/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050202.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, February 2, 2005, Vol. 9, No. 27 Headlines AAMES MORTGAGE: Moody's Junks Series 2001-2 Class B Certificates ABS MORTGAGE: Fitch Puts Low-B Ratings on 2 $6.250MM Certificates ADELPHIA COMMS: Compensation Board Adopts 2005 Incentive Plan ADVENTIST NURSING HOME: Case Summary & Largest Unsecured Creditors AKA HOSPITALITY LLC: Voluntary Chapter 11 Case Summary ALLEGHENY TECH: Earns $35 Million of Net Income in Fourth Quarter AMCAST INDUSTRIAL: Comm. Taps FTI Consulting as Financial Advisor AMERICAN BUSINESS: Look for Bankruptcy Schedules by Mar. 18 AMERICAN BUSINESS: Wants Ordinary Course Professionals to Continue AMERICAN RESTAURANT: Files Third Amended Disclosure Statement ANDREW CORP: Earns $14.6 Million of Net Income in First Quarter ASTRIS ENERGI: Completes Czech Affiliate Purchase ATA AIRLINES: Gets Lease Decision Period Extended to February 25 ATA AIRLINES: Wants Plan Filing Period Extended to June 23 AXIA NETMEDIA: Will Release 2005 Second Quarter Results Today BALL CORP: Agrees to $125 Million Accelerated Stock Buyback BANC OF AMERICA: Fitch Puts BB- Rating on $701,000 2005-1 Certs. BANC OF AMERICA: Fitch Assigns Low-B Ratings on 4 Mortgage Certs. BANC OF AMERICA: Fitch Puts Low-B Ratings on Two 2005-A Certs. BAYVIEW CAPITAL INC: Case Summary & 2 Largest Unsecured Creditors BUCKEYE TECHNOLOGIES: Moody's Puts B1 Rating on $85M Sr. Term Loan CHESAPEAKE ENERGY: Hosting Fourth Quarter Webcast on Feb. 23 CIRTRAN CORP: Completes Compromise Settlement with IRS CORNELL COS: Names Dr. Isabella Cunningham to Board COTT CORPORATION: Appoints Andrew Prozes to Board of Directors CP SHIPS: Expects $70 to $73 Million Net Income for 2004 CRANSTON, R.I.: Moody's Lifts Rating on General Obligation Bonds CWMBS INC: Fitch Puts Low-B Ratings on Two 2005-5 Mortgage Certs. DELTA AIR: Completes Flight Reductions at DFW Int'l. Airport DI GIORGIO: Tender Offer Termination Cues S&P to Affirm B Rating DUKE FUNDING: S&P Places Ratings on CreditWatch Negative DYCOAL INC: Sells Komar Briquetter Machine to Startec in 363 Sale EXCALIBUR INDUSTRIES: May Swap Debt for Equity to Reduce Debt EXTENDICARE INC: Acquires Assisted Living Concepts for $129.5MM EYE CARE: Extends Senior & Sub. Debt Tender Offer Until Feb. 16 FALCON PRODUCTS: Taps Stutman Treister as Reorganization Counsel FALCON PRODUCTS: Look for Bankruptcy Schedules by Apr. 18 FEDERAL-MOGUL: Champion Pension Trustees Okays FM Ignition Scheme FLEXTRONICS: Grants Stock Options to New Employees FOSTER WHEELER: Sets Annual Shareholders' Meeting For May 10 GE COMMERCIAL: S&P Places Low-B Ratings on Six Certificate Classes GLOBAL HOLDINGS: TSX Delists Multiple Voting Shares HIGH VOLTAGE: Seeks Interim Financing to Provide More Liquidity HILITE INT'L: Moody's Puts B3 Rating on $150M Sr. Sub. Notes HUNTSMAN CORP: Moody's Reviews Debt Ratings for Possible Upgrade HYDROCHEM INDUSTRIAL: Moody's Junks $150 Million Senior Notes IKON OFFICE: Earns $16.6 Million of Net Income in First Quarter INTERSTATE BAKERIES: Retains Houlihan Lokey as Financial Advisor JADE CBO: Fitch Maintains Junk Rating on $23.5 Million Sr. Notes K. HOVNANIAN: Moody's Upgrades Ratings & Says Outlook is Stable KAISER ALUMINUM: Judge Fitzgerald Approves PBGC Settlement Pact KAISER ALUMINUM: Court Approves Deal with Lloyds Underwriters LAIDLAW INT'L: Reports Greyhound Pension Funding Requirements LB COMM'L: Moody's Junks $2.678M Class M & $2.23M Class N Notes LEMONTONIC INC: Appoints Michael Geddes to Board of Directors LYNX THERAPEUTICS: Stockholders to Vote on Proposed Solexa Merger MAGNUM HUNTER: Moody's Reviewing Ratings & May Upgrade MERRILL LYNCH: Fitch Puts Low-B Ratings on Private Mortgage Certs. MILLPORT, ALABAMA: United States Wants a Receiver Appointed MIRANT CORP: Chief Executive Officer Marce Fuller Will Resign MOTHERS WORK: Moody's Junks $125 Million Senior Secured Notes NATIONAL CENTURY: Trust Objects to Claims of Three Ex-Directors NDCHEALTH CORP: Defaults on Sr. Notes Due to Late Quarterly Filing NEW WORLD: Retains Keen Realty to Market Winchester Property NORTH ATLANTIC: CFO Resignation Prompts S&P to Junk Ratings NOVELIS INC: TRC Capital Offers CDN $26.75 per Common Share O'SULLIVAN IND: Dec. 31 Balance Sheet Upside-Down by $184.5 Mil. OMEGA HEALTH: Earns $8.9 Million of Net Income in Fourth Quarter OZARK AIR: Wants Chapter 11 Case Converted to Chapter 7 PARMALAT CANADA: Sells North American Bakery Group POPE & TALBOT: Declares $0.08 Dividend per Common Share QUEENSGATE SPECIAL: Moody's Puts Ba1 Rating on $25 Million Notes RESIDENTIAL ASSET: Fitch Junks Two Home Equity Transactions SBC COMMUNICATIONS: Fitch Puts 'BB+' Rating on Watch Negative SBC COMM: AT&T Acquisition Prompts Moody's to Review Ratings SEVILLE ENTERPRISES: Case Summary & Largest Unsecured Creditors SLS INT'L: Appoints Steven Hicks & Dell Furano to Board SOLUTIA INC: Wants to Settle Four Environmental Proceedings SOLUTIA INC: CP Films Wants to Assume Amended Toray Supply Pact SPRINGFIELD GRANITE: Case Summary & 20 Largest Unsecured Creditors STEVENOT WINERY: Section 341(a) Meeting Slated for February 25 SYNAGRO TECH: Moody's Puts B2 Rating on $305M Credit Facility SYNAGRO TECHNOLOGIES: S&P Revises Rating Outlook to Negative TENNECO AUTOMOTIVE: To Make Voluntary $40 Million Debt Pre-Payment TRINITY LEASING: Voluntary Chapter 11 Case Summary TROPICAL SPORTSWEAR: Committee Taps Stroock & Stroock as Counsel UAL CORP: Renews Talks with TWU on Restructuring Agreements UAL CORPORATION: Files 10th Reorganization Status Report USGEN NEW ENGLAND: Files Plan of Liquidation in Maryland VISTEON CORP: Posts $115 Million Net Loss in Fourth Quarter W.R. GRACE: Won't Face Competing Chapter 11 Plans Until May 24 WASHINGTON MUTUAL: S&P Puts Low-B Ratings on Six Cert. Classes WORLDCOM INC: Bondholder Suit Against Andersen Going to Trial WORLDSPAN LP: Moody's Lowers B1 Senior Implied Rating to B2 Z PROMPT: Completes Restructuring & Exits from Bankruptcy * Alvarez & Marsal Names Sajan P. George as Co-Head * Upcoming Meetings, Conferences and Seminars ********* AAMES MORTGAGE: Moody's Junks Series 2001-2 Class B Certificates ---------------------------------------------------------------- Moody's Investors Service has downgraded one certificate class and has placed on review for possible downgrade one certificate class issued in two transactions issued by Aames Mortgage Trust in 2001. The transactions are backed mostly by first-lien fixed rate mortgage loans originated by Aames Financial Corporation and serviced by Countywide Home Loans, Inc. The Class B certificates issued by Aames Mortgage Trust 2001-2 have been downgraded, and the Class B certificates issued by Aames Mortgage Trust 2001-1 have been placed on review for possible downgrade. The transactions have taken significant losses causing gradual erosion of the overcollateralization. As of December 25, 2004, the realized cumulative losses were 5.58% and 5.50% for the 2001-1 and 2001-2 transactions, respectively. The existing credit enhancement levels in the transactions do not provide adequate protection to support the ratings on the most subordinate certificate classes. Moody's complete rating actions are: -- Issuer: Aames Mortgage Trust * Downgrade: * Series 2001-2; Class B, downgraded to Caa3 from B2 * Under review for downgrade: * Series 2001-1; Class B, current rating Ba2, under review for possible downgrade ABS MORTGAGE: Fitch Puts Low-B Ratings on 2 $6.250MM Certificates ----------------------------------------------------------------- Fitch rates Popular ABS mortgage pass-through trust series 2005-1: -- $504,060,000 classes AF-1 to AF-6, AV-1A, AV-1B, and AV-2 certificates 'AAA'; -- $44,060,000 class M-1 certificates 'AA'; -- $34,380,000 class M-2 certificates 'A'; -- $9,690,000 class M-3 certificates 'A-'; -- $9,060,000 class M-4 certificates 'BBB+'; -- $6,250,000 class B-1 certificates 'BBB'; -- $5,000,000 class B-2 certificates 'BBB-'; -- $6,250,000 privately offered class B-3 certificates 'BB+'; -- $6,250,000 privately offered class B-4 certificates 'BB'. The 'AAA' rating on the senior certificates reflects the 22.05% total credit enhancement provided by: * the 7.05% class M-1, * the 5.50% class M-2, * the 1.55% class M-3, * the 1.45% class M-4, * the 1.00% class B-1, * the 0.80% class B-2, * the 1.00% privately offered class B-3, * the 1.00% privately offered class B-4, and * the 2.70% target overcollateralization -- OC. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the quality of the loans and the integrity of the transaction's legal structure, as well as the primary servicing capabilities of Equity One, Inc. (rated 'RPS3+' by Fitch) and JPMorgan Chase Bank, as trustee. The certificates are supported by two collateral groups. Group I consists of fixed-rate mortgage loans while group II consists of adjustable-rate mortgage loans. As of the cut-off date, Dec. 31, 2004, the mortgage loans have an aggregate balance of $489,836,905. The weighted average coupon - WAC -- rate is approximately 7.129% while the weighted average remaining term to maturity is 345 months. The average cut-off date principal balance of the mortgage loans is approximately $144,452. The weighted average combined loan-to-value -- CLTV -- ratio of the mortgage loans at origination was approximately 85.39%, and the weighted average Fair, Isaac & Co. (FICO) score was 640. The properties are primarily located in: * Michigan (7.94%), * California (6.92%), and * New York (6.74%). ADELPHIA COMMS: Compensation Board Adopts 2005 Incentive Plan ------------------------------------------------------------- On January 26, 2005, the Compensation Committee of the Board of Directors of Adelphia Communications Corporation adopted the Adelphia Communications Corporation 2005 Short-Term Incentive Plan, effective January 1, 2005. The STIP provides for the payment of cash bonuses for the 2005 calendar year to certain eligible employees of the Company, subject to the satisfaction of certain qualitative and quantitative performance measures. In general, full-time employees with a title of Director and above, including certain of the Company's Named Executive Officers, are eligible to participate in the STIP. In addition, certain General Managers of local cable systems are also eligible to participate in the STIP. Awards are determined based on the satisfaction of certain performance criteria established for Adelphia Communications, and where relevant, the satisfaction of certain performance criteria for certain regional operations, and individual performance criteria. The Company and regional performance goals include: revenue, operating cash flow, capital expenditures, customer care, internal controls and level of basic subscribers. Awards under the STIP will be paid not later than March 14, 2006. These employees are not eligible to participate in the STIP: -- Employees on a sales commission plan or sales incentive plan; -- Temporary, term and leased employees, contract workers and interns; or -- Employees not on the Company payroll on the date that STIP awards are paid. In connection with the grant of awards under the STIP during 2005, the Company will send to each employee who is a participant in the STIP an award letter that sets forth the level of the participant's award, at target, which is designated as a percentage of the participant's salary. 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. 78; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVENTIST NURSING HOME: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Adventist Nursing Home, Inc. PO Box 95 Livingston, New York 12541 Bankruptcy Case No.: 05-10507 Type of Business: The Debtor operates a nursing home. Chapter 11 Petition Date: January 31, 2005 Court: Northern District of New York (Albany) Judge: Robert E. Littlefield Jr. Debtor's Counsel: Marc S. Ehrlich, Esq. Ehrlich Hanft Baird & Arcodia 64 Second Street Troy, New York 12180 Tel: (518) 272-2110 Total Assets: $3,931,893 Total Debts: $3,145,372 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ New York State Department of Health $754,305 Jerome Alaimo Assessment Fund Administrator Office of Pool Admin PO Box 4757 Syracuse, NY 13221 Sloan Management, Inc. $336,425 3 College Avenue Frederick, MD 21701 Visiting Nurses Home Care $93,301 Suite 300A 855 Central Avenue Albany, NY 12206 Bond, Schoeneck & King $81,238 111 Washington Avenue Albany, NY 12210 Cardinal Health 110, Inc. $58,913 c/o Menter, Rudin & Trivelpiece, PC 500 South Salina Street Syracuse, NY 13202 Any-Time Home Care, Inc. $57,601 PO Box 995 Nyack, NY 10960 Unlimited Care, Inc. $46,387 Kosco $28,000 Amos Post Division NYAHSA/FLTC $26,820 GC Risk Management Service $26,016 State Insurance Fund $24,962 Juliete Payne/GCG Risk Management New York Oncology Hematology, PC $18,457 Niagara Mohawk Power Corporation $17,475 Attn: Bankruptcy Unit VTA Management Services, Inc. $14,139 Ginsberg's $11,041 MTM Pharmacy Services, Inc. $10,088 Regional Rehabilitation Services $8,499 New York State Department of $7,500 Taxation & Finance Mead Johnson $7,200 Heatlhmedx, Inc. $6,831 AKA HOSPITALITY LLC: Voluntary Chapter 11 Case Summary ------------------------------------------------------ Debtor: AKA Hospitality LLC dba Courtesy Inn 8345 West Freeway Fort Worth, Texas 76116 Bankruptcy Case No.: 05-31160 Type of Business: The Debtor operates an inn. Chapter 11 Petition Date: January 31, 2005 Court: Northern District of Texas (Dallas) Judge: Steven A. Felsenthal Debtor's Counsel: Arthur I. Ungerman, Esq. Arthur I. Ungerman, Esquire One Glen Lakes Tower 8140 Walnut Hill Lane, No. 301 Dallas, Texas 75231 Tel: (972) 239-9055 Fax: (972) 239-9886 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. ALLEGHENY TECH: Earns $35 Million of Net Income in Fourth Quarter ----------------------------------------------------------------- Allegheny Technologies Incorporated (NYSE:ATI) reported net income of $35 million, on sales of $778.1 million for the fourth quarter ended December 31, 2004. Results included inventory valuation reserve charge of $29.5 million, primarily due to continued increases in raw material costs. Retirement benefit expense was $25.0 million in the quarter. In the fourth quarter 2003, ATI reported a net loss of $232.7 million, on sales of $484.4 million. Results included net non- recurring special charges of $198.3 million. Fourth quarter 2003 results also included a LIFO inventory valuation reserve charge of $14.2 million and retirement benefit expense of $32.7 million. Net income for the full-year 2004 was $19.8 million, on sales of $2.7 billion. Results for 2004 included a LIFO inventory valuation reserve charge of $112.2 million, retirement benefit expense of $119.8 million, and a $40.4 million, or $0.48 per share, special gain related to actions taken to control certain retiree medical costs, net of costs related to the new ATI Allegheny Ludlum labor agreement and the June 2004 J&L asset acquisition. For the full-year 2003, results were a net loss of $314.6 million, on sales of $1.9 billion. Results for 2003 included net special charges of $201.3 million, a $1.3 million charge for the cumulative effect of change in accounting principle, a LIFO inventory valuation reserve charge of $37.0 million, and retirement benefit expense of $134.4 million. "ATI's results are an outcome of our strategy to transition ATI to profitability and position the Company for long-term success," said Pat Hassey, Chairman, President and Chief Executive Officer of Allegheny Technologies. "Revenues significantly increased in each of our segments as a result of improved demand from most markets, pricing actions, and higher raw material surcharges. Compared to last year, sales increased 61% to $778 million in the fourth quarter 2004 and increased by 41% to $2.7 billion for the full-year 2004. Importantly, ATI was profitable for the full-year 2004, and the fourth quarter net income of $0.35 per share demonstrated the results of our revenue growth, strategic investments and cost reductions. "Flat-Rolled Products segment fourth quarter results were aided by the recovery in the U.S. stainless steel market, pricing actions, and the successful integration of our recently acquired stainless steel assets. Continuing operating efficiencies and cost reductions were both enhanced by our new progressive labor agreement in our stainless steel business. A key 2004 strategy for ATI was to 'fix' our stainless steel business. We believe our stainless steel business is now positioned for long-term profitable growth and cash generation. "Fourth quarter results in our High Performance Metals segment were very good as a result of improved demand from commercial aerospace, higher selling prices, and operating efficiencies from our recently expanded Richburg, SC rolling mill. In addition, our exotic alloys business performed well due to continued strong demand, improved product mix, and continuing operating efficiencies and cost reductions. Segment operating margins reached nearly 19% of sales. "In our Engineered Products segment, fourth quarter results improved as a result of strong demand from several key markets, higher selling prices, and the benefits from cost reductions. "We continue to be optimistic about 2005. While 2004 was a period of transition and transformation for ATI, we expect 2005 to be a year of revenue growth and accelerating profitability. Most of our end markets remain strong. Sales are expected to grow due to the full year impact of significantly improved prices and higher volumes. Overall, we expect base-prices to be higher in 2005 than in 2004 for approximately 95% of this year's shipments in our Flat-Rolled Products and High Performance Metals segments. Our High Performance Metals segment unfilled orders increased by approximately $100 million at the end of 2004 compared to year-end 2003. We remain encouraged by the aerospace market build forecasts in terms of both the number and size of aircraft as well as increased high performance metal content," said Pat Hassey. "We expect a full year of benefits in 2005 from the strategic assets added in 2004, principally the stainless steel melt shop and finishing operations in Midland, PA and Louisville, OH acquired in June 2004, the upgraded Brackenridge, PA stainless steel melt shop completed in September 2004, and the expanded high performance metals long-products rolling mill in Richburg, SC, which began production in mid-2004. "We plan to continue to improve operating performance through the ATI Business System. We have established a 2005 cost reduction goal of approximately $100 million, before the effects of inflation, which includes certain synergies and cost reductions from the J&L asset acquisition and the new labor agreement in our stainless steel business. Finally, retirement benefit expense is projected to be approximately $33 million lower in 2005 than in 2004, primarily as a result of actions taken in 2004 to control retiree medical costs." Fourth Quarter 2004 Financial Highlights a. Sales of $778 million increased 61% compared to the fourth quarter 2003 b. Operating profit improved to $75.1 million as a result of improved performance across all business segments c. Net income of $35.0 million, or $0.35 per share Full-Year 2004 Financial Highlights a. Sales increased 41% to $2.7 billion compared to 2003 b. Net income improved to $19.8 million, or $0.22 per share c. Gross cost reductions totaled $142 million, significantly exceeding $104 million plan About the Company Allegheny Technologies Incorporated -- http://www.alleghenytechnologies.com/ -- (NYSE:ATI) is one of the largest and most diversified specialty materials producers in the world, with revenues of approximately $1.9 billion in 2003. The Company has approximately 8,800 employees world-wide and its talented people use innovative technologies to offer growing global markets a wide range of specialty materials. High-value products include nickel-based and cobalt-based alloys and superalloys, titanium and titanium alloys, specialty steels, super stainless steel, exotic alloys, which include zirconium, hafnium and niobium, tungsten materials, and highly engineered strip and Precision Rolled Strip products. In addition, we produce commodity specialty materials such as stainless steel sheet and plate, silicon and tool steels, and forgings and castings. * * * As reported in the Troubled Company Reporter on Sept. 3, 2004, Moody's Investors Service confirmed Allegheny Technologies Incorporated's senior implied rating of B1 and senior unsecured ratings of B3. The ratings confirmation is based on: * the company's improving cost structure, * favorable purchase price for additional low-cost stainless capacity, and * enhanced liquidity position from its recent equity offering. The ratings continue to reflect, however: * Allegheny Technologies' high leverage, * its concentration in cyclical end-use markets, and * exposure to volatility of input costs. The outlook is stable. AMCAST INDUSTRIAL: Comm. Taps FTI Consulting as Financial Advisor ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio gave the Official Committee of Unsecured Creditors of Amcast Industrial Corporation and its debtor-affiliates permission to employ FTI Consulting, Inc., as its financial advisor. FTI Consulting will: a) assist the Committee in the review of financial related disclosures required by the Court and with information and analyses required for the Debtors' debtor-in-possession financing; b) assist the Committee with a review of the Debtors' short- term cash management procedures and their proposed key employee retention program and other critical employee benefit programs; c) assist and advise the Committee with respect to the Debtors' identification of core business assets and the disposition of assets or liquidation of unprofitable operations; d) assist in the review of the Debtors' performance of cost benefit evaluations with respect to the affirmation or rejection of various executory contracts and leases; e) assist in the review of financial information distributed by the Debtors to the creditors, including cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various assets and liability accounts, and analysis of proposed transactions for which Court approval is required; f) assist in the review and preparation of information and analysis necessary for the confirmation of a chapter 11 plan and in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; g) provide litigation services with respect to accounting and tax matters, along with expert witness testimony on case related issues as required by the Committee; and h) render all other general business consulting services to the Committee and its counsel that is necessary in the Debtors' chapter 11 case. Micheal J. Selwood, a Managing Director at FTI Consulting, dislcoses the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Senior Managing Directors $560 - $653 Directors/Managing Directors $415 - $560 Associates/Consultants $195 - $385 Paraprofessionals $ 95 - $168 Mr. Selwood reports that FTI Consulting's compensation consists of a monthly fee of $125,000 in the first month of the Debtors' engagement of the Firm, $100,000 on the second month, and $75,000 on the third month and for every succeeding month. FTI Consulting assures the Court that it does not represent any interest adverse to the Committee, the Debtors or their estates. Headquartered in Dayton, Ohio, Amcast Industrial Corporation -- http://www.amcast.com/-- is a manufacturer and distributor of technology-intensive metal products to end-users and supplier in the automotive and plumbing industry. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 30, 2004 (Bankr. S.D. Ohio Case No. 04-40504). Jennifer L. Maffett, Esq., at Thompson Hine LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $104,968,000 and total debts of $165,221,000. AMERICAN BUSINESS: Look for Bankruptcy Schedules by Mar. 18 ----------------------------------------------------------- American Business Financial Services, Inc., and its debtor- affiliates sought and obtained an extension until Mar. 18, 2005, from the U.S. Bankruptcy Court for the District of Delaware to file their Equity Holder Lists, Schedules of Assets and Liabilities and Statements of Financial Affairs. Rule 1007(a)(3) of the Federal Rules of the Bankruptcy Procedure requires the Debtors to file their list of equity security holders, Schedules of Assets and Liabilities, and Statements of Financial Affairs within 15 days from the Petition Date. Pursuant to Rule 1007-1(d) of the Local Rules of the Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the Debtors have an automatic extension of 30 days to deliver these documents. Bonnie Glantz Fatell, Esq., at Blank Rome, LLP, in Wilmington, Delaware, told the Court that the Debtors have over 6,000 equity holders and more than 30,000 creditors. The Debtors are in the process of identifying equity holders at the street level and of preparing separate Schedules and Statements for each of the Debtors on a deconsolidated basis. Due to the number of equity holders and creditors, the current deadlines by which the Debtors are required to file their Equity Holder Lists, Schedules and Statements may not be sufficient. Ms. Fatell explained that this task is particularly burdensome because the individuals available to complete the task on the Debtors' behalf must divide their time between gathering the information necessary to prepare the Schedules and Statements and managing the Debtors' operations. Headquartered in Philadelphia, Pennsylvania, American Business Financial Services, Inc., together with its subsidiaries, is a financial services organization operating mainly in the eastern and central portions of the United States and California. The Company originates, sells and services home mortgage loans through its principal direct and indirect subsidiaries. The Company, along with four of its subsidiaries, filed for chapter 11 protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203). Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,083,396,000 in total assets and $1,071,537,000 in total debts. (American Business Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICAN BUSINESS: Wants Ordinary Course Professionals to Continue ------------------------------------------------------------------ Prior to the Petition Date, American Business Financial Services, Inc., and its debtor-affiliates, in the ordinary course of business, regularly call on attorneys, accountants and public relation firms in connection with their businesses and other aspects of operations. The services provided by these Ordinary Course Professionals include, among other things: (1) prosecuting or otherwise handling various collection, foreclosure, mortgagor bankruptcy and related real estate matters; (2) providing services and advice, as needed, with respect to various truth-in-lending, employment discrimination and workers' compensation matters or litigation matters that are not otherwise stayed; (3) handling various discrete corporate or regulatory matters; (4) prosecuting claims against non-mortgagor third parties for breach of contract, negligence, defamation and other torts; (5) performing various tax and accounting services; (6) providing consulting services for strategic communications, public relations and investor relations; and (7) performing various other matters requiring the expertise and assistance of professionals. To ensure the Debtors' businesses and operations continue uninterrupted, the Debtors assert that it is necessary to continue to employ and compensate the Ordinary Course Professionals without the need for the Debtors or the Ordinary Course Professionals to file employment and fee applications. Many of the Ordinary Course Professionals receive only modest fees and may not be willing to continue performing services for the Debtors if forced to comply strictly with the retention and fee requirements. In lieu of preparing and filing employment and fee applications for every Ordinary Course Professional, the Debtors propose to implement these procedures: (a) Each Ordinary Course Professional to be employed by the Debtors postpetition will file or cause to be filed a declaration setting forth that an Ordinary Course Professional does not represent or hold any interest Adverse to the Debtors or their estates. (b) Each Declaration will also provide a description of: (i) the scope of the Services to be provided; and (ii) the rates proposed to be charged for the Services. (c) The Declaration will be filed as promptly as possible after the Petition Date or after the Debtors' engagement of an Ordinary Course Professional postpetition. It will be served on: (i) the US Trustee; (ii) the 20 Debtors' largest unsecured creditors or counsel to a creditors' committee, if appointed; (iii) counsel to U.S. Bank, N.A., as indenture trustee for Subordinated Unsecured Notes and the Subordinated Collateralized Notes; and (iv) counsel to the Debtors' postpetition lender. (d) The notice parties will have 10 days after their receipt of a Declaration to object to an Ordinary Course Professional retention. The objecting party will serve any objections on the Debtors, the affected Ordinary Course Professional and the Notice Parties on or before the Objection Deadline. If any objection cannot be resolved within 10 days, the matter will be set for hearing on the next regularly scheduled omnibus hearing date or on a later date as may be agreeable to the parties. If no objection is received by the Objection Deadline, the Debtors will be authorized to retain and pay the Ordinary Course Professional subject additional requirements. (e) The Debtors will pay each Ordinary Course Professional 100% of their fees and expenses upon the submission to, and approval by, the Debtors of an invoice setting forth in reasonable detail the nature of the Services rendered and expenses actually incurred; provided, however, that if any Ordinary Course Professional's fees exceeds $25,000 -- not including expert witness fee or other expenses -- in any month during the pendency of the Debtors' cases, then the payment to that Ordinary Course Professional during the month will be subject to the prior approval of the Court. (f) On every 90 days commencing on the date the motion is approved, the Debtors will file and serve on the Notice Parties a statement setting forth: (i) the name of every Ordinary Course Professional retained to date and a general description of the Services provided by each Ordinary Course Professional; (ii) for each Ordinary Course Professional, the aggregate amount paid as compensation for Services rendered and expenses incurred during the preceding Statement Period; and (iii) for each Ordinary Course Professional, the aggregate amount paid as compensation for Services rendered and expenses incurred during the Debtors' cases. The Debtors anticipate filing a number of formal retention applications to employ various professionals in their bankruptcy proceedings. The proposed OCP Procedures will not apply to those professionals for whom the Debtors are filing separate applications for employment. Accordingly, the Debtors seek the Court's permission to retain and compensate the Ordinary Course Professionals pursuant to the OCP Procedures. Headquartered in Philadelphia, Pennsylvania, American Business Financial Services, Inc., together with its subsidiaries, is a financial services organization operating mainly in the eastern and central portions of the United States and California. The Company originates, sells and services home mortgage loans through its principal direct and indirect subsidiaries. The Company, along with four of its subsidiaries, filed for chapter 11 protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203). Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,083,396,000 in total assets and $1,071,537,000 in total debts. (American Business Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICAN RESTAURANT: Files Third Amended Disclosure Statement ------------------------------------------------------------- American Restaurant Group, Inc., and its debtor-affiliates filed their Third Amended Disclosure Statement explaining their Third Amended Plan of Reorganization with the U.S. Bankruptcy Court for the Central District of California. A full-text copy of the Disclosure Statement explaining the Plan is available for a fee at: http://www.researcharchives.com/download?id=040812020022 The Debtors revised the Disclosure Statement twice to satisfy the Official Committee of Unsecured Creditors. The Committee previously complained that the Debtors' Disclosure Statement was full of mistakes and omissions. One complaint focused on the Disclosure Statement saying that the Debtors' estates would be substantively consolidated when the Plan says creditor constituencies will be treated separately. The Third Amended Disclosure Statement contains some other changes: * balance sheet projection; * summary of net liquidation proceeds; * valuation of each of the Debtors' estates; * allowed unsecured claims is changed from $164.9 to $163.8 million; * general unsecured creditors will receive a pro rata share of approximately 12% of their allowed claim from the Allocated New Common Stock (no more cash distribution); * voting and balloting procedures; and * distribution to creditors in a substantive consolidation of the Debtors. About the Plan American Restaurant's Plan aims to restructure the Debtors' debt, capital structure and business operations to permit the Debtors to emerge from bankruptcy with a viable business and a deleveraged capital structure. The Plan projects debt reduction from $204.5 million to approximately $26.5 million through a debt-to-equity swap. The noteholders' committee, holding in excess of 75% of the aggregate principal amount of the outstanding old notes, supports the Debtors' Plan. Wells Fargo Foothill pledged a $40 million exit financing facility upon the consummation of the Plan. Headquartered in Los Altos, California, American Restaurant Group, Inc., through its subsidiaries operating as Stuart Anderson's, specializes in U.S.D.A. Choice fresh-cut steak; seasoned, seared, and slow-roasted prime rib; and a variety of seafood entrees complete with 'all the fixin's'. The company and its debtor- affiliates filed a chapter 11 petition on Sept. 28, 2004 (Bankr. C.D. Cal. Case No. 04-30732). Thomas R. Kreller, Esq., at Milbank, Tweed, Hadley & Mccloy represents the Debtors in their restructuring efforts. When the Debtor filed for bankruptcy protection, it listed $77,873,000 in assets and $273,395,000 in total debts. ANDREW CORP: Earns $14.6 Million of Net Income in First Quarter --------------------------------------------------------------- Andrew Corporation, a global communications systems and equipment supplier, reported first quarter sales of $474.1 million, up 15% from $410.8 million in the year ago quarter and higher than previous guidance of $440 million to $470 million. Higher sales were primarily due to increased market demand for products within the Wireless Infrastructure and Satellite Communications segments. Net income was $14.6 million or $0.09 per share, compared to net income of $3.8 million or $0.02 per share in the year ago quarter and higher than previous guidance of $0.03 to $0.06 per share. "Our first quarter results were stronger than anticipated, driven by higher sales in each major region and improved operating leverage," said Ralph Faison, president and chief executive officer, Andrew Corporation. First quarter results include intangible amortization of $7.7 million or $0.03 per share and pre-tax restructuring charges of $1.8 million. The year ago quarter included intangible amortization of $9.4 million or $0.04 per share, a pre-tax loss of $4.5 million or $0.02 per share related to the sale of assets, and pre-tax restructuring charges of $0.7 million. Additionally, in the first quarter fiscal 2005, the company recorded a $2.6 million or $0.01 per share benefit for the reversal of previously accrued taxes resulting from a favorable resolution of certain tax-related matters. Orders for the first quarter increased 11% to $453 million versus the prior year quarter due mainly to increased demand for Wireless Infrastructure, offset partially by lower orders for Satellite Communications and Network Solutions. The book-to-bill ratio was less than one in the first quarter, but improved sequentially from the prior quarter. The top 25 customers represented 68% of sales compared to 68% in the prior quarter and 70% in the year ago quarter. Major original equipment manufacturers (OEMs) accounted for 41% of sales, compared to 37% in the prior quarter and 41% in the year ago quarter. The largest customer for the first quarter was Lucent Technologies at 10.5% of sales. Sales By Market Segment and Major Region Effective for the first quarter fiscal 2005, the company will report sales by market segment. Wireless Infrastructure sales consist of the Antenna and Cable Products Group, Base Station Subsystems Group, Network Solutions Group and Wireless Innovations Group. Wireless Infrastructure sales increased 11% versus the prior year quarter driven by increased demand in all major regions. Satellite Communications sales increased 69% versus the prior year quarter driven by a significant volume ramp for certain products supporting the consumer broadband satellite market. Americas Sales increased 11% versus the year-ago quarter driven by higher sales for all major product groups supporting network upgrades and expansion in Latin America and growth in Satellite Communications in North America. Sales in Antenna and Cable Products and Base Station Subsystems declined versus the prior year quarter driven by weaker near-term trends in North America relating to operator consolidation and asset rationalization. Sales in Network Solutions declined modestly versus the prior year quarter due to the timing of geolocation hardware installations. Europe, Middle East, Africa (EMEA) Sales increased 27% compared to the prior year quarter due mainly to Antenna and Cable Products and Base Station Subsystems supporting network upgrades and expansion in Western Europe and emerging markets. Sales in Wireless Innovations increased modestly supporting operator needs for increased coverage solutions. EMEA sales also benefited from favorable foreign currency exchange rates due mainly to a weaker dollar against the euro. Asia Pacific Sales in Asia Pacific increased 7% versus the prior year quarter driven by higher sales in Antenna and Cable Products and Wireless Innovations supporting network expansion and coverage in India and China. Base Station Subsystems declined modestly versus the prior year quarter. Recent Highlights -- Acquired Xenicom following the close of the quarter for approximately $11.5 million in cash. Xenicom adds additional software capabilities to the Network Solutions Group and is focused on helping wireless operators manage and optimize 2G, 2.5G, and 3G wireless networks. -- Acquired selected assets of ATC Tower Services for approximately $10 million, consisting of cash and the assumption of lease obligations. ATC provides an immediate national construction services presence and additional channel distribution opportunities for Wireless Infrastructure products. -- Expanded presence in China with the opening of the Andrew Technology Center in Shanghai. The Shanghai center will focus on active radio frequency (RF) subsystems. -- Expanded manufacturing capabilities for base station antennas in Sorocaba, Brazil, to better support the growing needs of our customers in Central America, South America and the Caribbean. "The strength of our globally diversified customer base and industry-leading portfolio of products and services position Andrew for long-term sales growth and improved profitability," said Faison. "The acquisitions of Xenicom and ATC expand our addressable market beyond traditional hardware and enhance our ability to deliver full systems support to both our OEM and wireless operator customers." First Quarter Financial Summary Gross margin was 23.3%, compared with 22.2% in the prior quarter and 25.3% in the year ago quarter. Consistent with previous guidance, gross margin increased 110 basis points sequentially from the prior quarter due to the completed relocation of certain manufactured product lines within the Antenna and Cable Product Group, lower start-up costs for certain filter product lines within the Base Station Subsystems Group and a more favorable product mix within the Base Station Subsystems Group. Research and development expenses were $26.9 million or 5.7% of sales, compared to $25.6 million or 6.2% of sales in the year ago quarter. Research and development expenses decreased as a percentage of sales due mainly to higher sales leverage and a continued focus on project rationalization. Sales and administrative expenses were $51.0 million or 10.8% of sales, compared to $52.5 million or 12.8% of sales in the year ago quarter. Sales and administrative expenses continue to decrease due mainly to higher sales leverage and the effects of our cost savings and merger integration programs. "The strength of our business model continues to deliver greater operating leverage. With 15% growth in sales, sales and administrative expenses declined in absolute dollars compared to the prior year quarter," said Faison. Intangible amortization was $7.7 million in the first quarter, compared to $9.4 million in the year ago quarter. It is anticipated that total intangible amortization will decrease from $38.3 million in fiscal 2004, to approximately $22.0 million in fiscal 2005. Interest income increased to $1.7 million in the first quarter, compared to $0.7 million in the year ago quarter due mainly to $0.8 million of interest income associated with a favorable resolution of certain tax-related matters. Interest expense was $3.7 million in the first quarter, compared to $3.9 million in the year ago quarter. The reported tax rate for the first quarter was 24.1%, reflecting an underlying effective tax rate on operations of 37.5% and a $2.6 million benefit related to the reversal of previously accrued taxes resulting from a favorable resolution of certain tax-related matters. Total diluted shares outstanding increased to 181 million from 159 million in the year ago quarter due mainly to the accounting effects of outstanding convertible debt and 1.7 million shares issued in conjunction with the MTS Wireless Components acquisition in March 2004. Balance Sheet and Cash Flow Highlights Cash and cash equivalents were $179 million at December 31, 2004, compared to $189 million at September 30, 2004. Cash and cash equivalents declined primarily due to increased working capital requirements associated with higher sales and annual incentive plan payouts for fiscal 2004. Accounts receivable were $447 million and days' sales outstanding (DSOs) were 82 days at December 31, 2004, compared to $417 million and 74 days at September 30, 2004. DSOs increased mainly because of a higher mix of international sales, but remained within our historical target range of 80 to 85 days. Inventories were $356 million and inventory turns were 4.1x at December 31, 2004, compared to $351 million and 4.3x at September 30, 2004. Total debt outstanding was $303 million at December 31, 2004, compared to $299 million at September 30, 2004. Total debt to capital decreased to 16.1% at December 31, 2004, compared to 16.4% at September 30, 2004. Cash flow used in operations was $18.8 million in the first quarter, compared to cash flow used in operations of $15.7 million in the year ago quarter. Capital expenditures were $14.0 million in the first quarter, compared to $19.6 million in the prior year quarter. It is anticipated that capital expenditures will be slightly lower than depreciation for fiscal 2005. Second Quarter Fiscal 2005 Guidance For the second quarter, sales are anticipated to range from $450 million to $480 million driven by improving trends in North America and global growth in Wireless Infrastructure, offset partially by a sequential decline of approximately $15 million to $20 million of sales in Satellite Communications due mainly to a reduced level of involvement in certain consumer broadband satellite programs. Gross margin is anticipated to increase in the second quarter due mainly to operational improvements and a favorable product mix, offset partially by higher raw material costs. Total operating expenses are anticipated to modestly increase on an absolute basis compared to the first quarter due mainly to higher expenses associated with the acquisitions of ATC and Xenicom and Sarbanes-Oxley compliance requirements. This outlook does not include any impact related to the expensing of stock options under the Financial Accounting Standards Board's Statement 123(R), which is effective for quarters beginning after June 15, 2005. The company anticipates an effective tax rate of approximately 37.5%, which does not reflect the impact of any potential repatriation of cash under the American Jobs Creation Act. Earnings per share are anticipated to range from $0.07 to $0.10, including intangible amortization and restructuring costs of approximately $0.02 per share. Diluted shares are anticipated to be approximately 181 million. "The underlying long-term trends driving network upgrades and expansion continue to be healthy and we are encouraged by the opportunities we see globally in the industry," said Faison. "Our focus remains committed to delivering sales growth above the market, improved operational performance and increased cash flow from operations in fiscal 2005." Attached to this news release are preliminary financial statements for the first fiscal quarter ended December 31, 2004. About Andrew Andrew Corporation (NASDAQ:ANDW) designs, manufactures and delivers innovative and essential equipment and solutions for the global communications infrastructure market. The company serves operators and original equipment manufacturers from facilities in 35 countries. Andrew -- http://www.andrew.com/-- headquartered in Orland Park, IL, is an S&P 500 company founded in 1937. * * * As reported in the Troubled Company Reporter on July 9, 2004, Standard & Poor's Ratings Services assigned its 'B+' rating to Andrew Corp.'s $240 million 3.25% convertible subordinated notes due Aug. 15, 2013. In addition, Standard & Poor's assigned its preliminary BB/B+ ratings to the company's $750 million Rule 415 shelf registration for senior unsecured/subordinated debt. A 'BB' corporate credit rating also was assigned to Andrew Corp. The outlook is stable. As a result of the Allen Telecom and Celiant Corp. acquisitions in July 2003 and June 2002, respectively, Andrew Corp. is one of the leading global suppliers of communications products and systems to the wireless subsystem infrastructure market. The company provides total customer solutions, including virtually all components of a wireless base station that are outsourced by major network original equipment manufacturers and operators. As of March 31, 2004, total debt outstanding was about $353 million, adjusted for operating leases. "The ratings reflect a below-average business profile due to the highly competitive and cyclical spending environment of the wireless and cable television industries in which the company operates, as well as its acquisitive growth strategy," said Standard & Poor's credit analyst Rosemarie Kalinowski. "This is partially offset by a solid financial profile for the rating and the company's strong market position in wireless infrastructure components." ASTRIS ENERGI: Completes Czech Affiliate Purchase ------------------------------------------------- Astris Energi, Inc., (OTC Bulletin Board:ASRNF) completed the purchase of its affiliate Astris s.r.o., located in the Czech Republic. The terms of the deal were agreed to in a Memorandum of Understanding signed in September 2004 and approved by Astris shareholders at Astris' Annual and Special Meeting of Shareholders on October 22, 2004. Prior to the purchase, Astris owned 30% of the shares of Astris s.r.o. The remaining 70% was owned by Macnor Corp., a company controlled by Astris President and CEO Jiri K. Nor. With the completion of this purchase, Astris now owns 100% of the issued and outstanding shares of Astris s.r.o. Under the purchase terms, Macnor received an aggregate consideration of 5,000,000 purchase units. Each purchase unit consists of one common share and one share purchase warrant. 