/raid1/www/Hosts/bankrupt/TCR_Public/050404.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, April 4, 2005, Vol. 9, No. 78
Headlines
ACCERIS COMMS: Equity Deficit Widens to $61,965,000 at Dec. 31
ACCERIS COMMS: Selling Corporation to Platinum Equity's Matrix
ADAMS OUTDOOR: S&P Puts B+ Rating on Proposed $285M Sr. Sec. Loan
ADELPHIA COMMS: Wants to Tap Holland & Knight as Special Counsel
ALASKA AIRLINES: Finalizes $160M Recapitalization with BofA
ALLIANCE ATLANTIS: Appoints R. J. Steacy to Board & Audit Comm.
ALLIANCE ATLANTIS: Earns $9.1 Million of Net Income in 2004
ALOHA AIRLINES: Closes $65 Mil. DIP Financing & Pays Off ATSB
AMERICAN AIRLINES: Corrects Media Report on Outsourcing with TWU
AMERICAN BUSINESS: Wants Until June 19 to Decide on Eight Leases
AMERICAN BUSINESS: Wants to Walk Away from Utah & Irvine FF&E
ARMSTRONG HOLDINGS: Incurs $80.8 Million Net Loss in 2004
ASSET BACKED: Moody's Assigns Ba1 Rating to Class M8 Sub. Cert.
ATA HOLDINGS: Okun Enterprises Wins Bid for Chicago Express
ATA AIRLINES: Court Lifts Stay For Mellins to Pursue Lawsuit
AUBURN FOUNDRY: The Reserve Group Offers $14 Mil. for Two Plants
BANC OF AMERICA: Fitch Puts Low-B Ratings on Four Mortgage Certs.
BLOCKBUSTER INC: Moody's Downgrades Sr. Implied Debt Rating to Ba3
CAESARS ENT: Names S. Rosen as Flamingo Las Vegas' Interim Pres.
CASCADES INC: Sells Wood Wyant Unit to Groupe Sani-Marc for $23.2M
CATHOLIC CHURCH: Portland Gets Court OK to Hire Hamilton as Expert
CHAMPIONSHIP AUTO: Delays 10-K Filing to Complete Financial Audit
CHARTER COMMS: Inadequate Surplus Spurs Non-Payment of Dividends
CMS ENERGY: Fitch Affirms Ratings After Issuance of 20MM Shares
COMMERCIAL FEDERAL: Fitch Puts Ratings on Watch Negative
COMMERCIAL FEDERAL: Moody's Affirms Long-Term Deposits Ba1 Rating
COMSTOCK RESOURCES: Moody's Affirms Low-B Debt Ratings
CORECOMM NEW YORK: Court Extends Solicitation Period Until May 31
CORECOMM NEW YORK: Plan Confirmation Hearing Set for April 13
CRDENTIA CORP: Acquires Nursing Services Center in Detroit
CREDIT SUISSE: Fitch Assigns Low-B Ratings to Two Mortgage Certs.
CREDIT SUISSE: Moody's Junks Class O Pass-Through Certificates
CYPRESS HILLS APARTMENTS: Voluntary Chapter 11 Case Summary
D-BOX TECHNOLOGIES: Completes $2 Million Private Placement
DELPHI CORP: Audit Committee Completes Internal Accounting Probe
DELPHI CORP: Will Pay Quarterly Dividends on May 2
DELTAGEN INC: Pays $4 Mil. to Lexicon as Initial Claim Settlement
DEX MEDIA: Pays Down $131 Million Bank Debt in First Quarter
DONNKENNY INC: Judge Drain Approves Disclosure Statement
DRESSER INC: Restates Financial Statements & Delays 10-K Filing
FEDERAL-MOGUL: Appoints Mario Leone as Sr. Vice President & CIO
FRESH CHOICE: Can't File Annual Report with SEC On Time
GENEVA STEEL: Committee Wants a Trustee & Pushes CEO Johnsen Out
HAPPY KIDS: Creditors Committee Taps Traub Bonacquist as Counsel
HAPPY KIDS: Committee Taps FTI Consulting as Financial Advisors
HAWAIIAN AIRLINES: Showdown With Pilots Continued to Apr. 13
HAYES LEMMERZ: Seeks to Amend Credit Agreement
HIGH VOLTAGE: U.S. Trustee Appoints 7-Member Creditors Committee
HUSMANN-PEREZ: Voluntary Chapter 11 Case Summary
IFT CORP: Losses & Deficit Trigger Going Concern Doubt
INTELIDATA TECH: Auditors Express Going Concern Doubt
INTERNAP NETWORK: Posts $18.1 Million Net Loss in F.Y. 2004
JOHN DECONIE: Case Summary & 20 Largest Unsecured Creditors
KAISER ALUMINUM: Dec. 31 Balance Sheet Upside Down by $2.4 Billion
KMART CORP: Asks Court to Compel $6,136,910 Refund from IRS
M/I HOMES: S&P Places BB Rating on $150 Million Senior Notes
MASONITE INT'L: Shareholders Okay KKR Stile Acquisition's Bid
MAUREEN LENAHAN: Case Summary & 20 Largest Unsecured Creditors
MCI INC: Resuming Talks with Qwest to Discuss Increased Bid
MIRANT CORP: Court Denies Efforts to Suppress Expert Testimony
MIRANT CORP: Two Parties Say Apr. 11 Valuation Hearing Too Early
MIRANT CORP: Wants to Limit Valuation Reports Distribution
MORGAN STANLEY: Fitch Puts Low-B Ratings on Six Mortgage Certs.
MORTGAGE ASSET: Fitch Rates $2 Mil. Class B Mortgage Certs. at BB
NORTEL NETWORKS: Names Gary Kunis as Chief Technology Officer
NOVELIS INC: Incurs $93 Million Net Loss in 2004 Fourth Quarter
ORMET CORP: Judge Sellers Confirms Chapter 11 Plan
OWENS CORNING: Judge Fullam Estimates Asbestos Claims at $7 Bil.
OWENS CORNING: Releases 4th Quarter & Annual 2004 Results
PACER INTERNATIONAL: Moody's Confirms Low-B Debt Ratings
QWEST COMMS: Increases MCI Takeover Bid to $8.9 Billion
QWEST COMMS: MCI Resuming Talks to Discuss Increased Bid
SALT CREEK: Fitch Rates $500,000 Class B-5$L Notes at BB-
SEARS HOLDINGS: Discloses Cash & Stock Elections Results
SR TELECOM: Incurs $86.1 Million Net Loss in 2004
STELCO INC: Appellate Ct. Reinstates Keiper & Woollcombe to Board
STELCO INC: Globe and Mail Says Mittal Steel's Kicking the Tires
SUNSET PARK: Moody's Assigns Ba3 Rating to $3 Mil. Class E Notes
TCT TECHNICAL: Case Summary & 20 Largest Unsecured Creditors
TIMKEN CO: Moody's Affirms Sr. Implied & Sr. Unsec. Ba1 Ratings
TOWER AUTOMOTIVE: Committee Wants to Retain Akin Gump as Counsel
TRESTLE HOLDINGS: Auditors Express Going Concern Doubt
UNIVERSAL ACCESS: Vanco Direct to Buy Assets for $13 Million
UNITED PRODUCERS: Files for Chapter 11 Protection in S.D. Ohio
UNITED PRODUCERS: Case Summary & 25 Largest Unsecured Creditors
US AIRWAYS: Court Approves Investment Pact with Republic Airways
US AIRWAYS: Court Extends Exclusive Plan Filing Period to May 31
WELLS FARGO: Fitch Puts Low-B Ratings on Classes B-4 & B-5 Certs.
WHITEHEAD MANN: Case Summary & 20 Largest Unsecured Creditors
WHITEHEAD MANN: Files Prepackaged Chapter 11 Plan in New York
WORLDCOM INC: Michael Jordan Wants Claim Objection Overruled
W.R. GRACE: Acquires Concrete Admixture Business in Sweden
WYNDHAM INT'L: Moody's Junks $140M Sr. Sec. 2nd Lien Term Loan C
WYNDHAM INTERNATIONAL: S&P Junks $140 Million Second Lien Loan
* Glass & Associates Welcomes Dalton Edgecomb and Jerry Sepich
* Ernst & Young & Ellis Foster Combine British Columbia Practices
* BOND PRICING: For the week of March 28 - April 1, 2005
*********
ACCERIS COMMS: Equity Deficit Widens to $61,965,000 at Dec. 31
--------------------------------------------------------------
Acceris Communications Inc. (OTCBB:ACRS) reported its financial
results for the year ended December 31, 2004.
For the year ended December 31, 2004, the Company's total
operating revenue was $113.1 million compared to $135.9 million
in 2003. The Company had a loss from continuing operations of
$22.9 million compared to a loss from continuing operations of
$32.0 million for the year ended December 31, 2004. The Company
recorded a net loss of $22.8 million for the year ended
December 31, 2004, versus a net loss of $31.4 million for the year
ended December 31, 2003. The net loss per common share was
$1.18 in 2004 versus a net loss per common share of $4.48 in 2003.
Highlights of 2004:
-- The Company reduced its loss from continuing operations in
2004 compared to 2003 through integration initiatives. The
Company's operations during 2004 were negatively impacted by
the decision, in mid 2004, to halt geographic expansion of
its local dial tone offering as a direct result of
regulatory uncertainty in the domestic markets. In 2005,
the Company suspended efforts to acquire new local dial tone
customers, but will continue to service its existing local
customers. The Company may re-enter the market when it can
enter into acceptable wholesale agreements.
-- Acceris' ongoing operating losses were funded in 2004 by
Counsel Corporation under its Keep Well agreement, from the
proceeds on the sale of shares held in Buyers United Inc.
and from the issuance of a $5 million convertible three-year
term note. Acceris will require additional funding in 2005
to continue to execute on its business plan. Counsel's Keep
Well with Acceris expires on June 30, 2005 and is not
expected to be extended beyond its current maturity.
-- Significant structural changes continue to occur in both the
International and US telecommunications markets. Based on
the extent and the pace of these changes, coupled with
financial constraints, Acceris has concluded that it should
consider opportunities to merge or dispose of its
telecommunications operations.
-- Acceris Communications Technologies was granted a patent by
the State Intellectual Property Office of the People's
Republic of China for its proprietary technology that
enables Voice over Internet Protocol communications.
Acceris' international patent portfolio and pending
applications are founded on what Acceris believes to be
seminal patents in VoIP (US Patent no. 6243373 and US Patent
no. 6438124).
-- Using its patented technology and platform, Acceris launched
an enhanced services product that includes features such as
find-me/follow-me, on-the-fly conferencing, unified
voicemail and message distribution. Acceris plans to expand
its offerings and utilize its patented technology to offer a
competitive VoIP solution to the marketplace.
-- Acceris Communications Technologies initiated litigation to
protect its VoIP patent rights while, at the same time,
pursuing a licensing program for its intellectual property.
-- Acceris became involved in shareholder litigation in 2004,
the details of which are disclosed in the Form 10K filed
with the Securities and Exchange Commission. The Company
believes that these claims are without merit and intends to
continue to vigorously defend these actions.
"Acceris' traditional long distance telephone business requires
greater scale to effectively compete. Given the significant
changes that are occurring in the industry, a merger or disposal
of our telecommunications business is a logical step. As well,
Acceris must focus its resources on deriving value from its
significant investment in VoIP technology. Acceris owns an
international portfolio of VoIP patents, has a history of
providing VoIP networks and services, and has built and developed
its internal VoIP expertise. By doing so, we will be in a better
position to generate shareholder value." said Kelly Murumets,
President of Acceris Communications.
Acceris Communications Inc. -- http://www.acceris.com/-- is a
broad based communications company serving residential, small and
medium-sized business and large enterprise customers in the United
States. A facilities-based carrier, it provides a range of
products including local dial tone and 1+ domestic and
international long distance voice services, as well as fully
managed and fully integrated data and enhanced services. Acceris
offers its communications products and services both directly and
through a network of independent agents, primarily via multi-level
marketing and commercial agent programs. Acceris also offers a
proven network convergence solution for voice and data in Voice
over Internet Protocol communications technology and holds two
foundational patents in the VoIP space.
As of December 31, 2004, the Company's equity deficit widened
to $61,965,000 compared to a $42,953,000 equity deficit at
December 31, 2003.
ACCERIS COMMS: Selling Corporation to Platinum Equity's Matrix
--------------------------------------------------------------
Acceris Communications Inc. (OTCBB:ACRS) entered into a letter of
intent to sell its 100% ownership interest in its communications
services subsidiary, Acceris Communications Corp., to Matrix
Telecom(R), a Platinum Equity company.
Under the letter of intent, Acceris Communications Inc. would
receive cash and other consideration for the transfer of all of
the shares of Acceris to Matrix.
"We are extremely pleased at the prospect of engaging in a
transaction with companies that have the reputation, experience
and resources of Matrix and Platinum Equity", said Kelly Murumets,
President of Acceris Communications Inc. "The proposed
transaction will give Acceris the ability to gain scale and
continue to improve operating efficiencies."
Finalization of the sale is contingent upon the execution of a
Share Purchase Agreement, approval by Acceris Communications Inc.
shareholders and Board of Directors, regulatory approval, and
other customary closing conditions. The companies anticipate
executing the agreement by April 30, 2005, and closing the
proposed transaction during the third quarter of 2005. During the
interim period between executing the agreement and closing the
transaction, the parties are expected to enter into a management
services agreement.
"This will be another outstanding add-on to expand the
capabilities of Matrix Telecom," said Johnny O. Lopez, Executive
Vice President for Global Mergers & Acquisitions at Platinum
Equity. "Along with the pending acquisition of Global Crossing's
Small Business Group, Acceris' network, services and product
capabilities will help create value by further solidifying
Matrix's position in the marketplace."
About Matrix Telecom
Matrix Telecom Inc., a Platinum Equity company --
http://www.matrixvalue.com/-- is a fully integrated, facilities-
based telecommunications carrier providing premium quality voice
and data services to a nationwide customer base. Headquartered in
Dallas, Texas, Matrix Telecom offers a complete line of voice,
data, and Voice over IP products servicing the residential and
business markets. Matrix Telecom offers wholesale products direct
to other carriers, as well as retail products distributed through
resellers and agents. Matrix Telecom is committed to providing
customized communication services that exceed customers'
expectations for quality, value, and reliability.
About Platinum Equity
Platinum Equity -- http://www.platinumequity.com/-- is a global
M&A&O(R) firm specialized in the merger, acquisition, and
operation of mission-critical services and solutions companies.
Since its founding in 1995, the firm has completed more than 65
transactions, building a diverse portfolio of companies with
nearly 40,000 employees, more than 600,000 customer sites, and a
multi-billion dollar revenue base. Platinum Equity in 2004 was
named the 32nd largest private company in the United States by
Forbes magazine.
About Acceris Communications Inc.
Acceris Communications Inc. -- http://www.acceris.com/-- is a
broad based communications company serving residential, small and
medium-sized business and large enterprise customers in the United
States. A facilities-based carrier, it provides a range of
products including local dial tone and 1+ domestic and
international long distance voice services, as well as fully
managed and fully integrated data and enhanced services. Acceris
offers its communications products and services both directly and
through a network of independent agents, primarily via multi-level
marketing and commercial agent programs. Acceris also offers a
proven network convergence solution for voice and data in Voice
over Internet Protocol communications technology and holds two
foundational patents in the VoIP space.
As of December 31, 2004, the Company's equity deficit widened
to $61,965,000 compared to a $42,953,000 equity deficit at
December 31, 2003.
ADAMS OUTDOOR: S&P Puts B+ Rating on Proposed $285M Sr. Sec. Loan
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' ratings and
its '3' recovery rating to Adams Outdoor Advertising L.P.'s
proposed $285 million senior secured credit facility, reflecting
the expectation of meaningful (50% to 80%) recovery of principal
by lenders in the event of a payment default.
At the same time, Standard & Poor's affirmed its 'B+' corporate
credit rating on the Atlanta, Ga.-headquartered advertising
services provider. The outlook is stable.
The credit facility consists of a $25 million revolving facility
and a $260 million term B loan. Both components share a first
priority security interest in substantially all assets of the
company and are due in 2012. Proceeds from the proposed facility
would be used to refinance the company's existing first and second
lien credit facilities totaling $295 million, and pay a $4 million
dividend to partners.
"The ratings on Adams reflect its heavy debt levels and relatively
small cash flow base. This is tempered by Adams' fair business
risk profile, which emphasizes the more stable local and regional
advertising revenues," said Standard & Poor's credit analyst Emile
Courtney. In addition, Adams has healthy operating cash flow
margins, moderate capital expenditures, and modest required debt
amortization.
ADELPHIA COMMS: Wants to Tap Holland & Knight as Special Counsel
----------------------------------------------------------------
Adelphia Communications Corporation and its debtor-affiliates seek
the U.S. Bankruptcy Court for the Southern District of New York's
authority to employ Holland & Knight LLP as their special counsel.
Holland & Knight provides general representation to its clients
in numerous areas, including corporate, regulatory and litigation
matters. The ACOM Debtors believe Holland & Knight is well
equipped to serve as their special counsel in their Chapter 11
cases.
On March 16, 2004, the Debtors employed Holland & Knight as an
ordinary course professional. Currently, the Debtors deem it
necessary to employ Holland & Knight as special counsel because:
-- the firm has begun to exceed the monthly cap for ordinary
course professionals; and
-- the Debtors seek to expand the scope of the services the
firm provides to them.
As special counsel, Holland & Knight will:
a. represent the Debtors in the litigation involving Circle
Acquisitions, Inc.;
b. provide representation in general litigation matters in the
Southeast region; and
c. provide legal advice pertaining to business matters in the
Southeast region.
The Debtors will pay the firm based on its hourly rates and
reimburse the firm of its actual and necessary expenses incurred.
Holland & Knight's current hourly rates are:
Attorneys $170 to $700
Paralegals $90 to $245
As of March 18, 2005, Holland & Knight received $334,598 from the
Debtors. The Debtors still owe the firm $418,424 for fees and
expenses incurred.
David R. Softness, Esq., a partner at Holland & Knight, assures
the Court that the firm does not hold or represent an interest
adverse to the Debtors' estates.
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. 83; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ALASKA AIRLINES: Finalizes $160M Recapitalization with BofA
-----------------------------------------------------------
Alaska Airlines, Inc., finalized a $160 million variable rate
credit facility with a syndicate of financial institutions. The
loan will mature in March 2008.
The syndicate is led by Bank of America, N.A., as administrative
agent, Citicorp USA as syndication agent, and U.S. Bank as
documentation agent, and includes HSH Nordbank, Merrill Lynch
Capital Corporation, Wachovia Bank, RZB Finance and JPMorgan Chase
Bank. Any borrowings will be secured by either aircraft or cash
collateral. This facility replaces the Company's $150 million
credit facility that expired in December 2004. The Company said
it has no immediate plans to borrow using this credit facility.
About the Company
Alaska Airlines is the nation's ninth largest carrier. Alaska and
its sister carrier, Horizon Air, together serve more than 80
cities in Alaska, the Lower 48, Canada and Mexico. For more news
and information, visit the Alaska Airlines Newsroom on the
Internet at http://newsroom.alaskaair.com/
Seattle-based Alaska Air Group is the parent company of Alaska
Airlines and Horizon Air Industries. The company and its sister
carrier, Horizon Air, together serve 80 cities in Alaska, the
Lower 48, Canada and Mexico.
* * *
Alaska Airlines' 9-1/2% equipment trust certificates holds Moody's
B1 ratings and Standard & Poor's 'BB' ratings.
ALLIANCE ATLANTIS: Appoints R. J. Steacy to Board & Audit Comm.
---------------------------------------------------------------
Alliance Atlantis Communications Inc. appoints Robert J. Steacy to
its Board of Directors and the Company's Audit Committee,
effective March 30, 2005. Mr. Steacy, a Chartered Accountant, has
extensive financial executive experience and is currently the
Executive Vice-President and Chief Financial Officer of the
Torstar Corporation, a TSX listed media company. Mr. Steacy
serves as a director of Black Press Limited and is Chair of the
Audit Committee and serves as a director of Transit Television
Network and the University of Toronto Press, where he is also the
Chair of the Human Resources Committee and a member of the Audit
Committee. Mr. Steacy is also a Trustee of the Somerset
Entertainment Income Fund.
In 2005, Alliance Atlantis Communications Inc. --
http://www.allianceatlantis.com/-- celebrates its 10th
anniversary as a leading specialty broadcaster, continuing to
offer Canadians recognizable, high-quality brands boasting
targeted, high-quality programming across 13 specialty channels.
The Company co-produces and distributes a limited number of
television programs in Canada and internationally, including the
hit CSI franchise, and holds a 51% limited partnership interest in
Motion Picture Distribution LP, Canada's leading motion picture
distribution business. The Company's common shares are listed on
the Toronto Stock Exchange - trading symbols AAC.A, AAC.NV.B and
on NASDAQ - trading symbol.
* * *
As reported by the Troubled Company Reporter on Nov. 1, 2004,
Standard & Poor's Ratings Services raised its long-term corporate
credit rating on Alliance Atlantis Communications Inc. to 'BB'
from 'BB-'. Standard & Poor's also assigned its 'BB' rating to
the company's proposed C$700 million senior secured bank facility.
A recovery rating of '3' was assigned to the loan, indicating
expectations of a meaningful recovery of principal (50%-80%) in
the event of default. The bank loan rating is based on
preliminary terms and conditions and is subject to review once
final documentation is received. Borrowings under the proposed
bank facility are being used to refinance the existing senior
subordinated debt and revolving credit facility. Standard &
Poor's will withdraw the 'B' rating on the company's subordinated
debt, effective October 28, 2004. S&P says the outlook is stable.
ALLIANCE ATLANTIS: Earns $9.1 Million of Net Income in 2004
-----------------------------------------------------------
Alliance Atlantis Communications Inc. reported financial and
operating results for the fourth quarter and year ended
December 31, 2004.
"We are very pleased with the Company's operating accomplishments
in 2004," said Michael MacMillan, Chairman and Chief Executive
Officer. "Our broadcast and motion picture distribution assets
delivered record earnings in 2004 and our CSI franchise is poised
to start delivering substantial earnings and cash flow in 2005.
As well, Alliance Atlantis' financial strength and flexibility and
our competitive position have significantly improved over the past
year. We remained diligent in executing our strategic plans for
growth and our operating results for 2004 indicate that the
Company is beginning to reap the benefits of our strategy put in
place a few years ago."
Mr. MacMillan further stated that "We are a leader in the Canadian
specialty broadcast industry and our stable of 13 well branded
channels attracts a growing number of subscribers and advertisers.
We continue to outpace the industry with respect to advertising
sales growth. We are co-owner and co-producer of the immensely
popular and very valuable CSI franchise, which consists of three
series that are airing or will be aired in every significant
television broadcast market in the world. We control Canada's
largest motion picture distributor with growing operations in the
U.K. and Spain. And last but not least, we have put in place a
solid capital structure to help us prudently plan our expansion in
the future."
In December 2004, Alliance Atlantis strengthened its capital
structure with the completion of a comprehensive debt refinancing.
The refinancing included a blend of long term bank and
institutional revolving and term credit facilities which were used
to refinance the Company's US$300 million 13% senior subordinated
notes and to refinance the Company's existing C$300 million
revolving credit facility. As a result of these refinancing
efforts, Alliance Atlantis was able to substantially reduce its
cost of funds and secure increased flexibility within its capital
structure to match the Company's expected strong free cash flow
profile. This is expected to result in reduced levels of
indebtedness as well as substantially reduced annual interest
charges going forward.
Quarterly Comparison
For the three months ended December 31, 2004, consolidated revenue
increased to $323.9 million compared to $267.8 million in the
prior year's period representing a 21% increase. Broadcasting
contributed $72.6 million - up 19%; Motion Picture Distribution
generated $147.2 million, representing an increase of 16%; and
Entertainment's revenue contribution was $104.0 million - up 31%
compared to the prior year's quarter.
The CSI franchise accounted for 90% of Entertainment's fourth
quarter revenue (2003 - 46%).
Consolidated EBITDA for the three months ended December 31, 2004,
was $50.8 million compared to a loss of $166.9 million in the
prior year's period. Broadcasting contributed $22.9 million,
representing an 11% increase; Motion Picture Distribution
contributed $20.1 million representing a 28% increase; and
Entertainment's EBITDA contribution was $22.2 million compared to
a loss of $190.3 million in the prior year's quarter.
Operating earnings (losses) (which exclude income taxes,
discontinued operations - net of tax, investment gains and losses,
foreign exchange gains and losses) were losses of ($10.4) million
for the three months ended December 31, 2004 - compared to
operating losses of ($244.6) million in the prior year's period.
Net operating earnings (losses) were losses of ($2.9) million in
the quarter, representing the previously described operating
losses (net of $7.5 million of tax recoveries), compared to net
operating losses of ($257.6) million recorded in the same period
last year (net of $13.0 million of tax). On a diluted per share
basis, net operating losses were ($0.07) compared to losses of
($6.02) in the prior year's period.
Adjusted operating earnings (losses) (which are the above noted
operating earnings but exclude cash and non-cash Entertainment
restructuring charges and the debt restructuring charges recorded
up to the operating earnings (losses) line) were $25.7 million for
the three months ended December 31, 2004 - compared to ($35.8)
million in the prior year's period. Adjusted net operating
earnings (losses) were $20.2 million in the current year,
representing the adjusted operating earnings (losses) described
above net of $5.5 million of taxes, increasing from the (
$123.9) million recorded in the same period last year (net of
$88.1 million of taxes). On a diluted per share basis, adjusted
net operating earnings (losses) were $0.46 compared to ($2.90) in
the prior year's period.
Net earnings (losses) before discontinued operations for the three
months ended December 31, 2004, were $9.1 million - compared to a
($136.6) million net loss before discontinued operations in the
same period last year. Diluted earnings per share before
discontinued operations were $0.21 based on a weighted average
43.9 million shares outstanding compared to diluted loss per share
before discontinued operations of ($3.19) based on a weighted
average 42.8 million shares outstanding in the prior year's
period.
Net earnings (losses) for the three months ended December 31,
2004, were $9.6 million - compared to a ($151.7) million net loss
in the same period last year. Diluted earnings per share were
$0.22 based on a weighted average 43.9 million shares outstanding
compared to diluted loss per share of ($3.54) based on a weighted
average 42.8 million shares outstanding in the prior year's
period.
Twelve months ended December 31, 2004 compared to the Pro forma
twelve months ended December 31, 2003
Consolidated revenue for the twelve-month period increased to
$1.02 billion compared to $866.0 million for the same period last
year representing a 17% increase. Broadcasting contributed
$245.9 million - up 16%; Motion Picture Distribution generated
$512.1 million representing a 30% increase; and Entertainment
revenue contribution was $258.7 million compared to $260.7 million
in the prior year's pro forma period.
The CSI franchise accounted for 79% of Entertainment's revenue for
the year ended December 31, 2004 (Pro forma 2003 - 51%).
Consolidated EBITDA for the twelve months ended December 31, 2004
was $159.5 million compared to a loss of $114.0 million in the
prior year. Broadcasting contributed $73.3 million, representing
an 18% increase; Motion Picture Distribution contributed
$72.9 million representing an impressive 40% increase; and
Entertainment's EBITDA contribution was $50.2 million compared to
a loss of $185.7 million in the prior year.
Consolidated EBITDA for the twelve months ended December 31, 2004
includes the deduction of $16.7 million of stock based
compensation and $15.8 million of costs incurred that are
attributed to the Entertainment Group review and restructuring
that was announced in December 2003. Neither of these amounts was
included in the Company's 2004 EBITDA guidance of $193.0 million.
Operating earnings (losses) (which exclude income taxes,
discontinued operations - net of tax, investment gains and losses,
foreign exchange gains and losses) were $9.8 million for the
twelve months ended December 31, 2004 - compared to operating
losses of ($294.5) million in the prior year. Net operating
earnings (losses) were $16.8 million in 2004, representing the
previously described operating earnings (net of $7.0 million of
tax recoveries), compared to ($309.4) million of net operating
losses recorded in the prior year (net of $14.9 million of taxes).
On a diluted per share basis, net operating earnings (loss) were
$0.39 compared to ($7.25) in the prior year.
Adjusted operating earnings (losses) (which are the above noted
operating earnings but exclude cash and non-cash Entertainment
restructuring charges and the debt restructuring charges recorded
up to the operating earnings (losses) line) were $49.1 million for
the twelve months ended December 31, 2004 - compared to
($85.7) million in the prior year. Adjusted net operating earnings
(losses) were $41.9 million in the current year, representing the
adjusted operating earnings (losses) described above net of
$7.2 million of taxes, increasing from the ($175.7) million
recorded in the same period last year (net of $90.0 million of
taxes). On a diluted per share basis, adjusted net operating
earnings (losses) were $0.96 compared to ($4.11) in the prior
year.
Net earnings (losses) before discontinued operations for the
twelve months ended December 31, 2004, were $33.8 million -
compared to a net loss of ($165.8) million before discontinued
operations last year. Diluted earnings per share before
discontinued operations were $0.78 based on a weighted average
43.6 million shares outstanding compared to diluted per share loss
before discontinued operations of ($3.88) based on a weighted
average 42.7 million shares outstanding in the prior year.
Net earnings (losses) for the twelve months ended Dec. 31, 2004,
increased to $29.7 million - compared to a ($182.1) million net
loss last year. Diluted earnings per share were $0.68 based on a
weighted average 43.6 million shares outstanding compared to
diluted per share loss of ($4.26) based on a weighted average
42.7 million shares outstanding in the prior year.
Operating Highlights
"By streamlining our operating structure to better align with our
focus of continued profitable growth as a broadcaster, Alliance
Atlantis has been able to capitalize on strategic growth
opportunities in Broadcasting and Motion Picture Distribution
while continuing to maximize the significant value of the CSI
franchise," said Mr. MacMillan. "Performance in each of our
business segments contributed to a gratifying year for our
shareholders as reflected in our share price."
Broadcasting
For the year ended December 31, 2004, both advertising and
subscriber revenues were up significantly over the prior year
providing record financial results for Broadcasting.
Alliance Atlantis continued to lead the industry in advertising
sales growth. Alliance Atlantis' ability to attract audiences led
the Company's total advertising sales to increase year over year
by 26% with both analog and digital channels achieving strong
overall growth during the year. For the first quarter of 2005
Broadcasting's advertising sales momentum is continuing with an
estimated 21% increase over the same period last year.
Subscriber revenues increased by 10% over the prior year and by
18% over the prior year's quarter. This consistent growth in
subscription revenue, we believe, is in large part due to Alliance
Atlantis' strong channel brands and relevant and well-targeted
programming.
Alliance Atlantis' new digital specialty channels are among the
industry leaders and three of our digital channels - Showcase
Action, Showcase Diva and IFC Canada - achieved the milestone of
1.0 million paid subscribers. Additionally, with the launch of
our eighth digital channel - Fine Living - in September 2004, the
Company continued its practice of bringing well-branded and
advertiser-friendly programming to Canadians.
Motion Picture Distribution
Motion Picture Distribution delivered record results in the year
ended December 31, 2004, and continued to execute its goals of
growth and diversification internationally while maintaining its
leading market share in Canada.
Revenue for the twelve-month period was up 30% to $512.1 million
as compared to $392.9 million in the prior year's Pro forma
period. Canadian operations contributed 70% of revenue (Pro forma
2003 - 82%), UK operations contributed 18% (Pro forma 2003 - 18%)
and Spanish operations (for the period from the date of
acquisition on May 12, 2004) contributed 12% (pro forma 2003 -
nil).
In Canada, the Partnership secured, for the 4th consecutive year,
the top theatrical market share with almost 18%. The success at
the box office was attributable to a wide variety of titles
including The Lord of the Rings:
* Return of the King,
* Fahrenheit 9/11,
* The Notebook, and
* the Academy Award(R) winning films:
-- Finding Neverland,
-- Eternal Sunshine of the Spotless Mind, and
-- Motorcycle Diaries.
Our UK subsidiary, Momentum Pictures broke its box office record
in 2004 and significantly increased its market share. During 2004,
Momentum released 13 titles theatrically, including Lost in
Translation and Eternal Sunshine of the Spotless Mind. Also
during 2004, Momentum licensed film packages to Channel 4 and
BSkyB, the largest Free TV and Pay TV broadcasters in the UK.
Going forward, these arrangements are expected to increase
Momentum's revenue in the television window.
Our Spanish subsidiary, Aurum Producionnes achieved the highest
box office market share of all independent distributors in Spain.
Successful DVD/video releases in 2004 included The Lord of the
Rings: Return of the King and The Passion of the Christ. As
reported in the previous quarter, the signing of a new DVD/video
distribution agreement on more favourable terms than the prior
agreement is expected to significantly improve DVD/video margins
in 2005 and beyond. Additionally, film print and DVD replication
agreements were signed and are expected to lower unit costs.
Entertainment
In 2004, Alliance Atlantis completed its restructuring of its
Entertainment assets and its exit from the Company's historical
production business. This allows Alliance Atlantis to focus its
efforts on growing the CSI franchise and exploiting its library in
Canada and internationally.
The CSI franchise continues to drive Entertainment and deliver
outstanding results for Alliance Atlantis. 27 episodes of the CSI
franchise were delivered in the fourth quarter of 2004 (2003 - 17
episodes) and 58 episodes were delivered in the full twelve month
period (2003 - 46.5 episodes).
International sales of CSI: Crime Scene Investigation, CSI: Miami
and CSI: NY remain strong and continue to grow. The CSI franchise
has also delivered outstanding results through weekend syndication
and second-window cable sales in the U.S. market.
Following on the strong performance of CSI: Crime Scene
Investigation and acceptance of CSI: Miami in weekend syndication,
the weekend syndication rights for CSI: NY have already been
licensed by King World to the vast majority of the available U.S.
market. Additionally, CSI: NY was recently licensed by King World
to Spike TV for certain U.S. second window cablecast rights,
joining CSI: Crime Scene Investigation (also licensed to Spike TV)
and CSI: Miami (licensed to A&E Networks) which already have U.S.
second window licensing agreements in place.
Closing Comments
"2004 was a remarkable year for us, during which Alliance Atlantis
and its shareholders were able to benefit from our continued
strategic focus and transformed balance sheet," said Mr.
MacMillan. "In 2005, Alliance Atlantis celebrates its 10th
anniversary as a broadcaster and the Company is keenly focussed on
remaining a market-leader while delivering shareholder value."
In 2005, Alliance Atlantis Communications Inc. --
http://www.allianceatlantis.com/-- celebrates its 10th
anniversary as a leading specialty broadcaster, continuing to
offer Canadians recognizable, high-quality brands boasting
targeted, high-quality programming across 13 specialty channels.
The Company co-produces and distributes a limited number of
television programs in Canada and internationally, including the
hit CSI franchise, and holds a 51% limited partnership interest in
Motion Picture Distribution LP, Canada's leading motion picture
distribution business. The Company's common shares are listed on
the Toronto Stock Exchange - trading symbols AAC.A, AAC.NV.B and
on NASDAQ - trading symbol.
* * *
As reported by the Troubled Company Reporter on Nov. 1, 2004,
Standard & Poor's Ratings Services raised its long-term corporate
credit rating on Alliance Atlantis Communications Inc. to 'BB'
from 'BB-'. Standard & Poor's also assigned its 'BB' rating to
the company's proposed C$700 million senior secured bank facility.
A recovery rating of '3' was assigned to the loan, indicating
expectations of a meaningful recovery of principal (50%-80%) in
the event of default. The bank loan rating is based on
preliminary terms and conditions and is subject to review once
final documentation is received. Borrowings under the proposed
bank facility are being used to refinance the existing senior
subordinated debt and revolving credit facility. Standard &
Poor's will withdraw the 'B' rating on the company's subordinated
debt, effective October 28, 2004. S&P says the outlook is stable.
ALOHA AIRLINES: Closes $65 Mil. DIP Financing & Pays Off ATSB
-------------------------------------------------------------
Aloha Airgroup, Inc., and its principal operating subsidiary,
Aloha Airlines, Inc., have finalized a $65 million debtor-in-
possession financing facility with Ableco Finance, LLC, an
affiliate of Cerberus Capital Management, L.P., and Goldman Sachs
Credit Partners, L.P. With the facility secured, Aloha's first
order of business is to use a portion of the funds to pay off its
Air Transportation Stabilization Board federal loan guarantee and
certain local bank term loans.
"We are extremely fortunate to have aligned ourselves with two
highly respected financial institutions such as Cerberus and
Goldman Sachs," said David A. Banmiller, Aloha's president and
chief executive officer. "This financing commitment from our new
lenders is a significant step in our goal to quickly exit
bankruptcy and represents a vote of confidence in our
restructuring business plan."
Aloha is repaying its ATSB loan guarantee two and a half years
ahead of its scheduled maturity. The ATSB program was designed to
help the nation's air carriers recover from financial losses due
to the terrorist attack on the United States on September 11,
2001.
"Post-911, Aloha was most grateful to be awarded a loan guarantee
by the ATSB," said Mr. Banmiller. "Today we have met that
obligation and now with new working capital, we will accelerate
our business plan to achieve financial stability and exit from
bankruptcy."
Prior to obtaining the Court-approved DIP loan, Aloha had already
paid back $24 million to ATSB due to wage concessions and
productivity improvements from employees.
"Each and every one of our employees is to be commended for
assisting the Company in its efforts to rebound from the industry-
wide problems that have plagued all carriers over the past four
years," said Mr. Banmiller. "With the continued support of our
employees, lenders and business partners, we are sure to succeed
in reorganizing and emerging as a stronger airline."
Headquartered in Honolulu, Hawaii, Aloha Airgroup, Inc. --
http://www.alohaairlines.com/-- provides air carrier service
connecting the five major airports in the State of Hawaii. Aloha
Airgroup and its subsidiary Aloha Airlines, Inc., filed for
chapter 11 protection on Dec. 30, 2004 (Bankr. D. Hawaii Case No.
04-03063). Alika L. Piper, Esq., Don Jeffrey Gelber, Esq., and
Simon Klevansky, Esq., at Gelber Gelber Ingersoll & Klevansky
represent the Debtors in their restructuring efforts. When the
Debtor filed for protection from its creditors it listed more than
$50 million in estimated assets and debts.
AMERICAN AIRLINES: Corrects Media Report on Outsourcing with TWU
----------------------------------------------------------------
A media report indicated that American Airlines outsourced 42
percent of its maintenance work in 2004. This is misleading,
American Airlines says. American has worked closely with the
Transport Workers Union to keep the majority of its maintenance
work in-house, as long as it can do so and remain competitive.
The company does all of its heavy maintenance work and 80 to 90
percent of its total maintenance with American Airlines mechanics.
American Airlines notes that Wednesday's report is based on
Department of Transportation data, which includes work done
through Texas Aero Engine Service Ltd, a joint venture formed in
1998 between American Airlines and Rolls-Royce. TAESL does engine
repair and overhaul work on the RB211 engine, which American has
on its Boeing 757 fleet, and the Trent 800 engine, which powers
American's premier Boeing 777 aircraft.
The TAESL repair facility is staffed by more than 530 American
Airlines employees and has generated more than 200 additional
American Airlines jobs specifically tied to the growth of engine
maintenance work performed for new customers.
About American Airlines
American Airlines is the world's largest airline. American,
American Eagle and the AmericanConnection regional airlines serve
more than 250 cities in over 40 countries with more than 3,800
daily flights. The combined network fleet numbers more than 1,000
aircraft. American's award- winning Web site --
http://www.AA.com/-- provides users with easy access to check and
book fares, plus personalized news, information and travel offers.
American Airlines is a founding member of the oneworld Alliance,
which brings together some of the best and biggest names in the
airline business, enabling them to offer their customers more
services and benefits than any airline can provide on its own.
Together, its members serve more than 600 destinations in over 135
countries and territories. American Airlines, Inc. and American
Eagle are subsidiaries of AMR Corporation (NYSE: AMR).
* * *
As reported in the Troubled Company Reporter on Feb. 28, 2005,
Standard & Poor's Ratings Services placed its ratings on American
Airlines Inc.'s (B-/Stable/--) equipment trust certificates on
CreditWatch with negative implications. The rating action does
not affect issues that are supported by bond insurance policies.
"The CreditWatch review is prompted by Standard & Poor's concern
that a prolonged difficult airline industry environment,
characterized by high fuel prices, excess capacity, and intense
price competition in the domestic market, has weakened the
financial condition of almost all U.S. airlines and increased
the risk of widespread simultaneous bankruptcies," said Standard &
Poor's credit analyst Philip Baggaley.
At December 31, 2004, AMR Corp.'s balance sheet shows that
liabilities exceed assets by $581 million.
AMERICAN BUSINESS: Wants Until June 19 to Decide on Eight Leases
----------------------------------------------------------------
American Business Financial Services, Inc., and its debtor-
affiliates are parties to eight possible unexpired non-residential
real property leases that have not been assumed or rejected as of
March 18, 2005:
Parties to Lease Execution Property Address
---------------- --------- ----------------
Philadelphia Design and 10/27/1997 Wissahickon
Distribution Center L.P., Industrial Center
Equivest Development, Inc. Philadelphia, PA
and American Business
Financial Services, Inc.
Calabasas Village, LLC and First Security Calabasa Village
Home American Credit, Inc. Mortgage Lending West Hills, CA
Corp. assigned
Lease to HAC on
05/01/2004
ABFS and HQ Global 03/06/2003 as Cherry Hill Center
Workplaces amended on Mount Laurel, NJ
11/17/2004
American Business Mortgage 1/21/2005 High Quality
Services, Inc., and High Business Center --
Quality BC-Mt. Laurel, Inc. Mt. Laurel, Inc.
Mt. Laurel, NJ
ABFS and Linx Funding, LLC 03/10/2004 Braverton Street
Edgewater, MD
ESI Mortgage, L.P. and HAC June 2004; Frost Bank Plaza
commenced on Austin, TX
07/01/2004
Crescent Real Estate 11/01/2004 Congress Avenue
Funding VIII, LP and Austin, TX
Upland Mortgage Broker
Services
Wanamaker, LLC and ABFS 11/27/2002 The Wanamaker
Building
Philadelphia, PA
The Debtors do not acknowledge or admit that all of the
identified agreements are non-residential real property leases
pursuant to Section 365(d)(4) of the Bankruptcy Code. However,
out of an abundance of caution, the Debtors included the
agreements to the extent that Section 365(d)(4) protections are
applicable to them.
The Debtors presently use the leased properties as corporate
office space, loan origination centers and storage facilities.
The Debtors attest that they are current on their postpetition
rent obligations to their landlords.
Jason W. Staib, Esq., at Blank Rome LLP, in Wilmington, Delaware,
tell Judge Walrath that the Leases represent important assets of
the Debtors' estates and are critical in the near term to the
Debtors' ability to jump start their loan origination business.
The Debtors have not yet made a final determination as to whether
all of the Leases will be needed in the future or whether the
Leases may have other value. Absent an extension of the 60-day
deadline under Section 365(d)(4) to assume or reject the Leases,
the Debtors will be compelled to make determinations regarding
the Leases that may ultimately turn out to be imprudent.
The Debtors ask the U.S. Bankruptcy Court for the District of
Delaware, to the extent that the Leases are non-residential real
property leases, to extend the time within which they must elect
to assume or reject the leases, through and including June 19,
2005.
