/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/041222.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 22, 2004, Vol. 8, No. 282 Headlines ABITIBI-CONSOLIDATED: S&P Slices Corporate Credit Rating to BB- ADELPHIA COMMS: Selling Supercable Interests to J. Anton for $3M AGILENT TECHNOLOGIES: Moody's Revises Ratings Outlook to Stable AMERICAN RESTAURANT: Moody's Withdraws Junk Ratings AMERICAN WAGERING: Raises $2.2MM to Meet Gaming Board Regulation AMES DEPARTMENT: Ashley Furniture Wins Bid for Leesport Property ANDERSEN 2000 INC: Case Summary & 20 Largest Unsecured Creditors ARMSTRONG: Eyes January Confirmation Ruling from Judge Robreno AT&T CORP: Declares $0.2375 Per Share Regular Quarterly Dividend ATA AIRLINES: Court OKs Southwest's Bid for Chicago-Midway Gates AVAYA INC: Completes Redemption of Liquid Yield Option(TM) Notes BALLANTRAE HEALTHCARE: Court Confirms Amended Joint Plan BALTIMORE MARINE: Liquidating Agent Hires Navigant as Accountants BANC OF AMERICA: Fitch Puts Low-B Ratings on 17 Cert. Classes BROADVIEW HOSPITALITY: Case Summary & Largest Unsecured Creditors CALICO COMMERCE: Makes Final Cash Liquidating Distribution CALPROP CORP: $10.8M Equity Deficit Triggers Going Concern Doubt CALPROP CORP: Chairman V. Zaccaglin Wants To Take Company Private CAM CBO: Fitch Maintains Junk Rating on $29.4M Class C Notes CARE CONCEPTS: Parties Agree to End Media Billing Transaction CATHOLIC CHURCH: Spokane Wants to Hire Paine Hamblen as Counsel CELL THERAPEUTICS: Selling 2.59 Mil. Common Shares at $7.10 Each CHECKMATE STAFFING: Has Until April 4 to File a Chapter 11 Plan CONSTELLATION BRANDS: Concurs with Partners to Forego Chalone Bid CYPRESSTREE INVESTMENT: Fitch Affirms B- Rating on $57.5M Notes DEL MONTE FOODS: Moody's Affirms Ba3 Senior Implied Rating EASTMAN HILL: Fitch Holds Junk Ratings on Combos & Preferreds EASYLINK SERVICES: Obtains $15 Million Senior Bank Loan EB2B COMMERCE: Judge Blackshear Approves Disclosure Statement EL COMANDANTE: Codere PR to Take Charge of Racing Operations FEDERAL-MOGUL: Asks Court to Okay Waukesha Settlement Agreement GALEY & LORD: Chapter 7 Trustee Hires Lamberth Cifelli as Counsel GENOIL: Inks Agreement Eliminating All Secured Debt GETTYSBURG RETIREMENT: Case Summary & Largest Unsecured Creditors HEDSTROM CORP: U.S. Trustee Picks 7-Member Creditors Committee HEDSTROM CORP: Creditors Committee Taps Piper Rudnick as Counsel HEWETT'S ISLAND: Moody's Rates Class D Notes & Securities at Ba2 HILL CITY: U.S. Trustee Picks 7-Member Creditors Committee HILL CITY: Committee Wants to Hire Heller Draper as Counsel J.P. MORGAN: S&P Upgrades Ratings on Class F Certificates to B JAFRA WORLDWIDE: Sept. 30 Balance Sheet Upside-Down by $62 Million JOHN HUBLER NISSAN-SUZUKI: Voluntary Chapter 11 Case Summary LATHAM MANUFACTURING: Moody's Rates $125M Sr. Sec. Debts at B2 LORAL SPACE: Subsidiary to Build Broadcast Satellite for EchoStar MANUFACTURED HOUSING: Payment Shortfall Triggers S&P's D Rating MBK PARTNERSHIP: Case Summary & 20 Largest Unsecured Creditors MISSISSIPPI CHEMICAL: Terra Industries Completes Acquisition MORGAN STANLEY: S&P Junks Class M Mortgage Pass-Through Certs. MOUNT CLEMENS: Fitch Affirms BB Rating on $82.8M Revenue Bonds NEW FRONTIER: Case Summary & 20 Largest Unsecured Creditors NEWAVE: Subsidiary Secures Fraud Protection with SquareTrade Pact NORSKE SKOG: S&P Slices Corporate Credit Rating to BB- from BB NORTHWESTERN: Paying $14.5M in Sec. Debt from Asset Sale Proceeds OAO SEVERSTAL: S&P Says Bid for Stelco Unlikely to Proceed OCTANE ENERGY: Hiring Financial Advisor to Review Alternatives OSBORNE ENTITIES: Case Summary & 58 Largest Unsecured Creditors PALADYNE CORP: Recurring Losses Trigger Going Concern Doubts PANAMSAT: Moody's Reviewing Low-B & Junk Ratings & May Downgrade PANDA-ROSEMARY: Moody's Reviewing Ba2 Rating & May Upgrade PARMALAT USA: Liquidation Analysis Under the Chapter 11 Plans PEACHTREE FRANCHISE: Moody's Junks $6.192 Million Class C Notes PEGASUS SATELLITE: Judge Haines Okays Employee Retention Program PLAINS EXPLORATION: Fitch Withdraws BB+ Rating on Senior Debt PROVIDENCE RI: Fitch Revises Outlook on B Rating to Positive PSEG ENERGY: Fitch Affirms BB Rating & Says Outlook is Negative PSEG ENERGY: Moody's Affirms Ba3 Senior Unsecured Rating PSEG ENERGY: S&P Revises Outlook on BB- Rating to Negative SHILOH INDUSTRIES: Moody's Rates $175M Senior Secured Debt at Ba3 SOLUTIA INC: Has Exclusive Right to File Plan Until April 11 SOUTH STREET TAVERN: Case Summary & 7 Largest Unsecured Creditors STAR GAS: Fitch Withdraws Single-B Ratings on Secured Debt STELCO INC: Proofs of Claim Must be Received by January 31 TEMBEC INC: Weak Cash Flow Fear Prompts S&P to Cut Ratings to B THINK AGAIN: Voluntary Chapter 11 Case Summary TOUAX LEASE: Moody's Downgrades Rating on $33.5M Notes to Ba1 TRICO MARINE: Files Prepack Chapter 11 Petition in S.D. New York TRICO MARINE: Case Summary & 4 Largest Unsecured Creditors UAL CORP: Engineers Want to Intervene to Defend Interests UAL CORP: U.S. Bank & L.A. Responds to Injunction Request UNIVERSAL COMPRESSION: S&P Rates $1.3B Senior Secured Debts at BB US AIRWAYS: Asks Court to Extend Removal Period to April 30 USG CORP: Provides Status Report on Asbestos PI Claims Estimation VOICEIQ INC: Creditors & Shareholders Approve Plan of Arrangement W.R. GRACE: Wants Judge Fitzgerald to Handle Asbestos Claim Issues WINSTAR COMMUNICATIONS: SEC Revokes Securities Registration YUKOS OIL: Wants to Employ Fulbright & Jaworski as Counsel YUKOS OIL: Look for Bankruptcy Schedules & Statements by Feb. 12 * Upcoming Meetings, Conferences and Seminars ********* ABITIBI-CONSOLIDATED: S&P Slices Corporate Credit Rating to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Montreal, Quebec-based newsprint producer Abitibi-Consolidated Inc. to 'BB-' from 'BB'. At the same time, all ratings outstanding, including those on subsidiary Abitibi-Consolidated Co. of Canada, were lowered to 'BB-' from 'BB'. The outlook is negative. "The ratings action reflects our concern that Abitibi will not be able to materially reduce debt through internally generated cash flows in the next 12-24 months," said Standard & Poor's credit analyst Daniel Parker. "At even recent stronger newsprint prices, Abitibi's existing debt load in relation to its ability to generate cash is high for the ratings. Of particular concern is the company's ability to reduce debt before any pricing downturn," Mr. Parker added. The appreciation of the Canadian dollar will further hamper efforts to reduce debt. For every one U.S. cent appreciation of the Canadian dollar, EBITDA is negatively affected by about C$30 million (net of hedging). The ratings on Abitibi reflect its high debt levels, heavy exposure to cyclical commodity-oriented groundwood papers, and weak financial performance in the wake of highly unfavorable industry conditions. In the past five years the demand for newsprint has declined by about 15% because of waning newspaper readership, the infiltration of electronic media in the dissemination of information and advertising, and the migration of commercial printing to more value-added grades. At Sept 30, 2004, the company had debt of C$5.5 billion (adjusted for off-balance- sheet financing) and net revenues of about C$5 billion over the past 12 months. These risks are partially offset by the company's leading market position in newsprint and groundwood papers, and by its competitive cost position in North America. The negative outlook reflects concerns that the ratings could be lowered further if the company does not demonstrate that it is able to start reducing its current debt levels. Standard & Poor's believes that the company is poorly positioned financially to weather a cyclical downturn. The company does have some strategic options, which provides a level of non-operational flexibility. ADELPHIA COMMS: Selling Supercable Interests to J. Anton for $3M ---------------------------------------------------------------- Adelphia Communications Corp., Adelphia Communications International, Inc., and other debtor-affiliates seek the authority of the U.S. Bankruptcy Court for the Southern District of New York to sell certain shares of interests to Jorge Eljuri Anton or to another person that submits a higher or otherwise better offer, free and clear of all encumbrances pursuant to a share purchase agreement. Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher, in New York, relates that Debtor Adelphia Communications International owns about 20% of the interests in Supercable ALK Internacional, SA, a Venezuelan joint venture. Supercable Venezuela is among the largest cable companies in Venezuela with 101,000 subscribers and $50 million in annual revenues. Since 1994, Adelphia has invested around $3 million in Supercable Venezuela. Ahmad Khamsi, the founder and president of Supercable Venezuela, owns 60% of the interests in Supercable Venezuela while Mr. Anton owns the remaining 20%. Moreover, the ACOM Debtors hold certain interests in two Colombian joint ventures: * ACOM owns 1% of the interests of SuperCable Telecomunicaciones SA -- Supercable Colombia I; and * Adelphia holds 6% interest in SuperCable Colombia SA -- Supercable Colombia II. Adelphia also holds a 20% interest in Supercable Corporation, a Delaware Corporation, which holds another 48% interest in Supercable Colombia I. Four other shareholders, including Messrs. Khamsi and Anton, own the remaining interests in Supercable Colombia I and Supercable Colombia II. Supercable Colombia has about 14,000 subscribers in Colombia and generated $6 million in revenues in 2003. In October 2003, due to declining economic and political conditions in Venezuela and Colombia, the Debtors agreed to divest their shares in Supercable Colombia, Supercable Corporation, and Supercable Venezuela. In February 2004, the Debtors, with their financial advisors, commenced efforts to market the Shares. As of November 22, 2004, the Debtors have provided around 30 potentially interested parties with an offering memorandum. Mr. Shalhoub says that although the Debtors received two indications of interest from third parties other than Mr. Anton, the indications of interest significantly undervalued the Shares and were unacceptable to the Debtors and their Joint Venture partners. Accordingly, the Debtors engaged in discussions and negotiations with Mr. Anton who indicated an interest in purchasing the Shares under the terms on which the Debtors would be willing to sell. As a result of the negotiations, the Debtors negotiated a Share Purchase Agreement with Messrs. Anton and Khamsi. The Shares Purchase Agreement provides that in consideration of the sale of the Shares, Mr. Anton will pay the Debtors $3,000,000 by wire transfer. The Purchase Price will be allocated between Adelphia and ACOM. At Closing, Mr. Anton, acting on Supercable Venezuela's behalf, will pay Adelphia $300,000 in respect of dividends previously declared and ratified by Supercable Venezuela shareholders. The sale of the Shares in accordance with the Shares Purchase Agreement is supported by sound business justification, Mr. Shalhoub asserts. The Debtors determined that the consideration for the Shares under the Purchase Agreement: -- exceeds all other offers made for the Shares; and -- is fair consideration for the assets being sold. Mr. Shalhoub points out that the fairness of the purchase price will be further tested because the Shares Purchase Agreement is subject to higher or otherwise better offers. If approved and consummated, the sale of the Shares will enable the Debtors to divest themselves of arguably high-risk investments in countries experiencing significant political and economic unrest at a fair and reasonable price. Moreover, the cable systems owned by the Joint Ventures are not integral or related to the operation of any of the Debtors' going-forward businesses. The Debtors do not believe that the Shares are subject to any encumbrances. Mr. Shalhoub assures the Court that to the extent the Shares are encumbered, the Debtors will satisfy one or more of the five subsections of Section 363(f) of the Bankruptcy Code. Furthermore, the Sale Order will provide that encumbrances, if any, will attach to the net proceeds from the sale of the Shares with the same force and effect as the liens previously had on the Shares, subject to the Debtors' rights and defenses. Accordingly, the Debtors submit that the sale of the Shares, free and clear of any encumbrances, must be approved pursuant to Section 363(f) of the Bankruptcy Code. The Debtors additionally ask the Court to rule that Mr. Anton is entitled to the protections provided by Section 363(m) of the Bankruptcy Code in connection with his proposed purchase of the Shares. Section 1146(c) provides that: "[the] issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1129 of this title, may not be taxed under any law imposing a stamp or similar tax." Consistent with Section 105(a), the exemption from "stamp or similar taxes" provided under Section 1146(c) has been broadly construed by bankruptcy courts to include asset sales and transfers that occur prior to confirmation of a chapter 11 plan. Accordingly, the Debtors seek the exemption of the proposed sale from transfer taxes pursuant to and subject to the terms of Section 1146(c). 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) AGILENT TECHNOLOGIES: Moody's Revises Ratings Outlook to Stable --------------------------------------------------------------- Moody's Investors Service affirmed the debt ratings of Agilent Technologies, Inc., and revised the rating outlook to stable from negative. Agilent has returned to operating profitability and positive cash flow generation, which Moody's believes will be sustainable through moderate cyclical swings. Financial flexibility has been restored through a demonstrably lower level of fixed costs, the start of a more targeted approach to its markets, and increased cash balances which have bolstered Agilent's liquidity cushion. The following ratings were affirmed: * Senior implied rating of Ba2; * $1.15 billion senior unsecured convertible notes rated Ba2; * Senior unsecured issuer rating of Ba2. Moody's also assigned a speculative grade liquidity rating of SGL-1. The ratings are supported by: (1) Agilent's strong market position in its core products; (2) elimination of near term liquidity concerns due to the return to positive cash flow and increase in cash balances; and (3) debt metrics which generally meet or exceed those of peers within their rating category. Previous concerns about Agilent's underfunded pension and benefit plans have been eased as the shortfall has been reduced by market performance and contributions, but Moody's anticipates it will still negatively impact cash and effective leverage for the near future. The ratings are constrained by: (1) Agilent's short and volatile history as an independent company; (2) the short duration of its "post-turnaround" phase and the expectation that long term strategic initiatives are still being developed; and (3) the lack of alternate liquidity besides cash balances. Ratings also reflect the volatility in Agilent's end markets, which: (a) could result in volatile sales growth and profit margins, or (b) could require unanticipated spending to remain competitive. Revenue growth is likely to be flat to negative in key markets in coming quarters because of continued market weakness and the discontinuation of a low margin business in the semiconductors products group. Agilent's SGL-1 liquidity rating reflects very good liquidity derived from cash balances of $2.3 billion at the end of FYE October 2004, and the expectation that management will consistently maintain cash balances above $1.8 billion. Moody's expects that Agilent will continue to generate positive cash flow over the next twelve months as it continues to reap the benefits of previous investments and restructuring activities. Moody's believes Agilent's cost structure has been reduced sufficiently to allow cash flow to remain neutral or positive even in a modest downturn scenario. As a result of past spending on long-lived systems and efforts to reduce assets and outsource manufacturing processes, capex is likely to remain at diminished levels for the near future. Agilent has no near term maturities, and the ratings reflect no expectation of large returns of cash to shareholders. The rating outlook is stable despite strong debt metrics relative to other companies at this rating level. The rating is restrained in part by Agilent's short, tumultuous history as an independent company operating in volatile business segments. Evidence that Agilent can sustain its current performance levels through business cycles, that current levels of R&D investment and capital expenditures are sufficient to maintain Agilent's market position, and maintenance of prudent financial policies, could drive ratings up over the medium term. A change in financial policy, such as initiation of a policy to return significant amounts of cash to shareholders prior to satisfying a potential put on the notes, could cause a downward revision in the rating or outlook. An increase in business risk or a change in Agilent's competitive position or performance versus peers, which could indicate an increase in pricing pressure, margin pressure, or future investment, or a shift in market dynamics such as customer credit quality or inventory obsolescence, could also cause negative rating pressure. Agilent's financial profile improved significantly over the past year as it realized the benefits of its restructuring efforts since 2001 to improve fundamental business processes. For the fiscal year ended October 2004, unadjusted EBITDA was positive for the first time since FYE 2001, and GAAP EBIT was positive in each of the four quarters of fiscal 2004. Agilent reported $562 million of positive cash flow before financing transactions, and ended the year with cash balances of $2.3 billion and $1.15 billion of debt obligations. Moody's anticipates that Agilent will sustain the cost reductions, which drove margin improvement and cash flow generation last year, and which provides cushion against volatile sales levels. ROA remained modest at 6.3% for 2004, but has the potential to improve to double digits due to discontinued low-margin businesses and stabilization of the second-half weakness of semiconductors and related equipment. Moody's expects key leverage and debt protection measures to remain near levels reached during FY 2004. At the end of the fiscal year, Agilent's debt to normalized EBITDA was 1.3 times (versus 26 times for FY 2003), and net operating cash flow was 47% of funded debt. Cash flow may experience some volatility based on margin pressure, top line volatility, and changing investment needs, but Moody's expects cash flow will stay above 40% of funded debt for the near term. Agilent's financial policy has been defensive, which served the company well during difficult times. The $1.15 billion of convertible notes can be put in December 2006. The rating incorporates the expectation that Agilent will maintain sufficient cash on hand to repay the notes if they are not refinanced. Agilent's lack of a credit facility makes it entirely dependent on its own cash balances to finance its operating and capital needs. Agilent Technologies, Inc., headquartered in Palo Alto, California, is a diversified technology company serving the communications, electronics and life sciences industries. Revenues in fiscal 2004 were $7.2 billion. Approximately 40% of sales were derived from test and measurement, 41% from semiconductor-related businesses and 19% from life sciences. AMERICAN RESTAURANT: Moody's Withdraws Junk Ratings --------------------------------------------------- Moody's Investor's Service has withdrawn all ratings on American Restaurant Group, Inc. The company filed for a Chapter 11 bankruptcy protection on September 27, 2004, as part of a prenegotiated reorganization plan. Ratings withdrawn are as follows: * $161.8 million 11.5% senior secured note (2006) rating of Caa2, * Senior Implied rating of Caa2, and the * Issuer rating of Ca. American Restaurant Group, Inc., with headquarters in Los Altos, California, operates 93 steakhouses under the trade name "Stuart Anderson's Black Angus" principally in the Western United States. Revenue over the twelve months ending June 2004 was $276 million. AMERICAN WAGERING: Raises $2.2MM to Meet Gaming Board Regulation ---------------------------------------------------------------- American Wagering, Inc., has minimum cash flow from operations and exposure to a cash flow shortage due to the claims against the Company resulting from certain state court actions and its chapter 11 Case. The Gaming Control Board Regulation 22.040 Reserve Requirement requires the Company have cash reserves of $2,200,000 to cover any outstanding wagering liability such as unpaids, future tickets and telephone account deposits. To meet the Regulation's requirements, the Company has obtained a $1,100,000 irrevocable standby letter of credit collateralized by $1,100,000 in certificate of deposits, which are classified in its balance sheet as restricted cash. Additionally, the Company's President and Chief Executive Officer, Victor Salerno, has personally secured an additional $1,100,000 irrevocable standby letter of credit to meet the Gaming Control Board's total reserve requirement of $2,200,000. Mr. Salerno was paid $52,500 for his personal guarantee. In order to collateralize this irrevocable standby letter of credit in the amount of $1,100,000, Mr. Salerno was required to obtain a second mortgage on his personal residence in the amount of $1,500,000. An inability to increase the reserve as necessary would have an adverse impact upon the Company including, but not limited to, requiring a significant reduction in the number of locations operated by the Leroy's subsidiary and requiring a significant reduction in the handle (total amount wagered). Going Concern Doubt The Company's independent auditors, Piercy Bowler Taylor and Kern, have indicated in their report dated April 15, 2004, on the Company's most recent annual financial statements for the fiscal year ended January 31, 2004, that they had substantial doubt as to the Company's ability to continue as a going concern. Headquartered in Reno, Nevada, American Wagering, Inc. -- http://www.americanwagering.com/main.html-- owns and operates a number of subsidiaries including, but not limited to, (1) Leroy's Horse and Sports Place, which operates 47 race and sports books licensed by the Nevada Gaming Commission, giving it the largest number of books in the state; (2) Computerized Bookmaking Systems, the dominant supplier of computerized sports wagering systems in the state of Nevada; and (3) AWI Manufacturing (formerly AWI Keno) is licensed by the Nevada Gaming Commission as a manufacturer and distributor, and has developed a self-service race and sports wagering kiosk. The Company filed for chapter 11 protection on July 25, 2003 (Bankr. D. Nev. Case No. 03-52529). Thomas H. Fell, Esq., at Gordon & Silver, Ltd., represents the Debtor in its restructuring efforts. When the Debtor filed for bankruptcy, it listed $13,694,623 in total assets and $13,688,935 in total debts. AMES DEPARTMENT: Ashley Furniture Wins Bid for Leesport Property ---------------------------------------------------------------- First Industrial Development Services, Inc., initially offered to purchase the commercial real property of Ames Department Stores and its debtor-affiliates located at Leesport, Ontelaunee Township in Berks County, Pennsylvania, for $23,000,000. Subsequently, the Debtors received offers from: (a) Ashley Furniture Industries, Inc., (b) Equity Industrial Partners Corporation, and (c) FBE Limited. At the Auction, Equity Industrial submitted a final bid of $28,000,000 with a $3,000,000 deposit and a closing date on or before February 28, 2005. On the other hand, Ashley Furniture submitted a final offer of $26,750,000 with a closing date on the next business day after the Court approves its bid. At the conclusion of the Auction, the Debtors, in consultation with the Official Committee of Unsecured Creditors and Kimco Funding, LLC, the Debtors' lender, have designated the Ashley Final Bid as the best offer for the purchase of the Leesport Property. The Court finds Ashley Furniture's final offer as the best offer and Equity Industrial's final offer as the second best offer. Accordingly, Judge Gerber authorizes the Debtors to sell the Leesport Property to Ashley Furniture for $26,750,000. 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) ANDERSEN 2000 INC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Andersen 2000 Inc. 306 Dividend Drive Peachtree City, Georgia 30269 Bankruptcy Case No.: 04-14155 Type of Business: The Company designs, manufactures and installs complete incineration, pollution control and heat recovery systems for hazardous materials, infectious materials, radioactive materials and municipal waste. See http://www.crownandersen.com/ Chapter 11 Petition Date: December 20, 2004 Court: Northern District of Georgia (Newnan) Debtor's Counsel: J. Robert Williamson, Esq. J. Ashley Reynolds, Esq. Scroggins and Williamson 1500 Candler Building 127 Peachtree Street, Northeast Atlanta, Georgia 30303 Tel: (404) 893-3880 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Lynn Whitsett Corporation Trade Debt $254,453 PO Box 18280 Memphis, Tennessee 38181 Attn: Bobby Lashley Tel: (770) 428-8600 Fax: (770) 428-7444 Cembell Industries, Inc. Trade Debt $173,859 5417 Paris Road Chalmette, Louisiana 70043 Group Engineers Malaysia SDN Trade Debt $106,574 Lot 280 Westwood Jalan Tabuan Kuching, Sarawak 93200 Lantec Far East SDN BHD Trade Debt & $66,782 Sales Rep Commissions Harbison-Walker Refractories Trade Debt $64,122 Citilegal LLC Legal-Arbitration $62,081 Yusuf Bin Ahmed Kanoo Sales Rep Commissions $51,020 Refractory Techserve Pte Ltd Trade Debt $49,829 Infinitech Ind Machinery Pte Sales Rep Commissions $47,970 Decker, Hallman, Barber & Legal-Domestic $33,926 Briggs Singapore International Legal-Arbitration $33,536 Arbitration Process Sales Company, Inc. Sales Rep Commissions $33,113 Pentad Associates, Inc. Sales Rep Commissions $24,320 Trotter Manufacturing Co. Sales Rep Commissions $21,556 Erichson Company, Inc. Sales Rep Commissions $21,371 Synertek Process Equipment Sales Rep Commissions $17,792 Arcom Technologies Sales Rep Commissions $17,527 Precision Systems, Inc. Trade Debt $14,880 Astec Systems Group Trade Debt $12,100 Dillon Enterprises, Inc. Sales Rep Commissions $11,106 ARMSTRONG: Eyes January Confirmation Ruling from Judge Robreno -------------------------------------------------------------- On November 23 and December 15, 2004, U.S. District Judge Eduardo Robreno held status conferences in Armstrong World Industries, Inc.'s Chapter 11 case. The agenda for the conference was how to proceed with the case following the Bankruptcy Court's December 2003 proposed findings of fact and conclusions of law and its proposed confirmation order for Armstrong's Plan of Reorganization. Judge Robreno replaced Judge Alfred Wolin as the U.S. District Judge overseeing the matter earlier this year. No proceedings in the U.S. District Court had been held in Armstrong's case since the status of the prior judge was challenged in a related case in late 2003. Creditors' Committee Complains The Unsecured Creditors Committee raised objections to the proposed confirmation order and wants to put more evidence into the record that Judge Newsome didn't allow. Specifically, the Creditors Committee wants to introduce evidence about Congress passing the FAIR Act and Armstong paying a lot less under that legislation to resolve its asbestos-related liabilities. Under the current plan, commercial creditors recover about 60% of what they're owed and $1.8 billion is allocated for asbestos claims. The FAIR Act could cut Armstrong's asbestos-related liability payments to approximately $520 million. Allan J. Arffa, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison LLP, representing the Creditors, told Judge Robreno that Dr. Mark Peterson's valuation of Armstrong's asbestos-related liability was wildly inflated and Judge Newsome didn't allow the Committee's expert, Dr. Letitia Chambers, sufficient time to present evidence of much lower liability estimates. Company Supports Plan "The Company continues to support Court approval of the Plan, but it is unable to predict when and if it will be confirmed. Therefore, the timing and terms of a resolution of the Company's Chapter 11 case remains uncertain," Armstrong World Industries' Assistant Secretary Walter T. Gangl says in a recent regulatory filing with the Securities and Exchange Commission. Stephen Karotkin, Esq., at Weil, Gotshal & Manges, LLP, representing Armstrong, reminded Judge Robreno that the Committee at some time expressed wholesale support for the plan it now complains is replete with deficiencies. Armstrong says the Committee is manufacturing objections and its arguments couldn't be more transparent or disingenuous. Judge Robreno indicated he would probably issue a ruling on the Creditors Committee's objections to the Plan in January. Chesapeake, et al., Want Confirmation Postponed Chesapeake Partners Management Co., D.C. Capital Partners, L.P. and Glen Hill Capital -- as shareholders managing in excess of 10% of AWI's common stock -- ask the Company's board of directors to act to postpone the confirmation of the Plan so as to allow for certain events to create more value for AWI's constituencies, including its common stockholders. According to Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, in New York, postponement of plan confirmation until the end of the second quarter of 2005 is warranted in AWI's Chapter 11 case because of: (a) the substantially improved prospects of the Fairness in Asbestos Injury Resolution Act of 2003 becoming law in 2005; (b) the dramatic impact the litigation would have on creditor and shareholder recoveries in the Armstrong cases; (c) Judge Wolin's recusal in accordance with the reasoning of the United States Court of Appeals for the Third Circuit, as set forth in "In re Kensington Indus," 368 F. 3d 289 (3rd Cir. 2004); and (d) the lack of harm to AWI's business or enterprise value as a result of continuing to operate in Chapter 11 through the middle of 2005. Mr. Dunne asserts that the chances that the FAIR Act will receive presidential signature and become law in the near term are greater now than they have ever been. As drafted, the FAIR Act would result in an additional $1.0 to $1.3 billion in recoveries to creditors and equity holders. With this difference, the Debtors could fully satisfy the claims of their unsecured creditors, which currently it cannot, and provide a significant return to shareholders, while still treating their asbestos personal injury claimants in a fair fashion acceptable to Congress and providing them with an established payment system and guaranteed award values. Remaining in Chapter 11 for an additional time period will cause no significant harm to AWI, Mr. Dunne says. The Shareholders believe that the Board has a fiduciary duty to them, while fulfilling its duties to other creditors, to ensure that the Debtors' Plan does not prematurely and unnecessarily foreclose the potential application and tremendous benefits of the FAIR Act in AWI's case. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) AT&T CORP: Declares $0.2375 Per Share Regular Quarterly Dividend ---------------------------------------------------------------- AT&T's Board of Directors declared a regular dividend of $0.2375 per share, payable Feb. 1, 2005, to AT&T common shareowners of record on Dec. 31, 2004. The common share dividends will go to about 2.7 million shareowners. About the Company AT&T Corp. (NYSE "T") -- http://www.att.com/-- has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services. * * * As reported in the Troubled Company Reporter on Oct. 12, 2004, Moody's Investors Service affirmed AT&T Corporation's debt ratings subsequent to the company's recent restructuring and headcount reduction announcement. Moody's affirmed these ratings: * Senior Implied Rating, Ba1 * Senior unsecured debt, Ba1 * Senior unsecured shelf, (P) Ba1 * Short-term debt, NP * Liquidity Rating, SGL-1 The outlook is negative for all ratings. ATA AIRLINES: Court OKs Southwest's Bid for Chicago-Midway Gates ---------------------------------------------------------------- ATA Holdings Corp. (ATAHQ), reported that the U.S. Bankruptcy Court for the Southern District of Indiana granted approval for Southwest Airlines' proposed acquisition of certain of ATA's Chicago-Midway Airport lease rights. The bid, which has the backing of the Air Transportation Stabilization Board and ATA's Official Committee of Unsecured Creditors, is subject to approval by the City of Chicago. Judge Basil Lorch III approved the transaction at a hearing held yesterday, December 21, to confirm Southwest Airlines' bid as the highest and best bid, and to authorize the transactions called for in the bid. "[Yesterday] marks a major step in our reorganization and continuation as a leading low-fare carrier," said George Mikelsons, Chairman, President and CEO of ATA. "The court's approval confirms that our arrangement with Southwest is the optimal outcome for ATA, our employees, customers, the City of Chicago and our stakeholders." The Southwest Airlines agreement, secured just eight weeks after ATA filed for reorganization, includes a total of $117 million in commitments to ATA, with the transfer to Southwest Airlines of lease rights to six gates and a maintenance hangar at Chicago- Midway Airport for $40 million, $47 million in financing and an investment of $30 million into ATA once it emerges from bankruptcy, representing 27.5 percent of equity in a reorganized ATA. The proposed transaction would also create the first significant codeshare agreement for both airlines, expected to launch in early February on Chicago-Midway flights. Codesharing will allow each airline to transfer passengers to the other airline on a single ticket. The Southwest Airlines bid was selected by ATA upon conclusion of an auction, which took place pursuant to authorization of the U.S. Bankruptcy Court, in which ATA's Chapter 11 reorganization case is pending. Bidding at the auction were Southwest Airlines and AirTran Airways, Inc. Southwestern's Statement "We are obviously pleased with [the] bankruptcy court approval," said Southwest Airlines CEO Gary Kelly. "We have enjoyed working with the ATA people, and we look forward to getting started on our code sharing early next year. I extend my congratulations to ATA as it begins its restructuring process. The real winners, of course, are Customers traveling to and from Chicago Midway Airport who will see more low-fare Southwest service and a continuing presence from ATA." Beyond the initial code share agreement at Chicago Midway Airport, future code share connection opportunities are possible at: Las Vegas, Seattle, Phoenix, Los Angeles International, and Orlando. Criteria would include the ability to ensure efficient facilities to accommodate passenger and baggage transfer between the two airlines and the ability to provide convenient, viable connecting schedules. 