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/raid1/www/Hosts/bankrupt/TCR_Public/050512.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, May 12, 2005, Vol. 9, No. 111 Headlines AADCO AUTOMOTIVE: Appoints Richard Dole to Board of Directors AADCO AUTOMOTIVE: Completes $1.2M Debenture Funding with Quorum ADELPHIA COMMS: Exchanges Barbs with W.R. Huff on EVP Compensation AEGIS COMMS: December 31 Balance Sheet Upside-Down by $12 Million ALAMOSA HOLDINGS: Reports 1st Qtr. Results & Redeems Senior Notes AINSWORTH LUMBER: Posts $55.1 Million Net Income for First Quarter ALTERNATIVE LOAN: S&P Rating on Class B-4 Notes Tumbles to D AMPEX CORP: March 31 Balance Sheet Upside-Down by $92.7 Million ARVINMERITOR INC.: Weak Performance Cues S&P to Cut Ratings to BB ATA AIRLINES: Chicago Express Gets Court Nod to Reject Agreements AVOTUS CORP: Wholly Owns Applied Research After Exercising Option BELLAIRE GENERAL: Chap. 11 Case Converted to Chap. 7 Liquidation BOISE CASCADE: Earns $64.7 Million of Net Income in First Quarter BROADBAND OFFICE: Court OKs Sale of Broadsoft Shares for $237,600 BUCA INC: Must Comply with July 29 Deadline to Continue Listing CALPINE CORP: Metcalf Offering $155M Redeemable Preferred Shares CATHOLIC CHURCH: Tucson Judge Nixes Substantive Consolidation Bid CLEARLY CANADIAN: BG Capital Takes Preferred Equity Position CNE GROUP: AMEX Warns of Possible Stock Delisting COEUR D'ALENE: A. Lundquist & A. Vitale Elected as New Directors COLETO CREEK: Fitch Affirms BB/BB- Ratings on Secured Loans COLETO CREEK: S&P Puts Low-B Ratings on $378.1 Million Term Loans COLUMBIA HOUSE: BMG Direct Sale Prompts S&P to Watch Ratings COMPRESSION POLYMERS: S&P Rates $215 Mil. Sr. Unsec. Notes at B- COMPTON PETROLEUM: Posts $10.06M Net Income for First Quarter CONGOLEUM CORP.: March 31 Balance Sheet Upside-Down by $21 Million DELTA AIRLINES: Has Uncertainty About GECC & Amex Loan Covenants D.R. HORTON: Improved Financial Profile Cues S&P to Hold Ratings DOMTAR INC: Registering New $500 Million Debt Securities EAGLEPICHER HOLDINGS: Final DIP Financing Hearing on May 18 EAGLEPICHER HOLDINGS: Hires Brookwood as Financial Advisors ELCOM INTERNATIONAL: March 31 Balance Sheet Upside-Down by $4 Mil. ENRON CORP: Bankruptcy Court Approves Generacion Settlement Pact ENRON CORP: Court Approves Seven Settlement Agreements EPICUS COMMS: Postpetition Focus is on Customer Creditworthiness FIBERMARK INC: Chapter 11 Examiner Taps Weil Gotshal as Counsel FIRST CMBS: Fitch Affirms C$23 Million Bonds' Low-B Ratings FLAGSTONE CBO: Fitch Affirms BB Rating on $12.8 Million Notes FOSTER WHEELER: Apr. 1 Balance Sheet Upside-Down by $520 Million FRIEDMAN'S INC: Asks Court to Approve Amended DIP Financing GLOBAL CROSSING: Amends 2004 Form 10-K Due to Material Weaknesses GREEN TREE: Interest Payment Default Triggers S&P's D Rating HAYES LEMMERZ: Asks Court to Strike GE Capital's Objections HEXCEL CORPORATION: Offers to Exchange 6-3/4% Senior Sub. Notes IMPACT DESIGN: Voluntary Chapter 11 Case Summary INDYMAC ABS: S&P Rating on Class BF Trust Certs. Tumbles to D INTELIDATA TECH: Recurring Losses Prompt Going Concern Doubt INTERSTATE BAKERIES: Wants to Reject Elisie Scott Realty Lease INTRAWEST CORP.: Poor Debt Measures Cue S&P's Stable Outlook J.A. JONES: Carroll Services Has Until June 25 to Object to Claims JANE NIEBLER: Case Summary & 4 Largest Unsecured Creditors JOSEPH & PATRICIA GIRONE: Case Summary & 4 Largest Creditors KMART CORP: Sears & Kmart Commence Organizational Restructurings KMART CORP: Wants Summary Judgment to Limit FLOORgraphics' Damages LAS AMERICAS: Acquiring Dry Cleaning Operations in Bankruptcy LUCID ENTERTAINMENT: Defaults on Leases & Restructuring Operations MAXIM CRANE: Has Until June 17 to Object to Claims MCI INC: Consumers to Benefit from MCI-Verizon Deal, Verizon Says MIRANT CORP: Disclosure Statement Hearing Continued Sine Die MIRANT CORP: NRG Energy Eyed Merger & Valued Company at $13 Bil. MIRANT CORP: MAGi Committee Says Disclosure Statement is Confusing NATIONAL ENERGY: Inks Power Companies' Claims Settlement Pact NBCCAT CORPORATION: Case Summary & 40 Largest Unsecured Creditors NETWORK INSTALLATION: Resumes Stock Trading Under NWKI Ticker NEWPORT AVALON: Case Summary & 18 Largest Unsecured Creditors NORTHWESTERN CORP: Inks Settlement Pact with Montana PSC NVR INC.: Strong Debt Protection Prompts S&P to Lift Ratings ORGANIZED LIVING: Wants to Hire LoftusGroup as Financial Advisors ORGANIZED LIVING: Wants to Hire Squire Sanders as Bankr. Counsel PEGASUS SATELLITE: Can Amend Spectrasite Master Site Pact PRESTIGE BRANDS: Moody's Up Ratings, Citing Strong Performance RECOTON CORPORATION: Court Confirms Joint Plan of Liquidation REFOCUS GROUP: Asks Shareholders to Okay Privatization Deal ROCK OF AGES: Asking Secured Lenders to Waive Covenant Default RUSSEL METALS: Selling Lachine Facility for $5.7 Million SARGENT ELECTRIC: Case Summary & 20 Largest Unsecured Creditors SALEM COMMS: Earns $2.4 Million of Net Income in First Quarter SAXON ASSET: S&P Rating on Class BF-1 Trust Tumbles to D SOLECTRON CORP: Names M. Busselen as VP for Corp. Communications TERESA ELLIS: Voluntary Chapter 11 Case Summary THISTLE MINING: Court Approves Plan of Compromise & Reorganization TNP ENTERPRISES: PNM Resources Buy-Out Spurs Moody's to Up Ratings TRUMP HOTELS: Plan of Reorganization to Take Effect by May 20 TRUMP HOTELS: Posts $45.4 Million Net Loss for First Quarter 2005 TRUMP HOTELS: Record Date for Plan Distributions is March 28 UNIVERSAL HOSPITAL: March 31 Balance Sheet Upside-Down by $92 Mil. UAL CORP: Judge Wedoff Okays Termination of Pension Plans USGEN NEW ENGLAND: U.S. Trustee Objects to Plan Confirmation VERIZON HAWAII: S&P Hacks Rating on $300 Million Notes to B+ XOMA LTD: Shareholder Equity Soars by $20 Million in First Quarter YUKOS OIL: Fulbright Asks Court to Seal Distribution Motion ********* AADCO AUTOMOTIVE: Appoints Richard Dole to Board of Directors ------------------------------------------------------------- AADCO Automotive Inc. appointed Richard Dole to its board of directors. This will increase the current board to five directors. Mr. Dole is a founder and Senior Strategies Partner of the Quorum Group of Companies. He provides guidance to both the Quorum Growth Capital Division and Quorum Real Estate Investment Division. He also assists Quorum's investee companies in reviewing new opportunities. Mr. Dole has over 20 years of professional and operating experience in corporate finance in the areas of technology and growth companies. He has also held legal counsel positions with Northern Telecom Inc., and engaged in private practice in Calgary and Toronto. He holds an Honours Bachelor of Science degree from the University of Toronto and law degrees from Cambridge and Dalhousie Universities. AADCO Automotive Inc. is a growing Canadian public company with a unique business model committed to complete vehicle dismantling to provide quality used OEM parts, recyclable core from insurance salvage and aftermarket parts to meet the needs of the collision/mechanical repair industry. AADCO serves over 3000 collision/mechanical repair clients across Ontario through it's LKQ parts division. AADCO maintains one of the largest unbolted inventories of quality used OEM parts in Canada at it's 87,000 sq. ft. facility In Brampton, Ontario. AADCO is the only auto recycler to have been awarded the ECOLOGO for environmental stewardship. At Dec. 31, 2004, AADCO Automotive's stockholders' deficit narrowed to $2,693,810 from a $2,928,010 deficit at June 30, 2004. AADCO AUTOMOTIVE: Completes $1.2M Debenture Funding with Quorum --------------------------------------------------------------- AADCO Automotive Inc. reported the completion of a private placement of a $1,200,000 convertible debenture with Quorum Investment Pool Limited Partnership. The convertible debenture has a term maturing on December 15, 2009, bears an interest rate of 6%, and is convertible into Common Shares of AADCO at the rate of $0.10 per share during the first 2 years of the term, and at $0.11, $0.12, and $0.13 per share during the third, fourth, and fifth years of term, respectively. The convertible debenture is callable by AADCO upon certain performance conditions being met. A transaction fee of $24,000 was paid to QIP Management Inc., the general partner of Quorum Investment Pool Limited Partnership. The expiry date of the hold period for the convertible debenture or common shares issued as a consequence thereof is September 11, 2005. This is the final tranche of the previously announced funding from Quorum Funding Corporation of Toronto, and brings the investment in AADCO by both Quorum P.I.P.E. Trust and Quorum Investment Pool Limited Partnership to a total of $2,250,000. With this funding in place, the restructuring of AADCO is complete. Coincident with the first Quorum funding, in excess of $4,600,000 of current 12% and 16% interest debt was equitized, creating the strongest balance sheet since the Company's inception. In April of 2003, AADCO commenced a cost costing program which has trimmed in excess of $2,000,000 from the Company's annual overhead putting AADCO in a better position to pursue its market expansion goals and profitability. About Quorum The Quorum Group of Companies was founded in 1987 under the leadership of Wanda Dorosz, the current CEO and Managing Partner. It operates from its headquarters in Toronto with a wholly owned subsidiary office in Bermuda. Since 1987, Quorum has invested over $350 million on behalf of institutions and high net worth individuals. Notably, in the past five years, which have been characterized by extreme market turmoil, Quorum has retained each and every investee company. AADCO is proud of the association developed to date with Quorum and looks forward to utilizing this funding to meet the targets of its attractive business model. About AADCO Automotive AADCO Automotive Inc. is a growing Canadian public company with a unique business model committed to complete vehicle dismantling to provide quality used OEM parts, recyclable core from insurance salvage and aftermarket parts to meet the needs of the collision/mechanical repair industry. AADCO serves over 3000 collision/mechanical repair clients across Ontario through it's LKQ parts division. AADCO maintains one of the largest unbolted inventories of quality used OEM parts in Canada at it's 87,000 sq. ft. facility In Brampton, Ontario. AADCO is the only auto recycler to have been awarded the ECOLOGO for environmental stewardship. At Dec. 31, 2004, AADCO Automotive's stockholders' deficit narrowed to $2,693,810 from a $2,928,010 deficit at June 30, 2004. ADELPHIA COMMS: Exchanges Barbs with W.R. Huff on EVP Compensation ------------------------------------------------------------------ As reported in the Troubled Company Reporter on Apr. 7, 2005, Adelphia Communications Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve: (a) Adjusted Base Salaries for Executive Vice Presidents; (b) an Amended Short Term Incentive Plan Opportunity for General Counsel; (c) a Key Employee Continuity Plan for Executive Vice Presidents; and (d) an Amended Performance Retention Plan for Executive Vice Presidents. After lengthy analysis and consideration, the Compensation Committee of ACOM's Board has approved the EVP KERP proposal. The Compensation Committee consulted Watson Wyatt Worldwide while ACOM's management reviewed data provided by Towers Perrin HR Services. 1. Adjusted Base Salaries and Amended Short Term Incentive Plan The Debtors plan to increase Ms. Wittman's base salary from $490,000 to $600,000 and Mr. Sonnenberg's base salary from $266,000 to $325,000 effective as of January 1, 2005. The Debtors also seek the Court's authority to increase Mr. Sonnenberg's STIP opportunity from 60% to 80% of EBITDAR target so that he could potentially realize a STIP bonus of $260,000. 2. Key Employee Continuity Program The EVPs will be eligible to receive Stay Bonuses in an amount that is one and a half times their base salaries, totaling $900,000 for Ms. Wittman and $487,500 for Mr. Sonnenberg. In the event of a sale of the company, the EVPs will be eligible to receive Sale Bonuses in an amount that is two times their base salaries, totaling $1,200,000 for Ms. Wittman and $650,000 for Mr. Sonnenberg. 3. Amended Performance Retention Plan In September 2004, the Court approved an amendment to the Debtors' Performance Retention Plan whereby the performance awards intended to replace the long-term incentive component of an employee's compensation package in the absence of an equity-based compensation plan, can potentially vest, at the discretion of the Compensation Committee, if an employee is terminated as a result of the sale of less than substantially all of the Debtors' assets. Although it is unlikely that either of the EVPs would be terminated as a result of a sale of less than substantially all of the Debtors' assets, out of an abundance of caution and for consistency purposes, the Debtors wish to apply the amended PRP trigger to the EVPs. W.R. Huff Objects Representing W.R. Huff Asset Management Co., L.L.C., Gregg L. Weiner, Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP, in New York, asserts that the Bankruptcy Court no longer has jurisdiction to render a decision on the ACOM Debtors' request or in any way address the issues presented in light of Huff's timely filing of its notice of appeal of the Third KERP Motion. Mr. Weiner notes that the issues on appeal include the same issues presented in the Debtors' request. Thus, Mr. Weiner says, the filing of Huff's notice of appeal divested the Bankruptcy Court of jurisdiction to address the Debtors' request. In addition, Mr. Weiner continues, even if the Bankruptcy Court were found to have jurisdiction to enter the Motion, there is simply no basis for the exorbitant increases in the EVPs' compensation. "The Debtors claim these increases to the EVPs' compensation are a result of the increased responsibilities resulting from the Debtors' decision to engage in a dual track sale and emergence process. However, the Debtors have always known that a sale of the company was a possibility. Likewise, both the CFO and the GC -- each of whom have a long history of working with bankrupt companies -- know all too well that a sale is always a possibility in a chapter 11 context." In fact, Mr. Weiner notes, both have previously worked for companies, which were involved in chapter 11 sales. According to Mr. Weiner, it is simply not true that for two experienced restructuring professionals, "the notion of a dual-track sale and emergence process was not reasonably foreseeable." Moreover, Mr. Weiner adds, having previously been employed by chapter 11 debtors, and being hired during the ACOM Debtors' chapter 11 cases, both Vanessa Wittman and Brad Sonnenberg are uniquely familiar with the complexity and volume of work involved in a chapter 11 process. However, even with that knowledge, Mr. Weiner says, both Ms. Wittman and Mr. Sonnenberg agreed to be retained by the Debtors at the compensation, which was offered to them at that time. Although the ACOM Debtors assert that the KERP is necessary because of the EVPs' increased workload, Mr. Weiner points out that the work that the EVPs have been conducting is reaching its final stages. "The sales process is reaching its conclusion and the Debtors are now working on a one-track process. The negotiations with the Department of Justice are already complete. In addition, while the Debtors claim that the EVPs will continue to have ongoing responsibilities related to the sale and that it would be difficult to replace the EVPs, there is no need at this time to add to the high levels of compensation already awarded to the EVPs." Mr. Weiner also notes that the ACOM Debtors provide no support for the assertion that the EVPs are underpaid. According to Mr. Weiner, the ACOM Debtors provide no evidence that salaries in the cable industry have dramatically increased. Furthermore, Mr. Weiner says, the Debtors fail to cite to any comparable increases for executives involved in chapter 11 proceedings. Mr. Weiner asserts that the Debtors failed to justify the sheer size of the EVPs' salary and bonus increases. The ACOM Debtors are also requesting authority to grant the EVPs' bonuses pursuant to the Continuity Program. If approved, Mr. Weiner says, that coverage will doubly reward the EVPs while not incentivizing them to remain with the company for the entire period, which the ACOM Debtors claim they are needed. Mr. Weiner believes that the bonuses will not ensure that the EVPs remain in the Debtors' employ through the plan process or in the sale transition period, when the Debtors claim the EVPs services are required. "[The bonuses] are simply gifts to the EVPs." Mr. Weiner reminds the Court that this is the ACOM Debtors' fourth time to seek enhancement of the compensation and retention programs for their senior most employees. "[T]he current request is on top of approximately $60 million which was already awarded as part of the Debtors' existing retention plans. Furthermore, this staggering amount does not even include the bonuses and other compensation that are soon to be sought for CEO William Schleyer and COO Ronald Cooper," Mr. Weiner says. For these reasons, W.R. Huff asks the Court to deny the Debtors' request. ACOM Debtors Respond The ACOM Debtors assert that Ms. Wittman and Mr. Sonnenberg are invaluable to their reorganization and emergence processes. Brian E. O'Connor, Esq., at Willkie Farr & Gallagher, LLP, in New York, notes that only W.R. Huff has objected to the ACOM Debtors' request. "Notably, neither the representatives of the ad hoc committee of holders of ACC senior notes, whose constituents include holders of approximately $2 billion of ACC senior notes, nor the Official Committee of Equity Security Holders has opposed the Motion. Each of these groups has had the opportunity to work with and observe Ms. Wittman and Mr. Sonnenberg in the performance of their duties and neither group has been reluctant to aggressively note their views on actions proposed by the Debtors in the past. It is reasonable to conclude that both groups recognize the sensible approach being advocated by the Debtors in the matter at hand and, as responsible fiduciaries for their constituents, see no basis to risk the loss of these valued assets." Mr. O'Connor asserts that the Court has jurisdiction over the Debtors' Motion. As a matter of law, Mr. O'Connor says, the filing of a notice of appeal divests the lower court of jurisdiction only to proceed "with respect to the matters raised in the appeal." According to Mr. O'Connor, in the ACOM Debtors' Motion, the Court is being asked to consider a matter not previously before it. As a factual matter, Mr. O'Connor says, the Court previously authorized the ACOM Debtors to implement several compensation and retention programs for employees below the EVP level. "As the appeal of the KERP Orders cannot, by definition, exceed the scope of the orders themselves, Huff's contention that [the Bankruptcy] Court lacks jurisdiction to address the EVP KERP based on an appeal of the KERP Motion is entirely without merit." The ACOM Debtors contend that the EVP KERP is a "fair and reasonable measure to preserve the value of [their] estates." Moreover, the ACOM Debtors clarify that although their Motion indicates that the stay bonuses proposed to be offered to the EVPs under the existing Continuity Program would be paid in June 2005, in the interest of clarity, the Motion should have explained that those bonuses were proposed to be paid no earlier than nine months from the date that the EVPs' inclusion in the Continuity Program is approved and those employees are formally invited to participate in the program (an event which has not yet occurred). At the request of the Creditors' Committee, the ACOM Debtors have also agreed to modify the Continuity Program to provide that the EVPs' stay bonuses may not be paid until the earlier of the consummation of a plan of reorganization in their cases or the closing of a transaction that effectuates a change in control -- less favorable treatment than that which was already approved for other executives. "While it is clear that Huff does not share the views of its fellow committee members, the Debtors believe that the request for [the] modification by the Creditors' Committee further demonstrates the enormous value to the Debtors' estates and constituents of retaining the EVPs," Mr. O'Connor says. Accordingly, the ACOM Debtors ask the Court to overrule Huff's Objection and approve the EVP KERP. 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. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) AEGIS COMMS: December 31 Balance Sheet Upside-Down by $12 Million ----------------------------------------------------------------- Aegis Communications Group, Inc. (OTC Bulletin Board: AGIS) reported its results for the year ending 2004. "2004 was a year of difficult transition for Aegis," said Richard Ferry, President and CEO of Aegis. "A new Board of Directors and new executive management team came together in September and began the task of recovering from events affecting the Company's performance earlier in the year and setting a new strategic direction. "He also stated, "Declining revenues, resulting in part from the shift in strategy of a major client and conditions within the markets which Aegis serves, caused Aegis management to take aggressive action to rationalize costs to a new revenue base. Among the initiatives undertaken was the reduction of excess capacity resulting in the closure of 4 call centers and the elimination of associated expense. Simultaneously, management reached out to all Aegis clients to strengthen long-standing relationships and build trust and confidence in the Aegis brand. Additionally, the company believe new clients are starting to catch the vision of the new Aegis as it expands the product offering, continue a tradition of service excellence, and take advantage of new offshore capabilities." A net loss applicable to common shareholders of $22.2 million for the year ended December 31, 2004, versus a net loss applicable to common shareholders of $19.1 million. Excluding net income from discontinued operations, a gain on sale of the related assets, and a gain on the early extinguishment of debt, the company incurred a net loss from continuing operations of $22.2 million for the period ended December 31, 2004, as compared to a net loss from continuing operations of $10.9 million for the period ended December 31, 2003. For the year ended December 31, 2004, revenues from continuing operations were $94.3 million versus $139.9 million in the prior year, a decrease of $45.6 million, or 32.6%. The decrease in revenues versus the year ended December 31, 2003 resulted from a number of factors. First, an inbound contract with a cable services provider that expired in the fourth quarter of 2003 was not renewed by the client as they made a decision to consolidate their customer service into their available in-house capacity. This expired inbound contract accounted for approximately 33% of the decrease for 2003 vs. 2004. Second, the decision at the end of June 2004 by a large telecommunications customer to discontinue its outbound acquisition services accounted for a majority of the 26% decrease in revenue billings on their campaigns 2003 vs. 2004. Additionally, another of our telecommunications clients (who is one of our five largest clients) reduced transaction volumes and a client in the membership services industry ramped down a campaign in the first quarter of 2004. Revenues for the third quarter of 2004 were also negatively impacted by the hurricanes experienced in the southeastern part of the country. Revenue Mix. Inbound CRM and non-voice services continued to be responsible for the majority of our revenues in 2004. Together those two service areas accounted for approximately 75.6% of our revenues, as compared to 74.1% in 2003. Outbound CRM revenue for 2004 accounted for approximately 24.4% as compared to 25.9% in 2003. The decrease in outbound CRM revenues for 2004 is due to reduced volume for existing client programs. The company seeks to secure recurring revenues from long-term relationships with companies that utilize customer contact strategies as integral, ongoing elements in their CRM programs. In addition to providing services on an outsourcing basis, in which the company provides all or a substantial portion of a client's CRM needs, the company also continue to perform project- based services for certain clients. Project-based services, however, are frequently short-term and there can be no assurance that these clients will continue existing projects or provide new ones in the future. About the Company Aegis Communications Group, Inc. -- http://www.aegiscomgroup.com/ -- is a worldwide transaction-based business process outsourcing Company that enables clients to make customer contact programs more profitable as well as drive efficiency in back office processes. Aegis' services are provided to a blue chip, multinational client portfolio through a network of client service centers employing approximately 2,200 people and utilizing approximately 2,700 production workstations. At Dec. 31, 2004, Aegis Communications' balance sheet showed a $12,061,000 stockholders' deficit, compared to a $26,449,000 deficit at Dec. 31, 2003. ALAMOSA HOLDINGS: Reports 1st Qtr. Results & Redeems Senior Notes ----------------------------------------------------------------- Alamosa Holdings, Inc. (Nasdaq/NM: APCS), a PCS Affiliate of Sprint (NYSE: FON) reported financial and operational results for the first quarter ended March 31, 2005, including previously announced results on April 11, 2005, for net subscriber additions, total subscribers and average monthly customer churn. During the first quarter, the Company closed the merger with AirGate PCS, Inc., and began integration to the Alamosa system. Reported financial results reflect AirGate's operations from Feb. 16, 2005, through the first quarter ended March 31, 2005. Alamosa also exchanged convertible preferred stock and announced its intention to redeem the 12-7/8% Senior Discount Notes due 2010. Total consolidated revenue for the first quarter was $267.8 million comprised of: (1) $190.0 million in subscriber revenues, (2) $68.2 million in travel revenues (including wholesale and resale), and (3) $9.6 million in product sales revenues. On a standalone basis, Alamosa reported total revenue of $223.6 million comprised of: (1) $155.0 million in subscriber revenues, (2) $60.6 million in travel revenues (including wholesale and resale), and (3) $8.0 million in product sales revenues. For the former AirGate properties from February 16, 2005, total revenue was $44.7 million, comprised of: (1) $34.9 million in subscriber revenues, (2) $8.1 million in travel revenues (including wholesale and resale), and (3) $1.6 million in product sales revenues. Total consolidated Adjusted