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/raid1/www/Hosts/bankrupt/TCR_Public/050511.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, May 11, 2005, Vol. 9, No. 110 Headlines AAIPHARMA INC: Files for Chapter 11 Protection in Delaware AAIPHARMA INC.: Case Summary & 30 Largest Unsecured Creditors AAIPHARMA: Selling Pharmaceutical Divisions for $170 Million ADELPHIA COMMS: Senior Noteholders Slam Comm.'s Hiring of Weiser ADVANCED ENERGY: Faces Delisting Due to Internal Control Problems AFFINITY TECH: Issues Additional $75,000 of Convertible Notes AIR CANADA: Machinists' Union Complains About Outsourcing ALDERWOODS: Consumer Group Files Class Action Suit in N.D. Calif. ALLEGHENY ENERGY: Good Performance Prompts S&P to Lift Ratings ARGUS CORP: Current Debts 200-Times Current Assets at April 15 ARMSTRONG WORLD: Proposed EPA Settlement Draws Fire from Insurers ATA AIRLINES: Wants to Assume Continental Interline Agreement BORDEN CHEMICAL: March 31 Balance Sheet Upside-Down by $515 Mil. CALPINE CORP.: Reliance on Asset Sales Cues S&P to Lower Ratings CAMCO INC: Equity Deficit Narrows to $17.58 Million at March 31 CAPRESI LLC: Case Summary & 20 Largest Unsecured Creditors CARAUSTAR INDUSTRIES: Weak Earnings Prompt S&P to Lower Ratings CARRIER ACCESS: Receives Nasdaq Deficiency Notice Due to Tardy 10K CATHOLIC CHURCH: Tucson Wants Hartford Settlement Pact Approved CLEARLY CANADIAN: Consolidated Shares Begin Trading on NASDAQ COLUMBUS MCKINNON: Moody's Revises Rating Outlook to Positive COOKS INC.: Case Summary & 20 Largest Unsecured Creditors COVANTA ENERGY: Warren Subsidiary Owes $900,000 to Covanta Energy CRANKUP SCAFFOLDING: Case Summary & 16 Largest Unsecured Creditors CREDIT SUISSE: Moody's Rates Four Securitization Classes at Low-B CRIIMI MAE: Reports First Quarter 2005 Financial Results CRITICAL PATH: March 31 Balance Sheet Upside-Down by $114.5 Mil. CTI FOODS: Moody's Rates Proposed $115M Senior Sec. Loan at B2 CTI FOODS: S&P Rates Proposed $115 Million Second-Lien Loan at B DANA KIKLIS: Voluntary Chapter 11 Case Summary DELTA AIR: CEO Supports Congressman Price's Pension Legislation DENBURY RESOURCES: Posts $30.1 Mil. of Net Income in First Quarter DIGITAL LIGHTWAVE: To Appeal Nasdaq Delisting Notice DYNEGY HOLDINGS: Sale Talks Cue Fitch to Junk Sr. Unsecured Debts DYNEGY INC: Planned Segment Sale Prompts Moody's to Review Ratings DYNEX POWER: Filing Annual Financial Statements in Mid-May EAGLEPICHER INC: Moody's Withdraws Rating After Bankruptcy Filing ENCORE MEDICAL: Can Fund Cash Needs for One Year, Moody's Says FARMLAND IND: Wants to Sell Equity Interest in Cooperative Finance FEDERAL-MOGUL: Court Orders Mediation for Verizon's Complaint FLINTKOTE CO: Committee Taps Frank/Gecker as Special Counsel FLINTKOTE CO: Has Until Aug. 30 to Make Lease-Related Decisions FOOTMAXX HOLDINGS: Balance Sheet Upside Down by $16.24M at Dec. 31 GEORGIA-PACIFIC: Board Declares Dividends as Net Income Doubled GEORGIA-PACIFIC: T.D. Bell & J.A. Boscia Elected as Directors HAWAIIAN AIRLINES: Names Rick Fall as Senior Cargo Director HAYES LEMMERZ: Asks Lenders for 30 Days to Complete Title Work HCA INC: Moody's Says Liquidity is Excellent & Cash Flow is Strong IRIDIUM OPERATING: Wants Exclusive Period Extended Through July 11 JAMES RIVER: S&P Junks Proposed $150 Mil. Senior Unsecured Notes MAGNOLIA INC: Case Summary & 20 Largest Unsecured Creditors MARKWEST ENERGY: Form 10-K Filing Delay Cues S&P to Watch Ratings MCDERMOTT INT'L: March 31 Balance Sheet Upside-Down by $232 Mil. MCG COMMERCIAL: Portfolio Credit Quality Average Rating Up B+/B MCI INC: Pays $118.2 Million to Settle Tax Dispute with Miss. MCI INC: Shareholders Urge Qwest to Revive Offer MCLEODUSA INC: Asks Court to Enter Final Decree to Close Case MESA 2002-1: Moody's Pares Ratings on Classes B-1 & B-2 to Low-B MIRANT CORP: Wants to Expand Scope of Deloitte's Engagement MOUNT SINAI: Good Performance Prompts S&P's Stable Outlook NETWORK INSTALLATION: Insufficient Cash Spurs Going Concern Doubt NORSTAN APPAREL: Will Auction Assets on May 19 OWENS CORNING: Court Sets May 17 Conference on Bondholder Suit PACIFIC ENERGY: Earns $3.4 Million of Net Income in First Quarter PEGASUS SATELLITE: Asks Court to Okay PCC Tax Reporting Settlement PHELPS DODGE: Inks Pact to Invest $3M in Fortress Over Two Years PURADYN FILTER: To Submit Plan of Action to Retain AMEX Listing QUIGLEY COMPANY: Plan Solicitation Period Extended Until Aug. 1 REGIONAL DIAGNOSTICS: Gets Interim Nod on Postpetition Financing REGIONAL DIAGNOSTICS: Look for Bankruptcy Schedules on June 19 ROYAL GROUP: Weakened Profitability Prompts S&P to Lower Ratings RURAL CELLULAR: March 31 Balance Sheet Upside-Down by $618 Million SPANISH BROADCASTING: Moody's Rates $425M New Debts at Low-B SPIEGEL INC: Can File Senior Debt Financing Letters Under Seal STAR GAS: Moody's Confirms Junk Ratings After Review TECHNEGLAS INC: Has Exclusive Right to File Plan Until Aug. 29 TRANMONTAIGNE INC: Earns $47.1 Million of Net Income in 4th Qtr. TRUMP HOTELS: Masque Publishing Objects to $0 Cure Amount UAL CORP: Creditors' Committee Supports PBGC Agreement UNISOURCE ENERGY: Declares Quarterly Dividend & Elects Directors US AIRWAYS: Nears Completion of Merger with America West VERIZON HAWAII: Fitch Withdraws BB+ Rating of Sr. Unsecured Debt WARNACO GROUP: Good Performance Cues S&P to Lift Ratings to BB- YUKOS OIL: Fulbright & Jaworski Applies for Final Compensation ZIFF DAVIS: March 31 Balance Sheet Upside-Down by $974.9 Million * Nick Butler Joins Cadwalader's London Firm as Special Counsel * Mintz Levin Expands Washington D.C. Office with New Partners * Upcoming Meetings, Conferences and Seminars ********* AAIPHARMA INC: Files for Chapter 11 Protection in Delaware ---------------------------------------------------------- aaiPharma Inc. (PINK SHEETS: AAII) and all its domestic subsidiaries have filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The filing will enable aaiPharma to continue normal business operations during the restructuring proceedings. $210 Million DIP Financing In connection with the Company's chapter 11 filing, aaiPharma also completed negotiation of the definitive agreements to receive $210 million in debtor-in-possession financing. The DIP facility, subject to approval by the Bankruptcy Court, will be used to replace the Company's existing $180 million senior credit facility and supplement the Company's cash flow during the reorganization process with an incremental $30 million revolving credit facility. Of the $210 million, $15 million will be available as a 30-day interim facility immediately upon bankruptcy court approval and execution of the definitive agreements, and the remainder will be available upon later bankruptcy court approval of the terms of the final facility. The DIP Facility will help ensure that vendors, suppliers and other business partners will continue to be paid under normal terms for goods and services provided during the period while the company is operating in chapter 11. Pharmaceuticals Division Sale These developments follow aaiPharma's report that it has entered into an agreement to sell the assets of its Pharmaceuticals Division, as part of its anticipated reorganization in chapter 11, for $170 million. "Securing DIP financing and entering into an agreement to sell the Pharmaceuticals Division are important steps in reorganizing aaiPharma to position it for future success," stated Dr. Ludo J. Reynders, President and CEO of aaiPharma. "This process provides us the opportunity we need to restructure our finances, strengthen our business performance and work toward a sustained turnaround. We appreciate the continuing support of our customers, creditors, and suppliers and the dedication of our employees to making aaiPharma healthier overall." Headquartered in Wilmington, North Carolina, aaiPharma Inc. -- http://aaipharma.com/-- provides product development services to the pharmaceutical industry and sells pharmaceutical products which primarily target pain management. AAI operates two divisions: AAI Development Services and Pharmaceuticals Division. The Company and eight of its debtor-affiliates filed for chapter 11 protection on May 10, 2005 (Bankr. Del. Case Nos. 05-11341 to 05-11350). Karen McKinley, Esq. and Mark D. Collins, Esq. at Richards, Layton & Finger, P.A.; Jenn Hanson, Esq., and Gary L. Kaplan, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP; and the firm of Robinson, Bradshaw & Hinson, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, the reported consolidated assets amounting to $323,323,000 and consolidated debts totaling $446,693,000. AAIPHARMA INC.: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: aaiPharma Inc. aka Applied Analytical Industries, Inc. aka AAI 2320 Scientific Park Drive Wilmington, North Carolina 28405 Bankruptcy Case No.: 05-11341 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Applied Analytical Industries Learning Center, Inc. 05-11342 AAI Properties, Inc. 05-11343 AAI Technologies, Inc. 05-11344 AAI Japan, Inc. 05-11345 aaiPharma LLC 05-11347 Kansas City Analytical Services, Inc. 05-11348 AAI Development Services, Inc. (Delaware) 05-11349 AAI Development Services, Inc. (Massachusetts) 05-11350 Type of Business: The Debtors provide product development services to the pharmaceutical industry and sell pharmaceutical products which primarily target pain management. AAI operates two divisions: AAI Development Services and Pharmaceuticals Division. See http://aaipharma.com/ Chapter 11 Petition Date: May 10, 2005 Court: District of Delaware Judge: Peter J. Walsh Debtors' Counsel: Karen McKinley, Esq. Mark D. Collins, Esq. Richards, Layton & Finger, P.A. One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 -- and -- Jenn Hanson, Esq. Gary L. Kaplan, Esq. Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004 Tel: (212) 859-8000 -- and -- Robinson, Bradshaw & Hinson, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina 28246 Debtors' Consultants: FTI Consulting, Inc. 3 Times Square, 11th Floor New York, New York 10036 Debtors' Investment Banker: Rothschild Inc. 1251 Avenue of the Americas New York, New York 10020 Consolidated Financial Condition as of March 31, 2005: Total Assets: $323,323,000 Total Debts: $446,693,000 Consolidated List of the Debtors' 30 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Wachovia Bank, N.A. Bond Debt $187,680,208 401 South Tryon Street 12th Floor Charlotte, NC 28288-1179 c/o Kelley Drye & Warren LLP 101 Park Avenue New York, NY 10178 Fax: (212) 808-7897 Novartis Pharmaceuticals Trade Debt $1,749,705 Corporation 59 Route 10 East Hanover, NJ 07936-1080 Attn: Legal Department Tel: (973) 781-3452 Fax: (973) 781-8265 Roxane Laboratories Trade Debt $1,692,736 P.O. Box 74680 Chicago, IL 60675-4680 Attn: Legal Department Tel: (800) 520-1631 Fax: (800) 520-1666 Cardinal Distribution, Inc. Trade Debt $411,936 7000 Cardinal Place Dublin, OH 43017 Attn: Legal Department Tel: (614) 757-2778 Fax: (800) 234-8701 Eli Lilly & Company, Inc. Trade Debt $323,760 1301 South Dakota Street Indianapolis, IN 46225 Attn: Kenneth Gregory Tel: (317) 276-2206 Cardinal Health/Cord Logistics Trade Debt $313,819 15 Ingram Boulevard, Suite 100 LaVergne, TN 37086 Attn: Human Resources Department Tel: (615) 793-4400 Fax: (615) 287-2462 Fine Chemicals Corporation Trade Debt $110,260 North Brunswick II, L.L.C. Lease Claim $147,295 Agilent Technologies Trade Debt $76,198 Ernst & Young AG Professional Services $66,998 State of Delaware Government Fees $66,252 Division of Corporations IMS Trade Debt $57,213 Cardinal Health Packaging Trade Debt $52,221 Unifirst-Wilmington Trade Debt $49,332 Progress Energy Utility Services $40,508 Bank of America Leasing & Lease Claim $35,084 Capital TMP Worldwide Trade Debt $29,891 Kashiwa Fudosan America, Inc. Trade Debt $28,994 South Carolina Electric & Utility Services $28,153 Gas Company Vesey Air LLC Lease Claim $26,498 Firemans Fund Insurance Insurance $25,164 Chase-Logeman Corporation Trade Debt $24,888 Professional Provided Services Professional Services $24,642 Willis of North Carolina, Inc. Trade Debt $24,339 Fisher Scientific Trade Debt $23,680 William Fathauer Trade Debt $22,444 c/o Southwest Clinical Research, Inc. Peter Winkle Trade Debt $22,100 W.A. Rutledge & Associates Trade Debt $20,394 Creative Promotional Trade Debt $19,925 Products, Inc. Honeywell Trade Debt $18,323 AAIPHARMA: Selling Pharmaceutical Divisions for $170 Million ------------------------------------------------------------ aaiPharma Inc. entered into an asset purchase agreement to sell its Pharmaceutical Divisions for $170 million. aaiPharma didn't name the purchaser in a Form 8-K delivered to the Securities and Exchange Commission this week, but promised to describe the sale agreement in detail when it files its quarterly report by May 12. The sale pact is subject to adjustments and contingent royalties, of which $8 million will be placed in escrow at closing to fund obligations that could arise after completion of the sale. Under the sale agreement, aaiPharma will provide manufacturing and support services to the purchaser. aaiPharma Inc. -- http://www.aaipharma.com/-- is a science-based company with corporate headquarters in Wilmington, North Carolina with over 25 years experience in drug development. The company also sells branded pharmaceutical products, including the Darvon(R) and Darvocet(R) product lines, primarily in the area of pain management. As of Dec. 31, 2004, aaiPharma listed $534,600,000 in assets and $459,800,000 in debts. At Dec. 31, 2004, aaiPharma's balance sheet showed a $111,890,000 stockholders' deficit, compared to $74,723,000 of positive equity at Dec. 31, 2003. ADELPHIA COMMS: Senior Noteholders Slam Comm.'s Hiring of Weiser ----------------------------------------------------------------- As reported in the Troubled Company Reporter on Apr. 20, 2005, the Official Committee of Unsecured Creditors in Adelphia Communications Corporation and its debtor-affiliates' Chapter 11 cases asked the U.S. Bankruptcy Court for the Southern District of New York for authority to retain Weiser LLP as its tax and intercompany transaction consultants, nunc pro tunc to March 22, 2005. Ad Hoc Committee Objects Based on the Creditors Committee's application, the Committee says, it needs Weiser's assistance "to formulate its own position concerning the proper amount, characterization and treatment" of the billions of dollars of intercompany claims that have been scheduled by and among the 230 Debtors in their Chapter 11 cases. The Creditors Committee also asserts that Weiser's tax expertise is required for "an analysis and understanding of the tax implications attendant to each alternative plan scenario." The Ad Hoc Committee of ACC Senior Noteholders, as holders (or investment advisors to holders) of over $1.7 billion in claims against Adelphia Communications Corporation, deems as patently improper the Creditors Committee's stated desire "to formulate its own position" regarding the intercompany transactions. The Ad Hoc Committee notes that the resolution of intercompany issues could materially affect the potential distribution to unsecured creditors. However, Bruce Bennett, Esq., at Hennigan, Bennett & Dorman LLP, in Los Angeles, California, points out that the impact will be strictly intercreditor in nature. The determination regarding intercompany claims, Mr. Bennett explains, "will impact the allocation of value among the various bankruptcy estates, but will have no impact whatsoever on the aggregate value of the estates." Thus, Mr. Bennett concludes, the treatment of intercompany claims "will not impact the total value that will be distributed to the unsecured creditors represented by the [Creditors] Committee, only the amounts to be distributed among [its] various constituents." The Ad Hoc Committee also complains that there is no need for the Creditors Committee to employ Weiser for tax advice because the Creditors Committee already has retained Neilson Elggren as financial advisors. Mr. Bennett points out that pursuant to Neilson Elggren's retention application, Mr. Elggren specializes in forensic accounting, litigation support, and other bankruptcy accounting services including bankruptcy taxation and business valuation issues. "There simply is no need for an additional firm to be employed to do the work that the Creditors Committee's existing professionals can handle," Mr. Bennet argues. Accordingly, the Ad Hoc Committee asks the Court to deny the Creditors Committee's application to retain Weiser. The Ad Hoc Committee also seeks the Court's permission to file, under seal, a Confidential Supplement to its Objection. The Ad Hoc Committee wants to supplement its Objection with inconsistent representations previously made by the Creditors Committee to the Court in a confidential letter. Because the Committee Letter was filed under seal and not publicly available, the Ad Hoc Committee requests authority to file the Confidential Supplement under seal and to limit its dissemination to those persons who previously received copies of the Committee Letter. According to Mr. Bennett, the Confidential Supplement discusses and attaches the Committee Letter, which the Creditors Committee sent to the Court on a confidential basis. The Ad Hoc Committee does not want to risk disclosing to the public statements that were made by the Creditors Committee with the expectation of confidentiality. "At the same time, the Ad Hoc Committee, in maintaining the confidentiality of the [Creditors] Committee's communications, should not be hampered in making its case in support of its Objection to the Committee Application," Mr. Bennett asserts. Mr. Bennett contends that disclosure of the confidential information contained in the Confidential Supplement is not necessary for the protection of the public, creditors of the Debtors or third parties, because: (a) the Confidential Supplement will be reviewed by the Court, (b) the Ad Hoc Committee proposes to provide copies of the Confidential Supplement to the significant parties-in- interest in the ACOM Debtors' Chapter 11 cases, and (c) the publicly filed Objection describes the basis of the Ad Hoc Committee's objection to the Committee Application in appropriate and sufficient detail. The Court promptly approves the Ad Hoc Committee's request. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVANCED ENERGY: Faces Delisting Due to Internal Control Problems ----------------------------------------------------------------- Advanced Energy Industries, Inc. (Nasdaq: AEIS) has identified two material weaknesses in its internal control over financial reporting as of Dec. 31, 2004, which are described in the Company's annual report: (i) a lack of appropriate segregation of duties defined within our enterprise resource planning system; and (ii) the combination of a lack of information system integration and uniformity regarding the Company's Japan operations and a lack of sufficient human resources for proper segregation of duties and oversight in Japan. Management has taken five steps to remediate these material weaknesses: a) Recruited and hired an internal audit manager and a staff internal auditor to fill the vacancies left by the departure of our previous internal audit manager and staff during the third and fourth quarters of 2004; b) Reallocated additional human resources within the Company to the internal audit department until an adequate staff level has been recruited and hired directly for the internal audit department. The increased staffing of this department is focused on the completion of the implementation and testing of appropriate segregation of duties defined within our corporate ERP system; c) Increased executive management involvement in the details of the remediation project to ensure that appropriate segregation of duties are defined within our corporate ERP system; d) Assigned a financial manager from our corporate headquarters to Japan on a temporary basis. This manager will be physically present in Japan beginning in the second quarter of 2005; and e) Developed a plan to implement the corporate ERP system in Japan upon completion of the manufacturing transition. Delisting Notice The Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market on May 6, 2005, indicating that Advanced Energy is not in compliance with the filing requirement for continued listing set forth in Nasdaq Marketplace Rule 4310(c)(14) due to the lack of an attestation on internal control from its independent auditor under Section 404 of the Sarbanes-Oxley Act. Unless Advanced Energy requests a hearing in accordance with the Nasdaq Marketplace Rule 4800 Series, Advanced Energy's common stock is subject to delisting from The Nasdaq Stock Market, effective May 17, 2005. Advanced Energy will request such a hearing before a Nasdaq Listing Qualifications Panel. According to Nasdaq Marketplace Rules, the hearing request will stay the delisting of Advanced Energy's securities pending the Nasdaq Listing Qualifications Panel's decision. Advanced Energy understands that until this issue is resolved, the fifth character "E" will be appended to its trading symbol, thereby changing its trading symbol to AEISE, as of the opening of business on May 10, 2005. Nasdaq Marketplace Rule 4310(c)(14) requires Advanced Energy to file with The Nasdaq Stock Market copies of all reports and other documents filed or required to be filed with the Securities and Exchange Commission (SEC) on or before the date they are filed with the SEC. The Nasdaq letter contends that Advanced Energy has not complied with this requirement, because Advanced Energy's Annual Report on Form 10-K for the year ended December 31, 2004 did not contain an opinion from Advanced Energy's independent auditor relating to management's assessment of internal control over financial reporting. The report from Advanced Energy's independent auditor relating to internal control over financial reporting, which is included in Advanced Energy's 2004 Form 10-K, states that the auditor is not able to express an opinion on management's assessment or on the effectiveness of Advanced Energy's internal control over financial reporting. Advanced Energy believes that the inclusion of the independent auditor's report in the 2004 Form 10-K constitutes compliance with Rule 4310(c)(14) and intends to present its arguments at the hearing before the Nasdaq Listing Qualifications Panel. The Company is also working with its independent auditors to resolve this issue. There can be no assurance that the Nasdaq Listing Qualifications Panel will determine that Advanced Energy is in compliance with Rule 4310(c)(14) or otherwise grant Advanced Energy's request for continued listing. About the Company Advanced Energy Industries offers a comprehensive suite of focused technologies critical to high-technology manufacturing processes worldwide. The Company operates in regional centers in North America, Asia, and Europe and offers global sales and support through direct offices, representatives, and distributors. Founded in 1981, AE is publicly held and traded on NASDAQ as AEIS. AE continues to enter new markets through strategic acquisitions and partnerships, as well as to internally develop proprietary, process-focused technologies-all key elements that further strengthen the company's position in process-critical, scalable, highly-patented technologies. AFFINITY TECH: Issues Additional $75,000 of Convertible Notes ------------------------------------------------------------- Affinity Technology Group, Inc. (OTCBB:AFFI) disclosed that the holders of a majority in principal amount of its convertible notes have agreed to allow the Company to continue to issue additional convertible notes under its convertible note program. Prior to the action, the Company was precluded from selling additional convertible notes because the Company is in default regarding payment of principal and interest due under its convertible notes. The Company has also issued an additional $75,000 principal amount of its convertible notes. The issuance of the convertible notes is a continuation of the convertible note program under which the Company is authorized to issue up to $1,500,000 principal amount of its convertible notes. To date, the Company has issued $1,355,336 in aggregate principal amount of its convertible notes. The notes are convertible into the Company's common stock at $0.20 per share and are secured by all the outstanding stock of the Company's wholly owned patent licensing subsidiary, decisioning.com. Joe Boyle, Chairman, President and Chief Executive Officer, stated, "We are very pleased with the continued support our convertible noteholders have given the Company and its patent licensing program. Our immediate focus will remain on attempting to raise additional capital while prosecuting the reexamination of our financial account patent." About the Company Through its subsidiary, decisioning.com, Inc., Affinity Technology Group, Inc., owns a portfolio of patents that covers the automated processing and establishment of loans, financial accounts and credit accounts through an applicant-directed remote interface, such as a personal computer or terminal touch screen. Affinity's patent portfolio includes U. S. Patent No. 5,870,721C1, No. 5,940,811, and No. 6,105,007. At Dec. 31, 2004, Affinity Technology's balance sheet showed a $1,513,523 stockholders' deficit, compared to a $1,329,579 deficit at Dec. 31, 2003. Going Concern Doubt The Company's independent registered public accounting firm, Scott Mcelveen L.L.P., raised substantial doubt about Affinity's ability to continue as a going concern due to the Company's recurring operating losses, accumulated deficit and certain convertible notes in default. AIR CANADA: Machinists' Union Complains About Outsourcing --------------------------------------------------------- The International Association of Machinists and Aerospace Workers has filed a complaint with the federal Privacy Commission relating to Air Canada outsourcing work currently performed in the airline's Employees Relations Department. The nature of the complaint lodged by IAMAW District 140 stems from its recent discovery that employees of Hewitt working in Mumbai, India, will handle the data processing of employee information. "It's a sad day when your private employee information, personal banking data, your rate of pay and benefits has been contracted out," said IAMAW General Vice President Dave Ritchie. "With identity theft so rampant these days, the thought of this information falling into the wrong hands terrifies me!" While Air Canada met its contractual obligations to the Machinists with regard to providing the notice required for outsourcing, the information it provided was misleading. Air Canada said the work was to be transferred to Hewitt who would perform the functions in a center to be established in Montreal or Toronto. Although a center is being established in Toronto to receive calls from Air Canada employees, the information will then be forwarded to India for processing. The Union and its members have not been notified that the work will be sent offshore. The transfer is schedule to take effect June 6, 2005. "We are very concerned about this transition," said IAMAW Assistant Deputy Jim Coller. "We have no idea how the privacy of our members or of other Air Canada employees will be protected once this work is processed offshore." All Air Canada employees fall under the Personal Information Protection and Electronic Documents Act (PIPEDA) legislation. Air Canada filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and filed a Section 304 petition in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Mr. Justice Farley sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004. Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier. Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher, serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from their creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. On September 30, 2004, Air Canada successfully completed its restructuring process and implemented its Plan of Arrangement. The airline exited from CCAA protection raising $1.1 billion of new equity capital and, as of September 30, has approximately $1.9 billion of cash on hand. As of December 31, 2004, Air Canada's shareholders' deficit narrowed to CDN$203 million compared to a $4.155 billion deficit at December 31, 2003. ALDERWOODS: Consumer Group Files Class Action Suit in N.D. Calif. ----------------------------------------------------------------- Funeral Consumers Alliance, Inc., Gloria Jaccarino Bender, Anthony J. Jaccarino, John Clark, Donna Sprague, Nancy and Ira Helman and Robert Chitel, on behalf of themselves and those similarly situated, filed a class action suit in the United States District Court for the Northern District of California against three funeral home service providers and two casket makers for alleged unfair and anti-competitive business practices and for violating anti-trust funeral laws: * Alderwoods Group, Inc., * Service Corporation International, * Stewart Enterprises, Inc., * Hillenbrand Industries, Inc., and * Batesville Casket Company. Founded in 1963, the Alliance is comprised of non-profit entities, including memorial societies that provide consumers with information on funeral-related goods and services. According to Matthew L. Cantor, Esq., at Constantine Cannon, in New York, FCA is the only national organization dedicated to protecting consumer rights in the death care industry. The Alliance has more than 400,000 members nationwide. FCA asserts that various persons, firms, corporations and organizations have participated as co-conspirators to the Defendants in the alleged violations, including: * National Funeral Directors Association, * Dignity Memorial partners of Service Corporation, * Aurora Casket Company, and * The York Group, Inc. The Funeral Rule Anti-competitive and anti-consumer practices have been prevalent in the funeral industry for decades, Mr. Cantor relates. To protect consumers, the Federal Trade Commission enacted the Funeral Industry Practices Trade Regulation Rule, effective as of April 30, 1984, which basically: * requires funeral homes to unbundle their prepackaged funerals and give consumers an itemized price listing of every good and service they sold; and * prohibits funeral homes from refusing to service or from otherwise penalizing consumers who purchase caskets from Independent Casket Discounters -- third-party casket sellers that are unaffiliated with any funeral home companies. In 1994, the FTC amended the Funeral Rule to ban "casket handling fees". The ban was designed to guarantee that consumers would benefit from real choice and price competition. Anti-Competitive Conduct Mr. Cantor contends that despite FTC's efforts, the Defendants have been successful in suppressing competition in the casket market and fixing and maintaining supracompetitive prices for caskets: (a) The Defendants conspired through a group boycott to prevent ICDs from selling Batesville, the dominant casket brand, as well as certain other casket brands. The Defendants "collectively refused" to sell certain casket brands to ICDs. The Funeral Home Defendants also threatened to withhold their business from Batesville and other casket manufacturers if the manufacturers sell to ICDs. (b) The Defendants engaged in a campaign of disparagement against ICDs. Some of the more commonly used disparaging lines against the ICDs' caskets are "their handles fall off", "the bottoms drop out", "they are made by prisoners", "they are tin cans" and "they are all seconds." (c) The Funeral Home Defendants engaged in concerted efforts to restrict casket price competition and coordinate their casket pricing, including: -- restricting or preventing price advertising; -- sharing price information, which serves to establish uniform price minimums, in violation of the anti-trust laws; and -- promoting sham discounting of funeral package purchases. Class Action Allegations The class action is filed under Rules 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure for violations of Section 1 and 2 of the Sherman Act and the California Unfair Competition Law, Section 17200 of the California Business and Professions Code. The Rule (b)(3) Class is comprised of all consumers located in the United States who purchased Batesville caskets from the Funeral Home Defendants during the fullest period permitted by the applicable statue of limitations. The Rule (b)(2) Class includes the FCA, all members of the Rule (b)(3) Class, and all consumers who are threatened with injury by the Defendants' conspiracies. Mr. Cantor notes that members of the both Classes include hundreds of thousands, if not millions, of consumers. They are so numerous that their joinders would be impracticable. Neither FCA nor the Consumer Plaintiffs have any conflict of interest with the Class members. Their claims are typical of the claims of the Class and they will fairly and adequately protect the interests of the Class. Claims for Relief Mr. Cantor argues that each of the Defendants, along with their co-conspirators, entered into continuing illegal contracts, combinations, or conspiracies in restraint of trade. The contracts are illegal per se under Section 1 of the Sherman Act, Mr. Cantor says. Mr. Cantor emphasizes that the contracts, combinations and conspiracies have caused anti-competitive effects in the casket market: (a) ICD Competition Has Been Excluded ICDs are either completely blocked from selling caskets, or severely restricted from doing so by being forced to try to purchase caskets indirectly from rogue funeral homes unaffiliated with the Funeral Home Defendants and their co-conspirators. Numerous ICDs have either lost a significant percentage of their sales to funeral homes, or have gone out of business altogether. (b) Consumers Pay Fixed and Supracompetitive Prices For Caskets The prices for the Defendants' caskets are substantially higher than those charged by ICDs for comparable caskets. In an unrestrained environment where they would have faced substantially greater price competition from ICDs, the Funeral Home Defendants would have been forced to lower their casket prices in order to compete with the lower pricing of ICDs. (c) Consumer Choice Has Been Restricted The Defendants offered consumers only one brand of casket -- Batesville. In contrast, ICDs offer a pressure-free environment to view a large variety of caskets from various manufacturers. (d) Competition in the Sale of General Funeral Services Has Been Suppressed By engaging in anti-competitive conduct, the Defendants maintained their pricing power over consumers with respect to all of the other funeral goods and services they provide. "There is no legitimate business justification for the concerted efforts of defendants and their co-conspirators to suppress competition in the casket market," Mr. Cantor asserts. As a result of the Sherman Act violations, Mr. Cantor says, the Class Members have been injured in their business and property in an amount not presently known. "At a minimum, the amount could be hundreds of millions of dollars, prior to trebling." The violations and the effects thereof are continuing and will continue unless injunctive relief is granted, Mr. Cantor adds. Thus, the Consumer Plaintiffs seek claims for relief for: * Unlawful or Rule of Reason Price-Fixing against all Defendants, * Unlawful or Rule of Reason Group Boycott against all Defendants, * Conspiracy to Monopolize the Casket Market against the Funeral Home Defendants; and * Violations of California's Unfair Competition Law against all Defendants. The Class asks the District Court to: (a) declare and adjudge that the Defendants committed violations of federal and state laws; (b) permanently enjoin and restrain the Defendants and their assigns from: -- fixing casket prices; -- boycotting and disparaging ICDs; -- sharing casket price information; -- restricting casket price advertising; -- offering sham discounts through package pricing; and -- committing any other violations of the Sherman Act or the California's Unfair Competition Law; (c) direct the Defendants to pay them damages, in an amount to be determined at trial, plus prejudgment interest, to compensate the Class Members for the overcharges they incurred from the Defendants' violations of the federal anti-trust laws; (d) direct the Defendants to provide them with restitution for the overcharges that were extracted by violating the California Unfair Competition Law; and (e) award the Class attorneys' fees and cost of suit. The Consumer Plaintiffs demand a jury trial. Alderwoods Group is the second largest operator of funeral homes and cemeteries in North America, based upon total revenue and number of locations. As of June 19, 2004, the Company operated 716 funeral homes, 130 cemeteries and 61 combination funeral home and cemetery locations throughout North America. Of the Company's total locations, 59 funeral homes, 53 cemeteries and four combination funeral home and cemetery locations were held for sales as of June 19, 2004. The Company provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, the Company operates insurance subsidiaries that provide customers with a funding mechanism for the pre-arrangement of funerals. * * * As previously reported in the Troubled Company Reporter on July 27, 2004, Standard & Poor's Ratings Services it affirmed its 'B+' corporate credit rating on the funeral home and cemetery operator Alderwoods Group, Inc., and assigned its 'B' debt rating to the company's proposed $200 million senior unsecured notes due in 2012. At the same time, Standard & Poor's also assigned its 'BB-' senior secured bank loan rating and its '1' recovery rating to Alderwoods' proposed $75 million revolving credit facility, which matures in 2008, and to its proposed term loan B, which matures in 2009. The existing term loan had $242 million outstanding at March 27, 2004, but will be increased in size. The bank loan ratings indicate that Standard & Poor's expects a full recovery of principal in the event of a default, based on an assessment of the loan collateral package and estimated asset values in a distressed default scenario. The company is expected to use the proceeds from the new financings to redeem $320 million of 12.25% senior unsecured notes, repay a $25 million subordinated loan, and fund transaction costs. As of March 27, 2004, the company had $614 million of debt outstanding. (Loewen Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLEGHENY ENERGY: Good Performance Prompts S&P to Lift Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit ratings on Allegheny Energy Inc. and its subsidiaries to 'BB-' from 'B+'. The outlook is positive. The upgrade reflects the company's progress in debt reduction using proceeds from asset sales and free cash flow, and through accelerated debt to equity conversion. Also supporting the upgrade is management's proactive approach in seeking regulatory relief and implementing cost reduction and reliability improvement initiatives. Allegheny, headquartered in Greensburg, Pennsylvania, owns about 10,850 MW of generation capacity and serves about 1.5 million customers. Allegheny's service territory spans five states. Most of Allegheny's regulated revenue is generated from: (1) Pennsylvania (about 40%), (2) West Virginia (about 30%), and (3) Maryland (about 20%), while the remaining roughly 10% is generated from Ohio and Virginia. "The positive outlook reflects the expectation that Allegheny will continue to execute its plan to pay down $1.5 billion or more of debt between December 2003 and year-end 2005," said Standard & Poor's credit analyst Tobias Hsieh. "Increased progress in selling assets, paying down debt, and stabilizing cash flow, or positive outcomes from rate filings could lead to ratings being raised," he continued. ARGUS CORP: Current Debts 200-Times Current Assets at April 15 -------------------------------------------------------------- Argus Corporation Limited had Cdn. $1,863 of cash as of the close of business on April 15, 2005, with outstanding payables of approximately Cdn. $203,376. Shareholdings Argus indirectly owns 21,596,387 Common Shares of Hollinger with a market value at the close of trading on April 15, 2005, on the Toronto Stock Exchange of Cdn. $6.02 per share or an aggregate of Cdn. $130,010,250. The market value of Argus' shareholdings is subject to the minority interest of Ravelston, that was stated to be Cdn. $27,961,203 at December 31, 2004 when the value of Argus' investment in Common Shares of Hollinger was Cdn. $144,695,793. The market value of Argus' shareholdings is also subject to future income taxes on unrealized net capital gains that was stated to be Cdn. $24,972,978 at December 31, 2004. Ravelston holds all of the Common Shares and Class C Preference Shares of Argus and 2,900 of Argus' 55,893 issued Class A Preference Shares $2.60 Series. Operating Expenses Argus' announced that its operating expenses have significantly increased over the past year. Amongst the increased expenses that Argus stated that it has been incurring, and will continue to incur, are related to legal proceedings, including two class action lawsuits and the proceedings related to an inspection of Hollinger, and regulatory compliance. Argus Corporation Limited (TSX:AR.PR.A)(TSX:AR.PR.D)(TSX:AR.PR.B) is a holding company and its assets consist principally of an investment in the retractable common shares of Hollinger, Inc., a Canadian public company listed on the Toronto Stock Exchange, a receivable from The Ravelston Corporation Limited, the Company's parent company and cash. Argus owns or controls 61.8% of the Retractable Common Shares. These Common Shares are the only significant asset held by Argus. Hollinger in turn owns 66.8% of the voting shares and 17.4% of the equity of International. Hollinger and International have both also been subject to Management and Insider Cease Trade Orders for their failure to file financial statements and related reports when required. Those orders were issued on June 1, 2004. Based on the company's alternative financial reporting, as of September 30, 2004, Argus has a $44,034,263 stockholders' deficit compared to $6,522,159 of positive equity at Dec. 31, 2003. ARMSTRONG WORLD: Proposed EPA Settlement Draws Fire from Insurers ----------------------------------------------------------------- Armstrong World Industries, Inc., and its debtor-affiliates asked the U.S. Bankruptcy Court for the District of Delaware to approve their settlement agreement with the Environmental Protection Agency. As reported in the Troubled Company Reporter on Apr. 29, 2005, On September 30, 2003, the United States, on behalf of the Environmental Protection Agency, filed Claim No. 4724 against Armstrong World Industries, Inc.'s estate. The EPA Claim alleges, inter alia, that AWI is liable to the EPA under the Comprehensive Environmental Response, Compensation and Liability Act. Specifically, the EPA Claim alleges that AWI is jointly and severally liable for costs incurred and to be incurred by the EPA in the course of responding to releases and threatened releases of hazardous substances into the environment at or from a number of sites. The EPA Claim identified seven of those sites. The Sites principally involve those that are not owned and operated by AWI and as to which other private parties may also have responsibility for response costs and for other damages. The EPA Claim further asserts that AWI has continuing obligations with respect to the Malvern TCE Superfund Site pursuant to a consent decree that AWI and 34 other potentially responsible parties entered into with the United States Government before the Petition Date. Pursuant to the Malvern Consent Decree, AWI and the other PRPs agreed to perform the remedy for the Malvern Site's cleanup. The EPA Claim alleges that AWI has continuing prepetition injunctive performance obligations under the Malvern Consent Decree, and that those obligations are non-dischargeable obligations that will remain enforceable after a plan of reorganization is approved by the Court. Because of the parties' desire to avoid protracted and expensive litigation, shortly after the Petition Date, AWI and the EPA commenced negotiations toward a "global" resolution of AWI's alleged prepetition environmental liabilities. The negotiations proved difficult and time-consuming, as the parties addressed numerous complex issues at the intersection of the bankruptcy and environmental laws, involving numerous sites where AWI is alleged to have some liability. As a result of those negotiations, the parties came up with the EPA Settlement Agreement. Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, told the Court that the EPA Settlement Agreement addresses all claims the EPA has, or may have in the future, with respect to AWI's alleged CERCLA liability by placing them into one of six different categories and then specifying how those categories of claims are to be treated in AWI's bankruptcy. The six categories, and the treatment of those claims, are: (1) Claims Relating to Liquidated Sites Being the largest category consisting of claims relating to 19 sites, AWI will provide the EPA with allowed general unsecured claims on account of each of the Liquidated Sites, ranging in size from $0 to $7,780,0004 -- for an aggregate unsecured claim of $8,727,739. Regardless of the amount of the allowed claim, AWI's alleged liabilities arising from prepetition conduct relating to the Liquidated Sites are fully discharged. The EPA agrees, for settlement purposes, that any claims or rights to other forms of relief that it could assert against AWI are satisfied, whether for matters known or unknown, unless the claim arises from AWI's postpetition conduct. (2) Claims Relating to Insurance Sites Insurance Sites are a subset of Liquidated Sites. If, at any time in the future, AWI receives insurance proceeds on account of the Insurance Sites in excess of the costs of pursuing the insurance, AWI will pay 48% of the excess proceeds to the EPA until the allowed claim with respect to that Liquidated Site is paid in full. (3) Claims Relating to Discharged Sites The Discharged Sites comprise 18 sites. All alleged liabilities of AWI to the EPA under Sections 106 and 107 of the CERCLA and Section 7003 of the Resource Conservation and Recovery Act, that arise from prepetition acts, omissions or conduct of AWI or, its predecessors, with respect to the Discharged Sites are discharged. The difference in treatment between the 18 sites included among the Discharged Sites and the three Liquidated Sites as to which the EPA receives a $0 allowed unsecured claim is that AWI does not obtain contribution protection with respect to the Discharged Sites. (4) Claims Relating to AWI-Owned Sites AWI-Owned Sites are sites owned by AWI at the time of plan confirmation or any time after. The EPA's claims with respect to the AWI-Owned Sites are not discharged, and any liability for the AWI-Owned Sites passes through the bankruptcy unaffected. (5) Claims Relating to Additional Sites An Additional Site refers to any site that is not an AWI- Owned Site but for which AWI might be liable as a result of its prepetition conduct and which is not specifically mentioned elsewhere in the EPA Settlement Agreement. AWI's liability for Additional Sites is discharged, but AWI may nevertheless be required to pay Response Costs if the claim for those costs is liquidated by settlement or a judgment in a determined amount. In this case, AWI's payment to the EPA would be the same as it would have been had the liability for the Additional Site been liquidated in the Chapter 11 case and treated as an allowed general unsecured claim under a confirmed plan. AWI may not be ordered to perform work at Additional Sites. (6) Claims Relating to the Malvern Site AWI agrees to comply with all of its obligations under the Malvern Consent Decree, and AWI's obligations under the Malvern Consent Decree will not be impaired in any way by the Chapter 11 case, confirmation of a plan or the EPA Settlement Agreement. In addition, to the extent AWI has entered into executory contracts with other parties to perform work at the Malvern Site to comply with its obligations under the Malvern Consent Decree, AWI is required to assume certain agreements pursuant to Section 365 of the Bankruptcy Code. AWI asks the Court to approve the EPA Settlement Agreement. AWI also seeks permission to assume the Malvern Consent Decree and any executory contracts related to its performance to effectuate the terms of the Settlement Agreement. In exchange for the allowed claims granted on account of the Liquidated Sites, the EPA has covenanted not to sue AWI under the CERCLA or Section 7003 of the RCRA for costs incurred or to be incurred with respect to each Liquidated Site, or to compel AWI to perform work at any Liquidated Site. Mr. Collins tells Judge Fitzgerald that under the EPA Settlement Agreement, AWI is also entitled to full protection from all existing and future third-party claims for contribution for any past or future cleanup or other Response Costs at the Liquidated Sites and the Malvern Site. Furthermore, AWI reserves all of its arguments and defenses under applicable environmental laws with respect to any claims asserted against it at any of the Additional Sites. Mr. Collins states that the EPA has agreed to negotiate fair and equitable terms in settlement of any claims arising at an Additional Site. Moreover, the EPA Settlement allows AWI to deal with yet unknown claims under a plan of reorganization on the same terms with which they would have been treated if they were currently known and liquidated, thus allowing AWI to avoid costly estimation proceedings or litigation over whether those claims constitute dischargeable claims in its Chapter 11 case. Responses (1) Travelers The Travelers Indemnity Company and Travelers Casualty and Surety Company oppose the Settlement Agreement to the extent that it purports to provide Armstrong World Industries, Inc., or the Environmental Protection Agency with any right to seek reimbursement from Travelers for any portion of the settlement allocated to the Liquidated Sites. Prior to 1975, Travelers issued certain insurance policies to AWI. On May 20, 1998, Travelers and AWI entered into a settlement agreement that resolved certain disputes that had arisen between them regarding coverage under the Policies. Under the 1998 Agreement, AWI released Travelers from, inter alia, all claims "under, related to, arising from, or with respect to the Policies," with the exception of certain claims arising out of AWI's environmental liabilities at sites that were not known to AWI at the time of the 1998 Agreement. AWI released Travelers with respect to all claims arising out of Known Environmental Sites. By letter dated June 9, 2003, AWI notified Travelers that AWI was engaging in negotiations with the EPA to resolve its alleged liability for environmental property damage at a number of sites throughout the country, including, without limitation: -- the Angelillo Site (Connecticut), -- the Casmalia Site (California), -- the Lang Property (New Jersey), -- the Peterson/Puritan Site (Rhode Island), and -- the Kingston Steel Drum/Ottati & Goss Site (New Hampshire). AWI further asserted in its letter that with respect to the Peterson/Puritan Site, the EPA had advised that AWI was considered to be a significant Potentially Responsible Party. The EPA demanded in excess of $12 million from AWI on account of that site. In response to AWI's letter, Travelers requested information regarding the Sites, including documentation showing when AWI became aware that it was a PRP at the Sites. Specifically, Travelers sought to determine whether AWI was aware of its potential liability at the Sites at the time of the execution of the 1998 Agreement. AWI did not respond to Travelers' requests for information. Thus, to date, Travelers has been unable to determine whether the Sites fall within the category of Known Environmental Sites under the 1998 Agreement. To the extent AWI was aware of its potential liability at the Sites at the time the 1998 Agreement was executed, the Sites constitute Known Environmental Sites and the Travelers has no coverage obligations to AWI with respect to them. Moreover, if any of the Sites are not Known Environmental Sites and AWI believes Travelers owes indemnity obligations under the Policies for any of the Sites, then AWI had an obligation to involve Travelers in its negotiations with the EPA prior to executing any settlement agreement. Travelers notes that AWI failed to do so. The EPA Settlement defines the Sites, together with other environmental sites, as Liquidated Sites. The EPA Settlement further defines the Peterson/Puritan Site as both a Liquidated Site and an Insurance Site and purports to entitle the EPA or AWI to seek payment from AWI's insurers with respect to the $7,780,000 settlement amount allocated to that site. The EPA Settlement is silent as to how or whether AWI or the EPA may seek insurance coverage with respect to Liquidated Sites that are not Insurance Sites, Travelers notes. Furthermore, Travelers avers that neither AWI's request nor the EPA Settlement provides recitals, explanations, justifications or representations concerning: (i) the basis for the $8,727,739 settlement for all Liquidated Sites; (ii) the basis for allocating the total settlement among the Liquidated Sites as set forth in the EPA Settlement; or (iii) the basis on which insurance coverage may be sought with respect to the Liquidated Sites or the Insurance Sites. Because of AWI's failure to provide Travelers with requested information concerning the Sites and because the EPA Settlement and the Motion are silent with respect to the basis for the settlement, Travelers is unable to determine whether the EPA Settlement prejudices its rights. Travelers further objects to the EPA Settlement to the extent it purports to provide the EPA with an assignment of rights under the Policies or a right to bring a direct action against Travelers. Accordingly, Travelers asks the Court to deny the EPA Settlement. (2) Liberty Mutual Charlene D. Davis, Esq., at The Bayard Firm, in Wilmington, Delaware, tells the Court that the proposed Settlement Agreement between AWI and the EPA involves certain liabilities, for which AWI seeks indemnity under policies issued by Liberty Mutual Insurance Company. The EPA Settlement seeks to allocate nearly 90% of the total settlement consideration to one -- the Peterson/Puritan Site in Lincoln/Cumberland, Rhode Island -- among at least 38, of the sites involved. According to Ms. Davis, there is no basis for the EPA Settlement's proposed $8,727,739 overall allowed claim or for the $7,780,000 allocated to the Peterson/Puritan Site. The Settlement Agreement is purposely structured to enable AWI and the EPA to assert against Liberty Mutual, in the coverage context, that the Court's approval of the Settlement constitutes claim or issue preclusion as to reasonableness of the overall settlement and as to the allocation of the agreed allowed claim amounts to the Peterson/Puritan Site. Ms. Davis maintains that the overall stipulated claim amount or the allowance of the $7,780,000 claim allocated to the Peterson/Puritan Site, as opposed to a single aggregate allowed claim for all resolved sites, does not have reasoned basis and, therefore, the amounts are the "product of speculation and guesswork." "Insurance is highly germane to the Settlement Agreement," Ms. Davis says. The allowed EPA claims will receive from the AWI estate the fractional percentage distribution that other general insured claims receive. Ms. Davis notes that the total agreed claims for the six Insurance Sites is $8,603,169, which is more than 98% of the overall settlement amount. For those Insurance Sites, the Settlement contemplates that the EPA may have a right to bring "a direct action against any of AWI's insurers" for the portion of the claim amount not paid by the AWI estate, doubtless on the likely-to-be-asserted theory that once the EPA receives an allowed claim from the Court, the EPA can assert it has a federal judgment entitling it to garnish policies under the state law. Ms. Davis adds that the EPA can elect to waive direct action rights and share in any proceeds AWI recovers from the insurer -- the proceeds, if any, to be shared 52% for AWI and 48% for the EPA. In that event, AWI can "allocate in writing all insurance proceeds on a fair and equitable basis among the various Insurance Sites and other sites." Thus, AWI will not be bound by the claim amount allocations that it seeks to impose on Liberty Mutual, however, it can reallocate insurance proceeds among all sites, insured or uninsured, for its own benefit. Accordingly, Liberty Mutual proposes to set the matter for full evidentiary hearing before the Court. That discovery will include both documents and depositions of the pertinent AWI and EPA witnesses. Shortly, Liberty Mutual will serve formal document requests seeking among other things: (1) the extensive analyses and presentations by environmental and legal professionals on both sides; (2) all documents relating to AWI's alleged equitable allocation at each Liquidated Site; (3) all documents relating to total past and estimated future costs of clean up at the site; (4) all documents relating to the arguments that AWI's waste was less toxic than the waste of the other PRPs; (5) all documents relating to AWI's allocations and the expected cost of remediation at each Liquidated Site; (6) all AWI-generated documents indicating its knowledge as to the hazardous nature of the waste it sent to the Peterson/Puritan Site; and (7) all documents relating to negotiations between AWI and the EPA relating to the Settlement Agreement. In addition, Liberty Mutual states that if any settlement based on a thorough analysis of AWI's liability and appropriate allocation of the projected remedy cost is subsequently approved -- and the present Settlement Agreement should not be approved -- the Court should make clear in its order that nothing: (i) be deemed to sanction or create a direct cause of action by the EPA against Liberty Mutual that would not otherwise exist under state law; or (ii) in any way affect or impair AWI's obligation to Liberty Mutual to pay retrospective policy premiums. In line with the Settlement hearing scheduled for May 16, 2005, Liberty Mutual further asks the Court to continue the hearing to a later date. An extension will permit sufficient time for Liberty Mutual to complete discovery and to prepare for an evidentiary hearing to be determined by the Court. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. As of March 31, 2005, the Debtors' balance sheet reflected a $1.42 billion stockholders' deficit. (Armstrong Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants to Assume Continental Interline Agreement ------------------------------------------------------------- ATA Airlines, Inc., and Continental Airlines, Inc., are parties to an Interline Agreement For Employee Reduced Fare Travel, dated as of May 9, 1997, and as amended on February 1, 2001. Under the Agreement, selected employees of the parties are eligible for reduced fare transportation on each other's airlines. Jeffrey Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that the Interline Agreement is essential to ATA Airlines. It allows the Debtor to move and position its flight crews and other employees where they are needed at substantially reduced costs. A dispute has arisen between ATA and Continental regarding ATA's performance under the Interline Agreement. To resolve the dispute, the parties entered into a settlement agreement under which: -- ATA Airlines will assume the Interline Agreement, as amended; and -- Continental will accept $30,759 as full and complete cure of any defaults by ATA Airlines under the Interline Agreement. The cure represents the amount ATA Airlines will be obligated to pay under Section 365(b)(1) of the Bankruptcy Code, upon the assumption of the Agreement. Pursuant to Section 365 of the Bankruptcy Code, the Debtors ask the U.S. Bankruptcy Court for the Southern District of Indiana to approve the Settlement Agreement. Mr. Nelson notes that the Settlement Agreement contains specific details that are highly confidential and proprietary. The Debtors also seek the Court's permission to file the Agreement under seal. They have provide a copy of the Agreement, on a confidential basis, to the United States Trustee and counsel for Southwest Airlines, the DIP lender, the Official Committee of Unsecured Creditors, the ATSB. 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) BORDEN CHEMICAL: March 31 Balance Sheet Upside-Down by $515 Mil. ---------------------------------------------------------------- Borden Chemical reported improved revenues, operating income, Segment EBITDA and Adjusted EBITDA for the three-month period ending March 31, 2005 compared with the first quarter of 2004. Net sales for the quarter increased 26 percent to $485 million versus $385 million for the same period last year, reflecting higher average selling prices and volume improvement. Sales volumes increased 5 percent for the period, reflecting continued strength in domestic and international wood and industrial markets. Borden Chemical's operating income for the quarter was $32 million versus operating income of $21 million in the previous year period, with the increase driven largely by increased volumes, higher average selling prices and lower business realignment expenses. The company reported a net loss for the quarter of $4 million compared with net income of $5 million for the first quarter 2004. The decrease is due primarily to higher interest expense and a mark to market adjustment on a foreign currency hedge contract associated with the Bakelite AG acquisition. Earnings before interest, taxes, depreciation and amortization (Segment EBITDA) totaled $44 million for the quarter versus $35 million for the first quarter of 2004. The increase is due primarily to higher volumes and improved margins, despite continuing high raw material costs. Segment EBITDA is considered by management to be a key measure of operating performance. Adjusted EBITDA totaled $45 million from $39 million reported in the first quarter of 2004 due primarily to higher volumes and improved margins. Adjusted EBITDA is used to determine compliance with certain covenants contained in the indenture governing the company's Notes and its Amended and Restated Credit Facility. Adjusted EBITDA is defined as Segment EBITDA adjusted to exclude unusual and certain permitted items. Additional detail regarding these metrics is included as part of this press release. "Our positive first quarter operating results continue to build on the results generated in 2004," said Craig O. Morrison, president and chief executive officer. "We are pleased with the performance of our company as we continue to drive volume growth, pricing and productivity initiatives across our businesses." As previously announced, Borden Chemical completed the acquisition of Bakelite AG from its parent company, Rutgers AG, on April 29, 2005. Accordingly, the operating results of Bakelite AG are not included in the consolidated operating results of Borden Chemical for the three-month period ending March 31, 2005. About the Company Based in Columbus, Ohio, Borden Chemical, Inc. -- http://www.bordenchem.com/--- is a global source for industrial resins and adhesives, formaldehyde, UV light-curable coatings and adhesives, and other specialty products serving a broad range of markets including the forest products, construction, oilfield, composites, electronics, automotive and foundry industries At Mar. 31, 2005, Borden Chemical, Inc.'s balance sheet showed a $515,000,000 stockholders' deficit, compared to a $549,000,000 deficit at Dec. 31, 2004. CALPINE CORP.: Reliance on Asset Sales Cues S&P to Lower Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Calpine Corp. and its subsidiaries to 'B-' from 'B'. The outlook is negative. In addition, Standard & Poor's lowered its ratings on debt that Calpine guarantees. The ratings for the following debt issues remain unchanged: (1) the 'BBB-' SPUR rating on Gilroy Energy Center LLC's bonds, (2) the 'BB-' rating on the Rocky Mountain Energy Center LLC and the Riverside Energy Center LLC loans, (3) the 'CCC+' rating on the third lien Calpine Generating Co. LLC debt, and (4) the 'BBB' rating on Power Contract Financing LLC's bonds. The San Jose, California-based company, which develops, acquires, owns, and operates power generation facilities, has about $18 billion of total debt outstanding. "The ratings on Calpine were lowered because the company must continue to rely on asset sales and contract monetizations to meet its interest payments and other fixed obligations in 2005 and 2006," said Standard & Poor's credit analyst Jeffrey Wolinsky. "In addition, the rating action is based on uncertain prospects for improvements in power markets, making it unlikely that Calpine will be able to meet these obligations with internal cash flow generation," said Mr. Wolinsky. Standard & Poor's also said that although Calpine alleviated many of its liquidity issues regarding its 2003-2004 debt maturities through successful refinancing, asset sales, and monetizations, liquidity will remain a credit concern because Calpine's new debt instruments restrict its ability to issue debt and sell assets. CAMCO INC: Equity Deficit Narrows to $17.58 Million at March 31 --------------------------------------------------------------- Camco, Inc. (TSX:COC) reported $5.3 million net income for the first quarter ending March 26, 2005, primarily as a result of the sale of its Hamilton facility. This compares to a $3.7 million net loss of for the same period last year, due to significant provisions for Hamilton plant closure costs. Total sales for the first quarter amounted to $132 million, up 7.6% from sales of $123 million for the first quarter of 2004. Excluding a one-time gain on the sale of the Hamilton facility and plant closure costs, the Company reported a loss from operations of $2.1 million in the first quarter of 2005 compared to income of $0.6 million for the same period last year. Lower income from operations in the first quarter of 2005 was the result of lower margins on final sales of Hamilton manufactured product in the first quarter and increased raw material commodity prices. Recent increases in material costs, especially steel and plastic, have had an adverse impact on manufacturing costs. As a result the Company announced price increases in 2004 to the domestic market effective January 2, 2005, which have only partially offset the full impact of the material cost inflation. Closure-related income of $7.8 million, primarily from the sale of the Hamilton facility, was recorded in the first quarter of 2005 compared to closure costs of $5.9 million for the same period last year. The net closure income in the first quarter was the result of a one-time gain of $10.5 million from the sale of the Hamilton facility partially offset by the losses incurred on the sale of equipment and other operating costs of the facility in the first quarter. James Fleck, President and CEO commented: "Camco was pleased to close the sale of the Hamilton site to McMaster University in the first quarter of 2005. McMaster plans to transform the site into a leading Canadian research facility. This transaction provided fair value to Camco shareholders. Higher material costs, primarily steel and plastic as well as increased transportation costs continue to negatively impact profits despite higher sales. Although the material cost environment remains difficult, we are addressing this challenge proactively through our continued focus on productivity as well as potential further price increases." Camco, Inc. -- http://www.geappliances.ca/-- is the largest Canadian manufacturer, marketer and service provider of home appliances, with manufacturing operations in Montreal, Quebec. The Company's product line includes such popular names as GE, Hotpoint, Moffat, Monogram, BeefEater and Samsung. Camco also produces and services private brands for major Canadian department stores. As of March 31, 2005, Camco's stockholders' deficit narrowed to $17,575,000 from a $22,879,000 stockholders' deficit at Dec. 31, 2004. CAPRESI LLC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Capresi LLC dba CapriBlu Ristorante 1617 Westcliff Drive Newport Beach, California 92600 Bankruptcy Case No.: 05-13140 Type of Business: The Debtor operates a restaurant. Chapter 11 Petition Date: May 6, 2005 Court: Central District of California (Santa Ana) Judge: Robert W. Alberts Debtor's Counsel: Paul S. Nash, Esq. 38 Technology Drive, Suite 250 Irvine, Californi 92618-2301 Tel: (949) 727-9041 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Rettig Chiropractic Business premises $1,000,000 Offices, Inc. lease PO Box 38 Value of security: Cedar Glen, CA 92321 $832,548 Rewards Network Trade Debt $36,000 301 N Lake Ave, Suite 202 Pasadena, CA 91101 United Mileage Visa Bank loan $19,000 PO Box 15298 Palantine, IL 19850-5298 Wells Fargo Bank Trade debt $13,907 Citi Bank Advantage Trade debt $11,524 Alfredo Abate Private party $10,000 loan MBNA America Trade debt $9,462 Wells Fargo Bank Trade debt $8,151 Board of Equalization Sales tax $8,000 American Express Trade debt $7,429 HP Financial Services Trade debt $6,300 Value of security: $500 Bank of America Bank loan $5,200 Alaska Airlines Visa American Express Trade debt $4,562 DCS Trade debt $3,800 Chase Platinum Master Card Bank loan $3,540 American Express Trade debt $3,467 KPFF Consulting Engineers Trade debt $2,149 Home Depot Credit Services Trade debt $1,961 Eversoft Trade debt $1,476 Value of security: $100 Pier 1 Imports Trade debt $252 CARAUSTAR INDUSTRIES: Weak Earnings Prompt S&P to Lower Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on recycled paperboard producer, Caraustar Industries Inc., including its corporate credit rating, to 'B+' from 'BB-', and its senior secured bank loan rating, to 'BB-' from 'BB'. The outlook is stable. The downgrade reflects Austell, Georgia-based Caraustar's persistent subpar credit metrics because of weak earnings and its aggressive capital structure. Total debt, including capitalized operating leases, at March 31, 2005, was $550 million, with debt to EBITDA of 9x. "Despite noticeably improved industry capacity utilization rates, the potential for modestly higher prices, and ongoing cost-savings efforts, we do not foresee sufficient improvement in Caraustar's financial performance to maintain the former ratings," said Standard & Poor's credit analyst Pamela Rice. "Caraustar's earnings should improve in 2005, resulting in credit protection measures more in line for the current ratings. The outlook could be revised to negative if market conditions worsen, if the company is unable to realize sufficient benefits from its cost reduction efforts, or if it is unable to raise selling prices to at least offset rising raw-material costs. Caraustar's business profile could support a slightly higher rating; however, a positive outlook is unlikely to occur unless the company successfully addresses is highly leveraged capital structure." Caraustar's earnings woes are mostly related to unfavorable industry dynamics despite consolidation and vigorous capacity- rationalization efforts. "We believe that the company will benefit from its efforts to reduce costs and centralize procurement, but realization of its recently announced price increase is necessary to avoid further margin compression," Ms Rice said. CARRIER ACCESS: Receives Nasdaq Deficiency Notice Due to Tardy 10K ------------------------------------------------------------------ Carrier Access Corporation (Nasdaq: CACS), a manufacturer of broadband communications equipment, received a Nasdaq Staff Determination letter. The letter indicates that although the company filed its Form 10-K for the fiscal year ended December 31, 2004, the filing did not include management's assessment of its internal controls over financial reporting and the associated auditor attestation report. Because the Company has not timely filed an amended Form 10-K, with the Attestations, it is not in compliance with the Nasdaq continued listing requirements set forth in Nasdaq Marketplace Rule 4310(c)(14). As a result of the delinquency, Carrier Access common stock will begin trading under the symbol "CACSE" effective at the opening of business on Friday, May 6, 2005, and its common stock is also subject to delisting from the Nasdaq Stock Market. Carrier Access intends to request an appeal hearing with the Nasdaq Listing Qualifications Panel within seven days of the date of the Determination letter for continued listing on the Nasdaq National Market. Under Nasdaq Market Place Rules, Carrier Access securities will remain listed on the Nasdaq National Market pending the outcome of the hearing. There can be no assurance that the Panel will grant a request for continued listing. As announced in its press release on May 2, 2005, Carrier Access remains committed to accurate and transparent financial reporting. The Company is working diligently with its auditors KPMG to complete its 2004 Form 10-K and to fully comply with all requirements for continued listing. About the Company Carrier Access (NASDAQ: CACS) -- http://www.carrieraccess.com/-- provides consolidated access technology designed to streamline the communication network operations of service providers, enterprises and government agencies. Carrier Access products enable customers to consolidate and upgrade access capacity, and implement converged IP services while lowering costs and accelerating service revenue. Carrier Access' technologies help our customers do more with less. CATHOLIC CHURCH: Tucson Wants Hartford Settlement Pact Approved --------------------------------------------------------------- Before the Petition Date, Hartford Fire Insurance Company and First State Insurance Company issued to, or for the benefit of, the Diocese of Tucson and Other Releasing Parties seven insurance policies: Insurer Policy Number Policy Period ------- ------------- ------------- Hartford Fire 59 SMP 502213 05/29/64 - 05/29/67 Hartford Fire 59 SMP 100629 05/29/67 - 05/29/70 Hartford Fire 59 SMP 102760 05/29/70 - 05/29/73 Hartford Fire 59 SMP 104993 05/29/73 - 05/29/76 Hartford Fire 59 CBP 207956 05/29/76 - 05/29/77 First State 943447 01/01/80 - 06/01/81 Hartford Fire M78718 05/29/74 - 05/29/75 Other Releasing Parties refer to any person that is or may claim to be insured under any Policy, including without limitation all parishes, churches, schools and other institutions within or affiliated with the Diocese, along with each of their past, present or future subsidiaries. Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, relates that numerous individuals have asserted claims against the Diocese for injuries suffered due to sexual abuse by priests that were allegedly negligently hired, supervised, or maintained by the Diocese. Certain disputes between the Diocese and Hartford have arisen and would be likely to arise in the future concerning Hartford's position regarding the nature and scope of Hartford's responsibilities, if any, to provide coverage to the Diocese and the Other Releasing Parties under the Policies for the Tort Claims, including without limitation the sufficiency of the evidence of the existence and terms of the Policies, whether: -- policy terms or exclusions provide or preclude coverage for the Tort Claims; -- the Diocese has complied with certain conditions precedent to coverage contained in the Policies; and -- to what extent the costs incurred in connection with the Tort Claims are allocable to the Policies. The Diocese believes that resolution of the disputes is warranted in view of (i) the significant costs to the Chapter 11 estate to litigate its coverage claims against Hartford either through an adversary proceeding or on a piecemeal basis, (ii) the risks of the outcome of the litigation and the time to obtain a final determination, (iii) the possibility that coverage under the Policies may not be implicated, and (iv) the Diocese's desire to obtain maximum value from its insurers under the Policies for the purpose of making payments to the holders of the Tort Claims. Toward that end, the Diocese and Hartford engaged in extensive, good faith, arm's-length negotiations to attempt to reach a comprehensive resolution of their disputes. By this motion, the Diocese asks the U.S. Bankruptcy Court for the District of Arizona to: * approve the Settlement and Insurance Policy Repurchase Agreement and Release among the Diocese and Other Releasing Parties, as sellers, and Hartford as purchaser; * approve the settlement and compromise of claims between the Diocese and Hartford; and * find that the Agreement complies with the Bankruptcy Code and other applicable law, including Section 20-1123 of the Arizona Revised Statutes. Specifically, the Agreement provides that: (a) the Diocese and the Other Releasing Parties will sell to Hartford the Policies for $7 million to be paid to the Estate; (b) the Diocese and the Other Releasing Parties will provide a full release to Hartford with respect to and in connection with the Hartford Policies, including any other unknown insurance policies issued by Hartford under which the Estate may have insurance coverage. The Diocese and the Other Releasing Parties agree that the release represents a fair consideration for the purchase price paid by Hartford to buy back the Policies in view of the various disputes among the parties, and in no way constitutes an annulment of the Policies within the meaning of Section 20-1123 of the Arizona Revised Statutes; and (c) Hartford will provide full releases to the Diocese and the Other Releasing Parties with respect to and in connection with any claims in connection with the Policies. Tucson also seeks the Court's authority to sell back to the Hartford writing companies the seven Policies issued by Hartford. The seven Policies will be sold back together with any other unknown insurance policies that were issued or allegedly issued by Hartford to the Diocese or under which the Diocese is or may claim to be an insured, named insured, person insured, additional insured, additional person insured, or otherwise entitled to any coverage or benefits under any insurance policies pursuant to the terms of the Agreement, free and clear of liens, claims, encumbrances and other interests. Agreement Must be Approved Mr. Nye maintains that the dispute between the Diocese and Hartford regarding the availability of insurance coverage under the Policies will prove costly and time consuming to litigate to a conclusion, and will further delay payment of the claims against the Diocese, including the Tort Claims. Were the Diocese to obtain a favorable coverage determination in a coverage action, it is likely that Hartford would appeal, further prolonging a final decision and increasing the litigation expense to the bankruptcy estate. The proposed settlement, on the other hand, is well within the range of likely outcomes of the litigants' dispute. The Diocese believes that the settlement and purchase payment reflects an appropriate balance of costs, risks and potential rewards of litigation. Furthermore, Hartford has asserted issues regarding the nature and scope of its responsibilities, if any, to provide coverage to the Diocese under the Policies for the Tort Claims. Resolving these coverage disputes would involve extended litigation in which expenses likely could, in the aggregate, amount to hundreds of thousands of dollars or, if litigated on a contingent fee basis, would dilute the ultimate recovery to the Diocese. In addition to stemming the costs of further litigation with Hartford, the settlement will ensure that there are funds available to make payments to the holders of claims, including those with Tort Claims. According to Mr. Nye, the $7,000,000 payment represents a good deal for the Diocese and the holders of the Tort Claims. Supplemental Injunction Tucson further asks the Court to issue permanently enjoin all claimants to assert their claims only against the Diocese and not Hartford. Tucson believes that a supplemental injunction is necessary and appropriate to protect the integrity of the settlement and sale contemplated by the Agreement. It is also essential to a workable reorganization of the Diocese. Mr. Nye explains that without the supplemental injunction, Hartford will not consummate the settlement and purchase the Policies -- and the Diocese will not receive the contemplated consideration. Mr. Nye notes that all persons holding claims against the Diocese, including Tort Claims, are protected in that they have the right to pursue their claims against the proceeds of the sale of the Policies. A full-text copy of the Settlement Agreement is available for free at: http://bankrupt.com/misc/hartford_settlement_agreement.pdf The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., and Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. (Catholic Church Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) CLEARLY CANADIAN: Consolidated Shares Begin Trading on NASDAQ ------------------------------------------------------------- Clearly Canadian Beverage Corporation (CNQ:CCBC)(OTCBB:CCBC) received confirmation that NASDAQ has processed the necessary documentation in connection with the Company's reverse split (consolidation) on a 10 old for one new share basis. Accordingly, effective May 5, 2005, the shares of the Company began trading on OTCBB on a post-consolidated basis under the new trading symbol of CCBEF. The Company's voluntary de-listing from the CNQ became effective as of the close of business on May 6, 2005. Based in Vancouver, B.C., Clearly Canadian Beverage Corporation -- http://www.clearly.ca/-- markets premium alternative beverages and products, including Clearly Canadian(R) sparkling flavoured water, Clearly Canadian O+2(R) oxygen enhanced water beverage and Tre Limone(R), which are distributed in the United States, Canada and various other countries. As of Dec. 30, 2004, Clearly Canadian's balance sheet showed a $3,515,000 stockholders' deficit, compared to $1,125,000 in positive equity at December 31, 2003. COLUMBUS MCKINNON: Moody's Revises Rating Outlook to Positive ------------------------------------------------------------- Moody's Investors Services has changed Columbus McKinnon Corporation's rating outlook to positive and affirmed its existing ratings. Ratings affirmed: * B2 senior implied rating, * B3 issuer rating, * B3 on the $115 million 10% senior secured (2nd lien) notes, due 2010, and * Caa1 on the $155 million 8.5% senior subordinated notes, due 2008. Moody's does not rate Columbus McKinnon's $65 million senior secured revolving credit facility due 2007. In changing the rating outlook to positive, Moody's recognizes the improvement in Columbus McKinnon's financial and operating performance over the past year as the company benefited from a strong cyclical recovery in the US manufacturing and construction sectors. In addition to higher demand, the company's lowered cost structure and improved efficiency as a result of the extensive restructuring efforts during the downturn also contributed to the performance improvement. Importantly, Columbus McKinnon has been able to maintain its leading market position in key product categories through the downturn. It estimates that about 75% of its domestic sales are from products where it has the No. 1 market position. On the other hand, the ratings continue to be constrained by the strong cyclicality of Columbus McKinnon's business, intense competition and on-going pricing pressure within the highly fragmented material handling industry, the company's still high debt leverage, and the long-term impact of a contracting domestic manufacturing base as more US manufacturers move overseas. Columbus McKinnon Corporation, headquartered in Amherst, New York, is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling. The company reported revenues of approximately $492 million and adjusted EBITDA of $49.6 million for the LTM period ended January 2, 2005. COOKS INC.: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Cook's, Inc. aka Cook's/Turkiz, Inc. aka Cook's Wholesale Flooring 7260 Delta Circle Austell, Georgia 30168 Bankruptcy Case No.: 05-68648 Type of Business: The Debtor distributes a wide variety of tile and wood flooring products. Chapter 11 Petition Date: May 9, 2005 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: J. Robert Williamson, Esq. Scroggins and Williamson 1500 Candler Building 127 Peachtree Street, Northeast Atlanta, Georgia 30303 Tel: (404) 893-3880 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ W.F. Taylor Co., Inc $775,638 Dept. 1544 Los Angeles, CA 90084-1544 Turkiz Ceramics USA/Israel $334,867 PO Box 5265 Kefar Hasidim Israel 20400 Limestone Marble Industries $159,713 Julius Simon St. Industrial Zone PO Box 10579 Haifa Bay, Israel 26119 Yurtbay Seramik $110,391 UPS Supply Chain Solutions, Inc $101,751 Ballesmar Ceramica $100,901 Burke Mercer $99,506 Ozmar Mermer-Maden $89,257 Beaulieu United $55,739 Interceramic, Inc. $55,668 Bank of America $53,143 Quality Carpet Cushion $50,858 American Biltrite $49,054 Steven R. McClellan $40,461 Solarbrite, Inc. $38,522 Galaxy Impex $35,471 Lexmark Carpet Mills, Inc. $32,894 MD Building Products, Inc. $31,779 Mega Shipping & Forwarding $30,996 California Cartage $30,475 COVANTA ENERGY: Warren Subsidiary Owes $900,000 to Covanta Energy ----------------------------------------------------------------- In a quarterly report filing with the Securities and Exchange Commission, Craig D. Abolt, Senior Vice President and Chief Financial Officer of Covanta Energy Corporation, relates that as part of Covanta's emergence from bankruptcy, Covanta and its subsidiary that operates the waste-to-energy facility in Warren County, New Jersey, entered into several agreements approved by the U.S. Bankruptcy Court for the Southern District of New York to: (a) reimburse Covanta for employees and employee-related expenses; (b) provide for payment of a monthly allocated overhead expense reimbursement in a fixed amount; and (c) permit Covanta to advance up to $2 million in super- priority DIP Loans to Covanta Warren to meet any liquidity needs. As of March 31, 2005, Covanta Warren owed Covanta $900,000, Mr. Abolt reports. In the event the parties are unable to timely reach agreement upon and consummate a restructuring of the contractual arrangements governing Covanta Warren's operation of the Warren Facility, Covanta may, among other things, elect to litigate with counterparties to certain agreements with Covanta Warren, assume or reject one or more executory contracts related to the Warren Facility, attempt to file a plan of reorganization on a non- consensual basis, or liquidate Covanta Warren. In that event, Mr. Abolt says Covanta Warren creditors may receive little or no recovery on account of their claims. