/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050329.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, March 29, 2005, Vol. 9, No. 73 Headlines ADELPHIA COMMS: WSJ Says $725 Mil. SEC Settlement in the Works ADELPHIA COMMS: Gets Court OK to Sell 200,000 Class A UCOMA Shares AF&L INSURANCE: Financial Strength is Poor, A.M. Best Says AIRCRAFT FINANCE: Moody's Junks $171M Classes B & C Notes ALL MARK: Case Summary & 21 Largest Unsecured Creditors AMAZON.COM: Shareholder Deficit Narrows to $227 Mil. at Dec. 31 AMERICAN REPROGRAPHICS: S&P Ups Rating on $130M Sr. Sec. Facility AMES DEPARTMENT: Sells Rocky Hill Property to 18 Bridge for $3M ANY MOUNTAIN: Owner Wants to Reorganize Rather Than Liquidate AT&T CORP: Moves Annual Meeting to June to Discuss SBC Merger AT&T CORP: Inks Long-Term Wholesale Services Pact with Bellsouth ATA AIRLINES: Chicago Express Wants to Reject 71 Agreements AUBURN FOUNDRY: Exploring Sale of Plant II Near Interstate 69 BANC OF AMERICA: S&P Puts Low-B Ratings on 6 Series 2005-1 Certs. BEAR STEARNS: Fitch Puts Low-B Ratings on 6 2005-PWR7 Certificates BJ SERVICES: Redeeming Convertible Senior Notes for $422.4 Million BLOCKBUSTER INC: Hollywood Bid Update Prompts S&P to Hold Ratings BLUE DOLPHIN: On-Going Liquidity Issues Spur Going Concern Doubt BOOTH CREEK: EBITDA Drop Cues S&P to Junk Credit Rating to CCC BUFFALO MOLDED: Plastech to Take Over Auto Business, Report Says CAPITAL LEASE: Fitch Affirms $6.8 Mil. Certs. at B+ & Junks Two CARDIAC SCIENCE: PwC Raises Doubt About Going Concern Viability CATHOLIC CHURCH: Court OKs Spokane's Proposed Interim Fee Protocol CENTERPOINT ENERGY: Moody's Assigns Ba2 Rating to $1 Bil. Facility CHASE FUNDING: S&P Affirms Low-B Ratings on Four Cert. Classes CHASE MORTGAGE: S&P Affirms Low-B Ratings on Nine Cert. Classes COUNTRYWIDE HOME: Fitch Holds Junk Ratings on 3 Mortgage Certs. CREDIT SUISSE: Moody's Junks Two Securitization Class Ratings DOLE FOOD: S&P Puts BB Rating on Proposed $1B Sr. Sec. Facilities DONNKENNY INC: Kronish Lieb Approved as Creditors Comm. Counsel DONNKENNY INC: Taps Alvarez & Marsal as Restructuring Consultants EAGLEPICHER: Various Concerns Prompt S&P to Junk Rating to CCC+ EDISON MISSION: Moody's Lifts Sr. Secured Debt Rating to Ba2 ENRON CORP: Asks Court to Approve Gas Transmission Settlement EXIDE TECH: Sandell, et al., Buy $3 Million Convertible Notes FALCON PRODUCTS: Taps Recovery Group for Turnaround Advice FINOVA GROUP: Court Formally Closes Mezzanine's Chapter 11 Case FITNESS EXPERIENCE: Atlas Partners Advising on 36 Retail Leases FLYI INC: Financial Restructuring Triggers Late Form 10-K Filing GENERAL BINDING: Moody's Affirms Caa1 Rating on $150M Sr. Notes GENERAL TRAILER: Case Summary & 20 Largest Unsecured Creditors GLASS GROUP: Gets Okay to Hire Focus Management as Fin'l. Advisor GLOBAL LEARNING: Disclosure & Plan Confirmation Hearing on June 16 GRAHAM CORP: Receiver Appointed for Discontinued U.K. Companies GREAT REPUBLIC: A.M. Best Says Financial Strength is Marginal GUITAR CENTER: Good Performance Prompts S&P to Lift Rating to BB HIGH VOLTAGE: Wants Until April 29 to Object to Old Claims HMQ METAL: CEO Upbeat About Ability to Emerge from Chapter 11 HOELTER TECH: Filing for Ch. 11 & Buying Movie Distribution Rights IAAI FINANCE: Moody's Junks Proposed $150 Million Senior Notes INSURANCE AUTO: S&P Junks $150 Million Senior Notes INTERSTATE BAKERIES: Wants Until Oct. 21 to Challenge Bank Claims JILLIAN'S ENT: Plan Administrator Wants Removal Period Extended JJ GOLF INC: Case Summary & 20 Largest Unsecured Creditors JOHNSONDIVERSEY: Fitch Assigns Low-B Ratings on Senior Debts KAISER ALUMINUM: Wants to Assume Plate Finishing Agreement KAISER ALUMINUM: Gets Court Nod to Reject Houston Office Lease KOPPERS INC: Dec. 31 Balance Sheet Upside-Down by $62 Million KRISPY KREME: Has Until Apr. 11 to File October Quarterly Reports MARVIN & SONS: Case Summary & 20 Largest Unsecured Creditors MCLEODUSA INC: Lots of Bad News & Second Bankruptcy May Follow METROPOLITAN MORTGAGE: Selling 3 Insurance Cos. in Package Deal MIRANT CORP: Shareholders Meeting Request Stayed Until April 13 MISSION ENERGY: Moody's Upgrades Senior Secured Debt to B2 from B3 NANOMAT INC: Wants to Hire Calaiaro Corbett as Bankruptcy Counsel NDCHEALTH CORP: 10-Q Filing Prompts S&P to Upgrade Ratings NEW WORLD: District Court Puts Limits on Committee's Investigation NOBLE DREW: Case Summary & 20 Largest Unsecured Creditors OMI TRUST: Likely Default Prompts S&P's D Rating on Class M-2 OPBIZ LLC: Moody's Places B3 Ratings on $506M Sr. Sec. Term Loans OWENS CORNING: CSFB Appeals False X-Ray Readings Issue PEABODY ENERGY: Fitch Upgrades $900 Mil. Senior Notes to BB+ PEGASUS SATELLITE: Asks Court to Bar Creditors from Taking Action PHELPS DODGE: Moody's Ups Cumulative Pref. Rating to (P)Ba1 PHILLIPS-VAN: Moody's Reviews $400M Debt Ratings & May Upgrade PITTSBURGH CITY: Moody's Lifts $825M Debt Rating From Ba1 to Baa3 POGO PRODUCING: Prices $300 Million Senior Subordinated Notes PROFESSIONAL LIFE: A.M. Best Says Financial Strength is Marginal QUAKER FABRIC: Banks Agree to Waive Defaults Through July 15 RANCHO LA VALENCIA: Voluntary Chapter 11 Case Summary RESI FINANCE: S&P Puts Low-B Ratings on Six Series 2005-A Secs. RESIDENTIAL FUNDING: Fitch Puts Low-B Ratings on $913,000 Certs. SALOMON BROTHERS: Losses Cue S&P to Cut Two Classes to D Rating SALTIRE IND: Wants to Cut Insurance Benefits for 490 Retirees SAXON ASSET: Fitch Downgrades Class BF-1 to BB- from BB+ SCHIRMER'S LLC: Case Summary & 20 Largest Unsecured Creditors SECOND CHANCE: Relocating Operations from Michigan to Alabama SOLUTIA INC: 74 Claims Transferred to Longacre Master Fund SONEX RESEARCH: Liabilities Exceed Assets by More Than $1.6 Mil. SOUTHERN FAMILY: A.M. Best Says Insurer's Fin'l. Strength is Weak SPIEGEL INC: Wants to Honor Eddie Bauer Employee Incentive Bonuses SPIEGEL INC: Modifies Stay for Lounsbery to Pursue Lawsuit STAAR SURGICAL: Auditors Doubt Going Concern Ability STATION CASINOS: Good Performance Prompts S&P to Affirm Ratings TECO AFFILIATES: Confirmation Hearing Will Commence on April 5 TECO AFFILIATES: Will File Separate Operating Reports Under Seal TORCH OFFSHORE: Balks at Committee's Request to Appoint a Trustee TORCH OFFSHORE: Gets Final Order on DIP Loan & Cash Collateral Use TORCH OFFSHORE: Nasdaq Halts Common Stock Trading UAL CORP: Court Okays Escrow Bond Payments to U.S. Bank UAL CORPORATION: Files 12th Reorganization Status Report UNISYS CORPORATION: Moody's Says Liquidity is Adequate for 2005 UNITED RENTALS: Lenders Waive Default on Late Annual Report Filing USG CORPORATION: L&W Wants to Enter Into New Real Property Leases V-ONE CORP: Proginet is Offering $2.05 Million to Buy Assets VALLEY MEDIA: Can Start Soliciting Acceptances of Liquidating Plan VANGUARDE MEDIA: Liquidation Brings Void to Black Community VERTIS INC: Moody's Junks $348 Million 9.75% Sr. Secured Notes WHX CORP: U.S. Trustee Appoints 3-Member Creditors Committee WHX CORP: PwC Approved as Independent Auditors & Tax Advisors WILLIAMS PROD: Moody's Reviews B2 Debt Rating for Possible Upgrade WORLDCOM INC: Settles Dispute Over 10 Champion Comms. Claims * Former Deloitte Director Dov Frishberg Joins Alvarez & Marsal * LeBoeuf Lamb Moves Bankr. Practice to Chicago, Legal Week Says * Large Companies with Insolvent Balance Sheets ********* ADELPHIA COMMS: WSJ Says $725 Mil. SEC Settlement in the Works -------------------------------------------------------------- The Wall Street Journal reported last week that Adelphia Communications Corp. is putting a deal together with the Justice Department and the U.S. Securities and Exchange Commission under which the cable television company will pay $725 million to settle all claims arising from its accounting scandal. Citing sources familiar with the situation, the Journal says the settlement amount is one of the largest in U.S. history; WorldCom settled SEC charges for $750 million in 2003. 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 COMMS: Gets Court OK to Sell 200,000 Class A UCOMA Shares ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of New York gives permission to Adelphia Communications Corporation and its debtor-affiliates to sell their interest in United Global Com, Inc., through open market transactions. United Global Com is an international broadband communications provider of video, voice and Internet services, with operations in 15 countries outside the United States. UCOMA's network reaches approximately 12.7 million homes, and serves about 7.5 million video subscribers, 730,000 voice subscribers and 925,000 Internet subscribers. Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, in New York, relates that in June 2002, Adelphia Communications Corporation and its debtor-affiliates sold 2.6 million of their shares in UCOMA. Since the June 2002 Sale, the price of the Stock increased from $3.50 to $6.50 per share in July 2004. On January 18, 2005, UCOMA entered into an agreement to merge with Liberty Media. Under the merger, the ACOM Debtors will have the option to receive, for every share in UCOMA, $9.58 in cash or $9.42 of expected value in Liberty Global stock, both of which are below the current trading price of UCOMA. The ACOM Debtors have around 200,000 remaining Class A shares in UCOMA, which is currently trading at approximately $9.75 per share. In light of the relatively high current share price, the Debtors believe that selling their remaining UCOMA shares at this time is a sound financial decision. The proceeds of the sale of the Stock will be used in accordance with the terms of the ACOM Debtors' Amended and Restated Credit and Guaranty Agreement dated August 26, 2002. 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) AF&L INSURANCE: Financial Strength is Poor, A.M. Best Says ---------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating of AF&L Insurance Company and its subsidiary, Senior American Life Insurance Company (both of Warrington, Pa.) to D (Poor) from B (Fair) earlier this month. The rating outlook is negative. The rating reflects AF&L Insurance's capital position and substantial fourth quarter 2004 net loss as a result of reserve increases, losses from its long-term care business and one-time expenses associated with management's restructuring. The increased losses have caused substantial deterioration to the organization's capital and surplus position. At year-end 2004, AF&L Insurance reported negative capital and surplus on its annual statement. Consequently, AF&L Insurance and Senior American have ceased writing any new business. AF&L Insurance is currently working with regulatory authorities to attempt to rectify its current financial position. While its subsidiary Senior American's year-end financials are not as troubled, it is still adversely impacted by AF&L Insurance's financial condition. For Best's Ratings, an overview of the rating process and rating methodologies, visit Best's Rating Center at http://www.ambest.com/ratings For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites visit Best's Health Center at http://www.ambest.com/health A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. AIRCRAFT FINANCE: Moody's Junks $171M Classes B & C Notes --------------------------------------------------------- Moody's Investors Service downgraded its ratings on four classes of notes issued by Aircraft Finance Trust. The complete rating action is: Issuer: Aircraft Finance Trust, Series 1999-1 * US $512 Million Class A-1 Floating Rate Notes due May 15, 2024, rated Ba1 to B1; * US $201 Million Class A-2 Floating Rate Notes due May 15, 2024, rated A2 to Baa1; * US $100 Million Class B Floating Rate Notes due May 15, 2024, rated B3 to Caa2; and * US $71 Million Class C Fixed Rate Notes due May 15, 2024, rated Caa3 to Ca. The downgrades are due to the dramatic increase in maintenance expenses incurred by the trust in recent months and the rising concern that this trend will continue over the course of the year. In January 2005, the Class D Notes defaulted on interest followed by a Class C interest default in February 2005. In addition, as of the March 15, 2005, distribution date, approximately 60% of the Class B reserve account had been drawn. At the levels of maintenance expenses incurred in recent months it is possible that the Class B Notes could default on interest as early as next month. The higher expenses in 2005 may also delay the payment of minimum principal payments to the Class A Notes for a number of months which places greater risk on the ultimate return of principal to Class A investors There are currently four off-lease aircraft in the AFT fleet, representing around 9% of the portfolio, three of which have signed new leases, but have not yet been delivered. Over the remainder of 2005, the current leases will expire on nine aircraft, totaling approximately 27% of the portfolio by value and 40% by lease revenue. The company has been remarketing these aircraft actively and in some cases has secured LOIs or signed new leases; however the expected lease rates are 30%-40% lower than their current rates. Moody's also believes that the relatively large releasing task for 2005 will also result in continuing volatility on the timing and the amount of the expenses for the near future. ALL MARK: Case Summary & 21 Largest Unsecured Creditors ------------------------------------------------------- Debtor: All Mark Paving Marking Systems, Inc fka Newmark Manufacturing, Inc. 3752 Copeland Drive Zephyrhills, Florida 33542 Bankruptcy Case No.: 05-05517 Chapter 11 Petition Date: March 25, 2005 Court: Middle District of Florida (Tampa) Debtor's Counsel: Ginnie Van Kesteren, Esq. Ginnie Van Kesteren, P.A. 111 Second Ave Northeast, Suite 706 St. Petersburg, Florida 33706 Tel: (727) 898-9669 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 21 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Ennis Paint, Inc. $251,431 PO Box 671185 Dallas, TX 75267-1185 Avery Dennison Corporation $154,159 3645 Collection Center Drive Chicago, IL 60693 American Express $77,657 PO Box 530001 Atlanta, GA 30353 United Rentals Highway Technologies $75,400 Bank One $37,873 Chase Platinum Mastercard $29,444 Mahan Paint Stripping $22,580 Citibusiness Card $19,497 Chrisp Company $16,625 Elan Financial Services $14,162 Advanta Bank Corp $13,758 Capital One F.S.B. $11,738 Rapid Metal Products, Inc. $10,929 The Terrace Bank of Florida $10,778 Gulf State Asphalt Co., LP $9,857 Tierra, Inc. $9,650 Better Barricades, Inc. $9,642 Skip-Line, Inc. $8,613 Capial One Services $8,110 HRH of Southwest Florida $6,365 Pinnacle Central Co., Inc. $5,980 AMAZON.COM: Shareholder Deficit Narrows to $227 Mil. at Dec. 31 --------------------------------------------------------------- Amazon.com's Dec. 31, 2004, balance sheet shows liabilities exceed assets by $227 million. Amazon.com has incurred significant net losses since it began doing business. As of December 31, 2004, the Company had an accumulated deficit of $2.39 billion. That figure nets billions of losses in prior years, a $35 million profit in 2003 and a whopping $588 million of net income in 2004. and its stockholders' deficit was $227 million. As of December 31, 2004, Amazon.com had long-term indebtedness of $1.86 billion. The Company makes annual, or semi-annual, interest payments on the indebtedness under its two convertible notes, which are due in 2009 and 2010. Although it made debt principal reduction payments over the last two years, it may incur substantial additional debt in the future, and in any event a significant portion of its future cash flow from operating activities is likely to remain dedicated to the payment of interest and the repayment of principal on its indebtedness. The Company's indebtedness could limit its ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other purposes in the future, as needed; to plan for, or react to, changes in technology and in its business and competition; and to react in the event of an economic downturn. Amazon.com, Inc., a Fortune 500 company, opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. We seek to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavor to offer customers the lowest possible prices. Amazon.com and its affiliates operate seven retail websites: * http://www.amazon.com/ * http://www.amazon.co.uk/ * http://www.amazon.de/ * http://www.amazon.co.jp/ * http://www.amazon.fr/ * http://www.amazon.ca/and * http://www.joyo.com/ In addition, the company operates http://www.a9.com/and http://www.alexa.com/that enable search and navigation, and http://www.imdb.com/-- a comprehensive movie database. * * * As reported in the Troubled Company Reporter on Dec. 8, 2004, Moody's Investors Service upgraded the long-term debt ratings of Amazon.com and assigned a positive rating outlook as a result of the company's consistent improvement in operating margins, reduction in funded debt levels, and strengthening operating cash flow. These ratings are upgraded: * Senior implied of B1, * Issuer rating of B2, * Various convertible subordinated notes issues maturing 2009 thru 2010 of B3, * Multiple shelf ratings of (P) B2, (P) B3, and (P) Caa1. This rating is affirmed: * Speculative grade liquidity rating of SGL-2. AMERICAN REPROGRAPHICS: S&P Ups Rating on $130M Sr. Sec. Facility ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on American Reprographics Co.'s (ARC) $130 million first priority senior secured credit facility to 'BB' from 'BB-'. At the same time, Standard & Poor's assigned its recovery rating of '1' to this credit facility, indicating a high expectation of a full recovery of principal in the event of a payment default. In addition, Standard & Poor's affirmed its 'B' rating on ARC's $225 million second lien term loan B, and assigned a recovery rating of '4', indicating our expectation that lenders would experience marginal (25%-50%) recovery of principal in the event of a payment default. Concurrently, Standard & Poor's affirmed its 'BB-' corporate credit rating on the company. Approximately $320 million in debt was outstanding as of Dec. 31, 2004. "The upgrade of the first priority secured credit facility to a level one notch above the corporate credit rating reflects a reassessment of the recovery prospects for first lien lenders due to certain changes to our future interest rate assumptions and a modest prepayment of principal following the company's recently completed IPO," said Standard & Poor's credit analyst Sherry Cai. AMES DEPARTMENT: Sells Rocky Hill Property to 18 Bridge for $3M --------------------------------------------------------------- Neil Berger, Esq., at Togut, Segal & Segal LLP, in New York, tells the U.S. Bankruptcy Court for the Southern District of New York that Ames Department Stores and its debtor-affiliates renewed their efforts to sell their commercial real property located at 2418 Main Street, in Rocky Hill, Connecticut. The Rocky Hill Property consists of 12.7 acres of land and the office building contains 228,000 square feet of space. In October 2004, the Court authorized the sale of the Rocky Hill Property to Thomas Briggs for $3.7 million. However, Mr. Briggs failed to close on the sale. As a result of the default, the Debtors retained Mr. Briggs' $200,000 contract deposit as liquidated damages pursuant to the Briggs Purchase Agreement. The Debtors have obtained an offer from 18 Bridge LLC to purchase the Property for $3 million. On February 28, 2005, the Debtors concluded the terms of a sale of the Property to 18 Bridge. 18 Bridge will purchase the land and the improvements and all easements, tenements, hereditaments, rights, licenses, privileges and appurtenances belonging or relating thereto, together with all right, title and interest of Debtor Ames Realty II, Inc., in and to any streets, roads, alleys or other public ways adjoining or serving the Land, including Ames Realty's rights to any land lying in the bed of any street, road, alley or other public way, open or proposed, and any strips, gores, culverts and rights-of-way adjoining or serving the Land. 18 Bridge will also get all equipment and furnishings and all other tangible personal property owned by Ames Realty and located on the Premises on the Closing Date. The $3 million Purchase Price will be payable in cash. 18 Bridge delivered a $150,000 deposit to Ames Realty as a good faith deposit. The balance will be paid in cash at the Closing, subject to customary prorations and adjustments as may be provided under the Purchase Agreement. The proposed transaction with the 18 Bridge for the Property is a private sale, not subject to higher or better offers, as permitted under Rule 6004(f)(1) of the Federal Rules of Bankruptcy Procedure. Mr. Berger notes that the Property has been marketed exhaustively for more than two years. It has been the subject of two prior failed offers to purchase. The Debtors believe that the additional costs of a new bidding and auction process for the Property are not justified under these circumstances and are not likely to lead to any additional value to the Debtors' estates. Furthermore, the Property is no longer needed for the Debtors' wind-down operations and, consequently, its ongoing maintenance and upkeep requires the payment of continuing and significant costs without any corresponding benefit to the Debtors. The only recorded Lien against the Property is a mortgage in favor of Kimco Funding, LLC, under the Revolving Credit, Guaranty and Security Agreement dated as of September 27, 2002, between the Debtors and Kimco. Kimco consented to the sale of the Property to 18 Bridge or to an entity that may submit a higher offer. Kimco agreed to release its Liens against the Property as the Liens will transfer to the net proceeds of the sale. Mr. Berger relates that the Debtors have previously tendered to the State of Connecticut, and the State has accepted, the Transfer Tax Payment in connection with the Briggs Sale. Though the closing on the Briggs Sale never occurred, the Debtors have not sought a refund of the Transfer Tax Payment. Accordingly, the Proposed Sale to 18 Bridge should be exempt from any transfer tax imposed by the State of Connecticut or any local government within the State. The Debtors reserve all of their rights to seek a return of all or a portion of the Transfer Tax Payment. At the Debtors' behest, the Court approves the sale of the Rocky Hill Property to 18 Bridge, free and clear of any liens, claims and encumbrances. Ames Department Stores filed for chapter 11 protection on August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANY MOUNTAIN: Owner Wants to Reorganize Rather Than Liquidate ------------------------------------------------------------- Jim Welte, writing for the Marin Independent Journal, reports that Eldon "Bud" Hoffman, founder and CEO of Any Mountain, Ltd., is in a last-ditch effort to emerge from chapter 11, reviewing bids from prospective purchasers. In a hearing at the U.S. Bankruptcy Court in Santa Rosa this month before the Honorable Alan Jaroslovsky, Mr. Welte relates, attorneys for Any Mountain and creditors said the sale of some or all of the company was the next logical step. "We know the debtor has solicited bids for the company, and people have expressed interest in buying assets or buying the company," Jay Indyke, Esq., at Kronish, Lieb, Weiner and Hellman in New York, which represents the Official Committee of Unsecured Creditors, told the Court. "We'll find out what others think this business is worth in this process," Michael Fallon, Esq., Any Mountain's lawyer, told Judge Jaroslovsky. Mr. Hoffman told Mr. Welte the past few months have been his worst nightmare. "I wouldn't wish this on my worst enemy," he said. Mr. Hoffman blames his private lender for the chapter 11 filing. "I would have never filed bankruptcy without something pushing me to do this," he said. "I thought this guy was an angel on my shoulder, and I couldn't have been more wrong." Mr. Hoffman tells Mr. Welte his preferred choice would be to reorganize the company and sell two of its stores -- but not its main store in Corte Madera. Mr. Hoffman said he wants to avoid selling the entire company and going out of business. "All this talk about liquidation is absolutely, positively what I do not want to do," he said. "We're coming up with a plan for reorganization, and we plan to continue operation. For the employees, many of whom have been with me for a long time, and for this industry, I'm not about to close the doors. I'm looking for an investor -- somebody that would like to invest in the company that is not a shark or a buzzard," he said. Headquartered in Corte Madera, California, Any Mountain Ltd, operates ten specialty outdoor stores throughout the San Francisco Bay Area. The Company filed for chapter 11 protection on Dec. 23, 2004 (Bankr. N.D. Calif. Case No. 04-12989). Michael C. Fallon, Esq., of Santa Rosa, California represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed below $50,000 in assets and more than $1 million in debts. AT&T CORP: Moves Annual Meeting to June to Discuss SBC Merger ------------------------------------------------------------- AT&T will reschedule its 120th Annual Meeting of Shareowners to accommodate the standard proxy filing procedures related to the proposed acquisition of AT&T by SBC Communications, Inc. The annual meeting, originally scheduled for May 18, 2005, is now expected to be held in June, and a new record date will be set when the official meeting date has been determined. As reported in the Troubled Company Reporter on Feb. 1, 2005, SBC Communications Inc. and AT&T signed an agreement for SBC to acquire AT&T, a combination that creates the nation's premier communications company with unmatched global reach. The transaction combines AT&T's global systems capabilities, business and government customers, and fast-growing Internet protocol (IP)-based business with SBC's extraordinary local exchange, broadband and wireless solutions. Both companies have common values focused on customer service, innovation and reliability. Under terms of the agreement, approved by the boards of directors of both companies, shareholders of AT&T will receive total consideration currently valued at $19.71 per share, or approximately $16 billion. AT&T shareholders will receive 0.77942 shares of SBC common stock for each common share of AT&T. Based on SBC's closing stock price on Jan. 28, 2005, this exchange ratio equals $18.41 per share. In addition, at the time of closing, AT&T will pay its shareholders a special dividend of $1.30 per share. The stock consideration in the transaction is expected to be tax-free to AT&T shareholders. The acquisition, which is subject to approval by AT&T's shareholders and regulatory authorities, and other customary closing conditions, is expected to close by the first half of 2006. About SBC Communications SBC Communications Inc. -- http://www.sbc.com/--is a Fortune 50 company whose subsidiaries, operating under the SBC brand, provide a full range of voice, data, networking, e-business, directory publishing and advertising, and related services to businesses, consumers and other telecommunications providers. SBC holds a 60 percent ownership interest in Cingular Wireless, which serves 49.1 million wireless customers. SBC companies provide high-speed DSL Internet access lines to more American consumers than any other provider and are among the nation's leading providers of Internet services. SBC companies also now offer satellite TV service. At Sept. 30, 2004, SBC Communications' balance sheet showed a $27,472,000 stockholders' deficit, compared to a $43,877,000 deficit at Dec. 31, 2003. About AT&T For more than 125 years, AT&T (NYSE: T) has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services. * * * As reported in the Troubled Company Reporter on Feb. 18, 2005, Standard & Poor's Ratings Services placed its ratings on various AT&T Corp.-related synthetic transactions on CreditWatch with positive implications. The rating actions follow the Feb. 1, 2005 placement of the long-term corporate credit and senior unsecured debt ratings assigned to AT&T Corp. on CreditWatch with positive implications. Moody's, S&P and Fitch have assigned their single-B and double-B ratings to AT&T's outstanding public debt. AT&T CORP: Inks Long-Term Wholesale Services Pact with Bellsouth ---------------------------------------------------------------- AT&T Corp. signed a long-term commercial agreement with BellSouth (NYSE: BLS) for local wholesale phone services for the provisioning of wholesale local phone services throughout the nine-state BellSouth region in the Southeast. This agreement enables AT&T to continue serving its existing local customers in the region. AT&T disclosed last summer that it had stopped actively marketing traditional residential and small-business voice services, and this agreement does not change that decision. With the successful completion of negotiations with AT&T, BellSouth now has more than 100 commercial agreements with wholesale customers. "While BellSouth has been providing AT&T with wholesale services for several years, we are now entering a new commercial relationship," said Rex Adams, president of BellSouth Interconnection Services. "We look forward to offering AT&T our world-class wholesale services at commercially negotiated rates." About BellSouth Corporation BellSouth Corporation is a Fortune 100 communications company headquartered in Atlanta, Ga., and a parent company of Cingular Wireless, the nation's largest wireless voice and data provider. About AT&T For more than 125 years, AT&T (NYSE: T) has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services. * * * As reported in the Troubled Company Reporter on Feb. 18, 2005, Standard & Poor's Ratings Services placed its ratings on various AT&T Corp.-related synthetic transactions on CreditWatch with positive implications. The rating actions follow the Feb. 1, 2005 placement of the long-term corporate credit and senior unsecured debt ratings assigned to AT&T Corp. on CreditWatch with positive implications. Moody's, S&P and Fitch have assigned their single-B and double-B ratings to AT&T's outstanding public debt. ATA AIRLINES: Chicago Express Wants to Reject 71 Agreements ----------------------------------------------------------- Pursuant to Section 365 of the Bankruptcy Code, Chicago Express Airlines, Inc., seeks the United States Bankruptcy Court for the Southern District of Indiana's authority to reject 71 executory contracts and unexpired leases. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that the Agreements are for goods and services, equipment, or personal and nonresidential real property that is no longer necessary to the operations of Chicago Express. Mr. Nelson notes that ATA Airlines, Inc. and its debtor-affiliates have decided to undertake efforts to sell the assets, including the stock, of Chicago Express. In connection with those efforts, on March 21, 2005, the Court approved the Debtors' proposed Sale Procedures for Chicago Express. Chicago Express will reject the 71 Agreements effective 11:59 p.m. EST, on March 31, 2005. By then, Chicago Express will have: * informed all of the counter-parties to the Agreements of its intent to reject the Agreements; and * surrendered possession of all real and personal property leased pursuant to the Agreements. As a result, Mr. Nelson says, the counterparties will be barred from continuing to accrue administrative expenses to the detriment of Chicago Express' other creditors. Chicago Express does not want to expose its estate to unwarranted postpetition administrative expenses. Mr. Nelson points out that the Court has previously recognized the idea of a de facto rejection prior to the entry of an order approving a Rejection Motion in In re American Commercial Lines LLC, Case No. 03-90305, also a large Chapter 11 case. Since the deadline for submitting qualifying bids is March 25, 2005, Chicago Express does not know whether the Qualifying Bids will propose transactions that contemplate the assumption and assignment of some or all of the Agreements. If the assumption and assignment of any of the Agreements is part of any Sale selected, Chicago Express will notify the affected counterparties to any Agreement that the rejection of the Agreement will be contingently withdrawn pending approval of the Sale. 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 Nos. 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. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) AUBURN FOUNDRY: Exploring Sale of Plant II Near Interstate 69 ------------------------------------------------------------- Urvaksh Karkaria, writing for The Journal Gazette, reports that Auburn Foundry is exploring a sale of its remaining plant (known as Plant II near Interstate 69), according to John R. Burns, Esq., at Baker & Daniels, which represents the company in its chapter 11 restructuring. Last month, the Bankruptcy Court approved a disclosure statement explaining the company's chapter 11 plan. The Plan proposes to pay priority claims in full. Unsecured creditors, owed $1.75 million, will receive an initial $375,000 cash distribution and additional payments over time based on an excess cash flow computation. That plan doesn't have a high level of creditor support. Last week, the U.S. Bankruptcy Court for the Northern District of Indiana, Fort Wayne Division, continued a confirmation hearing to allow the Debtor 30 additional days to file an amended disclosure statement and reorganization plan that creditors find more palatable. Headquartered in Auburn, Indiana, Auburn Foundry, Inc. -- http://www.auburnfoundry.com/-- produces iron castings for the automotive industry and automotive aftermarket industry. The Company filed for chapter 11 protection on February 8, 2004 (Bankr. N.D. Ind. Case No. 04-10427). John R. Burns, Esq., and Mark A. Werling, Esq., at Baker & Daniels represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed both estimated debts and assets of over $10 million. BANC OF AMERICA: S&P Puts Low-B Ratings on 6 Series 2005-1 Certs. ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Banc of America Commercial Mortgage Inc.'s $2.3 billion commercial mortgage pass-through certificates series 2005-1. The preliminary ratings are based on information as of March 25, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying loans, and the geographic and property type diversity of the loans. Classes A-1, A-2, A-3, A-4, A-SB, A-5, A-1A, A-J, XP, B, C, and D are currently being offered publicly. The remaining classes will be offered privately. Standard & Poor's Ratings Services' analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.60x, a beginning LTV of 95.1%, and an ending LTV of 86.8%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com. Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Banc of America Commercial Mortgage Inc. Series 2005-1 Class Rating Preliminary amount ($) ----- ------ ---------------------- A-1 AAA 39,800,000 A-2 AAA 185,100,000 A-3 AAA 555,000,000 A-4 AAA 343,041,000 A-SB AAA 132,125,000 A-5 AAA 383,422,000 A-1A AAA 219,184,000 A-J AAA 168,352,000 B AA 60,955,000 C AA- 20,318,000 D A 43,539,000 E A- 20,319,000 F BBB+ 26,123,000 G BBB 20,318,000 H BBB- 34,832,000 J BB+ 5,805,000 K BB 8,708,000 L BB- 8,708,000 M B+ 2,902,000 N B 5,805,000 O B- 11,611,000 P N.R. 26,123,942 XC* AAA 2,322,090,942 XP* AAA TBD * Interest-only class with a notional dollar amount. N.R. -- Not rated. TBD -- To be determined. BEAR STEARNS: Fitch Puts Low-B Ratings on 6 2005-PWR7 Certificates ------------------------------------------------------------------ Bear Stearns Commercial Mortgage Securities Trust 2005-PWR7, commercial mortgage pass-through certificates are rated by Fitch Ratings: -- $78,000,000 class A-1 'AAA'; -- $188,000,000 class A-2 'AAA'; -- $106,000,000 class A-AB 'AAA'; -- $527,652,000 class A-3 'AAA'; -- $85,748,000 class A-J 'AAA'; -- $1,124,565,652 class X-1* 'AAA'; -- $1,092,297,000 class X-2* 'AAA'; -- $33,737,000 class B 'AA'; -- $8,434,000 class C 'AA-'; -- $15,463,000 class D 'A'; -- $11,246,000 class E 'A-'; -- $11,245,000 class F 'BBB+'; -- $9,840,000 class G 'BBB'; -- $12,652,000 class H 'BBB-'; -- $4,217,000 class J 'BB+'; -- $4,217,000 class K 'BB'; -- $5,623,000 class L 'BB-'; -- $4,217,000 class M 'B+'; -- $1,406,000 class N 'B'; -- $2,811,000 class P 'B-'; -- $14,057,652 class Q 'NR'; * Notional amount and interest only. Classes A-1, A-2, A-AB, A-3, A-J, X-2, B, C, and D are offered publicly, while classes X-1, E, F, G, H, J, K, L, M, N, P, and Q 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 124 fixed-rate loans having an aggregate principal balance of approximately $1,124,565,652, as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the Report titled 'Bear Stearns Commercial Mortgage Securities Trust 2005-PWR7' dated March 4, 2005, available on the Fitch Ratings web site at http://www.fitchratings.com/ BJ SERVICES: Redeeming Convertible Senior Notes for $422.4 Million ------------------------------------------------------------------ BJ Services Company (NYSE: BJS; CBOE; PCX) has called for the redemption of all of its outstanding Convertible Senior Notes due 2022. The aggregate redemption price is approximately $422.4 million ($817.99 per $1,000 principal amount), plus accrued and unpaid interest to, but excluding, the redemption date, which is April 25, 2005. The Company intends to fund the redemption of the Notes from cash. Holders will have the right to elect to convert their Notes to shares of the Company's common stock, par value $.10 per share, at any time prior to the close of business on the second business day before the redemption date, in accordance with the terms of the indenture governing the Notes. If any holder exercises the right, the Company has the right to settle the conversion in cash, common stock or a combination thereof. BJ Services Company is a leading provider of pressure pumping and other oilfield services to the petroleum industry. * * * As reported in the Troubled Company Reporter on Jan. 3, 2005, the Company received a report from a whistleblower alleging that its Asia Pacific Region Controller had misappropriated Company funds in fiscal 2001. The Company began an internal investigation into the misappropriation and whether other inappropriate actions occurred in the Region. The Region Controller admitted to multiple misappropriations during a 30-month period ended April 2002. The misappropriations identified to date total approximately $9.0 million and have been repaid to the Company. The misappropriated funds were recorded as an expense in the Consolidated Statement of Operations in prior periods and, therefore, no restatement is required. As a result, the Company expects to record $9.0 million as Other Income in the Consolidated Condensed Statement of Operations for the quarter ending December 31, 2004. The Company is conducting a review of accrued liabilities and certain other balance sheet accounts for the Asia Pacific Region and a review of certain tax records in the region before filing its Form 10-K. As the Company continues its investigation, further adjustments may be recorded in the Consolidated Statement of Operations. The Company also received whistleblower allegations that illegal payments to foreign officials were made in the Asia Pacific Region. The Audit Committee of the Board of Directors engaged independent counsel to conduct a separate investigation to determine whether any such illegal payments were made. That investigation, which is also continuing, has found information indicating that illegal payments to government officials in the Asia Pacific Region aggregating in excess of $1.5 million may have been made over several years. Earlier this month, the Company said it would give a notice of default to the lenders under its $400 million revolving credit facility for failing to comply with its covenants to timely provide audited financial statements. The delivery of the company's annual report to the SEC solves this problem. The Company also indicated it has no borrowings under its $400 million Revolving Credit Facility and has cash and cash equivalents and short-term investments in excess of its other indebtedness. BLOCKBUSTER INC: Hollywood Bid Update Prompts S&P to Hold Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services today affirmed its ratings for Blockbuster Inc., including the 'BB' corporate credit rating, and removed them from CreditWatch, where they were placed with negative implications on Nov. 11, 2004. The outlook is stable. This action follows the company's announcement that it has decided not to extend its offer to purchase its closest competitor, Hollywood Entertainment Corp. (B+/Watch Dev/--), for approximately $1.3 billion, thereby effectively abandoning its bid to make the acquisition. Blockbuster is a leading global provider of in-home movie and game entertainment, with approximately 8,900 stores throughout the Americas, Asia, and Australia. It is the No. 1 player in the mature and fragmented $8.2 billion U.S. video rental market. "Ratings reflect the risks of operating in a mature and declining video rental industry, the company's dependence on decisions made by movie studios, its high leverage, and the technology risks associated with delivery of video movies to the home," said Standard & Poor's credit analyst Diane Shand. "In the near term, however, new technologies are not expected to affect the creditworthiness of the company." In the retail market (in which Blockbuster has about a 4% share), the company competes against big box retailers (e.g., Best Buy Co. Inc. and Circuit City Stores Inc.), discounters (e.g., Wal-Mart Stores Inc. and