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. AVAYA INC: Completes Redemption of Liquid Yield Option(TM) Notes ---------------------------------------------------------------- Avaya, Inc. (NYSE: AV), reported that at 5:00 p.m. on December 20, 2004, $61,000 principal amount at maturity of the company's Liquid Yield Option(TM) Notes due 2021 -- LYONs, which represented all outstanding LYONs, were redeemed for cash. Holders will receive the redemption price of $545.67 per $1,000 principal amount at maturity of LYONs. Since Avaya delivered to holders its notice of redemption on November 18, 2004, holders of $548.7 million principal amount at maturity of LYONs converted their outstanding LYONs into 20,546,199 shares of Avaya common stock pursuant to the terms of the indenture. As provided in the indenture, each $1,000 principal amount at maturity of LYONs was exchangeable for 37.4437 shares of Avaya common stock. Prior to the conversions and the redemption of the LYONs, Avaya's diluted share count included 20,548,503 shares related to the LYONs as required pursuant to SFAS 128. Of these shares, 20,546,199 shares were issued in connection with the conversions of the LYONs described above and will continue to be included in Avaya's diluted share count in future periods and 2,284 shares were related to LYONs redeemed for cash and accordingly, will be excluded from Avaya's diluted share count in future periods. An aggregate of 20 fractional shares was cashed out in connection with the conversion transactions. Because the shares issued in connection with the conversions of the LYONs were already included in Avaya's diluted share count, the conversions of the LYONs will not result in an increase in Avaya's diluted share count. "The LYONs redemption and recent senior secured notes tender are the latest steps in Avaya's longstanding financial strategy to de-lever our balance sheet and strengthen our capital structure," said Garry K. McGuire, chief financial officer and senior vice president, corporate development, Avaya. Avaya said its total debt has been reduced to approximately $370 million, substantially all of which it assumed in connection with the company's recent acquisition of Tenovis GmbH & Co. KG. The assumed Tenovis debt includes $279 million related to an accounts receivable securitization and $68 million of real estate financing obligations. About Avaya Avaya, Inc., designs, builds and manages communications networks for more than one million businesses worldwide, including more than 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services. Driving the convergence of voice and data communications with business applications -- and distinguished by comprehensive worldwide services -- Avaya helps customers leverage existing and new networks to achieve superior business results. For more information visit the Avaya website: http://www.avaya.com/ Liquid Yield Option(TM) Notes is a trademark of Merrill, Lynch & Co., Inc. * * * As reported in the Troubled Company Reporter on Nov. 18, 2004, Standard & Poor's Ratings Services raised its rating on Basking Ridge, New Jersey-based Avaya Inc.'s senior unsecured debt to 'B+' from 'B' to reflect lower amounts of priority secured debt in Avaya's capital structure. On November 16, 2004, Avaya announced it had successfully tendered for $271 million of its outstanding $284 million of senior secured notes. Avaya maintains access to an undrawn $250 million senior secured credit facility, although the senior unsecured debt holders would not be materially disadvantaged. The corporate credit rating is affirmed, with a positive outlook. BALLANTRAE HEALTHCARE: Court Confirms Amended Joint Plan -------------------------------------------------------- The Honorable Harlin DeWayne Hale of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, put his stamp of approval on the Amended Joint Plan of Reorganization filed by Ballantrae Healthcare, LLC, and the Official Committee of Unsecured Creditors. The Plan took effect on December 20, 2004. Pursuant to the Plan, General Unsecured creditors, which include general vendors and approximately 1,050 tort claimants, recover: a) a cash payment on a pro rata basis from a $1.1 million portion of certain settlement proceeds; b) a post-confirmation Debtor shareholder package in six reorganized Debtors; or c) a cash payment calculated on a pro rata basis from any recovery on account of avoidance actions. The face amount of the damages asserted by these tort claimants is approximately $71 million, which is at variance with the Debtor's records. Ballantrae Healthcare, LLC is a nursing home operator. The Company and its debtor-affiliates filed for chapter 11 protection on March 28, 2003 (Bankr. S.D. Tex. Case No. 03-33152). David Ellerbe, Esq., at Neligan, Tarpley, Andrews and Foley LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $23,555,239 in total assets and $39,243,335 in total debts. BALTIMORE MARINE: Liquidating Agent Hires Navigant as Accountants ----------------------------------------------------------------- Alan M. Grochal, the liquidating agent for Baltimore Marine Industries, Inc.'s estate, sought and obtained permission from the U.S. Bankruptcy Court for the District of Maryland, Baltimore Division, to retain Navigant Consulting, Inc., as his accountant and financial advisor. Navigant Consulting is expected to: a) advise the Liquidating Agent with respect to accounting, financial, and operational issues related to the estate and proposed actions of the Liquidating Agent and other parties; b) assist the Liquidating Agent in the preparation of the estate's tax returns and other tax related filings; c) assist the Liquidating Agent in analyzing, and if appropriate, objecting to the claims of the Debtor's creditors and in negotiating with such creditors; d) analyze preferential transfers and advise in preference litigation; e) advise and assist the Liquidating Agent in monetizing all nonliquidated assets that the estate has taken title to pursuant to the Plan; f) assist the Liquidating Agent in making distributions to holders of allowed claims pursuant to and in accordance with the terms of the Plan; g) assist the Liquidating Agent with analyzing WARN act claims; and h) perform such other accounting, financial, and operating consulting services as may be required and are deemed to be in the interests of the estate in accordance with the Liquidating Agent's powers and duties as set forth in the Plan. Michael T. Atkinson, a Director at Navigant, discloses rates of the professionals at his Firm: Designation Rate ----------- ---- Managing Directors $400 - $450 Directors/Associate Directors $300 - $390 Managing Consultant $220 - $325 Senior Consultant $220 - $250 Analyst/Consultant $170 - $240 Administrative $80 To the best of the Liquidating Agent's knowledge, Navigant consulting does not have any interest materially adverse to the Debtor and its estate. Baltimore Marine Industries, Inc.'s main line of business is ship repair. The Company filed for chapter 11 relief on June 11, 2003 (Bankr. Md. Case No. 03-80215). Martin T. Fletcher, Esq., Cameron J. Macdonald, Esq., and Dennis J. Shaffer, Esq., at Whiteford Taylor & Preston L.L.P., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million each. The Court confirmed the Debtor's Joint Plan of Liquidation on June 25, 2004, offering 36% recovery to General Unsecured Creditors. BANC OF AMERICA: Fitch Puts Low-B Ratings on 17 Cert. Classes ------------------------------------------------------------- Fitch has taken rating actions on Banc of America -- BofA -- Mortgage Securities, Inc., mortgage pass-through certificates: Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2002-H Groups 1 & 2: -- Class A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2002-J: -- Class A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2002-K Groups 1 - 4: -- Class A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2002-L Groups 1 - 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 'BB' from 'B'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-A Groups 1 - 4: -- 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 'BB-' from 'B'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-G Groups 1 - 3: -- 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'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-H Groups 1 - 3: -- 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'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-I Groups 1 - 3: -- 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'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-J Groups 1 - 4: -- 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'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-K Groups 1 - 3: -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-L Groups 1 - 3: -- 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'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-1 Group 1: -- Class 1A affirmed at 'AAA'; -- Class 1-B-1 upgraded to 'AAA' from 'AA'; -- Class 1-B-2 upgraded to 'AA-' from 'A'; -- Class 1-B-3 upgraded to 'A-' from 'BBB'; -- Class 1-B-4 upgraded to 'BBB-' from 'BB'; -- Class 1-B-5 upgraded to 'BB-' from 'B'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-1 Group 2: -- Class 2A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-2 Group 1: -- Class 1A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-2 Group 2: -- Class 2A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-4 Group 1: -- Class 1A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-4 Group 2: -- Class 2A affirmed at 'AAA'; -- Class 2-B-1 affirmed at 'AA'; -- Class 2-B-2 affirmed at 'A'; -- Class 2-B-3 affirmed at 'BBB'; -- Class 2-B-4 affirmed at 'BB'; -- Class 2-B-5 affirmed at 'B'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-6 Group 1: -- Class 1A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-6 Group 2: -- Class 2A affirmed at 'AAA'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-7: -- Class A affirmed at 'AAA'. The upgrades, affecting approximately $50 million of outstanding certificates, are being taken as a result of low delinquencies and losses, as well as increased credit support levels. As of the Nov. 26, 2004, distribution date, the credit enhancement for the upgraded classes increased approximately 2.5 to 2.7 times the original credit enhancement levels. The pool factors (current mortgage loans outstanding as a percentage of the initial pool) ranged from 26% to 36% on these deals. The affirmations, affecting approximately $6.5 billion of outstanding certificates, are due to credit enhancement levels consistent with future loss expectations. The pool factors ranged from 8% to 79% on these deals. The collateral on these deals primarily consists of 15- to 30-year fixed-rate and adjustable-rate mortgages secured by first liens on one- to four-family residential properties. Further information regarding delinquencies, losses and credit enhancement is available on the Fitch Ratings web site at http://www.fitchratings.com/ BROADVIEW HOSPITALITY: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------------- Lead Debtor: Broadview Hospitality Holdings, LLC 400 West Douglas Wichita, Kansas 67202 Bankruptcy Case No.: 04-16882 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Wichita Hospitality Holdings, LLC 04-16883 Wichita Realty, LLC 04-16884 Type of Business: The Companies operates hotels. Chapter 11 Petition Date: December 17, 2004 Court: District of Kansas (Wichita) Judge: Chief Judge Robert E. Nugent Debtor's Counsel: Christopher W. O'Brien, Esq. Robbins, Tinker, Smith & Tinker 200 East First Street, Suite 540 Wichita, Kansas 67202 Tel: (316) 263-6257 Fax: (316) 263-9136 Total Assets Total Debts ------------ ----------- Broadview Hospitality Holdings, LLC $1M to $10M $1M to $10M Wichita Hospitality Holdings, LLC $1M to $10M $1M to $10M Wichita Realty, LLC $1M to $10M $1M to $10M Consolidated List of Debtors' 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Dean E. Norris, Inc. Trade Debt $60,000 4053 East Navajo Wichita, Kansas 67210 Adams & Jones, Chtd. Trade Debt $50,000 155 North Market, Suite 600 PO Box 1034 Wichita, Kansas 67201-1034 Women's International Trade Debt $40,457 Bowling Congress aka WIBC 5301 South 76th Street Greendale, Wisconsin 53129 SBC Trade Debt $32,408 PO Box 93017 Dallas, Texas 75393-0170 AT&T Trade Debt $8,818 AWC Paint & Decoration Center Trade Debt $8,618 Auto Clerk, Inc. Trade Debt $7,042 Cox Communications Trade Debt $6,197 Heartland Textile Trade Debt $6,187 Westar Energy Trade Debt $5,661 Even-Temp of Wichita, Inc. Trade Debt $5,491 Kansas Gas Service Trade debt $5,290 Cintas, Inc. Trade Debt $5,193 Blue Cross Blue Trade Debt $5,078 Shield of Kansas CableRep Advertising Trade Debt $4,978 Home Depo Commercial Credit Trade Debt $4,572 Kan-Tech, Inc. Trade Debt $4,457 KABA ILCO, Inc. Trade Debt $4,456 Aramark Uniform Services Trade Debt $4,252 SBC Smart Yellow Pages Trade Debt $3,399 CALICO COMMERCE: Makes Final Cash Liquidating Distribution ----------------------------------------------------------- On Dec. 28, 2004, Calico Commerce, Inc., will make a $0.03 per share second liquidating dividend to stockholders of record on Aug. 26, 2003. This final dividend represents the remaining assets in the company, and the company expects to make no further distributions to stockholders. The liquidating dividend is being made pursuant to the terms of, and in accordance with, the joint Plan of Reorganization filed by Calico and its Official Committee of Equity Security Holders, and approved by order of the United States Bankruptcy Court for the Northern District of California, San Jose Division, Case No. 01-56101-MSJ, entered on Aug. 14, 2003, confirming the First Amended Joint Plan of Reorganization (Dated June 30, 2003) filed by Calico Commerce Inc. and the Official Committee of Equity Security Holders appointed in the case. Calico made an initial liquidating distribution on Dec. 18, 2003, of $0.46 to each Calico stockholder of record as of Aug. 26, 2003, based upon 39,417,057 shares of Common Stock outstanding as of the Record Date. Calico made a second liquidating distribution in May 2004 to its stockholders of record at the close of business on the Record Date of $0.09 per share for each share of the company's common stock that they owned. In this final liquidating distribution, the company's stockholders of record at the close of business on the Record Date will receive $0.03 per share for each share of the company's common stock that they owned. Accordingly, the total of all liquidating distributions paid by Calico to its stockholders of record on the Record Date shall aggregate $0.58 per share. The company's transfer agent, American Stock Transfer & Trust Co., will be the distribution agent for purposes of distributing this final $0.03 dividend. The distribution will be mailed to each stockholder (or, in certain circumstances, a confirmation of credit to the stockholder's brokerage account) by the transfer agent on or about Dec. 28, 2004. All stockholders much cash the checks sent to them in connection with this distribution within 6 months or the funds will be void and considered "unclaimed property" under the plan of reorganization. After this final distribution of all remaining assets to creditors and equity holders, and after entry of the final decree in the bankruptcy case, the company expects to dissolve. Calico Commerce filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on Dec. 14, 2001, after executing an agreement to sell substantially all of its operating assets to PeopleSoft, Inc. CALPROP CORP: $10.8M Equity Deficit Triggers Going Concern Doubt ---------------------------------------------------------------- During the nine months ended September 30, 2004, and the year ended December 31, 2003, CalProp Corporation incurred net losses of approximately $2.7 million and $15.1 million, respectively. At September 30, 2004, the Company has cumulative losses of approximately $46.4 million, a stockholders' deficit of approximately $10.8 million and diminishing financial resources. These conditions raise substantial doubt about the Company's ability to continue as a going concern. In order to obtain cash to continue the Company's operations and maintain viability as a going concern, most of the land held for development and an option to purchase property in Riverside County, California either has been or may be sold instead of being developed as originally intended. Based on its agreements with lenders, the Company believes that it will have sufficient liquidity to finance its single remaining construction project through 2005 using funds generated from operations and funds available under its existing bank loan agreement for that project. Management's plan with respect to managing cash flow includes these components: (1) pay off debt that is coming due in 2004 and 2005, (2) minimize operating expenses, and (3) maintain control over costs. With regard to debt coming due, management plans to pay off most of the loans through cashflow from operations and expects to extend any remaining related party loans until funds are made available. With regard to minimizing operating expenses, management plans to achieve this by continuing to closely examine overhead items. Management anticipates that the funds generated from operations and borrowings from its existing loan commitments will be adequate to allow the Company to continue operations and complete its only current residential development and construction project in 2005. The Company has decreased its portfolio of real estate holdings substantially over the last twelve months in an effort to reduce its operations and repay debt in response to the Company's weakened financial condition and resulting need to conserve cash. The Company's Chairman of the Board and Chief Executive Officer, who is also the Company's single largest stockholder, has proposed to the Company's Board of Directors that they consider a transaction in which he and certain other current stockholders would become the Company's sole stockholders, with cash to be paid to the Company's other stockholders. Founded in 1961, Marina Del Rey, California-based Calprop Corporation builds quality homes in some of the most desirable communities in California and Colorado. CALPROP CORP: Chairman V. Zaccaglin Wants To Take Company Private ----------------------------------------------------------------- Victor Zaccaglin, CalProp Corporation's Chairman of the Board, Chief Executive Officer and single largest stockholder, has proposed to the Company's Board of Directors that the Company become a privately held company. As currently envisioned by Mr. Zaccaglin, the transaction would involve a tender offer for outstanding Company common stock by a corporation to be formed by Mr. Zaccaglin and to which certain other existing Company stockholders would contribute their Company shares, followed by a merger of that corporation with the Company in which cash would be paid at the same amount per share as that paid in the tender offer for any publicly held Company shares not tendered in the tender offer. Mr. Zaccaglin and the other stockholders expected to participate in the merger currently own approximately 83% of the Company's outstanding shares. No specific price has been proposed by Mr. Zaccaglin for the acquisition of the Company's publicly held shares and there is no assurance that any transaction will actually be commenced or completed. The Company has retained Duff & Phelps, LLC, to provide financial advice to the Company in connection with its consideration of a possible transaction and to provide its opinion with respect to whether any specific transaction that may ultimately be proposed by Mr. Zaccaglin is fair to the Company's public stockholders from a financial point of view. Mr. Zaccaglin's proposal and the Board of Director's consideration of that proposal are prompted by the Company's deteriorating financial condition, the substantial continuing costs that will be incurred if the Company remains a publicly traded company and uncertainty regarding the Company's continuing viability on a long-term basis unless it obtains additional equity capital. Going Concern Doubt During the nine months ended September 30, 2004, and the year ended December 31, 2003, CalProp Corporation incurred net losses of approximately $2.7 million and $15.1 million, respectively. At September 30, 2004, the Company has cumulative losses of approximately $46.4 million, a stockholders' deficit of approximately $10.8 million and diminishing financial resources. These conditions raise substantial doubt about the Company's ability to continue as a going concern. About the Company Founded in 1961, Marina Del Rey, California-based Calprop Corporation builds quality homes in some of the most desirable communities in California and Colorado. CAM CBO: Fitch Maintains Junk Rating on $29.4M Class C Notes ------------------------------------------------------------ Fitch Ratings affirms two classes of notes issued by CAM CBO I. These affirmations are the result of Fitch's review process and are effective immediately: -- $37,521,168 class A notes 'AAA'; -- $21,000,000 class B notes 'B+'; -- $29,453,255 class C notes remain at 'C'. CAM CBO is a collateralized debt obligation -- CDO -- managed by Conning Asset Management, which closed Nov. 13, 1998. CAM CBO is composed of mainly high yield bonds. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch Ratings conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. Since Dec. 12, 2003, the collateral has continued to perform. The class A overcollateralization -- OC -- ratio has increased from 142.3% as of Dec. 12, 2003, to 178% as of the trustee report dated Oct. 29, 2004, while class B OC ratio has increased from 106.3% to 114.1% over the same period. According to the trustee report, CAM CBO's defaulted assets represented 24.1% of the $82.9 million of total collateral and eligible investments. Assets rated 'CCC+' or lower represented approximately 27.1%, excluding defaults. The rating of the class A notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class B and C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. As a result of this analysis, Fitch has determined that the current ratings assigned to the class A , class B and class C notes still reflect thSe current risk to note holders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, and also available at Fitch's web site. CARE CONCEPTS: Parties Agree to End Media Billing Transaction ------------------------------------------------------------- Interactive Brand Development, Inc. (AMEX:IBD) (f/k/a Care Concepts I, Inc.) disclosed that its agreement to acquire Media Billing Company, LLC, and its wholly owned subsidiary, Internet Billing Company LLC, from PHSL Worldwide Inc. will be mutually terminated by the parties. "Principally as a result of public policy concerns expressed by the American Stock Exchange, we believe it to be in the best interest of IBD, and thus our shareholders, to terminate our agreement with PHSL. The termination is mutual and has no effect on our recently completed acquisition of 39.5% of Penthouse Media Group, Inc.," said Steve Markley, IBD's Chief Operating Officer. As reported in the Troubled Company Reporter on Sept. 28, Care Concepts I, Inc., rescinded the closing of its acquisition of Media Billing Company, LLC, and its wholly owned subsidiary Internet Billing Company, LLC, that was purchased from Penthouse International, Inc., in August 2004. On Sept. 20, 2004, the Company received a notice from the AMEX of its intention to delist the Company's Common Stock from trading on the exchange, pending a hearing requested by the Company. By agreeing to rescind the closing of the iBill acquisition unless and until the Company has satisfactorily resolved all listing eligibility issues and receives all necessary AMEX approvals related to the iBill transaction, the staff of the AMEX has agreed to withdraw its notice of intent to de-list the Company's securities. There can be no assurance that the Company will be able to satisfactorily resolve all listing issues or that it will receive all such AMEX approvals associated with the iBill transaction. About Interactive Brand Development, Inc. Interactive Brand Development, Inc., (AMEX:IBD) is a media and marketing holding company with significant consumer brand investments. The company owns interests in animation brands; adult entertainment brands; and in online auctions. The Company's brand investments include Penthouse Media Group (PMG), publisher of Penthouse Magazine, a brand-driven global entertainment business founded in 1965 by Robert C. Guccione. PMG's flagship PENTHOUSE(TM) brand is one of the most recognized consumer brands in the world and is widely identified with premium entertainment for adult audiences. PMG is operated by affiliates of Marc Bell Capital Partners, LLC as a global multimedia company encompassing Internet distribution through multiple websites, video production, broadcast, clubs and product licensing. Auditors Express Doubt On January 15, 2003, Care Concepts dismissed Angell & Deering as its principal accountants and auditors. A&D's report on the Company's financial statements expressed substantial doubt about the Company's ability to continue as a going concern. On January 15, 2003, William J. Hadaway was hired to review the Company's 2002 financial statements. On October 30, 2003, Care Concepts dismissed WJH. WJH shared A&D's doubts. Effective October 30, 2003, the Company engaged the accounting firm of Jewett, Schwartz & Associates as its new independent accountants to audit the financial statements for the fiscal year ending December 31, 2003. CATHOLIC CHURCH: Spokane Wants to Hire Paine Hamblen as Counsel --------------------------------------------------------------- According to Bishop William S. Skylstad of the Diocese of Spokane, it is critical for the Diocese to be represented by counsel who have significant bankruptcy experience and expertise in large and complex Chapter 11 cases and who are members of law firm, which has specific expertise in other practice specialties that will be needed in the Diocese's Reorganization Case. This includes corporate law, non-profit law, trust law, probate law, finance and commercial law, real estate law and personal injury and insurance defense law. Bishop Skylstad explains that Spokane will need legal services regarding: (a) the evaluation of legal issues relating to the question of what constitutes property of the estate of Spokane; (b) the evaluation of real property issues and related ownership issues; (c) the evaluation of personal property issues and related ownership issues; (d) the evaluation of the relationship between the Bankruptcy Code, the law governing the corporation sole structure and the laws governing the workings of a roman Catholic diocese; (e) potential First Amendment issues; (f) the evaluation of the relationship between the Bankruptcy Code, the laws governing the corporation sole structure and the laws governing the workings of a Roman Catholic Church. Spokane seeks authority from the U.S. Bankruptcy Court for the Eastern District of Washington to employ Paine, Hamblen, Coffin, Brooke & Miller, LLP, as general restructuring counsel for its Chapter 11 case, effective as of December 6, 2004. Paine Hamblen is a general practice firm, which dates back to 1893. It has 65 lawyers specializing in a multitude of practice areas including bankruptcy, healthcare, energy, tax and probate, labor and employment, corporate finance, securities, environmental, banking, real estate and litigation. Paine Hamblen's bankruptcy section has substantial experience in providing representation in bankruptcy cases and has provided representation on several large bankruptcy cases. Bishop Skylstad relates that Paine Hamblen has been representing Spokane since 2002 and is familiar with Spokane's structure and its business affairs. The firm has developed a significant knowledge base regarding the Diocese, its various property interests and the claims which have been asserted against it. Bishop Skylstad discloses that Spokane paid Paine Hamblen a $200,000 retainer, which has been deposited in a segregated trust account at Inland Northwest Bank in Spokane. In addition to the retainer, Paine Hamblen has reserved the right to request monthly post-filing additions to the Retainer for $75,000. The additional monthly contributions would commence in January 2005 and will be subject to upward or downward adjustment, based on the level of activity of the Reorganization Case. The Retainer is in advance against fees for services to be rendered and costs to be incurred by Paine Hamblen. Paine Hamblen will have the right, in its sole discretion to: (a) apply the Retainer wholly or partially to pay its allowed professional compensation and expense reimbursements; or (b) obtain the payment from Spokane's available assets. Any portion of the Retainer that exceeds the amount of all fees earned and costs incurred and approved by the Court by Paine Hamblen will be refundable. The firm will be paid based on its professionals' hourly rates: Partners $175 - $250 Associates $120 - $200 Paralegals $65 - $125 Paine Hamblen will not seek further payment from Spokane's insurers for any defense-related services it provides for the Diocese after the filing without prior Court approval, Bishop Skylstad says. Shaun M. Cross, a partner at Paine Hamblen, assures the Court that the firm is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code as modified by Section 1107. In addition, Paine Hamblen does not hold any interest adverse to Spokane. 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. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) CELL THERAPEUTICS: Selling 2.59 Mil. Common Shares at $7.10 Each ---------------------------------------------------------------- Cell Therapeutics, Inc., (Nasdaq: CTIC; Nuovo Mercato) has agreed to sell approximately 2,586,000 shares of its common stock to several institutional investors in a registered direct offering at a negotiated price per share of $7.10. The shares of common stock in this offering are being issued under an existing shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission on March 22, 2004. A prospectus supplement related to the offering will be filed with the U.S. Securities Exchange Commission. Copies of the prospectus supplement may be obtained directly from: Cell Therapeutics, Inc. 501 Elliott Avenue West Suite 400 Seattle, Washington 98119 Attention: Investor Relations About Cell Therapeutics, Inc. Headquartered in Seattle, Cell Therapeutics, Inc. -- http://www.cticseattle.com/-- is a biopharmaceutical company committed to developing an integrated portfolio of oncology products aimed at making cancer more treatable. At Sept. 30, 2004, Cell Therapeutics' balance sheet showed a $51,719,000 stockholders' deficit, compared to a $82,542,000 deficit at Dec. 31, 2003. CHECKMATE STAFFING: Has Until April 4 to File a Chapter 11 Plan --------------------------------------------------------------- Checkmate Staffing, Inc., and its debtor-affiliates sought and obtained an extension until, April 4, 2005, from the U.S. Bankruptcy Court for the District of Delaware to file a plan of reorganization. On June 18, 2004, the Debtor sold substantially all of its assets to New Staff, Inc., for $4,133,835. New Staff paid an initial $500,000 with the remaining balance to be paid over a one-year period in quarterly installments. After the first installment payment was made, New Staff raised issues concerning the sale and payment under the note. The Court understands that while the Debtors are trying to resolve the sale and payment issues, they don't have sufficient funds to proceed with the plan confirmation process. Headquartered in Orange, California, Checkmate Staffing Inc., -- http://www.checkmatestaffing.com-- is a provider of staffing services in the U.S. and abroad to clients such as Home Depot and J. C. Penney. The Company filed for chapter 11 protection on December 29, 2003, (Bankr. C.D. Calif. Case No. 03-19318). Marc J. Winthrop, Esq., at Winthrop Couchot represents the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $50 million in total assets and $100 million in total debts. CONSTELLATION BRANDS: Concurs with Partners to Forego Chalone Bid ----------------------------------------------------------------- Constellation Brands supports the decision made by its joint venture partners, Domaines Barons de Rothschild (Lafite) and Huneeus Vintners LLC, not to match a competing offer submitted for the purchase of The Chalone Wine Group, Ltd. (Nasdaq: CHLN) at $14.25 per share. "We are disciplined buyers and see no reason to bid up the price of Chalone," commented Richard Sands, Constellation Brands chairman and chief executive officer. "There are many other opportunities that we can explore with our joint venture partners, and we will. It is our desire to work together with our long-time friends at Huneeus Vintners, as well as our new friends at DBR, to create a new California fine wine portfolio in the near future." On Oct. 30, 2004, DBR signed a merger agreement with The Chalone Wine Group to purchase the latter for $11.75 per share, which was approved by the Chalone board of directors, following a recommendation for such approval by the special committee of independent directors formed to review and evaluate the proposed offer. The offer would have resulted in DBR taking Chalone private and the subsequent formation of a joint venture with Constellation Brands, Inc. (NYSE: STZ, ASX: CBR) and Huneeus Vintners LLC, to produce fine California wines. DBR, owned by the Rothschild family and Chateau Lafite Rothschild, owns and operates a prestigious set of wine properties in France, Chile, Portugal and Argentina, which produce and sell a selection of ultra premium and luxury wines. Huneeus Vintners LLC, owned by The Huneeus Family, and founded by Agustin Huneeus, is a privately held wine company in Napa, California, owning the Quintessa Estate and other vineyard properties. Agustin Huneeus has based his successful career in the wine industry on his belief that "Great wines are a reflection of place." He and his wife Valeria purchased the 280-acre Quintessa property in 1990 and developed Quintessa into a world- class wine estate. About the Company Constellation Brands, Inc. -- http://www.cbrands.com./-- is a leading international producer and marketer of beverage alcohol brands with a broad portfolio across the wine, spirits and imported beer categories. Constellation Brands is also the largest fine wine company in the United States. Well-known brands in Constellation's beverage alcohol portfolio include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet, Fleischmann's, Mr. Boston, Paul Masson Grande Amber Brandy, Franciscan Oakville Estate, Estancia, Simi, Ravenswood, Blackstone, Banrock Station, Hardys, Nobilo, Alice White, Vendange, Almaden, Arbor Mist, Stowells and Blackthorn. * * * As reported in the Troubled Company Reporter on Dec. 9, 2004, Moody's Investors Service assigned a Ba2 rating to Constellation Brands, Inc.'s proposed $2.9 billion senior secured credit facility from which the proceeds will be used to finance the approximately $1.4 billion purchase of The Robert Mondavi Corporation (no debt rated by Moody's) announced in November 2004. The secured debt rating is one notch lower than the Ba1 rating for Constellation's existing $1.2 billion facility due to the substantial amount of incremental debt and the reduction in excess collateral coverage in a distress scenario. Concurrent with the rating assignment (and prospective withdrawal of the existing secured debt rating), Moody's confirmed Constellation's existing ratings and assigned a stable ratings outlook. These rating actions conclude the review for possible downgrade initiated on November 9, 2004. Constellation's Speculative Grade Liquidity rating of SGL-1, denoting very good liquidity, is unaffected by the rating actions and will be revisited after the completion of the proposed acquisition and financings. CYPRESSTREE INVESTMENT: Fitch Affirms B- Rating on $57.5M Notes --------------------------------------------------------------- Fitch Ratings upgrades two classes of notes and affirms one class of notes issued by CypressTree Investment Partners I, Ltd., a revolving cash-flow collateralized debt obligation -- CDO: -- $48,920,526 class B-1 notes upgraded to 'AAA' from 'AA'; -- $56,564,359 class B-2 notes upgraded to 'AAA' from 'AA'; -- $57,500,000 class C notes affirmed at 'B-'. Fitch conducted detailed analysis of CypressTree and its underlying collateral. As of the most recent trustee report dated Oct. 29, 2004, CypressTree had 33.21% in assets rated 'CCC+' or below. Since the date of the last rating action in November 2003, the credit quality of the collateral pool has improved from an average rating of 'B-/CCC+' to 'B-.' As a result of this and other analysis, Fitch has determined that the ratings previously assigned to the class B notes merit an upgrade, while the class C notes still reflect the current risk to investors. According to the most recent trustee report, all overcollateralization -- OC -- and interest coverage -- IC -- tests continue to pass their test levels. The senior OC and IC test ratios (class A/B OC and IC tests) are at 179.38% and 264.23% respectively, versus a minimum trigger of 119% and 130% respectively, while the total OC and IC ratios (class C OC and IC tests) are at 116.09% and 155.22% respectively versus minimum triggers of 109% and 125% respectively. For purposes of calculating the OC and IC tests, par haircuts are applied to defaulted assets depending on the type of collateral asset defaulted. In addition, the fixed-rate assets have a weighted average coupon -- WAC -- of 8.27%, and the floating-rate assets have a WAS of 2.96%. The average life of the portfolio is 3.33 years. The ratings of the class B notes address the likelihood that investors will receive timely payment of interest and ultimate payment of principal, as per the governing documents. The ratings of the class C notes address the likelihood that investors will receive ultimate payment of interest and ultimate payment of principal, as per the governing documents. CypressTree, which closed in August 1997, is a cash-flow CDO managed by CypressTree Investment Partners. CypressTree is composed of primarily U.S. high yield senior secured loans, U.S. high yield senior unsecured bonds and emerging market sovereign debt securities. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and its portfolio management strategy. CypressTree is a revolving transaction with the reinvestment period having ended in October 2002. Under the terms of the Indenture, the asset manager is restricted in their ability to sell collateral assets, and may only do so once an asset has been declared defaulted by a rating agency. CypressTree is further restricted from executing amendments on any of the collateral debt securities. The class B notes are amortizing as they are the most senior remaining in the capital structure. CypressTree Investment Management Company, Inc., was formed in 1988 as an independent investment management firm focused exclusively on the non-investment grade loan and high yield bond asset classes. The firm and affiliated companies have a 15-year track record managing a cumulative total of $4.6 billion in loan and high yield bond portfolios. CypressTree manages investment programs for institutional clients including banks, insurance companies, pension plans and endowments. Fitch will continue to monitor and review this transaction for future rating adjustments. DEL MONTE FOODS: Moody's Affirms Ba3 Senior Implied Rating ---------------------------------------------------------- Moody's Investors Service downgraded Del Monte Foods Company's speculative grade liquidity rating to SGL-2 from SGL-1 due to the scheduled tightening of financial covenants in July 2005. The SGL-2 rating indicates good liquidity. Moody's also affirmed Del Monte's Ba3 senior implied rating and stable outlook. Moody's expects Del Monte to generate significant free cash flow over the next twelve months, which the company could direct to term debt repayment, share repurchases, and acquisitions. Due to seasonality, the company relies on its revolver on an interim basis during the year, with utilization typically at a low in May/June and peaking in September/October, during the harvest and packing season, after which utilization quickly decreases. Del Monte's $300 million revolving credit commitment provides an adequate cushion of unused revolver availability to meet peak working capital needs. The SGL rating could be raised again if additional debt paydown and earnings improvement enhance covenant cushions under the tighter required levels beginning in July 2005. Given the seasonal nature of its cash flow, the company's maintenance of a solid liquidity position is an important factor for its long-term ratings and outlook (Ba3 senior implied with a stable outlook). Del Monte generates relatively stable and predictable operating cash flow. The company benefits from product diversity across several food categories with relatively stable consumption trends, well-known brands, and leading shares in most of its product categories. Operating cash flow after capital spending (about $188 million in the LTM ending 10/31/05) is expected to remain strong despite cost pressures. Required debt amortization is limited over the next twelve months ($6 million). Working capital will be a material source of cash in the next six months, but the company's working capital is highly seasonal due to the annual crop cycle, so the company will likely need to draw on its revolver in the autumn to fund a seasonal working capital build. At 1/25/04, $142 million was drawn under the revolver and about $50 million of the commitment was utilized for letters of credit, leaving over $100 million of availability at seasonally high time of usage. The $300 million revolver matures in 2008. The company's cushion under financial covenants has been comfortable, but covenants tighten in F1Q06 (ending July 2005), which would leave a narrower cushion unless debt is paid down and earnings increase. Del Monte's business diversity provides some scope to sell assets without impairing remaining assets and enterprise value, but the assets are largely encumbered. Del Monte Foods Company, with revenues of $3.2 billion, has headquarters in San Francisco, California. The company's senior implied rating is Ba3 with a stable outlook. EASTMAN HILL: Fitch Holds Junk Ratings on Combos & Preferreds ------------------------------------------------------------- Fitch Ratings affirms five classes of notes issued by Eastman Hill Funding I, Ltd. These affirmations are the result of Fitch's review process and are effective immediately: -- $452,018,749 class A-1FL 'AA'; -- $8,828,491 class A-1FX 'AA'; -- $460,847,241 class A-2 IO 'AA'; -- $10,000,000 class A-3 'BBB'; -- $26,465,343 class B-1 'B' -- $25,000,000 combination securities remain at 'CC'; -- $17,875,000 subordinate preference shares remain at 'C'. Eastman Hill is a collateralized debt obligation -- CDO -- managed by Trust Company of the West -- TCW -- which closed July 2, 2001. Eastman Hill is composed of investment grade corporate, leveraged loans, high yield bonds and residential mortgaged backed securities. Included in this review, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the current ratings assigned to the all classes still reflect the current risk to noteholders. Since the last rating action, the collateral has slightly improved, as a result of the TCW's decision to rotate into agency RMBS (Fannie Mae and Freddie Mac) securities from investment grade corporates. The weighted average rating factor -- WARF -- has decreased to 20 ('BBB-') from 21 ('BBB-'). The class A-1 par value test -- PVT -- and class A-3 PVT have increased to 109.4% and 107.1% as of the trustee report dated Oct. 29, 2004, from 108.9 % and 106.9% as of the last date of May 30, 2003. The class B-1 PVT has decreased to 98.4% from 99.1% and remains below the trigger level of 100.3%. As of the most recent trustee report available, Eastman Hill's defaulted assets represented 2.5% of the total collateral and eligible investments. Assets rated 'CCC+' or lower represented approximately 4.8%, excluding defaults. In May 2004 TCW amended the transaction to reduce the notional amount of it swap schedule. Despite this reduction, Eastman Hill is still considerably over-hedged and continues to suffer from the low interest rate environment. There was an insufficient amount of interest proceeds available on the June 30, 2004, distribution dates to pay current class A-1, A-2 and A-3 note interest from the interest waterfall. Principal proceeds of $156,381 were used to remedy this shortfall. On the Sept. 30, 2004, distribution there was sufficient interest collections to pay class A-1, A-2 and A-3 current interest. The class B-1 note balance has capitalized as a result of insufficient interest or principal collections on the last three payment dates. As of Sept. 30, 2004, the capitalized interest is $2,465,343. The ratings on class A-1FL, A-1FX and A-3 address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class A-3 notes does not address the distribution of the class A-3 Step-Up Interest Distribution Amount. The ratings of the class B- 1 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. This rating of the class B-1 does not address the distribution of the class B-1 Step-Up Interest Distribution Amount. The ratings of the subordinated preference shares address the likelihood that investors will receive their stated balance of principal by the legal final maturity date. The rating of the Class A-2 Interest- Only Notes addresses the likelihood that investors will receive full and timely payments of interest on scheduled interest payment dates. This rating does not address any distribution of principal. The rating of the Combination Securities addresses the return of principal only and the rating of the Subordinated Preference Shares addresses the return of the Aggregate Outstanding Amount only. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralized Debt Obligations,' dated Sept. 13, 2004, available on Fitch's web site. EASYLINK SERVICES: Obtains $15 Million Senior Bank Loan ------------------------------------------------------- EasyLink Services Corporation (NASDAQ: EASY), has obtained a $15 million Senior Credit Facility provided by Wells Fargo Foothill. Of the $12 million of proceeds drawn at closing, approximately $9.1 million was used to refinance all of EasyLink's outstanding senior debt and approximately $1.4 million will be used to repay the Company's subordinated debt at maturity during the first quarter of 2005. The balance of the financing, net of transaction costs, is available to fund EasyLink's working capital needs, including its revenue growth initiatives. The Senior Credit Facility includes a $12 million term loan drawn at closing repayable in monthly payments over 60 months with an interest rate of 3.75% over the prime rate (currently 5.25%). Also, the Company has the ability to obtain advances of up to approximately $3.0 million initially, at an interest rate of 0.75% over the prime rate, subject to restrictions contained in the agreements governing the facility. This availability may be increased to $7.5 million, within the total borrowing limit of $15 million, subject to satisfaction of certain conditions. The facility is secured by the assets of the Company and its domestic subsidiaries and is subject to compliance with various negative and affirmative covenants. Thomas Murawski, President and CEO of EasyLink commented: "This refinancing further strengthens EasyLink financially. Based on current interest rate levels, the new facility compares favorably to the 12% rate of our previous senior debt. Most importantly, it significantly improves our cash flow in 2005 and 2006 as the new financing spreads out our debt principal payments over 5 years and eliminates the $5.6M principal payment that otherwise would have been due June 1, 2006 on one of our senior notes being refinanced. With this financing we have finally completed our debt restructuring initiative commenced nearly 4 years ago and can focus fully on executing our growth plans in 2005 and beyond." The refinancing of the Company's existing senior debt and the consequent elimination of previously capitalized interest will result in a gain before income taxes of approximately $1 million to be recognized in the fourth quarter of 2004. Interest on the new facility, however, will be recognized as incurred resulting in increased interest expense for financial reporting purposes in future periods. About EasyLink Services Corporation EasyLink Services Corporation (NASDAQ: EASY) -- http://www.EasyLink.com/-- headquartered in Piscataway, New Jersey, is a leading global provider of services that power the exchange of information between enterprises, their trading communities, and their customers. EasyLink's global network handles over 1 million transactions every business day on behalf of over 60 of the Fortune 100 and 20,000 other companies worldwide. We facilitate transactions that are integral to the movement of money, materials, products, and people in the global economy, such as insurance claims, trade and travel confirmations, purchase orders, invoices, shipping notices and funds transfers, among many others. EasyLink helps companies become more competitive by providing the most secure, efficient, reliable, and flexible means of conducting business electronically. Going Concern Doubt In its Form 10-Q for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, EasyLink Services reports that for each of the years ended December 31, 2003 and 2002, the Company received a report from its independent accountants containing an explanatory paragraph stating that the Company suffered recurring losses from operations since inception and has a working capital deficiency that raises substantial doubt about the Company's ability to continue as a going concern. EB2B COMMERCE: Judge Blackshear Approves Disclosure Statement ------------------------------------------------------------- The Honorable Cornelius Blackshear of the U.S. Bankruptcy Court for the Southern District of New York approved the amended disclosure statement explaining eB2B Commerce's amended plan of reorganization filed on Dec. 17, 2004. The Debtors are authorized to transmit the Disclosure Statement to their creditors and to solicit their votes to accept or reject the Plan. Ballots accepting or rejecting the plan must be filed on or before 4:00 p.m. Eastern Time on Jan. 18, 2005. About the Plan Key elements of the amended reorganization plan includes: 1) treatment of all claims from a cash contribution of $500,000 from Trinad Capital LP, of which: (i) $400,000 will fund distributions under the Plan; and (ii) $100,000 will fund operations of the Reorganized Debtor; 2) distribution of new common stock to certain interestholders under the Plan; and 3) distribution of available cash on a pro rata basis to unsecured creditors to the extent the Liquidation Trustee determines it to be, with 3% interest following the Plan's effective date. Objections against the confirmation of the Plan, if any, must be filed and served on the: -- Debtor's Counsel: Halperin Battaglia Raicht, LLP 555 Madison Avenue 9th Floor New York, New York 10022 Attn: Robert D. Raicht, Esq. -- and -- -- U.S. Trustee: United States Trustee 33 Whitehall Street New York, New York 10004 on or before Jan. 18, 2005. Headquartered in New York, New York, eB2B Commerce provides business-to-business transaction management services that simplify trading partner integration, automation, and data exchange across the order management life cycle. The Company filed for chapter 11 protection on Oct. 27, 2004 (Bankr. S.D.N.Y. Case No. 04-16926). Alan D. Halperin, Esq., at Halperin Battaglia Raicht LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $1,232,200 in total assets and $5,546,900 in total debts. EL COMANDANTE: Codere PR to Take Charge of Racing Operations ------------------------------------------------------------ Equus Gaming Company (OTC Pink Sheets: EQUUS), a publicly traded partnership with thoroughbred horse races and entertainment interests in Latin America and the Caribbean, had entered into term sheets with Codere Puerto Rico, Inc. and its affiliates, under which it is contemplated that Codere PR will be in charge of the racing operations at El Comandante and become the operator and manager of the Video Gaming System expected to be installed in Puerto Rico. Equus agrees to support Codere PR's license application to the Racing Commission to operate El Comandante Race Track and to operate and manage the VGS. The Racing Commission is scheduled to meet on Jan. 18 and 19, 2005, and, if necessary, on Jan. 20, 2005, to consider Codere PR's license applications. Subject to the licenses being granted and the fulfillment of other conditions in the term sheets, including the finalization of rules and regulations relating to the VGS, Equus expects to receive annual revenues sufficient to enable it to refinance its existing noteholder debt and amounts owed by it to the Commonwealth of Puerto Rico. The revenue stream will be guaranteed for a period of ten years or until the existing debt, or its replacement, is repaid, whichever occurs first, and will be backed up by an irrevocable bank letter of credit. After the guarantee expires, Equus will continue to receive a percentage of the VGS Net Win, as defined in the term sheets, plus rent from the Race Track. Codere PR will own or lease new state-of-the-art VGS equipment and provide the working capital necessary to operate and manage the VGS. Codere PR has the right to appoint three members to Equus' seven-member board of directors. Equus' three independent directors, all residents of Puerto Rico, will remain on the board with proposed newly elected member J. Michael Wilson. The term sheets provide that if Codere PR exercises its right to appoint three board members, Larry Lucas of Codere PR will become chairman of the board. The term sheets also provide that, subject to regulatory and bankruptcy court approval, Codere PR will be a joint operator of the El Comandante Race Track with El Comandante Management Company LLC, the present operator, on an interim basis until licenses are granted. Codere PR will be granted options to purchase up to 12 million, but not less than 10 million, Class A units of Equus at a price of $2.00 per unit to expire, if not earlier exercised, 90 days (10 days as to 4 million units) after the last to occur of the granting of the VGS license to Codere PR, the granting of the license to Codere PR to operate El Comandante Race Track and the finalization of the rules and regulations relating to the VGS, in compliance with conditions in the term sheets. As consideration for the granting of the option, Codere PR has paid $500,000 to Equus and is required to pay an additional $500,000 within 48 hours after the issuance of a 15-year license to Codere PR to operate El Comandante Race Track. The term sheets are subject, in their entirety, to the parties entering into definitive agreements, to all necessary regulatory approvals and to the approval of the bankruptcy court in respect of certain affiliates of Equus currently in Chapter 11 bankruptcy. Codere PR was chosen as the winning bidder, in a bid process, to manage and operate El Comandante Race Track and the VGS. Under the term sheets, Equus agrees to deal exclusively with Codere PR in respect of the VGS and the Race Track and to support Codere PR's license applications. Codere PR is majority- owned by Codere America, S.L., a Spanish limited-liability company, which is wholly owned by Codere S.A. of Madrid, Spain. Headquartered in Canovanas, Puerto Rico, El Comandante Management Company LLC operates the only thoroughbred racetrack in Puerto Rico. The Company filed for chapter 11 protection on Oct. 15, 2004 (Bankr. D. Del. Case No. 04-12972). Daniel K. Astin, Esq., at The Bayard Firm represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in total assets and debts. FEDERAL-MOGUL: Asks Court to Okay Waukesha Settlement Agreement --------------------------------------------------------------- Federal-Mogul Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve a Deed of Settlement between Debtors T&N Limited, Federal-Mogul Export Services Limited, Federal-Mogul Engineering Limited, and Federal- Mogul Shoreham Limited, on the one hand, and Waukesha Bearings Limited and Delaware Capital Formation, Inc., on the other hand. The Waukesha Sale Under the terms of an Offer Letter dated August 15, 2001, the Settling Debtors sold T&N Limited's Whitemetal Polymer and Ceramic Bearings Division and the Magnetics Bearings Division to Waukesha for GBP16.9 million or US$31.3 million. The assets sold to Waukesha as part of the Businesses included certain plant and machinery, three parcels of real property in the United Kingdom, certain intellectual property rights, goodwill, inventory, certain contractual rights, and miscellaneous other assets. The Businesses were conducted principally by FM Shorham, then known as Federal-Mogul RPB Limited, as agent for T&N Limited and, in some cases, as agent for FM Export Services Limited. Each of the Settling Debtors is a U.K. Debtor. Thus, the Administrators of the Settling Debtors are also parties to the Deed of Settlement. The parties agreed that Waukesha took the necessary actions to accept the terms of the Offer Letter and, as a result, the transaction was consummated and the Businesses were transferred to Waukesha prior to the Petition Date. James E. O'Neill, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, in Wilmington, Delaware, relates that the Offer Letter sets forth a number of warranties relating to the sale of the Businesses. The Warranties cover matters relating to the pre- sale conduct of the Businesses, the condition and pre-sale ownership of the assets used in conducting the Businesses, pre- sale litigation involving the Businesses, real property sold as part of the Businesses, employee, pension and tax issues, and other miscellaneous enumerated matters. The Offer Letter further provides that the Settling Debtors will have no liability for claims brought for breach of the Warranties unless the claims were brought within two years of completion of the sale of the Businesses. The two-year period expired on August 15, 2003. Furthermore, T&N Limited separately agreed to indemnify Waukesha against certain environmental liabilities relating to the period prior to the sale of the Businesses to Waukesha. The scope and extent of that indemnity are set forth in a Deed Including Environmental Indemnity and Escrow Arrangements Relating to the Sale of the Business of Each of the Whitemetal, Polymer and Ceramic Bearing Divisions of T&N Limited, dated as of August 15, 2001. To provide for the potential obligations of the Settling Debtors under the Warranties, the Environmental Deed, and certain warranties in related agreements, the Settling Debtors and Waukesha agreed that a portion of the consideration to be paid by Waukesha for the Businesses would be paid into two escrow accounts: -- GBP1,000,000 of the consideration payable under the Offer Letter was paid into an escrow account to provide for T&N Limited's potential liabilities under the Environmental Deed; and -- GBP2.1 million was paid into a separate escrow account to provide for any claims that Waukesha might assert against the Settling Debtors under the Offer Letter or under clause 2 of the Environmental Deed. These accounts have been jointly maintained at a bank in Birmingham, England in the names of the parties' solicitors. The documents governing the Escrow Accounts each specify that no payments may be made from the Escrow Accounts other than on written instructions of both the Settling Debtors and Waukesha. Federal Mogul Corporation, the ultimate parent of the Debtors, also entered into a Deed of Guarantee with Waukesha Bearings Limited and Waukesha Bearings Corporation. Waukesha has alleged that the Deed of Guarantee renders Federal-Mogul also liable for the Settling Debtors' obligations under the Offer Letter. On March 3, 2003, Waukesha Bearings and Delaware Capital Formation each filed Claim Nos. 6788 and 3789 against Federal-Mogul in unliquidated amounts relating to the alleged obligations. Waukesha's Claims By a letter dated August 9, 2002, Waukesha asserted nine discrete claims against the Settling Debtors under the Offer Letter. The claims relate to certain alleged pension-related claims, alleged retirement benefit obligations, obligations in connection with certain union agreements, and other miscellaneous claims, both fixed and contingent. The claims aggregated in excess of GBP11.8 million or US$21.2 million, plus certain unliquidated amounts. Waukesha also asserted a claim against the Settling Debtors under the Environmental Deed relating to certain costs for environmental consultants performing services at the parcels of real property sold as part of the Businesses in Glasgow, Scotland and Manchester, England. The Settling Debtors disputed Waukesha's claims. Subsequently, the parties undertook extensive discussions to arrive at a consensual resolution of Waukesha's claims. The discussions were successful and resulted in a compromise set forth in the Deed of Settlement. The terms of the Deed of the Settlement are: (a) Waukesha will be paid GBP700,000 out of the Escrow Account in full and final satisfaction of all claims, present and future, under or relating to the Offer Letter, the Environmental Deed, and a Transitional Services Agreement also entered into by the parties in connection with the sale of the Businesses; (b) Waukesha will be paid GBP10,000 out of the Environmental Escrow Account relating to the Property Costs. However, in the event the Property Costs ultimately total less than GBP10,000, Waukesha will refund the unused balance of the GBP10,000 to the Debtors no later than December 31, 2004; (c) GBP6,872 will be paid from the Environmental Escrow Account to Dover UK Holdings Limited, a U.K. affiliate of Waukesha Bearings Limited, in satisfaction of certain invoices relating to environmental consulting services rendered; (d) After payment of the amounts, the balance of the funds in the Escrow Accounts, which aggregate GBP2.58 million or US$4.64 million will be remitted to FM Shoreham; and (e) The order approving the Debtors' request will deem the proofs of claim filed by Waukesha Bearings and Delaware Capital Formation against Federal-Mogul to be withdrawn with prejudice. 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. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) GALEY & LORD: Chapter 7 Trustee Hires Lamberth Cifelli as Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia gave S. Gregory Hays, the Interim Chapter 7 Trustee for Galey & Lord, Inc., and its debtor-affiliates, permission to employ Lamberth, Cifelli, Stokes & Stout P.A., as his counsel. Lamberth Cifelli will: a) advise, assist and represent Mr. Hays with respect to his rights, powers, duties and obligations in the administration of the Debtors' bankruptcy cases and the collection, preservation and administration of the Debtors' estates; b) advise, assist and represent Mr. Hays with regard to any claims and causes of action which the Debtors' estate may have against various parties including: (i) claims for preferences, fraudulent conveyances, improper disposal of assets, and other claims and rights to recovery granted to the estate, (ii) instituting appropriate adversary proceedings and other litigation and represent the Trustee with regard to those claims and causes of actions, and (iii) advise and represent the Trustee with regard to the review and analysis of any legal issues incident to the Debtors' bankruptcy cases. c) advise, assist and represent Mr. Hays with regard to the investigation of the desirability and feasibility of: (i) the rejection or assumption and potential assignment of any executory contract or unexpired leases, and (ii) the liens and encumbrances asserted against property of the Debtors' estate and potential avoidance benefit for the estate; d) advise, assist and represent Mr. Hays in connection with all applications, motions, or complaints concerning reclamation, sequestration, relief from stay, disposition or other use of the Debtors' estates. e) advise, assist and represent Mr. Hays in connection with the sale or other disposition of the remaining assets of the Debtors; f) assist and provide support to Mr. Hays with regard to the proper receipt, disbursement and accounting of funds for the property of the Debtors' estates; and g) perform any other legal services to Mr. Hays that are necessary to the administration of the Debtors' bankruptcy cases. James C. Ciffeli, Esq., a Partner at Lamberth Cifelli, is the lead attorney for Mr. Hays. Mr. Cifelli discloses that attorneys who will perform services to Mr. Hays' office will charge from $150 to $335 per hour, while paralegals will charge from $75 to 110 per hour. Lamberth Cifelli assures the Court that it does not represent any interest adverse to Mr. Hays, the Debtors or their estates. Headquartered in Atlanta, Georgia, Galey & Lord, Inc., a leading global manufacturer of textiles for sportswear, including denim, cotton casuals and corduroy, and its debtor-affiliates filed for chapter 11 protection on August 19, 2004 (Bankr. N.D. Ga. Case No. 04-43098). The Court converted the case to a chapter 7 proceeding on November 29, 2004. S. Gregory Hays is the Chapter 7 Trustee for the Debtors' estate. Jason H. Watson, Esq., and John C. Weitnauer, Esq., at Alston & Bird LLP, and Joel H. Levitin, Esq., at Dechert LLP, represent the Debtor. When the Debtor filed for chapter 11 protection, it listed $533,576,000 in total assets and $438,035,000 in total debts. GENOIL: Inks Agreement Eliminating All Secured Debt --------------------------------------------------- Genoil (TSX VENTURE:GNO) (OTCBB:GNOLF) entered into an agreement to eliminate approximately $3 million of debt held by a secured creditor. The agreement contemplates that the creditor will exercise its 10 million warrants currently held in Genoil. The proceeds from the exercise of the 10 million warrants will be used to pay off Genoil's secured debt. Genoil will concurrently arrange for the sale of the common shares to certain third parties. This agreement is subject to Genoil having arranged for the purchase of shares by January 21, 2005, and all related documentation being completed by January 26, 2005. Genoil will receive no proceeds on the share sales, but this transaction will significantly enhance Genoil's balance sheet. Genoil is a technology development company providing solutions to the oil and gas industry through the use of proprietary technologies. Genoil's shares are listed on the TSX Venture Exchange under the symbol GNO and on the OTC Bulletin Board under the symbol GNOLF. Going Concern Doubt The Corporation has not achieved commercial operations from its various patents and technology rights and continues to incur losses. At March 31, 2004, the Company has a working capital deficiency of $3,044,177, including a note payable due in January 2005. The future of the Corporation is dependent upon its ability to maintain the continued financial support of the note holder, and obtain additional financing to fund the development of commercial operations. These consolidated financial statements are prepared on the basis that the Corporation will continue to operate throughout the next fiscal period to March 31, 2005, as a going concern. A failure to continue as a going concern would then require that stated amounts of assets and liabilities be reflected on a liquidation basis, which would differ from the going concern basis. GETTYSBURG RETIREMENT: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Gettysburg Retirement Community Inc. dba The Shepherds Choice of Gettysburg 867 York Road Gettysburg, Pennsylvania 17325 Bankruptcy Case No.: 04-07430 Type of Business: The Debtor operates a nursing facility containing 118 beds located in Straban Township, Adams County, Pennsylvania. Chapter 11 Petition Date: December 14, 2004 Court: Middle District of Pennsylvania (Harrisburg) Judge: Mary D. France Debtor's Counsel: Robert E. Chernicoff, Esq. Cunningham & Chernicoff PC 2320 North Second Street P.O. Box 60457 Harrisburg, PA 17106 Tel: 717-238-6570 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Village Green Health Care Note $250,000 Assoc. 3105 Old Gettysburg Road Camp Hill, PA 17011 Diamond Pharmacy Service $160,125 645 Kolter Drive Commerce Park Indiana, PA 15701 Nutrition Mgmt. Services $65,411 Box 725 Kimberton Road Kimberton, PA 19442 Pharmerica Bank $79,803 Functional Pathways $76,093 Rehab Works, LLC $70,266 Nursefinders $41,694 Intelistaf Pay to NCO $33,196 Medical Staffing Network Inc. $30,534 Gulf South Medical Supply $29,218 KCI $23,350 Global Healthcare Group $21,194 Gettysburg Hospital $18,930 Sysco Food Service $18,892 Bonded Applicators, Inc. $15,007 Stokes Kelly & Hinds, LLC $7,900 Augustine Medical $7,000 Caring Hearts $6,570 Continental Health Equipment $6,031 Lehigh Valley Respiratory $5,480 Care HEDSTROM CORP: U.S. Trustee Picks 7-Member Creditors Committee -------------------------------------------------------------- The United States Trustee for Region 10 appointed seven creditors to serve on the Official Committee of Unsecured Creditors in Hedstrom Corporation and its debtor-affiliate's chapter 11 case: 1. GRI 4/F Centre Attn: Robert Thennes 10 Granville Rd. Tsimshatsui, Kowloon Hong Kong 2. Jia Chao Attn: Tom Hugar No.75 ChangShing St. Changhus, Taiwan 3. MacSteel Centers USA Attn: John Christian 555 State Road Bensalem, Pennsylvania 19020 4. Ten Care Nicolon Attn: Laurie Martin 365 South Holland Drive Pendergrass, Georgia 30567 5. Silverplay (HK) Ltd. Attn: Elliot S. Wiezar 6F No. 45 Lane 76 Ruie Guang Rd. 114 Neihu Taipei, Taiwan 6. MPI Label Systems Attn: Randy L. Kocher 450 Courtney Road Sebring, Ohio 44672 7. Graphcom, Inc. Attn: Michael D. First 2300 DeFoor Hills Atlanta, Georgia 30318 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Arlington Heights, Illinois, Hedstrom Corporation -- http://www.hedstrom.com/-- manufactures and markets well- established children's leisure, outdoor recreation and home decor products, including outdoor gym sets, spring horses, trampolines, skating equipment (through Backyard Products Unlimited, currently in a Canadian receivership proceeding); play balls (through non- debtor BBS Industries, Inc.); and arts and crafts kits, game tables, indoor sleeping bags, play tents and wall decorations (through ERO Industries). The Company filed for chapter 11 protection on October 18, 2004 (Bankr. N.D. Ill. Case No. 04-38543). Allen J. Guon, Esq., and Steven B. Towbin, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC, represent the Debtors in their restructuring efforts. When the Company filed for chapter 11 protection, it listed estimated assets of $10 million to $50 million and estimated debts of more than $100 million. HEDSTROM CORP: Creditors Committee Taps Piper Rudnick as Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois gave the Official Committee of Unsecured Creditors of Hedstrom Corporation and its debtor-affiliates permission to employ Piper Rudnick LLP as its counsel. Piper Rudnick will: a) consult with the Debtors' professionals and representatives concerning the administration of their chapter 11 cases; b) assist the Committee in preparing and reviewing pleadings, motions and correspondences and appear and represent the Committee in proceedings before the Court; c) provide legal counsel to the Committee in its investigation of the acts, conduct, assets, liabilities and financial condition of the Debtors, the operation of their businesses, any sale of their assets, and any other matters relevant to the Debtors' chapter 11 cases; d) examine and investigate claims asserted against the Debtors and their secured creditors; e) confer and negotiate with the Debtors, other parties in interest, and their respective attorneys and professionals concerning the Debtors' businesses and properties, proposed chapter 11 plan, claims, liens, and other aspects of their bankruptcy cases; and f) provide the Committee with other legal services that are appropriate and necessary in relation to the Debtors' chapter 11 cases. David M. Neff, Esq., and Deborah M. Gutfeld, Esq., are the lead attorneys for the Committee. Mr. Neff discloses that the Firm received a $50,000 retainer from the Debtors. Mr. Neff will charge at $465 per hour, while Ms. Gutfeld will charge at $310 per hour. Piper Rudnick assures the Court that it does not represent any interest adverse to the Committee, the Debtors or their estate. Headquartered in Arlington Heights, Illinois, Hedstrom Corporation -- http://www.hedstrom.com/-- manufactures and markets well- established children's leisure, outdoor recreation and home decor products, including outdoor gym sets, spring horses, trampolines, skating equipment (through Backyard Products Unlimited, currently in a Canadian receivership proceeding); play balls (through non- debtor BBS Industries, Inc.); and arts and crafts kits, game tables, indoor sleeping bags, play tents and wall decorations (through ERO Industries). The Company filed for chapter 11 protection on October 18, 2004 (Bankr. N.D. Ill. Case No. 04-38543). Allen J. Guon, Esq., and Steven B. Towbin, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC, represent the Debtors in their restructuring. When the Company filed for chapter 11 protection, it listed estimated assets of $10 million to $50 million and estimated debts of more than $100 million. HEWETT'S ISLAND: Moody's Rates Class D Notes & Securities at Ba2 ---------------------------------------------------------------- Moody's Investors Service assigned these ratings to the securities issued by Hewett's Island CLO II, Ltd.: * Aaa to the Class A-1 Notes, * Aa2 to the Class A-2A and Class A-2B Notes, * A1 to the Class B-1A and Class B-1B Notes, * A2 to the Class B-2 Notes, * Baa2 to the Class C Notes, * Ba2 to the Class D Notes, and * Ba2 to the Combination Securities. According to Moody's, the ratings assigned to the notes address the ultimate cash receipt of all required interest and principal payments as set forth in the governing documents and are based on the expected losses posed to noteholders relative to the promise of receiving the present value of such payments. Moody's rating of the combination securities only addresses the ultimate receipt of the rated balance (as defined in the operative documents) and is based upon the expected loss posed to the holders of the combination securities relative to the promise of receiving the present value of such payments. Moody's also analyzed the risk of diminishment of cashflows from the underlying portfolio of corporate debt due to defaults, the characteristics of these assets and the safety of the transaction's legal structure. The Collateral Manager for the transaction is CypressTree Investment Management Co, Inc., located in Boston, Massachusetts. BroadStreet Group LLC brought the transaction to market. HILL CITY: U.S. Trustee Picks 7-Member Creditors Committee ---------------------------------------------------------- The United States Trustee for Region 5 appointed seven creditors to serve on the Official Committee of Unsecured Creditors in Hill City Oil Company, Inc.'s chapter 11 case: 1. Marathon Ashland Petroleum LLC Attn: John E. Locker 3200 Pointe Parkway, Suite 200 Norcross, Georgia 30092 2. ExxonMobil Oil Corporation Attn: Thomas A. Wilson 857 Charwhit Ct. Great Falls, Virginia 22066 3. Chevron USA, Inc. Attn: Krystal Krause 2005 Diamond Blvd., Room 2184 Concord, California 94520 4. Imperial Trading Co., Inc. Attn: Keith M. Beba 701 Edwards Avenue Elmwood, Louisiana 70123 5. Coca-Cola Enterprises, Inc. Attn: William Kaye 31 Rose Lane East Rockaway, New York 11518 6. Community Coffee Co. LLC Attn: Terry M. Rudd 3332 Partridge Lane, Bldg. A Baton Rouge, Louisiana 70809 7. Retif Oil & Fuel, Inc. Attn: David Hecker 527 Destrehan Avenue Harvey, Louisiana 70058 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Houma, Louisiana, Hill City Oil Company, Inc. -- http://www.hillcityoil.com/-- sells industrial oil, metalworking fluids, automotive and off-highway lubricants, oilfield products, and service products. The Company filed for chapter 11 protection on October 25, 2004 (Bankr. E.D. La. Case No. 04-18007). W. Christopher Beary, Esq., at Orrill, Cordell & Beary, L.L.C., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets and liabilities of $50 million to $100 million. HILL CITY: Committee Wants to Hire Heller Draper as Counsel ----------------------------------------------------------- The Official Committee of Unsecured Creditors of Hill City Oil Company, Inc.'s chapter 11 proceedings asks the U.S. Bankruptcy Court for the Eastern District of Louisiana for permission to employ Heller, Draper, Hayden, Patrick & Horn, L.L.C. as its counsel. a) assist the Committee in its investigation of the acts, conduct, assets, liabilities and financial condition of the Debtor, and the operation of the Debtor's business, including the formulation of a plan of reorganization; b) advise the Committee as to its duties and powers; c) prepare on behalf of the Committee all motions, pleadings, applications, notices, orders and papers deemed necessary during its representation of the Committee; d) appear before the Court, the District Court and any appellate courts to protect the interests of the unsecured creditors of the Debtor; e) assist and advise the Committee in its consultations with the Debtor relative to the overall administration of the Debtor's estate; f) assist the Committee in requesting the appointment of a Trustee or Examiner under Section 1104 of the Bankruptcy Code, if necessary; and g) perform all other legal services as may be required in the interests of the Debtor's unsecured creditors, including prosecution and avoidance actions, preference and other recovery actions. Jan M. Hayden, Esq., and Douglas S. Draper, Esq., are the lead attorneys for the Committee. Both Mr. Hayden and Mr. Draper will charge at $310 per hour. Mr. Hayden discloses that the Firm did not receive a retainer for its services to the Committee. Mr. Hayden reports Heller Draper's professionals bill: Designation Hourly Rate ----------- ----------- Members $225 Associates 175 Paralegals 80 Heller Draper assures the Court that it does not represent any interest adverse to the Committee, the Debtor or its estate. Headquartered in Houma, Louisiana, Hill City Oil Company, Inc. -- http://www.hillcityoil.com/-- sells industrial oil, metalworking fluids, automotive and off-highway lubricants, oilfield products, and service products. The Company filed for chapter 11 protection on October 25, 2004 (Bankr. E.D. La. Case No. 04-18007). W. Christopher Beary, Esq., at Orrill, Cordell & Beary, L.L.C., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets and liabilities of $50 million to $100 million. J.P. MORGAN: S&P Upgrades Ratings on Class F Certificates to B -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on five classes of J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates from series 1998-C6. At the same time, ratings are affirmed on three other classes from the same transaction. The raised and affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios, as well as the resolution of several loans formerly with the special servicer. As of the Dec. 15, 2004, remittance report, the collateral pool consisted of 71 loans with an aggregate principal balance of $497.8 million, down from 91 loans totaling $796.4 million at issuance. The master servicer, Midland Loan Services, Inc., provided Dec. 31, 2003, net cash flow -- NCF -- DSC figures for 97% of the pool. Based on this information, Standard & Poor's calculated a current weighted average DSC of 1.41x, down from 1.54x at issuance. The trust has experienced three losses totaling $13.1 million, and two appraisal reduction amounts -- ARAs -- are in place totaling $6.8 million. Three loans ($14.3 million, 3%) are delinquent, while the remaining loans in the pool are current. The current top 10 loans have an aggregate outstanding balance of $288.9 million (58%). The weighted average DSC for the top 10 loans decreased to 1.46x, down from 1.58x at issuance. The decreased DSC occurred due to significant performance declines for four of the 10 loans, all of which are on Midland's watchlist. Standard & Poor's reviewed property inspections provided by the master servicer for all of the assets underlying the top 10 loans and all were characterized as "excellent" or "good." There are four loans ($21.8 million, 4%) with the special servicer, CRIIMI MAE Services L.P. An $8.6 million loan secured by a 99-room hotel property in San Mateo, California is more than 90 days delinquent. The loan was transferred to the special servicer and the property was also closed in August 2003. The special servicer is pursuing a discounted payoff or note sale. An ARA of $6.8 million is in effect. A 154,226-sq.