EBITDA of $62.5 million for the first quarter included $55.3 million from the Alamosa properties and $7.3 million for the former AirGate properties from February 16, 2005. The consolidated Company reported a first quarter net loss of $3.1 million, after preferred stock dividends and inducement premiums of $2.9 million. This compares to a net income of $1.6 million, after preferred stock dividends, during the fourth quarter of 2004. On a standalone basis, Alamosa generated $7.6 million in net income. The former AirGate properties generated a net loss of $6.3 million. As previously disclosed on April 11, 2005, the Company reported that combined net subscribers grew by 65,000 during the first quarter to end at 1.395 million total direct subscribers. Net subscriber additions were 55,000 for Alamosa for the full quarter and 10,000 for the former AirGate properties from the date of the merger until the end of the quarter. Along with subscriber growth, the Company reported combined average monthly customer churn of 2.3 percent for the first quarter unchanged from the fourth quarter of 2004 and down from 2.4 percent in the same period one year ago. On a standalone basis, Alamosa's average monthly customer churn was 2.2 percent compared to 2.3 percent in the prior quarter, while the former AirGate properties reported an average monthly customer churn of 2.5 percent compared to 2.7 percent in the prior quarter. The Company launched 68 new sites, including 22 in the former AirGate properties and added an additional 33 second carriers in the first quarter, resulting in an increased covered population of 19.4 million, including 13.1 million covered pops in the Alamosa properties and 6.3 million in the former AirGate properties. During the quarter, the Company spent approximately $30.4 million on fixed asset additions, including $22.7 million in the Alamosa footprint and $7.7 million in the former AirGate properties. The Company exchanged approximately 31,000 units of convertible preferred stock prior to March 31, 2005 with approximately 184,000 additional units being converted subsequent to quarter end, representing a liquidation value in excess of $53.9 million and resulting in the issuance of 16 million newly-issued shares of common stock. Inducement premiums paid in these transactions included approximately 383,000 shares of common stock. As a result of these recent transactions, Alamosa eliminated in excess of $6.8 million in dividend requirements on these units through the November 2006 call date. Since June 1, 2004 the Company has eliminated approximately 417,000 units of preferred stock, or approximately 61% of the original outstanding preferred issue and approximately $103 million in liquidation value in exchange for approximately 32 million newly-issued shares of Alamosa common stock. Senior Note Redemption The redemption of the 12-7/8% Senior Notes announced on March 29, 2005, was completed on April 25, 2005 for $6.4 million. The Company will avoid approximately $4 million dollars in interest expense over the next five years, based on the original maturity of the Notes. "We experienced strong momentum in the first quarter, both as the result of our operational efforts last year and our early success in the initial integration of the former AirGate properties," said David E. Sharbutt, Chairman and Chief Executive Officer of Alamosa Holdings, Inc. "We are excited about the growth we are seeing in our business, our path toward financial profitability and rationalization of our balance sheet through the early conversion of convertible preferred stock and the early redemption of the 12 7/8% Senior Notes, both of which will avoid the cash outlay of dividends and interest in the future. All in all, we are very encouraged by the start to 2005, both for Alamosa and the wireless industry in general. We look forward to maintaining that momentum for the balance of 2005," Mr. Sharbutt concluded. About Alamosa Alamosa Holdings, Inc. is the largest (based on number of subscribers) PCS Affiliate of Sprint (NYSE: FON), which operates the largest all-digital, all-CDMA Third-Generation (3G) wireless network in the United States. Alamosa has the exclusive right to provide digital wireless mobility communications network services under the Sprint brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois, California, Georgia, South Carolina, North Carolina and Tennessee. Alamosa's territory includes licensed population of 23.2 million residents, including 15.8 million residents in Alamosa's territories and 7.4 million residents in the recently acquired AirGate properties. About Sprint Sprint -- http://www.sprint.com/mr-- offers an extensive range of innovative communication products and solutions, including global IP, wireless, local and multiproduct bundles. A Fortune 100 company with more than $27 billion in annual revenues in 2004, Sprint is widely recognized for developing, engineering and deploying state-of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network; an award-winning Tier 1 Internet backbone; and one of the largest 100-percent digital, nationwide wireless networks in the United States. * * * As reported in the Troubled Company Reporter on Feb. 7, 2005, Standard & Poor's Ratings Services raised its ratings on Alamosa Holdings, Inc., and its subsidiaries, including the corporate credit rating, which was raised to 'B-' from 'CCC+'. At the same time, the corporate credit rating on AirGate PCS, Inc., was raised to 'B-' from 'CCC+'. Other ratings on AirGate were also raised. Both companies are wireless affiliates of Sprint Corp. "The upgrade on Alamosa is based on continuing positive operating momentum, which is strengthening credit measures," said Standard & Poor's credit analyst Eric Geil. The upgrade on AirGate is based on the pending acquisition of the company by financially- and operationally-stronger Alamosa. Standard & Poor's expects Alamosa to improve AirGate's operating performance, which recently has been weak compared with that of other Sprint affiliates. The ratings on both companies will be analyzed on a consolidated basis. S&P said the outlooks for both companies are stable. AINSWORTH LUMBER: Posts $55.1 Million Net Income for First Quarter ------------------------------------------------------------------ Ainsworth Lumber Co. Ltd. (TSX:ANS) reported its financial results for the quarter ended March 31, 2005. ------------------------------------------------------------------- ($ millions, except Three months ended March 31 per share data) --------------------------- 2005 2004 ------------------------------------------------------------------- Sales 345.6 190.6 Operating earnings 108.8 91.0 Foreign exchange loss on long-term debt 5.9 5.7 Net Income (loss) 55.1 (19.8) Earnings (loss): $ per share 3.76 (1.36) EBITDA (1) 133.5 104.4 Cash flow from operations (2) 15.1 45.0 ------------------------------------------------------------------- (1) EBITDA, a non-GAAP financial measure, represents operating earnings before amortization of capital assets plus other income (expense). (2) Cash provided by operations after changes in non-cash working capital. The company generated net income of $55.1 million for the first quarter of 2005, compared to a net loss of $19.8 million for the same period in 2004. The increase in profitability is a result of a $17.8 million increase in operating earnings, a $100.0 million decrease in finance expense due to a one time refinancing charge of $106.2 million in 2004, a $5.4 million decrease in other income (expense), and a $34.7 million increase in income tax expense. Operating earnings for the first three months were $108.8 million compared to $91.0 million for the same period in 2004, representing a 19.6% increase. First quarter sales of $345.6 million were $155.0 million or 81.3% higher than the first quarter of 2004. As a result of the acquisition of four oriented strand board production facilities during 2004, OSB shipment volumes increased by 122.8% compared to the first quarter of 2004. Ainsworth's per unit production costs increased by 21.6% as a direct result of increases in natural gas and oil prices and wood fibre costs. EBITDA, defined as operating earnings before amortization of capital assets plus other income, was $133.5 million compared to $104.4 million in the same period last year. While OSB production capacity and shipments increased significantly compared to the same period in 2004, the growth in operating earnings was dampened by the decline in OSB prices from the record levels experienced in 2004, combined with the overall increase in OSB production costs. Cash provided by operations (after changes in non-cash working capital) during the quarter was $15.1 million compared to cash provided by operations of $45.0 million in the first quarter of 2004. During the quarter, non-cash working capital increased due to the seasonal build up of log inventories, and an increase in accounts receivable due to higher OSB shipment volume. During the quarter the Company made a timber licence deposit of $36.2 million pursuant to an application for timber licences in the Prince George and the Quesnel timber supply areas, for approximately 1.4 million m3 of timber per year over a period of fifteen years. As part of the application for these timber licences, the Company is considering an opportunity to construct an OSB facility in these areas. No commitments to proceed with these plans have been made. At March 31, the Ministry of Forests had not granted the licences to the Company. Ainsworth had a cash balance of $177.6 million at March 31, 2005, compared to $212.6 million at December 31, 2004 and $60.6 million at March 31, 2004. Subsequent to March 31, 2005, the Company secured sufficient additional long-term timber tenure to permit the expansion of the Grande Prairie facility. The Company plans to commence construction in the second quarter of 2005. This expansion should provide an additional 600 mmsf (3/8" basis) of OSB production annually to the Company. "We are very optimistic that the stable North American economy will continue to support housing starts and home renovations in the near term. Our increased production capacity has positioned us well for benefiting from a larger market share in the future, while developing economies of scale and searching for efficient ways of increasing production at out facilities," said Brian Ainsworth, Chairman and Chief Executive Officer. Ainsworth Lumber Co., Ltd., a British Columbia corporation headquartered in Vancouver, Canada, is a publicly traded integrated OSB producer that also manufactures specialty overlaid plywood and finger-jointed lumber. Ainsworth have a 13% market share in OSB after purchasing Potlatch. OSB sales represent approximately 97% of total revenues. * * * As reported in the Troubled Company Reporter on Sept. 16, 2004, Moody's Investors Service assigned a B2 rating to Ainsworth Lumber Co. Ltd.'s proposed US$450 million new note issues. The new notes are being issued to fund Ainsworth's US$457.5 million purchase of Potlatch Corporation's oriented strandboard assets, and will rank equally with Ainsworth's existing senior unsecured notes. Accordingly, the ratings on the existing notes, as well as Ainsworth's senior implied and issuer ratings, were downgraded to B2. The ratings outlook is stable. Standard & Poor's Ratings Services also affirmed its 'B+' long-term corporate credit and senior unsecured debt ratings on Vancouver, B.C.-based Ainsworth Lumber Co. Ltd. At the same time, the ratings were removed from CreditWatch, where they had been placed on Aug. 26, 2004, following the company's announcement to purchase all of Potlatch Corp.'s oriented strandboard manufacturing and related facilities for about US$457.5 million. Ainsworth's proposed new issues of US$300 million of fixed senior unsecured notes due 2012 and US$150 million of floating variable- rate senior notes due 2010 were also assigned 'B+' ratings. S&P says the outlook is stable. ALTERNATIVE LOAN: S&P Rating on Class B-4 Notes Tumbles to D ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on three classes of mortgage pass-through certificates from two transactions issued by Alternative Loan Trust and serviced by Countrywide Home Loans Inc. At the same time, ratings are affirmed on the remaining certificates from the deals. The lowered ratings reflect a decrease in credit support to the subordinate classes. The reduction in credit support is due to inconsistent net losses, which exhausted the credit support of these classes. Current credit support ranges from 0.00% to 0.57%. The affirmations reflect the adequate credit support currently available to each rated class. These credit support levels are sufficient to protect the classes from losses on an actual and projected basis. Credit enhancement for all series is provided by subordination. As of the April 2005 remittance date, total delinquencies range from 6.14% to 13.20%, and cumulative losses, as a percentage of the original trust balances, ranged from 0.27% to 0.38%. The outstanding pool balances of these series are no greater than 53% of their original size. The collateral for each series are 30-year, conventional fixed- rate residential mortgage loans. Ratings Lowered Alternative Loan Trust 2003-5T2 Rating ------ Series Class To From ------ ----- -- ---- 2003-13 B-4 CCC B Alternative Loan Trust 2003-17T2 Rating ------ Series Class To From ------ ----- -- ---- 2003-38 B-3 B BB 2003-38 B-4 D B Ratings Affirmed Alternative Loan Trust 2003-5T2 Series Class Rating ------ ----- ------ 2003-13 A-1, A-2, A-3, A-4 AAA 2003-13 A-6, A-8, PO, A-R AAA 2003-13 M AA 2003-13 B-1 A 2003-13 B-2 BBB 2003-13 B-3 BB Alternative Loan Trust 2003-17T2 Series Class Rating ------ ----- ------ 2003-38 A-1, PO, A-R AAA 2003-38 M AA 2003-38 B-1 A 2003-38 B-2 BBB AMPEX CORP: March 31 Balance Sheet Upside-Down by $92.7 Million ---------------------------------------------------------------- Ampex Corporation (OTCBB:AEXCA) reported net income of $5.9 million after deduction of $2.6 million for the cost of patent litigation. In the first quarter of 2004 the Company reported a net loss of $300,000 million after deduction of $500,000 million of patent litigation expense. Total revenues were $17.9 million in the first quarter of 2005 compared with $9.9 million in the first quarter of the prior year. Licensing revenue totaled $11.4 million in the first quarter of 2005, up from $1.7 million in the first quarter of 2004. During the first quarter of 2005 new patent licensing agreements were announced with six additional manufacturers of digital still cameras (Casio Computer Co., Ltd., Matsushita Electric Industrial Co. Ltd., Olympus Corporation, PENTAX Corporation, Samsung Techwin Co., Ltd. and Victor Company of Japan, Ltd.). In the first quarter of 2005, $3.1 million of licensing revenue reflected prepayments of royalty obligations through the first quarter of 2006. The balance of $8.3 million represents royalties in respect of past or current sales under licenses that provide for running royalties based on the licensee's revenues from products that infringe our patents. In the first quarter of 2004, all of the Company's licensing revenue came from running royalties paid by manufacturers of digital video camcorders. During the first quarter of 2005, the Company's intellectual property costs included litigation costs of $2.6 million related to lawsuits that it initiated in October 2004 against Eastman Kodak Company (NYSE:EK) alleging patent infringement. Suits brought against two other manufacturers of digital still cameras were settled in the fourth quarter of 2004 upon successfully concluding licensing agreements. Patent litigation costs incurred in the first quarter of 2004 totaled $0.5 million. The Company may seek to enforce its digital imaging patents by instituting additional litigation against manufacturers of digital still cameras, digital video camcorders, DVD recorders or other products if we believe our patents are being infringed by such manufacturers and licensing agreements cannot be concluded on satisfactory terms. The Licensing segment contributed operating profit of $8.4 million in the first quarter of 2005 compared to operating profit of $0.9 million in the first quarter of 2004. Product sales and service revenues from the Company's Recorders' segment totaled $6.5 million for the first quarter of 2005 compared to $8.2 million in the first quarter of 2004. The sales decline is primarily attributed to an ongoing transition from an older generation of tape-based image and data acquisition products to a newly introduced range of solid state and hard disk-based products. Such sales declines coupled with increased research and development and selling and administrative costs for the Recorders' segment, which were partially offset by improved gross profit margins, resulted in a drop in operating income in the first quarter of 2005 to $0.7 million compared to $2.0 million in the first quarter of 2004. Interest expense, net and other financing costs, totaled $741,000 in the quarter ended March 31, 2005, compared to $2.4 million or in the quarter ended March 31, 2004, reflecting $62.4 million of debt repayment in the fourth quarter of 2004. On May 3, 2005 the Company called $10 million of its 12% senior notes to be redeemed, which will reduce the principal amount to $5.8 million when completed in the second quarter of 2005. The Company's annual effective tax rate was less than the statutory rate in the quarter ended March 31, 2005 due to the ability to offset taxable income with available net operating loss carryforwards which at December 31, 2004 totaled $178 million. In the quarter ended March 31, 2004 the Company benefited from income, including its pro rata share of gains realized on the sale of investments held by a limited partnership, totaling $1.2 million. The limited partnership sold or distributed all remaining investments by the end of 2004. Headquartered in Redwood City, California, Ampex Corporation -- http://www.ampex.com/-- is one of the world's leading innovators and licensors of technologies for the visual information age. At Mar. 31, 2005, Ampex Corporation's balance sheet showed a $92,742,000 stockholders' deficit, compared to a $99,429,000 deficit at Dec. 31, 2004. ARVINMERITOR INC.: Weak Performance Cues S&P to Cut Ratings to BB ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on ArvinMeritor Inc. to 'BB' from 'BB+', and lowered all other long-term ratings on the company and related entities. The 'B-1' short-term rating on ARM is affirmed. The outlook is negative. Total consolidated debt at March 31, 2005, stood at about $1.5 billion. Troy, Michigan-based ARM is a leading global supplier of integrated systems, modules, and components to the automotive and commercial vehicle industries. The downgrade reflects: (1) weak operating performance caused by internal operating inefficiencies, (2) uncovered steel price increases, and (3) the lower volume levels of important customers General Motors Corp. (BB/Negative/B-1) and Ford Motor Co. (BB+/Negative/B-1). ARM's funds from operations (FFO) to adjusted debt ratio, a key measure of cash flow protection, has been subpar for a number of years. It is not expected to strengthen in the near-to- intermediate term to a level commensurate with the ratings given the challenges facing the company and the industry. For the past four years, FFO to adjusted debt has been in the mid-teens percent area, well below an expected 25%. ARM's operational inefficiencies have been exacerbated by additional incurred costs at its commercial vehicle systems (CVS) business, which are caused by high volumes. Together, these factors are limiting margins at this unit at a time when demand for medium and heavy trucks is nearing a cyclical peak. Standard & Poor's still expect those markets to remain strong in 2006, although visibility in the medium term is limited. To improve earnings measures and cash flow generation, ARM is undertaking a restructuring program, primarily at its troubled light vehicle systems (LVS) segment, and is also taking steps to improve its cost structure at its CVS operations. However, it will take some time to achieve the full benefits from restructuring activities. "The ratings on ARM, a leading supplier to the automotive industry, reflect the firm's relatively weak financial profile, which is expected to gradually strengthen over the next one-to-two years as the firm benefits from restructuring actions," said Standard & Poor's credit analyst Daniel R. DiSenso. The ratings also reflect the company's fair business profile, characterized by exposure to cyclical and highly competitive end markets. ARM is expected to pursue an organic growth plan, supplemented on occasion with tuck-in acquisitions. Material debt-financed acquisitions are not expected and are not factored into the ratings. ARM has strong market positions and diversity in its customer base, geographic reach, and end markets. Almost all the company's products serving the North American market hold a No. 1 or No. 2 share, as do most products serving the European market. However, this strong market presence is partially blunted by: (1) intense competition, (2) constant product pricing pressures, and (3) exposure to raw material price swings. Together, these challenges limit the company's margins and profit potential. * * * Last week, ArvinMeritor Inc. said it will be laying off approximately 1,350 hourly employees and 250 salaried workers over the next 18 months and close 11 plants. About ArvinMeritor ArvinMeritor Inc. provides the global transportation industry with integrated systems, modules, and components. The Company serves light vehicle, commercial truck, trailer, and specialty original equipment manufacturers and related aftermarkerts. ArvinMeritor also provides coil coating applications, including those for the transportation, appliance, construction and furniture industries. As reported in the Troubled Company Reporter on Feb. 8, 2005, Fitch Ratings affirmed its BB+ Rating of ArvinMeritor's senior unsecured debt. ArvinMeritor's balance sheet dated March 31, 2005, shows $5.8 billion in assets and $4.8 billion in liabilities. ATA AIRLINES: Chicago Express Gets Court Nod to Reject Agreements ----------------------------------------------------------------- As previously reported, Chicago Express Airlines, Inc., sought the United States Bankruptcy Court for the Southern District of Indiana's authority to reject 71 executory contracts and unexpired leases. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that the Agreements are for goods and services, equipment, or personal and nonresidential real property that is no longer necessary to the operations of Chicago Express. * * * Judge Lorch rules that nothing in the Order prohibits or restricts Chicago Express' ability to contingently withdraw the request prior to the effective date of rejection as to certain agreements. Chicago Express may assume and assign those agreements as part of the sale of its assets. 