Target Corp.), and specialty stores. "These risks are partially mitigated by Blockbuster's dominant market position in the video rental industry, good cash flow generating capabilities, its healthy store base, and geographic diversity," added Ms. Shand. BLUE DOLPHIN: On-Going Liquidity Issues Spur Going Concern Doubt ---------------------------------------------------------------- Blue Dolphin Energy Company (Nasdaq: BDCO) reported a net loss of $616,827 on revenues of $475,341 for the quarter ended December 31, 2004, compared to a net loss of $850,378 on revenues of $531,838 for the quarter ended December 31, 2003. Fourth quarter 2004 results include a non-cash compensation expense of approximately $617,000 associated with warrants issued to certain of the Company's Directors. The decrease in 4th quarter revenues was primarily due to lower oil and gas sales of approximately $267,000, offset in part by higher pipeline transportation revenues of approximately $210,000 due primarily to an increase in gas transportation rates negotiated on the Blue Dolphin Pipeline system. For the year ended December 31, 2004, the Company reported a net loss of $2,500,334 on revenues of $1,435,646, compared to a net loss of $793,058 on revenues of $2,516,814 for the year ended December 31, 2003. The decrease in year end 2004 results compared to 2003 results was due to lower oil and gas sales revenues of approximately $1,186,000, non-cash compensation expense of approximately $818,000 primarily associated with the issuance of Warrants to certain of the Company's Directors, and the incurrence of expenses of approximately $320,000 associated with financing transactions. The Company's auditors UHY Mann Frankfort Stein & Lipp CPAs, LLP, raised substantial doubt about Blue Dolphin's ability to continue as a going concern due to the Company's on-going liquidity problems. For the year ended December 31, 2004, the Company generated total revenues of approximately $1.4 million while operating costs and general administrative costs, excluding certain non-cash compensation expense, totaled approximately $2.8 million. "In order to satisfy our working capital and capital expenditure requirements for the year ending December 31, 2005, we believe that we will need to raise approximately $500,000 of capital," the Company said in its regulatory filing. "Unless operating performance of existing assets significantly improves or a significant acquisition of earning assets is made, we will need to either, extend the payment terms of our promissory notes, arrange external financing and/or sell assets to raise the necessary capital." There are currently 6,863,689 shares of common stock issued and outstanding. About the Company Blue Dolphin Energy Company -- http://www.blue-dolphin.com/-- is engaged in the gathering and transportation of natural gas and condensate. Questions should be directed to G. Brian Lloyd, Vice President, Treasurer, at the Company's offices in Houston, Texas, 713-227-7660. BOOTH CREEK: EBITDA Drop Cues S&P to Junk Credit Rating to CCC -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Booth Creek Ski Holdings Inc. to 'CCC' from 'B-'. Standard & Poor's also placed all the ratings on CreditWatch with negative implications. "The rating actions are based on a significant deterioration in Booth Creek's EBITDA and the considerably shorter time frame in which the company must refinance current maturities," said Standard & Poor's credit analyst Andy Liu. Booth Creek's ski resort, The Summit at Snoqualmie, is having one of the lowest snowfall seasons on record, dramatically affecting skier visits. Year-over-year skier visits at the Summit declined 83% during the quarter. The slight improvements in skier visits at the company's other ski resorts were insufficient to offset the decline. The resulting reduction in EBITDA has led to bank covenant violations. While the company obtained a waiver from its lender, the maturity of its credit facility was changed to May 31, 2005, from Oct. 31, 2005, and the size of the revolving credit facility was reduced to $18 million from $25 million. These changes mean that Booth Creek will have only two months to complete its refinancing of current maturities and that liquidity will be very strained for the duration. Booth Creek operates six regional ski resorts catering mainly to day and overnight visitors. Its resorts are clustered in New Hampshire and the Lake Tahoe region in California, with one in Washington State. Booth Creek's real estate business, which has a different peak season, only marginally reduces the company's seasonal swings in revenues, as ski resort operations (including lift-ticket sales, dining, and others) account for the vast portion of revenues. BUFFALO MOLDED: Plastech to Take Over Auto Business, Report Says ---------------------------------------------------------------- The Detroit Free Press reported last week that Plastech Engineered Products, Inc., has agreed to take over the $45-million automotive business from Andover Industries, following approval from the Honorable Thomas P. Agresti of the U.S. Bankruptcy Court for the Western District of Pennsylvania on March 18. The paper said that the deal is expected to close by April 4. The deal keeps Andover's 600 workers, who generated $65 million of revenue in 2004, employed. As previously reported in the Troubled Company Reporter, Andover started talking to potential buyers in November 2004. Dearborn, Michigan-based Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is a privately held major producer of plastic interior and exterior trim components for the automotive industry. Plastech's total balance sheet debt was about $504 million at Dec. 31, 2004. Plastech employs 7,600 people at 35 facilities in North America. Plastech has its own challenges. In February 2005, Standard & Poor's Ratings Services placed its 'BB-' corporate credit rating on Plastech Engineered Products Inc., on CreditWatch with negative implications. "The action followed indications that 2004 financial results were materially weaker than expected and that a waiver will be sought from lenders to avoid violation of certain covenants under the company's senior secured credit agreement," Standard & Poor's credit analyst Nancy Messer said at the time. Headquartered in Andover, Ohio, Buffalo Molded Plastics, Inc., dba Andover Industries, -- http://www.andoverplastics.com/-- manufactures rocker panels, grilles, pillars and body side molding components for General Motors Corp. and DaimlerChrysler. The Company filed for chapter 11 protection on Oct. 21, 2004 (Bankr. W.D. Pa. Case No. 04-12782). David Bruce Salzman, Esq., at Campbell & Levine, LLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts in the $10 million to $50 million range. David W. Lampl, Esq., at Leech Tishman Fuscaldo & Lampl, LLC, represents the Official Committee of Unsecured Creditors in the Debtor's chapter 11 case. CAPITAL LEASE: Fitch Affirms $6.8 Mil. Certs. at B+ & Junks Two --------------------------------------------------------------- Fitch Ratings affirms Capital Lease Funding Securitization, L.P.'s corporate credit-backed pass-through certificates, series 1997- CTL-1: -- $16.4 million class A-2 'AAA'; -- $17.8 million class A-3 'AAA'; -- Interest-only class IO 'AAA'; -- $15.5 million class B 'AA+'; -- $15.5 million class C 'A'; -- $6.1 million class D 'BBB-'; -- $6.8 million class E 'B+'. The $1.9 million class F and the $1.3 million class G certificates remain at 'CCC'. The affirmations are the result of the transaction paydown and subsequent increase in credit enhancement offsetting the overall decline in the tenants' ratings. As of the March 2005 distribution date, the pool has paid down 37.1% to $81.4 million from $129.4 million at issuance. There have been no specially serviced loans and no realized losses since issuance. Fitch is concerned with the two Winn-Dixie loans. On Feb. 21, 2005, Winn-Dixie Stores, Inc. filed for Chapter 11 bankruptcy protection. The Winn-Dixie loans, both secured by properties located in Slidell, Louisiana, represent 7.9% of the pool as of the March 2005 distribution date. While the bankruptcy filing is seen as a negative event for the pool, both stores are currently open and operating. Fitch will closely monitor future lease rejection announcements to assess the impact of any new developments to the pool. The pool's tenants consist of: * CVS Corp. (26.2%), * Circuit City (19.5%), * Rite Aid Corp. (12.2%), * RadioShack Corp. (8.9%), * Winn-Dixie (7.9%), * New York State Electric & Gas Corp. (6.4%), * Food Lion (Delhaize America Inc.) (5.2%), * Royal Ahold N.V. (4.8%), * Walgreen Co. (4.0%), * AutoZone Inc. (3.6%), and * HCA Inc. (1.5%). The weighted average rating of the tenants is 'B+'/'B'. In January 2005, there was a $14.8 million payoff of a loan in which Health Care Service Corp. (rated 'A-' by Fitch) guaranteed the lease. CARDIAC SCIENCE: PwC Raises Doubt About Going Concern Viability --------------------------------------------------------------- Cardiac Science, Inc. (Nasdaq: DFIB) filed its Annual Report on Form 10-K with the Securities and Exchange Commission. The Company's independent registered public accounting firm, PricewaterhouseCoopers, LLP, raised substantial doubts about the Company's ability to continue as a going concern based on the Company's history of operating losses. From inception, the Company said it has incurred substantial losses and negative cash flows from operations. For the years ended December 31, 2004 and 2003, Cardiac Science incurred losses of $18,669 and $12,537, respectively, and negative cash from operations of $8,776 and $16,347, respectively. As of Dec. 31, 2004, the Company had $13,913 cash on hand, $27,046 of working capital, $52,664 of short and long term debt, and an accumulated deficit of $124,357. "If we do not realize the expected revenue and cost of goods, or if operating expenses increase substantially, or if we cannot maintain our DSO ratio, we may not be able to fund our operations for the next twelve months," the Company said in its regulatory filing. "In addition, our line of credit and our Senior Notes require maintenance of certain financial covenants, of which we were in violation during 2004. Even though we have obtained waivers for all covenant violations and have amended the covenants for 2005 and going forward, if in the future, we fail to comply with these financial covenants as amended, we could be unable to use our line of credit or be in default under the Senior Notes. If we are in default, we may be subject to claims by the note holders seeking to enforce their security interest in our assets. Such claims, if they arise, may substantially restrict or even eliminate our ability to utilize our assets in conducting our business, and may cause us to incur substantial legal and administrative costs." Also, PwC expressed an opinion that management's assessment of the Company's internal controls over financial reporting as of December 31, 2004, was fairly stated, in all material respects, based on criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furthermore, in the opinion of the independent registered public accounting firm, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established by COSO. About the Company Cardiac Science develops, manufactures and markets a complete line of Powerheart(R) brand, automated public access defibrillators (AEDs), and offers comprehensive AED/CPR training and AED program management services that facilitate successful deployments. The company makes the Powerheart(R) CRM(R), the only FDA-cleared therapeutic patient monitor that instantly and automatically treats hospitalized cardiac patients who suffer life-threatening heart rhythms. Cardiac Science also manufactures its AED products on a private label basis for other leading medical companies such as Nihon Kohden (Japan), Quinton Cardiology Systems and GE Healthcare. For more information please visit http://www.cardiacscience.com/or call (949) 797-3800. CATHOLIC CHURCH: Court OKs Spokane's Proposed Interim Fee Protocol ------------------------------------------------------------------ As previously reported in the Troubled Company Reporter on December 27, 2004, The Diocese of Spokane sought to establish a procedure for paying and monitoring the interim compensation due from the estate on a monthly basis. By reviewing the amounts requested on a monthly basis rather than every 120 days, Spokane believes that it, the United States Trustee, and creditors and other parties-in-interest will be in a better position to monitor and control the costs and fees of estate professionals on a current basis. The Diocese also notes that the various Professionals already have devoted and will be required to devote substantial time, effort, money, and expense to its case. The absence of a procedure permitting payment of interim compensation on a monthly basis may cause undue financial burdens on the Professionals, unfairly compel the retained Professionals to finance the Chapter 11 case, or discourage other Professionals, whose services Spokane might require, from accepting or continuing employment in this case. At the Debtor's behest, Judge Williams approve its proposed procedure for awarding interim compensation and reimbursement of expenses to all Professionals. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) CENTERPOINT ENERGY: Moody's Assigns Ba2 Rating to $1 Bil. Facility ------------------------------------------------------------------ Moody's Investors Service placed the ratings of CenterPoint Energy, Inc. (CenterPoint, Ba2 senior unsecured) and CenterPoint Energy Resources Corp. (CERC, Ba1 senior unsecured) on review for possible upgrade. Moody's also revised the rating outlook for CenterPoint Energy Houston Electric, LLC (CEHE, Baa2 senior secured) to stable from negative. In addition, Moody's assigned ratings to CenterPoint and CEHE's bank credit facilities. Moody's assigned a Ba2 rating to CenterPoint's $1.0 billion unsecured bank credit facility expiring in 2010, a Baa3 rating to CEHE's $200 million unsecured revolving credit facility expiring in 2010, and a Baa2 rating to CEHE's $1.31 billion "back-stop" facility, which, when utilized, will be secured by General Mortgage Bonds. Drawings under the back-stop facility may be made until November 16, 2005 and drawn amounts will term out for two years. Use of proceeds from the back-stop facility is restricted to the repayment of a $1.31 billion secured term loan which matures on November 11, 2005. The review for possible upgrade for CenterPoint reflects the progress made to date with respect to the company's debt reduction plans as a result of the sale of the Texas Genco operations, the steady financial improvements being generated at CERC and the progress to date at CEHE with respect to its 2004 True-Up proceeding, and the prospect for near-term recoveries associated with its True-up balance. The review also anticipates that CenterPoint will generate increased cash from operations and make significant debt reduction in 2005 by utilizing the proceeds of asset sales and possibly equity issuances. In addition, we view the recent implementation of a $1.3 billion "back-stop" credit facility at subsidiary CEHE positively, as it adequately addressed near-term liquidity risks. The review of CERC's ratings is merited by the solidification of CERC's creditworthiness on stand-alone factors. CERC's credit metrics are improving due to rate relief granted during 2004, and there is potential that incremental improvement will result from three outstanding rate cases that are expected to conclude this year. Its ratios are reasonably in line with those of low investment-grade integrated gas companies. The review also recognizes CERC's successful renewal of the Southern Gas Operations' transportation contract (by far CERC's largest commercial contract) and provisions under the SEC's financing order and credit facility covenants that help to insulate the creditworthiness of CERC from CNP. An upgrade of CERC's senior unsecured rating to Baa3 is likely provided that CenterPoint's de-leveraging plan progresses as expected. Key upcoming milestones in the plan include, but are not limited to, CenterPoint completing the sale of its STP nuclear assets (expected 1H05), deciding whether to undertake a quasi- reorganization (by May 10, 2005), and renewing its financing order with the SEC before the current one expires on June 30, 2005. A delay in the renewal of the SEC financing order could prohibit CenterPoint from financing activity, including the refinancing of $325 million of CERC's 8.125% notes due on July 15, 2005. Moody's anticipates that CEHE's issuance of securitization bonds could be delayed for some time, possibly beyond the time of CERC's July 2005 debt maturity. CenterPoint currently plans to use a portion of the proceeds from the securitization bond issuance to repay CERC's notes. As part of the review, we will explore CenterPoint's contingency plans for refinancing CERC's debt maturity in July and the impact on CERC's liquidity. An upgrade would also be conditioned on CERC's reasonably tracking its near-term forecast, with retained cash flow/adjusted debt of at least 10%, including borrowings under its accounts receivables facility and operating leases capitalized at 8x. This would entail satisfactory progress on its outstanding rate proceedings and demonstrating continuing profitability improvements from cost efficiencies and margins from organic growth projects. The stable ratings outlook for CEHE reflects the company's progress to date associated with the 2004 True-Up proceedings, and our belief that its credit profile will be stable or improve over the next few years. The rating and outlook also incorporate our expectation that there may be substantial regulatory and legal litigation delays associated with concluding the 2004 True-up proceeding, which could drag out over a prolonged period. However, the rating and outlook do not anticipate a surprisingly negative outcome for the CTC application, the 2004 True-Up determination or financing order appeals. The rating and outlook also do not anticipate an early settlement of regulatory and legal issues. Moody's expects the PUCT's financing order authorizing the issuance of approximately $1.8 billion of securitized RRB's to be appealed to the District Court in Austin. In our opinion, the legal appeals associated with both the $2.3 billion True-up determination and the financing order could take several years to fully work through the court system, creating longer term regulatory and legal litigation risks. We expect CEHE's funds from operations to adjusted total debt to be in the range of 10% to 15% over the near- to intermediate-term and we incorporate an expected improvement in FFO interest coverage following an expected refinancing of the $1.3 billion term loan in November 2005. CenterPoint Energy is an electric and gas transmission and distribution company headquartered in Houston, Texas. CHASE FUNDING: S&P Affirms Low-B Ratings on Four Cert. Classes -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on classes M-1 and M-2 from Chase Funding Loan Acquisition Trust, series 2001-C3. The rating on the class M-1 certificates was raised to 'AAA' from 'AA', while the rating on class M-2 was raised to 'A+' from 'A'. Concurrently, ratings are affirmed on 70 classes from nine transactions from the same issuer. The raised ratings reflect adequate actual and projected credit support percentages, despite moderate delinquencies, that meet the levels necessary for the revised ratings. The higher credit support percentages resulted from significant principal prepayments of the underlying collateral coupled with the shifting interest structure of the transaction. The transaction has paid down to approximately 11% of its original balance. On an actual basis, credit enhancement percentages have at least doubled the original loss coverage levels associated with the upgraded classes. The projected credit support percentage for class M-1 has increased to approximately 77% from 15.25% at issuance, while the projected credit support percentage for class M-2 has increased to approximately 30% from its original level of 10.75%. In addition, series 2001-C3 has been producing a significant amount of excess interest cash flow, which has been utilized to cover monthly losses. As of the February 2005 remittance period, approximately 14.94% of the mortgage pool had serious delinquencies (90-plus days, foreclosure, and REO), and the transaction had incurred approximately 0.88% in cumulative realized losses. The affirmed ratings reflect adequate actual and projected credit support percentages, despite moderate delinquencies and cumulative realized losses. As of the February 2005 remittance date, serious delinquencies ranged from 0.03% for series 2003-C2 to 22.99% for loan group two of series 2001-C1. Cumulative realized losses, as a percentage of the original pool balance, ranged from 0.00% for series 2003-C2 to 1.96% for loan group one of series 2001-C2. Credit support is provided by subordination, overcollateralization, and excess spread, except for the B classes, where there is no subordination. The underlying collateral consists of 30-year fixed-rate or adjustable-rate subprime mortgage loans secured by first liens on residential properties. Ratings Raised Chase Funding Loan Acquisition Trust Mortgage loan asset-backed certs Rating Series Class To From ------ ----- -- ---- 2001-C3 M-1 AAA AA 2001-C3 M-2 A+ A Ratings Affirmed Chase Funding Loan Acquisition Trust Mortgage loan asset-backed certs Series Class Rating ------ ----- ------ 2001-C1 IA-3, IA-4, IIA-1 AAA 2001-C1 IIM-1 AA+ 2001-C1 IM-1 AA 2001-C1 IM-2, IIM-2 A 2001-C2 IA-4, IA-5, IIA-1 AAA 2001-C2 IIM-1 AA+ 2001-C2 IM-1 AA 2001-C2 IM-2, IIM-2 A 2001-C2 IB, IIB BBB 2001-C3 B BBB 2001-FF1 A-1, A-2 AAA 2001-FF1 M-1 AA+ 2001-FF1 M-2 A+ 2001-FF1 B BBB 2002-C1 IA-6 AAA 2002-C1 IM-1, IIM-1 AA 2002-C1 IM-2, IIM-2 A 2002-C1 IB, IIB BBB 2003-C1 IA-2, IA-3, IA-4, IA-5, IIA-2 AAA 2003-C1 IM-1, IIM-1 AA 2003-C1 IM-2, IIM-2 A 2003-C1 IB, IIB BBB 2003-C2 IA, IIA, IA-X, IIA-X, IA-P, IIA-P AAA 2003-C2 B-1 AA+ 2003-C2 B-2 A+ 2003-C2 B-3 BBB+ 2003-C2 B-4 BB+ 2003-C2 B-5 B+ 2004-AQ1 A-1, A-2 AAA 2004-AQ1 M-1 AA 2004-AQ1 M-2 A 2004-AQ1 M-3 A- 2004-AQ1 B-1 BBB+ 2004-AQ1 B-2 BBB 2004-AQ1 B-3 BBB- 2004-AQ1 B-4 BB+ 2004-AQ1 B-5 BB 2004-OPT1 A-1, A-2 AAA 2004-OPT1 M-1 AA 2004-OPT1 M-2 A 2004-OPT1 M-3 A- 2004-OPT1 B-1 BBB+ 2004-OPT1 B-2 BBB 2004-OPT1 B-3 BBB- 2004-OPT1 B-4 BB+ CHASE MORTGAGE: S&P Affirms Low-B Ratings on Nine Cert. Classes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 13 classes from six series of mortgage pass-through certificates issued by Chase Mortgage Finance Trust. Concurrently, ratings are affirmed on 308 classes from 25 series from the same issuer. The raised ratings reflect the appreciated percentages of actual and projected credit support, as well as low total delinquencies and realized losses to date. The appreciated credit support percentages resulted from the shifting interest structure, which were accelerated by significant principal prepayments on the underlying collateral. Currently, the projected credit support percentages for each upgraded class is at least 2x the original loss coverage levels associated with the new ratings. The upgraded transactions have less than 35% of their original pool principal balances outstanding. Total delinquencies, as of the February remittance period, ranged from 0.00% for series 2002- S8 to 18.85% for series 2001-S7. Cumulative realized losses, as a percentage of original pool balance, ranged from 0.00% for five transactions to 0.03% for series 2001-S5. The affirmed ratings reflect adequate actual and projected credit support percentages, low total delinquencies, and low or no realized losses to date. Credit support for these transactions is provided by subordination. The underlying collateral consists primarily of conventional, fully amortizing, 30-year, fixed-rate mortgage loans, which are secured by first liens on one-to four-family residential properties. Ratings Raised Chase Mortgage Finance Trust Mortgage pass-through certs Rating Series Class To From ------ ----- -- ---- 2001-S5 B-2 AAA AA 2001-S7 B-1 AAA AA 2001-S7 B-2 AA+ A 2002-S4 M AAA AA+ 2002-S4 B-1 AAA AA 2002-S4 B-2 AA+ A 2002-S6 B-1 AAA AA- 2002-S6 B-2 AAA A- 2002-S8 M AAA AA 2002-S8 B-1 AA+ A 2002-S8 B-2 A+ BBB 2003-S1 M AA+ AA 2003-S1 B-1 A A+ Ratings Affirmed Chase Mortgage Finance Trust Mortgage pass-thru certs Series Class Rating ------ ----- ------ 1999-AS2 A-P, A-X, IA-1, IIA-4 AAA 2001-S5 IA-4, A-P, A-X, IIA-1, M, B-1 AAA 2001-S7 A-4, A-6, A-P, A-X, M AAA 2002-S3 B-2 A 2002-S4 A-23, A-P AAA 2002-S6 IA-4, IIA-1, A-X, A-P, M AAA 2002-S8 IA-1, IA-P, IA-X, IIA-1, IIA-P, IIA-X AAA 2003-S1 IA-1, IA-P, IA-X, IIA-1, IIA-P, IIA-X AAA 2003-S1 B-2 BBB 2003-S2 A-1, A-2, A-3, A-4, A-X, A-P AAA 2003-S2 B-1 AA 2003-S2 B-2 A 2003-S3 A-1, A-2, A-3, A-4, A-5, A-8, A-9, A-10 AAA 2003-S3 A-X, A-P, M AAA 2003-S3 B-1 AA 2003-S3 B-2 A 2003-S4 IA-1, IA-2, IA-3, IA-4, IA-5, IA-6, IA-8 AAA 2003-S4 IA-9, IA-10, IA-11, IA-12, IA-13, IA-P AAA 2003-S4 IA-X, IIA-1, IIA-2, IIA-3, IIA-P, IIA-X AAA 2003-S4 M AA 2003-S4 B-1 A 2003-S4 B-2 BBB 2003-S4 B-3 BB 2003-S4 B-4 B 2003-S5 A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8 AAA 2003-S5 A-9, A-X, A-P, A-R AAA 2003-S5 B-1 AA- 2003-S5 B-2 BBB 2003-S5 B-3 BB 2003-S5 B-4 B+ 2003-S6 A-1, A-2, A-3, A-X, A-P AAA 2003-S6 M AA 2003-S6 B-1 A 2003-S6 B-2 BBB 2003-S6 B-3 BB 2003-S6 B-4 B 2003-S7 A-1, A-2, A-3, A-4, A-X, A-P AAA 2003-S7 M AA 2003-S7 B-1 A 2003-S7 B-2 BBB 2003-S7 B-3 BB 2003-S7 B-4 B 2003-S8 A-1, A-2, A-3, A-X, A-P AAA 2003-S8 M AA 2003-S8 B-1 A 2003-S8 B-2 BBB 2003-S8 B-3 BB 2003-S8 B-4 B 2003-S9 A-1, A-X, A-P AAA 2003-S9 M AA 2003-S9 B-1 A 2003-S9 B-2 BBB 2003-S9 B-3 BB 2003-S9 B-4 B 2003-S10 A-1, A-2, A-3, A-X, A-P AAA 2003-S10 M AA 2003-S10 B-1 A 2003-S10 B-2 BBB 2003-S10 B-3 BB 2003-S10 B-4 B 2003-S11 IA-1, IIA-1, IIA-2, IIA-3, IIA-4, IIA-5 AAA 2003-S11 IIA-6, IIA-7, IIA-8 IIA-9, IIA-10, IIIA-1 AAA 2003-S11 A-P, A-X AAA 2003-S11 M AA 2003-S11 B-1 A 2003-S11 B-2 BBB 2003-S11 B-3 BB 2003-S11 B-4 B 2003-S12 IA-1, IA-2, IA-3, IA-P, IIA-1, IIA-P, A-X AAA 2003-S12 M AA 2003-S12 B-1 A 2003-S12 B-2 BBB 2003-S12 B-3 BB 2003-S12 B-4 B 2003-S13 A-1, A-2, A-3, A-5, A-6, A-7, A-8, A-9 AAA 2003-S13 A-10, A-11, A-12, A-13, A-14, A-15, A-16 AAA 2003-S13 A-17, A-18, A-X AAA 2003-S13 M AA 2003-S13 B-1 A 2003-S13 B-2 BBB 2003-S13 B-3 BB 2003-S13 B-4 B 2003-S14 IA-1, IA-2, IA-3, IA-4, IA-5, IIA-1, IIA-2 AAA 2003-S14 IIA-3, IIA-4, IIA-5, IIA-6, IIA-7, IIA-8 AAA 2003-S14 IIA-9, IIA-10, IIIA-1, IIIA-2, IIIA-3 AAA 2003-S14 III-A4, IIIA-5, IIIA-6, IIIA-7, IIIA-8 AAA 2003-S14 III-A9, IIIA-10, AP, AX AAA 2003-S14 M AA 2003-S14 B-1 A 2003-S14 B-2 BBB 2003-S14 B-3 BB 2003-S14 B-4 B 2003-S15 IA-1, IA-2, IA-3, IA-4, IA-X, IIA-1, IIA-2 AAA 2003-S15 IIA-3, IIA-4, IIA-5, IIA-6, IIA-7, IIA-8 AAA 2003-S15 IIA-9, IIA-10, IIA-11, IIA-12, IIA-13 AAA 2003-S15 II-A14, IIA-15, IIA-16, IIA-17, IIA-18 AAA 2003-S15 II-AX, A-P AAA 2003-S15 M AA 2003-S15 B-1 A- 2003-S15 B-2 BBB- 2003-S15 B-3 BB 2003-S15 B-4 B 2004-S1 A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-P AAA 2004-S1 M AA 2004-S1 B-1 A 2004-S1 B-2 BBB 2004-S1 B-3 BB 2004-S1 B-4 B 2004-S2 IA-1, IA-2, IA-3, IA-4, IA-5, IIA-1, IIA-2 AAA 2004-S2 IIA-3, IIA-4, IIA-5, IIA-6, IIA-7, IIA-8 AAA 2004-S2 IIA-9, A-P, A-X AAA 2004-S2 M AA 2004-S2 B-3 BB 2004-S2 B-4 B COUNTRYWIDE HOME: Fitch Holds Junk Ratings on 3 Mortgage Certs. --------------------------------------------------------------- Fitch has upgraded four, affirmed 22, downgraded one, and removed one class from Rating Watch Negative from Countrywide Home Loans, Inc. -- CWMBS residential mortgage-backed securitizations: CWMBS mortgage pass-through certificates, series 1998-12 (Alt 1998-4): -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B1 affirmed at 'AAA'; -- Class B2 affirmed at 'A'; -- Class B3 affirmed at 'BB'; -- Class B4 remains at 'CCC'. CWMBS mortgage pass-through certificates, series 2001-3 (Alt 2001-2): -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B1 affirmed at 'AA-'; -- Class B2 affirmed at 'BBB'; -- Class B3 downgraded to 'CCC' from 'B'; -- Class B4 remains at 'C'. CWMBS mortgage pass-through certificates, series 2001-28: -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B1 upgraded to 'AAA' from 'AA'; -- Class B2 upgraded to 'AA' from 'BBB+'; -- Class B3 upgraded to 'A' from 'BB'; -- Class B4 upgraded to 'BBB' from 'B'. CWMBS mortgage pass-through certificates, series 2002-11 (Alt 2002-7): -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'B'; -- Class B4 remains at 'CC'. CWMBS mortgage pass-through certificates, series 2003-41: -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B' and removed from Rating Watch Negative. The affirmations reflect asset performance and credit enhancement consistent with expectations and affect $445,364,330 of outstanding certificates. The upgrades reflect an increase in credit enhancement relative to future loss expectations and affect $9,352,696 of outstanding certificates. As of the Feb. 25, 2005, distribution, the current credit enhancement of upgraded classes B-1, B-2, B-3, and B-4 is 9.21%, 5.71%, 3.2%, and 1.69% (up from 1.0%, 0.65%, 0.40%, and 0.25% as of the closing date Nov. 30, 2001), respectively. Currently, 90% of the collateral has paid down. The negative rating action on class B3 of series 2001-3 (Alt 2001- 02) was taken due to the losses incurred and the delinquencies in relation to decreasing credit support provided by class B4 and affect $1,272,045 of outstanding certificates. As of the Feb. 25, 2005, distribution, there have been $1.7 million in cumulative losses, and 15.31% of outstanding loans are in the 90-plus day delinquency bucket (including foreclosure and REO). Fitch will continue to closely monitor these deals. CREDIT SUISSE: Moody's Junks Two Securitization Class Ratings ------------------------------------------------------------- Moody's Investors Service has upgraded 23 classes of mezzanine and subordinated tranches from 7 mortgage securitizations issued by Credit Suisse First Boston Mortgage Securities Corp. in 2001. Moody's has also downgraded 13 classes of mezzanine and subordinated tranches from 6 mortgage securitizations issued by Credit Suisse First Boston Mortgage Securities Corp. in 2001 and 2002. According to Michael Labuskes, Associate Analyst, "The actions are based on the fact that the bonds' current credit enhancement levels, including excess spread where applicable, are either high or low compared to the current projected loss numbers for the current rating level." According to Mr. Labuskes, "In general, the securitizations being upgraded have benefited from rapid prepayments resulting in the deleveraging of the transactions. In addition, many of these mortgage pools underlying most of these securitizations have performed better than our original expectations." The securitizations being downgraded suffer primarily from the performance of the underlying loans with cumulative losses exceeding our original expectations. Certain of the pools have heavy geographic concentrations, large numbers of multi-family properties and small balance loans. These factors can be expected to contribute to higher severity of losses for those pools. Existing credit enhancement levels may be low given the current projected losses on the underlying pools. The complete rating actions are: Issuer: Credit Suisse First Boston Mortgage Securities Corp. Upgrade: * Series 2001-2; Class B-1, upgraded to Aaa from Aa2 * Series 2001-2; Class B-1X, upgraded to Aaa from Aa2 * Series 2001-2; Class B-2, upgraded to Aa2 from A2 * Series 2001-2; Class B-2X, upgraded to Aa2 from A2 * Series 2001-4; Class M-1, upgraded to Aaa from Aa2 * Series 2001-AR7; Class IV-M-1, upgraded to Aaa from Aa2 * Series 2001-AR7; Class IV-M-2, upgraded to Aa2 from A2 * Series 2001-11; Class C-B-1, upgraded to Aaa from Aa2 * Series 2001-11; Class C-B-2, upgraded to Aa2 from A2 * Series 2001-11; Class C-B-3, upgraded to A2 from Baa2 * Series 2001-AR24; Class C-B-1, upgraded to Aa1 from Aa3 * Series 2001-AR24; Class C-B-2, upgraded to A1 from A3 * Series 2001-AR24; Class IV-M-1, upgraded to Aaa from Aa2 * Series 2001-AR24; Class IV-M-2, upgraded to Aa2 from A2 * Series 2001-26; Class I-B-1, upgraded to Aaa from Aa3 * Series 2001-26; Class I-B-2, upgraded to Aa3 from A3 * Series 2001-26; Class I-B-3, upgraded to A3 from Baa3 * Series 2001-26; Class I-B-4, upgraded to Ba1 from Ba3 * Series 2001-26; Class D-B-1, upgraded to Aaa from Aa3 * Series 2001-26; Class D-B-2, upgraded to Aa3 from A3 * Series 2001-33; Class C-B-1, upgraded to Aaa from Aa3 * Series 2001-33; Class C-B-2, upgraded to Aa3 from A3 * Series 2001-33; Class C-B-3, upgraded to A3 from Baa3 Downgrade: * Series 2001-11; Class III-M, downgraded to Baa1from Aa3 * Series 2001-AR19; Class C-B-2, downgraded to Baa3 from A3 * Series 2001-AR19; Class C-B-3, downgraded to B2 from Baa3 * Series 2001-28; Class I-B-1, downgraded to A3 from Aa2 * Series 2001-28; Class I-B-2, downgraded to Baa3 from A2 * Series 2001-28; Class I-B-3, downgraded to B1 from Baa2 * Series 2001-28; Class I-B-4, downgraded to Caa2 from Ba2 * Series 2001-28; Class I-B-5, downgraded to C from B2 * Series 2002-22; Class II-B-1, downgraded to Ba1 from Baa2 * Series 2002-22; Class II-B-2, downgraded to B2 from Baa3 * Series 2002-9; Class II-B, downgraded to B1 from Baa2 * Series 2002-10; Class I-M-2, downgraded to Baa2 from A2 * Series 2002-10; Class I-B, downgraded to B1 from Baa2 DOLE FOOD: S&P Puts BB Rating on Proposed $1B Sr. Sec. Facilities ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating and a recovery rating of '1' to Dole Food Co.'s and co-borrower, foreign subsidiary Solvest Ltd.'s proposed $1.0 billion senior secured credit facilities. The 'BB' bank loan rating is rated one notch higher than Dole's corporate credit rating; this and the '1' recovery rating indicate that lenders can expect full (100%) recovery of principal in the event of a default. Proceeds from the new facilities will be used to refinance certain existing indebtedness, to pay related fees and expenses and for working capital and general corporate purposes on an ongoing basis. The rating is based on preliminary documentation and is subject to review once final documentation has been received. The 'BB' rating on Dole's existing term loans D and E will be withdrawn upon completion of the transaction. At the same time, Standard & Poor's affirmed its ratings on Dole and DHM Holding Co., including 'BB-' corporate credit ratings. The outlook is negative. The Westlake Village, California-based fresh fruit and vegetable producer and marketer will have about $2.2 billion of lease-adjusted debt outstanding at closing. "The ratings reflect Dole's highly leveraged financial profile which is somewhat mitigated by its leading position as a worldwide marketer, distributor, processor, and grower of branded fresh fruit, vegetables and processed fruits," said Standard & Poor's credit analyst Ronald Neysmith. DONNKENNY INC: Kronish Lieb Approved as Creditors Comm. Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave the Official Committee of Unsecured Creditors of Donnkenny, Inc., and its debtor-affiliates, permission to employ Kronish Lieb Weiner & Hellman LLP, as its counsel Kronish Lieb will: a) attend the meetings of the Committee, review the motions and documents relating to proposed purchases of the Debtors' assets, and participate in the process of attempting to increase the sales price of the Debtors' assets; b) assist the Committee in negotiating a payment plan to creditors, and review financial information furnished by the Debtors to the Committee; c) review and investigate the liens of purported secured party or parties, the Debtors' schedules, statement of affairs and business plans; d) confer with the Debtors' management and counsel, and advise the Committee as to the ramifications regarding all of the Debtors' activities and motions before the Bankruptcy Court; e) file appropriate pleadings on behalf of the Committee, and review and analyze the work product of other professionals and report to the Committee; f) assist the Committee in negotiations with the Debtors and other parties in interest regarding, debtor in possession financing and exit financing, raising equity, selling assets and developing a plan of reorganization; and g) perform all other legal services for the Committee as may be necessary or proper in the Debtors' chapter 11 cases. Lawrence C. Gottlieb, Esq., a Member at Kronish Lieb, is the lead attorney for the Committee. Mr. Gottlieb charges $695 per hour for his services. Mr. Gottlieb reports Kronish Lieb's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Cathy Hershcopf Partner $525 Christopher A. Jarvinen Associate $360 Brent Weisenberg Associate $295 Seth Van Aalten Associate $255 Rebecca G. Goldstein Legal Assistant $170 Kronish Lieb assures the Court that it does not represent ant interest adverse to the Committee, the Debtors or their estates. Headquartered in New York City, Donnkenny, Inc., designs, imports, and markets broad lines of moderately and better-priced women's clothing. Almost all of the Debtors' products are produced abroad and imported into the U.S., principally from Bangladesh, China, Guatemala, Hong Kong, India, Korea, Mexico, Nepal, and Vietnam. The Company and its debtor-affiliates filed for chapter 11 protection on February 7, 2005 (Bankr. S.D.N.Y. Case No. 05-10712). Bonnie Steingart, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $45,670,000 and total debts of $100,100,000. DONNKENNY INC: Taps Alvarez & Marsal as Restructuring Consultants ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York, Manhattan Division, gave Donnkenny, Inc., and its debtor- affiliates permission to retain Alvarez & Marsal, LLC, as their restructuring consultants. Under a Letter Agreement dated Feb. 1, 2005, between the Debtors and Alvarez & Marsal, the Firm's staff has assumed certain management positions in the Debtor's businesses and A&M personnel will serve as Executive Officers. Steven Cohn, a Managing Director at Alvarez & Marsal currently serves as Chief Restructuring Officer of Donnkenny, Inc., reporting to the Chief Executive Officer, and assisting in the Debtors' operations and reorganization. Dennis Stogsdill, a director of Alvarez & Marsal, currently serves as the Debtors' Assistant Restructuring Officer. Messrs. Cohn and Stogsdill and other Executive Officers of Alvarez & Marsal will be: a) assisting the CEO in developing for the Board of Directors' review of strategic business alternatives for maximizing the enterprise value of the Debtors' various business lines; b) serving as the principal contact with the Debtors' creditors with respect to the Debtors' financial and operational matters; c) assist in the development of controls and procedures for the operations of the Debtors during their chapter 11 proceedings; and d) perform all other services as requested or directed by the Board and CEO that are reasonably related to restructuring consultancy services. Mr. Cohn discloses that Alvarez & Marsal received a $150,000 retainer. Mr. Cohn reports Alvarez & Marsal's professionals bill: Designation Hourly Rate ----------- ----------- Managing Directors $550 - $650 Directors $375 - $500 Associates/Analysts $200 - $350 Alvarez & Marsal assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in New York City, Donnkenny, Inc., designs, imports, and markets broad lines of moderately and better-priced women's clothing. Almost all of the Debtors' products are produced abroad and imported into the U.S., principally from Bangladesh, China, Guatemala, Hong Kong, India, Korea, Mexico, Nepal, and Vietnam. The Company and its debtor-affiliates filed for chapter 11 protection on February 7, 2005 (Bankr. S.D.N.Y. Case No. 05-10712). Bonnie Steingart, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $45,670,000 and total debts of $100,100,000. EAGLEPICHER: Various Concerns Prompt S&P to Junk Rating to CCC+ --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Eagle Picher Inc. and Eagle Picher Holdings Inc., including the corporate credit ratings to 'CCC+' from 'B-', and kept all ratings on CreditWatch with negative implications. The ratings were originally placed on CreditWatch on Dec. 28, 2004. The rating action is based on a combination of several factors: * Extremely tight liquidity, cash and availability on its credit agreement totaled only $11 million at March 10, 2005; Forbearance agreement with senior lenders expires June 10, 2005; * "Going concern" opinion from auditors; * Continued challenges associated with its automotive supplier businesses; * Potential tightening of credit from vendors; * Possibility of alternative financing that could result in coercive exchange or possible bankruptcy filing; * Challenges in selling and obtaining sufficient proceeds from possible divestitures in a timely manner. "The ratings reflect Eagle Picher's vulnerable business position and weak financial profile, including extremely tight liquidity and near-term risk of default," said Standard & Poor's credit analyst John R. Sico. Eagle Picher also has operating challenges because of heavy exposure to the intensely competitive auto supplier market, including uncertain prospects for production levels in 2005. Eagle Picher recently reached a forbearance agreement with its credit facility lenders through June 10, 2005, and made its $12 million interest payment on its 9.75% senior notes due 2013. Still, the ratings remain on CreditWatch pending the evaluation