2,000,000 of the warrants are exercisable at CDN$0.90; 2,000,000 of the warrants are exercisable at CDN$1.10; and 1,000,000 are exercisable at CDN$1.30. The warrants expire three years from the closing date. Since 1992, Astris s.r.o. has focused on AFC electrode research and development. The company owns a 1.5-acre property in Vlasim, Czech Republic with a 8,000 square foot manufacturing facility. Currently, the site is the location of Astris' pilot production line for the manufacture of its POWERSTACK(TM) MC250 fuel cells, a key component to Astris' product line of AFC-powered portable and stationary generators. "The purchase of Astris s.r.o. adds approximately CDN$2.2 million to our assets and completes a key phase of our business development plan," said Anthony Durkacz, Vice President of Finance. "This will enable us to aggressively pursue institutional funding; target large strategic partners; and develop new revenue streams from product sales and licensing." Astris Energi, Inc., -- http://www.astris.ca/-- is a late-stage development company committed to becoming the leading provider of affordable fuel cells and fuel cell generators internationally. Over the past 21 years, more than $17 million has been spent to develop Astris' alkaline fuel cell for commercial applications. Astris is commencing pilot production of its POWERSTACK(TM) MC250 technology in 2005. Astris is the only publicly traded company in North America focused exclusively on the alkaline fuel cell. Going Concern Doubt The Company has incurred several years of losses. At Sept. 30, 2004, the Company reported a deficit of $7,816,381 and continues to expend cash amounts that significantly exceed revenues. These conditions cast significant doubt as to the ability of the Company to continue in business and meet its obligations as they come due. Management is considering various alternatives, including possible private placements to raise capital in fiscal 2004. Nevertheless, there is no assurance that these initiatives will be successful. The Company's continuance as a going concern is dependent on the success of the efforts of its directors and principal shareholders in providing financial support in the short term, the success of the Company in raising additional long-term financing either from its own resources or from third parties, the commercialization of one or more of the Company's research projects and the Company achieving profitable operations. ATA AIRLINES: Gets Lease Decision Period Extended to February 25 ---------------------------------------------------------------- As previously reported, Jeffrey Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that ATA Airlines and its debtor-affiliates were lessees or sublessees with respect to a number of unexpired non-residential real property leases. As part of their restructuring efforts, the Debtors are in the process of evaluating the property covered by the Leases. The Debtors' decision with respect to each Lease depends in large part on whether the location will play a future role under the Debtors' plan or reorganization. Whether each Lease is assumed, assumed and assigned, or rejected will depend, most significantly, on whether the Debtors will continue operations at the location once a plan of reorganization is implemented. Accordingly, the Debtors ask the Court to extend the time within which they may assume, assume and assign, or reject unexpired non- residential real property leases, to and including the earlier of February 25, 2005, or the date on which a Plan is confirmed. * * * Pursuant to Section 365(d)(4) of the Bankruptcy Code, the period in which the Debtors must assume, assume and assign, or reject any and all unexpired non-residential real property leases is extended through the earlier of February 25, 2005, or the date of confirmation of a plan of reorganization. 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. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants Plan Filing Period Extended to June 23 ---------------------------------------------------------- Since the Petition Date, ATA Airlines and its debtor-affiliates and their advisors have been evaluating all facets of their businesses and operations to determine the best method for returning value to their creditors, including analyzing leases of aircraft used in the Debtors' operations and executory contracts. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that the Debtors undertook an auction of certain assets that culminated in the closing of a deal with Southwest Airlines Co., involving the sale of certain of the Debtors' assets at Midway Airport in Chicago, Illinois. Section 1121(b) of the Bankruptcy Code provides for an initial period of 120 days after the Petition Date during which a debtor has the exclusive right to file a plan of reorganization. Section 1121(d) further provides that: "On request of a party in interest . . . and after notice and a hearing, the court may for cause reduce or increase the 120- day period or the 180-day period. . . ." Mr. Nelson tells Judge Lorch that due to the complexity of the auction and sale process, the overall complexity of these Chapter 11 cases, and despite diligent efforts working towards a fair and equitable plan formulation, the Debtors will not be able to file a plan by February 23, 2005. Accordingly, the Debtors ask the United States Bankruptcy Court for the Southern District of Indiana to extend the exclusive period during which they may file a plan to and including June 23, 2005. The Debtors' motion filed with the U.S. Bankruptcy Court does not seek an extension of the exclusive period to solicit acceptances of the plan of reorganization. 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. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) AXIA NETMEDIA: Will Release 2005 Second Quarter Results Today ------------------------------------------------------------- Axia will release its fiscal Second Quarter 2005 results today, February, 2, 2005. Additionally, a conference call for the investment community will be held Thursday, February 3, 2005 at 2:30 p.m. (Eastern) and 12:30 p.m. (Mountain). Axia Chairman and CEO Art Price, President Murray Wallace and Chief Financial Officer Peter McKeown will participate. To participate in the conference call, dial (416) 640-4127 in Toronto and internationally. If you are connecting from other parts of Canada, dial 1-800-814-4857. Please call 10 minutes prior to the start of the call. In addition, a live webcast (listen-only mode) of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1004080 A replay of the conference call will be available at (416) 640-1917 or 1-877-289-8525, passcode 21110624 followed by the number sign from 4:30 p.m. (ET) February 3, 2005 to midnight (ET) Thursday, February 10, 2005, or through the webcast archives at http://www.newswire.ca/ Axia NetMedia Corporation is a leading designer, provisioner and operator of Real Broadband networks to government and enterprise customers in Canada and other parts of the world. As an "operator of operators", Axia provides Real Broadband guaranteed connectivity using a unique business model that levels the playing field for both urban and rural customers in a geographic region. Axia's high-end e-learning applications connect people with the tools and information they need to perform more effectively. Axia has 186 employees and trades on the Toronto Stock Exchange under the symbol "AXX". * * * As reported in the Troubled Company Reporter on May 28, 2004, Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to industrial products manufacturer AXIA, Inc. The outlook is stable. BALL CORP: Agrees to $125 Million Accelerated Stock Buyback ----------------------------------------------------------- Ball Corporation (NYSE: BLL) has agreed to repurchase approximately $125 million of its outstanding common stock in a privately negotiated accelerated stock repurchase transaction with BNP Paribas using cash on hand and available borrowings. The transaction immediately reduces Ball's reported outstanding common stock by three million shares. The shares are subject to a market price adjustment provision which may require a payment to be made by Ball or to Ball based on the volume weighted average trading price of the company's shares over an agreed upon period of time. After Monday's transaction, approximately eight million shares remain under a stock repurchase authorization approved by the company's board of directors in July 2004. About the Company Ball Corporation is a supplier of high-quality metal and plastic packaging products to the beverage and food industries. The company also owns Ball Aerospace & Technologies Corp., which develops sensors, spacecraft, systems and components for government and commercial markets. Ball employs more than 14,000 people worldwide and reported 2004 sales of $5.4 billion. * * * As reported in the Troubled Company Reporter on Nov. 10, 2004, Fitch Ratings has affirmed the ratings for Ball Corporation's (NYSE: BLL) senior secured credit facilities and senior notes at 'BB+' and 'BB', respectively, and revised the Rating Outlook to Positive. Approximately $1.6 billion of debt is affected by these actions. The ratings are supported by BLL's leading market positions, stability of end markets and customers, steady margin performance, and strong free cash flow generation. In the past two years, BLL has successfully integrated the Schmalbach acquisition and has utilized free cash flow to improve the balance sheet. Concerns include higher share repurchases, potential leverage hikes related to acquisition activities, price pressures in the plastics and food can businesses, adverse weather conditions, and the uncertain resolution of the German Deposit Law. The Positive Outlook recognizes BLL's consistent delevering efforts, improving financial performance, and the expectation that the company will maintain current credit profile. Fitch believes the company's targeted $250 million reduction in net debt in 2004 is achievable, given its margin expansion trend and strong free cash flow generation. At the same time, Fitch expects the company to significantly increase share repurchases beyond 2004 in the absence of large acquisition opportunities, limiting further balance sheet improvement. BLL's credit profile is strong for the rating category: at September 30, 2004 on an LTM basis: * EBITDA/interest was 6.4 times (x), * total adjusted debt/EBITDA was 2.5x, and * total adjusted debt/capital was 64.5%. BANC OF AMERICA: Fitch Puts BB- Rating on $701,000 2005-1 Certs. ---------------------------------------------------------------- Banc of America Funding Corporation mortgage (BAFC) pass-through certificates, series 2005-1, are rated by Fitch Ratings: -- $193,197,087 classes 1-A-1 through 1-A-10, 30-IO, 30-PO, and 1-A-R 'AAA' (senior certificates); -- $3,304,000 class B-1 'AA'; -- $1,501,000 class B-2 'A'; -- $701,000 class B-3 'BBB'; -- $701,000 class B-4 'BB'. The 'AAA' rating on the senior certificates reflects the 3.50% subordination provided by * the 1.65% class B-1, * the 0.75% class B-2, * the 0.35% class B-3, * the 0.35% privately offered class B-4, * the 0.25% privately offered class B-5, and * the 0.15% privately offered class B-6 (B-5 and B-6 are not rated by Fitch). The ratings on the class B-1, B-2, B-3, and B-4 certificates are based on their respective subordination. Fitch believes the amount of credit enhancement will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral purchased by Banc of America Funding Corporation, the integrity of the legal and financial structures, and the master servicing capabilities of Wells Fargo Bank, N.A. (rated 'RMS1' by Fitch) and Washington Mutual Securities Corp. (rated 'RMS2+' by Fitch). The transaction consists of one group of 368 fully amortizing, fixed interest rate, first lien mortgage loans, with original terms to maturity of approximately 20-30 years. The aggregate unpaid principal balance of the pool is $200,205,119 as of Jan. 1, 2005 (the cut-off date), and the average principal balance is $544,036. The weighted average original loan-to-value ratio - OLTV -- of the loan pool is approximately 70.52%; approximately 5.7% of the loans have an OLTV greater than 80%. The weighted average coupon - WAC -- of the mortgage loans is 6.039%, and the weighted average FICO score is 721. Cash-out and rate/term refinance loans represent 25.14% and 30.84% of the loan pool, respectively. The states that represent the largest geographic concentration are: * California (49.99%), * New York (6.35%), and * Illinois (5.54%). All other states represent less than 5% of the outstanding balance of the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ BAFC, a special purpose corporation, purchased the mortgage loans from: * Bank of America, N.A., * Wells Fargo Bank, N.A., * National City Mortgage Co., * Chase Home Finance LLC, * Countrywide Home Loans, Inc., * Loan City, and * American Home Mortgage and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. Wells Fargo Bank, N.A. and Washington Mutual Mortgage Securities Corp. will serve as master servicers. Wells Fargo Bank, N.A. will serve as securities administrator. Wachovia Bank, N.A. will serve as trustee. For federal income tax purposes, an election will be made to treat the trust as a real estate mortgage investment conduit. BANC OF AMERICA: Fitch Assigns Low-B Ratings on 4 Mortgage Certs. ----------------------------------------------------------------- Banc of America Mortgage Securities, Inc., series 2005-1, mortgage pass-through certificates are rated: Group 1 certificates: -- $240,024,624 classes 1-A-1 through 1-A-24, 1-A-R, 1-A- LR, 30-IO, and 30-PO 'AAA' (senior certificates); -- $3,454,000 class 30-B-1 'AA'; -- $1,233,000 class 30-B-2 'A'; -- $740,000 class 30-B-3 'BBB'; -- $494,000 class 30-B-4 'BB'; -- $370,000 class 30-B-5 'B'. Group 2 certificates: -- $76,723,652 classes 2-A-1, 15-IO, and 15-PO 'AAA' (senior certificates); -- $507,000 class 15-B-1 'AA'; -- $351,000 class 15-B-2 'A'; -- $78,000 class 15-B-4 'BB'; -- $78,000 class 15-B-5 'B'. The 'AAA' ratings on the group 1 senior certificates reflect the 2.70% subordination provided by: * the 1.40% class 30-B-1, * the 0.50% class 30-B-2, * the 0.30% class 30-B-3, * the 0.20% privately offered class 30-B-4, * the 0.15% privately offered class 30-B-5, and * the 0.15% privately offered class 30-B-6. Classes rated based on their respective subordination: * 30-B-1 'AA', * 30-B-2 'A', * 30-B-3 'BBB', * 30-B-4 'BB', and * 30-B-5 'B'. Class 30-B-6 is not rated by Fitch. The 'AAA' ratings on the group 2 senior certificates reflect the 1.70% subordination provided by: * the 0.65% class 15-B-1, * the 0.45% class 15-B-2, * the 0.25% class 15-B-3 certificates, * the privately offered 0.10% class 15-B-4, * the privately offered 0.10% class 15-B-5, and * the privately offered 0.15% class 15-B-6. Classes rated based on their respective subordination: * 15-B-1 'AA', * 15-B-2 'A', * 15-B-4 'BB', and * 15-B-5 'B'. Classes 15-B-3 and 15-B-6 are not rated by Fitch. The ratings also reflect the quality of the underlying collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction is secured by two pools of mortgage loans. Loan group 1, respectively, collateralizes the group 1 certificates. Loan group 2, respectively, collateralizes the group 2 certificates. The group 1 collateral consists of 498 recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to four-family residential mortgage loans with original terms to stated maturity ranging from 240 to 360 months. The weighted average original loan-to-value ratio - OLTV -- for the mortgage loans in the pool is approximately 68.69%. The average balance of the mortgage loans is $495,353, and the weighted average coupon - WAC -- of the loans is 5.812%. The weighted average FICO credit score for the group is 751. Second homes constitute 5.41% and there are no investor-occupied properties. Rate/term and cash-out refinances represent 36.79% and 16.69%, respectively, of the group 1 mortgage loans. The states that represent the largest geographic concentration of mortgaged properties are: * California (49.22%), * Florida (6.82%), and * Virginia (6.72%). All other states constitute fewer than 5% of properties in the group. The group 2 collateral consists of 137 recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to two-family residential mortgage loans with original terms to stated maturity ranging from 120 to 180 months. The weighted average OLTV for the mortgage loans in the pool is approximately 61.30%. The average balance of the mortgage loans is $569,715, and the WAC of the loans is 5.320%. The weighted average FICO credit score for the group is 746. Second homes constitute 12.46%, and there are no investor-occupied properties. Rate/term and cash-out refinances represent 43.59% and 23.29%, respectively, of the group 2 mortgage loans. The states that represent the largest geographic concentration of mortgaged properties are: * California (43.73%), * Florida (13.14%), and * Illinois (7.72%). All other states constitute fewer than 5% of properties in the group. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc., deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as two separate real estate mortgage investment conduits. Wells Fargo Bank, National Association, will act as trustee. BANC OF AMERICA: Fitch Puts Low-B Ratings on Two 2005-A Certs. -------------------------------------------------------------- Banc of America Funding Corporation's -- BAFC -- mortgage pass-through certificates, series 2005-A, are rated by Fitch Ratings: Group 4 certificates: -- $152,993,000 classes 4-A-1 'AAA' (group 4 senior certificates); -- $2,451,000 class 4-B-1 'AA'; -- $949,000 class 4-B-2 'A'; -- $632,000 class 4-B-3 'BBB'; -- $475,000 class 4-B-4 'BB'; -- $316,000 class 4-B-5 'B'. The 'AAA' rating on the group 4 senior certificate reflects the 3.25% subordination provided by classes 4-B-1 through 4-B-6. The 'AA' rating on the class 4-B-1 certificate reflects the 1.70% subordination provided by classes 4-B-2 through 4-B-6. The 'A' rating on the class 4-B-2 certificate reflects the 1.10% subordination provided by classes 4-B-3 through 4-B-6. The 'BBB' rating on the class 4-B-3 certificate reflects the 0.70% subordination provided by classes 4-B-4 through 4-B-6. The 'BB' rating on the class 4-B-4 certificate reflects the 0.40% subordination provided by classes 4-B-5 and 4-B-6. The 'B' rating on the class 4-B-5 certificate reflects the 0.20% subordination provided by class 4-B-6. Class 4-B-6 certificate is not rated by Fitch. Fitch believes the amount of credit enhancement will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral purchased by Banc of America Funding Corporation, the integrity of the legal and financial structures, and the servicing capabilities of Wells Fargo Bank, N.A. (rated 'RPS1' by Fitch), Bank of America, N.A. (rated 'RPS1'), Countrywide Home Loans Servicing LP (rated 'RPS1'), and GreenPoint Mortgage Funding, Inc. (rated 'RPS2-'). The trust is comprised of five loan groups of adjustable interest rate, fully-amortizing mortgage loans secured by first liens on one- to four-family residential properties. Loan groups 1, 2, and 3 are cross-collateralized; loan group 4 is a stand alone group; and loan group 5 is a stand alone group. Fitch did not rate the certificates collateralized by loan groups 1, 2, 3 and 5. Loan group 4 consists of 282 mortgage loans that have an original term to maturity of 360 months. The aggregate unpaid principal balance of the pool is $158,132,581.16 as of Jan. 1, 2005 (the cut-off date) and the average principal balance is $560,754. The weighted average original loan-to-value ratio - OLTV -- of the loan pool is approximately 69.90%. The weighted average coupon - WAC -- of the mortgage loans is 5.391% and the weighted average FICO score is 736. Cash-out and rate/term refinance loans represent 8.25% and 27.31% of the loan pool, respectively. The state that represents the largest geographic concentration of mortgaged properties is California (69.14%). All other states represent less than 5% of the outstanding balance of the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003, entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available on the Fitch Ratings web site at http://www.fitchratings.com/ BAFC, a special purpose corporation, deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. Wachovia Bank, N.A. will serve as trustee and Wells Fargo Bank, N.A. will serve as securities administrator. Elections will be made to treat the trust as multiple real estate mortgage investment conduits for federal income tax purposes. BAYVIEW CAPITAL INC: Case Summary & 2 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Bayview Capital, Inc. 317 Dutchmans Point Road Mantolokin, New Jersey 08738-1011 Bankruptcy Case No.: 05-12757 Chapter 11 Petition Date: January 31, 2005 Court: District of New Jersey (Trenton) Debtor's Counsel: Timothy P. Neumann, Esq. Broege, Neumann, Fischer & Shaver, LLC 25 Abe Voorhees Drive Manasquan, New Jersey 08736 Tel: (732) 223-8484 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 2 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ James Maggs, Esq. $113,812 Maggs & McDermott 800 Old Bridge Rd Brielle, NJ 08730-1334 James Maggs, (732) 223-9870 Howard Schraub Trade debt $67,000 8746 Caminito Sueno La Jolla, CA 92037-1604 BUCKEYE TECHNOLOGIES: Moody's Puts B1 Rating on $85M Sr. Term Loan ------------------------------------------------------------------ Moody's Investors Service assigns a B1 rating to Buckeye Technologies Inc.'s (Buckeye) $85 million increase of its senior secured term loan B, affirms all other ratings, and changes outlook to stable from negative. Buckeye is amending its current bank agreement to increase the size of its existing term loan B by $85 million. Proceeds from the increased term loan along with $15 million of cash on hand will be used to repurchase all, approximately $100 million, of the company's outstanding 9.25% senior subordinated notes. Ratings affirmed are: * Senior implied rated B2 * Senior unsecured issuer rating rated Caa1 * US$150 million, guaranteed senior secured term loan B, due October 15, 2008, rated B1 * US$70 million, guaranteed senior secured revolver, due September 15, 2008, rated B1 * US$200 million, 8.5%, guaranteed senior unsecured notes, due 2013, rated B3 * US$100 million, 9.25% senior subordinated notes, due 2008, rated Caa1 * US$150 million, 8.0% senior subordinated notes, due 2010, rated Caa1 The outlook is stable. Affirmation of the B2 senior implied rating reflects Buckeye Technologies' leading position for several of its product, continued focus on cost reduction, and improved liquidity. The ratings also reflect Buckeye's relatively weak operating performance, (over the past several years) and earnings the volatility in its earnings, which is due in part to its product mix, as well as competitive pressures and industry over capacity in various segments. The change in outlook to stable from negative reflects the company's improved liquidity due in part to an improving price environment for a number of its products, a continued focus on cost reduction, and lower debt levels. The stable outlook also reflects Moody's expectation that operating performance will continue to improve, that management will continue to focus on costs and further debt reduction, while maintaining the quality of its asset base, and liquidity remains adequate. In an effort to reduce the volatility of its earnings mix Buckeye Technologies has been trying to reduce its dependence on market fluff pulp production, which accounted for approximately 18% of total sales in fiscal year 2004. However, the Company continues to have a sizeable position with 250,000 tonnes of fluff pulp, of which only 50,000 tonnes is used internally for the production of airlaid non-woven products. Significant competition and industry capacity expansion in 2001 have also lead to over capacity in airlaid non-woven products. Buckeye's aggregate operating rate for airlaid non-wovens is approximately 70%. Cotton cellulose based products have also been significantly impacted in recent years due to the decrease in use of higher quality cotton based paper. Despite having a leading market position for a number of its products the company competes against companies that are substantially larger and with greater financial flexibility such as Archer-Daniels-Midland, Borregard, Rayonier, Tembec, and Weyerhauser for specialty fibers and Ahlstrom, GP, Kimberly Clark, PGI, and Rayonier for airlaid non-wovens. Over the past three and a half years Buckeye Technologies has taken approximately $11 million in restructuring charges and $104 million in impairment charges as a result of its two phase restructuring and impairment programs to reduce costs and improve it competitiveness. Even after adjusting for these one-time items credit metrics have been very weak. Leverage has consistently been around 7.0x, with coverage below 2.0x and adjusted operating earning unable to cover interest. Buckeye Technologies has been able to generate positive free cash flow on a rolling twelve-month basis for the last several quarters, which has enabled it to reduce debt from approximately $661 million in the 4Q03 to $571 million in the 2Q05 (the company has a June fiscal year end). However, despite a recent improvement in gross margins, free cash flow has been driven in large part by capex levels that have been significantly below depreciation and a steady benefit from working capital due in part to the closure of several facilities. Although these events have enabled the company to reduce debt, these events will not sustain cash flow over the long term and the company must rely on an improved pricing environment and a continued focus on costs to improve operating performance and generate stronger credit metrics going forward. Although Buckeye Technologies is exposed to commodity type products a large percentage of its product mix is focused towards more specialty items, which tend to have less volatile pricing. These products are used in the manufacturing of LCD screens, tire cords, thickeners, and food casings (chemical cellulose), as well as more value added consumer staples such as diapers, wipes and fem care products (non-wovens and fluff pulp), in addition to filter and specialty papers including currency (customized fibers). Buckeye Technologies has also focused a significant amount of effort on cost reductions with the closure of several inefficient high cost facilities and reduced headcount from 2,200 to approximately 1,700. Closure of the Lumberton and Cork facilities should reduce working capital requirements by $14 million. The company also announced the closure of their Glueckstadt facility in Germany, which will cease operations by calendar year-end 2005. Factors that could negatively impact the ratings or outlook would be deterioration in operating performance or liquidity due in part to a weak pricing environment for its products, higher inputs costs, or increased competition, whereas a sustained improvement in credit metrics and liquidity would be positive events. Over the near term, Moody's anticipates leverage moderating below the 5.0x level with coverage exceeding 2.0x and retained cash flow before working capital approaching 10% on a sustained basis. If the Company meets or exceeds these levels on a sustained basis while maintaining the quality of its asset base and adequate liquidity the ratings and/or outlook would likely improve. Moody's believes Buckeye Technologies is likely to remain free cash flow breakeven to slightly positive over the next twelve months and although cash on the balance sheet will be modest there should be adequate availability under its $70 million revolver. Although there are restrictions under its various bond indentures limiting the amount of bank debt outstanding at anyone time the most strict limitation is under its 2010 bond indenture for $275 million, which will allow for the increase in the term loan to $185 million and the ability to draw under the revolver if needed. Buckeye Technologies, Inc., based in Memphis, Tennessee, produces and markets specialty cellulose products made from both wood and cotton, utilizing air-laid and wet-laid processes. CHESAPEAKE ENERGY: Hosting Fourth Quarter Webcast on Feb. 23 ------------------------------------------------------------ Chesapeake Energy Corporation (NYSE: CHK) has scheduled its 2004 fourth quarter and full year earnings release to be issued after the close of trading on the New York Stock Exchange on Tuesday, Feb. 22, 2005. A conference call is scheduled for Wednesday morning, Feb. 23, 2005, at 9:00 am EST to discuss the release. The telephone number to access the conference call is 913-981-5520. We encourage those who would like to participate in the call to place your calls between 8:50 and 9:00 am EST. For those unable to participate in the conference call, a replay will be available for audio playback at 12:00 pm EST on Wednesday, Feb. 23, 2005 and will run through midnight Tuesday, March 8, 2005. The number to access the conference call replay is 719-457-0820; passcode for the replay is 9640052. The conference call will also be simulcast live on the Internet and can be accessed by going directly to the Chesapeake website at http://www.chkenergy.com/and selecting "Conference Calls" under the "Investor Relations" section. The webcast of the conference call will be available on our website indefinitely. About the Company Chesapeake Energy Corporation is the sixth largest independent producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States. The company's Internet address is http://www.chkenergy.com/ * * * As reported in the Troubled Company Reporter on Dec. 3, 2004, Moody's assigned a Ba3 rating to Chesapeake Energy's $600 million of 10-year senior unsecured notes, affirmed its Ba3 senior unsecured note, Ba3 senior implied, and SGL-2 liquidity ratings, and moved the outlook to positive from stable. CIRTRAN CORP: Completes Compromise Settlement with IRS ------------------------------------------------------ CirTran Corporation (OTCBB:CIRT) has completed a compromise settlement with the Internal Revenue Service, taking what it called "a major step forward" in restructuring its balance sheet. Iehab J. Hawatmeh, founder, president and CEO of CirTran, an international full-service contract manufacturer of IT, consumer and consumer electronics products, said the agreed-to $500,000 was sent to the IRS "on-schedule and in accordance" with a settlement reached late last year. "CirTran has now satisfied all of its outstanding federal tax liabilities, thus taking a major step forward in restructuring our balance sheet," he said. The IRS said it was owed $2.3 million by CirTran as of Sept. 30, 2004, when the company began the appeals process. In November 2004, it notified CirTran that its offer in compromise had been accepted. Concurrent with announcing its settlement with the IRS in November, CirTran also said it had reached agreement with Utah State Tax Commission, allowing it to pay its liability in equal monthly installments through December 2005. Mr. Hawatmeh said CirTran is "on-schedule " with these payments as well. "The difficult times endured by the IT industry worldwide took their toll on CirTran as well," said Mr. Hawatmeh. "Now we see light at the end of the tunnel, and believe that all these problems will soon be behind us. CirTran had a strong second half of fiscal 2004 and are about the progress made in the early days of 2005." About the Company CirTran Corporation (OTCBB:CIRT) -- http://www.cirtran.com/-- is a premier international full-service contract manufacturer of low to mid size volume contracts for printed circuit board assemblies, cables and harnesses to the most exacting specifications. Headquartered in Salt Lake City, CirTran's modern 40,000-square foot manufacturing facility is the largest in the Intermountain Region, providing "just-in-time" inventory management techniques designed to minimize an OEM's investment in component inventories, personnel and related facilities, while reducing costs and ensuring speedy time-to-market. About CirTran-Asia CirTran-Asia -- http://www.CirTran-Asia.com/-- was formed in 2004 as a high-volume manufacturing arm and wholly-owned subsidiary of CirTran Corporation with its principal office in ShenZhen, China. CirTran-Asia operates in three primary business segments: high- volume electronics, fitness equipment and household products manufacturing, focusing on being a leading manufacturer for the multi-billion dollar Direct Response Industry, which sells through infomercials, print and Internet advertisements. * * * As reported in the Troubled Company Reporter on Jan. 5, 2005, Cirtran Corporation sustained losses of $1,497,673 and $2,910,978 for the nine months ended Sept. 30, 2004, and the year ended Dec. 31, 2003, respectively. As of Sept. 30, 2004, and Dec. 31, 2003, the Company had an accumulated deficit of $19,638,953 and $18,141,280, respectively, and a total stockholders' deficit of $3,684,023 and $4,915,251, respectively. In addition, the Company used, rather than provided, cash in its operations in the amounts of $1,075,957 and $1,123,818 for the nine months ended September 30, 2004, and the year ended Dec. 31, 2003, respectively. These conditions raise substantial doubt about the Company's ability to continue as a going concern. In addition, the Company is a defendant in numerous legal actions. These matters may have a material impact on the Company's financial position, although no assurance can be given regarding the effect of these matters in the future. CORNELL COS: Names Dr. Isabella Cunningham to Board --------------------------------------------------- Cornell Companies, Inc. (NYSE: CRN) has appointed Isabella C. M. Cunningham, Ph.D., to the Company's Board of Directors. Dr. Cunningham began her service on the board on Jan. 26, 2005. In addition, Director Marcus A. Watts has informed the Company that he will not stand for reelection to the Company's Board of Directors. Dr. Cunningham is a private consultant and has held a variety of positions in communications, marketing, law and business education in the United States and internationally. Since 1983, she has been the Ernest A. Sharpe Professor in Communication at The University of Texas at Austin. Prior to that time, Dr. Cunningham developed the first Criminal Justice Program at St. Edward's University. At that time, Dr. Cunningham worked closely with the Texas Commission on Law Enforcement Officer Standards and Education and its Director, Mr. Fred Toler, to develop academic standards for promotion and advancement of officers, and a graduate program in the Criminal Justice area. She taught several courses in that program and worked to develop specific training for peace officers. She has been published extensively in the area of business, marketing and communications. She holds a Ph.D. and a Master's Degree in Business Administration and Marketing from Michigan State University, a Master's Degree in Business Administration from Escola de Administracao de Empresas de Sao Paulo, and a Doctor of Jurisprudence Degree from Faculdade da Direito da Universidade Catolica de Sao Paulo, Brazil. Dr. Cunningham is a director of XILIX Corp. and Dupont Photomasks, Inc. Anthony R. Chase, lead director of the board of directors and chairman of the Nominating Committee, said, "We welcome Isabella to the Board. She brings with her years of experience in corporate and community service, including specific experience in the criminal justice field. We are delighted to have Isabella join us and assist with our workload. Her wealth of experience, including her marketing expertise, will benefit Cornell and we look forward to her valuable contributions in the future." Regarding Mr. Watts' decision, his term of service will end as of the Company's next annual meeting of stockholders. In connection with this decision, Mr. Watts said, "I have enjoyed my time on the board and am pleased to have been able to serve with such a distinguished group of directors." "The Company was very lucky to have had Marc on the Board. His contribution over the past four years has been invaluable. We understand his decision to not stand for reelection and wish him the best," stated Mr. Chase. About the Company Cornell Companies, Inc. is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. Cornell -- http://www.cornellcompanies.com/-- has 67 facilities in 16 states and the District of Columbia and 5 facilities under development or construction, including a facility in one additional state. Cornell has a total service capacity of 18,390, including capacity for 2,138 individuals that will be available upon completion of facilities under development or construction. * * * Moody's Rating Services and Standard & Poor's assigned their single-B ratings to Cornell Companies' 10-3/4% Senior Notes last year. COTT CORPORATION: Appoints Andrew Prozes to Board of Directors -------------------------------------------------------------- Cott Corporation (NYSE:COT; TSX:BCB) reported the appointment of Andrew Prozes, CEO of LexisNexis Group, to the Company's Board of Directors effective immediately. Cott's Board of Directors took the action at its regular meeting on January 27, 2005. A Canadian citizen, Mr. Prozes heads up the LexisNexis Group. LexisNexis is a leader in global legal, news and business information. A member of Reed Elsevier Group plc, LexisNexis does business in over 100 countries with approximately 14,000 employees worldwide. In addition to its flagship Web-based Lexis(R) and Nexis(R) research services, the company includes some of the world's most respected legal publishers such as Martindale-Hubbell, Matthew Bender, Butterworths, JurisClasseur, and Quicklaw. Mr. Prozes serves on the Board of Directors of Reed Elsevier. He has also held senior executive positions with Thomson Corporation and Southam Inc. "We're thrilled to welcome Andy to our Board," commented Frank Weise, chairman of Cott Corporation. "His global perspective and executive level experience with successful companies in both Canada and the U.S. will be great assets to the Board of Directors as Cott continues to expand its reach while working to improve profit performance." Mr. Prozes graduated from the first co-op mathematics class at the University of Waterloo with a degree in Computer Science. He holds an MBA from York University. Mr. Prozes graduated from the Harvard Executive Management program in Strategic Marketing. "I'm honoured to be joining Cott's Board of Directors at this time," added Mr. Prozes. "In addition to the talent and experience that my fellow directors bring to the Company, John Sheppard and his management team have a clear plan for the Company's future and I'm pleased to be a part of it." Cott Corporation is the world's largest retailer brand soft drink supplier, with the leading take home carbonated soft drink market shares in this segment in its core markets of the United States, Canada and the United Kingdom. * * * As reported in the Troubled Company Reporter on Sept. 2, 2004, Standard & Poor's Rating Services revised its outlook for Cott Corp. to positive from stable. At the same time, Standard & Poor's affirmed its 'BB' long-term corporate credit and 'B+' subordinated debt ratings on Toronto, Ontario-based Cott Corp. Total debt outstanding was about US$362 million at July 3, 2004. As reported in the Troubled Company Reporter on Aug. 23, 2004, Moody's Investors Service upgraded the ratings for Cott Corporation recognizing the company's strong and consistent financial and operating performance throughout the recent past and affirming Moody's expectation of continued success over the ratings horizon. CP SHIPS: Expects $70 to $73 Million Net Income for 2004 -------------------------------------------------------- CP Ships Ltd. is in the process of finalizing its 2004 fourth quarter and annual results and plans to report these fully on February 10, 2005. Based on preliminary estimates, CP Ships expects its 2004 full year net income to be in the $70 to $73 million range, before unusual charges of $5 million. The unusual charges are for legal and other costs of the Board's Special Committee review of the August 2004 restatement and for costs of the departure of the former CEO in December 2004. In reporting third quarter results on 15th November 2004, CP Ships expected 2004 net income to be similar to 2003's $82 million before restatement. "Fourth quarter operating income before unusual charges will likely be our best quarter ever, albeit a little down on previous guidance," said Chairman Ray Miles. "So long as current industry and market conditions continue, we maintain our outlook that 2005 earnings will substantially exceed 2004." Management will host a conference call and webcast presentation with the investment community at 11:00 EST, 4:00 pm UK time on February 10. The webcast will be accessible on the CP Ships website -- http://www.cpships.com/-- where it will also be available in archive. One of the world's leading container shipping companies, CP Ships provides international container transportation services in four key regional markets: TransAtlantic, Australasia, Latin America and Asia. Within these markets CP Ships operates 39 services in 23 trade lanes, most of which are served by two or more of its brands: ANZDL, Canada Maritime, Cast, Contship Containerlines, Italia Line, Lykes Lines and TMM Lines. As of Sept. 30, 2004, CP Ships' vessel fleet was 81 ships and its container fleet 457,000 teu. Its 2003 volume was 2.2 million teu, more than 80% of which was North American exports or imports. It also owns Montreal Gateway Terminals, which operates one of the largest marine container terminal facilities in Canada. CP Ships' stock is traded on the Toronto and New York stock exchanges under the symbol TEU. It is listed in the S&P/TSX 60 Index of top Canadian publicly listed companies. * * * As reported in the Troubled Company Reporter on Feb. 24, 2004, Standard & Poor's Ratings Services assigned its 'BB+' rating to container shipping company CP Ships Ltd.'s US$175 million convertible senior subordinated note issue. At the same time, the 'BBB-' long-term corporate credit and 'BB+' senior unsecured debt ratings on the company were affirmed. Proceeds from the notes will be used to reduce drawings under the company's credit lines. The outlook is stable. CRANSTON, R.I.: Moody's Lifts Rating on General Obligation Bonds ---------------------------------------------------------------- Moody's Investors Service has upgraded to Baa3 with a positive outlook from Ba1 with a negative outlook the underlying rating for the City of Cranston's (Rhode Island) outstanding general obligation bonds. The upgrade affects approximately $66.4 million in previously issued parity debt. The upgrade to Baa3 reflects the elimination of the city's accumulated operating deficits and augmentation of its cash position, driven by a new administration and management team's well-developed and timely implementation of a fiscal recovery plan and strengthened fiscal oversight, as well as the city's full funding of fiscal 2004's required pension contribution. The positive outlook reflects management's projections for surplus operations in fiscal 2005 and ongoing structural balance between recurring revenues and expenditures throughout the medium term, as well as management's commitment to reduce the city's large, unfunded pension obligation. The Baa3 rating also reflects the city's sizable, primarily residential tax base characterized by an average socioeconomic profile, and a low debt burden. Implementation Of Recovery Plan, Including Accelerated Funding Of Deficit Through Tax Revenue Increases, Reverses Deteriorated Financial Position; Challenges Still Exist Moody's expects that Cranston's financial position will continue to benefit from the implementation of a comprehensive fiscal recovery plan drafted by the new administration and management team in 2003 along with active involvement of the State Auditor General. The City's finances had severely deteriorated in recent years, driven by weak fiscal oversight and poor budgetary projections that led to accumulated operating deficits in the General and School Department Funds and a large, unfunded pension obligation. After a new management team implemented a recovery plan, that included a substantial statutorily authorized supplemental tax increase of $11.6 million, conservative budget assumptions, and prudent expenditure control efforts, Cranston achieved a positive General Fund balance position in fiscal 2003 (equivalent to a narrow 3.5% of General Fund revenues). Since that time, the City increased General Fund reserves to $16.1 million (a satisfactory 9.1% of revenues) in fiscal 2004, with the supplemental tax incorporated into the baseline tax rate as well a further tax rate increase. Importantly, management expects to end fiscal 2005 with surplus operations, given a budget based on conservative assumptions including the funding of a $1 million required reserve. The City's ability to effectuate its expectations for fiscal 2005 and to maintain structurally balanced operations, at a minimum, throughout the medium term will be an important consideration in future rating decisions. In addition to strengthening its General Fund position in fiscal 2004, the city also improved operations in its School Department Fund. The School Department Fund recorded a fiscal 2003 accumulated deficit of $3.9 million (3.8% of annual revenues), due to a $1.35 million structural operating imbalance and a one-time cost associated with a $2.3 million hospitalization fund deficit (now collapsed into the School Department Fund). In fiscal 2004, a $3.9 million one-time transfer from the General Fund eliminated the accumulated deficit. Additionally, improved budgeting and expenditure controls contributed to structurally surplus operations in fiscal 2004, with the School Department reserves ending the year at $1.6 million (a narrow 1.3% of annual revenues). In fiscal 2004, the City resumed funding the police and fire pensions above the actuarially determined amount ($23.9 million contributed, $21.9 million annual required contribution). However, the pensions remain severely underfunded, leaving Cranston with a substantial $215 million unfunded liability, and an 11% funded ratio. Going forward, management plans to make annual contributions in an amount of at least $6 million above the current year's pension costs. Following this formula, management estimates that the City's police and fire pension plan will be 50% funded by 2017 and 100% funded by 2026. Moody's believes that the retirement system is a key component of the City's overall credit quality, and continued reduction of the unfunded pension liability will be an integral part of our future rating decisions. Stable Residential City Characterized By Average Wealth Levels Moody's expects the City's sizable $5.46 billion tax base to continue to exhibit moderate growth in the medium term, given its favorable location, status as the third most populous city in Rhode Island, and ongoing residential development. Cranston is a stable, largely residential city (70% of assessed value) that borders Providence (rated Baa1, with a positive outlook) and is tied closely to the metro area economy. A recent revaluation, effective fiscal 2004, has boosted assessed valuation by 71.7%, capturing the significant market value appreciation throughout the community. Officials anticipate future moderate growth, given ongoing and planned development throughout the community. Resident wealth levels remain on par with state medians, and the full value per capita of $68,846 is just below the state median. Debt Position Expected To Remain Manageable Moody's believes that Cranston's 1.4% overall debt position will remain manageable given an aggressive amortization of principal (64.1% in 10 years), and no other significant borrowing plans. Although the city maintains large debt authorizations beyond the current issue, management has no immediate bonding plans. Within the next one to two years, however, the City may issue short-term notes for various capital projects. Outlook The positive outlook reflects Moody's belief that, given the implementation of the city's fiscal recovery plan, conservative budgeting, a higher tax rate built into the tax structure, and expected reduction of the unfunded pension liability, the City's financial profile will continue to improve. What could change the rating - UP: * Continued augmentation of reserve levels. * Reduction of the city's unfunded pension obligation. * Continued conservative approach to budgeting. What could change the rating - DOWN: * Deterioration of reserves or liquidity among the city's major operating funds. * Inability to maintain recently improved fiscal oversight and budgeting. Significant use of non-recurring solutions, including use of pension assets, to balance budget. Key Statistics: -- Parity debt: $66.4 million -- 2000 Population: 79,269 -- 2004 Full value: $5.46 billion -- Full value per capita: $68,846 -- Median family income: 104.7% of state -- Per capita income: 101.3% of state -- Overall debt burden: 1.4% -- Payout of principal (10 years): 64.1% -- FY04 General Fund balance: $16.1 million (9.1% of revenues) -- FY04 School Department Fund balance: $1.1 million (1.3% of revenues) CWMBS INC: Fitch Puts Low-B Ratings on Two 2005-5 Mortgage Certs. ----------------------------------------------------------------- Fitch rates CWMBS, Inc.'s mortgage pass-through certificates, Countrywide Home Loans, Inc. - CHL -- mortgage pass-through trust 2005-5: -- $387.0 million classes A-1 through A-8, PO, and A-R certificates (senior certificates) 'AAA'; -- $7.0 million class M certificates 'AA'; -- $2.4 million class B-1 certificates 'A'; -- $1.4 million class B-2 certificates 'BBB'; -- $800,000 class B-3 certificates 'BB'; -- $600,000 class B-4 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 3.25% subordination provided by: * the 1.75% class M, * the 0.60% class B-1, * the 0.35% class B-2, * the 0.20% privately offered class B-3, * the 0.15% privately offered class B-4, and * the 0.20% privately offered class B-5 (not rated by Fitch). Classes rated based on their respective subordination: * M 'AA', * B-1 'A', * B-2 'BBB', * B-3 'BB', and * B-4 'B'. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults, as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP (Countrywide Servicing), rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of CHL. The certificates represent an ownership interest in a group of 30-year conventional, fully amortizing mortgage loans. The pool consists of 30-year fixed-rate mortgage loans totaling $367,145,098, as of the cut-off date, Jan. 1, 2005, secured by first liens on one- to four- family residential properties. The mortgage pool, as of the cut-off date, demonstrates an approximate weighted-average loan-to-value ratio - OLTV -- of 72.60%. The weighted average FICO credit score is approximately 743. Cash-out refinance loans represent 18.12% of the mortgage pool and second homes 5.27%. The average loan balance is $524,493. The three states that represent the largest portion of mortgage loans are: * California (48.27%), * New York (8.32%), and * New Jersey (4.25%). Subsequent to the cut-off date, additional loans were purchased prior to the closing date, Jan. 28, 2005. The aggregate stated principal balance of the mortgage loans transferred to the trust fund on the closing date is $399,999,597. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Approximately 92.75% and 7.25% of the mortgage loans were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios, and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. DELTA AIR: Completes Flight Reductions at DFW Int'l. Airport ------------------------------------------------------------ Delta Air Lines completed its planned reduction of daily flights at DFW International Airport, and in the process has cleared 24 gates in DFW's Terminal E. In September, Delta Air Lines said it would drop DFW as one of its major hubs and greatly reduce its flight operations in North Texas. Nevertheless, Terminal E is open for business and the empty gates represent an unprecedented chance at growth for another carrier. On this last day of Delta hub service at DFW, Airport Ambassadors and volunteers hosted a small reception for Delta employees as a way to thank them for their years of dedication to the airline and the Airport. The volunteers gave away cookies and ribbons, and HMS Host provided Starbucks Coffee for the event. In addition, DFW posted a special e-message of thanks to Delta and its employees on the Airport's web site, http://www.dfwairport.com/ On Feb. 1, DFW will regain control of 24 gates in Terminal E and the Airport is currently in negotiations with multiple carriers for use of those gates. In early January, DFW offered the gates in a package deal to any domestic airline interested in leasing at least ten of them, as part of an unprecedented stimulus plan. The offer included free rent in Terminal E for one year and up to $22-million in other incentives. "Rest assured, we are doing everything we can to attract new or increased service to DFW," said Jeff Fegan, CEO of DFW International Airport. "This temporary setback represents a unique and very attractive opportunity for any carrier to gain a considerable stronghold in the competitive North Texas air travel market." The impact of Delta's reduction of service at DFW Airport is already having a profound impact on DFW International Airport and the North Texas economy. DFW alone will lose $50-million in annual revenues. Delta's restructuring also means the North Texas economy as a whole will lose 7000 jobs and more than three-quarters of a billion dollars annually as a ripple effect, according to a recent study commissioned by the Airport. "We're working to maintain our strong business relationships with companies impacted negatively by Delta's reductions," said Kevin Cox, Chief Operating Officer of DFW International Airport. "We will also pass measures to relieve concessionaires of many of their minimum requirements to do business in Terminal E while we search for another air carrier or carriers to step in." The DFW International Airport Board later this week is expected to approve an aid measure for concessionaires, relieving them of normal rent payments until additional air service returns to Terminal E. Last month, the Board set aside minimum commission requirements from sales for concessionaires affected by Delta's flight reductions. "DFW has demonstrated time and again that it is committed to seeing my business interests are protected," said Jethro Pugh, owner of one of the concession businesses in Terminal E. "We saw it in the period of time after 9/11, and we're seeing it now. The Airport's leadership in times of difficulty is what sets it apart." Formerly the second-largest carrier at DFW and one of the original carriers from the Airport's opening in 1974, Delta will now occupy four gates in DFW's Terminal E. Continental Airlines and Northwest Airlines will each occupy three gates, while AeroMexico and Champion Air will also continue to utilize gates in Terminal E. About the Company Delta Air Lines -- http://delta.com/-- is the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 493 destinations in 87 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam, Northwest Airlines, Continental Airlines and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. At Dec. 31, 2004, Delta Air's balance sheet showed a $5.8 billion stockholders' deficit, compared to a $659 million deficit at Dec. 31, 2003. DI GIORGIO: Tender Offer Termination Cues S&P to Affirm B Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Di Giorgio Corp., including the 'B' corporate credit rating, following the company's announcement that it has terminated its previously announced offer to purchase its outstanding 10% senior notes due 2007 and that it has withdrawn its previously announced planned private offering of senior notes due 2013. (Standard & Poor's withdrew its 'B' rating on that planned offering.) The outlook remains stable. Di Giorgio's credit measures are in line with current ratings. The company has adequate liquidity and does not face a sizable debt maturity until 2007, when its bank facility and 10% senior notes mature. "The ratings reflect the company's heavy debt burden, its participation in the highly competitive food wholesale and distribution industry, and the expectation that credit measures will remain consistent with current ratings for the next several years," said Standard & Poor's credit analyst Stella Kapur. Although Carteret, New Jersey-based Di Giorgio has a somewhat protected niche market position in the New York metropolitan area, its customer base is concentrated. Excluding The Great Atlantic & Pacific Tea Co., Inc., -- A&P, which the company lost as a customer in October 2003, Di Giorgio's five largest customers accounted for 42% of last-12-month net sales as of Sept. 25, 2004. This customer concentration, combined with heavy dependence on a single market, exposes the company to potential revenue losses if a key customer leaves or if there is an economic downturn in the region. DUKE FUNDING: S&P Places Ratings on CreditWatch Negative -------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class B, C-1, C-2, and D notes issued by Duke Funding II Ltd., a CDO backed by ABS and other structured securities, on CreditWatch with negative implications. Concurrently, the ratings on the class A-1 and A-2 notes are affirmed based on the level of credit enhancement available. The transaction is managed by Duke Funding Management LLC. The CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the notes since the transaction was originated in October 2001. These factors primarily include a reduction in the level of overcollateralization available to support the notes and a decrease in the credit quality of the assets in the collateral pool. The overcollateralization ratios have shown some deterioration since the transaction was initially rated. According to the most recently available trustee report (Dec. 15, 2004), the class A/B overcollateralization ratio still remains in compliance, with a ratio of 107.90%, versus the minimum required 105.89%; however, this ratio has migrated from an initial value of 110.09%. The class C overcollateralization ratio is also in compliance, with a ratio of 103.54%, versus the minimum required 101.53%; however, this ratio has migrated from an initial value of 104.72%. Finally, the class D overcollateralization ratio is currently at 102.10% (above its minimum required ratio of 100.1%), but down from 103.28% at close. Standard & Poor's also noted that the calculation of the overcollateralization ratios include a $2.02 million haircut in the numerator of the ratio. Standard & Poor's will be reviewing the results of current cash flow runs to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios while still paying all of the rated interest and principal due on the notes. The results of these cash flow runs will be compared to the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the amount of credit enhancement available. Ratings Placed On CreditWatch Negative Duke Funding II Ltd. Rating Current Original Class To From Bal. ($ mil.) Bal.($ mil.) ----- -- ---- ------------- ------------ B AA-/Watch Neg AA- 40.000 40.000 C-1 BBB/Watch Neg BBB 4.933 6.000 C-2 BBB/Watch Neg BBB 6.578 8.000 D BB/Watch Neg BB 4.000 4.000 Ratings Affirmed Duke Funding II Ltd. Class Rating Balance ($ mil.) ----- ------ ---------------- A-1 AAA 200.00 A-2 AAA 33.00 Transaction Information: Issuer: Duke Funding II Ltd. Co-issuer: Duke Funding II Inc. Current manager: Duke Funding Management LLC Underwriter: Credit Suisse First Boston Trustee: JPMorganChase Bank Transaction type: CDO of ABS DYCOAL INC: Sells Komar Briquetter Machine to Startec in 363 Sale ----------------------------------------------------------------- Startec, Inc. (Pink Sheets: STIN) closes the sale of its primary physical asset in the form of a coal briquetter machine known as a Komar (Startec Roll) Briquetter S/N 3307, including all accessory equipment required for operation. Ownership of the machine was held by I Briquetter, Ltd., a Nevada entity, wholly owned by Startec, Inc., and Startec Development, LLC, another subsidiary of Startec, Inc. The sale to a Delaware limited liability company known as I Synfuels, LLC, was completed on January 25, 2005. The terms of the sale provide for an initial payment of $1.6 million and the possibility of future deferred income from the machine if specified conditions are satisfied. The bulk of the initial money received from the asset sale was paid directly to Startec, Inc.'s secured creditors, in partial satisfaction of Startec obligations, and to Dycoal Inc., as provided below. The cash paid to Startec from this initial payment in the approximate sum of $121,000 is being used to satisfy Startec's obligations to other creditors, which will remain substantial, even after this payment. By Order of the United States Bankruptcy Court for the Western District of Pennsylvania in the Dycoal Inc. case, one-half any income from the asset sold is to be divided evenly between the Seller and Dycoal, Inc., debtor in the bankruptcy case. Startec's portion of the remaining income will be divided equally between Startec's subsidiary, as Seller, and its secured creditors, Komar Industries, Inc./KI Development, Ltd., until such time as obligations totaling in excess of $6,000,000.00 have been paid to those creditors. Startec presently also owes significant sums to creditors other than those secured creditors. If the machine performs as expected during an initial period, and if an agreement is reached by the Buyer and other parties concerning certain legal and tax questions that must be resolved in order to qualify the machine under the terms of the contract of sale, the venture should produce an income stream for I Briquetter, Ltd., beginning, possibly, in the third quarter of 2005 and continuing through the end of 2007. Any income is subject to the interests of Dycoal and Startec's secured creditors described above. The exact amount of any income that might be payable to Startec cannot be calculated because of many variables with respect to the amount of coal processed, the BTU content of the coal, the price of oil on the open market and other factors, all of which are beyond the control of I Briquetter or Startec. Any revenue stream generated from the machine will terminate no later than the end of 2007. Dycoal, Inc., filed for chapter 11 protection on June 16, 1999 (Bankr. W.D. Pa. Case No. 99-24594) (McCullough, J.). Michael Kaminski, Esq., at DKW Law Group in Pittsburgh, represents Dycoal in its restructuring. EXCALIBUR INDUSTRIES: May Swap Debt for Equity to Reduce Debt ------------------------------------------------------------- As of January 21, 2005, due to Excalibur Industries' discontinuing the Tulsa-based companies and the amount of debt that its continuing operations have to service, management does not believe that the Company will be able to fund its operations, working capital requirements and debt service requirements for at least the next twelve months through cash flows generated from operations. Since it has no additional borrowings available under its existing line of credit, the Company will need to continue to finance its operations through other capital financings. It has sought, and continues to seek, equity financing and debt financing in the form of a revised credit facility, private placement, or a public offering to provide additional capital. However, the additional financing has not been available to Excalibur, and it may continue to be unavailable to it, when and if needed, on acceptable terms or at all. Debt for Equity In addition to the Company discontinuing the Tulsa-based companies and the bank liquidation, it is continuing to seek other restructuring measures to reduce its debt load, including the possibility of converting some of its outstanding indebtedness, accrued expenses, and accounts payable into its equity. To date, Excalibur Industries has received no commitments from any of its creditors that they would agree to any such conversions or settlements. The Company may incur additional losses if the weak conditions in the United States manufacturing sector or the energy field services market continue, or if they deteriorate further. Such losses could require the Company to renegotiate its affirmative covenants with its lender, including the liquidity ratio and debt service ratios. The ability to comply with these covenants in the future will depend on whether the Company can obtain additional capital financing and increase its cash flows from operations. Excalibur Industries intends to adopt a formal plan of reorganization that it anticipates will include a restructuring of its bank debt, seller notes, and stockholder debt so that its remaining operating entity, Shumate Machine Works, can support the ongoing debt service that remains after the proposed restructuring. Additionally, management anticipates substantial reduced overhead costs from the closed Tulsa-based companies and further reductions in the holding company expenses. Further, management anticipates that, due in part to increasing energy prices, demand for its energy related field service products will increase in the coming fiscal year. The proposed reorganization, debt restructuring, operating expense reductions, and the Company's intent to capitalize on anticipated increase in demand are the steps that management is taking to try to return to profitability. However, there can be no assurances that these steps will be completed or that Excalibur will ever return to profitability. Management intends to retain any future earnings to retire debt, finance the expansion of business and any necessary capital expenditures, and for general corporate purposes. All its bank debt contains restrictions as to the payment of dividends. Excalibur Industries, Inc., is a contract machining and manufacturing company focused in the energy field services market. On September 30, 2003, Excalibur Industries discontinued the operations of its wholly owned subsidiaries, Excalibur Services, Inc. and Excalibur Steel, Inc., and it also discontinued the manufacturing operations of its wholly owned subsidiary Excalibur Aerospace, Inc. On December 9, 2003, Stillwater National Bank and Trust conducted a UCC-1 sale of the equipment, inventory and other assets of the Tulsa Operations in Tulsa, Oklahoma via an auctioneer hired by the bank. The net proceeds of this auction, in the approximate amount of $690,000, were delivered directly to Stillwater National Bank to pay for the costs of the auction of about $60,000, and applied the remaining approximately $630,000 to the outstanding debt of the Excalibur credit facility. On December 31, 2003, Excalibur Steel, Excalibur Services, and Excalibur Aerospace each filed a voluntary petition for protection under Chapter 7 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, Southern District of Texas. The three subsidiaries identified an aggregate amount of $6,837,000 in liabilities on its debtor schedules in the bankruptcy proceedings. EXTENDICARE INC: Acquires Assisted Living Concepts for $129.5MM --------------------------------------------------------------- Extendicare, Inc., (TSX:EXE.MV)(TSX:EXE.SV)(NYSE:EXE), and its wholly owned U.S. subsidiary, Extendicare Health Services, Inc. -- EHSI, it has closed the acquisition of Assisted Living Concepts, Inc., -- ALC (OTC. BB: ASLC). The transaction was approved at an ALC shareholders meeting held on Jan. 31, 2005. EHSI entered into a definitive merger and acquisition agreement with ALC to acquire all of the outstanding shares and stock options of ALC for US$18.50 per share totalling approximately US$129.5 million. Total consideration for the transaction, including assumption of debt, is approximately US$278 million. ALC has a portfolio of 177 assisted living facilities, comprised of 122 owned properties and 55 leased facilities representing 6,838 units, located in 14 states; many in markets where Extendicare already operates. The portfolio is relatively new having been constructed through the mid-to-late 1990's. EHSI has financed this transaction through: * US$25 million cash on hand, * a US$55 million loan from Extendicare, Inc., * drawing US$60 million from its revolving line of credit, and EHSI assumed ALC's existing debt of US$138 million. ALC's debt will be non-recourse to EHSI, and it will be excluded from EHSI's existing financial covenants under EHSI's credit facility. With this acquisition, Extendicare, through its subsidiaries, now operates 440 long-term care and assisted living facilities across North America, with capacity for over 34,400 residents. As well, through its operations in the United States, Extendicare offers medical specialty services such as subacute care and rehabilitative therapy services, while home health care services are provided in Canada. The Company employs 38,500 people in North America. * * * As reported in the Troubled Company Reporter on April 14, 2004, Standard & Poor's Ratings Services assigned its 'BB-' bank loan rating to nursing home company Extendicare Health Services Inc.'s (EHSI) new senior secured credit facility due June 2009. A recovery rating of '1' also was assigned to the facility, indicating the expectation for a full recovery of principal in the event of a default. At the same time, Standard & Poor's assigned its 'B-' rating to the company's $125 million of new senior subordinated notes due 2014. Proceeds of the notes will be used, along with cash and a modest draw on the new revolver, to repay existing senior subordinated notes. The outstanding ratings on the company and its parent, Extendicare, Inc., including the 'B+' corporate credit rating, were affirmed. The outlook was revised to positive from stable. EYE CARE: Extends Senior & Sub. Debt Tender Offer Until Feb. 16 --------------------------------------------------------------- Eye Care Centers of America, Inc. is extending its offer to purchase for cash all of its: -- $100 million aggregate principal amount of 9-1/8% Senior Subordinated Notes due 2008; and -- $30 million aggregate principal amount of Floating Interest Rate Subordinated Term Securities due 2008. The tender offer, which was to have expired at 12:00 Midnight, New York City time, on Jan. 31, 2005, will be extended to 12:00 Midnight, New York City time, on Feb. 16, 2005, unless further extended or earlier terminated by ECCA. The depositary, Global Bondholder Services Corporation, has advised ECCA that: -- $91,935,000 aggregate principal amount of the Fixed Rate Notes, representing approximately 92% of the Fixed Rate Notes outstanding, and -- $30,000,000 aggregate principal amount of the Floating Rate Notes, representing 100% of the Floating Rate Notes outstanding, had been validly tendered and not withdrawn as of 5:00 p.m., New York City time, on Jan. 31, 2005. ECCA accepted all consents validly tendered prior to 5:00 p.m., New York City time, on Jan. 14, 2005, and the supplemental indenture, which eliminates substantially all of the restrictive covenants and certain events of default contained in the indenture governing the Notes, has been executed and will become effective upon acceptance for payment of the Notes. Notes tendered and consents delivered prior to 5:00 p.m., New York City time, on Jan. 14, 2005, may no longer be withdrawn or revoked. The terms of the extended offers remain unchanged from the original offers as set forth in the offering materials. The total consideration paid to holders that tendered their Notes and delivered their consents prior to 5:00 p.m., New York City time, on Jan. 14, 2005, was equal to $1,032.92 per $1,000 principal amount of the Fixed Rate Notes and $1,002.50 per $1,000 principal amount of the Floating Rate Notes, each of which included a consent payment of $2.50 per $1,000 principal amount of the Notes. Holders that tender their Notes after 5:00 p.m., New York City time, on Jan. 14, 2005, and prior to the expiration of the tender offer will receive $1,030.42 per $1,000 principal amount of the Fixed Rate Notes and $1,000.00 per $1,000 principal amount of the Floating Rate Notes. Also, in all cases, ECCA will pay accrued and unpaid interest on the Notes up to, but not including, the date of payment. The tender offer is being extended in order to satisfy, and remains subject to, various conditions including the completion of the acquisition of ECCA by Moulin International Holdings Limited and Golden Gate Capital and the related financing transactions. ECCA currently intends, but is not committed, to redeem all Notes not tendered and accepted for payment shortly after the expiration or termination of the tender offer at the applicable redemption prices set forth in the Notes, plus accrued and unpaid interest to, but not including, the redemption date. Information regarding the pricing, tender and delivery procedures and conditions of the tender offer and consent solicitation is contained in the Offer to Purchase and Consent Solicitation Statement dated Jan. 3, 2005, and related documents. Copies of these documents can be obtained by contacting Global Bondholder Services Corporation, the information agent and depositary, at (866) 294-2200 (toll free) or (212) 430-3774 (collect). J.P. Morgan Securities Inc. is the exclusive dealer manager and solicitation agent for the tender offer and consent solicitation. Additional information concerning the terms and conditions of the tender offer and consent solicitation may be obtained by contacting J.P. Morgan Securities Inc. at (212) 270-7407 (collect). About the Company Eye Care Centers of America, Inc. is the third largest operator of optical retail stores in the United States as measured by revenue. The company currently operates 377 stores in 33 states. The company's brand names include EyeMasters, Binyon's, Visionworks, Hour Eyes, Dr. Bizer's VisionWorld, Dr. Bizer's ValuVision, Doctor's ValuVision, Stein Optical, Vision World, and Eye DRx. Founded in 1984, the company is headquartered in San Antonio, Texas. * * * As reported in the Troubled Company Reporter on Jan. 21, 2005, 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. FALCON PRODUCTS: Taps Stutman Treister as Reorganization Counsel ---------------------------------------------------------------- Falcon Products, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Missouri for authority to retain Stutman, Treister & Glatt Professional Corporation as their reorganization counsel. Stutman Treister will: (a) advise the Debtors regarding matters of bankruptcy law, (b) represent the Debtors in proceedings and hearings (c) advise the Debtors concerning the requirements of the Bankruptcy Code, federal and local rules relating to the administration of these case and the effect of these cases on the operation of the Debtors' business and affairs, (d) prepare all necessary motions applications, orders, and other legal papers, and (e) assist the Debtors in the negotiation, preparation, confirmation, and implementation of a plan or plans of reorganization. Stutman Treister discloses that the Debtors paid the Firm a $400,000 retainer. The current hourly rates of professionals at Stutman Treister: Professional Hourly Rate ------------ ----------- Robert A. Greenfield $695 Jeffrey C. Krause $610 Eve H. Karasik $520 Marina Fineman $380 Andrew M. Parlen $275 Michelle S. Moghadom $170 To the best of the Debtors' knowledge, Stutman Treister is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Saint Louis, Missouri, Falcon Products, Inc. -- http://www.falconproducts.com/-- design, manufacture, and market an extensive line of furniture for the food service, hospitality and lodging, office, healthcare and education segments of the commercial furniture market. The Debtor and its eight debtor- affiliates filed for chapter 11 protection on January 31, 2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP represent the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $264,042,000 in assets and $252,027,000 in debts. FALCON PRODUCTS: Look for Bankruptcy Schedules by Apr. 18 --------------------------------------------------------- Falcon Products, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Missouri for an extension until Apr. 18, 2005, to file their: (a) schedules of assets and liabilities, (b) statement of financial affairs, (c) schedule of current income and expenses, (d) list of executory contracts and unexpired leases, and (e) list of equity security holders. The Debtors also seek the authority of the Court to file their schedules and statements on a consolidated basis. The Debtors operated as a single, integrated enterprise, and detailed financial information is maintained on a consolidated basis. The Debtors explain that due to the size and complexity of their operations, they need more time to gather the necessary information to accurately prepare and file their schedules and statements. Headquartered in Saint Louis, Missouri, Falcon Products, Inc. -- http://www.falconproducts.com/-- design, manufacture, and market an extensive line of furniture for the food service, hospitality and lodging, office, healthcare and education segments of the commercial furniture market. The Debtor and its eight debtor- affiliates filed for chapter 11 protection on January 31, 2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP represent the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $264,042,000 in assets and $252,027,000 in debts. FEDERAL-MOGUL: Champion Pension Trustees Okays FM Ignition Scheme ----------------------------------------------------------------- Ann Hearn and Champion Pensions Limited, in their capacity as Trustees of the Champion Pension Scheme, assert claims against U.K. Debtor Federal-Mogul Ignition (U.K.) Limited, on behalf of the FM Ignition Pension Plan. The Debtors' Third Amended Joint Plan of Reorganization intended that the U.K. Debtors would each propose a Scheme of Arrangement or Company Voluntary Arrangement in the administration proceedings held in the United Kingdom. It is also intended that the Scheme or CVA in relation to FM Ignition should be in terms the same or substantially similar effect as Section 3.7.3 of the Plan. Section 3.7.3(b)(i) of the Plan provides that for the FM Ignition Pension Plan claims to receive "Treatment A" under the Plan, the Trustees must: "(i) . . . vote in favor of acceptance of the Plan for FM Ignition and give irrevocable undertaking at least 5 Business Days before the Confirmation Hearing that they will vote to approve a Scheme of Arrangement and/or Voluntary Arrangement, as appropriate, for FM Ignition in terms to the same or substantially similar effect so far as relevant to FM Ignition as the terms of . . . Section 3.7.3(b)" The Trustees have cast a ballot in favor of the Plan. They want "Treatment A" apply to FM Ignition Pension Plan claims, consistent with Section 3.7.3(b)(i) of the Plan. In their Irrevocable Undertaking dated December 3, 2004, the Trustees swear that they will support and vote to approve the Scheme or CVA, in respect of the FM Ignition Pension Plan; provided it contains terms to the same or substantially similar effect as the terms of Section 3.7.3(b) of the Plan. The Irrevocable Undertaking is conditioned on the Plan's ultimate confirmation by the Bankruptcy Court. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) FLEXTRONICS: Grants Stock Options to New Employees -------------------------------------------------- Flextronics (Nasdaq: FLEX) will grant options to purchase an aggregate of approximately 1.5 million ordinary shares to employees of recently acquired software design companies and other new employees. The options will be granted from the company's 2004 Award Plan for New Employees, will have an exercise price equal to the closing price of Flextronics' ordinary shares on the date of grant, will expire 10 years after the date of grant (or following termination of employment, if earlier), and will become exercisable over four years, with the first 25% becoming exercisable on the first anniversary of the date of grant and the remainder becoming exercisable in equal monthly installments thereafter. About the Company Headquartered in Singapore (Singapore reg no.199002645H), Flextronics -- http://www.flextronics.com/-- is the leading Electronics Manufacturing Services (EMS) provider focused on delivering innovative design and manufacturing services to technology companies. With fiscal year 2004 revenues of USD$14.5 billion, Flextronics is a major global operating company that helps customers design, build, ship, and service electronics products through a network of facilities in 32 countries on five continents. This global presence provides customers with complete design, engineering, and manufacturing resources that are vertically integrated with component capabilities to optimize their operations by lowering their costs and reducing their time to market. * * * As reported in the Troubled Company Reporter on Nov. 16, 2004, Moody's Investors Service assigned a Ba2 rating to Flextronics International Ltd.'s new $500 million 6.25% senior subordinated notes, due 2014. At the same time, the company was assigned a liquidity rating of SGL-1, reflecting Flextronics' significant on-hand liquidity, unfettered access to the sizeable $1.1 billion revolver and the expectation for generating moderately positive free cash flow (pre-Nortel payments) over the next twelve months. The affirmation of the existing ratings and stable outlook incorporates the company's fairly conservative capital structure as well as its sustained ability to produce meaningful sales growth and slow, steady margin expansion. The ratings further balance the execution risk presented by the Nortel acquisition and the company's ability to produce adequate capital returns on each of the emerging ODM and software initiatives. The ratings outlook is stable. Net proceeds from the notes offering will be utilized to repay existing borrowings under the revolving credit facility, with excess of approximately $145 million set aside in support of general corporate purposes. FOSTER WHEELER: Sets Annual Shareholders' Meeting For May 10 ------------------------------------------------------------ Foster Wheeler Ltd. (OTCBB: FWHLF) said it expects to hold its 2005 Annual General Meeting of Shareholders on Tuesday, May 10, 2005, at 9:00 a.m. (EDT) at the company's offices located at Perryville Corporate Park, Clinton, New Jersey. Any shareholder proposals, including any regarding the nomination of persons for election to the board of directors, should be submitted in writing to the attention of: The Corporate Secretary Foster Wheeler Ltd. Perryville Corporate Park Clinton, New Jersey 08809-4000 no later than March 7, 2005. A Notice of Meeting and Proxy Statement will be mailed to the company's shareholders prior to the meeting. About the Company Foster Wheeler Ltd. is a global company offering, through its subsidiaries, a broad range of design, engineering, construction, manufacturing, project development and management, research and plant operation services. Foster Wheeler serves the refining, oil and gas, petrochemical, chemicals, power, pharmaceuticals, biotechnology and healthcare industries. The corporation is based in Hamilton, Bermuda, and its operational headquarters are in Clinton, New Jersey, USA. At Sept. 24, 2004, Foster Wheeler's balance sheet showed a $441,238,000 stockholders' deficit, compared to an $872,440,000 deficit at Dec. 26, 2003. GE COMMERCIAL: S&P Places Low-B Ratings on Six Certificate Classes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to GE Commercial Mortgage Corp.'s $1.707 billion commercial mortgage pass-through certificates series 2005-C1. The preliminary ratings are based on information as of Jan. 31, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: (1) the credit support provided by the subordinate classes of certificates, (2) the liquidity provided by the fiscal agent, (3) the economics of the underlying loans, and (4) the geographic and property type diversity of the loans. Classes A-1, A-2, A-3, A-AB, A-4, A-5, A-1A, A-J, B, C, D, and X-2 are currently being offered publicly. The remaining classes will be offered privately. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.46x, a beginning LTV of 96.0%, and an ending LTV of 85.9%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned GE Commercial Mortgage Corp. Class Rating Amount ($) ----- ------ ---------- A-1* AAA 76,758,000 A-2* AAA 419,364,000 A-3* AAA 155,543,000 A-4* AAA 36,998,000 A-AB* AAA 49,587,000 A-5* AAA 481,049,000 A-1A* AAA 146,374,000 A-J* AAA 113,095,000 B AA 42,677,000 C AA- 17,071,000 D A 27,740,000 E A- 14,937,000 F BBB+ 23,473,000 G BBB 14,937,000 H BBB- 25,606,000 J BB+ 4,268,000 K BB 8,535,000 L BB- 10,670,000 M B+ 2,134,000 N B 6,401,000 O B- 4,268,000 P N.R. 25,606,868 X-P** AAA 1,656,689,000*** X-C** AAA 1,707,091,868*** * Classes A-1, A-2, A-3, A-AB, A-4, A-5, and A-1A receive interest and principal before class A-J. Losses are borne by the A-J class before classes A-1, A-2, A-3, A-AB, A-4, A-5 and A-1A, which will be applied pari passu. ** Interest-only class *** Notional amount N.R. -- Not rated. GLOBAL HOLDINGS: TSX Delists Multiple Voting Shares --------------------------------------------------- Global (GMPC) Holdings, Inc., (TSX VENTURE:GGH.MV.A) (TSX VENTURE:GGH.SV.B) reported that at the close of business on Jan. 28, 2005, the Company's Multiple Voting Shares will be delisted from the TSX Venture Exchange. The holders of the Multiple Voting Shares have the right, at any time, to require that the Corporation exchange Multiple Voting Shares held by them into Subordinate Voting Shares, on the basis of one Subordinate Voting Share for one Multiple Voting Share. Such exchange shall be completed by the remittance to the Corporation of a written notice to that effect together with the share certificate. Share certificates can be delivered to: Global (GMPC) Holdings Inc. 2300 Yonge Street, Suite 3000 Toronto, ON M4P 1E4 Attn: Chris Carmichael Currently the Company has a total of 40,230,535 Subordinate Voting Shares outstanding and 3,843,035 Multiple Voting Shares outstanding. The Company's Subordinate Voting Shares will remain listed on the TSX Venture Exchange under the symbol GGH.SV.B Global (GMPC) Holdings, Inc., is a merchant bank, which provides bridge loan services (asset back/collateralized financing), to companies across many industries such as oil & gas, mining, real estate, manufacturing, retail, financial services, technology and biotechnology. HIGH VOLTAGE: Seeks Interim Financing to Provide More Liquidity --------------------------------------------------------------- High Voltage Engineering Corporation is seeking interim financing to provide additional liquidity to the company. HVE is experiencing significant liquidity difficulties particularly affecting the U.S. operations of its Robicon Corporation subsidiary, where it has recently decreased its production, furloughed a portion of its work force and implemented other cost- cutting measures. As previously reported by HVE in connection with the announcement of its second quarter results, the company currently has no material availability under its existing credit lines. In addition to Robicon, the company's other principal operating subsidiary, ASIRobicon SpA, is also incurring significant liquidity issues primarily relating to insufficient cash flow from operations. HVE is soliciting additional financing for working capital purposes for each of ASIRobicon SpA and Robicon Corporation. The liquidity issues have not significantly impacted HVE's other operating businesses and its foreign operations including Evans, High Voltage Engineering Europa, ASIRobicon, Ltd. and ASIRobicon Shanghai Electric Company. In light of the company's financial challenges, HVE is exploring a number of strategic options, including a possible sale of all or some of its operating businesses. HVE, with assistance from its financial and legal advisors, is exploring additional financing through either the equity or debts markets, as well as through a possible sale of all or some of its businesses. There can be no assurance however, that sufficient financing can be obtained, can be obtained on a timely basis, or can be obtained on commercially reasonable terms. The failure of the company to obtain additional financing, consummate significant asset sales quickly, or resolve future defaults with respect to its loan agreements and other debt, may require the company to seek protection under Chapter 11 of the federal bankruptcy code and would have a material adverse effect on the company's financial condition. About the Company Headquartered in Wakefield, Massachusetts, High Voltage Engineering Corp., designs and manufactures technology-based products in three segments: power conversion technology and automation, advanced surface analysis instruments and services, and monitoring instrumentation and control systems for heavy machinery and vehicles. The Company filed for chapter 11 protection on March 1, 2004 (Bankr. Mass. Case No. 04-11586). The Company was represented by Fried, Frank, Harris, Shriver, & Jacobson LLP, Goulston & Storrs, P.C., and Evercore Restructuring L.P. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $100 million. The Company's Third Amended Joint Chapter 11 Plan of Reorganization was confirmed by the U.S. Bankruptcy Court for the District of Massachusetts on July 21, 2004, allowing the Company to emerge only 163 days after it commenced its chapter 11 case. * * * As reported in the Troubled Company Reporter on Jan. 25, 2005, High Voltage has entered into a Management Agreement with Marotta Gund Budd & Dzera, LLC, pursuant to which their associate Charles A. Schultz, Jr., will become HVE's interim Chief Financial Officer. HILITE INT'L: Moody's Puts B3 Rating on $150M Sr. Sub. Notes ------------------------------------------------------------ Moody's Investors Service assigned a B3 rating to the proposed guaranteed senior subordinated notes of Hilite International, Inc. ("Hilite Holdings" individually and "Hilite" for the consolidated company) and effectively downgraded the Hilite family's senior implied rating to B1, from Ba3. Proceeds from the senior subordinated notes and the anticipated new revolving credit facility at primary domestic subsidiary Hilite Industries, Inc. will be utilized to refinance existing debt and pay transaction fees and expenses. The rating outlook for Hilite is stable following these rating actions. The rating actions pertaining to Hilite are: Hilite Holdings: -- Assignment of B3 rating for the proposed $150 million of guaranteed senior subordinated unsecured notes due 2012, to be issued under rule 144A with registration rights; -- Assignment of B1 senior implied rating for Hilite Holdings (corresponding with a withdrawal of the previously assigned Ba3 senior implied rating at Hilite Industries) -- Represents an effective downgrade of the senior implied rating for the Hilite family to B1, from Ba3 -- The movement of the senior implied rating up to the Hilite Holdings level was necessitated by Hilite's proposed issuance of debt at the holding company level; -- Assignment of B2 senior unsecured issuer rating for Hilite Holdings (corresponding with a withdrawal of the previously assigned B1 senior implied rating at Hilite Industries) -- Represents an effective downgrade of the senior unsecured issuer rating for the Hilite family to B2, from B1 -- The movement of the senior unsecured issuer rating up to the Hilite Holdings level was necessitated by Hilite's proposed issuance of debt at the holding company level; Hilite Industries: -- Downgrade to B1, from Ba3, of the existing $50 million guaranteed senior secured revolving credit facility due March 2008; -- Downgrade to B1, from Ba3, of the existing $125 million guaranteed senior secured term loan A due March 2009; -- Withdrawal of the existing Ba3 senior implied rating (corresponding with the assignment of a B1 senior implied rating at Hilite Holdings) -- Withdrawal of the existing B1 senior unsecured issuer rating (corresponding with the assignment of a B2 senior unsecured issuer rating at Hilite Holdings) Hilite Germany GmbH & Co. KG: -- Downgrade to B1, from Ba3, of Euro 60 million guaranteed senior secured term loan A due March 2009 Moody's initially assigned ratings for the existing senior secured credit facilities of Hilite Industries and Hilite Germany during February 2003. Ratings for these existing facilities will be withdrawn upon the closing of the proposed $150 million senior subordinated notes offering by Hilite Holdings and the simultaneous closing of Hilite Industries' proposed new $85 million guaranteed senior secured revolving credit facility maturing 2010, which Moody's has not been asked to rate. Unused effective revolving credit availability on the closing date should approximate $41 million. While the proposed refinancing transactions will benefit Hilite International by extending debt maturities and deferring principal amortization that would have been required under the existing credit facilities, the rating downgrades reflect Moody's growing concern regarding the company's ability to maintain existing revenues and operating margins. This is based upon Hilite's modest scale relative to competitors and customers, combined with very challenging industry conditions and upward cost pressures. Hilite International's ratings will continue to be challenged prospectively by the difficulty of maintaining margins in the face of intense competition from primarily larger and more financially secure auto parts suppliers, ongoing consolidation of these suppliers, intensifying price compression from original equipment vehicle manufacturers ("OEM"), rising commodity prices, reduced industry vehicle production volumes in both North America and Europe due to factors including rising dealer inventories and gas prices and also the declining impact of incentives on vehicle sales, delayed or cancelled new vehicle program launches, declining market shares of Hilite's key customers, significant ongoing launch and R&D expenditures, reduced up-front tooling and engineering OEM reimbursement rates, and stepped-up reporting requirements necessitating public filings of financial statements by Hilite following the notes offering. Moody's additionally notes that despite the significant technology contained within Hilite International's product lines, these products appear more commodity-like in nature based upon current business dynamics than the rating agency had determined during earlier evaluations. Hilite is increasingly being required to implement additional price reductions over previously contracted levels in order to remain eligible to bid on new business with several major customers. While Hilite International 's 2004 credit metrics continued to be consistent with a weak Ba3 senior implied rating or a strong B1 senior implied rating, results fell well behind beginning-of-year estimates. Moody's remains concerned whether Hilite will experience a gradual slide in performance and be unable to offset the substantial majority of incremental costs/price reductions that it potentially faces. International's customer base remains highly concentrated with General Motors, Volkswagen, and Audi, which are all expected to experience performance challenges over the next year. Moody's furthermore believes that Hilite is motivated to pursue an aggressive acquisition strategy in order to increase its competitive standing and improve potential returns to the company's equity investors. The pro forma debt structure following the proposed refinancing transactions will notably perpetuate the mismatch between Hilite International's dollar-denominated US debt facilities and the fact that a substantial portion of the Company's revenues and asset bases are domiciled in Europe. Hilite International's ratings gain support from LTM credit protection measures that remain favorable relative to peers within its rating category, and from the elimination of Hilite's significant level of impending near-term loan principal amortization requirements and extension of its debt maturity profile through the proposed refinancing transactions. In addition, the company remains a global supplier capable of single sourcing worldwide operations for OEM's. Demand for Hilite's key product lines stands to benefit from increased regulatory pressures for improved emissions control, combined with consumers' desire for enhanced fuel economy and the increased penetration of automatic transmissions in Europe. The majority of the company's products benefit from long life cycles, seven-to-15 years for engine parts, as most are not model- specific. Hilite has more completely integrated its 2002 acquisition of Hydraulik-Ring GmbH in Germany and believes that it is realizing significant benefits from the acquired technologies, materially increased geographic diversification, and expanded customer base. The company also recently opened a sales office in China following several business wins in that region. Management believes that approximately 90% of Hilite International's expected sales volume through 2007 will come from products already under contract. The Company is highly focused on reducing its cost base through lean manufacturing, plant consolidation, and improved manufacturing efficiencies, as well as through improved raw materials sourcing procedures. Hilite's senior management team has collectively contributed $5.2 million of cash equity and is therefore significantly invested in the company. Overall cash equity invested in the company by management and the sponsors approximates $122 million. Future events that could result in an unfavorable adjustment to Hilite's outlook or ratings include material declines in margins and free cash flow performance resulting in rising leverage, declining liquidity and weakening cash interest coverage. Continued high levels of non-contractual price give-backs, loss of market share by Hilite or its key customers, pursuit of a material acquisition which is not readily accretive to performance, inability to offset rising commodity prices, and further evidence of a reduced technological advantage versus competitors would pressure ratings, especially if decreased cushions under covenants and/or increased revolving credit borrowings result in insufficient liquidity. A future improvement in Hilite's outlook or ratings is viewed by Moody's as the less likely outcome but could result if margins stabilize and substantial net debt reduction occurs, and if the company is also awarded significant new high-margin business with a broadened base of customers. Hilite's consolidated September 30, 2004 credit protection measures pro forma for the proposed refinancing transactions include total debt/EBITDA leverage approximating 3.1x before off- balance sheet items and total debt/EBITDAR leverage including off- balance sheet items as debt approximating 3.3x. Pro forma closing EBIT coverage of cash interest is weakened but still healthy at about 2.0x, while the pro forma EBIT return on total assets declined to about 6.5% and pro forma "retained cash flow less CapEx"/total debt remained favorable at almost 7.5%. For the twelve months ended September 30, 2004, on an as-adjusted basis, the non-guarantor subsidiaries would have had approximately $26.7 million of trade payables and no debt outstanding, excluding intercompany debt, would have held approximately 53% of consolidated assets, and would have generated approximately 54% of our consolidated net sales and 52% of our EBITDA. Hilite industries' proposed $85 million guaranteed senior secured revolving credit facility will be secured by substantially all assets and stock of itself and its direct and indirect domestic subsidiaries, and by 65% of the stock of foreign subsidiaries. Downstream guarantees will be provided by ultimate holding company Hilite Holdings, and direct holding company Hilite International Group Holdco, Inc., and upstream guarantees will be provided by all direct and indirect domestic subsidiaries. Hilite Holdings' proposed $150 million of guaranteed senior subordinated unsecured notes will be guaranteed on an unsecured senior subordinated basis by each of the current and future domestic subsidiaries that will guarantee the new senior secured credit facility, including Hilite Industries, the primary borrower under the credit agreement. These notes will be contractually subordinated to all senior debt of the issuer and guarantors, effectively subordinated all secured debt of Hilite Holdings and its subsidiaries to the extent of the value of the assets, and structurally subordinated to all liabilities of non-guarantor subsidiaries. The proposed notes will be non-call for four years until 2008, will contain a 35% equity clawback provision effective on or before 2008, and also a change of control provision entitling holders to require repurchase at a price of 101. The proposed notes will additionally contain a 30-day grace period for non- payment of interest together with provisions to permit the blockage of all payments on the notes and the subsidiary guarantees for up to 179 days in the event of certain non-payment defaults. Hilite International, headquartered in Cleveland, Ohio, is a designer and manufacturer of highly-engineered, valve-based components, assemblies, and systems used principally in powertrain (engine and transmission) applications for the automotive market. Products offered include camphasers, diesel valves, cylinder deactivation valves, and emissions control units for engine applications; solenoid valves and proportioning valves for transmission applications; and brake proportioning valves, and wheel cylinders for brake applications. The majority of Hilite's equity is owned by a combination of private equity sponsors and several members of management. The Company's annualized revenues approximate $400 million. HUNTSMAN CORP: Moody's Reviews Debt Ratings for Possible Upgrade ---------------------------------------------------------------- Moody's Investors Service places the ratings of Huntsman LLC (senior implied at B2 - HLLC), Huntsman International Holdings LLC (senior implied at B2 - HIH), Huntsman International LLC (senior unsecured at B3 - HI), and Huntsman Advanced Materials LLC (senior implied at B2 Advanced Materials) under review for possible upgrade. The action follows a further review of the specifics of the initial public offering (IPO) transaction for Huntsman Corporation, along with a better understanding of Huntsman Corporation's future strategies to reduce debt and simplify its operating structure. Moody's assigned a B1 senior implied rating and Caa1 senior unsecured rating to the new parent company Huntsman Corporation. The outlook for Huntsman Corporation's (HC) rating is stable. Moody's also expects to possibly upgrade the existing Huntsman entities that are currently rated. When the IPO is successfully completed the outlook for the existing ratings, that are now under review, will likely move to stable. These possible ratings moves assume that the IPO will be completed in a timely fashion and will be executed within the financial and documentation parameters that have been shared with Moody's. It is our belief that the IPO proceeds, to be used for debt reduction, will reach subsidiaries via equity injections as opposed to inter-company debt obligations. Huntsman Corp. has filed a registration statement with the Securities and Exchange Commission for a proposed IPO of its common stock. Huntsman Corp. is the new holding company that will own or control the existing Huntsman companies. Moody's expects Huntsman Corp. to raise approximately $1.3 billion in net proceeds from the IPO offering, which Huntsman Corp. will use to repay indebtedness at various subsidiaries. In addition, a portion of the proceeds from any exercise of the underwriter's over-allotment option may be used to further reduce outstanding indebtedness. Moody's believes that, subject to improvements in cash flow from operations, further material reductions in indebtedness are likely over the next several years. Moody's also believes that large debt financed acquisitions to grow the group are no longer a central operating strategy. While the possible upgrades incorporate strategic bolt-on acquisitions they are not expected to be material or to delay the expected improvement in credit metrics as debt is reduced. Existing Huntsman stockholders are also expected to participate in the offering and Huntsman Corp. will not benefit from these secondary sale proceeds. Moody's believes the Huntsman family will continue to have effective control of the new public corporation. The ratings assigned are: -- Huntsman Corporation: * Senior Implied - B1 * Issuer Rating - Caa1 * Outlook - Stable The ratings placed under review for possible upgrade: -- Huntsman LLC: * Guaranteed senior secured revolving credit facility, $350 million due 2009 -- B1 - would move to Ba3 * Guaranteed senior secured term loan B, $715 million due 2010 -- B2 - would move to B1 * Guaranteed senior secured notes, $451 million due 2010 - B2 - would move to B1 * Guaranteed senior unsecured notes, $300 million due 2012 - - B3 - would move to B2 * Guaranteed senior unsecured floating rate notes, $100 million due 2011 -- B3 - would move to B2 * Senior Implied - B2 - would move to B1 * Issuer Rating - Caa1 - would move to B3 -- Huntsman International Holdings LLC: * Guaranteed senior secured revolving credit facility, $375 million due 2008 -- B1* - would move to Ba3 * Guaranteed senior secured multi currency facility, $50 million due 2008 -- B1* - would move to Ba3 * Guaranteed senior secured term loan B, $1,340 million due 2010 -- B1 - would move to Ba3 * Approximately $479 million accreted value senior discount notes, due 2009- Caa2 - would move to B3 * Senior Implied - B2 - would move to B1 * Issuer Rating -- Caa2 - would move to B3 * These two facilities in combination total $375 million -- Huntsman International LLC * Guaranteed senior secured revolving credit facility, $375 million due 2008 -- B1* - would move to Ba3 * Guaranteed senior secured multi currency facility, $50 million due 2008 -- B1* - would move to Ba3 * Guaranteed senior secured term loan B, $1,340 million due 2010 -- B1 - would move to Ba3 * Guaranteed senior unsecured notes, $150 million due 2009 - - B3 - would move to B2 * Guaranteed senior unsecured notes, $300 million due 2009 - - B3 - would move to B2 * Guaranteed senior subordinated notes, $350 million due 2015 -- Caa1 - would move to B3 * Senior subordinated notes due 2009 -- Caa1 - would move to B3 * These two facilities in combination total $375 million -- Huntsman Advanced Materials LLC: * Guaranteed senior secured notes, $250 million due 2010 -- B2 - would move to Ba3 * Guaranteed senior secured floating rate notes, $100 million due 2008 -- B2 - would move to Ba3 * Senior Implied -- B2 - would move to Ba3 * Issuer Rating -- Caa1 - would move to B1 Currently the only debt, rated by Moody's, that has been identified in the Form S-1 filing (the filing is not yet effective) for reduction includes approximately $489.9 million to redeem substantially all of Huntsman International 's 13.375% Senior Discount Notes due 2009 (the "HIH Senior Discount Notes"); approximately $177.9 million to repay $159.4 million in aggregate principal amount of Huntsman LLC 's 11 5/8% Senior Secured Notes due 2010 (the "HLLC Senior Secured Notes"). Total debt at the Huntsman Corp. level Pro Forma for the IPO may drop to approximately $5.1 billion from $6.2 billion. There will also be substantial debt reduction at the HMP Equity Holdings Corporation entity. The possible upgrades and stable outlooks reflect the effect of the IPO on the debt profile of the Company, and the prospect of changes in HC financial policies, which we believe, include additional debt reduction. Moody's believes the completion of the IPO will have a positive impact on the group's credit metrics. The possible upgrades assume the strong likelihood for continued debt reduction given the expected improvement in the operating performance of the various entities. This assumption is supported by the group's recent strength in business fundamentals. The possible stable outlooks assume that the various companies will demonstrate sustainable profitability and free cash flow generation over the next several years. Moody's notes that free cash flow generation at the group has been relatively weak over the last several years. Moody's notes that the companies, even after the IPO, remain highly levered and the ratings and outlooks are based on the expectation of material debt reduction over the next twelve months. If this debt reduction is slowed the ratings or outlooks could be pressured downward. If, however, free cash flow generation were to reach or exceed $500 million in 2005 and be used for debt reduction and this was combined with ongoing positive industry fundamentals, over the intermediate term, the outlook or ratings would be positively pressured. Moody's notes that Huntsman Corp.'s principal operating subsidiaries, Huntsman International, Huntsman LLC and Advanced Materials, are currently financed separately from each other and this may continue for some time. The debt instruments of each such subsidiary limit Huntsman Corp.'s ability to allocate cash flow or resources from one subsidiary, and its related group of subsidiaries, to another subsidiary group. It is for this reason Moody's rates these companies primarily on a stand-alone basis. Advanced Materials, which is likely to see a possible move to Ba3 on its senior secured note, is not directly benefiting from the IPO proceeds in terms of specific debt reduction. Moody's possible upgrade expects that Advanced Materials will remain relatively un-levered going forward and thus warrants a stronger potential move upward. The possible upgrade at Advanced Materials also results from an improved operating outlook and a meaningful change in the groups over all financial philosophy. The possible stable outlook at Advanced Materials reflects the prospect of uncertainty surrounding the efforts to simplify Huntsman Corp.'s corporate structure over time. Huntsman Corporation is a global manufacturer of differentiated and commodity chemical products. Huntsman Corp.'s products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining and synthetic fiber industries. Huntsman Corp. had pro forma revenues for the nine months ended September 30, 2004 and the year ended December 31, 2003 of $8.4 billion and $9.3 billion, respectively. HYDROCHEM INDUSTRIAL: Moody's Junks $150 Million Senior Notes ------------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to HydroChem Industrial Services, Inc.'s proposed $150 million issue of senior subordinated notes due 2013. At the same time Moody's affirmed the existing ratings of the Company. The outlook on the ratings is stable. The proceeds from the proposed subordinated note offering, together with $25 million drawn under a proposed $55 million senior secured credit facility due 2011, (unrated) and $60 million of equity will be used to refinance the purchase of the Company by Oaktree Capital Management which was finalized December 31, 2004. Oaktree Capital paid $237 million or approximately 6.8 times the company's twelve month ended September 30, 2004 EBITDA as adjusted for recent contractual wins. Oaktree also entered into an earnout agreement, which will require additional cash payments of up to $10 million for company performance for the 2005 period as well as the cash value of realized benefits of certain tax loss carryforwards. The ratings acknowledge the operating improvements generated from new management initiatives in late 2002. However, these benefits are offset by the increase in leverage from the recapitalization, especially in light of the HydroChem Industrial's history of relatively flat sales and lack of pricing power despite the cyclical upturn in the principal sectors it serves, including petrochemicals and petroleum. Pro forma leverage is high at 5 times the twelve months ended September 28, 2004 EBITDA. In addition, HydroChem Industrial has a weak pro forma balance sheet with negative shareholders equity and intangibles comprising 53% of total assets. The ratings, however, also reflect the improved free cash flow generation that represents 7.8% of pro forma debt; the improvement in asset utilization as measured by pro forma EBIT to total assets which went from 10% for fiscal 2003 to 15% for the twelve months ended September 28, 2004; and improved EBIT-based fixed charge coverage of 1.5 times in the current pro forma period versus 1 time twelve months ago. The ratings also incorporate HydroChem Industrial's diversified product offering and national scope and the stability of demand for most of the company's industrial cleaning services. The outlook for the ratings is stable. The current rating assumes that the Company will be able to double its retained cash during 2005 and to delever to under 4.25 times by the beginning of fiscal 2006. Lower than anticipated cash generation and debt reduction could have negative rating implications. A sustained improvement in sales generation, retained cash and leverage below 4 times EBITDA would provide upward pressure on the rating. The Caa1 rating on the proposed $150 million issue of senior subordinated notes due 2013 reflects the structural subordination of the notes to senior debt including borrowings under the credit facility. The notes will be guaranteed, on a senior subordinated unsecured basis, by HydroChem's direct and indirect Restricted Subsidiaries that are Domestic Subsidiaries. Debt incurrence will be limited by a fixed charge test, as defined, of 2 times. The ratings affected are: * Senior Implied of B2, affirmed; * Senior Unsecured Issuer rating of B3, affirmed; * $110 million issue of 10.375% senior subordinated notes due 2007, affirmed at Caa1; * Proposed $150 million issue of senior subordinated notes due 2013, assigned a Caa1. The outlook is stable. Upon the refinancing of the 10.375% senior subordinated notes due 2007 with the proceeds of the new financing, the rating will be withdrawn. HydroChem Industrial Services, Inc., based in Houston, Texas is the parent company of HydroChem Industrial Cleaning, Inc. and HydroChem International, Inc. HydroChem Industrial Services is an operating company, which is a wholly-owned subsidiary of HydroChem Holding, Inc. The Company is a national provider of industrial cleaning services to a diversified client base of over 800 customers, often under long-term contracts, including Fortune 500 and S&P Global 1200 companies. For the twelve month period ended September 30, 2004, total sales were comprised of hydroblasting services (40%), industrial vacuuming services (30.6%), chemical cleaning services (20.9%), and tank cleaning services (4.3%) and other (3.3%). The company's revenues are generated from services to the petrochemical industry (40.6%), oil refining (30.6%), electric utilities (20.9%), pulp and paper mills (3.3%), with the remainder (4.6%) coming from other industries. IKON OFFICE: Earns $16.6 Million of Net Income in First Quarter --------------------------------------------------------------- IKON Office Solutions (NYSE:IKN) reported results for the first quarter of Fiscal 2005. Net income for the first quarter was $16.6 million. The Company previously communicated expectations of $.12 to $.14. Total revenues were $1.1 billion for the first quarter of Fiscal 2005. The decline of 3.6% from the first quarter of Fiscal 2004 was primarily attributable to the decline in finance revenues as a result of the transition out of captive leasing in North America. Foreign currency translation provided a 1.5% benefit to total revenues. Targeted revenues, which exclude technology hardware and finance revenues in North America, increased by approximately 3%, due to positive performance in service offerings and the benefits of the fees received from GE Commercial Finance. "We made important progress on a number of key initiatives in the quarter," stated Matthew J. Espe, IKON's Chairman and Chief Executive Officer. "Although we did absorb weakness in North American equipment sales and off-site Managed Services in the quarter, these challenges were offset by solid results in Customer Services, Professional Services and on-site Managed Services. On- site Managed Services delivered another strong quarter, winning new multi-year contracts while strengthening our base of recurring revenue. In addition, Europe delivered a strong quarter in both revenue and operating margin expansion. Our national account program, which leverages both our equipment and service offerings, continued to grow revenues in the quarter, with 13 new contract wins." Mr. Espe continued, "As we launched important strategic initiatives including the new integrated selling model and a broader Professional Services coverage strategy, we experienced a temporary decline in sales productivity which impacted our North American equipment performance in the first quarter. These major improvements to our coverage and selling processes extended our selling cycle in the quarter. We remain confident in the financial and competitive benefits these strategies will bring to the Company and expect our productivity to substantially improve throughout Fiscal 2005. "Our off-site Managed Services businesses, comprised of legal document services and digital printing, experienced another quarter of softness and produced lower revenues and reduced operating profitability compared to the prior year. In contrast to our other service offerings, these two businesses are short- cycle in nature and are highly price competitive. As a result, we are taking aggressive actions to improve the flexibility of the cost structure of these businesses. "The strategic priorities we set for 2005 around operating leverage, core growth, and expansion are well underway. We have seen significant progress in many of our growth platforms and will continue to invest in efficiency initiatives to achieve future operational improvements," said Mr. Espe. Financial Analysis Net Sales of $461.9 million, which includes the sale of copier/printer multifunction equipment and supplies, increased by 2.3% from the first quarter of Fiscal 2004. Growth in copier/printer equipment revenues, which represents approximately 90% of Net Sales, was 3.5% and was primarily driven by the current leasing model and strong performance in many of our growth platforms such as national accounts, on-site Managed Services and Europe. The current leasing model provides the Company with origination fees for leases funded in the U.S. and Canada as part of the Company's strategic alliance with GE. Without the leasing model, equipment revenues would have been down 5.6% over the first quarter a year ago due to weakness in North American equipment sales. Gross profit margin on Net Sales declined to 28.4% from 29.5% in the first quarter of Fiscal 2004, due primarily to the mix of products sold and growth in lower margin national account revenues. However, gross profit margin increased sequentially from 27.3% in the fourth quarter of Fiscal 2004. Services of $602.9 million, which includes revenues from the servicing of copier/printer equipment, Managed Services (on- and off-site), Professional Services, rentals and other fees, increased by 2.9% from the first quarter of Fiscal 2004. Overall Services growth was driven by growth in Customer Service, on-site Managed Services, and Professional Services, as well as profit sharing and fees received from GE under the strategic alliance. Customer Services, which represents approximately 60% of Services, grew by 2.1% compared to the prior year, fueled primarily by double-digit growth in color and production copy volumes. Total services growth was partially affected by declines in off-site Managed Services. Gross profit margin on Services held constant with the same period a year ago, at 40.0%. Finance Income of $30.8 million declined by 68.9% from the prior year due to the Company's transition out of captive lease financing in North America. Most of the finance income from the retained U.S. portfolio is expected to run off by 2007. Gross profit margin on finance income increased to 74.4% for the first quarter from 64.7% for the same period a year ago, due to the higher margins associated with the European and retained U.S. leasing portfolios. Selling and Administrative Expenses declined by $18.7 million from the first quarter of the prior year, primarily as a result of the leasing transition. Sequentially, expenses declined by $22.0 million reflecting lower selling expense, administrative headcount reductions, and ongoing centralization actions to leverage process and economic efficiencies. Expenses also benefited in the quarter from a refund of administrative fees from GE. Taxes on income for the first quarter of Fiscal 2005 were calculated at an effective income tax rate of 32.5% compared to 37.8% for the first quarter of Fiscal 2004. The decrease in the effective income tax rate was due to a benefit of $1.3 million received during this quarter from tax planning strategies in Europe. The effective income tax rate for the remaining quarters of Fiscal 2005 will be 38.0%, resulting in a full year effective tax rate of 37.0%. Balance Sheet and Liquidity Unrestricted cash was $292 million as of December 31, 2004, with cash used for operations in the first quarter totaling approximately $92 million compared to a use of cash in the prior year's first quarter of $122 million. Capital expenditures on operating rentals and property and equipment, net of proceeds, totaled $17 million for the quarter compared to $13 million for the same period a year ago. As a result of a reduction in debt in the quarter, the total debt to capital ratio decreased to 47% from 49% at the end of Fiscal 2004. During the first quarter, the Company repurchased 1.96 million shares of IKON's outstanding common stock for approximately $22 million. Since March 31, 2004, the Company has repurchased 8.7 million shares for approximately $99 million, leaving $151 million remaining for share repurchases under the 2004 Board authorization. IKON's Board of Directors approved the Company's regular quarterly cash dividend of $.04 per common share, payable on March 10, 2005 to holders of record at the close of business on February 22, 2005. Outlook "We are energized by the work we have underway - the success we're seeing in services growth combined with actions we're taking to drive further expense reductions," said Mr. Espe. "As we ramp up our strategic initiatives for 2005, including improvements in our sales coverage model, we are taking steps to align our cost structure and balance selling and administrative expenses to ensure we meet our goals. We are maintaining our full year expectations for earnings per diluted share in the range of $.63 to $.68. This outlook excludes any charges we may incur to improve our business, including possible charges for the off-site Managed Services business, as well as the expensing of stock options beginning in the fourth quarter of Fiscal 2005. "Second quarter earnings per diluted share are expected to be in the range of $.14 to $.16," concluded Mr. Espe. About IKON IKON Office Solutions -- http://www.ikon.com/-- the world's largest independent channel for copier, printer and MFP technologies, delivers integrated document management solutions and systems, enabling customers worldwide to improve document workflow and increase efficiency. IKON integrates best-in-class systems from leading manufacturers, such as Canon, Ricoh, Konica Minolta, EFI and HP, and document management software from companies like Captaris, EMC (Documentum), Kofax and others, to deliver tailored, high-value solutions implemented and supported by its global services organization - IKON Enterprise Services. IKON represents one of the industry's broadest portfolios of document management services, including professional services, a unique blend of on-site and off-site managed services, customized workflow solutions, and comprehensive support through its service force of 16,600 employees, including its team of 7,000 customer service technicians and support resources worldwide. With Fiscal 2004 revenues of $4.65 billion, IKON has approximately 500 locations throughout North America and Western Europe. * * * As reported in the Troubled Company Reporter on Jan. 4, 2005, Moody's assigned a first time speculative grade liquidity rating of SGL-1 for IKON Office Solutions, indicating very good liquidity. The rating considers its $473 million of cash balances at September 2004, expectations of adequate cash flow from operations to finance capital expenditures, and good room under the covenants in its largely undrawn $200 million secured bank facility, all in the context of its public debt maturities, which total approximately $57 million over the next twelve months. INTERSTATE BAKERIES: Retains Houlihan Lokey as Financial Advisor ---------------------------------------------------------------- The Official Committee of Equity Security Holders appointed in Interstate Bakeries Corporation and its debtor-affiliates' chapter 11 cases, wants to retain Houlihan Lokey Howard & Zukin Capital, Inc., as its financial advisor, nunc pro tunc to Nov. 29, 2004. The Equity Committee needs Houlihan Lokey to assist it in the tasks associated with analyzing and implementing critical restructuring alternatives, and to help guide it through the Debtors' reorganization efforts. Houlihan Lokey is a nationally recognized investment banking/financial advisory firm with nine offices worldwide and more than 500 professionals. The firm provides investment banking and financial advisory services and execution capabilities in a variety of areas, including financial restructuring, where the firm is one of the leading investment bankers and advisors to debtors, secured and unsecured creditors, acquirors, and other parties-in-interest involved in financially distressed companies, both in and outside of bankruptcy. Houlihan Lokey's Financial Restructuring Group, which has over 100 professionals dedicated to these engagements, will be providing the agreed-on financial advisory services to the Equity Committee. Houlihan Lokey has served as a financial advisor in some of the largest and most complex restructuring matters in the United States, including serving as the financial advisor to the debtors in the Chapter 11 restructurings of Covad Communications, DairyMart Convenience Stores, Inc. and XO Communications, Inc., and as the financial advisor to official creditor committees in the Chapter 11 proceedings of, among others, Farmland Industries, Inc., Enron Corp., Williams Communications Corp., AmeriServe Food Distribution, Inc. and Owens Corning, Inc., The National Benevolent Association. Kevin McGoey, representative of the Equity Committee, informs the Court that since November 29, 2004, Houlihan Lokey has been providing critical services to the Equity Committee, including, among others: -- reviewing extensive operating and financial information; -- meeting with the Debtors' management, advisors, and other professionals involved in the Debtors' Chapter 11 cases; -- analyzing various issues confronting the Debtors, including, without limitation, Debtors' DIP financing, customer and vendor issues and employee compensation matters; -- participating in meetings with the Equity Committee; and -- responding to multiple inquiries from equity holders. The Equity Committee believes that Houlihan Lokey is well qualified and able to represent the Equity Committee in a cost- effective, efficient and timely manner. As financial advisor to the Equity Committee, Houlihan Lokey will: (1) evaluate the Debtors' assets and liabilities; (2) analyze the Debtors' financial and operating statements; (3) analyze the Debtors' business plans and forecasts; (4) evaluate the Debtors' DIP financing, cash collateral usage and adequate protection, and the prospects of any exit financing in connection with any plan of reorganization or liquidation; (5) provide specific valuation or other financial analyses as the Equity Committee may require in connection with the Debtors' bankruptcy cases; (6) assess the financial issues and options concerning the sale of the Debtors, or any of them, or their assets and structuring any Plan; (7) provide testimony in court, on behalf of the Equity Committee, if necessary or as reasonably requested by the Equity Committee, subject to the terms of the Engagement Letter; and (8) provide further and other services as reasonably may be required by the Equity Committee. The Equity Committee proposes that Houlihan Lokey will be compensated under this Fee Structure: (a) The firm will be paid a $100,000 monthly fixed fee; (b) The firm will be paid an additional transaction fee of 1% of any and all consideration distributed and received by the Debtors' equity security holders; (c) The Transaction Fee will be earned on the earlier of: (1) confirmation of a Plan; or (2) the closing of any other transaction or series of transaction in which the Debtors' equity holders receive a distribution or some form of consideration; (d) The Transaction Fee will be payable "In Kind" or in the same manner and currency/form as and when received by the equity holders, so that the firm's interests are fully aligned with the equity holders, without diluting any other constituents' recovery; and (e) The firm will be reimbursed for all out-of-pocket expenses that are reasonably incurred in connection with its services, consistent with the firm's normal and customary billing practices. The Equity Committee further proposes that Houlihan Lokey will be indemnified by the Debtors for any claim arising from, related to, or in connection with the firm's engagement. The Indemnified Parties will be reimbursed for any legal or other expenses they reasonably incur. The Debtors, however, will have no obligation to indemnify the firm, or to provide contribution or reimbursement to the firm, for any claim or expense that is finally judicially determined, and from which there is no further right of appeal, to have resulted from the incompetence, willful misconduct, gross negligence, bad faith or self-dealing of any Indemnified Party. Matthew R. Niemann, a member of Houlihan Lokey, assures Judge Venters that the firm is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Houlihan Lokey holds no interest materially adverse to the Debtors, their creditors, and shareholders for matters for which the firm is to be retained. Mr. Niemann also attests that the firm has no connection to the Debtors, their creditors, shareholders, or their related parties. * * * Judge Venters approves the Equity Committee's application. The Court also rules that 25% of Houlihan Lokey's monthly fee during the first four months of its engagement will be held back as opposed to 20% under the Interim Compensation Order, subject to review and allowance of payment by the Court pursuant to the firm's interim and final fee application and request for reimbursement of costs. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) JADE CBO: Fitch Maintains Junk Rating on $23.5 Million Sr. Notes ---------------------------------------------------------------- Fitch Ratings upgrades one class of notes issued by Jade CBO, Limited. This rating action is effective immediately: -- $23,757,455 senior notes upgraded to 'AA+' from 'AA-'; -- $23,556,369 second priority senior notes remain at 'CC'. Jade is a collateralized debt obligation - CDO -- managed by Morgan Stanley Investment Management which closed Oct. 16, 1997. Jade is composed primarily of emerging market corporate and sovereign debt with limited exposure to high yield U.S. corporate debt. Included in this review, Fitch Ratings discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. Since the last review, the collateral has continued to improve. The weighted average rating of the collateral improved to 'B' from 'CCC+', which is primarily due to upgrades of several sovereign ratings, including Bulgaria, Russia, Ecuador, and Venezuela. As of the Jan. 20, 2005, trustee report, the senior overcollateralization - OC -- ratio has increased to 193.1% from 157.5% as of Nov. 20, 2003, report, relative to a minimum required threshold of 149%. In addition, the senior notes have continued to delever, redeeming an additional $10.6 million since the last rating action in December of 2003. Since the close of Jade, 72.2% of the original outstanding balance of the senior notes has been redeemed. The improving credit quality of collateral is also illustrated by the change in the percentage of collateral rated 'CCC+' or lower. These levels have improved to 21.6% of the collateral from 34.7% as of the previous rating action. However, there are several risk factors, including scheduled principal distributions after the legal final maturity of Jade, large single-obligor exposures, and interest rate risk. Jade is currently scheduled to receive $3.4 million of principal distributions after the legal final maturity of the structure. However, the asset manager has the ability to sell collateral, which helps to mitigate this risk. Second, there are a few large obligor investment-grade exposures, including two Bulgarian sovereign bonds together representing over 29% of the outstanding collateral debt securities. These exposures were taken into consideration in the model simulations. Finally, Jade is exposed to interest rate risk as there is no interest rate hedge. As of the most recent trustee report, floating rate assets compose 53.2% of the portfolio. The senior liabilities are floating, and the second priority notes bear a fixed coupon. As a result, in model simulations the second priority senior notes performed more favorably in rising interest rate scenarios. The rating of the senior notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the second priority notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. As of the last payment date, the second priority notes have deferred interest balance of approximately $256,369. The original note balance of the second priority notes was $22.3 million. Given the improvement in collateral quality and the amortization of the rated liabilities, Fitch has determined that the current ratings assigned to the senior notes no longer reflect the current risk to noteholders and subsequently have been improved. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ For a detailed discussion of Bulgarian sovereign debt, please see Fitch's Jan. 31, 2005, commentary, 'Bulgaria's Public Finances Intact Despite Fiscal Boost.' K. HOVNANIAN: Moody's Upgrades Ratings & Says Outlook is Stable ---------------------------------------------------------------- Moody's Investors Service raised the ratings of K. Hovnanian Enterprises, Inc., including its senior implied rating, issuer rating, and ratings on existing senior notes to Ba1 from Ba2, and the ratings on its existing senior subordinated notes to Ba2 from Ba3. The ratings outlook was changed back to stable from positive. The stable ratings outlook reflects Moody's expectation that the company will continue to execute its acquisition-based growth strategy in a disciplined manner. The ratings acknowledge Hovnanian Enterprises' increased size, scale and market penetration, strong interest coverage and margin and return performance, continuing success in diversifying its operating profits, smooth integration of previous acquisitions, long history, and significant management ownership. At the same time, however, the ratings consider Hovnanian Enterprises' higher-than-average business risk profile given its apparent appetite for acquisitions, greater use of debt leverage than that of its peers, capacity under its credit agreement that could lead to substantial additional debt incurrence, integration risks associated with its acquisitions, larger-than-average amount of spec building, and the cyclical nature of the homebuilding industry. The ratings changes are: * Senior implied rating raised to Ba1 from Ba2 * Senior unsecured issuer rating raised to Ba1 from Ba2 * $140 million of 10.5% senior notes due 10/01/2007 raised to Ba1 from Ba2 * $100 million of 8% senior notes due 04/01/2012 raised to Ba1 from Ba2 * $215 million of 6.5% senior notes due January 15, 2014 raised to Ba1 from Ba2 * $150 million of 6.375% senior notes due December 15, 2014 raised to Ba1 from Ba2 * $200 million of 6.25% senior notes due January 15, 2015 raised to Ba1 from Ba2 * $150 million of 8.875% senior subordinated notes due 04/01/2012 raised to Ba2 from Ba3 * $150 million of 7.75% senior subordinated notes due 5/15/2013 raised to Ba2 from Ba3 * $100 million of 6% senior subordinated notes due January 15, 2010 raised to Ba2 from Ba3 (P)Ba1/(P)Ba2/(P)Ba2/(P)Ba3 prospective ratings (from one notch lower across the board) on $162 million of various securities that could be offered under a multiple seniority shelf registration All of K. Hovnanian Enterprises' debt is guaranteed by the parent company, Hovnanian Enterprises, Inc., and by its restricted operating subsidiaries. As illustrated in the Homebuilding Rating Methodology dated December 2004, Hovnanian outperformed its Ba rating category in product and price point diversity, gross margins, return on assets, and interest coverage. The gross margin metric, 25.6% through mid-year fiscal 2004, was particularly impressive considering that Hovnanian forgoes a substantial amount of the profit potential inherent in building a home by owning substantially less land than that of its peer group. However, unadjusted debt leverage, as measured by homebuilding debt/capitalization, although not by debt/EBITDA, still stood out as among the more aggressive in its peer group. Considering that Hovnanian owns less and options more land than its peer group, its true debt leverage may be somewhat understated. Nevertheless, Hovnanian's deleveraging momentum has been clear, and Moody's expects the company to maintain an average 50% net homebuilding debt/capitalization ratio or better in line with management's long -term target. Going forward, the ratings outlook will depend largely on the company's clearly adopting, and maintaining, a debt leverage target at 45% or lower, growing its equity base, and successfully integrating its recent and any further acquisitions while continuing to generate above-average returns. Factors that could stress the outlook and ratings will include material problems in integrating its acquired companies or any significant releveraging of the balance sheet for acquisitions, share repurchases, or because of major impairment charges. Established in 1959 and headquartered in Red Bank, New Jersey, Hovnanian Enterprises, Inc. designs, constructs and markets single-family detached homes and attached condominium apartments and townhouses. Revenues and net income for fiscal 2004, ended October 31, 2004, were $4.2 billion and $349 million, respectively. KAISER ALUMINUM: Judge Fitzgerald Approves PBGC Settlement Pact --------------------------------------------------------------- To recall, Kaiser Aluminum Corporation and its debtor-affiliates ask Judge Fitzgerald to approve the Pension Benefit Guaranty Corporation Settlement Agreement and dismiss as moot the Law Debenture Objection. The Law Debenture Objection is rendered moot by the parties' agreement regarding the allowance of the PBGC general unsecured claim and administrative claim. * * * Judge Fitzgerald approves the Settlement Agreement between the Debtors and the Pension Benefit Guaranty Corporation. Judge Fitzgerald dismisses Law Debenture Trust Company of New York's objection to the PBGC's proofs of claim as moot. Law Debenture's request for reconsideration of the stay imposed on its Claim Objection is also denied. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Court Approves Deal with Lloyds Underwriters ------------------------------------------------------------- In 2000, Kaiser Aluminum & Chemical Corporation instituted an insurance coverage action against liability insurers, styled Kaiser Aluminum & Chemical Corp. v. Certain Underwriters at Lloyds, London, Case No. 31241, in the Superior Court of California for the County of San Francisco. The Products Coverage Action spans the period from 1959 to 1985 and involves more than 300 insurance policies. Under the Action, KACC seeks: (a) a declaratory judgment that the Insurers are obligated to cover asbestos-related bodily injury claims against KACC relating to products manufactured or sold by KACC; and (b) damages for breach of contract and breach of the covenant of good faith and fair dealing against several of the Insurers. The Products Coverage Action intends to establish KACC's rights, and the Insurers' obligations, with respect to present and future Asbestos Claims. Additionally, KACC seeks to recover certain costs from the Insurers in connection with the defense and settlement of the Asbestos Claims. The Official Committee of Asbestos Claimants, and Martin J. Murphy, the legal representative for future asbestos claimants, represents the Asbestos Claimants in the Debtors' Chapter 11 cases. Various persons have also filed bodily injury claims alleging exposure to silica containing products manufactured or sold by KACC. Anne M. Ferazzi is the appointed legal representative for the future silica claimants. Silica Claimants and other tort claimants potentially holding claims covered under the Insurance Policies may assert that a portion of the proceeds from any settlements obtained in the Products Coverage Action should also be used to satisfy their claims. Coverage Dispute with ICW Insurance Company of the West, a defendant in the Products Coverage Action, issued one excess insurance policy -- Policy No. AX374505 -- for the period beginning April 1, 1980 to April 1, 1981. The ICW Policy has a $2,000,000 limit as part of a $50,000,000 layer, excess of $150,000,000 underlying limits. To date, other than previously settled or insolvent coverage, only the first layer policy of $2,000,000 has been exhausted. In the Products Coverage Action, ICW has asserted various arguments as to why it should not pay at all or why, if it may have the obligation, the obligation does not arise except under limited circumstances and upon certain exhaustion approaches. All of ICW's arguments are disputed by KACC. ICW Settlement Agreement KACC and ICW entered into a settlement agreement, which provides that ICW pay $1,400,000 to KACC. The Settlement Funds will be used to pay holders of tort claims covered by the ICW Policy and to defray the related Asbestos Litigation Costs. In return for the payment of the Settlement Funds, KACC will release all of its rights against ICW under the ICW Policy and will dismiss ICW from the Products Coverage Action. Settlement Funds Escrow To avoid incurring certain taxable income with respect to the Settlement Funds while those funds are being held for claimants holding Asbestos Claims, Silica Claims, and Other Tort Claims, KACC will place the Funds in escrow pursuant to an escrow agreement. The Escrow Agreement will allow KACC to establish escrow funds that qualify for special tax treatment pursuant to Treasury Regulations under Section 468B of the Internal Revenue Code of 1986, as amended. The special qualification will essentially relieve KACC of tax consequences in respect of interest earned by escrowed funds that are for the benefit of third-party tort claimants, and thus KACC and the escrow agent appointed under the Escrow Agreement will take all actions necessary to ensure the qualification. Similar settlement proceeds or awards obtained in the future from other Insurers will also be placed into the escrow account established by the Escrow Agreement. A copy of the Escrow Agreement, once finalized, will be provided to the Creditors Committee, the Asbestos Representative, and the Silica Representative. At the Debtors' behest, Judge Fitzgerald approves the Settlement and the Escrow Agreements. The Court authorizes the Escrow Agent to hold the Settlement Funds and other settlement proceeds or awards that may be deposited by or on behalf of KACC, in escrow until the time the Court authorizes disbursement of the Funds to the Claimants. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 215/945-7000) LAIDLAW INT'L: Reports Greyhound Pension Funding Requirements ------------------------------------------------------------- As previously reported, Laidlaw International, Inc., together with its wholly owned U.S. subsidiaries including Greyhound Lines, Inc., is a party to an agreement with Pension Benefit Guaranty Corporation regarding the funding levels of eight single employer pension plans maintained in the United States by Greyhound. Under the PBGC Agreement, Laidlaw made two $50,000,000 cash contributions to the Greyhound U.S. Plans in both June 2004 and June 2003. Additionally, Laidlaw issued 3,800,000 shares of common stock to a trust formed for the benefit of the Greyhound U.S. Plans. At August 31, 2004, Kevin E. Benson, Laidlaw President, Chief Executive Officer, and Director, relates that all the 3,800,000 shares of common stock remained in the Pension Plan Trust. Based on the closing price of the common stock on the New York Stock Exchange, the shares had an aggregate market value of $63,300,000 at November 1, 2004. The 3,800,000 shares held in the Pension Plan Trust have been accounted for as treasury shares. The PBGC has a second priority lien on the assets of Laidlaw's U.S. operating subsidiaries other than Greyhound to secure Laidlaw's funding obligations under the PBGC Agreement. Greyhound's defined benefit pension plan for employees represented by the Amalgamated Transit Union represents approximately 70% of the total plan assets and benefit obligation as of August 31, 2004. The ATU Plan is the largest of the Greyhound U.S. Plans. Based on current regulations and plan asset values at August 31, 2004, and assuming annual investment returns exceed 3% and that the contributions required under the PBGC Agreement are made along this timeframe, Laidlaw does not anticipate any significant additional minimum funding requirements for the ATU Plan over the next several years. However, Mr. Benson says there is no assurance that the ATU Plan will be able to earn the assumed rate of return, that new regulations will not prescribe changes in actuarial mortality tables and discount rates, or that there will be market driven changes in the discount rates, which would result in the Laidlaw Group being required to make significant additional minimum funding contributions in the future. The contributions under the PBGC Agreement are in addition to any minimum funding obligations required under the current regulations. Accordingly, Laidlaw expects to contribute an additional $13,700,000 to all plans other than the ATU Plan, which currently has no minimum funding requirements, for the year ended August 31, 2005. Headquartered in Arlington, Texas, Laidlaw, Inc., now known as Laidlaw International, Inc., -- http://www.laidlaw.com/-- is North America's #1 bus operator. Laidlaw's school buses transport more than 2 million students daily, and its Transit and Tour Services division provides daily city transportation through more than 200 contracts in the US and Canada. Laidlaw filed for chapter 11 protection on June 28, 2001 (Bankr. W.D.N.Y. Case No. 01-14099). Garry M. Graber, Esq., at Hodgson Russ LLP, represents the Debtors. Laidlaw International emerged from bankruptcy on June 23, 2003. * * * As reported in the Troubled Company Reporter on Dec. 27, 2004, Moody's Investors Service has placed the long-term debt ratings of Laidlaw International, Inc., under review for possible upgrade. The review is prompted by the recent announcement by the company that it had entered into a definitive agreement to sell both of its healthcare businesses to Onex Partners LP, an affiliate of Onex Corporation, for $820 million. Net proceeds after fees and assumption of a small amount of debt by the buyer is estimated at $775 million, with a majority of the proceeds intended to be used to repay substantial levels of Laidlaw's existing debt. Moody's has also assigned a Speculative Grade Liquidity Rating of SGL-2 to Laidlaw International, Inc. As part of the rating action, Moody's has reassigned to Laidlaw International, Inc., certain ratings, including the senior implied and senior unsecured issuer ratings, originally assigned at Laidlaw, Inc., in order to reflect more appropriately the company's current organizational structure. As reported in the Troubled Company Reporter on Dec. 9, 2004, Standard & Poor's Ratings Services placed its ratings, including its 'BB' corporate credit rating, on Laidlaw International, Inc., on CreditWatch with positive implications. The rating action follows Laidlaw's announcement that it has entered into definitive agreements to sell both of its health care companies, American Medical Response and Emcare, to Onex Partners L.P. for $820 million. Laidlaw expects to receive net cash proceeds of $775 million upon closing of the transaction, which is expected by the end of March 2005. Naperville, Illinois-based Laidlaw currently has about $1.5 billion of lease-adjusted debt. LB COMM'L: Moody's Junks $2.678M Class M & $2.23M Class N Notes --------------------------------------------------------------- Moody's Investors Service upgraded the rating of five classes, downgraded the ratings of two classes and affirmed the ratings of eight classes of LB Commercial Mortgage Trust 1999-C2, Commercial Mortgage Pass-Through Certificates, Series 1999-C2. Moody's rating action are: * Class A-1, $124,081,507, Fixed, affirmed at Aaa * Class A-2, $450,024,000, Fixed, affirmed at Aaa * Class X, Notional, affirmed at Aaa * Class B, $37,928,000, Fixed, upgraded to Aaa from Aa2 * Class C, $37,929,000, Fixed, upgraded to Aa3 from A2 * Class D, $13,386,000, Fixed, upgraded to A1 from A3 * Class E, $23,427,000, Fixed, upgraded to A3 from Baa2 * Class F, $12,271,000, Fixed, upgraded to Baa2 from Baa3 * Class G, $11,155,000, Fixed, affirmed at Ba1 * Class H, $17,849,000, Fixed, affirmed at Ba2 * Class J, $4,462,000, Fixed, affirmed at Ba3 * Class K, $7,586,000, Fixed, affirmed at B1 * Class L, $9,816,000, Fixed, affirmed at B2 * Class M, $2,678,000, Fixed, downgraded to Caa1 from B3 * Class N, $2,230,000, Fixed, downgraded to Caa3 from Caa2 As of the January 18, 2005 distribution date, the transaction's aggregate principal balance has decreased by approximately 14.7% to $761.3 million from $892.4 million at closing. The Certificates are collateralized by 121 loans secured by commercial and multifamily properties. The pool includes an investment grade large loan component representing 33.9% of the pool, a conduit component representing 63.2% of the pool and credit tenant lease component representing 2.9% of the pool. The conduit loans range in size from less than 0.1% to 2.5% of the pool, with the top ten conduit loans representing 25.3% of the pool. Three loans, representing 3.4% of the pool, defeased and have been replaced with U.S. Government securities. Two loans have been liquidated from the pool resulting in aggregate realized losses of approximately $300,000. Three loans, representing 1.5% of the pool, are in special servicing. Moody's has estimated aggregate losses of approximately $2.4 million for all of the specially serviced loans. Thirty-one loans, representing 18.8% of the pool, are on the master servicer's watchlist including four of the top ten conduit loans. Moody's was provided with year-end 2003 operating results for 98.4% of the pool and partial year 2004 operating results for 67.4% of the pool. Moody's weighted average loan to value ratio for the conduit portion of the pool is 83.1%, compared to 87.6% at origination. The upgrade of Classes B, C, D, E and F is due to increased subordination levels, improved overall conduit pool performance and the improved performance of one of the shadow rated loans. The downgrade of Classes M and N is due to realized and expected losses on the specially serviced loans and loan to value ratio dispersion. Based on Moody's analysis, 20.1% of the conduit pool has a loan to value ratio greater than 100.0%, compared to 0.0% at securitization. The large loan component consists of two investment grade shadow rated loans. The SunAmerica Loan ($137.0 million - 18.0%) is secured by a Class A 780,000 square foot office building located in the Century City submarket of Los Angeles, California. The loan represents the A note in a whole loan that has a current balance of $200.5 million. The B note is held outside the trust. Major tenants include SunAmerica Life Insurance Company, Moody's insurance financial strength rating Aaa, Bear Stearns Corporation, Moody's long term issuer rating Aa3, and O'Melveny & Myers, which together lease 28.0% of the property. Each of these tenants has extended its lease since securitization, but the aggregate current base rents are approximately $2.8 million below securitization levels. The property is currently 88.6% occupied, compared to 96.0% at securitization. Moody's shadow rating for this loan is Aa3, compared to Aa2 at securitization. The Century City Shopping Center Loan ($121.3 million - 15.9%) is secured by a 784,000 square foot regional mall located in Century City, Los Angeles. The loan represents the A note in a whole loan that has a current balance of $153.3 million. The B note is held outside the trust. The shopping center is anchored by Bloomingdale's and Macy's. The property is currently 95.4% occupied, essentially the same as at securitization. The property's financial performance has improved significantly since securitization, largely due to increased revenues and stable operating expenses. Moody's shadow rating for this loan is Aa3, compared to A3 at securitization. The top three conduit loans represent 6.4% of the outstanding pool balance. The largest conduit loan is the Weberstown Mall Loan ($19.4 million -- 2.5%), which is secured by an 845,000 square foot regional mall located in Stockton, California. The center is anchored by Dillard's, Sears and J.C. Penney. The center's occupancy is 100.0%, compared to 80.4% at securitization. Moody's loan to value ratio is 62.3%, compared to 73.3% at securitization. The second largest conduit loan is the Monmouth Executive Center Loan ($15.9 million -- 2.1% of pool), which is secured by a 173,000 square foot Class B office building located in Freehold, New Jersey. The property's performance has declined since securitization due to lease rollovers. The property is 58.1% leased, compared to 97.7% at origination. The loan is on the watchlist due to occupancy declines. Moody's loan to value ratioF is in excess of 100.0%, compared to 95.5% at securitization. The third largest conduit loan is the Capital Senior Living -- Tesson Heights Loan ($13.9 million -- 1.8%), which is secured by a 186-unit assisted living facility located in St. Louis, Missouri. The facility is 98.0% occupied, compared to 93.0% at securitization. Moody's loan to value ratio is 81.1%, compared to 88.6% at securitization. The largest exposures in the credit tenant lease component are CVS (Moody's senior unsecured rating A3) and Walgreen's (Moody's long term issuer rating Aa3). The pool's collateral is a mix of retail (39.1%), office (27.2%), multifamily (12.1%), industrial (6.8%), lodging (4.5%), healthcare (4.0%), U.S. Government securities (3.4%) and credit tenant lease (2.9%). The collateral properties are located in 27 states and the District of Columbia. The highest state concentrations are California (50.2%), New York (4.8%), Texas (4.5%), Maryland (4.5%) and Florida (4.1%). All of the loans are fixed rate. LEMONTONIC INC: Appoints Michael Geddes to Board of Directors ------------------------------------------------------------- Lemontonic, Inc., (TSX-VEN: LEM) reported that Mr. Michael Geddes of Toronto, Ontario has been appointed to the Board of Directors. Mr. Geddes is the President and sole shareholder of Lone Eagle Entertainment, a Toronto-based production company. Lone Eagle Entertainment has produced a number of highly recognized reality-based productions, including 'Popstars', which debuted as the No. 1 Canadian Primetime Series on Canadian Television in February 2001 and continued this leadership for three straight seasons. This success was followed up by 'Hooked Up', 'The Call' and most recently 'The Office Temps', which recently completed principal photography and will debut on Global Television in the spring of 2005. Mr. Geddes was previously employed at Atlantis Communications, Inc., where he was Head of Marketing in the production and distribution divisions. Martin Doane, Chairman of the Corporation stated, "Michael's background as both an entrepreneur and the President of Lone Eagle Entertainment, a thought leader in its field, will be an asset as Lemontonic plans its expansion into additional markets and through multiple marketing channels." Lemontonic, Inc. -- http://www.lemontonic.com/-- is a social networking software company that has developed proprietary instant messaging technology. The Corporation has invested over six million over the past two years launching this technology into the online dating category and is poised to distribute its solution internationally and in additional verticals in 2005. At Sept. 30, 2004, the Company's stockholders' deficit widen to CDN$660,338 compared to a $397,999 deficit at Dec. 2003. LYNX THERAPEUTICS: Stockholders to Vote on Proposed Solexa Merger ----------------------------------------------------------------- Lynx Therapeutics, Inc. (Nasdaq:LYNX) will hold its 2004 annual meeting of stockholders on March 1, 2005, at Lynx's principal executive offices located at 25861 Industrial Boulevard, Hayward, Calif., beginning at 11 a.m. P.T. The proposals for consideration by Lynx's stockholders include approval of the previously announced business combination with United Kingdom-based Solexa Limited. Lynx began mailing a Proxy Statement/Prospectus containing information about the annual meeting, including the proposed business combination with Solexa and other items for stockholder consideration on Jan. 28, 2005. Lynx stockholders of record at the close of business on Jan. 3, 2005, are entitled to vote at the annual meeting. "We urge our stockholders, regardless of the number of shares they hold, to vote in favor of the proposals in the Proxy Statement/Prospectus, including the items relating to the proposed Solexa combination, as we believe joining forces will provide strategic and financial benefits to Lynx stockholders, particularly in reducing the cost and time to develop and commercialize our jointly owned technology," stated Mary L. Schramke, Ph.D., Lynx's acting chief executive officer. "Additionally, we believe that following the upcoming stockholders' meeting, Lynx will again be in full compliance with Nasdaq listing requirements. We have filed an appeal with Nasdaq, which stayed Nasdaq's decision to delist our shares, and concurrently we have filed an application for initial listing of our shares following consummation of the proposed transaction with Solexa." On Jan. 4, 2005, Lynx received a Nasdaq Staff Determination letter indicating that its securities are subject to delisting from the Nasdaq SmallCap Market based on the Company's failure to hold an annual meeting of stockholders by Dec. 31, 2004, in accordance with Nasdaq Marketplace Rule 4350(e) and solicit proxies and provide proxy statements to Nasdaq in accordance with Nasdaq Marketplace Rule and 4350(g). Lynx requested and was granted a hearing before a Nasdaq Listing Qualifications Panel to be held on February 9, 2005 to review the Staff's determination. However, there can be no assurance that the Listing Qualifications Panel will grant Lynx's request for continued listing. Lynx's common stock will continue to be listed on the Nasdaq SmallCap Market pending a final ruling. On Sept. 28, 2004, Lynx and United Kingdom-based Solexa Limited announced the signing of a definitive agreement providing for the combination of the two companies. On Jan. 21, 2005, Lynx filed a final Registration Statement on Form S-4 regarding the proposed transaction with Solexa and other matters and on Jan. 24, 2005, Lynx filed a Proxy Statement/Prospectus with the Securities and Exchange Commission, which is available at the SEC Web site at http://www.sec.gov/The transaction, which is subject to approval by the Lynx stockholders and acceptance by the Solexa shareholders, is expected to close in the first quarter of 2005. About the Company Lynx believes that it is a leader in the development and application of novel genomic analysis solutions. By "novel," Lynx means next generation technology that will take the engagement of thought leaders before broader commercial acceptance can occur. Lynx's Massively Parallel Sequencing System (MPSS(TM)) consists of proprietary instrumentation and software that are used to analyze millions of DNA molecules in parallel, enabling genome structure characterization at an unprecedented level of resolution. As applied to gene expression analysis, MPSS(TM) provides comprehensive and quantitative digital information important to modern systems biology research in the pharmaceutical, biotechnology and agricultural industries. For more information, visit Lynx's Web site at http://www.lynxgen.com/ * * * Going Concern Doubt In its Form 10-Q for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, Lynx Therapeutics' accountants, Ernst & Young LLP, included a going concern opinion in its financial statements for the year ended Dec. 31, 2003, due to losses incurred since inception. These losses continue in 2004, with a $4.3 million net loss for the three months ended Sept. 30, 2004. "We are considering various options, which include securing additional equity financing, obtaining new collaborators and customers and other strategic actions," the Company said in its SEC filing. "If we raise additional capital by issuing equity or convertible debt securities, our existing stockholders may experience substantial dilution. There can be no assurance that additional financing will be available on satisfactory terms, or at all. If we are unable to secure additional financing on reasonable terms, or are unable to generate sufficient new sources of revenue through arrangements with customers, collaborators and licensees, we will be forced to take substantial restructuring actions, which may include significantly reducing our anticipated level of expenditures, the sale of some or all of our assets, or obtaining funds by entering into financing or collaborative agreements on unattractive terms, or we will not be able to fund operations." MAGNUM HUNTER: Moody's Reviewing Ratings & May Upgrade ------------------------------------------------------ Moody's placed Magnum Hunter Resource's ratings under review for possible upgrade, including its B1 senior implied and B2 senior unsecured note ratings. MHR's rating outlook had been positive. This follows MHR's announcement that it will be acquired in an all-stock transaction by unleveraged Cimarex Energy (unrated). Cimarex' management will run the merged business. The merger is valued at approximately $2.1 billion, with Cimarex assuming MHR's $645 million of debt as of December 31, 2004. Cimarex is the product of the 2002 merger of Key Production and Helmerich and Paynes's upstream division. The merger adds a substantial Mid-continent dimension to MHR and adds a substantial Permian Basin dimension to Cimarex. There is a degree of overlap in both firm's Gulf Coast activity. Importantly, Cimarex management has long been known for a very conservative leverage philosophy and for its conservative bookings of proven undeveloped reserves. Based on Cimarex' more conservative estimates of MHR reserves, it is paying $14/boe or $2.33/mcfe for MHR's reserves and approximately $48,000/boe of daily MHR production. The merged firm would hold approximately 224.8 mmboe of proven reserves, of which 186.6 mmboe or 83% of reserves would be proven developed. The merger roughly doubles each firm's production. Cimarex' proven developed reserve life has been approximately a comparatively short 5.2 years while MHR's has been approximately 8.5 years. The merged firm would have a below average proven developed reserve life of approximately 6.4 years. The decision on whether to upgrade the merged entity or not will rest largely on a review of both firm's forthcoming year-end 2004 results, in particular each firm's 2004 FAS 69 data, and importantly, the merged company's likely growth and funding strategies. Cimarex has had high reserve replacement costs, especially extremely high costs in 2003. MHR's reserve replacement costs exceed $11/boe in 2003. Cimarex has also reported that it will not book 100 bcfe of MHR's estimated (as of October 1, 2004) 1,000 bcfe of proven reserves as proven, indicating a more conservative standard for booking reserves. Cimarex' effective de-booking of 100 bcfe of MHR reserves also indicates that MHR's past reserve replacement costs would have been higher than reported. Nevertheless, based upon year-end reserve data indicated by both firms, and deducting the 100 bcfe of MHR reserves that Cimarex will not book as proven, the merger would very considerably reduce leverage on proven developed reserves from a high $5.45/Boe of proven developed reserves to approximately $3.50/Boe of proven developed reserves. Magnum Hunter Resources, Inc., is headquartered in Irving, Texas. Cimarex Energy Co. is headquartered in Denver Colorado. MERRILL LYNCH: Fitch Puts Low-B Ratings on Private Mortgage Certs. ------------------------------------------------------------------ Merrill Lynch Mortgage Investors, Inc. -- MLMI, mortgage pass- through certificates, series MLMI 2005-A1, are rated by Fitch Ratings: -- $539.6 million classes I-A-1, II-A-1, II-A-2, and III-A (senior certificates) 'AAA'; -- $7.8 million class M-1 certificates 'AA'; -- $4.8 million class M-2 certificates 'A'; -- $2.0 million class M-3 certificates 'BBB'; -- $2.0 million privately offered class B-1 certificates 'BB'; -- $1.1 million privately offered class B-2 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 3.50% subordination provided by: * the 1.40% class M-1, * the 0.85% class M-2, * the 0.35% class M-3, * the 0.35% class B-1, * the 0.20% class B-2, and * the 0.35% class B-3 (not rated by Fitch). Classes rated based on their respective subordination: * M-1 'AA', * M-2 'A', * M-3 'BBB', * B-1 'BB', and * B-2 'B'. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults, as well as bankruptcy, fraud, and special hazard losses in limited amounts. Fitch believes the above credit enhancement will be adequate to cover credit losses. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, and the master servicing capabilities of Wells Fargo Bank, N.A. (rated 'RMS1' by Fitch). The trust consists of 1,258 conventional, adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $559,198,793 as of the cut-off date (Jan. 1, 2005). Each of the mortgage loans are fixed rate for a period of three, five, or seven years, after which they are indexed off the one-year LIBOR or one-year U.S. Treasury. The average unpaid principal balance as of the cut-off- date is $444,514. The weighted average original loan-to-value ratio - OLTV -- is 70.76%. The weighted average FICO is 738. Cash-out refinance loans represent 18.38% of the loan pool. The three states that represent the largest portion of the mortgage loans are: * California (49.33%), * Virginia (8.53%), and * Maryland (5.80%). None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ MLMI, the depositor, will assign all its interest in the mortgage loans to the trustee for the benefit of certificate-holders. For federal income tax purposes, an election will be made to treat the trust fund as multiple real estate mortgage investment conduits. Wachovia Bank, National Association, will act as trustee. MILLPORT, ALABAMA: United States Wants a Receiver Appointed ----------------------------------------------------------- Alice H. Martin, Esq., Unites States attorney for the Northern District of Alabama and Lloyd C. Peeples, III, Esq., Assistant U.S. Attorney for the Dept. of Agriculture's (USDA) Rural Utility Service ask the U.S. Bankruptcy Court for the District of Northern Alabama, Jasper Division, to appoint a receiver in the Town of Millport, Alabama's chapter 9 case. The government wants a receiver appointed to fix rates and collect charges sufficient to provide payments to the USDA, cure default payments, and pay operating and maintenance expenses of Millport's water and sewerage systems. Between 1993 and 2000, Millport issued four revenue bonds: * $338,000 Series 1993 Bond * $350,000 Series 1997 * $473,000 Series 1999 * $920,000 Series 2000 as security for the loans provided by the USDA. The government alleges that Millport has failed to make its scheduled installment payment of $111,044.43 due on Jan. 1, 2004. The total remaining indebtedness due on the Bonds is $2,014,000. Additionally, Millport has failed to keep its accounts current and provide adequate financial data to the USDA. Despite the USDA's repeated and amicable demands made to Millport, it remained under payment default and refuses to provide the financial data. The Town of Millport, Alabama, filed for chapter 9 protection on Dec. 14, 2004 (Bankr. N.D. Ala. Case No. 04-73885). Robert L. Shields, III, Esq., at The Shileds Law Firm represents the Debtor in its restructuring efforts. MIRANT CORP: Chief Executive Officer Marce Fuller Will Resign ------------------------------------------------------------- Dan Streek, Mirant Corporation's Vice-President, Controller, and Principal Accounting Officer, disclosed in a Form 8-K filing dated December 30, 2004, with the Securities and Exchange Commission that the company entered into a Separation Agreement and Release of Certain Claims with its Chief Executive Officer, S. Marce Fuller. The Separation Agreement provides for the payment by Mirant Corp. of a $3,400,000 lump sum separation payment to Ms. Fuller upon the termination of her active employment with Mirant Corp. In addition, the Separation Agreement provides that Ms. Fuller will be paid her 2004 short-term incentive at her $850,000 target amount. In exchange, Ms. Fuller releases all rights and claims under any change-in-control agreement or plan of reorganization with Mirant Corp. The filing does not indicate when Ms. Fuller will step down. The terms of the Agreement have been approved by the U.S. Bankruptcy Court for the Northern District of Texas pursuant to an Order issued on September 2, 2004, but filed under seal. All of Mirant's official committees support the Separation Agreement. A full-text copy of the Separation Agreement is available for free: http://sec.gov/Archives/edgar/data/1010775/000110465904041556/a04-15389_1ex99d1.htm 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) MOTHERS WORK: Moody's Junks $125 Million Senior Secured Notes ------------------------------------------------------------- Moody's Investors Service downgraded the long-term debt ratings of Mothers Work, Inc. The outlook is stable. The downgrade reflects Moody's expectations that there will be no near term turnaround in the company's operating performance given the competitive pressures in the maternity apparel market and the growth in its store overhead cost structure. In addition, the downgrade reflects Moody's opinion that Mothers Work is over-stored and that the increase in cost due to the growth in the store base has made Mothers Work's results highly sensitive to any further erosion in comparable store sales or increases in markdowns. The ratings downgraded are: * Senior Implied - to B3 from B2; * $125 million senior secured guaranteed senior notes, maturing 2010 - to Caa1 from B3; * Unsecured Issuer Rating - to Caa1 from B3. Moody's does not rate Mothers Work's $60 million revolving credit facility, maturing October 2009. Approximately $6.9 million of letters of credit were outstanding as of December 31, 2004, with $53.1 million of committed availability. The stable ratings outlook reflects Moody's expectation that Mothers Work will continue to have adequate liquidity through a combination of revolver availability and on balance sheet cash. Internally generated cash flow is expected to support its working capital and capital expenditures for fiscal year 2005. However, given the high fixed costs associated with the growing store base, any shortfall in sales or gross margins could potentially cause the company's free cash flow to be negative. In addition, the stable outlook reflects Mothers Work's stable capital structure, with the senior notes not coming due until 2010 and the absence of revolver covenants as long as $10 million of availability is retained. The B3 senior implied rating reflects Mothers Work's high rent adjusted leverage, weak fixed charge coverage, softening margins, weak comparable store sales trends, sales volatility, and significantly increased competition from the addition of maternity-related goods by other specialty apparel stores. The rating recognizes Mothers Work's adequate liquidity from its on balance sheet cash and $60 million revolving credit facility. The rating recognizes the "needs based" demand for the company's products, the strong brand name recognition of its key brands in the maternity space, and its new strategic initiatives to expand distribution. Mothers Work began rolling out leased departments in Sears in April 2004 and will roll out a licensed maternity clothing line in Kohl's in February 2005. While these two partnerships make strategic sense, it is Moody's opinion that they do not address the fundamental problem of the cost structure associated with the company's own store base. In addition, Mothers Work has begun the roll-out of a "Destination Maternity" superstore that will consolidate several stores in existing markets. Although this will help to modestly reduce the store count, it will take time and capital to implement and does not provide a near term relief to the store cost structure. Mothers Work's sales for the LTM period ended December 31, 2004 were approximately $520 million, up from prior periods, but same store sales continued to be weaker with comparable store sales declining by 4.2% for the quarter. For the LTM period, EBIT and EBIT margin were $21.3 million and 4.1% respectively compared with $24.6 million and 4.7% for the fiscal year ended September 30, 2004. The decline in earnings caused adjusted debt/EBITDAR to rise to 6.9x from 6.7x at fiscal year end. Given the recent downgrade, a ratings upgrade is highly unlikely over the near term. A positive outlook could be assigned should the negative trend in comparable store sales reverse and the company's earnings improve such that free cash flow to debt is sustained between 2 to 5%. Mothers Work's ratings eventually could move upward should comparable store sales turn positive and the store cost structure be reduced, causing the Company to sustain adjusted debt to EBITDAR below 6.25x and free cash flow to debt above 5%. The ratings could move downward should Mothers Work's liquidity deteriorate or the Company needs to borrow to permanently finance working capital, capital expenditures, or share repurchases. Ratings could also move downward should operating performance decline further causing a further weakening in the Company's credit metrics. The rating on the senior notes is notched down by one from the senior implied to reflect its junior position to the $60 million senior secured asset-based credit facility. In October 2004, the company executed a new $60 million asset-based facility that matures in October 2009. Mothers Work, Inc., headquartered in Philadelphia, Pennsylvania, is the largest independent retailer of maternity and related apparel in the U.S. As of September 30, 2004 Mothers Work operated 1,115 maternity locations, including 883 stores and 232 leased departments, predominately under the trade names Motherhood Maternity, A Pea in the Pod, and Mimi Maternity. Revenues for the fiscal year ended September 30, 2004 were approximately $518 million. NATIONAL CENTURY: Trust Objects to Claims of Three Ex-Directors --------------------------------------------------------------- The Unencumbered Assets Trust -- successor-in-interest to National Century Financial Enterprises, Inc., and its debtor-affiliates -- asks the U.S. Bankruptcy Court for the Southern District of Ohio to disallow certain proofs of claim filed by Harold W. Pote, Thomas G. Mendell and Eric R. Wilkinson, former directors and officers of the Debtors. Messrs. Pote, Mendell and Wilkinson seek claims for indemnity against certain Debtors. Each seeks $873,415 for costs and expenses allegedly incurred by the claimant, and "amounts that remain contingent and unliquidated" as a result of the claimant's alleged right to indemnification, contribution, reimbursement or other payments: Original Amended Asserted Claimant Claim No. Claim No. Debtor -------- --------- --------- -------- Pote, Harold 375 873 NPF VI 376 874 NPF XII 377 875 NCFE Mendell, Thomas 378 -- NPF VI 379 877 NPF XII 373 876 NCFE 373 878 NCFE Wilkinson, Eric 371 870 NPFVI 374 871 NPF XII 372 872 NCFE The Former Directors also seek indemnification for various lawsuits filed against them: -- Bank One, N.A. v. Poulsen, et al., No. 2:03cv394 (S.D. Ohio); -- City of Chandler, et al., v. Bank One, N.A., et at., No. 2:03cv1220 (D. Ariz.); -- Crown Cork & Seal Co., Inc., et al. v. Credit Suisse First Boston Corp., et al., No. 2:03cr2084 (D. Ariz.); -- ING Bank NV v. JPMorgan Chase Bank, et al., No. 1:03cv7396 (S.D.N.Y.); -- Lloyds TSB Bank PLC v. Bank One, N.A. et al., No. 2:03ev2784 (D.N.J.); -- Metropolitan Life Insurance Co., et al. v. Bank One, N.A., et al., No. 2:03cv1882 (D.N.J.); -- New York City Employees' Retirement System, et al. v. Bank One, N.A., et al., No. 1:03cv9973 (S.D.N.Y.); -- Parrett v. Bank One, N.A., et al., No. 2:03ev541 (D. Ariz.); -- Pharos Capital Partners, L.P. v. Deloitte & Touche, L.L.P., et al., No. 2:03ev362 (S.D. Ohio); and -- State of Arizona, et al. v. Credit Suisse First Boston Corp., et al., No. 2:Ocv1618 (D. Ariz.). Claims for Indemnification Sydney Ballesteros, Esq., at Gibbs & Bruns, LLP, in Houston, Texas, points out that the Former Directors' Claims meet the three elements held by the Sixth Circuit to establish that a claim is disallowed under Section 502(e)(1)(B) of the Bankruptcy Code: (a) The Claims seek indemnity. The concept of reimbursement includes indemnity; (b) The various claims asserted in various pending lawsuits are claims on which the Debtors could be held jointly liable with the Former Directors or vicariously liable through them; and (c) The Former Directors' asserted right to indemnification under the Debtors' Articles of Incorporation, Debtor's Code of Regulation, and the Debtor's by-laws is not absolute, but contingent. Ms. Ballesteros also cites that there has been no determination on the merits of the lawsuits against the Former Directors and no determination by disinterested directors as to whether the Former Directors acted in good faith and in the Debtors' best interests. Pursuant to the Ohio Code, the Former Directors are not entitled to reimbursements for defense costs unless and until they are successful on the merits of the lawsuits. The Former Directors offered no evidence to establish that they actually and reasonably incurred damages as a result of the pending litigation against them. Insider Claims The Former Directors are insiders as defined under Section 101(31)(B) and are, therefore, subject to exception of Section 502(b)(4), which provides that: ". . . the court, after notice and hearing, will determine the amount of such claim . . . except to the extent that - (4)if such claims is for services of an insider or attorney of the debtor, such claim exceeds the reasonable value of such services." No Supporting Documentation Ms. Ballesteros further asserts that the Former Directors failed to provide, much less establish, any "credible and reliable" evidence to support their indemnification claims: (a) For most litigation regarding which indemnity is sought, the specific claims and allegations being defended are not disclosed, nor is there any explanation as to why their purported expenses would fall within the scope of any asserted and cognizable indemnity obligation; (b) No calculation, information or documents is provided for the $873,415 figure asserted by each Former Director. Since each of Messrs. Pote, Wilkinson and Mendell has been sued in a different combination of lawsuits, the calculation and claim for the identical amount is suspect; (c) No documentation has been provided to show that the amounts were "actually" or "reasonably incurred." The Former Directors' expenses have been paid by JPMorgan or its affiliates. Accordingly, (1) the Former Directors have not themselves "actually" incurred or paid any of the expenses they assert, (2) the expenses were incurred in whole or in part to protect JPMorgan and are thus not subject to indemnity by the Debtors, and (3) the expenses were incurred in whole or in part due to the Former Directors' service to and affiliation with JPMorgan rather than solely or primarily due to service or loyalties to the Debtors. Even if the Former Directors met or could meet the