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/raid1/www/Hosts/bankrupt/TCR_Public/050207.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, February 7, 2005, Vol. 9, No. 31 Headlines A.P.I. INC: Stutman Treister Approved as Futures Rep. Counsel A.P.I. INC: Section 341(a) Meeting Slated for Feb. 14 ACANDS: Has Until Feb. 23 to File Chapter 11 Plan ALAMOSA HOLDINGS: S&P Upgrades Corporate Credit Rating to B- AMERICAN CLASSIC: Claims Objections Deadline Stretched to Apr. 26 ATA AIRLINES: U.S. Trustee Looks for More Facts from Ernst & Young AUSTIN HDC LIMITED: Case Summary & 19 Largest Unsecured Creditors BLACK DIAMOND: Fitch Upgrades & Affirms Ratings of 1998-1 Notes BLOCKBUSTER: Fitch Maintains Rating Watch Negative Status CARRINGTON MORTGAGE: Fitch Rates $10.3 Mil. 2005-NC1 Cert. at BB+ CASH TECH: Subsidiary Buys Exclusive Healthcare Software License CINCINNATI BELL: Fitch Puts Low-B Ratings on Senior & Sub. Notes CINCINNATI BELL: S&P Rates Puts B- Rating on Senior & Sub. Notes CLIENTLOGIC CORP: Moody's Junks $35 Million Second Lien Facility COLAD GROUP: Case Summary & 19 Largest Unsecured Creditors COMMERCIAL MORTGAGE: Fitch Junks $21.7 Mil. 1998-C2 Mortgage Cert. DELPHI TRUST: Moody's Slices Rating on Preferred Stock to Ba1 DELTA AIR: January 2005 Domestic Traffic Up 9.8% From Year Ago DVI FINANCIAL: Moody's Junks Five Note Classes ENTERPRISE PRODUCTS: Earns $115.4 Mil. of Net Income in 4th Qtr. FAIRCHILD SEMICONDUCTOR: Moody's Rates New $450M Term Loan at Ba3 GE COMMERCIAL: Fitch Puts Low-B Ratings on Six Mortgage Certs. HEALTHSOUTH CORP: Names Joe Clark & Jim Foxworthy to Exec. Posts INDEPENDENCE II: Moody's Junks $17M Class C Secured Notes INTELSAT: Discount Note Issue Prompts Fitch to Watch Debt Ratings INTELSAT LTD: Moody's Junks Three Note Classes IWO HOLDINGS: Taps Evercore Restructuring as Financial Consultant K&F PARENT: Moody's Junks Proposed $55 Million Senior PIK Notes K&F PARENT: S&P Places B- Rating on $55 Million Senior PIK Notes KAISER ALUMINUM: Settles Disputes with 3 U.S. Government Agencies INTELLIGROUP INC: SEC Probes Financial Reporting Issues LAIDLAW INT'L: Presents 2005 Initiatives to Select Investors LAND O'LAKES: Posts $11.9 Million Net Loss in Fourth Quarter LAS VEGAS SANDS: Prices $250 Million Private Debt Offering MD BEAUTY: S&P Junks Planned $57 Million Second Priority Facility MD BEAUTY: Moody's Puts B2 Rating on First Lien Credit Facilities METRIS SECURED: Moody's Puts Ba2 Rating on $52 Mil. Secured Notes MOHEGAN TRIBAL: S&P Rates Proposed $200M Sr. Unsec. Notes at BB- MOONLIGHT HOSPITALITY: Voluntary Chapter 11 Case Summary MORTGAGE CAPITAL: S&P Places Low-B Ratings on Three Cert. Classes NDCHEALTH: Likely Default Prompts S&P to Junk Ratings NOMURA ASSET: S&P Lifts Ratings on Class B-2 Certificates to BB+ NORTHWEST AIRLINES: Reports 76.8% January 2005 Load Factor NTELOS INC: Moody's Puts B2 Rating on $400MM Sr. Sec. Term Loan OMNOVA SOLUTIONS: Transferring Distribution Rights to Three Brands PARKER DRILLING: Names Robert McKee to Board of Directors PARMALAT: Bondi Inks Stipulation Allowing Citibank to Sue Units PEGASUS SATELLITE: Wants to Establish Uniform Balloting Procedures PMA CAPITAL: S&P Upgrades Credit & Debt Ratings to B from CC PRIMUS TELECOM: Moody's Puts B3 Rating on $100M Sr. Sec. Term Loan RADIO ONE: S&P Rates Planned $200 Million Senior Sub. Notes at B- RESOURCE TECHNOLOGY: Court Approves Consortium Settlement Pact RURAL/METRO: Launches Cash Tender Offer for 7-7/8% Sr. Notes SOLUTIA INC: Inks Agreements with Senior Vice President & COO STRUCTURED ASSET: Fitch Rates $15.8MM Class B 2005-1 Cert. at BB TEE JAYS: Files for Chapter 11 Protection in N.D. Alabama TEE JAYS MANUFACTURING: Case Summary & Largest Unsecured Creditors TIME WARNER: S&P Junks Proposed $200 Million Senior Notes TOMMY HILFIGER: S&P Pares Corporate Credit Rating to BB- from BB TOWER AUTOMOTIVE: Court Approves First Day Motions UAL CORP: Court Extends Exclusive Plan Filing Period to April 30 US AIRWAYS: January 2005 Load Factor Up 3.9% from 2004 US AIRWAYS: Wants to Amend Airbus Agreements USG CORP: Has Until June 30 to File Plan of Reorganization USGEN: Classification of Claims & Interests Under the Plan U.S. MINERAL: Court Says Only Trustee Can File & Prosecute Plan WARNER TELECOM: Partial Refinancing Cues Moody's to Affirm Ratings WILLAMETTE VALLEY: List of its 20 Largest Unsecured Creditors WILTEL COMM: SBC Acquisition Prompts Moody's to Change Outlook WYNDEMEIR ON LAKE: Case Summary & 12 Largest Unsecured Creditors XEROX CORP: Fitch Affirms Senior Unsecured Debt at BB ZEMACH CORPORATION: Case Summary & 10 Largest Unsecured Creditors ZEUS SPECIAL: S&P Assigns B Ratings to Senior Discount Notes * Helen Duncan to Lead Fulbright's California Litigation Practice * Rick Cieri Joins Kirkland & Ellis as Partner in New York Office * BOND PRICING: For the week of February 7 - February 11, 2005 ********* A.P.I. INC: Stutman Treister Approved as Futures Rep. Counsel ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Minnesota gave Thomas H. Carey, the Legal Representative for Future Asbestos- Related Claimants of A.P.I. Inc., permission to employ Stutman, Treister & Glatt Professional Corporation, as his counsel. Stutman Treister will: a) advise Mr. Carey on all pleadings and asbestos-related claims activities in the Debtor's bankruptcy proceedings; b) advise Mr. Carey regarding any events or actions that affect the rights of future asbestos claimants; c) file pleadings and appear at hearings involving the Debtor's bankruptcy proceedings and assist in preparing Mr. Carey to testify whenever appropriate; and d) perform all other legal services to Mr. Carey that are necessary in connection with asbestos-related claims. Alan Pedlar, a Senior Shareholder at Stutman Treister, is the lead attorney for Mr. Carey. Mr. Pedlar will bill the Debtor $625 per hour for his services. Mr. Pedlar reports Stutman Treister's professionals bill: Designation Hourly Rate ----------- ----------- Counsels $275 - $625 Paralegals $170 - $185 Law Clerks $135 - $195 Stutman Treister assures the Court that it does not represent any interest adverse to Mr. Carey, the Debtor or its estate. Headquartered in St. Paul, Minnesota, A.P.I. Inc., http://www.apigroupinc.com/-- is a wholly owned subsidiary of the APi Group, Inc., and is an industrial insulation contractor. The Company filed for chapter 11 protection on January 5, 2005 (Bankr. D. Minn. Case No. 05-30073). James Baillie, Esq., at Fredrikson & Byron P.A., represents the Debtor's restructuring. When the Debtor filed for protection from its creditors, it listed total assets of $34,702,179 and total debts of $63,000,000. A.P.I. INC: Section 341(a) Meeting Slated for Feb. 14 ----------------------------------------------------- The U.S. Trustee for Region 12 will convene a meeting of A.P.I. Inc.'s creditors at 1:30 p.m., on February 14, 2005, at the U.S. Courthouse, Room 1017, 300 South Fourth Street, Minneapolis, Minnesota 55415. 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 St. Paul, Minnesota, A.P.I. Inc., http://www.apigroupinc.com/-- is a wholly owned subsidiary of the APi Group, Inc., and is an industrial insulation contractor. The Company filed for chapter 11 protection on January 5, 2005 (Bankr. D. Minn. Case No. 05-30073). James Baillie, Esq., at Fredrikson & Byron P.A., represents the Debtor's restructuring. When the Debtor filed for protection from its creditors, it listed total assets of $34,702,179 and total debts of $63,000,000. ACANDS: Has Until Feb. 23 to File Chapter 11 Plan ------------------------------------------------- ACands, Inc., sought and obtained an extension from the U.S. Bankruptcy Court for the District of Delaware of their exclusive period to file a chapter 11 plan. The Debtor has until Feb. 23, 2005, to file a plan and has until April 26 to solicit acceptances to that plan. The Debtor is actively engaged in discussions with the Official Committee of Unsecured Creditors and the Futures Representative in order to reach a consensus on the terms of the plan. The Debtor wants the exclusive period extended to facilitate and preserve what has been an orderly, efficient and cost-effective plan process for the benefit of all creditors to date. AcandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002, (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million. ALAMOSA HOLDINGS: S&P Upgrades Corporate Credit Rating to B- ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on Alamosa Holdings, Inc., and its subsidiaries, including the corporate credit rating, which was raised to 'B-' from 'CCC+'. At the same time, the corporate credit rating on AirGate PCS, Inc., was raised to 'B-' from 'CCC+'. Other ratings on AirGate were also raised. Both companies are wireless affiliates of Sprint Corp. "The upgrade on Alamosa is based on continuing positive operating momentum, which is strengthening credit measures," said Standard & Poor's credit analyst Eric Geil. The upgrade on AirGate is based on the pending acquisition of the company by financially- and operationally-stronger Alamosa. Standard & Poor's expects Alamosa to improve AirGate's operating performance, which recently has been weak compared with that of other Sprint affiliates. The ratings on both companies will be analyzed on a consolidated basis. The outlooks for both companies are stable. On Dec. 8, 2004, Alamosa announced an agreement to purchase AirGate PCS, Inc., through a merger with a subsidiary of Alamosa for $630 million, including $238 million of existing AirGate net debt. AirGate shareholders will receive 2.87 shares of Alamosa stock, or an equivalent amount of cash consideration, up to an aggregate of $100 million. The transaction is subject to approval by shareholders in a Feb. 15, 2005 vote. The combination of Alamosa's 915,000 subscribers (as of Dec. 31, 2004) and AirGate's 385,000 (as of Sept. 30, 2004) should yield modest corporate, administrative, and financial benefits and foster a more favorable negotiating position with Sprint. However, because the carriers' operations do not overlap, are not adjacent, and are largely decentralized, operating cost savings could be limited. Overall, Alamosa expects about $10 million in annual cost savings in 2005 and subsequent years, but expects to incur about $5 million in additional operating expense in 2005. To improve competitiveness and subscriber growth, Alamosa also expects to increase capital expenditures at AirGate, which had reduced investment in its network to conserve cash while under financial stress in the past two years. The ratings reflect: (1) intense wireless industry competition and downward pressure on unit voice revenue, (2) a weak business position compared with better entrenched, (3) financially stronger rivals, (4) the increasing commodity-like nature of wireless services, and (5) potential acquisition integration risk. These factors are partly mitigated by Alamosa's continuing operating improvement, as well as brand recognition and operating benefits from the Sprint affiliation. AMERICAN CLASSIC: Claims Objections Deadline Stretched to Apr. 26 ----------------------------------------------------------------- Paul Gunther, the Plan Administrator in American Classic Voyages Co. and its debtor-affiliates chapter 11 proceedings, sought and obtained an extension of the Claims Objection Deadline until April 26, 2005, from the U.S. Bankruptcy Court for the District of Delaware. Since the company's chapter 11 plan was confirmed on Feb. 6, 2003, Mr. Gunther and his staff were able to reconcile the Debtors' records with records of reimbursements and credits given to approximately 18,156 creditors. The Plan administrator is now in the process of reconciling the remaining passenger claims for the Debtors' seventh ship -- the SS Patriot. This extension will not prejudice the Reorganized Debtors' adversaries because the time allowance will provide them with an opportunity to communicate with the Plan Administrator regarding the propriety of their claims. American Classic Voyages Co., the world's largest U.S.-flag cruise company and markets four distinct products that cruise Hawaii, along the coast of North and Central America and on America's inland waterways, filed for chapter 11 protection on October 19, 2001 (Bankr. Del. Case No. 01-10954). Francis A. Monaco Jr., Esq., at Walsh, Monzack & Monaco, P.A., and Jeremy W. Ryan, Esq. at Saul Ewing LLP, represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed $37,413,665 in total assets and $452,829,987 in total debts. The Debtors' Second Amended Chapter 11 Liquidating Plan became effective in August 19, 2003. ATA AIRLINES: U.S. Trustee Looks for More Facts from Ernst & Young ------------------------------------------------------------------ As previously reported, ATA Airlines and its debtor-affiliates seek the United States Bankruptcy Court for the Southern District of Indiana's authority to employ Ernst & Young, LLP, as their independent auditor, nunc pro tunc to Oct. 26, 2004. Ernst & Young has a vast amount of experience in providing accounting, tax and financial advisory services in restructurings and reorganizations, and enjoys an excellent reputation for services it has rendered in other Chapter 11 cases on behalf of debtors and creditors throughout the United States. U.S. Trustee Objects On behalf of Nancy J. Gargula, the U.S. Trustee for Region 10, Joseph F. McGonigal, Trail Attorney in Indianapolis, Indiana, notes that Ernst & Young, LLP is charging higher fees in the Debtors' cases than in American Commercial Lines' confirmed case. Ernst & Young's fees for its ACL employment are: Partners and Principals $420 - $560 Senior Managers $336 - $420 Managers $245 - $294 Seniors $175 - $210 Staff $140 ACL employs Ernst & Young to perform an audit of its consolidated financial statements in its bankruptcy proceeding before the United States Bankruptcy Court for the Southern District of Indiana. Mr. McGonigal tells the Court that the U.S. Trustee is concerned with the disparity in fees charged by Ernst & Young in two complicated Chapter 11 cases. Thus, the U.S. Trustee seeks additional information from Ernst & Young by affidavit supporting the disparity in its fees. Mr. McGonigal also notes that the engagement letter attached to Ernst & Young Employment Application revealed that $50,000 of the $337,500 had been paid. It is, however, unclear to the U.S. Trustee when the payment was actually made. The Debtors' Statement of Financial Affairs identified $124,225 paid to Ernst & Young in Cincinnati, Ohio, and $40,240 in Chicago in the 90-day prepetition period, but Mr. McGonigal cites that no disbursement totaling $50,000 was contained in the amounts paid. An affidavit prepared by James A. Pease, an Ernst & Young partner, revealed that $132,665 had been paid to Ernst & Young during the 90-day period before the Petition Date. If the $50,000 was paid prepetition, it isn't identified on the Debtors' Statement of Financial Affairs. If the payment was actually made postpetition, Mr. McGonigal asserts that it should not be approved by the Court absent a detailed description of services performed, prepared and submitted according to the Court's Order Supplementing Rule B-2016-1 of the Local Bankruptcy Rules of the U.S. Bankruptcy Court for the Southern District of Indiana, issued on December 21, 2004. In addition, to the extent that any of the prepetition payments to Ernst & Young are subsequently determined by the Court to be avoidable pursuant to any of the Chapter 11 avoidance statutes, Ernst & Young should be prepared to waive its resulting unsecured prepetition claim. 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) AUSTIN HDC LIMITED: Case Summary & 19 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Austin HDC Limited 1300 East 38 1/2th Street Austin, Texas 78722 Bankruptcy Case No.: 05-10516 Chapter 11 Petition Date: January 31, 2005 Court: Western District of Texas (Austin) Judge: Frank R. Monroe Debtor's Counsel: Gray Byron Jolink, Esq. 4131 Spicewood Springs Road, Building C-8 Austin, TX 78759 Tel: 512-346-7717 Estimated Assets: Unstated Estimated Debts: $1 Million to $10 Million Debtor's 19 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Century Plaza, Northfork LP $71,000 c/o Capital Area Management P.O. Box 27917 Austin, TX 78755 Shankosha USA $61,000 1550 Louis Avenue Elk Grove Villiage, IL 60007 Shankosha USA Miele Inc. $41,000 9 Independence Way Princeton, NY 08540 Bowe Permac $32,000 Jackson Walker L.P. $31,677 Southwest Laundry & Supply $16,808 Watch Omega Holdings $12,500 Team Texas $5,600 First Financial Asset Management $5,526 Dry Cleaning Computer Systems $3,915 Linde Gas, LLC $3,325 Texaco Fleet Management $2,676 Covers Etc., Inc. $2,612 Tony R. Bertolino $1,640 Swisher $1,500 Ginny's $1,282 SBC Datacom $842 BFI $428 On the Move $275 BLACK DIAMOND: Fitch Upgrades & Affirms Ratings of 1998-1 Notes --------------------------------------------------------------- Fitch Ratings affirms one class and upgrades five classes of notes issued by Black Diamond CLO 1998-1 Ltd. These rating actions are effective immediately: -- $157,559,560 class A-2 notes affirmed at 'AAA'; -- $10,000,000 class A-3 notes upgraded to 'AA+' from 'AA-'; -- $15,000,000 class A-4 notes upgraded to 'A+' from 'A-'; -- $7,000,000 class B-1L notes upgraded to 'BBB+' from 'BBB-'; -- $18,000,000 class B-1 notes upgraded to 'BBB+' from 'BBB-'; -- $11,100,000 class B-2 notes upgraded to 'BB+' from 'BB-'. Black Diamond CLO is a collateralized loan obligation - CLO -- managed by Black Diamond Capital Management, L.L.C., that closed Jan. 20, 1999. Black Diamond CLO is composed of primarily high yield loans (78%) and high yield bonds (22%). Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates relative to the minimum cumulative default rates required for the rated liabilities. As of the Jan. 3, 2005, trustee report, the class A-1 notes have been paid in full, and the class A-2 notes have been paid down by approximately $132.4 million, representing 45.7% of the original class A-2 note balance. Since the last rating action on June 12, 2003, the class A overcollateralization -- OC -- ratio has improved from 119.62% to 135.61%, versus a trigger of 110%, and the class B OC has improved from 107.77% to 112.84%, versus a trigger of 104%, as of the Jan. 3, 2005, trustee report. The weighted average spread has declined slightly from 3.77% to 3.51%, and the weighted average rating has remained stable at 'B/B-'. As of the most recent trustee report, Black Diamond CLO defaulted assets represented approximately 0.79% of the $203.0 million of total collateral. Assets rated 'CCC+' or lower represented approximately 15.3%, excluding defaults. The rating of the class A-2, A-3, and A-4 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class B-1L, B-1, and B-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ As a result of this analysis, Fitch has determined that the current ratings assigned to the class A-3, A-4, B-1L, B-1, and B-2 notes no longer reflect the current risk to noteholders and have subsequently improved. BLOCKBUSTER: Fitch Maintains Rating Watch Negative Status --------------------------------------------------------- Resolution of Blockbuster Inc.'s Rating Watch Negative status remains contingent on the company's financing plans for the proposed transaction of Hollywood Entertainment Corporation and the subsequent implications on the capital structure and combined operations, according to Fitch Ratings in its latest credit update on Blockbuster. Fitch placed Blockbuster's 'BB' senior secured and 'B+' senior subordinated ratings on Rating Watch Negative on Nov. 11, 2004, after the company expressed interest in purchasing Hollywood Entertainment Corporation through a $1.3 billion cash offer, including $350 million of existing debt. The credit update is available on the Fitch Ratings web site at http://www.fitchratings.com/ CARRINGTON MORTGAGE: Fitch Rates $10.3 Mil. 2005-NC1 Cert. at BB+ ----------------------------------------------------------------- Carrington Mortgage Loan Trust's mortgage pass-through certificates, series 2005-NC1, are rated by Fitch Ratings: -- $816,712,900 classes A-1A, A-1B, A-1C1, the privately offered A-1C2, A-2, and A-3 mortgage pass-through certificates (senior certificates) 'AAA'; -- $35,532,000 class M-1 certificates 'AA+'; -- $32,443,000 class M-2 certificates 'AA'; -- $20,599,000 class M-3 certificates 'AA-'; -- $27,808,000 class M-4 certificates 'A'; -- $16,994,000 class M-5 certificates 'A-'; -- $15,964,000 class M-6 certificates 'BBB+'; -- $12,874,000 class M-7 certificates 'BBB'; -- $10,300,000 class M-8 certificates 'BBB-'; -- $10,300,000 class M-9 certificates 'BB+'. The 'AAA' rating on the senior certificates reflects the 20.70% total credit enhancement provided by: * the 3.45% class M-1, * the 3.15% class M-2, * the 2.00% class M-3, * the 2.70% class M-4, * the 1.65% class M-5, * the 1.55% class M-6, * the 1.25% class M-7, * the 1.00% class M-8, * the 1.00% class M-9, and * the 2.95% initial overcollateralization -- OC. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the integrity of the transaction's legal structure, as well as the primary servicing capabilities of New Century Mortgage Corporation (rated 'RPS3' by Fitch). Deutsche Bank National Trust Company will act as trustee. As of the cut-off date, Feb. 1, 2005, the mortgage loans have an aggregate balance of $1,029,909,316. The weighted average mortgage rate - WAC -- is approximately 6.920%, and the weighted average remaining term to maturity - WAM -- is 358 months. The average cut-off date principal balance of the mortgage loans is approximately $213,073. The weighted average original loan-to- value ratio is 81.60%, and the weighted average Fair, Isaac & Co. - FICO -- score is 635. The properties are primarily located in: * California (49.80%), * Florida (5.26%), and * New York (4.92%). CASH TECH: Subsidiary Buys Exclusive Healthcare Software License ---------------------------------------------------------------- Cash Technologies, Inc.'s (Amex: TQ) subsidiary, Heuristic Technologies, Inc., has signed an amendment to its agreement with ClaimRemedi, Inc., a California developer of healthcare-related data processing software, which, subject to certain minimum transaction volume requirements, grants Heuristic the exclusive worldwide right to use, sell or sub-license ClaimRemedi's medical claims processing software. The amendment also extends the term of the ClaimRemedi agreement from 3 to 8 years. A third or more of the billions of medical claims processed each year in the United States contains mistakes such as diagnostic or procedure code errors which prevent the claims from being automatically processed and paid. These claims must be manually evaluated, rejected, edited and resubmitted, creating vast inefficiency and unnecessary costs. ClaimRemedi's software permits healthcare insurers and providers to electronically analyze these claims and rapidly identify and correct the data errors, providing dramatic reductions in processing costs. The software has been extensively tested and successfully deployed nationwide. Testing recently conducted by Heuristic with a large healthcare insurer demonstrated extraordinary results, reducing overall processing costs for the insurer by an estimated 40%. The ClaimRemedi software will be marketed as the central component of Heuristic's Pro837(TM) product. Pro837 is part of Heuristic's suite of healthcare products which includes innovative claims processing tools such as electronic verification of patient insurance eligibility, automated analysis of paper-based claims using optical character recognition (OCR) and other tools that will employ Cash Tech's patented EMMA(TM) technology. Heuristic receives recurring revenues from fees generated as each claim is processed. Robert Bleyhl, President of ClaimRemedi, stated, "The partnership with Heuristic takes advantage of their outstanding industry relationships and product knowledge. This allows us to focus on our core competency -- creating the best of breed technology for claims editing and processing." "Deepening our relationship with ClaimRemedi is invaluable to Heuristic's strategic plan," explained Ray Pedden, CEO of Heuristic. "Their excellent product will help expand Heuristic's participation in the enormous medical data processing marketplace." About ClaimRemedi ClaimRemedi -- http://www.claimremedi.com/-- has developed an automated, single-source, all-payer, medical claims scrubbing solution that applies all seven levels of SNIP/WEDI edits as well as payer-specific business rules. This combination of service and functionality is unique in the industry, giving clients a cost effective solution to the claims automation issues they face. About Cash Technologies Cash Technologies, Inc. -- http://www.cashtechnologies.com/and http://www.heuristictech.com/-- develops and markets innovative data processing systems, including the BONUS((TM)) and MFS((TM)) financial services systems and EMMA((TM)) transaction processing software. Its Heuristic subsidiary creates and markets healthcare and employee benefits data processing solutions and debit card programs. At Nov. 30, 2004, the Company reports a $1,328,157 stockholders' deficit. CINCINNATI BELL: Fitch Puts Low-B Ratings on Senior & Sub. Notes ---------------------------------------------------------------- Fitch Ratings has assigned ratings to two Cincinnati Bell, Inc.'s (CBB) issues: -- $250 million of 7% senior unsecured notes due 2015 rated 'B+'; -- $100 million of 8 3/8% senior subordinated notes due 2014 rated 'B'. The Rating Outlook is Stable for all ratings. Both securities will be issued under Rule 144A. In addition, a 'BB-' rating has been assigned to a new $250 million five-year senior secured revolving credit facility and the rating withdrawn on its existing credit facility upon its termination. The proceeds from the offering and the new revolving credit facility will be used to retire the debt outstanding under the existing bank facility. The current facility will be terminated upon the refinancing. Under the new credit facility, CBB has the right to request an increase in the aggregate amount of up to $500 million of incremental credit facilities in the form of a new revolving credit facility or as term loans. Fitch anticipates that CBB will use the revolving credit facility as well as cash on hand to call the 16% senior subordinated discount notes due in 2009, which are callable beginning March 26, 2006. As of Sept. 30, 2004, approximately $372 million in 16% senior subordinated discount notes was outstanding. Fitch's rating of CBB reflects the relative stability and lower level of business risks associated with the company's local exchange and wireless businesses and its ability to generate sustained levels of free cash flow. The company has high leverage relative to its peer group; debt to EBITDA at the end of the third quarter of 2004 was 4.3 times. Fitch notes that the company's primary financial strategy is to delever, and therefore expects debt to continue to decline at a modest pace over the next few years. Fitch notes that in an 8-K filing on Feb. 2, 2005, CBB disclosed that potential significant deficiencies have been identified by CBB and its auditor, Pricewaterhouse Coopers -- PwC, related to instances of non-compliance with purchase authorization policies, unauthorized access to certain financial systems and data, and CBB's closing process. These potential weaknesses may not lead to the issuance of a qualified opinion by PwC; however, should one be issued or if there are future restatements, Fitch would reevaluate the ratings assigned to CBB. Operationally, CBB is strategically focused on defending and growing its local exchange and wireless businesses. CBB's local wireline business (which includes its local, hardware, and managed services and other business segments) through the first nine months of 2004 accounted for 81% of consolidated revenue and 86% of consolidated EBITDA. Competitive pressure is increasing as evidenced by the 1.6% decline in total access lines year over year. Additional competitive pressures developed as cable companies launched voice services using voice over Internet protocol - VoIP -- in mid-2004. The company has been mitigating these pressures through bundling wireless and high-speed data services with its wireline voice services (local and long distance) into a package the company refers to as a 'super bundle.' As of Sept. 30, 2004, approximately 18% of the consumer households in its incumbent local exchange carrier - ILEC -- operating territory subscribe to a super bundle. Cincinnati Bell Wireless - CBW -- is the market share leader in the Cincinnati and Dayton, Ohio, basic trading areas and provides an avenue for CBB to further strengthen its service bundle. There is still some uncertainty as to the resolution of the company's partnership with Cingular Wireless, which acquired a 19.9% stake in CBW through the acquisition of AT&T Wireless. The two companies have taken positive steps to resolve future ownership and roaming arrangements. The companies have agreed to a put/call arrangement effective in September 2005 that could result in CBB acquiring Cingular's stake for $83 million and have modified the roaming arrangement so that EBITDA levels for CBW were largely preserved. CBB has stated that it would like Cingular to ultimately form a long-term relationship with CBW, and anticipates entering discussions with Cingular prior to the September 2005 put/call date. CBB's 'B+' senior unsecured rating reflects the subordination to the company's senior secured debt and the Cincinnati Bell Telephone Co. - CBT -- notes. Pro forma for the refinancing, at the end of the third quarter of 2004, approximately $454 million of debt was senior to CBB's senior unsecured debt. The notching of the senior secured debt above the senior unsecured debt is indicative of the anticipated recovery by the senior secured debt holders and their first-priority claim on the economic interests of CBT and CBW. CBB reported total debt outstanding of $2.186 billion as of the end of the third quarter of 2004, a reduction of approximately $102 million from year-end 2003. Although fourth-quarter 2004 results have not been released, CBB has indicated that it reduced debt in 2004 by slightly more than its guidance of $140 million. CINCINNATI BELL: S&P Rates Puts B- Rating on Senior & Sub. Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to diversified telecommunications carrier Cincinnati Bell Inc.'s -- CBI -- proposed $250 million of senior notes due 2015 and $100 million of 8.375% senior subordinated notes due 2014 (an add- on to a previous issue), both to be issued under Rule 144A with registration rights. At the same time, existing ratings for CBI (B+/Negative/--) and its local telephone subsidiary, Cincinnati Bell Telephone Co. -- CBT, were affirmed. The outlook is negative. Overall leverage is not materially changed by this transaction, as proceeds from the notes will be used, in conjunction with borrowings under a new $250 million secured bank facility, to repay about $439 million of bank debt under an existing facility, as well as to pay the consent for the 7.25% note amendments. The notes are rated two notches below the corporate credit rating to reflect their junior standing relative to obligations at CBT, including $250 million of unsecured debt, and drawings under the $250 million senior secured bank facility at CBI. "The ratings reflect CBI's aggressive leverage, coupled with prospects for increasing competition faced by both its incumbent local exchange carrier -- ILEC, CBT, and its majority-owned wireless subsidiary," said Standard & Poor's credit analyst Catherine Cosentino. "While management is taking steps to mitigate threats to CBT, which provides the majority of consolidated cash flow, cable telephony competition poses the potential for both increased access line losses and pricing pressure at the ILEC. The wireless industry is expected to grow in the foreseeable future, but competition from better-financed competitors is intense, and CBI's recent wireless subscriber losses are a concern. The company's modest capital spending needs, however, will enable it to continue to generate sizable free cash flows, somewhat mitigating the aforementioned challenges." CLIENTLOGIC CORP: Moody's Junks $35 Million Second Lien Facility ---------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to ClientLogic Corporation's $122 million first lien bank credit facilities and a Caa2 rating to its $35 million second lien bank credit facilities -- Term Loan C. This is the first time that Moody's has rated the debt of the Company. The rating outlook is stable. The B3 senior implied rating reflects ClientLogic's: 1. modest presence relative to competitors within the highly competitive call center outsourcing industry, 2. high client concentration, 3. meager free cash flow, 4. high debt leverage with low asset coverage of debt. Mitigating these risks are the company's positive trend of customer wins and its contractual revenues from blue chip clients with whom Clientlogic Corp. has had long-term relationships. Proceeds of the current offering will be used to refinance $122 million of drawn bank credit facilities. The new credit facilities will consist of a $30 million revolver, undrawn upon closing, $92 million first lien term loan (Term Loan B), and $35 million second lien term loan (Term Loan C). Final maturity of these bank facilities will occur on the earlier date of either 2012 or six months before final maturity of the company's subordinated debt with British Telecom, whose final maturity is currently August 2008. Term Loan C has a second priority lien on the collateral pool consisting of all tangible and intangible assets. The collateral pool excludes the Company's share of its offshore joint venture assets of operations in India and the Philippines. The stable outlook reflects Moody's expectation that ClientLogic Corp. will expand its blue chip client base, thereby generating free cash flow to be applied to debt reduction. Factors that would cause downward rating pressure include significant adverse changes to ClientLogic's contracts with any of its top ten clients, a decline in operating margins, or a decline to its free cash flow. Clientlogic Corp.'s debt leverage is high, as measured by its $1 million free cash flow for the trailing twelve months ended September 30, 2004 compared to its $174 million debt pro forma for the transaction. Low asset coverage of debt is reflected in the company's negative book equity of $105 million at Sept. 30, 2004. Factors that would cause upward rating pressure include evidence of sustained free cash flow generation as a result of successful contract renewals, new business wins and contract management, sustained moderation of capital expenditures to historic levels, and improvement in operating margins. Moody's notes that sustained free cash flow generation should exceed about 5% of total debt for any upgrade consideration. ClientLogic Corp. has limited business diversity; approximately 90% of the company's revenue is contributed by its customer care/inbound call center outsourcing business, with the remaining 10% by fulfillment and marketing services. Although revenues and cash flows are becoming more geographically diverse, customer concentration is moderately high, with approximately 58% of revenues supplied by ClientLogic's top ten clients. In addition to potentially large swings in annual service revenues from individual clients, the revenue stream also faces vulnerability as contacts can be cancelled on a very short notice. ClientLogic Corp. also faces challenges from competitors with greater infrastructure in low cost geographies, such as in India and the Philippines, and an increasing trend towards outsourcing in these low cost geographies. Currently, ClientLogic follows a 70:30 ratio of near shore to off shore operating infrastructure. At September 30, 2004, ClientLogic's liquidity included its cash balances approximating $7 million. The ratings assigned are: * Senior Implied Rating of B3 * $92 Million First Lien Term Loan B due 2012 rated B3 * $30 Million First Lien Revolving Credit Facility rated B3 * $35 Million Second Lien Term Loan C due 2012 rated Caa2 * Long Term Issuer Rating rated Caa3 Headquartered in Nashville, Tennessee, ClientLogic Corporation provides outsourced call center services worldwide. COLAD GROUP: Case Summary & 19 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Colad Group, Inc. 801 Exchange Street Buffalo, New York 14210 Bankruptcy Case No.: 05-10765 Type of Business: The Debtor designs, develops and manufactures packaging products. See http://www.colad.com/ Chapter 11 Petition Date: February 3, 2005 Court: Western District of New York (Buffalo) Debtor's Counsel: Ingrid S. Palermo, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, New York 14604-2711 Tel: (585) 231-1141 Total Assets: $1 Million to $10 Million Total Debts: $10 Million to $50 Million Debtor's 19 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Mark S. Wallach, Esq. Trustee: $1,600,000 169 Delaware Avenue Bankruptcy Buffalo, NY 14202 Case No. 12-14554 Deltacraft Paper Company $208,023 99 Bud Mil Drive Buffalo, NY 14206 Paradise Promotional $82,516 Packaging P.O. Box 390 Lancaster, NY 14086 US Bank National Association $73,334 Susan Calise/Corporation Trust Department Ex-ma-fed US Bank - 1 Federal Street 3rd Floor Boston, MA 02110 Bryce Thermal Finishing $64,639 Films, LLC P.O. Box 18338 Memphis, TN 38181-0338 Niagara Mohawk Power Company $62,804 300 Erie Boulevard West Syracuse, NY 13252 Fleet Bank $61,020 10Fountain Plaza Buffalo, NY 14202 United Parcel Service $59,043 Zdarsky, Sawicki & Agostinelli $49,268 Baird & Bartlett Company, Inc. $44,596 Henry Fuchs Specialty Products Aim Corrugated Container $43,948 Corporation Form Flex $39,618 C&M Forwarding Company, Inc. $37,772 Synergy Tooling System Inc. $37,333 Baldwin Paper Company $37,212 Unisource Worldwide $37,101 Fringe Benefit Analysts $35,052 Corra-board Product, $33,270 Division of Tim Bar C Digicon Imaging, Inc. $30,331 COMMERCIAL MORTGAGE: Fitch Junks $21.7 Mil. 1998-C2 Mortgage Cert. ------------------------------------------------------------------ Fitch Ratings downgrades Commercial Mortgage Acceptance Corp. -- CMAC, commercial mortgage pass-through certificates, series 1998- C2: -- $21.7 million class L to 'CC' from 'CCC'. These classes are affirmed by Fitch: -- $8.4 million class A-1 'AAA'; -- $837.8 million class A-2 'AAA'; -- $671.1 million class A-3 'AAA'; -- Interest-only class X 'AAA'; -- $144.6 million class B 'AAA'; -- $173.5 million class C 'AAA'; -- $173.5 million class D 'A+'; -- $43.4 million class E to 'A-'; -- $21.7 million class G 'BB+'; -- $36.1 million class H 'BB-'; -- $65.1 million class J 'B'; -- $21.7 million class K 'B-'. Fitch does not rate the $122.9 million class F or the $9.9 million class M certificates. The downgrade of class L is the result of expected losses on several specially serviced loans, which will likely erode a portion of principal. Since issuance, the pool balance has been reduced by 18% to $2.35 billion from $2.89 billion at issuance. Four of the top six loans in the pool (21.1%) have been defeased. As of the January 2005 distribution date, 14 loans (3.1%) were in special servicing, including five 90+ days delinquent loans (3.2%). The largest specially serviced loan, 330 South Warminster Road (1.1%), is secured by an office property in Hatboro, Pennsylvania and is over 90 days delinquent. The property is now 92% leased and 65% occupied. The second largest specially serviced loan (0.34%) is secured by a multifamily property in Charlotte, North Carolina and is also over 90 days delinquent. For both of these loans the special servicer is evaluating workout options and losses are expected. The next specially serviced loan (0.20%), is secured by a multifamily property in Dallas, Texas, and is current. The loan is expected to be paid off at par next month and no losses are expected at this time. Realized losses in the pool total $33.4 million, or 1.2% of the pool's original principal balance. DELPHI TRUST: Moody's Slices Rating on Preferred Stock to Ba1 ------------------------------------------------------------- Moody's Investors Service has lowered the long-term ratings of Delphi Corporation to Baa3 and its short term rating for commercial paper to P-3. The rating outlook is negative. The downgrade reflects Moody's expectations that Delphi Corp.'s cash generation and credit metrics will remain under pressure through 2006 as a result of: 1. lower US production levels and market share of General Motors, its largest customer; 2. higher commodity costs; 3. large required pension contributions during 2005 and 2006; and 4. a high wage and benefit structure among its domestic UAW master agreement work force. While Delphi Corp. has continued to make progress on several of its key longer-term strategic objectives (growing its non-General Motors volumes, increasing its geographic diversification and reducing higher cost domestic employment levels), the magnitude of lower General Motors volumes, short term rigidity in its domestic employee expense and contractual arrangements, and net un- recovered raw material costs more than offset these gains. These challenges and the resulting pressure on Delphi's performance are expected to continue into 2006. However, Moody's believes that if Delphi can maintain progress in expanding its non-GM and its non-US operations, while reducing higher wage and benefit domestic employment levels, the company could lay the groundwork for operating margins, cash generation and credit measures that are more solidly supportive of the Baa3 rating. As Delphi enters this period of transition it benefits from solid liquidity in the form of sizable cash balances and committed bank credit facilities. The negative outlook recognizes the challenges that Delphi will face during 2005 and 2006, and the risks that the company might not remain on track to adequately strengthen its credit metrics by 2007. Specifically, the ratings changed are: -- Delphi Corporation: * Senior unsecured to Baa3 from Baa2 * Commercial Paper to Prime-3 from Prime-2 * Shelf ratings to (P)Baa3 from (P)Baa2 for senior unsecured, (P)Ba1 from (P)Baa3 for subordinated and (P)Ba2 from (P)Ba1 for preferred -- Delphi Trust(s): * Backed Preferred Stock to Ba1 from Baa3 * Shelf Ratings to (P)Ba1 from (P)Baa3 While Delphi Corp. has made progress in diversifying its customer base, General Motors continues as its single largest customer and, at approximately 50% of total revenues, General Motors' production volume and market share in the critical North American region will continue to have a major impact on Delphi. Lower Delphi shipments to GM in the second half of 2004, un-recovered raw material costs, and legacy employee costs in North America are the primary drivers of the poor financial results and footings. Excluding certain non-recurring and other impairment charges from the preliminary results for 2004, Delphi Corp.'s total adjusted debt (ex-pension)/EBITDAR is estimated at 2.6 times, and balance sheet debt/EBITDA was approximately 2 times. Adjusted operating margins declined from 2003 and were just over 1%. EBIT/I at 1.6 times and the EBIT margin at 1.2% also weakened from 2003 levels. Free cash flow (FCF) for 2004 improved as a result of lower working capital and capital expenditures, with FCF coverage of adjusted total debt (ex-pension) at roughly 8%. Assumptions used in determining pension and post retirement benefit liabilities also resulted in an increase in recorded liabilities at year-end 2004. However, Moody's focuses on the amount and timing of cash payments required to fund these claims rather than the year-to- year movement in the size of the liability given the impact of applying a lower discount rate. Under current assumptions Delphi is expected to contribute $1.6 billion-$1.7 billion to its domestic pension plans over the next 18 months. While cash at year-end was $.95 billion, free cash flow (post pension contributions) over the next two years may be negligible, which would limit the scope for debt reduction prior to any asset sales. Incremental borrowings may also be needed to fund these requirements, which could further weaken coverage ratios. As a result, a negative outlook has been assigned. Delphi Corp. has continued to grow its non- General Motors automotive business as well as its adjacent market (commercial vehicles, independent aftermarket and consumer electronics) revenues. Sales to other OEMs, aftermarket channels, consumer electronics and other adjacent markets should cross over the 50% threshold in 2005. Contributions from its Electrical, Electronic and Safety segment have continued to grow and now represent close to 49% of total revenues, and over 100% of operating profits with stable margins. Non-GM customers in this sector accounted for 55% of sector revenue (net of inter-sector sales) in 2004. Delphi Corp. has substantial global scale and an advanced product offering which makes it an attractive supplier to OEMs with both regional and global purchasing strategies. OEMs also are expected to continue outsourcing product development, and seek complete systems and modules, a trend likely to favor tier 1 suppliers with leading technologies and global capabilities, but at competitive pricing. The Company exceeded its 2003 objectives of reducing staffing levels to address its legacy costs and made further progress in resolving structural, cost and profitability issues of business units in its Automotive Holdings Group ("AHG"). Continued positive trends in these areas could position Delphi to offset the current downward pull from lower GM production, un-recovered raw material costs and higher accruing employee benefit expense. Delphi Corp. has $3 billion of committed bank credit facilities in addition to its existing cash reserves of $0.95 billion at year- end as well as accounts receivable securitization and factoring facilities. The Company remains in compliance with its financial covenants with its defined debt/EBITDA ratio at 2.4 times vs. the covenant level of 3.25 times. The Company has a $.5 billion long- term debt maturity in 2006. Operating and income statement ratios are weak and will likely remain under pressure during 2005 and 2006. The ratings incorporate current trends in automotive demand, which could adversely affect the first half of 2005. But, significant sustained deterioration in the Company's metrics beyond the first half, or expectations that the Company might not remain on track to adequately strengthen its operating performance by 2007 could result in lower ratings. Critical near term metrics will be the company's ability to sustain margins at least equal to current levels and achieve positive free cash flow while maintaining adequate reinvestment in the business. Over time the Company will need to demonstrate improvements in these metrics. Unexpected developments with respect to ongoing pension matters or accounting investigations that place additional calls on the Company's currently strong liquidity could adversely affect the ratings. Factors that could help support the rating in the Baa3 category include improving profitability in the company's core continuing automotive segments, reducing losses at AHG, progress in improving the profitability, further customer and geographic diversification, reduction of the domestic employee expense base, or higher recovery of raw material costs. Key metrics include; adjusted total debt (ex-pension)/EBITDAR retreating towards 2 times, EBIT margins and EBIT/I coverage improving towards 5% and 4 times respectively, and FCF/total adjusted debt (ex-pension) consistently at or above 8%. Delphi Corp., headquartered in Troy, Michigan, is the world's largest automotive component supplier with annual revenues of $28.6 billion in 2004. DELTA AIR: January 2005 Domestic Traffic Up 9.8% From Year Ago -------------------------------------------------------------- Delta Air Lines (NYSE: DAL) reported traffic results for January 2005. System traffic for January 2005 increased 12.3 percent from January 2004 on a capacity increase of 5.2 percent. Delta's system load factor was 71.8 percent in January 2005, up 4.5 points from the same period last year. Domestic traffic in January 2005 increased 9.8 percent year over year, while capacity increased 1.7 percent. Domestic load factor in January 2005 was 70.7 percent, up 5.2 points from the same period a year ago. International traffic in January 2005 increased 21.1 percent year over year on a 19.4 percent increase in capacity. International load factor was 75.5 percent, up 1.1 points from January 2004. During January 2005, Delta operated its schedule at a 94.5 percent completion rate, compared to 97.9 percent in January 2004. The January 2005 results reflect the impact of weather events that occurred in the second half of January 2005. Delta boarded 8,640,596 passengers during the month of January 2005, an increase of 9.4 percent from January 2004. 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. DVI FINANCIAL: Moody's Junks Five Note Classes ---------------------------------------------- Moody's Investors Service downgraded Class A-5 and Classes B, C, D and E of notes issued in the 1999-1 medical equipment lease securitization by DVI Financial Services, Inc. The rating actions reflect under-collateralization of the outstanding notes, high obligor concentrations and lower obligor credit quality in the remaining asset pool as well as the uncertainty in future recoveries on defaulted receivables. As a result of high cumulative defaults and lower than expected recoveries on defaulted receivables, the outstanding note balance exceeded the remaining pool balance by approximately $1.9 million as of December 31, 2004. In addition, because the current Aggregate Discounted Collateral Balance (ADCB) represents only 2% of the initial ADCB, obligor concentrations have increased significantly with the top 10 obligors comprising 93.6% of ADCB. Future performance is highly dependent on the credit quality of these largest accounts. Several top obligors have previously defaulted, and after reaching a restructuring agreement with the servicer, their balances have been returned to ADCB as current. The downgrade actions take into account a higher likelihood of default among obligors that have previously defaulted and undergone a restructuring. Furthermore, should an obligor with a substantial balance default in the future, any recoveries from either liquidation of repossessed equipment or restructuring are likely to be low due to the age of the equipment. Successful work-out cases are also less likely with the passage of time. The complete rating actions are: * Issuer: DVI Receivables VIII, L.L.C., Series 1999-1 * $5,009,268 Class A-5 Asset-Backed Notes, downgraded to B3 from Ba2; * $439,691Class B Asset-Backed Notes, downgraded to Caa2 from B2; * $880,381 Class C Asset-Backed Notes, downgraded to Ca from Caa1; * $586,254 Class D Lease-Backed Notes, downgraded to C from Caa3; * $734,818 Class E Lease-Backed Notes, downgraded to C from Ca. ENTERPRISE PRODUCTS: Earns $115.4 Mil. of Net Income in 4th Qtr. ---------------------------------------------------------------- Enterprise Products Partners L.P.'s (NYSE:EPD) financial results for the three months and twelve months ended Dec. 31, 2004. Reported results for Enterprise's fourth quarter and full year of 2004 include three months of results from GulfTerra Energy Partners, L.P., which merged into an affiliate of Enterprise on September 30, 2004. The partnership reported record quarterly net income of $115.4 million for the fourth quarter of 2004 compared to $34.2 million for the fourth quarter of 2003. For the full year of 2004, Enterprise earned net income of $268.3 million, or $0.87 per unit, compared to $104.5 million, or $0.41 per unit, in 2003. Net income for the fourth quarter of 2004 included a gain on the sale of assets of approximately $15.1 million, or $0.04 per unit, related to the satisfaction of certain requirements of the sale agreement whereby a 50% interest in the Cameron Highway Oil Pipeline was sold to an affiliate of Valero Energy Corporation in 2003. Approximately $10.1 million of this gain was the non-cash recognition of a receivable that is due from Valero no later than December 31, 2006 while $5.0 million of the gain was associated with a cash payment received from Valero during the fourth quarter of 2004. Due to the continued effects of Hurricane Ivan on certain of our operations, it is estimated our earnings for the fourth quarter and full year of 2004 could have been higher by approximately $17 million, or $0.05 per unit, and $24 million, or $0.09 per unit, respectively, if not for a decrease in natural gas and natural gas liquid volumes delivered to our facilities. This estimated impact is prior to any potential claims for recoveries under our business interruption insurance. Distributable cash flow for the fourth quarter of 2004 was a record $197.1 million compared to $74.6 million in the fourth quarter of 2003. Based on the partnership's declared distribution of $0.40 per unit with respect to the fourth quarter that will be paid on February 14, 2005, distributable cash flow provided 1.24 times coverage of this distribution. Distributable cash flow is a non-GAAP financial measure that is defined and reconciled, later in this press release, to its most directly comparable GAAP financial measure, cash provided by operating activities. "We are proud to announce record performance in our first quarter after completing the GulfTerra merger," said O.S. "Dub" Andras, Vice Chairman and Chief Executive Officer of Enterprise. "The strengths of our complementary businesses and approximately $120 million of annualized cash savings realized to date have made our merger with GulfTerra accretive to our partners. Our integrated and diversified businesses across the natural gas and NGL value chain generated distributable cash flow for the quarter that exceeded our cash distributions paid to partners by $34 million with each of our major business segments reporting a solid quarter." Revenue for the fourth quarter of 2004 increased by 101%, to approximately $2.9 billion compared to $1.4 billion for the fourth quarter of 2003. Operating income for the fourth quarter of 2004 increased by 165% to $175.3 million compared to $66.1 million for the fourth quarter of 2003. Gross operating margin increased by 156% to $279.2 million for the fourth quarter of 2004 from $109.0 million for the same quarter in 2003. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased by 176% to $275.6 million for the fourth quarter of 2004 from $99.9 million for the fourth quarter of 2003. Gross operating margin and EBITDA are non-GAAP financial measures that are defined and reconciled, later in this release, to their most directly comparable GAAP financial measure. Review of Segment Performance As a result of the merger, Enterprise revised its business segment reporting into four distinct segments. These segments are organized based on the type of services rendered and the products produced or sold. A schedule accompanying this press release lists the major assets that are included within each business segment. NGL Pipelines & Services - The NGL Pipelines & Services segment includes the partnership's NGL pipelines, storage facilities and fractionators and its natural gas processing plants and related NGL marketing activities. Gross operating margin for this segment increased by 78%, or $62.4 million, in the fourth quarter of 2004 to $142.5 million from $80.1 million in the same quarter in 2003. Enterprise's natural gas processing and related businesses accounted for $75.1 million of gross operating margin for this segment in the fourth quarter of 2004 compared to $7.6 million in the fourth quarter of 2003. This increase was due to the contributions from the GulfTerra assets and nine processing plants acquired from El Paso Corporation in the third quarter of 2004 as well as improved performance from Enterprise's legacy processing plants and NGL marketing business. The processing business benefited from favorable processing economics due to the continued strong demand for NGLs by the petrochemical and motor gasoline industries as a result of improvements in the U.S. and global economies. Gross operating margin from the NGL pipelines and storage business was $52.0 million during the fourth quarter of 2004 versus $61.0 million in the fourth quarter of 2003. The Mid-America and Seminole pipelines accounted for $44.7 million of the gross operating margin for the partnership's NGL pipelines and storage business during the fourth quarter of 2004. This is a 24%, or $8.5 million, increase from the $36.2 million these pipelines earned during the same quarter of 2003. This increase was more than offset by a decrease in gross operating margin from export terminal services; reduced demand for certain Louisiana NGL pipelines, in part due to lower volumes resulting from the effects of Hurricane Ivan; and pipeline integrity expenses. Total transportation volumes for the NGL pipeline business averaged 1,390,000 BPD for the fourth quarter of 2004 compared to 1,281,000 BPD in the fourth quarter of 2003. Transportation volumes for the Mid-America and Seminole pipelines increased by 15%, or 120,000 BPD, to 908,000 BPD in the fourth quarter of 2004 from 788,000 BPD in the same period of 2003. Enterprise's NGL fractionation business earned gross operating margin of $15.3 million for the fourth quarter of 2004 compared to $11.5 million in the fourth quarter of 2003. NGL fractionation volumes for the fourth quarter of 2004 averaged 304,000 BPD versus 241,000 BPD in the fourth quarter of 2003. "While we posted record results for the fourth quarter of 2004, the lingering effects of Hurricane Ivan reduced volumes delivered to some of our pipelines, natural gas processing and NGL fractionation facilities in eastern Louisiana due to damage to offshore wells and pipelines owned by third parties. We saw volumes increase in December; however, we estimate that for the fourth quarter these effects reduced gross operating margin by approximately $17 million," stated Mr. Andras. Onshore Natural Gas Pipelines & Services - The Onshore Natural Gas Pipelines & Services segment includes the partnership's onshore natural gas pipelines and natural gas storage businesses. Gross operating margin for this segment for the fourth quarter of 2004 was $72.0 million compared to $4.1 million in the fourth quarter of 2003. Onshore natural gas pipelines generated $64.8 million of gross operating margin in the fourth quarter of 2004 versus $4.1 million in the fourth quarter of 2003. Onshore transportation volumes were 5.6 trillion British thermal units per day (Tbtu/d) compared to 0.6 Tbtu/d in the fourth quarter of 2003. Natural gas storage services accounted for $7.2 million of gross operating margin in the fourth quarter of 2004. This combined $67.9 million increase for the segment was due to the contribution of the GulfTerra assets and increased margin and volume on the Acadian system. Offshore Pipelines & Services - The Offshore Pipelines & Services segment includes the partnership's offshore natural gas and crude oil pipelines and platforms. Gross operating margin for this segment for the fourth quarter of 2004 was $33.9 million compared to $0.1 million in the fourth quarter of 2003. Offshore natural gas pipelines recorded gross operating margin of $14.4 million on average throughput of 1.8 Tbtu/d in the fourth quarter of 2004 versus $0.1 million and 0.4 Tbtu/d, respectively, for the same quarter in 2003. Gross operating margin for the partnership's offshore platform services and production business was $13.6 million for the fourth quarter of 2004. Enterprise's offshore oil pipelines business recorded gross operating margin of $5.8 million in the fourth quarter of 2004 on net volumes of 138,000 BPD. The increase for this segment was primarily attributable to the contribution from the GulfTerra assets. Petrochemical Services - The Petrochemical Services segment includes the partnership's butane isomerization, propylene fractionation and octane enhancement businesses including related pipeline facilities. Gross operating margin for the Petrochemical Services segment during the fourth quarter of 2004 increased by 25%, or $6.1 million, to $30.8 million from $24.7 million in the same quarter of 2003. Each of the three businesses in this segment reported an increase in gross operating margin. Capitalization Total debt principal outstanding at December 31, 2004 was approximately $4.3 billion, which represented 44.2% of the partnership's total capitalization. Enterprise had cash of approximately $34 million at the end of 2004. Outlook "Drilling activity in the major producing areas, including the deepwater Gulf of Mexico, Rocky Mountains and San Juan, and the improving economy have increased the demand for our integrated midstream energy services. Over the next two years, we expect large volumes of new production from both the deepwater and the Rockies to flow into our integrated system of assets," stated Mr. Andras. "Recently, the partnership's Cameron Highway oil pipeline and natural gas and NGL facilities in central Louisiana began receiving first production from the large Mad Dog and Holstein developments in the Southern Green Canyon area of the deepwater Gulf of Mexico. These volumes, along with oil volumes received by our Poseidon oil pipeline from the Frontrunner development, should steadily increase during 2005 as these developments ramp up to full production. In addition, we expect initial production from the K-2 and K-2 North developments will begin flowing into our facilities during the second quarter of 2005," said Mr. Andras. "The merger of Enterprise and GulfTerra has strengthened our leading business positions across the natural gas and NGL value chain in some of the largest producing basins in the United States. This has provided our partnership with an abundant portfolio of organic growth opportunities to construct new facilities or expand existing assets. Thus far, we have identified approximately $2 billion of organic growth projects over the next three years, including our recently announced Independence Trail and Hub project and the Constitution oil and natural gas pipeline projects in the deepwater Gulf of Mexico; the expansion of some of our key western NGL assets to support new production in the Rocky Mountain and San Juan regions; and enhancements to some of our existing facilities on the Texas Gulf Coast to serve our refining and petrochemical customers," said Mr. Andras. "We are also optimistic about the opportunities to make disciplined acquisitions during 2005 at reasonable valuations that will be accretive to the cash flow of our partnership," Mr. Andras concluded. About the Company Enterprise Products Partners L.P. is the second largest publicly traded energy partnership with an enterprise value of approximately $14.0 billion, and is a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs and crude oil. Enterprise transports natural gas, NGLs and crude oil through 31,000 miles of onshore and offshore pipelines and is an industry leader in the development of midstream infrastructure in the Deepwater Trend of the Gulf of Mexico. Services include natural gas transportation, gathering, processing and storage; NGL fractionation (or separation), transportation, storage, and import and export terminaling; crude oil transportation and offshore production platform services. For more information, visit Enterprise on the Web at http://www.epplp.com/ * * * As reported in the Troubled Company Reporter on Sept. 24, 2004, Standard & Poor's Rating Services affirmed its 'BB+' corporate credit rating on Enterprise Products Partners L.P. At the same time, Standard & Poor's assigned its 'BB+' senior unsecured rating to Enterprise Products' subsidiary Enterprise Products Operating L.P.'s proposed (in aggregate) $2.0 billion note issues. The notes will be