/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050506.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, May 6, 2005, Vol. 9, No. 106 Headlines 24 HOUR FITNESS: Forstmann Little Deal Cues S&P to Watch Ratings AMERICA WEST: April 2005 Capacity Up 2.8% from Last Year AMERIGAS PARTNERS: 96% of Noteholders Tender 8.875% Senior Notes ARTHUR BISHOP: Case Summary & 13 Largest Known Creditors ATA AIRLINES: Wants to Lease Boeing 737s from Q Aviation ATA AIRLINES: Wants Plan Filing Period Extended to August 22 BANC OF AMERICA: Fitch Affirms Five Mortgage Certificate Classes BOMBARDIER INC: Mesaba Airlines Joins Bombardier CRJ Family BOXCARS PROPERTIES: Case Summary & 15 Largest Unsecured Creditors CAROLINA TOBACCO: Wants to Hire Farleigh Wada as Bankr. Counsel CAROLINA TOBACCO: Wants to Hire Brownstein Rask as Special Counsel CARRINGTON MORTGAGE: Rates $7.7 Mil. Private Certificates at BB+ COMPOSITE SOLUTIONS: Case Summary & 20 Largest Unsecured Creditors COMPOSITE TECHNOLOGY: Files Chapter 11 Petition in C.D. Calif. COMPOSITE TECHNOLOGIES: Voluntary Chapter 11 Case Summary CP SHIPS: Acquires Borg International Freight Services CREDIT SUISSE: Fitch Holds CC Rating on $16.1 Million Class I DAVID SHOWKER: Case Summary & 10 Largest Unsecured Creditors DEUTSCHE ALT-A: S&P Holds Low-B Ratings on Four Cert. Classes DEXCOM INC: March 31 Balance Sheet Upside-Down by $54.6 Million DURA AUTOMOTIVE: Refinances Loan with New $325M Credit Facilities ELECTRIC CITY: Raises $5.6 Million in Equity Sale ENERGEM RESOURCES: Expects to Release Tardy Financials by May 10 EURASIA GOLD: Delays Filing of Financial Reports Until May 15 FAIRPOINT COMMS: Recapitalization Wipes Out Shareholder Deficit FALCONBRIDGE LTD: OSC Won't Intervene in Noranda Acquisition FOOTSTAR INC: Exclusive Solicitation Period Extended Until June 13 FOOTSTAR INC.: U.S. Trustee Appoints Six-Member Creditor Committee FORD MOTOR: S&P Cuts Ratings & Says Outlook is Negative FRESENIUS MEDICAL: Renal Buy-Out Cues Moody's to Review Ratings GENERAL MOTORS: S&P Cuts Ratings & Says Outlook is Negative GMAC COMMERCIAL: Fitch Affirms Four Low-B Ratings GMAC COMMERCIAL: Fitch Affirms Six Mortgage Certificate Classes GRASSY CREEK: Case Summary & 15 Largest Unsecured Creditors GREENBRIER COMPANIES: Moody's Rates $175M Senior Notes at B1 GREENBRIER COS: S&P Rates Proposed $175MM Sr. Unsec. Notes at B+ HARTLEY OF ILLINOIS: Case Summary & 21 Largest Known Creditors HAWK CORP: First Quarter Net Sales Climb 19.6% to $72.1 Million HCC INDUSTRIES: Moody's Withdraws Junk Ratings Due to Lack of Info HIGH VOLTAGE: Gets Interim Okay to Draw $5 Mil. Under DIP Facility HOLLINGER INC: Independent Directors Want P.G. White Removed HOLLINGER INC: Has Until Month-End to Settle SEC Action HOLLINGER INC: Ernst & Young's Inspection Fee Totals C$7.20 Mil. HOLLINGER INC: Holds $72.3 Million Cash as of April 29 IFT CORP: Amex Requests Compliance Plan by May 31 IMPATH: Committee Hires Bridge Associates as Wind-Down Consultant IMPAX LAB: Noteholder Sends Notice of Default Due to Tardy 10-K JOHN HENRICHSEN: Case Summary & 3 Largest Unsecured Creditors JP MORGAN: Fitch Upgrades $38.1 Mil. Class F to BB+ from BB KAISER ALUMINUM: Asks Court to Okay HSBC Bank Claim Settlement KAISER ALUMINUM: Wants Insurance Cos. to Prove Validity of Claims LAC D'AMIANTE: U.S. Trustee Appoints 11-Member Creditors Committee LISTWORKS CORP: Kurtzman Matera Approved as Ch. 7 Trustee Counsel MARKLAND TECH: Subsidiary Wins $36 Million Engineering Contracts MCLEODUSA INC: Payment Default Cues Moody's to Review Junk Ratings MERIDIAN AUTOMOTIVE: Will Honor Prepetition Employee Obligations MIRAVANT MEDICAL: Closes $8 Million Private Equity Funding MKP CBO: Fitch Junks Three Note Classes NEW CHEMUNG: Case Summary & 41 Largest Known Creditors NEW DOMINION: Case Summary & Largest Unsecured Creditor NEXTEL PARTNERS: Good Performance Cues S&P to Lift Ratings NFB FOODWORKS: Court Gives Nod to Use $572,813 of Cash Collateral NOMURA ASSET: Fitch Holds Junk & Default Ratings on $31MM Certs. NORTHWESTERN CORP: Inks Claims Settlement Pact with PPL Montana NORTHWESTERN CORP: Wants QUIP Shares Given to Class 7 Creditors OAO SEVERSTAL: North American Unit Restructuring After Buy-Out OWENS CORNING: Dist. Court Affirms Order Blocking B-Readers Suit PACIFIC LIFE: Fitch Affirms CC & B Ratings on A-3 & B Notes PENN TRAFFIC: GE Commercial Provides $164 Million to Finance Plan PHOENIX COLOR: Moody's Junks Proposed $35 Mil. 2nd Lien Term Loan PRECISE TECHNOLOGY: Poor Performance Spurs S&P's Negative Outlook R. CHACRA: Voluntary Chapter 11 Case Summary SA HOLDINGS: Sues City of South Amboy to Get Property Sale Moving SAAN STORES: Emerges from CCAA Protection with $30M Exit Facility SAAN STORES: Re-Opens 142 Stores Across Canada After CCAA Exit SALOMON BROTHERS: S&P Junks Series 2000-C3 Class N Certificates SKIN NUVO: Committee Taps Heller Ehrman & Jones Vargas as Counsel STATEN ISLAND: Fitch Affirms BB- Rating on $49 Million Bonds STELCO INC: Court OKs Sale of Welland Pipe's U&O Mill to Grinolet STRATOS GLOBAL: Owes Ex-Director Antle $C$1.74M from Court Ruling SYRATECH CORP: Alvarez & Marsal Approved as Turnaround Consultants SYRATECH CORP: Peter J. Solomon Approved as Investment Bankers TALON TECHNOLOGIES: Case Summary & 81 Largest Known Creditors TELEX COMMS: March 31 Balance Sheet Upside-Down by $976,000 TENET HEALTHCARE: Posts $3 Million Net Loss in First Quarter TENPINS INC: Voluntary Chapter 11 Case Summary TOPSAIL CBO: Full Payment Prompts Moody's Withdraw Ratings TRAINER WORTHAM: Moody's Junks $7.6 Million Class B-1L Notes TRUMP HOTELS: Expects to Emerge from Bankruptcy on May 12 UNICAL INT'L: Ch. 7 Trustee Taps ASK Financial as Special Counsel UNITED RENTALS: Delays Form 10-Q Filing to Complete 2004 Audit USG CORP: Earns $77 Million of Net Income in First Quarter USG CORP: U.S. Trustee Appoints Seven-Member Equity Committee VALLEY MEDIA: Can Retain Cross & Simon as Special Counsel VERTIS INC: March 31 Balance Sheet Upside-Down by $478 Million WELLINGTON PROPERTIES: Northen Blue Approved as Bankruptcy Counsel WESCORP ENERGY: Former Alaskan Governor Joins Board WORLDCOM INC: Late Appeal Means No Appeal for Pro Se Claimant YOUNG BROADCASTING: Closes Amended Senior Credit Facility YUKOS OIL: Moscow Court Freezes Yukos' Remaining Assets * Moody's Says Canadian Corporate Governance Better than in U.S. * BOOK REVIEW: George Eastman: Founder of Kodak ********* 24 HOUR FITNESS: Forstmann Little Deal Cues S&P to Watch Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'B' corporate credit rating, on 24 Hour Fitness Worldwide Inc. on CreditWatch with negative implications, following the company's announcement that it has agreed to be acquired by Forstmann Little & Co. The transaction is valued at around $1.6 billion. At Dec. 31, 2004, 24 Hour Fitness had about $512 million of debt outstanding, including redeemable preferred stock. "The CreditWatch listing is based on concerns that the transaction could increase 24 Hour Fitness' debt leverage and pressure cash flow through higher interest expense," said Standard & Poor's credit analyst Andy Liu. Forstmann Little plans to finance the transaction with more than $900 million from its equity and subordinated debt funds, with the balance financed through a senior loan facility. The transaction is expected to close in June 2005, subject to regulatory approval. The CreditWatch listing will likely be resolved when 24 Hour Fitness' future capital structure is finalized. San Ramon, California-based 24 Hour Fitness is the second-largest operator of fitness clubs in the U.S. It has 345 clubs in the U.S., with 2.8 million members, and another 15 clubs in Asia. AMERICA WEST: April 2005 Capacity Up 2.8% from Last Year -------------------------------------------------------- America West Airlines (NYSE: AWA) reported traffic statistics for the month of April and year-to-date 2005. Revenue passenger miles (RPMs) for April 2005 were a record 2.1 billion, an increase of 7.3 percent from April 2004. Capacity for April 2005 was a record 2.5 billion available seat miles, up 2.8 percent from April 2004. The passenger load factor for the month of April was a record at 81.7 percent versus 78.3 percent in April 2004. "The strong unit revenue trends we experienced during the first quarter continued into April with a record April load factor, a small year-over-year increase in yield, and strong revenue per available seat mile (RASM)," remarked Scott Kirby, executive vice president, sales and marketing. Commenting on the airline's operational performance during April, Chief Operating Officer Jeff McClelland said, "We had an excellent operational month as well, completing 85.2 percent of our flights on-time during April. Because of our outstanding operational performance during the month, including reaching specific internal departure goals, each eligible employee will receive a $50 'Get on board 2005' incentive check for the month's performance." Also for April, the airline will report to the Department of Transportation that its domestic on-time performance was 85.2 percent and its completion factor was 99.4 percent. America West -- http://www.americawest.com/-- operates more than 900 flights daily to 95 destinations in the U.S., Canada, Mexico and Costa Rica. The airline's 13,500 employees are proud to offer a range of services including more destinations than any other low-cost carrier, first-class cabins, assigned seating, airport clubs and an award-winning frequent flyer program. * * * As reported in the Troubled Company Reporter on Apr. 25, 2005, Standard & Poor's Ratings Services placed selected ratings on America West Holdings Corp. and subsidiary America West Airlines Inc., including the 'B-' corporate credit rating on both, on CreditWatch with negative implications. Ratings on selected enhanced equipment trust certificates (EETCs) of America West Airlines Inc., which were placed on CreditWatch on Feb. 24, 2005, as part of an industry wide review of aircraft-backed debt, remain on CreditWatch. "The CreditWatch placement is based on the potential combination of America West with US Airways Inc. (rated 'D'), the major operating subsidiary of US Airways Group Inc. (rated 'D'), both currently operating under Chapter 11 bankruptcy protection," said Standard & Poor's credit analyst Betsy Snyder. "The combination could present significant labor integration and financial challenges, depending on how any such combination is structured." AMERIGAS PARTNERS: 96% of Noteholders Tender 8.875% Senior Notes ---------------------------------------------------------------- AmeriGas Partners, L.P. (NYSE:APU) reported that the tender offer and consent solicitation for its outstanding 8.875% Series B Senior Notes due 2011 expired at 5:00 P.M., New York City time, on May 2, 2005. The Partnership accepted for purchase all of the approximately $373 million aggregate principal amount of the Notes tendered, representing 96% of the total principal amount outstanding. Approximately $14.6 million aggregate principal amount of Notes remain outstanding. Pursuant to the Partnership's Offer to Purchase and Consent Solicitation Statement, dated April 4, 2005, the supplemental indenture relating to the Notes, dated as of April 13, 2005, became effective (and the amendments contained therein became operative) upon acceptance of the Notes for purchase. Credit Suisse First Boston LLC acted as the Dealer Manager and Solicitation Agent for the tender offer. The Partnership and AmeriGas Finance Corp., as co-issuer, also disclosed the completion of a private placement of $415 million of 7.25% Senior Notes due 2015. The notes have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Net proceeds of the offering were used to fund the purchase of the Notes pursuant to the tender offer. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. About the Company Through its subsidiaries, AmeriGas Partners, L.P. (NYSE:APU) is the largest retail propane distributor in the United States. The Partnership serves residential, commercial, industrial, agricultural and motor fuel customers from over 650 retail locations in 46 states. * * * As reported in the Troubled Company Reporter on Apr. 15, 2005, AmeriGas Partners, L.P.'s -- APU -- $400 million senior notes due 2015, issued jointly and severally with its special purpose financing subsidiary Amerigas Finance Corp., are rated 'BB+' by Fitch Ratings. The Rating Outlook is Stable. An indirect subsidiary of UGI Corp. is the general partner and 44% limited partner for APU, which, in turn, is a master limited partnership - - MLP -- for AmeriGas Propane, L.P. -- AGP, an operating limited partnership. Proceeds from the new senior notes will be utilized to repurchase outstanding 8.875% APU senior notes pursuant to an ongoing tender offer. ARTHUR BISHOP: Case Summary & 13 Largest Known Creditors -------------------------------------------------------- Debtor: Arthur Patrick Bishop 7948 Abramshire Avenue Dallas, Texas 75231 Bankruptcy Case No.: 05-35170 Chapter 11 Petition Date: May 4, 2005 Court: Northern District of Texas (Dallas) Judge: Steven A. Felsenthal Debtor's Counsel: Edwin Paul Keiffer, Esq. Hance Scarborough Wright Ginsberg & Brusilow, LLP 1401 Elm Street, Suite 4750 Dallas, Texas 5202 Tel: (214) 651-6517 Fax: (214) 744-2615 Estimated Assets: $1 Million to $10 Million Estimated Debts: $50,000 to $100,000 Debtor's 13 Largest Known Creditors: Entity Claim Amount ------ ------------ Atmos Energy Unknown P.O. Box 650205 Dallas, TX 75265-0205 Capital One Unknown P. O. Box 26074 Richmond, VA 23260 Cingular Wireless Unknown P. O. Box 650553 Dallas, TX 75265-0553 Dallas Water Utilities Unknown 1500 Marilla Street, #21A Dallas, TX 75201 Direct TV Unknown 1820 E. Sky Harbor Circle South Phoenix, AZ 85034-9700 Estate of Kelly Scott Bishop, Sr. Unknown c/o Jones, Allen & Fuquay, LLP Attn: Lindy D. Jones/Charles Fuquay 8828 Greenville Avenue Dallas, TX 75243-7143 IRS Unknown Special Procedures Mail Code DAL-5020 1100 Commerce Street Dallas, TX 75242 National City Mortgage Co. Unknown P.O. Box 1820 Dayton, OH 45401 SBC Unknown P.O. Box 930170 Dallas, TX 75393-0170 Sterling Bank Unknown 2525 McKinnon Street Dallas, TX 75201 T Bank Unknown 1600 Dallas Parkway, Suite 125 Dallas, TX 75248 TXU Unknown P.O. Box 227097 Dallas, TX 75222-7079 Vintage Bank Unknown P.O. Box 577 Waxahachie, TX 75168 ATA AIRLINES: Wants to Lease Boeing 737s from Q Aviation -------------------------------------------------------- After the Petition Date, ATA Airlines, Inc. and its debtor- affiliates negotiated the return of several leased Boeing 737-800 aircraft. The Debtors also held extensive discussions with various potential lessors to replace a portion of the Returned Aircraft with older Boeing 737 "classic," aircraft to meet ATA Airlines' postpetition fleet plan and operational needs. With the consent of the Official Committee of Unsecured Creditors, the Debtors and Q Aviation, LLC, executed a letter of intent pursuant to which Q Aviation will lease five to 12 Boeing 737 classic aircraft to ATA Airlines. The Letter of Intent contains the financial details of the Leases that are confidential in nature. The Letter of Intent has been filed under seal pursuant to Section 1110 of the Bankruptcy Code. Although the entry of the Q Aviation Leases may be performed in "ordinary course" of business, the Debtors, out of an abundance of caution, ask the United States Bankruptcy Court for the Southern District of Indiana to approve the Leases. Jeffrey J. Graham, Esq., at Sommer Barnard Attorneys, PC, in Indianapolis, Indiana, tells Judge Lorch that, although ATA Airlines is in the process of reviewing and in some cases altering its fleet plan, the addition of the Aircraft to replace a portion of the Returned Aircraft is essential to ATA Airline's continuing operational needs and to the Debtors' reorganization effort. The Debtors further ask the Court to: * lift the automatic stay provided by Section 362(a) to allow Q Aviation to exercise all of its rights and remedies under the Leases. * consider the obligations contained in Section 1110(c)(1) applicable to the Debtors under the Leases. * grant administrative expense status pursuant to Sections 503(b) and 507(a) to any and all claims of Q Aviation arising under or related to the Leases, once the Leases are duly executed. ATSB Responds The Air Transportation and Stabilization Board does not object to the Debtors' proposed transactions with Q Aviation. However, the ATSB intends to clarify that any administrative claim granted to Q Aviation will be subject to and subordinate to the superpriority administrative claim granted to the ATSB Lender Parties pursuant to the April 19, 2005 Court Order approving the Settlement Agreement among the Debtors, the ATSB Lender Parties and the Official Committee of Unsecured Creditors. United States Attorney Susan W. Brooks reminds the Court that if Q Aviation is granted a superpriority claim without the ATSB's prior written consent, the material provisions of the April 19 Order would cease to be valid and binding, constituting an event of default. 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. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants Plan Filing Period Extended to August 22 ------------------------------------------------------------ Pursuant to Section 1121(d) of the Bankruptcy Code, ATA Airlines, Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of Indiana to extend the period during which they have the exclusive right to file a plan of reorganization to and including August 22, 2005. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, explains that, in addition to managing their day-to-day operations, the Debtors and their advisors have been evaluating all facets of their businesses and operations to determine the best method for returning value to their creditors, including, analyzing leases of aircraft used in their operations and executory contracts. The Debtors undertook two auctions, one of which culminated in the closing of a deal with Southwest Airlines, Inc., involving the sale of certain assets at Midway Airport in Chicago, Illinois. Due to the complexity of the auctions and sale processes, the overall complexity of these Chapter 11 cases, and despite diligent efforts working towards a fair and equitable plan formulation, the Debtors require more time to continue to work diligently towards the filing of the Plan. Mr. Nelson says the Debtors will continue to keep the Official Committee of Unsecured Creditors, the Air Transportation Stabilization Board, and Southwest Airlines apprised of their business plans. 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. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) BANC OF AMERICA: Fitch Affirms Five Mortgage Certificate Classes ---------------------------------------------------------------- Fitch Ratings downgrades Banc of America Commercial Mortgage Inc.'s commercial mortgage pass-through certificates, series 2001-1: -- $5.9 million class O to 'CCC' from 'B-'. In addition, Fitch affirms these certificates: -- $95.1 million class A-1 'AAA'; -- $527.8 million class A-2 'AAA'; -- $50 million class A-2F 'AAA'; -- Interest-only class X 'AAA'; -- $35.6 million class B 'AA+'; -- $21.3 million class C 'AA-'; -- $19 million class D 'A'; -- $9.5 million class E 'A-'; -- $9.5 million class F 'BBB+'; -- $19 million class G 'BBB'; -- $14.2 million class H 'BBB-'; -- $13.3 million class J 'BB+'; -- $23.5 million class K 'BB'; -- $2.1 million class L 'BB-'; -- $5.5 million class M 'B+'; -- $6.8 million class N 'B'; Fitch does not rate the $13 million class P certificates. The downgrade is the result of the expected losses on the specially serviced loans. As of the April 2005 distribution date, the pool's aggregate balance has decreased by 8.1% to $871.1 million from $948.1 million at issuance. Currently, 11 loans (7.6%) are in special servicing, five (5.7%) of which are real estate owned. The largest asset (2.3%) in special servicing is a multifamily REO property located in Grapevine, Tex. Occupancy has declined at the property due to a weak rental market in Fort Worth, Texas, and the surrounding area. The special servicer is attempting to increase occupancy at the property before bringing to market. An appeal to a court ruling is ongoing regarding three loans (4.7%) in the transaction. Based on the outcome of the appeal, the expected losses to the trust related to these loans could change. Fitch continues to monitor the appeal process, and will make the necessary ratings adjustments if necessary. Fitch reviewed the 315 Park Avenue loan (10%), the one credit assessed loan in the pool. While occupancy has declined slightly to 87.7% as of September 2004, from 91.3% as of year-end 2003, the financial performance during the first nine months of 2004 was on par with the performance of the property of the previous year. Due to this consistent performance, the loan maintains an investment grade credit assessment. BOMBARDIER INC: Mesaba Airlines Joins Bombardier CRJ Family ----------------------------------------------------------- Bombardier Aerospace welcomes Northwest Airlink partner Mesaba Airlines of Eagan, Minnesota, as the newest operator of the industry-leading Bombardier CRJ family of regional jets. Mesaba was selected to operate the 15 Bombardier CRJ200 aircraft recently ordered by Northwest Airlines. "We're delighted to welcome Mesaba Airlines to the growing list of CRJ operators," said Steven Ridolfi, President, Bombardier Regional Aircraft. "We're confident that Mesaba will realize the same economic benefits, outstanding performance and favorable passenger acceptance as other operators of the world's most popular regional aircraft." Mesaba Airlines will be the 40th operator of Bombardier CRJ aircraft worldwide and the 13th in the U.S. To date, 121 CRJ airliners have been delivered to Northwest Airlines, including 45 Bombardier CRJ200 and 76 Bombardier CRJ440 aircraft. Deliveries of the CRJ200 aircraft to Northwest Airlines are scheduled to commence in the third quarter of 2005. "We believe that the CRJ aircraft will provide our passengers with comfortable and reliable service across our expanding route network in the U.S and Canada," said John Spanjers, President and Chief Operating Officer, Mesaba Airlines. "We are delighted at the opportunity to grow our operations by introducing the CRJ to the fleet." About Mesaba Airlines Founded in 1944 with a single plane to shuttle local employees to neighboring cities, Mesaba Airlines has grown to become the eight largest regional airline in the United States. Mesaba currently serves 109 cities throughout the U.S and Canada, from Northwest Airlines' three major hubs in Minneapolis/St-Paul, Detroit, and Memphis. About Bombardier A world-leading manufacturer of innovative transportation solutions, from regional aircraft and business jets to rail transportation equipment, Bombardier Inc. -- http://www.bombardier.com/-- is a global corporation headquartered in Canada. Its revenues for the fiscal year ended Jan. 31, 2005, were $15.8 billion US and its shares are traded on the Toronto Stock Exchange (BBD). Bombardier, CRJ, CRJ200 and CRJ700 are trademarks of Bombardier Inc. or its subsidiaries. * * * As reported in the Troubled Company Reporter on Apr. 20, 2005, Standard & Poor's Ratings Services affirmed its ratings, including its 'BB' long-term corporate credit rating, on Bombardier Inc. and its subsidiaries. At the same time, Standard & Poor's removed the ratings on Bombardier from CreditWatch, where they were placed Dec. 13, 2004. The outlook is negative. The affirmation follows a review of Bombardier's fiscal 2005 results, a review of financial prospects for the next few years, and recent discussions with senior management regarding financial and strategic priorities. BOXCARS PROPERTIES: Case Summary & 15 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Boxcars Properties, Ltd. dba Parkwood Place Apartments 1400 Parkwood Place Huntsville, Texas 77320 Bankruptcy Case No.: 05-36941 Type of Business: The Debtor owns an apartment building. Chapter 11 Petition Date: May 2, 2005 Court: Southern District of Texas (Houston) Judge: Marvin Isgur Debtor's Counsel: Calvin C. Braun, Esq. Attorney at Law 8100 Washington Avenue, Suite 120 Houston, Texas 77007 Tel: (713) 880-3366 Fax: (713) 880-3225 Total Assets: $2,668,352 Total Debts: $1,492,915 Debtor's 15 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Entergy Gulf States Misc. Business Debt $4,593 P.O. Box 61009 New Orleans, LA 70161-1009 City of Huntsville Misc. Business Debt $3,799 1212 Avenue M Huntsville, TX 77340 Centerpoint Energy Misc. Business Debt $1,651 P.O. Box 4981 Houston, TX 77210-4981 Premium Financing Misc. Business Debt $1,551 Specialists, Inc. P.O. Box 730223 Dallas, TX 75373-0223 Entergy Misc. Business Debt $689 P.O. Box 61009 New Orleans, LA 70161-1009 SBC Misc. Business Debt $601 P.O. Box 930170 Dallas, TX 75393-0170 Reed's Lawn & Landscaping Misc. Business Debt $595 21 Jacob St. Huntsville, TX 77320 National Water & Power Misc. Business Debt $324 22 Executive Park Irvine, CA 92614 Jeffrey Harris Misc. Business Debt $250 304 Ten Oaks Dr. Georgetown, TX 77320 Walker County Hardware Misc. Business Debt $203 P.O. Box 1086 Huntsville, TX 77342-1086 SBC Long Distance Misc. Business Debt $165 P.O. Box 660688 Dallas, TX 75266-0688 AT&T Misc. Business Debt $146 P.O. Box 2969 Omaha, NE 68103-2969 GE Capital Misc. Business Debt $117 P.O. Box 676013 Dallas, TX 75267-6013 Sierra Springs 203038 $78 American Commercial Credit SVC P.O. Box 44587 Phoenix, AZ 85064-4587 IWS-Houston Welding Supply Misc. Business Debt $23 111 Buras Road Belle Chasse, LA 70337 CAROLINA TOBACCO: Wants to Hire Farleigh Wada as Bankr. Counsel --------------------------------------------------------------- Carolina Tobacco Company asks the U.S. Bankruptcy Court for the District of Oregon for permission to employ Farleigh Wada & Witt P.C. as its general bankruptcy counsel. Farleigh Wada is expected to: a) advise and assist the Debtor in its duties and obligations as a debtor-in-possession in the continued operation and management of its business and property; b) assist and represent the Debtor at all court proceedings and any adversary proceedings in its chapter 11 case; c) assist in the review and audit of claims filed against the Debtor and assist in the preparation and negotiation of a disclosure statement and plan of reorganization and in the confirmation process for that plan; and d) provide all other legal services that are appropriate and necessary in the Debtor's chapter 11 case. Tara J. Schleicher, Esq., a Shareholder at Farleigh Wada, discloses that the Firm received a $200,000 retainer. Ms. Schleicher charges $215 per hour for her services. Ms. Schleicher reports Farleigh Wada's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- F. Scott Farleigh Partner $285 David R. Ludwig Counsel $265 Valerie T. AuerBach Counsel $260 Brian R. Witt Counsel $260 Judy Gehrke Paralegal $90 Deborah R. Lewis Paralegal $90 Katie Reeder Paralegal $90 Farleigh Wada assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Portland, Oregon, Carolina Tobacco Company -- http://www.carolinatobacco.com/-- manufactures the Roger-brand cigarettes. The Company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Ore. Case No. 05-34156). When the Debtor filed for protection from its creditors, it listed total assets OF $24,408,298 and total debts of $14,929,169. CAROLINA TOBACCO: Wants to Hire Brownstein Rask as Special Counsel ------------------------------------------------------------------ Carolina Tobacco Company asks the U.S. Bankruptcy Court for the District of Oregon for permission to employ Brownstein, Rask, Sweeney, Kerr, Grim, DeSylvia & Hay, LLP, as its special counsel. Brownstein Rask is expected to: a) assist the Debtor's general bankruptcy counsel, Farleigh Wada, in adversary proceeding litigation cases pending in several U.S. states; b) represent the Debtor in negotiations of any settlements with the National Association of Attorney General; and c) manage and assist the Debtor's out-of-state counsel in the pending foreign proceedings in both the state and federal courts. Paul G. Dodds, Esq., a Partner at Brownstein Rask, discloses that the Firm received a $144,000 retainer. Mr. Dodds charges $210 per hour for his services. Mr. Dodds reports Brownstein Rask's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Andrew P. Kerr Counsel $210 Rebekah L. Stiles Counsel $150 Brownstein Rask assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Portland, Oregon, Carolina Tobacco Company -- http://www.carolinatobacco.com/-- manufactures the Roger-brand cigarettes. The Company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Ore. Case No. 05-34156). Tara J. Schleicher, Esq., at Farleigh Wada & Witt P.C. represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets OF $24,408,298 and total debts of $14,929,169. CARRINGTON MORTGAGE: Rates $7.7 Mil. Private Certificates at BB+ ---------------------------------------------------------------- Carrington Mortgage Loan Trust asset backed certificates, series 2005-NC2, are rated as: -- $553.7 million classes A-1, A-2 and A-3 certificates 'AAA'; -- $28.1 million class M-1 certificates 'AA+'; -- $25.6 million class M-2 certificates 'AA'; -- $15.4 million class M-3 certificates 'AA'; -- $26.7 million class M-4 certificates 'A'; -- $12.1 million class M-5 certificates 'A-'; -- $11 million class M-6 certificates 'BBB+'; -- $9.9 million class M-7 certificates 'BBB'; -- $8.8 million class M-8 (privately offered) certificates 'BBB'; -- $7.7 million class M-9 (privately offered) certificates 'BB+'. The 'AAA' rating on the senior certificates reflects the 23.18% total credit enhancement provided by: * the 3.90% class M-1, * the 3.55% class M-2, * the 2.13% class M-3, * the 3.70% class M-4, * the 1.67% class M-5, * the 1.52% class M-6, * the 1.37% class M-7, * the 1.22% class M-8, * the 1.06% class M-9 and * the 3.04% initial overcollateralization. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the integrity of the transaction's legal structure as well as the primary servicing capabilities of New Century Mortgage Corporation (rated 'RPS3' by Fitch). Deutsche Bank National Trust Company will act as trustee. As of the cut-off date, May 1, 2005, the mortgage loans have an aggregate balance of $720,677,652. One hundred percent of the loans have interest-only periods, which range from two to five years. The weighted average mortgage rate is approximately 6.517% and the weighted average remaining term to maturity is 357 months. The average cut-off date principal balance of the mortgage loans is approximately $284,986. The weighted average original loan-to-value ratio is 81.98% and the weighted average Fair, Isaac & Co. score is 652. The properties are primarily located in California (63.13%), Florida (4.58%) and Nevada (3.30%). COMPOSITE SOLUTIONS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Composite Solutions, Inc., a Florida Corporation P.O. Box 372 La Jolla, California 92038-0372 Bankruptcy Case No.: 05-04045 Type of Business: The Debtor develops and integrates high technology composite products and processes for sale to the construction industry. Chapter 11 Petition Date: May 5, 2005 Court: Southern District of California (San Diego) Judge: Peter W. Bowie Debtor's Counsel: Daniel Masters, Esq. Law Offices of Daniel C. Masters 6136 Mission Gorge Road, Suite 111 San Diego, California 92120 Tel: (619) 283-0333 Total Assets: $517 Total Debts: $1,837,698 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Dr. Gilbert Hegemier Loan $586,437 7350 Brodiaea Way La Jolla CA 92037 Tom Bache Loan $219,836 410 Westbourne Street La Jolla CA 92037 Allan Mangold Services $200,000 1011 Farrand Court Fallbrook CA 92028 Dr. Gilbert Hegmier Services $191,438 Jang Lee Services $110,816 Tom Bache Services $79,327 UC Regents #3 License Fees $61,248 Dr. Gilbert Hegemier Unreimbursed Expenses $60,622 Santosh K. Arya Loan $47,450 Duane Gee Loan $44,911 Michael J. Perlman Services $30,000 Edward Davis Services $30,000 Internal Revenue Service Federal income taxes $20,251 Smaha & Daley Attorneys Fees $19,222 Armhein Foley/Ace Intl(AFA) Services $17,500 Tom Bache Unreimbursed Expenses $15,906 Anna D'amico Wages $14,423 Tom Bache Vacation pay $10,945 Joyce E. Jones Loan $10,299 Blanchard Krasner & French Services $9,865 COMPOSITE TECHNOLOGY: Files Chapter 11 Petition in C.D. Calif. -------------------------------------------------------------- Composite Technology Corporation (OTC Bulletin Board: CPTC) filed a voluntary chapter 11 petition in the United States Bankruptcy Court for the Central District of California in Sta. Ana yesterday, May 5, 2005. The filing was made to resolve several litigation matters involving claims that demand certain CTC stock for alleged services and performance under some subscription agreements. The filing will enable the Debtor to continue to develop, produce and market its innovative and cost effective composite core electrical conductor to the utility industry. CTC's strategic partners have indicated their continued support throughout this voluntary reorganization. "CTC's plans to immediately submit a plan of reorganization providing for payment in full (100%) to unsecured creditors including honoring and adhering to the material provisions of its debenture holder agreements," said Leonard M. Shulman of Shulman Hodges & Bastian LLP in Foothill Ranch, California, CTC's bankruptcy counsel. Although CTC remains steadfast in opposing these claims, the ongoing cost of litigation in diverse jurisdictions necessitates the consolidation of these cases into a single forum. "Although CTC's financial condition remains strong, this litigation must be resolved so that CTC may continue to grow and implement its goals," said CTC's Chairman and CEO Benton Wilcoxon. "We have chosen to file this litigation-driven Chapter 11 to allow the Company's management to devote its full resources to the production and marketing of our products, rather than the demands and concerns created by litigation events that the company believes are merely extortionate claims made by those parties that have not contributed real value to the company. Given the unknown consequences of litigation which might have endangered our ability to continue as a company, we have sought protective measures. We are confident that our product sales will move forward and allow us to achieve our objectives and that our strategic partners understand that this reorganization will allow us to focus on introducing our key ACCC cable product to an industry that is in great need of a good solution to an overloaded electrical grid system." Mr. Wilcoxon stressed: "Our relationships with our customers, suppliers, strategic partners, and shareholders remain our primary focus which should allow us to achieve the objectives of building the company as well as building shareholder value." As a demonstration of its commitment to move quickly through the bankruptcy process and to commence payments to its creditors, CTC plans to file its Chapter 11 disclosure statement and reorganization plan as well as numerous procedural and substantive motions concurrently with the filing of its bankruptcy petition. CTC has taken swift action to maximize the value of its business for all creditors and interest holders. Consequently, CTC is optimistic that it will confirm its plan of reorganization and emerge from bankruptcy within 90 to 120 days. During the bankruptcy proceeding, CTC will be operating in a "business as usual fashion" paying its post-bankruptcy debts as they become due and timely servicing its customers' needs. Headquartered in Irvine, California, Composite Technology Corporation -- http://www.compositetechcorp.com/-- provides high performance advanced composite core conductor cables for electric transmission and distribution lines. The proprietary new ACCC cable transmits two times more power than comparably sized conventional cables in use today. ACCC can solve high-temperature line sag problems, can create energy savings through less line losses, and can easily be retrofitted on existing towers to upgrade energy throughput. ACCC cables allow transmission owners, utility companies, and power producers to easily replace transmission lines without modification to the towers using standard installation techniques and equipment, thereby avoiding the deployment of new towers and establishment of new rights-of- way that are costly, time consuming, controversial and may impact the environment. The Company filed for chapter 11 protection on May 5, 2005 (Bankr. C.D. Calif. Case No. 05-13107). Leonard M. Shulman, Esq., at Shulman Hodges & Bastian LLP, represents the Debtor in its restructuring efforts. As of March 31, 2005, the Debtors reported $13,440,720 in total assets and $13,645,199 in total liabilities. COMPOSITE TECHNOLOGIES: Voluntary Chapter 11 Case Summary --------------------------------------------------------- Debtor: Composite Technology Corporation 2026 McGaw Avenue, Irvine, California 92614 Bankruptcy Case No.: 05-13107 Type of Business: The Debtor provides composite core conductor cables for electric transmission and distribution lines. See http://www.compositetechcorp.com/ Chapter 11 Petition Date: May 5, 2005 Court: Central District of California (Santa Ana) Judge: John E. Ryan Debtor's Counsel: Leonard M. Shulman, Esq. Shulman Hodges & Bastian LLP 26632 Towne Center Drive #300 Foothill Ranch, California 92610-2808 Tel: (949) 340-3400 Financial Condition as of March 31, 2005: Total Assets: $13,440,720 Total Debts: $13,645,199 A list of the Debtor's 20 Largest Unsecured Creditors was not available as of press time. CP SHIPS: Acquires Borg International Freight Services ------------------------------------------------------ CP Ships Limited has acquired Borg International Freight Services Inc. Based in Montreal, Borg specializes in ocean and air freight forwarding and employs 22 people. Its annual gross revenue in 2004 was US $14 million. "The acquisition of Borg is a continuation of our plan to selectively develop logistics services as a way of leveraging strong regional market positions and adding value to our core container services. With Borg's Asian focus, we can build on the platform created by our acquisition of ROE Logistics a year ago," said Chairman Ray Miles. Borg's owner and founder Richard Azoulay is assuming a management role within the CP Ships logistics organization. One of the world's leading container shipping companies, CP Ships provides international container transportation services in four key regional markets: TransAtlantic, Australasia, Latin America and Asia. Within these markets CP Ships operates 39 services in 23 trade lanes, most of which are served by two or more of its brands: ANZDL, Canada Maritime, Cast, Contship Containerlines, Italia Line, Lykes Lines and TMM Lines. As of Sept. 30, 2004, CP Ships' vessel fleet was 81 ships and its container fleet 457,000 teu. Its 2003 volume was 2.2 million teu, more than 80% of which was North American exports or imports. It also owns Montreal Gateway Terminals, which operates one of the largest marine container terminal facilities in Canada. CP Ships' stock is traded on the Toronto and New York stock exchanges under the symbol TEU. It is listed in the S&P/TSX 60 Index of top Canadian publicly listed companies. * * * As reported in the Troubled Company Reporter on Feb. 24, 2004, Standard & Poor's Ratings Services assigned its 'BB+' rating to container shipping company CP Ships Ltd.'s US$175 million convertible senior subordinated note issue. At the same time, the 'BBB-' long-term corporate credit and 'BB+' senior unsecured debt ratings on the company were affirmed. Proceeds from the notes will be used to reduce drawings under the company's credit lines. The outlook is stable. CREDIT SUISSE: Fitch Holds CC Rating on $16.1 Million Class I ------------------------------------------------------------- Credit Suisse First Boston Mortgage Securities Corporation's mortgage pass-through certificates, series 1998-C1 are upgraded by Fitch Ratings: -- $136.6 million class C to 'AAA' from 'AA-'; -- $136.6 million class D to 'A' from 'BBB'; -- $37.3 million class E to 'BBB' from 'BBB-'. In addition, Fitch affirms these certificates: -- $6.6 million class A-1A 'AAA'; -- $1.1 billion class A-1B 'AAA'; -- $245.7 million class A-2M 'AAA'; -- Interest only class A-X 'AAA'; -- $136.6 million class B to 'AAA'. The $16.1 million class I remains at 'CC'. Fitch does not rate the $142.7 million class F, $18.7 million class G or $49.6 million class H. Class J has been depleted due to realized losses from the disposition of specially serviced loans. The upgrades are the result of increased subordination levels due to loan payoffs and amortization. As of the April 2005 distribution date, the pool's aggregate certificate balance has decreased 19.9%, to $1.98 billion from $2.48 billion at issuance. The pool is well diversified, with 286 of the original 324 loans remaining and a top five loan representing of 19.3%. To date, the transaction has realized losses in the amount of $58.5 million. Fitch remains concerned with the number of specially serviced loans in the transaction. There are currently eight loans (2.5%) in special servicing. Of the eight loans, three loans (0.9%) are real estate owned properties. Losses have been projected on the majority of specially serviced loans. Appraisal subordinate entitlement reduction adjustments have already been realized to the trust for many of these loans. Four loans have been assigned an individual credit assessment by Fitch. Of the four loans, currently three - Combined Properties Portfolio, Edens and Avant Portfolio and 45 Wall Street - maintain investment grade credit assessments. One loan, The Ritz Carlton- Cancun, maintains a below investment grade credit assessment. The Combined Properties Portfolio (5.39%) had a year-end 2004 Fitch stressed debt service coverage ratio increase to 1.71 times compared to 1.66x as of YE 2003 and 1.31x at issuance. The weighted average occupancy increased to 96.9% as of YE 2004 compared to 94.3% at issuance. The Edens and Avant Portfolio (3.91%) has shown improved performance with a Fitch Adjusted Net Cash Flow up 24.9% since issuance. Fitch stressed DSCR has increased to 1.79x for YE 2004 compared to 1.67x for YE 2003 and 1.44x at issuance. The occupancy as of YE 2004 has remained strong at 94.2%. The Ritz Carlton - Cancun (3.43%) is secured by the beneficiary interest in a trust which holds the 365-room hotel located in Cancun, Mexico. Although the performance of the collateral has declined due to a decrease in international tourism, the servicer provided financials show an improvement in collateral performance. The Fitch stressed DSCR for YE 2004 has rebounded to 1.48x compared to 1.05x for YE 2003 and 1.61x at issuance. Fitch will continue to monitor the progress of the collateral. The YE 2004 Fitch stressed DSCR for 45 Wall Street (2.8%) remains strong at 2.01x as compared to 2.25x as of YE 2003 and 1.17x at issuance. As of YE 2004, occupancy has remained at 99% compared to 99% as of YE 2003 and 95% at issuance. The Fitch stressed DSCR was calculated using net cash flow adjusted for market vacancy, capital reserves and non-cash items, divided by actual debt service utilizing a stressed refinance constant. Fitch applied various stress scenarios taking into consideration the expected losses on the above loans of concern. Under these scenarios, the subordination levels were sufficient to upgrade certain ratings. DAVID SHOWKER: Case Summary & 10 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: David Slyman Showker, III 644 Greenville Avenue PMB 311 Staunton, Virginia 24401 Bankruptcy Case No.: 05-50726 Chapter 11 Petition Date: April 30, 2005 Court: Western District of Virginia (Harrisonburg) Judge: Ross W. Krumm Debtor's Counsel: David W. Earman, Esq. 57 South Main Street, Suite 206 Harrisonburg, Virginia 22801 Tel: (540) 434-7306 Total Assets: $2,755,739 Total Debts: $1,815,668 Debtor's 10 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ SunTrust Deed of Trust $215,940 P.O. Box 85160 Value of security: Richmond, VA 23285 $195,000 Capital One Credit Card Purchases $27,320 P.O. Box 85147 Richmond, VA 23276 Community Bank Personal loan $20,000 P.O. Box 1209 Staunton, VA 24401 Elmore, Hupp & Co. Accountant fees $19,942 P.O. Box 2607 Staunton, VA 24401 Community Bank Personal loan $19,110 P.O. Box 1209 Staunton, VA 24401 Chase Personal loan $19,046 P.O. Box 15650 Wilmington, DE 19886 DuPont Community Credit Personal loan $19,000 Union 140 Lucy Lane P.O. Box 1365 Waynesboro, VA 22980 Webb, James and Betty Open account $5,514 200 Conner Road Waynesboro, VA 22980 Lowe's Credit card purchases $3,797 P.O. Box 105980 Atlanta, GA 31353 Vellines, Wick Attorney fees $1,470 P.O. Box 235 Staunton, VA 24401 DEUTSCHE ALT-A: S&P Holds Low-B Ratings on Four Cert. Classes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 48 classes of pass-through certificates from four transactions issued by Deutsche Alt-A Securities Inc. The affirmations are based on credit support that is sufficient to maintain the current rating levels. Credit support for Deutsche Alt-A Securities Inc. Alternative Loan Trust Series 2003-1 and Deutsche Alt-A Securities Inc. Mortgage Loan Trust Series 2003-3 is provided by subordination. Credit support for Deutsche Alt-A Securities Inc. Mortgage Loan Trust Series 2003-2XS and 2003-4XS is provided by excess spread, overcollateralization, and subordination. Cumulative losses in these transactions range from 0.00% to 0.07% of the original pool balances. In addition, 90-plus-day delinquencies (including REOs and foreclosures) range from 0.33% to 6.26% of the current pool balances. The underlying collateral consists of conventional fixed-rate residential mortgage loans secured by first liens on one- to four- family residential properties. The mortgage loans have original terms to maturity not greater than 30 years. Ratings Affirmed Deutsche Alt-A Securities Inc. Alternative Loan Trust Series Class Rating ------ ----- ------ 2003-1 A-1, A-2, A-3, A-PO, A-X AAA 2003-1 M AA 2003-1 B-1 A 2003-1 B-2 BBB 2003-1 B-3 BB 2003-1 B-4 B Deutsche Alt-A Securities Inc. Mortgage Loan Trust Series Class Rating ------ ----- ------ 2003-2XS A-3, A-4, A-5, A-6, A-IO AAA 2003-2XS M-1 AA 2003-2XS M-2 A 2003-2XS M-3 BBB 2003-3 I-A-1, I-A-X, II-A-1, II-A-2, II-A-3 AAA 2003-3 II-A-4, II-A-5, II-A-6, II-A-7, II-A-X AAA 2003-3 A-PO-1, III-A-1, IV-A-1, A-PO-2, M-X AAA 2003-3 M AA 2003-3 B-1 A 2003-3 B-2 BBB 2003-3 B-3 BB 2003-3 B-4 B 2003-4XS A-2, A-3, A-4, A-5, A-6A, A-6B, A-IO AAA 2003-4XS M-1 AA 2003-4XS M-2 A 2003-4XS M-3 BBB DEXCOM INC: March 31 Balance Sheet Upside-Down by $54.6 Million --------------------------------------------------------------- DexCom, Inc. (NASDAQ:DXCM) reported a net loss of $6.0 million for the three months ended March 31, 2005 compared to a net loss of $3.2 million for the three months ended March 31, 2004. Net loss attributable to common stockholders was $6.1 million for the three months ended March 31, 2005 compared to $4.0 million for the three months ended March 31, 2004. Included in the net loss attributable to common stockholders was accretion to redemption value of cumulative dividends earned on DexCom's Series B and C redeemable convertible preferred stock, and financing costs on Series B, C, and D redeemable convertible preferred stock, of $107,000 and $809,000 for the three months ended March 31, 2005 and 2004, respectively. Upon the closing of DexCom's initial public offering on April 19, 2005, all outstanding shares of preferred stock automatically converted into common stock. Research and development expense increased $2.2 million to $5.0 million for the three months ended March 31, 2005, compared to $2.8 million for the three months ended March 31, 2004. The increase was primarily related to $1.0 million for the short-term sensor approval support trial and associated expense related to the filing of the pre-market approval application with the FDA. DexCom also incurred an additional $0.6 million in material and labor expenses to produce our clinical trial product supplies and an additional $0.5 million in salary and other compensation expenses related to the addition of twenty-one employees. Selling, general and administrative expense increased $0.2 million to $0.5 million for the three months ended March 31, 2005, compared to $0.3 million for the three months ended March 31, 2004. The increase was primarily due to higher independent auditor fees and salary costs from increased headcount. On April 19, 2005, DexCom closed the initial public offering of its common stock in which it sold 4,700,000 shares of common stock for gross proceeds of $56.4 million. After deduction of underwriting discounts and commissions, DexCom received proceeds of $52.5 million that excluded $1.9 million in estimated offering expenses payable by DexCom. About the Company DexCom, Inc., headquartered in San Diego, Calif., is a development stage medical device company focused on the design and development of continuous glucose monitoring systems for people with diabetes. At Mar. 31, 2005, DexCom, Inc.'s balance sheet showed a $54,647,250 stockholders' deficit, compared to a $49,309,930 deficit at Dec. 31, 2004. DURA AUTOMOTIVE: Refinances Loan with New $325M