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. On March 10, 2004, Covanta Energy Corporation and its core subsidiaries emerged from chapter 11 as a wholly owned subsidiary of Danielson Holding Corporation. Some of Covanta's non-core subsidiaries have liquidated under separate chapter 11 plans. (Covanta Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) CRANKUP SCAFFOLDING: Case Summary & 16 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Crankup Scaffolding USA, Inc. 1633 Blairs Bridge Road Lithia Springs, Georgia 30122 Bankruptcy Case No.: 05-68609 Type of Business: The Debtor manufactures adjustable climbing scaffolds. See http://www.crankupscaffolding.com/ Chapter 11 Petition Date: May 9, 2005 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: Edward F. Danowitz, Jr., Esq. 300 Galleria Parkway, Northwest, Suite 960 Atlanta, Georgia 30339 Tel: (770) 933-0960 Estimated Assets: $1 Million to $10 Million Estimated Debts: $100,000 to $500,000 Debtor's 16 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Eugene Sak $225,000 118 Karley Lane Florence, AL 35630 Up Scaffold Company $118,000 2446A Highway 29 S Lawrenceville, GA 30044 Eagle Access, LLC $93,000 P.O. Box 712 Florence, SC 35631 Souhteastern Scaffolding, Inc. $18,000 Dillard Quinn $5,300 Up Scaffolding Of Alabama $4,000 Georgia Steel $3,000 Robert Holt $1,000 Gary Jones $1,000 Greystone Power $100 Blue Flame Gas Co. $64 Crankup Scaffolding, LLC $10 Step Up Distributor Associates, Icn. $10 Chicago Scaffolding, Inc. $10 Go Front Scaffolding $10 Up-Scaffolding Of Florida $10 CREDIT SUISSE: Moody's Rates Four Securitization Classes at Low-B ----------------------------------------------------------------- Moody's Investors Service has upgraded 35 classes of mezzanine and subordinated tranches from 9 mortgage backed securitizations issued by Credit Suisse First Boston Mortgage Securities Corp. in 2002. In addition, Moody's has downgraded 3 classes of subordinated tranches from 3 mortgage backed securitizations and confirmed the rating of 1 subordinate tranche from 1 mortgage backed securitization also issued by Credit Suisse First Boston Mortgage Securities Corp. in 2002. The pools are Jumbo-A/Alternative-A first lien adjustable-rate loans. The actions are based on the fact that the bonds' current credit enhancement levels, including excess spread where applicable, are either high or low compared to the current projected loss numbers for the current rating level. In general, the securitizations being upgraded have benefited from rapid prepayments resulting in the deleveraging of the transactions. In addition, many of the mortgage pools underlying most of these securitizations have performed better than our original expectations. The securitizations being downgraded suffer primarily from the performance of the underlying loans with cumulative losses exceeding our original expectations. The complete rating actions are: Issuer: Credit Suisse First Boston Mortgage Securities Corp. Upgrade: * Series 2002-AR2; Class I-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR2; Class I-B-2, Upgrade from A3 to Aa3 * Series 2002-AR2; Class II-M-1, Upgrade from Aa2 to Aaa * Series 2002-AR8; Class C-B-1, Upgrade from Aa2 to Aaa * Series 2002-AR13; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR13; Class C-B-2, Upgrade from A2 to Aa2 * Series 2002-AR13; Class C-B-3, Upgrade from Baa3 to A3 * Series 2002-AR13; Class C-B-4, Upgrade from Ba3 to Ba1 * Series 2002-AR13; Class V-M-1, Upgrade from Aa2 to Aaa * Series 2002-AR13; Class V-M-2, Upgrade from A2 to Aa2 * Series 2002-AR17; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR17; Class C-B-2, Upgrade from A3 to Aa3 * Series 2002-AR17; Class C-B-3, Upgrade from Baa3 to A3 * Series 2002-AR25; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR25; Class C-B-2, Upgrade from A3 to Aa3 * Series 2002-AR25; Class C-B-3, Upgrade from Baa3 to A3 * Series 2002-AR27; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR27; Class C-B-2, Upgrade from A3 to Aa3 * Series 2002-AR27; Class C-B-3, Upgrade from Baa3 to A3 * Series 2002-AR27; Class IV-M-1, Upgrade from Aa2 to Aaa * Series 2002-AR28; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR28; Class C-B-2, Upgrade from A3 to Aa3 * Series 2002-AR28; Class C-B-3, Upgrade from Baa3 to A3 * Series 2002-AR28; Class III-M-1, Upgrade from Aa2 to Aaa * Series 2002-AR31; Class C-B-1-X, Upgrade from Aa2 to Aaa * Series 2002-AR31; Class C-B-1, Upgrade from Aa2 to Aaa * Series 2002-AR31; Class C-B-2, Upgrade from A2 to Aa2 * Series 2002-AR31; Class C-B-3, Upgrade from Baa3 to A2 * Series 2002-AR31; Class C-B-4, Upgrade from Ba2 to Baa3 * Series 2002-AR31; Class C-B-5, Upgrade from B3 to B1 * Series 2002-AR33; Class C-B-1, Upgrade from Aa3 to Aaa * Series 2002-AR33; Class C-B-2, Upgrade from A2 to Aa2 * Series 2002-AR33; Class C-B-3, Upgrade from Baa2 to A2 * Series 2002-AR33; Class C-B-4, Upgrade from Ba2 to Baa3 * Series 2002-AR33; Class C-B-5, Upgrade from B3 to B1 Downgrade: * Series 2002-AR8; Class C-B-4, Downgrade from Ba3 to B1 * Series 2002-AR28; Class III-M-2, Downgrade from A2 to Baa2 * Series 2002-AR31; Class VII-M-2, Downgrade from A2 to Baa2 Confirmed: * Series 2002-AR33; Class V-M-2, Current rating A2 confirmed CRIIMI MAE: Reports First Quarter 2005 Financial Results -------------------------------------------------------- CRIIMI MAE Inc. (NYSE: CMM) reported net income to common shareholders of $828,000 in the first quarter of 2005 compared to net income to common shareholders of $2.5 million for the same period in 2004. "Our retained CMBS portfolio continues to generate significant cash flow and the balance of loans in special servicing continues to decline," Mark Jarrell, President and Chief Operating Officer, said. "We are pleased that specially-serviced hotel loans, which represent the largest percentage of loans in special servicing, has decreased over the last several quarters as the economy and the lodging sector continue to improve. This quarter, we decreased our overall expected loss estimate related to our CMBS by $9 million to $619 million as of March 31, 2005, primarily as a result of changes in the amount and timing of resolutions and dispositions of certain specially- serviced assets. A change in the timing of anticipated cash flows for certain of the Company's CMBS resulted in this quarter's $3.5 million impairment charge." Financial Results Net Income For the three months ended March 31, 2005, net income to common shareholders was $828,000, compared to $2.5 million for the first quarter of 2004. Results for the first quarter of 2005 included net interest margin of $9.5 million, total operating expenses of $6.5 million and net other charges of $3.0 million, including $3.5 million of impairment on certain of the Company's subordinated commercial mortgage-backed securities. Net Interest Margin for the Quarter Ended March 31, 2005 CRIIMI MAE's net interest margin decreased to $9.5 million for the three months ended March 31, 2005 compared to $10.9 million for the corresponding period in 2004 primarily due to the higher cost of financing the $260 million of non-recourse match-funded debt issued in June 2004 as part of the Company's refinancing of a significant amount of its recourse debt. During the first quarter of 2005, the Company's average total debt balance was $622 million compared to $727 million for the first quarter of 2004. The weighted average effective interest rate on the Company's total average debt outstanding during the first quarter was 8.5% compared to 7.4% for the same period in 2004. Other Items Results for the first quarter of 2005 also included reductions in aggregate impairment charges, net losses on insured mortgage security dispositions and extinguishment of debt as compared to the first quarter of 2004. This quarter's $3.5 million of impairment charges on CMBS was calculated as the difference between the fair value and amortized cost of certain of the Company's CMBS as of March 31, 2005 and resulted primarily from a change in the timing of anticipated cash flows for these CMBS. For the first quarter of 2004, impairment charges totaled $3.6 million, including a $3.1 million write down on two of the Company's non-core assets and $518,000 on one of the Company's CMBS. Net losses on insured mortgage security dispositions were $77,000 in the first quarter of 2005 compared to losses of $626,000 in the first quarter of 2004, due to fewer prepayments in 2005. The Company incurred no losses on extinguishment of debt this quarter compared to a net loss on extinguishment of debt of $707,000 associated with the refinancing of one of the Company's insured mortgage portfolios in the first quarter of 2004. Liquidity and Shareholders' Equity Increased Liquidity As of March 31, 2005, total liquidity approximated $52.7 million, including cash and cash equivalents of approximately $48.6 million and $4.1 million in liquid securities, compared to total liquidity of $45.1 million at December 31, 2004. CRIIMI MAE's retained CMBS portfolio, along with its other assets, continued to generate significant cash in the first quarter of 2005. Sources of cash included $11.4 million from the retained CMBS portfolio and $1.0 million from its non-core assets. Cash outflows during the first quarter of 2005 included interest payments on the Company's debt (excluding match-funded debt) of approximately $500,000, $2.8 million of corporate general and administrative expenses, $200,000 in interest rate swap payments, $434,000 of maintenance fee expense and $1.5 million for payment of preferred dividends. Unlike most other REITs, CRIIMI MAE is currently able to distribute or retain its net cash flows as a result of its tax net operating loss (NOL) carryforwards. As a result of the Company's election to be taxed as a trader in 2000, the Company has accumulated unused NOLs of approximately $291.4 million as of March 31, 2005. Any accumulated and unused net operating losses, subject to certain limitations, generally may be carried forward for up to 20 years to offset taxable income until fully utilized. As discussed in the Company's quarterly and annual reports filed with the Securities and Exchange Commission, the Company's future use of NOLs for tax purposes could be substantially limited in the event of an "ownership change" as defined under Section 382 of the Internal Revenue Code. The Company expects any dividends paid in 2005 to be taxable to the recipients to the extent of the Company's taxable income for the year. The determination of the taxability of a dividend distribution is based on the current year's earnings and profits (before application of the dividends paid deduction and NOL carryforwards), which approximates the Company's taxable income. The Company expects to offset taxable income, if any, by first applying the dividends paid deductions related to distributions on its stock and then by utilizing its prior year NOL carryforwards in 2005. Shareholders' Equity As of March 31, 2005, shareholders' equity was approximately $412.5 million, as compared to $428.1 million at December 31, 2004. The diluted book value per common share is based on total shareholders' equity less the liquidation value of the Company's then outstanding preferred stock. The net decrease in total shareholders' equity was primarily attributable to a reduction in the value of CMBS due principally to an increase in Treasury rates as of quarter end. Shareholders' equity as of March 31, 2005 includes, among other things, the excess of the carrying amount of the Company's CMBS rated AAA and the senior interest in its BBB- rated CMBS over the related non-recourse debt. The Company does not actually own these assets but is required by GAAP to include them on its balance sheet. After removing the net impact of the CMBS pledged to secure non-recourse debt and the related non-recourse debt, the adjusted book value was $16.94 per diluted common share and $17.27 per diluted common share as of March 31, 2005 and December 31, 2004, respectively. The net decrease in adjusted book value is primarily attributable to a reduction in the value of the retained CMBS portfolio due principally to an increase in Treasury rates as of quarter end. The Company believes adjusted book value per diluted common share provides a more meaningful measure of book value because the Company receives no cash flows from the CMBS pledged to secure non-recourse debt that are reflected on its consolidated balance sheet and used to calculate its book value in accordance with GAAP. All cash flows related to the CMBS pledged to secure non-recourse debt are used to service the related non- recourse debt. The reconciliation of this non-GAAP financial measure to shareholders' equity is presented in the tables that follow. CRIIMI MAE had 15,584,734 and 15,546,667 common shares outstanding as of March 31, 2005 and December 31, 2004, respectively. As of May 2, 2005, the Company has 15,587,827 common shares outstanding. Existing Operations As of March 31, 2005, specially serviced mortgage loans totaled $751.1 million, or 5.9% of the aggregate $12.7 billion of mortgage loans underlying the Company's CMBS. Hotel property mortgage loans (including the Shilo Inn loans with an aggregate principal balance of $134.7 million) accounted for $316.1 million, or 42% of the special servicing portfolio at quarter end, down from $375.7 million, or 46% of the special servicing portfolio at year end. The Company decreased its overall expected loss estimate related to its CMBS from $628 million at December 31, 2004 to $619 million at March 31, 2005, including cumulative actual losses of approximately $274 million realized from 1999 through March 31, 2005. These cumulative expected losses of $619 million are anticipated to occur through the life of the Company's CMBS. About the Company CRIIMI MAE Inc. is a commercial mortgage company structured as a REIT. CRIIMI MAE owns and manages a significant portfolio of commercial mortgage- related assets. Historically, CRIIMI MAE's primary focus was acquiring high- yielding, non-investment grade commercial mortgage-backed securities (subordinated CMBS). * * * As reported in the Troubled Company Reporter on March 30, 2005, Moody's Investors Service has placed its Caa2 preferred stock rating of CRIIMI MAE Inc. under review for possible upgrade. CRIIMI MAE is a REIT that owns and manages a portfolio of approximately $1 billion face amount in mortgage securities -- primarily investments in subordinate CMBS tranches. CRIIMI MAE emerged from bankruptcy in April 2001. Recapitalization of the REIT in January 2003 with infusions of common equity and subordinate debt, as well as with a new, less expensive secured financing package, have improved its financial flexibility and allowed it to retain operating cash flow. CRIIMI MAE has become current on dividends in arrears following distributions on June 30, 2003. The REIT continues to make preferred dividend distributions due to improved financial metrics and liquidity. The Board of Directors of CRIIMI MAE recently engaged a financial advisor to assist the REIT in undertaking a review of its various strategic alternatives, including a possible sale of the REIT. According to Moody's this rating action reflects the success of the company's recapitalization, strong sponsorship and management by Brascan Real Estate Finance Fund, ongoing ability to make preferred stock dividend distributions, and possible near term strategic restructuring that could further enhance the position of preferred stockholders. During its review, Moody's will examine the REIT's emerging business plan and possible strategic alternatives as they affect creditor protections. An upgrade in CRIIMI MAE's preferred stock rating will reflect further clarity in the strategic direction and ownership of the REIT, as well as enhancement trends in the position of preferred stockholders. These rating was placed under review for upgrade: * CRIIMI MAE Inc. -- Series B Preferred Stock at Caa2 CRITICAL PATH: March 31 Balance Sheet Upside-Down by $114.5 Mil. ---------------------------------------------------------------- Critical Path, Inc. (Nasdaq:CPTH) reported its unaudited financial results for the first quarter ended March 31, 2005. For the first quarter of 2005, revenues were $17.4 million, compared to $19.5 million in the fourth quarter of 2004 and $17.1 million in the first quarter of 2004. For the first quarter of 2005, net loss attributable to common shareholders, based on United States generally accepted accounting principles, was $12.7 million, compared to a net loss of $10.7 million for the fourth quarter of 2004 and a net loss of $13.1 million for the first quarter of 2004. For the first quarter of 2005, total cost of net revenues and operating expenses, based on GAAP, were $25.7 million, unchanged from the fourth quarter of 2004 and an 11% decline from $28.8 million for the first quarter of 2004. Adjusted EBITDA Results For the first quarter of 2005, earnings before interest income, interest expense, provision for income taxes, depreciation and amortization adjusted to exclude other items such as other income (expense), net, restructuring expenses, stock-based expenses and accretion on mandatorily redeemable preferred stock (or adjusted EBITDA), a non-GAAP measure we use to measure the performance of our business, was a loss of $3.1 million, compared to a loss of $2.0 million for the fourth quarter of 2004 and a loss of $7.9 million for the first quarter of 2004. For the first quarter of 2005, total cost of net revenues and operating expenses on an adjusted EBITDA basis were $20.5 million, compared to $21.5 million for the fourth quarter of 2004 and $25.0 million for the first quarter of 2004. "The results from our focus on consumer messaging solutions to our target markets with broadband, fixed-line and mobile operators were evident in the first quarter," said Mark Ferrer, chief executive officer and chairman of Critical Path. "This includes the launch of our new Memova brand, the announcement of our new Memova Mobile solution currently in use on a trial basis with mobile operators in Southeast Asia and Europe, the significant growth in our Memova Anti-Abuse bookings and the continued strength in our core Memova Messaging performance. We believe the alignment of our solutions to the growing consumer messaging market combined with our continued expense management, positions us to effectively compete for our client's investment dollars." "I am pleased with our progress managing spending levels, particularly our third quarter in a row of improved gross margins," said Jim Clark, chief financial officer. "Even though our general and administrative expenses increased in the March quarter due to the increased cost of our compliance efforts related to the requirements of the Sarbanes-Oxley Act, our total operating expenses achieved significant year-over-year improvement." As of March 31, 2005, the Company's cash and cash equivalents totaled $27.2 million, compared to $23.2 million at December 31, 2004 and $37.1 million at March 31, 2004. About the Company Critical Path, Inc.'s -- http://www.criticalpath.net/-- Memova(TM) solutions provide a new and improved email experience for millions of consumers worldwide, helping mobile operators, broadband and fixed-line service providers unlock the potential of email in the mass market. Memova(TM) Mobile gives consumers instant, on-the-go access to the messages that matter most. Featuring industry-leading anti-spam and anti-virus technology, Memova(TM) Anti-Abuse protects consumers against viruses and spam. Memova(TM) Messaging provides consumers with a rich email experience, enabling service providers to develop customized offerings for high-speed subscribers. Headquartered in San Francisco with offices around the globe, Critical Path's messaging solutions are deployed by more than 200 service providers throughout the world. At Mar. 31, 2005, Critical Path, Inc.'s balance sheet showed an $114,506,000 stockholders' deficit, compared to a $112,189,000 deficit at Dec. 31, 2004. CTI FOODS: Moody's Rates Proposed $115M Senior Sec. Loan at B2 -------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to a proposed $115 million senior secured second lien seven-year term loan being offered by CTI Foods Holding Co., LLC. Moody's also assigned a B2 senior implied rating to CTI Foods Holdings Co., LLC and a stable rating outlook. CTI will use the proceeds to refinance existing debt, pay a $35 million dividend to existing shareholders, and pay approximately $7 million in transaction costs. Moody's does not rate CTI's $45 million secured first lien bank credit facility. The rating on the $115 million secured term loan represents a first-time rating for this issuer. Moody's considered CTI's ratings in relation to certain key rating drivers for the food industry: (A) Scale and diversification CTI is a small niche manufacturer of food products primarily for the quick-serve-restaurant industry, with sales and earnings highly concentrated among a small number of products and customers largely in the Western and Southwestern US. (B) Franchise strength and growth potential. CTI's franchise strength is moderate. While it has a solid position with a small group of customers in a rather specialized industry niche, it remains vulnerable to competitive threats from larger more powerful food companies. Internal growth has been solid over the recent past, and given its small size, additional growth potential exists. (C) Distribution environment and pricing flexibility with customers. CTI's use of contracts with its customers helps protect it from price risk of commodity cost fluctuations, although its size and competitive environment limit its negotiating strength with customers. (D) Assessment of cost efficiency and profitability. CTI's margins and return on assets are low relative to some companies in the food industry. (E) Financial policy and credit metrics. CTI's leverage is high, and its coverages modest. Given capital expansion plans, Moody's do not expect major improvements in these over the rating horizon. CTI's ratings are limited by its small size, its rapid growth and the related execution risk inherent in a major capital expansion program currently underway, its low free cash flow, its limited product and geographic diversification, its moderately high leverage, and its highly concentrated customer base. The company (created in its current form via merger in 2003) reported FY2004 sales of $345 million, with earnings before interest and tax of approximately $20 million. It competes against much larger companies -- such as Cargill's (A2/stable) Excel subsidiary, ConAgra (Baa1/negative), Tyson Foods (Baa3/stable), and Smithfield (Ba1/stable) -- with much greater market power and financial resources than CTI. CTI is in the midst of a major program to increase its production capacity. While the company has two plants fully operational, a third plant has just been built and is still in the ramp-up phase, while a fourth plant is under construction. Additional plants may commence construction in the near term. Moody's believes that the degree of expansion planned runs the risk of straining CTI's financial and management resources should it encounter start-up problems with any of its new facilities. The company also has a highly concentrated customer base, with the top one and top three customers accounting for over 56% and 88% of revenues respectively. CTI's largest customer accounted for over 56% of 2004 revenues. The loss of any single customer could have a material negative impact on this company's operations. Additionally, CTI has a limited product line, producing largely different forms of pre-cooked and frozen meat and meat ingredients primarily for QSR restaurants. Finally, following the transaction, CTI's leverage will be moderately high with pro-forma debt/EBITDAR over 4.2X at FYE Jan 2005. CTI's ratings are supported by: (1) its strong customer relationships and product development capabilities, (2) its use of contracts with customers that greatly reduce both the price risk of commodity products it processes, and (3) the risk of having insufficient volumes in new manufacturing plants. CTI has forged strong customer relationships with a small group of restaurant companies whereby CTI produces key components of their food offerings (such as pre-cooked meat used for various restaurant items). The ability to cost-effectively produce a high-quality, consistent, labor saving product is particularly attractive to the QSR industry. CTI has been able to work with these companies to develop food ingredient products that meet these standards, and hence win a number of attractive contracts. And, given its customers' reluctance to alter the taste and consistency profile of their menu items, they tend to stay with key suppliers (such as CTI) for a long time. Moody's notes that CTI has never lost a major contract, and that it has experienced 100% contract renewals. CTI's active use of customer contracts allows it to significantly reduce several risks in its business. CTI typically manufactures food products under one or two year contracts, structured as tolling arrangements, containing pricing mechanisms which pass the risk of commodity input cost increases onto the customers. Without the price risk, CTI is left largely with execution risk, and hence is paid for its ability to produce products in line with customer specifications. Over 90% of CTI's sales are covered by such contracts. This has resulted in fairly steady earnings and cash flow over the past few years -- an impressive achievement in light of the severe volatility in world protein markets and the more volatile earnings experience of some protein processors. Additionally, CTI generally requires customers to enter into longer-term contracts (up to 5 years) if it needs to build a plant or expand productive capacity for a particular customer. This helps ensure that CTI will recoup its investment and earn an acceptable return on capital employed for the project. Moody's notes, however, that long-term contracts are not always required, and that CTI recently built a new manufacturing facility to manufacture soups and sauces that does not benefit from a long-term contract with any key customer. The US foodservice industry has continued to grow as away from home eating continues to rise. There has also been increasing demand from the foodservice industry for prepared and pre-cooked ingredients, which allow restaurants to reduce labor, increase consistency, and enhance food safety. CTI is currently a small manufacturer of food products primarily for the QSR industry. Its product line includes pre-cooked, frozen, and fresh meat products such as pre-cooked taco, steak, and chicken fajita meats, and hamburger patties. The company also produces soups, dehydrated refried beans, and grilled vegetables for the restaurant industry. Its customer base is small and highly concentrated, but includes Burger King, Cracker Barrel, Jack In The Box, Taco Bell, TGIF, and Wendy's. CTI is in the second year of a significant expansion of its productive capacity. The company currently has two plants fully operational, with a third plant which produces soups and sauces completed but in start-up phase. A fourth plant, which will produce dehydrated refried beans, is under construction and expected to be operational in 2006. Total cost for this bean plant will be approximately $25 million. Additionally, CTI is in discussions to construct a fifth plant -- a meat processing facility -- in the Midwest -- which could cost an additional $15 to $25 million. Including the Midwest meat processing plant under discussions, CTI's capital expenditures could range between $40 to $50 million, as compared to $4.6 million and $11.3 million in FY2003 and FY2004 respectively. The outlook on CTI's rating is stable and assumes that the company will maintain its solid operating performance and that it encounters no significant operating difficulties throughout this period of significant capital expansion. It anticipates that CTI will manage its growth in a way that maintains leverage and its overall credit profile at levels consistent with its rating, as well as no additional dividends until such time as debt protection measures materially improve. The stable outlook also anticipates no losses of major customers, and a continuing use of contracts, which mitigates the majority of price risk in its manufacturing operations. Moody's expects CTI to maintain Adjusted Debt/EBITDAR below 5 times. For upward rating pressure to build, CTI needs to expand and diversify its customer base so that the loss of any single customer would not have a material negative impact on its operations, as well as sustaining Adjusted Debt/EBITDAR below 4.5 times and Free Cash Flow/Debt in excess of 5%. Downward rating pressure could develop if the company's operating performance deteriorates, if it experiences operating difficulties or start up problems at its new plants, or loses a significant contract to the extent that debt and leverage increases to where Adjusted Debt/EBITDAR rose much above 5.5X. Following the transaction, the $115 million senior secured second lien term loan will represent the majority of CTI's debt. Post closing, CTI expects to have no drawings and only $3 million in letters of credit issued under its $45 million secured bank credit facility, allowing an additional $42 million in secured debt to be drawn. The agreement restricts additional secured debt primarily to drawings and letters of credit issued under the bank facility. Both the term loan and the credit facility receive upstream guarantees from subsidiaries. The senior secured term loan is rated at the same level as the senior implied rating given that the loan represent the preponderance of debt. The bank credit is secured on a first lien basis by substantially all assets of the company and stock of subsidiaries. The $115 million term loan is secured on a second lien basis by the same assets. Availability under the credit facility is governed by a borrowing base consisting primarily of inventory and accounts receivable. Ratings assigned are: * Senior implied rating at B2 * $115 million senior secured second lien seven-year term loan at B2 Headquartered in Wilder, Idaho, CTI Foods is a $345 million (sales) of food products primarily to the quick-serve restaurant industry. CTI FOODS: S&P Rates Proposed $115 Million Second-Lien Loan at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to meat processor CTI Foods Holding Co. LLC. At the same time, Standard & Poor's assigned its 'B' rating and '3' recovery rating to CTI Foods' proposed $115 million second- lien term loan, indicating the likelihood of meaningful (50%-80%) recovery of principal in the event of a payment default. The ratings are based on preliminary terms and are subject to review upon final documentation. Net proceeds from the second-lien term loan will be used improve financial flexibility, fund projects, and pay a dividend to owners. The outlook is stable. Pro forma for the transaction, Wilder, Idaho-based CTI Foods will have $115 million in total debt outstanding. The ratings reflect CTI Foods' leveraged capital structure, modest scale of operations, and customer and supplier concentration. CTI Foods is a manufacturer of processed food items for the restaurant industry with 90% of sales from pre-cooked and frozen meat products, although the company is expanding its product offering with soups, sauces, and dehydrated refried beans. Many of its products are custom-developed to meet specific customer requirements. The company is a smaller player in the $446 billion food prepared away from home market in the U.S. This market includes many larger, financially stronger competitors, particularly vertically integrated processors and suppliers of meat such as Tyson Foods (BBB/Stable/A-2) and Smithfield Foods (BB+/Stable/--). The company's operations are focused in the west and southwestern regions of the U.S. "Given the company's well-below-average business risk profile, we expect CTI Foods to maintain credit protection measures above the medians for the rating category and apply free cash flow to debt reduction," said Standard & Poor's credit analyst Alison Birch. The outlook could be revised to positive if the company diversifies its customer and product base while expanding the overall business and improving financial measures. A negative outlook could result if the company fails to meet expectations and liquidity becomes limited due to higher-than-anticipated revolver borrowing for potential plant acquisitions. DANA KIKLIS: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Dana Louis Kiklis 18 Dixey Drive Middleton, Massachusetts 01949 Bankruptcy Case No.: 05-14287 Chapter 11 Petition Date: May 10, 2005 Court: District of Massachusetts (Boston) Debtor's Counsel: Stephen E. Shamban, Esq. Stephen E. Shamban Law Offices, P.C. 222 Forbes Road, Suite 208 P.O. Box 850973 Braintree, Massachusetts 02185-0973 Tel: (781) 849-1136 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. DELTA AIR: CEO Supports Congressman Price's Pension Legislation --------------------------------------------------------------- U.S. Rep. Tom Price (R-Ga.) has introduced into the U.S. House of Representatives the Employee Pension Preservation and Taxpayer Protection Act of 2005, designed to protect the pensions of airline employees and address pension funding problems which threaten the industry's efforts to restructure. On behalf of Delta Air Lines' (NYSE: DAL) employees and retirees, Chief Executive Officer Gerald Grinstein issued a statement of support, saying: "Representative Price and the 11 members cosponsoring H.R. 2106 are to be commended for their leadership in introducing the Employee Pension Preservation and Taxpayer Protection Act of 2005. This legislation represents a very sensible and pragmatic approach to large, short-term airline pension funding obligations, which threaten the benefits that our employees and retirees have earned and are counting on. We have joined with Delta employees, retirees, the Air Line Pilots Association and other airlines to convince Congress that legislation is needed to ensure an orderly industry restructuring that protects employees, retirees and the government. "Delta and other airlines have substantial pension payments due over the next several years. These large payments have the potential to severely affect Delta's cash position. Delta, along with other carriers, needs a pension funding schedule that provides an affordable way to meet the benefit obligations, already earned by employees and retirees. EPPTPA would allow Delta to make payments to its pension plan over 25 years, rather than the current five-year timeline. With bankrupt airlines terminating their pension