Mr. Staib asserts that extending the Lease Decision Deadline will
provide the Debtors with the time and flexibility they need to
determine the importance of each Lease going forward or whether
the Leases may otherwise have value that can be realized through
an assignment or otherwise. Moreover, Mr. Staib notes that the
Debtors' Chapter 11 cases are complex, as evidenced by, among
other things, the time-consuming proceedings and negotiations
leading up to and culminating in the approval of the DIP
financing facility.
"The Debtors should not be forced prematurely to assume the
Leases given the risk of creating unnecessary administrative
expense claims," Mr. Staib says. "Nor should the Debtors be
forced prematurely to reject the Leases that may be under market
or that may otherwise be valuable to the Debtors' estates."
The Court will convene a hearing on April 12, 2005, to consider
the Debtors' request. By application of Del.Bankr.LR 9006-2, the
Debtors' Lease Decision Deadline is automatically extended until
the Court rules on the request.
Headquartered in Philadelphia, Pennsylvania, American Business
Financial Services, Inc., together with its subsidiaries, is a
financial services organization operating mainly in the eastern
and central portions of the United States and California. The
Company originates, sells and services home mortgage loans through
its principal direct and indirect subsidiaries. The Company,
along with four of its subsidiaries, filed for chapter 11
protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203).
Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $1,083,396,000 in
total assets and $1,071,537,000 in total debts. (American
Business Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
AMERICAN BUSINESS: Wants to Walk Away from Utah & Irvine FF&E
-------------------------------------------------------------
American Business Financial, Inc., and its debtor-affiliates seek
Judge Walrath's authority to immediately abandon certain
furniture, fixtures and equipment in Salt Lake City, Utah, and in
Irvine, California, pursuant to Sections 105 and 554 of the
Bankruptcy Code.
Utah FF&E
American Business and Upland Corporation were parties to a lease
dated March 17, 2000, with 123 N. Wright Brothers Drive, LLC for
certain office space in Salt Lake City, Utah. Upland Corporation
is an inactive non-Debtor subsidiary of ABFS that is in the
process of being dissolved.
ABFS and Upland then entered into a sublease, dated May 6, 2002,
with Microsoft Corporation. The base rent paid by Microsoft was
not sufficient to cover ABFS and Upland's obligations to Wright
Brothers under the Utah Lease.
As of the Petition Date, the Debtors were not occupying the space
subject to the Utah Lease, and use of the space was no longer
necessary for their business operations. On January 21, 2005,
the Court approved the Debtors' request to reject the Utah Lease
and the Microsoft Sublease.
Pursuant to the Microsoft Sublease, ABFS agreed to allow
Microsoft to use certain office furniture, fixtures and
equipment. Accordingly, these furniture and fixtures remain
located in the office space subject to the Utah Lease.
The Debtors have determined that the Utah FF&E are of
inconsequential value and the cost of removing, storing and
selling the items would offset all, or substantially all, of the
potential return. In addition, to the extent the Debtors have
any interest in the Utah FF&E, that interest would be subject to
the liens held by the lender under their DIP financing facility.
Irvine FF&E
American Business was a party to a sublease with Lockheed Martin
Corporation, dated March 4, 2004, for certain office space located
in Irvine, California. As of the Petition Date, the Debtors were
not occupying the Irvine Property and use of the space was no
longer necessary for their business operations. On January 21,
2005, the Debtors sought and obtained permission to reject the
Irvine Sublease.
In vacating the Irvine Property, the Debtors removed the personal
property that were useful in their continued business operations
or which had some other residual value. The Debtors, however,
identified certain items that are no longer useful to them or had
de minimus residual value. The unnecessary FF&E remain at the
Irvine location and consists of certain technology equipment.
The Debtors have determined that the Irvine FF&E is of
inconsequential value and the cost of removing, storing and
selling these items would offset all, or substantially all, of
the return that they could realize from a sale. In addition, to
the extent the Debtors have any interest in the Irvine FF&E, that
interest would be subject to the liens held by the lender under
their DIP financing facility.
Headquartered in Philadelphia, Pennsylvania, American Business
Financial Services, Inc., together with its subsidiaries, is a
financial services organization operating mainly in the eastern
and central portions of the United States and California. The
Company originates, sells and services home mortgage loans through
its principal direct and indirect subsidiaries. The Company,
along with four of its subsidiaries, filed for chapter 11
protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203).
Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $1,083,396,000 in
total assets and $1,071,537,000 in total debts. (American
Business Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ARMSTRONG HOLDINGS: Incurs $80.8 Million Net Loss in 2004
---------------------------------------------------------
Armstrong Holdings Inc. reported fourth quarter 2004 net sales of
$855.3 million that were 6.1% higher than fourth quarter net sales
of $805.8 million in 2003. Excluding the favorable effects of
foreign exchange rates of $18.4 million, net sales increased 3.8%.
An operating loss of $134.8 million was recorded for the fourth
quarter of 2004 compared to an operating loss of $12.1 million in
the fourth quarter of 2003. During the fourth quarter of 2004,
Armstrong recorded a non-cash goodwill impairment charge of
$48.4 million and a fixed asset impairment charge of $44.8 million
related to the European resilient flooring business.
For the year ended December 31, 2004, net sales were
$3,497,300,000, an increase of 7.3% from the $3,259,000,000
reported for 2003. Excluding the favorable effects of foreign
exchange rates of $87.9 million, consolidated net sales increased
4.5%. An operating loss for 2004 of $43.8 million compared to an
operating loss of $19.3 million for 2003. During 2004, Armstrong
recorded non-cash goodwill impairment charges of $108.4 million
and a fixed asset impairment charge of $44.8 million related to
European resilient flooring business. During 2003, Armstrong
recorded non-cash charges related to asbestos of $81 million.
During 2004 and 2003, Armstrong implemented several manufacturing
and organizational changes to improve our cost structure and
enhance our competitive position. The charges for these
initiatives incurred in 2004 totaled approximately $50 million, of
which approximately $32 million was for accelerated depreciation
and fixed asset impairments. In 2003, charges for cost reduction
initiatives totaled approximately $54 million, of which
approximately $32 million was for accelerated depreciation and
fixed asset impairments. The remaining amounts were primarily for
severances and other related costs.
In addition to the above items, results for 2004 reflect increased
selling prices that mostly offset higher raw material and energy
costs.
Segment Highlights for the Full Year 2004
Resilient Flooring
Resilient Flooring net sales of $1,215.1 million in 2004 increased
from net sales of $1,181.5 million in 2003. Excluding the
favorable impact of foreign exchange rates of $27.6 million, 2004
net sales were essentially flat versus 2003. An operating loss of
$150.2 million in 2004 compared to operating income in 2003 of
$56.2 million.
Contributing to the 2004 loss were a non-cash goodwill impairment
charge of $108.4 million, a non-cash fixed asset impairment charge
related to our European resilient business of $44.8 million and
cost reduction initiative charges of $32.7 million. Lower
laminate sales volume, increased costs to purchase PVC and wage
and salary inflation also reduced operating results.
Wood Flooring
Wood Flooring net sales of $832.1 million in 2004 increased 12.7%
from $738.6 million in the prior year. This increase was driven
primarily by improved pricing and increased volume in certain
products. Operating income of $51.4 million in 2004 compared to
an operating loss of $4.0 million in 2003. In addition to the
positive impact of higher sales, lower expenses for implementing
cost reduction initiatives and lower manufacturing overhead
resulting from prior initiatives contributed to the improved
operating results. Partially offsetting these were higher costs
for lumber and increased production expenses in certain plants.
Textiles and Sports Flooring
Textiles and Sports Flooring net sales of $265.4 million decreased
in 2004 compared to $271.9 million in 2003. Excluding the
translation effect of changes in foreign exchange rates of
$25.8 million, net sales decreased by 10.8%, primarily from volume
declines in carpet flooring products due to weak economic
conditions in our primary selling markets and loss of market
share, caused by the lack of new product development. An
operating loss of $7.1 million in 2004 compared to an operating
loss of $11.0 million recorded for 2003. The 2003 results
included expenses of $7.5 million associated with cost reduction
initiatives. The further decrease was due to the negative impact
of lower sales volume and prices.
Building Products
Building Products net sales of $971.7 million in 2004 increased
from $862.2 million in the prior year. Excluding the translation
effect of the changes in foreign exchange rates of $34.4 million,
sales increased by 8.4%, primarily due to higher sales volume in
commercial markets and improved pricing. Operating income
increased to $127.0 million from operating income of $95.2 million
in 2003. This increase resulted from higher sales volume and
prices, lower production expenses and increased equity earnings in
WAVE, which were only partially offset by inflation in the cost of
raw materials and energy, and higher selling expenses.
Cabinets
Cabinets net sales in 2004 of $213.0 million increased from
$204.8 million in 2003 due primarily to increased selling prices
and sales of higher priced products, both enabled by improved
customer service. Operating income of $1.4 million in 2004
compared to an operating loss of $11.1 million in the prior year.
The improved operating results were the result of increased net
sales, manufacturing efficiencies and reduced SG&A expenses,
partially offset by expenses for cost reduction initiatives.
References to performance excluding the effects of foreign
exchange are non-GAAP measures. Management believes that this
information improves the comparability of business performance by
excluding the impacts of changes in foreign exchange rates when
translating comparable foreign currency amounts.
A full-text copy of Armstrong Holdings' 2004 Annual Report on
Form 10-K is available for free at:
http://www.sec.gov/Archives/edgar/data/7431/000119312505065072/d10k.htm
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Balance Sheets
At December 31, 2004
(Amounts in millions)
Assets
Current Assets:
Cash and cash equivalents $515.9
Accounts and notes receivable, net 336.1
Inventories, net 529.2
Deferred income taxes 15.6
Income tax receivable 7.0
Other current assets 78.4
--------
Total current assets 1,482.2
Property, plant and equipment, less
accumulated depreciation and amortization 1,208.8
Insurance receivable for asbestos-related
liabilities, non-current 88.8
Prepaid pension costs 480.9
Investment in affiliates 72.5
Goodwill, net 136.0
Other intangibles, net 76.0
Deferred income taxes, non-current 941.6
Other non-current assets 122.6
--------
Total assets $4,609.4
========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $11.1
Current installments of long-term debt 8.2
Accounts payable and accrued expenses 447.4
Income taxes 20.3
Deferred income taxes 1.1
--------
Total current liabilities 488.1
Liabilities subject to compromise 4,866.2
Long-term debt, less current installments 29.2
Postretirement and post-employment benefit liabilities 262.6
Pension benefit liabilities 258.9
Other long-term liabilities 87.6
Deferred income taxes 19.2
Minority interest in subsidiaries 9.3
--------
Total non-current liabilities 5,533.0
Shareholders' equity (deficit):
Common stock 51.9
Capital in excess of par value 167.7
Reduction for ESOP loan guarantee (142.2)
Accumulated deficit (1,018.6)
Accumulated other comprehensive income (loss) 42.8
Less common stock in treasury (513.3)
--------
Total shareholders' (deficit) (1,411.7)
--------
Total liabilities and shareholders' equity $4,609.4
========
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Statements of Earnings
For the Year Ended December 31, 2004
(Amounts in millions)
Net sales $3,497.3
Cost of goods sold 2,811.0
Gross profit 686.3
Selling, general and administrative expenses 635.0
Charge for asbestos liability, net -
Goodwill impairment 108.4
Restructuring & reorganization charges, net 18.3
Equity (earnings) from joint venture (31.6)
--------
Operating (loss) (43.8)
Interest expense 8.4
Other non-operating expense 3.1
Other non-operating (income) (6.4)
Chapter 11 reorganization costs, net 6.9
--------
(Loss) before income taxes and effect of change
in acctg principle (55.8)
Income tax expense (benefit) 24.6
--------
(Loss) from continuing operations (80.4)
(Loss) from discontinued operations, net of tax
of $0.2, $0.1 and $0.0 (0.4)
--------
Net (loss) ($80.8)
========
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2004
(Amounts in millions)
Cash flows from operating activities:
Net (loss) ($80.8)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Effect of change in acctg principle, net -
Depreciation and amortization 151.0
Goodwill impairment 108.4
Fixed asset impairments 64.7
Deferred income taxes (22.4)
Equity (earnings) from affiliates, net (33.5)
Chapter 11 reorganization costs, net 6.9
Chapter 11 reorganization costs payments (15.9)
Restructuring and reorganization charges, net of
reversals 18.3
Restructuring and reorganization payments (4.1)
Asbestos-related insurance recoveries 4.5
Payments for asbestos-related claims -
Charge for asbestos liability, net -
Cash effect of hedging activities 1.1
Increase (decrease) in cash from change in:
Receivables (9.5)
Inventories (61.7)
Other current assets 11.8
Other non-current assets (34.8)
Accounts payable and accrued expenses 61.1
Income taxes payable (29.8)
Other long-term liabilities 3.5
Other, net 4.0
--------
Net cash provided by operating activities 142.8
Cash flows from investing activities:
Purchases of property, plant and equipment
and computer software (134.0)
Distributions from equity affiliates 10.0
Proceeds from the sale of assets 12.3
--------
Net cash (used for) investing activities (111.7)
Cash flows from financing activities:
(Decrease) in short-term debt, net (4.0)
Payments of long-term debt (9.8)
Other, net (1.2)
--------
Net cash (used for) financing activities (7.0)
Effect of exchange rate changes
on cash & cash equivalents 7.5
--------
Net increase in cash and cash equivalents $31.6
Cash and cash equivalents at beginning of year $484.3
--------
Cash and cash equivalents at end of year $515.9
========
Headquartered in Lancaster, Pennsylvania, Armstrong World
Industries, Inc. -- http://www.armstrong.com/-- the major
operating subsidiary of Armstrong Holdings, Inc., designs,
manufactures and sells interior finishings, most notably floor
coverings and ceiling systems, around the world. The Company and
its debtor-affiliates filed for chapter 11 protection on
December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen
Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C.
Silberglied, Esq., at Richards, Layton & Finger, P.A., represent
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed
$4,032,200,000 in total assets and $3,296,900,000 in liabilities.
(Armstrong Bankruptcy News, Issue No. 74; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ASSET BACKED: Moody's Assigns Ba1 Rating to Class M8 Sub. Cert.
---------------------------------------------------------------
Moody's Investors Service has assigned a rating of Aaa to the
senior certificates issued by Asset Backed Securities Corporation
Home Equity Loan Trust, Series 2004-HE8 and ratings ranging from
Aa2 to Ba1 to the subordinate certificates in the deal.
The securitization is backed by New Century Mortgage Corp.
originated adjustable-rate (83%) and fixed-rate (17%) sub-prime
mortgage loans. The ratings are based primarily on the credit
quality of the loans, past performance of collateral from this
originator, and on the protection from subordination,
overcollateralization, and excess spread. The credit enhancement
requirements reflect some benefit for due diligence performed on
the collateral. The credit quality of the loans backing this deal
is in line with previous securitizations by this issuer.
Saxon Mortgage Services, Inc. will service the loans. Moody's has
assigned its above average servicer quality rating (SQ2) to Saxon
for primary servicing of sub-prime loans.
The Complete Rating Actions Are:
Issuer: Asset Backed Securities Corporation Home Equity Loan
Trust, Series 2005-HE2
Issue: Asset Backed Pass-Through Certificates, Series 2005-HE2
* Class A1, rated Aaa
* Class A2, rated Aaa
* Class A3, rated Aaa
* Class M1, rated Aa2
* Class M2, rated Aa3
* Class M3, rated A2
* Class M4, rated A3
* Class M5, rated Baa1
* Class M6, rated Baa2
* Class M7, rated Baa3
* Class M8, rated Ba1
ATA HOLDINGS: Okun Enterprises Wins Bid for Chicago Express
-----------------------------------------------------------
ATA Holdings Corp. (ATAHQ), parent company of Chicago Express
Airlines, Inc., disclosed that Indianapolis-based Okun
Enterprises, Inc., was selected as the highest and best bidder at
the auction authorized by the U.S. Bankruptcy Court for the
Southern District of Indiana to sell the assets of Chicago
Express. Okun Enterprises, a real estate investment and
management firm, is controlled by Edward H. Okun. Okun's bid was
for substantially all the assets of Chicago Express including the
operating certificate, spare parts and inventory. In addition,
Okun has agreed to purchase two SAAB 340B aircraft owned by ATA
Airlines, Inc.
The bid is subject to U.S. Bankruptcy Court approval at a hearing
originally scheduled for April 1 in New Albany, but has been
rescheduled for today, April 4, 2005, at 1:30 p.m. Indiana Time in
Indianapolis. In addition, the bid is subject to assurances from
the Federal Aviation Administration and Department of
Transportation. Additional details concerning the sale will be
disclosed at the hearing. A total of six parties participated in
the Chicago Express auction.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco
to over 40 business and vacation destinations. Stock of parent
company, ATA Holdings Corp., is traded on the Nasdaq Stock
Exchange. The Company and its debtor-affiliates filed for chapter
11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No.
04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at
Baker & Daniels, represents the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they listed $745,159,000 in total assets and
$940,521,000 in total debts.
ATA AIRLINES: Court Lifts Stay For Mellins to Pursue Lawsuit
------------------------------------------------------------
As previously reported, Mosses and Anna Mellin asked the United
States Bankruptcy Court for the Southern District of Indiana to:
(1) require ATA Airlines, Inc. and its debtor-affiliates to
disclose what applicable liability insurance it has; and
(2) lift the automatic stay only to the extent of ATA
Airlines' liability coverage so that the Mellins may
proceed with either the lawsuit or arbitration proceeding
for personal injuries under the applicable policy of
insurance, in the Circuit Court of Cook County.
To resolve their disputes, the Debtors and Mosses and Anna Mellin
stipulate that:
(1) Pursuant to Section 362(d)(1) of the Bankruptcy Code, the
automatic stay will be lifted for the limited purpose of
allowing the Mellins to arbitrate any claims they may have
against ATA Airlines, Inc., arising out of the
November 29, 2003 incident involving Ms. Mellin;
(2) If the Mellins are successful in recovering against ATA
Airlines in arbitration, any recovery will be solely
limited to the extent of available insurance coverage. No
claim will be asserted against ATA Airlines or its
bankruptcy estate or the estates of any of the Debtors;
and
(3) Nothing in the stipulation will be construed to affect,
interfere with, remove or modify the jurisdiction and
power of the Court to administer the property of the
Debtors' estate. The Court will specifically retain
jurisdiction to determine the extent, validity, and
priority of any lien asserted by the Mellins against any
of the Debtors' property.
The Court approves the stipulation.
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: The Reserve Group Offers $14 Mil. for Two Plants
----------------------------------------------------------------
Auburn Foundry Inc. asks the U.S. Bankruptcy Court for the
Northern District of Indiana for authority to sell two of its
manufacturing facilities and certain related assets, free and
clear of all liens, claims and interests. Auburn also asks the
Court to convene a sale hearing on April 22.
Auburn's plants are located in the City of Auburn.
The Reserve Group submitted a $14 million proposal to buy Auburn
Foundry's plants including its remaining assets.
Other potential buyers are welcome to submit higher bids for the
assets no later than April 15. If other parties submit higher
bids, there will be an auction to determine the highest and best
bid for the assets.
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: Fitch Puts Low-B Ratings on Four Mortgage Certs.
-----------------------------------------------------------------
Banc of America Mortgage Securities, Inc.'s mortgage pass-through
certificates, series 2005-3, are rated:
Group 1 certificates:
-- $355,563,100.00 classes 1-A-1 through 1-A-32, 1-A-R, and
1-A-IO, (Group 1 senior certificates) 'AAA';
-- $6,640,000 classes 1-B-1, 'AA';
-- $1,844,000 classes 1-B-2, 'A';
-- $1,107,000 classes 1-B-3, 'BBB';
-- $738,000 classes 1-B-4, 'BB';
-- $553,000 classes 1-B-5, 'B'.
Group 2 certificates:
-- $220,168,000.00 classes 2-A-1, 2-A-2, 2-A-3, 2-A-4, and
2-A-IO, (Group 2 senior certificates) 'AAA';
-- $3,749,000 classes 2-B-1, 'AA';
-- $1,363,000 classes 2-B-2, 'A';
-- $682,000 classes 2-B-3, 'BBB';
-- $454,000 classes 2-B-4, 'BB';
-- $341,000 classes 2-B-5, 'B'.
Group 1 & 2 certificates:
-- $1,971,571 class 30-PO, 'AAA';
The 'AAA' ratings on the group 1 senior certificates reflect the
3.10% subordination provided by the:
* 1.80% class 1-B-1,
* 0.50% class 1-B-2,
* 0.30% class 1-B-3,
* 0.20% privately offered class 1-B-4,
* 0.15% privately offered class 1-B-5 and
* 0.15% privately offered class 1-B-6.
Classes 1-B-1, 1-B-2, 1-B-3, 1-B-4, and 1-B-5, are rated 'AA,'
'A,' 'BBB,' 'BB,' and 'B,' respectively, based on their respective
subordination. Class 1-B-6 is not rated by Fitch.
The 'AAA' ratings on the group 2 senior certificates reflect the
3.05% subordination provided by the:
* 1.65% class 2-B-1,
* 0.60% class 2-B-2,
* 0.30% class 2-B-3,
* 0.20% privately offered class 2-B-4,
* 0.15% privately offered class 2-B-5 and
* 0.15% privately offered class 2-B-6.
Classes 2-B-1, 2-B-2, 2-B-3, 2-B-4, and 2-B-5, are rated 'AA,'
'A,' 'BBB,' 'BB,' and 'B,' respectively, based on their respective
subordination. Class 2-B-6 is not rated by Fitch.
The ratings also reflect the quality of the underlying collateral,
the primary servicing capabilities of Bank of America Mortgage,
Inc. rated 'RPS1' by Fitch, and Fitch's confidence in the
integrity of the legal and financial structure of the transaction.
The transaction is secured by two pools of mortgage loans, which
respectively collateralize the group 1 and 2 certificates. Groups
1 and 2 are not cross-collateralized with each other.
The group 1 collateral consists of 683 recently originated,
conventional, fixed-rate, fully amortizing, first lien, one- to
four-family residential mortgage loans with original terms to
stated maturity ranging from 240 to 360 months. The weighted
average original loan-to-value ratio for the mortgage loans in the
pool is approximately 68.11%. The average balance of the mortgage
loans is $540,093 and the weighted average coupon of the loans is
5.795%. The weighted average FICO credit score for the group is
743. Second homes comprise 10.31% and there are no investor-
occupied properties. Rate/Term and cashout refinances represent
37.24% and 23.26%, respectively, of the group 1 mortgage loans.
The states that represent the largest geographic concentration of
mortgaged properties are:
* California (49.90%),
* New York (5.33%) and
* Illinois (5.30%).
All other states comprise fewer than 5% of properties in the
group.
The group 2 collateral consists of 919 recently originated,
conventional, fixed-rate, fully amortizing, first lien, one- to
four-family residential mortgage loans with original WAM ranging
from 300 to 360 months. The weighted average OLTV for the
mortgage loans in the pool is approximately 67.74%. The average
balance of the mortgage loans is $247,209 and the WAC of the loans
is 5.834%. The weighted average FICO credit score for the group
is 735. Second homes comprise 6.44% and there are no investor-
occupied properties. Rate/Term and cashout refinances represent
30.64% and 35.31%, respectively, of the group 2 mortgage loans.
The states that represent the largest geographic concentration of
mortgaged properties are:
* California (37.16%),
* Florida (10.73%) and
* Illinois (5.07%).
All other states comprise fewer than 5% of properties in the
group.
None of the mortgage loans are 'high cost' loans as defined under
any local, state or federal laws. For additional information on
Fitch's rating criteria regarding predatory lending legislation,
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/
Banc of America Mortgage Securities, Inc., deposited the loans in
the trust, which issued the certificates, representing undivided
beneficial ownership in the trust. For federal income tax
purposes, elections will be made to treat the trust as three real
estate mortgage investment conduits. Wells Fargo Bank, National
Association will act as trustee.
BLOCKBUSTER INC: Moody's Downgrades Sr. Implied Debt Rating to Ba3
------------------------------------------------------------------
Moody's Investors Service downgraded the long-term debt ratings of
Blockbuster Inc. (senior implied to Ba3) and affirmed the
Speculative Grade Liquidity Rating of SGL-2. The outlook is
negative. The downgrade is prompted by Blockbuster's weak fourth
quarter results which were significantly below Moody's
expectations and resulted in a deterioration of debt protection
measures. In addition, the downgrade reflects Moody's expectation
that the lower debt protection measures will be sustained over the
next twelve to eighteen months as management continues its current
level of spending on new initiatives, including the no late fee
program and the ramp up of the online business. This rating
action concludes the review for possible downgrade announced on
February 9, 2005.
The downgrade primarily reflects Moody's expectation that the
lower level of earnings and cash flow reported in the company's
fourth quarter and year-end results will be sustained over the
next 12 to 18 months as it continues spending on new initiatives.
EBITDA for the fourth quarter of 2004 was $82.1 million versus
Moody's expectation of around $190 million. Adjusted EBITDA
(which adjusts for rental amortization and purchases) for the full
fiscal year was $450.5 million versus Moody's expectations of some
$570 million. Free cash flow before dividends for the quarter was
$87.7 million versus Moody's expectations of $168 million; for the
full year, free cash flow before dividends was $128.6 million
versus Moody's expectations of $156 million.
In addition, the company had $100 million outstanding under the
revolver versus Moody's expectations of $50 million. This
resulted in adjusted debt/EBITDAR rising to 5.7x and free cash
flow to debt falling to 9.9%. Moody's expects weaker free cash
flow generation in fiscal year 2005 due to the additional spending
required to roll out the no late fee program, including
advertising and increased rental library purchases, as well as a
quicker ramp up in spending on acquiring on line subscribers.
Blockbuster is running well ahead of plan in acquiring on line
subscribers; however, this has impacted its earnings as it incurs
upfront subscriber acquisition costs in advance of earning the
monthly subscription fees.
The new rating category is supported by Blockbuster's:
* clear leadership and global presence in the area of video and
game rentals;
* the continued fragmented nature of the rental industry with
only one other sizable player (Movie Gallery post Hollywood
Entertainment acquisition);
* high brand value; and
* good liquidity.
In addition, the ratings reflect the discretionary nature of much
of the company's additional spending over the next twelve to
eighteen months, which provides some flexibility.
The ratings are constrained by:
* the weakened debt protection measures;
* the expectation that the online pricing war with Netflix will
continue over the next 12 months;
* as well as management's aggressive business policies as
evidenced by the hostile offer for Hollywood Entertainment;
and
* the quick roll out of the no late fee policy.
The negative outlook reflects Moody's concern that credit metrics
could deteriorate further should Blockbuster not be able to make
up the lost extended viewing fees with additional rental and
retail transactions.
While the elimination of extended viewing fees makes strategic
sense in order to compete effectively against retail sales, they
were a sizable portion of Blockbuster operating income --
approximately $250 to $300 million. Extended viewing fees for the
fiscal year 2005 were approximately $622 million or approximately
10% of total revenues.
Given the negative outlook an upgrade is highly unlikely.
The outlook could stabilize once there is clarity around the
sustainability of earnings after the elimination of late fees, and
should free cash flow/debt rise above 14% and adjusted debt to
EBITDAR fall below 5.5x. Ratings could move downward should
performance decline such that free cash flow to debt should falls
below 8% or adjusted debt to EBITDAR is likely to remain above
6.0x.
The SGL-2 reflects good liquidity. Internally generated cash flow
and cash on hand will be sufficient to fund its working capital,
capital expenditures, term loan amortization, and dividend
requirement over the next twelve months. Blockbuster has a
$500 million revolving credit agreement and, after deducting out
the Viacom letters of credit and outstanding borrowings,
$250 million was available under the facility.
These ratings are downgraded:
* Senior implied to Ba3 from Ba2;
* Issuer rating to B1 from Ba3;
* Senior Secured Bank Credit Facilities to Ba3 from Ba2; and
* Senior Subordinated Notes to B2 from B1.
These rating is affirmed:
* Speculative Grade Liquidity Rating of SGL-2.
Blockbuster Inc., headquartered in Dallas, Texas, is a leading
global provider of in-home movie and game entertainment with
approximately 9,100 stores throughout the Americas, Europe, Asia,
and Australia.
Total revenues for fiscal year 2004 were $6.1 billion.
CAESARS ENT: Names S. Rosen as Flamingo Las Vegas' Interim Pres.
----------------------------------------------------------------
Caesars Entertainment, Inc. (NYSE:CZR) named Senior Vice President
of Marketing Steven N. Rosen as interim president of the Flamingo
Las Vegas, one of the world's largest casino resorts. Mr. Rosen
will succeed Lorenzo Creighton, who has resigned to accept another
business opportunity.
A 20-year veteran of the gaming industry, Mr. Rosen during his
career has served in positions of increasing responsibility at
casino organizations in New Jersey, Mississippi and Nevada.
"Steve Rosen is a creative, proven executive who will successfully
guide the operation of the legendary Flamingo through the closing
of our merger with Harrah's Entertainment," said Caesars President
and Chief Executive Officer Wallace R. Barr. "With Steve's
leadership, our associates at the Flamingo will continue their
tradition of providing the world's best customer service."
Mr. Barr complimented Mr. Creighton's work for the company, which
began in 1995 when he was named senior vice president and general
manager of Bally's New Orleans. An Iowa native, Mr. Creighton
earlier served as a casino executive, a judge, a staff member for
the Iowa Gaming Commission and executive director of the
Mississippi Gaming Commission.
"Lorenzo Creighton has a distinguished record of service to
Caesars Entertainment. We thank him for his hard work and
dedication to the company and its associates, and we wish him the
very best in his future endeavors," Mr. Barr said.
Mr. Rosen joined Caesars Entertainment as a marketing executive
when the company was created as Park Place Entertainment in
December 1998. Earlier, he was senior vice president of corporate
marketing for Grand Casinos, which was acquired by Park Place.
Prior to joining Grand Casinos, he held posts at Caesars Palace in
Las Vegas and Harrah's Casino Hotel in Atlantic City.
Located at the heart of the Las Vegas Strip, at the intersection
of Las Vegas Boulevard and Flamingo Road, the world-famous
Flamingo Las Vegas boasts nearly 3,500 guest rooms and some of the
most exciting gaming action in the world.
About Caesars Entertainment
Caesars Entertainment, Inc. (NYSE:CZR) is one of the world's
leading gaming companies. With annual revenue of $4.2 billion,
27 properties on four continents, 26,000 hotel rooms, two million
square feet of casino space and 50,000 employees, the Caesars
portfolio is among the strongest in the industry. Caesars casino
resorts operate under the Caesars, Bally's, Flamingo, Grand
Casinos, Hilton and Paris brand names. The company has its
corporate headquarters in Las Vegas.
The company's Board of Directors in July 2004 accepted an offer
from Harrah's Entertainment, Inc., to acquire the company for
approximately $1.9 billion in cash and 67.7 million shares of
Harrah's common stock. Shareholders of both companies approved
the merger in separate meetings on March 11. The transaction is
contingent on approval by federal and state regulatory agencies
and is expected to close in the second quarter of 2005.
* * *
As reported in the Troubled Company Reporter on July 19, 2004,
Fitch Ratings has affirmed the following long-term debt ratings of
Harrah's Entertainment and placed the long-term ratings of Caesars
Entertainment on Rating Watch Positive.
HET
-- Senior secured debt 'BBB-';
-- Senior subordinated debt 'BB+'.
CZR
-- Senior unsecured debt 'BB+';
-- Senior subordinated debt 'BB-'.
CASCADES INC: Sells Wood Wyant Unit to Groupe Sani-Marc for $23.2M
------------------------------------------------------------------
Cascades Inc. reports the sale of the sanitation products
distribution and the chemical products manufacturing assets of its
Wood Wyant subsidiary to a subsidiary of Groupe Sani-Marc, located
in Victoriaville, Quebec, for about $23.2 million.
Cascades' decision to withdraw from the sanitation product
distribution business aligns with the company's strategic goal of
focusing operations on its core sectors namely the manufacturing
and the processing of tissue paper and packaging products. As
such, the Wood Wyant inc. assets related to the manufacturing of
tissue paper finished products, located in Pickering, Ontario, are
excluded from the transaction.
Wood Wyant, with about 270 employees and 13 distribution centers,
is a major sanitation product distributor in Canada. Since Wood
Wyant inc. is very well established in the commercial,
institutional and industrial sectors, the purchaser will pursue
its distribution operations under that name.
Commenting on the transaction, Ms. Suzanne Blanchet, President and
Chief Executive Officer of Cascades Tissue Group stated: "This
sale is in line with our strategic planning which began in 2004.
It will enable our Group to focus its expertise and resources on
the growth of our manufacturing and conversion of tissue paper
while continuing to develop its business with the entire group of
distributors including Wood Wyant".
Cascades, Inc., manufactures packaging products, tissue paper and
specialized fine papers. Internationally, Cascades employs 15,400
people and operates close to 150 modern and versatile operating
units located in Canada, the United States, France, England,
Germany and Sweden. Cascades recycles more than two million tons
of paper and board annually, supplying the majority of its fibre
requirements. Leading edge de-inking technology, sustained
research and development, and 40 years in recycling are all
distinctive strengths that enable Cascades to manufacture
innovative value-added products. Cascades' common shares are
traded on the Toronto Stock Exchange under the ticker symbol CAS.
* * *
As reported in the Troubled Company Reporter on Nov. 15, 2004,
Moody's Investors Service downgraded Cascades Inc.'s senior
implied rating to Ba2. The ratings were also downgraded on
Cascades, Inc.'s secured revolver, to Ba1 from Baa3, and on its
senior unsecured notes, to Ba3 from Ba1.
CATHOLIC CHURCH: Portland Gets Court OK to Hire Hamilton as Expert
------------------------------------------------------------------
The Archdiocese of Portland in Oregon, David A. Foraker as the
Future Claimants Representative, and the Official Tort Claimants'
Committee sought and obtained Judge Perris' approval to employ
Hamilton, Rabinovitz & Alschuler, Inc., as independent expert,
effective as of March 4, 2005.
Hamilton Rabinovitz will:
(a) develop a database and analytical models for use in
estimating and valuing the "future" claims of the Future
Claimants;
(b) consult with Mr. Foraker, Portland and the Committee with
regards to the design of a tort claims resolution
facility; and
(c) give expert testimony, as necessary.
Mr. Foraker, Portland and the Committee selected Hamilton
Rabinovitz because the firm is a leading expert on matters
relating to the estimation of "future" claims and the
administration of claims resolution facilities in "mass tort"
cases.
Thomas W. Stilley, Esq., at Sussman Shank LLP, in Portland,
Oregon, explains that Hamilton Rabinovitz' Executive Vice-
President, Francine F. Rabinovitz, Ph.D., has provided consulting
services to debtors, future claims representatives, insurance
companies, and shareholders in numerous Chapter 11 and "mass tort"
cases.
Hamilton Rabinovitz will be paid based on its discounted hourly
rates:
Designation Hourly Rates
--------------- ------------
Senior Partners $325
Junior Partners $325
Principals $325
Directors $325
Managers $300
Senior Analysts $250
Analysts $175
Research Associates $150
The firm's compensation and reimbursement of expenses will be
awarded as an administrative expense in the same manner as other
professionals that are employed, at the expenses of the estate and
in accordance with fee procedures in effect from time to time.
Compensation will be limited to $100,000 unless the limitation is
increased by further Court order.
Dr. Rabinovitz assures Judge Perris that Hamilton Rabinovitz does
not have an interest materially adverse to the Diocese's estate,
and is a disinterested person within the meaning of Section
101(14) of the Bankruptcy Code.
The Archdiocese of Portland in Oregon filed for chapter 11
protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004.
Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman
Shank LLP, represent the Portland Archdiocese in its restructuring
efforts. In its Schedules of Assets and Liabilities filed with
the Court on July 30, 2004, the Portland Archdiocese reports
$19,251,558 in assets and $373,015,566 in liabilities. (Catholic
Church Bankruptcy News, Issue No. 21; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
CHAMPIONSHIP AUTO: Delays 10-K Filing to Complete Financial Audit
-----------------------------------------------------------------
Championship Auto Racing Teams, Inc. (Pink Sheets: CPNT.PK) wasn't
able to file its 2004 Annual Report on Form 10-K with the U.S.
Securities and Exchange Commission by the March 31, 2005,
deadline. The Company filed a Form 12b-25 with the SEC, which
grants an automatic fifteen-day extension to the Form 10-K filing
deadline in order to complete the audit of its financial
statements for the year ended Dec. 31, 2004. In the Form 12b-25,
the Company stated that it was unable to complete its financial
statements by March 31, 2005, due primarily to the fact that its
operating subsidiary CART, Inc., filed for chapter 11 protection
in the U.S. Bankruptcy Court for the Southern District of Indiana
and the accounting for this transaction has not been completed.
The Company and its accountants have been working diligently to
finalize the financial statements and the 10-K as quickly as
possible. The Company believes it will be able to file the Form
10-K within the fifteen-day extension.
CART, Inc., continues to operate as debtor-in-possession under the
Bankruptcy Code in order to wind up its affairs. On August 3,
2004, CART filed CART's Amended Chapter 11 Plan and the Second
Amended Disclosure Statement For Amended Chapter 11 Plan of CART,
Inc., with the Bankruptcy Court. The Plan provides for the
distribution of the asset sale proceeds and other currently
available cash and the liquidation and distribution of the
remaining estate assets to CART, Inc.'s creditors. The
Disclosure Statement was approved as containing adequate
information by the Bankruptcy Court on August 3, 2004. The Plan
was confirmed on Sept. 23, 2004.
Going Concern Doubt
In its Form 10-Q for the quarterly period ended Sept. 30, 2004,
filed with the Securities and Exchange Commission, Championship
Auto said its intention to liquidate the remaining assets, pay off
the remaining liabilities, and complete the process of liquidation
and dissolution of the Company's affairs raise substantial doubt
about its ability to continue as a going concern.
"We currently intend to liquidate our remaining assets, pay off
our remaining liabilities, and complete the process of liquidation
and winding up the Company's affairs as soon as practicable," the
Company said in its regulatory filing. "Our Board of Directors
has not adopted a plan of liquidation and dissolution at this
time, but will consider this option when the liquidation and
bankruptcy of our subsidiary CART, Inc., is complete and after
approval by our shareholders. In the event that our Board of
Directors adopts a plan of liquidation and dissolution, we would
expect to incur liquidation expenses, in addition to payments of
ongoing operating expenses and settlement of existing or potential
obligations. Liquidation expenses may include, among others,
employee salaries, severance and related costs, legal and
accounting fees, as well as payments to a liquidation trustee."
Upon completion of the sale of substantially all of the Company's
operating assets to Open Wheel in February 2004, most of its
employees resigned and accepted employment with Open Wheel and the
Company ceased operations.
About the Company
Championship Auto Racing Teams, Inc., previously owned and
operated the ChampCar World Series. The Company has sold all of
its operating assets and is in the process of winding up its
affairs. The Company's subsidiary, CART, Inc., filed a petition
under Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Indiana on Dec. 16,
2003 (Bankr. S.D. Ind. Case No. 03-23385).
CHARTER COMMS: Inadequate Surplus Spurs Non-Payment of Dividends
----------------------------------------------------------------
Charter Communications, Inc., a cable television operator, will
not make the first quarter 2005 dividend payments on its preferred
stock. As a result, the rate of dividend accrual on the preferred
shares increases from 5.75% per year to 7.75% per year.
In a regulatory filing with the Securities and Exchange
Commission, Charter disclosed that the decision not to pay the
preferred dividends was made because it couldn't conclude with
certainty that it had an adequate surplus available for the
issuance of those dividends as required under Delaware law. This,
the Company said, does not impact compliance by the Company or its
subsidiaries with covenants under its or their respective credit
facilities or indentures. Further, the Company continued, this
determination regarding surplus is not a reflection of and does
not impact the Company's overall liquidity position and will not
adversely affect its ability to make payments on its other
obligations or otherwise impact its normal business operations.
"We cannot predict what impact, if any, this will have on
Charter's ability to raise additional financing in the future,"
the Company said.
About Charter Communications
Charter Communications, Inc. -- http://www.charter.com/-- a
broadband communications company, provides a full range of
advanced broadband services to the home, including cable
television on an advanced digital video programming platform via
Charter Digital(TM), Charter High-Speed(TM) Internet service and
Charter Telephone(TM). Charter also provides business-to-business
video, data and Internet protocol (IP) solutions through Charter
Business(TM). Advertising sales and production services are sold
under the Charter Media(R) brand.
At Dec. 31, 2004, Charter Communications' balance sheet showed a
$4.4 billion stockholders' deficit, compared to a $175 million
deficit at Dec. 31, 2003.
* * *
As reported in the Troubled Company Reporter on Nov. 18, 2004,
Fitch Ratings assigned a 'CCC+' rating to a proposed offering of
$750 million of convertible senior notes due 2009 issued by
Charter Communications, Inc. CHTR expects to use the proceeds
from the offering to prefund a portion of interest payments on the
new notes and to refinance CHTR's 5.75% convertible senior notes
due October 2005, of which approximately $588 million remain
outstanding. The Rating Outlook is Stable.
CMS ENERGY: Fitch Affirms Ratings After Issuance of 20MM Shares
---------------------------------------------------------------
Fitch Ratings affirms the outstanding ratings of CMS Energy
Corporation and primary subsidiary Consumers Energy Co. following
the issuance of 20 million shares of common stock by CMS (total
gross proceeds of $245 million). Proceeds of this latest stock
sale will be downstreamed into Consumers and for general corporate
purposes. The infusion of equity into Consumers fulfills a
requirement for the utility to have $2.3 billion in equity by
year-end 2005, as required by the Michigan Public Service
Commission in Consumers' recent gas rate order.
Along with the benefits of the recent refinancings and equity
issuances, Consumers continues to enjoy stable and predictable
earnings and cash flows and an improving regulatory environment in
Michigan. These factors support a Rating Outlook of Positive for
CMS and Stable for Consumers. CMS had approximately $7.3 billion
in consolidated debt (excluding securitization debt) outstanding
as of year-end 2004.
Fitch took positive rating actions on CMS and Consumers in
December 2004, recognizing the significant progress in refinancing
debt and the exit of a number of high risk activities, including
energy trading and marketing, divestiture of noncore assets, and
equity raising initiatives. As a result, CMS exhibits a reduced
risk profile and less leverage, while Consumers will be able to
benefit from the favorable rate order now that its equity
requirement has been achieved. Legacy issues, largely
aggressively financed international investments, continue to weigh
heavily on the credit profile of CMS, which remains burdened with
an aggressive capital structure.
Consumers has a number of regulatory filings pending with the
Michigan Public Service Commission including a $320 million
electric base rate increase and $628 million recovery of
regulatory assets, principally Clean Air Act expenditures.
Decisions in these matters and further progress in international
asset dispositions and reducing leverage will be important
components of future rating decisions.
Consumers, the principal subsidiary of CMS, is a combination
electric and natural gas utility that serves approximately 1.77
million electric and 1.67 million gas customers in Michigan's
Lower Peninsula.
Fitch affirms these ratings with a Positive Outlook:
CMS Energy Corporation
-- Secured bank loan 'BB';
-- Senior unsecured 'B+';
-- Preferred stock 'B'.
