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/raid1/www/Hosts/bankrupt/TCR_Public/050121.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, January 21, 2005, Vol. 9, No. 17 Headlines ACCURIDE CORP: S&P Rates Proposed $965M Senior Debts at Single-B ADELPHIA COMMS: Gov't. Seeks Forfeiture Ruling v. Two Rigases ANECO ELECTRICAL: Look for Bankruptcy Schedules by Jan. 28 ANOKA AVIATION SERVICES: Involuntary Case Summary ATA AIRLINES: Wants to Renew AIG Workers' Insurance Program ATA AIRLINES: Wants to Reject Pacers Suite License Agreement ATLANTIS PLASTICS: S&P Junks Proposed $125M Senior Sub. Notes AVAYA INC: Debt Reduction Prompts Moody's to Upgrade Ratings BALDWIN PIANO: Court Approves Settlement with QRS Music BELL CANADA: Converting 14,085,782 Series 15 Preferred Shares CAESARS ENTERTAINMENT: Complies with FTC Requirements on Merger CAPITAL ONE: Reports 28% Earnings Per Share Growth for 2004 COMMANDER AIRCRAFT: Court Converts Chapter 11 Case to Chapter 7 CONTIFINANCIAL: Trustee Terminates Soundview Equity Loan Trust COVANTA ENERGY: Reorganized Debtors' 4th Post-Confirmation Report COVANTA ENERGY: Warren Wants Service Deadline Extended to July 23 CRYOPAK INDUSTRIES: Inks Pact Amending Convertible Loan Agreement DUKE FUNDING: Moody's Places Ba3 Rating on Preference Shares DYNCORP INTL: Moody's Junks Proposed $320M Senior Sub. Notes E*TRADE FINANCIAL: S&P Alters Outlook on Low-B Ratings to Positive ENRON CORP: Court Approves Termination of Cuiaba Financing Pacts EYE CARE: S&P Junks Proposed $150 Million Subordinated Notes FEDERAL-MOGUL: Says Proposed Asbestos Trust is Fatally Flawed FIB BUSINESS: Fitch Junks Six Adjustable-Rate Note Classes FIBERMARK INC: Chapter 11 Plan Voting Deadline Moved to Jan. 24 FIRST VIRTUAL: Case Summary & 30 Largest Unsecured Creditors FREEDOM MEDICAL: Turns to Penn Hudson for Financial Advice GENERAL NUTRITION: Restructuring Prompts S&P to Lift Rating to B+ GITTO GLOBAL: U.S. Trustee Asks Court to Convert Case to Chapter 7 HAWAIIAN AIRLINES: Wants to Modify Pilots Contract HEALTHCARE PARTNERS: S&P Rates Planned $145M Sr. Sec. Debt at BB INTELSAT LTD: Fitch May Put Low-B Ratings on Unsecured Sr. Notes INTREPID USA: Has Until February 28 to File a Chapter 11 Plan KAISER ALUMINUM: Wants Removal Period Extended Until May 10 KEY ENERGY: Has Until March 25 to File Financial Reports LESLIE'S POOLMART: Prices 10-3/8% Senior Debt Offering MAYTAG CORP: Will Stop Selling Major Appliances at Best Buy Stores MEDCOMSOFT: Selling Equity under Private Placement for $1.5 Mil. MEDIA SERVICES: Annual Stockholders' Meeting Set for February 7 MESA GLOBAL: S&P Holds Low-B Ratings on Three Certificate Classes MIRANT CORP: Court Allows Expansion of Charles River's Services NEP SUPERSHOOTERS: S&P Rates Proposed $75.7 Million Loan at B NORTH AMERICAN: S&P Places Low-B Ratings on CreditWatch Negative NORTHWEST AIRLINES: Dec. 31 Balance Sheet Upside-Down by $3.1 Bil. NOVELIS INC: S&P Assigns B Rating to $1.4B Senior Unsecured Notes OWENS CORNING: Banks Present Medical, Legal & Valuation Experts OWENS CORNING: CSFB Wants to Sue Doctors for False X-Ray Readings OWENS CORNING: Third Circuit to Hear Banks' Appeal on Feb. 7 PACKAGING CORP: Earns $38 Million Net Income in Fourth Quarter PARMALAT USA: Will Reject Derle Supply Agreement After Transition PCA INTL: Poor Third Qtr. Performance Spurs Moody's to Junk Debts PEGASUS SATELLITE: Wants Lease Decision Deadline Extended to May PRESIDENT CASINOS: Broadwater Wins Bid for Biloxi Operations QUALITY DISTRIBUTION: Senior Floating Rate Notes to Prepay Debts QUALITY DISTRIBUTION: Moody's Junks Proposed Senior Unsec. Notes QUANTEGY INC: Employs Kurtzman Carson As Claims & Noticing Agent QUANTEGY INC: Taps Equity Partners as Marketing Agent REAL MEX: Extends Senior Debt Exchange Offering Until March 31 RED LINE RESTORATIONS: Case Summary & Largest Unsecured Creditors REMOTE DYNAMICS: Needs to Raise $6 Mil. More to Fund Operations SGD HOLDINGS: Files for Bankruptcy Protection in Delaware SGD HOLDINGS LTD: Case Summary & 17 Largest Unsecured Creditors SPIEGEL INC: BofA Wants Court to Lift Stay to Effect Set-Off SR TELECOM: Inks Letter of Intent for $50M Sr. Sec. Facility SR TELECOM: Revises Guidance for 2004 Fourth Quarter SR TELECOM: Fidelity Management Sells 1,725,400 Common Shares STRATUS TECH: Reducing 20% of Workforce to Save $15 Mil. in 2006 TANGO INC: Approves Plan to Retain Turnaround Specialist TODD MCFARLANE: U.S. Trustee Picks 4-Member Creditors Committee TODD MCFARLANE: Files Schedules of Assets and Liabilities ULTIMATE ELECTRONICS: Taps FTI Consulting as Financial Advisors ULTIMATE ELECTRONICS: Wants to Hire Ordinary Course Professionals UNITEDGLOBALCOM: S&P Places B Rating on CreditWatch Positive USGEN: Court Okays Sale of Two Hydroelectric Systems for $505 Mil. VALOR COMMS: S&P Puts BB- Rating on Planned $965M Sr. Sec. Debt VISTA GOLD: Luzon Exercises Option to Purchase Bolivia Project VITAL LIVING: Deficit & Funding Concerns Spur Going Concern Doubt W.R. GRACE: Gets Court Nod to Advance Payments for Legal Expenses WISTON XIV: Wants to Hire Brashear & Ginn as Bankruptcy Counsel WISTON XIV: Look for Bankruptcy Schedules by February 21 WORLDCOM INC: 10 Directors Settle Class Action for $54 Million WORLDCOM INC: Supreme Court Denies Certiorari to Calpers, et al. ZALE LIPSHY: Moody's Withdraws Ba3 Bond Rating After Full Funding * Goodwin Procter Adds 24 Partners to Boston Office * K&R Law Group Names C. Faber & R. Kessler Los Angeles Partners * BOOK REVIEW: Debtors and Creditors in America ********* ACCURIDE CORP: S&P Rates Proposed $965M Senior Debts at Single-B ---------------------------------------------------------------- Standard & Poor's Ratings Services reported that its 'B' corporate credit rating on Accuride Corp., which remains on CreditWatch with positive implications, where it was placed on Dec. 28, 2004, will be raised to 'B+' when Accuride completes its planned acquisition of Transportation Technologies Industries, Inc. -- TTI -- (B/Watch Pos/--), expected within the next few weeks. The ratings of TTI will be withdrawn following the acquisition. The outlook will be stable. In addition, Standard & Poor's assigned a 'B+' bank loan rating and a '3' recovery rating to Accuride's proposed $740 million senior secured credit facility, indicating the expectation that lenders will realize a meaningful recovery of principal (50%-80%) in the event of a default. Standard & Poor's also assigned a 'B-' rating to Accuride's proposed $225 million senior subordinated notes due 2015, to be issued under rule 144A with registration rights. Pro forma for the acquisition of TTI, Evansville, Ind.-based Accuride will have total debt of about $850 million. "The upgrade will reflect the improved operating performance of Accuride and TTI during the past year, as both companies have benefited from robust demand of the heavy-duty truck industry," said Standard & Poor's credit analyst Martin King. "We expect continued expansion of heavy-duty truck production during the next year, which should permit the company to generate free cash flow and reduce debt leverage to a level consistent with the rating. We expect Accuride to finance future acquisitions and other investments in a way that preserves credit quality." Accuride manufactures steel and aluminum wheels used for heavy- and medium-duty trucks, trailers, and light vehicles, primarily sport utility vehicles and light trucks. TTI manufactures various components, including wheel end components and assemblies, truck body and chassis parts, and seating assemblies used in heavy-duty trucks and industrial equipment. With the addition of TTI, Accuride will have a slightly stronger, but still-below-average, business profile, as revenue and customer diversity improves. Accuride may complete an initial public offering during the next few months. If the offering is successful, Standard & Poor's expects proceeds to be used to accelerate debt reduction. ADELPHIA COMMS: Gov't. Seeks Forfeiture Ruling v. Two Rigases ------------------------------------------------------------- The U.S. Government asks the U.S. District Court for the Southern District of New York to enter a preliminary order of forfeiture finding John J. Rigas and Timothy J. Rigas jointly and severally liable for personal money judgments totaling $2,533,000,000. The Government asks District Court Judge Leonard B. Sand to find that John and Timothy Rigas will forfeit the $2,533,000,000 to the Government. A July 30, 2003 Superseding Indictment returned against John and Timothy Rigas contained a "forfeiture allegation" which obligated the Defendants to forfeit all real property "that constitutes or is derived from proceeds traceable to the commission of" securities fraud, wire fraud and bank fraud offenses and the conspiracy to commit the offenses. U.S. Attorney David N. Kelley asserts that the Indictment contained a "substitute assets" provision which permitted the Government to enforce a forfeiture judgment on assets other than those actually derived from or traceable to the charged offenses. According to Mr. Kelley, the Government has proven at trial -- and a federal jury has found -- that John and Timothy Rigas defrauded Adelphia shareholders, bondholders, and lenders to enrich themselves and other members of the Rigas family. Evidence at trial also demonstrates that the Rigas family obtained several cable companies using the proceeds of the frauds committed on Adelphia and its lenders. John and Timothy Rigas also received hundreds of millions of dollars in the form of securities that were not paid for -- or through the refunding of cash that was paid by the Rigas family to Adelphia. In July 2004, the jury found John and Timothy Rigas guilty of conspiracy, securities fraud, and bank fraud. A full-text copy of the Government's request is available for free at: http://bankrupt.com/misc/forfeiture.pdf 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. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANECO ELECTRICAL: Look for Bankruptcy Schedules by Jan. 28 ---------------------------------------------------------- Aneco Electrical Construction, Inc., sought and obtained an extension until Jan. 28, 2005, from the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division, to file its Schedules of Assets and Liabilities and Statement of Financial Affairs. The Debtor assures the Court that it will do its best to complete its Schedules and Statement before the Section 341(a) meeting of the creditors scheduled for Feb. 4. Headquartered in Clearwater, Florida, Aneco Electrical Construction, Inc. -- http://www.anecoinc.com/-- is an electrical and telecommunications company serving the commercial, entertainment, industrial, medical, government and institutional building markets in the southeastern United States. The Company filed for chapter 11 protection on Dec. 30, 2004 (Bankr. M.D. Fla. Case No. 04-24883). Scott A. Stichter, Esq., at Stichter, Riedel, Blain & Prosser, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $51 million in estimated assets and $41 million in estimated debts. ANOKA AVIATION SERVICES: Involuntary Case Summary ------------------------------------------------- Alleged Debtors: Anoka Aviation Services, Inc. 8891 Airport Road PO Box 49337 Blaine, Minnesota 55449 Involuntary Petition Date: January 18, 2005 Case Number: 05-30283 Chapter: 11 Court: District of Minnesota (St. Paul) Judge: Dennis D. O'Brien Petitioners' Counsel: William I. Kampf, Esq. Henson & Efron PA 220 South 6th Street, Suite 1800 Minneapolis, Minnesota 55402 Tel: (612) 339-2500 Petitioners Amount ----------- ------ Roger K. Ness $320,000 3140 Utah Avenue North Crystal, Minnesotan 55427 Aircraft Maintenance Services, Inc. $6,061 Bill Ahman 607 Eagle Ridge Road Woodbury, Minnesota 55125 RC Avionics Inc. $4,519 Russ Callendar 1419 East Oake Trail Houlton, Wisconsin 54082 Twin Cities Aviation, Inc. $516 Bill Ahman 607 Eagle Ridge Road Woodbury, Minnesota 55125 ATA AIRLINES: Wants to Renew AIG Workers' Insurance Program ----------------------------------------------------------- ATA Airlines, its debtor-affiliates and American International Group, Inc., were parties to an agreement whereby AIG obtained workers' compensation insurance on the Debtors' behalf. The Existing Insurance Program expired on December 13, 2004. Under the Existing Insurance Program, the Debtors caused National City Bank of Indiana to issue a $7,000,000 letter of credit on AIG's behalf. On December 14, 2004, the Debtors renewed their workers' compensation insurance program with AIG. To obtain the workers' compensation coverage under the Renewal Insurance Program, the Debtors were required to post a new, additional letter of credit for $4,500,000 on AIG's behalf. The Debtors were further required to: -- seek the United States Bankruptcy Court for the Southern District of Indiana's authority to assume the Existing Insurance Program and enter into the Renewal Insurance Program; -- enter into future renewals of their workers' compensation insurance programs without the need for further Court approval; and -- cure any defaults and pay future obligations without further Court approval. In the event of a default by the Debtors under the Insurance Programs and upon five days' written notice by AIG, AIG will be allowed to: (i) cancel the Insurance Programs; (ii) foreclose on any collateral, in part or in full, which AIG has a security interest and which may be subject to the automatic stay; and (iii) receive and apply the unearned or returned premiums to the Debtors' outstanding obligations under the Insurance Programs. If the default is not cured within the appropriate period, the automatic stay will be lifted as to AIG without the need for further Court approval. The Renewal Insurance Program provides that the Debtors' reimbursement obligations and any other obligations under the Insurance Programs will be accorded administrative priority under Section 503(b) of the Bankruptcy Code. AIG is not required to file additional proof of claim or request for payment of administrative expenses. In addition, AIG is exempted from any deadline for filing prepetition or administrative claims. The Renewal Insurance Program also requires the Debtors to obtain Court approval of these conditions: (1) All collateral or security held at this time by AIG and all prior payments to AIG under the Insurance Programs are approved, and AIG is authorized to retain and use the collateral or security in accordance with its terms; (2) AIG is allowed to adjust, settle and pay insured claims, utilize funds provided for that purpose, and otherwise carry out the terms and conditions of the Insurance Programs, without the need for any further Court approval. However, nothing will be deemed to grant relief from the stay to a non-workers' compensation claimant to pursue any claim in a non-bankruptcy court; (3) The Insurance Programs will not be materially altered by any plan of reorganization filed in the Debtors' cases, and survive any plan of reorganization filed by the Debtors. Furthermore, nothing in any confirmed plan of reorganization in the Debtors' cases will impair AIG's interests in the collateral that it holds or is receiving; (4) The Debtors' rights against all collateral held by AIG are governed by the terms of the Insurance Program and related security documentation and the Debtors be prohibited from taking any action against AIG in the Court that is inconsistent with the terms of the documentation, including actions for turnover or estimation. During the pendency of these cases, AIG is not required, except as provided in the Insurance Programs documents, to return any part of the security it now holds for the Insurance Programs without adequate protection for its interest in the security to be returned pursuant to Section 361(1); and (5) The Debtors are authorized to reimburse AIG for its reasonable and necessary legal fees and expenses incurred in connection with the Insurance Program. Michael P. O'Neil, Esq., at Sommer Barnard Attorneys, PC, in Indianapolis, Indiana, tells Judge Lorch that the Debtors have complied with all of AIG's requirements for the Insurance Programs other than obtaining a Court Order approving the Insurance Programs and the remaining Program Conditions. Mr. O'Neil asserts that maintaining the workers' compensation insurance is mandated by state law and necessary to the Debtors' reorganizational efforts. Accordingly, the Debtors seek the Court's authority to: (a) assume the Existing Workers' Compensation Insurance Program; and (b) enter into a renewal of their Workers' Compensation Insurance Program with AIG. The Debtors also ask Judge Lorch to approve the Program Requirements. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants to Reject Pacers Suite License Agreement ------------------------------------------------------------ Pursuant to Section 365 of the Bankruptcy Code, ATA Airlines and its debtor-affiliates seek permission from the United States Bankruptcy Court for the Southern District of Indiana to reject a Conseco Fieldhouse Executive Suite License Agreement between ATA Holdings Corp., and the Pacers Basketball Corporation. The Contract grants ATA Holdings a license to use a suite at the Conseco Fieldhouse, in Indianapolis, Indiana, for events like the Indiana Pacers basketball games, concerts, family shows, and other sporting events. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, asserts that the benefits provided by the Contract to the Debtors are outweighed by the costs. The Contract is an unnecessary burden on the Debtors and their estate. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04- 19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATLANTIS PLASTICS: S&P Junks Proposed $125M Senior Sub. Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Atlanta, Georgia-based Atlantis Plastics, Inc. At the same time, Standard & Poor's assigned its 'B' rating and its recovery rating of '2' to the company's proposed $25 million senior secured revolving credit facility due 2010 and $80 million senior secured term loan B due 2011, based on preliminary terms and conditions. The rating on the credit facility is the same as the corporate credit rating; this and the '2' recovery rating indicate the expectation of a substantial (80% to 100%) recovery of principal in the event of a default. Standard & Poor's also assigned its 'CCC+' rating to the company's proposed $125 million senior subordinated notes due 2012 to be issued under Rule 144A with registration rights. Proceeds from the transaction will be used to refinance the company's existing credit facilities, to fund a $118 million dividend to shareholders, and for fees and expenses. The outlook is stable. Pro forma for the transaction, total debt will be about $205 million. "Atlantis Plastics' very aggressive financial profile overshadows its well-below-average business risk profile in highly competitive, cyclical polyethylene film and injection-molded plastic products, which serve mainly industrial customers," said Standard & Poor's credit analyst Liley Mehta. With annual revenues of about $334 million, Atlantis Plastics enjoys a competitive position in plastic films (including stretch films and custom films and representing about 65% of revenues), stemming from a decent cost structure and effective distribution capabilities. Injection-molded products (about 28% of sales) include components sold to original equipment manufacturers mainly in the home appliance industry, and siding panels for the home building industry and residential replacement market. Profile extruded products account for 7% of sales and are used in recreational vehicles, mobile homes, and other consumer and commercial products. AVAYA INC: Debt Reduction Prompts Moody's to Upgrade Ratings ------------------------------------------------------------ Moody's Investors Service upgraded the senior implied rating of Avaya, Inc., to Ba3 from B1. Moody's simultaneously withdrew the ratings of the 11-1/8% senior secured notes that have been substantially redeemed. The ratings outlook is positive. Ratings upgraded include: * Senior implied rating to Ba3 from B1 * Issuer rating to B1 from B2 * Shelf registration for senior unsecured debt and preferred stock to (P)B1 and (P)B3 from (P)B2 and (P)Caa1, respectively. Ratings withdrawn include: * Senior secured notes at B1. The rating action is based on: (1) the substantial de-leveraging of Avaya's balance sheet, (2) solid liquidity profile and continued improvement in operating performance, and (3) cash flow generation from recovering enterprise communications spending. The company has made substantial progress to reduce debt through the recent equity conversion of $298 million accreted value of outstanding LYONs and repurchase of outstanding senior secured notes due 2009 in December 2004. Pro forma for the extinguishment of existing notes and assumption of incremental debt from its Tenovis acquisition, debt has decreased to $342 million from $729 million at March 31, 2004. Pro forma cash balances stand at $969 million compared to $1.6 billion at fiscal year end September 30, 2004. Offsetting the lower leverage levels is $1.3 billion of benefit obligations related to pensions and post retirement benefit obligations. The company does not expect to make material contributions to its pensions through 2007. The rating is moderated by Moody's concern over the decline in the company's traditional voice telephony product, estimated to be falling at 20% per annum, and the degree to which sales of next generation voice-over-IP product offsets such product revenue loss. The rating is further constrained by supplier concentration and the weakening operating performance of its primary supplier of outsourced manufacturing. Avaya outsources a majority of its manufacturing to a single supplier, which exposes Avaya to potential supply disruption. The rating is supported by Avaya's leading market position in VoIP product and deeply entrenched base of enterprise customers. Avaya currently holds the number one market share in the U.S. and worldwide for IP telephony lines. The company estimates that over 90% of Fortune 500 companies use Avaya product. The current rating also considers the company's aggressive acquisition profile and the potential integration challenges it faces in the near term from the acquisitions of five companies over the past twelve months. The largest acquisition, Tenovis, a major European provider of enterprise communications systems and services, positions Avaya for expansion of its product lines into Europe, and is expected to add approximately $1 billion of revenue on an annual basis (nearly one quarter of Avaya's current revenue). In fiscal 2004, Avaya reversed a trend of declining revenue by growing its top line across all three segments by a total of 7% over fiscal 2003. As a result of restructuring and cost reduction efforts taken through fiscal 2002, consolidated operating margin has reached its highest level since Avaya's spin-off from Lucent in fiscal 2000, at nearly 8%. Avaya's ratio of LTM EBITDA to interest expense stands at 7.1 times while debt to EBITDA is at 1.3 times. The company generated $269 million of free cash flow (cash flow from operations less capital expenditures and cash acquisitions) in fiscal 2004. The positive ratings outlook considers Moody's expectations for sustained improvement in operating income and cash flow through continued revenue growth, both organically and through acquisition. The ratings could be favorably impacted to the extent Avaya demonstrates sustained growth of VoIP-based revenue faster than the decline in its traditional PBX product without negative impact to profitability. Alternatively, the ratings could be negatively impacted to the extent that revenue experiences material decline, improvements in operating performance and cash generation fall below expectations or future acquisitions materially reduce the company's liquidity or debt capacity. Avaya faces continuing exposure to indemnify or share certain liabilities with its former parent, Lucent Technologies, Inc., in connection with its spin-off from Lucent in September 2000. Under a contribution and distribution agreement, Avaya will indemnify Lucent for certain liabilities related to Avaya's businesses and all contingent liabilities primarily relating to its businesses or otherwise assigned to Avaya. Contingent liabilities over $50 million that are primarily related to Lucent's businesses shall be borne 90% by Lucent and 10% by Avaya, and contingent liabilities over $50 million that are primarily related to Avaya's businesses shall be borne equally by both Lucent and Avaya. Avaya, Inc., based in Basking Ridge, New Jersey, is a leading worldwide supplier of communications systems and software for enterprise customers. BALDWIN PIANO: Court Approves Settlement with QRS Music ------------------------------------------------------- The United States Bankruptcy Court for the Southern District of Ohio, Western Division, recently approved a negotiated settlement agreement between Dwight's Piano Co. (formerly known as Baldwin Piano & Organ Co.) and QRS Music Technologies, Inc., (OTCBB: QRSM) concerning preferential transfers made during the 90-day period prior to Baldwin's bankruptcy filing on May 31, 2001. Last year, the Court granted a default judgment for $477,601 plus interest. The negotiated settlement agreement reduced that amount to $61,395. QRS Music had previously recorded a $477,601 liability in relating to the default judgment. As a result of the negotiated settlement, for the quarter ending March 31, 2005, QRS Music will recognize a gain of approximately $259,000 (net of income taxes), or $.03 per share. QRS Music Technologies, Inc.'s stock is traded Over-The-Counter on the OTCBB: QRSM. Baldwin Piano & Organ Company is the largest U.S. manufacturer of keyboard instruments. Founded in 1862, the company is best known for making concert and upright pianos under the Baldwin, Chickering, and Wurlitzer names. It also makes ConcertMaster computerized player pianos and Baldwin Pianovelle digital keyboards. Baldwin has manufacturing facilities in Arkansas and Juarez, Mexico. It has sold 11 of its retail stores and plans to sell the rest. It also sold its retail finance business and plans to file for Chapter 11 bankruptcy protection. Seven different investment groups, led by Heartland Advisors, own about 65% of the company. BELL CANADA: Converting 14,085,782 Series 15 Preferred Shares ------------------------------------------------------------- Bell Canada reported that 14,085,782 of its 16,000,000 Cumulative Redeemable Class A Preferred Shares, Series 15 have been tendered for conversion, on a one-for-one basis, into Cumulative Redeemable Class A Preferred Shares, Series 16. Consequently, Bell Canada will issue 14,085,782 new Series 16 Preferred Shares on February 1, 2005. The balance of the Series 15 Preferred Shares that have not been converted will remain outstanding. The remaining 1,914,218 Series 15 Preferred Shares will continue to be listed on The Toronto Stock Exchange under the symbol BC.PR.A. The holders of the Series 15 Preferred Shares will, starting February 1, 2005, be entitled to receive monthly floating adjustable cash dividends, if declared by the board of directors of Bell Canada, computed in accordance with the terms and conditions attached to such shares. The Series 16 Preferred Shares will be listed on The Toronto Stock Exchange under the symbol BC.PR.D and should start trading on a "When Issued" basis at the opening of the market on January 24, 2005. The annual fixed dividend rate applicable to the Series 16 Preferred Shares for the period of five years beginning on February 1, 2005 will be 4.40%. Bell Canada, Canada's national leader in communications, provides connectivity to residential and business customers through wired and wireless voice and data communications, local and long distance phone services, high speed and wireless Internet access, IP-broadband services, e-business solutions and satellite television services. Bell Canada is wholly owned by BCE Inc. For more information please visit http://www.bell.ca/ BCI is operating under a court-supervised Plan of Arrangement, pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholder and dissolving the company. CAESARS ENTERTAINMENT: Complies with FTC Requirements on Merger --------------------------------------------------------------- Harrah's Entertainment, Inc. (NYSE:HET) and Caesars Entertainment, Inc., are in "substantial compliance" with requests from the Federal Trade Commission for information concerning the planned merger of the two companies. Last July, Harrah's and Caesars announced a $9.4 billion merger agreement that will create the world's largest distributor of casino entertainment. The FTC subsequently issued a "second request" for information from each company concerning the merger. The two companies each certified they have provided substantially all the information still being requested by the FTC. The transaction is expected to be completed in the second quarter, pending receipt of necessary regulatory approvals. About the Company Founded 67 years ago, Harrah's Entertainment, Inc. -- http://www.harrahs.com/-- owns or manages through various subsidiaries 28 casinos in the United States, primarily under the Harrah's and Horseshoe brand names. Harrah's Entertainment is focused on building loyalty and value with its valued customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. Caesars Entertainment, Inc., is one of the world's leading gaming companies. With 25 properties on four continents, 25,000 hotel rooms, two million square feet of casino space and 52,000 employees, the Caesars portfolio is among the strongest in the industry. Caesars casino resorts operate under the Caesars, Bally's, Flamingo, Grand Casinos, Hilton and Paris brand names. The company has its corporate headquarters in Las Vegas. * * * As reported in the Troubled Company Reporter on July 19, 2004, Fitch Ratings has affirmed the following long-term debt ratings of Harrah's Entertainment and placed the long-term ratings of Caesars Entertainment on Rating Watch Positive. HET -- Senior secured debt 'BBB-'; -- Senior subordinated debt 'BB+'. CZR -- Senior unsecured debt 'BB+'; -- Senior subordinated debt 'BB-'. CAPITAL ONE: Reports 28% Earnings Per Share Growth for 2004 ----------------------------------------------------------- Capital One Financial Corporation (NYSE: COF) reported 28 percent earnings per share growth for 2004. The company reaffirmed its earnings per share guidance for 2005 to be between $6.60 and $7.00 per share (fully diluted). Earnings were $1.5 billion for the year, compared with $1.1 billion in 2003. Earnings for the fourth quarter of 2004 were $195.1 million, compared with $265.7 million for the fourth quarter of 2003, and $490.2 million in the previous quarter. Higher marketing and provision expenses in the fourth quarter accounted for the lower earnings compared to the previous quarter and fourth quarter of 2003. "Capital One generated strong earnings and loan growth again in 2004, as it has each year since its initial public offering ten years ago," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "The company is well positioned for continued success in 2005 in both our US credit card and our growing and profitable diversification businesses." During the fourth quarter, managed loans grew $4.4 billion from $75.5 billion to $79.9 billion. Annual growth in managed loans was $8.6 billion, or 12 percent, from December 31, 2003. The company continues to expect that managed loans will grow at a rate of between 12 and 15 percent during 2005. The managed charge-off rate increased to 4.37 percent in the fourth quarter of 2004 from 4.05 percent in the previous quarter, but decreased from 5.32 percent in the fourth quarter of 2003. The increase in the managed charge-off rate in the fourth quarter of 2004 included a one-time 10 basis point effect from a change in our charge-off recognition policy for auto loans in bankruptcy. The company continues to expect its quarterly managed charge- off rate to stay between 4.0 and 4.5 percent in 2005, with seasonal variations. Additionally, the company increased its allowance for loan losses by $110 million in the fourth quarter of 2004, largely driven by the growth in reported loans. The company expects a seasonal reduction in its allowance for loan losses in the first quarter of 2005, and a likely increase for full year 2005. The managed delinquency rate (30+ days) decreased to 3.82 percent as of December 31, 2004 from 3.90 percent as of the end of the previous quarter. The managed delinquency rate as of December 31, 2003 was 4.46 percent. Capital One's managed revenue margin decreased to 12.66 percent in the fourth quarter of 2004 from 13.03 percent in the previous quarter. The company's managed revenue margin was 13.89 percent in the fourth quarter of 2003. "Return on managed assets for 2004 increased to 1.73 percent from 1.52 percent in 2003," said Gary L. Perlin, Capital One's Chief Financial Officer. "Although we expect to see a modest decline in our revenue margin in 2005 from our ongoing diversification and bias towards lower loss assets, we expect to continue to improve our operating efficiency and thus maintain a return on managed assets of between 1.7 and 1.8 percent in 2005, with some quarterly variability." Fourth quarter marketing expenses increased $193.4 million to $511.1 million from $317.7 million in the previous quarter, largely due to the launch of several new programs. Marketing expenses were $290.1 million in the fourth quarter of 2003. Marketing expenses for 2004 were $1.3 billion, a 20 percent increase over the $1.1 billion in 2003. The company expects annual marketing spend for 2005 to be similar to 2004. Annualized operating expenses as a percentage of average managed loans increased to 5.44 percent in the fourth quarter of 2004, from 5.35 percent in the previous quarter and decreased from 5.82 percent in the fourth quarter of 2003. Included in fourth quarter 2004 operating expenses were charges totaling $42.1 million for a combination of employee termination benefits and continued facility consolidations. The company expects about $50 million in additional restructuring charges in 2005 related to programs initiated in 2004. In the fourth quarter of 2004, the company completed the sale of its French loan portfolio and recorded a gain of $41.1 million, which is included in non-interest income. As announced during the second half of 2004, the company signed definitive agreements to acquire HFS Group, Onyx Acceptance Corporation, and eSmartloan. During the first quarter of 2005, Capital One completed the HFS and Onyx transactions, as well as the acquisition of InsLogic, a small insurance brokerage firm. The company expects to close the eSmartloan acquisition later in the first quarter of 2005. * * * As reported in the Troubled Company Reporter on Sept. 10, 2004, Standard & Poor's Ratings Services raised its long-term counterparty credit rating on Capital One Financial Corp. to 'BBB-' from 'BB+' and the long-term counterparty credit rating on its bank subsidiaries, Capital One Bank, Falls Church, VA and Capital One FSB, to 'BBB' from 'BBB-'. The short-term counterparty credit ratings are affirmed at 'A-3'. At the same time, Standard & Poor's revised the outlook to stable from positive. "The ratings action considers Capital One's successful navigation through a challenging operating environment, the company's success to-date in diversifying its business lines, the moderation of its managed loan growth, and management's adoption of a long-term strategy that considers further diversification," said Standard & Poor's credit analyst John K. Bartko, C.P.A. Despite some weakening of asset quality metrics due in large part to opportunistic forays into subprime lending in late 2002 and into early 2003, Capital One nevertheless navigated its way through a challenging operating environment that, though not a deep recession, saw sector competitors marginalized, credit quality compromised, and regulatory scrutiny intensified. COMMANDER AIRCRAFT: Court Converts Chapter 11 Case to Chapter 7 --------------------------------------------------------------- The Honorable Peter J. Walsh of the United States Bankruptcy Court for the District of Delaware entered an order