Credit Facilities ----------------------------------------------------------------- DURA Automotive Systems, Inc. (Nasdaq:DRRA) closed $325 million in new senior secured credit facilities. The new credit facilities include: (1) a $175 million asset-based revolving credit facility supported by a monthly borrowing base, to expire in May 2010; and (2) a $150 million senior secured second-lien term loan, due in May 2011; to refinance a $175 million revolving credit facility to expire in 2008 and a $111 million term loan C, due in 2008. "We believe the improved liquidity position from these new credit facilities will allow DURA to meet the near-term challenges in the automotive industry while maintaining our strategic course toward profitable growth and long-term value to our investors," said Keith Marchiando, vice president and chief financial officer of DURA Automotive. "We would like to thank our lenders for their continued support and confidence throughout this process." About the Company Headquarted in Rochester Hills, Michigan, DURA Automotive Systems, Inc., -- http://www.duraauto.com/-- is a leading independent designer and manufacturer of driver control systems, seating control systems, glass systems, engineered assemblies, structural door modules and exterior trim systems for the global automotive and recreation & specialty vehicle industries. DURA sells its products to every major North American, Asian and European automotive original equipment manufacturer (OEM) and many leading Tier 1 automotive suppliers. * * * As reported in the Troubled Company Reporter on Apr. 13, 2005, Moody's took these rating actions in conjunction with Dura Operating Corp.'s proposal to refinance its existing $286 million guaranteed senior secured first-lien credit agreement by simultaneously executing a new $175 million guaranteed senior secured first-lien asset-based revolving credit agreement (not rated) and a new $115 million guaranteed senior secured second- lien term loan. ELECTRIC CITY: Raises $5.6 Million in Equity Sale ------------------------------------------------- Electric City Corp. (Amex: ELC) recently closed on a series of transactions in which it raised gross proceeds of $5.625 million through the sale of common stock and warrants, and used $1.64 million of the proceeds to facilitate the closing of its previously announced acquisition of Maximum Performance Group. MPG is a leading provider of web-based, real-time energy asset management solutions designed to improve operating efficiencies associated with energy and facilities management with a focus on commercial and industrial air conditioning systems. The combined transactions included the purchase of MPG for $1.64 million in cash and 2.5 million shares of ELC stock. Shareholders of MPG will also be able to earn up to approximately 2.5 million in additional shares of ELC stock through an earn-out tied to the subsidiaries performance over the next eight quarters. The combined transactions also included the closing of $5.625 million in corporate funding through the sale of a package of securities to four investors, which included 6.25 million shares of its common stock and 3 year warrants to purchase 3.125 million additional shares of common stock at $1.05 per share. "We are very pleased to add Maximum Performance Group to our enterprise and to ensure proper funding for our growth as we see a pick up in our business across our two main sectors -- utility VNPPs and pull-thru customer sales," declared John Mitola, Electric City's Chief Executive Officer. "As we stated when we announced our intent to acquire MPG, this acquisition is the right addition at the right time and represents one of the most significant developments in ELC's history. Adding MPG to our enterprise, effectively doubles the size of Electric City's business, doubles the size of our staff, triples the reach of our corporate offices into very important locations in New York and California and more than doubles our platform of technology and corresponding available marketplace, by adding their eMAC air conditioning controller along with their other systems." "We have again demonstrated that our team has the wherewithal to continue to build ELC in a bold, yet prudent manner," continued Mr. Mitola. "We are confident that we struck the right balance by purchasing MPG at a very fair valuation and by raising a reasonable amount of additional corporate equity to ensure our growth and stability. By doubling our technological reach and maintaining proper levels of funding, we believe our customers and utility buyers find our enterprise to offer the widest range of energy efficiency/demand response systems while ensuring confidence in our ability to deliver. Today, we remain the only, publicly held company dedicated to the development of large-scale demand response systems (our VNPP) and we believe we are the only company in the marketplace that now offers, direct, add-on efficiency controls for lighting and air conditioning." "We feel that this transaction is a complete win-win for all parties involved," added Jeff Mistarz, Electric City's Chief Financial Officer. "As a result of this transaction all shareholders benefit from: -- The acquisition of Maximum Performance Group should greatly accelerate ELC's overall business growth, top line revenue and VNPP development. -- By acquiring MPG and issuing shares to their owners, another group of leading strategic investors joins our family including Nth Power, an energy ventures fund made up of utilities such as Alliant Energy, Dominion, FirstEnergy, Ontario Power Generation, Pacificorp, Sierra Pacific and Cinergy. -- By including additional utility and energy investors in this acquisition, ELC gains increased access to and credibility with both end use customers and utility companies. -- ELC becomes the only public company that manufactures and installs after market, add-on, lighting and air conditioning controls. -- ELC adds valuable senior management and expands its sales personnel and engineering and support staff in key geographical locations New York and California. -- ELC becomes the leading company that currently develops large-scale, demand response systems for utilities which are made up of lighting and air conditioning, thereby accelerating development timelines -- because more electric load can be captured at each customer facility. -- The simultaneous closing of the acquisition and corporate equity ensures a proper level of balance sheet stability needed to fund the Company's growth. -- ELC positions itself as the leading platform public company for providing patented energy efficiency technologies and development of large-scale, demand response systems." The added liquidity resulting from the funding will significantly improve the company's balance sheet strength, while it is also expected to accelerate the Company's growth as a leading developer and manufacturer of energy savings technologies and demand response systems. The group of investors participating in this funding included new and existing ELC investors and investment funds which specialize in utility and other energy investments. Going Concern Doubt The Company received a going concern opinion BDO SEIDMAN, LLP, on its audited financial statements for the period ended Dec. 31, 2004, largely as a result of its lack of liquidity and continuing losses. Electric City posted a $9.7 million loss in 2004. About Maximum Performance Group Maximum Performance Group -- http://www.maxpg.com/-- is a technology-based provider of energy and asset management products and services. The Company currently manufactures and markets its eMac line of controllers for HVAC and lighting applications and its Maximum Performance Software for coordination and control of central cooling plants. The eMac line of controllers provide intelligent control and continuous monitoring of HVAC and lighting equipment via wireless paging technology to reduce energy usage and improve system reliability. Maximum Performance Group has offices in College Point, NY and San Diego, CA. About Electric City(R) Electric City(R) is a leading developer, manufacturer and integrator of energy savings technologies and building automation systems. The Company currently markets the EnergySaver(TM), the GlobalCommander(R), as well as its independent development of scalable, negative power systems under the trade name Virtual "Negawatt" Power Plan "VNPP"(R). The Company is developing its first VNPP(R) development -- a 50-Megawatt negative power system for ComEd in Northern Illinois, a second system in the Denver area for Xcel Energy, a pilot program in Ontario, Canada with Enersource and now, a fourth system with PacifiCorp in the Salt Lake City area. Electric City(R) is based in Elk Grove Village, Illinois and is traded on the American Stock Exchange under the symbol ELC. Additional information is available at the Company's Web site at http://www.elccorp.com/or by calling 847-437-1666. ENERGEM RESOURCES: Expects to Release Tardy Financials by May 10 ---------------------------------------------------------------- Energem Resources Inc. was not able to file its audited financial statements for the first quarter ended Feb. 28, 2005, by the originally contemplated April 29, 2005, filing date. The Company's auditor continues to be in the process of completing the reviews and related report for the Annual financial statements. Once the Annual financial statements are finalized, the First Quarter financial statements can also be finalized. The Company now expects to file both the Annual Financial Statements and the First Quarter Financial Statements by Sunday, May 10, 2005. The Company advises that there is no actual or anticipated default of a financial statement filing requirement subsequent to that disclosed in the Notice of Default. Issuer Cease Trade Order As reported in the Troubled Company Reporter on Apr. 27, 2005, the securities commission or regulators may impose an issuer cease trade order if the Annual Financial Statements are not filed by June 19, 2005, and the First Quarter Statements are not filed by June 14, 2005. An issuer CTO may be imposed sooner if the Company fails to file its Default Status Reports on time. The Company intends to satisfy the provisions of the default status reports of (the) CSA Staff Notice 57-301 as long as it remains in default of the financial statement filing requirements by issuing, during the period of default, a Default Status Report on a bi-weekly basis. The Company advises that it is not subject to any insolvency proceeding. The Company advises that there is no other material information concerning the affairs of the Company that has not been generally disclosed. Energem Resources Inc. is a natural resources company listed on the Toronto Stock Exchange with projects in the energy and mining sectors in a number of African countries. The Company is committed to developing niche high margin natural resource projects in Africa and is currently active in 16 countries. Ventures encompass diamond mining and mineral exploration, mid- and up stream oil and gas projects, energy and mining related manufacturing, trading and trade finance businesses operating off a common logistics platform and infrastructure. The Company has offices and/or logistics and support infrastructure in Johannesburg, London, Beijing and a number of African countries. EURASIA GOLD: Delays Filing of Financial Reports Until May 15 ------------------------------------------------------------- Eurasia Gold Corp. (TSXV- EGX) will delay the filing of its comparative financial statements for the fiscal year ended Dec. 31, 2004, on or prior to April 30, 2005, which is 120 days after the end of Eurasia's last fiscal year, as required by applicable securities laws in the jurisdictions in which Eurasia is a reporting issuer. The Board of Directors of Eurasia passed a resolution effective Feb. 22, 2005, to appoint Deloitte & Touche LLP, Almaty, Kazakhstan, as auditors of Eurasia for the year ending Dec. 31, 2004. Prior to the appointment of Deloitte & Touche LLP, KPMG LLP had been Eurasia's auditors. The reason for the delay in preparing and filing the Annual Audited Financial Statements is that Eurasia's current auditor, Deloitte & Touche LLP, has informed Eurasia that it will be unable to render its audit report in respect of the Annual Audited Financial Statements prior to the April 30, 2005 deadline. The delay is primarily caused by the change of auditor from KPMG LLP to Deloitte & Touche LLP and that Eurasia's operations and successor auditor are located in Kazakhstan. Cease Trade Order Based on discussions with Eurasia's current auditor, it is anticipated that the annual financial statements will be prepared and filed on or about May 15, 2005. Should Eurasia fail to file its annual financial statements by June 30, 2005, a cease trade order may be imposed by the applicable securities commissions requiring that all trading in securities of Eurasia cease for such period specified in the order. It is anticipated that during the period of time that the annual financial statements remain outstanding, the insiders of Eurasia will be subject to a management cease trade order, prohibiting such insiders from trading Eurasia securities. Eurasia intends to satisfy the provisions of the alternate information guidelines of CSA Staff Notice 57-301 for so long as it remains in default of the financial statement filing requirements of applicable securities laws. Eurasia Gold Corp. has 118,332,250 common shares outstanding. FAIRPOINT COMMS: Recapitalization Wipes Out Shareholder Deficit --------------------------------------------------------------- FairPoint Communications, Inc. (NYSE:FRP) reported its financial results for the first quarter ended March 31, 2005. Highlights include: -- Successfully closing a $462.5 million initial public offering and obtaining a $688.5 million credit facility to complete a recapitalization and de-leveraging of the company. -- Earnings per share for the first quarter of $0.32 compared to a loss per share of $0.49 for the same period in 2004. -- Operating revenues for the period of $61.7 million, up 1.1% over the first quarter 2004 on gains in data/Internet and long distance revenues. -- Consolidated net income of $11.0 million versus the prior year period net loss of $4.6 million. -- Excluding a $2.5 million one-time distribution received in the 2004 first quarter, Adjusted EBITDA (as defined herein) was down 1.8% to $32.4 million from the same period in 2004. -- Sequential growth of total access line equivalents by 1,233 to 276,167, a 0.4% increase over the prior quarter as a result of increased business and high-speed data customers that more than offset voice access line decreases of 0.4%. -- Closing of the Berkshire Telephone Corporation acquisition on May 2nd and the signing of a definitive agreement and plan of merger to acquire Bentleyville Communications Corporation, a company adjacent to FairPoint's existing operations in Pennsylvania. "We are pleased with the performance of our business this quarter and are on track with our business plan. We are seeing the benefits from real growth in key areas of our business, careful cost control and our new, strengthened capital structure," said Eugene Johnson, Chairman and Chief Executive Officer. "Although the benefits of interest savings from our recapitalization won't be fully realized until the third quarter of this year, there has already been a significant benefit to net income." "We also continue to deliver on our acquisition strategy and are pleased to announce that we completed the acquisition of Berkshire Telephone on May 2, 2005, and that we signed an agreement on April 22, 2005 to acquire Bentleyville Communications in Southwestern Pennsylvania. The Bentleyville Communications transaction is smaller than the completed Berkshire transaction, but we expect both transactions to add to our Cash Available for Dividends this year," continued Mr. Johnson. "We will continue to seek acquisitions with limited integration risk and attractive cash returns." First Quarter Results FairPoint reported consolidated revenues from continuing operations for the three months ended March 31, 2005 of $61.7 million, an increase of 1.1% or $0.7 million compared to the three months ended March 31, 2004 of $61.0 million. Revenue growth was the result of increases in data/Internet and long distance revenues, which more than offset expected decreases in Universal Service (USF) and access revenues. Income from continuing operations was $16.2 million for the three months ended March 31, 2005 compared to $18.5 million for the three months ended March 31, 2004, a 12.4% decrease driven principally by the increased percentage of lower margin unregulated revenues in the total business mix due to DSL and long distance revenue growth. Excluding the higher cost of goods sold of $1.3 million related to growth in unregulated revenues, comparable cash expenses were up only 2.2% from the 2004 first quarter. Total operating expenses (including depreciation and amortization and stock based compensation) increased $2.9 million or 6.9% for the three months ended March 31, 2005 compared to the same period in the prior year. Depreciation and amortization expense increased $0.6 million and stock based compensation increased $0.4 million for the three months ended March 31, 2005 compared to 2004 first quarter. FairPoint reported earnings per share of $0.32 for the three months ended March 31, 2005, compared to a loss per share of $0.49 for the same period in 2004. This improvement is the result of the company's recapitalization completed on February 8, 2005 associated with the company's initial public offering, which substantially de-leveraged the company and provided a decrease in interest expense and consequently an improvement in earnings. The repurchase of the company's series A preferred stock and high yield debt resulted in significant one-time charges that are reflected in the financial statements. The company recognized income tax benefits of $28.9 million due to the taxable loss in the quarter driven primarily by the expenses incurred from the recapitalization. In addition, the company recognized income tax benefits of $66.0 million from the recognition of deferred tax benefits from the reversal of the deferred tax valuation allowance resulting from the company's expectation of generating future taxable income following the recapitalization. Adjusted EBITDA for the three months ended March 31, 2005 was $32.4 million, excluding one-time transaction expenses of approximately $86.2 million incurred in connection with the company's recapitalization, compared to Adjusted EBITDA of $35.5 million for the same period in the prior year. In the first quarter 2004, the company received a one-time distribution of $2.5 million related to the sale of a cellular partnership interest. Cash Available for Dividends (as defined herein) was approximately $12.8 million for the three months ended March 31, 2005 compared to a negative $3.1 million in the first quarter of 2004. On a pro forma basis assuming the recapitalization was completed on Jan. 1, 2005, Cash Available for Dividends was $18.2 million. Proposed Bentleyville Acquisition FairPoint has entered into a definitive agreement and plan of merger under which Bentleyville Communications would become a wholly owned subsidiary of FairPoint. Bentleyville Communications provides telecommunications, cable and Internet services to rural areas of Southwestern Pennsylvania and has approximately 3,586 access line equivalents currently in operation, which are adjacent to the company's existing operations in Pennsylvania. Through the Bentleyville Communications acquisition, FairPoint will double the number of access lines it serves in this region. The transaction is expected to contribute to FairPoint's Cash Available for Dividends, and is expected to close during the third quarter of 2005. Other Highlights -- On May 2, 2005, FairPoint successfully completed its acquisition of Berkshire Telephone Corporation for approximately $19.2 million before adjustments. Berkshire, established in 1926 and headquartered in Kinderhook, NY, provides service to approximately 7,300 access line equivalents serving five communities. Berkshire is adjacent to FairPoint's Taconic Telephone Corp. located in eastern New York State -- On February 8, 2005, FairPoint completed an initial public offering of 25,000,000 shares of its common stock at a price to the public of $18.50 per share. In connection with the IPO, the company obtained a new senior secured credit facility consisting of a $100 million revolving facility and a $588.5 million B-Term loan facility. FairPoint used the proceeds from the IPO and borrowings under its new credit facility primarily to refinance its existing credit facility, consummate tender offers for its outstanding high yield debt, redeem its series A preferred stock, repay operating subsidiary debt and pay related fees and expenses. Outlook "We are extremely confident in our business model and our ability to deliver consistent dividends to our shareholders," said Mr. Johnson. "We expect our growth will come from a combination of predictable and stable revenues from our regulated business, organic growth from our high-speed data and long distance products and contributions from acquisitions. The rural nature of most of our markets offers us unique advantages to grow our business with reasonable investment and allows us to enjoy different wireline trends than most providers." Capital expenditures in the first quarter were $4.8 million. This amount was lower than anticipated and revised full year capital expenditures are estimated at $27 to $28 million versus the prior estimate of $31 million. 2005 interest expense is estimated at $41 to $43 million taking into account our capital structure costs pre and post recapitalization. This estimate also takes into account the increased debt to fund the Berkshire acquisition and the two additional fixed interest rate swaps totaling $100 million announced in April 2005, but does not take into account the pending Bentleyville Communications acquisition or any other potential acquisitions in 2005. About FairPoint FairPoint Communications Inc. provides communications services to rural communities across the country. Incorporated in 1991, FairPoint's mission is to acquire and operate telecommunications companies that set the standard of excellence for the delivery of service to rural communities. Today, FairPoint owns and operates 27 rural local exchange companies (RLECs) located in 17 states. FairPoint serves customers with approximately 276,167 access line equivalents (voice access lines and high speed data lines, which include DSL, cable modem and wireless broadband) as of March 31, 2005 and offers an array of services, including local and long distance voice, data, Internet and broadband offerings. At March 31, 2005, FairPoint Communications' balance sheet showed $266,698,000 of positive equity, compared to a $172,952,000 stockholders' deficit at Dec. 31, 2004. FALCONBRIDGE LTD: OSC Won't Intervene in Noranda Acquisition ------------------------------------------------------------ The Ontario Securities Commission denied Stark Investments' request for an immediate hearing on the important issues that it has raised concerning Noranda Inc.'s offer to acquire the remaining shares of Falconbridge Limited. OSC advised Stark that there is insufficient time to hold a hearing prior to the expiry of the offer. Stark Investments is a manager of funds that are significant holders Falconbridge shares. Stark Investments Application Stark Investments filed an application with OSC under section 104 of the Ontario Securities Act asking the Commission to intervene in the Noranda Offer for Falconbridge shares. Stark Investments also asked the Commission to extend the time to complete this Offer and to order Falconbridge and its Directors to comply with the Ontario Securities Act by, among other things, obtaining a new fairness opinion and by issuing a new Directors' Circular to Falconbridge's shareholders. Falconbridge's Response The Special Committee of the Board of Directors of Falconbridge Limited (TSX:FL) informed OSC that Stark is a Wisconsin-based hedge fund with a common share position in Falconbridge and a short common share position in Noranda Inc., a fact which was not disclosed in Stark's statement. The members of the Special Committee of the Falconbridge Board have reviewed the concerns raised by Stark in consultation with their financial and legal advisors and concluded that the Directors' Circular and the accompanying valuation fully comply with Ontario Securities Law. Accordingly, the concerns raised by Stark are without merit, the Special Committee concluded. Rob Barnard, a Principal of Stark, said: "We have been raising our concerns about this offer for the last week with the Staff of the Commission. We met with them as late as this morning to once again outline the deficiencies with the Directors' Circular. We are extremely disappointed that the Commission has chosen to close the door on these important issues without even holding the hearing that we believe is a right given to all the shareholders of Falconbridge." In its Application, Stark raised a number of concerns that it believes the Commission ought to review. It remains Stark's opinion, as stated in its section 104 application, that: (i) The Fairness Opinion miscalculated NorandaFalconbridge's 2004 EBITDA in the valuation of the consideration, thereby significantly overstating the value of the consideration being offered to Falconbridge's minority; (ii) The Fairness Opinion overstated the value of the consideration being offered to Falconbridge minority shareholders by relying primarily on the comparable precedent transaction approach rather that the comparable company trading approach; (iii) The Fairness Opinion understated the value of Falconbridge by ignoring significant business and leverage differences between Falconbridge and Noranda; (iv) The Fairness Opinion failed to assess the fair market value of Falconbridge shares based on an open and unrestricted market test as required by OSC Rule 61-501, which regulates insider bids; (v) After adjusting for these issues, the Noranda Offer is approximately US$4.00 to US$8.00 per Falconbridge share below fair market value; and (vi) There are serious questions about the independence of the valuator. Stark is evaluating all of its options and intends to consider all of the avenues that are open to it to resolve what Stark believes are fundamental issues about the inadequacy of disclosure and the unfairness of the transaction. Falconbridge Limited is a leading producer of nickel, copper, cobalt and platinum group metals. Its common shares are listed on the Toronto Stock Exchange under the symbol FL. Falconbridge is owned by Noranda Inc. of Toronto (58.8%) and by other investors (41.2%). * * * As reported in the Troubled Company Reporter on Mar. 3, 2004, Standard & Poor's Ratings Services assigned its 'BB' global scale and 'P-3' Canadian national scale ratings to diversified metal and mining company Falconbridge Ltd.'s C$78 million par value cumulative preferred shares series 3. At the same time, all other ratings on Falconbridge, including the 'BBB-' corporate credit rating, were affirmed. At the same time, Standard & Poor's assigned its 'BB' rating to Toronto, Ontario-based Noranda's proposed US$1.25 billion junior preferred shares. FOOTSTAR INC: Exclusive Solicitation Period Extended Until June 13 ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of New York extended the time period during which Footstar Inc. and its debtor-affiliates have the exclusive right to solicit acceptances of their proposed Joint Plan of Reorganization from their creditors. The Debtors' exclusive solicitation period now runs through June 13, 2005. The Debtors remind the Court that they filed a Joint Plan and Disclosure Statement on Nov. 12, 2004. The Court approved the adequacy of the Disclosure Statement on an interim basis on Dec. 13, 2004. The Plan's confirmation is premised on the assumption of the Master Agreement governing the relationship between the Debtors and Kmart Corp. On Aug. 12, 2004, the Debtors filed a request with the Court seeking to assume the Master Agreement, but Kmart Corp. filed an objection to the Debtors' Assumption Motion on Sept. 30, 2004. The Court entered an order on Feb. 16, 2005, overruling in part Kmart's Assumption Objection. The Court declared that Section 365(c)(1) of the Bankruptcy Code does not serve as a limitation on the Debtors' right to assume the Kmart Agreement. The Court, however, did not render a decision on the remaining issues raised by Kmart's Assumption Motion and Objection, which include whether the Debtors can demonstrate adequate assurance of future performance and the amount of the Debtors' cure obligation. The Debtors anticipate that a trial on substantially all of the remaining issues raised by Kmart's Assumption Motion and Objection will commence by July 18, 2005. The Debtors give the Court four reasons why the solicitation period should be extended: a) the extension is out of an abundance of caution on the Debtors' part in the event that the proposed Plan as filed is withdrawn, not confirmed, or confirmed but does not take effect; b) since the Petition Date, the Debtors have made significant progress in their reorganization process, including streamlining their businesses, divesting substantially all of their non-core assets, and undertaking several initiatives to retain employees that will be crucial to the Debtors' operations when they emerged from chapter 11; c) the Debtors are not using the extension to pressure their creditors into accepting the proposed Plan because both the Creditors Committee and Equity Committee support the Plan; and d) the Debtors will use the extension in working diligently to resolve the issues surrounding the assumption of the Master Agreement. Headquartered in West Nyack, New York, Footstar Inc., retails family and athletic footwear. As of August 28, 2004, the Company operated 2,373 Meldisco licensed footwear departments nationwide in Kmart, Rite Aid and Federated Department Stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. The Company and its debtor-affiliates filed for chapter 11 protection on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350). Paul M. Basta, Esq., at Weil Gotshal & Manges represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed $762,500,000 in total assets and $302,200,000 in total debts. FOOTSTAR INC.: U.S. Trustee Appoints Six-Member Creditor Committee ------------------------------------------------------------------ The U.S. Trustee for Region 2 appointed the following creditors to the Official Committee of Unsecured Creditors: 1. Reebok International Ltd. 1895 J.W. Foster Boulevard Canton, Massachusetts 02021 Attn: Mr. Richard L. Fay, Sr. Director of Credit/Collections Tel: 781-401-7260, Fax: 781-401-7567 2. S. Goldberg & Co., Inc. d/b/a SGFootwear Co. 20 East Broadway Hackensack, New Jersey 07601-6892 Attn: Bernard Leifer, President Tel: 201-342-1200, Fax: 201-342-4405 3. Simon Property Group, LP 115 West Washington Street Indianapolis, Indiana 46204 Attn: Ronald M. Tucker, Esq. Tel: 317-263-2346 4. Mercury International Trading Corporation 19 Alice Agnew Drive North Attleboro, Massachusetts 02761 Attn: Mr. Louis R. Rotella, Executive VP - CFO Tel: 508-699-9000, Fax: 508-699-9088 5. Longacre Management, LLC 810 Seventh Avenue New York, New York 10019 Attn: John Brecker Tel: 212-259-4300, Fax: 212-259-4343 6. SPCP Group, LLC as agent for Silver Paint Capital Fund, L,P. and Silver Point Capital Ofshore Fund, Ltd. Two Greenwich Plaza Greenwich, Connecticut 06830 Attn: Michael A. Gatto Tel: 203-542-4031, Fax: 203-542-4100 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 West Nyack, New York, Footstar Inc., retails family and athletic footwear. As of August 28, 2004, the Company operated 2,373 Meldisco licensed footwear departments nationwide in Kmart, Rite Aid and Federated Department Stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. The Company and its debtor-affiliates filed for chapter 11 protection on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350). Paul M. Basta, Esq., at Weil Gotshal & Manges represents the Debtors in their restructuring efforts. When the Debtor filed for protection, it listed $762,500,000 in total assets and $302,200,000 in total debts. FORD MOTOR: S&P Cuts Ratings & Says Outlook is Negative ------------------------------------------------------- Standard & Poor's Ratings Services lowered its long- and short- term corporate credit ratings on Ford Motor Co., Ford Motor Credit Co., and all related entities -- except those of Hertz Corp. -- to 'BB+/B-1' from 'BBB-/A-3'. The rating outlook is negative. The ratings on Hertz (BBB-/Watch Dev/A-3) remain on CreditWatch, where they were placed on April 21, 2005, following Ford's disclosure that it was evaluating strategic options for Hertz, including its potential sale. Consolidated debt outstanding totaled $161.3 billion at March 31, 2005. The downgrade to non-investment-grade reflects S&P's skepticism about whether management's strategies will be sufficient to counteract mounting competitive challenges. Of greatest immediate concern is that Ford faces the prospect that its overall sport utility vehicle (SUV) business will not be able to generate the profitability it has enjoyed historically. Ford's financial performance has been heavily dependent on the earnings of its SUVs. Recently, though, sales of its midsize and large SUVs have plummeted. Industrywide demand for SUVs has evidently stalled, partly because of persistent high gasoline prices. In addition, competition has intensified due to a proliferation of new SUVs. "Ford has suffered from the aging of its SUV product line, which will be replaced by a family of new products starting late this year through 2007 -- the same time that GM [General Motors Corp.] will be doing the same," said Standard & Poor's credit analyst Scott Sprinzen. In anticipation of the maturing of its midsize and large SUV business, Ford has been curtailing production capacity dedicated to these products while launching an array of smaller SUVs and so-called "crossover utility vehicles." Moreover, competition could intensify in full-size pickups -- which S&P believes is Ford's only other major source of automotive earnings. Ford has benefited from the highly successful renewal of its pickup trucks that began in late 2003. However, GM will be renewing its pickups in one and a half years to two years, and Toyota Motor Corp. will introduce a new full-size pickup during this period. Even with extensive efforts to renew its product offerings, Ford continues to lose significant market share in North America. The company has sought to be disciplined in its pricing strategy and selective in its discounting, but it cannot sustain market-share losses indefinitely. In addition, it is questionable whether Ford's relative competitive standing has improved as a result of extensive cost- cutting in its North American operations. The company has downsized operations through curtailing excess production capacity, but the boost to its efficiency has been undermined by market-share losses. It has significantly reduced the size of its workforce, but total personnel costs have risen, in part due to the soaring cost of its relatively generous health insurance benefits. Among its other challenges in North America is its relationship with Visteon Corp. (B+/Watch Dev/--), Ford's ailing former affiliate and largest supplier. Ford continues to negotiate with Visteon regarding yet another restructuring of the agreements governing the relationship between the two companies. S&P assumes Ford will have to subsidize in some fashion a radical restructuring of Visteon's operations, at a cost that could well be greater than all the direct support it has already extended. Altogether, Ford's other automotive operations are not mitigating the difficulties it faces in North America. Although sweeping restructuring actions have recently returned the auto operations in Europe and Latin America to minimal profitability, it is questionable whether these units will contribute meaningfully to earnings in the next few years. At its Premier Automotive Group -- through which the company hopes to expand its presence in premium segments -- results have been mixed. Given the mismatch between their production and sales, the earnings of Volvo, Jaguar, and Land Rover will remain highly subject to foreign currency fluctuations, despite hedging efforts. Ford continues to derive significant earnings from Ford Credit, which has benefited from lower credit losses, improved performance on lease residuals, and its still-low average funding cost. Also, Ford Credit's reported results have benefited to an exaggerated extent from a significant reduction in accruals for credit losses and depreciation related to vehicles under operating leases. With the nonrecurrence of loss reserve reversals, the adverse effect of rising interest rates, and the downsizing of Ford Credit's finance assets outstanding, Ford Credit is unlikely to be able to sustain earnings at recent record levels. However, we believe management's targeted pretax earnings of more than $3 billion for 2005 (down from $4.4 billion in 2004) should be achievable, and that Ford Credit will be able to earn at least $2.5 billion per year on a sustainable basis. Ford's automotive cash flow has also been mediocre, totaling $1.0 billion in 2004. Although S&P now assumes automotive cash flow will be lower in 2005 than in 2004, Ford Credit is expected to continue generating substantial cash, and dividends to the parent of approximately $1.5 billion to $2.0 billion per year should be sustainable. Ford's capital structure is, on balance, consistent with the 'BB+' rating. However, Ford has a large, unfunded pension liability that totaled $12.3 billion at year-end 2004. More troubling, though, is Ford's massive unfunded retiree medical liability -- $32.4 billion at year-end 2004 -- which has continued to grow, even with the benefit of the new Medicare prescription drug program and VEBA contributions of $2.8 billion made during 2004. Given the intense competitive pressures the company faces, Ford has little leeway to curtail capital expenditures, which are budgeted at about $7 billion for 2005. Ford can monetize its investment in Hertz Corp., the world's largest daily car rental company and Ford's largest customer. Management has recently stated that it is evaluating long-term strategic alternatives for Hertz. Some cash could be saved by cutting the common dividend, but management has not indicated that this is being considered-- and announcing a dividend cut could further fuel negative capital market sentiments. The rating reflects the assumption that it will be difficult for Ford to improve its automotive profitability from the roughly breakeven level anticipated for full-year 2005 (before special charges, which S&P assumes will be substantial). However, Ford's financial performance has been extraordinarily volatile and unpredictable. Accelerating deterioration in the North American market mix, intensifying price competition, poor acceptance of Ford's future new products, labor strife, and/or a weakening of the general economy could ultimately jeopardize the rating. If Ford were able to roll back its health benefits through negotiations with the United Autoworkers (UAW), this could reduce its sizable personnel costs, a significant competitive disadvantage. However, S&P is skeptical about whether the UAW would cooperate in such an effort. Without modifications to its health care benefits, though, containing growth in its retiree medical liability through prefunding actions could consume the bulk of Ford's surplus cash generated in the foreseeable future. Otherwise, management has alluded to new cost-cutting initiatives, but the nature, extent, and ultimate efficacy of such measures are unclear. S&P assumes that, even without an investment-grade rating, Ford Credit will have sufficient funding flexibility to carry on its vital role of providing sales financing support to Ford. Although S&P has decided not to notch down Ford Credit's senior unsecured issue ratings from its corporate credit rating at this juncture, it could do so in the future. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ All ratings affected by this rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com/under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. * * * As reported in the Troubled Company Reporter on April 11, 2005, Ford Motor Co. delivered it's 2004 annual report on Form 10-K to the Securities and Exchange Commission on March 10, 2005. While financial results show some improvements from 2003, the company's performance has steadily declined over the past five years: Total Assets Total Liabilities ------------ ----------------- 1998 $237.5 +++ 1998 $213.5 + 1999 $270.2 +++++ 1999 $241.9 ++++ 2000 $284.4 +++++++ 2000 $265.1 ++++++ 2001 $276.5 ++++++ 2001 $268.1 ++++++ 2002 $295.2 +++++++ 2002 $283.9 ++++++++ 2003 $310.7 +++++++++ 2003 $298.4 +++++++++ 2004 $305.3 ++++++++ 2004 $288.4 ++++++++ Shareholder Equity Current Assets ------------------ -------------- 1998 $24.0 +++++++ 1998 $41.7 ++ 1999 $28.3 +++++++++ 1999 $44.9 +++ 2000 $19.3 ++++ 2000 $40.1 ++ 2001 $8.4 . 2001 $36.9 + 2002 $11.3 . 2002 $48.6 ++++ 2003 $12.3 + 2003 $61.2 +++++++ 2004 $16.9 +++ 2004 $59.2 +++++++ Current Liabilities Working Capital ------------------- --------------- 1998 $106.9 ++++++ 1998 ($65.2) 1999 $115.5 +++++++ 1999 ($70.6) 2000 $114.9 +++++++ 2000 ($74.8) 2001 $93.9 ++++ 2001 ($57.0) 2002 $61.5 . 2002 ($12.9) 2003 $112.7 +++++++ 2003 ($51.5) 2004 $122.8 ++++++++ 2004 ($63.6) Leverage Ratio Liquidity Ratio -------------- --------------- 1998 8.9 . 1998 0.4 +++ 1999 8.5 . 1999 0.4 +++ 2000 13.7 + 2000 0.3 +++ 2001 31.9 +++++++ 2001 0.4 +++ 2002 25.1 +++++ 2002 0.8 +++++++ 2003 24.3 +++++ 2003 0.5 +++++ 2004 17.1 +++ 2004 0.5 ++++ Net Sales Interest Expense --------- ---------------- 1998 $144.4 +++++ 1998 $0.8 +++++ 1999 $160.6 +++++++ 1999 $1.3 +++++++++ 2000 $170.1 ++++++++ 2000 $1.4 +++++++++ 2001 $162.4 +++++++ 2001 $1.4 +++++++++ 2002 $162.5 +++++++ 2002 $1.4 +++++++++ 2003 $164.3 ++++++++ 2003 $1.3 +++++++++ 2004 $171.6 ++++++++ 2004 $1.2 ++++++++ EBITDA Net Income ------ ---------- 1998 $23.3 +++++++ 1998 $22.0 +++++++ 1999 $24.9 ++++++++ 1999 $7.2 ++ 2000 $24.1 ++++++++ 2000 $3.4 + 2001 $10.7 +++ 2001 ($5.4) 2002 $16.1 +++++ 2002 ($1.0) 2003 $15.9 +++++ 2003 ($0.5) 2004 $11.4 +++ 2004 $3.5 + EBITDA Margin Profit Margin ------------- ------------- 1998 16.1%++++++++ 1998 15.2%+++++++ 1999 15.5%+++++++ 1999 4.5%++ 2000 14.2%+++++++ 2000 2.0%. 2001 6.6%+++ 2001 -3.3% 2002 9.9%++++ 2002 -0.6% 2003 9.7%++++ 2003 -0.3% 2004 6.6%+++ 2004 2.0%+ A free copy of Ford's latest annual report is available at: http://www.sec.gov/Archives/edgar/data/37996/000095012405001427/k91869e10vk. htm Ford estimates that it manufactures and sells 21% of all cars and trucks in the United States. General Motors' market share is about 28%; DaimlerChrysler captures 14%; Toyota's market share is about 11%; and Honda accounts for another 8%. U.S. automakers' share of the U.S. market has declined steadily for the past five years while Toyota, Honda, and other companies based in Europe, Korea and Japan have steadily increased. Ford employs approximately 327,500 workers. Ford's $162 billion in annual sales account for nearly 1-1/2% of the United States' gross domestic product. If Ford were a sovereign nation, it would rank as the 28th-largest country according to 2003 data from the World Bank -- larger than Finland, South Africa or Hong Kong, and smaller than Poland, Indonesia or Greece. Ford faces asbestos-related liability. Plaintiffs allege various health problems as a result of asbestos exposure, either from (i) component parts found in older vehicles (ii) insulation or other asbestos products in Ford's facilities or (iii) asbestos aboard Ford's former maritime fleet. Claims against the automaker have been rising: Date Active Claims ---- ------------- 12/31/01 18,000 ++++++++++++ 12/31/02 23,000 +++++++++++++++++ 02/28/03 25,000 ++++++++++++++++++ 02/03/04 41,500 ++++++++++++++++++++++++++++++ Ford does not disclose the number of claims filed against it after Feb. 3, 2004. Ford says that while annual payout and related defense costs in asbestos cases increased between 1999 and 2003, those amounts were not significantly higher in 2004. FRESENIUS MEDICAL: Renal Buy-Out Cues Moody's to Review Ratings --------------------------------------------------------------- Moody's Investors Service placed all ratings of Fresenius Medical Care AG and its parent Fresenius AG under review for possible downgrade following FME's announcement that it has entered into a definitive agreement to acquire Renal Care Group, Inc. Total consideration for the acquisition is US$3.5 billion for RCG's equity and US$500 million of assumed debt. The acquisition is expected to be entirely debt-financed through an extension of the company's existing senior credit facility. RCG is the fourth largest dialysis provider in the US, after FME, DaVita (senior implied rating B1) and Gambro. Pro forma for the acquisition, FY04 revenues of the combined entity would have been approximately US$7.5 billion, making it the largest player in the worldwide dialysis market. As of 31 March 2005 the two companies served a total of 117,000 patients in c. 1,560 clinics in North America and 158,000 patients in over 2,000 clinics worldwide. Separately, FME also announced a proposed change to its corporate legal structure from an Aktiengesellschaft (AG) to a Kommanditgesellchaft auf Aktien (KGaA), and additionally its intention to offer its preference shareholders the option to convert into ordinary shares. Concurrently the ratings of Fresenius AG have also been placed under review as a result of the proposed acquisition of Renal Care Group and the proposed change in corporate legal structure of FME. Fresenius currently owns a total of 36.9% of the subscribed capital (i.e. ordinary shares and preference shares) of FME and fully consolidates FME into its accounts. For the fiscal year ended December 2004, FME accounted for 69% and 81% of Fresenius' net sales and operating profit, respectively, and as a result, the credit profile of FME is a key factor in Fresenius' rating. In its review Moody's will focus on: (a) the credit metrics of FME pro forma for the acquisition of Renal Care Group and the company's future financial policy; (b) future growth prospects and operational strategy of the combined entity; (c) potential for integration risks as well as synergies as a result of the proposed transaction; (d) the proposed change in the corporate legal structure at FME and its impact on the control of the company by Fresenius. Completion of the transaction will be subject to Renal Care Group's shareholder approval and expiration of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act. These ratings are placed under review for possible downgrade: Fresenius Medical Care AG: * Senior implied rating of Ba1 * Issuer rating of Ba1 FMC Trust Finance Sarl: * US$225 million senior subordinated notes due 2011 rated Ba2 * US$200 million subordinated notes due 2011 rated Ba2 Fresenius Medical Care Capital Trust II: * US$450 million Trust Preferred Securities due 2008 rated Ba2 * Fresenius Medical Care Capital Trust III: * DM 300 million Trust Preferred Securities due 2008 rated Ba2 Fresenius Medical Care Capital Trust IV: * US$ 225 million Trust Preferred Securities due 2011 rated Ba2 Fresenius Medical Care Capital Trust V * Euro 300 million Trust Preferred Securities due 2011 rated Ba2 Fresenius AG: * Senior implied rating of Ba1 * Issuer rating of Ba1 * Euro 300 million of senior notes rated Ba1 Fresenius Medical Care AG is the world's leading provider of dialysis products and services. For the fiscal year ended 31 December 2004, Fresenius Medical Care AG generated net revenues of US$ 6,228 million. Fresenius AG is a global health care company with products and services for dialysis (through Fresenius Medical Care), international healthcare services and facilities management (Fresenius ProServe) and nutrition and infusion therapies (Fresenius Kabi). For the fiscal year ended 31 December 2004, Fresenius AG generated consolidated sales of Euro 7,271 million. GENERAL MOTORS: S&P Cuts Ratings & Says Outlook is Negative ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its long- and short- term corporate credit ratings on General Motors Corp. (GM), General Motors Acceptance Corp. (GMAC), and all related entities to 'BB/B-1' from 'BBB-/A-3'. The rating outlook is negative. Consolidated debt outstanding totaled $291.8 billion at March 31, 2005. The downgrade to non-investment-grade reflects S&P's conclusion that management's strategies may be ineffective in addressing GM's competitive disadvantages. Still, GM should not have any difficulty accommodating near-term cash requirements. The effort by Kirk Kerkorian's Tracinda Corp. to increase its ownership stake in GM represents an additional uncertainty; however, this is not a factor at all in the current rating action. Of greatest immediate concern is that GM's sport utility vehicles (SUVs) will no longer be as profitable as they have been in recent years. "GM's financial performance has been heavily dependent on the profit contribution of its SUVs," said Standard & Poor's credit analyst Scott Sprinzen. "Recently, though, sales of its midsize and large SUVs have plummeted, and industrywide demand has evidently stalled, partly because of high gas prices. Also, competition has intensified due to a proliferation of new SUVs," he continued. GM has suffered from the aging of its SUV product line, which will be replaced by a family of new products during 2006 and 2007 -- when Ford Motor Co. will be doing the same. Moreover, competition could intensify in full-size pickups -- GM's only other major source of automotive earnings. Although GM will be renewing its pickups in one and a half years to two years, Toyota Motor Corp. will introduce a new full-size pickup during this period. Even with extensive efforts to renew its products, GM continues to lose market share in North America, despite an aggressive pricing strategy -- and S&P believes the company's reliance on discounts has itself been detrimental to its brand equity. In addition, it is questionable whether GM's relative competitive standing has improved as a result of extensive cost-cutting in its North American operations. The company has downsized operations through curtailing excess production capacity, but the boost to its efficiency has been undermined by market-share losses. The company has significantly reduced the size of its workforce, but total personnel costs have risen, due in part to the soaring cost of its relatively generous health insurance benefits. Altogether, GM's overseas automotive operations are not mitigating the difficulties the company faces in North America. GM has been unprofitable in Europe since 1999, and its losses there this year will likely be substantial, even before taking account of costs related to yet another round of restructuring actions. GM had until recently been highly profitable in China, but it is now suffering from weak demand in that region. This decline could prove temporary, but it underscores the volatility of that market, where virtually all the world's automakers are investing heavily to expand their presence. GM continues to derive significant earnings from GMAC, which has benefited in recent years from low credit losses and improving lease residual realizations. However, as interest rates have risen, GMAC's sales finance earnings have recently weakened markedly from the exceptional levels of 2003 and 2004. GM's overall earnings have recently deteriorated precipitously. GM incurred an alarming $1.1 billion net loss in the first quarter of 2005. S&P believes profitability could remain poor for the rest of this year, and prospects for a return to adequate profitability in the next few years are becoming increasingly uncertain. Although GM has substantial cash reserves, its ability to withstand persistent poor financial performance is not unlimited. S&P now expects consolidated parent-level cash outflow to be in excess of $5 billion this year. Unless the automotive operations' cash generating ability improves, GM's burdensome postretirement benefit obligations could become even more onerous. Even with $9 billion of VEBA contributions made during 2004, favorable investment portfolio returns, and the estimated $4 billion benefit of the new Medicare prescription drug program, its unfunded retiree medical liability increased to $61 billion at year-end 2004 from the already massive $57 billion at year-end 2003. GM's financial performance has proven to be volatile and unpredictable. Accelerating deterioration in the North American market mix, intensifying price competition, poor acceptance of GM's future new products, labor strife, and/or a weakening of the general economy could ultimately jeopardize the rating. If GM were able to roll back its health insurance benefits, this could reduce a significant competitive disadvantage; however, S&P is skeptical about whether the company's principal labor union, the United Autoworkers, will cooperate with this. Otherwise, management has alluded to new cost-cutting initiatives, but the nature, extent, and ultimate efficacy of such measures are unclear. S&P assumes that, even without an investment-grade rating, GMAC will have sufficient funding flexibility to carry on its vital role of providing sales financing support to GM. Although GMAC will likely be more reliant on ABS funding, its future borrowing capacity in the unsecured term debt market is unclear. If GMAC remains heavily dependent on ABS funding, this would be detrimental to the asset protection for unsecured debtholders. Although S&P has decided not to notch down GMAC's senior unsecured issue ratings from its corporate credit rating at this juncture, it could still do so in the future. Given the advantages to a finance company of having a higher credit rating, GM could restructure the relationship between itself and GMAC to allow GMAC to receive a higher rating. Elements of such a plan might include the sale of a significant ownership stake in GMAC to a third party, installation of independent board members, and the inclusion of relatively comprehensive and restrictive financial covenants in borrowing agreements. However, the nature of the ongoing business ties between GM and GMAC would still need to be considered and would likely preclude more than a one-notch rating differential between the two. In the absence of sufficient steps to restructure the relationship between them, GMAC's rating will remain equalized with GM's. S&P is not reassessing its criteria for viewing such parent/subsidiary situations, nor does it see any grounds for making a special exception for GM and GMAC. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ All ratings affected by this rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com/under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. * * * General Motors Corporation, headquartered in Detroit, Michigan, is the world's largest producer of cars and light trucks. GMAC, a wholly-owned subsidiary of GM, provides retail and wholesale financing in support of GM's automotive operations and is one of the worlds largest non-bank financial institutions. As reported in the Troubled Company Reporter on April 11, 2005, General Motors Corp. delivered it's 2004 annual report on Form 10-K to the Securities and Exchange Commission on March 16, 2005. While financial results show some improvements from 2003, the company's performance has steadily declined over the past five years: Total Assets Total Liabilities ------------ ----------------- 1998 $246.6 + 1998 $230.8 + 1999 $274.7 ++ 1999 $253.2 + 2000 $303.1 +++ 2000 $272.0 ++ 2001 $323.9 ++++ 2001 $303.5 +++ 2002 $370.1 +++++ 2002 $363.0 +++++ 2003 $449.9 ++++++++ 2003 $424.4 +++++++ 2004 $482.0 +++++++++ 2004 $453.9 ++++++++ Shareholder Equity Current Assets ------------------ -------------- 1998 $15.8 ++ 1998 $119.7 . 1999 $21.5 ++++ 1999 $132.3 + 2000 $31.1 ++++++++ 2000 $144.3 + 2001 $20.4 ++++ 2001 $157.6 ++ 2002 $7.1 . 2002 $230.2 +++++ 2003 $25.5 ++++++ 2003 $274.7 ++++++ 2004 $28.1 +++++++ 2004 $306.4 ++++++++ Current Liabilities Working Capital ------------------- --------------- 1998 $50.2 . 1998 $69.5 ++++ 1999 $57.3 . 1999 $75.0 +++++ 2000 $139.8 ++++++ 2000 $4.5 . 2001 $121.1 +++++ 2001 $36.5 ++ 2002 $134.1 ++++++ 2002 $96.1 ++++++ 2003 $152.9 +++++++ 2003 $121.8 ++++++++ 2004 $170.5 ++++++++ 2004 $135.9 +++++++++ Leverage Ratio Liquidity Ratio -------------- --------------- 1998 14.6 + 1998 2.4 +++++++++ 1999 11.8 . 1999 2.3 +++++++++ 2000 8.7 . 2000 1.0 ++++ 2001 14.9 + 2001 1.3 +++++ 2002 51.1 ++++++++ 2002 1.7 ++++++ 2003 16.6 + 2003 1.8 +++++++ 2004 16.2 + 2004 1.8 +++++++ Net Sales Interest Expense --------- ---------------- 1998 $147.8 ++++ 1998 $6.6 +++++++ 1999 $167.3 ++++++ 1999 $7.7 ++++++++ 2000 $184.6 ++++++++ 2000 $0.8 . 2001 $177.2 +++++++ 2001 $0.7 . 2002 $177.3 +++++++ 2002 $0.4 . 2003 $185.8 ++++++++ 2003 $1.7 + 2004 $193.5 +++++++++ 2004 $2.4 ++ EBITDA Net Income ------ ---------- 1998 $17.4 +++++ 1998 $2.9 ++++ 1999 $21.7 +++++++ 1999 $6.0 +++++++++ 2000 $21.3 +++++++ 2000 $4.4 +++++++ 2001 $15.1 +++++ 2001 $0.6 . 2002 $14.6 ++++ 2002 $1.7 ++ 2003 $18.7 ++++++ 2003 $3.8 ++++++ 2004 $17.8 +++++ 2004 $2.8 ++++ EBITDA Margin Profit Margin ------------- ------------- 1998 11.8%+++++ 1998 2.0%++++ 1999 13.0%++++++ 1999 3.6%++++++++ 2000 11.5%+++++ 2000 2.4%+++++ 2001 8.5%++++ 2001 0.3%. 2002 8.2%++++ 2002 1.0%++ 2003 10.1%+++++ 2003 2.0%+++++ 2004 9.2%++++ 2004 1.4%+++ A free copy of GM's latest annual report is available at: http://www.sec.gov/Archives/edgar/data/40730/000004073005000050/final10k0315 05.txt General Motors -- the world's largest car maker -- manufactures and sells 28% of all cars and trucks in the United States. Ford's market share is about 21%; DaimlerChrysler captures 14%; Toyota's market share is about 11%; and Honda accounts for another 8%. U.S. automakers' share of the U.S. market has declined steadily for the past five years while Toyota, Honda, and other companies based in Europe, Korea and Japan have steadily increased. GM employs approximately 324,000 workers. GM's $193 billion in annual sales account for nearly 1-3/4% of the United States' gross domestic product. If GM were a sovereign nation, it would rank as the 26th-largest country according to 2003 data from the World Bank -- larger than Greece, Finland or South Africa, and smaller than Denmark, Poland or Indonesia. GM faces asbestos-related liability. GM says most of the cases involve brake products that incorporated small amounts of encapsulated asbestos. These products, generally brake linings, are known as asbestos-containing friction products. GM says the scientific data shows these asbestos-containing friction products are not unsafe and do not create an increased risk of asbestos- related disease. Notwithstanding GM's arguments about science, the Company's seen an increase in the number of asbestos-related personal injury claims. "A growing number of auto mechanics are filing suit seeking recovery based on their alleged exposure to the small amount of asbestos used in brake components," the Company says. GM's annual expenditures associated with the resolution of these claims decreased last year after increasing in nonmaterial amounts in recent years, but the amount expended in any year is highly dependent on the number of claims filed, the amount of pretrial proceedings conducted, and the number of trials and settlements which occur during the period. GMAC COMMERCIAL: Fitch Affirms Four Low-B Ratings ------------------------------------------------- Fitch Ratings upgrades GMAC's Commercial Mortgage Securities, Inc.'s commercial mortgage pass-through certificates, series 1998-C1: -- $28.8 million class B to 'AAA' from 'AA+'; -- $64.7 million class C to 'AAA' from 'AA'; -- $75.5 million class D to 'A+' from 'A'; -- $68.3 million class E to 'BBB+' from 'BBB'; -- $43.1 million class F to 'BBB' from 'BBB-'. In addition, Fitch affirms these classes: -- $626.8 million class A-2 'AAA'; -- $32.4 million class G 'BB+'; -- $25.2 million class H 'BB'; -- $14.4 million class J 'B'; -- $25.2 million class K 'B-'; -- Interest only class X 'AAA'; The $14.4 million class L and $10.8 million class M certificates remain 'CCC'. Fitch does not rate the $10 million class N certificates. The class A-1 certificates have been paid in full. The ratings upgrades are the result of stable loan performance and paydown. As of the April 2005 distribution date, the pool's aggregate certificate balance has decreased 27.61% to $1.04 billion from $1.438 billion at issuance. Of the original 181 loans, 138 remain outstanding in the pool. There are eight loans (22.04%) with the special servicer included the largest loan in the transaction. Fitch expects losses from loans currently in special servicing to be absorbed by classes N and M. The largest loan (18.74%) in special servicing is Senior Living Properties is collateralized by a pool of 72 healthcare properties located in various states and remains current. The borrowers filed for bankruptcy protection in May 2002. The loan was modified during bankruptcy to allow for the sale or refinance of the properties with the sale proceeds applied to the paydown the loan. The loan is backed by a surety bond, which has been guaranteed by Centre Reinsurance. The surety bond will continue to make debt service payments until the loan's maturity in 2008. Fitch closely monitors Centre's financial strength as well SLP's efforts to sell or refinance the properties. The second largest specially serviced loan (.93%) is a healthcare property in Irving, Texas. The loan transferred to the special servicer in November 2004 when the borrower was unwilling to fund the negative cash flow of the property. The borrower has requested a discounted payoff or modification of the loan. The special servicer continues to negotiate with the borrower to maximize the value of the asset. Hypothetical stress scenarios were applied to the trust, where specially serviced and other loans that concerned Fitch as having the potential to become problematic were assumed to default. Even under these stress scenarios, the resulting subordination levels remain sufficient to affirm the current ratings. Fitch continues to monitor the SLP loan closely, as well as the other loans of concerns. GMAC COMMERCIAL: Fitch Affirms Six Mortgage Certificate Classes --------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2001-C1 are downgraded by Fitch Ratings: -- $4.3 million class O to 'CC' from 'CCC'. In addition, Fitch affirms these classes: -- $42 million class A-1 'AAA'; -- $546.8 million class A-2 'AAA'; -- Interest-only class X-1 'AAA'; -- Interest-only class X-2 'AAA'; -- $41 million class B 'AA+'; -- $32.4 million class C 'A+'; -- $13 million class D 'A'; -- $17.3 million class E 'BBB+'; -- $13 million class F 'BBB'; -- $13 million class G 'BBB-'; -- $25.9 million class H 'BB+'; -- $6.5 million class J 'BB'; -- $6.5 million class K 'BB-'; -- $13 million class L 'B+'; -- $4.3 million class M 'B'; -- $4.3 million class N 'B-'. Fitch does not rate the $4.3 million class P certificates. The downgrade of class O is the result of the expected losses from the specially serviced loans which will have a negative impact on the credit enhancement level of the class. As of the April 2005 distribution date, the pool's aggregate principal balance has been reduced 8.9%, to $787.5 million from $864.1 million at issuance. Of the original 101 loans, 99 remain outstanding. Currently, four loans (2.9%) are in special servicing, with losses projected on three loans. The largest specially serviced loan (1.3%) is a 375-unit multifamily property located in Mesquite, Texas, and is real estate owned. Property management is attempting to increase occupancy at the property, which as of February 2005 was 83%. The second largest specially serviced loan (0.81%) is secured by an office property in Dallas, Tex. The property is also REO and listed for sale. Several investors have expressed interest, and the special servicer continues to explore purchase offers to maximize the value of the property. GRASSY CREEK: Case Summary & 15 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Grassy Creek, LLC P.O. Box 610 Heber City, Utah 84032 Bankruptcy Case No.: 05-26588 Chapter 11 Petition Date: April 26, 2005 Court: District of Utah (Salt Lake City) Judge: Glen E. Clark Debtor's Counsel: Harold D. Mitchell, Esq. 324 North Main Street Spanish Fork, Utah 84660 Tel: (801) 798-3574 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 15 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sovereen, Kent Loan $395,000 1010 West 850 South Woods Cross, UT 84007 Hundley, Rodney C. Loan $250,000 1860 Siggard Drive Slat Lake City, UT 84106 Nilson, Darrell Loan $250,000 6440 South Wasatch Boulevard Salt Lake City, UT 84106 Central Bank & Millenium Loan $130,000 Carlson-Howe Loan $75,000 Smith, Gary V. Loan $65,000 Blazzard Lumber Co. $60,000 Nilson, Brett Finders fee $50,000 B.T. Gallegos Construction Contractor's claim $48,000 Baker Homes, Inc. Loan $38,000 Iris, Mike & Sally Loan $35,000 Geneva Concrete Contractor $28,000 Beynon, Dell Contractor $12,000 Martineau, Ray G. Legal fees $11,000 Kamas City Development agreement $10,000 GREENBRIER COMPANIES: Moody's Rates $175M Senior Notes at B1 ------------------------------------------------------------ Moody's Investors Service assigned a B1 rating to $175 million of senior notes proposed to be issued by The Greenbrier Companies, a Ba3 senior implied rating, and a SGL-2 Speculative Grade Liquidity Rating. The outlook is stable. The rating reflects: (1) Greenbrier's position as the leading supplier of double- stack railcars, which are used in the high growth Intermodal business, (2) the high backlog as rail car orders remain strong for Greenbrier and the industry, and (3) the steady operating cash flow expected from the leasing and rail services operations. The company's record of profitability throughout the recent downturn and relatively moderate level of financial leverage given its lease portfolio also support the ratings. These strengths are balanced by: (1) the expectation of negative free cash flow driven by increased working capital needs and growth in the lease portfolio, (2) the need to begin replacing the large number of older rail cars that support its leasing operations, and (3) the relatively short maturity of its leases. The company also faces the risks associated with the high concentration of revenues from key customers as well as the limited number and concentration of key suppliers. Also factored into the ratings are the competitive challenges facing all three of Greenbrier's units from other larger companies, and certain aspects of governance including low board independence, limited direct financial expertise among directors, and succession planning issues for the board and for senior management. The stable outlook anticipates increased operating profit in the near term as the railcar manufacturing unit makes deliveries on its strong backlog of orders and the longer term stability of cash flow from the company's lease portfolio and services business. Moody's also expects the leasing and service operations could somewhat offset the highly cyclical nature of the railcar industry. The rating or the outlook could be pressured down should Greenbrier lose a key customer or supplier and be unable to replace that revenue or supply quickly, or if the company undertakes a material debt-financed expansion project or an acquisition, particularly if the acquisition poses integration risk. The rating could also be pressured if the company rapidly expands the lease portfolio or the portfolio quality of the current portfolio deteriorates, or does not generate positive free cash flow as the railcar production cycle moves to its peak. The rating or outlook could be raised if Greenbrier is able to meaningfully reduce its customer concentration, and can produce a sustainable manufacturing gross margin greater than 13% with strong portfolio characteristics of the lease assets. The ability to sustain consolidated interest coverage greater than 6x with the ratio of consolidated adjusted debt to EBITDAR at less than 3.5x would also be important factors for any positive rating action. In addition, improving corporate governance by increasing the percentage of independent directors to at least the average of other similarly sized corporations and by adding directors with direct financial or audit skills to the board, and improving the mix and availability of suppliers could be favorably factored into the rating. The SGL-2 rating reflects good quality liquidity with the expectation that the company will be able to fund its near-term cash requirements from operations or with cash on hand following the sale of the senior notes. Moody's expects modestly negative free cash flow over the near term, largely driven by higher working capital needs and by investment in new leases. The new senior notes will provide additional cash, which Moody's expects to be sufficient to fund operating and debt maturity needs over the near term. The bank revolver is sized adequately for the company's needs, and includes a portion specifically allocated for Canadian operations. The company has limited other alternatives to raise cash however, as substantially all the domestic assets are pledged to the bank lenders. Railcar Manufacturing Moody's notes that the company operates in three business lines serving primarily the Class I railroads. Each operation -- railcar manufacturing, leasing, and services -- competes against other firms that are substantially larger and better capitalized than Greenbrier. Nonetheless, the company has operated profitably throughout the last cycle, and has become the leader in double- stack intermodal cars with about a 60% market share. Intermodal traffic has grown sharply for the railroads, and we expect the railroads to invest heavily over time to meet demand for this high-growth segment. Greenbrier also produces heavy-weight boxcars. Both double-stack cars and the heavy boxcars are currently in demand and Greenbrier's backlog is now at is highest level since 1998, just before the last cyclical peak of railcar production. In Moody's view, Greenbrier is unlikely to maintain its market share nor fully participate in the growth of the railcar segment as the company is nearing its practical production capacity with no near-term plans to expand capacity. The company's production facilities are old and the company's capital spending has been quite modest for several years. As well, it is possible that margins may come under pressure from production inefficiencies as the company pushes incremental production through an ageing system. Since a substantial portion of the railcar parts are sourced through suppliers, it is possible the company may pursue co-production or assembly arrangements with suppliers or other manufacturers, including facilities outside of the U.S. However, that could take some time to arrange and may extend beyond the current railcar production peak. Leasing Unit Moody's also notes Greenbrier's finance unit is a stand-alone operation, rather than a captive finance company primarily supporting Greenbrier's manufacturing operation. Any warehousing of railcars (cars that are finished and awaiting final delivery or financing) is separated from finance operations. This accounts for the relatively large inventory position of the company. With less than 10,000 cars under lease, the leasing unit is comparatively small and other competitors have access to considerably more capital than Greenbrier and have a broader portfolio. Greenbrier has remained profitable by successfully pursuing a niche strategy in leasing. The portfolio has some concentration risk as a result, however. The majority of the cars are either box cars or flatcars, with an average age of over 10 years, and the average remaining term on the leases is relatively short. Net charge-offs have been modest so the principal risk is re-leasing once the current lease expires. Notably, Greenbrier has a high concentration of lease exposure as three lessees comprise nearly half of the lease assets. The biggest of these, Union Pacific, has advised the company of its intent to purchase the cars upon expiry of the lease term, so Greenbrier will need to replace about one-third of its leases to retain the same level of units on lease. As well, about one-third of the leases are on a 'per-diem' basis of short-term leases, which is a common practice in the railroad industry. Taken together, about two-thirds of Greenbrier's leases are at risk for re-leasing. Consequently, the lease portfolio, and its cash flow stream, has the potential to run down quickly unless Greenbrier can aggressively seek new assets. The company is addressing this issue, and the recently announced arrangement with Babcock & Brown to jointly originate and service lease assets reflects that attention. Equity Offering In addition to the debt financing, Greenbrier plans a primary offering of common stock. However, the equity offering will have no credit effect on the company as the proceeds are expected to be used to purchase a substantial portion of the shares currently held by the estate of a co-founder and the former Greenbrier chairman (Mr. James), as well as about half the shares held by the other co-founder, who is the current CEO. Part of the agreement for the company to purchase the Estate's stock position is that the Estate also ends the litigation against the directors initiated by Mr. James before his death. While the suit alleged the board adopted a shareholders' rights plan that conflicted with the shareholders' agreement to which he was a party, Moody's understands that there had been longer disagreement between Mr. James and the directors over the strategic direction of the company. Mr. James separately initiated an investigation over treatment of the reserves for its European investments, although the company disclosed that the firm hired by Mr. James reported no irregularities and the company has written off most of its European assets. It remains to be seen, however, how these challenges could have affected Greenbrier's operations or investment practices, or certain of Greenbrier's long serving managers. As well, the board could be challenged by succession planning, not just of the CEO but the entire senior management group which averages 18 years of service to the company and the board itself, with an average age of the outside directors of 68 years. As well, the board has a relatively low level of independent directors, and there is limited direct financial or audit experience among its directors. For the last twelve months ended February 28, 2005, Greenbrier generated revenue of $901 million with EBIT of $53 million. Less than 10% of revenue is from leasing operations, but that operation generates approximately half of the consolidated EBIT and contributes substantially to the net income. Pro-forma for the new senior notes and net of anticipated debt repayment, consolidated debt at February 28, 2005 (at 2Q, 2005) would have been approximately$250 million. Adjusting for the Participation (a profit sharing arrangement on the leasing portfolio), redeemable shares and the operating leases produces adjusted debt level of approximately $317 million. The pro-forma ratio of adjusted debt to EBITDAR was 3.7x. Greenbrier does not have a defined benefit plan in the U.S. and only a small funding obligation in Canada. Deconsolidation of the Finance Company Assets To reflect the different businesses, Moody's deconsolidated the finance company operations from the reported financial statements by capitalizing the finance assets at a relatively conservative ratio of debt to equity of 1:1. Pro-forma for the senior notes offering, this resulted in a more elevated leverage ratio for the manufacturing-alone operations with an adjusted debt to EBITDAR estimated at 4.8x LTM as of February 28, 2005. Interest coverage on a LTM was calculated at 4.7x, although further adjusting for the full year effect of the negative carry on the higher debt level (an incremental $67 million of debt at an estimated 4% negative carry) would reduce interest coverage ratio to an estimated 3.5x. Reported free cash flow LTM as of February 28, 2005 was a negative $52 million reflecting a large use of working capital in the manufacturing operation and stepped up investment in lease assets. This negative free cash flow was partially offset by equipment sales, which occur in the normal course of business. Moody's anticipates negative free cash flow over the near term from higher receivables and inventory associated with the rising sales and the company's ongoing efforts to add to its lease portfolio to replace the run-off. Moody's anticipates this shortfall will be funded with the proceeds from the senior notes offering, with little usage of the $125 million revolver. Debt Financing According to Moody's, Greenbrier's proposed debt restructuring will simplify its debt structure, provide stability to its capital base and improve liquidity. Proceeds from the senior notes will be used to repay much of the debt issued by several different subsidiaries of the company. Although some unsecured subsidiary debt will remain outstanding, the senior notes and the new bank facility will be guaranteed on a senior unsecured basis by the company's domestic subsidiaries. The senior notes will be effectively subordinated to secured debt of the company, principally the bank revolving credit. The bank revolving credit (not rated), which will refinance the company's bank loan, will consist of a new five-year revolving credit with $105 million of availability in the U.S. and C$25 million of availability in Canada. The revolver will be secured by substantially all domestic assets of the company and also guaranteed by substantially all the domestic subsidiaries. The revolver will contain covenants requiring a minimum level of net worth and minimum fixed charge coverage, and a maximum level of debt to capital, as defined. Ratings assigned: * The Greenbrier Companies, Inc. -- senior notes rating at B1; -- senior implied at Ba3, -- Speculative Grade Liquidity rating at SGL-2 The Greenbrier Companies, Inc., based in Lake Oswego Oregon, provides railroad services to the Class I railroads including railcar manufacturing, leasing and equipment maintenance. GREENBRIER COS: S&P Rates Proposed $175MM Sr. Unsec. Notes at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services said today that it assigned its 'BB-' corporate credit rating to freight car manufacturer Greenbrier Companies Inc. At the same time, Standard & Poor's assigned a 'B+' rating to the company's proposed $175 million senior unsecured notes due 2015, which will be sold under SEC Rule 144A with registration rights. The rating outlook is stable. "The ratings on Lake Oswego, Oregon-based Greenbrier reflect a weak business risk profile due to the volatility of the freight car manufacturing industry, as well as Greenbrier's limited customer and product diversity and its aggressively leveraged balance sheet," said Standard & Poor's credit analyst Paul Kurias. "The ratings also consider the benefits of Greenbrier's more stable (albeit small) leasing and service businesses, its strong market position in the intermodal railcar market, and favorable demand from the key U.S. market." The company's freight car business, representing about 75% of its fiscal 2004 revenue, is focused largely on the manufacture of intermodal cars for railroad customers. The leasing business represents about 10% of 2004 revenue, while smaller businesses, including repair and refurbishment of railcars, generated 11%. Greenbrier has good geographic diversity, with about half its revenues derived from outside the U.S. Nonetheless, demand for its key products is highly volatile because of swings in end- market demand. Revenue declined 38% in fiscal 2002 from 2001, but then increased about 100% between fiscals 2002 and 2004. Because of this revenue volatility and the company's moderate operating leverage, EBITDA has varied, ranging from $31 million in fiscal 2002 to $68 million in fiscal 2004. Greenbrier's competitive strengths include its leadership in a strong market and, more recently, its ability to control fluctuations in raw material costs by passing on cost increases. However, the company has a meaningful customer concentration, with its top two customers accounting for about half of revenue. This limits Greenbrier's pricing power. HARTLEY OF ILLINOIS: Case Summary & 21 Largest Known Creditors -------------------------------------------------------------- Debtor: Hartley of Illinois, Inc. Route 68 South P.O. Box 398 Ravenswood, West Virginia 26164 Bankruptcy Case No.: 05-21263 Type of Business: The Debtor manufactures specialty cleaning and polishing products. Hartley of Illinois, Inc., is affiliated with Hartley Oil Company, which filed for chapter 11 protection on Sept. 15, 2004 (Bankr. S.D. W.Va. Case No. 04-22469). Chapter 11 Petition Date: April 28, 2005 Court: Southern District of West Virginia (Charleston) Judge: Ronald G. Pearson Debtor's Counsel: Joseph W. Caldwell, Esq. Caldwell & Riffee P.O. Box 4427 Charleston, West Virginia 25364-4427 Tel: (304) 925-2100 Fax: (304) 925-2193 - and - Marshall C. Spradling, Esq. 100 Capitol Street, Suite 1110 Charleston, West Virginia 25301 Tel: (304) 343-2544 Fax: (304) 343-2546 Estimated Assets: $1 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 21 Largest Known Creditors: Entity Claim Amount ------ ------------ Ameren IP Unknown P.O. Box 511 Decatur, IL 62525 American Casting Unknown 51 Commercial Street Plainview, NY 11803 American Express TBS Unknown 501 Avery Street, Suite 9000 UNB Square Parkersburg, WV 26101 BOC Gases Unknown P.O. Box 371914 Pittsburgh, PA 15251 Bowman's Medical Center Pharmacy Unknown 1614 East Norris Drive Ottawa, IL 61350 Donald J. Lamps Unknown LaSalle County Tax 707 East Etna Road Box 1560 Ottawa, IL 61350 DOT Rail Service, Inc. Unknown P.O. Box 361 LaSalle, IL 61301 Financial Federal Credit, Inc. Unknown 4225 Naperville Road, Suite 265 Lisle, IL 60532 Hartley Oil Company Unknown P.O. Box 398 Ravenswood, WV 26164 Hicksgas Marseilles, Inc. Unknown P.O. Box 127 Marselles, IL 61341 I.V. Net, LLP Unknown P.O. Box 297 Peru, IL 61354 IBM Unknown 330 North Wabash Avenue Chicago, IL 60611 Industrial Rubber Products Co. Unknown P.O. Box 2348 Charleston, WV 25328 Modern Business Services Unknown P.O. Box 754 Ottawa, IL 61350 National City Unknown P.O. Box 856176 Louisville, KY 40285 Ottawa Medical Center, P.C. Unknown 1614 East Norris Drive Ottawa, IL 61350 Phil Southall Unknown Crooked Run Road Sandyville, WV 27275 Rental Pros LLC Unknown 409 East Stevenson Road Ottawa, IL 61350 Rockford Industrial Welding Supply Unknown 1050 Nimco Drive Crystal Lake, IL 60014 SBC Unknown P.O. Box 5072 Saginaw, MI 48605 Town & Country Disposal Unknown P.O. Box 704 Ottawa, IL 61350 HAWK CORP: First Quarter Net Sales Climb 19.6% to $72.1 Million --------------------------------------------------------------- Hawk Corporation (Amex: HWK) reported $72.1 million of net sales in the first quarter ended March 31, 2005, an increase of $11.8 million or 19.6%, from $60.3 million in the comparable prior year period. Income from operations for the first quarter of 2005 increased $0.9 million, or 15.8%, to $6.6 million from $5.7 million in the comparable prior year period. Included in the Company's income from operations in the first quarter of 2005 are $0.7 million of restructuring costs relating to the previously announced move of one of its friction products manufacturing facilities to Oklahoma and $1.1 million of charges related to the previously disclosed forgiveness of the remaining balance of shareholder loans outstanding. In the first quarter of 2004, income from operations included loan forgiveness costs of $0.7 million. Operating income before these charges was $8.4 million in the first quarter of 2005, an increase of 31.3%, or $2.0 million, from $6.4 million in the comparable prior year period. Net sales in the first quarter of 2005 were $72.1 million, a new quarterly record for the Company, compared to $60.3 million in the comparable prior year period. Double digit percentage increases were posted in each of the Company's business segments, with sales increases of 25.1% in the friction products segment, 10.7% in the precision components segment and 16.7% in the performance racing segment. The effect of foreign currency exchange rates accounted for 1.2% of the total 19.6% net sales increase during the quarter. In the first quarter of 2005, the Company's net sales benefited from new business awards and continued improved economic conditions in most of the Company's end markets, particularly in construction, heavy truck, specialty friction, fluid power, aerospace and automotive. Income from operations in the first quarter of 2005 increased to $6.6 million compared to $5.7 million in the comparable period of 2004. The improved operating income was primarily the result of increased sales volumes, product mix and continued implementation of lean manufacturing and cost reduction programs throughout the organization. This improvement in operating income occurred despite the restructuring and loan forgiveness costs. The Company reported income from continuing operations, after income taxes, of $1.9 million, or $0.20 per diluted share, for the first quarter of 2005 compared to $1.8 million, or $0.20 per diluted share in the comparable prior year period. The reported income from continuing operations, after income taxes of $0.20 per diluted share includes loan forgiveness costs of $1.1 million ($0.7 million, net of tax), or $0.08 per diluted share, and restructuring costs relating to the move of one of its friction products manufacturing facilities of $0.7 million ($0.5 million, net of tax), or $0.05 per diluted share. In the first quarter of 2004, the Company reported income from continuing operations, after income taxes of $0.20 per diluted share including a charge of $0.7 million ($0.5 million net of tax), or $0.05 per diluted share, in loan forgiveness costs associated with a partial forgiveness of shareholder loans. The first quarter 2005 results reflected the Company's full year anticipated effective tax rate of 50.9%. This rate is higher than the 39.0% used by the Company to compute its effective tax rate in the first quarter of 2004. However, the 2005 full year anticipated effective tax rate of 50.9% compares favorably to the Company's 2004 full year effective tax rate of 66.1%. The decrease in the full year effective tax rate for 2005 is substantially driven by the impact of tax rate differences on the expected full year foreign income and domestic losses to be incurred by the Company in 2005 as well as the impact on the effective tax rate of the repayment by the Company of certain state tax credits in 2004. Ronald E. Weinberg, Hawk's Chairman and CEO, said, "I am pleased with our first quarter results as we continue to exert our leadership position in the markets that we serve. Our end markets remain strong, we continue to gain market share with the introduction of new products and the roll out of new technology initiatives in both our friction products and precision component businesses, providing us significant new sales opportunities and customer relationships as we look forward through 2005 and beyond." Business Segment Results Net sales in the friction products segment for the first quarter ended March 31, 2005 increased $8.9 million, or 25.1%, to $44.4 million from $35.5 million in the comparable prior year period. Primary drivers of the sales increase were new product introductions in the construction and heavy truck markets, strong economic growth in the Company's global construction, heavy truck and aerospace markets, increased sales to the aftermarket and to a lesser extent, favorable foreign currency exchange rates. The effect of foreign currency exchange rates on the friction segment net sales accounted for 2.0% of the 25.1% increase during the quarter. For the first quarter ended March 31, 2005, income from operations in the friction products segment increased $1.1 million, or 28.2%, to $5.0 million from $3.9 million in the comparable prior year period. The increase was the result of improved sales volumes in most of the markets served by the segment which provided a higher absorption of fixed manufacturing costs. The gains were partially offset by increased operating costs to support the higher sales activity and restructuring costs of $0.7 million related to the plant relocation. As a percentage of net sales, the segment's operating margin improved to 11.3% for the three months ended March 31, 2005 from 11.0% in the comparable prior year period. In the Company's precision components segment, net sales for the three months ended March 31, 2005, were up $2.2 million, or 10.7%, to $22.8 million from $20.6 million in the comparable prior period. The segment net sales increases were driven by improvements primarily in the pump and motor and automotive markets during the quarter. Income from operations in the precision components segment in the first quarter of 2005 was $1.1 million compared to $1.3 million in the comparable prior year period, a decrease of 15.4%. The decrease was primarily the result of start-up activities associated with the Company's implementation of its new technology equipment, production inefficiencies in one of its plants and outsourcing costs as a result of the sales volume increases during the quarter as well as continued support of the segment's early stage facility in China. As a percentage of net sales, the segment's operating margin declined to 4.8% in the first quarter of 2005 compared to 6.3% for the comparable period of 2004. In the Company's performance racing segment, net sales for the quarter ended March 31, 2005 increased 16.7% to $4.9 million from $4.2 million in the prior period. For the quarter ended March 31, 2005, income from operations in the performance racing segment was flat at $0.5 million compared to the prior year period. Working Capital and Liquidity As of March 31, 2005 working capital increased by $5.1 million from December 31, 2004 levels. The increase was largely the result of growth in the Company's accounts receivable and inventory as a result of the higher sales and production volumes during the first quarter of 2005 and increased inventory requirements to support the move to the Company's new facility in Oklahoma. Business Outlook "The momentum that we experienced in new business awards that resulted in such strong net sales growth in the first quarter of 2005 is expected to continue in the second quarter of 2005," stated Mr. Weinberg. "As a result, we believe our net sales in the second quarter of 2005 will grow between 12% and 14% over the comparable period in 2004 achieving net sales of between $71.0 million and $72.5 million as compared to actual net sales of $63.4 million in the second quarter of 2004." Despite the restructuring costs relating to the previously announced move of one of its friction manufacturing facilities to Oklahoma, which are expected to be approximately $1.3 million in the second quarter of 2005 as compared to $0.2 million in the second quarter of 2004, the Company expects income from operations to be approximately $6.3 million, an increase of approximately 3% from income from operations reported in the second quarter of 2004 of $6.1 million. Excluding these charges, income from operations in the second quarter of 2005 will increase approximately 21% from the comparable quarter of 2004. The Company continues to reaffirm its previously issued full year guidance of net sales increasing 10% to 12% over 2004 levels, and income from operations, after giving effect to the charges relating to the relocation into its newly constructed manufacturing facility to increase by 7% to 9% when compared to 2004. Full year costs associated with the relocation project remain unchanged from the Company's previously issued guidance of $4.0 million to $4.5 million, and the project remains on plan for completion in 2005. Hawk Corporation is a worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment, recreational and performance automotive vehicles. Through its precision components group, the Company is a leading supplier of powder metal and metal injected molded components used in industrial, consumer and other applications, such as pumps, motors and transmissions, lawn and garden equipment, appliances, small hand tools, trucks and telecommunications equipment. The Company's performance racing group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has approximately 1,700 employees at 17 manufacturing, research, sales and administrative sites in 6 countries. * * * Moody's Investors Service and Standard & Poor's assigned single-B ratings to Hawk Corporation's 8-3/4% senior notes due Nov. 1, 2014. HCC INDUSTRIES: Moody's Withdraws Junk Ratings Due to Lack of Info ------------------------------------------------------------------ Moody's Investors Service has withdrawn these ratings of HCC Industries Inc.: * Caa1 senior implied rating, * Caa2 issuer rating, * Caa3 rating for the $80 million 10.75% senior subordinated notes due 2007. The ratings have been withdrawn because Moody's believes it lacks adequate information to maintain the ratings. HIGH VOLTAGE: Gets Interim Okay to Draw $5 Mil. Under DIP Facility ------------------------------------------------------------------ The Honorable Joan Feeney of the U.S. Bankruptcy Court for the District of Massachusetts, Eastern Division, gave interim approval to Stephen S. Gray, the chapter 11 Trustee of High Voltage Engineering Corporation and certain of its affiliates, to enter into a postpetition financing agreement with a group of lenders for which The Coast Special Situations Fund, LLC, serves as the Administrative Agent. The lenders have extended a $10 million secured revolving credit facility to High Voltage. The Trustee is allowed to draw up to $5 million from that DIP financing facility on an interim basis, pending a final DIP Financing Hearing. The Debtors need this new capital infusion to carry on the operation of their businesses, pay employees, pay vendors and purchase new inventory. Without the postpetition financing, the Debtors' estates will suffer immediate and irreparable harm. To secure the interests of the postpetition lenders, the lenders receive postpetition liens and security interests with priority over all administrative expenses, subject only to a specified carve-out to which the lenders agree. The Trustee says that although he has access to the prepetition lenders' cash collateral, that won't provide him with sufficient funding to sustain the Debtors' operations through a sale of the company's assets. The Trustee assured Judge Feeney that he was unable to obtain new unsecured credit elsewhere. A final hearing to consider the DIP financing facility will be held this morning, May 6, 2005, at 10:00 a.m. * * * As previously reported in the Troubled Company Reporter, on Feb. 21, 2005, Judge Feeney denied High Voltage and its debtor- affiliates' request to obtain debtor-in-possession financing from GE Commercial Finance. Judge Feeney expressed her disdain concerning the Debtors' tumble back into bankruptcy 163 after emerging from chapter 11 last year. She beat up the professionals. She said she needed more financial information. She questioned management and expressed doubts about their business judgment. American Landmark Master LLC and U.S. Trustee complained that the GE-backed "financing scheme" would "pre-ordain the future course of this case." An ad hoc committee of trade creditors lent their support to the DIP Financing proposal. Judge Feeney sided with the objectors. Judge Feeney went a step further and directed the U.S. Trustee to appoint a Chapter 11 Trustee in High Voltage's case. 