Frederick E. Schmidt Associate 260.00 Seth F. Kornbluth Associate 210.00 Michele E. Cosenza Associate 210.00 Chetram Deola MIS 90.00 Mario Merchan MIS 90.00 Mr. Drucker reports Angel & Frankel's other professionals bill: Designation Hourly Rate ------------ ----------- Principals/Counsel $350 - 700 Associates 210 - 350 Paraprossionals 90 - 110 Angel & Frankel assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in New York, New York, Athlete's Foot Stores, LLC, -- http://www.theathletesfoot.com/-- operates approximately 125 athletic footwear specialty retail stores in 25 states. The Company and its debtor-affiliate filed for chapter 11 protection on December 9, 2004 (Bankr. S.D.N.Y. Case No. 04-17779). When the Company filed for protection from its creditors, it listed total assets of $33,672,000 and total debts of $39,452,000. ATHELETE'S FOOT: Look for Bankruptcy Schedules on Jan. 24 --------------------------------------------------------- The Honorable Stuart M. Bernstein of the U.S. Bankruptcy for the Southern District of New York gave Athlete's Foot Stores, LLC, and its debtor-affiliate, Delta Pace, LLC, more time to file their schedules of assets and liabilities, statements of financial affairs, and schedule of executory contracts and unexpired leases. The Debtors have until January 24, 2005, to file those documents. The Debtors tell the Court that because of the size and complexity of their businesses, they will be "inundated" for the first few weeks of their bankruptcy cases with and requests from their vendors, lenders and other parties-in-interest and will need to attend to other priorities. The Debtors add that they are still accumulating and organizing all the information needed for their Statements and Schedules. The Debtors tell the Court that the extension will give them more time to accurately complete and finalize their Statements and Schedules and file those documents on or before the January 24 deadline. The Court's order is without prejudice to the Debtors' right to seek a further extension of the time to file their Schedules and Statements if they find it necessary to do. Headquartered in New York, New York, Athlete's Foot Stores, LLC, -- http://www.theathletesfoot.com/-- operates approximately 125 athletic footwear specialty retail stores in 25 states. The Company and its debtor-affiliate filed for chapter 11 protection on December 9, 2004 (Bankr. S.D.N.Y. Case No. 04-17779). Bonnie Lynn Pollack, Esq., and John Howard Drucker, Esq., at Angel & Frankel, P.C. represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed total assets of $33,672,000 and total debts of $39,452,000. BIO-RAD LAB: Selling $200 Million of Senior Subordinated Notes -------------------------------------------------------------- Bio-Rad Laboratories, Inc. (AMEX: BIO; BIOb), agreed to sell $200 million aggregate principal amount of its 6-1/8% Senior Subordinated Notes due 2014 in a private offering. The Company intends to close the transaction on Dec. 21, 2004. The Company intends to use the proceeds for working capital and general corporate purposes, which may include acquisitions. The new Senior Subordinated Notes have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws, and will be offered only to qualified institutional buyers in reliance on Rule 144A and in offshore transactions pursuant to Regulation S under the Securities Act of 1933, as amended. Unless so registered, the new Senior Subordinated Notes may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. Bio-Rad Laboratories for more than 50 years has provided a broad range of innovative tools and services to the clinical diagnostics and life science research markets. The company is world renowned among hospitals, universities, major research institutions, biotechnology and pharmaceutical firms for its commitment to quality and customer service. It has built strong customer relationships that advance research and development efforts and support the commercialization of new technology, especially in the high-growth fields of genomics, proteomics, biopharmaceutical discovery, food safety and biotechnology education. Bio-Rad now manufactures and distributes thousands of products that incorporate a wide range of technologies including electrophoresis, imaging, immunoassay, chromatography, microbiology, bioinformatics, and transfection. BIO-RAD LAB: Moody's Rates $200M Sr. Unsec. Sub. Notes at Ba3 ------------------------------------------------------------- Moody's Investors Service assigned a rating of Ba3 to Bio-Rad Laboratories' $200 million senior unsecured subordinated notes, due 2014. The ratings outlook has been changed to stable from positive. New ratings assigned: * Bio Rad Laboratories $200 million Senior Unsecured Subordinated Notes, due 2014, rated Ba3 Ratings affirmed: * Bio Rad Laboratories Senior Implied Rating, Ba2 * Bio Rad Laboratories Senior Unsecured Rating, Ba2 * Bio Rad Laboratories $225 million Senior Unsecured Subordinated Notes, due 2013, Ba3 The ratings assignment includes: (1) the risk of integrating current and future acquisitions, (2) competition from larger manufacturers that have greater resources and less leverage than the company, (3) continued exposure to foreign currency fluctuations, (4) control of the company and the board by the founding family, (5) pricing pressures in the BSE market, which is resulting in contracting Life Sciences and company-wide gross margins, and (6) dependence on government funding for some of the Life Sciences customers. The rating also considers the increased risk of litigation with the recent acquisition of MJ Research, Inc. Factors mitigating these concerns include: (1) broad customer, product and geographic diversification, (2) a high recurring base of revenues that accounts for 70% of total revenues, (3) strong product leadership and market share in both the Life Science and Clinical Diagnostic divisions, and (4) a strategy of focusing on the higher growth, less competitive specialty clinical diagnostic markets. Additional factors supporting the rating include: (1) a history of developing innovative tests and products for its end markets through internal research and developing spending (10% of revenues) and licensing, (2) a world wide direct sales force of 1000 people that contributes to 97% of total revenues, and (3) a successful track record of integrating acquisitions and product lines from other companies. The stable rating outlook reflects Moody's belief that Bio-Rad will continue to reduce debt, as revenue growth and expense management will result in growing cash flow. If operating results improve or the repayment of debt occurs faster than expected, the outlook could return to positive. However, if the company experiences difficulty in integrating acquisitions or competitive pressures from companies with greater financial resources and product offerings lead to slower revenue growth and increased margin pressure, the outlook could change to negative. Bio-Rad Laboratories plans to issue $200 million in senior unsecured subordinated notes, due 2014. The net proceeds would be used for general corporate purposes and to fund working capital. The Ba3 rating on the senior subordinated notes reflects their unsecured status and subordination to senior debt. While the notes are guaranteed, foreign subsidiaries, which account for substantially all of the company's assets, are excluded from the guarantee. Despite the increase in debt, Debt to EBITDA coverage is expected to be 2.2 times at the end of 2004 while EBITDA to Interest coverage is expected to be 9.8 times. The ratio of forecasted free cash flow to adjusted debt, however, will fall to 12% in 2004, down from 17% in 2004 because of an unusually high level of capital expenditures and greater debt. As the company expands its operating margins, repays debt, and capital spending returns to more normal levels, the ratio of adjusted free cash flow to adjusted debt would likely increase in the next few years. In August 2004, the company acquired the outstanding shares of MJ Research, Inc., a life science company specializing in premium instruments and consumables used in modern biological research, particularly thermal cyclers and DNA implication. The total purchase price of $90.0 million includes $7.0 of net tangible assets, $40.5 million in goodwill, and intangible assets of $42.5 million. The company financed the transaction by paying $31.0 million in cash, assuming liabilities of $9 million, and a $50 million litigation accrual. A court had ruled that MJ Research, Inc., had infringed several patents held by Appelera Corporation and Roche Molecular Systems, and owes these companies $19.8 million; MJ Research, Inc., had filed a counter suit against these two companies alleging a violation of anti-competitive laws. Bio-Rad, based in Hercules, California, manufacturers and supplies the life science research, healthcare and other markets with a broad range of products and systems used to separate complex chemical and biological materials and to identify, analyze, and purify their components. Revenues in 2003 were approximately $1 billion. BIO-RAD LAB: S&P Rates Proposed $200M Subordinated Notes at BB- --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to Bio-Rad Laboratories Inc.'s proposed $200 million of subordinated notes due Dec. 15, 2014. Proceeds are to be used for general corporate purposes, including acquisitions. At the same time, the 'BB+' corporate credit rating is affirmed. The outlook is stable. "The high-speculative-grade corporate credit rating on Hercules, California-based Bio-Rad Laboratories, Inc., reflects the company's defensible, but niche, positions in the life science and clinical laboratory markets, and its history of using significant debt-financed acquisitions to supplement growth," said Standard & Poor's credit analyst David Lugg. Despite Bio-Rad's defensible positions in the markets of in vitro diagnostics and life sciences, it remains a relatively small player in each, competing with significantly larger companies that are more diversified and have greater financial resources. Moreover, Bio-Rad's substantial international operations, which account for about 65% of sales, subject its revenues to swings in exchange rates and ongoing changes in global economic conditions. Bio-Rad's life science business is also vulnerable to reductions in government funding for life science research and changes in biopharmaceutical companies' R&D spending. Its solid positions in both the life science and clinical diagnostic markets reflect the company's long-standing customer relationships and its history of successful product introductions. In the life sciences markets, Bio-Rad has particular strengths in electrophoresis and gene transfer products. Results also have benefited from the company's position as the sole supplier of tests for bovine spongiform encephalitis -- BSE, or mad cow disease. Revenue and cash flow contributions from BSE tests are likely to decline, however, given that the market is maturing and that there is increased pricing pressure. The clinical diagnostics unit provides products for quality controls, autoimmune testing, and diabetes monitoring. In both markets, sales of reagents and consumable products provide predictable company revenue. BOMBARDIER INC: S&P Places Ratings on CreditWatch Negative ---------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'BB' long-term corporate credit ratings, on transportation- equipment manufacturer Bombardier, Inc., and its subsidiaries on CreditWatch negative. "The CreditWatch placement reflects new uncertainty about Bombardier's financial policies and strategic direction following the resignation of the company's CEO," said Standard & Poor's credit analyst Kenton Freitag. The increased uncertainty adds to Standard & Poor's previously stated concerns, formerly reflected in a negative outlook, that adverse developments in the U.S. airline industry could further affect the company's profitability. The unexpected departure of Paul Tellier comes at a sensitive time for Bombardier, and raises several concerns, including: (1) possible reduced confidence by capital providers (banks, bond holders, surety providers, and equity investors); (2) the potential for adoption of more aggressive financial policies; (3) the potential for a derailing of cost reduction initiatives; and (4) greater governance concerns. The departure of Mr. Tellier, as well as those of two independent directors, increases the already considerable influence of the controlling shareholder family. With Mr. Tellier's departure, the company will adopt a new executive structure. Former CEO Laurent Beaudoin will assume lead executive responsibility under an office of the president. The current heads of the aerospace and transportation divisions will take direct operational control of their respective divisions. Standard & Poor's will meet with management in the near term to gain greater clarity on the concerns noted above. Any downgrade would likely be limited to one or two notches, provided liquidity remains adequate. Conversely, ratings could be affirmed if the management changes are viewed as unlikely to disrupt the current financial policies of the company and its current financial position. BROOKS FORD INC: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: Brooks Ford, Inc. 211 Ogden Street Oxford, Nebraska 68967 Bankruptcy Case No.: 04-44298 Type of Business: The Debtor is an automobile dealer and provides auto repair services. Chapter 11 Petition Date: December 9, 2004 Court: District of Nebraska (Lincoln Office) Judge: Timothy J. Mahoney Debtor's Counsel: John T. Tarrell, Esq. John Tarrell Law Office 2002 Central Avenue P.O. Box 2084 Kearney, NE 68848 Tel: 308-234-6561 Fax: 308-236-5761 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. CANTERBURY CONSULTING: Nasdaq Will Delist Common Stock on Friday ---------------------------------------------------------------- Canterbury Consulting Group, Inc., (NASDAQ:CITI) reported that Nasdaq notified Canterbury that the Company had not regained compliance in accordance with Marketplace Rule 4310(c)(8)(B), and that its securities would be delisted from The Nasdaq SmallCap Market at the opening of business on December 17, 2004. On September 8, 2004, Nasdaq had notified Canterbury that "its common stock had not maintained a minimum market value of publicly held shares -- MVPHS -- of $1,000,000 over the previous 30 consecutive trading days, and, as a result, did not comply with Marketplace Rule 4310(c)(7)." In accordance with Marketplace Rule 4310(c)(8)(B), the Company was provided 90 calendar days, or until December 7, 2004, to regain compliance with the Rule. At the time of the receipt of the December 8, 2004, delisting letter, the Board of Directors of Canterbury was in process of deciding to respond to a delisting letter received after the close of business on December 1, 2004. On December 1, 2004, the Nasdaq Stock Market notified Canterbury that, "the Company does not comply with Marketplace Rule 4350(e) and 4350(g) and Staff has determined to delist the Company's securities from The Nasdaq Stock Market at the opening of business on December 10, 2004." These Rules relate to the requirement to hold an annual meeting of shareholders. Based upon the letter of December 8, 2004, the Company determined that an appeal of the December 1, 2004, delisting letter would be a pointless waste of its shareholders' resources. An additional determining factor in the Company's decision was a third delisting letter received on June 23, 2004, which stated, "For the last 30 consecutive business days, the bid price of the Company's common stock has closed below the minimum $1.00 per share requirement for continued inclusion under Marketplace Rule 4310(c)(4). Therefore, in accordance with Marketplace Rule 4310(c)(8)(D), the Company will be provided 180 calendar days, or until December 20, 2004, to regain compliance." * * * As reported in the Troubled Company Reporter on Nov 2, 2004, Canterbury Consulting Group, Inc., and its User Technology Services, Inc., subsidiary entered into a Settlement Agreement and Mutual Release with Ceridian Corporation. The Agreement represents the resolution of arbitration proceedings that the Company initiated in August 2003 for claims arising out of the Company's purchase of Usertech from Ceridian in September 2001. Under the terms of the Agreement, the Company has agreed to deliver to Ceridian $912,000, which represents outstanding amounts relating to the purchase of Usertech that had not been delivered to Ceridian pending resolution of the arbitration proceedings. In addition, the Company and Usertech have agreed that they will not seek bankruptcy or insolvency protection as set forth in the Agreement for a period of 91 days from October 4, 2004. The arbitration proceedings will be dismissed without prejudice following October 4, 2004, and they will be dismissed with prejudice after 91 days following October 4, 2004, if the Company and Usertech have not filed, or had filed against it, any such bankruptcy or insolvency proceedings. A full-text copy of the agreement containing the we-won't-file- for-bankruptcy promises is available at no charge at: http://www.sec.gov/Archives/edgar/data/794927/000079492704000028/ceridianexh ibit.txt CATHOLIC CHURCH: Spokane Diocese Will Keep Victims' Names Secret ---------------------------------------------------------------- The Diocese of Spokane sought and obtained permission from the U.S. Bankruptcy Court for the Eastern District of Washington to file portions of Schedule F (Creditors Holding Unsecured Non- priority Claims), the Master Mailing List, and any other pleadings, reports or other documents that might be filed later on, which disclose the names of victims of sexual abuse, under seal. "The Diocese has the duty to keep the identities of abuse victims in private," Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, explains. Mr. Paukert relates that many sexual abuse claimants have used pseudonyms or disclosed their names expecting that the Spokane Diocese would hold their identities in confidence. The Spokane Diocese has no objection if individuals who contend they are victims of sexual abuse decide to make their identities public. However, the Diocese believes that decision should be left to each individual and should not be forced upon the victims. The Diocese will provide copies of the sealed portions of pleadings, reports or documents to the Office of the U.S. Trustee. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., and Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Archdiocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHESAPEAKE ENERGY: Gets Requisite Consents to Amend Indenture ------------------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) disclosed that, pursuant to its previously announced cash tender offer and consent solicitation for any and all of its $209,815,000 aggregate principal amount outstanding of 8.375% Senior Notes due 2008, it has received the consents necessary to adopt certain proposed amendments to the indenture governing the Notes. The proposed amendments will eliminate substantially all of the restrictive covenants of the indenture. Adoption of the proposed amendments requires the consent of holders of at least a majority of the aggregate principal amount of the outstanding Notes. Holders who validly tendered their Notes by 5:00 p.m., Eastern Standard Time, on Dec. 13, 2004, and consented to the proposed amendments will receive the total consideration of $1,084.33 per $1,000.00 principal amount of Notes accepted for purchase, consisting of: (i) the purchase price of $1,074.33 and (ii) the consent payment of $10.00, plus accrued interest up to, but not including, the date of acceptance. As of the Consent Date, $190,825,000 in aggregate principal amount of the Notes had been tendered in the Offer. Acceptance of and payment for such Notes is expected to occur on Dec. 14, 2004, subject to satisfaction or waiver of certain conditions. Upon payment for such Notes, the amendments will become effective. Notes in the aggregate principal amount of $18,990,000 remain outstanding and subject to the Offer which is scheduled to expire at 12:00 midnight, Eastern Standard Time, on Dec. 28, 2004, unless extended. Holders who validly tender their Notes after the Consent Date and prior to the Expiration Date will receive the purchase price of $1,074.33 per $1,000.00 principal amount of Notes accepted for purchase. Payment for Notes tendered after the Consent Date is expected to be on or about Dec. 29, 2004. All holders whose Notes are accepted for payment will also receive accrued and unpaid interest up to, but not including, the applicable date of payment for the Notes. The terms of the Offer are described in the Company's Offer to Purchase and Consent Solicitation Statement dated Nov. 30, 2004, copies of which may be obtained from: MacKenzie Partners, Inc. Information Agent for the Offer (800) 322-2885 (US toll free) (212) 929-5500 (collect) The Company has engaged Deutsche Bank Securities, Inc., to act as dealer manager and solicitation agent in connection with the Offer. Questions regarding the Offer may be directed to: Deutsche Bank Securities, Inc. High Yield Capital Markets (800) 553-2826 (US toll-free) (212) 250-7466 (collect) About the Company Chesapeake Energy Corporation -- http://www.chkenergy.com/-- is the sixth largest independent producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States. * * * As reported in the Troubled Company Reporter on Dec. 3, 2004, Moody's assigned a Ba3 rating to Chesapeake Energy's $600 million of 10-year senior unsecured notes, affirmed its Ba3 senior unsecured note, Ba3 senior implied, and SGL-2 liquidity ratings, and moved the outlook to positive from stable. CITICORP MORTGAGE: Fitch Junks Series 1990-18 Class B Issue ----------------------------------------------------------- Fitch has taken rating actions on Citicorp Mortgage Securities, Inc., issues: Series 1990-18: -- Class B downgraded to 'C' from 'CCC'; Series 1995-2: -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AAA'; -- Class B-3 affirmed at 'AAA'; -- Class B-4 affirmed at 'AA'; -- Class B-5 affirmed at 'BBB+'. Series 1998-5: -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 upgraded to 'AAA' from 'AA'. Series 1999-5: -- Class M affirmed at 'AAA'; -- Class B-1 upgraded to 'AAA' from 'AA+'; -- Class B-2 upgraded to 'AAA' from 'AA-'; -- Class B-3 upgraded to 'AA' from 'A-'; -- Class B-4 upgraded to 'A' from 'BB-'. Series 1999-6: -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AAA'; -- Class B-3 upgraded to 'AAA' from 'AA'; -- Class B-4 upgraded to 'A' from 'BBB'. Series 1999-8: -- Class A affirmed at 'AAA' -- Class M affirmed at 'AAA' -- Class B-1 affirmed at 'AAA' -- Class B-2 upgraded to 'AAA' from 'AA'; -- Class B-3 upgraded to 'AAA' from 'A+'; -- Class B-4 upgraded to 'A' from 'BB+'. Series 2001-13: -- Class A affirmed at 'AAA'. Series 2002-3: -- Class A affirmed at 'AAA'. Series 2002-12: -- Class A affirmed at 'AAA'. Series 2003-2: -- Class A affirmed at 'AAA' -- Class B-1 upgraded to 'AAA' from 'AA'; -- Class B-2 upgraded to 'AA' from 'A'; -- Class B-3 upgraded to 'A' from 'BBB'; -- Class B-4 upgraded to 'BBB' from 'BB'; -- Class B-5 upgraded to 'B+' from 'B'. Series 2003-3: -- Class A affirmed at 'AAA'; -- Class B-1 upgraded to 'AAA' from 'AA'; -- Class B-2 upgraded to 'AA' from 'A'; -- Class B-3 upgraded to 'A' from 'BBB'; -- Class B-4 upgraded to 'BBB' from 'BB'; -- Class B-5 upgraded to 'B+' from 'B'. Series 2003-4: -- Class A affirmed at 'AAA'. Series 2003-5: -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Series 2003-10: -- Class A affirmed at 'AAA' Series 2003-11: -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. The upgrades, affecting $35,747,049 of outstanding certificates, are being taken as a result of low delinquencies, as well as increased credit support levels. The affirmations, affecting $1,746,097,876 of outstanding certificates, are due to credit enhancement consistent with future loss expectations. The downgrade affects $74,492 of outstanding certificates and is being taken as a result of poor collateral performance. As of the November distribution date, class B from series 1990-18 has 10.83% of credit enhancement but two of the five remaining loans are delinquent. The delinquent loans total $47,429, or 63.67%, of the current collateral balance. Over 99% of the original collateral has paid down and cumulative losses total more than $6 million. Of the remaining deals, the transactions that are 2003 vintage have experienced small increases in CE levels and have pool factors between 30% and 81%. The 2002 and 2001 vintage transactions have at least four times original CE levels and pool factors of 4%-22%. The transactions that are 1999 vintage and older have as much as eight times original CE levels and pool factors of 3%-7%. All of the Citicorp transactions are secured by 10-, 15-, 19-, and 30-year adjustable and fixed-rate mortgages extended to prime quality borrowers. Further information regarding current delinquencies, losses, and credit enhancement is available on the Fitch Ratings web site at http://www.fitchratings.com/ CONEXANT SYSTEMS: Expects $50-Mil Consumption in Channel Inventory ------------------------------------------------------------------ Conexant Systems, Inc. (NASDAQ:CNXT), is taking actions that will result in the consumption of approximately $50 million in channel inventory during its first fiscal quarter, which ends Dec. 31, 