issued in four tranches, due 2007, 2009, 2014 and 2034. The outlook is stable. As of June 30, 2004, the Houston, Texas- based company had about $4.2 billion of debt outstanding, pro forma for the proposed and other recent financings. Proceeds from the issuances will be used to permanently finance acquisition-related bank debt related to Enterprise Products' pending merger with GulfTerra Energy Partners L.P. The $6.1 billion merger (total consideration, including GulfTerra's debt) is expected to close on or near Sept. 30, 2004. The rating on Enterprise Products reflects its integrated energy midstream operations, which benefit from a considerable amount of fee-based revenue from pipeline operations, favorable asset positioning, and a long-standing strategic alliance with Shell Oil Co. Offsetting these positive attributes are the high cash flow volatility the partnership faces stemming from its sizeable natural gas processing and fractionation operations. Enterprise Products does not issue debt but does guarantee the debt of Enterprise Products Operating, therefore Enterprise Products carries the same rating as Enterprise Products Operating. "The stable outlook reflects the expectation that Enterprise Products will not engage in significant merger and acquisition activity until it has sufficiently integrated the operations of GulfTerra, should its merger proceed as expected," said Standard & Poor's credit analyst John Thieroff. "In the longer term, an upgrade to investment grade will depend on successful integration, a demonstrated reduction in earnings volatility, and continued deleveraging," continued Mr. Thieroff. FAIRCHILD SEMICONDUCTOR: Moody's Rates New $450M Term Loan at Ba3 ----------------------------------------------------------------- Moody's Investors Service assigned a Ba3 to the new $450 million term loan of Fairchild Semiconductor, withdrew the rating on the previous $300 million term loan, and affirmed the remaining ratings. Fairchild's rating outlook was changed to positive from stable. The new rating and affirmations assume the redemption of the company's $350 million outstanding 10.5% subordinated notes using loan proceeds and cash on hand. The new rating assigned is: * $450 million guaranteed senior secured term loan maturing 2010 of Ba3 The ratings affirmed are: * Senior implied rating of Ba3; * Speculative Grade Liquidity Rating of SGL-1; * Senior unsecured issuer rating of B1; * $180 million revolving credit facility maturing 2007 rated Ba3 The rating to be withdrawn following its redemption is: * $350 million 10.5% senior subordinated notes rated B2 The rating withdrawn is: * $300 million guaranteed senior secured term loan rated Ba3 The ratings consider Fairchild Semiconductor's modest fixed charge coverage levels even during an industry downturn; modest leverage relative to operating earnings; success in changing its product strategy to focus more narrowly on higher-margin specialized power product; and successful cost containment measures which have helped to stabilize its cost structure. The ratings also benefit from management's well-considered and consistent financial strategy. The ratings are constrained by Fairchild's modest free cash flow, resulting from modest margins and high capital expenditures; the volatility inherent in the semiconductor industry; and a trend of continued charges for asset valuations and business restructuring. The rating outlook has been changed to positive. Ratings could rise if Fairchild Semiconductor improves free cash flow relative to debt while maintaining its market position and appropriate spending levels. Moody's expects that Fairchild's free cash flow, after working capital and capex, is about 12% of debt balances, pro-forma for the debt repurchase. An increase in free cash flow, along with continued conservative financial strategy leading to reduced leverage, could favorably impact the ratings. Ratings or outlook could move downward if Fairchild significantly increases its business or financial risk through a change in financial policy or a leveraged acquisition. A decline in operating metrics, indicating difficulty with operational goals, could also result in downward actions. Fairchild Semiconductor's financial position and financial flexibility will improve as a result of the debt repayment. Moody's believes that interest expense will be cut nearly in half as a result of a lower coupon and lower debt balances. As a result, EBITDAR less capex fixed charge coverage will improve to nearly 3 times on a pro-forma basis, versus 2.1 times for the LTM ended December 2004. Pro-forma debt to EBITDA will fall to about 1.9 times from 2.4 times for the same period. Free cash flow will also improve due to the interest savings, but Moody's believes it will remain modest relative to debt balances as a result of capex needs. Fairchild Semiconductor's liquidity rating of SGL-1 reflects very good liquidity, bolstered by cash and liquid investments of approximately $500 million following the debt repayment. Backup liquidity is provided by a $180 million revolving credit facility under which there is full availability and comfortable cushion under financial covenants. The new $450 million term loan matures on December 31, 2010, with small quarterly amortizations starting in March 2005 and a bullet of $424 million due at maturity. It shares a credit agreement with the revolving credit facility, whose terms have been slightly modified as part of this financing. Key covenants have been relaxed to increase Fairchild's operating flexibility, but Moody's believes they still provide sufficient benefit to senior creditors. The credit facilities benefit from a springing lien, which collateralizes lenders if ratings fall below current levels. Fairchild Semiconductor, based in South Portland, Maine, is a leading global supplier of power semiconductors. Revenues in 2004 were about $1.6 billion. GE COMMERCIAL: Fitch Puts Low-B Ratings on Six Mortgage Certs. -------------------------------------------------------------- Fitch Ratings affirms GE Capital Commercial Mortgage Corp.'s commercial mortgage pass-through certificates, series 2002-3: -- $357.6 million class A-1 'AAA'; -- $553.8 million class A-2 'AAA'; -- Interest-only class X-1 'AAA'; -- Interest-only class X-2 'AAA'; -- $46.8 million class B 'AA'; -- $16.1 million class C 'AA-'; -- $26.3 million class D 'A'; -- $14.6 million class E 'A-'; -- $10.2 million class F 'BBB+'; -- $17.6 million class G 'BBB'; -- $11.7 million class H 'BBB-'; -- $27.8 million class J 'BB+'; -- $10.2 million class K 'BB'; -- $8.8 million class L 'BB-'; -- $10.2 million class M 'B+'; -- $8.8 million class N 'B'; -- $5.9 million class O 'B-'. Fitch does not rate the $17.6 million class P certificates. The rating affirmations reflect the stable pool performance and minimal paydown since issuance. As of the January 2005 distribution date, the pool has paid down 2.3% to $1.14 billion from $1.17 billion at issuance. There have been no delinquent or specially serviced loans since issuance. Fitch reviewed the credit assessment of the Westfield Portfolio loan (8.3%). Based on the stable to improved performance, the loan maintains an investment grade credit assessment. The Westfield Portfolio is secured by two regional malls. The weighted average occupancy for the malls as of September 2004 improved to 97.2% compared to 93.7% at issuance, fueled by a 7.3% increase in occupancy at Shoppingtown MainPlace. The second largest loan in the pool, Colonie Center (3.5%), fully defeased in February 2005. HEALTHSOUTH CORP: Names Joe Clark & Jim Foxworthy to Exec. Posts ---------------------------------------------------------------- HealthSouth Corporation (OTC Pink Sheets: HLSH) disclosed the appointments of Joe Clark, 48, and Jim Foxworthy, 53, to the positions of President of the Ambulatory Surgery Division and Chief Administrative Officer, respectively, effective March 1, 2005. "With these last two senior positions now filled, we have a well- qualified, well-rounded senior team to develop and implement the company's strategies moving forward," said HealthSouth President and Chief Executive Officer Jay Grinney. "Joe and Jim are both leaders in their respective areas of expertise and will be assets to the company and our senior team." Mr. Clark, who brings 26 years of healthcare industry experience to HealthSouth, will be responsible for the day-to-day operations of the division's 176 ambulatory surgery centers across the country. The ambulatory surgery division is HealthSouth's second largest division in terms of both revenue and EBITDA contribution. "I am delighted to welcome Joe as president of the Ambulatory Surgery Division," said Mike Snow, HealthSouth chief operating officer. "His diverse experience within the healthcare industry and proven track record in the areas of leadership, finance, partnership development, and strategic planning make him uniquely qualified for this position. I am confident that he will be a strong addition to our senior operations team." Most recently, Mr. Clark served as president and chief executive officer of Healthmark Partners, a privately held healthcare company which operates specialty hospitals and ambulatory surgery centers on a joint venture basis with physicians and non-profit hospitals. Mr. Clark successfully converted the company from an OB/GYN practice management firm into an ambulatory surgery company. Prior to his tenure at Healthmark, Mr. Clark worked for Response Oncology, Inc., a publicly held specialty healthcare company, serving over the years as chief financial officer, president, chief operating officer and chief executive officer. Mr. Clark's experience also includes positions held with American Medical International, Inc., and Humana, Inc. "I am excited about the opportunities ahead for HealthSouth and the ambulatory surgery division," Mr. Clark said. "My goal is to build on the great reputation our employees and physicians have earned throughout the country for providing quality care to our patients and their families." Mr. Clark has a bachelor's degree in economics from Dartmouth College and a master's degree in Management from Troy State University. As chief administrative officer, Mr. Foxworthy will have corporate responsibility for numerous strategic service areas, including human resources, enterprise-wide project management organization, printing/distribution, security, support services, aviation, travel management and the corporate conference center. He will work closely with the executive team to add value by developing and implementing a long-range human resources plan, benchmarking best practices and building programs and processes in support of and consistent with the company's mission. "Jim is an accomplished executive with an outstanding track record in both line and staff support positions, proving time and again his ability to generate results," Mr. Grinney said. "His expertise in the areas of leadership development, business planning, and culture change management will be essential to our growth and success in years to come." Most recently, Mr. Foxworthy served as corporate vice president for business transformation at Temple-Inland, a public corporation operating in various industry segments including corrugated packaging, financial services and manufactured lumber products. In his 12-year tenure at Temple-Inland, he was responsible for a multi-facility manufacturing business unit. Additionally, he led corporate strategic services, including human resources, communications, sourcing, logistics, aviation and information technology. Prior to Temple-Inland, Mr. Foxworthy spent 18 years with Union Camp Corporation, a leading maker of fine papers and packaging, where he served in a number of human resource roles including division manager of industrial relations. "This is a great opportunity to leverage my experience and background while working with others to develop programs that enhance the great resources already available in this organization," said Mr. Foxworthy. Mr. Foxworthy has a bachelor's degree in business administration from the University of Tennessee and completed the Advanced Management Program at the Wharton School of Business. About the Company HealthSouth is one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide. HealthSouth can be found on the Web at http://www.healthsouth.com/ * * * Notice of Late Filing HealthSouth Corporation filed a notification with the Securities and Exchange Commission disclosing the Company's inability to complete the preparation of its financial statements for the period ended Sept. 30, 2004, due to the investigation conducted by SEC and the Department of Justice. The Company said it engaged a forensic review team from PricewaterhouseCoopers LLP to review the Company's prior financial statements and retained Grant Thornton to assist in the reconstruction of the Company's financial accounts. As previously disclosed, the Company does not expect to file its restated historical financial statements for periods ended on or before December 31, 2003, with the SEC until the Company has completed the reconstruction of its financial records and PricewaterhouseCoopers completes its audit. The Company currently estimates that such financial statements will not be completed until the first quarter of 2005. INDEPENDENCE II: Moody's Junks $17M Class C Secured Notes --------------------------------------------------------- Moody's Investors Service announced that it took rating actions on the Class B Notes and Class C Notes issued by Independence II CDO, Ltd, a CDO collateralized by structured finance securities. The Class B Notes were downgraded from Aa3 on Watch for possible downgrade to Baa2 on Watch for possible downgrade and the Class C Notes were downgraded from B1 on Watch for possible downgrade to Caa2 on Watch for possible downgrade. According to Moody's, the current action reflects a concern about the loss of subordination supporting the notes and deterioration in the credit quality of the collateral pool, which has a significant exposure to securities with speculative-grade ratings, as noted in the latest deal surveillance report. Owing to the decline in credit quality, the ratings assigned to the Class B Notes and the Class C Notes prior to the rating actions taken today are no longer consistent with the credit risk posed to investors. -- Tranche Descriptions: * Issuer: Independence II CDO, Ltd. -- Tranche description: U.S. $78,000,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2036 * Prior Rating: Aa3 (Watch for possible downgrade) * Current Rating: Baa2 (Watch for possible downgrade) -- Tranche description: U.S. $17,000,000 Class C Mezzanine Secured Floating Rate Notes Due 2036 * Prior Rating: B1 (Watch for possible downgrade) * Current Rating: Caa2 (Watch for possible downgrade) INTELSAT: Discount Note Issue Prompts Fitch to Watch Debt Ratings ----------------------------------------------------------------- Fitch Ratings has placed the ratings of Intelsat, Ltd. and its wholly owned subsidiary, Intelsat, Ltd. on Rating Watch Negative following the announcement that the company plans to issue $300 million (proceeds) of senior discount notes to retire recently invested equity of an equal amount. Fitch's rating action affects about $4.6 million of existing debt. The new notes are going to be issued by a newly formed intermediate subsidiary placed between Intelsat and Intelsat Bermuda. This would rank the new issue as structurally senior to the Intelsat senior notes and structurally junior to all of the debt at Intelsat Bermuda. Fitch currently rates Intelsat and Bermuda: Intelsat -- Senior unsecured notes 'B-'. Bermuda -- Senior unsecured notes 'B+'; -- Senior secured credit facilities 'BB' . The proposed issuance and subsequent use of proceeds to retire equity increases the estimated pro forma total leverage as of Sept. 30, 2004, from about 6.2 times to 6.6x, based on Fitch estimates. Fitch expects that if the new senior discount note offering is successful and $300 million of equity is retired that the ratings on the existing senior notes at both the Intelsat, Ltd., and Intelsat Bermuda levels could be affected negatively. Fitch's 'BB' rating for the Intelsat Bermuda senior secured credit facilities (the draw is estimated at $350 million with $300 million unused on a revolver) is also at risk, although Fitch recognizes the substantial value of the assets securing the facilities. A future downgrade upon completion of the proposed offering of senior discount notes would recognize the impact of the additional leverage and the future significant increase in cash interest expense in five years when the proposed senior discount notes begin cash interest payments. The five-year period may coincide with a possible need to increase capital spending at that time to replace aging satellites. This action is based on existing public information and is being provided as a service to investors. INTELSAT LTD: Moody's Junks Three Note Classes ---------------------------------------------- Moody's Investors Service downgraded Intelsat, Ltd.'s existing long-term ratings and assigned a B3 rating to the private placement to be issued by a newly created subsidiary, Zeus Special Subsidiary Limited to yield the net proceeds of $300 million. Intelsat Ltd. plans on using the proceeds to purchase the preferred stock of its equity sponsors, which Moody's views as an effective dividend. The downgrade reflects not only the increase in leverage that will result from this dividend transaction, but Moody's view the company is inclined to aggressively use leverage for financial rather than business purposes. Intelsat Ltd. Moody's rating actions are: -- Intelsat Ltd.: Ratings downgraded are: * Senior Implied to B2 from B1 * Unsecured Issuer Rating to Caa1 from B3 * $400 Million 5.25% Global Notes due in 2008 to Caa1 from B3 * $600 Million 7.625% Sr. Notes due in 2012 to Caa1 from B3 * $700 Million 6.5% Global Notes due in 2013 to Caa1 from B3 * $200 Million 8.125% Eurobonds due in 2005 to B1 from Ba3 Ratings affirmed are: * The speculative grade liquidity rating is at SGL-2 -- Intelsat (Bermuda) Ltd.: Ratings downgraded are: * $300 Million Sr. Secured Revolver due in 2011 to B1 from Ba3 * $350 Million Sr. Secured T/L B due in 2011 - to B1 from Ba3 * $1000 Million Sr. Floating Rate Notes due in 2012 - to B2 from B1 * $875 Million Sr. Fixed Rate Notes due in 2013 - to B2 from B1 * $675 Million Sr. Fixed Rate Notes due in 2015- to B2 from B1 -- Zeus Special Subsidiary: Ratings assigned are: * $300 Million Sr. Unsecured Discount Notes due 2015 -- B3 The outlook on all ratings is negative. As a result of this transaction, Intelsat Ltd.'s pro forma debt will increase from 5.9x EBITDA to 6.3x. Moody's believes this metric will worsen slightly in 2005 before possibly improving in 2006, leaving the company very little financial flexibility. The downgrades further reflect Moody's concern that the Company is unlikely to use free cash flow or the proceeds from a future IPO to reduce leverage, which Moody's believes would leave the company vulnerable to negative developments in its business environment discussed in recent Moody's press releases. In addition to concerns about increased vulnerability to a downturn in the business environment as a result of the Company's increased leverage, the negative outlook continues to incorporate Moody's view that recent satellite failures could be indicative of more serious systemic problems. Moody's would likely move the rating outlook to stable if the failure review boards, established to examine the causes of the recent satellite failures, does not find systemic failings and Intelsat begins to reduce leverage with free cash flow or equity proceeds. Moody's would likely lower Intelsat's ratings if operational problems persist or if cash flow is distributed to shareholders instead of used to reduce leverage. Moody's has assigned a B3 rating to the senior unsecured discount notes issued by Zeus Special Subsidiary, one notch below Intelsat Ltd.'s senior implied rating, since these notes are structurally subordinated to secured bank debt and senior unsecured notes at Intelsat Bermuda (pre-transaction). The discount notes are not guaranteed, but Intelsat is a co-obligor. Upon FCC approval, Intelsat Bermuda will contribute all of its assets and liabilities to a subsidiary created in conjunction with this transaction, Intelsat Subsidiary Holding Company Ltd. Intelsat Bermuda will then merge with Zeus Special Subsidiary, so the discount notes will be obligations of Intelsat Bermuda while the existing obligations of Intelsat Bermuda will be obligations of Intelsat Subsidiary Holding. Effectively, the discount notes are being layered in between Intelsat and Intelsat Bermuda to facilitate a dividend payment to Intelsat's equity sponsors. Except for the negative effects of added leverage, the senior secured lenders and senior unsecured noteholders at Intelsat Bermuda are not impacted by this transaction (except for the name change of the obligor). Moody's believes Intelsat noteholders' position in the capital structure is, however, weakened by the new, structurally senior layer of debt and also believes they could be further weakened by future debt layering or exchanges. Intelsat Ltd., headquartered in Bermuda, owns and operates a global communication satellite system that provides capacity for voice, video, networks services, and the Internet in more than 200 countries and territories. IWO HOLDINGS: Taps Evercore Restructuring as Financial Consultant ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave IWO Holdings, Inc., and its debtor-affiliates permission to employ Evercore Restructuring L.P., as their financial consultant. Evercore Restructuring will: a) assist in the evaluation of the Debtors' businesses and in the development of long-term business plans and related financial projections; b) assist in the development of financial data and presentations to the Debtors' Board of Directors, various creditors and other parties in interests; c) analyze the financial liquidity of the Debtors and evaluate alternatives to improve the liquidity situation; d) analyze various restructuring scenarios and the potential impact of those scenarios on the value of the Debtors and the recoveries of the stakeholders impacted by those scenarios; e) provide advise with regards to restructuring or refinancing the Debtors' financial obligations and evaluate their debt capacity and alternative capital structures; f) participate in negotiations with the Debtors' creditors, suppliers, lessors and other parties in interest and negotiate with the Debtors' bank lenders with respect to potential waivers or amendments of various credit facilities; g) assist in arranging debtor-in-possession financing and provide expert witness testimony as requested by the Debtors; h) provide all other financial advisory services in connection with the analysis and negotiation of a restructuring of the Debtors. John P. Fitzsimons, a Managing Director at Evercore Restructuring, reports that the Firm's compensation consist of: a) a $100,000 monthly advisory fee and a $100,000 DIP financing fee for each DIP financing successfully arranged by Evercore Restructuring; and b) a $50,000 out-of-pocket expenses for the entire duration of the Debtors' engagement of Evercore Restructuring. Evercore Restructuring assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Lake Charles, Louisiana, IWO Holdings, Inc., -- http://iwocorp.com/-- through its Independent Wireless One Corporation subsidiary, is a PCS affiliate of Sprint PCS. IWO Holdings provides mobile digital wireless personal communications services, or PCS, under the Sprint and Sprint PCS brand names in upstate New York, New Hampshire (other than Nashua market), Vermont and portions of Massachusetts and Pennsylvania. The Debtors filed for chapter 11 protection on January 4, 2005 (Bankr. D. Del. Case Nos. 05-10009 to 05-10011). Jeffrey L. Tanenbaum, Esq., at Weil Gotshal & Manges LLP, and Mark D. Collins, Esq., at Richards Layton & Finger, represent the Debtors in their restructuring efforts. When the Debtors sought bankruptcy protection, they reported total assets of $246,921,000 and total debts of $413,275,000. K&F PARENT: Moody's Junks Proposed $55 Million Senior PIK Notes --------------------------------------------------------------- Moody's Investors Service has assigned a Caa2 rating to K&F Parent Inc.'s proposed $55 million Senior payment-in-kind -- PIK -- Notes, due 2015. Moody's assigned a B2 senior implied and a Caa2 senior unsecured issuer rating to K&F Parent, while withdrawing the senior implied and issuer ratings from K&F Parent s wholly owned principal operating company, K&F Industries, Inc. In addition, the rating agency has made definitive K&F Industries' B2 and Caa1 ratings prospectively assigned to the Company's senior secured credit facilities and senior subordinated notes, respectively, due to the completion of the contemplated re- financing and successful retirement of substantially all of K&F Industries' senior subordinated notes by way of tender offer. In a related action, Moody's has downgraded the rating on $0.6 million of K&F Industries' 9.625% senior subordinated notes remaining since completion of the tender for these notes in January 2005, to Caa1 from B3. This completes a review for further downgrade that had been in effect only for these notes since the November 2004 refinancing, in anticipation of the removal of essentially all covenant protection provided to any remaining notes outstanding upon completion of the tender offer. The ratings outlook is stable. The ratings continue to reflect K&F Parent's aggressively leveraged capital structure that resulted from the November 2004 acquisition of the company by Aurora Capital Group, marginally increased by the new Senior PIK Notes offering. The purpose of the proposed notes is to finance the $55 million redemption of senior preferred stock, issued by K&F Parent. This amount represents a substantial majority of the senior preferred class of stock, about 59%, and a large part of K&F Parent's total preferred and common equity base. Upon close of this offering and redemption of preferred stock, K&F Parent Inc.'s debt will represent about 76% of total capital. The stable outlook reflects Moody's expectations that although leverage will remain high over the next few years, a healthy operating environment should result in modest free cash flow generation that could be applied to moderately reduce debt balances over time. Ratings or their outlook may be revised downward if the company were to increase debt at either the parent company level or at any of its subsidiaries, such that debt/EBITDA exceeds 7.5x, while EBIT coverage of cash interest falls below 1.5x. Conversely, ratings or their outlook could be adjusted upward if the company were to repay substantial levels of debt while maintaining revenue stability and operating margins, such that debt/EBTIDA were to fall and remain below 5.5x for a sustained period, while EBIT covers cash interest expense by over 2.5x. Upon close of the proposed Senior PIK Notes offering, K&F Parent, Inc. will continue to be a heavily-levered company, owing mostly to the November 2004 acquisition of the company by Aurora Capital for $1.06 billion. Aurora's acquisition, which involved a $400 million increase in K&F Industries' debt levels, considerably reduced the company's financial flexibility and credit metrics, and left it more vulnerable to potential downturns in the aircraft sector or an increase in competitive pressures. As the result of the proposed notes offering and the retirement of the preferred stock, K&F Parent's leverage will increase slightly, while cash flows will be essentially unaffected due to the payment-in-kind (PIK) nature of interest payments specified in these notes' indenture. On a pro forma September 2004 basis, estimated leverage will increase from about 6.5x debt/EBITDA to almost 7x. Estimated EBIT is still expected to cover cash interest expense by about 2x, which is similar to coverage estimates before taking these notes into account. However, despite K&F Parents continued high-consolidated debt levels, Moody's believes that the company should continue to benefit from important operating strengths. These include K&F Industries' position as one of the world's leading sole source suppliers of aircraft wheels, brakes and anti-skid systems, and aircraft fuel tanks, its large diversified customer base, its technological expertise, and capable management. The Caa2 rating assigned to 's proposed $55 million notes, three notches below the senior implied rating and one notch below K&F Industries' existing senior subordinated notes, reflects the structural subordination of these notes to $845 million of committed debt issue by K&F Parent's principal operating company, K&F Industries, Inc. The existing K&F Industries debt is guaranteed by all of the Company's subsidiaries, while the new Senior PIK Notes will not be guaranteed by any of the Company's subsidiaries. Moreover, K&F Parent's ability to use cash from its operating subsidiaries is quite limited. Although the debt and the preferred stock issued at K&F Parent are all PIK, the parent company has the option make cash payments on the new Senior PIK Notes should it decide to do so. This optional demand on cash from the operating subsidiaries is limited by covenant provisions in the existing K&FI notes' indenture and senior secured credit agreement. K&F Industries' 9.625% senior subordinated notes have been downgraded to Caa1 and are rated the same as K&F Industries' recently-issued senior subordinated notes due 2014. Despite the same rating, the older subordinated notes carry a somewhat higher level of risk, in Moody's opinion, as they have been weakened by the removal of covenant protection resulting from the tender process. The need for a rating differential, often applied in similar circumstances, is mitigated by the similar priority in claim, the de-minimus remaining amount of these notes (less than $600,000) outstanding. The ratings that have been made definitive: -- K&F Industries Inc.: * $50 million senior secured revolving credit facility, due 2010, at B2; * $480 million senior secured term loan B, due 2012, at B2 * $315 million senior subordinated notes, due 2014, at Caa1 The ratings assigned are: -- K&F Parent, Inc.: * $55 million senior unsecured notes, due 2015, Caa2 * Senior Implied rating of B2 * Senior Unsecured Issuer rating of Caa2 The ratings downgraded are: -- K&F Industries Inc.: * $0.6 million 9.625% senior subordinated notes, due 2010, to Caa1 from B3 K&F Parent, Inc. is based in Los Angeles, California. Through its New York City --based wholly-owned operating subsidiary, K & F Industries, Inc, the Company is a leading manufacturer of wheels, brakes and brake control systems for commercial, general aviation and military aircraft through its subsidiary Aircraft Braking Systems Corporation. In addition, the Company is the world's leading manufacturer of flexible bladder-type fuel tanks for aircraft through its subsidiary Engineered Fabrics Corporation. 