/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050321.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, March 21, 2005, Vol. 9, No. 67 Headlines AAIPHARMA INC: Says Chapter 11 Filing is Highly Likely AAIPHARMA INC: Possible Payment Default Cues S&P to Lower Ratings A.B. DICK: Sets May Confirmation Hearing in Solicitation Protocol ACANDS INC: Gets Court Nod to Expand Beard Miller's Services ACANDS: Wants Until June 20 to File a Chapter 11 Plan ADELPHIA COMMS: Sells Three Lots & 254 Vehicles For $679,343 AIR CARGO: Creditors Committee Hires Whiteford Taylor as Counsel AMERICAN BUSINESS: Clarifies Accrued Interest Reporting with IRS AMERICAN LAWYER: Improved Capital Structure Cues S&P to Up Ratings AMERICAN TIRE: Moody's Assigns Caa2 Ratings to $330 Million Notes AMR CORP: Fitch Affirms Junk Rating on Senior Unsecured Debt ANCHOR GLASS: S&P Chips Rating to B- Owing to Poor Performance ARMSTRONG WORLD: Discloses '05 Target Bonus & Incentives for Execs ATA AIRLINES: Wants to Reject Orlando Airport Lease AXLE MERGER: Moody's Junks Planned $150M Senior Subordinated Notes BANC OF AMERICA: Fitch Puts Low-B Ratings on Two 2005-BOCA Loans BORDEN CHEMICAL: Dec. 31 Balance Sheet Upside-Down by $548.8 Mil. BRIDGEWATER SPORTS: Asks Court to Close Chapter 11 Case CATHOLIC CHURCH: Ct. Denies Hamilton Rabinovitz's Hiring in Tucson COMMERCE ONE: Has Until April 4 to File Plan of Reorganization CREDIT SUISSE: Fitch Downgrades Six 2002-TFL1 Mortgage Certs. CREDIT SUISSE: Fitch Assigns Low-B Ratings to Six Mortgage Certs. CYGNUS INC: Warns of Possible Bankruptcy Filing in Form 10-K DELOREAN MOTOR: Founder, John DeLorean, Dies at Age 80 EDISON MISSION: S&P Lifts Mission Energy's Bond Rating to CCC+ EDISON MISSION: S&P Lifts Rating on Senior Unsecured Bonds to B+ FIRST UNION: Moody's Junks Three Certificate Classes FLOWSERVE CORP: Gets Lenders' Okay to Call & Prepay 12.25% Notes G-STAR: Fitch Rates $35 Million Income Notes Due 2040 at BB GADZOOKS INC: Forever 21 Subsidiary Consummates Asset Acquisition GLOBE METALLURGICAL: Creditor Trustee Wants Case Closure Delayed HOMER CITY: S&P Affirms BB Ratings on $830M Bonds After Review INSURANCE AUTO: S&P Junks Proposed $150 Million Senior Sub. Notes INTEGRATED HEALTH: Distribution Sent to Class 6 Cash-Out Claimants INTERCELL INT'L: Files for Chapter 11 Protection in Colorado INTERCELL INT'L: Case Summary & 20 Largest Unsecured Creditors INTERNATIONAL COAL: Names Ben Hatfield President & CEO IRVING TANNING: Files for Chapter 11 Protection in Maine IRVING TANNING: Case Summary & 20 Largest Unsecured Creditors JP MORGAN: Fitch Affirms BB Rating on $16.3 Million Class G Certs. JP MORGAN: Fitch Affirms B Rating on $10.7 Million Class G Certs. KMART: Sears Shareholders Have Until Thursday to Vote on Merger KMART HOLDING: Enters into Separation Agreement with Harold Lueken LIBERTY MEDIA: S&P Pares Ratings on Five Bond-Backed Cert. Classes LODGENET ENT: Moody's Ups Ratings on $225M Sr. Sec. Debts to Ba1 MAXXAM INC: Annual Report Contains Bankruptcy Warning MCI INC: Qwest Merger May Lead to Liquidity Crisis, Report Says MCI INC: Qwest's Offer is Desperate, Verizon CEO Says METACHEM PRODUCTS: Court Formally Closes Bankruptcy Case MIDWEST GENERATION: S&P Lifts Credit Rating to B+ After Review MIIX GROUP: Creditors Must File Proofs of Claim by April 25 MIRANT CORPORATION: Valuation Hearing Starts on April 11 MUTUAL OIL: Case Summary & 20 Largest Unsecured Creditors NAVARRE CORP: S&P Puts B+ Rating on Planned $125M Sr. Unsec. Notes NEXSTAR BROADCASTING: S&P Rates New $455M Sr. Sec. Loans at B+ NETWORK INSTALLATION: Names Michael Rosenthal as New CFO NEXMED INC: Losses & Deficit Trigger Going Concern Uncertainty NUTRAQUEST INC: Comm. Hires Montgomery McCracken to Recover Assets OWENS CORNING: Garrison Says Asbestos PD Claim is Not Time Barred OXFORD AUTOMOTIVE: Judge Rhodes Confirms Second Amended Plan PACIFIC GAS: Wants Court to Reduce Class 6 Escrow by $86 Million PANAMSAT HOLDING: Moody's Lifts Rating on $250M Sr. Notes to B3 PARMALAT USA: Wants Until June 30 to Decide on Atlanta Contracts PROTECTION ONE: Moody's Puts B2 Rating on Proposed $275M Facility PROTECTION ONE: Debt Restructuring Prompts S&P to Upgrade Ratings PROXIM CORP: PwC Says Losses & Deficit Trigger Going Concern Doubt QWEST COMMS: Increases MCI Offer to $8.45 Billion QWEST COMMS: MCI Merger May Lead to Liquidity Crisis, Report Says RAYOVAC CORP.: Moody's Reviews Low-B Ratings & May Downgrade REEVES COUNTY: Debt Restructuring Cues S&P to Up Rating to BBB- RELIANCE GROUP: Gets Court OK to Sell Lot to Greenway for $33.2M REVLON CONSUMER: Completes $310 Million Sr. Debt Offering SEABULK INT'L: Moody's Reviews Low-B Ratings for Possible Upgrade SEABULK INT'L: S&P May Lift Credit B+ Rating After SEACOR Merger SEACOR HOLDINGS: Moody's Reviews Ratings for Possible Downgrade SEARS: Shareholders Have Until Thursday to Vote on KMART Merger SIMSBURY CLO: Fitch Junks Two Mezzanine Classes & Sub. Notes SOLUTIA INC: Has Until July 11 to File Plan of Reorganization SOLUTIA INC: Names Jonathon Wright & James Voss as New SVP SPIEGEL INC: Asks Court to Set Confirmation Hearing for May 17 SPIEGEL INC: Wants Court to Fix Solicitation & Voting Procedures SUBURBAN PROPANE: S&P Puts B Rating on $250M Senior Unsec. Notes SUNSTATE EQUIPMENT: S&P Junks $175 Mil. Senior Secured Notes TORCH OFFSHORE: Taps Bridge Associates as Restructuring Advisors TOUCH AMERICA: Plan Trustee Has Until June 3 to Object to Claims TOYS 'R' US: Bain, KKR & Vornado Buying Retailer for $6.6 Billion TOYS 'R' US: Fitch May Downgrade Rating Due to Kohlberg Sale TOYS 'R' US: Moody's Reviews Low-B Ratings for Possible Downgrade TRIANGLE MACHINE: Case Summary & 20 Largest Unsecured Creditors TROPICAL SPORTSWEAR: Taps Alvarez & Marsal as Financial Advisors UAL CORP: Wants to Walk Away From Three Boeing Aircraft Leases VARTEC TELECOM: Court Okays DeSoto Asset Sale to Regional Mgt. VENTURE HOLDINGS: Taps Rothschild Inc. as Investment Bankers WEIRTON STEEL: Trustee Wants Until April 15 to Object to Claims WEIRTON STEEL: Trust Wants to Sell L/C Refund Right to Fletcher WELLS FARGO: Fitch Places Low-B Ratings on Two Mortgage Certs. WESTCHESTER COUNTY: S&P Pares $113M Sr.-Lien Bond Rating to B WINN-DIXIE: Buffalo Rock Wants to Transfer Cases to Florida WINN-DIXIE: Court Gives Final Nod on $800 Million DIP Financing WINN-DIXIE: Wants to Employ Togut Segal as Conflicts Counsel WORLDCOM INC: Asks Court for Final Decree Closing 220 Cases WORLDCOM INC: Objects to Michael Jordan's $8 Million Claim YUKOS OIL: Judge Atlas Denies Stay Pending Appeal on Dismissal * WL Ross & Sumitomo Mitsui Create $300 Mil. DIP Financing Program * BOND PRICING: For the week of March 14 - March 18, 2005 ********* AAIPHARMA INC: Says Chapter 11 Filing is Highly Likely ------------------------------------------------------ aaiPharma Inc. (NASDAQ: AAII) says it can't file its 2004 Annual Report on time and is no longer in compliance with conditions for the continued listing of the Company's common stock on the Nasdaq Stock Market under Nasdaq Marketplace Rule 4310(c)(14) and under the terms of a June 2004 decision of a Nasdaq Listing Qualifications Panel that permitted continued listing of the Company's common stock. The Company has notified Nasdaq of its violation of these conditions and has requested that its common stock be permitted to continue to be listed on the Nasdaq Stock Market if the Company files its 2004 Form 10-K by April 30, 2005. April 30, 2005 is the extended deadline that would have been applicable to the Company's filing of management's assessment of internal control over financial reporting and the related attestation report of its independent registered public accountants under an SEC order issued in November 2004 and applicable to smaller issuers like the Company if the Company were to have filed its 2004 Form 10-K by March 16, 2005. As indicated in the Company's Notification of Late Filing, delay in the completion of management's assessment of internal control is a critical reason preventing the Company from timely filing its 2004 Form 10-K. Notwithstanding the request to Nasdaq, Nasdaq may determine to immediately suspend trading and cease listing of the Company's common stock. aaiPharma anticipates reporting $218 million in 2004 revenues and a $172 million net loss. This compares to a $32 million net loss on $236 million of revenue in 2003. "Our consolidated net revenues for 2004 decreased from 2003 as a result of a significant decrease in pharmaceutical product sales," the company said last week. "The decrease resulted from decreased sales volumes in our Darvon/Darvocet and Brethine product lines, which were affected by the amount of inventory previously sold into the wholesale channel, as well as the divestiture of our M.V.I. product lines in April 2004, as partially offset by contributions from our Roxicodone and Oramorph product lines, which were acquired in December 2003." Liquidity Problems aaiPharma does not anticipate it will have available sufficient cash on hand, or the ability to borrow under our senior credit facilities, to pay the approximately $10.5 million of scheduled interest due on April 1, 2005 on our $175 million 11.5% Senior Subordinated Notes due 2010. The company also fears it may not have adequate sources of liquidity to fund operations in the near term unless it obtains additional sources of liquidity. "We are unable to make all representations required to be made as a condition to borrowing any of the remaining $3.45 million available under the revolving credit portion of our senior credit facilities," the Company disclosed last week. "We are seeking to obtain waivers from the lenders under our senior credit facilities to permit us to borrow the remaining available amount notwithstanding our inability to make the required representations." Unless the company obtains a waiver or modification of various covenants in its senior credit facilities, an event of default will exist under those senior credit facilities at March 31, 2005 that would permit the acceleration of the $175.5 million of debt under those facilities. Acceleration of those facilities would entitle the holders of the Notes to accelerate as well. Rothschild Can't Find a Buyer The Company has been exploring a potential sale of some or all of the assets of its Pharmaceuticals Division, as well as other operating assets. In October 2004, aaiPharma engaged Rothschild Inc. to help, and in November 2004 Rothschild began a process to gauge the interest in any asset sale transaction by contacting potential strategic and financial purchasers. Potential purchasers expressing an interest were provided an opportunity to examine detailed information regarding the Pharmaceuticals Division, its business, products and products in development. "Although we continue to engage in discussions with a limited number of potential purchasers of assets of our Pharmaceuticals Division," the Company says, "we have not received a proposal for a material asset sale that has been acceptable to us." FTI Helping in Lender & Noteholder Talks "In light of our current financial condition," the Company relates, "we believe that our operations can no longer support our existing debt and that we must restructure our debt to levels that are more in line with our operations. We have also recognized the need to improve our liquidity. As a result, we are exploring all of our alternatives and have continued our engagement of FTI Consulting, Inc. as our financial advisor to assist us in these efforts." "With FTI, we have recently held preliminary discussions with Lenders under our senior credit facilities and advisors to an ad hoc committee of holders of our Notes in an effort to negotiate a consensual restructuring of our debt. Although we are seeking to negotiate a consensual restructuring with certain creditor constituents, none of the parties have agreed to the terms of any restructuring and we can provide no assurance that we will be able to reach an agreement with these creditors. In addition, we have recently held preliminary discussions with alternative lending groups to seek to obtain financing sufficient to refinance indebtedness outstanding under the senior credit facilities and/or to provide additional credit facilities in order to fund our operations while in a chapter 11 proceeding under the U.S. Bankruptcy Code if we were to commence such a proceeding; however, we can provide no assurance that we will be able to obtain such financing." Chapter 11 Highly Likely "Whether or not we are able to reach an agreement on the terms of a restructuring of our debt, in light of the uncertainty regarding our ability to obtain needed additional sources of liquidity to fund operations, it is highly likely that it will become necessary for us to seek relief under chapter 11 of the U.S. Bankruptcy Code. In the event of any restructuring of our debt, the interests of the holders of our common stock may be substantially diluted or eliminated." About aaiPharma aaiPharma Inc. -- http://www.aaipharma.com-- is a science-based company with corporate headquarters in Wilmington, North Carolina with over 25 years experience in drug development. The company also sells branded pharmaceutical products, including the Darvon(R) and Darvocet(R) product lines, primarily in the area of pain management. AAIPHARMA INC: Possible Payment Default Cues S&P to Lower Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on specialty pharmaceutical company aaiPharma, Inc., to 'CC', from 'CCC'. The subordinated debt rating was lowered to 'C' from 'CC'. At the same time, the ratings were placed on CreditWatch with negative implications. "The company indicates in its recent Form 8-K filing that it may not be able to make a $10.5 million scheduled interest payment on its $175 million, 11.5% senior subordinated notes due 2010," said Standard & Poor's credit analyst Arthur Wong. The due date for the interest payment is April 1, 2005. The company does not currently have any access to its revolving credit facility under its senior credit facility, and it also continues to incur substantial losses from operations. Furthermore, we believe that aaiPharma does not have the liquidity to fund its ongoing operations. aaiPharma needs to obtain waivers from its senior credit facility lenders in order to increase its borrowings or gain access to other sources of liquidity. The company has been seeking to sell its pharmaceutical assets since November 2004, however, no acceptable offers have yet been received. Standard & Poor's will continue to monitor the developing situation. The ratings will be lowered to 'D' if the interest payment is not made by the due date on April 1. A.B. DICK: Sets May Confirmation Hearing in Solicitation Protocol ----------------------------------------------------------------- A.B. Dick Company n/k/a Blake of Chicago, Corp., and its debtor-affiliate, Paragon Corporate Holdings, Inc., want the U.S. Bankruptcy Court for the District of Delaware to set a hearing to confirm their chapter 11 plan sometime in May. As reported in the Troubled Company Reporter on Feb. 22, 2005, the Debtors delivered their Liquidating Plan of Reorganization and an accompanying Disclosure Statement explaining that Plan to the U.S. Bankruptcy Court for the District of Delaware on Feb. 10, 2005. The Plan provides for the transfer of the Debtors' cash and other remaining assets, including all causes of action and avoidance claims, to liquidating trusts that will be formed for the benefit of holders of unsecured claims and subordinated claims. The Blake Liquidating Trust will be set-up to handle claims against Blake of Chicago. The Paragon Liquidating Trust will be set-up to handle claims against Paragon Corporate Holdings, Inc. The Debtors laid out proposed schedules and procedures in its request to approve solicitation procedures. They currently have the exclusive right to solicit acceptances for their Liquidating Plan until April 10, 2005. The Court has not yet approved the Disclosure Statement and has not yet authorized the Debtors use it to solicit acceptances for the Liquidating Plan. Headquartered in Niles, Illinois, A.B. Dick Company -- http://www.abdick.com/-- is a global supplier to the graphic arts and printing industry, manufacturing and marketing equipment and supplies for the global quick print and small commercial printing markets. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Del. Case No. 04-12002) on July 13, 2004. Frederick B. Rosner, Esq., at Jaspan Schlesinger Hoffman, LLP, and H. Jeffrey Schwartz, Esq., at Benesch, Friedlander, Coplan & Aronoff, LLP, represent the Debtors in their restructuring efforts. Richard J. Mason, Esq., at McGuireWoods, LLP, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed over $50 million in estimated assets and over $100 million in estimated liabilities. A.B. Dick Company changed its name to Blake of Chicago, Corp., in Dec. 8, 2004, as required by the terms of the APA with Presstek. ACANDS INC: Gets Court Nod to Expand Beard Miller's Services ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware authorizes ACandS, Inc., to expand the scope of services provided by Beard Miller Company LLP. Beard Miller has previously been authorized to perform services for the Debtor in connection with its 2002 and 2003 audits. ACandS wants Beard Miller to provide continuing audit services. Beard Miller will: a) perform a year-end audit and report on the financial statements of the Debtor for the year ending Dec. 31, 2004, and for each subsequent complete calendar year until the Debtor's bankruptcy case is concluded; and b) continue to advise the Debtor on general accounting or tax matters. Beard Miller will charge the Debtor $15,000 plus direct expenses. The Firm has not received a retainer in connection with postpetition services rendered to the Debtor. Beard Miller assures the Court that it does not represent any interest adverse to the Debtor or its estate as that term is defined under Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). Headquartered in Lancaster, Pennsylvania, ACandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002, (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million. ACANDS: Wants Until June 20 to File a Chapter 11 Plan ----------------------------------------------------- ACandS, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to extend its exclusive periods to file a plan of reorganization and solicit acceptances of that plan. ACandS thinks it can formulate a viable plan by June 20, 2005. ACandS asks the Court to extend its exclusive solicitation period through August 24. ACandS needs more time to negotiate an acceptable plan and to prepare adequate financial and non-financial information for disclosure to creditors. The Debtor assures the Court that no creditor will be prejudiced by this extension. Headquartered in Lancaster, Pennsylvania, ACandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002, (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million. ADELPHIA COMMS: Sells Three Lots & 254 Vehicles For $679,343 ------------------------------------------------------------ Pursuant to the procedures in selling excess assets approved by the U.S. Bankruptcy Court for the Southern District of New York, Adelphia Communications Corporation and its debtor-affiliates inform Judge Gerber that they will sell these properties for $679,343: 1. Property: Real property at 34 Hillcrest Drive, Coudersport, PA Purchaser: Douglas and Jennifer McClintic Agent: Trail's End Realty Amount: $205,000 Deposit: $1,000 Appraised Value: $60,000 2. Property: Real property at 105 South East Street, Coudersport, PA Purchaser: Hendorn, Inc. Agent: God's Country Real Estate Amount: $92,000 Deposit: $1,000 Appraised Value: $92,000 3. Property: Real property at 38 Hillcrest Drive, Coudersport, PA Purchaser: Kenneth and Susan Leiberman Agent: Four Real Estate, Inc. Amount: $193,000 Deposit: $1,000 Appraised Value: $193,000 4. Property: A vehicle Purchaser: GEICO Insurance Agent: God's Country Real Estate Amount: $4,930 Deposit: none Appraised Value: no appraisal was made 5. Property: 66 vehicles Purchaser: State Line Auto Auction Agent: none Amount: $65,400 Deposit: none Appraised Value: no appraisal on was made 6. Property: 140 vehicles Purchaser: Asset Disposal Group Agent: none Amount: $99,913 Deposit: none Appraised Value: no appraisal was conducted 7. Property: 46 vehicles Purchaser: Old Forge Auto Exchange Agent: none Amount: $16,000 Deposit: none Appraised Value: no appraisal was conducted 8. Property: a vehicle Purchaser: Ray Dravesky Agent: none Amount: $3,100 Deposit: none Appraised Value: no appraisal was made Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 82; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CARGO: Creditors Committee Hires Whiteford Taylor as Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Air Cargo, Inc., sought and obtained permission from the U.S. Bankruptcy Court for the District of Maryland, Baltimore Division, to retain Whiteford, Taylor & Preston L.L.P. as its counsel. Whiteford Taylor will: a) advise the Committee with respect to its powers and duties; b) prepare any necessary applications, motions, pleadings, orders, reports and other legal papers, and appear on the Committee's behalf in proceedings instituted by, against, or involving the Debtor and the Committee; c) assist the Committee in the investigation of the acts, liabilities and financial condition of the Debtor, its assets and liabilities and business operations, the disposition of the Debtor's assets and any other matters relevant to this case; d) assist the Committee in coordinating its efforts to maximize distributions to unsecured creditors; and e) perform legal services for the Committee as may be necessary or desirable in the interests of the unsecured creditors. Whiteford Taylor will coordinate with other professionals that the Committee will employ so as to avoid duplication of services. Martin T. Fletcher, Esq., a partner at Whiteford Taylor, discloses that his Firm's professionals' current billing rates range from $140 to $450 per hour. To the best of the Committee's knowledge, Whiteford Taylor doesn't have any interest materially adverse to the Debtor and its estate. Headquartered in Annapolis, Maryland, Air Cargo, Inc., provides contract management, freight bill auditing and consolidated freight invoicing and payment services for wholesale cargo customers. The Company filed for chapter 11 protection on Dec. 7, 2004 (Bankr. D. Md. Case No. 04-37512). Alan M. Grochal, Esq., at Tydings & Rosenberg, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $16,300,000 and total debts of $17,900,000. AMERICAN BUSINESS: Clarifies Accrued Interest Reporting with IRS ---------------------------------------------------------------- American Business Financial Services, Inc., posted an open letter to all of its subordinated debt investors on the Company web site -- http://www.abfsonline.com/-- to clarify the 1099 forms for the 2004 tax year that the Company recently sent out to its investors: Dear ABFS Noteholder, Recently ABFS sent out 1099 forms for the 2004 tax year to all subordinated debt investors, and we are aware that there is some confusion about how the Company treated accrued interest. We want to communicate directly with you regarding this issue and give you some background information to help you understand why certain investment interest was reported to the IRS. Unfortunately, like many other issues involving federal tax law, the explanation is somewhat technical and complicated, but we nonetheless felt it was important to try to address any questions you may have. The practical effect of the Internal Revenue Code is that debt instruments (ABFS investment and money market notes are types of debt instruments) which give investors the option to choose how interest earned is to be paid to investors (e.g., monthly, quarterly, annually or reinvested in the form of additional notes) are generally considered as having "original issue discount" (OID) for federal income tax purposes. Federal tax law requires any company that issues debt instruments with OID to report to the IRS the amount of the interest accrued on the debt instruments rather than the amount of interest paid. As you may know, all ABFS fixed term notes give the individual investor the option to decide how interest is to be paid. As a result, we were required to report to the IRS the amount of interest earned (OID) during the tax year regardless of whether the full amount of the interest earned had been actually paid to the noteholder. We regret the fact that the requirements of the Internal Revenue Code have resulted in what might seem like unfair treatment of certain noteholders. We also regret any confusion or frustration this issue may have caused you. However, we were bound by federal tax law to act in the manner we did. If you have additional questions regarding your 1099 form, we recommend that you consult with your own tax advisor. You should also feel free to call the IRS toll free tax assistance line at 1-800-829-1040. Sincerely, American Business Financial Services, Inc. March 17, 2005 Headquartered in Philadelphia, Pennsylvania, American Business Financial Services, Inc., together with its subsidiaries, is a financial services organization operating mainly in the eastern and central portions of the United States and California. The Company originates, sells and services home mortgage loans through its principal direct and indirect subsidiaries. The Company, along with four of its subsidiaries, filed for chapter 11 protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203). Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,083,396,000 in total assets and $1,071,537,000 in total debts. (American Business Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICAN LAWYER: Improved Capital Structure Cues S&P to Up Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit ratings on American Lawyer Media Holdings, Inc., and on its operating subsidiary, American Lawyer Media, Inc., which are analyzed on a consolidated basis, to 'B-'from 'CCC' and removed these ratings from CreditWatch, where they were placed on Feb. 3, 2005, with positive implications. The outlook is stable. Consolidated debt is about $302 million. "The upgrade is based on the improvement in the company's capital structure following the refinancing of the company's debt, and the moderate profit potential of two recent acquisitions," said Standard & Poor's credit analyst Steve Wilkinson. These transactions, consistent with Standard & Poor's expectations, improved American Lawyer's margin of compliance with its bank covenants; they also lowered its cash interest payments by refinancing high-yield debt with bank debt and new discount notes that do not require cash interest payments for four years. However, these benefits may be only temporary because the floating-rate bank debt will be exposed to rising interest rates, financial covenants will gradually tighten, and the new discount notes will require cash interest payments in early 2009. Rating stability relies on expectations for gradually improving EBITDA and key credit measures. The rating could be easily destabilized if American Lawyer does not gradually build its discretionary cash flow to meet the onset of cash interest payments on the new discount notes in early 2009, if operating momentum reverses, if its margin of covenant compliance narrows, or if debt-financed acquisitions keep financial risk elevated. The potential for a positive outlook, which Standard & Poor's views as a longer term development, depends on the company's ability to increase EBITDA and improve key credit ratios. American Lawyer maintains a niche position in legal publishing and related products. AMERICAN TIRE: Moody's Assigns Caa2 Ratings to $330 Million Notes ----------------------------------------------------------------- Moody's Investors Service assigned Caa2 ratings to the $130 million seven-year senior unsecured floating rate notes and the $200 million senior unsecured eight year fixed rate notes being issued by American Tire Distributors, Inc., in connection with Investcorp S.A.'s acquisition of the company from Charlesbank Capital Partners. The senior implied rating is B3. The senior implied rating reflects the relative stability of replacement tire shipments, favorable trends in underlying demand, and ATD's diverse geographic footprint across several major regional markets. The rating also incorporates the strength of the company's business model, certain scale and operating efficiencies, its recent track record of profitability, and continued prospects for free cash flow generation in its wholesale business. However, the rating also incorporates the high financial leverage involved in the transaction, ATD's dependence upon a limited number of tire manufacturers/suppliers, uncertainties associated with a strategy which will likely involve future acquisitions, and the characteristically low profit margins associated with distribution businesses. The ratings on the unsecured notes reflect their junior status to a $300 million asset backed revolving credit, which will not be rated, and their prospective low recovery rates in a downside scenario. The speculative grade liquidity rating is SGL-2. The rating outlook is stable. ATD was formerly Heafner Tire Group. Moody's had withdrawn the ratings of Heafner Tire Group in November 2003 following a significant refinancing. These ratings have been assigned: * Senior Implied -- B3 * $130 million of senior unsecured floating rate notes due in 2012 -- Caa2 * $200 million of senior unsecured fixed rate notes due in 2013 -- Caa2 * Issuer rating -- Caa2 * Speculative Grade Liquidity rating -- SGL-2 ATD is the largest wholesale distributor of replacement tires in the United States, and sells 11 of the 12 leading tire brands, several associate and private label brands, custom wheels and tire service equipment, tools and supplies. The acquisition is being valued at approximately $710 million prior to fees and expenses. The senior unsecured notes will be issued under Rule 144A of the Securities Act with registration rights. ATD is the principal operating entity in the corporate structure, but it also has several existing distributor subsidiaries who, in addition to future material subsidiaries, will serve as guarantors of the notes. ATD will have a $300 million asset backed five-year revolving credit facility with availability subject to a borrowing base. At the closing of the transaction approximately $165 million is expected to be drawn under this facility and about $61 million will be available under the borrowing base calculation. The asset backed revolver will have a first lien over the borrower's and its guaranteeing subsidiary's working capital and substantially all other assets, excluding real property, as well as a guarantee from ATD's parent, American Tire Distributors Holdings, Inc. The Holdings guarantee will be secured by the shares in ATD. Holdings will also have limited amounts of preferred stock from third party investors. These consist of a $20 million PIK issue maturing in 2015, and Series B preferred shares from a major tire vendor due in 2007. Series B preferred stock does not carry a cash dividend, and its principal amount due at maturity can be reduced by the volume of tires purchased, but would not exceed its carrying value of $4 million. Challenges the company will face include: * high financial leverage employed in its capital structure; * non-exclusive and competitive nature of its distributive function (competitors carry the same product, and tire manufacturers,subject to economics, may sell direct into the channels); * dependency upon a limited number of supplier relationships (three suppliers accounted for 71.5% of tire products sold in 2004), and modest operating profit margins in the 4% range. In addition the company will need to manage incremental working capital requirements driven by the rising number of SKUs, fundamental demand growth and anticipated increases in tire prices. ATD's balance sheet will also include substantial amounts of intangible assets which results in a sizable negative tangible net worth. Going forward, ATD's strategy will likely include additional acquisitions, which could introduce incremental challenges, add to financial leverage, and limit availability under its revolving credit. The level of fixed charges will increase as a result of the elevated leverage deployed in the capital structure. Given the level of fixed costs involved in a distribution model, this may add to the volatility of free cash flow generation should sales volume, margins or working capital metrics deteriorate. The company will also be exposed to rising interest rates given the variable rate component in its debt capital. ATD's strengths include: its position as the largest distributor in the $24 billion domestic replacement tire market; benefits this scale provides in operating efficiencies, breadth of product offering, scope to invest in customer service capabilities and technology infrastructure, and favorable trends expected in underlying demand (circa 2.5% p.a. growth). The company offers a wide range of products including tires from major manufacturers (tires are roughly 87% of revenue), custom wheels, and related tire equipment and supplies. ATD has an experienced management team which will continue as investors and has successfully integrated previous wholesale acquisitions. In addition it enjoys geographic diversity and has a diverse customer base, with no customer representing more than 2% of sales. Further, the share of replacement tire demand fulfilled by independent dealers, ATD's largest channel, is viewed as stable. The company sells into all channels except mass merchandisers. Its collection of major brand named products, custom wheels, and related equipment and supplies positions it well in its value proposition to customers, while its scale and multi-region capabilities make it attractive to tire manufacturers. Although the company operates on relatively modest distributor margins, its profitability is stable and its business model does not require significant capital expenditures. Consequently, free cash flow generation is expected to continue and grow in line with the business after some initial stepped-up infrastructure investments. The stable outlook anticipates that growth in replacement tire demand will continue and that ATD will maintain a sound business model and competitive position. The company should be able to continue offering an attractive value proposition to both customers and suppliers as the breadth of SKUs expands. In addition the diversity of it customer channels and broad geographic footprint should enhance the stability of margins and free cash flow generation. Factors that could lead to favorable ratings developments include application of free cash flow to debt reduction such that total adjusted debt/EBITDAR would fall closer to 5 times or below, a sustained increase in EBIT margins towards 5% and which lifts EBIT/I coverage above 2 times, and free cash flow generation to total adjusted debt at or above 5%. Conversely, the loss of a major supplier relationship, a deterioration in operating margins and cash flow, or a debt financed acquisition which raises total adjusted debt/EBITDAR closer to 8 times would be considered negative developments. ATD's total adjusted debt/EBITDAR, including the present value of operating leases, letters of credit and continuing guarantees, will be close to 7 times. Pro forma free cash flow to total adjusted debt will be roughly 4%, and pro forma EBIT/Interest coverage will be less than 1.5 times. After some initial incremental infrastructure investment, free cash flow is expected to increase in subsequent years but can be impacted by working capital requirements. Although the initial capital investment by Investcorp, management, and PIK preferred stock investors will be approximately $240 million, substantial goodwill and other intangibles will be created in the transaction. Initial tangible net worth is expected to be negative at roughly ($377) million. The combination of qualitative and quantitative measurements positions the senior implied rating at the B3 level. The company's asset backed facilities will have a priority first lien against the significant working capital assets at ATD and the guaranteeing subsidiaries, and substantially all other assets except a modest amount of real property. At the closing, outstandings under this facility will represent approximately 33% of the total balance sheet debt and 24% of total adjusted debt. Certain trade creditors also have $37 million of liens, which are subordinated to the claims of the revolver. Total unsecured debt will aggregate some 65% of total balance sheet debt, but 47% of total adjusted debt (inclusive of the present value of operating leases). The senior unsecured notes will have approximately $241 million of junior capital beneath them at closing. Although this is a significant amount of cushion the senior unsecured notes have been assigned a Caa2 rating, two notches below the senior implied rating. This results from their effective subordination to the priority claims of the revolver and secured trade creditors with respect to tangible assets, heightened exposure to more volatile enterprise values, uncertainties which may arise in a strategy likely to involve acquisitions, and potential for limited recovery in the event of default. Further, the position of the unsecured notes will be behind certain secured payables and pari pasu with significant amounts of other trade creditors. The structure of an asset-based revolver may limit flexibility to fund operating losses should insufficient eligible assets be available to support incremental borrowings. The SGL-2 rating reflects adequate initial liquidity. Internal cash flow, which has some seasonality to it, is expected to cover working capital and capital expenditure needs in the first year. Historically the company has been able to operate on relatively minimal cash balances. External liquidity comes from availability under its asset backed revolver and is subject to a borrowing base. Initially this is expected to provide scope for a further $61 million of borrowings after the initial draw of $165 million. Growth in underlying working capital assets would be required to fully access the remainder of the $300 million commitment. This was considered sufficient for a company of ATD's size and level of ongoing capital expenditures. The company will not be limited by financial covenants until defined "excess availability" under the revolver is less than $25 million, at which time a defined fixed charge coverage ratio of 1 to 1 will apply. As availability under the revolver is expected to increase over the next twelve months, this structure provides meaningful headroom from a financial covenant perspective. Alternate liquidity is limited given the extent of the collateral provided to first lien creditors. American Tire Distributors is a leading nationwide distributor of tires, wheels and automotive accessories with a network of 71 distribution centers. The company had revenues of approximately $1.3 billion in 2004, 1,900 employees, and is headquartered in Huntersville, North Carolina. AMR CORP: Fitch Affirms Junk Rating on Senior Unsecured Debt ------------------------------------------------------------ Fitch Ratings has affirmed the senior unsecured debt rating of AMR Corp. and its principal operating subsidiary American Airlines, Inc., at 'CCC+'. Fitch has also assigned a rating of 'B-' to the company's amended $850 million senior secured credit facility. The Rating Outlook for AMR and American has been revised to Negative from Stable. The 'CCC+' senior unsecured rating reflects American's continuing exposure to intense cash flow pressures and liquidity concerns in an airline industry operating environment that has become more difficult as a result of very high jet fuel prices and persistent domestic overcapacity. In spite of the progress made in 2003 to overhaul collective bargaining agreements and bring AMR's unit labor costs down to the low end of the legacy carrier group, losses continued in 2004 as the carrier faced approximately $1.1 billion in annual fuel cost pressures versus that of the prior year. With jet fuel prices still above $1.50 per gallon on the spot market and only a small amount of hedging in place for 2005, American again faces extreme cost challenges this year. At the same time, domestic passenger yields are unlikely to recover in 2005 in light of big capacity additions being made by low-cost carriers -- LCCs -- in domestic markets already saturated with low-cost seats. The change in the Rating Outlook to Negative reflects Fitch's expectation that large operating losses this year will lead to heightened liquidity pressures moving into 2006, particularly in the event that jet fuel prices remain near current levels. Weak operating cash flow generation in a high fuel cost scenario, together with heavy scheduled debt maturities and pension funding requirements, will likely lead the company to seek other opportunities to raise cash balances by year-end. A sustained high fuel price scenario in 2005 (i.e. average full- year crude oil prices of $50 per barrel) could translate into incremental fuel expense pressure of approximately $900 million over the 2004 consolidated fuel expense figure of $3.96 billion. Beyond the first quarter, during which American has 15% of fuel deliveries hedged, no significant hedging position is in place for the remainder of the year. Fitch estimates that a $1 change in the price of crude oil translates into an $80 million annual swing in operating cash flow. With spot crude oil now priced above $55 per barrel, jet fuel price changes continue to represent the most important credit risk factor for American and the entire U.S. airline industry in 2005. Passenger unit revenue weakness has already forced American to reduce scheduled capacity in domestic markets by 4% in the first quarter of 2005. Many of the schedule adjustments have occurred in nonhub markets (e.g. transcontinental routes) where the expansion of LCC route frequencies has contributed to passenger yield erosion. While capacity constraint may bolster American's revenue per available seat mile performance somewhat this year, the probability of dramatic industry capacity reduction tied to a potential US Airways liquidation is now lower as a result of recent progress made in the US Airways Chapter 11 reorganization effort. On the international side, American expects to grow available seat mile capacity by 12% this year. While unit revenue and margin trends remain far better in international markets, Fitch believes that large schedule additions in trans-Atlantic, Latin American, and trans-Pacific markets are likely to lead to intensifying yield pressure throughout the year. Even with robust demand patterns in place in these markets, new supply should constrain pricing improvements in 2005. Moves by other U.S. legacy carriers to negotiate labor concessions are likely to increase pressure on American to re-open collective bargaining agreements with its unions by year-end. If tentative labor deals at Continental are ultimately ratified and if United is successful in locking in pay-rate reductions and pension plan terminations through the bankruptcy court, American will likely be forced to seek additional concessions to maintain unit labor cost parity. New labor agreements at Northwest, if successfully negotiated by fall, could bring additional pressure on American to drive labor costs lower. Fixed cash obligations over the next two years are large, with scheduled debt and capital lease maturities of $806 million this year and $1.4 billion in 2006. In addition, capital spending will remain above $800 million this year with the delivery of 20 embraer regional jets for AMR Eagle. However, importantly, all of these deliveries (as well as two final B777 deliveries scheduled for 2006) are already financed. Unrestricted cash and short-term investment balances remained relatively strong at $2.9 billion (about 15% of annual revenues) as of Dec. 31, 2004. With respect to defined benefit pension plan funding, AMR faces a less daunting cash flow challenge than most of its legacy carrier peers. The company's total unfunded liability remained flat in 2004 at $2.7 billion (projected benefit obligation basis), largely as a result of good plan asset returns and a reduction in cash benefits paid to retirees. AMR has seen a less dramatic increase in unfunded liabilities due to a larger fixed-income component in its pension plan investments. The company expects required 2005 cash contributions to total $310 million, and that figure is likely to grow somewhat in 2006 once legislative relief related to so-called deficit reduction contribution -- DRC -- pension payments expires at the end of 2005. The 'B-' rating assigned to the secured credit facility reflects enhanced recovery prospects in the event of default associated with the facility's collateral pool. The facility, consisting of a $600 million revolver maturing in 2009 and a $250 million term loan maturing in 2010, is secured by aircraft (principally B757, B767, and MD80 fleet types) and American's Tokyo-Narita route authorities. As part of the amended credit facility agreement, American was required to pledge an additional 72 aircraft in addition to the previous collateral. This has further eroded the available pool of unencumbered assets that could secure future financings, but some aircraft will be freed up as the credit facility amortizes. The amended credit facility contains both a minimum liquidity and EBITDAR fixed-charge coverage covenant. The minimum liquidity requirement of $1.5 billion (falling to $1.25 billion after Sept. 30) is unlikely to be tested in 2005. However, increasingly stringent fixed-charge ratio requirements (notably a step-up to 1.10x) at Dec. 31, 2005) could force American to seek waivers from the bank group should operating results remain weak throughout the year. In light of increasing liquidity concerns, Fitch expects American to actively seek opportunities to raise cash through asset sales and/or asset-based financing transactions over the next year. Possible transactions include a special facilities bond