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 and 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) AVOTUS CORP: Wholly Owns Applied Research After Exercising Option ----------------------------------------------------------------- Avotus(R) Corporation (TSX Venture: AVS) exercised its option to acquire the remaining 51% of Applied Research Technologies of Salt Lake City. The option is being exercised pursuant to the terms of the purchase agreement dated September 30, 2004, under which Avotus purchased a 49% interest in ART. Price and terms are similar to the acquisition of the original 49%, plus a percentage of revenue for an earn-out period. Through the acquisition of ART with its innovative e-procurement technologies, including its online auction capabilities and best practices methodologies, Avotus further extends the leadership position of its Intelligent Communications Management(TM) (ICM) solution set. The transaction is expected to close on May 31, 2005 and is subject to the approval of the TSX Venture Exchange. "The addition of ART's capabilities into Avotus' ICM model in 2004 gave us the ability to automate the complete communications management cycle from procurement to payment," said Fred Lizza, Avotus president and CEO. "No one else in the industry has this combination of technology and domain expertise to help organizations fully manage their communications environments in outsourced, hosted, or in-house deployments. This acquisition completes the process we began earlier and enables us to more fully integrate the ART technology into our ICM solution." Commented Brad Buxton, ART president, "Carriers have always controlled negotiations. The marriage of Avotus and ART is an opportunity for businesses to take control of their relationships with their service providers. By combining the data and inventory awareness created by Avotus ICM with the best practices and savings of ARTools(R) WebAuction(TM) we are creating a new day in the telecommunications industry and people are realizing that it's a buyers' market." Avotus Corporation -- http://www.avotus.com/-- provides solutions that dramatically reduce the cost and complexity of enterprise communications. Intelligent Communications Management is Avotus' unique model for a single, actionable environment that enables any company to bring together decision-critical information about communications expense management, procurement and systems usage for wired, wireless and VoIP systems. Deployed as an onsite or hosted application, or as a completely outsourced value-added managed solution, Avotus enables dramatic savings while improving productivity and efficiency. Avotus is empowering Fortune 500 companies as well as thousands of other organizations worldwide to gain insight into and control over their communications environment. Its solutions are strongly supported and endorsed by industry-leading partners such as Avaya, Cisco, and Nortel. As of Dec. 31, 2004, Avotus Corporation's balance sheet deficit narrowed to $586,922 from a $16,881,103 deficit at Dec. 31, 2003. BELLAIRE GENERAL: Chap. 11 Case Converted to Chap. 7 Liquidation ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Texas converted Bellaire General Hospital LP's chapter 11 proceeding to a chapter 7 liquidation at the Debtor's behest. The Court entered the conversion order on April 29, 2005. The Debtor awaits the Court's approval of the appointment of Ben Floyd as the chapter 7 Trustee. Headquartered in Houston, Texas, Bellaire General Hospital, L.P. -- http://www.bellairemedicalcenter.com/-- operates a hospital. The Company filed for chapter 11 protection on January 3, 2005 (Bankr. D. Tex. Case No. 05-30089). Daniel F. Patchin, Esq., at McClain, Leppert & Maney, P.C. represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets and debts of $10 million to $50 million. BOISE CASCADE: Earns $64.7 Million of Net Income in First Quarter ----------------------------------------------------------------- Boise Cascade Company (formerly Boise Cascade Holdings, L.L.C.) reported first quarter 2005 net income of $64.7 million. Excluding $15.2 million of income related to the change in the fair value of interest rate swaps, net income was $49.5 million. Net income in the first quarter of 2004 was $2.1 million. First quarter 2004 includes financial results for the period of January 1 through March 31, when OfficeMax Incorporated (the Predecessor) operated the businesses. FINANCIAL HIGHLIGHTS ($ in millions) Boise Cascade Company Predecessor 1Q 2005 1Q 2004 Sales $1,432.3 $1,308.0 Net Income $64.7 $2.1 EBITDA $111.5 $81.6 Operating results in first quarter 2005 are not comparable to the results reported for the predecessor period in first quarter 2004 because of a number of factors, including: (i) depreciation expense was lower in first quarter 2005 due to purchase accounting; (ii) pension and other postretirement benefit expenses were lower in first quarter 2005 due to OfficeMax retaining liabilities associated with its former employees and providing us with pension plans with improved funding levels; and (iii) the company was formed as a limited-liability company and were not subject to entity-level taxation in first quarter 2005. Sales in first quarter 2005 increased 9.5% to $1.4 billion, compared with $1.3 billion in the first quarter a year ago. Sales in all of our businesses increased during the three months ended March 31, 2005, compared with the same period a year ago. Paper sales increased 8% due primarily to a 9% increase in weighted average paper prices, offset in part by lower sales volumes. Sales volumes in first quarter 2004 were particularly strong as customers ordered paper ahead of announced price increases and we shipped volumes in excess of our production, selling out of inventory. Packaging & Newsprint sales increased 26% due primarily to a 9% increase in weighted average prices and an 8% increase in sales volumes. Wood Products sales were relatively flat with the comparable period in the prior year, while Building Materials Distribution sales rose 12% due in large part to a 7% increase in sales volume and 5% higher prices. Income from operations increased $63.1 million to $81.7 million in first quarter 2005, compared with $18.6 million in the same period a year ago. Both our Paper and Packaging & Newsprint segments reported increased income in first quarter 2005, while our Wood Products segment reported decreased income. Segment income in Paper increased $55.0 million to $29.2 million due primarily to increased paper prices and, to a lesser extent, decreased depreciation expense and benefits costs. Segment income also increased in Packaging & Newsprint due to increased prices and sales volume for linerboard and increased prices for newsprint. Results in our Wood Products segment declined, compared with the same period in the prior year, primarily because of a decrease in sales volume and prices for plywood. The decline in this segment was partially offset by higher sales volumes, higher sales prices, and lower raw material costs for our engineered wood products. Operating income in our Building Materials Distribution segment was essentially flat, as the increase in sales was offset by increases in materials, labor, and other operating expenses. Segment sales, income, and EBITDA for first quarter 2005 and first quarter 2004 are shown in the tables below: Boise Cascade Company Predecessor Segment sales ($ millions) 1Q 2005 1Q 2004 Paper $357.8 $330.7 Packaging & Newsprint 193.8 153.7 Wood Products 322.4 321.3 Building Materials Distribution 696.2 619.2 Corporate and Other 19.4 22.1 Intersegment Eliminations (157.3) (139.0) Total $1,432.3 $1,308.0 Segment income (loss) ($ millions) Paper $29.2 $(25.8) Packaging & Newsprint 4.5 (12.4) Wood Products 33.1 44.1 Building Materials Distribution 24.4 24.9 Corporate and Other (10.3) (7.0) Total $80.9 $23.8 Segment EBITDA (a) ($ millions) Paper $42.2 $9.7 Packaging & Newsprint 13.7 (2.1) Wood Products 38.4 50.8 Building Materials Distribution 26.4 26.8 Corporate and Other (9.2) (3.6) Total $111.5 $81.6 (a) EBITDA represents income before interest (interest expense, interest income, and changes in fair value of interest rate swaps), income taxes, and depreciation, amortization, and depletion. Boise Cascade formerly known as OfficeMax, headquartered in Boise, Idaho, manufactures engineered wood products, plywood, lumber, and particleboard and distributes a broad line of building materials, including wood products manufactured by the company. Boise also manufactures a wide range of specialty and premium papers, including imaging papers for the office and home and papers for pressure-sensitive applications, as well as printing and converting papers, containerboard and corrugated boxes, newsprint, and market pulp. * * * As reported in the Troubled Company Reporter on Feb. 16, 2005, Standard & Poor's Ratings Services placed its ratings for OfficeMax Inc., including the 'BB' corporate credit rating, on CreditWatch with negative implications. "This action reflects our concerns regarding the company's softer-than-expected results for the fourth quarter and the resignation of its CEO, Christopher C. Milliken," said Standard & Poor's credit analyst Stella Kapur. OfficeMax now needs to fill three key senior management positions, including that of CEO, CFO, and president of the retail business. As reported in the Troubled Company Reporter on Jan. 3, 2005, Moody's Investors Service upgraded the senior implied rating of OfficeMax Incorporated to Ba1, upgraded the rating on the 7% senior notes due November 2013 to Baa2, and assigned a speculative grade liquidity rating of SGL-2. The outlook is stable. This concludes the review for upgrade initiated on July 14, 2004. The ratings upgraded: -- Senior implied rating to Ba1 from Ba2; -- Senior unsecured $560 million bank facility to Ba1from Ba2; -- Senior notes due 2013 to Baa2 from Ba2; -- Adjustable Conversion-Rate Equity Units to Ba1 from Ba2; -- Issuer rating to Ba1 from Ba2; -- Senior unsecured shelf to (P) Ba1 from (P) Ba2, and -- Preferred shelf to (P) Ba3 from (P) B1. BROADBAND OFFICE: Court OKs Sale of Broadsoft Shares for $237,600 ----------------------------------------------------------------- Broadband Office, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to sell 792,000 shares of Common Stock of Broadsoft, Inc., to Broadsoft for $237,600. The Common Stock has a $0.01 per share par value. Broadsoft agreed to buy back the shares at a purchase price of $0.30 per share for a total purchase price of $237,600. Shares of Broadsoft stock are not publicly traded, so opportunities to liquidate the Broadsoft shares are limited. KPCB Holdings, Inc., which asserts a first priority lien on the shares, declined to make an offer for the shares. The sale of the Stock to Broadsoft will be free and clear of liens, claims and encumbrances. KPCB's asserted liens will attach to the proceeds of the sale with the same validity, perfection and priority as currently existed. The proceeds from the sale will not be distributed by the Debtor without order of the Court or the written consent of the Official Committee of Unsecured Creditors and KPCB Holdings, Inc. Headquartered in San Mateo, California, Broadband Office, Inc., filed for chapter 11 protection on May 9, 2001 (Bankr. D. Del. Case No. 01-1720). BBO is now a non-operating company in the process of liquidating its assets. Adam Hiller, Esq., and David M. Fournier, Esq., at Pepper Hamilton LLP represent the company. When the Company filed for protection from its creditors, it listed $100 million in assets and debts. BUCA INC: Must Comply with July 29 Deadline to Continue Listing --------------------------------------------------------------- BUCA, Inc. (Nasdaq: BUCAE) reported that the Nasdaq Listing Qualifications Panel has granted the Company's request for continued listing of the Company's securities on The Nasdaq National Market provided that the Company meets certain conditions, including the filing on or before July 29, 2005, of its Annual Report on Form 10-K for the fiscal year ended December 26, 2004, and its Quarterly Report on Form 10-Q for the fiscal quarter ended March 27, 2005. The Company disclosed on March 31, 2005, that it had received notice from the Nasdaq Stock Market that the Company was not in compliance with the Nasdaq requirements for continued listing as a result of its failure to file with the SEC its Annual Report on Form 10-K for the fiscal year ended December 26, 2004 in a timely fashion, and that its securities were therefore subject to potential delisting from The Nasdaq National Market. As permitted by Nasdaq rules, the Company made a timely request for a hearing before the Nasdaq Listing Qualifications Panel where it requested an extension to file both its Annual Report on Form 10-K and its Quarterly Report on Form 10-Q. In connection with its granting of the Company's request for an extension, the Listing Qualifications Panel is also requiring that the Company provide certain information to the Panel, including information regarding the Company's previously announced internal investigation of matters relating to the termination of its interim chief financial officer and chief information officer by specified dates. The Company intends to provide Nasdaq with appropriate information in response to these requirements. The Company must also comply with all other continued listing requirements of The Nasdaq National Market to maintain its listing. The fifth character "E" will remain appended to the Company's symbol until the Company is in full compliance with Nasdaq's filing and continued listing requirements. If the Company is unable to comply with the conditions for continued listing required by the Panel, then the Company's securities are subject to immediate delisting from The Nasdaq National Market. The Company noted that work continues to be done in connection with the completion of its financial statements for the periods covered by the delinquent report and the audit and review of those financial statements. The Company intends to make every effort, but cannot assure that it will be able to meet the July 29, 2005 deadline established by the Panel. About the Company BUCA, Inc. owns and operates 107 highly acclaimed Southern Italian restaurants under the names Buca di Beppo and Vinny T's of Boston in 29 states and the District of Columbia. * * * As reported in the Troubled Company Reporter on Apr. 26, 2005, BUCA, Inc. inked an agreement with its lenders to waive financial covenant defaults under its credit facility, establish new financial covenants, increase the interest rate payable under the facility, and reduce the borrowing base. The Company paid the Lenders $400,000 for the waiver and amendment. BUCA, Inc., and certain of its direct and indirect subsidiaries are parties to a Credit Agreement dated as of November 15, 2004, with Wells Fargo Foothill, Inc., and Ableco Finance LLC, as lenders, and Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders. Pursuant to the Amendment and Waiver, the members of the Lender Group have: -- waived the Borrowers' current defaults under the Credit Agreement, including without limitation the defaults as of December 26, 2004 under the financial covenants regarding minimum EBITDA and fixed charge coverage, -- agreed to ease the minimum EBITDA and fixed charge coverage required for certain relevant testing periods in fiscal years 2005 and 2006, and -- agreed to amend the Credit Agreement in certain other respects. In consideration for that waiver and amendment, the Borrowers have agreed to: -- an increase in the interest rate on the $15,000,000 Term Loan B under the Credit Agreement by 2% per annum effective February 1, 2005 (subject to possible partial reduction in the future if certain conditions are met); -- a reduction in their borrowing base multiple under the Credit Agreement, commencing in 2006, from: (i) the lesser of: (A) 2.75 times trailing twelve-month EBITDA, minus $20,000,000, and (B) 60% of the most recently determined enterprise value of the Company and its direct and indirect subsidiaries, minus $20,000,000 (in each case as reduced by certain reserves), to (ii) the lesser of: (A) 2.50 times trailing twelve-month EBITDA, minus $20,000,000, and (B) 60% of the most recently determined enterprise value of the Company and its direct and indirect subsidiaries, minus $20,000,000 (in each case as reduced by certain reserves); and -- deliver delinquent financial reports by August 31, 2005, and provide the Lenders with monthly financial reports. BUCA had promised that it would report minimum EBITDA of $3.7 million for the three-month period ending March 27, 2005; that target's been cut to $1.9 million. For the six-month period ending June 26, 2005, BUCA had promised to report at least $6.9 million of EBITDA; the new target is $4.7 million. CALPINE CORP: Metcalf Offering $155M Redeemable Preferred Shares ---------------------------------------------------------------- Calpine Corporation's (NYSE: CPN) indirect subsidiary, Metcalf Energy Center, LLC, intends to commence a $155 million offering of 5.5-Year Redeemable Preferred Shares. Concurrent with the issuance of the Preferred Shares, Metcalf LLC will refinance, through a five-year, $100 Million Senior Term Loan, an existing $100 million non-recourse construction credit facility. Metcalf LLC owns Calpine's 602-megawatt Metcalf Energy Center in San Jose, Calif. The proceeds from the offering of the Redeemable Preferred Shares will ultimately be used as permitted by Calpine's existing bond indentures. Proceeds from the offering of the Senior Term Loan will be used to refinance all outstanding indebtedness under the existing construction credit facility, to complete construction of the Metcalf power plant, to pay fees and expenses related to the transaction, and as permitted by Calpine's existing bond indentures. The Redeemable Preferred Shares have not been registered under the Securities Act of 1933, and may not be offered in the United States absent registration or an applicable exemption from registration requirements. The Redeemable Preferred Shares will be offered in a private placement in the United States under Regulation D under the Securities Act of 1933 and outside of the United States pursuant to Regulation S under the Securities Act of 1933. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and the United Kingdom. Its customized products and services include wholesale and retail electricity, natural gas, gas turbine components and services, energy management, and a wide range of power plant engineering, construction and operations services. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. * * * As reported in the Troubled Company Reporter on May 11, 2005, 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. CATHOLIC CHURCH: Tucson Judge Nixes Substantive Consolidation Bid ----------------------------------------------------------------- Philip Hower and Meta Hower filed a complaint for declaratory relief and substantive consolidation against the Diocese of Tucson and approximately 76 parishes, schools and other institutions falling within the Debtor's network. The Complaint is based on theories that: -- the Affiliated Entities are not entities separate from the Diocese; -- the Diocese has complete domination and control over the Affiliated Entities; and -- the relationship between the Diocese and the Affiliated Entities warrants substantive consolidation under principles of bankruptcy law. The Howers seek, among other things, a declaratory judgment that the Affiliated Entities and their assets are not separate, legally recognized entities, are owned by the Diocese, and that the Affiliated Entities should be substantively consolidated with the Debtor. The Howers contend that the real property identified as belonging to Diocese-Related Entities in (i) Line 14 and amended Line 14 of the Diocese's Statement of Financial Affairs, (ii) Schedule F and amended Schedule F of the Diocese's Schedule of Assets and Liabilities, and (iii) the Diocese's Web site, are under the Diocese's complete and absolute control and domination, and that the Diocese owns the Disputed Real Property. The Howers allege that the Diocese "has grievously erred or attempted to perpetrate a fraud upon the U.S. Bankruptcy Court for the Southern District of Indiana and the creditors" by not listing the Disputed Real Property as assets of the estate in its Schedules and Statement. The Howers allege that the omission of these properties from Diocese's Schedules was, at best, in error and, at worst, fraudulent, and unjustified and mean-spirited. The Howers also assert that the Diocese "is attempting to sequester its most valuable assets under the falsehood of claimed independence, when it knows that the disputed properties are integral, inseparable parts of the debtor's estate." Prior to the Petition Date, the Howers filed tort-based lawsuits against Tucson before the U.S. District Court for the District of Arizona, based on sexual and emotional abuse, distress, fraud, obstruction of justice, and racketeering involving other persons or entities associated with or representing the Diocese or parishes, missions, schools, or other Diocese-related institutions. The tort suits have been removed to the Bankruptcy Court as a result of the Diocese's Chapter 11 petition. Howers Took the Initiative Ivan Safyan Abrams, Esq., asserts that the Official Committee of Tort Claimants ought to have filed the Complaint as part of its fiduciary duty to protect the creditors it represents. Despite a request made to the counsel for the Litigants Committee, C. Taylor Ashworth, Esq., to undertake this burden, Mr. Abrams says the Committee's counsel has neither contacted him nor filed the appropriate pleadings. Thus, the Howers were compelled to seek to preserve their financial and other interests and those of others similarly situated, and to file the Complaint. However, the Diocese has significant strong-arm powers and avoidance powers arising solely under the Bankruptcy Code, which could materially enhance the bankruptcy estate. The Howers did not include claims for relief based on those powers because they could only allege them if the Bankruptcy Court delegates the powers to them. Mr. Abrams informs Judge Marlar that the Diocese may have other avoidance actions against the Affiliated Entities. The Diocese may have transferred property to the Affiliated Entities during the 90-day preference period. These transfers may be avoidable preferences under Section 547 of the Bankruptcy Code. In addition, the Diocese may have conveyed property to the Affiliated Entities during the one-year prepetition period, which transfers may be recoverable under Section 548. Tucson Won't Exercise Strong-Arm Powers The Howers assert that the Affiliated Entities are "insiders." While the transfers do not appear on the Debtor's Statement of Financial Affairs, Tucson's contention that the Affiliated Entities are independent of the Diocese may have been the rationale for not disclosing transfers, if any. The Howers believe that the Diocese will not take the actions necessary to exercise its strong-arm powers, to avoid any interests in the properties or to avoid transfers to the Affiliated Entities. For this reason, the Howers seek the Court's authority to pursue claims against the Affiliated Entities arising under Sections 544, 545, 547, 548 and 550. Objections A. Tucson Diocese Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in in Tucson, Arizona, tells Judge Marlar that Philip Hower and Meta Hower are seeking "extraordinary relief" to be able to pursue actions on behalf of the entire estate as individual creditors. The Howers do not have a valid claim, or for that matter, a claims alleging childhood abuse. This reason alone is sufficient to deny the Howers' request. Ms. Boswell also notes that the Howers fail to show a colorable cause of action that, if successful, would benefit the estate on a cost benefit analysis or show that the Diocese or the Official Committee of Tort Claimants has abused its discretion by not bringing the action. Ms. Boswell points out that the Diocese's Plan of Reorganization gives Tort Claimants who are the victims of sexual abuse by Diocesan clergy, the ability to accept prompt and fair compensation. Tucson, therefore, asks Judge Marlar to deny the Howers' request in its entirety. B. Tort Committee On behalf of the Official Committee of Tort Claimants, C. Taylor Ashworth, Esq., at Stinson Morrison Hecker LLP, in Phoenix, Arizona, argues that (i) the commencement of avoidance actions is not necessary or beneficial to the estate or its creditors at this time, and (ii) the Howers are not appropriate parties to represent the bankruptcy estate. The Tort Committee believes that the Diocese's conduct of the proceedings is consistent with the highest standards for the Chapter 11 "bargaining process." Mr. Ashworth tells Judge Marlar that Tucson has promptly proposed a plan of reorganization. It has actively encouraged the Tort Committee and Tort Claimants to participate in the negotiated formulation of that Plan. It has diligently -- and with considerable success -- pursued settlements with insurers and others to fund the Plan. This is an alternative to litigation of the "parish property" issue as well as other issues. Mr. Ashworth notes that Tucson has charted a different course in its Chapter 11 case. The Tort Committee supports a full opportunity to pursue this course. Court Denies Howers' Request Judge Marlar denies the Howers' request as premature. Judge Marlar advises the Howers to "wait to see if the Plan is confirmed in a couple of months before we go into lengthy litigation." Judge Marlar dismisses the Complaint for Declaratory Relief, without prejudice. 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: BG Capital Takes Preferred Equity Position ------------------------------------------------------------ Clearly Canadian Beverage Corporation (OTCBB:CCBEF) has now completed its financing with BG Capital Group Ltd., pursuant to which BG Capital has purchased US$1,000,000 of preferred shares in the capital of Clearly Canadian, and has converted its previous US$1,000,000 secured loan and demand note into preferred shares, each at a price of US$1.00 per preferred share. Clearly Canadian issued 2,000,000 Class A preferred shares to BG Capital. The Class A preferred shares will be exchanged for 2,000,000 Class B preferred shares upon completion of the previously announced US$3,000,000 brokered and non-brokered private placements. At BG Capital's election, it is entitled to convert the Class B preferred shares into that number of common shares in the capital of Clearly Canadian that equals 50% of the fully diluted common shares of Clearly Canadian at the time of conversion. About BG Capital BG Capital Group is a merchant bank specializing in small to mid- cap growth opportunities. Its holdings include 100%, 50% and largest shareholder positions in numerous public and private companies throughout the United States and Canada. BG Capital has over 20 years of investor relations experience as well as in-depth marketing and financial management expertise. It has an incredible track record of success in identifying promising enterprises and profitably growing them with an effective hands-on management style. About Clearly Canadian 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. Additional details about the Clearly Canadian's Transactions with BG Capital appeared in the Troubled Company Reporter on April 7, 2005, March 7, 2005, and February 22, 2005. CNE GROUP: AMEX Warns of Possible Stock Delisting ------------------------------------------------- CNE Group, Inc. (AMEX: CNE), reported that on May 5, 2005, it received notice from the American Stock Exchange Staff indicating that at December 31, 2004 it did not meet certain of AMEX's continuing listing standards, specifically its: (i) Stockholders' Equity being less than $6,000,000 (Section 1003(a)(iii) of the AMEX Company Guide), and (ii) financial condition has become so impaired that it appears questionable that it will be able to continue operations and/or meet its obligations as they mature (Section 1003(a)(iv) of the AMEX Company Guide). AMEX has requested the Company to submit a plan, by June 6, 2005, that will demonstrate to AMEX the Company's ability to regain compliance, which the Company intends to do. The Plan is subject to the approval and to periodic monitoring by AMEX. Assuming the Company achieves its scheduled financial milestones as determined by AMEX, it will have until November 5, 2005 to regain compliance with the continuing listing requirements. If the Company does not achieve its scheduled financial milestones as determined by AMEX, the Company will lose its AMEX listing. At December 31, 2004, the Company's Stockholders' Equity was approximately $5,595,000, its current assets were $525,000, and its current liabilities were $3,672,000 of which primarily included notes and debenture payable and related interest payable amounting to approximately $1,945,000. No event of default has been declared by any holder thereof as of the date hereof. Management and the noteholders, who include directors, officers and an employee of the Company who is also a director, are currently renegotiating the terms of these notes. About the Company CNE Group is a holding company whose primary operating subsidiaries are SRC Technologies, Inc., and U.S. Commlink, Ltd. SRC has two operating subsidiaries: Connectivity, Inc., and Econo- Comm, Inc. Econo-Comm, Inc. conducts business under the name of Mobile Communications. These companies, which CNE acquired on April 23, 2003, market, manufacture, repair and maintain remote radio and cellular-based emergency response products to a variety of federal, state and local government institutions, and other vertical markets throughout the United States. SRC has intellectual property rights to certain key elements of these products -- specifically, certain communication, data entry and telemetry devices. In addition, CNE engages in the business of e-recruiting through its CareerEngine, Inc., subsidiary. The e-recruiting business does not generate a significant part of CNE's revenue, and is not significant to the operations of the Company. * * * As reported in the Troubled Company Reporter on May 9, 2005, Rosen Seymour Shapss Martin & Company LLP audited CNE Group, Inc.'s consolidated financial statements for the year ending Dec. 31, 2004. Their report includes language stating that substantial doubt exists as to CNE's ability to continue as a going concern. The auditors observe that CNE's financial statements show an accumulated deficit at December 31, 2004, of approximately $21,500,000. The Company has incurred substantial losses from continuing operations and sustained substantial cash outflows from operating activities. Further, at December 31, 2004, CNE's