of possible divestitures of its businesses and other assets to reduce its debt and improve Eagle Picher's liquidity. Near-term concerns remain regarding the company's need to further extend its forbearance agreement or receive an amendment by June 10, 2005. Standard & Poor's still views as a risk the potential for debt reduction via exchange offers or other actions that could impair bondholders should asset sales not proceed in a manner sufficient to satisfy its senior lenders. We will continue to monitor the company's liquidity position, including its ability to obtain waivers or amendments under its financing arrangements and meet its financial obligations. Failure to improve operating performance or sell assets in a timely basis could lead to a default in the near term. At Nov. 30, 2004, the Phoenix, Arizona-based industrial manufacturer had about $426 million of total debt outstanding. Eagle Picher provides products to the automotive, aerospace, defense, telecommunications, and pharmaceutical markets. Goods manufactured for the cyclical automotive sector, which comprises roughly 60% of Eagle Picher's revenues, include machined components, systems, and rubber-coated metal products for engine, transmission, axle/driveline, and chassis/suspension applications in passenger cars and light trucks. EDISON MISSION: Moody's Lifts Sr. Secured Debt Rating to Ba2 ------------------------------------------------------------ Moody's Investors Service upgraded the senior secured debt of Edison Mission Energy Funding Corporation to Ba2 from Ba3 and placed the rating under review for possible further upgrade. The upgrade and continuing review reflect the improved creditworthiness of the contractual off-taker Southern California Edison, and the much stronger liquidity position of EME Funding's parent company, Edison Mission Energy, following the completion of EME's sale of its international assets. The rating action also considers the importance of these Qualifying Facility generating plants to the electricity supply for California, which is a tighter market than most other U.S. regions, as well as predictability of contractually derived cash flow over the term of the financing. EME plays a substantial role in the day-to-day management and operation of EME Funding and owns the power projects that generate the underlying cash flow that is ultimately relied upon to service the debt of EME Funding. For the past three years, EME Funding's debt service coverage ratio was in excess of 2 times and Moody's expects the debt service coverage ratio to be in that range during the remaining term of the financing. EME owns 100% of Camino Energy Company, San Joaquin Energy Company, Western Sierra Energy Company, and Southern Sierra Energy Company, all of which provide upstream guarantees to EME Funding and receive project level dividends that are used to service the debt at EME Funding. These four entities have an ownership in four separate project companies that are engaged in the operation of natural gas fired cogeneration facilities located at enhanced oil recovery projects in California. The rating review will assess the expected performance of the four underlying projects over the next few years and the rating outcome will factor in the involvement of EME, as owner and operator. EME Funding is a special purpose Delaware corporation owned 99% by Broad Street Contract Services, Inc. and 1% by EME. It was formed for the sole purpose of issuing notes and bonds on behalf of the four guarantors, Camino, San Joaquin, Western Sierra, and Southern Sierra. The guarantors are each wholly owned subsidiaries of EME and the guarantors' principal assets are their respective interest in the following project companies: 1. Watson Cogeneration Company, 2. Midway-Sunset Cogeneration Company, 3. Sycamore Cogeneration Company, and 4. Kern River Cogeneration Company Each of the four project companies have power purchase agreements with investment grade California utilities, principally Southern California Edison Company, and each have steam sales agreements with different major energy companies. ENRON CORP: Asks Court to Approve Gas Transmission Settlement ------------------------------------------------------------- Prior to the Petition Date, Enron North America Corp. and Gas Transmission Northwest Corp. f/k/a PG&E Gas Transmission Northwest Corp., entered into: -- a number of firm transportation agreements; -- an imbalance service agreement; and -- a parking service agreement. Pursuant to the Parking Agreement, ENA parked on Gas Transmission's pipeline 10,787 MMBtu in net volume of natural gas. As of February 2005, the Parked Gas remains on Gas Transmission's pipeline. On October 15, 2002, Gas Transmission filed two claims against the Debtors: * Claim No. 13166 for $3,512,182 against ENA; and * Claim No. 13164 for $632 against Enron Energy Services, Inc. In the ENA Claim, Gas Transmission asserts amounts allegedly due under the Firm Agreements and the Parking Agreement. The Court later disallowed the EESI Claim at the Debtors' request. On May 3, 2004, Gas Transmission filed Claim No. 24766 against Enron Corp. for $3,512,182. Gas Transmission based the Enron Claim on amounts allegedly due pursuant to a guarantee by Enron on ENA's obligations under the Firm Agreements, the Imbalance Agreement and the Parking Agreement. On September 9, 2004, Gas Transmission filed an application for payment of a $2,881,345 administrative expense claim. The administrative expense claim represents: Actual transportation charges $482,120 Parking fees 323,151 Firm reservation charges 2,076,074 ENA contests Gas Transmission's administrative priority claim for the $2,076,074 firm reservation charges. With the exception of four days' use of the firm transportation capacity in December 2001, ENA contends it did not utilize the capacity under the Firm Agreements after the Petition Date. After discussions between the Debtors and Gas Transmission, the parties negotiated a settlement of their disputes. The Settlement Agreement provides that: a. ENA will pay Gas Transmission $327,154 as administrative expense; b. The ENA Claim will be reduced to $3,275,653 and allowed as a general unsecured claim; c. The Enron Claim will be disallowed and expunged in its entirety; d. The parties will exchange a mutual release of claims relating to the Firm Agreements, the Enron Guarantee, the Parking Agreement, the Imbalance Agreement and the Parked Gas; e. Gas Transmission will withdraw the Administrative Expense Application with prejudice; and f. All right, title and interest in and to the Parked Gas will reside with, and will be held by, Gas Transmission free and clear of any claims or interests of ENA. The Settlement allows the Reorganized Debtors to avoid further litigation concerning the Administrative Expense Application, the Gas Transmission Claims, the Firm Agreements, the Enron Guarantee, the Parking Agreement, the Imbalance Agreement, and the Parked Gas, Edward A. Smith, Esq., at Cadwalader, Wickersham & Taft, in New York, states. Accordingly, the Reorganized Debtors ask the Court to approve the Settlement. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 139; Bankruptcy Creditors' Service, Inc., 215/945-7000) EXIDE TECH: Sandell, et al., Buy $3 Million Convertible Notes ------------------------------------------------------------- Castlerigg Master Investments Ltd., Sandell Asset Management Corp., Castlerigg International Limited, Castlerigg International Holdings Limited, and Thomas E. Sandell are now deemed to beneficially own 2,606,929 shares of Exide Technologies common stock. The beneficial ownership is comprised of the ownership of 2,434,218 shares of Exide common stock and notes convertible into an additional 172,711 shares of Exide common stock. In the aggregate, the shares comprise 10.61% of Exide's outstanding common stock. Convertible Notes On March 15, 2005, Castlerigg Master Investments acquired $3,000,000 of Exide's Floating Rate Convertible Senior Subordinated Notes due 2013 convertible into 172,711 shares of Exide's common stock. Headquartered in Princeton, New Jersey, Exide Technologies is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. * * * As reported in the Troubled Company Reporter on March 22, 2005, Standard & Poor's Ratings Services assigned its 'B' rating to Exide Technologies' $290 million senior secured notes due 2013 and its 'B-' rating to the company's $60 million floating rate convertible senior subordinated notes due 2013, both to be issued under Rule 144A with registration rights. At the same time the 'B+' corporate credit rating on the company was affirmed, and the 'B' rating on its proposed $350 million senior notes was withdrawn. Lawrenceville, N.J.-based Exide, a global manufacturer of transportation and industrial batteries, has debt, including the present value of operating leases, of about $750 million. The rating outlook is negative. Exide replaced its proposed senior notes offering with the senior secured notes and convertible notes. Proceeds from the new debt issues will be used to reduce bank debt and for general corporate purposes. Security for the senior secured notes is provided by a junior lien on the assets that secured Exide's senior credit facility, including the bulk of its domestic assets and 65% of the stock of its foreign subsidiaries. "We expect earnings and cash flow improvements, provided the costs of lead remain fairly stable or decline and restructuring actions are effective," said Standard & Poor's credit analyst Martin King, "which should allow debt leverage to decline and cash flow coverage to improve over the next few years. FALCON PRODUCTS: Taps Recovery Group for Turnaround Advice ---------------------------------------------------------- Falcon Products Inc. has turned to the Recovery Group Inc., aka TRG Turnaround and Crisis Management, for turnaround advice. John S. Sumner, Jr., leads the engagement and will serve as Falcon's new chief restructuring officer. Mr. Sumner "has had a great deal of experience over the last 20 years in working with companies similar to Falcon that have gotten their balance sheets out of whack," Falcon Chairman and Chief Executive Franklin A. Jacobs told Gregory Cancelada at the St. Louis Post-Dispatch. "Basically, he's going to be the chief operating officer of this company, reporting to me and the board of directors." Mr. Cancelada relates that Falcon hopes aggressive restructuring and its leadership position in a niche market -- building furniture and fixtures for companies such as McDonald's Corp. and Hilton Hotels -- will allow it to prosper once it exits bankruptcy. Prior to filing for Chapter 11 protection, Falcon hired turnaround firm Alvarez & Marsal LLC, and continued that engagement postpetition. Falcon decided TRG would be a better fit, Mr. Jacobs told Mr. Cancelada. Headquartered in Saint Louis, Missouri, Falcon Products, Inc. -- http://www.falconproducts.com/-- designs, manufactures, and markets an extensive line of furniture for the food service, hospitality and lodging, office, healthcare and education segments of the commercial furniture market. The Debtor and its eight debtor-affiliates filed for chapter 11 protection on January 31, 2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP represent the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $264,042,000 in assets and $252,027,000 in debts. FINOVA GROUP: Court Formally Closes Mezzanine's Chapter 11 Case --------------------------------------------------------------- The Hon. Peter J. Walsh of the United States Bankruptcy Court for the District of Delaware issues a final decree closing the Chapter 11 case of FINOVA Mezzanine Capital, Inc., Case No. 01-702. All subsequent pleadings, therefore, will be filed and docketed in the case of FINOVA Capital Corporation, Case No. 01-698. As reported in the Troubled Company Reporter on March 11, 2005, the Reorganized FINOVA Debtors asked the Court to close the Mezzanine case following the voluntary dismissal and closing of the Teltronics Adversary Proceeding on Feb. 1, 2005. The Reorganized Debtors reiterated that the FINOVA Mezzanine Case should be closed because: * the Confirmation Order has become final and unappealable; * the Debtors' Plan of Reorganization has been implemented; * no significant property transfers remain unexecuted under the Plan with respect to FINOVA Mezzanine; * FINOVA Mezzanine has been successfully reorganized under the Plan; * all Plan payments required, including all fees under 28 U.S.C. Section 1930, have been made; and * no requests or contested matters remain that would preclude the closing of the FINOVA Mezzanine Case. Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. (Finova Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 215/945-7000) FITNESS EXPERIENCE: Atlas Partners Advising on 36 Retail Leases --------------------------------------------------------------- Brenda Porter Helms, Esq., the Chapter 7 Trustee overseeing the liquidation of THE FITNESS EXPERIENCE, INC., sought and obtained permission from Judge Squires to hire Atlas Partners, LLC, as her consultant to conduct a rapid evaluation of whether or not there is any value in 36 retail leases for store locations in Indiana, Illinois, Michigan, Ohio and Wisconsin, to which the estate is a party. Bank One, the Debtors' secured lender, supported the engagement. THE FITNESS EXPERIENCE, INC., filed a voluntary chapter 7 petition (Bankr. N.D. Ill. Case No. 05-02069) on January 21, 2005. In its bankruptcy petition, the Debtor estimated the value of its assets at $1 million to $10 million and liabilities between $10 million and $50 million. The Debtor did not project that funds would be available for distribution to unsecured creditors. The United States Trustee appointed: Brenda Porter Helms, Esq. The Helms Law Firm, P.C. 3400 West Lawrence Chicago, IL 60625 Telephone (773) 463-6427 to serve as the Chapter 7 Trustee. Ms. Helms is represented by: David R. Brown, Esq. Springer, Brown, Covey, Gaertner & Davis L.L.C. 400 South County Farm Road, Suite 330 Wheaton, IL 60187 Telephone (630) 510-0000 Joel H. Schneider, Managing Director of Atlas, leads the engagement. Atlas agreed to do the work in accordance with its usual and customary fees, $150 per Illinois location and $350 per out of state locations, all subject to a $10,000 cap. FLYI INC: Financial Restructuring Triggers Late Form 10-K Filing ---------------------------------------------------------------- FLYi Inc. fka Atlantic Coast Airlines, Inc., successfully completed a consensual restructuring of its financial obligations on February 18, 2005. The restructuring includes agreements with a majority of the Company's aircraft creditors. As a result of the timing of completing the restructuring, the resources and personnel required to complete and document the restructuring and the effects of the financial restructuring on the Company's financial statements, the Company has not been able to complete the work required to finalize certain portions of its Annual Report, including certain exhibits to be file therewith, by the required date. $192.2 Million Loss Expectation The Company expects to report an annual net loss of $192.2 million for 2004 compared to 2003 net income of $82.8 million. The Company is in the process of analyzing the recoverability of its long-lived assets as required by FASB Statement No. 144, including the impact of the recently completed restructuring of its aircraft financing. The analysis may result in the recordation of a non- cash impairment charge which would further increase the net loss for 2004 when the Company files its annual report. Auditors May Issue Going Concern Note In addition, it is likely that upon completion of their audit of the Company's consolidated financial statements, the report of its independent registered public accounting firm will include an explanatory paragraph stating that there is substantial doubt about the Company's ability to continue as a going concern. In 2004, the Company recorded a loss from continuing operations of $203.4 million compared to income of $66.6 million for 2003, and $23.6 million for 2002. For 2004, Independence Air's available seat miles (ASM) from continuing operations decreased 5.1% with the termination of the United Express program during the year. For 2004, the number of total passengers from continuing operations decreased 15.4% and revenue passenger miles (RPM) decreased 20.8%, attributable primarily to lost aircraft availability during the time the CRJs left United Express service until the time they began Independence Air service. FLYi Inc. fka Atlantic Coast Airlines Holdings, Inc., a Delaware corporation is a holding company with its primary subsidiary being Atlantic Coast Airlines, a regional airline serving 85 destinations in 30 states in the Eastern and Midwestern United States and Canada, with 850 scheduled non-stop flights system-wide every weekday. The Company has operated as a regional airline since 1992. * * * As reported in the Troubled Company Reporter on Feb. 25, 2005, Standard & Poor's Ratings Services revised the implications of its CreditWatch review on FLYi, Inc., (CC/Watch Dev/--) to developing from negative, following conclusion of the company's restructuring and payment of deferred interest on rated convertible notes. Dulles, Virginia-based FLYi is the parent of Independence Air, a small airline based at Washington Dulles International Airport. "FLYi's financial restructuring provides near-term relief through deferral of aircraft lease and debt obligations, though the company's financial condition remains precarious," said Standard & Poor's credit analyst Betsy Snyder. GENERAL BINDING: Moody's Affirms Caa1 Rating on $150M Sr. Notes --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of General Binding Corporation and changed the outlook from positive to stable. The affirmation of General Binding's credit ratings reflects stable operating and financial performance despite challenging conditions in the office products industry. Although operating margins have weakened in 2004, the company has been able to offset much of the pressure from rising raw material costs and a difficult pricing environment with improvements in the company's cost structure. The change in ratings outlook from positive to stable reflects weaker than expected financial performance by the company and reduced expectations for future growth. The stable outlook reflects Moody's expectation of minimal sales growth, flat operating margins and the continued use of free cash flows to reduce leverage. On March 16, 2005, General Binding announced that it entered into a merger agreement pursuant to which the company would merge with a subsidiary of ACCO World Corporation. Simultaneous with the merger, Fortune Brands, Inc. expects to spin off to its shareholders its ACCO World Corporation office products unit. Upon completion of the merger, which is expected to close in the summer, Fortune Brands' shareholders are expected to own 66% of ACCO and General Binding's shareholders 34%. The merger and spin- off are subject to regulatory approvals and other customary closing conditions. The merger is also subject to approval by General Binding's shareholders. General Binding's majority shareholder has agreed to vote for the merger. ACCO has obtained commitments for financing (not publicly rated) that are expected to be used to finance a $625 million cash dividend to Fortune Brands and to repay all of the debt of General Binding. If the merger is consummated and the existing rated debt is repaid, all of General Binding's ratings will be withdrawn. Moody's has affirmed these ratings: * $73 million senior secured revolving credit facility due 2008, rated B2; * $112 million senior secured term loan due 2008, rated B2; * $150 million 9.375% senior subordinated notes due 2008, rated Caa1; * Senior implied, rated B2; and * Senior unsecured issuer rating (non-guaranteed exposure), rated B3. Headquartered in Northbrook, Illinois, General Binding Corporation designs, manufactures and distributes branded office equipment, related supplies and laminating equipment and films. Revenues for the year ended December 31, 2004 were $712 million. ACCO World Corporation, headquartered in Lincolnshire, Illinois, is the world's largest supplier of office products with revenues of $1.2 billion for the year ended December 31, 2004. GENERAL TRAILER: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: General Trailer Park Associates dba Belmont Shores Mobile Estates 3101 North Central Avenue, Suite 1390 Phoenix, AZ 85012 Bankruptcy Case No.: 05-04377 Chapter 11 Petition Date: March 22, 2005 Court: District of Arizona (Phoenix) Judge: Redfield T. Baum Sr. Debtor's Counsel: Mark E Macdonald, Esq. Macdonald & Macdonald, PC 325 N. St. Paul St., #2400 Dallas, Texas 75201 Tel: (214) 237-4220 Fax: (214) 922-9718 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Alamitos Bay Partnership Ground rent $128,502 c/o Jacmar Builders Inc. 2200 W. Valley Blvd. Alhambra, CA 91803 Heller Ehrman Legal services $24,060 333 Bush Street San Francisco, CA 94104 City of Long Beach Water and gas $18,831 P.O. Box 630 Long Beach, CA 90842 Frederica Ross, as Trustee Partnership $15,624 for Robert J. Ross Trust distribution - outstanding check Frederica Ross Trust Partnership $15,624 distribution - outstanding check Mobile Home Specialists Mobile home $15,260 leveling Jerry Fletchall and Security $14,356 Sharon Cunningham deposit to be assumed, Disputed tort claim Rudy Wright and Security $14,330 Mary Wright deposit to be assumed, Disputed tort claim Gary and Michelle Disputed tort claim $13,806 Hawthorne Barry O'Neil and Disputed tort claim $13,806 Jeri O'Neil Ronald Maddox and Disputed tort claim $13,806 Marion Maddox Edward Loftus and Disputed tort claim $13,806 Lynn Loftus William Donaldson and Disputed tort claim $13,806 Dona Donaldson Michael & Agnes McKim Disputed tort claim $13,806 c/o Endeman, Lincoln, Turek & Heater Guy & Bernice Einsele Disputed tort claim $13,806 c/o Endeman, Lincoln, Turek & Heater Don & Linda Hunnell Disputed tort claim $13,806 c/o Endeman, Lincoln, Turek & Heater Thomas & Jean Lazarick Disputed tort claim $13,806 c/o Endeman, Lincoln, Turek & Heater Southern Calif. Edison Electricity $10,428 P.O. Box 600 Margaret Morgan Security deposit $7,427 Ron Shefi to be assumed, Disputed tort claim Phyllis Blatz Security deposit $7,411 to be assumed, Disputed tort claim GLASS GROUP: Gets Okay to Hire Focus Management as Fin'l. Advisor ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved The Glass Group, Inc.'s application to employ Focus Management Group, USA, Inc., as its financial consultants. Focus Management will: a) review and analyze the current financial condition of the Debtor and its business plans, cash flow projections, restructuring programs and other reports or analyses prepared by the Debtor or its professionals; b) assist the Debtor in preparing an operational restructuring plan to be presented to the Debtor's provider of post- petition financing; c) review, evaluate and analyze the financial ramifications of proposed transactions for which the Debtor seek Court approval, including DIP financing and cash management, assumption/rejection of real property leases and other contracts, management compensation and retention and severance plans; d) review, evaluate and analyze the Debtor's internally prepared financial statements and related documentation and attend and advise at meetings with the Debtor, its counsel, other financial advisors and representatives of the Creditors Committee; e) assist and advise the Debtor and its counsel in the development, evaluation and documentation for any plan of reorganization or strategic transactions, including developing, structuring and negotiating the terms and conditions of a proposed plan or strategic transactions; f) make recommendations to improve the Debtor's profitability and production efficiency and render testimony in behalf of the Debtor; and g) provide other services as requested by the Debtor and required in its chapter 11 case. J. Tim Pruban, President of Focus Management, disclosed that the Firm received a $75,000 retainer. Mr. Pruban reports Focus Management's professionals bill: Designation Hourly Rate ----------- ----------- Managing Directors $350 Senior Consultants $300 Focus Management assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Millville, New Jersey, The Glass Group, Inc., -- http://www.theglassgroup.com/-- manufactures molded glass container and specialty products with plants in New Jersey and Missouri. Its products include cosmetic bottles, pharmaceutical vials, specialty jars, and coated containers. The Company filed for chapter 11 protection on Feb. 28, 2005 (Bankr. D. Del. Case No. 05-10532). Derek C. Abbott, Esq., at Morris, Nichols, Arsht & Tunnell represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $50 million to $100 million. GLOBAL LEARNING: Disclosure & Plan Confirmation Hearing on June 16 ------------------------------------------------------------------ Global Learning Systems, Inc., and its debtor-affiliates delivered their Second Amended Disclosure Statement explaining their Amended Chapter 11 Plan to the U.S. Bankruptcy Court for the District of Maryland. Objections, if any, to the Disclosure Statement and Amended Plan must be filed by May 17, 2005. The Court will convene a combined disclosure and plan confirmation hearing on June 16, 2005, at 2:00 p.m. About the Plan The Plan provides for the substantive consolidation of the Debtors for distribution purposes. Upon confirmation, Keystone Learning will become a division of Global Learning. The Plan provides, among other things: -- Full payment to: * administrative claims; * priority claims; and * secured claims on the Effective Date. -- Priority tax claims will be paid over a six-year period with a 7% interest; -- Wage claim holders will receive 50% of their claims on the Effective Date, with the balance paid over a four- month period; -- Wachovia Bank will receive a $500,000 note and 1/3 of the stock in the Reorganized Global Learning; -- General Unsecured creditors are expected to recover 10% of their claims plus a pro rata share from the Makau litigation. About the Makau Litigation Keystone and Global Learning seek injunctive and monetary relief against the Makau Corporation, et al., based upon their misappropriation of Keystone trade secrets, copyright infringement, civil conspiracy, tortious interference with contract, tortious interference with prospective economic relations and conversion. In addition, Keystone and Global assert numerous bankruptcy causes of action against the Defendants. Expected monetary damages is at least $1,000,000. Based in Frederick, Maryland, GlobalLearningSystems.COM offers a library of over 1,200 courses through its Keystone subsidiary in VHS, CDROM, DVD and server format to home and business computer users, software developers and network professionals. Keystone provides training products to more than 420 of the Fortune 500 companies. GLS.COM also develops customized learning content, enterprise knowledge management software and comprehensive training support services for corporate and government clients through GLS. On June 6, 2003 GLS and Keystone filed a petition for relief under chapter 11 of Title 11 of the United States Code in the Bankruptcy Court for the District of Maryland, Greenbelt Division (Bankr. D. Md. Case No. 03-30218). GLS and Keystone are debtors-in- possession, and therefore have retained control of their businesses and assets. Both companies expect to emerge as dominate players in the rapidly expanding computer and Web-based training arena. When Global filed for protection, it estimated assets of more than $50,000,000 and estimated debts of $50,000,000. GRAHAM CORP: Receiver Appointed for Discontinued U.K. Companies --------------------------------------------------------------- Graham Corporation (AMEX:GHM) said that a receiver has been appointed to administer the Company's discontinued operations in the United Kingdom. The discontinued operations, which include Graham Vacuum and Heat Transfer Limited and GVHT's wholly owned operating subsidiary, Graham Precision Pumps Limited, are located in Congleton, Cheshire, U.K. On March 15, 2005, Graham Corporation's Board of Directors approved discontinuance of its U.K. operations and the sale of the U.K. companies. On March 21, 2005, the Company filed a Form 8-K with the Securities and Exchange Commission reporting this decision and also that it had proposed to appoint an appropriately qualified U.K. administrator for GVHT and GPPL as a step toward proceeding with the sale of the companies. The appointment of an administrator gives U.K. companies protection in a manner similar to bankruptcy proceedings in the U.S. On March 24, 2005, National Westminster Bank, as the primary creditor of the U.K. operations, exercised its right to place the businesses in receivership, which the Company anticipates will result in the liquidation of the operations. Receivership also provides protection similar to U.S. bankruptcy proceedings. The Company expects that the disposition will be completed by March 14, 2006. Graham Corporation expects to incur a non-cash charge of approximately $4.50 million to $5.25 million in the current fiscal quarter, which ends March 31, 2005. Any income tax benefits that may be realized as a result of the loss are not yet known. Bill Johnson, President and CEO of Graham Corporation, commented, "Strategically, we have recognized the need to streamline our operations and improve our cost competitiveness in the global market that we serve in order to grow the Company. We concluded that discontinuing our non-profitable U.K. business will strengthen Graham's operating performance, focus our resources and allow for greater investment in our core product lines." The U.K. operations had sales of $5.6 million for the first nine-months of fiscal year 2005, which ends March 31, 2005, and its net loss for that period was $329,000. Mr. Johnson went on to say, "We anticipate that the closing of our U.K. pump manufacturing operations will result in a seamless transition to our selected alternative sources for pumps and provide continued quality service of our core market channels and customers for engineered vacuum solutions." About the Company Graham Corporation designs and builds vacuum and heat transfer equipment for the process industries throughout the world. The principal industries that it serves include chemical, petrochemical, petroleum refining and electric power generation, including cogeneration and geothermal plants. Other markets served include metal refining, pulp and paper, shipbuilding, water heating, refrigeration, desalination, food processing, drugs, heating, ventilating and air conditioning. Graham's ejectors, liquid ring and dry vacuum pumps, condensers, heat exchangers and other products, sold either as components or as complete systems, are used by its customers to produce synthetic fibers, chemicals, petroleum products (including gasoline), electric power, processed food (including canned, frozen and dairy products), pharmaceutical products, paper, steel, fertilizers and numerous other products used everyday by people throughout the world. GREAT REPUBLIC: A.M. Best Says Financial Strength is Marginal ------------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating of Seattle- based Great Republic Life Insurance Company to C+ (Marginal) from B- (Fair) earlier this month. The rating outlook has been revised to stable from negative. This rating action is in response the sizeable decline in Great Republic Life's capitalization level in 2004, primarily the result of reserve strengthening in its core long-term care business. Additionally, the company has reported operating losses over the past three years, which has negatively impacted its already modest capital and surplus position. The majority of Great Republic Life's premium income continues to be generated through long-term care products. A.M. Best is concerned with the challenges for a company of its size, especially with its thinner margin of error, operating in this less predictable product line. Great Republic Life was one of the pioneers in the long-term care market, writing nursing home insurance, and was the first insurance company to offer a home health care policy. However, in recent years the company has written only very modest amounts of new business. For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, visit Best's Health Center at http://www.ambest.com/health For Best's Ratings, an overview of the rating process and rating methodologies, visit Best's Rating Center at http://www.ambest.com/ratings A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. GUITAR CENTER: Good Performance Prompts S&P to Lift Rating to BB ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on specialty music retailer Guitar Center Inc. The corporate credit rating was raised to 'BB' from 'BB-'. All ratings were removed from CreditWatch, where they were placed with positive implications Dec. 22, 2004. The outlook is stable. "The upgrade is based on the company's improved operating performance and credit protection measures," said Standard & Poor's credit analyst Robert Lichtenstein. Comparable-store sales increased 10% in 2004, while operating margins expanded to 11.0% from 9.8% the year before. Operating performance has been driven by good execution and favorable industry trends. As a result, cash flow protection measures strengthened, with lease- adjusted EBITDA covering interest by 7.0x, while leverage declined, with lease-adjusted debt to EBITDA at 1.7x, compared with 2.4x the previous year. The ratings reflect Guitar Center's participation in the highly competitive and fragmented music products retail market and its aggressive growth strategy. These factors are partially mitigated by the company's favorable market position and good credit protection measures for the rating category. Guitar Center is the nation's largest retailer of music products, with an 18% market share in a highly fragmented industry in which the top five music retailers account for only 29% of the industry's total sales. The company plans to accelerate its expansion by opening new stores and acquiring others. Operating performance continued to improve, supported by growth at Guitar Center retail stores and Musician's Friend direct sales, slightly offset by weakness at the American Music division. However, the acquisition of Music & Arts Center should improve performance at American Music, as it is more profitable. Same-store sales at the Guitar Center stores rose 10% in 2004, following a 7% gain in 2003. Operating margins in 2004 expanded to 11.0%, from 9.8% in 2003. The improvement resulted from higher gross margins, better expense leverage, and lower inventory shrink. HIGH VOLTAGE: Wants Until April 29 to Object to Old Claims ---------------------------------------------------------- High Voltage Engineering Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Massachusetts, Eastern Division, to extend their time to file objections to proofs of claim through and including April 29, 2005. High Voltage filed for bankruptcy protection a second time shortly after it emerged from chapter 11 last year. According to the Debtor, most of its attention and resources were diverted from resolving the remaining bankruptcy claims and the winding down of the first bankruptcy case due to the filing of the new petition. As previously reported, High Voltage's decision to file for bankruptcy was precipitated by insufficient liquidity from cash flow from its principal operating subsidiaries and the Company's inability to procure alternative sources of financing through either the debt or equity markets. While in Chapter 11, High Voltage intends to offer and sell as going concerns the assets of its three distinct operating groups: -- the Charles Evans division based in California, -- High Voltage Engineering Europa B.V. based in the Netherlands and ASIRobicon, and -- both Robicon Corporation based in Pittsburgh and ASIRobicon S.p.A. based in Milan, either separately or together. Headquartered in Wakefield, Massachusetts, High Voltage Engineering Corporation owns and operates a group of three industrial and technology based manufacturing and services businesses. HVE's businesses focus on designing and manufacturing high quality applications and engineered products which are designed to address specific customer needs. The Debtor filed its first chapter 11 petition on March 1, 2004 (Bankr. Mass. Case No. 04-11586). Its Third Amended Joint Chapter 11 Plan of Reorganization was confirmed on July 21, 2004, allowing the Company to emerge on Aug. 10, 2004. High Voltage filed its second chapter 11 petition on Feb. 8, 2004 (Bankr. Mass. Case No. 05-10787). S. Margie Venus, Esq., at Akin, Gump, Strauss, Hauer & Feld LLP, and Douglas B. Rosner, Esq., at Goulston & Storrs, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it listed $457,970,00 in total assets and $360,124,000 in total debts. HMQ METAL: CEO Upbeat About Ability to Emerge from Chapter 11 ------------------------------------------------------------- Tim Blydenburgh at The Observer-Dispatch reports that Metal Finishing Group, LLC, hopes to emerge from its Chapter 11 bankruptcy reorganization "with minimal impact to customers and associates," according to CEO Frederick H. Hager. "The four-year manufacturing downturn, particularly in Upstate New York, the costs of conducting business in heavily regulated and highly taxed New York state, and a shift in our customer base led to an over-extension of our obligations," Mr. Hager told Mr. Blydenburgh. While "extremely regrettable," the Chapter 11 filing will ensure continuity for customers and employees and protect the company's assets and those of its affiliate and two subsidiaries, Mr. Hager continued. Mr. Blydenburgh reports that HMQ was established in 1871. HMQ's operations, with plants in Herkimer, Oriskany and Syracuse, N.Y., employ 80 people. Mr. Hager told Mr. Blydenbeurgh that HMQ has an agreement with an investment group to bring in new capital, allowing its companies to resume the implementation of its business plan. The new financing depends on the restructuring of financial obligations, which "is best accomplished through the courts," Mr. Hager said. HMQ Metal Finishing Group, LLC, H.M. Quackenbush, Inc., HMQ National Plating, LLC, and HMQ Chemtech, LLC, filed for chapter 11 protection on March 16, 2005 (Bankr. N.D.N.Y. Case Nos. 05-61683 and 05-61690 through 05-61692), listing less than $2 million in assets and more than $15 million in liabilities. R. John Clark, Esq., at Hancock & Estabrook, LLP, represents the Debtors. The Debtors provide metal finishing and electroplating services, specializing in cadmium, tin, zinc-cobalt, copper, tin-lead, zinc- iron, nickel, and zinc barrel plating. See http://www.hmq.com/ HOELTER TECH: Filing for Ch. 11 & Buying Movie Distribution Rights ------------------------------------------------------------------ Hoelter Technologies Holding AG (OTC: HOTK) found it necessary to file a Chapter 11 proceeding to reorganize as a result of the loss of its subsidiaries in Germany and throughout Europe. As a result of these losses and the uncertainty of the circumstances in Europe, the Company's management has determined that the best way to clean the slate is to follow this procedure. Bayshore Media Group, a Nevada corporation has agreed to sell to Hoelter the exclusive distribution rights to a series of movies found at http://www.bayshoremediagroup.com/David Dadon, the producer of these movies and a well-respected director has agreed to enter into this transaction. The cash flow from these distribution rights will support the company from hereon. The value of the distribution rights exceeds $5 million. The reorganization will include all new officers and directors as well as a new direction concentrating in the Entertainment Industry. The company was moved to San Diego in early 2004, thus the filing will take place there. The Chapter Proceeding and Plan of Reorganization will be filed simultaneously as soon as they are prepared. About the Company Hoelter Technologies Holding AG develops and markets air, water and energy filtration systems and products that remove dust and other particulate matter, as well as kill bacteria, spores, molds and other airborne allergens from treated air streams. The Company is integrally affiliated with the Hoelter Group of companies, a collection of technology-oriented, internationally operating companies engaging in the field of environmental technology. IAAI FINANCE: Moody's Junks Proposed $150 Million Senior Notes -------------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to IAAI Finance Corp.'s proposed $150 million of senior notes, which are intended to replace its proposed $150 million senior subordinated notes offering (rated Caa1 on March 17, 2005) that was canceled. Concurrently, Moody's withdrew the Caa1 rating assigned to the proposed senior subordinated notes of IAAI Finance. Pro-forma for the aforementioned capital mix changes, Moody's affirmed all the debt ratings of Axle Merger Sub, Inc. and the senior implied rating of Insurance Auto Auctions, Inc. 