2004. As a result of this new inventory initiative, Conexant now anticipates that first fiscal quarter revenues will be approximately $140 million. In November, the company expected revenues between $175 million and $185 million. The company also said that its current-quarter results will include a one-time charge against earnings in the range of $40 million to $50 million, reflecting its previous communication of lower market prices and reduced end-customer demand for DSL and wireless LAN products. Accordingly, the company anticipates that gross margins for the first fiscal quarter, including the one-time charge, will be between 5 percent and 10 percent of revenues. Pro forma operating expenses for the first fiscal quarter are still expected to be approximately $93 million. As a result of the lower revenues and the one-time charge, the company anticipates that it will report a pro forma non-GAAP net loss per share in a range of $0.18 to $0.20 for the first fiscal quarter, compared to expectations in November of a pro forma non-GAAP net loss of $0.06 to $0.07 per share. "Conexant's lowered expectations for the first fiscal quarter are a consequence of our decision to normalize channel inventory," said Dwight W. Decker, Conexant chairman and chief executive officer. "We anticipate that approximately $50 million in channel inventory will be consumed this quarter, principally within our DSL business unit. "In the second fiscal quarter, we will continue to reduce channel inventory, but at a much lower level," Mr. Decker said. "The completion of our inventory normalization initiative will allow us to return to end customer demand levels of approximately $190 million to $200 million in quarterly revenues. "Several important product initiatives near completion will drive Conexant's growth moving forward," Mr. Decker said. "We expect increased revenues in our Broadband Media Processing business as new digital television solutions based on advanced modulation and compression technologies ramp to volume, and as we capitalize on growing opportunities for MPEG video products in applications inside and outside the PC. We also expect DSL growth in the second half of the year to be driven by the wider adoption of higher-bandwidth products, including our ADSL2plus and VDSL solutions. In our wireless LAN business, we anticipate that share recapture across our product line will result in solid growth in the second half of calendar 2005. "We are executing on our plan to reduce operating expenses to $80 million per quarter exiting this fiscal year as we further consolidate administrative functions and increasingly shift product development resources to lower-cost regions such as India and China," Mr. Decker said. "We continue to expect that we will reach a quarterly revenue break-even level of $220 million no later than the end of calendar 2005." The company will report first fiscal quarter financial results and hold its regular conference call for editors, analysts and investors in the second half of January 2005. About the Company Conexant Systems, Inc. -- http://www.conexant.com/-- is a fabless semiconductor company that recorded more than $900 million in revenues in fiscal year 2004. The company has approximately 2,400 employees worldwide, and is headquartered in Newport Beach, California. Key products include client-side xDSL and cable modem solutions, home network processors, broadcast video encoders and decoders, digital set-top box components and systems solutions, and dial-up modems. Conexant's suite of networking components includes a leadership portfolio of IEEE 802.11a/b/g-compliant WLAN chipsets, software and reference designs, as well as solutions for applications based on HomePlug(SM)and HomePNA(TM). The company also offers a complete line of asymmetric and symmetric DSL central office solutions, which are used by service providers worldwide to deliver broadband data, voice, and video over copper telephone lines. * * * As reported in the Troubled Company Reporter on Aug. 17, 2004, Standard & Poor's Ratings Services revised its outlook on Conexant Systems Inc. to negative from stable while affirming its 'B' corporate credit rating on the company. CSFB HOME: S&P Affirms BB Rating on Series 2003-4 Class B-2 Certs. ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on 18 classes from eight series of CSFB Home Equity Mortgage Trust home equity pass-through certificates. Concurrently, ratings on 73 classes from 14 series are affirmed from the same issuer. The raised ratings reflect the increase in the actual and projected credit support percentages to the respective classes due to the paydown of the collateral and the shifting interest structure of the transactions. As a result, the credit support percentages are approximately double the original percentages at the new rating levels. As of the October 2004 remittance date, the outstanding pool balances for the eight series with raised ratings ranged from 12.46% (series 2002-1) to 34.74% (series 2003-3). Total delinquencies ranged from 6.95% (series 2003-3) to 18.60% (series 2002-1). Cumulative realized losses ranged from 2.46% (series 2003-3) to 6.03% (series 2002-2). Three of the eight transactions are below their respective overcollateralization targets due to losses. However, projections show the transactions are adequately supported. The affirmed ratings reflect adequate actual and projected credit support percentages to the respective classes. Total delinquencies for the six transactions, where performance data was not given above, ranged from 1.34% for series 2004-2 to 6.95% for series 2003-3. Cumulative realized losses, as a percentage of original pool balance, ranged from 0.22% for series 2004-2 to 2.46% for series 2003-3. These six transactions are at or building to their respective overcollateralization targets. Credit support for these transactions is provided by subordination, overcollateralization, and excess interest cash flow. The collateral consist primarily of 30-year, fixed-rate, second lien mortgage loans, secured by one- to four-family residential properties. Ratings Raised CSFB Home Equity Mortgage Trust Home Equity Pass-Thru Certs Rating Series Class To From ------ ----- -- ---- 2002-1 M-1 AAA AA 2002-2 M-1 AAA AA 2002-2 M-2 AA A 2002-3 M-1 AAA AA 2002-3 M-2A, M-2B AA A 2002-4 M-1 AAA AA 2002-4 M-2 AA- A 2002-5 M-1 AAA AA 2002-5 M-2 AA- A 2003-1 M-1 AA+ AA 2003-2 M-1A, M-1B1, M-1B2 AA+ AA 2003-2 M-2A, M-2B A+ A 2003-3 M-1 AA+ AA 2003-3 M-2 A+ A Ratings Affirmed CSFB Home Equity Mortgage Trust Home Equity Pass-Thru Certs Series Class Rating ------ ----- ------ 2002-1 A-IO, P AAA 2002-1 M-2 A 2002-1 B BBB 2002-2 P AAA 2002-2 B BBB 2002-3 P AAA 2002-3 B BBB 2002-4 P AAA 2002-4 B BBB 2002-5 P, A-IO AAA 2002-5 B BBB 2003-1 A-1, A-2, P AAA 2003-1 M-2 A 2003-1 B BBB 2003-2 A-1, A-3, P AAA 2003-2 B-A, B-B BBB 2003-3 A-1, A-2, P AAA 2003-3 B BBB 2003-4 A-1, A-2, P AAA 2003-4 M-1 AA 2003-4 M-2 A 2003-4 B-1 BBB 2003-4 B-2 BB 2003-5 A-1, A-3, P AAA 2003-5 M-1 AA 2003-5 M-2 A 2003-5 B BBB 2003-6 A-1, A-2, A-3, P AAA 2003-6 M-1 AA 2003-6 M-2 A 2003-6 B-1, B-2 BBB 2003-7 A-1, A-2, A-3, A-IO, P AAA 2003-7 M-1 AA 2003-7 M-2 A 2003-7 B BBB 2004-1 A-1, A-2, A-3, A-IO, P AAA 2004-1 M-1 AA 2004-1 M-2 A 2004-1 B BBB 2004-2 A-1, A-IO, P AAA 2004-2 M-1 AA 2004-2 M-2 A 2004-2 B-1 BBB+ 2004-2 B-2 BBB 2004-2 B-3A, B-3F BBB- DAN RIVER: Selling Engineered Products Biz for $9.37 Million ------------------------------------------------------------ Dan River, Inc., (Pink Sheets:DVERQ) entered into an agreement on December 10, 2004, for the sale of the assets of its Engineered Products Division. The prospective purchaser is Porterdale Acquisition, LLC, a company affiliated with Industrial Specialty Fabrics, Inc., and Royal Cord, Inc., producers of yarns and fabrics for the rubber goods market. The purchase price is $9.37 million, which is subject to certain post-closing adjustments. The Company sought approval from the United States Bankruptcy Court for the Northern District of Georgia, Newnan Division, of an auction process pursuant to Section 363 of the Bankruptcy Code. In an auction process, prospective purchasers may submit written bids for the Engineered Products Division assets at any time on or prior to a proposed January 6, 2005, bid deadline. The court will consider the approval of the proposed auction procedures on December 17, 2004. The Court will give final approval of the proposed transaction January 11, 2005. Parties interested in submitting bids may contact: Dan Katz of Conway Del Genio & Gries & Co., LLC Financial Advisors to Dan River 212-813-1754 -- or -- Paul Ferdinands King & Spalding LLP Counsel to Dan River 404-572-3450 for additional information. Bob Major, President of the Engineered Products Division, commented, "This is a very positive development for Dan River's engineered products business and for its customers. A number of parties expressed an interest in acquiring, improving and developing this business. We are focused on completing the sale process and on continuing to partner with our customers to timely deliver even better quality, innovative products." Headquartered in Danville, Virginia, Dan River Inc. -- http://www.danriver.com/-- designs, manufactures and markets textile products for the home fashions, apparel fabrics and industrial markets. The Company and its debtor-affiliates filed for chapter 11 protection on March 31, 2004 (Bankr. N.D. Ga. Case No. 04-10990). James A. Pardo, Jr., Esq., at King & Spalding represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $441,800,000 in total assets and $371,800,000 in total debts. DATATEC SYSTEMS: Plans to Reorganize Under Chapter 11 ----------------------------------------------------- Eagle Acquisition Partners -- a group of institutional and individual investors led by Datatec Systems, Inc.'s (DATC.PK) Chief Executive Officer, Raul Pupo -- has acquired all of Datatec Systems' secured debt held by IBM Credit LLC and certain funds represented by The Palladin Group. In connection with the Eagle Acquisition bid, Raul Pupo and Vern Holden, a Managing Director of Datatec and member of Eagle Partners, have resigned their positions at Datatec. The Company has appointed William J. Adams, Jr., a current member of the Company's Board of Directors and a member of the Company's Special Independent Committee, to serve as the Company's Interim Chief Executive Officer. Mr. Adams has been a member of the Company's Board of Directors since April 2000. Datatec Systems intends over the next few days to begin the process of reorganizing its affairs under the Federal Bankruptcy Code under which Eagle Acquisition Partners intends to purchase substantially all of the assets of Datatec by credit bidding its debt in a sale of Datatec's assets under Section 363 of the Federal Bankruptcy Code. The Company has obtained debtor-in-possession funding from Alpine Associates in the amount of $2.5 million. The financing will make the necessary funds available to Datatec during the reorganization process so that Datatec will not experience any disruptions in its business affairs. In commenting on the acquisition, Mr. Adams stated "these announcements represent an exciting day for Datatec and its customers because as a result of the acquisition of our debt by Mr. Pupo's group and the establishment of a credit line with Alpine Associates, Datatec will be able to continue uninterrupted the high level of service that it provides its customers today." About Eagle Acquisition Partners Eagle Acquisition Partners is an investment group made up of individual and institutional investors, including Raul Pupo and Vern Holden as well as other key members of Datatec management and a former Board of Director, Walter Grossman. Eagle Acquisition Partners is committed to continuing the Company's focus on its core strengths of staging, configuration, and deployment services. About Datatec Systems, Inc. Fairfield, New Jersey-based Datatec Systems specializes in the large-scale deployment of networking technologies. Datatec's deployment services utilize a software-enabled implementation model and 'best practices' structured process to ensure consistent outcomes. Datatec's customers include Fortune 1000 companies with large, complex, multi-branch environments and world-class technology providers. The Troubled Company Reporter initiated coverage of Datatec on August 20, 2002, when the Nasdaq first indicated the company's stock listing was in jeopardy and followed the company's deteriorating relationship with IBM Credit throughout 2004. DELPHI CORP: Fitch Downgrades Rating on Preferred Trust to BB+ -------------------------------------------------------------- Fitch Ratings downgraded Delphi Corporation's ratings: -- Senior unsecured rating to 'BBB-' from 'BBB'; -- Trust preferred rating to 'BB+' from 'BBB-'; -- Commercial paper rating to 'F3' from 'F2'. -- The Rating Outlook is Negative. Fitch's rating actions reflect expectations that operating cash flow will be further constrained at a time when cash requirements, namely required pension contributions, are escalating. This has increased the risk of negative cash flow and higher net debt levels, despite currently healthy liquidity. Fitch's concerns include: * Delphi's heavy dependence on General Motors' production volume; * significant operating leverage to GM volumes due to a high fixed-cost structure, * constrained operating margins resulting from the continuance of significant commodity price pressures and original equipment manufacturer -- OEM -- pricing pressure, * still onerous legacy costs, * the potential risk of additional launch cost issues as seen in the third quarter of 2004, and heavy spending for technology development. Strengths include strong growth in non-GM business, a healthy proportion of high technology products, strong cash balances, and moderate debt levels. Over the intermediate term, an easing of commodity costs, an improvement in GM's competitive position, continued growth in Delphi's non-GM business, a closing of the pension gap, and meaningful progress addressing Automotive Holdings Group -- AHG -- losses could lead to a review of the Rating Outlook. Although leverage to GM is steadily decreasing each quarter and is on track to breech the 50% level in 2005, exposure to GM remains a concern. As inventories remain at historically high levels after second-half 2004 production cuts, GMs relatively dated product portfolio and Delphi's operating leverage to GM volumes pose incremental risk for 2005 cash flow expectations. Consumers have become somewhat desensitized to GM's substantial incentive packages, as evidenced by disappointing sales in recent months, increasing the risk of further production cuts. Although incentives have helped maintain volumes during the recent economic downturn, this may result in a reduced volume rebound as a result of any improvement in economic conditions. In addition, while GM's new product launches have been passenger cars, a product area that has sorely needed updating, trucks have accounted for the larger portion of GM's production. However, GM's trucks are now becoming dated in the marketplace, and Dodge and Ford have recently introduced new pickups and truck based sport-utes. While the truck market has traditionally been the bastion of Detroit automakers, new entrants from foreign competition like Nissan's Titan pickup and a significantly redesigned Toyota Tundra due in 2006 could cause erosion of GM's truck market share prior to the introduction of new truck products in 2007 and 2008, leading to additional volume pressure for Delphi. Delphi's top- line growth in non-GM business has been exceptional, indicating strong customer acceptance and technology strengths. Continued progress along this trend line should provide Delphi with the flexibility to address its fixed-cost structure and unprofitable business segments. High-required pension contributions, currently projected to peak in 2006 at approximately $1 billion, could absorb the large majority of Delphi's cash flow given expected margin pressures. Delphi's pension plan ended 2003 only slightly better off than it began, despite its impressive 20% asset returns. Asset returns and substantial 2003 contributions of $1 billion and 2004 contributions to date of $600 million have been overshadowed by a labor contract adjustment ($500 million) and a 50 bps reduction in the discount rate to 6.25% at the end of 2003. Since long-term interest rates have actually declined in the face of an improving economy and five Federal Reserve short-term rate hikes, Delphi's discount rate may have to be further ratcheted down, widening its underfunded position. However, over the intermediate term, a likely increase in long-term interest rates will reduce the underfunded position. In Delphi's case, a 100 bps increase in the discount rate would result in an approximate $1.2 billion reduction in the liability although this would still require that Delphi contribute substantial amounts to its pension plans. The level of benefits being paid out of Delphi's pension assets is moderate, and Delphi is currently funding in excess of those outflows. This provides an extended timeframe for Delphi over which to achieve an adequate return on its pension assets. In the area of other postretirement employee benefits -- OPEB -- or health care, Delphi continues to face long-term challenges with an approximate $9 billion unfunded obligation. However, near-term requirements are minimal as Delphi has only 0.25 retirees per active employee and in 2003, paid only $120 million in benefit costs under this pay-as-you-go system. Fitch expects commodity price pressures to remain high in 2005, especially steel costs, and to some degree the cost of petroleum- based raw materials like plastic resins. Margins will continue to be squeezed as the full impact of recent cost escalations work their way into supply contracts. Additionally, Delphi is exposed to commodity price pressures and supply issues among its suppliers. Delphi's legacy cost structure remains a key concern, as demonstrated by the announcement of a slower-than-anticipated U.S. work force attrition rate, another headcount reduction program totaling 8,500 (4.6% of its total work force) and the addition of three facilities to its Automotive Holdings Group. Fitch recognizes the long-term positive impact of steps taken to improve manufacturing efficiency and reduce headcount, but these issues have been and will continue to be addressed at only a moderate pace due to constraints from UAW labor contracts. Meanwhile, addressing its legacy cost structure has resulted in continued claims on operating cash flows (2005 restructuring charges of $150 million in after-tax cash) at a time when other cash requirements are rising. Launch cost issues, as seen in Delphi's third quarter ended Sept. 30, are standard for automotive suppliers, particularly when a supplier has garnered as much new business as Delphi has with non- GM customers. It appears as though Delphi was unable to recoup incremental launch costs from its customers, which may indicate that Delphi had internal difficulty managing its third quarter launch issues. Over time, Delphi will need to manage its new program launches more smoothly than was in seen in the third quarter. DISTINCTIVE DEVICES: Losses & Deficit Raise Going Concern Doubts ---------------------------------------------------------------- Distinctive Devices, Inc., incurred losses of $11,589,920 and $690,360 during the nine months ended September 30, 2004 and 2003, respectively, and had a working capital deficit of $49,084,916 at September 30, 2004. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management is seeking to obtain financing through the issuance of debt and equity. The ability of the Company to continue as a going concern is dependent upon management's ability to continue to obtain financing, to successfully implement its business plan and to establish profitable operations. To raise funds needed for working capital, to effect the bank settlement and to reach agreement with other galaxis creditors, will entail the issuance of a substantial number of the Company's common shares, or equivalents, with consequential resultant dilution in the value of shares held by current stockholders. If management's current fund raising efforts are not successful, the Company's ability to continue as a going concern remains in doubt. Conversely, if these efforts succeed, the Company can look forward to profitable operations in 2005. Distinctive Devices is based in Fort Lee, New Jersey and is the parent of subsidiaries in Germany and India, which develops software and hardware products for the digital television and telecom industries in the EU, India and Russia. DPL INC: S&P Affirms Low-B Ratings After SEC Filing Compliance -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' long-term and 'B' short-term corporate credit ratings on DPL Inc. and its regulated subsidiary, Dayton Power & Light Co. -- DP&L, and removed the ratings from CreditWatch with negative implications where they were placed on March 16, 2004. At the same time, Standard & Poor's affirmed all its other ratings on DPL and DP&L, including its 'BBB-' rating on DP&L's first mortgage bonds. The outlook is stable. Dayton, Ohio-based DPL had about $2.0 billion of debt outstanding as of Sept. 30, 2004. "The rating action follows the company's filing with the SEC its overdue audited financial statements for its 2003 10-K and its first, second, and third quarter 2004 10-Q financial statements with relatively minimal and immaterial restatements," said Standard & Poor's credit analyst Brian Janiak. "The resolution of this issue has also provided the company with access to DP&L's $100 million credit facility, which further stabilizes DPL's current creditworthiness," said Mr. Janiak. Nevertheless, DPL's new management remains challenged with the company's elevated debt levels, weak credit protection metrics, and modest liquidity. Furthermore, management also needs to continue to reconcile DPL's credibility and improve the company's former weak internal controls and corporate governance issues as well as resolve all outstanding legal issues and current investigations by the SEC, U.S. Attorney's Office, and Public Utilities Commission of Ohio. Failure by the company to reduce its consolidated debt leverage and improve its cash flow metrics would result in an outlook revision and adverse rating action. Conversely, upon successful resolution of its outstanding legal issues and investigations, the filing of its 2004 Form 10-K, and the company providing more specifics on its 2005 guidance and a strategic determination on its investment portfolio by March 2005, Standard & Poor's will re-evaluate the business risk profile and overall creditworthiness of DPL for a potential upward outlook revision or higher ratings. ENRON CORP: Objects to Banca Nazionale's Multi-Million Claims ------------------------------------------------------------- Enron Corp. and Banca Nazionale Del Lavoro, SpA, are parties to a certain Master Letter of Credit and Reimbursement Agreement dated October 5, 2000. Herbert K. Ryder, Esq., at LeBoeuf, Lamb, Greene & MacRae, LLP, in New York, relates that pursuant to the Reimbursement Agreement, Enron may ask BNL to issue letters of credit for Enron's account to support the performance of Enron's or its subsidiaries' obligations. Enron would reimburse BNL for any amounts drawn under any of the letters of credit issued under its terms. None of Enron's subsidiaries is a party to the Reimbursement Agreement. The Reimbursement Agreement does not impose any obligations on the subsidiary whose obligation a letter of credit supports. Enron Power Marketing, Inc., entered into a Master Power Purchase and Sale Agreement with Pacific Gas and Electric Company dated October 9, 2000, under which EPMI agreed to sell electric power to PG&E. Enron guaranteed up to $35,000,000 of EPMI's obligations under the Master Power Agreement. The Letters of Credit To support EPMI's obligations to PG&E under the Master Agreement, Enron asked BNL to issue two letters of credit aggregating $57,500,000 in December 2000, for Enron's account and for PG&E's benefit. BNL issued the Letters of Credit as requested. BNL, Mr. Ryder points out, did not ask EPMI to sign a written agreement obligating itself to reimburse BNL for any amounts drawn on the Letters of Credit. Each Letter of Credit expressly provides that the Uniform Customs and Practice for Documentary Credits govern it. The Reimbursement Agreement likewise provides that it is governed by the UCP. Also in December 2001, three other banks each issued a letter of credit to support EPMI's obligations to PG&E under the Master Agreement. The three letters of credit aggregate $42,750,000. On April 6, 2001, PG&E filed for Chapter 11 protection in the United States Bankruptcy Court for the Northern District of California. On April 9, 2001, EPMI exercised its contractual right to terminate the Master Agreement as a "forward contract." Under the Master Agreement, in the event of its early termination, the non-defaulting party will calculate a termination payment, which can be payable by either party depending on the relationship between the contract price and the current market price of electricity. Although EPMI was the non-defaulting party, the termination payment was payable by EPMI to PG&E. BNL and Enron amended the Letters of Credit on several occasions to, among others, extend the expiration date. The last amendment extended the expiration to November 30, 2001. In November 2001, PG&E sought to draw the full $57.5 million on the Letters of Credit. At the same time, PG&E drew on the three other letters of credit securing the Master Agreement, which aggregate $42.75 million. BNL dishonored PG&E's draw request, claiming that the draw did not meet the requirements of the Letters of Credit. The other three banks each honored PG&E's draw request and accordingly paid PG&E. PG&E Claims On October 15, 2002, PG&E filed Claim No. 12573 against EPMI alleging that the termination payment that EPMI owed to PG&E under the Master Agreement was $122,445,041. As a result of its successful draws on the three banks' letters of credit, PG&E already received $42,750,000. On account of amounts due PG&E under the Master Agreement, PG&E asserted an $86,353,173 claim against EPMI: EPMI liability under the Master Agreement $122,445,041 Payment received by PG&E 42,750,000 ------------ Unpaid balance 79,695,041 Interest through December 2, 2001 6,658,132 ------------ Total Claim $86,353,173 ============ On October 15, 2002, PG&E filed Claim No. 12938 against Enron. The PG&E Corp. Claim asserts a $35 million claim against Enron on account of Enron's guaranty of EPMI's obligations under the Master Agreement. New York Action In November 2002, PG&E commenced an action against BNL in the Supreme Court of the State of New York. In the New York Action, PG&E sought to recover the $57.5 million aggregate principal amount under the letters of credit plus interest. On May 20, 2003, a judgment for $65,099,982 was entered against BNL in the New York Action, which is the sum of $57,500,000, and $7,599,982 pre-judgment interest, costs and disbursements. BNL and PG&E Stipulation In July 2003, PG&E and BNL stipulated and agreed that: -- BNL will pay the amount of PG&E's judgment plus interest through the date of the payment; and -- in the event the judgment was reversed on appeal and PG&E was ordered to return the funds, BNL would have an allowed administrative claim in PG&E's bankruptcy case. The BNL and PG&E Stipulation was filed with the PG&E Bankruptcy Court on July 3, 2003. On June 10, 2004, the Appellate Division of the Supreme Court of the State of New York affirmed the judgment in the New York Action. As a result of that decision, BNL's payment to PG&E is now final. BNL Claims On October 10, 2002, BNL filed Claim No. 8057 against EPMI, and Claim No. 8548 against Enron. The BNL Claims were filed as general unsecured claims. Attached to Claim. 