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/raid1/www/Hosts/bankrupt/TCR_Public/050210.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, February 10, 2005, Vol. 9, No. 34 Headlines 360NETWORKS INC: Commences Cash Tender Offer for Common Shares ACTUANT CORP: Key Components Acquisition Cues S&P to Hold Ratings ADELPHIA COMMS: Sells Security Business to Devcon for $42.8MM AER AVIATION INC: Case Summary & 10 Largest Unsecured Creditors AIRGATE PCS: Posts $15.3 Million Net Loss in First Quarter AMRESCO COMMERCIAL: Puts Low-B Ratings on 3 Certificate Classes BALTIMORE MARINE: Hires Penta Advisory as Accountants and Advisors CASCADES INC: Keeps Profitability Despite Rise of Canadian Dollar CASE FINANCIAL: Losses & Deficit Trigger Going Concern Doubt CATHOLIC CHURCH: Spokane Wants CNA's Request to Lift Stay Denied COLTS 2005-1: S&P Places BB+ Rating on $10.575M Class E Notes CONSTRUX CONSTRUCTION: Wants to Use $1 Million of Cash Collateral CONSTRUX CONSTRUCTION: Taps Francis J. Giganti as General Counsel CORNING INC: S&P Places Low-B Ratings on CreditWatch Positive COVANTA ENERGY: Wants Exclusive Period Stretched to June 15 CUES INC: Case Summary & 14 Largest Unsecured Creditors CROWN OIL: Case Summary & 8 Largest Unsecured Creditors DANNY'S DIGGIN': Case Summary & 10 Largest Unsecured Creditors DEL MONTE: Subsidiary Successfully Completes Refinancing DIMON INC: Posts $1.9 Million Net Loss in Third Quarter 2005 DONNKENNY INC: Files Joint Plan of Reorganization in New York DONNKENNY INC: Secures $60 Million DIP Loan from CIT Group EAGLE PICHER: Poor Liquidity Cues S&P to Pare Credit Rating to B- ENRON CORP: Court Approves Allocation of Reserved Funds FEDERAL-MOGUL: U.K. Administrators Object to Plan Confirmation FEDERAL-MOGUL: Points Out Flaws in FAIR Act Draft FIDELITY NATIONAL: S&P Assigns BB Corp. Credit & Sr. Sec. Ratings FLEXTRONICS: Completes Transfer of Nortel's Montreal Operations FRIEDMAN'S: U.S. Trustee Appoints 9-Member Creditors Committee FRIEDMAN'S: Committee Retains Ellis Painter as Local Counsel FRIENDS HOSPITAL: Moody's Affirms B2 Bond Rating After Review HEALTH NET: Fitch Downgrades Senior Debt Rating to BB+ HEALTH NET: S&P Places Low-B Ratings on CreditWatch Negative HEILIG-MEYERS: RoomStore Disclosure Statement Hearing on Mar. 8 HIGH VOLTAGE: Files Chapter 22 Petition in Boston, Massachusetts HIGH VOLTAGE: Case Summary & 36 Largest Unsecured Creditors HORNACO INC: Case Summary & 40 Largest Unsecured Creditors ILLINOIS HEALTH: S&P Lifts Rating on Revenue Bonds to CCC from CC INTELSAT: Discount Note Issue Cues Fitch to Junk Senior Notes INTERSTATE HOTELS: Hosting 4th Quarter Earnings Call on Feb. 23 IWO HOLDINGS: Emerging from Bankruptcy Protection Today KEY COMPONENTS: Actuant Acquisition Cues S&P to Withdraw B- Rating KISTLER AEROSPACE: Gets Insurance Premium Financing from Cananwill KITCHEN ETC: Judge Walsh Confirms Second Amended Liquidation Plan KMART CORP: Settles Samsung Claim Assignment Dispute KRISPY KREME: Reducing Workforce by 25% to Save $7.4 Million LACLEDE STEEL: Disclosure Statement Hearing Scheduled for March 7 LEVI STRAUSS: S&P Places Junk Ratings on CreditWatch Positive MANUFACTURED HOUSING: S&P's Rating on Three Classes Tumbles to D MB TECH: Restructuring of Korean Operation Reduces Debt MIRANT CORPORATION: Court Orders Intercompany Claim Disclosures MOSAIC GROUP: Can Start Liquidating MCI Stock NEW SKIES: Wants to Amend Bank Loan via Deutsche Bank on IPO NEW VISUAL: Needs $820,000 to Operate Until April NORTEL NETWORKS: Completes Asset Transfer to Flextronics NORTHWESTERN CORP: Settles Litigation & Bankr. Claims with Magten NRG ENERGY: NRG McClain Wants Chapter 11 Case Dismissed OMNICARE INC: S&P Rates Proposed $345M Preferred Securities at BB ORMET CORP: Steelworkers Demand Fair Settlement OVERSEAS SHIPHOLDINGS: Moody's Confirms Ba1 Senior Unsec. Rating PARMALAT USA: Commences Adversary Proceeding Against Tuscan/Lehigh PEGASUS SATELLITE: Wants to Settle Dispute with Secured Lenders PHILIP SERVICES: Asks Court to Close 34 Chapter 11 Cases PILLOWTEX CORP: Court Approves Amendment to Trenwith Engagement PULASKI TIRE SERVICE: Case Summary & Largest Unsecured Creditors QUALTEC INC: Case Summary & 17 Largest Unsecured Creditors RADVIEW SOFTWARE: Dec. 31 Balance Sheet Upside-Down by $84,000 RIGGS NATIONAL: Moody's Pares Rating on Deposits from Baa3 to Ba1 RIGGS NATIONAL: Fitch Junks Subordinated Debt & Preferred Stock RITE AID: Closes Over-Allotment Option of Convertible Pref. Stock SAFETY-KLEEN: Creditor Trust Asks Court to Approve Market Hub Pact SEMGROUP LP: Moody's Lifts Secured Debt Rating to Ba3 from B1 SFBC INT'L: Registers 3.5 Million Common Shares for Public Offer SOLA INTERNATIONAL: Earns $9.4 Million of Net Income in 3rd Qtr. SOLUTIA INC: Court Approves Claim Waiver Procedures SPARKLE CLEANING: Case Summary & 11 Largest Unsecured Creditors SPEIZMAN INDUSTRIES: Court Confirms Amended Plan of Liquidation STANDARD COMMERCIAL: Earns $6.4 Million of Net Income in 3rd Qtr. STATER BROS: Dec. 26 Balance Sheet Upside-Down by $33.8 Million STONE TOWER: S&P Places Ratings on CreditWatch Positive TALCOTT NOTCH: S&P Affirms BB- Rating on Class A-4 Notes TEE JAYS MANUFACTURING: Section 341(a) Meeting Slated for March 23 UAL CORP: Inks Pact to Settle Advertising Dispute with Fallon UAL CORP: Court Okays Labor Pact Changes with Flight Attendants UNITED HOSPITAL: Creditors Committee Taps Thelen Reid as Counsel UNITED HOSPITAL: Hires Kurron Shares as Restructure Managers US AIRWAYS: Wants to Employ Global Insight as Experts USM CORPORATION: Case Summary & 20 Largest Unsecured Creditors WINN-DIXIE: Hosting Second Quarter Conference Call Today YOUTHSTREAM MEDIA: Losses & Deficit Trigger Going Concern Doubt YUKOS OIL: Gets Court Nod to Deposit $21 Million in Court Registry ZEMACH CORP: Taps Backenroth Frankel as Bankruptcy Counsel ZEMACH CORP: Section 341(a) Meeting Slated for March 7 * Sheppard Mullin Elects Five Attorneys to Partnership ********* 360NETWORKS INC: Commences Cash Tender Offer for Common Shares -------------------------------------------------------------- The Board of Directors of 360networks Corporation is aware that certain Shareholders of 360 have indicated on various occasions in the past their desire to sell all or a portion of their Shares. As there is no public trading of 360's Shares, most Shareholders have not have an opportunity to sell their Shares. 360 has considered various ways of providing liquidity to Shareholders. Accordingly, 360networks Corporation invites its shareholders to deposit common shares of 360. 360 will purchase less than all of its common shares for not more than $3 and not less than $2 per share. 360's offer to purchase expires at 5:00 p.m., Eastern Standard Time, on March 11, 2005, unless extended. A Shareholder may deposit Shares pursuant to: (a) an auction tender at a price between $2 and $3 per Share, in an increment of $0.10 per Share, specified by the Shareholder; or (b) a purchase price tender where the tendering Shareholder does not specify a price per Share, but rather agrees to have the Shareholder's Shares purchased at a certain Purchase Price. Shares deposited by a Shareholder pursuant to an Auction Tender will not be purchased by 360 if the price specified by the Shareholder is greater than the Purchase Price determined by 360. A Shareholder who wishes to deposit Shares but who does not wish to specify a price should make a Purchase Price Tender. For the purpose of determining the Purchase Price, Shares deposited pursuant to a Purchase Price Tender will be considered to have been deposited at $2 per Share. By making a Purchase Price Tender, a Shareholder will maximize the likelihood of having the holder's Shares purchased. 360 will purchase Shares under the Offer to a maximum aggregate amount of $8,000,000 plus any additional Shares pursuant to the exercise of the Issuer's Option, if any, and pursuant to Small Holding Purchases: Issuer's Option 360 will have the option, exercisable on or before the fifth day prior to the Expiration Date, to make available up to an additional $3,000,000 to purchase additional Shares at the Purchase Price to cover Over-Subscriptions. Over- Subscription occurs when the aggregate Purchase Price for Shares properly tendered exceeds $8,000,000. Proration If the number of Shares properly deposited by the Expiration Date is greater than the number of Shares that can be purchased for the Maximum Amount of $8,000,000, 360 will purchase at the Purchase Price the Shares deposited on a pro rata basis with adjustments to avoid the purchase of fractional shares. Small Holdings If, as a result of proration following the determination of the Purchase Price and exercise of the Issuer's Option, if any, the number of Shares to be returned to a Selling Shareholder is less than the 1,000 Shares, 360 will purchase at the Purchase Price all of the Shares from that Selling Shareholder to avoid the creation of Small Holdings -- holdings of less than 1,000 Shares. Multiple tenders pursuant to an Auction Tender at or below the Purchase Price or a Purchase Price Tender by the same shareholder will be aggregated for this purpose. All of 360's directors and senior officers owning vested options or Shares will be depositing vested options in the Option Buy-Back Program or will be depositing Shares pursuant to the Offer. 360 will take up Shares as soon as practicable after the Expiration Date, and in any event, within ten days after the Expiration Date and will pay for those Shares as soon as possible thereafter, but not later than three business days after taking up the Shares. The Purchase Price will be denominated and paid in U.S. dollars. The Board of Directors unanimously approved the Offer to provide all Shareholders with an opportunity for liquidity. Canadian securities laws prohibit 360 and its affiliates from acquiring any Shares, other than pursuant to the Offer, until at least 20 business days after the Expiration Date or termination of the Offer. 360 may in the future, subject to applicable law, purchase additional Shares in private transactions, through issuer bids or otherwise. Any purchases may be in the same terms, which are more or less favorable to Shareholders than the terms of the Offer. Any possible future purchases by 360 will depend on many factors, including 360's business and financial position, the results of the Offer and general economic and market conditions. Withdrawal Rights Deposits of Shares may be withdrawn by the Shareholder: (a) at any time, if the Shares have not been taken up by 360 before actual receipt by the Depositary of a notice of withdrawal in respect of the Shares; or (b) if the Shares have not been paid for by 360 within three business days of being taken up. 360 reserves the right to withdraw the Offer and not take up and pay for any Shares deposited under the Offer unless certain conditions are satisfied. Neither 360 nor its Board of Directors makes any recommendation to any Shareholder as to whether to deposit or to refrain from depositing Shares. Shareholders are urged to consult their own investment and tax advisors and make their own decision whether to deposit Shares to the Offer and, if so, how many Shares to deposit, and at what price or prices. Shareholders should carefully consider the income tax consequences of accepting the Offer. A full-text copy of the Offer is available for free at: http://bankrupt.com/misc/issuer_bid_circular.pdf Headquartered in Vancouver, British Columbia, 360networks, Inc. -- http://www.360.net/-- is a leading independent provider of fiber optic communications network products and services worldwide. The Company and its 22 debtor-affiliates filed for chapter 11 protection on June 28, 2001 (Bankr. S.D.N.Y. Case No. 01-13721), obtained confirmation of a plan on October 1, 2002, and emerged from chapter 11 on November 12, 2002. Alan J. Lipkin, Esq., and Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, represent the Company before the Bankruptcy Court. When the Debtors filed for protection from its creditors, they listed $6,326,000,000 in assets and $3,597,000,000 in liabilities. (360 Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) ACTUANT CORP: Key Components Acquisition Cues S&P to Hold Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on Actuant Corp., following the company's acquisition in December 2004 of Key Components, Inc., from an investor group for $315 million. The acquisition included the assumption of $80 million of debt of KCI's operating company, Key Components LLC. The ratings on Actuant have been removed from CreditWatch where they were placed Nov. 22, 2004, after Actuant announced its intent to acquire KCI. The ratings on Key Components were removed. The outlook on Milwaukee, Wisconsin-based Actuant is stable. "The ratings affirmation reflects our earlier indication that ratings would remain unchanged if management fulfilled its announced intent to issue equity in conjunction with the debt issuance undertaken to fund the KCI acquisition," said Standard & Poor's credit analyst Nancy Messer. "Although Actuant's leverage has increased somewhat pro forma for the acquisition, it remains at a level consistent with the 'BB' rating because of management's effort to balance the capital structure. The KCI acquisition demonstrates management's willingness to temporarily increase leverage in order to execute an attractive acquisition." Actuant had pro forma total balance sheet debt of about $442 million as of Jan. 31, 2005, incorporating the acquisition funding. The acquisition of KCI was funded by the issuance of $250 million in unrated term loans and $134 million of common equity. The $80 million debt assumed by Actuant in the acquisition was redeemed in January 2005. Actuant manufactures a variety of standard and customized products for niche automotive, industrial, and retail markets. Newly acquired KCI operates two business segments, electrical components and mechanical engineered components, which manufacture flexible shaft and remote valve components, turbocharger actuators and related accessories, battery chargers, wiring for uninterruptible power supplies, and other specialty electrical components for various end markets. The KCI acquisition, although significantly larger than what was incorporated into the 'BB' corporate credit rating, is consistent with Actuant's previously articulated growth strategy. The KCI businesses augment those of Actuant, and Standard & Poor's views positively Actuant's increase in scale and diversity. ADELPHIA COMMS: Sells Security Business to Devcon for $42.8MM ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved the asset purchase agreement between Devcon Security Services Corp. -- DSS, a wholly owned subsidiary of Devcon International Corp. (Nasdaq: DEVC), Adelphia Communications Corporation (OTC Pink Sheets: ADELQ) and certain of Adelphia's affiliates to purchase certain net assets of Adelphia's electronic security services operation, Starpoint Limited Partnership. The transaction is subject to satisfaction of certain approvals and other closing conditions and is expected to close on or before February 28, 2005. In approving the Devcon Sale Agreement, Judge Gerber makes it clear that the net proceeds of the Sale will be used in accordance with the terms of Extended DIP Order, dated May 6, 2004. The rights, if any, of Circle Acquisitions, Inc., and Circle Security Systems, Inc., with respect to the allocation of the net proceeds of the Sale will be reserved until the confirmation hearing on ACOM's plan of reorganization. DSS was the successful bidder for certain net assets of ACOM's electronic security services operation, Starpoint Limited Partnership, and has entered into a purchase agreement with Adelphia to acquire the operation. In announcing the successful bid, Stephen J. Ruzika, President of Devcon and DSS, said, "The acquisition of Adelphia's security services operation would make DSS a leader in the Florida electronic security services market. Opportunities exist to consolidate the operations of DSS and Adelphia Security, and we are optimistic that DSS will benefit from an increased market presence as a result of this platform acquisition." The estimated purchase price for the acquired net operating assets is approximately $42.8 million in cash, based substantially upon estimated contractually recurring monthly revenue of approximately $1.2 million. The purchase price is subject to adjustment, based primarily on the final contractual recurring monthly revenue calculation. DSS will be funding the transaction through available cash and a senior secured long-term debt facility. Adelphia's electronic security services operation being acquired is a leading provider of installation, monitoring and related security services to commercial and residential customers in Florida. The operation has sales and services offices in Boca Raton, Bonita Springs, Miami, Naples, Orlando and Tampa, as well as in Buffalo, New York. The operation has been ranked as the 19th largest electronic security services business in the United States by Security Dealer Magazine. The assets to be acquired include a modern, full-service monitoring center located in Naples, Florida, from which more than 57,000 subscribers' homes and businesses are monitored. After taking into consideration the planned acquisition and DSS's existing security services business, DSS would be providing security services to more than 62,000 customers. A copy of the Devcon Purchase Agreement is available for free at: http://bankrupt.com/misc/DevconAssetPurchaseAgreement.pdf Devcon has three operating divisions and an operating joint venture. The new Security Services Division provides electronic security services to commercial and residential customers in selected Florida markets. The Construction Division dredges harbors, builds marine facilities, constructs golf courses and prepares residential, commercial and industrial sites, primarily in the Bahamas and the eastern Caribbean. The Materials Division produces and distributes crushed stone, ready-mix concrete and concrete block in the eastern Caribbean with principal operations on St. Croix and St. Thomas in the U.S. Virgin Islands, on St. Maarten in the Netherlands Antilles, on St. Martin in the French West Indies, on Puerto Rico, and on Antigua in the independent nation of Antigua and Barbuda. DevMat, an 80-percent-owned joint venture, was formed in 2003 to build, own and operate fresh water, waste water treatment and power systems. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue Nos. 78 & 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) AER AVIATION INC: Case Summary & 10 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: AER Aviation, Inc. 13709 Gamma Road Addison, Texas 75244 Bankruptcy Case No.: 05-31584 Type of Business: The Debtor is in the aviation business. Chapter 11 Petition Date: February 8, 2005 Court: Northern District of Texas (Dallas) Judge: Barbara J. Houser Debtor's Counsel: Charles M. Hamilton, Esq. French and Hamilton 211 North Record Street, Suite 400 Dallas, Texas 75202 Tel: (972) 404-1414 Total Assets: $1,078,561 Total Debts: $1,208,402 Debtor's 10 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ East Texas Turbines Services $54,097 1874 County Road 1143 Tyler, Texas 75704 Central Texas Avionics Services $951 217 Corsair Drive Georgetown, Texas 78628 Raul Miranda Services $0 4917 Rolling Meadows #201 Dallas, Texas 75211 IRS Taxes $0 Mail Code 5020-DAL 1100 Commerce Street, Room 9B8 Dallas, Texas 75242 French & Hamilton Attorney Fees $0 Charles M. Hamilton 211 North Record Street Suite 400 Dallas, Texas 75202 Cord Johnson Sale of Aircraft $0 166 Rocky Point Abilene, Texas 76901 Colo Construction Company Sale of Aircraft $0 311 Forest Grove Richardson, Texas 75080 Bill and Greg Rand Unsecured Debt $0 2901 Dallas Parkway, Suite 380 Dallas, Texas 75093 Aviation Data Systems, Inc. Services $0 PO Box 634 Sanford, Florida 32772 Addison Airport of Texas Unsecured Debt $0 16051 Addison Road Addison, Texas 75001 AIRGATE PCS: Posts $15.3 Million Net Loss in First Quarter ---------------------------------------------------------- AirGate PCS, Inc. (Nasdaq:PCSA), a PCS Affiliate of Sprint, released its financial and operating results for its first fiscal quarter ended Dec. 31, 2004. Financial and operating highlights of the quarter include: -- Net loss for the quarter was $15.3 million, compared with net income of $173.0 million, in the first fiscal quarter of 2004. -- EBITDA, earnings before interest, taxes, depreciation and amortization, was $11.9 million compared with $11.8 million in the first fiscal quarter of 2004. -- Gross additions were 51,931 compared with 35,601 in the first fiscal quarter of 2004. -- Churn decreased to 2.72% from 3.10% in the first fiscal quarter of 2004. -- Net additions were 15,775 compared with 438 in the first fiscal quarter of 2004. -- Cash, cash equivalents and short-term investment securities increased to $110.0 million as of December 31, 2004 from $68.5 million at September 30, 2004. Notable financial effects during the quarter ended Dec. 31, 2003, included: -- A reduction to roaming revenues of approximately $0.9 million resulting from a correction in Sprint's billing system with respect to data-related inbound roaming revenues. -- A reduction of cost of service and roaming of $3.8 million related to a year-end settlement of 2003 Sprint service bureau fees and Sprint's decision to discontinue their billing system conversion. -- An increase of general and administrative expenses related to debt restructuring costs of $2.3 million. -- Net income was positively affected by a $184.1 million non- monetary gain from disposition of discontinued operations resulting from the elimination of the investment in iPCS. Recent Events On Dec. 8, 2004, it was disclosed that the Board of Directors approved a definitive agreement under which AirGate PCS, Inc., will merge with and into a wholly-owned subsidiary of Alamosa Holdings, Inc. Under the terms of the definitive agreement, AirGate shareholders will receive 2.87 Alamosa shares for every share of AirGate common stock they hold. Also, AirGate shareholders will have the option to elect cash consideration in place of Alamosa stock, up to an aggregate amount of $100 million, with the per share cash consideration based on the average closing price of Alamosa stock in the ten trading days prior to the completion of the transaction multiplied by 2.87. The shareholders of AirGate are scheduled to meet on Feb. 15, 2005, to vote on adoption of the merger agreement. Management Comments "AirGate is off to a great start for Fiscal 2005," said Thomas M. Dougherty, president and chief executive officer of AirGate PCS. "These improved results reflect the actions we have taken over the past year to strengthen our financial position, improve our operating efficiencies and increase the productivity of our sales channels. We will continue to build on this foundation and leverage our operating expertise to enhance our competitive position in the marketplace." "This was the first quarter in which we added a material number of wholesale subscribers," Mr. Dougherty continued. "We added approximately 23,000 wholesale subscribers during the quarter in addition to approximately 16,000 net subscribers added through our Sprint-branded business. We are very pleased with these net addition results especially considering that we were able to achieve a CPGA approaching $300 during the quarter." "The first quarter of Fiscal 2005 also marked a defining point for the Company as we announced a definitive agreement under which AirGate will merge with and into a wholly-owned subsidiary of Alamosa Holdings, Inc," Mr. Dougherty continued. "We believe that this proposed combination creates the premier Sprint PCS Affiliate serving a combined population of over 23 million residents and approximately 1.3 million subscribers. The increased scale of our combined company offers significant opportunities for additional operational and financial benefits, and will be a platform for future growth and value creation for customers and shareholders alike. Together we will leverage the assets and operating expertise of our companies, as well as the proven Sprint PCS brand, and move forward aggressively to strengthen our leadership position in the competitive wireless marketplace. With the proposed transaction with Alamosa, we have many reasons to be optimistic about the outlook for fiscal 2005. " About the Company AirGate PCS, Inc. is the PCS Affiliate of Sprint with the right to sell wireless mobility communications network products and services under the Sprint brand in territories within three states located in the Southeastern United States. The territories include over 7.4 million residents in key markets such as Charleston, Columbia, and Greenville-Spartanburg, South Carolina; Augusta and Savannah, Georgia; and Asheville, Wilmington and the Outer Banks of North Carolina. * * * As reported in the Troubled Company Reporter on Oct. 6, 2004, Moody's Investors Service assigned a B2 rating to the proposed $175 million of senior secured floating rate notes due 2011 of AirGate PCS, Inc., and affirmed the company's other ratings. The rating outlook is positive. The affected ratings are: * Senior implied rating B3 (affirmed) * Issuer rating Caa1 (affirmed) * $175 million senior secured floating rate notes due 2011 -- B2 (assigned) * $159 million 9.375% senior subordinated secured notes due 2009 -- Caa1 (affirmed) * $141 million senior secured credit facility due 2007/08 -- WR (withdrawn) AMRESCO COMMERCIAL: Puts Low-B Ratings on 3 Certificate Classes --------------------------------------------------------------- AMRESCO Commercial Mortgage Funding I Corp.'s mortgage pass- through certificates, series 1997-C1, are upgraded by Fitch Ratings: -- $9.6 million class F to 'AAA' from 'AA+'. These classes are affirmed by Fitch: -- $67.2 million class A-3 'AAA'; -- Interest-only class X 'AAA'; -- $24 million class B 'AAA'; -- $12 million class C 'AAA'; -- $21.6 million class D 'AAA'; -- $26.4 million class E 'AAA'; -- $31.2 million class G 'BBB-'; -- $4.8 million class H 'BB+'; -- $7.2 million class J 'B'; -- $2.4 million class K 'B-'. Fitch does not rate the $11.1 million class L certificates. The upgrades are primarily the result of increased subordination levels due to loan payoffs and amortization. As of the January 2005 distribution date, the pool's aggregate principal balance has been reduced by 54% to $217.4 million from $480.1 million at issuance. Realized losses to date total $938,463 or 0.20% of the original principal balance. Seven loans (14.3%) are in special servicing, including three 90 days delinquent loans (3.9%). A foreclosure is in process for two of these delinquent loans (3.08%), an office property in Salt Lake City, Utah (1.6%) and an industrial property in Leominster, Massachusetts (1.5%). Additionally, a discounted payoff is expected for the third loan (0.75%), secured by a retail property in Tonawanda, New York (0.75%). Four of the specially serviced loans (10.4%) are cross- collateralized and secured by multifamily properties in Tulsa, Oklahoma. The loans, previously delinquent, have been brought current and are expected to be returned to the master servicer shortly. BALTIMORE MARINE: Hires Penta Advisory as Accountants and Advisors ------------------------------------------------------------------ Alan M. Grochal, the Liquidating Agent for Baltimore Marine Industries, Inc., asks the U.S. Bankruptcy Court for the District of Maryland for authority to employ PENTA Advisory Services, LLC, as his successor accountants and financial advisors effective Jan. 3, 2005. PENTA is a spin-off from Navigant Consulting, Inc., the Debtor's former accountants. The Trustee does not wish to employ additional professionals but, rather seeks to continually employ previous members of Navigant whose employment has been transferred to PENTA. Michael Atkinson, Managing Director at PENTA, anticipates that his Firm will perform the same services previously performed by Navigant: a) advise the Liquidating Agent with respect to accounting, financial, and operational issues related to the estate and proposed actions of the Liquidating Agent and other parties; b) assist the Liquidating Agent in the preparation of the estate's tax returs and other tax liabilities; c) assist the Liquidating Agent in analyzing, and if appropriate, object to the claims of the Debtor's creditors and negotiate with such creditors; d) analyze preferential transfers and advise in preference litigation; e) advise and assist the Liquidating Agent in monetizing all nonliquidated assets that the estate has taken title to pursuant to the Plan; f) assist the Liquidating Agent in making distributions to holders of allowed claims pursuant to and in accordance with the terms of the Plan; g) assist the Liquidating Agent with analyzing the WARN act claims; and h) perform such other accounting, financial, and operating consulting services as may be required and are deemed to be in the interests of the estate in accordance with the Liquidating Agent's powers and duties as set forth in the Plan. The current hourly billing rates of PENTA's professionals are: Designation Rate ----------- ---- Managing Directors/Directors $320 - $450 Principals 260 - 330 Senior Engagement Managers 190 - 290 Consultants 150 - 260 Analysts/IT Staff 120 - 170 Administrative $80 To the best of the Liquidating Agent's knowlegde, PENTA is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Baltimore Marine Industries, Inc.'s main line of business is ship repair. The Company filed for chapter 11 relief on June 11, 2003 (Bankr. Md. Case No. 03-80215). Martin T. Fletcher, Esq., Cameron J. Macdonald, Esq., and Dennis J. Shaffer, Esq., at Whiteford Taylor & Preston L.L.P., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million each. The Court confirmed the Debtor's Joint Plan of Liquidation on June 25, 2004, offering 36% recovery to General Unsecured Creditors. CASCADES INC: Keeps Profitability Despite Rise of Canadian Dollar ----------------------------------------------------------------- Cascades Inc. (Symbol: CAS-TSX) reports net earnings of $23 million or $16 million of net earnings excluding specific items for the fiscal year ended Dec. 31, 2004. This compares with net earnings of $55 million or net earnings excluding specific items of $16 million for the same period in 2003. Sales increased 8.6% to $3.3 billion from $3 billion in 2003. Commenting on the results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "Throughout 2004 we were faced with some of the most challenging business conditions our industry has gone through in recent memory. However, Cascades was able to maintain its level of earnings and cash flow despite the appreciation of the Canadian dollar and the increased fibre and energy costs which were only partly offset by higher selling prices. Additional volumes in the US resulting from recent acquisitions in our packaging and tissue businesses and ongoing improvement in production efficiencies have contributed significantly to our ability to maintain this stability." Business highlights for 2004 -- Cascades maintains earnings and cash flow from operations level despite an 8% increase in the Canadian dollar; -- Increased integration (converting) through recently acquired Tissue and Packaging assets allowing Cascades to be closer to the end-user of its products; -- Focus on our core businesses of Packaging and Tissue with the decision to divest our distribution activities; and -- Cascades named amongst Canada's top 100 employers for the second consecutive year. Three-month period ended December 31, 2004 Sales increased by 11% during the fourth quarter of 2004, amounting to $806 million compared with $727 million for the same period last year. The increase was due mainly to business acquisitions realized over the course of the year. Higher prices were mitigated by higher energy and fibre costs and by the impact of an increase in the Canadian dollar exchange rate. Operating income amounted to $3 million for the period compared to $8 million achieved last year. Net earnings for the quarter ended Dec. 31, 2004 amounted to $5 million or $2 million of net earnings excluding specific items compared to net earnings of $6 million or a loss of $3 million of excluding specific items for the same period in 2003. The month of December 2004 was particularly difficult as downtime was extended to avoid building excess inventories. During the fourth quarter of 2004, the Company recorded an impairment charge of $18 million ($12 million after-tax) related to the property, plant and equipment of its de-inked pulp mill located in Cap-de-la-Madeleine, Quebec which was temporarily closed in March 2003. The Company has decided to permanently close this facility. Outlook Mr. Alain Lemaire, President and Chief Executive Officer added: "The last quarter was impacted by extended downtime in most of our operating sectors, representing approximately 6% of our primary mill quarterly capacity. This downtime will reduce our inventory levels going forward. The increase of energy, raw material and maintenance costs also impacted the results. While some of our markets remain very challenging, general economic conditions still remain favourable, especially in North-America. However, profitability going forward will continue to be sensitive to selling prices and the level of the Canadian dollar. Over the course of the next few months our priorities will be to complete the successful integration of recently acquired businesses while applying strict cash flow management in order to further deleverage our balance sheet." Dividend on Common Shares The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid on Mar. 17, 2005 to shareholders of record at the close of business on Mar. 3, 2005. About the Company Cascades, Inc., manufactures packaging products, tissue paper and specialized fine papers. Internationally, Cascades employs 15,400 people and operates close to 150 modern and versatile operating units located in Canada, the United States, France, England, Germany and Sweden. Cascades recycles more than two million tons of paper and board annually, supplying the majority of its fibre requirements. Leading edge de-inking technology, sustained research and development, and 40 years in recycling are all distinctive strengths that enable Cascades to manufacture innovative value-added products. Cascades' common shares are traded on the Toronto Stock Exchange under the ticker symbol CAS. * * * As reported in the Troubled Company Reporter on Nov. 15, 2004, Moody's Investors Service downgraded Cascades Inc.'s senior implied rating to Ba2. The ratings were also downgraded on Cascades, Inc.'s secured revolver, to Ba1 from Baa3, and on its senior unsecured notes, to Ba3 from Ba1. CASE FINANCIAL: Losses & Deficit Trigger Going Concern Doubt ------------------------------------------------------------ In their report dated December 19, 2004 on the financial statements for the fiscal year ended September 30, 2004, Case Financial, Inc.'s independent auditors -- Gumbiner Savett Inc. in Santa Monica, California -- expressed substantial doubt about the company's ability to continue as a going concern. Case Financial incurred a $2,578,438 net loss in the year ending Sept. 30, 2004, and posted $3,127,190 net loss the year earlier. There was an accumulated deficit of $12,444,158 as of September 30, 2004, and total liabilities exceeded total assets by $3,950,530 as of September 30, 2004. "We have been experiencing cash flow problems and new management is evaluating whether the overall business model is sustainable or should be discontinued so we can pursue a different business strategy," Case Financial said in a recent regulatory filing. Case Financial, Inc. provides pre-settlement and post-settlement litigation funding services to attorneys (and, previously, plaintiffs) involved in personal injury and other contingency litigation, conducted primarily within the California courts. CATHOLIC CHURCH: Spokane Wants CNA's Request to Lift Stay Denied ---------------------------------------------------------------- As previously reported, The Diocese of Spokane, by its own account, faces over 125 claims by individuals who allege that they were sexually abused as children by priests associated with the Diocese. Spokane has asserted defense and indemnity coverage claims for certain of the sexual abuse claims under primary general liability insurance policies allegedly issued to Spokane by CNA between 1976 and 1977 and between 1979 and 1989. CNA consists of: (a) American Casualty Company of Reading, (b) Pennsylvania, Columbia Casualty Company, (c) Continental Insurance Company, (d) Pacific Insurance Company, and (e) The Glens Falls Insurance Company With the exception of The Glens Falls Insurance Company, whose policy specifically bars coverage for sexual abuse-related claims, CNA has been funding Spokane's legal defense pursuant to a reservation of rights and cost-sharing arrangement with certain of Spokane's other alleged insurers. Before the Petition Date, Spokane demanded that its insurers settle many of the claims, waive coverage defenses, and accept Spokane's position on all disputed matters. CNA rejected the unreasonable demands. CNA asks Judge Williams to lift the automatic stay under Section 362(d)(1) of the Bankruptcy Code so it may continue the Declaratory Judgment Action. Charles R. Ekberg, Esq., at Lane Powell, PC, in Seattle, Washington, asserts that lifting the automatic stay would promote judicial economy. Mr. Ekberg explains that the Spokane County Superior Court is in the best position to hear and resolve the coverage litigation in an economic manner and consistent with the requirements and limitations of Article III and the Seventh Amendment of the United States Constitution. Objections A. The Diocese of Spokane Spokane asks Judge Williams to deny CNA's request to lift the automatic stay. On January 5, 2005, Spokane removed the lawsuit Pacific Insurance Company, et al. v. Catholic Bishop of Spokane et al., pending in Spokane County Superior Court to the U.S. Bankruptcy Court for the Eastern District of Washington, together with 20 other state court actions involving over 50 plaintiffs. Shaun M. Cross, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, in Spokane, Washington, contends that Spokane's removal of the CNA Declaratory Judgment Action renders CNA's request to lift the stay moot. Mr. Cross also tells Judge Williams that the factual assertions contained in CNA's lift stay request are argumentative, present a self-serving characterization of CNA's position regarding insurance coverage, and are irrelevant to the issue of whether cause exists for the Court to lift the automatic stay. Mr. Cross relates that Patrick O'Donnell testified recently in deposition that he advised his spiritual confessor many years ago at the St. Thomas Seminary in Seattle of his attraction to young boys. Mr. Cross explains that Spokane was not aware that Fr. O'Donnell had this discussion with his spiritual confessor until his deposition was taken in 2004 -- long after the sexual abuse lawsuits were initiated. Furthermore, any communications made by Fr. O'Donnell to his confessor were privileged under Washington law at the time they were allegedly made. Regarding the information and events surrounding the mediation that occurred from November 1 to 4, 2004, Spokane disputes CNA's allegation that it was not provided with sufficient information prior to mediation. Mr. Cross points out that Spokane provided voluminous amounts of data to CNA as well as the requested information prior to mediation. After that, CNA took an argumentative and unreasonable settlement position immediately prior to, and during mediation. CNA provided token settlement authority to address multiple claims and unreasonably refused to negotiate in further attempts to resolve the claims. Spokane believes that the Bankruptcy Court is the proper forum for the determination of all insurance coverage issues. The issues regarding insurance coverage will be intertwined in nearly every aspect of Spokane's Chapter 11 case. The Bankruptcy Court will most efficiently determine determination of insurance coverage issues. The Bankruptcy Court and not the Superior Court must make all determinations regarding property of Spokane's bankruptcy estate. Spokane does not object to the speedy prosecution of the CNA Declaratory Judgment Action in the Bankruptcy Court. B. Tort Committee George E. Frasier, Esq., at Riddell Williams P.S., in Seattle, Washington, informs the Court that Spokane's Official Committee of Tort Claimants intends to intervene in the CNA Declaratory Judgment and expects to file its pleadings for intervention by March 1, 2005. Mr. Frasier relates that the Tort Committee does not have first- hand knowledge regarding factual assertions contained in CNA's request and of CNA's Declaratory Judgment Action, which was filed 12 days after Spokane announced its intention to file a Chapter 11 petition. The Tort Committee supports Spokane's objection to CNA's request to lift the automatic stay. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Archdiocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) COLTS 2005-1: S&P Places BB+ Rating on $10.575M Class E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CoLTS 2005-1 Ltd./CoLTS 2005-1 Corp.'s $411,933,473 asset-backed, floating-rate notes series 2005-1. The preliminary ratings are based on information as of Feb. 8, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflects: -- the credit enhancement provided to each class of notes through the subordination of cash flows to the preference shares; -- the transaction's cash flow structure, which has been subjected to various stresses requested by Standard & Poor's; and -- the legal structure of the transaction, including the bankruptcy remoteness of the issuer. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned CoLTS 2005-1 Ltd./CoLTS 2005-1 Corp. Class Rating Amount ($) ----- ------ ---------- A-1 AAA 279,191,000 A-2 (revolver) AAA 11,083,333 B AA 23,266,000 C A 31,726,000 D BBB 25,381,000 E BB+ 10,575,000 Equity N.R. 41,793,767 Note: Classes B through E will be able to defer interest. N.R. - Not rated. CONSTRUX CONSTRUCTION: Wants to Use $1 Million of Cash Collateral ----------------------------------------------------------------- Construx Construction of Illinois, Inc., asks the U.S. Bankruptcy Court for the Central District of Illinois for authority to use up to $1 million of cash collateral securing repayment of the company's obligations to Central Bank of Illinois. The Debtor needs access to cash collateral to continue its day-to- day business operations. Without the use of the cash collateral, the estate will be irreparably harmed. To protect the Lender's interest, the Debtor proposes to provide Central Illinois Bank a security interest in all new accounts, contract rights, chattel paper, documents, general intangibles, equipment, furniture, and fixtures acquired by Construx after the petition date. Construx did not submit a budget showing how it proposed use the cash collateral. Headquartered in Springfield, Illinois, Construx Construction of Illinois, Inc. -- http://www.construxofillinois.com/-- designs and builds commercial, residential and industrial structures. The Company filed for chapter 11 protection on Jan. 27, 2005 (Bankr. C.D. Ill. Case No. 05-70329). When the Debtor filed for protection from its creditors, it estimated assets and debts at $50 million. CONSTRUX CONSTRUCTION: Taps Francis J. Giganti as General Counsel ----------------------------------------------------------------- Construx Construction of Illinois, Inc., seeks authority from the U.S. Bankruptcy Court for the Central District of Illinois to retain Francis J. Giganti, Esq., of Springfield, Illinois, as its bankruptcy counsel. Mr. Giganti will render all necessary services required in this bankruptcy proceeding. He will charge the Debtor for legal services at his current $175 hourly rate. To the best of the Debtor's knowledge, Mr. Giganti doesn't hold any interest materially adverse to the Company or its estate. Headquartered in Springfield, Illinois, Construx Construction of Illinois, Inc. -- http://www.construxofillinois.com/-- designs and builds commercial, residential and industrial structures. The Company filed for chapter 11 protection on Jan. 27, 2005 (Bankr. C.D. Ill. Case No. 05-70329). When the Debtor filed for protection from its creditors, it estimated assets and debts at $50 million. CORNING INC: S&P Places Low-B Ratings on CreditWatch Positive ------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB+' corporate credit and its other ratings on Corning, New York-based Corning Inc. on CreditWatch with positive implications. "The CreditWatch listing, which we expect to resolve by late March following meetings with the company, reflects sharply improving credit measures driven by a conservative financial policy that has been very focused on a stronger financial profile," said Standard & Poor's credit analyst Robert Schulz. "Our review will focus on the company's business prospects and risks, especially in its LCD segment, including evaluating how Corning's rebounding financial profile would be affected either by ongoing, solid LCD growth and the resulting investment needs or by an unexpectedly sharp slowdown in demand. We will also consider how a currently very strong liquidity profile will evolve." If we conclude that the company's various businesses should continue to be viewed as average in the aggregate and that the financial profile can be expected to attain and remain consistent with an investment-grade rating in light of business risks, a modest upgrade is possible. Alternatively, we may conclude that the visibility regarding LCD prospects in particular, but also regarding fiber/cable and diesel, makes an upgrade premature, and so we may affirm the current rating and revise the outlook to positive. Liquidity remains an important underpinning of the rating. At Dec. 31, 2004, Corning had around $1.8 billion in cash and short-term investments, most of which were domestically held and available, and an undrawn $2 billion revolving credit facility that expires Aug. 5, 2005, but is expected to be replaced in the spring of 2005. COVANTA ENERGY: Wants Exclusive Period Stretched to June 15 ----------------------------------------------------------- By this motion, the three remaining Debtors -- Covanta Warren Energy Resource Co., LP, Covanta Warren Holdings I, Inc., and Covanta Warren Holdings II, Inc. -- ask the United States Bankruptcy Court for the Southern District of New York to extend their exclusive periods to: -- file a plan or plans of reorganization to June 15, 2005; and -- solicit acceptances of that plan to August 16, 2005. The operations of all three Remaining Debtors relate to a waste- to-energy facility located in Oxford Township, Warren County, New Jersey. The Remaining Debtors have been engaged in discussions and negotiations with the Pollution Control Financing Authority of Warren County for an extended period of time concerning a potential restructuring of the parties' rights and obligations under various agreements related to the operation of the Warren Facility. Those negotiations were in part precipitated by a 1997 federal Court of Appeals decision invalidating certain of the State of New Jersey's waste-flow laws, which resulted in significantly reduced revenues for the Warren Facility. Since 1999, the State of New Jersey has been voluntarily making debt service payments with respect to the project bonds issued to finance construction of the Warren Facility, and Covanta Warren Energy Resource has been operating the Warren Facility pursuant to a letter agreement with the Pollution Control Authority establishing the terms on which the Remaining Debtors have been operating the Warren Facility. In addition to their negotiations with the Pollution Control Authority, the Remaining Debtors have been engaged in negotiations with the Authority and Oxford Township concerning the fees paid by the facility to Oxford Township, and it appears that the parties have reached an agreement concerning a reduction in the amount of those fees. The Remaining Debtors are continuing to evaluate a restructuring of the contractual arrangements governing their operation of the Warren Facility. Consistent with their business judgment and their obligation to seek to maximized recoveries for creditors generally, the Remaining Debtors are continuing to evaluate their options for a plan, and, among other things: -- whether to litigate with counterparties to certain agreements with Covanta Warren; -- assume or reject one or more executory contracts related to the Warren Facility; or -- liquidate Covanta Warren Energy Resource. Vincent E. Lazar, Esq., at Jenner & Block, LLP, in Chicago, Illinois, points out that the Remaining Debtors need more time so that they can continue their work toward achieving the most favorable resolution of their cases. "The Remaining Debtors are making good progress in these chapter 11 cases, and are not seeking an extension of time in order to harass their creditors," Mr. Lazar says. The Remaining Debtors' request for a further extension of the exclusivity periods is merely a reflection of the fact that the development, negotiation and confirmation of a viable set of plans in cases of similar complexity entail considerable time and effort. Besides, Mr. Lazar continues, the 120-day extension will not prejudice the legitimate interests of any creditor or equity security holder, and will afford the parties the opportunity to pursue to fruition the beneficial reorganization of the Remaining Debtors. Under these circumstances, the requested extension of the Exclusive Periods fully comports with Section 1121(d) of the Bankruptcy Code. * * * Judge Blackshear will convene a hearing today at 2:00 p.m., to consider the Remaining Debtors' request. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. On March 10, 2004, Covanta Energy Corporation and its core subsidiaries emerged from chapter 11 as a wholly owned subsidiary of Danielson Holding Corporation. Some of Covanta's non-core subsidiaries have liquidated under separate chapter 11 plans. (Covanta Bankruptcy News, Issue No. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000) CUES INC: Case Summary & 14 Largest Unsecured Creditors ------------------------------------------------------- Debtor: Cues, Inc. dba Russell's 268 Odlin Road Bangor, Maine 04401 Bankruptcy Case No.: 05-10181 Type of Business: The Debtor operates Russell Entertainment Center, a discount movie theater and billiards parlor. Chapter 11 Petition Date: February 6, 2005 Court: District of Maine (Bangor) Debtor's Counsel: Peter D. Klein, Esq. Stephen G. Morrell, Esq. Eaton Peabody PO Box 1210 Bangor, Maine 04402-1210 Tel: (207) 947-0111 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Miami North Personal property $1,254,868 c/o Curtis Kimball, Esq. as outlined in UCC Rudman & Winchell #2050001713119-10 PO Box 1401 between EKSTM-C, Inc. Bangor, ME 04402-1401 and Movie City Cinemas, Inc. as Debtors/Secured Value of Security: $1,000,000 Ms. Ruth Gray Loan (start up $95,000 275 Fourth Street investment) Old Town, ME 04468 Lion's Gate Films Trade Debt $6,559 2700 Colorado Avenue, Suite 200 (movie rentals) Santa Monica, CA 90404 Dead River Trade Debt $6,000 PO Box 40 (heating balance from Brewer, ME 04412-0040 2003-2004 winter) Bangor Hydro Trade Debt $5,948 PO Box 11008 (electric) Lewiston, ME 04243-9559 Dreamworks Distribution Trade Debt $5,358 1000 Flower Street (movie rentals) Glendale, CA 91201 Miramax Films Trade Debt $3,923 (movie rentals) Bangor Daily News Trade Debt $1,998 (movie advertising) New Market Films Trade Debt $1,648 (movie rentals) New Line Films Trade Debt $1,533 (movie rentals) Bangor Water District Trade Debt $1,471 (water & sewer) IDP Distribution Trade Debt $736 (movie rentals) DHL Trade Debt $525 Eye9d Trade Debt $400 (promoter for live entertainment) CROWN OIL: Case Summary & 8 Largest Unsecured Creditors ------------------------------------------------------- Debtor: Crown Oil & Petroleum Supplies, LLC 100 15th Avenue, Second Floor South Milwaukee, Wisconsin 53172 Bankruptcy Case No.: 05-21384 Chapter 11 Petition Date: February 4, 2005 Court: Eastern District of Wisconsin (Milwaukee) Judge: Susan V. Kelley Debtor's Counsel: Mark L. Metz, Esq. Reinhart Boerner Van Deuren s.c. 1000 North Water Street, Suite 2965 Milwaukee, WI 53202 Tel: 414-298-1000 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 8 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Community Bank & Trust Bank Loan $3,100,000 604 North 8th St. P.O. Box 1409 Sheboygan, WI 53082 GD Deal Holdings, LLC Lease Payment $210,000 953 Collett Avenue Bowling Green, KY 42102 Kentucky Dept. of Revenue Taxes $200,000 200 Fair Oaks Lane Frankfort, KY 40620 Charles C. Parks Company Trade debt $150,000 Petroleum Perfection Services $47,000 Baker Energy Unknown Girkin Development, LLC Lease Payment Unknown Tennessee Dept. of Revenue Taxes Unknown DANNY'S DIGGIN': Case Summary & 10 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Danny's Diggin' N Dozin', Inc. 205 North Washington Street Bloomfield, Iowa 52537 Bankruptcy Case No.: 05-00596 Type of Business: The Debtor is a construction contractor in the area of earthwork, grading, dozing, and digging. Chapter 11 Petition Date: February 8, 2005 Court: Southern District of Iowa (Des Moines) Judge: Lee M. Jackwig Debtor's Counsel: Jerrold Wanek, Esq. Garten & Wanek 835 Insurance Exchange Building 505 Fifth Avenue Des Moines, Iowa 50309 Tel: (515) 243-1249 Fax: (515) 244-4471 Total Assets: $647,675 Total Debts: $2,099,953 Debtor's 10 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Libertyville Savings Bank Value of Security: $133,533 PO Box 744 $486,425 Fairfield, IA 52556-0744 Komatsu Financial Value of Security: $40,000 PO Box 7049 $60,000 Downers Grove, IL 60515-7049 CIT Equipment Finance - US Value of Security: $37,500 1540 West Fountainhead Parkway $82,500 Tempe, AZ 85282 Hedrick Savings Bank Value of Security: $27,243 102 Main Street $18,750 Hedrick, IA 52563 Chem Gro of Houghton, Inc. $4,581 PO Box 76 Houghton, IA 52631 Pyramid Transportation $2,775 308 4th Avenue Northeast PO Box 391 Grand Meadow, MN 55936 Mid Country Machinery, Inc. $2,425 PO Box 1586 Fort Dodge, IA 50501 Walter Law Office $1,523 PO Box 716 Ottomwa, IA 52501 Graber Services, Ltd. $236 Highway 34 West 2098 220th Street Lockridge, IA 52635 Iowa Telecom $671 CMR Claims Department PO Box 60770 Oklahoma City, OK 731146 DEL MONTE: Subsidiary Successfully Completes Refinancing -------------------------------------------------------- Del Monte Foods Company (NYSE: DLM) disclosed that its wholly- owned subsidiary Del Monte Corporation has completed its previously announced plan to refinance a significant portion of its outstanding indebtedness. The refinancing included the consummation of the Corporation's cash tender offer and consent solicitation with respect to its outstanding 9-1/4% senior subordinated notes due 2011, the Corporation's private placement offering of $250 million principal amount of its 6-3/4% senior subordinated notes due 2015 and the Corporation's consummation of a new $950 million senior credit facility. The Corporation used the proceeds from the sale of the New Notes and borrowings under the New Credit Facility to fund the payment of consideration and costs relating to the Offer and to repay amounts outstanding under its previous credit facility. The New Credit Facility consists of a revolving credit facility of $350,000,000 with a term of six years, a $450,000,000 term loan A with a term of six years, and a $150,000,000 term loan B with a term of seven years. The Offer expired at 12:00 midnight, New York City time, on Monday, Feb. 7, 2005. As of the Expiration Time, $297,463,000 aggregate principal amount of Old Notes had been validly tendered and not withdrawn, which represented approximately 99.15% of the outstanding aggregate principal amount of the Old Notes. The Corporation has accepted for payment and paid for all Old Notes validly tendered and not validly withdrawn on or prior to the Expiration Time. Del Monte produces, distributes and markets shelf-stable branded and private label food and pet products in the U.S. retail market. Its market shares in: * private-label soup 70%, * canned fruit 42%, * canned seafood 42%, * canned vegetables 23%, * solid tomatoes 21%, and * infant food 12%. Del Monte's consumer brands include: * Del Monte, * StarKist, * S&W, * Contadina, * College Inn, and * Nature's Goodness. Del Monte also has a competitive position in dry and wet dog and cat food and snacks with such brands as 9Lives, Kibbles 'n Bits, Pup-Peroni, and Pounce. On a GAAP-reported basis, Del Monte's Consumer and Pet Products business segments represented 75% and 25% of fiscal 2004 sales and 61% and 39% of fiscal 2004 operating income (excluding corporate expenses), respectively. * * * As reported in the Troubled Company Reporter on Jan. 28 2005, Fitch Ratings assigns a 'BB-' rating to Del Monte Foods Company's new $250 million 6-3/4% privately placed senior subordinated notes due Feb. 15, 2015. Fitch also expects to rate Del Monte's new secured credit facility, projected to close in early February 2005. Fitch currently rates Del Monte's debt: -- Senior secured bank facility 'BB+'; -- Senior subordinated notes 'BB-'. -- Rating Outlook Stable. Del Monte's total debt as of October 31, 2004 was $1.5 billion. DIMON INC: Posts $1.9 Million Net Loss in Third Quarter 2005 ------------------------------------------------------------ DIMON Incorporated (NYSE: DMN) reported a net loss for the quarter ended Dec. 31, 2004, of $1.9 million, compared to $3.0 million, for the year earlier period. The Company's underlying net loss for the quarter, a non-GAAP measure that excludes market valuation adjustments for derivative financial instruments, discontinued operations, and non-recurring items, was $3.2 million, compared to $5.1 million, on the same basis last year. The excluded market valuation adjustments result from interest rate swaps that must be marked-to-market each quarter, even though they are being held to maturity. In discussing the Company's forecast and actual operating performance, DIMON management consistently excludes these market valuation adjustments because they do not reflect the Company's operating activities, are non- cash in nature, and will reverse in their entirety (gains and losses will offset each other) during the remaining term of the associated interest rate swaps. Management also excludes results from discontinued operations, and gains and charges resulting from unusual transactions or events that are not reflective of its underlying operations, and that are not expected to recur. DIMON's net income for the nine months ended Dec. 31, 2004, was $17.1 million, compared to $16.5 million, for the year earlier period. Underlying net income for the nine months, which excludes market valuation adjustments for derivative financial instruments, discontinued operations, and non-recurring items, was $21.0 million, compared to $16.3 million, on the same basis last year. Performance Summary Sales and other operating revenues for the third quarter were $366.4 million, compared to $284.6 million for the year earlier quarter. Increased shipments from South America, reflecting late season shipments from substantially larger crops, were the largest contributor to the sales increase. Shipments from Europe and Africa were also higher in comparison to the year earlier quarter. Sales and other operating revenues for the nine months ended Dec. 31, 2004 were $992.2 million, compared to $847.2 million for the year earlier period. Gross profit as a percentage of sales and other operating revenues for the third quarter was 10.7%, substantially unchanged from the year earlier quarter. For the nine months ended Dec. 31, 2004, gross profit was 15.0% of revenues, compared to 16.6% for the year earlier period. Selling, general and administrative expenses for the third quarter were $32.0 million, up $3.0 million or 10.2% in comparison to the year earlier quarter, primarily due to increased legal and professional expenses. SG&A expenses for the nine months ended December 31, 2004 were $92.3 million, down $0.9 million, or 1.0% in comparison to the year earlier period. Interest expense for the third quarter increased by $2.0 million, or 17.9%, in comparison to the year earlier quarter, reflecting a combination of additional borrowing and increased effective interest rates. At Dec. 31, 2004, total debt net of cash was $627.6 million, up $74.2 million, or 13.4%, in comparison to Dec. 31, 2003. The increase primarily reflects a larger financing requirement for trade accounts receivable resulting from increased sales for the quarter, and for inventories committed to customers. DIMON's uncommitted inventories remain at a comfortable level. Outlook Brian J. Harker, Chairman and Chief Executive Officer, stated, "Our third quarter results benefited from late season shipments from substantially larger South American crops, as the shift in global sourcing for leaf tobacco we have experienced over the past eighteen months has now stabilized. Although delayed by weather conditions, we have begun receiving initial deliveries of the current season Brazilian crop from growers, and we are encouraged by the general quality and quantity of leaf expected to be available to the Company from this origin. While a combination of increased grower prices and the relative weakness of the U.S. dollar will raise costs in Brazil, we expect to gain production efficiencies from an additional new processing line constructed during the off-season. "DIMON also made further progress in our global restructuring efforts. Although we continue to expect charges associated with the efforts to approximate $7 million, some portion may not be recognized until the next fiscal year. Reflecting our caution relating to the delayed Brazilian crop, we now expect the Company's underlying net income to be between $0.43 and $0.48 per basic share for the fiscal year ending March 31, 2005. Our current outlook excludes estimated restructuring charges, any effects from market valuation adjustments for derivatives, results from discontinued operations, and other non-recurring items." The timing and magnitude of fluctuations in the market valuation adjustments for derivative financial instruments (interest rate swaps) are driven primarily by often-volatile market expectations for changes in interest rates, and are inherently unpredictable. Because these adjustments are a component of net income prepared in accordance with generally accepted accounting principles, management is unable to provide forward looking earnings guidance on that basis. DIMON's Annual Reports on Form 10-K/A for the fiscal year ended March 31, 2004, and other filings with the Securities and Exchange Commission (the "SEC") which are available at the SEC's Internet site (http://www.sec.gov). In connection with the proposed merger of DIMON and Standard Commercial Corporation, the parties have filed a joint proxy statement/prospectus and other relevant documents concerning the merger with the U.S. Securities and Exchange Commission. Stockholders are urged to read the proxy statement/prospectus regarding the proposed transaction AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC because THEY will contain important information. Interested parties may obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about DIMON and Standard Commercial without charge at the SEC's Internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the filings with the SEC that are incorporated by reference in the proxy statement/prospectus can also be obtained, without charge, by directing a request to DIMON Incorporated, 512 Bridge Street, Post Office Box 681, Danville, Virginia 23543-0681, Attention: Investor Relations, (434) 792 7511. The respective directors and executive officers of DIMON and Standard Commercial and other persons may be deemed to be "participants" in the solicitation of proxies in respect of the proposed merger. Information regarding DIMON's directors and executive officers is available in its proxy statement filed with the SEC on July 13, 2004. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. DIMON Incorporated -- http://www.dimon.com/-- is the world's second largest dealer of leaf tobacco with operations in more than 30 countries. * * * As reported in the Troubled Company Reporter on Nov. 4, 2004, Moody's Investors Service confirmed the ratings of DIMON Incorporated and assigned a stable outlook, following the waivers and amendment granted by bondholders and banks of the company's technical defaults on its bonds and bank facilities. This concludes the review initiated on Oct. 13, 2004. Ratings confirmed: * Issuer rating at B2 * Senior implied rating at B1 * $200 million senior notes due 2011 at B1 * $125 million senior notes due 2013 at B1 The ratings confirmation reflects the stabilization of liquidity brought by the waivers and amendments. On Oct. 11, 2004, DIMON sought consent of waivers of previous defaults under the limitation on restricted payments covenant under the indentures related to the payment of dividends to holders of the company's common stock, and investments in a majority-owned subsidiary. Dividend payments have been made since December 2003 in violation of the indentures as a result of an apparent misunderstanding by company's management of the restrictions under the indentures. On Nov. 1, 2004, DIMON obtained a waiver of the defaults under all debt, and an amendment under the indenture allowing it to make dividend payments not to exceed $3.525 million in any quarter without regard to a consolidated interest coverage ratio test until June 30, 2005. DONNKENNY INC: Files Joint Plan of Reorganization in New York ------------------------------------------------------------- Donnkenny, Inc., and its debtor-affiliates filed with the U.S. Bankruptcy Court for the Southern District of New York on February 7, 2004, their Proposed Plan of Reorganization and Disclosure Statement. Terms of the Plan The Plan contemplates that the Debtors' operations will cease on the Plan's effective date. The Plan intends to substantively consolidate all debtor entities. Substantive consolidation refers to combining the assets and liabilities of two or more related debtors into a single pool to pay creditors. The CIT Group/Commercial Services, Inc., and other prepetition lenders under the 1999 Revolving Finance Agreement, will receive a pro-rata share of the proceeds of the asset sale. Holders of other secured claims will receive either the collateral securing the claim or cash payment over time covering both principal amount of the claim and interest. If the Debtors will opt to pay over time, the Secured Claim Holder will retain the liens on the collateral. Holders of general unsecured claims take nothing under the Plan. However, the Credit Agreement Lenders may elect to set aside an amount from the sale proceeds to be distributed among the General Unsecured Claim Holders. On the effective date of the Plan: (1) intercompany claims and equity interests will be cancelled; and (2) a Plan Administrator will be appointed to implement the Plan. Full-text copies of the Plan of Reorganization and Disclosure Statement are available for a fee at: http://www.researcharchives.com/download?id=040812020022 Headquartered in New York City, Donnkenny, Inc., and its debtor- affiliates design, import, and market broad lines of moderately and better priced women's clothing. The Debtors filed for chapter 11 protection on Feb. 7, 2005 (Bankr. S.D.N.Y. Case Nos. 05-10712 through 05-10716). Bonnie Steingart, Esq., Kalman Ochs, Esq., and Christopher R. Bryant, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $45,670,000 in total assets and $100,100,000 in total debts. DONNKENNY INC: Secures $60 Million DIP Loan from CIT Group ---------------------------------------------------------- Donnkenny, Inc., and its debtor-affiliates (OTC Bulletin Board: DNKY) has secured a new $60 million debtor-in-possession credit facility with its current lenders CIT Group/Commercial Services, Inc., and Wells Fargo Century Inc. and a factoring agreement with CIT, both of which are subject to Bankruptcy Court approval. The DIP Agreement limit of $60 million is inclusive of pre- petition and post-petition obligations. The Company expects that the DIP Agreement will allow the Company to finance its working capital needs and allow business operations to continue as normal during the sales process, including meeting obligations to employees, vendors and other suppliers of goods and services. 363 Asset Sale The Debtors have entered into an asset purchase agreement with Donn K Acquisition LLC, a company affiliated with Pacific Alliance LLC, to sell certain of its assets including its Nicole Miller(R) and Pierre Cardin(R) Licensed Products for approximately $16 million. The Agreement provides for the Company's core businesses to be acquired pursuant to section 363 of the U.S. Bankruptcy Code. On Feb. 4, 2005, Donn K provided the Debtors with a $500,000 deposit for the assets. The Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to: -- approve and authorize the proposed sale, assumption and assignment of the Assets provided in the Asset Purchase Agreement; -- approve the bidding procedures in connection with the Debtors' solicitation of higher and better bids than the bid reflected in the Asset Purchase Agreement; -- schedule an auction; -- approve the form and manner of notice of the proposed sale and bidding procedures; and -- authorize the reimbursement of up to $550,000, and the payment of a $625,000 Termination Fee to Donn K. The Debtors tell the Court that the Asset Purchase Agreement was negotiated and executed in good faith with Donn K Acquisition, and was determined to be the best and highest offer most likely to close. Daniel H. Levy, Chairman and CEO of the Company said, "We believe that the relationship with Donn K Acquisition and Pacific Alliance and the ability to utilize their systems, technology and expertise will offer Donnkenny an added competitive advantage. Their understanding of the business, their experience and the deep relationships that Pacific Alliance brings to our business will benefit our customers and employees, and suppliers. Mr. Levy added, "We believe that the ongoing support from our existing lenders through our DIP Agreement will help allow us to continue business operations as normal as we move forward with the sale process. We will do everything possible to try to ensure that there is no disruption in the quality of service we provide to our customers during this transition period and that our obligations to employees, vendors and others are met." Stock Termination The Company has filed a Form 15 with the Securities and Exchange Commission to terminate registration of the Company's common stock under the Securities Exchange Act of 1934, as amended. Upon the filing of the Form 15, the Company's obligation to file certain reports and forms under the 1934 Act including, but not limited to Forms 10-K, 10-Q and 8-K, will be terminated. The Company's Chapter 11 petition was filed in the United States Bankruptcy Court for the Southern District of New York. While there can be no assurances, the Bankruptcy Court supervision of the 363 sale approval process is expected to be completed within sixty days. Headquartered in New York City, Donnkenny, Inc., and its debtor- affiliates design, import, and market broad lines of moderately and better priced women's clothing. The Debtors filed for chapter 11 protection on Feb. 7, 2005 (Bankr. S.D.N.Y. Case No. 05-10712 through 05-10716). Bonnie Steingart, Esq., Kalman Ochs, Esq., and Christopher R. Bryant, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $45,670,000 in total assets and $100,100,000 in total debts. EAGLE PICHER: Poor Liquidity Cues S&P to Pare Credit Rating to B- ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on Eagle Picher, Inc., and Eagle Picher Holdings, Inc., to 'B-' from 'B+', and left them on CreditWatch, where they were placed on Dec. 28, 2004. Other ratings were also lowered and remained on CreditWatch. At Nov. 30, 2004, the Phoenix, Arizona-based industrial manufacturer had about $426 million of total debt outstanding. "The downgrade reflects the company's poor liquidity and operating prospects because of heavy exposure to the weak auto supplier market, including uncertain prospects for production levels in 2005," said Standard & Poor's credit analyst John Sico. "The company continues to have covenant issues and is in violation of certain of its financial covenants under its bank credit agreement and accounts receivable securitization program, as a result of the lower-than-expected profitability in the auto supplier market and in its defense and space operations." Eagle Picher announced that its CEO has resigned, and the company has hired a new chief development officer, with extensive restructuring experience, to assist it in evaluating strategic alternatives and potential debt reduction through divestitures of one or more business units. Standard & Poor's views this as a risk because of the potential for debt reduction via exchange offers or other actions that could impair bondholders. Eagle Picher provides products to the automotive, aerospace, defense, telecommunications, and pharmaceutical markets. ENRON CORP: Court Approves Allocation of Reserved Funds ------------------------------------------------------- As reported in the Troubled Company Reporter on Nov. 22, 2004, Enron Corporation and its debtor-affiliates asked the U.S. Bankruptcy Court for the Southern District of New York to approve their proposed allocation of about $5,500,000,000 of Reserved Funds among 139 entities. Throughout the course of the Debtors' bankruptcy cases, the Court authorized the Debtors to sell or otherwise dispose of assets they owned, and in some cases, those owned by non-debtors. Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, in New York, relates that in connection with the sale, settlement, or other disposition of the assets, claims, or contracts, the Court entered individual orders approving the disposition. The proceeds received under each Sale or Settlement Order, were often reserved, escrowed, or otherwise segregated pending either a further Court order or an agreement between the Debtors and the Official Committee of Unsecured Creditors providing for the disposition of the Reserved Funds. The Reserved Funds comprise the primary source of funding for distributions to creditors pursuant to the Debtors' confirmed Plan. The Confirmation Order authorizes the Debtors to take actions necessary to implement the Plan and to distribute the Reserved Funds in accordance with the Plan. The Plan addresses the distribution of Reserved Funds and directs the Debtors to file one or more motions with the Court to determine the allocation of proceeds reserved pursuant to a Sale or Settlement Order. The Reserved Funds will be allocated among the Reorganized Debtors or any of the Enron Affiliates designated, free and clear of all liens and in accordance with Section 1141 of the Bankruptcy Code, and be subject to distribution in accordance with the provisions of the Plan. * * * Judge Gonzalez grants the Debtors' proposed allocation except as to the allocation of proceeds from that certain sale of coal- related assets to Cline Resources and Development Company. Judge Gonzalez will conduct a hearing at 10:00 a.m., on March 3, 2005, or as soon as counsel may be heard with respect to the allocation for the Cline Transaction Proceeds. For allocations made subsequent to September 30, 2004, which are not otherwise included in the Proposed Allocation, or in the event the Debtors have overlooked a Sale or Settlement Order that should have been included, the Court authorizes the Debtors to file notices of proposed allocation. Any allocation of Reserved Funds pursuant to a Notice of Proposed Allocation served in accordance with the Case Management Order will be approved. The Reserved Funds allocated will vest in the designated Reorganized Debtor or any of its affiliates, free and clear of all liens and in accordance with Section 1141 of the Bankruptcy Code. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 135; Bankruptcy Creditors' Service, Inc., 15/945-7000) FEDERAL-MOGUL: U.K. Administrators Object to Plan Confirmation -------------------------------------------------------------- Under the absolute priority rule, creditors' claims take precedence over shareholders' claims in the event of a liquidation or reorganization. In behalf of the officials administering the insolvency proceedings of Federal-Mogul Corporation's U.K. debtor-affiliates, Christopher S. Sontchi, Esq., at Ashby & Geddes, in Wilmington, Delaware, complains that the chapter 11 plan unfairly treats the U.K. Debtors' creditors thereby violating the absolute priority rule. In contrast to the U.S. Debtors, the unsecured creditors of the U.K. Debtors -- who would have received a far greater percentage recovery than creditors of the U.S. Debtors in liquidation -- will receive comparatively less favorable treatment under the Plan. Certain unsecured creditors of the U.K. Debtors that did not guarantee the Debtors' Notes will receive only pennies on the dollar under the Plan. Mr. Sontchi relates that under the Plan, U.S. pensions are fully funded while U.K. pension schemes receive only a minimal payment. There is also an unjustified disparity of treatment between U.S. and U.K. claimants in the Asbestos Personal Injury Trust Distribution Procedures. According to Mr. Sontchi, the reorganization or liquidation of the U.K. Debtors cannot be effected though Chapter 11 cases alone. Rather, the Plan must be enforceable in the U.K. with respect to the U.K. Debtors and their creditors with claims arising outside the United States. In a recent decision of the High Court of Justice in London, Justice David Richards indicates, "absent a creditor's agreement to be bound, this can only be achieved by the collective mechanisms under U.K. law provided by Schemes or CVA." The U.K. Court also directed that the U.K. Administrators should not promote the Schemes of Arrangements or Company Voluntary Arrangements, or call any meeting of creditors for the purpose of directing the promotion of the Schemes or CVAs without further order of the U.K. Court. The U.K. Court also gave the Administrators liberty to oppose confirmation of the Plan and, in the event the Plan is confirmed over the U.K. Administrators' objection, to secure limitations to any injunctions to be made by the Bankruptcy Court so that they do not apply to the U.K. Debtors and their creditors. "Anticipating that the Administrators would be unable, consistent with their duties under U.K. law, to promote Schemes or CVAs, the Plan Proponents have included in the Plan several purported 'alternatives' for enforcing the Plan with respect to the U.K. Debtors. [N]ot only are these alternatives themselves fundamentally unfair and proposed in bad faith, but also, as indicated in the U.K. Judgment, they are inconsistent with U.K. law and are virtually certain not to occur." Therefore, Mr. Sontchi asserts that the Plan is not feasible and cannot be confirmed pursuant to Section 1129(a)(11) of the Bankruptcy Code. Accordingly, the U.K. Administrators assert that confirmation of the Plan must be denied. * * * It is the understanding of the Plan Proponents that the Administrators' objection includes the views of the Trustees of the T&N Pension Scheme as well as the views of certain U.K. asbestos claimants, and the Plan Proponents therefore regard it as an objection filed on behalf of the Administrators, the Trustees of the T&N Pension Scheme, and certain U.K. asbestos claimants. In a letter sent to Judge Lyons in December 2004 regarding the status of objections to confirmation of the Plan, James F. Conlan, Esq., at Sidley Austin Brown & Wood LLP, in Chicago, Illinois, relates that the parties are discussing the issues regarding the propriety and enforceability of the Plan. The Plan Proponents hope that certain of the issues will be resolved directly or indirectly by the estimation proceedings, as well as the inter-court communication process. In addition, certain of the issues may be addressed by further amendments to the Plan following the estimation proceedings. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) FEDERAL-MOGUL: Points Out Flaws in FAIR Act Draft ------------------------------------------------- In a statement delivered to all U.S. Senators, Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ.OB) and the Official Committee of Unsecured Creditors of Federal-Mogul outlined a series of flaws in, and reiterated opposition to, the discussion draft of the Fairness in Asbestos Injury Resolution (FAIR) Act of 2005 as introduced into the Congressional Record on Feb. 7 by Senator Arlen Specter -- R-PA. The statement described the inherently flawed and unfair nature of the legislation's payment allocations for Tier I -- companies presently in bankruptcy -- and other infirmities. While more than two-thirds of present and future true asbestos claims are from individuals exposed to asbestos by defendants in the building and construction trades -- an industry sector that includes, among others, the top eight Tier I defendants -- Tier I participants in the national fund would provide a mere six percent of payments. This bailout places the solvency of the national asbestos fund at risk. The statement explained an alternative analyzed by the financial advisor to the Creditors Committee that could provide approximately $12 billion in additional funding for the national trust if Tier I companies were permitted to complete their bankruptcy reorganization and have their liability addressed in a bankruptcy plan. This bankruptcy process would correctly transfer up to $12 billion from shareholders and other stakeholders of certain Tier I entities to the national trust and, thereby, to victims of asbestos exposure. While Federal-Mogul and the Creditors Committee support efforts to reform the asbestos litigation crisis, they cannot support trust fund legislation that would require Federal-Mogul to pay more than its fair share while providing a bailout to companies with the greatest liability. The statement outlined a number of additional shortcomings in current draft, including: (1) the likelihood that the FAIR Act's payment structure would drive additional companies into bankruptcy; (2) the unfair, and potentially unconstitutional, stripping away of insurance assets that will cause protracted litigation and cause additional uncertainty for victims; (3) joint and several liability provisions that create escalating and uncertain payments for business participants; (4) sunset and reversion language that leaves companies exposed to the tort system without any safeguards restricting venue or providing standard medical criteria; and (5) the disproportionately high payment level imposed on Federal-Mogul through reliance on a formula that is improperly based on revenue rather than liability. Federal-Mogul and the Creditors Committee, as they have done in the past, again urged the U.S. Senate to consider alternative legislation establishing standardized medical criteria as a more equitable solution to the asbestos litigation crisis. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. FIDELITY NATIONAL: S&P Assigns BB Corp. Credit & Sr. Sec. Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' corporate credit and senior secured ratings on Jacksonville Florida-based Fidelity National Information Services, Inc. -- FIS. FIS is a subsidiary of Fidelity National Financial, Inc. -- FNF -- (BBB/Watch Neg/--). The outlook is stable. "The ratings on FIS reflect its historically aggressive growth strategy, coupled with the heavy debt burden associated with its leveraged recapitalization," said Standard & Poor's credit analyst Philip Schrank. Ratings are supported by a leading niche market position, a stable recurring revenue base, and good cash-flow generation. With pro forma revenues exceeding $2.7 billion, FIS provides processing and information services to the financial services and real estate industries. While recent operating performance has been good, with operating margins exceeding 20%, the company has grown rapidly through acquisitions, and has yet to demonstrate a sustained track record of performance. Standard & Poor's expects acquisitions to remain an integral part of FIS' growth strategy, albeit at a more moderate pace. Pro forma total debt to EBITDA is in the area of 4.5x range. Capital expenditures are moderate, and the company's good free-cash-flow generation is expected to be used to reduce debt levels over time. Analytically, Standard & Poor's has attributed little credit support by the parent company, FNF. FIS' credit facilities are not guaranteed by its parent, and there are no cross default provisions existing within FNF's existing debt. FNF plans to sell a 25% equity stake in FIS to private equity holders. Proceeds from the drawdown of the credit facilities will be used for a leveraged recapitalization of FIS. Under the recapitalization plan, FIS will pay a dividend of $2.7 billion to FNF (which will in turn pay a special cash dividend to FNF shareholders). FLEXTRONICS: Completes Transfer of Nortel's Montreal Operations --------------------------------------------------------------- Flextronics (Nasdaq: FLEX) and Nortel Networks (NYSE: NT; TSX) successfully completed the transfer of the manufacturing operations and related assets including product integration, testing, repair and logistics operations of Nortel's Systems House in Montreal to Flextronics, as part of a previously announced agreement. "We are thrilled to welcome this world-class workforce with extensive industry experience," said Michael Marks, Flextronics' Chief Executive Officer. "This represents a significant increase in our complex, multi-technology telecom and network capabilities. Coupled with the optical design resources that we acquired last November, we have further diversified our product mix and strengthened our position as an end-to-end solutions provider in the telecom market." "The successful transition of these operations to Flextronics is an important milestone," said Sue Spradley, president, Global Operations, Nortel. "This step moves us closer to completing the journey we began five years ago to divest substantially all of our manufacturing activities in order to focus our resources on those areas that offer Nortel true competitive differentiation. Those areas include the introduction of new products and the deployment, network integration and support of complex, multi-technology network solutions." Both companies are working towards closing the balance of the agreement in the first half of 2005. This is subject to the implementation of systems and processes and to completion of the required information and consultation processes with relevant employee representatives. About Nortel Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world's greatest challenges. Nortel does business in more than 150 countries. About the Company Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics -- http://flextronics.com/-- is the leading Electronics Manufacturing Services (EMS) provider focused on delivering innovative design and manufacturing services to technology companies. With fiscal year 2004 revenues of USD$14.5 billion, Flextronics is a major global operating company that helps customers design, build, ship, and service electronics products through a network of facilities in 32 countries on five continents. This global presence provides customers with complete design, engineering, and manufacturing resources that are vertically integrated with component capabilities to optimize their operations by lowering their costs and reducing their time to market. * * * As reported in the Troubled Company Reporter on Nov. 16, 2004, Moody's Investors Service assigned a Ba2 rating to Flextronics International Ltd.'s new $500 million 6.25% senior subordinated notes, due 2014. At the same time, the company was assigned a liquidity rating of SGL-1, reflecting Flextronics' significant on-hand liquidity, unfettered access to the sizeable $1.1 billion revolver and the expectation for generating moderately positive free cash flow (pre-Nortel payments) over the next twelve months. FRIEDMAN'S: U.S. Trustee Appoints 9-Member Creditors Committee -------------------------------------------------------------- The United States Trustee for Region 21 appointed nine creditors to serve on an Official Committee of Unsecured Creditors in Friedman's Inc. and its debtor-affiliates' chapter 11 cases: 1. Tache USA Inc. Attn: Marc Moskoviz/Victor Weinman 44-40 11th Street Long Island City, New York 11101 2. Simon Property Group LP Attn: Ronald M. Tucker, Esq. 115 W. Washington Street Indianapolis, Indiana 46204 3. M. Fabrikant & Sons Attn: Michael Shaffet/Sheldon Ginsberg One Rockefeller Plaza New York, New York 10020 4. Rosy Blue, Inc. Attn: Nirav Dalal/Ragin Mehta 529 Fifth Avenue New York, New York 10017 5. Kensib, Inc. dba Media Solutions Attn: Marilee Coughlin/Patricia Sibley 3715 Northside Parkway 100 Northcreek, Suite 250 Atlanta, Georgia 30327 6. Alston & Bird LLP Attn: Dennis J. Connolly, Esq. 1201 W. Peachtree Street Atlanta, Georgia 30309-3424 7. PAJ, Inc. Attn: Karen Guest 2930 N. Stemmons Fairway Dallas, Texas 75247 8. Sumit Diamond Corporation Attn: Ken Fogal/Robert Olonoff 592 Fifth Avenue, 4th Floor New York, New York 10036 9. KIP Division of OTC International, Ltd. Attn: Lee Rothlein 3100 47th Avenue, 5th Floor Long Island City, New York 11101 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Savannah, Georgia, Friedman's Inc. -- http://www.friedmans.com/-- is the parent company of a group of companies that operate fine jewelry stores located in strip centers and regional malls in the southeastern United States. The Company and its affiliates filed for chapter 11 protection on Jan. 14, 2005 (Bankr. S.D. Ga. Case No. 05-40129). John W. Butler, Jr., Esq., George N. Panagakis, Esq., Timothy P. Olson, Esq., and Alexa N. Paliwal, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors it listed $395,897,000 in total assets and $215,751,000 in total debts. FRIEDMAN'S: Committee Retains Ellis Painter as Local Counsel ------------------------------------------------------------ The Official Committee of Unsecured Creditors of Friedman's Inc. and its debtor-affiliates asks the U.S. Bankruptcy Court for the Southern District of Georgia, Savannah Division, for authority to hire Ellis, Painter, Ratterree & Adams LLP as its local counsel. Ellis Painter will: a) assist & advise the Committee in its consultation with the Debtors relative to the administration of these cases; b) attend meetings and negotiate with the representatives of the Debtors and other parties-in-interest; c) assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs; d) assist the Committee in the review, analysis and negotiation of any plan of reorganization that may be filed and to assist the Committee in the review, analysis and negotiation of the disclosure statement accompanying any plan of reorganization; e) assist the Committee in the review, analysis, and negotiation of any financing agreements; f) take all necessary action to protect and preserve the interests of the Committee, including: i) the prosecution of actions on its behalf; ii) negotiations concerning all litigation in which the Debtors are involved; and iii) review and analyze claims filed against the Debtors' estates; g) prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; h) appear before the Courts and the U.S. Trustee to protect the interests of the Committee; and i) perform all other necessary legal services in these cases. David W. Adams, Esq., a partner at Ellis Painter, discloses his Firm's professionals' hourly billing rates: Designation Rate ----------- ---- Partner/Counsel $220 - $250 Associate 150 - 185 Paralegal/Legal Assistant 75 - 110 To the best of the Committee's knowledge, Ellis Painter is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Savannah, Georgia, Friedman's Inc. -- http://www.friedmans.com/-- is the parent company of a group of companies that operate fine jewelry stores located in strip centers and regional malls in the southeastern United States. The Company and its affiliates filed for chapter 11 protection on Jan. 14, 2005 (Bankr. S.D. Ga. Case No. 05-40129). John W. Butler, Jr., Esq., George N. Panagakis, Esq., Timothy P. Olson, Esq., and Alexa N. Paliwal, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors it listed $395,897,000 in total assets and $215,751,000 in total debts. FRIENDS HOSPITAL: Moody's Affirms B2 Bond Rating After Review ------------------------------------------------------------- Moody's Investors Service has affirmed the B2 bond rating for Friend's Hospital (PA) and removed the rating from Watchlist where it was placed for potential downgrade on January 12, 2005. We are maintaining the negative outlook on the bonds. This action affects approximately $7.5 million of outstanding Series 1993 bonds issued through the Philadelphia Hospitals and Higher Education Facilities Authority. The Series 1993 bonds are secured by a pledge of gross revenues only. The affirmation reflects a recent increase in cash to a level we believe is adequate to make near-term debt payments and expected operating improvement over the next year from staffing initiatives and changes in Medicare reimbursement. Nevertheless, the negative outlook reflects the fact that operating improvement is not yet evident in financial results and the absence of a track record of sustaining better operations. The hospital faces challenges associated with: 1) a still weak liquidity position, a risky investment allocation and increasing capital spending; 2) competition that has contributed to erratic volumes and higher labor costs; 3) a negative operating cashflow, even with recent improvement; and 4) a high dependency on Medicaid funding and several other state funding sources that are subject to annual allocations. We expect to reconsider the outlook when the hospital demonstrates expected operating improvement and an ability to maintain higher cash levels. Liquidity Still Weak Although Improving: After reaching a very low point in liquidity in mid-2004, there is evidence that the hospital has improved liquidity through the end of calendar year 2004 to a level that is still weak, but we believe provides adequate cushion for debt service payments in the near-term. As of November 30, 2004, the hospital had $4.9 million in unrestricted cash (48 days of cash on hand), compared with a low $1.5 million (16 days) as of fiscal yearend June 30, 2004. At its lowest level, we believe the hospital was at risk of missing debt service payments. Recent growth in cash reflects some improvement in operations, the receipt of a large $1.3 million unrestricted gift, $400,000 in funds received from Drexel University, which provided capital to renovate its rented space, and low capital spending. Based on operating improvement and the expected receipt of another $1 million gift in February 2005, we think this level of cash will at least be maintained and is adequate to fund the next principal payment of $1 million in May 2005. Because the hospital does not yet have a track record of sustaining better operations and maintaining cash, we think it is too early to comfortably assess the likelihood of making future principal payments, which are about $1 million annually. Risks to maintaining cash include operating challenges, investment risk and increasing capital spending. In our opinion, the hospital's investment allocation of 80% equities introduces a high degree of risk and potential volatility for an organization with weak liquidity. Following multiple years of deferring capital projects, spending is expected to increase to approximately $1.5 million annually as the hospital addresses routine renovation needs. The hospital's external cash sources were reduced last year following the termination of a $1 million bank line. Operating Improvement Recently Evident, But Margins Still Low: We believe Friends Hospital still faces a number of operating challenges that make future operations difficult to predict, although we note that meaningful progress had been made to improve performance. In fiscal year 2004, Friends continued a 5-year trend of negative operating cashflow, although the loss was $1.8 million less in 2004 than in 2003 (excluding a $3 million impairment charge in 2004). Through five months of fiscal year 2005, operating income and cashflow are about equivalent to the prior year period, excluding an unusually large third-party settlement, and the second half of the year should show improvement as recent initiatives start to take effect. Improvement in fiscal year 2004 was due to higher admissions (up 10%) and higher state grants. Additionally, Drexel University now leases space at the hospital for its psychiatry department, generating $360,000 annually in rent. The hospital has eliminated the use of agency nurses and reduced overtime, which will result in approximately $1 million in annual savings beginning in November, 2004. Finally, changes in Medicare reimbursement, which are effective January 2005, are expected to result in at least an additional $1 million in annual income. We believe these benefits could be partially offset by a number of operating challenges. While Friends Hospital has a niche are the only free-standing psychiatric hospital in the Philadelphia area, the hospital faces competition from hospitals that are part of larger systems. This competition is contributing to a 7% decline in admissions through five months of 2005 and wage inflation, as evidenced by the hospital's need to increase salaries to recruit nurses. The hospital derives a high 46% of its revenues from state and county Medicaid programs, which have granted modest annual increases and could be at risk depending on the state and county fiscal situations. Finally, in 2005 the hospital expects to receive state tobacco monies of approximately $1.8 million and a state grant of $500,000, both sources of cashflow that are subject to annual allocations. Key Ratios and Data (based on fiscal year 2004, ended June 30, 2004; investment income normalized at 6%): * Total Hospital Admissions: 6,438 * Total Operating Revenues: $35.5 million * Net Revenues Available for Debt Service: $2.3 million * Days Cash on Hand: 15.5 days * Maximum Annual Debt Service Coverage: 1.7 times * Total Debt Outstanding: $7.6 million * Operating Cash Flow Margin: -1.0% * Debt-to-Cash Flow: 4.3 times HEALTH NET: Fitch Downgrades Senior Debt Rating to BB+ ------------------------------------------------------ Fitch Ratings has downgraded the long-term issuer and senior debt ratings of Health Net, Inc. (HNT) to 'BB+' from 'BBB-'. At the same time, Fitch has downgraded the insurer financial strength ratings of Health Net of California and Health Net of Connecticut to 'BBB' from 'BBB+'. The Outlook remains Negative on all ratings. The rating actions affect approximately $400 million of senior unsecured notes outstanding. A list of Fitch's ratings on HNT and its subsidiaries can be found below. Today's rating action follows the company's announcement this morning that it will take a $252 million pretax charge to earnings in the fourth quarter of 2004, primarily to reflect a settlement of provider claims disputes and adverse prior-period reserve development. The overall effect of the company's charge, combined with operating difficulties in the company's northeast operations, have resulted in a capital profile for HNT and its regulated operating subsidiaries that is below Fitch's expectations for an investment-grade rating. The Negative Outlook reflects Fitch's concerns with respect to the company's exposure to ongoing litigation challenges and execution risks associated with management's turnaround strategy, as well as operational risks involved in the company's ongoing systems conversion. Approximately $169 million of the charge announced today is earmarked to cover settlements with providers related to claims processing and payment disputes. In addition, although the company announced a settlement of the litigation related to the 1998 sale of its workers' compensation business to Superior National Insurance Group, Inc., a follow-up suit has been filed. The final outcome of the follow-up litigation is currently uncertain. Also, a September 2004 decision from the U.S. Court of Appeals for the Eleventh Circuit in Atlanta for the most part affirmed the class status of providers in the multidistrict litigation being heard in the Southern District of Florida by District Court Judge Federico Moreno. This decision may result in accelerated settlement talks, which may further reduce HNT's cash position. Fitch's ratings on HNT continue to reflect the company's moderate financial leverage, good competitive position in the health insurance/managed care markets in California and in the New York metropolitan area, and strong presence in the traditionally stable margin Tricare business. The ratings also reflect industry challenges related to the rapidly increasing cost of providing health care, increasing competitive pressures, and regulatory and legal challenges that may affect the extent to which industry participants can manage costs and price their products appropriately. Health Net, Inc. is among the largest publicly traded managed care operations in the U.S., reporting Dec. 31, 2004, enrollment of 6.5 million individuals, including enrollment associated with its Tricare business. Although HNT's largest presence is in the State of California, the company operates in a total of 27 states. The company provides a variety of indemnity, PPO, POS, and HMO plans in the group, individual, Medicare risk, Medicaid, and Tricare markets. Fitch rates HNT and its subsidiaries: Health Net, Inc. -- Long-term issuer downgraded to 'BB+' from 'BBB-'; -- Senior debt downgraded to 'BB+' from 'BBB-'. Health Net of California, Inc. -- Insurer financial strength downgraded to 'BBB' from 'BBB+'. Health Net of Arizona, Inc. -- Insurer financial strength affirmed at 'BBB'. Health Net Health Plan of Oregon, Inc. -- Insurer financial strength affirmed at 'BBB'. Health Net of Connecticut, Inc. -- Insurer financial strength downgraded to 'BBB' from 'BBB+'. Health Net of New Jersey, Inc. -- Insurer financial strength affirmed at 'BBB'. Health Net of New York, Inc. -- Insurer financial strength affirmed at 'BBB'. The Rating Outlook is Negative. HEALTH NET: S&P Places Low-B Ratings on CreditWatch Negative ------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'BB+' counterparty credit rating on Health Net, Inc., and its various counterparty credit and financial strength ratings on Health Net's subsidiaries on CreditWatch with negative implications. "The ratings are being placed on CreditWatch negative in connection with Health Net's announced year-end 2004 financial results, which included substantial charges that were in excess of our expectations," explained Standard & Poor's credit analyst Joseph Marinucci. "These charges resulted in weak consolidated profitability, diminished interest coverage, and growing concern about the health plan segment's earnings quality and statutory capital adequacy per Standard & Poor's model." Standard & Poor's intends to meet with Health Net representatives to review the specific charges and their resultant effect on the company's prospective financial condition. Following the review, the ratings could be affirmed or lowered. If lowered, it is unlikely that the counterparty credit rating on Health Net will go below 'BB'. On Nov. 2, 2004, Standard & Poor's lowered its counterparty credit rating on Health Net Inc. to 'BB+' from 'BBB-'. At the same time, Standard & Poor's affirmed or lowered its counterparty credit and financial strength ratings on Health Net's various operating subsidiaries. All companies were assigned a negative outlook, which reflected Standard & Poor's concerns about the less- predictable nature of Health Net's prospective operating performance and the potential for sustained operational challenges. HEILIG-MEYERS: RoomStore Disclosure Statement Hearing on Mar. 8 --------------------------------------------------------------- As previously reported in the Troubled Company Reporter, HMY RoomStore, Inc., a wholly owned subsidiary of Heilig-Meyers Company, and its Official Committee of Unsecured Creditors filed a Joint Plan of Reorganization and Disclosure Statement with the U.S. Bankruptcy Court for the Eastern District of Virginia. The Bankruptcy Court will convene a hearing on March 8, 2005, at 2:00 p.m., in Richmond, Virginia, to consider the adequacy of the Disclosure Statement. The Plan Proponents will ask the Court to rule that the disclosure document contains the right amount of the right kind of information necessary to permit creditors to make informed decisions when they vote to accept or reject the Joint Plan. Under the terms of the Plan, RoomStore will emerge as a reorganized business enterprise and the unsecured creditors of RoomStore will receive common stock in Reorganized RoomStore in satisfaction of their claims against RoomStore. Heilig-Meyers Company, RoomStore's parent, is the single largest creditor and will receive approximately 67% of the new common stock of Reorganized RoomStore. Reorganized RoomStore will continue to operate stores under the RoomStore name. Disclosure Statement objections, if any, must be filed by March 1, 2005, and served on: Counsel for the Debtor: Bruce H. Matson, Esq. LeClair Ryan, A Professional Corporation 707 E. Main St., Suite 1100 Richmond, Virginia 23219 Counsel for the Creditors' Committee: Michael S. Stamer, Esq. Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 RoomStore offers a wide selection of professionally coordinated home furnishings in complete room packages at value-oriented prices. RoomStore operates 65 stores located in Pennsylvania, Maryland, Virginia, North Carolina, South Carolina and Texas. Heilig-Meyers Company filed for chapter 11 protection on Aug. 16, 2000 (Bankr. E.D. Va. Case No. 00-34533), reporting $1.3 billion in assets and $839 million in liabilities. When the Company filed for bankruptcy protection it operated hundreds of retail stores in more than half of the 50 states. In April 2001, the company shut down its Heilig-Meyers business format. In June 2001, the Debtors sold its Homemakers chain to Rhodes, Inc. GOB sales have been concluded and the Debtors are liquidating their remaining Heilig-Meyers assets. HIGH VOLTAGE: Files Chapter 22 Petition in Boston, Massachusetts ---------------------------------------------------------------- Less than a year following the confirmation of its chapter 11 plan, High Voltage Engineering Corporation tumbles back into bankruptcy with a second chapter 11 petition filed with the United States Bankruptcy Court for the District of Massachusetts, Eastern Division, on Feb. 8, 2005. The filing does not include any of HVE's international subsidiaries. HVE's decision to file for bankruptcy was precipitated by insufficient liquidity from cash flow from its principal operating subsidiaries and the Company's inability to procure alternative sources of financing through either the debt or equity markets. In connection with its filing, HVE has obtained a commitment for debtor-in-possession financing from GE Commercial Finance in the amount of $5 million, which may be increased to a maximum of $16.2 million if certain conditions are satisfied, including a condition that the Debtors use their reasonable best efforts to obtain offers for some or all of the Debtors' assets. Upon court approval, this new credit facility will be available as needed to supplement HVE's existing cash flow from operations and enhance its ability to meet its future obligations to its employees, customers, vendors and other business partners throughout the bankruptcy process. While in Chapter 11, HVE intends to offer and sell as going concerns the assets of its three distinct operating groups: -- the Charles Evans division based in California, -- High Voltage Engineering Europa B.V. based in the Netherlands and ASIRobicon, and -- both Robicon Corporation based in Pittsburgh and ASIRobicon S.p.A. based in Milan, either separately or together. The successful purchasers will be those offering the highest and best financial terms, although the company may also give consideration to purchasers that provide a strong strategic fit. HVE will seek to consummate the contemplated assets sales prior to June 30, 2005. Phillip Martineau, the Chief Executive Officer of HVE, who joined the company in mid-December 2004, stated, "HVE has operating businesses with great customers, great technology and wonderful people. It is now time to sell the operating group assets to equally great owners with the financial strength and intention to grow the businesses going forward. While it is unfortunate that a Chapter 11 filing is necessary, it represents the most efficient process to facilitate a rapid sale of the business assets as ongoing concerns, which will maximize value to our stakeholders while minimizing customer disruption and any concern about continuing the high level of support which has been a signature of HVE companies." Headquartered in Wakefield, Massachusetts, High Voltage Engineering Corporation owns and operates a group of three industrial and technology based manufacturing and services businesses. HVE's businesses focus on designing and manufacturing high quality applications and engineered products which are designed to address specific customer needs. The Debtor filed its first chapter 11 petition on March 1, 2004 (Bankr. Mass. Case No. 04-11586). Its Third Amended Joint Chapter 11 Plan of Reorganization was confirmed on July 21, 2004, allowing the Company to emerge on Aug. 10, 2004. High Voltage filed its second chapter 11 petition on Feb. 8, 2004 (Bankr. Mass. Case No. 05-10787). S. Margie Venus, Esq., at Akin, Gump, Strauss, Hauer & Feld LLP, and Douglas B. Rosner, Esq., at Goulston & Storrs, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it listed $457,970,00 in total assets and $360,124,000 in total debts. HIGH VOLTAGE: Case Summary & 36 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: High Voltage Engineering Corporation 500 Hunt Valley Drive New Kensington, Pennsylvania 15068 Bankruptcy Case No.: 05-10787 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Robicon Corporation 05-10789 Ansaldo Ross Hill, Inc. 05-10791 HVE Acquisition Corporation 05-10792 Hivec Holdings, Inc. 05-10794 Nicole Corporation 05-10795 Type of Business: High Voltage Engineering owns and operates several affiliated companies specializing in generators and motors. The company's chief subsidiary ASIRobicon, manufactures variable frequency drives that reduce energy use in industrial electric motors, motors, generators, power conversion products, and electronic controls for heavy-duty vehicles. ASIRobicon operates in Canada, the US, China, Romania, and Europe. See http://www.asirobicon.com/ High Voltage Engineering Corporation and all of its U.S. subsidiaries emerged from a chapter 11 reorganization in August 2004 (Bankr. Mass. Case No. 04-11586). Lawyers at Fried, Frank, Harris, Shriver, & Jacobson LLP, represented the company in that 163-day trip through bankruptcy that converted $155 million of debt into a 97% equity stake in the reorganized company. Chapter 11 Petition Date: February 8, 2005 Court: District of Massachusetts (Boston) Judge: Joan N. Feeney Debtors' Counsel: S. Margie Venus Akin, Gump, Strauss, Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002-5200 Tel: (713) 220-5800 Fax: (713) 236-0822 -- and -- Douglas B. Rosner, Esq. Goulston & Storrs 400 Atlantic Avenue Boston, Massachusetts 02110-3333 Tel: (617) 482-1776 Financial Advisor: Marotta Gund Budd & Dzera, LLC Unaudited Consolidated Financial Condition as of October 30, 2004: Total Assets: $457,970,00 Total Debts: $360,124,000 A. High Voltage Engineering Corporation's 19 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Grant Thornton LLP Trade debt $612,078 33960 Treasury Center Chicago, IL 60694-3900 Attn: James Rita Tel: (617) 848-4885 Thermo Electron Corporation Trade debt $159,550 Department CH 10385 Palatine, IL 60055-0385 Outlooksoft Corporation Trade debt $95,971 100 Prospect Street North Tower Stamford, CT 06901 Protivity Trade debt $75,346 625 Liberty Avenue Pittsburgh, PA 15222 Russell Reynolds Trade debt $51,501 Association Inc. Church Street Station PO Box 6427 New York, NY 10249-6427 Ropes & Gray Trade debt $50,274 One International Place Boston, MA 02110-2624 Attn: Don S. DeAmicis, Esq. Tel: (617) 951-7732 National Commercial Capital Trade debt $42,897 PO Box 691355 Cincinnati, OH 45269-1355 National Commercial Capital PO Box 691355 Cincinnati, OH 45269-1355 Bowne of New York City Trade debt $36,615 Attn: Accounting Department 345 Hudson Street New York, NY 10014-9884 Stroock & Stroock & Lavan LLP Trade debt $21,303 180 Maiden Lane New York, NY 10038-4982 Attn: Michael Sage Tel: (212) 806-5400 Physical Electronics USA, Inc. Trade debt $16,052 AT&T Trade debt $13,160 EJC Edgewater LLC c/o Campbell Estate Trade debt $11,331 Hilco Appraisal Services LLC Trade debt $10,100 Advanced Materials Engineering Trade debt $10,080 (Amer) Evercore Restructuring, L.P. Trade debt $10,000 Core Systems Trade debt $8,187 Pacific Gas & Electric ESV Trade debt $6,299 Premium Assignment Corporation Trade debt $5,817 Austin Scientific Company, Inc. Trade debt $3,645 B. Robicon Corporation's 17 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ NWL Transformers, Inc. Trade debt $1,007,143 312 Rising Sun Road Bordentown, NJ 08505 Attn: Dave Seitz Tel: (609) 298-7300 ext. 223 X-Mark/CDT Trade debt $802,135 2001 North Main Street Washington, PA 15301 Attn: Carl M. Bruckner, GM Tel: (724) 228-7373 ext. 154 Powerex Trade debt $746,969 200 E. Hillis Street Youngwood, PA 15697 Attn: Mike Drake Tel: (724) 925-4457 Hitran Corporation Trade debt $562,456 362 Highway 31 Flemington, NJ 08822 Attn: Jim Hindle Tel: (908) 782-5525 x. 224 Gatway Fasteners, Inc. Trade debt $522,023 5103 Old William Penn Highway Export, PA 15632 Attn: Jay Mangold Tel: (724) 327-7777 Hunterdon Transformer Company Trade debt $500,613 75 Industrial Drive Phillipsburg, NJ 08865 Attn: Mark Brock Tel: (908) 454-2400 Koester Metals, Inc. Trade debt $496,940 1441 Quality Drive Defiance, OH 43512 Attn: Gary Koester Tel: (419) 782-2595 NWL Capacitors Trade debt $458,284 PO Box 97 204 Carolina Drive Snow Hill, NC 28580 Attn: Dave Seitz Tel: (609) 298-7300 Norlake Manufacturing Company Trade debt $447,457 PO Box 215 39301 Taylor Parkway Elyria, OH 44036 Attn: Jim Markus Tel: (440) 353-3200 Epcos Inc. Trade debt $435,626 Special Products Division 186 Wood Avenue South Iselin, NJ 08330-2725 Attn: Barbara Korovich Tel: (732) 906-4338 R-Theta Inc. Trade debt $382,907 6220 Krestrel Road Mississauga ON L5T 1Y9 Canada Attn: Canute Fernandes Tel: (905) 795-0077 BHC Components Limited Trade debt $377,555 20/21 Cumberland Drive Granby Industrial Estte Weymouth Dorset, DT4 9TE Canada Attn: Peter Maclure Tel: 011 44 1305 830730 Unifab Enclosures, Inc. Trade debt $341,056 1947 Setterington Drive RR#2 Kingsville, ON N9Y 2E5 Canada Jianghai America Inc. Trade debt $337,520 c/o Bear Marketing 6910 Treeline Drive, Unit A Brecksville, OH 44141 Cincinnati Heat Exchangers Trade debt $292,652 5900 West Chester Road, Suite 1 West Chester, OH 45069 Attn: Tim Stilson Tel: (513) 874-7232 Telsa Power & Automation, Inc. Trade debt $289,555 6510 Bourgeois Road Houston, TX 77066 Tel: (281) 444-1200 AVX Corporation Trade debt $284,760 c/o Campisano Company 6561 Harr Cincinnati, OH 45247-7822 HORNACO INC: Case Summary & 40 Largest Unsecured Creditors ---------------------------------------------------------- Lead Debtor: Hornaco, Inc. 3810 Drake Avenue South West Huntsville, Alabama 35805 Bankruptcy Case No.: 05-80560 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- John H. Barry, Inc. 05-80561 Chapter 11 Petition Date: February 7, 2005 Court: Northern District Of Alabama (Decatur) Judge: Jack Caddell Debtor's Counsel: Kevin D. Heard, Esq. Heard & Heard P.C. 307 Clinton Avenue, West Suite 200 Huntsville, AL 35801 Tel: 256-535-0817 Total Assets Total Debts ------------ ----------- Hornaco, Inc. $0 $3,970,343 John H. Barry, Inc. $0 $1,064,951 A. Hornaco, Inc.