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 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 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 and affirmed ratings are contingent upon the completion of the merger. If the merger is not completed, all of the ratings will be withdrawn. Moody's took these rating actions with respect to IAAI Finance: * Assigned $150 million senior notes due 2013, rated Caa1 (rating will be transferred to IAAI upon closing of the merger) * Withdrew $150 million senior subordinated notes due 2012, rated Caa1 Moody's took these rating actions with respect to Axle Merger (ratings will be transferred to IAAI upon closing of the merger): * Affirmed $50 million senior secured revolving credit facility due 2011, rated B2; * Affirmed $115 million senior secured term loan facility due 2011, rated B2. Moody's took these rating actions with respect to IAAI: * Affirmed Senior Implied, rated B2; * Lowered Senior Unsecured Issuer Rating (non-guaranteed exposure) to Caa3 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: 1. substantial leverage; 2. revenue concentration with the three largest suppliers accounting for about 37% of the company's 2004 unit sales; 3. a lack of long term contractual commitments from suppliers; 4. 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 5. 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; 1. high barriers to entry due to property size, information technology and infrastructure requirements of the salvage auction business; 2. 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 3. 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 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 effectively subordinated to existing and future senior secured debt of IAAI and its subsidiaries and will be guaranteed on a senior 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. INSURANCE AUTO: S&P Junks $150 Million Senior Notes --------------------------------------------------- Standard & Poor's Rating Services assigned its 'CCC+' rating to the $150 million senior notes due 2013 of Insurance Auto Auctions Inc. (IAAI) and withdrew its 'CCC+' rating on the company's $150 million senior subordinated notes, which were never sold. The 'B' corporate credit rating on IAAI was affirmed. Pro forma for the senior notes offering and a new bank credit facility, Westchester, Illinois-based 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. Proceeds from the senior notes, combined with $115 million of borrowings under the bank credit facility and $144 million of sponsor equity, will be used to purchase IAAI and refinance its existing debt. Kelso & Co., a private investment firm, is acquiring the company 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. "We expect that IAAI will continue to improve earnings and cash flow and that debt leverage will decline modestly," said Standard & Poor's credit analyst Martin King. "The narrow scope of operations and an aggressive growth appetite limit upside potential. Relatively stable demand and positive, albeit modest, free cash flow limit downside risk." IAAI has a narrow scope of operations and modest size, notwithstanding its No. 2 market position within its niche. It operates 78 salvage vehicle auction facilities in 32 states, serving 60 of the top 75 metropolitan markets. INTERSTATE BAKERIES: Wants Until Oct. 21 to Challenge Bank Claims ----------------------------------------------------------------- The deadline to file an adversary proceeding or contested matter for claims challenging the extent, validity, enforceability, perfection or priority of Interstate Bakeries Corporation and its debtor-affiliates' prepetition obligations or the liens granted to the prepetition secured lenders on the Prepetition Collateral has previously been extended to April 22, 2005, for the Debtors, the Official Committee of Unsecured Creditors, the Official Committee of Equity Security Holders and U.S. Bank National Association, as indenture trustee. The parties want to further extend the Challenge Deadline. Accordingly, parties agree that: (1) JPMorgan Chase Bank N.A., as Administrative Agent, on behalf of the Prepetition Secured Lenders, holds a valid and perfected security interest in personal property owned by the Debtors and Interstate Brands Corporation as of the Petition Date, including: (a) accounts, documents, equipment, general intangibles, instruments, investment property and chattel paper as defined in Article 9 of the New York Uniform Commercial Code; (b) deposit accounts that were under JPMorgan's control, or cash that was in its possession, or, to the extent either the deposit accounts and cash represent proceeds of the Property in which it has a perfected a security interest; provided, however, that no stipulation is made as to the extent, validity or perfection of any liens or security interests in or on the Grantors' property, which include: (i) property subject to a certificate of title statute or a statute, regulation or treaty of the United States that preempts Article 9, including, without limitation, vehicles, copyrights, boats, vessels and aircraft; and (ii) Excluded Property; (c) tort claims; (d) interests in, or claims under, insurance policies, except as provided with respect to proceeds in New York UCC Section 9-315; (e) rights represented by a judgment, other than a judgment taken on a right to payment in which JPMorgan otherwise holds a perfected lien; (f) interest in, or liens on real property, including leases or rents under it, except as otherwise provided in the New York UCC; (g) property that is not located in a state in the United States or within the District of Columbia; (h) proceeds that are not perfected; and (i) property rights under that are created or protected by registration or other action under the statutes or laws of a foreign country or governmental unit; (2) JPMorgan, on behalf of the Prepetition Secured Lenders, holds a valid and perfected lien on each Grantor's interest in the parcels of real property, but only to the extent: (a) of the legal description of the real property contained in the applicable mortgage/deed of trust; (b) that the applicable mortgage/deed of trust has been properly recorded and remains of record in the real property records of the appropriate recording office; and (c) of the indebtedness expressly secured by the applicable mortgage/deed of trust, subject to any limitation; and (3) The Challenge Deadline is extended through and including October 21, 2005. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) JILLIAN'S ENT: Plan Administrator Wants Removal Period Extended --------------------------------------------------------------- Steven Victor, the Plan Administrator appointed pursuant to the confirmed chapter 11 plan of Jillian's Entertainment Holdings, Inc., and its debtor-affiliates, asks the U.S. Bankruptcy Court for the Western District of Kentucky, Louisville Division, to extend, until June 30, 2005, his time to remove civil actions. Mr. Victor needs additional time to address and take the best course involving several lawsuits against the Reorganized Debtors pending in various state and federal courts. He submits that the extension will not prejudice the Reorganized Debtors' adversaries. Headquartered in Louisville, Kentucky, Jillian's Entertainment Holdings, Inc. -- http://www.jillians.com/-- operates more than 40 restaurant and entertainment complexes in about 20 states. The Company filed for chapter 11 protection on May 23, 2004 (Bankr. W.D. Ky. Case No. 04-33192). Edward M. King, Esq., at Frost Brown Todd LLC and James H.M. Sprayregen, Esq., at Kirkland & Ellis LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated assets of more than $100 million and estimated debts of over $100 million. Judge David T. Stosberg confirmed the Debtors' Amended Joint Liquidating Plan on Dec. 12, 2004. JJ GOLF INC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: JJ Golf, Inc. dba Bolivar Golf Club dba Evergreen Golf Course 8212 Halls Road Bolivar, New York 14715 Bankruptcy Case No.: 05-12264 Type of Business: The Debtor operates a public golf course. Chapter 11 Petition Date: March 25, 2005 Court: Western District of New York (Buffalo) Judge: Carl L. Bucki Debtor's Counsel: Garry M. Graber, Esq. Hodgson, Russ LLP 1800 One M&T Plaza, Suite 2000 Buffalo, NY 14203 Tel: 716-856-4000 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Allegany County $19,254 7 Court Street Belmont, NY 14813 NYS Dept. of Taxation & NYS Employment Tax $1,882 Finance Bankruptcy Section P.O. Box 5300 Albany, NY 12205 U.S. Dept. of Treasury $1,849 1500 Pennsylvania Ave., NW Washington, DC 20220 Sprague, Randy Family Membership/ $700 Adam Robinson Landes, Milton Single Membership $700 & Cart Kibbe, Duff Single Membership $700 & Cart Windus, Alan Family Membership/ $650 Kirk, Olivia Root, Karl Family Membership/ $650 Andrew, Gretchen Ingalls Nolan, Brian Family Membership/ $650 Tyler, Clay, Camden Morris, Robert Family Membership/ $650 Kimberly, Robert T., Michelle, Matthew, Andrew Hyde, Jesse Family Membership/ $650 Jesse Jr., Nathan Ahrens, Jeanne Single Membership $625 & Cart Storage Perry, Fred Sr. H & W Membership $600 Nichols, Sue Single Membership $600 & cart rental Watson, Martin H & W Membership $550 Walsh, Scott H & W Membership $550 Walsh, David H & W Membership $550 Smith, Stephen H & W Membership $550 Slocum, Gerry H & W Membership $550 Petzen, James H & W Membership $550 JOHNSONDIVERSEY: Fitch Assigns Low-B Ratings on Senior Debts ------------------------------------------------------------ Fitch Ratings has placed JohnsonDiversey, Inc.'s senior secured debt rating of 'BB' and senior subordinated debt rating of 'B+' on Rating Watch Negative following weaker than expected operating results for the fourth quarter and full-year 2004 compared to Fitch's expectations. The rating action reflects Fitch's concerns regarding the company's weaker than expected margins, weakened cash flow generation from operations, and higher than expected debt level. Total liquidity available to JohnsonDiversey has declined in recent quarters due to tightening of financial covenants. At Dec. 31, 2004, the company had $28 million in cash and it could borrow an additional $82 million under its senior secured revolver and remain in compliance with financial covenants. Offsetting Fitch's concerns is JohnsonDiversey's manageable debt maturity schedule of $8 million in 2005, $8 million in 2006, and $9 million in 2007. The next significant debt maturity is $149 million in 2009. Additionally, the ratings reflect JohnsonDiversey's diverse sales mix and product offerings as well as its strong market position as a global supplier of Institutional & Industrial -- I&I -- cleaning products. The company benefits from cash generation through its polymer business, which contributed double-digit operating margins in 2004 even with severe pressure from raw material cost escalation in the second half of 2004. Pending the execution of the company's proposed amendment to the credit agreement, and the review of the company's financial performance during the first quarter of 2005, the ratings could be affirmed or lowered. Fitch plans to meet with JohnsonDiversey's management in coming weeks to review ongoing operations. The company is seeking an amendment to its credit agreement to enhance liquidity to support seasonal working capital needs, and provide financial flexibility for growth initiatives and additional capital expenditures. JohnsonDiversey's credit statistics slightly improved during the 12 months ended Dec. 31, 2004, compared to the prior fiscal year due to a small increase in EBITDA and modest debt reduction, with EBITDA-to-interest incurred of 3.1 times, and debt-to-EBITDA of 3.4x. For the fiscal year ended Jan. 2, 2004, EBITDA-to-interest incurred was 2.8x and debt-to-EBITDA was 4.0x. However, the company's total adjusted debt-to-EBITDAR incorporating gross rent, was slightly weaker at 5.0x for full-year 2004 compared to 4.9x in the prior year due to an increase in rental expense and a higher accretive value for JohnsonDiversey Holdings' senior discount note. Balance sheet debt was approximately $1.3 billion at 2004 year-end. Additionally, the company has a $150 million accounts receivable -- A/R -- securitization program with approximately $130 million utilized as of Dec. 31, 2004, compared to $95 million at Jan. 2, 2004. The total adjusted debt amount includes operating leases, A/R program balance and JohnsonDiversey Holdings' senior discount note. JohnsonDiversey, Inc., is a global player in the I&I cleaning market, and sells its products into the following market segments; floor care, food service, restroom/housekeeping, laundry, and food processing. In addition, JohnsonDiversey is a global supplier of water-based acrylic polymer resins for printing, packaging, coatings, and plastics markets. The company is owned by JohnsonDiversey Holding, Inc., which is owned by Commercial Markets Holdco (67%) and Unilever (33%). In 2004, the company had $3.2 billion in net sales and $391 million in EBITDA. Free cash flow defined as net from operating activities minus capital expenditures and dividends was $54 million for the same period. KAISER ALUMINUM: Wants to Assume Plate Finishing Agreement ---------------------------------------------------------- Kaiser Aluminum & Chemical Corporation wants to assume its Plate Finishing Agreement with Spur Industries, Inc. dated July 15, 1998, pursuant to Section 365 of the Bankruptcy Code. Under the Plate Finishing Agreement, Spur Industries will finish KACC- furnished aluminum plate at a plant owned by Spur Industries near the Debtors' Trentwood, Washington, Plant. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, states that any objections to the Contract Assumption must be filed by 4:00 p.m., Eastern Time, on April 5, 2005. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Gets Court Nod to Reject Houston Office Lease -------------------------------------------------------------- The Hon. Judith K. Fitzgerald of the United States Bankruptcy Court for the District of Delaware authorizes Kaiser Aluminum Corporation and its debtor-affiliates to reject the office space lease between Kaiser Aluminum and Chemical Corporation and San Felipe Plaza, Ltd., provided that the rejection will be effective as of the date KACC vacates the premises. The Effective Date must not occur before March 31, 2005, or after June 30, 2005. The Court directs KACC to pay its monthly rental payments, taxes, insurance, maintenance, and operating expenses due under the San Felipe Lease through the Effective Date. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) KOPPERS INC: Dec. 31 Balance Sheet Upside-Down by $62 Million ------------------------------------------------------------- Koppers Inc. reported sales for the year ended December 31, 2004, of $952.5 million as compared to $842.9 million for the prior year. The increase in sales of $109.6 million or 13% is a result of increased sales in the US carbon materials and chemicals and railroad businesses of $71.7 million as well as higher sales in Australasia of $39.0 million, including $25.5 million from the consolidation of Chinese operations, and from favorable exchange conversion rates. Earnings before interest and taxes (EBIT) for the year were $65.1 million as compared to $19.1 million in 2003 with 2004 profits being positively impacted by increased volumes and margins in the US as well as Australasia. The 2003 EBIT results were adversely affected by special charges totaling $17.6 million, including, among others, $12.1 million of charges for restructuring and related costs associated with the US carbon materials and chemicals business. Net income for the year ended December 31, 2004 was $11.3 million as compared to net losses, before cumulative effect of accounting change, of $19.0 million in 2003. Net income in 2004 was positively impacted by higher sales and margins, plus $2.7 million from Chinese operations, while net income in 2003 was adversely affected by special charges of $17.6 million (see reconciliation on attached schedule). Borrowings of $385.8 million, net of cash and cash equivalents of $14.8 million, at December 31, 2004 were $371 million compared to $331.1 million at December 31, 2003. Cash flows from operations for the year were $18.9 million compared to operating cash flows of $12.4 million in 2003. At December 31, 2004 the Company had $14.8 million of cash and cash equivalents and $31.4 million of unused revolving credit availability for working capital purposes and was, and expects to continue to be, in compliance with all applicable debt covenants. Commenting on the year, President and CEO Walter W. Turner said, "I am very pleased with the results for 2004. The Company's EBIT increased to $65.1 million compared to $36.7 million before $17.6 million of special charges in 2003. We saw a significant turnaround in our US carbon materials and chemicals business where 2004 profits increased $17.6 million from 2003 and continued strength in our US railroad and Australian operations. We certainly benefited from improved economic conditions, particularly in our chemicals business; however, we also saw significant benefits realized in the improved profitability of the Company from the restructuring initiatives taken in 2003. The economic growth in China and the performance of our joint venture also exceeded expectations in 2004 with the achievement of a $4.7 million EBIT contribution from this very strategic market. We continue to be driven by our strategy of providing our customers with the highest quality products and services while continuing to focus on safety, health and environmental issues." About the Company Koppers, with corporate headquarters and a research center in Pittsburgh, Pennsylvania, is a global integrated producer of carbon compounds and treated wood products. Including its joint ventures, Koppers operates 38 facilities in the United States, United Kingdom, Denmark, Australia, China, the Pacific Rim and South Africa. The Company is a wholly owned subsidiary of KI Holdings Inc. The stock of KI Holdings Inc. is shared by a large number of employee investors and by majority equity owner Saratoga Partners of New York, N.Y. Koppers management will conduct a conference call today, March 29, 2005, beginning at 2:30 p.m. (ET) to discuss the Company's performance. Investors and bond holders may access the live audio broadcast by dialing 877 809 9521 (Domestic) or 706 643 9697 (International), Conference ID 4980976. Investors are requested to access the call at least 5 minutes before the scheduled start time in order to complete a brief registration. An audio replay will be available two hours after the call's completion. To access the recording dial 800 642 1687 (Domestic) or 706 645 9291 (International), Conference ID 4980976. The recording will be available for reply through April 29, 2005. At Dec. 31, 2004, Koppers Inc.'s liabilities exceed its total assets by $62 million. * * * As reported in the Troubled Company Reporter on Nov. 17, 2004, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to KI Holdings, Inc., the parent of Pittsburgh, Pennsylvania-based Koppers, Inc. Standard & Poor's also assigned its 'B-' rating to KI Holdings' proposed $100 million senior discount notes due 2014, subject to preliminary terms and conditions. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on Koppers, Inc., and revised the outlook to negative from stable. Proceeds from the proposed senior discount notes issue will be used to fund a $76 million dividend to shareholders and $20 million in cash will be retained on the balance sheet at the parent company for general corporate purposes. With about $920 million in sales, Koppers is a well-established producer of carbon compounds and treated wood products with about $520 million of total debt, including the proposed senior discount notes. The outlook revision reflects concerns regarding the aggressive financial policy of the company's owners. "The proposed transaction will mark the second debt-financed dividend payout within the past year and will leave very little room at the current ratings should profitability fail to improve as expected or if other strategic or financial decisions result in additional deterioration to the financial profile," said Standard & Poor's credit analyst George Williams. KRISPY KREME: Has Until Apr. 11 to File October Quarterly Reports ----------------------------------------------------------------- Krispy Kreme Doughnuts, Inc. (NYSE: KKD) obtained an agreement from the lenders under its Credit Facility last week that extends, until April 11, 2005, the date on which an event of default would occur by reason of the Company's failure to deliver financial statements for the quarter ended October 31, 2004. This is the third extension of that reporting deadline. As previously reported in the Troubled Company Reporter, Krispy Kreme's six-lender consortium, comprised of: * Wachovia Bank, N.A., * Branch Banking and Trust Company, * Bank of America, N.A., * Royal Bank of Canada, * CIBC Inc., and * The Bank of Nova Scotia, agreed to amend the $150 million Credit Facility to: * impose limitations on the issuance, extension and renewal of new letters of credit; * limit additional revolving credit or swing loan borrowings to $59,000,000; * restrict the creation of guarantees for debt incurred by the Company's joint ventures; * require prompt financial reporting from this point forward; and * require delivery of 13-week cash forecasts to the Lenders each Tuesday. These amendments remain in place and are effective whether or not the delinquent quarterly financial statements are delivered. If Krispy Kreme doesn't deliver to its lenders financial statements for the quarter ended October 31, 2004, on or before April 11, 2005, that will trigger an event of default absent a further waiver from the lenders. If a default occurs, the Credit Facility may be terminated and all amounts outstanding thereunder would be immediately due and payable. Talking to a New Lender Krispy Kreme says that it is currently negotiating with a new lending group to obtain new credit facilities. The proceeds of those new facilities would be used to repay in full the lenders under its current Credit Facility and for general corporate purposes. The Company cautions that there's no assurance that new credit facilities can be obtained. Josh Fineman at Bloomberg News reports that the Company is negotiating for a larger line of credit. Kroll Zolfo Cooper on Board As previously reported in the Troubled Company Reporter, Krispy Kreme hired Kroll Zolfo Cooper LLC as its financial advisor and interim management consultant. Stephen F. Cooper has been named Chief Executive Officer, and Steven G. Panagos now serves as President and Chief Operating Officer. Mr. Cooper is the Chairman and Mr. Panagos is a Managing Director of KZC. Since KZC's arrival, Krispy Kreme has announced cash conservation and cost-cutting measures. Earlier this month, Krispy Kreme said it was closing five of six test locations operated inside Wal-Mart stores. Founded in 1937 in Winton-Salem, North Carolina, Krispy Kreme is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates approximately 400 stores in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom. Krispy Kreme's Web site is at http://www.krispykreme.com/ MARVIN & SONS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Marvin & Sons, LLC P.O. Box 770 New York, New York 10116 Bankruptcy Case No.: 05-11892 Type of Business: The Debtor operates three stores from leased premises located at 8025 Jericho Turnpike, Woodbury, New York 11797; 133 Spruce Street, Cedarhurst, New York 11516 and 2164 Merrick Road, Merrick, New York 11566. Chapter 11 Petition Date: March 24, 2005 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtor's Counsel: Arnold Mitchell Greene, Esq. Robinson Brog Leinwand Greene Genovese & Gluck, P.C. 1345 Avenue of the Americas, 31st Floor New York, NY 10105 Tel: 212-586-4050 Fax: 212-956-2164 Total Assets: $5,178,811 Total Debts: $4,586,299 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Hearts on Fire Company, LLC $281,125 NW 5300, P.O. Box 1450 Minneapolis, MN 55485 Monte Carlo Designs Inc. $95,594 17 East 48th St., 8th Fl. New York, NY 10017 Cheerful Jewelry Ltd. $94,468 Unit 4, 3/F Fu Huang Ind. Bldg. 1 Hok Yuen St., East Hung Hom Kowloon, Hong Kong Alfred Meyers $74,215 C. Gonshor Fine Jewelry, Inc. $66,932 Chopard USA Ltd. $61,699 Citra-A $61,285 Charles Wolf & Sons $50,434 H.J. Hamdar $43,871 Concord Watch Co. $41,909 Chad Allison Designs $40,985 Giantto Watches $34,885 Barry Kronen $33,550 EBEL $32,185 Key Gems International Co., Ltd. $29,628 Seville Watch Corp. $29,426 I.D.I. Design Group $29,311 BACI Collection $25,908 LVMH Watch & Jewelry USA $25,682 V & P Jewelry Co., Ltd. $25,059 MCLEODUSA INC: Lots of Bad News & Second Bankruptcy May Follow -------------------------------------------------------------- McLeodUSA Incorporated delivered its annual report to the Securities and Exchange Commission on Fri., Mar. 25. The company warns that it may be forced to seek protection from creditors in a second Chapter 11 bankruptcy filing if its lenders do not continue to forbear from exercising their rights under outstanding Credit Facilities or execute a capital restructuring to eliminate the required principal and interest payments. Declining Revenues & Losses For the year ending December 31, 2004, total revenues were $716.2 million versus $869.0 million in 2003, reflecting federally mandated access rate reductions, lower long distance rates and volume, and the decline in price and volume of local services. McLeodUSA reported a $627.4 million net loss for 2004. Cash Balance Very Low The Company ended the year with $50.0 million of cash on hand which included a planned $20 million draw on its exit credit facility in the fourth quarter. At December 31, 2004, the Company had drawn a total of $100 million and had issued approximately $8 million of letters of credit of the $110 million funded exit credit facility. The Company was in compliance with all financial covenants at December 31, 2004. The Company's cash balance was approximately $45 million as of March 15, 2005. Forbearance Agreements On March 16, 2005, McLeodUSA and certain of its subsidiaries entered into a Forbearance Agreement with JPMorgan Chase Bank, N.A., as administrative agent related to its Credit Agreement and Exit Facility. Pursuant to the Forbearance Agreement, the lenders have agreed to forbear from exercising any remedies as a result of certain specified defaults under the Credit Facilities anticipated by the Company during the forbearance period, including, without limitation, the failure to make scheduled amortization payments under the Credit Facilities and interest payments under the Credit Agreement. The forbearance period, the purpose of which is to enable the parties to explore possible strategic transactions, runs through May 23, 2005. The Company expects it will not be required to make approximately $18.1 million of scheduled principal amortization and interest payments due on or before March 31, 2005, as a result of the Forbearance Agreement. JPMORGAN CHASE BANK, N.A., serves as Administrative Agent for a consortium of lenders to McLeodUSA comprised of: * JPMorgan Chase Bank NA * Credit Suisse First Boston * Bayerische Hypo-und Vereinsbank AG * Banc of America Strategic Solutions, Inc. * Commonwealth of Massachusetts Pension Reserves Investment Managemetn Board * Pension Investment Committee of General Motors for General Motors Employees Domestic Group Penion Trust * Fidelity Advisor Series I: Fidelity Advisor Leveraged Company Stock Fund * Fidelity Securities Fund: Fidelity Leveraged Company Stock Fund * Fidelity Advisor Series II: Fidelity Advisor High Income Advantage Fund * Jefferies & Co., Inc. * Banc of America Securities LLC as Agent for Bank of America, N.A. and * Theodore J. Forstmann On March 22, 2005, the Company elected not to make $2.8 million of interest payments on such loans and, as a result, an event of default occurred and the Company is required to accrue an additional two percentage points of interest on such loans as provided in the Forbearance Agreement. Exploring Strategic Alternatives McLeodUSA's Board of Directors has authorized the Company to pursue strategic alternatives. In support of these initiatives the Company has hired: * Miller Buckfire Ying & Co., LLC and * Gleacher Partners, LLC as its financial advisors. The Company is now actively pursuing a strategic partner or a sale of the Company while also taking steps to maintain future liquidity, including evaluating a capital restructuring to reduce the current debt level enabling the Company to achieve positive cash flow going forward. The Company has also begun discussions related to a capital restructuring with its agent bank and a group of lenders acting as a steering committee for the lenders under its credit facilities. The Company and the steering committee are in negotiations related to terms of a capital restructuring which includes the conversion of a significant portion of the Company's current outstanding debt into equity. Under that kind of a restructuring, the holders of the Company's current debt would become equity shareholders of the Company with the current holders of the preferred and common stock unlikely to receive any recovery. "While the Company continues to explore a variety of options with a view toward maximizing value for all of its stakeholders, none of the options presented to date have suggested that there will be any meaningful recovery for the Company's current preferred stock or common stock holders," McLeodUSA warns. "Accordingly, it is unlikely that holders of the Company's preferred stock or common stock will receive any recovery in a capital restructuring or other strategic transaction." Going Concern Doubt DELOITTE & TOUCHE LLP, the Company's auditors, say in their review of the company's 2004 financial statements that McLoedUSA's recurring losses from operations, negative net cash flows, and net stockholders' capital deficiency raise substantial doubt about the Company's ability to continue as a going concern. McLeodUSA's Dec. 31, 2004, balance sheet shows $1.026 billion in assets and a $47 million shareholder deficit. McLeodUSA Incorporated -- http://www.mcleodusa.com/-- provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company is a facilities-based telecommunications provider with, as of December 31, 2004, 38 ATM switches, 39 voice switches, 699 collocations, 432 DSLAMs and 2,426 employees. As of April 16, 2002, Forstmann Little & Co. became a 58% shareholder in the Company. McLeodUSA emerged from a prepackaged chapter 11 case (Bankr. D. Del. Case No. 02-10288) in April 2002. David S. Kurtz, Esq., and Gregg M. Galard, Esq., at Skadden, Arps, Slate, Meagher & Flom, represented McLeodUSA in its restructuring. METROPOLITAN MORTGAGE: Selling 3 Insurance Cos. in Package Deal --------------------------------------------------------------- Washington Insurance Commissioner Mike Kreidler and insurance regulators in Idaho and Arizona agreed last week to pursue a consolidated sale of the three insurance companies currently in receivership in connection with the financial collapse of parent holding company, Metropolitan Mortgage & Securities. "There is no question that a consolidated sale of the three companies is in the best interests of the policyholders, Metropolitan's creditors and the taxpayers of all three states," Mr. Kreidler said. "A consolidated sale offers the best way to maximize benefits for everyone involved." The affected companies are: * Western United Life Assurance Company, of Washington; * Old Standard Life Insurance Company, of Idaho; and * Old West Annuity & Life Insurance Company, of Arizona. Western United ranks as one of Washington's largest domestic insurance companies with 35,000 policyholders and $1.3 billion in assets. Mr. Kreidler assumed control of Western United Life Assurance Company under authority of a Thurston County Superior Court receivership order on March 2, 2004, shortly after Metropolitan sought bankruptcy protection. Western United's day-to-day operations have not been interrupted by the receivership. The sale will not affect policyholders. The three regulators have identified up to a half-dozen suitors qualified to purchase the companies and further infuse capital in their operations. The regulators have given the suitors 60 days -- until May 27 -- to complete "due diligence" evaluations of the companies and put final, best offers on the table. This process is proceeding concurrently with a bid process involving only the Arizona and Idaho companies. Once the final and best offers have been received, the three regulators will jointly evaluate them and decide what sale or sales are in the best interests of the respective companies. A final decision will be announced by the end of June. The three insurance regulators have hired Milliman USA, a nationally recognized management consulting firm, to evaluate the three sister insurance companies and make an independent, third- party assessment of the companies' worth. Headquartered in Spokane, Washington, Metropolitan Mortgage & Securities Co., Inc., owns insurance businesses. It filed for Chapter 11 protection (Bankr. E.D. Wash. Case No. 04-00757), along with Summit Securities Inc., on Feb. 4, 2004. Bruce W. Leaverton, Esq., of Lane Powell Spears Lubersky LLP and Doug B. Marks, Esq., of Elsaesser, Jarzabek, Anderson, Marks, Elliot & McHugh represent the Debtors in their restructuring efforts. When Metropolitan Mortgage filed for chapter 11 protection, it listed assets of $420,815,186 and debts of $415,252,120. As reported in the Troubled Company Reporter on Sept. 24, 2004, Metropolitan Mortgage & Securities Co., Inc., and its debtor-affiliate Summit Securities, Inc., filed a Joint Plan of Reorganization that would form the Metropolitan Creditors' Trust to convert assets to cash, resolve creditors' claims, and make distributions to creditors. MIRANT CORP: Shareholders Meeting Request Stayed Until April 13 --------------------------------------------------------------- The Official Committee of Equity Security Holders appointed in the chapter 11 cases of Mirant Corporation and debtor-affiliates asks the U.S. Bankruptcy Court for the Northern District of Texas to compel the Debtors to convene their annual shareholders' meeting to: (a) elect a new board of directors for Mirant Corporation; and (b) amend Mirant Corp.'s bylaws and certificate of incorporation as necessary to permit the replacement of all members of the Board. Mark C. Taylor, Esq., at Hohmann, Taube & Summers, LLP, in Austin Texas, states that bankruptcy courts have long recognized that shareholders have the right and duty to seek the removal of the members of a board of directors -- and the members of management reporting to that board -- who are not acting in a manner consistent with the shareholders' best interests or who otherwise are not representing the shareholders' interests in a Chapter 11 case. Case law also establishes that, so long as a management change is not intended to, or would not have the effect of, entirely derailing an on-going reorganization, a motion to compel an annual meeting should be granted. Mirant Corp.'s current Board has failed to conduct a shareholder meeting for over 18 months, despite the requirement in Mirant Corp.'s Bylaws and the operative provisions of Delaware law that require annual meetings of shareholders. Mirant Corp.'s last shareholders' meeting was held on May 22, 2003. Additionally, Board members have repeatedly and materially breached their fiduciary obligations to the shareholders by, inter alia, allowing the Debtors' management and reorganization professionals to press a purported business plan for the Debtors that grossly understates projected revenues and ignores significant assets of value, all in an apparent effort to depress artificially the Debtors' enterprise value. These breaches of fiduciary duty constitute ample "cause" to replace the entire Board under the Bylaws and relevant principles of Delaware Law. Mirant Corp. currently has eight directors in three, staggered classes. Three of those directors, S. Marce Fuller -- who is also the Debtors' chief executive officer -- David J. Lesar, and Ray M. Robinson, would have been the subject of a vote of the shareholders at the meeting that should have been held in May 2004. The terms of three other directors, A.W. Dahlberg, Stuart E. Eizenstat, and Robert F. McCullough, currently expire in May 2005. The terms of the remaining two directors, A.D. Correll and James F. McDonald, currently run in May 2006. Specifically, at the hearing on its request, the Equity will establish that: * The management team and professionals being overseen by Board have promulgated two business plans that appear to be intentionally designed to reduce artificially the value of the Debtors' assets, in part by relying on a fundamentally flawed, "home-grown" production model -- that is not used by any other market participant for valuation purposes -- and employing a variety of unsupportable value-reducing assumptions; * Following universal criticism of the Debtors' first attempt last March to formulate a valid business plan, the Board failed to ensure that its management and professionals meaningfully considered input on the business plan from the Equity Committee and its professionals. Instead, with the express or tacit acquiescence of the existing Board, the Debtors merely "went through the motions" in soliciting input from the Equity Committee and issued an equally faulty amended business plan; * The Board inexplicably has permitted that same management team and set of advisors to place no value at all on several significant assets of the Debtors for the purpose of its pre-emergence business plan. Those assets, however, are the likely source of substantial post-emergence revenues and value; * The current Mirant Board has further breached its fiduciary obligations to its shareholders -- and, potentially, engaged in impermissible self-protection -- by failing to ensure that a meaningful analysis of potentially highly valuable claims and causes of action against Mirant Corp.'s former parent, The Southern Company, is conducted. In this regard, the Board has allowed the Debtors' management and reorganization professionals to exclude the Equity Committee -- the statutory representative of all of Mirant Corp.'s interest holders -- from the investigative process by, inter alia, inexplicably delaying for months sharing an interim analysis of those claims with representatives of the Equity Committee; * Mirant Corp.'s current Board also has flouted the Court's express that directed that the Equity Committee be informed about, and permitted to participate in, certain management- related issues; * The Board failed to ensure that the Court's Order relating to the trading in the Debtors' securities was properly policed and enforced; * The Board permitted the crucial job of the Debtors' Chief Restructuring Officer to become a revolving door position, with no fewer than three individuals holding that role since the filing of these cases. In addition, the Board permitted the Debtors' estates to become potentially liable for a $15,000,000 fee from one of its professionals for services of questionable value; * The Board turned a blind eye while its management and professionals failed to take even minimal steps to reduce the Debtors' cost structure, which is unnecessarily high when bench-marked against industry norms; * The Board inexplicably failed to explore value-creating options for its MAEM unit, including the potential of a joint venture with a strategic partner possessing a strong balance sheet so as to generate profits from the Debtors' trading activities; * The Board has further breached its fiduciary duties by failing to ensure that the management team and outside professionals it is responsible for overseeing provide the Equity Committee, through its financial professionals and industry experts, with key operational data, assumptions, and projections, so as to permit the Equity Committee to understand and, where appropriate, critique the Debtors' business plan; and * Mirant Corp.'s current Board has failed to ensure that its management and professional advisors meaningfully involved the Equity Committee in discussions regarding the terms of a potential plan or plans of reorganization for the Debtors. Mr. Taylor explains that the motivating factors behind the breaches by current Board members of their fiduciary obligations to the shareholders are not hard to discern. The Board members -- with an apparent eye toward entrenching their positions with the Debtors -- have an obvious incentive to curry favor with the Debtors' creditors, given the expectation that any plan will result in the conversion of substantial debt into equity of the reorganized Debtors. The creditors, of course, have a powerful economic interest in pressing a valuation that does not exceed the total of claims against the Debtors. If that valuation is, in the end, accepted, the creditors would receive all of the equity in the reorganized Debtors -- and hence all the very material upside -- while the shareholders would be wiped out. The Equity Committee, by contrast, believes that proper oversight and direction from the Board will result in an assessment that there is substantial value for the shareholders. The breaches of the fiduciary duty owed to Mirant Corp.'s shareholders by the Board members plainly constitute "cause" for their removal. With respect to amendments to the Bylaws and Certificate of Incorporation, two-thirds vote of the shareholders will expressly permit any of the provisions to be amended. The permitted amendments will resolve any conflicting entrenchment provisions in the Bylaws or Certification of Incorporation and replace Mirant Corp.'s entire Board. Mr. Taylor notes that even if the election of a new Board causes the reorganization proceedings to shift in a new direction, which will not be dismissive of the shareholders' rights, it will be the result of the Board finally being held accountable to its shareholders. The Equity Committee' actions in light of the Board's abdication of its duties to the shareholders in seeking to compel shareholders' meeting are a far cry from a scheme to sabotage the reorganization proceedings that would constitute "clear abuse," Mr. Taylor asserts. Proceedings Stayed Judge Lynn stays all proceedings related to the Official Committee of Equity Security Holders' request to compel the Debtors to convene a shareholders' meeting pending the conclusion of the Debtors' valuation hearing. The Valuation Hearing is scheduled to convene on April 11, 12, and 13, 2005. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. 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 Nos. 49& 56; Bankruptcy Creditors' Service, Inc., 215/945-7000) MISSION ENERGY: Moody's Upgrades Senior Secured Debt to B2 from B3 ------------------------------------------------------------------ Moody's Investors Service upgraded the rating of Mission Energy Holding Company (MEHC: senior secured to B2 from B3) and affirmed the ratings of its subsidiaries Edison Mission Energy (EME: B1 senior unsecured), Midwest Generation, LLC (MWG: Ba3 first lien secured debt and credit facilities), and Homer City Funding, LLC (Homer City: Ba2 senior secured). The rating outlook for EME, MWG, and Homer City is revised to stable from positive. The outlook for MEHC is also stable. The rating upgrade at MEHC reflects greater flexibility to upstream funds from MEHC's subsidiaries, following the elimination of certain ring fencing provisions that previously existed in EME's charter. These provisions placed restrictions on the amount of dividends that could be annually upstreamed to MEHC from EME, its principal subsidiary, and were a key factor in the previously wider rating notching between MEHC and EME. With the termination of this provision and changes to the financing documents at MWG, EME's largest subsidiary, the movement of cash flow between MWG, EME, and MEHC is significantly less constrained and a narrowing of the rating notching between MEHC and EME is appropriate. The upgrade also reflects EME's substantially improved liquidity position, following the sale of its international power generation portfolio. The rating affirmation for EME, MWG, and Homer City considers EME's improved liquidity profile following the successful completion of the international asset sale, but also incorporates continuing high financial leverage at EME and at MEHC. While EME has remaining cash proceeds of approximately $1.8 billion, EME's ability to apply such proceeds to debt reduction at EME and at MEHC is constrained by call provisions in the companies' respective indentures. Management currently intends to maintain high cash balances over the next several years and to use the cash on hand to repay MEHC and EME debt at their respective maturities. Given the negative arbitrage entailed in holding large amounts of cash for several years, the ratings of MEHC and EME consider the possibility that some portion of this cash could be used for other purposes than debt repayment at MEHC and EME. Approximately $1.2 billion of MEHC and EME debt matures in 2008, while an additional $600 million of EME debt matures in 2009. Until this debt is paid down, EME's and MEHC's consolidated credit metrics will continue to reflect high leverage. Moody's expects that the ratio of consolidated adjusted funds from operations to adjusted total debt will be about 8% for EME and about 7% range for MEHC over the next several years; levels that are weaker than some similar issuers in the same rating category. The rating affirmation also considers the close linkage among the ratings of MWG and Homer City and their parent companies, EME and MEHC, given the importance of these two subsidiaries to the earnings and cash flow of EME and MEHC now that virtually all of the company's international businesses have been sold. In particular, the rating of MWG is fairly tightly linked to the rating of EME given MWG's reliance on cash flows coming from the intercompany note between MWG and EME. The stable rating outlook for MEHC, EME, MWG, and Homer City incorporates expectations for relatively predictable cash flow over the next few years from the company's predominantly base load coal-fired generating fleet located in the Midwest and in PJM. The stable outlook is buttressed by the significant amount of liquidity that exists at EME, which to some degree balances the high degree of leverage at EME and at MEHC. The ratings could be upgraded if: * EME completes the final phase of its restructuring program by repaying the holding company debt at MEHC and EME; * merchant coal prices in the Midwest and in PJM remain at healthy levels; and * EME continues to execute on a domestically focused strategy centered around its coal assets and its contracted natural gas portfolio in California. The ratings could be downgraded if: * EME does not follow through on its plans to repay holding company debt at EME and MEHC; * operating problems at Homer City or at MWG were to significantly impact capacity factors and operating costs; or * EME substantially depletes the amount of cash on its balance sheet through growth strategies that call for sizeable capital investments. Ratings upgraded with a stable outlook: * Mission Energy Holding Company: senior secured, upgraded to B2 from B3 Ratings affirmed and issuers for which the rating outlook is revised to stable from positive: * Edison Mission Energy: senior unsecured debt and Senior Implied rating B1; shelf registration for junior subordinated debt (P)B3 * Midwest Generation, LLC: senior secured credit facilities Ba3; second-priority notes B1 * Midwest Generation, LLC: pass-through certificates, guaranteed by Edison Mission Energy, B1 * Homer City Funding, LLC: senior secured bonds Ba2 Headquartered in Irvine, California, Edison Mission Energy is a wholly-owned subsidiary of Mission Energy Holding Company, which in turn is a wholly-owned subsidiary of Edison International. Midwest Generation, LLC and Homer City Funding, LLC are wholly- owned subsidiaries of Edison Mission Energy. NANOMAT INC: Wants to Hire Calaiaro Corbett as Bankruptcy Counsel ----------------------------------------------------------------- Nanomat, Inc., asks the U.S. Bankruptcy Court for the Western District of Pennsylvania for permission to employ Calaiaro, Corbett & Brungo, P.C., as its general bankruptcy counsel. Calaiaro Corbett is expected to: a) attend and represent the Debtor in the first meeting of creditors, and represent the Debtor in relation to acceptance or rejection of executory contracts; b) advise the Debtor with regard to its rights and obligations as a debtor-in-possession during its reorganization under chapter 11, and provide advice regarding possible preference actions; c) represent the Debtor in relation to any motions to convert or dismiss its chapter 11 case, and in relation to any motions for relief from stay filed by creditors; d) assist the Debtor in preparing a plan of reorganization and disclosure statement, and in preparing any objections to claims to be filed in the Debtor's chapter 11 case; and e) provide all other legal services that are appropriate and necessary in the Debtor's chapter 11 case. Donald R. Calaiaro, Esq., a Member at Calaiaro Corbett, is the lead attorney for the Debtor. Mr. Calaiaro discloses that the Firm received a $20,000 retainer. Mr. Calaiaro charges $250 per hour for his services. Other professionals performing services to the Debtor are Francis E. Corbett, Esq., charging $200 per hour, and J. Craig Brungo, Esq., charging $185 per hour. Paralegals who will perform services to the Debtor will charge at $55 per hour. Calaiaro Corbett assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in North Huntingdon, Pennsylvania, Nanomat, Inc. -- http://www.nanomat.com/-- is a leading manufacturer of nanomaterials, powders, and technologies. Nanomat filed for chapter 11 protection on March 18, 2005 (Bankr. W.D. Pa. Case No. 05-23245), estimating assets and debts of $10 million to $50 million. NDCHEALTH CORP: 10-Q Filing Prompts S&P to Upgrade Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services removed its ratings on Atlanta, Georgia-based NDCHealth Corporation from CreditWatch, raised its corporate credit and senior secured ratings to 'B' from 'CCC', and raised its subordinated debt rating to 'CCC+' from 'CC'. The outlook is stable. "The rating actions follow the filing of its delayed 10-Q for the period ending Nov. 26, 2004, by the March 21 deadline, thereby eliminating a potential event of default under its bond indenture," said Standard & Poor's credit analyst Lucy Patricola. NDC delayed the filing of its second quarter 10-Q because of improper accounting for returns of packaged software sold through the VAR channel, timing of revenue recognition for certain contracts, and miscellaneous adjustments for accruals. In conjunction with the its second quarter 10-Q, the company restated the first quarter of fiscal 2005, and fiscal years 2002, 2003 and 2004. The restatements, although somewhat significant for net income, did not affect cash flow or cash-flow prospects. The ratings on NDCHealth Corp. reflect pricing and cost pressures in its core product offerings and thin cash flow, somewhat offset by the company's good pharmacy market position and recurring revenue streams. NDCHealth provides transaction-processing products to the health care industry via its proprietary network and its point-of-service systems, and its information management services. Its primary market segment is prescription claims processing, adjudication, and payment systems, as well as database information on prescription drug sales and pharmacy operations. Total lease-adjusted debt was about $345 million as of November 2004. NEW WORLD: District Court Puts Limits on Committee's Investigation ------------------------------------------------------------------ The Honorable John E. Jones, III, of the U.S. District Court for the Middle District of Pennsylvania narrowed and remanded a bankruptcy court order giving New World Pasta Company's Official Committee of Unsecured Creditors authority to investigate prepetition transactions with a majority shareholder. The Committee, dominated by bondholders owed more than $150 million, thinks some of those prepetition transactions smack of self- dealing and some secured loans should be recharacterized as equity contributions, according to a report by John Beauge appearing in The Patriot-News. Mr. Beauge reports that Judge Jones denied the part of the appeal dealing with a pre-bankruptcy consensual arrangement with senior lenders. The bondholders, in effect, wanted the court to exclude from a negotiated agreement a term that could place at risk the considerable sum of money a lender has advanced to New World, the judge wrote. Headquartered in Harrisburg, Pennsylvania, New World Pasta Company -- http://www.nwpasta.com/-- is a pasta manufacturer in the United States. The Company, along with its debtor-affiliates, filed for chapter 11 protection (Bankr. M.D. Penn. Case No. 04-02817) on May 10, 2004. Eric L. Brossman, Esq., and Robert Bein, Esq., at Saul Ewing LLP, in Harrisburg, serve as the Debtors' local counsel. Bonnie Steingart, Esq., and Vivek Melwani, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, represent the Creditors' Committee. In its latest Form 10-Q for the period ended June 29, 2002, New World Pasta reported $445,579,000 in total assets and $451,816,000 in total liabilities. NOBLE DREW: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Noble Drew Ali Plaza Housing Corp. 230, 240, 250 Lott Avenue 23-25, 37 New Lots Avenue Brooklyn, New York 11233 Bankruptcy Case No.: 05-11915 Type of Business: Housing Project Chapter 11 Petition Date: March 25, 2005 Court: Southern District of New York (Manhattan) Judge: Cornelius Blackshear Debtor's Counsel: Gerard R. Luckman, Esq. Silverman Perlstein & Acampora, LLP 100 Jericho Quadrangle, Suite 300 Jericho, NY 11753 Tel: 516-479-6300 Fax: 516-479-6301 Total Assets: $43,500,000 Total Debts: $18,639,981 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ New Lots Plaza LLC $4,367,053 Eshel Management LLC 1950 Coney Island Ave. Brooklyn, NY 11218 NYC Dept. of Finance $4,021,464 P.O. Box 3121 New York, NY 10008 NYC Water Board $799,205 P.O. Box 410 Church Street Station New York, NY 10008 William L. Chisolm HDFC $796,354 319 Rockaway Ave. Brooklyn, NY 11233 DEP $793,256 [address not provided] Keyspan Energy $427,352 220-10 96th Ave. Queens Village, NY 11429 Building Service 32 B- $425,377 Pension, Health & Annuity Funds c/o Raab Stum & Goldman, LLP 440 Park Avenue S. New York, NY 10016 OHB Security Corp. $271,682 319 Rockaway Ave. Brooklyn, NY 11233 Pension 32B-J $216,466 Force One International Security $139,053 Keyspan Energy $78,000 MSC Restorations $60,405 S&G Building Repairs/Stanley Smith $53,969 NYC Dept. of Health $40,252 Henry Trakman $33,170 Guardsman Elevator $25,419 Guardsman Elevator $25,000 SCL Construction Corp. $16,025 Amerada Hess Corporation $15,248 Scienctor & Boiler Corp. $4,010 OMI TRUST: Likely Default Prompts S&P's D Rating on Class M-2 ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class M-2 certificates issued by OMI Trust 1999-E to 'D' from 'CC'. The lowered rating reflects the unlikelihood that investors will receive timely interest and the ultimate repayment of their original principal investment. OMI Trust 1999-E reported an outstanding liquidation loss interest shortfall for its class M-2 certificates on the February 2005 payment date. Standard & Poor's believes that interest shortfalls for this deal will continue to be prevalent in the future, given the adverse performance trends displayed by the underlying pool of manufactured housing retail installment contracts originated by Oakwood Acceptance Corp., and the location of subordinate class write-down interest at the bottom of the transaction's payment priorities (after distributions of senior principal). Standard & Poor's will continue to monitor the outstanding ratings associated with this transaction in anticipation of future defaults. OPBIZ LLC: Moody's Places B3 Ratings on $506M Sr. Sec. Term Loans ----------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to OpBiz, LLC's $496 million senior secured term loan A and $10 million senior secured term loan B. Both term loans mature in 2010. Moody's also assigned a B3 senior implied rating, Caa2 long-term issuer rating, and SGL-3 speculative grade liquidity rating. Proceeds from the bank facility were used to fund OpBiz's acquisition of the Aladdin Resort and Casino (Las Vegas, Nevada) in September 2004. The ratings outlook is stable. OpBiz's B3 rating considers that the company is entirely dependent on the cash flow generated by a relatively small, single gaming facility that emerged from Chapter 11 bankruptcy in September 2004, and that the current owners have limited casino operating experience. The ratings also incorporate the expectation that the transformation of the Aladdin into a Planet Hollywood branded casino will increase foot traffic, and ultimately improve financial results. OpBiz is currently conducting a $100 million renovation project which will convert the Aladdin into the Planet Hollywood Resort and Casino. The renovation includes both interior and exterior alterations designed to make the casino more accessible and attractive. The casino will continue to operate as the Aladdin until the renovation and re-branding is finished sometime in early to mid 2006. Positive ratings consideration is given to OpBiz's affiliation with the Planet Hollywood brand, the favorable outlook for the Las Vegas area gaming market, and the recent improvement in Aladdin's financial results, which can be attributed to favorable performance of the overall Las Vegas gaming market and an improved cost structure. The ratings also acknowledge that the interest rate determination mechanism related to the company's term loan A is designed to work in such a way that EBITDA coverage of interest remains at 1.2 times during the renovation. Other positive credit factors include significant restrictions included in the bank facility with respect to paying dividends, incurring additional debt, and making future capital expenditures. The stable outlook anticipates that the renovation and re-branding project will progress according to current plans, and that post- renovation, the casino will generate a sufficient return to meet debt service requirements. The outlook also expects that the Las Vegas area gaming market will continue to perform well and that nothing will occur that will materially harm the Planet Hollywood brand name. The stable outlook acknowledges that the casino property will suffer some decline in financial performance as a result of construction disruption. Ratings upside is limited at this time given the prospective nature of this rating. A slower than expected ramp-up could result in a ratings downgrade. The SGL-3 speculative grade liquidity rating considers that cash generated from operations, combined with the capital available that was initially invested, should be adequate to meet capital expenditure, renovation and debt service obligations for the next twelve months. Cash requirements for the next twelve month period are expected to include up to $100 million in capital expenditures related to the renovation project, approximately $4 million for maintenance capital expenditures, and about $27 million in interest payments. The company will likely experience a reduction in operating cash flow during the planned renovations; however, the credit agreement was designed to address these anticipated reductions. In addition to the interest rate mechanism that is in place, the covenant requiring OpBiz to achieve specified levels of EBITDA during the first two years of the credit agreement is significantly below Aladdin's current EBITDA level. There will be no revolver but the company is permitted certain cash reserves prior to mandatory principal repayments. Cost overruns have to be financed by the owners. The SGL-3 also acknowledges that most all of the company's assets will be fully encumbered. These new ratings were assigned to OpBiz, LLC: * Senior implied -- B3; * Long-term issuer -- Caa2 * $496 million senior secured term A loan due 2010 -- B3; * $10 million senior secured term loan B due 2010- B3; * Speculative grade liquidity rating - SGL-3; and * Stable ratings outlook. OpBiz, LLC, a subsidiary of BH/RE, LLC, acquired the Aladdin Resort and Casino (located in Las Vegas, Nevada) out of Chapter 11 bankruptcy in September 2004. OpBiz, along with its parent company, BH/RE, LLC and subsidiaries, were formed to acquire, operate and renovate the Aladdin. OpBiz has entered into an agreement with Planet Hollywood to license Planet Hollywood's trademarks. The renovation project will transform the Aladdin into the Planet Hollywood Resort and Casino. OpBiz has also entered into an agreement with Sheraton pursuant to which Sheraton will provide hotel management, marketing and reservation services for the hotel that will comprise a portion of Planet Hollywood Resort and Casino. OWENS CORNING: CSFB Appeals False X-Ray Readings Issue ------------------------------------------------------ Credit Suisse First Boston, as agent for Owens Corning's Bank lenders, is taking an appeal to the U.S. District Court from Judge Fitzgerald's Order denying its request for authority to commence an adversary case against certain B-readers who falsely reported X-ray readings as positive for asbestos-related disease in prepetition personal injury claims brought against the Debtors. CSFB puts three questions to the United States District Court for the District of Delaware for review: 1. Did the Bankruptcy Court err as a matter of law when, notwithstanding CSFB's offer to bear the costs of prosecuting the adversary proceeding and notwithstanding the existence of colorable claims, the Court denied the Motion for the sole reason that CSFB had not provided an indemnity, or equivalent security, against counterclaims asserted against the Debtors' estates -- the merits of which the Bankruptcy Court expressly declined to assess? 2. Did the Bankruptcy Court abuse its discretion when it based its Order denying the Motion solely on a factor -- the potential for unspecified counterclaims -- that has never been relied upon or considered as germane by the United States Court of Appeals for the Third Circuit -- or any other court -- when determining whether to grant derivative standing? 3. Did the Bankruptcy Court err in denying the Motion? 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. 102; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEABODY ENERGY: Fitch Upgrades $900 Mil. Senior Notes to BB+ ------------------------------------------------------------ Fitch Ratings has raised the ratings of Peabody Energy Corporation's: -- $650 million senior notes due 2013 to 'BB+' from 'BB'; -- $250 million senior notes due 2016 to 'BB+' from 'BB'; -- $900 million senior secured revolving credit facility to 'BBB-' from 'BB+'; -- $450 million senior secured term loan ratings to 'BBB-' from 'BB+'. The Rating Outlook remains Positive. The ratings reflect Peabody's large, well diversified operations, good control of low-cost production, strong liquidity, and moderate leverage. The outlook is for coal producers to continue to benefit from a strong pricing environment over the near term. Peabody should continue to benefit from recovery in coal prices coupled with strong cost control. The high proportion of coal sold under contract and the short- to medium-term fixed pricing nature of the contracts results in strong earnings visibility over that period. The company has consistently met its guidance. Fitch expects 2004 and 2005 price re-openings to lead to higher realizations over the next 24 months. Capital expenditures are expected to increase to the $500 million level from $267 million level given Federal lease payments and new longwall equipment for mines acquired last April from RAG Coal International AG. In addition, Peabody continues to make resource acquisitions, most recently the West Roundup Powder River Basin lease at $63 million a year over the next five years and the purchase of Illinois Basin reserves and surface assets from the Lexington Coal Company for $61 million. Operating cash flows are expected to amply cover capital expenditures, modest scheduled maturities of debt ($19 million in 2005 and $24 million in 2006), and dividends of about $40 million per year. While debt remains at $1.4 billion, the company's asset base has grown, as have earnings resulting in declining leverage: * debt/EBITDA was 2.5 times in 2004, and * down from 2.9x in 2003. Our expectations are for earnings to grow with no new debt for a leverage declining to 1.9x and EBITDA/interest expense of over 7.5x. Liquidity is quite strong: at Dec. 31, 2004, cash was $390 million, and $554 million of the $900 million secured revolver was available after utilization for letters of credit. In 2004, Peabody has been able to make greater use (roughly $200 million) of corporate guarantees to replace surety bonds to support reclamation obligations. Peabody has significant employee-related liabilities, some of which related to past operations, and significant reclamation obligations. At Dec. 31, 2004, Peabody's accrued postretirement benefit obligation was $1 billion, its liability for asset retirement obligations was $396 million, its workers compensation obligation was $269 million, and its minimum pension liability was $121 million. Operating expenses to serve these obligations run between $150 million and $180 million, and the obligations and expenses are well defined and stable in nature. Peabody is the largest U.S. coal producer, accounting for about 20% of domestic coal sales and fueling 10% of domestic electricity generation. Peabody's operations are well diversified, with new activity concentrated in the Powder River Basin and the Illinois Basin where it dominates. Peabody has over nine billion tons of coal reserves. The outlook for coal prices is strong in context of the overall power demand, the energy price environment, particularly natural gas, coupled with constraints to increased production posed by transportation and geological constraints. Fitch anticipates that Peabody will continue to reduce its debt and other liabilities relative to its operations during this favorable environment. PEGASUS SATELLITE: Asks Court to Bar Creditors from Taking Action ----------------------------------------------------------------- As previously reported, the Ad Hoc Noteholders Committee asked the United States Bankruptcy Court for the District of Maine to deny Plan confirmation absent modifications to the Plan that preserves the ability of the Liquidating Trustee to investigate and prosecute any and all claims. PCC Responds The members of the Ad Hoc Committee assert that they hold a large portion of Pegasus Satellite Communication, Inc.'s six series of unsecured notes but are not otherwise identified. The Ad Hoc Committee states that the Objection is prompted by "grave concerns regarding the dissipation of Pegasus Satellite Communications, Inc. and its debtor-affiliates' assets." Pegasus Communications Corporation tells the Court that the Ad Hoc Committee's Objection insinuates that the change in the Debtors' cash position during their Chapter 11 Cases is the result of secret dealings of questionable propriety, and is otherwise inexplicable. Jay S. Geller, Esq., in Portland, Maine, however, contends that the Debtors' transactions and expenditures have been the subject of frequent detailed disclosure and, where required, prior Court approval. Nor is the decline in cash, although significant, surprising in light of the early disposition of the Debtors' satellite assets, which had generated 96% of their revenues, and the costs of winding up that business, which had employed 779 employees at the Petition Date, and the other significant costs of these Chapter 11 Cases, including aggregate professional fees of approximately $22 million paid through the end of February. With limited exceptions, Mr. Geller says PCC is unaware of any concerns of the sort expressed by the Ad Hoc Committee having been raised during the nearly 10 months that the Chapter 11 Cases have been pending. PCC is unaware of similar concerns raised by the Official Committee of Unsecured Creditors, any of the Debtors' secured or unsecured creditors, or any of the numerous sophisticated professionals who have overseen the Debtors' operations in their Chapter 11 Cases. Nevertheless, the Ad Hoc Committee seeks to preserve the ability of the Liquidating Trustee to investigate and prosecute, among other claims, any claims arising from the Support Services Agreement or against non-Debtor affiliates of the Debtors and the Debtors' officers and directors arising subsequent to August 27, 2004, the effective date of the releases of the parties under the Global Settlement Agreement. While PCC strongly questions the justification for the further expense of the proposed investigation on top of approximately $22 million of professional fees already paid in the Chapter 11 Cases, PCC does not object to the proposed investigation. PCC believes, however, that the Liquidating Trustee's ability to assert claims in respect of the Support Services Agreement should be appropriately circumscribed in light of the Court's prior approval of the Support Services Agreement, the limitations agreed to by the Official Committee in the Global Settlement Agreement, and the circumstances in reliance on which PCC has continued to perform under the Support Services Agreement. Support Services Agreement Under a Support Services Agreement, Mr. Geller relates that Pegasus Communications Management Company has provided a variety of services and benefits that are critical to the Debtors' daily business operations, as well as their successful reorganization. These services are provided at PCMC's cost, with no profit component, and could not be performed by the Debtors themselves or obtained from third parties on economically viable terms. PCC believes that the ability of the Liquidating Trustee to assert claims relating to the Support Services Agreement should be no greater than the rights of the Official Committee under it, as modified by the agreement of the Official Committee under the Global Settlement Agreement, and should be subject to all defenses. Releases As inducement to PCC to enter into the Global Settlement Agreement, the Creditors Committee and certain of its members entered into the Letter Agreement with PCC, pursuant to which, the Creditors Committee and the Consenting Members agreed to support a plan of reorganization providing for certain specified releases of the Debtors' officers and directors, PCC and its non-Debtor affiliates, and PCC's and its non-Debtor affiliates' officers and directors. To the extent any Consenting Member supports the Ad Hoc Committee's Objection or objects to the releases provided in the Plan, Mr. Geller points out that the Consenting Member or the Creditors Committee would be in breach of its obligations to PCC under the Letter Agreement. PCC has previously advised counsel to the Official Committee that PCC reserves all of its rights under the Letter Agreement with respect to breach and all other breaches of the Letter Agreement. PCC asks the Court to preclude the Creditors Committee and the Consenting Members from taking any action before the Court in breach of their contractual commitments. The Committee and the Consenting Members should be estopped from asserting or supporting the Objection or otherwise objecting to the releases provided in the Plan. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) PHELPS DODGE: Moody's Ups Cumulative Pref. Rating to (P)Ba1 ----------------------------------------------------------- Moody's Investors Service upgraded Phelps Dodge Corporation's senior unsecured ratings to Baa2 from Baa3. Moody's also upgraded the prospective ratings under Phelps Dodge's $600 million shelf filing. The upgrade is based on the improvement in Phelps Dodge's capital structure and operating performance over the past three years as the company's efforts to reduce debt were accelerated by greatly improved copper and molybdenum prices over the past 18 months, and Moody's expectation that the company will be able to sustain improved debt protection measurements over the intermediate term. The rating outlook is stable. Ratings upgraded are: Phelps Dodge Corporation: * Senior unsecured notes, to Baa2 from Baa3; * Shelf registration for senior unsecured debt, to (P)Baa2 from (P)Baa3; * junior subordinated debt to (P)Baa3 from (P)Ba1; * cumulative preferreds, subordinated preferreds and jr. participating cumulative preferreds to (P)Ba1 from (P)Ba2; and * PD Capital Trust I and PD Capital Trust II guaranteed trust preferreds to (P)Baa3 from (P)Ba1. Cyprus Amax Minerals Company: * Senior unsecured notes, legally assumed by Phelps Dodge, to Baa2 from Baa3 The Baa2 rating reflects Phelps Dodge's position as the world's second largest copper producer, supplying approximately nine percent of world demand, and its good reserve position. The rating also considers Phelps Dodge's strong capital structure, as evidenced by its December 31, 2004 debt to capitalization ratio of 18%, down from 51% at December 31, 2001, and its good liquidity position. However, the rating also considers the company's still relatively high cost structure, its susceptibility to price increases in diesel, natural gas and electricity costs in particular, the capex associated with its mine development pipeline and its ongoing requirement to support reclamation and mine closing obligations. The stable outlook reflects the currently strong fundamentals in the copper market and Moody's expectation that Phelps Dodge will record solid earnings and cash flow in 2005 as it did in 2004, and that management will continue to maintain a favorable capital structure as it moves forward with its development objectives. An increase in ratings is unlikely in the next two to three years as the company has several significant development projects ahead of it, which are necessary to bring the company's total implied unit costs closer to its objective of $0.60/lb to $0.65/lb of copper. These projects entail significant capital costs and execution risks, significant permitting and regulatory issues in the case of Safford in Arizona and Tenke in the Congo, and political risk in the case of Tenke. The ratings could be lowered or outlook changed to negative if the maintenance of a debt to capitalization ratio of less than 35% is considered to be unsustainable through a metals price cycle. This is most likely to occur if there is a steep and prolonged decline in copper prices or if the company is unable to satisfactorily control its cost structure as it moves forward with its mine development projects or if it undertakes debt financed acquisitions. Phelps Dodge produced approximately 2.2 billion pounds of copper for its own account in 2004 and is a leading producer of molybdenum. In 2004, Phelps Dodge's mining division accounted for 77% of total revenues. Through PD Industries, the company is also involved in the manufacture of specialty chemicals, principally carbon black, and wire and cable. Headquartered in Phoenix, Arizona, Phelps Dodge had revenues of $7.1 billion in 2004. PHILLIPS-VAN: Moody's Reviews $400M Debt Ratings & May Upgrade -------------------------------------------------------------- Moody's Investors Service placed Phillips-Van Heusen Corporation's ratings on review for possible upgrade recognizing the company's improved operations and financial performance. The company's FY 2004 results showed meaningful improvements in margins, earnings and cash flow. The review will focus on the sustainability of the positive trend and the potential impact of the ongoing realignment of its business, the profitability of its individual brands, and its future ability to delever and to strengthen its debt servicing metrics. The ratings placed under review for possible upgrade are: * the $100 million issue of 7-3/4% senior secured debentures due 2023 of B1; * the $150 million issue of 8-1/8% senior unsecured notes due 2013 of B2; * the $150 million issue of 7-1/4% senior unsecured notes due 2011 of B2; * the senior implied rating of B1; and * the issuer rating of B2. PVH has made progress in diversifying its revenue sources by increasing licensing transactions, and it continues to rationalize its retail operations, including the opening of Calvin Klein stores, and introduce selective new brands. The results have included greater licensing royalties, increased overall revenues, an increase in same store sales, successful brand introductions, and improved margins, earnings, and leverage. The company has a dominant market in dress shirts, a large share of the sports shirt market, and diversified product sourcing and distribution structures. For the fiscal year 2004 (ended January 31, 2005) PVH reported a 3% increase in total revenues to $1.6 billion. The company's gross margin improved to 45% from 38% in 2003, its operating margin moved up to 7.9% from 3.5%, and EBITDA (unadjusted) rose to $162 million from $88 million. The growth in licensing revenues to $181 million, or 11% of total revenues, has assisted the margin improvement. Even though adjusted debt / EBITDAR improved to 5.7 times in 2004 from 8.3 times in 2003, it remains high. Phillips-Van Heusen Corporation is one of the world's largest apparel companies. It owns and markets the Calvin Klein brand worldwide. It is the world's largest shirt company and markets a variety of goods under its own brands: 1. Van Heusen, 2. Calvin Klein, 3. IZOD, 4. Arrow, 5. Bass and G.H. Bass & Co., 6. Geoffrey Beene, 7. Kenneth Cole New York, 8. Reaction Kenneth Cole, 9. BCBG Max Azria, 10. BCBG Attitude, 11. Sean John, 12. MICHAEL by Michael Kors, 13. Chaps and 14. Donald J. Trump Signature PITTSBURGH CITY: Moody's Lifts $825M Debt Rating From Ba1 to Baa3 ----------------------------------------------------------------- Moody's Investors Service has assigned a Baa3 and stable outlook to the City of Pittsburgh's $197.57 million in General Obligation Bonds, Series A and B of 2005. At this time, Moody's has upgraded the rating to Baa3/stable outlook from Ba1/Watchlist for possible upgrade on $825 million in general obligation debt, including this issue. The current issue is secured by an unlimited tax pledge; Series A will refund portions of the City's Series A of 1995 and Series A, B, C of 1997 bonds and Series B will refund portions of the City's Series B of 1195 and Series D of 1998 bonds for total net present value savings of slightly over 3% of refunded principal with no extension of maturities. The upgrade reflects the City's successful execution and expected prompt repayment of a $20 million draw on a line of credit from three area banks, implementation of the Financial Recovery Plan, and moderately successful collections of new revenue sources. The Baa3 rating also reflects the City's high debt burden, diverse economy anchored by a large institutional presence, and below average socioeconomic profile. The stable outlook reflects Moody's expectation that the City has solved its severe financial problems, but that some challenges still lie ahead in the current fiscal year in terms of collecting new revenues. Recovery Plan Implemented; Collections Of New Revenues Moderate After significant delays, the Intergovernmental Cooperation Authority, the City's state-appointed oversight board, approved the City's financial recovery plan late in 2004. The State legislature then enacted legislation allowing the City to implement two new revenue enhancements. The City has replaced the annual $10 Occupational Privilege Tax with a $52 Emergency and Municipal Services tax, paid by anyone employed in the City. The City has also implemented a new Payroll Preparation Tax, paid by for-profit local corporations many of whom were exempt from the former Business Privilege Tax, and will levy a new Facility Usage Fee on visiting sports players. Conversely, the City will also phase out its Business Privilege Tax and has eliminated its Mercantile Tax. The projected net gain from the legislative action is approximately $17.3 million in fiscal 2005. Additionally, the City increased the Deed Transfer Tax by 0.5%, has received a $3.5 million one-time grant from the State for homeland security, has eliminated its capital spending for the year, and will no longer remit $4 million in Regional Asset District taxes to the Pittsburgh School District (rated A2). Taken together, this represents approximately $32 million in new revenues or forgone expenditures for fiscal 2005. The recovery plan also includes approximately $39 million in additional expenditure cuts, including a two-year wage freeze, employee contributions for health insurance, and reductions in overtime pay (including the elimination of $1.3 million per month in recent overtime pay to firefighters due to a new approved contract). The City's five-year plan anticipates $22 million growth in General Fund balance by the end of fiscal 2009. Year-to-date collections of the two new revenue enhancements through the first half of March have been somewhat mixed. Collections of the Emergency and Municipal Services tax have been strong, with 78% collected in the first 2 � months of the year, well ahead of projections. Officials currently anticipate collections of this tax to be at least $1 million above budget by the end of the year. Collections of the Payroll Preparation Tax have not been as strong due to payroll system implementation issues because it is a new tax. The tax is collected quarterly and collections for the first quarter have been at 20% of the total annual budgeted figure, which translates to an 80% collection rate. Officials explain the slower collection rate on the newness of the tax and expect collections to improve over time as more employers get their payroll systems in place to estimate and remit the tax to the City. Officials project the collection rate to be over 90% by the end of the year. Given that the City budgeted for a 100% collection rate, a lack of improvement from the 80% collection rate will leave an approximately $8 million shortfall in revenues. Moody's believes that even with no improvement in collections, this gap would not significantly weaken the City's financial operations. Additionally, the City reports that current and prior real estate tax collections are ahead of budget and expect to be at least a $2.5 million ahead of budget by the end of the year. Diversified Economic Base Moody's believes the strong institutional employment within Pittsburgh's economy, combined with new business development, has positioned the City to better address a number of long-term growth issues in its $14.5 billion base. With substantial health care and educational sectors, large financial services activity and growth in high-tech industries, the City has been able to maintain an unemployment rate (3.7% in December, 2004) below state (5.1%) and national (5.1%) levels. A countywide property revaluation contributed to a 25% increase in the City's full valuation in 2001, resulting in almost $3 billion in additional value. An