issued related to terminal construction at New York's JFK International Airport, as well as debt financing backed by non-Section 1110-eligible aircraft, engines, and spare parts. AMR could still raise cash through the sale of its AMR Eagle regional airline unit. ANCHOR GLASS: S&P Chips Rating to B- Owing to Poor Performance -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Anchor Glass Container Corp., to 'B-' from 'B+' and removed the rating from CreditWatch with negative implications where it was placed on Feb. 2, 2005. Other ratings were also lowered and removed from CreditWatch. The outlook is negative. Tampa, Florida-based Anchor had total debt outstanding of about $472 million at Dec. 31, 2004. "The downgrade reflects the company's weaker-than-expected operating performance for 2004 and limited liquidity given lower- than-expected sales volume trends, elevated natural gas prices (the principal fuel for manufacturing glass), and increased raw- material costs--namely soda ash," said Standard & Poor's credit analyst Liley Mehta. As a result, the company had significant negative free cash from operations of $61 million in 2004, and debt leverage remained very aggressive. In addition, the unexpected resignation of the Chief Executive Officer in March 2005 gives rise to uncertainty regarding management's ability to drive operational initiatives and improve cash generated from operations, particularly given the considerable challenges facing the company. The ratings on Anchor reflect a weak business profile that incorporates its high customer concentration, vulnerability to steep increases in natural gas prices, substitution risk (arising from ongoing conversions from glass to plastic containers), capital-intensive operations, very aggressive debt use, and strained liquidity. With annual revenues of about $748 million, Anchor is the third- largest U.S. producer of glass containers for beer, beverages, and foods and has an estimated market share of 18%. Although the glass packaging industry is concentrated, competition is high from two larger, more efficient and global glass container producers, Owens-Illinois Inc., and Compagnie de Saint-Gobain S.A. Beer and flavored alcoholic beverages represent Anchor's largest end markets (62% of sales); other end markets are beverages, tea, food, and liquor. The company is vulnerable to ongoing substitution by alternative materials such as plastic, particularly in certain food segments, which have intensified competitive pricing pressures in the past year. If operating results and liquidity fail to improve to expected levels, as a result of higher raw-material prices, additional volume pressure or higher-than-anticipated capital outlays, ratings could be lowered in the near term. Also, if additional operating challenges arise, Anchor would be expected to take meaningful and proactive steps to preserve liquidity in order to avoid another downgrade. ARMSTRONG WORLD: Discloses '05 Target Bonus & Incentives for Execs ------------------------------------------------------------------ Armstrong Holdings, Inc., has established and administers executive compensation programs to attract and retain executive talent necessary for its operations. As a general rule, Armstrong also tries to structure its compensation programs to maximize the deductibility of Armstrong World Industries, Inc.'s executive compensation expense for tax purposes. Historically, the principal components of the Company's executive compensation have included base salary, an annual performance-based bonus under its Management Achievement Plan, and a long-term incentive component that has been provided under its 1999 Long-Term Incentive Plan. Since AWI filed for Chapter 11 protection in December 2000, the long-term incentive component has been provided through cash incentive awards instead of stock options, performance restricted shares or restricted stock awards, which have not been allowed under Chapter 11. Traditionally, Armstrong's independent Management Development and Compensation Committee of the Board of Directors meets in February to establish performance goals for the Company's operations under the MAP and LTIP, and establish target awards under those plans for executives to be paid in the future based on achievement of those operating goals. The committee sets operating performance goals and target awards under both of those plans. With respect to Armstrong's Chief Executive Officer, Michael D. Lockhart, his employment agreement dated August 7, 2000, addresses his contractual rights with respect to annual bonus and long-term incentive compensation. The committee administers Mr. Lockhart's awards under MAP and LTIP with a view towards observing those contractual obligations. If Armstrong performs above a MAP performance threshold for 2005, the MAP participants will be eligible to receive a payment in 2006 based on a percentage of their target bonus. Each executive's target bonus is calculated as a percentage of their annual base salary earnings ranging from 15% -- at the base level for participants -- to 125% -- for the CEO. Similarly, if the Company performs above a LTIP performance threshold for 2005 and 2006, participants in the LTIP will be eligible to receive a payment in 2007 equal to a percentage of their 2005 LTIP cash incentive award target grant. LTIP award target grants are calculated as a percentage of the executive's current base salary ranging from 12% -- at the base level for participants -- to 337% -- for the CEO. If Armstrong's performance equals the operating goals set by the committee, the authorized payout under each of the MAP and LTIP has been set at 120% of the executive's target bonus and LTIP award target grant. Mr. Lockhart's actual LTIP award payment, however, will be based on payout formulae established by the committee. If the Company does not achieve the threshold levels of performance against the MAP and LTIP operating goals that have been established, no payments on the 2005 awards will be made to executive officers. If the threshold MAP and LTIP performance is achieved, but the results are less than the goals, relatively lower authorized payouts are allowed for participants. If Armstrong should exceed the operating goals, there would be allowed a relative increase in the payments to participants under the MAP and LTIP. However, the committee has the discretion to reduce actual payments to participants based on individual performance factors. With the exception of Mr. Lockhart's LTIP awards, the committee has traditionally reduced the authorized MAP and LTIP payments, except in situations where the committee determined that a participant's contributions merited the full authorized payment. In a regulatory filing with the Securities and Exchange Commission, Walter T. Gangl, Armstrong Holdings' Deputy General Counsel and Assistant Secretary, reports the current base salary level, the 2005 MAP target bonus as a percentage of each executive's 2005 base salary earnings, and the LTIP award target grant amount for each executive officer: 2005 MAP Award Executive Current Base % of Actual Base 2005 LTIP Officer Salary Salary Earnings Award --------- ------------ ---------------- --------- Michael D. Lockhart $920,000 125% $3,100,000 Stephen J. Senkowski 529,412 70 1,138,200 F. Nicholas Grasberger 450,000 60 810,000 Matthew J. Angello 368,000 50 552,000 John N. Rigas 370,000 50 555,000 William C. Rodruan 272,400 45 272,400 Mr. Gangl adds that the executives are eligible to receive a merit-based salary increase effective April 1, 2005. Any increase to an executive's base salary earnings will be factored in to their MAP bonus to be paid in 2006. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants to Reject Orlando Airport Lease --------------------------------------------------- ATA Airlines, Inc., and its debtor-affiliates entered into an Airline-Airport Lease and Use Agreement with the Greater Orlando Aviation Authority, effective as of January 1, 1996. Under the Lease, ATA Airlines was billed monthly for the use of certain premises and facilities at the Orlando International Airport. The costs and fees associated with the Lease & Use Agreement are no longer economically feasible in light of the Debtors' reduced flight operations, Jeffrey C. Nelson, Esq., at Baker & Daniels, Indianapolis, Indiana, relates. Thus, the Debtors propose to terminate the Lease. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) AXLE MERGER: Moody's Junks Planned $150M Senior Subordinated Notes ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to Axle Merger Sub, Inc.'s proposed $165 million senior secured credit facility and a Caa1 rating to IAAI Finance Corp.'s proposed $150 million of senior subordinated notes. The senior secured credit facility is expected to comprise a $115 million term loan B and a $50 million revolving credit facility. In addition, Moody's assigned Insurance Auto Auctions, Inc., a senior implied rating of B2 and a senior unsecured issuer rating of B3. Axle Merger and IAAI Finance are newly formed companies controlled by Kelso & Company and were set up specifically to consummate a merger transaction with IAAI. On February 23, 2005, affiliates of Kelso entered into a merger agreement to acquire IAAI for total consideration of about $409 million, including refinanced debt and fees and expenses. The agreement provides for the merger of Axle Merger with and into IAAI, with IAAI as the surviving corporation. The closing of the merger is subject to certain terms and conditions, including stockholder approval and the completion of financing. The transaction is expected to close in the second quarter of 2005. The acquisition is expected to be financed with the proceeds from the $115 million term loan B, $150 million of senior subordinated notes and a $144 million equity contribution from Kelso. Axle Merger is expected to be the borrower under the senior secured credit facility. The closing of the senior secured credit facility is conditioned upon the completion of the merger. Upon the completion of the merger, IAAI will assume all the obligations of Axle Merger under the senior credit facility. The revolving credit facility will be available to IAAI during the six-year period commencing with the closing date of the merger. IAAI Finance is expected to issue the $150 million of senior subordinated notes. As the closing of the merger is not expected until the second quarter of 2005, the proceeds from the note offering will be deposited in an escrow account and will be invested in cash, cash equivalents or treasury securities. The proceeds invested in the escrow account will be used to redeem the notes if the closing of the merger has not occurred on or prior to September 22, 2005 or if the merger agreement is terminated before that date. If the merger is completed, IAAI will assume IAAI Finance's obligations under the notes. All of the assigned ratings are contingent upon the completion of the merger. If the merger is not completed, all of the ratings will be withdrawn. Moody's assigned these ratings to Axle Merger (which ratings will be transferred to IAAI upon closing of the merger): * $50 million senior secured revolving credit facility due 2011, rated B2; * $115 million senior secured term loan facility due 2011, rated B2. Moody's assigned these ratings to IAAI Finance (which ratings will be transferred to IAAI upon closing of the merger): * $150 million Senior Subordinated Notes due 2012, rated Caa1; Moody's assigned these ratings to IAAI: * Senior Implied, rated B2; * Senior Unsecured Issuer Rating, rated B3; The ratings outlook is stable. The ratings are subject to the review of the final executed documents and the closing of the merger. The ratings reflect: * substantial leverage; revenue concentration with the three largest suppliers accounting for about 37% of the company's 2004 unit sales; * a lack of long term contractual commitments from suppliers; * intense competition from other national and regional salvage pools for supply of salvage vehicles and potential additional competition from new market entrants such as used car auction companies; and * the company's dependence on recently implemented technology systems, which may be subject to disruption and require significant cost to maintain and upgrade. The ratings also reflect: * the company's number two market position in the US salvage auction market with only Copart, Inc. (the market leader) and the company maintaining a national scope; * high barriers to entry due to property size, information technology and infrastructure requirements of the salvage auction business; * expected continued growth in supply of salvage auction vehicles due to the trend of consistent increases in the number of registered vehicles, total miles traveled and the complexity of vehicles; and * minimal inventory risk as about 96% of 2004 revenues represent fee income derived from sales of vehicles consigned to the company. The stable ratings outlook reflects Moody's expectation of continued growth in vehicle auction volume, an increase in revenues per unit sold and a significant reduction in capital expenditures from the $29 million incurred in 2004. Capital expenditures in 2004 included significant costs for major rehabilitation projects, facility consolidations and expansions. As a result, Moody's expects operating margins and free cash flows to improve significantly in 2005. Free cash flows are expected to be used to reduce borrowings under the company's term loan facility. The outlook or ratings could be pressured if the expected improvement in operating margins and free cash flows fails to materialize due to reduced auction volume, an inability to improve revenues per unit sold or higher than expected maintenance requirements. In addition, although the company has not had significant costs to date related to environmental compliance and remediation and does not expect such costs to be material, a significant increase in costs to comply with environmental laws or to remediate a contamination at the company's facilities could pressure the rating. The ratings or outlook could be raised if revenue growth is greater than expected, which results in a sustainable ratio of free cash flow to debt in the range of 8-10%. The B2 rating assigned to the proposed senior credit facility of Axle Merger will be transferred to IAAI in connection with the merger and reflects the credit profile of IAAI pro forma for the merger. Upon closing of the merger, the senior credit facility will have a first priority security interest in substantially all the tangible and intangible assets of IAAI and its subsidiaries including a pledge of 100% of the capital stock of domestic subsidiaries. The term loan B amortizes at a rate of .25% a quarter with the balance payable at maturity. The credit facility has a cash flow sweep, initially set at 75%, with a step down if the company achieves a decline in its leverage ratio. The company expects to have significant availability under the revolver at closing based on expected levels of financial covenants. The Caa1 rating assigned to the senior subordinated notes of IAAI Finance will be transferred to IAAI in connection with the merger and reflects the credit profile of IAAI pro forma for the merger. Upon closing of the merger, the notes will be contractually subordinated to existing and future senior debt of IAAI and its subsidiaries and will be guaranteed on a senior subordinated basis by substantially all existing and future domestic subsidiaries of IAAI. The ratio of free cash flow to debt was about 11% in 2004 reflecting the minimal debt load of the company in 2004. Moody's expects that ratio to be about 4-6% in the year after the acquisition closes. The ratio of debt to reported EBITDA would have been about 8 times in 2004 on a pro forma basis for the acquisition and is expected to improve to about 5 times in 2005. Insurance Auto Auctions, Inc. is the second largest provider of salvage auction services in the United States with a network of 78 sites in 32 states. The company sells salvage and theft-recovered vehicles at auctions at one of its facilities or via the internet through proxy or live internet bidding. A majority of the vehicles processed by the company are sold under a fixed fee and percentage of sale consignment method. The company obtains the majority of its supply of vehicles from insurance companies. The company is headquartered in Westchester, Illinois. Revenues for the year ending December 31, 2004, were about $240 million. BANC OF AMERICA: Fitch Puts Low-B Ratings on Two 2005-BOCA Loans ---------------------------------------------------------------- Banc of America Large Loan, Inc., series 2005-BOCA, is rated by Fitch Ratings: -- $258,486,000 class A-1 'AAA'; -- $64,621,000 class A-2 'AAA'; -- $632,000,000 class X-1 'AAA'; -- $632,000,000 class X-2 'AAA'; -- $52,283,000 class B 'AA+'; -- $23,462,000 class C 'AA'; -- $23,462,000 class D 'AA-'; -- $23,462,000 class E 'A+'; -- $23,462,000 class F 'A'; -- $23,462,000 class G 'A-'; -- $46,924,000 class H 'BBB+'; -- $23,462,000 class J 'BBB'; -- $46,914,000 class K 'BBB-'; -- $35,198,000 class L 'BB+'; -- $54,802,000 class M 'BB'. All classes are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are five full-service hotels and two golf courses with an aggregate principal balance of $700,000,000 as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the report titled 'Banc of America Large Loan Inc., Series 2005- BOCA,' dated Feb. 28, 2005 and available on the Fitch Ratings web site at http://www.fitchratings.com/ BORDEN CHEMICAL: Dec. 31 Balance Sheet Upside-Down by $548.8 Mil. ----------------------------------------------------------------- Borden Chemical, Inc., reported its results for the fourth quarter and year ended December 31, 2004. Highlights include: -- quarterly volume growth of 3.7 percent and annual volume growth of 6 percent; -- quarterly earnings before interest, taxes, depreciation and amortization (Segment EBITDA) of $40.2 million, an increase of 13.3 percent versus previous year period, and full-year segment EBITDA of $154.5 million, an increase of 20.9 percent over the previous year; -- quarterly adjusted EBITDA of $44.7 million and full-year adjusted EBITDA of $172.7 million; -- quarterly net income of $6.5 million and an annual net loss of $179.7 million due to one-time sale related costs and tax write-offs. "Our strong operating results for the fourth quarter and full year demonstrate the ability of our businesses to generate consistent, positive results," said Craig O. Morrison, president and chief executive officer. "We continue to focus on providing customers with products and services that solve their application needs, while managing our margins and controlling costs." Fourth Quarter Results Sales for the fourth quarter totaled $454.7 million versus $356.5 million for the same period last year, with the 27.6 percent increase resulting primarily from higher average selling prices and volume improvement. The sales volume increase of 3.7 percent for the period reflects continued strength in domestic and international wood markets, as well as strong volume growth in industrial resins and oilfield products. Earnings before interest, taxes, depreciation and amortization (Segment EBITDA) totaled $40.2 million for the quarter versus $35.5 million for the fourth quarter 2003. Higher volumes and selling prices more than offset increased raw material costs during the period. Adjusted EBITDA for the quarter was $44.7 million. The company's operating income for the quarter was $22.9 million versus operating income of $5 million for the previous year period, with the increase driven largely by improved margins and a $11 million decrease in business realignment expense and impairments versus the fourth quarter 2003. The company recorded net income for the fourth quarter period of $6.5 million compared with a net loss of $4.8 million for the fourth quarter 2003. The improvement was due primarily to enhanced operating results, which were partially offset by higher interest expense. Quarterly Business Segment Results North American Forest Products North American Forest Products net sales increased $60.2 million, or 32.7 percent, to $244 million in the fourth quarter compared with the same period in 2003, while Segment EBITDA increased $5.6 million, or 24.2 percent. The sales increase resulted from improved volumes reflecting continued strength in the housing and furniture markets and strong board pricing. The sales increase also resulted from Borden Chemical's ability to pass through raw material price increases, and favorable product mix. The Segment EBITDA improvement primarily reflects improved product contribution margins despite record high costs for key raw materials, as well as reduced operating costs. North American Performance Resins North American Performance Resins net sales increased $24.1 million, or 27.5 percent, to $111.9 million during the period from the previous year period, primarily due to improved volumes and increased selling prices. Volume improvements in the foundry resins, industrial and oilfield resins businesses were partially offset by volume declines in the laminate and melamine derivatives segment. Segment EBITDA increased $1.9 million, or 17.2 percent, versus the comparable period last year driven by sales and volume improvements as well as improved product mix. International Operations International net sales increased $13.9 million, or 16.4 percent, to $98.8 million in the fourth quarter compared to the same period in 2003. Improved European volumes, higher selling prices related to the pass through of increased raw material costs and foreign currency translations across all regions were the significant factors driving the sales increase. Segment EBITDA decreased $0.8 million, or 8.9 percent, reflecting reduced margins due to pricing pressures as well as costs of $1.3 million associated with a mechanical failure at a Brazilian formaldehyde plant. The company believes the majority of the impact of the mechanical failure is covered by insurance. Results for 2004 For the full year ended December 31, 2004, Borden Chemical generated sales of $1.69 billion compared with sales of $1.43 billion for the same period in 2003. Operating income was $73.6 million versus $66.5 million in 2003. Segment EBITDA was $154.5 million, versus $127.7 million for 2003. Year-over-year sales volumes increased 6 percent. The company recorded a net loss of $179.7 million for the year, compared with 2003 net income of $23 million. The 2004 loss included a non-cash charge of $137.1 million recorded in the second quarter related to the company's ability to utilize net deferred tax assets on a go-forward basis, and $69 million in legacy legal, unusual and transaction-related expenses. Adjusted EBITDA for the year was $172.7 million. Update on Bakelite Acquisition On October 7, Borden Chemical announced the signing of a definitive agreement to acquire Bakelite AG from its parent company, Rutgers AG. Borden Chemical will use a combination of debt and cash to finance the transaction. The company anticipates closing the acquisition in the second quarter 2005. About the Company Borden Chemical -- http://www.bordenchem.com/-- is a leading producer of binding and bonding resins, performance adhesives, and the building-block chemical formaldehyde for various wood and industrial markets through its network of 48 manufacturing facilities in 9 countries. The company is owned by the investment firm Apollo Management, L.P. and is based in Columbus, Ohio. At Dec. 31, 2004, Borden Chemical's balance sheet showed a $548,825,000 stockholders' deficit, compared to a $96,193,000 deficit at Dec. 31, 2003. BRIDGEWATER SPORTS: Asks Court to Close Chapter 11 Case ------------------------------------------------------- Bridgewater Sports Arena, L.P., asks the U.S. Bankruptcy Court for the District of New Jersey to close its chapter 11 case after disbursing the $8.1 million cash generated from the sale of its assets to DJD Amusements LLC pursuant to the confirmed modified Second Amended Plan of Reorganization. The Debtors already fully paid: * administrative expense claims, * $15,000 of priority claims, and * $6,300,000 of secured clams. The Debtor also paid: * $200,000 to satisfy Brian Barefoot's $1,457,994 claim; and * $175,000 to satisfy general unsecured claims. Unsecured creditors recovered 20% of claims totaling $947,899. Headquartered in Bridgewater, New Jersey, Bridgewater Sports Arena, L.P., is a recreational facility in Central New Jersey. The Company filed for chapter 11 protection on August 5, 2003 (Bankr. N.J. Case No. 03-35809). Brian L. Baker, Esq., and Morris S. Bauer, Esq., at Ravin Greenberg, PC, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $50 million each. The Company's Second Amended Plan of Reorganization was confirmed in November 23, 2005. CATHOLIC CHURCH: Ct. Denies Hamilton Rabinovitz's Hiring in Tucson ------------------------------------------------------------------ As previously reported in the Troubled Company Reporter, Feb. 9, 2005, the Unknown Claims Representative, A. Bates Butler III, and the Guardian ad litem, Charles Arnold, in the Diocese of Tucson's Chapter 11 case seek Judge Marlar's permission to retain Hamilton, Rabinovitz, & Alschuler, Inc., as consultants. Hamilton provides analytical services focused on the estimation of claims and the development of claims procedures with regard to payments and assets of a claims resolution trust. However, Ilene J. Lashinsky, United States Trustee for Region 14, objects to A. Bates Butler III and Charles Arnold's application to retain Hamilton, Rabinovitz, & Alschuler, Inc., as consultant because they seek to retain professional under Section 328 rather than Section 327 of the Bankruptcy Code. According to Christopher J. Pattock, Trial Attorney for the U.S. Trustee, Section 328, among other things, provides that compensation may be reduced only if the terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of the terms and conditions. This standard makes it much more difficult to object to fees at the end of the case if it appears that the fees requested are not reasonable, Mr. Pattock says. * * * The United States Bankruptcy Court for the District of Arizona denies the application. Judge Marlar rules that given the approximately 35 years of experience of the Unknown Claims Representative, A. Bates Butler III, and the Guardian ad litem, Charles Arnold, as attorneys, Messrs. Butler and Arnold have appropriate training and skill and are uniquely suited to the task of estimating the potential and size of the unknown claims -- without costing the estate a large administrative expense. "The estimations [that would have been provided by Hamilton, Rabinovitz, & Alschuler] are nothing more than that," Judge Marlar says. To assist all parties in making the estimates -- and without suggesting that this is the only way to deduce answers to the problem -- Judge Marlar recommends that Messrs. Butler and Arnold, as a primitive starting point, take discovery pursuant to Rule 9014 of the Federal Rules of Bankruptcy Procedure and ask the Diocese to: (a) list all priests employed by, or in the service of, the Diocese, from 1950 to the present, together with their years of service and parishes served; (b) state the approximate population of each parish at the time each priest served it; (c) identify from the list each priest whom any claim of sexual misconduct or abuse was made, no matter how minor the incident; (d) as to each priest, describe where the information was obtained -- for example, from files, letters, other documents, etc.; (e) as to each incident: * describe the nature of the grievance, and the name and age of the alleged victim at the time of the incident; * evaluate how -- that is in what "tier," 1-4 -- the claim would be treated in the current plan of reorganization; and * describe whether the incident was resolved, whether by monetary or non-monetary means; (f) describe all monetary settlements made by the Diocese, from 1950 to the present, by amount; (g) describe all verdicts rendered by a court of law, after trial or summary judgment, relative to any of the priest listed; (h) for each priest against whom a charge or allegation of sexual misconduct was made, describe the time period from the first to the last allegation; and (i) describe how many offending priest, or those alleged to have committed the sexual offenses, were dealt with by the criminal justice system and how. Messrs. Butler and Arnold are, by no means, limited to these questions in their effort to evaluate the probability of future claims, Judge Marlar says. The information provided by the discovery will be provided under seal, and for the time being, only the U.S. Bankruptcy Court for the District of Arizona, Tucson's counsel, and Messrs. Butler and Arnold and their counsel, will have access to the information. The information will remain confidential, unless the Court modifies the order in the future. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., and Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. (Catholic Church Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) COMMERCE ONE: Has Until April 4 to File Plan of Reorganization -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of California extended the period within which Commerce One, Inc., n/k/a CO Liquidation, Inc., and its debtor-affiliates have the exclusive right to file a chapter 11 plan to April 4, 2005. The Court also extended the period within which the Debtors have the exclusive right to solicit acceptances for that plan to June 3, 2005. As reported in the Troubled Company Reporter on Dec. 8, 2004, the Debtors got the Court's nod to sell seven patents relating to Web services to JGR Acquisition, Inc., for $15.5 million. JGR Acquisition, a newly formed subsidiary of Commerce One's secured creditors Com Vest Investment Partners II LLC and DCC Ventures, LLC, outbid eight other bidders. Web services are programmatic interfaces that can seamlessly travel among diverse networks and diverse applications and languages. Web services provide a standard way to interoperate among diverse software applications that run on diverse platforms. According to Wintergreen Research, in 2003, the Web services market, excluding portals, accounted for $208 million in revenue and could have a compound average growth rate of as much as 52% from 2003 through 2008. The Company developed an important patent portfolio for the emerging Web services market. This portfolio includes seven issued U.S. patents and 30 U.S. patent applications. United States Patent and Trademark Office records show that five of Commerce One's patents are: Patent No. Title ---------- ----- 6,751,600 Method for automatic categorization of items 6,591,260 Method of retrieving schemas for interpreting documents in an electronic commerce system 6,542,912 Tool for building documents for commerce in trading partner networks and interface definitions based on the documents 6,226,675 Participant server which process documents for commerce in trading partner networks 6,125,391 Market makers using documents for commerce in trading partner networks Headquartered in San Francisco, California, Commerce One, Inc. (n/k/a CO Liquidation, Inc.) -- http://www.commerceone.com/-- provides software services that enable businesses to conduct commerce over the Internet. Commerce One, Inc., and its wholly owned subsidiary, Commerce One Operations, Inc., filed for chapter 11 protection on Oct. 6, 2004 (Bankr. N.D. Calif. Case Nos. 04- 32820 and 04-32821). Doris A. Kaelin, Esq., and Lovee Sarenas, Esq., at the Murray and Murray, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, they listed $14,531,000 in total assets and $12,442,000 in total debts. As of December 2, 2004, Commerce One estimates that its liabilities owed to creditors total approximately $9.7 million, including approximately $5.1 million owed to ComVest. The Company expects that total liabilities will continue to increase over time. CREDIT SUISSE: Fitch Downgrades Six 2002-TFL1 Mortgage Certs. ------------------------------------------------------------- Fitch Ratings downgrades Credit Suisse First Boston Mortgage Securities Corp., commercial mortgage pass-through certificates, series 2002-TFL1: -- $10.1 million class E to 'BBB-' from 'A-'; -- $4.3 million class F-ABP to 'BBB-' from 'BBB+'; -- $8 million class G-ABP to 'BB+' from 'BBB-'; -- $3 million class H-ABP to 'B+' from 'BBB-'; -- $6.5 million class F-WBC to 'B+' from 'BB+'; -- $3.5 million class G-WBC to 'B-' from 'BB-'. Classes E, F-WBC, and G-WBC are removed from Rating Watch Negative. In addition, Fitch places these classes on Rating Watch Evolving: -- $3.8 million class F-ALH 'A-'; -- $10 million class G-ALH 'BBB'; -- $6 million class H-ALH 'BB+'. Fitch affirms these classes: -- $125.5 million class A-2 at 'AAA'; -- Interest Only class A-X at 'AAA'; -- $37 million class B at 'AAA'; -- $44 million class C at 'AA'; -- $29 million class D at 'A'; -- $3.6 million class F-COT at 'BBB+'; -- $1.4 million class G-COT at 'BBB'; -- $2.8 million class H-COT at 'BBB-. Fitch does not rate the $3.3 million class H-WBC. These classes have paid in full since issuance: A-1, F-717, G-717, H-717, F-PH, G-PH, H-PH, J-PH, F-AON, G-AON, H-AON, F-SP, G-SP, F-POR, and G-POR. The classes are downgraded due to the continued decline of the pool's performance since issuance. The Alliance LHMD Portfolio was placed on RWE due to the potential payoff in April 2005. As of year-end 2004 the weighted average debt service coverage ratio -- DSCR -- for the four remaining trust mortgage assets was 1.05 times compared to 1.21x as of year-end 2003 and 1.39x at issuance. The overall Fitch adjusted net cash flow -- NCF -- as of year-end 2004 declined 13.1% since year-end 2003 and 24.4% since issuance. As of the February 2005 distribution date, the outstanding principal balance has been reduced by approximately 62% to $301.8 million compared to $794 million at issuance. The Alliance BP Multifamily Portfolio (36.4%) consists of 13 cross-collateralized and cross-defaulted multifamily properties, located in six states. As of year-end 2004, the Fitch adjusted NCF declined 17.1% from year-end 2003 and 21.7% since issuance. The corresponding DSCR as of year-end 2004 was 1.03x compared to 1.25x as of year-end 2003 and 1.32x at issuance. The overall portfolio occupancy as of December 2004 was 82.2% compared to 88.7% as of December 2003 and 88.6% at issuance. The decrease in NCF and corresponding drop in the DSCR triggered a cash trap. The loan is on a hyper-amortization schedule, which pays down the mezzanine debt. In addition, the borrower is no longer collecting management fees. The Alliance LHMD Multifamily Portfolio (36.3%) consists of 21 cross-collateralized and cross-defaulted multifamily properties located in six states. As of year-end 2004, the Fitch adjusted NCF declined 6.1% from year-end 2003 and 23.2% since issuance, due to softening markets, and high in-place concessions. The corresponding DSCR as of year-end 2004 was 1.06x compared to 1.13x as of year-end 2003 and 1.39x at issuance. The portfolio's occupancy as of December 2004 was 88% compared to 90.4% as of December 2003 and 91.0% at issuance. The decrease in NCF and corresponding drop in DSCR has triggered a cash trap. The loan is on a hyper-amortization schedule, and the borrower is no longer collecting management fees. Alliance Holding Investment, the original sponsor, recently entered into an agreement with Lehman Brothers Holding, Inc. (the junior mezzanine holder) to assume the future debt obligation. Wachovia Securities, the master servicer, recently received a payoff notice for April 2005. The Cottonstar Portfolio (13.2%) consists of two office buildings, totaling 593,534 square feet located in Dallas, Texas. As of year-end 2004, the Fitch adjusted NCF declined 12.1% from year-end 2003 and 8.8% since issuance. The corresponding DSCR as of year- end 2004 was 1.31x compared to 1.49x as of year-end 2003 and 1.43x at issuance. The decline is due to the continued drop in occupancy. As of December 2004, occupancy was 86% compared to 89% as of June 2004 and 90% at issuance. Approximately 6.3% of the portfolio's net rentable area -- NRA -- expires in 2005 and 21.1% of the NRA expires in 2006. As of December 2004, the portfolio's in-place rents were approximately $19 per square foot, generally in line with market rents. Williamsburg and The Commons Multifamily Portfolio (14.0%), consists of two garden-style apartment properties with 1,264 units located in Cincinnati, Ohio. As of year-end 2004 the Fitch adjusted NCF declined 21% from year-end 2003 and 43.1% since issuance. The Fitch adjusted DSCR as of year-end 2004 was 0.79x compared to 0.99x as of year-end 2003 and 1.39x at issuance. The decline is attributed to a softening market, and decreased occupancy and in-place concessions. The portfolio's occupancy as of December 2004 dropped to 69.1% compared to 79.0% as of August 2004 and 83% at issuance. The loan was transferred to Wachovia Securities, the special servicer, due to failure to make debt service payments. The special servicer is currently negotiating a resolution with the borrower. Although Fitch is concerned with the interest-only, floating-rate nature of the loans, all loans benefit from extension options which require the purchase of LIBOR cap agreements. The transaction is secured by four floating-rate senior participation interests (A notes) in whole loans. The senior participation interests are divided into a pooled portion and a non-pooled portion. The junior participation interest in a loan is referred to as the B note and is not contributed to the trust. The DSCRs reported herein are based on the current balance of the senior participation interest. CREDIT SUISSE: Fitch Assigns Low-B Ratings to Six Mortgage Certs. ----------------------------------------------------------------- Credit Suisse First Boston Mortgage Securities Corp., series 2005-C1 commercial mortgage pass-through certificates are rated by Fitch Ratings: -- $113,741,000 class A-1 'AAA'; -- $125,500,000 class A-2 'AAA'; -- $113,100,000 class A-AB 'AAA'; -- $181,606,000 class A-3 'AAA'; -- $674,347,000 class A-4 'AAA'; -- $92,510,000 class A-J 'AAA'; -- $1,510,367,836 class A-X* 'AAA'; -- $1,426,004,000 class A-SP* 'AAA'; -- $43,423,000 class B 'AA'; -- $13,216,000 class C 'AA-'; -- $24,543,000 class D 'A'; -- $18,880,000 class E 'A-'; -- $20,767,000 class F 'BBB+'; -- $15,104,000 class G 'BBB'; -- $18,880,000 class H 'BBB-'; -- $5,663,000 class J 'BB+'; -- $5,664,000 class K 'BB'; -- $5,664,000 class L 'BB-'; -- $5,664,000 class M 'B+'; -- $5,664,000 class N 'B'; -- $3,776,000 class O 'B-'; -- $22,655,836 class P not rated (NR). * Notional amount and interest only. Classes A-1, A-2, A-AB, A-3, A-4, A-J, B, C, and D are offered publicly, while classes E, F, G, H, J, K, L, M, N, O, P, A-X, and A-SP are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 166 fixed-rate loans having an aggregate principal balance of approximately $1,510,367,836, as of the cutoff date. For a detailed description of Fitch's rating analysis, see the report 'Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C1,' dated Feb. 23, 2005, available on the Fitch Ratings web site at http://www.fitchratings.com/ CYGNUS INC: Warns of Possible Bankruptcy Filing in Form 10-K ------------------------------------------------------------ Cygnus, Inc., (OTC Bulletin Board: CYGN) reported total revenues of $556,000 for the year ended December 31, 2004, compared to $2.9 million for the year ended December 31, 2003. This decrease is the result of the termination of the Company's Sales, Marketing and Distribution Agreement with Sankyo Pharma Inc. in December 2003. Cygnus posted a net loss of $8.1 million for the year ended December 31, 2004, compared to net income of $49.4 million for the year ended December 31, 2003. The net income for the year ended December 31, 2003 resulted from a gain of $75.8 million in the fourth quarter due to the Company's settlement with Sankyo Pharma. Total costs and expenses for the year ended December 31, 2004 were $11.6 million, compared to $27.0 million for the year ended December 31, 2003. Costs of product revenues were $240,000 for the year ended December 31, 2004, compared to $15.4 million for the year ended December 31, 2003. The decrease in costs of product revenues for 2004 was partially a result of the Company's reduced product revenues and suspension of its manufacturing efforts. In addition, costs of product revenues for the year ended December 31, 2003 included $5.3 million of underabsorbed indirect overhead associated with building up the Company's manufacturing capacity to meet then-expected future volumes and a write-off of approximately $6.4 million of inventory. The Company did not have any research and development expenses for the year ended December 31, 2004, compared to $5.1 million for the year ended December 31, 2003. Cygnus ceased all research and development activities and manufacturing in the fourth quarter of 2003. Sales, marketing, general and administrative expenses for the year ended December 31, 2004 were $11.4 million, compared to $6.4 million for the year ended December 31, 2003. This increase is a result of maintaining personnel and capacity to resume manufacturing and research and development activities if Cygnus were to have entered into a strategic alliance or found an acquiror for the Company. On December 16, 2004, Cygnus entered into an Asset Purchase Agreement with Animas for the sale of substantially all of its assets (other than its cash and cash equivalents, accounts receivable, and its claims in the arbitration matter with Ortho- McNeil Pharmaceutical, Inc.), including its intellectual property rights, product development and production equipment, regulatory package, inventory and certain assumed contracts, including all supplier, manufacturing and license agreements related to its products, to Animas for $10.0 million in cash. Upon the closing of the asset sale to Animas, Cygnus will satisfy its arbitration obligation to Sanofi-Aventis in order to release the Company's assets, including its intellectual property, from the security interests that Sanofi-Aventis has in those assets. Asset Sale & Plan of Dissolution On February 9, 2005, Cygnus filed its definitive Proxy Statement on Schedule 14A with the Securities and Exchange Commission seeking stockholder approval for the asset sale and for a Plan of Complete Liquidation and Dissolution. The Special Meeting of Stockholders will be held on March 23, 2005. Stockholders of Cygnus are urged to read the proxy statement and any other relevant documents filed with the SEC because they contain important information. Investors and security holders can obtain free copies of the proxy statement and other relevant documents by contacting Cygnus, Inc., 400 Penobscot Drive, Redwood City, CA 94063-4719. Documents filed with the SEC by Cygnus are available free of charge at the SEC's web site at http://www.sec.gov/ The Company anticipates that the asset sale to Animas, if approved by the Company's stockholders, will close in the first quarter of 2005. Additionally, Cygnus must vacate its Redwood City, California, facility on or before March 31, 2005, pursuant to the Lease Termination Agreement with its landlord, executed on December 16, 2004. Thereafter, it is anticipated that only two employees will remain. The Company has rented office space in San Francisco, California, and plans to pursue the Company's arbitration matter against Ortho-McNeil Pharmaceutical Inc., a Johnson & Johnson company, and to wind down the Company. As of December 31, 2004, Cygnus' cash and cash equivalents totaled $10.3 million. Also as of December 31, 2004, Cygnus had total liabilities of $12.7 million, of which $5.7 million were current liabilities. These balances included amounts due to Sanofi- Aventis pursuant to the Company's remaining arbitration obligation of $11.5 million, of which $4.5 million is due March 31, 2005. Under the Company's renegotiated arbitration obligation with Sanofi- Aventis entered into on January 27, 2005, the Company owes Sanofi-Aventis $4.5 million on March 31, 2005, rather than February 28, 2005; and $5.5 million at the time of the closing of its asset sale to Animas, for a total of $10.0 million. In the event, however, that the Company has not paid this $5.5 million prior to February 28, 2006, then Cygnus will owe $4.0 million at that time to Sanofi-Aventis and $3.0 million on February 28, 2007, for a total of $11.5 million. Form 10-K The Company's Form 10-K for the year ended December 31, 2004 was filed with the SEC on March 16, 2005. The report of the Company's independent registered public accounting firm, which is part of the Company's Form 10-K, raised going concern doubts due to the Company's significant losses from operations, negative operating cash flows and has a $7,000 net capital deficiency at Dec. 31, 2004. Bankruptcy Warning "If the asset sale to Animas is not completed, whether due to the failure of stockholders to approve the transaction or to the failure to satisfy closing conditions, we would likely file for, or be forced to resort to, bankruptcy protection and it is unlikely that there would be funds available for a distribution to stockholders," the Company said in its regulatory filing. "These conditions raise substantial doubt about our ability to continue as a going concern." About the Company Cygnus -- http://www.cygn.com/-- has developed, manufactured and commercialized new and improved glucose-monitoring devices. The three generations of Cygnus' GlucoWatch(R) Biographers are the only products approved by the FDA that provide frequent, automatic and non-invasive measurement of glucose levels. The Biographer is not intended to replace the common "finger-stick" or alternative site testing methods, but is indicated as an adjunctive device to supplement blood glucose testing to provide more complete, ongoing information about glucose levels. At Dec. 31, 2004, Cygnus' balance sheet showed a $7,000 stockholders' deficit, compared to $6,822,000 of positive equity at Dec. 31, 2003. DELOREAN MOTOR: Founder, John DeLorean, Dies at Age 80 ------------------------------------------------------ John DeLorean, the founder of The DeLorean Motor Co., died of a