plans entirely and other carriers failing even to offer their employees defined benefit plans, Delta is merely asking Congress to pass legislation to allow Delta to improve the prospects for benefits people have already earned." About the Company Delta Air Lines -- http://delta.com/-- is the world's second- largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 490 destinations in 85 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. At March 31, 2005, Delta Air's balance sheet showed a $6.6 billion stockholders' deficit, compared to a $5.8 billion deficit at Dec. 31, 2004. * * * As reported in the Troubled Company Reporter on Apr. 20, 2005, Standard & Poor's Ratings Services affirmed its 'CC' corporate credit rating on Delta Air Lines Inc. (CC/Developing/--) and removed the rating from CreditWatch. The rating had been originally placed on CreditWatch on Nov. 12, 2004; implications were most recently revised to developing on March 25, 2005. The outlook is developing. At the same time, Standard & Poor's lowered its ratings on selected Delta debt issues, and removed the ratings from CreditWatch. "The downgrade of selected Delta debt issues aligns their ratings with the 'CC' corporate credit rating, which was affirmed and removed from CreditWatch," said Standard & Poor's credit analyst Philip Baggaley. DENBURY RESOURCES: Posts $30.1 Mil. of Net Income in First Quarter ------------------------------------------------------------------ Denbury Resources Inc. (NYSE:DNR) disclosed its first quarter 2005 financial and operating results. The Company's production in the first quarter of 2005 increased 3% over fourth quarter of 2004 production, averaging 29,724 barrels of oil equivalent per day -- BOE/d. The Company also posted near-record earnings for the quarter of $30.1 million, or $0.54 per common share, as compared to earnings of $22.3 million or $0.41 per common share for the first quarter of 2004. Included in first quarter 2005 net income are approximately $6.7 million of pre-tax non-cash charges ($4.6 million after tax) related to the Company's decision to discontinue hedge accounting as of January 1, 2005. These charges include the resultant mark-to-market adjustments of its oil and natural gas derivative contracts and amortization of deferred hedge mark-to-market value losses that existed as of December 31, 2004 which are being amortized as the contracts expire in 2005. Excluding these non-cash charges, net income for the first quarter of 2005 would have been approximately $34.7 million, or $0.63 per share. Adjusted cash flow from operations (cash flow from operations before changes in assets and liabilities, a non-GAAP measure) for the first quarter of 2005 was $69.4 million, an 18% increase over first quarter 2004 adjusted cash flow from operations of $58.9 million. Net cash flow provided by operations, the GAAP measure, totaled $77.9 million during the first quarter of 2005, as compared to $53.0 million during the first quarter of 2004. The difference between the adjusted cash flow and cash flow from operations is due to the changes in receivables, accounts payables and accrued liabilities during the quarter. Production Production for the quarter was 29,724 BOE/d, a 3% increase over the fourth quarter of 2004 average of 28,977 BOE/d and a 6% increase over the first quarter of 2004 levels, after adjustment for the offshore properties sold in July 2004. Oil production from the Company's tertiary operations increased 19% over prior quarter levels, and 37% when compared to first quarter 2004 tertiary oil production, averaging 8,644 Bbls/d in 2005's first quarter as a result of production increases at Little Creek, Mallalieu and McComb Fields. Natural gas production from the Barnett Shale increased to 1,313 BOE/d in the first quarter of 2005, up from 229 BOE/d for the first quarter of 2004. Higher production from tertiary operations and from the Barnett Shale were partially offset by declines in production from the Company's onshore Louisiana properties which decreased from 8,825 BOE/d in the first quarter of 2004 to 6,710 BOE/d in the first quarter of 2005, with the majority of the decrease from Thornwell and Lirette Fields. First Quarter 2005 Financial Results Oil and natural gas revenues, excluding hedges, were approximately the same in the respective first quarters, as higher commodity prices more than offset lower production levels resulting from the July 2004 sale of offshore properties. Cash payments on hedges were $1.1 million in the first quarter of 2005, a significant decrease from the $14.3 million paid in the first quarter of 2004, as most of the Company's out-of-the-money hedges expired as of December 31, 2004. In addition to the cash payments, the Company expensed $6.7 million of mark-to-market and other charges in the first quarter of 2005 relating to the Company's decision to discontinue hedge accounting as of January 1, 2005. As a result of this accounting change, all future changes in the fair values of the Company's oil and natural gas derivative instruments will result in income or expense in the Company's statement of operations. Oil price differentials (Denbury's net oil price received as compared to NYMEX prices) deteriorated during 2004, particularly in the last quarter, as the price of heavy, sour crude produced primarily in the Company's East Mississippi properties dropped significantly relative to NYMEX prices. These differentials did not change significantly during the first quarter of 2005, although they appear to be improving early in the second quarter. The Company's average NYMEX differential increased from $4.24 per Bbl during the first quarter of 2004 to $6.54 per Bbl during the first quarter of 2005, a $2.30 per Bbl decrease in the price the Company received relative to NYMEX prices, and approximately the same as the fourth quarter 2004 differential of $6.48 per Bbl. While lease operating expenses were approximately the same in the respective first quarters, on a per BOE basis operating expenses increased 27%, from $6.76 per BOE in the first quarter of 2004 to $8.58 per BOE in the first quarter of 2005. These per BOE expenses compare to an average of $7.60 per BOE in the fourth quarter of 2004. The single biggest reason for the increase relates to the increasing emphasis on tertiary operations, for which operating expenses averaged $9.90 per BOE during 2004 and $10.07 per BOE during the first quarter of 2005, higher than the operating costs for the Company's other operations. The balance of the cost increases is generally attributable to higher energy costs to operate Company properties and general cost inflation in the industry. Production taxes and marketing expenses generally change in proportion to commodity prices and therefore were higher in the first quarter of 2005 than in the comparable quarter of 2004. The July 2004 sale of the Company's offshore properties also contributed to an increase in production taxes and marketing expenses on a per BOE basis during 2005, as most of its offshore properties were tax exempt. General and administrative expenses increased 37% between the two first quarter periods, averaging $2.43 per BOE in the first quarter of 2005, up from $1.42 per BOE in the prior year's first quarter. Most of the increase is attributable to approximately $950,000 of incremental consultant fees, primarily related to compliance costs associated with, or audit work related to, the Sarbanes-Oxley Act and approximately $1.0 million of non-cash compensation resulting from the issuance of restricted stock during 2004. Interest expenses decreased on a gross and per BOE basis as a result of lower overall debt levels following the sale of the Company's offshore properties in July 2004, the proceeds of which were used to retire the Company's bank debt, and as a result of approximately $262,000 of interest expense that was capitalized during the first quarter of 2005 related to the CO2 pipeline being constructed to East Mississippi. Depreciation, depletion and amortization expense increased only slightly to $8.05 per BOE from the Company's fourth quarter DD&A rate of $7.98. DD&A for the first quarter of 2004 was $8.19 per BOE. The Company recognized current income tax expense of $5.3 million in the first quarter of 2005 related to anticipated alternative minimum taxes due that will not be offset by the Company's enhanced oil recovery credits. 2005 Outlook Denbury's 2005 development and exploration budget is currently set at $305 million, including estimated costs of the CO2 pipeline being constructed to East Mississippi, as compared to $209.4 million spent during 2004 (excluding acquisitions). Based on current commodity prices and project inventory, it is likely that this capital budget will increase in the near future by as much as $30 million to $50 million. Any acquisitions made by the Company will increase these capital budget amounts. Denbury's total debt as of March 31, 2005 was approximately $225 million, with $200 million undrawn on its recently reaffirmed bank borrowing base. The Company reaffirms its production guidance for 2005 of 31,000 BOE/d, which represents organic growth of over 10% from its average 2004 production levels, after adjusting for the July 2004 offshore sale. The forecasted production from the Company's core operations, its tertiary oil projects, remains unchanged at 10,000 BOE/d for 2005. Gareth Roberts, Chief Executive Officer, said: "We are pleased with our operational results this quarter and our outlook for the future. Production from our tertiary operations was right on forecast, averaging 8,644 Bbls/d, a 19% increase over the fourth quarter tertiary production rates. Our tertiary operations are responding as planned and we continue to expand our tertiary recovery operations in Southwest Mississippi, having started injections at Brookhaven Field and Smithdale Field in the first part of 2005. We have completed one additional CO2 source well thus far this year, which should bring our CO2 production capacity to around 400 MMcf/d, with two or three more CO2 source wells scheduled to be drilled later this year. Our CO2 pipeline to East Mississippi is on track with its forecasted completion date in mid-2006, with a possibility of completing it prior to that date. "We recently acquired additional Barnett Shale acreage at a reasonable cost of approximately $500 per acre, bringing our total net acreage in that area to approximately 43,500 acres. We have shot seismic over our 18,000 net acres in Parker County, Texas and based on a review of that seismic, it appears that only a minimal amount of the area is affected by collapse structures in the underlying Ellenburger formation -- karsting. While we are suffering from cost inflation in our industry, at current commodity prices, we expect to generate record cash flow and earnings this year. Our future continues to look bright." Denbury Resources, Inc. -- http://www.denbury.com/-- is a growing independent oil and gas company. The Company is the largest oil and natural gas operator in Mississippi, owns the largest reserves of CO2 used for tertiary oil recovery east of the Mississippi River, and holds key operating acreage in the onshore Louisiana and Texas Barnett Shale areas. The Company increases the value of acquired properties in its core areas through a combination of exploitation drilling and proven engineering extraction practices. * * * As reported in the Troubled Company Reporter on Mar. 15, 2004, Standard & Poor's Ratings Services affirms its 'BB-' corporate credit rating on Denbury Resources, Inc., and revised its outlook on the company to positive from stable. DIGITAL LIGHTWAVE: To Appeal Nasdaq Delisting Notice ---------------------------------------------------- Digital Lightwave, Inc. (Nasdaq:DIGL) received Nasdaq Staff Determination that the Company fails to comply with the stockholders' equity, market value of listed securities, and the net income from continuing operation requirements set forth in Marketplace Rule 4310(c)(2)(B), and that its securities are, therefore, subject to delisting from the Nasdaq SmallCap Market at the opening of business on May 10, 2005. The Company has requested a hearing before the Nasdaq Listing Qualifications Panel to review the Staff Determination. The request for hearing, filed with The Nasdaq Stock Market on May 6, will stay the delisting of the Company's securities pending a determination by the Nasdaq Listing Qualifications Panel. Pursuant to Nasdaq Marketplace Rule 4820, a hearing shall be scheduled, to the extent practicable, within 45 days of the date of the request for hearing. There can be no assurance the Panel will grant the Company's request for continued listing. On March 29, 2005, the Company previously reported that it had received a notice from the staff of The Nasdaq Stock Market concerning the possible delisting of the Company's securities from the Nasdaq SmallCap Market due to the Company having failed to comply with the continued listing requirements set forth in Marketplace Rule 4310(c)(2)(B), which requires the Company to have a minimum of $2.5 million in stockholders' equity or $35.0 million market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. On April 29, 2005, the Company also previously reported that it is examining other trading alternatives for its common stock, including the OTC Bulletin Board, under the symbol DIGL to be effective immediately following any delisting from the Nasdaq SmallCap Market. The Company cannot, however, provide assurance that its common stock will be quoted on the OTC Bulletin Board or on any other market or quotation service, following any delisting from the Nasdaq SmallCap Market. About the Company Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. Digital Lightwave's customers -- companies that deploy networks, develop networking equipment, and manage networks -- rely on its offerings to optimize network performance and ensure service reliability. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. Network operators and telecommunications service providers use fiber optics to provide increased network bandwidth to transmit voice and other non-voice traffic such as internet, data and multimedia video transmissions. The Company provides telecommunications service providers and equipment manufacturers with product capabilities to cost-effectively deploy and manage fiber optic networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. At Dec. 31, 2004, Digital Lightwave's balance sheet showed a $29,146,000 stockholders' deficit, compared to a $21,140,000 deficit at Dec. 31, 2003. DYNEGY HOLDINGS: Sale Talks Cue Fitch to Junk Sr. Unsecured Debts ----------------------------------------------------------------- Fitch Ratings places the ratings for Dynegy Inc. -- DYN -- and Dynegy Holdings Inc. -- DYNH -- on Rating Watch Positive following the announcement that the company is exploring a sale or strategic monetization of its natural gas mid-stream operations. In addition, the company today released operating results for the first quarter of 2005 which generally reflect modestly improving market conditions in midstream and power generation. The senior unsecured debt at both DYN and DYNH is 'CCC+' and the Rating Outlook prior to today's action was Positive. The Positive Rating Watch reflects the likelihood that a monetization of DYN's midstream assets would be favorable for its creditors and could, if completed, result in a rating upgrade later in 2005. Given strong commodity market conditions and high valuations for comparable transactions, DYN's midstream assets have a significant current value. In addition, DYN would be able to utilize approximately $1.8 billion in tax benefits which would minimize cash tax payments and maximize proceeds available for debt reduction. The company has stated that all proceeds from a transaction would be applied toward debt reduction and has estimated a pro forma net debt-to-capitalization approaching 50%. Based on its preliminary financial analysis of a range of potential transactions, Fitch expects a modest improvement in cash flow derived credit ratios from a sale. In addition, prospective recovery values for all classes of debt should increase although this will depend on the amount of cash received and also on the allocation of funds between the different classes. DYN -- Indicative senior unsecured debt 'CCC+'; -- Convertible debentures 'CCC+'. DYNH -- Secured revolving credit facility and term loan 'B+'; -- Second priority secured notes 'B'; -- Senior unsecured debt 'CCC+'. Dynegy Capital Trust I -- Trust preferred stock 'CC'. DYNEGY INC: Planned Segment Sale Prompts Moody's to Review Ratings ------------------------------------------------------------------ Moody's Investors Service placed the debt ratings of Dynegy Inc. and its rated subsidiaries (Dynegy Holdings Inc., B3 Senior Implied) under review for possible upgrade. This action reflects the company's announcement that it is planning to sell its natural gas liquids business segment, which should provide the opportunity for material debt repayment. The review also reflects the continuing improvement Dynegy has made in its post-Enron restructuring, including selling Illinois Power, sales of non-core assets, mitigation of its tolling obligations, including the Sithe acquisition, and the recent settlement of shareholder lawsuits related to "Project Alpha." Dynegy recently announced that it had settled class action lawsuits related to a 2001 structured transaction known as "Project Alpha" that resolves the last material litigation facing the company. The settlement requires Dynegy to make a $250 million cash payment, which will reduce its liquidity; however, we would expect Dynegy to maintain total liquidity, including cash on hand and availability under its revolving credit facility, of at least $700 million even after the settlement payment. More importantly, this settlement removes a significant source of uncertainty regarding the company's future direction. As a result of the settlement, Dynegy will be able to sell its midstream natural gas liquids business and evaluate other possible strategic transactions. Dynegy's natural gas liquids segment is currently generating about $300 million per year of cash flow, and at current asset sale multiples in the 8 to 10x range, Dynegy could realize $2.5 to $3 billion in total proceeds. In addition, Dynegy has a large income tax net operating loss position that could shelter virtually all of the gain from the sale of this business. Consequently, Dynegy will be able to sell its midstream business in a tax efficient manner and monetize the value of its NOL. Dynegy currently has adjusted debt of about $5.5 billion, which ignores the non-recourse Sithe debt but includes lease obligations and its convertible preferred securities. Moody's expects that Dynegy should be able to prepay at least $2.5 billion of this debt from its sales proceeds, or about 45% of its outstanding debt. Following the midstream sale, Dynegy will be a pure-play electric power generator with greater focus and a lower cost structure. Moody's expects continued consolidation in the merchant power sector and Dynegy will be positioned to participate in this consolidation. The ratings review will include an analysis of Dynegy's expected operating and free cash flow from its power generation business following the midstream disposition, the value of its generation assets relative to its outstanding debt, its capital structure post debt repayment and the company's ongoing working capital requirements of its customer risk management segment. Ratings placed under review include those of Dynegy Inc. and its rated subsidiaries, except Sithe/Independence. Dynegy Inc., headquartered in Houston, Texas, is the parent of Dynegy Holdings Inc. Dynegy's primary businesses are power generation and natural gas liquids. DYNEX POWER: Filing Annual Financial Statements in Mid-May ---------------------------------------------------------- Dynex Power Inc. missed the deadline for filing its financial statements, related management's discussion and analysis, and annual information form for the year ended December 31, 2004. Under the securities laws of the provinces in which Dynex is a reporting issuer, these materials were required to be filed by April 30, 2005. Based on its current expectations, Dynex anticipates that the Annual Filings will be filed on or prior to May 20, 2005. Having come through a difficult restructuring period, followed by a lengthy delay in the arrangement of working capital finance, the Company has been unable to complete its audit prior to the April 30, 2005, deadline and is therefore late in releasing its annual financial statements. Management expects the results to be in line with current expectations for 2004 results. Management Cease Trade Order The Company has received, from the Ontario Securities Commission, on May 6, 2005, a temporary management cease trade order, and the Company has requested a final management cease trade order, related to the Company's securities, which has been imposed against all persons who are directors and senior officers of the Company. The temporary cease trade order prohibits such persons from trading in Dynex's securities for a period of 15 days from the date of that order. The temporary management cease trade order does not, and the management cease trade order will not, affect the ability of persons who have not been directors or officers of the Company to trade in the Company's securities. Under the terms of the temporary management cease trade order, the Company must file its Annual Filings on or before May 21, 2005. The Company currently intends to make all such filings prior to May 20, 2005. Pending the filing of the Annual Filings, the Company will satisfy the alternative information guidelines recommended by the Ontario Securities Commission Policy 57-603 and the Canadian Securities Administrators Staff Notice 57-301 and issue a Default Status Report on a bi-weekly basis during the default period. These reports will disclose any material change in the information contained in this news release and the related material change report. The reports will also disclose, among other things, any failure by Dynex to fulfill its stated intentions during the default period and any other material information concerning the Company's affairs that has not been generally disclosed. About the Company Dynex Power Inc. -- http://www.dynexsemi.com/-- is one of the world's leading suppliers of specialist high power semiconductor products, and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations. Dynex designs and manufactures high power bipolar discrete semiconductors, power modules, including insulated-gate bipolar transistors (IGBTs), and high power electronic assemblies. Dynex products are used world wide in power electronic applications including electric power generation, transmission and distribution, marine and rail traction drives, aircraft, electric vehicles, industrial automation and controls. EAGLEPICHER INC: Moody's Withdraws Rating After Bankruptcy Filing ----------------------------------------------------------------- Moody's Investors Service withdrew all ratings for both EaglePicher Incorporated and parent EaglePicher Holdings, Inc. in connection with their April 11, 2005, voluntarily filing to reorganize under Chapter 11 of the Bankruptcy Code. Per management EaglePicher's liquidity and borrowing ability were severely limited, which restricted the company's ability to proceed with an out-of-court restructuring. EaglePicher has received a commitment for up to $50 million in debtor-in-possession financing. This will facilitate EaglePicher's previously planned divestiture of a number of operating units and enable the company to more effectively restructure its business. These specific ratings were withdrawn: * Caa3 rating for EaglePicher Incorporated 's $250 million of 9.75% guaranteed senior unsecured notes due September 2013; * Caa1 ratings for EaglePicher Incorporated 's $275 million of guaranteed senior secured bank credit facilities, consisting of: -- $125 million revolving credit facility due August 2008; -- $150 million ($142.8 million remaining) term loan B due August 2009; * C rating for EaglePicher Holdings, Inc.'s $166.9 million current balance (including dividend accretion) of 11 3/4% cumulative redeemable exchangeable preferred stock mandatorily redeemable in March 2008; * Caa1 senior implied rating for EaglePicher Holdings, Inc. ; * Ca senior unsecured issuer rating for EaglePicher Holdings, Inc. EaglePicher, headquartered in Phoenix, Arizona, is a diversified manufacturer of products for automotive, defense and aerospace applications, in addition to other industrial niches. Annual revenues currently approximate $710 million ENCORE MEDICAL: Can Fund Cash Needs for One Year, Moody's Says -------------------------------------------------------------- Moody's Investors Service assigned the speculative grade liquidity rating of SGL-3 for Encore Medical IHC, Inc. The SGL-3 rating reflects the company's "adequate" liquidity position and incorporates Moody's expectation that, over the next twelve months, Encore will fund its ordinary working capital, capital expenditures and other cash requirements without accessing external sources. The rating also considers the external committed source of liquidity available for the company, in the form of a $30 million revolving credit facility, to be "adequate." Moody's expects Encore to maintain a modest cushion with respect to its financial covenants. As reported in the Troubled Company Reporter on Sep. 20, 2004, Moody's Investors Service assigned B1 ratings for the guaranteed senior secured bank facilities being arranged for Encore Medical IHC, Inc., including its planned $30 million revolver and $150 million term loan B. Moody's also assigned a Caa1 rating for Encore's new $165 million senior subordinated notes and a B2 senior implied rating. Moody's also assigned a Caa2 senior unsecured issuer rating to Encore Medical Corporation. Moody's projects that over the twelve months ending Dec. 31, 2005, Encore will generate cash flow from operations of approximately $20 million. With an estimated $10-$11 million in capital expenditures, Moody's expects the company to generate free cash flow of $8 to $10 million. In addition, Encore faces term debt amortization payments of $7.5 million in 2005. Integration costs associated with the Empi acquisition are expected to total $3.5 to $4.0 million, including $0.8 million in severance costs in the first quarter of 2005. Operating cash flow is supported by the strong demographic fundamentals of the medical device industry. Growing sales of its electrotherapy products combined with the benefit provided by Empi's products contributed to an increase in gross margin within the rehabilitation division. Gross margin also improved in the surgical division as higher margin products drove the increase in sales and improved product mix. On a consolidated basis, Moody's expects volume growth in the mid single digits. Encore financed its purchase of Osteoimplant Technology, Inc., in February by borrowing $14.7 million on its revolver. Encore will have access to the remaining $15.3 million revolving credit facility to support ongoing working capital and general corporate purpose needs. However, Moody's projects the availability on the remaining revolver to be restricted to approximately $9.5 million at the end of 2005 as the maximum allowable leverage ratio drops to 5.50x from 6.00x. In addition to its revolver, the company had cash balances of approximately $14.3 million at April 2, 2005. Moody's expects Encore to be able to meet its working capital and capital spending plans from it cash flow and does not anticipate the company relying on its revolver for these purposes, but expects the company to consider its use for potential future acquisitions. Moody's projects Encore will maintain only a modest cushion against the financial covenants in the company's bank credit facility and, therefore, the covenants could potentially strain the company's liquidity position. Moody's notes the company's maximum allowed leverage ratio drops to 5.50x in the quarter ending December 31, 2005. Moody's projects the company's leverage ratio to be approximately 5.34x at the end of 2005. Encore is a diversified orthopedic device company that develops, manufactures and distributes a comprehensive range of high quality orthopedic devices, including surgical implants, sports medicine equipment and products for orthopedic rehabilitation, pain management and physical therapy. FARMLAND IND: Wants to Sell Equity Interest in Cooperative Finance ------------------------------------------------------------------ J.P. Morgan Trust Company, N.A., the Liquidating Trustee for the FI Liquidating Trust created under Farmland Industries, Inc., now known as Reorganized FLI, Inc.'s chapter 11 plan, asks the U.S. Bankruptcy Court for the Western District of Missouri for approval to sell a portion of the Debtors' equity interest in The Cooperative Finance Association, Inc., for $163,450 to Shipman Elevator Company. The Liquidating Trustee and Shipman Elevator Company entered into an Asset Purchase and Sale Agreement dated as of April 20, 2005. Shipman will buy a portion of the CFA Interest, specifically the Class B common stock that has been earned for the years 1984 through 2003, for $163,450. The interest consists of non-voting class B common stock with a face value of approximately $8.6 million, representing approximately 22% of the outstanding equity in CFA. Farmland Industries, Inc., was one of the largest agricultural cooperatives in North America with about 600,000 members. The firm operates in three principal business segments: fertilizer production; pork processing, packing and marketing; and beef processing, packing and marketing. The company, along with its affiliates, filed for chapter 11 protection (Bankr. W.D. Mo. Case No. 02-50557) on May 31, 2002 before the Honorable Jerry W. Venters. The Debtors' Counsel is Laurence M. Frazen, Esq. of Bryan Cave LLP. When the Debtors filed for chapter 11 protection, they listed total assets of $2.7 billion and total debts of $1.9 billion. Pursuant to the Second Amended Joint Plan of Reorganization filed by Farmland Industries, Inc. and its debtor- affiliates, the court declared May 1, 2004 as the Effective Date of the Plan. FEDERAL-MOGUL: Court Orders Mediation for Verizon's Complaint ------------------------------------------------------------- At the request of Cellco Partnership doing business as Verizon Wireless, and Bank of America Corporation and Bank of America, N.A., Judge Lyons orders the parties to participate in mediation before the Honorable Vincent A. Bifferato, Esq. Federal-Mogul will not participate in the Mediation at this time. Federal-Mogul contends that the primary dispute lies between Verizon Wireless and BofA. As previously reported, Verizon Wireless asked the Court to compel Federal-Mogul Global, Inc., to turn over $1,120,320 in funds, including interest as a result of a mistake in banking transactions by Mellon Bank and Bank of America. The funds were erroneously deposited into Federal-Mogul's account at Bank of America instead of in the account of Kyocera Wireless Corporation, the named payee on the check. Federal-Mogul asserted six defenses in response to Verizon Wireless' complaint: 1. Verizon's claims against Federal-Mogul fail to state a claim for which relief can be granted. 2. Verizon may not recover on the claims asserted against Federal-Mogul because the claims are barred, in whole or in part, by the doctrine of laches. 3. Verizon may not recover on the claims asserted against Federal-Mogul because the claims are barred in whole or in part, by the doctrines of waiver and estoppel. 4. If Verizon suffered any of the damages alleged in the Complaint, the damages were caused, in whole or in part, by the conduct of persons or entities other than Federal- Mogul; and, in the event that Federal-Mogul is found liable for any damages asserted, it is entitled to have any liability diminished in proportion to the damages attributable to the culpable conduct of the person or entities other than Federal-Mogul. 5. Verizon's claim against Federal-Mogul are barred or diminished by Verizon's failure to mitigate the damages that Verizon alleges to have sustained. 6. Verizon's claims against Federal-Mogul are barred, in whole or in part, by the doctrine of unclean hands. For these reasons, Federal-Mogul asked the Bankruptcy Court to: a. deny the relief sought by Verizon Wireless in its Complaint; b. dismiss the Complaint with prejudice; and c. award Federal-Mogul its costs and expenses, including attorney's fees incurred in the case. Mellon Bank, N.A., told the Bankruptcy Court that it is not liable to Verizon Wireless. To the extent that it has any liability, Mellon Bank asserted that the liability is only passive and secondary, resulting from the active and primary actions or inactions of Federal-Mogul and Bank of America. To the extent any liability is imposed on it in connection with the Complaint, Mellon Bank asserted that it is entitled under the Uniform Commercial Code and other applicable law to be fully indemnified, held harmless and reimbursed for the amount of liability by Federal-Mogul and Bank of America. But Michael Seidi, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., in Wilmington, Delaware, argued that Federal- Mogul is not liable to Mellon Bank because the bank's claims are barred, in whole or in part, by the doctrines of laches, waiver, estoppel, and unclean hands. Mellon's claims are also barred by the applicable statute of limitations, and by its failure to timely file a proof of claim in the Debtors' bankruptcy cases, Mr. Seidi contended. The parties filed motions for dismissal and summary judgment against each other. In his ruling on the summary judgment motions, Judge Lyons found that Mellon Bank was entitled to charge Verizon Wireless' account because the check was properly payable. The Court noted that Section 4-401 does not explicitly fix liability of a bank to its customer "but one must infer that, unless the statute authorizes a bank to charge its customer's account, it may not; and, if a bank charges a customer's account for an item that is not authorized, the bank must reverse the entry." Following the Court's Summary Judgment Order, Verizon and BofA agreed to engage in settlement discussions. Judge Lyons directs the Mediator to assist the Mediating Parties to develop proposals, which will enable them to arrive at a mutually acceptable resolution of the controversy between them. The Mediating Parties will share equally in the mediation cost, including the Mediator's hourly fees. In the event that the Mediator advises the Court that the matter cannot be settled, the Mediating Parties and Federal-Mogul will submit a joint plan of discovery, or otherwise propose individual discovery plans, for the Court's consideration. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and $8.86 billion in liabilities. At Dec. 31, 2004, Federal-Mogul's balance sheet showed a $1.925 billion stockholders' deficit. At Mar. 31, 2005, Federal-Mogul's balance sheet showed a $2.048 billion stockholders' deficit, compared to a $1.926 billion deficit at Dec. 31, 2004. (Federal- Mogul Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) FLINTKOTE CO: Committee Taps Frank/Gecker as Special Counsel ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware gave the Official Committee of Asbestos Personal Injury Claimants appointed in Flintkote Company and its debtor-affiliate's chapter 11 cases permission to employ Frank/Gecker LLP as its special litigation and insurance counsel. The Committee chose Frank/Gecker as its special counsel because of the Firm's substantial experience in asbestos litigation in bankruptcy cases and in complex insurance litigation. Frank/Gecker will: a) represent the Committee in pending and anticipated asbestos related future litigation; b) assist and advise the Committee in its consultations with the Debtor and other parties relative to litigation and insurance related matters; c) perform analyses of the Debtors' insurance policies and the claims asserted against the estates in order to advise the Committee for the purposes of the overall administration of the estate; and d) take all other specialized legal services as agreed upon from time to time by the Committee and Frank/Gecker. The hourly rates of Frank/Gecker's professionals performing services to the Committee are: Professional Hourly Rate ------------ ----------- Frances Gecker $475 Joseph D. Frank $425 Jeffrey M. Glass $320 Frank/Gecker assures the Court that it does not represent any interest materially adverse to the Committee, the Debtors or their estates. Headquartered in San Francisco, California, The Flintkote Company is engaged in the business of manufacturing, processing and distributing building materials. The Company and its affiliate filed for chapter 11 protection on April 30, 2004 (Bankr. Del. Case No. 04-11300). James E. O'Neill, Esq., Laura Davis Jones, Esq., and Sandra G. McLamb, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of more than $100 million. FLINTKOTE CO: Has Until Aug. 30 to Make Lease-Related Decisions --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended, until Aug. 30, 2005, the period within which Flintkote Company and its debtor-affiliate, Flintkote Mines Ltd. can elect to assume, assume and assign, or reject their unexpired nonresidential real property leases. The Debtors explain that they are a party to an unexpired nonresidential lease located at Three Embarcadero Center, Suite 1190, San Francisco, California 94111. That lease is where the Debtors' corporate headquarters is located and is an integral part of their business operations. The present term of the lease will expire on Aug. 31, 2007. The Debtors gave the Court three reasons why the extension is warranted: a) the Debtors are not prepared to assume or reject the unexpired lease at this stage of their bankruptcy cases and obligate their estates for the 2 � years remaining on the lease term; b) the Debtors' continued need for the unexpired lease is directly tied to their continued operations after the confirmation of a proposed plan, which was agreed upon by the Debtors, the Creditors Committee and the Futures Representative to be filed by June 30, 2005; and c) the Debtors' are current on all post-petition obligations under the lease and the extension will not harm the landlord of that lease. Headquartered in San Francisco, California, The Flintkote Company is engaged in the business of manufacturing, processing and distributing building materials. The Company and its affiliate filed for chapter 11 protection on April 30, 2004 (Bankr. Del. Case No. 04-11300). James E. O'Neill, Esq., Laura Davis Jones, Esq., and Sandra G. McLamb, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of more than $100 million. FOOTMAXX HOLDINGS: Balance Sheet Upside Down by $16.24M at Dec. 31 ------------------------------------------------------------------ Footmaxx Holdings, Inc., (TSX VENTURE:FMX) reported that during 2004 the company continued to face the challenges of a strengthening Canadian dollar and changes in the reimbursement policies of corporate health plans in Canada and the United States. The decline in the value of the US dollar, the currency in which Footmaxx transacts the majority of its business, reduced revenues by $623,500 or 4.4% of 2003 revenues. Changes to the reimbursement policies also reduced orthotic demand and volumes. As a result, revenues in 2004 were $13,045,751, a decrease of $992,676 or 7.1% from $14,038,427 in 2003. In order to deal with these challenges the company initiated cost reduction programs in late 2003 and early in 2004 that more than offset the negative impact of decreased revenues. This resulted in the company increasing EBITDA over prior year by $442,254 to $1,661,048. The net loss in 2004 was reduced to $462,354, an improvement of $544,573. 