additional revaluation in 2002 further increased the full value by 6% to $15 billion, but that came down in fiscal 2003 to the current $14.5 billion due to tax appeals. The City also continued to face population declines in the 1990s, albeit at a slower rate than during the 1980s (9.5% vs. 12.8%). The City continues to have a weak demographic profile, with wealth and income levels falling below state medians and a below average full value per capita of $42,224. High Debt Burden Moody's expects the City's high debt burden (9.9% of full valuation) will continue to present considerable challenges, although Moody's views favorably the City's restriction to $25 million in annual capital debt issuance. The City has not issued new, non-refunding debt for several years due to the fiscal crisis. A sizable level of the total outstanding debt is attributable to the issuance of pension bonds in 1998 to reduce a significant $511 million unfunded pension liability. Also, the City's aggressive economic development efforts have been partly funded through the issuance of off-balance sheet debt by component units like the Urban Redevelopment Authority as well as the joint venture with the Sports and Exhibition Authority of Pittsburgh and Allegheny County. The City's debt amortization is just above average, with 58.9% retired within ten years. What could change the rating - UP: * Improved collections of new revenue sources * Rebuilding of General Fund balance to adequate levels What could change the rating - DOWN: * Sustained weak revenues * Further deterioration of narrow reserves Key Statistics: * 2000 Population: 334,563 * 2003 Full Valuation: $14.5 Billion * Full Value Per Capita: $43,224 * 1999 Per Capita Income as % of State: 90.1% * 1999 Median Family Income as % of State: 78.9% * Direct Debt Burden: 5.8% * Overall Debt Burden: 9.9% * Payout of Principal (10 years): 58.9% * Post-Sale Parity Debt Outstanding: $831.8 Million * FY03 General Fund Balance: $35.2 Million (9.5% of General Fund Revenues) POGO PRODUCING: Prices $300 Million Senior Subordinated Notes ------------------------------------------------------------- Pogo Producing Company (NYSE: PPP) priced a private offering of $300 million of 6-5/8% Senior Subordinated Notes due 2015. Pogo intends to use net proceeds from the sale of the notes to reduce outstanding senior indebtedness under its revolving credit facility. Pogo expects to close the sale of the notes on March 29, 2005, subject to satisfaction of customary closing conditions. The notes have not been registered under the Securities Act of 1933, as amended or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. This announcement shall not constitute an offer to sell or the solicitation of an offer to buy the notes nor shall there be any sale of the notes 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 Headquartered in Houston, Texas, Pogo Producing Company explores for, develops and produces oil and natural gas. Pogo owns interests in 90 federal and state Gulf of Mexico lease blocks offshore from Louisiana and Texas (94 lease blocks if, and when, the lease blocks on which Pogo was the high bidder at the March 16th OCS lease sale are awarded to Pogo). Pogo also owns approximately 705,000 gross leasehold acres in major oil and gas provinces in the United States, approximately 588,000 gross acres in the Gulf of Thailand, approximately 778,000 gross acres in Hungary and 1,044,000 acres in New Zealand. Pogo common stock is listed on the New York Stock Exchange and the Pacific Exchange under the symbol "PPP". * * * As reported in the Troubled Company Reporter on March 24, 2005, Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on Pogo Producing Co. At the same time, Standard & Poor's assigned its 'BB' rating to the company's proposed $300 million subordinated notes due 2015. Proceeds from the note offering will be used to repay existing bank borrowings under the company's $750 million credit facility. Houston, Texas-based Pogo had $755 million of debt as of Dec. 31, 2004. "The stable outlook on Pogo reflects our expectations that Pogo will prudently manage its more aggressive financial policies and 2005 budget initiatives while maintaining its sound financial profile and adequate liquidity for the current ratings," said Standard & Poor's credit analyst Brian Janiak. PROFESSIONAL LIFE: A.M. Best Says Financial Strength is Marginal ---------------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating of Professional Life & Casualty Company (Chicago, IL) to C++ (Marginal) from B- (Fair) earlier this month. The rating outlook is negative. This rating action reflects Professional Life's increased exposure to high-risk investments, the lack of surrender protection on the company's products and its low level of risk-adjusted capitalization. Below investment grade bonds comprised almost 30% of admitted bonds, while equities comprised over 20% of invested assets. Together, these high-risk assets comprised over 260% of capital and surplus. In addition, Professional Life's deteriorating risk-based capitalization directly reflects the increased investment in high-risk assets. Professional Life's annuity products have no surrender charges, and are susceptible to discretionary withdrawal at any time. Despite the lack of surrender protection, the company has experienced strong retention on its fixed annuity line, reflecting the high crediting rates on their products. However, the increased investment risk and increasing duration mismatch between assets and liabilities presents liquidity concerns for Professional Life. Despite the investment risks, both operating earnings and capital and surplus have grown considerably over the past five years, aided by strong retention and favorable investment returns. A.M. Best believes that the future success of Professional Life will be dependent upon its ability to mitigate the risk levels on its investment portfolio and preserve capital and surplus in varying interest rate environments, along with managing liquidity risk should it experience a prolonged period of high surrenders on its fixed annuities. For Best's Ratings, an overview of the rating process and rating methodologies, visit Best's Rating Center at http://www.ambest.com/ratings A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. QUAKER FABRIC: Banks Agree to Waive Defaults Through July 15 ------------------------------------------------------------ On March 11, 2005, Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, and Quaker Fabric Mexico, S.A. de C.V., as Borrowers, and Quaker Fabric Corporation, the Borrowers' Parent Company Guarantor, entered into a Forbearance and Amendment to the Second Amended and Restated Credit Agreement dated as of Feb. 14, 2002 with Fleet National Bank. Under the Bank Forbearance Agreement, the Borrowers and Quaker Fabric Corporation acknowledged that in the absence of a waiver from the Bank, they would be in breach of both the debt service coverage ratio covenant and the profitable operations covenant in the Credit Agreement for the last quarter of 2004 and possibly in violation of those covenants and the leverage ratio and senior debt ratio covenants for each of the first and second quarters of 2005 and that these breaches would constitute Events of Default, as defined in the Credit Agreement. In the Bank Forbearance Agreement, the Bank agreed to waive the Specified Bank Defaults through the period ending July 15, 2005, subject to certain conditions including the Bank's receipt of fully executed copies of a similar waiver from Pruco Life Insurance Company and The Prudential Insurance Company of America, holding $45.0 million of Senior Notes due October 2005 and 2007, with respect to the fixed charge coverage ratio, senior debt ratio and the total debt ratio set forth in the Note Agreements. The Bank Forbearance Agreement also provides for, among other things: (i) an increase in the interest rate and fees payable under the Credit Agreement; (ii) a reduction in the permitted aggregate amount of capitalized leases and purchase money debt to $5,000,000; (iii) the inclusion of a minimum EBITDA covenant; (iv) a change in the definition of EBIT; (v) monthly financial reporting to the Bank; (vi) the grant, not later than March 31, 2005, of a perfected, first priority security interest (subject to certain exceptions, including pari passu liens to be granted to the holders of the Term Notes) in all personal property assets of the Borrowers and the Company then owned or thereafter acquired and the contemporaneous execution of an intercreditor agreement, in form and substance satisfactory to the Bank, among the Bank, the holders of the Term Notes, the Borrowers and the Company, which is a condition to any further borrowing under the Credit Agreement; and (vii) the reduction of the maximum amount of loans and letters of credit the Bank has agreed to make under the Credit Agreement to $15,000. In the Bank Forbearance Agreement, the Borrowers and the Company agreed that they will repay all amounts outstanding, and cash collateralize all letters of credit issued, under the Credit Agreement on July 16, 2005, and that at such time the Bank will have all of its rights and remedies under and in respect of the Credit Agreement and applicable law, including those arising by virtue of the occurrence of the Specified Bank Defaults. The parties previously had entered into waivers on December 20, 2004, February 28, 2005, and March 4, 2005, with respect to the debt service coverage ratio covenant and the profitable operations covenant in the Credit Agreement and including a reduction in the Bank's Commitment to $20,000,000. On March 11, 2005, QFR and QFC, as guarantor, entered into a Forbearance to Note Agreements with respect to the Note Agreements with Prudential. Pursuant to the terms of the Insurance Company Forbearance Agreement, QFR and QFC acknowledged that in the absence of a waiver from Prudential, QFR and the Company would be in breach of the fixed charge coverage ratio set forth in the Note Agreements for the last quarter of 2004 and possibly for each of the first and second quarters of 2005 and possibly in breach of the senior debt ratio and total debt ratio set forth in the Note Agreements for each of the first and second quarters of 2005 and that this breach would constitute an Event of Default, as defined in the Note Agreements. In the Insurance Company Forbearance Agreement, the Insurance Company agreed to waive the Specified Insurance Company Defaults through the period ending July 15, 2005, subject to certain conditions including, but not limited to, the Insurance Company's receipt of fully executed copies of a similar waiver from the Bank with respect to the debt service coverage ratio covenant, the profitable operations covenant, the senior debt ratio covenant and the leverage ratio covenant set forth in the Credit Agreement. The Insurance Company Forbearance Agreement also provides, among other things: (i) that the Company will not permit any Priority Debt (as defined in the Note Agreements) to be outstanding at anytime other than as permitted under the Note Agreements; (ii) the Company will not, and will not permit any subsidiary to, directly or indirectly create, incur, assume or permit to exist any Lien (as defined in the Note Agreements) for securing Recourse Obligations (as defined in the Note Agreements); (iii) for the inclusion of a consolidated minimum EBITDA covenant; (iv) for monthly financial reporting to the Insurance Company; (v) for the grant, not later than March 31, 2005, of a perfected, first priority security interest (subject to certain exceptions, including pari passu liens to be granted to the Bank) in all personal property assets of the Borrowers and the Company then owned or thereafter acquired and the contemporaneous execution of an intercreditor agreement, in form and substance satisfactory to the Insurance Company, among the Bank, the Insurance Company, Borrowers and the Company; and (vi) that on or prior to July 10, 2005, the Company shall enter into a refinancing credit facility and using the proceeds thereof shall repay in full all of the Obligations (as defined in the Insurance Company Forbearance Agreement). Pursuant to the Insurance Company Forbearance Agreement, on July 15, 2005, the Company has agreed to immediately repay to the Insurance Company all of the outstanding Obligations, and the Company has acknowledged that the Insurance Company shall be free in its sole and absolute discretion to proceed to enforce any or all of its rights and remedies under or in respect of the Note Agreements and applicable law, including without limitation, those of termination, acceleration, enforcement and other rights and remedies arising by virtue of the maturity of the Obligations and of the occurrence of the Specified Defaults. The parties previously had entered into waivers on December 22, 2004, February 28, 2005, and March 4, 2005, with respect to the fixed charge coverage covenant in the Note Agreements. As of March 14, 2005, QFR owed $40,000,000 principal plus accrued interest under the Note Agreements. The EBITDA covenant with Fleet and Prudential requires that Quaker Fabric not permit EBITDA, calculated as of the last day of each fiscal month, to be less than: For the Month Ended Minimum EBITDA ------------------- -------------- January 2005 ($1,000,000) February 2005 ($250,000) March 2005 $500,000 April 2005 $1,000,000 May 2005 $1,000,000 June 2005 $1,000,000 The Company says it is in discussions with a commercial bank regarding a proposed new credit facility to replace, and repay borrowings under, the Note Agreements and the Credit Agreement. Prepayment of the Note Agreements may result in the Company incurring prepayment penalties in an amount which may be as much as $2,300,000. Quaker Fabric expects a new facility to include terms which may be unfavorable to the Company including, but not limited to, the grant of security interests to the Prospective Lender to secure the payment and performance of QFR's and the Company's obligations under the proposed credit facility and restrictions on QFR's and the Company's capital expenditures going forward. Quaker Fabric Corporation (NASDAQ: QFAB) is a leading manufacturer of woven upholstery fabrics for furniture markets in the United States and abroad, and the largest producer of Jacquard upholstery fabric in the world. For the year ending Jan. 1, 2005, net sales totaled $289.1 million, an 11% decline from 2003 net sales. The Company reported a $2.0 million net loss 2004, compared to $7.9 million of net income in 2003. The Company's balance sheet shows $266 million of assets at Jan. 1, 2005, and $100 million of debt obligations. RANCHO LA VALENCIA: Voluntary Chapter 11 Case Summary ----------------------------------------------------- Debtor: Rancho La Valencia, Inc. 8235 Douglas Avenue, Suite 805 Dallas, Texas 75225 Bankruptcy Case No.: 05-33267 Type of Business: Real Estate Chapter 11 Petition Date: March 25, 2005 Court: Northern District of Texas (Dallas) Judge: Barbara J. Houser Debtor's Counsel: John Paul Stanford, Esq. Quilling, Selander, Cummiskey and Lownds 2001 Bryan Street, Suite 1800 Dallas, TX 75201 Tel: 214-871-2100 Fax: 214-871-2111 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-largest creditors. RESI FINANCE: S&P Puts Low-B Ratings on Six Series 2005-A Secs. --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to RESI Finance L.P. 2005-A/RESI Finance DE Corp. 2005-A's $142.379 million real estate synthetic investment securities series 2005-A. The ratings are based on credit enhancement levels, the transaction's shifting interest structure, a legal structure designed to minimize potential losses to security holders caused by the insolvency of the issuer, and the credit rating assigned to Bank of America N.A. ('AA/A-1+'), based on its obligations pursuant to the forward delivery agreement and the credit default swap agreement. Ratings Assigned RESI Finance L.P. 2005-A/RESI Finance DE Corp. 2005-A Class Rating Amount (mil $) ----- ------ -------------- B3 A 42.713 B4 A- 14.238 B5 BBB- 28.475 B6 BB+ 12.340 B7 BB 11.390 B8 BB- 7.594 B9 B+ 9.492 B10 B 6.645 B11 B- 9.492 RESIDENTIAL FUNDING: Fitch Puts Low-B Ratings on $913,000 Certs. ---------------------------------------------------------------- Fitch rates Residential Funding Mortgage Securities I, Inc.'s -- RFMSI -- mortgage pass-through certificates series 2005-S2: -- $253,294,095 classes A-1 through A-6, A-P, A-V, R-I, and R-II certificates (senior certificates) 'AAA'; -- $3,913,400 class M-1 'AA'; -- $1,565,100 class M-2 'A' -- $782,600 class M-3 'BBB'. -- $521,700 class B-1 'BB'; -- $391,300 class B-2 'B'. The $391,347 class B-3 is not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 2.90% subordination provided by: * the 1.50% class M-1, * the 0.60% class M-2, * the 0.30% class M-3, * the 0.20% privately offered class B-1, * the 0.15% privately offered class B-2 and * the 0.15% privately offered class B-3. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s -- RFC -- master servicing capabilities (rated 'RMS1' by Fitch). As of the cut-off date, March 1, 2005, the mortgage pool consists of 607 conventional, fully amortizing, fixed-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of approximately $260,859,542. The mortgage pool has a weighted average original loan-to-value -- OLTV -- ratio of 68.15%. The weighted-average FICO score of the loans in the pool is 742, and approximately 68.77% and 4.94% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Loans originated under a reduced loan documentation program account for approximately 21.07% of the pool, equity refinance loans account for 22.49%, and second homes account for 2.50%. The average loan balance of the loans in the pool is approximately $429,752. The three states that represent the largest portion of the loans in the pool are: * California (32.22%), * Virginia (9.82%), and * Maryland (5.41%). None of the mortgage loans were subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, none of the mortgage loans in the pool are mortgage loans that are referred to as 'high-cost' or 'covered' loans or any other similar designation under applicable state or local law in effect at the time of origination of such loan if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees. 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 purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers except in the case of 32.5% of the mortgage loans, which were purchased by the depositor through its affiliate, Residential Funding, from HomeComings Financial Network, Inc., a wholly-owned subsidiary of the master servicer. Approximately 26.6% of the mortgage loans were purchased from and are being subserviced by Provident Funding Associates, L.P., an unaffiliated seller. Approximately 14.3% of the mortgage loans were purchased from First Savings Mortgage Corp., an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than approximately 3.% of the mortgage loans to Residential Funding. Approximately 68.5% of the mortgage loans are being subserviced by HomeComings Financial Network, Inc. (rated 'RPS1' by Fitch). U.S. Bank National Association will serve as trustee. RFMSI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. SALOMON BROTHERS: Losses Cue S&P to Cut Two Classes to D Rating --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes E-GF and F-GF of Salomon Brothers Mortgage Securities VII Inc.'s commercial mortgage pass-through certificates series 2001-CDC to 'D' from 'CCC' and 'CCC-', respectively. At the same time, the ratings on classes C, D, E-NM, and F-NM remain on CreditWatch with negative implications, where they were placed Dec. 17, 2004. The downgrades of classes E-GF and F-GF reflect principal losses incurred upon the liquidation of the last remaining hotel securing the GF Hotel loan, which was originally secured by nine properties. The trust realized a $12.4 million loss in March 2005, which caused class E-GF to lose 50% of its remaining $3.9 million principal balance. Classes F-GF and G-GF (not rated) lost 100% of their outstanding principal balances, $3.5 million and $6.9 million, respectively. The ratings assigned to classes C, D, E-NM, and F-NM remain on CreditWatch with negative implications pending the receipt of further information concerning the lease renewal of the major tenant at 74 New Montgomery Street, a 119,481 square foot office building in downtown San Francisco, which secures one of the two remaining loans in the mortgage pool. Ratings Lowered Salomon Brothers Mortgage Securities VII Inc. Commercial mortgage pass-through certs series 2001-CDC Rating Class To From ----- -- ---- E-GF D CCC F-GF D CCC- Ratings Remain On Creditwatch Salomon Brothers Mortgage Securities VII Inc. Commercial mortgage pass-through certs series 2001-CDC Class Rating ----- ------ C BBB-/Watch Neg D BBB-/Watch Neg E-NM BB/Watch Neg F-NM BB-/Watch Neg SALTIRE IND: Wants to Cut Insurance Benefits for 490 Retirees ------------------------------------------------------------- Saltire Industrial Inc., wants to cut medical and life insurance benefits for 490 retirees to "help preserve its remaining, and limited, assets for distribution among its creditors," according to a report by David A. Smith at the Republican-Standard. Saltire says the alternative is that the company will likely be forced to file for Chapter 7, or liquidation, which would result in immediate termination of all retiree benefits. "Requiring the debtor to continue funding retiree benefits . . . does not foster an equitable distribution of the debtor's estate," the company wrote in pleadings reviewed by Mr. Smith. Since August, Saltire said it has spent an average $82,000 monthly, or more than $500,000, to cover retiree benefits. Its plan, the company argues, is "a necessary, if not critical element" of settling its debts. According to court papers, Saltire and its Offiicial Committee of Unsecured Creditors negotiated the proposal with the United Auto Workers. The UAW represents about 200 of the retirees. Among other things, the plan calls for ceasing coverage on April 30, then treating the amounts determined to be due retirees as "general unsecured claims" against Saltire's estate. Additionally, retirees would receive $500 cash payments no later than May 6, though that amount would be credited against future payouts from the estate. The Honorable Burton R. Lifland will review the company's request at a hearing on April 21 in Manhattan. Headquartered in New York, New York, Saltire Industrial, Inc., fka Scovill, Inc., and the successor to Scovill Manufacturing Co., manufactures diverse consumer and industrial products sold under a variety of brand names. The Company filed for chapter 11 protection on August 17, 2004 (Bankr. S.D.N.Y. Case No. 04-15389). Albert Togut, Esq., at Togut, Segal & Segal LLP represents the Debtor in its restructuring. When the Debtor filed for protection, it listed $1 million to $10 million in estimated assets and $10 million to $100 million in estimated debts. SAXON ASSET: Fitch Downgrades Class BF-1 to BB- from BB+ -------------------------------------------------------- Fitch Ratings has taken rating action on the following Saxon Asset Securities Trust issue: Series 1999-5 -- Class AF-1 affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 affirmed at 'A'; -- Class BF-1 downgraded to 'BB-' from 'BB+'. All of the mortgage loans in the series 1999-5 transaction were either originated or acquired by Saxon Mortgage, Inc. The mortgage loans consist of fixed-rate sub-prime mortgage loans and are secured by first liens, primarily on one- to four-family residential properties. As of the February 2005 distribution date, the series 1999-5 transaction is 63 months seasoned, and the pool factor (current mortgage loan principal outstanding as a percentage of the initial pool) is approximately 16%. The affirmations reflect credit enhancement consistent with future loss expectations and affect approximately $36.4 million of outstanding certificates as detailed above. The negative rating action on the class BF-1 is taken due to worse than expected performance of the underlying collateral in this transaction. The high level of losses incurred has resulted in the continuous decline of overcollateralization -- OC, which is currently at $1,792,421, or 3.80% of the collateral balance. Target OC is currently at $2,124,636, and the six-month average monthly loss, after application of excess spread, is approximately $138,628. The sixty-plus delinquencies (including bankruptcies, foreclosures, and real estate owned) currently make up 17.67% of the pool. Fitch will continue to closely monitor this transaction. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings website at http://www.fitchratings.com/ SCHIRMER'S LLC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Schirmer's LLC 2916 Annandale Road Falls Church, VA 22042 Bankruptcy Case No.: 05-10874 Type of Business: The Debtor sells outdoor furniture and playground equipment. See http://www.schirmersllc.com/ Chapter 11 Petition Date: March 14, 2005 Court: Eastern District of Virginia (Alexandria) Judge: Robert G. Mayer Debtor's Counsel: Donald F. King, Esq. Odin, Feldman & Pittleman 9302 Lee Highway, Suite 1100 Fairfax, VA 22031 Tel: (703) 218-2100 Fax: (703) 218-2160 Estimated Assets: Less than $50,000 Estimated Debts: $1,000,000 to $10,000,000 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Phillip Pollet $420,000 R1 Box 10 Seagrove, NC 27341 Doug Pollet $400,790 5833 Bever Hill Lane Oak Ridge, NC 27310 Sundance Spas $377,284 14801 Quarum Drive Dallas, TX 75254 Brown Jordan Company $266,363 1801 N. Andrews Ave. Pompano Beach, FL 33069 Commonwealth of Virginia $228,929 Roseneath 3600 Center Richmond, VA 23218 Doug Cashmere $224,506 6509 Marjory Lane Bethesda, MD 20817 Washington Post $224,457 1150 15th Street Washington, DC 20071 Potomac Bank of Virginia $200,000 9910 Main Street Fairfax, VA 22031 Tropitone Furniture $172,130 5 Marconi Irvine, CA 92618 Pollet Enterprises, Inc. $152,057 1607 Battleground Avenue Greensboro, NC 27408 Internal Revenue Service $127,796 P.O. Box 105887 Atlanta, GA 30348 Lane Acceptance Group $110,870 4380 Highway 145 Tupelo, MS 38801 Nationwide Insurance $104,912 P.O. Box 96040 Charlotte, NC 28296 Verizon (Directories) $82,374 P.O. Box 64809 Baltimore, MD 21264 Carefirst Bluecross/Blueshield $74,365 840 First Street, NE Washington, DC 20065 Best & Langston, Inc. $73,862 2815 N. William Street, Suite F Goldsboro, NC 27530 Comptroller of Maryland $72,753 301 West Preston Street Baltimore, MD 21201-2383 Woodard, Inc. $64,970 168 North Clinton, 3rd Floor Chicago, IL 60661 Childlife Inc. $64,689 55 Whitney Street Holliston, MA 01746 Winston Furniture $63,808 540 Dolphin Road P.O. Box 868 Haleyville, AL 35565 SECOND CHANCE: Relocating Operations from Michigan to Alabama ------------------------------------------------------------- Second Chance Body Armor, Inc., is asking the U.S. Bankruptcy Court for the Western District of Michigan for permission to eliminate nearly 100 jobs and relocate its operations to Geneva, Alabama, next month. The Associated Press says Second Change Vice President Matt Davis said the job cuts are necessary to emerge from Chapter 11 Bankruptcy, and that the decision to move jobs to south Alabama was made after a consultant determined that would reduce overhead costs and improve cash flow. In January 2005, the Bankruptcy Court gave Second Chance Body Armor, Inc., permission to employ BDO Seidman, LLP as its accountants and business and financial consultants. William K. Lenhart leads the team of BDO Seidman professionals working for Second Chance. The decision affects around 50 current employees and 48 who are on furlough, Patrick Sullivan and Bill O'Brien at the Record-Eagle report. About 50 people who work in the company headquarters, sales and marketing, research and development and administration will remain in Central Lake, Michigan. Messrs. Sullivan and O'Brien note that Second Chance's request comes as the company is looking to the Bankruptcy Court for final approval of a six-month financing agreement with Comerica Bank at a hearing scheduled on April 4, 2005. Based in Central Lake, Michigan, Second Chance Body Armor, Inc. -- http://www.secondchance.com/-- manufactures wearable and soft concealable body armor. The Company filed for chapter 11 protection on Oct. 17, 2004 (Bankr. W.D. Mich. Case No. 04-12515). Stephen B. Grow, Esq., at Warner Norcross & Judd, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets and liabilities of $10 million to $50 million. Daniel F. Gosch, Esq., at Dickinson Wright PLLC, represents the Official Committee of Unsecured Creditors. The Company's exclusive period to file a chapter 11 plan is intact through June 1, 2005, and the company has until June 17, 2005, to make decisions about whether to assume, assume and assign, or reject its unexpired nonresidential leases. SOLUTIA INC: 74 Claims Transferred to Longacre Master Fund ---------------------------------------------------------- From July 21, 2004, to March 11, 2005, the Clerk of the U.S. Bankruptcy Court for the Southern District of New York recorded 64 claim transfers to Longacre Master Fund, Ltd. in the chapter 11 cases of Solutia, Inc., and its debtor-affiliates: Transferor Claim Amount ---------- ------------ A Boilard Sons Inc. $14,564 A&L Sandblasting & Painting Inc. 483,635 AB Container Company, Inc. 26,853 Action Resources, Inc. 105,392 Adams & Ruxton Construction Co. 286,122 AMBS Chemical Search 18,250 Associated Electro-Mechanics Inc. 84,621 Austin Industrial Inc. 1,657,578 Bay Wood Products, Inc. 138,784 Brenntag Southeast Inc. 41,745 Cana-Tex LLC 149,148 Carrier Corp. 108,851 Cat Tech Inc. 64,950 Chemineer, Inc. 75,700 Ciba Specialty Chemicals Corp. 397,033 Conam Inspector & Engineering Services Inc. 32,546 Container Recycling Inc. 12,000 Contaminant Control Inc. 311,068 Deep South Crane Rentals 92,812 DSM Chemicals North America, Inc. 359,492 Dupont Teijin Films 1,794,015 E.I. Du Pont De Nemours And Company 4,609,356 Electronic Supply Co., Inc. 14,811 Enpro, Inc. 14,224 Exam Inc. 39,727 Greif Bros Corp. 265,479 Groundwater Services, Inc. 163,033 Heucotech Ltd, 42,220 Heucotech Ltd. 39,960 Hill Engineers, Architects, Planners, Inc. 45,933 Hosokawa Bepex Corp. 117,157 Industrial Corrosion Controls, Inc. 22,855 Industrial Waste Cleanup 60,404 Industrial Waste Cleanup Inc. 62,163 JLM Industries Inc. 518,400 Martin Gas Sales Inc. 275,698 Naff's Welding & Fabrication 104,092 Noble & Associates, Inc. 68,936 Norman Stein & Associates, Inc. 43,821 O'Brien & Gere Engineers, Inc. 13,776 Osterman & Co. Inc. 69,210 Perstorp Polyols Inc. 117,055 Plastics Distributors Company Inc. 106,464 Potesta & Associates Inc. 356,018 Prayon Inc. 34,986 Process Data Control Corp. and PDC Corp. 115,200 Quad Chemical Corp. 54,709 R Knepper Construction Inc. 154,154 R&K Products and Services Inc. 83,933 Recall Total Information Management 15,757 Rexel United DBA Rexel Southern 40,258 Rosenlew Inc. 204,596 Shield Pack Inc. 91,051 Shipping Utilities Inc. 52,607 Southern Management Company 65,521 Southern Metal Processing Co. Inc. 18,253 Sowa Constructions Services Inc. 59,652 Suburban Industries Inc. 62,735 Teris LLC 134,295 The Advent Group, Inc. 70,794 The Hughes Group, Inc. 206,748 Twin Pines Coal Company Inc. 182,353 Twitchell Corporation 84,077 Well Safe Inc. 154,606 Fair Harbor Capital, as assignee, also transferred 10 claims to Longacre: Transferor Claim Amount ---------- ------------ Advanced Communications Solutions, Inc. $11,956 AEP Industries 6,298 Basic Chemical Services, Inc. 10,619 BlueRidge Solvent 45,222 Burner Design 2,403 Electric Motors 9,848 Mitchell Machine 24,720 Patco Lumber Co. 25,352 Pressure Concrete 15,466 Stark Printing Co. 25,917 As previously reported, Amroc Investments LLC, as assignee, had transferred 31 claims to Longacre Master Fund, Ltd. 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) SONEX RESEARCH: Liabilities Exceed Assets by More Than $1.6 Mil. ---------------------------------------------------------------- Sonex Research, Inc., retained legal counsel earlier this month to prepare a response to a Complaint filed on February 9, 2005, in the U.S. District Court for the Eastern District of Pennsylvania by investors seeking the return of $175,000 in equity investments made in Sonex during 2004 plus unspecified compensatory and punitive damages. The Company, which continues to experience cash flow problems, has also arranged for the extension of the due dates of various loans from shareholders, obtained additional short-term loans, and is receiving the continued services by its officers and a key consultant who are deferring compensation, through the grant of security interests in its patents. The Complaint was filed by Bruce W. Majer of Plymouth Meeting, Pa., Allen W. Fortna of Whitehall, Pa., and the Hermitage Partnership of Philadelphia, Pa. The Investors purchased a total of 700,000 shares of the Company's common stock at $.25 per share and warrants to purchase an additional 700,000 shares exercisable at $.25 per share. The Complaint is an action for federal and state securities fraud, common law fraud, and related claims by the Investors who believe they were induced to purchase securities based on a series of false and misleading statements, and is filed against Sonex, its former President, CEO and director Roger D. Posey, former director Jim Z.I. Williams, current CFO, Secretary and director George E. Ponticas, and Dr. Andrew A. Pouring, current Sonex Chairman of the Board, CEO and President. Dr. Pouring and Mr. Ponticas, who comprise the current management and Board of Directors of Sonex, believe many aspects of the claims in the Complaint are without merit and that the issuance of the securities to the Investors was made in accordance with applicable federal and state securities laws. A response to the Complaint is expected to be filed before the end of March 2005. In securing legal representation, the Company was required to remit a cash retainer of $12,000. Dr. Pouring and Mr. Ponticas each made loans to the Company of $5,000 to provide sufficient funds for the retainer. The acceptance of the two loans has been incorporated into agreements granting first and second security interests in the Company's patents applicable primarily to a recent shareholder loan, compensation being deferred with respect to services provided on an ongoing and forward basis by Dr. Pouring, Mr. Ponticas and the consultant who serves as the Company's Director of Business Development and technical program manager; other past due notes payable to shareholders; unpaid compensation for past services; and Company credit card and equipment lease obligations personally guaranteed by Dr. Pouring. Going Concern Doubt When HAUSSER + TAYLOR LLC audited Sonex's 2003 financial statements, the firm expressed doubt about the company's ability to continue as a going concern given its uncertain ability to generate sufficient revenue and ultimately achieve profitable operations, and significant net losses since inception. Sonex's Sept. 30, 2004, balance sheet shows $397,650 in assets and liabilities topping $2 million. About the Company Sonex Research, Inc., a leader in the field of combustion technology, is developing its patented Sonex Combustion System (SCS) piston-based technology for in-cylinder control of ignition and combustion, designed to increase fuel mileage and reduce emissions of internal combustion engines. Sonex plans to complete development, commercialize and market its Sonex Controlled Auto Ignition (SCAI) combustion process to the automotive industry to improve fuel efficiency of gasoline-powered vehicles. Additionally, independent third-party testing has confirmed the potential of the SCS application for direct-injected diesel engines to significantly reduce harmful soot in-cylinder without increasing fuel consumption. Other SCS designs are being used to convert gasoline engines of various sizes to operate on safer, diesel-type "heavy fuels" for use in military and commercial applications requiring light weight and safe handling and storage of fuel, such as in UAVs (unmanned aerial vehicles). SOUTHERN FAMILY: A.M. Best Says Insurer's Fin'l. Strength is Weak ----------------------------------------------------------------- A.M. Best Co. downgraded the financial strength ratings of Southern Family Insurance Company, Inc., and its affiliate, Atlantic Preferred Insurance Company (both of Tampa, FL) to C (Weak) from B (Fair) earlier this month. The ratings have been removed from under review and assigned a negative outlook. As requested by management of the parent, Poe Financial Group, as well as referenced in its press release dated February 17, 2005, the ratings for Southern Family and Atlantic Preferred will subsequently be withdrawn and assigned an NR-4 (Company Request) classification. In addition, the NR-2 (Insufficient Size and/or Operating Experience) classification of Florida Preferred Property Insurance Company, an additional subsidiary of Poe Financial Group, has been revised to NR-4. The ratings of the companies had previously been downgraded and placed under review with negative implications on December 28, 2004, in response to deterioration in risk-adjusted capitalization and pending A.M. Best's review of management's planned recapitalization initiatives. As a result of continued uncertainty regarding the financial condition and overall strategic direction of Southern Family and Atlantic Preferred, the companies were further downgraded on February 17, 2005. A.M. Best recently completed a preliminary review of year-end 2004 financials, which reflected further deterioration in risk-adjusted capitalization. This was driven by significant adverse reserve development in hurricane losses and continued premium expansion. These factors, combined with management's unwillingness to execute a recapitalization plan to support the ratings, have resulted in Southern Family and Atlantic Preferred being further downgraded. For Best's Ratings, an overview of the rating process and rating methodologies, visit Best's Rating Center at http://www.ambest.com/ratings For current Best's Ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, visit Best's Property/Casualty Center at http://www.ambest.com/pc A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. SPIEGEL INC: Wants to Honor Eddie Bauer Employee Incentive Bonuses ------------------------------------------------------------------ Spiegel, Inc., and its debtor-affiliates anticipate that an announcement pertaining to their proposed liquidation of Eddie Bauer, Inc.'s Home Division will have a significantly adverse effect on their ability to retain critical employees, particularly those in management positions and those at the corporate level. Moreover, the continued operation of the Home Division prior to complete liquidation and the smooth-running of the liquidation process depends on the services of certain key managers and the maintenance of employee morale. During the course of the liquidation process, the Debtors must strive to maintain goodwill with and the best possible work environment for all employees. Accordingly, the Debtors seek the Court's authority to offer certain non-normal course fixed sum incentives to identified key employees, on an aggregate not to exceed $966,000, on the condition that they remain in the Debtors' employ until they complete necessary participation in the liquidation. The Debtors believe that retaining key employees will allow them to gradually maximize the value of their business and assets. Marc B. Hankin, Esq., at Shearman & Sterling, LLP, in New York, relates that the employee incentive bonus will be communicated to the designated employees along with the employee's expected termination date. At the termination date, employees would receive their normal course severance benefits as well as any incentive bonus due and owing to them. The Debtors have determined that the payment of up to $966,000 associated with the Employee Incentive Bonuses is more than justified by the benefits that the Debtors expect to realize from them, including boosting morale and discouraging resignations among key employees, as well as incentivizing employees to vigorously assist in preserving and enhancing the value of the Home Division, pending an orderly and value-maximizing liquidation. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPIEGEL INC: Modifies Stay for Lounsbery to Pursue Lawsuit ---------------------------------------------------------- On January 31, 2002, Margaret Lounsbery commenced an action in the Supreme Court of the State of New York, County of Onondaga, seeking, inter alia, compensation for alleged injuries that occurred in January 1999, as a result of the collapse of a bed purchased from the Eddie Bauer Carousel Center store in Syracuse, New York, in December 1997. On September 25, 2003, Ms. Lounsbery filed Claim No. 2284 against Eddie Bauer, Inc., for $35 million. The parties stipulate and agree that: (a) The automatic stay will be modified solely to permit the parties to prosecute and defend against the Litigation and to take actions as are necessary to exercise their rights, provided, however, that Ms. Lounsbery may enforce or execute on any: -- settlement; -- judgment entered by a court of competent jurisdiction; or -- other disposition of the underlying claims in the Litigation only to the extent those claims are not first satisfied by any other defendant in the Litigation or by the proceeds from any of the Debtors' applicable liability insurance policies. (b) Ms. Lounsbery will retain the right to pursue any efforts to collect any amount from Bekins Van Lines, LLC, as co- defendant in the Litigation. (c) Ms. Lounsbery will not engage in any efforts to collect any amount from the Debtors or: * the Debtors' current and former employees, officers, and directors; * any person indemnified by the Debtors; * any person listed as an additional insured under the Debtors' liability insurance policies; * any direct or indirect parent corporations, affiliates or subsidiaries of the Debtors; * the officers, directors and employees of any parent, affiliate, or subsidiary of the Debtors; or * any other entity or individual sharing coverage with the Debtors. Ms. Lounsbery's Claim and any other bankruptcy claims that have been filed or asserted by Ms. Lounsbery are withdrawn. (d) Any settlement of the litigation will include a general release of all claims against the Debtors and the indemnities. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) STAAR SURGICAL: Auditors Doubt Going Concern Ability ---------------------------------------------------- STAAR Surgical Company, a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, reported financial results for its fourth quarter and full year 2004, which ended December 31, 2004, earlier this month. Total product sales for the fourth quarter were $13,951,000, compared with $12,753,000 for the same quarter last year and $12,140,000 for the third quarter of 2004. Excluding the impact of changes in currency, fourth quarter 2004 total product sales were $13,385,000, an increase of 4% over the fourth quarter of 2003. During the fourth quarter, international ICL sales increased 56% compared with the fourth quarter of 2003 and 31% compared with the third quarter of 2004. Total product sales for the year ended December 31, 2004 were $51,685,000 compared with $50,409,000 for 2003. Total revenue for 2003 was $50,458,000, which included royalties from technology licenses that terminated as of March 31, 2003. Excluding the impact of changes in currency, total product sales for 2004 were $49,482,000, a decrease of 2% over 2003. For 2004, international sales of the ICL increased 38% compared with 2003. In addition, international sales of the Company's pre-loaded silicone IOL continued to gain momentum in the market. Net loss for the fourth quarter of 2004 was $4,384,000, compared with a net loss of $3,520,000 for the same period last year and a net loss of $2,268,000 for the third quarter of 2004. Net loss for 2004 was $11,332,000, compared with a net loss of $8,357,000 for 2003. Net loss for the fourth quarter and full year 2004 included a $500,000 reserve against the partially collateralized notes of a former director. The reserve represents approximately $0.02 of the loss recorded during the fourth quarter and full year. STAAR exited the fourth quarter with approximately $9,312,000 in cash, cash equivalents and short-term investments compared with $11,842,000 in cash and cash equivalents at October 1, 2004 and $7,286,000 at January 2, 2004. STAAR's bank debt at the end of the fourth quarter of 2004 was approximately $3,004,000. Total current liabilities, including the bank debt, were $13,480,000. Going Concern Doubt Due to the Company's recurring losses and negative cash flows, the Company believes it is likely to receive an opinion from its independent public accountants on its financial statements for the year ended December 31, 2004, stating that there is substantial doubt about the Company's ability to continue as a going concern. The Company is taking steps to aggressively reduce operating expenses and increase its revenues while at the same time reviewing other strategic alternatives; however, there can be no assurance that these measures will be successful. With revamped and stronger teams in the areas of R&D, regulatory and quality assurance, the Company began reducing its reliance on outside consultants during the fourth quarter of 2004. This reduction in spending is expected to save the Company approximately $1.0 million annually. In early February 2005, the Company implemented additional cost reduction strategies, including the reduction in size of its direct sales force, which is expected to result in another $1.0 million in annualized cost savings. The Company will continue to pursue other cost savings opportunities with the goal of realizing a total of $3.0 million in annual cost savings. The Company does not expect to realize significant benefits from the cost reductions in the first quarter of 2005 and estimates it will use approximately $3.5 million of cash for operating activities in that quarter. While the benefit of the cost reductions will be fully implemented in the second quarter, a continued decline in U.S. sales could offset some of the savings for future periods. As a result of the level of cash available to the Company to fund ongoing operations as well as new product initiatives, STAAR Surgical is exploring opportunities to raise additional resources. These opportunities are in addition to those the Company is exploring with Morgan Stanley, its investment banker. Morgan Stanley Exploring Alternatives "[O]ur Board of Directors is working closely with Morgan Stanley, to evaluate a number of strategic and financial alternatives, including acquisitions, mergers, licensing agreements and divestitures," said David Bailey, President and CEO of STAAR Surgical. "In addition, we are in the process of implementing further cost- cutting strategies," continued Mr. Bailey. "These coupled with the cost-cutting strategies we implemented in the fourth quarter of 2004 and in February 2005, should lead to annualized cost savings of approximately $3 million. Despite these aggressive actions and considering our level of cash burn, we will need to raise additional money to fund our ongoing operations. We are in the process of evaluating all of our options to accomplish this goal. "Regarding receiving approval for our Visian(TM) ICL by the Food and Drug Administration, timing remains uncertain," continued Mr. Bailey. "Following our meeting with the FDA on January 27, 2005, we believe that our Monrovia, California facility will be re- audited, although we have not yet requested a re-audit and the timing has not been determined. However, we were encouraged by the recent approval from the Office of Device Evaluation in Washington, DC, of our application to allow our trial investigators to continue enrollment of up to 75 eyes each month in the ICL clinical investigation while the pre-market approval is pending. "Although international sales of our ICL and pre-loaded IOL continue to meet or exceed our internal expectations, domestic IOL sales remain challenging," continued Mr. Bailey. "Sales of our IOLs were down 11% during the fourth quarter of 2004 compared with the same period last year. However, we are optimistic regarding our ability to bring to market our three-piece Collamer IOL and insertion system, which is scheduled for shipment in the second quarter of 2005. We continue to believe that the introduction of this new lens and injector system will greatly enhance our ability to compete in this market." Gross profit margin was 47.2% for the fourth quarter of 2004 compared with 56.6% for the same quarter last year and 50.2% percent for the third quarter of 2004. The decline in gross profit was primarily due to increased costs of manufacturing engineering and quality assurance, an increase in inventory provisions, higher unit costs due to process changes and reduced volume, and a shift in geographical and product mix. Gross profit margin for the year ended December 31, 2004 was 50.6% compared with 55.2% for 2003. Essentially, the same factors affecting the quarter affected the year. Total selling, general, and administrative expenses in the fourth quarter increased 8% to $10,399,000 compared with the same period last year. Marketing and selling expense decreased 3.3%, on lower promotional costs in the U.S. partially offset by the negative impact of foreign exchange rate changes. R&D expense (which includes the expense of regulatory and quality assurance activities) increased nearly 10% in the fourth quarter compared to the same period last year, primarily due to costs related to consultants utilized for the Company's ongoing interactions with the FDA and to the costs of the redesign of the three-piece Collamer IOL and insertion system. These expenses were partially offset by the decreased R&D costs of subsidiaries as the Company consolidated these activities into one location. R&D expense for the fourth quarter of 2004 decreased 11% compared with the third quarter 2004. General and administrative expenses for the fourth quarter of 2004 increased 13.2% compared with the fourth quarter of 2003 primarily as the result of professional fees associated with compliance with the Sarbanes-Oxley Act, increased legal fees and insurance premiums. "We are committed to protecting and enhancing shareholder value," continued Mr. Bailey. "While we remain focused on resolving the issues with the FDA to pave the way for an ICL approval in the U.S. as well as rejuvenating sales of our cataract products, we feel it is prudent to also consider strategic and financial alternatives. We believe that there may be several strategic and financial alternatives available to us, and we are working diligently to explore as many of them as possible." About STAAR Surgical STAAR Surgical is a leader in the development, manufacture and marketing of minimally invasive ophthalmic products employing proprietary technologies. STAAR's products are used by ophthalmic surgeons and include the revolutionary VISIAN ICL(TM) as well as innovative products designed to improve patient outcomes for cataracts and glaucoma. STAAR's ICL has received CE Marking, is approved for sale in 37 countries and has been implanted in more than 40,000 eyes worldwide. It is currently under review by the FDA for use in the United States. STATION CASINOS: Good Performance Prompts S&P to Affirm Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services revised its rating outlook on Las Vegas, Nevada-based Station Casinos, Inc. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the owner of off-Strip casino properties, including its 'BB' corporate credit rating. Total debt outstanding was approximately $1.3 billion at Dec. 31, 2004. "The outlook revision reflects Station's solid operating performance in 2004 and continuing positive momentum in the first quarter of 2005. As a result its earnings growth, Station was able to reduce debt leverage during 2004 while accomplishing expansion projects and strategic acquisitions and land purchases," said Standard & Poor's credit analyst Michael Scerbo. Standard & Poor's expects Station's expansion and/or development projects to accelerate over the next few years given the strength of the company's business model and solid market momentum (i.e. Phase I & Phase II of Red Rock Station and possibly the development of Wild Wild West). At the same time, expected free cash flow generation should enable Station to achieve its development goals while maintaining total debt to EBITDA in the 4x-4.5x range (adjusted for operating leases). TECO AFFILIATES: Confirmation Hearing Will Commence on April 5 -------------------------------------------------------------- On February 24, 2004, the U.S. Bankruptcy Court for the District of Arizona approved the Stipulated Discovery Plan Concerning Confirmation Hearing that was executed by the Teco Energy, Inc., and its debtor-affiliates, Citibank, N.A., as administrative agent to the Debtors' prepetition lenders, Aretex LLC, and Franklin Mutual Advisors, LLC. The Discovery Plan provides for, among other things: -- a stipulated timeframe for the parties to conduct discovery relating to confirmation of the Debtors' Plan of Reorganization; -- the scheduling of an initial confirmation hearing for April 5, 2005, to be used for administrative matters related to confirmation and as a pre-trial conference; and -- scheduling of continued confirmation hearings on April 19 and 20, 2005. Craig D. Hansen, Esq., at Squire, Sanders & Dempsey L.L.P., tells Judge Case that a significant amount of the discovery requested by the Non-Consenting Banks under the Discovery Plan relates to the Non-Consenting Banks' objection based on the claim that Citibank and all of the other Prepetition Lenders that executed the Master Settlement and Restructuring Agreement dated January 24, 2005, are insiders of the Debtors and that their votes in favor of the Plan should not be counted for purposes of determining whether there is an impaired accepting class pursuant to Section 1129(a)(10) of the Bankruptcy Code. Pursuant to the Discovery Plan, the Debtors, Citibank and the Non-Consenting Banks engaged in an extensive discovery process, resulting in the production of substantial amounts of document discovery, and depositions. Additionally, the Non- Consenting Banks also requested from the Debtors, Citibank and third parties a substantial amount of document discovery related to their Insider Allegations. The Non-Consenting Banks informed the Debtors that they intend to take the depositions of numerous individuals with respect to the Insider Allegations. Parties Seek New Confirmation Hearing Schedule The Non-Consenting Banks do not believe that they will be prepared to litigate the Insider Allegations as part of the confirmation hearing dates currently scheduled for April 19 and 20, 2005. The Debtors, however, want the Confirmation Hearing concluded as quickly as possible, and certainly no later than the end of May 2005, to provide continued stability to their trading counterparties -- with whom they buy gas and sell power -- and to take advantage of enhanced revenue opportunities as the summer months approach. The Debtors engaged in extensive good faith discussions and negotiations with the Non-Consenting Banks and Citibank to reach a mutually agreeable schedule to complete the contested Confirmation Hearing in an efficient and expeditious manner. As a result of those negotiations, the Debtors, the Non-Consenting Banks and Citibank agreed that the initial confirmation hearing scheduled for April 5, 2005 should go forward as originally contemplated. The parties agreed that the Confirmation Hearings on April 19 and 20 should be used primarily to present the testimony -- both direct and by cross-examination -- of Houlihan Lokey Howard & Zukin, PA Consulting LLC, and Jefferies & Co. Houlihan and PA Consulting are expert witnesses who will testify in support of the Plan, and Jefferies has been retained as an expert witness by the Non-Consenting Banks. The Debtors believe that it is unlikely that all of the expert witness examinations will be completed by the end of the day on April 20, and that an additional day to day-and-a-half of trial time will be needed to complete the examinations. Subject to the Court's calendar, the Debtors ask Judge Case to schedule an additional day to day-and-a-half of trial time for the purposes of concluding all expert witness examinations before the end of April 2005. The Debtors also intend to present the testimony of John Duff, President of the Debtors, and, potentially, Michael Schuyler, who is in charge of all of the Debtors' energy trading activities. The Debtors believe that their case-in-chief in support of confirmation, including all relevant cross examinations, can be completed in approximately a day-and-a-half of trial time. Accordingly, the Debtors ask the Court to schedule an additional two days of trial time during the week of May 10, 2005. The Debtors believe that any unused Court time during the week of May 10, can be used for purposes of oral argument with respect to any confirmation objections that present primarily legal issues. To complete the confirmation hearings concerning the Plan, the Debtors also seek approximately four additional days of trial time between the week of May 16 through May 27, 2005. The Debtors believe that this hearing time will be primarily used to adjudicate the Insider Allegations of the Non-Consenting Banks. The Debtors believe that both the Non-Consenting Banks and Citibank agree with this timetable. Proposed Revised Confirmation Hearing Schedule March 30, 2005 Parties to exchange non-expert witness lists. April 1, 2005 Jefferies expert witness report and supporting materials provided. April 5, 2005 Commencement of Confirmation Hearing -- administrative matters and pre-trial conference only. April 8, 2005 Expert witness deposition of Houlihan Lokey, PA Consulting and Jefferies to be completed. April 14, 2005 Parties to exchange expert exhibit lists. April 14, 2005 Written objections to confirmation of Plan of Non-Consenting Banks to be filed. April 19 & 20, Continued confirmation hearing involving 2005 direct and cross examination of expert witnesses. The parties request up to two additional hearing dates prior to the end of April 2005 to complete examination of all expert witnesses. Week of May 9, Continued confirmation hearing to: 2005 (2 Trial Days Requested) (a) complete Debtors' case-in-chief; and (b) time permitting, oral argument on legal issues relating to confirmation. May 16 to 27, Continued confirmation hearing to complete 2005 (4 Trial trial of outstanding issues, including Days Requested) Insider Allegation of Non-Consenting Banks. Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- http://www.tecoenergy.com/-- own and operate the two largest combined-cycle natural gas generation facilities in the United States. The Debtors filed for bankruptcy protection on Jan. 26, 2005 (Bank. D. Ariz. Case No. 05-01143, and 05-01149 through 05-01151). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey L.L.P., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,196,000,000 in total assets and $2,268,800,000 in total debts. (TECO Affiliates Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) TECO AFFILIATES: Will File Separate Operating Reports Under Seal ---------------------------------------------------------------- Judge Case of the U.S. Bankruptcy Court for the District of Arizona gave his permission to Teco Energy, Inc.'s Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co. units to file their separate Monthly Operating Reports under seal. According to Craig D. Hansen, Esq., at Squire, Sanders & Dempsey L.L.P., in Phoenix, Arizona, the Debtors sought permission from the U.S. Trustee to file consolidated monthly operating reports. However, the U.S. Trustee denied the Debtors' request, stating that it prefers each Debtor entity to file Monthly Operating Reports separately. The Debtors believe that filing separate Monthly Operating Reports would reveal very sensitive financial and commercial information that their competitors could use to determine the amounts at which they purchase natural gas and sell power. That would give the Debtors' competitors a competitive advantage over them. Since it is crucial to the Debtors' reorganization that their competitors do not have access to the information contained in the separate Monthly Operating Reports, the Debtors seek the Court's permission to file their Monthly Operating Reports under seal. Mr. Hansen explains that the sensitive financial and commercial information contained in the separate Monthly Operating Reports qualify as "commercial information" under Section 107(b) of the Bankruptcy Code, which should be filed under seal. The Debtors assure the Court that they will voluntarily share the separate Monthly Operating Reports with the U.S. Trustee, Citibank, N.A., the administrative agent to the Debtors' prepetition lenders, Aretex, LLC, and Franklin Mutual Advisors, LLC, on the condition that the parties keep the Monthly Operating Reports confidential. Kelly Singer, Attorney for Panda Gila River L.P., will voluntarily produce the records to agents, banks and the U.S. Trustee subject to a confidentiality order. Mr. Singer also informs the Court that no objections were filed concerning the Debtors' request. Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- http://www.tecoenergy.com/-- own and operate the two largest combined-cycle natural gas generation facilities in the United States. The Debtors filed for bankruptcy protection on Jan. 26, 2005 (Bank. D. Ariz. Case No. 05-01143, and 05-01149 through 05-01151). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey L.L.P., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,196,000,000 in total assets and $2,268,800,000 in total debts. (TECO Affiliates Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) TORCH OFFSHORE: Balks at Committee's Request to Appoint a Trustee ----------------------------------------------------------------- Torch Offshore, Inc., and its debtor-affiliates object to their Official Committee of Unsecured Creditors' request that the U.S. Bankruptcy Court for the Eastern District of Louisiana appoint a Chapter 11 Trustee in their bankruptcy proceedings. The Debtors remind the Court that the appointment of a chapter 11 trustee is an extraordinary remedy imposed only in the most unusual situations. The Committee, Torch Says, presented to the Court meritless claims which can't be supported by clear and convincing evidences. As previously reported, the Committee gave the committee three reasons warranting appointment of a chapter 11 trustee: a) the proposed settlement with General Electric Capital Corporation are onerous and overreaching; b) the terms of the debtor-in-possession financing weren't the best that the Debtors could have negotiated and c) certain of the Debtor Professionals aren't disinterested. Torch Offshore answered the Committee's allegations point by point. Torch Offshore states that GE, being a secured creditor, only sought to foreclose its collateral. GE can't be charged with fraud, dishonesty, gross mismanagement or any other cause under Section 1104(a)(1) of the Bankruptcy Code for wanting to foreclose. The Debtors again remind the Court that it has reviewed the DIP Financing Agreement as well as the retention applications of King & Spalding LLP, Raymond James & Associates, Inc., and Bridge Associates LLC. The Debtors are confident that the Court wouldn't have approved the financing agreement as well as the retentions if it found them unsatisfactory or questionable. Torch Offshore adds that despite the Committee's thrust of promoting the best interests of all parties-in-interest, it fails to provide facts. The Debtors point out that dissatisfaction with business decisions of a debtor-in-possession isn't sufficient for an appointment of a trustee. The Debtors assure the Court that they are effectively managing their estates as debtors-in-possession. They challenge the Committee to provide hard facts supporting its allegations that Regions Bank and GE are taking control of the chapter 11 cases. 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. TORCH OFFSHORE: Gets Final Order on DIP Loan & Cash Collateral Use ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Eastern District of Louisiana granted Torch Offshore, Inc., and its debtor-affiliates final approval: a) to obtain Postpetition Financing and grant Security Interests and Superpriority Administrative expense status pursuant to Sections 361, 362, and 364 of the Bankruptcy Code; and b) to use Cash Collateral pursuant to Section 363(c) of the Bankruptcy Code. The Debtors are permitted to obtain Postpetition Financing up to an aggregate amount of $8.9 million plus a Bonding Facility of up to $2 million from Regions Bank and Export Development Canada to be secured by a first priority priming lien on certain assets of the Debtors. Under the Debtors' Prepetition Loan Documents with Regions Bank, Export Development, and other Lenders, they owe approximately $15 million under a Prepetition Working Capital Facility, $4,854,532 under a Term Loan from Regions, and $78,480,671 under what's called the Midnight Express Facility, plus interest accruing on amounts and fees, costs, expenses, and other charges accrued, accruing, or chargeable with respect to the Loan Documents. Postpetition Financing and Cash Collateral The Postpetition Financing and use of the Cash Collateral are under a Court-approved DIP Loan Agreement between the Debtors, Regions Bank and Export Development. Proceeds of the DIP Financing and proceeds from the Cash Collateral are to be used pursuant to a 13-week cash flow forecast, from Jan. 7, 2005, up to April 1, 2005, as agreed from time to time between the Debtors and the Lenders. All loans under the DIP Loan Agreement will terminate and become due and payable on April 1, 2005, which may be extended up to an additional 90 days upon the written consent of the Lenders in the exercise of their sole discretion and to be conditioned upon the Lenders' receipt of a new 13-week cash flow forecast from the Debtors. The Debtors will use the proceeds from the DIP Financing and the Cash Collateral to continue the operation of their businesses, to minimize disruption of their business operations, to manage and preserve their estates to maximize recovery to their creditors, for general and administrative expenses, and funds for a successful reorganization of their businesses. The Lenders have consented to the Debtors' use of the full amount of the Cash Collateral. To adequately protect their interests, the Lenders are granted a First Priority Priming Lien on the Debtors' Prepetition Collateral and on their Postpetition Accounts Receivables. Relief from Automatic Stay Upon the occurrence or in the Event of a Default: a) the DIP Lenders may immediately cease making advances on the DIP Financing, terminate the Debtors' Use of Cash Collateral, and exercise all rights and remedies under the DIP Loan Documents, without further order of the Bankruptcy Court; and b) during the continuation of an Event of Default and after providing seven business days' notice to the Debtors, the Debtors' counsel, and counsel to Huisman Special Lifting Equipment B.V., the DIP Lenders may exercise all rights and remedies against the DIP Collateral and Prepetition Collateral provided for in the DIP Loan Agreement, the Prepetition Loan Agreements, and all related Documents without further order from the Court. 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. TORCH OFFSHORE: Nasdaq Halts Common Stock Trading ------------------------------------------------- Torch Offshore, Inc. (NASDAQ:TORCQ) received a notice from the staff of The NASDAQ Stock Market that the NASDAQ Listing Qualifications Panel has denied the Company's request for continued listing of its common stock on the NASDAQ National Market. Accordingly, the Company's common stock is delisted from the NASDAQ National Market effective Monday, March 28, 2005. The Company plans to apply for its shares of common stock to be quoted on the Pink Sheets, however no assurances can be made that any broker or market maker will make a market in the Company's common stock. The "Pink Sheets" is a centralized quotation service that collects and publishes market maker quotes in real time, primarily through its Web site at http://pinksheets.com/ As of March 24, 2005, the Company's stock traded at $1.431. 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. UAL CORP: Court Okays Escrow Bond Payments to U.S. Bank ------------------------------------------------------- As previously reported, UAL Corporation and its debtor-affiliates brought an adversary proceeding seeking a declaration that certain bond agreements together with their Facilities Sublease with the Regional Airports Improvement Corporation are part of a "disguised" financing arrangement and not a true lease subject to Section 365 of the Bankruptcy Code. The RAIC issued: * $25,000,000 in aggregate amount of Adjustable-Rate Facilities Sublease Refunding Revenue Bonds, Issue of 1984, United Air Lines, Inc. (Los Angeles International Airport); and * $34,390,000 in aggregate amount of Facilities Sublease Refunding Revenue Bonds, Issue of 1992, United Air Lines, Inc. (Los Angeles International Airport). U.S. Bank is the indenture trustee with respect to the Bonds. Pursuant to the Facilities Sublease, United is obligated to pay to U.S. Bank certain rental payments that are equal to the principal of, premium, if any, and interest on the Bonds. The Bankruptcy Court granted summary judgment in favor of the Debtors. U.S. Bank, the RAIC and the City of Los Angeles appealed from the judgment to the United States District Court for the Northern District of Illinois. Consequently, the District Court reversed the Bankruptcy Court's judgment and granted summary judgment in favor of the Bond Parties. United has taken an appeal from the District Court's order to the U.S. Court of Appeals for the Seventh Circuit. As a result of Judge Darrah's ruling, the Debtors, U.S. Bank and the RAIC stipulate and agree that: 1) until final resolution of the matter, the Debtors are required to place sufficient funds into escrow to cover the outstanding payment obligations connected with the Bonds and certain related additional payment obligations; and 2) U.S. Bank and the RAIC are barred from enforcing any remedies under any Bond Agreement on account of non-payment of obligations by the Debtors. James H.M. Sprayregen, Esq., at Kirkland & Ellis, says that the Debtors want to cooperate with U.S. Bank, the RAIC and the City as the matter progresses toward resolution. Pursuant to the parties' proposed Escrow Agreement, the Debtors will place $9,128,625 into escrow, which represents the amounts due on the Bonds for April 1, 2003, May 15, 2003, October 1, 2003, November 15, 2003, April 1, 2004, May 15, 2004, October 1, 2004, and November 15, 2004. Going forward, the Debtors will deposit $1,100,000 before each April 1 and October 1, and $1,182,156 before each May 15 and November 15, to be held in escrow. The funds in escrow will be held in trust for the benefit of U.S. Bank and the RAIC, and will be distributed pursuant to the terms of the Escrow Agreement or further Bankruptcy Court order. U.S. Bank and the RAIC argued that the Debtors should escrow amounts due for fees and expenses and additional interest for non-payment of amounts previously due. The Debtors disagreed. The parties consent to reserve these issues until a later date. At the Debtors' request, Judge Wedoff approves the Stipulation compelling the Debtors to escrow funds. 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. Employing 61,200 workers, United, United Express and Ted operate more than 3,500 flights a day to more than 200 U.S. domestic and international destinations from hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. 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. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORPORATION: Files 12th Reorganization Status Report -------------------------------------------------------- UAL Corporation and its debtor-affiliates report that they have been negotiating with the International Association of Machinists and Aerospace Workers and other unions on permanent wage and benefit savings and pension alternatives. The Debtors are grateful for the breathing room the various sources of savings have provided during the difficult winter months. Nevertheless, James H.M. Sprayregen, Esq., at Kirkland & Ellis, emphasizes that the Debtors must have the cost savings derived from termination and replacement of the defined benefit pension plans to procure exit financing. While progress has been made, the Debtors have been unable to reach agreements with the IAM and the Aircraft Mechanics Fraternal Association on long-term cost savings. The alternatives to pension termination and replacement that these unions have proposed are either not feasible or do not provide the necessary savings to satisfy the metrics required for exit financing. Mr. Sprayregen insists that termination and replacement of the defined benefit pension plans is necessary due to the structural changes in the airline industry. The Debtors face revenue pressure from low-cost carriers and price reductions by network carriers. Fuel prices have continued to increase. Accordingly, if there is no agreement on cost savings and pension issues with the unions by April 11, 2005, the Debtors will seek voluntary distress termination for each defined benefit pension plan. On March 11, 2005, the Debtors transmitted new offers for aircraft financing to the Aircraft Trustees. The Debtors proposed a litigation standstill in the pending antitrust and other litigation for a negotiation period through May 15, 2005. The Debtors promised that all negotiation-related communications may not be used in subsequent litigation. The Debtors proposed to the Trustees an agreement not to attempt to repossess any aircraft through May 15, 2005, if the Debtors increase their adequate protection payments through that date. The Debtors and Air Wisconsin Airlines Corporation are in the process of negotiating an agreement to resolve the dispute over the Jet Service Agreement by having the documents reviewed by a neutral third-party. The parties will present an agreement for approval to the Court shortly. The Debtors have successfully settled almost 700 preference claims. The settlements will bring the estates more than $3,000,000 in cash and more than $2,300,000 in non-cash plus other benefits. 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. Employing 61,200 workers, United, United Express and Ted operate more than 3,500 flights a day to more than 200 U.S. domestic and international destinations from hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. 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. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNISYS CORPORATION: Moody's Says Liquidity is Adequate for 2005 --------------------------------------------------------------- Moody's lowered the speculative grade liquidity rating of Unisys Corporation to SGL-3 from SGL-2 based on increased potential for future charges and impairments to decrease operating profitability. Following lower than expected financial performance for 2004, Unisys received a waiver of a financial covenant and amended certain financial covenants under its $500 million unsecured credit facility. The entire facility was available for borrowing as of December 31, 2004. The company expects that first half 2005 results will be negatively impacted by problems involving certain outsourcing contracts. The speculative grade liquidity rating of SGL-3 for Unisys Corporation (Ba1/negative outlook) reflects adequate liquidity characterized by: (1) balance sheet liquidity of $661 million in cash and investments as of December 31, 2004; (2) accessible external liquidity; and (3) expected free cash flow generation (cash flow from operations less capital expenditures) in excess of $50 million in 2005. Moody's believes Unisys' current liquidity profile remains sufficient to satisfy next twelve months' scheduled debt maturities and capital spending requirements as well as cash outflows related to restructuring activities and postretirement benefit and pension contributions. In recent quarters, operating and cash flow performance has suffered as a result of underperformance on three outsourcing contracts, unexpected deferral of enterprise server sales, and delays in expected signings of service contracts. Excluding impairment and restructuring charges taken during the last two quarters of 2004, operating margins were reduced to 3.1% from 7.2% in 2003. Full year GAAP profitability of $39 million fell from $259 million in 2003, and would have been significantly negative if not for a $97 million recorded tax benefit from favorable tax audit settlements. Free cash flow generation of $36 million ended well below management's initial 2004 guidance of $100 million in free cash flow (which was subsequently revised downward during the year). Company expectations for 2005 free cash flow is for a minimum of $50 million. Moody's anticipates capital expenditures to average about $95 million per quarter. The 2005 cash flow includes $65 million in cash outflows related to restructuring activities recognized in September 2004, and a $30 million net tax refund from the IRS. The actions taken to reduce the company's cost structure will target facility consolidation and headcount reduction. Expected annualized savings of $70 million should be realized on a run rate basis by the end of 2005. At December 31, 2004, Unisys had cash balances of $661 million, invested in cash and other highly rated investments. In January 2005, the company satisfied a $150 million scheduled debt maturity from existing cash balances, reducing pro forma cash balances to $511 million. A sizable portion of Unisys' cash balance is located offshore and only a small amount would not be available for immediate repatriation, as a result of funds held in cash restrictive environments. The company maintains a $500 million multi-year unsecured revolving credit facility, maturing in May 2006. Following lower than expected fourth quarter 2004 results, the company received a waiver of one of its financial covenants. The company also amended certain financial covenants. The company remains in compliance and should have sufficient cushion under those covenants throughout 2005. An event of default on the revolver could cause acceleration on certain Unisys obligations and a termination of the accounts receivable securitization program. Moreover, any aggregate default of $25 million on other Unisys debt would constitute an event of default on the revolver. As of December 31, 2004, there were no outstanding borrowings under the revolver and it could be accessed at the company's discretion. Any potential future borrowings require material adverse change representations as a condition to each borrowing. In addition to the unsecured bank facility, the company has a $225 million accounts receivable securitization program, subject to availability. As of December 31, 2004, $225 million of receivables had been sold under the program. The program contains certain financial covenants and requires annual renewals with a final expiry in December 2006. Moody's believes Unisys will remain within covenant compliance and expects the company to renew and continue its reliance on the program. At December 31, 2004, Unisys' total debt was $1.1 billion, with its next material debt obligation of $400 million due in June 2006. During January 2005, the company satisfied its maturing 7.25% senior notes with existing cash balances, resulting in a pro forma debt balance of $901 million. Remaining cash balances are seen as sufficient to satisfy short-term debt maturities and other borrowings under various short-term uncommitted facilities. In 2005, the company expects to contribute about $27 million to its postretirement benefit plan and $70 million toward its worldwide defined benefit pension plan. In fiscal 2004, an aggregate $90 million was contributed toward these plans. UNITED RENTALS: Lenders Waive Default on Late Annual Report Filing ------------------------------------------------------------------ United Rentals, Inc. (NYSE: URI), disclosed that the lenders under its secured credit facility have agreed the company may defer providing 2004 audited financial statements until June 29, 2005. The lenders also agreed to waive certain defaults arising from the company's delay in filing its 2004 Report on Form 10-K. United Rentals also disclosed results for 2004, while not yet finalized, are expected to meet or exceed the outlook provided in the third quarter earnings release on October 20, 2004. Unaudited Financial Highlights * Total revenues increased 12.7% for the fourth quarter and 8.4% for the full year 2004 to a record $3.11 billion. * Same-store rental revenues in the general rentals segment increased 13.1% for the fourth quarter and 10.9% for the full year. * Rental rates increased 7.4% for the fourth quarter and 7.5% for the full year. * Cash flow from operations was $761 million for the full year. * Free cash flow was $385 million after total rental and non- rental capital expenditures of $635 million. * The total cash balance at December 31, 2004 was $302 million, an increase of $223 million from 2003. * The company determined, in the course of Sarbanes-Oxley testing, that the provision for income taxes was higher than required for periods prior to 2004; the company will restate pre-2004 results to reduce the provision for income taxes by a total of approximately $25 million. Selected Business Highlights Unaudited Financial Data The company will delay finalizing its 2004 results and filing its Report on Form 10-K to allow additional time to review matters relating to the previously announced SEC fact-finding inquiry. The company believes this delay will extend beyond the Form 10-K due date, including the 15-day extension period. This delay will also give the company time to complete work on the income tax restatement and its evaluation and testing of internal controls and other items described below. The selected financial data and 2004 outlook provided in this press release are unaudited and subject to change based on completion of the audit or the outcome of the SEC inquiry or internal review. This data should not be viewed as a substitute for full financial statements or as a measure of the company's performance. Total revenues for the fourth quarter of 2004 were $836.4 million, an increase of 12.7% compared with $742.2 million for the fourth quarter of 2003. Dollar utilization for the fourth quarter of 2004 was 62.9%, an increase of 4.6 percentage points from the fourth quarter of 2003. The size of the rental fleet, as measured by the original equipment cost, increased to $3.7 