8057 are the Letters of Credit, and to Claim No. 8548, the Reimbursement Agreement. The BNL Claims assert a claim for reimbursement for amounts drawn by PG&E, Mr. Ryder says. The BNL Claims also assert that BNL is subrogated to the rights of the beneficiary of the letters of credit against EPMI and Enron. BNL believes that it is subrogated to PG&E's claim against EPMI under the Master Agreement and to PG&E's claim against Enron under its guaranty of EPMI's liability under the Master Agreement. PG&E Settlement Agreement On December 23, 2003, PG&E, EPMI and certain other Enron subsidiaries entered into a Settlement Agreement and Limited Mutual Release. The PG&E Settlement Agreement provides that PG&E released EPMI and Enron from any claims PG&E might have under the Master Agreement. Both the Enron Bankruptcy Court and PG&E Bankruptcy Court approved the PG&E Settlement Agreement. BNL's Subrogation Motion On November 10, 2003, BNL asked Judge Gonzalez to lift the automatic stay to the extent necessary to prevent extinguishment of BNL's subrogation rights. On April 21, 2004, Judge Gonzalez denied BNL's Subrogation Motion. Judge Gonzalez first held that BNL's payment to PG&E was not final and that BNL therefore could not avail itself of the warranties made by the beneficiary to the applicant. Judge Gonzalez also held that only Enron was the applicant for the letters of credit and that BNL could subrogate, if at all, only to the rights of Enron. BNL timely moved for reconsideration of the Subrogation Decision. On July 27, 2004, Judge Gonzalez denied the request for reconsideration. Although it filed the Subrogation Motion in the Enron Bankruptcy Court, BNL has not taken any action in the PG&E bankruptcy case to establish any subrogation rights against PG&E. BNL has not filed a motion or claim in PG&E's case asserting any right of subrogation to any claims held by PG&E against Enron or EPMI. BNL also did not seek relief from stay from the PG&E Bankruptcy Court to assert any subrogation rights. Objections to the BNL Claims By this objection, the Debtors ask Judge Gonzalez to: (a) disallow and expunge Claim No. 8057; and (b) reduce Claim No. 8548. The BNL Claims must be disallowed and expunged to the extent they are based on subrogation to PG&E's rights, Mr. Ryder asserts. BNL has no subrogation rights. BNL, as a letter of credit issuer, has subrogation rights only to the extent provided in Section 5-117(a) of the New York Uniform Commercial Code. Mr. Ryder notes that the letters of credit and the Reimbursement Agreement expressly incorporate the UCP. BNL's assertion that the UCP will provide the decisional principles precludes application of Section 5-117(a). Even if Judge Gonzalez applies Section 5-117(a), BNL wrongfully dishonored the letters of credit and therefore has no subrogation rights under that statute. BNL's claim to subrogation rights faces several additional insuperable hurdles. "BNL did not have even prospective subrogation rights, let alone presently existing rights, until it made final payment on the letters of credit, and the claims to which BNL seeks subrogation were released by PG&E prior to BNL's final payment," Mr. Ryder observes. Thus, if BNL has any subrogation rights, it subrogates only to a claim that has been released. Although BNL asserted an administrative claim in the PG&E bankruptcy case, BNL has never asserted any subrogation rights in that case, Mr. Ryder adds. The PG&E Bankruptcy Court confirmed a plan of reorganization for PG&E, which has become effective. That PG&E Plan thus bars the assertion of any subrogation rights by BNL. Because BNL does not have any subrogation rights, the Debtors believe that BNL's claim against EPMI must be disallowed and expunged in its entirety. EPMI has no contract with BNL and is not the applicant for the letters of credit. Hence, BNL does not have a right to reimbursement from EPMI. Mr. Ryder points out that if BNL has subrogation rights, Sections 502(e)(1) and 509(b) of the Bankruptcy Code compel it to elect whether to assert its subrogation claim or its reimbursement claim. If BNL elects subrogation, then its claim against EPMI is allowable as an unsecured claim for no more than $57.5 million, since BNL is not entitled to postpetition interest, costs or fees. Additionally, BNL's claim against Enron is allowable as an unsecured claim for no more than $35 million, the maximum amount of PG&E's claim against Enron under its guaranty of EPMI's obligations. On the other hand, if BNL elects reimbursement, its unsecured claim against Enron Corp. is limited to $57.5 million, since BNL is not entitled to postpetition interest, costs or fees, and its claim against EPMI must be disallowed and expunged since BNL does not have a right to reimbursement from EPMI. BNL Responds According to Paul D. Leake, Esq., at Jones Day, in New York, the BNL Claims became fixed and liquidated on July 3, 2003, when BNL paid $65,806,272 to PG&E. The Claims were filed to protect BNL in the event it suffered losses attributable to the Letters of Credit issued to PG&E. The Letters of Credit were issued to PG&E as security for EPMI's obligations under the Master Agreement, which mutually obligates EPMI and PG&E. Among the mutual obligations was PG&E's liability for about $400 million in direct access credits. BNL believes that the Debtors simply ignore the relevant facts and its own fraudulent conduct when it objects to BNL's now fixed and liquidated claims. The Debtors also actively mislead in an improper attempt to portray the BNL Claims as a convoluted and complicated effort to achieve double recovery. The facts, however, cannot be concealed by redundant and confusing arguments. Mr. Leake points out that "PG&E owed Enron about $306 million more than Enron owed PG&E. After receiving $65,806,272 from BNL, however, in approving PG&E's $372 million settlement payment, the Court did not require an escrow for BNL's claim because it found that Enron would be able to satisfy BNL's claims 'subsequent to a determination of the merits of [BNL's] claims." Enron's goal is basically the retention of $65,806,272 that rightfully belongs to BNL, Mr. Leake alleges. Much of the Objection is an attempt to malign BNL for its November 30, 2001, decision to challenge PG&E's draw request; a decision made by BNL in good faith and that was expressly required by the NYUCC because of Enron's refusal to waive perceived discrepancies in the draw. If Enron waived the discrepancies, as BNL requested, then the draw would have been paid. Enron did not just fail to waive the discrepancies, Enron apparently agreed that the deficiencies existed as they later took the position that they had a claim against PG&E for wrongful draw and would have a claim against BNL for wrongful honor if it paid PG&E. Mr. Leake informs the Court that at the same time Enron requested extensions to Letters of Credit's maturity date, Enron also concealed from BNL material facts that, if known, would have precluded BNL from extending the Letters of Credit. In requesting the extensions, Enron did not disclose that: (i) EPMI had already terminated the Master Power Agreement with PG&E; (ii) EPMI and PG&E were already negotiating the proper calculation of debits and credits due as a result of the termination; (iii) Each of PG&E and EPMI had already alleged that the other was in breach of payment obligations under the terminated Master Agreement; (iv) EPMI had already applied amounts owed by PG&E against amounts it owed PG&E; (v) Enron had already taken the written position that PG&E owed EPMI over $400 million of direct access credits; (vi) EPMI would later take the position that it transferred the direct access credits to certain affiliates; or (vii) EPMI, in a calculated effort to reduce its secured claim against PG&E and thereby manufacture a supposed unsecured claim against EPMI, would later reverse its prior written position and assert that it had not setoff amounts owed by PG&E. With Enron's actions, the BNL Claims are supportable on numerous grounds under applicable contract, statutory, and common law, including: -- fraudulent concealment; -- fraudulent misrepresentation; -- negligent misrepresentation; -- unjust enrichment; -- quantum meruit; -- indemnity; -- fraudulent conveyance; -- breach of contract; and -- rights of subrogation. With Enron's cherry-picking of facts, it ignores most of the grounds for the BNL Claims. Enron only chooses to address BNL's right to recover against it for breach of contract and against EPMI by way of subrogation. The validity of the BNL Claims is, however, clear even when analyzed on Enron's attack on breach of contract and subrogation. Moreover, by attempting to join issue on some, but not all, of the grounds supporting the BNL Claims, Enron failed to even rebut the prima facie validity of the BNL Claims afforded by Rule 3001 of the Federal Rules of Bankruptcy Procedure. The merits of the BNL Claims are now before the Court and they are plain. It is therefore time for BNL's claims to be satisfied. Debtors Want New Claims Expunged Despite the passage of two years since the Bar Date, BNL seeks to assert, for the first time, new claims for: (a) fraudulent concealment, fraudulent misrepresentation and negligent misrepresentation -- the New Fraud Claims; (b) indemnity and quantum meruit -- the New Theory Claims; (c) fraudulent conveyance; and (d) unjust enrichment. For BNL to go through proper procedure for asserting the New Claims, it should have filed a motion for leave to: -- amend under Rule 15; or -- file a late claim under Rule 9006 of the Federal Rules of Bankruptcy Procedure due to "excusable neglect." The Debtors assert that the New Claims must be stricken because: (a) the New Fraud Claims, the fraudulent conveyance claim and the unjust enrichment claim -- the New Fact Claims -- cannot "relate back" to the filing of the Claims because they arise out of a different set of operative facts; (b) allowing amendment of Claims to add any of the New Claims at this late stage would be inequitable; (c) BNL cannot meet its burden of proving that its failure to assert the New Claims for nearly two years after the Bar Date was due to "excusable neglect"; and (d) BNL lacks standing to assert the fraudulent conveyance claim. BNL knew the facts related to the New Theory Claims at the time it filed its original claim in October 2002 and, since at least December 2002, has known the material facts regarding the New Fraud Claims. BNL has also known the facts underlying the fraudulent conveyance claim and the unjust enrichment claim since at least February 2004. Nevertheless, BNL failed to assert any of these claims prior to filing its response in October 2004. BNL has not proffered any explanation for its delay. Amendment at this time would prejudice the administration of the Debtors' estates, especially now that the Plan is confirmed and the Debtors have a deadline by which they must file all claim objections. Mr. Ryder argues that allowing BNL to assert the New Claims at this late stage, whether by amendment or filing a late claim, could potentially "open up the floodgates" for the filing of similar late claims. Moreover, Mr. Ryder continues, there is no basis for Judge Gonzalez to allow the New Claims to be filed late pursuant to Bankruptcy Rule 9006. BNL's failure to timely assert the New Claims was not due to "excusable neglect." A finding of excusable neglect is unwarranted because the timing of the filing of the New Claims was within BNL's control and BNL has failed to exercise reasonable diligence in raising the New Claims. Enron and EPMI believe that allowing the New Claims after the unexplained and lengthy delays would compromise their ability to complete their claims review and efficiently administer their estates and would be unfair to other creditors. Accordingly the Debtors ask the Court to issue an order: (a) precluding BNL from amending its Claims to include any of the New Claims; and (b) striking from BNL's Response all references to the New Claims. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. FEDERAL-MOGUL: Asbestos Property Damage Committee Objects to Plan ----------------------------------------------------------------- On behalf of the Official Committee of Asbestos Property Damage Claimants appointed in the chapter 11 cases of Federal-Mogul Corporation and its debtor-affiliates, Theodore J. Tacconelli, Esq., at Ferry Joseph & Pearce, in Wilmington, Delaware, asserts that the Plan cannot be confirmed for these reasons: (a) If neither the Company Voluntary Arrangements/Schemes nor Consensual Marketing Procedures are implemented, the Plan forces creditors with Class 6H claims against T&N Limited to participate in the claims adjudication process in the United Kingdom and be subject to U.K. insolvency law, even though their claims were filed with the Bankruptcy Court and are deemed allowed, unless objected to, pursuant to Section 502 of the Bankruptcy Code. Because the Plan transfers the claims allowance process from the Bankruptcy Court, the Plan violates Section 502 as well as Section 1129(a)(1); (b) The Debtors and the Official Committee of Unsecured Creditors breached their fiduciary duties to creditors of the U.K. Debtors by proposing a plan that effectively forecloses the possibility of a competitive auction process for the assets and business of the U.K. Debtors. As a consequence, the Debtors and the Creditors Committee violated Sections 1103 and 1107. As Plan Proponents, they violated the mandate of Section 1129(a)(2) by failing to comply with the applicable provisions of Chapter 11; (c) The Plan is designed to allow Federal-Mogul to acquire the assets of T&N at a bargain price to the detriment of Property Damage Claimants and other T&N creditors. Because the Plan does not seek to maximize the value of the U.K. Debtors for the benefit of the U.K. Debtors' creditors, it has not been proposed in good faith and cannot be confirmed pursuant to Section 1129(a)(3); (d) The Plan violates the "best interest of the creditors" test as set forth in Section 1129(a)(7) because Class 6 creditors will receive less under the Plan than they would receive in a Chapter 7 liquidation of T&N Limited; (e) The Plan violates the Absolute Priority Rule of Section 1129(b) because it: -- provides value to Federal-Mogul Corporation, the U.K. Debtors' parent, as prior equityholders; and -- grants warrants to out-of-the-money equityholders. (f) The Plan violates the unfair discrimination proscriptions of Section 1129(b) because other unsecured creditors will, or in some cases, may, get a greater recovery than will Class 6H creditors; (g) In violation of Section 1129(b), the Plan unfairly discriminates against Class 6H claimants of the U.K. Debtors by providing a greater recovery to asbestos personal injury claimants vis-a-vis the recovery to other, similarly situated unsecured creditors; and (g) The Plan excludes asbestos property damage claims from the trust established pursuant to Section 524(g). The Plan creates an Asbestos Personal Injury Trust, but fails to include all claims rising from damage caused by asbestos. A trust established pursuant to Section 524(g) must include all asbestos related claims. 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) FIRST HORIZON: S&P Places Low-B Ratings on 36 Certificate Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 21 classes of securities issued from nine First Horizon Mortgage Pass-Through Trust transactions. Simultaneously, ratings are affirmed on 348 classes from 25 transactions (including the nine aforementioned classes) from the same issuer. The raised ratings reflect a significant increase in credit support percentages to the mezzanine and subordinate classes due to the paydown of the senior classes, combined with the shifting interest feature of the transactions and very low losses. Credit support is provided by subordination. Additional loss protection is provided by mortgage insurance for loans with loan-to-value -- LTV -- ratios in excess of 80%, reducing the effective LTV ratios by paying up to 25% of the outstanding principal balance and terminating when the outstanding principal balance has reached 78% of the value of the property. The affirmations on the remaining classes reflect stable credit support percentages, very low losses, and rapid prepayments. Additionally, the affirmation for the First Horizon ABS Trust 2004-HE1 transaction is based solely upon credit support in the form of bond insurance provided by Financial Guaranty Insurance Co. ('AAA' financial strength rating). As of the January 2004 distribution date, total delinquencies range from 0.00% (series 2004-AR2, 2003-AR1, 2002-6, 2002-8, and 2002-AR1) to 16.12% (series 2000-H), and serious delinquencies range from 0.00% (for 19 of the 25 transactions) to 6.24% (series 2000-H). Cumulative realized losses are only found in series 2003-5 (0.14%) and series 2000-H (0.10%). The pools initially comprised fixed- and adjustable-rate prime nonconforming mortgage loans secured by first and second liens on owner occupied one- to four-family dwellings. First Horizon Home Loan Corp., which is ranked STRONG under Standard & Poor's Servicer Evaluations program and is also on Standard & Poor's Select Servicer list, is the servicer of these mortgage loans. Ratings Raised First Horizon Mortgage Pass-Through Trust Mortgage Pass-Thru Certs Rating Series Class To From ------ ----- -- ---- 2002-6 B-2 AAA AA+ 2002-6 B-3 AA+ AA- 2002-6 B-4 AA A- 2002-6 B-5 BBB+ BB 2002-8 B-1 AAA AA+ 2002-8 B-2 AA+ A+ 2002-8 B-3 AA- BBB+ 2002-9 B-1 AA+ AA 2002-9 B-2 A+ A 2002-AR1 B-1 AAA AA+ 2002-AR1 B-2 AA+ AA- 2002-AR1 B-3 A+ A- 2002-AR2 B-1 AAA AA 2002-AR2 B-2 AA A 2002-AR2 B-3 A- BBB 2003-2 B-1 AA+ AA 2003-2 B-2 A+ A 2003-2 B-3 BBB+ BBB 2003-AR1 B-1 AA+ AA 2003-AR1 B-2 AA- A 2003-AR1 B-3 BBB+ BBB Ratings Affirmed First Horizon Mortgage Pass-Through Trust Mortgage Pass-Thru Certs Series Class Rating ------ ----- ------ 2000-H I-A, I-A-R, II-A, III-A, IV-A AAA 2000-H I-B-1, II-B-1, III-B-1, IV-B-1, V-B-1 AAA 2000-H I-B-2, II-B-2, III-B-2, IV-B-2, V-B-2 AAA 2000-H D-B-3 AA+ 2002-6 I-A-3-I, I-A-3-II, I-A-R, II-A-1, B-1 AAA 2002-8 I-A-6, I-A-7, I-A-8, I-A-PO AAA 2002-8 II-A-1, II-A-R AAA 2002-9 I-A-1, I-A-2, I-A-3, I-A-R, II-A-1 AAA 2002-9 B-3 BBB 2002-AR1 I-A-1, II-A-1, III-A-1 AAA 2002-AR2 I-A-1, II-A-1, III-A-1 AAA 2003-2 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-2 I-A-12, I-A-RU, I-A-RL, II-A-1, II-A-2 AAA 2003-2 B-4 BB 2003-2 B-5 B 2003-3 1-A-1, 1-A-2, 1-A-3, 1-A-4, 1-A-5, 1-A-6 AAA 2003-3 I-A-RU, I-A-RL, II-A-1 AAA 2003-3 B-1 AA 2003-3 B-2 A 2003-3 B-3 BBB 2003-3 B-4 BB 2003-3 B-5 B 2003-4 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-4 I-A-7, I-A-8, I-A-9, I-A-10, I-A-11 AAA 2003-4 I-A-RU, I-A-RL, II-A-1, II-A-2, II-A-3 AAA 2003-4 B-1 AA 2003-4 B-2 A 2003-4 B-3 BBB 2003-4 B-4 BB 2003-4 B-5 B 2003-5 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-5 I-A-8, I-A-9, I-A-10, I-A-11 AAA 2003-5 I-A-12, I-A-13, I-A-14, I-A-15, I-A-16 AAA 2003-5 I-A-17, I-A-18, I-A-19, I-A-R, II-A-1 AAA 2003-5 II-A-2, II-A-3, III-A-1 AAA 2003-5 B-1 AA 2003-5 B-2 A 2003-5 B-3 BBB 2003-5 B-4 BB 2003-5 B-5 B 2003-6 A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8 AAA 2003-6 A-9, A-RU, A-RL AAA 2003-6 B-1 AA 2003-6 B-2 A 2003-6 B-3 BBB 2003-6 B-4 BB 2003-6 B-5 B 2003-7 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-7 I-A-7, I-A-8, I-A-9, I-A-10, I-A-11 AAA 2003-7 I-A-12, I-A-13, I-A-14, I-A-15, I-A-16 AAA 2003-7 I-A-17, I-A-18, I-A-19, I-A-20, I-A-21 AAA 2003-7 I-A-22, II-A-1 AAA 2003-7 B-1 AA 2003-7 B-2 A 2003-7 B-3 BBB 2003-7 B-4 BB 2003-7 B-5 B 2003-8 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-8 I-A-7, I-A-8, I-A-9, I-A-10, I-A-11 AAA 2003-8 I-A-12, I-A-13, I-A-14, I-A-15, I-A-16 AAA 2003-8 I-A-17, I-A-18, I-A-19, I-A-20, I-A-21 AAA 2003-8 I-A-22, I-A-23, I-A-24, I-A-25, I-A-26 AAA 2003-8 I-A-27, I-A-28, I-A-29, I-A-30, I-A-31 AAA 2003-8 I-A-32, I-A-33, I-A-34, I-A-35 AAA 2003-8 I-A-36, I-A-37, I-A-38, I-A-39, I-A-40 AAA 2003-8 I-A-41, I-A-42, I-A-43, I-A-44, I-A-45 AAA 2003-8 I-A-46, I-A-47, II-A-1 AAA 2003-8 B-1 AA 2003-8 B-2 A 2003-8 B-3 BBB 2003-8 B-4 BB 2003-8 B-5 B 2003-9 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2003-9 I-A-7, I-A-8, I-A-9, I-A-PO AAA 2003-9 I-A-10, I-A-11, I-A-12, II-A-1 AAA 2003-9 B-1 AA 2003-9 B-2 A 2003-9 B-3 BBB 2003-9 B-4 BB 2003-9 B-5 B 2003-AR1 I-A-1, II-A-1, II-A-R, III-A-1 AAA 2003-AR1 B-4 BB 2003-AR1 B-5 B 2003-AR2 I-A-1, II-A-1, II-A-R, III-A-1 AAA 2003-AR2 B-1 AA 2003-AR2 B-2 A 2003-AR2 B-3 BBB 2003-AR2 B-4 BB 2003-AR2 B-5 B 2003-AR3 I-A-1, II-A-1, II-A-R, III-A-1 AAA 2003-AR3 B-1 AA 2003-AR3 B-2 A 2003-AR3 B-3 BBB 2003-AR3 B-4 BB 2003-AR3 B-5 B 2004-AR1 I-A-1, II-A-1, II-A-RU, II-A-RL, III-A-1 AAA 2004-AR1 III-A-2 AAA 2004-AR1 B-1 AA 2004-AR1 B-2 A 2004-AR1 B-3 BBB 2004-AR1 B-4 BB 2004-AR1 B-5 B 2004-2 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2004-2 I-A-7, I-A-8, I-A-9, I-A-RU, I-A-RL AAA 2004-2 II-A-1, III-A-1 AAA 2004-2 B-1 AA 2004-2 B-2 A 2004-2 B-3 BBB 2004-2 B-4 BB 2004-2 B-5 B 2004-3 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5 AAA 2004-3 I-A-RU, I-A-RL, II-A-1 AAA 2004-3 B-1 AA 2004-3 B-2 A 2004-3 B-3 BBB 2004-3 B-4 BB 2004-3 B-5 B 2004-AR2 I-A-1, II-A-1, II-A-RU, II-A-RL, III-A-1 AAA 2004-AR2 IV-A-1 AAA 2004-AR2 B-1 AA 2004-AR2 B-2 A 2004-AR2 B-3 BBB 2004-AR2 B-4 BB 2004-AR2 B-5 B 2004-AR3 I-A-1, II-A-1, II-A-RU, II-A-RL, III-A-1 AAA 2004-AR3 IV-A-1 AAA 2004-AR3 B-1 AA 2004-AR3 B-2 A 2004-AR3 B-3 BBB 2004-AR3 B-4 BB 2004-AR3 B-5 B 2004-4 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A-6 AAA 2004-4 I-A-7, I-A-PO, I-A-RU, I-A-RL, II-A-1 AAA 2004-4 II-A-2, II-A-3, II-A-4 AAA 2004-4 B-1 AA 2004-4 B-2 A 2004-4 B-3 BBB 2004-4 B-4 BB 2004-4 B-5 B Ratings Affirmed First Horizon ABS Trust Series Class Rating ------ ----- ------ 2004-HE1 notes AAA Ratings Affirmed First Horizon Alternative Mortgage Pass-Through Trust Mortgage Pass-Thru Certs Series Class Rating ------ ----- ------ 2004-AA1 A-1, A-2, A-3, A-R AAA 2004-AA1 B-1 AA 2004-AA1 B-2 A 2004-AA1 B-3 BBB 2004-AA1 B-4 BB 2004-AA1 B-5 B GENERAL MILLS: Will Use Snack Ventures Deal Proceeds to Trim Debt ----------------------------------------------------------------- General Mills, Inc., and PepsiCo, Inc., reached a definitive agreement directing their Snack Ventures Europe joint venture to redeem General Mills' 40.5 percent ownership interest for $750 million. The transaction is expected to be completed in early 2005. General Mills intends to use after-tax proceeds from this transaction to reduce debt. As a result, the company now expects to significantly exceed its $675 million debt reduction target for fiscal 2005. General Mills also expects its 2005 net earnings per share to include a gain from the redemption of its interest in SVE. Excluding this one-time gain, General Mills reaffirmed its 2005 earnings target of $2.75 to $2.80 per share. General Mills, Inc., headquartered in Minneapolis, Minnesota, is a manufacturer of packaged food products. * * * As reported in the Troubled Company Reporter on Sept. 3, 2004, Moody's Investors Service affirmed the Baa2 senior unsecured and Prime-2 short-term ratings for General Mills. In addition, Moody's assigned a new prospective (P)Baa3 subordinated rating and (P)Ba1 preferred stock rating to the company's new $5.9 billion multi-seniority shelf registration. The shelf registration statement has not yet been declared effective. The rating outlook remains stable. GLOBAL CROSSING: Dist. Court Okays $325-Mil Securities Settlement ----------------------------------------------------------------- Judge Gerard Lynch of the United States District Court for the Southern District of New York approved "a $325 million settlement of a fraud suit accusing Global Crossing Ltd. founder Gary Winnick and other officials of inflating revenue at the defunct fiber-optic network operator," Bloomberg News reports. Judge Lynch finds the settlement "fair, reasonable, and adequate." According to David Glovin at Bloomberg, the pact calls for $245 million to settle securities-fraud claims and about $80 million for pension claims. Mr. Winnick will contribute $55 million; a former law firm for the company, Simpson, Thatcher & Bartlett, will pay $19 million and the company's insurance will cover the rest. Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on December 9, 2003. (Global Crossing Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) GLOBALNET CORP: Independent Accountants Raises Going Concern Doubt ------------------------------------------------------------------ GlobalNet Corporation has negative working capital at September 30, 2004, and December 31, 2003, and has experienced negative operating cash flows as well as continuing net losses for the nine months ended September 30, 2004, and for the twelve months ended December 31, 2003 and December 31, 2002. Additionally, the Company has experienced significant operating losses since its inception. The Company is also in default on several notes payable. Management filed Chapter 11 bankruptcy for its subsidiary in June 2004 and is currently renegotiating or in the process of curing these defaults, however the Company may still incur late fees and additional extension fees to cure the defaults that exist under GlobalNet Corporation. Management also believes that it may require additional financing to cure the defaults. Management's focus continues to target a reduction in operating expenses, improving network efficiencies, raising margins and increasing revenues from new and existing customers in order to enhance the internal generation of cash flows. The recent bankruptcy filing has lead to a further reduction in the stability of existing sales and related margins. Management believes that finding alternative carriers with higher margins is a requirement for the survival of the Company. As such, new focus has been placed internally to meet those requirements. Management is also exploring different alternatives to address its short-term and long-term financing needs, including raising equity and debt financings. There can be no assurances, however, that the Company will be successful in implementing any of these alternatives Substantial doubt about the Company's ability to continue as a going concern was expressed in an explanatory paragraph in the Company's report from its independent public accountants, which accompanied the Company's Annual Report on Form 10-KSB. Headquartered in New York, New York, Globalstar Telecommunications -- http://www.globalstar.com/-- provides global mobile and fixed wireless voice and data services. The Company filed for chapter 11 protection on June 30, 2004 (Bankr. S.D.N.Y. Case No. 04-14480). Robert R. Leinwand, Esq., at Robinson Brog Leinwand Greene Genovese & Gluck P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it did not disclose its assets but listed $1,823,799,468 in total debts. GOODMAN GLOBAL: Moody's Junks $450M Senior Subordinated Notes ------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Goodman Global Holdings Inc.'s new senior credit facilities along with a B2 senior implied rating and a SGL-2 rating. The outlook is stable. The ratings consider: (1) Goodman's high leverage, (2) low interest coverage, (3) seasonality, (4) working capital swings, (5) expected higher raw materials pricing, and (6) the competitive nature of the heating, ventilation, and air conditioning -- HVAC -- business. The ratings also consider the company's impressive market share, and expectations for improving cash flow generation. The SGL-2, speculative grade liquidity rating reflects: (1) the company's good liquidity, (2) adequate revolver availability, and (3) lack of immediate short term debt maturities. Ratings assigned are: * $150 million senior secured revolving credit facility due 2010, rated at B2; * $350 million senior secured term loan B due 2011, rated at B2; * $200 million senior unsecured floating rate notes due 2012, rated at B3; * $450 million senior subordinated notes due 2012, rated at Caa1; * Senior Implied rated at B2; * Issuer rating at Caa1. Proceeds from the $350 million term loan B along with the $200 million of senior unsecured floating rate notes, $450 million of senior subordinated notes, and $478 million of contributed equity from Apollo Management, L.P., senior management, as well as rollover capital by the Goodman family, will go towards funding the $1.4 billion asset purchase of substantially all the assets, equity interests, direct and indirect subsidiaries, as well as certain other assets, from Goodman Global Holdings, Inc. The revolver is expected to be undrawn at closing but will have almost $40 million of non-trade letters of credit outstanding at close. The SGL-2 rating indicates good liquidity for the next twelve months with, solid revolver availability despite some, significant quarterly seasonal working capital swings. Alternative liquidity options are limited as all assets will be encumbered. The company benefits from low capital expenditures relative to its size and consistent positive cash flow generation. Capital spending is currently anticipated to be around $50 million for 2005 and return to maintenance levels for 2006 of up to $25 million. The company's peak period of working capital usage is its first and second quarters. The company's sales are strongest in the second and third quarters due to seasonal swings. In the recent third quarter results, the company reported year over year revenue improvement of 8.5% due to growth in their distribution channels and favorable market conditions within the HVAC industry. Moody's expects the company to have modest free cash flow after capital expenditures for the first half of 2005 as the first two quarters are the weakest in terms of cash flow generation due to the seasonal buildup of inventories and accounts receivable. Accounts receivables peak in the second quarter and third quarters. For the full twelve months forecast period, Moody's expects Goodman to have free cash flow in the area of $48 to $55 million. Should there be, however, a substantial further increase in raw material costs or unfavorable weather conditions, cash flow generation could be pressured. The ratings are constrained by the company's initial very high leverage. On a proforma basis, total debt will equal $1 billion and compares with reported LTM EBITDA of $140 million for a debt to EBITDA coverage ratio of 6.1 times adjusted for various one- time items and 7.1 times on an as reported basis. Increases in raw material prices, primarily steel and copper, have been a concern and may negatively impact EBITDA margins which declined to 10.9% in 2003 from 11.8% in 2002 on an as reported basis. For the LTM period thorough September the company's EBITDA margins were basically static at 10.8%, also on an as reported basis. The company has announced 4% to 9% price increases effective January 1, 2005. This follows a 5% price increase that became effective September 1, 2004. The company's competitors have also been raising their prices. The company is expected to generate low levels of free cash flow relative to its initial debt levels. For 2005, Moody's anticipates that the company's free cash flow to total debt will be in the area of 5%. However, Moody's notes that capital expenditures of about $50 million in 2005 compares with almost $28 million in 2004 and that majority of the difference mostly reflects the investment in 13 seer related manufacturing capacity. The company has a stated goal of deleveraging as quickly as possible. Growth from expanded market shares attributed to new seer 13 installations is expected to improve free cash flow as a percent of debt to over 10% for FY 2006, if market conditions hold. If interest rates rise, the floating rate notes could become a larger drag on the company's free cash flow. These notes are callable after 2 years. The ratings benefit from the company's position as the second largest domestic manufacturer of HVAC, products for residential and commercial use. The company's products are typically more attractively priced than its competitors and its warranty history suggests a competitive value offering. The company's business is driven by a very large replacement market with over 60% of units sold serving as replacements of existing units. The company enjoys an expansive distribution network with over 725 distribution points including 113 company owned stores and over 140 independent distributors. The ratings consider the company's diversified customer base with no single customer representing over 6% of net sales and with the top 10 customers believed to represent less than 25% of sales. The company also offers a wide range of products within its industry segment. Its split systems represented 38.7% of LTM revenues through September 30, 2004. Moody's understands that the federally mandated move to the new 13 seer standard is an opportunity for Goodman to gain market share thorough its value pricing because 13 seer units will likely be more expensive than the current 10 seer models industry wide. Hence, as builders and contractors seek to limit the cost of HVAC systems and as residential consumers seek to improve their efficiency levels, Goodman's prices may be the hook. The company believes it is the low cost provider in the industry. Moody's considers this an important benefit given the coming mandated 13-seer industry standard and its potential impact on competitors manufacturing and pricing strategies. The $500 million senior secured credit facilities will be fully and unconditionally guaranteed on a joint and several basis by all of the existing and future direct and indirect domestic subsidiaries of the borrower. The facilities will be secured by a perfected first priority pledge on all of the equity interests of the borrower unless these are classified as unrestricted subsidiaries. Amortization on the term loan will be 1% annually, payable in quarterly installments, with the balance due at maturity. The facilities will benefit from a 50% excess cash flow sweep, 100% of debt issuances, and 100% of any asset sales. The revolving credit facility is to have a maximum letters of credit level not to exceed $50 million. The $200 million senior unsecured floating rate notes mature in 2012 and are structurally subordinated to secured debt of the Issuer. All of Goodman's existing and future domestic restricted subsidiaries that guarantee the new senior secured credit facilities will also guarantee the senior unsecured floating rate notes. The $450 million senior fixed subordinated notes due 2012 are unsecured senior subordinated obligations of the company. These notes are also unconditionally guaranteed on an unsecured senior subordinated basis and were rated at the Caa1 level to reflect their contractual subordinated position in the capital structure. The senior unsecured issuer rating has also been rated at the Caa1 level despite the fact that any unsecured debt would not benefit from any upstream subsidiary guarantees as does the rest of the debt in the proposed capital structure, however, due to the anticipated lack of any tangible asset coverage and questionable enterprise coverage in a distress scenario, the issuer rating has not been notched below the senior subordinated notes. The ratings and or outlook may improve if the company successfully gains market share and is able to translate expected market share gains into higher free cash flow. A ratings upgrade would be likely if the company was able to reduce its total debt to EBITDA to less than 5 times, generate free cash flow equal to at least 8% of outstanding debt on a sustainable basis, and improve its interest coverage to above 3 times. These targets compare with proforma estimates of just over 6 times for debt to adjusted EBITDA, 6.6% for free cash flow, and around 2.2 times for adjusted EBITDA coverage of interest. The ratings or outlook could deteriorate if the company was to lose one of its various lawsuits or its existing insurance liability coverage was to become insufficient to minimize the impact of any potential legal settlements. Over the long term, changes in regulation may also affect the company's margins, particularly, as it relates to refrigerant usage and the associated costs of any replacement product. However, this risk is not likely to affect the rating over the intermediate term. Goodman Global Holdings, Inc., located in Houston, Texas, is the second largest domestic manufacturer of heating, ventilation and air conditioning, or HVAC, products for residential and commercial use. Total revenues for 2004 are estimated to be in the area of $1.3 billion while adjusted EBITDA is expected to be over $160 million. GRACE INDUSTRIES: Wants Access to $1.4 Million of Cash Collateral ----------------------------------------------------------------- Grace Industries, Inc., and its debtor-affiliate ask the U.S. Bankruptcy Court for the Eastern District of New York for authority to use cash collateral securing repayment of obligations to their secured lender St. Paul Fire and Marine Insurance Company and its affiliates to avoid immediate and irreparable harm to their estates. The Debtors urge the Court to grant them access to St. Paul's cash collateral in accordance with a weekly budget projecting: For the Week Ending ----------------------------------------------- 12/12 12/19 12/26 1/2 ---------- --------- ---------- -------- Revenues $2,278,762 $ 687,106 $2,679,169 $315,000 Labor/Equipment 1,542,500 817,500 1,930,000 165,000 Job Costs 96,275 53,000 45,000 46,775 Payroll 45,120 45,120 91,540 46,660 Loans/Leases 98,737 157,730 98,737 --------- -------- --------- ------- Total 783,844 (386,244) 612,629 (42,172) St. Paul serves as the surety holder of 19 active government projects currently undertaken by the Debtors. St. Paul has approximately $85 million worth of performance and payment bonds outstanding on these projects. The Debtors owe St. Paul $5.6 million and the obligation is secured by first priority liens on substantially all of Grace's assets, inventory, accounts receivable, machinery and equipment. The value of these assets approximates $20 million. The Debtors tell the Court that St. Paul loaned and advanced premiums to them totaling $6.2 million to help finance their projects including the World Trade Center clean-up. This indebtedness is secured by a second mortgage on a real property owned by Grace Industries' affiliate located in 151-21 6th Road in Whitestone. The property's estimated value is at least $40 million. The Debtors explain that they have never defaulted on their payments to St. Paul and their indebtedness is over secured. They alleged that St. Paul wants to take over their business operations by refusing to grant the Debtors access to their accounts receivable and available funds of $1.4 million. This move by St. Paul causes the Debtors to default on profitable jobs they are presently performing. According to the Debtors, St. Paul's representative Matthew Silverstein has advised them that it will not authorize any more borrowings unless a "joint control agreement" is reached. St. Paul also objected to the Debtors' plan to liquidate their asphalt plant for $12 million. Headquartered in Whitestone, New York, Grace Industries Inc. -- http://www.graceindustriesinc.com/-- specializes in asphalt manufacturing & paving, concrete paving; airport, highway & bridge construction; electrical, interior & exterior engineering & design; demolition, foundations, piling, real estate, and roads, sewer and water main construction. The Company filed for chapter 11 protection on Dec. 6, 2004 (Bankr. E.D.N.Y. Case No. 04-27013). Matthew G. Roseman, Esq., at Cullen and Dykman Bleakley Platt LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $46 million in total assets and $30 million in total debts. GRACE INDUSTRIES: Section 341(a) Meeting Slated for January 3 ------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of Grace Industries, Inc., and its debtor-affiliate's creditors at 10:30 a.m., on Jan. 3, 2005, at 33 Whitehall Street in New York, New York. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Whitestone, New York, Grace Industries Inc. -- http://www.graceindustriesinc.com/-- specializes in asphalt manufacturing & paving, concrete paving; airport, highway & bridge construction; electrical, interior & exterior engineering & design; demolition, foundations, piling, real estate, and roads, sewer and water main construction. The Company filed for chapter 11 proctetion on Dec. 6, 2004 (Bankr. E.D.N.Y. Case No. 04-27013). Matthew G. Roseman, Esq., at Cullen and Dykman Bleakley Platt LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $46 million in total assets and $30 million in total debts. GREEN TREE FINANCIAL: Moody's Junks Twelve Certificate Classes -------------------------------------------------------------- Moody's Investors Service has downgraded certain senior, mezzanine and subordinate certificates of 20 Green Tree Financial Corp. (subsequently Conseco Finance Corp.) manufactured housing securitizations. The transactions are currently being serviced by Green Tree Investment Holdings II LLC, which bought the MH servicing platform of Conseco Finance in 2003. Moody's previously downgraded the senior, mezzanine and subordinate certificates of 44 Green Tree's 1992-1998 securitizations in December 2003 and 13 Conseco's 1999-2002 securitizations in December 2003 and August 2004. The rating actions were prompted by the continued performance deterioration of Green Tree pools and the resulting erosion of credit support. The current review is prompted by the continued weaker-than- expected performance of Green Tree's pools. Although repossessions and loss severities have decreased, the improvement has been slower than expected. As a result, losses remain high and credit support continues to erode. The B-2 classes of many of the pools have been completely written down. Green Tree Investment Holdings II LLC is a joint venture between Fortress Investment Group LLC and Cerberus Capital Management. The complete ratings actions are: Issuer: Green Tree Financial Corporation Series 1993-2: * 8.00% Class B Certificates, downgraded from B3 to Caa1 Series 1996-3: * 7.70% Class M-1 Certificates, downgraded from B1 to B2 Series 1996-4: * 7.40% Class A-6 Certificates, downgraded from Aa3 to A2 * 7.90% Class A-7 Certificates, downgraded from Aa3 to A2 * 7.75% Class M-1 Certificates, downgraded from B2 to B3 Series 1996-5: * 8.05% Class M-1 Certificates, downgraded from B2 to B3 Series 1996-6: * 7.95% Class M-1 Certificates, downgraded from Ba3 to B3 Series 1996-7: * 7.70% Class M-1 Certificates, downgraded from Ba1 to B1 * 7.70% Class B-1 Certificates, downgraded from Ca to C Series 1996-8: * 7.85% Class M-1 Certificates, downgraded from B1 to B3 Series 1996-9: * 7.63% Class M-1 Certificates, downgraded from B1 to B2 * 7.65% Class B-1 Certificates, downgraded from Ca to C Series 1997-1: * 6.86% Class A-5 Certificates, downgraded from A1 to A2 * 7.29% Class A-6 Certificates, downgraded from A1 to A2 * 7.22% Class M-1 Certificates, downgraded from B1 to B3 * 7.23% Class B-1 Certificates, downgraded from Ca to C Series 1997-2: * 7.24% Class A-6 Certificates, downgraded from A3 to Baa1 * 7.62% Class A-7 Certificates, downgraded from A3 to Baa1 * 7.54% Class M-1 Certificates, downgraded from B2 to Caa1 Series 1997-3: * 7.14% Class A-5 Certificates, downgraded from A3 to Baa1 * 7.32% Class A-6 Certificates, downgraded from A3 to Baa1 * 7.64% Class A-7 Certificates, downgraded from A3 to Baa1 * 7.53% Class M-1 Certificates downgraded from B2 to Caa1 Series 1997-4: * 6.88% Class A-5 Certificates, downgraded from A2 to A3 * 7.03% Class A-6 Certificates, downgraded from A2 to A3 * 7.36% Class A-7 Certificates, downgraded from A2 to A3 * 7.22% Class M-1 Certificates, downgraded from B1 to B3 Series 1997-5: * 6.62% Class A-5 Certificates, downgraded from Aa3 to A2 * 6.82% Class A-6 Certificates, downgraded from Aa3 to A2 * 7.13% Class A-7 Certificates, downgraded from Aa3 to A2 * 6.95% Class M-1 Certificates, downgraded from Ba3 to B2 * 6.97% Class B-1 Certificates, downgraded from Ca to C Series 1997-7: * 7.03% Class M-1 Certificates, downgraded from B1 to B3 Series 1998-1: * 6.04% Class A-4 Certificates, downgraded from A3 to Baa2 * 6.68% Class A-5 Certificates, downgraded from A3 to Baa2 * 6.33% Class A-6 Certificates, downgraded from A3 to Baa2 * 6.77% Class M-1 Certificates, downgraded from B1 to B3 Series 1998-2: * 6.24% Class A-5 Certificates, downgraded from Baa1 to Baa3 * 6.81% Class A-6 Certificates, downgraded from Baa1 to Baa3 * 6.94% Class M-1 Certificates, downgraded from B2 to Caa1 Series 1998-4: * 6.18% Class A-5 Certificates, downgraded from Baa2 to Baa3 * 6.53% Class A-6 Certificates, downgraded from Baa2 to Baa3 * 6.87% Class A-7 Certificates, downgraded from Baa2 to Baa3 * 6.83% Class M-1 Certificates, downgraded from Caa1 to Caa2 Series 1998-5: * 6.54% Class A-1 Certificates, downgraded from Baa1 to Baa3 * 6.71% Class M-1 Certificates, downgraded from B2 to Caa1 Series 1998-7: * 6.32% Class A-1 Certificates, downgraded from Baa1 to Baa3 * 6.40% Class M-1 Certificates, downgraded from Ba3 to B3 * 6.84% Class M-2 Certificates, downgraded from B3 to Caa2 Series 1998-8: * 6.28% Class A-1 Certificates, downgraded from Baa1 to Baa3 * 6.98% Class M-1 Certificates, downgraded from Ba3 to B3 * 7.08% Class M-2 Certificates, downgraded from Caa2 to Ca HANOVER DIRECT: Gets Delisting Notice from American Stock Exchange ------------------------------------------------------------------ Hanover Direct, Inc., (Amex: HNV) received a letter from the American Stock Exchange dated Dec. 9, 2004, notifying the Company that it has failed to satisfy an additional continued listing standard. Specifically, the Company has yet to file its Quarterly Report on Form 10-Q for the fiscal quarter ended Sept. 25, 2004, which is a condition for the Company's continued listing on the Exchange, as required by Sections 234 and 1101 of the Company Guide, and is a material violation of its listing agreement with the Exchange. Therefore, pursuant to Section 1003(d) of the Company Guide, the Exchange is authorized to suspend and, unless prompt corrective action is taken, remove the Company's securities from the Exchange. The Exchange advised that if the Company is not in compliance with the aforementioned filing requirements by Dec. 31, 2004, the Exchange staff will initiate delisting proceedings as appropriate. Also, should the Company regain compliance with the filing requirements prior to Dec. 31, 2004, the Exchange staff will review the filing to determine whether the Company is making progress consistent with the plan. On completion of its review, the Exchange staff may take action including the initiation of delisting proceedings. The Company may appeal a staff determination to initiate delisting proceedings in accordance with Section 1010 of the Company Guide. As previously reported, on Nov. 17, 2004, the Company announced that the Audit Committee of the Board of Directors of the Company is investigating two financial statement matters previously disclosed by the Company and other accounting-related matters with the assistance of independent outside counsel. The Company does not believe the investigation will be completed by Dec. 31, 2004, and has so advised the Exchange. The Company understands that the Audit Committee may receive at least a preliminary report by mid-January 2005 and cannot predict the outcome of that report or any additional adjustments to its financial statements that may be necessitated thereby. However, the Company intends to file its Quarterly Report on Form 10-Q for the fiscal quarter ended Sept. 25, 2004, as promptly as practicable following the conclusion of the investigation. There can be no assurance that the Company will be able to maintain the listing of its Common Stock on the American Stock Exchange. About the Company Hanover Direct, Inc., (Amex: HNV) and its business units provide quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers, as well as a comprehensive range of Internet, e-commerce, and fulfillment services to businesses. The Company's catalog and Internet portfolio of home fashions, apparel and gift brands include Domestications, The Company Store, Company Kids, Silhouettes, International Male, Scandia Down, and Gump's By Mail. The Company owns Gump's, a retail store based in San Francisco. Each brand can be accessed on the Internet individually by name. Keystone Internet Services, LLC -- http://www.keystoneinternet.com/-- the Company's third party fulfillment operation, also provides the logistical, IT and fulfillment needs