2004 Fourth Quarter Results Fourth quarter revenues for 2004 decreased $20,390, from $3,044,140 in 2003 to $3,023,750 in 2004. An unfavorable exchange rate year over year accounted for a decrease of $139,000. However, orthotic volumes increased year over year by 655 pairs offsetting the decrease caused by foreign exchange by $72,000. Increases in footwear and non-prescription orthotics further reduced the decrease in revenues to $20,501. EBITDA increased $77,579 in the fourth quarter of 2004 to $252,856 from the $175,277 achieved for the fourth quarter of 2003. Fixed cost reduction was the main contributing factor. Net loss for the fourth quarter of $190,036 is $183,735 less that the loss the company incurred for the quarter of $373,771. Fixed cost reduction and a year to date depreciation adjustment of $100,000 re leasehold improvements were the main contributors to the improvement. Overall Performance During 2004 the company continued to face the challenges of a strengthening Canadian dollar and changes in the reimbursement policies of corporate health plans in Canada and the United States. The decline in the value of the US dollar, the currency in which Footmaxx transacts the majority of its business, reduced revenues by $623,500 or 4.4% of 2003 revenues. Changes to the reimbursement policies also reduced orthotic demand and volumes. As a result, revenues in 2004 were $13,045,751, a decrease of $992,676 or 7.1% from $14,038,427 in 2003. In order to deal with these challenges the company initiated cost reduction programs in late 2003 and early in 2004 that more than offset the negative impact of decreased revenues. This resulted in the company increasing EBITDA over prior year by $442,254 to $1,661,048. The net loss in 2004 was reduced to $462,354, an improvement of $544,573. Revenues Revenues for 2003 decreased during the year by $992,676 or 7.1%, to $13,045,751 from $14,038,427. The strengthening Canadian dollar versus the US dollar, accounted for $623,500 of this decrease as approximately 60% of the Company's revenues are in US dollars. Orthotic volume decreased by 3.5%, further decreasing revenues for the year by approximately $400,000. Approximately 75% of the decline was in Canada where changes in corporate and government health plan coverage for orthotics was the primary reason for the decrease. Revenues generated from system placements decreased during 2004 due to a shift in marketing direction from system sales to system rentals, which resulted in the placement of systems remaining strong in 2004. During 2004 the company expanded our product base to include more non-prescription orhotics as well as a full line of shoes that are sold with orthotics. Revenues generated from these products more than offset the decrease in revenues caused by the change in marketing of systems. The revenues in Canada for 2004 were 2.3% below revenues in Canada for 2003 mainly due to orthotic volume decrease and shift to rentals from system sales. There was a 8.9% decrease in revenues from the International business of which 80% was due to the unfavorable foreign exchange situation. Gross Profit Gross Profit for 2004 decreased $544,512 or 6.9% from $7,863,704 in 2003, to $7,319,192 in 2004. The unfavourable net impact of the strengthening Canadian dollar on gross profit was approximately $453,000. Foreign exchange reduced costs at our US manufacturing plant and for certain raw materials and computer hardware purchased from the US. The decrease in gross profit due to the decrease in volume of custom orthotics was approximately $200,000. However this was partially offset by gross profits earned from the sale of new products such as footwear and expanded non-prescription orhotics. Canadian gross profits remained fairly level with 2003 due to cost reduction programs. Gross profit in the International business was mainly impacted by unfavorable foreign exchange rates. Operating Expenses Selling & Administrative expenses decreased $770,753 or 14.2% during 2004. This is the second straight year of fixed expense reduction over 14%. The favourable effect of the stronger Canadian dollar reduced expenses by approximately $157,000; $145,000 in US Selling and $12,000 in finance and administrative for those expenses paid in US dollars. The balance of the $550,967 cost reduction in Field Sales was the result of the cost reduction program implemented late in 2003. Marketing expense reduction of $96,277 was also the result of a cost reduction program implemented early in 2004. Finance and administration reduction was $45,461, the result of various expense reductions realized during the year. Information Technology expenses decreased by $40,324 from $967,643 in 2003 to $927,319 in 2004. This is the result of effective cost control during 2004. Net Loss Net Loss for 2004 is $462,354, which is $544,573 less than the $1,006,927 recorded for 2003. The $544,573 decrease in net loss is the result of the $544,512 decrease in gross profit being more than offset by the $770,753 decrease in Selling and Administrative expenses as well as a $175,689 decrease in unfavourable balance sheet foreign exchange variance. Footmaxx Holdings -- http://www.footmaxx.com/-- produces and globally markets high quality, state-of-the-art foot orthotics. Footmaxx's proprietary software uses advanced computer techniques to produce individually prescribed and technologically superior foot orthotics which reduce foot, knee, hip and lower back pain and enhance both the comfort and performance level of the wearer. For more information on Footmaxx visit: As of Dec. 31, 2004, Footmaxx Holdings' balance sheet showed a $16,243,740 stockholders' deficit compared to a $15,781,386 deficit at Dec. 31, 2003. GEORGIA-PACIFIC: Board Declares Dividends as Net Income Doubled --------------------------------------------------------------- Georgia-Pacific Corporation's (NYSE: GP) board of directors declared a regular quarterly dividend of 17.5 cents per share on the company's common stock. The dividend is payable May 23, 2005 to shareholders of record as of May 13, 2005. During the meeting, the company's chairman and chief executive officer, A.D. "Pete" Correll, told shareholders, "It (2004) was an outstanding year for Georgia-Pacific. Net income more than doubled and we had strong results in all businesses." Correll noted that the board of directors increased the quarterly cash dividend 40 percent in February, reflecting the company's confidence in the overall stability of its earnings base. "In 2005, we will continue to deliver on our promise to improve our financial strength and flexibility to achieve investment-grade ratios and increase value for our shareholders by reducing debt, maximizing cash flow and improving returns on capital. "At the end of the day, our job is all about earning superior returns for our shareholders and delivering top-performing products and services to our customers," Mr. Correll concluded. Headquartered at Atlanta, Georgia-Pacific -- http://www.gp.com/-- is one of the world's leading manufacturers and marketers of tissue, packaging, paper, building products and related chemicals. With 2004 annual sales of $20 billion, the company employs approximately 55,000 people at more than 300 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R), Green Forest(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. Georgia-Pacific's building products manufacturing business has long been among the nation's leading suppliers of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers. * * * As reported in the Troubled Company Reporter on Dec. 20, 2004, Moody's Investors Service changed the outlook on Georgia-Pacific Corporation's ratings to positive from stable, with similar outlook changes initiated for the other entities through which Georgia-Pacific and its subsidiaries and predecessor companies have issued debt. At the same time, Moody's affirmed Georgia- Pacific's senior implied rating at Ba2, and the senior unsecured and issuer ratings at Ba3. Moody's continued its practice of rating debt that is either issued or guaranteed by Fort James Corporation at a level equivalent with the Ba2 senior implied rating, with all other debt rated one notch below at Ba3. Georgia- Pacific's Speculative Grade Liquidity -- SGL -- rating was also affirmed at SGL-2, which indicates good liquidity. * Georgia-Pacific Corporation: -- Outlook changed to positive from stable Ratings affirmed: -- Senior Implied: Ba2 -- Senior unsecured: Ba3 -- Issuer rating: Ba3 -- Speculative Grade Liquidity Rating: SGL-2 * Fort James Corporation: -- Outlook changed: to positive from stable Rating affirmed: -- Senior Unsecured: Ba2 * G-P Canada Finance Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba3 * Fort James Operating Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba2 As reported in the Troubled Company Reporter on May 6, 2004, Standard & Poor's Ratings Services revised its outlook on Atlanta, Ga.-based Georgia-Pacific Corp. (GP) and its subsidiaries to stable from negative, and affirmed its 'BB+' corporate credit and senior unsecured debt ratings. GEORGIA-PACIFIC: T.D. Bell & J.A. Boscia Elected as Directors ------------------------------------------------------------- Georgia-Pacific Corp. (NYSE: GP) shareholders, at their annual meeting on May 3, 2005, elected two new directors and three current directors to new terms, and approved two of three company proposals. Two new directors were elected to serve until the 2008 annual meeting: Thomas D. Bell Vice Chairman President Chief Executive Officer Cousins Properties Inc. -- and -- Jon A. Boscia Chairman Chief Executive Officer Lincoln National Corp. Mr. Bell also serves as a director of Lincoln Financial Group, AGL Resources Inc. and Regal Entertainment Group. Mr. Boscia is also a director of Hershey Foods Corp. Directors elected to serve until the 2008 annual meeting were: James S. Balloun Retired Chairman President Chief Executive Officer Acuity Brands Inc. A. D. "Pete" Correll Chairman Chief Executive Officer Georgia-Pacific -- and -- John D. Zeglis Retired Chief Executive Officer Chairman AT&T Wireless Services Director James B. Williams (72), retired chairman of SunTrust Banks Inc., retired from the board of directors as required by the company's corporate governance guidelines. Mr. Williams joined the Georgia-Pacific board in 1989. He chaired the company's finance committee and served on several board committees, including the executive and governance committee. Williams chaired the SunTrust Banks board of directors from 1998 to 2004. Additionally, shareholders approved the 2005 Georgia-Pacific Corp. Long-Term Incentive Plan. This amendment authorizes an additional 8 million shares for the company's management-level employee incentive program. Shareholders also passed a proposal to ratify Ernst & Young as the company's independent auditors for 2005. Shareholders did not adopt an amendment to eliminate the company's classified board structure. Headquartered at Atlanta, Georgia-Pacific -- http://www.gp.com/-- is one of the world's leading manufacturers and marketers of tissue, packaging, paper, building products and related chemicals. With 2004 annual sales of $20 billion, the company employs approximately 55,000 people at more than 300 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R), Green Forest(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. Georgia-Pacific's building products manufacturing business has long been among the nation's leading suppliers of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers. * * * As reported in the Troubled Company Reporter on Dec. 20, 2004, Moody's Investors Service changed the outlook on Georgia-Pacific Corporation's ratings to positive from stable, with similar outlook changes initiated for the other entities through which Georgia-Pacific and its subsidiaries and predecessor companies have issued debt. At the same time, Moody's affirmed Georgia- Pacific's senior implied rating at Ba2, and the senior unsecured and issuer ratings at Ba3. Moody's continued its practice of rating debt that is either issued or guaranteed by Fort James Corporation at a level equivalent with the Ba2 senior implied rating, with all other debt rated one notch below at Ba3. Georgia- Pacific's Speculative Grade Liquidity -- SGL -- rating was also affirmed at SGL-2, which indicates good liquidity. * Georgia-Pacific Corporation: -- Outlook changed to positive from stable Ratings affirmed: -- Senior Implied: Ba2 -- Senior unsecured: Ba3 -- Issuer rating: Ba3 -- Speculative Grade Liquidity Rating: SGL-2 * Fort James Corporation: -- Outlook changed: to positive from stable Rating affirmed: -- Senior Unsecured: Ba2 * G-P Canada Finance Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba3 * Fort James Operating Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba2 As reported in the Troubled Company Reporter on May 6, 2004, Standard & Poor's Ratings Services revised its outlook on Atlanta, Ga.-based Georgia-Pacific Corp. (GP) and its subsidiaries to stable from negative, and affirmed its 'BB+' corporate credit and senior unsecured debt ratings. HAWAIIAN AIRLINES: Names Rick Fall as Senior Cargo Director ----------------------------------------------------------- Hawaiian Airlines disclosed the appointment of Rick Fall as senior director of cargo sales and service. Mr. Fall is responsible for all aspects of Hawaiian's cargo program but is particularly focused on developing new revenue opportunities within the islands, and between Hawaii and destinations it serves in the Western U.S., the South Pacific, and Australia. "Rick's experience and strong industry ties within Asia Pacific will be especially useful in expanding our growth potential within that region," said Norm Davies, Hawaiian's executive vice president of operations. Mr. Fall brings 34 years of airline experience to Hawaiian, including the past seven years for Continental Airlines as its Honolulu-based director of cargo sales for Asia Pacific. Prior to that, he managed national travel agency sales for Continental in Houston from 1995-1997, as well as for Delta Air Lines in Atlanta from 1990-1995. His airline career began in 1970 with Western Airlines in Los Angeles. Mr. Fall earned his Bachelor of Arts in Sociology from California State University at Long Beach, along with a Masters in Business Administration from National University in San Diego. Hawaiian has earned a special stature within the air cargo industry, being the first federally certified carrier to provide regularly scheduled freight service on March 20, 1942. Its federal cargo certificate number: 001. Hawaiian's conversion to Boeing 767-300 aircraft in 2003 for transpacific service increased its cargo carrying capacity by 34 percent and created new opportunities to transport goods between Hawaii and the West Coast, especially in conjunction with Asia- based carriers. Hawaiian Airlines, Inc. -- http://www.HawaiianAir.com/-- is a subsidiary of Hawaiian Holdings, Inc. (AMEX and PCX: HA). Since the appointment of a bankruptcy trustee in May 2003, Hawaiian Holdings has had no responsibility for the management of Hawaiian Airlines and has had limited access to information concerning the airline. On March 21, 2003, Hawaiian Airlines, Inc., filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the District of Hawaii (Case No. 03-00827). Joshua Gotbaum serves as the chapter 11 trustee for Hawaiian Airlines, Inc. Mr. Gotbaum is represented by Tom E. Roesser, Esq., and Katherine G. Leonard, Esq., at Carlsmith Ball LLP and Bruce Bennett, Esq., Sidney P. Levinson, Esq., Joshua D. Morse, Esq., and John L. Jones, II, Esq., at Hennigan, Bennett & Dorman LLP. The Bankruptcy Court confirmed the Chapter 11 Trustee's Plan of Reorganization on March 10, 2005. HAYES LEMMERZ: Asks Lenders for 30 Days to Complete Title Work -------------------------------------------------------------- Hayes Lemmerz International, Inc., is the borrower under an amended and restated Credit Agreement, originally dated June 3, 2003, governing its existing Senior Secured Term Loan and Senior Secured Revolving Loan. The Amended and Restated Credit Agreement relaxed some financial covenants and increased the Company's ability to fund growth opportunities. Among other things, the Amended and Restated Credit Agreement: * established a new second lien $150 million term loan, from which approximately 50% of the net proceeds were used to repay a portion of the existing Senior Secured Term Loan, with the remainder to be used for general corporate purposes; * reduced the Company's interest rate on the existing term loan by 50 basis points; * favorably modified financial covenants; and * allowed the Company to retain 50% of the net proceeds from the proposed divestiture of its Commercial Highway Hub and Drum business for capital expenditures. * * * On May 4, 2005, Hayes Lemmerz International, Inc., asked the Lenders to consent to a 30-day extension of the time to complete certain post-closing covenants. These post-closing covenants include the completion of title work with respect to certain real property included in the collateral. In a regulatory filing with the Securities and Exchange Commission, Hayes Lemmerz said that no assurances could be given that the lenders will consent to the requested extension. Hayes Lemmerz International, Inc., is a world leading global supplier of automotive and commercial highway wheels, brakes, powertrain, suspension, structural and other lightweight components. The Company filed for chapter 11 protection on December 5, 2001 (Bankr. D. Del. Case No. 01-11490) and emerged in June 2003. Eric Ivester, Esq., and Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meager & Flom represent the Debtors. (Hayes Lemmerz Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on April 11, 2005, Moody's Investors Service assigned a B2 rating for HLI Operating Company, Inc.'s proposed $150 million guaranteed senior secured second-lien term loan facility. HLI Opco is an indirect subsidiary of Hayes Lemmerz International, Inc. The rating outlook remains stable. While the company has reaffirmed its earning guidance and the senior implied and guaranteed senior secured first-lien facility ratings remain unchanged at B1, Moody's determined that widening of the downward notching of HLI Opco's guaranteed senior unsecured notes was necessary to reflect additional layering of the company's debt. The senior unsecured notes are effectively subordinated to the proposed new senior secured second-lien term facility, and approximately $75 million of higher-priority debt will be added to the capital structure. These specific rating actions were taken by Moody's: * Assignment of a B2 rating for HLI Operating Company, Inc.'s proposed $150 million guaranteed senior secured second-lien credit term loan C due June 2010; * Downgrade to B3, from B2, of the rating for HLI Operating Company, Inc.'s $162.5 million remaining balance of 10.5% guaranteed senior unsecured notes maturing June 2010 (the original issue amount of $250 million was reduced as a result of an equity clawback executed in conjunction with Hayes Lemmerz's February 2004 initial public equity offering); * Affirmation of the B1 ratings for HLI Operating Company, Inc.'s approximately $527 million of remaining guaranteed senior secured first-lien credit facilities, consisting of: * $100 million revolving credit facility due June 2008; * $450 million ($427.3 million remaining) bank term loan B facility due June 2009 (which term loan is still expected to be partially prepaid through application of about half of the net proceeds of the proposed incremental debt issuance); * Affirmation of the B1 senior implied rating; * Downgrade to Caa1, from B3, of the senior unsecured issuer rating (which rating does not presume the existence of subsidiary guarantees). HCA INC: Moody's Says Liquidity is Excellent & Cash Flow is Strong ------------------------------------------------------------------ Moody's Investors Service upgraded HCA Inc.'s speculative grade liquidity rating to an SGL-1 from SGL-2. The rating upgrade reflects the company's excellent liquidity position with strong cash flows, an undrawn $1.75 billion, five year revolver, and improved cushion in its financial covenants following the repayment of $700 million in debt during the first quarter of 2005. HCA benefits from having a largely unencumbered asset base, and Moody's notes that HCA recently announced plans to divest ten hospitals that are located in non-strategic markets during 2005. HCA's SGL-1 rating incorporates its relatively strong cash flow generating capabilities. Moody's notes that improvements in HCA's equivalent admission growth rate due to increases in outpatient volume, combined with the recent moderation of bad debt expense due to a declining growth rate of uninsured patients contributed to solid operating performance during the first quarter of 2005. The company's senior implied rating is Ba2 with a stable outlook. HCA Inc., headquartered in Nashville, Tennessee is the nation's largest acute care hospital company operating 190 acute care hospitals and other healthcare facilities in the U.S. and Europe. IRIDIUM OPERATING: Wants Exclusive Period Extended Through July 11 ------------------------------------------------------------------ Iridium Operating LLC and its debtor-affiliates sought and obtained an extension from the U.S. Bankruptcy Court for the District of Delaware of the time within which they alone can file a chapter 11 plan. The Debtors' Exclusive Plan Filing Period is extended through and including July 11, 2005. The Debtors also sought and obtained more time to solicit acceptances of that plan from their creditors, through Sept. 12, 2005. The Debtors have determined an orderly reorganization will maximize the value of their assets and their estates, and deliver the greatest value to their creditors. The Debtors need additional time to build a plan of reorganization that takes into account the substantive changes to the Debtors' businesses. Iridium Operating LLC develops and deploys a global wireless personal communication system. The Company and its debtor- affiliates filed for chapter 11 protection on August 13, 1999 (Bankr. D. Del. Case No. 99-02854). William J. Perlstein, Esq. and Eric R. Markus, Esq. at Wilmer, Cutler & Pickering represent the Debtors in their restructuring efforts. JAMES RIVER: S&P Junks Proposed $150 Mil. Senior Unsecured Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Richmond, Virginia-based coal producer James River Coal Co. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and its recovery rating of '1' to JRCC's proposed $100 million senior secured credit facilities. The bank loan and recovery ratings indicate that bank lenders can expect full recovery of principal in the event of a payment default. In addition, Standard & Poor's assigned its 'CCC+' senior unsecured rating to JRCC's proposed, $150 million of senior unsecured notes due 2012. The ratings on the senior notes reflect the note holders' deeply subordinated position after considering the priority claims of the senior secured creditors. In a bankruptcy scenario, Standard & Poor's expects that the level of priority liabilities relative to the company's distressed collateral value would place note holders at a material disadvantage. All ratings except the recovery rating were placed on CreditWatch with negative implications. "The CreditWatch placement reflects our concern that, if the proposed transaction is not completed, the company's current liquidity of approximately $7 million may be insufficient to fund operating and financing needs," said Standard & Poor's credit analyst Dominick D'Ascoli. "Upon successful completion of the transaction, we will remove all ratings from CreditWatch and assign a stable outlook. All of these newly assigned ratings are based on preliminary terms and conditions and are subject to review upon receipt of final documentation." Proceeds from JRCC's proposed note offering, combined with proceeds from an equity issuance, will be used to refinance existing debt, to fund the acquisition of Triad Mining Inc., and for general corporate purposes. Total book debt outstanding is expected to be about $151 million. With 8.5 million tons of production in 2004, JRCC, which emerged from bankruptcy in May 2004, is a relatively small coal producer with operations heavily concentrated in the difficult, high-cost Central Appalachia region. More than 90% of its 2004 production was from challenging underground thin coal seam mines, which are generally more prone to operating disruptions than surface mining. JRCC's proposed acquisition of Triad is expected to improve the company's operating and geographic diversity. Triad is located in the Illinois basin region in Indiana and primarily operates surface mines. The proposed senior secured credit facilities consist of: -- A five-year $25 million revolving credit facility maturing 2010; and -- A seven-year $75 million synthetic letter of credit facility maturing in 2012. The facilities will be secured by a perfected first-priority security interest in substantially all of the company's tangible and intangible assets and stock. Standard & Poor's believes that a potential payment default could be caused by the combination of numerous factors, including: (1) weak coal prices; (2) higher production costs, especially as a result of mine disruptions and inefficiencies; (3) new government regulations making certain mines uneconomical; or (4) access to developing and mining new reserves becoming prohibitive. MAGNOLIA INC: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Magnolia's Inc. dba Magnolia's International Spa and Wellness Center 382 Millburn Avenue Millburn, New Jersey 07041 Bankruptcy Case No.: 05-25545 Type of Business: The Debtor operates a spa. Chapter 11 Petition Date: May 9, 2005 Court: District of New Jersey (Newark) Debtor's Counsel: David Edelberg, Esq. Nowell Amoroso Klein Bierman, P.A. 155 Polifly Road Hackensack, New Jersey 07601 Tel: (201) 343-5001 Fax: (201) 343-5181 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Taylor Danar $1,910,973 25 Farley Road Short Hills, NJ 07078 Taylor Danar $351,660 25 Farley Road Short Hills, NJ 07078 Bank of America $88,875 290 Millburn Avenue Millburn, NJ 07041 Elaine Danar $48,000 25 Farley Road Short Hills, NJ 07078 Ultima Moda $38,705 5 Alpaugh Farm Road Lebanon, NJ 08833 American Express $19,845 Ultima Moda $19,000 Visa $16,112 Advanta Bank Corporation $15,693 M. Luis Plumbing & Heating, LLC $15,288 Mastercard Advanta $12,791 Aetna $10,199 Steve D'Angelo $9,794 Michelle Koster $9,494 The Buchholtz $9,456 Takara Belmont USA, Inc. $7,406 Levitt & Cerciello $7,145 Artstone, Inc. $5,400 American Express $5,256 Jersey Central Power & Light $4,314 MARKWEST ENERGY: Form 10-K Filing Delay Cues S&P to Watch Ratings ----------------------------------------------------------------- Standard & Poor's Rating Services placed its 'B+' corporate credit rating on MarkWest Energy Partners L.P. on CreditWatch with negative implications after the company's announcement that its Form 10-K filing would be further delayed and that it would be required to restate its 2002 through 2004 financial statements. MWE has not filed its Form 10-K on time as a consequence of identifying material weaknesses under Section 404 of the Sarbanes- Oxley Act, primarily involving reporting processes in its Southwest business unit. In addition, both MWE and MarkWest Hydrocarbon Inc., the majority interest holder in MWE's general partner, have now determined that they must file restatements for 2002 through 2004 to reflect compensation expense for the sale of interests in MWE's general partner. "The CreditWatch listing reflects concern about repeated and protracted delays in the company's Form 10-K filing, uncertainty about the magnitude of impending restatements, the possibility that further delays could reduce the partnership's liquidity, and the risk of material weaknesses being greater in scope than expected," said Standard & Poor's credit analyst Plana Lee. MWE has obtained covenant waivers from its banks under its revolving credit facilities until June 30, 2005. The company was previously granted a waiver through April 30, 2005, which it was unable to meet. MWE has also received an extension to regain compliance from the American Stock Exchange until May 31, 2005, having missed its previous May 2 deadline. MCDERMOTT INT'L: March 31 Balance Sheet Upside-Down by $232 Mil. ---------------------------------------------------------------- McDermott International, Inc. (NYSE:MDR) reported net income of $22.4 million, for the 2005 first quarter, compared to a net loss of $10.9 million, for the corresponding period in 2004. Weighted average common shares outstanding on a fully diluted basis were approximately 70.8 million and 65.3 million for March 31, 2005 and March 31, 2004, respectively. Revenues in the first quarter of 2005 were $439.1 million, compared to $499.3 million in the corresponding period in 2004. Operating income was $40.7 million in the 2005 first quarter, compared to an operating loss of $2.1 million in the 2004 first quarter. Included in the first quarter 2005 operating income was approximately $2.5 million of corporate qualified pension expense, compared to $15.3 million in the first quarter 2004. The year- over-year reduction in corporate qualified pension expense reflects the previously announced spin-off of The Babcock & Wilcox Company's pension plan and related expense which was completed on January 31, 2005. In addition, beginning January 1, 2005, McDermott now allocates to its Government Operations segment the related pension expense of that segment. "The Company has started the year off right by delivering strong first quarter results," said Bruce W. Wilkinson, Chairman of the Board and Chief Executive Officer of McDermott. "McDermott has now produced net income for four consecutive quarters and, as a result of this performance, our liquidity continued to strengthen. Both of our consolidated operating segments continued to deliver solid results in the quarter, but as McDermott, and particularly J. Ray, continues to deliver finished projects to our customers, it is becoming more essential that we obtain new awards to replace the recently completed work. I am optimistic that as the year progresses, we will start to see J. Ray's backlog build again." Marine Construction Services Segment Revenues in the Marine Construction Services segment were $286.6 million in the 2005 first quarter, compared to $365.8 million a year ago. The year-over-year reduction in revenues resulted primarily from the 2004 completion of several large EPIC projects and decreased fabrication activity on projects in Louisiana, partially offset by a field development project in Australia and a number of marine installation projects in the Middle East and Asia Pacific regions. Segment income for the 2005 first quarter was $29.1 million, compared to a segment loss of $3.6 million in the 2004 first quarter. Major items contributing operating income to the 2005 first quarter were change orders, contract close-outs and settlements on projects in the Caspian, Asia Pacific and Middle East regions, increased international marine operations, increased activity in our Mexican ship repair facility and gains on sales of assets. At March 31, 2005, J. Ray's backlog was $1.1 billion, compared to backlog of $1.25 billion and $1.3 billion at December 31, 2004 and March 31, 2004, respectively. Government Operations Segment Revenues in the Government Operations segment increased $19.1 million, to $152.6 million in the 2005 first quarter, compared to $133.5 million a year ago. The increase was primarily due to higher volumes in the manufacture of nuclear components for certain U.S. government programs, and increased revenues from commercial nuclear environmental services and other commercial work, including increased uranium downblending. Segment income increased $4.3 million, to $24.0 million, compared to the 2004 first quarter, primarily due to higher volume and margins from the manufacture of nuclear components for certain U.S. government programs, timing on the recognition of equity in income from investees and increased commercial activity. These improvements were partially offset by the previously announced corporate allocation of $5.3 million related to qualified pension expense, which in prior years resided in the corporate segment. At March 31, 2005, BWXT's backlog was $1.7 billion, essentially equivalent to the backlog at both December 31, 2004 and March 31, 2004. The Babcock & Wilcox Company The Company wrote off its remaining investment in B&W of $224.7 million during the second quarter of 2002 and has not consolidated B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy filing in February 2000. B&W's revenues were $344.7 million in the first quarter of 2005, a decrease of $32.4 million compared to the first quarter of 2004. B&W's net income for the 2005 first quarter was $12.7 million, compared to $24.2 million in the corresponding period in 2004. About the Company McDermott International, Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy. At Mar. 31, 2005, McDermott International, Inc.'s balance sheet showed a $232,051,000 stockholders' deficit, compared to a $261,443,000 deficit at Dec. 31, 2004. MCG COMMERCIAL: Portfolio Credit Quality Average Rating Up B+/B --------------------------------------------------------------- Fitch Ratings upgrades one class and affirms one class of notes issued by MCG Commercial Loan Trust 2001-1. These rating actions are effective immediately: -- $34,237,410 class A notes affirmed at 'AAA'; -- $35,363,000 class B notes upgraded to 'AA' from 'A'. There are three primary reasons for this rating action. First, credit enhancement has improved due to reduced leverage. On the April 20, 2005 payment date, the class A note received $36.5 million in principal distributions. This payment leaves 14.89% of the original note remaining. In total, 55.32% of the capital structure has been redeemed leaving $158 million in collateral to cover $69.6 million in rated notes. Secondly, significant excess spread continues to provide strong credit enhancement. Lastly, there has been improved credit quality of the collateral. Since the last review, the credit quality of the portfolio has improved to an average rating of 'B+/B' from an average rating of 'B- /CCC+'. These ratings are the result of Algorithmics' Credit Rating System model. Algorithmics is an affiliate of Fitch Ratings. The ratings of the class A and class B notes address the likelihood that investors will receive full and timely payments of interest on scheduled interest payment dates, as well as the stated balance of original principal on the final payment date. MCG Commercial Loan Trust 2001-1 is a collateralized loan obligation that closed on Dec. 27, 2001. The portfolio is a static pool, with no discretionary trading. Substitution is limited to defined circumstances not to exceed 20% of the original portfolio balance. The servicer is MCG Capital (Nasdaq: MCGC), based in Arlington, Virginia. The rated liabilities are supported by the cash flows of a static portfolio of high-yield loans to middle market U.S. businesses, a majority of which are privately owned. The loans were made for the purpose of working capital, growth, acquisitions, and recapitalizations. The loan obligors operate in several industries including industrial and consumer manufacturing, transportation and services. A majority of the loans are subordinate loans, with the remaining balance divided between senior unsecured and senior secured obligations. 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/ MCI INC: Pays $118.2 Million to Settle Tax Dispute with Miss. ------------------------------------------------------------- MCI Inc. agrees to pay $118.2 million to the State of Mississippi to settle a tax dispute, according to Dana Cimilluca at Bloomberg News. The company will pay $100 million to the state, $14 million to cover the Attorney General Jim Hood's fees and donate $4.2 million to the Children's Justice Center of Mississippi. "It will come in handy to deal with our budget deficit," Mr. Hood told Laura Hipp at the Clarion Ledger. The attorney general wants lawmakers to use the funds for education and law enforcement. The settlement is subject today to the U.S. Bankruptcy Court for Southern District of New York's approval. If the Court will approve the settlement, the money will be transferred to state accounts 10 days later. The state of Mississippi alleged that MCI 's back taxes reached $1 billion, Ms. Hipp continues. KMPG LLP -- MCI's accounting firm -- is being investigated for the remaining $900 million. According to Ms. Hipp the attorney general said that MCI evaded paying some taxes from 1998 to 2002 by declaring income from its out-of-state subsidiaries as royalties. Mr. Hood adds that the income should have been counted as corporate income. Part of the deal between MCI and the state includes old Worldcom's headquarters in Jackson which is valued at approximately $7 million. MCI is also facing tax evasion suits from other states and has yet to settle with them. "We're in productive discussions with the other states, and look forward to reaching a settlement of this matter," MCI spokesman Peter Lucht told Bloomberg. He declined to say when other settlements will be reached or how much they will be. 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. MCI INC: Shareholders Urge Qwest to Revive Offer ------------------------------------------------ Bloomberg News reports that some of MCI, Inc.'s largest shareholders want Qwest Communications International, Inc., to continue its pursuit to acquire MCI. These shareholders include Fairholme Capital Management LLC, Elliot Associates LP and Omega Advisors, Inc. "I'm not giving up on this," Fairholme President Bruce Berkowitz told Bloomberg. "I told [Qwest] to come back to the table." According to Dana Cimillucca at Bloomberg News, Fairholme owns about 3.4% of MCI stock as of December 2004. Elliott Associates holds a 3.5% stake in MCI as of April 1, 2005. Omega Advisors owns 3.7% of MCI stock as of April 11, 2005. As previously reported, the MCI Board of Directors concluded that Verizon Communication, Inc.'s $26 per share offer is superior to Qwest's $30 per share bid. "From the standpoint of risk versus reward, Verizon's revised offer presents MCI with a stronger, superior choice," Nicholas deB. Katzenbach, MCI Board Chairman said in a press release. 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. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. MCLEODUSA INC: Asks Court to Enter Final Decree to Close Case ------------------------------------------------------------- McLeodUSA Incorporated wants the U.S. Bankruptcy Court for the District of Delaware to enter a final decree formally closing its chapter 11 case. The Plan is fully consummated, and the administration of McLeodUSA's chapter 11 estate is complete. It is therefore necessary and appropriate that the Bankruptcy Court enter a final decree closing the case. The only matter remaining in this case is resolution of two proofs of claim filed by New Millenium Growth Fund LLC. The Proofs of Claim involve substantially the same claims asserted in a lawsuit initiated by New Millenium prior to the Petition Date, captioned In re McLeodUSA Incorporated Securities Litigation, Civil Action No. C02-1(MWB), currently pending in the U.S. District Court for the Northern District of Iowa, Cedar Rapids Division. The U.S. District Court for the District of Delaware granted the joint motions of McLeodUSA and New Millenium to withdraw the reference of the Claims Objection from the Bankruptcy Court and to transfer venue of the Claims Objection to the Iowa District Court. Accordingly, no pending matters remain before this Court, and McLeodUSA's chapter 11 case has been fully administered. McLeodUSA Inc. -- 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 March 31, 2005, 38 ATM switches, 39 voice switches, 699 collocations, 432 DSLAMs and approximately 2,300 employees. As of April 16, 2002, Forstmann Little & Co. became a 58% shareholder in the Company. At March 31, 2005, McLeodUSA's balance sheet showed a $127.6 million stockholders' deficit, compared to a $46.8 million deficit at Dec. 31, 2004. The Company filed for a prepackaged chapter 11 petition on January 20, 2002 (Bankr. D. Del. Case No. 02-10288). David S. Kurtz, Esq., and Gregg M. Galard, Esq., at Skadden, Arps, Slate, Meagher & Flom, represented McLeodUSA in its restructuring. On April 5, 2005, the Court confirmed the Debtor's Plan of Reorganization and the Plan became effective on April 16, 2002. Reorganized Company in Trouble As reported in the Troubled Company Reporter on May 6, 2005, 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. 