2003 revenues totaled $343 million. K&F PARENT: S&P Places B- Rating on $55 Million Senior PIK Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to K&F Parent Inc.'s $55 million senior payment-in-kind -- PIK -- notes due 2015 offered under Rule 144A with registration rights and its 'B+' corporate credit rating to the company. At the same time, Standard & Poor's affirmed its ratings, including the 'B+' corporate credit rating, on K&F Industries, Inc., an indirect wholly owned subsidiary of K&F Parent, which conducts all of its business through K&F Industries. The outlook is stable. Proceeds of the notes will be used to redeem a portion of senior PIK preferred stock. Outstanding debt, pro forma for the notes, is $850 million. "The ratings on K&F Industries -- K&F -- reflect a heavy debt burden, a very aggressive financial policy, modest scale of operations (annual revenues about $350 million), and some cyclicality," said Standard & Poor's credit analyst Roman Szuper. Those factors are somewhat offset by the firm's defensible positions in niche commercial and military aerospace markets and efficient operations. The ratings also incorporate an expectation that the company will employ its generally predictable free cash flow to reduce a high debt level. In November 2004, Aurora Capital Group acquired K&F in a transaction that doubled debt and deteriorated significantly most credit protection measures. Pro forma for the notes, debt to adjusted EBITDA is at 7x, debt to capital 77%, and adjusted EBITDA to cash interest 2.5x. The Aurora acquisition is the third recapitalization of privately held K&F since 1997. However, steady debt reduction following previous such transactions improved most credit statistics to levels above average for the rating. New York City-based K&F is a leading supplier of braking systems -- wheels, steel and carbon brakes, and antiskid systems -- to the aerospace industry. Braking products (80%-85% of sales and a higher percentage of profits) are on diverse civil and military programs, with a focus on short-haul, high-cycle aircraft. The company is also the leader in the small global commercial and military market for flexible bladder aircraft fuel tanks (15%-20%). A diversified customer base of more than 175 airlines, airframe manufacturers, governments, and distributors, an installed base of about 27,000 aircraft (including helicopters), and predominantly sole-source contracts enhance stability. A focus on high-margin aftermarket business, coupled with an ability to raise prices, enable K&F to maintain strong operating profit margins in the 30%-35% range. K&F's relatively steady free cash flow generation, improving industry conditions, and management's commitment to debt reduction should gradually improve the financial profile to a level appropriate for the ratings. Cash flow shortfalls, further redemption of preferred stock with debt, or acquisitions would delay anticipated strengthening of currently subpar credit protection measures, which could warrant an outlook revision to negative. The outlook revision to positive is not likely in the short term, but could be considered longer term if better than expected operating performance is coupled with accelerated debt reduction. KAISER ALUMINUM: Settles Disputes with 3 U.S. Government Agencies ----------------------------------------------------------------- The U.S. Department of Treasury, Internal Revenue Services allows $1,635,077 in aggregate tax refund claimed by the Debtors pursuant to its filed amended federal tax returns for years ending December 31, 1997, December 31, 2000, and December 31, 2001. The IRS is prepared to pay the Debtors $1,635,077, plus any interest, less an amount equal to any outstanding prepetition tax assessment against the Debtors, which Holdback the IRS will hold in administrative freeze pending the exercise of its set-off rights against the allowed Aggregate Tax Refund Claim. In October 2003, the Court approved a consent decree settling the environmental claims of the United States, the States of California, Rhode Island, and Washington, and the Puyallup Tribe of Indians. The Consent Decree granted: (i) the United States Department of Interior and the National Oceanic and Atmospheric Administration an allowed claim for $5,500,000; and (ii) the Environmental Protection Agency an allowed claim of $17,828,839, both against KACC. Moreover, the Court granted the United States, on behalf of the Bonneville Power Administration, a power marketing administration within the Department of Energy, an allowed claim for $3,544,943, for its claims arising under: (1) Bonneville's March 1998 service agreement for point-to- point transmission service with KACC; and (2) Bonneville's January 1978 lease agreement with KACC for the lease of certain transmission equipment. In a Court-approved stipulation, the Debtors agreed to set off a portion of a refund owed then by the Department of Homeland Security, U.S. Customs and Border Protection, against the Bonneville Claim, reducing that claim to $3,303,938. The United States contends that it is entitled to set off the Tax Refund against the Federal Agencies' Claims. Accordingly, the Debtors and the Federal Agencies enter into a stipulation to resolve their differences. The parties agree that: (1) The automatic stay will be lifted to allow the Federal Agencies to set off the Tax Refund against the Federal Agencies' Claims: (a) One-half of the Tax Refund will be applied against the Bonneville Claim; and (b) The balance of the Tax Refund will be applied pro rata against the Department of Interior and National Oceanic Claim and the EPA Claim; (2) To effect the set-off, the Debtors will, upon receipt of the Tax Refund from the IRS, immediately remit payment of the Tax Refund to the United States by electronic funds transfer pursuant to instructions provided by the Department of Justice. The Debtors agree and acknowledge that, notwithstanding their receipt of the Tax Refund from the IRS, they have no right, claim, or any interest in the Tax Refund nor will their receipt of the Tax Refund impair in any way the agreed set-off; (3) Within 30 days of the United States' receipt of the remittance of the Tax Refund, the Bonneville and the Environmental Agencies will provide the Debtors and their claims and noticing agent, Logan & Company, with the exact amounts by which the Bonneville Claim, the Department of Interior and National Oceanic Claim, and the EPA Claim were reduced by the set-off; (4) If the tax assessment is ultimately determined to be less than the Holdback, the stay will be lifted to permit the Federal Agencies to set off the difference between the assessment and the Holdback against the Federal Agencies' Claims similar in manner to the other contemplated set- offs; (5) The Debtors' rights under applicable law to contest the tax assessment or the amount of interest are preserved under the Stipulation; and (6) The Debtors will not alter, modify, or amend in any way any of the terms of the Stipulation through a plan or reorganization or otherwise. The Debtors ask the Court to approve the Stipulation. J. Christopher Kohn, Esq., Tracy J. Whitaker, Esq., and Matthew Troy, attorneys at the Civil Division of the U.S. Department of Justice in Washington D.C., represent Bonneville Power Administration in the agreement. The EPA is represented by Alan S. Tenenbaum, Esq., and Eric S. Williams, trial attorneys at the Environmental Enforcement Section, Environmental and Natural Resources Division of the U.S. Department of Justice in Washington D.C. 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) INTELLIGROUP INC: SEC Probes Financial Reporting Issues ------------------------------------------------------- Intelligroup, Inc., a global provider of strategic IT outsourcing services, provided an update regarding the status of its financial reporting and further announced the commencement of a formal investigation by the Securities Exchange Commission. As previously disclosed, Intelligroup has been contacted by the SEC regarding Intelligroup's intent to restate certain financial statements. On Jan. 28, 2005, Intelligroup received notice that the SEC has commenced a formal investigation into these issues. Intelligroup has and will continue to cooperate with the SEC in this regard. On Sept. 24, 2004, Intelligroup intends to restate its financial statements for the years ending December 31, 2001, 2002 and 2003, and for the quarter ended March 31, 2004. In connection with the expected restatement, Intelligroup has engaged its current independent registered accounting firm to re-audit the financial statements subject to the restatement. Intelligroup intends to report its audited, restated financial results as soon as possible following the conclusion of the re-audit. Notwithstanding, the Company expects to have preliminary, unaudited financial results for the quarters ending June 30, 2004, September 30, 2004 and December 31, 2004 in the near future and intend to report certain financial metrics, such as revenue and net income, in relation to these periods following the finalization of such results. On Nov. 1, 2004, the Company disclosed the appointment of J.H. Cohn LLP as the Company's independent registered public accounting firm effective immediately, following the resignation of Deloitte & Touche LLP. J.H. Cohn will begin its work with the review of the Company's interim financial information for the quarter ended June 30, 2004. Deloitte & Touche LLP recently informed the Company that its previously announced intention to resign was effective immediately. As previously disclosed, Deloitte's decision to resign was not the result of any disagreements between the Company and Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. About the Company Intelligroup, Inc. -- http://www.intelligroup.com/-- is an information technology services strategic outsourcing partner to the world's largest companies. Intelligroup develops, implements and supports information technology solutions for global corporations and public sector organizations. The Company's onsite/offshore delivery model has enabled hundreds of customers to accelerate results and significantly reduce costs. With extensive expertise in industry-specific enterprise solutions, Intelligroup has earned a reputation for consistently exceeding client expectations. * * * As reported in the Troubled Company Reporter on Sept. 28, the Company is in default under its revolving credit facility as a result of the failure to file its Form 10-Q for the 2004 second quarter in a timely manner, and expects it would also be in default under certain financial covenants based on likely second quarter results. The Company is working with its senior lender to obtain waivers for such defaults. Although the Company believes at this time that it will obtain waivers of these defaults from the lender under its revolving credit facility, if the Company cannot obtain such waivers, the indebtedness outstanding under its revolving credit facility could be accelerated. LAIDLAW INT'L: Presents 2005 Initiatives to Select Investors ------------------------------------------------------------ On January 13 and 14, 2005, Douglas Carty, Senior Vice-President and Chief Financial Officer of Laidlaw International, Inc., and other members of management presented a review of Laidlaw's strategic initiatives and financial condition to certain investors. The names of these investors weren't identified. The visual presentation is available from the Securities and Exchange Commission at no charge at: http://www.sec.gov/Archives/edgar/data/737874/000095012405000173/c91138exv99w1.htm Among others, management put emphasis on the sale of the Healthcare companies. Management believes the sale will bring value to the company, reduce complexity and strengthen the balance sheet. The sale will net Laidlaw $775 million in cash, after fees and debt assumption. Laidlaw will use the sale proceeds to pay the $573 million Term B facility as well as buy back 3.8 million shares. Laidlaw, management says, will focus on its transportation operations and continue to seek opportunities for margin improvement. Management plans to expand margins for Laidlaw Education Services by 300 to 400 bps over the next three to four years through: -- contract rationalization; -- centralization of administrative services; -- technology deployment to reduce operating costs; and -- clustering of regional operations. Management wants to achieve sustainable profitability for Greyhound Lines, Inc. To do this, management will simplify Greyhound's network based on yield -- eliminating unprofitable and marginally profitable routes -- broaden customer appeal and enhance package delivery services. As to Laidlaw Transit Services, management plans to build revenue, lower unit costs and maintain strong safety record. 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. LAND O'LAKES: Posts $11.9 Million Net Loss in Fourth Quarter ------------------------------------------------------------ Land O'Lakes, Inc., reported 2004 net earnings of $20.1 million, as compared to $82.0 million for 2003. Company officials indicated that 2004 earnings were affected by non- cash pretax charges of approximately $23 million related to unrealized hedging losses and a $36.5 million impairment against its investment in CF Industries, Inc., a fertilizer manufacturer. Factoring out those non-cash adjustments, the company reported strong operating performance in nearly all its businesses. Excluding unrealized hedging, impairments, litigation benefits and restructuring charges, 2004 pretax earnings were $84.8 million, versus comparable results of $66.7 million in 2003. For the fourth quarter, Land O'Lakes reported a net loss of $11.9 million, as compared to net earnings of $39.1 million for the fourth quarter of 2003. Excluding unrealized hedging, impairments, litigation benefits and restructuring charges, fourth quarter pretax earnings were $27.1 million in 2004, versus comparable results of $39.9 million in 2003. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) exceeded company guidance. EBITDA was $91.9 million for the quarter and $227.5 million for the year. Year-end sales totaled $7.7 billion, a 22-percent increase over 2003 sales of $6.3 billion. Fourth quarter sales of $1.9 billion represented a 1-percent increase over the fourth quarter of 2003. The company also reported continued progress against its key strategic initiatives of paying down debt and building balance sheet strength; portfolio management; and building its branded businesses. Strategic Initiatives Paying down debt/building balance sheet strength Land O'Lakes made prepayments on term debt totaling $127 million in 2004, of which $100 million was related to the establishment of a new, three-year receivables securitization facility in March. Nothing was drawn on the securitization facility at year-end. While Land O'Lakes has no significant term debt payments due until 2008, company officials indicated a continued commitment to accelerated debt reduction and expressed their intention to make a $50 million prepayment of term debt later this month. The company ended the year with an improved long-term debt to capital ratio and strong liquidity ($391 million in cash-on-hand and unused borrowing authority). Proactive portfolio management The company reported progress on several key portfolio initiatives in 2004 including reducing its exposure to market risk in the Swine business. Company officials indicated they anticipate completing the sale of substantially all of its swine production assets during 2005. Accordingly, the swine division will be recorded in the company's financial statements as a discontinued operation from this point forward. The company also reported the sale of $10.8 million in non-core or non- strategic assets in the fourth quarter, bringing full-year cash raised from such divestitures to $31.9 million. Building branded businesses The company reported positive performance in its branded and proprietary businesses and products lines, including the LAND O LAKES brand in Dairy Foods, Feed and Eggs; the Purina brand in Feed; CROPLAN GENETICS in Seed; and AgriSolutions in Agronomy. Dairy Foods Dairy Foods reported $28.1 million in pretax earnings for the fourth quarter and $16.5 million for the year, as compared to 2003's pretax earnings of $22.6 million for the fourth quarter and $3.6 million for the year. Dairy Foods reported sales of $1.06 billion for the quarter and $4.0 billion for the year, as compared to $887.7 million and $3.0 billion in 2003. The earnings improvement was driven primarily by positive performance in the Value Added side of the business. The company, for example, reported strong earnings in its core Branded Butter, Spreads and Deli Cheese categories. While the company continued to face significant challenges in its Industrial (manufacturing) operations, progress was made in reducing costs and adjusting product mix, resulting in improved financial results in this category, particularly in the Upper Midwest and West. The company also completed the Phase II expansion of its Cheese and Protein International (CPI) joint venture cheese and whey processing facility on time and on budget. This expansion should reduce per-unit cost and improve profitability at the West Coast facility. Feed Feed reported fourth quarter pretax earnings of $13.9 million and a full- year pretax loss of $7.3 million, as compared to pretax earnings of $21.4 million and $46.4 million, respectively, in 2003. Feed earnings in 2004 included an unrealized hedging loss of $13.6 million and $5.5 million in litigation settlement gains, while 2003 earnings included an unrealized hedging gain of $11.8 million and $22.4 million in litigation settlement gains. Feed sales were $603.4 million for the quarter and $2.6 billion for the year, as compared to $682.2 million for the quarter and $2.5 billion for the full year in 2003. Feed faced notable challenges in the livestock/commodity area, driven by competitive pressures, increased energy, transportation and ingredient costs, and ongoing market volatility and restructuring in the swine and dairy industries. Overall, livestock feed volume was down 2%. Lifestyle Feed volume was strong, up 10% from one year ago, with particularly positive performance in companion animal and horse feeds. Seed Seed continued strong performance in 2004, with full-year pretax earnings of $15.8 million, versus $11.6 million for 2003. For the fourth quarter, Seed reported $2.0 million in pretax earnings, as compared to a $2.3 million loss in fourth quarter 2003. Seed sales were $115.2 million for the fourth quarter and $538.4 million for the full year, as compared to 2003's $129.8 million and $479.3 million, respectively. Volume improvements, particularly in corn; the growth of the CROPLAN GENETICS brand; and the strength of the local cooperative distribution system all contributed to Seed's performance. Layers/Eggs The company participates in the Layers/Eggs industry through its Moark joint venture. In this segment, year-end pretax earnings totaled $21.0 million, compared to $33.4 million in 2003. For the fourth quarter, the Company reported a $6.0 million loss, as compared to pretax earnings of $24.3 million in the same quarter one year ago. Contributing to the earnings decline were a 3 cents/dozen drop in average egg prices and a 5 cents/dozen increase in feed costs year-over-year. Sales for the year were $541.3 million, with fourth quarter sales of $111.4 million. This compared to consolidated sales of $317.8 million for 2003, and $175.7 million for the fourth quarter of last year. This is the first full year in which Moark sales were included in Land O'Lakes financial statements. Because consolidation began in July 2003, only half-year of Moark's sales were included in Land O'Lakes 2003 financials. Full-year sales for Moark were $552 million in 2003. Agronomy Land O'Lakes conducts its Agronomy business primarily through the Agriliance joint venture, in which Land O'Lakes holds 50-percent interest. The company reported a $16.7 million pretax loss in Agronomy for the year, as compared to $13.2 million in Agronomy pretax earnings in 2003. The 2004 loss was the result of a $36.5 million non-cash impairment charge related to the company's $249.5 million investment in CF Industries (fertilizer manufacturing). For the quarter, the company reported a $46.3 million loss in Agronomy, as opposed to a $14.6 million loss for the fourth quarter of 2003. Again, the CF Industries impairment was recorded in the fourth quarter. About the Company Land O'Lakes is a national, farmer-owned food and agricultural cooperative, with annual sales of more than $7 billion. Land O'Lakes does business in all 50 states and more than 50 countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and local cooperatives with an extensive line of agricultural supplies (feed, seed, crop nutrients and crop protection products) and services. * * * As reported in the Troubled Company Reporter on Dec. 15, 2004, Moody's Investors Service upgraded Land O'Lakes' speculative grade liquidity rating to SGL-3 from SGL-4 and affirmed the company's B2 senior implied rating with a negative outlook. The SGL upgrade reflects Moody's expectation that cash flow generation over the next twelve months will be at levels that are likely to cover capital spending, member payments, and required debt amortization, though the company may need to access external funds on an interim basis during the twelve months to cover working capital needs. The SGL upgrade also takes into account that Land O' Lakes' refinancing transactions earlier this year reduced required term loan amortization to a low level through 2008 and adjusted financial covenants to levels that provide adequate cushion for lower than expected earnings. Land O'Lakes has adequate unused availability under its committed revolver and receivables securitization facilities, which have been extended to January 2007. LAS VEGAS SANDS: Prices $250 Million Private Debt Offering ---------------------------------------------------------- Las Vegas Sands Corp. (NYSE: LVS) has priced an offering of $250 million in aggregate principal amount of senior notes due 2015 in a private offering under Rule 144A of the Securities Act of 1933. The senior notes will carry a coupon of 6.375%. The price to investors will be 99.089% resulting in a yield to maturity of 6.5%. This represents a spread of 233 basis points over the applicable U.S. treasury yield. In conjunction with the offering, the company's operating subsidiaries, Las Vegas Sands, Inc., and Venetian Casino Resort, LLC, intend to enter into a $1.570 billion amended and restated senior secured credit facility, consisting of a $1.065 billion funded term loan, a $105 million delayed-draw term loan and a $400 million revolving credit facility. The amended credit facility is expected to include additional term loan borrowings of $400 million, increase the revolving credit facility by $275 million and include revised covenants to provide greater flexibility. Las Vegas Sands Corp. intends to use the net proceeds of the offering and the $400 million of additional term loan borrowings under the amended credit facility to retire the outstanding 11% mortgage notes due 2010 of Las Vegas Sands, Inc. and Venetian Casino Resort, LLC. The proceeds from the offering will be deposited in an escrow account and released upon satisfaction of certain financing conditions, including the closing of the amended and restated senior secured credit facility. The offering of senior notes and the amended and restated senior secured credit facility are expected to close in February 2005. The company expects to realize significant reductions in interest expense as a result of these transactions. The offering of senior notes will not be registered under the Securities Act of 1933, as amended, and the senior notes may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. About the Company Las Vegas Sands Corp. is a hotel, gaming, resort and exhibition/convention company headquartered in Las Vegas, Nevada. The company owns The Venetian Resort Hotel Casino and the Sands Expo and Convention Center, where it hosts exhibitions and conventions, in Las Vegas and the Sands Macao in the People's Republic of China Special Administrative Region of Macau. The company is also developing additional casino hotel resort properties in Macau, including the Macao Venetian Casino Resort. * * * As reported in the Troubled Company Reporter on Feb. 3, 2005, Moody's Investors Service assigned a B2 rating to Las Vegas Sands Corp.'s (NYSE:LVS) proposed $250 million senior unsecured notes due 2015. Moody's also assigned a B1 senior implied rating, B3 long-term issuer rating, positive ratings outlook, and SGL-3 speculative grade liquidity rating. Las Vegas Sands Corp. is a holding company that owns 100% of Las Vegas Sands, Inc. Las Vegas Sands Corp. completed an initial public offering of its common stock in December 2004. Moody's also assigned a B1 rating to Las Vegas Sands, Inc.'s and Venetian Casino Resorts, LLC's (the Restricted Group) proposed $400 million senior secured term loan B add-on and $275 million senior secured revolving credit facility availability add-on. Existing Restricted Group ratings were confirmed. Once the transaction closes, the Restricted Group's B1 senior implied, B3 long-term issuer, and speculative grade liquidity ratings will be withdrawn. Although these ratings will be located at the highest rated entity, once the new transactions close, Moody's ratings and analysis will continue to reflect the credit profile and financing structure of the Restricted Group. The ratings reflect the Restricted Group's continued operating and financial improvements, favorable outlook for the Las Vegas Strip, successful expansion efforts to date, and good risk/reward profile of the $1.6 billion Palazzo Casino Resort (Phase II) development which should further enhance the competitive position and overall asset quality of the Company. The ratings also reflect the popularity and quality of Venetian's casino property and the position of Las Vegas as one of the largest entertainment markets and trade show destinations in the U.S. MD BEAUTY: S&P Junks Planned $57 Million Second Priority Facility ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B' corporate credit rating to MD Beauty, Inc. In addition, a 'B' rating and '4' recovery rating were assigned to MD Beauty's planned $165 million first priority lien bank facility, indicating an expected marginal recovery of principal (25% to 50%) in the event of a payment default. A 'CCC+' rating and '5' recovery rating were also assigned to MD Beauty's planned $57 million second priority lien bank facility, indicating an expectation of negligible recovery of principal (0% to 25%) in the event of a payment default. The outlook is stable. Proceeds from the $222 million of total bank facilities will be used to pay a dividend to all existing shareholders including Berkshire Partners and JH Partners, and to refinance the company's existing debt. "The ratings on MD Beauty reflect its narrow product focus and participation in the highly competitive and fragmented cosmetics industry, relatively small sales and earnings base, and the risks associated with expanding and upgrading its operating platforms," said Standard & Poor's credit analyst Patrick Jeffrey. The company has shown significant sales growth and operating improvement during the past two years, and maintains good brand loyalty in its niche health beauty and cosmeceutical segments. MD BEAUTY: Moody's Puts B2 Rating on First Lien Credit Facilities ----------------------------------------------------------------- Moody's Investors Service assigned a first-time B2 senior implied rating to MD Beauty, Inc., and rated the Company's proposed first- lien credit facilities B2 and the second-lien credit facilities B3. Proceeds from the debt transaction will refinance existing debt and fund a sizeable dividend to existing shareholders. MD Beauty is majority owned by Berkshire Partners and JH Partners, following Berkshire's and JH's investments in the partially debt- financed recapitalization of MD Beauty in May 2004. The rating outlook is stable. The ratings assigned are: * Senior implied rating B2; * $15 million senior secured first-lien revolving credit facility due 2011, B2; * $150 million senior secured first-lien term loan facility due 2012, B2; * $57 million senior secured second-lien term loan facility due 2013, B3; * Senior unsecured issuer rating, Caa1. The ratings are restrained by the significant debt levels being assumed for non-productive purposes, which is concerning given the company's limited track record at current earnings levels and the risks associated with its high growth, possible competitive threats, and operational transitions. The debt load being assumed heightens the company's need to maintain its increased profit levels and generate strong cash flow. Despite its success, MD Beauty still possesses limited scale in a $31.1 billion cosmetics and toiletries industry in the US that is characterized by significant competition due to low entry barriers, well-resourced companies, like Estee Lauder and L'Oreal, and numerous niche or faddish brands. Moody's ratings reflect the risk of depending upon only two primary brands, Bare Escentuals and MD Formulations. The ratings also recognize that MD Beauty's past success has been positively impacted by the CEO's marketing expertise, as well as her ability and willingness to act as a spokesperson to drive purchases and customer loyalty through regular appearances on QVC, in infomercials and at other company sponsored events. Moody's believes her continued involvement will be a key factor in the company's performance. The ratings and stable outlook are supported by the Company's impressive growth momentum and success in establishing a leading position and strong customer loyalty in fast growing niche segments of the cosmetics and skin care categories, particularly with its mineral-based cosmetics brand (Bare Escentuals) and its first-to-market glycolic acid skin care brand (MD Formulations). Moody's recognizes that MD Beauty's products are well-positioned relative to the growing interest in natural personal care products, and its marketing campaigns have resonated with consumers, with QVC and infomercials driving consumer education and loyalty. In addition, they serve as profitable advertising vehicles to drive sales in other channels. Faddish risks are modestly offset by the consumable nature of its products, with strong repeat purchase activity and increased interest in automatic replenishment programs. Notwithstanding potential cannibalization, service and pricing pressures, MD Beauty's sales diversification strategy is sensible and recent hires possess relevant experience and talent to execute. Moody's expects that MD Beauty will continue to benefit from new store openings by wholesalers, Ulta and Sephora and from new retail opportunities with department stores such as Nordstrom's. Additional opportunities include further cross- selling its complementary brands and in growing international sales. Over the coming year, Moody's does not anticipate rating changes. However, Moody's could consider a positive outlook change if management successfully builds upon the recent operational performance to a degree that allows for rapid deleveraging. The establishment of a longer track record at current profitability levels, more diversified mix of products, brands and distributional channels, and sustained deleveraging over the long- term could result in a ratings upgrade. Conversely, negative rating actions could be possible through the realization of identified risks resulting in weakened profit levels and impaired debt reduction capability. The first-lien senior secured credit facilities are rated at the Senior Implied level due to their significant position in the pro forma debt structure and the fact that tangible asset support is not expected to fully cover borrowings in a distressed scenario. Moody's recognizes that the brands could provide intangible asset coverage, but that values are likely to trend with operating performance. Similarly, while Moody's recognizes the effective subordination of the second-lien facility, Moody's does not believe that the difference in recovery prospects for the two liens warrants more than a 1-notch differential, given the weak tangible asset base and the potential for significant enterprise value erosion in a distress scenario. Proceeds from a $15 million debt issuance by MD Beauty's parent will supplement the dividend to the sponsors Although the additional debt is not a contractual obligation of MDB, Moody's recognizes the effectively increased debt burden, given the parent's sole reliance on MDB to meet this rapidly accreting holding company obligation. However, the ratings also recognize important protections for MDB creditors including the modest size