stroke this past weekend in New Jersey. He was 80 years old. Mr. DeLorean was a former General Motors executive, and frequently critical of the company. His attempts to build a better automobile won him recognition in the movie "Back to the Future" and in auto magazines, but the financial pressures led to criminal charges against him personally -- of which he was acquitted -- and his company's collapse. The DeLorean Motor Co. bankruptcy case, originally filed as a Chapter 11 case in October, 1982, and converted to Chapter 7 in December, 1983. "This case was a no-asset case when it converted," David W. Allard, the trustee of 17 years recalled when the case was closed in 2000. "Hundreds of lawsuit recoveries over the years, including one very large jury verdict in New York in 1998, created a sizable estate for distribution." Mr. Allard is with the Detroit law firm of Allard & Fish, P.C., and, in 2000, was president-elect of the National Association of Bankruptcy Trustees. Attorneys estimated in 1983 that creditors would receive less than 5 cents on the dollar, yet the unsecured creditors received an interim distribution of 9% in 1990 and ultimately received checks for 90% of the remaining balance. The complex and often contentious international case was presided over by Judge Ray Reynolds Graves, United States Bankruptcy Court in Detroit, Mich. Mr. Allard was represented by Deborah Fish, Esq., at Allard & Fish, in Detroit, Mich., Sheldon Toll, Esq., Robert Weiss, Esq., and Judy Calton, Esq., of Honigman Miller Schwartz and Cohn, Detroit, Mich., Whitney Gerard, Esq., and Zachary Shimer, Esq., at Chadbourne & Park in New York, and Michael Hess, Esq., the lead trial lawyer in the New York case, who left Chadbourne & Parke after concluding the trial to become Mayor Giuliani's City Corporation Counsel. The firm of Jay Alix & Associates led by Jay Alix and Rob Rock, Southfield, Mich., New York, N.Y., Chicago, Ill., served as Mr. Allard's accountant. EDISON MISSION: S&P Lifts Mission Energy's Bond Rating to CCC+ -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit ratings on Edison Mission Energy and its wholly owned subsidiary, Edison Mission Marketing and Trading, to 'B+' from 'B', and removed the ratings from CreditWatch with positive implications where they were placed on Aug. 2, 2004. At the same time, Standard & Poor's raised its ratings on Mission Energy Holding Co's $800 million senior secured notes to 'CCC+' from 'CCC'. The outlook is stable. "The rating action follows the completion of the sale of the majority of EME's international portfolio of assets for total proceeds of about $2.9 billion and the reduction of about $1.2 billion in debt," said Standard & Poor's credit analyst Arleen Spangler. "With the completion of the asset sales, EME has decreased its financial leverage and avoided a liquidity crisis," she continued. The improvement in the rating anticipates that EME will use the majority of the remainder of the proceeds from the asset sales to repay debt as it matures. The asset sales and large cash balance allow EME to effectively alleviate all of its refinancing risk through 2011. This assumes that projects continue to provide cash flow as expected and the cash balance is used to repay debt as it matures. Absent this cash balance, EME would be exposed to significant refinancing risk beginning in 2008. The stable outlook reflects Standard & Poor's expectation that the financial position of EME and its major subsidiaries has improved and stabilized. Standard & Poor's does not expect wholesale markets to improve until closer to the end of the decade, so it did not incorporate a rebound in wholesale margins in the rating. Although it is Standard & Poor's view that EME's financial risk has stabilized, any significant, sustained reduction in cash flow from operations from adverse business conditions may cause Standard & Poor's to lower the rating. The current rating also anticipates that the cash proceeds from the international asset sales will be used to reduce debt as it matures. An outcome that would require EME to refinance this debt as it matures would be viewed negatively by Standard & Poor's. If wholesale markets improve dramatically and EME successfully pays down a significant amount of debt, then ratings could improve. EDISON MISSION: S&P Lifts Rating on Senior Unsecured Bonds to B+ ---------------------------------------------------------------- Standard & Poor's its ratings on Edison Mission Energy Funding Corp.'s senior unsecured bonds to 'B+' from 'B', and removed the ratings from CreditWatch with positive implications where they were placed on Aug. 2, 2004. The outlook is stable. "The rating action follows a similar rating action taken on independent power producer Edison Mission Energy (EME; B+/Stable/--), the 100% owner of four guarantors in this project transaction," noted Standard & Poor's credit analyst Arleen Spangler. "EME's rating was raised to reflect the completion of the sale of the majority of EME's international portfolio of assets for total proceeds of about $2.9 billion and the reduction of about $1.2 billion in debt," she continued. With the completion of the asset sales, EME has decreased its financial leverage and avoided a liquidity crisis. The improvement in the rating anticipates that EME will use the majority of the remaining proceeds from the asset sales to repay debt as it matures. The asset sales and large cash balance allow EME to effectively alleviate all of its refinancing risk through 2011. This assumes that projects continue to provide cash flow as expected and the cash balance is used to repay debt as it matures. Absent this cash balance, EME would be exposed to significant refinancing risk beginning in 2008. The stable outlook reflects the outlook on EME. While EME Funding Corp. continues to exhibit financial strength due to highly predictable and stable revenues from steam sales and the power supply contracts, its credit is tied to that of its parent, EME, which may have an incentive to act to harm the subsidiary should it experience credit deterioration or in an insolvency event. FIRST UNION: Moody's Junks Three Certificate Classes ---------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes, affirmed the ratings of seven classes and downgraded the ratings of three classes of First Union-Lehman Brothers-Bank of America Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1998-C2 as follows: -- Class A-1, $70,329,449, Fixed, affirmed at Aaa -- Class A-2, $1,693,794,000, Fixed, affirmed at Aaa -- Class IO, Notional, affirmed at Aaa -- Class B, $170,403,000, Fixed affirmed at Aaa -- Class C, $170,402,000, Fixed, upgraded to Aaa from A1 -- Class D, $204,483,000, Fixed, upgraded to A1 from Baa1 -- Class E, $68,161,000, Fixed, upgraded to A3 from Baa2 -- Class F, $51,121,000, Fixed, upgraded to Baa2 from Ba1 -- Class G, $102,241,582, Fixed, affirmed at Ba2 -- Class H, $17,040,241, Fixed, affirmed at Ba3 -- Class J, $34,080,482, Fixed, affirmed at B1 -- Class K, $51,120,723, Fixed, downgraded to Caa1 from B3 -- Class L, $34,080,482, Fixed, downgraded to Caa2 from Caa1 -- Class M, $14,237,559, Fixed, downgraded to C from Ca As of the February 18, 2005 distribution date, the transaction's aggregate principal balance has decreased by approximately 21.3% to $2.7 billion from $3.4 billion at securitization. The Certificates are collateralized by 587 loans secured by commercial and multifamily properties. The pool consists of a conduit component representing 77.5% of the pool, a large loan component representing 15.5% of the pool and a credit tenant lease component representing 7.0% of the pool. The loans range in size from less than 1.0% to 4.9% of the pool, with the ten loans representing 23.2% of the outstanding pool balance. Fifty-two loans, representing 7.5% of the pool, have defeased and have been replaced with U.S. Government securities. Twenty-two loans have been liquidated from the trust, resulting in realized losses of approximately $36.9 million. Twelve loans, representing 4.1% of the pool, are in special servicing. The largest loan in special servicing is the First Union Loan, the largest conduit loan, which is discussed below. Moody's has estimated aggregate losses of approximately $5.6 million for all of the specially serviced loans. Moody's was provided with year-end 2003 operating results for 100.0% of the performing loans and partial year 2004 operating results for 88.0% of the performing loans. Moody's weighted average loan to value ratio for the conduit component is 82.5% compared to 86.7% at Moody's last full review in July 2003 and compared to 89.8% at securitization. The upgrade of Classes C, D, E and F is due to increased subordination levels and stable overall pool performance. The downgrade of Classes K, L, and M is due to realized and expected losses from specially serviced loans, LTV dispersion and interest shortfalls. Based on Moody's analysis, 19.8% of the conduit pool has a LTV greater than 100.0%, compared to 22.1% at last review and compared to 12.7% at securitization. Due to trust expenses and appraisal reductions, Classes K, L and M have accrued but unpaid interest shortfalls amounting to approximately $2.7 million as of the most recent distribution date. In addition, unrated Class N has interest shortfalls of approximately $2.0 million. The large loan component consists of four shadow rated loans. The largest shadow rated loan is the Broadmoor Austin Loan ($130.9 million - 4.9%), which is secured by a seven-building, 1.1 million square foot office complex located in Austin, Texas. The property is leased to IBM Corporation (Moody's senior unsecured rating A1) under a triple net lease that expires in March of 2011; however, IBM has the option to give back 30.0% of the premises in March of 2006. The loan has amortized 15.0% since securitization. The loan is currently shadow rated Baa2, the same as at securitization. The second largest shadow rated loan is the IBM Corporate Office Complex Loan ($122.3 million - 4.6%), which is secured by a five- building 1.1 million square foot office complex located in Somers, New York. The property is leased to IBM under a triple net lease that is coterminous with the loan maturity date of October 2013. The loan has amortized 31.4% since securitization. The loan is shadow rated A1, the same as at securitization. The third largest shadow rated loan is the Fox Valley Mall Loan ($85.5 million - 3.2%), which is secured by a 1.4 million square foot regional shopping center located in Aurora (Chicago), Illinois. The mall is anchored by Marshall Field's, Sears, Carson Pirie Scott and J.C. Penney. All of the anchors own their respective stores. The property's performance has been stable since securitization. Mall shop occupancy and per square foot mall sales for 2004 were 77.0% and $334 respectively, compared 85.0% and $277 at securitization. Moody's shadow rating is Baa3, compared to Ba1 at securitization. The fourth largest loan in the pool is the Hawthorne Center Loan ($77.9 million - 2.9%), which is secured by a 1.2 million square foot regional shopping center located in Vernon Hills (Chicago), Illinois. The mall is anchored by Marshall Field's, Sears, Carson Pirie Scott and J.C. Penney. All of the anchors own their respective stores. Mall shop occupancy and per square foot mall sales for 2004 were 93.0% and $362 respectively, compared 86.0% and $295 at securitization. Moody's shadow rating is A3, compared to Baa3 at securitization. The top three conduit loans represent 5.4% pool. The largest conduit loan is the First Union Plaza Loan ($60.7 million - 2.3%), which is secured by a 615,000 square foot Class A office building located in Atlanta, Georgia. The property is 92.0% occupied, compared to 95.6% at securitization. Major tenants include Sutherland, Asbill and Brennan, LP (33.0% NRA; lease expiration April 2015) and Heery International (15.2% NRA; lease expiration September 2007). The loan was transferred to special servicing in September 2003 due to the borrower's failure to obtain the servicer's approval for a major lease. The loan is current and borrower discussions are ongoing. Moody's LTV is 83.3%, compared to 85.5% at last review and compared to 90.0% at securitization. The second largest conduit loan is the Oakwood Village Loan ($59.1 million - 2.2%), which is secured by a 1,224-unit apartment complex located in Morris County, New Jersey. The property's performance has been stable since securitization. The property is 95.0% occupied, compared to 97.7% at securitization. Moody's LTV is 76.5%, compared to 77.1% at last review and compared to 91.0% at securitization. The third largest conduit loan is the Phillips Place Loan (23.3 million - 0.9%), which is secured by a 130,000 square foot retail center located in Charlotte, North Carolina. Major tenants include Phillips Place Cinemas (23.0% GLA; lease expiration November 2016) and Restoration Hardware (7.0% GLA; lease expiration September 2012). The property is 94.1% occupied, compared to 89.7% at securitization. Moody's LTV is 76.1%, compared to 87.0% at last review and compared to 97.4% at securitization. The CTL component includes 71 loans secured by properties leased under bondable leases. The largest exposures are Brinker International ($59.0 million; Moody's senior unsecured rating Baa2), CVS ($38.6 million; Moody's senior unsecured rating A3) and Walgreen Co. ($25.3 million; Moody's long term issuer rating Aa3). The weighted average shadow rating for the CTL component is Baa3, compared to Baa2 at securitization. The pool collateral is a mix of: * retail (28.0%), * multifamily (26.9%), * office (20.1%), * U.S. Government securities (7.5%), * CTL (7.0%), * hotel (4.7%), * industrial and self storage (3.8%), * healthcare (1.6%), and * mixed use (0.4%). The collateral properties are located in 41 states and the District of Columbia. The highest state concentrations are: * California (11.7%), * Texas (10.3%), * Illinois (8.8%), * New York (8.3%), and * Florida (7.1%). All of the loans are fixed rate. FLOWSERVE CORP: Gets Lenders' Okay to Call & Prepay 12.25% Notes ---------------------------------------------------------------- Flowserve Corp. (NYSE:FLS) obtained consents from its major lenders that enhance the company's flexibility under its credit agreements. Among other things, these consents amend certain lending covenants to permit the possible issuance by the company of new subordinated or senior unsecured debt to call and prepay its outstanding 12.25% Senior Subordinated Notes, which are first callable in Aug. 2005. These consents also extend until Sept. 30, 2005, the company's covenant requirement for delivering to lenders its 2004 audited financial statements. The company previously announced that it repaid about $210 million of debt in 2004 and more than $600 million over the past three years. "We are pleased with the support and confidence our lenders have shown us in granting these consents," said Flowserve Chief Financial Officer Mark A. Blinn. "These provide us with considerable flexibility as we continue our work to finalize our 2004 financial statements, strengthen our financial controls and further improve our capital structure." These consents will be more fully described in Form 8-K reports that the company plans to file with the Securities and Exchange Commission. About the Company Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in 56 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. * * * As reported in the Troubled Company Reporter on Feb 11, 2005, Moody's Investors Service has affirmed the ratings of Flowserve Corp., following its recent announcement regarding the restatement of its financial results, divestiture of non-core operations, its 2004 debt reduction amount, and the pending departure of its CEO. Moody's said the Company's rating outlook remains stable. The ratings affirmed are: * Senior implied rating of Ba3, * Issuer rating of B1, * Ba3 for the $300 million senior secured revolving credit facility, due 2006, * Ba3 for approximately $203 million of senior secured term loan A, due 2006, * Ba3 for approximately $465 million of senior secured term loan C, due 2009, * B2 for approximately $268.5 million of senior subordinated notes, due 2010. These numbers reflect the last reported financial statements of Flowserve as of the first quarter of 2004 and do not reflect subsequent reported debt reduction by the company in its press releases. G-STAR: Fitch Rates $35 Million Income Notes Due 2040 at BB ----------------------------------------------------------- Fitch Ratings has rated the notes issued by G-STAR 2005-5 Ltd. and co-issuer G-STAR 2005-5 Corp.: -- $423,000,000 class A-1 floating-rate senior notes due 2040 'AAA'; -- $60,000,000 class A-2 floating-rate senior notes due 2040 'AAA'; -- $37,000,000 class A-3 floating-rate senior notes due 2040 'AA'; -- $21,000,000 class B 5.73% fixed-rate senior subordinate notes due 2040 'A-'; -- $24,000,000 class C floating-rate subordinate notes due 2040 'BBB'; -- $35,000,000 income notes due 2040 'BB'. The ratings of the classes A-1, A-2, and A-3 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes B and C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating on the income notes addresses the ultimate payment of aggregate outstanding amount of the income notes as of the closing date of $35,000,000 (the rated principal amount). The ratings are based upon the capital structure of the transaction, the quality of the collateral, and the overcollateralization and interest coverage tests provided for within the indenture. During the four-year interest-only period, the collateral advisor may trade up to 10% of the total portfolio balance annually on a discretionary basis. The collateral portfolio will be managed by GMAC Institutional Advisors, LLC, a wholly owned subsidiary of GMACCM. At the end of the 110-day ramp-up period the quality of the collateral will have a maximum Fitch weighted average rating factor -- WARF -- of 8.5 ('BBB-/BB+'). The proceeds of the notes will be used to purchase a portfolio of real estate structured finance securities, consisting of approximately 43.6% subprime residential mortgage securities -- RMBS, 16.2% conduit commercial mortgage-backed securities -- CMBS, 13.7% B-Notes, 10% large-loan CMBS, 6.2% prime residential mortgage securities, 3.5% collateralized debt obligations -- CDOs, 3.5% corporate securities, and 3.3% real estate investment trust -- REIT -- securities. GIA-issued deals currently included in the portfolio are approximately 6%. These holdings are limited to 6.5% of the portfolio as per the governing documents. A notable feature of the transaction includes the cumulative loss test that diverts excess interest to invest in additional collateral should the cumulative loss exceed a predetermined threshold during the interest-only period. The collateral advisor can also enter into asset-specific hedges with the effect of categorizing fixed securities as deemed-floating securities or floating securities as deemed-fixed securities while remaining within the transaction's covenanted fixed/floating collateral parameters. GIA, a wholly owned subsidiary of GMAC Commercial Mortgage Corporation, is a Delaware limited-liability company headquartered in Horsham, Pennsylvania. Currently, GIA offers a wide range of advisory and asset-management services focused on commercial whole loans, investment-grade CMBS, non- investment-grade CMBS, commercial real estate private equity, mezzanine debt, and CDOs. In addition to offering its asset-management services, GIA is also an active co-investor with its clients. GIA's assets under management have grown to $10.6 billion as of Dec. 31, 2004, from $3.6 billion in December 2001. These assets include 10 CDOs with balances totaling more than $5.9 billion. GIA received and currently maintains a 'CAM1' rating, Fitch's top rating for CDO asset managers. The rating was affirmed on Oct. 1, 2004. For more information, see the presale report 'G-STAR 2005-5 LTD./CORP.,' dated Feb. 28, 2005, and available on the Fitch Ratings web site at http://www.fitchratings.com/ GADZOOKS INC: Forever 21 Subsidiary Consummates Asset Acquisition ----------------------------------------------------------------- Gadzooks 21, Inc., a wholly owned subsidiary of Forever 21, Inc., consummated the previously announced acquisition of assets from Gadzooks, Inc. (Pink Sheets:GADZQ). In this transaction, Gadzooks 21 purchased substantially all of Gadzooks' operating assets, including its inventory and 150 of Gadzooks' retail stores located in 36 states. The sale of Gadzooks' assets was subject to a competitive auction and the approval of the Bankruptcy Court for the Northern District of Texas. Don Chang, CEO and Founder of Forever 21, said, "We are happy and excited to welcome the Gadzooks brand into the Forever 21 family. We look forward to expanding upon Gadzooks' tradition of offering its style conscious customers quality merchandise at affordable prices by combining it with our own merchandising expertise." About Forever 21 Forever 21, Inc., is a national specialty retailer of apparel and accessories for fashion-oriented women, now operating over 200 retail stores in 28 states. Forever 21, Inc., was founded in Los Angeles, California in 1984 and has grown consistently over the last 21 years achieving sales of $640 million in 2004. Headquartered in Carrollton, Texas, Gadzooks, Inc. -- http://www.gadzooks.com/-- is a mall-based specialty retailer selling casual clothing, accessories and shoes for 16-22 year old females. The Company now operates 243 stores in 40 states. The Company filed for chapter 11 protection on February 3, 2004 (Bankr. N.D. Tex. Case No. 04-31486). Charles R. Gibbs, Esq., and Keith Miles Aurzada, Esq., at Akin Gump Strauss Hauer & Feld, LLP, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $84,570,641 in total assets and $42,519,551 in total debts. GLOBE METALLURGICAL: Creditor Trustee Wants Case Closure Delayed ---------------------------------------------------------------- Morton C. Batt, the Creditor Trustee of the Globe Metallurgical Inc. Creditor Trust, asks the U.S. Bankruptcy Court for Southern District of New York to keep Globe Metallurgical Inc.'s bankruptcy case open. The Creditor Trust was established pursuant to the terms of Globe's confirmed Second Amended Plan of Reorganization. As previously reported in Friday's Troubled Company Reporter, the Debtor asked the Court to formally close its chapter 11 case after having made final distributions under its confirmed Plan and having filed a final report. The Debtor acknowledges that there are adversary cases pending in Court but doesn't think it will affect the parties if Judge Cornelius Blackshear closes the chapter 11 proceeding. Mr. Batt discloses that 35 avoidance actions are pending in Court and anticipates he'll file 71 more. He says that prematurely closing the case will cut off his rights to pursue the avoidance actions. Mr. Batt says that despite Globe's assurance that all matters have been resolved, three members of the Official Committee of Unsecured Creditors aren't paid yet. Mr. Batt asks the Court that the final decree closing the case should be entered only after he has commenced all avoidance actions and all fees are paid. Headquartered in Beverly, Ohio, Globe Metallurgical, Inc., is the largest domestic producer of silicon-based foundry alloys and one of the largest domestic producers of silicon metal. The Company filed for chapter 11 protection on April 2, 2003, (Bankr. S.D.N.Y. Case No. 03-12006). Timothy W. Walsh, Esq., at DLA Piper Rudnick Gray Cary U.S., LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. HOMER CITY: S&P Affirms BB Ratings on $830M Bonds After Review -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' ratings on Homer City Funding LLC's $300 million secured lease obligation bonds or SLOBs due 2019 and $530 million SLOBs due 2026, and removed the ratings from CreditWatch where they were placed with positive implications on Aug. 2, 2004. The outlook is stable. Homer City Funding LLC, an indirect, wholly owned subsidiary of Edison Mission Energy (EME; B+/Stable/--), is the funding vehicle for the Homer City plant, a 1,884 MW, coal-fired generation plant in Pennsylvania. "The rating action follows a rating action taken on EME, the 100% indirect owner of Homer City," noted Standard & Poor's credit analyst Arleen Spangler. "While EME's ratings were raised to 'B+' from 'B', Homer City's ratings were affirmed at 'BB'," she continued. The stable outlook reflects both the stand-alone outlook on Homer City that continues to operate well given high natural gas prices, and the stable outlook on EME, its complete owner. There is little chance for an upgrade until Standard & Poor's is comfortable that Homer City has the ability to lock in strong gross margins on a longer-term basis, and has the ability to fund major capital improvement for environmental upgrades if necessary under a low natural gas price scenario. An upgrade would also require an improvement in EME's credit rating. A downgrade could occur if spark spreads reduce substantially and Homer City is unable to make necessary capital improvements. Homer City's rating is linked to EME's rating, so a downgrade in EME's ratings could lead to a downgrade in Homer City's rating. INSURANCE AUTO: S&P Junks Proposed $150 Million Senior Sub. Notes ----------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'B' corporate credit rating to Westchester, Illinois-based Insurance Auto Auctions Inc. At the same time, Standard & Poor's assigned its 'B' senior secured rating and '2' recovery rating to the company's proposed $165 million credit facility, indicating the likelihood that lenders will realize substantial (80%-100%) recovery of principal in the event of a payment default, with recovery expected to fall at the lower end of the range. It also assigned a 'CCC+' rating to IAAI's proposed $150 million senior subordinated notes due 2012. "The ratings reflect IAAI's narrow scope of operations and modest size, notwithstanding its No. 2 market position within its niche, combined with a highly leveraged capital structure and thin cash flow protection," said Standard & Poor's credit analyst Martin King. IAAI operates 78 salvage vehicle auction facilities in 32 states, serving 60 of the top 75 metropolitan markets. Pro forma for the transactions, IAAI, which operates salvage vehicle auctions, will have total debt of about $365 million, including the present value of operating leases. The rating outlook is stable. "The stable outlook reflects the expectation that IAAI will continue to improve earnings and cash flow and that debt leverage will decline modestly," Mr. King said. "Upside potential is limited by the narrow scope of operations and an aggressive growth appetite. Downside risk is limited by relatively stable demand and positive, albeit modest, free cash flow." Proceeds from the subordinated notes, combined with $115 million of borrowings under the credit facility and $144 million of sponsor equity, will be used to purchase IAAI and refinance its existing debt. The company is being acquired by Kelso & Co., a private investment firm, for 11x 2004 EBITDA. The initial borrowers of the notes and bank credit facility will be subsidiaries of Kelso, and IAAI will assume the obligations upon completion of the planned acquisition. INTEGRATED HEALTH: Distribution Sent to Class 6 Cash-Out Claimants ------------------------------------------------------------------ As previously reported in the Troubled Company Reporter, Dec. 16, 2004, Judge Walrath authorized IHS Liquidating, LLC, to make a $20,000,000 initial distribution to the holders of Allowed Class 4 and Class 6 claims. On March 2, 2005, Poorman-Douglas Corporation, the court-appointed claims agent in the Chapter 11 cases of Integrated Health Services, Inc., and its debtor-affiliates, sent letters to holders of Class 6 General Unsecured Claims that have made or are deemed to have made the Class 6 Cash-Out Election. The letter enclosed a payment to the holder equal to 3% of that holder's General Unsecured Claim subject to the Class 6 Cash-Out Election. The distribution represents full and complete satisfaction of the General Unsecured Claim for which the Class 6 Cash-Out Election was made or deemed to have made. Poorman-Douglas advises that a separate distribution will be made at a later date to claims in another class as well as General Unsecured Claims not eligible for the Class 6 Cash-Out Election. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect September 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 89; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERCELL INT'L: Files for Chapter 11 Protection in Colorado ------------------------------------------------------------ Intercell International Corporation (NASDAQ OTC:IICP) filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Colorado. It intends to submit a Plan of Reorganization to allow it to continue future operations. A spokesperson for Intercell said that the Company undertook this action in response to a decision made by a judge in the Denver County Small Claims Court relating to wage claims made by former employees of Brunetti DEC, LLC, which is a wholly owned subsidiary of the Company. Brunetti filed for Chapter 7 liquidation under the U.S. Bankruptcy Code on March 1, 2005. The decision could potentially allow creditors of Brunetti to assert their claims against the Company. Headquartered in Denver, Colorado, Intercell International Corporation -- http://www.intercell.com/-- is a technology holding company that provides capital, guidance, and strategic support to small private technology companies. The Company filed for chapter 11 protection on March 16, 2005 (Bankr. D. Co. Case No. 05-15181). Michael A. Littman, Esq., in Arvada, Colorado, represents the Debtor in its restructuring efforts. When the Debtors filed for protection from its creditors, it listed $180,898 in total assets and $400,800 in total debts. INTERCELL INT'L: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Intercell International Corporation 370 17th Street, Suite 3640 Denver, Colorado 80202 Bankruptcy Case No.: 05-15181 Type of Business: A technology holding company that provides capital, guidance, and strategic support to small private technology companies. Chapter 11 Petition Date: March 16, 2005 Court: District of Colorado Judge: A. Bruce Campbell Debtor's Counsel: Michael A. Littman, Esq. 7609 Ralston Road Arvada, Colorado 80002 Tel: (303) 422-8127 Total Assets: $180,898 Total Debts: $400,800 Debtors' 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ JP Morgan Chase Bank Lease $101,852 32nd Floor 370 17th Street Denver, CO 80202 Kristi Kampmann Salary $45,000 370 17th Street, Suite 3640 Denver, CO 80202 NanoPierce Technologies Loan $35,000 370 17th Street, Suite 3640 Denver, CO 80202 Particle Interconnect $32,658 4180 Center Park Drive Colorado Springs, CO 80916 Allen Bcall Compensation Claim $25,034 12105 Applewood Cl Broomfield, CO 80020 The Summit Group, Inc. Office Lease of $21,548 3333 S. Wadsworth Blvd. Brunetti DEC LLC, Suite C-105 a subsidiary Lakewood, CO 80227 Hi County Wire & Utility Services of $17,417 Telephone LTD Brunetti DEC LLC, PO Box 1226 a subsidiary Arvada, CO 80001 Struges & Houston, P.C. Legal Services of $16,307 PO Box 36210 Brunetti DEC LLC, Albuquerque, NM 87176 a subsidiary Kaiser Permanente Insurance for $14,678 Dept 57 Employees of Denver, CO 80281 Brunetti DEC LLC, a subsidiary Advanced Security Services to $13,602 Technologies, Inc. Brunetti DEC LLC, 1158 S. Lipan Street a subsidiary Denver, CO 80223 The St. Paul Companies Bond payments of $12,500 2 N. Charles Street #320 Brunetti DEC LLC, Baltimore MD 21201 a subsidiary Gelfond Hockstadt & Auditing/ $12,625 Pangburn accounting 1670 Broadway, services Suite 3000 Denver, CO 80202 Dell Services of $11,341 PO Box 920 Brunetti DEC LLC, Des Moines, IA 50368 a subsidiary Bradley, Allen & Assoc. Accounting services $11,155 225 Union Blvd, Ste. 450 for Brunetti DEC Lakewood, CO 80228 LLC, a subsidiary US Bank Advantage Line Company line of $10,578 PO Box 790179 credit of St. Louis, MO 63179 Brunetti DEC LLC, a subsidiary Joseph DePetro Wages from $9,635 1895 E. Mt. LAurel Cir. Brunetti DEC LLC, Highlands Ranch, Co 80126 a subsidiary Charles Brunetti Employment claims $8,789 877 F. 17th Ave., Unit 3A (judgement) and Denver, CO 80218 reimbursement Claim Kris Jackson Wages from $8,286 21306 E. 40th Place Brunetti DEC LLC, Denver, CO 80249 a subsidiary James Stine Wages from $6,999 701 F. 130th Court Brunetti DEC LLC, Thornton, CO 80241 a subsidiary Timothy Stewart Wages due from $6,464 11845 Snowshoe Drive Brunetti DEC LLC, Parker, CO 80138 a subsidiary INTERNATIONAL COAL: Names Ben Hatfield President & CEO ------------------------------------------------------ International Coal Group appointed Ben Hatfield, 48, as President and Chief Executive Officer. Mr. Hatfield has most recently served as President, Eastern Operations of Arch Coal, Inc. Prior to joining Arch, Mr. Hatfield was Executive Vice President of El Paso Energy's Coastal Coal Company. That assignment was preceded by a lengthy career with Massey Energy Company where he last served as Executive Vice President and Chief Operating Officer. At ICG, Mr. Hatfield succeeds George Desko who served as Interim CEO since October 1, 2004 but has resigned to pursue other interests. Wilbur L. Ross, Chairman of ICG, said, "We are delighted that a coal executive of Ben's stature has agreed to lead the Company as it aggressively develops its existing reserves and seeks to acquire complementary properties. We are grateful to George Desko for his excellent jump-starting of formerly bankrupt mines." Mr. Hatfield added, "I am excited by the opportunity to grow International Coal Group into a major company with such significant financial and strategic sponsorship. The Company is positioned to do well in this climate of strong industry fundamentals." International Coal Group was formed on October 1, 2004 by an investor group led by WL Ross & Co. LLC to acquire the principal assets of bankrupt Horizon Natural Resources. ICG owns and operates surface and underground coal mining operations with substantial reserve bases strategically located in Kentucky, West Virginia and Illinois. Mr. Hatfield is a mining engineer graduate of Virginia Tech. He lives with his wife, Debbie, and daughters Ashley Kay and Lauren, in Charleston, West Virginia. About the Company International Coal Group, based in Ashland, Kentucky, is engaged in the mining and marketing of steam coal. * * * As reported in the Troubled Company Reporter on Oct. 29, 2004, Standard & Poor's Rating Services assigned its 'B-' corporate credit rating to International Coal Group LLC. At the same time, Standard & Poor's assigned its 'B-' rating and recovery rating of '3' to International Coal's proposed $285 million senior secured bank credit facility. The outlook is stable. The bank loan rating is the same as the corporate credit rating; this and the '3' recovery rating indicate a meaningful recovery (50% to 80%) of principal in the event of a default on the company's senior secured revolving credit facility. "The ratings on ICG reflect its relatively small size; its high- cost profile and significant exposure to the difficult operating environment of Central Appalachia," said Standard & Poor's credit analyst Paul Vastola. They also reflect heavy capital spending needs to address aging mining equipment; fairly aggressive debt leverage factoring debt-like obligations; and uncertainties/concerns pertaining to the condition of its mines due to underspending by its predecessors during two bankruptcies. Ratings also reflect ICG's high-quality coal, nominal postretirement liabilities, and currently favorable conditions in the domestic coal industry. IRVING TANNING: Files for Chapter 11 Protection in Maine -------------------------------------------------------- Irving Tanning Company, in Hartland, Maine, filed for Chapter 11 bankruptcy protection last week, after Bank North cut off access to the company's working capital facility. Irving Tanning manufactures and sells leather goods. This is Irving Tanning's second chapter 11 filing. The company emerged from a previous chapter 11 proceeding filed in 2001. Headquartered in Hartland, Maine, Irving Tanning Company, -- http://www.irvingtanning.com/-- is a leading supplier of leather to global footwear, handbag and personal leather goods industries. The Company filed for chapter 11 protection on March 17, 2005 (Bankr. D. Maine Case No. 05-10423). Michael A. Fagone, Esq., at Bernstein, Shur, Sawyer & Nelson, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $22 million and total debts of $15 million. IRVING TANNING: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Irving Tanning Company Nine Main Street Hartland, Maine 04943 Bankruptcy Case No.: 05-10423 Type of Business: The Debtor a leading supplier of leather to global footwear, handbag and personal leather goods industries. See http://www.irvingtanning.com/ Chapter 11 Petition Date: March 17, 2005 Court: District of Maine (Bangor) Judge: Louis H. Kornreich Debtor's Counsel: Michael A. Fagone, Esq. Bernstein, Shur, Sawyer & Nelson P.O. Box 9729 Portland, ME 04104 Tel: 207-774-1200 Financial Condition as of February 26, 2005 Total Assets: $22,000,000 Total Debts: $15,000,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Town of Hartland $73,303 - Note $823,875 c/o Peggy Morgan Payable P.O. Box 280 $750,572 - Bonds Hartland, ME 04943 Payable through 2017 Maine Municipal Bond Bank Tyson Fresh Meats, Inc. Trade debt $773,800 c/o Fred Locke a/d/b IBP, Inc. 800 Stevens Port Drive Ste. 832 Dakota Dunes, SD 57044 Central Maine Power Company Utilities ` $83,528 c/o Dottie Belanger 83 Edison Drive Augusta, ME 04332 Sprague Energy Corp. Trade debt $64,009 Hartland Pollution Control Trade debt $38,759 Univar USA, Inc. Trade debt $34,186 B.A.S.F. Corp. Trade debt $32,932 Chemtan Co. Inc. Trade debt $25,776 Stahl Finishing Trade debt $23,971 Cooms Electric Trade debt $22,751 TEL USA Canada Inc. Trade debt $20,075 Keystone Trade debt $16,940 Embassy Freight Systems Trade debt $16,245 Butler Brothers Trade debt $15,236 Tannin Corporation Trade debt $14,832 Leather Tech GMBH Trade debt $10,607 M.K. & Sons Express, Inc. Trade debt $6,779 Sam Hprp Chemicals, Inc. Trade debt $6,757 Chemco Mfg. Co., Inc. $6,705 Palo Air Cargo Trade debt $6,647 JP MORGAN: Fitch Affirms BB Rating on $16.3 Million Class G Certs. ------------------------------------------------------------------ J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass- through certificates, series 1997-C4, are upgraded by Fitch Ratings: -- 26.5 million class F to 'A+' from 'A'. In addition, Fitch affirms these certificates: -- $32.2 million class A3 'AAA'; -- Interest-only class X 'AAA'; -- $24.4 million class B 'AAA'; -- $22.4 million class C 'AAA'; -- $20.3 million class D 'AAA'; -- $6.1 million class E 'AAA'; -- $16.3 million class G 'BB'. Fitch does not rate the $12.2 million class NR certificates. The upgrade reflects improved credit enhancement levels resulting from loan payoffs and amortization. As of the February 2005 distribution date, the pool's aggregate balance has been reduced by 61% to $160.4 million from $407 million at issuance. The trust has had no realized losses to date. Four loans (9.7%) are being specially serviced including a 90 days delinquent loan (4.3%) and a loan in foreclosure (0.6%). The largest loan in special servicing (4.3%) is secured by a 259-unit skilled nursing home in Bloomington, Illinois. The loan is 90 days delinquent and the special servicer and the borrower are currently negotiating workout proposals. The next largest specially serviced loan (3.7%) is secured by a multifamily property in Los Angeles, California. The loan is current; however, there is a pending lawsuit against the trust. Fitch remains concerned about the healthcare (12%) and hotel (6%) concentrations in the pool. JP MORGAN: Fitch Affirms B Rating on $10.7 Million Class G Certs. ----------------------------------------------------------------- J.P. Morgan Commercial Mortgage Finance Corp.'s commercial mortgage pass-through certificates, series 1996-C2 are upgraded: -- $25.1 million class E to 'AA-' from 'A+'; -- $2.3 million class F to 'A' from 'BBB+'. These classes are also affirmed by Fitch: -- Interest-only class DX at 'AAA'; -- $2.2 million class C at 'AAA'; -- $16.8 million class D at 'AAA'; - -$10.7 million class G at 'B'. Fitch does not rate the $2.2 million class NR certificates. Classes A, AX, and B have paid in full. The upgrades are a result of increased subordination levels due to amortization and prepayments. As of the March 2005 distribution date, the pool's aggregate principal balance has decreased 80.5% to $59.2 million from $304.6 million at issuance. Since issuance, the deal has become more concentrated with only 20 loans remaining. Of the remaining loans, 77% are expected to mature in 2005. All of the loans' prepayment lockout periods have expired; however, there are yield maintenance provisions in place through maturity. Two loans (15.2%) are in special servicing and are current with no expected losses. The largest loan (8.3%) is secured by a retail property located in Des Moines, Iowa. The loan transferred to special servicing in December 2004, when the single tenant Younkers merged with Saks and notified they plan to vacate when their lease expires in August 2005. The second loan (6.9%) is secured by a 120 bed nursing home located in North Huntingdon, Pennsylvania. The loan transferred to the special servicer in August 2004 due to a non-monetary default and declining performance. KMART: Sears Shareholders Have Until Thursday to Vote on Merger --------------------------------------------------------------- Kmart Holding Corporation (Nasdaq: KMRT) and Sears, Roebuck and Co. (NYSE: S) confirmed that the deadline for Sears shareholders of record to make merger consideration elections in connection with the proposed merger of Kmart and Sears is 5:00 p.m., Eastern Time, on March 24, 2005. Sears shareholders who hold their shares in "street name," through the Sears associate stock purchase plan, or in certain Sears retirement plans may have an election deadline earlier than March 24, 2005. Such shareholders should carefully review any materials they received from their broker or the relevant plan trustee or administrator to determine the election deadline applicable to them. Sears shareholders of record wishing to make an election regarding the consideration they would like to receive for their Sears shares must deliver to EquiServe Trust Company, N.A., the exchange agent, properly completed Election Forms, together with their stock certificates or properly completed notices of guaranteed delivery, by 5:00 p.m., Eastern Time, on Thursday, March 24, 2005, the election deadline. Sears shareholders may elect cash, shares of common stock of Sears Holdings Corporation, the new holding company created to facilitate the merger of Kmart and Sears, or a combination of the two for their Sears shares. All elections are subject to the proration procedures provided in the merger agreement designed to ensure that in the aggregate 55 percent of Sears shares will be converted into the right to receive 0.5 of a share of Sears Holdings common stock per share and 45 percent of Sears shares will be converted into the right to receive a cash consideration of $50.00 per share, without interest, upon the merger's completion. As a result, a Sears shareholder may not receive the exact form of consideration elected, and the ability of a Sears shareholder to receive the form of consideration elected will depend on the elections made by other Sears shareholders. All of the documents necessary to make merger consideration elections were previously mailed to Sears shareholders of record as of January 26, 2005. Sears shareholders may obtain additional copies of the election documents by contacting D.F. King & Co., Inc. at (800) 549-6650. A more complete description of the merger consideration and the adjustment and proration mechanisms applicable to elections is contained in the election materials mailed to Sears shareholders and the joint proxy statement/prospectus dated February 18, 2005, both of which Sears shareholders are urged to read carefully and in their entirety. Kmart and Sears expect to publicly announce the preliminary proration calculation on Monday, March 28, 2005. The final election results, including the consideration to be received by Sears shareholders who elect cash and who elect stock, will be announced as soon as practicable thereafter. The proposed merger remains subject to the satisfaction of closing conditions, including Kmart and Sears shareholder approval. As previously announced, a meeting date of March 24, 2005, has been established for meetings of Kmart and Sears shareholders to vote on the merger agreement. Sears and Kmart shareholders are also reminded that holders of record of Sears common stock and Kmart common stock, respectively, as of the close of business on January 26, 2005 are entitled to vote on the proposed merger and may vote by telephone, the Internet or by mail, as explained in detail in the joint proxy statement/prospectus dated February 18, 2005. About Sears Holdings Corporation Created to facilitate the merger of Kmart and Sears, Roebuck announced on Nov. 17, 2004, and subject to the receipt of shareholder approvals and the satisfaction or waiver of other conditions, upon close of the merger, Sears Holdings Corporation is expected to be the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full-line and specialty retail stores in the United States and Canada. Sears Holdings is expected to be the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands are expected to include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It is also expected to have Martha Stewart Everyday products, which are now offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. About Sears, Roebuck and Co. Sears, Roebuck and Co. is a leading broadline retailer providing merchandise and related services. With revenues in 2004 of $36.1 billion, Sears offers its wide range of home merchandise, apparel and automotive products and services through more than 2,400 Sears-branded and affiliated stores in the U.S. and Canada, which includes approximately 870 full-line and 1,100 specialty stores in the U.S. Sears also offers a variety of merchandise and services through sears.com, landsend.com, and specialty catalogs. Sears is the only retailer where consumers can find each of the Kenmore, Craftsman, DieHard and Lands' End brands together -- among the most trusted and preferred brands in the U.S. The company is the largest provider of product repair services with more than 14 million service calls made annually. For more information, visit Sears' website at http://www.sears.com/ About Kmart Holding Corporation 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 intends to buy Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. KMART HOLDING: Enters into Separation Agreement with Harold Lueken ------------------------------------------------------------------ On January 26, 2005, Kmart Management Corporation and Kmart Holding Corporation entered into a separation agreement with Harold W. Lueken, Senior Vice President, General Counsel and Secretary of Kmart. Under the terms of the Agreement, Mr. Lueken's employment terminated on January 31, 2005, and he continues to receive certain benefits through January 31, 2006. Pursuant to the Agreement and subject to Kmart's and Mr. Lueken's execution of a mutual release, Mr. Lueken will receive a lump sum payment in lieu of any amounts owed to him under Kmart's Long Term Incentive Plan. He will also receive his base salary for one year commencing on the effective date of the Agreement, subject to certain reductions, and will be eligible for his 2004 annual bonus. In addition, certain shares of restricted stock of Kmart Holding Corporation previously granted to Mr. Lueken will vest and become free of transfer restrictions and the remaining unvested shares of restricted stock will be forfeited on the effective date of the Agreement. Pursuant to the Separation Agreement, dated as of January 26, 2005, Kmart Holding Corporation and Harold W. Lueken agree that the Company will pay Mr. Lueken, in lieu of any outstanding Long Term Incentive Awards, $750,000 in a cash lump sum. Mr. Lueken will also be eligible for his annual bonus for the fiscal year beginning January 29, 2004. The amount of the 2004 Annual Bonus will be determined based on Kmart's adjusted EBITDA for the fiscal year beginning January 29, 2004, as compared to a target amount of $730 million. In no event will Mr. Lueken's bonus payment exceed 100% of his target bonus. Mr. Lueken holds restricted shares of Holding Corp. that were granted to him pursuant to a Restricted Stock Agreement, effective as of September 3, 2003. The Restricted Stock has previously vested and become free of transfer restrictions with respect to 5,703 shares. As of the Effective Date, the Restricted Stock will vest and become free of transfer restrictions with respect to an additional 5,703 shares. The remainder of the Restricted Stock will be forfeited as of the Effective Date. From the Effective Date through the first anniversary of the Separation Agreement, Mr. Lueken will be provided with continued welfare benefits. A full-text copy of the parties' Separation Agreement is available free of charge at: http://www.sec.gov/Archives/edgar/data/1229206/000095012405001369/k91800exv10w35.txt 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 intends to buy Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. Kmart and Sears expect their merger to close early this month. (Kmart Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000) LIBERTY MEDIA: S&P Pares Ratings on Five Bond-Backed Cert. Classes ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on the corporate bond-backed certificates issued by PreferredPLUS Trust Series LMG-1, PreferredPLUS Trust Series LMG-2, PPLUS Trust Series LMG-3, and Corporate Backed Trust Certificates Liberty Media Debenture Backed Series 2001-32 Trust. At the same time, the ratings are removed from CreditWatch negative, where they were placed Feb. 8, 2005. The rating actions and CreditWatch removals reflect the lowered ratings on the underlying securities, the $133.575 million 8.25% senior debentures due Feb. 1, 2030, the $31 million 8.50% senior unsecured notes due July 15, 2029, the $30.55 million 8.25% senior debentures due Feb. 1, 2030, and the $128 million 8.25% senior debentures issued by Liberty Media Corp., and their removal from CreditWatch negative, where they were placed Jan. 21, 2005. The $125.875 million 8.75% PreferredPLUS Trust Series LMG-1 issue is a swap-independent synthetic transaction that is weak-linked to the underlying collateral, the $133.575 million 8.25% senior debentures issued by Liberty Media Corp. The $31 million 8.50% PreferredPLUS Trust Series LMG-2 issue is a swap-independent synthetic transaction that is weak-linked to the underlying collateral, the $31 million 8.50% senior unsecured notes issued by Liberty Media Corp. The $30.55 million 8.25% PPLUS Trust Series LMG-3 is a swap-independent synthetic transaction that is weak- linked to the underlying collateral, the $30.55 million 8.25% senior debentures issued by Liberty Media Corp. The $25 million Corporate Backed Trust Certificates Liberty Media Debenture Backed Series 2001-32 Trust issue is a swap-independent synthetic security that is weak-linked to the underlying collateral, the $128 million 8.25% senior debentures issued by Liberty Media Corp. A copy of the Liberty Media Corp.