converting Commander Aircraft Company's chapter 11 case to a chapter 7 proceeding on Jan. 14, 2005. The United States Trustee complained that Debtor failed to pay its quarterly fees since Dec. 1, 2003. The company currently owes $12,750 in quarterly fees based on reported disbursements. The payment of quarterly fees is required by law until the case is closed, converted or dismissed. Headquartered in Bethany, Oklahoma, Commander Aircraft Company, a wholly owned subsidiary of publicly traded Aviation General, Incorporated, filed for chapter 11 protection on Dec. 27, 2002 (Bankr. D. Del. Case No. 02-13804). David Lee Finger, Esq., in Wilmington, Delaware, represents the Debtor in its liquidation efforts. When the Debtor filed for chapter 11 protection, it estimated between $1 million to $10 million in assets and debts. CONTIFINANCIAL: Trustee Terminates Soundview Equity Loan Trust -------------------------------------------------------------- The trustee of the CFN Liquidating Trust, Jeffrey H. Beck, disclosed the termination of the Soundview Home Equity Loan Trust 1999-1 securitization. CFN Liquidating Trust is successor to ContiFinancial Corporation, ContiMortgage Corporation, and affiliates pursuant to the companies' confirmed Chapter 11 plan. CFN Liquidating Trust, its asset manager, Boston Portfolio Advisors, Inc., and its business and tax counsel, Miller Nash LLP, handled this unique, complex transaction over a three-month period, closing the transaction on Dec. 17, 2004. The termination, completed more than a year prior to the anticipated early redemption date for the Soundview Trust asset- backed notes, was accomplished through the acquisition and tender of notes having an outstanding principal balance of approximately $109 million. The termination was concluded in connection with the sale by auction of the portfolio of real estate and promissory notes secured by residential mortgages owned by the Soundview Trust. According to Mr. Beck, the sale of the portfolio was a highly unique transaction, which CFN Trust was able to accomplish because of the outstanding performance of its advisors: "Michelle Slater of Miller Nash and Gene Wetzold of Boston Portfolio Advisors were able to discover the approach, skillfully design the structure within the operative documents, and successfully negotiate that legal structure with the counter-parties to the Soundview Trust, the Soundview bondholders and the auction purchaser," said Mr. Beck. "I am grateful for the hard work and cooperation of all the parties involved in the success of this transaction." CFN Trust -- http://www.cfntrust.com/-- owned the residual interest in the Soundview Trust, which (together with related distributions held in reserve) was encumbered by claims of Greenwich Capital Markets, Inc., Greenwich Capital Financial Products, Inc., and MBIA Insurance Corporation. By its termination of the Soundview Trust and portfolio sale, CFN Trust was able to settle those claims, liquidate its assets, and realize a recovery of approximately $34 million. Jeffrey H. Beck of J Beck & Associates, Inc., in Boca Raton, Florida has served as a trustee, examiner and receiver since 1984 and has brought successful resolution to a substantial number of complex corporate reorganizations and liquidations in the financial sector and, as well, in a broad range of other industries. Boston Portfolio Advisors is headquartered in Fort Lauderdale, Florida, and was founded in 1979. Serving the financial services industry, Boston Portfolio Advisors provides a broad range of integrated solutions designed to help financial services organizations better manage their assets and operations. As one of the largest multi-specialty law firms in the Pacific Northwest, Miller Nash LLP serves clients locally and worldwide from its offices in Portland, Oregon, and Seattle and Vancouver, Washington. COVANTA ENERGY: Reorganized Debtors' 4th Post-Confirmation Report ----------------------------------------------------------------- The Reorganized Debtors under the Covanta Energy Corporation Second Joint Reorganization Plan and the Covanta Tampa Amended Joint Plan of Reorganization filed their fourth status report on January 14, 2005. The Reorganized Debtors have taken these steps, among others, in connection with consummation of the Second Reorganization Plan and the Tampa Plan: (a) The Reorganized Debtors assumed or rejected their executory contracts and unexpired leases and continued the process of paying Cure Amounts with respect to those executory contracts and unexpired leases that they assumed. The Reorganized Debtors are continuing to resolve disputes concerning the Cure Amounts; (b) The Reorganized Debtors continue to engage in the claims reconciliation process with respect to Disputed Claims against the Reorganized Debtors and the Remaining Debtors, including the prosecution of claims objections pursuant to the Second Reorganization Plan and Tampa Plan. All claim objections for the Second Plan Debtors have been filed; (c) Distributions were made or are in the process of being made by the Reorganized Debtors in accordance with the Second Reorganization Plan on account of all currently allowed Claims in Class 1, Class 3A, Class 3C, Class 4, Class 7 and Class 8. The Reorganized Debtors continue to make substantial progress toward making distributions to holders of Allowed Claims in Classes 4 and 8, and the second quarterly distribution for both classes was completed. The Reorganized Debtors will not make distributions to individual holders of Claims in Class 6 until all the claims are actually allowed or disallowed; (d) Distributions were made by the Reorganized Debtors in accordance with the Tampa Plan on account of all Allowed Claims in Class 1, Class 2, and Subclass 3A under the Tampa Plan; (e) In October 2004, Covanta Lake II's Disclosure Statement was approved. Covanta Lake II's Plan and Disclosure Statement were sent to its creditors for solicitation on October 22, 2004. On December 1, 2004, the United States Bankruptcy Court for the Southern District of New York held a confirmation hearing for the Covanta Lake Plan. The Court entered an order confirming the Covanta Lake Plan on December 2. The Covanta Lake Plan became effective on December 14; and (f) On December 7, 2004, the U.S. Bankruptcy Court for the Southern District of New York entered a Final Decree closing 22 of the Reorganized Debtors' cases after finding that the estates of the 22 Reorganized Debtors had been fully administered. Only six Reorganized Debtors' cases remain open. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. On March 10, 2004, Covanta Energy Corporation and its core subsidiaries emerged from chapter 11 as a wholly owned subsidiary of Danielson Holding Corporation. Some of Covanta's non-core subsidiaries have liquidated under separate chapter 11 plans. (Covanta Bankruptcy News, Issue No. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) COVANTA ENERGY: Warren Wants Service Deadline Extended to July 23 ----------------------------------------------------------------- Covanta Warren Energy Resources Co., LP, asks the United States Bankruptcy Court for the Southern District of New York to extend its deadline to serve summonses and preference complaints until July 23, 2005, on: (1) Professional Health Services, Inc. -- for Adversary Proceeding Case No. 04-02910; and (2) Technion, Inc. -- for Adversary Proceeding Case No. 04-02911. Its current service deadline will expire January 24, 2005. Vincent E. Lazar, Esq., at Jenner & Block, LLP, in Chicago, Illinois, explains that without the 180-day extension, Covanta Warren and its creditors could incur unnecessary costs related to effecting service of, and pursuing, the Preference Complaints "at a time when it is not yet clear that it is in the best interests of Covanta Warren or its creditors to pursue such claims." Covanta Warren is continuing to review its options with respect to filing a plan of reorganization. In accordance with its duties to its creditors, Covanta Warren filed the Preference Complaints as "placeholder" lawsuits to avoid the impact of the expiration of the statute of limitations to bring preference actions upon their estates. Mr. Lazar acknowledges that it is possible under Covanta Warren's proposed plan of reorganization that Covanta Warren will not pursue preference actions. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. On March 10, 2004, Covanta Energy Corporation and its core subsidiaries emerged from chapter 11 as a wholly owned subsidiary of Danielson Holding Corporation. Some of Covanta's non-core subsidiaries have liquidated under separate chapter 11 plans. (Covanta Bankruptcy News, Issue No. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) CRYOPAK INDUSTRIES: Inks Pact Amending Convertible Loan Agreement ----------------------------------------------------------------- Cryopak Industries, Inc., (TSX VENTURE:CII) reached an agreement with the holders of 40% of the Company's outstanding $3.6 million convertible loan agreement -- CLA -- to amend and restate the CLA. Under the terms of the amended CLA, interest, which had been accumulating at 10% per annum, has been forgiven, and 2.53% interest added to the outstanding principal. The principal will be repayable in equal installments every six months beginning December 31, 2006. A reduced interest rate of LIBOR plus 25 basis points will be paid on the outstanding principal during this period. The amended CLA is no longer convertible into common shares of the Company. This offer has also been made to the remaining holders with an interest in the CLA and the Company is in discussions with representatives for certain of those parties at this time. With facilities in Vancouver and Montreal, Cryopak provides temperature-controlling products and solutions. The Company's clients include some of North America's leading retailers and consumer goods companies, as well as global pharmaceutical companies. In its retail business, the Company develops, manufactures and sells reusable ice substitutes, flexible hot and cold compresses, reusable gel ice and instant hot and cold packs. These products are marketed under such popular brand names as Ice-Pak(TM), Flexible Ice(TM) Blanket, Simply Cozy(R), and Flex Pak(TM). In its pharmaceutical business, the Company engineers solutions and supply products that help our customers safely transport their temperature sensitive pharmaceuticals. Over the past few years the Company has evolved into a recognized player in this growing segment as we assist customers in optimizing their cold chain processes. The Company's shares are listed on the TSX Venture Exchange under the symbol CII. For more information about the Company, visit http://www.cryopak.com/or call 1-800-667-2532. * * * Going Concern Doubt During the six months ended September 30, 2004, Cryopak Industries incurred a loss of $516,819. During the years ended March 31, 2004, 2003 and 2002, the Company incurred losses of $2,747,895, $2,420,842 and $273,759 respectively, and during the year ended March 31, 2004, the Company experienced negative cash flows from operations of $297,883. As at September 30, 2004, the deficit is $7,009,847 and the working capital deficiency is $4,541,266. The Company continues to be in default on the repayment of the principal and accrued interest of the convertible loan, which was due on June 7, 2003. These conditions raise substantial doubt on Company's ability to continue as a going concern. DUKE FUNDING: Moody's Places Ba3 Rating on Preference Shares ------------------------------------------------------------ Moody's Investors Service downgraded its ratings of these Classes of Notes and Preference Shares issued by Duke Funding II, Ltd., a collateralized debt obligation issuance: (1) $6,000,000 Class C-1 Mezzanine Secured Floating Rate Notes due 2036 from Baa2 on watch for possible downgrade to Ba1 no longer on watch for possible downgrade; (2) $8,000,000 Class C-2 Mezzanine Secured Fixed Rate Notes due 2036 from Baa2 on watch for possible downgrade to Ba1 no longer on watch for possible downgrade; (3) $4,000,000 Class D Subordinate Secured Fixed Rate Notes due 2036 from Ba3 on watch for possible downgrade to B2 no longer on watch for possible downgrade; (4) $5,000,000 Class 1 Pass-Through Notes due 2036 from Ba3 (as to the ultimate receipt of payments on the Class 1 Rated Balance calculated using a discount factor of 5 per cent per annum) on watch for possible downgrade to B1 (as to the ultimate receipt of payments on the Class 1 Rated Balance, which has amortized over time, calculated using a discount factor of 5 per cent per annum) no longer on watch for possible downgrade; (5) 9,600 Preference Shares (U.S. $9,600,000 Aggregate Liquidation Preference) from Ba3 (as to the payment of the liquidation preference) on watch for possible downgrade to B2 (as to the payment of the liquidation preference) no longer on watch for possible downgrade. The Preference Shares are rated as to the repayment of principal only. Moody's noted that the transaction, which closed in October of 2001, is currently failing the Moody's Maximum Rating Distribution Test. The ratings of the Class C-1, the Class C-2 Notes, the Class D Notes, the Pass-Through Notes and the Preference Shares were placed on the Moody's watchlist for possible downgrade on December 2, 2004. Moody's stated that the ratings assigned to the Class C-1 Notes, to the Class C-2 Notes, to the Class D Notes, to the Pass-Through Notes and to the Preference Shares, prior to the rating action taken today, are no longer consistent with the credit risk posed to investors. DYNCORP INTL: Moody's Junks Proposed $320M Senior Sub. Notes ------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to the proposed $420 million senior secured credit facility of DynCorp International LLC and a Caa1 rating to its proposed issuance of $320 million of senior subordinated notes. In addition, Moody's assigned a senior implied rating of B2 and a speculative grade liquidity rating of SGL-3 to DynCorp. The senior secured credit facility will include a $345 million term loan facility and a $75 million revolving credit facility. DIV Capital Corporation, a wholly owned subsidiary of DynCorp with nominal assets, will be a co-issuer of the senior subordinated notes. The Notes are expected to be issued pursuant to Rule 144A under the Securities Act. Veritas Capital has entered into a definitive agreement to acquire DynCorp from Computer Sciences Corporation -- CSC -- for total consideration of $850 million. The purchase price and related fees and expenses will be financed with the proceeds from the term loan, the Notes and $225 million of preferred and common equity. The revolver is expected to be unused at closing. Moody's assigned these ratings to DynCorp: * $75 million Senior Secured Revolving Credit Facility, rated B2; * $345 million Senior Secured Term Loan Facility, rated B2; * $320 million Senior Subordinated Notes, rated Caa1; * Senior Implied, rated B2; * Senior Unsecured Issuer Rating, rated B3; * Speculative Grade Liquidity Rating, rated SGL-3. The ratings outlook is stable. The ratings are subject to the review of the final executed documents and audited financial statements. The ratings reflect: (1) substantial leverage; (2) revenue concentration with three contracts expected to comprise about 60% of revenues for the fiscal year ended April 1, 2005; (3) significant revenue generation from politically unstable regions of the world that may make it difficult to complete contract performance and deploy qualified personnel; (4) the company's exposure to potential changes in government spending policies; (5) relatively low EBITDA margins; limited free cash flow generation in the last few years because of the growth in accounts receivable balances; and (6) significant contract re-competes in the next year. The ratings also reflect: (1) the company's position as a leading provider of government technical services and outsourced solutions; (2) long term contracts and long-standing relationships with key government agencies including the Department of State and Department of Defense; (3) global presence and infrastructure; (4) high percentage win rates on re-competes; (5) significant contract backlog in relation to revenues (total backlog at November 26, 2004 was about $2.3 billion of which $1.1 billion was funded); (6) the continuing trend toward outsourcing of work by government agencies; and (7) adequate liquidity. Although the total backlog amounts are significant, there is no guarantee that these revenues will materialize. The stable ratings outlook reflects the expected continued growth in demand for outsourced services by the federal government and the belief that DynCorp is competitively positioned to benefit from this growth. Moody's expects DynCorp to grow its revenues, improve operating margins and utilize free cash flows to reduce borrowings under its secured credit facility. The ratings or outlook could be pressured if: (1) insurgency activities in politically unstable regions of the world cause the government to halt the company's operations in a particular region or make it difficult to deploy personnel to perform services; (2) the government's spending priorities shift and cause the termination of any large contracts; the company is unable to win a significant portion of re-competes for its large contracts; (3) the company is unable to win sufficient new business to grow its revenue base; (4) the company increases leverage due to another large acquisition; or (5) the company incurs substantial costs in connection with certain outstanding legal proceedings. The ratings or outlook could be positively impacted if the company improves free cash flow through stronger than expected revenue growth or improved margins. The assignment of the SGL-3 speculative grade liquidity rating reflects the company's adequate liquidity profile and Moody's expectation of quarterly cash flow volatility, which may require significant utilization of the revolver. Moody's expects cash flows from operations to fluctuate during the next four quarters due to the company's rapid revenue expansion and uncertainty as to the timing of collection of billed and unbilled accounts receivables. The company's recurring cash needs in the next twelve months will also include a minimal amount of capital expenditures and term loan amortization and an excess cash flow sweep pursuant to the terms of the proposed secured credit facility. Although Moody's expects the company to generate significant free cash flow from operations in the next twelve months, the timing of such cash flows is uncertain and the company may need to rely heavily on its revolver. Although financial covenant levels under the proposed credit facility have not been finalized, Moody's expects the company to have adequate cushion against the covenants over the next twelve months. The $420 million in senior credit facilities will be secured by substantially all the assets of DynCorp including a first-priority pledge of 100% of the capital stock of domestic subsidiaries. An unconditional guarantee from all material subsidiaries supports the credit facility. The $320 million of Notes will be subordinated to existing and future senior debt of DynCorp and will rank equally with future senior subordinated debt. The Notes will be guaranteed on a senior subordinated basis by existing and future domestic subsidiaries of the company. DynCorp will be highly leveraged at the closing of the acquisition with debt to total book capitalization of about 75%. Pro forma free cash flow to total debt is expected to be in the range of 5%-7% in the fiscal year ending April 1, 2005. Pro forma debt to EBITDA is expected to be about 5.5 times for the fiscal year 2005 and pro forma EBITDA to interest is expected to be over 2 times. Headquartered in Irving, Texas, DynCorp provides defense technical services and government outsourced solutions primarily to U.S. government customers throughout the United States and internationally. DynCorp's revenues for the twelve-month period ended October 1, 2004 was about $1.6 billion. E*TRADE FINANCIAL: S&P Alters Outlook on Low-B Ratings to Positive ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' long-term counterparty rating on E*TRADE Financial Corp. E*TRADE Bank's counterparty ratings were affirmed at 'BB/B.' At the same time, the outlook for E*TRADE Financial was revised to positive from stable. The outlook for E*TRADE Bank remains stable. "The outlook revision at E*TRADE Financial Corp reflects continued improvements in fundamental performance as it benefits from its strategic and operational restructuring program, operating leverage at the brokerage segment, and reduced balance sheet leverage at the holding company," said Standard & Poor's credit analyst Helene De Luca. "Also, higher core earnings at the Bank, driven primarily by its lower cost of funds, continue to enhance the holding company's income diversification." Should the brokerage segment expand its market share and revenue of its core business, the Bank continue to generate consistent and improving core earnings, and the holding company continue its lower balance sheet leverage, E*TRADE Financial Corp.'s ratings could be raised. ENRON CORP: Court Approves Termination of Cuiaba Financing Pacts ---------------------------------------------------------------- Prior to their bankruptcy filing, Enron Corp. and certain of its affiliates became involved with certain affiliates of Shell Gas B.V. in the construction of a power plant in Cuiaba, Brazil, and related natural gas pipeline spurs in Brazil and Bolivia. The Cuiaba Project is now completely built and operational. Martin A. Sosland, Esq., at Weil Gotshal & Manges LLP, in New York, relates that the Cuiaba Project consists of four companies that on an integrated basis: -- operate around 480 MW gas-fired, combined-cycle power plant in Cuiaba, Mato Grosso, Brazil; -- purchase natural gas in Bolivia or Argentina; and -- transport the gas to Brazil for use as fuel in the generation of electrical energy at the Power Plant. Empresa Produtora de Energia Ltda., a power generation company, operates the Power Plant. Gasoriente Boliviano Ltda., a gas transportation company, operates a 226-mile, 18-inch gas pipeline in Bolivia to transport natural gas to the Bolivia-Brazil border. Gasocidente do Mato Grosso Ltda., another gas transportation company, operates a 175-mile, 18-inch gas pipeline in Brazil, which connects to the GasBol pipeline at the Bolivia-Brazil border and transports natural gas from the border to the Power Plant. Transborder Gas Services Ltd., a gas supply company, purchases natural gas from Bolivian or Argentinean sources, arranges for transportation of the gas, including through GasBol and GasMat, and sells the gas to EPE. The Cuiaba Project sells all of the capacity of, and energy produced by, EPE to Furnas Centrais Eletricas SA, one of Brazil's federally owned electricity generation companies. Shell Settlement Agreement With the U.S. Bankruptcy Court for the Southern District of New York's approval, the Debtors, Shell Gas B.V., Shell Overseas Trading Limited, Shell Cuiaba Holdings Limited and Shell Gas Latin America B.V., entered into a settlement agreement dated June 3, 2003, to resolve disputes regarding the obligation to fund proposed budget increases during the development of the Cuiaba Project. Pursuant to the Settlement Agreement, the parties agreed to use commercially reasonable efforts to obtain the release of any liens relating to the Cuiaba Financing. Cuiaba Financing Agreements In September 1999, Reorganized Debtors Enron Corp., Enron South America, LLC, Enron do Brazil Holdings, Ltd., and Enron Brazil Power Holdings I, Ltd. entered into financing arrangements with respect to the Cuiaba Project: 1. Enron International Bolivia Holdings Ltd.; 2. the Shell Companies -- SOTL, Shell Gas B.V., Shell Austria Gesellschaft m.b.H., Shell International Investments Limited, Shell Cuiaba, Shell Treasury Dollar Company Limited; 3. the CIB Companies -- EPE, EPE Holdings Ltd., EPE Investments Ltd., GasBol, GasMat, GasMat Holdings Ltd., GasMat Investments Ltd., Transborder Gas, EPE Generation Holdings Ltd.; 4. Interjuris S/C Ltda., as Escrow Agent; 5. KfW, formerly Kreditanstalt Fur Wiederaufbau; 6. Overseas Private Investment Corporation; 7. Transredes - Transporte de Hidrocarburos S.A.; and 8. Banco Citibank S.A., Citibank, N.A., Bolivia, and Citibank, N.A., as agents Pursuant to the financing arrangements, OPIC and KfW agreed to provide limited recourse project financing with respect to the development and construction of the GasBol and GasMat pipelines and the Power Plant: (a) OPIC, EPE, GasMat and GasBol, entered into a Finance Agreement dated September 30, 1999, as amended from time to time; (b) EPE, GasMat, GasBol and KfW entered into a KfW ECA Loan Facility Agreement dated September 30, 1999, as amended from time to time -- the KfW Covered Loan Agreement; (c) EPE, GasBol, GasMat and KfW entered into a KfW Commercial Loan Facility Agreement dated September 30, 1999, as amended from time to time -- the KfW Uncovered Loan Agreement; (d) EPE, GasMat, GasBol, OPIC, KfW, Banco Citibank, Citibank Bolivia, and Citibank N.A., and certain other parties entered into a Common Terms Agreement, dated September 30, 1999, as amended from time to time; (e) EPE, Enron, SOTL and Transredes entered into a Liquidity Facility Agreement dated September 30, 1999, as amended from time to time; (f) OPIC, KfW, Transredes, Enron, Shell and certain other parties, entered into an Intercreditor Agreement dated September 30, 1999, as amended from time to time; and (g) GasBol, EPE, and GasMat and the Agents entered into a letter agreement dated June 10, 1999, as amended on June 14, 1999, as amended from time to time -- the Agency Fee Letter. As contemplated under the Financing Agreements, OPIC and KfW were granted a security interest in certain of the assets of EPE, GasMat, GasBol and certain other CIB Companies to secure the obligations under the Financing Agreements. Mr. Sosland reports that certain condition precedents were never satisfied under the Financing Agreements. As a result, the parties to the Cuiaba Financing Agreements desire to: * terminate each of the Financing Agreements and related documents; and * release the security interests and any potential claim established under the Agreements. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Debtors sought and obtained the Court's authority to enter into the Termination Agreement. The Debtors believe that the settlement contemplated by the Termination Agreement is a very favorable development for their Chapter 11 cases. The Termination Agreement resolves numerous complicated legal and factual issues relating to the Financing Agreements. Additionally, the Termination Agreement facilitates the removal of liens on a substantial number of assets as required pursuant to the terms of the Settlement Agreement. Termination Agreement The salient terms of the Termination Agreement are: A. Termination of Financing Agreements These agreements will be terminated: -- OPIC Finance Agreement; -- KfW Covered Loan Agreement; -- KfW Uncovered Loan Agreement; -- Common Terms Agreement; -- Intercreditor Agreement; -- Liquidity Facility Agreement; and -- Agency Fee Letter B. Termination of Security Agreements 29 Security Agreements related to the financing arrangements will be terminated C. Termination of Performance Security In connection with the termination of each Financing and Security Agreements, any performance or retention bond, parent guaranty, letter of credit or other security provided by any party to another will, as of the Effective Date of the Termination Agreement, be terminated and cancelled, and will thereafter be null, void and of no further binding effect. D. Termination of Escrow Account The escrow agreement dated October 10, 2000, entered into by Freshfields Bruckhaus Deringer, LLP, EPE, GasBol, GasMat, OPIC, KfW and certain other parties, pursuant to which certain of the agreements related to the Financing were escrowed, will be terminated and cancelled and will thereafter be null, void and of no further binding effect. OPIC and KfW will provide written instructions directing the escrow agent under the Freshfields Escrow Agreement to destroy the escrowed documents and to notify the parties that the documents have been destroyed. E. Revocation of POA The Borrowers and Lenders will revoke each of the powers of attorney executed in connection with the Financing Agreements. No party will be entitled to receive any payments or indemnities as a result of the revocation of the POA. F. Release Each party will release any encumbrance granted to it under the Security Agreements. To formalize in Brazil the termination and the release of the securities created in Brazil, the Brazilian Governmental Authorities may require the presentation of a separate release term of each Security Agreement executed in Brazil. The parties will agree promptly after the written request of the Borrowers to execute the release terms, as they become reasonably necessary. The parties will take all measures that may be necessary or desirable for the registration in Brazil of the Termination Agreement, together with its sworn translation into Portuguese, and the release terms. Each party will take further action, as may be necessary or reasonably desirable, to terminate or release any encumbrance on any asset of any CIB Company. G. Release of Claims Each Lender, on behalf of itself and its affiliates will, on the Effective Date, fully and forever release and discharge each Borrower and its related parties from all claims that could be asserted by any Lender against any Borrower or any of their related parties. Each of the Lenders will not seek to bring any action of any kind against any Borrower Released Party for any claim, and each of the Borrowers will not seek to bring any action of any kind against any of the Lender Released Parties for any claim. H. Release of Claims by the Borrowers Each Borrower, on behalf of itself and its affiliates, will on the Effective Date, release and discharge each Lender and its related parties of and from all claims that could be asserted after the Effective Date, by any Borrower against any Lender. A copy of the Termination Agreement is available for free at: http://bankrupt.com/misc/CuiabaTerminationPact.pdf Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. EYE CARE: S&P Junks Proposed $150 Million Subordinated Notes ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on Eye Care Centers of America, Inc., including the 'B' corporate credit rating. All ratings were removed from CreditWatch, where they were placed with developing implications on Dec. 7, 2004. The outlook is stable. At the same time, Standard & Poor's assigned its 'B' bank loan rating to Eye Care Centers' proposed $190 million secured credit facility. A recovery rating of '3' also was assigned to the loan, indicating that lenders can expect a meaningful recovery of principal (50%-80%) in the event of a default. In addition, a 'CCC+' rating was assigned to Eye Care's proposed $150 million subordinated note issuance. Proceeds from the credit facility and subordinated notes, along with $163 million in equity contribution, will be used to fund the buyout of Eye Care Centers by Moulin International and Golden Gate Capital. Moulin International (unrated), a Hong Kong based optical frames manufacturer and distributor, will own a controlling equity interest in the company. Pro forma for the transaction, Eye Care will have about $315 million in funded debt. "Ratings on the San Antonio-based specialty optical retail chain reflect Eye Care Centers' participation in the increasingly competitive and promotional optical retail industry, its small size relative to key competitors, and high debt leverage," said Standard & Poor's credit analyst Ana Lai. The company, which is the third-largest optical retail chain in the U.S., benefits from its satisfactory market position in the relatively stable, but highly competitive and fragmented, U.S. optical retail market. Eye Care faces strong competition from industry leader Luxottica S.p.A., owner of Lenscrafters and Cole Vision, which has much larger chains in terms of sales and store locations, and thus benefits from greater economies of scale. Still, industry fundamentals remain positive, supported by favorable demographics, product innovations, and the growing role of managed care in this industry. Eye Care Centers operates 377 stores, primarily in the superstore format, under nine different brands. The company's strategy to cluster stores in its target markets to maximize operating efficiencies has enabled it to attain the No. 1 or No. 2 share position in most of its largest regional markets. FEDERAL-MOGUL: Says Proposed Asbestos Trust is Fatally Flawed ------------------------------------------------------------- Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ) and the Official Committee of Unsecured Creditors of Federal-Mogul submitted a joint letter to the U.S. Senate strongly opposing the creation of a national asbestos trust fund, citing the extremely inequitable and adverse impact such a proposal would have on Federal-Mogul and its future viability. While Federal-Mogul and the Creditors Committee support efforts to reform the asbestos litigation crisis through passage of a medical criteria bill and also support enactment of meaningful tort reform measures, the Company and Creditors cannot support a national trust that imposes a grossly disproportionate payment obligation on Federal-Mogul while providing a bailout to a small number of companies that are responsible for the lion's share of the most serious asbestos claims in the tort system. In a process strikingly reminiscent of the "taxation without representation" that the American Revolution was fought over, the trust fund would compel mandatory annual payments for a period of nearly 30 years from companies, a number of whom have joined a new coalition of defendant companies opposing the legislation. These payments threaten the viability of countless companies, bear no relevance to their asbestos exposure or costs, and have been developed in the absence of consultation with or input from the companies. Compounding the devastating effect of the payments, the trust fund would strip companies of their insurance coverage for asbestos claims -- coverage on which premiums have been paid and that would be forfeited, perhaps unconstitutionally. Through this manifestly unfair and undemocratic process, the legislation would make Federal-Mogul the largest proposed contributor to the national asbestos trust, requiring the Company to pay a far greater amount to the trust fund than it would under its reorganization plan, while simultaneously eliminating the company's ability to access its insurance assets to compensate foreign asbestos claimants. In their letter, the Company and Creditors Committee again outlined the dire business consequences that passage of legislation creating a national asbestos trust would have on the Company, and urged Senators to consider alternative legislation establishing medical criteria as a more equitable solution to the asbestos litigation crisis. This joint Company and Creditors Committee letter follows a Jan. 3, 2005, business coalition letter to Senate Judiciary Committee Chairman Arlen Specter (R-PA) signed by Exxon Mobil, DuPont, Federal-Mogul and the Creditors Committee, and other U.S. businesses opposing the national trust. As in the case of the other companies signing the coalition letter, Federal-Mogul can demonstrate that it fares far worse under the legislation than under the existing tort system or if allowed to confirm its reorganization plan. * * * Federal-Mogul Corporation and the Official Committee of Unsecured Creditors assert that the concept of a national no-fault asbestos claims trust, as incorporated in the Federal Activities Inventory Reform Act, is fatally flawed, despite the best efforts of the U.S. Senate and business, insurance and organized labor stakeholders. A full-text copy of Federal-Mogul and the Committee's joint letter is available for free at: http://bankrupt.com/misc/fedmogul_ontheFAIRAct.pdf Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's larges 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. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIB BUSINESS: Fitch Junks Six Adjustable-Rate Note Classes ---------------------------------------------------------- Fitch Ratings takes rating actions on these classes of securities: FNBNE Business Loan Notes, series 1998-A: -- Class A notes affirmed at 'AA'; -- Class M-1 affirmed at 'BBB'; -- Class M-2 notes affirmed at 'BB'. FIB Business Loan Notes, series 1999-A: -- Class A notes downgraded to 'A+' from 'AA'; -- Class M-1 notes affirmed at 'BBB'; -- Class M-2 notes affirmed at 'BB'. FIB Business Loan Notes, series 2000-A: -- Class A notes downgraded to 'B' from 'BBB-'; -- Class M-1 notes downgraded to 'CCC' from 'B'; -- Class M-2 notes downgraded to 'CC' from 'CCC''; -- Class B notes affirmed at 'CC'. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 1999-1: -- Class A notes downgraded to 'BB-' from 'BBB'; -- Class M notes downgraded to 'CCC' from 'B-'. -- Class B notes downgraded to 'CC' from 'CCC'. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 2000-1: -- Class A notes downgraded to 'B' from 'BBB-'; -- Class M notes downgraded to 'CC' from 'CCC'. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 2000-2: -- Class A notes downgraded to 'BB+' from 'BBB'; -- Class M notes downgraded to 'B-' from 'B'. For the affirmed classes, the transactions are performing within Fitch's expectations. The downgraded classes reflect deterioration in credit quality and adverse collateral performance within the securitizations, and the resulting decline in credit enhancement available in each transaction. Fitch's performance expectations incorporated several stress scenarios, which included stressed recovery rates on both defaulted contracts and expected defaults on delinquent contract balances. As a result of current performance and the assumed scenarios, ratings have been lowered or affirmed. Since Fitch's last rating action on Aug. 1, 2003, delinquencies within the FIB securitizations have remained at historically high levels. Specifically, loans to borrowers in the manufacturing, metals/steel mill, and millwork/textile industries have contributed to the transactions' high delinquency and loss levels, which have exceeded Fitch's initial base case assumptions. Credit Enhancement and Excess Spread Structurally, the FIB securitizations contain a mechanism that traps additional excess spread equal to the full amount of all delinquent loans 180-720 days past due. However, the significant portfolio delinquency experience, in some cases greater than 20%- 30% of the outstanding collateral loan balance prevents the trapping mechanism to adequately fund up the reserve account to the required levels and have hindered the transactions' abilities to absorb losses. Consequently, the transactions have experienced a significant reduction in available excess spread, which has in turn, negatively impacted credit enhancement. Of particular concern is the continued increasing under- collateralized position for several transactions. Although delinquencies have remained relatively stable, albeit higher than Fitch's original expectations and historical levels, the pace of recoveries has not increased enough to help collateralize the transactions. As of Nov. 30, 2004, the 1998-A, 1999-A, 2000-A, 2000-1, and 2000-2 are currently under-collateralized by -2.03%, - 8.90%, -23.66%, -22.65%, and -3.05%, respectively. Methodology Employed In its analysis, Fitch reviewed each securitization at the individual loan level. For all loans greater than 90 days past due, Fitch modeled expected losses and recoveries for each loan based on the collateral supporting that loan. During its collateral review, Fitch assessed expected recoveries on each piece of collateral. Essential to Fitch's analysis were: * the specific collateral type supporting the loans (i.e. machinery and equipment, real estate and/or accounts receivable), * appraised values, * FIB's lien position; * historical recovery rates and * FIB's own expected recovery rates. After estimating future recoveries and subsequent losses on each loan, Fitch defaulted all loans over 90 days past due in each transaction in order to estimate future enhancement levels. This practice enabled Fitch to estimate the amount of future enhancement that would be able to cover losses for each class of notes. Fitch's review also took into consideration certain top borrower concentrations within the securitizations relative to current and expected credit enhancement levels. Securitization-specific performance statistics as of Nov. 30, 2004: FNBNE Business Loan Notes, series 1998-A: -- pool factor of 16% and cumulative net losses of 7.56%; -- the 90-720 day delinquency rate is 7.54% and the 180-720 day delinquency rate is 7.54%. FIB Business Loan Notes, series 1999-A: -- pool factor of 22% and cumulative net losses of 15.52%; -- the 90-720 day delinquency rate is 13.09% and the 180- 720-day delinquency rate is 7.96%. FIB Business Loan Notes, series 2000-A: -- pool factor of 29% and cumulative net losses of 21.88%; -- the 90-720 day delinquency rate is 13.38% and the 180- 720-day delinquency rate is 8.30%. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 1999-1: -- pool factor of 30% and cumulative net losses of 12.97%; -- the 90-720 day delinquency rate is 19.62% and the 180- 720-day delinquency rate is 12.06%. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 2000-1: -- pool factor of 44% and cumulative net losses of 21.90%; -- the 90-720 day delinquency rate is 25.17% and the 180- 720-day delinquency rate is 16.53%. FIB SBA Loan-Backed Adjustable-Rate Certificates, series 2000-2: -- pool factor of 41%; cumulative net losses of 15.57%; -- the 90-720 day delinquency rate is 8.43% and the 180-720 day delinquency rate is 6.32%. Fitch will continue to closely monitor these transactions and may take additional rating action in the event of further deterioration. FIB, formerly First National Bank of New England, is a Connecticut Bank and Trust Company organized in 1955 and headquartered in Hartford, Connecticut. Prior to August 2001, FIB was a wholly owned subsidiary of First International Bancorp, Inc., a Delaware Corporation. United Parcel Service, headquartered in Atlanta, Georgia, purchased FIB in August 2001. FIBERMARK INC: Chapter 11 Plan Voting Deadline Moved to Jan. 24 --------------------------------------------------------------- FiberMark, Inc., (OTC Bulletin Board: FMKIQ) filed a notice extending the voting deadline on its Plan of Reorganization to January 24. Originally set for January 20, the deadline was extended to provide additional time to resolve certain issues. As reported in the Troubled Company Reporter on Jan. 19, 2005, FiberMark advised the U.S. Bankruptcy Court for the District of Vermont that disagreements among bondholder members of the company's Creditors Committee as to a number of corporate governance issues could result in a rejection of the Plan by the company's bondholders. Although the Creditors Committee had agreed to support the Plan of Reorganization filed on Dec. 17, its bondholder members have been unable to reach a consensus regarding certain implementation documents, primarily related to corporate governance, which must be filed in advance of the confirmation hearing and must be approved prior to the Plan's effective date. The company said it would withdraw the Plan of Reorganization on January 21 if agreement among the creditors cannot be reached on the implementation issues prior to that date. In that event, the company intends to file a new Plan of Reorganization that would include typical governance provisions. The company anticipates no other material changes to its Plan. Any new Plan, if filed, may require a second voting process, which would likely result in a delay in the company's emergence from chapter 11 of approximately 30 to 60 days, or until late March or April. Although the company was not a party to the discussions that occurred among several of its major bondholders, it understands that the discussions centered on issues related to post-emergence corporate governance matters, including corporate charter and by-law provisions related to shareholder rights. Since the reorganized company is to be incorporated under Delaware law, matters of corporate governance would be determined with reference to such law. While an extensive array of shareholder protections exist under Delaware law, such protections may vary by agreement of the shareholders. Any variation may impact positively or negatively the rights of a particular shareholder, depending on the size of its holdings. The company believes that its major future shareholders were unable to agree unanimously on the degree to which the company's future corporate governance provisions should be changed from the standard provisions of Delaware law, with the result that the company's Plan as filed on December 17 may not receive the votes required for Bankruptcy Court approval. These rights relate to the new shareholders of FiberMark, including current bondholders and trade creditors. The rights at issue do not pertain to current shareholders, whose shares are expected to be cancelled as specified in FiberMark's Plan of Reorganization, with no recovery expected for such current shareholders. The company does not anticipate publicly reporting fourth-quarter and year-end 2004 results if it emerges from chapter 11 as a private company prior to year-end SEC filing deadlines. However, should emergence from chapter 11 be delayed beyond March 30, the company would anticipate publicly reporting these results and filing an Annual Report on Form 10-K with the SEC. Headquartered in Brattleboro, Vermont, FiberMark, Inc. -- http://www.fibermark.com/-- produces filter media for transportation applications and vacuum cleaning; cover stocks and cover materials for books, graphic design, and office supplies and base materials for specialty tapes, wallcoverings and sandpaper. The Company filed for chapter 11 protection on March 30, 2004 (Bankr. D. Vt. Case No. 04-10463). Adam S. Ravin, Esq., D.J. Baker, Esq., David M. Turetsky, Esq., and Rosalie Walker Gray, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $329,600,000 in total assets and $405,700,000 in total debts. FIRST VIRTUAL: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: First Virtual Communications, Inc. 3200 Bridge Parkway, Suite 202 Redwood City, California 94065 Bankruptcy Case No.: 05-30145 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- CUseeMe Networks, Inc. 05-30146 Type of Business: The Debtor delivers integrated software technologies for rich media web conferencing and collaboration solutions. See http://www.fvc.com/ Chapter 11 Petition Date: January 20, 2005 Court: Northern District of California (San Francisco) Judge: Thomas E. Carlson Debtors' Counsel: Kurt E. Ramlo, Esq. Skadden, Arps, Slate, Meagher & Flom 300 South Grand Avenue #3400 Los Angeles, CA 90071 Tel: 213-687-5628 Total Assets: $7,485,867 Total Debts: $13,567,985 Debtor's 30 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Cornell Research Foundation Technology Sale $300,000 Attn: Lewis Goodwin Agreement 20 Thornwood Drive, Ste. 105 Ithaca, NY 14850 Baker & McKenzie, Attorneys Trade $298,518 at Law Attn: Cynthia Jackson 660 Hansen Way Palo Alto, CA 94304 France Telecom Trade $112,500 Attn: Tania L'Hermite 38 Rue du General Leclerc 92794 Issy les Moulineaux Cedex 9 Paris, France Westport Joint Venture Lease $95,961 American Express Trade $35,889 Kompass Integrated Solutions Trade $27,286 American Inform Technology Trade $23,800 Corp. Cooley Godward LLP Trade $18,528 Ilima Partners, LLC Trade $17,050 Wilson Sonsini Goodrich Trade $16,353 & Rosati McVey Defense Initiatives Trade $15,088 Group Inc. Market-Vantage Internet Trade $14,745 Performance Marketing LLC Mark Laita Photography Trade $14,650 AT&T Trade $14,402 Gung-Ho Company Trade $14,286 ArchiText, Inc. Trade $13,735 BroadPR, Inc. Trade $12,490 Delaware Secretary of State Annual Incorporation $11,873 Division of Corporations Fees CDW Corporation Trade $10,849 8020 Group Trade $10,600 PricewaterhouseCoopers, LLP Trade $10,512 Okeeffe & Company Trade $10,000 KPMG LLP Trade $10,000 Productivity Card Services Trade $9,801 Overture Partners, LLC Trade $7,910 E*Trade Trade $7,624 Immix Group Inc. Trade $7,500 Bowne of Los Angeles, Inc. Trade $6,987 Agere Systems Trade $6,824 Spherion Corporation Trade $6,544 FREEDOM MEDICAL: Turns to Penn Hudson for Financial Advice ---------------------------------------------------------- Freedom Medical, Inc., seeks authority from the U.S. Bankruptcy Court for the Eastern District of Pennsylvania to retain Penn Hudson Financial Group, Inc., as its financial advisor during its bankruptcy proceeding. Penn Hudson is expected to: a) evaluate the Debtor's business; b) render advice to the Debtor and its management with respect to various strategic alternatives; c) assist the Debtor with the preparation and presentation of a plan of reorganization and assist in its implementation; d) identify prospective lenders and purchasers and exploit alternatives of restructuring the Debtor's indebtedness to Wachovia Bank, N.A. and assist in the sale of the Debtor's assets; e) prepare and disseminate information required by prospective lenders and purchasers; f) provide expert testimony, to the extent necessary, with respect to its analysis and advice; and g) provide any additional financial advice and assistance to the Debtor as may be required and agreed upon. Robert M. Starr, a managing director at Penn Hudson, discloses that the Debtor will pay his Firm a success fee of $1.75% for any aggregate debt refinanced and placed, and $1.75% for any assets sold. For their professional services, the Debtor agrees to pay the hourly rate of $300 to managing directors and $195 to vice presidents and associates of the Firm. To the best of the Debtor's knowledge, Penn Hudson is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Exton, Pennsylvania, Freedom Medical, Inc., -- http://www.freedommedical.com/-- sells electronic medical equipment and related services to hospitals, alternate site healthcare providers, and EMS transport organizations. The Company filed for chapter 11 protection on December 29, 2004 (Bankr. E.D. Pa. Case No. 04-37092). When the Debtor filed for protection from its creditors, it listed estimated assets and debts of more than $50 million. GENERAL NUTRITION: Restructuring Prompts S&P to Lift Rating to B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its bank loan rating on General Nutrition Centers, Inc., to 'B+' from 'B'. The company recently used the proceeds from a senior unsecured note offering to repay a significant portion of its term loan, thereby reducing the overall level of its senior secured debt. As a result, the value of the company, in a distressed scenario, will more than fully cover the smaller bank loan. A recovery rating of '1' was also assigned to the loan, indicating the expectation for full recovery of principal in the event of a default. All other ratings on GNC were affirmed, including the 'B' corporate credit rating. The outlook is stable. "Ratings on GNC, a leading specialty retailer of nutritional supplements, reflect the company's recent weak operating performance, expectations of continued operational challenges, its product liability risk, and high debt leverage," said Standard & Poor's credit analyst Kristi Broderick. GNC's recent weak operating performance is due to softness in the diet category, a drop-off in sales of low-carb products, and poor execution of operations, which has resulted in a loss of market share. The company's merchandise assortment has not been managed well. A healthy first quarter of 2004 was more than offset by a soft second quarter and an even weaker third quarter. This deteriorating trend is revealed in GNC's comparable-store sales figures for its company-owned domestic stores, which increased 6.7% in the first quarter, but fell 3.2% in the second quarter and then 10.7% in the third quarter. While other players in the nutritional supplements industry are feeling the softness in the diet category, they have not experienced the magnitude of GNC's recent weakness in comparable-store sales. GITTO GLOBAL: U.S. Trustee Asks Court to Convert Case to Chapter 7 ------------------------------------------------------------------ Phoebe Morse, the United States Trustee for Region 1, asks the U.S. Bankruptcy Court for the District of Massachusetts to convert the Chapter 11 case filed by Gitto Global Corporation to a Chapter 7 liquidation proceeding. Ms. Morse gives the Court three reasons militating in favor of her request: a) the Debtor has failed to file its monthly operating reports since the period ending October 31, 2004, and those reports are necessary for the office of Ms. Morse to monitor the Debtor's chapter 11 case; b) since the Court authorized the sale of substantially all of the Debtor's assets on December 10, 2004, and closed on December 17, 2004, there has been a continuing loss or diminution of the Debtor's estate; and c) with practically all of its assets sold, the Debtor is unable to conduct ongoing business, it has no reasonable likelihood of rehabilitation and is therefore unable to effectuate a plan of reorganization. The Court will convene a hearing at 2:00 p.m., on Feb. 9, 2005, to consider Ms. Morse's conversion motion. Headquartered in Lunenburg, Massachusetts, Gitto Global Corporation -- http://www.gitto-global.com/-- manufactures polyvinyl chloride, polyethylene, polypropylene and thermoplastic olefinic compounds. The Company filed for chapter 11 protection on September 24, 2004 (Bankr. D. Mass. Case No. 04-45386). Andrew G. Lizotte, Esq., at Hanify & King P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. HAWAIIAN AIRLINES: Wants to Modify Pilots Contract -------------------------------------------------- Having reached a deadlock with its pilots union despite months of negotiations, Hawaiian Airlines requested bankruptcy court approval to extend and modify its labor contract with the Air Line Pilots Association -- ALPA. The company said it would continue to try to reach a negotiated agreement. Trustee Joshua Gotbaum said, "We would much rather negotiate an agreement -- as we've done with every other union -- than have the court impose one. We have proposed a contract that would preserve the 40-plus percent wage increases the pilots have enjoyed over the past four years, plus additional wage increases, plus a pension plan as generous as any in the industry, plus profit sharing. Unlike every other airline, we've proposed no wage cuts and no cost cuts. From the onset of negotiations we have sought to keep costs from rising more, by moving to industry standard productivity and benefits. We think that's what Hawaiian needs to do at a time when every one of our competitors is cutting costs and lowering fares." In its filing with the bankruptcy court, Hawaiian noted that over the past four years the airline's labor costs had risen to the point that they were now higher than those of its major competitors. Since airlines are now competing primarily on the basis of low fares, Hawaiian believes that to compete its costs, including labor costs, cannot be out of line. Nonetheless, the airline pointed out that it has not proposed to cut wages or overall labor costs, but instead only to keep them from rising even more. Hawaiian has already negotiated agreements that meet this test with the Association of Flight Attendants, the International Association of Machinists, the Network Engineers, and the Transport Workers Union. Taken together, the contracts already negotiated cover 89 percent of the union employees. All of these contracts were recommended by these unions for ratification by their members; some have already been ratified, and others are now in process. However, Hawaiian cannot exit bankruptcy until new contracts are in place for all unions. Gotbaum said the court process would provide a deadline and help speed Hawaiian's exit from bankruptcy, and that was the reason for the company's action. In its other labor agreements, Hawaiian has negotiated wage increases, combined with improvements in productivity and changes in benefits so that overall costs would neither rise nor fall. The airline would not discuss the details of any of the agreements, but said that it had made similar proposals to the pilots. The company noted that it had negotiated cost cuts from many of its suppliers, including its aircraft lessors, that in 2005 alone these would save Hawaiian some $66 million. Nonetheless, Gotbaum said, Hawaiian could not succeed if its labor contracts or costs were uncompetitive. Gotbaum also noted that everyone recognizes the contribution of the pilots and other employees to the airline's recovery. "Hawaiian's success is due in large part to the people who are Hawaiian Airlines. Our goal is contracts that are fair and recognize the extraordinary contributions of our employees, while meeting Hawaiian's competitive needs. If Hawaiian is to get out of bankruptcy and survive, we need both." After consulting with ALPA, Hawaiian requested a hearing on its motion by the bankruptcy court on February 14 and 15, 2005. In the interim, the company will continue to attempt to reach an agreement. Headquartered in Honolulu, Hawaii, Hawaiian Airlines, Inc., -- http://hawaiianair.com/-- is a subsidiary of Hawaiian Holdings, Inc. Amex and PCX: HA). The Company provides primarily scheduled transportation of passengers, cargo and mail. Flights operate within the South Pacific and to points on the west coast as well s Las Vegas. Since the appointment of a bankruptcy trustee in May 2003, Hawaiian Holdings has had no involvement in the management of Hawaiian Airlines and has had limited access to information concerning the airline. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. D. Hawaii Case No. 03-00817). Joshua Gotbaum serves as the chapter 11 trustee for Hawaiian Airlines, Inc. Mr. Gotbaum is represented by Tom E. Roesser, Esq., and Katherine G. Leonard, Esq., at Carlsmith Ball LLP, and Bruce Bennett, Esq., Sidney P. Levinson, Esq., Joshua D. Morse, Esq., and John L. Jones, II, Esq., at Hennigan, Bennett & Dorman LLP. When the Debtors filed for protection from their creditors, they listed $100 million in assets and $100 million in debts. HEALTHCARE PARTNERS: S&P Rates Planned $145M Sr. Sec. Debt at BB ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' corporate credit rating to Torrance, California-based integrated medical provider HealthCare Partners Ltd. -- HCP. Standard & Poor's has also assigned its 'BB' senior secured debt rating and '3' recovery rating to HCP's proposed $10 million senior secured revolving credit facility maturing in 2010 and a $135 million senior secured term loan B maturing in 2011. Also, a financial sponsor purchased a minority interest in the company through preferred equity. Management and physician partners will continue to hold a majority stake. The company is expected to use the proceeds from the $135 million term loan, sponsor preferred equity, and a portion of cash on hand for a distribution to HCP's partners. Pro forma for the transaction, HCP will have $135 million of total debt outstanding. The outlook on HCP is stable. "The speculative-grade ratings reflect HCP's exposure to capitation risk, its payor and regional concentration, and its increased debt obligation following the transaction," said Standard & Poor's credit analyst Jesse Juliano. "These concerns are partially offset by the company's strong position in the Los Angeles County market, its long-standing relationships with its largest payors, and its successful record of managing costs." HCP, the largest privately owned medical group in California, is an integrated health care services provider focused on the Los Angeles County market. HCP generally contracts with managed care health plans to provide care for a capitated (per member per month) rate. HCP provides its services through a network of more than 700 primary care physicians, 1,800 specialists, and 21 hospitals. HCP's success will depend on its ability to negotiate for fixed capitation rates that are higher than the variable and increasing costs of providing care. While HCP has successfully managed this risk in the past, the company will have less financial flexibility to absorb unexpected operating shortfalls after the recapitalization transaction. In addition, the company's four largest clients (PacifiCare, Blue Cross of California, HealthNet, and Blue Shield of California) account for 85% of HCP's total membership, a concentration that reflects the dominance of these insurance providers in the Los Angeles County market. The loss of one of these providers or significant changes to related contracts could hurt HCP's operating performance. Also, HCP is exposed to potential (though currently unforeseen) regulatory changes related to providing care in the state of California. Finally, 37% of HCP's revenues come from senior capitation. If Medicare reimbursement and Medicare Advantage, a program that outsources Medicare coverage to private insurance companies, are less favorable businesses than anticipated, HCP could also be adversely affected. INTELSAT LTD: Fitch May Put Low-B Ratings on Unsecured Sr. Notes ---------------------------------------------------------------- Fitch Ratings has initiated coverage of Intelsat, Ltd., and its wholly owned subsidiary, Intelsat (Bermuda), Ltd., and expects to assign a 'B-' rating to Intelsat's unsecured senior notes, a 'B+' rating on the proposed offering of Intelsat Bermuda unsecured senior notes, and a 'BB' rating to the proposed new Intelsat Bermuda senior secured credit facilities upon finalization of buyout terms from Zeus Holdings. The Rating Outlook would be Stable. Fitch's rating action would affect an estimated $4.6 billion of existing and proposed pro forma total debt as of the end of the third quarter 2004. Fitch's expected ratings are based on the assumption that contributed equity will be at least $515 million, total consolidated debt is in the range of $4.6 billion, and the ratio of total debt to EBITDA is approximately 6 times. If the terms of the Zeus buyout deviate from these expectations, the ratings will be reviewed and could be revised. Fitch's expected ratings reflect Intelsat's size and scale as the second largest global provider of wholesale fixed satellite services, its high prospective leverage of about 6x (as measured by total pro forma debt to pro forma EBITDA), its adequate liquidity position, and Fitch's expectation for modest free cash flow generation even after its planned $5.1 billion acquisition by Zeus Holdings. Fitch's expected ratings also consider the intense competition for lease contracts in the face of industry overcapacity and difficult telecommunications industry conditions. Although Intelsat is the largest provider of commercial satellite capacity to the U.S. government and military, its largest customer segment remains traditional telephone carriage. This segment has been experiencing a decline in revenue due to both the overcapacity in the satellite industry and to a loss of customers to lower cost terrestrial fiber optic cable. The expected ratings also consider the growing competition from the company's largest rival, SES Global. The expected ratings are based on Intelsat's pro forma capital structure after an expected $5.1 billion acquisition by financial buyers investing about 10% ($515 million) of the purchase price in equity. Based on the estimated purchase price, this amount of equity leaves only thin asset coverage of the consolidated pro forma total debt. Although free cash flow should be sufficient to support modest capital spending and debt reduction, liquidity could be constrained if new satellite construction ramps up again. Unexpected satellite failures, such as the IS-804 failure on Jan. 14, 2005, may lead to earlier than planned capital spending requirements. Key to Fitch's expectation of stable EBITDA and free cash will be maintaining low capital expenditure levels after its recent rapid deployment and acquisition of new satellite capacity. Over the long term, satellites will need to be replaced as useful lives end. The cost of these satellite replacements could be substantial as demonstrated by the nearly $300 million per satellite that Intelsat spent on its new satellite additions over the past several years. The expected ratings also reflect possible sensitivity to the telecommunications sector specifically and to overall economic activity in general. Credit support is derived from a backlog of customer contracts of approximately $3.9 billion, which should provide stability in revenue generation. Even under the increased debt burden, pro forma total debt at Sept. 30, 2004, will be increasing from $2.2 billion to an estimated $4.6 billion, Intelsat should still produce free cash flow annually. Intelsat's liquidity position is supported by pro forma cash in excess of $80 million and an expected $300 million initially undrawn revolver. Fitch expects that a significant portion of expected free cash flow will be utilized to reduce leverage and increase its financial capacity for future satellite additions. The initiation of a common stock cash dividend over the foreseeable future, without a material improvement in industry conditions and Intelsat's financial performance could have a significant detrimental impact on the company's credit profile. During 2005, Fitch anticipates that the company will generate free cash flow levels of more than $200 million, representing a modest 4% of total debt. Fitch expects total consolidated leverage, as measured by the ratio of total debt to EBITDA, to remain over 5x over the next couple of years. Other than a $200 million February 2005 debt maturity, for which Intelsat Bermuda has arranged replacement financing in the form of a new secured term loan, Intelsat has nominal amounts of scheduled debt maturities from 2005-2007; however, $400 million of its 5.25% senior notes mature in 2008, presenting refinancing risk. Fitch believes that this refinancing risk is magnified, given the company's possible need to ramp up its capital spending in that time frame. Fitch's expected 'B-' rating for Intelsat Ltd.'s pro forma $1.7 billion of senior notes versus the expected 'B+' rating for Intelsat Bermuda's estimated pro forma $2.45 billion of senior notes reflects the structural subordination of the parent company notes to the proposed subsidiary senior notes to be issued by Intelsat Bermuda and the diminished recovery prospects of the parent company notes relative to the subsidiary notes. Fitch's expected 'BB' rating for the proposed new Intelsat Bermuda senior secured credit facilities (the expected draw will be $350 million with $300 million unused on a revolver) reflects the substantial value of the assets securing the facilities. Fitch's expected Stable Rating Outlook reflects the prospects for stable revenues from its lease backlog and the expected resulting free cash flow balanced with the very competitive operating environment, ownership by an investment group, and possible steep future increases in capital spending requirements. These expected ratings are based on existing public information and are provided as a service to investors. INTREPID USA: Has Until February 28 to File a Chapter 11 Plan ------------------------------------------------------------- The Honorable Nancy C. Dreher of the U.S. Bankruptcy Court for the District of Minnesota extended the period within which Intrepid U.S.A., Inc., and its debtor-affiliates have the exclusive right to file a chapter 11 plan through and including February 28, 2005. The Debtors have until April 29, 2005, to solicit acceptances of that plan from their creditors. This is the Debtors' first extension of their exclusive periods. The Debtors gave the Court three reasons militating in favor for an extension of their exclusive periods: a) the Debtors' chapter 11 cases are huge and complex, with operations in 31 U.S. states out of over 100 locations, having approximately 5,700 employees, a payroll of approximately $94 million and hundreds of creditors; b) the Debtors need additional time to gather and prepare all the information necessary for a proposed disclosure statement and to negotiate with their creditors and other parties-in-interest for a consensual joint plan of reorganization; c) the Debtors have to resolved certain contingencies related to their reorganization efforts, including a possible sale process of their businesses, obtaining debtor-in-possession financing and loan agreements and working on claims resolutions; and d) the Debtors will not use the extension to pressure their creditors and other parties-in-interest into acceding to a joint plan that is not confirmable. Headquartered in Edina, Minnesota, Intrepid U.S.A., Inc., provides nursing and home care services to approximately 100,000 clients annually through 195 offices in 30 states. The Company and its debtor-affiliates filed for chapter 11 protection on January 29, 2004 (Bankr. D. Minn. Case No. 04-40416). Cass S. Weil, Esq., and James A. Rubenstein, Esq., at Moss & Barnett, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. KAISER ALUMINUM: Wants Removal Period Extended Until May 10 ----------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates seek an additional 120 days extension of the period within they may remove numerous asbestos-related and civil actions pending in multiple courts and tribunals pursuant to Section 1452 of the Judiciary Procedures Code and Rule 9027 of the Federal Rules of Bankruptcy Procedure. The Debtors ask the United States Bankruptcy Court for the District of Delaware to extend their Removal Period until the later of: (a) May 10, 2005; or (b) 30 days after the entry of the order terminating the automatic stay with respect to the particular Action sought to be removed. Due to several factors, including the number of Actions involved and the complex nature of the Actions, the Debtors have not yet determined which, if any, of the Actions should be removed and, if appropriate, transferred to the District of Delaware. The Removal Period Extension serves to protect the Debtors' valuable right to economically adjudicate lawsuits under Section 1452 if circumstances warrant removal. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, notes that absent Removal Period Extension, the potential consolidation of the Debtors' affairs into one court may be frustrated and the Debtors may be forced to address claims and proceedings in a piecemeal fashion to the detriment of their creditors. Ms. Newmarch maintains that the Removal Period Extension will not prejudice the plaintiffs in the various stayed Actions because those parties may not prosecute the Actions absent relief from the automatic stay. Judge Fitzgerald will convene a hearing on February 28, 2005, at 1:30 p.m. to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the Removal Period is automatically extended through the conclusion of that hearing. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) KEY ENERGY: Has Until March 25 to File Financial Reports -------------------------------------------------------- Key Energy Services, Inc., (NYSE: KEG) disclosed that all of the conditions to the Consent Solicitation it commenced on Jan. 7, 2005, relating to the Company's outstanding 6-3/8% Senior Notes due 2013 and 8-3/8% Senior Notes due 2008 have been satisfied with respect to the 6-3/8% Notes. The Company, the Company's subsidiary guarantors of the 6-3/8% Notes and the trustee all have executed and delivered the Supplemental Indenture with respect to the 6-3/8% Notes pursuant to which certain covenants have been amended to provide the Company until March 31, 2005, to comply with the financial reporting covenants in that indenture. In consideration of the consent, the Company will pay to consenting holders of the 6-3/8% Notes an amount equal to $2.50 for each $1,000 in principal amount of the Notes on the 1st day of each month for which the reporting covenants have not been satisfied. As a result of these actions, the effective time with respect to the Consent Solicitation for the 6-3/8% Notes has occurred. Consents from the holders of the 6-3/8% Notes that were accepted before the effective time may not be revoked; however, any holders of 6-3/8% Notes who tender consents to the amendment before 5:00 p.m. (EST) on Jan. 21, 2005, the expiration date for the Consent Solicitation, will receive the consent payment. Holders of 6-3/8% Notes who do not consent by the expiration date will not receive the consent payment. The Company has not yet received the requisite consent of the holders of the 8-3/8% Notes to similarly amend the indenture governing that series of Notes. Holders of the 8-3/8% Notes have until the expiration date to consent to the amendments to the indenture of that series of notes. A comprehensive description of the Consent Solicitation and its conditions can be found in the Consent Solicitation Statement. The Company has retained Lehman Brothers to serve as the Solicitation Agent and D.F. King & Co., Inc. to serve as the Information Agent and Tabulation Agent for the Offer. Requests for documents may be directed to: D.F. King & Co., Inc. 48 Wall Street, 22nd Floor New York, N.Y. 10005 Toll-free: (800) 848-2998 (212) 269-5550 Questions regarding the solicitation of consents may be directed to Lehman Brothers, at (800) 438-3242 (toll-free) or (212) 528-7581, Attention: Liability Management. This announcement is not an offer to purchase or sell, a solicitation of an offer to purchase or sell or a solicitation of consents with respect to any securities. The solicitation is being made solely pursuant to the Consent Solicitation Statement dated Jan. 7, 2005. About the Company Key Energy Services, Inc., is the world's largest rig-based well service company. The Company provides oilfield services including well servicing, contract drilling, pressure pumping, fishing and rental tools and other oilfield services. The Company has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Argentina and Egypt. * * * As reported in the Troubled Company Reporter on August 19, 2004, Standard & Poor's Ratings Services' 'B' corporate credit rating on Key Energy Services, Inc., remains on CreditWatch with developing implications. Midland, Texas-based Key Energy had about $485 million of total debt outstanding as of June 30, 2004. LESLIE'S POOLMART: Prices 10-3/8% Senior Debt Offering ------------------------------------------------------ Leslie's Poolmart, Inc., disclosed the pricing terms of its previously announced cash tender offer and consent solicitation for its 10-3/8% Senior Notes due 2008. The total consideration for the Notes, which will be payable in respect of Notes accepted for payment that were validly tendered with consents and not withdrawn on or prior to 5:00 p.m., New York City time, on Jan. 7, 2005, will be $1,059.30 for each $1,000 principal amount of Notes, which includes the consent payment of $30.00 per $1,000 principal amount of Notes. Notes accepted for payment that are validly tendered subsequent to 5:00 p.m., New York City time, on Jan. 7, 2005, but on or prior to 5:00 p.m., New York City time, on Feb. 2, 2005, will receive the tender offer consideration of $1,029.30 for each $1,000 principal amount of Notes, which is equal to the total consideration minus the consent payment of $30.00 per $1,000 principal amount of Notes. The total consideration for the Notes was determined as of 2:00 p.m., New York City time, on Jan. 19, 2005, and is equal to the present value on the initial payment date (which is expected to be on Jan. 25, 2005) of $1,025.94 (i.e., the redemption price of the Notes on July 15, 2005, which is the earliest redemption date of the Notes), determined based on a fixed spread of 50 basis points over the yield today of the 1-1/8% U.S. Treasury due June 30, 2005. The Reference Treasury yield and the tender offer yield to calculate the total consideration are 2.616% and 3.116%, respectively. The Offer is scheduled to expire at 5:00 p.m., New York City time, on Feb. 2, 2005, unless extended or earlier terminated. The Offer remains subject to the satisfaction of certain conditions including the financing condition to consummate the Offer. The terms and conditions of the Offer are described in the Offer to Purchase and Consent Solicitation Statement dated Dec. 23, 2004, copies of which may be obtained from the information agent for the Offer: Global Bondholder Services Corporation U.S. Toll-free: (866) 794-2200 Collect: (212) 430-3774 Banc of America Securities LLC is acting as the exclusive dealer manager and solicitation agent in connection with the Offer. Questions regarding the Offer may be directed to Banc of America Securities LLC, High Yield Special Products, at (888) 292-0070 (U.S. toll-free) or (704) 388-9217 (collect). This announcement is for information purposes only and is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of consents with respect to any securities. The Offer is being made solely by the Offer to Purchase and Consent Solicitation Statement dated Dec. 23, 2004. About the Company Founded in 1963, Leslie's Poolmart, Inc., is the country's leading specialty retailer of swimming pool supplies and related products. The Company markets its products through 470 retail stores in 36 states; a nationwide mail-order catalog; and an internet E- commerce site http://www.lesliespool.com/ * * * As reported in the Troubled Company Reporter on Jan. 13, 2005, Standard & Poor's Ratings Services assigned its 'B-' rating to Phoenix, Arizona-based Leslie's Poolmart Inc.'s proposed $170 million senior unsecured notes, to be issued under Rule 144A with registration rights. The existing ratings on the company, including the 'B' corporate credit rating, were affirmed. The outlook was revised to stable from positive. The rating on the proposed senior unsecured notes is one notch lower than the corporate credit rating in accordance with Standard & Poor's policy of notching down senior unsecured debt when there is significant senior secured debt that has a priority claim to the company's assets. Note proceeds will be used to partly fund the recapitalization of the company. Leslie's $59.5 million 10.375% senior unsecured notes will be refinanced as part of the transaction, and the 'B-' rating on them will be withdrawn. A five-year, $75 million revolving credit facility is also part of the financing associated with the recapitalization. Standard & Poor's does not rate this revolver. This facility will refinance the company's existing $75 million revolver. The 'B+' rating on the existing facility will be withdrawn when the transaction is completed. "The ratings reflect the highly seasonal nature of Leslie's business, which can be affected by unfavorable weather, the company's participation in the relatively small pool supply market, and weak financial ratios," said Standard & Poor's credit analyst Kristi Broderick. While Leslie's 474 stores in 36 states make it the largest U.S. pool-supply chain, the company competes with many local stores, regional chains, home improvement centers, and discounters in a highly fragmented industry. Although it is a national chain, Leslie's does have some geographic concentration: about 41% of its store base is in California and Texas. The company's business exhibits substantial seasonality. Sales are significantly higher in the quarters ending June and September -- the peak months of swimming pool use. Hot weather and extended warm seasons (summers that start early and end late) usually result in favorable trends for the business, while cold, rainy, and shortened warm seasons (summers that start late and end early) generally result in unfavorable trends. MAYTAG CORP: Will Stop Selling Major Appliances at Best Buy Stores ------------------------------------------------------------------ Maytag Corporation (NYSE: MYG) will no longer sell Maytag-branded major appliances at the specialty retailer, Best Buy. Maytag will continue to sell its Hoover floor care products at Best Buy, which remains an important floor care customer. "We have a good business relationship with Best Buy. However, our white goods business with the specialty retailer has significantly declined over the years," said Ralph F. Hake, Maytag chairman and CEO. "At this time, it does not make sense to continue selling our major appliances at Best Buy." Hake said that our sales of major appliances at Best Buy have significantly declined over several years. In 2004, they represented about 1 percent of Maytag's consolidated revenue. The discontinuation will become effective later in the first quarter 2005. Maytag and Hoover branded products continue to be available at thousands of department, retail and home improvement stores across the country, including Maytag Stores. Maytag Corporation is a $4.8 billion home and commercial appliance company focused in North America and in targeted international markets. The corporation's primary brands are Maytag(R), Hoover(R), Jenn-Air(R), Amana(R), Dixie-Narco(R) and Jade(R). * * * As reported in the Troubled Company Reporter on Oct. 27, 2004, Fitch Ratings has downgraded the senior unsecured rating on Maytag Corp. to 'BB+' from 'BBB-' and the short-term debt rating to 'B' form 'F3'. The Rating Outlook is Stable. MEDCOMSOFT: Selling Equity under Private Placement for $1.5 Mil. ---------------------------------------------------------------- MedcomSoft, Inc., (TSX - MSF) entered into an agreement with Loewen, Ondaatje, McCutcheon Limited who has agreed to act as exclusive agent, on a best efforts basis, in connection with a proposed private placement of units. Three million units shall be issued on a private placement basis at a price of $0.50 per unit for gross proceeds of $1.5 million. Each Unit will consist of one common share and one quarter common share purchase warrant. One full warrant will entitle the holder to purchase one common share at an exercise price of $0.65 for a period of 24 months from the closing date which is expected to be on or before January 31, 2005. The private placement is subject to certain conditions, including, but not limited to, satisfactory due diligence, the execution of an agency agreement, the execution of subscription agreements with the subscribers and the receipt of all necessary regulatory approvals. The private placement is in addition to the Company's previously announced Rights Offering. The net proceeds of this financing would be used for working capital purposes. MedcomSoft, Inc., designs, develops and markets cutting-edge software solutions to the healthcare industry. MedcomSoft has pioneered the use of codified point of care medical terminologies and intelligent pen-based data capture systems to create a new generation of electronic medical records -- EMR. As a result of MedcomSoft innovations, physicians and managed care organizations can now securely build and exchange complete, structured and homogeneous electronic patient records. MedcomSoft applications are written with the latest Microsoft tools to run on the Windows platform (Windows 2000 & XP), operate with MS SQL Server 2000(TM), support MS Terminal Server and fully integrate with MS Office 2003, Exchange and Outlook(R). MedcomSoft applications are fully compatible with Tablet PCs and wireless technology. As of September 30, 2004, the Company's stockholders' deficit narrowed to $1,372,508 compared to a $1,436,072 deficit at June 30, 2004. MEDIA SERVICES: Annual Stockholders' Meeting Set for February 7 --------------------------------------------------------------- The Annual Meeting of Stockholders of Media Services Group, Inc., a Nevada corporation, will be held at the offices of Greenberg Traurig, LLP, 200 Park Avenue, 15th Floor in New York, New York 10166 on February 7, 2005, at 10:00 a.m., in order to: (1) approve a management proposal to amend the Amended and Restated Articles of Incorporation to change the name of the Company from 'Media Services Group, Inc.' to 'MSGI Security Solutions, Inc.'; (2) elect one Class I director for a three-year term or until its successor is duly qualified and elected; (3) consider a proposal to ratify and approve an amendment to the Company's 1999 Stock Option Plan to increase the number of shares authorized to be issued from 62,560 to 562,560 shares; (4) consider a proposal to ratify and approve the issuance of two stock option grants to acquire an aggregate of 20,000 shares to persons who became directors of the Company during the last fiscal year; and (5) transact other business as may properly come before the meeting or any adjournments thereof. The Board of Directors has fixed the close of business on December 31, 2004, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. Media Services Group, Inc. (Nasdaq: MSGI) is a proprietary solutions provider developing a global combination of innovative emerging businesses that leverage information and technology. MSGI is currently comprised of two operating companies; Future Developments America and Innalogic. The company is principally focused on the homeland security, public safety and surveillance industry. Their corporate headquarters is located in New York, with regional offices in Washington, DC, and Calgary. The corporate telephone is: 917-339-7134. Additional information is available on the company's Web site: http://www.mediaservices.com/ * * * Going Concern Doubt In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities & Exchange Commission, Media Services' independent accountants, Amper, Politziner & Mattia P.C., raised substantial doubt on the company's ability to continue as a going concern due to its recurring losses from operations and negative cash flows from operations, in addition to certain contingencies that may require significant resources. Effective December 29, 2003, the Company changed its legal name from MKTG Services, Inc. to Media Services Group, Inc. MESA GLOBAL: S&P Holds Low-B Ratings on Three Certificate Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 16 classes from four MESA Global Issuance Co. transactions. On Dec. 30, 2004, ratings were raised on six classes as shown below. The actual and projected credit support percentages adequately supported the ratings at the time of the upgrades. The higher credit support percentages resulted from principal prepayments and the shifting interest structure of the transactions. In addition, total delinquencies and cumulative realized losses have been relatively moderate, compared to similar mortgage pools. As of the December 2004 remittance date, total delinquencies ranged from 12.4% (series 2002-2) to 36.1% (series 2002-3). Additionally, cumulative realized losses were less than 17% for the different series, ranging from 3.07% (series 2002-3) to 16.7% (series 2001-4). Credit support consists of net monthly excess cash flow, overcollateralization, and subordination. Additionally, the senior classes from all of the MESA Global Issuance Co. transactions benefit from monoline insurance policies from Ambac Assurance Corp. ('AAA'), except for series 2002-3, which is covered by MBIA Insurance Corp. These policies guarantee timely payments of interest and ultimate payment of principal to the notes. The unpaid pool principal balance as a percentage of the original balance is approximately 20% for series 2001-4, 28.1% for series 2002-1, 28.9% for series 2002-2, and 43.51% for series 2002-3. The other affirmations (ratings not raised Dec. 30, 2004) reflect actual and projected credit support percentages that adequately support the current ratings. In addition, total delinquencies and cumulative realized losses were low to moderate. The certificates and notes evidence interest in a trust fund consisting primarily of a pool of one- to four-family, fixed- and adjustable-rate, first- and second-lien mortgage loans, with terms to maturity of not more than 30 years. Substantially all of the mortgage loans have certain deficiencies (document and other) and have delinquency histories that exceed the scope of the originator's usual underlying guidelines. The mortgage loans are known as scratch-and-dent, document deficient, reperforming loans. Ratings Affirmed MESA Global Issuance Co. Asset-backed Certificates Current Previous Series Class Rating Rating (as of Dec. 29, 2004) ------ ----- ------- -------- 2001-4 M-1 AAA AA- 2001-4 M-2 A+ A 2002-1 M-1 AAA AA 2002-2 M-1 AAA AA 2002-2 M-2 AA A 2002-3 M-1 AA+ AA Ratings Affirmed MESA Global Issuance Co. Asset-backed Certificates Series Class Rating ------ ----- ------ 2001-4 B BBB 2002-1 M-2 A+ 2002-1 B-1 BBB 2002-1 B-2 BB 2002-2 B-1 BBB 2002-2 B-2 BB 2002-3 A, A-IO AAA 2002-3 M-2 A 2002-3 B-1 BBB 2002-3 B-2 BB MIRANT CORP: Court Allows Expansion of Charles River's Services --------------------------------------------------------------- Beginning in July 2003, Charles River Associates rendered services to Mirant Corporation and its debtor-affiliates as Energy Consultants. Charles River provided: (a) assistance in the evaluation of the Debtors' business prospects; (b) assistance in the development of the Debtors' long-term business plan; (c) analysis of the Debtors' projects and business plan and evaluate alternatives; (d) strategic advice with regard to energy industry specific issues; (e) professional opinion in negotiations among the Debtors and their suppliers and other interested parties with respect to energy-related transactions; (f) testimony in the Debtors' Chapter 11 cases concerning any of the subjects encompassed by Charles River's energy consulting services, if appropriate, and as required; (g) assistance and advise to the Debtors concerning the terms, conditions and impact of any transaction proposed by Charles River; and (h) other advisory services as are customarily provided in connection with the analysis and negotiation of energy- related transactions. In October 2004, the Debtors asked Charles River to provide additional services: (a) analysis of whether the Debtors' generation assets located in the control areas operated by the New York Independent System Operator, Inc., ISO New England, Inc., PJM Interconnection, LLC, and California Independent System Operator Corporation meet the Federal Energy Regulatory Commission's standards for charging market-based rates; (b) preparation of an affidavit or other testimony to accompany the Debtors' Triennial update to the FERC. The Debtors anticipate that Charles River's fees for the Additional Services will not exceed $20,000. At the Debtors' request, Judge Lynn of the U.S. Bankruptcy Court for the Northern District of Texas expands the scope of Charles River's representation to include the Additional Services. The Court authorizes Charles River to draw down on the currently held retainer as payment of amounts previously approved by the Mirant Fee Committee. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEP SUPERSHOOTERS: S&P Rates Proposed $75.7 Million Loan at B ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating, with a recovery rating of '4', to NEP Supershooters LP's proposed $75.7 million first-lien term loan C, indicating expectations of a marginal recovery of principal (25%-50%) in the event of default. At the same time, Standard & Poor's affirmed its 'B' and 'CCC+' debt ratings on NEP Supershooters and its 'B' corporate credit rating on parent company NEP, Inc. These companies are analyzed on a consolidated basis. The outlook is stable. Loan proceeds and a $4.3 million preferred stock investment will be used to fund the purchase of certain mobile production assets and contracts from rival National Mobile Television -- NMT -- and the Outside Broadcast Division (Visions) of The Television Corporation PLC of the U.K. On a Dec. 31, 2004, pro forma basis, NEP, a Pittsburgh, Pennsylvania-based provider of outsourced media services for live and broadcast sports and entertainment events, had $247.6 million of debt. "The acquisitions enhance NEP's business lead in mobile TV production for premium U.S. events and provide a solid competitive position in the U.K. market," said Standard & Poor's credit analyst Steve Wilkinson. However, financial risk is high, with pro forma debt to EBITDA of 4.5x, up from 4.2x at rating inception in July 2004. The corporate credit rating on the parent company reflects its cash flow concentration in the mobile TV production business, high tolerance for financial risk, potential volatility stemming from contract gains and losses, weak results in its more unpredictable and cyclical Screenworks and Studios units, limited track record of operating performance as a consolidated entity, and small cash flow base. These factors are minimally offset by NEP's businesses' good competitive positions and decent margins. The stable outlook incorporates the expectation that the NMT and Visions asset acquisitions will increase NEP's pro forma EBITDA at least 40%, that leverage will gradually decline, and that discretionary cash flow will remain at least break-even. Shortfalls from these expectations, or a narrowing of NEP's thin margin of covenant compliance, could lead to a revision in the outlook to negative. Long-term potential for a positive outlook or upgrade would depend on NEP improving profitability, consistently generating positive discretionary cash flow, and reducing leverage, while maintaining a strong competitive position. NORTH AMERICAN: S&P Places Low-B Ratings on CreditWatch Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on construction services provider North American Energy Partners Inc. -- NAEP -- to 'B' from 'B+'. The secured bank facility rating was lowered to 'B+' from 'BB-' and the senior unsecured rating to 'B-' from 'B'. At the same time, the ratings were placed on CreditWatch with negative implications. The company announced that it will need to restate its financial results for the past two quarters, which will likely result in breaches to its financial covenants under its secured credit facility. "The ratings action reflects our concerns about the company's weak profitability and its ability to execute in an increasingly competitive environment, said Standard & Poor's credit analyst Daniel Parker. "The ratings will remain on CreditWatch until the company is able to resolve its bank financing arrangements, and shore up its liquidity and long-term financing needs," Mr. Parker added. The earnings restatement appears to be the result of a delay in accruing costs related to an unprofitable steam-assisted gravity drainage site project. This is the second large project that the company appears to have underbid. The ability to properly bid and win contracts is critical to profitability and Standard & Poor's expects the competitive environment to become more difficult, as NAEP's customers (generally, major oil sands producers) are determined to lower construction costs. These customers have increasingly demanded more fixed price- or unit priced-based contracts, which create margin pressure for construction services providers such as NAEP, if they are not bid on properly. The ratings on NAEP reflect the company's very aggressive financial profile and below-average business profile, which are partially offset by its leading market position in servicing oil sands projects. NAEP provides construction services such as site preparation, ore removal, piling, and pipeline installation to oil and gas and natural resource companies. The business profile reflects the major risks the company faces, which include delays or cancellations of oil sands projects, additional competition, margin pressures as oil sands producers try to lower costs, and customer concentration risk. These risks are partially offset by the company's leading position in providing these services in its core market in Alberta. NORTHWEST AIRLINES: Dec. 31 Balance Sheet Upside-Down by $3.1 Bil. ------------------------------------------------------------------ Northwest Airlines Corporation (Nasdaq: NWAC), the parent of Northwest Airlines, realized a net loss of $420 million or $4.84 per common share for its fourth quarter, including unusual items. This compares to the fourth quarter of 2003 when Northwest reported net income of $363 million or $3.60 per diluted share, including unusual items. Excluding unusual items, Northwest reported a fourth quarter 2004 net loss of $359 million or $4.14 per common share versus the fourth quarter of 2003 when the airline reported a net loss of $129 million or $1.49 per common share. Northwest reported a full-year net loss of $878 million or $10.16 per common share, including unusual items. This compares to net income of $236 million or $2.62 per diluted share, including unusual items, reported for 2003. Excluding unusual items, Northwest reported a full-year net loss of $713 million or $8.25 per common share. In 2003, Northwest reported a full-year net loss of $565 million or $6.57 per common share, excluding unusual items. Unusual items in this year's fourth quarter included a $115 million gain from the sale of Northwest's remaining shares of Orbitz, $99 million in aircraft impairments associated with the earlier retirement of certain aircraft and a $77 million increase in frequent flyer liability, principally associated with revised estimates relating to the future pattern of mileage redemptions. In the fourth quarter of 2003, Northwest realized $492 million of unusual items resulting from the completion of an initial public offering of Pinnacle Airlines Corp., the sale of Northwest's holdings in Hotwire, the partial sale of its stock holdings in Orbitz, the completion of a debt exchange and a transaction pertaining to Northwest debt secured by foreign real property. Commenting on the quarter, Doug Steenland, president and chief executive officer, said, "This was a difficult quarter for Northwest Airlines. Stubbornly high fuel costs, revenue pressures from competitors' pricing actions and labor cost savings realized by some of our major competitors make it imperative that Northwest achieve labor restructuring quickly in order to return to profitability." "In the fourth quarter, we made noteworthy progress with our labor cost restructuring by completing pilot and salaried worker wage and benefit reductions. In addition, we maintained our revenue premium and sustained a strong liquidity position, enhanced during the quarter by the refinancing of our bank credit facility." Steenland continued, "Once we achieve labor cost restructuring, we believe Northwest has a strong business strategy for success: operating excellence, first-class facilities, a truly global network, and employees who strive to put our customers first." He added, "We now are in contract mediation with ground workers represented by the International Association of Machinists and Aerospace Workers (IAM) and with the Aircraft Mechanics Fraternal Association (AMFA). In addition, we are continuing contract negotiations with representatives of our other unions." Financial Results Operating revenues in the fourth quarter increased by 6.4% versus the fourth quarter of 2003 to $2.75 billion. This included an increase in passenger revenue of $80 million and an increase in cargo revenue of $35 million. Passenger revenue per available seat mile decreased by 3.0% on 7.4% additional available seat miles -- ASMs. The unit revenue decrease was due in part to a year-over-year decline in unused non-refundable tickets resulting from a change in re-ticketing rules in 2003. Operating expenses in the quarter increased 15.4% versus a year ago to $3.0 billion, excluding unusual items. Unit costs excluding fuel and unusual items decreased by 6.1% on 7.4% more ASMs. During the quarter, fuel averaged 139 cents per gallon, up 68.9% versus the fourth quarter of last year. Had the fuel prices of fourth quarter 2003 been in place during the fourth quarter of 2004, Northwest's fuel costs would have been $252 million lower. Similarly, had the fuel prices of full-year 2003 been in place during 2004, Northwest's full-year fuel costs would have been $662 million lower. Northwest's quarter-ending cash balance was $2.61 billion of which $2.46 billion was unrestricted. This compares to $2.68 billion at the end of the third quarter of which $2.54 billion was unrestricted. "During the quarter, we strengthened our liquidity position by restructuring a $975 million bank credit facility to be repaid over six years. Our efforts to maintain one of the industry's strongest cash balances remains a key element of Northwest's long-term business strategy," said Bernie Han, executive vice president and chief financial officer. About the Company Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo, and Amsterdam, and approximately 1,500 daily departures. Northwest and its travel partners serve more than 900 cities in more than 160 countries on six continents. At Dec. 31, 2004, Northwest Airlines' balance sheet showed a $3.1 billion stockholders' deficit, compared to a $2 billion deficit at Dec. 31, 2003. NOVELIS INC: S&P Assigns B Rating to $1.4B Senior Unsecured Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Novelis Inc.'s US$1.4 billion senior unsecured notes due 2015. At the same time, Standard & Poor's withdrew its CP ratings on Alcan Aluminum Corp., as this entity was transferred to Novelis on Jan. 6, 2005. The outlook on Novelis Inc. is stable. "This notes issue completes the initial debt markets activity stemming from the spin-off of Novelis from Alcan Inc.," said Standard & Poor's credit analyst Don Marleau. "Novelis' leading position in the global aluminum rolled products market and extensive geographic and product diversity are constrained by the company's high debt leverage," Mr. Marleau added. Standard & Poor's estimates total debt to EBITDA of 5.0x, based on US$2.9 billion of total debt and trailing 12-month financial results at Sept. 30, 2004. Novelis uses: * primary and recycled aluminum to produce can sheet for sale to beverage producers and can fabricators; * various rolled products for construction, industrial, and transportation uses; and * foil for packaging. Novelis' management will be completely independent of Alcan after the spin-off, although the companies will maintain transition services agreements for up to 12 months, and will have in place multiyear metals sales agreements. The company has a strong competitive position, benefiting from an unrivaled top-two position in each of the world's major aluminum consuming regions and product segments. Further offsetting the risks of an aggressive capital structure are the company's broad geographic diversity, its position as the world's largest purchaser of primary aluminum, and the industry's high barriers to entry. The outlook is stable. Novelis' diversity and strong market position, coupled with generally good demand in its key markets, should ensure that the company generates financial performance that is consistent for the ratings in next several years. The prospect, however, for some debt reduction appears good, thereby potentially boosting the company's credit metrics in the medium term. OWENS CORNING: Banks Present Medical, Legal & Valuation Experts --------------------------------------------------------------- David A. Hickerson, Esq., at Weil, Gotshal & Manges LLP, representing Credit Suisse First Boston, as agent for Owens Corning's prepetition institutional lenders, introduced video excerpts from Dr. Gary Friedman's deposition into evidence with Judge Fullam's permission and indulgence. Dr. Friedman is a medical doctor and has 21 years of experience with asbestos-related disease research and litigation. Dr. Friedman has published a number of peer-reviewed articles and has reviewed medical records from thousands of patients alleging exposure to asbestos -- some whose claims are speculative and some who've died from mesothelioma. Dr. Friedman is also a certified B-reader. Dr. Friedman examined medical records submitted to Owens Corning from Drs. Raymond A. Harron, Jay T. Segarra, Philip H. Lucas, and James W. Ballard, in support of asbestos-related personal injury claims. Dr. Friedman says he wouldn't rely on those doctors' x-ray interpretations for any reason and certainly not for the purpose of paying or settling a personal injury claim. Dr. Friedman says Dr. Harron finds diffuse interstitial fibrosis in 95% of the chest x-ray's he reads and he has this remarkable ability to find that irregularity in all six regions of patients' lungs. That leads Dr. Harron to diagnose asbestosis for those patients. Dr. Friedman says Dr. Harron's findings are bogus. Dr. Friedman says that Dr. Ballard appears to confuse fat tissue, breast tissue and muscle images with diffuse interstitial fibrosis, leading to false conclusions that most of his patients suffer from asbestosis. Dr. Friedman's reviews of the other suspect doctors' x-rays show similar irregularities. Dr. Friedman examined a sample of medical records supplied to document claims against Owens Corning in connection with Dr. Vasquez's estimation of Owens Corning's asbestos-related future liability for SEC reporting purposes. Dr. Friedman explains that these four doctors' patients' records were flagged because of the sheer number of cases they handled. Dr. Friedman reviewed medical records underpinning a number of NSP Settlement Agreements and found evidence of pulmonary functional impairment in only 13% of the cases. Dr. Friedman has studied the literature about asbestos-related diseases for decades. Dr. Friedman is convinced that exposures to asbestos are declining. Dr. Friedman explains that Owens Corning hired him a number of years prior to filing for bankruptcy for medical advice. Dr. Friedman was involved in establishing the NSP settlement procedures and training claims processors. Owens Corning turned to Dr. Friedman after filing for chapter 11 protection for guidance about whether to and how to challenge claims in bankruptcy. Dr. Friedman says he told Owens Corning he wasn't sure he was the right person to talk about dealing with claims in bankruptcy. A question arose, Dr. Friedman says, about whether the company needed to separate meritorious from specious claims in its bankruptcy proceedings because to the extent the company paid claims of people who weren't sick, that would take money away from legitimate creditors. Dr. Friedman believes that 2/3 of the non-malignant claims pending against Owens Corning do not meet the criteria for payment under the NSP. This is based on his: (1) actual experience in a clinical setting; (2) experience working with other asbestos defendants; and (3) extensive reviews of claimants' medical records. Dr. Friedman admits that he focused on problem cases and those falling outside the range of what's normal. He does not purport to express any opinion on each of the 250,000 claims pending against Owens Corning. Dr. Friedman agrees that the medical criteria for impairment under the NSP is stricter than what's required under guidelines established by the American Thoracic Society and American Medical Association. The NSP criteria disqualifies many cigarette smokers that might otherwise be compensated in the tort system. The NSP required functional impairment, which is not required in the tort system. "How do you distinguish between impairment and injury?" Mary Beth Hogan, Esq., at Debevoise & Plimpton, asked Dr. Friedman. Injury, Dr. Friedman explained, is alteration of a body part or function. Impairment is the loss of that body part or function. Disability, Dr. Friedman continued, describes how that loss of use affects someone's lifestyle. "Are 1/0 and 0/1 ILO readings frequently confused?" a lawyer asked Dr. Friedman. "Yes." "Are you aware of any other defendant who went to similar lengths to challenge medical evidence?" another lawyer asked. "No." "Are you aware of any other defendant who went to similar lengths to weed out non-malignant claims?" "No." Dr. Friedman says that while he doesn't know the total economic impact, he does know that his work supplied Owens Corning with the facts and ammunition necessary to renegotiate some settlement agreements for lower dollar amounts. Ms. Hogan asked Dr. Friedman if he knew why Owens Corning sent certain medical records to him. "No," Dr. Friedman said, adding that he suspected it was because something caused the company to doubt the veracity of the underlying claim. Ms. Hogan asked Dr. Friedman if he knew how many claims were in the NSP system. Dr. Friedman said that he recalls a number like 215,000, because he remembers thinking during initial discussions that he thought the number was overwhelming. Ms. Hogan asked Dr. Friedman if he knows how unimpaired claimants fared in the tort system. "No," Dr. Friedman said, but recalled hearing about some