and PIK interest nature of the holdco debt; the long-dated maturity (beyond that of the rated facilities); and the expectation that the restricted payments provisions in the senior secured credit agreements and the terms of the subordination agreement will substantially prohibit MDB's ability to pay dividends to its parent prior to the full repayment of the senior secured facilities. MD Beauty, Inc. with headquarters in San Francisco, California, is a leading marketer of cosmetics and skin products, under the Bare Escentuals and MD Formulations brands. METRIS SECURED: Moody's Puts Ba2 Rating on $52 Mil. Secured Notes ----------------------------------------------------------------- Moody's Investors Service has assigned a Ba2 rating to the newly-created Class D Notes issued out of the existing issuance vehicle, Metris Secured Note Trust 2004-2 The complete rating actions is: * Issuer: Metris Secured Note Trust 2004-2 * $52,800,000 Floating Rate Secured Notes, Class D, rated Ba2 The Ba2 rating is based on the quality of the underlying pool of credit card receivables, the transaction's legal and structural protections, and the ability of Direct Merchants Credit Card Bank as originator of the credit card accounts and servicer of the receivables. The Class D Notes are subordinate to the previously issued Baa2- rated Class C Notes (f.k.a. "Secured Notes") as well as the Class A, Class M and Class B certificates issued out of the related Metris Master Trust. The legal and structural enhancements include early amortization triggers, subordination of 13.5% of excess collateral and subordinate rights to a spread account. The Class D Notes carry a One-Month LIBOR-based floating rate coupon. Unlike most other credit card asset-backed transactions, payment of interest on the Class D Notes is subordinate to the loss allocation for all of the more senior classes of notes, among other things, thereby increasing the risk that available cashflows may not be sufficient to pay interest on the Class D Notes. To mitigate this risk, a Class D Note Reserve Account has been established, initially funded at $9,088,200, which may be drawn upon to cover any shortfalls in available cashflows to meet future Class D coupon obligations. Furthermore, the structure requires that this reserve account be replenished from available cashflows, if any, on a monthly basis up to an amount deemed to be sufficient to cover a 30-month interest period. The Class D Notes have an expected principal payment date of October 20, 2006 and a legal maturity date of October 20, 2010. Moody's rating addresses the likelihood of interest payments being made when due and the return of principal by the legal maturity date, not the expected principal payment date. Direct Merchants Credit Card Bank, National Association -- DMCCB, the originator of the credit card accounts and servicer of the Metris Master Trust receivables, is a subsidiary of Metris Companies, Inc. Metris Companies is an information-based direct marketer of consumer credit products, fee-based services and extended service plans, primarily to moderate-income consumers with limited or higher risk credit histories. The outstanding long-term senior unsecured debt of MCI is rated Caa2. DMCCB has a Ba3 long-term deposit rating and a bank financial strength rating of D-. All the ratings carry a positive outlook and are currently on review for possible upgrade. A New Issue Report for the Metris Master Trust Series 2004-2 securities will be available at http://www.moodys.com/ MOHEGAN TRIBAL: S&P Rates Proposed $200M Sr. Unsec. Notes at BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to the Mohegan Tribal Gaming Authority's -- MTGA -- proposed $200 million senior unsecured notes due 2013. At the same time, Standard & Poor's assigned its 'B+' rating to MTGA's proposed $200 million senior subordinated notes due 2015. In addition, Standard & Poor's affirmed its ratings on MTGA, including its 'BB' corporate credit rating. The outlook is stable. Pro forma for these transactions, MTGA had approximately $1.4 billion in debt outstanding, including approximately $115 million of tax-exempt Tribal debt that is serviced via a priority distribution from casino cash flow, at Dec. 31, 2004. MTGA was formed to own and operate the Mohegan Sun casino. Net proceeds from these transactions will be used to repay amounts outstanding under its bank credit facility, $280 million of which related to the acquisition of the Pocono Downs racetrack. On Jan. 25, 2004, MTGA acquired the Pocono Downs racetrack from Penn National Gaming for $280 million. MTGA expects to spend up to $225 million to build-out the racetrack for the planned installation of up to 3,000 slot machines at the facility and pay a one-time fee to the state. "Cash flow generation from Pennsylvania somewhat offsets longer-term concerns with increased competition, however, given the size of the investment, we believe MTGA will be challenged to achieve a favorable return on its investment in the first year," said Standard & Poor's credit analyst Peggy Hwan. MOONLIGHT HOSPITALITY: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Debtor: Moonlight Hospitality, LLC dba Quality Inn & Suites fka Sunrise Hospitality, LLC 2401 Brick Church Park Nashville, Tennessee 37207 Bankruptcy Case No.: 05-01319 Type of Business: The Debtor operates an inn. Chapter 11 Petition Date: February 3, 2005 Court: Middle District of Tennessee (Nashville) Judge: George C. Paine Debtor's Counsel: Robert James Gonzales, Esq. Mendes & Gonzales PLLC 120 30th Avenue North Suite 1000 Nashville, TN 37203 Tel: 615-846-8000 Fax: 615-846-9000 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-largest creditors. MORTGAGE CAPITAL: S&P Places Low-B Ratings on Three Cert. Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on classes D, E, F, H, J, K, and L of Mortgage Capital Funding Inc.'s commercial mortgage pass-through certificates from series 1998-MC1. Concurrently, all other outstanding ratings are affirmed. The raised and affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. As of January 2005, the trust collateral consisted of 207 commercial mortgages with an outstanding balance of $1.027 billion, down 20.66% since issuance. To date, there have been nine realized losses totaling $19.12 million (1.48% of the initial pool balance). The master servicer, GMAC Commercial Mortgage Corp. -- GMACCM, reported full-year 2003 net cash flow -- NCF -- debt service coverage ratios -- DSCRs -- for 94.1% of the pool, including five loans totaling $25.1 million, or 2.69% of the pool, which have been defeased. Based on this information and excluding defeasance, Standard & Poor's calculated the weighted average DSCR for the pool at 1.40x, which is slightly slightly from 1.37x at issuance. The current weighted average DSCR for the top 10 loans, which comprises 26.7% of the pool, is 1.36x, compared to 1.32x at issuance. DSCRs for six of the top 10 loans have weakened since issuance. The third-, fourth-, and 10th-largest loans appear on the watchlist for lower DSCRs and decreases in occupancy. The third-largest loan, Montgomery Park, is secured by an office building in Portland, Oregon that has suffered a decline in occupancy to 72% as of December 2004 due to a softer office market. The fourth-largest loan is secured by a multifamily property in Buffalo Grove, Illinois. Property income has declined due to a soft rental market, and DSCR has fallen to 1.08x as of Sept. 30, 2004, from 1.22x at issuance. The 10th-largest loan, Town Square Shopping Center, is located in Roanoke, Virginia and is watchlisted due to a decrease in occupancy to 73% as of September 2004. The most recently reported DSCR, as of Sept. 30, 2004, improved to 1.22x from 1.0x year-end 2003. Property inspection reports provided by GMACCM for the top 10 loans noted all of the properties to be in at least good overall condition. Three loans totaling $21.56 million, or 2.1%, were reported as delinquent as of the January 2004 distribution. One loan for $5.4 million, 0.53%, is 30 days delinquent. One loan for $6.6 million, 0.64%, has matured and been transferred to the special servicer, ARCap Servicing, Inc. -- ARCap. ARCap expects a full payoff shortly of the matured loan. The other two delinquent loans are with ARCap, and are discussed below: -- The largest specially serviced asset, Shops at Sterling Pond I, is REO and has a current balance of $10.78 million and a total exposure of $10.95 million (1.05%, $38 per sq. ft.). It is composed of two single-tenant retail buildings totaling 283,000-sq.-ft. located in Sterling Heights, Michigan that were formerly occupied by a Kmart and a Builders Square, both of which are now vacant. A May 2004 appraisal valued both buildings as is at $11.2 million. ARCap is marketing the properties and has received expressions of interest on both buildings. -- King James Office Buildings has a balance of $5.3 million and a total exposure of $6.8 million (0.52%, $46 per sq. ft.) and is secured by two four-story suburban office buildings totaling 167,000 sq. ft. in Westlake, Ohio near Cleveland. Occupancy has fallen at both buildings but a receiver is in place. A Sept. 2004 appraisal valued both buildings as is at $7.88 million. ARCap is pursuing foreclosure. The servicer's watchlist includes 57 loans totaling $306.9 million, or 29.9%. The loans are on the watchlist due to low occupancies, DSCRs, or upcoming lease expirations, and were stressed accordingly by Standard & Poor's. The pool has geographic concentrations greater than 5% in: * California (13.9%), * Texas (12.0%), * Oregon (9.5%), * Florida (8.1%), * New York (6.3%), and * Illinois (5.3%). Property type concentrations greater than 5% include: * retail (33.0%), * multifamily (29.6%), * office (25.1%), and * lodging (6.4%). Standard & Poor's stressed various loans in the mortgage pool, paying closer attention to the specially serviced and watchlisted loans. The expected losses and resultant credit enhancement levels adequately support the raised and affirmed ratings. Ratings Raised Mortgage Capital Funding, Inc. Commercial Mortgage Pass-Thru Certs. Series 1998-MC1 Rating Class To From Credit Enhancement (%) ----- -- ---- ---------------------- D AAA AA+ 25.23 E AA+ A+ 18.93 F AA A 17.67 H BBB- BB+ 8.85 J BB+ BB 7.59 K BB BB- 6.33 L B+ B 3.18 Ratings Affirmed Mortgage Capital Funding, Inc. Commercial Mortgage Pass-Thru Certs. Series 1998-MC1 Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-2 AAA 38.47 B AAA 33.42 C AAA 26.49 X AAA N/A NDCHEALTH: Likely Default Prompts S&P to Junk Ratings ----------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate and senior secured credit ratings on NDC Health to 'CCC' from 'B-', and its subordinated debt rating from 'CCC' to 'CC'. The ratings remain on CreditWatch, with developing implications. "This action follows the company's announcement that it received notice from holders of its senior subordinated notes that its delay in filing its Form 10-Q for the quarter ended Nov. 26, 2004, constitutes a default under the notes," said Standard & Poor's credit analyst Lucy Patricola. This notice initiates a 60-day cure period, which will expire on March 21, 2005, at which point the bondholders can exercise their rights to declare the bonds in default, including accelerated payment. The company also announced that the scope of review that caused the initial filing delay has widened to other services within their Information Services unit. Any restatements resulting from the review would be non-cash in nature and reflect revenue recognition policies. The downgrade reflects heightened concerns regarding the filing delays because of the expanded scope of review and the default notice filed by holders of the subordinated notes. Standard & Poor's will monitor the company's progress in filing its statements, any further actions taken by its other creditors, and ongoing operating trends to determine the final impact on the rating. Should statements be filed during the cure period, without substantial restatements, and no further creditor actions are taken, the corporate and senior ratings could be raised back into the 'B' category. If the company is unable to file by the end of the cure period, the creditors could accelerate the debt. * * * NDCHealth Corporation (NYSE: NDC) has $200,000,000 of 10-1/2% Senior Subordinated Notes Due 2012 outstanding. Mary A. Bernard, Esq., at King & Spalding LLP, in New York, provided the company with legal advice in connection with an Exchange Offer involving the 10-1/2% Notes in 2003. In October 2004 NDCHealth Corporation identified certain practices regarding the exchange of physician software inventory held by the Company's value-added resellers that were inconsistent with Company policies. Following a thorough review and analysis, and after discussion with the Company's independent accountants, on January 4, 2005 the Audit Committee of the Board of Directors determined it is appropriate to restate prior-period results beginning with its fiscal year ended May 31, 2002 through the first quarter of fiscal year 2005 ended August 27, 2004. The restatement will also include other identified adjustments from prior periods. NDCHealth is delinquent in its SEC reporting. At August 27, 2004, Atlanta-based NDCHealth's balance sheet showed $792 million in assets and $327 million of positive shareholder equity. NDCHealth is a leading provider of healthcare claims transaction processing in terms of the number of electronic transactions processed and the number of pharmaceutical manufacturer customers and related value-added services for pharmacies, hospitals and physicians and a leading provider of market research information for pharmaceutical manufacturers based on the number of customers. NDC processed over 2.5 billion electronic healthcare transactions in fiscal 2002 and over 3 billion in fiscal 2003. The company provides information services to more than 100 pharmaceutical manufacturers in the U.S., the United Kingdom and Germany. NDC believes it is the only comprehensive provider of both transaction processing services and market research information in the healthcare industry. NOMURA ASSET: S&P Lifts Ratings on Class B-2 Certificates to BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on class B-2 of Nomura Asset Securities Corp.'s commercial mortgage pass-through certificates from series 1996-MDV, and affirmed its ratings on three other classes from the same transaction. The raised rating reflects the fact that 82% of the loan pool balance has now been defeased. Five of the nine remaining loans in this fixed-rate, large loan pool are fully defeased. Two other loans are partially defeased. The most recent defeasance was of the second largest loan in the pool, Marriott Residence Inn II pool (representing 20% of the total pool balance), which was fully defeased in November 2004. In early January 2005, the Shaner Flexible Note, with a balance of $24.4 million, was paid off. Combined with the payoff of the First Industrial pool loan in November 2003 and amortization of eight of the nine remaining loans, the pool balance has been reduced by 15% since issuance. The two loans that have been partially defeased include: -- The HGI loan pool loan, which represents 9% of the total loan pool. Four retail outlet centers originally secured this loan. The largest property, located in Kenosha, Wisconsin, was released through partial defeasance of the loan in August 2003. Net cash flow -- NCF -- for the full year 2003 for the three non-defeased properties has declined by 22% since issuance. As a result, the debt service coverage ratio -- DSCR -- has declined to 1.63x for the year ended Dec. 31, 2003 from 1.73x at issuance. This trend continued as DSCR for the first nine months of 2004 declined further to 1.42x. In addition, 68% of the leased space in the three centers is rolling before the loan's maturity in March 2006; and -- The AEW/Shaner Hotels loan, which represents 9% of the total loan pool. Thirty-five hotels located in 14 states initially secured this loan. Twenty-five of the properties with current allocated loan amounts totaling $35.9 million have since been defeased. NCF for the 10 non-defeased hotels for the year ended Dec. 31, 2003 has decreased by 54% since issuance. As a result, DSCR has declined to 1.71x for the same period from 1.91x at issuance. The two non-defeased loans include: -- The Buena Vista Palace property loan, which represents 4% of the total loan pool. This loan is secured by a ground leasehold interest in the Buena Vista Palace Hotel (now known as the Wyndham Palace Hotel), a 1,014-room convention-type hotel just outside Disney World in Orlando, Florida. The property has rebounded nicely since 2001 to the point where NCF for the year ended Dec. 31, 2003, was 24% above its level at issuance, and DSCR increased to 2.26x from 1.42x for the same period. The positive trend has continued, as DSCR was 2.73x for the first nine months of 2004; and -- The InnKeepers pool loan, which represents 4% of the total loan pool. Eight Marriott Residence Inns secure the loan, with a current balance of $25.4 million. While NCF was 25% below its level at issuance for the year ended Dec. 31, 2003, annualized NCF for the first nine months of 2004 was 32% above 2003 full year results. As a result, DSCR, while still down from 3.03x at issuance, has rebounded to 2.40x for the first nine months of 2004 from 2.14x for full year 2003. The overall performance of this property pool has been impacted by the decline in performance of the three properties located in the Silicon Valley. The overall operating performance of the non-defeased portion of the loan pool has declined since issuance. NCF for the year ended Dec. 31, 2003, for the non-defeased portion has decreased by 16% since issuance. Additionally, the remaining non-defeased portion of the loan pool exhibits a heavy concentration in lodging, with this property type representing 73% of the remaining non-defeased loan balance. Of the nine remaining loans, six loans have an effective maturity in March 2006. The other three mature in 2007, 2009, and 2011, respectively. Rating Raised Nomura Asset Securities Corp. Commercial Mortgage Pass-Thru Certs. Series 1996-MDV Rating Class To From Credit Support ----- -- ---- -------------- B-2 BB+ B 0.0% Ratings Affirmed Nomura Asset Securities Corp. Commercial Mortgage Pass-Thru Certs. Series 1996-MDV Class Rating Credit Support ----- ------ -------------- A-1A AAA 39.9% A-1B AAA 39.9% A-1C AAA 39.9% NORTHWEST AIRLINES: Reports 76.8% January 2005 Load Factor ---------------------------------------------------------- Northwest Airlines (Nasdaq: NWAC) disclosed a systemwide January load factor of 76.8 percent, 3.7 points above January 2004. Northwest flew 5.82 billion revenue passenger miles (RPMs) and 7.58 billion available seat miles (ASMs) in January 2005, a traffic increase of 11 percent and a capacity increase of 5.7 percent versus January 2004. NORTHWEST AIRLINES TRAFFIC SUMMARY January 2005 January 2004 Change Revenue Passenger Miles (000s): System 5,818,635 5,242,302 11.0% Domestic 3,232,796 2,968,906 8.9% International 2,585,839 2,273,396 13.7% Pacific 1,723,284 1,563,132 10.2% Atlantic 862,555 710,264 21.4% Available Seat Miles (000s): System 7,580,596 7,173,096 5.7% Domestic 4,505,746 4,477,147 0.6% International 3,074,850 2,695,949 14.1% Pacific 1,999,507 1,785,012 12.0% Atlantic 1,075,343 910,937 18.0% Load Factor: System 76.8% 73.1% 3.7 pts Domestic 71.7% 66.3% 5.4 pts International 84.1% 84.3% (0.2) pts Pacific 86.2% 87.6% (1.4) pts Atlantic 80.2% 78.0% 2.2 pts Enplaned Passengers 4,171,174 3,794,594 9.9% About the Company Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. Northwest and its travel partners serve more than 900 cities in more than 160 countries on six continents. At Dec. 31, 2004, Northwest Airlines' balance sheet showed a $3.09 billion stockholders' deficit, compared to a $2.01 billion deficit at Dec. 31, 2003. NTELOS INC: Moody's Puts B2 Rating on $400MM Sr. Sec. Term Loan --------------------------------------------------------------- Moody's Investors Service assigned a B2 senior implied rating to NTELOS, Inc. Moody's also assigned B2 ratings to the and $35 million first lien senior secured revolving credit facility, and a B3 rating to the $225 million of second lien senior secured term loan as outlined below. The ratings outlook is stable. The ratings assigned are: * Senior Implied Rating -- B2 * $400 million First Lien Senior Secured Term Loan due 2011 -- B2 * $35 million First Lien Senior Secured Revolving Credit Facility due 2010 -- B2 * $225 million Second Lien Secured Term Loan due 2012 -- B3 * Issuer Rating -- Caa1 The B2 senior implied rating reflects NTELOS Inc.'s modest expected free cash flow generating capacity over our two year rating horizon, along with elevated leverage pro-forma for the proposed debt issuance. The ratings are supported by the company's stable high EBITDA margins for its ILEC operations along with its opportunity to realize EBITDA growth by increasing its wireless subscriber base and growing its wireless wholesale revenues. The ratings are constrained by the effects of NTELOS's increased post-recapitalization debt, which include high leverage, low interest coverage, and limited free cash flow. The proposed debt issuance is part of a recapitalization and sale transaction whereby the debt proceeds will be used to repurchase up to 76% of existing equity for an amount not to exceed $440 million and refinance existing debt. Following the refinancing and self-tender offer, an affiliate of Quadrangle Capital Partners L.P. and Citigroup Venture Capital Equity Partners, L.P. will purchase up to 24.9% of the post- recapitalization equity of the Company. Subsequent to receipt of regulatory approvals, the Equity Sponsors will acquire the remainder of the company's equity. The closings of the refinancing and initial stock repurchase by the Company are not conditioned on the sale of any equity to the Equity Sponsors. NTELOS Inc. is an integrated communications provider serving businesses, telecom carriers and residential customers predominantly in Virginia and West Virginia. In addition to the company's wireless network, its wireline operations consist of an ILEC, CLEC, ISP, as well as a long-haul backbone. The Company entered and emerged from bankruptcy in 2003 primarily due to its inability to access its revolver to fund negative cash flows resulting from the slower-than-expected realization of wireless profits. Subsequent to emerging from bankruptcy, NTELOS has experienced meaningful improvements in EBITDA and free cash flow by increasing revenue and operating margins. The Company has been able to transition a significant amount of prepay subscribers acquired in the 2000 PCS PrimeCo acquisition to its postpay products resulting in decreased churn. While we believe NTELOS Inc.'s targeted regional and hybrid calling plans will continue to drive subscriber growth, the Company will be challenged to also increase ARPU given tough competition in its service territory. However, NTELOS's multi-year wireless wholesale agreement with Sprint, with its favorable fixed rate provisions, should also support revenue growth. NTELOS Inc. operates two incumbent local exchange carriers in rural areas in Virginia. Like all local exchange carriers, the company has been losing local access lines in its incumbent territory. We believe this erosion is likely to stabilize given the company's dominant market position, with essentially no voice competition, as well as its focus on superior customer service. NTELOS's facilities-based CLEC strategy, free of significant regulatory risk, is likely to support its slight wireline revenue and EBITDA growth. The 1st lien debt comprises about two-thirds of total debt pro-forma for the refinancing, supporting the B2 rating equivalent to the senior implied rating. The 1st lien financing, issued at the parent level, benefits from good asset coverage provided by the company's spectrum holdings and ILEC access lines along with upstream guarantees provided by all of the Company's direct and indirect subsidiaries, with the exception of NTELOS Inc.'s two ILEC subsidiaries. However, capital stock of the ILEC subsidiaries has been pledged as security in addition to the assets held by guarantor entities. The rating further benefits from assurances that no other party will be able to perfect a lien on the Company's property and assets, with the exception of the 2nd lien debt holders. The B3 rating on the 2nd lien term loan reflects is effective subordination to the 1st lien claims, moderated by our belief that the company's assets should provide adequate coverage to the 2nd lien creditors in a distress scenario. The B3 rating on the 2nd lien term loan also reflects the benefits from the anti-layering restrictions of the credit agreement that restrict the ability of future debt issuances from obtaining a priority position. The Caa1 senior unsecured issuer rating reflects Moody's view that a prospective future unsecured creditor would not benefit from asset coverage in a distress scenario. Our ratings are predicated on the ability of NTELOS to generate meaningful wireless subscriber growth, ranging from 6-8%, which combined with growing wholesale revenues should yield growing wireless EBITDA, while maintaining ILEC EBITDA margins in the mid to high sixty percent range, in-line with its RLEC peers, generating positive free cash flow sufficient to service its minimal near-term debt amortization requirements, $4 million each in years 2005-2009, plus an excess free cash flow sweep beginning in 2006, while providing for increased financial flexibility. The stable outlook reflects the low business risk associated with the company's ILEC and facilities based CLEC strategy, along with an effective marketing strategy for its wireless segment. Despite access line erosion and wireless competition, we believe the company will generate positive cash flow in 2006, with more meaningful FCF in 2007. The ratings would be negatively affected if wireless subscriber growth lagged behind company projections or if the Equity Sponsors pursue an acquisitive strategy or otherwise divert cash flow from debt repayment. The ratings could be positively affected if free cash flow growth accelerates and/or debt reduces more rapidly to where free cash flow raises above 5% of debt. Based in Waynseboro, Virginia, NTELOS Inc., is a regional communications provider in Virginia and West Virginia with LTM revenues of over $300 million. OMNOVA SOLUTIONS: Transferring Distribution Rights to Three Brands ------------------------------------------------------------------ In a move to further strengthen its leading position in the commercial wallcovering market, OMNOVA Solutions Inc. (NYSE: OMN) is transferring distribution responsibilities for three of its commercial wallcovering brands: GENON(R), MURASPEC WALLS(TM) and GUARD(R). As part of this strategic realignment, some distribution relationships with these three brands will change and some will remain as currently configured. Changes include: -- MDC: Will distribute GENON and MURASPEC WALLS wallcoverings in the the United States, except in the upper Midwest. Order status and new orders, call 800-717-5651 or 800-621-4006. -- LBI Boyd: OMNOVA Solutions has reached an agreement in principle with LBI to distribute the GUARD wallcovering brand in the United States. Order status and new orders, call 800-472-7891. Continuing under the current arrangement: -- Hirshfield's: Will continue to distribute GENON wallcoverings in the states of North Dakota, South Dakota, Nebraska, Kansas, Missouri, Iowa, Minnesota and Eau Claire, Wisconsin. Order status and new orders, call 800-432-3699. -- Levey: Will continue to distribute GENON, MURASPEC WALLS and GUARD wallcoverings in Canada. Order status and new orders, call 800-320-4614 (Canada) or 800-588-3990 (U.S.). "We are thrilled to be expanding our relationship with MDC, who has done a terrific job as distributor for OMNOVA's BOLTA(R) brand commercial wallcovering and MEMERASE(R) flexible whiteboards," said Roger Oates, OMNOVA Solutions' Product General Manager for Commercial Wallcovering - Americas. "We are equally pleased that Hirshfield's will continue their excellent job of representing GENON wallcoverings in the upper Midwest states where they have the leading market position. Likewise, we are excited that Levey and LBI Boyd are now key partners in our extensive industry- leading distributor line-up for OMNOVA products." In connection with this strategic realignment, OMNOVA will wind down operations at its Muraspec N.A. commercial wallcovering distribution business in Randolph, Massachusetts over a period of about 30 days. Muraspec N.A. employs about 63 people. "We regret the impact this decision will have on the employees of Muraspec N.A.," Mr. Oates said. "But we believe focusing on strong, independent distribution will be the most effective way to maximize exposure of our brands in the marketplace." About the Company OMNOVA Solutions Inc. is a technology-based company with 2004 sales of $746 million and 2,000 employees worldwide. OMNOVA is an innovator of emulsion polymers and specialty chemicals, decorative and functional surfaces, and single-ply roofing systems for a variety of commercial, industrial and residential end uses. * * * As reported in the Troubled Company Reporter on Jan. 31, 2005, Fitch Ratings has affirmed OMNOVA Solutions Inc.'s (Omnova) credit ratings: -- $165 million senior secured notes 'B+'; -- $100 million senior secured credit facility 'BB-'; -- Rating Outlook Negative. Omnova's continued weak financial performance and small company size support the ratings affirmation. The company has been able to withstand the pressure from rapidly rising raw material costs, including costs for styrene, butadiene and PVC resin, by raising product prices. However, these cost increases have not yet been fully offset, so operating margins remain weak. Omnova is experiencing some delay in fully recouping raw material cost increases in part due to its position as a downstream chemical producer and converter. For the trailing 12 months ended Nov. 30, 2004, EBITDA-to-interest incurred was 1.3 times versus 1.9x at year-end 2003. Total debt-to-EBITDA was to 7x for year-end 2004 compared to 6.5x at year-end 2003. The Negative Rating Outlook reflects the current operating weakness and the liquidity impact of the December 2004 credit facility amendment. The December 2004 credit facility This amendment eliminated the fixed charge coverage financial covenant and increased the revolver's minimum availability to $20 million. As a result, revolver borrowing availability has been reduced during a period of weak operating cash flow generation. Fitch expects that Omnova's operating margins will improve in 2005 as product price increases outpace raw material cost increases. Moreover, Fitch expects demand to remain good in the performance chemicals and building products segments; the timing for improvement in the decorative products segment remains uncertain. PARKER DRILLING: Names Robert McKee to Board of Directors --------------------------------------------------------- Parker Drilling Company (NYSE: PKD) has appointed Robert E. (Rob) McKee to the Board of Directors. The appointment of Mr. McKee, recently-retired executive vice president, exploration and production for ConocoPhillips Inc., became effective on Feb. 3, 2005. Mr. McKee joined Conoco in 1967 and served in positions including engineer, manager and vice president, administration. In 1982 and 1983, Mr. McKee attended the Sloan Business School at Massachusetts Institute of Technology (MIT) as a Sloan Fellow. In 1992 he was appointed executive vice president, exploration, production and administration, and a senior vice president of DuPont, which was Conoco's parent company at the time. "Rob's 38 years of experience in the oil and gas business and his outstanding record of performance with Conoco, where he led their overall upstream operations to excellence, and in other areas such as