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ GE Capital Franchise Finance secured by blanket $1,900,000 PO Box 848319 lien on fixtures, Dallas, TX 75284 equipment, machinery and inventory GE Capital Franchise Finance secured by real $1,249,000 PO Box 848319 property Dallas, TX 75284 Secured value: $832,000 GE Capital Franchise Finance machinery, inventory $575,000 PO Box 848319 Secured value: Dallas, TX 75284 $350,000 McLane Vendor $54,986 Taco Bell Royalty Vendor $51,969 Taco Bell Advertising Vendor $42,611 Charles Roberts, Jr. Vendor/Landlord on $25,487 commercial lease Balch & Bingham $10,141 UFPC Vendor $4,962 Kuhns & Associates Vendor $4,210 Malmgren Vendor $4,125 Taco Bell Corporation Vendor $3,920 Franchise Service Options Vendor $3,759 Par Tech Vendor $3,610 Diversified Services Vendor $3,401 Archon Group Vendor $3,000 Don Horner $2,981 Mr. Rooter Vendor $2,842 American Express #2 Vendor $2,425 Ricketts Refrigeration Vendor $1,668 B. John H. Barry, Inc.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ GE Capital Franchise Finance secured by blanket $1,000,000 P.O. Box 848319 lien on fixtures, Dallas, TX 75284 equipment, machinery and inventory secured value: $800,000 McLane Vendor $21,005 7188 Collection Center Drive Chicago, IL 60693 KFC Royalty Vendor $9,642 PO Box 102778 Atlanta, GA 30368 Taco Bell Advertising Vendor $7,542 Taco Bell Royalty Franchisor $7,267 KFC Advertising Vendor $4,791 North Alabama Advertising Vendor $3,354 Kuhns & Associates Vendor $2,350 Diversified Services Vendor $2,340 Par Tech Vendor $1,922 Mr. Rooter Vendor $1,134 Marshall Durbin Vendor $886 BFI Vendor $368 Taco Bell Corp. Vendor $360 Barco Vendor $335 Archway Marketing Vendor $254 Yum Brands Vendor $239 Miller Zell Vendor $229 ITC Deltacom Vendor $173 Hummingbyrd d/b/a Roto Open account $168 Rooter ILLINOIS HEALTH: S&P Lifts Rating on Revenue Bonds to CCC from CC ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating two notches to 'CCC' from 'CC' on Illinois Health Facilities Authority's $41.195 million series 1992 revenue bonds and $17.145 million series 1996 bonds, issued for Mercy Hospital and Medical Center (Mercy), Illinois. The outlook is stable. "The rating and outlook reflect a debt service reserve fund that is now fully funded and principal and interest payments that have been current as of Jan. 1, 2005, as confirmed by the trustee's counsel," said Standard & Poor's credit analyst Suzie Desai. In addition, the rating and outlook reflect Mercy's location in a neighborhood that is slowly undergoing economic transition and housing growth, which could improve the future overall patient payor mix, and operational improvements as a result of ongoing expense controls. However, there have been some ongoing fluctuations in operations during the first six months of unaudited fiscal 2005. The 'CCC' rating on Mercy's debt indicates that it is highly vulnerable to nonpayment due to its weak balance sheet and limited financial flexibility, which is characterized by very low liquidity levels, high leverage, and low cash to debt. In addition, Mercy's high government payor mix and underfunded self-insurance program could negatively affect its balance sheet if any unexpected issues arise. Operations have slowly improved since the large losses incurred in fiscal 2000. Management has made, and continues to make, operational changes, including staffing level improvements and reductions in costly agency nurse use. The stable outlook reflects the expectation that Mercy will continue to make its interest and principal payments to the trustee and bondholders on time and that management will continue to improve internal operations and achieve break-even results in fiscal 2005. Liquidity should not further deteriorate during the next year due to some of the onetime cash cushions expected this year. Nonetheless, Mercy continues to be in a difficult business position, as reflected by the current rating, and exhibits a weak financial profile that will make it susceptible to default if unexpected events occur. Standard & Poor's will continue to monitor the events that affect this credit closely. INTELSAT: Discount Note Issue Cues Fitch to Junk Senior Notes ------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the ratings of Intelsat, Ltd. and its wholly owned subsidiary, Intelsat (Bermuda), Ltd., following the issuance of $478.4 million ($305.2 million gross proceeds) of senior discount notes at an intermediate subsidiary currently named Zeus Special Sub Ltd. (Zeus). Intelsat's Rating Outlook is Stable. Fitch has also initiated a rating of 'B-' on the new Zeus senior discount notes. The rating actions are: Intelsat, Ltd. -- Senior unsecured notes to 'CCC+' from 'B-'. Zeus Special Sub Ltd. -- Senior unsecured discount notes initiated at 'B-'. Intelsat (Bermuda), Ltd. -- Senior unsecured notes to 'B' from 'B+'; -- Senior secured credit facilities to 'BB-' from 'BB'. The Stable Rating Outlook reflects the prospects for stable revenues from its lease backlog and the expected resulting free cash flow offset by a very competitive operating environment and ownership by an investment group. Fitch's rating action affects about $4.9 billion of existing debt. The new Zeus notes were issued by a newly formed intermediate subsidiary placed between Intelsat and Intelsat Bermuda. This ranks the new issue as structurally senior to the Intelsat senior notes and structurally junior to all of the debt at Intelsat Bermuda. The 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. When cash accrual on the notes begins in 2010, the annual cash interest payment will be approximately $44.3 million. Fitch's ratings not only reflect the overall increased leverage in the consolidated capital structure but also reflect Intelsat's possible need to increase capital spending at about the same time as the new Zeus senior discount notes go cash pay. This action is based on existing public information and is being provided as a service to investors. INTERSTATE HOTELS: Hosting 4th Quarter Earnings Call on Feb. 23 --------------------------------------------------------------- Interstate Hotels & Resorts (NYSE:IHR), the nation's largest independent hotel management company, will release fourth-quarter and full-year 2004 financial results on Wednesday, Feb. 23, 2005, before the market's opening. Management will hold a conference call at 10 a.m. E.T. to discuss those results. The call will be hosted by Chief Executive Officer Steve Jorns and Chief Financial Officer Bill Richardson. Stockholders and other interested parties may listen to a simultaneous webcast of the conference call on the Internet by logging onto Interstate's Web site -- http://www.ihrco.com/or http://www.streetevents.com/-- or may call (800) 240-4186, reference number 11023378. (International investors may call (303) 262-2131.) A recording of the call will be available by telephone until midnight on Wednesday, Mar. 2, 2005, by dialing (800) 405-2236, reference number 11023378. A replay of the conference call will be posted on Interstate Hotels & Resorts' Web site through Mar. 23, 2005. About the Company Interstate Hotels & Resorts -- http://www.ihrco.com/-- operates more than 300 hospitality properties with nearly 70,000 rooms in 40 states, the District of Columbia, Canada, Russia, and Portugal. BridgeStreet Corporate Housing Worldwide, an Interstate Hotels & Resorts' subsidiary, is one of the world's largest corporate housing providers. BridgeStreet and its network of Global Partners offer more than 8,700 corporate apartments located in 91 MSAs throughout the United States and internationally. * * * As reported in the Troubled Company Reporter on Aug. 23, 2004, Moody's Investors Service has assigned a B2 senior implied rating to Interstate Hotels & Resorts, Inc., and its consolidated subsidiaries. The B2 ratings previously assigned to the firm's five-year $75 million secured term loan and to the three-year $60 million revolver of Interstate Operating Company, L.P., a subsidiary of Interstate Hotels & Resorts, Inc., are unaffected. Interstate Hotels & Resorts, Inc. guarantees these bank credit facilities, which are secured by the capital stock and assets of the borrower, assets of the guarantor, and benefit from the first lien rights to receive management contract payments. This is the first time Moody's has assigned a senior implied rating to the company. The rating outlook is stable. IWO HOLDINGS: Emerging from Bankruptcy Protection Today ------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware confirmed the pre-packaged Chapter 11 Joint Plan of Reorganization of IWO Holdings, Inc., a PCS affiliate of Sprint (NYSE:FON), and its wholly owned subsidiaries, Independent Wireless One Corporation and Independent Wireless One Leased Realty Corporation. The Company expects the Joint Plan of Reorganization to become effective today, Feb. 10, 2005. Pursuant to the Joint Plan of Reorganization, the Company's old senior secured credit facility will be repaid in full, using the net proceeds of the issuance of two new series of notes, and the holders of the Company's old senior notes will receive 100% of the common stock of the reorganized Company, subject to dilution for management equity. General unsecured creditors will be unimpaired and paid in full in the ordinary course of business. The existing equity interests in the Company, all of which is held by US Unwired Inc., will be cancelled. Also, as part of the plan, the Company's agreements with Sprint PCS will be amended, and the Company's management contract with US Unwired will also be cancelled, subject to a four-month transition period. The new management team will be led by Bret Cloward. The Debtors filed their "pre-packaged" chapter 11 plan on Jan. 4, 2005, to implement its previously announced financial reorganization to restructure and substantially reduce the Company's debt, strengthen its balance sheet and increase its liquidity. As reported in the Troubled Company Reporter on Dec. 2, 2004, IWO Holdings commenced a solicitation of votes from the holders of its 14% Senior Notes due 2011 in support of a pre-packaged Chapter 11 plan of reorganization. IWO has entered into a lock-up agreement with holders of approximately 68% of the outstanding principal amount of its Senior Notes pursuant to which they have agreed to vote in support of the Chapter 11 plan. In connection with the Chapter 11 plan, a newly formed corporation which will be merged into IWO upon consummation of the plan anticipates issuing $225,000,000 in aggregate proceeds of new notes. The proceeds of such new notes would be used primarily to repay IWO's senior credit agreement debt. 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 Jan. 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. KEY COMPONENTS: Actuant Acquisition Cues S&P to Withdraw B- Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its ratings on Key Components LLC, including the 'B+' corporate credit rating. The company had been placed on CreditWatch with positive implications on Nov. 22, 2004, after Actuant Corp. (BB/Stable/--) announced that it planned to acquire Key Components. The acquisition was completed in December 2004 and all publicly issued debt outstanding has subsequently been retired. KISTLER AEROSPACE: Gets Insurance Premium Financing from Cananwill ------------------------------------------------------------------ Kistler Aerospace Corporation asks the U.S. Bankruptcy Court for the Western District of Washington for authority to enter into an insurance premium finance agreement with Cananwill, Inc. Kistler must maintain its insurance policies to keep its business operations and estate assets insured, and that's necessary for an effective reorganization. Cananwill has agreed to finance the payment of the premiums. The Debtors will deliver a $22,988.55 cash downpayment and finance the $42,341.45 balance by making eight monthly payments of $5,472.66. To secure Cananwill's interests, the Debtor will grant the insurance premium financier a security interest in unearned or returned premiums and other amounts due to Kistler under the policies. Headquartered in Kirkland, Washington, Kistler Aerospace Corporation, develops a fleet of fully reusable launch vehicles to provide lower cost access to space for Earth orbiting satellites. The Company filed for chapter 11 protection on July 15, 2003(Bankr. W.D. Wash. Case No. 03-19155). Jennifer L. Dumas, Esq., Youssef Sneifer, Esq., at Davis Wright Tremaine LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $6,256,344 in total assets and $587,929,132 in total debts. KITCHEN ETC: Judge Walsh Confirms Second Amended Liquidation Plan ----------------------------------------------------------------- The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware confirmed the Second Amended Liquidating Plan of Reorganization filed by Kitchen Etc., Inc., on January 31, 2005. Judge Walsh concluded that the Plan: a) contains only provisions that are consistent with the interests of creditors, equity security holders and with public policy with respect to the manner of selection of the Plan Administrator who will serve, on or after the Effective Date as the sole officer and director of the Debtor; b) includes only provisions that are not inconsistent with applicable provisions of the Bankruptcy Code and applicable law; c) has been proposed in good faith and not by any means forbidden by law; d) complies with Section 1129(a)(11) of the Bankruptcy Code that provides for the liquidation of the Debtor and its remaining assets; and e) does not unfairly discriminate against Class 6 and Class 7 claims in accordance with Section 1129(b)(1) of the Bankruptcy Code and is fair and equitable to those two classes as required under Section 1129(b)(2)(c) of the Bankruptcy Code. As reported in the Troubled Company Reporter on Dec. 27, 2004, the Plan provides for the appointment of a Plan Administrator who will act as the sole representative of the Debtor upon the Effective Date of the Plan and who will have the authority and power to make the required distributions under the Plan. Judge Walsh approved the Debtor's designation of Joseph Myers of Clear Thinking Group LLC, as the Plan Administrator. A full-text copy of the Second Amended Liquidation Plan are available for a fee at: http://www.researcharchives.com/download?id=040812020022 The Court set March 9, 2005, as the Administrative Claims Bar Date for filing any and all Administrative Expense Claims against the Debtor. Those claims must be filed and served on or before the March 9 bar date to the Debtor's claims agent, CPT Group Inc. Headquartered in Exeter, New Hampshire, Kitchen Etc., Inc. -- http://www.kitchenetc.com/-- was a multi-channel retailer of household cooking and dining products. Kitchen Etc. filed for chapter 11 protection on June 8, 2004 (Bankr. Del. Case No. 04- 11701) and quickly retained DJM Asset Management to dispose of all 17 Kitchen Etc. stores throughout New England, New York, Delaware, Pennsylvania, Maryland and Virginia. Bradford J. Sandler, Esq., at Adelman Lavine Gold and Levin, PC, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $32,276,000 in total assets and $33,268,000 in total debts. KMART CORP: Settles Samsung Claim Assignment Dispute ---------------------------------------------------- On February 26, 2002, Samsung Electronics of America, Inc., filed Claim No. 266 for $15,436,191. Samsung partially assigned its interest in Claim No. 266 to EULER American Credit Indemnity Company in the amount of $8,796,068. As assignee of a portion of Claim No. 266, EULER filed Claim No. 25066 for $8,796,068 in June 2002. Samsung subsequently assigned another portion of Claim No. 266, in the amount of $4,999,963, to Goldman Sachs Credit Partners L.P., which, in turn, transferred that claim to Third Avenue Value Fund. In May 2003, Kmart Corporation commenced an adversary proceeding against Samsung seeking to avoid certain transfers made by Kmart to Samsung prior to the Petition Date. Neither EULER nor Third Avenue have assigned or transferred any interest in their Claims. Kmart has timely filed objections to Claim No. 266, as well as EULER's and Third Avenue's assigned claims. In a Court-approved stipulation, Kmart, EULER, and Third Avenue stipulate and agree that: (a) Samsung's assignment of portions of Claim No. 266 to EULER and Third Avenue is ratified and deemed valid and enforceable; (b) The EULER Claim is allowed for $8,796,068 and the Third Avenue Claim is allowed for $4,999,963, both as Class 5 Trade Vendor/Lease Rejection Claims against Kmart. Kmart will make a distribution to EULER and Third Avenue on account of the Allowed Claims in accordance with the Plan; (c) The Parties release each other from all actions that Kmart may have had, may now have, or may in the future have against any of them arising out of or relating to Claim No. 266 and the claims assigned to EULER and Third Avenue, except as specifically provided in the Stipulation; (d) In consideration of Kmart's release: -- EULER will be deemed to assign to Kmart a 10% interest in the EULER Claim, which assignment is effective January 21, 2005. After taking into account this assignment, the post-assignment allowed EULER Claim will be $7,916,461, and the post-assignment allowed Kmart claim will be $879,607; and -- Third Avenue will be deemed to assign a 10% interest in the Third Avenue Claim, which assignment is effective January 21, 2005. After taking into account this assignment, the post-assignment allowed Third Avenue Claim will be $4,499,966, and the post-assignment allowed Kmart claim will be $499,996; and (e) Kmart reserves all rights, claims, and defenses asserted, or which it may assert, in the Adversary Proceeding. The approved Stipulation will not in any way release Samsung from any liability in the Adversary Proceeding. However, Kmart will make distributions on the Assigned Claims, notwithstanding any objection it may have earlier asserted with respect to those claims under Section 502(d) of the Bankruptcy Code. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- is the nation's second largest discount retailer and the third largest merchandise retailer. Kmart Corporation currently operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. (Kmart Bankruptcy News, Issue No. 89; Bankruptcy Creditors' Service, Inc., 215/945-7000) KRISPY KREME: Reducing Workforce by 25% to Save $7.4 Million ------------------------------------------------------------ Krispy Kreme Doughnuts, Inc. (NYSE: KKD) is reducing the number of employees in its corporate, mix plant, equipment manufacturing, and distribution facilities by approximately 25%. It is estimated that these actions will result in annual pre-tax savings of approximately $7.4 million and a cash restructuring charge of approximately $600,000 in the first fiscal quarter. The Company also recently divested a corporate airplane that was subject to an operating lease. It is estimated that this action will result in annual pre-tax savings of approximately $3 million but will involve a cash charge of approximately $300,000 in the first fiscal quarter related to the divestiture. March 25 Deadline Looms As previously reported in the Troubled Company Reporter on Jan. 27, 2005, the six-lender consortium under Company's Credit Facility have agreed to defer until March 25, 2005, the date on which an event of default would occur because of the Company's failure to deliver financial statements to the lenders for the quarter ended Oct. 31, 2004. Also, as previously disclosed, the Company is currently unable to borrow funds under the Credit Facility. The Company presently is working on a business plan and intends to conduct discussions with its lending banks regarding amendments to its Credit Facility. The Company's cash from operations continues to be impacted adversely by previously disclosed unfavorable sales trends, and by the substantial costs and expenses associated with ongoing litigation, regulatory and restructuring matters. In light of the foregoing, Krispy Kreme believes that it will need to obtain, by the end of the waiver period, additional credit to fund its operations and required capital expenditures. There can be no assurance that the Company will be able to reach any agreement with the banks or that funding will be available when and in the amounts needed. "Krispy Kreme is a great brand, and we are working very hard to help the Company rediscover its potential," said Steve Panagos, Krispy Kreme's President and Chief Operating Officer recently imported from Kroll Zolfo Cooper LLC. Stephen F. Cooper is serving as Chief Executive Officer, replacing Scott A. Livengood, who retired as Chairman of the Board, President and Chief Executive Officer and resigned as a director of the Company last month. Krispy Kreme Doughnuts, Inc. disclosed in early January that its Board of Directors concluded that the Company's previously issued financial statements for the fiscal year ended February 1, 2004 and the last three quarters of fiscal year 2004 should be restated to correct accounting errors estimated to total $6 to $8 million. Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates more than 400 stores in 45 U.S. states, Australia, Canada, Mexico the Republic of South Korea and the United Kingdom. Krispy Kreme can be found on the World Wide Web at http://www.krispykreme.com/ LACLEDE STEEL: Disclosure Statement Hearing Scheduled for March 7 ----------------------------------------------------------------- The Honorable Barry S. Schermer of the U.S. Bankruptcy Court for the Eastern District of Missouri will convene a hearing on Mar. 7, 2005, at 9:00 a.m., to consider the adequacy of a Disclosure Statement filed on Jan. 31, 2005, by Laclede Steel Company and its Official Unsecured Creditors Committee to explain their Plan of Liquidation. The Plan Proponents will ask the Court to rule that the disclosure document contains the right amount of the right kind of information necessary to permit creditors to make informed decisions when they vote to accept or reject the Joint Plan. Objections to the Disclosure Statement, if any, must be filed with the Bankruptcy Clerk in St. Louis by February 28, 2005, and served on the Plan Proponents' counsel: Attorneys for the Debtor and Debtor-in-Possession: Lloyd A. Palans, Esq. Christoper J. Lawhorn, Esq. David M. Unseth, Esq. Cullen K. Kuhn, Esq. BRYAN CAVE, LLP 211 N. Broadway, Suite 3600 St. Louis, MO 63102-2750 Attorneys for the Official Unsecured Creditors Committee: Steven Goldstein, Esq. Robert A. Breidenbach, Esq. GOLDSTEIN & PRESSMAN, P.C. 121 Hunter Avenue, Suite 101 St. Louis, MO 63124-2082 Objectors are instructed to identify those portions of the Disclosure Statement they assert are incomplete, misleading, erroneous, or otherwise objectionable and further instructed to state in detail the information the objector wants added or deleted from the Disclosure Statement. Where appropriate, the objecting party is directed to propose acceptable language which the objecting party requests be included in the disclosure statement. The Disclosure Statement must be approved by the Bankruptcy Court before the Plan may be submitted to the creditors for a vote. A copy of the Plan, a court-approved Disclosure Statement and a notice indicating the time, date and place for a Confirmation Hearing will be sent to all parties-in-interest at a later date. One of only three full-line producers of continuous-weld pipe in the United States at the time, Laclede Steel Company sought chapter 11 protection for a second time on July 27, 2001 (Bankr. E.D. Mo. Case No. 01-48321). The company disclosed more and $100 million in assets and liabilities at the time of the filing. Over the past three and half years, the Company has closed its facilities, conducted going concern sales and liquidated most of its real property and other assets for the benefit of its creditors. LEVI STRAUSS: S&P Places Junk Ratings on CreditWatch Positive ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on jeans designer and marketer Levi Strauss & Co., including its 'CCC' long-term corporate credit rating, on CreditWatch with positive implications. San Francisco, California-based Levi Strauss had about $2.3 billion in total debt outstanding at Aug. 29, 2004. The CreditWatch listing reflects Standard & Poor's expectation that full year results will demonstrate improvement in the company's operating results and liquidity position. Standard & Poor's analysis will focus on the benefits from the cost-reduction and restructuring efforts in the past year, sustainability of revenues, and the ability to reduce debt and extend maturities. "We will conduct a comprehensive review of the company's progress, including its operating and financial strategies. Resolution of the CreditWatch listing, which could result in the corporate credit rating being raised to the 'B' category, is expected with the conclusion of our review, which should be completed within the next 30 days," said credit analyst Susan H. Ding. MANUFACTURED HOUSING: S&P's Rating on Three Classes Tumbles to D ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on three classes from three Green Tree-related manufactured housing transactions to 'D'. The lowered ratings reflect the reduced likelihood that investors will receive timely interest and the ultimate repayment of their original principal investment. Manufactured Housing Contract Senior/Sub Pass-thru Trust 1999-3 reported an outstanding liquidation loss interest shortfall for its B-1 class on the February 2005 payment date. At the same time, Manufactured Housing Contract Senior/Sub Pass-Thru Trust 1999-6 and Manufactured Housing Contract Senior/Sub Pass-Thru 2000-2 each reported an outstanding liquidation loss interest shortfall for its M-2 classes. Standard & Poor's believes that interest shortfalls for these transactions will continue to be prevalent in the future, given the adverse performance trends displayed by the underlying pools of collateral, as well as the location of mezzanine and subordinate class write-down interest at the bottom of the transactions' payment priorities (after distributions of senior principal). Standard & Poor's will continue to monitor the outstanding ratings associated with these transactions in anticipation of future defaults. Ratings Lowered Manufactured Housing Contract Senior Sub Pass-thru Trust 1999-3 Rating Class To From ----- -- ---- B-1 D CC Manufactured Housing Contract Senior Sub Pass-thru Trust 1999-6 Class To From ----- -- ---- M-2 D CC Manufactured Housing Contract Senior Sub Pass-thru Trust 2000-2 Class To From ----- -- ---- M-2 D CC MB TECH: Restructuring of Korean Operation Reduces Debt ------------------------------------------------------- MB Tech (OTCBB: MBTT) has reorganized its core assets and business structure to enhance its financial outlook. In cooperation with A-Telecom, MB Tech's restructure has accomplished: -- the disposition of aged bad assets; -- the clearance of long-term accounts payable and liabilities; -- the restructuring of the business which enjoyed neither competitive power or profit (the old LNB business); -- the improvement of cash flow by reducing labor, fixed cost and indirect cost; MB Tech continues to focus its business on developing and marketing the product line led by innovative satellite antenna solutions known as "Faserwave." As previously reported, for the LNB business, MB Tech has established a cooperative relationship with A-Telecom, a top tier manufacturer in Korea for LNB products. MB Tech Inc. will market and sell those LNB products for the North America market under the brand of MB Tech. For information on MB Tech's product line, visit: http://www.princetonresearch.com/clients/MBTechQ14.pdf About the Company MB Tech is a global manufacturer and distributor of electronic components. MB Tech and its subsidiaries produce products for the DBS satellite industry and state-of-the-art RF microwave and communications technologies with consumer and military applications. MB Tech serves the satellite television market as a provider of hardware and bundled solutions, and is expanding to serve the satellite radio and military hardware and solutions sectors. MB Tech manufactures, distributes and/or markets several proprietary solutions that differentiate it from competitors, including active and non-active auto-tracking (portable and stationary) flat antennas, a mobile phased shift array antenna, and a marine antenna. MB Tech pioneered advancements like the dual-horn LNB, which allows multiple set-top boxes to be connected to a single satellite dish, enabling viewing of multiple channels simultaneously on different television monitors, and a tri-horn LNB, which provides the ability to download signals from multiple satellites over a single dish. * * * Going Concern Doubt In its Form-10QSB for the quarterly period ended Sept. 30, 2004, filed with the Securities and Exchange Commission, MB Tech disclosed that it has experienced recurring losses since inception and has negative cash flows from operations that raise substantial doubt as to its ability to continue as a going concern. For the quarters ended Sept. 30, 2004 and 2003, the Company experienced net losses of $764,736 and $635,792 respectively. At Sept. 30, 2004, MB Tech's balance sheet showed a $277,579 stockholders' deficit, compared to a $547,988 deficit at Sept. 30, 2003. MIRANT CORPORATION: Court Orders Intercompany Claim Disclosures --------------------------------------------------------------- Deutsche Bank Securities, Inc., holds a $45,000,000 liquidated, unsecured claim against Mirant Americas, Inc. -- Mirant Corporation debtor-affiliate. Deutsche Bank's Claim were held originally by El Paso North America through its affiliates Shady Hills Holding Company and Mesquite Investors, LLC. The Claim was assigned to Deutsche Bank postpetition. Mirant Americas' Schedules of Assets and Liabilities disclose that Mirant Americas Energy Marketing, LP, and Mirant Services, LLC, hold unliquidated, unsecured, intercompany claims against Mirant Americas totaling $600,000,000. Deutsche Bank wants proof of those intercompany claims or Deutsche Bank wants those claims disallowed. Susheel Kirpalani, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, New York, tells Judge Lynn of the U.S. Bankruptcy Court for the Northern District of Texas that the Bankruptcy Code and Bankruptcy Rules contain certain requirements designed to ensure disclosure and finality throughout the reorganization process. Examples include filing deadlines or "bar dates" for asserting claims and requirements that debtors file schedules disclosing the extent of their liabilities. These mechanisms should, when followed, provide creditors with a meaningful picture of their obligor's financial condition, Mr. Kirpalani explains, which can then serve as a backdrop against which a reorganization plan can be formulated. They also enable creditors -- and, if appointed, their statutory creditors' committee -- to be vigilant in ascertaining the nature of all claims competing for the assets of their debtor. The Bankruptcy Code and Bankruptcy Rules also impose obligations on creditors to ensure that the estate's picture, as presented by the debtor, includes complete information concerning the debtor's liabilities. Indeed, creditors must make meaningful disclosures when filing claims and must substantiate their assertions to enable parties in interest to ascertain whether asserted claims are legitimate, and whether there are any defenses or offsets to lodge in response. These procedures have not been adequately followed by the Debtors in these cases, both when acting as debtor-preparer of the Schedules and as debtor-claimant asserting intercompany claims. Mirant America's Schedules are Deficient Mirant Americas' Schedules admit just one undisputed third-party creditor, Deutsche Bank, with Claims of $45,000,000, plus interest. In addition to Deutsche Bank's liquidated, undisputed claims, Mirant Americas scheduled intercompany claims asserted by two debtor entities, MAEM and Mirant Services, as unliquidated and contingent claims totaling $600,000,000 -- but virtually no information is provided to ascertain the validity of these claims. Thus, MAEM and Mirant Services allegedly comprise as much as 93% of the unsecured creditor body of the Mirant Americas estate, yet Mirant America's third-party creditors have been given no information from which to assess the legitimacy of MAEM's and Mirant Services' assertions. As a vigilant creditor trying to participate in Mirant Americas' bankruptcy case, Deutsche Bank has been attempting to ascertain the nature, extent, and validity of the potentially significant Intercompany Claims. Unfortunately, except for a limited degree of responsiveness by the Court-appointed Examiner, Deutsche Bank's overtures have been rebuffed by the Mirant Americas "fiduciaries" to date. Deutsche Bank is increasingly concerned about the lack of representation by the existing fiduciaries because, as the Debtors and the multiple creditors' committees come under increased pressure to file one or more Chapter 11 plans, they have little incentive to focus on an estate like Mirant Americas which has but one scheduled third-party creditor. However, Deutsche Bank is entitled, under the Bankruptcy Rules, to know the extent of Mirant America's "real" liabilities. Mirant Americas' Schedules simply do not provide the necessary transparency, Deutsche Bank complains. Order an Intercompany Claims Bar Date Given the advanced stage of the Debtors' Chapter 11 cases, Deutsche Bank insists there is ample cause to impose a filing deadline in accordance with Bankruptcy Rule 3003(c)(3) for Intercompany Claims against Mirant Americas. First, Rule 3003(c)(2) of the Federal Rules of Bankruptcy Procedure expressly requires that "any creditor" whose claim is "scheduled as disputed, contingent, or unliquidated shall file a proof of claim . . . within the time prescribed [by the Court]." Moreover, establishing a deadline will enable creditors of Mirant Americas to ascertain with certainty the extent of the competing liabilities asserted against their Debtor. Without the Intercompany Claims Bar Date, Mirant Americas will be unable to propose, and its creditors will be unable to evaluate, a Chapter 11 Plan on an informed basis. Alternatively, Disallow the Intercompany Claims Deutsche Bank also objects to the Intercompany Claims on account of, among other things, they are wholly unsubstantiated. The absence of any supporting documentation precludes a meaningful examination of the range of objections that can be raised in connection with the Claims. In any event, Deutsche Bank says, the Intercompany Claims are not entitled to any presumptive validity and, in the absence of proofs of claim supported by evidence, the Intercompany Claims should be disallowed. In the alternative, Deutsche Bank also objects to the MAEM Claim under Section 502(e)(1)(B) of the Bankruptcy Code, on the grounds that the Claim appears to be for some type of reimbursement obligation from Mirant Americas. As a contingent reimbursement claim, Section 502(e)(1)(B) mandates its disallowance. * * * Judge Lynn directs the Debtors to file with the Court, in accordance with Section 521 of Bankruptcy Code, and Rules 1007(k) and 1009 of the Federal Rules of Bankruptcy Procedure, amended Schedules of Assets and Liabilities disclosing the Debtors' full account of known prepetition intercompany claims based on: (a) books and records that exist today; and (b) any intercompany claims of which the Debtors' General Counsel has knowledge based on the General Counsel's having received written notice of the same asserted against Mirant Americas by any other Debtors or non-debtor affiliate; The Court authorizes the Examiner appointed in the Debtors' Chapter 11 cases, pursuant to Section 1104, to investigate the validity and amount of the Amended Intercompany Claims including, without limitation, any defenses, set-offs, or challenges available to Mirant Americas, and file with the Court, a non- confidential report setting forth the Examiners' detailed report setting for the Examiner's detailed findings and conclusions with respect to the Investigation. The Debtors may seek leave of the Court, subject to the objection of any party-in-interest, to file further amendments to the Amended Schedules with respect to the Amended Intercompany Claims, provided that the Debtors may not amend the Amended Schedules with respect to the Amended Intercompany Claims absent further order of the Court for cause shown. Furthermore, the Court directs the Debtors to provide the Examiner -- including his professional advisors -- with reasonable access to any and all information required for the Examiner to conduct his investigation and to prepare the Mirant Americas Intercompany Claims Report including, without limitation, access to the Debtors': -- books and records; -- financial statements; -- accounting software; -- contracts and other supporting documents; -- board resolutions; -- minutes; -- inter-corporate reconciliation policies and procedures; and -- in-house, legal, accounting, and finance personnel. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) MOSAIC GROUP: Can Start Liquidating MCI Stock --------------------------------------------- Jeffrey H. Mims, the chapter 11 Trustee for the estates of Mosaic Group (US) Inc., and its debtor-affiliates sought and obtained an approval from the Honorable Harlin De Wayne Hale of the U.S. Bankruptcy Court for the Northern District of Texas to sell the Debtors' MCI stock. MCI, Inc., became the successor of Worldcom, Inc., after Worldcom filed for bankruptcy in July of 2002. The Debtors have an allowed $1,350,000 claim against Worldcom. According to Worldcom's Plan of Reorganization, Mosaic will get a cash payment and some MCI stock. The Trustee wants to liquidate the MCI stock it now holds to get the maximum market rates. Morgan Stanley will facilitate the sale of the MCI shares for a $1,250 fee. Headquartered in Irving, Texas, Mosaic Group (US) Inc., a world- leading provider of results-driven, measurable marketing solutions for global brands, filed for chapter 11 relief on December 17, 2002 (Bankr. N.D. Tex. Case No. 02-81440). Charles R. Gibbs, Esq., David H. Botter, Esq., and Kevin D. Rice, Esq., at Akin, Gump, Strauss, Hauer & Feld, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it estimated debts and assets of over $100 million each. Mosaic Group, Inc. -- http://www.mosaic.com/-- also sought and obtained protection under the Companies' Creditors Arrangement Act in Canada. On June 15, 2004, Jeffrey H. Mims was appointed as chapter 11 Trustee. NEW SKIES: Wants to Amend Bank Loan via Deutsche Bank on IPO ------------------------------------------------------------ New Skies Satellites B.V. (NYSE:NSK) (AEX:NSK), the global satellite communications company, is seeking an amendment to its existing credit facilities via Deutsche Bank. The amendment is being sought in connection with the proposed initial public offering of New Skies Satellites Holdings Ltd., its indirect parent company, and will seek, among other changes, an increase in the size of the revolving credit facility, new financial covenant levels and a reduction in pricing on the facilities. A registration statement relating to the initial public offering of New Skies Satellites Holdings Ltd.'s securities has been filed with the U.S. Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. About the Company New Skies Satellites is one of only four fixed satellite communications companies with truly global satellite coverage, offering data, video, Internet and voice communications services to a range of telecommunications carriers, broadcasters, large corporations, Internet service providers and government entities around the world. New Skies has five satellites in orbit and ground facilities around the world. The company also has secured certain rights to make use of additional orbital positions for future growth. New Skies is headquartered in The Hague, The Netherlands, and has offices in Hong Kong, New Delhi, Sao Paulo, Singapore, Sydney and Washington, D.C. * * * As reported in the Troubled Company Reporter on Oct. 26, 2004, Moody's Investors Service assigned a B2 senior implied rating to New Skies Satellites, BV, reflecting the substantial financial risk associated with its proposed recapitalization, significant operating risk inherent in the satellite industry, and challenging competitive environment. As part of this rating action, Moody's initiates these ratings: * B2 -- Senior Implied Rating * B1 -- $75 million senior secured revolving credit facility * B1 -- $460 million senior secured term loan * B3 -- $160 million senior unsecured floating rate note * Caa1 -- $125 million senior subordinate notes * B3 -- Senior Unsecured Issuer Rating * SGL-3 -- Speculative Grade Liquidity Rating The outlook for all ratings is stable. New Skies' B2 senior implied rating reflects high leverage and a weak fixed charge coverage. Moody's expects New Skies' to take on leverage of approximately 12x debt to free cash flow (Total debt/CFFO less CAPEX less dividend) by the end of the year, and fixed charge coverage (EBITDA-CAPEX/Cash Interest) to fall to about 1.9x. Moody's is concerned that these high fixed debt payments will weaken New Skies' ability to react to an increasing competitive environment, and potential operational shortfall. The rating also incorporates rising costs of insurance across the industry, which may offset any margin gains resulting from improved operational efficiency or higher utilization rates. NEW VISUAL: Needs $820,000 to Operate Until April ------------------------------------------------- New Visual Corporation entered into a loan agreement with Double U Master Fund LP in December 2004. New Visual borrowed $300,000 from Double U. The principal amount of the loan and any accrued and unpaid interest is due and payable on June 24, 2005. The Company may prepay the loan in whole or in part at any time without penalty. Interest on the principal amount of the loan outstanding accrues at the annual rate of 15% and is payable on the earlier of March 24, 2005 or the maturity of the loan, or upon prepayment of the principal. The Company received net proceeds of $267,000 from this loan following the payment of due diligence fees and transaction related fees and expenses. Part of the proceeds of this loan were used to pay down and retire the line of credit from Melton Management Ltd. In September 2004, the Company entered into a loan agreement with Melton Management Ltd., pursuant to which it borrowed $250,000 from Melton. The principal amount of the loan and any accrued and unpaid interest is due and payable on March 24, 2005. The Company may prepay the loan in whole or in part at any time without penalty. Interest on the principal amount of the loan outstanding accrues at the annual rate of 15% and is payable on the earlier of December 24, 2004 or the maturity of the loan, or upon prepayment of the principal. New Visual received net proceeds of $220,000 from this loan following the payment of transaction related fees and expenses. In July 2004, New Visual entered into a revolving line of credit agreement with Wells Fargo Bank, National Association, which allows it to borrow up to $100,000 on a revolving basis. Interest on any amount borrowed under the line of credit accrues at a floating rate equal to the prime rate set by the bank plus a margin of .500% and is payable monthly beginning in Sept. 2004. The line of credit terminates on August 10, 2005, at which time any outstanding principal and any accrued and unpaid interest is due and payable. The Company's obligations under the line of credit are secured by funds deposited with the bank by one of its officers and directors. New Visual has agreed to indemnify that officer and director for any losses or expenses he may incur as a result of providing security for the line of credit. Fund Needs Notwithstanding the proceeds of the loans described, New Visual needs to raise a minimum of $820,000 on an immediate basis in order to maintain its operations as presently conducted through April 30, 2005. If unable to raise this amount, New Visual Corporation will not be able to maintain operations as presently conducted and may cease operating as a going concern. Unless the Entertainment Business generates revenues, New Visual will need to raise an additional $3 million to $4 million to realize its business plan as contemplated and complete the design and testing of a commercially deployable version of the Semiconductor Technologies and its eventual commercialization. The Company has no commitments for any such financing, and there can be no assurance that additional capital will be available to it on commercially acceptable terms, or at all. Management also intends to attempt to raise funds through private sales of common stock and borrowings. The inability to obtain such financing will have a material adverse effect on the Company's business, its operations and future business prospects. It is also anticipated that any successful financing will have a significant dilutive effect on existing stockholders. Going Concern Doubt The independent registered public accounting firm's report accompanying New Visual's financial statements for the year ended October 31, 2004, includes an explanatory paragraph relating to the uncertainty of the Company's ability to continue as a going concern, which may makes it more difficult for the Company to raise additional capital. Its auditors believe that there are conditions that raise substantial doubt about the Company's ability to continue as a going concern. New Visual Corporation is developing advanced transmission technology to enable data to be transmitted across copper telephone wire at speeds and over distances that exceeds those offered by leading DSL technology providers. The Company intends to market this novel technology to leading equipment makers in the telecommunications industry. Through its wholly owned subsidiary, NV Technology, the Compaqny intends to design, develop, manufacture and license semiconductor hardware and software products based upon our Semiconductor Technologies. Through its wholly owned subsidiary, NV Entertainment, the Company recognized in the year ended October 31, 2004, gross profit from the revenues from the hit feature-length documentary, STEP INTO LIQUID. According to its distributor, the Film has grossed $3.7 million in box office receipts since its domestic theatrical release in August 2003. Since April 2004 it has been, and now remains, in wide DVD release domestically, grossing approximately $14 million in sales and rentals. The Film is currently in theatrical distribution internationally. NORTEL NETWORKS: Completes Asset Transfer to Flextronics -------------------------------------------------------- Flextronics (Nasdaq: FLEX) and Nortel Networks (NYSE: NT; TSX) successfully completed the transfer of the manufacturing operations and related assets including product integration, testing, repair and logistics operations of Nortel's Systems House in Montreal to Flextronics, as part of a previously announced agreement. "We are thrilled to welcome this world-class workforce with extensive industry experience," said Michael Marks, Flextronics' Chief Executive Officer. "This represents a significant increase in our complex, multi-technology telecom and network capabilities. Coupled with the optical design resources that we acquired last November, we have further diversified our product mix and strengthened our position as an end-to-end solutions provider in the telecom market." "The successful transition of these operations to Flextronics is an important milestone," said Sue Spradley, president, Global Operations, Nortel. "This step moves us closer to completing the journey we began five years ago to divest substantially all of our manufacturing activities in order to focus our resources on those areas that offer Nortel true competitive differentiation. Those areas include the introduction of new products and the deployment, network integration and support of complex, multi-technology network solutions." Both companies are working towards closing the balance of the agreement in the first half of 2005. This is subject to the implementation of systems and processes and to completion of the required information and consultation processes with relevant employee representatives. About Flextronics Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics -- http://flextronics.com/-- is the leading Electronics Manufacturing Services (EMS) provider focused on delivering innovative design and manufacturing services to technology companies. With fiscal year 2004 revenues of USD$14.5 billion, Flextronics is a major global operating company that helps customers design, build, ship, and service electronics products through a network of facilities in 32 countries on five continents. This global presence provides customers with complete design, engineering, and manufacturing resources that are vertically integrated with component capabilities to optimize their operations by lowering their costs and reducing their time to market. About Nortel Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world's greatest challenges. Nortel does business in more than 150 countries. * * * As reported on the Troubled Company Reporter on Jan. 31, 2005, Standard & Poor's Ratings Services affirmed its 'B-' credit rating on Nortel Networks Lease Pass-Through Trust certificates series 2001-1 and removed it from CreditWatch with negative implications, where it was placed Dec. 8, 2004. NORTHWESTERN CORP: Settles Litigation & Bankr. Claims with Magten ----------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) reached an agreement in principle which would settle all pending legal actions, appeals, claims and disputes by and among NorthWestern, Magten Asset Management Corporation and Law Debenture Trust Company of New York LLC. The settlement is subject to completing mutually acceptable definitive documentation and ultimate approval by the United States Bankruptcy Court for the District of Delaware. According to Gary G. Drook, NorthWestern President and Chief Executive Officer, the settlement, if approved by the Bankruptcy Court, will resolve the only pending appeal of NorthWestern's confirmed plan of reorganization and resolves a significant amount of pending legal actions, claims and disputes brought by Magten and Law Debenture, in its capacity as Indenture Trustee on behalf of itself and the "non-accepting" Class 8(b) holders of the Montana Power QUIPs securities. "As NorthWestern Energy moves forward from its reorganization, it is important that we appropriately address pending litigation and disputed claims remaining from the bankruptcy," Mr. Drook said. "We believe this settlement is in the best interest of the Company and its shareholders as it removes the uncertainty associated with this protracted legal dispute that, if continued, would have resulted in significant cost to the Company." The agreement calls for NorthWestern to distribute to Law Debenture as the Indenture Trustee for its own benefit and on behalf of Magten and other non- accepting Class 8(b) QUIPS holders 382,732 shares of NorthWestern common stock and 710,449 warrants not yet distributed to Class 8(b) claimants that would have been distributed to those holders had they accepted the Company's confirmed plan of reorganization. Also, NorthWestern will distribute to the Indenture Trustee for itself and on behalf of Magten and the non- accepting Class 8(b) QUIPS holders $17.4 million worth of common stock (or approximately 870,000 shares) which were set aside for such QUIPS holders in reserves established for Class 9 pending litigation claims. Any fees and expenses asserted to be owed to Law Debenture as the Indenture Trustee will be paid from the distribution of the stock and warrants. NorthWestern will make no cash distributions as part of the settlement. NorthWestern will be filing a motion seeking approval of the settlement and will be asking the Bankruptcy Court to approve the settlement as soon as possible after appropriate notice to NorthWestern's creditors and parties-in- interest. Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on Nov. 1, 2004. At Sept. 30, 2004, Northwestern Corp.'s balance sheet showed a $602,981,000 stockholder's deficit, compared to a $585,951,000 deficit at Dec. 31, 2003. NRG ENERGY: NRG McClain Wants Chapter 11 Case Dismissed ------------------------------------------------------- NRG McClain, LLC, does not operate any businesses or hold any assets other than $1,311,536.81 in sale proceeds. As previously reported, the U.S. Bankruptcy Court for the Southern District of New York approved the sale of substantially all of NRG McClain's Assets to Oklahoma Gas & Electric Company for $159,950,000. A substantial portion of the Sale Proceeds was paid to NRG McClain's prepetition secured lenders in satisfaction of McClain's outstanding secured debt obligations under a prepetition credit agreement. The remaining portion of the Sale Proceeds will be used by McClain to satisfy certain administrative expense obligations that were expected to accrue prior to the closing of the Bankruptcy Case. Once the NRG McClain Funds are distributed, NRG McClain's estate will be fully administered. Ryan Blaine Bennett, Esq., at Kirkland & Ellis, LLP, in New York, asserts that the interests of creditors and NRG McClain would be better served by the dismissal of NRG McClain's Chapter 11 case in accordance with Sections 305(a) and 1112(b) of the Bankruptcy Code. Bankruptcy courts are specifically empowered to dismiss a case for cause where there is an "absence of a reasonable likelihood of rehabilitation," or for "inability to effectuate a plan." Moreover, the aggregate amount of allowed secured claims in NRG McClain's Chapter 11 case well exceeds the undistributed amount of the McClain Funds. Consequently, there is no recovery available from the NRG McClain Funds to satisfy any outstanding administrative expense claims, priority claims, or any other general unsecured claims. If NRG McClain were to propose a Chapter 11 plan of liquidation, Section 1129(a)(9) of the Bankruptcy Code would remain unsatisfied. Thus, that plan could not be confirmed. Alternatively, a case may be dismissed pursuant to Section 305(a)(1) of the Bankruptcy Code if the interests of creditors and the debtor would be better served by the dismissal. Mr. Bennett notes that the dismissal of NRG McClain's Chapter 11 case will terminate the accrual of unnecessary administrative expenses and is in the best interests of the Debtors and their creditors. Accordingly, NRG McClain asks the Court to dismiss its Chapter 11 case as soon as the distribution of the NRG McClain Funds is completed. Within five days after the final distribution of the NRG McClain Funds, NRG McClain will file an affidavit attesting that the distributions have been completed and that there are no outstanding fees owed to the U.S. Trustee. The Bankruptcy Court would retain limited jurisdiction over administrative matters like professional fees and certain other limited distributions. NRG Energy, Inc., owns and operates a diverse portfolio of power-generating facilities, primarily in the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. The company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-13024) on May 14, 2003. The Company emerged from chapter 11 on December 5, 2003, under the terms of its confirmed Second Amended Plan. James H.M. Sprayregen, Esq., Matthew A. Cantor, Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented NRG Energy in its $10 billion restructuring. * * * As reported in the Troubled Company Reporter on Dec. 14, 2004, Standard & Poor's Ratings Services assigned its 'CCC+' rating to NRG Energy Inc.'s (NRG; B+/Stable/--) proposed $400 million convertible perpetual preferred stock. The outlook is stable. OMNICARE INC: S&P Rates Proposed $345M Preferred Securities at BB ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to Omnicare Inc.'s proposed $345 million of Series B 4.00% trust preferred income equity redeemable securities (PIERS) due June 15, 2033. These securities are being offered in exchange for an existing PIERS issue. Unlike the existing PIERS, these are primarily convertible into cash. A change in accounting treatment for these "contingently convertible" securities has rendered them less attractive to issuers as the potential conversion is now dilutive to earnings. Otherwise, the new issue is identical to the old PIERS. "All the ratings assigned to Omnicare, including this one, remain on CreditWatch with negative implications where they were placed May 24, 2004, in light of the company's hostile bid for 'BB' rated competitor NeighborCare, Inc.," said Standard & Poor's credit analyst David Lugg. If successful, debt could increase by $1.5 billion, markedly weakening credit measures, with total debt to EBITDA possibly rising to almost 4.5x, from 2.5x. At the same time, changes in state Medicaid practices have pressured margins and the implementation of the Medicare drug benefit in 2006 will have an uncertain impact. ORMET CORP: Steelworkers Demand Fair Settlement ----------------------------------------------- The United Steelworkers of America -- USWA -- said that despite a statement released by Ormet Corporation on Feb. 7, the last remaining obstacle preventing a fair contract settlement and an end to the current labor dispute between the Union and Wheeling- based company is, in fact, Ormet management. Ormet's statement, read in part that, "Ormet stands ready to make every effort to resolve, in good faith, the issues that remain on the table." USWA District 1 Director David McCall called the statement "ironic." "Ormet took our jobs hostage and forced our members into the street by insisting on massive, unnecessary concessions," he said. "Of course, proclaiming the company's 'good faith' publicly does not necessarily make it so." Likewise, Mr. McCall pointed out that no amount of self- congratulation by Ormet management will make the company's plan to reorganize under Chapter 11 Bankruptcy protection any more viable without an agreement with the USWA. Mr. McCall said that the Union has made a number of contract proposals based on the principles that enabled other bankrupt Steelworker employers to emerge from bankruptcy. The USWA's proposal to Ormet would preserve as many jobs as possible and largely retain existing levels of wages and benefits for active members and retirees. "Laying off employees, contracting out jobs, cutting wages, slashing retiree health insurance benefits and reducing production capacity for the sake of short-term savings will not solve Ormet's long-term financial problems," Mr. McCall said. "In recent years, the USWA assisted other financially strapped companies in navigating their way out of bankruptcy, and we are trying to do the same with Ormet. The difference in the other cases is that management, unlike Ormet's management, was willing to work constructively with the USWA." "Our members understand the need to make sacrifices when necessary," Mr. McCall said, "but by insisting on these major concessions and refusing to consider our proposals, Ormet has not demonstrated anything but its short-sighted desire to line the pockets of company executives on the backs of our members and retirees." Headquartered in Wheeling, West Virginia, Ormet Corporation -- http://www.ormet.com/-- is a fully integrated aluminum manufacturer, providing primary metal, extrusion and thixotropic billet, foil and flat rolled sheet and other products. The Company and its debtor-affiliates filed for chapter 11 protection on January 30, 2004 (Bankr. S.D. Ohio Case No. 04-51255). Adam C. Harris, Esq., in New York, represents the Debtors in their restructuring efforts. When the Company filed for bankruptcy protection, it listed $50 million to $100 million in estimated assets and more than $100 million in total debts. OVERSEAS SHIPHOLDINGS: Moody's Confirms Ba1 Senior Unsec. Rating ---------------------------------------------------------------- Moody's Investors Service confirmed the ratings of Overseas Shipholding Group, Inc., -- senior unsecured and senior implied at Ba1. Moody's also changed the rating outlook to negative from stable. This completes the ratings review opened on December 13, 2004, following the announcement by the company of its acquisition of Stelmar Shipping (not rated) for $1.36 billion. The ratings reflect the size and scale of Overseas Shipholding's tanker shipping operations, expectations of near term free cash flow to reduce a substantial portion of the incremental debt associated with the Stelmar acquisition, Overseas Shipholding's maintenance of a favorable liquidity profile, and the limited integration risk of Stelmar's product tanker operations. The ratings anticipate that Overseas Shipholding will return to pre-acquisition levels of debt and liquidity within the next year. The ratings are balanced by the risks associated with the highly cyclical shipping sector in which the company operates, the volatility of charter rates within that sector, and the Company's use of short-term spot charters to employ the majority of its fleet. While in the current environment, Overseas Shipholding can generate strong free cash flow to service the incremental debt associated with the Stelmar acquisition, Moody's believes that overall credit metrics could be significantly weakened in the event of a market downturn that resulted in charter rates similar to those seen over the past decade. Moody's notes that the market is at relatively high charter rates today, but average rates over the cycle would produce much weaker credit metrics. The negative outlook reflects the substantial increase in debt to fund the acquisition, and the company's reliance on continued strong shipping market conditions to generate the free cash flow for debt reduction. The potential for other meaningful investments over the near term also contributes to the negative outlook. Ratings may be downgraded if shipping market conditions deteriorate meaningfully in the near-term, if free cash flow from operations and asset sales are insufficient to reduce debt to below $1 billion by fiscal year end 2005, or if lease-adjusted debt does not reduce rapidly from the current pro forma level of 2.7x EBITDAR. The ratings could also be pressured down if the company were to take on another large acquisition over the near term. Moody's also notes that the senior unsecured rating may be separately subject to downward notching because of the relatively high level of secured debt in the Company's capital structure, to the extent that the company does not reduce such levels of senior secured debt, which Moody's expects over the near term. The rating outlook could be stabilized if the company achieves its target of reducing debt to below $1 billion within the next twelve months, with lease-adjusted debt/EBITDAR below 2.0x, while having demonstrated a smooth integration of the Stelmar fleet. To finance the acquisition of Stelmar Shipping, OSG's total debt nearly doubled to $1.8 billion. As a result, Moody's estimates OSG's pro forma leverage (lease-adjusted debt/EBITDAR) at fiscal 2004 will increase to over 2.7x, from about 1.9x as of September 2004. Moody's notes that OSG's operating results during 2004 benefit from an unusually-high charter rate environment which serves to moderate the increase in the pro forma leverage calculations. However, the rating agency expects tanker charter rates to fall over the next 6-18 months, which would imply the potential for high leverage even as the Company reduces its indebtedness. Nevertheless, even with lower freight rates anticipated in both the crude oil tanker market (Overseas Shipholding's current primary market) as well as in the product tanker markets that drive a substantial portion of Stelmar's revenue, Moody's believes that OSG will achieve substantial free cash flow generation. This free cash flow, along with proceeds from contemplated asset sales, are expected to be applied reduce debt over the near term. The company has targeted reducing debt to below $1.0 billion by the end of fiscal year 2005. The ratings also consider Overseas Shipholding's maintenance of a relatively strong liquidity profile. Prior to funding the acquisition, Overseas Shipholding had liquidity (cash, revolver availability, and tax-adjusted Capital Construction Fund balances) of about $1.3 billion. The Company utilized $500 million of its cash in funding the Stelmar acquisition. As part of the acquisition, Overseas Shipholding also increased its bank revolver to $1.3 billion. In monitoring Overseas Shipholding's capital structure, Moody's will place particular focus on the company's levels of off-balance sheet financing, which is estimated at over $500 million as of fiscal 2004. A substantial portion of the Company's fleet (estimated at 27% pro forma the Stelmar acquisition) is chartered- in, predominantly on short- to medium-term time charter bases. This suggests a significant interest on the part of the company to use such vehicles to gain access to additional tonnage. Also, Overseas Shipholding contemplates certain sale and leaseback transactions; while a sale and leaseback would reduce balance sheet debt as well as potential asset value exposure on owned vessels, Overseas Shipholding's adjusted debt and off balance sheet exposure would increase proportionately. In Moody's view, any material degree of additional reliance on operating leases would represent a deterioration in credit fundamentals, as implied by increased lease-adjusted debt levels. The senior unsecured notes are rated Ba1, the same as the senior implied rating. The majority of Overseas Shipholding's debt (about 74%, pro forma) is unsecured and issued at the holding company level including about $1.3 billion of unsecured revolving credit agreement (not rated). Overseas Shipholding's $472 million of secured debt is collateralized by only about one-fourth of the fleet, implying a substantial amount of unencumbered assets supporting the senior unsecured notes. Still, Moody's considers the significant portion of senior secured debt in the pro forma capitalization to be high. The senior unsecured ratings may be notched below the senior implied rating should the percentage of senior secured debt to total debt remain in this range of 25%. However, Moody's anticipates that debt reduction will largely be directed towards senior secured debt, thereby lowering the percentage of senior secured debt to total debt in the capital structure The ratings confirmed are: * $150 million 7.5% senior unsecured notes, due 2024, Ba1, * $200 million 8.25% senior unsecured notes due 2013, Ba1, * $85 million 8.75% senior unsecured notes due 2013, Ba1, * Senior implied rating of Ba1, and * Unsecured issuer rating of Ba1 Overseas Shipholding Group, Inc., headquartered in New York City, New York, is one of the world's leading independent bulk shipping companies engaged primarily in the ocean transportation of crude oil and petroleum products, operating a fleet of over 100 vessels. PARMALAT USA: Commences Adversary Proceeding Against Tuscan/Lehigh ------------------------------------------------------------------ Parmalat USA Corp. and Farmland Dairies, LLC, seek to avoid as a fraudulent transfer a supply agreement between Parmalat USA and Tuscan/Lehigh Dairies, Inc., executed within one year before the U.S. Debtors' Petition Date. Parmalat USA and Farmland also want to recover amounts owed by Tuscan and disallow Tuscan's claims arising out of their rejection of the Supply Agreement. Parmalat USA and Farmland further ask the Court to disallow any claim filed by Tuscan against them until the time it has already paid all amounts for which it is liable in connection with the fraudulent transfer. Gary T. Holtzer, Esq., at Weil, Gotshal & Manges, LLP, in New York, relates that on May 30, 2003, Parmalat USA and Tuscan entered into the Supply Agreement, pursuant to which Parmalat USA agreed to process, package, and load milk products under the Tuscan label at Farmland's Sunnydale facility in Brooklyn, New York. Mr. Holtzer explains that the U.S. Debtors were insolvent or their property constituted unreasonably small capital within the meaning of Section 548 of the Bankruptcy Code and Section 25:2-29 of the New Jersey Uniform Fraudulent Transfer Act in the year prior to their Petition Date, including when the Supply Agreement was executed. On June 2, 2004, Tuscan filed a request to compel Parmalat USA to assume or reject the Supply Agreement. On June 30, 2004, the Court approved a stipulation dated June 29, 2004, between Tuscan and Parmalat USA wherein the parties agreed to Parmalat USA's rejection of the Supply Agreement effective as of Sept. 30, 2004. On October 28, 2004, Tuscan filed a proof of claim against Parmalat USA, and an identical claim against Farmland asserting general unsecured claims against each of the Debtors for $57,052,568 for alleged damages arising from the rejection of the Supply Agreement. Mr. Holtzer notes that as of the Contract Date, the Processing Fee of $0.28 per gallon of fluid milk fixed by the Supply Agreement was far below the market value of the Co-Packing and other services required from Parmalat USA. According to Tuscan, in 2005, it would cost them $0.43 to 0.44 per gallon of fluid milk to obtain similar services in the open market. For the 2005-2006 contract year, Tuscan's calculations show that the discrepancy between the Processing Fee set by the Supply Agreement and the market price for similar services will be more than $4.9 million. As set forth in the Rejection Damage Claims, in each successive year, Tuscan estimates that the market price would rise by an additional penny per gallon of fluid milk, further increasing the discrepancy between the market price and the contract price each and every year. Tuscan states that the difference between the value of the services it was entitled to receive under the Supply Agreement, and the value that it is required to pay aggregates over $57 million. Tuscan is not obligated and gave no consideration for the licenses and easements provided to them, to Beyer Farms, Inc., and to any other Tuscan designees under the Provided Facilities feature of the Supply Agreement. The fair market value for the use of the Provided Facilities is estimated to be not less than $175,000 per year, Mr. Holtzer says. Mr. Holtzer contends that Tuscan gave less than the equivalent value in exchange for the obligations incurred under the Supply Agreement. Moreover, the Supply Agreement constituted a transfer by the U.S. Debtors of an interest in property that occurred, and an obligation that they incurred, within one year before their Petition Date. 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. 43; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATELLITE: Wants to Settle Dispute with Secured Lenders --------------------------------------------------------------- As previously reported, the Senior Secured Lenders sought payment of default interest alleging that the Default Interest is due and owing to the: (a) the Senior Term Lenders under the terms of the Senior Credit Agreement for $2,312,067; and (b) the Revolving Lenders under the terms of the Revolving Credit Agreement for $108,000. The Senior Lenders also sought payment of Prepayment Amounts due and owing under the terms of the: (a) the Senior Credit Agreement for $8,955,000; and (b) the Revolving Credit Agreement for $540,000. Similarly, Wilmington Trust Company, on behalf of the Junior Secured Lenders, sought payment of a Default Interest under the terms of the Junior Credit Agreement for $791,579 and a Prepayment Amount under the Junior Credit Agreement for $2,157,138. The Official Committee of Unsecured Creditors objected to the Secured Lenders' requests. By this motion, the Pegasus Satellite Communications, Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Maine to approve a settlement agreement with the Creditors Committee and a bank steering committee of lenders. Pursuant to the Stipulation, the parties agree that: (a) The Debtors will pay: * $9,229,296 to the Senior Secured Lenders in satisfaction of the Senior Lenders' Prepayment Premium. If not paid within the two-day period after Court approval of the Stipulation, the Senior Settlement Amount will accrue interest of $3,161 per diem for each day until the amount is paid in full. No amount will be payable by the Debtors on account of the Senior Default Interest Amount; and * $2,096,773 to the Junior Secured Lenders in satisfaction of the Junior Prepayment Premium. To the extent the Junior Settlement Amount is not paid within a two-day period after the Court approves the Stipulation, interest of $718 per diem will accrue for each day until the amount is paid in full. No amount will be payable by the Debtors on account of the Junior Default Interest Amount. Approximately $8,704,407 of the Senior Settlement Amount will be paid to Bank of America, N.A., as administrative agent, as a voluntary prepayment amount. Bank of America will distribute the amount to the Tranche D Lenders. Approximately $524,889 of the Senior Settlement Amount will be paid to Madeleine, LLC, who will distribute the amount to the Revolving Lenders. (b) Within two business days after the approval of the Stipulation has become final and payment of the Senior Settlement Amount and Junior Settlement Amount are received by the Senior Lenders and Wilmington Trust, the Bank Steering Committee and Wilmington Trust will withdraw the Premium Motions, with prejudice. (c) All reasonable professional fees and expenses incurred by the Senior Lenders and Wilmington Trust in connection with the Debtors' Chapter 11 cases will be paid by the Debtors within 10 calendar days of receipt of an invoice for the professional fees and expenses by the Debtors and counsel to the Committee. (d) Upon receipt by the Senior Lenders and Wilmington Trust of the Senior and Junior Settlement Amounts, the Debtors will no longer be required to comply with the provisions of the Cash Collateral Order with respect to the Senior Lenders and Wilmington Trust, and the Cash Collateral Order will no longer be in force or effect with respect to the Debtors' obligations to the Senior Lenders and Wilmington Trust, but all obligations of the Debtors contained in the Cash Collateral Order with respect to the Committee will remain in full force and effect. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, relates that the parties each came to the conclusion that the Secured Lenders' claim for the Prepayment Premiums is very strong and the claim for the Default Interest Amounts is considerably weaker. Accordingly, the Prepayment Premiums are being paid almost in their entirety and the claim for Default Interest Amounts is being waived. While the Creditors' Committee believes that it has meritorious objections to the payment of the Prepayment Amounts, on balance the parties believe that the Secured Lenders have a strong case. Mr. Keach reminds that Court that it has already ruled that the prepayments were "voluntary" prepayments payable under the loan documents. The 2% to 3% Prepayment Premiums sought by the Secured Lenders appear to be within the range that courts have upheld as reasonable. Moreover, the bulk -- i.e., over 80% -- of the Prepayment Premiums is being sought by the Senior Lenders whose claims are against the solvent debtor operating company. In sum, the parties concluded that the Secured Lenders had very strong claims with respect to the Prepayment Premium portion of these claims. The Stipulation also reflects the parties' belief that the claim for the Default Interest Amounts is far harder to prove and that claim is being waived. While the Secured Lenders believe that they have meritorious claims for an award of default interest, on balance, the parties believe that the Committee has a strong case. The Secured Lenders received payment of their claims in full less than four months after the Petition Date, during which time they received both current payment of interest and fees. In addition, as a result of offers by DIRECTV, Inc., to purchase the Debtors' assets for amounts far in excess of the Secured Lenders' claims, which offers began on the Petition Date, the Secured Lenders' ability to establish their entitlement to an additional "risk premium" in the form of Default Interest Amounts for the entire period between the Petition Date and the Prepayment Date is also uncertain. According to Mr. Keach, it is beyond question that a litigated resolution of the Premium Motions would be both time-consuming and exceedingly costly for the Debtors. The Stipulation permits the Debtors' estates to avoid the uncertainty, delay and strain on financial resources associated with litigation of the Premium Motions. By contrast, if the litigation were to continue, it would require, among other things, substantial discovery as well as briefing and numerous appearances by counsel. 