large multi-million dollar settlements that grouped impaired and unimpaired claimants. "Do you know what an unimpaired claimant was paid under the NSP?" Ms. Hogan asked. "$1,000," Dr. Friedman responded. Banks' Legal Expert Prof. Lester Brickman Mr. Hickerson called Professor Lester Brickman to the witness stand. Prof. Brickman testified that he's had a long-standing research interest in asbestos litigation. In 1991, on the basis of knowledge and expertise that he'd acquired on the subject, he was requested by the Administrative Conference of the United States, an executive branch agency of the federal government, to draft a proposed administrative alternative to asbestos litigation and to organize a colloquy to consider and debate that proposal. The Chairman of the Administrative Conference said: [W]e asked Professor Lester Brickman to prepare a paper proposing an administrative claims solution for comment and criticism by the panel, and we look forward to comments by the audience. Let me introduce Professor Brickman, who teaches law at Cardozo Law School, Yeshiva University. He is a leading authority in the area of attorney's fees and has written numerous articles on the subject. Professor Brickman became interested in the subject of asbestos litigation some years ago when he was hired as a consultant by one of the defendants in the asbestos litigation to review contingent fee issues. He has since had the opportunity to extensively review empirical data, case files, and other materials on the subject. Because of his work in this area, we asked Professor Brickman to draft a proposed administrative solution which our panelists have been invited to criticize. Over the past fourteen years, Prof. Brickman has devoted a substantial amount of time to research on asbestos litigation and has published four articles on the subject: (1) The Asbestos Litigation Crisis: Is There A Need For An Administrative Alternative?, 13 Cardozo L. Rev. 1819 (1992); (2) The Asbestos Claims Management Act of 1991: A Proposal To The United States Congress, 13 Cardozo L. Rev. 1891 (1992); (3) Lawyers' Ethics And Fiduciary Obligation In The Brave New World Of Aggregative Litigation, 26 Wm. & Mary Envtl. L. & Pol'y Rev. 243, 272-98 (2001); and (4) On The Theory Class's Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality, 31 Pepp. L. Rev. 33 (2004). "In these articles," Prof. Brickman explains, "I discuss the nature of asbestos-related disease; the history of asbestos litigation, including the phenomenon of the unimpaired claimant; the role of attorney-sponsored screenings; the effective hourly rates generated by contingent fee-financing of the litigation and the effect of those fees on the litigation; the use and effects of forum selection; the impact of mass consolidations; and the culmination of the litigation in the bankruptcy of many former producers and sellers of asbestos-containing products and the administration of that bankruptcy process." Prof. Brickman says he has a fifth paper in the works, examining ethical issues in asbestos litigation. "Finally, Prof. Brickman says, "my qualifications as an expert on asbestos litigation, attorney-sponsored screenings, the formation and structure of asbestos bankruptcy trusts and the 'trust distribution procedures' adopted by extant trusts as well as those proposed in pending bankruptcies, were confirmed after being challenged in a recent asbestos bankruptcy proceeding," referring to In re Western Asbestos Co. et al., Debtors, 2003 Bankr. LEXIS 1894 at *3 (Oct. 31, 2003). Mr. Hickerson proffered Prof. Brickman as an expert witness on American law, tort reform and other matters. Michael Lynn, Esq., at Kaye Scholer LLP, representing the Future Claimants' Representative, objected. The Court is the only expert on American law, Mr. Lynn argued. Additionally, in Nov. 2003, a bankruptcy court ruled that Prof. Brickman could not testify as an expert. Judge Fullam agreed that only the Court is an expert on American law but overruled Mr. Lynn's other objections. Prof. Brickman is critical of the asbestos litigation industry. "As the cost of the litigation to business and insurers has galloped to new heights," Prof. Brickman says, "the disconnect between medical science and our tort and bankruptcy systems becomes more extreme." The press has widely reported that many of the claimants have no lung impairment. This is true but misleading. In fact, 80-90% of asbestos claimants have no asbestos-related illness recognized by medical science. To understand the massive disconnect between medical science and tort litigation, Prof. Brickman undertook an extensive empirical study of asbestos litigation. On the basis of that study -- available at http://www.ssrn.com/asbstract=490682-- Prof. Brickman reached these conclusions: -- Approximately 90% of asbestos claims today largely consists of former industrial and construction workers and others: (a) recruited by an extensive network of entrepreneurial companies which are employed by lawyers to "screen" hundreds of thousands of potential litigants each year at local union halls, hotel and motel rooms, shopping center parking lots, and other locations throughout the country to assemble the "inventory" that fuels the litigation; (b) asserting claims of injury though they have no medically cognizable asbestos -related injury and cannot demonstrate any statistically significant increased likelihood of contracting an asbestos-related disease in the future; (c) these claims are being asserted in a civil justice system that has been drastically altered to accommodate the interests of these litigants and their lawyers by dispensing with many evidentiary requirements and proof of proximate cause, giving rise to what he terms "special asbestos law"; (d) mostly in so-called "magic jurisdictions" where judges and juries not only appear aligned with the interests of plaintiff lawyers but where the outcomes of such litigations are known before the cases are filed; (e) these claims are often supported by specious medical evidence, including: * evidence generated by the entrepreneurial screening enterprises and B-readers-specially certified x-ray readers that the plaintiff lawyers select, who receive millions of dollars a year in income for producing bogus medical evidence which is not a product of good faith medical judgment, and * pulmonary functions tests which are often administered in knowing violation of standards established by the American Thoracic Society and result in findings of impairment which would not be found if the tests were properly administered; and (f) these claimants frequently testify according to scripts prepared by their lawyers which are replete with misstatements with regard to: * identification and relative quantities of asbestos-containing products that they came in contact with at work sites, * the information printed on the containers in which the products were sold, and * their own physical impairments. As former targets of the litigation enter bankruptcy and replacement deep pockets are cultivated, witness testimony about products in workplaces 30-40 years ago simply shifts to accommodate such changes-compelling circumstantial confirmation that the testimony is orchestrated by plaintiff lawyers. -- It is beyond cavil that asbestos litigation thus represents a massive civil justice system failure. Prof. Brickman refers to the litigation as a "malignant enterprise." -- An increasing amount of asbestos claiming is now being channeled through the bankruptcy process where the proceedings are largely insulated from public view. The issues are complex and newspaper coverage fails to inform the public of what is occurring which, in plainest terms, amounts to a perversion of legal process. The leading plaintiff law firms, a baker's dozen or so, completely control the bankruptcy proceedings. Laden with boundless conflicts of interest which are ignored by the courts, they create the bankruptcy plans, establish the criteria for the payment of the very claims which they are asserting, select the trustees to operate the trusts that will be created to actually pay the claims (with the approval of the bankruptcy court which virtually always is forthcoming) and constitute the Trust Advisory Committees which have veto power over changes in the Trusts' structure. The TDPs (Trust Distribution Procedures) they create allow these lawyers to treat the trusts' funds as "piggy banks," accessible at will irrespective of whether a claimant is actually injured or had actual exposure to defendants' products, let alone whether the exposure was a substantial factor causing injury. In fact, in some cases, all that is required to "prove" the requisite exposure is for the claimant to sign a form saying he was exposed. -- The bankruptcy trusts are being created as a result of the enactment by Congress in 1994 of a special set of bankruptcy provisions designed to facilitate the reorganization of firms with asbestos liabilities (11 U.S.C. Sec. 524 (g)). Under these provisions, the asbestos claims against an insolvent debtor are channeled to a "trust" which is funded by equity provided by the debtor and increasingly, by the debtor's insurance coverage. For the trust to be established and thus insulate the debtor from future liability, 75% of claimants must vote to approve the plan. Because this vote is on the basis of "one man, one vote," it gives plaintiff attorneys an additional incentive to troll for more "un-sick" claimants to add to their inventories; doing so gives them control over the bankruptcy process, including assuring substantial cash flows to them at the expense of the 5-10% of claimants who have actually suffered injury. This control has led to the "pre-packaged bankruptcy" -- which, in its current form, is a further perversion of legal process. Prof. Brickman believes that mass consolidation of cases increases the settlement values of non-malignant claims at the expense of the malignant claimants. Judge Fullam cut Prof. Brickman and Mr. Hickerson off saying that all of this testimony is already in the record. Nobody cross-examined Prof. Brickman. Banks' Asbestos Liability Valuation Expert Dr. Frederick Dunbar Ralph I. Miller, Esq., at Weil, Gotshal & Manges LLP, representing the Banks, called Dr. Fredrick C. Dunbar, Senior Vice President for National Economic Research Associates, to the witness stand to provide valuation testimony. Dr. Dunbar's expert opinion is that Owens Corning's liability on account of allowable present and future claims (including contract claims) is $2.046 billion. Dr. Dunbar uses Dr. Vasquez's data set as his starting point, uses a 2.17% inflation factor (based on the yield of CPI-index TIPS issued by the Treasury Department) and applies an 8.12% discount rate (which assumes Owens Corning was a good single-A credit prior to its chapter 11 filing). Focusing on Owens Corning's asbestos-related liability, Dr. Dunbar stepped Judge Fullam through a reconciliation of his estimate to Dr. Peterson's estimate to pinpoint the differences in their assumptions and methodologies: Start with Dr. Dunbar's Forecast $2,046,000,000 -------------- Step 1: Government Statistics Step 1.1: Substitute KPMG mesothelioma incidence 142,000,000 Step 1.2: Substitute Nicholson incidence for all cancers 129,000,000 Step 2: Latency Step 2.1: Estimate non-malignant claims as ratio of cancer claims 24,000,000 Step 3: Propensity to Sue Step 3.1: Remove age adjustment in propensity to sue 151,000,000 Step 3.2: Eliminate surge adjustment in claims data 904,000,000 Step 4: Dismissal Rates Step 4.1: Take Maritime Asbestos Legal Clinic and Taylor & Cire (administratively dismissed) claims out of dismissal rates 301,000,000 Step 4.2: No dismissal rate adjustment 626,000,000 Step 5: Proof of Injury Step 5.1: Remove audit adjustment to lung and other cancer claims 97,000,000 Step 5.2: Remove audit adjustment to non-malignant claims 739,000,000 Step 6: Average Values Step 6.1: Include punitive component of settlement values 1,088,000,000 Step 6.2: Remove age adjustment to settlement values 396,000,000 Step 6.3: Include verdicts in average claim values 203,000,000 Step 6.4: Pay claims with Forced Vital Capacity greater than or equal to 80% 1,862,000,000 Step 7: Inflation and Discounting Step 7.1: Use risk-free discount rate and 2.5% inflation rate 2,232,000,000 Step 7.2: Adopt Dr. Peterson's pending claim count 127,000,000 --------------- End with Dr. Peterson's Forecast $11,068,000,000 =============== Again, focusing only on Owens Corning's asbestos-related liability, Dr. Dunbar stepped Judge Fullam through a reconciliation of his estimate to Dr. Vasquez's estimate to pinpoint the differences in their assumptions and methodologies: Start with Dr. Dunbar's Forecast $2,046,000,000 -------------- Step 1: Government Statistics Step 1.1: Substitute KPMG cancer incidence 126,000,000 Step 2: Latency Step 2.1: Estimate non-malignant claims as ratio of cancer claims 65,000,000 Step 3: Propensity to Sue Step 3.1: Substitute Vasquez age and surge adjusted propensity to sue 212,000,000 Step 4: Dismissal Rates Step 4.1: Substitute Vasquez dismissal rates from NSP Period 695,000,000 Step 5: Proof of Injury Step 5.1: Remove audit adjustment to lung and other cancer claims 74,000,000 Step 5.2: Remove audit adjustment to non-malignant claims 346,000,000 Step 6: Average Values Step 6,1: Substitute Vasquez punitive adjustment 220,000,000 Step 6.2: Adopt other Vasquez value adjustments, including for age (417,000,000) Step 6.3: Pay claims with Forced Vital Capacity greater than or equal to 80% 922,000,000 Step 7: Inflation and Discounting Step 7.1: Use risk-free discount rate and 2.0% inflation rate 483,000,000 Step 7.2: Adopt Dr. Mayer's pending claim count 64,000,000 -------------- End with Dr. Vasquez's Forecast $4,624,000,000 ============== Dr. Dunbar did not attempt to reconcile his forecast to Dr. Rabinovitz's forecast. The main differences are that she predicts a surge in the propensity to sue by using the two-year 1999-2000 period rather than a longer five-year period and by starting with Dr. Vasquez's data set. "Reasonable people can differ," Dr. Dunbar said, telling Judge Fullam that after receiving and reading his colleagues' reports, he made some adjustments to his forecast to account for the reasonable differences. Dr. Dunbar stressed that this alternative forecast is not what he's convinced is right, but what he believes could be considered reasonable. Start with Dr. Dunbar's Forecast $2,046,000,000 -------------- Step 1: Government Statistics Step 1.1: Substitute KPMG cancer incidence 155,000,000 Step 2: Latency Step 2.1: Estimate non-malignant claims as ratio of cancer claims 39,000,000 Step 3: Propensity to Sue -- No change 0 Step 4: Dismissal Rates Step 4.1: Substitute Dr. Vasquez's Maritime Asbestos Legal Center dismissal rates 176,000,000 Step 5: Proof of Injury Step 5.1: Remove audit adjustment to lung and other cancer claims 57,000,000 Step 6: Average Values Step 6.1: Substitute Dr. Vasquez's punitive damage adjustment 230,000,000 Step 6.2: Pay claims with Forced Vital Capacity greater than or equal to 80% $1,000 68,000,000 Step 7: Inflation and Discounting Step 7.1: Use risk-free rate of 6% 380,000,000 -------------- Dr. Dunbar's Alternative Forecast $3,151,000,000 ============== Dr. Dunbar assumes that any claimant with a Forced Vital Capacity greater than 80% is unimpaired, does not hold an allowable claim, and is entitled to no compensation. "Do you know of any state, Dr. Dunbar, that permits recovery by a plaintiff that has no proof?" Mr. Miller asked. "We will stipulate that a claimant with no proof is not entitled to compensation," Roger Podesta, Esq., at Debevoise & Plimpton, representing the Debtors, interjected. "I'll accept that stipulation," Judge Fullam said. Dr. Dunbar believes that asbestos claims have peaked because the epidemiological data shows exposure incidence has declined. Dr. Dunbar has seen that SEC-reported reserves for asbestos-related liability are declining relative to 2001 and 2002. "You're confident SEC filings never underestimate liability?" Judge Fullam asked. "The liability may be understated, but numbers of claims are probably correct," Dr. Dunbar responded. Mr. Miller asked Dr. Dunbar if he relied on the estimates of Armstrong's and Babcock & Wilcox's asbestos liability referred to in those company's confirmation orders. "I didn't," Dr. Dunbar said, "because there were no competing valuations in those two bankruptcy cases." "The Court only heard from one side?" Judge Fullam asked. "There were objectors, but nobody presented the court with valuations of those debtors' asbestos liabilities that competed with Dr. Peterson's valuations." "Your estimates of Armstrong's and Babcock & Wilcox's asbestos liability would have been smaller?" Judge Fullam queried. "Yes," Dr. Dunbar replied. On cross-examination, Mr. Podesta asked Dr. Dunbar for clarification about his dismissal rates. "There are 128,000 open claims in Owens Corning's database today, correct?" "Yes." "And you propose to eliminate 114,000 of those?" "Yes." "You propose to make 90% of the present claims disappear?" "Have you ever thought of becoming a defense attorney?" Mr. Podesta said before Dr. Dunbar could answer. "And Dr. Vasquez's estimate of the number of future claims is 10 times your estimate?" "Yes," Dr. Dunbar confirmed. "Has your claims estimation model been published in a peer- reviewed journal?" "No." "Has it been applied in any other bankruptcy case?" "No." "Your unpublished, unreviewed model is being testing in litigation for the first time in this case?" "Yes." Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: CSFB Wants to Sue Doctors for False X-Ray Readings ----------------------------------------------------------------- Credit Suisse First Boston, as Agent for the prepetition institutional lenders to Owens Corning and certain of its affiliates, asserts claims for fraud and negligent misrepresentation against physicians who falsely reported chest radiograph (x-ray) readings as positive for asbestos-related disease when, in fact, the readings showed no compensable injury. These physicians, include: (1) Raymond A. Harron; (2) Jay T. Segarra; (3) Philip H. Lucas; (4) James W. Ballard; and (5) 100 John Doe physicians. Rebecca S. Butcher, Esq., at Landis Rath & Cobb, LLP, in Wilmington, Delaware, relates that the false reports resulted in Owens Corning paying $2.5 billion to "settle" asbestos-related personal injury claims against the company that had no medical basis and should never have been filed. Recent scientific studies of Drs. Guy K. Friedman and Joseph N. Gitlin indicate that the individual physicians have accounted for a dramatically disproportionate number of asbestos personal injury claims filed against the Debtors and have routinely and systematically over diagnosed non-malignant asbestos-related physical impairment in support of the claims. According to Ms. Butcher, medical research has described asbestosis as a disappearing disease, and many pulmonology practices see no cases of the disease. The phenomenon is generally believed to arise from the fact that asbestos exposure has decreased dramatically since the passage of the Occupational Safety and Health Act (OSHA) in 1970. Notwithstanding the decrease, the number of non-malignant asbestos-related personal injury claims grew exponentially in the 1990s. It is estimated that up to 90% of new asbestos claims are filed by individuals with little or no impairment, and that payments for non-malignant claims account for 64% of the compensation paid to asbestos plaintiffs. Consistent with these broader trends, the vast majority of the asbestos personal injury claims filed against Owens Corning prior to its Chapter 11 filing was from claimants with alleged asbestos-related impairment that was non-malignant. Pulmonary x-rays are the principal medical diagnostic tool for identifying and documenting non-malignant asbestos-related disease for purposes of substantiating the existence of an asbestos personal injury claim and determining the amount for which a claim is settled, whether under the National Settlement Program, or independently of the NSP. A "positive" classification of an x-ray sufficient for compensation by an asbestos defendant usually means noting a parenchymal abnormality and indicating a small opacity profusion category of 1/0 or higher, according to standards promulgated by the International Labour Organization for reading and scoring x-rays for asbestos-related injury. "You May Have Million Dollar Lungs" Ms. Butcher tells the U.S. Bankruptcy Court for the District of Delaware that "Screening" companies encourage workers to have free chest x-rays performed, even if they have no symptoms of any pulmonary impairment. These companies actively solicit asymptomatic workers, who may have been occupationally exposed to asbestos, touting: "You May Have Million Dollar Lungs." "The screenings are usually done in mobile vans parked near union halls or in hotel parking lots. These screening companies were set up by individuals generally lacking medical experience to create a mechanism for screening hundreds of thousands of workers who could claim to have been exposed to asbestos in the workplace. Screening companies have reportedly processed over one million workers, and account for the overwhelming majority of non-malignant claims filed to date," Ms. Butcher says. Who Are the B-readers? "B-readers" are so-called because they must pass part "B" of a test on x-ray interpretation. They are physicians specially trained and certified to read and score pulmonary x-rays taken of workers alleged to have been exposed to asbestos. To obtain the B-reader credential, physicians must undergo certification by the National Institute of Occupational Safety and Health, a division of the Centers for Disease Control. Between 1994 and 1999, there were 600 certified "B-readers" in the United States. Of this pool of B-readers, however, only a handful were routinely consulted and asked by plaintiffs' lawyers to read and score pulmonary x-rays for purposes of providing medical documentation of asbestos-related disease. These B-readers developed reputations for systematically interpreting chest x-rays of asbestos claimants as positive for asbestos-related disease in 90-100% of all cases. According to Ms. Butcher, the B-readers examine the x-rays after the fact, away from the patient and the testing site, and may not even be licensed to practice medicine in the state where the x-rays were taken. Some x-ray readers spend only minutes in making their findings and are paid hundreds of thousands of dollars in the aggregate for reading mass quantities of chest x- rays. CSFB believes that some claimants' x-rays are "shopped around" to a number of B-readers until one is found who will report a positive reading for asbestos-related injury sufficient to sustain a claim for compensation. Rates of "positive" findings by these doctors have been as high as 90% according to some studies, Ms. Butcher says. An audit of non-malignancy claims conducted by the Manville Personal Injury Trust, one of the largest asbestos claims processors, has shown that certain B-readers whose findings served as the basis for thousands of claims failed independent review more than 50% of the time. Given these findings, the Manville Trust now refuses to pay claims based on medical evidence from certain laboratories and by physicians whose diagnostic record appeared medically unsound. When B-readers interpret x-rays for asbestos-related disease, they know they are doing so for purposes of providing "independent" and professional medical documentation necessary to substantiate an asbestos personal injury claim that will be filed against an asbestos defendant, they know the cut off of 1/0 in the ILO system that generally qualifies for compensation from an asbestos defendant, and they frequently receive payment for their services depending on the results of the reading they provide, with greater compensation if they report that an x-ray exhibits positive indications of asbestos-related injury than if they report it does not. The Friedman and Gitlin reports independently audited samples of B-reader x-ray reports and revealed that the incidence of asbestos-related nonmalignant impairment reported by the physicians is totally inconsistent with available peer review literature and is medically and scientifically incredible. No Fuss for the Debtors On December 20, 2004, CSFB wrote to Owens Corning explaining the apparent wrongdoing by the B-readers and demanded that the Debtors initiate their own suit. The letter informed Owens Corning of CSFB's intention to file a motion to sue the B-readers, if it did not receive a response by January 3, 2005. Owens Corning, according to Ms. Butcher, has proven unwilling to prosecute the proposed suit, prompting CSFB to file its request. Ms. Butcher asserts that CSFB has derivative standing to commence an adversary proceeding against the B-readers because: (a) there is a colorable claim in favor of the estate, which is not being pursued; and (b) in respect of which, CSFB is willing to take the risk of funding the proceeding. Since there is no cognizable rationale for not allowing the potential benefit to the estate to be prosecuted, CSFB seeks the Bankruptcy Court's authority to initiate an adversary proceeding against the B-readers to pursue the estates' claims and causes of action. At the same time, CSFB asks Judge Fullam to withdraw the reference to the Bankruptcy Court and have this matter dealt with by the District Court. In accordance with the requirements of Rule 5011- 1 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, CSFB asks Judge Fitzgerald to determine that the proceeding to be withdrawn involves both "core" and "non-core" issues. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 95; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Third Circuit to Hear Banks' Appeal on Feb. 7 ------------------------------------------------------------ As reported in the Troubled Company Reporter on Oct. 19, 2004, Credit Suisse First Boston, as Agent for a consortium of prepetition bank lenders to Owens Corning and certain of its affiliates, delivered Notices of Appeal to the U.S. Bankruptcy Court and U.S. District Court for the District of Delaware indicating its intent to take an appeal from Senior U.S. District Judge John P. Fullam's Order dated Oct. 5, 2004, directing substantive consolidation of Owens Corning's estates, to the United States Court of Appeals for the Third Circuit. Credit Suisse wants the Third Circuit to overturn Judge Fullam's order authorizing substantive consolidation now. The Plan Proponents want the Third Circuit to defer any ruling until a confirmation order for a plan of reorganization providing for substantive consolidation is entered. If, however, the Appellate Court is inclined to review Judge Fullam's interlocutory ruling, the Plan Proponents ask the Court to uphold the ruling. Hearing Schedule The Third Circuit will hear oral argument in this matter on February 7, 2005. As previously reported in the Troubled Company Reporter, Judge Fullam delivered a non-fatal blow to the holders of Owens Corning's bank debt when he released his decision that the Debtors' estates should be substantively consolidated, meaning all rolled into one. The effect of that substantive consolidation would be to effectively eliminate any structural priority the banks obtained when they lent money to Owens Corning subsidiaries and obtained guarantees from other Owens Corning entities. The Banks say that treating them pari passu with Owens Corning's other unsecured creditors deprives them of nearly $1 billion in value. A copy of Judge Fullam's 8-page ruling is available at no charge at: http://bankrupt.com/misc/OWC_Substantive_Consolidation.pdf Judge Fullam found a substantial identity between Owens Corning entities. Judge Fullam said it was impossible for the Banks to have relied on the separate creditworthiness of any one borrower. The cross-guarantees, Judge Fullam reasoned, also militated in favor of substantive consolidation. Judge Fullam made it clear that though substantive consolidation is justified, this does not mean that the Banks must be treated pari passu with all other unsecured claims. Judge Fullam suggests there may be a middle-of-the-road approach to treating the Banks claims in the context of a consensual chapter 11 plan. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 94; Bankruptcy Creditors' Service, Inc., 215/945-7000) PACKAGING CORP: Earns $38 Million Net Income in Fourth Quarter -------------------------------------------------------------- Packaging Corporation of America (NYSE:PKG) reported fourth quarter earnings of $38 million, compared to breakeven fourth quarter 2003 earnings. Fourth quarter 2004 earnings include income of $17 million from a dividend paid to PCA by Southern Timber Venture, a timberlands joint venture in which PCA's holds a 31% ownership interest. Fourth quarter 2003 earnings included a one-time after tax charge of $10 million, to settle certain benefits-related matters with Pactiv Corporation dating back to April 12, 1999. Net sales for the fourth quarter were $493 million compared to $431 million in 2003. PCA intends to increase its quarterly cash dividend on its common stock from $0.15 per share to $0.25 per share, or $1.00 per share annually. The first quarterly dividend of $0.25 per share will be paid to shareholders of record as of March 15, 2005 with a payment date of April 15, 2005. Full year net income for 2004 was $69 million, or $0.64 per share, compared to a loss of $14 million, or $0.14 per share, in 2003. Full year 2004 earnings include a decrease of $2 million, or $0.02 per share, to PCA's previously reported results for the nine months ended September 30, 2004, as a result of an understatement of the intercompany profit reserve for products held in inventory. As shown in the attached table, adjusted net income, which excludes special items, was $52 million, or $0.48 per share, in 2004 compared to $42 million, or $0.40 per share, in 2003. Full year sales were $1.9 billion compared to $1.7 billion in 2003. Higher prices and volume for both containerboard and corrugated products improved earnings by $0.25 per share compared to the fourth quarter of 2003. This increase was partially offset by higher wood, recycled fiber, energy, transportation, labor and benefits costs, which together totaled about $0.13 per share. Higher earnings for the full year, compared to 2003, were driven by higher prices and volume and lower interest expense, which were partially offset by the same costs that affected the 2004 fourth quarter. The large dividend from Southern Timber Venture was the result of the sale of a portion of its timberlands in Mississippi and Alabama. In the fourth quarter, PCA increased cash-on-hand by $94 million. At year-end, cash-on-hand and long-term debt were $213 million and $695 million, respectively. Paul T. Stecko, Chairman and CEO of PCA, said, "We had a very strong fourth quarter, with our corrugated products volume per workday up 6.7% over last year's record fourth quarter volume. Our mills continued to run extremely well, which was important in light of our very strong corrugated products demand. Pricing continued to improve over the third quarter but was offset by higher wood, energy and transportation costs." Commenting on the dividend increase, Mr. Stecko said, "Since initiating dividend payments in January 2004, PCA has continued to improve its business and financial strength. The increase in our annual dividend rate from $0.60 per share to $1.00 per share reflects PCA's strong commitment to provide value to our shareholders." "As is normally our practice," Mr. Stecko continued, "we will be taking our annual mill maintenance outages at our Counce and Valdosta linerboard mills during the first quarter. These outages will result in higher operating costs and less production, negatively impacting earnings. We also expect to see seasonally higher energy and wood costs. Considering all of these items, we currently expect first quarter earnings of about $0.12 per share." About the Company Packaging Corporation of America (NYSE:PKG) is the sixth largest producer of containerboard and corrugated packaging products in the United States with sales of $1.9 billion in 2004. PCA operates four paper mills and 66 corrugated product plants in 26 states across the country. * * * As reported in the Troubled Company Reporter on Dec. 20, 2004, Moody's Investors Service affirmed Packaging Corporation of America's senior implied, issuer and senior unsecured ratings at Ba1. The outlook remains unchanged and is stable. Ratings Affirmed: * Outlook: Stable * Senior Implied: Ba1 * Senior Unsecured Bank Facility: Ba1 * Senior Unsecured: Ba1 * Issuer Rating: Ba1 Packaging Corporation's Ba1 senior implied rating is supported by its good track record of profitability, debt reduction and historically strong credit protection metrics. Packaging Corporation has consistently been one of North America's lowest cost containerboard produces. This results from a good energy supply mix with relatively moderate exposure to fossil fuels, good fiber mix with little exposure to recycled inputs, good forward integration into converting operations and good backwards integration into pulp. The ratings also reflect, however, Packaging Corporation's high concentration in containerboard, a commodity with relatively volatile pricing. Accordingly, small changes in pricing result in large changes in earnings, cash generation, and debt protection measurements. Expectations are for relatively strong commodity pricing over the next several quarters. However, the over-hang of excess capacity together with macroeconomic risks to the U.S. economy may limit the magnitude and duration of commodity price appreciation and margin expansion. This concern is exacerbated by the ongoing displacement of North American manufacturing activity by Asian and other foreign competitors that potentially reduces the size of Packaging Corporation's effective market. Along with systemic supply/demand issues, Packaging Corporation and other containerboard manufacturers are vulnerable to continued margin pressure from input costs from increasing fiber, chemicals and energy prices. Owing to these factors and, as well, increased benefits expenses, Packaging Corporation's cost advantage relative to other containerboard manufacturers has been significantly eroded in recent quarters. As a relatively modest company that has already monetized the majority of its timberland assets, Packaging Corporation does not have the same degree of operational and financial flexibility to further reconfigure its operations that a more substantial company would have. The ratings are also constrained by the significant (40%) ownership position of Madison Dearborn Partners -- MDP. PARMALAT USA: Will Reject Derle Supply Agreement After Transition ----------------------------------------------------------------- Derle Farms, Inc., and its wholly owned subsidiary Kingsland Dairies, Inc., asked the U.S. Bankruptcy Court for the Southern District of New York to compel Farmland Dairies, LLC, and Parmalat USA Corporation to assume or reject immediately a supply agreement dated January 1, 1999, as amended on June 2, 2003. Mark N. Parry, Esq., at Moses & Singer, LLP, in New York, informs the Court that Derle distributes, sells and markets milk and dairy products to customers principally situated in New York City. Derle must deliver fresh products to its customers on a continuous basis. Farmland Will Reject Derle Supply Agreement Farmland Dairies, L.L.C., states that the Supply Agreement with Derle Farms, Inc., includes a number of provisions that render it burdensome to Farmland. Accordingly, Farmland will reject the Supply Agreement. Transition Period After Farmland Dairies, LLC, and Parmalat USA Corp. consented to the immediate rejection of the Supply Agreement, Derle Farms, Inc., sought a 60-day transition period. The parties stipulate that: (a) Parmalat USA will reject the Supply Agreement. (b) From December 17, 2004, through and including the Rejection Date -- the Transition Period -- Farmland will continue to provide Co-Packing Services and otherwise perform in accordance with the terms and conditions of the Supply Agreement, except as otherwise expressly modified: (i) Purchase and Sale of Products Farmland may provide Derle with products out of its facility in Wallington, New Jersey, provided that Farmland will continue to load all those products onto Derle's or its designees' trucks at Farmland's Sunnydale plant in Brooklyn, New York. Should Farmland determine to load all products from its Wallington Facility, Derle will have the right to discontinue taking product from Farmland on five- days' notice via facsimile, and the Supply Agreement will be deemed to have been rejected by Farmland as of that date -- the Termination Date. (ii) Labeling Farmland agrees to provide products under Derle's private label, provided, however, that on the Rejection Date, Derle will purchase any and all outstanding Derle labels in Farmland's possession at Farmland's actual out-of-pocket expense. (c) Derle will pay the current outstanding receivable due and owing to Farmland for $2,707,087 by the dates and in the amounts set forth on the schedule of payments. In addition to the scheduled payments, Derle will pay Farmland for all Co-Packing Services provided during the Transition Period in the ordinary course of business as set forth in the Supply Agreement. (d) To secure its obligations under the Supply Agreement, Derle will grant Farmland a continuing first priority security interest in its present and future accounts receivable and all obligations for the payment of money arising out of its sale of goods or rendition of services, subject, however, to any validly existing perfected liens. Upon full payment of all payments other than that pertaining to certain disputed charges totaling $87,506, which the parties will make a good faith effort to resolve, at Derle's request and expense, Farmland will deliver a termination statement on Form UCC-3 to evidence the release and termination of Farmland's liens. (e) In the event that Derle defaults in any of the Scheduled Payments or unreasonably withholds payment in connection with any of the Ordinary Course Payments, and that default continues for a period of five days after notifying Derle, in addition to all rights and remedies Farmland may have as a secured party pursuant to applicable law, including the possession or disposition of the collateral, the full outstanding amount of all payments, including payment for all Derle labels in Farmland's possession, will be accelerated without any further Court order or notice to Derle, and Farmland will no longer have further obligation to adhere to the terms of the Supply Agreement and the Supply Agreement will be deemed rejected. (f) Derle or its designee will relinquish to Farmland the Provided Facilities and remove from the Sunnydale Facility any personal property belonging to Derle or its designee presently located on the Provided Facilities, on the Rejection Date. (g) Derle fully and finally releases and discharges Farmland from any and all claims, including any rejection damage claim pursuant to Section 365 of the Bankruptcy Code, relating to the Supply Agreement. (h) Farmland fully and finally releases and discharges Derle from any and all claims relating to the Supply Agreement, including any claim related to amounts paid to Derle. 