-ft. office building in Manassas, Virginia secures a $7.5 million loan. The loan was recently transferred to CRIIMI MAE because it failed to payoff at maturity. CRIIMI MAE noted that the borrower is in the process of selling the collateral, but was not able to complete the closing prior to maturity. A 109-unit multifamily property in Charlotte, North Carolina secures a $4.2 million loan that is more than 90 days delinquent. The loan was transferred to the special servicer Feb. 26, 2004, due to imminent default. CRIIMI MAE is discussing a workout while pursuing foreclosure. An ARA of $42,547 is in effect. A 63-room Comfort Inn in Webster, Texas secures a 60 to 90 days delinquent loan for $849,902. The loan was transferred to the special servicer Nov. 30, 2004, for imminent default. The Sept. 30, 2004, DSC and occupancy was 1.65x and 37%. Midland reported a watchlist of 16 loans ($135.5 million, 27%). A portfolio of 11 multifamily properties with 1,835 combined units in the greater Greensboro, North Carolina area secures the third-largest loan ($32.9 million, 7%). The portfolio has performed poorly due to significant industry layoffs in the immediate area as well as a favorable home-buying environment. Both factors contributed to a June 30, 2004, portfolio-level DSC of 0.87x and occupancy of 76%. A 354,518-sq.-ft. retail property in Philadelphia, Pennsylvania secures the seventh-largest loan ($22.2 million, 4%). The loan was placed on the watchlist when K-Mart vacated 103,800 sq. ft. at the collateral property in July 2002 prior to its Jan. 31, 2013, lease expiration. According to Midland, two new tenants have taken approximately half of the vacated space and lease proposals are out for the remaining portion. The Dec. 31, 2003, DSC was 0.98x. A 418-unit multifamily property in Wyoming, Michigan secures the ninth-largest loan ($14.7 million, 3%). The collateral property has performed poorly due to the favorable home-buying environment, which has forced the borrower to offer rent concessions. The Dec. 31, 2003, DSC was 0.74x. A 319-room Crown Plaza Hotel in Grand Rapids, Michigan secures the 10-largest loan ($14.1 million, 3%). The Dec. 31, 2003, DSC fell to 0.75x, largely due to capital expenditures at the property. The DSC as of June 30, 2004 increased to 1.07x. The remaining loans are on the watchlist due to low occupancy issues, lease expirations, and low DSC levels, all of which reflect the pool's concentration in multifamily collateral. The trust collateral is located across 23 states with only Virginia (28%) and New Jersey (13%) accounting for more than 10% of the pool balance. Property concentrations greater than 10% of the pool balance are found in: * multifamily (30%), * office (22%), * retail (19%), and * lodging (18%) property types. Standard & Poor's stressed various loans with credit issues as part of its pool analysis. The resultant credit enhancement levels support the revised ratings. Ratings Raised J.P. Morgan Commercial Mortgage Finance Corp. Mortgage Pass-Through Certs Series 1998-C6 Rating Class To From Credit Enhancement (%) ----- -- ---- ---------------------- B AAA AA+ 34.18 C AAA A+ 26.18 D A BBB- 16.58 E BBB+ BB+ 13.38 F B B- 5.39 Ratings Affirmed J.P. Morgan Commercial Mortgage Finance Corp. Mortgage Pass-Through Certs Series 1998-C6 Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-2 AAA 43.78 A-3 AAA 43.78 X AAA N/A N/A - Not applicable JAFRA WORLDWIDE: Sept. 30 Balance Sheet Upside-Down by $62 Million ------------------------------------------------------------------ Jafra Worldwide Holdings (Lux) S.aR.l. and subsidiaries, doing business as Jafra Cosmetics International, reported its financial results for the third quarter of 2004. Third Quarter Results Measured in local currencies, net sales increased approximately 13% in the third quarter of 2004 over the comparable prior year period. Net sales of $94.8 million in the third quarter of 2004 increased 10% compared to $86.8 million in the third quarter of 2003, which was less than the increase measured in local currencies because of weaker average exchange rates. Mexico's net sales increased 30% and 22% measured in local currency and U.S. dollars, respectively, in the third quarter of 2004 over the third quarter of 2003. Net sales in the United States decreased 11% in the third quarter of 2004 over the comparable prior year period due to decreases in both the Hispanic Division and the U.S. Division. Europe's net sales measured in U.S. dollars increased in the third quarter of 2004 by 9% compared to the third quarter of 2003 due primarily to stronger local currencies compared to the U.S. dollar. In local currencies, net sales in Europe were constant over both periods. Due primarily to the increases in the Mexico consultant base, the Company reported a 7% increase in the average number of consultants during the third quarter of 2004 over the comparable prior year period. Income from operations was $13.0 million during the third quarter of 2004 compared to $11.5 million during the third quarter of 2003. During the third quarter of 2004, the Company recorded $2.2 million of restructuring and impairment charges, consisting primarily of severance charges due to the departure of certain members of management. Exchange gain, primarily the remeasurement of U.S. dollar- denominated debt, had a favorable change of $9.2 million during the third quarter of 2004. Net interest expense (including interest income) decreased slightly during the third quarter of 2004 over the comparable prior year period. During the third quarter of 2004, the Company entered into a new credit agreement and as a result, the Company recorded a $4.5 million loss on extinguishment of debt related to the write off of deferred financing fees related to the previous credit agreement. Nine-Month Results Measured in local currencies, net sales for the first nine months of 2004 increased 12% over the comparable prior year period. Net sales measured in U.S. dollars increased 9%, or $25.0 million to $301.7 million for the first nine months of 2004 compared to $276.7 million for the first nine months of 2003. The net sales increase was due to an increase in Mexico's net sales which increased 24% and 17% measured in local currency and U.S. dollars, respectively, for the first nine months of 2004 over the first nine months of 2003. Net sales in Europe increased 7% measured in U.S. dollars primarily due to stronger average local currencies compared to the U.S. dollar, but decreased 2% measured in local currencies. Net sales in the U.S. decreased approximately 6% because of a decreased average consultant base and decreased consultant productivity. The Company reported an 8% increase in the average number of consultants during the first nine months of 2004 over the comparable prior year period. Income from operations was $15.3 million for the first nine months of 2004 compared to $24.4 million for the first nine months of 2003. During the first nine months of 2004, the Company recorded $5.0 million of restructuring and asset impairment charges in order to move substantially all of its production to its Mexico subsidiary and related to severance charges for the departure of certain members of management. Additionally, the Company recorded $29.7 million of transaction related expenses during the first nine months of 2004 for the acquisition of the Company by Vorwerk and other transactions contemplated but not completed compared to $15.5 million of transaction related fees during the first nine months of 2003 for the recapitalization of the Company and other transactions contemplated but not completed. Transaction fees related to the acquisition in 2004 were primarily compensation expense to the holders of options to purchase Jafra S.A. stock for the cancellation of all options, bonus payments to certain members of management and non-employee board of director members and insurance cancellation costs due to change of control provisions within the insurance contracts. During the second quarter of 2003, the Company completed a recapitalization of its operations by the issuance of new debt and therefore expensed $13.3 million in bonus payments to the holders that held options to purchase common stock of CDRJ Investments Lux S.A. (the former parent of Jafra S.A.) and to certain members of management and non-employee board of director members. Excluding these transaction related expenses and restructuring and impairment charges, income from operations on a non-GAAP basis would have been $50.0 million for the first nine months of 2004 compared to $40.0 million for the same period of the prior year. As a percentage of net sales, excluding transaction related expenses and restructuring and impairment charges, operating income on a non-GAAP basis in the first nine months of 2004 increased to 16.6% from 14.4% for the comparable prior year period. Exchange losses, primarily due to the remeasurement of U.S. dollar-denominated debt, decreased $4.9 million during the first nine months of 2004 over the comparable prior year period. Interest expense (net of interest income) increased $6.4 million, primarily as a result of a greater average debt balance associated with the recapitalization of the Company's operations in May 2003. During the first nine months of 2004, the Company recorded a $4.5 million loss on extinguishment of debt compared to $6.6 million in the comparable prior year period. During the first nine months of 2004 there was an income tax benefit of $1.7 million compared to income tax expense of $1.2 million in the first nine months of 2003. As a result of increased transaction related expenses, restructuring and impairment charges and interest expense partially offset by a favorable change in income taxes and decreased losses on extinguishment of debt, the Company's net loss increased to $11.2 million for the first nine months of 2004 compared to $8.1 million for the first nine months of 2003. Due to the discontinuation of operations in Venezuela, Colombia, Chile and Peru in 2003, the results of these markets are included in the statements of operations as losses on discontinued operations. Commenting on the results, Ronald Clark, Chairman and Chief Executive Officer, said, "Jafra Mexico has continued to have an exceptional year. Mexico's net sales measured in U.S. dollars increased 22% in the quarter and 17% year to date. This growth has been driven by the growth in the number of consultants in Mexico. In the quarter, Jafra Mexico averaged approximately 318,000 consultants, which is 22% more than in the same quarter of the prior year. Mexico has offered a variety of successful promotions during 2004, which have resulted in this significant growth. We are very proud of our Mexican operations." Gonzalo Rubio, Jafra's President and Chief Operating Officer spoke about new strategies. "As we near the end of 2004, we are looking for ways to focus on our core business units of Mexico, the United States and Europe. As such, we have decided to cease direct selling operations in South America and have entered into a distributorship agreement with a third party in Brazil. Subsequent to the end of the third quarter, we concluded selling products out of our Brazil entity and look to do the same at our Argentina subsidiary in late 2004 or early 2005. We are excited about this new venture because it allows Jafra to keep a presence in Brazil and service Jafra consultants and their customers without taking our focus and efforts away from our core business units." Mr. Clark concluded, "We look forward to the completion of 2004, which will be another successful year for Jafra. We are excited about our possibilities in 2005 and look forward to the introduction of new products and programs." About the Company Jafra Worldwide Holdings (Lux) S.aR.l. -- http://www.jafra.com/-- is a direct seller of skin and body care products, color cosmetics, fragrances and other personal care products. Jafra sells its Jafra brand products through a direct selling network of approximately 438,000 independent consultants, who market and sell Jafra's products to their customers. Jafra operates in three primary markets: Mexico, the United States and Europe. In Europe, Jafra operates in Germany, Switzerland, Italy, Austria, Holland and several other countries through distributors. At Sept. 30, 2004, Jafra Worldwide's balance sheet showed a $62,014,000 stockholders' deficit, compared to a $55,389,000 deficit at Dec. 31, 2003. JOHN HUBLER NISSAN-SUZUKI: Voluntary Chapter 11 Case Summary ------------------------------------------------------------ Debtor: John Hubler Nissan-Suzuki, Inc. 2310 West Jonathan Moore Pike Columbus, Indiana 47201-9254 Bankruptcy Case No.: 04-23042 Type of Business: The Company is a dealer of Nissan and Suzuki cars. Chapter 11 Petition Date: December 20, 2004 Court: Southern District of Indiana (Indianapolis) Judge: James Coachys Debtor's Counsel: Gary Lynn Hostetler, Esq. Hostetler & Kowalik, P.C. 101 West Ohio Street, Suite 2100 Indianapolis, Indiana 46204 Tel: (317) 262-1001 Fax: (317) 262-1010 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 Unsecured Creditors. LATHAM MANUFACTURING: Moody's Rates $125M Sr. Sec. Debts at B2 -------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Latham Manufacturing Corp.'s senior credit facilities and a B2 senior implied rating. The ratings reflect Latham's high leverage, low level of projected free cash flow vs. its debt levels, business seasonality, large working capital swings, and uncertainty related to the pace and size of future acquisitions. The ratings also consider the recurring nature of the company's pool liner business and the competitive advantages for the company's product in colder climates. The ratings outlook is stable. Moody's Investor's Service assigned these ratings: * $35 Million Senior Secured Revolving Credit Facility, maturing in 2009, rated B2; * $90 Million Senior Secured Term Loan, maturing in 2010, rated B2; * Senior Implied Rating, rated B2; * Senior Unsecured Issuer Rating, rated B3. Proceeds from the $125 million credit facilities will be used primarily to finance, in part, the acquisition of Latham, refinance existing debt of approximately $32 million, and for general corporate purposes. The $35 million revolver is expected to have around $2 million of usage at the transaction close. The revolver will be available for use either in U.S. dollars or Canadian Dollars while the term loan is only U.S. dollar based. Moody's notes that Latham has additional non-rated debt including $31 million of mezzanine financing. The ratings are constrained by: (1) the company's significant leverage, (2) low levels of free cash flow, (3) significant goodwill, (4) high customer concentration, (5) significant working capital swings, and (6) uncertainty surrounding the credit implications of future acquisitions. The company's top 5 clients represent over 50% of sales. As a result, were its top clients to experience operating difficulty, Latham would likely find itself significantly affected. The ratings are also constrained by the discretionary nature of pool purchases and the belief that swings in consumer confidence and the economy are likely to affect demand. The company's business is primarily based in the North Eastern United States and Canada. Seasonal weather also affects demand and therefore the company's working capital needs. Although the company's acquisition basket limits the total amount of acquisitions, the permitted basket restricts the largest acquisition to $10 million and allows up to $20 million per year and a total of $60 million over the life of the loan, which is large enough to potentially impact the company's credit quality given Latham's size and the expectations for cash flow generation. The ratings benefit from the company's strong customer relationships and from a significant percent of its sales coming from liner replacement and related services. Additionally, the company's largest customer will be a significant minority investor in Latham. The company's replacement sales are driven by pool liners' estimated useful life of around ten years. Demand for pools benefits from the currently low cost of capital and the active pace of home refinancings. Although demand for pools would likely come under pressure if consumer confidence and the general economy weaken, Latham will likely gain market share as pools designed with pool liners are more affordable than concrete pools. The $125 million senior secured credit facilities will be guaranteed by all existing and future direct and indirect subsidiaries of the company, both jointly and severally. The facilities will be secured by a first priority perfected lien (subject to permitted liens) on and security interest in 100% of the capital stock and other equity interests of the company and each existing and subsequently acquired or organized direct or indirect domestic and first-tier foreign subsidiary of the company (65% in the case of a first-tier foreign subsidiary) and substantially all tangible and intangible assets of the parent, the company and each existing and subsequently acquired or organized direct or indirect subsidiary of the company. The facilities call for mandatory prepayments and include a 75% excess cash flow sweep and have certain restrictions on asset sales and the use of proceeds. The cash flow sweep's percentage decreases to 50% if the total operating company leverage ratio of the borrower and its subsidiaries is less than or equal to 3.5 times as of the end of any fiscal year. The stable ratings outlook reflects the expectation that the company's competitive position combined with consistent demand for its products will allow the company to report profitable growth. The stable outlook also reflects expectations that the company's acquisition strategy will absorb most of the cash flow that is internally generated and that would otherwise be available to reduce leverage. The ratings may deteriorate if the company's free cash flow generation to total debt was to fall below 4% or if interest coverage was to fall below 2 times. The ratings and or outlook may improve if the company's free cash flow generation to total debt increases to above 8% on a consistent basis and total debt to EBITDA improves to under 3.5 times and is expected likely to improve further. Latham's covenants, subject to final documentation, are expected to be comprised of a maximum total operating company leverage covenant to be set initially at 5.5 to 1.0 with step-down provisions, minimum fixed charge coverage covenant to be set initially at 1.0 to 1.0 with step-up provisions, and a minimum interest coverage covenant to be set initially at 2.0 to 1.0 with step-up provisions. Moody's expects the company to be in compliance for at least the next twelve months. Moody's notes that changes in documentation, structure, or operating performance from what has been relied upon, may have yielded a different ratings outcome. The company's EBITDA to interest for 2005 is expected to be over 2.5 times while its total debt to EBITDA is expected to be around 4 times. The company's 2004 EBITDA is estimated to be under $30 million. The company's fixed charge coverage ratio is expected to be under 1.3 times for 2005. The company's cash flow sweep is expected to support deleveraging before accounting for the impact of acquisitions. However, Moody's notes that free cash flow to total debt of approximately 5% for 2005 before acquisitions, is in line with the ratings category. Latham Manufacturing Corp. is a wholly owned subsidiary of Latham Acquisition Corp., a company formed by an affiliate of Brockway Moran & Partners, Inc. The company manufactures swimming pool components and pool accessories in North America with a broad portfolio of leading brands. LORAL SPACE: Subsidiary to Build Broadcast Satellite for EchoStar ----------------------------------------------------------------- Space Systems/Loral has been selected by EchoStar Communications Corporation, Englewood, Colo., to build EchoStar XI, a new direct broadcast satellite (DBS) based on SS/L's 1300 platform that will support EchoStar's DISH Network(TM) and serve as backup to its existing fleet. EchoStar XI, anticipated to be delivered in early 2007, will be the fifth SS/L-built satellite in the EchoStar fleet. The contract is subject to standard bankruptcy court approval. EchoStar Communications Corporation (Nasdaq: DISH) serves more than 10.4 million satellite TV customers through its DISH Network, the fastest growing U.S. provider of advanced digital television services in the last four years. DISH Network offers hundreds of video and audio channels, Interactive TV, HDTV, sports and international programming, together with professional installation and 24-hour customer service. DISH Network ranks No. 1 in Customer Satisfaction among Cable/Satellite TV Subscribers by J.D. Power and Associates. Visit EchoStar's DISH Network at http://www.dishnetwork.com/or call 1-800-333-DISH (3474). Space Systems/Loral, a subsidiary of Loral Space & Communications (OTC Bulletin Board: LRLSQ), is a premier designer, manufacturer, and integrator of powerful satellites and satellite systems. SS/L also provides a range of related services that include mission control operations and procurement of launch services. Based in Palo Alto, Calif., the company has an international base of commercial and governmental customers whose applications include broadband digital communications, direct-to-home broadcast, defense communications, environmental monitoring, and air traffic control. SS/L satellites have amassed more than 1,100 years of reliable on-orbit service. SS/L is ISO 9001:2000 certified. For more information, visit http://www.ssloral.com. Loral Space & Communications is a satellite communications company. In addition to Space Systems/Loral, through its Skynet subsidiary Loral owns and operates a fleet of telecommunications satellites used to broadcast video entertainment programming, and for broadband data transmission, Internet services and other value-added communications services. For more information, visit Loral's web site at http://www.loral.com/ Loral Space & Communications is a satellite communications company. It owns and operates a fleet of telecommunications satellites used to broadcast video entertainment programming, distribute broadband data, and provide access to Internet services and other value-added communications services. Loral also is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management. The Company and various affiliates filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-41710) on July 15, 2003. Stephen Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the company filed for bankruptcy, it listed total assets of $2,654,000,000 and total debts of $3,061,000,000. MANUFACTURED HOUSING: Payment Shortfall Triggers S&P's D Rating --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the IM-2 class of certificates issued by Manufactured Housing Contract Trust Pass-Through Certificates Series 2000-3 to 'D' from 'CC'. The rating action follows an $8,555 shortfall in the payment of interest on the loss liquidation amount due to the class IM-2 certificates on the Dec. 20, 2004, remittance date. On the Nov. 20 remittance date, the class IM-2 certificates were written down by $1.11 million to cover a portion of the class I-A principal shortfall experienced during that period. The priority of distributions is such that the class IM-2 liquidation loss interest is lower in priority than the senior class principal shortfall amounts. Consequently, although the certificates received interest on the adjusted balance on the Dec. 20 distribution date, the certificates did not, however, receive interest on the $1.11 million loss liquidation amount outstanding from the prior distribution date. The priority of distributions is such that the class IM-2 liquidation loss interest is lower in priority than the senior class principal shortfall amounts. Consequently, although the certificates received interest on the adjusted balance on the Dec. 20 distribution date, the certificates did not, however, receive interest on the $1.11 million loss liquidation amount outstanding from the prior distribution date. On Nov. 22, 2004, Standard & Poor's lowered its rating on the class IM-2 certificates to 'CC' from 'CCC-', reflecting the unlikelihood that the certificates would receive timely payments of interest on the liquidation loss amount. The trust consists of manufactured housing loans originated by GreenPoint Financial LLC, which are being serviced by Green Tree Servicing LLC, following its recent purchase and assumption of GreenPoint Credit LLC's manufactured housing servicing platform. MBK PARTNERSHIP: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: MBK Partnership 5761 Glenridge Way Klamath Falls, Oregon 97603 Bankruptcy Case No.: 04-69814 Type of Business: Residential real estate developer accused, according to Brent Walth writing for The Oregonian, of building the 33-lot North Ridge Estates subdivision in Klamath Falls on top of a World War II military barracks constructed of asbestos-containing materials. Mr. Walth indicates that price tag for the clean-up is $20 million and the property, if not contaminated, is valued at $6 million. Chapter 11 Petition Date: December 17, 2004 Court: District of Oregon (Eugene) Judge: Albert E. Radcliffe Debtor's Counsel: David A. Foraker, Esq. Greene & Markley, P.C. 1515 Southwest 5th Avenue #600 Portland, OR 97201 Tel: 503-295-2668 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Sterling Savings Bank Tort Unknown 540 Main Street Klamath Falls, OR 97601 South Valley Bank & Trust Tort Unknown P.O. Box 5210 Klamath Falls, OR 97601 Umpqua Bank Tort Unknown P.O. Box 1140 Coos Bay, OR 97420 Washington Mutual Bank Tort Unknown 12691 Pala Dr. - MS156DPCA Garden Grove, CA 92841 Environmental Protection Compliance Unknown Agency Environment 1200 Sixth Ave. ORC-158 Seattle, WA 98101 Oregon Dept. Environmental Compliance Unknown Quality Environment 2146 NE 4th St., Ste. 104 Bend, OR 97701 James D. Selim & Karen Tort Unknown Wilson 3232 Northridge Dr. Klamath Falls, OR 97601 Neil M. Walle & Jenny M. Lee Tort Unknown 808 Main St. Klamath Falls, OR 97601 Allen E. & Joann A. Burns Tort Unknown 3808 Old Fort Rd. Klamath Falls, OR 97601 Kelley R. & Angelina A. Tort Unknown Mingus 3547 Northridge Dr. Klamath Falls, OR 97601 Kil Nam Lee Revocable Living Tort Unknown Trust 3502 Northridge Drive Klamath Falls, OR 97601 Matthew A. & Darcy K. Tort Unknown Stewart 5761 Clenridge Way Klamath Falls, OR 97603 Melvin Haas Tort Unknown 2729 Old Fort Road Klamath Falls, OR 97601 Archie L. & Linda Linman Tort Unknown 3630 Cougar Butte Lane Klamath Falls, OR 97601 Brian M. & Carol E. Craig Tort Unknown 2727 Old Fort Rd. Klamath Falls, OR 97601 Daniel & Jenny Prince Tort Unknown 515 Prince of Wales Ct. Franklin, TN 37064 Russell C. & Jody A. Carter Tort Unknown 3845 Scott Valley Dr. Klamath Falls, OR 97601 Joseph E. & Carol A. Tort Unknown Sarsenski 3451 Old Fort Road Klamath Falls, OR 97601 Margaret R. Wenneis Tort Unknown P.O. Box 7639 Klamath Falls, OR 97602 Jodi M. Orlando Revocable Tort Unknown Trust 3515 Northridge Dr. Klamath Falls, OR 97601 MISSISSIPPI CHEMICAL: Terra Industries Completes Acquisition ------------------------------------------------------------ Terra Industries Inc. (NYSE:TRA) completed its acquisition of Mississippi Chemical Corporation (OTCBB:MSPIQ) pursuant to Mississippi Chemical's second amended restated Plan of Reorganization, and that Mississippi Chemical has exited bankruptcy. "This is an exciting day for Terra and Mississippi Chemical," said Michael L. Bennett, Terra's President and Chief Executive Officer. "The acquisition of Mississippi Chemical strengthens Terra's asset base and positions the company for long-term sustainability and success. This transaction increases Terra's feedstock sourcing from low-cost gas regions and expands Terra's product sourcing and distribution capabilities beyond our existing North American and U.K. operations by diversifying our asset base in Trinidad and the U.S. The addition of Mississippi Chemical also strengthens Terra's industrial nitrogen market position. We remain confident that this transaction will enhance Terra's earnings power throughout the nitrogen market cycle and deliver significant value to our shareholders. "We also welcome more than 200 Mississippi Chemical employees to Terra," Mr. Bennett continued. "They are an experienced, dedicated group who we believe will be real assets to the company, and we look forward to integrating our two workforces." As a result of the acquisition, Terra owns through Mississippi Chemical a 50% interest in Point Lisas Nitrogen Limited in The Republic of Trinidad and Tobago. This facility has the capacity to produce annually 715,000 tons of ammonia from low-cost natural gas supplied under a contract with the National Gas Company of Trinidad and Tobago. Terra now owns nitrogen-manufacturing facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, complementing its nitrogen production facilities in: * Sioux City, Iowa; * Verdigris, Oklahoma; * Woodward, Oklahoma; * Courtright, Ontario; * Billingham, England; and * Severnside, England. Production at the Donaldsonville facility is limited to one anhydrous ammonia plant that operates on a swing basis to take advantage of favorable relationships between natural gas costs and anhydrous ammonia prices. Terra also now owns and operates a storage and distribution terminal in Donaldsonville -- one of the northernmost points on the Mississippi River capable of receiving ocean-going nitrogen vessels, and a 50% interest in an ammonia terminal located near Houston, Texas. Terra is now the leading U.S. producer of urea ammonium nitrate solutions -- UAN, anhydrous ammonia -- AA -- and ammonium nitrate -- AN, and the leading U.K. producer of AA and AN. Including its 50% interest in the Point Lisas facility, Terra has the capacity to annually produce: -- 4.3 million tons of UAN, the most versatile nitrogen fertilizer in North America; -- 4.6 million tons of AA, the basic ingredient for most nitrogen fertilizers and many industrial products; and -- 1.8 million tons of AN, the nitrogen fertilizer preferred by most British farmers and a popular nitrogen fertilizer source in the southeastern U.S. Of Terra's 4.6 million tons of AA production capacity, 8% will rely on natural gas sources in Trinidad, 75% in North America and 17% in the U.K. Spin-off of Mississippi Phosphates Corporation Prior to the transaction's completion and pursuant to Mississippi Chemical's Plan of Reorganization, the equity of Mississippi Phosphates Corporation was transferred to certain unsecured creditors pursuant to the Plan of Reorganization. Terra Industries, Inc., with 2003 revenues of $1.4 billion, is a leading international producer of nitrogen products. Headquartered in Yazoo City, Mississippi, Mississippi Chemical Corporation produces nitrogen and phosphorus products used as crop nutrients and in industrial applications. Production facilities are located in Mississippi, Louisiana, and through Point Lisas Nitrogen Limited, in The Republic of Trinidad and Tobago. On May 15, 2003, Mississippi Chemical Corporation, together with its domestic subsidiaries, filed voluntary petitions seeking reorganization under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S. Miss. Case No. No.: 03-02984). James W. O'Mara, Esq., and Doug Noble, Esq., at Phelps Dunbar, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $552,934,000 in assets and $462,496,000 in debts. MORGAN STANLEY: S&P Junks Class M Mortgage Pass-Through Certs. -------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on 10 classes of Morgan Stanley Capital I Trust Series 2003-TOP11's commercial mortgage pass-through certificates on CreditWatch with negative implications. Concurrently, the ratings on five non-investment-grade classes are lowered and the remaining seven outstanding ratings from the same transaction are affirmed. The CreditWatch placements and lowered ratings reflect significant concerns regarding the Troy Technology Park Portfolio loans, which represent the fourth-largest exposure in the pool. The loans were transferred to ARCap Special Servicing, Inc., the special servicer, Nov. 5, 2004, due to imminent default associated with a severe forthcoming vacancy at the collateral properties. The CreditWatch placements also reflect concerns regarding the Alabama and Arizona Warehouse/Distribution Centers loan, which represents the third-largest exposure and is secured by two single-tenant distribution facilities whose tenant is in bankruptcy. The loan is also with the special servicer. The Troy Technology Park Portfolio consists of three cross- collateralized and cross-defaulted loans ($25.8 million, 2%). The loans are secured by three office/flex properties with 11 buildings in Troy, Michigan that were built between 1986 and 1987. The aggregate size of the properties is 426,536-square-foot (sq. ft.) with General Motors Corp. (GM; 'BBB-') occupying 80% of the collateral at issuance. GM announced plans to consolidate much of its real estate requirements into facilities located in Detroit, Warren, and Pontiac, Michigan. Per the announcement, GM has steadily vacated its space in the collateral properties, as its various leases expirations between Dec. 31, 2003, and Dec. 31, 2005. Ignoring any potential new leases, current occupancy of 80% will decline to 40% after Dec. 31, 2004, and fall to 8% after Dec. 31, 2005. Market information garnered from local brokers and appraisers noted material declines in market rental rates and occupancy since issuance. The sources also noted that significant downtime is currently required to lease up vacant space. Standard & Poor's revaluation suggests a severe valuation decline from issuance. The lowered ratings partially reflect the decline in value, while the CreditWatch placements indicate uncertainty concerning the resolution of the loans. Further negative rating actions may occur pending ARCap's loan resolution strategy. The Alabama and Arizona Warehouse/Distribution Centers loan ($27.5 million, 2%) is secured by two industrial distribution facilities totaling 1.5 million sq. ft. in Montgomery, Alabama and Glendale, Arizona. The properties are 100% leased to KB Toys, Inc., which filed for bankruptcy in January 2004. The loans were subsequently transferred to ARCap due to KB's right to reject the leases in bankruptcy. KB will announce any further store closings by Jan. 31, 2005, which may total between 140 and 240 stores. KB plans to continue operating approximately 600 stores after it emerges from bankruptcy in early 2005. Per ARCap, both properties are in excellent condition and a hard lock box is in place; additional collateral in the form of a $3.9 million letter of credit is available as well. No losses are expected at this time. Wells Fargo Bank N.A, the master servicer, reported a watchlist of 13 loans with an aggregate principal balance of $44.6 million (4%), with two loans ($28.7 million, 2%) comprising the majority of the watchlist. The first loan ($16.6 million) is secured by a 129,030-sq.