Fitch affirms these ratings with a Stable Outlook:
Consumers Energy Co.
-- Secured and first mortgage bonds 'BBB-';
-- Senior unsecured 'BB';
-- Preferred stock 'BB-'.
COMMERCIAL FEDERAL: Fitch Puts Ratings on Watch Negative
--------------------------------------------------------
Fitch Ratings places the long-term and short-term ratings for
Commercial Federal Corporation -- CFB -- on Rating Watch Negative.
Fitch has also affirmed all ratings for Commercial Federal Bank,
the bank subsidiary of CFB. The Rating Outlook for the bank
remains Stable.
Fitch places CFB's long-term and short-term ratings on Rating
Watch Negative pending CFB's development of more robust liquidity
and capital management planning and policies at the holding
company. The importance of more formal liquidity planning at the
parent is underscored by several factors including:
* CFB's level of common stock repurchase activity;
* the bank's need to seek approval from its regulator,
the Office of Thrift Supervision, to pay dividends to
the parent;
* parent debt service requirements;
* CFB's growth strategies that will require capital
support; and
* parent borrowings from an unaffiliated financial
institution requiring a covenant waiver.
Since Fitch believes the bank subsidiary's ability to service its
debt remains unchanged, Fitch has affirmed all bank ratings with a
Stable Rating Outlook.
Fitch's action follows the company's announcement today of an
agreement to sell its $10.6 billion third-party mortgage servicing
portfolio and the discontinuation of wholesale mortgage
originations. The scale of CFB's servicing business is not
sufficient to drive ongoing profitability. Fitch believes that
CFB can better deploy capital in its existing core businesses of
commercial, small business, and retail banking in the Midwest.
Fitch expects that consummation of the sale and the associated
balance sheet restructuring will not materially lower CFB's
capital levels. CFB's solid asset quality and sound reserves also
support the rating affirmation and Stable Rating Outlook for the
bank. While earnings performance remains weak even on risk-
adjusted basis, CFB's net interest margin has stabilized and
should continue to benefit from ongoing changes in loan and
deposit mixes.
Fitch expects to assess CFB's progress in implementing sound
parent company liquidity and capital guidelines and planning in
the second half of 2005.
These ratings are placed on Rating Watch Negative by Fitch:
Commercial Federal Corporation
-- Long-term 'BBB-';
-- Short-term 'F3'.
These ratings are affirmed with a Stable Rating Outlook by Fitch:
Commercial Federal Corporation
-- Individual 'C';
-- Support '5';
Commercial Federal Bank
-- Long-term deposits 'BBB';
-- Long-term 'BBB-';
-- Subordinated debt 'BB+';
-- Short-term 'F3';
-- Short-term deposits 'F3';
-- Individual 'C';
-- Support '5';
COMMERCIAL FEDERAL: Moody's Affirms Long-Term Deposits Ba1 Rating
-----------------------------------------------------------------
Moody's Investors Service affirmed its ratings and positive
outlook on Commercial Federal Bank (long-term deposits at Ba1).
The affirmation follows Commercial Federal's announcement of its
intention to substantially exit the mortgage banking business.
Specifically, Commercial Federal plans to sell its sizable
portfolio of mortgage loans serviced for other institutions and
exit related activities, including wholesale mortgage
originations. Moody's believes that exiting mortgage banking, a
scale business in which Commercial Federal was comparatively
small, will reduce the company's earnings volatility and interest
rate risk, and also allow its management to focus its energies on
core commercial and retail banking.
Moody's noted that Commercial Federal's profitability, measured as
pre-provision, pre-tax profitability relative to risk-weighted
assets, remains below the levels enjoyed by most higher-rated
peers. Future rating direction will reflect the company's ability
to improve its core profitability. The rating agency added that
Commercial Federal's emphasis on expanding its retail and
commercial core deposit base, which has already resulted in an
improved funding profile, should enhance its earnings profile
going forward.
Commercial Federal Corporation is an $11.5 billion thrift holding
company headquartered in Omaha, Nebraska.
COMSTOCK RESOURCES: Moody's Affirms Low-B Debt Ratings
------------------------------------------------------
Moody's Investors Service affirmed the B1 senior implied rating
and B2 senior unsecured notes rating for Comstock Resources, Inc.
following the company's announcement that it is acquiring 120.2
bcfe of proved reserves from EnSight Energy for approximately
$192.5 million. The rating outlook remains stable but could
weaken if the company is unable to improve its weak drilling
results and its drillbit finding and development cost of
$21.75/boe for 2004; and if Comstock does not reduce leverage on
its proved developed reserves by year-end.
Moody's believes the transaction is potentially a good fit for
Comstock's onshore operations and provides new drilling
opportunities in the company's core areas and that the Bois d'Arc
IPO will enable the company to indirectly monetize a portion of
its Gulf of Mexico reserves. The outlook remains stable on the
expectation of a reduction in leverage on the proved developed
reserves which is currently increasing from $5.73/boe for FYE
December 31, 2004 to $6.09/boe pro forma for the EnSight
acquisition. This increase occurs despite the $125 million
($121 million net proceeds) of new equity that will partially fund
the acquisition given that partial funding is still coming from
about $70 million of debt and that the properties contain a large
component (63%) of proved undeveloped reserves.
A positive outlook will require significant improvement in:
* Comstock's capital productivity evidenced by greatly
improving the drillbit F&D closer to $10.00/boe;
* sustainable leverage on the PD reserves to within $5.00/boe;
* Comstock's ability to mount sustainable sequential quarterly
production gains; and
* the completion of the Bois d'Arc IPO and subsequent repayment
of associated debt.
The purchase price amounts to about $81,750/boe of daily unit of
production and $2.26/mcfe ($13.60/boe) of proven reserves fully
loaded for the development capex on the existing proven reserves.
With a stable outlook, the ratings actions for Comstock Resources
are:
* Affirmed at B1 -- Comstock's senior implied rating
* Affirmed at B2 -- Comstock's 6.875% senior unsecured
guaranteed notes due 2012
* Affirmed at B3 - Comstock's issuer rating
For FYE 2004, Comstock reported all-sources high finding and
development costs of $15.75/boe ($2.63/mcfe), which includes the
Ovation acquisition completed in 2004 for a total of $62 million.
On the drillbit side, Comstock only replaced about 88% of
production through extensions and discoveries, resulting in a very
high F&D of $21.75/boe ($3.63/mcfe).
These results have pushed the company's three-year average all-
sources F&D to $10.49/boe ($1.75/mcfe) compared to $7.67/boe
($1.32/mcf) for 2003. Though the three year averages are still
competitive, the recent trends have been very high and could be
viewed as unsustainable long-term.
The ratings are restrained by:
* the company's concentration of its reserves and production;
* high leverage on the proved developed reserves; a high full
cycle cost structure;
* lagging capital productivity trend indicated by increasingly
high F&D results for the past two years and replacing less
than 100% of production through the drillbit in 2004;
* the still remaining exposure to the short lived and very
capital intensive Gulf of Mexico through its ownership
interest in Bois d'Arc; and
* the learning curve associated with new water-drive oil
properties acquired as part of the EnSight properties.
The ratings are supported by:
* the company's increasing focus in the onshore U.S. markets,
particularly in areas the company is already operating and
away from the steep decline GOM;
* the opportunity to reduce debt and improve its liquidity
position with the Bois d'Arc IPO;
* the company's demonstrated willingness to issue equity to
partially fund the EnSight acquisition; and
* the strong commodity price outlook which should continue to
support the company's high full cycle cost structure over the
near term.
The note rating remains one notch below the senior implied rating
due to the high amount of secured debt relative to the senior
unsecured notes despite the guarantees offered by the
subsidiaries, including Bois d'Arc. However, even after the Bois
d'Arc IPO and related debt repayment, the notes will likely remain
notched as Bois d'Arc will be released as a guarantor (though
Comstock will own approximately 48% of the stock) of the notes
upon its repayment of the debt owed to Comstock and that at least
$150 million of secured debt is expected remain outstanding after
this repayment. Removal of the notch may be considered if the
funded secured debt declines and is expected to remain a much
smaller component of total funded debt.
The EnSight acquisition presents the company with additional
drilling opportunities to potentially grow production and reserves
organically while also providing additional diversification away
from the high decline GOM. The acquired properties are located in
areas that Comstock already has a presence, is familiar with the
geology and could provide the company with synergies to improve
unit economics. However, part of the acquisition is the water-
flood oil Laurel field which has not been a core competency for
Comstock and will require them coming up the learning curve.
Typically this type of production is durable and consistent;
however it is higher costs and may impact the company's overall
unit economics to some degree.
Comstock's full cycle cost structure for Q4'04 was $25.18/boe and
remains high among the sector. These high costs are driven by the
rising 3-year all-sources F&D of $10.49/boe and the high lease
operating expenses of $8.38/boe for Q4'04. The rise in LOE
expense from $6.62/boe in Q2'04 is mostly driven by the shut in
production in the Gulf of Mexico due to hurricane Ivan as well as
the proportionate consolidation of the Bois d'Arc partnership.
At the point the shut-in volumes come back on line, the company's
full cycle costs should see an improvement, however, a partial
offset to this improvement could come from the higher cost water-
flood oil production acquired from EnSight. Further improvement
could come from the repayment of the debt associated with Bois
d'Arc upon completion of its IPO which will lower the company's
peer unit interest cost.
Leverage (debt/PD reserves) remains high for the company.
Pro forma or the transaction, the company's debt/PD reserves will
be about $6.09/boe, which is on the high end for the ratings.
Moody's notes that before the EnSight acquisition, the Ovation
acquisition and the Bois d'Arc formation leverage had been under
$5.00/boe. However, those two transactions pushed leverage on the
PD reserves to $5.56/boe and had not improved before the EnSight
acquisition. The Bois d'Arc IPO will enable Comstock to reduce
debt by about $150 million, however, after accounting for the
reserves allocated to Bois d'Arc and the stock held by Comstock,
leverage would improve.
Comstock is headquartered in Frisco, Texas.
CORECOMM NEW YORK: Court Extends Solicitation Period Until May 31
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Corecomm New York, Inc., and its debtor-affiliates until
May 31, 2005, to solicit acceptances of their First Amended Plan
of Reorganization from their creditors. Corecomm New York is an
affiliate of ATX Communications, Inc.
The Debtors explain that the proposed Plan is supported by
Leucadia National Corporation and the Official Committee of
Unsecured Creditors, and incorporates comprehensive settlement
agreements reached with Verizon Wireless and SBC. The extension
of their exclusive solicitation period will give the Debtors more
time to obtain confirmation of their Plan.
The Debtors explain that they are not attempting to delay their
reorganization and the confirmation hearing of their Plan for any
speculative purposes or to pressure their creditors to accept an
unsatisfactory Plan.
Headquartered in Bala Cynwyd, Pennsylvania, ATX Communications,
Inc. -- http://www.atx.com/-- is a local exchange and
interexchange carrier providing integrated voice and data
services, and operates a nationwide asynchronous transfer mode
network. ATX, CoreComm New York, Inc., and their affiliates filed
for chapter 11 protection on January 15, 2004 (Bankr. S.D.N.Y.
Case Nos. 04-10214 through 04-10245). Paul V. Shalhoub, Esq., and
Marc Abrams, Esq., at Willkie, Farr, & Gallagher LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed $664
million in total assets and $596.7 million in total debts.
CORECOMM NEW YORK: Plan Confirmation Hearing Set for April 13
-------------------------------------------------------------
The Honorable Prudence Carter Beatty of the U.S. Bankruptcy Court
for the Southern District of New York will convene a hearing at
2:30 p.m., on April 13, 2005, to consider confirmation of
Corecomm New York, Inc., and its debtor-affiliates' First Amended
Plan of Reorganization. Corecomm New York is an affiliate company
of ATX Communications, Inc.
Judge Beatty approved the Debtors' Disclosure Statement on
Feb. 28, 2005.
The Debtors' Plan incorporates a comprehensive settlement with
Leucadia National Corporation and with local exchange carriers
Verizon Wireless and SBC. Those three creditors agreed not to
share in the distributions to be made to other holders of general
unsecured claims.
Leucadia will be issued a $25 million New Senior Note and 100% of
New Common Stock (850,000 shares) to satisfy its claim of
approximately $170 million; the New Common Stock will not be
publicly traded.
The Debtors will make a cure payment to Verizon for $16.5 million
and will assume their executory contracts; the rest of Verizon's
$58 million claim will be satisfied after general unsecured
creditors recover 15% of their claims.
SBC's $37 million claim will be satisfied through the sales
proceeds of the Debtors' Mid-West operations.
General unsecured creditors will share $7 million in cash and will
recover 8.75% to 10% of their allowed claims.
Allowed convenience claim holders will receive cash payment equal
to 15% of their allowed claims on the effective date.
Subordinated claims, old common stock interests and equity
interests will be extinguished on the effective date.
Full-text copies of the Disclosure Statement and Amended Plan are
available are no charge at:
http://bankrupt.com/misc/CoreCommDisclosureStatement.pdf
-- and --
http://bankrupt.com/misc/CoreComm1rstAmendedChap11Plan.pdf
All ballots must be delivered, no later than today, April 4, 2005,
to the Debtors' balloting agent:
Donlin, Recano & Company Inc.
419 Park Avenue South
New York City, New York 10016
Objections to the Amended Plan, if any, must be filed and served
by April 11, 2005.
Headquartered in Bala Cynwyd, Pennsylvania, ATX Communications,
Inc. -- http://www.atx.com/-- is a local exchange and
interexchange carrier providing integrated voice and data
services, and operates a nationwide asynchronous transfer mode
network. ATX, CoreComm New York, Inc., and their affiliates filed
for chapter 11 protection on January 15, 2004 (Bankr. S.D.N.Y.
Case Nos. 04-10214 through 04-10245). Paul V. Shalhoub, Esq., and
Marc Abrams, Esq., at Willkie, Farr, & Gallagher LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed $664
million in total assets and $596.7 million in total debts.
CRDENTIA CORP: Acquires Nursing Services Center in Detroit
----------------------------------------------------------
Crdentia Corp. (OTC Bulletin Board: CRDE) acquired Health Industry
Professionals, LLC, a provider of per diem nursing services
throughout the Detroit metropolitan area. Terms of the
transaction were not released.
Founded in 1997, Health Industry Professionals has a strong
existing client base with major hospitals in the region and
several local Fortune 500 companies where it provides staffing for
on-site private medical clinics. In addition to per diem nursing
services, the Company also offers hourly and private duty home
care services. Health Industry Professionals has a database of
approximately 900 healthcare professionals and will continue to
operate under the direction of co-founders Matthew Cahillane and
C. Michael Emery, who have joined Crdentia's senior management
team.
"I am very pleased to announce Crdentia's acquisition of Health
Industry Professionals," said Crdentia's Chairman and Chief
Executive Officer James D. Durham. "Health Industry Professionals
is a well-run company with a strong local reputation and an
impressive customer base -- all qualities we look for in potential
acquisition targets. As part of the Crdentia team, I believe we
can take Health Industry Professionals to the next level of growth
while further establishing the Crdentia footprint in a major
metropolitan market."
In a joint statement, Health Industry Professionals co-founders
Matthew Cahillane and C. Michael Emery commented, "We are strong
believers in Crdentia's multidimensional approach to healthcare
staffing services and feel that the Health Industry Professionals
brand will flourish as part of Crdentia. With access to
Crdentia's staffing resources and industry expertise, we are very
excited about the opportunity to expand our market leading
position."
Commenting on the acquisition, Crdentia's President Pamela
Atherton stated, "Like many major cities across the country,
Detroit is experiencing a severe shortage of qualified healthcare
workers resulting in a significant number of unfilled staffing
requests. We will look to augment Health Industry Professional's
strong per diem staffing services and local market acumen with
Crdentia's travel nurses to accelerate our growth prospects."
Health Industry Professionals represents one of two acquisitions
recently announced by Crdentia in 2005 focusing on healthcare
staffing services. Founded in August 2002, Crdentia successfully
integrated four acquisitions in 2003 along with two acquisitions
in 2004. Crdentia currently ranks among the 10 largest healthcare
staffing providers in the U.S. market.
About the Company
Crdentia Corp. -- http://www.crdentia.com/-- is one of the
nation's leading providers of healthcare staffing services.
Crdentia seeks to capitalize on an opportunity that currently
exists in the healthcare industry by targeting the critical
nursing shortage issue. There are many small, private companies
that are addressing the rapidly expanding needs of the healthcare
industry. Unfortunately, due to their relatively small
capitalization, they are unable to maximize their potential,
obtain outside capital or expand. By consolidating well-run small
private companies into a larger public entity, Crdentia intends to
facilitate access to capital, the acquisition of technology, and
expanded distribution that, in turn, drive internal growth.
As of September 30, 2004, Crdentia had a $1,899,908 stockholders'
deficit compared to a $4,741,642 positive equity at December 31,
2003.
CREDIT SUISSE: Fitch Assigns Low-B Ratings to Two Mortgage Certs.
-----------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities Corp., home equity
mortgage trust 2005-2, pass-through certificates are rated as:
-- $352,800,200 class A-1, A-2, A-3, A-R and class A-RL
certificates 'AAA';
-- $27,120,000 class M-1 certificates 'AA+';
-- $13,680,000 class M-2 certificates 'AA';
-- $11,520,000 class M-3 certificates 'AA-';
-- $11,760,000 class M-4 certificates 'A+';
-- $11,520,000 class M-5 certificates 'A';
-- $10,800,000 class M-6 certificates 'A-';
-- $10,800,000 class M-7 certificates 'BBB+';
-- $10,800,000 class M-8 certificates 'BBB';
-- $7,680,000 class M-9 certificates 'BBB-';
-- $7,920,000 class B-1 certificates 'BB+';
-- $3,600,000 class B-2 certificates 'BB'.
The 'AAA' rating on the senior certificates reflects the 31.60%
total credit enhancement provided by:
* the 5.65% class M-1,
* the 2.85% class M-2,
* the 2.40% class M-3,
* the 2.45% class M-4,
* the 2.40% class M-5,
* the 2.25% class M-6,
* the 2.25% class M-7,
* the 2.25% class M-8,
* the 1.60% class M-9,
* the 1.65% class B-1,
* the 0.75% class B-2 and
* the 5.10% target overcollateralization.
All certificates have the benefit of monthly excess cash flow to
absorb losses. In addition, the ratings reflect the quality of
the loans, the integrity of the transaction's legal structure as
well as the primary servicing capabilities of Wilshire Credit
Corporation (74.2%) and IndyMac Bank, F.S.B (25.8%) and JPMorgan
Chase Bank, National Association as trustee.
The mortgage pool consists of second lien fixed-rate subprime
mortgage loans with a cut-off date aggregate principal outstanding
balance of $448,974,859. As of the cut-off date March 1, 2005,
the weighted average loan rate is approximately 10.18%. The
weighted average original term to maturity is 206 months. The
average cut-off date principal balance of the mortgage loans is
approximately $50,119. The weighted average combined original
loan-to-value ratio is 93.84% and the weighted average Fair, Isaac
& Co. score was 682.
The properties are primarily located in:
* California (39.42%),
* Florida (5.73%) and
* New York (5.53%).
On the closing date, the depositor will deposit approximately
$123,261,919 into a pre-funding account. The amount in this
account will be used to purchase subsequent mortgage loans after
the closing date and on or prior to June 24, 2005.
All of the mortgage loans were purchased by an affiliate of the
depositor from various sellers in secondary market transactions.
For federal income tax purposes, an election will be made to treat
the trust as multiple real estate mortgage investment conduits.
CREDIT SUISSE: Moody's Junks Class O Pass-Through Certificates
--------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded the ratings of two classes and affirmed the ratings of
fourteen classes of Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-
CKN5 as:
-- Class A-2, $15,452,912, Fixed, affirmed at Aaa;
-- Class A-3, $102,809,986, Fixed, affirmed at Aaa;
-- Class A-4, $681,279,000, Fixed, affirmed at Aaa;
-- Class A-X, Notional, affirmed at Aaa;
-- Class A-CP, Notional, affirmed at Aaa;
-- Class A-Y, Notional, affirmed at Aaa;
-- Class B, $37,548,000, Fixed, upgraded to Aa1 from Aa2;
-- Class C, $18,773,000, Fixed, upgraded to Aa2 from Aa3;
-- Class D, $24,138,000, Fixed, affirmed at A2;
-- Class E, $10,728,000, Fixed, affirmed at A3;
-- Class F, $13,410,000, Fixed, affirmed at Baa1;
-- Class G, $18,773,000, Floating, affirmed at Baa2;
-- Class H, $12,069,000, Floating, affirmed at Baa3;
-- Class J, $14,751,000, Fixed, affirmed at Ba1;
-- Class K, $20,114,000, Fixed, affirmed at Ba2;
-- Class L, $5,364,000, Fixed, affirmed at Ba3;
-- Class N, $9,387,000, Fixed, downgraded to B3 from B2; and
-- Class O, $8,046,000, Fixed, downgraded to Caa2 from B3.
As of the March 17, 2005 distribution date, the transaction's
aggregate balance has decreased by approximately 5.1% to $1.0
billion from $1.1 billion at securitization. The Certificates are
collateralized by 193 mortgage loans secured by commercial and
multifamily properties. The loans range in size from less than
1.0% to 6.8% of the pool, with the top ten loans representing
38.4% of the pool.
The pool includes one investment grade shadow rated loan
representing 6.8% of the pool. Three loans, representing 9.3% of
the pool, have defeased and have been replaced with U.S.
Government securities. The defeased loans include the largest
conduit loan, Eaton Vance/Alliance GT-4 Portfolio ($67.8 million -
6.7%), and the eighth largest conduit loan, Eaton Vance/Alliance
GT-3 Portfolio ($26.0 million - 2.6%). One loan has been
liquidated from the trust resulting in a realized loss of
approximately $1.1 million.
Five loans, representing 4.0% of the pool, are in special
servicing. Moody's has estimated aggregate losses of
approximately $11.2 million for all of the specially serviced
loans.
Moody's was provided with year-end or partial year 2004 operating
results for 92.1% of the performing loans. Moody's loan to value
ratio for the conduit component is 86.7%, compared to 87.5% at
securitization. The upgrade of Classes B and C is due to
increased subordination levels and stable overall pool
performance. The downgrade of Classes N and O is due to projected
losses from the specially serviced loans, LTV dispersion and
interest shortfalls. Based on Moody's analysis, 12.5% of the
conduit pool has a LTV greater than 100.0%, compared to 6.4% at
securitization. Twelve loans, representing 10.3% of the pool,
show debt service coverage of 0.9x or less based upon the
borrowers' reported operating performance and the actual constant.
Due to trust expenses and appraisal reductions, Classes N and O
have accrued but unpaid interest shortfalls totaling approximately
$185,700 as of the most recent distribution date. In addition,
unrated Class P has interest shortfalls of approximately $438,000.
The shadow rated loan is the Ocean Towers Loan ($69.2 million -
6.8%), which is secured by a 317-unit luxury residential
cooperative located in Santa Monica, California. Property
performance has been stable. The loan is shadow rated Aa2, the
same as at securitization.
The top three conduit exposures represent 12.2% of the outstanding
pool balance. The largest conduit loan is the Macomb Mall Loan
($45.8 million - 4.5%), which is secured by a 509,000 square foot
retail center located in Roseville, Michigan. Major tenants
include Crowley's Value City (25% GLA; expiration October 2013),
Kohl's (16.0% GLA; lease expiration January 2017) and Babies"R"Us
(7.0% GLA; lease expiration January 2013). The property is 93.1%
occupied, compared to 98.0% at securitization. Moody's LTV is
81.6%, the same as at securitization.
The second largest conduit loan is the One Sugar Creek Place Loan
($44.6 million - 4.4%), which is secured by a 509,400 square foot
office building located in Sugar Land, Texas, which is
approximately 20 miles southwest of Houston. The property is
100.0% occupied, the same as at securitization. Moody's LTV is
92.4%, compared to 95.6% at securitization.
The third largest conduit exposure consists of the Coldwater
Crossing Loan ($14.0 million - 1.4%), Kings Mall I and II Loan
($11.4 million - 1.1%) and the Eastgate Marketplace Loan
($8.6 million - 0.8%), three cross-collateralized loans secured by
three retail centers located in Fort Wayne, Indiana (one) and
Cincinnati, Ohio (two).
The three properties total 507,900 square feet. The overall
occupancy of the portfolio is 74.5%, compared to 94.0% at
securitization. The decline in occupancy is due to the smallest
loan, Eastgate Marketplace, which is now 13.0% occupied after
Garden Ridge (87.0% GLA) filed for bankruptcy and vacated the
center last year. The loan is on the master servicer's watchlist
due to a decrease in occupancy. Despite the drop in the
portfolio's occupancy, net operating income has increased since
securitization due to the strong performance of Coldwater
Crossing, the largest loan in the portfolio. Moody's LTV is
87.1%, compared to 100.7% at securitization.
The pool's collateral is a mix of:
1.office and mixed use (28.0%);
2. multifamily and cooperative (26.5%);
3. retail (24.6%), U.S. Government securities (9.3%);
4. industrial and self storage (6.5%); and
5. lodging (5.1%).
The collateral properties are located in 28 states and the
District of Columbia.
The highest state concentrations are:
1. California (26.1%),
2. Texas (14.9%),
3. New York (11.2%),
4. Ohio (8.0%) and
5. Michigan (7.2%)
All of the loans are fixed rate.
CYPRESS HILLS APARTMENTS: Voluntary Chapter 11 Case Summary
-----------------------------------------------------------
Debtor: Cypress Hills Apartments
dba Timmaron Ridge Apartments
9850 Whitehurst Avenue
Dallas, Texas 75243
Bankruptcy Case No.: 05-33436
Type of Business: The Debtor leases apartments.
Chapter 11 Petition Date: March 31, 2005
Court: Northern District of Texas (Dallas)
Judge: Harlin DeWayne Hale
Debtor's Counsel: Joyce W. Lindauer, Esq.
8140 Walnut Hill Lane, Suite 301
Dallas, Texas 75231
Tel: (972) 503-4033
Fax: (972) 503-4034
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 Unsecured
Creditors.
D-BOX TECHNOLOGIES: Completes $2 Million Private Placement
----------------------------------------------------------
D-Box Technologies Inc. has completed its previously announced
private placement by raising the maximum amount of $2.0 million.
At a final closing held on March 31, 2005, D-Box issued 4,240,000
units to ten subscribers in Canada, the United States and Europe
at a price of $0.25 per unit, for proceeds to D-Box of $1,060,000.
Each unit consists of one common share and one-half of a warrant.
Each full warrant entitles the holder to acquire one additional
common share of D-Box at a price of $0.55 for a period of one
year. The units were placed directly by D-Box.
As previously announced, D-Box raised $940,000 at the initial
closing of the private placement.
The proceeds from the private placement will be used by D-Box
primarily for commercialization and development of new products.
The common shares and warrants issued by D-Box at the final
closing are subject to a four-month hold period, which expires on
August 1, 2005.
The common shares of D-Box are listed on the TSX Venture Exchange
(DBO.A). After the private placement of 4,240,000 shares, there
are 41,535,232 common shares of D-Box issued and outstanding.
As of December 31, 2004, D-Box's equity deficit narrowed to
$46,424 compared to a $276,486 deficit at March 31, 2004.
DELPHI CORP: Audit Committee Completes Internal Accounting Probe
----------------------------------------------------------------
Delphi Corp. (NYSE: DPH), said the Audit Committee of its Board of
Directors, represented by Wilmer Cutler Pickering Hale and Dorr,
LLP, outside counsel, and PricewaterhouseCoopers, forensic
accountants, has substantially completed its internal accounting
investigation.
Robert H. Brust, chairman of Delphi's Audit Committee, said, "Our
internal investigation is substantially complete and no
significant issues have been identified other than those
previously disclosed and the matters set forth below. Although we
continue to review the conduct of certain lower- and mid-level
executives, we have concluded our review of officers and believe
that no further changes in the company's top management will be
required as a result of our investigation. We are confident in
Delphi's current financial management and its 23-member Strategy
Board that comprises Delphi's top internal policy-making group."
As previously reported, Delphi's Audit Committee initiated an
internal investigation in response to an SEC inquiry regarding the
accounting for certain transactions with suppliers of information
technology services in 2001. The transactions under the internal
review included rebates, credits or other lump sum payments
received from suppliers or paid to customers from 1999 to the
present. In the course of the investigation, the Audit Committee
also examined the company's accounting for transactions involving
the disposition of indirect material and inventory and certain
other transactions.
Mr. Brust reported the Committee's conclusions as of March 4,
2005, namely:
-- The review of transactions involving the receipt of rebates,
credits or other lump sum payments from suppliers has been
substantially completed. The results will be reported in
the company's restated financial statements.
-- The results of the investigation did not identify any
transactions involving rebates, credits or lump sum payments
made to customers that required adjustments to previously
reported financial results.
-- The company improperly accounted for $237 million in cash
payments made to its former parent in calendar year 2000 as
part of a settlement agreement. The results of the
investigation concluded that the payment should have been
accounted for entirely as warranty claims and should have
been expensed or charged against the warranty accrual in
2000 rather than reflected as an adjustment to post
retirement obligations and amortized over future periods.
Furthermore, with respect to $85 million in credits received
in 2001 from its former parent, the company is determining
the appropriate treatment of $30 million of such credits
that were recorded as income, and will present its
conclusions to the Audit Committee. The results will be
reported in the company's restated financial statements.
-- The company is reviewing two items not previously
identified:
* the timing of the release of $45 million of reserves in
the first quarter of 2002, and the period of recognition
for an $18 million payment received from a customer in
the fourth quarter of 2000, and will present its
conclusions to the Audit Committee. The results will be
reported in the company's restated financial statements.
"I would like to thank the Delphi organization for continuing its
focus on our customers. During this difficult internal
investigation, Team Delphi never lost sight of our objective to be
our customers' best supplier," said J.T. Battenberg III, Delphi
chairman and CEO. "We continue to be focused on streamlining the
company for cost leadership and investing in our technology-based
product business globally."
Mr. Battenberg said Delphi continues to cooperate fully with the
SEC's ongoing investigation and expects to review the Audit
Committee's conclusions with the SEC soon. In addition, the
Department of Justice has advised Delphi that it is conducting an
investigation, but that the company is not a target of that
investigation.
Delphi's management is in the process of preparing restated
financial statements for audit and review by its independent
auditors, Deloitte & Touche LLP, reflecting the matters identified
above as well as certain other out of period adjustments and other
lesser matters arising out of the investigation. The company
expects to complete the restatement and also provide audited
financial statements for 2004 on or before June 30, 2005. In
addition, Delphi, in conjunction with the Audit Committee is
evaluating the company's internal controls, including those for
financial reporting, and expects to be able to include a full
assessment by its outside auditors with the issuance of its
audited financial statements for 2004.
About the Company
Delphi -- http://www.delphi.com/-- is the world's largest
automotive component supplier with annual revenues topping $25
billion. Delphi is a world leader in mobile electronics and
transportation components and systems technology. Multi-national
Delphi conducts its business operations through various
subsidiaries and has headquarters in Troy, Michigan, USA, Paris,
Tokyo and Sao Paulo, Brazil. Delphi's two business sectors --
Dynamics, Propulsion, Thermal & Interior Sector and Electrical,
Electronics & Safety Sector -- provide comprehensive product
solutions to complex customer needs. Delphi has approximately
186,500 employees and operates 171 wholly owned manufacturing
sites, 42 joint ventures, 53 customer centers and sales offices
and 34 technical centers in 41 countries.
* * *
As reported in the Troubled Company Reporter on March 24, 2005,
the sale of Delphi Corporation's global automotive battery
operations to Johnson Controls Inc. for $212.5 million does not
affect the current ratings of Delphi, according to Fitch Ratings.
Fitch's 'BB+' rating on Delphi's senior unsecured debt remains on
Rating Watch Negative. Additionally, in a separate announcement,
Delphi announced that it has substantially completed its financial
accounting investigation with only modest further adjustments,
which Fitch sees as a positive step for the company.
To resolve the Rating Watch Negative status, Fitch will be focused
on the filing of Delphi's financial statements (currently
estimated by the company to be by June 30), the status of the
investigation by the Securities & Exchange Commission, any further
changes to the company's financial management team and the status
of its bank agreement. Fitch will also focus on Delphi's ability
to manage the current severe operating environment, where Delphi's
margin pressures will be exacerbated by GM's production cutbacks
for the first half of 2005.
DELPHI CORP: Will Pay Quarterly Dividends on May 2
--------------------------------------------------
The Delphi Corp.'s (NYSE: DPH) Board of Directors declared a
quarterly dividend of $0.03 per share on Delphi $0.01 par value
common stock. The previous quarterly dividend was $0.07 per share
paid in December 2004.
The Board determined that the reduction of the dividend is the
prudent course of action at this time given the uncertain near-
term industry outlook. The Board will continue to evaluate the
company's dividend policy on a quarterly basis.
"We recognize that our dividend is an important part of our total
shareholder return," said J.T. Battenberg III, Delphi chairman and
CEO. "This decision is aimed at balancing the near-term industry
challenges with our commitment to our shareholder value creation."
The dividend is payable May 2, 2005, to shareholders of record as
of the close of business today, April 4, 2005.
Battery Business Sale
Delphi Corporation signed a non-binding letter of intent with
Johnson Controls Inc. to sell our global lead-acid battery
business for approximately $212.5 million. The transaction is
subject to negotiation of definitive agreements, due diligence,
completion of information and consultation procedures with the
Works Councils in Europe, final negotiations with the UAW and IUE,
and necessary corporate and regulatory approvals, as well as
certain other closing conditions.
"We are continuing to refine our product portfolio and the sale of
this business frees up resources, helping us focus on our growing
product lines for both original equipment and independent
aftermarket customers," J.T. Battenberg III, the Company's
Chairman and CEO said.
Delphi has already consolidated the production of its Anaheim and
Olathe battery operations into our two remaining battery
operations at New Brunswick, New Jersey and Fitzgerald, Georgia.
The ultimate disposition of Delphi's two remaining U.S. facilities
will be determined based upon final negotiations with the UAW and
IUE, and conclusion of the definitive acquisition agreement with
JCI.
About the Company
Delphi -- http://www.delphi.com/-- is the world's largest
automotive component supplier with annual revenues topping $25
billion. Delphi is a world leader in mobile electronics and
transportation components and systems technology. Multi-national
Delphi conducts its business operations through various
subsidiaries and has headquarters in Troy, Michigan, USA, Paris,
Tokyo and Sao Paulo, Brazil. Delphi's two business sectors --
Dynamics, Propulsion, Thermal & Interior Sector and Electrical,
Electronics & Safety Sector -- provide comprehensive product
solutions to complex customer needs. Delphi has approximately
186,500 employees and operates 171 wholly owned manufacturing
sites, 42 joint ventures, 53 customer centers and sales offices
and 34 technical centers in 41 countries.
* * *
As reported in the Troubled Company Reporter on March 24, 2005,
the sale of Delphi Corporation's global automotive battery
operations to Johnson Controls Inc. for $212.5 million does not
affect the current ratings of Delphi, according to Fitch Ratings.
Fitch's 'BB+' rating on Delphi's senior unsecured debt remains on
Rating Watch Negative. Additionally, in a separate announcement,
Delphi announced that it has substantially completed its financial
accounting investigation with only modest further adjustments,
which Fitch sees as a positive step for the company.
To resolve the Rating Watch Negative status, Fitch will be focused
on the filing of Delphi's financial statements (currently
estimated by the company to be by June 30), the status of the
investigation by the Securities & Exchange Commission, any further
changes to the company's financial management team and the status
of its bank agreement. Fitch will also focus on Delphi's ability
to manage the current severe operating environment, where Delphi's
margin pressures will be exacerbated by GM's production cutbacks
for the first half of 2005.
DELTAGEN INC: Pays $4 Mil. to Lexicon as Initial Claim Settlement
-----------------------------------------------------------------
Lexicon Genetics Incorporated (Nasdaq: LEXG) reached an agreement
with Deltagen, Inc., providing for the settlement of Lexicon's
claim in Deltagen's bankruptcy proceedings and the assumption by
Deltagen of a sublicense agreement from Lexicon. The agreement
has been approved by the U.S. Bankruptcy Court for the Northern
District of California overseeing Deltagen's bankruptcy
proceedings. Lexicon received an initial payment of $4 million in
connection with the settlement and may receive up to $6 million in
additional payments from Deltagen's net licensing revenues from
existing lines of knockout mice and related phenotypic data.
Lexicon will also be entitled to receive royalties on Deltagen's
net licensing revenues from any lines of knockout mice that
Deltagen may generate in the future.
The assumed sublicense grants Deltagen non-exclusive rights under
patents controlled by Lexicon covering gene targeting technologies
for the generation of knockout mice, subject to limitations on the
number of lines of knockout mice Deltagen may generate in the
future.
As a result of this settlement, Lexicon said that its revenues for
the three months ending March 31, 2005, will exceed $13 million,
which is above the high end of Lexicon's revenue guidance for the
quarter. Lexicon also reiterated its full year 2005 revenue
guidance of $70 million to $75 million.
About Lexicon Genetics
Lexicon Genetics is a biopharmaceutical company focused on the
discovery and development of breakthrough treatments for human
disease. Lexicon is systematically discovering the physiological
and behavioral functions of genes to identify potential points of
therapeutic intervention, or drug targets. Lexicon makes these
discoveries using its proprietary gene knockout technology to
model the physiological effects that could be expected from
prospective drugs directed against novel targets. The Company has
advanced knockout-validated targets into drug discovery programs
in six therapeutic areas: diabetes and obesity, cardiovascular
disease, psychiatric and neurological disorders, cancer, immune
system disorders and ophthalmic disease. Lexicon is working both
independently and through strategic collaborations and alliances
to accelerate the development and commercialization of its
discoveries. Additional information about Lexicon is available
through its corporate Web site http://www.lexicon-genetics.com/
Deltagen Inc. provides essential data on the in vivo mammalian
functional role of newly discovered genes. The Company and its
debtor-affiliates filed for chapter 11 protection on June 27, 2003
(Bankr. N.D. Calif. Case No. 03-31906). Alan Talkington, Esq.,
and Frederick D. Holden, Esq., at Orrick, Herrington and
Sutcliffe, and Henry C. Kevane, Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub, P.C., represent the Debtors in their
restructuring efforts.
DEX MEDIA: Pays Down $131 Million Bank Debt in First Quarter
------------------------------------------------------------
Dex Media, Inc. (NYSE: DEX) paid down $131 million in bank debt
during the first quarter of 2005.
"We are pleased with our continued capacity to repay debt ahead of
schedule," said George Burnett, president and CEO of Dex Media.
"In addition, we would like to reconfirm our full-year 2005
guidance, which includes an increase in free cash flow over 2004;
decreased capital expenditures; adjusted EBITDA margin and full-
year revenue growth rates that are consistent with 2004; and debt
paydown that will approximate one-half turn of leverage before
giving effect to dividend payments."
The company will release its first quarter earnings and hold its
quarterly conference call on May 4, 2005.
About the Company
Dex Media, Inc., is the exclusive publisher of the official White
and Yellow Pages for Qwest Communications International Inc. In
2004, the company published 44.5 million copies of 269 directories
in Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska,
New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington
and Wyoming. In addition to connecting advertisers and consumers
through its print and CD-ROM directories, Dex Media provides fully
searchable advertising on DexOnline.com(TM), the most used
Internet Yellow Pages in Dex Media's 14-state region, according to
market research firm comScore.
In 2004, Dex Media generated revenue of approximately
$1.65 billion, excluding the effects of purchase accounting
related to the acquisition of Dex Media West LLC.
* * *
As reported in the Troubled Company Reporter on June 18, 2004,
Fitch Ratings affirmed these ratings on Dex Media's subsidiaries,
Dex Media East LLC (DXME) and Dex Media West LLC (DXMW):
DXME
-- $1.1 billion senior secured credit facility 'BB-';
-- $450 million senior unsecured notes due 2009 'B';
-- $525 million senior subordinated notes due 2012 'B-;
DXMW
-- $2.1 billion senior secured credit facility 'BB-';
-- $385 million senior unsecured notes due 2010 'B';
-- $780 million senior subordinated notes due 2013 'B-'.
In addition, Fitch has assigned a 'CCC+' rating to the holding
company's, Dex Media Inc., $500 million 8% notes due 2013 and its
$750 million 9% aggregate principal discount notes due 2013, which
has a current accreted value of $512 million. Approximately
$6.3 billion of debt is affected by Fitch's actions. The Rating
Outlook is Stable.
On July 28, 2004, Moody's Investor Service upgraded its credit
ratings by two notches to B3.
In anticipation of a common stock offering and the use of a
portion of the proceeds to reduce debt, on May 17, 2004,
Standard & Poors revised the outlook on Dex's single-B credit
ratings to stable from negative.
DONNKENNY INC: Judge Drain Approves Disclosure Statement
--------------------------------------------------------
The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the
Southern District of New York approved the Disclosure Statement
explaining the Second Amended Chapter 11 Plan of Donnkenny, Inc.,
and its debtor-affiliates. Judge Drain found the Disclosure
Statement to contain the right amount and the right kind of
information to allow creditors to make an informed decision
whether to accept or reject the Debtors' Plan.
The Court will convene a hearing on April 19, 2005, at 10:00 a.m.
to discuss the merits of the Plan. Objections, if any, must be
filed by 12:00 noon of April 15.
Terms of the Plan
The Plan contemplates that the Debtors' operations will cease on
the Plan's effective date.
The Plan intends to substantively consolidate all debtor entities.
Substantive consolidation refers to combining the assets and
liabilities of two or more related debtors into a single pool to
pay creditors.
The CIT Group/Commercial Services, Inc., and other prepetition
lenders under the 1999 Revolving Finance Agreement, will receive a
pro-rata share of the proceeds of the asset sale.
Holders of other secured claims will receive either the collateral
securing the claim or cash payment over time covering both
principal amount of the claim and interest. If the Debtors will
opt to pay over time, the Secured Claim Holder will retain the
liens on the collateral.
Holders of general unsecured claims take nothing under the Plan.
However, the Credit Agreement Lenders may elect to set aside an
amount from the sale proceeds to be distributed among the General
Unsecured Claim Holders.
On the effective date of the Plan:
(1) intercompany claims and equity interests will be cancelled;
and
(2) a Plan Administrator will be appointed to implement the
Plan.
Headquartered in New York City, Donnkenny, Inc., and its debtor-
affiliates design, import, and market broad lines of moderately
and better priced women's clothing. The Debtors filed for chapter
11 protection on Feb. 7, 2005 (Bankr. S.D.N.Y. Case Nos. 05-10712
through 05-10716). Bonnie Steingart, Esq., Kalman Ochs, Esq., and
Christopher R. Bryant, Esq., at Fried, Frank, Harris, Shriver &
Jacobson LLP, represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they listed $45,670,000 in total assets and
$100,100,000 in total debts.