-related research update, dated March 15, 2005, can be found on RatingsDirect at http://www.ratingsdirect.com/,Standard & Poor's Web-based credit analysis system. Ratings Lowered and Removed From Creditwatch Negative PreferredPLUS Trust Series LMG-1 $125.875 million 8.75% corporate bond-backed certificates Rating Class To From ----- -- ---- Certs. BB+ BBB-/Watch Neg PreferredPLUS Trust Series LMG-2 $31 million 8.50% corporate bond-backed certificates Rating Class To From ----- -- ---- Certs. BB+ BBB-/Watch Neg PPLUS Trust Series LMG-3 $30.55 million 8.25% corporate bond-backed certificates Rating Class To From ----- -- ---- A BB+ BBB-/Watch Neg B BB+ BBB-/Watch Neg Corporate Backed Trust Certificates Liberty Media Debenture Backed Series 2001-32 Trust $25 million corporate bond-backed certificates Rating Class To From ----- -- ---- A-1 BB+ BBB-/Watch Neg LODGENET ENT: Moody's Ups Ratings on $225M Sr. Sec. Debts to Ba1 ---------------------------------------------------------------- Moody's Investors Service revised the outlook for LodgeNet Entertainment Corporation to stable from negative and raised the rating on the senior secured bank debt to Ba3 from B1. The stable outlook and ratings affirmation reflects: (1) a year over year decline in leverage, achieved partially through the company's application of equity proceeds to debt reduction; (2) anticipated continuation of improved operating trends; (3) ability to manage performance through a weak economic environment; and (4) expectations for continued modest positive free cash flow. Ratings are: * $75 Million Senior Secured Revolver due 2008 -- to Ba3 from B1 * $150 Million (approximately $110 million outstanding) Senior Secured Term Loan due 2008 -- to Ba3 from B1 * $200 Million 9.5% Senior Subordinated Notes due 2013 -- B3 (affirmed) * Senior Implied Rating -- B1 (affirmed) * Senior Unsecured Issuer Rating -- B2 (affirmed) The outlook is stable. The B1 senior implied continues to reflect the company's extensive required capital investment and long payback period; significant exposure to the lodging industry's inherent seasonality, cyclicality, and volatility; and moderately high financial leverage of 3.4 times, which Moody's anticipates will continue to decline modestly to the approximately 3 times range by year end 2005. While absolute leverage is not excessive, the aforementioned substantial capital expenditure requirements and exposure to the lodging industry, as well as its relatively small size, necessitate a high degree of financial flexibility for LodgeNet. Furthermore, LodgeNet's business model remains highly sensitive to both hotel occupancy levels and the quality of Hollywood product, neither of which management can control. The company has achieved some success in diversifying its per-room revenue with alternative entertainment, including high-speed Internet access, music, and television on demand offerings, but movies continue to comprise the bulk of revenue, and less compelling movie inventory negatively impacts performance. The ratings also, however, incorporate the benefits associated with LodgeNet's large installed room base (over one million rooms served) and the consequent advantages of scale; exclusivity and high renewal rates of contracts with an average 6.5 year tenor; and modest growth potential and cost savings from the increasing portion of digital rooms (52% as of year end 2004). To date, LodgeNet has been successful at gaining market share, and the capital intensive nature of the business creates meaningful barriers to entry from additional competitors. Additionally, LodgeNet increasingly benefits from the geographical diversity of its over one million rooms; this considerable base creates cost savings and somewhat insulates LodgeNet from region specific events that negatively impact the lodging industry. Finally, while LodgeNet's proposed ventures into the health care market remain unproven, Moody's views this initiative as a low risk means of potentially expanding its customer base. Operational improvements, evidence of ability to manage through the business cycle and the commensurate transition to modest positive free cash flow, as well as the equity-supported de- leveraging, warrant the change in outlook to stable. LodgeNet has achieved consistent EBITDA growth since 2000 and modest positive free cash flow in 2004 despite the weak macroeconomic environment, demonstrating the ability and discipline to withstand negative industry conditions through a reduction in expansionary capital expenditures. Continued free cash flow growth and application of proceeds to debt reduction would drive the ratings upward. Deteriorating financial performance likely due to factors outside of management's control could drive a negative change in outlook, potentially due to increased competition from portable media (i.e. iPods, hand held game players, and the like) or a worsening travel and/or economic environment. LodgeNet's business demands heavy upfront investment at the onset of a contract and a continual need to upgrade equipment, resulting in high capital expenditures, and free cash flow of approximately $6 million in 2004 remains modest in the context of over $300 million of debt. High capital expenditures contribute to weak coverage of fixed charges, illustrated by EBITDA less capital expenditures of 1.1 times interest expense. However, increased financial flexibility following application of equity proceeds to debt reduction and EBITDA growth support the ratings, and improved pricing on the term loan will lead to annual interest expense savings of an estimated $3 million. Moody's anticipates LodgeNet will remain in compliance with covenants on its bank facilities and retain access to its entire $75 million revolving credit facility, further boosting liquidity. LodgeNet's increased equity base created additional junior capital which supports the upgrade for the senior secured ratings to Ba3, now one notch above the B1 senior implied. Bank debt currently represents about 35% of drawn debt (almost 50% of debt capacity, given full availability under the $75 million revolver) and benefits from the cushion provided by the $200 million of senior subordinated notes, the recently increased equity, and security in assets, including what Moody's continues to believe represent good value associated with its existing contracts. The B3 rating and the two notch gap from the senior implied on the 9.5% senior subordinated notes reflect the contractual and effective subordination to the company's existing and future senior secured bank debt. LodgeNet provides interactive television and broadband solutions to hotels, including resorts and casino hotels, throughout the United States and Canada, as well as select international markets. The company maintains its headquarters in Sioux Falls, South Dakota. MAXXAM INC: Annual Report Contains Bankruptcy Warning ----------------------------------------------------- MAXXAM Inc. (AMEX:MXM) filed its annual report on Form 10-K with the Securities and Exchange Commission, this week. The audited Consolidated Financial Statements and other sections of the Form 10-K discuss how the cash flows of its subsidiaries, The Pacific Lumber Company -- Palco -- and Scotia Pacific Company LLC -- Scotia LLC, have been adversely affected by the failure of the California North Coast Regional Water Quality Control Board to release for harvest a number of timber harvesting plans which have already been approved by the other government agencies which review Palco's THPs. Default & Bankruptcy Warning Palco is currently in default under its credit agreement, and management estimates that, without the prompt release of a substantial portion of these THPs and necessary amendments to such credit agreement, its cash flows from operations, together with funds under the credit agreement, will not provide sufficient liquidity to fund its current level of operations. Scotia LLC estimates that, without the prompt release of a substantial portion of these THPs, its cash flows from operations, together with funds available under its credit agreement, will be inadequate to pay the entire amount of interest due on the July 20, 2005, payment date for the Scotia LLC Timber Notes, which would constitute an event of default under the indenture governing the Timber Notes. In the event of a Scotia LLC default or a Palco liquidity shortfall, Palco and Scotia LLC may be required to take extraordinary actions: -- reducing expenditures by laying off employees and shutting down various operations; -- seeking other sources of liquidity, such as from asset sales; and -- seeking protection by filing under the U. S. Bankruptcy Code. Going Concern Doubt Deloitte & Touche LLP's audit report on MAXXAM's Consolidated Financial Statements for the year ended December 31, 2004, contains an explanatory paragraph concerning these matters, which states that the cash flows of MAXXAM Inc.'s wholly owned subsidiary, Palco and its wholly owned subsidiary, Scotia LLC, have been adversely affected by delays in obtaining regulatory approvals to harvest timber, and that the difficulties these subsidiaries are experiencing in meeting their loan agreement covenants and paying the interest on the Timber Notes raise substantial doubts about Palco's and Scotia LLC's ability to continue as going concerns. Further, Deloitte's audit report states that the difficulties of these subsidiaries raise substantial doubt about the ability of MAXXAM Inc. and subsidiaries to realize their timber related assets and discharge their timber related liabilities in the normal course of business and continue as a going concern. As previously announced in prior earnings statements, MAXXAM may from time to time purchase shares of its common stock on national exchanges or in privately negotiated transactions. Fourth Quarter Results MAXXAM reported a net loss of $0.8 million for the fourth quarter of 2004, compared to net income of $13.3 million for the fourth quarter of 2003. Net sales for the fourth quarter of 2004 totaled $104.6 million, compared to $93.8 million for the same period of 2003. For 2004, MAXXAM reported a net loss of $46.6 million, or $7.79 per share, compared to a net loss of $11.6 million, or $1.79 per share, for 2003. Net sales for 2004 were $347.5 million compared to $336.6 million for 2003. MAXXAM reported operating income of $13.3 million for the fourth quarter and $14.3 million for 2004, compared to operating income of $27.3 million and $41.4 million for the comparable periods of 2003. Forest Products Operations The forest products segment's net sales for the fourth quarter of 2004 increased slightly compared to the same period of a year ago as a result of an increase in net sales of logs and chips for the fourth quarter as compared to the same period of 2003. Although lumber shipments increased overall, the mix shifted away from upper grades to lower-priced common grades resulting in a decline in revenues from lumber sales. The forest products segment's operating income decreased for the fourth quarter of 2004 versus the same period of 2003. Results for the fourth quarter of 2003 include a $16.8 million gain on the sale of timberlands. In addition, gross margins on sales of lumber for the 2004 fourth quarter decreased due to higher per unit production costs, largely driven by the need to increase purchases of logs from third parties as a result of lower harvests. Real Estate Operations Net sales for the real estate segment increased for the 2004 fourth quarter versus the same period of 2003. An increase in sales of acreage at Palmas del Mar, residential and commercial lots at Fountain Hills and residential lots at Mirada contributed to the higher net sales. Operating results improved largely due to the increase in sales. Racing Operations Net sales and operating results for the racing segment declined slightly for the 2004 fourth quarter versus the same period of the prior year. Average daily attendance at Sam Houston Race Park and handle from host simulcasting declined in the fourth quarter of 2004 versus the same period of 2003, and this negatively impacted pari-mutuel commissions. The decline in operating results was due to lower net sales and higher operating expenses. Corporate Operations The corporate segment's operating loss for the fourth quarter of 2004 increased principally due to a $6.1 million charge related to stock-based compensation expense, which is adjusted as the market value of the Company's common stock changes. About the Company MAXXAM Inc. (AMEX:MXM) is engaged in a wide range of businesses from aluminum and timber products to real estate and horse racing. The Company's timber subsidiary, Pacific Lumber, owns about 205,000 acres of old-growth redwood and Douglas fir timberlands in Humboldt County, California. MAXXAM's real estate interests include commercial and residential properties in Arizona, California, and Texas, and Puerto Rico. The company also owns the Sam Houston Race Park, a horseracing track near Houston. MCI INC: Qwest Merger May Lead to Liquidity Crisis, Report Says --------------------------------------------------------------- According to a report released by The Eastern Management Group, the increased premium offered by Qwest for MCI along with its outstanding obligations may lead to a liquidity crisis if the merger between the two companies goes through. Furthermore, the report suggests that current estimates of corporate synergies are significantly overestimated resulting in even greater risks of economic problems down the road. The report, entitled "Critical Implications of the Proposed Qwest- MCI Merger: A Financial Analysis," is available on the company's Web site, located at http://www.easternmanagement.com/ "We foresee a liquidity crisis at Qwest-MCI based on the premium paid to MCI shareholders, lingering MCI bankruptcy issues, costs to unlock synergies, and hundreds of millions in unconditional purchase obligations for unnecessary capacity in Qwest's long distance business," said Paul Robinson, vice president of The Eastern Management Group. "In order to sell the deal to the industry, regulators, and shareholders, Qwest has overestimated synergies between itself and its competitor MCI and underestimated integration costs to make the deal look rosier than it really is." Both Qwest and Verizon are currently in talks to acquire MCI Communications, the Ashburn, VA-based company, formerly known as WorldCom. The Eastern Management Group, a management-consulting firm with over 400 clients in the telecommunications industry, believes the industry, the economy, and the public interest would be better served by a merger of Verizon Communications and MCI. Robert A. Saunders, the firm's research director, states, "Despite the increase in the share price offer to MCI shareholders, The Eastern Management Group continues to maintain that Verizon's size and industry position grant substantially more stability to stakeholders. Furthermore, we believe that capex trends and realizable commitments favor a Verizon-MCI merger rather than Qwest alternative." The Eastern Management Group recently completed a detailed study of MCI's potential acquisition and its impact on the telecommunications industry entitled "Critical Implications of the Proposed Qwest-MCI Merger: An Industry White Paper," also available on the company's Web site. This follow-on study goes into greater depth on the financials of Qwest's tertiary offer to MCI including analyses of opex and capex synergies, purchase obligations, and Qwest's long distance business and debt ratios. "Our research shows that management historically overestimates synergies, while underestimating integration costs when selling the acquisition to shareholders, regulators, and Wall Street. We have drawn the same conclusions in the Qwest-MCI estimates, which have been discounted by Wall Street," said Dr. Robinson. "We believe the new offer is a last ditch effort which is intended to sow further division between those shareholders who favor long- term goals and those who invested for quick profits." The Eastern Management Group is one of the oldest and largest management-consulting firms focused exclusively on the communications industry. For more than a quarter century, The Eastern Management Group has served over 400 communications industry clients worldwide, including every major carrier, manufacturer and software company. The Eastern Management Group has offices in the U.S. and Japan. About the Company Qwest Communications International Inc. (NYSE:Q) -- http://www.qwest.com/-- is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. At Dec. 31, 2004, Qwest Communications' balance sheet showed a $2,612,000,000 stockholders' deficit, compared to a $1,016,000,000 deficit at Dec. 31, 2003. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. If Qwest's offer is accepted by MCI's shareholders, Standard & Poor's will evaluate the company's plans for integrating MCI, its financial plans, and longer-term strategy given the competitive and consolidating telecommunications industry. Moreover, the status of the shareholder lawsuits is still uncertain and could be a factor in the rating or outlook even after the CreditWatch listing is resolved under an assumed successful bid by Qwest for MCI at current terms. As such, if Qwest's bid is rejected and it terminates efforts to acquire MCI, ratings on Qwest will be affirmed and removed from CreditWatch, and a developing outlook will be reassigned. MCI INC: Qwest's Offer is Desperate, Verizon CEO Says ----------------------------------------------------- In a letter to MCI, Inc., dated March 16, 2005, Ivan Seidenberg, Verizon Communications, Inc.'s Chief Executive Officer, asserted that the Qwest deal is perilous for MCI for four reasons: 1. Qwest's revenue was down and operating losses were up year over year, while cash provided by operating activities continued to decline. 2. Qwest finished the year with $17.3 billion of debt, more than twice the market value of the company's stock. All of Qwest's debt is rated at "junk" levels by the major rating agencies. 3. Qwest has no organic wireless capability, instead relying upon a resale arrangement with another carrier that effectively limits Qwest's ability to market the wireless voice and data services that are increasingly in demand by large business customers. In addition, Qwest has no directory-publishing business, a money-losing long-distance carrier, and a core local telephone business declining in line with industry trends-and no offsetting growth businesses. 4. Given its extraordinarily high leverage, substantial contingent liabilities and likely dim stand-alone growth prospects, we would expect Qwest's share price to remain volatile. "No wonder there appears to be a desperate quality to Qwest's efforts to acquire MCI -- explaining in the future the failure to have delivered on exaggerated promises of synergies is understandably preferable to the stark reality of its current stand-alone financial prospect," Mr. Seidenberg adds. A full-text copy of Mr. Seidenberg's March 16 letter is available for free at the Securities and Exchange Commission: http://www.sec.gov/Archives/edgar/data/723527/000119312505051961/d425.htm Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 76; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. METACHEM PRODUCTS: Court Formally Closes Bankruptcy Case -------------------------------------------------------- The Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware entered a final decree closing the chapter 11 case of Metachem Products, LLC. The Bankruptcy Court confirmed Metachem's Plan of Reorganization on Dec. 27, 2002. Judge Walrath closed the case after the Reorganized Debtor reported that all of its obligations under the Plan have been satisfied and a final report has been filed as required by Local Rule 5009-1(c). No disputes and unresolved claims are pending before the Court. Headquartered in New Castle, Delaware, Metachem Products, LLC, filed for chapter 11 protection on May 10, 2002 (Bankr. D. Del. Case No. 02-11375). Mark D. Collins, Esq., Rebecca L. Booth, Esq., at Richards, Layton & Finger represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated $50 million in assets and estimated $100 million in debts. MIDWEST GENERATION: S&P Lifts Credit Rating to B+ After Review -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit ratings on Midwest Generation LLC to 'B+' from 'B', and removed the ratings from CreditWatch with positive implications where they were placed on Aug. 2, 2004. Midwest Gen is indirectly wholly owned by Edison Mission Energy (EME; B+/Stable/--) and relies on payments from EME promissory notes to meet its debt service obligations. The outlook is stable. At the same time, Standard & Poor's raised its rating on Midwest Gen's $700 million first-lien term loan due 2011 and $200 million first-lien working-capital facility due 2009 to 'BB-' from 'B+' and affirmed its '1' recovery rating. The '1' recovery rating indicates that lenders can expect full recovery of principal in an event of default. Standard & Poor's also raised its rating on Midwest Gen's pass-through certificates of $333.5 million due 2009 and $813.5 million due 2016, each of which are guaranteed by EME to 'B+' from 'B'. In addition, Standard & Poor's also raised its rating on Midwest Finance Corp's $1 billion in second-lien notes due 2034 to 'B' from 'B-' and affirmed its '3' recovery rating. Midwest Finance is an issuing entity for the notes whose repayment obligations are guaranteed by its parent, Midwest Gen. The '3' recovery rating indicates that lenders can expect meaningful recovery of principal (50% to 75%) in an event of default. "The stable outlook reflects the outlook on EME, because of Midwest Gen's reliance on EME for certain interest payments under an intercompany note," said Standard & Poor's credit analyst Arleen Spangler. "There is little chance for an upgrade until Standard & Poor's is comfortable that Midwest Gen has the ability to lock in strong gross margins on a longer-term basis, or reduces debt such that there is adequate coverage under a low natural gas price scenario, and refinancing risk eases," she continued. An upgrade would also require an improvement in EME's credit rating. A downgrade could occur if Midwest Gen is unsuccessful in attracting any longer-term contracts and spark spreads in the Midwest are unfavorable. Midwest Gen's rating is also tied to EME's rating, so a downgrade in EME's ratings would lead to a downgrade in Midwest Gen's rating. MIIX GROUP: Creditors Must File Proofs of Claim by April 25 ----------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware set April 25, 2005, at 4:00 p.m. as the deadline for all creditors owed money by MIIX Group, Inc., on account of claims arising prior to Dec. 20, 2004, to file their proofs of claim. A separate deadline for governmental units holding claims is set on June 19, 2005, at 4:00 p.m. Creditors must file written proofs of claim on or before the April 25 General Bar Date or June 19 Governmental Bar Date and those forms must be delivered to: The MIIX Group, Inc. c/o Delaware Claims Agency LLC Claims Department P.O. Box 515 Wilmington, Delaware 19899 -- or -- Delaware Claims Agency LLC c/o Parcels, Inc. Attn: The MIXX Group, Inc. Claims Department 4 East 7th Street Wilmington, Delaware 19899 Headquartered in Lawrenceville, New Jersey, The MIIX Group, Inc., provides management services to medical malpractice insurance companies. The Company along with its debtor-affiliate filed for chapter 11 protection on Dec. 20, 2004 (Bankr. D. Del. Case No. 04-13588). Andrew J. Flame, Esq., at Drinker Biddle & Reath LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and debts between $10 million and $50 million. MIRANT CORPORATION: Valuation Hearing Starts on April 11 -------------------------------------------------------- One of the fundamental questions in Mirant Corporation and its affiliate-debtors' Chapter 11 cases is how much the Debtors' business is worth. The answer will determine, among other things, whether the Debtors' unsecured creditors get paid in full and whether the equity holders receive any recovery under the Debtors' Plan or Reorganization. Robin Phelan, Esq., at Haynes and Boone, LLP, in Dallas, Texas, points out recent developments that underscore the importance of a valuation to the reorganization process: (1) On November 23, 2004, the Official Committee of Equity Holders of Mirant Corp. filed two actions asking the Court to authorize the Debtors to hold a shareholders' meeting for the purpose of electing a new slate of directors; and (2) On January 19, 2005, the Debtors filed their proposed plan of reorganization and related disclosure statement. The Debtors' value bears heavily on both matters. If the old equity is out of the money, there is no reason to hold a shareholders' meeting. "[I]t would be a pointless exercise that would serve only as a distraction and a waste of limited judicial and estate resources," Mr. Phelan says. Similarly, the Plan process necessitates a determination of whether or not unsecured creditors will get a full recovery and whether old equity is entitled to any recovery at all. Obviously, the determinations are likely to materially impact the parties' negotiating positions as the process moves toward Plan confirmation. The Debtors, with the agreement and support of the Official Committee of Unsecured Creditors of Mirant Corp., the Official Committee of Unsecured Creditors of Mirant Americas Generation LLC, and the Equity Committee believe that it would be advantageous to obtain a determination from the Court regarding the Debtors' value prior to the approval of a disclosure statement explaining the Plan and in lieu of proceeding at this time with the litigation of the Equity Committee Actions. At the Debtors' behest, the Court orders that: (a) April 11, 12, and 13, 2005, are fixed as the dates for the Valuation Hearing; and (b) these dates, deadlines, and limitations apply to the Valuation Hearing: * Conference under Rule 26(f) of the Federal Rules of Bankruptcy Procedure: The parties will confer at a mutually convenient time to consider the valuation issue and the basis of their proposed values and the possibilities for a prompt settlement or resolution of the Valuation Proceeding. * Initial Disclosures: The disclosures required by Rule 26(a)(1) of the Federal Rules of Civil Procedure, as incorporated by Rule 7026 of the Federal Rules of Bankruptcy Procedure, need not be made by any of the parties. * Discovery Cut-Off: By April 1, 2005, the Valuation Parties will complete all discovery, including depositions. * The discovery taken in the Valuation Proceeding will be conducted in accordance with the Federal Rules of Civil Procedure, as adopted by the Federal Rules of Bankruptcy Procedure. * * * Parties that have notified the Court of their intention to participate in the Valuation Proceedings are: -- Mirant Corporation, -- Official Committee of Unsecured Creditors of Mirant Corp., -- Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, -- Ad Hoc Committee of Bondholders of MAGi, -- Law Debenture Trust Company of New York as Indenture Trustee and Property Trustee, -- the MirMA Landlords, -- California Power Exchange Corporation, -- Potomac Electric Power Company, and -- Deutsche Bank AG. 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. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) MUTUAL OIL: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Mutual Oil Company, Inc. 1609 Old New Castle Road Fultondale, Alabama 35068 Bankruptcy Case No.: 05-02551-TOM11 Chapter 11 Petition Date: March 15, 2005 Court: Northern District of Alabama Judge: Tamara O. Mitchell Debtor's Counsel: Robert L. Shields III, Esq. The Shields Law Firm 2025 Third Avenue North Suite 301 Birmingham, AL 35203 Tel: (205) 323-0010 Total Assets: $1,000,001 up to $10 Million Total Debts: $1,000,001 up to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ SN Servicing Corporation Equipment, $1,595,245 323 Fifth Avenue Inventory, (900,000 P.O. Box 35 Modernizing secured) Eureka, CA 95502 Hunt Refining Co. $425,928 P.O. Box 11407 Drawer 611 Birmingham, AL 35246-0611 Chevron Products $53,848 P.O. Box 102020 Atlanta, GA 30368 Allied Energy Corp. $46,193 Drawer# AL0156 P.O. Box 830769 Birmingham, AL 35283-0769 Ralph's Truck Repair $20,891 9212 Hwy 155 Montevallo, AL 35115 Federated Insurance $7,008 P.O. Box 467500 Atlanta, GA 31146 Bains and Bains Rental $5,400 93 Azalia Trail Oneonta, AL 35121 The Moltan Company $5,363 P.O. Box 1000 Memphis, TN 38148 Veterans Oil Company $3,851 2070 Hwy 150 Bessemer, AL 35022 National City Petroleum $2,580 P.O. Box 691355 Cincinnati, OH 45269-1355 Amjad Sultan $2,542 1412 Berry Road Birmingham, AL 35226 Metro Service & Equipment $2,457 P.O. Box 1305 Fultondale, AL 35068 Buckner Barrels $2,159 P.O. Box 889 Springville, AL 35146 Southtrust Bank $1,732 Commercial Lease P.O. Box 830803 Birmingham, AL 35283 Lease Capital $1,574 270 Doug Baker Blvd. Suite 700-204 Birmingham, AL 35242 Bill Lykens & Sons $1,354 1500 4th Avenue South Birmingham, AL 35233 Bill Renfrow $1,216 P.O. Box 830803 Birmingham, AL 35283 Colonial Bank $929 P.O. Box 10088 Birmingham, AL 35202 The Dungan Company $897 3302 Old Saw Mill Road Moody, AL 35004 Rodney Netherton $725 1644 County Hwy 38 Horton, AL 35980 NAVARRE CORP: S&P Puts B+ Rating on Planned $125M Sr. Unsec. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to New Hope, Minnesota-based Navarre Corp. The outlook is negative. At the same time, Standard & Poor's assigned its 'B+' rating to the company's proposed $125 million senior unsecured notes due 2012. The 'B+' senior unsecured debt rating is one notch below the corporate credit rating, reflecting a material amount of senior secured debt in the capital structure. Proceeds from the notes are expected to be used largely to finance Navarre's proposed acquisition of FUNimation Productions Ltd. "The ratings reflect Navarre's position as a niche distributor and publisher of home entertainment and software products to domestic retail customers, modest historical earnings, and potentially volatile revenues and earnings from acquired entertainment content," said Standard & Poor's credit analyst Martha Toll-Reed. "These factors are partially mitigated by Navarre's improved pro forma profitability and moderately leveraged financial profile." Founded in 1983, Navarre's revenues and EBITDA for the 12 months ended Dec. 31, 2004 were $601 million and $23.6 million, respectively. The company's historical revenues were derived predominantly from the distribution of prepackaged PC software and other media content. The proposed FUNimation acquisition will add less than $75 million of revenues, but will approximately double Navarre's EBITDA base. FUNimation will represent the third and largest of a series of strategic acquisitions to expand the company's revenue stream from licensed rights to home entertainment content in Navarre's more profitable publishing segment. In addition, the company should benefit from its ability to leverage sales of its licensed content through its distribution segment infrastructure and retail channel access. However, sales of home entertainment products and content are seasonal and can vary significantly with the popularity of the content. Navarre has a limited track record of operating performance at its current stand-alone profitability levels. The pro forma last-12-month EBITDA margin was about 8% as of Dec. 31, 2004. NEXSTAR BROADCASTING: S&P Rates New $455M Sr. Sec. Loans at B+ -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to Nexstar Broadcasting Group Inc.'s proposed $455 million senior secured credit facilities. A recovery rating of '3' was also assigned, indicating the expectation of a meaningful recovery of principal in the event of default or bankruptcy. At the same time, Standard & Poor's assigned its 'B-' rating to Nexstar's proposed $75 million add-on to its existing 7% notes due 2014. Proceeds from the transactions are expected to be used to refinance the company's existing bank debt and to call its 12% senior subordinated notes due 2008. Standard & Poor's ratings on Nexstar, including its 'B+' long-term corporate credit rating, were affirmed, but with a revision of outlook to negative from stable. Pro forma consolidated debt, including debt obligations of Mission Broadcasting that are guaranteed by Nexstar, totaled approximately $650 million at Dec. 31, 2004. The effect of the proposed refinancing is to lower the company's interest expense, which should benefit free cash flow growth in 2005. "The outlook revision to negative recognizes that debt to EBITDA, which is already high for the 'B+' rating level, is likely to increase in 2005, a nonelection year," said Standard & Poor's credit analyst Alyse Michaelson Kelly. The rating on Nexstar continues to reflect high leverage from aggressive debt-financed acquisition activity, the potential for additional station purchases that could limit credit profile improvement, and TV broadcasting's mature revenue growth prospects. These factors are only partially offset by the cash flow diversity provided by the company's major-network-affiliated TV stations with decent positions in small and midsize markets, broadcasting's good margin and discretionary cash flow potential, and station asset values. Including pending acquisitions and dispositions, Nexstar owns and operates 46 TV stations that reach 7.4% of U.S. TV households in 27 small and midsize markets. Included in the company's portfolio are stations affiliated with the three major broadcast networks. The NBC- and CBS-affiliated stations contribute a majority of total broadcast cash flow. No market accounts for more than 15% of total broadcast cash flow, which helps mitigate the impact of regional economic volatility on advertising demand. The negative outlook recognizes that leverage is relatively high for the 'B+' rating level. There is modest debt capacity at the current rating to withstand operating shortfalls or acquisitions. Reducing leverage by using cash flow to lower debt, in both political and nonpolitical years, will be important in any consideration of an outlook revision to stable. NETWORK INSTALLATION: Names Michael Rosenthal as New CFO -------------------------------------------------------- Network Installation Corp. (OTC Bulletin Board: NWKI) appointed Michael Rosenthal as its new Chief Financial Officer. Network Installation CEO Jeffrey Hultman stated, "In my career I've led two companies through rapid growth during a relatively short time span. One of the most critical keys to success during this period is implementing sound financial controls, planning and modeling. With Mike on board, I am supremely confident we have an individual who can lead this effort." He added, "Historically, we've achieved significant accomplishments working together and see no reason why we cannot replicate our past successes with Network Installation." Incoming CFO Michael Rosenthal commented, "I am truly excited to be back working with Jeff and joining the management team at Network Installation. I believe we are properly positioned to exploit the rapid growth of the wireless communication marketplace and look forward to meeting the challenges ahead." About Michael Rosenthal From 2003-04 Michael Rosenthal served as CFO for EdgeFocus, Inc., a start-up broadband company, which offers high-speed Wi-Fi Internet access to apartment residents. The company's apartment communities are primarily owned by large REITs including AIMCO, Archstone, and Equity Residential. During his tenure, the company was launched from infancy to within several months of reaching self-sustainable cash flow. As VP/General Manager and Director of Cellular One, Texas Region from 1999-2002, Mr. Rosenthal was responsible for all operations and build-out of 3 adjacent rural/suburban markets in Texas with over 1M POPs from the Gulf of Mexico to North Texas and into East and West Texas, including 15 retail stores. Functions included sales management, P&L accountability, marketing, operations/control, staffing, providing direction and feedback to network engineering, selecting and building retail stores, and building direct and indirect sales channels. During 2000 and 2001, the Texas Region produced nearly 200% of plan, which measures EBITDA, churn, gross ads, ARPU, and COA. His 2002 EBITDA budget was over $85 million while managing over 100 employees. From 1989-1998 Mr. Rosenthal served in several positions including Executive Director with Primco PCS JV and Airtouch Cellular (both now Verizon Wireless) where he was responsible for coverage strategy, affiliate and roaming partner negotiations, capital allocation strategy, and evaluation of resale. During his tenure he successfully negotiated the company's first roaming contracts and launched dual-mode roaming capability with all major carriers, e.g., GTE, RBOCs, etc. PrimeCo had not had any roaming prior to this roll out. Mr. Rosenthal received a B.S. in Economics and his M.B.A. in Finance from Arizona State University and his M.A. in Telecommunications from George Washington University. He also successfully completed the Stanford University Executive Program in Advanced Management. Network Installation Corp. -- whose Sept. 30, 2004, balance sheet showed a $213,146 stockholders' deficit -- provides communications solutions to the Fortune 1000, Government Agencies, Municipalities, K-12 and Universities and Multiple Property Owners. These solutions include the design, installation and deployment of data, voice and video networks as well as wireless networks including Wi-Fi and Wi-Max applications and integrated telecommunications solutions including Voice over Internet Protocol applications. For more information, visit http://www.networkinstallationcorp.net/ NEXMED INC: Losses & Deficit Trigger Going Concern Uncertainty -------------------------------------------------------------- NexMed, Inc., (Nasdaq: NEXM) reported its 2004 financial results. For the year ended December 31, 2004, the Company recorded revenue of $359,369 compared to $110,743 for the same period in 2003. The 2004 revenues were mostly received from research and development agreements. For the year ended 2004, the net loss applicable to common stock was $17,023,648, as compared to $20,351,410 for year ended 2003. The decrease in net loss applicable to common stock is primarily attributable to the increase in revenues, the decrease in interest expense in 2004 and a deemed dividend related to the beneficial conversion feature of the Company's preferred stock issued in 2003. As of December 31, 2004, the Company had cash, cash equivalents, marketable securities and short-term investments of approximately $9.13 million as compared to $10.98 million at December 31, 2003. Going Concern Doubt In its Form 10-K for the year ended Dec. 31, 2004, filed with the Securities and Exchange Commission, the Company's independent registered public accounting firm has concluded that there is substantial doubt about NexMed's ability to continue as a going concern due to the Company's losses to date, expected losses in the future, limited capital resources and accumulated deficit. "These factors may make it more difficult for us to obtain additional funding to meet our obligations," the Company said in its regulatory filing. "Our continuation is dependent upon our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. We anticipate that we will continue to incur significant losses at least until successful commercialization of one or more of our products, and we may never operate profitably in the future." About the Company NexMed, Inc., is an emerging drug developer that is leveraging its proprietary drug technology to develop a significant pipeline of innovative pharmaceutical products to address large unmet medical needs. Its lead NexACT(R) product under development is the Alprox-TD(R) cream treatment for erectile dysfunction. The Company is also working with various pharmaceutical companies to explore the incorporation of NexACT(R) into their existing drugs as a means of developing new patient-friendly transdermal products and extending patent lifespans and brand equity. NUTRAQUEST INC: Comm. Hires Montgomery McCracken to Recover Assets ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of New Jersey authorizes the Official Committee of Unsecured Creditors appointed in Nutraquest, Inc.'s chapter 11 cases, to employ Montgomery, McCracken, Walker & Rhoads LLP as special litigation counsel on a contingency fee basis to bring derivative claims on behalf of the Debtor's estate. Montgomery McCracken will be paid a contingency fee calculated on the total value of all assets in the Debtor's behalf through an adversary proceeding or a settlement. Montgomery McCracken will be compensated as follows: Time Elapsed Between Filing Contingent Fee of the Initial Complaint and Date Estate Recoveries an Agreement in Principle is