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. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. (Parmalat Bankruptcy News, Issue Nos. 35, 36 & 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) PCA INTL: Poor Third Qtr. Performance Spurs Moody's to Junk Debts ----------------------------------------------------------------- Moody's Investors Service has downgraded PCA International Inc.'s senior implied rating to Caa1 from B2 and downgraded PCA International LLC's senior unsecured notes to Caa2 from B3. Outlook has been changed to negative. These ratings have been downgraded: * for PCA International LLC -- Issuer: -- $165 million senior unsecured notes due 2009 to Caa2 from B3; * for PCA International, Inc. -- Parent: -- Senior implied rating to Caa1 from B2; -- Senior unsecured issuer rating to Caa3 from Caa1; The downgrades reflect PCA International's poor third quarter performance, which resulted in deteriorating credit metrics and caused the company to violate its LTM EBITDA covenant. Although the company is in process of amending its credit facility and revising its covenants, its existing $50 million senior secured credit facility was fully drawn as of October 31, 2004. The company expects to have modest interest coverage for the next two years. Moody's expects PCA's fiscal 2005 leverage (Debt/EBITDA) to significantly exceed its fiscal 2004 leverage of 4.9x; fiscal 2006 leverage is expected to range between 5.0x and 6.0x. Operating margins (EBIT/revenue) have been decreasing since fiscal 2003 (to roughly 7% in LTM ended October 2004) and are only expected to marginally improve in fiscal 2006. The weakening credit metrics were caused in part by the abnormally active hurricane season in the South East (where 22% of the company's studios are located), which contributed to negative same store sales comparisons in the second and third quarter. The increased business and financial risks are somewhat mitigated by the licensing arrangement PCA has with Wal-Mart through 2012. PCA is the predominant portrait vendor to Wal-Mart with roughly 95% of PCA's revenue coming from Wal-Mart. PCA's relationship with Wal-Mart, combined with Wal-Mart's growth strategy of consistently opening new stores every year, has resulted in revenue of about $325 million for the LTM ended October 2004, which is about the same as fiscal 2004 revenue, despite same store sale compression in the second and third quarter of fiscal 2005. The Caa2 rating on PCA International's senior notes reflects their senior position to the unrated senior subordinated notes but effective subordination to the unrated $50 million secured revolving credit facility. The rating also recognizes the fact that total recovery under a distressed scenario is expected to be less than 1%. The senior notes are guaranteed by PCA International, Inc., (parent) and the company's domestic subsidiaries. The company believes it will meet its semi-annual interest payment on February 1st from its increasing cash position and current availability under the revolver. The negative ratings outlook reflects Moody's belief that PCA's credit metrics could further deteriorate and that the company may have to revamp its capital structure if it is unable to service its debt. Moody's will consider stabilizing the ratings if PCA successfully renegotiates its credit facility to provide additional liquidity and PCA achieves greater profitability from the stabilization of same store sales, which should allow it to service its debt. Negative ratings actions could be considered if profitability continues to deteriorate, the company is unable renegotiate it credit facility or if the company changes its relationship with Wal-Mart. PCA is a nationwide provider of professional color portraits of adults, children and families with $325 million in revenues for the last twelve months ended October 2004. The company operates over 2,200 permanent studios in U.S, Canadian, and Mexican Wal-Mart stores, as well as Meijer, Inc., stores and military bases. PCA also operates a traveling business providing portrait photography services to additional retail locations and institutions. PEGASUS SATELLITE: Wants Lease Decision Deadline Extended to May ---------------------------------------------------------------- Pegasus Satellite Communications, Inc., and its debtor-affiliates ask the United States Bankruptcy Court for the District of Maine to further extend their deadline to assume, assume and assign, or reject non-residential real property leases through May 1, 2005. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, tells the Court that the current Lease Decision Deadline has not provided a sufficient amount of time for the Debtors to determine whether to assume, assume and assign, or reject their Real Property Leases. The Debtors have begun, but not yet completed, the process of selling their broadcast television assets. Included among the assets that are the subject of the sale process are some or all of the Real Property Leases. Pending the Debtors' decision to assume or reject the Real Property Leases, the Debtors will perform all of their undisputed obligations arising from and after the Petition Date under the leases in a timely fashion, including the payment of postpetition rent due, as required by Section 365(d)(3) of the Bankruptcy Code. As a result, although the lessors under the Real Property Leases have not expressly consented to the extension, there should be no prejudice to the lessors. Mr. Keach relates that the Debtors want to preserve maximum flexibility in restructuring their business. Flexibility is particularly needed in light of the upcoming auction with respect to the Debtors' broadcast television assets and the importance of that auction to the Debtors' ability to consummate a reorganization 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. Maine 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. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) PRESIDENT CASINOS: Broadwater Wins Bid for Biloxi Operations ------------------------------------------------------------ President Casinos, Inc., (OTC:PREZQ.OB) reported that Broadwater Development, LLP, was the winning bidder for the Company's Biloxi casino and hotel operations under the terms of Section 363 of the United States Bankruptcy Code. The agreement is for a purchase price of $82.0 million, subject to certain closing adjustments. Broadwater Development, LLP is comprised of Roy Anderson and W.C. Fore of Gulfport, Mississippi, and Dezer Development Group from Miami, Florida. A hearing to approve the auction results and sale to the winning bidder is scheduled before the United States Bankruptcy Court for the Eastern District of Missouri on January 26, 2005. The closing is anticipated to occur in the Spring of 2005. It is anticipated that the operation will continue in Biloxi with the new owners. In the interim, casino and hotel operations and management will remain business as usual. Innovation Capital Holding, LLC and Harbour Financial, LLC assisted President Casinos, Inc., with this sales transaction. President Casinos, Inc., owns and operates dockside gaming facilities in Biloxi, Mississippi and downtown St. Louis, Missouri, north of the Gateway Arch. The Company filed for bankruptcy protection on June 20, 2002. At Nov. 30, 2004, President Casinos' balance sheet showed a $54,412,000 stockholders' deficit, compared to a $52,349,000 deficit at Feb. 29, 2004. QUALITY DISTRIBUTION: Senior Floating Rate Notes to Prepay Debts ---------------------------------------------------------------- Quality Distribution, LLC, the wholly owned subsidiary of Quality Distribution, Inc. (Nasdaq: QLTY), and its wholly owned subsidiary, QD Capital Corporation, plan to offer, through a private placement, Senior Floating Rate Notes due 2012, subject to market and other conditions. Quality Distribution, LLC and QD Capital Corporation intend to use the gross proceeds of the offering, which are expected to be approximately $85 million: (i) to prepay approximately $70.0 million of term loan indebtedness outstanding under their credit agreement, (ii) to make a distribution to their parent, Quality Distribution, Inc., to be used to redeem all $7.5 million principal amount of Quality Distribution, Inc.'s Series B Floating Interest Rate Subordinated Term Securities due 2006, and (iii) for general corporate purposes. The proposed offering of the Notes is conditioned upon receipt of an amendment of the credit agreement. The amendment will, among other things, permit the issuance of the Notes and the application of the proceeds therefrom. In addition, upon completion of offering of the Notes, the amendment will eliminate the consolidated interest coverage covenant and the consolidated total leverage covenant, and replace them with a consolidated senior secured leverage covenant. The Notes will be offered within the United States only to qualified institutional buyers pursuant to rule 144A under the Securities Act of 1933, as amended, and outside the United States, only to non- U.S. investors in reliance on Regulation S. The Notes to be offered will not be registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or a solicitation of an offer to buy the Notes. About the Company Headquartered in Tampa, Florida, Quality Distribution, Inc., through its subsidiary, Quality Carriers, Inc., and TransPlastics, a division of Quality Carriers, and through its affiliates and owners-operators, manages approximately 3,500 tractors and 8,000 trailers. Quality Distribution also provides other bulk transportation and related services, including tank cleaning and freight brokerage. Quality Distribution is an American Chemistry Council Responsible Care(R) Partner and is a core carrier for many of the Fortune 500 companies that are engaged in chemical production and processing. * * * As reported in the Troubled Company Reporter on Oct. 15, 2004, Moody's Investors Service lowered all ratings of Quality Distribution, LLC. Specifically, these ratings are affected: * Senior Implied rating to Caa1 from B2 * $215 million senior secured credit facilities, consisting of a $75 million revolving credit due 2008 and a $140 million term loan B due 2009, to Caa1 from B2 * $125 million senior subordinated notes due 2010, to Caa3 from Caa1 * Senior Unsecured Issuer rating to Caa2 from B3. The ratings have a stable outlook. This completes a review for possible downgrade that was initiated in February 2004. The rating downgrade considers the substantial deterioration in Quality Distribution's operating profits and cash flow generation from both 2003 levels as well as expected 2004 levels, despite a generally favorable market for transportation services. Although the company has demonstrated continued revenue growth, the deterioration in operating profits stems from costs associated with problems in and disposal of the PPI insurance unit, increases in environmental and insurance claims reserves, and generally weaker results experienced in the company's operations. In light of this, Moody's believes that Quality Distribution's financial metrics, including fixed charge coverage and cash flow to debt, will be significantly weaker than previously estimated. In addition, the rating downgrade considers the potential ongoing implications of reported irregularities at Quality Distribution's insurance subsidiary, PPI, on the company's credit fundamentals. Although the company sold certain assets of PPI in July 2004, Moody's remains concerned about residual legal ramifications that may still ensue from incidents involving this enterprise. The ratings have a stable outlook, reflecting Moody's expectations that the company will take actions to remedy recent difficulties its trucking businesses have experienced, particularly where improvements in driver turn-over are concerned, as well as the financial flexibility provided by current liquidity available to the company. Nevertheless, Moody's believes that absent an improvement in operating performance the company could face difficulty in maintaining compliance with existing financial covenants in its bank credit facility. The ratings or their outlook could be downgraded if Quality Distribution's business model were to further suffer due to softer revenue growth, or if the trend to higher-than-anticipated operating expenses were to continue, resulting in operating margins of below 5%, which would further impede the company's cash flow and liquidity. Conversely, ratings or their outlook may be revised upward if the company demonstrates sustained improvement in transportation revenue growth to over 10% annually and operating margins of over 7%, resulting in robust interest coverage levels and cash flow generation adequate to substantially repay debt. QUALITY DISTRIBUTION: Moody's Junks Proposed Senior Unsec. Notes ---------------------------------------------------------------- Moody's Investors Service has assigned a Caa2 rating to Quality Distribution, LLC's proposed senior unsecured notes, due 2012. The purpose of the proposed 144A notes offering is to repay about $82 million of existing debt, including a prepayment of about $70 million of the company's $138 million term loan B, due 2009. In conjunction with this offering, the company has proposed amendments to its senior secured bank credit facility to provide the company with additional room under its financial covenant restrictions. In addition, Moody's has affirmed these ratings: * $143 million amended revolving credit facility, rated Caa1, * $125 million senior subordinated notes due 2010, rated Caa3, * Senior Implied rating of Caa1, and * Senior Unsecured Issuer rating of Caa2. The ratings have a stable outlook. The ratings continue to reflect Quality Distribution's weak operating profits and cash flow experienced in FY 2004, resulting in weak financial metrics, including fixed charge coverage and cash flow to debt, despite a generally favorable market for transportation services. Although the company has demonstrated continued revenue growth, the deterioration in operating profits stems from costs associated with problems in and disposal of the PPI insurance unit, increases in environmental and insurance claims reserves, and generally weaker results experienced in the company's operations. In addition, the ratings continue to consider the potential implications of reported irregularities at Quality Distribution's insurance subsidiary, PPI, on the company's credit fundamentals. Although the company has recently settled all shareholder lawsuits relating to the PPI incident, addressing a major hurdle in resolving litigation relating to PPI, Moody's remains concerned about residual legal ramifications that may still ensue from incidents involving this enterprise. However, the ratings also positively consider the incremental liquidity benefit provided to the company through the amendment of certain bank facility terms, which decreases the likelihood of default under those facilities owing to possible financial covenant violation. The ratings have a stable outlook, reflecting Moody's expectations that the company will take actions to remedy recent difficulties its trucking businesses have experienced, particularly where improvements in driver turn-over are concerned, and that the company has a substantially improved ability to maintain compliance with its amended financial covenants in its bank credit facility. The ratings or their outlook could be downgraded if Quality Distribution's business model were to further suffer due to softer revenue growth, or if the trend to higher-than-anticipated operating expenses were to continue, resulting in operating margins persistently below 5%, which would further impede the company's cash flow and liquidity. Conversely, ratings or their outlook may be revised upward if the company demonstrates sustained improvement in transportation revenue growth of over 10% annually and operating margins of over 7%, resulting in robust interest coverage levels and cash flow generation adequate to substantially repay debt. Upon close of the proposed notes offering, in which the company's total debt will remain essentially unchanged, Quality Distribution will remain heavily-leveraged as it emerges from a difficult operating period. As the result of consequences from the PPI incident as well as other market-driven factors, Quality Distribution's operating performance in 2004 has been well below expected levels. For the first nine months of 2004, while transportation revenues grew 10% from the same period in 2003 to $467 million, operating margins declined to about 3% of revenue (versus almost 6% for the same period in 2003). The company encountered increased expenses associated with insurance costs and environmental liabilities, lost income that had previously been derived from the PPI insurance business, and bore additional SG&A costs. On pro forma debt of about $280 million upon close, this represents about 6.8x nine months September 2004 EBITDA, annualized (4.2x adjusted EBITDA per bank credit facility covenant calculations). While much of this reduction in earnings is non-cash in nature, cash flow generation has been negatively impacted, and Moody's believes that cash flow will continue to be constrained in the near future. Operating cash flow for the first nine months of 2004 was about $12 million, compared to almost $21 million in the same period in 2003. On capital expenditures of $8 million, the company has only generated about $4 million of free cash flow through September 2004, representing, on an annualized basis, about 2% of pro forma debt. Moody's expects that even if operating trends improve the company will be only marginally free cash flow positive in 2005, suggesting limited capacity for debt repayment. However, with the amendment of the company's senior secured credit facilities, the company does have some headroom in liquidity to provide a small amount of cushion against a further decline in operating cash flows. Upon close of the proposed transaction, none of the company's $75 million revolving credit facility is expected to be drawn, with about $17 million used for letters of credit. Moody's expects the full remaining $58 million to be available under the revolver upon close, which, the rating agency believes, should be adequate to provide for coverage of fixed cost and planned CAPEX requirements over the near term in the event of a modest set back in operating performance. The Caa2 rating on the senior unsecured notes, one notch below both the senior implied and the senior secured credit facility ratings, reflects the severity of loss that could be borne by holders of these notes in the event of default. These notes are effectively subordinated to all existing and future secured debt of the company, but senior in priority to QD's $125 million senior subordinated notes due 2010, rated Caa3. Moody's assesses the asset coverage of all debt to be weak, particularly so for the two classes of unsecured notes. Since the company operates under an "asset light" business model, Quality Distribution has only a limited amount of fixed assets available to cover existing debt levels. On total assets of $382 million (as of September 2004), only $125 million of this amount was represented by fixed assets, while $131 million comprised goodwill. Accounts receivable is the only other asset reported of significance, at about $99 million. In a liquidation scenario, Moody's believes that realizable asset values could be significantly below total debt outstanding ($280 million, pro forma this transaction), and that coverage available to unsecured debt holders would imply substantial loss of principal. Quality Distribution, LLC, and its holding company Quality Distribution, Inc., are headquartered in Tampa, Florida. Through its subsidiaries and affiliates, the company is a leading transporter of bulk liquid and dry bulk chemical products. The company is 55% owned by Apollo Investment Fund III, LP, and 45% owned by management and other investors. QUANTEGY INC: Employs Kurtzman Carson As Claims & Noticing Agent ---------------------------------------------------------------- Quantegy, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Middle District of Alabama to retain Kurtzman Carson Consultants LLC as their claims and noticing agent. The Debtors estimate they have over 3,000 potential creditors and they believe that Kurtzman Carson will be able to help them effectively and efficiently serve notices to these creditors. Kurtzman Carson's will: a) prepare and serve required notices in these cases; b) file with the Clerk's Office a certificate or affidavit of service that includes an alphabetical list of persons on whom the notice was served and the date and manner of service; c) maintain copies of all proofs of claim and proofs of interest; d) docket all proofs of claim and proofs of interest; e) implement necessary security measures to ensure the completeness and integrity of the claims registers; f) transmit to the Clerk's Office a copy of the claims registers on a periodic basis; g) maintain an up-to-date mailing list for all entities that have filed proofs of claim or proofs of interest and make the list available upon request to the Clerk's Office or any party in interest; h) provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in these cases without charge during regular business hours; i) record all transfers of claims pursuant to Bankruptcy Rule 3001(e); j) comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; k) provide temporary employees to process claims as necessary; l) comply with further conditions and requirements as the Clerk's Office or the Court may be at any time prescribe; m) provide other claims processing, noticing, balloting and related administrative services as may be requested from time to time by the Debtor; and n) act as balloting agent. Christopher R. Schepper, Chief Operating Officer at Kurtzman Carson, discloses that the Debtors paid his Firm a $75,000 retainer. Professionals at Kurtzman Carson and their current billing rates per hour: Designation Billing Rate ----------- ------------ Senior Bankruptcy Consultant $225 - $295 Bankruptcy Consultant 125 - 210 Technology/Programming 115 - 195 Case Manager 75 - 115 Clerk 40 - 65 To the best of the Debtors' knowledge, Kurtzman Carson is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Opelika, Alabama, Quantegy, Inc. -- http://www.quantegy.com/-- provides a full line of audio, video, data, storage, logging and instrumentation recording media products. The Company along with its debtor-affiliates filed for chapter 11 protection on Jan. 10, 2005 (Bankr. M.D. Ala. Case No. 05-80042). Cameron-RRL A. Metcalf, Esq., at Espy, Metcalf & Poston, PC, represents the Debtors in their restructuring efforts. When Quantegy, Inc., filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million to $50 million. QUANTEGY INC: Taps Equity Partners as Marketing Agent ----------------------------------------------------- Quantegy, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Middle District of Alabama to hire Equity Partners, Inc., of Maryland as their marketing, advertising, financing and real-estate agent during their chapter 11 cases. Kenneth W. Mann, a member of Equity Partners, discloses that the Debtors gave his Firm $18,000 in advance for advertising, marketing, travel or any other out-of-pocket expense. For any asset sale, the Debtors agreed to pay Equity Partners a percentage of the proceeds. To the best of the Debtors' knowledge, Equity Partners does not hold any interest materially adverse to the Debtors or their estates. Headquartered in Opelika, Alabama, Quantegy, Inc. -- http://www.quantegy.com/-- provides a full line of audio, video, data, storage, logging and instrumentation recording media products. The Company along with its debtor-affiliates filed for chapter 11 protection on Jan. 10, 2005 (Bankr. M.D. Ala. Case No. 05-80042). Cameron-RRL A. Metcalf, Esq., at Esq., Metcalf & Poston, PC, represents the Debtors in their restructuring efforts. When Quantegy, Inc., filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million to $50 million. REAL MEX: Extends Senior Debt Exchange Offering Until March 31 -------------------------------------------------------------- Real Mex Restaurants, Inc., has extended the expiration date for its previously announced exchange offer relating to its outstanding 10% Senior Secured Notes Due 2010 which commenced on Sept. 28, 2004. The exchange offer, which was initially scheduled to expire on Oct. 27, 2004, has been extended until 5:00 p.m., E.S.T. on March 31, 2005. Holders of Notes previously tendered for exchange shall have the right to withdraw tenders of Notes at any time prior to the expiration of the exchange offer. As of this date, holders of $103,259,000 or approximately 98%, of the outstanding principal amount of Notes have tendered their Notes for exchange. As previously announced, the Company has temporarily suspended the use of its exchange offer prospectus. Such suspension shall continue to be in effect until further notice from the Company. About the Company Headquartered in Long Beach, California, Real Mex Restaurants -- http://www.eltorito.com/-- is the largest full-service, casual dining Mexican restaurant chain operators in the United States, with 164 restaurants in California and an additional 35 company- owned restaurants in twelve other states. These include 69 El Torito Restaurants, 69 company-owned Chevys Fresh Mex Restaurants, 39 Acapulco Mexican Restaurants, 6 El Torito Grill Restaurants, 5 company-owned Fuzio Universal Pasta Restaurants, the Las Brisas Restaurant in Laguna Beach, and several regional restaurant concepts such as Who-Song & Larry's, Casa Gallardo, El Paso Cantina, Keystone Grill and GuadalaHARRY'S. Real Mex Restaurants is committed to the highest standards and is dedicated to serving the freshest Mexican food with excellent service in a clean, comfortable, and friendly environment. * * * As reported in the Troubled Company Reporter on Jan. 14, 2005, Standard & Poor's Ratings Services affirmed its ratings, including the 'B' corporate credit rating, on casual-dining restaurant operator Real Mex Restaurants, Inc. All ratings were removed from CreditWatch. The outlook is stable. The ratings affirmation follows Real Mex's acquisition of Chevys Inc., for $77.9 million, to be funded through a $70 million senior unsecured term loan and cash balances. The acquisition of Chevys, the second-largest casual-dining Mexican restaurant in California, improves the company's market position in California, where its El Torito and Acapulco concepts are the largest and third-largest casual-dining Mexican restaurant chains, respectively. Standard & Poor's believes the acquisition risk is limited because Real Mex is already adept at operating casual-dining Mexican restaurants in California. Moreover, the company could realize cost savings from the consolidation of general and administrative expenses, as well as lower food distribution costs. Pro forma leverage will be high, but will remain about the same as previous levels, with total lease-adjusted debt to EBITDA at about 5.0x. "The ratings reflect Real Mex's participation in the highly competitive restaurant industry, its small size and regional concentration, weak cash flow protection measures, and a highly leveraged capital structure," said Standard & Poor's credit analyst Robert Lichtenstein. The company is a small player in the highly competitive casual-dining sector of the restaurant industry. Although Real Mex has a leading position in California as a casual-dining Mexican restaurant operator, the company maintains a relatively small market share among overall casual-dining chains. Many of its competitors have substantially greater financial and marketing resources, and continue to expand rapidly. Moreover, Real Mex is regionally concentrated, with about 90% of its restaurants in California. RED LINE RESTORATIONS: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Red Line Restorations, LLC 914 East Main Street Stamford, Connecticut 06902 Bankruptcy Case No.: 05-50053 Chapter 11 Petition Date: January 18, 2005 Court: District of Connecticut (Bridgeport) Judge: Alan H.W. Shiff Debtor's Counsel: Hale C. Sargent, Esq. Sargent and Sargent, LLC 830 Post Road East PO Box 454 Westport, Connecticut 06881 Tel: (203) 226-3331 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 8 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ John P. Kendall Alleged Fraudulent $5,600,000 Faneuil Hall Associates 175 Federal Street Boston, Massachusetts 02110 Royal Publications $20,000 790 West Tennessee Avenue Denver, Colorado 80223 James Patterson Labor $17,500 10,000 Shelbyville Road Louiseville, Kentucky New Hope Realty Trust Rebt in Arrears $13,200 914 East Main Street Stamford, Connecticut 06902 ABCO Welding Supply Welding Machines & $4,980 Supplies New Hope Welding/Fabrication Fabrication & $2,356 Supplies SBC Telephone Services $521 Federal Express Shipping $350 REMOTE DYNAMICS: Needs to Raise $6 Mil. More to Fund Operations --------------------------------------------------------------- Remote Dynamics, Inc., began beta tests of its new product offering, REDIview during November 2004 with a full-scale commercial launch scheduled for the first calendar quarter of 2005. REDIview is an Internet and service bureau-based software application that provides an extensive array of real-time and accurate mapping, trip replay, and vehicle activity reports. In addition, REDIview includes a series of exception-based reports designed to highlight inefficiencies in the operations of a vehicle fleet. Utilizing Remote Dynamics proven, high-capacity network service center, customers may access their information securely through the Internet from any personal computer or certain other devices. REDIview incorporates technologies that allow for fast and effective integration into legacy applications operated by companies with vehicle fleets and mobile workers. This design allows companies to easily extend their existing supply chain management systems to the mobile workforce for transaction processing and customer fulfillment. REDIview was also designed to be hardware and network agnostic to provide the maximum flexibility in designing solutions that best fit the customer's specific needs. Sales Decline Expectations Historically, much of Remote Dynamics Inc.'s revenues have been derived from products and services sold to the long-haul trucking industry, small to medium-sized companies through its VMI product line and to member companies of SBC Communications, Inc. The Company expects revenues from these legacy customers to decline substantially during 2005, and for the Company to sustain ongoing business operations and ultimately achieve profitability, it must substantially increase its sales and penetration into the marketplace with competitive products and services such as REDIview. Profitability Expectations Management currently does not expect to achieve profitability during its current fiscal year since the Company will be expanding its sales force and building a base of customers that purchase information and data services from the Company on a monthly recurring basis. Key to achieving profitability is to obtain a REDIview customer base that provides monthly recurring revenues and corresponding gross margins that exceed operating costs and expenses to support the REDIview customer base. Management currently estimates that for the Company to achieve profitability, it will need to have approximately 38,000 to 40,000 units of its REDIview products in service. However, there can be no assurance that the Company can achieve the required sales of REDIview to meet its profitability goals. The Company believes that the potential market opportunity for automatic vehicle location products in the United States, such as its GPRS-based REDIview product to be launched in the first calendar quarter of 2005, is significant. The Company currently believes that it will be positioned with its telematics product lines and proven operations support to take advantage of the significant market potential. In addition, the Company has renewed its service vehicle contract with SBC for an additional term that ends on December 31, 2005. Critical Success Factors Critical success factors in management's plans to achieve positive cash flow from operations include: (1) ability to raise a minimum of $6 million in additional capital resources to fund the Company's operations until revenues from REDIview are sufficient to fund ongoing operations; (2) significant market acceptance of REDIview in the United States; (3) maintaining and expanding the Company's direct sales channel and expanding into new markets not currently served by the Company; New salespersons will require training and time to become productive. In addition, there is significant competition for qualified salespersons, and the Company must continue to offer attractive compensation plans and opportunities to attract qualified salespersons. (4) maintaining and expanding indirect distribution channels; Securing and maintaining adequate third party