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) PHILIP SERVICES: Asks Court to Close 34 Chapter 11 Cases -------------------------------------------------------- Philip Services, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Texas to close the chapter 11 cases of these Debtors: * 21st Century Environmental Management, Inc. (Nevada) Case No: 03-37719-H2-11 * 21st Century Environmental Management, Inc. Case No: 03-37726-H2-11 * Ace/Allwaste Environmental Services of Indiana, Inc. Case No: 03-37727-H2-11 * Allworth, Inc. Case No: 03-37729-H2-11 * Cappco Tubular Products USA, Inc. Case No: 03-37733-H2-11 * Chem-Freight, Inc., Case No: 03-37735-H2-11 * Chemical Pollution Control, Inc., of Florida Case No: 03-37736-H2-11 * Chemical Pollution Control, Inc., of New York Case No: 03-37737-H2-11 * Chemical Reclamation Services Inc. Case No: 03-37738-H2-11 * Cousins Waste Control Corporation Case No: 03-37739-H2-11 * Cyanokem, Inc. Case No: 03-37740-H2-11 * D&L, Inc. Case No: 03-37742-H2-11 * Delta Maintenance, Inc. Case No: 03-37741-H2-11 * International Catalyst, Inc. Case No: 03-37743-H2-11 * Jesco Industrial Services Case No: 03-37744-H2-11 61-1090856 * Luntz Acquisition (Delaware) Corporation Case No: 03-37759-H2-11 * Northland Environmental, Inc. Case No: 03-37745-H2-11 * Philip Reclamation Services, Houston, Inc. Case No: 03-37749-H2-11 * Philip Services/North Central, Inc. Case No: 03-37750-H2-11 * Philip Transportation and Remediation, Inc. Case No: 03-37751-H2-11 * PSC Industrial Services, Inc. Case No: 03-37756-H2-11 * PSC Recovery Systems, Inc. Case No: 03-37754-H2-11 * Republic Environmental Recycling (New Jersey), Inc. Case No: 03-37757-H2-11 * Republic Environmental Recycling (Pennsylvania), Inc. Case No: 03-37758-H2-11 * Republic Environmental Recycling (Transportation Group), Inc. Case No: 03-37760-H2-11 * Republic Environmental Recycling (Technical Services), Inc. Case No: 03-37761-H2-11 * Resource Recovery Corporation Case No: 03-37762-H2-11 * Rho-Chem Corporation Case No: 03-37763-H2-11 * RMF Global, Inc. Case No: 03-37764-H2-11 * Serv-Tech EPC, Inc. Case No: 03-37766-H2-11 * Serv-Tech EPC Subsidiary, Inc. Case No: 03-37768-H2-11 * Solvent Recovery Corporation Case No: 03-37769-H2-11 * Thermalkem, Inc. Case No: 03-37770-H2-11 * Total Refractory Systems, Inc. Case No: 03-37772-H2-11 James Matthew Vaughn, Esq., at Porter & Hedges, L.L.P., in Houston Texas, contends that: (1) these Debtors have resolved all matters related to their bankruptcy cases; (2) these Debtors completed distributions to creditors with allowed claim pursuant to the confirmed Plan; (3) these Debtors have paid all administrative fees; (4) all contested matters and adversary proceedings have been resolved by compromise or settlement or have otherwise been fully and finally adjudicated by the Court. Philip Services Corporation, a holding company which owns directly or indirectly a series of industrial and metals services companies that operate throughout North America, filed for chapter 11 protection with its debtor-affiliates on June 2, 2003 (Bankr. S.D. Tex. Case No. 03-37718). Robert E. Richards, Esq., John F. Higgins, Esq., and James Matthew Vaughn, Esq., at Porter & Hedges LLP, and Peter D. Wolfson, Esq., Robert E. Richards, Esq., at Sonnenschein Nath & Rosenthal LLP, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $613,423,000 in total assets and $686,039,000 in total debts. The Court confirmed the Debtors' Second Amended and Restated Joint Plan of Reorganization on Dec. 10, 2003. The Plan became effective on Dec. 31, 2003. PILLOWTEX CORP: Court Approves Amendment to Trenwith Engagement --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved Pillowtex Corporation and its debtor-affiliates' request to amend the terms of the Trenwith Engagement. As previously reported, the Court authorized the Official Committee of Unsecured Creditors to retain Trenwith Securities, LLC, as investment banker and advisor, to assist the Committee and the Debtors with the marketing of certain of the Debtors' real property and improvements in Kannapolis, North Carolina, and the exploration of other business opportunities, pursuant to the terms of an engagement letter between the parties. As set forth in the Engagement Letter, Trenwith was to market the Kannapolis Property for six weeks in exchange for a $50,000 monthly base fee and a $200,000 flat success fee -- or a lesser fee of $160,000 with respect to certain prospective developers who had already been identified as possibly being interested in the Property. Trenwith began marketing the Property on behalf of the Committee and the Debtors in May 2004. Three offers ultimately resulted from Trenwith's marketing efforts, including that of Manchester Real Estate & Construction, LLC. The Manchester offer provides that the Debtors will retain a 1/3 equity interest in the joint venture that acquired and developed the Property. The Debtors and the Committee determined that the Manchester Offer, which is subject to the submission of higher or better offers, offered the Debtors' creditors with the best potential upside value to be realized from the Property. The Court subsequently approved Manchester as the stalking horse bidder based on its letter of intent. In the interim, the Debtors and the Committee worked with Manchester to prepare the numerous complicated definitive documents needed to consummate the proposed sale. These definitive documents have now been finalized, executed, and submitted to the Court in connection with a motion to approve the transaction, scheduled to be heard on December 14, 2004. At the time Trenwith was initially retained in May 2004, the Debtors and the Committee did not have any definitive documents or even a term sheet explaining how the development of the Property through a joint venture agreement would look. As a result, Trenwith was forced to approach prospective interested parties with only a conceptual outline of the JV Structure. Consequently, given the complexity of the deal, Trenwith's marketing efforts were inhibited. Now that the terms of the Development Projects have been crystallized by the Manchester offer, the Committee believes that the estate could benefit if Trenwith were to commence another, full blown marketing effort utilizing the Manchester Offer to its list of prospective investors. Since the terms of Trenwith's engagement did not contemplate the remarketing effort or even an auction utilizing the JV Structure, Trenwith requested, and the Committee agreed, to amend its terms of engagement. The Amendments As compensation for the additional services provided by Trenwith from October 1, 2004, until the entry of an order approving the sale or disposition of the Property and approval of the JV Structure, Trenwith will be compensated with an additional reduced monthly advisory fee of $35,000 for each 30-day month of service or, as applicable, on a pro-rata 30-day month. In addition, the success fee component of Trenwith's compensation has been restructured to specifically provide Trenwith with an incentive to maximize the value received by the estate from the bids received at the auction. In the event the cash consideration paid by any winning bidder exceeds $3,000,000, Trenwith will be paid an Incentive Bonus equal to 1% of the amount exceeding $3,000,000. This represents a modest incentive fee of $10,000 for every additional $1 million bid at the auction. Castle & Cooke was declared the highest bidder at the conclusion of the auction held on Friday, December 10, 2004, for the sale of Pillowtex's Plant 1 complex and wastewater treatment facility located in Kannapolis, North Carolina. The final bid was for a purchase price of $4.25 million in cash plus a convertible promissory note in the principal amount of $2.125 million. Elio Battista, Jr., Esq., at Blank Rome, LLP, asserts that the revised fee structure is fair, reasonable, and appropriately structured to motivate Trenwith to remarket the JV Structure in a manner to provide the greatest value to the estate. The Committee has consulted with the Debtors concerning the proposed terms of the Amendments to the Trenwith Engagement, and the Debtors indicated that they have no objection to the proposed modifications. Trenwith will file with the Court a fee application within two weeks of its receipt of the payment of any Transaction Fee to inform the Court of the consideration paid to Trenwith under the Agreement, pursuant to the requirements of Rule 2016 of the Federal Rules of Bankruptcy Procedure and any Court order. Headquartered in Dallas, Texas, Pillowtex Corporation -- http://www.pillowtex.com/-- sold top-of-the-bed products to virtually every major retailer in the U.S. and Canada. The Company filed for Chapter 11 protection on November 14, 2000 (Bankr. Del. Case No. 00-4211), emerged from bankruptcy under a chapter 11 plan, and filed a second time on July 30, 2003 (Bankr. Del. Case No. 03-12339). The second chapter 11 filing triggered sales of substantially all of the Company's assets. David G. Heiman, Esq., at Jones Day, and William H. Sudell, Jr., Esq., at Morris Nichols Arsht & Tunnel, represent the Debtors. On July 30, 2003, the Company listed $548,003,000 in assets and $475,859,000 in debts. (Pillowtex Bankruptcy News, Issue No. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000) PULASKI TIRE SERVICE: Case Summary & Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Pulaski Tire Service, Inc. 7808 Pulaski Highway Baltimore, Maryland 21237 Bankruptcy Case No.: 05-12596 Type of Business: The Debtor is a retailer of used tires and repairs and tows trucks. Chapter 11 Petition Date: February 7, 2005 Court: District of Maryland (Baltimore) Debtor's Counsel: Edward Malcolm Kimmel, Esq. Kimmel & Roxborough, LLC 7629 Carroll Avenue, Southern Suite 4 Takoma Park, Maryland 20912 Tel: (202) 872-0220 Fax: (202) 872 0293 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million Debtor's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Tire Supplies, Inc. $300,000 1000 N Clayton St Wilmington DE 19805 GMAC Non-purchase $250,000 P.O. Box 660208 Money Security Dallas TX 75266 Value of Security: $78,000 Vernell DeShazo $50,000 3901 Hilton Road Baltimore MD 21215 Herman DeShazo $50,000 13 Dell Court Baltimore MD 21216 Alice DeShazo $40,000 3406 Alto Road Baltimore MD 21216 Ruth Riddick $40,000 5511 Boseworth Ave Baltimore MD 21244 Snap On Tools $20,000 7301 Mount Vista Rd Kingsville MD 21087 Constance DeShazo $20,000 3406 Alto Road Baltimore MD 21216 Aron DeShazo $20,000 5511 Boseworth Ave Baltimore MD 21207 Jean Hill $15,000 1828 E Lafayette Ave Baltimore MD 21213 Chaunte DeShazo $13,000 9300 J Carsins Run Owings Mills MD 21117 Tamera Curtis $10,000 3612 Kenyon Ave Baltimore MD 21213 Action Auto Part $300 7905 Philadelphia Rd Baltimore MD 21237 Robert DeShazo $1 715 Druid Park Lake Drive Baltimore MD 21217 QUALTEC INC: Case Summary & 17 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Qualtec, Inc. 5010 Sunnyside Avenue, Suite 305 Beltsville, Maryland 20705 Bankruptcy Case No.: 05-12626 Chapter 11 Petition Date: February 7, 2005 Court: District of Maryland (Greenbelt) Judge: Nancy V. Alquist Debtor's Counsel: Jerold K. Nussbaum, Esq. 60 West Street, Suite 220 Annapolis, Maryland 21401 Tel: (410) 280-5000 Fax: (410) 269-1665 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 17 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service $780,000 31 Hopkins Plaza, Room 1150 Baltimore, Maryland 21201 FMS $180,000 4300 Georgia Avenue Washington, DC 20011 Tel: (202) 829-0501 Wildwood Leasing $160,000 P.O. Box 750 California, Maryland 20619 Tel: (301) 863-8655 Kemper Associate $150,000 2600 Virginia Avenue, NW Washington, DC 20037 Tel: (202) 337-5019 California EDD $120,000 P.O. Box 82676 Sacramento, California 94230-6276 Metters Companies $106,000 8200 Greensboro Drive McLean, Virginia 22102 Tel: (703) 821-3300 UPI, Inc. $81,000 2044 Veterans Boulevard Suite 210 Kenner, LA 70062 Tel: (504) 465-0100 Onsite Companies $45,000 Hanover Parkway Hanover, Maryland Tel: (410) 579-4307 Pilero, Mazza, Pargament $38,000 MD Office of Unemployment Insurance $27,000 Verizon $12,000 Aetna $8,900 Staples Credit Plan $8,700 The Hartford $7,000 Key Building $5,500 Sprint $3,000 IOS $2,400 RADVIEW SOFTWARE: Dec. 31 Balance Sheet Upside-Down by $84,000 -------------------------------------------------------------- RadView Software Ltd. (OTCBB: RDVWF), a premier provider of solutions for verifying the performance, scalability and integrity of business critical Web applications, reported financial results for the quarter and year ended Dec. 31, 2004. Revenues for the fourth quarter of 2004 were $1,329,000 compared to $1,253,000 for the fourth quarter of 2003. The Company's net loss for the fourth quarter of 2004 was $866,000, compared to a net loss of $1,087,000 for the fourth quarter of 2003. "The fourth quarter results bring a respectable close to 2004 with revenue and earnings in-line with our expectations," commented Ilan Kinreich, President and CEO of RadView. "Revenues have shown year-over-year growth, primarily driven by software license revenues, and we have continued to reduce our operating losses. We continue to see the benefits of working with OEM partners from expanded distribution capabilities and greater diversification of our revenue sources." Revenues for the year ended 2004 were $4,663,000 compared to $4,836,000 for the year ended 2003. The Company's net loss for the year ended 2004 was $3,780,000, or $0.19 per share, compared to a net loss of $5,085,000 million, or $0.31 per share, for the year ended 2003. Ilan Kinreich continued, "In 2005, we look to build on the positive momentum created in the second half of 2004 to reach our objective of achieving operating profitability through revenue growth. We have identified several initiatives to help us reach this goal including expansion of our distribution channel with localized products and new OEM relationships, promotion of the TestView product suite offering to increase average deal size, and introduction of new products to address specific market segments. To support these efforts, we are seeking additional financing during the first quarter of 2005." The Company also announced the departure of Robert Steinkrauss from the Company's board of directors effective Feb. 3, 2005. Mr. Steinkrauss' resignation was due to conditions with his employer limiting the number of outside boards on which he may participate. "We are thankful for the outstanding services of Mr. Steinkrauss to the Company over the last four years and we wish him best of luck in his future endeavors," commented Ilan Kinreich. The Company has commenced a search for a replacement director. About RadView RadView(TM) Software Ltd. (OTCBB: RDVWF) is a leading provider of solutions for verifying the performance, scalability and integrity of business-critical Web applications. Deployed at over 1,550 customers worldwide from major industries such as financial services, retail, manufacturing, education and technology, RadView's award-winning products enable customers to reduce costs while improving the quality of their Web applications throughout the development lifecycle. Corporate offices are located in Burlington, Mass. For more information visit http://www.radview.com/or call 1-888-RADVIEW. At Dec. 31, 2004, RadView Software's balance sheet showed an $84,000 stockholders' deficit, compared to $1,796,000 of positive equity at Dec. 31, 2003. RIGGS NATIONAL: Moody's Pares Rating on Deposits from Baa3 to Ba1 ----------------------------------------------------------------- Moody's Investors Service changed the ratings of Riggs National Corporation (subordinated to B2 from B1) and its lead bank subsidiary, Riggs Bank N.A., (deposits to Ba1 from Baa3). Moody's left unchanged the ratings of Riggs Capital and Riggs Capital Trust II preferred stock at Caa1. The ratings remain on review, direction uncertain. Moody's said the downgrade followed the rejection by Riggs National Corporation of the revised terms and conditions put forward by PNC Financial Services Group, Inc. for it to proceed with the merger agreement announced in July 2004. Moody's also noted the increased level of legal and other expenses Riggs incurred in the fourth quarter of 2004. While some of these expenses were of a non-recurring nature, Moody's believes such expenses will continue to weigh on the company's core profitability over the foreseeable future. Core profitability was impacted by the run-off in international banking deposits that had been a source of cheap and stable funding, the rating agency added. Despite this, Moody's observed that Riggs National's liquidity remains sound and its asset quality indicators and regulatory capital ratios are healthy. Moody's expects the situation at Riggs to be dynamic and will revisit the review status within 90 days. The ratings downgraded and remaining under review, direction uncertain, are: -- Riggs National Corporation: * Subordinate to B2 from B1 -- Riggs Bank N.A.: * Long-term deposits to Ba1 from Baa3 * Short-term deposits to Not Prime from P-3 * Issuer to Ba3 from Ba2 The ratings remaining under review, direction uncertain are: -- Riggs Bank N.A.: * Bank financial strength - D -- Riggs Capital and Riggs Capital II: * Trust Preferred - Caa1 Riggs National Corporation is a bank holding company headquartered in Washington, D.C. with assets of $5.9 billion as of September 2004. RIGGS NATIONAL: Fitch Junks Subordinated Debt & Preferred Stock --------------------------------------------------------------- Fitch Ratings has lowered the individual ratings for Riggs National Corporation and Riggs Bank National Association to 'D/E' from 'D'. All other ratings for Riggs National Corporation (RIGS; long-term senior rating of 'B') and its subsidiaries remain unchanged. Additionally, Fitch revised RIGS' Rating Watch to Negative from Evolving (for additional detail, see comment dated Jan. 28, 2005, and available on the Fitch Ratings web site at http://www.fitchratings.com/ The downgrade of the individual rating reflects Fitch's continuing concerns regarding RIGS' deteriorating financial condition given the company's recently announced fourth quarter 2004 results, which reflected a $60 million loss. The loss resulted from a substantial level of expenses related to RIGS' compliance with the Bank Secrecy Act and multiple investigations. The company incurred a $16 million fine (remains subject to change) to the U.S. Department of Justice, reserved $8 million for litigation, and incurred $17 million in expenses related to the sale of its international businesses. The revision to Rating Watch Negative from Evolving reflects the news that RIGS' board of directors has unanimously rejected the revised terms and conditions demanded by The PNC Financial Services Group, Inc. (PNC) for that merger to close and filed suit against PNC in Superior Court for The District of Columbia. This suit seeks to hold PNC responsible for its wrongdoing and for the resulting damages it has caused, or, alternatively, to require PNC to uphold its end of the agreement and proceed with the merger in accordance with the agreement. Furthermore RIGS sent a letter informing PNC that its actions constituted an anticipatory repudiation of the merger agreement between the two entities and that RIGS is now entitled to discuss merger combinations with other interested parties. The Negative Watch is reflective of the greatly reduced possibility that the PNC deal will go through and the current absence of an agreement with another acquirer. The following ratings have been downgraded and placed on Rating Watch Negative by Fitch: Riggs National Corporation -- Individual rating to 'D/E' from 'D'. Riggs Bank National Association -- Individual rating to 'D/E' from 'D'. These ratings have been placed on Rating Watch Negative by Fitch: Riggs National Corporation -- Short-term 'B'; -- Long-term 'B'; -- Subordinated debt 'CCC'; -- Support '5'. Riggs Bank National Association -- Short-term 'B'; -- Short-term deposit 'B'; -- Long-term 'B+'; -- Long-term deposit 'BB-'; -- Support '5'. Riggs Capital -- Preferred stock 'C'. Riggs Capital II -- Preferred stock 'C'. RITE AID: Closes Over-Allotment Option of Convertible Pref. Stock ----------------------------------------------------------------- Rite Aid Corporation (NYSE, PCX:RAD) reported the closing of the underwriters' exercise in full of an over-allotment option to purchase 200,000 shares of Rite Aid's 7.0% Series E Mandatory Convertible Preferred Stock in connection with its previously announced public offering of HiMEDS(SM). Shares of HiMEDS(SM) have an annual dividend yield of 7.0% and a threshold appreciation price of $5.36. Each share of HiMEDS(SM) will automatically convert on Feb. 1, 2008, subject to certain adjustments, into no fewer than 9.3284 shares of Rite Aid's common stock, depending on the then-prevailing market price of Rite Aid's common stock. At any time prior to Feb. 1, 2008, the HiMEDS(SM) may be converted at the option of the holders or, under certain circumstances, by Rite Aid. Net proceeds to the Company from the exercise of the over- allotment option were $9.7 million. Rite Aid intends to use the net proceeds from the exercise of the over-allotment option to redeem, at a purchase price of 105% plus any accrued dividends, 30,000 shares of each of its Series F Cumulative Convertible Pay- in-Kind Preferred Stock, Series G Cumulative Convertible Pay-in- Kind Preferred Stock and Series H Cumulative Convertible Pay-in- Kind Preferred Stock. Any remaining additional net proceeds will be used for working capital and general corporate purposes. The offering was lead managed by J.P.Morgan, with Citigroup acting as a co-manager. Copies of the prospectus and prospectus supplement related to the public offering may be obtained from J.P. Morgan Securities Inc., Prospectus Department, One Chase Manhattan Plaza, New York, NY 10081 (Telephone Number 212-552- 5164). About the Company Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of $16.6 billion and approximately 3,400 stores in 28 states and the District of Columbia. * * * As reported in the Troubled Company Reporter on Jan. 7, 2005, Fitch Ratings assigned a 'B' rating to Rite Aid Corporation's 7.5% $200 million senior secured notes due 2015. The proceeds from the issue will be used to repay the $170.5 million 7.625% senior unsecured notes due April 2005 and the $38.1 million 6% senior notes due December 2005. These notes rank pari passu with the company's outstanding secured notes. Fitch rates Rite Aid: -- $1.7 billion senior unsecured notes 'B-'; -- $800 million senior secured notes 'B'; -- $1.4 billion bank facility 'B+.' The Rating Outlook is Stable. SAFETY-KLEEN: Creditor Trust Asks Court to Approve Market Hub Pact ------------------------------------------------------------------ Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, Safety-Kleen Creditor Trust, by and through its trustee, Oolenoy Valley Consulting, LLC, seeks United States Bankruptcy Court for the District of Delaware's authority to enter into a settlement agreement with Market Hub Partners Holding, LLC. Market Hub Partners is the successor-in-interest to Market Hub Holding Company, which formerly conducted business as Energy USA- TPC Corp. The Trustee filed a complaint against Market Hub to avoid and recover certain preferential or, in the alternative, fraudulent transfers totaling $1,321,030, made by the Debtors to Market Hub 90 days before the Petition Date. After arm's-length negotiations, the Trustee and Market Hub agree to settle the Avoidance Action under these terms: (a) Market Hub will pay the Trustee $350,000 on or before February 23, 2005, by check made payable to the Safety-Kleen Creditor Trust; (b) The Trustee will hold the Settlement Amount in escrow pending Court approval of the Settlement Agreement. Should the Court decide not to approve the Agreement, the Trustee will return the escrowed Settlement Amount to Market Hub and the parties will return to their positions status quo ante; (c) After the receipt by the Trustee of the full Settlement Amount, the Avoidance Action will be dismissed with prejudice, with each party bearing its own attorneys' fees and costs. The Settlement Amount will not be deemed received by the Trustee until the time as it is finally honored by the banking institution on which it is drawn; and (d) The parties will grant mutual releases from any and all claims, liabilities, actions, or causes of action, arising from or related to the Avoidance Actions. However, the Mutual Releases with respect to: (1) Market Hub, does not cover: -- any proofs of claim filed by Market Hub or its predecessors-in-interest; -- any scheduled claims filed by the Debtors concerning Market Hub or its predecessors-in- interest; and -- Market Hub's claim for the Settlement Amount; and (2) the Trust and Trustee, will not affect any defenses relating to those excluded Market Hub Claims. The Trustee informs the Court that it has not assigned any of the claims and causes of actions asserted in the Avoidance Action. Headquartered in Delaware, Safety-Kleen Corporation -- http://www.safety-kleen.com/-- provides specialty services such as parts cleaning, site remediation, soil decontamination, and wastewater services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Del. Case No. 00-02303) on June 9, 2000. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,031,304,000 in assets and $3,333,745,000 in liabilities. (Safety-Kleen Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 215/945-7000) SEMGROUP LP: Moody's Lifts Secured Debt Rating to Ba3 from B1 ------------------------------------------------------------- Moody's upgraded SemGroup, L.P.'s senior implied rating to Ba3 from B1. Moody's upgraded SemCrude, L.P.'s existing secured debt ratings by one notch and assigned a Ba3 rating to a new $175 million senior secured fourth tranche, for SemCams Holding Company, taking the total senior secured credit facility to $924.6 million. The new tranche will partially fund $249 million of acquisitions. The rating outlook is stable. The outlook is sensitive to the need for sustained tight adherence to hedging policy and procedures; sound covered merchant marketing and trading results; leveraged acquisitions; and the banks' enforcement of borrowing base and debt covenant disciplines. The acquisitions add core fixed asset, fee-based, relative mass to the asset base. With a new $75 million of cash private equity from Carlyle/Riverstone Global Energy and Power Fund II, the $175 million Canadian Term Loan will fund: 1) the $218.7 million purchase of Central Alberta Midstream's majority interests in three sour gas processing plants and 600 miles of associated natural gas gathering lines, and 2) the $30 million purchase of Texon, L.P.'s three propane terminals situated along the TEPPCO pipeline in Missouri, Arkansas, and Indiana. Central Alberta, the largest licensed sour gas processor in Alberta, Canada, is a ChevronTexaco and BP joint venture. Typically under life-of-field lease agreements, its assets provide vital natural gas gathering and processing services for producers in the Kaybob, Canada and broader west-central Alberta region. The original three credit tranches were increased from $550 million to $750 million to fund the higher dollar value of working capital, letters of credit (L/C) and merchant marketing and trading activity now conducted at far higher oil and refined product prices and at higher volumes as a result of acquisitions. One loan agreement governs all four tranches, which are also joint and severally guaranteed by SemGroup, its domestic subsidiaries, and foreign subsidiaries to the extent a guarantee does not trigger adverse tax consequences. All tranches are in U.S. dollars. The upgrades are supported by SemGroup's significantly larger, more diversified business mass; significantly greater proportion of durable fee-based fixed assets; industry seasoned management; demonstrated execution of balanced growth and funding strategy; acceptable pro-forma leverage for the ratings; and history of executing conservative policies, procedures, and controls over covered merchant marketing and trading. Since the original B1 senior implied rating, SemCrude completed the 1 million barrel expansion of its Cushing, Oklahoma crude oil storage capacity, now 3.8 million barrels at Cushing and 4.8 million in aggregate, raised a new $75 million of private equity from a second investment group, and is adding the CAMS and Texon hard assets. The ratings are restrained by: a) a large merchant marketing and trading business requiring daily back office precision and strict adherence to hedging policy and procedure; b) related heavy and volatile working capital needs; c) increased leverage after the Central Alberta acquisition, though acceptable for the ratings and on a more durable asset base; d) still modest levels of Term Loan B and the Canadian Term Loan collateral cover by fixed assets; ongoing acquisition and releveraging risk, though acquisitions over $50 million require bank consent; and e) the challenges of an acquisition-driven growth strategy in an extremely competitive midstream acquisition market. However, while SemGroup seeks growth, it is not an MLP. Unlike many MLP's, it is not forced to seek increased cash flow to meet distribution growth promises to the market. Importantly, however, in addition to SemGroup's own restrictive policy on the matter, the rated credit agreements restrict SemGroup to running only fully covered positions. Nevertheless, the ratings are sensitive to its ability to successfully market, trade, and hedge its activity through volatile spot and forward markets and execute profitable marketing business in backwardated, transition, and contango markets. The ratings also benefit from SemGroup's logistical fixed asset and marketing positions in the core central North American crude oil production, refining, transportation, and consumption corridor spanning the Gulf Coast, mid-Continent, Midwest, and natural gas processing and marketing in Canada. Its diversification across several hydrocarbon commodities, midstream activities, and regions may provide greater market opportunity, information, and risk diversification. These acquisitions amplify the scale of SemGroup's midstream infrastructure, and its customer relationships, in the heart of the North American energy infrastructure. Conversely, that activity also exposes small SemGroup's management, systems, and resources to powerful forces across multiple world and regional commodity markets impacting covered merchant marketing and trading. The credit agreements do restrict the company to run fully covered positions, but its activity still exposes it to smaller degrees of basis risk, commodity price differentials, and time differentials. The Central Alberta and Texon acquisitions bring a reported $37 million of EBITDA to SemGroup, though this will need to be realized post-acquisition. Before non-cash mark-to-market gains and losses, SemGroup reports $126 million of EBITDA in the twelve months ending November 30, 2004 on $12.5 billion of revenue. Pro-forma for the acquisitions, EBITDA over last twelve months would appear to be in the $160 million range, before non-cash mark-to-market gains and losses. Approximately 52% of pro-forma EBITDA would be generated from durable fee and tariff based activity while 48% would be generated by high volume, thin margin, market sensitive activity, requiring intense back office controls and precise rigorous adherence to hedging policy. SemGroup's book mark-to-market gains and losses can be significant, as in third quarter 2004 where such non-cash losses totaled $41 million. Such gains and losses are most pronounced in sharply rising or falling hydrocarbon commodity markets though these are also the markets in which SemGroup believes its opportunities are greatest. Even though SemGroup has not elected to use hedge accounting for its fully-hedged activity, as long as the actual positions in its hedge portfolio match its underlying physical positions, mark-to-market losses will be matched by physical commodity gains and mark-to-market gains would match physical market losses. SemGroup does have the option to elect hedge accounting for approximately 10% of its activity, representing approximately $1 billion in gross revenue. However, even though 90% of its mark-to-market gains and losses relate to underlying and offsetting physical positions, SemGroup states that the very large volume and fast pace of that activity would require far larger overhead costs and systems investment than it currently wishes to make to qualify this activity for hedge treatment. In the meantime, SemGroup states that 90% of its mark-to-market gains and losses typically have zero cash impact, due to offsetting underlying physical commodity positions. SemGroup (formerly Seminole Group, L.P.) was founded in early 2000. It is privately held and wholly-owns SemCrude (63% of LTM EBITDA), SemFuel (16%), SemGas (nil %), SemStream (10%), and SemCanada (12%). After the acquisitions, SemCanada would generate roughly 30% of EBITDA and SemCrude 47%. Cross guarantees support the credit facilities. SemGroup buys, sells, transports, terminals, and stores crude oil, refined products, natural gas, and natural gas liquids along the energy corridor stretching from the U.S. Gulf Coast, through the MidContinent, Midwest, and into Canada. It engages in the midstream gathering, aggregating, storage, marketing, and merchant trading of crude oil and natural gas liquids; the marketing of refined petroleum products and propane to jobbers, wholesalers, industrial consumers, and cogeneration plants. SemGroup operates crude oil and natural gas gathering, transportation, terminal, and storage assets along the Gulf Coast through Canadian corridor, and also markets natural gas in Canada. As of October 31, 2004, SemGroup owned 4.8 million barrels of crude oil storage, 900,000 barrels of refined product storage, 150,000 barrels of propane storage, 2,654 miles of pipeline and gathering systems, and 165 crude oil transport and services vehicles. It moves roughly 580,000 barrels/day of oil, 186,000 barrels/day of refined products, 130,000 barrels/day of natural gas liquids, and 1 BCF/day of natural gas. SemGroup uses its asset base and operating, marketing, and market prowess to move hydrocarbons, striving, across all market conditions, to profit from market inefficiencies in the movement of oil, natural gas, natural gas liquids, and refined products from production source to consumption point. SemGroup also provides risk management, well services, and transportation services to its customers. Physical positions are hedged by either offsetting physical positions or in the options, futures, or over-the-counter markets. Activity includes buying and selling covered physical and paper positions in those commodities in the process of its multi-service merchant function. Time, location, quality, and volume differentials arise from the gaps between where and when a specific volume and quality of crude oil or refined product is needed, versus the current geographic location, volume, and quality characteristics of potential supply, as well as in the difference between spot and forward prices. SemGroup's storage capacity is let for third party fee business and used by SemGroup to take proprietary advantage of time differentials in covered physical buy-sell transactions, and in merchant trading activity taking advantage of location, quality, and volume differentials in the service of producer and consumer needs. When markets shift from backwardation to contango, SemGroup shifts tactics in its proprietary use of its storage assets and engages more in the buying of prompt physical volumes and simultaneous forward sale of that volume at the higher forward price. The ratings also benefit from the considerable control provided by the borrowing base, covenants, and banks that are seasoned in the midstream business; the fact that the borrowing base has tended to cover combined working capital debt, letters of credit, and permanent debt, with added protection for Term Loan B and the acquisition revolver provided by first security in fixed assets; and the partial strategic hedge (against the secular decline in U.S. oil production) provided by SemGroup's 4.8 million barrels of crude oil storage capacity (3.8 million barrels of storage strategically connected to the Cushing, Oklahoma hub) and terminaling assets that allow SemGroup to participate in rising imported crude oil volumes. Borrowing capacity under the Ba2 rated $550 million working capital facility is governed by a borrowing base determined by specified advance rates against eligible receivables and inventory, net of crude oil payables. It permits up to $250 million of borrowing base availability to fund hedged crude oil and refined product storage positions taken during contango markets. While not conservative, those advance rates are fairly standard for the sector. The facility is also supported by an annual third party borrowing base audit and twice monthly borrowing base reports from SemGroup. A report is submitted weekly when availability under the working capital revolver is less than $50 million. As of January 17, 2005, the eligible borrowing base was estimated by the agent banks to be $442 million, distilled from $231 million of eligible receivables, $199 million of eligible inventory, $84 million of unused letters of credit and eligible margin deposits, and offset by $72 million of crude oil purchase commitments. The company had borrowed $178 million and issued $172 million of letters of credit under the borrowing base, leaving $92 million of unused availability. Based on the sale of 30% of SemGroup's private equity for $75 million, we estimate SemGroup's going concern equity value to approximate $250 million and its implied enterprise value would approximate $730 million. Pro-forma for the financings, total debt would be $480 million. The capital structure would include roughly $145 million of working capital borrowings; the $150 million of Term Loan B; the $175 million of Canadian Term Loan; $4.4 million of capital lease obligations; and $6.4 million of subordinated convertible notes. Pro-forma for the financings and acquisitions, EBITDA over the last twelve months, before mark-to-market gains and losses, would be in the $150 million to $159 million range. Pro-forma EBITDA/Interest would be in the range of 6.0x (up from 5x last year), Total Debt/EBITDA would be in the range of 3x, and Debt/Capital would be in the range of 69%. SemGroup carries high working capital. As of November 30, 2004, this included approximately $1 billion of accounts receivable, $196 million of inventory, and $103 million of current derivative assets, all funded largely by approximately $1.1 billion of accounts payable, $80 million of accruals, and $157 million of derivatives liabilities. The components rise and fall sharply with spikes and declines in crude oil, refined product, and natural gas prices. The specific ratings assigned by Moody's to SemGroup are: i) Upgraded to Ba2 from Ba3 SemCrude's $550 million (was $400 million) working capital borrowing base revolver maturing August 2008, first secured by all borrower and guarantor working capital, and junior secured by all borrower and guarantor fixed assets. The facility has a $250 million contango borrowing and L/C sub-limit. ii) Upgraded to Ba3 from B1 SemCrude's $50 million (unchanged) revolving credit facility maturing August 28, 2008, first secured by the borrower's and all guarantors' fixed assets and junior secured by all borrower and guarantor working capital assets. iii) Upgraded to Ba3 from B1 a $150 million (was $100 million) 6 year Term Loan B, first secured by first secured by the borrower's and all guarantors' fixed assets and junior secured by all borrower and guarantor working capital assets. iv) Assigned a Ba3 to a new $175 million 6 year Canadian Term Loan for SemCams Holding Company, first secured by the borrower's and all guarantors' fixed assets and junior secured by all borrower and guarantor working capital assets. v) Upgraded the Senior Implied Rating to Ba3 from B1. vi) Upgraded the Senior Unsecured Non-guaranteed Issuer Rating to B1 from B2. Key financial covenants, after amendments, include: (i) Maximum Senior Funded Debt to EBITDA of 3.50x (L/C's issued for commodity purchases, and contango borrowings of up to $100 million, are excluded from Senior Funded Debt), (ii) Minimum EBITDA/Cash Interest + Letter of Credit Fees coverage of 3.00x; (iii) Maximum Debt to Capitalization shall not exceed 70% at closing and decline to 65% by December 31, 2005; (iv) Minimum Current Ratio of 1.00x; Operating Cash Flow (after unfunded capital spending) divided by Interest Expense plus partner distributions shall not be less than 1.15x; Minimum Net Working Capital of $35 million. SemGroup, L.P., is headquartered in Tulsa, Oklahoma. SFBC INT'L: Registers 3.5 Million Common Shares for Public Offer ---------------------------------------------------------------- SFBC International, Inc. (NASDAQ:SFCC), a provider of drug development services to branded pharmaceutical, biotechnology, generic drug and medical device companies, has filed a registration statement on Form S-3 with the Securities and Exchange Commission relating to a proposed public offering of 3,500,000 shares of its common stock. 