strategic planning, business growth, technology development, information systems, environment, safety and continuous improvement efforts make him an excellent addition to our Board," said Robert L. Parker, Jr., president and chief executive officer. "His expertise will be extremely valuable as we continue to work toward and plan for future growth." Mr. McKee is past member of the board of directors of the American Petroleum Institute, the National US-Arab Chamber of Commerce, the Society of Petroleum Engineers, and the US-Russian Business Council. He currently serves on the Institute of International Education Board (Southern Region), the advisory committee of the University of Texas Engineering Department, the Colorado School of Mines Advisory Board, and the Board of Questar Corporation. He is the Chairman of Enventure, a joint venture company of Shell and Halliburton. About the Company Parker Drilling -- http://www.parkerdrilling.com/-- is a Houston- based, global energy company specializing in offshore drilling and workover services in the Gulf of Mexico and international land and offshore markets. Parker also owns Quail Tools, a provider of premium industry rental tools. Parker Drilling has 57 marketed rigs and employs approximately 2900 people worldwide. * * * Moody's Rating Services and Standard & Poor's assigned its single-B ratings to Parker Drilling's 9-1/2% senior notes due 2013 last year. As reported in the Troubled Company Reporter on August 19, 2004, Moody's assigned a B2 rating to Parker Drilling's pending $150 million of senior unsecured floating rate 6 year notes, and affirmed its existing B2 senior unsecured note and B1 secured bank debt ratings. PARMALAT: Bondi Inks Stipulation Allowing Citibank to Sue Units --------------------------------------------------------------- Citibank, N.A., and Citibank, N.A. International Banking Facility have asked the U.S. Bankruptcy Court for the Southern District of New York to vacate the Preliminary Injunction entered in the Section 304 proceeding of Parmalat Finanziaria SpA and its affiliates. Citibank intends to commence proceedings against Parmalat Paraguay S.A. and Parmalat Del Ecuador S.A., non-debtor units of Finanziaria. Parmalat Paraguay has defaulted on various promissory note obligations to Citibank totaling approximately $4.8 million. By letter dated March 17, 2004, Citibank declared the entire unpaid principal amount of these obligations, together with all accrued and unpaid interest and other amounts payable, to be due and payable. Citibank wants to initiate proceedings against Parmalat Paraguay in the Commercial Court of the City of Asuncion, Paraguay, to collect on Parmalat Paraguay's obligations. If Citibank succeeds in obtaining a judgment, Parmalat Paraguay's assets will be impressed with a lien in Citibank's favor. If Parmalat Paraguay fails to satisfy that judgment, the Paraguay Court may order that its assets be sold at auction to satisfy that judgment. Parmalat Ecuador also has defaulted on various promissory note obligations to Citibank aggregating approximately $6.05 million. On January 21, 2004, Citibank declared the entire unpaid principal amount of the obligations, together with all accrued and unpaid interest and other amounts payable under it, to be due and payable. These amounts have not been paid. Citibank wants to commence proceedings against Parmalat Ecuador in the Civil Court of Quito, Ecuador, to collect on the obligations. Citibank intends to seek a "juicio de providencia preventives" -- a pre-judgment attachment of the assets of Parmalat Ecuador under the Ecuador Civil Procedure Code. Within 15 days of the granting of the relief, Citibank would be required to -- and intends to -- commence in the Ecuador Court a "juicio verbal sumario" -- an action to collect the debt. If Citibank succeeds in obtaining judgment, it would seek payment from Parmalat Ecuador. If the judgment is not satisfied, the Ecuador Court may order that Parmalat Ecuador's assets be sold at auction. While neither Parmalat Paraguay nor Parmalat Ecuador is a debtor in any insolvency proceeding, Citibank has argued that the Preliminary Injunction on its face appears to bar commencement of the proceedings Citibank wants to initiate against them. Absent Preliminary Injunction, Citibank would not be stayed under Italian law or otherwise from commencing proceedings against Parmalat Paraguay and Parmalat Ecuador. The Preliminary Injunction, as currently in effect, provides Parmalat SpA and its affiliates with more relief with respect to Parmalat Paraguay and Parmalat Ecuador than they are entitled to under Italian law. Citibank also asserted that the Preliminary Injunction operates, inappropriately, as an anti-foreign suit injunction against it. The Preliminary Injunction unfairly discriminates against creditors that are subject to the jurisdiction of the Court, because similarly situated creditors not subject to the Court's jurisdiction are free to take action against Parmalat Paraguay and Parmalat Ecuador outside of the United States. This discrimination against U.S. creditors contravenes the purpose and policies underlying Section 304 of the Bankruptcy Code, including the policy of equal treatment of all creditors. The Foreign Debtors have admitted that it is not their intention to include affiliated entities that are conducting business outside of the Italian Proceedings within the scope of the Preliminary Injunction. The Foreign Debtors disclosed not only that non-debtor entities like Parmalat Paraguay and Parmalat Ecuador are not intended to be covered by the Preliminary Injunction, but also that under Italian law those non-debtor entities are not entitled to the benefit of any stay. Subsequently, in a Court-approved Stipulation, Citibank and Dr. Bondi agree that: (1) At 5:00 p.m. (New York time) on March 31, 2005, the Preliminary Injunction Order will automatically, and without the necessity of any other or further notice to any party, be deemed modified to permit Citibank to take any action of any kind or nature to enforce its rights against Parmalat Paraguay, Parmalat Ecuador or otherwise with respect to their obligations. The period between the execution of the Stipulation by the parties and March 31, 2005, is the "Standstill Period," which may be extended for an additional period of time upon a written agreement of all parties. (2) During the Standstill Period, the Foreign Debtors will provide Citibank with, regarding Parmalat Paraguay and Parmalat Ecuador: * access to company management; * access to their Paraguayan and Ecuadorian advisers; * access to their books and records; * copies of any of these documents: -- forecasts; -- budgets; -- restructuring plans; -- term sheets relating to a sale or other disposition of the assets; -- purchase and sale agreements; and -- correspondence of any kind or nature relating in any way to a sale or other disposition of the assets or the restructuring of the indebtedness; and (3) During the Standstill Period, the Foreign Debtors will not sell, transfer, encumber or incur new debt on any of the assets or shares of any of the Parmalat Paraguay Entities or the Parmalat Ecuador Entities without Citibank's prior written consent, which will not be unreasonably withheld. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. (Parmalat Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATELLITE: Wants to Establish Uniform Balloting Procedures ------------------------------------------------------------------ Pegasus Satellite Television, Inc., asks Judge Haines to approve a set of uniform noticing, balloting, voting and tabulation procedures to be used in connection with asking creditors to vote to accept its Chapter 11 plan of reorganization. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, reminds Judge Haines that the Company filed its Chapter 11 plan on January 7, 2005, and a hearing to consider the adequacy of the Company's Disclosure Statement explaining that plan is scheduled for February 9, 2005, at 11:00 a.m. in Portland. The Debtors ask the Court to establish a Voting Record Date -- a date that will separate creditors who can vote from creditors who can't. Rule 3017(d) of the Federal Rules of Bankruptcy Procedure, Mr. Keach relates, provides that, for the purposes of vote solicitation, "creditors and equity security holders include holders of stock, bonds, debentures, notes and other securities of record on the date the order approving the disclosure statement is entered or another date fixed by the court, for cause, after notice and a hearing." Bankruptcy Rule 3018(a) contains a similar provision regarding determination of the record date for voting purposes. Claims in the Debtors' cases may have been traded and may continue to be traded. The Debtors ask that February 9, 2005, be fixed as the Voting Record Date. The Debtors propose to solicit votes from holders of Class 3 Unsecured Claims. These creditors are impaired and entitled to vote to accept or reject the plan. The Debtors don't plan to ask creditors holding Secured Claims, Priority Claims, Tax Claims or other unimpaired creditors for their votes because they will be paid in full and presumed to accept the Plan. The Debtors won't ask holders of Class 4 Subordinated Claims and Class 5 Shareholders to vote either because these stakeholders are out of the money and deemed to reject the Plan. The Trumbull Group, LLC, the Debtors' official balloting agent, will mail copies of the Plan, the Disclosure Statement, customized ballots, and solicitation letters and notice of the Confirmation Hearing to creditors entitled to vote. The Debtors anticipate that Trumbull will mail Solicitation Packages out by February 19, 2005. The Debtors propose a special set of voting procedures for soliciting votes from the Senior Noteholders. The Debtors will deliver a truckload of solicitation packages to The Depository Trust Company for distribution to Brokers and other Record Holders for redistribution to their customers, which are, in turn, the beneficial owners of the Senior Notes. Mr. Keach tells the Court that the Debtors would mail a notice to unimpaired creditors advising them that a plan was filed, a disclosure statement was approved, and that impaired creditors' votes are being counted. That notice will also advise the unimpaired creditors of the date and time of the Confirmation Hearing and the deadline and procedures for filing confirmation objections. The Debtors will post copies of the Plan and Disclosure Statement on their Web site at http://www.pgtv.com/and notice will be published in The Wall Street Journal, The New York Times and USA Today. The Debtors want all ballots returned to Trumbull by March 17, 2005, at 4:00 p.m. (Eastern Standard Time) in order to be counted. If any holder of a contingent, unliquidated or disputed claim wants to vote on the Plan, the Debtors propose that motions for temporary allowance of a claim for voting purposes be filed by February 25, 2005. In the Tabulation Process, the Debtors ask the Court to approve these rules and standards: a. Any Ballot that is properly completed, executed, and timely returned to the Balloting Agent, but does not indicate an acceptance or rejection of the Plan, or indicates both an acceptance and rejection of the Plan, will not be counted. b. Any Ballot that is returned to the Balloting Agent indicating acceptance or rejection of the Plan, but that is unsigned or does not contain an original signature, will not be counted. c. Any Ballot postmarked prior to the deadline for submission of Ballots, but received afterward, will not be counted, unless otherwise ordered by the Bankruptcy Court. d. Whenever a Holder of a Claim submits more than one Ballot voting the same Claim prior to the deadline for receipt of Ballots, except as otherwise directed by the Bankruptcy Court, the last such properly completed and executed Ballot received prior to the Voting Deadline will be deemed to reflect the voter's intent and thus to supersede any prior Ballots. e. For purposes of determining under Section 1126(c) of the Bankruptcy Code whether one-half in number of Claims in Each Class has accepted the Plan, separate Claims held by a single creditor in a particular Class will be aggregated as if the creditor held one Claim in that Class, and the votes related to that Claims will be treated as a single vote to accept or reject the Plan. f. A Holder of a Claim that is entitled to vote must vote all of its Claims within a particular Class either to accept or reject the Plan and may not split its vote. Accordingly, a Ballot with respect to a Claim (or multiple Ballots with respect to separate Claims within a single Class) that partially rejects and partially accepts the Plan, or that indicates both a vote for and against the Plan, will not be counted. g. If a creditor simultaneously casts inconsistent duplicate Ballots, with respect to the same Claim, those Ballots will not be counted. h. Each creditor will be deemed to have voted the full amount of its Claim. i. Any Ballot received by the Balloting Agent by telephone, fax, e-mail or other electronic communication will not be counted. j. Unless otherwise ordered by the Bankruptcy Court, questions as to the validity, form, eligibility (including time of receipt), acceptance and revocation or withdrawal of Ballots will be determined by the Balloting Agent and the Debtors (with the consent of the Committee, not to be unreasonably withheld) in their discretion, which determination will be final and binding. The Debtors further propose that four types of Ballots not be counted or considered for any purpose in determining whether the Plan has been accepted or rejected: (a) any Ballot received after the Voting Deadline, unless the Debtors (with the consent of the Official Committee of Unsecured Creditors, not to be unreasonably withheld) have granted an extension of the Voting Deadline with respect to such Ballot in writing; (b) any Ballot that is illegible or contains insufficient information to permit the identification of the claimant; (c) any Ballot cast by a person or entity that does not hold a Claim in the Voting Class; and (d) any Ballot cast for a Claim scheduled as unliquidated, contingent, or disputed for which no proof of claim was timely filed or deemed timely filed. The Debtors ask the Court to put its stamp of approval on customized ballot forms Trumbull's created for use in Pegasus' cases. A hearing on this matter is scheduled for 11:00 a.m. on February 9, 2005, in Portland. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) PMA CAPITAL: S&P Upgrades Credit & Debt Ratings to B from CC ------------------------------------------------------------ Standard & Poor's Ratings Services raised its counterparty credit and senior debt ratings on PMA Capital Corp. -- PMACC -- to 'B' from 'CC' and removed these ratings from CreditWatch, where they were placed on June 29, 2004. The outlook is stable. "These rating actions are based on significant improvement in PMACC's financial flexibility in 2004 and strong capital adequacy at the group's main workers' compensation operating subsidiaries," said Standard & Poor's credit analyst Laline Carvalho. Partially offsetting these factors is the group's damaged franchise, weak operating performance at its workers' compensation subsidiaries, poor (albeit improving) fixed-charge coverage, and negative operating cash flows. "Although uncertainty also remains with regards to the reserve adequacy of PMACC's run-off operations, this factor has been partially mitigated by the purchase in 2004 of reserve development cover protecting these operations," Ms. Carvalho added. Operating units Pennsylvania Manufactureres Assoc. Insurance Co., Pennsylvania Manufacturers Indemnity Co., and Manufacturers Alliance Insurance Co.'s -- collectively, PMAIG -- combined ratio is expected to remain at 104%-106% in the next two years, reflecting declining market conditions. PMAIG's capital adequacy is expected to remain strong but decline in the next two to four years, in anticipation of material dividends expected to be paid to the holding company. Fixed-charge coverage is expected to remain weak in the medium term in the 1x-2x range, reflective of the reduced size of PMACC's ongoing operations as well as expected weak earnings at PMAIG over the medium term. Assuming no dividend restrictions are imposed on PMAIG, Standard & Poor's believes the holding company should be able to build enough cash to meet interest payments and repay the convertible debentures in 2009; however, PMACC's ability to fully service debt obligations beyond 2009 will remain highly dependent on improvements in PMAIG's operating performance, any further regulatory restrictions on dividend payments, and the group's ability to regain access to the capital markets. Given the substantial franchise damage, Standard & Poor's believes PMACC will not have the ability to fully tap the financial markets, at least in the medium term. PRIMUS TELECOM: Moody's Puts B3 Rating on $100M Sr. Sec. Term Loan ------------------------------------------------------------------ Moody's Investors Service has assigned a B3 senior secured bank debt rating to Primus Telecommunications Holdings Inc.'s, a subsidiary of Primus Telecommunications Group Inc., $100 million senior secured term loan. Additionally, Moody's has affirmed the Company's B3 senior implied rating and all other ratings at PTGI and PTHI. Moody's assigned rating is: -- Primus Telecommunications Holdings * $100 million Senior Secured Term Loan maturing 2011 - B3 Moody's affirmed ratings are: -- Primus Telecommunications Group * Senior Implied - B3 * 12.75% Global Senior Notes due 2009 - Caa2 * 5.75% Convertible Subordinated Debentures due 2007 - Caa3 * Issuer Rating - Caa2 -- Primus Telecommunications Holdings * 8.0% Senior Notes due 2014 - B3 The outlook is stable. The ratings reflect relatively recent stability in the Company's top line performance, declining net leverage, as well as its past success in raising equity and debt funding. While revenues for the 9 months ended Q3'04 increased nearly 7% year-over-year, the increase is effectively attributable to positive currency fluctuations. Nevertheless, the ratings continue to reflect Primus' still relatively high and increasing pro forma total leverage (3.6x TTM as of Q3'04, 4.2x pro forma for the proposed transaction), thin (and declining) operating margins (10.9% EBITDA margin for the 9 months ended Q3'04, down 1% YoY) and competitive pressures from better capitalized incumbent operators. While the Company is currently undertaking various domestic and international growth initiatives, Primus' core business is comprised of commoditized sectors within the telecommunications business - namely, the provisioning of domestic and international voice, data, and dial-up Internet services to SMEs and residential customers. The Company's low margins suggest such commoditization. Despite continued declines within the Company's core businesses (e.g. international and domestic long distance, and dial-up Internet), the stable rating outlook reflects Moody's view that growth initiatives (e.g. DSL, cellular resale, VoIP, local and service bundling) are strategically sound and mitigate top line, core business deterioration going forward. Should new initiative revenue growth be materially slower than expected over the next several quarters, Moody's could change the outlook to negative. If the Company were to meet or exceed expectations with respect to revenue growth (e.g. greater than 5% per year), EBITDA margins (i.e. greater than 15%), or total leverage (e.g. less than 3.5x), ratings could improve over time. However, Moody's believes that the company is highly dependent on the success of its new initiatives in order to maintain and grow its existing revenue base and improve currently nominal margins (less than 11% EBITDA margin for the 9 months ended Q3'04). Should several of its larger initiatives (e.g. Lingo, the company's U.S. VoIP service) materially fail to meet expectations (i.e. slower sales growth, lower margins); the Company's ratings could come under pressure. Given the preponderance of international operations and revenues, Primus is also exposed to currency fluctuations. While Primus has benefited from such fluctuations as of late, particularly with respect to the Australian dollar and the Euro versus the U.S. dollar, the company remains exposed given that its debt is largely U.S. dollar denominated. Primus Telecommunications Group and Primus Telecommunications Holdings' domestic subsidiaries will guarantee the term loan (with certain exceptions including public or private offerings of stock in a legal entity relating to the Lingo brand name). Moody's understands that the term loan will be secured by a perfected first priority lien on Primus Telecommunications Holdings' assets and the assets of Primus' domestic subsidiaries. Additionally, the term loan is secured by a pledge of stock of the aforementioned domestic subsidiaries and 65% of the voting stock of foreign subsidiaries directly owned by Primus Telecommunications Holdings or it's domestic subsidiaries. The senior secured term loan rating is not notched higher than the B3 senior implied rating in spite of the pledge of domestic assets and foreign voting stock. The $100 million senior secured term loan, while being structurally subordinated to the subsidiary obligations, benefits from an upstream guarantee from only the company's domestic subsidiaries. These subsidiaries account for 18% of the company's revenues and 22% of total assets, respectively, as of Q3'04. Primus Telecommunications Holdings's ratings do recognize the seniority of the debt at this entity to approximately $282 million in Primus Telecommunications Group debt. However, the existing $235 million of senior unsecured notes are also structurally subordinated to the company's subsidiary obligations, mostly trade payables, which effectively rank senior to these notes given the absence of upstream subsidiary guarantees. This is substantially mitigated by intercompany debt obligations at the foreign operating subsidiaries, which are security for the term loan. Moody's believes Primus is susceptible to competitive pressures from facilities-based, better-capitalized telecom providers since its network is comprised more from leased components than fixed assets. In addition, Primus generates a substantial amount of prepaid revenues, which can be more volatile given their greater susceptibility to competitive pricing initiatives. Moody's recognizes, however, that the company's geographic and end- customer diversification mitigates some of this risk. Nearer term, Moody's believes that execution risk will increase as the company undertakes to realign its product offerings within the marketplace. Additionally, the company's geographic diversity (North America, Europe and Asia-Pacific comprise 37%, 33% and 30% of revenues, respectively) mitigates some of the heightened business risk by reducing the overall volatility of Primus' various cash flow streams. At the end of September 2004, Primus' $150 million in cash (pro forma for the note issuance) should be sufficient to fund the company's expected interest expense, capex and an expected acceleration of new growth initiatives before the company begins to see any significant operating results from its new growth opportunities. Moody's anticipates that in 2005, EBITDA will decline significantly year-over-year reflecting the expected higher SG&A costs associated with the acceleration of the new growth opportunities (e.g. DSL, VoIP). As a result, Moody's expects free cash flow may be negative for 2005, which will effectively be a transition year for the company. Moody's acknowledges that over the past several years, Primus Telecommunications has raised new funding from both debt and equity issuances. Proceeds have been largely used to retire and refinance existing debt, and this has allayed Moody's earlier concerns regarding near-term liquidity and amortization pressure. Moody's notes that Primus cannot access additional bank facilities under the current indenture to provide for additional external liquidity should cash reserves and operating cash flow fall significantly short of current expectations. In addition, Moody's expects that the company may use at least some portion of the proceeds from the proposed term loan to opportunistically repurchase outstanding debt, thereby further reducing nearer term debt amortizations. Currently, Primus has no material debt amortizations until 2007. Moody's notes that the company's total domestic assets of $163 million cover the senior secured term loan 1.6x without giving any consideration to the equity value of 65% of the voting stock of foreign subsidiaries that are also part of the security package. Primus Telecommunications, a global facilities-based telecommunications service provider with operations in the USA, Canada, Australia and Europe, recorded sales of approximately $1.35 billion for the last twelve months ended September 30, 2004. The company is headquartered in McLean, Virginia. RADIO ONE: S&P Rates Planned $200 Million Senior Sub. Notes at B- ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Radio One Inc., including the 'B+' corporate credit rating, on CreditWatch with positive implications. At the same time, Standard & Poor's assigned its 'B-' rating to the company's proposed $200 million senior subordinated notes due 2015 and placed the rating on CreditWatch with positive implications. Proceeds from the proposed transaction are expected to be used to help fund redemption of the company's 6.5% convertible preferred securities. Pro forma for the transaction, total debt was approximately $808 million at Sept. 30, 2004. "The CreditWatch listing acknowledges that the company's credit profile has improved and that consideration of a one-notch upgrade, to the 'BB-' rating level, is warranted," said Standard & Poor's credit analyst Alyse Michaelson Kelly. Standard & Poor's expects that leverage could be maintained at a level appropriate for a 'BB-' rating while the company pursues its growth initiatives. Pro forma leverage is about 5.6x, compared with total debt, including debt-like preferred stock, to EBITDA of 6.25x in 2003 and 6.9x in 2002. For analytical purposes, Standard & Poor's included the company's preferred stock in its calculation of debt to EBITDA. As a result, the proposed transaction has no impact on the company's debt-to-EBITDA ratio but is expected to lower its cost of capital. Prudently allocating free cash flow and following a disciplined approach to acquisitions could help keep leverage at an appropriate level. Upgrade potential is also linked either to a refinancing of Radio One's credit facility, which matures in 2007, or to an amendment of its financial covenants. The 6.25x total debt to EBITDA covenant included in the company's current bank agreement tightens to 4.5x at June 30, 2005. Because the proposed subordinated notes would be included in the covenant calculation, Radio One might not be in compliance with the more restrictive threshold in mid-2005. Management intends to refinance its bank facility by June 30, 2005, to, among other things, increase borrowing capacity, create a more flexible covenant package, and reduce near- and intermediate-term debt amortization. The size and expected use of a new credit facility, its covenants, and its amortization will also be assessed in the rating review. Standard & Poor's will monitor Radio One's progress in replacing or modifying its existing bank facility, and will evaluate the company's prospects for maintaining a credit profile in line with a 'BB-' rating level, in resolving the CreditWatch listing. RESOURCE TECHNOLOGY: Court Approves Consortium Settlement Pact -------------------------------------------------------------- Consortium Service Management Group, Inc. (OTC Bulletin Board: CTUM) reported that the U.S. Bankruptcy Court, Northern District of Illinois, Eastern Division, approved the settlement agreement between the trustee of Resource Technology Corporation -- RTC, Chastang Landfill, Inc., Waste Management Holding, Inc. and Consortium Service Management Group, Inc. Among the actions approved were the: -- the termination of the Chastang Landfill contract between Consortium and RTC, -- the payment of $75,000 by Consortium to the trustee for RTC, and -- the mutual release of all claims by and against Consortium and RTC. The order becomes effective 10 days after the Feb. 1, 2005, issue date. This ruling permits Consortium to move forward on its new contract with Waste Management, the landfill site's owner, for the operations at the Chastang Landfill. Consortium will be able to begin startup and landfill gas production operations at the Chastang Landfill under its contract with Waste Management, Inc. The company has a 10-year operating agreement with a possible five-year extension to operate the complex, which is near Mobile, Ala. Donald S. Robbins, president and CEO of Consortium Services Management Group, said, "After months of delays for the startup of the project, we are anxious to get started now that the uncertainty has been removed. This project is expected to bring new revenue to our company as well as open the door to other installations throughout the U.S. and Canada." The agreement was submitted in December 2004 to the bankruptcy court in Chicago, where RTC's proceedings are pending for approval. The startup of the Chastang site's gas production was delayed by a legal dispute between RTC and Waste Management, Inc. As a result, installation was stopped approximately 19 months ago. The ASME-certified, 177 metric-ton complex includes compressors and technology for separating and removing high levels of CO2 content from raw landfill methane gas resulting in pipeline quality methane gas suitable for the commercial natural gas market. The company will be paid from revenues generated from the sale of the gas. There are approximately 18,000 landfills in the U.S. and Canada. The company believes its technology could fit production criteria of up to 15% to 20% of these landfills. Consortium Service Management Group, Inc., owns the patent-pending technology for landfill gas production. Resource Technology Corporation filed for chapter 11 protection on Nov. 15, 1999 (Bankr. N.D. Ill. Case No. 99-35434). The Debtor's chapter 11 case was converted to a chapter 7 proceeding on Jan. 18, 2000. Alex Pirogovsky, Esq., at Ungaretti & Harris, Brian M. Graham, Esq., and Brian L. Shaw, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC represent the Debtors in their liquidation efforts. RURAL/METRO: Launches Cash Tender Offer for 7-7/8% Sr. Notes ------------------------------------------------------------ Rural/Metro Corporation (Nasdaq: RURL) has commenced a cash tender offer and consent solicitation for any and all of the $150 million aggregate principal amount outstanding of its 7-7/8% Senior Notes due 2008. The company intends to fund the tender offer with a portion of the net proceeds from borrowings under a new senior secured credit facility and the issuance or incurrence of other indebtedness. The tender offer is conditioned upon the consummation of the financing transactions, a minimum tender of outstanding notes, and other general conditions. As part of the tender offer, the company is soliciting consents from the holders of the notes for certain proposed amendments that would eliminate or modify substantially all of the restrictive covenants, certain events of default, and certain other provisions contained in the indenture governing the notes. Noteholders that tender their notes will be required to consent to the proposed amendments, and noteholders that consent to the proposed amendments will be required to tender their notes. Tendering noteholders who validly tender, and do not withdraw, their notes and deliver, and do not revoke, consents by the consent date, which is February 16, 2005, will receive total consideration of $1,017.00 per $1,000 principal amount of such notes. The total consideration includes a consent payment of $20.00 