DRESSER INC: Restates Financial Statements & Delays 10-K Filing
---------------------------------------------------------------
Dresser, Inc., said it will not timely file its 2004 Annual Report
on Form 10-K with the Securities and Exchange Commission. The
Company is restating certain prior results. The Company
previously reported on March 8, 2005, that it was conducting a
review of fourth quarter adjustments disclosed in the Company's
2003 Annual Report on Form 10-K. These adjustments included:
-- a $10.0 million decrease to pre-tax income; and
-- a $2.4 million decrease to income tax expense and were
comprised of non-cash charges, the majority of which related
to excess and obsolete inventory write-offs and the initial
recognition of certain foreign pension liabilities from
prior years.
While the review is not yet complete, the Company has concluded
that portions of the fourth quarter 2003 adjustments will be
restated to prior periods.
The Company will restate certain previously issued financial
statements to reflect a correction of an error related to the
historical accounting for its LIFO inventories. The expected
effect of the correction is a decrease in net inventories of
approximately $7.0 million as of September 30, 2004. The
aggregate expected effect on operations from January 1, 2001
through September 30, 2004 is a decrease to operating income of
less than $2.0 million. The remainder affects operating income in
periods prior to 2001.
The information contained in this release is unaudited and subject
to change as the Company completes its restatements and 2004
financial statements.
The Company reported that cash and cash equivalents totaled
$98.6 million on December 31, 2004, compared to $102.0 million on
September 30, 2004.
Aggregate borrowings under the Company's senior secured credit
facility, senior unsecured term loan, and senior subordinated
notes were $1,055.0 million at December 31 2004, compared to
$1.065 billion at the end of the third quarter of 2004. Total
debt, including capital leases, on December 31, 2004 was
$1.075 billion, compared to $1.084 billion on September 30, 2004.
Bookings for the year ended December 31, 2004 were $2,087.6, up
from $1.760 billion for the year-ago period. Bookings for the
three months ended December 31, 2004 were $573.6 million, compared
to $461.2 million for the same period in 2003.
Capital expenditures for the year ended December 31, 2004 were
$50.3 million, compared to $36.3 million in 2003. The majority of
the increase was due to the $11.8 million consolidation of certain
flow control operations in Houston.
Patrick Murray, Chairman and Chief Executive Officer, said, "We
are pleased to report that the favorable global market trends that
have been benefiting our business the past year continued through
the fourth quarter of 2004. The major leading indicators of our
business -- energy consumption rates, commodity prices, and
capital expenditures by the energy industry--continue to reflect
favorable trends. These market trends, together with foreign
currency appreciation and the acquisition of the retail fueling
business of Nuovo Pignone, were the primary reasons for the year-
over-year improvement in bookings." Foreign currency appreciation
and Nuovo Pignone accounted for approximately 20% and 30%,
respectively, of the improvement in 2004 fourth quarter bookings
as compared to the same period in 2003.
Mr. Murray said that the Company's fourth quarter will be impacted
by previously announced expenses associated with the departure of
the former CEO and the Company's voluntary investigation into
transactions that involved sales to sanctioned countries.
"However, absent these expenses, we expect to report improved
operating results year-over-year for the quarter and twelve months
ended December 31, 2004. We're also pleased to report that we
made optional debt repayments of $55 million during 2004,
including $10 million in the fourth quarter, exceeding our goal
for the year of $50 million in optional repayments."
Mr. Murray said the Flow Control segment saw stronger
international demand for control valves and pressure relief
products. "However, we have yet to see the expected benefits from
the plant consolidations in the on/off valve and instrument
product lines, and profitability in these two units remains
disappointing."
The Measurement Systems segment experienced significant volume
increases from increased demand for fueling dispensers and
services in the U.S., the acquisition of Nuovo Pignone, and strong
customer demand in Europe. "Measurement Systems continues to
perform well and made a substantial contribution to our improved
year-over-year results," Mr. Murray said.
"Compression and Power Systems volumes were also up due to
strengthened demand for natural gas compression and power
generation products, industrial blowers and aftermarket parts.
Bookings and inquiries relating to natural gas compression
activity increased significantly in the fourth quarter, and we
expect this trend to continue in 2005."
Mr. Murray said a number of significant events occurred in 2004,
including the acquisition and integration of Nuovo Pignone and the
technology purchase from Wartsila related to the Company's natural
gas engine business.
"We are optimistic about 2005 given current market conditions and
our healthy level of backlog," Mr. Murray said.
Completion of the financial restatements will also affect the
Company's ability to timely provide 2004 audited financial
statements to its lenders under the Company's senior secured
credit facility and senior unsecured term loan and to the holders
of its 9-3/8% Senior Subordinated Notes. The Company has amended
its senior secured credit facility and received a consent under
its senior unsecured term loan to extend the delivery date of its
audited financial statements and 2004 Annual Report on Form 10-K
to May 30, 2005.
Headquartered in Dallas, Texas, Dresser, Inc. --
http://www.dresser.com/-- is a worldwide leader in the design,
manufacture and marketing of highly engineered equipment and
services sold primarily to customers in the flow control,
measurement systems, and compression and power systems segments of
the energy industry. Dresser has a comprehensive global presence,
with over 8,500 employees and a sales presence in over 100
countries worldwide.
* * *
As reported in the Troubled Company Reporter on March 15, 2005,
Standard & Poor's Ratings Services placed the 'BB-' ratings on
Addison, Texas-based Dresser, Inc., on CreditWatch with negative
implications. The action follows Dresser's announcement that it
will most likely be delayed in filing its 10K before
March 31, 2005, and that the company could potentially have
difficulty providing timely 2004 audited financial statements to
its lenders.
Filing delays could result from an ongoing company review
concerning a $10 million adjustment to pretax income and a
$2.4 million decrease to income-tax expense recorded in fourth-
quarter 2003, reported in the company's 2003 10K.
The company has stated that it will seek waivers from lenders
extending filing deadlines and expects that they will be granted.
Nevertheless, the CreditWatch listing reflects the potential for
ratings to be lowered if the company fails to receive waivers (and
thus potentially violate covenants under the company's senior
secured credit facility, senior unsecured term loan, and
9.37% senior subordinated notes), or if other potential
difficulties arise in the near term that would adversely affect
credit quality. Standard & Poor's will continue to review these
matters as further information is disclosed, to assess the
potential effect on credit quality before resolving the
CreditWatch listing.
FEDERAL-MOGUL: Appoints Mario Leone as Sr. Vice President & CIO
---------------------------------------------------------------
President and Chief Executive Officer Jose Maria Alapont disclosed
the appointment of Mario Leone as senior vice president and chief
information officer and a member of the Strategy Board for
Federal-Mogul Corporation (OTCBB:FDMLQ), effective May 2, 2005.
"Mr. Leone's global automotive leadership and technology
expertise, coupled with his commitment to outstanding customer
focus, will drive the development of world-class information
systems and support Federal-Mogul's global profitable growth
strategy," said Mr. Alapont.
Mr. Leone has 25 years of international business experience, most
recently as chief information officer at Fiat Group and IVECO -
the commercial vehicle company of the Fiat Group.
Previously, Mr. Leone was director, global business information
systems at Dow Chemical; and director, SAP program implementation
at Polimeri Europa - a Union Carbide-EniChem joint venture. Mr.
Leone began his career at Union Carbide, where he held several
positions of increasing responsibility in technical sales,
marketing, new product development licensing and information
technology.
Mr. Leone earned a bachelor's degree in chemistry from Boston
University and a master's degree in business administration with a
concentration in finance from Babson College, both located in
Massachusetts.
Headquartered in Southfield, Michigan, Federal-Mogul Corporation
-- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some
$6 billion. The Company filed for chapter 11 protection on
October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J.
Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at
Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at
Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C.,
represent the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$10.15 billion in assets and $8.86 billion in liabilities.
At Dec. 31, 2004, Federal-Mogul's balance sheet showed a
$1.925 billion stockholders' deficit.
FRESH CHOICE: Can't File Annual Report with SEC On Time
-------------------------------------------------------
Fresh Choice, Inc., says it is unable to file its annual report on
Form 10-K for the year ended December 26, 2004, with the
Securities and Exchange Commission by the prescribed filing date
of March 28, 2005. The filing of its Form 10-K has been hindered
by the Company's Chapter 11 bankruptcy proceedings as well as its
ongoing review of accounting for leased properties and leasehold
improvements.
The Company said it was working with Macias Gini & Company LLP,
its independent registered public accounting firm, on a
restatement related to its accounting for leased properties and
leasehold improvements. Accordingly, the Company's financial
statements previously filed with the SEC should no longer be
relied upon. Once the Company's review is complete and its
independent registered public accounting firm has concurred with
the Company's interpretation of the applicable accounting
principles, the Company expects to restate its historical
financial statements. As of March 28, 2005, the Company's
review of its accounting for leased properties and leasehold
improvement continues.
Headquartered in Morgan Hill, California, Fresh Choice, Inc. --
http://www.freshchoice.com/-- owns and operates 39 salad bar
eateries, mostly located in California. The company filed for
chapter 11 protection on July 12, 2004 (Bankr. N.D. Calif. Case
No. 04-54318). Debra I. Grassgreen, Esq., Tobias S. Keller,
Esq., and Joshua M. Fried, Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub, P.C., represent the Debtor in its
restructuring efforts. When the Debtor filed for protection
from its creditors, it listed $29,651,000 in total assets and
$14,348,000 in total debts.
GENEVA STEEL: Committee Wants a Trustee & Pushes CEO Johnsen Out
----------------------------------------------------------------
Dave Anderton at the Deseret Morning News reports that Ken C.
Johnsen, chief executive officer of Geneva Steel LLC, will step
down on May 15 and hand control of the company's affairs to a to-
be-named bankruptcy trustee. Mr. Anderton reports that Mr.
Johnsen said his departure was a mutual decision between himself
and Geneva's Official Committee of Unsecured Creditors. As soon
as the trustee is appointed, Geneva's Board of Directors will
dissolve.
"Their preference was to appoint a trustee, have me step down, and
let their trustee manage the real estate," Mr. Johnsen told the
newspaper, referring to the Creditors' Committee. "This trustee
will be responsible for essentially running the company. It's
just a transition from one part of the case to another."
Geneva's plans for a mixed-use development of commercial and
residential sites will be handed over to the trustee. The trustee
will have the option of continuing to develop the property or
taking the property in a new direction.
Headquartered in Provo, Utah, Geneva Steel LLC, owns and operates
an integrated steel mill. The Company filed for chapter 11
protection on January 25, 2002 (Bankr. Utah Case No. 02-21455).
Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E.
Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its
restructuring efforts. When the Company filed for protection from
its creditors, it listed $262 million in total assets and
$192 million in total debts.
HAPPY KIDS: Creditors Committee Taps Traub Bonacquist as Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of Happy Kids Inc.,
and its debtor-affiliates asks the U.S. Bankruptcy Court for the
Southern District of New York for permission to retain Traub
Bonacquist & Fox LLP as its counsel, nunc pro tunc to March 16,
2005.
The Committee reminds the Court that it entered an order on
March 30, 2005, withdrawing the employment of Chadbourne & Parke
LLP as its counsel due to potential conflicts of interest.
Chadbourne & Parke filed a request on March 17, 2005, to withdraw
as the Committee's counsel, because it previously represented,
currently represents and may in the future represent certain
Potentially Interested Parties.
Traub Bonacquist is expected to:
a) provide the Committee with legal advice with respect to its
rights, duties and powers in the Debtors' chapter 11 cases;
b) consult with the Debtors, their counsel, other professionals
retained in the Debtors' chapter 11 cases and the U.S.
Trustee concerning the administration of the Debtors' 11
cases and their impact on their estates;
c) assist and advise the Committee in analyzing the claims of
creditors and in negotiating with those creditors;
d) assist and advise in the Committee's investigation of the
acts, conduct, assets, liabilities, and financial condition
of the Debtors, the operation of the Debtors' businesses,
and any other matters relevant to the chapter 11 cases or to
the formulation of a plan of reorganization or liquidation,
including considering the appointment of a trustee or
examiner;
e) assist and advise the Committee in its analysis and
negotiations with the Debtors and any third parties, in the
formulation of any plan of reorganization or liquidation,
and with respect to the Committee's communications with the
general creditor body regarding significant matters in the
Debtors' bankruptcy cases;
f) prepare pleadings, motions, applications, objections and
other papers as may be necessary in furtherance of the
Committee's interests and objectives, and represent the
Committee at all hearings and other proceedings;
h) analyze and advise the Committee of the meaning and
importance of all pleadings and other documents filed with
the Court; and
g) perform all other legal services as may be required and
deemed to be in the interest of the Committee in accordance
with the provisions of the Bankruptcy Code.
Michael S. Fox, Esq., Adam Friedman, Esq., and Fred Levy, Esq.,
are the lead attorneys for the Committee. Mr. Fox charges
$565 per hour for his services, while Mr. Friedman charges $425
per hour and Mr. Levy charges $395 per hour.
Mr. Fox reports Traub Bonacquist's professionals bill:
Designation Hourly Rate
----------- -----------
Partners $395 - $675
Counsel $395
Associates $265 - $285
Paralegals $90 - $165
Traub Bonacquist assures the Court that it does represent any
interest adverse to the Committee, the Debtors or their estates.
Headquartered in New York, New York, Happy Kids, Inc., and its
affiliates are leading designers and marketers of licensed,
branded and private label garments in the children's apparel
industry. The Debtors' current portfolio of licenses includes
Izod (TM), Calvin Klein (TM) and And1 (TM). The Company and its
debtor-affiliates filed for chapter 11 protection on Jan. 3,
2005 (Bankr. S.D.N.Y. Case No. 05-10016). Sheldon I. Hirshon,
Esq., at Proskauer Rose LLP, represents the Debtors in their
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $54,719,000 and total
debts of $82,108,000.
HAPPY KIDS: Committee Taps FTI Consulting as Financial Advisors
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave the Official Committee of Unsecured Creditors of Happy Kids
Inc., and its debtor-affiliates permission to employ FTI
Consulting, Inc., as its financial advisors.
FTI Consulting will:
a) assist the Committee with information and analyses required
for the Debtors' debtor in possession financing including,
preparation for hearings regarding the use of cash
collateral and DIP financing;
b) assist the Committee in the review of the Debtors' proposed
key employee retention and other critical employee benefit
programs, and assist the Committee with respect to the
Debtors' identification of core business assets and the
disposition of assets or liquidation of unprofitable
operations;
c) assist the Committee in the review of the Debtors'
performance of cost/benefit evaluations with respect to the
affirmation or rejection of various executory contracts and
leases;
d) assist the Committee regarding the valuation of the present
level of operations and identification of areas of potential
cost savings, including overhead and operating expense
reductions and efficiency improvements;
e) assist the Committee in the review of financial information
distributed by the Debtors to creditors and others,
including cash flow projections and budgets, cash receipts
and disbursement analysis, analysis of various asset and
liability accounts, and analysis of proposed transactions
for which Court approval is sought;
f) attend meetings and assist in discussions with the Debtors,
potential investors, banks, other secured lenders, the
Committee and any other official committees organized in
the Debtors' chapter 11 proceedings, the U.S. Trustee, other
parties in interest and professionals hired;
g) assist in the review and preparation of information and
analysis necessary for the confirmation of a plan of
reorganization in the Debtors' chapter 11 proceedings; and
h) render all other general business and financial consulting
services that are necessary in the Debtors' bankruptcy
proceedings.
Samuel Star, a Senior Managing Director at FTI Consulting,
discloses that the Firm will charge a $45,000 monthly fee.
FTI Consulting assures the Court that it does represent any
interest adverse to the Committee, the Debtors or their estates.
Headquartered in New York, New York, Happy Kids, Inc., and its
affiliates are leading designers and marketers of licensed,
branded and private label garments in the children's apparel
industry. The Debtors' current portfolio of licenses includes
Izod (TM), Calvin Klein (TM) and And1 (TM). The Company and its
debtor-affiliates filed for chapter 11 protection on Jan. 3,
2005 (Bankr. S.D.N.Y. Case No. 05-10016). Sheldon I. Hirshon,
Esq., at Proskauer Rose LLP, represents the Debtors in their
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $54,719,000 and total
debts of $82,108,000.
HAWAIIAN AIRLINES: Showdown With Pilots Continued to Apr. 13
------------------------------------------------------------
As reported in the Troubled Company Reporter on March 28, 2005,
members of the Air Line Pilots Association International voted 144
to 122 to reject a proposal for a new two-year contract with
Hawaiian Airlines that would tinker with retirement and disability
benefits and raise medical insurance premiums. The carrier
went to Bankruptcy Court last week to ask a judge to impose that
new contract on ALPA members.
A report from the Associated Press says that U.S. Bankruptcy Judge
Robert Faris continued the hearing until April 13.
"I wish everyone the best in resolving this matter consensually.
That would be better for everybody," the AP relates Judge Faris
told the lawyers.
Kirk McBride, chairman of ALPA's master executive committee, told
Rick Daysog at the Star Bulletin that members were outraged by $7
million of management bonuses that were paid out last year with
approval from Bankruptcy Judge Robert Faris. "In general, there
was a perception that interaction with management at Hawaiian does
not provide for constructive problem solving and smooth employee
relations," Mr. McBride said.
Hawaiian Trustee Joshua Gotbaum told Mr. Daysog he was
disappointed that union members rejected the contract, which he
said was better than any proposal made by the airline to its
pilots in the past two years. Mr. Gotbaum said the contract would
have made Hawaiian's pilots among the best paid in the industry
and would have kept the pilots' pension plan intact for the next
seven years.
"Both sides need to sit down and roll up their sleeves and see
what can be done to resolve this process," Jim Giddings, chairman
of the union's negotiating committee, told the AP.
Hawaiian Airlines has already struck new labor agreements with the
International Association of Machinists, the Transport Workers
Union, the Network Engineering Group and the Association of Flight
Attendants. The Bankruptcy Court confirmed Hawaiian Airlines
Inc.'s plan of reorganization on March 10, 2005. The Company
hopes to emerge from chapter 11 very soon. A new labor contract
with the Pilots is a condition to the Plan taking effect.
On March 21, 2003, Hawaiian Airlines, Inc., filed a voluntary
petition for reorganization under Chapter 11 of the United States
Bankruptcy Code in the U.S. Bankruptcy Court for the District of
Hawaii (Case No. 03-00827). Joshua Gotbaum serves as the chapter
11 trustee for Hawaiian Airlines, Inc. Mr. Gotbaum is represented
by Tom E. Roesser, Esq., and Katherine G. Leonard, Esq., at
Carlsmith Ball LLP and Bruce Bennett, Esq., Sidney P. Levinson,
Esq., Joshua D. Morse, Esq., and John L. Jones, II, Esq., at
Hennigan, Bennett & Dorman LLP.
HAYES LEMMERZ: Seeks to Amend Credit Agreement
----------------------------------------------
On March 22, 2005, Hayes Lemmerz International, Inc., met with
lenders under its $450 million Senior Secured Term Loan and its
$100 million Senior Secured Revolving Credit Facility to request
approval of a proposed amendment to its Credit Agreement dated as
of June 3, 2003. Patrick C. Cauley, Hayes Lemmerz's Vice
President, General Counsel and Secretary, discloses in a
regulatory filing with the Securities and Exchange Commission that
the Company seeks to:
-- establish under the Credit Agreement a new term loan of up
to $150 million principal amount, which new loan would be
secured by a second lien on the collateral securing the
existing Senior Secured Term Loan and Senior Secured
Revolving Credit Facility; and
-- modify certain financial covenants contained in the Credit
Agreement.
Mr. Cauley says that no assurances can be given that the lenders
will approve the proposed amendment.
Hayes Lemmerz International, Inc., is a world leading global
supplier of automotive and commercial highway wheels, brakes,
powertrain, suspension, structural and other lightweight
components. The Company filed for chapter 11 protection on
December 5, 2001 (Bankr. D. Del. Case No. 01-11490) and emerged in
June 2003. Eric Ivester, Esq., and Mark S. Chehi, Esq., at
Skadden, Arps, Slate, Meager & Flom represent the Debtors. (Hayes
Lemmerz Bankruptcy News, Issue No. 61; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
* * *
As reported in the Troubled Company Reporter on March 14, 2005,
Moody's Investors Service assigned a B2 rating for the proposed
new guaranteed senior unsecured notes of HLI Operating Company,
Inc., an indirect subsidiary of Hayes Lemmerz International, Inc.
Half of the net proceeds of the proposed notes will be applied to
prepay existing senior secured term loans, with the other half to
be used to either augment cash or repay outstanding revolver debt
or accounts receivable securitization usage.
Moody's additionally downgraded all of the existing ratings for
HLI Opco in response to Hayes Lemmerz's weaker-than-anticipated
consolidated free cash flow performance since its June 2003
reorganization out of Chapter 11 bankruptcy. Hayes Lemmerz will
likely once again realize negative free cash flow generation
during the fiscal year ending January 31, 2006, and will
therefore have to rely on either its balance sheet cash or
liquidity facilities in order to finance a portion of its cash
interest obligations during this period.
Moody's said the outlook for HLI Opco's ratings is stable after
incorporating Moody's actions above.
These specific rating actions were taken by Moody's:
-- Assignment of a B2 rating for HLI Operating Company, Inc.'s
proposed Euro 120 million guaranteed senior unsecured notes
maturing 2012, to be issued under Rule 144A with
registration rights;
-- Downgrade to B2, from B1, of the rating for HLI Operating
Company, Inc.'s $162.5 million remaining balance of 10.5%
guaranteed senior unsecured notes maturing June 2010 (the
original issue amount of $250 million was reduced as a
result of an equity clawback executed in conjunction with
Hayes Lemmerz's February 2004 initial public equity
offering);
-- Downgrade to B1, from Ba3, of the ratings for HLI Operating
Company, Inc.'s approximately $527 million of remaining
guaranteed senior secured bank credit facilities, consisting
of:
-- $100 million guaranteed senior secured bank revolving credit
facility due June 2008;
-- $450 million ($427.3 million remaining) guaranteed senior
secured bank term loan facility due June 2009 (which term
loan will be prepaid by approximately $73 million through
application of about half of the net proceeds from the
proposed notes offering);
-- Downgrade to B1, from Ba3, of the senior implied rating; and
-- Downgrade to B3, from B1, of the senior unsecured issuer
rating, which rating does not presume the existence of
subsidiary guarantees.
HIGH VOLTAGE: U.S. Trustee Appoints 7-Member Creditors Committee
----------------------------------------------------------------
The United States Trustee for Region 1 appointed seven creditors
to serve on the Official Committee of Unsecured Creditors of
High Voltage Engineering Corporation and its debtor-affiliates'
chapter 11 cases:
1. Hitran Corporation
Attn: John (Tripp) C. Hindle
362 Highway 31
Flemington, New Jersey 08822
Phone: 908-782-5525 x 246, Fax: 908-782-9733
2. NWL Transformers & NWL Capacitors
Attn: Peter M. Kiehart
312 Rising Sun Road
Bordentown, New Jersey 08505
Phone: 609-298-7300 x 276, Fax: 609-298-1982
3. X-Mark (A Belden CDT Company)
Attn: Carl M. Bruckner
2001 North Main Street
Washington, Pennsylvania 15301
Phone: 724-228-7373 x 154, Fax: 724-228-2122
4. Powerex, Inc.
Attn: Michael Drake
200 East Hillis Street
Youngwood, Pennsylvania 15697
New York, New York 10006
Phone: 724-925-4457, Fax: 724-925-4393
5. Koester Metals, Inc.
Attn: Gary & Jack Koester
1441 Quality Drive
Defiance, Ohio 43512
Phone: 419-782-2595 x 206, Fax: 419-782-7863
6. Jianghai America, Inc.
Attn: Yuan Wang
3104 Sunrise Ridge Lane
Hacienda Heights, California 91745
Phone: 626-274-1692, Fax: 626-336-6960
7. Five Star Electric Motors, Inc.
Attn: Richard W. Lux
4729 Shavano Oak
San Antonio, Texas 78249
Phone: 210-492-4200, Fax: 210-492-4280
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 Wakefield, Massachusetts, High Voltage
Engineering Corporation -- http://www.asirobicon.com/-- 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.
HUSMANN-PEREZ: Voluntary Chapter 11 Case Summary
------------------------------------------------
Debtor: Husmann-Perez Family Ltd Partnership
5309 29th Street East
Ellenton, Florida 34222
Bankruptcy Case No.: 05-05774
Chapter 11 Petition Date: March 29, 2005
Court: Middle District of Florida (Tampa)
Judge: K. Rodney May
Debtor's Counsel: Frederick T Lowe, Esq.
Florida Law Group LLC
3907 Henderson Boulevard, Suite 200
Tampa, Florida 33629
Tel: (813) 288-9525
Fax: (813) 282-0384
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file its list of 20 Largest Unsecured
Creditors.
IFT CORP: Losses & Deficit Trigger Going Concern Doubt
------------------------------------------------------
IFT Corporation (Amex: IFT), reported its operating results for
the fourth quarter ended December 31, 2004.
Operating Results
For the quarter ended December 31, 2004:
-- IFT Corp's revenue was $994,785 as compared to revenue of
$490,549 in the fourth quarter of 2003.
-- IFT Corp's net loss was $(160,216) as compared to a net loss
of $(3,746,162) in the fourth quarter of 2003.
-- IFT Corp's net loss for continuing operations was $(437,094)
as compared to a net loss for continuing operations of
$(1,403,152) in the fourth quarter of 2003.
-- IFT Corp's net income for discontinued operations was
$276,878 as compared to a net loss for discontinued
operations of $(2,343,010) in the fourth quarter of 2003.
-- IFT Corp reported net loss per share - basic and diluted -
of $(0.005) as compared to $(0.228) in the comparable period
in 2003, of which:
* $(0.015) loss per share - basic and diluted - related to
continuing operations as compared to $(0.085) loss per
share in the comparable period in 2003; and
* $0.010 income per share - basic and diluted - related to
discontinued operations as compared to $(0.143) loss per
share in the comparable period of 2003.
"Although we had a one time charge of $3,122,765 related to the
discontinued operations of our RSM Technologies, Inc. subsidiary
for the 2004 year, we rebounded with outstanding revenue growth by
our Infiniti Products, Inc. subsidiary in the fourth quarter as
compared to the fourth quarter of 2003," stated Michael T. Adams,
CEO of IFT Corp.
Following the end of the fourth quarter of 2004:
-- Cancellation of Indebtedness -- On January 4, 2005, the
Company issued 18,181,818 shares of restricted common stock
to Richard J. Kurtz, Chairman of the Board, in exchange for
his cancellation of $6,000,000 of indebtedness advanced to
the Company and its subsidiaries for working capital and
other requirements in the past.
-- Acquisition of LaPolla Industries, Inc. -- On February 11,
2005, the Company closed the acquisition of LaPolla
Industries, Inc. for $2 Million in cash and a nominal amount
of restricted common stock.
LaPolla is located in Tempe, Arizona. LaPolla has 10
employees. The basic assets of LaPolla include
manufacturing equipment, product formulations, raw material
and finished goods inventory, long term employees, customers
and vendors, office equipment, accounts receivable, and
goodwill. The Chairman of the Board and majority
shareholder, Richard J. Kurtz, advanced $2 Million in cash
to finance the acquisition. The $2 Million advance was made
in the form of a demand loan bearing interest at 9% per
annum payable by the Company to Mr. Kurtz. LaPolla's
trailing twelve months revenue as of January 31, 2005 was
approximately $8 Million.
-- Long Term Employment Agreements
-- On January 28, 2005, the Company hired Douglas J. Kramer
as its new President and Chief Operating Officer pursuant
to an Executive Employment Agreement.
-- On February 1, 2005, the Company entered into a new
Executive Employment Agreement with its CEO, Michael T.
Adams.; and
-- On February 25, 2005, the Company hired Charles R. Weeks
as its new Chief Financial Officer and Corporate
Treasurer pursuant to an Employment Agreement.
"We have engineered a new dynamic in our overall organization and
strong forward progress is taking place. The Chairman of the
Board, Richard J. Kurtz, converted $6 Million of our indebtedness
to him into equity and we hired a new President and COO, Douglas
J. Kramer, who brought to us a proven sales and marketing team.
We also made our first new strategic growth plan acquisition for
$2 Million and we hired a new CFO, Charles R. Weeks, in the first
quarter of this year," continued Mr. Adams. "With the integration
of Infiniti and LaPolla nearing completion, we feel confident that
our first quarter 2005 estimated revenues will exceed $2.3
Million," concluded Mr. Adams.
Going Concern Qualification
The report of the Company's independent registered public
accounting firm on the Company's consolidated financial statements
as of and for the year ended December 31, 2004, expressed
substantial doubt about the Company's ability to continue as a
going concern. Factors contributing to this substantial doubt
include recurring losses from operations and net working capital
deficiencies. The Company is dependent on the continued funding
currently being received from the Chairman of the Board for its
continued operations. The discontinuance of such funding and the
unavailability of financing to replace such funding would more
likely than not cause the Company to cease operations.
About Infiniti Products, Inc.
Infiniti Products, Inc., markets, sells, manufactures and
distributes acrylic roof coatings, roof paints, sealers, and
roofing adhesives to the home improvement retail and
industrial/commercial construction industries.
About LaPolla Industries, Inc.
LaPolla Industries, Inc., markets, sells, manufactures and
distributes acrylic roof coatings, sealers, and polyurethane foam
systems to the industrial/commercial construction industries.
About IFT Corporation
IFT Corporation is a holding company focused on acquiring and
developing companies that operate in the coatings, paints, foams,
sealants, and adhesives markets.
INTELIDATA TECH: Auditors Express Going Concern Doubt
-----------------------------------------------------
InteliData Technologies Corp. (NASDAQ:INTD), a leading provider of
electronic bill payment and presentment technologies, reported
financial results for the three-month and twelve-month periods
ended December 31, 2004. The annual report on Form 10-K for the
year ended December 31, 2004, includes restated consolidated
financial statements for certain transactions.
Revenues for the fourth quarter of 2004 totaled $2,800,000, a
decrease of $1,562,000 from the $4,362,000 reported for the fourth
quarter of 2003. Full-year revenue totaled $13,742,000, as
compared to $20,630,000 for the full-year period of 2003.
Gross profit for the three-month and twelve-month period ended
December 31, 2004 totaled $1,476,000 and $7,424,000, respectively.
This resulted in a gross margin of 53% for the three-month period
as compared to 59% for the prior-year period, while on a full-year
basis, the Company's gross margin decreased to 54% as compared to
63% for the twelve-month period of 2003.
The net losses for the three-month and twelve-month periods ended
December 31, 2004 was $2,919,000, and $33,235,000 respectively.
The net loss for fiscal year 2004 included a noncash, goodwill
impairment charge of $25,771,000. These net loss results compare
to $1,162,000, and $1,672,000 for the comparable prior year
periods.
Cash and cash equivalents as of December 31, 2004 totaled
$3,223,000, compared to $7,603,000 as of year-end 2003. Because
the Company has recurring losses from operations and is
experiencing difficulty in generating cash flow, there is
substantial doubt about its ability to continue as a going
concern.
"In 2004 we continued to focus our business on the bill payment
market and to improve our operating efficiencies," said Alfred S.
Dominick, Jr., Chairman and CEO. "We also continue to introduce
and implement industry leading payment capabilities. Since our
last earnings conference call, we successfully implemented the
industry's only true Least Cost Routing solution at two banks, we
signed an agreement to implement our interbank payment warehouse
at another and, with the Frost Bank implementation, we
demonstrated our ability to deploy our payment solution on
multiple platforms, extending our reach from the mainframe, big
bank market to the mid-tier, J2EE server-based market."
Merger Agreement
On March 31, 2005, the Company entered into a definitive agreement
to be acquired by Corillian Corporation, a publicly traded company
(Nasdaq: CORI) based in Hillsboro, Oregon, that provides solutions
that enable banks, brokers, financial portals and other financial
service providers to rapidly deploy Internet-based financial
services. The purchase consideration for the Company is
approximately $19.5 million, subject to adjustment. Under the
terms of the agreement, each outstanding share of the Company's
common stock will be converted into the right to receive 0.0954 of
a share of Corillian's common stock and $0.0832 in cash without
interest. The closing of this transaction is subject to, among
other things, the effectiveness of the registration/proxy
statement on Form S-4 to be filed with the Securities and Exchange
Commission and approval of the Company's stockholders. As a
result, there can be no assurances that the acquisition will be
completed or as to the timing thereof.
"At the end of the day, however, having great products is not
enough to be successful," commented Mr. Dominick. "You need scale
as well. Consequently, we have been actively exploring strategic
alternatives for the Company to see our payments vision through.
These efforts have resulted in the definitive agreement to merge
with Corillian, as previously announced. We believe this
transaction is in the best interest of our shareholders, our
customers, and our employees as we seek to unlock the value of our
industry leading products."
Going Concern Doubt & Bankruptcy Warning
"In the event our merger with Corillian is not successful, we may
be required to seek protection from our creditors, or we may need
to sell assets and/or raise additional capital through private
placements," the Company said in its regulatory filing. "While we
continue to operate as a going concern, we have significant
liquidity and capital resource issues relative to our ability to
generate cash flows and to raise additional capital if needed. We
may not be able to generate sufficient revenue to become
profitable on a sustained basis, or at all. We have incurred
significant losses and negative cash flows from operations for
several years and our ability to raise or generate enough cash to
survive may be questionable. We expect that the operating cash
flow deficit will continue and absent further financing or
significant improvement in sales, potentially result in our
inability to continue operations. As a result of these and other
factors, our independent registered public accounting firm has
included in its report on the 2004 consolidated financial
statements an explanatory paragraph expressing that there is
substantial doubt about our ability to continue as a going
concern."
If the Corillian transaction is not successful, the Company's
achievement of its operating plan remains predicated upon both
existing and prospective clients' decisions to procure certain
products and services in a timeframe consistent with the operating
plan assumptions. Historically, these decisions have not evolved
timely for varying reasons, including slower than expected market
demand, budgetary constraints, and internal product development
and resource initiatives. Further, based on the Company's
declining financial condition, existing and prospective clients
have expressed concerns regarding the risks of acquiring software
and services from InteliData. While some are satisfied as long as
the source code continues to be held in escrow, others are
employing a wait-and-see approach to InteliData's continuation as
a going concern.
About the Company
With over a decade of experience, InteliData --
http://www.InteliData.com/-- provides online banking and
electronic bill payment and presentment technologies and services
to leading banks, credit unions, financial institution processors
and credit card issuers. The Company develops and markets
software products that offer proven scalability, flexibility and
security in supplying real-time, Internet-based banking services
to its customers. The Company also provides application services
provider and hosting solutions.
INTERNAP NETWORK: Posts $18.1 Million Net Loss in F.Y. 2004
-----------------------------------------------------------
Internap Network Services Corporation (AMEX: IIP), a leading
provider of performance-based routing services for IP networks,
reported fiscal fourth quarter and year-end results for the year
ended December 31, 2004. For the fourth quarter, revenues totaled
$37.1 million, an increase of 5.7% compared to the third quarter
2004. Year-end 2004 revenues increased to $144.5 million, an
increase of 4.3% compared to 2003.
Quarterly Highlights:
-- The Company's customer base grew to 1,929 customers, an
increase of 41 net new customers in the quarter. Among the
new customers are:
* Anteon Corporation,
* Broadvox,
* Cambridge Software,
* Dune Capital Management,
* G4 Communications,
* Halliburton,
* Jobster,
* Lord Abbett & Co.,
* Peak 10,
* Perot Systems Government Services and
* Rogers Wireless, among others
-- Gross margin was 46.2% (defined as revenues of $37.1 million
less $19.98 million of direct cost of network divided by
revenues)
"Internap's top line grew by more than 4% in 2004 despite an
effective 46% drop in IP acquisition rates on new and existing
customers," said Gregory A. Peters, Internap President and Chief
Executive Officer. "Our industry continues to rationalize with
mergers and business model changes. Internap is well positioned
to profitably grow in this changing environment."
Full Year Results
The company attributed the increase in revenue to demand for
bundled service offerings of IP services and datacenter solutions
in addition to the contribution from its Flow Control Platform
customer premise equipment.
2004 Highlights:
-- Consolidated Revenue growth of 4.3%; IP services declined
0.8%, Colocation up 24% and Flow Control Platform growth up
292%
-- The Company's customer base grew by a net of 291 new
customers
-- Gross margin improved to 46.7%, an increase of 7.2%,
compared to 43.6% in 2003
-- Cost of network declined $1.2 million despite a 45% increase
in customer usage on the network
-- Completed conversion of Series A Preferred Stock to common
stock
-- Completed $56 million equity raise
-- Net cash ending 2004 was $51 million
Internap's net loss was $18.1 million for 2004 compared to a net
loss of $69.2 million for the prior year.
Restatement
As a result of a review of Internap's accounting practices with
respect to leasing transactions, the company has restated its
consolidated financial statements for certain prior periods in
order to comply with Statement of Financial Accounting Standards
No. 13, "Accounting for Leases" and Financial Accounting Standards
Board Technical Bulletin No. 88-1, "Issues Relating to Accounting
for Leases" and other related matters. Internap has restated its
audited financial statements for the fiscal years ended
December 31, 2003 and 2002, and its unaudited financial statements
for the quarters ended March 31, June 30, and September 30, 2004
and 2003, as well as the quarter ended December 31, 2003.
In connection with the company's evaluation of internal control
over financial reporting for the fiscal year ended December 31,
2004, the company identified two material weaknesses. Because of
the material weaknesses, the company's management has concluded
that the Company did not maintain effective internal control over
financial reporting as of December 31, 2004, based on criteria in
Internal Control-Integrated Framework. The Company said its
management and Audit Committee have dedicated significant
resources to assessing the underlying issues giving rise to the
restatements and to ensure that proper steps have been and are
being taken to improve our internal control over financial
reporting.
About the Company
Internap Network Services Corporation -- http://www.internap.com/
-- is the market leader of intelligent route-control solutions
that bring reliability, performance and security to the Internet.
The company's patented and patent-pending technology address the
inherent weaknesses of the Internet, enabling enterprises to take
full advantage of the benefits of deploying business-critical
applications such as e-commerce, Voice over IP (VoIP), video-
conferencing, and streaming audio/video across the Internet.
Through a portfolio of high-performance IP solutions, customers
can bypass congestion points, overcome routing inefficiencies and
optimize performance of their applications. Internap solutions
are backed by an industry-leading performance guarantee that
covers the entire Internet as opposed to just one network. These
offerings include: network- and premise-based route optimization
solutions, colocation, VPN, content distribution, managed security
and managed storage services.
Internap currently serves more than 1,900 customers including
Fortune 1000 and mid-tier enterprises in the financial services,
government; travel/hospitality, manufacturing,
media/entertainment, technology and retail industries. The company
provides services throughout the United States, United Kingdom and
Japan with service expansion to Sydney, Singapore, and Hong Kong
this spring.
JOHN DECONIE: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: John Richard DeConie
143 Dutch Road East
East Brunswick, New Jersey 08816
Bankruptcy Case No.: 05-19977
Type of Business: The Debtor owns DeConie Masonry and General
Contractors, Inc., which filed for chapter 11
protection on September 29, 2004 (D. N.J.
Case No. 04-41042).
Chapter 11 Petition Date: March 31, 2005
Court: District of New Jersey (Newark)
Debtor's Counsel: Hal L. Baume, Esq.
Fox Rothschild LLP
Princeton Pike Corporate Center
997 Lenox Drive, Building 3
Lawrenceville, New Jersey 08648-2311
Tel: (609) 896-3600
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
------ --------------- ------------
Bricklayers & Allied Business debt $205,000
Craftworkers International in litigation
3281 Route 206, Suite 3
Bordentown, NJ 08505
E.P. Henry Corporation Business debt $77,546
201 Park Avenue in litigation
Woodbury, NJ 08096
The Phillips Companies Business debt $47,850
800 Passaic Avenue in litigation
Harrison, NJ 07029
Riverside Supply Company Business debt $42,063
6 Washington Road in litigation
Sayreville, NJ 08872
SilKemp Concrete, Inc. Business debt $32,404
93 State Highway 33 in litigation
Englishtown, NJ 07726
Advanced Formwork, Inc. $25,846
31 Park Avenue
Englishtown, NJ 07726
MidState Industrial Business debt $24,181
Supply, Inc. in litigation
2 John Street
P.O. Box 151
Jamesburg, NJ 08831
Consolidated Brick & Business debt $17,783
Building Supplies in litigation
127 West 24th Street
New York, NY 10011
Cheney Flashing Personal guarantee $12,629
P.O. Box 818 of business debt
Trenton, NJ 08605
Gamka Sales Company Business debt $9,949
983 New Durham Road in litigation
Edison, NJ 08817
APS Supply Company Personal guarantee $8,669
711 Cooper Street of business debt
Beverly, NJ 08010
Eastern Concrete Personal guarantee $1,760
Materials, Inc. of business debt
Mershon Concrete Personal guarantee $1,740
of business debt
County Concrete Personal guarantee $1,605
of business debt
Williams Scotman Personal guarantee $946
of business debt
American Art Stone $515
HK Buzby $168
Internal Revenue Service Taxes Unknown
Newark District Office
State of New Jersey Unknown
Division of Employer Accounts
State of New Jersey Unknown
Department of Labor
KAISER ALUMINUM: Dec. 31 Balance Sheet Upside Down by $2.4 Billion
------------------------------------------------------------------
Kaiser Aluminum reported a net loss of $637.5 million for the
fourth quarter of 2004, compared to a net loss of $573.2 million
for the fourth quarter of 2003. For the full year 2004, Kaiser's
net loss was $746.8 million, compared to a net loss of
$788.3 million for 2003.
The 2004 results include a non-cash pre-tax operating charge of
$793.2 million -- including a fourth-quarter charge of
$638.5 million -- nearly all of which is related to resolution of
various matters in the company's Chapter 11 case, specifically the
termination of the company's pension and post-retirement benefit
plans and a related settlement with the United Steelworkers of
America.
Net sales in the fourth quarter and full year of 2004 were
$257.7 million and $942.4 million, compared to $183.3 million and
$710.2 million for the same periods of 2003.
Kaiser President and Chief Executive Officer Jack A. Hockema said,
"Separate and apart from the required non-cash accounting charges
-- nearly all of which are associated with incremental progress in
the resolution of various matters in our Chapter 11 case -- we
were pleased with the operating performance of our fabricated
products operations in 2004. In particular, operating income for
this business increased sharply compared to the operating loss of
2003. The year-over-year improvement was due primarily to
improved demand, which resulted in increases in shipments and
higher average realized prices. Similarly, the operating results
for fabricated products in the fourth quarter of 2004 improved
dramatically from those of the year-ago quarter. Shipments were
especially strong in the fourth quarter of 2004, particularly for
aerospace and automotive products. The quarter-over-quarter
increase in average realized prices was partially attributable to
product mix, with individual product lines displaying varying
levels of recovery from their recessionary lows of the past
several years."
Mr. Hockema said, "The company is making steady progress in
resolving our remaining Chapter 11 issues, and we expect that
Kaiser will emerge from Chapter 11 in the second half of 2005."
At Dec. 31, 2004, Kaiser Aluminum's balance sheet showed a
$2.4 billion stockholders' deficit, compared to a $1.7 billion
deficit at Dec. 31, 2003.
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.
KMART CORP: Asks Court to Compel $6,136,910 Refund from IRS
-----------------------------------------------------------
On November 19, 2002, the United States Bankruptcy Court for the
Northern District of Illinois approved a compromise between the
Internal Revenue Service and Kmart Corporation under which the IRS
agreed to pay Kmart a net tax refund of $7,266,256 for the tax
years January 1986 through 1999.