balance sheet shows a $3,146,873 working capital deficit. COEUR D'ALENE: A. Lundquist & A. Vitale Elected as New Directors ---------------------------------------------------------------- Coeur d'Alene Mines Corporation (NYSE: CDE; TSX: CDM) reported the election of Andrew Lundquist and Alex Vitale as the newest members of its Board of Directors, at the Company's Annual Shareholders meeting held on May 10 in Coeur d'Alene. Mr. Lundquist is Managing Partner of Lundquist, Nethercutt & Griles LLC, a business and government relations consulting and project management firm he founded in 2002. He is also a Director of Pioneer Natural Resources Company, an oil and gas company, and AREVA, the American division of a French nuclear company. Mr. Vitale is Managing Director in the Technology Investment Banking Department of Deutsche Bank Securities Inc. Each of the nine members of Coeur's Board of Directors were elected to one year terms by more than 95% of the votes cast at the Annual Meeting and a quorum of 83% of shareholders voting. In addition to Mr. Lundquist and Mr. Vitale, re-elected directors to the board were Dennis E. Wheeler, James J. Curran, Cecil D. Andrus, John H. Robinson, Robert E. Mellor, Timothy R. Winterer and J. Kenneth Thompson. Voting on the proposal for the 2005 Non- employee Directors' Equity Incentive Plan was adjourned until June 3, 2005 due to lack of quorum established at the meeting for this proposal. Coeur d'Alene Mines Corporation is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. Coeur has mining interests in Nevada, Idaho, Alaska, Argentina, Chile, Bolivia and Australia. * * * As reported in the Troubled Company Reporter on Oct. 4, 2004, Standard & Poor's Ratings Services affirmed its 'B-' corporate credit and senior unsecured debt ratings on Coeur D'Alene Mines Corporation and removed the ratings from CreditWatch, where they were placed on June 1, 2004, with positive implications. S&P said the outlook is stable. Coeur D'Alene, an Idaho-based silver and gold mining company, currently has about $180 million in debt. COLETO CREEK: Fitch Affirms BB/BB- Ratings on Secured Loans ----------------------------------------------------------- Fitch Ratings expects to affirm the 'BB' and 'BB-' ratings, respectively, of Coleto Creek WLE, LP's $205 million secured 1st lien term loan due 2011 (B loan) and $150 million secured 2nd lien term loan due 2012 (C loan) upon completion of the proposed $35 million issuance. The issuance will consist of an advance under the existing B loan, and the proceeds will partially finance a cash distribution to the sponsors. The ratings are currently constrained by the refinancing risk associated with the projected outstanding principal balance at maturity. Fitch has evaluated Coleto's credit quality on a stand- alone basis, independent of the credit quality of its owners. Fitch views Coleto's projected financial performance as sufficient to support the additional debt burden at the current rating level. The cumulative effect of interest and principal on the additional debt is to increase the projected outstanding principal balance in 2011 to $279 million. The current ratings remain consistent with the probability of default on said balance attributable to a failed hypothetical refinancing of that balance. See Fitch's new issue report, 'Coleto Creek WLE, LP,' dated Oct. 20, 2004, for a detailed discussion of the refinancing analysis. Updated projections provided by the sponsors were incorporated in Fitch's refinancing analysis. The projections include a revised capital expenditure plan, the impact of new emissions guidelines on operating expenses, and additional revenue from the extension of an existing power purchase agreement. Taken together, these changes have little effect on cash available for debt service prior to the maturity of the loans. Over the long term, annual CAFDS has been reduced by approximately $6 million, resulting in only a slight decline in debt service coverage ratios under a hypothetical refinancing scenario. In response to the Clean Air Interstate Rule, management has chosen to burn Powder River Basin coal of higher-quality and lower-sulfur content than previously contemplated. The schedule of capital expenditures has been modified accordingly, and the improvements necessary to facilitate the transition to the planned fuel mix have been scheduled for completion in 2008. Cumulative capital expenditures remain unchanged through the maturity of the loans, and the impact on projected financial performance is minor. The installation of pollution control equipment, the use of higher-quality PRB coal, and the projected availability of allowances under CAIR are expected to reduce Coleto's emissions costs. However, operating expenses have increased with the purchase of the more expensive, high grade PRB coal. Management also anticipates higher demand for PRB coal under the new CAIR guidelines and has adjusted fuel expenses accordingly. In the medium term, the increased cost of PRB coal will be partially offset by the two-year extension of an existing fixed-price PPA, which will provide additional revenue and greater cash flow stability. Coleto is a special purpose vehicle formed solely to own the Coleto Creek power generation facility and is indirectly owned by Sempra Energy Partners and Carlyle/Riverstone Global Energy & Power Fund II, LP. Coleto wholly owns a base-load, coal-fired generation facility with a net capacity of 632 MW, a coal-blending facility and five coal trains located in Goliad County, Tex. Coleto currently sells energy and capacity to investment-grade counterparties under multiple PPAs expiring between 2008 and 2014. Contractual revenues contribute approximately 90% of total revenues through 2009. Uncommitted output is sold on a merchant basis and represents between 10% of total capacity until 2009 and over 98% thereafter. Sempra Energy Resources, an affiliate of SEP, oversees operations, markets energy and capacity, procures fuel, and provides general management services. COLETO CREEK: S&P Puts Low-B Ratings on $378.1 Million Term Loans ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to Coleto Creek WLE LP's $228.1 million first lien term loan B1 due 2011 and its 'BB-' rating to Coleto Creek's $150 million second lien term loan C1 due 2012. Standard & Poor's also assigned its '1' recovery rating to the term loan B and '3' recovery rating to the term loan C. The '1' recovery rating indicates a high expectation of full recovery of principal in the event of a default, while the '3' rating indicates meaningful (50%-80%) recovery of principal in the event of a default. The lower rating on term loan C reflects the subordinated nature of the second lien, and the requirement that any principal payments on loan C can be made only after term loan B has been completely paid off. Proceeds from the loans will be used to refinance $193.1 million that is outstanding under the $205 million term loan B issued in July 2004 and the $150 million term loan C also issued in July 2004. The current borrowing program, which involves $35 million in new money under the term loan B structure, will also enable the project to pay a $50 million dividend to the sponsors, including $15 million from $26.5 million in cash on the balance sheet as of March 31, 2005. The rating incorporates Coleto Creek's plans for the installation of a baghouse and selective non-catalytic reduction and a shift to 100% Power River Basin (PRB) coal, which entails a capital expenditure that is about $30 million greater over the next six years than the original plan in July 2004. "The higher capital expenditure and the increase in debt burden are partly offset by the extension of the 150 MW purchased power agreement with J. Aron for two years from July 2006 to June 2008, the lower cost and volatility associated with PRB coal, and the expected reduction in interest costs from the refinancing," said Standard & Poor's credit analyst Swami Venkataraman. "These factors enable coverage ratios and recovery expectations to remain in line with the ratings," said Mr. Venkataraman. COLUMBIA HOUSE: BMG Direct Sale Prompts S&P to Watch Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B+' ratings on New York, New York-based Columbia House Co. on CreditWatch with positive implications. The rating action follows the recent announcement that BMG Direct, a subsidiary of Bertelsmann AG (BBB+/Stable/A-2), has entered into an agreement to acquire Columbia House, a club-based direct marketer of music and video products, for an undisclosed amount. "Upon the completion of the transaction, ratings will be raised to reflect the much higher credit strength of the new parent company," said Standard & Poor's credit analyst Ana Lai. COMPRESSION POLYMERS: S&P Rates $215 Mil. Sr. Unsec. Notes at B- ---------------------------------------------------------------- Standard & Poor's Ratings Services said today that it affirmed its 'B' corporate credit rating on Moosic, Pennsylvania-based building products manufacturer Compression Polymers Holdings LLC in connection with its sale to AEA Investors LLC. The outlook is stable. At the same time, Standard & Poor's assigned its 'B-' senior unsecured rating to the $65 million floating rate notes due 2012 and $150 million fixed-rate notes due 2013, issued under Rule 144a with registration rights, of Compression Polymers Holding Corp. (Compression; Compression LLC's successor company). The senior unsecured debt is rated one notch below the corporate credit rating, based on Standard & Poor's expectations that the level of priority liabilities, relative to Compression's assets, will place senior unsecured lenders at a disadvantage in bankruptcy. The senior unsecured notes are guaranteed by Compression's wholly owned operating subsidiaries, Compression Polymers Corp. and Vycom Corp. The newly assigned ratings are based on preliminary terms and conditions. Proceeds from the unsecured notes plus equity were used to finance the acquisition (excluding fees) of the company by AEA from the previous equity sponsors. Compression's existing bank debt was repaid, and the related ratings have been withdrawn. Total debt at closing was about $217 million, including capitalized operating leases. "Credit measures are expected to be weak as a result of the increased debt leverage and interest expense associated with its new capital structure. Rising interest rates are also expected to contribute to relatively thin free cash flows," said Standard & Poor's credit analyst Lisa Wright. "The outlook could be revised to negative, or the ratings lowered, if earnings and liquidity are affected by weaker end-market conditions, more competition, or greater-than-expected increases in resin costs or interest rates. A ratings upgrade is unlikely unless the company establishes a larger presence in the exterior trim market." Compression, with 2004 sales of $170 million, operates three main plastic product segments: (1) trimboard (sold under the AZEK brand), (2) bathroom partitions and lockers, and (3) plastic sheet manufacturing. COMPTON PETROLEUM: Posts $10.06M Net Income for First Quarter ------------------------------------------------------------- Compton Petroleum Corporation disclosed its financial and operating results for the quarter ended March 31, 2005. First Quarter Highlights: -- Quarterly production averages 28,714 boe/d, 12% increase from first quarter 2004. -- Revenue of $107 million, 20% increase from first quarter 2004. -- Cash flow of $52 million, 28% increase from first quarter 2004. -- $90 million equity issue completed. -- 60 wells drilled. FINANCIAL SUMMARY ------------------------------------------------------------------------ - Three Months Ended March 31, ($000s, except per share amounts) 2005 2004 % Change ------------------------------------------------------------------------ - Gross revenue $ 106,589 $ 89,031 +20% Cash flow from operations(1) $ 52,277 $ 40,948 +28% Cash flow/share - basic(1) $ 0.43 $ 0.35 +23% - diluted(1) $ 0.41 $ 0.33 +24% Adjusted net earnings from operations(1) $ 15,354 $ 14,235 +8% Net earnings $ 10,059 $ 22,301 -55% Net earnings per share - basic $ 0.08 $ 0.19 -58% - diluted $ 0.08 $ 0.18 -56% Capital expenditures $ 96,379 $ 84,048 +15% ------------------------------------------------------------------------ - (1) See cautionary statement located at the front of the Management Discussion and Analysis. OPERATING SUMMARY ------------------------------------------------------------------------ - Three Months Ended March 31, 2005 2004 % Increase ------------------------------------------------------------------------ - Average production Natural gas (mmcf/d) 130 120 8% Liquids (bbls/d) 7,090 5,655 25% ------------------------------------------------------------------------ - Total (boe/d) 28,714 25,717 12% Average pricing(1) Natural gas ($/mcf) $ 6.60 $ 6.25 6% Liquids ($/bbl) 46.23 40.03 15% ------------------------------------------------------------------------ - Total ($/boe) $ 41.25 $ 38.04 8% Field netback ($/boe) $ 24.31 $ 22.86 6% ------------------------------------------------------------------------ - (1) 2004 prices have been restated to exclude hedge losses and transportation charges. Operations Review Compton drilled 60 (51 net) wells during the first quarter of 2005. The Company is budgeting 66 wells for the second quarter, with drilling accelerating in the second half of the year. Currently, over 90% of the Company's 2005 drilling locations have been identified and surface rights are being acquired. Although first quarter operations were affected by an early break up, the Company believes its expanded 2005 drilling program remains achievable. Drilling Summary Of the 60 (51 net) wells drilled during the quarter, 16 were classified as exploratory and 44 as development wells. The increasing development of the Company's oil and gas plays is reflected in a higher percentage of development wells in 2005 compared to prior years. The following table summarizes drilling results to March 31, 2005. ------------------------------------------------------------------------ - Gas Oil D&A Total Net Success ------------------------------------------------------------------------ - Southern Alberta 25 - - 25 22 100% Central Alberta 10 - - 10 7 100% Peace River Arch - 20 4 24 22 83% ------------------------------------------------------------------------ - 35 20 4 59 51 93% Standing, cased wells 1 - ------------------------------------------------------------------------ - Total 60 51 ------------------------------------------------------------------------ - Southern Alberta The majority of Compton's exploration and development activities in 2005 will continue to focus on Southern Alberta. The Company plans to spend $251 million in the South and drill 269 wells. Compton holds approximately 1,220 sections of land in the area, prospective for multiple zones, including the plains Belly River, foothills multiple thrusted Belly River sands at Callum, Basal Quartz at Hooker and the Wabamun/Crossfield at Okotoks/Mazeppa. Additional upside exists in the shallower Edmonton Formation/Horseshoe Canyon Coals. During the first quarter of 2005, the Company drilled 25 (22 net) wells with a 100% success rate in Southern Alberta. Horseshoe Canyon Coal Bed Methane During the third quarter of 2004, Compton recompleted six wells targeting the Horseshoe Canyon Coals, primarily at Centron, Gladys and Brant to further assess the area's CBM potential. The results were encouraging and the recompleted wells appeared to be very similar to those wells of industry competitors immediately north and south of the Company's acreage. Recently the Company has cored four wells in the Horseshoe Canyon CBM zone. This will augment our upcoming pilot drilling program of 24 wells. The Company's first pilot, consisting of four wells, has been licensed and drilling has commenced. Licensing of the second pilot is underway. Full geological/resource results are expected by the middle of the fourth quarter. Hooker Compton continued its successful Basal Quartz drilling program at Hooker in the first three months of 2005. Hooker has and continues to be a main component of Compton's multiple resource plays. Since 1999, Compton has drilled 20-24 wells annually at Hooker. The Company has determined that the pool, discovered by Compton, has expanded to 1.5 tcf gas-in-place. Four successful wells were drilled and cased in the first quarter, and the Company remains on track to drill 36 wells at Hooker during the year. Plains Belly River In the first quarter, Compton drilled 19 gas wells of a planned 65 well program targeting Belly River sands in the Centron, Gladys and Brant areas. The Company's drilling program was delayed by the early break-up. All wells encountered multiple pay sections and uphole produceable Horseshoe Canyon Coals. The Company employed its extensive 3D and 2D seismic data base to successfully target the various Belly River sands. Confirmation, through drilling, of the Company's seismic models has resulted in superior first quarter results and recognition of a large number of additional locations. In the first quarter, Compton continued to add to its land base by acquiring an additional township of land targeting Belly River and Horseshoe Canyon coals. Currently Compton has in excess of 150 locations in various stages of acquisition. Callum Thrusted Belly River As a result of continuing seismic interpretation, coupled with geologic mapping of recent drilling, Compton has added two multi- well pads to its existing program at Callum. In the second quarter Compton will spud its first well of the 2005 program. Callum is a multiple thrusted, over pressured, gas charged Belly River play with 25-35 individual sands found over 1000m of vertical section. Compton has not encountered any free water in the sands over this section. A key to success in developing the Callum prospect rests with rock characterization and completion optimization. In the eight Compton wells drilled to date, various completion techniques have been evaluated. All have produced gas, with initial production ranging from 300 mcf/d to 2.1 mmcf/d. In order to develop a representative petrophysical and engineering model to optimize this resource, Compton plans on cutting core on all wells drilled in 2005. To date, Compton has cored one well. Coring allows for a first hand examination of the rock and a comparison and calibration of well log response. When combined with specialized core analysis techniques, the results aid in identifying the more prospective sand intervals, as well as appropriate completion fluids and methods to maximize production from these complex rock types. Compton estimates gas-in-place at Callum is approximately 80 bcf per section. Based on Compton's initial detailed geological and engineering analysis of core, well log, test and production data, Callum appears to exhibit many similarities to deep tight gas pools in the Rocky Mountain region of the United States, including the Jonah and Pinedale pools of the Greater Green River Basin in Wyoming. Compton is employing knowledge derived from these pools in the development of the Callum prospect. Wabamun/Crossfield Compton applied to the Alberta Energy and Utilities Board for approval to drill up to six horizontal wells at the north end of the Okotoks Wabamun "B" pool on the site of an existing producing well, just outside the southeastern limits of the City of Calgary. This is a unique, cooperative project designed to manage and coordinate surface and subsurface development where existing operations are faced with encroachment of urban communities and to accelerate the depletion of Compton's reserves. If the well licenses are approved, Compton has committed to abandon these six wells in the Okotoks area within 15 years compared to the projected remaining life of more than 50 years for the two existing wells. The EUB conducted an extensive eight week hearing during the first quarter of 2005 to review the well applications and a decision is expected near the end of the second quarter. Central Alberta Central Alberta provides Compton excellent exploration and development drilling opportunities using similar techniques gained through its experience from Southern Alberta Deep Basin unconventional gas drilling. The Company plans to spend $68 million in Central Alberta in 2005 and drill 58 wells in the area. Compton drilled 10 (7 net) wells in the first quarter of 2005 with a 100% success rate. The Company drilled 6 gas wells at Niton during the first quarter, with all wells encountering multiple pay zones. It is anticipated that production from these wells and future offsets will result in Compton expanding its 20 mmcf/d gas plant in the second half of the year. Peace River Arch The Peace River Arch area contains multi-zone potential, including light oil production at Cecil and Worsley and natural gas exploration at Howard and Pouce Coupe. The Company plans to spend $51 million in the Arch in 2005 and drill 56 wells. The Company drilled 24 (22 net) wells in the first quarter of the year with an 83% success rate. Following a very successful 2004 drilling program, Compton accelerated its Worsley drilling program for 2005. Seventeen wells were drilled and cased in the first quarter of 2005, with all wells generating better results than existing wells. As a result of first quarter success, the Company has expanded its drilling program by 55 additional locations in the pool. Approval for a pool wide waterflood on the Charlie Lake H and J pool at Worsley was received in February 2005. The waterflood is projected to increase the ultimate recovery rate from 5-7%, primary, to 25%. Six wells are being converted to injectors to facilitate the pool wide waterflood. Compton hopes to double the reserve value and production from the Charlie Lake H and J pools by year-end. Compton Petroleum Corporation is a Calgary-based independent public company actively engaged in the exploration, development and production of natural gas, natural gas liquids and crude oil in the Western Canada Sedimentary Basin. The Company's capital stock trades on the Toronto Stock Exchange under the symbol CMT, and is included in both the S&P/TSX Composite Index and the TSX Mid-Cap Index. * * * As reported on the Troubled Company Reporter on May 7, 2002, Standard & Poor's assigned its single-'B' senior unsecured debt rating to Compton Petroleum Corp.'s proposed US$150 million debt issue maturing in 2009. At the same time, Standard & Poor's affirmed its single-'B'-plus corporate credit rating on the Calgary, Alberta-based company. S&P says the outlook is stable. Standard & Poor's also withdrew its single-'B'-minus subordinated debt rating on Compton's originally proposed US$150 million issue, as this senior unsecured issue is being offered in lieu of the original subordinated notes. CONGOLEUM CORP.: March 31 Balance Sheet Upside-Down by $21 Million ------------------------------------------------------------------ Congoleum Corporation (AMEX:CGM) reported its financial results for the first quarter ended March 31, 2005. Sales for the three months ended March 31, 2005 were $57.6 million, compared with sales of $52.0 million reported in the first quarter of 2004, an increase of 10.8%. The net loss for the quarter was $352 thousand, versus a net loss of $435 thousand in the first quarter of 2004. Roger S. Marcus, Chairman of the Board, commented "First quarter sales grew from 2004 to 2005 due to higher selling prices coupled with increased unit volume. Unit volume improved through growth in builder products and upper end residential tile, partly offset by declines in sales of do-it-yourself tile through home centers. Selling price increases we instituted in 2004 and early 2005 to pass along raw material cost increases accounted for just over 7% of the total sales growth. Unfortunately, the rampant inflation in the cost of raw materials, particularly resins, amounted to more than eight points in gross margin versus the first quarter of last year, significantly more than what we passed along in our pricing. We continue to improve manufacturing efficiency and control operating expenses. However, the combined effect of these improvements, our higher unit volume, and increases in selling prices, merely offset the surge in raw material prices. We had hoped the raw material cost inflation would moderate, but it has not abated." Mr. Marcus continued, "As we indicated last month, we continue to make positive progress with our reorganization. We reached an agreement in principle with representatives of the Asbestos Claimants' Committee and the Future Claimants' Representative to make certain modifications to our proposed plan of reorganization and related documents governing the settlement and payment of asbestos-related claims against Congoleum. Our attorneys are preparing an amended plan and disclosure statement which we expect to submit to the court in the near future. We remain committed to overcoming the inevitable challenges, getting a plan confirmed, and putting the financial and management burden of our asbestos liabilities behind us." Headquartered in Mercerville, New Jersey, Congoleum Corporation -- http://www.congoleum.com/-- manufactures and sells resilient sheet and tile floor covering products with a wide variety of product features, designs and colors. The Company filed for chapter 11 protection on December 31, 2003 (Bankr. N.J. Case No. 03-51524) as a means to resolve claims asserted against it related to the use of asbestos in its products decades ago. Domenic Pacitti, Esq., at Saul Ewing, LLP, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $187,126,000 in total assets and $205,940,000 in total debts. At Mar. 31, 2005, Congoleum Corporation's balance sheet showed a $21,341,000 stockholders' deficit, compared to a $20,989,000 deficit at Dec. 31, 2004. DELTA AIRLINES: Has Uncertainty About GECC & Amex Loan Covenants ---------------------------------------------------------------- Delta Air Lines, Inc., says there's significant uncertainty whether it will be in compliance with the financial covenants contained in financing agreements with GE Commercial Finance Facility and American Express Travel Services Company, Inc. Those covenants require Delta to maintain specified levels of cash and cash equivalents and achieve certain levels of EBITDAR. Delta makes it clear that is was in full compliance with these financial covenants at March 31, 2005, and no event of defult exists at this time. "However," Delta said in a regulatory filing this week, "there is significant uncertainty whether we will be in compliance with all of these covenants in the near-term or in future periods." Delta points to three problem areas: (a) the volatility of fuel prices, which remain at historically high levels. Crude oil is a component of jet fuel. Crude oil prices are volatile and may increase or decrease significantly. Delta's business plan assumes that the average annual jet fuel price per gallon in 2005 