leasing sources for customers who purchase the Company's products. There can be no assurances that any of these success factors will be realized or maintained. Although the Company, which filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas Dallas Division, believes that it has exited the Chapter 11 process as a stronger and more financially viable entity, at this time it is not possible to accurately predict the effect of the bankruptcy filing on its business. It is possible that because of operating performance or other factors, the Company may not be able to continue as a going concern. Accordingly, the Company urges that extreme caution be exercised with respect to existing and future investments in any of the Company's securities. Should the Company not continue as a going concern, it may be unable to realize its assets and discharge its liabilities in the normal course of business. The Company has incurred significant operating losses since inception and has limited financial resources to support itself until the time that it is able to generate positive cash flow from operations. The Company had cash and cash equivalents of $3.3 million as of November 30, 2004. Based in Richardson, Texas, Minorplanet Systems USA, Inc. (nka Remote Dynamics, Inc. -- http://www.minorplanetusa.com/-- develops and implements mobile communications solutions for service vehicle fleets, long-haul truck fleets and other mobile- asset fleets, including integrated voice, data and position location services. Minorplanet, along with two affiliates, filed for chapter 11 protection (Bankr. N.D. Texas, Case No. 04-31200) on February 2, 2004. Omar J. Alaniz, Esq., and Patrick J. Neligan, Jr., Esq., at Neligan Tarpley Andrews and Foley LLP, represent the Debtors in their restructuring efforts. When Minorplanet filed for bankruptcy, it estimated assets and debts at $10 million to $50 million. * * * As reported in the Troubled Company Reporter on Dec. 6, 2004, Remote Dynamics, Inc., in compliance with Nasdaq Marketplace Rule 4350(b)(1)(b), reported that BDO Seidman LLP, the company's independent registered accounting firm, issued an audit report for the fiscal year ended Aug. 31, 2004, which expressed an unqualified opinion but included an explanatory paragraph concerning Remote Dynamics' ability to continue as a going concern based upon its history of recurring losses from operations and negative cash flows from operating activities. SGD HOLDINGS: Files for Bankruptcy Protection in Delaware --------------------------------------------------------- SGD Holdings, Ltd. (OTC Bulletin Board: SGDD), filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Chapter 11 allows a company to continue operating in the ordinary course of business and to maximize recovery for the company's stakeholders. The filing will enable the company to continue to conduct business as usual while it develops a reorganization plan. Headquartered in Addison, Texas, SGD Holdings, Ltd., through its subsidiary, is a wholesaler of fine jewelry, offering both gold and silver jewelry to retailers throughout the United States. The Company filed for chapter 11 protection on January 20, 2005 (Bankr. D. Del. Case No.: 05-10182). Donna L. Harris, Esq., at Cross & Simon, LLC, represent the Debtor in its restructuring efforts. When the Debtor filed for bankruptcy, it reported an estimated assets amounting to $1 million to $10 million and estimated debts amounting to $10 million to $50 million. SGD HOLDINGS LTD: Case Summary & 17 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: SGD Holdings, Ltd. aka Goldonline International, Inc. aka Benton Ventures, Inc. 4385 Sunbelt Drive Addison, Texas 75001 Bankruptcy Case No.: 05-10182 Type of Business: The Debtor is a holding company engaged in acquiring and developing jewelry businesses. Its principal operating subsidiary, HMS Jewelry Company, Inc., is a national jewelry wholesaler, specializing in 18K, 14K and 10K gold and platinum jewelry. HMS markets its products to a network of over 30,000 retail jewelers through the distribution of a catalog and through its B2B online catalog at http://www.HMSgold.com/ See http://www.sgdholdings.com/ Chapter 11 Petition Date: January 20, 2005 Court: District of Delaware Judge: Mary F. Walrath Debtor's Counsel: Donna L. Harris, Esq. Cross & Simon, LLC 913 North Market Street, Suite 1001 Wilmington, Delaware 19801 Tel: (302) 777-4200 Fax: (302) 777-4224 Estimated Assets: $1 Million to $10 Million Estimated Debts: $10 Million to $50 Million Debtor's 17 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Lakewood Development Litigation $7,200,000 Corporation c/o Phillip W. Offill, Jr., Esq. Godwin Gruber LLP 1201 Elm Street, Suite 1700 Dallas, Texas 75270 Houston REIT Operating Trade $110,160 Partnership c/o Hartman Management, Inc. 1450 Sam Houston Parkway North, Suite 100 Houston, Texas 77043 G. David Gordon Trade $87,832 7633 East 63rd Place, Suite 210 Tulsa, Oklahoma 74133 BJB Services, Inc. Trade $62,785 7633 East 63rd Place, Suite 210 Tulsa, Oklahoma 74133 Guest & Company Trade $59,450 Cooper & Scully Trade $51,614 Michael Maness Trade $21,000 Jules P. Sem, Esq. Professional Fees $18,330 Gaunt & Kruppstadt, LLP Professional Fees $14,173 Eurovest Trade $6,132 Stewart & Stewart Attorneys Professional Fees $2,857 Bradley, Andrew, Professional Fees $2,590 Christopher & Kaye Olde Monmouth Stock Transfer Trade $2,530 M&R Resource Services, Inc. Trade $2,153 PublicEase, Inc. Trade $1,660 Legget & Clemons Trade $515 James G. Gordon & Litigation Unknown Lisa K. Gordon SPIEGEL INC: BofA Wants Court to Lift Stay to Effect Set-Off ------------------------------------------------------------ Eddie Bauer, Inc., deposited with Bank of America, N.A., $2,500,000 as cash collateral pursuant to the terms of a cash collateral account agreement dated December 19, 2002. Eddie Bauer pledged the Prepetition Cash Collateral in line with certain automatic clearinghouse services or facilities to be provided by BofA. As of the Petition Date, the Prepetition Cash Collateral continues to be held by BofA in the deposit account, in Eddie Bauer's name, for BofA's benefit. As of its bankruptcy petition date, Spiegel, Inc., owed $22,986,825 to BofA pursuant to the terms of an amended and restated term loan agreement on March 27, 1996. Eddie Bauer, in accordance with the terms of an unconditional subsidiary guaranty of payment dated March 7, 1997, unconditionally guaranteed the payment of Spiegel's obligations arising under or in connection with, inter alia, the Term Loan Agreement. Under the Guaranty's terms, Eddie Bauer granted to BofA, in addition to BofA's common law set-off right, an express contractual right of set-off with respect to all Eddie Bauer balances, credits or deposits from time to time held by BofA or any BofA agent or bailee. On September 30, 2003, BofA filed Claim No. 2845 and supporting documentation evidencing the $22,986,825 Prepetition Debt. In its Proof of Claim, BofA noted that the Prepetition Debt is partially secured by the Prepetition Cash Collateral. Under applicable non-bankruptcy law, Daniel F. Flores, Esq., at Pitney Hardin, LLP, in New York, tells the U.S. Bankruptcy Court for the Southern District of New York that BofA is entitled to set off the Prepetition Cash Collateral against the Prepetition Debt, which are mutual, prepetition debts owed by and to the same parties under Section 553 of the Bankruptcy Code, subject to a modification of the automatic stay. Mr. Flores contends that BofA is "not adequately protected," thus cause exists to modify the stay to permit it to effect a set-off against the Prepetition Cash Collateral pursuant to Section 553. Accordingly, BofA asks the Court to lift the stay to permit it and its assigns to effect a set-off of the Prepetition Cash Collateral against the Prepetition Debt. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 215/945-7000) SR TELECOM: Inks Letter of Intent for $50M Sr. Sec. Facility ------------------------------------------------------------ SR Telecom(TM), Inc., (TSX: SRX; Nasdaq: SRXA) entered into a non- binding Letter of Intent from a major U.S. lender, for a five-year revolving Senior Secured Credit Facility in an amount of up to US$50 million. The amount that may be drawn under the facility is limited to a borrowing base defined by percentages of qualifying receivables, inventory and the fair market value of the land and building owned by SR Telecom in Montreal. The facility will bear interest at floating rates related to LIBOR. Completion of the Senior Secured Credit Facility is subject to a number of conditions, including satisfactory completion of due diligence, a concurrent issuance of equity and subordinated debt of no less than US$30 million, execution of satisfactory inter-creditor and subordination agreements with the lenders of our subsidiary, CTR, negotiation of satisfactory documentation and other conditions and covenants customary for a facility of this nature. The Senior Secured Credit Facility is part of a broader comprehensive refinancing package, details of which will be announced in the coming weeks. About SR Telecom SR Telecom (TSX: SRX, Nasdaq: SRXA) designs, manufactures and deploys versatile Broadband Fixed Wireless Access solutions. For over two decades, carriers have used SR Telecom's products to provide field-proven data and carrier-class voice services to end- users in both urban and remote areas around the globe. SR Telecom's products have helped to connect millions of people throughout the world. A pioneer in the industry, SR Telecom works closely with carriers to ensure that its broadband wireless access solutions directly respond to evolving customer needs. Its turnkey solutions include equipment, network planning, project management, installation and maintenance. SR Telecom is an active member of WiMAX Forum, a cooperative industry initiative, which promotes the deployment of broadband wireless access networks by using a global standard and certifying interoperability of products and technologies. * * * As reported in the Troubled Company Reporter on May 5, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on SR Telecom, Inc., to 'CCC' from 'CCC+'. The outlook is negative. "The ratings action reflects continued poor operating performance and material negative free operating cash flow in 2003, and follows the company's announcement that it plans to undertake additional restructuring of its operations," said Standard & Poor's credit analyst Michelle Aubin. The negative outlook reflects the possibility that the ratings on SR Telecom could be lowered further if the company's operating performance and liquidity position do not improve. SR TELECOM: Revises Guidance for 2004 Fourth Quarter ---------------------------------------------------- SR Telecom(TM), Inc., (TSX: SRX; Nasdaq: SRXA) is revising its previously announced guidance for the fourth quarter of fiscal 2004 because of unanticipated delays in receiving major purchase orders under existing frame contracts and the deferral of certain shipments of other orders into the first quarter of 2005, The Company now expects that its consolidated revenues in the fourth quarter of fiscal 2004 will be in the range of $22 to $25 million. Moreover, the Company will not achieve break-even results in its core wireless business in the fourth quarter of 2004, and will generate a significant loss. Consolidated cash balances at year-end were approximately $6.9 million, of which approximately $1.9 million was restricted. Due to anticipated demand under existing frame contracts and bids in progress and the deferral of certain contracts from 2004 into 2005, the Company is confident that the Company will achieve consolidated revenues in the range of $170 million to $200 million in 2005. However, the Company has also been adversely impacted by a reduction in the availability of supplier credit, which in turn has slowed raw material purchases and production. This production slowdown will have the effect of producing a significant EBITDA loss during the first quarter of 2005. Despite this loss, and contingent on the anticipated refinancing of the Company's existing indebtedness in the near future, the Company expects to be in a position to increase production by the second quarter of 2005 and to realize consolidated EBITDA in the range of $15 million for fiscal 2005. New Purchase Orders from Latin America SR Telecom received purchase orders valued at approximately CDN$10 million from a major telecommunications operator in Latin America. These orders are part of the previously announced frame contract under which the operator selected the SR500(TM) family of fixed wireless access systems. Deliveries are scheduled to commence immediately. The operator will deploy the networks throughout the country to provide urban-quality services to rural and remote communities. These include first-time residential services to some areas, an expanded payphone network and the introduction of broadband Internet services to the rural communities. Further deployment and expansion for this universal access program is expected to take place in 2005. Additional Airstar orders from Indonesia SR Telecom received new orders valued at approximately CDN$1 million from PT Aplikanusa Lintasarta, the largest data and corporate network communications provider in Indonesia. These add-on orders are for a project that was initiated in September 2003. Lintasarta has selected the airstar(TM) wireless broadband solution to provide ATM, frame relay and clear channel services to its customers in the Java, Kalimantan and Sulawesi regions of Indonesia. With these orders, Lintasarta will add airstar base stations and Customer Premises Equipment to its growing network of airstar systems. Deliveries are scheduled to commence immediately. About SR500 The SR500 family of fixed wireless access systems enables operators to extend their reach and deliver a full range of tailor-made voice and data applications to end-users. The systems provide bandwidth-on-demand and allow service providers to offer bundled service packages to meet the various needs of their customers. The SR500 system can be deployed as a standalone wireless access technology or as an overlay network that complements narrowband wireless local loop networks. About Airstar With product availability at 3.5, 10.5, 26 and 28 GHz, the advanced and adaptive airstar platform addresses the needs of service providers and carriers who offer metropolitan broadband connectivity services. Airstar's intelligent ATM-based technology optimizes spectrum use through packet-based dynamic bandwidth allocation, enabling it to handle a wide variety of services and provide on-demand bandwidth quickly, reliably and economically. airstar is also used for cellular transmission infrastructure applications and has been deployed in Europe, Asia, Latin America, the Middle East and North America. About SR Telecom SR Telecom (TSX: SRX, Nasdaq: SRXA) designs, manufactures and deploys versatile Broadband Fixed Wireless Access solutions. For over two decades, carriers have used SR Telecom's products to provide field-proven data and carrier-class voice services to end- users in both urban and remote areas around the globe. SR Telecom's products have helped to connect millions of people throughout the world. A pioneer in the industry, SR Telecom works closely with carriers to ensure that its broadband wireless access solutions directly respond to evolving customer needs. Its turnkey solutions include equipment, network planning, project management, installation and maintenance. SR Telecom is an active member of WiMAX Forum, a cooperative industry initiative, which promotes the deployment of broadband wireless access networks by using a global standard and certifying interoperability of products and technologies. * * * As reported in the Troubled Company Reporter on May 5, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on SR Telecom, Inc., to 'CCC' from 'CCC+'. The outlook is negative. "The ratings action reflects continued poor operating performance and material negative free operating cash flow in 2003, and follows the company's announcement that it plans to undertake additional restructuring of its operations," said Standard & Poor's credit analyst Michelle Aubin. The negative outlook reflects the possibility that the ratings on SR Telecom could be lowered further if the company's operating performance and liquidity position do not improve. SR TELECOM: Fidelity Management Sells 1,725,400 Common Shares ------------------------------------------------------------- Fidelity Management & Research Company and Fidelity Management Trust Company reported that certain fund accounts for which Fidelity serves as investment adviser have sold 1,725,400 shares (or 9.69%) of SR Telecom Inc.'s outstanding common stock and warrants convertible to common stock. Fidelity had control but not ownership of those shares. As a result of the sale, Fidelity holds 0 shares (or 0%) of SR Telecom Inc.'s outstanding common stock and warrants convertible to common stock. Fidelity's sale of SR Telecom Inc.'s outstanding common stock was executed on the Toronto Stock Exchange. Fidelity fund sales have been made for investment purposes only and not with the purpose of influencing the control or direction of SR Telecom Inc. The Fidelity funds may, subject to market conditions, make additional investments in or dispositions of securities of SR Telecom Inc, including additional purchases or sales of common stock. Fidelity does not, however, intend to acquire 20% of any class of the outstanding voting or equity securities of SR Telecom Inc. SR Telecom is an active member of WiMAX Forum, a cooperative industry initiative, which promotes the deployment of broadband wireless access networks by using a global standard and certifying interoperability of products and technologies. * * * As reported in the Troubled Company Reporter on May 5, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on SR Telecom, Inc., to 'CCC' from 'CCC+'. The outlook is negative. "The ratings action reflects continued poor operating performance and material negative free operating cash flow in 2003, and follows the company's announcement that it plans to undertake additional restructuring of its operations," said Standard & Poor's credit analyst Michelle Aubin. The negative outlook reflects the possibility that the ratings on SR Telecom could be lowered further if the company's operating performance and liquidity position do not improve. STRATUS TECH: Reducing 20% of Workforce to Save $15 Mil. in 2006 ---------------------------------------------------------------- Stratus Technologies International, S.a r.l. will reduce its current worldwide workforce of 903 people by approximately 20 percent. The company's management estimates the downsizing will result in savings of approximately $15 million in fiscal year 2006, beginning Feb. 28, 2005. This reduction will also make financial resources available for strategic business investment, and will better align operational costs and expenses with business growth. The workforce reduction begins Jan. 19 and will be carried out over a period of approximately two months. The action will result in a charge against earnings of approximately $11 million in the fourth quarter of fiscal year 2005, ending Feb. 27, 2005. "While difficult to make, we believe this decision is necessary for us to successfully execute our business plans, strengthen our ability to compete in our chosen markets, and attain our financial and strategic goals," said David Laurello, president and CEO of Stratus Technologies. "Reducing costs, while ensuring our ability to invest in key strategic initiatives, is consistent with prudent management. Further, our commitment to serving customers with superior products and services remains undiminished. We believe the restructuring will improve our financial standing and solidly position the company for increased growth and profitability in the future." About Stratus Technologies Stratus Technologies is a global provider of fault-tolerant computer servers, technologies and services, with more than 20 years of experience focused in the fault-tolerant server market. Stratus(R) servers provide high levels of reliability relative to the server industry, delivering 99.999% uptime or better. Stratus servers and support services are used by customers for their critical computer-based operations that are required to be continuously available for the proper functioning of their businesses. For more information, visit http://www.stratus.com/ At Aug. 29, 2004, Stratus Technologies' balance sheet showed a $76,749,000 stockholders' deficit, compared to a $70,909,000 restated deficit at Feb. 29, 2004. TANGO INC: Approves Plan to Retain Turnaround Specialist -------------------------------------------------------- The management of Tango Incorporated (PINK SHEETS:TNGO) has approved a plan to begin soliciting bids from certain turnaround specialists over the next two weeks. Tango will be looking for assistance in three main areas: 1.) assisting Tango to be able to achieve a true market evaluation. 2.) hiring the right management group to maintain compliance with listing requirements. 3.) presenting an Acquisition and Banking strategy to ensure the Company's growth. "Over the past several months Tango's stock has been named on the Rules SHO list from the NASDAQ, was unknowingly listed on the Berlin Stock Exchange and then encountered some operational shortcomings. Tango's team is committed to building out a successful company. In order to achieve that objective, we are commencing the process of recruiting a team of people with the expertise to help guide the Company and build a strong, growth orientated company over the next twelve months. Tango's term for hire calls for potential bidders to assist in the prevention of a reverse split, while still enabling the Company to acquire the necessary assets to move the business forward. It also necessitates recruiting and retaining a management team with control structures necessary to maintain the Company's compliance in meeting OTC BB requirements. Tango will also be changing its corporate focus," said Sameer Hirji, CEO. About the Company Tango Incorporated is a holding company that will purchase interests in emerging growth orientated companies that demonstrate a strong ability to grow rapidly. Tango's management will look for unique opportunities that demonstrate ability to provide a consistent revenue stream. * * * Going Concern Doubt In its Form 10-QSB for the quarterly period ended April 30, 2004, filed with the Securities and Exchange Commission, Tango, Inc., reported that, as of April 31, 2003 and 2004, its auditors expressed substantial doubt about the company's ability to continue as a going concern in light of continued net losses and working capital deficits. TODD MCFARLANE: U.S. Trustee Picks 4-Member Creditors Committee --------------------------------------------------------------- The United States Trustee for Region 14 appointed four creditors to serve on an Official Committee of Unsecured Creditors in Todd McFarlane Productions, Inc.'s chapter 11 case: 1. Greg Capullo 5017 Colonial Drive Schenectady, New York 12303 Tel: (518) 357-9265, Fax: (518) 357-9270 2. Neil Gaiman c/o Kenneth F. Levin 20 N. Wacker Drive, #4200 Chicago, Illinois 60606 Tel: (312) 827-9000, Fax: (312) 827-9001 3. Haberlin Studios Inc. Attn: Brian Haberlin 28411 Rancho De Linda Laguna Niguel, California 92677 Tel: (949) 425-9622, Fax: (949) 425-9623 4. Comicraft Attn: Richard Starkings 8910 Rayford Drive Los Angeles, California 90045 Tel: (310) 215-0362, Fax: (775) 890-5787 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 Tempe, Arizona, Todd McFarlane Productions, Inc. -- http://www.spawn.com-- publishes comic books including Spawn, Hellspawn, & Sam and Twitch. The Company filed for chapter 11 protection on Dec. 17, 2004 (Bankr. D. Ariz. Case No. 04-21755). Kelly Singer, Esq., at Squire Sanders & Dempsey, LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors it listed more than $10 million in assets and more than $50 million in debts. TODD MCFARLANE: Files Schedules of Assets and Liabilities --------------------------------------------------------- Todd McFarlane Productions, Inc., filed with the U.S. Bankruptcy Court for the District of Arizona its Schedules of Assets and Liabilities disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property B. Personal Property $1,565,199 C. Property Claimed as Exempt D. Creditors Holding Unsecured Priority Claims $ 500,000 E. Creditors Holding Unsecured Priority Claims F. Creditors Holding Unsecured Nonpriority Claims $15,775,507 ---------- ----------- Total $1,565,199 $16,275,507 Headquartered in Tempe, Arizona, Todd McFarlane Productions, Inc. -- http://www.spawn.com-- publishes comic books including Spawn, Hellspawn, & Sam and Twitch. The Company filed for chapter 11 protection on Dec. 17, 2004 (Bankr. D. Ariz. Case No. 04-21755). Kelly Singer, Esq., at Squire Sanders & Dempsey, LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed more than $10 million in assets and more than $50 million in debts. ULTIMATE ELECTRONICS: Taps FTI Consulting as Financial Advisors --------------------------------------------------------------- Ultimate Electronics, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to employ FTI Consulting, Inc., as their financial advisors. FTI Consulting is expected to: a) assess the Debtors' short-term and long-term cash flow forecasts and liquidity projections; b) analyze the Debtors' business plan in order to evaluate restructuring alternatives; c) assist the Debtors' management and the Board of Directors in contingency planning and analyze current trade support and assist management in addressing vendor-related issues; d) assess the impact of proposed store closings on the Debtors' cash flow projections; e) advise the Debtors' management on cash conservation measures and assistance with implementation and assist in the development and implementation of a store closing process; f) assist the Debtors in their discussions and negotiations with their lenders including analyzing any proposed modifications to existing credit agreements; and g) provide other financial advisory services as requested by the Debtors' management or the Board of Directors. Robert J. Duffy, a Senior Managing Director at FTI Consulting, discloses that the Firm received a $250,000 retainer. Mr. Duffy reports FTI Consulting's professionals bill: Designation Hourly Rate ----------- ----------- Senior Managing Directors $560 - 625 Directors/Managing Directors 395 - 560 Associates/Consultants 195 - 385 Administration/Paraprofessionals 95 - 168 FTI Consulting assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Thornton, Colorado, Ultimate Electronics, Inc. -- http://www.ultimateelectronics.com/-- is a specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain, Midwest and Southwest regions of the United States. The Company operates 65 stores and focuses on mid- to high-end audio, video, television and mobile electronics products. The Company and its debtor-affiliates filed for chapter 11 protection on January 11, 2005 (Bankr. D. Del. Case No. 05-10104). J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $329,106,000 and total debts of $160,590,000. ULTIMATE ELECTRONICS: Wants to Hire Ordinary Course Professionals ----------------------------------------------------------------- Ultimate Electronics, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to continue to employ, retain and pay professionals they turn to in the ordinary course of their businesses without bringing formal employment applications to the Court. In the day-to-day operation of their businesses, the Debtors regularly call on various professionals to provide them with services related to matters arising in the ordinary course of business. These services include tax advice and preparation, legal advice pertaining to commercial, corporate and securities, regulatory matters and real estate matters, real estate brokerage and consulting, and information technology consulting. Because their businesses are huge and complex, the Debtors tell the Court that it would be costly and inefficient to require them to file individual employment and compensation applications with the Court for every Ordinary Course Professional due to the relatively small fees and few numbers of Professionals they will retain. The Debtors assure the Court that: a) no Ordinary Course Professional will be paid in excess of $30,000 per month and all the Professionals' total fees will not exceed in the aggregate of $350,000 during the pendency of the Debtor's chapter 11 cases; and b) the Debtors will file with the Court every 120 days after the Court's order approving the retention of the Ordinary Course Professionals a statement containing: (i) the name of each Ordinary Course Professional, (ii) the aggregate amounts paid as compensation for services rendered and reimbursement of expenses incurred by the Professionals, and (iii) a general description of the services rendered by the Professionals. Although some of the Ordinary Course Professionals may hold minor amounts of unsecured claims, the Debtors do not believe that any of them have an interest materially adverse to the Debtors, their creditors and other parties-in-interest. Headquartered in Thornton, Colorado, Ultimate Electronics, Inc. -- http://www.ultimateelectronics.com/-- is a specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain, Midwest and Southwest regions of the United States. The Company operates 65 stores and focuses on mid- to high-end audio, video, television and mobile electronics products. The Company and its debtor-affiliates filed for chapter 11 protection on January 11, 2005 (Bankr. D. Del. Case No. 05-10104). J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $329,106,000 and total debts of $160,590,000. UNITEDGLOBALCOM: S&P Places B Rating on CreditWatch Positive ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on European cable TV operator UnitedGlobalCom, Inc. -- UGC, including the 'B' corporate credit rating, and related entities on CreditWatch with positive implications. This action follows the announced merger agreement between UGC and its approximate 53% economic owner Liberty Media International, Inc. -- LMI. "If the merger is consummated, ratings on UGC will reflect the ratings of its new parent, which will incorporate the assets of LMI," explained Standard & Poor's credit analyst Catherine Cosentino. "The rating on the parent entity may be higher than the current 'B' corporate credit rating on UGC, given its 45% interest in Japanese cable TV operator Jupiter Telecommunications Co. Ltd. -- JCOM. JCOM generates substantial EBITDA and has good growth prospects relative to that of UGC's European cable operations, which have been viewed by Standard & Poor's as being fairly weak." Standard & Poor's will meet with management to review JCOM's business strategy, as well as the potential for an initial public offering at this entity at some point and accompanying prospects for the post-merger combined company to exert control of JCOM under terms of the joint venture agreement. We will also evaluate the combined company's plans for the significant cash and noncore monetizable investment balances that are expected to exist subsequent to the merger, especially in light of management's indications about prospective share buybacks. USGEN: Court Okays Sale of Two Hydroelectric Systems for $505 Mil. ------------------------------------------------------------------ Judge Mannes of the U.S. Bankruptcy Court for the District of Maryland authorizes USGen New England, Inc., to consummate the sale of two hydroelectric systems spanning the Connecticut River and the Deerfield River to TransCanada Hydro Northeast, Inc., for $505,000,000, subject to adjustment. TransCanada will also assume certain contracts, leases, and liabilities in connection with the sale. The Asset Purchase and Sale Agreement, as amended, among USGen, USG Services Company, LLC, a non-debtor affiliate, and TransCanada is approved. As reported in the Troubled Company Reporter on Dec. 27, 2004, USGen New England, Inc., and an affiliate of TransCanada Corporation announced that TransCanada will purchase hydroelectric generation assets with a total generating capacity of 567 megawatts -- MW -- for $505 million US in cash, subject to adjustment. No qualified competing bids were received by the court-ordered deadline so the auction did not take place. The purchase is subject to the sale of the 49 MW Bellows Falls hydroelectric facility to the Vermont Hydroelectric Power Authority, which will result in a $72 million US reduction in purchase price. Headquartered in Bethesda, Maryland, USGen New England, Inc., an affiliate of PG&E Generating Energy Group, LLC, owns and operates several electric generating facilities in New England and purchases and sells electricity and other energy-related products at wholesale. The Debtor filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30465). John E. Lucian, Esq., Marc E. Richards, Esq., Edward J. LoBello, Esq., and Craig A. Damast, Esq., at Blank Rome, LLP, represent the Debtor in its restructuring efforts. When it sought chapter 11 protection, the Debtor reported assets amounting to $2,337,446,332 and debts amounting to $1,249,960,731. VALOR COMMS: S&P Puts BB- Rating on Planned $965M Sr. Sec. Debt --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to Valor Communications Group, Inc., which will become the new parent company of Valor Telecommunications LLC upon the successful completion its initial public offering. The outlook is negative. Simultaneously, Standard & Poor's assigned its 'BB-' rating to Valor Telecommunications Enterprises LLC's -- VTE -- proposed $965 million senior secured bank facility. A recovery rating of '3' also was assigned to the bank loan, indicating the expectation for a meaningful recovery of principal (50%-80%) in the event of a default or bankruptcy. VTE is an indirect subsidiary of Valor. Closing of the IPO is contingent upon completion of the new credit facility. In addition, Standard & Poor's assigned its 'B' rating to the $280 million senior unsecured notes due 2015, to be issued under Rule 144A with registration rights by VTE and Valor Telecommunications Enterprises Finance Corp. -- co-issuers. The IPO is not contingent upon the issuance of these notes. Cash proceeds of about $500 million from the IPO will be used to pay down the company's second-lien loan and senior subordinated loan. Proceeds from the new bank facility and senior unsecured notes will be used to repay the existing term loan. Ratings on the existing second-lien loan, senior subordinated loan, and senior secured term loan will be withdrawn upon completion of the proposed transactions. In addition, the corporate credit rating on Valor Telecommunications Enterprises LLC and Valor Telecommunications Enterprises LLC II will be withdrawn due to the guarantees provided by the new parent company of these subsidiaries' debt. If the proposed transactions are not completed, existing ratings will remain at their current levels; therefore, these ratings were removed from CreditWatch. "The new ratings reflect the deleveraging impact of the proposed IPO," said Standard & Poor's credit analyst Rosemarie Kalinowski. "However, the negative outlook assigned to Valor addresses the potential longer-term impact of cable telephony on the company's competitive position." Pro forma for the transactions, total debt outstanding was about $1.2 billion as of Sept. 30, 2004. Valor plans to pay a significant annual dividend of about 75% of free cash flow. VISTA GOLD: Luzon Exercises Option to Purchase Bolivia Project -------------------------------------------------------------- Luzon Minerals Ltd. has informed Vista Gold Corp. (AMEX: VGZ; TSX: VGZ) that it wishes to exercise its option to purchase Vista's Amayapampa gold project in Bolivia. Mike Richings, Vista President and CEO, stated, "We are very pleased that Luzon has decided to proceed, although the bankable project feasibility study is still in the final stages of completion. We also wish to congratulate Luzon on achieving a major milestone in the development of this excellent project by reaching a socio-economic agreement with the local communities