To calculate the Net Tax Refund, William J. Barrett, Esq., at
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLC, in Chicago,
Illinois, relates that Kmart and the IRS agreed on the mechanism
and quantum of the interest computations for each income tax
overpayment and underpayment for tax years January 1986 through
1999. Both parties also resolved any outstanding issues,
including the proper application of the interest netting
provisions contained in Section 6621(d) of the Internal Revenue
Code of 1986. No separate settlement agreement was ever executed.
Kmart "netted" its prior overpayments of $14.4 million against
various amounts it owed, resulting in the Net Tax Refund owing to
Kmart. Pursuant to the Court order approving the compromise, the
IRS paid Kmart the Net Tax Refund on November 26, 2002.
Mr. Barrett notes that the IRS expressly acknowledged that the
Compromise Motion accurately "reflect[ed] our agreement with the
debtor." No party, including the IRS, filed an objection to the
Compromise Motion.
Pursuant to the Compromise Order, Mr. Barrett says Kmart reserved
all of its rights under the Internal Revenue Code, while the IRS
specifically released Kmart from other claims that the IRS might
have asserted relating to either corporate income taxes on or
before January 1999 or the excise taxes arising on or before
December 31, 1998.
The Second Refund
On February 7, 2002, and prior to the Court's approval of the
Compromise Order, the IRS started a new and separate examination
of Kmart's consolidated corporate income tax returns for the
fiscal years ending January 2000 through 2002. As a result of the
IRS's examination of certain net operating loss and credit
carrybacks from fiscal years ending January 2000 through 2002, the
IRS was required to make adjustments to its tax calculations for
Kmart for fiscal years ending January 1989, 1992, 1993, 1995, and
1997. This examination resulted in the IRS concluding that it
owed Kmart an additional $6,136,910.
On November 19, 2004, Kmart signed IRS Form 870, pursuant to which
it agreed with the IRS's calculation of the Second Refund. On
January 20, 2005, the Congressional Joint Committee on Taxation
approved the IRS examination report detailing the updated tax
analysis. As of February 4, 2005, the IRS has not paid the Second
Refund to Kmart because it is calculating the applicable interest
to be paid with the Second Refund.
As part of an IRS post-audit review of the interest calculations
done for previous examination cycles, Mr. Mr. Barrett says the
IRS belatedly asserted that it incorrectly overpaid Kmart an
interest of $1,646,901 as part of a refund for fiscal year
January 1993 that occurred as a result of the January 1993 through
January 1995 audit cycle. The IRS seeks to rectify the mistake --
though the Compromise Order expressly precludes it from doing so -
- by netting the amounts it claims were mistakenly paid, against
the interest to be paid to Kmart as part of the Second Refund.
Kmart and the IRS have since engaged in a series of
teleconferences, wherein Kmart explained to the IRS why its
collection efforts were barred for periods covered by the release
language of the Compromise Order. Mr. Barrett informs the Court
that the IRS has been so far unwilling to withdraw from its
position, and continues to state that it will recoup the alleged
interest overpayment from the amounts owed to Kmart in the Second
Refund, in derogation of the IRS's court-ordered obligations under
the Compromise Order.
By this motion, Kmart asks the Court to:
(a) require the IRS to comply with the Compromise Order by
paying the Second Refund in full; and
(b) find the IRS in contempt as sanction for the willful
and continuous failure to adhere to the express terms of
the Compromise Order.
IRS Objects
The United States Government, on behalf of the Internal Revenue
Service, challenges Kmart to explain why the Bankruptcy Court has
subject matter jurisdiction or cite a statutory waiver of
sovereign immunity allowing the tax refund issue to be brought
before the Court.
United States Attorney Peter J. Fitzgerald Esq., argues that the
Compromise Motion was filed only to approve an agreement to set-
off or, at most, ratify the administrative Form 870 agreements
already entered by Kmart Corporation and its debtor-affiliates.
The Compromise Motion could not override sovereign immunity by
hauling the IRS into court without the necessary procedures, and
rendering it subject to contempt if it then failed to adhere to
the compromise as approved by the
Court.
Mr. Fitzgerald explains that a judicial settlement regarding
Kmart's liabilities for taxes or erroneous refunds would have
first required a motion under Section 505 of the Bankruptcy Code,
served pursuant to Rule 7004(b)(5) of the Federal Rules of
Bankruptcy Procedure. Rule 7004(b)(5) requires that the Attorney
General be served with any motion commencing a contested mater.
In that regard, the Attorney General would have had sole authority
to enter into any judicial compromise.
No IRS representative signed the Compromise Motion. To the extent
that IRS attorney Robert Little signed a letter confirming that
the Compromise Motion reflected the out-of-court administrative
agreements on the Forms 870, Mr. Fitzgerald says Mr. Little
plainly could not waive sovereign immunity to a future summary
motion to pay a tax refund.
Assuming there is jurisdiction, the U.S. Government believes that
Kmart's request fails to state a claim upon which relief may be
granted because:
(1) Kmart's interpretation of its own Compromise Motion is
untenable because the Motion does not deal with interest;
and
(2) even if the Compromise Motion does not deal with interest,
it prevents only "claims against the debtor" and thus does
not prevent the Government, when processing a claim
against the Government for yet another refund for the same
tax year, from relying on the doctrine of recoupment to
account for the erroneously paid interest.
"There was never any binding agreement regarding interest, even
assuming arguendo that the IRS was bound by the Form 870, or by
its failure to object to [a waiver language] that debtor's former
counsel quietly slipped into the [Compromise Motion hoping the
IRS would fail to notice]," Mr. Fitzgerald says.
Mr. Fitzgerald also contends that Kmart's request fails to supply
sufficient details about which amounts are claimed in respect to
which tax periods, thus making it more difficult for the Court to
see why the doctrine of recoupment applies and also why the
language of the Compromise Motion does not have the effect that
Kmart now alleges.
Kmart cannot point to any specific provision in the Compromise
Order that enjoins the IRS to issue any specific tax refunds at
that time, let alone two years later, based on a post-settlement
claim for refund submitted by Kmart. To the contrary, Mr.
Fitzgerald points out that the Order reflects that the Court
understood itself to be approving a compromise regarding a set-off
issue. The Court found that the IRS might be entitled to
modification of the stay to exercise its set-off rights addressed
by the Compromise.
Mr. Fitzgerald explains that the IRS made a mistake in calculating
the amount of an interest as part of a refund to Kmart. The IRS
wants to eliminate that mistake by taking the amount already paid
into account when refunding another part of the tax principal and
interest that would otherwise be due for the year. This is a
classic case for recoupment. The Court should not allow itself to
be misled, based on Kmart's contention that the Court may
summarily enforce an alleged judicial settlement, into entering an
affirmative injunction purporting to compel the U.S. Government to
pay money to Kmart, in violation not only of Rule 7001 of the
Federal Rules of Bankruptcy Procedure, but also of Section
106(a)(4) of the Bankruptcy Code and Section 2414 of the Judiciary
Procedures Code.
"It is sad that a company such as Kmart, and sadder still that the
large law firm and well regarded lawyers representing it, feel
that they cannot seek a judicial resolution of a good faith
dispute without the bluster of screaming 'contempt' and asking for
'sanctions,' particularly given that they do not bother to point
to any provision of the [Compromise] order that the government
might even arguably have willfully disobeyed," Mr. Fitzgerald
says.
Mr. Fitzgerald tells the Court that the contempt allegation
appears to be naught but another manifestation of the inexplicable
insistence of Kmart's attorneys in doing everything they can to
avoid simply filing an adversary complaint.
Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART
Holding Corporation) -- http://www.bluelight.com/-- operates
approximately 2,114 stores, primarily under the Big Kmart or Kmart
Supercenter format, in all 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam. The Company filed for chapter 11
protection on January 22, 2002 (Bankr. N.D. Ill. Case No.
02-02474). Kmart emerged from chapter 11 protection on May 6,
2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, LLP, represented the retailer in its restructuring
efforts. The Company's balance sheet showed $16,287,000,000 in
assets and $10,348,000,000 in debts when it sought chapter 11
protection. Kmart bought Sears, Roebuck & Co., for $11 billion to
create the third-largest U.S. retailer, behind Wal-Mart and
Target, and generate $55 billion in annual revenues. The
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act expired on Jan. 27, without complaint by the Department of
Justice. (Kmart Bankruptcy News, Issue No. 92; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
M/I HOMES: S&P Places BB Rating on $150 Million Senior Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' rating to M/I
Homes Inc.'s (M/I) recently issued $150 million 6.875% senior
notes due 2012. At the same time, Standard & Poor's affirmed its
'BB' corporate credit rating on M/I. The outlook is stable.
"The ratings reflect M/I's conservative financial profile, good
market position, and measured, organic growth that has generated
solid margins," said Standard & Poor's credit analyst Tom Taillon.
"While sales and profitability remain concentrated in its Midwest
markets, M/I has acknowledged the near-term challenges for this
region and continues to prudently expand into areas in the
Southeast and Mid-Atlantic. Standard & Poor's expects the growth
in both units and profits from these markets outside the Midwest
to more evenly balance the portfolio geographically within the
next few years. Earnings in 2005 are expected to be back-ended,
as regulatory and weather-related delays have slowed production in
some communities."
Standard & Poor's expects the company to maintain its relatively
conservative business focus on growing at a measured pace. M/I's
solid debt protection measures may come down modestly in the near
term, but should remain adequate for the rating, given current
above-average levels and management's focus on organic, profitable
growth.
MASONITE INT'L: Shareholders Okay KKR Stile Acquisition's Bid
--------------------------------------------------------------
Masonite International Corporation's (TSX and NYSE: MHM)
shareholders approved the proposed plan of arrangement pursuant to
which Stile Acquisition Corp., an affiliate of Kohlberg Kravis
Roberts & Co. L.P. (KKR), will acquire Masonite for
C$42.25 cash per share.
The transaction was approved by 91.9% of the votes cast by
shareholders voting at the meeting and by 91.8% of the votes cast
by shareholders other than votes in respect of shares held by
members of senior management.
KKR -- http://www.kkr.com/-- is one of the world's oldest and
most experienced private equity firms specializing in management
buyouts, with offices in New York, Menlo Park, California and
London, England. Over the past 28 years, KKR has invested in more
than 115 transactions with a total value of US$138 billion.
Masonite is a unique, integrated building products company with
its Corporate Headquarters in Mississauga, Ontario, Canada and its
International Administrative Offices in Tampa, Florida. Masonite
operates more than 70 facilities with over 12,000 employees
worldwide, spanning North America, South America, Europe, Asia,
and Africa. Masonite sells its products -- doors, components,
industrial products and entry systems -- to a wide variety of
customers in over 50 countries.
* * *
As reported in the Troubled Company Reporter on Dec. 28, 2004,
Standard & Poor's Ratings Services placed ratings on Mississauga,
Ontario-based Masonite International Corp., including its 'BB+'
long-term corporate credit rating on CreditWatch with negative
implications. The CreditWatch placement follows the announcement
that it is to be acquired by an affiliate of Kohlberg Kravis
Roberts & Co. -- KKR -- in a transaction valued at C$3.1 billion.
MAUREEN LENAHAN: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Maureen Lenahan
aka Maureen Lynn Lenahan
aka Maureen L. Lenahan
9 Barclay Lane
Voorhees, New Jersey 08043
Bankruptcy Case No.: 05-20123
Type of Business: The Debtor owns Castle Academy, which filed for
chapter 11 protection on October 18, 2004
(D. N.J. Case No. 04-43205).
Chapter 11 Petition Date: April 1, 2005
Court: District of New Jersey (Camden)
Judge: Judith H. Wizmur
Debtor's Counsel: Andrew B. Altenburg, Jr., Esq.
12000 Lincoln Drive West, Suite 208
Marlton, New Jersey 08053
Tel: (856) 596-2225
Total Assets: $1,282,770
Total Debts: $1,831,513
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
American Business Credit Value of Security: $605,000
Balapointe Office Centre $325,000
111 Presidential Boulevard Value of Senior Lien:
Bala Cynwyd, PA 19004 $240,563
HomeAmerican Credit, Inc. Value of Security: $162,500
dba Upland Mortgage $200,000
PO BOX 41415 Value of Senior Lien:
Philadelphia, PA 191019386 $108,518
New Jersey Department of Taxes $76,119
Labor and Workforce Development
PO Box 077
Trenton, NJ 086250077
Borough of Barrington $22,243
229 Trenton Avenue
Barrington, NJ 08007
State of New Jersey Taxes $7,725
Department of the Treasurer
One Port Center, Suite 200
Camden, NJ 08103
Household Credit Services Credit card $4,923
PO Box 17051 purchases
Baltimore, MD 212971051
Sears Credit card $4,117
PO Box 182149 purchases
Columbus, OH 432182149
Citi Cards Credit card $3,896
PO Box 8107 purchases
South Hackensack, NJ 076068107
Osceola County Tax Collector Taxes $3,750
260 North Beaumont Avenue
Kissimmee, FL 34741
Internal Revenue Service Taxes $2,864
Philadelphia, PA 192550010
Internal Revenue Service
Philadelphia, PA 192550010
Discover Card Credit card $2,744
PO Box 15251 purchases
Wilmington, DE 198865251
Discover Card Credit card $1,965
PO Box 15251 purchases
Wilmington, DE 198865251
Chase MasterCard Credit card $1,716
PO Box 15583 purchases
Wilmington, DE 198861194
Bank of America Credit card $1,704
PO Box 53132 purchases
Phoenix, AZ 850723132
Anthony J. Digneo Trade debt $1,502
aka Advantage Engineering, LLC
127A Gaither Drive
Mount Laurel, NJ 08054
Capital One Credit card $1,220
PO Box 85147 purchases
Richmond, VA 23276
Chase MasterCard Credit card $1,198
PO Box 15583 purchases
Wilmington, DE 198861194
Capital One Credit card $1,036
PO Box 85147 purchases
Richmond, VA 23276
Capital One Credit card $1,020
PO Box 85147 purchases
Richmond, VA 23276
Capital One Credit card $692
PO Box 85147 purchases
Richmond, VA 23276
MCI INC: Resuming Talks with Qwest to Discuss Increased Bid
-----------------------------------------------------------
MCI, Inc., intends to re-engage with Qwest Communications
International Inc. (NYSE: Q) to review Qwest's March 31, 2005,
proposal to acquire the company. MCI has received a waiver from
Verizon enabling it to engage in discussions with Qwest at any
time until the date of the MCI shareholder vote on the proposed
Verizon transaction. That date has not yet been set.
"Verizon has a signed agreement with MCI that we believe will
deliver superior value to MCI's shareholders," Verizon
Communications Inc. (NYSE: VZ) said in a press statement. "At
MCI's request, we have agreed that it may have discussions with
Qwest about any offer Qwest presents until the MCI shareholder
vote."
Verizon intends to file a registration statement, including a
proxy statement of MCI, and other materials with the Securities
and Exchange Commission in connection with the proposed
transaction.
Qwest's $8.9 Billion Bid
Qwest Communications International Inc. (NYSE: Q) raised its bid
to acquire MCI Inc. for $8.9 billion, after MCI Inc.'s board of
directors accepted Verizon's $7.64 billion takeover proposal.
Qwest's revised offer of $27.50 per share ($27.90 including the
$0.40 per share dividend paid on March 15) consists of:
-- Cash consideration of $13.50 ($13.90 including the $0.40
per share dividend paid on March 15) per share (an
increase of 34% in cash from our previous proposal and an
aggregate increase in cash to MCI shareholders of
$1.1 billion);
-- Equity consideration of $14.00 per share with the value
protected by a new collar mechanism;
-- Improved collar that provides an additional 10% of
downside protection to a Qwest share price of $3.32 (with
Qwest having the right to settle any downside adjustment
in cash or shares) and elimination of the 10% collar
above a $4.15 share price permitting MCI shareholders to
participate in 100% of the appreciation of the Qwest
share price above $4.15 as well as providing MCI
shareholders earlier participation in the synergies; and
-- An increase in the Specified Included Liabilities
threshold before any price adjustment to $1.775 billion
from $1.725 billion.
In addition, Qwest added a provision that would allow it, between
the time its proposal is declared superior and closing, to
substitute up to $2 billion in cash for $2 billion in stock it
would otherwise issue to MCI shareholders by raising up to $2
billion in third party equity financing. Qwest said it included
this provision to respond to existing Qwest, MCI and other equity
investors who have expressed a strong interest in investing in the
equity of the combined company at closing.
Qwest Urges MCI to Level Playing Field
In response to Verizon's and MCI's comments urging MCI's board of
directors to conduct a transparent sales process which considers
the best interests of its shareholders, Qwest said in a press
statement:
"The recent series of bids and counter bids make it clear this
has become an auction in all but name -- the very process that
Mr. Seidenberg said Verizon would not be drawn into. Given
this fact, we urge the MCI Board to cease its favoritism, stop
attempting to tilt the regulatory playing field and run a fair,
transparent, complete and timely sales process. Only such an
auction is consistent with the MCI Board's execution of its
fiduciary responsibilities and in the best interests of all
involved.
"On Tuesday, March 29, after several weeks of discussions, Mr.
Capellas informed us that the MCI Board did not require any
additional information or discussions regarding its ability to
evaluate Qwest and that they had received all of the
information they needed. In addition, Qwest informed Mr.
Capellas that it had completed its due diligence process.
Therefore, it is questionable what additional information the
MCI Board would require at this time.
"In a dubious example of corporate governance, the Board of MCI
has ceded its ability to terminate its agreement with Verizon
for a Superior Proposal, a concession that is inconsistent with
its obligation to maximize value for MCI shareholders. In
fact, they now no longer have the right to negotiate and
conclude a value creative transaction on behalf of their
owners. We believe our latest offer of $27.50 per share is
clearly superior, and we have provided a significant amount of
detail surrounding it. Therefore the MCI Board should now
declare that our offer is superior.
"Based on [Fri]day's press reports, we note with interest that
some of MCI's largest shareholders consider our offer to be
superior. We believe that any attempt to deny shareholders the
value we are offering would be a dereliction of fiduciary duty
on the part of the MCI's Board.
"We fully expect the MCI Board to notify us of its decision by
April 5."
About MCI
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc.
About Qwest
Qwest Communications International Inc. (NYSE:Q) --
http://www.qwest.com/-- is a leading provider of voice, video and
data services. With more than 40,000 employees, Qwest is
committed to the "Spirit of Service" and providing world-class
services that exceed customers' expectations for quality, value
and reliability.
At Dec. 31, 2004, Qwest Communications' balance sheet showed a
$2,612,000,000 stockholders' deficit, compared to a $1,016,000,000
deficit at Dec. 31, 2003.
* * *
As reported in the Troubled Company Reporter on March 1, 2005,
Standard & Poor's Ratings Services placed its ratings on Denver,
Co.-based diversified telecommunications carrier Qwest
Communications International, Inc., and subsidiaries, including
the 'BB-' corporate credit rating, on CreditWatch with negative
implications. This follows the company's counter bid to Verizon
Communications, Inc., for long-distance carrier MCI, Inc., for
$3 billion in cash and $5 billion in stock. MCI also has about
$6 billion of debt outstanding.
The ratings on MCI, including the 'B+' corporate credit rating,
remain on CreditWatch with positive implications, where they were
placed Feb. 14, 2005 following Verizon's announced agreement to
acquire the company. The positive CreditWatch listing for the MCI
ratings reflects the company's potential acquisition by either
Verizon or Qwest, both of which are more creditworthy entities.
However, the positive CreditWatch listing of the 'B+' rating on
MCI's senior unsecured debt assumes no change to the current MCI
corporate and capital structure under an assumed acquisition by
Qwest, such that this debt would become structurally junior to
other material obligations.
"The negative CreditWatch listing of the Qwest ratings reflects
the higher business risk at MCI if its bid is ultimately
successful," explained Standard & Poor's credit analyst Catherine
Cosentino. As a long-distance carrier, MCI is facing ongoing
stiff competition from other carriers, especially AT&T Corp.
Moreover, MCI is considered to be competitively disadvantaged
relative to AT&T in terms of its materially smaller presence in
the enterprise segment and fewer local points of presence -- POPs.
The latter, in particular, results in higher access costs relative
to AT&T. Qwest also faces the challenge of integrating and
strengthening MCI's operations while improving its own
underperforming, net free cash flow negative long-distance
business. These issues overshadow the positive aspects of Qwest's
incumbent local exchange carrier business that were encompassed in
the former developing outlook.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Moody's Investors Service has placed the long-term ratings of MCI,
Inc., on review for possible upgrade based on Verizon's plan to
acquire MCI for about $8.9 billion in cash, stock and assumed
debt.
These MCI ratings were placed on review for possible upgrade:
* B2 Senior Implied
* B2 Senior Unsecured Rating
* B3 Issuer rating
Moody's also affirmed MCI's speculative grade liquidity rating at
SGL-1, as near term, MCI's liquidity profile is unchanged.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
As reported in the Troubled Company Reporter on Feb. 16, 2005,
Fitch Ratings has placed the 'A+' rating on Verizon Global
Funding's outstanding long-term debt securities on Rating Watch
Negative, and the 'B' senior unsecured debt rating of MCI, Inc.,
on Rating Watch Positive following the announcement that Verizon
Communications will acquire MCI for approximately $4.8 billion in
common stock and $488 million in cash.
MIRANT CORP: Court Denies Efforts to Suppress Expert Testimony
--------------------------------------------------------------
The Honorable Michael Lynn of the U.S. Bankruptcy Court for the
Northern District of Texas denied a motion by Mirant Corporation
to suppress expert testimony on the company's valuation. Benjamin
Schlesinger and Associates and Kenneth Slater, whose analyses
prove that Mirant is attempting to hide millions of dollars in
company value, will be heard during the bankruptcy valuation
hearing, scheduled to begin on April 12, 2005.
A fair assessment of the value of Mirant's assets is in the best
interest of the company and all of its stakeholders. The Equity
Holders believe that the company and several of its large
creditors are conspiring to intentionally undervalue the Company
in order to hide value from shareholders and abuse the bankruptcy
process for personal gain.
Mirant's business plan uses energy prices that are more than a
year old. Since that time, energy prices have increased,
significantly adding to the value of the company. "The company's
attempt to use outdated and under-priced fuel oil and gas prices
is clear and convincing evidence of the corporate larceny Mirant
is attempting to commit," said Paul Syiek, a Mirant shareholder.
"This represents just one example of the multiple hide and seek
valuation games that Mirant is playing and we hope that Judge
Lynn's decision to allow our expert testimony is a sign that he's
not going to let Mirant get away with theft."
Mirant's current plan of reorganization calls for all creditors,
with the exception of equity holders, to receive 100 percent
recovery (90 percent in cash, 10 percent in stock), while
shareholders receive nothing. The Equity Committee has agreed
that the plan represents a calculated abuse of the bankruptcy
process that would have the net effect of improperly wiping out
billions of dollars in shareholder value, while large creditors
such as Citicorp eventually receive more than 100 percent
recovery.
"Mirant was once again attempting to avoid the fact that their
experts relied on outdated material despite having access to
publicly available current information. The company's attempted
suppression of these documents was properly thwarted by the court.
These reports are instrumental to determining an accurate and fair
value for the company and we are pleased that these reports will
be considered for this purpose," said Ed Weisfelner, lead attorney
for Mirant's equity committee.
Mirant Corporation's valuation hearing is scheduled to begin
April 12, 2005, in Fort Worth, Texas.
About the Equity Committee
The Equity Committee appointed in Mirant Corporation and its
debtor-affiliates' chapter 11 proceeding, was formed in September
2003 to represent shareholder interests in Mirant Corporation's
Chapter 11 proceedings. The U.S. Trustee overseeing Mirant's
Chapter 11 case appointed the Official Committee of Equity
Security Holders. This committee includes five members and is
represented by Brown Rudnick Berlack Israels LLP.
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 CORP: Two Parties Say Apr. 11 Valuation Hearing Too Early
----------------------------------------------------------------
William K. Snyder, the examiner appointed in Mirant Corporation
and debtor-affiliates' bankruptcy cases, recommends that the U.S.
Bankruptcy Court for the Northern District of Texas continue the
hearing to determine the total enterprise value of the Debtors and
the hearing on the adequacy of the Debtors' Disclosure Statement
for a period of two weeks.
Mr. Snyder explains that the volume of work that must be
completed before the Debtors and other key constituencies will be
fully and fairly prepared to address the critical issues of the
enterprise value of the Debtors and the adequacy of the
Disclosure Statement is tremendous.
Mr. Snyder relates that, as of March 21, 2004, approximately 50
subpoenas, document subpoenas and requests for production of
documents were served in connection with the Valuation Hearing,
and discovery disputes have popped up. Dozens of potential
witnesses have been noticed for deposition by various
participating Valuation Parties, but no depositions have been
actually taken. Mr. Snyder notes that the only point on which
the parties have found agreement has been in response to his
request that the parties produce written valuation-related
discovery to one another electronically to reduce the copying
costs associated with making responsive documents available to
all the Valuation Parties.
On January 27, 2005, Mr. Snyder hosted the first of two "summits"
with the Debtors and the official committees to discuss the
status of plan negotiations and issues relating to the valuation
of the Debtors. The second meeting occurred in New York City on
March 17, 2005. The Debtors, the three official committees,
Phoenix Partners LP and the Examiner were in attendance. The
Examiner's agenda for the meeting included discussion of possible
points of agreement that could form the basis for trial
stipulations, as well as the coordination of ongoing discovery
efforts and trial exhibits. Mr. Snyder tells Judge Lynn that the
March 17 meeting made it abundantly clear that:
(i) the parties cannot possibly be ready for trial by
April 11; and
(ii) the Valuation Hearing will almost certainly take more than
three days.
Mr. Snyder also believes that a two-week continuance of the
Disclosure Statement Hearing would provide the Debtors additional
time to resolve objections to the Disclosure Statement and ensure
sufficient time to permit the inclusion of necessary enterprise
value information in the Disclosure Statement. Moreover, a two-
week continuance should not impact the timing of the confirmation
hearing currently scheduled for June 8, 2005.
Phoenix Wants Hearing Moved to May
Phoenix Partners LP, Phoenix Partners II LP, and Phaeton
International (BVI) Ltd., believe that there simply is no reason
to rush to judgment on the issue. The Phoenix Entities agree
with the Examiner that the Valuation Hearing and the deadline for
discovery should be adjourned to allow for the orderly completion
of discovery and to allow the parties with an appropriate amount
of time to prepare for the Valuation Hearing. The Phoenix
Entities, however, suggest that the Valuation Hearing be
adjourned to May 9, 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 No. 57; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Wants to Limit Valuation Reports Distribution
----------------------------------------------------------
Mirant Corporation and its debtor-affiliates object to the
distribution of initial expert valuation reports to parties that
will participate at the Valuation Hearing scheduled for April 11
to 13, 2005. The Debtors are concerned that unrestricted sharing
of the Initial Expert Disclosures may raise selective disclosure
concerns under the U.S. federal securities laws and could put them
in the untenable position of having to publicly disclose the
Initial Expert Disclosures in a filing with the U.S. Securities
and Exchange Commission.
Thomas E. Lauria, Esq., at White & Case LLP, in Miami, Florida,
explains that the broader the dissemination of non-public
information that is likely to be viewed as material, even to
parties purporting to be subject to confidentiality, the greater
the risks that:
(a) the information will, as a practical matter, lose its
confidential status; and
(b) leak into the market and result in undesirable, if not
illegal, trading activities.
"Balanced against these concerns is the interest of the various
Valuation Parties (aside from the statutory committees) in
getting access to the Initial Expert Disclosures to prepare for
the Valuation Hearing," Mr. Lauria tells Judge Lynn. "This
interest is comparatively weak, however, in the absence of any
showing that a particular Valuation Party's interests are not
adequately protected and represented by the participation of the
statutory committees in the valuation litigation."
The Debtors want to restrict distribution of the Initial Expert
Disclosures to the Official Committees.
The Debtors indicate they have no intention of asking the Court
to hold a secret valuation hearing -- it will be a public
hearing, at which all parties-in-interest can participate and be
heard.
These are parties who have indicated their intention to
participate at the Valuation Hearing and with which the Debtors
don't want to share the Initial Expert Reports:
1. the Ad Hoc Committee of Bondholders of MAGi,
2. Edison Mission Energy,
3. Law Debenture Trust Company of New York,
4. Phoenix Partners LP,
5. Phoenix Partners II LP,
6. Phaeton International (BVI) Ltd.,
7. Kinder Morgan Power Company,
8. U.S. Bank National Association,
9. the MIRMA Landlords,
10. Potomac Electric Power Company,
11. the California Power Exchange Corporation,
12. Credit Suisse First Boston,
13. Citigroup N.A., and
14. Wells Fargo Bank, National Association
Deutsche Bank AG, New York Branch has withdrawn its notice of
intent to participate at the Valuation Hearing.
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 No. 57; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MORGAN STANLEY: Fitch Puts Low-B Ratings on Six Mortgage Certs.
---------------------------------------------------------------
Morgan Stanley Capital I Trust 2005-HQ5, commercial mortgage pass-
through certificates are rated:
-- $121,000,000 class A-1 'AAA';
-- $160,900,000 class A-2 'AAA';
-- $159,400,000 class A-3 'AAA';
-- $66,400,000 class A-AB 'AAA';
-- $711,252,000 class A-4 'AAA';
-- $112,372,000 class A-J 'AAA'
-- $30,474,000 class B 'AA';
-- $19,046,000 class C 'AA-';
-- $15,237,000 class D 'A+';
-- $17,141,000 class E 'A';
-- $15,237,000 class F 'A-';
-- $15,237,000 class G 'BBB+';
-- $13,333,000 class H 'BBB';
-- $20,950,000 class J 'BBB-';
-- $5,714,000 class K 'BB+';
-- $5,714,000 class L 'BB';
-- $5,714,000 class M 'BB-';
-- $3,809,000 class N 'B+';
-- $1,905,000 class O 'B';
-- $3,809,000 class P 'B-';
-- $1,523,690,515* class X-1 'AAA';
-- $1,486,416,000* class X-2 'AAA'.
*Notional amount and interest only.
Classes A-1, A-2, A-3, A-AB, A-4, X-2, A-J, B, C, D, and E are
offered publicly, while classes X-1, F, G, H, J, K, L, M, N, O,
and P 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 89 fixed-rate
loans having an aggregate principal balance of approximately
$1,523,690,515 as of the cutoff date.
For a detailed description of Fitch's rating analysis, see the
report 'Morgan Stanley Capital I Trust 2005-HQ5,' dated March 14,
2005, available on the Fitch Ratings web site at
http://www.fitchratings.com/
MORTGAGE ASSET: Fitch Rates $2 Mil. Class B Mortgage Certs. at BB
-----------------------------------------------------------------
Mortgage Asset Securitization Transactions, Inc. $122.04 million
MASTR Specialized Loan Trust 2005-01, mortgage pass-through
certificates, is rated by Fitch Ratings:
-- $99,732,000 class A-1 and A-2 (senior certificates) 'AAA';
-- $9,516,000 class M-1 'AA';
-- $5,499,000 class M-2 'A';
-- $3,893,000 class M-3 'BBB';
-- $1,359,000 class M-4 'BBB-';
-- $2,040,000 class B 'BB'.
Credit enhancement for the 'AAA' class A-1 and A-2 certificates
reflects the 20.65% subordination provided by classes M-1, M-2, M-
3, M-4, and B, as well as initial overcollateralization -- OC --
and monthly excess interest.
Credit enhancement for the 'AA' class M-1 certificates reflects
the 12.95% subordination provided by classes M-2, M-3, M-4 and B,
initial OC, and monthly excess interest.
Credit enhancement for the 'A' class M-2 certificates reflects the
8.50% subordination provided by classes M-3, M-4 and B, initial
OC, and monthly excess interest.
Credit enhancement for the 'BBB' class M-3 certificates reflects
the 5.35% subordination provided by classes M-4 and B, initial OC,
and monthly excess interest.
Credit enhancement for the 'BBB-' class M-4 certificates reflects
the 4.25% subordination provided by class B, initial OC, and
monthly excess interest.
Credit enhancement for the 'BB+' class B certificates reflects the
2.60% subordination provided by initial OC and monthly excess
interest.
In addition, the ratings on the certificates reflect the quality
of the underlying collateral, and Fitch's level of confidence in
the integrity of the legal and financial structure of the
transaction.
The mortgage pool consists of fixed- and adjustable-rate mortgage
loans secured by first and second liens on one- to four-family
residential properties, with an aggregate principal balance of
$123,584,018. As of the cut-off date, March 1, 2005, the mortgage
loans had a weighted average original loan-to-value ratio -- OLTV
-- of 84.79%, current loan-to-value ratio -- CLTV -- of 80.21%,
weighted average current FICO score of 629, weighted average
coupon of 6.750%, and an average principal balance of $143,535.
Single-family properties account for approximately 69.97% of the
mortgage pool, two- to four-family properties 7.05%, and condos
7.29%. Owner occupied properties make up 92.06% of the pool.
The three largest state concentrations are:
* California (23.23%),
* Florida (7.33%), and
* Nevada (5.40%).
None of the mortgage loans are 'high cost' loans as defined under
any local, state, or federal laws. For additional information on
Fitch's rating criteria regarding predatory lending legislation,
see the press release dated May 1, 2003 'Fitch Revises Rating
Criteria in Wake of Predatory Lending Legislation' and Feb. 23,
2005 'Fitch Revises RMBS Guidelines for Antipredatory Lending
Laws,' available on the Fitch Ratings web site at
http://www.fitchratings.com/
Mortgage Asset Securitization Transactions, Inc., deposited the
loans into the trust, which issued the certificates, representing
beneficial ownership in the trust. For federal income tax
purposes, the trust fund will consist of multiple real estate
mortgage investment conduits. Deutsche Bank National Trust
Company will act as trustee. GMAC Mortgage Corporation, rated
'RSS1-' by Fitch, and Wells Fargo Bank N.A., rated 'RSS2', will
act as servicers for this transaction, with Wells Fargo Bank N.A.,
rated 'RMS1,' acting as master servicer.
NORTEL NETWORKS: Names Gary Kunis as Chief Technology Officer
-------------------------------------------------------------
Nortel Networks Corporation (NYSE:NT) (TSX:NT) reported the
appointment of Gary Kunis as Chief Technology Officer. As CTO,
Kunis will lead the strategic vision for the company's product and
technology portfolio.
Until 2002, Mr. Kunis was the Chief Science Officer at Cisco
Systems. One of the pioneers of the Internet in the 1980s, Kunis
has led numerous development and engineering breakthroughs related
to Internet Protocol standards and routing technology used to
connect the worldwide web of networks that make up the Internet.
Mr. Kunis will report to Gary Daichendt, president and chief
operating officer, effective April 4, 2005.
"We're thrilled to have Gary join our team. He's an acknowledged
Internet pioneer with a solid record of accomplishment and I know
he will provide an outstanding contribution to Nortel's technology
leadership," said Gary Daichendt, president and chief operating
officer, Nortel. "His track record in leading the building,
servicing and selling of network technologies globally will be a
strong addition. He's an excellent senior leader who throughout
his career has consistently demonstrated his ability to link
technology innovation with business success both internally and
externally."
Earlier in his career, Mr.Kunis was involved in the design,
implementation and operation of large scale data and
telecommunications networks for several U.S. government agency
programs, including the Department of Defense, U.S. Navy, U.S. Air
Force, National Aeronautics and Space Administration, as well as
for civilian agencies while working for the Boeing Company. Mr.
Kunis also held a number of senior engineering positions with
Boeing's commercial and defense-related businesses.
A graduate of the State University of New York at Binghamton with
a Bachelor of Arts degree in Economics, Kunis also holds a
Master's Degree in Economics from Tufts University.
Nortel is a recognized leader in delivering communications
capabilities that enhance the human experience, ignite and power
global commerce, and secure and protect the world's most critical
information. Serving both service provider and enterprise
customers, Nortel delivers innovative technology solutions
encompassing end-to-end broadband, Voice over IP, multimedia
services and applications, and wireless broadband designed to help
people solve the world's greatest challenges. Nortel does
business in more than 150 countries. For more information, visit
Nortel on the Web at http://www.nortel.com/.For the latest Nortel
news, visit http://www.nortel.com/news
* * *
As reported in the Troubled Company Reporter on Jan. 31, 2005,
Standard & Poor's Ratings Services affirmed its 'B-' credit rating
on Nortel Networks Lease Pass-Through Trust certificates series
2001-1 and removed it from CreditWatch with negative implications,
where it was placed Dec. 8, 2004.
The affirmation is based on a valuation analysis of properties
that provide security for the two notes that serve as collateral
for the pass through trust certificates.
The initial rating on the securities relied upon the ratings
assigned to both Nortel Networks Ltd. and ZC Specialty Insurance
Co. The Dec. 8, 2004, CreditWatch placement followed the
Dec. 3, 2004 withdrawal of the rating assigned to ZC.
The properties are secured by five single-tenant, office/R&D
buildings in Research Triangle Park, North Carolina that are
leased to Nortel (B-/Watch Developing), which guarantees the
payment and performance of all obligations of the leases. The
lease payments do not fully amortize the notes. A surety bond
from ZC insures the balloon amount.
Due to the withdrawal of the rating on ZC, Standard & Poor's
current analysis incorporates the rating on Nortel and internal
valuations of the properties, including balloon risk. The
valuations factored in current market data. The rating will not
necessarily be in alignment with Nortel's due to the balloon risk,
which is no longer mitigated by a rated entity.
A balloon payment of $74.7 million is due at maturity in
August 2016. If this amount is not repaid, the indenture trustee
can obtain payment from the surety, provided certain conditions
are met.
NOVELIS INC: Incurs $93 Million Net Loss in 2004 Fourth Quarter
---------------------------------------------------------------
Novelis Inc. (NYSE: NVL; Toronto) filed its Annual Report on Form
10-K with the Securities and Exchange Commission. The Annual
Report included final audited financial statements that included
an adjustment from the preliminary full year results, announced on
March 2, 2005.
As Novelis continued with the carve-out reconciliation of the
financial data received from its former parent Alcan Inc., it
determined that modifications to the company's cash flow
statements were necessary, but the modifications did not change
the company's cash position. Adjustments were made in relation to
a pension plan in Europe and to the value attributed to the four
Pechiney facilities, both elements being part of the transfer of
assets and liabilities to Novelis upon its creation. The
adjustment to the cash flow statement has no impact on the
company's income statement or balance sheet. In addition, the
adjustment will not impact earnings going forward. As a
result, the company reaffirmed the 2005 guidance provided on
March 2, 2005.
Novelis Inc. reported a fourth quarter 2004 loss of $93 million
compared to net income in the fourth quarter 2003 of $54 million.
For the full year, net income was $55 million in 2004, down
$102 million from $157 million in 2003.
Results for the fourth quarter of 2004 included an after-tax
restructuring charge of $5 million, the previously announced asset
impairment of $65 million as well as a $21 million tax provision
and $12 million in costs both related to the spin-off from Alcan
and the start-up of Novelis. The fourth quarter of 2003 included
an $8 million gain from asset sales and positive tax adjustments
of $24 million.
Full year 2004 results included after-tax restructuring charges of
$18 million, the asset impairment of $65 million, as well as the
$21 million of tax provision and the $12 million in costs
mentioned previously. Full year 2003 results included
restructuring charges and asset impairments of $6 million, gains
on sales of assets of $26 million and positive tax adjustments of
$24 million.
Rolled product shipments climbed by 12% to 671 kt for the fourth
quarter of 2004 over the equivalent period in 2003, and 12% to
2,785 kt for the full year. For 2004, the increase in shipments
is attributed to strong market demand, an increase in market share
in South America, and the inclusion of four Pechiney foil plants
which were purchased at the end of 2003 and whose shipments are
not in the 2003 results. The four foil plants contributed 3% to
shipments for the quarter and 4% for the full year.
Sales and operating revenues climbed by 31% for the fourth quarter
of 2004 over the similar period in 2003 and 25% for the full year
while cost of sales and operating expenses experienced similar
increases. The major contributing factors to both Sales and
operating revenues and Cost of sales were the increase in LME
(London Metal Exchange) pricing, which was up 19% for the quarter
and 21% for the year, in addition to the stronger shipment levels.
The weakening of the U.S. dollar against other currencies,
especially the euro, was also a factor.
Selling, general & administrative expenses (SG&A) increased in
both the fourth quarter and the full year results. Included in
SG&A for both the quarter and year are expenses related to the
spin-off from Alcan and start up costs for Novelis, SG&A from the
four Pechiney plants, and the strengthening euro. Pechiney, which
was consolidated as of December 31, 2003, is reflected in the 2004
and 2003 balance sheets but only in the 2004 results. Moving
forward, 2005 SG&A is expected to be higher than 2004 due to an
increase in stand-alone corporate costs. We also expect one-time
start-up costs of $20 to $25 million in 2005.
Other expenses (income) - net, were up significantly in the fourth
quarter of 2004 over the equivalent period in 2003, due mainly to
the asset impairment in Italy of $65 million and $8 million in
restructuring charges in Europe. These were only partially offset
by the FAS 133 mark-to-market gain on derivatives of $32 million.
In the fourth quarter of 2003, there was $12 million from gains on
disposal of assets and an environmental provision of $25 million.
The FAS 133 mark-to-market gain was just $3 million in the fourth
quarter of 2003. For the full year 2004, Other expenses (income)
- net, included a $26 million in restructuring and asset
impairment charges in Europe, including a $8 million asset
impairment in the U.K. and the separate asset impairment of
$65 million in Italy. FAS 133 mark-to-market gains on derivatives
were $69 million for the year, an increase of $50 million from
2003. For the full year 2003, there were asset impairment and
restructuring charges of $8 million, a $25 million environmental
provision and $30 million of gains on the sale of assets.
In the fourth quarter of 2004, the effective tax rate was 141%
compared to a weighted average statutory rate of 38%. For the
year, the weighted average statutory rate was 37% while the
effective rate was 74%. The major differences for both periods
were caused by the $65 million pre-tax asset impairment in Europe
for which a tax recovery is not expected and the $21 million tax
provision in connection with the spin off of Novelis, for which
there is no related income.
In 2003, the effective tax rates for the fourth quarter and for
the full year were 65% and 25%, respectively, which compared to
the weighted average statutory rates of 29% and 37%, respectively.
The main differences were positive tax adjustments relating to the
resolution of a transfer pricing issue and the realization of a
previously unrecognized loss carry-forward totaling $24 million.
Pro-forma earnings (loss) per share (EPS) was $(1.26) for the
fourth quarter of 2004 and $0.74 for the full year.
"We are very pleased overall with our 2004 performance," said
Brian Sturgell, President and CEO. "We ended our last year as a
part of Alcan on solid operational footing, and we are starting
our first year as Novelis in a global leadership position in the
areas that matter to our customers. The fourth quarter reflected
significant one-off impacts, many relating to the spin-off from
Alcan. However, the year reflected continued high performance of
the rolling business. With our new independence, we see
opportunities for the future to move this company forward."
2005 Outlook
The outlook provided for 2005 includes two key components. First,
capital expenditures are not expected to exceed $175 million.