-ft. office complex in Gaithersburg, Maryland. The property's occupancy fell to 90% as of March 31, 2004. The associated decline in revenue caused the net cash flow -- NCF -- DSC to decrease to 0.88x as of March 31, 2004. Since then, the DSC has increased to 1.20x (as of Sept. 30, 2004). A 364-room Holiday Inn in Independence, Ohio, which is approximately 15 minutes south of Cleveland, secures the other loan ($12.1 million). The hotel is in a soft market and the borrower reported Dec. 31, 2003, occupancy of 56%. The borrower also noted that recurring operating expenses are approximately 15% above underwritten levels. The combined effect resulted in a decrease in DSC to 0.25x as of Dec. 31, 2003. The remaining loans on the watchlist appear due to upcoming lease expirations, low DSCs, and low occupancies, and were stressed accordingly by Standard & Poor's. As of the Dec. 13, 2004, remittance report, the collateral pool consisted of 188 loans with an aggregate principal balance of $1.2 billion, stable since issuance, at which time there were 188 loans totaling $1.2 billion. Wells Fargo provided Dec. 31, 2003, NCF DSC figures for 97% of the pool. Based on this information, Standard & Poor's calculated a weighted average DSC of 2.04x, down from 2.11x at issuance. To date, the trust has not experienced a loss and all of the loans in the pool are current. The top 10 loans have an aggregate outstanding balance of $338.1 million (29%). The weighted average DSC for the top 10 loans has declined to 2.28x, down from 2.43x at issuance. The decreased DSC occurred mainly due to declines in performance of the largest, sixth-, and seventh-largest loans, which experienced either nonrecurring declines in revenue and nonrecurring increased expenses. Standard & Poor's reviewed property inspections provided by Wells Fargo for all of the assets underlying the top 10 loans and all were characterized as "excellent" or "good." The trust collateral is located across 35 states, with only California (30%) and Massachusetts (10%) accounting for more than 10% of the pool balance. Property concentrations greater than 10% of the pool balance are found in: * office (33%), * retail (29%), and * industrial (13%) property types. Standard & Poor's stressed or revalued various loans with credit issues as part of its pool analysis. The resultant credit enhancement levels support the revised ratings. Ratings Lowered and Placed on Creditwatch Negative Morgan Stanley Capital I Trust 2003-TOP11 Commercial Mortgage Pass-Through Certs Series 2003-TOP11 Rating Class To From Credit Enhancement (%) ----- -- ----------------------------- H BB-/Watch Neg BB 2.04 J B+/Watch Neg BB- 1.78 K B/Watch Neg B+ 1.53 L B-/Watch Neg B 1.27 M CCC+/Watch Neg B- 1.02 Ratings Placed on Creditwatch Negative Morgan Stanley Capital I Trust 2003-TOP11 Commercial Mortgage Pass-Through Certs Series 2003-TOP11 Rating Class To From Credit Enhancement (%) ----- -- ----------------------------- C A/Watch Neg A 6.75 D A-/Watch Neg A- 5.60 E BBB+/Watch Neg BBB+ 4.33 F BBB/Watch Neg BBB 3.69 G BBB-/Watch Neg BBB- 3.05 Ratings Affirmed Morgan Stanley Capital I Trust 2003-TOP11 Commercial Mortgage Pass-Through Certs Series 2003-TOP11 Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-1 AAA 12.22 A-2 AAA 12.22 A-3 AAA 12.22 A-4 AAA 12.22 B AA 9.55 X-1 AAA N/A X-2 AAA N/A N/A - Not applicable MOUNT CLEMENS: Fitch Affirms BB Rating on $82.8M Revenue Bonds -------------------------------------------------------------- Fitch Ratings affirms and removes from Rating Watch Negative the 'BB' rating on the approximately $82.8 million outstanding County of Macomb Hospital Finance Authority hospital revenue bonds, series 2003B -- Mount Clemens General Hospital. The Rating Outlook is Negative. Fitch placed the bonds on Rating Watch Negative on Nov. 11 due to the potential of a qualified audit opinion, which had postponed the release of the audit. In order for the audit to be released without a qualified opinion, Mount Clemens General Hospital -- MCGH -- needed a waiver from all bondholders, which has been received. Management anticipates the release of the audit this week. The Negative Rating Outlook reflects MCGH's continued operating losses, which were exacerbated by a 35-day nurses' strike that ended Sept. 11, 2004, and low debt service coverage. Fitch expects that MCGH's profitability, as supported by operating initiatives, will improve over the medium term. However, any deterioration in balance sheet or operating ratios could lead to additional downward movement in the rating. MCGH's main operating component is a 288-bed acute care osteopathic teaching hospital in Mount Clemens, Michigan, approximately 25 miles northeast of downtown Detroit. Total consolidated revenue including affiliates equaled $220 million in fiscal 2003 (unaudited). MCGH covenants to provide annual and quarterly disclosure to bondholders. Recent disclosure to Fitch has been timely and thorough, including a balance sheet, income statement, statement of cash flows, utilization statistics and management and discussion and analysis. NEW FRONTIER: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: New Frontier Construction, Inc. 6324 Starview Drive Park City, Utah 84098 Bankruptcy Case No.: 04-39997 Type of Business: The Debtor is a construction company that builds and remodels houses in Park City, Deer Valley, Jeremy Ranch, Pinebrook, Woodland, Heber, Midway, and Wyoming. Chapter 11 Petition Date: December 15, 2004 Court: District of Utah (Salt Lake City) Judge: Glen E. Clark Debtor's Counsel: L. Mark Ferre, Esq. 1366 East Murray Holladay Road Salt Lake City, UT 84117 Tel: 801-274-9909 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Key Bank Personal Property $100,259 P.O. Box 94831 of Debtor Cleveland, OH 44101 Chrysler Financial 2002 Dodge Pick-up $28,552 P.O. Box 55000 Secured value: Dept. 203201 $25,000 Detroit, MI 48255 Frontier Lumber, Inc. Cash Flow $22,076 P.O. Box 189 Lapoint, UT 84039 Key Bank Loan $20,000 P.O. Box 94831 Cleveland, OH 44101 VM Electric Electrical Contractor $17,888 George S. May International Consulting fees $15,486 Scott Rasmussen State & Tile $14,000 Materials & Labor Redhawk Lot-11 American Express Cash Flow $13,724 Stock Building Supply Materials Redhawk $8,688 Lot-11 Citi Card Cash flow $7,867 Bank One NFF Cash flow $7,809 Martin Garage Doors Garage Doors $6,028 Redhawk Lot-11 The Red Hawk Wildlife Homeowners Fees $4,715 Preserve Redhawk Lot-11 Belcher's Auto Cash flow $4,000 Noel Williams Construction Concrete (Gypcrete) $3,264 BMW Store Stone Masonry on $2,024 Redhawk Lot-11 Joy's Interiors Interior decorating $1,113 consulting Redhawk Lot-11 Mirror Lake Service Fuel & Supplies $1,067 Free and Associates Appraisal on Redhawk $1,000 Lot 11 Log house Park City Nursery Landscaping $978 NEWAVE: Subsidiary Secures Fraud Protection with SquareTrade Pact ----------------------------------------------------------------- NeWave Inc.'s (OTC Bulletin Board: NWAV) wholly owned subsidiary, Auction Liquidator, has secured fraud protection for its customers through an agreement with SquareTrade. Auction Liquidator specializes in the re-selling of unwanted or excess items, from both businesses and consumers, through online auction consignment. By combining the traditional roles of home garage sales and local auction houses with the indisputable power of auction sites such as eBay, Auction Liquidator will establish itself as an invaluable resource, connecting supply with demand. Auction Liquidator is scheduled to launch its operation in January 2005. NeWave CEO Michael Hill stated, "Since the dawn of e-commerce in the 1990s, security had been the one of primary obstacles to the full maturation of online commerce. Through our partnership with an industry leader such as SquareTrade, Auction Liquidator customers will have the ability to predetermine a buyer or seller's trustworthiness and capacities based on their SquareTrade rating. All SquareTrade members are monitored to assure the maintenance of high standards in auction transactions. He added, "This high degree of protection will assist Auction Liquidator in setting our standards for excellence in customer satisfaction." About SquareTrade SquareTrade was founded in 1999 to provide a way for people to transact online with peace of mind. Since then, SquareTrade has rapidly grown to become the world's leading online dispute resolution service. The SquareTrade Seal Program, has become the most recognizable symbol of trust, attracting several thousand new members each month. SquareTrade was recognized with the "2002 Outstanding Practical Achievement Award" by the prestigious CPR Institute for Dispute Resolution. The World Economic Forum selected SquareTrade as one of the top 100 Technology Pioneers of 2001 and 2002. SquareTrade has acted as a key presenter to the Federal Trade Commission, the European Union and the United Nations Economic Commission for Europe on the issue of global online consumer protection. SquareTrade is a privately held company funded by top tier investors, including Weston Presidio Capital and JP Morgan Partners. SquareTrade's mission is to build trust in transactions and to create a better online trading experience. SquareTrade's services aim to help buyers identify trustworthy sellers they can buy from safely, as well as help good sellers show buyers that they can be trusted. They have two complementary services: the SquareTrade Seal, an easy way for buyers to recognize good sellers, and Dispute Resolution -- an easy way for buyers and sellers to work out problems. SquareTrade serves a broad range of marketplaces through partnerships with industry leaders, including eBay, Verisign, PayPal and the California Association of REALTORS(R). About NeWave, Inc. NeWave, Inc. (OTCBB: NWAV) is a direct marketing company which utilizes the internet to maximize the income potential of its customers, by offering a fully integrated turnkey ecommerce solution. NeWave's wholly owned subsidiary Onlinesupplier.com, offers a comprehensive line of products and services at wholesale prices through its online club membership. Additionally, NeWave's technology allows both large complex organizations and small stand-alone businesses to create, manage, and maintain effective website solutions for e-commerce. The Company hosts Web sites at http://www.newave-inc.com/ http://www.onlinesupplier.com/and http://www.auctionliquidator.com/ * * * As reported in the Troubled Company Reporter on June 8, 2004, Kabani & Company's report on the Company's consolidated financial statements for the fiscal years ended December 31, 2003, and December 31, 2002, included an explanatory paragraph expressing substantial doubt about NeWave's ability to continue as a going concern. Losses have continued in 2004. For the nine-month period ending Sept. 30, 2004, NeWave posted a $3,344,334 net loss. NORSKE SKOG: S&P Slices Corporate Credit Rating to BB- from BB -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on pulp and paper producer Norske Skog Canada Ltd. to 'BB-' from 'BB'. At the same time, Standard & Poor's lowered its senior secured rating to 'BB' from 'BB+' and its senior unsecured rating to 'BB-' from 'BB'. The outlook is negative. "The rapid appreciation of the Canadian dollar, as well as continued cost pressures such as in energy, will negatively affect cash flow," said Standard & Poor's credit analyst Dan Parker. These items have offset much of the product price increases and C$100 million of productivity improvements the company achieved in the last year. For every 1-cent appreciation of the Canadian dollar, EBITDA is negatively affected by about C$15 million dollars. "The ratings action reflects our belief that a rising Canadian dollar combined with rising cost pressures will limit the company from improving its credit profile as much as previously forecasted for 2005," added Mr. Parker. Although NorskeCanada has made significant improvements in 2004, the overall credit profile has remains weak. For the trailing 12 months ended Sept. 30, 2004, EBITDA interest coverage was 1.7x, funds from operations to total debt was only 7%, and leverage is aggressive with total debt to EBITDA of 6.5x. At the current ratings, Standard & Poor's targeted NorskeCanada to average total debt to capital of 3.8x and EBITDA interest coverage of more than 3x over the cycle. NorskeCanada financial targets and policies could strengthen the company in the medium term, although it remains at an operating disadvantage to its peers. The company is committed to improving the balance sheet and has targeted a total-debt-to-capitalization ratio of 35%. Standard & Poor's believes the company is capable of achieving the targeted ratios through internally generated cash flow, a relative advantage over some peers. As NorskeCanada's operating margins have been lower historically than its competitors, the company's cost reduction efforts are necessary. The company's three-year average operating margin is only 8.6% versus 10.6% for Bowater, Inc., and 18.6% for Abitibi- Consolidated, Inc. In recent quarters, NorskeCanada has been successful in narrowing the gap in operating margins relative to its leading competitors, but continued operating improvements are necessary, given its relatively higher exposure to Canadian dollar appreciation and other cost escalations. NORTHWESTERN: Paying $14.5M in Sec. Debt from Asset Sale Proceeds ----------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) expects to complete the paydown of approximately $14.5 million in medium- and long-term secured debt before year-end 2004 through early redemption provisions. According to Brian B. Bird, NorthWestern's Chief Financial Officer, the debt will be paid down from approximately $25 million in proceeds from recent asset sales. This includes approximately $15 million that NorthWestern received from the sale of bank debt issued to the Company from CornerStone Propane Partners L.P. as part of a previously reported claims settlement made through both companies' bankruptcy reorganizations and $10 million in partial payment of intercompany obligations from the sale of business locations of Blue Dot Services, Inc. NorthWestern is paying down $13 million of 7.25% Montana senior secured term notes due March 3, 2008, and $1,446,000 in 8.95% Montana First Mortgage Bonds due Jan. 1, 2022. The Company will have approximately $835.5 million in secured debt outstanding following the transactions. "These early debt redemptions are part of the Company's strategy to further improve our balance sheet and reduce interest expenses as we work to obtain an investment grade rating," said Mr. Bird. In addition, Mr. Bird said that the Company expects to announce its 2005 earnings guidance and dividend policy following the filing of the Company's 2004 Annual Report on Form 10-K after its March 2005 Board of Directors meeting. Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on November 1, 2004. OAO SEVERSTAL: S&P Says Bid for Stelco Unlikely to Proceed ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit rating on Russia-based integrated steel company OAO Severstal and removed it from CreditWatch, where it was placed on Nov. 10, 2004. The outlook is stable. "The rating action reflects Standard & Poor's opinion that Severstal's bid for Canadian steelmaker Stelco, Inc., which was the reason for the CreditWatch placement, is unlikely to proceed, at least in the short term," said Standard & Poor's credit analyst Elena Anankina. The court has extended the bankruptcy stay period at Stelco (D/--/--) to February 2005. Severstal's high appetite for acquisitions remains one of the key factors constraining the rating at the 'B+' level, despite relatively favorable operating and financial profiles. Standard & Poor's expects that Severstal's profitability and cash flow generation will continue to benefit from favorable industry conditions. S&P will continue to closely monitor Severstal's financial policy, particularly in areas such as M&A (including the expected return of mining assets from Severstal's shareholders), capital expenditures, debt, distributions to shareholders, and financial support to group members. In the longer term, the rating will be driven largely by Severstal's ability to resist the cost erosion caused by the appreciation of the Russian ruble and to curb working capital outlays, as well as by developments in the Russian steel market and the success of the company's strategy of entering higher value added market segments and improving operating efficiency. "Any upgrade would require a more predictable financial policy and improved transparency, and the rating is therefore constrained at its current level," added Ms. Anankina. OCTANE ENERGY: Hiring Financial Advisor to Review Alternatives -------------------------------------------------------------- Octane Energy Services Ltd. (TSX-V:OES) reported that as part of management's review of strategic alternatives available to the company in the context of the receivership of its wholly owned subsidiaries, Octane's board of directors has authorized management to engage an independent financial advisor to assist with the examination and analysis of alternatives. If Octane has selected an advisor, the advisor's identity is not public. The strategic alternatives to be considered may include, but will not necessarily be limited to: (1) maintaining the status quo and continuing as an independent oilfield services company; (2) merging with another company; or (3) the sale of all or a division of the company for cash or shares. Any strategic or corporate restructuring alternatives identified will be subject to review and approval of the board of directors and to shareholder and regulatory approvals, as required. The Court of Queen's Bench of Alberta approved a Octane Energy Services, Ltd.'s sale to Nabors Drilling LLP of the equipment associated with the pipeline installation and maintenance business formerly run by Octane Energy Services, Inc., for net proceeds of approximately $2,500,000. These proceeds have been applied to retire the debtor-in-possession financing supplied by HSBC Bank Canada (approximately $300,000) and the outstanding indebtedness to GE Capital Equipment Finance, Inc. (approximately $1,800,000), with the balance to be applied to any shortfall owing to HSBC Bank Canada following collection of outstanding receivables at Octane Energy Services, Inc. Management believes that virtually all former employees of Octane Energy Services, Inc. will be hired by Nabors. Octane Energy Services Ltd. remains under management direction under the protection of the CCAA filing and its wholly owned subsidiary Pronghorn Controls Ltd. remains intact and outside of the CCAA process. Pronghorn Controls Ltd. will carry on business in the ordinary course as it has done since the filing under the CCAA on October 15, 2004. Octane Energy Services Ltd.'s wholly- owned subsidiaries Octane Energy Services Inc. and Octane Energy Services (BC) Inc. were placed into receivership by consent after close of business on Friday, December 4, 2004. In addition, the role of the court appointed monitor was expanded at the parent company (Octane Energy Services Ltd.) and includes a receivership over the equipment held in that corporate entity. Octane is an emerging, diversified oilfield services company. The company provides complementary services in facilities construction and electrical, instrumentation and maintenance services. The company employs its core base of assets and qualified personnel from its field offices strategically located across Western Canada. The common shares of Octane trade on the TSX Venture Exchange under the symbol "OES". OSBORNE ENTITIES: Case Summary & 58 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Osborne Entities, Inc. aka Martin & MacDonald Company 4650 Astor Road Louisville, Kentucky 40218 Tel: (502) 968-9148 Bankruptcy Case No.: 04-38100 Type of Business: The Company is a member of National Association of Waterproofing & Structural Repair Contractors -- NAWSRC. See http://www.nawsrc.org/ Chapter 11 Petition Date: December 20, 2004 Court: Western District of Kentucky (Louisville) Judge: David T. Stosberg Debtor's Counsel: Stewart E. Bland, Esq. Suite 1100, One Riverfront Plaza 401 West Main Street Louisville, Kentucky 40202 Tel: (502) 584-7371 Fax: (502) 584-7386 Estimated Assets: Unstated Estimated Debts: $1 Million to $10 Million Debtor's 58 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service $340,455 Attention: Alma Wyatt Group 3700-MDP-527 1500 Ormsby Station Road Louisville, Kentucky 40223 Todd Osborne and Dorothy Osborne $77,836 7215 Wood Briar Road Louisville, Kentucky 40241 BAC Local #4 IN/KY CBA Escrow $52,540 2041 Broadway Anderson, Indiana 46012 LaVena Wilkins $48,232 5700 Harrods Run Road Prospect, Kentucky 40059 W. Thomas Cook $48,232 605 Berwyn Drive Louisville, Kentucky 40223 CMA Supply of Louisville $47,354 Kentucky State Treasurer $26,435 Revenue Cabinet Frankfort, Kentucky 40601 American Express $20,979 Advanta Bank Corporation $18,808 Triden/White Capital $18,623 Construction Supply Drema Dawson $16,035 American Scaffolding, Inc. $16,014 Platinum Plus for Business $14,293 TAO Investments, LLC $12,700 ChemRex, Inc. $12,166 A C Krebs Company $10,381 McCauley Nicholas & Company $8,870 Sealant Sales $6,971 Louisville/Jefferson County $6,026 Revenue National City Bank Value of Security: $5,979 $5,000 Rental Service Corporation $5,976 Hieb Concrete Products, Inc. $4,253 Albert Oil Co., Inc. $3,497 Microvisions Computer System $2,698 First Federal Savings Bank Value of Security: $2,662 $27,000 Nextel Partners $2,140 Tom Brown, Inc. $1,814 The Home Depot $1,762 Glenoaks Country Club $1,480 First Federal Savings Bank Value of Security: $1,419 $11,000 NES Rentals $1,218 AGC of Kentucky, Inc. $1,215 Life-Guard WP, Inc. $1,178 Pennzoil 10 Minute Oil Change $1,146 Builders Exchange $995 Suwannee River Supply, Inc. $963 Computer Ease $945 Middleton & Reutlinger $917 Orr Safety Corporation $881 McBee Systems, Inc. $879 Ulrich Chemical Products, Inc. $853 Cintas Corporation $710 Indiana Department of Revenue $708 Advanced-Sherman $708 Black & Decker, Inc. $610 Kentucky Derby Festival $600 BaptistWorx $590 Big O Shepherdsville Road $452 Kwik-Set Fasteners, Inc. $355 Parrish Tractor, Inc. $319 Naylor Publications, Inc. $290 Southern Sealants Distributors $281 Refreshment Services $232 Monitronics $220 Crystal Communications $180 Pitney Bowes $123 Louisville Metro Finance $50 Department City of Radcliff $25 PALADYNE CORP: Recurring Losses Trigger Going Concern Doubts ------------------------------------------------------------ Market Central, Inc., (formerly Paladyne Corp.) failed to generate positive cash flow during the year ended August 31, 2004, and its cash resources on hand are insufficient for its long term needs. As a result, certain debt, vendor payables, capital leases and other obligations are in arrears and default. This situation has existed since 2001 and the Company has taken several significant steps to alleviate the problems. During fiscal 2004 and subsequent to year-end, the Board of Directors approved the sale of up to $7,000,000 in Series A preferred Stock. During the year, $3,000,000 of these shares were sold. The Board elected to sell additional shares since August 31, 2004, in an effort to stabilize the capital needs of the Company and to permit the Company to exploit its knowledge management assets. The Company expects that after completion of the sale of the Series A Preferred Stock, an additional capital raise of up to $10,000,000 will be necessary to provide the stability needed to fully exploit the Company's opportunities in the knowledge management markets. Management has been aggressively preparing for this subsequent offering and they are optimistic that the subsequent offering will be possible and that it will be accretive to existing shareholders. There are no assurances the Company will be successful in raising the funds required. The Company also expects that sales of its SourceWare products will begin in the second quarter of fiscal 2005, although this cannot be predicted with certainty. As shown in the Company's consolidated financial statements, during the years ended August 31, 2004 and 2003, the Company incurred losses from continuing operations of $5,264,004 and $2,047,214, respectively. The Company's current liabilities exceeded its current assets by $7,071,971 as of August 31, 2004. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. Going Concern Doubt The independent auditor's report on the Company's August 31, 2004, financial statements states that the Company's recurring losses raise substantial doubts about the Company's ability to continue as a going concern. The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued developing, marketing and selling of its products and services and additional equity investment in the Company. Market Central, Inc., (formerly Paladyne Corp.) is a knowledge management company specializing in state of the art solutions that enable businesses to efficiently store, categorize and retrieve information. The Company owns multiple patents and patent-pending technologies and has developed a suite of solutions that include software for next-generation search, intelligent document recognition, data capture, cleansing, mining, and integration. The Company also operates one wholly owned subsidiary, eCommerce Support Centers, Inc., which provides outsourced contact center solutions and Customer Relationship Management services; inbound technical support, sales, and customer service; outbound pre-sales and sales; data mining; and campaign management. PANAMSAT: Moody's Reviewing Low-B & Junk Ratings & May Downgrade ---------------------------------------------------------------- Moody's Investors Service has placed the debt ratings for PanAmSat Holding Corp., and the company's operating subsidiary PanAmSat Corporation (B1 Senior Implied) under review for possible upgrade based on its announcement to issue $1.0 billion of equity in an initial public offering, of which a portion is expected to be used to reduce debt. The ratings placed under review for PanAmSat Holding Corp. are: * Senior implied rating of B1; * Issuer rating of B1; * $250 million of Senior Discount Notes rated Caa1. The ratings placed under review for PanAmSat Corporation are: * $2,460 million senior secured bank debt of B1; * $150 million of senior secured notes due 2008 of B1; * $125 million senior secured notes due 2028 of B1; * $1,010 million senior unsecured notes due 2014 of B2. The review was initiated based on our expectation that the company plans to issue $1 billion of equity in an initial public offering adding additional equity to the company's thinly capitalized balance sheet, and the potential for the company to use a portion of the proceeds to reduce debt and leverage in a more expedient manner than Moody's had anticipated. Moody's review will focus on the level of capital added net of any dividends, the level of improvement to the credit metrics, expectation for further credit improvement, and the company's strategy for the balance sheet and shareholder returns in the future. PanAmSat Corporation, headquartered in Wilton, Connecticut, is one of the world's top three satellite operators. With an owned and operated fleet of 24 satellites, PanAmSat is a leading global provider of video, broadcasting and network distribution and delivery services. PANDA-ROSEMARY: Moody's Reviewing Ba2 Rating & May Upgrade ---------------------------------------------------------- Moody's Investors Service placed the Ba2 senior secured bonds of Panda-Rosemary Funding Corporation under review for possible upgrade. The rating action reflects the pending acquisition of the project and its underlying assets by Virginia Electric and Power Company (VEPCO: senior unsecured A3, stable outlook), the consummation of which would trigger various changes under the project's indenture. These changes include the release of the collateral securing the bonds and the assumption of an unconditional payment obligation by VEPCO. Additionally, project bondholders would be granted the same rights and remedies as VEPCO's senior unsecured bondholders pursuant to VEPCO's senior indenture. The acquisition of the project by VEPCO is subject to certain closing conditions, including approvals from federal and state regulatory agencies. In the event that the proposed acquisition is consummated and the project's bonds become the obligation of VEPCO and rank pari passu with its senior unsecured obligations, the rating would be upgraded to A3, consistent with the rating of VEPCO's senior unsecured debt. Panda-Rosemary Funding Corporation is indirectly owned by Panda Energy International, a developer of power projects headquartered in Dallas, Texas. PARMALAT USA: Liquidation Analysis Under the Chapter 11 Plans ------------------------------------------------------------- The liquidation analysis of Parmalat USA Corporation and its debtor-affiliates reflects the estimated cash proceeds, net of liquidation-related costs that would be realized if each of Parmalat USA Corp., Farmland Dairies, LLC, and Farmland Stremicks Sub, L.L.C. -- formerly known as Milk Products of Alabama, L.L.C. -- were liquidated in accordance with Chapter 7 of the Bankruptcy Code. The Liquidation Analysis is based on a number of estimates and assumptions that, although considered reasonable by management and Lazard Freres and Co., LLC -- the Debtors' investment banker and financial advisor -- are inherently subject to significant business, economic and competitive uncertainties and contingencies beyond the U.S. Debtors' control, and which could be subject to material change. Accordingly, James A. Mesterharm, the Debtors' Chief Restructuring Officer, states, there can be no assurance that the recoveries from the liquidation of assets reflected in the Liquidation Analysis would be realized if the U.S. Debtors were liquidated under Chapter 7 and actual results could vary materially from those estimated in the Liquidation Analysis. The Liquidation Analysis illustrates that in a Chapter 7 liquidation, holders of claims in: (i) PUSA Class 3 (General Unsecured Claims against PUSA) would receive no recovery; (ii) Farmland Classes 3a (General Unsecured Claims against Farmland) and 3c (Convenience Claims) would receive no recovery; and (iii) MPA Class 3 (General Unsecured Claims against MPA), would receive an estimated 52.6% recovery. The Liquidation Analysis is based on information from the U.S. Debtors' projected balance sheet as of December 31, 2004, and assumes that the Debtors would commence a Chapter 7 liquidation on December 31, 2004. The Liquidation Analysis also assumes that the Projected Balance Sheet is a reasonable proxy for the actual December 31, 2004, balance sheet. The Liquidation Analysis assumes that the liquidation of Farmland Dairies, LLC, would commence under the direction of a Bankruptcy Court-appointed trustee and would continue for a period of approximately 12 months, during which time all of Farmland's significant assets would either be sold or conveyed to the lien holders, and the cash proceeds, net of liquidation related costs, would then be distributed to creditors. Although some assets could be liquidated in less than 12 months, other assets would be more difficult to collect or sell, thus requiring a liquidation period substantially longer than 12 months. During the liquidation, the trustee would generally undertake: (i) the orderly sale of inventory, buildings, land, and equipment and other fixed assets; and (ii) the orderly wind-down of daily operations. For certain assets, liquidation values were estimated for each asset. For other assets, liquidation values were assessed for assets in similar categories by estimating the percentage recoveries that a trustee might obtain for that category of asset. With respect to Milk Products of Alabama, LLC, the Liquidation Analysis assumes that Farmland is liquidated. With respect to Farmland, the Liquidation Analysis assumes that the Chapter 7 trustee would be able to negotiate a charging lien against the assets, which are subject to the claims of secured creditors. Absent an agreement between the Chapter 7 trustee and the secured creditors, funding for the Chapter 7 trustee would be limited to the $50,000 carve-out provided for in the Postpetition Financing Order and the proceeds of any avoidance actions, which are subject to liens in favor of Milk Products in accordance with the terms of the Postpetition Financing Order. It is assumed that without an agreement as to a charging lien between the Chapter 7 trustee and the secured creditors, the Chapter 7 trustee would likely abandon many of the assets in favor of the secured creditors. Farmland Dairies, LLC Liquidation Analysis Statement of Assets ($ in millions) Estimated Projected Hypothetical Liquidation Balance Sheet Percentage Value (Unaudited) Recovery (Unaudited) ------------- ------------ ----------- Cash and Cash Equivalents $2.3 97.2% $2.2 Accounts Receivable 48.6 55.5% 26.9 Inventory 18.5 30.0% 5.5 Prepaid Expenses 18.2 0.0% 0.0 Other Current Assets 0.9 0.0% 0.0 Property and Plant 30.1 69.5% 20.9 Equipment 12.4 31.8% 3.9 Other PP&E 8.1 12.5% 1.0 Miscellaneous Other Assets 2.3 0.0% 0.0 Intercompany Receivables 172.1 7.8% 13.5 Other Intangible Assets 172.4 2.7% 4.7 ------------- ----------- Total Assets $485.9 $78.8 Preference Claims $4.8 100.0% $4.8 Costs Associated with Liquidation: Payroll and Overhead Costs ($5.5) Selling Commissions (1.6) Chapter 7 Trustee Fees (1.6) Chapter 7 Professional Fees (0.9) ----------- ($9.6) Net Estimated Liquidation Proceeds Available for Distribution $74.0 ===== Farmland Dairies, LLC Liquidation Analysis Distribution Analysis Summary ($ in millions) Estimated Estimated Allowable Liquidation Claims Value --------- ----------- Farmland Sources of Cash Net estimated liquidation proceeds available for distribution $74.0 Farmland administrative claim against PUSA $1.5 1.5 ----------- Net estimated proceeds available for distribution $75.5 _________________________________________________________________ Citibank Secured Claims Citibank receivables Purchase Agreement $27.8 $26.9 Hypothetical recovery to Citibank 97.0% Proceeds available after Citibank Secured Claims $48.5 _________________________________________________________________ Real Estate Tax Claims Real Estate Tax Claims $0.0 $0.0 --------- ----------- Total Secured Tax Claims $0.0 $0.0 Hypothetical recovery to Secured Tax Claims 100.0% Postpetition Credit Agreement Secured Claims Carve-out for Professional Fees $4.6 $4.6 Postpetition Credit Agreement 34.3 34.3 --------- ----------- Total Postpetition Credit Agreement Secured Claims $38.9 $38.9 Hypothetical recovery