Reached ----------------- ------------------------------------ 10% 0 - 120 days 15% 121 - 180 days 20% 181 - 240 days Montgomery McCracken will be paid immediately after every cash recovery. Montgomery McCracken will get a super-priority claim against non-cash recoveries after these assets will be liquidated. Headquartered in Manasquan, New Jersey, Nutraquest, Inc., is the marketer of the ephedra-based weight loss supplement, Xenadrine RFA-1. The Company filed for chapter 11 protection on October 16, 2003 (Bankr. N.J. Case No. 03-44147). Andrea Dobin, Esq., and Simon Kimmelman, Esq., at Sterns & Weinroth, P.C. represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. OWENS CORNING: Garrison Says Asbestos PD Claim is Not Time Barred ----------------------------------------------------------------- In December 2004, Owens Corning and its debtor-affiliates filed objections to Garrison Public School District #51's asbestos property damage claims. Garrison is a public school district located in Garrison, North Dakota. Speights & Runyan is the counsel for Garrison. Daniel A. Speights, Esq., at Speights & Runyan, in Hampton, South Carolina, states that contrary to the Court's earlier suggestion that dispositive motions should be filed after discovery, the Debtors included "Initial Objections" to Garrison's Claim Nos. 8783 and 8926, which the Debtors submit, "the Court can and should resolve as a matter of law based on the undisputed evidence already available." The primary basis of the Debtors' Initial Objections is that Garrison's Claims are time barred. According to Mr. Speights, the Debtors face a "substantial if not insurmountable hurdle" to prevail as a matter of law under prevailing applicable authorities: * Tioga Public School #15 of Williams County, State of North Dakota v. United States Gypsum Company, 984 F.2d 915 (8th Cir. 1993); * Montana-Dakota Utilities Co. v. W.R. Grace & Co., 14 F.3d 1274 (8th Cir. 1994); and * Hebron Public School District of Morton County v. United States Gypsum Co., 475 N.W.2d.120 (N.D. 1991). The Bankruptcy Court recognizes the universal rule that the Debtors have the burden of proof with respect their affirmative statute of limitations defense. The North Dakota Supreme Court has held in In re Hebron Public School that the applicable six- year statute of limitation does not accrue until the aggrieved party discovers facts, which constitute the basis of its claim for relief. In the case of MDU v. W.R. Grace, Mr. Speights relates that because a North Dakota building owner may not bring an asbestos property damage lawsuit until there is contamination, the North Dakota statute of limitations does not accrue until the building owner "could have learned, with the exercise of reasonable diligence, that its building had been contaminated by asbestos." Furthermore, the District Court instructed the jury, inter alia, that in order to find that MDU's claim was time barred, it must only find that MDU knew or with the exercise of reasonable care should have known that the fireproofing contained asbestos and might post a health hazard. The jury ruled in favor of the asbestos company on the statute of limitations. Two years later, however, the Eighth Circuit reversed that ruling. In a unanimous opinion authored by Chief Judge Arnold, the Circuit Court found that under North Dakota law, "[r]egardless of the plaintiff's knowledge of a potential cause of action, no cause of action exits until the plaintiff suffers some compensable harm." Therefore, the Circuit Court recognized that before it can determine when the statute of limitations began to run on MDU's Claims, it must first determine when an asbestos plaintiff is injured and can bring suit. The Circuit Court cited the case of Tioga Public School v. United States Gypsum for the proposition that, "[t}he asserted injury here is not simply an injury to the [covering] or to the school buildings; rather, the injury is the contamination of the Tioga school buildings by asbestos and the consequent health risk to the building's occupants." Mr. Speights tells the Bankruptcy Court that based on that analysis, the Circuit Court held that the District Court committed reversible error in failing to charge the jury that the proper standard was whether MDU knew or should have known of asbestos contamination and health risk more than six years before it brought suit. The Debtors, as long-time participants in the asbestos litigation, are not only aware of these holdings, but Fibreboad itself was a party in Kansas City v. W.R. Grace & Co., et al., 778 S.W.2d 264 (W.D. Mo. App. 1989), aff'd sub. nom. 855 S.W.2d 360 (Mo. 1993) -- the first case in the United States to hold that the statute does not run until contamination and health risk, Mr. Speights points out. In Kansas City v. W.R. Grace, Fibreboard settled and Kansas City obtained a jury verdict against one of its co-defendants, Keene Corporation. The $8,000,000 actual damage award was affirmed on appeal. The Court's treatment of a "bad facts" presented by Fibreboard and its co-defendants illustrates that the only proper question in a statute of limitations fight is when the contesting party can prove the claimant knew of contamination and health hazard and, even better than MDU, demonstrate the irrelevancy of the building owner's general knowledge of the hazards of asbestos or the inevitability of abatement. Mr. Speights contends that the Debtors simply cannot be heard to claim that Garrison's statute of limitations accrued more than six years before the Petition Date when the Debtors claim even today that there is no evidence that their product contaminated Garrison's building or presented a health hazard. "Stated more succinctly, the Debtors have conceded that the statute of limitations has not accrued." In addition, the Debtors manufactured thermal system insulation, principally Kaylo, which was used extensively on pipes and boilers in buildings. At the urging of Owens Corning, whose counsel, Jesse Hill, was the TSI representative on the Environmental Protective Agency Committee that developed the pertinent regulations in 1987, TSI is not classified as a presently friable material: Thermal system insulation that has retained its structural integrity and that has an undamaged protective jacket or wrap that prevents fiber releases shall be treated as non-friable and therefore is subject only to periodic surveillance and preventive measures as necessary. As a result of the regulation, which Owens Corning obtained, contamination and health risk -- the legal prerequisites for a lawsuit -- do not ordinarily take place with respect to TSI until the material has lost its structural integrity. Debtors Cannot Prevail The Debtors cannot prevail at this point on their statute of limitations argument under the MDU precedent. Despite the fact that MDU was a North Dakota case, however, the Debtors have suggested in their Objections that the North Dakota revival statute bars Garrison's claims. The essence of that act is that any public building owner who commenced an asbestos property damage action prior to August 7, 1997, would not have to face a limitations defense. With respect to the Debtors' choice to proceed against Garrison before the parties have conducted discovery, Speights & Runyan who was lead trial counsel in all North Dakota asbestos property damage cases, believes that it will be able to show that the revival statute was passed in 1993 at the urging of the State of North Dakota directly as a result of the District Court's rulings the previous year in MDU. Moreover, not only was the District Court's standard difficult for any building owner, but also it was the State of North Dakota that prepared the 1980 report that furnished the basis of the dismissal of MDU's claims. Under the District Court's standard, the trial was monopolized by testimony surrounding what the building owner knew or could have known about asbestos rather than whether there was a compensable injury. The year after the revival statute was enacted, the Eighth Circuit reversed the District Court ruling and explained the accrual test -- which largely obviated the need for the revival statute. Nevertheless, the Debtors now argue that the revival statute -- passed to assist public building owners and the public health -- can be used to eliminate the right of public building owners to bring lawsuits while allowing private building owners to litigate the actions for years under the MDU appellate standard. It is patently clear, however, that the legislature intended to assist public building owners, not to discriminate against them. More importantly, under Tioga, Garrison had no right to bring a lawsuit against the Debtors for their "harmless" product before 1997; the Debtors' interpretation would mean that the legislature intended to bar asbestos property damage lawsuits by public building owners before they even existed. Leaving aside the legal impediments to abolishing an action before it accrues, there is no evidence that the legislature intended an absurd result. The only common sense interpretation of the act is that in exchange for the revival of the statute of limitations, the State was told that it had to bring its lawsuit under the revival statute by August 1, 1997. The Act specifically provides that, "[b]y enactment of this statute of limitations, the Legislative Assembly does not imply that suits would otherwise be barred by an existing limitations period." With the reversal of the MDU and the 1994 Eighth Circuit opinion establishing the statute of limitations test for asbestos property damage cases in North Dakota, Garrison need not and does not rely on the revival statute and could not have done so under the Debtors' view because it did not have a cause of action to be revived prior to 1997. Not only is there no evidence that Garrison's claim had accrued before the bankruptcy, but the Debtors position is that their products have not caused any harm through the release of asbestos fibers. Therefore, Garrison's claims against the Debtors did not exist before the revival statute was enacted, much less before the limitations period had expired. On behalf of Garrison, Speights & Runyan asks the Court to overrule the Debtors' Objections. The State of North Dakota, which holds Claim Nos. 8774 and 8922, and Kindred Public School District, which holds Claim No. 8886, support Speights & Runyan's contentions. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) OXFORD AUTOMOTIVE: Judge Rhodes Confirms Second Amended Plan ------------------------------------------------------------ The Honorable Steven W. Rhodes of the U.S. Bankruptcy Court for the Eastern District Of Michigan, Detroit Division confirmed the Second Amended Non-Consolidate Plan of Reorganization filed by Oxford Automotive, Inc., and its debtor-affiliates. Judge Rhodes confirmed the Debtor's Amended Plan on March 9, 2005. Judge Rhodes approved the adequacy of the Debtors' First Amended Disclosure Statement on Jan. 18, 2005. Judge Rhodes concludes that: a) the Plan was proposed in good faith pursuant to Section 1129(a)(3) of the Bankruptcy Code; b) the Debtors, the Unsecured Creditors Committee, the Noteholders Committee, and their respective directors, officers, agents, affiliates, representatives, attorneys and advisors participated in the negotiation and preparation of the Plan and are therefore entitled to protections under Section 1125(c) of the Bankruptcy Code and the exculpation provisions in Article XII of the Plan; c) the Plan complies with all applicable provisions of the Bankruptcy Code, including Sections 1129(a)(1), 1122(a) and 1123(a); d) pursuant to Section 1123(a)(5) of the Bankruptcy Code, the Plan provides for adequate and proper means of its implementation, including the Debtors' ability to make all payments to be made on the Effective Date; e) Article VI of the Plan and other provisions of the Plan provides adequate means for: (i) the Secured Noteholders Distribution and the North American Unsecured Distribution and the liquidation of the remaining assets of the North American Debtors, (ii) the cancellation of the Senior Secured Notes and the Old OAI Interests and the transfer of the Reorganized Entity of the remaining Foreign Stock, (iii) the authorization and issuance of New Common Stock and the necessary information with respect to the corporate governance, directors, and officers of the Post-Effective Date Debtors and Reorganized Entity, and (iv) the authorization for all necessary corporation action of the Post-Effective Date Debtors; f) Pursuant to Section 1123(a)(7) of the Bankruptcy Code, the provisions of the Plan are consistent with the interests of creditors and equity security holders; and g) the Plan is feasible pursuant to Section 1129(a)(11) of the Bankruptcy Code, it complies with all requirements of Federal Rule Bankruptcy Procedure 3016 and all objections to the Plan's confirmation have been overruled by the Court's confirmation order. The Plan also incorporates a settlement agreement among Oxford Automotive, Inc., and its debtor-affiliates, the Official Committee of Unsecured Creditors, the Ad Hoc Committee of the Debtors' Senior Secured Noteholders, and the Debtors' Postpetition DIP Lenders. The material terms of this Settlement are: a) all pending litigation brought by the Committee will be dismissed upon the Effective Date of the Second Amended Plan; and b) holders of North American General Unsecured Claims will receive an aggregate distribution of $8 million and a Post- Effective Date Committee will be established to govern Post- Effective Date matters relating solely to the holders of North American General Unsecured Claims, including distribution to creditors and the claims objection and resolution process in respect of North American's claims The Second Amended Plan provides that the Settlement is a full and complete resolution of all North American General Unsecured Claims and any and all Causes of Action against the Reorganized Entity and its subsidiaries and the Noteholders, the Lenders under the Term Loan Facility, the Agent under the Term Loan Facility, the DIP Lenders, the Indenture Trustee, and the DIP Agent related to the North American Claims. Full text copies of the Amended Disclosure Statement and Amended Plan are available at no charge at: http://www.bmccorp.net/oxauto The Debtors anticipate that the Plan's Effective Date will occur today, Monday, March 21, 2005. Headquartered in Troy, Michigan, Oxford Automotive, Inc. -- http://www.oxauto.com/-- is a Tier 1 supplier of specialized metal-formed systems, modules, assemblies, components and related services for the automotive industry. Oxford's primary products include structural modules and systems, exposed closure panels, suspension systems and vehicle opening systems, many of which are critical to the structural integrity and design of the vehicle. The Company and its debtor-affiliates filed for chapter 11 protection on December 7, 2004 (Bankr. E.D. Mich. Case No. 04-74377). I. William Cohen, Esq., at Pepper Hamilton LLP represents the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $727,023,000 in total assets and $771,325,000 in total debts. PACIFIC GAS: Wants Court to Reduce Class 6 Escrow by $86 Million ---------------------------------------------------------------- Janet A. Nexon, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin, in San Francisco, California, relates that on December 7, 2004, the Federal Energy Regulatory Commission approved a settlement agreement between Pacific Gas and Electric Company and Duke Energy Corporation, among other parties. The Settlement is "based upon a calculation of Duke's total estimated refund amounts for spot sales in the CAISO [California Independent System Operator Corporation] and CalPX [California Power Exchange] markets" from October 2, 2000, to June 20, 2001, and from January 1, 2000, to October 1, 2000. The Settlement Agreement provides that certain parties to the Settlement, including PG&E, will receive Deemed Distributions, each of which will be applied as an offset to amounts payable by the Settling Participant to CalPX and CAISO. The Settlement Agreement further provides that although the Settling Participants that received a Deemed Distribution are not entitled to certain cash distributions, "FERC approval of this Agreement . . . constitutes FERC's determination that the escrow established by PG&E pursuant to its Plan of Reorganization for payment of its outstanding debts to the PX may be reduced in an amounts equal to the Deemed Distributions under this Agreement." PG&E has established a separate escrow account for disputed Claims in Class 6 in the aggregate amount of $1.6 billion, pursuant to an Escrow Order dated March 5, 2004, and a stipulation dated November 13, 2003, with a number of Class 6 creditors. The Class 6 Stipulation provided that any reduction in the amount deposited in the escrow would be made "only upon order of the Bankruptcy Court pursuant to a reasonably noticed motion." Ms. Nexon asserts that it is appropriate for PG&E to reduce the amount in the Class 6 escrow funds because the offset of the PG&E Deemed Distribution by CalPX under the Settlement will have the effect of reducing PG&E's total obligations to the Class 6 claimants. In this regard, PG&E seeks the Court's authority to withdraw $85,987,391 from the Class 6 Escrow plus interest. Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. Pacific Gas and Electric emerged from chapter 11 protection on April 12, 2004, paying all creditors 100 cents-on-the-dollar plus post-petition interest. PANAMSAT HOLDING: Moody's Lifts Rating on $250M Sr. Notes to B3 --------------------------------------------------------------- Moody's Investors Service has upgraded the debt ratings for PanAmSat Holding Corp. and its operating subsidiary, PanAmSat Corporation concluding a review dated December 20, 2004. This review was precipitated by the company's announced intention to complete a $900 million initial public equity offering, of which a substantial portion was stated to be used to reduce debt. The upgraded rating for PAS Holdings is: * $250 million of Senior Discount Notes to B3 from Caa1. The upgraded ratings for PAS are: * Issuer rating to B1 from B2; * Senior implied rating to Ba3 from B1; * $2.3 billion senior secured bank facility to Ba3 from B1; * $150 million senior secured notes due 2008 to Ba3 from B1; * $125 million senior secured notes due 2028 to Ba3 from B1; and, * $656.5 million senior unsecured notes due 2014 to B1 from B2. The outlook for the ratings is stable. The upgrade reflects the effect of the $900 million equity issue on the company's credit metrics and balance sheet capitalization. Proceeds from the equity offering will be used to pay a dividend to the company's shareholders of $200 million, to reduce debt by approximately $625 million (unless the green shoe is exercised which could moderately increase the amount of debt reduction), and for general corporate purposes. Moody's anticipates the planned repayment of $270 million of PAS's senior secured bank facilities and $354 million of the company's 9.0% senior unsecured notes due 2014 reducing both leverage and interest expense more quickly than expected. However, the rating action also reflects the company's decision to initiate a material dividend program, which we anticipate will result in ongoing distributions, using much of the company's free cash flows over the intermediate-term. This factor constrains the rating upgrade to a single notch despite the company achieving its deleveraging target earlier than expected, as we anticipate that there will be minimal further credit improvement over the next few years. Although Moody's remains concerned with how prudently management will manage the balance sheet vis-a-vis supporting equity holder interests, Moody's believes the company's current business plan includes sufficient free cash flow generation to fund these distributions, accumulate cash for moderate unforeseen satellite failure, and sufficiently meet debt indenture repayment requirements and maturities over the intermediate-term. The stable outlook reflect PAS's mature growth profile and ability to generate good cash flow, its very strong industry position with a significant global footprint, its strong and diversified customer base, the company's significant operating margins, and a committed contract backlog currently of almost $4.9 billion. The company's dividend plans are expected to leave PAS with only moderate debt reduction capability and credit metric improvement, which supports the stable outlook over the next few years. Debt indenture covenants are also an important component of the ratings. The financial covenants allow for a moderate amount of operational flexibility but do not allow any material increase in debt leverage or additional debt at PAS, but do not restrict increasing debt further at PAS Holdings. Covenants currently include a maintenance test of 5.75 times total debt-to-adjusted EBITDA which steps down over time and which adds back sales-type lease principal payments. The equity infusion from the IPO and the resulting debt repayment will improve the company's ability to aggressively bring its lease adjusted leverage down to under 5.5 times EBITDAR by the end of this year. Given the company's new dividend plan, Moody's anticipates the company maintaining leverage at about 5.0 times for the foreseeable future thereafter. A commitment to further improving credit metrics beyond present expectations could pressure ratings upward. Any leveraging recap or acquisition, which would reverse the aforementioned credit benefits, or unmitigated failure of any satellites which would cause the material loss of customers and revenues, as well as uninsured satellite assets, could put negative pressure on the ratings. PanAmSat Corporation, headquartered in Wilton, Connecticut, is one of the world's top three satellite operators and was recently bought by an equity sponsor group led by Kohlberg, Kravis Roberts & Co. and including The Carlyle Group, Providence Equity Partners and management. With an owned and operated fleet of 23 satellites, PAS is a leading global provider of video, broadcasting and network distribution and delivery services. PARMALAT USA: Wants Until June 30 to Decide on Atlanta Contracts ---------------------------------------------------------------- Parmalat USA Corp. and Farmland Dairies LLC seek the U.S. Bankruptcy Court for the Southern District of New York's authority to reject, assume, or assume and assign, as the case may be, certain executory contracts and unexpired leases in connection with a potential sale of Farmland's fluid milk and other beverage business based in Atlanta, Georgia, on the earlier of the sale's closing and June 30, 2005. As described in their Chapter 11 Plan and Disclosure Statement, the U.S. Debtors determined that the values of their estates would be maximized by a reorganization of Farmland's business around its Northeast and Michigan operations. That revised strategy called for Farmland to concentrate on its fresh-milk and nationwide extended-shelf-life milk business and to divest its non-core operations, including the Atlanta Business. Accordingly, about that time, the U.S. Debtors and their professionals commenced a marketing process for the assets comprising the Atlanta Business. Farmland is currently engaged in negotiations concerning the terms and provisions of an asset purchase agreement related to the sale of the Atlanta Business to a potential purchaser. It is anticipated that a request for an order approving the sale of the Atlanta Business to the Purchaser, free and clear of all liens, claims, encumbrances, and interests, will be filed shortly. Given that the Purchaser intends to operate the Atlanta Business as a going concern, the terms of the sale agreement currently under negotiation provide for the Purchaser's assumption of certain of the Atlanta Contracts. The U.S. Debtors also anticipate that the sale of the Atlanta Business will close prior to the Effective Date of the Plan. However, the Debtors cannot be absolutely certain that the sale will close within that timeframe or that the consummation of the proposed sale to the Purchaser will, in fact, occur. Thus, the Debtors believe that deciding on the Atlanta Contracts will provide them with the flexibility needed to ensure that those contracts are preserved pending the anticipated closing on the sale of the Atlanta Business. Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, tells Judge Drain that the confirmation of the U.S. Debtors' Plan implements their assumption or rejection of the various executory contracts and unexpired leases. Absent the authority to decide on the contracts and leases, the Debtors would have been forced to decide on the Atlanta Contracts without knowing with certainty whether the potential sale of the Atlanta Business to the Purchaser will, in fact, occur, or which agreements the Purchaser has committed to assume. A premature rejection of the Atlanta Contracts would have jeopardized the sale currently under negotiation. A premature assumption of the Atlanta Contracts, to preserve them in connection with the potential sale of the Atlanta Business, would have burdened the Debtors with current administrative costs. Ms. Goldstein explains that if, ultimately, the Purchaser failed to close on the Atlanta Business sale, or closed but determined not to take certain contracts, the rejection damages arising from any Atlanta Contracts prematurely assumed as of confirmation would have generated unnecessary administrative costs. Granting the Debtors' request to assume or reject the Atlanta Contracts at a time when there is certainty will void subjecting their estates to unnecessary risks and costs. The non-debtor parties to the Atlanta Contracts that are affected by the U.S. Debtors' Request will not be unfairly prejudiced, Ms. Goldstein assures the Court. The Debtors' request provides certainty to those parties that on the earlier of the Sale Date and June 30, 2005, the Debtors will have effectuated the applicable assumptions and rejections. A list of the Atlanta Contracts is available for free at: http://bankrupt.com/misc/Atlanta_Contracts_and_Leases.pdf Headquartered in Wallington, New Jersey, Parmalat U.S.A. Corporation -- http://www.parmalatusa.com/--generates more than EUR7 billion 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. The company employs over 36,000 workers in 139 plants located in 31 countries on six continents. It 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. The Bankruptcy Court confirmed the U.S. Debtors' Plan of Reorganization on March 7, 2005. (Parmalat Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000) PROTECTION ONE: Moody's Puts B2 Rating on Proposed $275M Facility ----------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Protection One Alarm Monitoring, Inc.'s proposed $275 million secured credit facility. Concurrently, Moody's upgraded the rating on the company's 8.125% senior subordinated notes to Caa1 from Ca and the senior implied rating to B2 from Caa2. The outlook has been changed to stable from positive. The ratings upgrade reflects increased liquidity and an improved capital structure as a result of the recent consummation of an exchange agreement with affiliates of the Quadrangle Group and the proposed retirement of the company's indebtedness maturing in 2005. The ratings benefit from a recurring revenue stream from the company's alarm contract portfolio, reduced customer attrition rates and an improved cost structure. The ratings also reflect the reduction in the company's customer account base over the last few years, intense competition and significant costs to acquire new customer accounts. Moody's took these rating actions: * Assigned $25 million senior secured revolving credit facility due 2010, rated B2; * Assigned $250 million senior secured term loan B due 2011, rated B2; * Upgraded $110 million 8.125% Senior Subordinated Notes, due 2009, upgraded to Caa1 from Ca; * Upgraded Senior Implied, upgraded to B2 from Caa2; * Upgraded Senior Unsecured Issuer, upgraded to B3 from Caa3; * Withdrew $30 million 13.625% Senior Subordinated Notes, due 2005, rated Ca. Moody's expects to withdraw these rating upon completion of the redemption of these notes: * $164 million 7.375% Senior Unsecured Notes, due 2005, rated Caa2. Proceeds from the proposed $250 million term loan B are expected to be used to repay the remaining $78 million balance of the company's existing revolving credit facility, redeem the remaining $164 million of 7.375% senior unsecured notes and pay related fees and expenses. The company expects to have in excess of $10 million of cash and cash equivalents on hand upon completion of the refinancing. The $25 million revolving credit facility is expected to be undrawn and fully available at closing. The company has significantly improved its capital structure recently. On February 8, 2005, the company completed a debt restructuring with affiliates of the Quadrangle Group, the lenders under its existing credit facility and the majority equity holders in the company's publicly traded direct parent, Protection One, Inc. The transaction reduced the obligations under the company's credit facility by $120 million in exchange for common stock of Protection One. The company also recently retired its $30 million of 13.625% senior subordinated discount notes utilizing cash on hand. The cash on hand was derived from the $46 million cash portion of the $73 million tax sharing settlement with Westar Energy, Inc., the company's former majority owner, in November 2004. The upgrade of the senior implied rating to B2 from Caa2 reflects the significant reduction in leverage and improvement in liquidity by the company. The company had $547 million of debt at September 30, 2004, all of which was considered a current liability. As of December 31, 2004, on a pro forma basis for the debt refinancing and restructuring transactions discussed above, the company would have about $360 million of debt with no maturities before 2009. Interest expense for the year ending Dec. 31, 2004, was about $44 million and would have been about $27 million on a pro forma basis. Despite operating with limited liquidity and a highly leveraged capital structure during the last few years, the business has performed reasonably well. Although the company's revenues declined from $290 million in the year ended December 31, 2002 to $269 million in the year ended December 31, 2004, gross profit and EBITDA margins (excluding non-recurring items) improved. The decline in revenue reflected a cut back in spending to generate new accounts, which caused a decline in the size of the customer base. New accounts typically generate negative cash flows initially due to upfront costs, which are not fully offset by the purchase price paid by the customer for the alarm system. The company's margins benefited from the implementation of cost cutting measures and the improvement in customer account attrition rates to 7.8% in the year ending December 31, 2004 from 11.2% in the year ending December 31, 2002. The improvement in attrition rates reflected the company's focus on obtaining high quality customers by requiring higher credit scores and a higher initial investment by the customer in the alarm system. The company now relies on its internal sales force and alliances with strategic partners such as BellSouth Telecommunications, Inc. to acquire accounts. The stable ratings outlook reflects Moody's expectation that the company will stabilize its customer base by investing in new account generation to offset customer attrition. Cash flows should benefit from the continuing growth of the market for residential and commercial security products, the company's improved attrition rate and lower interest costs as a result of the debt restructuring and refinancings. Free cash flows from operations are expected to be utilized to build short-term liquidity or reduce borrowings under the credit facility. Moody's believes that absent an acquisition or other unusual transaction, a downgrade in the outlook or ratings is unlikely in the near term due to the stability of the company's recurring revenue stream and its improved cost structure. The outlook or rating could improve if the company can grow its customer base and generate a sustainable level of free cash flow -- after capital expenditures and net customer acquisition costs -- to debt in the range of 8-10%. The outlook or rating could be pressured if the company significantly increases leverage due to an acquisition or if the company's attrition rates return to the high levels of a few years ago. The B2 rating assigned to the proposed senior secured credit facility reflects a first priority security interest in all tangible and intangible assets of the company and its subsidiaries and 100% of the capital stock of the company and its domestic subsidiaries. The credit facility is notched at the senior implied level reflecting the preponderance of senior secured debt in the capital structure. The term loan B amortizes at a rate of .25% a quarter with the balance payable at maturity. The credit facility has a cash flow sweep, initially set at 75%, subject to a step down if the company achieves a specified decline in its leverage ratio. In the event that the 8.125% senior subordinated notes due 2009 are not repaid in full or refinanced prior to June 2008, the revolver and term loan B will automatically mature and all amounts outstanding shall be deemed immediately due and payable. The Caa1 rating on the 8.125% senior subordinated notes reflects the contractual subordination of these notes to all existing and future senior indebtedness of the company. The notes are guaranteed on a senior subordinated basis by substantially all the direct and indirect domestic subsidiaries of the company. Free cash flow (after capital expenditures and net customer acquisition costs) to debt was about 6% for the year ended December 31, 2004. Excluding the cash proceeds from the Westar tax sharing settlement and debt restructuring costs, free cash flow to debt would have been about 2% in 2004. Moody's expects free cash flow to debt (excluding debt restructuring costs) to be about 5-7% in 2005. Protection One Alarm is the third largest electronic security provider in the United States based on recurring monthly revenues. The two largest providers are ADT Security Services, Inc. and Brinks Home Security. The company has 66 branches and four monitoring facilities. The company installs, monitors and maintains security alarms catering to residential, commercial, multifamily and wholesale customers. Over 80% of the company's revenues are derived from sales to single family residential and commercial customers. The company derives most of its revenue stream from recurring monitoring revenues, which are generally sold pursuant to three to five year contracts. Headquartered in Lawrence, Kansas, the company had revenue of $269 million for the year ended December 31, 2004. PROTECTION ONE: Debt Restructuring Prompts S&P to Upgrade Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Lawrence, Kansas-based Protection One Alarm Monitoring Inc. to 'B+', and removed the rating from CreditWatch, where it was placed on Nov. 15, 2004. Standard & Poor's also raised the senior subordinated debt rating to 'B-'. The outlook is negative. The ratings action follows the recent completion of an out-of- court debt restructuring with affiliates of Quadrangle Group, the company's majority equity holders and lenders under its credit facility, along with the company's plans to refinance its near term debt obligations. At the same time, Standard & Poor's assigned its 'B+' bank loan rating, with a recovery rating of '2', to Protection One's proposed $275 million senior secured bank facility, which will consist of a $25 million revolver and $250 million term loan. The senior secured debt rating, which is the same as the corporate credit rating, along with the recovery rating, reflect our expectation of substantial recovery (80%-100%) of principal by lenders in the event of a payment default. The proceeds from this facility, along with a portion of cash on the balance sheet, will be used to refinance the remaining $78 million under the existing revolving credit facility, along with the company's $164 million senior unsecured notes. "The ratings reflect Protection One's modest presence in the highly competitive U.S. security alarm industry, declining revenues, and leveraged financial profile," said Standard & Poor's credit analyst Ben Bubeck. These are offset partly by a largely recurring revenue base and the expectation for continued positive free operating cash flow generation. The outlook is negative. While the recently completed debt restructuring and proposed refinancing substantially improve Protection One's financial profile, the company has not returned to a growth trajectory. Failure to stabilize or generate modest revenue growth over the near to intermediate term may result in a lower rating. PROXIM CORP: PwC Says Losses & Deficit Trigger Going Concern Doubt ------------------------------------------------------------------ Proxim Corporation (Nasdaq: PROX), filed its Annual Report on Form 10-K for the year ended Dec. 31, 2004, with the Securities and Exchange Commission last week. The Company's auditors, PricewaterhouseCoopers LLP, raised substantial doubt about Proxim's ability to continue as a going concern due to substantial losses and negative cash flows from operations, and a $497.5 million accumulated deficit as of Dec. 31, 2004. The Company disclosed that it is required to pay royalty payments of $12.5 million in the next four quarters in connection with the litigation settlement with Symbol Technologies Inc. Also, the Company may be required to repay $10 million of bridge loan plus accrued interest on June 30, 2005, the maturity date of the bridge loan, in the event the bridge loan has not been converted to the Company's common stock earlier. The Company's financial statements issued March 11, 2004, for the year ended Dec. 31, 2003, also contained a going concern qualification. About the Company Proxim Corporation -- http://www.proxim.com/-- is a leader in wireless networking equipment for Wi-Fi and broadband wireless networks. The company is providing its enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. At Dec. 31, 2003, Proxim Corporation's balance sheet showed a $44,928,000 stockholders' deficit, compared to a $79,088,000 deficit at Dec. 31, 2003. QWEST COMMS: Increases MCI Offer to $8.45 Billion ------------------------------------------------- On March 16, 2005, Qwest Communications International, Inc., transmitted a letter to MCI, Inc.'s Board of Directors, containing its revised offer for the acquisition of MCI. The letter states: March 16, 2005 The Board of Directors MCI, Inc. Attention: Chairman, Board of Directors 22001 Loudoun County Parkway Ashburn, VA 20147 Dear Mr. [Nicholas D.] Katzenbach: As you know, on February 11, 2005, we proposed a stock and cash merger with MCI valued at $24.60 per MCI share. We improved the terms of our proposal on February 24. On March 15, we delivered to your legal counsel a merger agreement reflecting a revised structure. Over the last two weeks, we obtained access to a certain amount of legal, financial and operational information on MCI. With the benefit of this information we have reconfirmed our confidence in the unique value creation potential of a Qwest/MCI merger and we are pleased to present an improved proposal to acquire MCI. This improved proposal is over 25% higher than Verizon's offer, representing over $1.7 billion in additional value payable to MCI stockholders. In addition, our proposal will deliver significant additional value to your stockholders from synergies of approximately $18 per MCI share. The Qwest/MCI merger will create a company with: * a world-class, state-of-the-art global network; * an advanced product suite to exceed customer needs with accelerated expansion into next generation applications; * a seasoned sales force; * superior customer service; and * a highly achievable synergy plan. A Qwest/MCI combination will lead to fewer and less extensive divestiture demands from regulatory agencies and will avoid the industry concentration and public policy issues a Verizon/MCI merger presents. In fact, MCI's legal counsel has acknowledged that the Qwest/MCI transaction could close more quickly than a Verizon/MCI transaction, although they did not agree with us as to how much more quickly. We believe the synergies of a combined Qwest/MCI are significant and achievable and should flow from: * Elimination of duplicative facilities with improved scale yielding access/termination efficiencies; * Reduction in overlapping staff functions for nationwide sales/operations, network administration and corporate; * Avoidance of redundant spend on national networks; * IT savings resulting from the elimination of duplicative operations systems spend; and * Reduction in advertising spend, consolidation of real estate and improved revenue penetration. A substantial number of MCI stockholders have recognized that the value of these significant synergies and your own forecasts of improved performance can only be realized by MCI stockholders in a meaningful way if they retain a substantial portion of the combined company as they will in a Qwest/MCI merger. MCI stockholders will share appreciably in the value creation of a combined Qwest/MCI, but will have no meaningful share of Verizon after it merges MCI out of existence. In the past two weeks, many MCI stockholders have clearly expressed their preference for the Qwest offer through words and action. MCI stockholders have periodically traded its share price up to within 5% of our proposal and have thereby confirmed the value of our equity and validated our proposal as value creative and superior to the Verizon offer. The fact that over $4.5 billion of MCI's shares have traded above $20.75 since February 14th further indicates that MCI stockholders place superior value on our proposal. In addition to the value, regulatory and synergy benefits to MCI stockholders of a Qwest/MCI combination, let me describe our improved proposal, which will be even more compelling to your stockholders. Our revised proposal represents an aggregate value today of $26.00 per share to MCI stockholders consisting of $10.50 in cash and $15.50 in stock consideration to be delivered as follows: (i) $6.00 per share in cash to be paid by MCI in regularly scheduled quarterly dividends (including today's dividend payment) and a payment upon MCI stockholder approval of the transaction, (ii) $4.50 per share in cash to be paid by Qwest at closing and (iii) $15.50 per share to be paid in Qwest stock at closing. As you know, in a Qwest/MCI transaction MCI stockholders will be protected from a potential decline in Qwest's share price prior to closing by means of a "collar." Qwest stock has not traded below the "collar" for the last four months, while the Verizon stock has traded below their offer price for over 66% of the trading days since January 18th. Further economic details of our proposal are provided in the term sheet attached as Exhibit A. The merger agreement reflecting this revised proposal and the terms of our merger would be subject to approval by Qwest's Board of Directors. Finally, as you know, we have delivered to and discussed with your advisors final commitment letters for the financing required to consummate our merger and operate the combined company. Under the agreement with Verizon you have the right to engage in negotiations with Qwest in light of our superior proposal. We respectfully request that you take the steps necessary to enable MCI to execute a merger agreement with us as soon as possible. Of course, time is of the essence. Because the only change in our previous proposal is the significant increase in the value of our offer, we are hopeful that you can conclude your deliberations on our proposal quickly. As each day passes, MCI stockholders are denied the ability to realize the benefits of the superior transaction we have proposed. We trust that the MCI Board of Directors will recognize the desire of MCI stockholders to maximize stockholder value through a merger with Qwest and we request your response before the close of business on March 25, 2005. Sincerely yours, /s/ RICHARD C. NOTEBAERT Richard C. Notebaert Chairman and Chief Executive Officer Qwest Communications International Inc. Economic Terms of Qwest $8.45 Billion Offer Consideration: Qwest common stock and cash to MCI stockholders Value: $26.00 per share consideration to MCI stockholders Offer consists of: (i) $10.50 in cash; and (ii) $15.50 of Qwest common stock based on an exchange ratio of 3.735 Qwest shares per MCI share, subject to the Value Protection Mechanism. The value of the Stock Consideration is based on a Qwest stock price of $4.15. Pro forma ownership split of approximately 40.0% MCI / 60.0% Qwest, subject to the Value Protection Mechanism. Value In the event that the average trading price for Protection common stock during a period of 20 trading days Mechanism prior to the closing of the transaction does Regarding not equal $4.15 per share, then the exchange Qwest Stock ratio will be adjusted as: Component: * If the Qwest Share Price is between and inclusive of $3.74 and $4.14, then the exchange ratio will be adjusted upward to deliver value of $15.50 in Stock Consideration to MCI stockholders. However, Qwest may at its option deliver all or a portion of this value protection in cash in lieu of common stock. * If the Qwest Share Price is between and inclusive of $4.16 and $4.57, then the exchange ratio will be adjusted downward to deliver value of $15.50 in Stock Consideration, to MCI stockholders. * If the Qwest Share Price is below $3.74, then the exchange ratio will be 4.144. However, Qwest may at its option deliver all or a portion of this value protection in cash in lieu of Qwest common stock, provided that the exchange ratio will under no circumstances be less than 3.735. * If the Qwest Share Price is above $4.57, then the exchange ratio will be 3.392. As a result of this Value Protection Mechanism, the value of the Stock Consideration is protected against a decline of up to 10% in the stock price of Qwest. Cash Approximately $6.00 of the $10.50 cash Consideration: consideration will be paid in quarterly dividends and as a payment to be made as soon as practicable following MCI stockholder approval of the transaction. The payment of the $6.00 will be reduced by the $0.40 per share cash dividend approved by the MCI Board of Directors on February 11, 2005, and paid on March 16, 2005, and by the amount of any dividends to be declared by MCI during the period from today to the consummation of the merger, subject to any limitations imposed by MCI debt covenants. Specified The cash and stock consideration outlined will Included be subject to adjustment with respect to the Liabilities: specified included liabilities on substantially the same terms as provided in the Verizon agreement. Example of For clarity, given the above and assuming a Overall December 31, 2005 closing, each MCI stockholder Potential would receive between signing and closing: Value to MCI: * Approximately $6.00 in quarterly dividends and a payment as soon as practicable following MCI shareholder approval of the transaction; * Approximately $4.50 in cash at closing; and * 3.735 Qwest shares in Stock Consideration at closing subject to the Value Protection Mechanism. * Assuming MCI stockholders own 40% or more of the combined company, they would also likely realize approximately $18 per share of value from cost synergies - yielding a total value to MCI stockholders in a merger with Qwest in excess of $40 per share. MCI to Review New Qwest Proposal MCI, Inc. (Nasdaq: MCIP) reported that it has received a revised merger offer of $10.50 in cash and 3.735 Qwest shares (subject to adjustment under a collar) per MCI share. MCI's Board of Directors will respond by close of business on March 28, 2005, after a thorough review of this revised offer. On February 14, 2005, MCI and Verizon signed a joint merger agreement. On March 2, 2005, MCI announced its intention to engage with Qwest for a two-week period to review its latest proposal. This engagement was conducted with the concurrence of Verizon. The two-week window to exchange information between MCI and Qwest officially concludes at close of business today. About Qwest Qwest Communications International Inc. (NYSE:Q) -- http://www.qwest.com/--is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. At Dec. 31, 2004, Qwest Communications' balance sheet showed a $2,612,000,000 stockholders' deficit, compared to a $1,016,000,000 deficit at Dec. 31, 2003. * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. If Qwest's offer is accepted by MCI's shareholders, Standard & Poor's will evaluate the company's plans for integrating MCI, its financial plans, and longer-term strategy given the competitive and consolidating telecommunications industry. Moreover, the status of the shareholder lawsuits is still uncertain and could be a factor in the rating or outlook even after the CreditWatch listing is resolved under an assumed successful bid by Qwest for MCI at current terms. As such, if Qwest's bid is rejected and it terminates efforts to acquire MCI, ratings on Qwest will be affirmed and removed from CreditWatch, and a developing outlook will be reassigned. QWEST COMMS: MCI Merger May Lead to Liquidity Crisis, Report Says ----------------------------------------------------------------- According to a report released by The Eastern Management Group, the increased premium offered by Qwest for MCI along with its outstanding obligations may lead to a liquidity crisis if the merger between the two companies goes through. Furthermore, the report suggests that current estimates of corporate synergies are significantly overestimated resulting in even greater risks of economic problems down the road. The report, entitled "Critical Implications of the Proposed Qwest- MCI Merger: A Financial Analysis," is available on the company's Web site, located at http://www.easternmanagement.com/ "We foresee a liquidity crisis at Qwest-MCI based on the premium paid to MCI shareholders, lingering MCI bankruptcy issues, costs to unlock synergies, and hundreds of millions in unconditional purchase obligations for unnecessary capacity in Qwest's long distance business," said Paul Robinson, vice president of The Eastern Management Group. "In order to sell the deal to the industry, regulators, and shareholders, Qwest has overestimated synergies between itself and its competitor MCI and underestimated integration costs to make the deal look rosier than it really is." Both Qwest and Verizon are currently in talks to acquire MCI Communications, the Ashburn, VA-based company, formerly known as WorldCom. The Eastern Management Group, a management consulting firm with over 400 clients in the telecommunications industry, believes the industry, the economy, and the public interest would be better served by a merger of Verizon Communications and MCI. Robert A. Saunders, the firm's research director, states, "Despite the increase in the share price offer to MCI shareholders, The Eastern Management Group continues to maintain that Verizon's size and industry position grant substantially more stability to stakeholders. Furthermore, we believe that capex trends and realizable commitments favor a Verizon-MCI merger rather than Qwest alternative." The Eastern Management Group recently completed a detailed study of MCI's potential acquisition and its impact on the telecommunications industry entitled "Critical Implications of the Proposed Qwest-MCI Merger: An Industry White Paper," also available on the company's Web site. This follow-on study goes into greater depth on the financials of Qwest's tertiary offer to MCI including analyses of opex and capex synergies, purchase obligations, and Qwest's long distance business and debt ratios. "Our research shows that management historically overestimates synergies, while underestimating integration costs when selling the acquisition to shareholders, regulators, and Wall Street. We have drawn the same conclusions in the Qwest-MCI estimates, which have been discounted by Wall Street," said Dr. Robinson. "We believe the new offer is a last ditch effort which is intended to sow further division between those shareholders who favor long- term goals and those who invested for quick profits." The Eastern Management Group is one of the oldest and largest management-consulting firms focused exclusively on the communications industry. For more than a quarter century, The Eastern Management Group has served over 400 communications industry clients worldwide, including every major carrier, manufacturer and software company. The Eastern Management Group has offices in the U.S. and Japan. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. About the Company Qwest Communications International Inc. (NYSE:Q) -- http://www.qwest.com/-- is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. At Dec. 31, 2004, Qwest Communications' balance sheet showed a $2,612,000,000 stockholders' deficit, compared to a $1,016,000,000 deficit at Dec. 31, 2003. * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. If Qwest's offer is accepted by MCI's shareholders, Standard & Poor's will evaluate the company's plans for integrating MCI, its financial plans, and longer-term strategy given the competitive and consolidating telecommunications industry. Moreover, the status of the shareholder lawsuits is still uncertain and could be a factor in the rating or outlook even after the CreditWatch listing is resolved under an assumed successful bid by Qwest for MCI at current terms. As such, if Qwest's bid is rejected and it terminates efforts to acquire MCI, ratings on Qwest will be affirmed and removed from CreditWatch, and a developing outlook will be reassigned. RAYOVAC CORP.: Moody's Reviews Low-B Ratings & May Downgrade ------------------------------------------------------------ Moody's Investors Service has placed the debt ratings of Rayovac Corporation on review for possible downgrade following the company's announcement that it has reached an agreement to purchase Tetra Holding GmbH, a leading aquatic pet supplies company, for around EUR415 million. The rating action reflects the potential for material debt increases, given the high purchase price (at over 2x sales). In addition, the rating action recognizes the additional complexity of integrating Tetra's global operations at the same time it is absorbing the $1.4 billion February 2005 acquisition of United Industries, which in turn had engaged in debt-financed purchases of consumer lawn and pet supplies companies in recent periods. The rating review will include a comprehensive analysis of Tetra's operations, the integration strategy, and the impacts of the acquisition on Rayovac's capital and corporate structures, existing integration plans, and deleveraging schedule. In particular, Moody's will evaluate Tetra's performance trends, its global competitive and retail set, and its operational platform, with the aim of assessing any underlying business risks/investment needs, as well as synergy potential. Further, Moody's will assess the implications of the Tetra transaction for additional purchases, including the size, financing and product/geographic focus of such acquisitions. Lastly, Moody's will continue to review the performance expectations for the existing Rayovac and United Industries' businesses, which may offset acquisition related concerns or may heighten the need to achieve anticipated sales and profit growth through acquisitions. Notwithstanding these concerns, Moody's recognizes that the Tetra acquisition is consistent with Rayovac's strategy of acquiring leading brands in attractive categories (particularly in the growing pet supplies market). The acquisition will further diversify the company's revenue base from its historical concentration in consumer batteries, a category that has experienced historical profit erosion due to price deflation and promotional activity from Rayovac and its large competitors. Further, Rayovac has a strong global integration and facility optimization track record from its VARTA and Remington purchases in the last few years, achieving margin expansion and synergies beyond expectations (with lower costs). Lastly, Rayovac standalone is continuing to perform well on the strength of its restructuring gains and a significantly more stable North American consumer battery environment over the last year. Rating concerns include recent softness in Rayovac's Remington product line, challenges in UIC's Nu-Gro business (acquired by UIC in early 2004), potential threats posed by competitors and concentrating retailers, increased costs for raw materials and brand support, and the significant contribution of currency gains and acquisitions to growth. These ratings were placed under review: * Senior implied rating, B1; * $300 million senior secured revolving credit facility due 2011, B1; * $540 million senior secured US term loan B due 2012, B1; * USD140 million - equivalent EUR denominated senior secured European term loan B due 2012, B1; * USD50 million - equivalent CAD denominated senior secured Canadian term loan B due 2012, B1; * $700 million 7 3/8% senior subordinated notes due 2015, B3; * $350 million 8.5% senior subordinated notes due 2013, B3; * Senior unsecured issuer rating, B2. With headquarters in Atlanta, Georgia, Rayovac Corporation is a global consumer products company with a diverse product portfolio including consumer batteries, electric shavers, and lawn and pet supplies. Reported sales for the twelve-month period ended January 2005 were $1.5 billion, but recent acquisitions (including Tetra) result in pro forma sales of around $2.6 billion. REEVES COUNTY: Debt Restructuring Cues S&P to Up Rating to BBB- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its underlying rating on Reeves County, Texas' lease-rental certificates of participation debt outstanding two notches to 'BBB-' from 'BB' based on improved coverage levels that should result from management's restructuring of debt service. The outlook is stable. The rating agency also assigned its 'BBB-' standard long-term rating, and stable outlook, to the county's $41.05 million series 2005 taxable additional lease-rental revenue refunding certificates of participation. The certificates are scheduled to sell on March 22. The county will use certificate proceeds to refund a portion of its certificates outstanding to lower the annual rental payment. "Our decision to raise the rating is contingent on management's refunding of the debt outstanding it has identified to us," said Standard & Poor's credit analyst James Breeding. "Should management not successfully complete the refunding, we will revert the rating back to 'BB'." The restructuring's effect will be an extension of the maturity schedule and a lowering of the rental payment from 2005 through 2011. In 2004, Reeves County and the Federal Bureau of Prisons finalized an agreement in which the bureau will continue to use only Reeves County Detention Center's sections I and II. The new per diem has been set at $48.25 for a minimum of 2,025 federal inmates. The new agreement will extend to Jan. 31, 2007, with annual per diem adjustments. Since the bureau will only use space available in sections I and II, the county has negotiated an agreement with Arizona Department of Corrections to house a minimum of 778 of the state's inmates in section III of the facility at a per diem of $45.70. "We assume the bureau's continued use of the facility and the revenues associated with the facility's operation will continue to provide sufficient coverage of all operating costs and related debt service," added Mr. Breeding. With the restructuring of the rental payments and the assumption that the facility will continue to be used only by the bureau, the facility should generate sufficient revenues to cover expenses and debt service by roughly 1.3x. When revenue from Arizona is added from its use of section III, coverage remains roughly the same. Coverage improves as more inmates are added to sections I and II. Management will use up-front savings resulting from the restructuring to provide a cushion against possible inmate population fluctuations and reimburse the county's general fund for previous extraordinary transfers that were made to cover facility operating costs during the period when section III was not being used. The rating action affects roughly $54 million of appropriation debt outstanding. RELIANCE GROUP: Gets Court OK to Sell Lot to Greenway for $33.2M ---------------------------------------------------------------- The Hon. James Colins of the United States Bankruptcy Court for the Southern District of New York gave M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania and Liquidator of Reliance Insurance Company, permission to sell 182.91 acres of real property to Greenway Associates, LLC, for $33,211,964. The parcel of real property is located in Loudoun County, Virginia. As reported in the Troubled Company Reporter on Feb. 25, 2005, Jerome B. Richter, Esq., at Blank, Rome, in Philadelphia, relates that the Property was purchased in 1987 when RIC acquired 409 acres of land for $26,634,439, or $1.49 per square foot. Of the 409 acres, 112.5 acres were zoned residential and 296.5 were zoned commercial. At $1.49 per square foot, the 112.5 acres of residential land had a pro rata cost of $7,301,745, while the 296.5 acres of commercial land had a pro rata cost of $19,332,694. During the governmental approval process, 41.5 residential acres were designated and dedicated as flood plain, community recreational space, or roadway improvements. The remaining 71 net acres of residential land were sold in five transactions between 1999 and 2002 for $22,970,800. Of the 296.5 acres of commercial land, 84.7 acres were set aside and dedicated as flood plain, right-of-way or toll road use during the development approval process. The Property is part of the remaining commercially zoned land. While originally calculated to encompass 211.81 acres, a recent survey revealed that the parcel actually totals 210.53 acres. The Liquidator had an Agreement to sell this acreage to Toll Brothers Realty Trust for $16,511,000. However, the transaction was terminated after TB Realty Trust demanded unacceptable price concessions during the due diligence period. TB Realty Trust was the winner of a bidding process. After the termination of the TB Realty Trust contract, RIC's brokers re- established contact with other competing bidders, but none were willing to re-open negotiations. RIC determined that the Loudoun Parkway Center was not saleable on an as-is basis at the appraisal value. RIC investigated the possibility of rezoning selected portions of the remaining commercial land and discovered that there was a greater demand for retail commercial use than office commercial use. A mixed-use site, with significant retail footage, would present a better marketing platform for the remaining office land, as office users would demand immediate access to a variety of retail services. As a result, RIC began pursuing a strategy to rezone certain parts of the commercial land so portions could be used for retail commercial, office commercial and residential. Approximately 27.62 of the 210.53 remaining acres of commercially zoned property was sold to TC Midlantic Development, Inc., for $7,599,247 early in January 2004. The TC Midlantic Agreement, which was contingent on TC Midlantic having the 27.62 acres rezoned, has not been consummated. Loudoun County informed RIC and TC Midlantic that the rezoning call for was not likely to occur. Due to that fact and the potential sale of the larger parcel to Greenway, TC Midlantic asked RIC to sell the 27.62 acres without a rezoning condition at a reduced price-reflecting the diminished value under the existing "commercial office only" development restrictions. RIC is currently completing negotiations with TC Midlantic and expects to execute a new contract shortly. The new TC Midlantic contract will then be presented to the Commonwealth Court for approval. In early 2004, Loudoun County informed RIC that rezoning the remaining tract would be looked upon favorably if the property were sold to a developer unrelated to RIC with a significant national or local real estate development presence. RIC asked its brokers, Cassidy and Pinkard, to contact the former bidders to gauge interest in purchasing the Property conditioned on rezoning. Six large developers, three of which had a national presence, and all with a presence in Loudoun County, were asked to submit bids. Three complied and Greenway submitted the winning bid. The Agreement provides Greenway with the right to pursue rezoning at the Property at its sole cost and expense. Greenway will accept the Property in as-is condition. If the TC Midlantic Agreement is not consummated, Greenway is obligated to purchase the 27.62 acres, with the base purchase price will be increased to $37,300,000. If any contingencies increase the Purchase Price, Greenway will provide an irrevocable letter of credit amounting to $5,000,000 to secure its obligations to pay those additional amounts in the event the triggering approvals are obtained. Greenway has paid a $4,000,000 non-refundable deposit into escrow. RIC is obligated to spend up to $100,000 to cure any local code or other violations between the effective date of the Agreement and closing, if necessary. RIC will pay Cassidy and Pinkard a broker's fee of 3.5% of the Purchase Price, or $1,162,418. RIC has $2,508,800 in surety bonds securing certain bonded improvements and cash escrows of $574,244 securing certain escrowed improvements, posted with Loudoun County and the Loudoun County Sanitation Authority. Greenway will assume all of RIC's obligations to complete the improvements. Within 90 days of closing, Greenway will execute new Bond and Escrow Agreements with the Loudoun County Entities, assuming all liability and replacing RIC as obligor. To secure these obligations, at closing, Greenway will provide RIC with a $2,508,800 irrevocable letter of credit to secure the Bonds and will make a $574,244 cash payment to reimburse RIC for the cash escrow. Greenway is financially able to consummate the transition. Greenway is owned by Trident Investments, LLC, of Michigan. Trident indicated that as of October 31, 2004, it had total assets of $55,041,665. One of Trident's members is Anthony Soave. As of December 31, 2004, Mr. Soave and his wife had a total net worth of $452,942,000. The Liquidator obtained the advice of Robert G. Johnson, MAI of JMSP, Inc., located in Herndon, Virginia. Mr. Johnson prepared an appraisal report dated January 11, 2005, that calculated the fair market value for the Property as $19,300,000, in contrast to the Purchase Price of $33,211,964. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) REVLON CONSUMER: Completes $310 Million Sr. Debt Offering --------------------------------------------------------- Revlon Consumer Products Corporation, a wholly owned subsidiary of Revlon, Inc. (NYSE: REV), successfully completed its previously- announced offering of $310 million aggregate principal amount of 9-1/2% Senior Notes due 2011. The offering and the related transactions will extend the maturities of RCPC's debt that would have otherwise been due in 2006 and will reduce the Company's exposure to floating rate debt. Commenting on the announcement, Revlon President and CEO Jack Stahl stated, "I am pleased with the strong support and vote of confidence in our Company demonstrated by the investment community. Their strong participation in our offering enables us to further strengthen our balance sheet and advances our progress against our objective of creating long-term profitable growth and value creation." Concurrently with the completion of the offering, the Company also announced that, on April 15, 2005, RCPC will redeem all of the $116.2 million aggregate principal amount outstanding of its 8-1/8% Senior Notes due 2006 and the $75.5 million aggregate principal amount outstanding of its 9% Senior Notes due 2006 and that it has effected a covenant defeasance of the 8-1/8% Senior Notes and the 9% Senior Notes by: (i) mailing irrevocable notices of redemption with respect to such notes and (ii) irrevocably depositing in trust with the trustee under the indentures an amount sufficient to redeem such notes. The Company indicated that RCPC also used a portion of the proceeds from the offering: (i) to prepay $100 million of indebtedness outstanding under the term loan facility of its credit agreement, together with accrued interest and the prepayment fee associated with such prepayment, and (ii) to pay a portion of the fees and expenses incurred in connection with the transactions described above. Copies of the notices of redemption on the 8-1/8% Senior Notes and the 9% Senior Notes have been mailed to all record holders by the trustee under each of the indentures governing such notes, U.S. Bank National Association, 60 Livingston Avenue, St. Paul, MN 55107. The issuance of the 9-1/2% Senior Notes was conducted pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the U.S. in accordance with Regulation S under the Securities Act. The issuance of RCPC's 9-1/2% Senior Notes was not registered under the Securities Act, and such notes may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, nor shall there be any sale of securities mentioned in this press release 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 Revlon Consumer Products Corporation is a wholly owned subsidiary of Revlon, Inc., a worldwide cosmetics, skin care, fragrance, and personal care products company. The Company's vision is to deliver the promise of beauty through creating and developing the most consumer preferred brands. Web sites featuring current product and promotional information can be reached at http://www.revlon.com/andhttp://www.almay.com/.Corporate investor relations information can be accessed at http://www.revloninc.com/. The Company's brands, which are sold worldwide, include Revlon(R), Almay(R), Ultima(R), Charlie(R), Flex(R), and Mitchum(R). * * * As reported in the Troubled Company Reporter on March 10, 2005, Moody's Investors Service assigned a Caa2 rating to the proposed $205 million senior notes offering by Revlon Consumer Products Corporation. In addition, Moody's affirmed Revlon's existing ratings and its negative rating outlook. The affirmation and assignment of long-term ratings reflect the company's continued operational and financial progress, including the prospective improvement in Revlon Consumer's near-term liquidity profile as proceeds from the notes are used to refinance bonds maturing as early as February 2006. However, the continuation of a SGL-4 speculative grade liquidity rating and a negative long-term rating outlook reflect the company's ongoing negative free cash flow profile and ongoing liquidity concerns beyond the near term. The ratings affected by this action are: * New $205 million senior notes due 2011, assigned at Caa2; * Senior implied rating, affirmed at B3; * $160 million senior secured revolving credit facility due 2009, affirmed at B2; * $800 million senior secured term loan facility due 2010, affirmed at B3; * $116 million 8.125% senior notes due 2006, affirmed at Caa2; * $76 million 9% senior notes due 2006, affirmed at Caa2; * $327 million 8.625% senior subordinated notes due 2008, affirmed at Caa3; * Speculative grade liquidity rating, affirmed at SGL-4; * Senior unsecured issuer rating, affirmed at Caa2. At the same time, Standard & Poor's Ratings Services affirmed its ratings on Manhattan-based cosmetics manufacturer Revlon Consumer Products Corp., including its 'B-' corporate credit rating. At the same time, Standard & Poor's assigned a 'CCC' senior unsecured debt rating to Revlon's planned $205 million senior unsecured note offering due 2011. The outlook is negative. Approximately $1.4 billion of debt is affected by this action. Proceeds from the $205 million senior unsecured note offering will be used primarily to repay approximately $192 million of debt due in 2006. "The refinancing of Revlon's debt maturities due in 2006 significantly improves the company's short-term liquidity, however, the company will be challenged to improve operations in fiscal 2005 due to a soft mass-market color cosmetics segment, and planned increases in marketing and promotional expenses to support new product introductions," said Standard & Poor's credit analyst Patrick Jeffrey. While Revlon achieved its revised targeted EBITDA level of $190 million in fiscal 2004, the company's planned increased media spending, particularly in the first half of 2005, will affect the company's EBITDA growth and margins for fiscal 2005. As a result, the company will need to continue to demonstrate sustained operating stability and adequate liquidity before a stable outlook is considered. SEABULK INT'L: Moody's Reviews Low-B Ratings for Possible Upgrade ----------------------------------------------------------------- Moody's Investors Service placed SEACOR Holdings Inc.'s ratings under review for possible downgrade and Seabulk International Inc.'s ratings under review for possible upgrade following the announced merger between the two companies. Ratings placed under review for possible downgrade are SEACOR's: (i) Senior unsecured notes rated Baa3; (ii) Shelf registration for senior unsecured securities rated (P)Baa3, for subordinated securities rated (P)Ba1, and for preferred stock rated (P)Ba2. Ratings placed under review for possible upgrade are SEABULK's: (i) Senior implied rating of B1; (ii) Senior unsecured notes rated B2; (iii) Senior unsecured issuer rating of B2. Under the terms of the announced merger, SEACOR will issue 0.2694 shares of its common stock for each share of SEABULK common stock plus $4.00 in cash per share of SEABULK common stock. Based on SEACOR's share price as of March 16, 3005, the total equity value the transaction is approximately $532 million. In addition, SEACOR will assume SEABULK's net outstanding obligations of approximately $471 million (net of $55 million of cash and restricted cash) for a total purchase price of approximately $1 billion. Based on SEABULK's 2004 EBITDA of approximately $97 million (adjusted to reflect the expensing of drydock costs of $26 million), SEACOR is paying over 10x EBITDA (over 8x, if drydock costs are capitalized and amortized), which Moody's considers "full" for companies in this business. Moody's estimates that SEABULK's EBITDA (again, adjusted to expense drydock costs) should increase to around $110-115 million in 2005, reflecting the cyclical upturn in the sector; however, that still indicates a fully priced deal. The acquisition of SEABULK provides a number of benefits to SEACOR, including greater scale and international diversification in the offshore support vessel market and an attractive platform in the U.S. Jones Act tanker market. SEABULK's offshore support vessels (45% of revenue) adds to SEACOR's position in markets where it operates and also gives it a presence in the West Africa offshore support market. SEABULK's tankers (43% of revenue) and harbor tug division (12% of revenue) provide relatively steady cash flow and they also offer diversification benefits because their results are not as directly related to the energy services cycle. SEABULK's five double- hulled U.S.-flag tankers as well as its two double-hulled foreign- flag tankers are seen as premium assets. SEACOR's rating review was prompted primarily by the increase in leverage associated with the pending merger resulting from the assumption of approximately $526 million in SEABULK debt (gross). Assuming the transaction is financed as described above, SEACOR's total balance sheet debt at 12/31/04 increases from $596 million (43% debt/capital) to $1,122 million (48% debt/capital) on a pro forma basis. Moreover, SEACOR's net debt (including available-for-sale securities and a construction reserve fund) at 12/31/04 increases from $100 million (7% net debt/net capital) to $725 million (29% net debt/net capital) on pro forma basis, an increase of $625 million. In the past, SEACOR's strong balance sheet and liquidity have partially mitigated concerns about the company's poor financial performance relative to its peers during the most recent downturn in the drilling cycle, particularly in the U.S. Gulf of Mexico. When Moody's confirmed SEACOR's rating on 9/16/04 (subsequently affirmed on 10/14/04 in response to SEACOR's announced acquisition of ERA Aviation, Inc.), it was noted that the company's large cash and investments balances exceeded total debt outstanding. That support for the rating largely goes away with this transaction. Moody's believes that SEABULK's contribution of $100-$115 million in adjusted EBITDA (range representing 2004 actual and 2005 estimates) does not negate the effects of the increased leverage on either a gross or net basis nor does it negate continuing concerns about SEACOR's poor financial performance relative to its similarly rated peers with or without the merger. Pro forma for the merger, SEACOR would have reported approximately $173 million in EBITDA in 2004 resulting in Debt/EBITDA of 6.5x (5.0x excluding $250 million in convertible debt issued by SEACOR in December 2004) and EBITDA/Interest coverage of 3.1x. Looking ahead to 2005, for which Moody's estimates pro forma EBITDA of $225-$235 million, Debt/EBITDA and EBITDA/Interest are expected improve to around 5.0x and 3.3x-3.5x, respectively. Even with these improvements, SEACOR's metrics are more consistent with Ba-rated peers than Baa3-rated peers. A single notch downgrade is the most likely outcome. While SEACOR's financial results improved during the fourth quarter of 2004 due to higher rates and utilization of its vessels in the U.S. Gulf of Mexico reflective of cyclical strengthening in the oil services sector, higher seasonal rates for its Inland River barge business, and earnings associated with the clean-up of a major oil spill by the company's environmental services business, Moody's believes that these results cannot be expected to recur over longer periods of time. In its review of SEACOR's ratings, Moody's will focus on the company's pro forma credit profile and operating characteristics, both current and projected, relative to its peers; the company's ability to achieve improved earnings and asset returns after the merger that are both sustainable and consistent with an investment grade rating; the longer-term (i.e., "through the cycle") prospects for the company's offshore marine segment and helicopter business; and the company's liquidity position. SEABULK's rating review is prompted by the pending merger with SEACOR, which, even after considering a possible downgrade, will most likely be rated higher than SEABULK. In its review of SEABULK's ratings, Moody's will focus on the impact of the pending merger and, secondarily, on SEABULK's recent results and trends. A single notch upgrade is the most likely outcome. SEACOR Holdings Inc., headquartered in Houston, Texas, provides offshore marine services to the oil and gas exploration and production industry. Other business activities involve environmental services, inland river operations, and helicopter transportation services to the oil and gas industry, mainly in the U.S. Gulf of Mexico. Seabulk International, Inc., headquartered in Ft. Lauderdale, Florida, is a provider of marine support and transportation services, primarily to the energy and chemical industries. SEABULK INT'L: S&P May Lift Credit B+ Rating After SEACOR Merger ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BBB' corporate credit rating on oil and gas marine vessel company SEACOR Holdings Inc., on CreditWatch with negative implications and its 'B+' corporate credit rating on Seabulk International Inc., on CreditWatch with positive implications. "We took the CreditWatch actions after the companies announced they signed a definitive merger agreement," said Standard & Poor's credit analyst Jeffrey Morrison. Houston, Texas-based SEACOR has about $595 million in long-term debt outstanding. Ft. Lauderdale, Florida-based Seabulk has about $535 million in long-term debt outstanding. The negative CreditWatch listing for SEACOR reflects the expectation that assumed debt resulting from the transaction will weaken the company's financial profile, potentially leading to lower ratings in the near term. The positive CreditWatch listing for Seabulk reflects the potential improvement in business profile and financial performance to be reaped by Seabulk from integration into the investment-grade rated SEACOR. The transaction's equity and cash portion is valued at about $532 million, and SEACOR will assume $471 million in net debt obligations from Seabulk. The transaction is expected to close by the end of the second quarter 2005. The CreditWatch listings will be resolved in the near-to- intermediate term pending a full review to assess the business risk and anticipated financial profile of the new entity. SEACOR HOLDINGS: Moody's Reviews Ratings for Possible Downgrade --------------------------------------------------------------- Moody's Investors Service placed SEACOR Holdings Inc.'s ratings under review for possible downgrade and Seabulk International Inc.'s ratings under review for possible upgrade following the announced merger between the two companies. Ratings placed under review for possible downgrade are SEACOR's: (i) Senior unsecured notes rated Baa3; (ii) Shelf registration for senior unsecured securities rated (P)Baa3; (iii) subordinated securities rated (P)Ba1; and (iv) preferred stock rated (P)Ba2. Ratings placed under review for possible upgrade are SEABULK's: (i) Senior implied rating of B1; (ii) Senior unsecured notes rated B2; (iii) Senior unsecured issuer rating of B2. Under the terms of the announced merger, SEACOR will issue 0.2694 shares of its common stock for each share of SEABULK common stock plus $4.00 in cash per share of SEABULK common stock. Based on SEACOR's share price as of March 16, 3005, the total equity value the transaction is approximately $532 million. In addition, SEACOR will assume SEABULK's net outstanding obligations of approximately $471 million (net of $55 million of cash and restricted cash) for a total purchase price of approximately $1 billion. Based on SEABULK's 2004 EBITDA of approximately $97 million (adjusted to reflect the expensing of drydock costs of $26 million), SEACOR is paying over 10x EBITDA (over 8x, if drydock costs are capitalized and amortized), which Moody's considers "full" for companies in this business. Moody's estimates that SEABULK's EBITDA (again, adjusted to expense drydock costs) should increase to around $110-115 million in 2005, reflecting the cyclical upturn in the sector; however, that still indicates a fully priced deal. The acquisition of SEABULK provides a number of benefits to SEACOR, including greater scale and international diversification in the offshore support vessel market and an attractive platform in the U.S. Jones Act tanker market. SEABULK's offshore support vessels (45% of revenue) adds to SEACOR's position in markets where it operates and also gives it a presence in the West Africa offshore support market. SEABULK's tankers (43% of revenue) and harbor tug division (12% of revenue) provide relatively steady cash flow and they also offer diversification benefits because their results are not as directly related to the energy services cycle. SEABULK's five double- hulled U.S.-flag tankers as well as its two double-hulled foreign- flag tankers are seen as premium assets. SEACOR's rating review was prompted primarily by the increase in leverage associated with the pending merger resulting from the assumption of approximately $526 million in SEABULK debt (gross). Assuming the transaction is financed as described above, SEACOR's total balance sheet debt at 12/31/04 increases from $596 million (43% debt/capital) to $1,122 million (48% debt/capital) on a pro forma basis. Moreover, SEACOR's net debt (including available-for-sale securities and a construction reserve fund) at 12/31/04 increases from $100 million (7% net debt/net capital) to $725 million (29% net debt/net capital) on pro forma basis, an increase of $625 million. In the past, SEACOR's strong balance sheet and liquidity have partially mitigated concerns about the company's poor financial performance relative to its peers during the most recent downturn in the drilling cycle, particularly in the U.S. Gulf of Mexico. When Moody's confirmed SEACOR's rating on 9/16/04 (subsequently affirmed on 10/14/04 in response to SEACOR's announced acquisition of ERA Aviation, Inc.), it was noted that the company's large cash and investments balances exceeded total debt outstanding. That support for the rating largely goes away with this transaction. Moody's believes that SEABULK's contribution of $100-$115 million in adjusted EBITDA (range representing 2004 actual and 2005 estimates) does not negate the effects of the increased leverage on either a gross or net basis nor does it negate continuing concerns about SEACOR's poor financial performance relative to its similarly rated peers with or without the merger. Pro forma for the merger, SEACOR would have reported approximately $173 million in EBITDA in 2004 resulting in Debt/EBITDA of 6.5x (5.0x excluding $250 million in convertible debt issued by SEACOR in December 2004) and EBITDA/Interest coverage of 3.1x. Looking ahead to 2005, for which Moody's estimates pro forma EBITDA of $225-$235 million, Debt/EBITDA and EBITDA/Interest are expected improve to around 5.0x and 3.3x-3.5x, respectively. Even with these improvements, SEACOR's metrics are more consistent with Ba-rated peers than Baa3-rated peers. A single notch downgrade is the most likely outcome. While SEACOR's financial results improved during the fourth quarter of 2004 due to higher rates and utilization of its vessels in the U.S. Gulf of Mexico reflective of cyclical strengthening in the oil services sector, higher seasonal rates for its Inland River barge business, and earnings associated with the clean-up of a major oil spill by the company's environmental services business, Moody's believes that these results cannot be expected to recur over longer periods of time. In its review of SEACOR's ratings, Moody's will focus on the company's pro forma credit profile and operating characteristics, both current and projected, relative to its peers; the company's ability to achieve improved earnings and asset returns after the merger that are both sustainable and consistent with an investment grade rating; the longer-term (i.e., "through the cycle") prospects for the company's offshore marine segment and helicopter business; and the company's liquidity position. SEABULK's rating review is prompted by the pending merger with SEACOR, which, even after considering a possible downgrade, will most likely be rated higher than SEABULK. In its review of SEABULK's ratings, Moody's will focus on the impact of the pending merger and, secondarily, on SEABULK's recent results and trends. A single notch upgrade is the most likely outcome. SEACOR Holdings Inc., headquartered in Houston, Texas, provides offshore marine services to the oil and gas exploration and production industry. Other business activities involve environmental services, inland river operations, and helicopter transportation services to the oil and gas industry, mainly in the U.S. Gulf of Mexico. Seabulk International, Inc., headquartered in Ft. Lauderdale, Florida, is a provider of marine support and transportation services, primarily to the energy and chemical industries. SEARS: Shareholders Have Until Thursday to Vote on KMART Merger --------------------------------------------------------------- Sears, Roebuck and Co. (NYSE: S) and Kmart Holding Corporation (Nasdaq: KMRT) confirmed that the deadline for Sears shareholders of record to make merger consideration elections in connection with the proposed merger of Kmart and Sears is 5:00 p.m., Eastern Time, on March 24, 2005. Sears shareholders who hold their shares in "street name," through the Sears associate stock purchase plan, or in certain Sears retirement plans may have an election deadline earlier than March 24, 2005. Such shareholders should carefully review any materials they received from their broker or the relevant plan trustee or administrator to determine the election deadline applicable to them. Sears shareholders of record wishing to make an election regarding the consideration they would like to receive for their Sears shares must deliver to EquiServe Trust Company, N.A., the exchange agent, properly completed Election Forms, together with their stock certificates or properly completed notices of guaranteed delivery, by 5:00 p.m., Eastern Time, on Thursday, March 24, 2005, the election deadline. Sears shareholders may elect cash, shares of common stock of Sears Holdings Corporation, the new holding company created to facilitate the merger of Kmart and Sears, or a combination of the two for their Sears shares. All elections are subject to the proration procedures provided in the merger agreement designed to ensure that in the aggregate 55 percent of Sears shares will be converted into the right to receive 0.5 of a share of Sears Holdings common stock per share and 45 percent of Sears shares will be converted into the right to receive a cash consideration of $50.00 per share, without interest, upon the merger's completion. As a result, a Sears shareholder may not receive the exact form of consideration elected, and the ability of a Sears shareholder to receive the form of consideration elected will depend on the elections made by other Sears shareholders. All of the documents necessary to make merger consideration elections were previously mailed to Sears shareholders of record as of January 26, 2005. Sears shareholders may obtain additional copies of the election documents by contacting D.F. King & Co., Inc. at (800) 549-6650. A more complete description of the merger consideration and the adjustment and proration mechanisms applicable to elections is contained in the election materials mailed to Sears shareholders and the joint proxy statement/prospectus dated February 18, 2005, both of which Sears shareholders are urged to read carefully and in their entirety. Kmart and Sears expect to publicly announce the preliminary proration calculation on Monday, March 28, 2005. The final election results, including the consideration to be received by Sears shareholders who elect cash and who elect stock, will be announced as soon as practicable thereafter. The proposed merger remains subject to the satisfaction of closing conditions, including Kmart and Sears shareholder approval. As previously announced, a meeting date of March 24, 2005, has been established for meetings of Kmart and Sears shareholders to vote on the merger agreement. Sears and Kmart shareholders are also reminded that holders of record of Sears common stock and Kmart common stock, respectively, as of the close of business on January 26, 2005 are entitled to vote on the proposed merger and may vote by telephone, the Internet or by mail, as explained in detail in the joint proxy statement/prospectus dated February 18, 2005. About Kmart Holding Corporation 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 intends to buy Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. About Sears Holdings Corporation Created to facilitate the merger of Kmart and Sears, Roebuck announced on Nov. 17, 2004, and subject to the receipt of shareholder approvals and the satisfaction or waiver of other conditions, upon close of the merger, Sears Holdings Corporation is expected to be the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full-line and specialty retail stores in the United States and Canada. Sears Holdings is expected to be the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands are expected to include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It is also expected to have Martha Stewart Everyday products, which are now offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. About Sears, Roebuck and Co. Sears, Roebuck and Co. is a leading broadline retailer providing merchandise and related services. With revenues in 2004 of $36.1 billion, Sears offers its wide range of home merchandise, apparel and automotive products and services through more than 2,400 Sears-branded and affiliated stores in the U.S. and Canada, which includes approximately 870 full-line and 1,100 specialty stores in the U.S. Sears also offers a variety of merchandise and services through sears.com, landsend.com, and specialty catalogs. Sears is the only retailer where consumers can find each of the Kenmore, Craftsman, DieHard and Lands' End brands together -- among the most trusted and preferred brands in the U.S. The company is the largest provider of product repair services with more than 14 million service calls made annually. For more information, visit Sears' website at http://www.sears.com/ * * * As reported in the Troubled Company Reporter on Nov. 19, 2005, Standard & Poor's Ratings Services said that its ratings on Sears, Roebuck and Company, including the 'BBB' corporate credit rating, remain on CreditWatch with negative implications, where they were initially placed October 21, 2004. This CreditWatch update follows the announcement that Sears has agreed to merge with unrated Kmart Holding Corporation in a transaction valued at over $11 billion. It is likely that ratings for Sears and the new holding company parent, Sears Holdings Corporation, will be in the 'BB' category upon completion of the merger, which is scheduled for the end of March 2005. The combined company will include the approximate 870 Sears full-line stores, 1,500 Kmart discount stores, and about 1,100 Sears specialty stores. With combined revenue of about $55 billion, Sears Holdings will be the third-largest retailer in the U.S., behind Wal-Mart Stores Inc. and Home Depot Inc. Despite the company's much greater size, and synergies that are estimated by management of about $500 million per year after the third year, both companies lag their peers in terms of store productivity and profitability. Sears continues to be challenged by competitors such as J.C. Penney Company Inc. and Kohl's Corporation, while Kmart faces Wal-Mart in numerous markets. To be successful, Standard & Poor's believes that management will need to make the Sears and Kmart stores more relevant to consumers in terms of convenience, merchandising, and value. Although we see the merger as an opportunity for Sears to accelerate its off- the-mall strategy by converting existing Kmart stores into Sears Grand stores, this strategy is still in its infancy and has yet to demonstrate success. While Kmart has greatly improved its profitability by reducing both costs and promotional sales, sales continue to decline. Selling some Sears proprietary brands may help differentiate the company's offerings, but it will still face substantial challenges competing with Wal-Mart and Target Corporation. Business risk for the combined entity will limit consideration for an investment-grade rating. Financing for the acquisition is expected to utilize existing cash at both companies. Sears Holdings should be able to utilize asset sales, tax benefits, and a lower or eliminated dividend to enhance cash flow, which will help offset restructuring costs. Standard & Poor's will monitor developments, and meet with management to discuss the company's future financial and business policies prior to resolving the CreditWatch listing. SIMSBURY CLO: Fitch Junks Two Mezzanine Classes & Sub. Notes ------------------------------------------------------------ Fitch Ratings affirms seven classes of notes issued by Simsbury CLO, Limited. These rating actions are effective immediately: -- $162,024,064 class I senior notes at 'AAA'; -- $23,000,000 class II senior notes at 'AA+'; -- $41,000,000 class III mezzanine notes at 'BBB+'; -- $39,250,000 class IVA mezzanine notes at 'BB'; -- $16,750,000 class IVB mezzanine notes at 'BB'; -- $3,740,185 class V mezzanine notes at 'B+'; -- $9,000,000 class VIA mezzanine notes at 'CC'; -- $8,750,000 class VIB mezzanine notes at 'CC'; -- $42,650,000 subordinated notes at 'C'. Simsbury is a collateralized loan obligation -- CLO -- managed by Babson Capital Management LLC that closed Sept. 15, 1999. Simsbury is composed of approximately 80% senior secured loans and 20% high yield bonds. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest- rate scenarios to measure the breakeven default rates relative to the minimum cumulative default rates required for the rated liabilities. Since the last rating action, the collateral has continued to perform within expectations. The weighted average rating has improved to 'B+' as of the most recent trustee report dated Jan. 14, 2005, from 'B' as of Dec. 13, 2002. The senior par value test has increased from 125.82% to 162.72%. The class III/IV mezzanine par value test has increased from 102.16% to 106.76%. Currently, the class V/VI mezzanine par value test has increased from 96.80% to 99.2% but is not passing its required threshold of 100.0%. The failure of the class V/VI mezzanine par value test results in the redemption of the class V and VI notes. To date, 68.8% of the class V notes have been redeemed. The positive credit improvements are slightly offset by a declining weighted average spread and weighted average coupon. The weighted average spread has decreased to 2.76% from 3.28%. The weighted average coupon has decreased to 9.68% from 9.94% and is not passing its required threshold of 10.15%. The ratings of the class I, II, III, IV, V, and VI notes address the likelihood that investors will receive full and timely payments of interest on scheduled interest payment dates as per the documents, as well as the stated balance of principal by the legal final maturity date. The rating of the subordinated notes addresses the receipt of the stated balance of principal by the legal final maturity date. Since inception the subordinated notes have received approximately $32 million or 76% of the original investment. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ SOLUTIA INC: Has Until July 11 to File Plan of Reorganization ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York extended the period within which Solutia, Inc., and its debtor- affiliates has the exclusive right to file a plan of reorganization through and including July 11, 2005, and to solicit and obtain acceptances of that plan through and including September 7, 2005. The extension will permit the current plan process to move forward in an orderly fashion. The extension will provide the Debtors' management with sufficient time to finish developing and begin implementing a viable long-term business plan, to estimate the various claims that have been asserted against them (including claims based on alleged toxic torts and environmental remediation) and permit the Debtors' and their diverse creditor constituencies sufficient time to negotiate the terms of a consensual chapter 11 plan of reorganization that will enable the Debtors to emerge from chapter 11 and thrive as a reorganized entity, the Debtors say. 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. 35; Bankruptcy Creditors' Service, Inc., 215/945-7000 SOLUTIA INC: Names Jonathon Wright & James Voss as New SVP ---------------------------------------------------------- Solutia Inc. (OTC Bulletin Board: SOLUQ), a leading manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products, disclosed two changes to its executive leadership team, effective immediately. "These changes are another important step in our strategy to position Solutia to thrive after emergence from Chapter 11," said Jeffrey N. Quinn, president and CEO, Solutia Inc. Jonathon P. Wright has been named senior vice president of Solutia Inc. and president of integrated nylon. In this role he will lead Solutia's integrated nylon division, a $1.6 billion business that is a leading producer of high-performance polymers, carpet fiber, and chemical intermediates. He will have responsibility for all commercial, operational and strategic aspects of the business. Wright replaces John F. Saucier, who will be leaving Solutia. James R. Voss has been named senior vice president - business operations for Solutia Inc. In this role he will have enterprise- wide responsibility for human resources, procurement, information technology, governmental affairs, communications and public affairs. "Jonathon and Jim are seasoned professionals who bring fresh perspectives to their roles at Solutia. The decision of these two proven executives to join our team is a clear endorsement of the progress we are making to position Solutia for future success," added Mr. Quinn. "Jonathon will provide the strategic and commercial leadership that will revitalize our integrated nylon business. Jim will be a strong partner with Jonathon and Luc De Temmerman, senior vice president of Solutia Inc. and president of performance products, in their efforts to optimize our business and operational performance." Mr. Wright, 45, joins Solutia from Charles River Associates, a global management consulting firm, where he served as vice president. Prior to that, he led Arthur D. Little's strategy practice and management consulting business in North America. During his eight-year consulting career, Mr. Wright worked extensively in the petrochemical, specialty chemical, and related process industries. Previously, Mr. Wright held various operating, commercial and strategic roles with British Gas. Mr. Wright holds a M.Sc. in economics from Reading University and was an honors graduate in economics from City of London Polytechnic. Mr. Voss, 38, joins Solutia from Premcor Inc., a major independent oil refiner, where he most recently served as senior vice president and chief administrative officer. In addition to his four years at Premcor, Voss' previous business experience includes ten years in operational and human resources capacities with United Parcel Services, Foodmaker Industries and Swank Inc. Mr. Voss holds bachelor's degrees in psychology and sociology from Maryville University, a master's degree in human resources development from Webster University, and a MBA from Washington University in St. Louis. In addition to Messrs. Quinn, De Temmerman, Wright and Voss, Solutia's executive leadership team consists of: James M. Sullivan, senior vice president and chief financial officer; Rosemary L. Klein, senior vice president, general counsel and corporate secretary; Max W. McCombs, vice president - environmental, safety and health; and Robert T. DeBolt, vice president - strategy. 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. SPIEGEL INC: Asks Court to Set Confirmation Hearing for May 17 -------------------------------------------------------------- Spiegel Inc. and its debtor-affiliates ask Judge Blackshear of the U.S. Bankruptcy Court for the Southern District of New York to convene a hearing to consider confirmation of their Chapter 11 Plan on May 17, 2005, at 10:00 a.m. The Debtors propose that they be permitted to continue the Confirmation Hearing from time to time as appropriate without further notice except for adjournments announced in open court. The Debtors ask the Court to direct that objections, if any, to the Plan must be filed and served on May 5, 2005, at 4:00 p.m. (prevailing Eastern Time). The Debtors further propose that objections to the Plan or any proposed modifications, if any, must: -- be in writing; -- state the name and address of the objecting party and the amount and nature of the claim or interest of that party; and -- state with particularity the basis and nature of any objection to the Plan. A copy of the Confirmation Hearing Notice will be mailed to all creditors and equity security holders. The Notice will also be published in the national editions of The New York Times, The Wall Street Journal, USA Today and The Globe and Mail. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. SPIEGEL INC: Wants Court to Fix Solicitation & Voting Procedures ---------------------------------------------------------------- James L. Garrity, Esq., at Shearman & Sterling, LLP, in New York, reminds Judge Blackshear that Spiegel Inc., and its debtor- affiliates filed their Plan of Reorganization on Feb. 18, 2005, and a hearing to consider the adequacy of their Disclosure Statement explaining the Plan is scheduled for March 29, 2005. Concurrent with the recent filing of their Chapter 11 Plan and the Disclosure Statement Hearing, the Debtors ask Judge Blackshear to approve a set of uniform noticing, balloting, voting and tabulation procedures to be used in connection with asking creditors to vote to accept the Plan. The Debtors ask the Court to establish March 29, 2005, as the Record Date, which is the date that will separate creditors who can vote from creditors who cannot. Rule 3017(d) of the Federal Rules of Bankruptcy Procedure provides that, for the purposes of vote solicitation, "creditors and equity security holders will include holders of stock, bonds, debentures, notes, and other securities of record on the date the order approving the disclosure statement is entered or another date fixed by the court, for cause, after notice and a hearing." Bankruptcy Rule 3018(a) contains a similar provision regarding determination of the record date for voting purposes. The Debtors will solicit votes from General Unsecured Claim Holders in Class 4 and Convenience Claim Holders in Class 5. Claims in Class 1 (Groveport Secured Claims), Class 2 (Other Secured Claims) and Class 3 (Non-Tax Priority Claims) are designated as unimpaired classes and, therefore, are conclusively presumed to accept the Plan. Equity interests in Class 6 are not receiving distributions under the Plan and, thus, are conclusively presumed to reject the Plan. The Debtors intend to have Bankruptcy Services, LLC, to serve as their official solicitation and tabulation agent. Bankruptcy Services will commence mailing the Solicitation Packages -- containing the order approving the Disclosure Statement, a notice on the hearing to confirm the Plan, and a ballot, for impaired classes, or a notice of non-voting status, for unimpaired classes -- no later than one week after the Court enters an order approving the Disclosure Statement. Mr. Garrity relates that in order to be counted as a vote to accept or reject the Plan, each Ballot must be properly executed, completed, and transmitted to Bankruptcy Services so as to be received no later than 4:00 p.m. (prevailing Eastern Time) on May 5, 2005. The Debtors have established standards and protocols for the voting and tabulation of the Ballots: (1) Ballots voting to accept or reject the Plan must be "actually received" by Bankruptcy Services on or before the Voting Deadline. The Ballots may be transmitted to Bankruptcy Services through: * mail by returning an original executed ballot to: Bankruptcy Services, LLC 757 Third Avenue, 3rd Floor New York, New York 10017 Attn: Spiegel, Inc., Balloting * a facsimile copy of an executed ballot which is faxed to (646) 282-2501 and received prior to the Voting Deadline will be effective as delivery of a manually executed ballot; or * a scanned copy of an executed ballot, saved in portable document format and attached to an e-mail that is sent to spiegelvote@bsillc.com Any Ballot actually received after the Voting Deadline will not be counted unless the Debtors will have granted in writing an extension of the Voting Deadline with respect to that Ballot. (2) If a holder of a claim submits more than one Ballot with respect to the same claim prior to the Voting Deadline, only the first Ballot actually received by BSI will count unless the Court orders that the holder has sufficient cause within the meaning of the Bankruptcy Rule 3018(a) to submit, or the Debtors consent to the submission of, a superseding Ballot. (3) If a claim holder casts simultaneous duplicative Ballots voted inconsistently, then those Ballots will be counted as one vote accepting the Plan. (4) The authority of the signatory of each Ballot to complete and execute that Ballot will be presumed. (5) Any Ballot that is not signed, is illegible or contains insufficient information to permit the identification of the claimant will not be counted. (6) Ballots transmitted electronically will be counted, provided that their requirements are fully complied with. (7) Ballots transmitted by facsimile will be counted. (8) A claimholder must vote the entire claim within one particular class under the Plan either to accept or reject the Plan, and may not split its vote with respect to the claim between more than one class, whether or not those claims are asserted against the same or multiple Debtors. Accordingly, a Ballot that partially rejects and partially accepts the Plan, or that indicates both a vote for and against the Plan, will be counted as one vote accepting the Plan. (9) Any Ballot that is timely received and duly executed but does not indicate whether the holder of the relevant claim is voting to accept or reject the Plan will be counted as a vote accepting the Plan. (10) Any Ballot cast by a person or entity that does not hold a claim in a class that is entitled to vote to accept or reject the Plan will not be counted. Any Ballot cast for a claim scheduled as unliquidated, contingent, or disputed for which no proof of claim was timely filed will not be counted. If any creditor seeks to challenge the allowance of its claim to vote on the Plan, the Debtors ask the Court to direct that creditor to file a motion for an order pursuant to Bankruptcy Rule 3018(a) temporarily allowing its claim in a different amount for voting purposes. A Creditor's Voting Motion must be filed 10 days after the later of the date of service of the Confirmation Hearing Notice and the date of service of notice of an objection, if any, to that claim. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. SUBURBAN PROPANE: S&P Puts B Rating on $250M Senior Unsec. Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit rating on retail propane and fuel oil distributor Suburban Propane Partners L.P., and revised the outlook on the company to negative from stable. Standard & Poor's also assigned its 'B' senior unsecured rating to the partnership's pending $250 million add-on to its 6.875% senior unsecured notes due 2013. Whippany, N.J.-based Suburban had $536.1 million of debt as of Dec. 25, 2004, of which roughly 67% resides at Suburban Propane L.P., the operating limited partnership. "The outlook revision reflects the partnership's weaker operating and financial performance due to high fuel costs and a warm heating season," said Standard & Poor's credit analyst Andrew Watt. "If the partnership's marginal credit metrics do not improve in the near term, a ratings downgrade could occur," said Mr. Watt. Standard & Poor's also said that it changed its business profile score on Suburban to '9' from '8', reflecting increased business risk from participation in the fuel oil sector, as well as natural gas and electricity marketing and heating, ventilation, and air conditioning activities. Standard & Poor's categorizes business profiles from '1' (strong) to '10' (weak). Other rating concerns include Suburban's master limited partnership (MLP) structure, a highly leveraged financial profile with weakening credit measures, exposure to weather, seasonal demand patterns, and changing commodity prices, and acquisition risk. These concerns are only partially countered by the partnership's large retail propane operations and the company's high percentage ownership of customer tanks. SUNSTATE EQUIPMENT: S&P Junks $175 Mil. Senior Secured Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Sunstate Equipment Co. LLC and its 'CCC+' rating, two notches lower, to the company's proposed Rule 144-A (without registration rights) $175 million senior secured notes (with a second-priority lien) due 2012. The outlook is stable. The company will also enter a new unrated senior secured $150 million four-year revolving credit facility, secured by first- priority liens, to fund future equipment purchases and working- capital needs. However, in arriving at the rating on the second- lien notes a determination of the recovery prospects on the first- lien facility was performed and indicated an expectation of full recovery of principal but a negligible recovery of principal for the second lien. Both the unrated $150 million senior secured revolving credit facility due in 2009 (first lien) and the $175 million senior secured notes due 2012 (second lien) are secured by essentially all of the assets of the company including accounts receivable, inventory, and equipment by first and second liens, respectively. Sunstate, based in Phoenix, Arizona, is a privately owned and operated equipment rental company that started in 1977 and has grown organically to 46 locations in eight states, mainly in the Southwest including several fast-growing metropolitan areas, including Phoenix and Las Vegas. It will use the proceeds from these notes to repay all existing debt outstanding, make a distribution to the principal owner Michael Watts, and buy out minority owners. "The ratings are not expected to change in the intermediate term, although the company will face challenges from ongoing competitive conditions while saddled with a heavy debt burden," said Standard & Poor's credit analyst John Sico. "Sunstate will need to maintain financial discipline and liquidity as it embarks on growth objectives that include plans to diversify from its concentrated base of operations." TORCH OFFSHORE: Taps Bridge Associates as Restructuring Advisors ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Louisiana gave Torch Offshore, Inc., and its debtor-affiliates permission to employ Bridge Associates LLC, as their chief restructuring advisors. Bridge Associates will: a) assist the Debtors with their daily operations and restructuring efforts, including negotiations with parties in interest; b) meet with the Debtors' senior management and financial staff to evaluate the Debtors' cash flow and liquidity and to propose and implement initiatives to conserve cash flow and improve liquidity; c) work with the Debtors' senior management to prepare and maintain a go forward budget to support their operations during restructuring under chapter 11; (d) work with the Debtors' senior management, sales and accounting staff to review and evaluate strategic options for effective deployment of the Debtors' assets, to ensure effective review of bidding procedures for future business, and to assist in the identification of cost reduction and corporate right-sizing opportunities; e) assist the Debtors and their investment bankers with the development of strategies for refinancing the Debtors, on any potential business combinations and assist in negotiating with potential investors; g) assist the Debtors' senior management in connection with evaluating and negotiating any debtor-in-possession financing, in determining and implementing appropriate staffing levels at the corporate offices and in the field, and in identifying and negotiating the sale and alternative disposition of the Debtors' assets, business units or operations; h) assist senior management in developing and executing negotiating strategies for dealing with senior debt holders, trade debt and other parties in interest, and attend meetings with the Debtors' senior management and Board of Directors; and i) provide all other financial, operational and restructuring advisory services that are necessary in the Debtors' chapter 11 cases Carl H. Young, III, a Managing Director at Bridge Associates, discloses that the Firm received a $150,000 retainer. Mr. Young charges $400 per hour for his services. Other professionals performing services to the Debtors are Anthony H. N. Schnelling charging $450 per hour, David Phelps charging $400 per hour, and Chad Peterson charging $250 per hour. Mr. Young reports Bridge Associates' professionals bill: Designation Hourly Rate ----------- ----------- Managing Directors/Directors $300 - $450 Senior Associates/Senior Consultants $250 - $300 Associates/Consultants $200 - $275 Bridge Associates assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Gretna, Louisiana, Torch Offshore, Inc., provides integrated pipeline installation, sub-sea construction and support services to the offshore oil and gas industry, primarily in the Gulf of Mexico. The Company and its debtor-affiliates filed for chapter 11 protection (Bankr. E.D. La. Case No. 05-10137) on Jan. 7, 2005. Jan Marie Hayden, Esq., at Heller, Draper, Hayden, Patrick & Horn, L.L.C., and Lawrence A. Larose, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed $201,692,648 in total assets and $145,355,898 in total debts. TOUCH AMERICA: Plan Trustee Has Until June 3 to Object to Claims ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extends the deadline before which Chanin Capital Partners -- the Plan Trustee appointed to facilitate the liquidation of Touch America Holdings, Inc., and its debtor-affiliates' estates pursuant to their confirmed Amended Liquidating Chapter 11 Plan -- can object to proofs of claim filed against the Debtors until June 3, 2005. The Plan Trustee has already objected to 595 of the 1,000 claims filed against the Debtors' estates. The extension will give the Trustee more time to thoroughly review and evaluate the remaining claims. Also, the Trustee continues to negotiate for a consensual resolution of many disputed claims. Removal Period As reported in the Troubled Company Reporter on March 16, 2005, the Plan Trustee has until July 28, 2005 to remove prepetition lawsuits and other actions and related proceedings to the District of Delaware pursuant to Section 1452 of the Bankruptcy Code and Bankruptcy Rule 9027. Headquartered in Butte, Montana, Touch America Holdings, Inc., through its principal operating subsidiary, Touch America, Inc., develops, owns, and operates data transport and Internet services to commercial customers. The Company filed for chapter 11 protection on June 19, 2003 (Bankr. D. Del. Case No. 03-11915). Maureen D. Luke, Esq. and Robert S. Brady, Esq. at Young Conaway Stargatt & Taylor, LLP represent the Debtor. When the Company filed for bankruptcy protection, it listed $631,408,000 in total assets and $554,200,000 in total debts. The Debtors Plan became effective on October 19, 2004. TOYS 'R' US: Bain, KKR & Vornado Buying Retailer for $6.6 Billion ----------------------------------------------------------------- Bain Capital, Kohlberg Kravis Roberts and Vornado Realty have agreed to acquire Toys 'R' Us for $6.6 billion excluding debt, bringing an end to a seven-month auction process. The Bain-KKR- Vordado deal topped a competing bid for the company from a group led by Cerberus Capital Management. As reported in the Troubled Company Reporter on Aug. 16, 2004, Fitch Ratings placed its 'BB' rating on Toys 'R' Us' senior notes. "TOY has not been able to gain sales traction in its U.S. toy stores despite completing a major remodeling program in 2002 and adding exclusive merchandise to its offerings. The U.S. toy segment's comparable store sales were down 5.6% in the first quarter of 2004, following three consecutive years of negative comparable store sales. Slow sales reflect competition from the discounters as well as a drop in video game sales and a lack of hot toys to drive store traffic," Fitch said at that time. Under the terms of the sale agreement, the investment group will acquire all of the outstanding shares of Toys "R" Us, Inc. for $26.75 per share, representing a transaction value of $6.6 billion plus the assumption of debt. Each of the investors will own equal stakes in the company upon completion of the transaction. John Eyler, Chairman and Chief Executive Officer of Toys "R" Us, said, "We are pleased to announce this transaction, which brings our strategic review to a very successful conclusion. There was competition among bidders during the review process, and the acquisition price reflects the compelling value of the global Toys "R" Us and Babies "R" Us operations and assets." Mr. Eyler continued, "During the course of our strategic review, we redefined our business model and sharpened our competitive position. This enabled us to strengthen the value we provide to our customers, and we were rewarded with market share gains this past holiday season. We believe that our new financial partners will help us build on this momentum and we look forward to a successful future as a leading toy and baby products retailer." "Toys "R" Us and Babies "R" Us are premiere franchises with strong global brand recognition and a collection of high quality product offerings including toys, children's apparel, and baby products and accessories," stated Matt Levin, a Managing Director at Bain Capital. "We are excited by the prospect of partnering with the management team and employees to strengthen the long-term operating and financial performance of the businesses." "We are delighted to be partners with Bain and KKR, and look forward to building significant value for our investors," said Steve Roth, Chairman and Chief Executive Officer of Vornado. "We are delighted to be joining forces with Vornado, Bain Capital and the employees and management of the company to realize the full potential of the Toys "R" Us and Babies "R" Us businesses and brands in the U.S. and internationally," said Michael M. Calbert, a Director at KKR. "We look forward to building on the many strengths of the company to make the stores a better place to shop and work." Completion of the deal is contingent on regulatory review and approval by the shareholders of Toys "R" Us, Inc. and is expected to occur by July. Credit Suisse First Boston LLC acted as the exclusive financial advisor to Toys "R" Us, Inc. in connection with the strategic review and this transaction. Simpson Thacher & Bartlett LLP acted as legal advisor to Toys "R" Us, Inc. and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates acted as legal advisor to the Board of Directors of Toys "R" Us, Inc. About Toys "R" Us Toys "R" Us is one of the leading specialty toy retailers in the world. Currently it sells merchandise through 1,500 stores, including 681 toy stores in the U.S. and 601 international toy stores, including licensed and franchise stores as well as through its Internet sites at http://www.toysrus.com/and http://www.imaginarium.comand http://www.sportsrus.com/ Babies "R" Us is the largest baby product specialty store chain in the world and a leader in the juvenile industry, and sells merchandise through 218 stores in the U.S. as well as on the Internet at http://www.babiesrus.com/ About Vornado Vornado Realty Trust -- http://www.vno.com/-- is a fully integrated real estate company and one of the largest REITs in the nation, with an enterprise value of $17 billion and owning and/or managing approximately 87 million square feet of real estate. Vornado owns and operates office, retail, and showroom properties with a large concentration in the NY Metro area and in the Washington, DC and Northern Virginia area. About Bain Capital Bain Capital -- http://www.baincapital.com/-- is a global private investment firm that manages several pools of capital including private equity, high-yield assets, mezzanine capital and public equity with more than $24 billion in assets under management. Since its inception in 1984, Bain Capital has made private equity investments and add-on acquisitions in over 225 companies around the world, including such leading retailers and consumer companies as Staples, Domino's Pizza, Burger King, and Dollarama. Headquartered in Boston, Bain Capital has offices in New York, London and Munich. About KKR KKR is one of the world's oldest and most experienced private equity firms specializing in management buyouts, with offices in New York, Menlo Park, California and London. Over the past three decades, KKR has invested in 11 transactions in the retail sector in North America and Europe, representing over $17 billion of aggregate value, covering a broad range of channels including supermarkets, consumer drugstores, and specialty retail. For more information, visit http://www.kkr.com/ TOYS 'R' US: Fitch May Downgrade Rating Due to Kohlberg Sale ------------------------------------------------------------ Based on current information, Fitch Ratings believes that Toys 'R' Us, Inc. could be downgraded, and possibly into the 'B' category, following the sale of the company to a joint venture formed by affiliates of Kohlberg Kravis Roberts & Co., Bain Capital Partners LLC, and Vornado Realty Trust. This investor group has agreed to acquire TOY for $6.6 billion and assume TOY's debt, which totals approximately $2.3 billion. TOY's senior notes are currently rated 'BB' by Fitch and remain on Rating Watch Negative, where they were placed in August 2004. It is currently expected that the acquisition will be financed with a material debt component. Vornado separately announced this morning that it will be investing $450 million for a one-third interest in the acquiring joint venture, implying a total equity component of $1.35 billion. This, in turn, implies a debt component of the purchase price in excess of $5 billion. This amount of debt would push TOY's adjusted debt/EBITDAR to around nine times on a pro forma basis from around 5.0 times in the twelve months ended Oct. 30, 2004. It is possible that the company will raise additional equity or engage in asset sales, with the proceeds used to reduce acquisition debt. Nonetheless, the Rating Watch Negative status reflects the expectation that without a significant equity component to the financing, a downgrade of potentially several notches would likely be warranted. Fitch will base its final rating decision on an assessment of the structure and financial profile of the acquiring entity. Fitch will also continue to evaluate trends in TOY's operations, which remain pressured by competition from the discounters and general weakness in toy retailing. TOYS 'R' US: Moody's Reviews Low-B Ratings for Possible Downgrade ----------------------------------------------------------------- Moody's Investors Service placed the long-term ratings of Toys "R" Us, Inc. (senior implied at Ba1), as well as its SGL-1 speculative grade liquidity rating, on review for possible downgrade. This review action results from today's announcement that Toys "R" Us, Inc. has agreed to be acquired for $6.6 billion plus the assumption of all debt by a consortium consisting of Kohlberg Kravis Roberts & Co., Bain Capital Partners LLC, and Vornado Realty Trust. Ratings placed on review for possible downgrade: 1. Senior implied rating at Ba1; 2. Senior unsecured issuer at Ba2; 3. Senior unsecured notes rating at Ba2, and 4. Speculative grade liquidity rating of SGL-1. At present, little is known about the proposed capital structure for Toys post-closing of the acquisition, although it is likely that leverage will increase, perhaps very significantly. Additionally, little is known with respect to the future strategic plan of the new owners, including potential real estate divestitures and sales of divisions, as well as the potential implications of Bain's present ownership of the challenged Kay-Bee Toys chain. While existing bond indentures permit pledging of unlimited amounts of inventory, and do not contain change of control provisions, in the event any other assets, including real estate, are pledged as collateral to secure in excess of roughly $1 billion in additional borrowings, the existing unsecured bondholders would share pari passu in that incremental excess collateral. TRIANGLE MACHINE: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Triangle Machine & Manufacturing Company, Inc. PO Box 9 Hurst, Texas 76053 Bankruptcy Case No.: 05-42662 Type of Business: The Debtor manufactures fishing accessories. See http://www.fishingworld.com/CycloneWinder/ Chapter 11 Petition Date: March 16, 2005 Court: Northern District of Texas (Ft. Worth) Judge: Russell F. Nelms Debtor's Counsel: Eric A. Liepins, Esq. Eric A. Liepins, P.C. 12770 Coit Road, Suite 1100 Dallas, Texas 75251 Tel: (972) 991-5591 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Charles Womack $400,000 11500 South Pipeline Euless, TX 76040 Lee Bonham $400,000 11500 South Pipeline Euless, TX 76040 Weber Metals, Inc. $65,525 PO Box 318 Paramount, CA 90723 The Roberts Law Firm $64,671 240 Long Road, Suite 230 Chesterfield, MO 63005 Constellation New Energy $49,792 P.O. Box 200187 Dallas, TX 75320-0187 Earle M. Jorgensen Steel $47,008 2030 West Commerce Street Dallas, TX 75265 Lafleur Petroleum Services $36,386 1810 Banks Drive Weatherford, TX 76087-9430 Quality Plating Company $34,595 2665 North Darlington Tulsa, OK 74115-2809 K.D. CNC Machining $31,785 2135 Webb Lynn Road, Suite A Arlington, TX 76018 RHW Metals Inc. $28,982 P.O. Box 3489 Fort Worth, TX 76133 Metal Tek International $27,300 Box 68-9827 Milwaukee, WI 53268-9827 Tradco, Inc. $26,514 PO Box 1092 Washington, MO 63090 Chapdelaine & Associates, Inc. $25,768 P.O. Box 972619 Dallas, TX 75397-2619 JC Tool Supply $23,862 P.O. Box 1018 Hurst, TX 76053 Accurate Weld, Inc. $20,560 2736 St. Louis Fort Worth, TX 76110 Resource Metals $17,164 14311 Reeveston Road Houston, TX 77039 Aluminum Precision Product $16,509 3333 West Warner Avenue Santa Ana, CA 92704-5316 A.J. Rod Company, Ltd. $16,443 P.O. Box 9125 Houston, TX 77261-9125 Trident Company $15,716 PO Box 951835 Dallas, TX 75395-1835 Rheaco $13,800 1801 West Jefferson Street Grand Prairie, TX 75051 TROPICAL SPORTSWEAR: Taps Alvarez & Marsal as Financial Advisors ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida gave Tropical Sportswear Int'l Corporation and its debtor-affiliates permission to employ Alvarez & Marsal, LLC, as their financial and restructuring advisors. Alvarez & Marsal will: a) provide consulting services to the Debtors' Chief Executive Officer and Board of Directors in connection with efforts to improve the Debtors' financial and operating performance; b) assist in evaluating the Debtors' current business plan, prepare a revised operating plan and cash flow forecast and present that operating plan and forecast to the Debtors' Board of Directors; c) assist in identifying cost reduction and operations improvement opportunities, and assist in financing issues including preparation of reports, and communicate with the Debtors' creditors and other constituents; d) assist in other restructuring proposal activities that will be presented to the Chief Executive Officer and Board of Directors; e) assist in the overview of the Debtors' organization and operating procedures, in interaction with the Debtors' parties in interest and attend meetings with the Debtors' counsel; f) advise the Debtors in the formulation of an employee retention incentive plan, prepare hypothetical liquidations analyses, and review and analyze the transactions with insiders, related parties and affiliates; g) assist the Debtors in preparing various financial reporting documentation, in the preparation of a plan of reorganization, and in providing expert testimony in support of the Debtors; and h) provide all other financial and restructuring advisory services that are necessary in the Debtors' chapter 11 cases. Peter A. Briggs, a Managing Director at Alvarez & Marsal, charges $610 per hour for his services. Mr. Briggs discloses that the Firm received a $400,000 retainer. Other professionals performing services to the Debtors are William Johnsen, charging $475 per hour, and Eric Scanlan, charging $325 per hour. Mr. Briggs reports Alvarez & Marsal's professionals bill: Designation Hourly Rate ----------- ----------- Managing Director $475 - $650 Director $375 - $475 Associate $275 - $350 Analyst $200 - $250 Mr. Briggs reports that the Firm's compensation consist of a Transaction Fee equal to 1% of the Total Consideration relating to the sale, in part or in whole of any of the Debtors' assets. Alvarez & Marsal assures the Court that it does not represent any interest adverse to the Debtor or their estates. Headquartered in Tampa, Florida, Tropical Sportswear Int'l Corp. -- http://www.savane.com/-- designs, produces and markets branded branded apparel products that are sold to major retailers in all levels and channels of distribution. The Company and its debtor-affiliates filed for chapter 11 protection on Dec. 16, 2004 (Bankr. M.D. Fla. Case No. 04-24134). David E. Bane, Esq., and Denise D. Dell-Powell, Esq., at Akerman Senterfitt, represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $247,129,867 and total debts of $142,082,756. UAL CORP: Wants to Walk Away From Three Boeing Aircraft Leases -------------------------------------------------------------- UAL Corporation and its debtor-affiliates seek Judge Wedoff's permission to abandon three Boeing 737-522 Aircraft and Engines bearing Tail Nos. N916UA, N917UA and N920UA. U.S. Bank is the Security Trustee for all three Aircraft, which are currently parked at Timco Aviation Services in Goodyear, Arizona. The Debtors need to maximize their fleet utility at the lowest possible cost. James H.M. Sprayregen, Esq., at Kirkland & Ellis, reports that the Debtors analyzed several aircraft financings and considered the financing structure and related equipment in light of the projected demand for air travel, flight schedules, maintenance requirements, labor costs and other business factors. The Debtors own the Aircraft and Engines. The Debtors financed the Aircraft and Engines through the issuance of Notes. The Aircraft and Engines secure the Notes. After careful review, the Debtors determined that these Aircraft and related Engines are burdensome to their estates. The financing terms exceed the current market value and the payment obligations far outweigh the benefits that the Debtors receive from using the Aircraft. Mr. Sprayregen asks the Court to expedite the effectiveness of the abandonments to minimize the administrative claims the financiers and other parties may assert against the Debtors' estate. 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. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARTEC TELECOM: Court Okays DeSoto Asset Sale to Regional Mgt. -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas authorizes Vartec Telecom, Inc., and its debtor-affiliates to sell a 4.1686-acre tract of vacant land located at 1006 East Pleasant Run Road in DeSoto, Texas, to Regional Management, Inc., for $455,000. The Court also authorizes the Debtors to pay two real estate agents. Options Real Estate Investments, Inc. -- VarTec's agent -- and Quine & Associates, Inc. -- Regional's agent, will split a 6% brokerage commission when the sale closes. Other Pending Asset Sale The Debtors also sought the Court's authority to sell these assets: * Addison I -- a 136,000 square foot, one and two-story office building complex with 1,023 parking spaces, located at 16675 Addison Road, and * Addison II -- a 180,400 square foot office and warehouse building with 599 parking spaces, located at 4550 Excel Parkway, to SPI IH II, L.P., for $12.5 million. SPI agreed to lease back certain spaces in both Addison I and Addison II, which will save the Debtors from incurring significant expenses related to immediately vacating the Addison locations. Headquartered in Dallas, Texas, Vartec Telecom Inc. -- http://www.vartec.com/-- provides local and long distance service and is considered a pioneer in promoting 10-10 calling plans. The Company and its affiliates filed for chapter 11 protection on November 1, 2004 (Bankr. N.D. Tex. Case No. 04-81695). Daniel C. Stewart, Esq., William L. Wallander, Esq., and Richard H. London, Esq., at Vinson & Elkins, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $100 million in assets and debts. VENTURE HOLDINGS: Taps Rothschild Inc. as Investment Bankers ------------------------------------------------------------ Venture Holdings Company LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Michigan for permission to retain Rothschild Inc. and certain of its affiliates as their investment bankers pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, nunc pro tunc to Jan. 28, 2005. The Debtors selected Rothschild Inc. because they believe it is highly qualified and able to represent them in a cost-effective, efficient and timely manner. Rothschild Inc. is expected to: a) advise the Debtors with respect to the potential sale involving some or substantially all of their assets; b) advise the Debtors in analyzing and structuring a Sales Transaction involving their assets and identify and contact parties interested in a possible Transaction; c) assist the Debtors in preparing a Confidential Information Memorandum describing the Debtors' financial position and operations for distribution to parties involved in a potential Transaction; d) participate on the Debtors' behalf in negotiations concerning a Transaction and also participate in hearings before the Bankruptcy Court and provide relevant testimony with respect to matters related to a Transaction; and e) provide all other investment banking and financial advisory services that Rothschild Inc., and the Debtors will agree from time to time. Michael Barr, a Managing Director at Rothschild Inc., discloses that the Firm received a $200,000 Retainer Fee. Mr. Barr reports Rothschild Inc.'s terms of compensation: a) an Advisory Fee of $800,000 payable no later than April 30, 2005, except in the event that the Debtors suspended or terminated the sale process for the Debtors' assets before Feb. 28, 2005; b) upon the consummation of a Sales Transaction, a Transaction Fee equal to 1% of the amount of Consideration involved in the Transaction, however, if the existing bank debt holders as a group exchange or convert debt to equity of the Debtors, Rothschild will be entitled to a Transaction Fee equal to 5% of the Consideration to be determined by the highest bona fide offer received during the sale process, subject to a minimum Fee of $1 million; c) in the event a Transaction is consummated during the term of Rothschild's engagement for substantially all of the Debtors and its affiliates, the Retainer Fee and Advisory Fee will be credited against the Transaction Fee; and d) in the event that a Transaction is not consummated and the Debtors receive a Break-Up Fee or other expense reimbursement, the Debtors will pay Rothschild a fee equal to 50% of the Break-Up Fee, subject to a maximum amount equal to the Transaction Fee. Rothschild Inc. assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Fraser, Michigan, Venture Holdings Company and its debtor-affiliates filed for chapter 11 protection (Bankr. E.D. Mich. Case No. 03-48939) on March 28, 2003. Deluxe Pattern Corporation and its debtor- affiliates filed for chapter 11 protection on May 24, 2004 (Bankr. E.D. Mich. Case No. 04-54977). Together, Venture and Deluxe are part of a worldwide full-service automotive supplier, systems integrator and manufacturer of plastic components, modules and systems. As of March 31, 2002, the Debtors had total assets of $1,459,834,000 and total debts of $1,382,369,000. WEIRTON STEEL: Trustee Wants Until April 15 to Object to Claims --------------------------------------------------------------- The Weirton Steel Corporation Liquidating Trustee asks the U.S. Bankruptcy Court for the Northern District of West Virginia to extend, through April 15, 2005, the deadline to object to claims filed by: (i) National Steel Corporation, (ii) the United States Environmental Protection Agency/ Department of Justice, and (iii) active salaried employees as of April 1, 2004, asserting retiree benefits. Mark E. Freedlander, Esq., at McGuireWoods LLP, in Pittsburgh, Pennsylvania, relates that the Liquidating Trustee has continued to diligently prosecute and negotiate administrative claims objections. However, due to the volume of asserted claims, the continuous filing of late administrative claims, protracted negotiations, and the corresponding litigation processes, the Liquidating Trustee has not finally resolved the Remaining Claims and requires a brief additional period of time to do so. Absent an extension of the Claim Objection Deadline, the Liquidating Trustee will be compelled to file objections to the Remaining Claims without having adequate opportunity to amicably resolve the many outstanding administrative claims disputes. Certain of the Remaining Claims are subject to agreements in principle regarding the terms of settlement, and the filing of an objection to the claims at this time could jeopardize the Liquidating Trustee's ability to finalize and consummate the settlements, Mr. Freedlander tells the Court. * * * The Court will hold a telephonic hearing on April 19, 2005, to consider the Trustee's request. Judge Friend issues a Bridge Order extending the Claim Objection Deadline as to the claims filed by National Steel, EPA and certain active employees, pending entry of a final order on the Trustee's request. Headquartered in Weirton, West Virginia, Weirton Steel Corporation was a major integrated producer of flat rolled carbon steel with principal product lines consisting of tin mill products and sheet products. The company was the second largest domestic producer of tin mill products with approximately 25% of the domestic market share. The Company filed for chapter 11 protection on May 19, 2003 (Bankr. N.D. W. Va. Case No. 03-01802). Judge L. Edward Friend, II administers the Debtors' cases. Robert G. Sable, Esq., Mark E. Freedlander, Esq., David I. Swan, Esq., James H. Joseph, Esq., at McGuireWoods LLP, represent the Debtors in their liquidation. Weirton sold substantially all of its assets to Wilbur Ross' International Steel Group. Weirton's confirmed Plan of Liquidation became effective on Sept. 8, 2004. (Weirton Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 215/945-7000) WEIRTON STEEL: Trust Wants to Sell L/C Refund Right to Fletcher --------------------------------------------------------------- As part of the closing of the sale of Weirton Steel Corporation's assets, an irrevocable standby letter of credit totaling $400,000 was cash collateralized at 110%, or a total of $440,000, with Fleet Capital Corporation, the Agent for the Debtor's Postpetition Facility. The Letter of Credit was for the benefit of the U.S. Department of Labor, Insurance and Assessment Section, Employment Standards Administration, Office of Workers' Compensation Programs, Division of Longshore and Harbor Worker's Compensation. Mark E. Freedlander, Esq., at McGuireWoods LLP, in Pittsburgh, Pennsylvania, relates that the Letter of Credit collateralized past and future claims against Weirton and not its successor, the Liquidating Trust, relating to Workers' Compensation that arise under the Longshore and Harbor Workers' Compensation Act. After the Closing, the U.S. Labor Department drew the Letter of Credit and collected $400,000 from Fleet Capital. The Liquidating Trust received from Fleet Capital $37,058 of collateral in excess of the Letter of Credit value for Weirton's benefit. The U.S. Labor Department has the right to retain the Collateral for a reasonable period of time to satisfy any valid Longshore Workers' Compensation claims that may be asserted. The U.S. Labor Department has informed the Liquidating Trust that it is their practice to hold the Collateral for three to five years after the cessation of an entity's business subject to Longshore Workers' Compensation. Any remaining Collateral that exists three to five years after the last Longshore Workers' Compensation claim is filed will be refunded to the Liquidating Trust. Against this backdrop, the Liquidating Trust seeks the Court's authority to sell its Contingent Refund Right to Robert C. Fletcher, the Trustee of the Liquidating Trust, for $50,000, free and clear of any liens, claims, encumbrances and other interests. Mr. Freedlander asserts that the prompt sale of the Contingent Refund Right will realize the maximum value from the Liquidating Trust's contingent interest in the Collateral. Due to the potential amount of the Contingent Refund Right, the Liquidating Trustee cannot make a final distribution to creditors until the Contingent Refund Right is administered. Due to the three to five year timeframe established by the U.S. Labor Department before the release of the remainder of the Collateral, the Liquidating Trust cannot be terminated until it either recovers the Collateral or administers the Contingent Refund Right. The Trust believes that the fact that Mr. Fletcher is the Liquidating Trustee does not preclude the Court from making the determination that Mr. Fletcher is a good faith purchaser under Section 363(m) of the Bankruptcy Code. Mr. Freedlander assures the Court that the proposed sale is not tainted by any fraud or impropriety. There has been full disclosure of the proposed sale by the filing of the request. Mr. Freedlander notes that the proposed sale will permit the Liquidating Trustee to fully administer its assets by mid-2005 as scheduled, and obtain a final decree and terminate the Liquidating Trust. Headquartered in Weirton, West Virginia, Weirton Steel Corporation was a major integrated producer of flat rolled carbon steel with principal product lines consisting of tin mill products and sheet products. The company was the second largest domestic producer of tin mill products with approximately 25% of the domestic market share. The Company filed for chapter 11 protection on May 19, 2003 (Bankr. N.D. W. Va. Case No. 03-01802). Judge L. Edward Friend, II administers the Debtors' cases. Robert G. Sable, Esq., Mark E. Freedlander, Esq., David I. Swan, Esq., James H. Joseph, Esq., at McGuireWoods LLP, represent the Debtors in their liquidation. Weirton sold substantially all of its assets to Wilbur Ross' International Steel Group. Weirton's confirmed Plan of Liquidation became effective on Sept. 8, 2004. (Weirton Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 215/945-7000) WELLS FARGO: Fitch Places Low-B Ratings on Two Mortgage Certs. -------------------------------------------------------------- Fitch rates Wells Fargo mortgage pass-through certificates, series 2005-AR6: -- $975,359,100 classes A-1 and A-R (senior certificates) 'AAA'; -- $11,504,000 class B-1 'AA'; -- $5,502,000 class B-2 'A'; -- $3,002,000 class B-3 'BBB'; -- $2,000,000 class B-4 'BB'; -- $1,501,000 class B-5 'B.' The 'AAA' rating on the senior certificates reflects the 2.50% subordination provided by the 1.15% class B-1 certificates, the 0.55% class B-2 certificates, the 0.30% class B-3 certificates, the 0.20% privately offered class B-4 certificates, the 0.15% privately offered class B-5 certificates, and the 0.15% privately offered class B-6. Classes B-1, B-2, B-3, B-4, and B-5 are rated 'AA,' 'A,' 'BBB,' 'BB,' and 'B,' respectively, based on their respective subordination. The class B-6 certificates are not rated by Fitch. Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral, the integrity of the legal and financial structures and the servicing capabilities of Wells Fargo Bank, N.A. ([WFB]; rated 'RPS1' by Fitch). The transaction is secured by one pool of mortgage loans, which consist of fully amortizing, one- to four-family, adjustable-rate mortgage loans that provide for a fixed interest rate during an initial period of approximately 10 years. Thereafter, the interest rate will adjust on an annual basis to the sum of the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year and a gross margin. Approximately 2.30% of the aggregate mortgage loans are interest only loans, which require only payments of interest until the month following the first adjustment date. The mortgage loans have an aggregate principal balance of approximately $1,000,369,046 as of the cut-off date (March 1, 2005), an average balance of $559,804, a weighted average remaining term to maturity -- WAM -- of 357 months, a weighted average original loan-to-value ratio -- OLTV -- of 66.10% and a weighted average coupon -- WAC -- of 5.319%. Rate/Term and cashout refinances account for 33.01% and 13.41% of the loans, respectively. The weighted average FICO credit score of the loans is 744. Owner occupied properties and second homes comprise 94.47% and 5.53% of the loans, respectively. The states that represent the largest geographic concentration are: * California (44.39%), * New York (5.35%), and * Illinois (4.45%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003, entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation', available on the Fitch Ratings web site at http://www.fitchratings.com/ All of the mortgage loans were generally originated in conformity with underwriting standards of WFB. WFB sold the loans to Wells Fargo Asset Securities Corporation -- WFASC, a special purpose corporation, who deposited the loans into the trust. The trust issued the certificates in exchange for the mortgage loans. WFB will act as servicer, master servicer and custodian, and Wachovia Bank, N.A. will act as trustee and paying agent. For federal income tax purposes, an election will be made to treat the trust as a real estate mortgage investment conduit. WESTCHESTER COUNTY: S&P Pares $113M Sr.-Lien Bond Rating to B ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating three notches to 'B' from 'BB' on $113 million of Westchester County Health Care Corp., New York's senior-lien bonds. The outlook on the rating is negative. In addition, Standard & Poor's affirmed its 'AAA' rating on $138 million of the corporation's subordinate-lien debt, which is guaranteed by Westchester County (rated 'AAA'). "The lowered rating reflects the corporation's inability to measurably close the operating gap through management actions, resulting in a growing realization that WCHCC will not be able to survive without direct government subsidies," said Standard & Poor's credit analyst Liz Sweeney. The need for government support comes at a time when the parties from which WCHCC is looking to receive support -- Westchester County, New York State, and the federal government -- are all struggling with their own budget issues. Although there is a proven willingness to assist WCHCC's survival, the timing is unfortunate for WCHCC. In addition, the gap that WCHCC is asking for support in filling has grown considerably during the last year to $100 million, making it more of a strain on the supporting parties. Liquidity remains critically low, and is not likely to carry WCHCC beyond the next few months, so a solution of some kind will be necessary this year. The rating is in the 'B' category and the outlook is negative because it is uncertain if, and when, a government support package will be secured, and whether the solution will be long-term or temporary. In addition, it is Standard & Poor's view that a hospital that is reliant on government support for viability will not be allowed to operate with the kind of operating flexibility, profitability, and liquidity expected of higher rated entities. The lowering of the rating affects $113 million of senior-lien debt, which is backed by a revenue pledge of Westchester Medical Center. The rating action does not affect the $138 million subordinate-lien debt, which is rated 'AAA', based on a guarantee of Westchester County. The county is rated 'AAA'. However, the rating on the county will continue to be evaluated in light of the county's guarantees on behalf of the corporation and its current and future support for the corporation. Management is adept at managing with a minimal amount of cash and has not missed any debt payments. However, a pension contribution of $14.5 million that was due in December 2004 was deferred, and must be paid by May 2005. Another $20 million payment will be due by February 2006. WCHCC is not likely to be able to make those payments while operating with a $60 million loss from operations. Management estimates that it could run out of cash within a couple of months without outside support. The future direction of the rating will likely hinge on the corporation's ability to demonstrate a long- term, predictable, and measurable solution to the question of government support. WINN-DIXIE: Buffalo Rock Wants to Transfer Cases to Florida ----------------------------------------------------------- Buffalo Rock Company asks the U.S. Bankruptcy Court for the Southern District of New York to transfer Winn-Dixie Stores, Inc., and its debtor-affiliates' Chapter 11 cases to the U.S. Bankruptcy Court for the Middle District of Florida, Jacksonville Division, or any other district in the southeastern United States where venue would be appropriate under Section 1408 of the Judiciary Code. Section 1408 sets forth the eligibility for a debtor to file for bankruptcy within a particular venue. Robert B. Rubin, Esq., at Burr & Forman LLP, in Birmingham, Alabama, explains that while at first glance the Debtors may technically meet the requirements for venue in the U.S. Bankruptcy Court for the Southern District of New York, on deeper examination into the facts underlying the Debtors' eligibility, it is apparent that the Debtors "manufactured" venue in the New York Court through machinations shortly before the Petition Date. According to Mr. Rubin, it appears that the basis for the venue of the Debtors' bankruptcy cases in New York is by virtue of Dixie Stores, Inc., the first-filed bankruptcy case. Dixie Stores is a wholly owned subsidiary of Winn-Dixie Stores, Inc., the ultimate parent company among the Debtors. The Debtors have selected venue in the Southern District of New York's Bankruptcy Court for the other Winn-Dixie entities by virtue of the other Debtors' status as "affiliates" of Dixie Stores. On February 9, 2005, 12 days prior to the Petition Date, Dixie Stores was incorporated in New York. The legal counsel that performed the incorporated was Skadden, Arps, Meagher & Flom LLP, lead bankruptcy counsel for the Debtors. Given the significant amount of prior preparation that an orderly Chapter 11 bankruptcy filing takes, it is clear that the Debtors have been in preparation for filing their Chapter 11 cases in advance of the February 9, 2005, incorporation of Dixie Stores, Inc. Mr. Rubin asserts that the only reasonable conclusion to be drawn is that the Debtors have engaged in blatant forum shopping in an effort to neutralize creditor involvement in their Chapter 11 cases. The Debtors know the geographical location of the body of their creditors. Of the 40 largest trade creditors and the 10 largest institutional creditors listed by the Debtors, only one creditor is from the state of New York. By requiring creditors to participate in a distant court, the Debtors seek to minimize the creditors' impact on the Debtors' restructuring efforts. Venue in New York virtually ensures that the creditors will be disenfranchised from complete and effective participation in the Debtors' bankruptcy cases. "The Debtors are taking advantage of the fact that absent full and vigorous involvement by the broad range of creditor constituencies in these cases, they will be able to advance their own interests (and potentially the interests of unknown others) at the expense of their creditors, not to mention the goals and policies of the Bankruptcy Code," Mr. Rubin says. The venue of the Debtors' bankruptcy cases is improper due to the manufacture of venue via last minute, prepetition machinations. However, even if the Court finds that the Debtors' prepetition "manufacture" of eligibility is valid, the convenience of the parties and the interest of justice dictate that the Court transfer the Debtors' Chapter 11 cases to the most appropriate venue -- the Middle District of Florida. Mr. Rubin asserts that to retain the Debtors' cases in New York would reward the blatant forum shopping engaged in by the Debtors while simultaneously hindering the abilities of the Debtors' creditors to effectively participate in the proceedings and increasing the costs of bankruptcy administration. The Debtors' bankruptcy cases have few, if any, relationships to the state of New York absent the last minute incorporation of a shell company. If the Court does not grant Buffalo Rock's request, then the result would be to effectively allow any debtor to file in any district, no matter their level of contact with that district. Buffalo Rock, a beverage bottler headquartered in Birmingham, Alabama, sells its products in Georgia, Alabama, and Florida. Buffalo Rock asserts that the Debtors owe it $2,800,000 as of the Petition Date. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). David J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINN-DIXIE: Court Gives Final Nod on $800 Million DIP Financing --------------------------------------------------------------- The U.S. Bankruptcy Court has granted final approval for the Winn-Dixie Stores, Inc.'s $800 million debtor-in-possession credit facility from Wachovia Bank, N.A. The DIP credit facility, which replaces the Company's previous $600 million credit line, will be used to supplement the Company's cash flow during the reorganization process. The Court also granted final approval for a number of other court filings known as "First Day Motions" this week. The orders granted by the Court will help the Company continue to operate its business during the reorganization process. On Feb. 21, 2005, as part of its voluntary filing to reorganize under Chapter 11, Winn-Dixie filed more than 25 First Day Motions to support its associates and vendors, together with its customers and other stakeholders. At hearings this week, Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York granted final approval of the Company's request to: * continue payment of salaries, wages and health and welfare benefits to associates as normal; * pay vendors for goods and services provided on or after Feb. 22, 2005; and * continue honoring obligations to its customers under the Company's Customer Reward Card program. All Winn-Dixie stores in the U.S. and the Bahamas are open and conducting business as usual. Peter Lynch, President and Chief Executive Officer, said: "We are continuing to make good progress in our reorganization case. A seven-member creditors' committee has now been formed and, along with its financial and legal advisors, is actively engaged in the proceedings. We look forward to a cooperative and productive relationship with them as we continue to take steps to strengthen our business." Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). David J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINN-DIXIE: Wants to Employ Togut Segal as Conflicts Counsel ------------------------------------------------------------ Winn-Dixie Stores, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of New York to employ Togut, Segal & Segal LLP as their conflicts counsel, nunc pro tunc to February 28, 2005. Togut will handle matters that the Debtors may encounter which are not appropriately handled by the Debtors' bankruptcy counsel, Skadden, Arps, Slate, Meagher & Flom LLP, because of a potential or actual conflict of interest, or alternatively which can be more efficiently handled by Togut. This will avoid unnecessary litigation and reduce the overall expense of administering the Debtors' Chapter 11 cases. The Debtors have selected Togut because of its experience in business reorganizations under Chapter 11 of the Bankruptcy Code. In addition, Togut possesses extensive expertise, experience and knowledge practicing before the Court. Togut has been actively involved in major Chapter 11 cases. As the Debtors' conflicts counsel, Togut will: (a) advise the Debtors regarding their powers and duties as Debtors-in-Possession in the continued management and operation of their businesses and properties; (b) attend meetings and negotiate with representatives of creditors and other parties-in-interest; (c) take necessary action to protect and preserve the Debtors' estates, including prosecuting actions on the Debtors' behalf, defending any action commenced against the Debtors and representing the Debtors' interests in negotiations concerning litigation in which the Debtors are involved, including, but not limited to, objections to claims filed against the estates; (d) prepare on the Debtors' behalf motions, applications, answers, orders, reports and papers necessary to the administration of the estates; (e) advise the Debtors in connection with any potential sale of assets; (f) appear before the Court and any appellate courts and protect the interests of the Debtors' estates before these courts; and (g) perform other necessary legal services and provide other necessary legal advice to the Debtors in connection with the Debtors' Chapter 11 Cases. The Debtors will pay Togut according to these hourly rates: Partners $630 to $765 Paralegals and Associates $125 to $525 Counsel to the Firm $545 Albert Togut, Esq., a senior member of Togut, assures the Court that the firm is a "disinterested person" as that term is defined by Section 101(14) of the Bankruptcy Code. Mr. Togut believes that the firm holds no adverse interest to the Debtors. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). David J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Asks Court for Final Decree Closing 220 Cases ----------------------------------------------------------- Alfredo R. Perez, Esq., at Weil Gotshal & Manges LLP, in New York, relates that in accordance with WorldCom Inc.'s Plan of Reorganization, certain restructuring transactions were effectuated as of the Effective Date. These restructuring transactions included the substantive consolidation of various Chapter 11 estates, and the merger of certain Debtors with and into other Debtors. The Reorganized Debtors identified: * 171 Debtor Subsidiaries, which were merged into one or more of the Debtors, dissolved, or otherwise consolidated as of the Effective Date; and * 49 Debtor Subsidiaries, which survived on and after the Effective Date. By this motion, the Reorganized Debtors ask the Bankruptcy Court to enter a final decree closing the Chapter 11 cases of: (a) 171 Merged Subsidiaries, effective as of April 20, 2004; and (b) 49 Surviving Subsidiaries, effective no later than March 31, 2005. Mr. Perez notes that on or before April 20, 2004, the Merged Subsidiaries ceased to operate as independent entities and their Chapter 11 cases were ripe for closing. The Reorganized Debtors do not seek to close the Chapter 11 cases of WorldCom, Inc., and Intermedia Communications, Inc., Mr. Perez clarifies. The Reorganized Debtors only seek to close the 220 cases, without prejudice to the U.S. Trustee's claims for statutory fees in connection with the WorldCom case and the Intermedia case. Pursuant to Section 1930(a)(6) of the Judicial Procedures Code, the Debtors have paid hundreds of thousands of dollars in quarterly fees to the U.S. Trustee, and will continue to incur these fees until their Chapter 11 cases are closed. Mr. Perez points out that absent an order closing their Chapter 11 cases, the Reorganized Debtors will be forced to incur the substantial and ongoing financial burden of paying the quarterly fees to the U.S. Trustee on the 220 Chapter 11 cases. Moreover, the Reorganized Debtors assert that their Chapter 11 cases have been fully administered as required by Section 350(a) of the Bankruptcy Code. The Court has entered a confirmation order that is final and non-appealable. The Plan has been substantially consummated and payments to be made under the Plan have commenced. To the extent that any claims remain pending against one of the Closing Debtors, the claims are deemed claims against the WorldCom Debtors or the Intermedia Debtors as a result of substantive consolidation. The WorldCom case and the Intermedia case will continue to be jointly administered for the purpose of adjudicating or resolving pending claims against either the WorldCom Debtors or the Intermedia Debtors. Thus, the 220 Chapter 11 cases have been rendered redundant by substantive consolidation and the rights of creditors will not be adversely affected by the closing of those cases. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 78; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Objects to Michael Jordan's $8 Million Claim ---------------------------------------------------------- In 1995, Michael Jordan and WorldCom, Inc., entered into an agreement, which provided for WorldCom's right to use Mr. Jordan's name, likeness, and personal services, to develop, manufacture, produce, sell, distribute, advertise and promote WorldCom's products and services. The Agreement, which provided for a 10-year contract term, precluded Mr. Jordan from conducting certain activities, including: (1) unreasonably withholding approval of packaging, advertising or promotional materials; and (2) using products or services which the Debtors' competitors produced or provided as long as alternatives were reasonably available from non-competitors. The agreement also contained a confidentiality clause, provisions for termination, and a non-assignment clause that prohibited Mr. Jordan from transferring his rights or obligations under the agreement without the Debtors' prior written consent. On January 16, 2003, Mr. Jordan filed Claim No. 11414 for $2 million, plus contingent and unliquidated amounts allegedly for unpaid annual compensation due on June 30, 2002, under the Agreement. Mark Shaiken, Esq., at Stinson Morrison Hecker LLP, in Kansas City, Missouri, relates that the Debtors rejected the Agreement on July 18, 2003. On August 14, 2003, Mr. Jordan amended his original claim with Claim No. 36077. Mr. Jordan alleged that the Debtors owed him $8 million pursuant to the rejected Agreement. The Debtors previously objected to Mr. Jordan's Claim. Mr. Shaiken argues that Claim No. 36077 does not satisfy the requirements of Rules 3001 and 3002 of the Federal Rules of Bankruptcy Procedure to qualify as a proof of claim. Mr. Jordan failed to provide sufficient documentation to support his claim. Mr. Jordan asserted that he did not supply a copy of the agreement because of a confidentiality provision, but offered to make a copy available to the United States Bankruptcy Court for the Southern District of New York if requested. Mr. Shaiken argues that an offer to bring a proof of claim into compliance with Bankruptcy Rule 3001 does not cure the claim filing. Furthermore, Mr. Jordan will not be prejudiced by the Debtors' Objection, as pre-trial proceedings in the matter have yet to begin. Since September 10, 2004, Mr. Jordan has steadfastly refused to agree to the terms of a scheduling order. As a consequence, no discovery has been conducted. No dispositive motions have been filed. Thus, Mr. Jordan's ability to investigate and contest the Debtors' Objection has not been affected in any manner, Mr. Shaiken maintains. The Debtors assert two additional legal reasons for their Objection to Claim No. 36077: (A) Mr. Jordan's claim is for breach of an employment contract that is limited by the statutory cap of Section 502(b)(7) of the Bankruptcy Code. Section 502(b)(7) "is intended to limit claims for future compensation which would have been earned had the parties continued to perform under the terminated employment contract." In re Lavelle Aircraft Co., Bankr. No. 94-174996DWS, 1996 WL 226852, at *5 (Bankr. E.D. Pa. May 2, 1996). A primary reason for this limitation is that "the party experiencing a loss due to the premature termination of a long term agreement has the capacity to mitigate its damages." For instance, the employee can find other employment. Mr. Shaiken explains that the statute "relieve[s] bankrupt employers of the continuing duty to pay high salaries to [those] who had been able to exact favorable . . . salaries while the business prospered." In re Prospect Hills Res., Inc., 837 F.2d 453, 455 (11th Cir. 1988). (B) Mr. Jordan failed to mitigate his damages after the Debtors rejected Mr. Jordan's contract pursuant to Section 365(a) of the Bankruptcy Code. As a result of the Debtors' rejection of the Agreement, Mr. Jordan then had an affirmative duty to locate and obtain other employment to mitigate his damages. Instead, Mr. Jordan failed to mitigate damages and is now seeking to recover the full amount of his contract with the Debtors. There is a question of fact as to whether Mr. Jordan made a good faith effort to seek comparable employment after the Debtors rejected his contract. Mr. Jordan cannot show that the Debtors' additional objections would "beyond doubt" be futile. Mr. Shaiken reminds the Court that the Debtors have filed a timely objection to Mr. Jordan's Claim in their 30th Omnibus Objection to Claims. The Debtors now desire to amend that timely objection to give Mr. Jordan notice of newly discovered legal theories based on the same events and circumstances. Under Rule 15(c)(2) of the Federal Rules of Civil Procedure, a revised pleading will relate back to an original pleading if it is based on the same series of transactions or occurrences, even if it asserts new legal theories. Mr. Shaiken points out that the Debtors' supplemental objections clearly arise out of the same transactions and occurrences that are the basis of Claim No. 36077 and the objection to that Claim. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: Judge Atlas Denies Stay Pending Appeal on Dismissal -------------------------------------------------------------- The United States District Court for the Southern District of Texas refuses to grant a stay while Yukos Oil Company appeals from the U.S. Bankruptcy Court's decision dismissing its Chapter 11 case. In a Memorandum and Order dated March 18, 2005, District Court Judge Nancy F. Atlas held that Yukos failed to show that the Bankruptcy Court abused its discretion when it denied the Company's request for stay pending appeal. Yukos failed to demonstrate for purposes of its request that it has a likelihood of success on the merits of its appeal. The Bankruptcy Court had noted a number of factors leading to its decision that the totality of the circumstances supported a finding of cause under Section 1112(b). Judge Atlas relates that in In re Chaffin, 816 F.2d 1070 (5th Cir. 1987), mod. 836 F.2d 215 (5th Cir. 1988), the Fifth Circuit permits a finding of cause under Section 1112(b) based on a totality of the circumstances. The District Court looked into the four criteria set forth in In re First South Savings Ass'n, 820 F.2d 700, 709 (5th Cir. 1987), in considering whether to grant or deny a stay pending appeal: (1) A likelihood of success on the merits; (2) Irreparable injury to the movant if the stay is not granted; (3) Substantial harm to other parties if the stay is granted; and (4) Whether granting the stay would serve the public interest. Judge Atlas notes that there are serious issues involved in the bankruptcy appeal and, therefore, Yukos must show that its appeal has "patent substantial merit" or that it presents a "substantial case on the merits." Yukos had argued that dismissal for cause under Section 1112(b) of the Bankruptcy Code is not permitted unless it is in the best interest of the estate or creditors. Yukos asserted that Section 1112(b) involves a two-step analysis -- first, to determine whether "cause" exists either to dismiss or to convert the Chapter 11 proceeding to a Chapter 7 proceeding, and second, to determine which option is in "the best interest of creditors and the estate." Only after cause is established is the Bankruptcy Court required to consider whether to dismiss or to convert. Judge Atlas holds that the Bankruptcy Court's decision is supported by record and Yukos has not shown that the decision was based on clearly erroneous factual findings or any error of law. "There is clear evidence in the record that Yukos suffers continuing financial losses and a significant diminution of its bankruptcy estate at the hands of the Russian Federation government," Judge Atlas says. Even if Yukos' interpretation of Section 1112(b) were accepted, Judge Atlas admits she still could not find that Yukos has a likelihood of success on the merits. Judge Atlas explains that the best interests of the creditors often diverge from the best interests of the estate. Judge Atlas notes that Yukos' largest creditor by far is the Russian Federation government, which has no interest in the continuation of the bankruptcy proceeding and whose interests were considered in the Bankruptcy Court's determination of "cause" under Section 1112(b). The District Court also expresses serious concerns about whether Yukos' case should properly proceed in the Southern District of Texas or in the United States at all. There are serious issues regarding jurisdiction under 11 U.S.C. Section 109, according to Judge Atlas. The cases relied upon by Yukos appear factually dissimilar from the circumstances at bar and, therefore, unpersuasive. Yukos' reliance on these distinguishable cases seems to stretch the Bankruptcy Code beyond its intended scope. The District Court agrees that Yukos will suffer irreparable harm if the stay is not granted because it will likely cease to exist before the District Court can rule on the appeal. The District Court also finds that Yukos has shown that any harm to Deutsche Bank AG that would result from a stay pending appeal would be substantially outweighed by the potential harm to Yukos if the stay is denied. Public interest did not figure in the District Court's decision. "[T]he public interest does not favor either party in connection with [Yukos' request]," Judge Atlas says. Judge Atlas explains that there are a number of competing public interests involved in the case. The public has an interest in due process, the orderly administration of justice, and careful consideration of important legal issues. These interests favor a stay while the District Court considers the issues raised by this appeal. Judge Atlas also points out that, while the District Court does not endorse the Russian Federation's conduct regarding Yukos, its affiliates or executives, the public interest of one country not interfering in another sovereign's enforcement of its own laws generally is relevant as a factor relating to the District Court's comity concerns and to the application of the act of state doctrine. 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. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) * WL Ross & Sumitomo Mitsui Create $300 Mil. DIP Financing Program ------------------------------------------------------------------ Sumitomo Mitsui Banking Corporation and WL Ross & Co. LLC set up a program to invest up to US$300 million in secured debtor-in- possession financings to companies reorganizing under Chapter 11 of the U.S. Bankruptcy Code. WL Ross & Co. LLC will be responsible for managing the program's portfolio. SMBC and WLR expect the program to produce synergies between the two firms that will further expand their DIP finance business in the competitive U.S. market. WLR is a leader in distressed investments globally, having sponsored more than $2.5 billion of such investments since its inception in 2000. Its successful commitments to steel, textiles and coal are well known. SMBC is one of the leading financial institutions in Japan. Its U.S. branches are located in New York, Los Angeles and San Francisco. Masayuki Oku, Deputy President and Head of International Banking Unit of SMBC said, "Building upon our already substantial experience in DIP finance in the U.S., we look forward to expanding the business through this exciting new relationship with WL Ross & Co. LLC. Its unparalleled expertise and network of contacts make WL Ross & Co. LLC the ideal partner for SMBC in this business." Wilbur L. Ross Jr., Chairman of WLR commented, "We are delighted to have been selected by such a prestigious financial group to manage this pioneering effort. For many years we have had mutually profitable relationships with SMBC and its Daiwa Securities SMBC affiliate." * BOND PRICING: For the week of March 14 - March 18, 2005 -------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- ABC Rail Product 10.500% 12/31/04 0 Adelphia Comm. 3.250% 05/01/21 8 Adelphia Comm. 6.000% 02/15/06 8 Allegiance Tel. 11.750% 02/15/08 33 Allegiance Tel. 12.875% 05/15/08 31 Amer. Comm. LLC 12.000% 07/01/08 5 Amer. Color Graph. 10.000% 06/15/10 69 Amer. Restaurant 11.500% 11/01/06 63 Amer. Tissue Inc. 12.500% 07/15/06 62 American Airline 7.377% 05/23/19 67 American Airline 7.379% 05/23/16 68 American Airline 8.800% 09/16/15 75 American Airline 9.070% 03/11/16 71 American Airline 10.610% 03/04/11 67 AMR Corp. 4.250% 09/23/23 74 AMR Corp. 4.500% 02/15/24 67 AMR Corp. 9.000% 08/01/12 75 AMR Corp. 9.200% 01/30/12 74 AMR Corp. 9.750% 08/15/21 64 AMR Corp. 9.800% 10/01/21 64 AMR Corp. 9.850% 01/02/09 72 AMR Corp. 9.880% 06/15/20 65 AMR Corp. 10.000% 04/15/21 68 AMR Corp. 10.190% 05/26/16 74 AMR Corp. 10.200% 03/15/20 65 AMR Corp. 10.290% 03/08/21 60 AMR Corp. 10.450% 11/15/11 57 AMR Corp. 10.550% 03/12/21 57 Anvil Knitwear 10.875% 03/15/07 64 Apple South Inc. 9.750% 06/01/06 16 Applied Extrusion 10.750% 07/01/11 59 Armstrong World 6.350% 08/15/03 71 Armstrong World 6.500% 08/15/05 70 Armstrong World 7.450% 05/15/29 72 Armstrong World 9.000% 06/15/04 70 Armstrong World 9.750% 04/15/08 70 AT Home Corp. 0.525% 12/28/18 7 AT Home Corp. 4.750% 12/15/06 13 ATA Holdings 12.125% 06/15/10 44 ATA Holdings 13.000% 02/01/09 45 Atlantic Coast 6.000% 02/15/34 33 Atlas Air Inc. 9.702% 01/02/08 56 Avado Brands Inc. 11.750% 06/15/09 20 B&G Foods Holding 12.000% 10/30/16 8 Bank New England 8.750% 04/01/99 8 Bank New England 9.500% 02/15/96 5 Bethlehem Steel 10.375% 09/01/03 0 Big V Supermarkets 11.000% 02/15/04 1 Borden Chemical 9.500% 05/01/05 1 Budget Group Inc. 9.125% 04/01/06 0 Burlington Inds. 7.250% 08/01/27 7 Burlington Inds. 7.250% 09/15/05 7 Burlington Northern 3.200% 01/01/45 61 Calpine Corp. 4.750% 11/15/23 75 Calpine Corp. 7.750% 04/15/09 71 Calpine Corp. 8.500% 02/15/11 72 Calpine Corp. 8.625% 08/15/10 71 Cendant Corp. 4.890% 08/17/06 51 Collins & Aikman 12.875% 08/15/12 68 Color Tile Inc. 10.750% 12/15/01 0 Comcast Corp. 2.000% 10/15/29 44 Cone Mills Corp. 8.125% 03/15/05 11 Cray Research 6.125% 02/01/11 66 Delta Air Lines 2.875% 02/18/24 49 Delta Air Lines 7.711% 09/18/11 61 Delta Air Lines 7.779% 01/02/12 56 Delta Air Lines 7.900% 12/15/09 39 Delta Air Lines 7.920% 11/18/10 62 Delta Air Lines 8.000% 06/03/23 40 Delta Air Lines 8.270% 09/23/07 70 Delta Air Lines 8.300% 12/15/29 33 Delta Air Lines 8.540% 01/02/07 72 Delta Air Lines 9.000% 05/15/16 36 Delta Air Lines 9.200% 09/23/14 42 Delta Air Lines 9.250% 03/15/22 35 Delta Air Lines 9.300% 02/02/10 61 Delta Air Lines 9.375% 09/11/07 66 Delta Air Lines 9.750% 05/15/21 34 Delta Air Lines 9.875% 04/30/08 73 Delta Air Lines 10.000% 05/17/10 73 Delta Air Lines 10.000% 06/01/08 59 Delta Air Lines 10.000% 06/01/09 65 Delta Air Lines 10.000% 06/01/10 64 Delta Air Lines 10.000% 08/15/08 46 Delta Air Lines 10.060% 01/02/16 49 Delta Air Lines 10.125% 05/15/10 37 Delta Air Lines 10.140% 08/26/12 50 Delta Air Lines 10.375% 02/01/11 40 Delta Air Lines 10.375% 12/15/22 33 Delta Air Lines 10.430% 01/02/11 73 Delta Air Lines 10.500% 04/30/16 52 Delta Air Lines 10.790% 03/26/14 71 Delta Mills Inc. 9.625% 09/01/07 49 Delphi Trust II 6.197% 11/15/33 75 Diva Systems 12.625% 03/01/08 1 Duty Free Int'l 7.000% 01/15/04 24 DVI Inc. 9.875% 02/01/04 7 E. Spire Comm Inc. 10.625% 07/01/08 0 E. Spire Comm Inc. 12.750% 04/01/06 0 E. Spire Comm Inc. 13.000% 11/01/05 0 E&S Holdings 10.375% 10/01/06 51 Eagle Food Center 11.000% 04/15/05 4 Encompass Service 10.500% 05/01/09 0 Enron Corp. 6.400% 07/15/06 31 Enron Corp. 6.500% 08/01/02 33 Enron Corp. 6.625% 10/15/03 32 Enron Corp. 6.625% 11/15/05 32 Enron Corp. 6.725% 08/01/09 32 Enron Corp. 6.750% 08/01/09 32 Enron Corp. 6.750% 09/01/04 33 Enron Corp. 6.750% 09/15/04 30 Enron Corp. 6.875% 10/15/07 31 Enron Corp. 6.950% 07/15/28 33 Enron Corp. 7.000% 08/15/23 25 Enron Corp. 7.125% 05/15/07 32 Enron Corp. 7.375% 05/15/19 32 Enron Corp. 7.625% 09/10/04 33 Enron Corp. 7.875% 06/15/03 31 Enron Corp. 9.125% 04/01/03 31 Enron Corp. 9.875% 06/15/03 33 Falcon Products 11.375% 06/15/09 40 Federal-Mogul Co. 7.375% 01/15/06 30 Federal-Mogul Co. 7.500% 01/15/09 30 Federal-Mogul Co. 8.160% 03/06/03 29 Federal-Mogul Co. 8.370% 11/15/01 30 Federal-Mogul Co. 8.800% 04/15/07 31 Fibermark Inc. 10.750% 04/15/11 75 Finova Group 7.500% 11/15/09 44 Fleming Cos. Inc. 10.125% 04/01/08 33 Flooring America 9.250% 10/15/02 0 Foamex L.P. 9.875% 06/15/07 60 Golden Books Pub. 10.750% 12/31/04 1 HNG Internorth. 9.625% 03/15/06 32 Icon Health & Fit 11.250% 04/01/12 75 Imperial Credit 9.875% 01/15/07 0 Imperial Credit 12.000% 06/30/05 0 Impsat Fiber 6.000% 03/15/11 69 Inland Fiber 9.625% 11/15/07 49 Intermet Corp. 9.750% 06/15/09 64 Iridium LLC/CAP 10.875% 07/15/05 17 Iridium LLC/CAP 11.250% 07/15/05 17 Iridium LLC/CAP 13.000% 07/15/05 17 Iridium LLC/CAP 14.000% 07/15/05 17 IT Group Inc. 11.250% 04/01/09 1 Kaiser Aluminum & Chem. 12.750% 02/01/03 15 Kmart Corp. 6.000% 01/01/08 15 Kmart Corp. 9.350% 01/02/20 22 Kmart Corp. 9.780% 01/05/20 74 Kmart Funding 9.440% 07/01/18 40 Lehman Bros. Holding 6.000% 05/25/05 67 Lehman Bros. Holding 7.500% 09/03/05 60 Level 3 Comm. Inc. 2.875% 07/15/10 57 Level 3 Comm. Inc. 5.250% 12/15/11 75 Level 3 Comm. Inc. 6.000% 03/15/10 52 Level 3 Comm. Inc. 6.000% 09/15/09 54 Liberty Media 3.750% 02/15/30 64 Liberty Media 4.000% 11/15/29 69 Lukens Inc. 7.625% 08/01/04 0 LTV Corp. 8.200% 09/15/07 0 MacSaver Financial 7.400% 02/15/02 9 MacSaver Financial 7.875% 08/01/03 5 Metamor Worldwide 2.940% 08/15/04 0 Metro Mortgage 9.000% 12/15/04 0 Mississippi Chem. 7.250% 11/15/17 73 Muzak LLC 9.875% 03/15/09 63 Nat'l Steel Corp. 8.375% 08/01/06 3 Nat'l Steel Corp. 9.875% 03/01/09 3 Northern Pacific Railway 3.000% 01/01/47 59 Northpoint Comm. 12.875% 02/15/10 1 Northwest Airlines 7.248% 01/02/12 73 Northwest Airlines 7.360% 02/01/20 66 Northwest Airlines 7.875% 03/15/08 69 Northwest Airlines 8.070% 01/02/15 65 Northwest Airlines 8.130% 02/01/14 68 Northwest Airlines 10.000% 02/01/09 70 Northwest Steel & Wir. 9.500% 06/15/01 0 Nutritional Src. 10.125% 08/01/09 72 Oakwood Homes 7.875% 03/01/04 41 Oakwood Homes 8.125% 03/01/09 25 Oglebay Norton 10.000% 02/01/09 75 O'Sullivan Ind. 13.375% 10/15/09 31 Orion Network 11.250% 01/15/07 52 Orion Network 12.500% 01/15/07 52 Owens Corning 7.000% 03/15/09 66 Owens Corning 7.500% 05/01/05 70 Owens Corning 7.500% 08/01/18 66 Owens Corning 7.700% 05/01/08 63 Owens Corning Fiber 8.875% 06/01/02 65 Owens Corning Fiber 9.375% 06/01/12 65 Pegasus Satellite 9.625% 10/15/05 57 Pegasus Satellite 9.750% 12/01/06 60 Pegasus Satellite 12.375% 08/01/06 58 Pegasus Satellite 12.500% 08/01/07 59 Pegasus Satellite 13.500% 03/01/07 0 Pen Holdings Inc. 9.875% 06/15/08 61 Penn Traffic Co. 11.000% 06/29/09 54 Piedmont Aviat. 10.300% 03/28/06 7 Piedmont Aviat. 10.350% 03/28/12 0 Polaroid Corp. 6.750% 01/15/02 2 Polaroid Corp. 7.250% 01/15/07 3 Polaroid Corp. 11.500% 02/15/06 2 Primedex Health 11.500% 06/30/08 50 Primus Telecom 3.750% 09/15/10 57 Railworks Corp. 11.500% 04/15/09 1 Read-Rite Corp. 6.500% 09/01/04 56 Realco Inc. 9.500% 12/15/07 40 Reliance Group Holdings 9.000% 11/15/00 25 Reliance Group Holdings 9.750% 11/15/03 2 RDM Sports Group 8.000% 08/15/03 0 RJ Tower Corp. 12.000% 06/01/13 59 S3 Inc. 5.750% 10/01/03 0 Safety-Kleen Corp. 9.250% 05/15/09 0 Safety-Kleen Corp. 9.250% 06/01/08 0 Salton Inc. 12.250% 04/15/08 66 Silverleaf Res. 10.500% 04/01/08 0 Specialty Paperb. 9.375% 10/15/06 75 Syratech Corp. 11.000% 04/15/07 21 Teligent Inc. 11.500% 12/01/07 0 Tower Automotive 5.750% 05/15/24 18 Triton PCS Inc. 8.750% 11/15/11 66 Triton PCS Inc. 9.375% 02/01/11 67 Twin Labs Inc. 10.250% 05/15/06 17 United Air Lines 6.831% 09/01/08 16 United Air Lines 7.762% 10/01/05 3 United Air Lines 7.811% 10/01/09 35 United Air Lines 8.030% 07/01/11 12 United Air Lines 8.250% 04/26/08 21 United Air Lines 8.310% 06/17/09 53 United Air Lines 8.700% 10/07/08 48 United Air Lines 9.000% 12/15/03 7 United Air Lines 9.125% 01/15/12 8 United Air Lines 9.200% 03/22/08 45 United Air Lines 9.350% 04/07/16 48 United Air Lines 9.560% 10/19/18 38 United Air Lines 9.750% 08/15/21 8 United Air Lines 9.760% 05/13/06 48 United Air Lines 10.020% 03/22/14 45 United Air Lines 10.250% 01/15/07 8 United Air Lines 10.360% 11/20/12 54 United Air Lines 10.670% 05/01/04 8 Univ. Health Services 0.426% 06/23/20 59 United Homes Inc. 11.000% 03/15/05 0 US Air Inc. 7.500% 04/15/08 0 US Air Inc. 8.930% 04/15/08 0 US Air Inc. 9.330% 04/15/08 42 US Air Inc. 10.250% 01/15/07 1 US Air Inc. 10.490% 06/27/05 3 US Air Inc. 10.900% 01/01/09 5 US Air Inc. 10.900% 01/01/10 5 US Airways Pass. 6.820% 01/30/14 40 Westpoint Stevens 7.875% 06/15/08 0 Winn-Dixie Store 8.875% 04/01/08 57 Winsloew Furniture 12.750% 08/15/07 20 Winstar Comm Inc. 12.500% 04/15/08 0 World Access Inc. 13.250% 01/15/08 3 Xerox Corp. 0.570% 04/21/18 50 ********* 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. 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For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, 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. 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