Next, BGP or Segment Income is expected to grow between 5% and
10%, excluding the impact of FAS 133 mark-to-market gains or
losses on derivatives.
"Moving through 2005 can obviously create new challenges since
this is our first year as an independent company," said Brian W.
Sturgell, president and chief executive officer. "Rapid
fluctuations in metal pricing and significant changes in currency
or economies are uncertainties that are not under our control. The
2005 outlook is based on information currently available to
management."
Novelis -- http://www.novelis.com/-- incorporated Jan. 6, 2005
when it separated from Alcan, is the global leader in aluminum
rolled products and aluminum can recycling, with 37 operating
facilities in 12 countries and more than 13,500 dedicated
employees. Novelis has the unparalleled capability to provide its
customers with a regional supply of high-end rolled aluminum
throughout Asia, Europe, North America, and South America.
Through its advanced production capabilities, Novelis supplies
aluminum sheet and foil to automotive, transportation, beverage
and food packaging, construction, industrial and printing markets.
* * *
As reported by the Troubled Company Reporter on Jan. 21, 2005,
Standard & Poor's Ratings Services assigned its 'B' rating to
Novelis Inc.'s US$1.4 billion senior unsecured notes due 2015. At
the same time, Standard & Poor's withdrew its CP ratings on Alcan
Aluminum Corp., as this entity was transferred to Novelis on
Jan. 6, 2005. The outlook on Novelis, Inc., is stable.
As reported in the Troubled Company Reporter on Jan. 17, 2005,
Moody's Investors Service assigned a B1 rating to Novelis, Inc.'s
$1.4 billion senior unsecured, guaranteed note issue due January
2015 and affirmed the Company's existing ratings. The notes will
be guaranteed by all wholly owned subsidiaries in the U.S. and
Canada and certain wholly owned foreign subsidiaries. The
guarantee structure is the same as that provided in the Company's
recently placed senior secured bank facilities. Moody's said the
rating outlook is stable.
ORMET CORP: Judge Sellers Confirms Chapter 11 Plan
--------------------------------------------------
The Honorable Barbara Sellers of the U.S. Bankruptcy Court for the
Southern District of Ohio confirmed Ormet Corp.'s chapter 11 plan.
Pursuant to the Plan, the Company's largest creditor
MatlinPatterson Asset Management LLC will own shares of the
Reorganized Ormet.
Orment got the Court's approval to increase its retirees' health
insurance costs to save money. Ormet expects to save about $5
million from the retiree health costs. The Court also allowed
Ormet to break labor contracts, which resulted in conflicts with
the United Steelworkers of America. Union workers have been on
strike since November last year.
Michael Williams, Ormet Chief Executive Officer, said in an
interview with The Associated Press "he would like to have the
employees back, but without them the company is meeting its
production goals."
Union representatives don't think the plan confirmation will
affect the negotiations between Ormet and the striking employees.
Ormet also obtained Judge Sellers' support not to sell two of its
Ohio plants.
Headquartered in Wheeling, West Virginia, Ormet Corporation --
http://www.ormet.com/-- is a fully integrated aluminum
manufacturer, providing primary metal, extrusion and thixotropic
billet, foil and flat rolled sheet and other products. The
Company and its debtor-affiliates filed for chapter 11 protection
on January 30, 2004 (Bankr. S.D. Ohio Case No. 04-51255). Adam C.
Harris, Esq., in New York, represents the Debtors in their
restructuring efforts. When the Company filed for bankruptcy
protection, it listed $50 million to $100 million in estimated
assets and more than $100 million in total debts.
OWENS CORNING: Judge Fullam Estimates Asbestos Claims at $7 Bil.
----------------------------------------------------------------
The Honorable John P. Fullam, Sr., estimated the total amount of
contingent and unliquidated claims against Owens Corning for
personal injury or death caused by exposure to asbestos, including
pending claims, future claims, and contract claims, at $7 billion.
The Official Committee of Asbestos Personal Injury Claimants and
the Official Representative for Future Asbestos Personal Injury
Claimants appointed in the Debtors' chapter 11 cases pressed for a
high estimate, which will give their constituencies greater voting
power and greater relative participation in the fruits of the
reorganization proceeding.
The banks and lenders under the Credit Agreement, with Credit
Suisse First Boston as agent, and bondholders, conversely, argued
for a low estimate.
The Debtors, as the Plan proponent, does not argue for any
particular valuation, but seeks to avoid obstacles to plan
confirmation.
The Asbestos Committee and the Futures Representative called on
these claim valuation experts to present their valuations:
Experts Valuation
------- ---------
Mark A. Peterson $11.10 billion
Francine F. Rabinovitz 8.15 billion
The Debtors' expert is Dr. Thomas Vasquez, who the Banks also
called as a witness during the estimation proceedings. Dr.
Vasquez suggested a range between $6.5 and 6.8 billion. The Banks
also called on Dr. Frederick Dunbar to present and justify his
$2.08 billion valuation of the asbestos personal injury claims.
"We are not, at this time, deciding how much each claimant will
actually be entitled to receive, but the total amount which the
claimants, as a group, could legitimately have claimed as
compensation, as of the petition date," Judge Fullam explains.
"The values of future claims should be estimated on the same basis
-- i.e., what their claims would have been worth in the tort
system as it existed on the petition date. But the estimate of
the number of such future claims should take into account changes
likely to ensue as a result of the reorganization."
According to Judge Fullam, Dr. Dunbar's testimony is completely at
odds with the other experts' testimony. Judge Fullam notes that
it seems Dr. Dunbar has adopted every assumption, which would
lower the estimate, and has rejected every assumption, which would
substantially increase the estimate.
Judge Fullam does not agree with Dr. Peterson that the number of
claims will continue to increase sharply for the next five years
based on the upsurge in filings as a result of the National
Settlement Program. Judge Fullam believes that the upsurge was a
temporary aberration. Judge Fullam contends that Dr. Peterson
failed adequately to take into account the changes in the asbestos
litigation landscape, which have already occurred and which will
likely continue.
Judge Fullam finds the opinions of Dr. Vasquez and Dr. Rabinovitz
equally persuasive. "Both have attempted, and largely succeeded,
in adjusting historical figures to reflect changed circumstances."
However, Judge Fullam says, Dr. Rabinovitz's estimate is a little
too high, because it does not adequately take into account the
aging of the population, and the impact of aging on both values
and propensity to sue.
Dr. Vasquez's estimate, Judge Fullam observes, did not deviate too
greatly from his estimate reported by Owens Corning to the
Securities and Exchange Commission.
Judge Fullam concluded that the appropriate figure lies somewhere
between Dr. Vasquez's high estimate and Dr. Rabinovitz's low
estimate.
A full-text copy of Judge Fullam's 11-page Memorandum and Order is
available free of charge at:
http://bankrupt.com/misc/EstimationMemo&Order.pdf
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: Releases 4th Quarter & Annual 2004 Results
---------------------------------------------------------
Owens Corning (OWENQ) reported financial results for the fourth
quarter ended December 31, 2004, as well as results for the full
year 2004.
For the fourth quarter of 2004, the company reported net sales of
$1.484 billion, an increase of 16 percent compared to net sales of
$1.275 billion for the same period in the prior year. Net income
for the fourth quarter of 2004 rose 67 percent to $72 million,
compared to net income of $43 million for the fourth quarter of
2003. Owens Corning reported income from operations of
$146 million for the quarter, including $21 million of Chapter 11-
related charges and $21 million in asbestos-related insurance
recoveries. In addition, during the fourth quarter we finalized
our recoveries of insurance proceeds related to the flood at
our L'Ardoise, France facility resulting in a total gain of
$28 million, primarily related to business interruption losses
attributable to the first half of 2004. For the fourth quarter
of 2003, Owens Corning reported income from operations of
$112 million for the quarter, including a credit of $10 million
for restructuring and other charges, $10 million of Chapter 11-
related charges, and $1 million in asbestos-related insurance
recoveries.
For the full year, sales increased 14 percent to $5.675 billion,
compared to $4.996 billion for 2003. Net income increased 77
percent to $204 million, compared to $115 million for all of 2003.
For the full year, Owens Corning reported income from operations
of $427 million, including $54 million of Chapter 11-related
charges, partially offset by $24 million in asbestos-related
insurance recoveries and a credit of $5 million for restructuring
and other charges. For 2003, Owens Corning reported income from
operations of $267 million, including charges of $34 million for
restructuring and other charges and $85 million of Chapter
11-related charges, partially offset by $5 million in asbestos-
related insurance recoveries.
Owens Corning increased its cash balance by $120 million
during the year to end 2004 with a cash balance of $1.125 billion.
"We are very pleased with our results for the quarter and
the year," said Dave Brown, Owens Corning's Chief Executive
Officer. "Through a combination of record sales and productivity
we offset significant increases in energy and raw material costs
while our commitment to safety resulted in a significant decline
in the number of injuries sustained by our employees. We believe
that the overall improvement that we achieved in our operations
positions us well to serve our markets and to continue profitable
growth in 2005."
A full-text copy of Owens Corning's Form 10-K report is available
at no charge at the Securities and Exchange Commission at:
http://www.sec.gov/Archives/edgar/data/75234/000119312505044604/d10k.htm
Owens Corning and Subsidiaries
Consolidated Balance Sheet
As of December 31, 2004
(In millions of dollars)
Current Assets:
Cash and cash equivalents $1,125
Receivables 527
Inventories 445
Other Current Assets 31
----------
Total Current Assets 2,128
Other Assets:
Restricted Cash - asbestos and insurance related 188
Restricted Cash - securities and other 1,418
Deferred Income Taxes 999
Pension-related assets 499
Goodwill 198
Investment in Affiliates 82
Other Non-current Assets 117
----------
Total Other Assets 3,501
Plant & Equipment:
Land 80
Buildings & Leasehold Improvements 803
Machinery & Equipment 3,293
Construction in Progress 128
----------
4,304
Accumulated Depreciation (2,294)
----------
Net plant and equipment 2,010
----------
TOTAL ASSETS $7,639
==========
Liabilities not Subject to Compromise:
Accounts Payable & Accrued Liabilities $909
Short-term debt 11
Long-term debt - current portion 31
----------
Total Current Liabilities 951
Long-Term Debt 38
Pension plan liability 731
Other Employee Benefits Liability 401
Other Liability 178
----------
Total Other 1,310
Liabilities Subject to Compromise 9,171
Company-obligated Securities of Entities Solely
Parent Debentures - Subject to Compromise 200
Minority Interest 49
Stockholders' Deficit:
Common Stock 6
Additional paid in capital 692
Accumulated Deficit (4,447)
Accumulated Comprehensive Income (Loss) (330)
Other (1)
----------
Net Stockholder's Equity (4,080)
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $7,639
==========
Owens Corning and Subsidiaries
Consolidated Statement of Operations
For the Year Ended December 31, 2004
(In millions of dollars)
Net sales $5,675
Cost of Sales 4,649
----------
Gross Margin 1,026
Operating Expenses:
Marketing and Administrative Expenses 530
Science and Technology Expenses 47
Restructure Costs -
Chapter 11 related reorganization items 54
Recoveries from Asbestos Litigation Claims - OC (24)
Other (8)
----------
Total Operating Expenses 599
Income (Loss) from Operations 427
Interest expense, net (12)
----------
Income (Loss) Before Income Tax Expense 439
Income tax expense 227
----------
Income (Loss) Before Minority Interest and Equity
in Net Income (Loss) of Affiliates 212
Minority Interest and equity
in net earnings of affiliates (8)
----------
Net Income (Loss) Before Cumulative Effect of Change
in Accounting Principle 204
Cumulative Effect of Change in Accounting Principle -
----------
Net Income $204
==========
Owens Corning and Subsidiaries
Consolidated Statement of Cash Receipts & Disbursements
For the Year Ended December 31, 2004
(In millions of dollars)
Net Cash Flow from Operations
Net Income $204
Reconciliation of net cash flow from operations
Non-cash items:
Provision for asbestos litigation claims -
Provision for depreciation 228
Provision for impairment of fixed assets 7
Provision (credit) for deferred income taxes 133
Provision for pension and other employee benefits
liabilities 120
Cumulative effect of accounting change -
Other 20
(Increase) decrease in receivables (23)
(Increase) decrease in inventories (42)
Increase (decrease) in accounts payable and accrued
liabilities 69
Change in liabilities subject to compromise -
Proceeds from insurance for asbestos litigation claims 24
Pension fund contribution (231)
Payments for other employee benefits liabilities (34)
Increase in restricted cash - asbestos and insurance
related (22)
Increase in restricted cash, securities,
and other - Fibreboard (23)
Other 19
----------
Net cash flow from operations 449
Net Cash Flow from Investing
Additions to plant and equipment (232)
Investment in subsidiaries and affiliates, net of cash (96)
Proceeds from the sale of assets or affiliates 8
----------
Net cash flow from investing (320)
Net Cash Flow from Financing
Proceeds from long-term debt -
Payments on long-term debt (21)
Net increase (decrease) in short-term debt -
Net (decrease) increase in subject to compromise (5)
Other 2
----------
Net cash flow from financing (24)
Effect of exchange rate changes on cash 15
----------
Net increase in cash and cash equivalents 120
Cash and cash equivalents at beginning of year 1,005
----------
Cash and equivalents at end of period $1,125
==========
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com/-- manufactures fiberglass
insulation, roofing materials, vinyl windows and siding, patio
doors, rain gutters and downspouts. The Company filed for chapter
11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
represents the Debtors in their restructuring efforts. At
Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in
assets and a $4.2 billion stockholders' deficit. The company
reported $132 million of net income in the nine-month period
ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No.
101; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PACER INTERNATIONAL: Moody's Confirms Low-B Debt Ratings
--------------------------------------------------------
Moody's Investors Service has confirmed the ratings of Pacer
International, Inc. (senior implied B1), and has changed the
company's rating outlook to positive from stable. The change in
outlook was prompted by recent improvements in Pacer's operating
results as well as expectations of continued favorable financial
performance due to the over-all strength in the intermodal rail
sector. The positive rating outlook considers the potential for
the company to further reduce debt through robust cash flow
generation.
The B1 Senior Implied rating considers significant recent
improvements in Pacer's operating results owing to sustained
strong economic fundamentals in the intermodal rail transportation
sector in which the company operates, resulting in strong positive
free cash flow generation which has facilitated debt reduction.
These strengths are balanced by Pacer's relatively heavy lease-
adjusted leverage, modest tangible asset coverage to its current
bank facilities, and the thin operating margins inherent in the
company's agency-oriented business model.
The positive rating outlook reflects Moody's expectations that
Pacer will continue to generate strong positive cash flows over
the next 12-18 months, allowing the company to further reduce debt
levels. Ratings could be subject to upgrade if Pacer were to
achieve continued revenue growth while sustaining margins at or
above current levels, further improved free cash flow generation
to levels above 15% of lease-adjusted debt, and reduced overall
leverage such that lease-adjusted debt/EBITDAR were less than
3.5 times. Ratings or their outlook could face downward revision
if the company were to increase balance sheet debt or operating
lease levels appreciably without concomitant increases in cash
flow generation, if lease-adjusted debt/EBITDAR were to exceed
4.5 times, or if free cash flow were to fall below 10% of debt due
to an unexpected downturn in the intermodal sector or if the
company were to pursue a more aggressive financial strategy.
In an improving intermodal transportation market, Pacer has been
able to take advantage of a strong and diversified customer base
in both its retail and wholesale operations to grow revenue and
profits, while repaying a significant amount of balance sheet debt
from generated cash flow. Revenue grew about 13% over this
period, to $1.8 billion in the FY ending December 2004, while
maintaining gross profit margins at about 22%. On light capital
expenditure levels (averaging about $4 million over this period),
which is a typical consequence of the company's asset-light and
lease-oriented business model, Pacer generated a fairly robust
level of free cash flow.
As a result, the company was able to repay balance sheet debt by
about 33%, from $247 million as of December 2002 to $173 million
at year-end 2004. Balance sheet leverage improved substantially,
from debt/EBITDA of about 3 times to about 1.8 times in 2004,
while free cash flow (unadjusted for leases) represented about 23%
of debt drawn under its borrowing facilities.
However, because a substantial portion of the company's operating
assets is obtained by way of operating leases Moody's analysis
also considers lease-adjusted leverage metrics. Such metrics have
improved less dramatically; Moody's estimates that lease-adjusted
debt/EBITDAR has reduced from about 4.5 times as of FY 2002 to
about 3.9 times as of FY 2004, while lease-adjusted free cash flow
to debt increased from about 10% to 14%. Nevertheless, Moody's
estimates the lease adjusted leverage ratios to be strong for this
rating category, and expects that continued positive cash flow
generation will further improve these metrics over the near term.
To assure access to rail capacity for cargo booked through its
wholesale segment operations, Pacer has secured long-term
contracts with key class 1 railroads. These contracts comprise
the majority of the company's purchased transportation costs.
In particular, Pacer has large slot arrangements with both CSX and
Union Pacific with remaining terms of eleven and seven years,
respectively. Moody's believes that such relationships provide
the company a degree of competitive advantage over smaller agency-
based intermodal services. However, Moody's also notes that this
implies a concentration of reliance on these two carriers, both of
which experienced difficulties in their intermodal operations in
2004. As such, Pacer's ability to service customer requirements
could be negatively affected by any on-going problems encountered
by either CSX or Union Pacific in their respective operations.
Moody's believes that, given expectation for positive free cash
generation over the near-term, Pacer's liquidity position should
be adequate to cover unexpected market swings or working capital
requirements. The company has a $75 million senior secured
revolving credit facility in place, of which about $19 million was
used in December 2004 against overdrafts. As the company
maintains only minimal cash balances Moody's expects that this
level of overdraft usage will be common going forward, while
additional drawings on the facility for working capital or CAPEX
purposes are less likely. Moreover, the company has no scheduled
debt maturities until March 2008.
However, the rating agency continues to note the generally high
level of debt relative to the company's asset base. Pacer
reported a total asset balance of $606 million in December 2004,
48% of which was represented by goodwill ($288 million), and about
38% by accounts receivable ($232 million), which is a function of
the gross sales volume. Only 8% ($49 million) of the company's
assets were comprised of fixed assets. This implies relatively
weak tangible asset protection for the company's balance sheet
indebtedness.
These ratings have been confirmed:
Pacer International, Inc.:
* Senior secured term loan due 2010, rated B1;
* Senior secured revolving credit facility due 2008, rated B1;
* Senior implied rating of B1; and
* Senior unsecured issuer rating of B2.
Headquartered in Concord, California, Pacer International, Inc.,
is a leading non-asset based North American third-party logistics
and transportation provider, offering logistics and other services
to facilitate the movement of freight from origin to destination.
Pacer International's services include:
* wholesale stacktrain services;
* as well as retail trucking;
* intermodal marketing;
* warehousing and distribution;
* international freight forwarding; and
* supply-chain management services.
Pacer had FY 2004 revenue of $1.8 billion.
QWEST COMMS: Increases MCI Takeover Bid to $8.9 Billion
-------------------------------------------------------
Qwest Communications International Inc. (NYSE: Q) raised its bid
to acquire MCI Inc. for $8.9 billion, after MCI Inc.'s board of
directors accepted Verizon's $7.64 billion takeover proposal.
Qwest sent a letter to MCI Inc.'s Board of Directors disclosing
the revised offer:
March 31, 2005
The Board of Directors
MCI, Inc.
Attention: Chairman, Board of Directors
22001 Loudoun County Parkway
Ashburn, VA 20147
Dear Mr. Katzenbach:
The MCI Board has executed an Amended Merger Agreement with
Verizon that we believe offers MCI shareholders inferior terms,
conditions and value than what Qwest offered in our proposal of
March 28. We were particularly dismayed that MCI did not
contact us to discuss our willingness to adjust our offer prior
to signing the Amended Merger Agreement, a step MCI
deliberately chose not to take even though it certainly could
have benefited MCI shareholders. Our dismay was heightened
because at the March 16, MCI board meeting, we very clearly
asked that MCI contact us before acting if for any reason it
did not find our proposal superior and Verizon's amended offer
was clearly in response to a finding by the MCI Board that the
Qwest bid constituted a Superior Proposal. At no time during
your board deliberations on Monday did any Board member, MCI
management representative or MCI advisor ask Qwest whether it
had received Qwest's best and final proposal. At the same time
-- it is now clear to us -- there was continuing dialogue with
Verizon to negotiate and finalize an amendment to the agreement
that delivered less value on less favorable terms than the
Qwest proposal.
We are particularly concerned that MCI has now abandoned its
unilateral right to terminate the amended Verizon agreement to
accept a Superior Proposal. As you well know, under the
original merger agreement, if MCI received a Superior Proposal
that was not matched by Verizon, MCI could terminate the merger
agreement and submit the Superior Proposal to a shareholder
vote.
Now, in a complete abdication of its duties to act in the best
interest of its shareholders, MCI can be forced to submit the
Verizon offer to a shareholder vote even if the MCI Board
recommends against the Verizon offer because MCI has received a
Superior Proposal.
By surrendering MCI's right to terminate the merger agreement
upon receiving a Superior Proposal the Board has seriously
compromised its ability to manage the bidding process to get
the highest value possible for MCI stockholders. It is
difficult to understand how the goal of maximizing value for
MCI stockholders is served by consistently favoring one bidder
over another, especially since it has only been our
persistence, rather than a level playing field, that has
significantly increased the value of MCI shares. In the event
Verizon insists on forcing a vote on its transaction even after
the MCI Board has declared the Qwest offer a Superior Proposal
-- delaying the time before MCI shareholders can receive the
benefits of Qwest's Superior Proposal -- we expect the MCI
Board to be vigilant in making sure Verizon does not abuse the
proxy process to delay or further impede our Superior Proposal.
On March 16, 2005, we presented to the MCI Board a stock and
cash proposal valued at $26.00 per MCI share, after inclusion
of MCI's March 15 dividend payment of $0.40 per share. We
confirmed our offer on March 28, 2005, and delivered a merger
agreement we were prepared to sign and executed commitments for
$5.75 billion of financing. At your March 16 Board meeting, we
described the potential for a combined Qwest and MCI, detailed
and explained the synergies that we believe can be achieved in
this combination and outlined the superior value and value
creation potential of a Qwest/MCI merger as compared to the
Verizon offer.
In accepting Verizon's amended offer, the MCI Board has failed
to take into consideration the significant additional value
that the Qwest proposal delivers to your shareholders from
projected synergies as compared to a merger with Verizon. As
we described in detail to the MCI Board on March 16 and have
stated publicly on many occasions, we believe the value to MCI
shareholders from participating in the synergies of a combined
Qwest/MCI should exceed $17 per MCI share compared to less than
$1 in the case of Verizon. This opportunity of $16 per MCI
share is economic value that the MCI shareholders will be
deprived of in a MCI/Verizon merger as compared to a
combination with Qwest.
We also discussed with you and your advisors the reasons for
our belief that regulatory approval would be obtained more
quickly for a Qwest/MCI combination than a Verizon/MCI merger.
In response to questions about how Qwest/MCI might compete with
much larger companies, we set forth our conviction that MCI's
legacy of successfully bringing competition and consumer choice
to our industry despite its size would be continued in a
Qwest/MCI combination.
We remain committed to a Qwest/MCI transaction as we believe it
will deliver superior value to shareholders as well as
significant benefits to customers, employees and other
stakeholders. Accordingly, we hereby submit a revised offer to
you for a merger of MCI and Qwest. We are confident that this
offer constitutes a Superior Proposal within the meaning of
your amended agreement with Verizon. Our revised offer of
$27.50 per share ($27.90 including the $0.40 per share dividend
paid on March 15) consists of:
-- Cash consideration of $13.50 ($13.90 including the $0.40
per share dividend paid on March 15) per share (an
increase of 34% in cash from our previous proposal and an
aggregate increase in cash to MCI shareholders of
$1.1 billion);
-- Equity consideration of $14.00 per share with the value
protected by a new collar mechanism;
-- Improved collar that provides an additional 10% of
downside protection to a Qwest share price of $3.32 (with
Qwest having the right to settle any downside adjustment
in cash or shares) and elimination of the 10% collar
above a $4.15 share price permitting MCI shareholders to
participate in 100% of the appreciation of the Qwest
share price above $4.15 as well as providing MCI
shareholders earlier participation in the synergies; and
-- An increase in the Specified Included Liabilities
threshold before any price adjustment to $1.775 billion
from $1.725 billion.
In addition, we have added a provision that would allow us,
between the time our proposal is declared superior and closing,
to substitute up to $2 billion in cash for $2 billion in stock
we would otherwise issue to MCI shareholders by raising up to
$2 billion in third party equity financing. We have included
this provision to respond to existing Qwest, MCI and other
equity investors who have expressed a strong interest in
investing in the equity of the combined company at closing.
We would note that before taking into account the likely value
to the MCI shareholders of the substantial synergies projected
at $17 per MCI share, our offer is approximately 20% higher
than Verizon's offer, $4.40 per MCI share and $1.4 billion in
the aggregate. We have significantly enhanced the downside
protection to MCI shareholders by the increased cash in our
offer, now approximately 50% of the proposed consideration, as
well as by a new collar offering enhanced downside protection
to the equity consideration of our offer.
We believe the total value of our revised bid, including
projected synergies, is approximately $44 per MCI share as
compared to a Verizon bid of approximately $24. Given this
significant disparity, we are confident that the MCI Board
acting in the best interests of its shareholders will conclude
that our offer constitutes a Superior Proposal.
Please note that unlike the amended Verizon agreement, we would
not increase the amount of the termination fee and expenses by
25%, nor would we seek to prevent the MCI Board from
terminating an agreement with us if MCI were presented with a
Superior Proposal we do not meet. We have expended
considerable effort since an inferior Verizon offer was first
accepted on February 13 to help MCI stockholders realize fair
value for their shares, and we refuse to participate with the
MCI Board and Verizon in constructing economic or timing
barriers that further burden the bidding for MCI shares to the
detriment of MCI shareholders. We think MCI shareholders
should receive the highest price available in the market.
We once again request that you take the steps necessary under
your agreement with Verizon to recognize our offer as a
Superior Proposal. We believe time is of the essence and,
accordingly, we think it reasonable to inform you that if you
do not determine our offer is a Superior Proposal on or before
midnight April 5, 2005, our offer will be withdrawn.
We look forward to creating value for both our stockholders in
a Qwest/MCI merger.
Sincerely,
Richard C. Notebaert
Chairman and Chief Executive Officer
cc: Mr. Richard C. Breeden
Mr. Larry Grafstein
Lazard Freres & Co.
Mr. Phillip Mills
Davis Polk & Wardwell
About MCI
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc.
About Qwest
Qwest Communications International Inc. (NYSE:Q) --
http://www.qwest.com/-- is a leading provider of voice, video and
data services. With more than 40,000 employees, Qwest is
committed to the "Spirit of Service" and providing world-class
services that exceed customers' expectations for quality, value
and reliability.
At Dec. 31, 2004, Qwest Communications' balance sheet showed a
$2,612,000,000 stockholders' deficit, compared to a $1,016,000,000
deficit at Dec. 31, 2003.
* * *
As reported in the Troubled Company Reporter on March 1, 2005,
Standard & Poor's Ratings Services placed its ratings on Denver,
Co.-based diversified telecommunications carrier Qwest
Communications International, Inc., and subsidiaries, including
the 'BB-' corporate credit rating, on CreditWatch with negative
implications. This follows the company's counter bid to Verizon
Communications, Inc., for long-distance carrier MCI, Inc., for
$3 billion in cash and $5 billion in stock. MCI also has about
$6 billion of debt outstanding.
The ratings on MCI, including the 'B+' corporate credit rating,
remain on CreditWatch with positive implications, where they were
placed Feb. 14, 2005 following Verizon's announced agreement to
acquire the company. The positive CreditWatch listing for the MCI
ratings reflects the company's potential acquisition by either
Verizon or Qwest, both of which are more creditworthy entities.
However, the positive CreditWatch listing of the 'B+' rating on
MCI's senior unsecured debt assumes no change to the current MCI
corporate and capital structure under an assumed acquisition by
Qwest, such that this debt would become structurally junior to
other material obligations.
"The negative CreditWatch listing of the Qwest ratings reflects
the higher business risk at MCI if its bid is ultimately
successful," explained Standard & Poor's credit analyst Catherine
Cosentino. As a long-distance carrier, MCI is facing ongoing
stiff competition from other carriers, especially AT&T Corp.
Moreover, MCI is considered to be competitively disadvantaged
relative to AT&T in terms of its materially smaller presence in
the enterprise segment and fewer local points of presence -- POPs.
The latter, in particular, results in higher access costs relative
to AT&T. Qwest also faces the challenge of integrating and
strengthening MCI's operations while improving its own
underperforming, net free cash flow negative long-distance
business. These issues overshadow the positive aspects of Qwest's
incumbent local exchange carrier business that were encompassed in
the former developing outlook.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Moody's Investors Service has placed the long-term ratings of MCI,
Inc., on review for possible upgrade based on Verizon's plan to
acquire MCI for about $8.9 billion in cash, stock and assumed
debt.
These MCI ratings were placed on review for possible upgrade:
* B2 Senior Implied
* B2 Senior Unsecured Rating
* B3 Issuer rating
Moody's also affirmed MCI's speculative grade liquidity rating at
SGL-1, as near term, MCI's liquidity profile is unchanged.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
As reported in the Troubled Company Reporter on Feb. 16, 2005,
Fitch Ratings has placed the 'A+' rating on Verizon Global
Funding's outstanding long-term debt securities on Rating Watch
Negative, and the 'B' senior unsecured debt rating of MCI, Inc.,
on Rating Watch Positive following the announcement that Verizon
Communications will acquire MCI for approximately $4.8 billion in
common stock and $488 million in cash.
QWEST COMMS: MCI Resuming Talks to Discuss Increased Bid
--------------------------------------------------------
MCI, Inc., intends to re-engage with Qwest Communications
International Inc. (NYSE: Q) to review Qwest's March 31, 2005,
proposal to acquire the company. MCI has received a waiver from
Verizon enabling it to engage in discussions with Qwest at any
time until the date of the MCI shareholder vote on the proposed
Verizon transaction. That date has not yet been set.
"Verizon has a signed agreement with MCI that we believe will
deliver superior value to MCI's shareholders," Verizon
Communications Inc. (NYSE: VZ) said in a press statement. "At
MCI's request, we have agreed that it may have discussions with
Qwest about any offer Qwest presents until the MCI shareholder
vote."
Verizon intends to file a registration statement, including a
proxy statement of MCI, and other materials with the Securities
and Exchange Commission in connection with the proposed
transaction.
Qwest Urges MCI to Level Playing Field
In response to Verizon's and MCI's comments urging MCI's board of
directors to conduct a transparent sales process which considers
the best interests of its shareholders, Qwest said in a press
statement:
"The recent series of bids and counter bids make it clear this
has become an auction in all but name -- the very process that
Mr. Seidenberg said Verizon would not be drawn into. Given
this fact, we urge the MCI Board to cease its favoritism, stop
attempting to tilt the regulatory playing field and run a fair,
transparent, complete and timely sales process. Only such an
auction is consistent with the MCI Board's execution of its
fiduciary responsibilities and in the best interests of all
involved.
"On Tuesday, March 29, after several weeks of discussions, Mr.
Capellas informed us that the MCI Board did not require any
additional information or discussions regarding its ability to
evaluate Qwest and that they had received all of the
information they needed. In addition, Qwest informed Mr.
Capellas that it had completed its due diligence process.
Therefore, it is questionable what additional information the
MCI Board would require at this time.
"In a dubious example of corporate governance, the Board of MCI
has ceded its ability to terminate its agreement with Verizon
for a Superior Proposal, a concession that is inconsistent with
its obligation to maximize value for MCI shareholders. In
fact, they now no longer have the right to negotiate and
conclude a value creative transaction on behalf of their
owners. We believe our latest offer of $27.50 per share is
clearly superior, and we have provided a significant amount of
detail surrounding it. Therefore the MCI Board should now
declare that our offer is superior.
"Based on [Fri]day's press reports, we note with interest that
some of MCI's largest shareholders consider our offer to be
superior. We believe that any attempt to deny shareholders the
value we are offering would be a dereliction of fiduciary duty
on the part of the MCI's Board.
"We fully expect the MCI Board to notify us of its decision by
April 5."
About MCI
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc.
About Qwest
Qwest Communications International Inc. (NYSE:Q) --
http://www.qwest.com/-- is a leading provider of voice, video and
data services. With more than 40,000 employees, Qwest is
committed to the "Spirit of Service" and providing world-class
services that exceed customers' expectations for quality, value
and reliability.
At Dec. 31, 2004, Qwest Communications' balance sheet showed a
$2,612,000,000 stockholders' deficit, compared to a $1,016,000,000
deficit at Dec. 31, 2003.
* * *
As reported in the Troubled Company Reporter on March 1, 2005,
Standard & Poor's Ratings Services placed its ratings on Denver,
Co.-based diversified telecommunications carrier Qwest
Communications International, Inc., and subsidiaries, including
the 'BB-' corporate credit rating, on CreditWatch with negative
implications. This follows the company's counter bid to Verizon
Communications, Inc., for long-distance carrier MCI, Inc., for
$3 billion in cash and $5 billion in stock. MCI also has about
$6 billion of debt outstanding.
The ratings on MCI, including the 'B+' corporate credit rating,
remain on CreditWatch with positive implications, where they were
placed Feb. 14, 2005 following Verizon's announced agreement to
acquire the company. The positive CreditWatch listing for the MCI
ratings reflects the company's potential acquisition by either
Verizon or Qwest, both of which are more creditworthy entities.
However, the positive CreditWatch listing of the 'B+' rating on
MCI's senior unsecured debt assumes no change to the current MCI
corporate and capital structure under an assumed acquisition by
Qwest, such that this debt would become structurally junior to
other material obligations.
"The negative CreditWatch listing of the Qwest ratings reflects
the higher business risk at MCI if its bid is ultimately
successful," explained Standard & Poor's credit analyst Catherine
Cosentino. As a long-distance carrier, MCI is facing ongoing
stiff competition from other carriers, especially AT&T Corp.
Moreover, MCI is considered to be competitively disadvantaged
relative to AT&T in terms of its materially smaller presence in
the enterprise segment and fewer local points of presence -- POPs.
The latter, in particular, results in higher access costs relative
to AT&T. Qwest also faces the challenge of integrating and
strengthening MCI's operations while improving its own
underperforming, net free cash flow negative long-distance
business. These issues overshadow the positive aspects of Qwest's
incumbent local exchange carrier business that were encompassed in
the former developing outlook.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Moody's Investors Service has placed the long-term ratings of MCI,
Inc., on review for possible upgrade based on Verizon's plan to
acquire MCI for about $8.9 billion in cash, stock and assumed
debt.
These MCI ratings were placed on review for possible upgrade:
* B2 Senior Implied
* B2 Senior Unsecured Rating
* B3 Issuer rating
Moody's also affirmed MCI's speculative grade liquidity rating at
SGL-1, as near term, MCI's liquidity profile is unchanged.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
As reported in the Troubled Company Reporter on Feb. 16, 2005,
Fitch Ratings has placed the 'A+' rating on Verizon Global
Funding's outstanding long-term debt securities on Rating Watch
Negative, and the 'B' senior unsecured debt rating of MCI, Inc.,
on Rating Watch Positive following the announcement that Verizon
Communications will acquire MCI for approximately $4.8 billion in
common stock and $488 million in cash.
SALT CREEK: Fitch Rates $500,000 Class B-5$L Notes at BB-
---------------------------------------------------------
Fitch Ratings assigns ratings to Salt Creek High Yield CSO I, Ltd.
2005-1:
-- U.S. $99,000,000 class A-1$L notes, due Sept. 20, 2010
rated 'AAA';
-- U.S. $20,000,000 class A-2$L notes, due Sept. 20, 2010
'AA+';
-- U.S. $1,000,000 class A-6$L notes, due Sept. 20, 2010 'A';
-- U.S. $40,000,000 class A-7$L notes, due Sept. 20, 2010 'A-';
-- U.S. $10,000,000 class B-2$L notes, due Sept. 20, 2010
'BBB';
-- U.S. $500,000 class B-5$L notes, due Sept. 20, 2010 'BB-';
-- JPY 1,000,000,000 class A-3YL notes, due Sept. 20, 2010
'AA'.
The transaction is a synthetic collateralized swap obligation
giving investors leveraged access to the credit risk of a diverse
portfolio of credit default swaps comprised of 80 high yield,
corporate reference entities. Salt Creek HY CSO gains access to
the credit risk of the portfolio via a credit default swap between
Salt Creek HY CSO and Bear Stearns Credit Products Inc., as swap
counterparty. This trade has a scheduled maturity date of Sept.
20, 2010. The rating of the notes addresses the likelihood that
investors will receive full and timely payments of interest and
ultimate receipt of principal by the scheduled maturity date.
Salt Creek HY CSO provides protection to the swap counterparty via
a credit default swap that is collateralized with the issuance
proceeds of the notes. The proceeds of U.S. $ notes are invested
in an 'AAA' collateralized GIC and the proceeds of the Yen notes
are invested in 'AAA' rated collateral.
Salt Creek HY CSO pays the swap counterparty for any losses due to
credit events experienced in the portfolio above the first loss
amount for each class up to the balance on the notes by
liquidating collateral. Trading gains or losses from substituting
reference entities in and out of the portfolio will increase or
decrease the portfolio's aggregate loss amount.
The ratings are based upon the structure of the issuer, the
financial strength of Bear Stearns (rated 'F1+/A+' by Fitch), as
the swap provider, and the investment manager capabilities of TCW
Asset Management Company, as the portfolio manager.
Fitch will monitor the performance of this transaction. Deal
information and historical data on Salt Creek HY CSO is available
on the Fitch Ratings web site at http://www.fitchratings.com/
SEARS HOLDINGS: Discloses Cash & Stock Elections Results
--------------------------------------------------------
Sears Holdings Corporation (Nasdaq: SHLD), the major new retail
company resulting from the merger of Kmart Holding Corporation and
Sears, Roebuck and Co., has been informed by EquiServe Trust
Company, N.A., the exchange agent in connection with the merger,
that final results of the cash and stock elections by Sears,
Roebuck and Co. shareholders are as follows:
Cash Elections: Valid elections to receive $50 in cash for
each share of Sears, Roebuck common stock
were made with respect to 7,382,118 shares
of Sears, Roebuck common stock;
Stock Elections: Valid elections to receive 0.5 of a share
of Sears Holdings common stock for each
share of Sears common stock were made with
respect to 197,655,072 shares of Sears,
Roebuck common stock; and
Non-Elections: No election was made with respect to
21,185,749 shares of Sears, Roebuck stock.
These elections were subject to proration calculations so that, in
the aggregate, 55 percent of the Sears, Roebuck shares outstanding
as of the closing on March 24, 2005 were converted into the right
to receive 0.5 of a share of Sears Holdings common stock per share
and 45 percent were converted into the right to receive $50 in
cash per share. Based on these final results of the elections,
the merger consideration to be paid to Sears shareholders is as
follows:
Cash Elections: Sears, Roebuck shareholders who validly
elected cash will receive $50 for each
Sears, Roebuck share with respect to which
that election was made;
Stock Elections: Sears, Roebuck shareholders who validly
elected to receive Sears Holdings stock
will receive 0.5 of a share of Sears
Holdings common stock for approximately
62.95 percent of their shares and $50 in
cash for approximately 37.05 percent of
their shares with respect to which that
election was made; and
Non-Elections: Sears, Roebuck shareholders who did not
make a valid election will receive $50 in
cash for each of their Sears, Roebuck
shares.
Pursuant to the Agreement and Plan of Merger dated as of Nov. 16,
2004, by and among Sears Holdings, Kmart, Sears, Roebuck, Kmart
Acquisition Corp. and Sears Acquisition Corp., fractional shares
of Sears Holdings will not be issued. In lieu thereof,
shareholders will receive cash based on the closing Kmart stock
price of $124.83 on March 23, 2005.
Kmart shareholders received one share of Sears Holdings common
stock for each Kmart share.
In connection with the consummation of the merger, approximately
157.4 million shares of Sears Holdings common stock are being
issued to former Sears, Roebuck and Kmart shareholders and
approximately $5.1 billion in cash is being paid to former Sears,
Roebuck shareholders.
Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART
Holding Corporation) -- http://www.bluelight.com/-- operates
approximately 2,114 stores, primarily under the Big Kmart or Kmart
Supercenter format, in all 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam. The Company filed for chapter 11
protection on January 22, 2002 (Bankr. N.D. Ill. Case No.
02-02474). Kmart emerged from chapter 11 protection on May 6,
2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, LLP, represented the retailer in its restructuring
efforts. The Company's balance sheet showed $16,287,000,000 in
assets and $10,348,000,000 in debts when it sought chapter 11
protection. Kmart bought Sears, Roebuck & Co., for $11 billion to
create the third-largest U.S. retailer, behind Wal-Mart and
Target, and generate $55 billion in annual revenues. The
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act expired on Jan. 27, without complaint by the Department of
Justice. (Kmart Bankruptcy News, Issue No. 92; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
SR TELECOM: Incurs $86.1 Million Net Loss in 2004
-------------------------------------------------
SR Telecom Inc. (TSX: SRX, NASDAQ: SRXA) reported its results for
the fourth quarter and fiscal year ended December 31, 2004.
"Despite the uncertainty associated with the refinancing issues we
are currently dealing with, and the circumstances that caused our
fourth quarter revenues to fall short of our original forecasts,
we remain encouraged by the business opportunities we see with
both new and longstanding customers, and by the interest being
generated by our products, particularly the WiMAX-ready
symmetry(TM) platform," said Pierre St-Arnaud, SR Telecom's
President and Chief Executive Officer. "Further, in spite of
disappointing results in the fourth quarter, we have exceeded the
objectives of our restructuring initiative by reducing our
operating costs by more than one-third on an annualized basis."
Consolidated Fourth Quarter Results
Consolidated revenues for the fourth quarter of fiscal 2004
totaled $24.8 million, compared to $41.6 million in the fourth
quarter of fiscal 2003. The consolidated operating loss for the
fourth quarter of fiscal 2004 was $20.9 million, compared to an
operating loss of $12.8 million in the same period in 2003.
The consolidated net loss for the fourth quarter of 2004
was $41.9 million, compared to a consolidated net loss of
$14.2 million in the corresponding period in 2003.
"As we explained in January when we revised our guidance, delays
in receiving purchase orders from key customers, timing issues
related to the delivery of equipment, and the effect of reduced
supplier credit resulted in a decrease in overall sales volumes in
the fourth quarter of fiscal 2004," said Mr. St-Arnaud. "In turn,
our gross margins were also severely impacted by the decreased
sales volumes, under-absorbed overhead costs related to lower
manufacturing volumes, and variations in sales mix with increased
lower margin product sales."
Certain one-time events also had a substantial effect on the
Corporation's results.
Selling, general and administrative expenses in the core wireless
business segment decreased to $14.1 million for the fourth quarter
of 2004, compared to $18.8 million for the same period in 2003.
This decrease was primarily due to the effects of the
restructuring that were implemented in the second and third
quarters of 2004. However, the benefits of the restructuring were
partially offset by a provision of $1.9 million related to an
account receivable in the Middle East, by the effect of
eliminating the expected sub-lease revenue of $1.6 million on the
U.S. operating lease, and by a $0.9 million provision for an offer
of settlement of a litigation.