billion at December 31, 2004 from $3.5 billion at December 31, 2003. The age of the rental fleet was 40 months at the end of 2004 and 2003. Total revenues for the full year 2004 were $3.11 billion, an increase of 8.4% compared with $2.87 billion for 2003. Dollar utilization for the full year 2004 was 60.1%, an increase of 3.0 percentage points from the prior year. Cash flow from operations was $761.0 million for the full year 2004 and proceeds from rental equipment sales were $235.2 million. Total capital expenditures were $634.6 million in 2004 compared with $377.9 million in 2003. After capital expenditures, free cash flow was $385.1 million for the full year 2004 compared with $145.7 million for the full year 2003. General Rentals Segment The general rentals segment includes the rental of more than 600 types of construction, aerial, industrial and homeowner equipment as well as related sales and service. General rentals segment revenues were 92% of total revenues for the full year 2004. Fourth quarter 2004 revenues for the general rentals segment were $771.7 million, an increase of 15.7% compared with $667.3 million for the fourth quarter of 2003. Rental rates for the fourth quarter of 2004 increased 7.4% and same-store rental revenues increased 13.1% from the fourth quarter of 2003. Rental revenues generated by sharing equipment among branches were 12.6% of segment rental revenues for the fourth quarter of 2004 compared with 12.1% for the fourth quarter of 2003. Full year 2004 revenues for the general rentals segment were $2.85 billion, an increase of 12.4% compared with $2.54 billion for 2003. Rental rates for the full year 2004 increased 7.5% and same-store rental revenues increased 10.9% from 2003. Rental revenues generated by sharing equipment among branches were 11.8% of segment rental revenues for the full year 2004 compared with 11.5% for the full year 2003. Traffic Control Segment The traffic control segment includes the rental of equipment for controlling traffic as well as related services and activities. Traffic control segment revenues were 8% of total revenues for the full year 2004. Fourth quarter 2004 revenues for the traffic control segment were $64.7 million compared with $74.9 million for the fourth quarter of 2003, a decline of $10.2 million or 13.6%. Full year 2004 revenues for the traffic control segment were $254.9 million compared with $330.2 million for 2003, a decline of $75.3 million or 22.8%. CEO Comments on Performance and Outlook Wayland Hicks, chief executive officer said, "2004 was an important year for United Rentals. We surpassed $3 billion of revenues for the first time and our free cash flow of $385 million was the highest in our company's history. Our intense efforts to improve rental rates resulted in a 7.5% rate improvement in 2004, our highest annual increase. "Our revenue growth of 8.4% continues to outpace our primary end market, private non-residential construction, which recovered 4% in 2004 according to Department of Commerce data. This achievement reflects strong revenue growth of 12.4% in our general rentals segment, partially offset by continued weakness in our traffic control segment. "Our 2005 outlook is for total revenues of $3.4 billion. This outlook assumes 11% revenue growth in the general rentals segment, partially offset by a continued decline in our traffic control segment. Growth in general rentals is expected to be driven by continuing our rate initiatives, targeted for at least a 5% increase in rental rates; expanding our rental fleet; the planned opening of 30 to 35 new locations; and increasing contractor supplies revenues 25%. Our outlook assumes continued modest growth in non-residential construction which, despite growth in 2004, is still about 20% below peak historical levels. "We'll finalize our results as soon as possible. However, it's important to take the extra time needed to review matters related to the SEC inquiry. In the interim, we have provided selected unaudited financial data that highlights our progress over the past year. "We continue to feel positive about industry fundamentals and the direction of our business. We remain focused on our goals of driving revenue growth, improving our margins and increasing our return on capital. We plan to achieve these goals primarily through strong organic growth and new branch openings." SEC Non-Public Fact-Finding Inquiry The SEC is conducting a non-public fact-finding inquiry of the company. The company is cooperating with the SEC, continues to provide information to the SEC and has formed a special committee of independent directors with separate counsel to review matters relating to the SEC inquiry. The inquiry appears to relate to a broad range of the company's accounting practices and does not seem to be confined to a specific time period. Restatement of Financial Results for Prior Periods to Reduce Income Tax Expense and Other Items During testing of the company's internal controls, as required by Section 404 of the Sarbanes-Oxley Act, the company determined that the provision for income taxes was higher than required for periods prior to 2004. The company has not finally determined the impact this will have on specific periods, but estimates the correction of this will result in a decrease in the provision for income taxes for prior years by a total of approximately $25 million, with a corresponding increase in net income. The company expects that it will restate its financial statements for the years 1999 through 2003 to correct the income tax provision. Accordingly, investors are cautioned not to rely on the company's historical financial statements. The company has determined that the control deficiencies that resulted in the income tax provision being higher than required represented a material weakness in the company's internal controls over financial reporting at December 31, 2004. The company believes that it has taken adequate measures to remedy this weakness. As previously reported, the company identified a material weakness in the third quarter partially relating to its self-insurance reserve estimation and evaluation process. The company is conducting additional testing of the process and reserve levels in 2004 and prior periods. The company is also evaluating whether a material weakness exists relating to a deficiency in reconciling physical inventory quantities to accounting records for certain types of bulk rental equipment inventory, which had an unreconciled difference of approximately $4 million. The company does not believe that any deficiency that has been identified would adversely impact the 2004 outlook or the selected unaudited financial data provided. However, the company's evaluation and testing of internal controls, including testing of any remediation of deficiencies, has not yet been completed. There can be no assurance as to the outcome of this testing or that additional material weaknesses will not be identified or adjustments required. United Rentals, Inc., is the largest equipment rental company in the world, with an integrated network of 730 rental locations in 47 states, ten Canadian provinces and Mexico. The company's 12,700 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 600 different types of equipment with a total original cost of $3.7 billion. United Rentals is a member of the Standard & Poor's MidCap 400 Index and the Russell 2000 Index(R) and is headquartered in Greenwich, Connecticut. Additional information about United Rentals is available at http://www.unitedrentals.com/ * * * As reported in the Troubled Company Reporter on Dec. 9, 2004, Fitch Ratings initiates coverage on United Rentals, Inc. -- UR -- and its principal operating subsidiary United Rentals, Inc. North America -- URNA. The ratings are: United Rentals, Inc.: -- Subordinated debt 'B'. United Rentals, Inc. (North America) (Guaranteed by United Rentals, Inc.): -- Senior secured debt 'BB'; -- Senior unsecured debt 'BB-'; -- Subordinated debt 'B'. Fitch says the Rating Outlook is Stable. Approximately $3.1 billion of securities are covered by Fitch's actions. As reported in the Troubled Company Reporter on Sept. 1, 2004, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating and its other ratings on United Rentals (North America), Inc., on CreditWatch with negative implications. The action followed the announcement by the company that it received notice from the SEC of a non-public, fact-finding inquiry of the company. Although no specific reason or scope has been cited for the investigation, the notice was accompanied by a subpoena requesting the production of documents relating to certain of the company's accounting records. USG CORPORATION: L&W Wants to Enter Into New Real Property Leases ----------------------------------------------------------------- Before they filed for bankruptcy, USG Corporation and its debtor-affiliates routinely entered into agreements for the lease of non-residential real property for use in operating their businesses. The majority of the Leases are for locations in which Debtor L&W Supply Corporation operates distribution centers. L&W stocks a wide range of construction materials and delivers construction materials to a job site and places them in areas where work is being done. L&W conducts its operations through approximately 185 centers located in 36 states, most of which are leased from third parties. The Debtors also have various other Leases for, among other things, warehouse and office space. On the average, the Debtors enter into approximately 70 lease transactions each year, each with an average five-year term. In addition, the aggregate rental payments over the initial term of each lease generally does not exceed $5 million. Since the Petition Date, certain of the Debtors' leases expired according to their terms, and the Debtors either extended the terms or executed new leases for the same locations. The Debtors also periodically identify new locations that are strategically beneficial or required for business operations, and enter into new leases with respect to these sites. Because entry into leases for those new and existing locations is in the ordinary course of their businesses, the Debtors have not sought Court approval for those lease transactions. A number of the Debtors' new or existing landlords have stated that they will not enter into leases with the Debtors without specific authorization from the Court. While the Debtors have indicated to those parties that no Court order is required, and while the Debtors believe that some landlords generally would agree with their position, some appear unwilling to take any "risk" on the issue. Instead, the landlords want the comfort of a Court order confirming the Debtors' inherent authority to enter into the new leases. Given the volume of their leasing activity, the Debtors relate that it would not be cost-effective, and it would be an unnecessary burden on the Court, to seek individual authority for each lease where a landlord might demand court authorization. The Debtors, therefore, ask the Court to enter an order authorizing them to enter into new leases or amend existing leases, provided that the base rent due under each lease or amended lease does not exceed $5 million. With respect to an amendment to a lease, the base rent due under any extended term would not exceed $5 million. The Debtors believe that these procedures will ensure their continued and uninterrupted leasing of strategic locations, which is necessary for the efficient operation of their businesses. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/--throughits subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 82; Bankruptcy Creditors' Service, Inc., 215/945-7000) V-ONE CORP: Proginet is Offering $2.05 Million to Buy Assets ------------------------------------------------------------ V-ONE Corporation is asking the U.S. Bankruptcy Court for the District of Maryland, Greenbelt Division, to approve a debtor-in- possession credit facility from Proginet Corporation (OTCBB: PRGF) and allow an expedited sale of its assets to Proginet. Kevin J. Shay, writing for The Business Gazette, reports that Proginet Corp., a Garden City, N.Y., developer of security software, is offering $2.05 million to buy V-ONE's assets. Located in Germantown, Maryland, V-ONE (fka Virtual Open Network Environment Corp.), is a global Internet security company offering secure, cost effective and easy to manage network solutions for the remote access, wireless and satellite markets. At Sept. 30, 2004, V-ONE's balance sheet shows $1 million in assets and $4 million in liabilities. The company's accumulated deficit topped $70 million at Sept. 30, 2004. V-ONE products have been deployed by U.S. government agencies charged with homeland security, including the FBI, NSA, and Departments of Defense, Justice and the Treasury, and by Fortune 1000 companies in healthcare, banking & finance, transportation and high-tech. People rely upon V-ONE's proven track record for providing SSL VPN information security technology for use over the Internet, intranets, extranets and private networks. For further information, see http://www.v-one.com/ VALLEY MEDIA: Can Start Soliciting Acceptances of Liquidating Plan ------------------------------------------------------------------ The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware approved the Disclosure Statement explaining Valley Media, Inc.'s Liquidating Chapter 11 Plan. Judge Walsh determined that the Disclosure Statement contained "adequate information" within the meaning of Section 1125 of the Bankruptcy Code. Valley Media is now authorized to solicit acceptances of its plan from creditors. Objections, if any, to the Plan must be filed by April 29, 2005, at 4:00 p.m. The Court will convene a hearing on May 6 at 9:00 a.m. to discuss the merits of the Plan. As previously reported, Valley Media filed its Liquidating Plan on Feb. 9, 2005. The Plan provides for the liquidation and distribution of all of Valley Media's assets to all holders of allowed claims and interests. Valley Media projects that it will have approximately $1.4 million to $2.4 million of cash on hand on the Effective Date. It also intends to pursue $66 million of litigation claims and avoidance actions to increase the amount of money available for distribution to creditors. A Liquidating Trust will be established on the Effective Date. All assets of the estate including litigation claims and avoidance actions will be transferred to the Trust for redistribution to creditors. Administrative claims, secured claims and priority claims will be paid in full on the Effective Date. General unsecured creditors are expected to recover $0.006 to $0.023 on the dollar. Subordinated claims and equity holders get nothing under the Plan. Headquartered in Woodland, California, Valley Media, Inc. -- http://www.valleymedia.com/-- was a full-line distributor of music and video entertainment products. The Company filed for chapter 11 protection on November 20, 2001 (Bankr. D. Del. Case No. 01-11353). Bernard George Conaway, Esq., at Fox Rothschild LLP, Christopher A. Ward, Esq., at The Bayard Firm, Christopher Martin Winter, Esq., at Duane Morris LLP, et. al. represent the Debtor. When the Debtor filed for protection from its creditors, it listed $241,547,000 in total assets and $259,206,000 in total debts. VANGUARDE MEDIA: Liquidation Brings Void to Black Community ----------------------------------------------------------- The Hilltop, the student-run newspaper at Howard University, reports that Vanguarde Media, publishers of Savoy, Honey and Heart & Soul magazines, is going out of business and all three of its magazines will become extinct. "In a market where there are not many black magazines to begin with, it can feel like a major loss when a black magazine does not survive. We have already seen the end of BET Weekend, Emerge, Impact, and Code, just to name a few, and now loosing three black magazines at once is a detrimental blow," the paper said. The Hilltop relates that Keith Clinkscales, who was the chairman and CEO of Vanguarde, stated that his efforts to raise funds in order to keep the business operating had been unsuccessful. Provender Capital Group, Vanguarde's primary financial backer, blamed the shutdown on "dramatically lower advertising revenue due to the downturn in the economy." The Hilltop says that Vanguarde's bankruptcy will put approximately 70 people out of work, "but the loss of this company will be lamented by a much greater number of people." Vanguarde Media, Inc., and Vanguarde Holdings, Inc., publishes magazines for the urban woman, the affluent African-American, and people in the urban music business. The company filed for Chapter 11 Protection on November 26, 2003 (Bankr. S.D.N.Y. Case No. 03-17509). Ira A. Reid, Esq., at Baker & McKenzie represents the Debtors. VERTIS INC: Moody's Junks $348 Million 9.75% Sr. Secured Notes -------------------------------------------------------------- Moody's Investors Service has downgraded all ratings of Vertis, Inc., including its: * $343 million 9.75% senior secured second lien notes due 2009 -- to B3 from B2 * $348 million 10.875% senior notes due 2009 -- to Caa1 from B3 * $284 million 13 1/2% senior subordinated notes due 2009 -- to Caa2 from Caa1 * Senior implied rating -- to B3 from B2 * Issuer rating -- to Caa1 from B3 The ratings outlook remains negative. The downgrade reflects a heightening of competitive pressure in virtually all of Vertis's markets, lack of sustained recovery from the recent market slump in insert spending, and continued setbacks in its UK operations. The company has failed to meet Moody's expectations for top line growth and leverage reduction. Moody's expects that Vertis's cash flow generation will be insufficient to materially reduce leverage in the intermediate term. The ratings recognize Vertis's scale, its solid market position in the newspaper insert and direct mail businesses and the experience of its management team. Vertis's leverage stood at approximately 6.6 times total debt to EBITDA at the end of December 2004. Adjusting for the securitization facility, parent mezzanine debt, and unfunded pension obligations, leverage stood at 7.5 times, which is a fully leveraged profile. Based upon a valuation of 6.5 times, Moody's considers that full recovery prospects are unlikely in a distress scenario. In particular, the Caa2 senior subordinated note rating underscores the weak asset protection coverage afforded to junior debtholders. Moody's does not rate $158 million in holding company mezzanine debt, which is structurally subordinated to all operating company obligations, and represents the company's most junior debt obligation. Because newsprint costs are passed-through to Vertis's customers, recent increases in newsprint costs have created an appearance of top line improvement. Weakness in the US dollar has similarly provided support to Vertis's top line masking a weakness in the fundamentals of its European business model. Moody's estimates that, adjusting for pass-through costs, Vertis's 2004 North American revenues would have been relatively flat and, adjusting for currency changes, its European operations would have shown a top line decline around 10% over the prior year. After three quarters of rebounding performance, Vertis's fourth quarter 2004 North American EBITDA slipped by 9% over the prior year, while its European business recorded EBITDA losses. At the end of December 2004, Vertis recorded liquidity of $116 million mainly represented by availability under its new unrated $200 million senior secured credit facility. Moody's considers that this level of liquidity will be ample to cover Vertis's seasonal working capital needs. In December 2004, the company put into place a new $200 million asset based senior secured revolving credit facility with only one financial covenant (a minimum EBITDA level) providing greater flexibility than its prior cash flow based revolver. Moody's expects that the company will successfully renew its $130 million off-balance sheet accounts receivable securitization facility which matures in 2005. The negative outlook incorporates Moody's expectation that sales and cash flow will remain pressured by competitive elements in the near-term and that any improvement in volume will continue to be offset by tighter pricing. Importantly, Vertis's UK operations have begun to create a drain on the company's financial resources. Moody's will continue to monitor the results of the recent UK restructuring initiatives. Ratings lift is unlikely in the near term. The company's pressured financial condition is largely the result of factors outside of management's control. Excess capacity in the insert business continues to result in a buyers market, where a relatively small group of national retailers can dictate ever- lowering price points in an increasingly commoditized environment. Vertis, Inc., a leading provider of integrated advertising products and marketing services, recorded 2004 revenues of $1.6 Billion. The company is headquartered in Baltimore, Maryland. WHX CORP: U.S. Trustee Appoints 3-Member Creditors Committee ------------------------------------------------------------ The United States Trustee for Region 2 appointed three creditors to serve on the Official Committee of Unsecured Creditors of WHX Corporation's chapter 11 case: 1. Steel Partners II, L.P. Attn: Jack Howard and Terrye Dewey 590 Madison Avenue, 32nd Floor New York, New York 10022 Phone: 212-758-3232 x 120 2. Pension Benefit Guaranty Corporation Attn: Garth Wilson 1200 K Street, N.W. Washington, D.C. 20005-4026 Phone: 202-326-4020 x. 3878 3. J.P. Morgan Trust Company, National Association Attn: Harold L. Kaplan and Mark F. Hebbeln 6525 West Campus Oval New Albany, Ohio 43054 Phone: 312-569-1000 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in New York City, New York, WHX Corporation -- http://www.whxcorp.com/-- is a holding company structured to acquire and operate a diverse group of businesses on a decentralized basis. WHX's primary business is Handy & Harman, a diversified industrial manufacturing company servicing the electronic materials, specialty wire and tubing, specialty fasteners and fittings, and precious metals fabrication markets. The Company filed for chapter 11 protection on March 7, 2005 (Bankr. S.D.N.Y. Case No. 05-11444). When the Debtor filed for protection from its creditors, it reported total assets of $406,875,000 and total debts of $352,852,000. WHX CORP: PwC Approved as Independent Auditors & Tax Advisors ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave WHX Corporation permission, on an interim basis, to employ PricewaterhouseCoopers LLP as its independent auditors and tax advisors. PricewaterhouseCoopers will: a) perform an audit of the Debtor and its non-debtor subsidiaries' consolidated financial statements and their internal control over financial reporting, and perform tests of the accounting records and its related procedures; b) prepare reports on the consolidated financial statements and the schedules supporting those financial statements, and prepare management's assessment regarding the effectiveness of the Debtor's internal control over financial reporting; c) assess the accounting principles used and significant estimates made by management, and evaluate the overall consolidated financial statement presentation; d) obtain an understanding of internal control over financial reporting, evaluate management's related assessment, test and evaluate the design and operating effectiveness of internal control over financial reporting; e) review the condensed consolidate balance sheets of the Debtor as of March 31, June 30 and September 30, and the related condensed consolidated statement of operations and cash flows for the quarterly and year-to-date reports and other quarterly reports; f) analyze accounting issues and advices to the Debtor's management regarding the proper accounting treatment of event, and review and comment on the Debtor's documents to be filed with the SEC; and g) provide all other auditing and tax advisory services as requested and agreed by the Debtor and PWC. Richard W. Ellis, C.P.A., a Partner at PricewaterhouseCoopers, discloses that the Firm received a $40,000 retainer. Mr. Ellis reports PricewaterhouseCoopers' professionals bill: Accounting Advisory: Designation Hourly Rate ----------- ----------- Partners $603 - $748 Directors/Senior Managers/Managers $284 - $458 Senior/Staff Accountants $174 - $186 Paraprofessionals $81 - $100 Advisory Services: Designation Hourly Rate ----------- ----------- Partners/Principals/Directors $695 - $755 Senior Managers/Managers $360 - $497 Senior Associates $258 - $271 Tax Services: Designation Hourly Rate ----------- ----------- Partners/Principals/Directors $539 - $803 Senior Managers/Managers $300 - $521 Senior/Staff Consultants $240 - $252 PricewaterhouseCoopers assures the Court that it does not represent any interest adverse to the Debtor or its estate. The Court will convene a hearing at 11:30 a.m., on March 31, 2005, to consider the Debtor's request to employ PWC on a permanent basis. Headquartered in New York City, New York, WHX Corporation -- http://www.whxcorp.com/-- is a holding company structured to acquire and operate a diverse group of businesses on a decentralized basis. WHX's primary business is Handy & Harman, a diversified industrial manufacturing company servicing the electronic materials, specialty wire and tubing, specialty fasteners and fittings, and precious metals fabrication markets. The Company filed for chapter 11 protection on March 7, 2005 (Bankr. S.D.N.Y. Case No. 05-11444). When the Debtor filed for protection from its creditors, it reported total assets of $406,875,000 and total debts of $352,852,000. WILLIAMS PROD: Moody's Reviews B2 Debt Rating for Possible Upgrade ------------------------------------------------------------------ Moody's Investors Service placed the debt ratings of Williams Production RMT Company (RMT, B2 Senior Implied) under review for possible upgrade. This action reflects the continuing progress that The Williams Companies, Inc. (Williams, Ba3 Senior Implied) has made in its domestic exploration and production business, including consistent reserves replacement, competitive finding and development costs, increased production and reduced leverage. The review for possible upgrade recognizes improvements disclosed for Williams E&P, but further analysis is necessary to quantify the ratings for RMT specifically. From mid-2002 through the first half of 2004, Williams restructured its business primarily by selling assets, including oil and gas properties, to reduce debt. Williams also limited its capital spending during this period, reducing drilling activity to one rig for a period of time. During 2004, Williams E&P resumed a more normal pace of development activity and, as a result, increased its total domestic proved reserves by 10%, to 498 million barrels of oil equivalent, and its proved developed reserves by 16% over the comparable year end 2003 values. Williams E&P replaced 248% of its 2004 production from all sources and 236% organically (extensions and discoveries, net of revisions). This continues Williams E&P's recent trend of consistent reserves replacement with 3-year reserves replacement from all sources and from the drillbit both at about 200%. Williams E&P replaced its production at competitive F&D costs. Both all-sources and organic F&D for 2004 were about $5.60 per boe, somewhat higher than its 3- year all-sources F&D of $5.10 and 3-year organic F&D of $5.23 per boe. Williams E&P's total 2004 domestic production increased less than 3% over full year 2003, reflecting stronger production early in 2003 and production from properties sold in 2003 as well as the reduction in drilling activity noted earlier. More importantly, Williams E&P increased its production in each successive quarter of 2004 with 4Q04 production 27% higher than 4Q03. Total 2005 production is expected to increase an additional 24% over 2004. Williams E&P's financial performance did not improve as much because a significant proportion of its 2004 production was hedged at below market natural gas prices. Many of these hedges have rolled off and Williams E&P should benefit from the current high commodity price environment as less than half of its projected 2005 production is hedged. Williams tendered for the senior unsecured notes at RMT in 2004, reducing total debt from $650 million at the beginning of the year to $525 million by year end. The combination of lower debt levels and higher proved developed reserves reduced RMT's leverage, as measured by debt per proved developed barrel of oil equivalent (debt per PD boe), from just over $6.00 at the end of 2003 to below $4 per PD boe at year end 2004. The ratings review will include analysis of RMT's final year end 2004 reserves, including the mix of PD and proved undeveloped reserves, F&D costs, expected 2005 production, leveraged full- cycle ratio for both 2004 and projected 2005, and leverage, including any further debt reduction plans. The review will also incorporate today's announcement that Williams E&P intends to accelerate its development activity in the Piceance Basin of western Colorado by contracting for 10 additional drilling rigs starting late in 2005. The increased drilling activity addresses one ratings concern, which is Williams E&P's high percentage of PUD reserves. However, this will also significantly increase capital spending, which will be evaluated in the context of Williams E&P's expected cash flow from operations. RMT is an indirect wholly owned subsidiary of Williams that owns and operates natural gas properties in the Piceance Basin of western Colorado and the Powder River Basin of northeastern Wyoming. These two basins represented 71% of Williams E&P's year end 2004 total domestic proved reserves and 72% of Williams E&P's 2004 domestic natural gas production. Ratings placed under review include those of Williams Production RMT Company. Williams Production RMT Company, an indirect wholly owned subsidiary of The Williams Companies, Inc., is an independent exploration and production company headquartered in Tulsa, Oklahoma. WORLDCOM INC: Settles Dispute Over 10 Champion Comms. Claims ------------------------------------------------------------ The Reorganized WorldCom, Inc., its debtor-affiliates and Champion Communications, Ltd., are parties to an Agreement for MCI 900 Service Billing and Collection. The Reorganized Debtors rejected the 900 B&C Agreement. The Reorganized Debtors owe Champion certain amounts on account of prepetition indebtedness under the 900 B&C Agreement. The Parties agree that the Reorganized Debtors' prepetition indebtedness due Champion pursuant to the 900 B&C Agreement is $13,003,770. Champion has transferred certain rights to its prepetition claim to Longacre Master Fund, Ltd. Longacre subsequently transferred certain rights to the prepetition claim it purchased from Champion to SPCP Group, L.L.C. Champion, Longacre and SPCP filed these proofs of claim on account of prepetition indebtedness for the 900 B&C Agreement: Claim No. Claim Amount --------- ------------ 6452 $8,137,433.49 27166 2,019,190.40 27598 2,019,190.40 27599 8,137,433.49 27600 8,137,433.49 33875 4,418,068.37 34577 9,638,271.00 34578 66,298.00 34579 9,638,271.00 34633 66,298.00 The Reorganized Debtors filed objections to the Champion Proofs of Claim, which, inter alia, seeks to disallow and expunge the claims. The Parties have reached an agreement to resolve the Champion Proofs of Claim and the prepetition indebtedness due under the 900 B&C Agreement as. In a Court-approved stipulation, the parties agree that: -- Claim No. 34579 will be amended and allowed as a Class 6 claim for $8,585,701.78. This amended claim will be allocated between Champion and Longacre: (a) Champion will be the record holder of and have rights to a portion of the allowed Class 6 claim for $3,825,130.29. (b) Longacre will be the record holder of and have rights to a portion of the allowed Class 6 claim for $4,760,571.49. -- SPCP will be the record holder of and have rights to an allowed Class 6 claim for $4,418,068.37 for proof of claim 33875. -- The Reorganized Debtors will pay the amended proofs of claim 34579 and 33875 in accordance with the Plan of Reorganization directly to the record holders, Champion, Longacre and SPCP. -- Claim Nos. 6452, 27166, 27598, 27599, 27600, 34577, 34578, and 34633 will be deemed withdrawn with prejudice pursuant to Federal Rule of Bankruptcy Procedure 3006 and will be expunged. -- The Reorganized Debtors will be deemed to have withdrawn, with prejudice, any objections to the Champion Proofs of Claim. -- The parties will exchange mutual releases. -- Champion agrees that the Reorganized Debtors can recover 28% of any caller credits and/or other chargebacks associated with prepetition calls made to Champion's 900 numbers, provided the Chargebacks have not been previously recovered on Settlement Statements dated on or before October 15, 2004. Champion agrees that the Reorganized Debtors can offset 28% of the Chargebacks against any postpetition amounts due Champion under its existing 900 Billing and Collection Agreement. 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. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Former Deloitte Director Dov Frishberg Joins Alvarez & Marsal --------------------------------------------------------------- Alvarez & Marsal, a global professional services firm, welcomes Dov Frishberg, Ph.D., formerly the director of economic services at Deloitte & Touche, to the firm's Dispute Analysis and Forensics group as a managing director in the New York office. With over 20 years of experience in economic and financial consulting to the legal community, Dr. Frishberg has assisted attorneys in all facets of commercial litigation and regulatory response. He has provided expert analysis and opinions related to matters involving securities fraud and valuation, patent and trademark infringement, antitrust and competitive restraints, mass torts class actions, employment discrimination and wage and hour claims, disputes among sovereigns, reimbursements for health care services, assessment of environmental damages, injury from failure to finance, post-merger adjustments, and more. Beyond services related to commercial disputes and regulations, Dr. Frishberg regularly leads assignments requiring the application of economic, statistical and mathematical techniques to review, plan, and forecast business operations and opportunities. Recently he has been increasingly involved in applying his expertise in these fields to analyses addressing accounting and auditing issues such as revenue recognition, valuation of contingent liabilities, and the treatment of long- lived assets, particularly as accounting practices have come under heightened scrutiny. Prior to his work at Deloitte & Touche, Dr. Frishberg led the litigation consulting practice at BDO Seidman LLP. He earned master's degrees and a doctorate degree in economics from Columbia University. Alvarez & Marsal's Dispute Analysis and Forensics group provides a range of analytical and investigative services to major law firms, corporate counsel and management involved in complex legal and financial disputes. DA&F provides sophisticated financial and economic analysis to assist clients in resolving high-stakes issues ranging from internal matters to litigation -- in the boardroom and the courtroom. The group also conducts corporate and technology investigations to help companies identify and mitigate risks and properly address internal or external financial inquiries. DA&F services include: expert testimony, lost profits analysis, business valuation, business interruption claims, accounting and financial analysis, claims preparation and review, arbitration service, forensics investigations, and technology forensics investigations including electronic evidence and computer forensics analysis. About Alvarez & Marsal Alvarez & Marsal is a leading global professional services firm with expertise in guiding companies and public sector entities through complex financial, operational and organizational challenges. Employing a unique hands-on approach, the firm works closely with clients to improve performance, identify and resolve problems and unlock value for stakeholders. Founded in 1983, Alvarez & Marsal draws on a strong operational heritage in providing services including turnaround management consulting, crisis and interim management, performance improvement, creditor advisory, financial advisory, dispute analysis and forensics, tax advisory, real estate advisory and business consulting. A network of nearly 400 seasoned professionals in locations across the US, Europe, Asia and Latin America, enables the firm to deliver on its proven reputation for leadership, problem solving and value creation. For more information, visit http://www.alvarezandmarsal.com/ * LeBoeuf Lamb Moves Bankr. Practice to Chicago, Legal Week Says ---------------------------------------------------------------- LeBoeuf Lamb Greene & & MacRae, L.L.P., is shuttering its Salt Lake City office and shifting its bankruptcy practice from Salt Lake City to its new office in Chicago, according to a report by Antony Collins at Legal Week. LeBoeuf chairman Steven Davis told Legal Week that Chicago would function as the "headquarters for [LeBoeuf's] bankruptcy practice". Legal Week adds that LeBoeuf offered the Salt Lake City staff the chance to relocate to Chicago. LeBoeuf Lamb's six Bankruptcy and Corporate Reorganization Practice partners are: John P. Campo, Esq. Peter A. Ivanick, Esq. Elizabeth Page Smith, Esq. LeBoeuf, Lamb, Green & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 Telephone 212-424-8000 Fax 212-424-8500 Neal L. Wolf, Esq. LeBoeuf, Lamb, Green & MacRae, L.L.P. Two Prudential Plaza, Suite 3700 180 North Stetson Avenue Chicago, IL 60601 Telephone 312-794-8000 Fax 312-794-8100 Todd L. Padnos, Esq. Bennett G. Young, Esq. LeBoeuf, Lamb, Green & MacRae, L.L.P. One Embarcadero Center San Francisco, CA 94111-3619 Telephone 415-951-1100 Fax 415-951-1180 LeBoeuf Lamb has one of the largest and most accomplished bankruptcy and restructuring practices in the United States. With more than 20 highly experienced lawyers practicing in the area on a full-time basis, offering top-quality service in this specialized field of law. LeBoeuf Lamb advises clients engaged in a wide variety of industries (including e-commerce, energy, financial services/insurance, manufacturing, real estate and transportation), commercial banks, investment banks and professional services firms. We have counseled the full range of debtors, creditors, creditors' committees, Chapter 11 trustees, indenture trustees for public debt issues, buyers and sellers of troubled companies, secured lenders and equipment lessors. LeBoeuf Lamb lawyers have represented debtors, creditor parties and trustees in some of the largest and best-known bankruptcies of the past two decades. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Airgate PCS Inc. PCSA (94) 299 86 Akamai Tech. AKAM (126) 183 62 Alaska Comm. Syst. ALSK (12) 650 85 Alliance Imaging AIQ (41) 654 36 Amazon.com AMZN (227) 3,249 919 AMR Corp. AMR (581) 28,773 (2,047) Amylin Pharm. Inc. AMLN (87) 358 282 Arbinet-Thexchan. ARBX (1) 70 11 Atherogenics Inc. AGIX (19) 93 77 Blount International BLT (283) 423 103 CableVision System CVC (1,944) 11,393 248 CCC Information CCCG (131) 80 (8) Cell Therapeutic CTIC (52) 174 87 Centennial Comm CYCL (516) 1,608 168 Choice Hotels CHH (203) 262 (32) Cincinnati Bell CBB (600) 1,987 (20) Clorox Co. CLX (457) 3,710 (422) Compass Minerals CMP (109) 642 99 Conjuchem Inc. CJC (35) 19 13 Cotherix Inc. CTRX (44) 25 20 Cubist Pharmacy CBST (75) 155 (6) Delta Air Lines DAL (5,519) 21,801 (2,335) Deluxe Corp DLX (179) 1,533 (337) Denny's Corporation DNYY (246) 730 (80) Dollar Financial DLLR (47) 335 82 Domino's Pizza DPZ (575) 421 (16) Eagle Hospitality EHP (26) 177 N.A. Echostar Comm-A DISH (2,078) 6,029 (41) Emeritus Corp ESC (102) 693 (53) Empire Resorts NYNY (13) 61 7 Fairpoint Comm. FRP (162) 831 (36) Foster Wheeler FWHLF (441) 2,268 (212) Foxhollow Tech. FOXH (60) 28 16 Graftech International GTI (44) 1,036 284 Hawaiian Holding HA (160) 236 (60) I2 Technologies ITWH (180) 385 85 IMAX Corp IMX (42) 230 17 Int'l Wire Group ITWG (80) 410 97 Isis Pharm. ISIS (18) 255 116 Life Sciences LSRI (5) 173 1 Lodgenet Entertainment LNET (68) 301 20 Majesco Holdings MJES (41) 26 9 Maxxam Inc. MXM (649) 1,017 72 Maytag Corp. MYG (75) 3,020 535 McDermott Int'l MDR (338) 1,245 (33) McMoran Exploration MMR (85) 156 29 New York & Co. NWY (14) 280 43 Northwest Airline NWAC (2,824) 14,042 (919) Northwestern Corp. NWEC (603) 2,445 (692) ON Semiconductor ONNN (381) 1,110 215 Pegasus Comm PGTV (203) 235 52 Per-se Tech. Inc. PSTI (25) 169 31 Phosphate Res. PLP (484) 280 6 Pinnacle Airline PNCL (18) 147 26 Primedia Inc. PRM (1,163) 1,577 (203) Protection One PONN (196) 475 (525) Quality Distribution QLTY (26) 377 9 Qwest Communication Q (2,612) 24,324 (68) SBA Comm. Corp. SBAC (27) 915 11 Sepracor Inc. SEPR (331) 1,039 636 St. John Knits Inc. SJKI (57) 208 73 Syntroleum Corp. SYNM (8) 48 11 US Unwired Inc. UNWR (263) 640 (335) U-Store-It Trust YSI (34) 536 N.A. Vector Group Ltd. VGR (48) 528 110 Vertrue Inc. VTRU (33) 486 31 WR Grace & Co. GRA (118) 3,087 774 Young Broadcasting YBTVA (12) 798 85 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, 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. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***