requirements of Section 502(b), their Claims should be disallowed on the basis that they are subject to valid defenses, Ms. Ballesteros contends. The actions of Messrs. Pote, Mendell and Wilkinson, as NCFE directors, may be related to the series of events resulting in the filing of the Debtors' cases. Thus, any claims asserted by the Former Directors are subject to the defenses of set-off and recoupment. Some if not all of the Claims would establish that the Former Directors did not act in good faith and in a manner believed to be in the Debtors' best interests. Thus, the Debtors may not indemnify the Former Directors if they are found liable for the conduct they are alleged to have committed in the lawsuits pending against them. For similar reasons, the Claims will be barred by the doctrines of equitable estoppel, unclean hands, prior material breach and unjust enrichment if the Former Directors are found liable for the conduct they are alleged to have committed in the lawsuits pending against them. Withdrawal of the Reference Though many of the bankruptcy and procedural issues in the Trust's Objection do not implicate matters at issue in litigations pending before Judge Graham in the U.S. District Court for the Southern District of Ohio and many of the issues in the Objection may best be administered and resolved by the Bankruptcy Court, to the extent that particular rulings may affect or involve specific issues also in dispute in cases before Judge Graham, the Trust asks the District Court to withdraw the reference with respect to those particular issues so that the discovery and adjudication on those matters may be coordinated by Judge Graham. Headquartered in Dublin, Ohio, National Century Financial Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB Claims Trust, the Litigation Trust, the VI/XII Collateral Trust, and the Unencumbered Assets Trust, is in the midst of liquidating estate assets. The Company filed for Chapter 11 protection on November 18, 2002 (Bankr. S.D. Ohio Case No. 02-65235). The Court confirmed the Debtors' Fourth Amended Plan of Liquidation on April 16, 2004. Paul E. Harner, Esq., at Jones Day, represents the Debtors. (National Century Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) NDCHEALTH CORP: Defaults on Sr. Notes Due to Late Quarterly Filing ------------------------------------------------------------------ NDCHealth Corporation (NYSE: NDC) is continuing to work to complete and file with the Securities and Exchange Commission as soon as possible its Quarterly Report on Form 10-Q for the fiscal second quarter ended Nov. 26, 2004, and anticipates doing so prior to March 21, 2005. The company also anticipates filing restated financial results on Forms 10-K/A and 10-Q/A beginning with the fiscal year ended May 31, 2002, through the first quarter of fiscal 2005 ended Aug. 27, 2004 at the same time. In addition to NDCHealth's focus on the previously disclosed contemplated areas of adjustment to be reflected in its restated financial statements, the company determined to review and has reviewed certain other aspects of its business regarding the application of generally accepted accounting principles. In this regard, the company has identified certain Intelligent Health Repository services within its Information Management segment for which its review indicates that the timing of recognition of some revenue should have been delayed in fiscal 2004 and the first quarter of fiscal 2005. These services represent less than 4% of the company's total revenue during this time period, and only a portion of this revenue is affected. As previously disclosed, the restatement will also include adjustments related to its physician software products and other identified adjustments from prior periods. As part of the process to complete its restated financial statements, NDCHealth is assembling the detailed support required to make the specific adjusting entries for the items described above. The company does not believe that the trends of its annual revenue, earnings and cash flow results will be substantially changed by the restatement. In addition, all adjustments are expected to be non-cash in nature. NDCHealth also reported that, consistent with its prior disclosure indicating this might occur, the company has received notice under its 10-1/2% Senior Subordinated Notes due 2012 that the company's delay in filing its Form 10-Q for the quarter ended Nov. 26, 2004, with the SEC constitutes a default under the Notes. The company expects such default will not, however, result in any acceleration of the Notes if the company files its Form 10-Q prior to March 21st, as anticipated. About the Company NDCHealth Corp. -- http://www.ndchealth.com/-- is a leading information solutions company serving all sectors of healthcare. Its network solutions have long been among the nation's leading, automating the exchange of information among pharmacies, payers, hospitals and physicians. Its systems and information management solutions help improve operational efficiencies and business decision making for providers, retail pharmacy and pharmaceutical manufacturers. Headquartered at Atlanta, Ga., the company provides information vital to the delivery of healthcare every day. * * * As reported in the Troubled Company Reporter on Jan. 10, 2005, Moody's Investors Service downgraded the senior secured bank facility rating of NDCHealth Corporation to B1 from Ba3, the senior subordinated notes rating to B3 from B2 and the issuer rating to B2 from B1 and has placed the ratings on review for further possible downgrade. The downgrade is prompted by continued erosion of its fundamental financial performance. The review for possible downgrade is prompted by the company's failure to timely file its quarterly financial statements due to its determination to restate prior period results beginning with its fiscal year end May 31, 2002, which precludes access to its revolving credit facility. Ratings on review for further possible downgrade: * Senior Secured Bank Facility Rating B1 (previously Ba3) * Senior Subordinated Debt B3 (previously B2) * Senior Implied Rating B1 (previously Ba3) * LT Issuer Rating B2 (previously B1) NEW WORLD: Retains Keen Realty to Market Winchester Property ------------------------------------------------------------ New World Pasta Company has retained Keen Realty, LLC, to market for sale approximately 48 acres of excess land in Winchester, Virginia. New World Pasta filed for Chapter 11 protection in May 2004 in the United States Bankruptcy Court for the Middle District of Pennsylvania. Available to users and investors are 48+/- acres of vacant land located on Park Center Drive in the Fort Colliers Industrial Park in Winchester, Va. The land is excess land from a 73-acre parcel in which New World Pasta utilizes 25 acres. The land is zoned M1- General Industrial and has available all utilities. Also, the property has road access at two points. The land is sited only 1/2 a mile from US-Route 11 and one mile from Interstate 81. Fort Colliers Industrial Park is only an hour driving time from Washington, D.C. "This is an excellent development opportunity," said Craig Fox, Keen Realty's Vice President. "This land is in a premier location and already has utilities in place. We are already receiving offers so we ask that interested parties move quickly," Mr. Fox added. Keen Realty, LLC is a consulting firm specializing in the disposition of excess real estate. Other current and recent clients of Keen include Frank's Nursery & Crafts, Cable & Wireless, Arthur Andersen, Country Home Bakers, Fleming, House of Lloyd, Huffman Koos, Just for Feet, Pillowtex, Spiegel/Eddie Bauer, and Warnaco. For more information on the sale of these facilities, contact: Keen Realty, LLC 60 Cutter Mill Road Suite 407 Great Neck, N.Y. 11021 Telephone: 516-482-2700 Fax: 516-482-5764 e-mail: krc@keenconsultants.com Attn: Craig Fox Headquartered in Harrisburg, Pennsylvania, New World Pasta Company -- http://www.nwpasta.com/-- is a pasta manufacturer in the United States. The Company, along with its debtor-affiliates, filed for chapter 11 protection (Bankr. M.D. Penn. Case No. 04- 02817) on May 10, 2004. Eric L. Brossman, Esq., and Robert Bein, Esq., at Saul Ewing LLP, in Harrisburg, serve as the Debtors' local counsel. Bonnie Steingart, Esq., and Vivek Melwani, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, represent the Creditors' Committee. In its latest Form 10-Q for the period ended June 29, 2002, New World Pasta reported $445,579,000 in total assets and $451,816,000 in total liabilities. NORTH ATLANTIC: CFO Resignation Prompts S&P to Junk Ratings ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on smokeless tobacco processor and niche cigarette manufacturer North Atlantic Holding Company, Inc., and its wholly owned subsidiary, North Atlantic Trading Co. Inc., including its corporate credit rating to 'CCC+' from 'B'. At the same time, the CreditWatch implications were revised to developing from negative. The ratings remain on CreditWatch where they were originally placed on Nov. 18, 2004. About $347 million of rated debt on New York, New York-based North Atlantic is affected. The downgrade follows: (i) the company's recent announcement that a key senior officer, David Brunson (the president and chief financial officer), has left the company; (ii) the amendment to the revolving credit facility that reduces the amount available to $35 million from $50 million (the credit agreement had originally called for a $10 million reduction after 18 months); and (iii) The hiring of management consulting firm, Alvarez and Marsal, to assess the company's operations, identify cost saving and performance-improvement opportunities. In addition, the company expects that it may be in violation of its fixed-charge covenant requirement for the 12 months ending March 31, 2005, and June 30, 2005, respectively. North Atlantic is currently in discussions with lenders on amending the covenant. If a default were to occur under the bank credit agreement, it would also trigger an event of default under the senior notes and under North Atlantic Holding's senior discount notes. Standard & Poor's will meet with management to discuss the current operating environment and North Atlantic's business strategies and financial policies. Furthermore, before resolving the CreditWatch listing, North Atlantic will have to secure amendments to its existing senior secured credit facility pertaining to the covenant violations. NOVELIS INC: TRC Capital Offers CDN $26.75 per Common Share ----------------------------------------------------------- Novelis, Inc., (NYSE: NVL; Toronto) has been notified of an unsolicited, below market "mini-tender" offer from TRC Capital Corporation. TRC is offering to purchase up to 2.5 million common shares of Novelis, or approximately 3.38% of the common shares outstanding, at a price of CDN $26.75 per common share. This is a discount of 2.90% from the closing price of NVL on the Toronto Stock Exchange on January 28, 2005. Novelis wishes to inform its common shareholders that it does not in any way recommend or endorse the TRC Capital Corporation offer, and that Novelis is in no way associated with TRC Capital Corporation, the offer, or any of their offer documentation. TRC Capital has made numerous unsolicited "mini-tender" offers for shares of other companies in the recent past. "Mini-tender" offers are offers to purchase a small percentage of a company's outstanding shares, thereby avoiding most of the filing, disclosure and procedural requirements of Canadian securities and United Sates federal securities legislation. The Canadian Securities Administrators and the United States Securities and Exchange Commission have cautioned investors about "mini-tender" offers, noting that these offers invite investors to sell their securities at below-market prices Novelis advises shareholders to consult their financial advisors and to exercise caution with respect to this offer. Novelis understands that shareholders who have already tendered may withdraw their common shares by providing the written notice described in the TRC Capital offering documents prior to the expiration of the offer. Novelis, Inc. -- http://www.novelis.com/-- which was spun-off by Alcan, Inc., effective Jan. 6, 2005, is the global leader in aluminum rolled products and aluminum can recycling. The Company has 37 operating facilities in 12 countries and more than 13,500 dedicated employees. Novelis has the unparalleled capability to provide its customers with a regional supply of high-end rolled aluminum products throughout Asia, Europe, North America, and South America. Through its advanced production capabilities, the Company supplies aluminum sheet and foil to the automotive and transportation, beverage and food packaging, construction and industrial, and printing markets. * * * As reported by the Troubled Company Reporter on Jan. 21, 2005, 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. As reported in the Troubled Company Reporter on Jan. 17, 2005, Moody's Investors Service assigned a B1 rating to Novelis, Inc.'s $1.4 billion senior unsecured, guaranteed note issue due January 2015 and affirmed the Company's existing ratings. The notes will be guaranteed by all wholly owned subsidiaries in the U.S. and Canada and certain wholly owned foreign subsidiaries. The guarantee structure is the same as that provided in the Company's recently placed senior secured bank facilities. The rating outlook is stable. O'SULLIVAN IND: Dec. 31 Balance Sheet Upside-Down by $184.5 Mil. ---------------------------------------------------------------- O'Sullivan Industries Holdings, Inc. (OTC: OSULP), a leading manufacturer and distributor of office, household and home organization RTA furniture, reported net sales of $66.2 million for its second fiscal quarter ended December 31, 2004. Second quarter sales increased 1.5% over prior year. Net sales grew sequentially 5.6% over first quarter and represented the second consecutive quarter of increasing sales. "Organizational changes and a focused strategic plan are beginning to manifest themselves in the marketplace," stated Bob Parker, President and CEO. "Bringing together a proven, professional senior management team has provided O'Sullivan with the opportunity for a more detailed focus on our key account sales and marketing strategies," Mr. Parker concluded. Cash flow for the second quarter was $6.9 million as compared to a negative $1.2 million reported in the first quarter. Six months cash flow results were a positive $5.8 million. There was no outstanding balance on the revolving line of credit at the close of the second quarter. These results are due to the intense focus on cash management throughout the business. Rick Walters, Executive Vice President and CFO, summarized, "By focusing on working capital improvements, especially on inventory efficiency and production control, we were able to generate a quarterly positive cash flow of $6.9 million while meeting all our current interest obligations. Continuing to emphasize balance sheet improvements and a company-wide focus on cash management should provide adequate funds to meet continuing cash needs and give us the financial stability for future growth." As expected, the focused execution on reducing working capital, especially inventory levels, resulted in an operating loss of $3.2 million for fiscal 2005's second quarter. This compares to an operating profit of $2.7 million in the fiscal 2004 second quarter. The main causes of the year-over-year reduction were the gross profit impact of unabsorbed manufacturing overhead due to lower factory production levels and continued high raw material costs. This gross profit impact was in-line with Company plans and reflects the successful execution of an inventory reduction of almost $10 million in the quarter. Net loss for the second quarter of fiscal 2005 was $12.1 million, compared to a net loss of $5.4 million for the same quarter of fiscal 2004. Net loss for the first half of fiscal 2005 was $20.6 million, compared to a loss of $12.7 million for the first half of fiscal 2004. The decline was due primarily to our lower operating income. EBITDA for fiscal 2005's second quarter was $0.04 million, or 0.1% of net sales, compared to EBITDA of $6.6 million, or 10.2% of net sales reported in the fiscal 2004 second quarter. This EBITDA decline is consistent with the operating income change noted above and reflects the impact of the inventory reduction focus. EBITDA should be considered in addition to, but not as a substitute for or superior to, operating income, net income, operating cash flow and other measures of financial performance prepared in accordance with generally accepted accounting principles. EBITDA may differ in the method of calculation from similarly titled measures used by other companies. EBITDA provides another measure of the operations of the business and liquidity prior to the impact of interest, taxes and depreciation. Further, EBITDA is a common method of valuing companies such as O'Sullivan. Conclusion and Outlook "The continued focus on the execution of our plan has resulted in a much needed reduction of working capital and a positive impact on cash," concluded Bob Parker. "We are committed to this cash management focus and believe our efforts to build a consumer- focused, marketing driven company will begin to show more favorable results by the end of fiscal '05 and into fiscal '06. However, financial performance for the balance of fiscal '05 will continue to be a challenge compared to the prior year results. We anticipate a reduction of net sales in the mid-single digit range and lower earnings due to the impact of high material costs, unfavorable manufacturing absorption as we reduce inventory, and a higher mix of promotionally priced products." At Dec. 31, 2004, O'Sullivan Industries' balance sheet showed a $184,526,000 stockholders' deficit, compared to a $150,093,000 deficit at Dec. 31, 2003. OMEGA HEALTH: Earns $8.9 Million of Net Income in Fourth Quarter ---------------------------------------------------------------- Omega Healthcare Investors, Inc. (NYSE:OHI) reported its results of operations for the quarter and fiscal year ended December 31, 2004. The Company also reported Funds From Operations available to common stockholders for the three and twelve months ended December 31, 2004 of $10.6 million or $0.22 per common share and a deficit of ($21.9) million or ($0.47) per common share, respectively. The $10.6 million of FFO available to common stockholders for the quarter includes the impact of $0.8 million of non-cash restricted stock expense. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts. Adjusted FFO, which excludes the impact of the non-cash charge, was $0.24 per common share for the three months ended December 31, 2004. GAAP Net Income Including the gain from discontinued operations of $3.8 million for the three months ended December 31, 2004, the Company reported net income available to common stockholders of $8.9 million, or $0.19 per diluted common share, on operating revenues of $24.2 million. This compares to net income available to common stockholders of $155 thousand, or $0.00 per diluted common share, and operating revenues of $21.7 million for the same period in 2003. Including the gain from discontinued operations of $3.3 million for the twelve months ended December 31, 2004, the Company reported a net loss available to common stockholders of ($40.1) million, or ($0.88) per diluted common share, on operating revenues of $90.5 million. This compares to net income of $2.9 million, or $0.08 per diluted common share, in 2003. The ($40.1) million net loss reported for the twelve months ended December 31, 2004, includes the impact of $53.8 million of non-cash redemption and refinancing charges and $6.4 million of exit fees associated with refinancing-related activities during the first half of 2004. Fourth Quarter Results -- Operating Revenues and Expenses Operating revenues for the three months ended December 31, 2004 were $24.2 million. Operating expenses for the three months ended December 31, 2004 totaled $8.4 million, comprised of $5.5 million of depreciation and amortization expense, $2.0 million of general, administrative and legal expenses and $0.8 million of restricted stock amortization. -- Other Expenses Interest expense for the quarter was $6.7 million and non-cash interest expense totaled $0.5 million. -- Funds From Operations For the three months ended December 31, 2004, reportable FFO available to common stockholders was $10.6 million, or $0.22 per common share, compared to $11.0 Million, or $0.20 per common share, for the same period in 2003. The $10.6 million of FFO for the quarter includes the impact of $0.8 million of non-cash restricted stock amortization associated with the Company's issuance of restricted stock grants to executive officers during the third quarter of 2004. However, when excluding the $0.8 million of restricted stock amortization described above in 2004 and certain non-recurring revenue and expense items in 2003, adjusted FFO was $11.5 million, or $0.24 per common share, compared to $11.0 million, or $0.20 per common share, for the same period in 2003. For further information, see the attached "Funds From Operations" schedule and notes. -- Asset Sales In December 2004, the Company sold three closed facilities, located in Florida, Pennsylvania and Washington, realizing proceeds of approximately $5.5 million, net of closing costs and other expenses, resulting in an accounting gain of approximately $3.8 million. The Company currently has no closed facilities remaining in its portfolio. Year End Results Operating Revenues and Expenses Operating revenues for the twelve months ended December 31, 2004 were $90.5 million. Operating expenses for the twelve months ended December 31, 2004 totaled $30.4 million, comprised of $21.5 million of depreciation and amortization expense, $7.7 million of general, administrative and legal expenses and $1.1 million of restricted stock amortization. Other Expenses - Cash interest expense for the twelve months ended December 31, 2004 was $23.1 million. In addition, $19.1 million of interest expense associated with refinancing activities was recorded during the first quarter of 2004 (see Financing Activities and Borrowing Arrangements section below). The Company also recorded during the second quarter of 2004 a $3.0 million charge relating to professional liability claims associated with the Company's former owned and operated facilities. Funds From Operations - For the twelve months ended December 31, 2004, reportable FFO available to common stockholders was a deficit of ($21.9) million, or ($0.47) per common share, compared to $35.0 million, or $0.64 per common share, for the same period in 2003. The 2004 FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by NAREIT and includes the impact of $53.8 million of non-cash refinancing-related charges, $6.4 million of exit fees associated with a terminated credit facility, $1.1 million of non-cash restricted stock amortization expense associated with the Company's issuance of restricted stock grants to executive officers and a $0.3 million adjustment to derivatives to their fair value. However, when excluding the charges described above in 2004 and certain other non-recurring revenue and expense items, adjusted FFO was $42.1 million, or $0.91 per common share, for 2004 as compared to $45.7 million, or $0.83 per common share, for 2003. For further information, see the attached "Funds From Operations" schedule and notes. Asset Sales - During 2004, the Company sold six closed facilities, realizing proceeds of approximately $5.7 million, net of closing costs and other expenses, resulting in an accounting gain of approximately $3.3 million. As a result, the Company currently has no closed facilities remaining in its portfolio. Financing Activities and Borrowing Arrangements 4.0 Million Primary Common Stock Offering - On December 15, 2004, the Company closed an underwritten public offering of 4,025,000 shares of Omega common stock at $11.96 per share, less underwriting discounts. The sale included 525,000 shares sold in connection with the exercise of an over-allotment option granted to the underwriters. The Company received approximately $45.7 million in net proceeds from the sale of the shares, after deducting underwriting discounts and before estimated offering expenses. $60 Million 7% Unsecured Notes Issuance - On October 29, 2004, the Company completed a privately placed offering of an additional $60 million aggregate principal amount of 7% senior notes due 2014 at an issue price of 102.25% of the principal amount of the notes (equal to a per annum yield to maturity of approximately 6.67%), resulting in gross proceeds to the Company of approximately $61.4 million. The terms of the notes offered were substantially identical to the Company's existing $200 million aggregate principal amount of 7% senior notes due 2014 issued in March 2004. The notes were issued through a private placement to qualified institutional buyers under Rule 144A under the Securities Act of 1933 and in offshore transactions pursuant to Regulation S under the Securities Act. Credit Facility Increased to $200 Million - On March 22, 2004, the Company entered into an agreement with Banc of America Securities LLC, as lead arranger, Bank of America, N.A., as administrative agent and a lender, and a syndicate of other financial institutions as lenders, including UBS Loan Finance LLC and Deutsche Bank AG, to provide a $125 million senior secured four- year revolving credit facility. On April 30, 2004, the Company exercised its right to increase the revolving commitments under the senior credit facility by an additional $50 million to $175 million. On November 5, 2004, the Company amended the senior revolving credit facility to permit further increases of the revolving commitments under the senior credit facility by an additional $125 million, up to $300 million in the future. On December 2, 2004, the Company exercised its right to increase the aggregate revolving committed amount under the senior credit facility by $25 million to an aggregate of $200 million. 9.25% Series A Preferred Redemption - On April 30, 2004, the Company fully redeemed its 9.25% Series A Cumulative Preferred Stock (NYSE:OHI PrA) ("Series A preferred stock"). The Company redeemed the 2.3 million shares of Series A preferred stock at a price of $25.57813, comprising the $25 liquidation value and accrued dividend. Under FASB-EITF Issue D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," the repurchase of the Series A preferred stock resulted in a non-cash charge to net income available to common shareholders of approximately $2.3 million reflecting the write-off of the original issuance costs of the Series A preferred stock Interest Rate Cap Sale - In connection with the Company's repayment and termination of the $225 million senior secured credit facility, the Company sold its $200 million interest rate cap on March 31, 2004. Net proceeds from the sale totaled approximately $3.5 million and resulted in a loss of approximately $6.5 million, which was recorded during the first quarter of 2004 and included in the $19.1 million of interest expense associated with refinancing activities. $200 Million 7% Unsecured Notes Issuance - On March 22, 2004, the Company closed on a private offering of $200 million of 7% senior unsecured notes due 2014. The notes are unsecured senior obligations of the Company, which have been guaranteed by the Company's subsidiaries. The notes were issued in a private placement to qualified institutional buyers under Rule 144A under the Securities Act and in offshore transactions pursuant to Regulation S under the Securities Act. 18.1 Million Secondary Common Share Issuance and 2.7 Million Share Primary Offering - On March 8, 2004, the Company closed an underwritten public offering of 18.1 million shares of Omega common stock at $9.85 per share owned by Explorer Holdings L.P., its then largest stockholder ("Explorer"). As a result of the offering, Explorer no longer owns any of Omega's common stock. The Company did not receive any proceeds from the sale of the shares sold by Explorer. In connection with the 18.1 million common stock offering, the Company issued approximately 2.7 million additional shares of Omega common stock at a price of $9.85 per share, less underwriting discounts, to cover over-allotments in connection with the 18.1 million secondary offering. The Company received net proceeds of approximately $22.4 million from this offering. Series D Preferred Offering; Series C Preferred Repurchase and Conversion - On February 5, 2004, the Company announced that Explorer granted the Company an option to repurchase up to 700,000 of the Company's 10% Convertible Series C preferred stock ("Series C preferred stock"), which were convertible into the Company's common shares, held by Explorer at a negotiated purchase price of $145.92 per Series C preferred stock (or $9.12 per common share on an as converted basis). Explorer further agreed to convert any remaining Series C preferred stock into shares of common stock, all of which were subsequently sold pursuant to the secondary offering discussed above. On February 10, 2004, the Company announced the closing of the sale of 4,739,500 shares of 8.375% Series D cumulative redeemable preferred stock ("Series D preferred stock"). The preferred stock was issued at $25 per share and trades on the NYSE under the symbol "OHI PrD." The Company received net proceeds of approximately $114.8 million from this offering. The Company used approximately $102.1 million of the net proceeds from the Series D preferred stock offering to repurchase 700,000 shares of the Company's Series C preferred stock from Explorer. In connection with the closing of the repurchase, Explorer converted its remaining 348,420 Series C preferred stock into approximately 5.6 million shares of the Company's common stock. The combined repurchase and conversion of the Series C preferred stock reduced the Company's preferred dividend requirements, increased its market capitalization and facilitated future financings by simplifying the Company's capital structure. Under FASB-EITF Issue D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," the repurchase of the Series C preferred stock resulted in a non-cash charge to net income available to common shareholders of approximately $38.7 million. Portfolio Developments Investment Activity Essex Healthcare - On January 13, 2005, the Company closed on $58.1 million of net new investments as a result of the exercise by American Health Care Centers of a put agreement with the Company for the purchase of 13 skilled nursing facilities. In October 2004, American and its affiliated companies paid one thousand dollars to the Company and agreed to eliminate the right to prepay the existing Company mortgage in the event the option was not exercised. The gross purchase price of $78.8 million was offset by approximately $7.0 million paid by the Company to American in 1997 to obtain an option to acquire the properties. The net purchase price also reflects approximately $13.8 million in mortgage loans the Company had outstanding with American and its affiliates, which encumbered 6 of the 13 properties. The 13 properties, all located in Ohio, will continue to be leased by Essex Healthcare Corporation. The master lease and related agreements have approximately six years remaining and in 2005 annual payments are approximately $8.9 million with annual escalators. Guardian LTC Management, Inc. - On November 2, 2004, the Company purchased 14 SNFs and one assisted living facility from subsidiaries of Guardian LTC Management, Inc., for a total investment of $72.4 million. Thirteen of the facilities are located in Pennsylvania and two in Ohio. The 15 facilities were simultaneously leased back to the sellers, which are subsidiaries of Guardian, under a new master lease effective November 2, 2004. On December 3, 2004, the Company purchased one additional facility located in West Virginia from the sellers for an additional $7.7 million. The West Virginia facility is a combined SNF and rehabilitation hospital. The West Virginia facility was added to the master lease on December 3, 2004. Rent under the master lease is $8.2 million for the first lease year commencing November 2, 2004, with annual increases thereafter. The term of the master lease is ten years and runs through October 31, 2014, followed by four renewal options of five years each. The Company also received a security deposit equivalent to three months rent. CommuniCare Health Services, Inc. - The Company closed a first mortgage loan on November 1, 2004, in the amount of $6.5 million on one SNF in Cleveland, Ohio. The operator of the facility is an affiliate of CommuniCare Health Services, Inc., an existing Company tenant. The term of the mortgage is ten years and carries an interest rate of 11%. The Company received a security deposit equivalent to three months interest. Senior Management - On April 30, 2004, the Company purchased two SNFs, representing 477 beds for a total investment of $9.4 million. The purchase price included funds for capital expenditures, additional bed licenses and transaction costs. Both facilities are located in Texas and were combined into an existing master lease with an existing operator. Rent under the master lease was increased by approximately $1.0 million for the first lease year commencing May 1, 2004, with annual increases thereafter. The term of the master lease was increased to 10 years, and is followed by two 10 year renewal options. During the first lease year, the operator will fund a security deposit equivalent to approximately four months of the incremental rent. Haven Healthcare - Effective April 1, 2004, the Company purchased three SNFs, representing 399 beds for a total investment of $26.0 million. Two of the facilities are located in Vermont, with the third located in Connecticut. The facilities were combined into an existing master lease with a current operator. Rent under the master lease was increased by approximately $2.7 million for the first lease year commencing April 1, 2004, with annual increases thereafter. The term of the master lease had been increased to ten years on January 1, 2004 and runs through December 31, 2013, followed by two 10 year renewal options. The Company received a security deposit equivalent to three months of the incremental rent. Re-leasing and Restructuring Activity Sun Healthcare Group, Inc. - Effective November 1, 2004, the Company re-leased two SNF's formerly leased by Sun Healthcare Group, Inc., both located in California. The first, representing 59 beds, was re-leased to a new operator under a single facility lease with a five year term and an initial annual lease rate of approximately $200,000. The second, representing 98 beds, was also re-leased to a new operator under a single facility lease with a three and a half year term and an initial annual lease rate of approximately $180,000. On March 1, 2004, the Company entered into an agreement with Sun regarding 51 properties that were leased to various affiliates of Sun. Under the terms of a master lease agreement, Sun would continue to operate and occupy 23 long-term care facilities, five behavioral properties and two hospital properties through December 31, 2013. One property, located in Washington and formerly operated by a Sun affiliate, was already closed and the lease relating to that property was terminated. With respect to the remaining 20 facilities, 17 were already transitioned to new operators and three were in the process of being transferred to new operators. Also effective March 1, 2004, the Company re-leased one SNF formerly leased by Sun located in California and representing 58 beds, to a new operator under a Master Lease, which has a ten-year term and has an initial annual lease rate of approximately $0.12 million. Effective January 1, 2004, the Company re-leased SNFs to an existing operator under a new master lease, which has a five-year term and an initial annual lease rate of $0.75 million. Four former Sun SNFs, three located in Illinois and one located in Indiana, representing an aggregate of 449 beds, were part of the transaction. The fifth SNF in the transaction, located in Illinois and representing 128 beds, was the last remaining owned and operated facility in the Company's portfolio. Alterra Healthcare - On October 1, 2004, the Company re-leased one assisted living facility formerly leased to Alterra Healthcare located in Ohio and representing 36 beds to a new operator under a single facility lease. This lease has a three-year term and an annual rent of $220,000. Claremont Healthcare Holdings, Inc. - Effective January 1, 2005, the Company re-leased one SNF formerly leased to Claremont Health Care Holdings, Inc., located in New Hampshire and representing 68 beds to an existing operator at an initial annual lease rate of $500,000. This facility was added to an existing Master Lease which expires on December 31, 2013, followed by two 10-year renewal options. The operator will increase the current security deposit by $125,000 on March 1, 2005. Effective March 8, 2004, the Company re-leased three SNFs formerly leased by Claremont Health Care Holdings, Inc., located in Florida and representing 360 beds, to an existing operator at an initial annual lease rate of $2.5 million. These facilities were added to an existing master lease, the initial term of which has been extended ten years to February 2014. The aggregate annual lease rate under this master lease, inclusive of the $2.5 million, is $3.9 million. Mariner - On December 10, 2004, Mariner notified the Company of its intention to exercise its right to prepay in full the $59.7 million aggregate principal amount owed to us under a promissory note secured by a mortgage with an interest rate of 11.57%, together with the required prepayment premium of 3% of the outstanding principal balance and all accrued and unpaid interest, on February 1, 2005. In addition, pursuant to certain provisions contained in the promissory note, Mariner will pay the Company an amendment fee owing for the period ending on February 1, 2005. Tiffany Care Centers, Inc. - On April 6, 2004, the Company received approximately $4.6 million in proceeds on a mortgage loan payoff. The Company held mortgages on five facilities located in Missouri, representing 319 beds, which produced approximately $0.5 million of annual interest revenue in 2003. Other Assets Closed Facilities - During 2004, the Company sold six closed facilities, realizing proceeds of approximately $5.7 million, net of closing costs and other expenses, resulting in an accounting gain of approximately $3.3 million. As a result of these transactions, the Company currently has no closed facilities remaining in its portfolio. Sun Healthcare Group, Inc. Common Stock - Under the Company's restructuring agreement with Sun, previously announced on January 26, 2004, the Company received the right to convert deferred base rent owed to the Company, totaling approximately $7.8 million, into 800,000 shares of Sun's common stock, subject to certain non- dilution provisions and the right of Sun to pay cash in an amount equal to the value of that stock in lieu of issuing stock to the Company. On March 30, 2004, the Company notified Sun of its intention to exercise its right to convert the deferred base rent into fully paid and non-assessable shares of Sun's common stock. On April 16, 2004, the Company received a stock certificate for 760,000 shares of Sun's common stock and cash in the amount of approximately $0.5 million in exchange for the remaining 40,000 shares of Sun's common stock. 2005 Adjusted FFO Guidance Affirmed The Company affirmed its 2005 adjusted FFO available to common stockholders to be between $1.00 and $1.02 per common share. The Company's adjusted FFO guidance (and related GAAP earnings projections) for 2005 excludes the future impacts of gains and losses on the sales of assets, expenses related to nursing home operations, additional divestitures, certain one-time revenue and expense items, capital transactions, and restricted stock amortization expense. Reconciliation of the adjusted FFO guidance to the Company's projected GAAP earnings is provided on a schedule attached to this Press Release. The Company may, from time to time, update its publicly announced FFO guidance, but it is not obligated to do so. The Company's adjusted FFO guidance is based on a number of assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results. Dividend Policy Common Dividends - On January 18, 2005, the Company's Board of Directors announced a common stock dividend of $0.20 per share to be paid February 15, 2005 to common stockholders of record on January 31, 2005. At the date of this release, the Company had approximately 50.9 million outstanding common shares. Preferred Dividends - On January 18, 2005, the Company's Board of Directors also declared its regular quarterly dividends for Series B and D preferred stock, payable February 15, 2005 to preferred stockholders of record on January 31, 2005. Series B and D preferred stockholders of record on January 31, 2005 will be paid dividends in the amount of approximately $0.53906 and $0.52344, per preferred share, respectively, on February 15, 2005. The liquidation preference for the Company's Series B and D preferred stock is $25.00 per share. Regular quarterly preferred dividends represent dividends for the period November 1, 2004 through January 31, 2005. Tax Treatment for 2004 Dividends Preferred A Dividends - On February 16, 2004 and May 17, 2004, the Company paid dividends to its Preferred A stockholders in the approximate per share amount of $0.578130, for stockholders of record on February 2, 2004 and April 30, 2004, respectively. The Company has determined that 22.03% of all Preferred A dividends in 2004 should be treated for tax purposes as a return of capital, with the balance of 77.97% treated as an ordinary dividend. Preferred B Dividends - On February 16, 2004, May 17, 2004, August 16, 2004 and November 15, 2004, the Company paid dividends to its Preferred B stockholders in the approximate per share amount of $0.539060 for stockholders of record on February 2, 2004, April 30, 2004, July 30, 2004 and October 29, 2004, respectively. The Company has determined that 22.03% of all Preferred B dividends in 2004 should be treated for tax purposes as a return of capital, with the balance of 77.97% treated as an ordinary dividend. Preferred D Dividends - On May 17, 2004, August 16, 2004 and November 15, 2004, the Company paid dividends to its Preferred D stockholders in the approximate per share amounts of $0.471090, $0.523440 and $0.523440 for stockholders of record on April 30, 2004, July 30, 2004 and October 29, 2004, respectively. The Company has determined that 22.03% of all Preferred D dividends in 2004 should be treated for tax purposes as a return of capital, with the balance of 77.97% treated as an ordinary dividend. Common Dividends - On February 16, 2004, May 17, 2004, August 16, 2004 and November 15, 2004, the Company paid dividends to its Common stockholders in the per share amounts of $0.17, $0.18, $0.18 and $0.19, for stockholders of record on February 2, 2004, April 30, 2004, July 30, 2004 and October 29, 2004, respectively. The Company has determined that 100% of the common dividends paid in 2004 should be treated for tax purposes as a return of capital. About the Company Omega is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At December 31, 2004, the Company owned or held mortgages on 221 skilled nursing and assisted living facilities with approximately 23,105 beds located in 29 states and operated by 42 third-party healthcare operating companies. * * * As reported in the Troubled Company Reporter on Nov. 2, 2004, Fitch Ratings published a credit analysis report on Omega Healthcare Investors, Inc., providing insight into Fitch's rationale for its ratings of: -- $300 million of outstanding senior unsecured notes 'BB'; -- $168 million of preferred stock 'B'. The Rating Outlook is Stable. OZARK AIR: Wants Chapter 11 Case Converted to Chapter 7 ------------------------------------------------------- Ozark Air Lines, Inc., d/b/a Great Plains Airlines asks the United States Bankruptcy Court for the Northern District of Oklahoma to enter an order converting its chapter 11 case to a chapter 7. The carrier tells the Bankruptcy Court it hasn't located any investors or financing to successfully reorganize and emerge from bankruptcy. As reported in the Troubled Company Reporter on Oct. 8, 2004, Ozark acknowledged that in the event an acceptable offer is not received in the future for the sale of its 121 Operating Certificate issued by the Federal Aviation Administration, this case may be converted to a case under chapter 7 of the Bankruptcy Code so that a bankruptcy trustee can complete the administration of this bankruptcy estate by: (a) liquidating the airplane parts and tools in the possession of Oklahoma Regional Jet Center, Inc.; (b) prosecuting whatever claim the estate has against ORJC related to the parts and tooling; (c) collecting any amounts due Ozark by others; and (d) prosecuting avoidance claims against third parties. Headquartered in Tulsa, Oklahoma, Ozark Air Lines, Inc. -- http://www.gpair.com/-- owns an air carrier that served Colorado Springs, Albuquerque, Tulsa, Oklahoma City and Nashville. The Company filed for chapter 11 protection on January 23, 2004 (Bankr. N.D. Okla. Case No. 04-10361). Sidney K. Swinson, Esq., Jeffrey D. Hassell, Esq., and John D. Dale, Esq., at Gable & Gotwals represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $10 million. PARMALAT CANADA: Sells North American Bakery Group -------------------------------------------------- Parmalat Dairy & Bakery, Inc., has sold the company's North American Bakery Group, which includes the Archway brands, Mother's brands and the U.S. and Canadian private label cookie businesses to the private equity firm Catterton Partners, and their operating partner Insight Holdings. Terms were not disclosed. Under this agreement, the U.S. bakery name will change to the "Archway & Mother's Cookie Company, Inc." and the Canadian bakery will be known as "A&M Cookie Company Canada" with Catterton Partners and Insight Holdings leveraging their strong industry expertise to provide the bakery management team with marketing and operational strategies targeted at building sales and long-term profit. "We are pleased to have finalized this transaction with Catterton Partners," said Marc Caira, President and CEO of Parmalat Dairy & Bakery, Inc. "This transaction allows us to fully focus on our long term commitment to the Canadian dairy market as an industry leader dedicated to the health and wellness of Canadians through our milk and dairy products, fruit juices, cultured products, cheese products and table spreads." Insight Holdings focuses on consumer goods having run such successful companies as Farley's & Sathers Candy Co., Famous Amos Cookies, Terra chips, and La Victoria Salsa. About Catterton Partners With more than $1.2 billion under management, Catterton Partners is a leading private equity firm in the U.S. focused exclusively on the consumer industry. Catterton's combination of investment capital, strategic and operating skills, and network of industry contacts has enabled it to become the most sought after private equity firm in the consumer sector. Catterton considers investments across a number of targeted consumer-industry "verticals": Food and Beverage, Retail and Restaurants, Consumer Products and Services, and Media and Marketing Services. Catterton's unique combination of value-added resources has resulted in the creation of numerous market leading companies, such as Build-A-Bear Workshop, PF Chang's China Bistro, Baja Fresh, Farley's and Sathers Candy Co., Titan Outdoor, Pharmaceuticals Holdings, Inc., Gold Coast Beverage Distributors, Odwalla, Inc., and Wellness Pet Food. Since being founded in 1990, Catterton has had one of the strongest investment track records in the consumer industry. Parmalat Canada produces milk and dairy products, fruit juices, cultured products, cheese products and table spreads with such respected brands as Beatrice(R), Lactantia(R), Balderson(R), Black Diamond(R) and Astro(R). Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. POPE & TALBOT: Declares $0.08 Dividend per Common Share ------------------------------------------------------- Pope & Talbot, Inc., (NYSE:POP) reported a first quarter dividend payment of 8 cents per share, payable on March 3, 2005, to common stockholders of record February 17, 2005. Pope & Talbot -- http://www.poptal.com/-- is a pulp and wood products company. The Company is based in Portland, Oregon and traded on the New York and Pacific stock exchanges under the symbol POP. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the U.S. and Canada. Markets for the Company's products include the U.S., Europe, Canada, South America, Japan, China, and the other Pacific Rim countries. * * * As reported in the Troubled Company Reporter on Sept. 30, 2004, Moody's Investors Service affirmed the Ba2 senior implied, Ba3 issuer and Ba3 senior unsecured ratings of Pope & Talbot, Inc. The rating outlook continues to be stable. Ratings Affirmed: * Ba3 for the US$75 million of 8.375% debentures and US$50.8 million of 8.375% senior notes, both due June 1, 2013, * Ba2 for Pope & Talbot's senior implied rating, and * Ba3 for its senior unsecured issuer rating. As reported in the Troubled Company Reporter on July 15, 2004, Standard & Poor's Ratings Services revised its outlook on pulp and lumber producer, Pope & Talbot, Inc., to stable from negative. The corporate credit and senior unsecured debt ratings are affirmed at 'BB'. QUEENSGATE SPECIAL: Moody's Puts Ba1 Rating on $25 Million Notes ---------------------------------------------------------------- Moody's Investors Service assigned ratings to notes issued by Queensgate Special Purpose Limited, a limited liability company incorporated under the laws of Bermuda, for the benefit of Reassure America Life Insurance Company -- REALIC, an indirect, wholly-owned subsidiary of Swiss Reinsurance Company. The transaction was brought to market by Swiss Re Capital Markets. A rating of A1 was assigned to the US$175,000,000 Series 2005-A Fixed Rate Notes due December 31, 2024. A rating of Baa1 was assigned to the US$45,000,000 Series 2005-B Fixed Rate Notes due December 31, 2024. A rating of Ba1 was assigned to the US$25,000,000 Series 2005-C Fixed Rate Notes due December 31, 2024. The transaction is a securitization of future profits to emerge on five closed blocks of life insurance policies owned by REALIC. Moody's has assessed the expected cashflows from the securitised blocks of policies under a variety of stress scenarios and believes that the resilience of the cash flows is consistent with the underlying ratings assigned to the Notes. Moody's ratings address the ultimate cash receipt of all required interest and principal payments as provided by the governing documents, and is based on the expected loss posed to the note holders relative to the promise of receiving the present value of such payments. Moody's evaluation included extensive review of the technical basis, methodology and historical data used to develop the risk analysis done by Millman Inc. (an actuarial consulting firm retained by the sponsor) to assess potential losses to noteholders. This review, together with a detailed analysis of the transaction's legal structure and the financial strength of the various parties to the transaction, provided Moody's with sufficient comfort that the resulting ratings adequately capture the risk to investors in these securities. RESIDENTIAL ASSET: Fitch Junks Two Home Equity Transactions ----------------------------------------------------------- Fitch Ratings has performed a review of various Residential Asset Mortgage Products - RAMP -- home equity transactions. Based on the review, these rating actions have been taken: Residential Asset Mortgage Products, Inc., series 2001-RM2 Group 1: -- Classes A-I, AP-I, AV-I affirmed at 'AAA'; -- Class M-I-1 affirmed at 'AAA'; -- Class M-I-2 affirmed at 'AA-'; -- Class M-I-3 affirmed at 'BBB'; -- Class B-I-1 affirmed at 'BB'; -- Class B-I-2 affirmed at 'B'. Residential Asset Mortgage Products, Inc., series 2001-RM2 Group 2: -- Class A-II affirmed at 'AAA'; -- Class M-II-1 affirmed at 'AA+'; -- Class M-II-2 affirmed at 'A+'; -- Class M-II-3 affirmed at 'BBB+'; -- Class B-II-1 affirmed at 'BB'; -- Class B-II-2 affirmed at 'B'. Residential Asset Mortgage Products, Inc., series 2001-RZ2 Groups 1 and 2: -- Class M-1 upgraded to 'AAA' from 'AA+'; -- Class M-2 upgraded to 'AA' from 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B downgraded to 'C' from 'CCC'. Residential Asset Mortgage Products, Inc., series 2001-RZ3: -- Class M-1 upgraded to 'AAA' from 'AA'; -- Class M-2 upgraded to 'AA' from 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B remains at 'CC'. Residential Asset Mortgage Products, Inc., series 2001-RZ4: -- Class A-5 affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'. The upgrades of the M-1 and M-2 bonds of the 2001-RZ2 and 2001-RZ3 series ($21.5 million outstanding, as of the Jan. 25, 2005 distribution date) are taken as a result of growth in credit enhancement - CE -- from the initial levels of 9.50% (M-1 bond) and 5% (M-2 bond) to the current levels of 97.76% and 50.15% (M-1 and M-2 bonds, 2001-RZ2 series) and 89.53% and 47.31% (M-1 and M-2 bonds, 2001-RZ3 series), respectively. The affirmations of the other classes of the above series reflect CE consistent with future loss expectations and affect approximately $97 million of outstanding certificates. The pool factors (current mortgage loans outstanding as a percentage of the initial pool) for these deals ranged from 9.45% to 26.84%. The downgrade of the Class B bond of the 2001-RZ2 series ($4,481,499 outstanding, as of the Jan. 25, 2005, distribution date) to 'C' from 'CCC' is taken as a result of overcollateralization - OC -- being reduced to zero and the bond suffering writedowns because of monthly losses exceeding monthly excess interest. The net monthly losses (gross losses minus excess interest) for the past three months averaged approximately $52,000. As of the Jan. 25, 2005, distribution date, the OC was zero for the 2001-RZ2 series as against a target of $1,000,000. The mortgage loans in these transactions consist of fixed-rate and adjustable-rate mortgages extended to subprime borrowers and are secured by first liens on one- to four-family residential properties. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ SBC COMMUNICATIONS: Fitch Puts 'BB+' Rating on Watch Negative ------------------------------------------------------------- Fitch Ratings has placed the 'A+' senior unsecured debt rating of SBC Communications, Inc. on Rating Watch Negative and placed the 'BB+' senior unsecured debt rating of AT&T Corp. on Rating Watch Positive following the announcement of SBC's proposed acquisition of AT&T for approximately $15 billion in SBC common stock and the assumption of approximately $6 billion of net debt. Including a $1 billion special dividend to be paid to AT&T shareholders at the close of the transaction the total value of the transaction is approximately $22 billion. The Rating Watch Negative also applies to the existing long-term debt of various SBC subsidiaries that no longer issue debt, as financing activities have been consolidated at the SBC Communications level. In addition to the long-term rating of SBC, the 'F1' commercial paper ratings of SBC and SBC International, the 'A' rating of Cingular Wireless and the 'A' rating assigned to AT&T Wireless debt guaranteed by Cingular are on Rating Watch Negative. Finally, the 'B' commercial paper rating of AT&T has been placed on Rating Watch Positive. The closing of the transaction is anticipated to be in the first half of 2006. The rating action reflects Fitch's concern regarding the prospects for the moderately higher business risk profile of SBC following the acquisition of AT&T. The transaction is not expected to have a material impact on SBC's credit metrics, given AT&T's low leverage for its current assigned rating. AT&T's gross debt to EBITDA for 2004 was approximately 1.5 times, and its net debt to EBITDA was 1.0x. SBC's 2004 leverage, which was affected by its financing for Cingular's acquisition of AT&T Wireless in October 2004, was 2.2x including proportionate Cingular debt (but including only approximately two months of EBITDA from AT&T Wireless). At year-end 2005, Fitch expects SBC's leverage to be in the 1.5x-1.7x range. At year-end 2006 and following the close of the acquisition of AT&T, Fitch expects the combination of SBC's debt and SBC's 60% share of Cingular's public debt to be in the range of $34-36 billion. Strong free cash flows at both SBC and AT&T prior to the close of the transaction are expected to allow both companies to continue to reduce debt in the interim. Fitch expects the 2006 pro forma leverage of SBC to approximate 1.5x, which if achieved could limit the company's senior unsecured debt to a one-notch downgrade. Fitch's primary concerns with the effect of the acquisition on SBC are the weak business fundamentals of the long distance business, the impact of the integration costs on the company's cash flow, and the risk that the projected synergies will be materially less than anticipated. Over the past several years, heightened competition, weak demand and unstable pricing have contributed to the erosion of AT&T's revenues and EBITDA. In addition, AT&T has suffered from a lack of growth opportunities in its core business. The impact of the weak fundamentals of the long distance business on SBC's credit profile will be moderated by the significant synergies of the combined companies, which are expected to reach $2 billion annually by 2008. Since receiving long distance approvals at the end of 2003, SBC has been aggressively targeting the enterprise customer market. Synergies will arise from the elimination of duplicate spending on network, information technology, sales efforts and headquarters functions. In evaluating the transaction, Fitch will evaluate the potential synergies and the cash flows of the combined companies after integration costs. SBC is expected to incur integration costs of approximately $1.6-1.9 billion in 2006 following the close of the transaction, with integration costs declining thereafter. The transaction is expected to close in the first half of 2006 following the customary regulatory approvals. The effects of the regulatory approval process on the economic potential of the transaction are not known, and could have an impact on the ultimate financial profile of the company. The Rating Watch Negative applies to the 'A+' senior unsecured debt of these issuers: -- SBC Communications Corp.; -- SBC Communications Capital Corp.; -- Ameritech Capital Funding; -- Illinois Bell Telephone Company; -- Indiana Bell Telephone Company; -- Michigan Bell Telephone Company; -- Pacific Bell Telephone Company; -- Wisconsin Bell Telephone Company; -- Southern New England Telecom Corp.; -- Southern New England Telephone; -- Southwestern Bell Telephone; -- Southwestern Bell Capital Corp. SBC COMM: AT&T Acquisition Prompts Moody's to Review Ratings ------------------------------------------------------------ Moody's Investors Service has placed SBC Communications Inc.'s and its telephone subsidiaries' A2 long term and P-1 short term ratings on review for possible downgrade based on the Company's plan to acquire AT&T for about $23 billion in cash, stock and assumed debt. At the same time, Moody's is placing the Ba1 long term rating of AT&T on review for possible upgrade. Moody's is affirming the Baa2 senior unsecured rating and stable outlook for Cingular Wireless. The review for possible downgrade of SBC Communications will focus on SBC's ability to generate multi-billion dollar revenue and cost saving synergies in light of AT&T's declining revenues and cash flows while at the same time assisting Cingular Wireless' efforts to integrate recently purchased AT&T Wireless. The review will also consider SBC's plans to return cash to shareholders. Moody's review for possible upgrade of AT&T will focus on SBC Communications' intentions for AT&T's debt upon completion of the merger. While a SBC guarantee of AT&T's debt will equalize AT&T's and SBC's long term ratings, Moody's believes unguaranteed AT&T debt would still likely benefit from indirect SBC support. As a result, AT&T's rating could potentially rise several notches while Moody's view of SBC's pro forma business risk will primarily drive SBC's rating. SBC Communications' current A2 rating reflects the Company's strong incumbent wireline operating position offset by increasing cable voice over Internet protocol (VOIP) competition as well as the ambitious integration of AT&T Wireless by Cingular Wireless. Declining revenues and cash flows largely drive AT&T's current Ba1 rating offset, by otherwise strong free cash flow-to-debt metrics. At a minimum, Moody's believes the AT&T and SBC Communications combination will allow for some vertical synergies. While SBC Communications has indicated that the net present value of synergies from this transaction exceed $15 billion, the merger will drain human and financial resources for at least two years at a time when the future direction of the telecommunications industry is uncertain. SBC Communications clearly believes the threat to its core wireline cash flow stream from cable competition is significant and Moody's believes the Company's decisions to enhance and diversify its long distance, broadband, wireless and video revenue streams is strategically appropriate. Nonetheless, execution risk for SBC is substantial. Moody's believes the proposed merger is positive for AT&T from an operational standpoint. Recent regulatory rulings pertaining to UNE-P pricing have been harmful for AT&T's future business prospects, especially in the consumer space. While AT&T is a premier long haul provider with excellent customer relationships, Moody's believes the long haul sector remains intensely competitive with companies like MCI, Qwest, Level 3 and others aggressively pricing capacity and other long distance services. SBC's recent merger activity signals its apparent desire to be the leading telecommunications company in the United States, if not the world. In addition to the announced transaction, Cingular Wireless, 60% owned by SBC, recently acquired AT&T Wireless for $41 billion, making it the nation's largest wireless operator. Moody's believes that SBC Communications' purchase of AT&T will complement nearly all of its current business activities and establish it as the leader in enterprise data services, a potential growth area and one where it will maintain an unrivaled position. While owning such an extensive and high quality long distance network will potentially stabilize SBC's cost structure in relation to its own long distance, broadband and even wireless long haul transport needs, AT&T's top line revenue stream remains in steep decline. The ratings affected by these rating actions are: -- SBC Communications Inc.: * prospective lt. debt rating,(P)A2, review for possible downgrade ("RFD") * prospective pfd. rating,(P)Baa1, RFD * issuer rating, A2, RFD * sr. unsec. lt. debt rating, A2, RFD * short term debt rating, P-1, RFD * Ameritech Capital Funding Corp.: * sr. unsec. lt. debt rating, A2, RFD -- Ameritech Credit Corp.: * sr. unsec. lt. debt rating, A2, RFD -- Illinois Bell Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- Indiana Bell Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- Michigan Bell Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- Pacific Bell Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- SBC Communications Capital Corp.: * sr. unsec. lt. debt rating, A2, RFD -- SBC International Inc.: * short term debt rating, P-1, RFD -- Southern New England Telecommunications Corp.: * sr. unsec. lt. debt rating, A2, RFD -- Southern New England Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- Southwestern Bell Telephone Co.: * sr. unsec. lt. debt rating, A2, RFD -- Wisconsin Bell, Inc.: * sr. unsec. lt. debt rating, A2, RFD -- AT&T Corp.: * senior implied rating, Ba1, review for possible upgrade ("RFU") * issuer rating, Ba1, RFU * sr. unsec. lt. debt rating, Ba1, RFU * prospective lt. debt rating, (P)Ba1, RFU The ratings been withdrawn as part of this rating action: -- Ameritech Capital Funding Corp., issuer rating, formerly A2 -- SBC Communications Capital Corp., issuer rating, formerly A2 SBC is a regional Bell operating company headquartered in San Antonio, Texas. AT&T is the nation's largest long distance carrier headquartered in Bedminster, New Jersey. SEVILLE ENTERPRISES: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Seville Enterprises, Inc. 123 Lucas Street Waxahachie, Texas 75165-2201 Bankruptcy Case No.: 05-31185 Type of Business: The Debtor manufactures plastic films. Chapter 11 Petition Date: January 31, 2005 Court: Northern District of Texas (Dallas) Judge: Steven A. Felsenthal Debtor's Counsel: William Lyle Perlman, Esq. Perlman & Robison 3626 North Hall Street, Suite 610 Dallas, Texas 75219 Tel: (214) 520-2200 Financial Condition as of January 31, 2005: Total Assets: $1,599,423 Total Debts: $2,308,275 The Debtor did not file a list of its 20 Largest Unsecured Creditors. SLS INT'L: Appoints Steven Hicks & Dell Furano to Board ------------------------------------------------------- SLS International, Inc. (OTC Bulletin Board: SITI) has appointed R. Steven Hicks and Dell Furano to its Board of Directors. Mr. Hicks is currently Chairman of Capstar Partners, LLC while Mr. Furano, is CEO of Signatures Network. Each are well-known in the entertainment industry and have built Several widely recognized and highly successful companies. "I am pleased to join SLS International's Board at such a key juncture for the company," said Mr. Hicks. "The company has invested heavily to develop promising technology that offers a unique audio experience for both consumers and industry professionals. I look forward to sharing my experience in developing other entertainment companies to help SLS as it expands." "Today, SLS has the technology, manufacturing capability and product mix to attract wide-spread consumer interest," said Mr. Furano. "I look forward to working with John and his team as they continue to develop the market. After listening to the speakers, I am even more convinced of the potential for the products and the company." Prior to forming his new venture, Capstar Partners, LLC, which specializes in assisting early stage technology companies with growth strategies and investments, Mr. Hicks was Vice Chairman of AMFM Inc., the nation's largest owner and operator of radio stations across the US. The company merged in August, 2000 with Clear Channel Communications, Inc. In 1996 Mr. Hicks founded Capstar Broadcasting Corporation. Capstar Broadcasting's strategy was to be a leading consolidator or middle Market radio stations across the US and by 1998 was the nation's largest holding company with 350 stations. In 1998, Mr. Hicks led Capstar Broadcasting to a successful initial public offering on the New York Stock Exchange. In 1999 Capstar Broadcasting merged with Chancellor Media Corp. and in a stock swap valued at $4.1 billion. Mr. Hicks has been a member of the Board of Directors of XM Satellite Radio, HealthTronics and numerous private companies. During over the past 33 years, he has developed extensive relationships throughout the Broadcast and entertainment industry. Mr. Hicks is a graduate of the University of Texas and the past Director of the National Radio Broadcasters Association. Mr. Furano is presently the founder and CEO of Signatures Network -- http://www.signaturesnetwork.com/-- a merchandising and promotional company that has the rights to market products for over 125 of the worlds leading entertainers including, U2, The Beatles, Jessica Simpson, Alan Jackson and Jennifer Lopez, among others. Prior to forming Signatures Network, Mr. Furano was the founding CEO of Sony Signatures, Sony Corp.'s entertainment, merchandising, licensing and consumer products division. While at the helm of Sony Signatures, he quickly built the division into a major entertainment licensing and branding powerhouse. Before joining Sony Pictures Entertainment, Mr. Furano teamed up with legendary music producer Bill Graham to co-found Winterland Productions, a music merchandising company. In the mid 1980's he sold Winterland to CBS Inc. Mr. Furano is a graduate of Stanford University. "I am pleased that we were able to attract two outside Directors with such stature in the entertainment industry," stated John Gott, President and CEO of SLS International. "I look forward to working closely with them to receive their expertise and assistance in all elements of our business. Their reputation for success in our industry should create many new opportunities for us among retailers and industry professionals." About the Company Based in Springfield, Mo., SLS International, Inc. -- http://www.slsloudspeakers.com/-- is a 30-year-old manufacturer and developer of new patent-pending ultra-high fidelity Ribbon Driver loudspeakers, Patented Evenstar Digital Amplifiers and sound systems for the commercial, home entertainment, professional and music markets. SLS has perfected the ribbon- driver technology enabling their loudspeakers to achieve exceptional inner detail and accuracy with 20 to 30 percent less the distortion of typical compression driver and dome tweeters. SLS speakers and systems are used in high profile venues such as NBC/MSNBC's 2002 Olympics studios in Salt Lake City -- NBC is a wholly owned subsidiary of General Electric; MSNBC is jointly owned by GE and Microsoft Corporation -- the Recording Academy's Grammy Producers SoundTable events, and for the NAMM winter show, providing sound in the AVID Technology booth. * * * Going Concern Doubt In its Form 10-QSB for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, SLS International's accountants raised substantial doubt about the Company's ability to continue as a going concern due to the Company's negative cash flows and operating losses in recent years. SOLUTIA INC: Wants to Settle Four Environmental Proceedings ----------------------------------------------------------- Solutia, Inc., is a party to environmental-related legal proceedings to which Solutia seeks contribution from other potentially responsible parties. On August 19, 2004, the U.S. Bankruptcy Court for the Southern District New York approved a joint prosecution and defense agreement between Solutia, Monsanto Company and Pharmacia Corporation wherein they set up a protocol for their cooperation in the joint prosecution and defense of these environmental actions: (a) United States v. Pharmacia Corp., No. 99-63-GPM (Southern District of Illinois) -- Area 1 Litigation; (b) Pharmacia Corp. v. Clayton Chemical Acquisition LLC, No. 02-CV-428-MJR (Southern District of Illinois) -- Area 2 Litigation; (c) Solutia Inc. v. McWane Inc., No. CV-03-PWG-1345-E (Northern District of Alabama); and (d) allocation pursuant to a certain "Area 2 Sites Revised and Amended RI/FS Participation Agreement". The Area 1 Litigation relates to certain environmental sites located within the corporate limits of the Villages of Sauget and Cahokia, Illinois and near Solutia's William G. Krummrich plant in Sauget. These sites are comprised of three closed landfills, one filled wastewater pond, one flooded borrow pit, one filled borrow pit and six creek segments along Dead Creek. The Area 2 Litigation relates to environmental sites located within the corporate limits of the Villages of Sauget, Cahokia and East St. Louis, Illinois and near Solutia's William G. Krummrich plant. These sites consist of four closed landfills and four inactive sludge dewatering lagoons, including related groundwater and surface water contamination emanating from these sources. Solutia and Pharmacia have negotiated a settlement with certain of the defendants in the Environmental Litigations, as well as other defendants in similar contribution actions. The parties have entered into settlement agreements with: * Crown, Cork & Seal Company (USA) Inc., * Service America Corporation, * Volume Services America, Inc., and * The Glidden Company The Debtors ask the Court to approve the Settlement Agreements. Service America Settlement Service America and Volume Services America were identified as Potentially Responsible Parties for both the Area 1 Sites and the Area 2 Sites. Pharmacia and Solutia brought claims against Service America seeking contribution for cost recovery estimated to be more than $800,000. Under the Service America Settlement Agreement, Service America agreed to pay Pharmacia and Solutia $10,000 -- to be credited against costs incurred for Area 1 Sites and to pay $500,000 to the parties who participated in the Remedial Investigation and Feasibility Study conducted in the Area 2 Sites. The parties will exchange mutual releases. Crown Cork Settlement Crown Cork was identified as a Potentially Responsible Party for the Area 2 Sites. Pharmacia and Solutia sought contribution from Crown Cork for cost recovery for various remedial efforts there. Solutia initially estimated its claim against Crown Cork at less than $250,000. Pursuant to the Crown Cork Settlement Agreement, Crown Cork will pay Pharmacia and Solutia $45,000 in satisfaction of all claims asserted by Pharmacia and Solutia against Crown Cork in the Area 2 Litigation. Pharmacia and Solutia will dismiss their claims against Crown Cork in the Area 2 Litigation. Moreover, Pharmacia, Solutia and Crown Cork all agreed not to sue each other on account of claims asserted in the litigation, except for claims based on significant new information related to the Area 2 Sites. Crown Cork also agreed to pay Pharmacia and Solutia an additional $25,000 upon the grant by the Illinois Court of contribution protection to Crown Cork with respect to environmental obligations related to the Area 2 Sites. Pharmacia, Solutia and Crown Cork agreed to file a joint motion with the Illinois Court for this relief. However, the contribution protection will not include claims by Pharmacia and Solutia against Crown Cork based on significant new information regarding materials disposed of by Crown Cork at the Area 2 Sites. Glidden Settlement Glidden was identified as a Potentially Responsible Party for the Area 2 Sites, and Pharmacia and Solutia sought contribution from Glidden for cost recovery for remedial efforts there. Solutia estimated that Glidden's share of liability was 2% or more. Under the Glidden Settlement Agreement, Glidden agreed to join the Participation Group and participate in the cost allocation process established by the group. In addition, Glidden agreed to pay, as a premium to Pharmacia and Solutia, 10% of recovery costs allocated to Glidden for the Area 2 Sites. In exchange for Glidden's agreement to join the Participation Group and payment of the premium, Pharmacia and Solutia agreed to withdraw their claims against Glidden asserted in the Area 2 Litigation. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA INC: CP Films Wants to Assume Amended Toray Supply Pact --------------------------------------------------------------- Before its bankruptcy petition date, CPFilms, Inc. -- Solutia Inc.'s debtor-affiliate -- and Toray Plastics (America), Inc., entered into a supply contract setting forth the terms of CPFilms' purchase and Toray's supply of specialty film and commodity film products necessary for the operation of CPFilms' business. According to M. Natasha Labovitz, Esq., at Gibson, Dunn & Crutcher LLP, in New York, CPFilms uses the Products in the manufacture of solar control window film and industrial intermediates. Toray has unique technology to produce certain of these Products with optical and handling properties during manufacturing, which cannot be matched by other producers. The Prepetition TPA Contract provided that CPFilms was entitled to purchase an estimated amount of specialty film and commodity film in 2004 with a 5% increase in available quantities during each of 2005 and 2006, all at fixed prices set forth in the Prepetition TPA Contract. Due to subsequent increases in market prices, the pricing set forth in the Prepetition TPA Contract is currently below market. The market price for commodity film has increased by $0.40 per lb. in 2004, and is estimated to increase by $0.55 per lb. in 2005, above the prices set forth in the Prepetition TPA Contract. Ms. Labovitz explains that while the Prepetition TPA Contract locks in very favorable prices and assures CPFilms a source for a significant portion of its requirements of these key materials, certain other value-added services furnished by Toray are not documented in the contract. Toray's obligations for producing and holding Product inventory and warehousing, services it has provided during the contract term at its own expense, are vaguely defined as "per current policies and agreements". In addition, the Prepetition TPA Contract does not obligate Toray to provide product development services -- even though those services have historically been provided by Toray on request at no additional charge to CPFilms -- or specify the use or ownership of intellectual property arising from joint product development projects between Toray and CPFilms. CPFilms' Product requirements have significantly increased since it entered into the Prepetition TPA Contract. CPFilms forecasts that it will require significantly larger quantities of both commodity film and specialty film than it is entitled to under the Prepetition TPA Contract. Toray is currently CPFilms' sole supplier for certain of the Products for which CPFilms' requirements now exceed the maximum volumes under the Prepetition TPA Contract. Toray has been supplying Product to CPFilms above the current contract levels, but it is under no obligation to do so or to sell those volumes at the below market prices set forth in the Prepetition TPA Contract. CPFilms decided to enter into an Amended and Restated Supply Agreement. The Amended Agreement provides supply security and price protection for Product volumes in excess of the amounts set forth in the Prepetition TPA Contract, along with other contract improvements that save costs. The Amended Agreement increases the amounts of specialty film that CPFilms is entitled to purchase and Toray is obligated to supply in 2005 and increases maximum available quantities for 2006, in each case at the same favorable prices set forth in the Prepetition TPA Contract. CPFilms anticipates that the increased volumes for 2005 and 2006 will satisfy its specialty film requirements. The Amended Agreement also increases the amount of commodity film that CPFilms is entitled to purchase and Toray is obligated to supply in both 2005 and 2006 at the same favorable prices set forth in the Prepetition TPA Contract. Because CPFilms' commodity film requirements may exceed the revised 2005 and 2006 quantity estimates, the Amended Agreement also allows CPFilms to purchase commodity film in excess of revised annual volumes at a higher fixed price for 2005 and a formula based price for 2006. The prices for commodity film purchases in excess of the increased quantities under the Amended Agreement are still significantly below the current market price and the pricing formula for 2006 is structured to capture similar cost-savings, Ms. Labovitz says. In addition to locking in favorable prices at higher volumes, the Amended Agreement clearly defines Toray's obligation to provide warehousing and consignment services at its expense, obligates Toray to perform product development services at CPFilms' request at no additional charge, and clarifies that CPFilms is the exclusive owner of all new product developments and associated intellectual property rights. The Amended Agreement provides a significant benefit to CPFilms' estate by securing supply of additional quantities of key materials at favorable prices in a rising market and by obligating Toray to continue to furnish certain value-added services at no additional charge to CPFilms during the remaining term of the Agreement. Cure Amount and Adequate Assurance CPFilms acknowledges that it owes Toray $1,773,723 for Products delivered but not paid for before the Petition Date. Toray has agreed to reduce its Claim by 10% to $1,596,351 and to accept payment in six consecutive monthly installments of $133,029 on the first of each calendar month during 2005 and one final installment of $798,176 payable on July 1, 2005. Toray has also agreed to waive any further claims under the Prepetition TPA Contract. CPFilms believes that adequate assurance of future performance under the Amended Agreement is provided by its operational credibility and history of dealings with Toray. Accordingly, CPFilms sought and obtained the Court's authority to Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPRINGFIELD GRANITE: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Springfield Granite Company, Inc. 3702 East Kerr Springfield, Missouri 65803 Bankruptcy Case No.: 05-60226 Chapter 11 Petition Date: January 31, 2005 Court: Western District of Missouri (Springfield) Debtor's Counsel: David E. Schroeder, Esq. David Schroeder Law Offices, PC 1524 East Primrose Street, Suite A Springfield, Missouri 65804-7915 Tel: (417) 890-1000 Fax: (417) 886-8563 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ John P Hardwick Shareholder loan $677,532 3876 S Cottage Springfield, MO 65807 Lotus Exim International Inc. Open account $347,000 41 Bancker Street Englewood, NJ 07631 Bedrock International Open account $134,329 9929 Lackman Rd Lenexa, KS 66219 Sun Marble LLC-Kansas Open account $58,460 9600 Dice Lane Lenexa, KS 66215 Electrolux Construction Open account $22,274 Products Midwest Tile Marble Open account $19,814 Cold Spring Granite Company Open account $14,090 c/o Harris Bank IMC Open account $9,820 International Granite Company Open account $9,748 Global Granite & Marble Open account $9,476 Yates & Danielson LLP Open account $9,000 CU of Springfield Open account $8,417 GE Capital Open account $8,333 Natural Sone Imports LLC Open account $7,451 Natural Stone & Tile Open account $6,400 Gran Quartz Open account $6,168 Midwest Aerials Open account $5,042 Reliable Chevrolet Open account $4,688 Fleetcor Open account $3,938 AGM USA Open account $3,200 STEVENOT WINERY: Section 341(a) Meeting Slated for February 25 -------------------------------------------------------------- The U.S. Trustee for Region 17 will convene a meeting of Stevenot Winery and Imports, Inc.'s creditors at 9:00 a.m., on February 25, 2005, at the Office of the U.S. Trustee, 235 Pine Street, Suite 700 San Francisco, California 94104. This is the first meeting of creditors required under U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Murphys, California, Stevenot Winery and Imports, Inc. -- http://www.stevenotwinery.com/-- operates a winery. The Company filed for chapter 11 protection on Jan. 24, 2005 (Bankr. E.D. Calif. Case No. 05-90138). Daniel L. Egan, Esq., at Wilke, Fleury, Hoffelt, Gould & Birney, LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $7,663,000 and debts of $6,425,281. SYNAGRO TECH: Moody's Puts B2 Rating on $305M Credit Facility ------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Synagro Technologies, Inc. reflecting management's higher financial risk tolerance as evidenced by the inauguration of a cash dividend policy in advance of the accumulation of significant retained cash and the resulting negative impact to free cash flow of this policy. The downgrade also reflects Synagro Technologies' sizable debt-funded capital investment required to support its growing facilities business, deficit to breakeven free cash flow which is weak relative to its pro-forma debt throughout the intermediate term, and the absence of meaningful improvement in operating margins. In Moody's opinion, pro-forma liquidity is strained due to the large capital expenditure and dividend programs during the near term. Moody's took the ratings actions: * Existing $120 million guaranteed senior secured credit facility, maturing in 2007, downgraded to B2 from B1; * Existing $150 million issue of 9.5% guaranteed senior subordinated notes, due 2009, downgraded to Caa1 from B3; * The senior implied rating is downgraded to B2 from B1; * The senior unsecured issuer rating is downgraded to B3 from B2 (non-guaranteed exposure) The assigned rating is: * Proposed $305 million guaranteed senior secured credit facility, maturing 2012, is rated B2. The ratings outlook is stable. Proceeds from the proposed facility will finance a portion of the planned recapitalization of Synagro Technologies, which includes a secondary offering of approximately $148 million of common equity (which includes convertible preferred currently owned by GTCR) and the expected primary sale of about $30 million of common. The proceeds are intended to be used to refinance approximately $30 million of outstandings under the existing $120 million senior secured credit facility, to refinance other notes (not rated by Moody's) of about $5 million, to pay approximately $165 million for the principal, accrued interest and call premium for tender of the existing 9.5% guaranteed senior subordinated notes due 2009, to pay approximately $140 million to exiting shareholders and to pay transaction costs of roughly $16 million. The ratings are subject to the review of final documentation. Upon the closing of the proposed transactions, the ratings on existing debt will be withdrawn. The ratings reflect Moody's belief that the company's cash from operations less capex (free cash flow) to debt ratio of 8.3% for the twelve months ended September 30, 2004 is not sustainable given Synagro's newly awarded facilities business. Moody's believes this ratio, expressed in a percentage, could fall to the low single digits for fiscal 2004 and likely remain there for the foreseeable future. In addition, the fixed charge coverage for the twelve months ended September 2004 remains insufficient at 0.8 times, despite an improvement in overall business activity. Financial leverage is high with expected pro forma total debt to estimated fiscal 2004 EBITDA of 4.1 times with consideration given to the approximately $65 million of existing Industrial Revenue Bonds (about 4.5 times as adjusted for rent). The ratings are supported by Synagro Technologies' leading position in the wastewater residuals management business, its fairly predictable revenue stream given the longevity of its municipal contracts, and relatively low customer churn rate. Despite the significant intangibles at approximately 34% of total assets, some comfort is derived from the maintenance of EBIT return on average total assets above 7% for the twelve months ended September 30, 2004. The stable ratings outlook incorporates an expectation of limited financial flexibility during the debt-funded facilities expansion. The ratings outlook is highly sensitive to the company's expected level of cash flow generation and profitability metrics. Should the company's retained cash decline further than expected or should the company pursue an acquisition based growth strategy and increase financial leverage, the ratings could be jeopardized. Alternatively, a significant and sustained build in retained cash over an extended period coupled with organic growth, margin improvements (returning to historical levels of above 16% EBIT margins), and reduction of leverage (free cash flow to total debt including IRBs consistently in the high to mid single digits) could lead toward positive rating consideration. The B2 rating assigned to the proposed secured credit facility for Synagro Technologies recognizes its senior position in the proposed capital structure and the expectation of full recovery in a distress scenario. The absence of notching above the B2 senior implied reflects the facility's position as the preponderance of debt in the proposed capital structure. The proposed facility consists of a $95 million revolver, a $180 million term loan B, and a delayed draw $30 million term B facility, all due 2012. The delayed draw facility will be available for a period of six months and will be used to fund permitted capital expenditures. Moody's notes that while the bank agreement ties permitted cash dividends to a free cash flow concept, the defined term differs from Moody's view of free cash which is defined as cash from operations less capex less cash dividends. The collateral package includes substantially all the assets of the subsidiaries, with the exception of those with non-recourse IRB debt whose revenue and assets are pledged to $65 million in non-recourse project revenue bonds related to the construction of certain thermal facilities. The facility is guaranteed by all of the company's subsidiaries except those associated with non- recourse IRB debt. Upon the consummation of the proposed financings, Synagro Technologies expects to have no drawdowns under the proposed $95 million credit facility. There is expected to be $35 million outstanding in letters of credit, which are used to support performance obligations of the company. There will be a $50 million sublimit for letters of credit. The Company had $117 million of performance bonds and other guarantees and $33.5 million of letters of credit outstanding as of Sept. 30, 2004. The Caa1 rating on the existing senior subordinated notes reflects the deep contractual subordination of the notes to all of the existing and future senior indebtedness of the Company and the likelihood of some impairment in a distress scenario. Synagro Technologies, Inc., based in Houston, Texas is the largest recycler of biosolids and other organic residuals in the United States. The Company serves close to 600 municipal and industrial water and water treatment accounts in over 37 states, and is the only organic residual disposal company with national coverage. The Company had revenue of $320 million for the twelve months ended September 2004. SYNAGRO TECHNOLOGIES: S&P Revises Rating Outlook to Negative ------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Synagro Technologies, Inc., to negative from stable. At the same time, Standard & Poor's assigned its 'BB-' senior secured bank loan rating and a recovery rating of '4' to Houston, Texas-based Synagro's proposed $305 million senior secured credit facilities, based on preliminary terms and conditions. The senior secured bank loan rating is the same as the corporate credit rating; this and the '4' recovery rating indicate that lenders can expect marginal (25% to 50%) recovery of principal in the event of default. The 'BB-' corporate credit rating is affirmed. Pro forma for the transaction, total debt, including non-recourse project revenue bonds, will be approximately $250 million. Synagro is expected to use the proceeds from the new senior secured credit facilities to retire substantially all existing debt and partially fund capital spending on new facilities. "While the company benefits from relatively stable demand for biosolids management services, and an improved debt maturity profile following the refinancing, the new dividend policy related to a secondary common stock offering represents a meaningful use of free operating cash flow and signals a shift to a more aggressive financial policy," said Standard & Poor's credit analyst Franco DiMartino. Dividend spending could limit the company's financial flexibility and weaken credit protection measures should Synagro experience operating challenges related to adverse weather conditions or the loss of a key customer account. The ratings on Synagro reflect its narrow scope of operations and substantial debt usage that