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. MESA 2002-1: Moody's Pares Ratings on Classes B-1 & B-2 to Low-B ---------------------------------------------------------------- Moody's Investors Service downgrades two certificates and confirms one certificate issued by MESA 2002-1 Global Issuance Company. The transaction is a resecuritization backed by another residential mortgage backed security. The Class M-2 is being confirmed while the Class B-1 and B-2 certificates are being downgraded based on the weak performance of the underlying security as well as the reduced level of credit enhancement provided by the overcollateralization and the subordinated classes relative to the current projected losses. Complete rating actions are: Issuer: MESA 2002-1 Global Issuance Company Confirm: Class M-2, current rating A2, confirmed at A2 Downgrade: Class B-1, current rating Baa2, downgraded to Ba1; Class B-2, current rating Ba2, downgraded to B3. MIRANT CORP: Wants to Expand Scope of Deloitte's Engagement ----------------------------------------------------------- Mirant Corporation and its debtor-affiliates have asked Deloitte & Touche, LLP, for assistance in their determination of whether certain special purpose entities should be consolidated in the financial statements under FASB Interpretation No. 46 as it relates to power purchase agreements in place at Mirant Mid- Atlantic and Jamaica Public Service Company. The Debtors asked Deloitte to assist management in its preparation of accounting analyses and in reaching its conclusions as to the appropriate accounting treatment of certain MirMA and JPS contracts. Deloitte commenced providing these services on February 25, 2005. In this regard, the Debtors ask the U.S. Bankruptcy Court for the Northern District of Texas to expand the scope of Deloitte's engagement, effective as of February 25, to provide the Consolidation Services. The Debtors are banking on Deloitte's relevant experience. The consolidation issues are complex and relatively new, and Deloitte has expertise in the analysis of the PPAs as variable interests. Given Deloitte's background and experience, the Debtors believe that the firm is both well qualified and able to provide the expanded services in their Chapter 11 cases in the most efficient and timely manner. The Debtors propose to pay Deloitte its customary hourly rates for services rendered. The rates to be charged for the Consolidation Services are: Partner/Principal $600 Director $550 Senior Manager $475 Manager $400 Senior Consultant $325 The rates are consistent with Deloitte's applicable rates charged to its non-bankruptcy clients. The Debtors also propose to reimburse Deloitte for its expenses. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) MOUNT SINAI: Good Performance Prompts S&P's Stable Outlook ---------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook to stable from negative on Mount Sinai NYU Health Obligated Group's outstanding bonds. In addition, Standard & Poor's affirmed its 'BB' rating on New York State Dormitory Authority's bonds, issued for Mount Sinai NYU Health Obligated Group. "The outlook has been revised to stable from negative due to improved, though still negative, operating results; increased liquidity; and the stabilization of the senior management teams of Mount Sinai Hospital and NYU Hospitals Center," said Standard & Poor's credit analyst Liz Sweeney. Mount Sinai Hospital's and NYU Hospitals Center's key senior managers have been in place for about two years. The rating continues to reflect Mount Sinai NYU Health's challenges, which include: (1) negative operating results; (2) weak balance sheet characteristics, including slim liquidity and high leverage; (3) looming capital needs; and (4) the obligated group members' continued need to use off- balance-sheet financing and asset sales to access capital and boost bottom lines. Other than the joint and several obligation for the series 2000A-D bonds, the redefining of the obligated group into separate entities has been effectuated. The boards and management of the two key participants, Mount Sinai Hospital and NYU Hospitals Center, operate independently and the parties intend to disaffiliate legally as soon as they can refund the existing debt. The parent continues to actively monitor the financial performance of the members of the obligated group and their compliance with the bond covenants. The obligated group also includes NYU Hospitals Center's affiliate, Hospital For Joint Diseases, which intends to merge fully into NYU Hospitals Center in the next 12 months. However, the refunding process is difficult, given the credit levels of the three parties and the regulatory hurdles in New York State, and a refunding could take a few years. In the meantime, Standard & Poor's analysis will still focus on the obligated group and system results, which serve as the basis for the rating, while it conducts separate discussions with Mount Sinai Hospital, NYU Hospitals Center, and Hospital For Joint Diseases to understand the obligated group's component results. Operating results are on a positive trend, even though they were negative in 2004, and results for the first three months of 2005 are very encouraging across the obligated group. Although the results for the full year may not mirror the first quarter's unexpectedly strong results, overall operating performance in 2005 is expected to represent continued improvement over 2004. In addition, the improved liquidity provides a modest cushion in the event of an unexpected shortfall. NETWORK INSTALLATION: Insufficient Cash Spurs Going Concern Doubt ----------------------------------------------------------------- Network Installation Corp. (OTC Bulletin Board: NWKI, NWKIE) reported its financial results for fiscal year 2004. The Company also disclosed a change in its revenue recognition policy from the 'Completed Contracts Method' to the 'Percent Completed Method'. Network Installation recorded record revenue of $1,889,739 for the year ended December 31, 2004. Network Installation CEO Jeffrey R. Hultman stated, "While the Company did report record revenue for 2004, our new management team in place just 60 days, has put together a very aggressive growth strategy which we believe should yield considerably greater growth in 2005. Our current project backlog is already at a record level of over $1.8 million." "Furthermore, I've been fortunate in my experiences to have headed up two significant high growth ventures and believe we have another here with Network Installation," Mr. Hultman added. "I've also engineered approximately a dozen acquisitions of various size and scope. I feel we have identified several potentially significant acquisition candidates which if consummated, could considerably accelerate our path to achieving critical mass." "We've changed our revenue recognition policy from the 'Completed Contracts Method' to the 'Percent Completed Method', which is the preferred method of many companies in our industry," Network Installation CFO Michael V. Rosenthal said. "We believe that by doing so, investors should receive a more fair and accurate assessment of our financial progress." Now compliant with its 10-KSB filing, Network Installation has notified Nasdaq and was informed that after a brief customary review, its shares should once again begin trading under its normal ticker symbol within a few days. Going Concern Doubt Network Installation's independent auditors raise substantial doubt about the Company's ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Dec. 31, 2004, pointing to insufficient cash flows for operations. "Our audited financial statements for the fiscal year ended December 31, 2004, reflect a net loss of $4,167,705," the Company stated in its Annual Report. "These conditions raise substantial doubt about our ability to continue as a going concern if we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital needs. Without such external funding, we would have to materially curtail our operations and plans for expansion." At Dec. 31, 2004, Network Installation's balance sheet showed a $1,877,631 stockholders' deficit, compared to a $2,594,707 deficit at Dec. 31, 2003. About Network Installation Network Installation Corp. -- http://www.networkinstallationcorp.net/ -- provides communications solutions to the Fortune 1000, Government Agencies, Municipalities, K-12 and Universities and Multiple Property Owners. These solutions include the design, installation and deployment of data, voice and video networks as well as wireless networks including Wi-Fi and Wi-Max applications and integrated telecommunications solutions including Voice over Internet Protocol applications. NORSTAN APPAREL: Will Auction Assets on May 19 ---------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of New York approved Norstan Apparel Shops Inc.'s application to auction its assets to the highest and best bidder on May 19, 2005, at 10:00 a.m., at the offices of Katten Muchin Rosenman LLP located at 575 Madison Avenue in Manhattan. Qualified bidders must submit bids not later than 12:00 p.m. on May 13, 2005. Objections, if any, must be filed with the Court by May 19 at 4:00 p.m. The Court will convene a sale hearing on May 26, 2005, at 11:00 a.m. $26 Million Bid in Hand Fashion Cents Acquisition LLC offers to buy the assets for $14 million in cash and assume more than $12 million in liabilities. In the event that Fashion Cents isn't the successful bidder at the May 19 auction, it is entitled to a $200,000 break-up fee. Copies of the bidding procedures and the offer from Fashion Cents Acquisition are available at Norstan's counsel: Katten Muchin Rosenman LLP Attn: Merritt A. Pardini, Esq. Tel: 212-940-8800 Email: merritt.pardini@kattenlaw.com Information concerning the assets may be obtained through Norstan's marketing agent: Abacus Advisors Attn: Alan Cohen Tel: 212-751-9150 Email: acohen@abacusadvisor.com Headquartered in Long Island City, New York, Norstan Apparel Shops Inc., dba Fashion Cents, operates 229 retail stores selling women's budget-priced apparel. The stores are located in 24 states throughout the Midwestern, Midsouthern, Mid-Atlantic and southeastern regions of the United States. The Company and its debtor-affiliates filed for chapter 11 protection on April 8, 2005 (Bankr. E.D.N.Y. Case No. 05-15265). Jeff J. Friedman, Esq., at Katten Muchin Zavis Rosenman represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $19,637,000 and total debts of $44,776,000. OWENS CORNING: Court Sets May 17 Conference on Bondholder Suit -------------------------------------------------------------- On April 30, 2001, an action was filed against certain of Owens Corning's current and former directors and officers, as well as certain underwriters in the United States District Court for the District of Massachusetts. The suit, styled as John Hancock Life Insurance Company, et al. v. Goldman, Sachs & Co., et al., purports to be a securities class action on behalf of purchasers of certain unsecured debt securities of Owens Corning in offerings occurring on April 30, 1998 and July 23, 1998. The complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 since the registration statements pursuant to which the offerings were made: -- contained untrue and misleading statements of material fact; and -- omitted to state material facts. John Hancock Life Insurance Company, et al., amended the Complaint on July 5, 2001, seeking an unspecified amount of damages or, where appropriate, rescission of the plaintiffs' purchases. Goldman, Sachs & Co., et al. filed a motion to dismiss the action on November 20, 2001. Goldman Sachs' motion was heard on April 11, 2002. The District Court denied the request in August 2002. On March 9, 2004, the District Court granted class certification as to those claims relating to written representations but denied certification as to claims relating to alleged oral representations. A status conference on the matter is set for May 17, 2005. Owens Corning, although not named in the class action suit, believes that the claim is without merit. 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. 107; Bankruptcy Creditors' Service, Inc., 215/945-7000) PACIFIC ENERGY: Earns $3.4 Million of Net Income in First Quarter ----------------------------------------------------------------- Pacific Energy Partners, L.P. (NYSE:PPX) disclosed that recurring net income for the three months ended March 31, 2005, was $10.3 million, or $0.34 per limited partner unit, compared to $8.1 million, or $0.31 per limited partner unit, in the first quarter of 2004. Recurring net income for the first quarter of 2005 excludes: -- a $2.0 million expense associated with clean-up of the Line 63 oil release that occurred on March 23, 2005; -- a $3.1 million expense related to the accelerated vesting of restricted units under the Partnership's long-term incentive plan, as a result of the change in control caused by the purchase of the Partnership's general partner by LB Pacific, LP on March 3, 2005; and -- a $1.8 million expense incurred as a result of the general partner transaction. This expense is required by generally accepted accounting principles to be reported as a Partnership expense, even though these costs were reimbursed to the Partnership. The reimbursement is accounted for as a capital contribution to the Partnership. This expense is charged to the general partner in calculating the net income applicable to the limited partner units. Including the non-recurring expenses, net income for the three months ended March 31, 2005, was $3.4 million, or $0.17 per limited partner unit. The results for the first quarter reflect the benefit of the acquisition of the Rangeland pipeline system, higher pipeline volumes on the West Coast and in the Rocky Mountains, lower spending for Pacific Terminals, and the benefit of tariff increases on Line 2000 in May 2004 and on Line 63 in November 2004. Partially offsetting these increases were significantly lower gathering and blending margins for Pacific Marketing and Transportation -- PMT, and pipeline repair costs associated with earth movement and stream erosion due to heavy rainfall in Southern California. "Our first quarter results continue to show the strength of our strategic business units," stated Irv Toole, President and CEO. "The Pacific Terminals storage and distribution system continues to produce strong financial results in our West Coast Business Unit. Our Rocky Mountain Business Unit has enjoyed increased market share for pipeline shipments, as well as the benefit of the Canadian pipelines we acquired in 2004. We're excited about the growth potential in both of our business units." On April 22, 2005, the Partnership announced an increase in its cash distribution to $0.5125 per unit for the first quarter of 2005, or $2.05 per unit annualized. This represents an increase of 2.5% over its fourth quarter 2004 distribution level and 5.1% over its first quarter 2004 distribution level. The distribution will be paid on May 13, 2005, to holders of record as of May 2, 2005. Irv Toole commented, "We're pleased to increase our cash distributions again this quarter. We've made substantial progress in the reclamation of the Line 63 oil release and are happy to report that Line 63 is back in operation. Our underlying business remains strong, and we look forward to further increases in our cash distributions as we execute our development plans for the Rangeland pipeline system, complete additional acquisitions, and pursue key expansion and development projects." Distributable cash flow available to the limited partners' interest for the first quarter of 2005 was $16.8 million. On a weighted average and diluted basis, there were 29,673,000 limited partner units outstanding during the first quarter of 2005, approximately 18% more units outstanding than in the first quarter of 2004. Pacific Energy Partners, L.P. -- http://www.PacificEnergy.com/-- is a master limited partnership headquartered in Long Beach. Pacific Energy is engaged principally in the business of gathering, transporting, storing and distributing crude oil and other related products in California and the Rocky Mountain region, including Alberta, Canada. Pacific Energy generates revenues primarily by transporting crude oil on its pipelines and by leasing capacity in its storage facilities. Pacific Energy also buys, blends and sells crude oil, activities that are complementary to its pipeline transportation business. * * * As reported in the Troubled Company Reporter on Jan. 25, 2005, Moody's Investors Services assigned a B1 rating to LB Pacific, LP's $170 million Term Loan B -- TLB, to be secured by 34.6% of the subordinated equity units of Pacific Energy Partners, LP's -- PPX -- and by the equity of Pacific Energy GP, LLC -- PEGP -- which holds the 2% general partner interest in PPX. Moody's affirms PPX's Ba2 senior unsecured note and Ba1 senior implied ratings and stable outlook. PPX is a midstream oil master limited partnership and PEGP is its general partner. PEGASUS SATELLITE: Asks Court to Okay PCC Tax Reporting Settlement ------------------------------------------------------------------ Pegasus Communications Corporation is the parent company of a group of corporations that have historically filed and are required to continue filing consolidated income tax returns for federal income tax purposes and also, to the extent applicable, for state and local income tax purposes. Until 2004, the PCC Affiliated Group has included Pegasus Satellite Communications, Inc., and certain other Debtors. For U.S. federal income tax purposes, PSC can join in the filing of a consolidated return with the PCC Affiliated Group so long as PCC or another member of the PCC Affiliated Group owns at least 80% of both the total voting power of the stock in PSC and 80% of the total value of the stock of PSC. However, as of January 1, 2004, the Debtors and PCC believe that this ownership test was no longer met. PCC informed the Debtors that, effective January 1, 2004, it intends to cease treating PSC as a corporation eligible to join in the filing of a consolidated return with the PCC Affiliated Group. Accordingly, the Debtors believe that it is no longer appropriate for PSC and its subsidiaries to join in the filing of a consolidated federal income tax return as members of the PCC Affiliated Group for federal income tax purposes. Upon the disaffiliation of the PSC Group from the PCC Affiliated Group, the ability of the PSC Group to utilize net operating losses arising from the PSC Group's prior operations became dependent, in part, on PCC's apportionment to the PSC Group of limitations and certain related tax attributes applicable to the PCC Affiliated Group's use of NOLs. Without PCC's apportionment, the PSC Group would be limited in using certain NOLs properly attributable to it to offset taxable income from the sale of the Debtors' assets, which would significantly reduce the amount of cash available for distribution to the creditors. Following the January 1, 2004 disaffiliation of the PSC Group from the PCC Affiliated Group, the U.S. Bankruptcy Court for the District of Maine approved a global settlement among the Debtors, DIRECTV, Inc., National Rural Telecommunications Cooperative, PCC and certain members of the Official Committee of Unsecured Creditors, pursuant to which the Debtors sold to DIRECTV substantially all of the assets of the Debtors' direct broadcast satellite business. Following the Satellite Sale, the Debtors began negotiations with the Creditors Committee and PCC over the terms of a sale of the Broadcast Assets. During these negotiations, disputes arose between PCC, on one hand, and the Debtors and the Creditors Committee, on the other, over the apportionment of the PCC Affiliated Group's overall limitations and related tax attributes affecting use of NOLs. To resolve these disputes, the Debtors and PCC have entered into a settlement agreement that governs certain aspects of the Parties' conduct in reporting their federal, state and local income tax liabilities. This would include the determination and calculation of their tax attributes, as well as other tax-related matters with respect to the Debtors' Chapter 11 cases. By this motion, the Debtors ask the Court to approve, and make binding on all entities, the Settlement Agreement. Three underlying principles establish the basis for the Settlement Agreement: a. Each member of the PSC Group has been a member of the affiliated group of corporations validly filing a consolidated tax return for U.S. federal income tax purposes of which PCC is the common parent for taxable periods ending on or before December 31, 2003; b. Each member of the PSC Group ceased to be a member of the PCC Affiliated Group: (1) in the filing of a consolidated U.S. federal income tax return under Section 1501 et. seq. of the Internal Revenue Code of 1986, as amended; and (2) in the filing of any applicable consolidated, unitary, combined or similar state and local income tax return as of and for taxable periods ending on or after January 1, 2004; and c. Each member of the PSC Group has been a member of an affiliated group eligible to file a consolidated tax return for U.S. federal income tax purposes of which PSC is the common parent under Section 1501 et. seq. of the Code and any applicable consolidated, unitary, combined or similar state and local income tax return, for taxable periods ending on or after the Disaffiliation Date. According to Guy S. Neal, Esq., at Sidley Austin Brown & Wood LLP, in New York, the PSC Group, not the PCC Group, will be entitled to further use of the portion of the consolidated NOLs of the PCC Affiliated Group properly attributable to the PSC Group under the applicable income tax regulations. However, due to certain changes in the stock ownership of PCC prior to the Disaffiliation Date, Mr. Neal says, the use of some of those consolidated NOLs is limited. Under the income tax regulations, Mr. Neal relates, the PSC Group cannot use the NOLs except to the extent that PCC elects to apportion to the PSC Group all or part of the limitations applicable to the PCC Affiliated Group's use of the NOLs. The PCC will make the apportionment on the PCC Affiliated Group's 2004 consolidated income tax return due September 15, 2005. The Settlement Agreement contains dispute resolution provisions to allow for a final determination of amounts in accordance with applicable tax laws prior to the due date for filing the PCC Group's return on September 15, 2005. Mr. Neal tells the Court that the Settlement Agreement also puts in place provisions designed to preserve the value of the PSC Group's NOLs, which includes provisions that the PCC Group: (a) will not prematurely take a worthless stock deduction which could adversely affect the availability of the NOLs; (b) will not amend its income tax returns in a manner that could adversely affect the PSC Group; (c) will provide the PSC Group with advance copies of its tax returns implementing the settlement; and (d) will allow the Liquidating Trustee access to its books and records and to participate in any tax audit that could affect the Settlement Agreement. Moreover, Mr. Neal adds, the Settlement Agreement allows the PCC Group to participate in further proceedings in the event the Court does not approve the Settlement Agreement by the Administrative Bar Date, including through potential extensions of the Administrative Bar Date for the PCC Group. The Settlement Agreement will terminate on June 15, 2005, unless an order approving it has become a final order. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 215/945-7000) PHELPS DODGE: Inks Pact to Invest $3M in Fortress Over Two Years ---------------------------------------------------------------- Phelps Dodge Exploration Corporation has now completed two agreements with Fortress Minerals Corp. In the first agreement, Fortress has an option to earn an 80% interest in PDEC's subsidiary Svetloye Gold Corporation, formerly named PD Russia Inc. SGC holds a 100% indirect interest in the Svetloye gold project, Khabarovsk Region of eastern Russia. Fortress has paid US$500,000 to PDEC to earn a 51% interest in SGC. The remaining 29% interest will be granted by SGC upon the earlier to occur of: (a) completion of drilling and trenching earn-in requirements; and (b) completion of additional drilling and trenching requirements or conversion of the exploration license to a mining license. The Svetloye project has high grade gold mineralization outcropping at surface and an aggressive drill program is scheduled for 2005 by Fortress. In a second agreement, Fortress has entered into a regional wide Mongolian alliance with PDEC in which PDEC can earn up to a 70% interest in any of Fortress's copper, gold, silver and molybdenum projects in Mongolia. The earn-in is subject to certain investments by PDEC in Fortress, and the funding of certain exploration and development programs on the properties. PDEC will invest US$3.0 million by way of private placement over two years into Fortress (US$1.7 million in Year 1 and US$1.3 million in Year 2) at Cdn$0.80 per share in Year 1 and at market price plus 50% in Year 2. The private placement has received TSX Venture Exchange approval and Fortress has received the Year 1 payment of US$1.7M. Phelps Dodge Corporation is a global leader in the mining and manufacturing industries, employing more than 13,500 people in 27 countries. As reported in the Troubled Company Reporter on Mar. 29, 2005, Moody's Investors Service upgraded Phelps Dodge Corporation's senior unsecured ratings to Baa2 from Baa3. Moody's also upgraded the prospective ratings under Phelps Dodge's $600 million shelf filing. The upgrade is based on the improvement in Phelps Dodge's capital structure and operating performance over the past three years as the company's efforts to reduce debt were accelerated by greatly improved copper and molybdenum prices over the past 18 months, and Moody's expectation that the company will be able to sustain improved debt protection measurements over the intermediate term. The rating outlook is stable. Ratings upgraded are: Phelps Dodge Corporation: * Senior unsecured notes, to Baa2 from Baa3; * Shelf registration for senior unsecured debt, to (P)Baa2 from (P)Baa3; * junior subordinated debt to (P)Baa3 from (P)Ba1; * cumulative preferreds, subordinated preferreds and jr. participating cumulative preferreds to (P)Ba1 from (P)Ba2; and * PD Capital Trust I and PD Capital Trust II guaranteed trust preferreds to (P)Baa3 from (P)Ba1. Cyprus Amax Minerals Company: * Senior unsecured notes, legally assumed by Phelps Dodge, to Baa2 from Baa3 As reported in the Troubled Company Reporter on December 15, 2003, Fitch has changed the Rating Outlook on Phelps Dodge to Positive from Stable and affirmed the company's senior unsecured rating at 'BBB-', commercial paper at 'F3' and the company's mandatory convertible preferred at 'BB+'. PURADYN FILTER: To Submit Plan of Action to Retain AMEX Listing --------------------------------------------------------------- puraDYN Filter Technologies Inc. (AMEX:PFT) received a letter of notice from the Staff of the American Stock Exchange indicating that the Company is below certain of the Exchange's continued listing standards. Specifically, as set forth in Sections 1003(a)(i) and (ii) of the AMEX Company Guide, the Company has sustained: -- losses from continuing operations and/or net losses in two out of its three most recent fiscal years with stockholders' equity of less than $2 million; and -- losses from continuing operations and/or net losses in three out of its four most recent fiscal years with stockholders' equity of less than $4 million. The Company has been given the opportunity to submit a plan to the AMEX outlining actions it has taken, or will take, over the next 18 months that will bring it into compliance with continued listing standards. The Company intends to submit a compliance plan to AMEX by May 31, 2005 and the Company's Common Stock continues to trade on AMEX. If AMEX accepts the plan, the Company may be able to continue its listing during the plan period of up to 18 months, during which time the Company will be subject to periodic review to determine whether it is making progress consistent with the plan. If the plan is not accepted by AMEX, or if accepted but the Company is not in compliance with continued listing standards at the end of the 18-month period, or has not made progress consistent with the plan, the AMEX may still elect to initiate delisting proceedings with regard to the Company's Common Stock. "As outlined in our 2004 earnings release, the Company is currently in the process of raising capital. This capital is necessary to meet the ongoing listing requirements of AMEX as well as providing the funding needed to advance our business plan," said Joseph V. Vittoria, Chairman. About the Company puraDYN (AMEX: PFT) designs, manufactures and markets the puraDYN(R) Bypass Oil Filtration System, the most effective filtration product on the market today. It continuously cleans lubricating oil and maintains oil viscosity to safely and significantly extend oil change intervals and engine life. Effective for internal combustion engines, transmissions and hydraulic applications, the Company's patented and proprietary system is a cost-effective and energy-conscious solution targeting an annual $13 billion potential industry. The Company has established aftermarket programs with several of the transportation industry leaders such as Volvo Trucks NA, Mack Trucks, PACCAR; a strategic alliance with Honeywell Consumer Products Group, producers of FRAM(R) filtration products; and continues to market to major commercial fleets. puraDYN(R) equipment has been certified as a 'Pollution Prevention Technology' by the California Environmental Protection Agency and was selected as the manufacturer used by the US Department of Energy in a three-year evaluation to research and analyze performance, benefits and cost analysis of bypass oil filtration technology. * * * As reported in the Troubled Company Reporter on Apr. 20, 2005, puraDYN Filter Technologies Inc. reported financial results for the fiscal year ended December 31, 2004. Net sales for the year totaled approximately $2.5 million as compared with approximately $1.91 million in 2003, an increase of approximately 30%. Net loss was approximately $3.58 million, compared with a net loss of approximately $4.05 million in the previous year. This increase in net sales is attributable to the addition of several new domestic and international distributors, which expanded the Company's distribution network by 22%. The company also benefited from an increase in sales to one of its largest customers, and a marked increase in sales through the OEM customer base. Efforts to streamline operating costs were evidenced by the decrease in selling, general, administrative and salary expenses by approximately $142,000 in 2004, a decrease of 4%. Cost of sales increased by approximately $243,000, an increase of 10% primarily due to the 30% increase in net sales. Cost of sales did not increase proportionately to net sales due to the increased utilization of overhead and improvements in raw material sourcing. The Company is currently working with private investors, including current stockholders, in raising funds in the amount of approximately $2.6 million. Going Concern Doubt As a result of these funds not being secured as of the date of filing and in light of Company's need for additional funds in 2005 and beyond, the audit opinion of Daszkal Bolton LLP, the Company's independent registered public accounting firm, contained a going- concern explanatory paragraph. The American Stock Exchange rules require AMEX-listed companies to publicly announce whenever a Form 10-KSB includes an audit opinion containing a going concern explanation. QUIGLEY COMPANY: Plan Solicitation Period Extended Until Aug. 1 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York extended the time period during which Quigley Company Inc. has the exclusive right to solicit acceptances of its proposed Plan of Reorganization from its creditors. The Debtor's exclusive solicitation period now runs through August 1, 2005. The Debtor filed its Chapter 11 Plan of Reorganization and Disclosure Statement on March 4, 2005. The Debtor gave the Court four reasons in support of the extension: a) the Debtor's chapter 11 case is large and complex, with 60,000 pre-petition Civil Actions and more than 160,000 Asbestos Personal Injury Claims pending as of the Petition Date; b) since the Debtor filed its Plan, it has been involved in negotiations and exchanges of information with the interested parties, including the Creditors Committee and the Future Demand Holders' Representative in order to reach a consensus on the terms of the Plan; c) there are still open issues yet to be resolved by Quigley, the Creditors Committee and the Future Demand Holders' Representative, and once an agreement is reached on those issues, Quigley will file an amended plan and request a hearing on an amended disclosure statement that will accompany an amended plan; and d) the extension will not harm the Debtor's creditors because the Creditors Committee and the Future Demand Holders' Representative both support the extension. Headquartered in Manhattan, Quigley Company is a subsidiary of Pfizer, Inc., which used to produce and market a broad range of refractories and related products to customers in the iron, steel, glass and other industries. The Company filed for chapter 11 protection on Sept. 3, 2004 (Bankr. S.D.N.Y. Case No. 04-15739) to resolve legacy asbestos-related liability. When the Debtor filed for protection from its creditors, it listed $155,187,000 in total assets and $141,933,000 in total debts. Michael L. Cook, Esq., at Schulte Roth & Zabel LLP, represents the Company in its restructuring efforts. Albert Togut, Esq., at Togut Segal & Segal serves as the futures representative. REGIONAL DIAGNOSTICS: Gets Interim Nod on Postpetition Financing ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Ohio gave Regional Diagnostics, L.L.C., and its debtor-affiliates interim authority: a) to obtain post-petition financing pursuant to Section 363 and 364 of the Bankruptcy Code from Merrill Lynch Capital in its capacity as Post-Petition Agent for itself and the Post- Petition Lenders; b) to use Cash Collateral securing repayment of pre-petition obligations to the Pre-Petition Lenders; and c) to grant liens, super-priority claims and adequate protection to Merrill Lynch, the Post-Petition Lenders, and the Pre-Petition Lenders. Pre-Petition Debt Under various Credit and Loan Agreements, the Debtors owe: Pre-Petition Lender Amount Owed ------------------- ----------- Pre-Petition Lenders (under a Revolving Loan & Term Loan Facility $30,100,000 Subordinated Lenders (under a Sr. Subordinated Loan Agreement) $13,500,000 ----------- $43,600,000 DIP Financing and Cash Collateral The Court allows the Debtors to obtain up to $2,250,000 of DIP Loans from the Post-Petition Lenders under a Post-Petition Financing Agreement. The Debtors will use the proceeds of the DIP Loans from Merrill Lynch and the Post-Petition Lenders and the Pre-Petition Lenders' Cash Collateral for their operating expenses and to serve the Debtors' employees, suppliers and vendors. The Pre-Petition Lenders have consented to the Debtors' limited use of the Cash Collateral. The Debtors will use the proceeds from the DIP Loans and the Cash Collateral in strict compliance with a 14-week Budget covering the period from April 22 to July 19, 2005. A full-text copy of the Budget is available at no charge at: http://bankrupt.com/misc/RegionalDiagnosticsBudget.pdf To adequately protect their interests, Merrill Lynch, the Post- Petition Lenders, and the Pre-Petition Lenders are granted additional and replacement liens on all of the Debtors' post- petition assets. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C., -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. REGIONAL DIAGNOSTICS: Look for Bankruptcy Schedules on June 19 -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Ohio gave Regional Diagnostics, L.L.C., and its debtor-affiliates more time to file their Schedules of Assets and Liabilities, Statements of Financial Affairs, Schedules of Current Income and Expenditures, Statements of Executory Contracts and Unexpired Leases and Lists of Equity Security Holders. The Debtors have until June 19, 2005, to file those documents. The Debtors explain that they have identified a number of creditors and other parties in interest that will be likely included in their Schedules and Statements. But due to the size and complexity of the Debtors' bankruptcy cases, and the fact that many pre-petition invoices have not yet been received or entered into the their accounting system, they need the extension to gather all the information necessary to prepare and file their respective Schedules and Statements. The Debtors relate that the extension will ensure that the Schedules and Statements they will file are accurate and complete and enable them to easily manage their transition to chapter 11. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C., -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. ROYAL GROUP: Weakened Profitability Prompts S&P to Lower Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on Royal Group Technologies Ltd. to 'BB' from 'BBB-'. At the same time, Standard & Poor's removed its ratings on Royal Group from CreditWatch, where they were placed with negative implications Oct. 15, 2004. The outlook is currently negative. The ratings reflect a transitioning management team, and short- term problems such as weak liquidity, weak internal controls, and near-term refinancing requirements. The ratings also reflect longer-term issues such as weakening profitability and a low return on capital. These risks are partially offset by the company's adequate annualized cash flow protection and moderate leverage. "Although the moderate debt leverage, steady free cash flow generation, and an underlying solid business profile have supported the ratings through a very difficult year, we now believe that the distractions caused by the criminal investigations and governance problems have resulted in (and exposed) both short- and long-term problems," said Standard & Poor's credit analyst Daniel Parker. "Accordingly, the overall business and financial profile do not currently support an investment-grade rating," added Mr. Parker. Despite significant improvement with regards to corporate governance, the company is still in transition as it seeks to hire a permanent chief executive officer and chief financial officer. The company has also proposed five new independent candidates to join the board following its annual general meeting. S&P believes it will take at least several quarters before new management and the board decide on any major strategic decisions, and before new management would be able to learn the business. The company has multiple business lines and requires a continued focus on efficiencies and operations to maintain its competitive position. In addition, the required initiatives to address the short-term issues could take at least several quarters. The outlook is negative. If the company does not address its weak liquidity and inefficient debt structure in the next eight months, the ratings could be lowered further. The current ratings can tolerate weak profitability and cash flow in the medium term, but only under the assumption that financial performance trends will not further deteriorate. Standard & Poor's believes profitability will be hampered by: (1) high resin prices, (2) a strong Canadian dollar, and (3) the potentially negative effects of rising interest rates on the housing and home renovation markets. RURAL CELLULAR: March 31 Balance Sheet Upside-Down by $618 Million ------------------------------------------------------------------ Rural Cellular Corporation (NASDAQ:RCCC) reported first quarter 2005 financial results. Richard P. Ekstrand, President and Chief Executive Officer, commented: "We are pleased to announce next generation product availability in all of our regions. The added functionality and features are being met with growing demand and increased LSR. Also affirming our strategy, we are capturing an increasing number of next generation outcollect minutes in all our regions." Mr. Ekstrand added, "RCC's financial performance reflects the transition to our next generation networks, with increases in service revenue, and includes $46.8 million in EBITDA, which is in line with our previous guidance." RCC's first quarter operating highlights reflect: -- Continued construction of next generation networks and handset transition, -- Growing number of next generation roaming minutes, and -- Increased service revenue reflecting higher LSR and USF payments. Revenue and Customers Service Revenue The Company's service revenue increased 6.9% to $94.7 million for the quarter. This increase resulted from LSR increasing to $47 for the quarter compared to $43 last year. Driving the higher LSR were increased access and features revenue together with increased USF payments. These payments were $8.4 million during the first quarter of 2005 compared to $2.8 million last year. The Company's customer pass-through charges were $3.4 million during the quarter compared to $2.4 million for 2004. Customers Reflecting the strong demand for next generation technology, the Company's postpaid gross customer additions increased to approximately 43,000, compared to 39,000 in 2004. Additionally, migrations to GSM and CDMA handsets during the quarter were approximately 56,000. Last year, the Company upgraded 30,000 TDMA handsets during the quarter. RCC's total customers were 726,747 at March 31, 2005 compared to 729,811 at December 31, 2004. Affecting the Company's customer churn this quarter were TDMA customer service challenges in its Northeast and Northwest regions. The Company believes the primary drivers for this churn are technical issues on its TDMA network and the saturation of its call centers resulting from activations and migrations, and other calls dealing with billing and technical questions. Roaming Revenue During the first quarter, 57% of the Company's roaming minutes came from next generation technology compared to less than half of total roaming minutes during the fourth quarter of 2004. Roaming revenue of $19.6 million reflects the decline in roaming yield to $0.14 per minute in 2005 compared to $0.18 per minute in 2004. Impacting roaming revenue during the quarter was the accelerated transition by the Company's national roaming partners to next generation technology handsets. The Company believes it did not capture available roaming revenue, primarily in its South region, due to the next generation handset conversion of its roaming partners, which was ahead of RCC's next generation network overlays. Also contributing to the decline was the effect of the transfer of the Northwest Region Oregon 4 service area to AWE on March 1, 2004. During January and February of 2004, the Oregon 4 service area provided approximately $2.5 million of roaming revenue. Equipment Subsidy Reflecting strong customer demand for next generation products, the Company's net per customer subsidy this quarter declined 14% to $53 compared to last year. Equipment revenue increased 63.9% to $9.1 million for 2005. Cost of equipment sales increased 44.3% to $14.4 million for 2005. Operating Costs Network Cost RCC's network cost for first quarter of 2005 increased 13.7% to $26.7 million, reflecting additional costs of operating multiple networks (analog, TDMA and next generation networks), increased incollect expense, and 104 cell sites newly activated since March 31, 2004. Per minute incollect cost for the first quarter of 2005 was approximately $0.12 per minute compared to $0.13 last year. Selling, General and Administrative During the first quarter of 2005, SG&A increased 16.7% to $35.5 million. The increase primarily reflects sales and marketing costs increasing 21.1% to $14.9 million from the market launch of next- generation technology products. Also contributing to the increase in SG&A was a 39.5% increase in regulatory pass-through fees to $3.4 million. Interest Expense Interest expense for 2005 decreased 22.1% to $42.7 million. The decrease primarily reflects the $11.8 million write-off of debt issuance costs under our former credit agreement in March 2004. RCC did not repurchase preferred securities during the first quarter of 2005. Network Construction and Capital Expenditures Capital expenditures for the first quarter were approximately $26.1 million, reflecting the activation of new cell sites for its next-generation networks together with other network overlay, edge-out and expansion efforts in all regions. RCC anticipates total capital expenditures for 2005 to be approximately $100 million. About the Company Rural Cellular Corporation, based in Alexandria, Minnesota, provides wireless communication services to Midwest, Northeast, South and Northwest markets located in 15 states. At March 31, 2005, Rural Cellular's balance sheet showed a $617,901,000 stockholders' deficit, compared to a $596,338,000 deficit at Dec. 31, 2004. SPANISH BROADCASTING: Moody's Rates $425M New Debts at Low-B ------------------------------------------------------------ Moody's Investors Service upgraded the long-term ratings of Spanish Broadcasting System, Inc. Additionally, Moody's assigned B1 ratings to Spanish Broadcasting System, Inc.'s first lien senior secured credit facilities ($25 million first lien revolving credit facility and $300 million first lien term loan) and a B2 rating to the $100 million second lien term loan. The rating outlook is stable. The upgrade reflects the expectation of meaningful deleveraging and improvement in operating opportunities going forward, balanced by a still high debt burden and aggressive acquisition strategy. Moody's has assigned these ratings: * a B1 rating to the $25 million first lien revolving credit facility * a B1 rating to the $300 million first lien term loan * a B2 rating to the $100 million second lien term loan Moody's has upgraded these ratings: * the $75 million of Cumulative Exchangeable Redeemable Preferred Stock to Caa1 from Caa2 * the senior implied rating to B1 from B2, and * the senior unsecured issuer rating to B2 from B3. The outlook is stable. Proceeds from the transaction and cash on hand will be used to repay the company's $335 million 9-5/8% senior subordinated notes due 2009 and the existing senior secured credit facilities. Following the refinancing, Moody's will withdraw its ratings on these issues. The transaction results in no incremental leverage. The upgrade reflects SBS's more conservative capitalization, the resulting reduction in debt service, and an improved liquidity position, following the close of pending non-strategic asset divestitures (4 stations for aggregate gross proceeds of $202 million). The upgrade also incorporates Moody's view that SBS's strategic alliance with Viacom is a credit positive, analogous to an equity infusion in the company (10% equity investment in SBS). This partnership marks a departure from SBS' previous debt-financed acquisition strategy, as SBS acquired an additional radio station in the San Francisco area without the incurrence of any incremental debt. The upgrade also recognizes the strength of media giant, Viacom, as a financially conservative partner and the potential benefit to SBS through cross-promotional efforts on Viacom's CBS network and outdoor advertising properties. The company's ratings continue to benefit from the significant underlying asset value of its large market radio stations which provide ample coverage of total debt and preferred, even in the most reasonable downside scenarios. Additionally, SBS' ratings are supported by management's successful track record for improving operations and cash flow at its acquired stations. The fundamentally favorable economic and demographic trends within the Hispanic market and the increase in advertising targeting Hispanics continue to provide SBS with growth. Despite anticipated debt reduction efforts, SBS remains highly leveraged and SBS' ratings incorporate the likelihood that the company's aggressive acquisition strategy will persist. SBS operates in highly competitive urban markets. While SBS evidences a proven track-record, maintaining profitable growth may be challenging as programming costs and marketing expenditures increase in response to competition, often from better capitalized companies (especially in the LA market). SBS will remain vulnerable to the concentration of its cash flows and potential economic fluctuations in its three larger markets - NY, Miami and LA (at 30%, 25% and 24% of revenues, respectively). The stable outlook incorporates the likelihood that SBS will continue to grow revenues and improve profitability of existing and newly acquired stations. The ratings may enjoy further positive ratings momentum, if SBS remains focused on permanent debt reduction, favoring the use of its free cash flow and proceeds from pending asset sales to maintain leverage at or below 5 times total debt and preferred-to cash flow going forward. However, to the extent that the company uses debt to finance additional acquisitions or strategic diversification (e.g. Spanish language TV) and this increases leverage above current levels, the outlook may be revised to negative. Pro forma for the proposed transaction and asset sales, SBS's total debt-to-EBITDA is about 7.6 times and total debt + preferred-to-EBITDA is about 9 times for YE2004. Moody's expects leverage and interest coverage to improve meaningfully in the near term as the company intends to use $120 million of cash proceeds from pending asset sales to paydown their existing debt, strengthening SBS' balance sheet and financial flexibility. Additionally, Moody's expects leverage to further improve over time, as the acquired stations are integrated improving margins at these more developed stations. Moody's believes that SBS's sizeable pro forma cash balance of approximately $53 million provides the company with good liquidity. The B1 ratings on SBS's $325 million in senior secured first lien credit facilities reflects the senior-most position of this class of debt and the debt protection measures provided by the credit agreement. The facilities are secured by all of the capital stock and assets of the borrower and its subsidiaries, and also benefit from subsidiary guarantees (excluding certain Puerto Rico subsidiaries). The B2 rating on the $100 million in senior secured second lien term loan reflects their second-priority claim to the company's assets. The Caa1 rating on the existing preferred stock reflects their junior position to senior secured debt in the capital structure. Spanish Broadcasting, based in Miami, Florida, currently owns and operates 20 radio stations targeting the Hispanic radio audience. SPIEGEL INC: Can File Senior Debt Financing Letters Under Seal -------------------------------------------------------------- As previously reported, the U.S. Bankruptcy Court for the Southern District of New York approved Spiegel Inc. and its debtor- affiliates' work fee letters with GE Corporate Financial Services, Inc., Credit Suisse First Boston LLC, and JPMorgan Chase Bank, N.A., dated March 22, 2005. The Debtors continued their negotiations with the Prospective Lenders who performed due diligence regarding the provision of a Senior Debt Facility to Eddie Bauer, Inc., as would be reorganized pursuant to the Debtors' Chapter 11 plan of reorganization. As a result of those negotiations, Spiegel, Inc., Eddie Bauer, JPMorgan Securities Inc., JPMorgan Chase Bank, General Electric Capital Corporation, and CSFB have entered into a commitment letter, pursuant to which: (a) JPMorgan Chase Bank has severally committed to provide $150 million for the Senior Debt Facility; (b) GECC will lend $90 million of the Senior Debt Facility; and (c) CSFB has committed to provide $60 million of the Senior Debt Facility. Marc B. Hankin, Esq., at Shearman & Sterling LLP, in New York, informs the Court that the Senior Debt Facility will consist of a six-year $300 million term loan facility. The Loans will be repayable in quarterly installments for each 12-month period following the closing date of the Senior Debt Facility, and will be made in a single drawing on the Closing Date. Mr. Hankin discloses that JPMorgan Securities and GECC Capital Markets Group, Inc., are willing to act as joint lead arrangers and joint bookrunners for the Senior Debt Facility. In addition, JPMorgan Chase Bank is willing to act as the administrative agent, GECC as the syndication agent, and CSFB as the documentation agent. Each of the Joint Lead Arrangers intends to syndicate the Senior Debt Facility to a group of lenders to be identified by the Joint Lead Arrangers in consultation with the Debtors, Mr. Hankin relates. The Commitment Letter also obligates Spiegel and Eddie Bauer to jointly and severally indemnify the Commitment Parties and certain other related parties from and against claims and causes of action arising out of the Commitment Letter, the Senior Debt Facility, and the Debtors' Chapter 11 cases. In no event will that indemnification provision apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of the indemnified person. Spiegel, Eddie Bauer, JPMorgan Securities, JPMorgan Chase Bank, GECC, and CSFB have also entered into an underwriting fee letter. In addition, Spiegel, Eddie Bauer, JPMorgan Securities and JPMorgan Chase Bank have entered into an administrative fee letter. The Fee Letters specify the fees and expenses to be paid by the Debtors in consideration for the commitments and agreements of the Commitment Parties under the Commitment Letter. According to Mr. Hankin, the Administration Fee Letter calls for an annual administration fee, which fee will be payable in advance commencing on the Closing Date of the Senior Debt Facility and thereafter, until all amounts owed are paid in full. Pursuant to the Underwriting Fee Letter, one-half of the fees provided for will be fully earned and non-refundable on the date that the order approving the Debtors' request becomes final. The remaining portion of those fees will be earned and payable on the Senior Debt Facility Closing Date. The Fee Letters and the Commitment Letter also provide for the reimbursement of reasonable out-of-pocket expenses incurred by the Commitment Parties in connection with the contemplated transactions. The Debtors have agreed that the fees and expenses set forth in the Commitment Letter and the Fee Letters will constitute allowed administrative expense claims against them pursuant to Sections 503(b) and 507(a)(1) of the Bankruptcy Code, whether or not the Senior Debt Facility is consummated. Accordingly, the Debtors sought and obtained Judge Lifland's permission to enter into and perform under the Commitment Letter and Fee Letters and pay the corresponding fees and expenses. A full-text copy of the Commitment Letter is available for free at http://bankrupt.com/misc/Commitment_Letter.pdf Mr. Hankin says that the Fee Letters contain detailed proprietary information concerning the payable fees. That information is generally considered by the Commitment Parties, as well as the investment banking and finance lending industry as a whole, to be highly valuable and confidential information that is not generally disclosed to the public, or otherwise made accessible to competing financial institutions. The Debtors attest that the fees and fee structure set forth in the Fee Letters are competitive, fair and reasonable for financings, and in accordance with the customary practice in the finance lending industry from which the Debtors are seeking the Senior Debt Facility. Consequently, pursuant to Section 107(b) of the Bankruptcy Code and Rule 9018 of the Federal Rules of Bankruptcy Procedure, the Court authorized the Debtors to file the Fee Letters under seal. The Fee Letters will not be made available to anyone other than the Court, the United States Trustee and the Creditors Committee. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000) STAR GAS: Moody's Confirms Junk Ratings After Review ---------------------------------------------------- Moody's Investors Service confirmed the Caa1 senior implied rating and the Caa3 notes rating for Star Gas Partners. This ratings action concludes our review of the ratings. The current ratings reflect: (1) the continued weakness in the company's base heating oil business evidenced by three years of declining EBITDA trends resulting from still high attrition rates, customer conservation, still high operating costs, inherent margin volatility, and intense competition; (2) the uncertainty surrounding whether the company will use the excess cash proceeds from the sale of the propane business to tender for the senior notes; (3) readily accessible liquidity sources aside from the excess sales proceeds that can easily accommodate very high wholesale heating oil prices through the next heating season, coupon on the senior notes and ongoing operational needs; (4) the potential impact of shareholder litigation; and (5) the need for continued improvement in information flow from senior management. The ratings are supported by a new management team that has significant operating experience and the company's position as the largest heating oil distribution company in the U.S. The negative outlook reflects the near term expectation that volumes will likely continue to decline given continued customer attrition and conservation rates. Though there has been an improvement in operating performance in Q2'05: (1) the new strategic plan implemented by management still needs to clearly demonstrate a sustainable improvement in earnings and cash flow through the next heating season; (2) no clear plan for permanent debt reduction and better working capital management which continues to put pressure on the current capital structure; and (3) that the shareholder lawsuits will not have a material impact on the company. A stable outlook would require management to demonstrate that it has achieved at least some degree of sustained stability of the operations and that there is a significant reduction of debt or at least a catalyst for debt reduction before any additional value is lost to bondholders. Upon the sale of the propane business in December 2004, the company reported that it recognized approximately $146 million of excess proceeds (as defined under the indenture). Though the indenture permits up to a year to either tender for a portion of the 10.25% senior unsecured notes or invest in new assets, it was Moody's understanding that the company originally intended to tender for the notes for an amount equal to the excess sales proceeds as soon as possible. However, the company has reported that it had used approximately $54 million of the cash to fund working capital needs despite obtaining a new credit facility in December 2004 and has not given any clear indication on whether they will ultimately tender for the notes at all. While the company had the cash on hand to supplement its funding sources, it does however, indicate that the company's working capital needs have been underestimated for outlier price spikes and that the company's cash burn rate appears to be far outpacing cash inflows to date. Under the new credit facility, the company either had to meet a 1.1x fixed charge coverage test or leave at least $25 million available under the facility. Since the company has not been able to meet the coverage test thus far, it has to leave $25 million undrawn and thus has significantly relied on a portion of the cash proceeds to fund the spike in working capital. The underlying heating oil business has been on a significant decline for the past three years with that trend expected to continue through this year as signaled by the Q2'05 earnings announcement. The company reported EBITDA for the quarter is reportedly $62 million, adjusted for the $67 million goodwill write-off and $3.1 million associated with the severance of the former CEO. While this figure has quickly and substantially improved over Q1'05 EBITDA of $0, it is still about $11 million lower than the same quarter a year ago. Given that the last two quarters of the fiscal year are negative quarters, Moody's estimates Star Gas' EBITDA (adjusted for no-recurring items) for FYE 9/30/05 will range between $10 million and $20 million. Even at the high end of these estimates, Star Gas would still be approximately more than 60% lower than FY 2004 EBITDA levels and would result in the third consecutive year of declines in this business. The company reported debt of $401.4 million at 3/31/05, which includes the $265 million par value of 10.25% senior notes at the MLP and approximately $133 million of borrowings and $49.2 million of L/C's under the operating partnership's $260 million credit facility, leaving $57.6 million available under the facility. Near-term liquidity appears adequate to cover expected capex of about $1.4 million during the next two quarters and the next bond coupon payment of $13.6 million due 8/15/05. Liquidity cover is provided by cash on hand of about $105 million, which includes retention of the excess propane sales proceeds of approximately $92 million. The company is also heading into the end of the heating season where receivables are collected and thus result in much lower working capital borrowings. However, if the company does use the excess cash proceeds to tender for the notes, the company's liquidity position heading into next heating season could be strained if wholesale prices spike again as they did this year. As a result continued attrition rates of around 6.5% and customer conservation, volumes have decreased by 46.3 million gallons through the first six months of this year versus last year which is a 10.7% decline from a year ago. While Moody's believes that volume trends had recovered a bit during the last couple of months, the long-term sustainability of this trend is questionable at this point. On a positive note, margins appeared to have recovered as the company reported margins of about $.60/gallon, which is greatly improved from the $0.52 reported for the previous quarter. This was partially due to the structuring of new customer contracts to be more market based for the remainder of this year before locking in more fixed rate contracts closer to next year's heating season. The notes remained two notched below the senior implied rating to reflect their subordinated position at the holding company level relative to the secured working capital facility lenders which are collateralized by essentially all of the assets of the operating subsidiary. The senior notes also lack a guarantee by the operating subsidiary. Moody's ratings for Star Gas Partners, L.P. are: * Caa1 -- senior implied rating * Caa3 -- 10.25% senior unsecured notes due 2013 Star Gas Partners, L.P. is headquartered in Stamford, Connecticut. TECHNEGLAS INC: Has Exclusive Right to File Plan Until Aug. 29 -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio extended the time period during which Techneglas, Inc., and its debtor-affiliates, have the exclusive right to file a chapter 11 plan through and including Aug. 29, 2005. The Debtors have until Oct. 26, 2005, to solicit acceptances of that plan from their creditors. The Debtors gave the Court three reasons why the extension is warranted: a) the Debtor's chapter 11 case are large and complex, presenting a substantial number of legal questions and challenges in the areas of bankruptcy, real estate, corporate, labor, and environmental, and over $137 million in assets and over $336 million in debts; b) the Debtors have addressed many of the material issues facing their estates, including claims resolutions, post- petition financing, asset sale and disposition, executory contracts and unexpired nonresidential leases, and environmental issues related to their operations; and c) the Debtors are current on all their post-petition obligations and they are working with the Creditors Committee and other parties in interest in working towards a consensual plan of reorganization. Headquartered in Columbus, Ohio, Techneglas, Inc. -- http://techneglas.com/-- manufactures television glass (CRT panels, CRT funnels, solder glass and specialty glass), dopant sources, glass resins and specialty bulbs. The Company and its debtor-affiliates filed for chapter 11 protection on Sept. 1, 2004 (Bankr. S.D. Ohio Case No. 04-63788). David L. Eaton, Esq., Kelly K. Frazier, Esq., and Marc J. Carmel, Esq., at Kirkland & Ellis, and Brenda K. Bowers, Esq., Robert J. Sidman, Esq., at Vorys, Sater, Seymour and Pease LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $137 million and total debts of $336 million. TRANMONTAIGNE INC: Earns $47.1 Million of Net Income in 4th Qtr. ---------------------------------------------------------------- TransMontaigne Inc. (NYSE:TMG) reported financial results for the three and nine months ended March 31, 2005. The Company filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission. Revenues for the three months ended March 31, 2005, were approximately $2.7 billion, as compared to approximately $3.1 billion for the comparable period in the prior year. The decrease in revenues is due to a decrease in delivered volumes offset by an increase in commodity prices. Net operating margins for the three months ended March 31, 2005, were approximately $84.5 million compared to approximately $42.8 million for the three months ended March 31, 2004. Net earnings for the three months ended March 31, 2005, were approximately $47.1 million, as compared to approximately $18.4 million for the three months ended March 31, 2004. Net operating margins and net earnings for both periods were impacted by inventory gains recognized, inventory gains deferred, gains on forward purchase commitments prior to receipt of the product, and lower of cost or market adjustments. TransMontaigne believes that "adjusted net operating margins" and "adjusted operating income," which eliminate the impact of these inventory-related adjustments, are useful measures to evaluate and compare performance between reporting periods. Adjusted operating income for three months ended March 31, 2005 and 2004 was approximately $23.2 million and $13.1 million, respectively. Adjusted net operating margins for the supply, distribution and marketing segment for the three months ended March 31, 2005, were approximately $19.3 million, as compared to $12.0 million during the three months ended March 31, 2004. Light oil marketing margins were $7.9 million and $10.3 million during the three months ended March 31, 2005 and 2004, respectively. The decrease in light oil marketing margins is due principally to a decrease in delivered volumes of approximately 64,000 barrels per day. The Coastal Fuels assets contributed heavy oil margins of approximately $3.0 million and $5.4 million during the three months ended March 31, 2005 and 2004, respectively. The decrease in heavy oil margins is due principally to higher per unit procurement costs during 2005 as compared to 2004. The adjusted net operating margins from our supply chain management services increased to approximately $6.1 million during the three months ended March 31, 2005, from approximately $2.8 million for the comparable period in 2003, due principally to a increase in unit margins and additional volumes delivered to our existing customer base. The adjusted net operating margins (deficiencies) from our bulk and procurement activities and other increased to approximately $2.5 million in the three months ended March 31, 2005, as compared to approximately $(4.0) million in the three months ended March 31, 2004, due principally to a favorable spread between the cash market and the prompt month NYMEX futures contract during the liquidation of our inventory volumes. The adjusted net operating margins from our trading activities were due principally to short positions taken in the NYMEX options market in anticipation of declining commodity prices. The net operating margins from our terminals, pipelines, tugs and barges were approximately $13.8 million for the three months ended March 31, 2005, as compared to approximately $11.6 million for the three months ended March 31, 2004. The increase in net operating margins is due principally to an increase in the net margins at our Historical Facilities of approximately $1.5 million and approximately $0.7 million at our Coastal Fuels assets. Selling, general and administrative expenses for the three months ended March 31, 2005 and 2004, were approximately $9.9 million and $10.5 million, respectively. The decrease in selling, general and administrative expenses is due principally to a decrease in wages and employee benefits expense resulting from a reduction in head count. Product Supply Agreement On November 4, 2004, we executed a product supply agreement with Morgan Stanley Capital Group Inc. The product supply agreement expires on December 31, 2011, subject to provisions for early termination. Under the terms of the product supply agreement, MSCG is our principal supplier of gasoline and distillate to our existing marketing and distribution business at terminals connected to the Colonial and Plantation Pipelines and our Florida waterborne terminals. Product that we purchase from MSCG is at market-based rates. MSCG began supplying certain of our terminals during January 2005 with complete implementation during February 2005. We accept title and risk of loss to the products from MSCG upon discharge of the products from the delivering pipelines and vessels into our tank storage capacity at the respective terminals. On November 23, 2004, in connection with the closing of the product supply agreement and as partial consideration for MSCG entering into the product supply agreement, the Company issued warrants to MSCG to purchase 5.5 million shares of TransMontaigne Inc. common stock at an exercise price equal to $6.60 per share, subject to adjustments in accordance with the terms and conditions of the warrant certificate. Pursuant to the terms of the MSCG supply agreement, the per unit cost of the products are determined prior to their actual delivery to our terminals. During declining commodity prices, the Company will recognize losses between the pricing date and the date of receipt. Conversely, during rising commodity prices, the Company will recognize gains between the date the product is priced and the date of its receipt. Because of the significant increase in commodity prices experienced during the three months ended March 31, 2005, the Company recognized approximately $36.6 million on approximately 3.0 million barrels, which represents the average volume of barrels priced but not yet delivered to our terminals. Pursuant to our current risk management strategies, we generally do not manage the commodity price risk associated with these in- transit volumes that are supplied by MSCG to us at our terminals. TransMontaigne Inc. -- http://www.transmontaigne.com/-- is a refined petroleum products marketing and distribution company based in Denver, Colorado with operations in the United States, primarily in the Gulf Coast, Midwest and East Coast regions. The Company's principal activities consist of (i) terminal, pipeline, and tug and barge operations, (ii) marketing and distribution, and (iii) supply chain management services. The Company's customers include refiners, wholesalers, distributors, marketers, and industrial and commercial end-users of refined petroleum products. * * * Moody's Investors Service and Standard & Poor's assigned single-B ratings to Transmontaigne Inc.'s $200 million 9-1/8% senior subordinated notes due June 1, 2010. TRUMP HOTELS: Masque Publishing Objects to $0 Cure Amount --------------------------------------------------------- Pursuant to the assumption schedule attached to Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates' Plan of Reorganization, the Debtors assumed their license agreements with Masque Publishing, Inc. The Debtors listed $0 as cure amount. Masque objects to the Cure Amount. Under the License Agreements, the Debtors are granted the right to use Masque's patented casino table -- Spanish 21. Trump Marina Associates also used Masque's "Match the Dealer" trademark. The Debtors are required to pay a monthly license fee to Masque. Either party can terminate the License Agreements without cause upon written notice to the other party. Due to the play by their customers at Spanish 21 or Match the Dealer, the Debtors receive substantial revenues, Masque General Counsel David F. Zinger asserts. "These Debtors benefit from the License Agreements on a continuous monthly basis." In view of the on-going benefit enjoyed by the Debtors, Masque believes that the Cure Amount should not be $0. Mr. Zinger tells the Court that "Masque should be paid the full amount required by the License Agreements and as set out in the monthly invoices sent to the Debtors. . . ." 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. UAL CORP: Creditors' Committee Supports PBGC Agreement ------------------------------------------------------ After intensive, good faith, arm's-length negotiations, UAL Corporation and its debtor-affiliates and the Pension Benefit Guaranty Corporation have reached a global settlement for the defined benefit pension plans. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, informs the U.S. Bankruptcy Court for the Northern District of Illinois that the Agreement will consensually resolve all issues with the PBGC and avoid an Employee Retirement Income Security Act distress termination. There will be no need for minimum funding contribution hearings and the focus of the upcoming Section 1113 trial will be narrowed. The Agreement will accelerate the Debtors' efforts to implement labor and non-labor cost savings and productivity improvements. The Agreement will enable the Debtors to exit bankruptcy as a sustainable and profitable enterprise for the long-term, Mr. Sprayregen says. Financial Terms Pursuant to the Agreement, under the Debtors' proposed plan of reorganization, the PBGC will receive: 1) $500,000,000 of 6% Senior Subordinated Notes with a 25-year term. The Senior Notes are payable in kind through 2011 and payable in cash thereafter; 2) $500,000,000 of 8% Contingent Senior Subordinated Notes, issued in up to eight tranches of $62,500,000, each with a 15-year term. No tranche may be issued until December 31, 2009. Tranches will be issued within 45 days after the Debtors report LTM EBITDAR of at least $3,500,000,000, with no more than two tranches issued in a single year; and 3) $500,000,000 of 2% Convertible Preferred Stock with a 15- year term, payable in kind, semi-annually in arrears. The Debtors will issue 5,000,000 Shares, worth $100 per share. The Shares may be converted at 125% of the average closing price of the Common Stock for the first 60 days after Exit Date. The Shares may be converted after the 2nd anniversary of issuance. The Agreement incorporates a Safety Valve, whereby if the provisions are hindering the Debtors' ability to obtain exit financing, the parties may modify the terms of the Securities, namely to eliminate convertibility into common or preferred stock of Reorganized UAL. However, the economic value of the modified Securities must remain the same. Termination of Pension Plans Pursuant to the Agreement, the Pilot Plan, the Flight Attendant Plan, the Ground Plan and the Management, Administrative and Public Contract Employee Plan will be terminated. The PBGC will become statutory trustee of each Pension Plan. The Debtors will seek to terminate Independent Fiduciary Services, Inc., as plan administrator. The PBGC retains the right to seek a December 30, 2004 Termination Date for all plans. The proposed Termination Dates are: a) Flight Attendant and MA&PC Plans -- five business days after the PBGC's Notice of Determination; b) Ground Plan -- March 11, 2005; and c) Pilot Plan -- to be mutually determined with no restriction on the PBGC's right to seek December 30, 2004, as the Termination Date. Prior to the Termination Date, the Variable Plan will be merged into the MA&PC Plan. The amount that the Variable Plan is overfunded will reduce the face amount of the Senior Notes, on a dollar for dollar basis. This mechanism will allow the Debtors to recapture approximately $20,000,000 in overfunding of the Variable Plan within the next several years. Upon termination, the Debtors and the PBGC will cooperate to: a) seek Court authority to execute termination and trusteeship agreements; b) seek the termination and discharge of IFS's rights or obligations; and c) cooperate in any federal court action if Judge Wedoff does not approve the termination and trusteeship agreements. The Debtors will no longer have a plan administrator, fiduciary or similar obligations connected to the Pension Plans. The Debtors may not establish new ERISA-qualified defined benefit plans for 10 years after the effective date of a plan of reorganization. Claims Pursuant to the Agreement, the PBGC will: 1) have a single, prepetition, general, unsecured, unfunded liability claim against United Air Lines, Inc., in an amount to be determined under PBGC regulations; 2) settle and release all claims against the Debtors arising from the minimum funding contributions; 3) release the Debtors for any claims for PBGC insurance premiums, including interest and penalties; and 4) release all other claims against the Debtors. At the Debtors' election, the PBGC will assign 45% of any distribution for its claims. On the Effective Date, the Debtors will reimburse the PBGC for outside professional's fees and actual out-of-pocket expenses, with a cap of $7,000,000. What the Debtors Get The PBGC will dismiss with prejudice its appeal of the order approving the Air Line Pilots Association Revised Letter Agreement. The PBGC will "affirmatively support" the Debtors' restructuring activities and positions in these proceedings and the plan of reorganization. The PBGC will release its claims against the Debtors, namely: 1) over $990,000,000 in asserted administrative claims for the Debtors' failure to make minimum funding contributions; 2) an alleged joint and several liability claim against United Loyalty Services, Inc., with a real dollar value of $241,000,000; 3) an alleged $95,000,000 claim against three non-debtor affiliates based on joint and several liability; 4) an alleged $386,000,000 claim under a stipulation with the United States of America, with $20,000,000 as a secured set-off claim and $366,000,000 as an administrative claim; and 5) $8,000,000 worth of alleged administrative claims based on the Debtors' late payment of PBGC insurance premiums. The Court Should Approve the Agreement The Agreement is a linchpin in the Debtors' efforts to obtain $2,000,000,000 to $2,500,000,000 in financing commitments to exit from bankruptcy. Mr. Sprayregen estimates that the Agreement will save the Debtors $4,400,000,000 in minimum required cash contributions over the next six years and $1,300,000,000 for 2005 alone. The Debtors will be released from over $990,000,000 in alleged administrative minimum funding contribution claims and almost $800,000,000 in other alleged administrative claims. The dollar for dollar mechanism employed in the Variable Plan merger will benefit the estates. Without the Agreement, the $20,000,000 recapture would not be possible, requiring the Debtors to pay significant excise taxes. There is no question that the Agreement will benefit the Debtors' estates, Mr. Sprayregen says. The Agreement equitably and consensually resolves the contentious pension issues that have impeded the Debtors' reorganization since July 2004. Although the Agreement is subject to Court approval, the parties agree that judicial approval will be in the same manner as the April 30, 2003 collective bargaining agreements, thus preserving various third party rights to object to various aspects of the Agreement in the context of plan confirmation. Bradley Belt, Executive Director at the PBGC, signs the Agreement. A full-text copy of the PBGC Agreement is available for free at the Securities and Exchange Commission at: http://www.sec.gov/Archives/edgar/data/100517/000010051705000011/ualpbgc.htm Objections (1) AMFA The Aircraft Mechanics Fraternal Association objects to the Debtors' Agreement with the Pension Benefit Guaranty Corporation because the Debtors have not complied with the statutory requirement to provide notice of intent to terminate. Pursuant to 29 U.S.C. Section 1341(c)(1)(A), a single-employer plan may terminate under a distress termination only if the plan administrator provides a 60-day advance notice of intent to terminate. The Debtors acknowledge not fulfilling this requirement, and attempt to assure the Court that they "will issue such notices shortly." However, Scott C. Petersen, Esq., at Seham, Seham, Meltz & Petersen, in Kingwood, Texas, says that because the Debtors have not complied with the notice requirements, they are not entitled to a distress termination. Mr. Petersen also points out that the Debtors' proposed termination would violate the terms and conditions of the collective bargaining agreement with the AMFA. The AMFA has filed two grievances over the Debtors' failure to fund the pension plan and its intent to terminate the plan. Mr. Petersen states that the grievances must be arbitrated before the Debtors may proceed with the distress termination. The Debtors