Research and development expenses in the core wireless business
increased from $6.6 million in the fourth quarter of 2003 to
$9.2 million in the fourth quarter of 2004. The increase is
solely due to a $4.2 million adjustment to the utilization of the
federal investment tax credits as management has determined that
there is insufficient evidence of reasonable assurance that this
amount will be realized within the remaining life of the
investment tax credits.
"Excluding the effect of the charges associated with the U.S.
operating lease, the federal investment tax credits and the
litigation settlement provision, our operating costs have been
reduced by approximately 35% on an annualized basis, which was the
stated goal of our restructuring initiative," said David Adams, SR
Telecom's Senior Vice-President, Finance and Chief Financial
Officer. "Further, since the beginning of January we have taken
further steps to align our costs with current levels of business
activity and have temporarily laid-off a total of 156 employees.
We expect that employees will be recalled as production returns to
customary levels."
During the fourth quarter of 2004 SR Telecom also determined that
an increase in the valuation allowance for future income tax
assets was appropriate, as a result of the continued losses and
the significant uncertainties surrounding the future prospects of
the Corporation.
Consequently, consolidated income tax expense was $21.9 million in
the fourth quarter of 2004 compared to an income tax expense of
$1.4 million in the corresponding quarter in 2003. In the
beginning of the third quarter of 2003, the Corporation ceased
recognizing additional tax loss carry-forward benefits.
Consolidated Fiscal 2004 Results
Consolidated revenues for fiscal 2004 totaled $123.9 million,
compared to $127.9 million reported in fiscal 2003. The
consolidated operating loss for fiscal 2004 was $65.8 million,
compared to an operating loss of $41.0 million for fiscal 2003.
For fiscal 2004, the consolidated net loss totaled $86.1 million,
compared to $44.8 million in the prior year.
Restructuring, asset impairment and other charges of $15.9 million
were recorded in fiscal 2004, compared to restructuring, asset
impairment and other charges of $3.7 million in fiscal 2003. The
restructuring charges were incurred in order to bring the
Corporation's cost structure in line with current and projected
revenue levels.
Core Wireless Solutions Segment
Fourth quarter revenues in SR Telecom's core wireless solutions
business were $20.5 million, compared to $38.0 million reported
during the same period last year. The net loss for the fourth
quarter of fiscal 2004 totaled $35.1 million, compared to
$12.2 million in the fourth quarter of fiscal 2003. For
fiscal 2004, wireless revenues were $105.4 million, compared to
$113.8 million in fiscal 2003, and the net loss in fiscal 2004
reached $77.1 million, compared to $42.3 million in fiscal 2003.
Largely due to the increase in the valuation allowance for future
income tax assets, the income tax expense was $13.4 million for
the fourth quarter of fiscal 2004, compared to an income tax
recovery of $128,000 in the corresponding quarter of fiscal 2003.
CTR Segment
For the fourth quarter of fiscal 2004, CTR's revenues increased to
$4.3 million, compared to $3.6 million in the same period last
year. For the 2004 fiscal year, revenues reached $18.6 million,
compared to $14.1 million in fiscal 2003. In peso terms, net
revenue increased in the fourth quarter by 372 million pesos to
2,098 million pesos. The improvement is partially attributable to
the increase in access tariffs approved by the Chilean regulator,
Subtel, which took effect on March 1, 2004, and to the deployment
of new lines in urban areas of Chile.
The operating loss for CTR totaled $120,000 in the fourth quarter
of fiscal 2004, compared to an operating loss of $2.4 million in
the same period last year. For the 2004 fiscal year, CTR's
operating loss totaled $86,000, compared to an operating loss of
$8.1 million in fiscal 2003. The net loss for the fourth quarter
of 2004 from CTR was $6.8 million compared to a net loss of
$2.0 million in the corresponding period in 2003. For fiscal
2004, CTR's net loss was $9.0 million, compared to $2.5 million in
fiscal 2003.
Largely due to the increase in the valuation allowance for future
income tax assets, the income tax expense for the fourth quarter
of fiscal 2004 was $8.5 million, compared to an income tax expense
of $1.6 million in the fourth quarter of fiscal 2003.
"We believe that CTR will be able to continue to realize positive
EBITDA, and we expect it will generate approximately $7 million of
EBITDA in fiscal 2005," said Mr. Adams.
Financial Position
SR Telecom's consolidated cash and short-term investment position,
including restricted cash, decreased to $6.4 million as at
December 31, 2004, compared to the $18.7 million reported at
December 31, 2003. The decrease in the outstanding cash balance
resulted from the repayment of outstanding debt in the amount of
$15.5 million in 2004 as well as the use of cash to fund
operations in excess of that generated from sales.
The Corporation has $71.0 million of debentures that mature on
April 22, 2005.
"At present, we do not have sufficient cash and cash equivalents,
short-term investments, and cash from operations going forward to
satisfy our cash requirements," said Mr. Adams. "Accordingly, the
Corporation will have to refinance or roll over all or part of its
existing debt on or prior to April 22, 2005. SR Telecom is
seeking to raise additional working capital in conjunction with
its plan to refinance its existing debt. However, if the
Corporation is unable to obtain additional working capital to fund
operations, its ability to continue as a going concern could be
significantly impacted and it may be obliged to seek protection
from its creditors."
Refinancing Initiative
"Genuity Capital Markets and the Corporation are currently engaged
in continuing discussions with a restricted group of debenture
holders as well as with a possible investor with respect to the
potential recapitalization of the Corporation," Mr. Adams stated.
"However, there can be no assurance that an agreement can be
reached with respect to the recapitalization or that such
recapitalization can be concluded on terms satisfactory to the
Corporation."
Recent Events
-- On March 21, 2005, SR Telecom announced that it had received
follow-on purchase orders for SR500(TM) valued at
approximately $4 million from Sonatel, the national
telecommunications provider in Senegal. Deliveries are
scheduled to commence in the second quarter of 2005.
-- On February 14, 2005, SR Telecom engaged Genuity Capital
Markets to act as financial advisor and investment banker to
assist the Corporation in its refinancing activities.
-- On February 14, 2005, SR Telecom announced it had reached an
agreement with the lenders of Comunicacion y Telefonia Rural
S.A. -- CTR, its service provider subsidiary in Chile.
Pursuant to the agreement, CTR's lenders have waived
compliance with certain financial and operational covenants
contained in CTR's loan documents to March 31, 2005.
Subsequently, on March 30, 2005, CTR's lenders agreed to
extend the waiver until April 22, 2005.
-- On January 26, 2005, SR Telecom announced it had taken steps
to reduce its costs in order to align them with the current
level of business activity and laid-off 127 employees on a
temporary basis. The Corporation expects to recall
employees as soon as production returns to normal volumes.
SR Telecom expects that its results for the first quarter of
fiscal 2005 will be impacted by a reduction in the
availability of supplier credit, which has slowed raw
material purchases and production.
-- On January 26, 2005, SR Telecom announced follow-on orders
for an additional 15 angel(TM) base stations from Siemens
for the ongoing Telefonica TRAC project. Telefonica, a
leading international telecommunications operator, selected
angel over a number of competing technologies for an
extensive multi-service Broadband Fixed Wireless Access
network, which will ultimately see the deployment of
approximately 100,000 lines throughout Spain. The TRAC
initiative will deliver high quality voice and high-speed
data to suburban and rural areas throughout the country.
Deliveries of this current order were completed during the
first quarter of fiscal 2005.
-- On January 26, 2005, SR Telecom announced that its
airstar(TM) product was selected by Teleunit S.P.A, a major
Italian telecommunications operator, for the deployment of
its Broadband Fixed Wireless Access network in the Tuscany
region. The total value of the current phase of this
project, which marks the first extension of Teleunit's
initial roll-out of airstar systems, is approximately
$1.2 million. Further expansions of the WLL infrastructure
in the Tuscany and Marche regions of Central Italy are
expected to take place throughout 2005.
-- On January 19, 2005, SR Telecom received new orders valued
at approximately $1 million from PT Aplikanusa Lintasarta,
the largest data and corporate network communications
provider in Indonesia. These add-on orders are for a
project initiated in September 2003. Lintasarta has
selected the airstar wireless broadband solution to provide
ATM, frame relay and clear channel services to its customers
in the Java, Kalmantan and Sulawesi regions of Indonesia.
With these orders, Lintasarta will add airstar base stations
and Customer Premises Equipment to its growing network of
airstar systems. Deliveries have commenced.
-- On January 19, 2005, SR Telecom announced the receipt of
purchase orders valued at approximately $10 million from a
major telecommunications operator in Latin America. These
orders are part of a previously announced frame contract
under which the operator selected SR500 family of fixed
wireless access systems. Deliveries are scheduled to take
place in the first half of 2005.
-- On December 21, 2004, SR Telecom announced that its symmetry
Broadband Fixed Wireless Access system was selected by
Telecom Fiji Limited, the national service provider in Fiji,
as part of a commercial initiative to bring voice and
broadband access services to certain areas of the country.
Deliveries have commenced.
-- On December 16, 2004, SR Telecom received new orders valued
at approximately $7 million for its swing(TM) fixed wireless
access system product from ONATEL (Office Nationale des
Telecommunications), a national exchange carrier in Burkina
Faso for an urban telecommunication development project.
This is the third phase of a network expansion project that
was initiated in 2003. Deliveries have commenced.
-- On December 14, 2004, SR Telecom received follow-on orders
from a leading South American telecommunication service
provider for its airstar Broadband Fixed Wireless Access
system. The orders are part of a previously announced
agreement that extends over three years and is valued at
approximately US$20 million. To date, SR Telecom has
received orders totaling approximately US$2.6 million.
-- On December 13, 2004, SR Telecom announced an agreement with
Telstra, Australia's leading telecommunications and
information service provider, which confirms SR Telecom's
key supplier relationship with Telstra. As part of the
agreement SR Telecom will provide maintenance and support
services for Telstra's extensive network of swing fixed
wireless access systems. The initial maintenance and
support period extends until July 2007 and is valued at
approximately $10 million.
-- On November 22, 2004, SR Telecom announced that its symmetry
Broadband Fixed Wireless Access platform was selected by
Telmex Argentina for a broadband data and voice network
across Argentina. This is the first contract win for
symmetry. Deliveries have commenced.
-- On November 3, 2004, SR Telecom launched the industry's
first OFDMA-based WiMAX-ready platform, symmetry. An
evolution of SR Telecom's proven angel product technology,
symmetry encompasses the key technologies outlined in the
latest draft of the 802.16e standard, including OFDMA,
diversity, and space-time coding. Additionally, it can be
immediately deployed to deliver carrier-class voice and
broadband data services.
Outlook
"Given the uncertainty generated by our current financial
situation, we are not in a position to provide guidance for fiscal
2005. However, we remain optimistic about our long-term
opportunities in the broadband fixed wireless access marketplace,
and our ability to provide WiMAX-certified solutions to that
marketplace," Mr. St-Arnaud said.
SR TELECOM (TSX: SRX, Nasdaq: SRXA) designs, manufactures and
deploys versatile, Broadband Fixed Wireless Access solutions. For
over two decades, carriers have used SR Telecom's products to
provide field-proven data and carrier-class voice services to end-
users in both urban and remote areas around the globe. SR
Telecom's products have helped to connect millions of people
throughout the world.
A pioneer in the industry, SR Telecom works closely with carriers
to ensure that its broadband wireless access solutions directly
respond to evolving customer needs. Its turnkey solutions include
equipment, network planning, project management, installation and
maintenance.
SR Telecom is a principal member of WiMAX Forum, a cooperative
industry initiative, which promotes the deployment of broadband
wireless access networks by using a global standard and certifying
interoperability of products and technologies.
* * *
As reported in the Troubled Company Reporter on Jan. 24, 2005,
Standard & Poor's Ratings Services lowered its corporate credit
rating on wireless communications equipment provider, SR Telecom,
Inc., to 'CC' from 'CCC'. At the same time, the senior unsecured
debt rating on the company's C$71 million debentures due April 22,
2005, was lowered to 'CC' from 'CCC'. In addition, the ratings
were placed on CreditWatch with negative implications. A 'CC'
rating indicates that the company's obligations are currently
highly vulnerable to nonpayment. The ratings actions and
CreditWatch placement follow the Montreal, Quebec-based company's
announcement concerning its refinancing efforts as well
as revised financial guidance.
STELCO INC: Appellate Ct. Reinstates Keiper & Woollcombe to Board
-----------------------------------------------------------------
The Ontario Court of Appeal overturned the Ontario Superior Court
of Justice's ruling that removed Messrs. Roland Keiper and Michael
Woollcombe from Stelco Inc.'s (TSX:STE) Board of Directors.
Richard Drouin, Stelco's Chairman of the Board, said, "We are
pleased that the Court of Appeal has unanimously confirmed the
original decision of the Board of Directors. We welcome Messrs.
Keiper and Woollcombe back to the Board and look forward to their
positive contribution as we work to achieve the goal of a viable
and competitive Stelco."
"Like all of Stelco's directors, we look forward to achieving a
balanced restructuring that fairly takes into account the
interests of all stakeholders, including current and former
employees, creditors and suppliers, the Province of Ontario and
other communities in which Stelco operates and shareholders," said
Messrs. Keiper and Woollcombe.
"The Board, management and the advisors will continue to pursue
the successful completion of our Court-supervised restructuring in
the interests of all our stakeholders," said Mr. Drouin.
Steelworkers Union Comments
United Steelworker representatives said that Thursday's decision
by the Ontario Court of Appeal to reinstate two shareholder
representatives to Stelco's Board of Directors does not change one
bit the fact that the company and its board must deal responsibly
with workers and retirees.
Local 8782 President Bill Ferguson said, "As we have said from the
beginning, our goal and what should be the goal of all
stakeholders, is to make Stelco a viable long-term company that
honours its promises to its workers, retirees and communities. We
will work with anyone who respects our principles but we will not
allow our members and retirees to be treated as second class in
this process."
Stelco, Inc. -- http://www.stelco.ca/-- which is currently
undergoing CCAA restructuring proceedings, is a large, diversified
steel producer. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses.
STELCO INC: Globe and Mail Says Mittal Steel's Kicking the Tires
----------------------------------------------------------------
Greg Keenan at the Globe and Mail reports that Mittal Steel Co. NV
is interested in buying some of the non-core subsidiaries that
Stelco Inc. wanted to sell and then took off the market
temporarily while negotiations with the United Steelworkers of
America proceeded. Mr. Keenan cites people familiar with the
talks as his source. Mr. Keenan says his sources wouldn't
identify which of the four Stelco units Mittal is interested in
buying or whether it might purchase all of them.
Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified
steel producer. Stelco sought protection under the CCAA in
January 2004. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses.
SUNSET PARK: Moody's Assigns Ba3 Rating to $3 Mil. Class E Notes
----------------------------------------------------------------
Moody's Investors Service announced that it has assigned these
ratings to the notes issued by Sunset Park CDO-M Limited SPC:
* Aaa to U.S. $24,000,000 Class A Floating Rate Notes;
* Aa3 to U.S. $5,000,000 Class B-1 Floating Rate Notes;
* Aa3 to U.S. $1,000,000 Class B-2 Fixed Rate Notes;
* A3 to U.S.$10,000,000 Class C-1 Floating Rate Notes;
* A3 to U.S.$1,000,000 Class C-2 Fixed Rate Notes;
* Baa3 to U.S. $49,000,000 Class D-1 Floating Rate Notes;
* Baa3 to U.S.$5,000,000 Class D-2 Fixed Rate Notes; and
* Ba3 to U.S. $3,000,000 Class E Fixed Rate Notes.
The Notes have a legal final maturity date of December 20, 2009.
This transaction is a synthetic collateralized debt obligation
transaction in which Lehman Brothers will act as sponsor of the
transaction and Lehman Brothers Special Financing Inc. is the
credit default swap counterparty.
According to Moody's, the ratings of the Notes address the
ultimate cash receipt of all required interest and principal
payments as provided for by the governing documents, and are based
on the expected losses posed to investors relative to the promise
of receiving the present value of such payments. In addition,
Moody's notes that the ratings of all the Notes are linked to the
ratings of Ambac Assurance Corporation, which is guaranteeing the
obligations of Ambac Capital Funding, Inc. as issuer of the
investment agreement, LBSF as credit swap counterparty, the
reference entities under the swaps, and the permitted investments.
TCT TECHNICAL: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: TCT Technical Training, Inc.
740 S. Hillview Drive
Milpitas, California 95035
Bankruptcy Case No.: 05-51815
Type of Business: The Debtor provides advanced technical training
to some of the world's leading companies, as
well as progressive small and medium-sized
companies. See http://www.tcttech.com/
Chapter 11 Petition Date: March 30, 2005
Court: Northern District of California
Judge: James R. Grube
Debtor's Counsel: Charles E. Logan, Esq.
Law Offices of Charles E. Logan
95 S Market Street #660
San Jose, California 95113
Tel: (408) 995-0256
Total Assets: $539,519
Total Debts: $1,886,883
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Internal Revenue Service Taxes for 2003 $215,000
Special Procedure Branch
PO Box 99
San Jose, CA 95103
Ben 1-VEF 111,LLC Judgement $195,979
3340 Peachtree Road, NE
Power PLace 100-Suite 1660
Atlanta, GA 30326
Wells Fargo Master Card Credit card $101,449
34988 Newark Blvd. purchases
Newark, CA 64560
Hopkins & Carley Legal Services $47,738
Employment Development $13,400
Department
Paul Lightfoot Commissions $11,507
George Lee Commissions $5,040
Dante Aguinaldo Wages or Salary $4,925
Sonya Jimenez Wages or Salary $4,925
Dan Knapp Wages or Salary $4,925
Paul Lightfoot Wages or Salary $4,925
Pitney Bowes Trade Debt $4,870
Dante Aguinaldo Wages or Salary $4,117
Dan Knapp Wages or Salary $2,950
Paul Lightfoot Wages or Salary $2,225
Purush Aluri Wages or Salary $2,212
Tania Thaddeaus Wages or Salary $1,675
Sonya Jimenez Wages or Salary $883
TIMKEN CO: Moody's Affirms Sr. Implied & Sr. Unsec. Ba1 Ratings
---------------------------------------------------------------
Moody's Investors Service has affirmed The Timken Corporation's
Ba1 senior implied and senior unsecured ratings and changed the
ratings outlook to stable from negative. The change in the
outlook is based on the company's improved operating performance
and positive effect on financial metrics, the success in achieved
integration related synergies from the Torrington acquisition, and
a more favorable outlook for the company's industrial and steel
segments over the near and intermediate term.
Moody's Ba1 ratings reflect:
* Timken's market position as a leading manufacturer of roller
and needle bearings;
* its well-regarded reputation; and
* its long history of having endured several industrial cycles.
However, the Ba1 ratings incorporate Moody's concern over:
* continued pressure on the company's cost structure and
working capital needs due high input costs for scrap metal
and natural gas;
* continued market share erosion and weak operating performance
of North American automakers; and
* significant, ongoing pension benefit expenses associated with
a substantial under-funded pension liability.
The stable outlook is predicated on Moody's expectation the
company will decrease its reliance on a poorly-performing North
American auto manufacturing sector relative to the more robust
performance of the Industrial Segment and the portion of the Steel
Segment that is not dependent on North American automotive, such
that the next economic cycle will not have as severe an impact on
operating performance as the last one. Moody's anticipates this
will enable the company to continue to generate substantial levels
of retained cash flow, even during economic cycles, and maintain
an average of 20% retained cash flow-to-adjusted total debt
(adjusted to include under-funded pension liabilities and
guaranteed debt).
The stable outlook is also based on Moody's estimation that
adjusted free cash flow will double from approximately $50 million
in 2004 to more than $100 million in 2005. Moody's adjusts free
cash flow (defined as cash from operations less capital
expenditures and dividends) to neutralize the positive effect of
Continued Dumping and Subsidy Offset Act payments ("CDSOA" tariffs
collected on unfairly priced imports are directed to the
industries harmed) and the negative effect of voluntary pension
contributions, those above and beyond the company's regular
pension benefit expense.
In addition, Moody's expects average EBIT margins will be above
7%, average operating working capital-to-total sales will remain
below 23%, and EBIT interest coverage above 5.0x. Given the
company's operating performance volatility as a result of the
economic cycle, as was evidenced by a considerable deterioration
in credit metrics during the challenging economic environment from
2001-2003 and improvement during 2004 and so far in 2005, Moody's
believes the stable outlook will tolerate, for any given year,
some deviation from the average credit metrics stated above.
Downward ratings pressure could occur if the company is unable to
maintain average credit metrics consistent with those listed above
for the stable outlook listed above, giving effect to cyclical
operating performance volatility and the company's prospects for
recovering higher input costs through high prices and planned
surcharges in 2005 and 2006. Longer-term, downward pressure could
occur should Timken's market share erode due to increased imported
product purchased by its domestic end-use customers, or as in the
case of automotive, should North American auto manufacturers
continue to lose market share to foreign transplants. Conversely,
upward pressure on the ratings could occur if Timken's average
retained cash flow- and free cash flow-to-adjusted total debt were
to improve to 25% and 10%, respectively, EBIT margins near to 10%,
and average working capital to total sales around 20% or lower.
While Timken's internal sources of liquidity were constrained in
2004 by rising input costs, high cash pension payments, and
continued capital investment, Moody's expects the company will
generate at least $100 million in free cash flow in 2005,
irrespective of any potential CDSOA payments and excluding a
significant portion of approximately $135 million in expected
pension contributions.
In addition, the company has sufficient alternate sources of
liquidity with $419 million of availability under its senior
unsecured $500 million revolving credit facility due 2007.
The company is in compliance with all three financial covenants
with plenty of headroom to access full availability. Another
short-term, alternate source of liquidity in the first half of the
year is an on-balance sheet, $125 million accounts receivable
securitization facility that is used to fund working capital.
However, given the securitization funding vehicle issues
commercial paper in the short-term market, outstanding amounts
under this program are paid down in the 4th quarter.
The Timken Company is one of the world's largest manufacturers of
tapered roller bearings, needle bearings and high alloy specialty
steels. Headquartered in Canton, Ohio, Timken's 2004 revenue was
more than $4.5 billion.
TOWER AUTOMOTIVE: Committee Wants to Retain Akin Gump as Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of Tower Automotive,
Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for
the Southern District of New York for authority to retain Akin
Gump Strauss Hauer & Feld LLP as its counsel.
Specifically, Akin Gump will:
(a) advise the Committee with respect to its rights, duties
and powers in the Debtors' Chapter 11 cases;
(b) assist and advise the Committee in its consultations with
the Debtors relative to the administration of their cases;
(c) assist the Committee in analyzing the claims of the
Debtors' creditors and the Debtors' capital structure and
in negotiating with holders of claims and equity
interests;
(d) assist the Committee in its investigation of the acts,
conduct, assets, liabilities and financial condition of
the Debtors and of the operation of their businesses;
(e) assist the Committee in its analysis of, and negotiations
with, the Debtors or any third party concerning matters
related to, among other things, the assumption or
rejection of certain leases of non-residential real
property and executory contracts, asset dispositions,
financing of other transactions and the terms of one or
more plans of reorganization for the Debtors and
accompanying disclosure statements and related plan
documents;
(f) assist and advise the Committee as to its communications
to the general creditor body regarding significant matters
in the Debtors' cases;
(g) represent the Committee at all hearings and other
proceedings;
(h) review and analyze applications, orders, statements of
operations and schedules filed with the Court and advise
the Committee as to their propriety, including grounds for
support, joining or objections;
(i) advise and assist the Committee with respect to any
legislative or governmental activities, including, if
requested by the Committee, performing lobbying activities
on the Committee's behalf;
(j) assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives;
(k) prepare, on the Committee's behalf, any pleadings,
including without limitation, motions, memoranda,
complaints, adversary complaints, objections or comments
in connection with those pleadings;
(l) investigate and analyze any claims against the Debtors'
non-debtor affiliates; and
(m) perform other legal services as may be required by the
Committee in accordance with its powers and duties under
the Bankruptcy Code, Bankruptcy Rules or other applicable
law.
Ira S. Dizengoff, Esq., a partner at Akin Gump, relates that,
prior to the Petition Date, an ad hoc committee of certain
unaffiliated holders of the 12% Senior Notes due 2013 and the
9.25% Senior Euro Notes due 2010 issued by RJ Tower Corporation
was formed. As the Ad Hoc Committee's counsel, Akin Gump
reviewed and negotiated the terms of the Debtors' postpetition
financing and other first-day applications and requests and
appeared at first day hearings. The firm's services were
terminated after the United States Trustee appointed the Official
Committee on February 14, 2005.
The Committee believes that the firm possesses extensive knowledge
and expertise in the areas of law relevant to the Debtors' cases,
and is well qualified to represent the Committee in the Debtors'
cases.
Akin Gump's hourly rates for its services are:
Partners $475 - $795
Special Counsel and Counsel $385 - $735
Associates $230 - $450
Paraprofessionals $65 - $195
The firm intends to file an application for allowance of:
-- an enhanced fee award at the end of the Debtors' cases,
subject to the Committee's discretion, and
-- the fees and expenses incurred for services rendered to
the Ad Hoc Committee during the Pre-Committee Period
pursuant to Section 503(b) of the Bankruptcy Code at a
future date.
In addition, the Committee asks the Court to grant administrative
priority status for all fees and related costs and expenses
incurred by the Committee on account of services rendered by Akin
Gump in the Debtors' cases.
Mr. Dizengoff assures the Court that Akin Gump does not represent
nor hold any interest adverse to the Debtors' estates or their
creditors. "However, Akin Gump is a large firm with a national
and international practice, and may represent or may have
represented certain of the Debtors' creditors, equity holders,
affiliates or other [parties-in-interest] in matters unrelated to
these cases," Mr. Dizengoff says.
Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc.
-- http://www.towerautomotive.com/-- is a global designer and
producer of vehicle structural components and assemblies used by
every major automotive original equipment manufacturer, including
BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures
and assemblies, lower vehicle frames and structures, chassis
modules and systems, and suspension components. The Company and
25 of its debtor-affiliates filed voluntary chapter 11 petitions
on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through
05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq.,
Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet,
Esq., at Kirkland & Ellis, LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $787,948,000 in total assets and
$1,306,949,000 in total debts. (Tower Automotive Bankruptcy News,
Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000)
TRESTLE HOLDINGS: Auditors Express Going Concern Doubt
------------------------------------------------------
Trestle Holdings Inc. (OTC BB: TLHO), a supplier of digital
imaging products and solutions for pathology and telemedicine
applications, reported financial results for the quarter and year
ended December 31, 2004.
Revenues for the quarter ending December 2004 were $1.283 million,
an increase of 18% over $1.083 million in revenues for the same
quarter of 2003. The growth in sales resulted from new and
follow-on sales of the company's MedMicro(TM) family of digital
imaging products, partially offset by a decrease in support
revenues and sales of its MedReach(TM) telemedicine product which
the company has not been actively marketing. Overall product
sales increased by $341,000 or 40% over the prior year while
support revenues declined $141,000 or 63%. Gross profit for the
fourth quarter of 2004 was $614,000, compared to gross profit of
$821,000 for the comparable quarter of 2003. This decrease is the
result of a shift in revenue from higher margin support revenue to
lower margin product sales.
Operating expenses for the fourth quarter of 2004 were $1.672
million compared to $2.458 million for the fourth quarter of 2003.
Fourth quarter 2004 operating expenses consisted of $384,000 of
research and development expense and $1.289 million of selling,
general and administrative expense, compared to $613,000 of
research and development expense and $1.845 million of selling,
general and administrative expense for the fourth quarter of 2003.
Interest income and other, net, was $65,000 for the fourth quarter
of 2004 compared to $15,000 for the fourth quarter 2003. Net loss
for the fourth quarter 2004 was $998,000, or $0.19 per share, an
improvement over the same period for the prior year of loss of
$1.583 million, or $0.52 per share.
For the year ended December 31, 2004, revenues were $4.807 million
and gross profit was $2.564 million. Operating expenses for the
year were $7.752 million including $1.846 million in research and
development expense and $5.906 million in general and
administrative expenses. Interest income and other, net, for the
period was $123,000. Net loss for 2004 was $5.065 million, or
$1.24 per share.
Going Concern Doubt
The company's independent Certified Public accountants have
included a going concern qualification in its report covering the
company's financial statements. The qualification was based on
the cash balances of the company and its history of losses. The
company believes it has sufficient cash to fund operations through
December 31, 2005. In May 2003, as part of a corporate
reorganization, the company acquired the assets of Trestle
Corporation, a supplier of digital imaging and telemedicine
products. During the third quarter of 2003, completing its
reorganization, the company sold its remaining film library assets
and changed its name to Trestle Holdings, Inc. As a result of the
foregoing transactions comparisons to prior years are not
representative of Trestle's ongoing business.
Commenting on the results of the quarter, Maurizio Vecchione,
chief executive officer of Trestle Holdings Inc., said, "When
comparing the fourth quarter 2003 to the fourth quarter 2004 our
digital imaging product revenue grew by more than 50%. We believe
that this may indicate greater acceptance in the market for this
type of technology. Our challenge and opportunity going forward
will be to leverage this growing installed base into utilization
of our imaging and data-mining services."
About Trestle Holdings Inc.
Trestle Holdings Inc. develops and sells digital imaging and
telemedicine applications to the life sciences markets. The
company's products link dispersed users with each other,
information databases, and analytical tools. This improved
integration drives cost savings and process efficiencies, enables
improved pre-clinical and clinical phases of research and
development for new drugs, and enhances patient care.
UNIVERSAL ACCESS: Vanco Direct to Buy Assets for $13 Million
------------------------------------------------------------
Universal Access Global Holdings Inc. (OTC: UAXSQ) and its four US
subsidiaries operating under Chapter 11 bankruptcy protection
ask the U.S. Bankruptcy Court for the Northern District of
Illinois to approve an Asset Purchase Agreement with Vanco Direct
USA, LLC. Vanco proposes to buy substantially all of Universal
Access' assets for $13 million. The purchase price is subject to
adjustment if certain conditions are not met. The sale is subject
to higher and better offers from other bidders submitted in
accordance with bidding procedures to be approved by the Court,
and certain other closing conditions.
"We are pleased to have reached this important milestone in the
restructuring of Universal Access and welcome Vanco's interest in
our company," said Randy Lay, Chief Executive Officer of Universal
Access.
"With this contemplated acquisition, we expand relationships in
the US marketplace, and add significant value to our product and
service offerings," said Allen Timpany, Chief Executive Officer,
Vanco plc. "Universal Access has unique software tools and
capabilities that give us immediate information and access to the
US telecommunications market."
Because the sale of Universal Access' assets is subject to higher
and better offers, Vanco's offer is, in effect, the first bid in
an auction process. A motion to approve bidding procedures for
the auction was filed with the Court on March 25, 2005, and it is
anticipated that the Court will rule on the motion on April 15,
2005. Universal Access anticipates that the auction will take
place in mid-May 2005.
About Vanco plc
Established in 1988, Vanco plc (FTSE: VAN) is the leading global
Virtual Network Operator. With solutions available in 230
countries and territories, Vanco is selected by the world's
largest organisations to provide strategic network solutions. Its
customers include British Airways, Siemens, IBM/Lloyds TSB, Avis
Europe, Virgin Megastores, Ford Motor Company, Pilkington, Bacardi
and Smith & Nephew. Through the Vanco network solution customers
get access to the greatest geographic coverage available through a
single provider. Vanco offers incomparable flexibility to
customise and adapt the solution in line with market changes and
business priorities. Vanco is recognized by the industry for its
financial success and world class customer service delivery. A
significant proportion of its investment capital goes into
customer care which is reflected by the awards won, independent
market research and customer retention.
Headquartered in Chicago, Illinois, Universal Access Global
Holdings, Inc. -- http://www.universalaccess.com/-- provides
network infrastructure services and facilitates the buying and
selling of capacity on communications networks. The company, and
its debtor-affiliates, filed for a chapter 11 protection on
August 4, 2004 (Bankr. N.D. Ill. Case No. 04-28747). John Collen,
Esq., and Rosanne Ciambrone, Esq., at Duane Morris LLC, represent
the Company. David W. Wirt, Esq., and David Neier, Esq., at
Winston & Strawn, represent an Official Committee of Unsecured
Creditors. When the Debtor filed for protection from its
creditors, it listed $22,047,000 in total assets and $24,054,000
in total debts.
UNITED PRODUCERS: Files for Chapter 11 Protection in S.D. Ohio
--------------------------------------------------------------
United Producers and Producers Credit Corporation filed for
Chapter 11 protection in the United States Bankruptcy Court for
the Southern District of Ohio.
"We believe this step will help United Producers reorganize its
business and continue its long record of service to the farming
community for many years to come," said Dennis Bolling, President
and CEO. "We look forward to working with our customers in the
coming months as we take steps that will result in an even
stronger United Producers."
Starting today, April 4, United Producers will be conducting
livestock operations, and auctions as previous. United Producers
has reached an agreement with its bank to fund continuing
operations. Additionally, Producers Credit Corporation will
continue to conduct business as usual.
In 2004, United was found guilty of a cattle-brokering scam in two
separate federal law suits and was ordered to pay the plaintiffs a
total of $15 million dollars. According to Joe Danborn of the
Associated Press, the Columbus-based company closed 48 auction
houses, including 10 in Ohio, as it seeks to negotiate of more
than $15 million in legal settlements with farmers in several
states.
Civil legal proceedings resulting from the fraud case have played
a role in the Company's decision to seek protection under Chapter
11 of the United States Bankruptcy Code.
Headquartered in Columbus, Ohio, United Producers, Inc., offers
marketing, financing, and credit services to its member livestock
producers in the US corn belt, southeast, and midwest areas. The
Company and its debtor-affiliate filed for chapter 11 protection
on April 1, 2005 (Bankr. S.D. Ohio Case No. 05-55272). When the
Debtor filed for protection from its creditors, it estimated
between $10 million to $50 million in assets and debts. Randall
D. LaTour, Esq., at Vorys Sater Seymour and Pease represents the
Debtor in its restructuring efforts.
UNITED PRODUCERS: Case Summary & 25 Largest Unsecured Creditors
---------------------------------------------------------------
Lead Debtor: United Producers, Inc.
5909 Cleveland Avenue
P.O. Box 29800
Columbus, OH 43229
Bankruptcy Case No.: 05-55272
Debtor-affiliate filing separate chapter 11 petition:
Entity Case No.
------ --------
Producers Credit Corporation 05-55273
Type of Business: The Debtor offers marketing, financing, and
credit services to its member livestock
producers in the US corn belt, southeast, and
midwest areas.
See: http://www.uproducers.com/
Chapter 11 Petition Date: April 1, 2005
Court: Southern District of Ohio (Columbus)
Judge: Charles M Caldwell
Debtors' Counsel: Randall D. LaTour, Esq.
Vorys Sater Seymour and Pease
52 East Gay Street
P.O. Box 1008
Columbus, OH 43216
Tel: (614) 464-8290
Fax: (614) 719-4821
Total Assets: $10 Million to $50 Million
Total Debts: $10 Million to $50 Million
A. United Producers, Inc.'s 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
GE Cattle $17,062,431
Domina Law PC
2424 South 144th St.
Omaha, NE 68144
Curreys of Nebraska LLC $17,062,431
Domina Law PC
2424 South 144th Street
Omaha, NE 68144
Producers Livestock Corp. $1,237,039
Domina Law PC
2424 South 144th Street
Omaha, NE 68144
Rogers, Everett & Deborah $635,541
c/o Richard D. Rhyne - Lathrop
2345 Grand Blvd., Ste 2800
Kansas City, MO 64108
Harry Hayes $137,448
Domina Law PC
2424 South 144th St.
Omaha, NE 68144
Scholfield Veterinary Supply $2,657
P.O. Box 8232
Des Moines, IA 50301
Dell Commerical Credit $2,169
Dept 50-0059090269
P.O. Box 9020
Des Moines, IA 50368
United States Postal Service $2,000
USPA - Hasler
P.O. Box 0527
Carol Stream, IL 60132
Owen Electric Cooperative, Inc $1,994
P.O. Box 308
510 South Main Street
Florence, KY 41022
Hoffman Heating & Air $1,937
1791 East Johnson Lane
Vincennes, IN 47591
Lancaster Utilities Collection $1,786
104 East Main Street
P.O. Box 1099
Lancaster, Ohio 43130
Officemax Credit Plan $1,481
Dept. 58-3400616958
P.O. Box 9020
Des Moines, IA 50368
Stockton Animal Clinic $1,394
MFA Cattlement Auction Co.
14975 South Highway 39
Stockton, MO 65785
Sanders, Ed $1,350
4820 Mason Road
Fort Loramie, Ohio 45845
Rumbold Valley Farms, Inc. $1,132
Feed Division
411 North Chestnut Street
Kenwanee, IL 61443
Aquila $953
P.O. Box 219703
Kansas City, MO 64121
MFA Oil Company$ 850.95
1515 East First Street
Maryville, MO 64468
Geiler's Sunoco $846
101 West 1st Street
Kinmundy, IL 62854
Moore Wallace $813
P.O. Box 905046
Charlotte, NC 28290
American Electric Power $725
P.O. Box 24418
Canton, Ohio 44701
B. Producers Credit Corporation's 5 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Rogers, Everett & Deborah $365,541
c/o Richard D. Rhyne, Lathrop
2345 Grand Blvd., Suite 2800
Kansas City, MO 64108
Robbins, Joseph $1,500
Robbins Appraisal, Inc.
5200 Schott Road
Mayville, MI 48744
Bascom $143
Mutual Telephone Co.
P.O. Box 316
Bascom, OH 44809
Verizon Wireless $44
P.O. Box 790406
Saint Louis, MO 63179
OfficeMax Contract, Inc. $35
P.O. Box 360755
Pittsburgh, PA 15250
US AIRWAYS: Court Approves Investment Pact with Republic Airways
----------------------------------------------------------------
The Honorable Stephen S. Mitchell of the U.S. Bankruptcy Court for
the Eastern District of Virginia in Alexandria approved US Airways
Group, Inc.'s agreement with Republic Airways Holding, Inc., and
its majority shareholder, Wexford Capital LLC, on an equity and
financing package that includes a $125 million investment upon US
Airways' emergence from Chapter 11, in addition to options for
obtaining $110 million of other liquidity enhancements that would
be available prior to emergence to assist the airline in
completing its restructuring.
"The court's approval builds momentum toward the successful
implementation of our Plan of Reorganization and emergence from
Chapter 11," said Bruce R. Lakefield, US Airways president and
chief executive officer. "This agreement with Republic is another
important step in our efforts to raise sufficient capital to
remain a strong competitor in the marketplace."
The agreement is contingent on US Airways securing $350 million in
new cash investment (including the $125 million from Republic and
the $125 million previously secured from Eastshore Aviation, LLC)
to finance the US Airways Plan of Reorganization, and other
conditions. It also provides for representation on the US Airways
board of directors, and requires US Airways to amend and restate
its existing jet service agreement with Chautauqua, to assume that
agreement and to enter into a new jet service agreement with
Republic for regional jet feed using the Embraer 170 and 190
aircraft under the US Airways Express brand.
In addition, the agreement includes options for additional US
Airways financing subject to the consent and approval of the Air
Transportation Stabilization Board, including:
-- US Airways may exercise an option to obtain approximately
$110 million through the sale of certain assets, including
10 EMB-170 aircraft owned by US Airways;
-- three EMB-170 aircraft currently committed for delivery
to US Airways;
-- other EMB-170-related assets; 113 commuter slots at
Ronald Reagan Washington National Airport; and 24 commuter
slots at New York's LaGuardia airport.
-- US Airways would assign to Republic leases for an additional
15 EMB-170 aircraft, and would work with Republic to locate
an Embraer heavy maintenance facility at an agreed upon
location within the US Airways network. Republic would
enter into an RJ service agreement that would continue the
operation of the aircraft as US Airways Express. Republic
also would simultaneously lease back the Washington and
LaGuardia slots to US Airways. At any time on or after the
second anniversary of the slots sale/leaseback agreement, US
Airways would have the right to repurchase the slots at a
predetermined price.
-- After the effective date of US Airways' Chapter 11 Plan, if
US Airways does not exercise the slots sale/leaseback
option, Republic could purchase/assume debt and leases for
all 28 EMB-170 aircraft and to fly them as US Airways
Express. The net effect would be the sale of US Airways'
MidAtlantic aircraft to Republic. If either option is
exercised, Republic will comply with the applicable
provisions of all existing agreements with US Airways
regarding MidAtlantic. The aircraft would continue to fly
under the US Airways Express brand, operated by Republic.
Republic Airways Holdings, based in Indianapolis, Indiana is an
airline holding company that operates Chautauqua Airlines, Inc.,
and Republic Airlines Inc. Its principal operating subsidiary,
Chautauqua Airlines offers scheduled passenger service on more
than 700 flights daily to 76 cities in 32 states, Canada and the
Bahamas through code sharing agreements with four major U.S.
airlines. All of its flights are operated under its major airline
partner brand, such as AmericanConnection, Delta Connection,
United Express and US Airways Express. The airline employs more
than 2,600 aviation professionals.
Headquartered in Arlington, Virginia, US Airways' primary business
activity is the ownership of the common stock of:
* US Airways, Inc.,
* Allegheny Airlines, Inc.,
* Piedmont Airlines, Inc.,
* PSA Airlines, Inc.,
* MidAtlantic Airways, Inc.,
* US Airways Leasing and Sales, Inc.,
* Material Services Company, Inc., and
* Airways Assurance Limited, LLC.
Under a chapter 11 plan declared effective on March 31, 2003,
USAir emerged from bankruptcy with the Retirement Systems of
Alabama taking a 40% equity stake in the deleveraged carrier in
exchange for $240 million infusion of new capital.
US Airways and its subsidiaries filed another chapter 11 petition
on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian
P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning,
Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and
Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors
in their restructuring efforts. In the Company's second
bankruptcy filing, it lists $8,805,972,000 in total assets and
$8,702,437,000 in total debts.
US AIRWAYS: Court Extends Exclusive Plan Filing Period to May 31
----------------------------------------------------------------
US Airways, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Eastern District of Virginia to extend
the period within which they have the exclusive right to file a
plan of reorganization to May 31, 2005, and the exclusive right to
solicit acceptances of that plan to August 31, 2005.
Pursuant to an agreement with General Electric Capital
Corporation, the Debtors are currently obligated to file their
plan of reorganization and disclosure statement by April 15,
2005, and to emerge from bankruptcy by July 1, 2005. According
to Brian P. Leitch, Esq., at Arnold & Porter, the Debtors intend
to meet the deadline for filing a plan. Out of an abundance of
caution, however, the Debtors seek a modest extension of the
Exclusive Periods.
The request was supported by the company's unsecured creditors
committee and was unopposed by other interested parties. Thus,
the Court extended the Debtors' exclusive periods as requested.
Headquartered in Arlington, Virginia, US Airways' primary business
activity is the ownership of the common stock of:
* US Airways, Inc.,
* Allegheny Airlines, Inc.,
* Piedmont Airlines, Inc.,
* PSA Airlines, Inc.,
* MidAtlantic Airways, Inc.,
* US Airways Leasing and Sales, Inc.,
* Material Services Company, Inc., and
* Airways Assurance Limited, LLC.