will be approximately $1.22 (with each $0.01 increase in the average annual jet fuel price per gallon increasing our liquidity needs by approximately $25 million per year, unless the carrier is successful in offsetting some or all of this increase through fare increases or additional cost reduction initiatives). During the March 2005 quarter, Delta's average jet fuel price per gallon was $1.42. The forward curve for crude oil currently implies substantially higher fuel prices for the remainder of 2005 than Delta's business plan assumes. Delta has no hedges or contractual arrangements in place that would reduce its jet fuel costs below market prices. (b) the expiration of the carrier's current Visa/MasterCard processing contract in August 2005 and the likelihood that renewal or replacement processing contract will require a significant cash holdback to cover the processor's exposure for tickets sold, but not yet flown. Delta's Visa/MasterCard processing contract is important to its business because a substantial number of tickets sold are purchased using Visa or MasterCard credit cards. (c) the potential that other assumptions underlying the carrier's business plan may be incorrect in any material adverse respect. Many of these assumptions are not, Delta says, within its control, such as passenger mile yield, actions by competitors, pension funding obligations, interest rates, the achievement of all of the approximately $5 billion of targeted benefits (compared to 2002) projected in Delta's transformation plan, and the carrier's access to financing. Delta says it is currently seeking an amendment to the EBITDAR Covenant to reduce the level of EBITDAR it's required to achieve. "We cannot predict the outcome of this matter," Delta says, and warns that "[f]ailure to comply with the financial covenants or certain other requirements of the GE Commercial Finance Facility and our financing agreement with Amex could result in the outstanding borrowings under these agreements becoming immediately due and payable (unless the lenders waive any resulting event of default). If this were to occur, or if our level of cash and cash equivalents and short-term investments otherwise declines to an unacceptably low level, we would need to seek to restructure under Chapter 11 of the U.S. Bankruptcy Code." Going Concern Doubt Deloitte & Touche LLP, Delta's independent registered public accounting firm, has expressed doubt about the carrier's ability to continue as a going concern. Chapter 11 Warning "If we continue to experience significant losses," Delta says, "we would need to seek to restructure under Chapter 11 of the U.S. Bankruptcy Code. A restructuring under Chapter 11 of the U.S. Bankruptcy Code may be particularly difficult because we pledged substantially all of our remaining unencumbered collateral in connection with transactions we completed in the December 2004 quarter as a part of our out-of-court restructuring." Liquidity At March 31, 2005, Delta had cash and cash equivalents and short- term investments totaling $1.8 billion. During the March 2005 quarter, net borrowings totaled approximately $355 million, which included: (a) the final installment of $250 million under the Amex financing agreement; (b) $85 million under a commitment from a third party to finance on a long-term secured basis the purchase of five regional jet aircraft delivered during the March 2005 quarter; and (c) $20 million in net borrowings under the GECC revolving credit facility. Except for commitments to finance its purchases of regional jet aircraft in 2005 and 2006, Delta has no available lines of credit. Delta has significant obligations due in the nine months ending December 31, 2005 and thereafter. The obligations due in the nine months ending December 31, 2005 include: (a) approximately $700 million of operating lease payments; (b) $850 million of interest payments, which may vary as interest rates change on $5.6 billion principal amount of variable rate debt; (c) $640 million in debt maturities, approximately $510 million of which Delta expects will be cash payments; and (d) $230 million of estimated funding for defined benefit and defined contribution pension plans. Junk Ratings 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. 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. D.R. HORTON: Improved Financial Profile Cues S&P to Hold Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on D.R. Horton Inc. Additionally, the ratings on the company's senior and subordinated debt are affirmed. At the same time, the outlook is revised to positive from stable. The rating actions impact approximately $3.6 billion in outstanding debt. "The rating actions acknowledge Horton's improved financial profile due to a reduction in leverage, an increase in coverage measures, and management's pursuit of an organic growth strategy over the prior three years," said Standard & Poor's credit analyst Elizabeth Campbell. "This well-diversified, national homebuilder's above-average gross and operating margins improved over the past year as well, due to pricing power and cost efficiencies." The positive outlook is supported by Horton's lower leverage and stronger coverage measures and the pursuit of an organic growth strategy. Longer-term rating improvement would be driven by the continued pursuit of internal growth and maintenance of a moderate financial profile in order to appropriately mitigate the risks associated with a speculative production business model should housing demand soften. DOMTAR INC: Registering New $500 Million Debt Securities -------------------------------------------------------- Domtar, Inc., has filed a shelf registration statement with the United States Securities and Exchange Commission in accordance with the Multijurisdictional Disclosure System between Canada and the United States. It will allow Domtar to issue up to US$500 million of debt securities in the United States over the next two years. Domtar expects to use net proceeds from the sale of debt securities under the registration statement for general corporate purposes, including refinancing of existing debt. A registration statement relating to these securities has been filed with the SEC but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor will there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. Based in Montreal, Quebec, Domtar, Inc., is a major North American producer of fine papers, pulp, and lumber. More than 60% of the company's sales come from its paper segment, which churns out a variety of communication and specialty papers, including offset printing paper, photocopying paper, fine paper, and technical papers. * * * As reported in the Troubled Company Reporter on Oct. 28, 2004, Standard & Poor's Ratings Services revised its outlook on Domtar Inc. to negative from stable. At the same time, the 'BBB-' long- term corporate credit, the 'BBB-' senior unsecured debt, and the 'BB' global scale preferred stock ratings were affirmed. "The outlook revision reflects concerns that profitability and cash flow generation will be weaker-than-expected as a result of the appreciation of the Canadian dollar," said Standard & Poor's credit analyst Daniel Parker. EAGLEPICHER HOLDINGS: Final DIP Financing Hearing on May 18 ----------------------------------------------------------- EaglePicher Holdings, Inc., and its debtor-affiliates obtained interim approval to borrow up to $50 million from Harris Trust and Savings Bank, acting as collateral and administrative agent for the Lenders under a debtor-in-possession financing agreement. The U.S. Bankruptcy Court for the Southern District of Ohio also gave EaglePicher authority to repurchase EaglePicher Funding Corp.'s accounts receivable. The repurchase of the accounts receivable is a prerequisite imposed by the DIP lenders. General Electric Capital Corporation serves as purchaser, administrative and collateral agent, and indemnified person under the receivables purchase. The accounts receivable will serve as collateral to secure repayment of the DIP loan. The Debtors need the capital infusion to increase their liquidity in order to continue to operate and preserve the going concern value of the estates. Prepetition Indebtedness The Debtors owe approximately $251,300,000 to a group of lenders led by Harris Trust and Savings Bank. ABN AMRO Inc. and UBS Securities LLC are the syndication agents, and GECC serves as collateral agent under that prepetition loan agreement. In addition, the Debtors issued $250 million of 9-3/4% senior unsecured notes prior to filing for chapter 11 protection. Wells Fargo Bank, N.A., serves as the Indenture Trustee for those bondholders. Sale of Accounts Receivable The Debtors were able to realize $55 million through a receivables sale prior to their bankruptcy cases. The receivables purchaser sold interests to GECC from time to time. To date, GECC's interest in the accounts receivable is approximately $23 million. The DIP lenders and the Debtors agree to give GECC a super- priority administrative claim in exchange for agreeing to sell its interest in the accounts receivable. A final hearing to discuss the Debtors' requests is scheduled for May 18, 2005, at 10:00 a.m. Headquartered in Phoenix, Arizona, EaglePicher Incorporated -- http://www.eaglepicher.com/-- is a diversified manufacturer and marketer of innovative advanced technology and industrial products for space, defense, automotive, filtration, pharmaceutical, environmental and commercial applications worldwide. The company along with its affiliates filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Ohio Case No. 05-12601). When the Debtors filed for protection from their creditors, they listed $535 million in consolidated assets and $730 in consolidated debts. EAGLEPICHER HOLDINGS: Hires Brookwood as Financial Advisors ----------------------------------------------------------- EaglePicher Holdings, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division, to employ Brookwood Associates, LLC, as their financial consultant. The Debtors expect Brookwood to assist them in the sale of EaglePicher Pharmaceutical Services, LLC, and other similar transactions. In connection with the sale, Brookwood will: a) assist in preparing a memorandum and other materials describing the company; b) assist in identifying and screening prospective purchasers; c) coordinate discussions and meetings with prospective purchasers; and d) assist in soliciting and evaluating proporsals from prospective purchasers, negotiate the terms of the sale contract and conduct an auction. The Debtors will pay Brookwood: a) $10,000 per month; b) if a combination transaction occurs, EagelePicher will pay: i) a base fee of $370,000, ii) a 3% incentive fee in excess of $27 million but less than $30 million of the purchase price; and iii) 6% of aggregate consideration in excess of $30 million. Thomas L. Temple, a Managing Director at Brookwood, assures the Court of his Firm's "disinterestedness" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Phoenix, Arizona, EaglePicher Incorporated -- http://www.eaglepicher.com/-- is a diversified manufacturer and marketer of innovative advanced technology and industrial products for space, defense, automotive, filtration, pharmaceutical, environmental and commercial applications worldwide. The company along with its affiliates filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Ohio Case No. 05-12601). When the Debtors filed for protection from their creditors, they listed $535 million in consolidated assets and $730 in consolidated debts. ELCOM INTERNATIONAL: March 31 Balance Sheet Upside-Down by $4 Mil. ------------------------------------------------------------------ Elcom International, Inc. (OTC Bulletin Board: ELCO and AIM: ELC and ELCS), reported operating results for its first quarter ended March 31, 2005. Net revenues for the quarter ended March 31, 2005 decreased to $613,000, from $1,709,000 in the same period of 2004, a decrease of $1,096,000. Net revenues decreased primarily due to recording the fourth and final lump sum license payment from Capgemini UK Plc), of $1,142,000 in the first quarter of 2004, which was earned upon signing the thirteenth customer of the eProcurement Scotland program (this license fee is non-recurring). License and associated fees include license fees, hosting fees, supplier fees, usage fees and maintenance fees. Gross profit for the quarter ended March 31, 2005 decreased to $497,000 from $1,603,000 in the comparable 2004 quarterly period, a decrease of $1,106,000. This decrease is a result of the much higher level of one-time license and associated fees revenue recorded in the first quarter of 2004 as described above, versus revenues recorded in the first quarter of 2005. Operating expenses for the quarter ended March 31, 2005 were $1,572,000 compared to $1,673,000 in the 2004 quarter, a decrease of $101,000 or 6%. Throughout the first three quarters of 2003, the Company implemented cost containment measures designed to better align its SG&A expenses with lower than anticipated revenues. Those measures included personnel reductions throughout most functional and corporate areas. In general, these reductions have remained in place throughout 2004 and into 2005. In March 2004, the Company began hiring several staff in the U.K. and U.S. (support services) in order to service the expanding demand in the municipal market in the U.K., although the Company's headcount (full and part-time) has only increased by two, from 36 at March 31, 2004 to 38 at March 31, 2005. Nonetheless, due to a change in the mix of employees, personnel expenses decreased approximately $120,000 from the March 2004 quarter to the March 2005 quarter. Travel expenses increased from the 2004 quarter to the 2005 quarter, reflecting the increased level of travel required in connection with ongoing negotiations associated with the Zanzibar contract in the U.K., as well as discussions associated with raising capital. The first quarter of 2005 also reflects an increase in certain facility-related and other administrative expenses, reflecting the impact of inflation, however these increases were mostly offset by a reduction in depreciation and amortization expense, as various Company assets have been fully depreciated/amortized. The Company reported an operating loss of $1,075,000 for the quarter ended March 31, 2005 compared to a loss of $70,000 reported in the comparable quarter of 2004, an increase of $1,005,000 in the loss reported. This increased operating loss in the first quarter of 2005 compared to the 2004 quarter was primarily due to the 2004 one-time increase in license and associated fees revenue as discussed above. The Company's net loss for the quarter ended March 31, 2005 was $1,136,000, an increase in the loss of $963,000 from the comparable quarterly loss in 2004 of $173,000, as a result of the factors discussed above. Factors Affecting Future Performance The Company's consolidated financial statements as of December 31, 2004 and March 31, 2005 have been prepared under the assumption that the Company will continue as a going concern for the year ending December 31, 2005. In the Company's Annual Report on Form 10-KSB, the Company's independent public accountants, Vitale, Caturano & Company, LTD., have issued their report dated February 9, 2005 that included an explanatory paragraph referring to the Company's significant operating losses and substantial doubt in its ability to continue as a going concern without additional capital becoming available. The Company has incurred net losses every year since 1998, has an accumulated deficit of $117,779,000 as of March 31, 2005, and expects to incur a loss in fiscal year 2005. As of March 31, 2005, the Company had $67,000 of cash, which, along with anticipated operating receipts (including advance payments by certain clients), the Company expects will allow it to operate into June of 2005. The Company required additional financing in the first quarter of 2005 in order to continue to operate. Beginning in the second half of February 2005, the Company received bridge loans from the Chairman and CEO and Vice Chairman and Director. The bridge loans are intended, now in conjunction with the advance payments by certain clients, to provide the Company with funds necessary to operate during the period leading up to the Zanzibar contract being awarded and the proposed offering of Common Stock in the U.K. Through May 2, 2005, the Company has received a total of $200,000 from such bridge loans, however the Company expects it will require additional funds in June of 2005 to operate until the proposed offering of Common Stock in the U.K. may be consummated. The Company intends to seek additional capital via the issuance and sale of common shares to investors on the Alternative Investment Market of the London Stock Exchange in July of 2005, which, if consummated, is expected to result in substantial dilution to its stockholders. Failure to consummate such financing or other near- term financing or additional customer advances would likely force the Company to curtail operations and/or seek protection under bankruptcy laws. The Company is currently in discussions with multiple parties regarding the raising of additional capital, including the possible AIM Exchange offering, however, there can be no assurance that any such financing can be realized by the Company or, if realized, what the terms thereof may be, or that any amount the Company is able to raise will be adequate to support the Company's working capital requirements until it achieves profitable operations. However, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, as such, do not include any adjustments that may result from the outcome of these uncertainties. About the Company Elcom International, Inc. (OTC Bulletin Board: ELCO and AIM: ELC and ELCS) -- http://www.elcominternational.com/-- operates elcom, inc, an international B2B Commerce Service Provider offering affordable solutions for buyers, sellers and commerce communities to automate many or all of their purchasing processes and conduct business online. PECOS, Elcom's remotely-hosted flagship solution, enables enterprises of all sizes to achieve the many benefits of B2B eCommerce without the burden of infrastructure investment and ongoing content and system management. At March 31, 2005, Elcom International's balance sheet showed a $3,968,000 stockholders' deficit, compared to a $2,840,000 deficit at Dec. 31, 2004. ENRON CORP: Bankruptcy Court Approves Generacion Settlement Pact ---------------------------------------------------------------- Reorganized Enron Corporation and its debtor-affiliates sought and obtained the U.S. Bankruptcy Court for the Southern District of New York's approval of a settlement agreement that restructures Generacion Mediterranean S.A.'s intercompany accounts and ensures its compliance with Argentine law. GMSA owns and operates a power plant in Argentina. Enron Corp. owns 99.99% of GMSA while Enron Transportation Services, LLC, owns the remaining .01%. In accordance with their Chapter 11 Plan, the Reorganized Debtors will either transfer GMSA to Prisma Energy International, Inc., or sell GMSA to a third party. To maximize the value of a transfer or sale of GMSA, the Debtors believe they must resolve issues consistent with the Argentine law. Contributions to GMSA Sylvia Mayer Baker, Esq., at Weil Gotshal & Manges, in New York, relates that from 1993 to 2001, Enron and ETS made direct investments in GMSA aggregating $27.6 million to fund GMSA's operations. From 1999 to 2001, Enron, Enron South America LLC, Enron North America Corp., Enron Expat Services, Inc., and Enron International, Inc., funded an additional $20.8 million to GMSA through intercompany accounts. The additional contribution is reflected both in the domestic books of the Contributing Debtors and in the Argentine books of GMSA. However, the treatment of the contribution under the generally accepted accounting standards in the U.S. and in Argentina differs: * Under the U.S. GAAP, the Contributing Debtors each recorded their portion of the $20.8 million contribution as an intercompany receivable due from GMSA. * In its Argentine books, GMSA, pursuant to the Argentine GAAP, recorded the $27.6 million and the $20.8 million as irrevocable capital contributions to be used for the future subscription of shares in GMSA. Due to various circumstances, the Irrevocable Contributions are now out of compliance with Argentine GAAP. If the non-compliance is not cured, and so long as it lasts, the Reorganized Debtors believe GMSA will sustain a decrease in its net worth resulting in the loss of GMSA's capital. "[T]he loss of a company's capital is typically a ground for mandatory dissolution of that company," Ms. Baker says. To avoid any risk of dissolution and to preserve the value of the Reorganized Debtors' estates, the Contributing Debtors entered into a settlement agreement with Enron Asset Management Resources, Enron Caribbean Basin LLC, Enron Net Works LLC and Enron Property & Services Corp. Each of the Settling Parties holds outstanding accounts receivable due from GMSA. Argentine law requires that Argentine corporations have at least two shareholders. If an Argentine corporation has only two shareholders, like GMSA, one of the shareholders must own a minimum number of shares that represents 5% of the company's voting capital stock, but may represent as little as 2% depending on the circumstances. Since GMSA is owned 99.99% by Enron and .01% by ETS, GMSA has been advised that it is not in compliance with Argentine law. Accordingly, in the Settlement Agreement, the Settling Parties will include provisions to meet the requirements under Argentine law. Settlement Agreement The salient terms of the Settlement Agreement are: A. Transfer of GMSA Shares Enron will transfer to ETS the number of GMSA shares that will result in ETS owning a 4% equity interest in GMSA. B. Settlement of Claims Each of the Settling Parties will: -- release all of its claims against GMSA for accounts receivable; and -- consent to the Share Transfer. C. Additional Transaction Documents Enron and ETS will execute an Irrevocable Contributions Supplementary Agreement wherein they agree that: -- the Irrevocable Contribution will be used to absorb the accumulated losses reflected in GMSA's financial statements for fiscal year ended December 31, 2003; and -- the remaining balance of the Irrevocable Contribution will be applied to the future subscription of shares of Enron in GMSA. D. Economic Interest in GMSA Enron and ETS will grant each of the Settling Parties a pure economic participation in the economic rights as shareholders in GMSA equal to the percentage set forth in the Binding Term Sheet, provided that: -- the economic participation will neither be nor imply an equity or beneficial interest, nor any managing, voting, or other political rights in GMSA, all of which will remain with Enron and ETS; and -- the Settling Parties will not have any right to direct Enron and ETS how to vote any of their shares in GMSA or how to deal with the Irrevocable Contributions or have any control over the management of the business of GMSA. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 142; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Court Approves Seven Settlement Agreements ------------------------------------------------------ At Enron Corporation and its debtor-affiliates' request, the U.S. Bankruptcy Court for the Southern District of New York approved seven settlement agreements between these parties: 1. Enron North America Corp. and Risk Management & Trading Corp. -- and -- Northern Natural Gas Company 2. Enron Corp. and Enron North America Corp. -- and -- BNP Paribas and BNP Commodity Futures, Inc. 3. Enron Corp., Enron North America Corp., Enron Capital & Trade Resources International Corp., Enron Liquid Fuels, Inc., and Enron Gas Liquids, Inc. -- and -- Louis Dreyfus Corporation, Louis Dreyfus Energy Services, L.P., Louis Dreyfus Energy Limited, Louis Dreyfus Refining & Marketing Ltd., Louis Dreyfus Ventures Corp., Louis Dreyfus LPG Services Limited, and Cetragpa S.N.C. 4. Enron Power Marketing, Inc. -- and -- McMinnville Water and Light Department 5. Enron Corp. and Enron North America Corp. -- and -- WestLB AG, New York Branch and Contrarian Funds, LLC 6. Enron Energy Services, Inc., Enron Energy Services Operations, Inc., and Enron Corp. -- and -- Harrah's Operating Company, Harrah's Entertainment, Inc., Harrah's Maryland Heights LLC, Harrah's Laughlin, Inc., and Harrah's Las Vegas, Inc. 7. Enron North America Corp., Enron Energy Services, Inc., and Enron Energy Marketing Corp. -- and -- KeySpan Gas East Corporation, d/b/a KeySpan Energy Delivery Long Island, successor in interest to MarketSpan Gas Corporation and Long Island Lighting Company Pursuant to the Settlement Agreements: a. NNG will make a settlement payment to the Debtors. The Debtors and NNG will exchange a mutual release of claims. Their contracts will be deemed terminated and a related guaranty will be deemed revoked and terminated. NNG's Claim No. 23687 will be deemed irrevocably withdrawn. NNG will have an allowed general unsecured claim against ENA -- Claim No. 12893 -- for $5,500,000. b. BNPP's Claim No. 18516 is allowed as a prepetition general unsecured claim against Enron for $1,001,271. Claim No. 13853 is disallowed to the extent that it seeks any distribution from any of the Reorganized Debtors' estates or any other affirmative relief against Enron; provided, however, that the claims asserted in Claim No. 13853 are preserved for defensive purposes only by BNPP. Enron will reserve all rights to contest or challenge any defenses. Claim Nos. 25052, 23736 and 23739 are withdrawn and disallowed in their entirety. c. Dreyfus will make a settlement payment to the Debtors. The parties will exchange a mutual release of claims related to their Contracts and Guarantees. All proofs of claim filed by or on behalf of Dreyfus in connection with the Contracts and Guarantees will be deemed irrevocably withdrawn, with prejudice. The Debtors agree to dismiss six pending adversary proceedings that they filed against Dreyfus. d. McMinnville will make a settlement payment to EPMI. The parties will exchange a mutual release of claims related to their Contracts and Guaranty. All proofs of claim filed by or on behalf of McMinnville in connection with the Contracts and Guaranty will be deemed irrevocably withdrawn, with prejudice. e. WestLB will pay the Reorganized Debtors the unpaid amounts in connection with the termination of their Contracts. The parties will exchange limited releases of obligations and other specified matters related to their Contracts. Claim No. 13246 filed in connection with a guaranty and currently held by Contrarian will be allowed in its entirety. f. Harrah's will pay the Debtors amounts due under their Contracts as agreed to by the parties. The parties will exchange a mutual release of claims related to their Contracts and the Adversary Proceeding filed by the Debtors against Harrah's. All claims filed by or on behalf of Harrah's and its affiliates will be deemed irrevocably withdrawn, with prejudice. The Debtors agree to dismiss their complaint against Harrah's. g. KeySpan will pay the Debtors amounts due under their Contracts as agreed to by the parties. The Debtors and KeySpan will exchange a mutual release of claims related to their Contracts. All claims filed by or on behalf of KeySpan in connection with the Contracts will be deemed irrevocably withdrawn, with prejudice. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 142; Bankruptcy Creditors' Service, Inc., 15/945-7000) EPICUS COMMS: Postpetition Focus is on Customer Creditworthiness ---------------------------------------------------------------- Epicus Communications Group, Inc., reported an $8 million net loss for the nine-month period ended February 29, 2005. A significant component that loss was the recognition of $4.4 million bad debts in the company's trade accounts receivable portfolio attributable, the company says, to ineffective efforts by outsourced collection agencies. Since Epicus filed for chapter 11 protection, it has decreased its use of independent agent sales and has reestablished its "in house" sales staff. "We believe that this action will allow us to better qualify the creditworthiness of our new customers," the Company says. Epicus says that management is continuing a detailed review of all customer accounts, the credit ratings, and payment history of its customers. In accordance with the Company's various operating tariffs in the States in which the Company conducts business operations, management is raising service rates and discontinuing service to unprofitable customers and service areas. On March 11, 2004, Bankruptcy Judge Arthur Briskin ruled in favor of the Internal Revenue Service allowing the IRS to amend their claim of past due excise taxes to a total of $2,849,469.98. This motion was made by the IRS in October of 1997 during the bankruptcy hearings of Epicus, Inc.'s predecessor, The Telephone Company of Central Florida. Epicus Communications Group, Inc.'s original Plan of Reorganization was approved and accepted by Judge Briskin on July 9, 1999. In the approved Plan of Reorganization, Epicus Communications Group agreed to pay a maximum of $300,000 in past due excise taxes. Management is of the opinion that there would have never been an agreement to a debt of this size in the Plan of Reorganization for TCCF. Management is examining its legal options in this matter and a course of action has yet to be decided. Due to the unusual nature of this event and the uncertainty of the ultimate outcome related hereto, Management has not accrued any provision for this contingency in the accompanying financial statements. At the present time, the ultimate resolution of this matter is a component of the Company's filing for protection under Chapter 11 of the U.S. Bankruptcy Code. Epicus Communications Group, Inc., and it's operating subsidiary, Epicus, Inc., filed voluntary petitions in the U.S. Bankruptcy Court for the Southern District of Florida seeking reorganization relief under the provisions of Chapter 11 of the United States Bankruptcy Code (Case Nos. 04-34915 and 04-34916). Epicus' balance sheet dated Feb. 28, 2005, shows $3.2 million in assets and $19.1 million in liabilities. Alvin S. Goldstein, Esq., at Furr and Cohen, P.A., in Boca Raton, Florida, represents Epicus in its chapter 11 restructuring. FIBERMARK INC: Chapter 11 Examiner Taps Weil Gotshal as Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Vermont gave Harvey R. Miller, the Chapter 11 Examiner appointed in FiberMark, Inc., and its debtor-affiliates' chapter 11 cases, permission to employ Weil, Gotshal & Manges LLP as his counsel. Weil Gotshal will: a) take all necessary action to assist Mr. Miller in his investigation of the Debtors' affairs and conduct; b) prepare on behalf of the Mr. Miller, all necessary reports, pleadings, applications, and other papers in connection with Mr. Miller's duties; c) conduct examinations under Federal Rules of Bankruptcy Procedure 2004 and assist in any document production; d) assist the Mr. Miller in other tasks that he may be directed to undertake by order of the Bankruptcy Court; and e) perform all other necessary legal services for Mr. Miller in connection with the Debtors' chapter 11 case. Lori R. Fife, Esq., a Member at Weil Gotshal, is the lead attorney for Mr. Miller. Ms. Fife reports Weil Gotshal's professionals bill: Designation Hourly Rate ------------ ----------- Members/Counsel $550 to $775 Associates $260 to $490 Paraprofessionals $130 to $240 Weil Gotshal assures the Court that it does not represent any interest materially adverse to Mr. Miller, the Debtors or their estates. Headquartered in Brattleboro, Vermont, FiberMark, Inc. -- http://www.fibermark.com/-- produces filter media for transportation applications and vacuum cleaning; cover stocks and cover materials for books, graphic design, and office supplies and base materials for specialty tapes, wall coverings and sandpaper. The Company filed for chapter 11 protection on March 30, 2004 (Bankr. D. Vt. Case No. 04-10463). Adam S. Ravin, Esq., D.J. Baker, Esq., David M. Turetsky, Esq., and Rosalie Walker Gray, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $329,600,000 in total assets and $405,700,000 in total debts. FIRST CMBS: Fitch Affirms C$23 Million Bonds' Low-B Ratings ----------------------------------------------------------- N-45 First CMBS Issuer Corporation series 2003-1, commercial mortgage-backed bonds are upgraded by Fitch: -- C$8.4 million class B to 'AAA' from 'AA'; -- C$16.8 million class C to 'A+' from 'A'; -- C$19.6 million class D to 'BBB+' from 'BBB'. These classes are affirmed by Fitch: -- C$135.5 million class A-1 at 'AAA'; -- C$278.6 million class A-2 at 'AAA'; -- Interest only class IO at 'AAA'; -- C$14.0 million class E at 'BB'; -- C$9.1 million class F at 'B'; Fitch does not rate the $13.3 million class G certificates. The upgrades are the result of increased credit enhancement after the prepayment of the fourth largest loan, City Place, formerly 5.7% of the pool. As of the May 2005 distribution date, the pool has paid down 11.5%, to $495.3 million from $559.7 million at issuance. The properties are located in Canada, with concentrations in Quebec (59.9%) and Ontario (34.8%) and consist mostly of office (55.0%) and retail (25.9%) properties. To date, there have been no losses and no delinquent or specially serviced loans. FLAGSTONE CBO: Fitch Affirms BB Rating on $12.8 Million Notes ------------------------------------------------------------- Fitch Ratings affirms three classes of notes issued by Flagstone CBO 2001-1 LTD. These affirmations are the result of Fitch's review process. These rating actions are effective immediately: --$170,250,000 class A-1L notes at 'AAA'; --$72,500,000 class A-2L notes at 'AAA'; --$12,839,737 class B-1 notes at 'BB'. Flagstone, which closed Oct. 18, 2001, is a collateralized debt obligation initially managed by Pareto Partners. Pareto Partners was acquired by Standish Mellon who currently manages the transaction. Since the last rating action, the collateral performance has deteriorated; however, Flagstone continues to perform in line with Fitch's original ratings expectations. As of the April 2, 2005, trustee report, the class A overcollateralization ratio has deteriorated to approximately 110% from 113% over a one-year period, relative to a minimum required threshold of 106.75%. Excluding defaults, assets rated 'CCC+' or lower represented approximately 15.2% of the aggregate principal amount of portfolio collateral plus eligible investments relative to 14% from a year ago. Despite the collateral deterioration, there are several important structural safeguards which will help support the credit enhancement of the rated liabilities. For example, if the additional collateral amount test fails the minimum required level of 107.5% based on the class B OC test, this will result in the diversion of interest proceeds toward principal redemptions of the class B-1 notes and the purchase of additional collateral. During the revolving period, the amount necessary to cure this test is applied 25% to redeem the class B-1 notes and 75% to purchase new collateral. During the amortization period the 75% is applied to redeem all the notes sequentially. The structure also includes more traditional classes A and B OC tests as well as an interest coverage test. These structural safeguards in combination with high excess spread levels should stabilize Flagstone from expected volatility in the performance of the collateral. The ratings of the classes A-1L and A-2L notes, which are both guaranteed for interest and principal by XL Capital Assurance Inc., address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class B-1 note addresses the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date of Nov. 15, 2013. As a result of this analysis, Fitch has determined that the original ratings assigned to the classes A-1L, A-2L, and B-1 notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ FOSTER WHEELER: Apr. 1 Balance Sheet Upside-Down by $520 Million ---------------------------------------------------------------- Foster Wheeler Ltd. (OTCBB:FWHLF) reported its first-quarter 2005 financial results for the period ending April 1, 2005. The net after-tax income for the first quarter of 2005 was $1.2 million. Consolidated EBITDA was $31.2 million for the first quarter of 2005. "The financial results for the quarter were driven primarily by continued strong operating performance on existing contracts in the North American Power operations, the E&C Group's operations in Continental Europe, the United Kingdom, Asia Pacific and North America, and the return of the European Power operations to making a positive contribution," said Raymond J. Milchovich, chairman, president and chief executive officer. "Following last year's successful balance sheet restructuring, we have continued to achieve additional milestones in the Company's turnaround. In March, we announced that the Company had successfully closed a new $250 million, five-year Senior Credit Agreement. This new facility provides us with a significantly increased level of bonding capacity to support our global businesses, together with added liquidity and financial flexibility that is provided by the $75 million sub-limit for revolver borrowings." The net after-tax loss for the first quarter of 2004 was $4.3 million and the net loss per basic share was $2.09. Consolidated EBITDA for the first quarter of 2004 was $42.6 million. Worldwide Cash and Domestic Liquidity Total cash and short-term investments at the end of the first quarter of 2005 were $333.2 million, of which $289.3 million was held by non-U.S. subsidiaries. This compares with $390.2 million total cash and short-term investments at year-end 2004 and $453.8 million at the end of the first quarter of 2004. This decline in both domestic and worldwide cash during the last twelve months is the result of negative operating performance of the European Power operations, one-time fees and expenses associated with closing the equity-for-debt exchange offer and the new Senior Credit Agreement, and the working capital requirements of increased cost- reimbursable bookings. The Company's liquidity forecast continues to indicate that domestic liquidity is adequate through the first quarter of 2006, without domestic utilization of its $75 million revolving credit line. Segment EBITDA For the first quarter of 2005, the E&C Group's EBITDA was $26.3 million, compared with $35.1 million for the first quarter of 2004. The first-quarter 2004 results included a $10.5 million gain on the sale of development rights for a power project in Italy, which was not repeated in 2005. The Global Power Group's EBITDA for the first quarter of 2005 was $29.7 million, compared with $20.4 million in the first quarter of 2004. The increase in EBITDA was driven by a continued strong operating performance on existing contracts in the North American Power operations and the return of the European Power operations to making a positive contribution. Bookings, revenues and backlog New orders booked by the Company during the first quarter of 2005 were $460.0 million, compared with $629.9 million during the first quarter of 2004. For the first quarter of 2005, new bookings for the E&C Group were $324.5 million, compared with $473.2 million during the first quarter of 2004. This decrease is primarily due to several expected awards being delayed later into 2005. However, for a number of these expected awards, the Company has received partial release from the client to undertake specific project-related activities, pending anticipated full release later in 2005. New orders booked in the first quarter of 2005 for the Global Power Group were $183.0 million, compared with $156.7 million in the first quarter of 2004. The Company's operating revenues for the first quarter of 2005 were $523.1 million, down from $666.4 million in the first quarter of 2004. Operating revenues for the E&C Group in the first quarter of 2005 were $330.6 million, down from $394.5 million in the first quarter of 2004. The first-quarter 2004 revenues included higher reimbursable flow-through costs compared with the first quarter of 2005. Flow-through costs result in no profit or loss for the Company. The Global Power Group's operating revenues for the first quarter of 2005 were $195.1 million, down from $272.2 million in the first quarter of 2004. This reduction reflects the execution and completion of several major projects by the Company's North American and European operations in 2004 that were not replaced during 2005. The Company's backlog at April 1, 2005, was $1.9 billion, compared with $2.0 billion at year-end 2004, and $2.1 billion at the end of the first quarter of 2004. Company backlog at April 1, 2005, expressed in terms of Foster Wheeler scope, i.e. excluding reimbursable flow-through costs, was $1.4 billion, level with year-end 2004, and up from $1.0 billion at the end of the first quarter of 2004. E&C backlog at April 1, 2005, was $1.3 billion, substantially level with $1.4 billion at year-end 2004, and $1.3 billion at the end of the first quarter of 2004. E&C backlog expressed in Foster Wheeler scope was $878.8 million at April 1, 2005, compared with $883.4 million at year-end 2004, and $330.2 million at the end of the first quarter 2004. Global Power Group backlog at April 1, 2005, was $617.2 million, compared with $646.3 million at year-end 2004, and $817.5 million at the end of the first quarter of 2004. Expressed in terms of Foster Wheeler scope, Global Power Group backlog at April 1, 2005, was $505.3 million, compared with $534.4 million at year-end 2004, and $712.0 million at the end of the first quarter of 2004. Summary "Backlog, expressed as Foster Wheeler scope, has remained substantially level during the quarter. A number of the major projects which we were expecting to be awarded during the first quarter have been delayed later into 2005. We have received partial release to work on several of these projects, pending final release by the client. We remain confident that 2005 should be a very positive booking year for the Company," said Mr. Milchovich. "I am very pleased with the Company's first-quarter operating results. I believe that these results, and the latest financial milestones achieved, demonstrate that the Company is now much stronger, operationally and financially. I remain optimistic about the outlook for Foster Wheeler in 2005 and beyond." About the Company Foster Wheeler Ltd. -- http://www.fwc.com/-- is a global company offering, through its subsidiaries, a broad range of design, engineering, construction, manufacturing, project development and management, research and plant operation services. Foster Wheeler serves the refining, upstream oil and gas, LNG and gas-to-liquids, petrochemical, chemicals, power, pharmaceuticals, biotechnology and healthcare industries. The corporation is based in Hamilton, Bermuda, and its operational headquarters are in Clinton, New Jersey, USA. At Apr. 1, 2005, Foster Wheeler's balance sheet showed a $520,488,000 stockholders' deficit, compared to a $525,565,000 deficit at Dec. 31, 2004. * * * As previously reported in the Troubled Company Reporter on Apr. 18, 2005, Standard & Poor's Ratings Services raised its corporate credit rating on Hamilton, Bermuda-based Foster Wheeler to 'B-' from 'SD'. At the same time, Standard & Poor's assigned its 'CCC+' senior secured rating to the company's $261 million of 10.539% senior secured notes due 2011. The company's preferred stock is still in default. The outlook is negative. "We believe that Foster Wheeler has limited flexibility to carry out its near-term strategic business plan without potential adverse consequences for bondholders and other obligors," said Standard & Poor's credit analyst Joel Levington. "A failure to profitably increase the backlog in the near term, or to maintain sufficient domestic liquidity, would further strain the credit profile and lead to a ratings downgrade." FRIEDMAN'S INC: Asks Court to Approve Amended DIP Financing ----------------------------------------------------------- Friedman's Inc. (OTC: FRDMQ.PK) reached several agreements with Harbert Distressed Investment Master Fund, Ltd., which will facilitate its emergence from chapter 11 protection later this year. The Debtor asked the U.S. Bankruptcy Court for the Southern District of Georgia to approve its amended and restated $125 million debtor-in-possession facility with Citicorp USA, Inc., to enhance the borrowing capacity under the facility through a $25.5 million secured subordinated term loan. The Debtor also asked the Court for authority to consent to participation agreements between the Harbert Distressed Fund and certain of the program vendors in the Company's prepetition secured trade vendor support program. The Debtor entered into an agreement with the Harbert Distressed Fund to exclusively negotiate with the Harbert Distressed Fund through June 10, 2005, on the terms and conditions pursuant to which the Harbert Distressed Fund would become a plan investor in the Company's plan of reorganization. "We are pleased that the Harbert Distressed Fund has agreed to support the Company's reorganization strategy and efforts through providing the Company with additional excess liquidity to support our 2005 holiday merchandising program and to enter into exclusive negotiations with the Company on terms and conditions where the Harbert Distressed Fund would become a plan investor in the Company's plan of reorganization and emergence from chapter 11 reorganization later this year," said Sam Cusano, Chief Executive Officer. Under the terms of the amended and restated DIP facility, the Harbert Distressed Fund will become the lender in respect of a secured subordinated term loan for $25.5 million, following the assignment of such term loan to the Harbert Distressed Fund, on the same terms, and as part of, the Company's existing DIP facility, to be funded at closing. Upon the closing of the term loan, the revolver loan commitments under the DIP facility will be reduced to $99.5 million, so that the total notional amount of the DIP will continue to be $125 million. Upon closing of the term loan, the Company will have $12.5 million of additional availability under its revolving facility, and an additional $12.5 million of revolver availability will become available upon the Company's receipt of commitments from vendors sufficient to satisfy the Company's merchandise requirements through the 2005 holiday sales season. The term loan may be repaid or converted into new common equity of the Company upon the consummation of a plan of reorganization and the prior repayment of all outstanding revolving loans under the DIP facility. If the Harbert Distressed Fund is the plan investor in the Company's plan of reorganization, the term loan will be converted into new common equity of the Company following its emergence from chapter 11 at a conversion price which is equivalent to a 10% discount to the equity value of the Company upon emergence. If the Harbert Distressed Fund is not the plan investor, at its election either the term loan and a related termination fee may be repaid in cash, or the term loan may be converted at a conversion price which is the lesser of the equivalent of a 20% discount to the equity value of the Company upon emergence from chapter 11, or the price which is sufficient to convert the term loan into 25% of the new common equity upon emergence from chapter 11. The term loan remains subject to the satisfactory completion of due diligence by the Harbert Distressed Fund, the negotiation and execution of definitive documentation for the amendment and restatement of the DIP facility, the approval of the Bankruptcy Court, and certain other conditions. Under the terms of the commitment letter, Harbert Distressed Fund will have no liability to any party if the term loan does not close except as otherwise expressly provided in the definitive documentation for the amendment and restatement of the DIP facility to be negotiated. The Company expects that the amended and restated DIP facility should ensure sufficient liquidity through the Company's 2005 holiday inventory build-up period. "The Harbert Distressed Fund has invested in Friedman's capital structure in recent months and has entered into today's agreements because of our confidence in Friedman's management team and their reorganization strategy and expedited timetable for emergence from chapter 11 reorganization," said Howard Kagan, Vice President and Director of Investments for the Harbert Distressed Fund. Friedman's is also seeking Bankruptcy Court approval in connection with its granting of consents to the transactions contemplated by participation agreements entered into between the Harbert Distressed Fund and certain of the Company vendors in connection with such vendors' claims under the Company's pre-petition trade vendor program. The Company's consent to the Harbert Distressed Fund's participation in any particular vendor claim will be conditioned upon, and final only upon, satisfaction of, the occurrence of an effective date of a plan of reorganization and such vendors' compliance with certain trade terms, including obligations to fulfill 2005 holiday orders. The Company believes that its conditional consent in connection with the vendor trade claims will enhance the prospect of timely delivery of merchandise by affected vendors through its 2005 holiday inventory build-up period. The Bankruptcy Court will hear the DIP financing and vendor consent motions on Thursday, May 26, 2005, in Savannah. About the Harbert Distressed Fund Harbert Distressed Investment Master Fund, Ltd. manages approximately $3 billion in debt and equity investments in turnarounds, restructurings and event driven situations. Headquartered in Savannah, Georgia, Friedman's Inc. -- http://www.friedmans.com/-- is the parent company of a group of companies that operate fine jewelry stores located in strip centers and regional malls in the southeastern United States. The Company and its affiliates filed for chapter 11 protection on Jan. 14, 2005 (Bankr. S.D. Ga. Case No. 05-40129). John W. Butler, Jr., Esq., George N. Panagakis, Esq., Timothy P. Olson, Esq., and Alexa N. Paliwal, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $395,897,000 in total assets and $215,751,000 in total debts. GLOBAL CROSSING: Amends 2004 Form 10-K Due to Material Weaknesses ----------------------------------------------------------------- Global Crossing Limited delivered to the Securities and Exchange Commission an amendment of its annual report for the year ended December 31, 2004. In a regulatory filing with the Securities and Exchange Commission, John J. Legere, Global Crossing's Chief Executive Officer, relates that the purpose of the amendment is to disclose Global Crossing management's assessment of the effectiveness of its internal control over financial reporting as of December 31, 2004, as well as the audit reports by its independent registered public accounting firm, Ernst and Young LLP. Mr. Legere states that disclosure controls and procedures are those that are designed to ensure that information required to be disclosed by a public company in the filed reports under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Mr. Legere and his chief financial officer have concluded that Global Crossing's disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2004, due to a couple of deficiencies: (1) Global Crossing did not maintain appropriate control over non-routine processes, estimation processes and account reconciliations in the overall financial close process; and (2) Global Crossing did not maintain appropriate control over the estimation processes for the allowances for bad debt and sales credits. Mr. Legere notes that the material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in the 2004 financial statements, which report does not affect the accuracy of their financial statements, dated March 15, 2005. To address those material weaknesses, Global Crossing implemented certain remediation measures and is in the process of creating additional remediation plans. Global Crossing expects to complete the implementation of these measures by the end of the third quarter of 2005. A full-text copy of Global Crossing's Amendment to its 2004 Annual Report is available for free at: http://sec.gov/Archives/edgar/data/1061322/000119312505088451/d10ka.htm Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/--provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on December 9, 2003. GREEN TREE: Interest Payment Default Triggers S&P's D Rating ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on the subordinate B-1 class of Conseco Manufactured Housing Contract Senior/Sub Pass-Thru Certs Series 2001-3 to 'D' from 'CC'. The lowered rating reflects the reduced likelihood that investors will receive timely interest and the ultimate repayment of their original principal investment. This transaction reported an outstanding liquidation loss interest shortfall for its B-1 class on the May 2005 payment date. Standard & Poor's believes that interest shortfalls for this transaction will continue to be prevalent in the future, given the adverse performance trends displayed by the underlying pool of collateral, as well as the location of B-1 write-down interest at the bottom of the transaction's payment priorities (after distributions of senior principal). Standard & Poor's will continue to monitor the outstanding ratings associated with this transaction in anticipation of future defaults. HAYES LEMMERZ: Asks Court to Strike GE Capital's Objections ----------------------------------------------------------- As reported in the Troubled Company