3,102,000 shares are being offered by SFBC International, Inc., and 398,000 shares are being offered by certain of its executive officers. Also, SFBC intends to grant to the underwriters an option to purchase up to an additional 525,000 shares of common stock to cover over- allotments, if any. UBS Investment Bank will act as sole book-running manager for the proposed offering. Jefferies & Company, Inc., will act as co- manager. When available, copies of the preliminary prospectus relating to this offering may be obtained from UBS Investment Bank, Prospectus Department, 299 Park Avenue, New York, NY 10171. SFBC expects to use the proceeds of the proposed offering to repay $70 million of its outstanding term loan under its credit facility, for possible acquisitions and for general corporate purposes, including funding the continued growth and development of its business and working capital requirements. A registration statement relating to these securities has been filed with the Securities and Exchange Commission, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. About the Company SFBC International, Inc. -- http://www.sfbci.com/-- provides early and late stage clinical drug development services to branded pharmaceutical, biotechnology, generic drug and medical device companies around the world. The company has more than 30 offices located in North America, Europe, South America, India, and Australia. In early clinical development services, SFBC specializes primarily in the areas of Phase I and early Phase II clinical trials and bioanalytical laboratory services, including early clinical pharmacology. The company also provides late stage clinical development services globally that focus on Phase II through IV clinical trials. The company also offers a range of complementary services, including data management and biostatistics, clinical laboratory services, medical and scientific affairs, regulatory affairs and submissions, and clinical IT solutions. * * * As reported in the Troubled Company Reporter on Dec. 9, 2004, Standard & Poor's Ratings Services assigned its 'B+' corporate credit and bank loan ratings to SFBC International, Inc., a Miami, Florida-based provider of outsourced drug development services to the pharmaceutical industry. The 'B+' bank loan ratings apply to the company's $40 million revolving credit facility due December 2009 and a $120 million term loan facility due December 2010. The new borrowings will fund the company's pending $245 million acquisition of privately held PharmaNet, Inc. At the same time, a 'B-' rating has been assigned to SFBC's existing $143.8 million senior convertible debt issue. The outlook is positive. SOLA INTERNATIONAL: Earns $9.4 Million of Net Income in 3rd Qtr. ---------------------------------------------------------------- SOLA International Inc. (NYSE:SOL) disclosed its fiscal year 2005 third quarter results: -- Net sales of $163.1 million compared to $159.3 million in the prior year period, an increase of 2.4%. -- Reported net income of $9.4 million compared to a net loss of $25.3 million in the prior year period. -- Adjusted net income of $10.4 million compared to $7.6 million in the prior year period. -- Cash flow from operations of $22.6 million compared to $21.6 million in the prior year period. Third Quarter Results Net income under generally accepted accounting principles was $9.4 million in the fiscal 2005 third quarter compared to a net loss of $25.3 million in the prior year quarter. Adjusted net income this year, which excludes after-tax special charges for restructuring and merger-related costs of $0.1 million and $1.1 million, respectively, was $10.4 million, compared to adjusted net income of $7.6 million, in the prior year period. Prior year adjusted net income excludes after-tax costs of $3.5 million related to restructuring, $1.7 million associated with an unrealized currency translation loss on Euro-denominated bonds and $30.7 million for the net effect of the early extinguishment of debt. Gross margins were 39.7% in the fiscal 2005 third quarter compared to 40.7% in the year ago quarter. A planned reduction in manufacturing output, as a result of lower sales to Wal-Mart and continued sales weakness in Germany, temporarily increased production costs. Operating expense on a reported basis was $48.0 million compared to $49.4 million in the year ago period. Excluding special charges of $1.7 million this quarter and $4.6 million in the prior year, adjusted operating expense in the fiscal 2005 third quarter was $46.2 million compared to $44.7 million in the year ago period. The increase of $1.5 million from the prior year quarter primarily relates to costs associated with the implementation of internal controls related to compliance with Section 404 of the Sarbanes-Oxley Act, acquired operating expense at Great Lakes Coating Laboratory and Vision Systems Inc., and the impact of a weaker U.S. dollar when translating overseas expenses. Operating income on a reported basis was $16.8 million compared to $15.4 million in the year ago period. Adjusted operating income, excluding special charges of $1.7 million this quarter and $4.6 million in the year ago period, was $18.6 million in the fiscal 2005 third quarter and $20.0 million in the year ago period. Adjusted EBITDA, excluding special charges, was $26.3 million, or 16.1% of net sales, compared to $27.2 million, or 17.1% of net sales, in the year ago period. EBITDA, including special charges, was $25.6 million, or 15.7% of net sales, compared to a loss of $21.8 million in the year ago period, which included $41.0 million of refinancing costs. Net interest expense in the fiscal 2005 third quarter was $4.0 million compared to $8.1 million in the comparable year ago period. The reduction in interest expense reflects the benefits of the Company's refinancing, which was completed in the fiscal 2004 third quarter. The effective tax rate, on an adjusted basis, in the fiscal 2005 third quarter was 33.4% compared to 23.6% in the prior year period. The increase in the year-over-year tax rate is largely due to reduced interest expense in the United States from the refinancing and increased profitability in other jurisdictions with higher tax rates. Balance Sheet and Cash Flow Inventory at Dec. 31, 2004 compared to September 30, 2004 increased $2.5 million on a reported basis but decreased $1.0 million on a constant currency basis. Finished goods inventory turnover was 5.1 times in the quarter, which compares to 5.4 times in the second quarter of fiscal 2005 and 4.5 times in the prior year quarter. Receivables at Dec. 31, 2004 compared to Sept. 30, 2004, increased $8.8 million on a reported basis and increased $0.6 million on a constant currency basis. Total debt at Dec. 31, 2004 was $282.6 million, or 39.4% of capital, compared to $282.7 million, or 40.6% of capital, at Sept. 30, 2004 and $290.6 million, or 43.1% of capital, at Dec. 31, 2003. During the third quarter fiscal 2005, the Company repaid $2.2 million on its existing credit facility which, at Dec. 31, 2004 had an outstanding balance of $168.4 million. Since September 30, 2004, bank borrowings increased by $1.3 million to $10.0 million due primarily to the assumption of $1.2 million of debt related to the Vision Systems acquisition, and outstanding Eurobond liability increased by $0.8 million to $9.3 million due to a weaker dollar. Also, book equity increased by $22 million to $434 million due to favorable translation adjustment of $12 million and net income of $9 million. Cash flow from operations in the quarter was $22.6 million compared to $21.6 million in the prior year period, and was used to fund capital expenditures of $3.4 million and to repay $2.5 million of debt. Cash and cash equivalents at Dec. 31, 2004 was $132.1 million compared to $122.3 million at Sept. 30, 2004 and $102.0 million at December 31, 2003. Net debt at Dec. 31, 2004 was $150.5 million compared to $160.5 million at Sept. 30, 2004 and $188.6 million at Dec. 31, 2003. Nine Month Results Net sales for the nine months ended Dec. 31, 2004 were $494.5 million compared to $471.9 million for the nine months ended Dec. 31, 2003, an increase of 4.8%. On a constant currency basis, sales increased 0.6% for the first nine months of fiscal 2005 compared to the prior year period. For the nine months ended Dec. 31, 2004, sales on a constant currency basis in North America decreased 2.6%, Europe increased 1.1% and Rest of World increased 6.5% compared to the nine months ended Dec. 31, 2003. Operating income on a reported basis was $53.5 million for the nine months ended Dec. 31, 2004 compared to $55.9 million in the year ago period. Adjusted operating income, excluding special charges of $5.4 million this year and $4.6 million in the prior year, was $58.9 million in the first nine months of fiscal 2005 compared to $60.5 million in the comparable year ago period. Adjusted EBITDA, excluding restructuring and merger-related costs this year and restructuring costs, loss on debt extinguishment, unrealized currency losses on Euro-denominated debt, and minority interest last year, was $81.5 million in the nine months ended December 31, 2004 compared to $81.1 million in the year ago period. Net income on a reported basis was $28.0 million for the nine months ended Dec. 31, 2004 compared to a net loss of $18.1 million in the prior year period. Adjusted net income, which excludes restructuring and merger-related costs this year and restructuring costs, loss on debt extinguishment and an unrealized currency translation loss on Euro-denominated debt last year, was $32.3 million, or $0.99 earnings per share, for the nine months ended Dec. 31, 2004 compared with $22.6 million, or $0.90 earnings per share, in the prior year period. About the Company SOLA International Inc. -- http://www.sola.com/-- designs, manufactures and distributes a broad range of eyeglass lenses, primarily focusing on the faster-growing plastic lens segment of the global lens market, and particularly on higher-margin, value- added products. SOLA's strong global presence includes manufacturing and distribution sites in three major regions: North America, Europe and Rest of World (primarily Australia, Asia and South America) and approximately 6,600 employees in 27 countries servicing customers in over 50 markets worldwide. * * * As reported in the Troubled Company Reporter on Dec. 3, 2004, Standard & Poor's Ratings Services revised the outlook of SOLA International, Inc., to negative from stable and affirmed the 'BB-' corporate credit rating on the company. The outlook revision reflects our heightened concern that SOLA will be unable to comply with Section 404 of the Sarbanes-Oxley Act by Mar. 31, 2005, the company's fiscal year-end. Section 404 mandates that a company's auditor identify "any material internal control weakness" in attesting to whether management has sufficient operational command to produce reliable and compliant financial reports. SOLA's external auditors have identified internal control deficiencies. Its current ratings reflect the company's operating concentration in eyeglass lenses, a well-penetrated, mature, and innovative industry that faces challenges from large competitors as well as other forms of vision correction. The company is expanding its prescription laboratory network, which now contributes a significant portion of sales, through a series of modest-sized acquisitions. Prescription labs provide SOLA with more control over its product and distribution channels to end-users. Still, barriers to entry in this business are relatively low. On Dec. 1, 2004, SOLA's outlook was revised to negative, reflecting heightened concern that the company would be unable to comply with Section 404 of the Sarbanes-Oxley Act by Mar. 31, 2005, the company's fiscal year-end. While these risks contribute to a below-average business profile, SOLA benefits from a meaningful global market share (according to the company, it holds a No. 2 position in lens sales), financial parameters that are strong for the rating, and adequate liquidity. SOLUTIA INC: Court Approves Claim Waiver Procedures --------------------------------------------------- The United States Bankruptcy Court for the Southern District of New York approved a modified process for review and approval of small claim waivers falling within certain specified economic parameters in the chapter 11 cases of Solutia, Inc., and its debtor-affiliates. Under the proposed process, the Debtors will use the Claim Waiver Procedures to obtain more expeditious and cost-effective review by interested parties, in lieu of individual court approval, of certain waivers of small dollar amount claims. All other settlements would remain subject to Court approval on an individual basis pursuant to Section 363 of the Bankruptcy Code and Bankruptcy Rule 9019. Claim Waiver Procedures The salient terms of the Debtors' proposed Claim Waiver Procedures are: A. Transactions for which the Claim Waiver Procedures may be used The Claim Waiver Procedures would apply to a waiver of all or a portion of a prepetition claim where the size of the waiver amounts to, in each case, $500,000 or less. B. Notice and opportunity to object for Non-De Minimis Claim Waivers For Claim Waivers between $100,000 and $500,000, the Debtors propose that after a Debtor enters into a contract or contracts contemplating a Claim Wavier, the Debtors will serve a notice of the Proposed Waiver by e-mail, facsimile or overnight delivery service on: -- the United States Trustee for the Southern District ofNew York; -- counsel to the Official Committee of Unsecured Creditors; -- counsel to the Official Committee of Retirees; -- counsel to the agents for the Debtors' postpetition secured lenders; -- counsel to the indenture trustee for the secured public debt securities issued by the Debtors; -- counsel to the ad hoc committee for the secured public debt securities issued by the Debtors; -- counsel to the Official Committee of Equity Security Holders; and -- the creditor agreeing to the Claim Waiver and its counsel, if known. The Debtors propose that each Waiver Notice include these information with respect to the Proposed Waiver: (a) a description of and the basis for the claim or claims that are the subject of the Proposed Waiver and the Debtor party against whom the claim or claims are being asserted; (b) any known defenses to the claim that is the subject of the Proposed Waiver; (c) the identity of the non-debtor party or parties to the Proposed Waiver and any relationships between the party or parties and the Debtors; (d) the nature of any new contractual relationship that the Debtors will enter into as a result of the Proposed Waiver; (e) the business justifications for the Proposed Waiver and an assurance that any negotiations with the non-debtor party or parties to the Proposed Waiver occurred on an arm's- length basis; (f) instructions consistent with the procedures to assert objections to the Proposed Waiver; and (g) the Debtors' basis for believing that the Proposed Waiver is in the best interests of the estates as well as the probability of success of litigation of the claim. With respect to each Waiver Notice, Interested Parties have through 5:00 p.m., Eastern time, on the 10th calendar day after the date of service thereof to object to the Proposed Waiver. If no Objections are properly asserted before the expiration of the Notice Period, the applicable Debtor or Debtors would be authorized, without further notice and without further Court approval, to consummate the Proposed Waiver in accordance with the terms and conditions of the underlying contract or contracts. If each Interested Party consents in writing to the Proposed Waiver before the expiration of the applicable Notice Period, then the Debtors would be authorized to consummate the Proposed Waiver without waiting for the Notice Period to expire. Upon either the expiration of the Notice Period without the receipt of any Objections or the written consent of all Interested Parties, the Proposed Waiver would be deemed final and fully authorized by the Court. If any significant economic terms of a Proposed Wavier are amended after transmittal of the Waiver Notice, but before the expiration of the Notice Period, the applicable Debtor would be required to send a revised Waiver Notice to all Interested Parties describing the Proposed Waiver, as amended. If a revised Waiver Notice is required, the Notice Period would be extended for an additional five calendar days. C. Objection procedures Objections to any proposed Claim Waiver must: (a) be in writing; (b) be served on the Interested Parties and counsel to the Debtors so as to be received by all such parties before expiration of the Notice Period; and (c) state with specificity the grounds for objection. If an Objection to a Proposed Waiver is properly and timely served, the Debtors and the objecting Interested Party would use good faith efforts to resolve the Objection. If the Debtors and any objecting Interested Party were unable to achieve a consensual resolution, the Debtors would not be permitted to proceed with the Proposed Waiver pursuant to these procedures, but would have the ability to seek Court approval of the Proposed Waiver upon expedited notice and an opportunity for a hearing, subject to the Court's availability. Within 45 days after the end of each quarter, the Debtors will provide to the Interested Parties a report itemizing the assets sold and consideration received for each De Minimis Waiver completed during the quarter. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPARKLE CLEANING: Case Summary & 11 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Sparkle Cleaning Associates, Inc. 63 Fountain Street, Unit 104 Framingham, Massachusetts 01702 Bankruptcy Case No.: 05-10716 Chapter 11 Petition Date: February 4, 2005 Type of Business: The Debtor operates a commercial contract cleaning service. The Debtor handles a full range of housekeeping duties for clients located in Masssachusetts, Maine, New Hampshire, Rhode Island and the Washington, D.C, area, including, janitorial services, preventive maintenance, restoration, carpet cleaning, clinical housekeeping, pest control, grounds maintenance, planning, scheduling, quality control, and biohazard training. See http://www.sparklecleaning.us/ Court: District of Massachusetts (Boston) Judge: Robert Somma Debtor's Counsel: David B. Madoff, Esq. Madoff & Khoury LLP 124 Washington Street, Suite 202 Foxboro, Massachusetts 02035 Tel: (508) 543-0040 Fax: (508) 543-0020 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million Debtor's 11 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Carrie Johnson $280,000 c/o Gretchen Van Ness, Esq. 44 School Street, Suite 510 Boston, MA 02109 Internal Revenue Service $200,000 Special Procedures Function PO Box 9112 Boston, MA 02203 Robin Bandele Nash $20,000 34 Beach Road Vineyard Haven, MA 02568 HT Berry $9,000 Wallick & Associates $6,438 Cingular Wireless $3,984 NACM-NE/11551 $2,775 Atlantic Cleaning $2,373 Waste Management $1,195 Internal Revenue Service $1,000 Granite Communications $614 SPEIZMAN INDUSTRIES: Court Confirms Amended Plan of Liquidation --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia confirmed the First Amended Joint Plan of Liquidation of Speizman Industries, Inc., and its debtor-affiliates on Jan. 28, 2005. Judge W. Homer Drake determined that the Plan: * properly classifies the claims, * specifies the unimpaired classes of claims, * specifies the treatment of unimpaired classes of claims, * provides for the same treatment of each claim in each class, * provides adequate and proper means for its implementation, * is not inconsistent with applicable provisions of the Bankruptcy Code, * complies with applicable provisions of the Bankruptcy Code, * was proposed in good-faith, * provides for the payment for services or costs and expenses in connection with the Debtors Chapter 11 cases, * provides for the proper treatment of administrative and tax claims pursuant to the requirements of Section 1129((a)(9) of the Bankruptcy Code, * is feasible, * calls for the payment of fees payable under Section 1930 of the Judiciary Procedures Code, * does not alter retiree benefits, * is fair and equitable, and * does not call for the avoidance of taxes or the application of Section 5 of the Securities Act of 1933. All but one impaired claim holder voted to accept the Plan. Lonati SpA, an impaired secured lender, did not cast a ballot. Terms of the Plan Speizman Industries will be substantively consolidated with its debtor-affiliates -- Wink Davis Equipment Co., Todd Motion Controls, Inc., and Speizman Yarn Equipment Co., Inc. Intercompany claims, as a result, are cancelled. Lloyd Whitaker of Newleaf Corporation will serve as liquidating agent to administer distributions under the Plan. SouthTrust Bank, the Company's secured lender, is owed around $6.3 million. The collateral securing the $6.3 million claim will be surrendered to SouthTrust. The unsatisfied amount left after the value of the collateral is deducted from the claim amount is considered a general unsecured claim. Lonati SpA, another secured creditor, owed $4 million, won't receive anything. Unsecured creditors, owed an "undetermined" amount, are expected to see a de minimis recovery. Shareholders are wiped-out. Robert Speizman, the Company's former president, will kick $320,000 into the pot. Headquartered in Charlotte, North Carolina, Speizman Industries, Inc. -- http://www.speizman.com/-- is a distributor of specialized Commercial industrial machinery parts and equipment operating primarily in textile and laundry. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. N.D. Ga. Case No. 04-11540) on May 20, 2004. Michael D. Langford, Esq., at Kilpatrick Stockton LLP, represents the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $23,938,000 in assets and $23,073,000 in liabilities. STANDARD COMMERCIAL: Earns $6.4 Million of Net Income in 3rd Qtr. ----------------------------------------------------------------- Standard Commercial Corporation (NYSE: STW - News) reported income from continuing operations for the quarter and nine months period ended Dec. 31, 2004, was $11.1 million and $14.0 million, respectively, versus $6.9 million and $27.5 million for the respective prior year periods. As previously disclosed, the Company discontinued its tobacco operations in Italy during the second quarter of the current fiscal year. Net income including discontinued operations was $6.4 million for the quarter and a net loss of $18.6 million for the nine months period ended Dec. 31, 2004 versus $3.6 million net income and $4.1 million net loss, respectively, in the prior year. Robert E. Harrison, Chairman and Chief Executive Officer said, "We are pleased with the improvement in our results for this quarter after a tough start to the year. As we anticipated, shipping patterns began to normalize in the most recent quarter and resulted in a 27.4% increase in volumes shipped on a quarter over quarter basis and a corresponding increase in sales of 32.8%. Importantly, our gross margin percentage was up nearly one percentage point from 15.5% to 16.3% on a comparative basis as the mix of tobaccos shipped was more indicative of our global business base. We expect the improved shipping pattern will continue for the balance of the year and that freight issues in Malawi will ease." "We also continue to make progress in refocusing our business on our core tobacco operations. In January 2005, we sold our UK and Chile wool operations and expect to complete the sale of substantially all of our remaining wool interests by March 31, 2005." Quarter Ended December 31, 2004 Versus Quarter ended December 31, 2003 Sales Sales for the three months ended December 31, 2004 increased by 32.8% to $244.7 million from $184.3 million in the prior year period. The volume of tobacco sold during the current quarter increased by 27.4% over the prior year quarter. This was mainly due to increased shipments from Brazil, Thailand, Turkey and Argentina. Shipments from Zimbabwe and the USA were lower during the quarter primarily due to smaller crops and lower shipments from Malawi were due to a shortage of shipping containers. Gross Profit Gross profit for the quarter ended December 31, 2004 was $39.8 million versus $28.5 million in the prior year period. Gross margins as a percentage of sales increased from 15.5% to 16.3% primarily due to increases in Malawi, Thailand, India, Indonesia, Turkey and Brazil. These increases were partially offset by decreases of margins in China, USA and Argentina. Selling, General and Administrative Expenses SG&A expenses for the quarter were higher by $3.8 million. This was due to an increase in legal and professional expenses of $2.0 million, relating to the proposed merger with Dimon Incorporated and to Sarbanes-Oxley expenses, compensation of $0.8 million, insurance of $0.6 million and communication costs and rent expenses of $0.4 million. Interest Expense Interest expense for the current quarter was higher by $2.6 million due to both increased average borrowings and higher average rates. Income taxes Income tax expense as a percentage of pretax income can vary due to differences in the projected levels of pre-tax income for the year in tax jurisdictions with higher or lower tax rates and adjustments due to the resolution of reviews of certain taxing authorities. We favorably resolved certain outstanding items with certain tax authorities which resulted in an effective tax rate for the quarter of 18.5%. The effective tax rate for the prior year quarter was 31.9%. Income from Continuing Operations Income from continuing operations was $11.1 million for the current quarter versus $6.9 million in the prior year quarter. Loss from Discontinued Operations The tobacco operating loss for the three months ended December 31, 2004 was $3.7 million versus $0.5 million in the prior year quarter. The wool operating loss for the quarter was $0.9 million versus $2.8 million in the prior year period. The basic loss per share for the discontinued operations for the quarter was $0.34 versus $0.24 as the prior year period. Net Income The consolidated net income for the quarter was $6.4 million versus $3.6 million in the prior year period. Nine months ended Dec. 31, 2004 Versus Nine Months Ended Dec. 31, 2003 Sales Sales for the nine months ended December 31, 2004 increased by 21.2% to $650.6 million from $536.6 million in the prior year period. The volume of tobacco sold during the current nine months increased by 17.3% over the prior year period. This was mainly due to increased shipments from Brazil, India, Thailand, Russia, Turkey and Spain. Shipments from Kenya, Congo and Argentina were lower during the current nine months due to delayed customer delivery schedules. Shipments from Zimbabwe and the USA were lower primarily due to smaller crops. Lower shipments from Malawi were due to a shortage of containers. Gross Profit Gross profit for the nine months ended December 31, 2004 was $93.2 million versus $96.2 million in the prior year period. Gross margins were down from 17.9% to 14.3% primarily due to higher tobacco and operating costs in Kenya, Zimbabwe, China, India, Thailand, Turkey, USA, Argentina and Brazil. These decreases in percentages are offset by increases in Indonesia and Malawi. Selling, General and Administrative Expenses SG&A expenses for the current nine months were higher by $11.9 million. This was mainly due to a charge of $2.4 million accrued for fines relating to the European Commission investigation in Spain, increase in legal and professional expenses of $3.5 million, relating to the European Commission investigation in Spain, Sarbanes-Oxley and expenses related to the proposed merger with Dimon Incorporated, increases in compensation of $5.4 million, higher communication costs and rental expense of $1.2 million and other normal inflationary increases. Interest Expense Interest expense for the current nine months was higher by $6.5 million due to both increased average borrowings and higher interest rates, as well as payment of $1.0 million for the May 2004 early retirement of the 8-7/8% senior notes. Income taxes Income tax expense as a percentage of pretax income can vary due to differences in the projected levels of pre-tax income for the year in tax jurisdictions with higher or lower tax rates and adjustments due to the resolution of reviews of certain taxing authorities. We favorably resolved certain outstanding items with certain tax authorities which resulted in an effective tax rate for the nine months of 18.3%. The effective tax rate for the prior year nine months was 31.7%. Income from Continuing Operations For the current nine months income from continuing operations was $14.0 million versus $27.5 million in the prior year period. Loss from Discontinued Operations The operating loss for the discontinued tobacco operation for the nine months ended December 31, 2004 was $13.7 million versus a profit of $2.1 million in the prior year period. The charge recorded in the current nine months for the discontinued tobacco operation was $14.8 million. No tax benefit on the losses to discontinue the Italian operation was recorded due to the uncertainty of our ability to ultimately receive a tax benefit. The wool operating loss for the current nine months was $4.1 million versus $7.0 million in the prior year period. The charge recorded in the prior year period to discontinue the wool operation was $26.6 million. The basic loss per share for the discontinued operations for the current nine months was $2.38 versus $2.32 in the prior year period. Net Loss The consolidated net loss for the current nine months was $18.6 million versus a loss of $4.1 million in the prior year period. Because of the seasonal nature of the Company's business, results for interim periods are not necessarily indicative of business trends or results to be expected for the full year. Proposed Merger In connection with the proposed merger of Standard Commercial Corporation and DIMON, the parties have filed a joint proxy statement/prospectus and other relevant documents concerning the merger with the U.S. Securities and Exchange Commission. Stockholders are urged to read the proxy statement/prospectus regarding the proposed transaction and other relevant documents filed with the sec because they will contain important information. Interested parties may obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Standard Commercial Corporation and DIMON free at the Securities and Exchange Commission -- http://www.sec.gov/ Copies of the proxy statement/prospectus can also be obtained, without charge, by directing a request to: Standard Commercial Corporation 2201 Miller Road P.O. Box 450 Wilson, North Carolina 27894 Attn: Investor Relations (252) 291-5507 The respective directors and executive officers of Standard Commercial Corporation and DIMON and other persons may be deemed to be "participants" in the solicitation of proxies in respect of the proposed merger. Information regarding Standard Commercial Corporation's directors and executive officers is available in its proxy statement filed with the SEC on June 23, 2004. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. About the Company Headquartered in Wilson, North Carolina, Standard Commercial is an independent leaf tobacco dealer and operates in over thirty countries. * * * As reported in the Troubled Company Reporter on Nov. 15, 2004, Moody's Investors Service placed the ratings of Standard Commercial Corporation and Dimon Incorporated under review with direction uncertain, following the announcement by the two companies of a definitive merger agreement. The transaction remains subject to shareholders and regulatory approvals. Ratings placed under review with direction uncertain: * Standard Commercial Corporation -- Senior implied, at Ba3 -- Senior unsecured, at Ba3 -- Issuer rating, at B1 * Standard Commercial Tobacco Company -- Bank Credit facility, at Ba3 * Dimon Incorporated -- Senior guaranteed unsecured, at B1 -- Issuer rating, at B2 Dimon and Standard Commercial have announced their intent to merge. Under the terms of the agreement, Standard Commercial common shareholders would receive three shares of Dimon common stock per each share of Standard Commercial common stock, making Dimon the surviving entity. The merged company should have proforma annual revenue of approximately $1.9 billion, based on combined results for the twelve months ended June 30, 2004. The direction of the review reflects uncertainty on the final level of the senior implied rating of the new entity at conclusion of the review. Moody's does not believe that it has sufficient information at this stage to determine a higher likelihood for a Ba3 senior implied rating than for a B1. The direction of the review also reflects uncertainty about the ultimate structure of the new company, whether this new structure will create structural subordination of some debt, and whether -- as Dimon has indicated it might be a possibility -- Dimon's debt will be tendered. STATER BROS: Dec. 26 Balance Sheet Upside-Down by $33.8 Million --------------------------------------------------------------- Jack H. Brown, Chairman, President and Chief Executive Officer of Stater Bros. Holdings Inc. reported financial results for the first quarter of fiscal 2005 ended Dec. 26, 2004. Sales for the thirteen week first quarter ended December 26, 2004, understandably decreased 18.3% to $839.1 million compared to $1.027 billion for the thirteen weeks ended December 28, 2003. Results for the period ended December 28, 2003 included increased sales due to the Southern California grocery labor dispute. Like store sales decreased 22.2% for the thirteen weeks ended December 26, 2004 compared to the thirteen weeks ended December 28, 2003. The Company reported net income for the thirteen week first quarter ended December 26, 2004 of $3.4 million compared to net income of $34.6 million for the thirteen week first quarter ended December 28, 2003. Prior year results benefited from the labor dispute in Southern California. Mr. Brown said: "The decline in sales in the current year is due to the high sales level in the prior year during the Southern California grocery labor dispute. While the sales have declined we are pleased with the amount of new customers we have been able to retain. This year's results reflect our Stater Bros. Family post-strike retention efforts to retain many of our new "Valued Customers" providing excellent service and value. We are determined to maintain the existing level of new customers the Stater Bros. Family obtained during the labor dispute. We remain committed to providing a friendly and satisfying shopping experience to all our "Valued Customers" on every one of their visits to our stores." About the Company Stater Bros. Holdings Inc. is the largest privately held Supermarket Chain in Southern California and operates 160 supermarkets through its wholly owned subsidiary, Stater Bros. Markets. For information contact: Jack H. Brown, Chairman, President and Chief Executive Officer at (909) 783-5000. Stater Bros. Markets currently operates 160 Full Service Supermarket locations, with 47 in San Bernardino County, 44 in Riverside County, 30 in Orange County, 27 in Los Angeles County, 10 in Northern San Diego County, and 2 in Kern County. There are over 16,000 members of the Stater Bros. "Family" of Employees. Headquartered in Colton, California, Stater Bros., has been serving Southern California customers since 1936. At Dec. 26, 2004, Stater Bros.' balance sheet showed a $33,830,000 stockholders' deficit, compared to a $37,191,000 deficit at Sept. 26, 2004. STONE TOWER: S&P Places Ratings on CreditWatch Positive ------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class A-2, B, C, D-1, and D-2 notes of Stone Tower CLO Ltd., a cash flow balance sheet CLO transaction, on CreditWatch with positive implications. At the same time, the 'AAA' rating on the class A-1 notes is affirmed. The positive CreditWatch placements reflect factors that have positively affected the credit enhancement available to support the class A-2, B, C, D-1, and D-2 notes since the deal closed in July 2003. These factors include increases in the class A, B, C, and D overcollateralization ratios and paydowns totaling $169.312 million on the class A-1 notes. As of the most recent trustee report available, dated Jan. 15, 2005, the class A par value test ratio was 152.21%. This compares to a ratio of 120.04% reported on the initial trustee report (Sept. 15, 2003) and a test minimum ratio of 108.04%. Standard & Poor's noted that the par value ratios for the other classes have similarly increased. Standard & Poor's will be reviewing the results of current cash flow runs generated for Stone Tower CLO Ltd. to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared to the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the amount of credit enhancement available. Ratings Placed on CreditWatch Positive Stone Tower CLO Ltd. Rating Class To From Balance ($ mil.) ----- -- ---- ---------------- A-2 AA/Watch Pos AA 12.000 B A-/Watch Pos A- 14.750 C BBB/Watch Pos BBB 11.250 D-1 BB/Watch Pos BB 4.750 D-2 B+/Watch Pos B+ 4.875 Rating Affirmed Stone Tower CLO Ltd. Class Rating Balance ($ mil.) ----- ------ ---------------- A-1 AAA 93.436 Transaction Information Issuer: Stone Tower CLO Ltd. Co-issuer: Stone Tower CLO Corp. Manager: Stone Tower Debt Advisors Underwriter: Credit Suisse First Boston Trustee: Wachovia Bank N.A. Transaction type: Cash flow balance sheet CLO For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization (ROC) Statistic, please see "ROC Report January 2005," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Fixed Income," under "Browse by Sector" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired articles. TALCOTT NOTCH: S&P Affirms BB- Rating on Class A-4 Notes -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-3B and A-3L notes issued by Talcott Notch CBO I Ltd., a high-yield arbitrage CBO transaction managed by General Re-New England Asset Management, and removed them from CreditWatch with positive implications, where they were placed Sept. 2, 2004. At the same time, the ratings on the class A-2L and A-4 notes are affirmed based on the credit enhancement available to support the notes. The ratings on the class A-3B, A-3L, and A-4 notes were previously lowered Jan. 8, 2003 and Aug. 25, 2003. The raised ratings reflect factors that have positively affected the credit enhancement available to support the A-3B and A-3L notes since the last downgrade in August 2003. The primary factor was an increase in the level of overcollateralization available to support the notes. According to the most recent trustee report, dated Jan. 17, 2005, the senior class A overcollateralization ratio was at 138.7%, up from a ratio of 119.6% at the time of the Aug. 25, 2003 rating action, and above the minimum required ratio of 120%. Standard & Poor's reviewed the results of current cash flow runs generated for Talcott Notch CBO I Ltd. to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. When the stressed performance of the transaction was then compared to the projected default performance of the current collateral pool, Standard & Poor's found that the projected performance of the class A-3L and A-3B notes, given the current quality of the collateral pool, was not consistent with the prior ratings. Consequently, Standard & Poor's has raised its ratings on class A-3B and A-3L notes to the new levels. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings assigned to the rated classes continue to reflect the credit enhancement available to support the notes. Ratings Raised and Removed from Creditwatch Positive Talcott Notch CBO I Ltd. Rating Class To From ----- -- ---- A-3B AA AA-/Watch Pos A-3L AA AA-/Watch Pos Ratings Affirmed Talcott Notch CBO I Ltd. Class Rating ----- ------ A-2L AAA A-4 BB- Transaction Information Issuer: Talcott Notch CBO I Ltd. Co-issuer: Talcott Notch CBO I Ltd. (Delaware) Corp. Underwriter: Bear Stearns Cos. Inc. Trustee: JPMorgan Chase Transaction type: Arbitrage corporate HY CBO Tranche Initial Prior Current Information Report Downgrade Action ----------- ------- --------- ------- Date (MM/YYYY) 1/2000 8/2003 2/2005 Cl. A-1L note rtg. AAA AAA NR Cl. A-2L note rtg. AAA AAA AAA Cl. A-3B note rtg. AAA AA- AA Cl. A-3L note rtg. AAA AA- AA Sr. class A O/C ratio 129.28% 119.6% 138.5% Sr. class A O/C ratio min. 120.0% 120.0% 120.0% Cl. A-4 note rtg. A- BB- BB- Cl. A O/C ratio 118.79% 109.7% 119.1% Cl. A O/C ratio min. 110.0% 110.0% 110.0% Portfolio Benchmarks Current -------------------- ------- S&P wtd. avg. rtg. (excl. defaulted) B+ S&P default measure (excl. defaulted) 3.28% S&P variability measure (excl. defaulted) 2.33% S&P correlation measure (excl. defaulted) 1.18 Oblig. rtd. 'BBB-' and above 15.01% Oblig. rtd. 'BB-' and above 47.23% Oblig. rtd. in 'CCC' range 6.84% Oblig. rtd. 'CC', 'SD', or 'D' 17.93% S&P Rated Current O/C (ROC) Rating Action --------- ------------- Cl. A-2L 182.48% (AAA) Cl. A-3B 108.61% (AA) Cl. A-3L 108.61% (AA) Cl. A-4 102.35% (BB-) For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization (ROC) Statistic, please see "ROC Report January 2005," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Credit Ratings," under "Browse by Business Line" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired article. TEE JAYS MANUFACTURING: Section 341(a) Meeting Slated for March 23 ------------------------------------------------------------------ The Bankruptcy Administrator will convene a meeting of Tee Jays Manufacturing Co., Inc.'s creditors at 10:00 a.m., on March 8, 2005, at Federal Building, Cain St. Entrance, Room 200, Decatur, Alabama. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Florence, Alabama, Tee Jays Manufacturing Co., Inc., is a textile manufacturing company. The Company filed for chapter 11 protection on February 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 assets and debts between $50 million and $100 million. UAL CORP: Inks Pact to Settle Advertising Dispute with Fallon ------------------------------------------------------------- Prior to UAL Corporation and its debtor-affiliates' bankruptcy filing, Fallon, Inc., provided the Debtors with various advertising agency services, including advertisement creation and design, advertisement layout, placement and marketing strategy services and advertisement production. Fallon also purchased production services from third parties and purchased media for the Debtors' advertisements. The Debtors paid Fallon for its services, for acting as their agent and for other services that were passed on to third parties. In some instances, advertisements or placement schedules were modified or cancelled, resulting in credits in the Debtors' favor held by Fallon. The Debtors' Prepetition Credits with Fallon total $1,995,447. On May 9, 2003, Fallon filed Claim No. 36639 for $1,873,869 for various unpaid services and third party invoices. Fallon asserted that the Claim was secured by the Prepetition Credits. In September 2004, the Debtors notified Fallon that certain payments may constitute avoidable transfers within the meaning of Section 547 of the Bankruptcy Code. However, Fallon argued that: a) a portion of the transfers were advance payments to third parties; b) the transfers were made in the ordinary course of business; c) a portion of the payments reflected Fallon's role as a mere conduit and not the final recipient; and d) Fallon provided value to the Debtors. Thus, the parties engaged in good-faith negotiations and stipulate that: a) Fallon is entitled to an allowed secured claim for $1,873,869 that arises from a right to set off that amount of the Prepetition Credits; b) Fallon will pay the Debtors the $121,578 balance of the Prepetition Credits; c) Fallon will pay the Debtors $150,000 to settle the Preference Claim; d) Fallon will provide the Debtors with a discount against its fees for the next 12 months at this schedule: 1) $0 to $2,500,000 in fees will be discounted at 3%; 2) $2,500,000 to $4,000,000 in fees will be discounted at 4%; and 3) fees over $4,000,000 will be discounted at 5%; e) The Fallon Claim will be satisfied after the set-off is effected and the Debtors will withdraw their objection to Fallon's Claim. The Stipulation enables both parties to avoid the costs of additional negotiation or litigation. 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. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Court Okays Labor Pact Changes with Flight Attendants --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois authorizes the modifications of UAL Corporation and its debtor- affiliates' labor agreement with the Association of Flight Attendants - CWA. As reported in the Troubled Company Reporter on Jan. 25, 2005, the Debtors have been trying to modify collective bargaining agreements with their unions. On Nov. 5, 2004, the Debtors filed a request pursuant to Section 1113(c) of the Bankruptcy Code to reject the AFA-CWA collective bargaining agreement, among others. The Debtors have repeatedly stated that consensual agreements with the unions are preferable. Also, on November 5, the Debtors presented their unions, including the AFA, with opening proposals to modify the collective bargaining agreements. Since that time, the Debtors have engaged in intense discussions with the AFA's negotiating committee to agree on a contract that would achieve the needed cost reductions, while avoiding Section 1113(c) relief against the AFA. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, tells the Court that on Jan. 11, 2005, the Master Executive Council of the AFA accepted a term sheet from the Debtors. The membership ratification process began on January 18 and should be completed by Jan. 31, 2005. Under the Letter Agreement, all hourly pay rates will be reduced by 9.5%, effective Jan. 7, 2005. Purser, galley, LIP and language hourly premiums will be reduced by 9.0%. Understaffing Pay will be reduced from $10.00 to $5.00 per hour. From 2007 through 2009, pay rates will increase by 2.0% every year. The Agreement provides for modified vacation accrual and sick leave. In return for these concessions, the AFA will receive a percentage distribution of equity or other consideration provided to general unsecured creditors. The AFA stands to receive cash incentives under a Success Sharing Program up to 1.0% of wages from 2005 through 2009, depending on the Debtors' performance in certain metrics. The Debtors will withdraw their Section 1113 Rejection Motion without prejudice as it relates to the AFA. The AFA may terminate the Agreement if the Debtors fail to revise the labor contracts of other unions or fail to revise the wages and benefits of Salaried and Management employees. 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. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNITED HOSPITAL: Creditors Committee Taps Thelen Reid as Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of New York United Hospital Medical Center asks the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Thelen Reid & Priest LLP, as its counsel. Thelen Reid is expected to: a) assist the Committee in the exercise of oversight with respect to the Debtor's affairs including all issues impacting the Committee and the Debtor in its chapter 11 case; b) prepare on behalf of the Committee all necessary applications, motions, orders, reports and other legal papers; c) appear before the Court to represent the interests of the Committee and assist in the negotiation, formulation, drafting and confirmation of any plan of reorganization or liquidation and its related matters; d) assist the Committee in the exercise of oversight with respect to any to any transfer, pledge, conveyance, sale or other liquidation of the Debtor's assets; e) assist the Committee in the investigation of the Debtor's assets, liabilities, financial condition and operating issues relevant to the Debtor's chapter 11 case; f) perform all other services to the Committee that are necessary in the Debtor's chapter 11 case. Martin G. Bunin, Esq., a Member at Thelen Reid, is the lead attorney for the Committee. Mr. Bunin reports Thelen Reid's professionals bill: Designation Hourly Rate ----------- ----------- Partners $330 - $685 Counsels $320 - $600 Associates $210 - $460 Legal Assistants $115 - $230 Thelen Reid assures the Court that it does not represent any interest adverse to the Committee, the Debtor or its estate. Headquartered in Port Chester, New York, New York United Hospital Medical Center is a 224-bed, community healthcare provider and a member of the New York-Presbyterian Healthcare System, serving several Westchester communities, including Port Chester, Rye, Mamaroneck, Rye Brook, Purchase, Harrison and Larchmont. The Company filed for chapter 11 protection on December 17, 2004 (Bankr. S.D.N.Y. Case No. 04-23889). Lawrence M. Handelsman, Esq., at Stroock & Stroock & Lavan LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $39,000,000 and total debts of $78,000,000. UNITED HOSPITAL: Hires Kurron Shares as Restructure Managers ------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of New York gave New York United Hospital Medical Center permission to employ Kurron Shares of America, Inc., as its restructuring managers. The Court also approved the Firm's designation of Philip G. Dionne as President and Chief Executive Officer for the Debtor, nunc pro tunc, Dec. 17, 2004. The Court also ordered that Mr. Dionne will continue to provide services to the Debtor through Feb. 11, 2005. The Court approved the Management Agreement between the Debtor and Kurron Shares. The Agreement states that the Debtor's continued employment of Mr. Dionne after Feb. 11, 2005, is dependent upon the mutual consent by the Debtor and the Creditors Committee and subject to the Court's approval. Kurron Shares will: a) manage the Debtor's daily operations and restructuring or liquidation efforts, including negotiating with creditors and other parties-in-interest; b) provide reporting and testimony to Court, and develop a plan of reorganization or liquidation for the Debtor, subject to the approval of the Debtor's Board of Trustees; c) oversee the Debtor's day-to-day operations, coordinate and manage the chapter 11 process and communicate with customers, lenders, suppliers, employees, and other parties- in-interest; d) develop and implement a business plan to rehabilitate or liquidate the Debtor's business, through the design and implementation of programs to manage or divest assets, improve operations, reduce costs, and restructure or liquidate, all subject to the approval of the Debtor's Board of Trustees; e) interface with regulatory authorities, community leaders, and organizations on the Debtor's behalf; d) ensure that the Debtor complies with all obligations under the Bankruptcy Code, including financial reporting to the Court and parties-in-interest; e) represent the Debtor in dealings with statutory committees, their constituencies, and their professionals; and f) assist the Debtor in other matters related to the managing and restructuring of its business as may be mutually agreed upon by the Debtor and Kurron Shares. Arnold I. Katz, a Principal at Kurron Shares, discloses that the Firm received a $137,000 retainer. Mr. Katz discloses that the Firm will bill the Debtor a weekly fee of $17,135.00 for Mr. Dionne's services. Mr. Katz reports Kurron Shares' professionals bill: Designation Hourly Rate ----------- ----------- Principals $475 - $650 Senior Associates $425 Associates $250 Kurron Shares assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Port Chester, New York, New York United Hospital Medical Center is a 224-bed, community healthcare provider and a member of the New York-Presbyterian Healthcare System, serving several Westchester communities, including Port Chester, Rye, Mamaroneck, Rye Brook, Purchase, Harrison and Larchmont. The Company filed for chapter 11 protection on December 17, 2004 (Bankr. S.D.N.Y. Case No. 04-23889). Lawrence M. Handelsman, Esq., at Stroock & Stroock & Lavan LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $39,000,000 and total debts of $78,000,000. US AIRWAYS: Wants to Employ Global Insight as Experts ----------------------------------------------------- US Airways, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Virginia for authority to employ Global Insight, Inc., effective as of November 19, 2004, to provide expert consulting services and backup support services for certain aspects of the Chapter 11 cases. Dr. James W. Gillula, Professor Michael L. Wachter and Professor Barry T. Hirsch at Global Insight will be the primary professionals on this assignment. Global Insight was created by combining two leading economic and financial forecasting companies -- DRI, formerly Data Resources Inc., and WEFA, formerly Wharton Econometric Forecasting Associates. Upon integration in October 2002, the company changed its name to Global Insight. Global Insight is one of the world's leading economic information and consulting firms with over 500 employees around the world, including Canada, France, Italy, Germany, South Africa, the United Kingdom and the United States. Global Insight provides business decision makers with industry expertise, analysis, market evaluation, comparative industry rankings and data for over 70 industries around the world. The Experts at Global Insight enjoy the highest professional standing and reputation, with a wealth of experience in providing consulting services to a wide cross-section of industries. The Experts and Global Insight are well qualified and able to provide expert consulting services to the Debtors in a cost-effective, efficient and timely manner. Their services will not be duplicative of other professionals. Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, informs the Court that the Experts and Global Insight have already provided expert consulting services to the Debtors, on three matters: a) The Application to Reject Certain Collective Bargaining Agreements; b) The Application to Reduce Retiree Health Benefits; and c) The Motion to Approve Termination of Certain Defined Benefit Retirement Plans and Make Necessary Findings. The customary hourly rates charged by the Experts and Global Insight are: Michael L. Wachter $425 James W. Gillula $325 Barry T. Hirsch $175 Consultants $175 Associates $110 The Experts and Global Insight ascertain that they have no connection with the Debtors, their creditors or other parties in interest in these cases and do not hold any interest adverse to the Debtors' estates. The Experts and Global Insight are a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. 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) USM CORPORATION: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: USM Corporation dba Hudson Machinery dba United Global Supply dba United Shoe Machinery 32 Stevens Street Haverhill, Massachusetts 01831 Bankruptcy Case No.: 05-40541 Type of Business: The Debtor manufactures, sells, and distributes shoe machinery and parts to the footwear industry in North and Central America. It also manufactures, sells, and distributes industrial cutting machines and accessories. See http://www.hudsonmachinery.com/ Chapter 11 Petition Date: February 4, 2005 Court: District of Massachusetts (Worcester) Judge: Henry J. Boroff Debtor's Counsel: Christopher Martin Winter, Esq. Michael R. Lastowski, Esq. Jennifer L. Hertz, Esq. Duane Morris, LLP 1100 North Maket Street Wilmington, Delaware 19801-1246 Tel: (302) 657-4951 Fax: (302) 657-4901 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Teradyne Connection Systems Legal Judgment $902,348 PO Box 3644 Boston, Massachusetts 02241 Black & Decker PREBS $830,000 c/o Miles & Stockbridge 10 Light Street Baltimore, MD 21202-1497 ATOM S.P.A. Trade $265,806 Via Morosini, 6 Vigevano 27079, Italy Fortuna Trade $84,015 OFC Capital Trade $69,377 B.D.F. SRL Trade $67,205 British United Shoe Machine Trade $66,682 Essebi S.R.L. Trade $58,694 Silpar Di Rossi Felice EC.SNC Trade $30,351 Hudson Industrial Park Landlord $29,357 Keyspan Energy Delivery Utility $23,692 Bostik Findley, Inc. Trade $21,325 Secure Horizons Trade $18,200 DHL Express, Inc. Trade $16,699 Roberts Machine Shop Inc. Trade $15,897 Pilgrim Shoe & Sewing Machine Trade $12,635 B&D Associates, Inc. Trade $11,740 Lewiston Shoe Machinery Company PREBS $10,674 Austro Plast Trade $10,625 Mass Electric Utility $10,497 WINN-DIXIE: Hosting Second Quarter Conference Call Today -------------------------------------------------------- Winn-Dixie Stores (NYSE: WIN) will its second quarter earnings live over the Internet today, Feb. 10, at 8:30 a.m. EST with Winn- Dixie President and CEO Peter Lynch and Senior Vice President and CFO Bennett Nussbaum. To access the live webcast, log on to: http://phx.corporate-ir.net/playerlink.zhtml?c=78738&s=wm&e=988094or call 1-888-578-6632. There is no passcode for the call; just tell the operator you are calling for the Winn-Dixie event. For more information, call Kathy Lussier of Winn-Dixie, at +1-904-370-6025 or kathylussier@winn-dixie.com About the Company Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. Founded in 1925, the Company is headquartered in Jacksonville, Fla. Peter Lynch serves as president and CEO. If you are unable to participate during the live Web cast, the call will be archived on the Web site http://www.winn-dixie.com/ until Feb. 17, 2005, at midnight. To access the replay, under About Winn-Dixie/Investor Information, click on "Second Quarter Conference Call." The call will also be archived at http://www.prnewswire.com/ * * * As reported in the Troubled Company Reporter on Nov. 1, 2004, Standard & Poor's Ratings Services lowered its ratings on Winn- Dixie Stores Inc. The corporate credit rating was lowered to 'B-' from 'B'. The outlook is negative. "The downgrade is based on weaker-than-expected profitability and cash flow," explained Standard & Poor's credit analyst Mary Lou Burde. "Although the company should have sufficient liquidity to fund its near-term operating and capital needs, improved operating results or additional funding will be needed to execute longer- term strategic initiatives." YOUTHSTREAM MEDIA: Losses & Deficit Trigger Going Concern Doubt --------------------------------------------------------------- YouthStream Media Neworks, Inc., has incurred recurring operating losses since its inception. As of September 30, 2004, the Company had an accumulated deficit of $343,834,000, a stockholders' deficiency of $13,065,000, a working capital deficiency of $3,453,000, and a net loss and negative cash flows from operating activities for the year ended September 30, 2004 of $2,366,000 and $901,000, respectively, and has insufficient capital to fund all of its obligations. In August and September 2002, the Company defaulted on approximately $18,000,000 of its long-term debt. In addition, during the year ended September 30, 2004, the Company sold its remaining operating business, as a result of which the Company did not have any revenue-generating business operations at September 30, 2004. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company's management intends to continue efforts to settle the Company's outstanding obligations and minimize operating costs. The Company believes that its current available cash resources will be adequate to fund its current limited level of operations through its fiscal year ended September 30, 2005. However, to the extent the Company's estimates and assumptions are inaccurate and the Company is unable to successfully settle outstanding obligations at reduced amounts, the Company may not have sufficient cash resources to fund its ongoing obligations. In such event, the Company may be required to seek other funding and consider a formal or informal restructuring or reorganization. Prior to August 2002, YouthStream Media Networks, Inc., had a media business and a retail business. The media segment represented the Company's media, marketing and promotional services provided to advertisers by Network Event Theater, Inc. and American Passage Media, Inc. In August 2002, the Company sold substantially all of the assets and certain liabilities from this segment to Cass Communications, Inc., a subsidiary of Alloy, Inc., for $7 million in cash. The Company discontinued any remaining media operations at that time. The retail segment consisted of on-campus, online and retail store poster sales provided by its Beyond the Wall subsidiary. In February 2004, the Company sold substantially all of the assets, subject to certain liabilities, of this segment and discontinued its operation. In July 2004, the Company entered into a letter of intent to acquire a steel mini-mill located in Ashland, Kentucky. If the Company is able to complete this transaction, the Company expects to utilize all, or most, of its available cash resources to fund such endeavor, and will therefore need to obtain additional operating capital to fund corporate general and administrative expenses either through internal or external resources. The Company's management may also consider various strategic alternatives in the future, including the acquisition of new business opportunities, which may be from related or unrelated parties. However, there can be no assurances that such efforts will ultimately be successful. The Company may finance any acquisitions through a combination of debt and/or equity securities. YUKOS OIL: Gets Court Nod to Deposit $21 Million in Court Registry ------------------------------------------------------------------ According to Zack A. Clement, Esq., at Fulbright & Jaworski, in Houston, Texas, Yukos Oil Company opened a bank account at Southwest Bank of Texas in the name of Yukos USA, Inc., and deposited into that account, cash owned by the Debtor to insure that the Debtor would have sufficient funds to operate: (i) the office of its chief financial officer; and (ii) in its Chapter 11 case, including paying professionals. Currently, the Southwest Account contains approximately $22 million of cash that is the Debtor's property. Pursuant to a January 12, 2005, stipulation, the Debtor has reached an agreement with the U.S. Trustee concerning a procedure to invest, in compliance with Section 345 of the Bankruptcy Code, the Estate Cash that is in the Southwest Account and in Fulbright & Jaworski's Trust Account at Wells Fargo Bank. However, the Debtor has concluded that it can protect its Estate Cash better by paying $21 million from the Southwest Account into the Registry of the Court in its own name. The Debtor recognizes that it will require a court order for any of the money to be removed from the Registry of the Court. The Debtor is prepared to accept that burden. Mr. Clement says that the Debtor want to ensure that no one has access to its Estate Cash except pursuant to Court order. Accordingly, the Debtor seeks the United States Bankruptcy Court for the Southern District of Texas's authority to transfer all Estate Cash in the Southwest Account except for $1 million into the Court Registry to be invested by the Clerk of the Court in compliance with the Court's investment guidelines, Section 345 and the U.S. Trustee Investment Guidelines. The Debtor will provide adequate notice to the Clerk of the Court of any subsequent cash deposit it makes into the Registry of the Court, and will promptly thereafter report any new deposit to the U.S. Trustee. Mr. Clement also notes that the Debtor, as a holding company, will not be paying a large volume of bills. Many of the Debtor's bills will be for professionals working for the estate, and those already are subject to Court approval. Small expenditures, made in the ordinary course, can be paid out of the $1 million Estate Cash in the Southwest Account. Deutsche Bank Objects On behalf of Deutsche Bank AG, Jeffrey E. Spiers, Esq., at Andrews Kurth, LLP, in Houston, Texas, argues that the Debtor has not provided any concrete justification for its request. The Debtor provides no description of the alleged impending harm that is threatening Yukos USA's funds in the Yukos USA account. Mr. Spiers notes that the Debtor has already worked out an agreed stipulation with the U.S. Trustee whereby Yukos USA would invest its cash in investments backed by the Full Faith and Credit of the U.S. Government and thereby in compliance with Section 345 of the Bankruptcy Code. Yukos USA has already invested the funds in compliance with the agreement with the U.S. Trustee and has no need to place the majority of the funds in the registry of the Court. Deutsche Bank does not believe that the Debtor's request and the stipulation with the U.S. Trustee are linked. The U.S. Trustee Stipulation is entirely separate and distinct. The only linkage between the two motions is the Debtor's attempt to have the Court make findings on issues germane to the Court's consideration of Deutsche Bank's Motion to Dismiss and prior to Deutsche Bank's opportunity to conduct discovery on these issues on a timetable agreed to by the Debtor. Deutsche Bank suggests that the Court defer ruling on the Debtor's request until after it has ruled on the Motion to Dismiss. In the event the Court is inclined to consider the Debtor's request, Deutsche Bank asks the Court to refrain from making any findings of fact or conclusions of law prejudicial to the full and fair development and presentation to the Court of these issues relevant to the pending Motion to Dismiss. * * * Judge Clark authorizes Yukos Oil Company and Yukos USA, Inc., to pay all but $1,000,000 of the Estate Cash in the Yukos USA Account into the Court Registry to be held in the name and ownership of Yukos Oil. Yukos Oil may make subsequent cash deposits into the Court Registry. Yukos Oil will provide adequate notice to the Clerk of the Court of any subsequent cash deposit it proposes to make and will promptly after new deposit is made report any deposit to the U.S. Trustee. Any withdrawal or payment of funds from the Court Registry may only be made pursuant to a Court Order. Headquartered in Houston, Texas, Yukos Oil Company -- http://www.yukos.com/-- is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. (Yukos Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) ZEMACH CORP: Taps Backenroth Frankel as Bankruptcy Counsel ---------------------------------------------------------- Zemach Corporation ask the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Backenroth Frankel & Krinsky, LLP, as its general bankruptcy counsel. Backenroth Frankel is expected to: a) provide the Debtor with legal counsel with respect to its powers and duties as a debtor-in possession in the continued operation of its business and management of its property during its chapter 11 case; b) prepare on behalf of the Debtor all necessary applications, answers, orders, reports, and other legal documents which may be required in connection with its chapter 11 case; c) provide the Debtor with legal services with respect to formulating and negotiating a plan of reorganization with creditors; and d) perform other legal services for the Debtor as may be required during the course of its chapter 11 case, including the institution of actions against third parties, objections to claims, and the defense of actions which may be brought by third parties against the Debtor. Mark A. Frankel, Esq., a Member at Backenroth Frankel, is the lead attorney for the Debtor. Mr. Frankel discloses that the Firm received a $15,000 retainer. Mr. Frankel will bill the Debtor $410 per hour for his services. Mr. Frankel reports Backenroth Frankel's professionals bill: Designation Hourly Rate ----------- ----------- Counsels $375 - $450 Paralegals $125 Backenroth Frankel assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Brooklyn, New York, Zemach Corporation filed for chapter 11 protection on February 3, 2005 (Bankr. S.D.N.Y. Case No. 05-10614). When the Debtor filed for protection from its creditors, it listed total assets of $13,602,000 and total debts of $7,024,889. ZEMACH CORP: Section 341(a) Meeting Slated for March 7 ------------------------------------------------------ The U.S. Trustee for Region 2 will convene a meeting of Zemach Corporation's creditors at 2:30 p.m., on March 7, 2005, at the Office of the U.S. Trustee, 80 Broad Street, Second Floor, New York City, New York 1004-1408. 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 Brooklyn, New York, Zemach Corporation filed for chapter 11 protection on February 3, 2005 (Bankr. S.D.N.Y. Case No. 05-10614). Mark A. Frankel, Esq., at Backenroth Frankel & Krinsky, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $13,602,000 and total debts of $7,024,889. * Sheppard Mullin Elects Five Attorneys to Partnership ------------------------------------------------------ Sheppard, Mullin, Richter & Hampton LLP has elevated five of its attorneys to partner. The five new partners are Jason Gasper, Roy Goldberg, Jonathan Hangartner, Amar Thakur and Carlo Van den Bosch. "Each of these attorneys embody the firm's commitment to excellent legal representation and client service and are strong additions to the partnership. We are very proud to have this exceptional group of attorneys as our partners," said Guy Halgren, chairman of the firm. Jason Gasper, 35, is in the firm's Labor and Employment Practice Group in the Los Angeles office. Mr. Gasper has significant experience representing employers in wage and hour class actions and regularly counsels employers on personnel policies and procedures, employee discipline matters, employment contracts, and wage and hour issues. He also conducts internal wage and hour audits to identify potential employer liability before it surfaces in a lawsuit or government audit. Mr. Gasper has lectured extensively on wage and hour law, and has also lectured on other topics, including sexual harassment, discrimination, and leave of absence issues. He received his J.D. from Georgetown University in 1996 and his undergraduate degree, cum laude, from University of California, Los Angeles in 1993. Roy Goldberg, 42, in the Business Trial Practice Group and based in the firm's Washington, D.C. office, has extensive experience in commercial and regulatory litigation before federal and state courts, government agencies and domestic and international arbitration panels. Mr. Goldberg's substantive areas of litigation include aviation matters, commercial contract disputes, construction disputes, challenges to government user fees and rules and regulations, intellectual property disputes, and international trade matters. Prior to joining the firm, he was a Law Clerk to The Honorable Jim R. Carrigan, United States District Court for District of Colorado. Mr. Goldberg received his law degree from the University of Colorado in 1987 and received his undergraduate degree from University of Kansas in 1984. Jonathan Hangartner, 40, is in the Intellectual Property Practice Group and based in San Diego. Mr. Hangartner represents clients in a variety of intellectual property, complex commercial litigation and international arbitration matters. He has served as lead trial and appellate counsel, successfully representing clients in litigation involving claims of patent, trademark and copyright infringement, misappropriation of trade secrets, unfair competition and antitrust violations in federal courts throughout California and in the Southern District of New York. Mr. Hangartner received his J.D., magna cum laude, from Pace University in 1994, where he served on the editorial board of the law review. He received a B.S. in Engineering Physics, cum laude, from Tufts University in 1987. Upon completion of his undergraduate studies, Mr. Hangartner worked as an engineer for the U.S. Environmental Protection Agency for four years before entering law school. After law school, he served as law clerk to United States District Judge Gerard L. Goettel in the U.S. District Court for the Southern District of New York. Amar Thakur, 35, in the firm's Intellectual Property Practice Group in the Del Mar Heights office, has extensive experience in corporate and intellectual property transactional matters, including acquisition and protection of intellectual property, technology transfer agreements, patent and software licensing transactions, research and development transactions, marketing, co-promotion and distribution agreements, professional services agreements, materials transfer agreements, and laboratory services agreements. He also has counseled established corporations on patent and trademark issues relevant to a focused intellectual property portfolio, and conducted intellectual property audits and analyses in furtherance of company mergers and acquisitions. Mr. Thakur received his J.D. from Arizona State University in 1995 and a B.S. in Electrical Engineering from University of Washington in 1992. Carlo Van den Bosch, 33, is a member of the firm's Intellectual Property Practice Group and based in the firm's Orange County office. Mr. Van den Bosch specializes in intellectual property litigation and transactions, with substantial expertise in high- tech, Internet, entertainment and media matters. He has extensive experience in matters of infringement and the protection of trademarks, inventions, works of authorship, and trade secrets across a variety of industries, such as e-commerce, software, television, healthcare, apparel, finance, real estate, and entertainment, among others. Prior to joining the firm, Mr. Van den Bosch held positions in both the software and motion picture industries. Mr. Van den Bosch received his J.D. from the University of Southern California in 1996 and a B.S. in Mechanical Engineering from University of California, Los Angeles in 1993. About Sheppard, Mullin, Richter & Hampton LLP Sheppard, Mullin, Richter & Hampton LLP -- http://www.sheppardmullin.com/-- is a full service AmLaw 100 firm with 430 attorneys in nine offices located throughout California and in New York and Washington, D.C. The firm's California offices are located in Los Angeles, San Francisco, Santa Barbara, Century City, Orange County, Del Mar Heights and San Diego. Sheppard Mullin provides legal expertise and counsel to U.S. and international clients in a wide range of practice areas, including Antitrust, Corporate and Securities; Entertainment and Media; Finance and Bankruptcy; Government Contracts; Intellectual Property; Labor and Employment; Litigation; Real Estate/Land Use; Tax, Employee Benefits, Trusts and Estate Planning; and White Collar Defense. The firm was founded in 1927. ********* 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. 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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 ***