heighten vulnerability to adverse weather conditions or other business disruptions. These factors are only partially offset by its position as a well-established full-service provider in the fragmented wastewater residuals management industry and its efficient operations. With annual revenues of more than $300 million, Synagro manages the organic, non-hazardous residuals (biosolids) generated by public and privately owned wastewater treatment facilities. (Materials that meet federal and state regulations for beneficial reuse by land application or other methods are referred to as biosolids.) The company provides processing, land application, transportation, site monitoring, and environmental regulatory compliance services to more than 600 municipal and industrial accounts, with operations in 37 states and the District of Columbia. TENNECO AUTOMOTIVE: To Make Voluntary $40 Million Debt Pre-Payment ------------------------------------------------------------------ Tenneco Automotive (NYSE: TEN) will make a voluntary $40 million cash pre-payment on its $396 million Term Loan B credit facility, which matures in December 2010. "We remain committed to our number one priority of generating cash to pay down debt," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "Our sharp focus on business growth, cost reduction and operational improvement over the last five years has increased earnings and improved working capital, both strategies for generating cash for debt reduction." The company will make the cash pre-payment as a result of strong cash performance in 2004, having ended the year with cash balances of $214 million and no borrowings outstanding on its $220 million revolver or $180 million letter of credit facility. The pre-payment will reduce interest expense by about $2 million annually. About the Company Tenneco Automotive (S&P, B+ Corporate Credit Rating, B- Senior Subordinated Notes) is a $3.8 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,200 employees worldwide. Tenneco Automotive is one of the world's largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco Automotive markets its products principally under the Monroe(R), Walker(R), Gillet(R) and Clevite(R)Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer noise, vibration and harshness control components. * * * As reported in the Troubled Company Reporter on Nov. 18, 2004, Moody's Investors Service assigned a B3 rating to Tenneco Automotive, Inc.'s proposed $500 million 8.625% guaranteed senior subordinated notes offering, which will fully refinance all of the company's existing $500 million 11.625% senior subordinated notes issue. The refinancing transaction will result in $15 million of annual cash interest savings, and will extend the maturity of the company's subordinated obligations by five years. Moody's additionally affirmed all of Tenneco's existing ratings and improved the company's rating outlook to positive, from stable. More specifically, Moody's assigned these new rating for Tenneco: -- B3 rating for Tenneco's proposed 8.625% guaranteed senior subordinated unsecured notes due November 2014, to be issued under Rule 144A with registration rights Moody's affirmed these ratings for Tenneco: -- B1 rating for Tenneco's $800 million aggregate of guaranteed first-lien senior secured credit facilities, consisting of: * $220 million revolving credit facility due December 2008; * $180 million term loan B letter of credit/revolving loan facility due December 2010 (cash-collateralized by the lenders); * $400 million term loan B facility due December 2010; -- B2 rating for Tenneco's $475 million of 10.25% guaranteed senior secured second-lien notes due 2013; -- B1 senior implied rating; -- B2 senior unsecured issuer rating; -- B3 rating for Tenneco's $500 million of 11.625% guaranteed senior subordinated unsecured notes due October 2009, which rating will be withdrawn once these notes are called for redemption. TRINITY LEASING: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: Trinity Leasing, Ltd. 3724 Hays Groves, Texas 77619 Bankruptcy Case No.: 05-10131 Chapter 11 Petition Date: January 31, 2005 Court: Eastern District of Texas (Beaumont) Debtor's Counsel: Robert E. Barron, Esq. P.O. Box 1347 Nederland, TX 77627 Tel: 409-727-0073 Fax: 409-724-7739 Total Assets: $1 Million to $10 Million Total Debts: $100,000 to $500,000 The Debtor did not file a list of its 20-largest creditors. TROPICAL SPORTSWEAR: Committee Taps Stroock & Stroock as Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida gave the Official Committee of Unsecured Creditors of Tropical Sportswear Int'l Corporation and its debtor-affiliates permission to employ Stroock & Stroock & Lavan LLP as its counsel. Stroock & Stroock will: a) assist, advise and represent the Committee with respect to the administration of the Debtors' chapter 11 cases and with the Committee's powers and duties; b) assist the Creditors' Committee in maximizing the value of the Debtors' assets for the benefit of all creditors and in pursuing the confirmation of a plan of reorganization; c) assist the Committee in the investigation of the Debtors' assets, liabilities, financial condition and operations; d) commence and prosecute necessary and appropriate actions and proceedings on behalf of the Committee that may be relevant in the Debtors' chapter 11 cases; e) review, analyze or prepare, on behalf of the Committee, all necessary applications, motions, answers, orders, reports, schedules and other legal papers; f) appear before the Court to represent the interests of the Committee and confer with professional advisors retained by the Committee; and g) perform all other legal services for the Committee that are appropriate and necessary in the Debtors' chapter 11 cases. Michael J. Sage, Esq., a Member at Stroock & Stroock, is the lead attorney for the Committee. Mr. Sage discloses that the Firm has not received any retainer for its representation of the Committee. Mr. Sage will charge $750 per hour for his services. Mr. Sage reports Stroock & Stroock's professionals bill: Designation Hourly Rate ----------- ----------- Partners $500 - $750 Associates/Special Counsel $205 - $600 Paraprofessionals $150 - $260 Other Staff $ 75 - $150 Stroock & Stroock assures the Court that it does not represent any interest adverse to the Committee, the Debtors or their estates. Headquartered in Tampa, Florida, Tropical Sportswear Int'l Corp. -- http://www.savane.com/-- designs, produces and markets branded branded apparel products that are sold to major retailers in all levels and channels of distribution. The Company and its debtor- affiliates filed for chapter 11 protection on December 16, 2004 (Bankr. M.D. Fla. Case No. 04-24134). David E. Bane, Esq., and Denise D. Dell-Powell, Esq., at Akerman Senterfitt, represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $247,129,867 and total debts of $142,082,756. UAL CORP: Renews Talks with TWU on Restructuring Agreements ----------------------------------------------------------- James H.M. Sprayregen, Esq., at Kirkland & Ellis in Chicago, tells Judge Wedoff that UAL Corporation and its debtor-affiliates recommenced good faith negotiations with the Transport Workers Union of America to reconstitute the restructuring agreements. On January 19, 2005, the Debtors and the TWU negotiating committee reached a new tentative agreement that contained the modifications required by the Debtors, subject to membership ratification, which should be completed by the end of January. By this motion, the Debtors seek the Court's authority to enter into the Revised Agreement. Pursuant to the Revised Agreement, meteorologist base pay rates will be reduced by 7.2%, effective January 1, 2005. Meteorologist wage rates will increase by: 1.5086% effective July 1, 2005; 1% effective May 1, 2006; 1% effective May 1, 2007; 1% effective May 1, 2008; and 1% effective May 1, 2009. If the Debtors terminate the United Airlines, Management, Administrative and Public Contact Defined Benefit Pension Plan, which governs TWU pensions, TWU will waive any claims that termination would violate its collective bargaining agreement. TWU will not otherwise oppose termination efforts. If TWU's Pension Plan is terminated, the Debtors will make an initial monthly contribution to a defined contribution plan of between 3.25% and 7.25% of meteorologist compensation, based on each covered employee's points, which is defined as full years of age plus full years of service. The Debtors will continue these contributions through December 31, 2009. Beginning January 1, 2010, the Debtors will set the monthly contribution rate at 5.5% of meteorologist compensation. The Revised Restructuring Agreement enables TWU employees to share in the upside of the Debtors' recovery. TWU will participate in a revised profit sharing program if the Debtors exceed specified profit margins. TWU will participate in a success sharing program based on the Debtors' performance under annual incentives. If TWU's Pension Plan is terminated, the Debtors will issue $24,000 in Convertible Notes for distribution to covered employees. Under any plan supported by the Debtors, TWU will receive a percentage distribution of equity or other consideration provided to general unsecured creditors. The Debtors will reimburse TWU for certain fees and expenses, up to $30,000. The Revised Restructuring Agreement may be terminated if the Debtors fail to secure $625,000,000 in average annual savings from 2005 through 2010. If the Agreement is terminated, TWU will accrue and be entitled to an allowed administrative expense claim equal to the actual cash savings provided to the Debtors from Agreement's effective date through the earlier of: a) termination of the Agreement; or b) the effective date of a plan of reorganization. TWU will not be entitled to an administrative claim if its Pension Plan is not terminated. Mr. Sprayregen explains that the consensual modifications were reached only after careful deliberation and extensive, intense and complex negotiations. The modifications address the financial, transformational and labor relations imperatives facing the Debtors in a manner that will best serve the estates. With these modifications, the Debtors should be able to meet near-term liquidity needs, satisfy DIP Financing covenants and secure exit financing, all in a challenging industry environment. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORPORATION: Files 10th Reorganization Status Report -------------------------------------------------------- Over the last 30 days, UAL Corporation and its debtor-affiliates and their unions "have worked tirelessly" to reach consensual agreements on labor cost reductions and pension related issues. Ratification votes for tentative labor agreements should be completed by the end of January. The Debtors and the unions continue to negotiate over pension issues. The Debtors strongly believe that termination of the pension plans is necessary and inevitable. If a consensual resolution cannot be reached, the Debtors will file a request to terminate the pension plans. The Debtors will pursue negotiations with the Aircraft Trustees on a transaction-by-transaction basis. No meetings with holders have been conducted since the last Status Report; however, the Debtors have met with advisors to certain holders. Consensual restructurings of particular transactions will result in the Debtors' release of antitrust claims for that particular transaction. The Debtors are monitoring Delta Airlines' fare restructuring initiatives and subsequent efforts by competitors. Due to the Debtors' efforts to reduce domestic capacity while increasing international flights, the Debtors believe they are better positioned than other network carriers to compete with the restructured fares. In fact, this is precisely the type of escalating price pressure that the Debtors expected. In response, the Debtors adjusted fares on a market specific basis, with the majority of markets unaffected by Delta's maneuvers. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000) USGEN NEW ENGLAND: Files Plan of Liquidation in Maryland -------------------------------------------------------- USGen New England, Inc., has filed a Plan of Liquidation with the U.S. Bankruptcy Court for the District of Maryland, Greenbelt Division. Pursuant to the Plan, creditors with allowed unsecured claims will receive a cash payment for 100 percent of their claims plus annualized simple interest at 4 percent. USGen New England expects the bankruptcy court to hold a hearing in March on its disclosure statement describing the Plan of Liquidation. Following court approval, a solicitation period will commence for the company's creditors to vote to accept the plan. Pending an affirmative vote, USGen New England expects to emerge from bankruptcy in June. Based on this schedule, creditors would receive payments during the summer. Earlier this year, USGen New England closed on its approximately $656 million sale of three fossil fuel plants to Dominion. It has announced the sale of its remaining assets -- hydroelectric generation facilities in New England -- to an affiliate of TransCanada Corporation. That closing is expected during the first half of this year. A copy of USGen New England's Plan of Liquidation is available through NEGT's website at http://www.negt.com/ 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. VISTEON CORP: Posts $115 Million Net Loss in Fourth Quarter ----------------------------------------------------------- Visteon Corporation (NYSE: VC) released preliminary fourth quarter and full year results for 2004. For the fourth quarter 2004, Visteon reported revenue of $4.7 billion, up 5 percent compared with the same period in 2003. These results were driven by a 35 percent increase in non-Ford revenue. Non-Ford revenue for the quarter totaled a record $1.6 billion, up more than 7 percentage points from the same period last year. For the full year 2004, revenue totaled $18.7 billion, up $1 billion compared to 2003, despite a $460 million decline in Ford revenue. Full-year non-Ford revenue reached a record $5.7 billion, up 36 percent over 2003. Full-year non-Ford revenue represented 30 percent of total revenue. "Our record non-Ford revenue growth in 2004 exceeded our expectations and serves as testament to the innovative products customers are counting on us to deliver," said Mike Johnston, president and chief executive officer. "Our new business wins in 2004 continue to be in the growth products that are core to our success - interiors, climate and electronics, including lighting. We've strengthened our competitive position to serve customers around the globe by opening and expanding technical centers in every region. "We have implemented programs to reduce headcount and costs in the United States, but material surcharges and lower North American Ford production have put significant pressure on our operating results. As we announced last September, we are exploring strategic and structural changes to our U.S. operations to achieve a sustainable and competitive business. We are having constructive and ongoing discussions with Ford about such changes." Visteon's results are preliminary because, during the course of the year- end closing process, errors were discovered in the company's accounting for certain retiree health care and pension benefits, and income taxes. Management has made an initial evaluation of the impact of these errors and has included preliminary financial results reflecting these estimates. Because of these errors, Visteon is, in consultation with its independent registered public accounting firm, PricewaterhouseCoopers LLP, reviewing prior reports filed with the Securities and Exchange Commission to determine if any other adjustments or corrections are necessary. Visteon has not identified any other necessary adjustments at this time. Fourth Quarter 2004 During the fourth quarter of 2004, Visteon changed the method of determining the cost of production inventory for U.S. locations from the last- in, first-out method to the first-in, first-out method. Visteon believes the FIFO method of inventory costing will provide more meaningful information to investors and conforms all inventories to the same FIFO basis. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes", a change from the LIFO method of inventory costing to another method is considered a change in accounting principle that should be applied by retroactively restating all prior periods. For the fourth quarter 2004 Visteon reported a net loss of $115 million. These results include $41 million of after-tax special charges, primarily related to costs associated with a U.S. salaried employee voluntary termination incentive program that will result in a reduction of approximately 400 employees by March 31, 2005. For the fourth quarter 2003, as restated, Visteon reported a net loss of $829 million. These results included asset impairment write-downs, an increase in deferred tax asset valuation allowances, and special charges totaling $720 million after-tax. For the full year 2004, Visteon recorded a net loss of $1.489 billion. These results include non-cash write-downs of $871 million for increased valuation allowances against Visteon's deferred taxes, $314 million for asset impairment write-downs, and $78 million for other special charges. In aggregate these items totaled $1.263 billion after tax, or $10.08 per share. For the full year 2003, as restated, Visteon recorded a net loss of $1.190 billion. These results include the asset impairment write- downs, an increase in deferred tax asset valuation allowances and other special charges. In aggregate, after-tax, these items totaled $911 million. For the full year 2004, cash flow from operations was $427 million, a $57 million increase from 2003. Cash payments related to capital expenditures were $836 million for the full year 2004, $43 million lower than 2003. At year end 2004, Visteon had $752 million of cash and marketable securities, down $204 million from the previous year end. 2005 Outlook Visteon is exploring strategic and structural changes to its business in the United States that would involve Ford and Visteon's legacy businesses. Visteon is seeking a comprehensive agreement that could address a number of items. The discussions with Ford have been constructive and are ongoing. Because of the uncertainty surrounding future market and economic conditions, combined with Visteon's ongoing discussions with Ford, Visteon is not providing specific guidance at this time. "In light of mounting challenges facing our business, we are identifying actions to improve the company's cost structure and cash position," said Mr. Johnston. "In addition to our strategic and structural discussions with Ford, we are taking actions to focus capital and engineering resources to growth areas only, and minimize the impact of material surcharges." The Board of Directors considers each quarter whether to declare a cash dividend, and has declared and paid a cash dividend each quarter since its spin off from Ford in 2000. In light of the uncertainty regarding future market conditions, Visteon's current financial conditions and the ongoing discussions with Ford, the Board intends to discuss its options regarding the cash dividend at its regularly scheduled Feb. 9, 2005 meeting, including modification or suspension of the dividend. Visteon has concluded that the deficiencies in internal controls that led to the errors constitute a "material weakness," as defined by the Public Company Accounting Oversight Board's Auditing Standard No. 2. Consequently, management will be unable to conclude that Visteon's internal controls over financial reporting are effective as of Dec. 31, 2004. Furthermore, Visteon expects that PricewaterhouseCoopers LLP will issue an adverse opinion with respect to the company's internal controls over financial reporting, which opinion will be included in Visteon's 2004 Form 10-K. About the Company Visteon Corporation is a leading full-service supplier that delivers consumer-driven technology solutions to automotive manufacturers worldwide and through multiple channels within the global automotive aftermarket. Visteon has about 70,000 employees and a global delivery system of more than 200 technical, manufacturing, sales and service facilities located in 25 countries. * * * As reported in the Troubled Company Reporter on Sept. 15, 2004, Standard & Poor's Ratings Services placed its 'BB+' corporate credit rating for Visteon Corp. on CreditWatch with negative implications. "The CreditWatch reflects concerns about the auto supplier's ability to improve its poor profitability and cash flow generation in the wake of uncertain industry conditions," said Standard & Poor's credit analyst Martin King. These include lower-than- expected sales to its largest customer, Ford Motor Co. (BBB- /Stable/A-3), and high raw-material costs. W.R. GRACE: Won't Face Competing Chapter 11 Plans Until May 24 -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended the period within which W.R. Grace & Co., and debtor-affiliates has the exclusive right to file a chapter 11 plan through and including May 24, 2005. Judge Fitzgerald also extended the Debtors' exclusive period to solicit votes until July 24, 2005 to give them the opportunity to complete the confirmation process, respond to objections, and continue to negotiate with the asbestos parties regarding Plan amendments, without the distraction of addressing competing plans. 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. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) WASHINGTON MUTUAL: S&P Puts Low-B Ratings on Six Cert. Classes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Washington Mutual Asset Securities Corp.'s $651.2 million commercial mortgage pass-through certificates series 2005-C1. The preliminary ratings are based on information as of Jan. 31, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: (1) the credit support provided by the subordinate classes of certificates, (2) the liquidity provided by the trustee, (3) the economics of the underlying mortgage loans, and (4) the geographic and property type diversity of the loans. Classes X, A-1, A-2, A-J, B, C, D, E, F, G, H, J, K, L, M, N, and R are currently being offered publicly. The remaining classes will be offered privately. Standard & Poor's analysis of the portfolio determined that, on a weighted average basis, the pool has: * a debt service coverage -- DSC -- of 1.56x, * a beginning LTV of 69.3%, and * an ending LTV of 57.8%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Washington Mutual Asset Securities Corp. Class Rating Amount ($) ----- ------ ---------- X* AAA 651,193,081** A-1 AAA 311,490,000 A-2 AAA 229,000,000 A-J AAA 49,653,000 B AA 8,954,000 C A 13,024,000 D A- 4,070,000 E BBB+ 5,698,000 F BBB 4,884,000 G BBB- 5,698,000 H BB+ 8,140,000 J BB 3,256,000 K BB- 2,442,000 L B+ 2,442,000 M B 814,000 N B- 1,628,081 R*** N.R. N/A V*** N.R. N/A * Interest-only class ** Notional amount *** Residual certificates N.R. - Not rated N/A - Not applicable WORLDCOM INC: Bondholder Suit Against Andersen Going to Trial ------------------------------------------------------------- As previously reported, the Lead Plaintiffs in a consolidated securities class action arising from the collapse of WorldCom, Inc., asked the U.S. District Court for the Southern District of New York to find that certain of WorldCom's financials incorporated in the 2000 and 2001 registration statements for two WorldCom bond offerings contained material misstatements. The allegedly false statements on which the Lead Plaintiffs' request is based relate to the reporting of WorldCom's line costs, capital expenditures, depreciation and amortization, assets, and goodwill. The Lead Plaintiffs allege that the investment banks that underwrote the 2000 and 2001 Offerings violated Sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. Sections 77k and 77l. The Plaintiffs assert that the Underwriters did almost no investigation of WorldCom in connection with their underwriting of the bond offerings for the company, and because they did essentially no investigation, will be unable to succeed with their defense that they were diligent. The Lead Plaintiff argue that there were "red flags" that should have led the Underwriters to question even the audited financials filed by WorldCom. The Lead Plaintiffs in the Securities Litigation are: -- HGK Asset Management; -- Alan G. Hevesi, Comptroller of the State of New York, as Administrative Head of the New York State and Local Retirement Systems and as Trustee of the New York State Common Retirement Fund; and -- New York State Common Retirement Fund. * * * Arthur Andersen, LLP, is a defendant in a consolidated securities class action for its 1999 and 2000 audits of WorldCom's financial statements. Andersen faces claims under both the Securities Act of 1933, which has a strict liability standard, and the Securities Exchange Act of 1934, whose fraud provision requires the plaintiff to prove that Andersen acted with scienter. The Securities Class Action is pending before the U.S. District Court for the Southern District of New York. The New York State Common Retirement Fund was appointed lead plaintiff. The class was certified on October 24, 2003. After the close of discovery in the class action on July 9, 2004, Andersen sought partial summary judgment from the District Court and asserted that there is insufficient evidence that the 1999 WorldCom financial statements were materially false. With respect to the 1999 audit, Andersen sought summary judgment that its conduct of the 1999 audit conformed to the Generally Accepted Auditing Standards. Andersen also asserts that there is no evidence that it acted with scienter with respect to its audit of any of the three financial statements. In a 58-page Opinion and Order dated January 18, 2005, District Court Judge Denise Cote finds that the Lead Plaintiff has presented sufficient evidence to require the WorldCom accounting issues to be presented to a jury. Judge Cote explains that Andersen touted its Business Audit model as one that begins with the requirement that it know the business of the company it is auditing. The Lead Plaintiff has shown that Andersen understood that from 1999 to 2001: -- WorldCom was facing increasing competitive pressure and its strategy of growth by acquisition was stymied; -- it had a history of aggressive accounting strategies to boost its reported earnings per share and to minimize its reported line costs; -- by the end of 2000 it had exhausted several of those strategies; -- its stock was taking a pounding; and -- it would have to find or event new avenues if it wished to continue to dampen the negative news in its financial reporting and cushion its stock price. The District Court finds that the Lead Plaintiff has presented evidence to support its argument that Andersen acted in willful blindness to the realities at WorldCom and in abrogation of its duty as auditor. The Lead Plaintiff identified: 1. a host of audit failures, which would permit a jury to find that there was an egregious refusal to see the obvious, repeated failures to investigate the doubtful; and 2. a pattern of acquiescence in improper accounting practices. Andersen understood that its unqualified certification of the WorldCom financials would carry great weight with investors. "This is sufficient to constitute proof of recklessness," Judge Cote opines. Judge Cote holds that the Lead Plaintiff is entitled to demonstrate at trial the reckless misconduct through a cumulative pattern of decisions and inaction by several Andersen auditors that encompassed a multitude of important accounting issues. Andersen argues that it is not entitled to summary judgment on the Exchange Act Section 10(b) claim because the Lead Plaintiff has failed to demonstrate that a particular Andersen auditor acted with scienter. Andersen maintains that the 1999 and 2000 as well as the 2001 audits complied with GAAS and that conflicting expert opinions as to GAAS and Generally Accepted Auditing Principles compliance automatically prevent a finding or recklessness. The District Court holds that the submission of two competing reports, without more, neither prohibits a jury from determining that an auditor acted recklessly, nor compels summary judgment for an auditor. The Class Action trial will begin on February 28, 2005. A copy of Judge Cote's Opinion and Order is available for free at: http://bankrupt.com/misc/DCruling_andersen.pdf 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. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDSPAN LP: Moody's Lowers B1 Senior Implied Rating to B2 ----------------------------------------------------------- Moody's Investors Service has downgraded Worldspan L.P.'s senior implied rating to B2 from B1 following the Company's announcement of a refinancing transaction, reflecting reduced financial flexibility from potential movement of some of Expedia's online bookings from Worldspan to the Sabre GDS and from higher cash interest expense associated with the current offering. Concurrently, Moody's assigned a B2 rating to Worldspan's $440 million guaranteed senior secured bank credit facility due 2010 and a B3 rating to its $350 million guaranteed second lien senior secured notes due 2011. The B1 rating on the existing credit facility has been withdrawn. The rating outlook is stable. The current transaction involves the issuance of new $440 million bank credit facilities to redeem existing senior notes, AMR seller notes and preferred stock, and repay its existing term loan. Furthermore, Citigroup Venture Capital and Teachers Merchant Bank of Toronto will liquify their original $320 million preferred equity investment with proceeds from the current offering. The stable outlook reflects Worldspan's recurring revenue base from multi-year contractual arrangements for GDS travel distribution and its competitive cost structure, achieved through recent IT outsourcing initiatives. The stable outlook also assumes that Cendant's acquisition of Orbitz will not have a material negative impact on Worldspan's revenue, given Worldspan's contract with Orbitz, which expires in 2011. Under the Orbitz contract, Worldspan has a minimum volume guarantees totaling 16 million segments on an annual basis. Overall, the ratings continue to reflect: 1. an ongoing shift of travel distribution from traditional travel agencies to the online channel, 2. Worldspan's client revenue concentration within the online channel, 3. ongoing technology risks associated with the development of alternatives to GDS system connectivity, and 4. the continued financial duress of its airline client base. Worldspan has high online client concentration, where the Company's top four online agents account for a concentrated 46% of its revenues (gross transaction fees). Tier one airline carriers, excluding JetBlue and Southwest, which distribute travel through non-GDS channels, represented about 50% of its revenues as of September 30, 2004. On May 5, 2004 Expedia announced that it will shift a portion of its bookings from Worldspan to Sabre's GDS system. Moody's believes the potential shift represents a threat to Worldspan's financial performance as Expedia represented over 20% of Worldspan's total revenue, before inducement fees, as of September 30, 2004. According to the latest MIDT data, Worldspan's global online air travel bookings represent approximately 44% of its total bookings and Worldspan maintains a 64% share of the global online travel market. Worldspan's share of the larger traditional global GDS market is approximately 10% for 2004, compared to the other three GDS providers which each have an approximate 25% to 30% share of bookings according to the same data. Moody's also notes that Worldspan receives payment through the U.S. clearinghouse in approximate 45 day cycles, mitigating payment risks from airline clients with weak credit profiles. Factors that could cause downward rating pressure include significant adverse changes to Worldspan' contracts with more than one of its top five clients or channel shift for travel distribution accelerates, such that non GDS sources predominate and FCF to debt represents 5% or less. Converesly, upward rating pressure could occur upon sustained evidence of increasing free cash flow as a result of international expansion and new business generation, improvement in operating margins and debt reduction, including debt reduction achieved via an IPO. The B2 rating on the bank credit facilities reflect its senior and well-secured position. The facilities consist of a $400 million term loan and a $40 million revolver, undrawn upon closing, secured by a first priority interest in all assets, contracts, and equity interests of Worldspan's existing and future domestic operating subsidiaries and two-thirds of the capital stock of foreign subsidiaries. Worldspan's domestic operating subsidiaries contribute the vast majority of revenue, cash flow, and assets, including all of the company's GDS revenue. The guaranteed second lien senior secured notes rating reflects the notes second lien position for the same collateral package. As a result of the current offering, cash interest expense increases from about $44 million to $53 million in 2005. At September 30, 2004, Worldspan's liquidity consisted of $75 million cash, $50 million undrawn revolver expiring June 30, 2007, and $123 million free cash flow for the trailing twelve months ended September 30, 2004. The ratings assigned are: * B2 rating on $440 million guaranteed senior secured bank credit facility due 2010 * B3 rating on $350 million guaranteed second lien senior secured notes due 2011 * Caa2 rating on $44 million senior subordinated notes (Holding Company Notes) due 2010 The ratings withdrawn are: * B1 rating on $175 million guaranteed senior secured bank credit facility due 2007 * B2 rating on $280 million guaranteed senior unsecured notes due 2011 * Caa1 rating on $84 million senior subordinated notes (Seller Notes) due 2012 The ratings downgraded are: * B2 Senior Implied rating * Caa1 Long Term Issuer Rating Worldspan L.P., headquartered in Atlanta, Georgia, is an international provider of computer reservation systems and other IT services for the travel industry. Z PROMPT: Completes Restructuring & Exits from Bankruptcy --------------------------------------------------------- Z prompt, a wholly-owned subsidiary of AccuPoll (OCTBB:ACUP), has completed its restructuring and that it has emerged from Chapter 11 proceedings. The early dismissal was accomplished with the majority of debts resolved and a restructuring of the small amount of remaining debt. AccuPoll anticipates that the subsidiary will continue to operate profitably as it has for the past several months. "This event helps the organization better support our customers and provides a stable partner in the rollout and maintenance of AccuPoll's electronic voting systems," said Frank Wiebe, president of AccuPoll Holdings, Corp., parent company to Z prompt. Effective with its emergence from Chapter 11, Z prompt's capital structure has been improved so that its debt is significantly lower than before. As a result of the restructuring, Z prompt will operate with a lower cost basis, a more nimble staff and a reduced cost of delivery. Z prompt will continue to provide a number of standard service programs to fit the needs of customers, supporting a wide variety of hardware equipment and business locations. Standard service programs are available for U.S. and Canadian-based companies and cover On-site Desktop & Network Printer Service, Installation & Training, and Preventive Maintenance. About AccuPoll Holding Corp. Headquartered in Tustin, Calif., AccuPoll (OCTBB:ACUP) is the developer of a federally qualified electronic voting system featuring an intuitive touch screen input and a voter verified paper audit trail (VVPAT) that can be confirmed by the voter at the time the ballot is cast, creating a permanent paper audit trail as mandated in the "Help America Vote Act of 2002" (HAVA). About Z prompt Z prompt, Inc. manages technology support services for mid-range to Fortune 1000 companies. Using the latest technological advancements available, Z prompt assists management, end users, equipment manufacturers and other leading technology service companies by performing on-site hardware maintenance and related services. The Company filed for chapter 11 protection on March 23, 2004 (Bankr. C.D. Calif. Case No. 04-11894). Dennis H. Johnston, Esq., in Los Angeles, California, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $10,000 in total assets and $1,224,775 in total debts. * Alvarez & Marsal Names Sajan P. George as Co-Head --------------------------------------------------- Alvarez & Marsal, a global professional services firm and leader in turnaround management, announced that Sajan P. George, a Managing Director, has been named co-head of the firm's Public Sector Services Group. He will lead the group along with William V. Roberti, a Managing Director who has led A&M's Public Sector Services Group since its formation and recently spearheaded a first-of-its-kind financial and operational turnaround of the St. Louis Public Schools serving as the district's interim superintendent. Based in Atlanta, Mr. George, who specializes in restructuring advice and interim management services, has more than a decade of international restructuring experience, having performed turnarounds in Canada, Australia and the United States. As co- head of Alvarez & Marsal's Public Sector Services Group, he specializes in providing turnaround and restructuring advice to underperforming and distressed organizations in the Public Sector. Mr. George's public sector advisory assignments include serving as the interim Chief Financial Officer of the St Louis Public Schools wherein the School District was restructured to educate its 40,000 children in a more efficient and effective manner while developing a financial and operational model for urban education leadership, accountability and reform. Other notable engagements include the successful restructuring of the County of Orange, CA to emerge from the largest municipal bankruptcy in the US history; assisting the Australian government with a strategic review of the South Australian Thoroughbred, Harness and Greyhound Racing Industries; and determining the level of provincial government participation needed to maintain the viability of Canada's non-profit, co- operative housing sector in Ontario. About Alvarez & Marsal Founded in 1983, Alvarez & Marsal is a global professional services firm that helps businesses and organizations in the corporate and public sectors navigate complex business and operational challenges. With professionals based in locations across the US, Europe, Asia, and Latin America, Alvarez & Marsal delivers a proven blend of leadership, problem solving and value creation. Drawing on its strong operational heritage and hands-on approach, Alvarez & Marsal works closely with organizations and their stakeholders to help address complex business issues, implement change and favorably influence results. For more information about the firm, please visit http://www.alvarezandmarsal.com/ * Upcoming Meetings, Conferences and Seminars --------------------------------------------- February 9, 2005 NACHMAN HAYS BROWNSTEIN, INC. Due Diligence Symposium 2005 Hilton Woodbridge, Iselin, New Jersey Contact: 1-888-622-4297 or info@nhbteam.com February 10-12, 2005 AMERICAN BANKRUPTCY INSTITUTE 10th Annual Rocky Mountain Bankruptcy Conference Westin Tabor Center Denver, Colorado Contact: 1-703-739-0800 or http://www.abiworld.org/ February 11, 2005 AMERICAN BANKRUPTCY INSTITUTE Canadian-American Symposium on Cross Border Insolvency Law Marriott Eaton Center, Toronto, Ontario Contact: 1-703-739-0800 or http://www.abiworld.org/ March 2-3, 2005 PRACTISING LAW INSTITUTE 27th Annual Current Developments in Bankruptcy & Reorganization New York, NY Contact: 1-800-260-4PLI; 212-824-5710; or info@pli.edu March 3, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (L.A.) The Century Plaza Los Angeles, California Contact: 1-703-739-0800 or http://www.abiworld.org/ March 4, 2005 AMERICAN BANKRUPTCY INSTITUTE 12th Annual Bankruptcy Battleground West Looking Ahead to the Next Bankruptcy Cycle The Westin Century Plaza Hotel & Spa Los Angeles, Calif. Contact: 1-703-739-0800 or http://www.abiworld.org/ March 9-12, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Spring Conference JW Marriott Desert Ridge, Phoenix, Arizona Contact: 312-578-6900 or http://www.turnaround.org/ March 10-12, 2005 AMERICAN BAR ASSOCIATION Bench and Bar Bankruptcy Conference Washington, DC Contact: 800-238-2667-5147 or http://www.abanet.org/jd/bankruptcy/ April 7-8, 2005 PRACTISING LAW INSTITUTE 27th Annual Current Developments in Bankruptcy & Reorganization San Francisco, CA Contact: 1-800-260-4PLI; 212-824-5710 or info@pli.edu April 13, 2005 TURNAROUND MANAGEMENT ASSOCIATION Mediation in Turnarounds & Bankruptcies Milleridge Cottage Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ April 14-15, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Sixth Annual Conference on Healthcare Transactions Successful Strategies for Mergers, Acquisitions, Divestitures and Restructurings The Millennium Knickerbocker Hotel, Chicago Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com April 28, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (East) J.W. Marriott Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ April 28- May 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriot, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ May 9, 2005 AMERICAN BANKRUPTCY INSTITUTE New York City Bankruptcy Conference Millenium Broadway New York, New York Contact: 1-703-739-0800 or http://www.abiworld.org/ May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Washington, D.C. Contact: 1-800-CLE-NEWS or http://www.ali-aba.org/ May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Santa Fe, NM Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ May 13, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (N.Y.C.) Association of the Bar of the City of New York, New York Contact: 1-703-739-0800 or http://www.abiworld.org/ May 19-20, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Second Annual Conference on Distressed Investing Europe Maximizing Profits in the European Distressed Debt Market Le Meridien Piccadilly Hotel London UK Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com May 23-26, 2005 AMERICAN BANKRUPTCY INSTITUTE Litigation Skills Symposium Tulane University Law School New Orleans, Louisiana Contact: 1-703-739-0800 or http://www.abiworld.org/ June 2-4, 2005 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities and Bankruptcy Omni Hotel, San Francisco Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ June 9-11, 2005 ALI-ABA Chapter 11 Business Reorganizations Charleston, South Carolina Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ June 16-19, 2005 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org/ June 23-24, 2005 BEARD GROUP AND RENAISSANCE AMERICAN MANAGEMENT CONFERENCES The Eighth Annual Conference on Corporate Reorganizations Successful Strategies for Restructuring Troubled Companies The Millennium Knickerbocker Hotel, Chicago Contact: 1-800-726-2524; 903-595-3800 or dhenderson@renaissanceamerican.com July 14 -17, 2005 AMERICAN BANKRUPTCY INSTITUTE Ocean Edge Resort, Brewster, Massachusetts Contact: 1-703-739-0800 or http://www.abiworld.org/ July 27- 30, 2005 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Kiawah Island Resort and Spa, Kiawah Island, S.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ September 8-11, 2005 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference (Including Financial Advisors/Investment Bankers Program) The Four Seasons Hotel Las Vegas, Nevada Contact: 1-703-739-0800 or http://www.abiworld.org/ September 26, 2005 AMERICAN BANKRUPTCY INSTITUTE International Insolvency Workshop Site to Be Determined London, England Contact: 1-703-739-0800 or http://www.abiworld.org/ October 7, 2005 AMERICAN BANKRUPTCY INSTITUTE Views from the Bench Georgetown University Law Center Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ October 19-23, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Annual Convention Chicago Hilton & Towers, Chicago Contact: 312-578-6900 or http://www.turnaround.org/ November 2-5, 2005 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Eighth Annual Meeting San Antonio, Texas Contact: http://www.ncbj.org/ December 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (West) Hyatt Grand Champions Resort Indian Wells, California Contact: 1-703-739-0800 or http://www.abiworld.org/ December 1-3, 2005 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Grand Champions Resort, Indian Wells, Calif. Contact: 1-703-739-0800 or http://www.abiworld.org/ March 30 - April 1, 2006 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Scottsdale, AZ Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ April 18-22, 2006 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting JW Marriott Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ June 15-18, 2006 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org/ July 13-16, 2006 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Newport Marriott Newport, Rhode Island Contact: 1-703-739-0800 or http://www.abiworld.org/ July 26-29, 2006 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop The Ritz Carlton Amelia Island Amelia Island, Florida Contact: 1-703-739-0800 or http://www.abiworld.org/ October 11-14, 2006 TURNAROUND MANAGEMENT ASSOCIATION 2006 Annual Conference Milleridge Cottage Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ November 30-December 2, 2006 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Regency at Gainey Ranch Scottsdale, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org/ The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, 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 ***