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. Stephen Gray was appointed chapter 11 Trustee in February 2005. HOLLINGER INC: Independent Directors Want P.G. White Removed ------------------------------------------------------------ Hollinger Inc. (TSX: HLG.C)(TSX:HLG.PR.B) independent directors ask Justice Colin L. Campbell of the Ontario Superior Court of Justice for an order removing Peter G. White as a director and officer of Hollinger on April 28, 2005. Among other reasons, the Order has been sought as a result of Mr. White's role as an officer, director and shareholder of The Ravelston Corporation Limited, against which company Hollinger has commenced litigation to recover $636 million of liquidated and other damages. As reported in the Troubled Company Reporter on Apr. 25, 2005, Ravelston and Ravelston Management Inc. obtained an order of the Ontario Superior Court of Justice appointing RSM Richter Inc. as receiver of all of their assets (except for certain shares held directly or indirectly by them). The Order also provided, among other things, that until May 20, 2005, or at a later date as the Court may order, no proceeding or enforcement process in any court or tribunal is to be commenced or continued against or in respect of either or both of Ravelston and RMI and any proceedings currently under way (including Hollinger's lawsuit) pertaining to Ravelston and RMI) are temporarily stayed. In the Ravelston receivership application Mr. White took numerous positions, which are adverse to the interests of Hollinger. As a result of the commencement of the proceedings by RMI, an Event of Default has occurred under terms of the indentures governing Hollinger's US$78 million principal amount of 11.875% Senior Secured Notes due 2011 and US$15 million 11.875% Second Priority Notes due 2011. RMI is a guarantor of Hollinger's Notes. With respect to both the Senior Secured Notes and the Second Priority Notes, the relevant trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the relevant Notes has the right to accelerate the maturity of the Notes. Until the Event of Default is remedied or a waiver is provided by holders of the Notes, the terms of the Indentures prevent Hollinger from honouring retractions of its Series II Preference Shares submitted after April 19, 2005. Therefore, retractions of Hollinger's outstanding Series II Preference Shares submitted after such date have been suspended until further notice. Hollinger Inc.'s principal asset is its 17% equity and 66.8% voting interest in Hollinger International Inc., which is a newspaper publisher, the assets of which include the Chicago Sun- Times, a large number of community newspapers in the Chicago area and a portfolio of news media investments. Hollinger also owns a portfolio of revenue-producing and other commercial real estate in Canada, including its head office building located at 10 Toronto Street, Toronto. For more information on the company, access http://www.hollinger.com/ * * * Litigation Risks Hollinger, Inc., faces various court cases and investigations: (1) consolidated class action complaint filed in Chicago, Illinois; (2) class action lawsuit that was filed in the Saskatchewan Court of Queen's Bench on September 7, 2004; (3) US$425,000,000 fraud and damage suit filed in the State of Illinois by International; (4) lawsuit seeking enforcement of a November 15, 2003, restructuring proposal to uphold a Shareholders' Rights Plan, a declaration that corporate by-laws were invalid and to prevent the closing of a certain transaction. (5) lawsuit filed by International seeking injunctive relief for the return of documents of which it claims ownership; (6) US$5,000,000 damage action commenced by a lessor of an aircraft lease, in which Hollinger was the guarantor. (7) action commenced by the United States Securities and Exchange Commission on November 15, 2004, seeking injunctive, monetary and other equitable relief. (8) investigation by the enforcement division of the OSC. Court-Ordered Inspection On September 3, 2004, Mr. Justice Colin Campbell of the Ontario Superior Court of Justice ordered the appointment of an Inspector of the affairs of Hollinger pursuant to section 229 of the CBCA upon the application of Catalyst Fund General Partner I Inc. The Order broadly requires an investigation into the affairs of Hollinger and, specifically, into related party transaction and non-competition payments for the period January 1, 1997 to the present. It is estimated that the Inspector's future costs will average $1,000,000 per month. The remaining duration of the Inspection is uncertain though it is presently anticipated to continue for at least an additional 4 months. Litigation Costs Hollinger has incurred legal expense in the defence of various actions brought against it and others in both the United States and Canada. Hollinger has in turn advanced a claim against its directors' and officers' liability insurers asserting that, under the terms and conditions of the policy of insurance, these insurers are required to indemnify Hollinger in respect of this legal expense incurred in connection with some of the actions brought against Hollinger. The claims made total approximately $3,700,000. However, the actual amount of recovery is not determinable at the present time. Default As reported in the Troubled Company Reporter on Apr. 25, 2005, Hollinger is in default under the terms of the indentures governing Hollinger's US$78 million principal amount of 11.875% Senior Secured Notes due 2011 and US$15 million 11.875% Second Priority Secured Notes due 2011 due to Ontario Superior Court of Justice's appointment of RSM Richter Inc. as receiver of all of The Ravelston Corporation Limited's and Ravelston Management Inc.'s assets (except for certain shares held directly or indirectly by them, including shares of Hollinger Inc. and RMI). HOLLINGER INC: Has Until Month-End to Settle SEC Action ------------------------------------------------------- Hollinger Inc. (TSX: HLG.C)(TSX:HLG.PR.B) voluntarily entered into an arrangement whereby it deposited the net amount received by it directly and indirectly from the special dividends declared by the Board of Directors of Hollinger International Inc. on its Class A Common Stock and its Class B Common Stock. The arrangement is part of its settlement discussions with staff of the U.S. Securities and Exchange Commission relating to the action commenced by the SEC against Hollinger and certain of its former directors and senior executives. The escrow terminates upon the earlier to occur of the conclusion of the SEC Action as to all parties and, should Hollinger be unable to reach an overall settlement of the SEC Action, May 31, 2005. If termination of the arrangement occurs, staff of the SEC will have a reasonable opportunity to assert any rights it may have with respect to the escrowed funds. Hollinger Inc.'s principal asset is its 17% equity and 66.8% voting interest in Hollinger International Inc., which is a newspaper publisher, the assets of which include the Chicago Sun- Times, a large number of community newspapers in the Chicago area and a portfolio of news media investments. Hollinger also owns a portfolio of revenue-producing and other commercial real estate in Canada, including its head office building located at 10 Toronto Street, Toronto. For more information on the company, access http://www.hollinger.com/ * * * Litigation Risks Hollinger, Inc., faces various court cases and investigations: (1) consolidated class action complaint filed in Chicago, Illinois; (2) class action lawsuit that was filed in the Saskatchewan Court of Queen's Bench on September 7, 2004; (3) US$425,000,000 fraud and damage suit filed in the State of Illinois by International; (4) lawsuit seeking enforcement of a November 15, 2003, restructuring proposal to uphold a Shareholders' Rights Plan, a declaration that corporate by-laws were invalid and to prevent the closing of a certain transaction. (5) lawsuit filed by International seeking injunctive relief for the return of documents of which it claims ownership; (6) US$5,000,000 damage action commenced by a lessor of an aircraft lease, in which Hollinger was the guarantor. (7) action commenced by the United States Securities and Exchange Commission on November 15, 2004, seeking injunctive, monetary and other equitable relief. (8) investigation by the enforcement division of the OSC. Court-Ordered Inspection On September 3, 2004, Mr. Justice Colin Campbell of the Ontario Superior Court of Justice ordered the appointment of an Inspector of the affairs of Hollinger pursuant to section 229 of the CBCA upon the application of Catalyst Fund General Partner I Inc. The Order broadly requires an investigation into the affairs of Hollinger and, specifically, into related party transaction and non-competition payments for the period January 1, 1997 to the present. It is estimated that the Inspector's future costs will average $1,000,000 per month. The remaining duration of the Inspection is uncertain though it is presently anticipated to continue for at least an additional 4 months. Litigation Costs Hollinger has incurred legal expense in the defence of various actions brought against it and others in both the United States and Canada. Hollinger has in turn advanced a claim against its directors' and officers' liability insurers asserting that, under the terms and conditions of the policy of insurance, these insurers are required to indemnify Hollinger in respect of this legal expense incurred in connection with some of the actions brought against Hollinger. The claims made total approximately $3,700,000. However, the actual amount of recovery is not determinable at the present time. Default As reported in the Troubled Company Reporter on Apr. 25, 2005, Hollinger is in default under the terms of the indentures governing Hollinger's US$78 million principal amount of 11.875% Senior Secured Notes due 2011 and US$15 million 11.875% Second Priority Secured Notes due 2011 due to Ontario Superior Court of Justice's appointment of RSM Richter Inc. as receiver of all of The Ravelston Corporation Limited's and Ravelston Management Inc.'s assets (except for certain shares held directly or indirectly by them, including shares of Hollinger Inc. and RMI). HOLLINGER INC: Ernst & Young's Inspection Fee Totals C$7.20 Mil. ---------------------------------------------------------------- Ernst & Young Inc., as Hollinger Inc.'s (TSX: HLG.C)(TSX:HLG.PR.B) inspector pursuant to the Order of Justice Colin L. Campbell of the Ontario Superior Court of Justice, delivered a supplement to the Seventh Report to support its motion to seek an Order of the Court to permit it to examine former senior management of Hollinger, including Conrad (Lord) Black, F. David Radler and J.A Boultbee, on April 25, 2005. The motion was heard on April 25 and 26, 2005. At the conclusion of the motion, Mr. Justice Campbell reserved his decision. To April 29, 2005, the cost to Hollinger of the inspection (including the costs associated with the Inspector and its legal counsel and Hollinger's legal counsel) is in excess of C$7.20 million. Hollinger Inc.'s principal asset is its 17% equity and 66.8% voting interest in Hollinger International Inc., which is a newspaper publisher, the assets of which include the Chicago Sun- Times, a large number of community newspapers in the Chicago area and a portfolio of news media investments. Hollinger also owns a portfolio of revenue-producing and other commercial real estate in Canada, including its head office building located at 10 Toronto Street, Toronto. For more information on the company, access http://www.hollinger.com/ * * * Litigation Risks Hollinger, Inc., faces various court cases and investigations: (1) consolidated class action complaint filed in Chicago, Illinois; (2) class action lawsuit that was filed in the Saskatchewan Court of Queen's Bench on September 7, 2004; (3) US$425,000,000 fraud and damage suit filed in the State of Illinois by International; (4) lawsuit seeking enforcement of a November 15, 2003, restructuring proposal to uphold a Shareholders' Rights Plan, a declaration that corporate by-laws were invalid and to prevent the closing of a certain transaction. (5) lawsuit filed by International seeking injunctive relief for the return of documents of which it claims ownership; (6) US$5,000,000 damage action commenced by a lessor of an aircraft lease, in which Hollinger was the guarantor. (7) action commenced by the United States Securities and Exchange Commission on November 15, 2004, seeking injunctive, monetary and other equitable relief. (8) investigation by the enforcement division of the OSC. Court-Ordered Inspection On September 3, 2004, Mr. Justice Colin Campbell of the Ontario Superior Court of Justice ordered the appointment of an Inspector of the affairs of Hollinger pursuant to section 229 of the CBCA upon the application of Catalyst Fund General Partner I Inc. The Order broadly requires an investigation into the affairs of Hollinger and, specifically, into related party transaction and non-competition payments for the period January 1, 1997 to the present. It is estimated that the Inspector's future costs will average $1,000,000 per month. The remaining duration of the Inspection is uncertain though it is presently anticipated to continue for at least an additional 4 months. Litigation Costs Hollinger has incurred legal expense in the defence of various actions brought against it and others in both the United States and Canada. Hollinger has in turn advanced a claim against its directors' and officers' liability insurers asserting that, under the terms and conditions of the policy of insurance, these insurers are required to indemnify Hollinger in respect of this legal expense incurred in connection with some of the actions brought against Hollinger. The claims made total approximately $3,700,000. However, the actual amount of recovery is not determinable at the present time. Default As reported in the Troubled Company Reporter on Apr. 25, 2005, Hollinger is in default under the terms of the indentures governing Hollinger's US$78 million principal amount of 11.875% Senior Secured Notes due 2011 and US$15 million 11.875% Second Priority Secured Notes due 2011 due to Ontario Superior Court of Justice's appointment of RSM Richter Inc. as receiver of all of The Ravelston Corporation Limited's and Ravelston Management Inc.'s assets (except for certain shares held directly or indirectly by them, including shares of Hollinger Inc. and RMI). HOLLINGER INC: Holds $72.3 Million Cash as of April 29 ------------------------------------------------------ Hollinger Inc. (TSX: HLG.C)(TSX:HLG.PR.B) and its subsidiaries (other than Hollinger International and its subsidiaries) had approximately US$72.3 million of cash or cash equivalents, as of the close of business on April 29, 2005, including restricted cash, on hand Hollinger owns, directly or indirectly, 782,923 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock of Hollinger International. Based on the April 29, 2005 closing price of the shares of Class A Common Stock of Hollinger International on the New York Stock Exchange of US$9.45, the market value of Hollinger's direct and indirect holdings in Hollinger International was US$149,054,122. All of Hollinger's direct and indirect interest in the shares of Class A Common Stock of Hollinger International are being held in escrow in support of future retractions of its Series II Preference Shares. All of Hollinger's direct and indirect interest in the shares of Class B Common Stock of Hollinger International are pledged as security in connection with Hollinger's outstanding 11.875% Senior Secured Notes due 2011 and 11.875% Second Priority Secured Notes due 2011. In addition to the cash or cash equivalents on hand, Hollinger has previously deposited: a) approximately C$8.0 million in trust with the law firm of Aird & Berlis LLP, as trustee, in support of Hollinger's indemnification obligations to certain current and former independent directors and officers; and b) approximately US$5.5 million in cash with the trustee under the indenture governing the Senior Notes as collateral in support of the Senior Notes (which cash collateral is also collateral in support of the Second Priority Notes, subject to being applied to satisfy future interest payment obligations on the outstanding Senior Notes as permitted by amendments to the Senior Indenture). Consequently, there is currently in excess of US$147.1 million aggregate collateral securing the US$78 million principal amount of the Senior Notes and the US$15 million principal amount of the Second Priority Notes outstanding. Hollinger Inc.'s principal asset is its 17% equity and 66.8% voting interest in Hollinger International Inc., which is a newspaper publisher, the assets of which include the Chicago Sun- Times, a large number of community newspapers in the Chicago area and a portfolio of news media investments. Hollinger also owns a portfolio of revenue-producing and other commercial real estate in Canada, including its head office building located at 10 Toronto Street, Toronto. For more information on the company, access http://www.hollinger.com/ * * * Litigation Risks Hollinger, Inc., faces various court cases and investigations: (1) consolidated class action complaint filed in Chicago, Illinois; (2) class action lawsuit that was filed in the Saskatchewan Court of Queen's Bench on September 7, 2004; (3) US$425,000,000 fraud and damage suit filed in the State of Illinois by International; (4) lawsuit seeking enforcement of a November 15, 2003, restructuring proposal to uphold a Shareholders' Rights Plan, a declaration that corporate by-laws were invalid and to prevent the closing of a certain transaction. (5) lawsuit filed by International seeking injunctive relief for the return of documents of which it claims ownership; (6) US$5,000,000 damage action commenced by a lessor of an aircraft lease, in which Hollinger was the guarantor. (7) action commenced by the United States Securities and Exchange Commission on November 15, 2004, seeking injunctive, monetary and other equitable relief. (8) investigation by the enforcement division of the OSC. Court-Ordered Inspection On September 3, 2004, Mr. Justice Colin Campbell of the Ontario Superior Court of Justice ordered the appointment of an Inspector of the affairs of Hollinger pursuant to section 229 of the CBCA upon the application of Catalyst Fund General Partner I Inc. The Order broadly requires an investigation into the affairs of Hollinger and, specifically, into related party transaction and non-competition payments for the period January 1, 1997 to the present. It is estimated that the Inspector's future costs will average $1,000,000 per month. The remaining duration of the Inspection is uncertain though it is presently anticipated to continue for at least an additional 4 months. Litigation Costs Hollinger has incurred legal expense in the defence of various actions brought against it and others in both the United States and Canada. Hollinger has in turn advanced a claim against its directors' and officers' liability insurers asserting that, under the terms and conditions of the policy of insurance, these insurers are required to indemnify Hollinger in respect of this legal expense incurred in connection with some of the actions brought against Hollinger. The claims made total approximately $3,700,000. However, the actual amount of recovery is not determinable at the present time. Default As reported in the Troubled Company Reporter on Apr. 25, 2005, Hollinger is in default under the terms of the indentures governing Hollinger's US$78 million principal amount of 11.875% Senior Secured Notes due 2011 and US$15 million 11.875% Second Priority Secured Notes due 2011 due to Ontario Superior Court of Justice's appointment of RSM Richter Inc. as receiver of all of The Ravelston Corporation Limited's and Ravelston Management Inc.'s assets (except for certain shares held directly or indirectly by them, including shares of Hollinger Inc. and RMI). IFT CORP: Amex Requests Compliance Plan by May 31 ------------------------------------------------- IFT Corporation (Amex: IFT), received notice from the American Stock Exchange that after review of the Company's Form 10-K for the fiscal year ended Dec. 31, 2004, the Company does not meet certain of the Exchange's continued listing standards. The notice requires IFT to submit a plan by May 31, 2005, advising the Exchange of the action it has taken, or will take, to bring the Company into compliance with the continued listing standards identified below within a maximum of 18 months. Michael T. Adams, CEO of IFT, stated, "It's unfortunate that the American Stock Exchange was required to provide us with this notification, especially since it is aware that we make every effort as a matter of ordinary course to meet its requirements. Although I believe that this noncompliance matter will not remain outstanding for long, the Exchange has been generous in its notification by allowing us up to 18 months to regain compliance," continued Mr. Adams. "We have made our basic moving forward strategies known to the Exchange by virtue of the actions we have taken after December 31, 2004 to date, such as the cancellation of $6 Million indebtedness by the Chairman of the Board, retention of a proven sales and marketing team, and acquisition of LaPolla Industries, Inc., all of which have been disclosed in our periodic reports filed with the Securities and Exchange Commission as required by law. We value our relationship with the Exchange and expect to maintain it for the benefit of our shareholders. We will submit a plan as required by the notification by May 31, 2005 for the Exchange's consideration," concluded Mr. Adams. Specifically, the notice provides that the Company is not in compliance with Section 1003(a)(i) of the Exchange's Company Guide because its shareholders' equity is less than $2 million and it has losses from continuing operations and/or net losses in two out of its three most recent fiscal years; and Section 1003(a)(ii) of the Company Guide because its shareholders' equity is less than $4 million and it has losses from continuing operations and/or net losses in three out of its four most recent fiscal years. If the compliance plan is accepted by the Exchange, the Company has been advised that it may be able to continue its listing during the plan period of up to 18 months, during which time it will be subject to periodic review to determine whether it is making progress consistent with its plan. If the Company is not in compliance with the continued listing standards at the conclusion of the 18-month plan period, or does not make progress consistent with the plan during the plan period, the Exchange staff will initiate delisting proceedings as appropriate. If the Exchange initiates delisting procedures, depending on the circumstances, we may decide to appeal the ruling. Depending on the outcome of the appeal or otherwise, the Company will pursue having its common stock quoted on the OTC Bulletin Board (OTCBB). About IFT Corporation IFT Corporation is a publicly traded holding company focused on acquiring and developing companies that operate in the coatings, paints, foams, sealants, and adhesives markets. About LaPolla Industries, Inc. LaPolla Industries, Inc. markets, sells, manufactures and distributes acrylic roof coatings, roof paints, sealers, roofing adhesives, and polyurethane foam and wall systems to the home improvement retail and commercial/industrial construction industries. * * * Going Concern Doubt As reported in the Troubled Company Reporter on April 4, 2005, BAUM & COMPANY, P.A., in Coral Springs, Florida, expressed substantial doubt about the Company's ability to continue as a going concern after they audited IFT Corporation's consolidated financial statements as of and for the year ended December 31, 2004. 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, IFT warns. IMPATH: Committee Hires Bridge Associates as Wind-Down Consultant ----------------------------------------------------------------- The Official Committee of Equity Security Holders of Impath Inc. and its debtor-affiliates, sought and obtained from the U.S. Bankruptcy Court for the Southern District of New York, permission for authority to employ Bridge Associates LLC as its wind-down consultants, nunc pro tunc to Jan. 27, 2005. Bridge Associates' will: (a) Evaluate and investigate remaining claims and assets of the Debtors' estates in consultation with the Debtors and their professionals and the Equity Committee and its professionals; (b) Consult with the Debtors and their professionals and advisors and the Equity Committee and its professionals regarding wind-down of the Debtors' affairs and transition to the Liquidating Agent prior to the Effective Date; (c) Perform such Pre-Effective Date wind-down and transition services as are reasonable and necessary to ensure an orderly, timely and smooth wind-down and transition to the Liquidating Agent, in accordance with the Plan; (d) Assist and advise the Equity Committee, in consultation with the Debtors and their professionals and advisors, and Equity Committee professionals, relative to the administration of these Chapter 11 Cases prior to the Effective Date; and (e) Assist the Equity Committee and its professionals in any review, analysis, negotiation and formulation of any modifications to the Plan prior to confirmation. Bridge Associates reports the Firm's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Anthony H.N. Schnelling Managing Director $450 Mark Stickel Managing Director $350 David Garlock Senior Consultant $295 To the best of the Committee's knowledge, Bridge Associates is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in New York, New York, Impath Inc., together with its subsidiaries, is in the business of improving outcomes for cancer patients by providing patient-specific diagnostic and prognostic services to pathologists and oncologists, providing products and services to biotechnology and pharmaceutical companies, and licensing software to hospitals, laboratories, and academic medical centers. The Company filed for chapter 11 protection on Sept. 28, 2003 (Bankr. S.D.N.Y. Case No. 03-16113). George A. Davis, Esq., at Weil, Gotshal & Manges, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $192,883,742 in total assets and $127,335,423 in total debts. IMPAX LAB: Noteholder Sends Notice of Default Due to Tardy 10-K --------------------------------------------------------------- IMPAX Laboratories, Inc. (NASDAQ:IPXLE) reported steps taken to complete its financial closing and file its Annual Report on Form 10-K for the year ended December 31, 2004. The Company, in consultation with its auditor, decided to approach the Office of the Chief Accountant of the Securities and Exchange Commission to discuss the Company's accounting for its transactions under its Strategic Alliance Agreement with a subsidiary of Teva Pharmaceutical Industries Ltd. prior to filing its 2004 Annual Report on Form 10-K. The Company is presently preparing its submission. As previously announced, the Company and Teva have agreed to the net sales and margin allocable to IMPAX for 2004 and have also agreed not to make any further adjustments to such agreed amounts. The Company refers to this agreement as the 2004 Close-Out Letter. Additionally, the Company and Teva have entered into an amendment to the Strategic Alliance Agreement whereby, effective January 1, 2005, certain sales deductions that were previously required to be estimated have been replaced by fixed percentages thereby simplifying the accounting under the agreement. Both the 2004 Close-Out Letter and the amendment were completed in March 2005. Until the Company completes and files its 2004 Annual Report on Form 10-K, it will not be able to file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. Delisting Notice In related matters, also previously reported, on April 5, 2005, IMPAX received a Nasdaq Staff determination letter indicating that IMPAX failed to comply with the requirement for continued listing set forth in Nasdaq Marketplace Rule 4310(c)(14) because IMPAX failed to file its 2004 Annual Report on Form 10-K with Nasdaq and, therefore, IMPAX's common stock is subject to delisting from The Nasdaq Stock Market. A hearing has been scheduled before a Nasdaq Listing Qualifications Panel on May 19, 2005, to review the Staff's determination, although there can be no assurance that the Panel will grant IMPAX's request for continued listing pending its filing of its Annual Report. In the event that IMPAX's common stock is delisted from Nasdaq and is not otherwise approved for trading on any United States national securities exchange, it will constitute a "designated event" under the Indenture governing the Company's $95 million principal amount of 1.250% Convertible Senior Subordinated Debentures due 2024, giving each Debenture holder the option to require the Company to redeem the holder's Debentures at 100% of their principal amount, together with accrued and unpaid interest. Notice of Default from Debtholder IMPAX received a notice, dated April 22, 2005, from a holder of more than 25% aggregate principal amount of its 1.250% Convertible Senior Subordinated Debentures due 2024, stating that the Company failed to file its Annual Report on Form 10-K for the year ended December 31, 2004 with the SEC as required by the governing Indenture and requiring that the Company remedy such default forthwith. Under the Indenture, if the Company fails to file the Annual Report within 60 days after the date of the notice, it will constitute an "event of default" under the Indenture and thereafter either the Trustee or the holders of 25% in aggregate principal amount of the Debentures then outstanding, by notice to the Company, may declare the principal of and premium, if any, on all the Debentures then outstanding and the interest accrued thereon to be due and payable immediately. About the Company IMPAX Laboratories, Inc. -- http://www.impaxlabs.com/-- is a technology based specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of branded products. IMPAX markets its generic products through its Global Pharmaceuticals division and intends to market its branded products through the IMPAX Pharmaceuticals division. Additionally, where strategically appropriate, IMPAX has developed marketing partnerships to fully leverage its technology platform. IMPAX Laboratories is headquartered in Hayward, California, and has a full range of capabilities in its Hayward and Philadelphia facilities. JOHN HENRICHSEN: Case Summary & 3 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: John Lee Henrichsen & Kimberlee Hutchings Henrichsen 2460 East 3670 South St. George, Utah 84790 Bankruptcy Case No.: 05-26589 Chapter 11 Petition Date: April 26, 2005 Court: District of Utah (Salt Lake City) Judge: William T. Thurman Debtor's Counsel: Harold D. Mitchell, Esq. 324 North Main Street Spanish Fork, Utah 84660 Tel: (801) 798-3574 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 3 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Home Savings Bank Deficiency on trust $350,000 c/o Jason Boren deed note 201 South Main #600 Value of security: Salt Lake City, UT 84111 $225,000 Wells Fargo Bank Deficiency on motor $11,235 Auto Finance Division vehicle lease P.O. Box 11983 Santa Ana, CA 92711 Wells Fargo Bank VISA credit card $2,500 P.O. Box 30086 Los Angeles, CA 90030 JP MORGAN: Fitch Upgrades $38.1 Mil. Class F to BB+ from BB ----------------------------------------------------------- Fitch Ratings upgrades J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1999-C7: -- $40.1 million class C to 'AAA' from 'AA-'; -- $52.1 million class D to 'A+' from 'BBB'; -- $12.0 million class E to 'A-' from 'BBB-'; -- $38.1 million class F to 'BB+' from 'BB'. These classes are affirmed by Fitch: -- $53.8 million class A-1 'AAA'; -- $357.0 million class A-2 'AAA'; -- Interest-only class X 'AAA'; -- $40.1 million class B 'AAA'; -- $26.0 million class G 'B'; -- $4.0 million class H 'B-'. The $24 million class NR certificates are not rated by Fitch. The upgrades reflect the increased credit enhancement levels from loan payoffs and amortization. As of the April 2005 distribution date, the pool's aggregate principal balance has been reduced by 19% to $647.2 million from $801.4 million at issuance. In addition, the largest loan in the pool (7.8%) has defeased. One loan (1.2%) is currently real estate owned -- REO. The REO is secured by an office property in Jackson, Mississippi; the property was 68% occupied as of April 2004. The special servicer is working on stabilizing the property before marketing it for sale. Losses are expected. There have been no realized losses in the pool to date. KAISER ALUMINUM: Asks Court to Okay HSBC Bank Claim Settlement -------------------------------------------------------------- HSBC Bank USA, National Association, is the successor Indenture Trustee under an Indenture of Trust, dated as of March 1, 1997, between Industrial Development Corporation of Spokane County, Washington, as Issuer, and First National Association, as predecessor Indenture Trustee. Pursuant to the Indenture, Spokane County issued Solid Waste Disposal Revenue Bonds (Kaiser Aluminum & Chemical Corporation Project) Series 1997 in the aggregate principal amount of $19,000,000. Pursuant to a Loan Agreement, the County loaned the proceeds of the SWD Revenue Bonds to KACC to finance the costs of the acquisition, construction, installation and equipping of solid waste disposal facilities at the aluminum smelter facility owned by KACC in Mead, Washington. The SWD Revenue Bonds are secured by a pledge of the loan payments received by the County from KACC under the Loan Agreement. KACC also granted a subordinated lien upon certain of its property pursuant to a "Second Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing" as additional security for the Bonds. The Deed of Trust describes HSBC's lien on certain real and personal property. In 2002, HSBC filed a $19,645,788 secured claim -- Claim No. 1124 -- against KACC for all amounts due to HSBC under the indenture and the Loan Agreement. In 2004, KACC sought and obtained Court approval of bidding procedures for the sale of Parcels 1 and 7, located in Mead, Washington, and certain related assets and intellectual property. The Court authorized KACC to assume and assign related executory contracts. HSBC's collateral consists of a portion of the assets contained within or comprising Parcel 1. An auction was subsequently held at which CDC Mead, LLC, submitted the winning bid of $7.4 million for the Mead Assets. HSBC objected to the Sale Motion, arguing that the Mead Assets could not be sold free and clear of its lien unless there was an allocation of the Sale Proceeds to the Collateral and a valuation of that Collateral. Alternatively, HSBC argued that if the Court were to approve the sale of the Mead Assets free and clear of its lien, then the Court should order the escrow of the entire Sale Proceeds to protect its interests. KACC argued that the Court should permit the sale of the Mead Assets free and clear of HSBC's lien pursuant to Section 363(f) of the Bankruptcy Code pending a valuation of the Collateral. Moreover, although it did not dispute that an escrow of funds may be necessary to provide adequate protection to HSBC, KACC insisted that it should only have to escrow $1.2 million of the Sale Proceeds because HSBC's Collateral constitutes only a very small portion of the Mead Assets. In May 2004, Judge Fitzgerald approved the Sale Motion. Because the value of the Collateral had not yet been established, the Sale Order required KACC to place in escrow $4 million as adequate protection for any of HSBC's allowed secured claim until the Court establishes the amount of HSBC's Claim. At a hearing in July 2004, the Court established a process by which the value of the Collateral would be established. The Court directed HSBC to deliver appraisals of the Collateral to KACC, which KACC would decide to either accept or reject. If KACC rejected the appraisals, KACC was required to deliver its own appraisals to HSBC by no later than October 11, 2004. Ultimately, KACC did not accept HSBC's appraisals and had its own appraisals completed. The Court thereafter scheduled an evidentiary hearing to consider each party's appraisals and to determine the HSBC's allowed secured claim amount. Escrow Settlement As previously reported, KACC and HSBC reached a settlement that allows HSBC's secured claim at $1.6 million plus a pro rata share of interest earned on the escrow account from its inception through the date HSBC is paid. Furthermore, KACC and HSBC agreed to adjust the Escrow amount pursuant to the terms and conditions of a Court-approved stipulation. The Stipulation provided that KACC is authorized to reduce the Escrow to $2,275,000 plus a pro rata portion of the interest earned on the Escrow, which by agreement of the parties is deemed to be $20,000. The $2,295,000 remaining in the Escrow after the reduction will constitute adequate protection for the amount of any allowed secured claim of HSBC. HSBC Claim Settlement After extensive negotiations between KACC and HSBC before the scheduled evidentiary hearing, the parties reached a settlement with respect to the secured amount of Claim No. 1124. The terms of the Settlement are: (a) Claim No. 1124 will be allowed as: (i) a secured claim against KACC for $1,600,000; and (ii) a general non-priority unsecured claim against KACC for $18,045,788; (b) The secured portion of Claim No. 1124 will be paid within five business days after the entry of a final, non- appealable order approving the Settlement; (c) Except with respect to any claim HSBC or its predecessor, or both, may assert for its fees, charges, and expenses as Indenture Trustee, against any of the Debtors, whether asserted in Claim No. 1124 or otherwise, to the extent not expressly allowed pursuant to the Settlement, will be disallowed; and (d) KACC and HSBC reserve all right with respect to any application or claim of HSBC or its predecessor, or both, for payment of its fees, charges, and expenses as Indenture Trustee based on an assertion of substantial contribution under Section 503(b) or otherwise. KACC asks the Court to approve the Settlement Agreement. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 68; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Wants Insurance Cos. to Prove Validity of Claims ----------------------------------------------------------------- As previously reported in the Troubled Company Reporter, on March 31, 2005, ACE Property and Casualty Company, Century Indemnity Company, Industrial Underwriters Insurance Company, Pacific Employers Insurance Company, St. Paul Mercury Insurance Company, and Industrial Indemnity Company jointly filed, among other claims, Claim Nos. 7162 and 7174 against Kaiser Alumina Australia Corporation and Kaiser Finance Company. In addition, the Insurance Companies filed Claim Nos. 7516, 7520, and 7523 against Alpart Jamaica, Inc., Kaiser Jamaica Corporation, and Kaiser Bauxite Company. The Insurance Companies assert identical contingent and unliquidated claims against each of Kaiser Aluminum Corporation and its debtor-affiliates for any amounts potentially owing under 30 separate insurance policies issued to Kaiser Aluminum & Chemical Corporation, including any additional premium payments, deductibles, or other expenses that may become due under the Policies. The Policies cover periods from the 1960s to the mid-1980s. All of the Policies -- except several that were settled before the Petition Date -- are subject of litigation between KACC and ACE Property and other insurers in California relating to coverage for asbestos, noise-induced hearing loss, and coal tar pitch volatiles claims. Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, tells the United States Bankruptcy Court for the District of Delaware that the Debtors are not, and never have been, parties to the litigation and have not asserted claims under the Policies. Objection to the Insurance Claims The Insurance Companies allege that the Debtors "may" have liability under the Policies in the future. As an initial matter, Mr. DeFranceschi notes that the Insurance Companies do not specifically allege in the Insurance Claims, let alone provide any proof, that the Debtors have liability to the Insurance Companies. On that basis alone, Mr. DeFranceschi says, the Court should summarily dismiss the Insurance Claims. Mr. DeFranceschi also points out that because there Debtors have not asserted any claim under the Policies, the Insurance Companies have no basis to assert a claim against the Debtors. Even if claims by the Debtors against the Insurance Companies were pending, the Insurance Companies would be debtors of the Debtors -- not creditors. Accordingly, the Debtors asked the Court to: (a) disallow the Insurance Claims pursuant to Section 502; or (b) alternatively, estimate the Insurance Claims, pursuant to Section 502(c), at zero. Insurance Companies Say Debtors Need Facts to Disallow Claims ACE Property and Casualty Company, Century Indemnity Company, Industrial Underwriters Insurance Company, Pacific Employers Insurance Company, St. Paul Mercury Insurance Company, and Industrial Indemnity Company state that the Debtors have no factual or legal basis to object to the Insurance Companies' Claim Nos. 7162, 7174, 7516, 7520, and 7523. Moreover, even if estimation of the Insurance Claims would otherwise be proper, the Debtors still do not have any factual or legal basis for estimating the Claims under Section 502(c) of the Bankruptcy Code. Marc S. Casarino, Esq., at White and Williams LLP, in Wilmington, Delaware, argues that without reference to specific claims filed against the Debtors that are allegedly covered under the insurance policies, it is impossible to understand the factual basis for the Debtors' request on a claim-by-claim basis. To the extent that the Debtors assert continuing rights to insurance coverage under the Policies, they are bound to perform their continuing reciprocal obligations under these Policies. The Insurance Claims are intended to preserve the rights of the Insurance Companies to receive any and all reciprocal payments and performance under the Policies that the Debtors remain obligated to provide. Mr. Casarino explains that a properly filed proof of claim constituted prima facie evidence of the validity and amount of the claim. Accordingly, a party objecting to a claim must present affirmative evidence to overcome the presumption of validity. The Debtors bear the burden of producing evidence to rebut this presumption of validity. However, the Debtors have offered no evidence to support their objection to the Insurance Claims. The Debtors' mere conclusory statement that "it is inconceivable that any claims relating to . . . product liability, environmental liability and premises liability will ever be attributable to the . . . Debtors," is a legally insufficient basis for objection to the Insurance Claims. Mr. Casarino also points out that the Debtors fail to articulate an explicit justification for the disallowance of the Insurance Claims. Although the Insurance Claims are still unliquidated, the Bankruptcy Code recognizes that contingent and unliquidated claims are proper "claims." The Debtors' only articulated basis for disallowance is that the Insurance Claims are presently contingent and unliquidated. Furthermore, Section 502(b)(1) provides that the Court may disallow a claim to the extent that "such claim is unenforceable against the debtor, under any agreement, or applicable law for a reason other than because such claim is contingent or unmatured." Similarly, there is no basis for estimation of the Insurance Claims. The threshold issue that must be addressed before the Court could commence an estimation proceeding is whether the "fixing or liquidation" of the claim would "unduly delay the administration of" the Debtors' Chapter 11 cases. Determination of whether delay is "unjustifiable" requires consideration of not just the Debtors' interest, but of all parties-in-interest. Absent "undue delay," the Insurance Claims should not be estimated but, rather, liquidated, according to Mr. Casarino, citing O'Neill v. Continental Airlines, Inc., 981 F.2d 1450, 1461 (5th Cir. 1993). Estimation must be justified in light of its unfairness to the Insurance Companies by any limitation to their rights to a full satisfaction without a corresponding detriment to the Debtors, of which there is none. Mr. Casarino says that the Debtors' request contains only unsubstantiated, non-specific conclusory allegations that are "insufficient to sustain evidentiary burden" for compelling an estimation of the Insurance Claims. Debtors Want Insurance Companies to Prove Validity of Claims Alpart Jamaica, Inc., Kaiser Jamaica Corporation, Kaiser Bauxite Company, Kaiser Alumina Australia Corporation, and Kaiser Finance Corporation tell Judge Fitzgerald that the Insurance Companies completely ignore the fact that the Debtors submitted the Affidavit of Edward F. Houff in support of their request. Mr. Houff is the company's Vice-President, General Counsel, and Secretary. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that the Affidavit confirms that the Debtors have never asserted any claim under the Policies and that no claims attributable to the Debtors have ever been paid by the Insurance Companies under the Policies. Contrary to the Insurance Companies' allegations the Affidavit sets forth a detailed description of the nature of the Debtors' businesses and assets since the Debtors' inception and throughout the applicable periods of the Policies, which clearly establishes that the Debtors' businesses are extremely unlikely to ever generate a claim under the Policies. Ms. Newmarch rebuts that the Insurance Companies have the burden to prove the validity of the Insurance Claims by a preponderance of the evidence. However, the Insurance Companies fail to even try to prove the validity of their Claims, let alone produce evidence sufficient to satisfy their burden. With respect to the confirmation process for the Liquidating Debtors' Chapter 11 Plans of Liquidation underway, if liquidation of the contingent Insurance Claims cannot occur until a "contingency" is realized -- a claim covered by insurance is filed -- the Debtors would be required to wait indefinitely for the possibility that claims attributable to the Debtors might somehow arise in some amount under the Policies even though: (i) no claims have arisen since the inception of the Policies in the 1960s; and (ii) the Insurance Companies were unable to even suggest a basis on which any claims exist or could be estimated at any amount other than zero. The "wait," Ms. Newmarch says, would in turn, unreasonably delay some portion of the distributions to the Debtors' unsecured creditors because presumably a reserve would need to be established for the Insurance Claims. Given that the status quo has been the same for 40 years, and there is absolutely no reason to believe that the circumstances will change any time in the near future, there is simply no justification to require any delay under the circumstances. Even if the Insurance Claims are not disallowed, the Debtors ask the Court to estimate the Claims at zero since requiring the Claims to be liquidated only once a contingency has occurred would unduly, and indefinitely, delay the administration of their Chapter 11 cases. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 68; Bankruptcy Creditors' Service, Inc., 215/945-7000) LAC D'AMIANTE: U.S. Trustee Appoints 11-Member Creditors Committee ------------------------------------------------------------------ The United States Trustee for Region 7 appointed eleven creditors to serve on the Official Committee of Unsecured Creditors in Lac d'Amiante Du Quebec Ltee and its debtor-affiliates' chapter 11 cases: 1. Barbara Zondervan Attn: Robert Phillips, Esq. Simmons Cooper, LLC 707 Berkshire Blvd. P.O. Box 521 East Alton, Illinois 62024 Phone: 312-759-7500, Fax: 312-759-7516 2. Thomas Brown Attn: Ryan A. Foster, Esq. Ryan A. Foster Law Firm 440 Louisiana St., Suite 2100 Houston, Texas 77002 Phone: 713-236-2975 3. Melvin Eldon Boggs Attn: Alan Rich Baron & Budd, P.C. 3102 Oak Lawn Ave., Suite 1100 Dallas, Texas 75219 Phone: 800-946-9646, Fax: 214-520-1181 4. Kenna Hall Terrell Attn: Steven Kazan, Esq. Kazan McClaim Abrams Fernandez Lyons & Farrise 171 Twelfth St., Suite 300 Oakland, California 94607 Phone: 877-995-6372, Fax: 510-835-4913 5. Robert H. Lawhorn Attn; Robert Shuttlesworth, Esq. Williams Bailey Law Firm 8441 Gulf Freeway, Suite 600 Houston, Texas 77017 Phone: 800-220-9341, Fax: 713-643-6226 6. Benito T. Caceres Attn: Eric Bogdan, Esq. The Bogdan Law Firm 8866 Gulf Freeway, Suite 515 Houston, Texas 77017 Phone: 713-378-9378, Fax: 713-378-9379 7. James A. Bailey Attn: Brian Blevins, Esq. Provost Umphrey Law Firm 490 Park St. Beaumont, Texas 77704 Phone: 409-835-6000, Fax: 409-838-8888 8. Robert Ryan Attn: Christina Skubic, Esq. Brayton Purcell 222 Rush Landing Rd. Novato, California 94948 Phone: 415-898-1555, Fax: 415-898-1247 9. Timothy Crisler Attn: Lou Thompson Black, Esq. Brent Coon and Associates 917 Franklin, Suite 100 Houston, Texas 77002 Phone: 713-224-5949, Fax: 713-227-2018 10. Myra Meiers Attn: Thomas W. Bevan, Esq. Bevan & Associates, LPA 10360 Northfield Rd. Northfield, Ohio 44067 Phone: 330-467-8571, Fax: 330-467-4493 11. Samuel M. Cox Attn: Thomas M. Wilson, Esq. Kelley & Ferraro, LLP 1300 E. Ninth St., Suite 1901 Cleveland, Ohio 44114 Phone: (216)575-0777 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 Tucson, Arizona, Lac d'Amiante Du Quebec Ltee, fka Lake Asbestos of Quebec, Ltd., and its affiliates, are all non-operational and dormant subsidiaries of ASARCO Inc., nka ASARCO LLC. ASARCO mines, smelts and refines copper and molybdenum in the United States and Peru. The Company and its debtor-affiliates filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case No. 05-20521). Nathaniel Peter Holzer, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they each estimated assets and debts of more than $100 million. LISTWORKS CORP: Kurtzman Matera Approved as Ch. 7 Trustee Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Eric C. Kurtzman, the chapter 7 trustee overseeing the liquidation of The Listworks Corporation, Inc., permission to retain Kurtzman Matera Gurock Scuderi & Karben, LLP as his counsel, nunc pro tunc to March 1, 2005. Kurtzman Matera will: (a) prepare orders, applications and affidavits to retain professionals, including an auctioneer and accountant; (b) prepare all documents and court appearances necessary to approve settlements of the accounts receivable and/or avoidance actions; (c) prepare objections to invalid proofs of claim if such become necessary; and (d) serve in any other proceedings necessary in the administration of the estate. KMGSK's professionals bill: Designation Hourly Rate ----------- ----------- Attorneys $225-$350 Para-professional $150 KMGSK assures the Court that it does not represent any interest adverse to the Chapter 7 Trustee, the Debtor or any other parties- in-interest. Headquartered in Hawthorne, New York, The Listworks Corporation, Inc., filed a chapter 7 petition on Feb. 18, 2005 (Bankr. S.D.N.Y. Case No. 05-20106). James Berman, Esq., at Zeisler & Zeisler, P.C., represents the Debtor. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in assets and $10 million to $50 million in debts. MARKLAND TECH: Subsidiary Wins $36 Million Engineering Contracts ---------------------------------------------------------------- Markland Technologies, Inc.'s (OTCBB: MRKL) subsidiary EOIR Technologies, Inc., has been awarded two new contracts. The contracts have a combined potential value of $36 million. The first is a contract awarded by the Naval Surface Warfare Center Dahlgren Division to provide system design, engineering support and systems integration for a new land-based vehicle to be used by the US Marines with a potential value of $11 million. The second is a contract awarded by the US Army Night Vision and Electronics Sensor Directorate (NVESD) for prototype surveillance and force protection technology with a potential value of $25 million. NSWCDD provides extensive support to the U.S. Navy in many important areas which include the following; research and, development, test and evaluation, fleet support activities for surface warfare, combat systems, ordnance, strategic systems, amphibious warfare, mines and mine countermeasures. The Division conducts analysis, systems engineering, research, test, evaluation, and integration of important naval and joint warfare systems. This contract award signals an important step toward the goal that Markland Technologies Inc has established of extending its customer base within the US Navy and within NSWCDD in particular. The Army's NVESD research and development group is one of the U.S. military's most advanced technological leaders. Markland is working on a range of next-generation technology solutions for the NVESD, including night vision and advanced sensor applications, disposable sensors and other threat-detection systems. Many of the products and services being delivered on this contract utilize next-generation electro-optic and infrared sensor technologies that are being used in direct support of U.S. military combat operations in Iraq, Afghanistan and elsewhere. The Army's NVESD has been responsible for numerous key innovations in the fields of optical electronics and thermal imaging for weapons targeting, electronic surveillance and other mission-critical military applications. "We look forward to the beginning of a long and successful relationship between Markland and NSWC Dahlgren. Markland is poised to provide its talents to the Navy," said Robert Tarini, Markland CEO and Chairman. "To demonstrate our commitment, EOIR is creating a new division to focus on Naval and Marine Corps support. The award of this work is the first important step in establishing this new division." Markland has under taken important steps to fully integrate its majority owned Technest Holdings Inc (OTCBB: THNS) subsidiary into the day to day operations of Markland. Technest's Genex Technologies subsidiary has been selected as a major subcontractor by EOIR Technologies Inc to supply proprietary optical surveillance technology to be utilized on a number of large scale US Army contracts recently awarded to Markland. About Markland Technologies Markland Technologies, Inc., is committed to setting next- generation standards in defense and security through the provision of innovative emerging technologies and expert services. The Company is engaged in the identification of advanced technologies currently under development in laboratories, universities and in private industry, and in the transformation of those technologies into next-generation products. Markland's solutions support military, law enforcement and homeland security personnel to protect the nation's citizens, borders and critical infrastructure assets from the threat of terrorism and other dangers. Through strategic development, Markland focuses on the creation of dual- use technology and products with applications in both the defense market and civilian homeland security and law enforcement fields. The Company is a Board Member of the Homeland Security Industries Association, and is a featured Company on HomelandDefenseStocks.com * * * Going Concern Doubt In its Form 10-Q for the quarterly period ended Dec. 31, 2004, filed with the Securities and Exchange Commission, Markland reported net losses of $9,253,213 and $1,739,145 for the six months ended December 31, 2004 and 2003, respectively. During the six months ended December 31, 2004, Markland issued secured convertible promissory notes with a face value of $6,955,000 which, if not converted, are repayable between September and November 2005. "There is no assurance that Markland can reverse its operating losses, or that it can raise additional capital to allow it to continue its planned operations," the Company said in its quarterly filing. "These factors raise substantial doubt about Markland's ability to continue as a going concern," the Company added, echoing doubts expressed by WOLF & COMPANY, P.C., Boston, Massachusetts, when its audited Markland's financial statements for the fiscal year ending June 30, 2004. Auditors at MARCUM & KLIEGMAN LLP had similar doubts when they looked at Markland's 2003 financial statements. MCLEODUSA INC: Payment Default Cues Moody's to Review Junk Ratings ------------------------------------------------------------------ Moody's Investors Service has placed the debt ratings of McLeodUSA Inc. on review for possible downgrade following the company's failure to make scheduled principal and interest payments in March 2005, and its announcement that it is in negotiations with members of its lender group with regard to a capital restructuring. These ratings have been placed on review for possible downgrade: * Senior implied rating to RFD from Caa3 * $150.0 million senior secured revolving credit facility due 2007 to RFD from Caa3 * $150.8 million senior secured multi-draw term loan A due 2007 to RFD from Caa3 * $376.5 million senior secured term loan B due 2008 to RFD from Caa3 * Senior unsecured issuer rating to RFD from Ca The review will focus on: (a) near-term liquidity, (b) recovery prospects for bank lenders and the likely conversion of bank debt to equity, and (c) the potential that the company may again need to seek bankruptcy protection in the longer term. Upon concluding the review, it is likely that Moody's will downgrade or potentially withdraw McLeod's ratings if the company's debt is successfully exchanged for equity. McLeod failed to make $18.1 million of interest and principal payments on its bank debt during the first quarter of 2005. The company believes that by not making principal and interest payments on the credit facilities, cash on hand together with cash flows from operations will be sufficient to maintain operations without service disruptions. On March 16, 2005, and prior to its failure to make the aforementioned interest and principal payments, McLeod entered into a forbearance agreement with its lender group under which the banks have agreed not to take action (i.e. accelerate), as a result of the company's failure to make interest and principal payments, through May 23, 2005. McLeod has also entered into negotiations related to possible terms for a capital restructuring with a steering committee representing the lender group. According to the company, such a capital restructuring would likely include the conversion of all or a significant portion of the company's existing senior secured bank debt into equity. Moody's notes that McLeod entered into an exit facility pursuant to its reorganization plan in 2002. The exit facility, a $110 million revolving credit facility, which matures on May 31, 2007, is secured by first priority liens on the assets of McLeod and its domestic subsidiaries and ranks superior to the Caa3 rated bank debt. McLeodUSA is a facilities-based telecommunications services provider headquartered in Cedar Rapids, Iowa. For the trailing twelve months ended March 31, 2005, the company generated $683.1 million in revenues and $54.2 million in EBITDA (as adjusted for impairment and restructuring charges). Free cash flow for 2004 was $(32.7) million, from operating cash flow of $16.7 million. * * * Additional details about the bad news contained in McLeodUSA's annual report and the possibility of a second bankruptcy filing by the company appeared in the Troubled Company Reporter on March 29, 2005. JPMORGAN CHASE BANK, N.A., serves as Administrative Agent for a consortium of lenders to McLeodUSA. McLeodUSA has has hired MILLER BUCKFIRE YING & CO., LLC and GLEACHER PARTNERS, LLC, to explore its options. DELOITTE & TOUCHE LLP serves as the company's outside auditors. McLeodUSA Incorporated -- http://www.mcleodusa.com/-- provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company is a facilities-based telecommunications provider with, as of December 31, 2004, 38 ATM switches, 39 voice switches, 699 collocations, 432 DSLAMs and 2,426 employees. As of April 16, 2002, Forstmann Little & Co. became a 58% shareholder in the Company. McLeodUSA emerged from a prepackaged chapter 11 case (Bankr. D. Del. Case No. 02-10288) in April 2002. David S. Kurtz, Esq., and Gregg M. Galard, Esq., at Skadden, Arps, Slate, Meagher & Flom, represented McLeodUSA in its chapter 11 restructuring. MERIDIAN AUTOMOTIVE: Will Honor Prepetition Employee Obligations ---------------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates currently employ approximately 4,700 domestic employees, of whom 3,740 are hourly employees and 960 are full-time salaried employees. The Debtors also contract for approximately 350 temporary hourly positions. Edward J. Kosmowski, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, reports that the Employees perform a variety of critical functions for the Debtors, including the continued manufacture of automotive products and the performance of many administrative, accounting, supervisory, and other tasks, as well as serving the Debtors in consultant or management roles. Mr. Kosmowski believes that the Employees' skill and knowledge and understanding of the Debtors' infrastructure, operations and customer relations are essential to the effective operation and reorganization of the Debtors' business. Without the continued services of the Employees, an effective reorganization of the Debtors, with a focus on maximizing the value of the Debtors' estates, will not be possible. To minimize the personal hardship that the Employees will suffer if prepetition employee-related obligations are not paid when due or as expected, and to maintain morale and an essential workforce during this critical time, the Debtors seek the authority of the U.S. Bankruptcy Court for the District of Delaware to: (1) pay all prepetition employee wages, salaries and other accrued compensation; (2) reimburse all prepetition employee business expenses; (3) make all contributions to prepetition benefit programs; (4) make all payments for which prepetition payroll deductions were made; and (5) pay all processing costs and administrative expenses relating to all payments and contributions. The Debtors also ask Judge Walrath to direct applicable banks and other financial institutions to continue to honor and pay all checks and transfers drawn on their payroll accounts and employee benefits accounts. Prepetition Employee Obligations The Debtors' average aggregate monthly compensation for their Employees is approximately $15 million. Majority of payroll payments are made by direct deposit through electronic transfer of funds directly to the Employees, and the remaining Employees are paid via check. According to Mr. Kosmowski, compensation may be due and owing to the Employees as of the Petition Date because: (a) most of the Debtors' Employees are paid in arrears; (b) some discrepancies may exist between the amounts paid and amounts Employees or others believe should have been paid, which, on resolution, may reveal that additional amounts are owed to those Employees; (c) some payroll checks issued to Employees prior to the Petition Date may not have been presented for payment or cleared by the banking system and, accordingly, have not been honored and paid as of the Petition Date; and (d) variations in the Debtors' payroll schedules. A. Non-Union Employees The Debtors believe that, as of the Petition Date, approximately $4.6 million in the aggregate of accrued wages, salaries, overtime pay, commissions and other compensation, excluding reimbursable expenses, vacation pay, severance pay, deferred compensation and incentive bonus pay, earned prior to the Petition Date, remain unpaid to non-union Employees. However, the Debtors will not pay any Employees more than $10,000 for Unpaid Compensation and Employee Benefits; they are unaware of any Employees being owed more than $10,000. B. Union Employees The Debtors are party to seven active collective bargaining agreements: Plant Location Union Local Expiration Date -------------- ------- ----- --------------- Angola, Indiana IUE/CWA 888 12/17/2007 Canandaigua, New York UAW 3034 08/17/2007 Canton, Michigan UAW 36 TBD Detroit, Michigan UAW 174 10/14/2005 Ionia, Michigan IUE/CWA 436 12/20/2008 Jackson, Ohio USW 820-L 04/15/2006 Shreveport, Louisiana UAW none TBD "As of the Petition Date, the outstanding Unpaid Compensation owed to Union Employees is approximately $1.4 million in the aggregate," Mr. Kosmowski reports. C. Prepetition Employee Business Expenses Reimbursement Prior to the Prepetition Date, the Debtors, in the ordinary course of business, reimbursed Employees for certain expenses incurred on the Debtors' behalf in the scope of their employment. The Debtors, Mr. Kosmowski says, spend approximately $350,000 per month on Reimbursable Expenses, but they estimate that, as of the Petition Date, no more than $175,000 in Reimbursable Expenses remained unpaid. D. Prepetition Deductions & Withholdings During each applicable pay period, the Debtors routinely deduct certain amounts from paychecks, including, without limitation: (a) union dues and union funds contributions; (b) credit union deposits and payments; (c) garnishments, child support; and similar deductions; and (d) other tax deductions payable pursuant to certain of the Employee benefit plans. The Debtors then forward these amounts to various third party recipients. E. Payroll Taxes The Debtors, according to Mr. Kosmowski, are required by law to withhold from an Employee's wages amounts related to federal, state and local income taxes, social security and Medicare taxes for remittance to the appropriate federals, state or local taxing authorities, and then match from their own funds for social security and Medicare taxes and pay, based on a percentage of gross payroll, additional amounts for state and federal unemployment insurance. The Debtors' Payroll Taxes, including both the employee and employer portion for 2004 were approximately $57 million. On the average, the Debtors have historically withheld approximately $4.75 million in the aggregate from Employees' paychecks on monthly basis. Before the Petition Date, the Debtors withheld approximately $300,000 from Employees' earnings for the Payroll Taxes, but the amounts have not been forwarded to the appropriate taxing authorities prior to the Petition Date. Prepetition Employee Benefits The Debtors provide their Employees, in the ordinary course of business, with a number of employee benefits, including, but not limited to: (a) medical, health and dental insurance, (b) stop loss coverage, (c) workers' compensation payments, (d) vacation time, (e) sick leave, (f) pension and savings plans, and (g) miscellaneous other employee benefits. The Debtors also contribute to certain union-sponsored pension, health and welfare funds on behalf of certain Employees. A. Medical Health & Dental Plans The Debtors offer these insurance policies to their Employees for mental and dental insurance coverage: (a) Blue Cross PPO Medical Plan This self-insured medical and prescription drug plan costs the Debtors approximately $2 million per month, including approximately $150,000 in administrative fees paid to Blue Cross and Blue Shield of Michigan as the Debtors' third party administrator. As of the Petition Date, Blue Cross is owed $1,100,000. (b) Delta Dental Plan This program administers the Debtors' primary self-insured dental plan on behalf of the Debtors' approximately $150,000 per month, including approximately $20,000 in administrative fees to Delta Dental Plan as the Debtors' third party administrator. As of the Petition Date, the amounts owing in connection with the Delta Dental Plan are $262,000. (c) Employee-Sponsored Vision Plan The Debtors provide all salaried and non-bargaining unit Employees with the option to participate in a vision insurance plan through Vision Service Plan. Employees contribute 100% of the premiums in exchange for coverage. Approximately 1,100 Employees participate in this plan. (d) Blue Cross Medical Plan for IUE/CWA Represented Employees at the Ionia, Michigan Operations This is a fully insured PPO plan that provides coverage to approximately 900 Employees at the Ionia Operations. The plan provides for a range of PPO options for medical, prescription drug and vision coverage, and costs the Debtors approximately $500,000 per month in premiums, which represents approximately 80% of the cost of total coverage. The remainder is contributed by the participating Employees through payroll premium deductions. (e) Delta Dental Plan for IUE/CWA Represented Employees at the Ionia, Michigan Operations This is a fully insured plan that provides dental coverage to approximately 900 Employees at the Ionia Operations. This program costs the Debtors approximately $50,000 per month. (f) Blue Cross Shield of the Rochester Area Medical and Dental Plan This is a fully insured community rated plan providing medical, vision and dental coverage for approximately 20 Salaried Employees at the Canandaigua, New York Operations. This plan costs the Debtors approximately $25,000 per month. (g) Blue Care Network Plan for UAW Represented Employees at the Detroit, Michigan Operations This is a fully insured HMO that provides medical and prescription drug coverage to approximately 140 Employees at the Detroit Operations. This program costs the Debtors approximately $40,000 per month. (h) Delta Dental Plan for UAW Represented at the Detroit, Michigan Operations This is a fully insured plan that provides dental coverage to approximately 140 Employees at the Detroit Operations. This program costs the Debtors approximately $10,000 per month. In addition, the Debtors purchase loss coverage through Blue Cross Shield of Michigan to cap the Debtors' exposure for individuals at $250,000 per year. The Stop Loss Coverage costs the Debtors approximately $100,000 per month. B. Workers' Compensation Program Mr. Kosmowski tells the Court that the Debtors maintain blanket workers' compensation policy with Liberty Mutual Fire Insurance Co., which satisfies the Debtors' statutory obligations in each of the states the Debtors operate except Michigan and Ohio. The total annual premium paid under the Liberty Mutual Policy is $818,000. The Debtors are self- insured in Michigan and Ohio with the Administrators acting as the third party administrators. The Debtors also maintain a certain "Stop-Loss" Insurance Policy with Midwest Employers Casualty Co. to cover their exposure with respect to workers' compensation claims in Michigan and Ohio. The premiums under both the Liberty Mutual Policy and the Midwest Policy have been paid in full for calendar year 2005. As of the Petition Date, there were approximately 262 workers' compensation claims pending against the Debtors arising out of alleged injuries incurred by employees during the course of their employment with the Debtors. The Debtors have preserved approximately $9 million to resolve these prepetition Workers' Compensation Claims. In 2004, the Debtors paid approximately $6.2 million in claims in connection with their Worker's Compensation Program. The Debtors anticipate paying approximately the same amount in 2005. C. Vacation, Sick, Holiday & Leave Pay The total annual costs to the Debtors for Vacation, Sick, Holiday and Leave Pay is $20 million and it is included in gross payroll. D. Employee Pension & Savings Plan Prior to the Petition Date, and in the ordinary course of business, the Debtors maintained several pension and savings plans for the benefit of their Employees, including, but not limited to, the 401(k) Plans, the Pension Plans, the non-Union Retiree Medical Program and Union Retiree Programs. (a) 401(k) Plans The Debtors maintain six 401(k) plans that provide for automatic pre-tax salary deductions of eligible compensation up to the limits set by the Internal Revenue Code. Approximately 4,720 Employees participate in the 401(k) Plans, and the approximate monthly amount withheld from Employee paychecks is $600,000. (b) Pension Plans The Debtors sponsor two pension plans on behalf of Union Employees: -- Meridian Automotive Systems, Inc. Retirement Plan for Hourly-Rated Employees of the Reinforced Plastics Operation at Centralia, Illinois; and -- Meridian Automotive Systems, Inc. Pension Plan - Bargaining Unit Employees, in Jackson, Ohio. The Debtors are current with respect to funding contributions to the Pension Plans. Effective July 1, 2003, the Debtors and the Jackson union agreed to freeze the benefits of the Debtors' defined benefit pension plan and, effective January 1, 2004, the Debtors would contribute specified cents per hour to the multi-employee Steelworkers Pension Trust. The contributions payable for services rendered prior to the Petition Date is approximately $500,000. (c) Retiree Medical Programs Approximately 330 non-union Hourly and Salaried Employees at the Grand Rapids Operations are entitled to receive retiree medical, prescription drug and dental benefits upon retirement. As of the Petition Date, 154 active non- union Hourly and Salaried Employees were receiving retiree benefits pursuant to the Non-Union Retiree Medical Program. The Debtors' average monthly claim costs, net of retiree premium payments related to the Non-Union Retiree Benefit Program are approximately $75,000. The Debtors also provide for self-insured retiree medical and prescription drug benefits for Union Employees, covering 630 Employees. The Union Retiree Medical Programs are covered under the CBAs. The Debtors' average monthly claim costs related to the Union Retiree Medical Programs for 210 retirees are approximately $270,000. Additional Employee Benefits A. Life & Supplemental Life Insurance The Debtors provide primary life insurance coverage to approximately 4,700 Employees through MetLife, which costs the Debtors $25,000 per month. B. Disability The Debtors provide Employees with short and long term disability benefits, which costs the Debtors approximately $54,00 per month. As of the Petition Date, the total amounts owed to MetLife in connection with the Short Term Disability Benefits, Long Term Disability Benefits, Life Insurance, and Supplemental Life Insurance, is $312,000. C. Flexible Sending The Debtors offer their Employees the ability to contribute a portion of their compensation into flexible spending accounts for health and dependent care through Basic, Inc., which operates as a third party administrator to the plans. Approximately 370 Employees participate in the Flexible Spending Program, which costs the Debtors less than $34,000 per year. D. Tuition Reimbursement The Debtors also offer a tuition program for certain of their non-union Employees, wherein the Debtors reimburse Employees for 100% of tuition costs and registration fees for approved course work at college-level institutions. The Debtors estimate the aggregate amount of reimbursement due under the Tuition Reimbursement Program to be de minimis. * * * Judge Walrath grants the Debtors' request on an interim basis. The Debtors are authorized to honor and pay: (1) Employee Wages, Salaries and other Compensation up to an aggregate amount of $6 million; and (2) Employee Benefits in accordance with policies and prepetition practices, and in the ordinary course of the Debtors' business, including, but not limited to, the Unpaid Compensation, Deductions, Payroll Taxes, the Medical and Dental Insurance, the Retiree Medical Plans, the Stop Loss Coverage, Vacation Time, Sick Leave, Holiday and Leave Pay, the Employee Pension and Savings Plans and the Additional Employee Benefits that have been earned, accrued, vested, in accordance with the Bankruptcy Code, with no payment exceeding the $10,000 cap under Section 507(a)(4) for Unpaid Compensation and Employee Benefits. Judge Walrath also authorizes the Debtors to pay all prepetition Reimbursable Expenses in accordance with their prepetition practices and policies in an aggregated amount not to exceed $175,000. The Court will convene a hearing at 3:00 p.m. on May 26, 2005, to consider final approval of the Debtors' request. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRAVANT MEDICAL: Closes $8 Million Private Equity Funding ---------------------------------------------------------- Miravant Medical Technologies (OTCBB:MRVT), a pharmaceutical development company specializing in PhotoPoint(R) photodynamic therapy, disclosed the closing of an $8 million private placement of convertible Preferred Stock led by Scorpion Capital Partners LP, a New York-based SBIC, with net proceeds to the Company of $7.50 million. The Preferred Stock is convertible into Common Stock at the conversion price of $1.00 per share. The Company has also issued a warrant to purchase one share of Common Stock for each convertible share of Common Stock purchased. The exercise price of each warrant is $1.00 per share. Separately, the Company also announced an amendment to its March 2005 $15.0 million convertible debt line-of-credit agreement, to establish the minimum conversion rate at $1.00 per share of convertible Common Stock or 125% of the average monthly closing price of the month preceding the conversion, whichever is greater. Gary S. Kledzik, Ph.D., chairman and chief executive officer, said, "We are very pleased to announce the completion of this funding with Scorpion. The proceeds will primarily support the PHOTREX(TM) confirmatory phase III clinical trial for macular degeneration, slated to begin in Europe this summer." About Miravant Miravant Medical Technologies -- http://www.miravant.com/-- specializes in PhotoPoint(R) photodynamic therapy (PDT), developing photoreactive (light-activated) drugs to selectively target diseased cells and blood vessels. Miravant's primary areas of focus are ophthalmology and cardiovascular disease with new drugs in clinical and preclinical development. PHOTREX(TM) (rostaporfin), the Company's most advanced program, has received an FDA Approvable Letter as a treatment for wet age-related macular degeneration and a Special Protocol Assessment for a Phase III confirmatory clinical trial. Miravant's cardiovascular development program, supported by an investment from Guidant Corporation, focuses on life-threatening coronary artery diseases, with PhotoPoint MV0633 in advanced preclinical testing for atherosclerosis, vulnerable plaque and restenosis. At Dec. 31, 2004, Miravant's balance sheet showed a $1,982,000 stockholders' deficit, compared to a $7,027,000 deficit at Dec. 31, 2003. MKP CBO: Fitch Junks Three Note Classes --------------------------------------- Fitch Ratings has downgraded four classes of notes issued by MKP CBO I, Ltd., and removes all classes from Rating Watch Negative. These rating actions are effective immediately: -- $206,514,982 class A-1L to 'BBB-' from 'A-'; -- $25,000,000 class A-2L to 'CCC' from 'BB'; -- $7,375,000 class B-1A to 'CC' from 'B-'; -- $7,000,000 class B-1L to 'CC' from 'B-'. MKP CBO is a collateralized debt obligation -- CDO -- managed by MKP Capital Management, LLC. The deal was established in February of 2001 to issue $307.4 million in notes and equity. The portfolio supporting the CDO is composed of residential mortgage- backed securities -- RMBS, commercial mortgage-backed securities - - CMBS, and commercial and consumer asset backed securities -- ABS. The rating actions are a result of continued deterioration in the credit quality of MKP CBO's collateral pool and the continued negative impact of its interest rate hedge. Since the last rating action, the class A overcollateralization -- OC -- ratio decreased to 100.3% as of the most recent trustee report dated March 28, 2005, from 103.1% as of Oct. 28, 2004, and continues to fail the minimum OC of 106.0%. The class B OC ratio has also decreased, to 94.3% from 97.6% during the same reporting periods, and also continues to fail the trigger of 101.0%. Defaulted assets have increased to 4.97% of the total collateral and eligible investments. Assets rated 'BB+' or lower represented approximately 25.27%, excluding defaults. Since the previous rating action, there has been one credit risk sale of AFT 1999-1A class C, which recovered approximately 21% of its $4.7 million balance. In addition, five collateral positions have had their principal balances written down, indicating additional future defaults in the portfolio. The rating of the classes A-1L and A-2L notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes B-1A and B-1L notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. As a result of this analysis, Fitch has determined that the current ratings assigned to the classes A-1L, A-2L, B-1A, and B-1L notes no longer reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ NEW CHEMUNG: Case Summary & 41 Largest Known Creditors ------------------------------------------------------ Lead Debtor: New Chemung Speedrome, Inc. dba Stapleton Engines 619 Winsor Avenue Elmira, New York 14905 Bankruptcy Case No.: 05-22170 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Robert M. Stapleton 05-22171 Type of Business: Chemung Speedrome operates an auto racing track located in Chemung, N.Y. The Speedrome features all new TV-quality Musco lighting, a 3000 Seat Main Grandstand, and a 28 stall paved pit lane. The facility is situated on over 38 acres and is one of New York's finest 3/8 paved oval tracks. See http://www.chemungspeedrome.net/ Robert M. Stapleton is the President of New Chemung Speedrome, Inc. Chapter 11 Petition Date: May 4, 2005 Court: Western District of New York (Rochester) Debtor's Counsel: David D. MacKnight, Esq. Lacy, Katzen LLP 130 East Main Street Rochester, New York 14604 Tel: (585) 454-5650 Estimated Assets Estimated Debts ---------------- --------------- New Chemung Speedrome, Inc. Unstated $1 Million to $10 Million Robert M. Stapleton Unstated $1 Million to $10 Million Consolidated List of Debtors' 41 Largest Known Creditors: Entity Claim Amount ------ ------------ Beavers Petroleum Unknown 88 B Ridge Road Horeseheads, NY 14845 Big Footes Unknown 107 Broad Street Waverly, NY 14892 Britten Media Unknown 2322 Cass Road Traverse City, MI 49684 C & D Machine Shop Unknown 127 Route 352 Big Flats, NY 14814 Capital One Unknown P.O. Box 85147 Richmond, VA 23276 CCU Tax Service Unknown 330 West Williams Street Corning, NY 14830 Chad Silver Unknown c/o Carriage Estates 3374 Lower Maple Avenue Elmira, NY 14901 Chapman Unknown 2261 South 1560 West Wood Cross, UT 84047 Citi Cards Unknown Sears Gold Mastercard P.O. Box 182532 Columbus, OH 43218 D&B RMS Unknown 512 7th Avenue, 11th floor New York, NY 10018 Daktronics Unknown P.O. Box 86 Minneapolis, MN 55486 Dart Machinery Ltd. Unknown 353 Oliver Troy, MI 48084 Discover Bank Unknown 3311 Mill Meadow Drive Hilliard, OH 43026 Eastern Laboratory Services Unknown 390 Pennsylvania Avenue South Waverly, PA 18840 Gator Racing Photo News Unknown P.O. Box 2187 Syracuse, NY 13220 Horseheads Printing Unknown 2077 Grand Central Avenue Horseheads, NY 14845 HSBC Bank Unknown P.O. Box 9 Buffalo, NY 14240 Humor-Breyers Unknown Mid State Food Brokers 7489 Henry Clay Boulevard Liverpool, NY 13088 Internal Revenue Service Unknown Cincinnati, OH 45999 Jay's Carpet Center, Inc. Unknown 314 South Main Street Athens, PA 18810 Joseph, Mann & Creed Unknown 21403 Chagrin Boulevard, Suite 200 Beechwood, OH 44122 NASCAR NCO Group Unknown P.O. Box 41593 Philadelphia, PA 19101 NCO Financial Systems Unknown P.O. Box 41448 Philadelphia, PA 19101 NYS Automotive Wholesalers Unknown 442 South Bay Road, Suite A North Syracuse, NY 13212 New York State Unknown Department of Taxation & Finance NYS Assessment Receivables P.O. Box 4127 Binghamton, NY 13902 New York State Unknown Workers Compensation Board Finance Office Room 301 20 Park Street Albany, NY 12207 NYSEG Unknown P.O. Box 3287 Ithaca Dryden Road Ithaca, NY 14852 Attn: President Pro Consulting Services, Inc. Unknown P.O. Box 66510 Houston, TX 77266 Rand Sports & Entertainment Unknown 400 South Atlantic Avenue, Suite 101 Ormond Beach, FL 32176 Regional Economic Unknown Development & Energy Corporation 145 Village Square Painted Post, NY 14870 Rural Opportunities Enterprise Center Unknown 400 East Avenue Attn: Loan Servicing Rochester, NY 14607 Shull & Coyles Unknown 2300 Grand Central Avenue Horseheads, NY 14845 The Leader Unknown 34 West Pulteney Street P.O. Box 1017 Corning, NY 14830 The Star Gazette Unknown Classified Marketplace P.O. Box 2112 Binghamton, NY 13902 Viking Office Products Unknown P.O. Box 30488 Los Angeles, CA 90030 Vital Signs Unknown 202 Thorne Street Horseheads, NY 14845 WENY Unknown 474 Old Ithaca Road Horseheads, NY 14845 Williams Oil & Propane Unknown P.O. Box 207 Towanda, PA 18848 WLVY Unknown 1705 Lake Street Elmira, NY 14901 WYDC-TV Big Fox Unknown 33 East Market Street Corning, NY 14830 Young Explosive Corporation Unknown P.O. Box 18653 Rochester, NY 14618 NEW DOMINION: Case Summary & Largest Unsecured Creditor ------------------------------------------------------- Debtor: New Dominion Investments, LLC P.O. Box 470 Oakton, Virginia 22124 Bankruptcy Case No.: 05-11531 Chapter 11 Petition Date: April 25, 2005 Court: Eastern District of Virginia (Alexandria) Judge: Robert G. Mayer Debtor's Counsel: Russell B. Adams, III, Esq. Chung & Press, P.C. 6723 Whittier Avenue #302 McLean, Virginia 22101 Tel: (703) 734-3800 Fax: (703) 734-0590 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Mark Nelis Legal fees $40,000 196 North 21st Street Purcelville, Virginia 20132 NEXTEL PARTNERS: Good Performance Cues S&P to Lift Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Kirkland, Washington-based Nextel Partners Inc. to 'BB' from 'B+', and its unsecured debt rating to 'BB-' from 'B-'. Simultaneously, Standard & Poor's assigned its 'BBB-' bank loan rating and a recovery rating of '1' (denoting full recovery of principal in the event of a default or bankruptcy) to Nextel Partners Operating Corp.'s $550 million tranche D term loan which matures May 31, 2012, based on preliminary documentation. Proceeds of the tranche D term loan issued under the first amended and restated credit agreement dated May 19, 2004, will be used to refinance all outstanding tranche C term loans and for general corporate purposes. The rating on the tranche C term loan will be withdrawn. In addition, the rating on the $100 million undrawn revolver is raised to 'BBB-' from 'B+' with a recovery rating of '1'. Nextel Partners Operating Corp. is a wholly owned subsidiary of Nextel Partners. The outlook is positive. The unsecured debt rating is now one notch lower than the corporate credit rating from the previous two notches, because of the reduced amount of secured debt expected in the company's capital structure. The company is expected to reduce its bank term loan debt by $150 million in 2005. As of March 31, 2005, total debt outstanding was about $1.6 billion. "The rating upgrades on wireless carrier Nextel Partners reflects the improvement in the company's debt leverage, continued growth in EBITDA and improving free cash flow position, continued strong operating metrics, and an expectation that these positive financial and operating trends will continue," said Standard & Poor's credit analyst Rosemarie Kalinowski. Nextel Partners is expected to continue to maintain its competitive edge and high end user market niche as a result of its Direct Connect differentiated product. In the first quarter of 2005, total debt to EBITDA annualized and adjusted for operating leases declined to 3.7X from 4.8x in fiscal 2004. This metric is expected to improve further in 2005 to below 3x, given the company's operating leverage and growth in free cash flow. In the first quarter of 2005, EBITDA grew by 68% over the previous year quarter as a result of continued good subscriber growth and low churn of 1.4%, which is one of the best in the industry. Net subscriber additions of 99,400 in the quarter represented a high 29% subscriber growth rate since the first quarter of 2004. As of March 31, 2005, total subscribers were about 1.7 million. Monthly average revenue per unit remained strong at $67, one of the highest in the industry, reflecting the company's high-end subscriber base. NFB FOODWORKS: Court Gives Nod to Use $572,813 of Cash Collateral ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey approved NFB Foodworks, LLC's request, in an interim basis through May 24, 2005, to use up to $571,813 of cash collateral securing repayment of a debt owed to Interchange Bank. NFB Foodworks told the Court that it needs to use the Lender's cash collateral to: a) maintain and preserve its assets; b) continue the operation of its business, including but not limited to payroll, payroll taxes, employee expenses and insurance costs; c) complete work-in-process; and d) purchase replacement inventory. Interchange Bank agreed to let to Debtor use of the cash collateral through the conclusion of a final cash hearing on May 24, 2005. Between April 18, 2005 and May 24, 2005, the Debtor projects Cash Receipts will total $607,000 and it will be required to make Cash Disbursements totaling $571,813. Replacement liens of the same validity, extent and priority are granted to the Lender. Creditors or other interested parties having any objection to the court's interim order or entry of a final cash collateral order must file a written objection with the Clerk of Court before May 18, 2005. Headquartered in Moonachie, New Jersey, NFB Foodworks, LLC, is a refrigerated & frozen food retailer. The Company filed for chapter 11 protection on April 18, 2005, (Bankr. D. N.J. Case No. 05-22657). Bruce Gordon, Esq., at Bruce D. Gordon LLC represents the Debtor in its restructuring efforts. When the Company filed for protection from their creditors, it estimated assets of $1 million to $10 million and liabilities at $1 million to $10 million. NOMURA ASSET: Fitch Holds Junk & Default Ratings on $31MM Certs. ---------------------------------------------------------------- Fitch Ratings upgrades Nomura Asset Securitization Corp.'s commercial mortgage pass-through certificates, series 1996-D3: -- $35.2 million class A-3 certificates to 'AAA' from 'AA'; -- $39.1 million class A-4 certificates to 'AA' from 'A-'. In addition, Fitch affirms these classes: -- $272.5 million class A-1C 'AAA'; -- $19.6 million class A-1D 'AAA'; -- $39.1 million class A-2 'AAA'; -- $43 million class B-1 'BB'. The $27.4 million class B-2 remains at 'CCC' and the $3.7 million class B-3 at 'D'. Fitch does not rate class A-5. The upgrades are due to an increase in credit enhancement since issuance. As of the April 2005 distribution date, the pool's aggregate certificate balance has decreased by 37% since issuance, to $495.3 million from $782.6 million. Of the original 112 loans, 88 are currently outstanding in the pool. In addition, 14 loans (26%) have defeased to date. Five loans (2.5%) are currently in special servicing including a 90 days delinquent, two in foreclosure and two real estate owned. The largest specially serviced loan (0.7%) is secured by a hotel in Memphis, Tenn. The property is REO and is expected to be sold shortly. Losses are expected. The second largest loan in special servicing (0.6%) is secured by a hotel in Goodyear, Ariz. The loan is 90 days delinquent and the special servicer and the borrower are negotiating a potential sale. Losses are expected. Fitch remains somewhat concerned with the pool's high hotel (27%) concentration, although only three hotel loans are delinquent (1% of the pool). NORTHWESTERN CORP: Inks Claims Settlement Pact with PPL Montana --------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) has reached an agreement in principle with PPL Montana, LLC, a subsidiary of PPL Corporation (NYSE: PPL), to settle all claims and counterclaims pending in the case styled Northwestern Corporation vs. PPL Montana, LLC vs. NorthWestern Corporation and Clark Fork and Blackfoot, LLC, Cause No. CV-02-94-BU (SEH) pending in the U.S. District Court in Montana and PPLM's claims filed in NorthWestern's bankruptcy proceeding. According to Michael J. Hanson, President of NorthWestern, the litigation and claims involved a dispute regarding an asset purchase agreement between the parties involving NorthWestern's 500 kV Colstrip transmission assets located in east-central Montana. Under terms of the agreement in principal, NorthWestern will retain the Colstrip transmission assets and PPLM will pay NorthWestern $9 million in cash. The agreement also covers the cancellation of indemnity obligations stemming from the asset purchase agreement and PPLM's withdrawal of its claims pending in NorthWestern's bankruptcy proceeding along with the dismissal and release of claims arising out of the litigation. Subject to entering into a definitive agreement between the parties, the agreement will become effective following the dismissal by the U.S. District Court of the Montana lawsuit, and acceptance by NorthWestern's bankruptcy Plan Committee and approval by the U.S. Bankruptcy Court for the District of Delaware. Under the Plan Committee by-laws, NorthWestern will provide the Plan Committee with notice of the proposed settlement at least ten days prior to: (i) the filing of a motion seeking Bankruptcy Court approval of the proposed settlement; and (ii) the execution of any material agreement relating to the proposed settlement. In accordance with the Plan Committee by-laws, the settlement terms are subject to Bankruptcy Court approval and shall not be binding until an order is obtained and entered by the Bankruptcy Court. Subject to these approvals, NorthWestern expects to record a pre-tax gain of $9.0 million as a result of the cash consideration of the agreement. "We are pleased to that we have been able to reach an agreement with PPL Montana to conclude this long pending litigation," Mr. Hanson said. "This is another positive step in our effort to resolve outstanding reorganization issues and the related disruption and expense to our business so that we can further focus our efforts on serving the needs of our utility customers." Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on Nov. 1, 2004. NORTHWESTERN CORP: Wants QUIP Shares Given to Class 7 Creditors --------------------------------------------------------------- NorthWestern Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to compel Depository Trust Company to issue shares to holders of allowed Class 7 claims pursuant to their confirmed and effective Second Amended and Restated Plan of Reorganization. Pursuant to the Plan, if holders of Class 8(b) unsecured subordinated notes or QUIPs notes elect to have their claims treated as Class 9 general unsecured claims, then the new common stock, which otherwise would have been distributable to the Class 8(b) Claimholders will be distributed to Class 7 and Class 9 Claimholders. On Nov. 10, 2004, Law Debenture Trust Company of New York, the Indenture Trustee for the QUIPs Notes notified the Court that it would exercise its charging lien. In the Charging Lien Notice, Law Debenture asserted a lien on the Class 8(b) shares and warrants and demanded that no distribution of shares and warrrants be made to QUIPs holders until Law Debeture's fees and expenses are paid in full. Under the Plan, Class 7 Claimholders are entitled to a supplemental distribution of 324,134 of the 368,626 shares of New Common Stock and Class 9 Claimholders are entitled to the remaining 44,492 of those shares. On Feb. 16, 2005, the Reorganized Debtor instructed Depository Trust to transfer and credit the New Common Stock to the Class 7 Claimholders. Depository Trust, however, refused to comply with the instruction because of Law Debeture's Charging Lien Notice. Scott D. Cousins, Esq., at Greenberg Traurig, LLP, in Wilmington, Delaware, asserts that Law Debenture's Charging Lien Notice does not attach to those shares. Mr. Cousins reminds the Court that Law Debenture's counsel has, in fact, admitted in Court, in the April 15, 2005 hearing, that "[c]ertainly our charging lien is probably, I would grant this, that it probably does not attach to those particular share that are left there because it only goes to shares that distributed pursuant to the indenture." As reported in the Troubled Company Reporter on May 5, 2005, Magten Asset Management Corporation and Law Debenture Trust Company of New York want the order confirming NorthWestern Corporation and its debtor-affiliates' Second Amended and Restated Plan of Reorganization, and the Debtors' discharge, revoked. If the Court cannot grant that request, Magten Asset and Law Debenture want the disputed claims reserve adequately funded in accordance with the Plan's terms. The Disputed Claims Reserve was set up to protect holders of disputed claims that were left unresolved on Plan's effective date. Magten Asset and Law Debenture also ask the U.S. Bankruptcy Court for the District of Delaware to declare that because of gross negligence or willful misconduct in underfunding the Disputed Claims Reserve, the Debtors and certain of its executives are not entitled to exoneration or exculpation pursuant to Section 10.1 of the Plan. Magten Asset and Law Debenture brought their request to the Court through an adversary proceeding (Adv. Pro. No. 05-50866) commenced against the Debtors and certain of their executives on April 15, 2005. Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on Nov. 1, 2004. OAO SEVERSTAL: North American Unit Restructuring After Buy-Out -------------------------------------------------------------- Severstal North America, Inc., reported that it has made considerable progress in restructuring its Dearborn, Michigan steelmaking operations following its acquisition by OAO Severstal, Russia's second largest steel producer, in January 2004. Production capability and equipment reliability also improved over the past 14 months by devoting substantial internal resources to equipment failure modes analysis and diagnostics, improved preventative and predictive maintenance processes and the acquisition of spare parts to reduce maintenance outage periods. Many of the Company's quality and process improvements and cost reduction efforts were made possible through the introduction of the Total Operating Performance process, which previously had been implemented at OAO Severstal's steelmaking operations in Cherepovets, Russia. The Company focused additional resources on employee training in problem solving, team building and financial analysis skills and has expanded the number of employees participating in problem solving teams that improve efficiency, increase equipment reliability, improve housekeeping, product quality and employee safety. Several thousand ideas and over $20 million in verified cost savings were achieved in 2004 alone and efforts continue to expand the TOP process throughout the Company's steelmaking operations and staffs in 2005. The Company has also made considerable progress in securing a reliable supply of strategic raw materials. In the past year, the Company purchased over 1.2 million net tons of metallurgical coke for its blast furnaces from domestic and foreign suppliers. In addition, SNA is continuing efforts to secure domestic coke suppliers through the development of strategic partnerships. In December 2004, SNA and Wheeling-Pittsburgh Steel Corporation signed a non-binding letter of intent to form a joint venture company that would refurbish Wheeling-Pittsburgh's Follansbee, West Virginia coke producing facilities. The deliberations are continuing. One of the fundamental elements of SNA's operating and business plans is to continue SNA's environmental and safety performance improvements through targeted investments and the use of the Company's certified environmental and health and safety management systems. The Environmental Management System was certified according to the international ISO 14001 standard on Dec. 14, 2001 and continues as an important part of the Company's operating process improvements. In early 2004, OAO Severstal challenged SNA to set even higher health and safety standards and expectations for its operations through the development of a new Health and Safety Management System that would conform to the international Occupational Health and Safety Assessment Standard, OHSAS 18001. SNA successfully completed its OHSAS 18001 certification audit on March 16, 2005 and was officially certified on April 1, 2005. "It is our sincere belief and expectation that by instituting these systems and through the vigilance of our employees, we will continue to drive further improvements in our environment and health and safety performance which will be appreciated and deserved by our many stakeholders," said Mr. Makhov. In conjunction with a worldwide Severstal Group initiative, SNA has begun the process to become Sarbanes-Oxley compliant, to ensure that effective financial controls are in place. The first phase of SNA's implementation plan targets Section 404 compliance. Severstal North America, Inc. is an integrated flat rolled sheet steel producer that primarily serves the automotive, converter and service center markets in North America. SNA employs approximately 2,200 employees in its manufacturing facilities and corporate offices located in Dearborn, Michigan. * * * As reported in the Troubled Company Reporter on Dec. 22, 2004 Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit rating on Russia-based integrated steel company OAO Severstal and removed it from CreditWatch, where it was placed on Nov. 10, 2004. The outlook is stable. Severstal's high appetite for acquisitions remains one of the key factors constraining the rating at the 'B+' level, despite relatively favorable operating and financial profiles. Standard & Poor's expects that Severstal's profitability and cash flow generation will continue to benefit from favorable industry conditions. S&P will continue to closely monitor Severstal's financial policy, particularly in areas such as M&A (including the expected return of mining assets from Severstal's shareholders), capital expenditures, debt, distributions to shareholders, and financial support to group members. In the longer term, the rating will be driven largely by Severstal's ability to resist the cost erosion caused by the appreciation of the Russian ruble and to curb working capital outlays, as well as by developments in the Russian steel market and the success of the company's strategy of entering higher value added market segments and improving operating efficiency. "Any upgrade would require a more predictable financial policy and improved transparency, and the rating is therefore constrained at its current level," added Ms. Anankina. OWENS CORNING: Dist. Court Affirms Order Blocking B-Readers Suit ---------------------------------------------------------------- Judge Fullam affirms the Bankruptcy Court's decision denying Credit Suisse and First Boston's request to commence an adversary complaint against certain B-readers who falsely reported X-ray readings as positive for asbestos-related disease in prepetition personal injury claims asserted against Owens Corning and its debtor-affiliates. As previously reported, CSFB asserted that the Bankruptcy Court's decision constitutes a reversible error. CSFB cited the case of the Official Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery 330 F.3d 548 (3d Cir. 2003). Based on the Cybergenics case, CSFB pointed out that "Congress recognized and approved of derivative standing for creditors' committees [and intended] committees to play a robust and flexible role in representing the bankruptcy estate, even in adversarial proceedings." In his Memorandum and Order, Judge Fullam notes that in the Cybergenics case, the Court of Appeals sitting en banc ruled that a creditor's committee may be permitted to bring derivative lawsuits on behalf of debtors-in-possession, if the debtor-in- possession "unreasonably" or "unjustifiably" fails to bring suit on "colorable claims." In assessing the pros and cons, the Bankruptcy Court was required to accord to the debtor-in-possession "the deference normally accorded pursuant to the Business Judgment Rule," Judge Fullam says. "The Bankruptcy Judge properly concluded that the Debtors' decision not to initiate the proposed adversary action was justified, and that its unwillingness to expose the Debtors' estate to liability for the costs and expenses of defending, and perhaps paying, counterclaims was entirely reasonable." Judge Fullam relates that in 1996 and 1997, the Debtors had pursued similar litigation against certain laboratories which, in reliance on many of the same suspect B-readers that CSFB intends to sue, had performed pulmonary functions tests which lent support to claims which were actually invalid. The litigation was pursued for three years, ultimately producing a monetary settlement which was sufficient to cover only about one-third of Owens Corning's litigation expenses, Judge Fullam says. "This history, the fact that it is virtually impossible to 'prove' which of two conflicting readings of lung X-rays is correct, the virtual certainty that applicable statutes of limitation had long since expired, and the unlikelihood that any significant recovery against the suspect B-readers would prove to be collectible, provide ample reason for the debtor to be unwilling to file the proposed adversary action, and to be unwilling to permit CSFB to do so unless the debtor's estate is protected from the backlash of counterclaims which would almost certainly be asserted, as well as the counsel fees and expenses associated with the litigation." 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. 106; Bankruptcy Creditors' Service, Inc., 215/945-7000) PACIFIC LIFE: Fitch Affirms CC & B Ratings on A-3 & B Notes ----------------------------------------------------------- Fitch Ratings affirms two classes of notes issued by Pacific Life CBO 1998-1 Ltd./Corp., effective immediately: -- $12,477,850 class A-1 'AAA'; -- $38,000,000 class A-3 'B'; -- $32,000,000 class B 'CC'. Pacific Life is a collateralized bond obligation -- CBO -- managed by the Pacific Life Insurance Company. The Pacific Life notes are backed by a pool of $58 million of high yield securities, approximately 31% of which comes from emerging market debt. Fitch has reviewed in detail the portfolio performance of Pacific Life. Since the last rating action in January 2004, the class A-2 notes have been fully redeemed. In addition the portfolio has continued to deteriorate as depicted by the decline in the class B overcollateralization -- OC -- ratio. As of the April 2005 trustee report, the class B OC ratio has deteriorated to 58.9%, down from 75.7% in January 2004 relative to a test level of 120.0%. Over the same period, the class A OC ratio has shown some improvement, due to deleveraging, increasing to 98.0% from 97.4% over the same period. The class A OC test has been failing since April 2001 and the class B OC test since March 2000. As of the most recent trustee report, defaulted collateral represented 19.6% of the total portfolio balance, excluding eligible investments. Due to the failing OC levels, Pacific Life has been in an event of default since February 2002. The collateral deterioration has made it unlikely for Pacific Life to cure the OC test levels in the near future. The class A-1 notes have received principal redemptions amounting to 76.9% of the original notes issued. Both the class A-3 and class B notes have received the full stated coupon to date. However, during cash flow modeling analysis under benign credit stresses, projected interest proceeds alone were not sufficient to pay class B noteholders their coupon. This would result in principal proceeds being applied to pay the unpaid class B interest. This diversion of principal dollars to pay class B interest erodes the credit enhancement supporting the more senior notes. Although the class B notes are expected to receive interest for the foreseeable future, they are not expected to receive any ultimate principal recovery. As a result of this analysis, Fitch has determined that the current ratings assigned to the notes still reflect the current risk profile to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ PENN TRAFFIC: GE Commercial Provides $164 Million to Finance Plan ----------------------------------------------------------------- GE Commercial Finance Corporate Lending provided $164 million in financing to support a plan of reorganization by The Penn Traffic Company. The financing includes a fully underwritten $130 million revolving credit facility and a $6 million term loan. GE Commercial Finance also arranged a $28 million supplemental real estate facility with Kimco Realty as additional support for Penn Traffic's emergence from Chapter 11 of the Bankruptcy Code. Penn Traffic will use the exit financing to fund cash distributions required under the plan as well as its ongoing operating needs. The financing closed on April 13, 2005. "This exit financing package is a creative solution that allows Penn Traffic the financial flexibility to focus its efforts once again on growth and profitability," said Randy Martin, Senior Vice President - Finance, Penn Traffic. "The GE team worked diligently and creatively to find a solution that was best suited for our company and not a one-size-fits-all financing. We view this transaction as further evidence of GE's strong commitment to our organization and our industry." Steve Panagos, Chief Restructuring Officer for Penn Traffic and National Practice Leader for Kroll Zolfo Cooper, said: "GE's ability to structure, underwrite and syndicate this credit facility demonstrates one of their key strengths -- they don't just promise, they actually deliver. With its new financing in place, Penn Traffic now has a stronger balance sheet and improved operations to be even more competitive in its markets." The financing for Penn Traffic's plan of reorganization was provided jointly by Corporate Lending's Restructuring and Retail Finance teams. About GE Commercial Finance Corporate Lending GE Commercial Finance Corporate Lending offers financing to clients from middle-market companies to large corporations. Products and services include asset-based financing, cash flow lending and corporate restructuring. Corporate Lending is a leading global provider of financing solutions for investment and non-investment grade companies - committed to supporting clients at all stages of the business cycle. For more information on the businesses and products of GE Commercial Finance Corporate Lending, visit http://www.gelending.com/GE Commercial Finance, which offers businesses around the globe an array of financial products and services, has assets of over $230 billion and is headquartered in Stamford, Connecticut. General Electric (NYSE: GE) is a diversified technology, media and financial services company dedicated to creating products that make life better. For more information, visit the company's Web site at http://www.ge.com/ Headquartered in Rye, New York, The Penn Traffic Company operates 109 supermarkets in Pennsylvania, upstate New York, Vermont and New Hampshire under the BiLo, P&C and Quality trade names. Penn Traffic also operates a wholesale food distribution business serving 80 licensed franchises and 39 independent operators. The Company filed for chapter 11 protection on May 30, 2003 (Bankr. S.D.N.Y. Case No. 03-22945). Kelley Ann Cornish, Esq., at Paul Weiss Rifkind Wharton & Garrison, represents the Debtors in their restructuring efforts. When the grocer filed for protection from their creditors, they listed $736,532,614 in total assets and $736,532,610 in total debts. The Court confirmed the Debtor's First Amended Plan of Reorganization on March 17, 2005. The Plan took effect on Apr. 13, 2005. PHOENIX COLOR: Moody's Junks Proposed $35 Mil. 2nd Lien Term Loan ----------------------------------------------------------------- Moody's Investors Service upgraded the senior implied rating of Phoenix Color Corp. to B2, changed the outlook from negative to stable, and assigned a B2 and Caa1 to the company's proposed senior secured credit facilities. Ratings upgraded: * Senior implied rating -- to B2 from B3 * $105 million senior subordinated notes, due 2009 -- to Caa1 from Caa2 Ratings assigned: * $15 million first lien revolving credit facility, due 2010 -- B2 * $80 million first lien term loan facility, due 2011 -- B2 * $35 million second lien term loan facility, due 2011 -- Caa1 Rating affirmed: * Issuer rating -- Caa1 The rating outlook is stable. The upgrade of the senior implied rating to B2 results largely from an expected improvement in Phoenix's financial profile, following the recent sale of its loss-making Book Technology Park division, as well as from the improved liquidity and amortization profile conferred by the proposed first and second lien senior secured credit facilities. The change in outlook to stable reflects an expectation of more positive cash flow results and improved balance sheet metrics now that the company has shed its BTP one and two-color book manufacturing business and can focus its efforts on its core book components and multicolor juvenile book manufacturing operations. The ratings also incorporate Phoenix's leading market share in the book components business, the value of its contracts with leading publishing companies, and the limited number of domestic competitors in this sector. Nevertheless, the ratings recognize Phoenix's highly leveraged financial profile, the company's focus on a relatively narrow product range, concentration in its customer base and increasing competition from book manufacturers, especially overseas juvenile book manufacturers. At the end of December 2004, Phoenix completed the sale of the binding lines and press equipment related to its BTP operations to R.R. Donnelley in a transaction valued at $17 million. Since the sale proceeds equaled the lease termination costs of the underlying assets, Phoenix realized no net cash proceeds. However, management has estimated that the sale of its BTP division will result in a $9.7 million improvement in EBITDA from these sources: (1) $5.1 million from the elimination of BTP's EBITDA losses; (2) $3.4 million from the elimination of intercompany costs; and (3) $1.2 million from savings related to the buyout of operating leases and the elimination of registration requirements following the retirement of its existing $105 million in senior subordinated notes. Adjusting for these items, Moody's calculates the company's leverage stood at 4.3 times debt to EBITDA at the end of 2004, compared to 7.0 times on an unadjusted basis. In addition, management asserts that EBITDA will grow to $26 million during 2005, largely as a result of $4 million in new contracts with R.R. Donnelley. While the ratings upgrade and improved outlook mainly reflect an expected improvement in Phoenix's leverage and liquidity profile resulting from the BTP sale, rather than any improvement in the underlying performance of its core business lines, Moody's expects that the company's core businesses will continue to face competitive pricing pressure from both domestic and international rivals. Within the US, Phoenix's components business competes principally against Coral Graphics, Jaguar Advanced Graphics and Lehigh Press. In addition, the company's book manufacturing operations face increasing international competition especially from vendors in Asia. Ratings and/or outlook could be upgraded if the book component market experiences a significant increase in sales above Moody's current expectations. Ratings could be downgraded, or the outlook changed to negative, if management is unable to deliver on the cost savings and incremental business which it expects will occur as a result of the BTP sale, or if the company's book components or book manufacturing businesses suffer from heightened competitive pressure. The Caa1 rating on Phoenix's existing $105 million senior subordinated notes will be withdrawn upon the completion of the expected tender offer and subsequent retirement from the proceeds of the proposed credit facilities. The first lien facilities are rated at parity with the senior implied rating as they represent the preponderance of Phoenix's debt at closing. The $35 million second lien term loan is rated two notches below the senior implied rating reflecting its junior-most position within Phoenix's debt structure, the inability by second lien holders to pursue remedies until all first lien obligations have been satisfied in full, and the questionable recovery prospects available to its holders in a downside scenario. Headquartered in Hagerstown, Maryland, Phoenix Color Corp. is a leading manufacturer of book components and multicolored books. The company reported sales of $99 million in 2004. PRECISE TECHNOLOGY: Poor Performance Spurs S&P's Negative Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Precise Technology Inc. to negative from stable, reflecting the company's weaker-than-expected operating performance primarily because of delayed new product introductions and elevated raw-material costs during the past year. At the same time, Standard & Poor's affirmed its ratings on the company including its 'B+' corporate credit rating. Precise, based in North Versailles, Pennsylvania, had about $187 million of debt outstanding at Dec. 31, 2004. "Operating results during the past 12 months have failed to improve as anticipated as a result of the delayed regulatory approval and introduction of new medical products and higher than expected raw-material costs that have constrained margins and increased working capital requirements," said Standard & Poor's credit analyst Franco DiMartino. Should operating profitability for the remainder of the fiscal year fail to improve, Precise may be challenged to remain in compliance with the financial covenants in its bank credit agreement, and will have limited capacity to improve the financial profile in line with earlier expectations. Access to the credit facility is a key rating consideration in light of the company's small cash balance, limited free cash flow generation, and meaningful debt service requirements. The ratings on Precise reflect: (1) a below-average business profile due to the modest scope of the company's operations, (2) a highly fragmented and competitive industry structure, (3) the commodity nature of its products, and (4) a very aggressive financial policy. Partially offsetting factors include: (1) well-established positions in several packaging niches, (2) long-term contracts with customers that provide a stable revenue base and include resin cost pass-through provisions, and (3) relatively stable end markets. R. CHACRA: Voluntary Chapter 11 Case Summary -------------------------------------------- Debtor: R. Chacra, Inc. 1900 Fox Drive McAllen, Texas 78504 Bankruptcy Case No.: 05-70453 Chapter 11 Petition Date: May 2, 2005 Court: Southern District of Texas (McAllen) Judge: Richard S. Schmidt Debtor's Counsel: Antonio Villeda, Esq. 5414 North 10th Street McAllen, TX 78504 Tel: (956) 631-9100 Total Assets: $1,500,040 Total Debts: $893,580 The Debtor does not have any unsecured creditors who are not insiders. SA HOLDINGS: Sues City of South Amboy to Get Property Sale Moving ----------------------------------------------------------------- S.A. Holding Co., LLC, and Delilah's Den of S.A., Inc., commenced an adversary proceeding in the U.S. Bankruptcy Court for the District of New Jersey against the City of South Amboy and the City of South Amboy Zoning Board of Adjustment. The Debtors have battled with the City for years. The Debtors have agreed to shutter the adult entertainment club they operate, and have agreed to sell their real estate to a residential property developer. The City is blocking the sale and the Debtors blame the City for rendering their estates insolvent. The Debtors want the Bankruptcy Court to force the City to do what it promised so creditors don't suffer any further pain. Nature of Dispute The dispute among the Debtors and the City of South Amboy arises out of a contract and subsequent litigation in state and federal courts that spans over 8 years. S.A. Holding owns the real estate located at 3630 Route 35 North in South Amboy, New Jersey. Delilah's Den owns and operates an adult club on S.A. Holding's property. The Adult Club has live entertainment including "go-go" dancing. The Club also sells alcoholic beverages. On July 30, 1998, the parties entered into a settlement agreement allowing the Club to continue its operations for two years. The settlement was amended in September 2001 to give the Debtors another two years to operate. In 2003, the City of South Amboy went to the Superior Court of New Jersey, Middlesex County, Law Division [Docket No. 1-9822-95, L10667-96, L-10839-97] asking that the Court immediately shut down the Debtors' business. The Court granted the City's request. The Debtors appealed to the Superior Court of New Jersey, Appellate Division. The Appellate Division vacated the Trial Court's order and ordered a full evidentiary hearing on the breach of contract issue. The Breach of Contract The Debtors agreed to give their valuable rights to continue doing business as an adult club in exchange for the City placing the property into a redevelopment zone. However, the Debtors say the City of South Amboy failed to wuphold its end of the bargain and nothing happened for years. According to the Debtors, the City of South Amboy "intentionally, wantonly, arbitrarily and capriciously refused to place the Debtors' property in a realistic redevelopment zone." Despite the City of South Amboy's breach of the agreement, it continues to force the Debtors not to do business through the enforcement of the State Court Action. The Debtors are insolvent as a result. Property Sale in Jeopardy The Debtors now want to sell the property to Kara Homes Development LLC for $4.35 million. That sale transaction is contingent on rezoning the property. The South Amboy Redevelopment Agency is refusing to clear the sale becuase property is the subject to on-going litigation. The Debtors ask the Bankruptcy Court to force the City to do what it originally promised and stop blocking the sale. The Debtors argue that the rights they gave up under the settlement agreement are avoidable under New Jersey state law and under Sections 544 and 550 of the Bankruptcy Code. In short, the Debtors say, they received nothing from the City in exchange for their promises under the settlement agreement. Headquartered in New Brunswick, New Jersey, S.A. Holding Company, LLC,, owns real property in South Amboy, New Jersey. Delilah's Den of S.A., Inc., owns and operates an adult club on the property. The Debtors filed for chapter 11 protection on April 1, 2005 (Bankr. D. N.J. Case No. 05-19874). Michael F. Hahn, Esq., and William S. Katchen, Esq., at Duane Morris LLP represent the Debtors. When the Debtors filed for protection from their creditors, they listed $1 million to $10 million in assets and estimated debts of less than $50,000. SAAN STORES: Emerges from CCAA Protection with $30M Exit Facility ----------------------------------------------------------------- SAAN Stores Ltd. successfully emerged from court protection. The Company also disclosed the completion of its restructuring refinancing providing for availability of up to $36 million, to support the re-launch of the Company's reorganized network of 142 stores across Canada, scheduled for reopening this week. As of May 4, 2005, 101 stores have already been reopened, with fresh new inventory being delivered daily. SAAN, Canadian controlled and operated, is a discount family department store retailer, serving moderate and middle-income households, with locations reopening in all Provinces and Territories, except PEI and Nunuvat. Commenting on SAAN's restructuring and emergence, SAAN President, Doug Elliott stated: "Our experienced and dedicated restructuring team moved decisively and expeditiously over the last four months, focused on our mandate to reorganize SAAN's business to achieve a positive turnaround of the Company's operations. SAAN now has a sustainable business model and the financing support to return the Company to profitability, and to restore SAAN to its heritage and reputation for providing value and community leadership in small towns and rural communities across Canada." SAAN Refinancing Approved and Funded On March 24, 2005, the Court approved the terms of a $20 million DIP loan facility, which SAAN arranged with GMAC Commercial Finance Corporation - Canada. The GMACCF DIP Loan was contingent upon SAAN arranging subordinated debt of $6 million. The GMACCF DIP Loan and the GMACCF Loan Sub-Debt together comprise the SAAN Refinancing of up to $36 million. The GMACCF DIP Loan contemplates its conversion, in GMACCF's discretion, into a three- year senior secured, committed revolving $30 million emergence loan facility. On April 1, 2005, SAAN advised the Court that it had executed loan documents totaling $6 million with Gendis Inc., Jana Holdings Inc., and 6301533 Canada Inc., to satisfy the GMACCF Loan Sub-Debt requirement, providing for each party to fund $2 million respectively. GMACCF and the Court approved the GMACCF Loan Sub-Debt and the SAAN Refinancing was completed on Monday, May 2, 2005, providing the required funding for the Company's re- launch through its reorganized 142-store network. Mr. Greg Crombie, the Company's Communications Director, commenting on SAAN's refinancing, stated: "Our first priority with our financing now in place is to immediately reopen our stores. Our commitment is to restoring SAAN to its historic leadership position in all our markets, based on meeting consumer needs by delivering exceptional value everyday, on a wide range of household products and fashion apparel for the entire family. We are very encouraged by the response of Mayors and community leaders across Canada who have rallied to support a revitalized SAAN, recognizing the significant benefits of a vibrant retail presence to the vitality of their communities." Creditors Approve Proposal The Ontario Superior Court of Justice approved and sanctioned SAAN's Second Amended Proposal on May 2, 2005. Creditors representing 85.2% in dollar value of admitted claims and 96.7% in number voting in person or by voting letter overwhelmingly approved the Proposal on Apr. 20, 2005. The Court-appointed Trustee, RSM Richter, endorsed SAAN's Proposal as advantageous for affected creditors. SAAN's Proposal provides for payment options and distributions to Affected Creditors beginning August 2005 through August 2008, in the aggregate guaranteed amount of $6.5 million, up to a maximum of $11 million depending on SAAN's sales in future years. SAAN's Proposal Options SAAN's Proposal gives Affected Creditors three options: (1) Preferred Creditors Affected Creditors referred to in the Proposal as the "Preferred Creditors" are those prescribed by law to be paid in priority to all other claims when the First Dividend is paid, i.e.: prescribed priority government claims under the Income Tax Act; prescribed priority employee and former employee claims; and, prescribed administrative fees and expenses. (2) Electing Creditors Affected Creditors owed $500 or less will be paid in full when the First Dividend is paid. Affected Creditors who are owed greater than $500 have the option of accepting $500 in satisfaction of their claims when the First Dividend is paid. Affected Creditors with claims which are $500 or less, and Affected Creditors with claims greater than $500 agreeing to accept $500 in satisfaction of their claims are referred to in the Proposal as the "Electing Creditors". (3) Participating Creditors Affected Creditors owed more than $500 can receive dividends over time. These Affected Creditors are referred to in the Proposal as the "Participating Creditors" and they will have the right to share in four dividend payments during the period commencing August, 2005, through August, 2008. Many of the dividends have guaranteed amounts. The aggregate guaranteed amount is $6.5 million and, depending on SAAN's sales in future years, the dividends may be higher than the guaranteed minimum amounts, up to a maximum of $11 million. First Dividend Payment The payment of the First Dividend in the guaranteed amount of $2 million will be paid on or before August 31, 2005 as follows: (1) the claims of the Preferred Creditors shall be paid in full from the First Dividend in priority to the claims of the other Affected Creditors. (2) the claims of the Electing Creditors will be paid in full from the First Dividend. (3) the Participating Creditors shall be paid rateably, on a dollar for dollar basis, based on their proven claims, from the remainder of the First Dividend. Second, Third and Fourth Dividend Payments The Second, Third and Fourth Dividends referred to in the Proposal as payable over 2006, 2007 and 2008, will be a minimum of $4.5 million in the aggregate, up to a maximum of $9 million in the aggregate. These dividends will be paid on or before Aug. 31 in each of 2006, 2007 and 2008. In each of these three successive years the payment will be the greater of: (1) the guaranteed amount of $1.5 million; or, (2) the sum which is the total of, firstly, 1% of the Company's Sales up to $150 million, plus, secondly, 1.5% of the Company's Sales in excess of $150 million (Company's Sales meaning in the prior fiscal period and as defined in the Proposal); but, (3) in no event shall the payment in each of these three successive years exceed $3 million. Disposition Dividend In the event of the sale of the majority of the shares of SAAN to an arm's length third party on or before August 31, 2008, the Company shall pay an amount equal to three percent of the net sale proceeds (in cash or in kind) on the sale of such shares to the Proposal Trustee for pro-rata distribution to the Participating Creditors. Commenting on SAAN's Proposal to its creditors, Mr. Elliott stated: "It is apparent from the public reporting disclosing SAAN's financial performance during 2004 that without the late intervention of SAAN Acquisition Corp. and its December 16, 2004 purchase of SAAN, SAAN was on the eve of bankruptcy and the imminent end of the SAAN legacy was on the horizon. RSM Richter's April 6, 2005 Trustee Report to the Company's creditors concerning the Proposal estimated that in the event of SAAN's bankruptcy the unsecured creditors would experience no recovery. In recommending the acceptance of the Company's Proposal facilitated by SAAN's reorganization, RSM Richter estimated that unsecured creditors will recover between 12 cents and 15 cents on the dollar, rather than nothing. Mr. Elliott continued: "The overwhelming support for our creditor Proposal, combined with the completion of our restructuring funding, made possible SAAN's emergence from court protection as a revitalized and refinanced national retail chain, with 142 stores and over 1,600 employees, supported by valued supplier relations preserved with thousands of providers of goods and services. It has also paved the way for us to pay substantial future dividend payments to our creditors. We are very grateful to our creditors and stakeholders for their support of our reorganizational efforts." As reported in the Troubled Company Reporter on Jan. 19, 2005, SAAN sought and obtained protection under the Companies' Creditors Arrangement Act, to facilitate the Company's reorganization. Pursuant to the Initial Order, RMS Richter, Inc., has been appointed as the Monitor, an officer of the Court, to monitor SAAN's affairs during the CCAA process. The effect of the Initial Order is to stay SAAN's creditors from enforcing their claims against the Company. It also provides a means for SAAN to implement cost savings and to commence negotiations with stakeholders, with a view to implementing a restructuring through a plan of compromise and arrangement with affected creditors. SAAN STORES: Re-Opens 142 Stores Across Canada After CCAA Exit -------------------------------------------------------------- With SAAN's emergence and refinancing, SAAN Stores Ltd. is now poised and ready, with the commitment and solid support of its major landlords and suppliers, and its employees and lenders, to re-launch its reorganized and revitalized operations, strategically positioned as: (1) 142 stores across Canada with re-negotiated long-term leases reopening this week; (2) approximately 1,600 employees currently employed (with over 2,000 to be employed including seasonal employees), in SAAN's stores, and in the Company's Montreal logistics and operations facilities and its newly-established Toronto management office; (3) maintenance of a small administration office in the Company's former Winnipeg premises for purposes of orderly transitional management and the ongoing management of SAAN's pension fund for its plan members. At this time, retirees' benefits are continuing to be paid in the normal course; (4) approximately $20 million of new merchandise at retail acquired and either on hand in SAAN stores, or in the process of being delivered to SAAN stores; (5) approximately $60 million of additional new merchandise at retail committed by purchase orders to support the continuous restocking of SAAN stores; (6) exclusive arrangements established with a major Canadian retail supplier for launch of the Jessica Simpson label in Canada, and for the sale of the Enuff label in Canada; (7) new Merchandising and Store Operational Guidelines in place to support SAAN's re-launch initiative; (8) newly developed re-launch marketing program in place to support a speedy recovery of sales and market share for SAAN; and, (9) communications initiatives underway with Mayors and community leaders across Canada, developing local community support programs to celebrate the reopening of SAAN's stores in these communities. SAAN Executive Vice President, Julie Rulli, commenting on the reopening of SAAN's stores, stated: "Overwhelmingly, these 142 stores we are reopening represent the best of SAAN's original locations and provide a very positive base for restoring the SAAN heritage for success. We are extremely grateful for the loyalty and support of SAAN's customers throughout this challenging period of reorganization. We will require our customer's continued patience as we rebuild the organizational support and inventory levels in our stores, throughout the month of May, to create a welcoming and vibrant retail shopping experience." SAAN Vice President of Merchandise, Pam O'Rourke, commenting on the Company's re-launch, stated: "With our refreshed inventory commitments and our new fashion brand launch programs now in place, we are committed to retaining the best of SAAN's historic product offerings and complimenting this assortment by introducing new and exciting products that will enhance the total customer shopping experience and deliver exceptional value to our customers, everyday." As reported in the Troubled Company Reporter on Jan. 19, 2005, SAAN sought and obtained protection under the Companies' Creditors Arrangement Act, to facilitate the Company's reorganization. Pursuant to the Initial Order, RMS Richter, Inc., has been appointed as the Monitor, an officer of the Court, to monitor SAAN's affairs during the CCAA process. The effect of the Initial Order is to stay SAAN's creditors from enforcing their claims against the Company. It also provides a means for SAAN to implement cost savings and to commence negotiations with stakeholders, with a view to implementing a restructuring through a plan of compromise and arrangement with affected creditors. SALOMON BROTHERS: S&P Junks Series 2000-C3 Class N Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on classes B, C, D, E, F, G, and K of Salomon Brothers Commercial Mortgage Trust 2000-C3. Concurrently, all other outstanding ratings from this transaction are affirmed. The raised and affirmed ratings reflect improved pool performance and credit enhancement levels that provide adequate support through various stress scenarios. As of April 2005, the trust collateral consisted of 166 commercial mortgages with an outstanding balance of $809.3 million, down 11.5% since issuance. The master servicer, Midland Loan Services Inc., reported either full year 2003 or full or partial year 2004 net cash flow debt service coverage ratios for 96.1% of the loans. Based on this information, Standard & Poor's calculated the DSCR for the pool at 1.44x, up from 1.35x at issuance. The current weighted average DSCR for the 10 largest loans ($297.2 million; 36.7% of the pool) is 1.53x, up from 1.41x at issuance. The largest loan in the pool, One Financial Place, has a balance of $115 million (14.2%). This loan is secured by a 1,019,325- square-foot (sq. ft.) class A central business district office building located at 440 South LaSalle Street in Chicago Ill. As of March 31, 2005, occupancy was 85.5%, consistent with the downtown Chicago office market. Servicer reported NCF was $18.0 million, up from $17.0 million at issuance. DSCR has improved to 1.72x from 1.63x at issuance. Standard & Poor's re-underwrote the loan based upon information provided by Midland. Based upon Standard & Poor's current valuation criteria, the loan exhibits credit characteristics consistent with a 'AAA' rating. There are five loans (combined balance of $21.3 million; 2.63%) that are with the special servicer, Lennar Partners Inc. (Lennar). Three are secured by office properties and two are secured by multifamily properties. Three of the loans are current, one is 90-plus days delinquent, and one is a matured balloon loan, which is discussed below. The largest specially serviced loan is 85 Devonshire for $13.4 million (1.65%). A class B 92,000-sq.-ft. office building in downtown Boston, Massachusetts built in 1905 secures the loan. It is currently 84% occupied and last reported a NCF DSCR of 0.79x as of March 31, 2004. The borrower stopped making payments in December 2004 and the loan matured April 2005. The borrower has offered a deed-in-lieu, which Lennar is negotiating. The property has considerable near-term lease rollover and a loss is possible upon disposition. The remaining four specially serviced loans total $7.87 million (0.97%) and comprise two office properties and two multifamily properties. Losses may result from the disposition of some of these loans. The servicer's current watchlist notes 24 loans totaling $85.0 million (10.5%). The largest loan on the watchlist, Hamilton Court Apartments, for $15.4 million (1.9%), reported a NCF DSCR of 0.50x as of Dec. 31, 2004. However, net operating income DSCR was 1.27x, as the borrower has spent more than $1.0 million in capital expenditures to improve units, as they turn over. Most of the other loans on the watchlist appear due to low occupancies, low DSCRs, or upcoming lease expirations, and were stressed accordingly by Standard & Poor's. Based on discussions with Midland and Lennar, Standard & Poor's stressed various loans in the mortgage pool, paying closer attention to the specially serviced and watchlisted loans. The expected losses and resultant credit enhancement levels adequately support the rating actions. Ratings Raised Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-thru certs series 2000-C3 Rating ------ Class To From Credit Enhancement ----- -- ---- ------------------ B AAA AA 18.94% C AAA A 14.42% D AA A- 12.73% E AA- BBB+ 11.03% F A BBB 9.34% G BBB+ BBB- 7.64% K BB- B+ 2.70% Ratings Affirmed Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-thru certs series 2000-C3 Class Rating Credit Enhancement ----- ------ ------------------ A-1 AAA 24.31% A-2 AAA 24.31% H BB+ 4.25% J BB 3.40% L B 1.43% M B- 0.86% N CCC+ 0.44% X AAA N/A N/A-not applicable. SKIN NUVO: Committee Taps Heller Ehrman & Jones Vargas as Counsel ----------------------------------------------------------------- The Official Committee of Unsecured Creditors of Skin Nuvo International, LLC, and its debtor-affiliates asks the U.S. Bankruptcy Court for the District of Nevada for permission to employ Heller Ehrman LLP and Jones Vargas as its counsel. The two law firms are expected to: a) assist and advise the Committee in its consultations with the Debtors and in its examination, investigation and analysis of the Debtors' pre-petition and post-petition conduct, affairs and financial condition; b) review, analyze and advise the Committee concerning all motions, orders, statements and schedules filed with the Bankruptcy Court or any other court in which those filings affect the Debtors; c) assist and advise the Committee in evaluating, negotiating and proposing a plan of reorganization for the Debtors, and in engaging other professionals required by the Committee; d) assist and advise the Committee in litigations before the Court, in which those litigations involved substantial and material issues of bankruptcy law that affect the rights of unsecured creditors; and e) provide all other legal services to the Committee that are necessary in the Debtors' chapter 11 cases. Frederick P. Corbit, Esq., a Member at Heller Ehrman, and Janet L. Chubb, Esq., a Member at Jones Vargas are the lead attorneys who'll represent the Committee. Mr. Corbit reports Heller Ehrman's professionals bill: Designation Hourly Rate ------------ ----------- Counsel/Associates $290 - $450 Paralegals $150 Ms. Chubb reports Jones Vargas' professionals bill: Designation Hourly Rate ------------ ----------- Counsel/Associates $165 - $390 Paralegals $125 - $155 Both Heller Ehrman and Jones Vargas assure the Court that they do not represent any interest materially adverse to the Committee, the Debtors or their estates. Headquartered in Henderson, Nevada, Skin Nuvo International, LLC, dba Nuvo International, LLC, and dba A&E Aesthetics, LLC -- http://www.nuvointernational.com/-- specializes in offering progressive anti-aging treatments and top quality products and the first medical cosmetic company to launch a chain of retail skin care clinics in shopping malls throughout the United States. Keith M. Aurzada, Esq., and Sarah Link Schultz, Esq., at Akin Gump Strauss Hauer & Fled LLP represent the Debtors in their restructuring efforts. The Company and its debtor-affiliates filed for chapter 11 protection on March 7, 2005 (Bankr. D. Nev. Case No. 05-50463). When the Debtors filed for protection from their creditors, they estimated assets and debts of $10 million to $50 million. STATEN ISLAND: Fitch Affirms BB- Rating on $49 Million Bonds ------------------------------------------------------------ Fitch Ratings has affirmed the 'BB-' rating on $49 million of Staten Island University Hospital's bonds and placed the bonds on Rating Watch Negative. Rating Watch Negative indicates that the rating may be lowered in the near term. The New York State Attorney General's office has been investigating Staten Island University Hospital -- SIUH -- since 1998 regarding Medicaid overpayments of various clinic operations. One aspect of the investigation was settled in 1999 that resulted in a payback term of $2 million a year over 20 years. Other aspects of the investigation surrounding other regulatory requirements of the clinics are ongoing and an additional settlement with the AG is pending. Independent of this, through SIUH's voluntary disclosure to the Office of the Inspector General -- OIG, a graduate medical education reimbursement investigation, along with certain other federal investigations, commenced in 2004. The placement of the bonds on Rating Watch Negative is driven by the imminent nature of a settlement with the AG. Although a date has not been finalized, management has indicated that the negotiations are nearing the end. A settlement amount has not been disclosed, however, Fitch believes that the size and or terms of the settlement will place more pressure on Staten Island University Hospital's already weak financial profile. In addition, uncertainty remains regarding the OIG investigation. The OIG investigation may last several years and the potential size of the settlement is unknown. Fitch believes that final settlement terms with both parties will be structured so that the hospital can continue operating, however, at a further stressed level. Operating performance remained negative in fiscal year 2004 with a negative $3.6 million operating income. Fitch expected greater financial improvement with the engagement of Cambio in 2004. The bottom line remained flat with a $1.43 million bottom line in FY 2004 compared to a $1.48 million bottom line in 2003 (without one time items). The bottom line budget for FY 2005 is $7.8 million, which Fitch believes is achievable. Initiatives implemented include employee reductions, consolidation of services, and revenue cycle improvements. Through the first three months of FY 2005, excess income was $1.1 million compared to a budget of $1.5 million due to lower than expected volume. Liquidity measures are weak at 32.7 days at March 31, 2005. Due to SIUH's financial position and pending settlements, capital spending will be constrained. Fitch views this as worrisome as SIUH will need to continue to invest in its plant to remain competitive. However, SIUH's debt service is heavily front loaded and there will be significant cash flow relief starting in 2011 when debt service drops to $9 million from $23 million currently. Debt service coverage was sound at 1.8 times in fiscal 2004 and 1.9x for the three months ended FY 2005. Credit positives remain SIUH's strong market share and affiliation with North Shore Long Island Jewish Health System. SIUH maintains a leading market share of approximately 59%, which has increased from three years ago. Fitch values SIUH's affiliation with NSLIJ (rated 'A-' by Fitch) highly and believes the affiliation is beneficial for both parties. NSLIJ lends significant resources in terms of managed care contracting, joint planning, group purchasing and insurance. In light of current regulatory issues, Fitch views the affiliation as an important credit strength as NSLIJ's management team has been more involved and assisting the organization. There has been no monetary support from NSLIJ to SIUH. Fitch will continue to monitor the outcome of the investigations and determine the impact of the settlements on SIUH's rating. SIUH is a 686-staffed bed hospital with three campuses located in Staten Island, New York. SIUH had total operating revenue of $585 million in fiscal 2004. SIUH covenants to provide quarterly disclosure to Fitch and bondholders. Disclosure to Fitch includes quarterly statements including a balance sheet, income statement, and utilization statistics, and annual audited financials. Outstanding debt: -- $17,200,000 New York City Industrial Development Agency civic facility revenue bonds, (Staten Island University Hospital Project), series 2002C; -- $12,160,000 New York City Industrial Development Agency civic facility revenue bonds, (Staten Island University Hospital Project), series 2001A; -- $20,000,000 New York City Industrial Development Agency civic facility revenue bonds, (Staten Island University Hospital Project), series 2001B. STELCO INC: Court OKs Sale of Welland Pipe's U&O Mill to Grinolet ----------------------------------------------------------------- The Superior Court of Justice (Ontario) approved Stelco Inc.'s (TSX:STE) sale of Welland Pipe's U&O Mill to Grinolet Incorporation. The Court sealed that part of the agreement of purchase and sale dealing with the purchase price until the transaction has closed. As indicated previously, the purchase price is in excess of the independent liquidation appraisal values provided by Danbury Sales Inc. Ernst & Young Inc., the Court-appointed Monitor, had recommended that the Court approve the sale on the grounds that Stelco adequately canvassed the market for prospective purchasers, the purchase price was fair and commercially reasonable, and the sale represented the best recovery for Welland Pipe stakeholders. Welland Pipe's operations were closed in March 2003 because of the lack of demand for very large diameter pipe. As noted previously, Welland Pipe's land and buildings have been listed for sale with a listing price of $4 million. Financing Plan As reported in the Troubled Company Reporter on Mar. 30, 2005, Stelco sought the Court's approval to discontinue the capital raising process as it relates to its core business, and replace it with a financing plan. In an affidavit of Hap Stephen, Stelco's Chief Restructuring Officer, he noted that Stelco should be able to return to Court by no later than May 30, 2005, to file a CCAA plan and seek directions with respect to the calling of meetings to obtain approval of the CCAA plan by stakeholders. As reported in the Troubled Company Reporter on Apr 1, 2005, Stelco received Court authorization to access the capital markets in pursuit of new capital in the form of equity or a combination of debt and equity. Stelco, Inc. -- http://www.stelco.ca/-- 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. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on January 29, 2004, Stelco Inc. and certain related entities filed for protection under the Companies' Creditors Arrangement Act. STRATOS GLOBAL: Owes Ex-Director Antle $C$1.74M from Court Ruling ----------------------------------------------------------------- The Supreme Court of Newfoundland and Labrador ruled against Stratos Global Corp. (TSX: SGB) in a lawsuit brought by Paul Antle, a former director and officer of Stratos. The case involved a dispute arising from the sale by Stratos of a subsidiary to Mr. Antle in 1998, as well as a separate claim regarding the eligibility to exercise stock options. The Court awarded Mr. Antle C$1.74 million, plus interest and costs, which will be recognized in Stratos' second quarter financial results. The Corporation is currently considering its options with respect to an appeal. Stratos Global Corporation -- http://www.stratosglobal.com/-- is a publicly traded company (TSX: SGB) and the leading global provider of a wide range of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks. With its owned-and-operated infrastructure and extensive portfolio of industry-leading satellite and microwave technologies (including Inmarsat, Iridium, Globalstar, MSAT, VSAT, and others), Stratos serves the voice and high-speed data connectivity requirements of a diverse array of markets, including government, military, energy, industrial, maritime, aeronautical, enterprise, media and recreational users throughout the world. * * * AS reported in the Troubled Company Reporter on Oct. 27, 2004, Standard & Poor's Ratings Services assigned its 'BB-' long-term corporate credit rating to Stratos Global Corp., a global provider of remote telecommunications services. At the same time, Standard & Poor's assigned its 'BB-' bank loan rating and a '3' recovery rating to the company's proposed US$150 million senior secured credit facility with final maturity in 2010, which is secured by substantially all of the company's assets. The '3' recovery rating indicates expectations for a meaningful (50%-80%) recovery of principal in the event of a default or bankruptcy. Use of proceeds will be to refinance existing debt of about US$125 million, while the remainder will be available for general corporate purposes. The outlook is stable. As reported in the Troubled Company Reporter on Oct. 27, 2004, Moody's Investors Service assigned initial ratings to Stratos Global Corporation of: * (P) Ba2 Senior Implied, * (P) Ba2 Senior Secured, * (P) Ba3 Issuer, and * SGL-1. All long-term ratings are stable. SYRATECH CORP: Alvarez & Marsal Approved as Turnaround Consultants ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Massachusetts gave Syratech Corporation and its debtor-affiliates permission to employ Alvarez & Marsal, LLC, as their turnaround consultants. Alvarez & Marsal will: a) assist in reviewing their current business plan, including assessment of short-term liquidity, management and cash generation opportunities and assist in the preparation of the Debtors' 2006 and 2007 business plans; b) assist the Debtors with respect to the communications process with the Debtors' creditors and other constituencies and assist in negotiating and obtaining debtor-in-possession and exit financing; c) assist the Debtors' legal counsel in the analysis, development and revision of the Debtors' plan of reorganization; d) assist in developing and presenting weekly and monthly reports to the Debtors' Board of Directors and other creditor groups, and in the development and maintenance of a 13-week cash flow forecast model; and e) provide all other turnaround consultancy services to the Debtors that are necessary in their chapter 11 cases. Douglas P. Rosefsky, a Managing Director at Alvarez & Marsal, discloses that the Firm received a $115,000 retainer. Mr. Rosefsky charges $525 per hour for his services. Mr. Rosefsky reports Alvarez & Marsal's professionals bill: Professional Hourly Rate ------------ ---------- Scott Thompson $425 James Morden $325 Designation Hourly Rate ------------ ----------- Managing Directors $500 - $675 Directors $375 - $475 Associates $275 - $375 Analysts $150 - $300 Mr. Rosefsky discloses that Alvarez & Marsal will be paid with an Incentive Fee of up to $300,000 upon the confirmation of a plan of reorganization provided that the Board of Directors determine that the Firm contributed significantly to the Debtors' restructuring process and the confirmation of that plan. Alvarez & Marsal assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Boston, Massachusetts, Syratech Corporation -- http://www.syratech.com/-- manufactures, markets, imports and sells tabletop giftware and home decor products. The Debtor, along with its affiliates, filed for chapter 11 protection on Feb. 16, 2005 (Bankr. D. Mass. Case No. 05-11062). Andrew M. Troop, Esq. Arthur R. Cormier, Jr., Esq., Christopher R. Mirick, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $86,845,512 in total assets and $251,387,015 in total debts. SYRATECH CORP: Peter J. Solomon Approved as Investment Bankers -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Massachusetts gave Syratech Corporation and its debtor-affiliates permission to employ Peter J. Solomon Co., L.P., as their investment bankers. Peter J. Solomon will: a) review and analyze the business plans and financial projections prepared by the Debtors, including testing assumptions and comparing those assumptions to historical Debtor and industry trends; b) advise and assist in evaluating strategic and capital structure alternatives for the Debtors, including considering the desirability of effecting a financing, reorganization or sale transaction, and in developing a general strategy for accomplishing that transaction; c) advise and assist the management in making presentations to the Debtors' Board of Directors concerning general strategy for any proposed financing, reorganization or sale transaction; d) negotiate and execute on the Debtors' behalf confidentiality agreements with potential parties interested in a proposed financing, reorganization or sale transaction; e) advise and assist in negotiations of a proposed financing, reorganization or sale transaction, and in definitive agreements related to that transaction; and f) provide all other financial and investment banking advisor services to the Debtors that are necessary in their chapter 11 cases. Bradley I. Dietz, a Managing Director at Peter J. Solomon, reports that the Firm will be paid with a Monthly Advisory Fee of $75,000 and a $1,000,000 Reorganization Fee payable on the date of the confirmation of a chapter 11 plan Peter J. Solomon assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Boston, Massachusetts, Syratech Corporation -- http://www.syratech.com/-- manufactures, markets, imports and sells tabletop giftware and home decor products. The Debtor, along with its affiliates, filed for chapter 11 protection on Feb. 16, 2005 (Bankr. D. Mass. Case No. 05-11062). Andrew M. Troop, Esq. Arthur R. Cormier, Jr., Esq., Christopher R. Mirick, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $86,845,512 in total assets and $251,387,015 in total debts. TALON TECHNOLOGIES: Case Summary & 81 Largest Known Creditors ------------------------------------------------------------- Debtor: Talon Technologies, Inc. 7637 St. Clair Avenue Mentor, Ohio 44060 Bankruptcy Case No.: 05-16121 Type of Business: The Debtor manufacturers industrial machinery on a contract basis. See http://www.talontechnologiesinc.com/ Chapter 11 Petition Date: May 3, 2005 Court: Northern District of Ohio (Cleveland) Judge: Pat E. Morgenstern-Clarren Debtor's Counsel: Stephen D. Hobt, Esq. 1370 Ontario Street, Suite 450 Cleveland, Ohio 44113-1744 Tel: (216) 771-4949 Fax: (216) 771-5353 Total Assets: $913,256 Total Debts: $1,365,415 Debtor's 81 Largest Known Creditors: Entity Claim Amount ------ ------------ Action Collectors, Inc. Unknown 4807 Rockside Rd., Ste. 400 Cleveland, OH 44131 Active Plumbing Supply Company Unknown 38033 Elm Street Willoughby, OH 44094 Advance Gas & Welding Unknown 1662 East 331st Street, Unit 5 Eastlake, OH 44095 Advance Quality Group Unknown 1090 Erie Road Eastlake, OH 44095 American Japaning Unknown 4917 Van Epps Road Independence, OH 44131 American Stainless Corp. Unknown P.O. Box 8000 Buffalo, NY 14267 Anodizing Specialist, Inc. Unknown 7547 Tyler Boulevard Mentor, OH 44060 Bow Steel Unknown 6167 West 80th Street Indianapolis, IN 46278 Boyce Machine, Inc. Unknown 1524 Main Street Cuyahoga Falls, OH 44221 Castle Metals Unknown P.O. Box 643188 Pittsburgh, PA 15264-3188 Central Collection Agency Unknown 205 West St. Clair Avenue Cleveland, OH 44113 Cintas Corporation Unknown P.O. Box 1340 Painesville, OH 44077 Clark Chemical & Oil Unknown 7555 Bessemer Avenue Cleveland, OH 44127 Cleveland Speciality Inspection Unknown 8562 East Avenue Mentor, OH 44060 Copper and Brass Sales Unknown P.O. Box 77040 Detroit, MI 48277-7040 Dettelbach, Sicherman & Baumgart Unknown 1100 Ohio Savings Plaza 1801 East 9th Street Cleveland, OH 44114 Diamond Tech, Inc. Unknown 401 South Street Chardon, OH 44024 Dominion East Ohio Unknown P.O. Box 26666 Attn: System Credit 18th Floor Richmond, VA 23261-6666 Ecolawn, Inc. Unknown 6178 Bramblewood Place Mentor, OH 44060 Thomas Eisele Unknown 57 Sycamore Drive Painesville, OH 44077 ErieVu Unknown Maintenance, Inc. 38303 Airport Parkway Willoughby, OH 44094 Fanuc America Corp. Unknown Department 777986 Chicago, IL 60678-7986 Federated Insurance Unknown P.O. Box 64304 Saint Paul, MN 55164-0304 Global Control Unknown Timothy P. Gurewicz 5425 East Heisley Road Mentor, OH 44060 Guyer Precision Unknown 280 West Prospect Street Painesville, OH 44077 HiCarb Corporation Unknown 23610 St. Clair Avenue Euclid, OH 44117-2515 Humana Insurance Company Unknown 1100 Employers Boulevard Green Bay, WI 54344 Internal Revenue Service Unknown Insolvency Group 3 1240 East Ninth Street Room 457 Cleveland, OH 44199 Jackson Machinery Company, Inc. Unknown 3201 East Royalton Road Broadview Heights, OH 44147 John J. Cohagan Unknown 6070 Douglas Road Madison, OH 44057 Johnston Industrial Sales Co. Unknown 644 Quarry Lane Richmond Heights, OH 44143 JTS Machinery & Supply Company Unknown 7509 Tyler Boulevard Mentor, OH 44060 K&C Lawn Care Ltd. Unknown P.O. Box 263 Willoughby, OH 44096 Kowalski Heat Treat Unknown 3611 Detroit Avenue Cleveland, OH 44113 Paul Ladas, CPA Unknown 8804 Tyler Boulevard Mentor, OH 44060 Scott Lawrence Unknown 36200 Reeves Road Eastlake, OH 44095 LDMI Telecommunications Unknown Dept. 77609 P.O. Box 77000 Detroit, MI 48277-0609 Lloyd Gage & Tool Company Unknown 7777 Wall Street Cleveland, OH 44125 Michael Long Unknown 1330 Craneing Road Wickliffe, OH 44092 LSACleanpart LLC Unknown 1610B Berryessa Road San Jose, CA 95133 M&M Tool Corp. Unknown 8195 Tyler Boulevard, Suite 3 Mentor, OH 44060 Markem Unknown P.O. Box 2100 Keene, NH 03431-7110 Master Grinding 28917 Anderson Road Wickliffe, OH 44092 Unknown McMaster Carr Supply Company Unknown P.O. Box 7690 Chicago, IL 60680-7690 Medical Mutual of Ohio Unknown 2060 East 9th Street Attention: 017B5310 Cleveland, OH 44115-1355 Michael C. Johnston Unknown 38700 Bell Road Willoughby, OH 44094 Michael P. Harvey LPA Unknown 311 Northcliff Drive Rocky River, OH 44116 MT Heat Treat, Inc. Unknown 8665 Station Street Mentor, OH 44060 Nationwide Recovery Systems Unknown 2304 Tarply Drive, #134 Carrollton, TX 75006 Office of the U.S. Attorney Unknown Carl B. Stokes U.S. Court House 801 West Superior Avenue, Suite 400 Cleveland, OH 44113-1852 Ohio Dept of Job & Family Services Unknown Attn: Collection Dept. P.O. Box 182404 Columbus, OH 43218-2404 Ohio Valley Supply & Maintenance Co. Unknown 2122 St. Clair Avenue Cleveland, OH 44114 Parker SinclairCollins Unknown 95 Edgewood Avenue New Britain, CT 06051 Philpott Rubber Company Unknown 1010 Industrial Parkway Brunswick, OH 44212 Ted Robbins Unknown 4757 Brooksdale Road Mentor, OH 44060 John Roper Unknown 5783 Beech Drive MentorontheLake, OH 44060 SC Manufacturing Unknown 380 Kennedy Road Akron, OH 44305-4422 Shop Supply & Tool Company, Inc. Unknown 5814 Heisley Road Mentor, OH 44060 Sky Bank Unknown 30100 Chagrin Boulevard, Suite 100 Pepper Pike, OH 44124 State of Ohio Unknown Department of Taxation 30 East Broad Street Columbus, OH 43215 State of Ohio Unknown Bureau of Worker's Compensation P.O. Box 15567 30 West Spring Street, 22nd Floor Columbus, OH 43215-2256 State of Ohio Unknown Department of Taxation 615 West Superior Avenue Cleveland, OH 44113 James Steiner Unknown 105 Fairport Nursery Road Painesville, OH 44077 Ronald Stray Unknown 7685 Pinehurst Road MentorontheLake, OH 44060 Stricker Refinishing, Inc. Unknown 2060 Hamilton Cleveland, OH 44114 Terri Stupica, Esq. Unknown 6449 Wilson Mills Road Mayfield Heights, OH 44143 Joseph Sullivan Unknown 105 Fairport Nursery Road Painesville, OH 44077 Superior Honing Equipment, Inc. Unknown 6691 33rd East Sarasota, FL 34243 Tendon Manufacturing, Inc. Unknown 20805 Aurora Road Warrensville Heights, OH 44146 The Illuminating Company Unknown 6896 Miller Road Brecksville, OH 44141-3222 The Parker Store Unknown 520 Ternes Avenue Elyria, OH 44036 The Plain Dealer Publishing Company Unknown P.O. Box 740475 Cincinnati, OH 45274-0475 TruFab Technology Unknown 4860 East 345th Street Eastlake, OH 44095 U.S. Attorney General Unknown U.S. Dept. of Justice Tax Division Civil Trial Sec., Northern Region P.O. Box 55 - Ben Franklin Station Washington, DC 20044 Uline Unknown 2200 South Lakeshore Drive Waukegan, IL 60085 United Grinding Industries Unknown 280 West Prospect Street Painesville, OH 44077 UPS Unknown P.O. Box 650580 Dallas, TX 75265-0580 Virtual Manufacturing Unknown 4970 Emerald Lane Brunswick, OH 44212 W. Lewis Sales Company Unknown 6661 Cochran Road Solon, OH 44139 William Ruple Company Unknown 4765 Beidler Road Willoughby, OH 44094 Yarde Metals Unknown 45 Newell Street Southington, CT 06489 TELEX COMMS: March 31 Balance Sheet Upside-Down by $976,000 ----------------------------------------------------------- Telex Communications, Inc. reported operating results for its first quarter ended March 31, 2005. Net sales for the 2005 first quarter were $73.9 million, an increase of 9.8% compared to net sales of $67.3 million for the first quarter of 2004. First quarter 2005 operating income increased 3.8% to $7.1 million compared to operating income of $6.9 million for the 2004 first quarter. At March 31, 2005, Telex Communications' balance sheet showed a $976,000 stockholders' deficit, compared to a $2,214,000 deficit at Dec. 31, 2004. About the Company Telex Communications, Inc., designs, manufactures and markets audio and communications products and systems to commercial, professional and industrial customers. The Company markets over 30 product lines that span the professional audio and communications sectors. The Company operates through two business segments, Professional Audio and Audio and Wireless Technology. The Professional Audio segment product lines include sophisticated loudspeaker systems, wired and wireless intercom systems, mixing consoles, amplifiers, wired and wireless microphones and other related products. The Audio and Wireless Technology segment product lines include digital audio duplication products, military and aviation products, land mobile communication systems, wireless assistive listening systems and other related products. Telex Communications, Inc. (Telex or Successor), a Delaware corporation, is an indirect wholly owned subsidiary of Telex Communications Holdings, Inc. (Old Telex or Predecessor). Telex was formed in connection with the November 2003 restructuring of Old Telex's debt obligations. Upon the closing of the restructuring, Old Telex changed its name and Successor was renamed. Reference to "the Company" in this press release means Predecessor and/or Successor, as appropriate, for the relevant period(s). TENET HEALTHCARE: Posts $3 Million Net Loss in First Quarter ------------------------------------------------------------ Tenet Healthcare Corporation (NYSE:THC) reported a $3 million net loss for its first quarter ended March 31, 2005. This compares to a net loss of $122 million in the first quarter of 2004. The net loss for the first quarter of 2005 includes net income from continuing operations of $20 million, compared to net income of $26 million in the first quarter of 2004 and a loss from discontinued operations of $23 million, compared to a net loss of $148 million in the first quarter of 2004. "The first quarter's results show a number of encouraging signs for our business," said Trevor Fetter, president and chief executive officer. "Of particular note were a marked improvement in our admissions trend compared to recent quarters, a continued drop in bad debt as a percentage of our net operating revenues, generally good cost control and disciplined cash collections. Inpatient admissions showed a notable improvement from the declining trend of the last few quarters. This sequential improvement came after we had seen year-over-year declines for the three previous quarters. In fact, on a same-hospital basis, we were only 1.2 percent lower than the volumes achieved in the first quarter of 2004, which was by far Tenet's strongest quarter last year. As we have said, our ability to generate volume growth remains a critical ingredient to improved profitability, and our first quarter results showed signs of improvement in that key measure as compared to the previous quarter." "We continued to make progress on the fundamental drivers of our business," said Reynold Jennings, chief operating officer. "We achieved our objectives for mid- to high-single digit percentage pricing increases on the $1.5 billion of managed care contracts we renegotiated during the first quarter, representing almost a third of our managed care revenue. In addition, we are continuing to capture incremental efficiencies in our controllable operating expenses." Robert Shapard, chief financial officer, said, "We saw continued stabilization of bad debt expense in the first quarter. Stronger collections, improving volume trends, pricing enhancements, and continued cost management have all contributed to the company's improved cash position. Tenet ended the quarter with $1.5 billion in unrestricted cash, including a tax refund of $537 million received in late March". Continuing Operations Net income from continuing operations for the first quarter of 2005 was $20 million, including four items with an aggregate positive net after-tax impact totaling approximately $11 million: (1) loss from early extinguishment of debt of $15 million pre- tax, $10 million after-tax, or $0.02 per share; (2) litigation and investigation costs of $8 million pre-tax, $5 million after-tax, or $0.01 per share; (3) gain on sale of four home health agencies and an infusion center of approximately $6 million pre-tax, $4 million after-tax, or $0.01 per share; (4) positive non-cash adjustment of the valuation allowance for deferred tax assets of $22 million, or $0.05 per share. In addition, the company had stock compensation expense, included in salaries and benefits, of $13 million pre-tax, $8 million after-tax, or $0.02 per share in the first quarter of 2005 as compared to $20 million pre-tax, $13 million after-tax, or $0.03 per share in the first quarter of 2004. Patient Volumes Same-hospital admissions (excludes two hospitals that were opened during 2004) in the first quarter of 2005 were 177,261, an increase of 8,849 admissions, or 5.3 percent, compared to the fourth quarter of 2004 when same-hospital admissions were 168,412. Same-hospital admissions decreased 2,198, or 1.2 percent, from 179,459 admissions in the first quarter of 2004. There were 91 days in the first quarter of 2004, a leap year, a difference of one day, or 1.1 percent, as compared to 90 days in the first quarter of 2005. Adjusting for this difference in the number of days in each quarter, same-hospital admissions per day would have been down only 0.1 percent when compared to the first quarter of 2004. This is an improvement from the declining trend which characterized same-hospital, year-over-year admissions in each of the three previous quarters in 2004. Admissions in Tenet's 14 south Florida hospitals declined by 2,104, or 3.9 percent, in the first quarter of 2005 compared to the first quarter of 2004. This decline in south Florida was approximately 96 percent of the aggregate first quarter decline of 2,198 same-hospital admissions. More than half of the Florida hospital volume decline was the result of the conversion of patient admissions to observation status. Total admissions through the emergency department comprised 55 percent of total admissions for the first quarter of 2005, compared to 52 percent in the first quarter of 2004 and 53 percent in the fourth quarter of 2004. Same-hospital outpatient visits in the first quarter of 2005 were 1,364,012, an increase of 22,797 visits, or 1.7 percent, as compared to 1,341,215 in the fourth quarter of 2004. Same-hospital outpatient visits in the first quarter of 2005 were down 153,066 visits, or 10.1 percent, compared to the first quarter of 2004. Approximately half of this decrease was attributable to the sale or closure of various home health agencies, hospices and clinics during 2004. Same-hospital patient days were 928,388 in the first quarter of 2005, an increase of 55,337 days, or 6.3 percent, as compared to the sequential fourth quarter, and a decrease of 15,209 days, or 1.6 percent as compared to the first quarter of 2004. Same-hospital surgeries were 122,455 in the first quarter of 2005, an increase of 1,026 or 0.8 percent over the fourth quarter of 2004 and a decrease of 3,833 or 3.0 percent over the first quarter of 2004. Uninsured admissions declined to 3.5 percent of total admissions in the first quarter of 2005, as compared to 4.0 percent in the sequential, fourth quarter of 2004. This is a reversal of a trend in which the percentage of uninsured patients increased steadily in each successive quarter of 2004 from 3.2 percent in the first quarter last year. Patients qualifying for charity care comprised 1.3 percent of admissions in the first quarter of 2005. Outpatient visits in the first quarter of 2005 included 9.6 percent uninsured patients plus 0.3 percent of patients qualifying for charity care a slight increase as compared to 9.3 percent uninsured and 0.3 percent charity care outpatient visits in the sequential, fourth quarter of 2004. Uninsured patients and patients qualifying for charity care represented 22.5 and 0.8 percent, respectively, of all patients treated as outpatients in the emergency department in the first quarter of 2005. In the fourth quarter of 2004, these patients accounted for 22.6 and 0.9 percent, respectively. Revenues Net operating revenues were $2,499 million in the first quarter of 2005, a decrease of $75 million, or 2.9 percent, as compared to $2,574 million in the first quarter of 2004. Patient discounts provided under the Compact with Uninsured Patients ("Compact") reduced net operating revenue in the first quarter of 2005 by $155 million, or 5.8 percent. Tenet initiated the implementation of the Compact beginning in the second quarter of 2004. If the discounts under the Compact were added back to net revenues, it would have produced a non-GAAP measure of adjusted net operating revenues for the first quarter of 2005 of $2,654 million which would be an increase of $80 million or 3.1 percent compared to net operating revenues for the first quarter of 2004. Under the Compact, discounts are provided to uninsured patients at managed care-style rates established by each hospital. Discounts under the Compact were $155 million in the first quarter of 2005 compared to $141 million in the fourth quarter of 2004 and are expected to grow further in future quarters as Tenet continues to implement these discounts. Under the Compact, the discount offered to an uninsured patient is recognized as a contractual allowance, which reduces net operating revenues at the time the account is recorded. Prior to implementing these discounting provisions under the Compact, the vast majority of these discounts were ultimately recognized to be uncollectible and, as a result, were recorded in our provision for doubtful accounts. The Compact was in effect at 57 of our 69 core hospitals at March 31, 2005. The Compact was implemented in our core 17 California hospitals during the first quarter of 2005, leaving only our 12 Texas hospitals not yet participating in the program due to legal and regulatory issues. We are seeking, in association with other healthcare providers and industry associations in Texas, to address the various legal and other restrictions that currently limit our ability to implement the discounting components of the Compact at our hospitals in that state. Approximately $155 million in charity care, measured on a gross charges basis, was provided in the first quarter 2005, as compared to $148 million in the sequential, fourth quarter of 2004, and $148 million in the first quarter of 2004. Total uncompensated care for continuing operations, a non-GAAP measure, defined as the sum of charity care plus discounts provided under the Compact and provision for doubtful accounts, was $468 million in the first quarter of 2005, approximately 16.7 percent of the sum of net operating revenues plus charity care plus discounts provided under the Compact. In the fourth quarter of 2004, total uncompensated care as defined above was $484 million, or approximately 17.9 percent of the sum of net operating revenues plus charity care plus discounts provided under the Compact. In the first quarter of 2004, total uncompensated care as defined above was $425 million or approximately 15.6 percent of the sum of net operating revenues plus charity care. Pricing Same-hospital net inpatient revenue per admission for the first quarter of 2005 was $9,523 compared to $9,495 in the first quarter of 2004. However, this unit measurement has been reduced by the Compact. If the discounts under the Compact were added back to net inpatient revenue, it would produce a non-GAAP measure of adjusted net inpatient revenue per admission of $9,974 for the first quarter of 2005, an increase of $479, or 5.0 percent, over the first quarter of 2004. The increase in the percentage of uninsured patients from 3.2 percent of total admissions in the first quarter of 2004 to 3.5 percent in the first quarter of 2005 contributed to this overall pricing increase. Self-pay admissions generate higher revenue because self-pay patients are charged standard gross charges prior to any Compact discounts. (A reconciliation of net inpatient revenue to Compact-adjusted net inpatient revenue, how the company uses the measures and why the company believes these measures are useful, are provided in the tables below entitled "Additional Supplemental Non-GAAP Disclosures." The foregoing also applies to all non-GAAP measures described below.) Same-hospital net outpatient revenue per visit was $512 in the first quarter of 2005 compared to $513 in the first quarter of 2004. This unit measurement has also been impacted by the Compact. If the discounts under the Compact were added back to net outpatient revenue, it would produce a non-GAAP measure of $567 in same-hospital adjusted net outpatient revenue per visit in the first quarter of 2005, an increase of $54, or 10.5 percent, compared to same-hospital net outpatient revenue per visit in the first quarter of 2004. Same-hospital net outpatient revenue per visit was significantly impacted by the sale or closure of certain home health agencies, hospices and clinics during 2004. These businesses typically generated lower revenue per visit than Tenet's other outpatient services. Managed Care Revenues and Pricing The company disaggregates its managed care business into three distinct categories: (1) commercial managed care, (2) managed Medicare, and (3) managed Medicaid. Within managed care, approximately 78 percent of total patient revenues are from Tenet's commercial business, 15 percent from managed Medicare, and 7 percent from managed Medicaid in the first quarter of 2005. Managed care admissions components are: 65 percent commercial, 21 percent managed Medicare, and 14 percent managed Medicaid. Outpatient visits are 76 percent commercial, 10 percent managed Medicare, and 14 percent managed Medicaid. Commercial managed care admissions were 50,930 in the first quarter of 2005, a decline of 3,826, or 7.0 percent, from 54,756 admissions in the first quarter of 2004. This decline in commercial managed care patients was partially offset by an increase of 1,966, or 13.6 percent, in managed Medicare admissions to 16,451 in the first quarter of 2005, and an increase of 81, or 0.7 percent in managed Medicaid admissions to 11,109 in the first quarter of 2005. Managed Medicare and managed Medicaid provide significantly lower unit revenues than commercial rates, often half on a per-patient-day basis. Pricing in the first quarter of 2005, solely from the commercial managed care business category, increased by roughly 3 percent relative to the first quarter of 2004. On managed care contracts renegotiated in the first quarter of 2005, pricing increases have generally been in the range of mid- to high- single digits. Pricing increases on the company's aggregate managed care portfolio reflect the adverse mix shift with stronger relative growth coming from managed Medicare and managed Medicaid payers as discussed above. Controllable Operating Expenses Controllable operating expenses (consisting of salaries and benefits, supplies, and other operating expenses) were $2,115 million in the first quarter of 2005 as compared with $2,056 million in the first quarter of 2004, an increase of $59 million, or 2.9 percent. Compared to the sequential, fourth quarter of 2004, the increase in controllable operating expense was $39 million, or 1.9 percent. On a same-hospital basis, controllable operating expenses were $2,098 million in the first quarter of 2005, an increase of $46 million, or 2.2 percent, as compared with the first quarter of 2004. Salaries and benefits were $1,124 million, or 45.0 percent of net operating revenues in the first quarter compared to $1,076 million or 44.6 percent of net operating revenues in the sequential, fourth quarter of 2004, and compared to $1,091 million or 42.4 percent of net operating revenues in the first quarter of 2004. If the discounts under the Compact were added back to net operating revenues it would have resulted in a non-GAAP measure of salaries and benefits as a percent of adjusted net operating revenues of 42.3 percent in the first quarter of 2005 compared to 42.1 percent in the fourth quarter of 2004 and 42.2 percent in the first quarter of 2004. Salaries and benefits were $870 per equivalent patient day in the first quarter of 2005 down $6, or 0.7 percent, compared to $876 in the sequential fourth quarter of 2004, and up $29, or 3.4 percent, in the first quarter of 2004. Supplies expense was $457 million in the first quarter of 2005, up $13 million, or 2.9 percent as compared to the sequential fourth quarter of 2004, and up $23 million, or 5.3 percent, as compared to $434 million in the first quarter of 2004. If the discounts under the Compact were added back to net operating revenues it would have resulted in a non-GAAP measure of supplies expense as a percent of adjusted net operating revenues of 17.2 percent in the first quarter of 2005 compared to 17.4 percent in the fourth quarter of 2004. Supplies expense was $354 per equivalent patient day in the first quarter of 2005, a decrease of $8, or 2.2 percent, compared with $362 in the sequential quarter, and up $19, or 5.7 percent, as compared with $335 in the first quarter of 2004. This increase is primarily attributable to rapidly rising costs in, and utilization of, high cost products associated with orthopedic implants, cardiac items, blood products and pharmaceuticals. In addition, the high costs associated with new technology products are further increasing our supply costs. Other operating expenses were $534 million in the first quarter, down $22 million or 4.0 percent as compared with the sequential, fourth quarter of $556 million and up $3 million, or 0.6 percent, as compared with $531 million in the first quarter of 2004. If the discounts under the Compact were added back to net operating revenues, it would have resulted in a non-GAAP measure of other operating expenses as a percent of the adjusted net operating revenues of 20.1 percent in the first quarter of 2005 compared to 20.6 percent in the first quarter of 2004. Other operating expense was $414 per equivalent patient day, a decrease of $39, or 8.6 percent, relative to $453 in the sequential, fourth quarter of 2004. Included in other operating expense was malpractice expense of $52 million in the first quarter of 2005 compared to $62 million in the first quarter of 2004, a decrease of $10 million, or 16.1 percent. Provision for Doubtful Accounts Provision for doubtful accounts, or bad debt expense, was $158 million in the first quarter of 2005, a decline of $119 million from the provision for doubtful accounts of $277 million in the first quarter of 2004. Bad debt expense was 6.3 percent of net operating revenues in the first quarter of 2005, compared to 10.8 percent of net operating revenues in the first quarter of 2004. Compact discounts of $155 million in the first quarter of 2005 resulted in an associated $143 million reduction in the provision for doubtful accounts. If the $155 million and $143 million reductions as a result of the Compact were added back to net operating revenues and bad debt expense, respectively, this would have resulted in a non-GAAP measure of adjusted bad debt expense of $301 million, or 11.3 percent of adjusted net operating revenues in the first quarter of 2005. In the fourth quarter of 2004, bad debt expense as a percent of net operating revenue was 8.1 percent. If the $141 million and $130 million reductions as a result of the Compact were added back to net operating revenues and bad debt expense respectively, this would have resulted in a non-GAAP measure of adjusted bad debt expense of $325 million or 12.7 percent of adjusted net operating revenues. On this sequential quarter basis the first quarter of 2005 represents an improvement of 140 basis points. Accounts Receivable Accounts receivable were $1,595 million at March 31, 2005, a decline of $93 million, or 5.5 percent, from $1,688 million on December 31, 2004. This decline included a reduction of $125 million from discontinued operations. Accounts receivable from continuing operations were $1,519 million at March 31, 2005, an increase of $32 million from $1,487 million at December 31, 2004. Accounts receivable days outstanding from continuing operations decreased by 2 days to 55 days at March 31, 2005, from 57 days at December 31, 2004, due in part to improved collections. Cash Flow Unrestricted cash was $1,497 million at March 31, 2005, up $843 million from $654 million at December 31, 2004. Unrestricted cash at March 31, 2005, excludes $263 million of cash restricted as collateral for standby letters of credit issued under our new letter of credit facility that we entered into in December, 2004. Net cash provided by operating activities was $516 million in the first quarter of 2005, including a tax refund of $537 million. In accordance with generally accepted accounting principles, this cash flow figure excludes capital expenditures, proceeds of asset sales, and certain other items. Excluding the tax refund and cash provided by operating activities from discontinued operations of $45 million, our cash used in operating activities would have been $66 million which was primarily attributable to working capital requirements during the quarter, including our annual 401(k) match funding and the timing of accounts payable disbursements. Capital expenditures in the first quarter were $96 million. Substantially all capital expenditures in the first quarter were in continuing operations. Tenet received a tax refund of $537 million in the first quarter of 2005, and $62 million in proceeds at closing from the sale of four hospitals in Orange County, California. As of March 31, 2005, Tenet has divested 22 of the 27 hospitals included in the divestiture plan announced in January, 2004. Discussions are ongoing for the remaining five hospitals. Tenet is confident that it will exceed its estimate of $600 million in total proceeds, including tax benefits. Tenet raised $773 million in cash from the proceeds of an $800 million offering of 10-year debt in the quarter. Debt repurchases in the first quarter used $413 million of cash to repurchase debt with a par value of $400 million. These actions are part of the company's previously announced strategy of extending its debt maturities. Tenet has no material debt maturities until December 1, 2011. Liquidity Total debt was $4.8 billion at March 31, 2005, up from $4.4 billion at December 31, 2004. Net debt, a non-GAAP measure defined as total debt less unrestricted cash, was $3.3 billion at March 31, 2005, as compared to $3.8 billion at December 31, 2004. In December, 2004, $263 million of cash became restricted as collateral for our new letter of credit facility. Income Taxes The tax benefit of $17 million in the first quarter of 2005 on pre-tax income of $3 million from continuing operations includes a $22 million reduction in the valuation allowance against deferred tax assets. The remaining tax expense of $5 million primarily represents state income taxes and increases in tax contingency reserves. Discontinued Operations The loss from discontinued operations for the first quarter of $23 million, or $0.05 per share, includes three items with an aggregate positive net after-tax impact of approximately $3 million: (1) gain from sale of Orange County facilities and other assets of $22 million pre-tax, $14 million after-tax, or $0.03 per share; (2) impairment of long-lived assets and restructuring charges of $7 million pre-tax, $4 million after-tax, or $0.01 per share; (3) negative non-cash adjustment to the valuation allowance for deferred taxes of $7 million, or $0.01 per share. Accounts receivable related to discontinued operations declined to $76 million at March 31, 2005, a decline of $125 million, from $201 million at December 31, 2004. This reduction primarily reflects collections of retained accounts receivable from hospitals divested prior to March 31, 2005. About the Company Tenet Healthcare Corporation -- http://www.tenethealth.com/-- through its subsidiaries, owns and operates acute care hospitals and related health care services. Tenet's hospitals aim to provide the best possible care to every patient who comes through their doors, with a clear focus on quality and service. * * * As reported in the Troubled Company Reporter on Jan. 27, 2005, Fitch has rated Tenet Healthcare Corp.'s new $500 million senior unsecured notes issue due 2015 a 'B-' rating, consistent with the company's existing senior unsecured ratings that have also been affirmed by Fitch. The Rating Outlook remains Negative. Moody's Investors Service assigned a B3 rating to Tenet Healthcare's new $500 million senior unsecured note offering pursuant to Rule 144A. At the same time, Moody's affirmed the Company's B2 senior implied rating and other long-term ratings and its SGL-4 speculative grade liquidity rating. The ratings outlook remains negative. Standard & Poor's Ratings Services assigned its 'B' rating to Tenet Healthcare Corp.'s proposed $500 million senior unsecured notes due 2015. At the same time, Standard & Poor's affirmed Tenet's 'B' corporate credit rating, raised its ratings on Tenet's senior unsecured notes to 'B' from 'B-', and withdrew its bank loan and recovery ratings. TENPINS INC: Voluntary Chapter 11 Case Summary ---------------------------------------------- Lead Debtor: Tenpins, Inc. dba Lynnwood Lanes dba Lynnwood Rollaway dba Lynnwood Lanes Cafe 6210 200th Street Southwest Lynnwood, Washington 98036 Bankruptcy Case No.: 05-15663 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Eric J. & Brenda A. Wigginton 05-15668 Type of Business: The Debtor operates a bowling center, a skating rink and a cafe in Lynnwood, Washington. Eric J. and Brenda A. Wigginton, Tenpins, Inc.'s owners, filed for chapter 11 protection on April 29, 2005 (Bankr. W.D. Wash. Case No. 05-15668). Chapter 11 Petition Date: April 29, 2005 Court: Western District of Washington (Seattle) Judge: Samuel J. Steiner Debtor's Counsel: Martin E. Snodgrass, Esq. 3302 Oakes Avenue Everett, Washington 98201 Tel: (425) 783-0797 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. TOPSAIL CBO: Full Payment Prompts Moody's Withdraw Ratings ---------------------------------------------------------- Moody's Investors Service has withdrawn the ratings on these Classes of Notes issued by Topsail CBO, Ltd.: * U.S. $135,500,000 Class A Senior Floating Rate Senior Notes * U.S. $17,000,000 Class B-1 Senior Subordinated Fixed Rate Notes * U.S. $17,500,000 Class B-2 Senior Subordinated Floating Rate Notes * U.S. $5,000,000 Class C Subordinate Fixed Rate Notes According to Moody's, the ratings were withdrawn because the notes were paid in full on April 23, 2005. Topsail CBO, Ltd. closed in April of 2001. The ratings of these tranches have been withdrawn: Issuer: Topsail CBO, Ltd. Tranche Descriptions: U.S. $135,500,000 Class A Senior Floating Rate Senior Notes due 2013 Prior rating: Aaa Current rating: Withdrawn Tranche Descriptions: U.S. $17,000,000 Class B-1 Senior Subordinated Fixed Rate Notes due 2013 Prior rating: Baa3 Current rating: Withdrawn Tranche Descriptions: U.S. $17,500,000 Class B-2 Senior Subordinated Floating Rate Notes due 2013 Prior rating: Baa3 Current rating: Withdrawn Tranche Descriptions: U.S. $5,000,000 Class C Subordinate Fixed Rate Notes due 2013 Prior rating: B2 Current rating: Withdrawn TRAINER WORTHAM: Moody's Junks $7.6 Million Class B-1L Notes ------------------------------------------------------------ Moody's Investors Service lowered the ratings of three classes of Notes and of the Preference Shares issued by Trainer Wortham First Republic CBO II, Ltd.: * to A2 on review for downgrade (from Aa2 on review for downgrade), the U.S. $23,000,000 Class A-2L Floating Rate Notes Due April 2037; * to Ba3 on review for downgrade (from A2 on review for downgrade), the U.S. $10,000,000 Class A-3L Floating Rate Notes Due April 2037; * to Caa3 on review for downgrade (from B3 on review for downgrade), the U.S. $7,600,000 Class B-1L Floating Rate Notes Due April 2037; and * to B3 on review for downgrade (from Ba3 on review for downgrade), the U.S. $18,000,000 Preference Shares. This transaction closed on February 28, 2002. According to Moody's, the rating action results primarily from significant deterioration in the par coverage of the collateral pool. Moody's makes mention that the Preference Shares have paid down more than 50% of their proceeds as of the last payment date on the deal. Rating Action: Downgrade Issuer: Trainer Wortham First Republic CBO II, Ltd. Class Descriptions: U.S. $23,000,000 Class A-2L Floating Rate Notes Due April 2037 Previous Rating: Aa2 on review for downgrade New Rating: A2 on review for downgrade Class Descriptions: U.S.$10,000,000 Class A-3L Floating Rate Notes Due April 2037 Previous Rating: A2 on review for downgrade New Rating: Ba3 on review for downgrade Class Descriptions: U.S.$7,600,000 Class B-1L Floating Rate Notes Due April 2037 Previous Rating: B3 on review for downgrade New Rating: Caa3 on review for downgrade Class Descriptions: U.S. $18,000,000 Preference Shares Previous Rating: Ba3 on review for downgrade New Rating: B3 on review for downgrade TRUMP HOTELS: Expects to Emerge from Bankruptcy on May 12 --------------------------------------------------------- Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates are expected to emerge from Chapter 11 bankruptcy protection on May 12, according to Scott Butera, the company's president and chief operating officer, The Associated Press reports. The Honorable Judge Wizmur of the U.S. Bankruptcy Court for the District of New Jersey gave his stamp of approval on a stipulation setting the effective date of the Debtors' Plan of Reorganization on "the first business day on which all of the conditions set forth in . . . the Plan have been satisfied or waived, but in no event later than May 13, 2005." As previously reported in the Troubled Company Reporter on May 3, 2005, the Debtors, Mr. Trump and the Noteholder Committees believe that an Effective Date no later than May 13, 2005, provides sufficient time to close the necessary transactions required under the Plan. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor- affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005. UNICAL INT'L: Ch. 7 Trustee Taps ASK Financial as Special Counsel ----------------------------------------------------------------- Timothy Yoo, the chapter 7 trustee overseeing the liquidation of Unical International Inc., asks the U.S. Bankruptcy Court for the Central District of California, Los Angeles Division, for permission to retain, employ and compensate ASK Financial as special litigation counsel. The Trustee wants ASK to handle the analysis and recovery of preference and certain other avoidance actions. Gregory S. Abrams, Esq., ASK Financial's President and sole shareholder, will bill the estate $5,000 in analysis charges. The firm will also charge a $175 suit fee for each adversary complaint filed, which will be paid from initial proceeds recovered. Mr. Abrams assures the Court that the representation will not compromise the best interest of the Debtor and its estates. Headquartered in Los Angeles, California, UNICAL International Inc. -- http://www.nationaldist.com/-- is an importer, exporter, and distributor of products in such categories as housewares, stationery, babycare, and more. The Company filed for chapter 11 protection on March 4, 2004 (Bankr. C.D. Calif. Case No. 04- 14948). Martin J. Brill, Esq., at Levene, Neale, Bender, Rankin & Brill represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $10 million each. The Court converted UNICAL's chapter 11 case to a Chapter 7 proceeding on Nov. 10, 2004 (Bankr. C.D. Calif. Case No. 04- 14948). UNITED RENTALS: Delays Form 10-Q Filing to Complete 2004 Audit -------------------------------------------------------------- United Rentals, Inc. (NYSE: URI) will delay the filing of its Form 10-Q to extend beyond the due date to make way for the completion of the Company's final 2004 results. The earnings, other selected financial data and 2005 outlook provided herein are preliminary and subject to change based on completion of the 2004 audit or the outcome of the previously announced SEC inquiry and the related internal review. This data should not be viewed as a substitute for full financial statements or as a measure of the company's performance. As reported in the Troubled Company Reporter on March 29, 2005, United Rentals disclosed that the lenders under its secured credit facility have agreed the company to defer providing 2004 audited financial statements until June 29, 2005. The lenders also agreed to waive certain defaults arising from the company's delay in filing its 2004 Report on Form 10-K. United Rentals also disclosed that results for 2004, while not yet finalized, are expected to meet or exceed the outlook provided in the third quarter earnings release on October 20, 2004. Preliminary First Quarter 2005 Results Total revenues for the first quarter 2005 were $732 million, an increase of 13.5% compared with $645 million for the same period last year. Cash flow from operations for the quarter was $149 million and free cash flow was $45 million, compared with cash flow from operations of $203 million and free cash flow of $87 million for last year's first quarter. Free cash flow was after total rental and non-rental capital expenditures of $170 million in the 2005 period and $171 million in the 2004 period. The decrease in cash flow from operations and free cash flow in 2005 was attributable to less cash generated from working capital. The size of the rental fleet, as measured by the original equipment cost, was $3.7 billion at the end of the first quarter of 2005, and the age of the fleet was 40 months. The size and age were unchanged from year-end 2004. General Rentals Segment General rentals segment revenues represented 94% of total revenues in the first quarter of 2005. First quarter revenues for general rentals were $688 million, an increase of 14.7% compared with $599 million for the first quarter of 2004. Rental rates for the first quarter increased 9.7% and same-store rental revenues increased 11.1% from the first quarter of 2004. Traffic Control Segment First quarter revenues for the traffic control segment were $43.9 million compared with $45.4 million for the first quarter of 2004, a decline of 3.2%. Same-store rental revenues in the first quarter declined 2.8% from the first quarter of 2004. CEO Comments and Outlook Wayland Hicks, chief executive officer, said, "Our strong first quarter performance reflects the significant growth we achieved in our general rentals segment, where revenues grew 14.7% and same- store rental revenues were up 11.1%. The primary driver of this growth was the success of our ongoing rates initiative, which enabled us to improve pricing without impacting customer demand. We also increased our contractor supplies sales 41% in the quarter and opened three additional distribution centers to support future expansion." Mr. Hicks continued, "For the full year 2005, we anticipate total revenues of $3.4 billion, diluted earnings per share of $1.60 to $1.70 and free cash flow of at least $200 million. We expect to drive general rentals growth by improving rental rates at least 5% over last year, expanding our rental fleet, increasing contractor supplies sales by more than 30%, and opening new branches. We've opened 10 new branches this year and plan to open a total of 30 to 35 by year-end. "We are continuing to see improvement in our principal end market, private non-residential construction, where first quarter spending rose 7% year-over-year according to Department of Commerce data. This improvement supports the strategic investments we are making to drive future growth." Status of Results As previously announced, the company has delayed finalizing its 2004 results to allow time to: -- review matters relating to the SEC inquiry; -- complete work on an income tax restatement required to lower the provision for income taxes which in total was higher than required for periods prior to 2004; -- complete the evaluation and testing of internal controls required by SOX 404; and -- conduct additional testing of its self insurance reserves in 2004 and prior periods. The company expects to finalize its first quarter 2005 results after it issues final results for 2004. The company will also set its 2005 annual meeting date at that time. United Rentals, Inc., is the largest equipment rental company in the world, with an integrated network of 730 rental locations in 47 states, ten Canadian provinces and Mexico. The company's 12,700 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 600 different types of equipment with a total original cost of $3.7 billion. United Rentals is a member of the Standard & Poor's MidCap 400 Index and the Russell 2000 Index(R) and is headquartered in Greenwich, Connecticut. Additional information about United Rentals is available at http://www.unitedrentals.com/ * * * As additionally reported in the Troubled Company Reporter on Dec. 9, 2004, Fitch Ratings initiates coverage on United Rentals, Inc. -- UR -- and its principal operating subsidiary United Rentals, Inc. North America -- URNA. The ratings are: United Rentals, Inc.: -- Subordinated debt 'B'. United Rentals, Inc. (North America) (Guaranteed by United Rentals, Inc.): -- Senior secured debt 'BB'; -- Senior unsecured debt 'BB-'; -- Subordinated debt 'B'. Fitch says the rating outlook is stable. Approximately $3.1 billion of securities are covered by Fitch's actions. USG CORP: Earns $77 Million of Net Income in First Quarter ---------------------------------------------------------- USG Corporation (NYSE:USG) reported record first quarter net sales of $1.17 billion, an increase of $153 million, or 15 percent, from net sales of $1.02 billion reported in the first quarter of 2004. Net earnings in the first quarter rose $20 million, or 35 percent, to $77 million versus the $57 million reported in the first quarter of 2004. First quarter 2005 diluted earnings per share were $1.77 compared with $1.33 per share in the same period a year ago. "USG had another solid performance this quarter," reported USG Corporation Chairman, President and CEO William C. Foote. "Net sales were a record for any first quarter in USG's history. Operating margins improved for most businesses, led primarily by improvements in pricing, though margins remain under pressure from higher costs." USG's outlook for the remainder of 2005 is positive. Commenting on this outlook, Foote explained, "The strong new housing and residential repair and remodel markets are expected to keep demand for USG's gypsum wallboard products high. However, rising interest rates and tightening lending standards may bring demand levels down slightly from last year's levels. The commercial construction market, while still soft, is showing some signs of improvement. These factors, combined with our continued focus on margin improvement and select growth opportunities, should produce strong results in 2005." North American Gypsum USG's North American Gypsum business recorded first quarter 2005 net sales of $725 million, an increase of $86 million, or 13 percent, from the first quarter of 2004. Operating profit increased by $26 million to $107 million. United States Gypsum Company realized first quarter 2005 net sales of $654 million and operating profit of $93 million. Net sales increased by $80 million, or 14 percent, and operating profit improved by 52 percent compared with the first quarter of 2004. The higher net sales and operating profit were due primarily to higher selling prices for Sheetrock(R) brand gypsum wallboard. U.S. Gypsum's nationwide average realized price of gypsum wallboard was $133.73 per thousand square feet during the first quarter, an increase of $23.40, or 21 percent, compared with $110.33 per thousand square feet in the first quarter last year. First quarter 2005 prices reflect continued strong industry demand for wallboard and industry capacity utilization rates that exceeded 90 percent. The benefits of higher pricing were partially offset by higher costs, including higher energy and raw material prices. U.S. Gypsum's wallboard shipments in the first quarter totaled 2.7 billion square feet during each of the first quarters of 2005 and 2004. Gypsum wallboard shipments in March were the highest for any month in U.S. Gypsum's history. U.S. Gypsum continues to make investments to meet its customers' needs, satisfy the growing demand for Sheetrock brand gypsum wallboard and improve its cost position. The recently announced state-of-the-art modernization of its Norfolk, Virginia, gypsum wallboard facility will increase capacity, reduce production costs and improve service to customers in the Mid-Atlantic market. U.S. Gypsum also set volume records for shipments of Durock(R) brand cement board and Fiberock(R) brand gypsum fiber panels, as they were the highest ever recorded for any first quarter in U.S. Gypsum's history. The gypsum division of Canada-based CGC Inc. reported first quarter 2005 net sales of $75 million and operating profit of $12 million. Net sales increased by $2 million, or 3 percent, versus the first quarter of 2004 primarily due to the favorable effects of currency translation and higher selling prices for Sheetrock brand gypsum wallboard. The slight decline in operating profit to $12 million from $13 million was largely a result of higher manufacturing costs. Worldwide Ceilings USG's Worldwide Ceilings business reported first quarter net sales of $170 million, an increase of $4 million, compared with the first quarter of 2004. Operating profit in the first quarter of 2005 was $12 million, a decline of $3 million, compared with the same period last year. USG's domestic ceilings business, USG Interiors, reported net sales and operating profit of $117 million and $6 million, respectively. This compared with net sales of $120 million and operating profit of $12 million in the first quarter of 2004. The decline in sales was due largely to lower shipments of ceiling grid and tile. In last year's first quarter, market concerns over a shortage of steel used to make grid and related increases in steel costs contributed to unusually strong demand for grid products. Grid demand in the first quarter of 2005 is more in line with overall industry opportunity. Higher manufacturing costs, primarily related to energy and raw materials, for both ceiling grid and tile also contributed to lower operating profit in the quarter. These cost pressures were partially offset by improvements in pricing for both ceiling tile and grid. USG International reported net sales and operating profit of $51 million and $3 million, respectively, in the first quarter of 2005. This compared with net sales of $46 million and operating profit of $1 million for the same period a year ago. The profit improvement was due primarily to increased demand for ceiling systems and gypsum-related products in Europe and Latin America. The ceilings division of Canada-based CGC Inc. reported net sales of $13 million and $3 million in operating profit. Net sales and operating profit for the same period a year ago were $13 million and $2 million, respectively. Building Products Distribution L&W Supply, USG's building products distribution business, reported first quarter 2005 net sales of $456 million, up 26 percent, from $362 million in the same period a year ago. Operating profit for the company rose to $26 million from $14 million in the first quarter of 2004. The improved results reflect record first quarter shipments for gypsum wallboard and complementary building products, such as drywall metal, ceiling products, joint compound and roofing. L&W Supply's gypsum wallboard shipments were up 7 percent versus the first quarter of 2004. Results also benefited from higher prices for gypsum wallboard. Gypsum wallboard selling prices were up 19 percent compared with the same period last year. Other Consolidated Information First quarter 2005 selling and administrative expenses totaled $89 million, an increase of $12 million, or 16 percent, year-over- year. The higher expenses were due to an increased accrual related to the Bankruptcy Court-approved key employee retention plan, increased levels of compensation and benefits and higher expenses associated with various growth initiatives. Selling and administrative expenses as a percent of net sales were 7.6 percent, compared with 7.5 percent in the comparable 2004 period. Interest expense of $1 million was recorded in the first quarter of 2005 and 2004. Under AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," virtually all of USG's outstanding debt is classified as liabilities subject to compromise, and interest expense on this debt has not been accrued or recorded since USG's bankruptcy filing. USG incurred Chapter 11 reorganization expenses of $1 million in the first quarter of 2005, down from $2 million in the last year's first quarter. For the first quarter of 2005 and 2004, respectively, these expenses consisted of $6 million and $4 million in legal and financial advisory fees, partially offset by bankruptcy-related interest income of $5 million and $2 million, respectively. Under SOP 90-7, interest income on USG's bankruptcy-related cash is offset against Chapter 11 reorganization expenses. As of March 31, 2005, USG had $1.2 billion of cash, cash equivalents, restricted cash and marketable securities on a consolidated basis. This compared with $925 million reported on March 31, 2004 and $1.25 billion reported on December 31, 2004. Capital expenditures in the first quarter of 2005 were $33 million, compared with $20 million in the corresponding 2004 period. A full-text copy of USG's First Quarter 2005 Results is available for free at: http://sec.gov/Archives/edgar/data/757011/000095013705005305/c94755e10vq.txt USG Corporation Unaudited Consolidated Balance Sheet As of March 31, 2005 Assets Current Assets: Cash and cash equivalents $669,000,000 Short-term marketable securities 178,000,000 Restricted cash 42,000,000 Receivables, net 523,000,000 Inventories 346,000,000 Income taxes receivable 23,000,000 Deferred income taxes 7,000,000 Other current assets 94,000,000 ------------- Total current assets $1,882,000,000 Long-term marketable securities 310,000,000 Property, plant and equipment (net of accumulated depletion - $903,000,000 & $878,000,000) 1,856,000,000 Deferred income taxes 134,000,000 Goodwill 43,000,000 Other assets 150,000,000 ------------- Total Assets $4,375,000,000 ============= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable 268,000,000 Accrued expenses 194,000,000 Current portion of long-term debt 1,000,000 Income taxes payable 94,000,000 ------------- Total current liabilities 557,000,000 Deferred income taxes 26,000,000 Other liabilities 417,000,000 Liabilities subject to compromise 2,241,000,000 Stockholders' Equity: Preferred stock - Common stock 5,000,000 Treasury stock (256,000,000) Capital received in excess of par value 418,000,000 Accumulated other comprehensive income 49,000,000 Retained earnings 918,000,000 ------------- Total stockholders' equity 1,134,000,000 ------------- Total liabilities and stockholders' equity $4,375,000,000 ============= USG Corporation Unaudited Consolidated Statement of Earnings Three Months Ended March 31, 2005 Net Sales $1,173,000,000 Cost of products sold 959,000,000 ------------ Gross profit 214,000,000 Selling & administrative expenses 89,000,000 Chapter 11 reorganization expenses 1,000,000 ------------- Operating profit 124,000,000 Interest expense 1,000,000 Interest income (2,000,000) ------------- Earnings before income taxes 125,000,000 Income taxes 48,000,000 ------------- Net earnings $77,000,000 ============= USG Corporation Unaudited Core Business Results Three Months Ended March 31, 2005 Net Sales: North American Gypsum: U.S. Gypsum Company $654,000,000 CGC Inc. (gypsum) 75,000,000 Other subsidiaries 40,000,000 Eliminations (44,000,000) ------------- Total 725,000,000 Worldwide Ceilings: USG Interiors, Inc. 117,000,000 USG International 51,000,000 CGC Inc. (ceilings) 13,000,000 Eliminations (11,000,000) ------------- Total 170,000,000 Building Products Distribution: L&W Supply Corporation 456,000,000 Eliminations (178,000,000) ------------- Total USG Corporation $1,173,000,000 ============= Operating Profit: North American Gypsum: U.S. Gypsum Company 93,000,000 CGC Inc. (gypsum) 12,000,000 Other subsidiaries 2,000,000 ------------- Total 107,000,000 Worldwide Ceilings: USG Interiors, Inc. 6,000,000 USG International 3,000,000 CGC Inc. (ceilings) 3,000,000 ------------- Total 12,000,000 Building Products Distribution: L&W Supply Corporation 26,000,000 Corporate (23,000,000) Chapter 11 reorganization expenses (1,000,000) Eliminations 3,000,000 ------------- Total USG Corporation $124,000,000 ============= USG Corporation Consolidated Statements of Cash Flows Three Months Ended March 31, 2005 Operating Activities: Net earnings $77,000,000 Adjustments to reconcile net earnings to net cash: Depreciation, depletion and amortization 30,000,000 Deferred income taxes 15,000,000 (Increase) decrease in working capital: Receivables (110,000,000) Income taxes receivable 1,000,000 Inventories (8,000,000) Payables 17,000,000 Accrued expenses 5,000,000 (Increase) decrease in other assets (9,000,000) Increase in other liabilities 2,000,000 Decrease in liabilities subject to compromise (1,000,000) Other, net (2,000,000) ------------ Net cash provided by operating activities (14,000,000) ------------ Investing Activities: Capital expenditures (33,000,000) Purchases of marketable securities (184,000,000) Sales or maturities of marketable securities 144,000,000 Net proceeds from asset dispositions - Acquisition of business - ------------ Net cash used for investing activities (72,000,000) ------------ Financing Activities: Issuances of common stock 1,000,000 ------------ Net cash provided by financing activities 1,000,000 ------------ Effect of exchange rate changes on cash (2,000,000) Net decrease in cash and cash equivalents (87,000,000) Cash & cash equivalents, beginning of period 756,000,000 ------------ Cash & cash equivalents, end of period $669,000,000 ============ Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: U.S. Trustee Appoints Seven-Member Equity Committee ------------------------------------------------------------- Pursuant to Section 1102(a)(1) of the Bankruptcy Code, Kelly Beaudin Stapleton, the United States Trustee for Region 3, appoints an Official Committee of Equity Security Holders in USG Corporation and its debtor-affiliates' chapter 11 cases. The seven-member Equity Committee is composed of: 1. Berkshire Hathaway, Inc./ Marc Hamburg, Chief Financial Officer c/o: Thomas B. Walper, Munger, Tolles & Olson LLP 355 S. Grand Ave., 35th Floor, Los Angeles, CA 90071 Phone: 213-683-9193 Fax: 213-683-5193; 2. Gebr. Knauf Attn: Robert H. Claxton, SR VP Finance 2 Knauf Dr., Shelbyville, IN 46176 Phone: 317-398-4434 Ext. 8501 Fax: 317-398-3675; 3. Fidelity Low Priced Stock Fund c/o Fidelity Management and Research Co. Attn: Nate Van Duzer, Esq., Director of Restructuring 82 Devonshire St., E31C, Boston, MA 02109 Phone: 617-392-8129 Fax: 617-476-5174; 4. Frank W. Cawood & Associates., Inc. c/o: Timothy W. Anders, Esq. 103 Clover Green, Peachtree City, GA 30269 Phone: 770-632-3129 Fax: 770-632-9438; 5. Moody Aldrich Partners LLC Attn: Michael Pierre 18 Sewall St., Marblehead, MA 01945 Phone: 781-639-2750 Fax: 781-639-2751; 6. Triage Management L.P. Attn: Leon Frenkel, Sr. Manager 401 City Ave., Suite 800, Bala Cynwyd, PA 19004 Phone: 610-668-0404 Fax: 610-668-1919; and 7. Andrew L. Sole, Esq. 500 Fifth Avenue, Suite 2620, New York, NY 10110 Phone: 212-302-7214 Fax: 212-302-7353. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 215/945-7000) VALLEY MEDIA: Can Retain Cross & Simon as Special Counsel --------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware gave Valley Media Inc. permission to retain Cross & Simon, LLC, as its special litigation counsel, nunc pro tunc to Feb. 22, 2005. Cross & Simon will investigate and prosecute preference claims for Valley Media. Donna L. Harris, Esq., is the lead attorney in this engagement. Ms. Harris will bill the Debtor at her current hourly rate of $270. To the best of Valley Media's knowledge, Cross & Simon doesn't hold any interest materially adverse to the Debtor and its estate. Headquartered in Woodland, California, Valley Media, Inc. -- http://www.valleymedia.com/-- is a full-line distributor of music and video entertainment products. The Company filed for chapter 11 protection on November 20, 2001 (Bankr. D. Del. Case No. 01-11353). Bernard George Conaway, Esq., at Fox Rothschild LLP, Christopher A. Ward, Esq., at The Bayard Firm, Christopher Martin Winter, Esq., at Duane Morris LLP, et. al. represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $241,547,000 in total assets and $259,206,000 in total debts. VERTIS INC: March 31 Balance Sheet Upside-Down by $478 Million -------------------------------------------------------------- Vertis, Inc., reported results for the quarter ended March 31, 2005. For the three months ended March 31, 2005, net sales were $385.8 million, or 1.2% below the first quarter of 2004 net sales of $390.6 million. Excluding the pass-through costs for paper and the impact of foreign exchange, revenue would have been down 4% in the first quarter. Earnings before interest, taxes, depreciation and amortization amounted to a loss of $80.1 million for the three months ended March 31, 2005. This represents a decrease of $120.8 million, of which $97.8 million is a non-cash impairment charge at Vertis Europe resulting from the annual valuation of goodwill. Also included in EBITDA are restructuring charges amounting to $10.0 million for the three months ended March 31, 2005 compared to $0.9 million in the comparable 2004 period. Excluding these restructuring and impairment charges, the decline in EBITDA would have been $14.0 million, or 33.6%, in the first quarter. Vertis reported a net loss of $129.9 million in the first quarter of 2005 versus a net loss of $11.3 million in the first quarter of 2004. The 2005 net loss includes the $97.8 million non-cash loss discussed above. Dean D. Durbin, President and Chief Operating Officer, commented, "As we stated in the discussions of our fourth quarter results, we anticipated that some of the conditions that we experienced in late 2004 would linger into 2005. For example, the direct mail climate in Europe continues to be challenging. "In tandem with ongoing cost reduction and revenue enhancing efforts, we are pursuing other strategic alternatives relative to our European direct mail business," continued Mr. Durbin. Mr. Durbin also noted, "Our first quarter results were negatively impacted by lower volume and the continued poor conditions in Europe - the latter contributed $2.5 million of the year-over-year decline in EBITDA. In addition, in the first quarter of 2005 we recorded a charge of approximately $2.0 million to fully reserve an amount due from a customer who filed for bankruptcy protection. Although costs were in-line with our expectations, we did experience year-over-year increases in employee benefit, utility and freight costs. "We made significant organizational changes in the first quarter," noted Mr. Durbin. "We implemented a new sales organization structure that is more effective and implemented a new company- wide sales compensation plan, both aimed at driving top line growth. From a cost perspective we streamlined the organization, reducing staff by approximately 220 positions. Specific actions included the regionalization of our insert platform, reducing corporate staffing, and taking advantage of other right-sizing opportunities across the Company. The restructuring charges taken to date are expected to yield annualized savings of approximately $18 million. We strengthened our leadership team with the additions of Ann Raider, Chief Strategy Officer, who will also lead our sales and marketing organizations and David Laverty, Senior Vice President and General Manager, who will lead our advertising insert platform." "We ended the quarter with $107 million available on our revolving credit facility and our trailing twelve-month Bank EBITDA for covenant purposes was $173 million versus the $160 million minimum requirement," stated Stephen E. Tremblay, Chief Financial Officer. Bank EBITDA is not equivalent to the EBITDA amount included elsewhere in this earnings release, but rather is net of adjustments to exclude certain items as defined under the credit agreement. Regarding the short-term outlook, Mr. Durbin stated, "We expect the combination of actions we completed in the first quarter coupled with those we will complete in the second quarter, and positive momentum on the sales front, will combine to yield EBITDA growth in the second quarter of 2005 versus the second quarter of 2004. We also believe we will generate year-over-year growth for the full-year 2005." This outlook excludes restructuring charges and the goodwill impairment loss. About the Company Headquartered in Baltimore, Maryland, Vertis Inc., -- http://www.vertisinc.com/-- is the premier provider of targeted advertising, media, and marketing services. Its products and services include consumer research, audience targeting, media planning and placement, creative services and workflow management, targeted advertising inserts, direct mail, interactive marketing, packaging solutions, and digital one-to-one marketing and fulfillment. With facilities throughout the U.S. and the U.K., Vertis combines technology, creative resources, and innovative production to serve the targeted marketing needs of companies worldwide. At Mar. 31, 2005, Vertis, Inc.'s balance sheet showed a $478,483,000 stockholders' deficit, compared to a $348,560,000 deficit at Dec. 31, 2004. WELLINGTON PROPERTIES: Northen Blue Approved as Bankruptcy Counsel ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Middle District of North Carolina gave Wellington Properties, LLC, permission to employ Northen Blue, L.L.P., as its general bankruptcy counsel. Northen Blue will: a) advise the Debtor with respect to its duties and powers as a debtor-in-possession in its bankruptcy case; b) assist the Debtor in the operation of its business, including evaluating the desirability of continuing its business, and in the ability and means by which some or all of the Debtor's assets could be refinanced or liquidated to generate cash for the payment of claims filed against the Debtor's estate, and any other matters relevant to the formulation of a plan of reorganization; c) assist in the preparation and filing of all necessary schedules, statements of financial affairs, reports, and a disclosure statement and a plan of reorganization; d) assist and advise the Debtor in its examination and analysis of the conduct of its affairs and the causes of its insolvency, and in communicating with the general creditor body regarding any matters of general interest; e) prepare, review or analyze all applications, orders, statements of operations, and schedules filed with the Court by the Debtor or other third parties, and advise the Debtor as to the propriety of those filings; and f) perform all other legal services that are necessary in the Debtor's chapter 11 case. John A. Northen, Esq., a Partner at Northen Blue, is the lead attorney for the Debtor. Mr. Northen discloses that the Firm received a $41,515 retainer. Wellington Properties has not yet received Northen Blue's hourly billing rates for its professionals performing services for the Debtor. Northen Blue assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Durham, North Carolina, Wellington Properties, LLC, filed for chapter 11 protection on March 29, 2005 (Bankr. M.D.N.C. Case No. 05-80920). When the Debtor filed for protection from its creditors, it listed total assets of $11,625,087 and total debts of $12,632,012. WESCORP ENERGY: Former Alaskan Governor Joins Board --------------------------------------------------- Wescorp Energy Inc. (OTCBB: WSCE) appointed Steve Cowper to its Board of Directors. In addition to his appointment as a director, Mr. Cowper will be joining Wescorp as the Vice President of New Business Development. "Up until recently, new technology in the oil and gas industry has had a difficult time breaking through the 'not-invented-here' barrier. Based on what I'm seeing, those days are changing fast." Comments Mr. Cowper. "Wescorp Energy has exclusive access to major-league technology which will make production dramatically more efficient and less costly. Add the quality of Wescorp's management, and you get a company that's going to play a significant role in this industry's future. I'm happy to be part of the team." "Both I and the entire Board welcome the round-the-world business acumen that Governor Cowper brings to Wescorp. His addition to the Management Team will be instrumental in taking Wescorp's technologies to the next level." comments President and CEO Douglas Biles. From 1975-79 Mr. Cowper served in the Alaska Legislature where he was Chairman of the House Finance Committee and Chairman of the Alaska Lands Committee. From 1980 until 1981 he was a lobbyist on federal land use policy for the State of Alaska in Washington, DC. In 1984-85 Mr. Cowper was chairman of the Board of Trustees of the Alaska Permanent Fund Corporation, a $29 billion public investment fund recognized as the best-managed public fund in the US. In 1986 Mr. Cowper was elected Governor of Alaska. By establishing spending controls and reforming budget accountability he transformed a chronic state deficit to a $500 million surplus in four years. Mr. Cowper personally wrote legislation establishing the first state-endowed scientific research foundation in the US. He initiated an aggressive international trade policy and negotiated with Federal Express and other air freight carriers to establish Anchorage International Airport as the largest international air cargo hub in the world. He managed the Exxon Valdez crisis and successfully lobbied the US Congress for major oil-spill legislation. In 1988 he led the first US delegation from Alaska to the Russian Far East, described in the press as "melting the ice curtain" Mr. Cowper was the Lead Governor for Energy Policy for the National Governors Association and Chairman of the Interstate Oil and Gas Compact Commission. In 1989 Mr. Cowper was named one of the nation's top ten governors by Al Neuharth, publisher of USA Today. With his agenda largely accomplished, Mr. Cowper did not run for re-election in 1990. Following his term in office Mr. Cowper was President and acting Executive Director of the Northern Forum, an international association of 22 northern regional governments from 10 countries which worked with Russian regional governments to establish a fair division of resource-related revenues with Moscow, as well as technology transfers related to transportation and environmental monitoring. Mr. Cowper has traveled extensively in Russia, especially in Siberia and the Far East, both in an official and private capacity. In 1994 and 1997, Mr. Cowper was Co-Chairman of the Pacific Rim Fisheries Conference in Beijing and Tokyo respectively, a six-nation conference focusing on international fisheries management. In 1997 he co-authored a definitive report to NOAA on the Russian Far East fisheries. In 1998 he made a major presentation to the Government of Hokkaido, Japan, on oil spill-related issues. Since 1992 Mr. Cowper has been the managing partner of Steve Cowper & Associates (SC&A) which specializes in political analysis and public-sector policy for governments and private companies. SC&A is a certified US government contractor, and has been under contract from the US Trade & Development Agency (USTDA) for public infrastructure analysis in two West African countries, Gabon and Sao Tome and Principe. He also was a consultant to Sao Tome for the purpose of establishing transparent public contracting procedures. In 2004 SC&A was under contract to the Democratic Republic of Sao Tome and Principe to recommend draft legislation to govern the spending of future oil revenues and to create a permanent public investment fund. This contract was funded by the World Bank and UNDP. Mr. Cowper has been sponsored by the World Bank to make presentations on resource-derived revenue policy, most recently in Trinidad and Tobago in December 2004. In 2003 Mr. Cowper co-authored a report on electric power generation and transmission policy for the Alaska Industrial Development and Export Authority (AIDEA). Mr. Cowper is a member of the Advisory Board of the National Maritime Law Enforcement Academy in Washington, DC, which provides training for port security personnel worldwide. In 1991 he was a Visiting Fellow at the New York-New Jersey Port Authority. He is the Chairman of the Northeast Asia Economic Forum, which focuses on large energy projects in Japan, China, Korea, Mongolia, and Eastern Russia, and is part of the East-West Center at the University of Hawaii, where he was also a Visiting Scholar in 1998. His most recent publications are "After California", in Energy Markets October 2001, and "A National Oil and Gas Trust", in Natural Gas & Electricity September 2004. Mr. Cowper has lived, worked, or traveled in 55 countries. He has testified before the US Congress 14 times on federal land use, national forest management, national energy policy, fisheries management, oil and gas exploration and development, oil spill prevention, and granting "Most Favored Nation" status to Russia for trade purposes. He testified before the Canadian Parliament in 1996 on Arctic energy policy. Mr. Cowper received an honorary doctorate in laws from Kyung Hee University, Seoul, Korea in 1988. He won the President's Public Service Award from the Nature Conservancy in 1989, and the Distinguished Alumnus Award from the University of North Carolina in 1990. In 1989 he was made an Honorary Citizen of Magadan Oblast in Russia. About the Company Wescorp is situated in the Calgary - Edmonton corridor near the geographic centre of North America's oil and gas reserves, sharing the same language and work ethic as the continent's other dominant energy capitals - Houston, Dallas and Denver. Strongly networked within this culture and a major shareholder of energy holdings itself, Wescorp has the long-established relationships and financial resources necessary to bring new energy solutions to market. Wescorp initiates testing and development with major energy players to establish industry acceptance, and then provides the sales, service and distribution infrastructure necessary to market these innovations globally and profitably. * * * Going Concern Doubt The Company has incurred an accumulated deficit of approximately $10,500,000 through December 31, 2004. The Company has changed its focus to provide expertise to emerging companies, offering timely product solutions and strategic investment opportunities in the oil and gas industries, which will, if successful, mitigate these factors, which raise substantial doubt about the Company's ability to continue as a going concern. After the year-end and prior to the completion of the Company's Annual Financial Report, the Company successfully raised approximately $1,600,000 under a convertible debenture. However, in its 2004 audit report dated April 14, 2005, to Wescorp's Board of Directors, the Company's independent auditors, Williams & Webster, P.S., CPA, of Spokane, Wash., said that because the Company has incurred an accumulated deficit and had negative working capital at Dec. 31, 2004, "these factors raise substantial doubt about the Company's ability to continue as a going concern." Since early 2003, Wescorp Energy Inc. has been focused on the oil and gas industry, supplying and investing in technology, providing project management, and information solutions that optimize performance. Wescorp has the goal of acquiring companies that provide oil and gas specific technologies and information services to the petroleum industry. The Company continues to invest in businesses that own, or have rights to, technology that have emerged beyond research and initial development and are essentially market-ready. WORLDCOM INC: Late Appeal Means No Appeal for Pro Se Claimant ------------------------------------------------------------- Brenda E. Petite-el, doing business as Inka's Additions, notifies the Bankruptcy Court that she will take an appeal from Judge Gonzalez' order granting summary judgment on the Debtors' objection to Claim No. 23010 to the District Court. Debtors Object Rule 8002(a) of the Federal Rules of Bankruptcy Procedure states that a party will file a notice of appeal with the bankruptcy clerk within 10 days of the entry of the order or judgment the party seeks to appeal. Mark A. Shaiken, Esq., at Stinson Morrison Hecker, in Kansas City, Missouri, argues that Ms. Petite-el's Notice of Appeal was filed beyond the deadline prescribed by Bankruptcy Rule 8002(a). Ms. Petite-el filed the Notice almost a month after the deadline. Accordingly, the Debtors ask the Court to dismiss Ms. Petite-el's Notice of Appeal. Brenda Petite-el Responds Ms. Petite-el asserts that she is not a lawyer and was not aware of the actual timetable. After receiving notice of the judgment in the Debtors' favor, Ms. Petite-el says that she began to research how to file an appeal and immediately filed once she finally understood the information and procedures. Ms. Petite-el asks the Court to reconsider the facts and allow her Notice of Appeal. Bankruptcy Court Decision Judge Gonzalez notes that the Bankruptcy Court does not have the authority to consider a request for an extension to file a notice of appeal made after the 30-day period pursuant to Rule 8002(c) of the Federal Rules of Bankruptcy Procedure. Therefore, the Bankruptcy Court does not address the issue of "excusable neglect." Furthermore, Judge Gonzalez says, the Debtors' request to dismiss Ms. Petite-el's appeal is not within the Bankruptcy Court's jurisdiction. "[That] relief can only be granted by the District Court." Thus, Judge Gonzalez denies: (a) Ms. Petite-el's request to extend the time to file a notice of appeal; and (b) the Debtors' request to dismiss, without prejudice, to be filed in the District Court. Background Ms. Petite-el filed Claim No. 23010 on January 23, 2003. The Debtors objected to her Claim No. 23010. Accordingly, in March 2004, the Debtors sought summary judgment on their objection to Claim No. 23010. Brenda Petite-el's Contentions Ms. Petite-el owns and operates Inka's Additions, a business that makes and sells wigs to women who suffer from hair loss. In May 1998, Ms. Petite-el ordered telephone service from Brooks Fiber for the store's location at 15851 South U.S. 27, in Dewitt, Michigan. The Debtors later acquired Brooks Fiber and continued to provide telephone services to Brooks Fiber's customers. In 1999, Ms. Petite-el relocated her business twice. During her second relocation, the Debtors experienced technical difficulties. The Debtors were unable to complete the reinstallation and needed to come back at a later date to complete the work. Ms. Petite-el contends that she is entitled to lost profits due to the Debtors' failure to transfer her business telephone line. Ms. Petite-el argues that the Debtors' negligence to transfer the phone line quickly prevented possible clients from contacting her for two weeks. Ms. Petite-el calculated her damages based on the conclusion that future demand for wigs would necessitate the production of one wig per day. Ms. Petite-el estimates damages to reach $359,280. The Debtors argue that Ms. Petite-el cannot prove her damages as required by the relevant state law. Furthermore, the Debtors assert, Ms. Petite-el is barred from receiving damages under the filed tariff doctrine. * * * The Court finds that all of the relevant facts, which led to Claim No. 23010 and the subsequent objection occurred in Michigan, and, therefore, the laws of the State of Michigan govern the Inka's Additions litigation. Judge Gonzalez relates that a party may recover for lost profits arising from a breach of a contract if they are properly proven. However, Judge Gonzalez emphasizes, an aggrieved party can only recover for the loss of future profits, if the party can prove the amount of lost profits to a "reasonable degree of certainty as opposed to being based on mere conjecture or speculation." If a business has an established financial history, Judge Gonzalez says, that prior history may provide a reasonable basis to estimate lost profits. "[Ms. Petite-el] simply does not provide any proof to support her claim for $359,280 in lost profits," Judge Gonzalez notes. According to Judge Gonzalez, Ms. Petite-el's deposition testimony indicates that Inka's Additions was not generating a profit at any time prior to the Debtors' failure to transfer the phone line. Ms. Petite-el bases the amount of damages on the production of one hairpiece per day, but then later states that at no previous time was demand for her product high enough to necessitate the production of one wig per day, Judge Gonzalez notes. The Court further finds that Ms. Petite-el offers no evidence for her claim other than: -- her statement that her business was picking up; and -- the business had the potential to generate profits in the amount requested in the Claim. Ms. Petite-el, Judge Gonzalez continues, provided no financial records or other evidence that would suggest demand for her product was going to increase so drastically as to indicate that profits in the amount requested were attainable. In fact, the Court notes, Inka's past financial performance suggests that the business was highly unlikely to generate those profits. "It is the lack of evidence on the part of the Claimant to support her assertion that business was improving, combined with the past financial struggles of the Claimant's business which makes her claim purely speculative in that there is no historical support for the asserted lost profits estimate," Judge Gonzalez concludes. Accordingly, Judge Gonzalez grants the Debtors' request for summary judgment and disallows Claim No. 23010. 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. 88; Bankruptcy Creditors' Service, Inc., 215/945-7000) YOUNG BROADCASTING: Closes Amended Senior Credit Facility --------------------------------------------------------- Young Broadcasting Inc. (NASDAQ: YBTVA) completed an amendment and restatement of its senior credit facility. The amended credit facility provides for: -- a $300 million term loan that matures in 2012; and -- a $20 million revolving credit facility that matures in 2010. The full amount of the term loan was borrowed at the closing. Senior Notes Purchase YBI also disclosed that it had accepted for payment, and had purchased, all of its $246,890,000 outstanding principal amount of 8-1/2% Senior Notes due 2008 pursuant to the cash tender offer and consent solicitation commenced on April 11, 2005. The purchase of the Notes was financed by borrowings under the term loan portion of the amended credit facility. The terms of the Offer are more fully described in the Offer to Purchase and Consent Solicitation Statement and related Letter of Transmittal and Consent, each dated April 11, 2005. This announcement is neither an offer to purchase, nor a solicitation of an offer to purchase, nor a solicitation of tenders or consents with respect to, any Notes. The Offer is being made solely pursuant to the Statement and related Letter of Transmittal and Consent. About the Company Young Broadcasting Inc. (NASDAQ: YBTVA) owns ten television stations and the national television sales representation firm, Adam Young Inc. Five stations are affiliated with the ABC Television Network (WKRN-TV - Nashville, TN, WTEN-TV - Albany, NY, WRIC-TV - Richmond, VA, WATE-TV - Knoxville, TN and WBAY-TV - Green Bay, WI), three are affiliated with the CBS Television Network (WLNS-TV - Lansing, MI, KLFY-TV - Lafayette, LA and KELO- TV - Sioux Falls, SD) and one is affiliated with the NBC Television Network (KWQC-TV - Davenport, IA). KRON-TV - San Francisco, CA is the largest independent station in the U.S. and the only independent VHF station in its market. * * * As reported in the Troubled Company Reporter on Apr. 22, 2005, Moody's Investors Service assigned B1 ratings to Young Broadcasting Inc.'s $295 million in new senior secured credit facilities ($20 million revolving credit facility due 2010, $275 million senior secured term loan B due 2013). Additionally, Moody's affirmed Young's existing ratings, including a B2 senior implied rating, and changed the outlook to negative. The proceeds from the issuance will be used to redeem the company's 8.5% senior notes due 2008. Thus, the transaction is neutral to leverage. Moody's said the negative outlook incorporates Young's still high debt burden, operating margins that lag peers in the television broadcast sector, and our expectation that the company will continue to burn cash in the near-term. Accordingly, absent asset sales, the company is not able to meaningfully reduce debt. YUKOS OIL: Moscow Court Freezes Yukos' Remaining Assets ------------------------------------------------------- The Wall Street Journal reports that a Moscow Court has frozen Yukos Oil Company's remaining assets, including Samaraneftegas on he Volga, Tomskneft in Siberia, OAO East-Siberian Oil and Gas, OAO Syrzan refinery, OAA Achinsk refinery, OAO Angarsk trochemicals, ZAO Tambovnefteprodukt and ZAO rkutsnefteproduct. The freeze order was entered in one of the lawsuits filed by tate- owned Rosneft against Yukos. Since December 2004, after acquiring Yuganskneftegaz, Yukos' major oil production unit, Rosneft has brought several lawsuits against Yukos seeking to recover payments for oil deliveries Yuganskneftegaz made to Yukos. Headquartered in Houston, Texas, Yukos Oil Company is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. (Yukos Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Moody's Says Canadian Corporate Governance Better than in U.S. ---------------------------------------------------------------- Canadian businesses compare favorably to their U.S. counterparts when it comes to corporate governance, according to Ken Bertsch, Senior Vice President and Director of Corporate Governance at Moody's Investors Service. Mr. Bertsch made his comments at Moody's Annual Corporate Finance Conference held in Toronto on May 4, 2005. Moody's began assessing the corporate governance of the largest North American issuers in 2003. The purpose of these Corporate Governance Assessments is to evaluate practices that could have potential implications for an issuer's credit quality and to provide a creditor perspective on governance. Moody's has seen improved board processes over the past two years, including enhanced board and committee independence and an increased sense of responsibility among company directors. Moody's has also seen better governance disclosure and clearer lines of the accountability of independent auditors to audit committees, as well as strengthened audit committees with greater financial expertise. "We believe corporate governance improvements in the wake of post-Enron reforms have been significant in both the United States and Canada," Mr. Bertsch said. Canada's regulatory system, which requires companies to comply with regulations or to disclose why they have not complied, is particularly attractive from a corporate governance point of view. "This is a flexible and transparent system that provides a measure of reasonable pressure on issuers-including those that are controlled and would be exempt from certain U.S. stock market listing standards. Moreover, this structure may increase the probability that directors will be able to defend their positions instead of merely ticking the boxes when it comes time to vote," Mr. Bertsch said. In general, Moody's has favorable views of companies that reflect the Canadian Corporate Governance Guideline that calls for an independent board chairperson -- or at least a clear lead director. Nevertheless, it is still possible that some boards may be too cozy, Mr. Bertsch added. The closeness of directors on some Canadian boards reflects, in part, the size of the market, in comparison with the U.S., although Moody's also views some large U.S. company boards has having strong regional ties that may raise questions regarding whether they have sufficient diversity of perspective. In a situation where directors appear to be too close to each other and to senior management, questions can be raised about whether the board will provide tough oversight of management. Finally, there are differences in the amount of sway held by American and Canadian institutional investors. Arguably, the leading Canadian pension funds have greater influence over good governance practices than do U.S. funds, due to the greater concentration of investment capital in Canada. These positive dynamics are reflected in independent chairpersons, opposition to the use of stock options for outside directors, and greater shareholder voice on takeover defenses. "This seems to be more positive than negative from a creditor standpoint, particularly given the long-term nature of pension fund thinking," Mr. Bertsch said. * BOOK REVIEW: George Eastman: Founder of Kodak ----------------------------------------------- Author: Carl W. Ackerman Publisher: Beard Books Softcover: 596 pages List Price: $34.95 Order your personal copy at http://www.amazon.com/exec/obidos/ASIN/1893122999/internetbankrupt George Eastman was a Bill Gates of his time. This biography of Eastman (1854-1932) provides a fascinating look at the inventions, management style, interests, causes, and philanthropies of one of America's finest scientist-entrepreneurs. Eastman's inventions transformed photography into a relatively inexpensive and enormously popular leisure activity. His company, Eastman Kodak, was one of the first U.S. firms to mass-produce a standardized product. Along with Thomas Edison, he ushered in the age of cinematography. Eastman was born in Waterville, New York. At 23, working as a bank clerk, Eastman bought a camera and set in motion a revolution in photography. At the time, photographers themselves mixed chemicals to make light-sensitive emulsions and covered glass plates (called "wet plates") with the emulsions, taking photographs before the emulsions dried. It was an awkward, messy and time-sensitive undertaking. Eastman developed a process using dry plates and in 1884 patented a machine to produce coated dry plates. He began selling photographic plates made using his machines and as well as leasing his patent to foreign manufacturers. With the goal of reducing the size and weight of photographic equipment, Eastman then began investigating possibilities for a flexible film. He and William E. Walker developed the first such film, cut in narrow strips and wound on a roller device patented by Eastman. The Eastman Dry Plate and Film Co. began producing the film commercially in 1885. In 1888 Eastman patented the hand-held Kodak camera, designed specifically for roll film and initially priced at $25. (He made up the word "Kodak" using the first letter of his mother's maiden name, Kilbourne.) In 1889, Eastman began working with Thomas Edison, inventor of the motion picture camera. Edison's increasingly sophisticated models required a stronger, more flexible transparent film, which Eastman was able to deliver. He founded Eastman Kodak Co. in 1892 and began mass-producing a range of photographic equipment. Eastman was an astute businessman. He dealt shrewdly with competitors and sometimes fell out with former collaborators. Indeed, some of them filed and won patent infringement lawsuits against him. He was tireless in his inventing and entrepreneurial endeavors. In the early days he often slept in a hammock at the factory and cooked his own food there. His mother regularly showed up and insisted that he go home for a good meal and full night's sleep! Eastman demanded much of his employees, but no more than he demanded of himself. "An organization," he said, "cannot be sound unless its spirit is. That is the lesson the man on top must learn. He must be a man of vision and progress who can understand that one can muddle along on a basis in which the human factor takes no part, but eventually there comes a fall." George Eastman gave away more than $100 million, a princely sum at the time. He avoided publicity and conducted his philanthropic activities quietly. His causes reflected a wide range of interests, and included the University of Rochester, the Massachusetts Institute of Technology, and many others. This book draws on the contents of 100,000 letters to and from Eastman's friends, family, investors, competitors, employees and fellow inventors, along with Eastman's records and notes on his various inventions. The result is a meticulously detailed account of Eastman's myriad interests and hands-on management style, as well as the evolution of photography and a major 20th-century corporation. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***