per $1,000 principal amount of notes. Noteholders who validly tender their notes after the consent date will not receive the consent payment. The consent solicitation will expire at 5:00 p.m., New York City time, on Wednesday, Feb. 16, 2005, and the tender offer will expire at 11:59 p.m., New York City time on Thursday, March 3, 2005, in each case unless extended or earlier terminated by the company. The company anticipates settlement of the tender offer on March 4, 2005. Noteholders who validly tender their notes also will be paid accrued and unpaid interest, if any, up to, but not including, the payment date. The company's obligations to accept for purchase any notes validly tendered pursuant to the tender offer and make consent payments for consents validly delivered on or prior to the consent date are conditioned upon satisfaction or waiver of various conditions, including, among other things, the following: There being validly tendered (and not withdrawn) at least a majority in aggregate principal amount of the outstanding notes, The execution of a supplemental indenture to the indenture governing the notes, following receipt of required consents, and The borrowing under a new credit facility and through the issuance or incurrence of other indebtedness proceeds in an amount sufficient to repay its existing credit facility, pay the total consideration for the tender offer and fund the redemption of any notes not tendered in the tender offer on terms and conditions satisfactory to the company. This press release is not an offer to purchase, a solicitation of an offer to sell or a solicitation of consent with respect to any securities. The offer is being made solely by the Offer to Purchase and Consent Solicitation Statement and related Consent and Letter of Transmittal dated Feb. 3, 2005, and the information in this press release is qualified in its entirety by reference to the information contained therein. The company has retained Citigroup Global Markets Inc. to serve as the Dealer Manager for the tender offer and Solicitation Agent for the consent solicitation. Requests for documents may be directed to Global Bondholder Services Corporation, the Information Agent at 866-488-1500 (toll free) and 212-430-3774. Questions regarding the tender and consent solicitation may be directed to Citigroup Global Markets Inc. at 800-558-3745 (toll free). About the Company Rural/Metro Corporation -- http://www.ruralmetro.com/-- provides emergency and non-emergency medical transportation, fire protection, and other safety services to approximately 400 communities in 23 states. At Sept. 30, 2004, Rural/Metro Corp.'s balance sheet showed a $187,715,000 stockholders' deficit, compared to a $192,226,000 deficit at June 30, 2004. SOLUTIA INC: Inks Agreements with Senior Vice President & COO ------------------------------------------------------------- On January 11, 2005, Solutia, Inc., entered into an agreement dated as of July 19, 2004, with Luc De Temmerman, its Senior Vice President and Chief Operating Officer. During the Employment Period from July 19, 2004, until the six-month anniversary of the Emergence Date, Mr. De Temmerman will receive an annual base salary of not less than EUR289,519 -- corresponding to $350,000 at the exchange rate of 1.2089. Mr. De Temmerman will participate in Solutia's annual incentive program with a target annual bonus opportunity of 100% of his annual base salary. Mr. De Temmerman will also be entitled to participate in all long-term and other incentive plans or programs applicable to senior executive officers of Solutia and its subsidiaries and to the applicable savings, retirement, welfare benefit, and vacation plans. The Agreement provides for Mr. De Temmerman's eligibility for a special emergence bonus at the time at which the Court will have confirmed a Chapter 11 reorganization plan of Solutia and the Plan will have become effective, if Mr. De Temmerman is employed by Solutia on the Emergence Date. If Mr. De Temmerman is employed by Solutia on the six-month anniversary of the Emergence Date, or will have been terminated by Solutia without Cause, or will have resigned for Good Reason, or will have died or been terminated for Disability, he will be entitled to receive from Solutia a special emergence bonus equal to 30% of the bonus pool as determined in accordance with the terms of the Solutia Emergence Incentive Bonus Program. Under the Emergence Incentive Bonus Program, the amount of the entire bonus pool cannot exceed $7.5 million. Solutia's Board of Directors, in its discretion, may elect to pay Mr. De Temmerman's bonus in shares of Solutia common stock in lieu of cash if Mr. De Temmerman remains employed by Solutia as of the six-month anniversary of the Emergence Date. If Mr. De Temmerman voluntarily terminates his employment other than for Good Reason or is terminated for Cause between the Emergence Date and the six-month anniversary thereof, then he will forfeit his right to receive the special emergence bonus. If, during the Employment Period, Solutia terminates Mr. De Temmerman's employment other than for Cause, or Mr. De Temmerman terminates his employment for Good Reason, Solutia will pay Mr. De Temmerman: (a) any unpaid but accrued base salary through the Date of Termination; (b) any unpaid annual bonus earned with respect to the previous year; and (c) any unpaid accrued vacation pay. In addition, if the Date of Termination occurs before the Emergence Date, Mr. De Temmerman will receive an amount equal to 125% of his annual base salary immediately prior to the Date of Termination, provided that he waives any and all claims against Solutia and its subsidiaries. Mr. De Temmerman will also be entitled to any other benefits or amounts, excluding severance or separation pay or benefits, for which he is eligible. If Mr. De Temmerman's employment terminates because of death or disability, he or his estate, as applicable, will receive Accrued Obligations and Other Benefits. The Agreement supersedes Mr. De Temmerman's change-of-control agreement dated as of January 29, 2003, and his retention agreement dated as of December 11, 2003. A full-text copy of Mr. De Temmerman's Employment Agreement is available for free at: http://sec.gov/Archives/edgar/data/1043382/000106880005000030/ex99p2.txt Solutia and Mr. De Temmerman also entered into a letter agreement providing that Mr. De Temmerman, who is currently based in Belgium, will perform his services in St. Louis, Missouri, beginning not later than February 1, 2005, and that the assignment to St. Louis will not constitute Good Reason under the Agreement. The Letter Agreement provides for certain allowances so that Mr. De Temmerman will be made whole with respect to the costs incurred in his relocation. A full-text copy of the Letter Agreement is available for free at: http://sec.gov/Archives/edgar/data/1043382/000106880005000030/ex99p3.txt 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) STRUCTURED ASSET: Fitch Rates $15.8MM Class B 2005-1 Cert. at BB ---------------------------------------------------------------- Structured Asset Investment Loan Trust (SAIL) $1.9 billion mortgage pass-through certificates, series 2005-1, which closed on Jan. 28, 2005, are rated by Fitch Ratings: -- $1.693 billion classes A1 through A7 'AAA'; -- $37.5 million class M1 'AA+'; -- $54.2 million class M2 'AA'; -- $29.6 million class M3 'AA-'; -- $23.7 million class M4 'A+'; -- $21.7 million class M5 'A'; -- $19.7 million class M6 'A-'; -- $13.8 million class M7 'BBB+'; -- $14.8 million class M8 'BBB'; -- $15.8 million class M9 'BBB-'; -- $15.8 million class B 'BB'. The 'AAA' rating on the class A1 through A7 certificates reflects the 14.10% total credit enhancement provided by: * the 1.10% unrated class A8, * the 1.90% class M1, * the 2.75% class M2, * the 1.50% class M3, * the 1.20% class M4, * the 1.10% class M5, * the 1% class M6, * the 0.70% class M7, * the 0.75% class M8, * the 0.80% class M9, * the 0.80% class B as well as the 0.50% initial and target over-collateralization -- OC. Classes A3 through A8, M1 through M9 and B are all not re-offered. All certificates have the benefit of monthly excess cash flow to absorb losses. The ratings also reflect the quality of the loans, the soundness of the legal and financial structures, and the capabilities of Aurora Loan Services as Master Servicer. LaSalle Bank, N.A. (rated 'AA-' by Fitch), will act as Trustee. On the closing date, the trust fund will consist of three pools of first and second lien, adjustable- and fixed-rate, fully amortizing and balloon, residential mortgage loans with a total principal balance as of the cut-off date of approximately $1,971,495,286. The Group 1 mortgage pool consists of adjustable- rate and fixed-rate, conforming, first- and second-lien mortgage loans with a cut-off date pool balance of $726,501,022. Approximately 14.39% of the mortgage loans are fixed-rate and 85.61% are adjustable-rate mortgage loans. The weighted average loan rate is approximately 7.207%. The weighted average remaining term to maturity - WAM -- is 354 months. The average principal balance of the loans is approximately $161,122. The weighted average combined loan-to-value - CLTV -- ratio is 81.26%. The properties are primarily located in: * California (32.15%), * Illinois (8.38%) and * Florida (7.03%). The Group 2 mortgage pool consists of adjustable-rate and fixed- rate, nonconforming, first- and second-lien mortgage loans with a cut-off date pool balance of $926,729,298. Approximately 14.39% of the mortgage loans are fixed-rate and 85.61% are adjustable- rate mortgage loans. The weighted average loan rate is approximately 7.215%. The WAM is 350 months. The average principal balance of the loans is approximately $197,050. The weighted average CLTV ratio is 82.20%. The properties are primarily located in: * California (43.18%), * New York (5.45%) and * Florida (4.33%). The Group 3 mortgage pool consists of adjustable-rate and fixed- rate, nonconforming, first- and second-lien mortgage loans with a cut-off date pool balance of $318,264,964. Approximately 13.70% of the mortgage loans are fixed-rate and 86.30% are adjustable- rate mortgage loans. The weighted average loan rate is approximately 7.214%. The WAM is 351 months. The average principal balance of the loans is approximately $172,128. The weighted average CLTV ratio is 81.11%. The properties are primarily located in: * California (37.15%), * New York (6.30%) and * Florida (6.27%). Approximately 47.26%, 41.46% and 34.47% of the mortgage loans in Pool 1, Pool 2, and Pool 3 are 80+ LTV loans. Approximately 0.28% and 0.87% of the 80+ LTV loans in Pool 2 and Pool 3, respectively, are covered by existing primary mortgage insurance policies which were acquired by the borrower. In addition, a loan-level primary mortgage insurance policy will be acquired on or prior to the closing date from Mortgage Guaranty Insurance Company with respect to approximately 77.94%, 68.42%, and 78.19% of the 80+ LTV loans in Pool 1, Pool 2, and Pool 3, respectively. Approximately 52.53% of the mortgage loans were acquired by Lehman Brothers Holdings Inc. from BNC Mortgage, Inc., and 16.62% from Finance America, LLC. For federal income tax purposes, multiple real estate mortgage investment conduit elections will be made with respect to the trust estate. TEE JAYS: Files for Chapter 11 Protection in N.D. Alabama --------------------------------------------------------- Tee Jays Manufacturing Co., filed a voluntary chapter 11 petition with the United States Bankruptcy Court for the Northern District of Alabama, Decatur division, due to a slowdown in the textile industry. The Associated Press reported that Tee Jays, owned by Grupo M in the Dominican Republic, will begin its layoffs for 220 workers today and will close its Florence apparel plant next month. A company statement distributed to workers Friday said the closing day would likely be sometime between March 4 and March 18. Headquartered in Florence, Alabama, Tee Jays Manufacturing Co., manufactures textile. The Company filed for chapter 11 protection on Feb. 4, 2005 (Bankr. N.D. Ala. Case No. 05-80527). Stuart M. Maples, Esq., at Johnston Moore Maples & Thompson represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated between $50 million to $100 million in total assets and debts. TEE JAYS MANUFACTURING: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Tee Jays Manufacturing Co., Inc. P.O. Box 2033 Florence, Alabama 35630 Bankruptcy Case No.: 05-80527 Type of Business: The Debtor is a textile manufacturing company. Chapter 11 Petition Date: February 4, 2005 Court: Northern District Of Alabama (Decatur) Debtor's Counsel: Stuart M. Maples, Esq. Johnston Moore Maples & Thompson 400 Meridian Street, Suite 301 Huntsville, AL 35801 Tel: 256-533-5770 Estimated Assets: $50 Million to $100 Million Estimated Debts: $50 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Dominican Knits Trade Vendor $34,000,000 Parque Industrial Zona Franca Santiago, Dominican Republic Grupo M Industries, S.A. $7,900,000 Parque Industrial Zona Franca Santiago, Dominican Republic Compass Bank $1,000,000 PO Box 830927 Birmingham, AL 35283 CIT Group/Alstyle Apparel Trade Vendor $260,840 P.O. Box 1036 Charlotte, NC 28201 Wellstone Mills Trade Vendor $165,594 Frontier Suntrust Trade Vendor $124,434 Florence Natural Gas Dept. Trade Vendor $113,358 Avondale Mills Trade Vendor $103,610 Frontier CIT Trade Vendor $94,537 Danny R. Hendrix/Revenue Trade Vendor $89,262 Commissioner Gale Smith & Co. Trade Vendor $76,214 Everlight USA, Inc. Trade Vendor $53,991 Dystar, LP Trade Vendor $44,880 Versa Chem, Inc. Trade Vendor $44,044 Frontier Capitol Trade Vendor $43,608 Florence Utilities Trade Vendor $40,107 CIT Services Group Trade Vendor $25,422 CIBA Speciality Chemicals Trade Vendor $16,139 E.I. Du Pont De Nemours & Trade Vendor $14,843 Co. GrozBeckert USA, Inc. Trade Vendor $14,153 TIME WARNER: S&P Junks Proposed $200 Million Senior Notes --------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to Time Warner Telecom Holdings Inc.'s -- TWT Holdings -- planned $200 million of notes to be issued under Rule 144A with registration rights as an add-on to its 9.25% senior notes due 2014. Time Warner Telecom Holdings is an intermediate holding company for Littleton, Colorado-based competitive local exchange carrier Time Warner Telecom, Inc. -- TWT. The rating outlook on TWT and TWT Holdings has been revised to negative from stable. All existing ratings, including the 'B' corporate credit rating, were affirmed. Although Time Warner, Inc., has a 71% voting interest in TWT, no support from Time Warner, Inc., is imputed. Net proceeds of the offering will be used to fund the company's capital expenditures. Following the closing of the offering, the company will use cash on hand to redeem a portion of Time Warner Inc.'s 9.75% senior notes due 2008. The new unsecured notes are junior to potential bank borrowings, as well as the senior secured second-lien notes and obligations at the operating companies. Given the degree of concentration of such obligations relative to total assets, these notes are rated two notches lower than the corporate credit rating. "The outlook change reflects the continuing challenging business environment that has hampered TWT's ability to achieve meaningful revenue growth in 2004," explained Standard & Poor's credit analyst Catherine Cosentino. "This lack of growth creates uncertainty about prospects for business expansion in 2005 and beyond. While the company did achieve 5% growth in overall revenues for the 2004 fourth quarter, a lack of significant revenue growth over the next few years will impede the company's ability to achieve a meaningful level of net free cash flow (after capital expenditures)." Ratings reflect TWT's aggressive leverage and high business risk, despite its ongoing sales efforts in light of continued and potentially higher prospective competition from the incumbent local carriers and the vulnerabilities that the company may face in a weak telecom environment. TWT has also faced continued disconnects by carriers grooming and paring down their network requirements and, to a lesser extent, by enterprise customers cutting back telecommunications services spending. As a result of both financial and operating factors, the company experienced a loss of about $8 million in monthly revenue due to disconnects in the nine months ended Sept. 30, 2004. Despite such pressures, however, TWT was able to maintain a stable level of quarterly EBITDA of about $50 million during 2004 due to its aggressive selling efforts and increased sale of higher-margin products and services. Yet due to the capital intensive nature of its business, the company has continued to be net free cash flow negative after capital expenditures and has not been able to achieve any appreciable improvement in its high leverage levels (debt to EBITDA was at nearly 6x for 2004). TOMMY HILFIGER: S&P Pares Corporate Credit Rating to BB- from BB ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Tommy Hilfiger USA, Inc., including its corporate credit rating to 'BB-' from 'BB'. The ratings remain on CreditWatch with negative implications, where they were placed on Nov. 3, 2004. The men's and women's sportswear, jeanswear, and childrenswear company had about $343 million in long-term debt outstanding as of Dec. 31, 2004. "The rating actions reflect our concern regarding the company's negative operating trends, including the continued decline in revenues and the significant contraction in pre-tax earnings for the quarter ended December 2004," said Standard & Poor's credit analyst Susan Ding. (The company currently does not report after- tax earnings and has not filed 10Qs, due to a previously disclosed government investigation. The U.S. Attorney's office for the Southern District of New York is conducting an investigation regarding commission payments to a foreign subsidiary.) The company reported weaker-than-expected results for the quarter ended December 2004, primarily in its U.S. wholesale segment, which continued to experience significant revenue drop, and higher-than-expected markdowns for the fall and holiday season. Tommy Hilfiger's wholesale revenues declined by about 19% for the quarter, driven primarily by a 30.8% contraction in its U.S. wholesale business. In addition, the company also revised its fiscal 2005 forecast downwards, reflecting the negative effect of lower revenues and higher markdowns. While the company currently has sufficient liquidity resources, Standard & Poor's remains concerned with potential constraints that could affect the company's financial resources due to the additional legal costs arising from the government investigation and the class action lawsuits against the company. Standard & Poor's will continue to closely monitor developments as they occur. Resolution of the CreditWatch will depend on the outcome of the company's internal investigation and Standard & Poor's review of the company's business strategies and operating trends. TOWER AUTOMOTIVE: Court Approves First Day Motions -------------------------------------------------- Tower Automotive, Inc., has received approval of its "first day motions" relating to employee, financing and other operational matters from the U.S. Bankruptcy Court for the Southern District of New York. The motions encompass a number of issues related to the continued operation of the company in the normal course. Among the motions approved by the Court on Feb. 3, include those relating to the continued: -- payment of employee salaries, wages and benefits, -- honoring of warranties and other obligations to customers, and -- use of the company's existing cash management systems. Additionally, the company received approval of its request to immediately access $125 million of the $725 million debtor-in- possession financing it arranged with JPMorgan. The company expects to receive approval to access the full amount of its financing commitment at a hearing scheduled on Feb. 28, 2005. Kathleen Ligocki, Tower Automotive's President and Chief Executive Officer, said, "We are pleased to have received Court approval for all of our motions related to financing and employees, which enable us to operate our business as usual. I am also pleased to report that our operations have continued running during the first two days since our reorganization filing. Tower's customers have been supportive of the company during this difficult period, and we will continue to work hard to meet their needs. I also had the opportunity to meet with many Tower colleagues, and I feel they understand why we have taken this action and know the key role they play in the future success of the company." Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05- 10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts UAL CORP: Court Extends Exclusive Plan Filing Period to April 30 ---------------------------------------------------------------- Judge Wedoff of the United States Bankruptcy Court for the Northern District of Illinois gives UAL Corporation and its debtor-affiliates until April 30, 2005, to file a Chapter 11 Plan and until June 30, 2005, to solicit acceptances of the Plan. 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) US AIRWAYS: January 2005 Load Factor Up 3.9% from 2004 ------------------------------------------------------ US Airways reported its January 2005 passenger traffic. Mainline revenue passenger miles for January 2005 increased 3.9 percent on a 2.0 percent decrease in available seat miles compared to January 2004. The 68.3 percent passenger load factor, which was the highest for any January in the company's history, is a 3.9 percentage point increase compared to January 2004. The two wholly owned subsidiaries of US Airways Group, Inc., Piedmont Airlines, Inc. and PSA, Inc., and MidAtlantic Airways, reported a 139.1 percent increase in revenue passenger miles for January 2005, on 98.6 percent more capacity, compared to January 2004. The passenger load factor was 53.5 percent, a 9.1 percentage point increase compared to January 2004. Mainline system passenger unit revenue for January 2005 is expected to decrease between 6.0 percent and 7.0 percent compared to January 2004. US Airways ended the month of January 2005 completing 95.8 percent of its scheduled departures compared to 98.5 percent in January 2004, mostly due to severe winter weather in the East. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. US AIRWAYS: Wants to Amend Airbus Agreements -------------------------------------------- US Airways, Inc., and its debtor-affiliates seek the authorization of the U.S. Bankruptcy Court for the Eastern District of Virginia to implement transactions with Airbus North America Sales Inc., including: (1) entry into amendments to the Airbus A319/A320/A321 Purchase Agreement between AVSA, S.A.R.L., as Seller, and US Airways Group, Inc., as Buyer; (2) entry into amendments to the Airbus A330/A340 Purchase Agreement, between AVSA, as Seller, and Group, as Buyer; (3) entry into the AFS Agreement, between Airbus Financial Services and US Airways, Inc.; and (4) waiver of the Debtors' potential avoidance actions. In the late 1990s, the Debtors entered into the A320 Purchase Agreement and the A330 Purchase Agreement, under which the Debtors committed to buy and take delivery from AVSA of A319, A320, A321, A330 and A340 model aircraft, pursuant to a delivery schedule. The Purchase Agreements provided the Debtors with credits, which could be applied to the purchase of goods and services from AVSA. On the bankruptcy petition date, the Debtors operated five Airbus aircraft that were financed pursuant to trust indentures and mortgages, with Aviateur International Limited holding the requisite secured notes. The majority of the Debtors' Airbus aircraft were financed pursuant to Enhanced Equipment Trust Certificate transactions. Pursuant to the 2000-1 EETC transaction, which the Debtors entered into via the 2000-1C Certificates Purchase Agreement, the Debtors acquired certain C notes. Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, explains that the Debtors want to enter into the Airbus Letter Agreement to: a) resolve certain existing issues and claims; b) terminate their rights and obligations to acquire 35 Airbus aircraft; c) implement a delayed delivery schedule under the Purchase Agreements; and d) provide them with immediate cash upon conversion of credit memoranda. The parties amend the terms of the A320 Purchase Agreement to provide for a delayed schedule for the delivery of A320 and A321 model aircraft. The parties also agree to: -- a conversion of $1,528,000 in credits to a current cash payment to the Debtors; -- a conversion of $1,162,000 of the current outstanding balance of goods and services credit to a current cash payment to the Debtors, leaving the Debtors with a goods and services credit balance of $648,000; -- an allowance of the Debtors' remaining goods and services credits with AVSA. However, after application of all credits, AVSA may suspend deliveries of goods and services if the Debtors fail to pay trade invoices and the Debtors' trade payable balance exceeds $500,000. The amendments to the A320 Purchase Agreement also provide for the cancellation of all rights or obligations of the Debtors and AVSA for purchase and delivery of 35 Purchase Right Aircraft, with AVSA paying the Debtors $2,943,000. The Debtors also waive their rights to assert avoidance claims under Section 547 of the Bankruptcy Code for application of goods and services credits. The A330 Purchase Agreement is modified to provide for a delayed schedule for delivery of A330 model aircraft and conversion of $500,000 in credits to a cash payment to the Debtors, reducing the credit balance to zero. Pursuant to the AFS Agreement, AFS agrees to waive its rights to liquidated damages for certain aircraft financing transactions until December 31, 2005. The Debtors may purchase the Class C Pass Through Certificates, Series 2001-1 and the 8.39% Pass Through Certificates, Series 2000-3C, Class C held by AFS for the outstanding balance. The Debtors will not assert avoidance claims. Mr. Leitch tells Judge Mitchell that these Transactions resolve the uncertainty between the Debtors and the Airbus Entities. The Airbus Agreements allow the Debtors to receive over $3,100,000 from the conversion of credit memoranda to cash. The Debtors will be able to use the $2,900,000 balance of the credit memoranda for the purchase of goods and services from AVSA, due to cancellation of their rights and obligations to acquire the 35 Purchase Right Aircraft. These Transactions will result in benefits to the Debtors' estate and will enhance the prospects for a successful reorganization. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Has Until June 30 to File Plan of Reorganization ---------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended the period within which USG Corporation and its debtor-affiliates has the exclusive right to file a chapter 11 plan to June 30, 2005, to give the Debtors more time to resolve two principal issues -- the amount of the asbestos claims and the determination of which entity must pay those claims. Resolving these issues is necessary to formulate a confirmable chapter 11 plan. The Court also extended the Debtors' exclusive period to solicit votes on that plan through August 31, 2005. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. USGEN: Classification of Claims & Interests Under the Plan ---------------------------------------------------------- In accordance with Section 1122 of the Bankruptcy Code, USGen New England Inc.'s Plan of Liquidation groups claims and equity interests into four classes. Administrative Claims, Fee Claims, and Priority Tax Claims have not been classified and the holders of these Claims are not entitled to vote to accept or reject the Plan, pursuant to Section 1123(a)(1). Class Description Recovery Under The Plan ----- ----------- ----------------------- N/A Administrative Claims Paid in full in Cash N/A Fee Claims Paid in Cash N/A Priority Tax Claims Paid in full in Cash, including Postpetition Interest 1 Secured Claims Unimpaired Holder will receive: (a) 100% of recovery amount, including Postpetition Interest; or (b) the returned collateral. 2 Priority Claims Unimpaired Paid in full in Cash, including Postpetition Interest 3 General Unsecured Impaired Claims Paid in full in Cash, including: (a) Postpetition Interest; or (b) Modified Postpetition Interest. Shareholder Participation in the BSC Claim will not accrue or receive any Interest. 4 Interests Impaired NEGT will continue to retain Interests on and after the Effective Date. NEGT will receive, separate and apart from the Shareholder Participation, as a Distribution on account of such Interests: payment, if any, by the Disbursing Agent from the remainder of the Distribution Fund, Administrative Reserve, Disputed Claims Reserve and any other remaining Retained Estate assets after the payment in full of all Allowed Administrative Claims, Allowed Fee Claims, Allowed Priority Tax Claims, all other Allowed Claims and the Shareholder Participation under the Plan and subject to the terms of the Plan. 