to Postpetition Credit Agreement Secured Claims 100.0% Proceeds available after Postpetition Credit Agreement Secured Claims $9.6 _________________________________________________________________ Master Lease Secured Claims Master Lease Claim $8.4 $4.8 Hypothetical recovery to Master Lease Claim 57.4% Proceeds available after Master Lease Claim $4.8 _________________________________________________________________ Secured Administrative Claims Net MPA Administrative Claim $6.7 $4.8 Hypothetical recovery to Secured Administrative Claims 72.2% Proceeds available after Secured Administrative Claims $0.0 _________________________________________________________________ Secured LC Facility Claim LC Facility Claim $5.4 $0.0 Hypothetical Recovery to LC Facility Claim 0.0% Proceeds Available after Secured LC Facility Claim $0.0 _________________________________________________________________ Administrative Claims Unsecured Chapter 11 Administrative Claims Salaries, wages & benefits $7.8 $0.0 Postpetition Unpaid Master Lease Payments 8.5 0.0 Postpetition Accounts Payable 13.6 0.0 Postpetition Accrued Liabilities 21.4 0.0 --------- ----------- Total Chapter 11 Administrative Claims $51.3 $0.0 Hypothetical recovery to Unsecured Chapter 11 Administrative Claims 0.0% Proceeds available after Administrative Claims $0.0 _________________________________________________________________ Priority Unsecured Claims Priority Wage/Benefit Claims $1.9 $0.0 Priority Tax Claims 0.5 0.0 --------- ----------- Total Priority Unsecured Claims $2.3 $0.0 Hypothetical recovery to Priority Unsecured Claims 0.0% Proceeds available after Priority Unsecured Claims $0.0 _________________________________________________________________ Unsecured Claims Unsecured Master Lease Rejection Claim $78.7 $0.0 General Unsecured Claims 16.1 0.0 PBGC Claim 18.8 0.0 Parmalat USA Claim 10.4 0.0 Preference Claims 4.8 0.0 MPA Unsecured Claim 2.7 0.0 --------- ----------- Total Unsecured Claims $131.5 $0.0 Hypothetical recovery to Unsecured Claims 0.0% Net Estimated Deficiency to Unsecured Claims ($131.5) Proceeds available after Unsecured Claims $0.0 Farmland Stremicks Sub, L.L.C. Liquidation Analysis Distribution Analysis Summary ($ in millions) Estimated Estimated Allowable Liquidation Claims Value --------- ----------- MPA Sources of Cash Net proceeds from sale available for distribution $8.5 Net MPA Administrative Claim against Farmland $6.7 4.8 MPA Unsecured Claim against Farmland 2.7 0.0 ----------- Net Estimated Proceeds available for distribution $13.3 _________________________________________________________________ Administrative Claims Chapter 11 Professional Fees $0.8 $0.8 Hypothetical recovery to Administrative Claims 100.0% Proceeds available after Administrative Claims $12.5 _________________________________________________________________ Unsecured Claims PBGC Claim $18.8 $9.4 Parmalat USA Claim 4.9 2.5 General Unsecured Claims 1.4 0.7 --------- ----------- Total Unsecured Claims $25.1 $12.5 Hypothetical recovery to Unsecured Claims 49.8% Net Estimated Deficiency to Unsecured Claims ($12.6) Proceeds available after Unsecured Claims $0.0 Parmalat USA Corp. Liquidation Analysis Distribution Analysis Summary ($ in millions) Estimated Estimated Allowable Liquidation Claims Value --------- ----------- PUSA Sources of Cash PUSA Claims from MPA $4.9 $2.5 PUSA Claims from Farmland 10.4 0.0 ----------- Net Estimated Proceeds available for distribution $2.5 _________________________________________________________________ Secured Claims DIP Lender Claim $0.0 $0.0 Farmland Claim for Chapter 11 Professional Fees 1.5 1.5 --------- ----------- Total Secured Claims $1.5 $1.5 Hypothetical recovery to Secured Claims 100.0% Proceeds available after Secured Claims $0.9 _________________________________________________________________ Priority Unsecured Claims Priority Unsecured Claims $1.2 $0.9 Hypothetical recovery to Priority Unsecured Claims 76.4% Proceeds available after Priority Unsecured Claims $0.0 _________________________________________________________________ Unsecured Claims PBGC Claim $18.8 $0.0 Senior Unsecured Notes 20.1 0.0 Other Unsecured Claims 7.6 0.0 --------- ----------- Total Unsecured Claims $46.5 $0.0 Hypothetical recovery to Unsecured Claims 0.0% Net Estimated Deficiency to Unsecured Claims ($46.5) Proceeds available after Unsecured Claims $0.0 Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. (Parmalat Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEACHTREE FRANCHISE: Moody's Junks $6.192 Million Class C Notes --------------------------------------------------------------- Moody's Investors Service downgrades five classes of securities issued in Peachtree Franchise Finance's securitization of franchise loans. The rating action is due to the deterioration in recovery assumptions for the problem borrowers in the pool and the recent delinquency of Delta Bluff, a large borrower exposure. The complete rating actions are: * Peachtree Franchise Loan Notes, Series 1999-A -- $37,798,433 Class A-1 Notes, downgraded to Baa2 from A3; -- $44,896,000 Class A-2 Notes, downgraded to Baa2 from A3; -- $6,966,000 Class B Notes, downgraded to B1 from Baa3; -- $6,192,000 Class C Notes, downgraded to Caa3 from Caa1; -- Class A-X, downgraded to A3 from Aa3. Delinquencies as of the October 2004 distribution date total 22.7% of the pool with subordination protecting the Class A notes totaling 21.9%; 15.4% for Class B; and 9.5% for Class C notes. The largest problem borrower is Delta Bluff, an Applebee's borrower comprising 9.6% of the pool followed by BDSB of Utah (5.5%), and Slaymaker (5.1%). The ratings action considers expected recoveries on the problem borrowers in addition to future defaults among current borrowers. Peachtree is a Georgia limited liability company organized in January 1998 that began originating and servicing loans in July 1998. PEGASUS SATELLITE: Judge Haines Okays Employee Retention Program ---------------------------------------------------------------- Judge Haines of the U.S. Bankruptcy Court for the District of Maine approves the Broadcast Retention Plan with respect to the Broadcast Key Employees as modified of Pegasus Satellite Communications, Inc., and its debtor-affiliates: (a) The Broadcast Key Employees will be entitled to participate in the Broadcast Retention Plan consisting solely of Severance Payments and COBRA Benefits; (b) There will be no Retention Payments under the Broadcast Retention Plan; (c) The Broadcast Retention Plan will supersede any prepetition severance plans for the Broadcast Key Employees. The Severance Payment may be paid upon involuntary termination of a Broadcast Key Employee by the Debtors for reasons other than: -- termination for cause, including unsatisfactory performance; -- a transaction involving a sale, acquisition or change in control of the Debtors' Broadcast division or substantially all of the Broadcast Assets with a third party in which the Acquiror hires the Broadcast Key Employee upon the closing of that transaction on the terms, compensation, responsibilities and geographic location materially consistent with the Broadcast Key Employee's current employment; or -- if Pegasus Communications Corporation or any of its direct or indirect subsidiaries is the winning bidder for the Broadcast Assets and hires the Broadcast Key Employee; (d) Until the Court determines the winning bidder for the Broadcast Assets, the Debtors will provide the Committee with written notice if they will be terminating the employment of any of the Broadcast Key Employees. If the Committee objects to the proposed termination, the Committee will be required to make an appropriate Court application regarding the proposed termination and the Debtors will be prohibited from effectuating termination prior to entry of a Court order. If the Court approves an Acquiror as the winning bidder for the Broadcast Assets, the consent of the Committee will be required before the Debtors may terminate the employment of any of the Broadcast Key Employees; (e) If PCC is the winning bidder for the Broadcast Assets, any amounts that are paid out under the Broadcast Retention Plan by the Debtors will be repaid by PCC to the Debtors' estates no later than the closing of the sale or consummation of other transactions whereby PCC acquires the Broadcast Assets or the stock of the Broadcast Debtors; (f) The Severance Payments will be calculated as follows and will not aggregate more than $838,116 for all Broadcast Key Employees: Employee Level Minimum -------------- ------- Manager 13 weeks Director 26 weeks Vice President 52 weeks (g) A claim for the Severance Payment will constitute an administrative priority expense claim pursuant to Section 503(b) of the Bankruptcy Code. The payment of the Severance Payment to a Broadcast Key Employee will be conditioned upon the Broadcast Key Employee executing a valid release of claims arising out of the Broadcast Key Employee's employment or termination of employment, in a form satisfactory to the Debtors and the Committee, and reasonable in scope; (h) The COBRA Benefits will consist of family coverage for each of the Broadcast Key Employees for the following time periods, provided, that, the aggregate amount of premiums paid by the Debtors will not exceed $226,800: Employee Level Minimum -------------- ------- Manager 13 weeks Director 26 weeks Vice President 52 weeks (i) The reasonable expenses for the administration of COBRA Benefits, including expenses relating to an outsource benefits manager and a Pegasus Communications Media Corporation benefits administrator will be paid by PCMC and allocated in accordance with the Support Services Order; and (j) Under no circumstances will the Debtors have any liability to make any payments under the Broadcast Retention Plan to a Broadcast Key Employee retained by and subsequently terminated by an Acquiror. The Debtors are authorized, but not directed, to pay the Severance Payments to Broadcast Key Employees and pay the premiums for COBRA Benefits, all as appropriate under the Broadcast Retention Plan without further Court order. Furthermore, Judge Haines approves the Supplemental Satellite Retention Plan with respect to the Satellite Key Employees as modified: (a) The Satellite Key Employees will be entitled to participate in the Supplemental Satellite Retention Plan consisting of a Plan Bonus and a Discretionary Pool; (b) As of November 24, 2004, five of the Satellite Key Employees are employees of PCMC. The allocation of the costs of the Supplemental Satellite Retention Plan with respect to the PCMC employees will be made in accordance with the Support Services Order; (c) The Plan Bonus will consist of nine weeks additional salary and will not aggregate more than $276,000 for all Satellite Key Employees. The Plan Bonus will be paid upon the consummation date of a Chapter 11 plan for the Debtors, provided, however, if the Consummation Date will not have occurred by March 31, 2005, then 50% of the amount of the Plan Bonus will be paid on March 31, 2005, with the balance paid on the Consummation Date. No payment of the Plan Bonus will be made in the case of the voluntary termination of a Satellite Key Employee. In the case of an involuntary termination, without cause, on or after February 1, 2004, because the Satellite Key Employee has completed his or her duties necessary to achieve Plan Consummation, the Plan Bonus would be paid to the Satellite Key Employee on the date of termination. Prior to February 1, 2004, the Debtors will provide the Committee with written notice if they will be terminating the employment of any of the Satellite Key Employees, without cause, because the Satellite Key Employee has completed his or her duties necessary to achieve Plan Consummation, and if the Debtors intend to pay that Satellite Key Employee the Plan Bonus, and if the Committee objects to that proposed termination and the payment of the Plan Bonus, the Debtors will be required to make an appropriate Court application regarding the proposed termination and payment of the Plan Bonus and the Debtors will be prohibited from effectuating the termination and payment of the Plan Bonus prior to entry of a Court order; (d) To the extent that the amounts approved under the Satellite Retention Plan or the Supplemental Satellite Retention Plan are not paid out by virtue of employees forfeiting payments that were approved under the Satellite Retention Plan or the Supplemental Satellite Retention Plan, the cost savings will accrue and may be paid to Satellite Key Employees or other employees only; and (e) To the extent there are funds in the Discretionary Pool, in the event that there are circumstances in which the Debtors believe that additional payments to the Satellite Key Employees, or other employees are necessary, the Debtors will provide the Committee with written notice of their intention to make any additional payments to employees from the Discretionary Pool, and if the Committee objects to the proposed payment, the Committee will be required to make an appropriate application to the Court regarding the proposed payment, and the Debtors will be prohibited from making any payments until entry of a Court order. The Debtors are authorized, but not directed, to pay the Plan Bonus and amounts from the Discretionary Pool to Satellite Key Employees or other employees as appropriate under the Supplemental Satellite Retention Plan. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLAINS EXPLORATION: Fitch Withdraws BB+ Rating on Senior Debt ------------------------------------------------------------- Fitch Ratings has withdrawn the 'BB+' rating assigned to Plains Exploration & Production Company's senior secured bank facility and the 'B+' rating assigned to its Senior Subordinated debt. Fitch will no longer provide analytical coverage on this issuer. PROVIDENCE RI: Fitch Revises Outlook on B Rating to Positive ------------------------------------------------------------ Fitch Ratings revises the Rating Watch on approximately $30.7 million outstanding Providence, Rhode Island special obligation bonds, series 1995A-C and series 1996D, rated 'B', to Positive from Negative. The bonds mature variously through 2016. The revision of the Rating Watch to Positive from Negative reflects the bankruptcy court's recent acknowledgement of Dominion Resources, Inc., as the highest bidder to acquire US Gen New England Inc.'s 495-megawatt combined-cycle natural gas-fired Manchester Street Station located in the city, from which the tax revenues securing the bonds are generated. The sale of the asset is expected to close in the first quarter of 2005. At that time, Fitch will review the terms of the transaction and if favorable to bondholders, may move the rating upward, potentially as high as the 'BBB' category. The bonds are secured by property tax revenues paid to the city from the single taxpayer and current owner, the company, pursuant to the five-year tax stabilization agreement which expires in June 2009. Additional security is generated from the debt service reserve fund, fully funded at the maximum annual debt service -- MADS -- level of $3.7 million. The rating on the bonds was downgraded from 'BBB-' in 2003 following the bankruptcy filing of the company. The current tax stabilization agreement was approved by the city council and bankruptcy court last year and the city continues to receive full and timely payment of tax revenues, quarterly, totaling $6.6 million per year. Coverage of the $3.7 million MADS is stable at 1.78 times. PSEG ENERGY: Fitch Affirms BB Rating & Says Outlook is Negative --------------------------------------------------------------- Fitch Ratings has revised the Rating Outlook for Public Service Enterprise, Inc Group -- PSEG-- and subsidiary PSEG Power, LLC, to Positive from Stable following the announcement of a merger agreement between PSEG and Exelon Corp. Fitch has also affirmed the ratings of Public Service Electric and Gas, PSEG Energy Holdings and each of the Exelon entities as shown in the table at the end of this release. The rating actions reflect the stock for stock nature of the transaction that allows the combined entity to emerge with a strong credit profile, expected pre-tax synergies that management estimates will approximate $400 to $500 million annually and the positive impact of Exelon's strong nuclear management team on PSEG's nuclear operations. The companies have agreed to a nuclear service agreement to address the operating problems at PSEG's nuclear plants. About 70% of the synergies are expected to come from non-regulated operations. The combined entity will also benefit from a large portfolio of low cost coal and nuclear generation. Fitch estimates the combined entity will have a debt ratio of in the 45% range and a ratio of debt to EBITDA of less than 3.5 times. About 50% of projected EBITDA is expected to come from regulated distribution operations. The merger is conditioned on a number of state and federal agencies and is expected to take 12 to 15 months to complete. These included the New Jersey Board of Public Utilities, the Pennsylvania Public Utility Commission, the Illinois Commerce Commission, the Federal Energy Regulatory Commission -- FERC, the Nuclear Regulatory Commission, the SEC under the Public Utilities Holding Company Act and either the Department of Justice or the Federal Trade Commission. Meeting the FERC's market power requirements could prove to be difficult because of the concentration of generation in the PJM Region. The market power issues are mitigated by the membership of both companies in a Regional Transmission Organization -- RTO. Nonetheless the company is likely to be required to divest some fossil generation. The ratings of Exelon and PSEG are: Exelon Corp.: -- Senior unsecured debt 'BBB+'; -- Commercial paper 'F2'; -- Rating Outlook Stable. Exelon Generation, LLC: -- Senior unsecured debt 'BBB+'; -- Commercial paper 'F2; -- Rating Outlook Stable. Commonwealth Edison Co.: -- Secured debt 'A-'; -- Senior unsecured debt 'BBB+'; -- Preferred stock 'BBB'; -- Commercial paper 'F2'. PECO Energy Co.: -- Secured debt 'A'; -- Senior unsecured debt 'A-'; -- Preferred stock 'BBB+'; -- Commercial paper 'F1'. Public Service Enterprise Group Inc.: -- Indicative senior unsecured 'BBB'; -- Trust preferred securities 'BBB-'; -- Commercial paper rating 'F2'; -- Rating Outlook Positive. PSEG Power LLC: -- Senior unsecured 'BBB'; -- Rating Outlook Positive; PSEG Funding Trust I and II: -- Preferred securities 'BBB-'; -- Rating Outlook Positive. Enterprise Capital Trust I, II and III: -- Preferred securities 'BBB-'; -- Rating Outlook Positive. Public Service Electric and Gas Company: -- First Mortgage Bonds 'A'; -- Senior unsecured debt 'A-'; -- Preferred stock 'BBB+'; -- Commercial paper 'F2'; -- Rating Outlook Stable PSEG Energy Holdings: -- Senior unsecured debt 'BB'; -- Rating Outlook Negative. PSEG ENERGY: Moody's Affirms Ba3 Senior Unsecured Rating -------------------------------------------------------- Moody's Investors Service affirmed: * the Baa2 senior unsecured rating of Public Service Enterprise Group -- PEG, * the Baa1 senior unsecured rating of PSEG Power -- Power, * the A3 senior secured rating of Public Service Electric and Gas -- PSE&G, and * the Ba3 senior unsecured rating of PSEG Energy Holdings -- Holdings. The rating outlook for PEG was revised to stable from negative. The rating outlook for Power was revised to stable from negative. PSE&G's stable rating outlook remains unchanged. Additionally, Holdings' negative rating outlook remains unchanged. The rating actions follow the announcement of a planned merger of PEG with Exelon Corporation. Under the terms of the proposed transaction, Exelon will acquire PEG for approximately $12 billion in stock and approximately $14 billion in assumed debt. Moody's views the transaction as being positive for the creditworthiness of PEG and Power, whose debt will be assumed, respectively, by the surviving merged parent holding company and the unregulated generating company. Exelon is expected to assume PEG's holding company debt, while Exelon Generation -- Genco -- is expected to assume Power's outstanding debt. Exelon entered into a Nuclear Management Agreement with Power, effective January 2005. Moody's views this positively because Exelon's substantial experience in improving nuclear operations, and in implementing best practices and safety management could result in improved performance for Power's nuclear operations. With respect to PSE&G and Holdings, Moody's views the acquisition as being essentially credit neutral. Both companies will operate under their current business plans as standalone, self-funding subsidiaries of Exelon, at least initially. The stable outlook for PSE&G reflects the company's low business risk as a T&D utility, and its current and projected financial performance, which is expected to improve modestly in 2005-2006 and to be in line with its rating category. While Holdings has made progress in disposing of poorly performing assets and delivering on its financial targets this year, the negative outlook for Holdings reflects the company's history of volatile financial performance, and its continuing exposure to emerging markets, merchant power, and an ongoing tax audit at its leveraged lease subsidiary. The transaction requires Hart Scott Rodino clearance, SEC clearance under PUHCA, as well as NRC and FERC approval. Pennsylvania and New Jersey state regulatory approval will also be required. Exelon expects to obtain regulatory approvals in 12 to 15 months. Public Service Enterprise Group is an energy and energy services company based in Newark, New Jersey. PSEG ENERGY: S&P Revises Outlook on BB- Rating to Negative ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit rating on PSEG Energy Holdings LLC and revised the outlook to negative to reflect the ongoing financial impact of failed investments and investments, whose performance has been meaningfully below expectations, and to reflect concerns that asset dispositions may not be accompanied by commensurate levels of debt reduction and could deprive the company of those assets that are best able to contribute to cash flow. Newark, New Jersey-based Holdings' corporate credit rating reflects the company's stand-alone credit quality and therefore does not benefit from its affiliation with financially stronger companies within the Public Service Enterprise Group, Inc., family of companies. Likewise, the ratings on other members of Enterprise do not reflect the financial drag created by Holdings. "Following the merger between Exelon Corp. and Enterprise, Standard & Poor's expects to continue to rate Holdings on a stand-alone basis without reflecting the affiliation with the Exelon companies," said Standard & Poor's credit analyst David Bodek. Holdings is saddled with $1.8 billion of recourse debt obligations. After write-offs, Holdings also services about $1.4 billion of outstanding nonrecourse project debt. Holdings has demonstrated a willingness to sever ties to projects financed with nonrecourse debt that have not performed at levels consistent with expectations. Consequently, Standard & Poor's excludes Holdings' nonrecourse debt from calculations of the company's credit metrics. SHILOH INDUSTRIES: Moody's Rates $175M Senior Secured Debt at Ba3 ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of Shiloh Industries, Inc., in response to the company's continued strong cash flow generation and corresponding debt reduction. Moody's additionally assigned Ba3 ratings to Shiloh's proposed new guaranteed senior secured credit facilities, which will refinance the existing credit agreement. Shiloh's improved credit metrics have been achieved through significant new program launches of higher value-added products, combined with successful efforts to enhance operating margins and lower the company's break-even sales level. Shiloh's rating outlook following these rating actions is stable. These specific rating actions were taken: * Assignment of Ba3 ratings for Shiloh's $175 million of proposed new guaranteed senior secured credit facilities, to consist of: -- $125 million revolving credit facility due January 2010; -- $50 million term loan due January 2010; * Upgrade to Ba3, from B1, of the ratings of Shiloh's existing $174 million of remaining guaranteed senior secured credit facilities (which ratings will be withdrawn upon the closing of the proposed new credit agreement) consisting of: -- $60 million revolving credit facility due January 2007; -- $64.13 million remaining term loan A facility due January 2009; -- $49.75 million remaining term loan B facility due January 2009; * Upgrade to Ba3, from B1, of Shiloh's senior implied rating; and * Upgrade to B1, from B2, of Shiloh's senior unsecured issuer rating The rating upgrades reflect Shiloh's steady pace of debt and leverage reduction, which was realized in the midst of generally difficult industry conditions, which have plagued most North American automotive suppliers over the past year. While steel is the primary raw material that Shiloh's blanking and stamping operations require, the company proved substantially immune to the rapid rise in steel prices during 2004. According to management, this is a direct result of Shiloh's definitive strategy to take advantage of any customer programs, which serve to minimize external commodity risk, despite the possibility of foregoing upside benefits. Shiloh also recently completed several major new launches of higher value-added engineered welded blanking programs that should reach full run rate potential during 2005. Engineered welded blanking facilitates greater vehicle safety and reduced NVH properties at lower weights than competing technologies. OEM demand for this highly capital intensive and specialized welding process across a broader range of automobiles and light trucks is driving Shiloh's revenue and value-added margin growth at a faster pace than overall industry production. The fact that Shiloh has low dollar-per-vehicle content on a broad range of programs for each customer also helps to minimize the degree of exposure to particular platforms. Shiloh furthermore reduced its fixed cost base and level of break-even revenues by more than $130 million since 2002 through closely monitored actions aimed at reducing headcount, increasing labor productivity, implementing the use of highly sophisticated robotics, minimizing scrap, and driving down defective parts per million. Capital expenditures are now closely monitored and projected to run well below depreciation as the company looks to achieve greater capacity utilization and more effectively plan out the logistics of new programs. More specifically, for the twelve month pro forma period ended October 31, 2004, Shiloh's total debt/EBITDAR leverage is expected to have been reduced to approximately 2.2x, from 2.8x for the twelve month period ended April 30, 2004 (which results were the basis for Moody's last rating action dated July 1, 2004). EBIT coverage of cash interest for the twelve-month pro forma period ended October 31, 2004, is expected to be approximately 6.6x, versus the 3.7x cash interest coverage for the comparable period ended April 30, 2004. Shiloh's EBIT return on total assets also improved to 10.3%, from 8.4% over the same timeframe. The pro forma estimates assume that the proposed bank refinancing transaction occurs. Shiloh's commodity risk has been well hedged by virtue of the fact that about 80% of the company's actual steel purchases are conducted under OEM resale programs providing full pass-through of steel costs, and that approximately 10% of the company's steel requirements are satisfied through tolling arrangements under which Shiloh never actually owns the steel. In certain cases where Shiloh must buy directly, the company typically negotiates pass-through arrangements on a contract-by-contract basis (such as for heavy duty truck customers). However, due to global shortages of processed steel during the first half of 2004, the quality and availability of the steel was briefly a concern. The proposed new senior secured credit agreement will further enhance Shiloh's capital structure and flexibility by: (a) extending the facility maturities, (b) eliminating the costly term loan B, (c) increasing the revolver component of the deal to enable future debt reduction without penalty, (d) eliminating the borrowing base restriction, and (e) lowering the applicable interest rates. Shiloh is notably using internal cash flows and the new revolving credit facility to absorb an average of $40 million of financing for accounts receivable that were previously discounted under OEM fast-pay programs, which are being discontinued. Approximately half of this amount was already absorbed by Shiloh prior to its fiscal year end. Shiloh's ratings continue to be constrained by the company's small absolute size, niche focus, commodity-like nature of much of the traditional product line, and sensitivity to cyclical automotive and truck production volumes. Shiloh faces the risk of lost market share over time given that it is presently a North American-focused automotive supplier with an approximately 58% concentration with the Big 3 OEM's. Shiloh notably provides the largest share of GM's engineered welded blanks and is potentially materially exposed to GM's rising dealer inventories and near-term production cuts. Sales to the automotive industry overall during fiscal 2004 were approximately 89.5% of total revenues. Shiloh's average content per vehicle remains low at under $40, but has been gradually increasing as the company's product mix evolves. A meaningful portion of Shiloh's competition consists of in-sourced production that is being retained by the unionized OEM's. There additionally exist a large number of independent competitors for the company's more traditional product lines, which makes it essential for Shiloh to be able to demonstrate that is has the lowest operational cost, highest quality and service, and best technology. Shiloh continues to have significant excess capacity for blanking and engineered products, which it is working to absorb with new business awards that would ideally involve more non-automotive applications. The improvements in Shiloh's business appear to be directly tied to the company's current CEO, who came on board in this capacity in early 2002. While this individual remains dedicated to continuing in his current role at Shiloh and has chosen to be compensated to date almost exclusively with Shiloh's stock, the company is potentially poised to suffer a setback should he leave the company for any reason. On the other hand, the risk appears to be mitigated by the fact that several members of senior management have been selected by this CEO during his tenure to date, Shiloh's performance and stock valuation have been materially enhanced, and the company has developed a new corporate culture and operating discipline that would not be expected to readily revert back to old ways. Moody's furthermore notes that while Shiloh is a publicly traded company, approximately 60% of its common stock is owned or controlled by MTD Holdings, Inc., which sold its MTD Automotive subsidiary to Shiloh in 1999. While nothing of this nature has occurred to date and MTD does not appear to be anxious to liquidate its investment in Shiloh, Moody's has some concern that MTD could eventually place pressure on the company to re-lever itself in a material way in order to accommodate MTD's interests. The Ba3 ratings of the proposed new $175 million guaranteed senior secured credit facilities reflect the benefits and limitations of the collateral and guarantee package. The revolving credit and term loan facilities will be secured on a pari passu basis by a first-priority interest in substantially all domestic assets of Shiloh and its existing or future subsidiaries. In addition, the facilities will be secured by a first-priority interest in 100% of the stock of domestic subsidiaries and up to 65% of the stock of any foreign subsidiaries to the extent a larger percentage would cause material adverse tax consequences. Guarantees will be provided by all existing and future direct and indirect subsidiaries of Shiloh. Unlike under the company's prior credit agreements, advances against the revolving credit facility will not be subject to limitations based upon borrowing base calculations. Future events that could potentially drive Shiloh's ratings or outlook lower again include: (1) lack of sufficient steel availability, (2) the departure of key members of senior management, (3) a slowing of the pace of value-added net new business, (4) loss of market share, (5) failure to maintain both a technological advantage, (6) sufficient capacity within the laser-welded blanking segment, (7) problematic new business launches, (8) escalating customer price compression, (9) declining liquidity, (10) aggressive growth through either product line expansion or acquisitions, or (11) the initiation of transactions that would re-leverage Shiloh's balance sheet in order to return capital to MTD or other shareholders. Future events that could potentially drive Shiloh's ratings higher include continued debt reduction, margin improvement, development of a broadened product line, and generation of high-value-added new business for more diversified customer base including transplants and foreign automotive OEM's as well as a larger component of non-automotive companies. Shiloh, headquartered in Cleveland, Ohio, is a leading manufacturer of blanks, engineered welded blanks, engineered stampings and modular assemblies for the automotive and heavy truck industries. The company's stock is publicly traded, but controlling ownership of Shiloh is held by MTD Holdings, Inc. Shiloh's annual revenues currently approximate $640 million. SOLUTIA INC: Has Exclusive Right to File Plan Until April 11 ------------------------------------------------------------ According to M. Natasha Labovitz, Esq., at Gibson, Dunn & Crutcher LLP, in New York, Solutia, Inc., and its debtor-affiliates and continue to make progress with respect to four critical areas: (a) implementation of their business plan; (b) productive discussions with creditor and equity constituencies; (c) clarification of challenging legal issues and positions important to finalizing a reorganization plan; and (d) establishment of the bar date and analysis of claims. However, there is much left do. At the Debtors' behest, the U.S. Bankruptcy Court for the Southern District of New York enlarged the period within which the Debtors have the exclusive right to file a chapter 11 plan to April 11, 2005, to give the Debtors more time to finalize and confirm a reorganization plan. The period within which the Debtors have the exclusive right to solicit acceptances of that plan is extended to and including June 9, 2005. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOUTH STREET TAVERN: Case Summary & 7 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: South Street Tavern & Grill, Inc. 9720 Deer Lake Court Jacksonville, Florida 32216 Bankruptcy Case No.: 04-12723 Type of Business: The Company operates a sports bar. It is an affiliate of Sotav, Ltd., which filed for chapter 11 protection on Aug. 20, 2004 (Bankr. M.D. Fla. Case No. 04-08571). Chapter 11 Petition Date: December 20, 2004 Court: Middle District of Florida (Jacksonville) Judge: Jerry A. Funk Debtor's Counsel: Bryan K. Mickler, Esq. Mickler & Mickler 5452 Arlington Expressway Jacksonville, Florida 32211 Tel: (904) 725-0822 Total Assets: $402,000 Total Debts: $2,309,127 Debtor's 7 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ First Guaranty Bank & Trust Co-debtor on $2,045,164 c/o Candyce King, Esq. Business loan 2219 Park Street Jacksonville, Florida 32204 State of Florida Liquor License $141,000 Department of Revenue #26-0647 4COP 5050 West Tennessee Street #104 Value of Security: Tallahassee, Florida 32399-0100 $225,000 City of Jacksonville Personal property tax $12,500 117 W. Duval Street #480 Jacksonville, Florida 32202 Edward Don $2,613 Allied Companies Construction costs $2,507 BMI Royalties $1,237 ASCAP Royalties $937 STAR GAS: Fitch Withdraws Single-B Ratings on Secured Debt ---------------------------------------------------------- Fitch Ratings has withdrawn its private placement ratings for the secured debt of Star Gas Propane, L.P. -- Star Propane -- rated 'B+', and Petroleum Heat and Power Company, rated 'B', after the repurchase of the debt on Dec. 17, 2004. Proceeds from the sale of Star Propane to Inergy Propane, LLC, were used to fund the redemptions. Parent company, Star Gas Partners, L.P.'s -- Star Gas -- outstanding 'B-' rated $265 million principal amount of 10.25% senior notes due 2013, co-issued with its special purpose financing subsidiary Star Gas Finance Company, remains on Rating Watch Positive. The Rating Watch for Star Gas' debt was revised to Positive from Negative on Nov. 18, 2004, following the announcement of the sale of Star Propane. Star Gas is obligated under the indenture for its senior notes to apply the remaining net proceeds from the sale, estimated at approximately $164 million, to reduce Star Gas indebtedness or make investments in assets or capital expenditures useful to Star Gas or its subsidiaries. Management expects to use a new $260 million secured revolving credit agreement at Petro to manage near-term liquidity needs. Prospectively, Star Gas' rating and Rating Watch status will be dependent on the redeployment of the cash proceeds and stabilization of Petro's operations. STELCO INC: Proofs of Claim Must be Received by January 31 ---------------------------------------------------------- The Superior Court of Justice (Ontario) approved a creditors' Claims Procedure Process in the matter of the Stelco, Inc.'s restructuring at a hearing held Friday, December 17. The Claims Procedure Order granted outlines the procedures by which claims against the Company will be called for, reviewed and finally determined. Hap Stephen, Stelco's Chief Restructuring Officer, said, "[The] decision is a positive one for our creditors and for the restructuring process. It will quicken matters by enabling us to address claims at the same time as a restructuring plan is developed. It will provide meaningful information about the claim amounts that have to be addressed. And it will simplify the voting process in respect of any proposed restructuring plan." Under the process approved, any person who has a claim against the Company, or against its subsidiaries also under Court protection -- with the exception of certain types of claims that will not be subject to the process at this stage of the proceedings -- must submit a Proof of Claim to the Court-appointed Monitor by 5:00 p.m. (Eastern Time) on January 31, 2005. Claims which are not received by that date will be extinguished and the creditors asserting the claims will not be entitled to participate in any restructuring plan. Stelco and its subsidiaries under Court protection will be mailing a proof of claims package and instruction letter to all known creditors. In addition, a copy of the Court Order, the proof of claim document package and the instruction letter will be on the Web site of the Company's legal counsel at: http://www.mccarthy.ca/en/ccaa Creditors who do not receive a claim package, or any other interested parties, can obtain the information through the Web site. And a Notice to Creditors will be published twice in a number of newspapers in Canada, the United States and Europe before January 15, 2005. Individual Bondholders of the Company are not required to file Proofs of Claim at this time as the trustees under the applicable trust indentures are authorized to file aggregated Proofs of Claim for each series of Bonds. Stelco, Inc. -- http://www.stelco.ca/-- which is currently undergoing CCAA restructuring proceedings, is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Consolidated net sales in 2003 were $2.7 billion. TEMBEC INC: Weak Cash Flow Fear Prompts S&P to Cut Ratings to B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured ratings on Tembec, Inc., and its subsidiary, Tembec Industries, Inc., to 'B' from 'BB-'. The outlook is currently stable. "Earnings and cash flow are expected to be weak over the next year. The debt load is onerous, and the company's ability to reduce debt in the near term through internally generated cash is highly unlikely," said Standard & Poor's credit analyst Dan Parker. There are uncertainties surrounding several major factors that affect Tembec's results, specifically: (1) the appreciation of the Canadian dollar; (2) the strength of lumber prices; (3) the strength of pulp prices; and (4) resolution of the softwood lumber dispute, including any refund of duties. Even with optimistic assumptions, Standard & Poor's does not expect the company will be able to improve its credit profile in the near term, an expectation that was originally factored into the previous rating. The ratings on Tembec reflect its highly cyclical revenue exposure and aggressive debt levels, which have resulted in very weak financial performance through the bottom of the current cycle. The ratings also reflect an aggressive growth strategy. These risks are partially offset by significant operating leverage that should generate strong cash flow at the peak of the cycle, as well as by some revenue diversity. Tembec is the second-largest pulp producer in the market and the seventh-largest lumber producer in North America. The company is also involved in engineered wood products, newsprint, coated papers, paperboard, and chemicals. Tembec's performance continues to fluctuate because of its high exposure to pulp, the most volatile forest product, and punitive lumber duties on its softwood lumber exports to the U.S. With the majority of Tembec's cost base located in Canada, the strong Canadian dollar has greatly affected Tembec's relative cost position in its markets, as about 80% of the company's sales are exported. Tembec's vulnerability to exchange rates has contributed to exceptionally weak profitability for the past two years and highlights the possibility that under a sustained stronger Canadian dollar the company's cost position will remain below average. The outlook is stable. Although credit measures will remain very weak in the near term, Tembec has sufficient liquidity to manage through the difficult conditions. Standard & Poor's believes that further appreciation of the Canadian dollar, although painful, could also be followed by rising prices for commodities. If Tembec cannot improve its profitability, it will need to look at other options to reduce debt. THINK AGAIN: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Think Again, Inc. dba Great American Whole Food Farmacy 117 East Main Street Rogersville, Tennessee 37857 Bankruptcy Case No.: 04-24141 Type of Business: The Debtor is at the forefront of the emerging health and wellness industry. The Company's products include whole foods and Phi Plus. See http://www.thewholefoodfarmacy.com/ Chapter 11 Petition Date: December 8, 2004 Court: Eastern District Of Tennessee (Greeneville) Judge: Marcia Phillips Parsons Debtor's Counsel: Attorney Not Recorded Total Assets: Unknown Total Debts: Unknown The Debtor did not file a list of its 20-largest creditors. TOUAX LEASE: Moody's Downgrades Rating on $33.5M Notes to Ba1 ------------------------------------------------------------- Moody's Investors Service downgrades the ratings of notes issued by Touax Lease Receivables Master Trust 2001. The notes are backed by cash flow generated from lease payments on a pool of containers and railcars, which comprised 86% and 14% of the original equipment cost on the closing date, respectively. The downgrade results from the depletion of the principal reserve and the increase in the Debt to Net Book Value since the closing date. Issuer: TLR Master Trust 2001 * $33.5 Million of Fixed Rate Notes, rated Baa3, downgraded to Ba1. Since 2002 utilization rates have improved but lease rates remain low. More importantly, the principal reserve fund has been depleted due to the inability of the Trust to make the required quarterly principal payments on the schedule dates. The structure of the transaction does not allow for replenishment of this reserve fund, which was an integral part of the credit support on which the initial rating assigned to the notes was based. Furthermore, despite the current favorable container industry conditions, the debt service coverage ratio remains low. It is possible that in the future, the net cash flow from the containers will become insufficient to cover the required quarterly principal payments. As a consequence, the notes might suffer a growing principal deficiency, which will render the ultimate payment of principal more uncertain than expected on the closing date. Headquartered in Paris, France, the Touax Group is a diversified leasing company of marine containers, railcars, barges, and modular buildings. TRICO MARINE: Files Prepack Chapter 11 Petition in S.D. New York ---------------------------------------------------------------- Trico Marine Services, Inc. (OTC Bulletin Board: TMAR) reported that, as previously indicated, it and two of its domestic subsidiaries have filed a "prepackaged" chapter 11 financial reorganization case to restructure and substantially reduce the Company's debt, strengthen its balance sheet, and increase its liquidity. The prepackaged bankruptcy case was filed yesterday, December 21, in the United States Bankruptcy Court for the Southern District of New York. As part of its bankruptcy filing, the Company also filed with the Bankruptcy Court its prepackaged plan of reorganization. Holders of the Company's $250 million 8-7/8% senior notes due 2012 voted overwhelmingly to accept the plan. The Company's plan has received acceptances from 99.9% of the creditors who cast votes on the plan. Based on this high degree of support, it is expected that Trico will complete its restructuring quickly, with the Company's exit from chapter 11 expected to occur in less than 60 days. As previously indicated, the Company expects to continue normal operations throughout the restructuring process. All services provided to customers are expected to continue on a "business as usual" basis. "We have worked over the last several months with our creditor groups to reach an agreement on a debt restructuring. During this period, we have made the necessary preparations to ensure that the restructuring does not impact the services that Trico provides to its customers. We intend to utilize this restructuring to strengthen our business. During the restructuring, services will remain unaltered and all vendors can expect timely payment for postpetition goods and services," said Thomas Fairley, Trico's Chief Executive Officer. Debtor-in-Possession Financing In connection with the commencement of bankruptcy, the Company also entered into a $75 million debtor-in-possession financing facility with its existing U.S. lenders. The DIP facility is comprised of a $55 million term loan, which will be used to pay all of the outstanding indebtedness under the Company's existing U.S. secured term loan, and a new $20 million revolving credit facility. Following court approval, the new funding will supplement Trico's existing capital and allow the Company to meet its obligations related to the operation of its businesses, fulfill its payroll obligations, and pay vendors for goods and services provided after the bankruptcy filing. "Trico's operating cash, together with the amounts obtained under its debtor-in-possession financing facility, will enable it to operate its business and emerge from bankruptcy stronger, more streamlined, and in a better position to achieve our business goals," said Mr. Fairley. Upon effectiveness of Trico's plan of reorganization, and the satisfaction of certain conditions precedent thereunder, the DIP facility will convert into a $75 million exit financing facility, comprised of a $55 million term loan and a $20 million revolving credit facility, which will provide the reorganized Company with liquidity for working capital and other general corporate purposes. The Chapter 11 Filings In addition to the Chapter 11 petitions and the plan of reorganization, Trico asked the Bankruptcy Court to consider several motions benefiting its employees, vendors, service providers, customers, and other stakeholders. Trico asked for the Bankruptcy Court's permission to continue paying its employees' salaries and benefits, paying its vendors, maintaining its cash management systems, and to obtain financing. Trico's proposed payment of its prepetition debts, such as outstanding payments to the Company's vendors and service providers, is subject to the approval of the Bankruptcy Court. The Company made its bankruptcy filings in accordance with the Bankruptcy Court's special guidelines for "prepackaged" bankruptcy cases, pursuant to which Trico solicited and obtained the consent of its creditors to its plan of reorganization prior to the filing of the Chapter 11 cases. This pre-filing solicitation is expected to shorten the duration of Trico's bankruptcy. Trico expects to emerge from bankruptcy very quickly, subject to the Bankruptcy Court's approval and hearing schedule, perhaps in 60 days or less. Trico asked the Bankruptcy Court to set a plan confirmation hearing date within 30-45 days from December 21. Chapter 11 petitions have been filed by these three Trico entities: * Trico Marine Services, Inc.; * Trico Marine Assets, Inc.; and * Trico Marine Operators, Inc. Non-filing entities not affected by these bankruptcy proceedings include Trico Marine International, Inc. and these 11 direct and indirect foreign affiliates of Trico: * Trico Servicos Maritimos Ltda. (Brazil); * Coastal Inland Marine Services Ltd. (Nigeria); * Trico Marine International, Ltd. (Cayman); * Trico Marine International Holdings B.V. (Netherlands); * Trico Supply AS (Norway); * Trico Shipping AS (Norway); * Trico Supply (UK) Limited (England & Wales); * Albyn Marine Limited (England & Wales); * CHH-Trico PTE Ltd. (Singapore); * Servicos de Apoyo Maritimo de Mexico, S. de R.L. de C.V. (Mexico); and * Naviera Mexicana de Servicios, S. (Mexico). The Trico Plan As part of Trico's plan of reorganization, the holders of the Senior Notes will receive, in exchange for their total claims (including principal and accrued and unpaid interest), 100% of the fully diluted new common stock of the reorganized Trico Marine Services, Inc., before giving effect to: (i) the exercise of warrants to be distributed to the Company's existing holders of common stock pursuant to the plan, and (ii) a new employee option plan. On the effective date of the plan of reorganization, the sole equity interests in the reorganized Company will consist of the new common stock issued to the holders of the Senior Notes, the warrants, and options to be issued to employees. Copies of the plan of reorganization, disclosure statement and related documents will be available at http://www.kccllc.net/trico The Company's obligations under existing operating leases, or trade credit extended to the Company by its vendors and suppliers, will be unaffected by the restructuring and will be paid in full. Under the terms of the plan, Thomas Fairley will continue as the Company's Chief Executive Officer, and Trevor Turbidy will continue as the Company's Chief Financial Officer. Joseph Compofelice will remain Trico's non-executive Chairman of the Board of Directors. Advisors In connection with the financial restructuring of the Company, the Company has been represented by Lazard Freres & Co. LLC as financial advisors and Kirkland & Ellis LLP as legal advisors. The supporting holders of the Senior Notes have been represented by Houlihan Lokey Howard & Zukin Capital, Inc., as financial advisors and by Bingham McCutchen LLP as legal advisors. The Oil and Gas Exploration Industry Trico's reorganization follows a period of negative operating results attributable to weak demand for its vessels in the Gulf of Mexico and the North Sea. In response, Trico has cut costs to preserve liquidity, refinanced its credit facilities and sold some vessels. Other vessels have been relocated to more active markets to improve operating results. Trico will continue these measures under its new ownership and capital structure. The restructuring of Trico is designed to reenergize Trico's efforts to expand and compete in regions expected to become more active sites of oil and gas exploration. About Trico Trico provides a broad range of marine support services to the oil and gas industry, primarily in the Gulf of Mexico, the North Sea, Latin America, and West Africa. The services provided by the Company's diversified fleet of vessels include the marine transportation of drilling materials, supplies and crews, and support for the construction, installation, maintenance and removal of offshore facilities. Trico has principal offices in Houma, Louisiana and Houston, Texas. Please visit our website at http://www.tricomarine.com/for additional information. TRICO MARINE: Case Summary & 4 Largest Unsecured Creditors ---------------------------------------------------------- Lead Debtor: Trico Marine Services, Inc. 153 East 53rd Street New York, New York 10022 Bankruptcy Case No.: 04-17985 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Trico Marine Assets, Inc. 04-17986 Trico Marine Operators, Inc. 04-17987 Type of Business: The Companies provides marine support services to the oil and gas industry around the world. The Trico Companies operate a large, diversified fleet of vessels used in the transportation of drilling materials, crews and supplies necessary for the construction, installation, maintenance and removal of offshore drilling facilities and equipment. See http://www.tricomarine.com/ Chapter 11 Petition Date: December 21, 2004 Court: Southern District of New York (Manhattan) Judge: Stuart M. Bernstein Debtor's Counsel: Leonard A. Budyonny, Esq. Robert G. Burns, Esq. Kirkland & Ellis LLP Citigroup Center 153 East 53rd Street New York, New York 10022 Tel: (212) 446-4961 Fax: (212) 446-6460 Consolidated Financial Condition as of September 30, 2004: Total Assets: $535,200,000 Total Debts: $472,700,000 Debtors' 4 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Senior Notes Noteholders Bondholders $250,000,000 JPMorgan Chase Bank (Trustee) Accrued Interest: 600 Travis Street, Suite 1150 $24,800,000 Houston, Texas 77002 Tel: (713) 577-5200 Attn: Mauri J. Cowen Texas Crewboats, Inc. Vessel brokerage $75,950 P.O. Box 644 Services Freeport, Texas 77542-0644 Tel: (979) 233-8222 Fax: (979) 233-3459 Entergy Services, Inc. Electricity Service $22,200 P.O. Box 64001 Provider to the Houma, New Orleans, Louisiana 70164 Louisiana office Tel: 800-368-3749 Fax: 504-576-4150 Colbert Pierce Consulting, Inc. Vessel brokerage $2,350 742 East I-10 Service Road Services Slidell, Louisiana 70461 Tel: 985-643-5008 Fax: 985-643-5481 UAL CORP: Engineers Want to Intervene to Defend Interests --------------------------------------------------------- "This is an unwelcome motion," begins James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois. Mr. Sprayregen explains that UAL Corporation and its debtor-affiliates are a stronger enterprise than in April 2003. The Debtors have improved their network and route structure, streamlined and rationalized their fleet with more regional jets, and launched "Ted," a vibrant low-fare offering. Unfortunately, these improvements have not been sufficient to ensure long-term financial success. The sea change in airline industry fundamentals has intensified and cut deeper into profits. Harsh industry conditions have forced the Debtors to revisit labor costs, which remain the single largest expense. There is nothing the Debtors can do about the price of fuel, however unsustainable labor costs can be addressed. Liquidity Lacking sufficient liquidity, Mr. Sprayregen says the Debtors must move quickly. Many other airlines are also experiencing financial difficulty, however, most have sufficient liquidity to lower their cost structures gradually. The Debtors do not have this luxury. Under current projections, the Debtors' cash balance will sink to precarious levels during the historically lean winter months, putting the entire operation at risk. Unrelenting industry economics have put the Debtors in jeopardy of breaching the terms of the DIP financing facility. Mr. Sprayregen tells the United States Bankruptcy Court for the Northern District of Illinois that the industry has undergone permanent change. The next upturn in the cycle may not look like those in the past. Even if there is an improvement in the cycle, yields and revenues are unlikely to return to prior levels. Low Cost Carriers continue to expand, enter new markets and increase capacity. The Internet's price transparency is dragging down fares and business travelers may not revert to their premium- paying ways of the 1990's. These circumstances indicate that the industry is unlikely to benefit from increasing prices in the foreseeable future. With scores of aircraft parked in the desert available at the next revenue uptick, the economics of the industry will work against increased prices. Fuel Prices Mr. Sprayregen also notes that reports of increasing oil prices and their impact on airlines' profits are ubiquitous in the media and analyst reports. The Debtors project that rising fuel prices will cost $1,200,000,000 more in 2004 than anticipated at the end of 2003. The increase in crude oil prices has driven current jet fuel prices to almost double the level 18 months ago. From 2004 through 2010, the Debtors expect a $7,200,000,000 increase over prior fuel cost projections. In this environment, the Debtors cannot establish profitability without a wholesale restructuring. Labor Costs Regrettably, the Debtors require $725,000,000 in additional labor savings on average per year, to satisfy the financial metrics necessary for exit financing. The Debtors will continue to work with the unions to provide a consensual atmosphere for labor cost reductions. But whether by agreement or Court ruling, the Debtors must be permitted to implement the proposed changes to the collective bargaining agreements. Mr. Sprayregen asserts that the reward from the sacrifice will be worthwhile -- the preservation of a revitalized enterprise that will compete successfully and profitably, offering stable jobs with competitive pay, in a fundamentally changed industry. Mr. Sprayregen warns that time is of the essence. Persistently low yields coupled with record fuel prices have reduced the Debtors' cash flows and profitability. These shortfalls have brought a renewed urgency to the reorganization. Unless labor costs are reduced by January 2005, the Debtors may default under the DIP financing covenants, fail to maintain an adequate cash balance, and not achieve the credit metrics necessary to obtain exit financing. Pension Plans The Debtors must address the daunting pension liabilities. Mr. Sprayregen relates that the Debtors appreciate that their employees have been counting on their full retirement benefits earned through hard work. However, even before the Air Transportation Stabilization Board's loan guarantee rejection, critics were faulting the Debtors for sidestepping the pension issue. The ATSB doubted that the Debtors would generate sufficient cash flows to meet pension funding obligations as one of several grounds for denying loan the guarantee. Now, the Debtors must address the pension plan liabilities to attract exit financing. Severe industry conditions have made it clear that the Debtors' defined benefit plans are unaffordable. The mechanics of the pension situation may be complicated, but the Debtors and their stakeholders cannot avoid reckoning with these huge liabilities if the Debtors are to attract exit financing and emerge successfully from Chapter 11 in the face of industry dynamics that have deteriorated since December 2003. Many employees and retirees are fearful of a pension plan termination. Mr. Sprayregen says the apprehension is overblown because all vested participants will continue to receive guaranteed benefit payments. In particular, most current retirees would not see dramatic reductions in their monthly payments, and many retirees would not experience any reductions. Most employees -- except pilots, who must stop flying at age 60 -- could mitigate the impact of a termination by working until age 65, the traditional retirement age in most pension plans. Mr. Sprayregen says that a dispassionate assessment of the facts makes the Debtors' reality clear. The Debtors' pension plans encompass nearly 123,000 participants. If the Debtors make no contributions prior to an assumed June 2005 exit from bankruptcy, the pension plans will require a minimum of $4,300,000,000 in cash from 2005 through 2008. There are no realistic financial projections that produce a scenario where the Debtors can absorb liabilities of this magnitude. In response to these sobering statistics, the bottom-line question asked by the capital markets is whether a financially distressed company like the Debtors can afford to maintain its defined benefit plans. According to Mr. Sprayregen, the answer is no. DIP Financing In exchange for the DIP financing, the DIP Lenders demanded protections based on the maintenance of EBITDAR and minimum cash balance covenants. Subject to renegotiation of the covenants, the Debtors must meet specific EBITDAR targets each month based on the last 12 months' earnings. Missing a single covenant empowers the DIP Lenders to foreclose on collateral that is essential to operations. Without immediate savings, the Debtors risk breaching the minimum cash balance DIP Covenant. The DIP Lenders waived compliance for the October through December 2004 EBITDAR covenants, in exchange for additional safeguards, namely an increase in the minimum cash balance covenant from $600,000,000 to $750,000,000. Without additional labor savings by mid-January 2005, the Debtors' cash balance will fall below $900,000,000 through the first and second quarters of 2005, hitting monthly lows of: $892,000,000 in January 2005; $817,000,000 in February 2005; and $797,000,000 in March 2005. In early May 2005, the cash balance is projected to fall below the $750,000,000 floor. The projected January and February 2005 cash levels are too close to the covenants for an operation the size of the Debtors'. An increase in oil prices, a significant snowstorm, further erosion of yields or a host of other unexpected events could cause a covenant breach. Mr. Sprayregen insists that the Debtors must achieve the proposed labor and non-labor cost reductions to have a realistic prospect of maintaining compliance with the DIP Covenants. The Debtors must continue to tighten their cost structure to ensure a working relationship with the DIP Lenders. If the Debtors' costs remain high relative to other carriers', the Debtors will be forced to price their tickets at a loss. Lowering costs is essential for the Debtors to maintain consistent compliance with the DIP Covenants. Financial Viability The Debtors have survived unprecedented challenges over the past two years, including the aftermath of September 11, the Iraq war, SARS and the structural changes being wrought by the LCCs. However, the April 2003 modifications to the CBAs were insufficient to overcome deteriorating yields and massive fuel cost increases. For example, in their application to the ATSB, the Debtors projected a $656,000,000 operating profit for the first three quarters of 2004. However, the Debtors' operating earnings have come in almost $940,000,000 million below expectations. The Debtors' updated financial model projects operating earnings that will be $1,600,000,000 below expectations for 2004, driven by $1,200,000,000 in increased fuel prices. This estimate reflects a $275,000,000 shortfall from reduced mainline unit revenue and $175,000,000 in lower profits from United Express. In contrast to a $2,000,000,000 projected cash balance, the Debtors now expect liquidity of half that amount at year-end. Mr. Sprayregen states that three financial imperatives compel the requested modifications to the CBAs: 1. The Debtors must reduce labor costs to prevent the DIP Lenders from declaring a default, which will preserve sufficient cash for operations; 2. The Debtors must attract exit financing to leave Chapter 11. Exit lenders will not provide financing unless the Debtors make enough cost reductions to establish adequate cash flow to repay the financing, other debt and non- operating expenses; and 3. To achieve long-term financial stability, the Debtors must create a competitive cost structure, garner an acceptable credit rating and generate shareholder value. The IFPTE Wants to Intervene The International Federation of Professional and Technical Engineers, AFL-CIO & CLC, seeks the Court's authorization to intervene to defend its interests. The IFPTE is the exclusive bargaining representative for 437 engineers and related employees at the Debtors. The IFPTE members' interests may not be adequately represented in the Section 1113(c) process by the other unions. The IFPTE is the Debtors' only union that has not ratified a collective bargaining agreement. "[The IFPTE's] position is unique and makes it necessary for the IFPTE to intervene in this proceeding," Mark Richard, Esq., at Phillips, Richard & Rind, in Miami, Florida, tells Judge Wedoff. Mr. Richard assures the Court that allowing the IFPTE to participate will not result in delay. The Section 1113(c) process has commenced and the Debtors are in negotiations with their unions. Permitting the IFPTE to participate would level the playing field for the IFPTE. In fact, the IFPTE's request may expedite the reorganization by streamlining the Debtors' negotiations with their unions in a single venue. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: U.S. Bank & L.A. Responds to Injunction Request --------------------------------------------------------- UAL Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Illinois for a temporary restraining order or preliminary injunction enjoining U.S. Bank, the City of Los Angeles and the Regional Airports Improvement Corporation from enforcing any remedies under the Lease Agreements and Bond Agreements. James H.M. Sprayregen, Esq., at Kirkland & Ellis, reminds the Court that the Debtors are not permitted to make an interest payment on unsecured prepetition debt. However, non-payment could be improperly characterized as a default on the Lease Agreements. The City may interpret this event as an opportunity to seize control of the Debtors' facilities and space at LAX. If U.S. Bank, the City or RAIC terminate Agreements related to the LAX terminal, there are no monetary damages that will turn back the clock to compensate for the irreparable harm. Disruption to the Debtors' operations at LAX will disrupt all operations, not just those at LAX. Likewise, if forced to pay on the Bonds, the Debtors' financial structure will be weakened at the expense of all unsecured creditors. Responses (1) U.S. Bank Katherine A. Constantine, Esq., at Dorsey & Whitney, in Minneapolis, Minnesota, says that the Debtors' request for a temporary restraining order is obviated by the automatic stay. In other words, the stay bars U.S. Bank, the City and RAIC from exercising their remedies under the Lease Agreements and Bond Agreements. The Debtors do not need a redundant layer of legal protection. The injunction should not be granted because the Debtors have failed to demonstrate immediate and irreparable injury. The predicted harm is neither threatened nor inevitable. It will not come as a surprise to the Defendants if the Debtors default on the Bond payments. They anticipated this possibility some time ago. Therefore, there is no urgent need for the Debtors to receive increased Court protection. (2) City of Los Angeles The City of Los Angeles, designated as the Los Angeles World Airport, wants the Debtors' request denied. Rockard J. Delgadillo, Esq., City Attorney, explains that LAWA is precluded from exercising any remedies under the Agreements, regardless if the Debtors pay interest on the Bonds. These actions are already prohibited by Section 362(a)(3) of the Bankruptcy Code. Thus, no injunctive relief is required to achieve the Debtors' objective. Mr. Delgadillo is more concerned that the Debtors are using the procedure to obtain binding determinations on important issues. The Debtors are attempting to obscure the facts and distinctions between the dispute at issue and larger concerns. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNIVERSAL COMPRESSION: S&P Rates $1.3B Senior Secured Debts at BB ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' bank loan rating and recovery rating of '1' to natural gas compression equipment provider Universal Compression Inc.'s proposed $650 million senior secured credit facility, which consists of a $250 million, five-year senior secured revolving credit facility and a $400 million senior secured seven-year term loan B facility. In addition, Standard & Poor's affirmed the company's 'BB-' corporate credit rating and lowered its rating on Universal's $175 million senior unsecured notes by one notch to 'B' from 'B+' reflecting the substantial portion of secured debt that subordinates unsecured debtholders. Pro forma for the proposed refinancing, Houston, Texas-based Universal will have about $870 million in total debt. "The outlook for Universal is positive, which reflects the company's progress in improving its financial profile and the execution of a strategy that has focused the company on improving the productivity of its assets," said Standard & Poor's credit analyst Steven K. Nocar. The proposed facilities, along with a planned $100 million of borrowings under the company's credit-insured $200 million asset-backed securitization facility, will be used to refinance $440 million of 8.875% BRL senior secured notes due 2008, $82.2 million of BRL term loans due 2008, and about $50 million outstanding under the company's existing credit facility. A ratings upgrade is likely, if Universal continues to manage its growth while improving its financial position. US AIRWAYS: Asks Court to Extend Removal Period to April 30 ----------------------------------------------------------- US Airways, Inc., and its debtor-affiliates seek an extension of the period during which they may remove actions pending as of their bankruptcy petition date, until the later of April 30, 2005, or 30 days after any order terminating the automatic stay for an Action sought to be removed. The Debtors are parties to numerous judicial and administrative proceedings pending in various courts or administrative agencies throughout the United States and the world. The Actions involve a wide variety of claims. Due to the sheer number and the wide variety of the Actions, the Debtors need more time to decide which Actions should be removed and, if appropriate, transferred to this district. Brian P. Leitch, Esq., at Arnold & Porter, tells Judge Mitchell that an extension of the Removal Period is important. The extension will afford the Debtors a sufficient opportunity to make informed decisions on the removal of the Actions. This will protect the Debtors' right to economically adjudicate lawsuits if removal is warranted. The Debtors' adversaries will not be prejudiced by the extension because they may not prosecute the Actions without relief from the automatic stay. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Provides Status Report on Asbestos PI Claims Estimation ----------------------------------------------------------------- Paul N. Heath, Esq., at Richards, Layton & Finger, P.A, in Wilmington, Delaware, relates that the key issue in the bankruptcy of USG Corporation and its debtor-affiliates is their liability for present and future asbestos personal injury claims. Because the number of asbestos personal injury claims makes individual adjudication impractical, all parties agree that the Debtors' liability for these claims must be estimated. This is necessary to determine the amount that must be put in a trust to compensate legitimate claims. The Debtors contend that estimation of liability must be guided by the legal requirements of exposure and injury. By law, claimants must have meaningful exposure to the Debtors' asbestos-containing products and an actual injury that plausibly could have resulted from that exposure before they can collect from the estate. If the evidence demonstrates that the Debtors did not cause a claimant's injuries, or there is no cognizable injury, the claim must be estimated at zero dollars. The Official Committee of Asbestos Personal Injury Claimants, on the other hand, argues that the U.S. District Court for the District of Delaware should not consider the legal or factual merits of claims in estimation. The PI Committee asserts that the District Court should extrapolate liability from the Debtors' past settlement history, or, more precisely, a narrow selection from that history. The PI Committee maintains that because of their history of settling asbestos-related claims, the Debtors have effectively forfeited their right to present defenses to these claims. However, Mr. Heath asserts, due process does not allow the PI Committee to strip the Debtors' stakeholders of their property without first establishing liability. Mr. Heath recounts that since the outset of the Debtors' bankruptcy cases, the Debtors have requested an opportunity to show that they can pay every valid asbestos-related claim in full, while retaining significant equity for shareholders. In June 2002, the Debtors proposed a comprehensive plan for conducting substantive estimation hearings, through a Case Management Motion, to determine the required size of a trust -- pursuant to Section 524(g) of the Bankruptcy Code -- that could pay all legitimate present and future asbestos claims. In February 2003, District Judge Wolin ordered the parties to proceed with substantive estimation. Judge Wolin ordered that, during substantive estimation, the Debtors would be "permitted to present their defenses," "attack certain medical evidence under Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals," and "move for summary judgment on certain issues on a claims-wide consolidated basis." As of Judge Wolin's recusal, however, substantive estimation had not commenced. The Debtors firmly believe that their Chapter 11 cases can be advanced only if an estimation of asbestos personal injury liability is conducted. Substantive estimation offers the most reasonable means for the District Court to assess the merits of the pending and future claims. When the evidence is considered, the Debtors are confident that a trust will be sufficient to pay all valid current and future asbestos claimants in full. Today, the estimation proceedings remain in the same state they were when Judge Wolin issued his Case Management Order. There are over 100,000 pending asbestos-related personal injury claims, yet there has been no opportunity to present evidence -- including the factual, medical, and scientific information needed to properly organize these claims and estimate how many of them are valid and how much the valid claims are worth. There remains, therefore, a need for the District Court to address the merits of the Debtors' and the PI Committee's positions. The Debtors emphasize that the parties must now prepare for and conduct Section 502(c) substantive estimation hearings. The Debtors present a brief overview of their plan for substantive estimation and eventual plan confirmation: (A) Hearing to Define Valid and Invalid Claims Substantive estimation contemplates that the District Court would conduct a hearing to establish the characteristics of valid claims against Debtors. The District Court would not decide the validity of any individual claim during the hearing, but only determine what types of claims should be treated as payable for estimation purposes. In preparation for the hearing, the parties would conduct discovery of a limited, but statistically significant, number of claimants to gather the information necessary to determine the number of individuals who have valid and payable claims. The Debtors anticipate that, for most claimants, the discovery would require only a standardized set of interrogatories and a few document requests, primarily for certain medical records. The discovery would cover the standard information the claimants typically provide, like the claimant's medical history, claimed disease, occupational history, occupational and non-occupational asbestos exposure, and asbestos litigation history. The discovery would be used, in part, to determine the characteristics of the claims and to extrapolate from that information to the pool of existing and likely future claims. During the hearing, the claimants and the Debtors would present their expert evidence about the diseases that asbestos causes and the amount of exposure necessary to cause those diseases. The legal mechanisms to be used likely would include: (1) expert testimony; (2) Daubert challenges; (3) motions for partial summary judgment; and (4) adversarial evidentiary hearings. The claimants' inability to present prima facie evidence of a valid claim or the favorable resolution of some or all of the Debtors' defenses could dramatically reduce, by as much as a factor of 10, the number of valid asbestos-related claims pending, and thus would have a significant impact on the interests of all stakeholders. The Debtors have three examples of potential deficiencies in the claims that evince the powerful impact substantive estimation may have on the size and constitution of the universe of valid claims: (a) Only claimants with medically significant exposure to the asbestos in U.S. Gypsum's products have valid claims. The asbestos liability at issue arises almost exclusively from a single Debtor -- U.S. Gypsum. U.S. Gypsum manufactures a wide variety of products used in the construction industry, a small portion of which contained asbestos into the 1970s. The vast majority of asbestos personal injury claims against U.S. Gypsum pertain to one product -- drywall joint compound. While compensation is undeniably appropriate where U.S. Gypsum's products injured a claimant, it also is self-evident that claimants whose injuries were not caused by those products have no right to recover from the Section 524(g) trust and that these claims must be estimated at zero dollars. Under basic principles of legal causation, claimants may recover only if they can show that U.S. Gypsum's products were a "substantial factor" in causing their injuries. Historical data indicate that of those plaintiffs who brought suit against U.S. Gypsum from 1988 to 2001, less than 20% were identified as working in construction as their primary or secondary occupation. During substantive estimation, the Debtors would use medical, industrial hygiene, and construction experts to assist in determining the occupational characteristics of claimants who could have been exposed to airborne asbestos fibers from U.S. Gypsum's products at a level sufficient to be a substantial factor in causing disease. Identifying the characteristics of claimants with medically insignificant, or zero, exposure to U.S. Gypsum's products is a crucial component of the estimation process. (b) Unimpaired claimants do not have valid claims. The Debtors also would show that the majority of pending asbestos personal injury claims are based on harmless pleural changes -- often diagnosed by dubious methods -- that carry no symptoms whatsoever. These are the so- called "unimpaired" claimants, who suffer no ill effects from their alleged asbestos-related conditions, typically pleural plaques or pleural thickening. Although these claimants are not medically impaired, and therefore have no cognizable injury, the legal system is flooded with their claims. Experts estimate that 88% of an estimated 1.1 million total claims filed or estimated to be filed in the U.S. are expected to be non-malignant -- the vast majority of which will be unimpaired claims. Moreover, recent medical research indicates that the system by which most of these claimants were diagnosed with pleural changes is irredeemably flawed. At least two separate, peer-reviewed studies have concluded that only a tiny fraction -- fewer than 5% -- of radiographs interpreted by the asbestos claimants' experts as showing asbestos-related pleural changes actually evidence any changes. As stated in an editorial accompanying the most recent study this year, these disparities, which statistically cannot be explained by mere chance or reasonably differing opinions, "raise[] the question of whether objectivity and truthfulness among certain B- reader radiologists have been supplanted by partisanship and distortion of or departure from the truth driven by financial gain." This evidence suggests that many unimpaired claimants not only have no injury, but do not have any physiological impact whatsoever from their alleged asbestos exposure. The claims of unimpaired claimants must therefore be estimated at zero dollars. (c) Claims alleging mesothelioma are invalid because medical evidence does not support that U.S. Gypsum's products are capable of causing mesothelioma. Exposure to chrysotile asbestos, the type of asbestos found in U.S. Gypsum's joint compound, has not been proven to cause the disease mesothelioma. The prevailing epidemiological literature does not show that chrysotile causes mesothelioma at all, but even most dissenting experts agree that if chrysotile could cause mesothelioma, the levels of exposure would have to be remarkably high. During substantive estimation, the Debtors will show that most, if not all, claims alleging mesothelioma must be estimated at zero dollars. (B) Hearing to Value Valid Claims and Project the Number of Future Valid Claims With an understanding of the makeup of the claimant pool and the characteristics of a valid claim, the District Court would be in a position to estimate the total value of the asbestos personal injury claims. As a general matter, the total value may be determined by multiplying an average settlement value for each claim by the number of valid pending and projected future claims. Therefore, in the second part of the substantive estimation hearing, the District Court can estimate the total amount of the Debtors' present and future asbestos personal injury liability based on the definitions of a valid claim and on appropriate values for valid claims. The second part of substantive estimation primarily would involve epidemiological and economic expert testimony concerning: (a) the projected number of valid future asbestos personal injury claims against the Debtors; and (b) the aggregate present values of present and future claims based on meaningful historical settlement values for the various illnesses. These values would be used to determine the size of the Section 524(g) trust that the Debtors will propose in their reorganization plan. (C) Section 524(g) Trust and Plan Confirmation Because substantive estimation resolves the key dispute in the Debtors' Chapter 11 proceedings, the parties will be in a better position to negotiate a consensual reorganization plan, and the Debtors would be able to propose a plan consistent with the District Court's rulings. The plan would create a Section 524(g) trust, funded by the Debtors' assets, that is sufficient to pay all valid present and future asbestos personal injury claims in full, according to the number and value of claims determined by the Court. Because all valid claims will be paid in full under the Debtors' plan, the trust should be confirmed with the 75% supermajority of claims necessary to obtain a Section 524(g) channeling injunction. Conversely, because invalid claims will, by definition, be those for which the District Court has determined that there is no right to payment, invalid claimholders will not be entitled to vote on the trust. In this way, the Debtors anticipate that: * all their creditors, asbestos-related or otherwise, will be paid in full; * they will be entitled to a 524(g) channeling injunction for all future asbestos-related claims; and * they will emerge from bankruptcy with substantial shareholder equity and their asbestos liability resolved. (D) Judge Wolin's Separation of Cancer Claims Although Judge Wolin correctly decided the fundamental dispute in the Debtors' case, the Debtors do not believe that, as ruled by Judge Wolin, estimation should be divided into multiple phases. Separating the estimation hearings for cancer claims and unimpaired claims would produce both delay and a waste of the Debtors' resources. A dual-track estimation will require the Debtors to prepare nearly all of their expert witnesses twice. Not only will the Debtors' medical and epidemiological experts be required in both hearings, but the Debtors' exposure experts in construction and industrial hygiene likewise will have to appear twice. Whether a claimant has cancer or pleural plaques, his burden to show sufficient exposure to U.S. Gypsum's products is unchanged. In addition, if substantive estimation shows, as the Debtors are confident it will, that liability to cancer-only claimants does not exceed the Debtors' equity, the conclusion of the first wave of estimation hearings would provide no resolution to claimants, creditors, or shareholders. Plainly, no one can collect from the estate until the liabilities are estimated. Thus, even after the preparation, the hearing, the deliberation, and the District Court's order, all constituencies will remain in limbo while the parties gear up to perform the exercise again. Mr. Heath believes that a single, unified process, like what the Debtors propose, is the most sensible approach to conducting substantive estimation. The PI Committee's Suggested Approach Although the Debtors' estimation proposal promises to pay in full every claim the District Court deems valid, history suggests that the PI Committee will not accede to any estimation approach not guaranteed to consume the Debtors' shareholders' equity. Rather than conducting hearings to test the merits of the pending claims, the PI Committee argues that the District Court should rely solely on certain historical claims resolution data and estimate claims according to portions of their settlement and, to a lesser extent, litigation history. Although the claimants' counsel maintains that the Debtors' defenses to liability are specious, they simultaneously work to ensure that the District Court will never even hear the competing versions of the facts at issue. The PI Committee cannot dispute that the Debtors have settled tens of thousands of asbestos claims for reasons that have nothing to do with the merits of those claims, including the all-too-common reality that litigating a baseless claim often costs more than settling it. Nonetheless, the PI Committee asks the District Court to treat this corrupted snapshot of the Debtors' liability as the dispositive model for estimation. In the PI Committee's view, if the Debtors were forced to settle baseless, sham claims in the past, the District Court ought to preclude the Debtors from fighting against the PI Committee now. In this way, the PI Committee would make these proceedings themselves a vehicle for frivolous litigation. The Debtors are confident that when the competing arguments are weighed, the District Court will conclude that the Debtors' value far exceeds their asbestos liability. The PI Committee, on the other hand, plans to win the war by avoiding all the battles. The PI Committee hopes that, in the name of judicial economy, it can convince the District Court never to look at the relevant evidence or entertain the Debtors' defenses. This is an invitation that due process obligates the District Court to decline. The Debtors ask the District Court to implement the steps they have outlined, or schedule a contested motion regarding an appropriate estimation protocol. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) VOICEIQ INC: Creditors & Shareholders Approve Plan of Arrangement ----------------------------------------------------------------- VoiceIQ, Inc., (TSXV: VIQ) held the meetings of its shareholders and creditors for the purpose of voting on the previously announced Plan of Arrangement between the Company, Yoho Resources Investment Partnership, VIQ Solutions, Inc., and the Company's shareholders and creditors. VoiceIQ is pleased to advise that the special resolution to approve the Arrangement was approved by in excess of 98% of those shareholders voting on the resolution. Further, the Arrangement was approved by 97.1% of those creditors who voted in respect of approving the Arrangement as well as by creditors representing 99.3% of the value of claims held by all creditors voting in respect the Arrangement. The Arrangement remains subject to the approval of the Alberta Court of Queen's Bench pursuant to the Companies Creditors Arrangement Act (Canada) as well as to the approval of the Ontario Superior Court of Justice pursuant to the Business Corporations Act (Ontario). The approval of the Ontario Superior Court of Justice is being sought by VoiceIQ at 10:00 a.m. on Thursday, December 23, 2004. Subject to Court approval being received, the Company expects to complete the Arrangement transaction tomorrow, December 23, 2004. As reported in the Troubled Company Reporter on Nov 23, 2004, The Arrangement consists of two parts, the "Creditors' Arrangement", and the "Shareholders' Arrangement". The Shareholders' Arrangement provides for a reorganization of VoiceIQ and its business such that shareholders will maintain their interest in the Company's existing voice capture, digitization and compression business and for VoiceIQ to acquire producing oil and natural gas assets and focus on the oil and gas exploration and production business. Specifically, all of VoiceIQ's voice capture, digitization and compression assets and business are to be transferred to a newly formed company, VIQ Solutions, Inc. Shareholders will then exchange each common share of VoiceIQ held by them for one share of VIQ Solutions and a portion of a "new" common share of VoiceIQ. The Creditors' Arrangement provides for a settlement by VoiceIQ with its creditors pursuant to the Companies Creditors Arrangement Act (Canada). Creditors who are owed up to $2,000 by VoiceIQ are to receive 100% of their claim value in cash, while creditors owed more than $2,000 will receive the first $2,000 of their claim in cash, plus a pro rata share of a basket of cash and shares of VoiceIQ and VIQ Solutions. The estimated recovery for Creditors with claims exceeding $2,000 is $0.25 to $0.28 on the dollar. The Creditors' Arrangement and the Shareholders' Arrangement are each conditional on the other being approved. As a result of the Arrangement: -- VoiceIQ's shareholders will own all of the shares of a new entity (VIQ Solutions) that will own all of VoiceIQ's existing assets related to its voice capture, digitization and compression business and whose only debts will be certain normal course government obligations and the balance of a vendor take back loan incurred in the acquisition of the Spark and Cannon companies in April of 2004. -- VoiceIQ's existing shareholders will maintain an ownership interest in the ongoing Company, which will, through the Arrangement, have changed its name to Yoho Resources Inc., acquired oil and natural gas properties producing approximately 750 barrels of oil equivalent per day, received $7 million in new capital investment (comprised of $4 million of common shares at $2.00 per share and $3 million of "flow-through" shares at $2.40 per share) and have no debt. The balance of Yoho Resources' outstanding shares will be held by creditors, the investors providing the new capital investment and the vendors of the oil and gas assets. Yoho Resources will then be poised to recruit a permanent management team and focus on its development as a successful oil and gas exploration, production and marketing company. -- Upon the closing of the Arrangement, VoiceIQ's shares will be suspended from trading on the TSX Venture Exchange pending Yoho Resources recruiting a permanent management team and meeting the other conditions of the TSXV. There can be no assurance that Yoho Resources will be successful in meeting the conditions to be imposed by the TSXV related to the lifting of the trading suspension. In addition, VIQ Solutions has applied to have its shares listed on the TSXV, including applying for certain discretionary exemptions from the normal listing requirements of the TSXV, including from the sponsorship requirement. Conditional listing approval has not been received from the TSXV for this application and there can be no assurance that the approval or discretionary exemptions will be secured. Mr. David Outhwaite, President and CEO of VoiceIQ said, "Achieving shareholder and creditor approval is a significant milestone towards finalizing the reorganization of the Company, and the revitalization of its voice capture, digitization and compression business in the new company, VIQ Solutions, Inc. Once the reorganization is finalized, VIQ Solutions will be in a position to carry forward with its renewed business plan. Our plan calls for VIQ Solutions to be able to realize increased revenues and earnings such that our guidance for VIQ Solutions for fiscal 2005 calls for $19 to $22 million in revenue and $1 to $1.5 million in earnings." Interested parties are invited to contact Mr. David Outhwaite, President & CEO of VoiceIQ, at (403) 444-5573. W.R. GRACE: Wants Judge Fitzgerald to Handle Asbestos Claim Issues ------------------------------------------------------------------ As reported in the Troubled Company Reporter on November 15, 2004, W.R. Grace & Co. and its debtor-affiliates filed their Chapter 11 Plan and Disclosure Statement with the United States Bankruptcy Court for the District of Delaware on November 13, 2004. The U.S. District Court for the District of Delaware, however, currently retains jurisdiction over two key matters that are integral to the Plan: (1) the Debtors' amended motion for case management order establishing procedures for addressing asbestos personal- injury claims and certain related pleadings; and (2) the Asbestos Property Damage Claimants Committee and the Asbestos Personal Injury Claimants Committee's motion to approve the settlement agreement with Sealed Air Corporation fraudulent transfer lawsuit. The Debtors believe that because these matters are part-in-parcel to the Plan, they should be resolved in the same forum as the Plan. The Debtors ask the U.S. District Court for the District of Delaware to convey the referred matters to the U.S. Bankruptcy Court for the District of Delaware, so that the referred matters, which are integral to the Plan, can be considered by Judge Fitzgerald as she deals with other Plan-related issues. David Carickhoff, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., in Wilmington, Delaware, recounts that the Plan provides for the creation of an asbestos trust, which would be liable for the Debtors' asbestos claims and funded, in large part, by an approximately $1 billion cash and stock payment that would be owed by Sealed Air to the Debtors' estates pursuant to the Sealed Air Settlement Agreement. On November 26, 2003, the PD Committee and the PI Committee asked Judge Wolin to approve the Sealed Air Settlement Agreement pursuant to Rule 9019 of the Federal Rules of the Bankruptcy Procedure. However, due to the stay imposed by the Third Circuit as a result of the proceedings to have Judge Wolin removed from five asbestos-related Chapter 11 cases, no objection deadline or hearing date has ever been set for the Sealed Air Settlement Motion, and it remains pending before the District Court. However, given the Plan's dependency on the funds that would be owed on account of the proposed Sealed Air Settlement, its resolution is a pre-requisite to Plan confirmation. Furthermore, the Debtors' most recent motion for a case management order presents alternative procedures for determining the allowance of asbestos personal injury claims and asbestos property damage claims. While the Debtors' Original CMO proposal with respect to resolving asbestos personal injury claims was extensively briefed in 2001 and 2002, neither the District Court nor the Bankruptcy Court has ever addressed these issues. When the Chapter 11 cases were assigned to Judge Wolin in November 2001, he did not immediately address the issue. Instead, he had the parties re-brief these issues and put the matter on hold pending resolution of the Sealed Air and Fresenius Medical Care A.G. fraudulent transfer lawsuits. Judge Wolin never had occasion to resolve the Debtors' CMO proposal before the Third Circuit stayed all of the matters before Judge Wolin pending his eventual removal from the Chapter 11 cases. Thus, there would not be any prejudice to any interested parties or wasted judicial resources if the District Court refers these matters to the Bankruptcy Court. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 76; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINSTAR COMMUNICATIONS: SEC Revokes Securities Registration ----------------------------------------------------------- The Securities and Exchange Commission instituted and settled administrative proceedings against Winstar Communications, Inc., revoking the registration of each class of Winstar's securities for failing to file annual reports for any fiscal years subsequent to the fiscal year ending December 31, 1999, or quarterly reports for any fiscal period subsequent to its fiscal quarter ending September 30, 2000. In anticipation of the Commission's institution of the administrative proceedings, Winstar has submitted an Offer of Settlement, which the Commission has determined to accept. Winstar consented to the entry of the SEC Revocation Order dated December 1, 2004. SEC Secretary Jonathan G. Katz relates that at all times relevant to the administrative proceedings, Winstar's Common Stock, Senior Notes due 2006, Senior Subordinated Notes due 2006, Series A and Series B Redeemable Common Stock Purchase Warrants, and Rights to Purchase Series B Preferred Stock have been registered with the Commission under Section 12 of the Securities Exchange Act of 1934. The common stock, with symbol "WCIIQ," is quoted on the Pink Sheets. According to Mr. Katz, Winstar failed to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13, while its common stock was registered with the Commission in that it has not filed the required financial reports. Section 12(j) of the Exchange Act provides: "The Commission is authorized, by order, as it deems necessary or appropriate for the protection of investors to deny, to suspend the effective date of, to suspend for a period not exceeding twelve months, or to revoke the registration of a security, if the Commission finds, on the record after notice and opportunity for hearing, that the issuer of such security has failed to comply with any provision of this title or the rules and regulations thereunder. No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked pursuant to the preceding sentence." Thus, the Commission revokes the registration of each class of Winstar's securities pursuant to Section 12(j). Headquartered in New York, New York, Winstar Communications, Inc., provides broadband services to business customers. The Company and its debtor-affiliates filed for chapter 11 protection on April 18, 2001 (Bankr. D. Del. Case Nos. 01-01430 through 01-01462). The Debtors obtained the Court's approval converting their case to a chapter 7 liquidation proceeding in January 2002. Christine C. Shubert serves as the Debtors' chapter 7 trustee. When the Debtors filed for bankruptcy, they listed $4,975,437,068 in total assets and $4,994,467,530 in total debts. (Winstar Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: Wants to Employ Fulbright & Jaworski as Counsel ---------------------------------------------------------- Yukos Oil Company wants to employ Fulbright & Jaworski, LLP, as bankruptcy counsel. The Debtor selected Fulbright & Jaworski because the firm has substantial expertise and experience in bankruptcy matters, and will be able to provide the full range of services the Debtor needs in the case. Fulbright & Jaworski will render general bankruptcy representation to Yukos, including, but not limited to: (a) advising and consulting with the Debtor about its powers and duties as a debtor-in-possession in the continued operation of its business and management of its properties; (b) representing the Debtor in cash collateral and postpetition financing negotiations and litigation; (c) representing the Debtor in asset sales and other liquidity transactions; (d) representing the Debtor concerning disposition of its executory contracts; (e) assisting the Debtor in the development, negotiation, litigation and confirmation of a Chapter 11 plan of reorganization and the preparation of a disclosure statement or statements in respect of the Plan, concerning treatment of secured and unsecured claims including both trade debt and bond debt; (f) preparing for the Debtor any necessary applications, motions, complaints, adversary proceedings, answers, orders, reports, and other pleadings and legal documents, in connection with matters affecting the Debtor and its estate; (g) taking actions as may be necessary to preserve and protect the Debtor's assets, including, if required by the facts, the prosecution of avoidance actions and adversary or other proceedings on the Debtor's behalf, defense of actions commenced against the Debtor, negotiations concerning litigation in which the Debtor is involved, objection to claims filed against the Debtor's estate and estimation of claims against the estate; and (h) performing other legal services that the Debtor may request in connection with the Chapter 11 case. Yukos will compensate Fulbright & Jaworski for its services in accordance with the firm's customary hourly rates: Professionals Hourly Rates ------------- ------------ Partners $315 to $650 Counsel $165 to $420 Associates $155 to $300 Legal assistants $60 to $240 The hourly rate of Zack A. Clement, a partner at Fulbright & Jaworski, is currently $650 per hour. On December 3, 2004, Yukos hired Fulbright & Jaworski to do work concerning its financial reorganization, including the possibility of a bankruptcy filing. Yukos discloses that before the Petition Date, the firm received a $1,000,000 retainer from its subsidiary for work done to analyze and prepare for arbitration and insolvency proceedings concerning Yukos' problems. Fulbright & Jaworski also took payments from the retainer totaling $519,562, leaving a $480,438 balance. The retainer balance was transferred to an account held by Yukos USA, Inc., where it is held for the beneficial ownership of Yukos. Fulbright & Jaworski further received an additional $5,000,000 retainer, which is held in the firm's Trust Account at Wells Fargo Bank in Houston, Texas. The $5,000,000 retainer is property of Yukos, the company asserts. The additional $5,000,000 retainer came from funds transferred from a non-Russian subsidiary for the benefit of Yukos. Fulbright & Jaworski, thus, begins the case with a $5,000,000 retainer and has no claim for prepetition fees. Yukos notes that certain of its non-debtor subsidiaries will need legal representation to protect them from issues presented by the Russian Government's improper activity. To ensure that the Non- Debtor Subsidiaries have sufficient representation, certain of the subsidiaries have placed $15,000,000 in a litigation trust to provide a source of payment to Fulbright & Jaworski to provide for legal representation to certain Non-Debtor Subsidiaries. The money in the Litigation Trust comes from non-Russian subsidiaries and is not the property of Yukos. Mr. Clement discloses that Fulbright & Jaworski currently represents or has represented parties-in-interest in matters unrelated to Yukos' Chapter 11 case: A. Commercial Lenders: 1. BNP Paribas, 2. Citibank, N.A., 3. Commerzbank AG, 4. Credit Lyonnais, S.A., 5. Deutsche Bank AG, 6. HSBC Bank plc, 7. ING Bank N.V., 8. Societe Generale, and 9. UFJ Holdings, Inc. B. Parties Sought to Be Enjoined Pursuant to First Day Motions: 1. ABN AMRO Bank N.V., 2. Dresdner Kleinwort Wasserstein, and 3. JPMorgan Chase & Co. C. 20 Largest Unsecured Creditors: 1. Burson Marsteller, 2. Russian Federation, 3. Societe Generale, 4. BCEN Eurobank, and 5. PricewaterhouseCoopers ZAO Mr. Clement, however, assures Judge Clark that Fulbright & Jaworski (i) does not hold or represent an interest adverse to the Debtor's estate and (ii) is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Headquartered in Houston, Texas, Yukos Oil Company -- http://www.yukos.com/-- is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. (Yukos Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: Look for Bankruptcy Schedules & Statements by Feb. 12 ---------------------------------------------------------------- Rules 1007(a)(3) and 1007(c) of the Federal Rules of Bankruptcy Procedure require Yukos Oil Company to file its Schedules of Assets and Liabilities and Statement of Financial Affairs within 15 days after the Petition Date. To prepare the Schedules and Statement, Zack A. Clement, Esq., at Fulbright & Jaworski, LLP, in Houston, Texas, says Yukos must gather information from books, records, and documents relating to thousands of transactions. Collection of the information necessary to complete the Schedules and Statement will require the expenditure of substantial time and effort by the Debtor's employees and outside professionals, especially considering that much of this information is located in Russia. According to Mr. Clement, compiling financial and operational information concerning thousands of transactions per month to produce the Schedules and Statements is a sizeable task under any circumstances and made more difficult by Yukos' need to stabilize its business relationships and negotiate with the Russian Government in the wake of its Chapter 11 filing. In view of the amount of time involved in the project, as well as the size and complexity of Yukos' case and the demands upon its employees to assist in efforts to stabilize business operations since the Petition Date, it does not appear likely, Mr. Clement admits, that Yukos will be able to complete the Schedules and Statement properly and accurately by the deadline. Yukos asks the United States Bankruptcy Court for the Southern District of Texas to extend the filing deadline until February 12, 2005. Headquartered in Houston, Texas, Yukos Oil Company -- http://www.yukos.com/-- is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. (Yukos Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Upcoming Meetings, Conferences and Seminars --------------------------------------------- January 19, 2005 PRACTISING LAW INSTITUTE Emerging Issues in Workouts & Bankruptcies New York, NY Contact: 1-800-260-4PLI; 212-824-5710 or info@pli.edu February 9, 2005 NACHMAN HAYS BROWNSTEIN, INC. 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Contact: 1-703-739-0800 or http://www.abiworld.org/ March 9-12, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Spring Conference JW Marriott Desert Ridge, Phoenix, Arizona Contact: 312-578-6900 or http://www.turnaround.org/ March 10-12, 2005 ALI-ABA Bench and Bar Bankruptcy Conference Washington, DC Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ April 7-8, 2005 PRACTISING LAW INSTITUTE 27th Annual Current Developments in Bankruptcy & Reorganization San Francisco, CA Contact: 1-800-260-4PLI; 212-824-5710 or info@pli.edu April 13, 2005 TURNAROUND MANAGEMENT ASSOCIATION Mediation in Turnarounds & Bankruptcies Milleridge Cottage Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ April 14-15, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Sixth Annual Conference on Healthcare Transactions Successful Strategies for Mergers, Acquisitions, Divestitures and Restructurings The Millennium Knickerbocker Hotel, Chicago Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com April 28, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (East) J.W. Marriott Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.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/ May 9, 2005 AMERICAN BANKRUPTCY INSTITUTE New York City Bankruptcy Conference Millenium Broadway New York, New York Contact: 1-703-739-0800 or http://www.abiworld.org/ May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Washington, D.C. Contact: 1-800-CLE-NEWS or http://www.ali-aba.org/ May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Santa Fe, NM Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ May 13, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (N.Y.C.) Association of the Bar of the City of New York, New York Contact: 1-703-739-0800 or http://www.abiworld.org/ May 19-20, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Second Annual Conference on Distressed Investing Europe Maximizing Profits in the European Distressed Debt Market Le Meridien Piccadilly Hotel London UK Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com May 23-26, 2005 AMERICAN BANKRUPTCY INSTITUTE Litigation Skills Symposium Tulane University Law School New Orleans, Louisiana 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/ June 9-11, 2005 ALI-ABA Chapter 11 Business Reorganizations Charleston, South Carolina Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ June 16-19, 2005 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org/ June 23-24, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Eighth Annual Conference on Corporate Reorganizations Successful Strategies for Restructuring Troubled Companies The Millennium Knickerbocker Hotel, Chicago Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com 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/ September 8-11, 2005 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference (Including Financial Advisors/Investment Bankers Program) The Four Seasons Hotel Las Vegas, Nevada Contact: 1-703-739-0800 or http://www.abiworld.org/ September 26, 2005 AMERICAN BANKRUPTCY INSTITUTE International Insolvency Workshop Site to Be Determined London, England Contact: 1-703-739-0800 or http://www.abiworld.org/ October 7, 2005 AMERICAN BANKRUPTCY INSTITUTE Views from the Bench Georgetown University Law Center Washington, D.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, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (West) Hyatt Grand Champions Resort Indian Wells, California Contact: 1-703-739-0800 or http://www.abiworld.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/ March 30 - April 1, 2006 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Scottsdale, AZ Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ April 18-22, 2006 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting JW Marriott Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ June 15-18, 2006 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org/ July 13-16, 2006 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Newport Marriott Newport, Rhode Island Contact: 1-703-739-0800 or http://www.abiworld.org/ July 26-29, 2006 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop The Ritz Carlton Amelia Island Amelia Island, Florida Contact: 1-703-739-0800 or http://www.abiworld.org/ October 11-14, 2006 TURNAROUND MANAGEMENT ASSOCIATION 2006 Annual Conference Milleridge Cottage Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ November 30-December 2, 2006 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Regency at Gainey Ranch Scottsdale, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org/ The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***