of the Company's catalogs and web sites. Information on Hanover Direct, including each of its subsidiaries, can be accessed on the Internet at http://www.hanoverdirect.com/ At June 26, 2004, Hanover Direct's balance sheet showed a $46,503,000 stockholders' deficit, compared to a $47,629,000 deficit at December 27, 2003. HAYES LEMMERZ: Wants to Correct Arithmetic Error in Modified Plan ----------------------------------------------------------------- The HLI Creditor Trust -- a trust created by a trust agreement dated June 3, 2003, between Hayes Lemmerz International and its debtor-affiliates, and Avidity Partners, LLC, as Trustee, to litigate Trust Claims and make distributions of Trust Recoveries in accordance with the Debtors' Modified Plan --, Wells Fargo Bank, N.A., as indenture trustee, and U.S. Bank National Association, successor-in-interest to U.S. Bank Trust National Association, as indenture trustee, ask the United States Bankruptcy Court for the District of Delaware to: (a) correct an arithmetic error in the Modified Plan; and (b) approve the allocation of the Allowed Class 6 Claim amounts among the Subordinated Note Claims based on the corrected amount. On the Creditor Trust's behalf, Linda Richenderfer, Esq., at Saul Ewing, in Wilmington, Delaware, relates that: (1) Wells Fargo is indenture trustee for: -- the Debtors' 9-1/8% Senior Subordinated Notes due June 2007; -- the Debtors' 9-1/8% Senior Subordinated Notes due July 2007; -- the Debtors' 8-1/4% Senior Subordinated Notes due December 2008; and (2) U.S. Bank is indenture trustee for the Debtors' 11% Senior Subordinated Notes due 2006. Pursuant to the Modified Plan, all claims relating to the Subordinated Notes were placed in Class 6. As confirmed, the Modified Plan states that the Subordinated Note Claims are deemed Allowed Class 6 Claims, aggregating $885,919,552. Ms. Richenderfer clarifies that the Modified Plan did not allocate the $885,919,552 among the Subordinated Notes. The Modified Plan states that the $885,919,552 should be allocated on a pro rata basis. The Modified Plan defines "Pro Rata" to mean "the proportion that the principal face amount of Subordinated Notes held by the holder of a Claim in Class 6 bears to the aggregate principal face amount of the Subordinated Notes." The Trust is charged with making distributions to the holders of Allowed Class 6 Claims. In preparing for making distributions, the Trust discovered that the Allowed Class 6 Claims did not match the principal amounts of the Subordinated Notes, in that a Pro Rata distribution did not divide evenly. The Trust and the Indenture Trustees learned that there had been an arithmetic error in the Modified Plan and that the correct aggregate amount of Allowed Class 6 Claims is $885,646,238, not $885,919,552, after giving effect to the cash payments made to the Indenture Trustees under the Modified Plan and stipulations between the Debtors and the Indenture Trustees. Thus, Ms. Richenderfer asserts that it is necessary to allocate the Allowed Class 6 Claims among the Subordinated Note Claims based on the corrected aggregate amount of $885,646,238. The Trust and the Indenture Trustees ask the Court to approve the allocation of Allowed Class 6 Claims among the Subordinated Note Claims based on the corrected aggregate amount of $885,646,238, as: Notes Amount ----- ------ June 2007 Notes $225,605,604 July 2007 Notes $147,353,816 2008 Notes $233,097,957 2006 Notes $249,588,861 Hayes Lemmerz International, Inc., is a world leading global supplier of automotive and commercial highway wheels, brakes, powertrain, suspension, structural and other lightweight components. The Company filed for chapter 11 protection on December 5, 2001 (Bankr. D. Dela. Case No. 01-11490). Eric Ivester, Esq. at Skadden, Arps, Slate, Meager & Flom and Mark S. Chehi, Esq. at Skadden, Arps, Slate, Meager & Flom represent the Debtors' in their restructuring efforts. (Hayes Lemmerz Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) HUFFY CORP: Has Until Jan. 11 to Make Lease-Related Decisions ------------------------------------------------------------- The Honorable Lawrence S. Walter of the U.S. Bankruptcy Court for the Southern District of Ohio entered a bridge order extending, until January 11, 2005, the period within which Huffy Corporation and its debtor-affiliates can elect to assume, assume and assign, or reject their unexpired nonresidential real property leases. This is the Debtors' first extension of their lease decision period. The Debtors tell the Court that they are parties to several unexpired nonresidential properties located in several states, consisting mostly of their corporate offices, product line operations, and distribution and warehouse facilities. The Debtors relate that they are still in the process of evaluating their business needs in relation to their reorganization efforts. The Debtors argued that the extension would give them more time to determine which of the unexpired leases are the most beneficial to their estates in terms of deciding whether to assume or reject the unexpired leases. The Debtors assure Judge Walter that the extension will not prejudice the lessors and other parties in interest under the leases and they are current on all postpetition obligations under the leases. The Court's bridge order merely maintains the status quo of the Debtors' unexpired leases pending the Court's final decision on the Debtors' original motion to extend their lease decisions period until March 19, 2005. The Court will convene a hearing at 10:00 a.m., on Jan. 11, 2005, to consider the Debtors' original motion. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. HUFFY CORP: Committee Taps PwC Corporate Finance as Fin'l Advisor ----------------------------------------------------------------- The Official Committee of Unsecured Creditors in Huffy Corporation and its debtor-affiliates' chapter 11 proceedings asks the U.S. Bankruptcy Court for the Southern District of Ohio for permission to employ PricewaterhouseCoopers Corporate Finance LLC as its financial advisor. PricewaterhouseCoopers is expected to: a) review and analyze the Debtors' businesses, operations and financial condition including current and projected liquidity position of the Debtors; b) evaluate the Debtors' business plan and its corresponding financial projections; c) analyze the values available to the Committee members under various alternatives, including a review of M&A opportunities, potential strategic and financial buyers and estimated sale proceeds; d) assist the Committee with tactics and strategy for negotiating with the Debtors and other constituents; e) participate with the Committee in meetings and negotiations with the Debtors and other constituents in connection with restructuring plans; f) advise the Committee as to the timing, nature and terms of new securities, other considerations or other inducements to be offered pursuant to a restructuring; h) assist in the review and preparation of information and analysis necessary for the confirmation of a plan of reorganization; h) assist in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; and i) perform other necessary restructuring related services as requested by the Committee. Sudhin Roy, a Managing Director at PricewaterhouseCoopers, discloses that the Firm does not have hourly rates of compensation for professionals performing services to the Committee. Mr. Roy reports that PricewaterhouseCoopers compensation consist of: a) a monthly non-refundable fee of $75,000 commencing from November 3, 2004 until the termination of the Engagement Agreement between the Debtors and PricewaterhouseCoopers; and b) a Restructuring Fee equal to two percent but not exceeding $750,000 for any consideration received or retained by the holders of general prepetition claims against the Debtor in the event a restructuring of the Debtors' business is consummated. PricewaterhouseCoopers assures the Court that it does not represent any interest adverse to the Committee, the Debtors or their estates. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. IMAX CORP: Settles Litigation with United Cinemas' Former Owners ---------------------------------------------------------------- IMAX Corporation (Nasdaq:IMAX; TSX:IMX) settled a previously disclosed litigation with the former owners of United Cinemas International Multiplex B.V. -- UCI, an operator of multiplex theatres based in the United Kingdom. The majority of UCI's theatrical exhibition operations, and related entities, were recently sold to a private equity firm in the U.K. The specific terms of the settlement were not disclosed other than that the Company will receive cash payments in the fourth quarter of 2004 and first quarter of 2005. "We are extremely pleased with this settlement agreement," said IMAX's Co-Chairmen and Co-Chief Executive Officers Richard L. Gelfond and Bradley J. Wechsler. "The cash that we will receive increases our financial flexibility and will help us to continue to execute on our strategic plan of growing the number of IMAX(R) theatres around the world and making IMAX venues the place to see Hollywood's biggest event films." Added Messrs. Gelfond and Wechsler, "Because of this settlement, the success of The Polar Express: An IMAX 3D Experience, and other factors, we now expect to exceed our previous earnings guidance of $0.23 of net income per share ($0.25 prior to refinancing costs) for 2004." About IMAX Corporation Founded in 1967, IMAX Corporation -- http://www.imax.com/-- is one of the world's entertainment technology companies. IMAX's businesses include the creation and delivery of the world's cinematic presentations using proprietary IMAX and IMAX 3D technology, and the development of digital production and presentation. IMAX has developed revolutionary technology called IMAX DMR (Digital Re-mastering) that makes it possible for virtually any 35mm film to be transformed into the unparalleled image and sound quality of The IMAX Experience(R). The IMAX brand is recognized throughout the world for extraordinary and immersive family entertainment experiences. As of September 30, 2004, there were more than 235 IMAX theatres operating in 35 countries. IMAX(R), IMAX DMR(R) and The IMAX Experience(R) are trademarks of IMAX Corporation. At September 30, 2004, the company's stockholders' deficit narrowed to $49,145,000 compared to a $51,776,000 deficit at December 31, 2003. INN OF THE MOUNTAIN: 2nd Quarter Revenues Up 12.6% from Last Year ----------------------------------------------------------------- Inn of the Mountain Gods Resort and Casino, a business enterprise of the Mescalero Apache Tribe, reported that net revenue for its fiscal quarter ended Oct. 31, 2004, was $23.2 million, an increase of $2.6 million, or 12.6%, from $20.6 million for the prior-year second fiscal quarter. Adjusted EBITDA for the quarter ended Oct. 31, 2004 was $9.0 million, an increase of $1.6 million, or 21.6%, from $7.4 million for the prior-year period. The increase in net revenue was primarily attributable to a growth in gaming revenue during the period, which was 7.6% higher than last year's second fiscal quarter, as well as a continuing increase in revenue from retail operations located at the Travel Center, which opened in May 2003. For the quarter ended Oct. 31, 2004, the average gross slot win per unit per day was $154 (on a weighted average number of slot machines of 1,180) versus last year's second quarter of $149 (on a weighted average number of slot machines of 1,180). The average table game win per unit per day for the period was $691 versus last year's second quarter of $596. The weighted average number of table games was 38 for each of the comparable quarters. The increase in retail revenue reflects year-over-year increases in the sales from refueling stations and smoke shop, which offer favorable product pricing relative to other competitors, and to the operation of our convenience store. Michael French, Chief Operating Officer of IMGRC, in commenting on the quarter, stated: "Our continued growth in revenue and earnings is particularly satisfying. We are also pleased with the progress of our marketing and operating plans, which are on schedule for the new resort opening." Mr. French went on to say, "Our project liquidity also remains positive as we near the completion of our resort." Construction of IMGRC's new resort and casino is on schedule. Construction costs incurred on the resort's fixed-price contract through October 31, 2004, were $131 million, leaving the remaining costs of $10 million, which will be incurred prior to the resort opening in April 2005. Also, there are previously announced scope changes totaling $5 million relating to the build out of additional guest rooms, meeting rooms, a fitness center and an indoor swimming pool, which will be completed by the opening in April 2005. About the Company IMGRC is a business enterprise of the Tribe, a federally recognized Indian tribe with an approximately 725-square-mile reservation situated in the Sacramento Mountains in south-central New Mexico. IMGRC includes all of the resort enterprises of the Tribe, including Casino Apache, Casino Apache Travel Center, Ski Apache and a new resort project, currently under construction which, upon completion, will include a 273-room hotel, a new 38,000-square-foot casino (replacing the existing Casino Apache), a fitness center and indoor swimming pool, and a 37,000-square- foot convention and special events center, which will include capacity for 17,000 square feet of divisible meeting room space. * * * As reported in the Troubled Company Reporter on Aug. 25, 2004, Moody's Investors Service raised the ratings of Inn of the Mountain Gods Resort and Casino in response to the Department of Interior's recent approval of the Mescalero Apache Tribe's new gaming compact with the State of New Mexico, and IMG's recent payment of $23 million to the State of New Mexico as required by the compact settlement agreement that was reached in April 2004. The rating outlook is stable. The following ratings were raised: -- $200 million 12% senior unsecured notes due 2010, to B3 from Caa1 -- Senior implied rating, to B3 from Caa1; and -- Senior unsecured issuer rating, to B3 from Caa1. INTL IMAGING: Losses & Deficits Raise Going Concern Doubts ---------------------------------------------------------- International Imaging System, Inc.'s net loss from operations, negative working capital, and a capital deficiency are issues that raise substantial doubt about the Company's ability to continue as a going concern. As of June 30, 2004, International Imaging reported $720,045 in total assets and a stockholders' deficit totaling $724,022. Management has taken steps to achieve profitable operations by restructuring its sales pricing policies and production methods. In addition, the Company is pursuing negotiations with private and institutional lenders to secure additional working capital in the form of some combination of equity and debt. The Company financed its operations during the six-month period ended June 30, 2004, through revenues from operations and shareholder advances of $304,500. As of June 30, 2004, the Company's principal sources of liquidity consisted of accounts receivable of $389,450. The Company believes that the timely collection of such accounts receivable, together with expected revenues from operations, must be supplemented by additional capital from both existing and new shareholders in order to maintain its operations at current levels and to expand its operations. There can be no assurance that it will be able to find sources of financing on terms acceptable to it, if at all. If the Company does not find sources to finance the activities, it will be unable to expand operations, and may have to curtail certain of its current activities. International Imaging System, Inc., through its wholly owned subsidiary, Advanced Imaging Systems, LLC, is principally engaged in the manufacture and sale of telephone credit cards, check cashing cards and security cards of all types. The Company markets such products domestically and abroad. The Company also markets pre-owned, brand name photocopier machines for an unrelated party. IWO ESCROW: S&P Junks $150M Senior Secured & $75M Discount Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' corporate credit rating to IWO Escrow Co. The outlook is positive. The company is a newly formed entity that will be merged into IWO Holdings, Inc., an affiliate of Sprint PCS, after IWO Holdings completes a prepackaged Chapter 11 bankruptcy reorganization. A 'CCC+' rating and a recovery rating of '3' were assigned to IWO Escrow's proposed $150 million senior secured floating-rate notes due 2012. The '3' recovery indicates the expectation for a meaningful (50%-80%) recovery of principal in the event of a default. A 'CCC-' rating was assigned the company's proposed $75 million senior discount notes due 2015. The notes will be issued under Rule 144A with registration rights. Issue proceeds will be used to repay the existing $215 million in secured bank debt of IWO Holdings' subsidiary, Independent Wireless One Corp. The remaining funds will pay restructuring fees and expenses, disputed charges to Sprint Corp., and financing expenses. Upon emergence from Chapter 11, IWO holdings will have $225 million in total debt from the two new issues, compared with $375 million in pre-petition debt. IWO provides wireless services under the Sprint PCS brand to 231,000 subscribers in areas including Albany, New York and other smaller markets in upstate New York, Massachusetts, New Hampshire, and Vermont. The company has the exclusive right to use 30 MHz of spectrum licensed to Sprint PCS throughout territories with a population of 6.3 million. Within this area, IWO's network covers a population of about 4.8 million. IWO Holdings is currently 100%-owned by US Unwired, Inc. In connection with the reorganization, US Unwired's shares will be canceled and new common stock will be issued to the holders of IWO Holdings' existing senior notes. "Ratings on IWO reflect high financial risk from capital expenditure-related debt and negative free cash flow incurred during an extended business start-up period," said Standard & Poor's credit analyst Eric Geil. "Market penetration and average revenue per user -- ARPU -- are below average compared with peers' because of intense competition, weak marketing and distribution efforts, elevated customer churn, and relatively low penetration of data services. These factors have hampered revenue and EBITDA growth. Tempering factors include brand recognition and operating support from the Sprint PCS relationship, and roaming revenue from Sprint PCS customers in larger adjacent markets." KAISER ALUMINUM: Selling Prospect Plains Lot to Prospect Crossing ----------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates own a 14.32-acre real property located on Prospect Plains Road in Monroe Township, Middlesex County, New Jersey. The Property is comprised of two parcels of land. The first parcel was acquired by Kaiser Aluminum & Chemical Corporation in 1976 and originally used to manufacture phosphatic agricultural chemicals. Manufacturing operations were curtailed in 1984 and most of the buildings and fixtures used in the manufacturing operations have since been removed. KACC acquired the remaining parcel in 2000 to combine existing parcel to create a larger lot. The Property is currently held by KACC as part of its discontinued operations. In accordance with the Court-approved Miscellaneous Asset Sales Procedures, the Debtors intend to sell the Property to Prospect Crossing, LLC, pursuant to a purchase and sale agreement dated to be effective as of June 12, 2002. KACC proposes to sell the Property: (a) on an "as is" and "where is" basis, without any representation or warranties from the Debtors as to the quality or fitness of the Property for either its intended or any particular purposes; and (b) free and clear of all liens, claims, encumbrances, and other interests, pursuant to Section 363(f) of the Bankruptcy Code. A full-text copy of the Purchase Agreement is available for free at: http://bankrupt.com/misc/Kaiser_Prospect_Plains_Purchase_Agreement.pdf Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, informs the United States Bankruptcy Court for the District of Delaware that to the extent that the Secured Lenders, the Taxing Authorities or any other party has a Lien on or an Interest in the Property, those Liens and Interests would be subject to money satisfaction in accordance with Section 63(f)(5). All Liens and Interests will attach to the proceeds of the proposed sale with the same validity and priority as they had against the Property. Prospect Crossing will pay $959,000 and has placed in escrow a $25,000 earnest money deposit, which will be credited against the purchase price at closing. To make the Property marketable for redevelopment and allow the sale to be closed, Ms. Newmarch relates that KACC has entered into an easement agreement with Consolidated Rail Corporation, the owner of an adjacent property, for a drainage easement across a portion of Conrail's property. The executed easement will be held in escrow pending the sale of the Property and recorded immediately preceding the recording of the deed evidencing the Property Sale. KACC will pay Conrail $46,000 from the sale proceeds in exchange for the drainage easement. Additionally, KACC will pay the normal and customary costs of closing from the sale proceeds, as well as a standard broker's fee of 6% of the sale price to Resource Realty of Central New Jersey. Obligations to NJDEP In 1984, KACC learned that the soil and groundwater contamination existed at the Property. Surface remediation has since been completed, and bioremediation of the groundwater and offsite and onsite monitoring are ongoing in accordance with the terms of a Limited Restricted Use No Further Action Letter and Covenant Not to Sue issued by the New Jersey Department of Environmental Protection on June 23, 1999. To ensure that KACC has continued access to the Property as necessary to satisfy its obligations to the New Jersey Environmental Protection Department, KACC and Prospect Crossing will execute a declaration of restrictions at closing that will be recorded against the Property. KACC's obligations to the Environmental Protection Department with respect to the Property continue until 2015 or the time that the Department notifies KACC that the remedial activities are no longer required. Executory Contracts and Unexpired Leases KACC does not intend to assume and assign any executory contracts or unexpired leases pursuant to Section 365 in connection with the Transaction. Objection Procedures to the Transaction Written objections to the Transaction, if any, must be filed with the Court by December 23, 2004. Absent any Objections by the Objection Deadline, the Debtors will be authorized to consummate the Transaction without further delay. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) LAND O'LAKES: Moody's Affirms Ba2 Senior Implied Rating ------------------------------------------------------- Moody's Investors Service upgraded Land O'Lakes' speculative grade liquidity rating to SGL-3 from SGL-4 and affirmed the company's B2 senior implied rating with a negative outlook. The SGL upgrade reflects Moody's expectation that cash flow generation over the next twelve months will be at levels that are likely to cover capital spending, member payments, and required debt amortization, though the company may need to access external funds on an interim basis during the twelve months to cover working capital needs. The SGL upgrade also takes into account that Land O' Lakes' refinancing transactions earlier this year reduced required term loan amortization to a low level through 2008 and adjusted financial covenants to levels that provide adequate cushion for lower than expected earnings. Land O'Lakes has adequate unused availability under its committed revolver and receivables securitization facilities, which have been extended to January 2007. Land O'Lakes' improved liquidity provides important support to the company's B2 senior implied rating by providing needed financial flexibility while the company takes steps to enhance its long term profitability and credit quality. The SGL rating could improve further if Land O'Lakes is successful in increasing cash flow generation materially from current levels. The SGL rating could be pressured if profitability weakens, leading to tight covenant cushions and increased reliance on the revolver. Land O'Lakes is likely to cover cash needs from internal cash flow over the next year, with potential for modest reliance on external sources if bank EBITDA is not sustained at the $225 million level that the company expects to achieve in FY04. Earnings and working capital are seasonal, however, which leads to incremental reliance on its liquidity facilities (the accounts receivable line and revolver) on an interim basis during the year. Working capital tends to peak at the end of the first and third quarters. Strong holiday dairy demand and winter feed demand tend to result in a seasonally strong fourth quarter and a low point in cash needs, and seed and agronomy sales are concentrated in the spring. Commodity prices also can impact working capital, and unusually high prices (which have since moderated some) were a factor earlier in 2004. At the end of 3Q04, with working capital seasonally high, Land O'Lakes had fully utilized its $200 million of receivables facilities, had $52 million of the $200 million revolver utilized for letters of credit, and had no revolver drawings. Moody's expects the receivables facilities to be mostly utilized throughout the next year. The company's leverage covenant will tighten in 4Q04 and in 4Q05 but should leave adequate covenant cushion. Land O'Lakes' assets are secured, limiting alternative sources of liquidity, although the company could sell discrete businesses without affecting remaining operations. Land O'Lakes, Inc., based in Arden Hills, Minnesota, is a branded dairy food, feed, and agricultural supply cooperative. The company's latest twelve months revenues (9/30/04) were $7.7 billion. MARINER HEALTH: Subsidiary Plans to Prepay Mortgages to Omega ------------------------------------------------------------- Professional Health Care Management, Inc., an affiliate of Mariner Health Care, Inc., notified Omega Healthcare Investors, Inc. (NYSE:OHI) on Dec. 10, 2004, that PHCMI intends to exercise its right to prepay in full the Amended and Restated Secured Promissory Note dated September 1, 2001, from PHCMI and payable to the order of Omega in the principal amount of approximately $59.7 million. The Note has an interest rate of 11.57%. Pursuant to the notice and certain provisions of the Note, PHCMI will prepay the Note in full, together with: (i) the required prepayment premium of three percent (3%) of the outstanding principal and (ii) accrued and unpaid interest, on February 1, 2005. Also, PHCMI is also required to pay to Omega its good faith estimate of an amendment fee owing to Omega in connection with the Note, subject to certain "true-up" provisions contained in the Note. 