have not considered all available alternatives to pension termination. Mr. Petersen notes that on April 20, the U.S. Senate introduced the Employee Pension Preservation Act of 2005, which aims to allow airlines to fully fund all past and future pension obligations over a 25-year amortization period. The Debtors have not considered this legislation as an alternative to termination of the existing pension plans. Since the Debtors do not plan to exit Chapter 11 until the Fall, the Court should compel the Debtors to await a legislative solution. (2) IAM Sharon L. Levine, Esq., at Lowenstein Sandler, in Roseland, New Jersey, on behalf of the International Association of Machinists and Aerospace Workers, says the Agreement is counterproductive because it will: (a) deprive the Debtors of flexibility during the reorganization process; (b) place the PBGC in a privileged position relative to other unsecured creditors; (c) commit the PBGC to support the Debtors' reorganization plan; and (d) dilute the value in the estate available for distribution to other unsecured creditors. Ms. Levine labels the Agreement with the PBGC "a sub rosa plan." By issuing $1,500,000,000 of debt and preferred equity securities to the PBGC, the Agreement locks the reorganized Debtors' capital structure into place long before a plan of reorganization is subjected to the procedural requirements of the Bankruptcy Code. To receive the $1,500,000,000, the PBGC must unwaveringly support the Debtors' future actions, effectively committing the PBGC to back the Debtors' future efforts in these proceedings. Ms. Levine states that the IAM and the Debtors tried to reach consensual modifications to their collective bargaining agreements. The IAM wanted to explore all viable alternatives to pension termination. The Debtors represented that they would consider any alternatives and negotiate with the IAM in good faith. However, the "negotiations have not gone well," Ms. Levine informs the Court. The Debtors, in their zeal to terminate and replace their pension plans, have refused to negotiate in good faith with the IAM. The Debtors promised to spin off the IAM-represented beneficiaries under the pension plans into a stand alone plan. Instead, the Debtors rejected every alternative to termination and replacement proposed by the IAM. The IAM also accuses the Debtors of using the Agreement to lock up the PBGC's vote for the eventual plan of reorganization. Further strengthening the Debtors' hand, the Agreement will increase the PBGC's voting power by inflating its unsecured claim. Ms. Levine tells Judge Wedoff that a reorganization plan or financing proposal may come from other constituencies or contain other funding structures, including control capital as opposed to secured debt financing. The Agreement drastically reduces the likelihood that alternative solutions will come to fruition. Accordingly, the Agreement should not be approved. (3) Indenture Trustees U.S. Bank, HSBC Bank USA and the Bank of New York, represent $165,000,000, $985,000,000 and $2,100,000,000 of the Debtors' outstanding principal bond indebtedness. Patrick J. McLaughlin, Esq., at Dorsey & Whitney, in Minneapolis, Minnesota, asserts that certain aspects of the PBGC Agreement are inappropriate and represent potentially unlawful and unfair discrimination among creditors. The "the outrageous and unprecedented" Agreement, Mr. McLaughlin says, will allow the Debtors to improperly manipulate the confirmation process. The parties have calculated the PBGC's $9,800,000,000 Unfunded Liability Claim by using "PBGC regulations." Mr. McLaughlin says that this sum violates the Bankruptcy Code to the extent that it inflates the allowed amount of the Claim. The Debtors have not demonstrated the propriety of this amount or offered a basis for this valuation. Therefore, the Debtors have not provided sufficient information to evaluate the Agreement. Of the $9,800,000,000 Claim, 45% or approximately $4,400,000,000, is handed back to the Debtors for arbitrary reassignment to other creditors. The Debtors have not explained why the PBGC is willing to give away nearly half the Claim. Since no justification is provided, the Indenture Trustees assume that the claim amount is purposely inflated to provide the Debtors with the right to prefer one group of creditors over another. To prevent misuse, the Court or creditors should be given oversight of this disbursement. Otherwise, the Debtors could give preferred creditors a greater distribution than they would otherwise be entitled to receive, diluting distributions to other creditors. (4) Aircraft Trustees The Agreement improperly dictates the terms of a future reorganization and constitutes a sub rosa plan, according to James E. Spiotto, Esq., at Chapman and Cutler, in Chicago, Illinois, on behalf of U.S. Bank, Wells Fargo and the Bank of New York, as Indenture Trustee or Collateral Agent. The premature concessions offered to the PBGC, Mr. Spiotto explains, may complicate the Debtors' efforts to develop a plan that treats their creditor constituencies fairly. The Agreement is an overanxious attempt to placate one constituency at the expense of higher ranked creditors. A resolution of the PBGC claims should not be formulated in isolation, but should be subjected to the rigors of the reorganization plan process. This will protect other creditor constituencies who are now ignored. Mr. Spiotto says the Agreement is prejudicial because it unilaterally grants securities to the PBGC, while leaving unresolved the enormous administrative claims of the Trustees, which are higher in priority than the PBGC's unsecured claims. The Trustees also have large unsecured claims that will be diluted due to the Agreement's effect on post-reorganization equity values. The Debtors should not be allowed to give away estate assets to resolve the PBGC claim. Mr. Spiotto tells Judge Wedoff that the Trustees are getting the short end of the stick. The Trustees have over $1,300,000,000 in first priority administrative claims, exclusive of any claims for breaches of return conditions. The Trustees have administrative claims against the Debtors under the 1997-1 EETC transaction, which matured prior to the Petition Date. Under the 1997-1 EETCs, the Debtors owe $300,000,000 in principal plus $383,000,000 in postpetition interest. According to Mr. Spiotto, the Debtors' proposed restructuring of the 1997-1 EETCs illustrates the inequitable treatment given to the Trustees. The Debtors propose paying the Trustees only interest and modest principal reductions through 2011, when a $110,000,000 principal payment is due. Conversely, the largely unsecured PBGC receives preferred stock, which may be converted into common stock and liquidated, allowing the PBGC to recover ahead of secured creditors. Meanwhile, the secured creditors in the 1997-1 EETC transaction, will remain exposed to liquidation risk until at least 2011, even though the notes matured prepetition. (5) URPBPA The United Retired Pilots Benefit Protection Association complains that it is not being treated fairly. Jack J. Carriglio, Esq., at Meckler, Bulger & Tilson, in Chicago, Illinois, explains that the retired pilots gave up compensation during their working years under the assumption that they and their families would be provided for in retirement. The retired pilots have organized their financial commitments based upon expected pension income. Unlike other Americans, retired pilots are prohibited by law from returning to work in their profession after mandatory retirement age of 60. The impact of the Agreement on retired pilots will be dramatic. About 60% will experience reductions from their current pension income. Approximately 17% of retired pilots will lose more than half of their retirement benefit. The Agreement will curtail non-qualified benefits for about 51% of retired pilots. The Debtors try to portray pension termination as necessary to obtain exit financing. The "necessity argument is contrived," says Mr. Carriglio. The business plan is disputed and unproven and discussions with exit lenders are preliminary at best. The Debtors claim to have evaluated all reasonable alternatives to termination. However, the Debtors' method of considering alternatives to termination "is simply to reject all proposals made to them." Creditors Committee Supports the Agreement In a single-sentence filing, Fruman Jacobson, Esq., at Sonnenschein, Nath & Rosenthal, in Chicago, Illinois, says that the Official Committee of Unsecured Creditors supports the Agreement with the PBGC. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. UNISOURCE ENERGY: Declares Quarterly Dividend & Elects Directors ---------------------------------------------------------------- The board of directors of UniSource Energy Corp. (NYSE: UNS) declared a dividend of $0.19 per share of common stock. The dividend will be paid on June 10 to shareholders of record as of May 18, 2005. James S. Pignatelli, UniSource Energy chairman, president and chief executive officer, praised the company's recent accomplishments during today's annual shareholders' meeting at the Marriott University Park, 880 E. 2nd St., in Tucson. He also reported progress on a financial restructuring that will bolster the company's utility subsidiaries, Tucson Electric Power Co. (TEP) and UniSource Energy Services (UES). The financial restructuring is expected to improve TEP's equity to 40 percent under the method used by the Arizona Corporation Commission, satisfying a goal the commission set in 1999. The equity of UNS Gas and UNS Electric -- operating subsidiaries of UES -- also has been boosted above 40 percent as a result of the ongoing financial restructuring. Construction of a new 400-MW coal-fired generator at TEP's Springerville Generating Station is proceeding ahead of schedule, Pignatelli reported, and the unit should be online in the third quarter of 2006. Mr. Pignatelli also praised TEP's 2004 purchase of a share of the Luna Energy Facility, a partly constructed gas- fired power plant that should be complete in the summer of 2006. During the meeting, shareholders voted to extend the service of UniSource Energy's current board of directors for another year. The directors include: -- James S. Pignatelli -- Lawrence J. Aldrich, general partner of Valley Ventures III, LP -- Larry W. Bickle, managing director, Haddington Ventures, LLC -- Elizabeth T. Bilby, former president, Gourmet Products Inc. -- Harold W. Burlingame, senior executive advisor, AT&T Wireless Services -- John L. Carter, former executive vice president and CFO, Burr-Brown Corp. -- Robert A. Elliott, president and owner, The Elliott Accounting Group -- Kenneth Handy, former vice president and CFO, The Permanente Medical Group Inc. -- Warren Y. Jobe, former senior vice president, Southern Co. UniSource Energy's primary subsidiaries include Tucson Electric Power, which provides electric service to more than 375,000 customers in southern Arizona; UniSource Energy Services, an electric and gas utility serving more than 218,000 customers in northern and southern Arizona; and Millennium Energy Holdings, parent company of UniSource Energy's unregulated energy-related businesses. More information about UniSource Energy and its subsidiaries is available at: http://www.UniSourceEnergy.com/ * * * As reported in the Troubled Company Reporter on Apr. 14, 2005, Moody's Investors Service assigned a Senior Implied rating of Ba2 to UniSource Energy Corporation and assigned a rating of Ba2 to UniSource's proposed $105 million senior secured bank credit facility. This is the first time that Moody's has rated UniSource. Moody's also upgraded the ratings of UniSource's utility subsidiary Tucson Electric Power (TEP: senior unsecured to Ba1 from Ba3), concluding the review for upgrade that was initiated on February 8th. In addition, Moody's assigned a Baa3 rating to TEP's proposed new $400 million 5-year senior secured bank credit facility. The rating outlook is stable for both UniSource and TEP. The rating actions reflect: 1) Improvement in financial performance, which is due in part to recent deleveraging, and expectations that financial results will continue to improve over the next several years; 2) the relatively low business risk and stable cash flow associated with the regulated operations that comprise virtually all of UniSource's earnings and cash flow; 3) the medium term rate clarity that exists as a result of prior decisions by the state commission; and 4) the termination of a proposed leveraged acquisition of the company by a third party which eliminated uncertainty and the potential for additional holding company debt. Ratings assigned for UniSource are: -- Senior Implied Rating and senior secured bank credit facility; both Ba2, -- Speculative grade liquidity rating; SGL-2 Ratings assigned for TEP are: -- Senior secured bank facility; Baa3 Ratings upgraded for TEP are: -- Senior secured debt and senior secured bank facility upgraded to Baa3 from Ba2; -- Issuer Rating and senior unsecured debt upgraded to Ba1 from Ba3. US AIRWAYS: Nears Completion of Merger with America West -------------------------------------------------------- As previously reported, US Airways Group Inc. confirmed it is currently in talks with America West Holdings Corp. for a possible merger of the two companies creating a national low-cost airline that can compete with discount rivals. The Sacramento Business Journal reports that negotiations between the two airlines have progressed to the point where potential investors are studying a proposed business plan. One plan contemplates the combined airlines to operate under the US Airways logo, put attention on Midwestern markets and introduce flights to Hawaii. Experts are projecting a $500 million capital infusion is needed for the merger to take off, the Journal relates. Both parties are hoping to complete a deal before America West's annual meeting on May 17. US Airways hopes to emerge later this year. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. VERIZON HAWAII: Fitch Withdraws BB+ Rating of Sr. Unsecured Debt ---------------------------------------------------------------- Fitch Ratings has withdrawn the 'BB+' rating assigned to the senior unsecured debt of Verizon Hawaii and the 'BBB-' rating assigned to the company's first mortgage bonds (the first mortgage bonds matured in February 2005). The rating action affects $300 million of publicly outstanding senior unsecured debt assumed by the new company that was outstanding prior to the sale of the company to The Carlyle Group. The ratings being withdrawn do not apply to the debt issued by Hawaiian Telcom (which is the new name of the company) to finance the company's purchase from Verizon Communications, Inc. Fitch does not rate Hawaiian Telcom. The company was on Rating Watch Negative. Due to the sale of Verizon Hawaii by Verizon to the Carlyle Group in a private transaction on May 2, 2005, Fitch was unable to affirm, downgrade, or upgrade the debt formerly issued and retained by Verizon Hawaii. Given the private nature of the sale, Fitch does not have the information necessary to rate the new company, such as the capital structure of the new company, nor its prospective operating and financial policies. On May 21, 2004, Verizon Communications announced an agreement to sell its wireline related businesses in Hawaii to the Carlyle Group for approximately $1.6 billion (less debt) in cash. The transaction included the equity of Verizon Hawaii, which is the largest asset in the businesses sold, as well as the services and assets of Verizon Long Distance, Verizon Online, and Verizon Information Services in Hawaii. WARNACO GROUP: Good Performance Cues S&P to Lift Ratings to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on apparel designer and marketer The Warnaco Group Inc., including its long- term corporate credit rating to 'BB-' from 'B+'. At the same time, a '1' recovery rating was assigned to Warnaco's $175 million credit facility due 2007, indicating that secured lenders can expect full recovery of principal. The ratings outlook on New York, New York-based Warnaco is positive. Total debt outstanding at Jan. 1, 2005, was $211 million. "The upgrade incorporates the company's improved financial results and credit protection measures," said Standard & Poor's credit analyst Susan Ding. Since its emergence from bankruptcy protection in February 2003, the company has disposed of non-core assets, migrated to an outsourcing model, and reduced dilution and its sales to off-price channels. These efforts, in conjunction with better-cost controls, resulted in substantially higher operating margins for all of its business groups. Other improvements include management's track record at meeting projections and it ability to re-invigorate its Calvin Klein sportswear business and customer relationships. Warnaco was also able to extend the tenure on some of its licensing arrangements, including the Chaps relationship, to 2018. The company has also been able to procure new licensing arrangements that should benefit operations in fiscal 2005 and 2006. These include JLO, Kors by Michael Kors, Nautica, and Calvin Klein swimwear. Standard & Poor's expects Warnaco to continue its positive operating momentum and generate credit protection measures stronger than the rating median. YUKOS OIL: Fulbright & Jaworski Applies for Final Compensation -------------------------------------------------------------- Fulbright & Jaworski L.L.P. seeks allowance of fees and expenses, totaling $3,045,925: * professional fees for $2,611,845 for professional services rendered for the period December 14, 2004, through February 28, 2005; and * reasonable and necessary expenses for $434,080. Zack A. Clement, Esq., at Fulbright & Jaworski, L.L.P., in Houston, Texas, reminds the U.S. Bankruptcy Court for the Southern District of Texas that the firm quickly developed a primary strategy to deal with the Yukos Oil Company's case. Fulbright & Jaworski tried to: (a) enforce the automatic stay to stop the tax sale and possible future similar tax sales of other assets; (b) refer the Russian Government Tax Claim dispute to an international arbitration; and (c) confirm a Plan of Reorganization that hopes for the best -- reorganization as a going concern -- and prepares simultaneously for the worst -- continued dismemberment by the Russian Government -- necessitating a Litigation Trust to continue pursuing causes of action to recover recompense for the dismemberment. In a very short period of time, Fulbright & Jaworski put before the Court: (a) a Plan of Reorganization, providing both for a going concern reorganization and a Litigation Trust; (b) a motion to set a bar date; and (c) an Amended Motion to Refer to Arbitration. 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) ZIFF DAVIS: March 31 Balance Sheet Upside-Down by $974.9 Million ---------------------------------------------------------------- Ziff Davis Holdings Inc., the ultimate parent company of Ziff Davis Media Inc., reported operating results for its first quarter ended March 31, 2005. The Company's consolidated revenues totaled $42.7 million, representing a 2% increase compared to revenues of $42 million for the first quarter ended March 31, 2004. The Company reported consolidated earnings before interest expense, provision for income taxes, depreciation, amortization and non-recurring and certain non-cash charges including non-cash compensation of $4.3 million for the first quarter ended March 31, 2005, representing a 43% increase compared to EBITDA of $3 million for the prior year period. "Our first quarter results, while showing solid earnings growth versus prior year, reflect a continuation of the challenging technology and videogame markets, particularly in the area of print advertising revenue," said Robert F. Callahan, Chairman and CEO, Ziff Davis Holdings Inc. "We continue to accelerate our plans to line-extend our brands and services into new vertical and horizontal marketing solutions areas where demand for integrated marketing programs remains high and our brands and reader databases perform extremely well. We also continue to demonstrate through specific marketing case histories and reader research the unique effectiveness and value of print advertising to drive significant results for marketers." Consumer Tech Group The Consumer Tech Group is principally comprised of four magazines, PC Magazine, Sync, ExtremeTech, and our newest launch, DigitalLife; a number of consumer-focused websites, including pcmag.com and extremetech.com; and the Company's consumer electronics event, DigitalLife. Revenue for the Consumer Tech Group for the first quarter ended March 31, 2005 was $14.3 million, down $0.9 million or 6% compared to $15.2 million in the same period last year. The decrease was primarily due to lower advertising revenue for PC Magazine related to its first quarter rate base reduction. Proactively addressing the marketplace demand for increased affinity reader composition and advertising effectiveness, PC Magazine reduced its rate base 33% to 700,000 as of January 1, 2005, which in turn impacted pricing. However, the PC Magazine revenue decrease was partially offset by higher e-commerce revenue for the group's Internet operations and incremental revenue for Sync and ExtremeTech magazines which started publication during the second and fourth quarters of 2004, respectively. Cost of production for the Consumer Tech Group for the first quarter ended March 31, 2005 was $3.1 million, reflecting a decrease of $0.7 million or 18% compared to $3.8 million in the prior year period. The decrease in production costs was primarily related to the PC Magazine rate base reduction which resulted in substantially lower manufacturing, paper and distribution costs. This decrease was partially offset by incremental costs associated with Sync and ExtremeTech magazines. Selling, general and administrative expenses for the Consumer Tech Group were $9.4 million for the first quarter ended March 31, 2005, reflecting an increase of $1.1 million or 13% from $8.3 million in the same prior year period. The increase was primarily due to incremental costs associated with Sync and ExtremeTech magazines, and increased content, marketing and sales costs due to higher Internet sales volume. Enterprise Group The Enterprise Group is comprised of several businesses in the magazine, Internet, event, research and marketing tools areas. The three magazines in this segment are eWEEK, CIO Insight and Baseline. The Internet properties in this segment are primarily affiliated with the Enterprise Group's brands, including eweek.com, cioinsight.com and baselinemag.com, but also include over 30 weekly eNewsletters and the eSeminars(TM) business, which produces sponsored interactive webcasts. This segment also includes the Company's Custom Conference Group (CCG), which creates and manages several hundred sponsored events per year; Business Information Services (BIS), a research and marketing tools unit; and Contract Publishing, which produces custom magazines, white papers, case studies and other sales and marketing collateral for customers. Revenue for the Enterprise Group for the first quarter ended March 31, 2005 was $18.2 million compared to $15.5 million in the same period last year, reflecting a $2.7 million or 18% improvement. The increase was primarily related to higher advertising and eSeminars revenue from Internet operations, increased CCG event revenues and higher revenue from the BIS business in the first quarter of 2005. Cost of production for the Enterprise Group for both of the first quarters ended March 31, 2005 and 2004 was $3.4 million. Savings realized by the implementation of a number of new production and distribution initiatives and the impact of more favorable supplier contracts were offset by added costs from the increase in advertising pages for the group plus higher Internet costs due to more eSeminars. Selling, general and administrative expenses for the Enterprise Group were $12.6 million for the first quarter ended March 31, 2005, reflecting an increase of $0.7 million or 6% from $11.9 million in the same prior year period. The increase was primarily due to higher sales volumes for CCG events, BIS, Internet advertising and eSeminars. Game Group The Game Group is focused on the videogame market and is principally comprised of three magazines (Electronic Gaming Monthly, Computer Gaming World and Official U.S. PlayStation Magazine) and 1UP.com, an innovative online destination for gaming enthusiasts. The Game Group discontinued publishing GMR magazine and reduced the frequency of Xbox Nation magazine during the fourth quarter of 2004. Revenue for the Game Group for the first quarter ended March 31, 2005 was $10.2 million, down $1.1 million or 10% compared to $11.3 million in the same period last year. The decrease was primarily due to continued softness in the videogame magazine advertising sector which experienced a 17% decline in advertising pages for the first quarter ended March 31, 2005. There were also six fewer issues published by the Game Group during the quarter ended March 31, 2005, primarily related to the discontinuation of GMR magazine and a reduction in the frequency of Xbox Nation magazine. Cost of production for the Game Group for the first quarter ended March 31, 2005 was $5.3 million, reflecting a decrease of $0.4 million or 7% compared to $5.7 million in the prior year period. The savings realized by producing the six fewer issues in the first quarter of 2005 and the decrease in the total number of advertising pages were partially offset by additional costs incurred for retail partner fees, videogame DVDs and premiums (e.g. posters CDs, etc.) used to increase newsstand and subscriber sales. Selling, general and administrative expenses for the Game Group were $4.6 million for the first quarter ended March 31, 2005, reflecting a decrease of $1.3 million or 22% from $5.9 million in the same prior year period. The decrease was primarily due to savings in editorial, circulation and other costs realized as a result of discontinuing the publication of GMR magazine, reducing the frequency of Xbox Nation magazine and decreasing other general expenses. Cash Position and Payment of Senior Debt At March 31, 2005, the Company had $21.1 million of cash and cash equivalents, representing a decrease of $11.5 million versus the $32.6 million cash balance as of December 31, 2004. The decreased cash balance primarily reflects the expected seasonal reduction in advertising billings for the first quarter of 2005, a $4.3 million scheduled principal repayment made in connection with the Company's senior credit facility, $3.8 million of cash interest payments and $2.8 million of cash restructuring payments. New Senior Secured Floating Rate Notes Offering On April 22, 2005, the Company completed a private placement of $205.0 million of new Senior Secured Floating Rate Notes. The floating rate notes were issued at 100% of principal, are due in 2012 and not callable until May 1, 2007. The Company used approximately $178.0 million of the proceeds of the floating rate notes to immediately retire all of its outstanding indebtedness, including accrued interest, under its Amended and Restated Credit Agreement dated August 12, 2002, and to pay related fees and expenses. The remaining balance of approximately $27.0 million was added to the Company's existing cash balance and is available for general corporate purposes. "We are pleased with the outcome of the floating rate notes offering and want to thank our former bank group lenders for their support over the last three years," stated Mr. Callahan. "This recent notes offering speaks clearly to the market value and long- term growth opportunities for the Ziff Davis brand and media portfolio. We look forward to focusing our considerable assets and talented employees on driving further product innovation, revenue growth and return on investment for our customers, as well as creating increased Ziff Davis asset value for all of our note holders and shareholders." Business Outlook Due to technology marketplace conditions, primarily related to slower discretionary capital and promotion spending in the business-to-business sector (which the Company currently regards as short-term in nature), the Company anticipates that consolidated EBITDA for the second quarter of 2005 will be meaningfully lower than consolidated EBITDA for the second quarter ended June 30, 2004. Consistent with management's strategy to create long- term asset value, and in light of the elimination of quarterly financial covenants in connection with the pay-off on April 22, 2005 of its Amended and Restated Credit Agreement dated August 12, 2002, the Company has also made the decision to discontinue providing quarterly EBITDA guidance beyond the second quarter of 2005. About Ziff Davis Holdings Inc. Ziff Davis Holdings Inc. is the ultimate parent company of Ziff Davis Media Inc. Ziff Davis Media is a leading integrated media company serving the technology and videogame markets. The Company is an information services and marketing solutions provider of technology media including publications, websites, conferences, events, eSeminars, eNewsletters, custom publishing, list rentals, research and market intelligence. In the United States, the Company publishes 10 magazines including PC Magazine, Sync, ExtremeTech, DigitalLife, eWEEK, CIO Insight, Baseline, Electronic Gaming Monthly, Computer Gaming World and Official U.S. PlayStation Magazine. The Company exports the power of its brands internationally, with publications in 40 countries and 20 languages. Ziff Davis leverages its content on the Internet with 16 highly- targeted technology and gaming sites including pcmag.com, eweek.com, extremetech.com and 1UP.com. The Company also produces highly-targeted b-to-b events through its Custom Conference Group and large-scale consumer technology events including DigitalLife. With its main headquarters and PC Magazine Labs based in New York, Ziff Davis Media also has offices and lab facilities in the San Francisco and Boston markets. Additional information is available at http://www.ziffdavis.com/ At March 31, 2005, Ziff Davis' balance sheet showed a $974,859,000 stockholders' deficit, compared to a $948,537,000 deficit at Dec. 31, 2004. * Nick Butler Joins Cadwalader's London Firm as Special Counsel --------------------------------------------------------------- Nick Butler, a former associate in the Structured Finance Department at Linklaters, has joined Cadwalader, Wickersham & Taft LLP as Special Counsel in the Capital Markets Department, resident in the London office. Mr. Butler focuses on structured finance, with an emphasis on securitisation. He has represented leading investment banks, arrangers and issuers in transactions throughout the United Kingdom and Europe. "In addition to the recent appointments of partners Angus Duncan and Christian Parker to our London Capital Markets Department, we are delighted to welcome Nick to our expanding practice," stated Robert O. Link Jr., Cadwalader's Managing Partner and Chair of the Capital Markets Department. Andrew Wilkinson, Managing Partner of the London office, stated, "Nick is a great asset to our team as we continue to further enhance our capabilities and reputation in the UK and throughout Europe. His broad experience in all aspects of structured finance complements our practice, and supports our strategic initiative of expanding Cadwalader's prominence in capital markets on a global basis." "This is an exciting time to join Cadwalader's London office and internationally recognised Capital Markets Department", stated Mr. Butler. "The firm has made very clear its commitment to augmenting the Capital Markets practice, and I look forward to being a part of that growth." With particular expertise in securitisations, Mr. Butler's experience includes advising on both residential and commercial mortgage transactions. He also has a background in corporate finance and has counselled on mergers and acquisitions, joint ventures and general corporate law. Prior to his time in the Structured Finance Department at Linklaters, Mr. Butler spent eight years in the firm's Corporate Department following qualification, including secondments to the legal departments of Morgan Stanley and Hoare Govett. Mr. Butler completed his traineeship at Linklaters in 1994, having previously graduated from Guildford Law School in 1992 and New College, University of Oxford, in 1990. Cadwalader, Wickersham & Taft LLP -- http://www.cadwalader.com/-- established in 1792, is one of the world's leading international law firms, with offices in New York, London, Charlotte, and Washington. Cadwalader serves a diverse client base, including many of the world's top financial institutions, undertaking business in more than 50 countries in six continents. The firm offers legal expertise in securitisation, structured finance, mergers and acquisitions, corporate finance, real estate, environmental, insolvency, antitrust litigation, health care, banking, project finance, insurance and reinsurance, tax, and private client matters. * Mintz Levin Expands Washington D.C. Office with New Partners -------------------------------------------------------------- Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., expands its Washington, D.C. office with the addition of Robert D. Clark, Mark A. Kass and Carlos M. Nalda. Mr. Clark, formerly of Reed Smith, has joined as a member of the Health Care Section. Mr. Kass, formerly of Hogan & Hartson, is now a member of Mintz Levin's Business and Finance Section and Carlos Nalda, who was most recently of counsel at Steptoe & Johnson, LLP, is a member of Mintz Levin's Communications and IT Section. "Bob, Mark and Carlos each bring with them extraordinary talents in their particular practice areas," said Cherie Kiser, head of the Mintz Levin's Washington office and chair of the firm's Communication and IT Section. "As we continue to expand the firm's presence in the mid-Atlantic area, their combined expertise will enable us to continue to serve a broad array of clients." Mr. Clark earned a B.A. from the University of Maryland, a J.D. from Howard University and a LL.M. in Taxation from Georgetown University. Mr. Kass graduated from Yale University and earned his J.D. from Columbia School of Law. Mr. Nalda is a graduate of the American University School of International Service and earned his J.D. from George Washington University Law School. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC is a multidisciplinary law firm with over 450 attorneys and senior professionals in Boston, Washington D.C., Reston, VA, New York, New Haven, CT, Los Angeles and London. Mintz Levin is distinguished by its reputation for responsive client service and expertise in the areas of bankruptcy; business and finance; communications; employment; environmental; antitrust and federal regulatory; health care; immigration; intellectual property; litigation; public finance; real estate; tax; and trusts and estates. Mintz Levin's international clientele range from privately held start-ups to Fortune 100 companies in a wide array of industries including biotechnology, venture capital, telecommunications, health care and high technology. Mintz Levin -- http://www.mintz.com/-- was one of the first law firms to develop complementary consulting capabilities to provide complete solutions to clients' problems, including investment/wealth management, government and public affairs and transactional insurance. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Washington, D.C. Contact: 1-800-CLE-NEWS or http://www.ali-aba.org/ May 12-14, 2005 ALI-ABA Fundamentals of Bankruptcy Law Santa Fe, NM Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/ May 13, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (N.Y.C.) 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Contact: 1-703-739-0800 or http://www.abiworld.org/ October 12, 2005 TURNAROUND MANAGEMENT ASSOCIATION Breakfast Meeting Marriott Hotel, Tyson's Corner, VA Contact: 703-912-3309 or http://www.turnaround.org/ October 18, 2005 TURNAROUND MANAGEMENT ASSOCIATION TBA [Upstate New York] Rochester, NY Contact: 716-440-6615 or http://www.turnaround.org/ October 19-23, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Annual Convention Chicago Hilton & Towers, Chicago Contact: 312-578-6900 or http://www.turnaround.org/ October 20, 2005 TURNAROUND MANAGEMENT ASSOCIATION Colorado TMA Breakfast The Oxford Hotel, Denver, CO Contact: 303-457-2119 or http://www.turnaround.org/ October 27, 2005 TURNAROUND MANAGEMENT ASSOCIATION Informal Networking *FREE Reception for Members* The Davenport Press Restaurant, Mineola, NY Contact: 516-465-2356 or http://www.turnaround.org/ November 1-2, 2005 INTERNATIONAL WOMEN'S INSOLVENCY & RESTRUCTURING CONFEDERATION IWIRC 2005 Fall Conference San Antonio, Texas Contact: http://www.iwirc.com/ November 2-5, 2005 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Eighth Annual Meeting San Antonio, Texas Contact: http://www.ncbj.org/ November 9, 2005 TURNAROUND MANAGEMENT ASSOCIATION Breakfast Meeting The Center Club, Baltimore, MD Contact: 703-912-3309 or http://www.turnaround.org/ November 10, 2005 TURNAROUND MANAGEMENT ASSOCIATION Second Annual Australian TMA Conference Sydney, Australia Contact: 9299-8477 or http://www.turnaround.org/ November 11, 2005 AMERICAN BANKRUPTCY INSTITUTE Detroit Consumer Bankruptcy Workshop Wayne State University, Detroit, MI Contact: 1-703-739-0800 or http://www.abiworld.org/ November 14, 2005 TURNAROUND MANAGEMENT ASSOCIATION Workout Workshop Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ November 17, 2005 TURNAROUND MANAGEMENT ASSOCIATION TBA [Upstate New York] Buffalo, NY Contact: 716-440-6615 or http://www.turnaround.org/ November 17, 2005 TURNAROUND MANAGEMENT ASSOCIATION Colorado TMA Breakfast The Oxford Hotel, Denver, CO Contact: 303-457-2119 or http://www.turnaround.org/ December 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Fundamentals: Nuts & Bolts for Young Practitioners (West) Hyatt Grand Champions Resort Indian Wells, California Contact: 1-703-739-0800 or http://www.abiworld.org/ December 1-3, 2005 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Grand Champions Resort, Indian Wells, Calif. Contact: 1-703-739-0800 or http://www.abiworld.org/ December 8, 2005 TURNAROUND MANAGEMENT ASSOCIATION Holiday Gathering & Help for the Needy *FREE to Members* Mack Hall at Hofstra University, Hempstead, NY Contact: 516-465-2356 or http://www.turnaround.org/ December 8, 2005 TURNAROUND MANAGEMENT ASSOCIATION Annual Board of Directors Meeting Rochester, NY Contact: 716-440-6615 or http://www.turnaround.org/ December 14, 2005 TURNAROUND MANAGEMENT ASSOCIATION Breakfast Meeting Marriott Hotel, Tyson's Corner, VA Contact: 703-912-3309 or http://www.turnaround.org/ March 30 - April 1, 2006 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Scottsdale, AZ Contact: 1-800-CLE-NEWS or http://www.ali-aba.org April 18-22, 2006 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting JW Marriott Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org/ June 15-18, 2006 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org/ July 13-16, 2006 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Newport Marriott Newport, Rhode Island Contact: 1-703-739-0800 or http://www.abiworld.org/ July 26-29, 2006 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop The Ritz Carlton Amelia Island Amelia Island, Florida Contact: 1-703-739-0800 or http://www.abiworld.org/ October 11-14, 2006 TURNAROUND MANAGEMENT ASSOCIATION 2006 Annual Conference Milleridge Cottage Long Island, NY Contact: 312-578-6900 or http://www.turnaround.org/ October 25-28, 2006 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges New Orleans, LA Contact: http://www.ncbj.org/ November 30-December 2, 2006 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Regency at Gainey Ranch Scottsdale, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org/ October 10-13, 2007 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges Orlando, FL Contact: http://www.ncbj.com/ September 24-27, 2008 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges Scottsdale, AZ Contact: http://www.ncbj.org/ 2009 (TBA) NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges Las Vegas, NV Contact: http://www.ncbj.org/ 2010 (TBA) NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges New Orleans, LA Contact http://www.ncbj.org/ The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* 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 Pinili, Jr., 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 ***