affected by the proposed development." Also, the companies have agreed, subject to regulatory approval, to further amend the terms of the original purchase option agreement with respect to the payments previously due on Jan. 15, 2005, and Jan. 1, 2006. The amended agreement calls for Vista to receive from Luzon, within 5 business days of receiving TSX Venture Exchange approval, a payment consisting of US$100,000 and 2,000,000 Luzon common shares. This will be followed, on the earlier of June 15, 2005, or the date of the next financing completed by Luzon after Jan. 19, 2005, by a payment of US$850,000 in cash or, at Luzon's option, US$425,000 in cash and US$425,000 in units consisting of Luzon common shares and warrants to purchase common shares. The final payment will be made at the earlier of the start of construction or June 15, 2006. This payment remains unchanged from the original agreement, as reported in December 2003, in that Luzon will pay Vista US$4,000,000 in cash, or at Vista's option, a combination of Luzon common shares and cash based on Luzon's share price. If Luzon completes the purchase, and when production commences, Vista will also receive a 3% net smelter type royalty on gold production at gold prices of US$450 per ounce or below and 4% at gold prices above US$450 per ounce. Other terms of the agreement remain unchanged. About the Company Vista Gold Corp., based in Littleton, Colorado, evaluates and acquires gold projects with defined gold resources. Additional exploration and technical studies are undertaken to maximize the value of the projects for eventual development. The Corporation's holdings include the Maverick Springs, Mountain View, Hasbrouck, Three Hills, Wildcat projects and Hycroft mine, all in Nevada, the Long Valley project in California, the Yellow Pine project in Idaho, the Paredones Amarillos and Guadalupe de Los Reyes projects in Mexico, and the Awak Mas project in Sulawesi in Indonesia. * * * As reported in the Troubled Company Reporter on April 1, 2004, Vista Gold's independent auditors expressed doubt about the company's ability to continue as a going concern after reviewing its financial statements for the year ending Dec. 31, 2003. In its Form 10-Q for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, Vista Gold reported a $1,047,000 net loss for the three months ended September 2004, compared to a $531,000 net loss from the same period in September 2003. VITAL LIVING: Deficit & Funding Concerns Spur Going Concern Doubt ----------------------------------------------------------------- Vital Living, Inc., has suffered recurring losses from operations, has a working capital deficit, and is dependent on funding from sources other than operations. Since inception, the Company has been required to raise additional capital by the issuance of both equity and debt instruments. There are no commitments from funding sources, debt or equity, should cash flows be insufficient to fund ongoing operations or other cash commitments as they come due. These factors raise substantial doubt about the Company's ability to continue as a going concern. At September 30, 2004, the Company had cash of $210,326, including approximately $275,000 of cash in escrow, that was to be used to make the remaining 2004 interest payments on its December 2003 Senior Secured Convertible Notes. In October 2004, approximately $275,000 of cash held in escrow was released to the Company as a result of an agreement reached with the holders of its senior secured convertible notes to reduce the conversion price of the notes and exercise prices of certain warrants held by these holders. As of September 30, 2004, the Company's subsidiaries' total asset and liabilities were $57,378 and $2,873,214, respectively. As of December 31, 2003, those total assets and liabilities were $1,212,813 and $3,262,417, respectively. For the three and nine months ended September 30, 2004, total revenues for the subsidiaries were $52,809 and $1,502,788, respectively. For the comparative three and nine-month period of 2003, subsidiaries' total revenues were $821,049 and $1,588,232, respectively. The Company's net loss for the quarters ended September 30, 2004, and 2003 was $2,719,949 and $11,437,637, respectively, for a decrease of $9,137,485. A majority of the reduction relates the net effects of downward repricing adjustments. Management will be required to raise additional capital in the near term through offerings of securities to fund operations. No assurance can be given that the financing will be available or, if available, that it will be on commercially favorable terms. Moreover, available financing may be dilutive to current investors. The Company is in the process of improving, acquiring, or developing products for sale that would generate revenue to sustain its operations, as well as consolidating its operations in order to gain cost synergies and efficiencies. If successful, these actions will serve to mitigate the factors that have raised doubt about the Company's ability to continue as a going concern and increase the availability of resources for funding of the Company's current operations and future market development. In addition, the Company has been reliant on additional sales of its securities to raise capital in order to sustain operations during the nine months ended September 30, 2004. The Company expects to continue relying on additional sales of its securities in order to fund future operations. Through its operating subsidiaries, Vital Living Inc. develops or licenses nutraceuticals and proprietary drug delivery systems that can be applied to its nutraceuticals, marketing them for distribution through physicians, medical groups, chiropractic offices, and retail outlets. In addition, the Company formulates, markets, and distributes vitamins, herbs, high quality dietary supplements, and therapeutic and functional food products through similar distribution channels. Nutraceuticals are products that are isolated or purified from foods and generally sold in medicinal forms not usually associated with foods, including tablets, capsules, or drops. These nutraceuticals may have physiological benefits or have the ability to reduce the risk of chronic disease beyond basic nutritional products. Vital Living develops and tests its nutraceuticals in collaboration with leading medical experts in the nutraceuticals field. The Company has designed them to be incorporated by physicians into a standard physician-patient program in which patients supplement doctor-prescribed pharmaceuticals with Vital Living nutraceuticals. W.R. GRACE: Gets Court Nod to Advance Payments for Legal Expenses ----------------------------------------------------------------- W.R. Grace & Co., and its debtor-affiliates and seven of their current and former officers, directors and employees have received letters from the United States Department of Justice, District of Montana, advising them that they are the target of a pending federal grand jury investigation. The Investigation is looking into whether W.R. Grace & Co. was involved in obstructing agency proceedings, violating federal environmental laws, and conspiring with others to violate federal law. The Target Letter apparently concerns alleged conduct that was taken by the Debtors with respect to their operations in Libby, Montana. The Target Letter does not state the date of the alleged conduct that is being investigated by the Federal Grand Jury. However, the Debtors believe that most of the alleged conduct under investigation occurred before the Petition Date. In response to the Target Letter, the Debtors' counsel asked for additional time for the Debtors and the Individual Targets to respond. However, the federal government was concerned that, if the Named Parties were afforded additional time to respond, then applicable statutes of limitation could lapse. Accordingly, the federal government requested that each Named Party execute a tolling agreement. The Tolling Agreement tolls any applicable statutes of limitation until December 2, 2004. The Debtors understand that each of the other Named Parties is considering executing the Tolling Agreement, but they are each seeking to retain counsel to advise them on the matter. Accordingly, the Debtors sought and obtained the U.S. Bankruptcy Court for the District of Delaware's authority to advance payments for any reasonable legal expenses for legal services provided to their current or former officers, directors and employees involved with the Investigation and any action that may arise from, or is related to, the Investigation. The advance payments are necessary because: (a) Pursuant to its Certificate of Incorporation and By-laws, W.R. Grace has an obligation to indemnify its officers, directors and employees to the fullest extent allowed under Delaware law. This indemnification is permitted by the Delaware General Corporation Law; (b) The Debtors have a direct interest in seeing that the Individual Targets receive adequate protection because the Investigation concerns actions that the Individuals took while serving as officers, directors and employees of the Debtors. W.R. Grace & Co., itself, has also received a target letter. Thus, the Debtors' defense in the Investigation is inextricably tied with the defense of each individual, and any adverse factual findings made during the Investigation could adversely affect their estates. (c) The Investigation has targeted persons in key management positions. It is in the Debtors' best interest to see that these parties receive adequate legal representation because this treatment will maintain employee moral. This, in turn, will allow the Debtors to attract and maintain well-qualified individuals for these positions. A successful reorganization of the Debtors is dependent on attracting and retaining these individuals. (d) The advance payment is consistent with the first-day relief that was granted in the Debtors' Chapter 11 cases, by which the Bankruptcy Court authorized the Debtors to pay certain prepetition claims for, among other items, wages, salaries, commissions, bonuses and other compensation. (e) The individuals that have received target letters may not possess the funds to pay for their legal defenses, and, in any event, the risk of non-payment will make it difficult for them to retain adequate legal representation during the Investigation. The advance amounts will be paid, subject to potential undertaking that would be held by the Debtors, at the conclusion of the Investigation, in the event that any of the Individuals are found to have acted in a manner that would not permit the Debtors to indemnify them under Delaware law. 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. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) WISTON XIV: Wants to Hire Brashear & Ginn as Bankruptcy Counsel --------------------------------------------------------------- Wiston XIV Limited Partnership asks the U.S. Bankruptcy Court for the District of Nebraska for permission to retain Brashear & Ginn as its bankruptcy counsel. Brashear & Ginn is expected to: a) give the Debtor legal advice with respect to its powers and duties, as debtor-in-possession in the continued operation of its business and in the management and liquidation of its property; b) prepare on the Debtor's behalf all the necessary legal documents; c) prepare and file a plan of reorganization and accompanying disclosure statement; and d) perform all other legal services for the Debtor as may be reasonably requested by the Debtor. Robert V. Ginn, Esq., at Brashear & Ginn, discloses that the Debtor will pay him at his current hourly billing rate of $130 to $235. To the best of the Debtor's knowledge, Brashear & Ginn is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Stilwell, Kansas, Wiston XIV Limited Partnership filed for chapter 11 protection on Jan. 5, 2005 (Bankr. D. Nebr. Case No. 05-80037). When the Debtor filed for protection from its creditors, it estimated assets between $10 million and $50 million and estimated debts from $10 million to $50 million. WISTON XIV: Look for Bankruptcy Schedules by February 21 -------------------------------------------------------- The Honorable Timothy J. Mahoney of the U.S. Bankruptcy Court for the District of Nebraska gave Wiston XIV Limited Partnership until February 21, 2005, to file its Schedules of Assets and Liabilities and Statement of Financial Affairs. The Debtor needs more time to assemble all the necessary data to accurately prepare its Schedules and Statement. Headquartered in Stilwell, Kansas, Wiston XIV Limited Partnership filed for chapter 11 protection on Jan. 5, 2005 (Bankr. D. Nebr. Case No. 05-80037). Robert V. Ginn, Esq., at Brashear & Ginn, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $10 million and $50 million and estimated debts from $10 million to $50 million. WORLDCOM INC: 10 Directors Settle Class Action for $54 Million -------------------------------------------------------------- David Rovella at Bloomberg News reports that 10 former WorldCom directors will settle their alleged liabilities in a class action lawsuit led by the New York State Common Retirement Fund, for $54 million. The directors are among the defendants being sued for an alleged $11 billion accounting fraud. The 10 directors are: (1) James C. Allen, (2) Judith Areen, (3) Carl J. Aycock, (4) Max E. Bobbit, (5) Clifford L. Alexander, (6) Stiles A. Kellett, Jr., (7) Gordon S. Macklin, (8) John A. Porter, (9) Lawrence C. Tucker, and (10) the estate of John W. Sidgmore Bloomberg reports that at New York Comptroller Alan Hevesi's insistence, 20% of the settlement amount, totaling $18 million, will be taken out of the ex-WorldCom directors' pockets. The remaining $36 million will be credited to the directors' liability insurance. "We insisted, despite some legal cautions, that there be personal liability," Mr. Hevesi said in a news conference in New York. "We felt it would be unfair and not a deterrent to future failure on the part of directors." The NY Retirement Fund is the second largest pension fund in the U.S., and Mr. Hevesi is the sole trustee under the Fund. Judge Denise Cote has set a hearing on February 28, 2005, at the U.S. District Court for the Southern District of New York to consider approval of the settlement. Two former WorldCom directors remain in the lawsuit, Bert Roberts and Francesco Galesi. Banks Criticize Settlement JP Morgan Chase & Co., Bank of America Corp. and 14 other bank defendants insist that the $54 million settlement with the directors is flawed, David Gloving at Bloomberg News says. The banks want the directors to be included in the February 28 trial. Other Reactions In an interview with Bloomberg, securities lawyer Robert Mintz said the $54 million settlement would put pressure on the bank defendants, like JPMorgan and Bank of America, to also settle with the WorldCom investors before the February 28 trial. Michael Klausner, a law professor at Stanford University, told The New York Times that the settlement could discourage people from serving on boards. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Supreme Court Denies Certiorari to Calpers, et al. --------------------------------------------------------------- The United States Supreme Court affirms a ruling by the Court of Appeals for the Second Circuit that the U.S. District Court for the Southern District of New York holds jurisdiction over individual claims filed by WorldCom bondholders pursuant to Section 22(a) of the Securities Exchange Act of 1933. The Supreme Court denies certiorari to California Public Employees' Retirement System and other pension funds that purchased WorldCom bonds and brought individual actions in state courts, rather than joining a consolidated class action suit pending before the District Court. The funds, Greg Stohr at Bloomberg News says, now must choose between joining the Consolidated Class Action and waiting potentially years for that case to be resolved before they can press their claims separately in federal court. The Supreme Court's decision was issued without comment. The funds are represented by Milberg Weiss Bershad Hynes & Lerach. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) ZALE LIPSHY: Moody's Withdraws Ba3 Bond Rating After Full Funding ----------------------------------------------------------------- Moody's Investors Service has withdrawn the Ba3 rating assigned to Zale Lipshy University Hospital's Series 1997 Bonds (approximately $45.3 million outstanding) issued through the North Central Texas Health Facilities Authority. This action follows the receipt of the final defeasance verification report, which evidences the fully funded escrow account for the Series 1997 bonds. Zale Lipshy University Hospital has no other outstanding debt rated by Moody's. The hospital is now wholly owned by University of Texas Southwestern Medical School. * Goodwin Procter Adds 24 Partners to Boston Office --------------------------------------------------- Goodwin Procter LLP, one of the nation's leading law firms with 575 attorneys, added 24 partners to its Boston office. Nineteen of the partners join the firm from Testa, Hurwitz & Thibeault, and five of the partners join the firm from McDermott, Will & Emery. The majority of the partners joining the firm specialize in serving clients in the technology industry, with 10 of the new partners focusing exclusively in this space. * Technology Companies William J. Schnoor, Jr., Mark J. Practice Macenka, Jocelyn M. Arel, John M. Mutkoski, Kenneth J. Gordon and Mark T. Bettencourt (from Testa Hurwitz) John J. Egan III, Jack B. Steele, Robert E. Bishop and Christopher E. Brown (from McDermott, Will & Emery) * Buyouts and Mergers & Mark H. Burnett and Kathy A. Fields Acquisitions (from Testa Hurwitz) David J. Powers (from McDermott, Will & Emery) * Life Sciences Lawrence S. Wittenberg and Mitchell S. Bloom (from Testa Hurwitz) * Intellectual Property Douglas J. Kline, Steven J. Frank, Christopher W. Stamos, Duncan A. Greenhalgh, Ph.D. and Richard Myrus (from Testa Hurwitz) * Securities Litigation Brian E. Pastuszenski and Deborah S. Birnbach (from Testa Hurwitz) * White Collar Crime & Joseph F. Savage, Jr. and John J. Government Falvey, Jr. (from Testa Hurwitz) Investigations "These are some of the finest attorneys serving clients in the technology industry today," said Regina M. Pisa, chairman and managing partner of Goodwin Procter. "Goodwin Procter's long-term strategy is built upon a framework of strategic investment in key practices, such as technology companies, a balanced practice mix, and geographic growth. The addition of these 24 partners to our firm is a dynamic combination which creates a powerful platform from which to better serve our clients and clearly supports our overall strategic objectives." The new partners include former chairs and co-chairs of Testa's Mergers & Acquisitions, Corporate Finance, Life Sciences, Securities Litigation and White Collar Crime practice groups. All of the partners from McDermott, Will & Emery are returning to Goodwin Procter - four of the five began their careers at the firm, including John Egan, global head of McDermott's Private Equity/Emerging Companies Group. "In addition to technology, we are committed to growing our life sciences practice in Boston," said Mr. Pisa. "The backgrounds of our new life sciences and intellectual property partners, including many with chemistry, biochemistry and mechanical engineering degrees, is consistent with the requirements of this market." Eighteen partners are joining Goodwin Procter's Business Law Department and six partners are joining its Litigation Department. The firm expects to hire a number of associates as well. The new Litigation partners bring significant expertise in securities litigation, white collar crime, and intellectual property, which will further advance Goodwin Procter's existing practices in these areas. "We are honored to welcome attorneys of this caliber and national reputation to the firm," said Mr. Pisa. "The extraordinary amount of experience these partners bring to Goodwin Procter will transform our firm into a literal powerhouse in many of our strategic focus areas." Goodwin Procter developed a long-term strategic plan which it has been executing against since 2001 which focuses primarily on four overall goals: (1) expand in its key geographic markets - Boston, New York and Washington, DC - and explore new ones, primarily on the West Coast; (2) establish dominance within its areas of strategic practice focus - private equity & technology companies, intellectual property, financial services, real estate capital markets, and products liability - allowing the firm to move quickly when opportunities arise and creating critical mass to bring a depth of resources to its clients; (3) foster innovation within the firm and encourage and support the development of new practices, technologies and services; and (4) maintain a balanced practice mix that ensures the firm's ability to weather economic cycles and market shifts. As part of this growth initiative, the firm recently announced its combination on October 1, 2004, with Shea & Gardner, a premiere litigation firm, in Washington, DC. As a result of this combination, Goodwin Procter's Washington office stands at 85 attorneys today. In addition, the firm has grown its New York office from 10 attorneys in 1999 to more than 100 currently. "We are not a firm that is interested in expanding for expansion's sake, nor are we interested in being the largest, or having the most offices," said Pisa. "Our goal is to remain rigorously focused on those things which matter to our clients and impact our ability to serve those clients and to provide our people with continued opportunity for challenging work and career advancement." New Partners Technology Companies Practice: (from Testa, Hurwitz & Thibeault) -- Jocelyn M. Arel expertise lies in corporate and securities law matters, with an emphasis on securities offerings and merger and acquisition transactions. She was co-chair of Testa, Hurwitz & Thibeault's Corporate Finance and Securities Group. -- Mark T. Bettencourt concentrates in general corporate and securities law with extensive experience in mergers and acquisitions, public offerings, private placements of debt and equity securities, securities law compliance, and technology transfer and licensing. He was co-chair of Testa, Hurwitz & Thibeault's Corporate Finance and Securities Group. -- Kenneth J. Gordon has more than 13 years of experience representing privately held and publicly traded companies, investment banks and venture capital firms. He focuses his practice on the representation of emerging and public growth companies. -- Mark J. Macenka has more than 20 years of experience in the areas of business and securities law, mergers and acquisitions and venture capital and corporate finance. He represents public and private growth oriented companies in emerging and high technology industries, as well as venture capital firms and investment banks. -- John M. Mutkoski concentrates his practice in general corporate and securities law with significant experience in public offerings, private placements of securities, mergers and acquisitions, SEC compliance, and technology licensing and joint ventures. -- William J. Schnoor Jr. focuses his practice in the area of business and securities law, private equity and acquisitions. He has 20 years' experience in representing start-up, private and public companies in a wide range of industries. He has worked with numerous companies from their initial financing through successful initial public offerings or acquisitions. (from McDermott, Will & Emery) -- Robert E. Bishop advises clients on a wide variety of corporate and securities transactions, including private placements, public and private mergers and acquisitions and registered offerings of securities, as well as technology licensing and general business matters. -- Christopher E. Brown represents private equity firms and venture capital funds in early and later stage investments, leveraged buyouts, recapitalizations and venture capital fund formation and capital raising. He also represents emerging and established private and public companies in a wide variety of corporate and securities law matters including private and public securities offerings and mergers and acquisitions. -- John J. Egan III focuses on corporate securities, private equity and technology enterprises. His practice involves early and late-stage venture financings, IPOs, mergers and acquisitions, joint ventures, strategic licensing and the general representation of public and private technology companies. While at McDermott, Will & Emery, Egan was global head of the firm's Private Equity/Emerging Companies Group. -- Jack B. Steele works on a wide variety of corporate and securities law matters, including public offerings and private placements of securities, mergers and acquisitions, venture capital investments and general business representation. Buyouts and Mergers & Acquisitions: (from Testa, Hurwitz & Thibeault) -- Mark H. Burnett focuses primarily on business, corporate and securities law matters, mergers and acquisitions, and corporate finance and venture capital transactions. He was co-chair of Testa, Hurwitz & Thibeault's Mergers and Acquisitions Core Competency Group. -- Kathy A. Fields' practice concentrates on acquisitions and corporate and securities law. She has represented numerous public and private companies and venture capital firms in mergers and acquisitions, including acquisitions in advance of Chapter 11 filings, cross-border transactions, tender offers and going private transactions. While at Testa, Hurwitz & Thibeault, she was co-chair of its Mergers and Acquisitions Group. (from McDermott, Will & Emery) -- David J. Powers represents private equity firms, venture capital funds and emerging and established private and public companies on a wide variety of corporate and securities law matters. His practice includes representation in connection with public offerings and private placements of securities, mergers and acquisitions, buyouts and leveraged recapitalizations. Life Sciences: (from Testa, Hurwitz & Thibeault) -- Mitchell S. Bloom concentrates in general corporate and securities law with extensive experience in representing public and private life science companies, public offerings, venture capital investments, mergers and acquisitions, and technology licensing and collaborations. He was co-chair of Testa, Hurwitz & Thibeault's Life Sciences Practice. -- Lawrence S. Wittenberg has been an active participant in the life sciences industry since the mid-1980s, and his practice focuses exclusively on biotechnology and other life sciences companies. His clients range in size from start-ups to public companies. He was chairman of the Life Sciences Practice at Testa, Hurwitz & Thibeault. Intellectual Property: (from Testa, Hurwitz & Thibeault) -- Steven J. Frank focuses on advising clients in all areas of intellectual property law, with emphasis on patent prosecution, analysis of infringement and related issues, copyright questions, and the drafting and negotiation of agreements relating to the transfer or license of intellectual property. -- Duncan A. Greenhalgh, Ph.D. specializes in the protection and enforcement of intellectual property rights primarily in the field of life sciences, and represents private and publicly traded companies, and medical and academic institutions. -- Douglas J. Kline concentrates his practice on all aspects of intellectual property litigation, particularly patent infringement matters and other disputes related to the enforcement of intellectual property rights. While at Testa, Hurwitz and Thibeault, he chaired the firm's Patent and Intellectual Property Practice and Intellectual Property Litigation Groups. -- Richard Myrus focuses his practice on litigation matters. Prior to entering law school, he served as a helicopter pilot in the United States Navy. -- Christopher W. Stamos has experience in patent and trade secret matters, patent portfolio development, licensing, preparation of novelty assessments, preparation and prosecution of U.S. and foreign patent and trademark applications, and preparation of validity and infringement opinions. Securities Litigation: (from Testa, Hurwitz & Thibeault) -- Deborah S. Birnbach concentrates her practice in the areas of securities litigation, including class action defense, stockholder disputes, fiduciary duty claims and private equity litigation, and represents clients in unfair competition disputes, license agreement disputes, M&A- related litigation, intellectual property and trade secret litigation. -- Brian E. Pastuszenski has achieved national prominence in the defense of securities class action and shareholder litigation matters and proceedings brought by the SEC and other regulatory organizations and the related corporate governance, insurance and indemnification issues that such matters involve. While at Testa, Hurwitz & Thibeault, he was chair of the firm's Securities and Shareholder Litigation Group and co-chair of its Corporate Finance and Securities Group. White Collar Crime & Government Investigations: (from Testa, Hurwitz & Thibeault) -- John J. Falvey Jr.'s practice specializes in white collar criminal defense, governmental investigations, and complex civil litigation. His criminal and regulatory practice includes the representation of individuals and companies in SEC and criminal fraud investigations, conducting internal investigations and establishing compliance programs. -- Joseph F. Savage Jr. concentrates his practice on complex civil litigation, white collar criminal defense and governmental investigations. His practice involves representing individuals and companies in a wide variety of fraud, tax, public corruption, health care, securities, environmental and other investigations by federal, state and local law enforcement and government regulators. About Goodwin Procter LLP Goodwin Procter LLP is one of the nation's leading law firms. The firm's core areas of practice are corporate, litigation and real estate, with specialized areas of focus that include private equity & technology companies, intellectual property, financial services, real estate capital markets, and products liability. Goodwin Procter is headquartered in Boston, with offices in New York, New Jersey and Washington, DC. * K&R Law Group Names C. Faber & R. Kessler Los Angeles Partners ---------------------------------------------------------------- K&R Law Group LLP, a Los Angeles-based law firm that has one of the nation's largest groups of experienced attorneys fully dedicated to serving the health care industry, named two attorneys partners in its Los Angeles office. The new partners are: Cameron H. Faber, a health care and insurance coverage litigator; and Robert M. Kessler, a health care regulatory and business transactions attorney. "We're delighted to promote these two outstanding attorneys to the partnership of the firm because their hard work, legal skills and sound judgment exemplify the kind of valuable legal counsel our firm provides to clients," said Michael C. Foster, managing partner of K&R Law Group. "We look forward to Cameron and Robert's ongoing contributions to the growth and success of the firm." Mr. Faber has performed all aspects of commercial litigation in state and federal courts, including jury trials, bench trials and arbitrations. He has handled health care, insurance coverage, environmental, real property, trademark, contract and bankruptcy litigation for a wide range of clients. Mr. Faber earned his law degree from Loyola Law School in Los Angeles and his undergraduate degree from the University of California at Los Angeles. Mr. Kessler practices health care law, representing a number of venture-backed and publicly traded emerging health care technology companies, managed care organizations, health care systems and health care providers. He advises clients on business and regulatory matters, with an emphasis on state and federal laws relating to operational issues, including structuring health care businesses, regulatory and corporate compliance programs, licensure and certification, and risk-sharing arrangements. Mr. Kessler earned his law degree from Chicago-Kent College of Law and his undergraduate degree from the University of Southern California. Founded in 1977, K&R Law Group LLP -- http://www.knrlaw.com/-- is a key advisor to the health care industry. K&R specializes in representing quality health care organizations, such as health plans and other managed care organizations, insurance companies, physician groups and pharmacy benefit managers. * BOOK REVIEW: Debtors and Creditors in America ----------------------------------------------- Author: Peter J. Coleman Publisher: Beard Books Softcover: 303 pages List Price: $34.95 Order your personal copy at: http://amazon.com/exec/obidos/ASIN/189312214x/internetbankrupt Review by Susan Pannell Suppose that, three hundred or so years ago, you were in urgent need of a pig. But you couldn't afford the pig, so you purchased it on credit. (Yes, there was credit in the woodsy days of this country; it wasn't strictly a cash and barter economy.) Sometime later, the pig having served the purpose for which it was intended and hence being no longer recoverable, and you not being the winner of the lottery you'd relied upon to pay your debt, the creditor seeks satisfaction. He could proceed against you in a couple of different ways, but either way, assuming you still hadn't won the lottery, you went to jail. And there you rotted, unless you had the means to buy your way out, in which case you wouldn't be there in the first place. In a notorious perversion of logic, a debtor, like any other prisoner, was expected to feed and clothe himself while incarcerated. A pauper's grave--the so-called potter's field-- awaited the debtor who died in prison. It could have been worse: under ancient Roman law, creditors were entitled to chunks of your actual body and--sorry, Will Shakespeare--there was no penalty for hacking off a disproportionate slice. What changed this nefarious system? Not sentiment (at least not primarily), but hard economic facts. For one thing, it was an ineffective arrangement. The creditor derived malicious satisfaction from watching his debtor fade away in prison, but they didn't satisfy the debt. For another thing, the colonies suffered a chronic people shortage. They needed laborers and militiamen. Society couldn't afford to lose the prisoner's labor, or his ability to shoulder a musket and defend against Indian attacks. Nor could society afford to support the innocent wife and children "perishing with hunger & Cold" (here's where sentiments entered into the equation). The system began to be modified in various ways. For some categories of debtors, commonly single men who owed little, some colonies substituted indentured service for imprisonment. Another modification, applicable to petty debts, provided a release from prison and immunity from rearrest if the debtors swore he was impoverished--presumably a more effective deterrent centuries ago when there was true shame associated with being a deadbeat. A third modification put clothing, furniture, eating utensils, and tools beyond the reach of agreement. None of this was of any help to the larger defaulters, the businessmen, and it was for their benefit (economic necessity, again) that colonial bankruptcy laws began to evolve. Interestingly, the colonies preferred voluntary proceedings, giving the right of action to the insolvent, in contrast to English bankruptcy practice, which sided with the creditor. Development of bankruptcy relief was by no means smooth as predictably many stern and rockbound colonists took a moral stance against it. Complicating matters was the requirement that, until the Revolution, a debtor relief law, like any colonial legislation, had to be approved by the Crown, in this case the Board of Trade. The author provides a painstaking region-by-region analysis of the development of bankruptcy law, and sums up all the history in the concluding chapter. ********* 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, Dylan Carlo Gallegos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 2005. 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 ***