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. 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. MIRANT CORP: Failed to Make Scheduled Payment Despite Court Order ----------------------------------------------------------------- Mirant Corp. failed to make a scheduled payment to Pepco on December 13 as required by contract, despite an order issued on Friday by the United States District Court for the Northern District of Texas, denying Mirant's request to reject its obligations to pay Pepco. Pepco is taking all appropriate legal steps to enforce its right to payment and require Mirant to pay damages for its unilateral breach. Pepco is a subsidiary of Pepco Holdings, Inc. (NYSE: POM). "We are outraged at Mirant's blatant disregard for the Judge's order, and are hopeful that the courts will quickly address Mirant's unprecedented action," said Kirk J. Emge, General Counsel, Pepco. "We remain confident we will ultimately be paid." The payments due to Pepco are required as part of the Back-to-Back Agreement in the Asset Purchase and Sale Agreement -- APSA -- under which Mirant purchased Pepco's generating assets in December 2000. The Court found that the Back-to-Back Agreement is part of a larger contract that cannot be rejected in part, as Mirant sought to do. Since declaring bankruptcy in July 2003, Mirant has repeatedly and unsuccessfully attempted to obtain legal approval to terminate its contractual obligations to pay Pepco for the cost of electricity, which Pepco provides to Mirant. Contrary to prior representations made before the courts, Mirant last week issued a notice that it would suspend payments to Pepco. Friday's order reaffirmed that Mirant is legally required to make the payments. Pepco Holdings, Inc., is a diversified energy company with headquarters in Washington, D.C. Its principal operations consist of Pepco and Conectiv Power Delivery, which deliver 50,000 gigawatt-hours of power to more than 1.8 million customers in Washington, Delaware, Maryland, New Jersey and Virginia. The Company engages in regulated utility operations by delivering electricity and natural gas, and provides competitive energy and energy products and services to residential and commercial customers. 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 CORPORATION: Employs Piper Rudnick as Special Counsel ------------------------------------------------------------ As of August 29, 2003, Mirant Corporation and its debtor- affiliates employed Piper Rudnick, LLP, as an ordinary course professional. Before the bankruptcy petition date and continuing to the present, Piper Rudnick has served as counsel to the Debtors on various environmental and permitting matters, including representation in connection with a major environmental settlement recently negotiated with the United States Environmental Protection Agency, the Commonwealth of Virginia and the State of Maryland, a related settlement of a plant operating permit with the Virginia Department of Environmental Quality and on-going implementation of these agreements. In addition, Piper Rudnick provides: (a) environmental counseling; (b) defense of enforcement and permitting matters; and (c) representation in state energy regulatory matters, state litigation and state legislative matters, particularly in Maryland, Virginia, and Massachusetts. After learning that Piper Rudnick's fees and expenses exceeded the $50,000 monthly cap for Ordinary Course Professionals, the Debtors sought and obtained the Court's authority to employ Piper Rudnick as Special Counsel under Section 327(e) of the Bankruptcy Code. Piper Rudnick's continuing employment is crucial for the Debtors to ensure that they can draw on the firm's vast knowledge in connection with the EPA Project as well as various other non-bankruptcy, environmental and permitting matters. Catch-up Amounts Piper Rudnick's monthly compensation since its employment were: August 2003 $40,285 September 2003 $70,135 October 2003 $59,915 November 2003 $49,444 December 2003 $51,311 January 2004 $50,555 February 2004 $78,083 March 2004 $42,580 April 2004 $20,730 May 2004 $32,135 June 2004 $10,615 July 2004 $2,065 August 2004 $0 September 2004 $0 While Piper Rudnick's fees have averaged less than $50,000 per month, there have been a few sporadic months where the fees have exceeded the $50,000 per month cap. All of the work, which Piper Rudnick has performed, has been done at the Debtors' request. The Debtors' payment of those amounts exceeding $50,000 was inadvertent. Moreover, the Debtors have benefited from Piper Rudnick's work and no party has suffered any prejudice by payment of the Catch-up Amounts. At the Debtors' behest, Judge Lynn orders that the Catch-up Amounts paid by the Debtors to Piper Rudnick are retroactively authorized. The Debtors will immediately satisfy all outstanding obligations to Piper Rudnick, including payments that the Debtors elected to forego pending the Court's approval of the Application. The Debtors will continue paying Piper Rudnick its customary hourly rates for services rendered, and will reimburse Piper Rudnick pursuant to its customary reimbursement policies. The hourly rates of the lawyers working on the Debtors' Chapter 11 cases are: Deborah Jennings $510 Randy Tucker $510 Ben Boyd $440 Don McPherson $440 Ed Levin $425 Michael Vhay $410 Heather Klink $390 Marta Harting $380 Mary Jane DeWeese $380 Guy Flynn $370 James Elliot $350 Kathy Hinger $325 Dorothy Guy $290 Bruce Barnett $285 Charley Sung $225 Jesse Manchester $215 Traci Feit $215 William DuBois $215 Deborah Jennings, Esq., a partner at Piper Rudnick, assures the Court that the firm does not have any interest adverse to the Debtors, their creditors, or any other party-in-interest. Ms. Jennings relates that the two proofs of claim aggregating $189,125, previously filed by Piper Rudnick against the Debtors, have been assigned to Argo Partners in March 2004. 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) MISSISSIPPI AUTO RENTAL: Voluntary Chapter 11 Case Summary ---------------------------------------------------------- Debtor: Mississippi Auto Rental Service, LLC P.O. Box 203 Tupelo, Mississippi 38802 Bankruptcy Case No.: 04-17899 Type of Business: The Debtor provides auto rental services. Chapter 11 Petition Date: December 10, 2004 Court: Northern District of Mississippi (Aberdeen) Judge: David W. Houston III Debtor's Counsel: Craig M. Geno, Esq. Harris & Geno, PLLC P.O. Box 3380 Ridgeland, MS 39158 Tel: 601-427-0048 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not find a list of its 20-largest creditors. NEW CENTURY: Extends 3.50% Convertible Sr. Debt Offer to Dec. 23 ---------------------------------------------------------------- New Century Financial Corporation (NYSE: NEW) reported that its wholly owned subsidiary, New Century TRS Holdings, Inc., amended and extended its offer to convert all of its 3.50% Convertible Senior Notes due 2008 for shares of common stock of New Century Financial and cash. As amended, New Century TRS is offering to exchange for each $1,000 principal amount of the notes: -- a total of 28.7366 shares of New Century Financial common stock issuable on conversion of the notes in accordance with the terms of the notes; -- an additional consideration of $115 payable in shares of New Century Financial common stock based upon the average of the closing prices for the eight trading days ending on the second business day preceding the expiration of the offer; and -- accrued and unpaid interest from July 3, 2004 payable in cash. The offer and withdrawal rights will now expire at midnight, New York City time, on Thursday, Dec. 23, 2004, unless extended or terminated. The additional consideration was previously $110 per $1,000 principal amount of the notes and the offer was originally scheduled to expire on December 20, 2004. The principal amount of the notes tendered as of Dec. 9, 2004, was approximately $13.9 million, or about 6.6% of the $210 million aggregate principal amount of the notes currently outstanding. Subject to the changes to the terms of the offer described above, noteholders who wish to tender but have not yet done so may continue to use the letter of transmittal previously delivered. Noteholders who have already tendered their notes and who have not withdrawn such notes do not need to take any action to receive the shares of New Century Financial common stock and cash pursuant to the amended offer, unless they wish to withdraw their notes. The full terms and conditions of the offer are set forth in a joint prospectus dated Nov. 22, 2004, of New Century Financial and New Century TRS, the related letter of transmittal and the supplement to the joint prospectus dated Dec. 10, 2004, all of which have been mailed to noteholders. Lehman Brothers, Inc., and Bear, Stearns & Co., Inc., are acting as dealer managers and Mellon Investor Services LLC is the exchange agent. Questions and requests for additional copies of the prospectus, the prospectus supplement and the related letter of transmittal should be directed to: Lehman Brothers (800) 438-3242 -- or -- Georgeson Shareholder Communications, Inc., (800) 319-6872 Noteholders and stockholders are urged to read the prospectus, the prospectus supplement and the other related offer materials, including the tender offer statement, as amended, filed by New Century Financial and New Century TRS with the Securities and Exchange Commission because they contain important information. You may obtain these documents free of charge at the Web site maintained by the Securities and Exchange Commission at http://www.sec.gov/ Also, you may obtain documents filed by New Century Financial and New Century TRS with the Securities and Exchange Commission free of charge by requesting them in writing from: New Century Financial Corporation 18400 Von Karman Avenue, Suite 1000 Irvine, California, 92612 Attn: Carrie Marrelli Telephone No. (949) 224-5745 About the Company New Century Financial Corporation -- http://www.ncen.com/-- is a real estate investment trust and one of the nation's largest non-prime mortgage finance companies, providing first and second mortgage products to borrowers nationwide through its operating subsidiaries. New Century Financial is committed to serving the communities in which it operates with fair and responsible lending practices. * * * As reported in the Troubled Company Reporter on Oct. 19, 2004, Standard & Poor's Ratings Services raised its ratings on Irvine, California-based New Century Financial Corp. (New Century, NASDAQ: NEW), including the company's long-term counterparty rating, which was raised to 'BB' from 'BB-'. Concurrently, the ratings were removed from CreditWatch, where they were placed on April 6, 2004. The outlook is stable. NRG ENERGY: Offering $400 Mil. Convertible Perpetual Pref. Stock ---------------------------------------------------------------- NRG Energy, Inc., (NYSE:NRG) plans to issue approximately $400 million of convertible perpetual preferred stock through an offering to qualified institutional buyers pursuant to a private placement exemption under the Securities Act of 1933. The convertible perpetual preferred stock will be convertible into NRG common stock under certain conditions. The preferred stock will be callable after five years. The purpose of the preferred stock issuance is two-fold: (1) to provide funds for the redemption of a portion of NRG's outstanding 8% Second Priority Notes due 2013; and (2) to enable NRG to use existing cash balances to repurchase 13 million shares of common stock held by investment partnerships managed by MatlinPatterson Global Advisors, LLC. The issuance of the preferred stock will be subject to market conditions and other conditions and there can be no assurance that the issuance will be consummated. The share repurchase and the redemption of the notes are also subject to conditions and there can be no assurance that they will be consummated. The convertible perpetual preferred stock and the underlying common stock issuable upon conversion have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. 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. * * * As reported in the Troubled Company Reporter on Dec. 14, 2004, Moody's Investors Service upgraded all of the debt ratings of NRG Energy, Inc. (NRG: Senior Implied to B1 from B2). Moody's also assigned a Ba3 senior secured rating to the company's proposed $950 million secured revolving credit and term loan facility, a B2 Issuer Rating, and a Speculative Grade Liquidity Rating of SGL-1. This rating action concludes the review for possible upgrade that was initiated on November 15, 2004. The rating outlook is stable. NOVA CHEMICALS: Board Approves Rule 10b5-1 Stock Trading Plans -------------------------------------------------------------- NOVA Chemicals Corporation (NYSE:NCX)(TSX:NCX) now permits its directors and senior executive officers to participate in Rule 10b5-1 trading plans under the U.S. Securities Exchange Act of 1934. Pursuant to this rule, insiders may implement written trading plans when they are not in possession of material, non-public information. Written trading plans allow trading in company securities on a regular basis, pursuant to the plans, regardless of any subsequent material, non-public information insiders receive. The NOVA Chemicals Board of Directors' approval of the use of these trading plans by insiders reflects its beliefs that these trades are an appropriate method by which they may meet their personal portfolio diversification and liquidity needs. Insiders remain subject to the company's share ownership guidelines. "These plans will help us recruit and retain highly qualified management personnel by providing them with the flexibility to exercise options or sell their shares in predetermined ways," said Jeffrey M. Lipton, President and Chief Executive Officer of NOVA Chemicals. "We are confident these plans will contribute to the continued success of NOVA Chemicals." NOVA Chemicals (S&P, BB+ Long-Term Corporate Credit Rating, Positive) -- http://www.novachemicals.com/-- 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. OVERSEAS SHIPHOLDING: Moody's Reviewing Ratings & May Downgrade --------------------------------------------------------------- Moody's Investors Service placed the debt ratings (Ba1 Senior Implied) of Overseas Shipholding Group under review for possible downgrade following the announcement by the company of its proposed acquisition of Stelmar Shipping Ltd. for approximately $1.3 billion, approximately $843 million after taking into account assumption of existing Stelmar debt. The ratings review will focus on: (1) additional debt levels that the company will encounter to complete the acquisition of Stelmar, and its effect on liquidity and intermediate term debt leverage and debt service metrics, (2) The level to which the combined fleet's revenue base will be secured by fixed term contracts, versus the extent to which the company will remain exposed to spot tanker markets, and (3) an assessment of the integration of these vessels into Overseas Shipholding's current tanker operations, considering expectations for charter rates in the tanker markets at the time these vessels are delivered to the company. Moodys' notes that this acquisition involves assets of a similar technical and commercial nature to that of Overseas Shipholding's existing international crude oil and product tanker business. Considering the company's current fleet size and composition, as well as its history of successfully managing fleet growth, Moody's preliminary assessment is that the number and class of vessels acquired should pose only moderate integration risk. Moody's notes, however, that the acquisition of Stelmar substantially increases Overseas Shipholding's product tanker markets exposure, posing a modest amount of additional potential integration risk as the overall fleet profile changes. The additional debt incurred to complete the transaction is expected to increase financial leverage, and the stability and robustness of debt service metrics will be a function of future charter rates for vessels. While the current market for vessel charters is quite favorable, in both the crude oil and product tanker sectors, Moody's review will assess the company's ability to maintain adequate debt service metrics under scenarios involving charter rates returning to lower historical levels. The affected ratings include: * $150 million 7.5% senior unsecured notes, due 2024, rated Ba1, * $200 million 8.25% senior unsecured notes due 2013, rated Ba1, * $85 million 8.75% senior unsecured notes due 2013, rated Ba1, * Senior implied rating of Ba1, and * Unsecured issuer rating of Ba1. Overseas Shipholding Group, Inc., headquartered in New York, New York, is one of the world's leading independent bulk shipping companies engaged primarily in the ocean transportation of crude oil and petroleum products. The company's modern fleet consists of 61 oceangoing vessels that aggregate 11.2 million deadweight tons, of which 51 vessels operate in the international market and ten vessels operate in the U.S. flag market, making it the sixth largest independent tanker company in the world as measured by deadweight tons. The company is the only major U.S. shipping company with significant operations in both the international and U.S. flag markets. The company had LTM September 2004 time charter equivalent revenues of approximately $619 million. Stelmar Shipping Ltd., headquartered in Athens, Greece, operates one of the world's largest and most modern Handymax and Panamax tanker fleets with an average age of approximately six years. Stelmar's 40-vessel fleet consists of 24 Handymax, 13 Panamax and three Aframax tankers. Stelmar's fleet includes two-leased Aframax, and nine leased Handymax vessels. Stelmar had LTM September 2004 charter equivalent revenues of approximately $213 million. PARAMOUNT RESOURCES: S&P Places Ratings on CreditWatch Negative --------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' long-term corporate credit and 'B' long-term senior unsecured debt ratings on Calgary, Alberta-based Paramount Resources Ltd. on CreditWatch with negative implications following the company's announcement of its intention to seek shareholder and bondholder approval to spin-off a portion of its existing asset base into a new Canadian income trust. The proposed spin-off will affect the ratings on the US$215 million of public debt remaining after the announced repurchase of about US$85 million in debt. "As the proposed trust spin-off will remove about 55% of Paramount's third-quarter 2004 production and about 65% of the reserves estimated at Dec. 1, 2004, we expects Paramount's long- term corporate credit and senior unsecured bond ratings will be lowered," said Standard & Poor's credit analyst Michelle Dathorne. "If the spin-off occurs as outlined by the company, the rating on the US$215 million debt will likely be in the 'CCC' rating category, given the significantly reduced asset size, and the continued existence of a bank facility ranking ahead of the senior unsecured bonds," Ms. Dathorne added. Standard & Poor's expects to resolve the CreditWatch after reviewing: (1) the external engineer's reserve report, (2) the indicative terms of the company's renegotiated bank agreement, and (3) the final terms of the management agreement between the new trust and the company. If the trust spin-off does not occur, Paramount's ultimate ratings will likely not be materially different from its current levels. PIUTE PIPELINE: Wants to Hire Bennington as Bankruptcy Counsel -------------------------------------------------------------- Piute Pipeline, LLC, asks the U.S. Bankruptcy Court for the District of Colorado for permission to employ Bennington Johnson Biermann & Craigmile, LLC, as its general bankruptcy counsel. Bennington Johnson is expected to: a) provide the Debtor with legal counsel with respect to the Debtor's powers and duties as a debtor in possession; b) prepare on behalf of the Debtor a plan of reorganization and disclosure statement and obtain confirmation and approval of the disclosure statement and plan; c) prepare all necessary applications, motions, reports, notices and other legal documents; d) represent and assist the Debtor at all Court appearances and in all negotiations in the Debtor's chapter 11 case; e) represent and assist the Debtor in the litigation of adversary proceedings and contested matters; and f) perform all other legal services for the Debtor that might be appropriate and necessary. Deanna L. Westfall, Esq., at Bennington Johnson, is the lead attorney for the Debtor's restructuring. Ms. Westfall discloses that the Firm received a $14,055 retainer. Ms. Westfall will bill the Debtor $225 per hour for her services. Mr. Westfall reports Bennington Johnson's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Philip Johnson Member $240 Jacqueline Wayne Associate 160 Tami Sapp Associate 160 Rachel Dengler Paralegal 50 Bennington Johnson assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Dallas, Texas, Piute Pipeline, LLC, filed for chapter 11 protection on December 3, 2004 (Bankr. D. Colo. Case No. 04-36283). When the Debtor filed for protection from its creditors, it listed estimated assets and debts of $10 million to $50 million. PIUTE PIPELINE: Section 341(a) Meeting Slated for January 4 ----------------------------------------------------------- The U.S. Trustee for Region 20 will convene a meeting of Piute Pipeline LLC's creditors at 9:00 a.m., on January 4, 2004, at the Office of the U.S. Trustee, U.S. Custom House, 721 19th Street, Room 104, Denver, Colorado. This is the first meeting of creditors required under 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 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 Dallas, Texas, Piute Pipeline, LLC, filed for chapter 11 protection on December 3, 2004 (Bankr. D. Colo. Case No. 04-36283). Deanna L. Westfall, Esq., at Bennington Johnson Biermann & Craigmile, LLC 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. PREMIER PROPERTIES: Voluntary Chapter 11 Case Summary -------------------------------------------------- Lead Debtor: Alan C. Kendall dba Premier Properties fdba Palmer Properties fdba Capital Properties 719 - 16th Street Moline, Illinois 61265 Bankruptcy Case No.: 04-85449 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. Petition Date ------ -------- ------------- Bi-State Properties, Ltd. 04-85450 December 9, 2004 Golden Properties, Ltd. 04-85452 December 9, 2004 Platinum Properties, Ltd. 04-85453 December 9, 2004 Associates in Dentistry, Ltd. 04-85456 December 10, 2004 Eagle Properties, Ltd. 04-85457 December 10, 2004 Cheyenne Properties, Ltd. 04-85458 December 10, 2004 Breckenridge Properties, Ltd. 04-85459 December 10, 2004 Sapphire Properties, Inc. 04-85460 December 10, 2004 Quality Properties, Ltd. 04-85461 December 10, 2004 Chapter 11 Petition Date: December 9, 2004 Court: Central District of Illinois (Peoria) Judge: Thomas L Perkins Debtor's Counsel: Barry M Barash, Esq. Barash & Everett, LLC PO Box 1408 Galesburg, Illinois 61402 Tel: (309) 341-6010 Total Assets Total Debts ------------ ----------- Alan C. Kendall $1 Mil. to $10 Mil. $10 Mil. to $50 Mil. Bi-State Properties, Ltd. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Golden Properties, Ltd. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Platinum Properties, Ltd. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Associates in Dentistry, Ltd. $50,000 to $100,000 $50,000 to $100,000 Eagle Properties, Ltd. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Cheyenne Properties, Ltd. $1 Mil. to $10 Mil. $500,000 to $1M Breckenridge Properties, Ltd. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Sapphire Properties, Inc. $1 Mil. to $10 Mil. $1 Mil. to $10 Mil. Quality Properties, Ltd. $1 Mil. to $10 Mil. $500,000 to $1M The Debtors did not file lists of their 20 Largest Unsecured Creditors. PRINTPACK HOLDINGS: S&P Revises Outlook on BB Ratings to Positive ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Printpack Holdings, Inc., to positive from stable, citing the company's continued progress toward improving its financial profile. In addition, Standard & Poor's affirmed its 'BB' corporate credit and senior secured bank loan ratings on the company. Atlanta, Georgia-based Printpack had about $270 million of debt outstanding. "The outlook revision reflects Printpack's strengthening financial profile despite higher raw-material costs and intensified competitive conditions," said Standard & Poor's credit analyst Franco DiMartino. The company has utilized strong cash generation to reduce debt by over $100 million during the past few years. The ratings incorporate the expectation that any moderate-size acquisitions to support Printpack's growth strategy will be followed by a period of debt reduction to preserve credit quality. The ratings on Printpack Holdings and its operating subsidiary, Printpack, Inc., reflect its average business position as a leading domestic player in the flexible packaging market, offset by competitive industry conditions, and slow growth in core end markets. With annual revenues of more than $1 billion, privately held Printpack enjoys a leading market share in packaging for the fragmented but relatively stable salted snack foods segment. The company also has strong niche positions in packaging for cookies, confectionery, and bakery products. QUIK COMMISSIONS: Will Distribute Gibraltar Shares to Creditors --------------------------------------------------------------- Gibraltar Springs Capital Corporation (TSX VENTURE:GSP) has postponed the date for its annual and special meeting, scheduled to be held on Dec. 17, 2004. This meeting will now be held on Jan. 31, 2004. The record date for notice of the meeting has been set for December 20, 2004. Gibraltar also disclosed that the common shares owned by its controlling shareholder, Quik Commissions, Inc., are to be distributed to the creditors of Quik Commissions, Inc., in accordance with a proposal approved by creditors of Quik Commissions, Inc., and the court pursuant to the provisions of the Bankruptcy and Insolvency Act. Quik Commissions, Inc., is the owner of approximately 14,130,583 common shares in Gibraltar, representing approximately 58.2% of the issued and outstanding common shares. To the best knowledge of the management of Gibraltar, no single shareholder will own more than 50% of the issued and outstanding shares of Gibraltar following the distribution of the shares owned by Quik Commissions, Inc. The distribution is expected to take place in January 2005. Quik Commissions, Inc. -- according to material posted at http://www.nafinance.com/Listed_Co/English/gibraltar_e.htm-- is controlled by Mr. Len Vermeulen, who serves as President and CEO for Gibraltar Springs. Gibraltar Springs Capital Corporation bottles and markets Canadian Natural Mountain Spring Water. Gibraltar Springs is located in Gibraltar, Ontario, about 80 miles northwest of Toronto. Gibraltar Spring's license to take water, issued by the Ministry of Environment of Ontario, consists of 56 million imperial gallons or 255,500,000 liters of water per year. Gibraltar does private-label bottling too. See http://www.gibraltarsprings.com/ RCN CORP: Court Allows $3 Million IBM Patent Infringement Claim --------------------------------------------------------------- On November 19, 2004, the Official Committee of Unsecured Creditors appointed in the chapter 11 cases of RCN Corporation and its debtor-affiliates advised the U.S. Bankruptcy Court for the Southern District of New York that it supports the Debtors' request to estimate International Business Machines Corporation's claims to $0. Parties Settle Issue After arm's-length negotiations, the Debtors and IBM entered into an agreement to resolve their differences, as well as to avoid the costs, distractions, and delays associated with litigation, regarding IBM's patent infringement and other claims. Since the Agreement contains confidential and proprietary information including patent and pricing information that would be potentially harmful if made public, the parties sought and obtained Judge Drain's approval to file the Agreement under seal. Judge Drain clarifies that the Confidential Agreement and any information derived from the Confidential Agreement will remain confidential, be filed under seal, and be served on and made available only to: -- the United States Trustee, -- the Official Committee of Unsecured Creditors' counsel, -- counsel to the administrative agents for the prepetition secured lenders to the Debtors, and -- other parties as ordered by the Court after notice to IBM or agreed to by the Debtors and IBM. In a separate Court-approved stipulation, the parties agree that: (a) IBM is deemed to have an Allowed Class 5 RCN General Unsecured Claim aggregating $3,000,000, which will be allowed for all purposes under the Plan, including for voting, feasibility, and distribution purposes; (b) IBM will have no other Allowed Claim or Allowed Administrative Claim against any of the Debtors under the Plan; (c) IBM waives its right to object to the Plan, including to any assignment of any patents or licenses to any of the Reorganized Debtors under there; (d) IBM will vote in favor of the Plan, provided that the Plan is not amended in a manner that would adversely affect IBM or otherwise diminish or adversely affect IBM's rights under the Agreement. Service of the Stipulation without the Confidential Agreement will be made on all entities entitled to receive notice. Upon request by a party-in-interest, IBM will provide the party a version of the Confidential Agreement redacted to delete all commercially sensitive information. Any pleadings filed in the Chapter 11 cases that reference or disclose any of the information contained in the Confidential Agreement, other than information disclosed in the Stipulation, will be filed under seal and served only on those parties authorized to receive the Confidential Agreement. 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. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANCE GROUP: Creditors Committee Files Amended Plan for RFSC --------------------------------------------------------------- The First Amended Plan of Reorganization of Reliance Financial Services Corporation proposed by the Official Unsecured Creditors' Committee provides for the same classification and treatment of claims against and equity interest in RFSC. The First Amended Plan, however, now discloses the estimated amount of claims in Class 4a, which is $82,500,000. The change in amount from "unspecified" reflects the settlement with the Pension Benefit Guaranty Corporation. In addition, the Amended Plan quantifies the estimated claim amounts for Classes 1 and 4c. Previously listed as "unspecified," the clam amounts for these classes are now estimated at $0. The Estimated Claim Amounts per Class are: Class Definition Estimated Claim Amount ----- ---------- ---------------------- 1 Classified Priority Claims $0 2 Bank Claims $252,944,097 3 Other Secured Claims $0 4a General Unsecured Claims $82,500,000 4b Liquidator Claims $288,000,000 4c D&O Unsecured Claims $0 5 Equity Interests 1,000 Shares Recoveries from the Section 847 Refunds and other tax assets will not be available if Reorganized RFSC liquidates. Thus, a conversion of the case from Chapter 11 to Chapter 7 will preclude any tax recovery by Reorganized RFSC. Recoveries related to the D&O Litigation Proceeds should be at least as great under the proposed Plan if the Chapter 11 Case were converted to Chapter 7, and should not be less under the Plan. A free copy of the Creditors Committee's Amended Reorganization Plan for RFSC is available at: http://bankrupt.com/misc/Amended_Plan_for_RFSC.pdf A free copy of the Creditors Committee's Amended Disclosure Statement is available at: http://bankrupt.com/misc/Amended_Disclosure_Statement_for_RFSC.pdf Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) RHODES INC: Court Approves $88 Million DIP Credit Facility ---------------------------------------------------------- Rhodes, Inc., reported that the U.S. Bankruptcy Court for the Northern District of Georgia granted final approval of its $88 million debtor-in- possession credit facility. The facility is being provided by a group of lenders led by Wells Fargo Retail Finance and Back Bay Capital Funding. The Company had received interim approval of the DIP facility pursuant to a "first day order" approved by the bankruptcy court on November 9, 2004. The DIP financing, combined with the Company's cash from operations, is expected to provide funding for the Company's operations during the Chapter 11 process, and will expire on May 4, 2006. The Company is in compliance with all of the terms and conditions of the DIP credit agreement. "This is an important milestone in enabling Rhodes to reorganize and emerge as a strong, viable furniture retailer," said Steven S. Fishman, CEO, CRO and President of Rhodes. Mr. Fishman continued, "Final approval of our DIP credit facility allows us to continue to serve our customers and honor our obligations to our suppliers and to our employees while we complete our reorganization." Headquartered in Atlanta, Georgia, Rhodes, Inc., will continue to offer brand-name residential furniture to middle- and upper- middle-income customers through 63 stores located in 11 southern and midwestern states (after disposing of the locations listed above). The Company and two of its debtor-affiliates filed for chapter 11 protection on Nov. 4, 2004 (Bankr. N.D. Ga. Case No. 04-78434). Paul K. Ferdinands, Esq., and Sarah Robinson Borders, Esq., at King & Spalding represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated less than $50,000 in assets and more than $10 million in total debts. SOMERSET APTS: Case Summary & 3 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Somerset Apts., Ltd. 3608 S. 74th Street Omaha, Nebraska 68124 Bankruptcy Case No.: 04-84197 Type of Business: The Debtor operates an apartment complex in Lincoln, Nebraska. Chapter 11 Petition Date: December 13, 2004 Court: District of Nebraska (Omaha Office) Judge: Timothy J. Mahoney Debtor's Counsel: Howard T. Duncan, Esq. Duncan Law Office 1910 South 72nd Street, Suite 304 Omaha, NE 68124-1734 Tel: 402-391-4904 Fax: 402-391-0088 Total Assets: $10,000,000 Total Debts: $8,888,537 Debtor's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Portico Limited Partnership $798,728 3608 S. 74th St. Omaha, NE 68124 Nancy Blume, Judy Johnson, $110,207 Alwyn Johnson c/o Kevin R McManaman 1248 O St. #100 Lincoln, NE 68508 Frank Kerkhoff Unknown c/o Kyle Wallor 10306 Regency Pkwy Dr. Omaha, NE 68114 SPHERIS INC: S&P Junks Proposed $125 Million Subordinated Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to medical transcription services provider Spheris, Inc. At the same time, Standard & Poor's assigned its 'B+' senior secured debt rating and a recovery rating of '1' to the company's $100 million senior credit facility, which consists of a $25 million, five-year revolving credit facility and a $75 million, six-year term loan B. A 'CCC+' subordinated debt rating was assigned to Spheris' proposed $125 million, eight-year subordinated notes. On Nov. 5, 2004, Warburg Pincus and Soros Private Equity acquired Spheris in a leveraged buyout. The transaction was funded with an equity contribution from the sponsors and the proceeds from a $75 million term loan B and a $50 million senior subordinated bridge facility. The proceeds from the proposed $125 million subordinated debt issue will be used to refinance the $50 million senior subordinated bridge facility and to acquire Healthscribe, a smaller competitor, for $75 million. At the close of the subordinated debt transaction, Spheris will have an estimated $200 million of total debt outstanding. The outlook is stable. "The low-speculative-grade ratings reflect Spheris' narrow operating focus and relatively small scale as well as its limited operating history and weak financial profile," said Standard & Poor's credit analyst Jesse Juliano. "These concerns are only partially offset by the company's position as the second-largest player in a very fragmented industry and by the relatively predictable demand for medical transcription services." Franklin, Tennessee-based Spheris provides medical transcription services mainly to hospitals, but also to group practices. Medical transcription involves converting patient information from speech into text to include in medical records. Roughly 54% of hospitals currently perform this function internally. Spheris' relatively limited size and narrow operating focus make it highly susceptible to industry dynamics, which could include increases in regulation, new technologies, and competition. Pro forma for the transaction, the company's trailing revenues and adjusted EBITDA are only $200 million and $35 million, respectively. This adjusted EBITDA number factors in about $6 million in cost savings following the integration of Healthscribe, which Standard & Poor's believes is reasonable given management's previous integration experience. However, integration risk still exists and there is no guarantee the company will achieve its expected synergies. Spheris' fast growth and limited operating history in its present form are credit concerns. In 2003, Spheris was formed from the merger of Total eMed and a much larger competitor, EDiX. Revenues increased dramatically, more than tripling as a result of the transaction. The Healthscribe acquisition will increase scale and offshore labor capabilities. Offshoring medical transcriptionists -- MTs -- could significantly reduce labor costs. However, Spheris is paying a hefty purchase multiple for Healthscribe and may be challenged to realize the value of the investment. Furthermore, Spheris' fast growth and aggressive initiatives to build its business are credit weaknesses, though any near-term acquisitions are likely to be small. SPIEGEL INC: Wants Court Nod on Lease Satisfaction Agreement ------------------------------------------------------------ On November 25, 2003, Spiegel, Inc., and its debtor-affiliates rejected a lease with Esplanade at Locust Point-II Limited Partnership for 570,000 rentable square feet in an office building located at 3500 Lacey Road in Downers Grove, Illinois. The Lacey Road Building housed the Debtors' corporate headquarters. Additionally, the Debtors rejected two other unexpired non- residential real property leases associated with the Prepetition HQ Lease: (a) Sublease entered into by and between the Debtors and Continental Casualty Company; and (b) Parking lease entered into by and between Esplanade at Locust Point-III Limited Partnership and the Debtors. The Court fixed the Landlord's claim for damages arising from the rejection by the Debtors. First Postpetition HQ Lease Concurrent with the Prepetition HQ Lease rejection, the Court authorized the Debtors to enter into a new lease with the Landlord for smaller and less expensive space in the Lacey Road Building to serve as corporate headquarters and office space for Spiegel Catalog, Inc. The First Postpetition HQ Lease commenced on December 1, 2003, for a three-year term. Under the terms of that Lease, the Debtors are obligated to pay $12 per rentable square foot -- adjusted at 3% annually -- for 119,600 rentable square feet. In addition, the Debtors will pay its proportional share of the Lacey Road Building operating expenses. This results in a $225,000 current monthly rent. The remaining payments under the First Postpetition HQ Lease total $5,400,000. However, due to the sales of Spiegel Catalog and Newport News, Inc., and the transition of certain support functions to Eddie Bauer, Inc., the Debtors currently occupy only 16,800 rentable square feet of the Premises and anticipate that it will require less space going forward. Consequently, the Debtors and the Landlord engaged in discussions to: (a) terminate the First Postpetition HQ Lease; (b) alter the lease arrangement for the space that the Debtors are occupying; and (c) find replacement tenants to lease a portion of the Premises subject to the First Postpetition HQ Lease. The discussions resulted in the negotiation of a satisfaction agreement, a second postpetition HQ Lease, and a sublease to meet the parties' needs. The Satisfaction Agreement provides: A. Satisfaction Date The Debtors' obligations under the First Postpetition HQ Lease will be deemed satisfied as of December 1, 2004. B. Satisfaction Fee The Debtors will: (a) pay to Landlord a one-time $4,500,000 payment less the difference between: -- any rent paid by the Debtors under the First Postpetition HQ Lease for December 2004; and -- the product of $500 times the number of days in December for which the subtenant under the Sublease does not pay rent; (b) deliver the duly executed Sublease to the Landlord; and (c) deliver a bill of sale for the furniture, telephone system and security system remaining on the HQ Lease Premises as of the Satisfaction Date as full and complete compensation for the early satisfaction of the Debtors' obligations under the First Postpetition HQ Lease; C. Conditions to Satisfaction The Satisfaction Agreement is expressly contingent on the Debtors: (a) delivering the Sublease, the term of which would commence on December 22, 2004, and terminate on November 30, 2006, and on other terms acceptable to the Landlord in its sole and absolute discretion; and (b) obtaining Court approval of the Satisfaction Agreement by December 17, 2004. If the Debtors fail to enter into the Sublease before December 22, 2004, at the Landlord's election, the Satisfaction Agreement will be null and void and of no force and effect. D. Satisfaction and Assignment of Sublease Effective on the Satisfaction Date, the First Postpetition HQ Lease and the parties' rights and obligations under the Lease will be satisfied and will be of no further force and effect. The Debtors will pay a $55,000 broker's commission in connection with the Sublease. E. Surrender On the Satisfaction Date, the Debtors will surrender the HQ Lease Premises -- other than the space they will continue to occupy pursuant to any subsequent HQ lease -- to the Landlord in its current condition. F. Lessor Release The Landlord and its managing agent, including their officers and shareholders, are released and forever discharged of and from all claims and liabilities, which the Debtors may have against the released parties by reason or on account of the failure by the Landlord to perform and keep any of the covenants, agreements or obligations under the First Postpetition HQ Lease other than any indemnification provisions contained in the First HQ Lease, which, by their terms, survive the satisfaction of the First Postpetition HQ Lease. G. Lessee Release Other than the obligations set forth in the Satisfaction Agreement and other than the Landlord's rights under that Agreement, the Debtors and their officers and directors are released and forever discharged of and from all claims and liabilities which the Landlord may have against the released parties by reason or on account of the failure by the Debtors to pay, perform, and keep any of the covenants and obligations contained in the First Postpetition HQ Lease, which, by their terms, survive the satisfaction of the First Postpetition HQ Lease. H. Indemnity The indemnification provisions contained in the First Postpetition HQ Lease survive. Sublease and Broker's Commission According to James L. Garrity, Jr., Esq., at Shearman & Sterling, LLP, in New York, New York, as part of the Satisfaction Agreement, Spiegel has identified a subtenant for the Subleased Premises and has agreed to pay the Broker's Commission. As previously reported, the Debtors sought and obtained the Court's approval of a Sublease/Disposition Agency Agreement with Staubach Midwest, LLC. As broker for the Debtors, Staubach Midwest identified the prospective Sublessee for the Sublease. The Debtors now seek the Court's authority to pay a $55,000 Broker's Commission to Staubach Midwest in accordance with the Broker's Agreement. Second Postpetition HQ Lease The Debtors and the Landlord have agreed to enter into a short- term lease of significantly less space in the Lacey Road Building at minimal cost to the Debtors. The salient terms of the Second Postpetition HQ Lease are: (a) Lease term commences December 1, 2004, and ends April 30, 2006; (b) From December 1, 2004, through April 30, 2005, the Debtors will continue to occupy the Space -- 16,800 rentable square feet on the second floor in the Lacey Road Building; (c) From May 1, 2005, through April 30, 2006, the Debtors will occupy 6,000 rentable square feet, which space will be wholly within the existing 16,800 square feet occupied by the Debtors; (d) At all times during the term of the Second Postpetition HQ Lease, the Debtors will have access to the computer room on the second floor of the Lacey Road Building in a manner consistent with -- and no less favorable to the Debtors than -- its current access to the Space; (e) Other than nominal monthly rent, the Debtors will not be obligated to make any payments to the Landlord whether on account of rent, taxes, common area maintenance, utilities, operations, or any other charges; (f) The Debtors will have the right to continue to use any furniture, fixtures, and equipment conveyed by the Debtors to the Landlord pursuant to the Satisfaction Agreement. Accordingly, the Debtors seek the Court's authority to: (a) enter into the Lease Satisfaction Agreement, make a $4,500,000 payment, and deliver certain furniture and equipment in full satisfaction of the remaining rent owing under the First Postpetition HQ Lease; (b) enter into the Second Postpetition HQ Lease; (d) enter into the Sublease for a portion of the corporate headquarters, nunc pro tunc, if necessary; and (e) pay the $55,000 Broker's Commission to Staubach Midwest. Furthermore, the Debtors ask the Court to approve the settlement of the Landlord's Rejection Damages Claim against the Debtors. By satisfying in advance the First Postpetition HQ Lease and agreeing to a $4,500,000 termination fee, Mr. Garrity explains, Spiegel reduces its cash payment to the Landlord by $900,000 over the term of the First Postpetition HQ Lease -- remaining rent obligations minus Termination Fee -- as well as the added benefit of being free of the ongoing administrative burdens of making monthly payments, complying with the First Postpetition HQ Lease and remaining otherwise obligated under the Lease. The Satisfaction Agreement and the entry into a Second Postpetition HQ Lease at minimal cost to the Debtors will spare their estates administrative expenses for unutilized space. The Second Postpetition HQ Lease contains favorable market terms, in particular, that no payments will be required from the Debtors for the remaining Lease term. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) TEMBEC INC: Will Temporarily Suspend Activities at Kapuskasing -------------------------------------------------------------- Tembec, Inc., reported a two-week curtailment of operations at its newsprint facility in Kapuskasing, Ontario. The temporary shut-down is scheduled for the second half of January 2005. It will reduce production by approximately 13,000 metric tonnes and affect approximately 600 direct jobs. Company officials noted that the exact timing and related details will be finalized in early January 2005. As a consequence of that decision, the Tembec sawmill at the Kapuskasing site will also be closed for the same two-week period next January. This will result in the lay-off of an additional 120 workers. The newsprint operations are negatively impacted by the stronger Canadian dollar as most of the newsprint is sold in the United States. Moreover, Ontario's industrial electrical rates are now among the highest and most volatile in North America, with January being a particularly high cost month. The combination of these two factors has led to the decision. During meetings held yesterday at the Kapuskasing site, employees and union representatives were informed of the Company's decision and given the opportunity to discuss the situation with management. Tembec, Inc. -- http://www.tembec.com/-- is an integrated forest products company well established in North America and France, with sales of approximately $4 billion and some 11,000 employees. Tembec's common shares are listed on the Toronto Stock Exchange under the symbol TBC. * * * As reported in the Troubled Company Reporter on Oct. 28, 2004, Standard & Poor's Ratings Services revised its outlook on Tembec, Inc. to negative from stable. At the same time, the 'BB-' long- term corporate credit and the 'BB-' senior unsecured debt ratings on Tembec and its subsidiary, Tembec Industries Inc., were affirmed. TERRA INDUSTRIES: Anglo American to Complete Sale of Common Stock ----------------------------------------------------------------- Terra Industries, Inc., (NYSE:TRA) disclosed that Anglo American plc (NASDAQ:AAUK), through a wholly owned subsidiary, has agreed to sell its remaining 25,060,725 shares of Terra common stock in a private placement to a group of investors at a price of $7.50 per share. The transaction is expected to close on Dec. 20, 2004. The investors purchasing these shares have agreed not to sell them publicly until Feb. 15, 2005. Terra has agreed not to offer or sell any new shares, except under existing commitments, until March 15, 2005. The shares of Terra common stock being sold by Anglo American in the private placement have not been registered under the Securities Act of 1933, as amended, or any state securities laws. Unless so registered, the shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. Terra Industries, Inc., with 2003 revenues of $1.4 billion, is an international producer of nitrogen products. * * * As reported in the Troubled Company Reporter on Nov. 9, 2004, Fitch Ratings raised the ratings for Terra Industries' senior secured credit facility and 12.875% senior secured notes to 'BB-' from 'B+'. Fitch has also upgraded the 11.5% senior secured second priority notes to 'B' from 'B-'. Fitch has assigned a rating of 'CCC+' to the convertible preferred shares. Fitch revised the Rating Outlook to Positive from Stable. TERRACE OF SHREVEPORT: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Terrace of Shreveport, LLC 8950 East Kings Hwy Shreveport, Louisiana 71115 Bankruptcy Case No.: 04-14402 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- The Arbor and Terrace of Bossier City, LLC 04-14403 Type of Business: The Companies operate nursing homes. Chapter 11 Petition Date: December 6, 2004 Court: Western District of Louisiana (Shreveport) Judge: Stephen V. Callaway Debtor's Counsel: James A. Rountree, Esq. 400 Hudson Lane Monroe, Louisiana 71201-5504 Tel: (318) 398-2737 Fax: (318) 398-2738 Total Assets Total Debts ------------ ----------- Terrace of Shreveport, LLC $0 to $50,000 $1 Mil. to $10 Mil. The Arbor and Terrace of Bossier City, LLC $0 to $50,000 $1 Mil. to $10 Mil. Terrace of Shreveport, LLC's 19 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Colonial Trust Value of Security: $2,625,944 5336 North 19th Street $2,625,944 Phoenix, Arizona 85015 The Forsythe Group, LLC $200,000 507 Trenton Street West Monroe, Louisiana 71291 Scenicland Construction Co., LLC $28,000 507 Trenton Street West Monroe, Louisiana 71291 Albritton Service Company $9,322 Internal Revenue Service $4,000 Estate of Elmer Capp $1,976 Estate of William Dyers $1,909 Louisiana Department of Revenue $1,417 Estate of Gene Yarbrough $795 Louisiana Lawn Service $575 Estate of James Huber $400 Liquid Environmental Solutions $263 Parker Paper $239 Kirby Restaurant $213 Best of Times $150 IESI $150 Accuscreen Systems $105 Wood Electronics $75 Tghomas & Farr $20 The Arbor and Terrace of Bossier City, LLC's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The Forsythe Group, LLC $200,000 507 Trenton Street West Monroe, Louisiana 71291 Scenicland Construction Co., LLC $28,000 507 Trenton Street West Monroe, Louisiana 71291 Albritton Service Company $8,363 1009 East Georgia Avenue Ruston, Louisiana 71270 Internal Revenue Service $7,000 Conco Food Services $3,307 Chemtech $1,483 Louisiana Department of Revenue $1,417 Irene Sherrod $1,170 Parker Paper $1,074 Estate of Lela Sewell $900 Kirby Restaurant $560 Houghton's Hedges $525 Estate of Ruth Wade $525 Estate of Bess Lewis $446 Estate of William Van Ness $400 Leslie Rape $400 Consolidated Electronics, Inc. $375 Liquid Environmental Solutions $223 Stuart's, Inc. $178 Work Care of Willis Knighton $89 TIAA CMBS: S&P Affirms Low-B Ratings on Six Certificate Classes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on classes B, C, D, E, F, and G of TIAA CMBS I Trust's commercial mortgage pass-through certificates series 2001-C1. At the same time, all other outstanding ratings from this transaction are affirmed. The raised and affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. As of November 2004, the trust collateral consisted of 204 commercial mortgages with an outstanding balance of $1.15 billion, down 21.3% since issuance. The master servicer, GMAC Commercial Mortgage Corp. -- GMACCM, reported partial or full year 2003 net cash flow -- NCF -- debt service coverage ratios (DSCR) for 89.7% of the pool. Three loans totaling $20.4 million, or 1.7% of the pool, have been defeased. There are 35 credit tenant lease loans -- CTLs -- totaling $61.2 million (5.3% of the pool). All of the CTLs are guaranteed by CVS Corp. ('A-'). Excluding defeased and CTL loans, Standard & Poor's calculated the DSCR for the pool at 1.36x, from 1.52x at issuance. The current top 10 loans have an aggregate outstanding balance of $258.6 million, or 22.4% of the pool. The weighted average DSCR for the top 10 loans is 1.31x, flat from 1.32x at issuance. Six of the top 10 loans have reported increased DSCRs from issuance. Four of the top 10 loans report DSCRs that are at or below 1.09x, including two below 1.0x, which are secured by multifamily properties, which are on the watchlist (Jefferson Estates, 0.99x and Kenley Apartments, 0.95x). There are no delinquent or specially serviced mortgage loans in the pool. There has been one realized loss to date totaling $2.6 million (0.18% of initial pool balance). The servicer's watchlist contains 34 loans totaling $199 million (17% of the pool). Of these, 17 loans, secured by cooperative mortgage loans, had low DSCRs. This is mitigated by the low LTVs of the co-op loans. The pool has significant geographic concentrations in: * California (12.1%), * New York (10.4%), * Florida (8.7%), * New Jersey (8.4%), * Texas (7.0%), * Washington (6.4%), and * Colorado (5.7%). Property type concentrations include: * retail (34.7%), * multifamily (31.0%), * senior housing (9.2%), * industrial (8.9%), * office (7.6%), * mixed use (3.95%), and * lodging (3.4%). Standard & Poor's stressed various loans in the mortgage pool, paying closer attention to the loans on the watchlist, the loans with no DSCR data for two or more years (lack of financial reporting), and the loans with DSCRs below 1.10x not appearing on the watchlist. The expected losses and resultant credit enhancement levels adequately support the current rating actions. Ratings Raised TIAA CMBS I Trust Commercial Pass-Through Certs Series 2001-C1 Rating Class To From Credit Enhancement ----- -- ---- ------------------ B AAA AA 20.10% C A+ A 15.65% D A A- 13.75% E A- BBB+ 12.48% F BBB+ BBB 10.89% G BBB BBB- 9.62% Ratings Affirmed TIAA CMBS I Trust Commercial Pass-Through Certs Series 2001-C1 Class Rating Credit Enhancement ----- ------ ------------------ A-1 AAA 25.18% A-2 AAA 25.18% A-3 AAA 25.18% A-4 AAA 25.18% A-5 AAA 25.18% H BB+ 6.76% J BB 5.49% K BB- 4.54% L B+ 3.27% M B 2.63% N B- 2.00% X AAA N/A TRIMAS CORP: High Debt Leverage Prompts S&P to Review Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on TriMas Corp., including the 'BB-' corporate credit rating, on CreditWatch with negative implications. "The placement reflects the higher-than-expected debt leverage as a result of weaker EBITDA and higher debt levels," said Standard & Poor's credit analyst John Sico. TriMas has had to deal with rapidly rising steel prices that were not immediately passed along to customers. The increases are likely to affect fourth-quarter operating performance as well. In addition, the estimated reduction in working capital that generally occurs at year-end will likely be affected by the higher raw material costs, as inventory and receivables will be higher. Expectations for meaningful leverage reduction in the near term are uncertain. At Sept. 30, 2004, Bloomfield Hills, Michigan-based TriMas had total debt outstanding was about $775 million. TriMas has about $1 billion in sales from manufactured engineered products (transportation towing systems, packaging systems, fastening systems, industrial specialty products) serving niche markets in a diverse range of commercial, industrial, and consumer applications. Although TriMas has filed for an IP0 of common stock, it had not yet proceeded with the IPO, because of unfavorable market conditions. We would reassess TriMas' credit profile if it does proceed with the IPO. U.S. CAN: S&P Affirms B Corporate Credit Rating After Review ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on U.S. Can Corp. and its wholly owned subsidiary, United States Can Co. The corporate credit rating on U.S. Can is 'B'. All ratings were removed from CreditWatch with negative implications, where they were placed on Oct. 1, 2004, following the company's announcement that its report for the second quarter ended July 4, 2004, and restated financial statements for 2002 and 2003 with lenders to its credit agreement and the SEC would be delayed. The company was unable to meet the original filing deadlines because of an ongoing internal review conducted to address accounting and financial reporting issues related to the operations of its aerosol can manufacturing facility in Laon, France. The outlook is stable. Lombard, Illinois-based U.S. Can had total debt outstanding of about $559 million at Oct. 3, 2004. "The ratings affirmation incorporates the company's restated financial statements for 2002 and 2003 and the first quarter of 2004, which were filed in November 2004, resulting in lower-than previously-reported net income and increased debt leverage," said Standard & Poor's credit analyst Liley Mehta. U.S. Can remains highly leveraged and the earnings restatement has resulted in a further deterioration to the company's weak financial profile. Still, U.S. Can has maintained sufficient liquidity and cash generated from operations is expected to be sufficient to meet capital expenditures and working capital needs in 2005, and credit measures are expected to trend to appropriate levels. The company's audit committee along with independent advisors conducted the internal review, which identified certain accounting and financial reporting improprieties and related material errors in the company's financial statements, related to its Laon, France facility. The company has initiated various measures to strengthen its internal controls and procedures of its European operations, as well as to improve the cost structure at the underperforming Laon operations. The Laon plant generated $45 million to $50 million in annual revenues and is one of five U.S. Can aerosol can plants located in Europe. The ratings on U.S. Can reflect the company's very aggressive debt leverage, which overshadows its below-average business profile as a leading producer of general-line metal containers. With annual revenues of about $841 million, U.S. Can produces steel aerosol and other general-line metal containers primarily for personal care, household, automotive, paint, industrial, and specialty packaging products in the U.S., Europe, and Latin America; plastic containers in the U.S.; and metal food cans in Europe. UNITED AIRLINES: Cuts Compensation & Benefits to Save $12 Million ----------------------------------------------------------------- UAL Corporation (OTCBB: UALAQ.OB), the holding company whose primary subsidiary is United Airlines, reported changes to salaried and management employees' compensation and benefits that will achieve annual average savings of $112 million through permanent salary reductions, benefit changes, and productivity enhancements. The permanent SAM salary reductions will increase with an employee's responsibilities. * Salaried employees will take a 4% reduction. * Management employees will take a 6% reduction. * Officers will take an 8% reduction. * Members of the Executive Council (Glenn Tilton and his seven council members) will take an 11% reduction. In addition to the permanent salary reductions, and consistent with United's proposals to its unions, there will be a 4% temporary reduction in salaries. As a result, total reductions in salaries for the SAM group will range from 8% to15%. These salary reductions take effect January 1. The temporary reductions will be restored upon United's exit from bankruptcy. "This is very difficult for all our employees," said Sara Fields, senior vice president-People. "But it is absolutely essential if we are to build a strong and healthy company providing good, secure jobs, competitive compensation and benefits, and the opportunity to participate in the company's success in the future." The company also will adopt a revised benefit plan for salaried and management employees and is assessing the impact of changes to medical and dental programs, vacation and holiday schedules, and sick leave. These plans have not been finalized. The final component of the salaried and management savings is expected to be achieved through productivity enhancements. The company has already identified $30 million in annual productivity savings. These changes affect U.S.-based salaried and management employees and expatriates only. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. UNITED AIRLINES: Pension Rep. Wants to Join in Sec. 1113 Discovery ------------------------------------------------------------------ Independent Fiduciary Services, Inc., seeks the permission of the U.S. Bankruptcy Court for the Southern District of New York to participate in all discovery and proceedings related to UAL Corporation and its debtor-affiliates' Section 1113(c) Motion to reject their Collective Bargaining Agreements. IFS is the independent fiduciary appointed to protect the interests of the participants and beneficiaries of the Debtors' Pension Plans. IFS has an express duty to pursue all claims, obligations, debts or liabilities owing to the Plans. Filiberto Agusti, Esq., at Steptoe & Johnson, in Washington, D.C., recounts that IFS has sought to participate in the Section 1113(c) proceedings. However, the Debtors assert that IFS' participation is outside its standing and contrary to Section 1113. The Debtors' position is illustrated by their draft scheduling order for the Section 1113(c) proceedings, which excludes IFS. IFS must be allowed to participate because the Debtors intend to abandon the Pension Plans entirely. If IFS' participation is hindered, it renders IFS' mandate as illusory. As defender of the Plans, IFS cannot be barred from proceedings that affect the Plan's contractual right to contributions. In the Section 1113(c) proceedings, the Debtors will present a business plan that shows it cannot emerge from bankruptcy and fulfill its pension obligations. Consistent with the mandate, IFS must have the opportunity to test the actuarial assumptions inherent in the business plan. Also, IFS would like to present pension plan funding alternatives to the Debtors and the Court. IFS should be allowed to participate because it is a voice for individuals that otherwise will have no representation. Unions represent active employees. The Pension Benefit Guaranty Corporation represents beneficiaries, but only when the Plans are terminated. As appointed fiduciary, IFS represents all participants and beneficiaries, including active employees, former employees not yet eligible for pensions, retired participants and beneficiaries. IFS' participation will avoid the appointment of additional committees to represent current employees whose union is not present, former employees and current retired participants and beneficiaries. Currently, these constituencies have no representation. However, they have contacted the U.S. Trustee to address this issue. IFS can and should fulfill this role. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNITED AIRLINES: Names David Wing Vice President & Controller ------------------------------------------------------------- UAL Corporation (OTC Bulletin Board: UALAQ), parent of United Airlines, named David Wing its new Vice President and Controller. Mr. Wing is the former Executive Vice President and Chief Financial Officer of ATA Airlines, and has also worked at American Airlines, where he managed financial aspects of the airline's international expansion. At United, Mr. Wing will oversee the processing and reporting of all financial transactions, including statutory reporting. He will also be responsible for maintaining effective internal controls over financial reporting and the efficient and effective operation of the company's accounts payable, payroll, passenger and cargo revenue accounting worldwide, and Sarbanes-Oxley Section 404 implementation. His appointment is effective Jan. 3, 2005. Mr. Wing will work in United's world headquarters in Elk Grove Village, Illinois and will report to Jake Brace, United's Executive Vice President, Chief Financial Officer and Chief Restructuring Officer. "Dave brings to United valuable knowledge on a range of industry issues and extensive experience in airline financial management," Mr. Brace said. "This will be critical to United as we complete our restructuring and exit bankruptcy." The role of controller opened this year when former United Controller Lynn Hughitt was appointed to the role of Vice President for Compensation and Benefits. At ATA, Mr. Wing oversaw all aspects of accounting and financial reporting including SEC compliance, in addition to tax planning and compliance, Sarbanes-Oxley Section 404 implementation, long-term strategic planning, banking and cash management. Prior to his appointment as CFO in early 2003, Mr. Wing was ATA's Vice President and Controller. From 1983 to 1994, Mr. Wing worked at American Airlines in several accounting and financial positions. He spent several years in London managing financial aspects of American's service expansion into Europe and also helped develop American's financial and accounting plan for its Latin America expansion. Mr. Wing is a Certified Public Accountant, who holds a Masters in Business Administration and began his career as an auditor. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. USURF AMERICA: Names Craig Cook Vice President of Operations ------------------------------------------------------------ Usurf America, Inc. (OTC Bulletin Board: USURE), appointed Craig A. Cook to the Company as Vice President of Operations, as well as President of Usurf Communications, Inc. -- UCI, a wholly owned subsidiary of Usurf America, starting immediately. "Craig brings a tremendous mix of operational and management expertise to Usurf," said Usurf Chairman Dave Weisman. "He has a long career driving enterprise value, managing change, and building efficient organizations. We are extremely pleased to have someone with such versatility on our management team." Mr. Cook comes to Usurf from Sovereign Companies, having served as the Chief Operating Officer. Previously, he was the Chief Operating Officer for Denver Public Schools and the Assistant Superintendent of Kansas City Public Schools, Kansas City, Missouri, respectively. A retired Lieutenant Colonel in the U.S. Army, Mr. Cook served in various command and staff finance/accounting positions during his military service. He earned his MBA from the University of Nevada, Reno, and his BSBA from the University of Idaho. His 30+ years of experience in leading and managing complex organizations, and his expertise in finance/budgeting make him a welcome addition to the Usurf team. "In both the private and governmental sector, my management style has been to concentrate on cost containment and efficient organizational structure," said Mr. Cook. "I believe we have an extraordinary opportunity to restructure and revitalize Usurf, and in the process greatly expand our customer base and market opportunity. Execution is the key and I'm delighted to be given the tools and the mandate to drive real long-term shareholder value." About the Company Based in Colorado Springs, Colorado, Usurf America is implementing specific strategies designed to leverage the Company's IP-based software technology enabling fully ubiquitous voice, video and data product deployments in targeted geographic regions of the United States. For more information about Usurf America, please visit the Company's website at http://www.usurf.com/ * * * Going Concern Doubt In its Form 10-Q for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, Usurf America's auditors raised substantial doubt about the Company's ability to continue as a going concern due to recurring losses and a negative working capital. For the nine months ended Sept. 30, 2004, and 2003, the Company incurred a net loss of $12,448,539 and $1,990,795, respectively. As of Sept. 30, 2004, USURF had an accumulated deficit of $56,310,384. WAYLAND INVESTMENT: Revolver & Sr. Subordinated Notes Paid in Full ------------------------------------------------------------------ Fitch Ratings changes the senior secured revolving credit facility and senior subordinated notes to paid in full for Wayland Investment Fund: -- Senior secured revolving credit facility rated 'BBB'; -- Senior subordinated notes rated 'BB'. Wayland Investment Fund, LLC, is a market value collateralized debt obligation that closed on Dec. 23, 1997. The fund is managed by Wayzata Investment Partners, LLC. At inception, the senior secured revolving credit facility had a balance of $390 million and the senior subordinated notes had a balance of $60 million. On Sept. 23, 2004, the senior secured revolving credit facility was paid in full. On Nov. 29, 2004, Wayzata elected to make its final optional prepayment, which represented the total principal amount outstanding on the senior subordinated notes together with accrued interest. WESCORP ENERGY: Accumulated Deficit Spurs Going Concern Doubt ------------------------------------------------------------- Wescorp Energy Inc.'s financial statements show that the Company has an accumulated deficit of approximately $8,200,000 incurred through September 30, 2004. This factor raises substantial doubt about the Company's ability to continue as a going concern. The Company is currently changing its focus to provide expertise to emerging companies, offering timely product solutions and strategic investment opportunities in the oil and gas industries, which will, if successful, mitigate the factors which raise substantial doubt about the Company's ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan. An estimated $400,000 is believed necessary to continue the Company's operations and increase development through the end of this fiscal year. An additional $1,900,000 will be required to the end of the second quarter of 2005. This amount does not include any cash required for capital purchases. The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for international expansion through affiliations and other business relationships. This also anticipates that sales in Flowstar and Flowray will start to increase to the point where the businesses become profitable by the end of 2004, self sufficient on a cash flow basis by the end the second quarter of 2005. Should this not occur, then Wescorp will require additional working capital to finance any operating shortfall from the Flowstar/Flowray operations. On April 1, 2004, Wescorp completed the acquisition of 100% of the outstanding shares of Flowstar and Flowray in consideration of cash payments to the selling shareholders totaling approximately $401,500 (CDN$550,000). The Company's operations have been funded to date by debt and equity financing. It is relying on these sources of funding in order to provide the Company with sufficient capital to continue its development and operational plans. The Company does not have any lending arrangements in place with banking or financial institutions and does not anticipate that it will be able to secure these funding arrangements in the near future. To the extent that the Company requires additional funds to support its operations or the expansion of its business, it may sell additional equity or issue debt. Any sale of additional equity securities will result in dilution to its stockholders. There can be no assurance that additional financing, if required, will be available to the Company, or on acceptable terms. Wescorp Energy is situated in Edmonton near the geographic center of North America's oil and gas reserves, sharing the same time zone, language and ethic as the continent's other dominant energy capitals -- Houston, Dallas and Calgary. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- February 9, 2005 NACHMAN HAYS BROWNSTEIN, INC. Due Diligence Symposium 2005 Hilton Woodbridge, Iselin, New Jersey Contact: 1-888-622-4297 or info@nhbteam.com March 9-12, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Spring Conference JW Marriott Desert Ridge, Phoenix, Arizona Contact: 312-578-6900 or http://www.turnaround.org/ April 28- May 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriot, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ June 2-4, 2005 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities and Bankruptcy Omni Hotel, San Francisco Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ July 14 -17, 2005 AMERICAN BANKRUPTCY INSTITUTE Ocean Edge Resort, Brewster, Massachusetts Contact: 1-703-739-0800 or http://www.abiworld.org/ July 27- 30, 2005 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Kiawah Island Resort and Spa, Kiawah Island, S.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ October 19-23, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Annual Convention Chicago Hilton & Towers, Chicago Contact: 312-578-6900 or http://www.turnaround.org/ November 2-5, 2005 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Eighth Annual Meeting San Antonio, Texas Contact: http://www.ncbj.org/ December 1-3, 2005 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Grand Champions Resort, Indian Wells, Calif. Contact: 1-703-739-0800 or http://www.abiworld.org/ The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Bernadette C. de Roda, Rizande B. Delos Santos, Emi Rose S.R. Parcon, Jazel P. Laureno, Aileen M. Quijano and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***