Under a chapter 11 plan declared effective on March 31, 2003,
USAir emerged from bankruptcy with the Retirement Systems of
Alabama taking a 40% equity stake in the deleveraged carrier in
exchange for $240 million infusion of new capital.
US Airways and its subsidiaries filed another chapter 11 petition
on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian
P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning,
Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and
Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors
in their restructuring efforts. In the Company's second
bankruptcy filing, it lists $8,805,972,000 in total assets and
$8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue
No. 86; Bankruptcy Creditors' Service, Inc., 215/945-7000)
WELLS FARGO: Fitch Puts Low-B Ratings on Classes B-4 & B-5 Certs.
-----------------------------------------------------------------
Wells Fargo mortgage pass-through certificates, series 2005-4, are
rated by Fitch Ratings:
-- $291,602,634.00 classes A-1 through A-11, A-PO, A-R, and
A-LR, 'AAA' ('senior certificates');
-- $4,808,000 class B-1, 'AA';
-- $1,652,000 class B-2, 'A';
-- $902,000 class B-3, 'BBB';
-- $601,000 class B-4, 'BB';
-- $450,000 class B-5, 'B'.
The 'AAA' ratings on the senior certificates reflect the 2.95%
subordination provided by:
* the 1.60% class B-1,
* the 0.55% class B-2,
* the 0.30% class B-3,
* the 0.20% privately offered class B-4,
* the 0.15% privately offered class B-5, and
* the 0.15% privately offered class B-6.
The ratings on the class B-1, B-2, B-3, B-4, and B-5 certificates
are based on their respective subordination.
Fitch believes the amount of credit enhancement available will be
sufficient to cover credit losses. The ratings also reflect the
high quality of the underlying collateral, the integrity of the
legal and financial structures and the primary servicing
capabilities of Wells Fargo Bank, N.A., rated 'RPS1' by Fitch
Ratings.
The transaction consists of one group of 579 fully amortizing,
fixed interest rate, first lien mortgage loans, with original
terms to maturity of approximately 25 to 30 years. The aggregate
unpaid principal balance of the pool is $300,467,308 as of March
1, 2005, (the cut-off date) and the average principal balance is
$518,942. The weighted average original loan-to-value ratio --
OLTV -- of the loan pool is approximately 67.98%; approximately
0.96% of the loans have an OLTV greater than 80%. The weighted
average coupon of the mortgage loans is 5.856% and the weighted
average FICO score is 738. Cash-out and rate/term refinance loans
represent 28.76% and 27.51% of the loan pool, respectively.
The states that represent the largest geographic concentration
are:
* California (44.04%),
* New York (8.88%),
* Maryland (6.33%) and
* Virginia (5.59%).
All other states represent less than 5% of the outstanding balance
of the pool.
None of the mortgage loans are 'high cost' loans as defined under
any local, state or federal laws. For additional information on
Fitch's rating criteria regarding predatory lending legislation,
please see the press release issued May 1, 2003, entitled 'Fitch
Revises Rating Criteria in Wake of Predatory Lending Legislation,'
available on the Fitch Ratings web site at
http://www.fitchratings.com/
All of the mortgage loans were generally originated in conformity
with underwriting standards of WFB. WFB sold the loans to Wells
Fargo Asset Securities Corporation, a special purpose corporation,
who deposited the loans into the trust. The trust issued the
certificates in exchange for the mortgage loans. WFB will act as
servicer and custodian, and Wachovia Bank, N.A., will act as
trustee. Elections will be made to treat the trust as two
separate real estate mortgage investment conduits for federal
income tax purposes.
WHITEHEAD MANN: Case Summary & 20 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: Whitehead Mann Inc.
dba Whitehead Mann Pendleton James
dba Whitehead Mann Pendleton
fdba Pendleton James & Associates, Inc.
fdba Baines Leadership Solutions Corporation
280 Park Avenue
East Tower, 25th Floor
New York, New York 10017-1216
Bankruptcy Case No.: 05-12046
Type of Business: The Debtor provides consultancy services
concerning the recruitment of executive
personnel, management assessment, executive
development and psychometric evaluation.
See http://www.wmann.com/
Chapter 11 Petition Date: March 31, 2005
Court: Southern District of New York (Manhattan)
Judge: Stuart M. Bernstein
Debtor's Counsel: Douglas L. Furth, Esq.
Golenbock Eiseman Assor Bell & Peskoe, LLP
437 Madison Avenue
New York, New York 10022
Tel: (212) 907-7340
Fax: (212) 754-0777
Debtor's
Accountants: DeGrazia and Company
One Hollis Street, Suite 435
Wellesley, MA 02482
Total Assets: $545,847
Total Debts: $7,788,874
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Carleta (Jodi) Taylor Compensation $79,003
1555 Gold Camp Road
Colorado Springs, CO 80906
A. James DiFilippo Compensation $70,862
653 Case Road
Neshanic Station, NJ 08853
Diamond Castle Holdings LC Real Property Lease $45,736
280 Park Avenue, 25th Floor
New York, NY 10017
Leigh Kearney Compensation $37,863
1819 North Cascade
Colorado Springs, CO 80907
The State Insurance Fund Workers' Compensation $23,922
Workers' Compensation Insurance
PO Box 4788
Syracuse, NY 13221-4788
Chubb Trade Debt $20,764
AGResearch.info Trade Debt $15,416
Guardian Trade Debt $13,644
David J. Loring Compensation $9,525
Palmer Center, Ltd. Real Property Lease $7,185
Forum Personnel, Inc. Trade Debt $6,617
DSCI Corporation Trade Debt $5,545
American Express Company Trade Debt $4,759
IKON Financial Services Trade Debt & $4,742
Equipment Lease
Control Solutions Group Trade Debt $2,819
Fedex Trade Debt $2,341
Cogent Communications, Inc. Trade Debt $2,000
Pritchard Industries, Inc. Trade Debt $1,643
First Corporate Sedans Trade Debt $1,620
Fedex Trade Debt $1,479
WHITEHEAD MANN: Files Prepackaged Chapter 11 Plan in New York
-------------------------------------------------------------
Whitehead Mann Inc., the U.S.-based unit of Whitehead Mann Group
Plc -- the sixth largest executive search firm in the world --
filed a prepackaged chapter 11 plan of liquidation in the U.S.
Bankruptcy Court for the Southern District of New York on Thurs.,
Mar. 31, 2005.
The British-based parent is shuttering its offices New York,
Boston and Colorado Springs, and wants to wind up its existing
U.S. businesses. The U.S. company reports in its bankruptcy
papers that it has $546,000 in assets and $7.8 million of
liabilities.
Whitehead Mann Inc. merged with three other search firms (Baines
Gwinner (North America), Inc.; Pendletom James * Associates, Inc.;
and Summit Leadership Solutions Corp.) between 2000 and 2002. In
2002, as a result of a general slowdown in the U.S. economy, Peter
A. Clarke, the company's sole officer relates, the U.S. executive
search market, highly sensitive to macroeconomic trends, has
declined significantly. By the end of 2002, the Company reduced
its staff. In 2003, senior search partners jumped ship. Rent and
other overhead costs became unmanageable as revenues declined. As
a result, the Company couldn't meet its financial obligations.
Management concluded that an orderly liquidation was the best
course of action.
Douglas L. Furth, Esq., at Golenbock Eiseman Assor Bell & Peskoe
LLP, representing the Debtor, tells the Court that the Company
wants immediate authority to walk away from its office leases at:
* 280 Park Avenue in Manhattan
* 70 East 55th Street in Manhattan
* 200 Park Avenue in Manhattan
* 90 South Cascade Avenue in Colorado Springs and
* One International Place in Boston.
The Debtor also wants to advertise an auction for the contents of
its 280 Park Avenue office in the Sunday, April 3, edition of The
New York Times, and hold that sale on Wed., April 6, 2005, at
10:30 a.m.
headquartered in New York City, New York, Whitehead Mann Inc., --
http://www.wmann.com/-- provides consultancy services relating to
the recruitment of executive personnel, management assessment,
executive development and psychometric evaluation. The Company
filed for chapter 11 protection on March 31, 2005 (Bankr. S.D.N.Y.
Case No. 05-12046). Douglas L. Furth, Esq., at Golenbock Eiseman
Assor Bell & Peskoe, LLP, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $546,000 and total debts
of $7.8 million.
WORLDCOM INC: Michael Jordan Wants Claim Objection Overruled
------------------------------------------------------------
As previously reported, WorldCom, Inc. and its debtor-affiliates
objected to Michael Jordan's $8 million claim. Mark Shaiken,
Esq., at Stinson Morrison Hecker LLP, in Kansas City, Missouri,
argued that Claim No. 36077 did not satisfy the requirements of
Rules 3001 and 3002 of the Federal Rules of Bankruptcy Procedure
to qualify as a proof of claim. The Debtors contend that Mr.
Jordan failed to provide sufficient documentation to support his
claim.
Michael Jordan Responds
Jason M. Torf, Esq., at Schiff Hardin LLP, in Chicago, Illinois,
argues that the Debtors' Objection is completely without merit.
"Michael Jordan has satisfied his burden of proof by filing his
claim."
The Debtors' counsel has asserted incorrectly that Mr. Jordan has
not provided any evidence of the damage sustained other than a
reference to the base compensation payable under the Endorsement
Agreement with Mr. Jordan. Mr. Torf contends that the calculation
of damages for a breach of this type of contract is the base
compensation payable under the Agreement.
"The measure of damages for breach of a contract to pay money at
a stipulated time is, in the absence of any special circumstances
in the contemplation of the parties at the time of the execution
of the contract, the principal sum agreed to be paid by the terms
of the contract, with legal interest thereon." Terwilliger v.
Terwilliger, 206 F.3d 240, 248 (2d Cir. 2000).
Mr. Torf also relates that even though the Debtors already have
all relevant documents necessary to permit an evaluation of Mr.
Jordan's Claim in its possession, Mr. Jordan's counsel provided
duplicate copies after the Objection was filed. "There are no
factual issues to be discovered because the Agreement contains the
entire basis for Mr. Jordan's damages, rendering any discovery
superfluous and unnecessary," Mr. Torf says.
Mr. Torf further argues that Debtors' position that Mr. Jordan
failed to mitigate his damages is misguided. "Failure to mitigate
is an affirmative defense to a breach of contract claim. This
theory is wholly separate from the issue of damages and could be
conceivably be subsumed under the Debtors' current allegation of
insufficient information."
In addition, Mr. Torf continues, the Debtors have an obligation to
notify Mr. Jordan of the basis of their Objection when the
Objection is filed rather than to create a new basis for objection
long after the objection deadline has expired. Mr. Torf notes
that the Debtors' vaguely and casually asserted theory of failure
to mitigate is not part of its original Objection and thus, cannot
be raised now.
Thus, Mr. Jordan asks the United States Bankruptcy Court for the
Southern District of New York to:
(a) overrule the Debtors' objection;
(b) allow his Claim; and
(c) award him attorneys' fees and litigation costs.
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. 81; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
W.R. GRACE: Acquires Concrete Admixture Business in Sweden
----------------------------------------------------------
W. R. Grace & Co.s's Swedish subsidiary, Grace AB, has acquired
certain assets relating to the concrete admixtures business of
Perstorp Peramin AB located in Sweden. Perstorp Peramin AB is a
leading supplier of specialty chemicals and materials to the
construction industry in Sweden and other Northern European
countries. Terms of the acquisition were not disclosed.
Perstorp's concrete admixtures are sold to ready mix and
precast concrete producers and civil contractors in Sweden and
other Northern European countries. The acquisition expands
Grace's presence in this region and will be integrated into Grace
Construction Products, a business of Grace Performance Chemicals.
"This investment underscores our commitment to grow geographically
enabling us to best serve our customers," said Fred Festa,
President and Chief Operating Officer, W. R. Grace & Co.
"Perstorp's strong concrete admixture position in the ready mix
and precast segments in the region provides us with the platform
we need to accelerate our growth there. We are committed to
growing Grace through both internal development and acquisitions,
such as this one, that create economic value for all of our
stakeholders."
"Grace is dedicated to providing the industry with quality
products and the highest level of customer service globally,"
said Fabio Tegiacchi, General Manager, Specialty Construction
Chemical, Europe. "This acquisition complements our recent
acquisitions in Germany, France, Poland and Belgium and enables
us to better serve our customers throughout Europe."
Headquartered in Cambridge, Mass., Grace Construction
Products -- http://www.graceconstruction.com/-- a division of W.
R. Grace & Co. Conn., (NYSE:GRA), is a leading worldwide
manufacturer of concrete admixtures, cement-processing additives,
masonry products, products for architectural concrete, fire
protection, and waterproofing products. The company has more than
125 plants and sales offices around the world.
Headquartered in Columbia, Maryland, W.R. Grace & Co. --
http://www.grace.com/--suppliescatalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Company and its debtor-
affiliates filed for chapter 11 protection on April 2, 2001
(Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at
Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the
Debtors in their restructuring efforts. (W.R. Grace Bankruptcy
News, Issue No. 82 ; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WYNDHAM INT'L: Moody's Junks $140M Sr. Sec. 2nd Lien Term Loan C
----------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to Wyndham
International Inc.'s $530 million senior secured first lien term
loan B, $175 million senior secured first lien revolving credit
facility, and $50 million senior secured first lien letter of
credit revolving credit facility. Moody's also assigned a Caa1
rating to the company's $140 million senior secured second lien
term loan C, a B3 senior implied rating, Ca issuer rating, and
speculative grade liquidity rating of SGL-3. The ratings outlook
is stable.
The B3 senior implied rating reflects Wyndham's high debt levels,
nominal equity base, and weak credit metrics. In addition, the B3
rating reflects Moody's view that material debt reduction over the
near term will be challenging, leaving the company significantly
more vulnerable to event risk (geopolitical or terrorist events)
or deterioration in economic conditions over the intermediate
term. However, the ratings also incorporate the adequate asset
value of the properties assigned as collateral, improved operating
performance due in large part to a relatively strong operating
environment within the lodging industry, and improved debt
maturity profile.
Proceeds from the offering will be used to refinance existing debt
at Wyndham and extend maturities. The company will also be
refinancing a 6 asset CMBS facility that comes due in July 2005
and will enter into a new 8 asset CMBS facility, and the assigned
ratings assume the completion of these two financings. The
company will also maintain mortgages on two separate properties
that amounted to approximately $132 million as of March 2005.
In addition, Wyndham will pre-fund approximately $100 million of
capital expenditures to support certain projects that have been
delayed due to various constraints.
Post this transaction, Wyndham will have 33 core owned or leased
properties, 79 Wyndham franchised hotels, and 36 managed hotels
(excluding 2 properties held for sale). In terms of profit
contribution, the 33 owned or leased properties generated over 90%
of EBITDA in 2004.
Over the past four years Wyndham has restructured its operations
through significant asset sales, the realization of impairment
charges and asset write downs, and debt reduction. During the
four year period ending December 31, 2004, debt was reduced by
approximately $1.2 billion, while net fixed assets, including
assets held for sale, declined by over $2.3 billion and equity
deteriorated by about $1.7 billion. On March 24, 2005, Wyndham
concluded the sale of 23 of 25 properties that had been held for
sale, to a private investment fund managed by Goldman Sachs and
affiliates of Highgate Holdings. The two remaining properties are
to be sold within the next several months. The CMBS transactions
are expected to be completed by the end of the second quarter of
2005.
Despite the disposition of under performing or non-core assets,
meaningful debt reduction, and an improving operating environment
in the lodging industry, Wyndham's credit metrics continue to
remain weak. Pro forma for the refinancing, adjusted leverage
(including rent expense) will be very high at over 9.0x and
coverage will be relatively weak at under 1.5x.
However, liquidity should be adequate with balance sheet cash of
approximately $189 million, including $100 million for pre-funded
capex, and full access to its $175 million revolver. In addition,
capital expenditures will be limited by the bank credit agreement
to $150 million in 2005, $100 million in 2006, and $75 million
thereafter. However, 50% of unused amounts can be carried forward
one year, with the exception of 2005 in which 100% of the unused
amount can be carried forward to 2006.
The ratings are based on Moody's expectation that the majority of
restructuring initiatives are complete, and management's focus can
be devoted towards managing its core property base and
strengthening its balance sheet. The company also has the benefit
of concluding all of its restructuring initiatives during a
relatively strong operating environment for the lodging industry
that should continue over the intermediate term.
The SGL-3 speculative liquidity rating reflects Moody's view that
over the next twelve months Wyndham will be able to fund all cash
requirements from internal sources. In addition, cash on the
balance sheet, including restricted cash, will be relatively high
given the pre-funding of approximately $100 million of capex.
Covenant levels are set relatively high and Moody's views covenant
compliance as likely. The company does not currently own any
assets, outside of what is secured by the bank facility, the two
CMBS deals, two third party mortgages, and the two remaining
properties already committed for sale, that can be monetized in
the near term to satisfy liquidity needs.
The stable outlook reflects Moody's expectation that operating
performance will continue to improve, driven by RevPAR growth that
is at least in line with the overall lodging industry. If lodging
industry fundamentals remain strong Moody's would expect a
continued focus on debt reduction resulting in leverage declining
to under 8.0x and coverage improving to around 1.6x over the near
term. We also expect liquidity to remain adequate with full
access to the bank revolver and cash on hand. The stable outlook
also expects the company will successfully complete the 6 asset
and 8 asset CMBS facilities as well as the sale of the two
remaining properties held for sale. Factors that would result in
a lower rating would be an inability to reduce debt to more
manageable levels or deterioration in liquidity.
However, if credit metrics continue to improve with leverage
declining towards the 6.0x level, coverage of about 2.0x, and
retained cash flow to total debt (before working capital) of
approximately 10%, while liquidity remains adequate, the ratings
would likely improve.
The B3 rating on the $530 million senior secured first lien term
loan B, $175 million senior secured first lien revolving credit
facility, and $50 million senior secured first lien letter of
credit revolving credit facility, reflects the benefit derived
from a perfected first priority security interest in substantially
all of the tangible and intangible assets of 12 properties and a
negative pledge on five properties. The first lien facilities
also benefit from a security interest in all of the capital stock
of Wyndham and each of its direct and indirect subsidiaries.
The Caa1 rating on the senior secured second lien term loan C
facility reflects the same benefits as the first lien facilities,
except for security, in which they have a secondary claim.
Wyndham International, headquartered in Dallas, Texas, owns,
leases, manages, and franchises hotels primarily in the upper-
upscale and luxury segments of the hotel and resorts industry in
North America, Mexico, the Caribbean and Europe.
WYNDHAM INTERNATIONAL: S&P Junks $140 Million Second Lien Loan
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' rating and a
recovery rating of '3' to Wyndham International Inc.'s proposed
$755 million first lien senior secured bank facility due 2011,
indicating our expectation of meaningful (50%-80%) recovery of
principal in the event of a payment default.
Concurrently, Standard & Poor's assigned its 'CCC+' rating to the
company's $140 million second lien term loan C, and a recovery
rating of '5' which indicates Standard and Poor's expectation that
second lien lenders would experience negligible (0%-25%) recovery
of principal in the event of a payment default.
In addition, Standard & Poor's assigned 'B' corporate credit
rating to the Dallas, Texas-based hotel owner, leaser, manager,
and franchisor. The outlook is stable. Pro forma for this
transaction, about $1.8 billion in debt is outstanding as of
Dec. 31, 2004.
The first lien facility is expected to consist of a $175 million
first lien revolving credit facility, a $50 million first lien
institutional letter of credit, and a $530 million first lien Term
Loan B.
The new bank facility, along with $944 million in new or
refinanced CMBS indebtedness, will be used to repay existing debt
and to pre-fund $100 million of capital expenditures. This
includes repaying $1.2 billion outstanding under the company's
existing senior secured credit facility due 2006, and refinancing
about $620 million of its existing CMBS debt.
The ratings on Wyndham reflect a high degree of financial risk due
to its substantial debt levels and weak credit measures, tempered
by a good portfolio of hotels and a reasonably well-known brand.
Wyndham's credit measures weakened considerably during the lodging
industry downturn that began in mid-2001 and continued through the
end of 2003. However, as the lodging environment has recovered,
and as the company has shed non-strategic hotels using the
proceeds to reduce debt, the situation for Wyndham has improved.
Moreover, the proposed capital structure is expected to benefit
Wyndham by lowering its average cost of debt capital, extending
maturities, and as already stated, pre-funding $100 million of
2005 capital expenditures.
* Glass & Associates Welcomes Dalton Edgecomb and Jerry Sepich
--------------------------------------------------------------
Glass & Associates, Inc., one of the leading turnaround management
firms in the US and Europe, has announced that Dalton T. Edgecomb
has joined the firm as Principal, based out of Glass' flagship New
York office and Jerome P. Sepich has joined as Managing Director,
based out of Glass' Chicago office.
Dalton Edgecomb has more than 20 years business and restructuring
experience. Dalton has participated in more than 30 successful
turnaround engagements in a variety of industries including
energy, telecommunications, agri-business, healthcare,
transportation, and industrial manufacturing. Dalton has recently
served as the interim Chief Financial Officer of Covanta
Corporation, a $1 billion energy and waste management business,
during its Chapter 11 proceedings.
Mr. Edgecomb served as Chief Financial Officer and Treasurer for
PictureTel Corporation, a $350 million videoconferencing company.
During his tenure, Dalton played a principal role in developing
and executing the organization's restructuring plan. Once
profitable, Dalton, together with PictureTel's President,
engineered the sale of the corporation, increasing shareholder
value by more than 250%.
Mr. Edgecomb is a CPA, a Certified Turnaround Professional and a
Certified Insolvency and Reorganization Advisor. He serves on the
Board of Directors of the New York Chapter of the Turnaround
Management Association.
Jerry Sepich has over 20 years' lending and banking experience at
such nationally prominent lenders as CIT, Bank of America and
Heller Financial. Prior to joining Glass, Mr. Sepich was the
Regional Credit Manager at CIT Business Credit for the 10 state
Midwest Region. He was responsible for $1.2 billion in
commitments, $600 million outstanding and over 70 relationships.
His experience includes all facets of credit, asset-based lending,
restructurings, bankruptcies and workouts.
His extensive experience in workouts and restructurings includes
the agriculture, automotive, retail, metals, furniture and
staffing sectors. He has worked with companies with revenues from
$15 million to $2 billion and loans of $5 million to $200 million.
About Glass & Associates
Glass is a leading international turnaround and restructuring firm
with 45 professionals working throughout the United States and
Europe; the firm has offices in New York, Canton, Charlotte,
Chicago, Dallas, Detroit, Houston, London and Frankfurt. Founded
in 1985, Glass provides specialized interim management and
advisory services to troubled companies. Working in partnership
with our clients, the Glass team is comprised of senior executives
skilled in operations improvement, financial analysis and
restructuring. These individuals manage the sensitive process of
moving companies and their constituents along the complex path to
corporate recovery.
For more information visit http://www.glass-consulting.com/
* Ernst & Young & Ellis Foster Combine British Columbia Practices
-----------------------------------------------------------------
Two of B.C.'s leading professional services firms have signed a
letter of intent to combine their British Columbia practices.
Ernst & Young, a global leader in professional services, and Ellis
Foster, the eighth-largest public accounting firm in B.C.,
officially reported the proposed transaction, which will increase
the size of Ernst & Young's Vancouver office to 350 people.
The announcement confirms industry speculation that Ernst & Young
planned a strategic transaction as the firm continues to increase
its market share in Western Canada.
"We are very committed to serving this market. Ellis Foster is a
firm with a team of exceptional professionals and a client base
that will allow us to expand our presence in the province," says
Fred Withers, managing partner of Ernst & Young in Vancouver.
"With the proposed transaction, and a series of recent hires, we
have deep credentials in all of the industry segments that are
driving the vibrant B.C. economy," he says.
Ellis Foster reported revenues of approximately $12.5 million in
2004. Founded in 1961, the firm dominates the film and
entertainment and broker-dealer segments of the marketplace, and
is one of B.C.'s leading taxation firms. With a multilingual team
of professionals fluent in both Mandarin and Cantonese, Ellis
Foster is one of Canada's leading firms providing audit services
to Canadian companies with operations in mainland China.
Approximately 100 people from Ellis Foster will join the Ernst &
Young practice in Vancouver following the planned close of the
transaction on May 2.
"This merger is simply a perfect fit," says Larry Van Hatten,
managing partner of Ellis Foster. "Like Ernst & Young, our
success is based on cultivating strong relationships and
understanding our clients' needs. We share a commitment to
delivering quality service to clients, and fully supporting our
people as they develop professionally. The merger will be good
for our clients and for our people."
Other moves by Ernst & Young to increase the firm's presence in
Western Canada include two 2003 transactions - with
BlairCrossonVoyer in Vancouver, creating one of the dominant
business valuation and litigation support practices in B.C., and
with Synergy Partners in Calgary, forming one of the largest mid-
market players in corporate finance services in the West.
About Ernst & Young
Ernst & Young, a global leader in professional services, is
committed to restoring the public's trust in professional services
firms and in the quality of financial reporting. Its 100,000
people in 140 countries pursue the highest levels of integrity,
quality, and professionalism in providing a range of sophisticated
services centered on our core competencies of auditing,
accounting, tax, and transactions. Ernst & Young practices also
provide law services in some parts of the world where permitted.
Further information about Ernst & Young and its approach to a
variety of business issues can be found at
www.ey.com/perspectives. Ernst & Young refers to all the members
of the global Ernst & Young organization.
About Ellis Foster
For over 40 years Ellis Foster has worked hard to develop long-
term relationships with its clients, providing a full range of
business services with the highest standard of professionalism.
Ellis Foster-Vancouver's largest independent accounting firm-
emphasizes quality, commitment and a practical approach in the
delivery of cost-effective professional services and financial
advice, backed by vast experience in diverse industries and
specialties.
* BOND PRICING: For the week of March 28 - April 1, 2005
--------------------------------------------------------
Issuer Coupon Maturity Price
------ ------ -------- -----
ABC Rail Product 10.500% 12/31/04 0
Adelphia Comm. 3.250% 05/01/21 7
Adelphia Comm. 6.000% 02/15/06 7
Allegiance Tel. 11.750% 02/15/08 30
Allegiance Tel. 12.875% 05/15/08 31
Amer. Color Graph. 10.000% 06/15/10 64
Amer. Comm. LLC 12.000% 07/01/08 5
Amer. Plumbing 11.625% 10/15/08 15
Amer. Restaurant 11.500% 11/01/06 64
Amer. Tissue Inc. 12.500% 07/15/06 62
American Airline 7.377% 05/23/19 66
American Airline 7.379% 05/23/16 65
American Airline 8.839% 01/02/17 72
American Airline 8.800% 09/16/15 75
American Airline 9.070% 03/11/16 71
American Airline 9.850% 01/02/09 72
American Airline 10.180% 01/02/13 75
American Airline 10.190% 05/26/16 73
American Airline 10.610% 03/04/11 67
AMR Corp. 4.500% 02/15/24 73
AMR Corp. 9.000% 08/01/12 73
AMR Corp. 9.000% 09/15/16 74
AMR Corp. 9.200% 01/30/12 74
AMR Corp. 9.750% 08/15/21 64
AMR Corp. 9.800% 10/01/21 64
AMR Corp. 9.880% 06/15/20 64
AMR Corp. 10.000% 04/15/21 59
AMR Corp. 10.200% 03/15/20 64
AMR Corp. 10.290% 03/08/21 63
AMR Corp. 10.450% 11/15/11 56
AMR Corp. 10.550% 03/12/21 57
Anvil Knitwear 10.875% 03/15/07 64
Apple South Inc. 9.750% 06/01/06 20
Armstrong World 6.350% 08/15/03 71
Armstrong World 6.500% 08/15/05 70
Armstrong World 7.450% 05/15/29 68
Armstrong World 9.000% 06/15/04 70
AT Home Corp. 0.525% 12/28/18 7
AT Home Corp. 4.750% 12/15/06 10
ATA Holdings 12.125% 06/15/10 45
ATA Holdings 13.000% 02/01/09 44
Atlantic Coast 6.000% 02/15/34 29
Atlas Air Inc. 9.702% 01/02/08 51
Avado Brands Inc. 11.750% 06/15/09 20
B&G Foods Holding 12.000% 10/30/16 8
Bank of NY Co 4.400% 06/15/18 65
Bank New England 8.750% 04/01/99 10
Bank New England 9.500% 02/15/96 6
Bethlehem Steel 10.375% 09/01/03 0
Big V Supermarkets 11.000% 02/15/04 1
Borden Chemical 9.500% 05/01/05 1
Budget Group Inc. 9.125% 04/01/06 0
Burlington Inds. 7.250% 08/01/27 6
Burlington Inds. 7.250% 09/15/05 6
Burlington Northern 3.200% 01/01/45 60
Calpine Corp. 4.750% 11/15/23 66
Calpine Corp. 7.750% 04/15/09 69
Calpine Corp. 7.875% 04/01/08 74
Calpine Corp. 8.500% 02/15/11 70
Calpine Corp. 8.625% 08/15/10 69
Chic East ILL RR 5.000% 01/01/54 55
CIT Group Inc. 4.450% 06/15/13 74
Collins & Aikman 12.875% 08/15/12 46
Color Tile Inc. 10.750% 12/15/01 0
Comcast Corp. 2.000% 10/15/29 43
Cone Mills Corp. 8.125% 03/15/05 11
Continental Airlines 6.795% 08/02/18 75
CoreComm. Limited 6.000% 10/01/06 5
Cray Research 6.125% 02/01/11 63
Curagen Corp. 4.000% 02/15/11 74
Delta Air Lines 2.875% 02/18/24 49
Delta Air Lines 7.711% 09/18/11 58
Delta Air Lines 7.779% 01/02/12 56
Delta Air Lines 7.900% 12/15/09 39
Delta Air Lines 7.920% 11/18/10 57
Delta Air Lines 8.000% 06/03/23 43
Delta Air Lines 8.270% 09/23/07 70
Delta Air Lines 8.300% 12/15/29 33
Delta Air Lines 8.540% 01/02/07 72
Delta Air Lines 8.540% 01/02/07 71
Delta Air Lines 8.540% 01/02/07 71
Delta Air Lines 8.950% 01/12/12 61
Delta Air Lines 9.000% 05/15/16 35
Delta Air Lines 9.200% 09/23/14 44
Delta Air Lines 9.250% 03/15/22 34
Delta Air Lines 9.300% 01/02/10 61
Delta Air Lines 9.375% 09/11/07 66
Delta Air Lines 9.750% 05/15/21 34
Delta Air Lines 9.875% 04/30/08 73
Delta Air Lines 10.000% 06/01/08 59
Delta Air Lines 10.000% 08/15/08 50
Delta Air Lines 10.000% 06/01/09 65
Delta Air Lines 10.000% 05/17/10 73
Delta Air Lines 10.000% 06/01/10 64
Delta Air Lines 10.060% 06/01/10 64
Delta Air Lines 10.060% 01/02/16 48
Delta Air Lines 10.125% 05/15/10 42
Delta Air Lines 10.140% 08/14/11 68
Delta Air Lines 10.140% 08/26/12 50
Delta Air Lines 10.375% 02/01/11 40
Delta Air Lines 10.375% 12/15/22 35
Delta Air Lines 10.430% 01/02/11 73
Delta Air Lines 10.430% 01/02/11 73
Delta Air Lines 10.500% 04/30/16 52
Delta Air Lines 10.790% 03/26/14 71
Delta Air Lines 10.790% 03/26/14 34
Delta Mills Inc. 9.625% 09/01/07 48
Delphi Trust II 6.197% 11/15/33 51
Diva Systems 12.625% 03/01/08 1
Duty Free Int'l 7.000% 01/15/04 25
DVI Inc. 9.875% 02/01/04 7
E. Spire Comm Inc. 10.625% 07/01/08 0
E. Spire Comm Inc. 12.750% 04/01/06 0
E. Spire Comm Inc. 13.000% 11/01/05 0
E&S Holdings 10.375% 10/01/06 51
Eagle-Picher Inc. 9.750% 09/01/13 64
Eagle Food Center 11.000% 04/15/05 0
Edison Brothers 11.000% 09/26/07 0
Encompass Service 10.500% 05/01/09 0
Enron Corp. 6.400% 07/15/06 31
Enron Corp. 6.500% 08/01/02 33
Enron Corp. 6.625% 10/15/03 32
Enron Corp. 6.625% 11/15/05 30
Enron Corp. 6.725% 11/17/08 32
Enron Corp. 6.750% 09/01/04 32
Enron Corp. 6.750% 09/15/04 30
Enron Corp. 6.750% 08/01/09 32
Enron Corp. 6.875% 10/15/07 32
Enron Corp. 6.950% 07/15/28 31
Enron Corp. 7.000% 08/15/23 25
Enron Corp. 7.125% 05/15/07 32
Enron Corp. 7.375% 05/15/19 33
Enron Corp. 7.625% 09/10/04 33
Enron Corp. 7.875% 06/15/03 31
Enron Corp. 8.375% 05/23/05 32
Enron Corp. 9.125% 04/01/03 31
Enron Corp. 9.875% 06/15/03 33
Evergreen Intl. AVI 12.000% 05/15/10 75
Exodus Comm. Inc. 10.750% 12/15/09 0
Exodus Comm. Inc. 11.625% 07/15/10 0
Falcon Products 11.375% 06/15/09 44
Federal-Mogul Co. 7.375% 01/15/06 30
Federal-Mogul Co. 7.500% 01/15/09 28
Federal-Mogul Co. 8.160% 03/06/03 28
Federal-Mogul Co. 8.370% 11/15/01 30
Federal-Mogul Co. 8.800% 04/15/07 31
Fibermark Inc. 10.750% 04/15/11 71
Finova Group 7.500% 11/15/09 43
Fleming Cos. Inc. 10.125% 04/01/08 33
Flooring America 9.250% 10/15/07 0
Foamex L.P. 9.875% 06/15/07 51
Fruit of the Loom 8.875% 04/15/06 0
Gen Elec CAP CRP 4.500% 06/15/20 68
GMAC 5.900% 01/15/19 72
GMAC 5.900% 01/15/19 70
GMAC 5.900% 02/15/19 72
GMAC 5.900% 10/15/19 74
GMAC 6.000% 02/15/19 74
GMAC 6.000% 02/15/19 74
GMAC 6.000% 03/15/19 74
GMAC 6.000% 03/15/19 72
GMAC 6.000% 04/15/19 74
GMAC 6.000% 09/15/19 69
GMAC 6.050% 08/15/19 74
GMAC 6.050% 08/15/19 75
GMAC 6.050% 10/15/19 69
GMAC 6.125% 10/15/19 74
GMAC 6.400% 11/15/19 73
Golden Books Pub. 10.750% 12/31/04 1
Graftech Int'l 1.625% 01/15/24 74
Graftech Int'l 1.625% 01/15/24 73
GST Network Funding 10.500% 05/01/08 0
HNG Internorth. 9.625% 03/15/06 26
Household Fin. Co. 5.150% 07/15/18 73
Icon Health & Fit 11.250% 04/01/12 72
Imperial Credit 9.875% 01/15/07 0
Imperial Credit 12.000% 06/30/05 0
Impsat Fiber 6.000% 03/15/11 68
Inland Fiber 9.625% 11/15/07 47
Intermet Corp. 9.750% 06/15/09 58
Iridium LLC/CAP 10.875% 07/15/05 16
Iridium LLC/CAP 11.250% 07/15/05 17
Iridium LLC/CAP 13.000% 07/15/05 16
Iridium LLC/CAP 14.000% 07/15/05 16
IT Group Inc. 11.250% 04/01/09 1
Kaiser Aluminum & Chem. 12.750% 02/01/03 15
Kmart Corp. 6.000% 01/01/08 16
Kmart Corp. 8.990% 07/05/10 70
Kmart Corp. 9.350% 01/02/20 25
Kmart Corp. 9.780% 01/05/20 74
Kmart Funding 9.440% 07/01/18 40
Lehman Bros. Holding 6.000% 05/25/05 64
Lehman Bros. Holding 7.500% 09/03/05 52
Level 3 Comm. Inc. 2.875% 07/15/10 52
Level 3 Comm. Inc. 6.000% 09/15/09 53
Level 3 Comm. Inc. 6.000% 03/15/10 51
Liberty Media 3.750% 02/15/30 62
Liberty Media 4.000% 11/15/29 68
Loral Cyberstar 10.000% 07/15/06 74
Lukens Inc. 7.625% 08/01/04 0
LTV Corp. 8.200% 09/15/07 0
MacSaver Financial 7.400% 02/15/02 8
MacSaver Financial 7.600% 08/01/07 8
MacSaver Financial 7.875% 08/01/03 5
Metamor Worldwide 2.940% 08/15/04 1
Metro Mortgage 9.000% 12/15/04 0
Mirant Corp. 2.500% 06/15/21 74
Mississippi Chem. 7.250% 11/15/17 5
Muzak LLC 9.875% 03/15/09 48
Nat'l Steel Corp. 8.375% 08/01/06 3
Nat'l Steel Corp. 9.875% 03/01/09 3
Northern Pacific Railway 3.000% 01/01/47 58
Northern Pacific Railway 3.000% 01/01/47 58
Northpoint Comm. 12.875% 02/15/10 1
Northwest Airlines 7.248% 01/02/12 73
Northwest Airlines 7.360% 02/01/20 66
Northwest Airlines 7.875% 03/15/08 62
Northwest Airlines 8.070% 01/02/15 59
Northwest Airlines 8.130% 02/01/14 68
Northwest Airlines 8.700% 03/15/07 72
Northwest Airlines 9.875% 03/15/07 74
Northwest Airlines 10.000% 02/01/09 63
Northwest Steel & Wir. 9.500% 06/15/01 0
Nutritional Src. 10.125% 08/01/09 75
Oakwood Homes 7.875% 03/01/04 41
Oakwood Homes 8.125% 03/01/09 32
Oglebay Norton 10.000% 02/01/09 75
O'Sullivan Ind. 13.375% 10/15/09 32
Orion Network 11.250% 01/15/07 55
Orion Network 12.500% 01/15/07 55
Outboard Marine 9.125% 04/15/17 1
Owens Corning 7.000% 03/15/09 65
Owens Corning 7.500% 05/01/05 68
Owens Corning 7.500% 08/01/18 65
Owens Corning 7.700% 05/01/08 61
Owens Corning Fiber 8.875% 06/01/02 65
Owens Corning Fiber 9.375% 06/01/12 65
Pegasus Satellite 9.625% 10/15/05 57
Pegasus Satellite 9.750% 12/01/06 60
Pegasus Satellite 12.375% 08/01/06 59
Pegasus Satellite 12.500% 08/01/07 60
Pegasus Satellite 13.500% 03/01/07 0
Pen Holdings Inc. 9.875% 06/15/08 64
Penn Traffic Co. 11.000% 06/29/09 56
Piedmont Aviat 10.000% 11/08/12 0
Piedmont Aviat 10.250% 01/15/07 23
Piedmont Aviat 10.300% 03/28/06 7
Piedmont Aviat 10.350% 03/28/12 0
Pixelworks Inc. 1.750% 05/15/24 74
Polaroid Corp. 6.750% 01/15/02 0
Polaroid Corp. 7.250% 01/15/07 3
Polaroid Corp. 11.500% 02/15/06 0
Portola Packaging 8.250% 02/01/12 75
Primedex Health 11.500% 06/30/08 57
Primus Telecom 3.750% 09/15/10 57
Railworks Corp. 11.500% 04/15/09 1
Read-Rite Corp. 6.500% 09/01/04 52
Realco Inc. 9.500% 12/15/07 40
Reliance Group Holdings 9.000% 11/15/00 24
Reliance Group Holdings 9.750% 11/15/03 3
RDM Sports Group 8.000% 08/15/03 0
RJ Tower Corp. 12.000% 06/01/13 54
S3 Inc. 5.750% 10/01/03 0
Safety-Kleen Corp. 9.250% 05/15/09 0
Safety-Kleen Corp. 9.250% 06/01/08 0
Salton Inc. 10.750% 12/15/05 74
Salton Inc. 12.250% 04/15/08 60
Silverleaf Res. 10.500% 04/01/08 0
Specialty Paperb. 9.375% 10/15/06 75
Startec Global 12.000% 05/15/08 0
Syratech Corp. 11.000% 04/15/07 34
Teligent Inc. 11.500% 12/01/07 0
Teligent Inc. 11.500% 03/01/08 1
Tower Automotive 5.750% 05/15/24 18
Triton PCS Inc. 8.750% 11/15/11 71
Triton PCS Inc. 9.375% 02/01/11 72
Tropical SportsW 11.000% 06/15/08 54
Twin Labs Inc. 10.250% 05/15/06 17
United Air Lines 6.831% 09/01/08 8
United Air Lines 6.932% 09/01/11 50
United Air Lines 7.270% 01/30/13 44
United Air Lines 7.762% 10/01/05 3
United Air Lines 7.811% 10/01/09 35
United Air Lines 8.030% 07/01/11 15
United Air Lines 8.250% 04/26/08 21
United Air Lines 8.310% 06/17/09 53
United Air Lines 8.700% 10/07/08 48
United Air Lines 9.000% 12/15/03 8
United Air Lines 9.060% 09/26/14 46
United Air Lines 9.125% 01/15/12 9
United Air Lines 9.200% 03/22/08 45
United Air Lines 9.350% 04/07/16 48
United Air Lines 9.560% 10/19/18 38
United Air Lines 9.750% 08/15/21 8
United Air Lines 9.760% 05/13/06 48
United Air Lines 10.020% 03/22/14 45
United Air Lines 10.110% 01/05/06 41
United Air Lines 10.110% 02/19/06 38
United Air Lines 10.125% 03/22/15 45
United Air Lines 10.250% 07/15/21 8
United Air Lines 10.360% 11/20/12 54
United Air Lines 10.670% 05/01/04 8
Univ. Health Services 0.426% 06/23/20 61
United Homes Inc. 11.000% 03/15/05 0
US Air Inc. 7.500% 04/15/08 0
US Air Inc. 8.930% 04/15/08 0
US Air Inc. 9.330% 01/01/06 42
US Air Inc. 10.250% 01/15/07 1
US Air Inc. 10.490% 06/27/05 3
US Air Inc. 10.700% 01/15/07 23
US Air Inc. 10.900% 01/01/09 5
US Air Inc. 10.900% 01/01/10 5
US Airways Inc. 7.960% 01/20/18 48
US Airways Pass. 6.820% 01/30/14 40
Venture Hldgs 9.500% 07/01/05 1
Werner Holdings 10.000% 11/15/07 68
Westpoint Stevens 7.875% 06/15/05 0
Westpoint Stevens 7.875% 06/15/08 0
Winn-Dixie Store 8.875% 04/01/08 59
Winsloew Furniture 12.750% 08/15/07 20
Winstar Comm Inc. 12.500% 04/15/08 0
Winstar Comm Inc. 10.000 03/15/08 1
World Access Inc. 13.250% 01/15/08 4
World Access Inc. 4.500% 10/01/02 7
Xerox Corp. 0.570% 04/21/18 50
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. 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
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related conferences are encouraged. Send announcements to
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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
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Monthly Operating Reports are summarized in every Saturday edition
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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.
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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.
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