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. U.S. MINERAL: Court Says Only Trustee Can File & Prosecute Plan --------------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware gave Anthony R. Calascibetta, the Chapter 11 Trustee for the estate of United States Mineral Products Company, d/b/a Isolatek International, sole authority to file and prosecute a Disclosure Statement and Plan of Reorganization in the Debtor's chapter 11 case. Judge Fitzgerald's decision modifies the Plan Filing Stay order she entered on July 22, 2004, that gave Mr. Calascibetta's more time to file and prosecute a Plan for the company. Mr. Calascibetta and the Official Committee of Asbestos Personal Injury and Property Damage Claimants inked a Stipulation Agreement on Dec. 16, 2004, in which Mr. Calascibetta's sole authority to file and prosecute a Plan will become permanent without further orders from the Court if a Plan is not prosecuted by Jan. 24, 2005. Judge Fitzgerald approved the Stipulation on Jan. 25, 2005, giving Mr. Calascibetta's authority permanent and without further orders from the Court. Mr. Calascibetta's request is based on the fact that despite two Amended Plans being filed by the Debtor since the Petition Date, those Plans had provisions that were still unacceptable to the Asbestos Committee Claimants, the Trade Committee and the Legal Representative for Future Asbestos Claimants. Mr. Calascibetta explains that with the Debtor's exclusive period to file a plan under Section 1121 of the Bankruptcy Code terminating last year, the Stipulation is in the best interests of the Debtor, its estate, and the creditors and other parties in interest. Mr. Calascibetta assures the Court that he will work together with the Asbestos Committee Claimants, the Debtor's creditors and other parties in interest in formulating a consensual and confirmable Plan that would satisfy claims and successfully reorganize the Debtor. Headquartered in Stanhope, New Jersey, United States Mineral Products Company manufactures and sells spray-applied fire resistive material to the constructions industry in North America and South America. The Company filed for chapter 11 protection on July 23, 2001 (Bankr. D. Del. Case No. 01-2471). Henry Jon DeWerth-Jaffe, Esq., at Pepper Hamilton LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $23,773,000 and total debts of $13,864,000. WARNER TELECOM: Partial Refinancing Cues Moody's to Affirm Ratings ------------------------------------------------------------------ Moody's Investors Service affirms the debt ratings of Time Warner Telecom, Inc.'s and Time Warner Telecom Holdings, Inc., in light of the proposed partial refinancing of its 9-3/4% senior unsecured notes. Moody's affirms the ratings of: -- Time Warner Telecom, Inc.: * Senior implied rating at B2 * Issuer rating at B3 * Speculative grade liquidity rating at SGL-1 * 9-3/4% Sr. Notes due in 2008 at B3 * 10 1/8% Sr. Notes due in 2011at B3 -- Time Warner Telecom Holdings Inc.: * Sr. Sec.1st Priority Revolver at B1 * Sr. Sec. 2nd Priority FRN due in 2011at B1 * 9-1/4% Sr. Notes due in 2014 at B2. The rating outlook remains negative. Time Warner Telecom's B2 senior implied rating reflects Moody's concerns about fundamental competitive challenges confronting the CLEC industry, in general, and Time Warner Telecom's operations, specifically. In order to support its significant debt burden, Moody's believes Time Warner Telecom must achieve and sustain fairly high top-line growth, which would require taking market share from established and better-capitalized competition. The company's high leverage and its inability, to date, to generate free cash flow also constrains its strategic options in a challenging market, and thus suppresses the ratings. Time Warner Telecom's good liquidity position, healthy EBITDA margins, recent growth in its enterprise customer business, and the strength of its management team supports the ratings. Moody's also recognizes Time Warner Telecom's success in stabilizing its core revenue, as the growth in its enterprise segment has offset declines in the carrier and ISP market as well as reductions in intercarrier compensation due to regulatory changes. The rating also incorporates the favorable resolution of Time Warner Telecom's bankruptcy claim with MCI, its reduced exposure to changes in intercarrier compensation, as well as its advantageous cost structure and operational efficiency which result from the scalability of its Ethernet platform. Moody's believes that Time Warner Telecom's free cash flow generation is delayed by its business plan, which requires significant success-based capital investment. Moody's does not expect Time Warner Telecom to generate positive free cash flow until at least 2008, given its high interest burden and investment needs, which have averaged at the high end of the industry, with capital expenditure expected to surpass 20% of revenue for at least the intermediate term. Time Warner Telecom's negative ratings outlook reflects Moody's concern that these investment requirements, which are necessary to support its on-going strategic initiative and revenue growth, will continue to require cash beyond that generated though continuing operations, thus eroding the company's financial strength over the next several years. Moody's believes that, over the intermediate term, an increased emphasis by RBOCs and other CLECs on implementing technology similar to that of Time Warner Telecom will erode Time Warner Telecom's competitive advantage, which is currently driven by product differentiation. If Time Warner Telecom fails to defend its customer base, all else held equal, lower long term business- growth prospects may lead to lower ratings at the Company, which is dependent on profitable growth the service its debt. Moody's rating also assumes that further anticipated declines in carrier demand, due to consolidation in both the wireless and wireline segment of the telecommunication market, will only modestly affect Time Warner Telecom earnings. Should Time Warner Telecom fail to successfully replace revenue lost to consolidation or adequately reduce its cost structure over the intermediate term to neutralize the impact on earnings, the ratings are likely to fall. Specifically, sustained EBITDA margins of below 25% or net debt to EBITDA of higher than 5.5x would likely lead to a ratings downgrade. If Time Warner Telecom is able to achieve sufficient scale to further leverage fixed operational cost and infrastructure investment and neutralize, its current cash burn, the rating outlook is likely to stabilize. If Time Warner Telecom is also able to consistently demonstrate reduced earnings volatility resulting from improved revenue diversification, coupled with meaningful cost reductions, the outlook may also stabilize. Furthermore, if Time Warner Telecom can achieve sustained success that results in several consecutive quarters of free cash flow, the ratings could rise. Specifically, sustained EBITDA margins in excess of 35% coupled with reduced investment levels that allow for a free cash flow to debt metric in excess of 5% would like lead to higher ratings. The rating also incorporates the Company's strong liquidity position, which should allow it to weather several years of modest cash burn while it continues to build out its network. Moody's believes that Time Warner Telecom's significant cash and marketable security holding as well as $150 million unused availability under its revolving credit facility provided sufficient cushion to meet near term operating and investing needs. Moody's also notes that the proposed transaction strengthens Time Warner Telecom's debt maturity profile and thus supports its liquidity as well as its long-term ratings. Time Warner Telecom's speculative grade liquidity rating may come under pressure in the intermediate term, however, if the company's cash burn rate accelerates while it builds out its infrastructure. Moody's maintains the 9 �% notes' rating at the B2 senior implied level, as well as the senior unsecured notes at Time Warner Telecom at B3, one notch below the senior implied rating, despite the increased structural subordination resulting from this refinancing. The notching assumes that Time Warner Telecom 's proposed refinancing will effectively transfer $200 million of debt from TWTC to Holdings. Moody's notes that this additional subordination of the parent company obligations to higher amounts of Holdings debt puts pressure on the B3 ratings at Time Warner Telecom. Additional subordination of the Time Warner Telecom debt beyond this incremental $200 million could lead to a downgrade of the debt ratings at the Time Warner Telecom layer of the capital structure. Time Warner Telecom Inc., headquartered in Littleton, Colorado, provides data, dedicated Internet access, and local and long distance voice services to business customers in 44 metropolitan markets in the United States. WILLAMETTE VALLEY: List of its 20 Largest Unsecured Creditors ------------------------------------------------------------- Willamette Valley Distributing, L.L.C., released a list of its 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Oregon Dept. of Revenue Tobacco tax $1,516,492 BUS Tobacco Compliance P.O. Box 14725 Salem, OR 97309 Carolina Tobacco Company Promissory note $154,114 5620 SW Dover Lane Portland, OR 97225 American Express Trade debt $121,691 Box 0001 Los Angeles, CA 90096 Wells Fargo Bank Trade debt $43,118 General Tobacco Inc. Trade debt $32,250 Zurich North America Trade debt $28,219 USA Tobacco Distributing Inc Trade debt $27,238 Santa Fe Natural Tobacco Trade debt $26,686 Key Bank Credit Line Trade debt $14,901 Swisher International Inc. Trade debt $11,964 US Bank Visa Trade debt $6,913 Inter Continental Cigar Corp Trade debt $6,589 M and R Holdings Inc. Trade debt $6,537 Mobile Motor Medic Ltd. Trade debt $6,200 National Tobacco Inc. Trade debt $5,316 Quaker Trade debt $4,090 ConAgra Foods Trade debt $3,251 William J. Stalnaker, Esq. Legal Services $2,796 Sunset Fuel Co. Trade debt $2,510 Ranson Blackman LLP Legal Services $2,284 Headquartered in Oregon City, Oregon, Willamette Valley Distributing, L.L.C. is a tobacco distributor. The Company filed for chapter 11 protection (Bankr. D. Ore. Case No. 05-30712) on January 25, 2005. Stephen T. Boyke, Esq., at Greene & Markley, P.C., represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $1 million to $10 million. WILTEL COMM: SBC Acquisition Prompts Moody's to Change Outlook -------------------------------------------------------------- Moody's Investors Service changed the outlook of WilTel Communications LLC, a wholly owned subsidiary of WilTel Communications Group, Inc., to negative from stable due to the impact SBC's acquisition of AT&T may have on WilTel's revenue stream once the merger is complete. Additionally, under the terms of WilTel Communications' credit agreement, the SBC announcement is considered a material adverse effect. As a result, WilTel is currently unable to access the $25 million revolving credit facility. The announcement does not affect the scheduled amortization of the $360 million term loans. Subsequent termination of the preferred provider agreements, however, would be deemed an event of default under the credit agreement unless waived by the lender group. The ratings affirmed are: * Senior Implied Rating -- B3 * Issuer Rating -- Caa2 * $25 million Revolving Senior Secured Credit Facility due 2009 -- B2 * $260 million First-Priority Senior Secured Term Loan due 2010 -- B2 * $100 million Second-Priority Senior Secured Term Loan due 2011 -- Caa1 Outlook is changed from stable to negative Approximately 65% of WilTel Communications' revenues come from its relationship with SBC. WilTel is SBC's preferred provider of long distance services and has benefited from the growth of SBC's long distance and broadband businesses as well as its wireless affiliate, Cingular Wireless. If SBC plans on moving its long distance traffic to AT&T upon completion of the merger, Moody's will likely place WilTel's ratings on review for downgrade as the preferred provider relationship is a key support for its present ratings. In addition to the support provided by its relationship with SBC, WilTel Communications' ratings reflect the highly competitive long haul market in which WilTel operates and its relatively short post-bankruptcy operating history. Even with the preferred provider SBC relationship intact, Moody's expects that the company will realize only nominal revenue growth and EBITDA margin improvement. As a result, free cash flow generation will depend largely on careful operating expense and capital investment management. Without the SBC preferred provider agreements, Moody's believes WilTel Communications would burn a substantial amount of cash. To the extent the SBC and AT&T merger requires a long regulatory approval process and a slow transition of traffic from WilTel's network to AT&T's, the rating impact could be substantially limited if WilTel can replace the traffic and/or secure some compensation from SBC under its existing preferred provider agreements. Moody's believes the task of replacing this traffic will be challenging given the tough long haul competitive environment. WilTel Communications is a long distance carrier headquartered in Tulsa, Oklahoma. WYNDEMEIR ON LAKE: Case Summary & 12 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Wyndemeir on Lake Mytron, Inc. 246 Topper Road Fairfield, Pennsylvania 17320 Bankruptcy Case No.: 05-00550 Type of Business: The Debtor provides assisted living services. Chapter 11 Petition Date: February 3, 2005 Court: Middle District of Pennsylvania (Harrisburg) Debtor's Counsel: Robert L. Knupp, Esq. Knupp Kodak and Imblum PC 407 North Front Street P.O. Box 11848 Harrisburg, PA 17108 Tel: 717-238-7151 Fax: 717-238-5258 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million Debtor's 12 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Adams County Tax Claim $24,000 Bureau 111-117 Baltimore Gattysburg, PA 17325 ASPIRE ASPIRE $3,883 P.O. Box 23007 Columbus, GA 31902 Shipley Energy $1,054 P.O. Box 946 York, PA 17405 Carl E. Frantz Inc. Judgment $1,018 Agway Energy Products $1,002 First General Services of judgment $586 Pen-Mar Verizon Wireless $448 Mays Plumbing $365 Alexander Plumbing $306 Mcglalughlin's Refrig. & App. $130 Waste Management $89 Greencastle Hauling $48 XEROX CORP: Fitch Affirms Senior Unsecured Debt at BB ----------------------------------------------------- Fitch Ratings has affirmed Xerox Corp. and its subsidiaries' debt ratings: -- Senior unsecured debt 'BB'; -- Senior secured bank credit facility 'BBB-'. Fitch also upgrades the trust preferred securities to 'B+' from 'B' due to the company's strengthening financial profile and recovery prospects. The Rating Outlook is revised to Positive from Stable by Fitch. Approximately $6 billion of securities are affected by Fitch's action. The Positive Outlook and Xerox's ratings reflect the company's improved credit protection measures and adequate liquidity profile, consistent operating and financial performance, simplified capital structure, and progress in reducing core debt. Xerox continues to execute its operating strategy, and despite challenging prospects for growth in the near-term, Fitch expects operating performance will remain stable. Consistent financial and operational performance and strong free cash flow, along with successful core debt reduction, could result in further positive rating actions. Rating concerns center on the increasingly competitive nature of the printing equipment manufacturing industry and the need for Xerox to grow equipment revenues and improve the performance of the developing markets operations segment. Fitch anticipates tepid revenue growth in 2005 with continued margin pressures associated with the company's various end markets, particularly the office and low-end printer segments. While Xerox has significant unsecured debt maturities in 2005 and uncertain liabilities regarding outstanding litigation, Fitch believes that the company has sufficient liquidity and financial flexibility to meet maturities and absorb a reasonable adverse monetary outcome from litigation. Credit protection measures for the latest twelve months ending Dec. 31, 2004, continue to show sequential improvement. Xerox's leverage, measured by total debt to total EBITDA, is estimated to be approximately 4.9 times compared with 5.1x and 6.0x for 2003 and 2002, respectively. Similarly, Fitch estimates Xerox's core leverage (defined as nonfinancing debt divided by nonfinancing EBITDA) at year-end 2004 declined to approximately 1.8, compared with 2.2x in 2003 and 3.6x for 2002, respectively. In addition, the company's overall interest coverage (including the financing segment) was 2.9x, while Fitch estimates core interest coverage (defined as core EBITDA divided by core interest expense) was approximately 7.3x at year-end 2004, compared with 6.0x and 3.7x for 2003 and 2002, respectively. Fitch expects overall and core credit protection measures will remain stable and should gradually improve as a result of core debt levels being reduced from free cash flow while operational EBITDA remains flat. Xerox has maintained adequate liquidity and has been successful in obtaining secured funding for its finance receivables, as well as improving its working capital metrics. The company's liquidity at Dec. 31, 2004, consists of more than $3.2 billion of cash, consistent annual free cash flow above $1.5 billion the past three years, and an undrawn $700 million bank facility revolver expiring September 2008. To support business growth, Xerox also has access to a secured eight-year $5.0 billion credit facility provided by General Electric Vendor Financial Services expiring in October 2010. This facility is used for secured loans backed by U.S. finance receivables arising from the sale of Xerox's products. At Dec. 31, 2004, approximately $2.5 billion was available under this facility. In addition, in June 2004, Xerox arranged a three-year $400 million revolving credit facility secured by U.S. accounts receivable with General Electric Capital Corporation; as of Dec. 31, 2004, approximately $200 million was drawn from this facility. Additionally, Xerox has various multiyear committed secured funding facilities totaling approximately $2.0 billion, of which approximately $400 million was available at year-end. As of Dec. 31, 2004, total debt was $10.1 billion, not considering the $889 million of mandatorily convertible preferred stock due July 2006, or the $665 million of trust preferred securities due 2027. Approximately $4.4 billion of total debt is secured by various finance receivables, and Fitch believes this will remain consistent while core debt (nonfinancing operations) should be reduced. Xerox's finance receivables totaled $8.5 billion at Dec. 31, 2004. Debt maturities for 2005 are estimated at $3.1 billion, of which $1.9 billion is from secured debt and the majority of the remaining amount, over $900 million, is issued by Xerox Credit Corp. Fitch believes free cash flow, along with a strong cash balance, will enable the company to manage debt maturities and other obligations. Additional cash outlays are expected to continue in 2005 for the company's pension plans, as well as minimal remaining cash charges for previous restructuring charges, mostly for severance payments. In addition to Xerox Corp., the ratings affected are: * Xerox Credit Corp. and * Xerox Capital (Europe) PLC's rated senior debt and * Xerox Corp.'s $1.0 billion senior secured bank credit facility, which is also available to -- Xerox Canada Capital Limited and -- Xerox Capital (Europe) PLC. ZEMACH CORPORATION: Case Summary & 10 Largest Unsecured Creditors ----------------------------------------------------------------- Lead Debtor: Zemach Corporation 725 Avenue North Brooklyn, New York 11230 Bankruptcy Case No.: 05-10614 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Bram Will El LLC 05-10616 William Muschel, LLC 05-10617 Chapter 11 Petition Date: February 3, 2005 Court: Southern District of New York (Manhattan) Judge: Robert D. Drain Debtor's Counsel: Mark A. Frankel, Esq. Backenroth Frankel & Krinsky, LLP 489 Fifth Avenue New York, New York 10017 Tel: (212) 593-1100 Fax: (212) 644-0544 Total Assets Total Debts ------------ ----------- Zemach Corporation $13,602,000 $7,024,889 Bram Will El LLC $6,000,000 $7,030,904 William Muschel, LLC $10,003,000 $7,024,289 A. Zemach Corporation's 4 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Atlantic Welding & Sprinkler Initial payment $7,000 8 Wyckoff Avenue towards $48,000 Brooklyn, NY 11237 sprinkler contract Erwin Yesselman Management $6,000 85 Silver Lake Road Staten Island, NY 10301 Penn Proefiedt Schwarzfeld Serivces $2,477 114 W 47 Street, 19 Floor New York, NY 10036 Con Edison $1,366 JFK Station PO Box 1702 New York, NY 10116 B. Bram Will El LLC's 6 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Imico Funding Value of Security: $7,000,000 c/o Stark Amron et al. $6,000,000 7 Penn Plaza Ste. 600 New York, NY 10001 City of New York Value of Security: $24,289 NYC Law Department $6,000,000 100 Church Street Value of Senior Lien: New York, NY 10007 $7,000,000 Erwin Yesselman Management $6,000 85 Silver Lake Road Staten Island, NY 10301 Atlantic Welding & Sprinkler $350 8 Wyckoff Avenue Brooklyn, NY 11237 Penn Proefiedt Schwarzfeld Serivces $200 114 W 47 Street, 19 Floor New York, NY 10036 Con Edison $65 JFK Station PO Box 1702 New York, NY 10116 ZEUS SPECIAL: S&P Assigns B Ratings to Senior Discount Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' rating to Zeus Special Subsidiary Ltd.'s senior discount notes due 2015, which will initially yield $300 million of net proceeds. The notes will be issued under Rule 144A with registration rights. They will accrete for five years and then pay cash interest. Parent Intelsat Ltd. will be the co-obligor. The outlook on Intelsat was revised to negative from stable. Ratings on the company (including the 'BB-' corporate credit rating) and its affiliates were affirmed. "The outlook revision is a direct result of the proposed note issue," noted Standard & Poor's credit analyst Rosemarie Kalinowski. "The revision reflects not only the increase in absolute debt, but also a shift to a somewhat more aggressive financial policy." The new notes will be used to repay preferred stock issued by Intelsat's 100% owner, Zeus Holdings Ltd. Proceeds from the new debt will remain at Zeus Special Subsidiary Ltd. pending FCC approval of a reorganized corporate structure. Upon FCC approval, the senior discount notes will then become an obligation of Intelsat Bermuda Ltd. and the $650 million credit facility and $2.55 billion of senior unsecured notes that currently reside at Intelsat Bermuda Ltd. will become obligations of the newly created Intelsat Subsidiary Holding Co. Ltd. The new Zeus Special Subsidiary Ltd. notes are rated two notches lower than the corporate credit rating, reflecting that, after the reorganization, these notes will be junior to all of the debt at Intelsat Subsidiary Holding Co. Ltd. Pro forma for the new discount notes issue, as of Sept. 30, 2004, debt to EBITDA weakens slightly to 6.3x from 5.9x, while EBITDA coverage of gross interest expense is in the low 2.0x area. In the event that the FCC does not approve the reorganization, the discount notes will be redeemed. On Jan. 28, 2005, Zeus Holdings Ltd. completed its largely debt- financed acquisition of Intelsat Ltd. Ratings on Intelsat reflect the significant financial risk accruing from that largely debt- financed acquisition, as well as the more aggressive financial policy of its new owners. Business risk concerns include mature industry growth prospects, excess satellite capacity, competition from terrestrial fiber networks in the channel product (point-to-point traffic), and potential risk of satellite failure. These factors are somewhat mitigated by the solid business risk characteristics of stable, predictable cash flow from long-term contracts, limited competition because of high barriers to entry and orbital slot scarcity over key geographic areas, the essential nature of satellite services to key customers (particularly government agencies), and customer diversity. In addition, Intelsat's global fleet of satellites enables it to accommodate the multinational voice, data, and video needs of its solid customer base. * Helen Duncan to Lead Fulbright's California Litigation Practice ----------------------------------------------------------------- The international law firm of Fulbright & Jaworski L.L.P. has named Helen Lalich Duncan as been named Head of the Litigation Department for the firm's Los Angeles office. "With more than 20 years of great trial results, Helen is well positioned to lead our California litigation practice," said Stephen C. Dillard, Head of Fulbright's Worldwide Litigation Department. "She also exhibits the leadership capacity and visionary thinking that positions her to be effective in this role." Ms. Duncan, who joined Fulbright & Jaworski in 2002, will continue her national practice focusing on class action, securities, insurance insolvency, and tax litigation, while further developing the West Coast litigation practice for increased client service in the greater Los Angeles area, according to Dillard. "I'm pleased to have the opportunity to work alongside our excellent lawyers to broaden our client base and offer the depth of trial talent for which Fulbright is known," said Ms. Duncan. Ms. Duncan was recognized as one of the Best Lawyers in America in 2005-2006 and a "Super Lawyer" by Los Angeles Magazine and Southern California Super Lawyers in 2003-2004. Additional information on her experience and professional honors can be found on the firm's Web site at http://www.fulbright.com/ The Los Angeles Litigation Department includes approximately 45 attorneys whose diverse trial and appellate practice includes complex business litigation, securities, class action litigation, antitrust, insurance insolvency related litigation, products liability, environmental and bankruptcy litigation. About Fulbright & Jaworski L.L.P. Fulbright & Jaworski L.L.P. -- http://www.fulbright.com/-- is consistently ranked among the best litigation firms in the United States. The firm was named a top U.S. dispute resolution law firm in the Global Counsel 2004/2005 Dispute Resolution Handbook; among the "Arbitration Elite" by The American Lawyer; a top 10 U.S. law firm for intellectual property litigation by IP Worldwide; among the nation's top 30 firms for client service by BTI Consulting and a top 20 corporate law firm in America by Corporate Board Member Magazine. Founded in 1919, Fulbright is a full-service international law firm, with approximately 900 attorneys in 11 offices. * Rick Cieri Joins Kirkland & Ellis as Partner in New York Office ----------------------------------------------------------------- Kirkland & Ellis LLP welcomes Richard (Rick) M. Cieri as a partner in the Firm's New York office. The former head of the Business Restructuring and Reorganization Practice at Gibson, Dunn & Crutcher LLP, Mr. Cieri will join Kirkland's Restructuring, Insolvency, Workout & Bankruptcy Practice. Having been involved in some of the largest Chapter 11 cases in history, he brings a wealth of experience to Kirkland. "We are delighted to have a lawyer of Rick's stature join our partnership," says Thomas D. Yannucci, who chairs Kirkland's management committee. "Rick is a recognized leader in his field and will be a tremendous asset to our Firm. His arrival will only further enhance Kirkland's strong and growing New York office." "I have known Rick for more than 20 years and have worked alongside him," added James H.M. Sprayregen, the senior-most partner in Kirkland's Restructuring, Insolvency, Workout & Bankruptcy Practice. "He will add a big bat to our talented lineup." "This move will allow me to explore new opportunities and new challenges in a different environment," stated Mr. Cieri. "I am delighted to be joining a team as strong as Kirkland & Ellis LLP. I look forward to helping expand Kirkland's bankruptcy practice." Mr. Cieri, 48, has been regarded as one of the country's outstanding restructuring lawyers by numerous leading publications such as Chambers & Partners. In Chambers USA: America's Leading Lawyers for Business 2004 Guide, the publication noted: "Peers agree that he is a 'megaplayer on the debt side' and a smart deal- maker." Lexpert magazine -- a leading Canadian legal publication -- also called Mr. Cieri an "American superstar" in a March 2003 article on cross-border corporate restructuring. In addition, he has repeatedly been recognized as a top bankruptcy lawyer by Turnarounds & Workouts; the K&A Restructuring Register of "America's Top 100 Restructuring Professionals;" The Best Lawyers in America; The Guide to the World's Leading Financial Law Firms; Global Counsel Handbooks: Restructuring and Insolvency 2004/05; and The Guide to the World's Leading Insolvency Lawyers. In April 2000, The American Lawyer named him as one of its top corporate Dealmakers of the Year, the first time the publication ever named a restructuring lawyer to this prestigious list. Mr. Cieri's practice involves representing debtors, creditors' committees, and secured creditors in restructurings and bankruptcies, advising the boards of directors of financially troubled companies, providing advice in connection with tort and product liability claims facing a debtor and technology and intellectual property issues, in the structuring of secured and commercial transactions (including advice related to fraudulent conveyance, corporate spin-offs, and related securities issues), and the acquisition of and lending to financially troubled companies. He has played a key role in many of the country's largest Chapter 11 cases and business restructuring matters. He was debtors' counsel to: -- Federated Department Stores, Inc./Allied Stores Corporation; -- Trans World Airlines, Inc.; -- LTV Steel Company, Inc.; -- Solutia, Inc.; -- Laidlaw Inc.; -- Allegheny Energy, Inc.; -- NRG Energy, Inc.; -- The Loewen Group; -- Purina Mills, Inc.; -- Fruehauf Trailer Corporation; -- Montgomery Ward Holding Corp., Incorporated; -- World Kitchen, Inc.; -- Teleglobe Inc.; -- Napster, Inc.; -- Morrison Knudsen Corporation; -- Great American Communications Company; -- The Elder-Beerman Stores Corporation; -- Rax Restaurants, Inc.; and -- Cardinal Industries, Inc. in their respective chapter 11 cases or out-of-court restructurings. Also, Mr. Cieri was creditors' committee counsel in the Official Financial Institutions' Committee of: -- Kmart Corporation; -- Olympia & York Developments Limited; -- Allegheny Health, Education and Research Foundation; -- the Stratosphere Corporation; and -- GWI, Inc. and Specialty Foods Corporation Chapter 11 cases. He was also counsel to Federated Department Stores in its acquisition of R.H. Macy & Co., Inc. He has also gained notoriety on the speaking and writing circuits. Mr. Cieri has lectured and written numerous articles dealing with fiduciary duties of directors of financially troubled corporations, the restructuring of troubled leveraged buyouts, spin-offs, resolution of tort and product liability claims, fraudulent conveyances, prepackaged bankruptcy plans, intellectual property and technology issues in bankruptcy, plan confirmation and cramdown requirements of the Bankruptcy Code, securities issues in bankruptcy, and reclamation rights. Prior to joining Gibson, Dunn, & Crutcher LLP, Mr. Cieri was at Jones, Day, Reavis & Pogue for 18 years. His last position there was as chair of the Business Restructuring and Reorganization Practice. He earned his undergraduate degree from State University of New York at Buffalo and then graduated from the University of Michigan Law School. Mr. Cieri is married and has a daughter and a son. Kirkland & Ellis LLP is a 1,000-attorney law firm representing global clients in complex workout, insolvency and bankruptcy, corporate and tax, litigation, dispute resolution and arbitration, and intellectual property and technology matters. The Firm has offices in New York, Chicago, London, Munich, Los Angeles, San Francisco, and Washington D.C. * BOND PRICING: For the week of February 7 - February 11, 2005 -------------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Comm. 3.250% 05/01/21 15 Adelphia Comm. 6.000% 02/15/06 14 AMR Corp. 4.250% 09/23/23 74 AMR Corp. 4.500% 02/15/24 71 AMR Corp. 9.000% 08/01/12 72 AMR Corp. 10.200% 03/15/20 64 Applied Extrusion 10.750% 07/01/11 59 Armstrong World 6.350% 08/15/03 74 Bank New England 8.750% 04/01/99 11 Burlington Northern 3.200% 01/01/45 62 Calpine Corp. 7.750% 04/15/09 70 Calpine Corp. 7.875% 04/01/08 74 Calpine Corp. 8.500% 02/15/11 69 Calpine Corp. 8.625% 08/15/10 69 Cendant Corp. 4.890% 08/17/06 51 Chic East Ill. RR 5.000% 01/01/54 60 Comcast Corp. 2.000% 10/15/29 45 Cluett American 10.125% 05/15/08 64 Delta Air Lines 2.875% 02/18/24 56 Delta Air Lines 7.711% 09/18/11 67 Delta Air Lines 7.900% 12/15/09 51 Delta Air Lines 8.000% 06/03/23 55 Delta Air Lines 8.300% 12/15/29 41 Delta Air Lines 9.000% 05/15/16 42 Delta Air Lines 9.250% 03/15/22 41 Delta Air Lines 9.750% 05/15/21 41 Delta Air Lines 10.000% 08/15/08 63 Delta Air Lines 10.125% 05/15/10 49 Delta Air Lines 10.375% 02/01/11 49 Falcon Products 11.375% 06/15/09 38 Federal-Mogul Co. 7.500% 01/15/09 33 Finova Group 7.500% 11/15/09 47 Iridium LLC/CAP 14.000% 07/15/05 16 Inland Fiber 9.625% 11/15/07 49 Kaiser Aluminum & Chem. 12.750% 02/01/03 18 Lehmann Bros. Hldg. 21.680% 02/07/05 66 Level 3 Comm. Inc. 2.875% 07/15/10 64 Level 3 Comm. Inc. 6.000% 03/15/10 56 Level 3 Comm. Inc. 6.000% 09/15/09 57 Liberty Media 3.750% 02/15/30 67 Liberty Media 4.000% 11/15/29 71 Loral Cyberstar 10.000% 07/15/06 73 Mirant Corp. 2.500% 06/15/21 74 Mirant Corp. 5.750% 07/15/07 75 Mississippi Chem. 7.250% 11/15/17 73 Northern Pacific Railway 3.000% 01/01/47 61 Northwest Airlines 7.875% 03/15/08 73 Northwest Airlines 10.000% 02/01/09 75 NRG Energy Inc. 6.500% 05/16/06 0 Nutritional Src. 10.125% 08/01/09 73 Oglebay Norton 10.000% 02/01/09 75 O'Sullivan Ind. 13.375% 10/15/09 39 Owens Corning 7.000% 03/15/09 71 Owens Corning 7.500% 05/01/05 72 Owens Corning 7.500% 08/01/18 69 Pegasus Satellite 12.375% 08/01/06 63 Pegasus Satellite 13.500% 03/01/07 1 Pen Holdings Inc. 9.875% 06/15/08 50 Primus Telecom 3.750% 09/15/10 68 Reliance Group Holdings 9.000% 11/15/00 24 Revlon Cons. Prod. 8.125% 02/01/06 45 RJ Tower Corp. 12.000% 06/01/13 56 Salton Inc. 12.250% 04/15/08 75 Syratech Corp. 11.000% 04/15/07 49 Trico Marine Service 8.875% 05/15/12 73 United Air Lines 9.125% 01/15/12 8 United Air Lines 10.670% 05/01/04 8 Univ. Health Services 0.426% 06/23/20 57 Westpoint Stevens 7.875% 06/15/05 2 Westpoint Stevens 7.875% 06/15/08 2 Zurich Reinsurance 7.125% 10/15/23 63 ********* 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 ***