Reporter on January 19, 2005, General Electric Capital Corporation's applications for allowance and payment of administrative expenses relate to 50 Machines on 18 equipment schedules that ultimately were rejected by Hayes Lemmerz International, Inc., at various times during its bankruptcy case. GE Capital purchased the Machines for $15,222,464 before leasing the Machines to Hayes. GE Capital asked Judge Walrath to allow its administrative expense claims in the amounts to be proven at trial and award GE Capital reasonable attorneys' fees and costs incurred in pursuing those claims. Judge Walrath orders the parties to submit proposed findings of facts and conclusions of law as well as their post-trial briefs on March 17, 2005. Parties Deliver Post-Trial Briefs A. Reorganized Debtors Stephen E. Glazek, Esq., at Barris, Sott, Denn & Driker, P.L.L.C., in Detroit, Michigan, contends that the evidence Hayes Lemmerz International, Inc., presented at trial eviscerated General Electric Capital Corp.'s case. "GE Capital offered not a single live witness with personal knowledge of the condition of the machines. Its expert reviewed not a single inspection report, deposition or any other document revealing the condition of the machines. All it came up with were the sales prices received largely from dealers, and an appraisal that used only two comparables for 50 machines. GE Capital did not even have inspection reports for half of the machines; and it had no marketing and no documentation of asking prices or quotes." In a 49-page Post-Trial brief, Mr. Glazek asserts that GE Capital barely tried to prove a Casualty Occurrence, and cannot recover a stipulated loss value under a default remedy. Casualty Occurrence In stark contrast, Hayes' testimony proved that nearly two-thirds of the Group 1 Machines were in operating condition when they were returned to GE Capital, making it inconceivable that they had sustained a Casualty Occurrence. Although the remaining Group 1 Machines were not operable on their return because they were missing parts, Hayes' expert, Frederick Kucklick, and its lay witnesses testified that missing parts is a repairable condition. Stipulated Loss Value as Default Remedy Realizing the weakness of its Casualty Occurrence claim, Mr. Glazek notes that GE Capital pushed another theory that Hayes "defaulted" by failing to comply with the maintenance and return provisions of the Lease thereby entitling GE Capital to recover the Stipulated Loss Value as a default remedy. Mr. Glazek asserts that the theory is a belated afterthought of GE Capital, which theory affords it no relief. Mr. Glazek explains that before GE Capital can recover the Stipulated Loss Value as a default remedy, it must give Hayes a written declaration of default after notice of the specific breach and 30 days to cure it. "GE Capital can point only to its objections to Hayes' rejection motions as notice, which was inadequate since it failed to identify a single machine that lacked maintenance and the specific repair that Hayes failed to provide. GE Capital failed to show that Hayes actually breached its maintenance and return obligations during the requisite time period because Hayes returned nearly two-thirds of the Group 1 Machines in operating condition. Other machines were returned with some parts missing; but there is no evidence that the parts were removed from these machines during the prescribed period." Mr. Glazek clarifies that the time for Hayes to perform its return obligation arose only on the rejection date, giving rise to rejection damages, which cannot form the basis of an administrative claim. Furthermore, Mr. Glazek continues, there is no evidence whatsoever of a separate declaration of default. Tort Liability "GE Capital contended that Hayes committed a tort by taking parts from some equipment," Mr. Glazek notes. Tort damages, Mr. Glazek asserts, are recoverable under Section 503(b)(1) of the Bankruptcy Code only if the tort took place in the course of the debtor's business. "Here, the evidence is that all parts were removed from the Group 2 Machines before the Petition Date. Thus, GE Capital's Section 503(b)(1) claims fail," Mr. Glazek says. A full-text copy of the Reorganized Debtors' Post-Trial Brief is available at no cost at: http://bankrupt.com/misc/HayesPostTrialBrief.pdf The Reorganized Debtors also delivered to the Court their Proposed Findings of Fact and Conclusions of Law, a full-text copy of which is available at no charge at: http://bankrupt.com/misc/HayesFacts&Law.pdf B. GE Capital GE Capital's administrative expense claims arise from various choices made by Hayes while under the management of sophisticated workout specialists who had been retained to manage the company through its financial difficulties, Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, tells the Court. Ms. Boswell points out that Hayes chose to file for protection under Chapter 11 to take advantage of the substantial relief and financial benefits afforded to debtors under the Bankruptcy Code. Once in Chapter 11, Ms. Boswell relates, Hayes then chose to retain 41 machines on various Schedules past the first 59 days of its bankruptcy, preserving its ability to use the majority of GE Capital's machines. "However, just as the Bankruptcy Code affords Chapter 11 debtors substantial relief and financial benefits, it also imposes certain obligations. By choosing not to reject the Schedules prior to the Exposure Period, Hayes obligated itself and without the need for any notice by GE Capital, to comply with all of its obligations to GE Capital under the Lease, including repair and maintenance, equipment return, notice, and payment obligations. But Hayes consciously chose to ignore those obligations and seeks to avoid them." The decisions and choices that Hayes made are the ones that the Bankruptcy Code lets a debtor make, but not without consequences, Ms. Boswell says. "Those consequences mean that GE Capital is entitled to the remedies agreed by the parties in the Lease to compensate it for damages caused by Hayes." Therefore, GE Capital asks the Court to allow its administrative claims against Hayes, for: (a) $5,831,347, as liquidated damages for breaches of the Master Lease Agreement, calculated as the total Stipulated Loss Value for the Group 1 Machines less the sales proceeds received by GE Capital pursuant to the Master Lease Agreement, plus interest; (b) $1,269,000 for damages suffered by GE Capital based on the damage Hayes caused to the Group 2 Machines postpetition, calculated as the difference between the fair market value that the Group 2 Machines should have brought after crediting the sales proceeds for the Group 2 Machines, plus interest; and (c) attorney's fees and costs. The interest on the amounts of damages is calculated from the rejection date of each Schedule until the date of payment by Hayes at 18% per annum with respect to the Group 1 Machines and at the applicable judgment rate with respect to the Group 2 Machines. A full-text copy of GE Capital's Post-Trial Brief is available at no cost at: http://bankrupt.com/misc/GECCPostTrialBrief.pdf GE Capital's Proposed Findings of Facts and Conclusions of Law is available free of charge at: http://bankrupt.com/misc/GECCFacts&Law.pdf Hayes' Motion to Strike On February 1, 2005, the Court concluded the trial on General Electric Capital Corporation's applications for allowance and payment of administrative expense claims. At the conclusion of the trial, Judge Walrath ordered the parties to submit proposed findings of facts and conclusions of law as well as their post- trial briefs on March 17, 2005, and the answers to the post-trial briefs on April 7, 2005. Thomas G. Macauley, Esq., at Zuckerman Spaeder LLP, in Wilmington, Delaware, relates that in addition to GE Capital's Reply Brief, GE Capital also filed a 30-page objection to the Debtors' proposed findings of fact and conclusions of law. Mr. Macauley notes that GE Capital's Objection purports to respond to select findings of fact presented by the Debtors. According to Mr. Macauley, the parties' lawyers never agreed to, and the Court never allowed, the filing of a separate "objection" to the opposing party's proposed findings and conclusions. "GECC's unauthorized submission, although designated an 'Objection' is simply another answering brief, this one answering Hayes' proposed findings of fact," Mr. Macauley argues. "GECC's individual 'objections' are nothing more than GECC's arguments against Hayes' proposed findings of facts and in favor of its own version of facts." Mr. Macauley contends that GE Capital violated the Court's Order, by in effect filing two answering briefs -- one answering the Reorganized Debtors' Post-Trial Brief and the other addressing Hayes' findings and conclusions. "Violations of orders relating to briefing schedules are subject to sanctions," Mr. Macauley asserts, citing Del. Dist. LR 1.3. "Apparently, GECC believes it can play by its own rules, rather than those agreed by the parties and ordered by [the] Court. This is not the first time in this litigation that GECC has attempted to file an additional brief in an effort to obtain an unfair advantage. [The] Court should not tolerate such a blatant violation of its Order," Mr. Macauley says. Thus, the Debtors ask the Court to strike GE Capital's objection to Hayes' proposed findings of facts and conclusions of law. GE Capital Responds Julianne E. Hammond, Esq., at Blank Rome LLP, in Wilmington, Delaware, argues that the Debtors' proposed findings mischaracterized the evidence at trial. "Reading Hayes' proposed findings, one would think that the Machines that GECC leased to Hayes were meticulously maintained and repaired, and were returned to GECC in 'showroom' condition and appearance." "The purpose of the parties submitting proposed findings to the Court is to reflect the evidence at trial, not distort it," Ms. Hammond points out. According to Ms. Hammond, at the time the parties discussed the briefing schedule, GE Capital did not anticipate that Hayes would offer a distorted view of the evidence, and therefore, GE Capital did not request the ability to object to proposed findings. Given the amount in controversy and after seeing Hayes' mischaracterization of the evidence, although the Court's briefing schedule did not specifically authorize objections to proposed findings, GE Capital's lawyers felt compelled to state GE Capital's objections for the record. "Under the circumstances, GECC believes that a comparison of Hayes' proposed finding to the controverting evidence will provide the Court with a useful tool in evaluating the evidence and GECC's administrative claims," Ms. Hammond says. "Hayes makes much of the fact that the Objection was not permitted by the Court's briefing schedule and even goes so far as suggesting that sanctions may be appropriate." In all events, Ms. Hammond says, even if the Court determines that the Objection was not appropriate and is not helpful to the Court, sanctions are not warranted. "GECC merely was seeking to protect its interests and preserve its objections to what amounted to a distortion of the record by Hayes." To the extent the Court determines that there was any prejudice to Hayes, Ms. Hammond tells the Court that it can permit Hayes to file an objection to GE Capital's proposed findings and conclusions. If that is the Court's ruling, Ms. Hammond asserts that GE Capital should also be permitted to file a "corrected" version of its own findings and conclusions, as Hayes did, correcting any mistakes and providing any additional citations that may have been omitted. 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). HEXCEL CORPORATION: Offers to Exchange 6-3/4% Senior Sub. Notes --------------------------------------------------------------- Hexcel Corporation (NYSE: HXL) reported its offer to exchange new 6.75% Senior Subordinated Notes due 2015 that have been registered under the Securities Act of 1933 for any and all of its outstanding 6.75% Senior Subordinated Notes due 2015 that were sold under Rule 144A and Regulation S of the Securities Act of 1933. The form and terms of the new notes are identical in all material respects to the original notes, except that transfer restrictions and registration rights applicable to the original notes will not apply to the new notes. Hexcel Corporation will accept for exchange any and all original notes validly tendered and not withdrawn prior to the expiration date of 5:00 p.m., New York City time on June 8, 2005, unless extended. Tenders of the original notes may be withdrawn at any time prior to the expiration date. Copies of the prospectus and related transmittal materials governing the exchange offer may be obtained from the exchange agent, The Bank of New York, 101 Barclay Street, 7E, New York, New York 10286, Attention: Evangeline R. Gonzales, or by calling (212) 815-3738. This announcement does not constitute an offer to sell or buy any security; such offers shall only be made by means of a prospectus. About the Company Hexcel Corporation is a leading advanced structural materials company. It develops, manufactures and markets lightweight, high- performance reinforcement products, composite materials and composite structures for use in commercial aerospace, space and defense, electronics, and industrial applications. As of March 31, 2005, Hexcel Corporation reported a shareholder's deficit of $68,300,000 compared to $24,000,000 in December 31, 2004. IMPACT DESIGN: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Impact Design Group, Inc. dba Quality Images 4613 Phillips Highway, Suite 207 Jacksonville, Florida 32207 Bankruptcy Case No.: 05-04990 Type of Business: The Debtor provides quality printing at an affordable price. Quality Images utilizes state-of-the-art technology to make printing easy and affordable. See http://www.qualityimages.com/ Chapter 11 Petition Date: May 11, 2005 Court: Middle District of Florida (Jacksonville) Debtor's Counsel: Aaron R. Cohen, Esq. P.O. Box 4218 Jacksonville, Florida 32201 Tel: (904) 722-1866 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. INDYMAC ABS: S&P Rating on Class BF Trust Certs. Tumbles to D ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class BF from Home Equity Mortgage Loan Asset-Backed Trust, Series SPMD 2001-B to 'D' from 'CCC'. Concurrently, ratings on three other classes from the same series are affirmed. The rating on class BF was lowered as a result of the $63,639 principal write-down realized by the class during the April 2005 remittance period. Originally rated 'BBB', the subordinate class is supported by excess interest and overcollateralization. As net losses continued to exceed excess interest, overcollateralization eroded steadily by an average of $122,897 a month for the most recent 12 months. Monthly net losses have exceeded excess interest cash flow by an average of 2.42x during the same period. As of the April 2005 distribution date, cumulative realized losses were $7.30 million, representing 2.10% of the original pool balance. Total delinquencies were 52.36%, while serious delinquencies (90-plus days, foreclosure, and REO) were 34.37%. While the mortgage pool has paid down to approximately 12.35% of its original balance, steady high delinquencies and the resulting substantial losses have contributed to the complete erosion of the overcollateralization. Given the severe delinquency status and poor performance trend, collateral performance is likely to continue to result in losses that will outpace excess interest in the transaction. Standard & Poor's will continue to monitor the transaction closely. Despite the current poor collateral performance of the transaction, the ratings on the three remaining classes are affirmed, reflecting adequate actual and projected credit support provided by subordination, excess interest, and overcollateralization. Credit support is provided by subordination,overcollateralization, and excess interest cash flow. The collateral consists of fixed- and adjustable-rate home equity first- and second-lien loans, secured primarily by one- to four-family residential properties. Rating Lowered Home Equity Mortgage Loan Asset-Backed Trust, Series SPMD 2001-B Rating ------ Class To From ----- -- ---- BF D CCC Ratings Affirmed Home Equity Mortgage Loan Asset-Backed Trust, Series SPMD 2001-B Class Rating ----- ------ AV AAA MF-1 AA+ MF-2 A INTELIDATA TECH: Recurring Losses Prompt Going Concern Doubt ------------------------------------------------------------ InteliData Technologies Corp. (Nasdaq:INTD), a provider of electronic bill payment and presentment technologies, reported financial results for the three-month period ended March 31, 2005. Revenues for the first quarter of 2005 totaled $2,944,000, a decrease of $648,000 from the $3,592,000 reported for the first quarter of 2004. Gross profit for the three-month period ended March 31, 2005 totaled $1,687,000 with a resulting gross margin of 57%. This compares to a gross profit of $1,812,000 and a gross margin of 50% for the same period in 2004. The net losses for the three-month periods ended March 31, 2005 and 2004 were $1,920,000 and $1,533,000, respectively. Going Concern Doubt Cash and cash equivalents as of March 31, 2005 totaled $1,253,000, compared to $3,223,000 as of year-end 2004. Because the Company has recurring losses from operations and is experiencing difficulty in generating cash flow, there is substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are described in the quarterly report on Form 10-Q. Merger Update As previously announced, the Company entered into a definitive agreement to be acquired by Corillian Corporation on March 31, 2005. Under the terms of the merger agreement, the purchase consideration for the Company is approximately $19.2 million, subject to adjustment. Under the terms of the agreement, each outstanding share of the Company's common stock will be converted into the right to receive 0.0954 of a share of Corillian's common stock and $0.0844 in cash without interest, subject to adjustment. The closing of this transaction is subject to, among other things, the effectiveness of the proxy statement/prospectus on Form S-4 to be filed with the Securities and Exchange Commission and approval of the Company's stockholders. "We are working with Corillian on plans to allow for a seamless transition for our customers and employees," said Alfred S. Dominick, Jr., Chairman and CEO. "We are also developing joint sales strategies to market the combined company and its products to existing customers and prospects. The transition plans and the coordination are designed to facilitate an orderly cutover and a merger that will be immediately accretive to earnings. We continue to believe that this transaction is in the best interests of our shareholders, our customers, and our employees." About the Company With over a decade of experience, InteliData Technologies Corporation -- http://www.InteliData.com/-- provides online banking and electronic bill payment and presentment technologies and services to leading banks, credit unions, financial institution processors and credit card issuers. The Company develops and markets software products that offer proven scalability, flexibility and security in supplying real-time, Internet-based banking services to its customers. INTERSTATE BAKERIES: Wants to Reject Elisie Scott Realty Lease -------------------------------------------------------------- Interstate Bakeries Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Western District of Missouri's authority to reject a March 17, 1995, lease with Elisie Scott Realty. The Debtors lease from Elisie Scott Realty property at 94 Pershing Drive, in Derby, Connecticut. The Debtors want to walk away from the Lease effective as of April 29, 2005. The Debtors seek to avoid incurring unnecessary administrative charges for rent and other charges and repair and restoration of the Premises that provide no tangible benefit to their estates and will play no part in their future operations. "The resultant savings from the rejection of the Real Property Lease will favorably affect the Debtors' cash flow and assist the Debtors in managing their future operations," J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, says. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTRAWEST CORP.: Poor Debt Measures Cue S&P's Stable Outlook ------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook to stable from positive on Vancouver, British Columbia-based ski resort operator Intrawest Corp. At the same time Standard & Poor's affirmed its 'BB-' corporate credit and 'B+' senior unsecured debt ratings on the company. "From 2003-2004 Intrawest successfully reduced its debt to EBITDA ratio; however, for the first three quarters of fiscal 2005 the trend has reversed and it is our expectation that Intrawest's debt measures in the near term will not decrease to the extent first envisioned," said Standard & Poor's credit analyst Ronald Charbon. On Feb. 26, 2003, the outlook on Intrawest was changed to positive following the expectation that the announced Leisura transaction would accelerate and bring greater certainty to Intrawest's previously announced plan to improve its credit measures and achieve significant free cash flow. The corporate credit rating on Intrawest reflects: (1) the cyclical and seasonal resort business, (2) an aggressive financial policy, and (3) continued uncertainty in travel patterns. These weaknesses are offset by: (1) Intrawest's leading position and successful track record in owning, operating, and developing village-centered destination resorts across North America; (2) the maturing of the portfolio of resorts into a less capital-intensive stage; and (3) the company's disciplined resort real estate development strategy. Intrawest has a moderate liquidity position that is sufficient for meeting its capital needs. At March 31, 2005, the company recorded funds from operations of about US$132 million for the nine months of fiscal 2005 and a negative discretionary cash flow position of about US$6.5 million for the same period. Balance- sheet cash position was US$129 million and Intrawest has a US$425 million revolving credit facility at the corporate level with availability of about US$108 million. Individual resorts have lines of credit between US$5 million and US$10 million. Intrawest's business strategy is sound, with a portfolio of well- positioned resorts and resort accommodation developments that are supported by a strong sales and marketing team. The company has reduced weather-related risk by diversifying its operations among various geographic markets, offering a variety of leisure activities in a resort village atmosphere. Skier visits are supported by each resort's inventory of warm beds and locations that are in close proximity to major population centers. Having completed the majority of the significant capital expenditures required to develop its resort portfolio, Intrawest is able to focus increasingly on its sales and marketing system to further develop its reputation as a premier resort operator. J.A. JONES: Carroll Services Has Until June 25 to Object to Claims ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Western District of North Carolina gave Carroll Services, LLC, the Liquidation Trustee appointed under J.A. Jones, Inc., and its debtor-affiliates' chapter 11 plan, an extension, through and including June 25, 2005, to object to claims, except Class 6 Claims and Class 10 Claims, filed against the Debtors' estates. The Court confirmed the Debtors' Third Amended and Restated Joint Plan Liquidating Plan of Reorganization on Aug. 19, 2004, and the Plan took effect on Sept. 28, 2004. Carroll Services explains that while it has objected to or resolved a majority of the Other Administrative Expense Claims, Carroll believes the extension is necessary for it to accurately review and determine the validity of certain of those remaining claims. Carroll Services assures the Court that the extension will not prejudice any of the Debtors' creditors and other parties in interest. Headquartered in Charlotte, North Carolina, J.A. Jones, Inc., was founded in 1890 by James Addison Jones. J.A. Jones is a subsidiary of insolvent German construction group Philipp Holzmann and a holding company for several US construction firms. The Debtors filed for chapter 11 protection on September 25, 2003 (Bankr. W.D.N.C. Case No. 03-33532). John P. Whittington, Esq., at Bradley Arant Rose & White, LLP, and W. B. Hawfield, Jr., Esq., at Moore & Van Allen represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed debs and assets of more than $100 million each. On August 19, 2004, the United States Bankruptcy Court for the Western District of North Carolina approved the Third Amended and Restated Joint Plan of Liquidation of J.A. Jones' and certain of its debtor-subsidiaries. JANE NIEBLER: Case Summary & 4 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Jane Niebler N94 W21825 Schlei Road Menomonee Falls, Wisconsin 53051 Bankruptcy Case No.: 05-27990 Type of Business: An involuntary chapter 11 petition is pending against the Debtor's spouse, John Niebler, before the Honorable James E. Shapiro. That involuntary petition was filed on April 19, 2005 (Bankr. E.D. Wis. Case No. 05-26253). Chapter 11 Petition Date: May 10, 2005 Court: Eastern District of Wisconsin (Milwaukee) Judge: James E. Shapiro Debtor's Counsel: Denis P. Bartell, Esq. DeWitt Ross & Stevens Two East Mifflin Street, Suite 600 Madison, Wisconsin 53703-2599 Tel: (608) 255-8891 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 4 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ First National Bank of Hartford $550,000 116 West Summer Street Hartford, WI 53027 G&R Investment Company $298,696 P.O. Box 444 Menomonee Falls, WI 53052 State Financial Bank NA $237,781 10708 West Janesville Road Hales Corners, WI 53130 Associated Bank $110,000 Lake shore National Association 1217 North Taylor Drive Sheboygan, WI 53082 JOSEPH & PATRICIA GIRONE: Case Summary & 4 Largest Creditors ------------------------------------------------------------ Debtors: Joseph & Patricia Girone 27 Kelly Drive Marlton, New Jersey 08053 Bankruptcy Case No.: 05-25600 Type of Business: The Debtors previously filed for chapter 11 protection on May 6, 2004 (Bankr. D. N.J. Case Nos. 04-24140 & 04-32548). Chapter 11 Petition Date: May 10, 2005 Court: District of New Jersey (Camden) Debtor's Counsel: Jeffrey B. Saper, Esq. Law Offices of Jeffrey B. Saper, PC The Lexington Building 180 Tuckerton Road Medford, New Jersey 08055 Tel: (856) 985-9770 Fax: (856) 985-2781 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 4 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ SJ Gas Utility Services $1,900 P.O. Box 6000 Hammonton, NJ 08037 Connectiv Utility Services $1,200 P.O. Box 4875 Trenton, NJ 08650 Verizon Telephone Services $550 P.O. Box 4850 Trenton, NJ 08650 Comcast Cable Services $324 P.O. Box 3006 Southeastern, PA 19398 KMART CORP: Sears & Kmart Commence Organizational Restructurings ---------------------------------------------------------------- Sears Holdings Corporation's wholly owned subsidiaries, Sears, Roebuck and Co., in Hoffman Estates, Illinois, and Kmart Holding Corporation in Troy, Michigan, have commenced organizational restructurings related to functions at their home offices, as a result of their business combination. In a Form 8-K filed with the Securities and Exchange Commission, Sears Holdings Vice President and Controller William K. Phelan explains that the primary goal of the restructurings is to integrate the two companies' headquarters operations and increase operating efficiencies which will substantially reduce each company's workforce at their headquarters. The costs associated with the Sears organizational restructuring will be accounted for as part of the purchase price for the acquisition of Sears by Kmart. The number of Kmart employees affected by the reduction is dependent, among other things, on the number of employees who will accept the relocation offers. The terms of the benefit packages offered are being communicated to a substantial number of its affected employees beginning on April 26, 2005. According to Mr. Phelan, Sears Holdings expects the process of identifying and notifying all affected Kmart personnel to continue for the next several months. Sears Holdings will record charges for termination benefits related to the Kmart restructuring in the current and future fiscal quarters in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Sears Holdings estimates that cash expenditures will be incurred in the full amount of the charges. Mr. Phelan adds that not all affected Kmart employees have been identified and the number of employees who will accept relocation offers is not known. As a result, Sears Holdings is unable to make a determination of an estimate or range of estimates associated with these activities. Sears Holdings Cuts 500 Jobs Sears Holdings laid off more than 500 workers at the Sears headquarters in Hoffman Estates, Illinois, during the last week of April 2005, Josh Fineman at Bloomberg News reports. This is part of Sears Holdings' plan to "substantially reduce" jobs at both the Sears headquarters and the Kmart headquarters in Troy, Michigan. According to Bloomberg, Sears Holdings seeks to reduce $300 million in costs as part of the Kmart-Sears merger. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 94; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Wants Summary Judgment to Limit FLOORgraphics' Damages ------------------------------------------------------------------ FLOORgraphics, Inc., supplies floor advertising to Kmart stores under a March 18, 1998 Retail Advertising License Agreement with Kmart Corporation. The Agreement was subsequently modified by two written Addenda dated March 20, 2000, and August 28, 2000. Both Addenda expressly incorporated the terms and conditions of the Agreement, and ultimately extended the contract term to March 17, 2002. Kmart rejected the Contract in bankruptcy, thereby creating a breach of contract as of January 21, 2002. FLOORgraphics alleges that a letter dated March 24, 1998, created an automatic renewal provision, entitling it to enforce the Contract as long as Kmart uses floor advertising in its stores. FLOORgraphics asserts damages for Kmart's breach extending to perpetuity, estimated at $59 million. However, William Barrett, Esq., at Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, in Chicago, Illinois, argues that, by its terms, the Agreement was in no event to be construed on behalf of either FLOORgraphics or Kmart to create a right of automatic renewal. The Contract contained a complete merger and integration clause. Mr. Barrett contends that FLOORgraphics' post-March 17, 2002 damages claims fail as a matter of law because: (i) the content of the March 24, 1998 letter is barred by the parol evidence rule; (ii) any promises in the March 24, 1998 letter are unenforceable for lack of consideration; and (iii) any terms in the March 24, 1998 letter were suspended by the subsequent written Addenda to the Agreement. There are no material issues of contested fact that would preclude judgment for Kmart regarding post-March 17, 2002 damages, Mr. Barrett says. Since FLOORgraphics was allowed to leave its advertising in Kmart stores through June 18, 2002, and Kmart allowed FLOORgraphics to perform consistent with the Agreement up to and beyond March 17, 2002, FLOORgraphics can prove no damages for Kmart's January 21, 2002 breach. Against this backdrop, Kmart asks the U.S. Bankruptcy Court for the Northern District of Illinois for summary judgment limiting FLOORgraphics' damages to the time period ending March 17, 2002. Kmart wants the Court to declare that FLOORgraphics' claim is disposed of in its entirety because there are no damages to measure. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 94; Bankruptcy Creditors' Service, Inc., 215/945-7000) LAS AMERICAS: Acquiring Dry Cleaning Operations in Bankruptcy ------------------------------------------------------------- Las Americas Broadband, Inc. (Pink Sheets: LABNQ) signed a Letter of Intent to acquire Kleenerz, a privately held dry cleaning retail operation located in Southern California. The company contemplates a reorganization plan to be submitted to the court in the next month, which will include a definitive purchase agreement. The acquisition would result in the shareholders of Kleenerz having a controlling interest in LABN, and is contingent on various approvals including but not limited to the Federal Bankruptcy court, the Committee of Unsecured Creditors of LABN, and the shareholders of LABN. The acquisition is also contingent on the obtaining of any requisite financing by Kleenerz. Headquartered in Tehachapi, California, Las Americas Broadband, Inc. -- http://www.lasamericasbroadband.com/-- operates a cable and satellite television network in Kern County, California. The Debtor filed for chapter 11 protection on Feb. 28, 2005 (Bankr. E.D. Calif. Case No. 05-11397). Leonard K. Welsh, Esq., at Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $4,964,500 in total assets and $4,641,110 in total debts. LUCID ENTERTAINMENT: Defaults on Leases & Restructuring Operations ------------------------------------------------------------------ Lucid Entertainment Inc. disclosed plans to restructure its business. Key elements of the plan involve: -- focusing operations and new development in North America; -- restructuring the Company's short and long term indebtedness; -- aggressive cost cutting measures at both head office and at the operating properties; and -- seeking an experienced and reputable operator for the future. When the outgoing CEO and Chairman, Michael Wilkings, departed from the Company abruptly due to health reasons, the Company left behind was in financial difficulty. A team of Directors and employees headed by Toronto lawyer Sander Shalinsky, interim Chairman and Alan Moore, director and acting C.E.O. was installed to formulate and execute a plan to stabilize operations and give the Company an opportunity to thrive. Default The Company is in default of its leases and other agreements at Lucid Manchester and The Hippodrome, London and will not resume operations at these locations. There is the possibility of pending action against the Company as a result of these defaults, however the extent of the action, if any, is unknown at this time. The Company is also withdrawing from other previously announced developments in the U.K. specifically Cardiff and Liverpool, as well as Atlanta Georgia. "The Company is fully focused on its properties in North America. This is where our investors want us to concentrate." said Sander Shalinsky, acting Chairman and board Director. As part of its plan, the Company will focus on re-structuring its short- term and long-term obligations, which includes reaching suitable agreements with various lenders, lessors, creditors and some Landlords. Without such agreements in place it will be difficult for the Company to operate and attract new investment. Measures have already been taken to drastically reduce Head Office expenses through staff lay-off, employment contract negotiations and by cutting occupancy costs. In addition, occupancy costs at Lucid Toronto have now been reduced. New Investment Talks Underway Discussions are underway for new investment money in Lucid Entertainment, contingent upon the Company successfully completing its restructuring plan. "Our investors have indicated a willingness to continue but only with a leaner and more stable Lucid", said Alan Moore, "and investment will be used to promote growth and future development of the business. We have the resolve to execute our restructuring plan and we are entirely focused on achieving it. " About the Company Lucid Entertainment Inc. is a leading operator and developer of branded entertainment and hospitality venues internationally. * * * As reported in the Troubled Company Reporter on Apr. 28, 2005, Lucid Entertainment Inc. will delay the filing of its annual audited financial statements for the year ended Dec. 31, 2004, and its interim financial statements for the first quarter ended March 31, 2005, past their respective due dates of April 30, 2005, and May 30, 2005. The delay arises as a result of Lucid's recent business and operational challenges imposed by certain developments, which have all been previously disclosed, including: (i) the resignation of Lucid's Chairman and Chief Executive Officer (ii) the ceasing of the operations of Lucid's subsidiary in Manchester, England due to a failure to transfer the liquor serving license required for its operations and its defaults with lenders, creditors and loan guarantors, (iii) the resignation of a director of Lucid due to conflicts arising from the financial difficulties of Lucid's subsidiary operating in Manchester, England, (iv) Lucid's and some of its other subsidiaries' default under other material contracts and (v) the resignation of Lucid's chief accountant. As a result of these developments Lucid has been forced to manage some significant changes to its business and operations which among other things are limiting its ability to produce the information necessary in order to complete its annual audited financial statements and to fund the services of its accountants in the UK. This information is necessary for the preparation of Lucid's audited annual financial statements. MAXIM CRANE: Has Until June 17 to Object to Claims -------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Pennsylvania gave Maxim Crane Works, LLC, dba ACR Management, L.L.C., an extension, through and including June 17, 2005, to object to claims, commence any adversary proceedings, and file any contested matters, motions, and applications in their chapter 11 cases. The Court confirmed the Debtors' Third Amended Plan of Reorganization on Dec. 29, 2004, and the Plan took effect on Jan. 4, 2005. The Reorganized Debtors gave the Court four reasons in support of their request: a) the Reorganized Debtors are still in the process of prosecuting various adversary proceedings and numerous omnibus, as well as specific objections to proofs of claim that have been filed in their chapter 11 cases; b) there are currently 8 omnibus objections to claims, 10 specific objections to individual claims, and 8 adversary proceedings pending in Court, with many hearing yet to be scheduled or are still pending in Court; c) the Reorganized Debtors are still continuing to exchange information and discussing settlement with the opposing parties involved in the claims asserted against the Debtors; and d) the Reorganized Debtors believe there may likely exists additional outstanding and envisioned claims objections, adversary proceedings and other contested matters in their chapter 11 cases. Headquartered in Pittsburgh, Pennsylvania, ACR Management, L.L.C., and 16 debtor-affiliates (commonly known as Maxim Crane Works) filed for chapter 11 protection on June 14, 2004 (Bankr. W.D. Pa. Case No. 04-27848). The Company is the largest provider of comprehensive crane and lifting equipment rentals and services in North America. The Company has a network of 38 crane rental yards (plus three satellite locations) that provide services to some 8,000 customers in 41 states and the U.S. Virgin Islands. Anup Sathy, Esq., David L. Eaton, Esq., James J. Antonopoulos, Esq., Roger J. Higgins, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis; Douglas Anthony Campbell, Esq., David Bruce Salzman, Esq., Paul J. Cordaro, Esq., and Salene R. Mazur, Esq., at Campbell & Levine, LLC; Joel D. Applebaum, Esq., and Robert S. Hertzberg, Esq., at Pepper Hamilton LLP; and Richard F. Rinaldo, Esq., at Meyer Unkovic & Scott, represent the Debtors in their restructuring efforts. MCI INC: Consumers to Benefit from MCI-Verizon Deal, Verizon Says ----------------------------------------------------------------- In a filing with the Securities and Exchange Commission, Verizon Communications, Inc., asserts that the MCI-Verizon merger transaction will enable the combined company to establish the nation's most advanced broadband platform, capable of delivering next-generation services in markets across the United States. The combination of MCI's global Internet Protocol (IP) network and products with Verizon's deployment of a fiber optic network to customers' premises will enable faster delivery of advanced multimedia services. The combined company will be capable of offering the most innovative, advanced and wide ranging services to consumers, governments and businesses. Verizon relates that a combined Verizon and MCI will use its financial strength and network resources to develop new products and services for consumers and businesses at competitive prices. "Verizon's financial strength will allow it to invest approximately $2 billion in MCI's network and information technology platforms after the transaction is complete. This substantial investment in the critical infrastructure will accelerate the delivery of IP services to consumers. The combination of Verizon's dense, in-region local wireline network and best-in-class wireless network with MCI's long distance voice and data network and Internet backbone will result in a robust, globally competitive company." 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. MIRANT CORP: Disclosure Statement Hearing Continued Sine Die ------------------------------------------------------------ Judge Lynn will continue the hearing on Mirant Corporation and its debtor-affiliates' Amended Disclosure Statement, originally set for May 11, 2005, to a later date. All remaining issues involving the Disclosure Statement, including the formal objections filed with the Court, will be addressed at the date to be determined by the Court. As reported in the Troubled Company Reporter on Apr. 1, 2005, the Debtors delivered their First Amended Joint Plan of Reorganization and First Amended Disclosure Statement explaining that Plan to the U.S. Bankruptcy Court for the Northern District of Texas on March 25, 2005. Mirant said that its plan as originally filed on January 19, 2005, was the product of extensive, but incomplete, negotiations with the Corp Committee, the MAGI Committee. Although not supported by either committee, Mirant believes that Plan reflected the basic construct around which the parties had negotiated to that point and otherwise represented, in the Debtors' view, a reasonable and appropriate compromise that permitted the value of the Debtors' business to be maximized and provided a fair allocation between the Debtors' estates. Negotiations regarding the terms under which the Debtors would emerge from chapter 11 protection continued since January. Mirant believes that the Amended Plan reflects the current status of discussions with various parties, and reflects an agreement in principal with the Corp Committee. Given the current state of negotiations, Mirant believes there is a reasonable prospect of obtaining the support of the MAGI Committee before the Disclosure Statement begins. Mirant makes it clear that the Amended Plan does not reflect material input from the Official Committee of Equity Security Holders because there isn't sufficient value to flow to that constituency. The Equity Committee continues to argue that holders of Equity Interests in Mirant are entitled to a recovery because the enterprise value of the Debtors' business exceeds the amount necessary to provide a full recovery to creditors. The Debtors say they're ready to proceed with the hearing on April 11, 2005, at which time they'll ask the Court to determine enterprise value. If creditors accept and the Court confirms the Amended Plan: * The Debtors' business will continue to be operated in substantially its current form, subject to: (1) certain internal structural changes that the Debtors believe will improve operational efficiency, facilitate and optimize the ability to meet financing requirements and accommodate the enterprise's debt structure as contemplated at emergence; and (2) potentially organizing the new parent entity for the Debtors' ongoing business operations in the jurisdiction outside the United States; * The estates of Mirant Corp., Mirant Americas Energy Marketing, LP, Mirant Americas, Inc., and the other debtor- subsidiaries -- excluding Mirant Americas Generation, LLC, and its debtor-subsidiaries -- will be substantially consolidated for purposes of determining treatment of and making distributions in respect of claims against and equity interests in Consolidated Mirant Debtors; * MAG's estates will be substantially consolidated for purposes of determining treatment of and making distributions in respect of Claims against and Equity Interests in Consolidated MAG; * The holders of unsecured claims against Consolidated Mirant Debtors will receive a pro rata share of 100% of the shares of New Mirant common stock, except for: (1) certain shares to be issued to the holders of certain MAG Claims; and (2) the shares reserved for issuance pursuant to the New Mirant Employee Stock Programs, which will provide for an eligible pool of awards to be granted to New Mirant's eligible employees and directors in the form of stock options; * The unsecured claims against Consolidated MAG will be paid in full through: (1) the issuance to general unsecured creditors and holders of MAG's revolving credit facility and MAG's senior notes maturing in 2006 and 2008 of: (i) new debt securities of a newly formed intermediate holding company under MAG -- "New MAG Holdco" -- or, at the option of the Debtors, cash proceeds from third-party financing transactions, equal to 90% of the full amount owed to those creditors; and (ii) common stock in the Debtors' new corporate parent that is equal to 10% of the amount owed; and (2) the reinstatement of MAG's senior notes maturing in 2011, 2021 and 2031; * The intercompany claims between and among Consolidated Debtors and Consolidated MAG will be resolved as part of a global settlement under the Amended Plan whereby Intercompany Claims will not receive a distribution under the Plan; * The consolidated business will have approximately $4.33 billion of debt -- as compared to approximately $8.63 billion of debt at the commencement of the Debtors' Chapter 11 cases -- comprised of: (1) $1.14 billion of debt obligations associated with non- debtor international subsidiaries of Mirant; (2) $169 million of miscellaneous domestic indebtedness including, in particular, the $109 million of the certain "West Georgia Plan Secured Notes", issued by West Georgia Generating Company, LLC; (3) $1.7 billion of reinstated debt at MAG; and (4) $1.32 billion of new debt issued by New MAG Holdco in partial satisfaction of certain existing MAG debt, which amount does not include the obligations under numerous agreements between Mirant Mid-Atlantic, LLC and various special purpose entities -- "Owner Lessors" -- which relate to two power stations, the Morgantown Station and the Dickerson Station; * To help ensure the feasibility of the Amended Plan with respect to Consolidated MAG, Mirant Corp. will contribute value to MAG, including the trading and marketing business -- subject to an obligation to return a portion of the imbedded cash collateral in the trading and marketing business to Mirant; provided that, under certain circumstances, the Debtors may elect to satisfy this obligation by transferring $250 million to Mirant Americas from New MAG Holdco -- the Mirant Peaker, Mirant Potomac and Zeeland generating facilities and commitments to make prospective capital contributions of $150 million for refinancing and, under certain circumstances, up to $265 million for sulfur dioxide capital expenditures; * MAG's prospective working capital requirements will be met with the proceeds of a new senior secured credit facility of $750 million; * Substantially all of the Debtors' contingent liabilities associated with the California energy crisis and certain related matters will be resolved pursuant to a global settlement in accordance with the Amended Plan; * The disputes regarding the Debtors' ad valorem real property taxes for the Bowline and Lovett facilities will be settled and resolved on terms that permit the feasible operation of these assets, or the Debtors that own the assets will remain in Chapter 11 until those matters are resolved by settlement or through litigation; * Substantially all of Mirant Corp.'s assets will be transferred to New Mirant, which will serve as the corporate parent of the Debtors' business enterprise on and after the Plan effective date and which will have no successor liability for any unassumed obligations of Mirant Corp.; similarly, the trading and marketing business of the "Trading Debtors" will be transferred to Mirant Energy Trading LLC, which shall have no successor liability for any unassumed obligations of the Trading Debtors; * The outstanding Mirant common stock will be cancelled and the holders thereof will receive any surplus value after creditors are paid in full, plus the right to receive a pro rata share of warrants issued by New Mirant if they vote to accept the Plan. Reorganization Value The Blackstone Group, L.P., the Debtors' financial advisor, estimates the enterprise value for Mirant Corp. at the Plan effective Date to be between $7.0 and $8.3 billion, with $7.6 billion used as the midpoint estimate. The estimated enterprise value for MAG at the Effective Date is between $3.1 and $3.7 billion, with $3.4 billion used as the midpoint estimate. Blackstone utilized two methodologies to derive the reorganization values of Mirant Corp., MAG, and New MAG HoldCo based on the Debtors' financial projections: (1) a comparison of the Valued Entities and their projected performance to publicly traded comparable companies -- commonly called a Comparable Company Analysis; and (2) a calculation of the present value of the free cash flows under the Projections, including an assumption for a terminal value -- commonly called a Discounted Cash Flow or DCF Analysis. The Comparable Company Analysis involves identifying a group of publicly traded companies whose businesses are comparable to those of the Debtors, and then calculating ratios of various financial results to the public market values of these companies. The ranges of ratios derived are then applied to the Valued Entities' financial results to derive a range of implied values. The discounted cash flow approach involves deriving the unlevered free cash flows that the Valued Entities would generate assuming the Projections were realized. The cash flows and an estimated value of the Valued Entities at the end of the projected period are discounted to the present at the Debtor's estimated post- restructuring weighted average cost of capital to determine the enterprise values of the Valued Entities. Blackstone used a range of discount rates from 11% to 13%. Blackstone assigned weightings of 50% to the Comparable Company Analysis and 50% to the DCF Analysis for MAG and the Caribbean. For other domestic assets and the Philippines, Blackstone assigned weightings of 40% to the Comparable Company Analysis and 60% to the DCF Analysis. Equity Value After estimating the enterprise values of the Valued Entities, Blackstone estimated the equity value of the entities by making several adjustments to reorganization value: (1) Deducting the long-term indebtedness at the Effective Date; (2) Adding the estimated value of the Net Operating Losses; (3) Adding unrestricted excess cash balances; and (4) Adding or transfer other asset value that is not reflected in the Projections. After the Adjustments, the estimated total equity value of Mirant Corp. is estimated between $3.5 and $4.7 billion, with $4.1 billion used as an estimate of the total equity value at the Effective Date. The estimated total equity value of MAG is between $307 million and $935 million, with $591 million used as an estimate of the total equity value at the Effective Date. The estimated total equity value of New MAG Holdco is between $1.9 billion and $2.5 billion, with $2.2 billion used as an estimate of the total equity value at the Effective Date. In preparing its analyses, Blackstone: * reviewed historical operating and financial results of the Debtors; * reviewed certain financial projections prepared by the Debtors for the operations of the Valued Entities; * discussed current operations and prospects of the operating businesses with the Debtors; * reviewed the Debtors' assumptions underlying those projections; * considered the market values of publicly traded companies that Blackstone and the Debtors believe are in businesses reasonably comparable to the operating businesses of the Valued Entities; and * made other examinations and performed other analyses as necessary and appropriate for the purposes of the valuations. The Debtors' financial projections through 2011 are annexed to their First Amended Disclosure Statement as Exhibit D. Estimated Allowed Claims The Debtors made significant changes to the estimated allowed claim amounts. Placed side-by-side for comparison, the Estimated Allowed Claims under the Amended Plan and under the "original plan" are: A. Unclassified Claims Claim Classes Amended Plan Original Plan ------------- ------------ ------------- Administrative Claims $64.1 million Undetermined Priority Tax Claims $12.7 million $55.6 million B. Classified Claims and Interests of Consolidated Mirant Debtors Claim Classes Amended Plan Original Plan ------------- ------------ ------------- 1 Priority Claims $0 Undetermined 2 Secured Claims $154 million $143.8 million 3 California Party $283-320 million $283.2 million Secured Claims 4 Unsecured Claims $6.4 billion $6.7 billion Allowed Claims plus $530 million Postpetition Accrued Interest 5 Convenience Claims $3.7 million $19.9 million 6 Equity Interests N/A Undetermined C. Classified Claims and Interests of Consolidated MAG Claim Classes Amended Plan Original Plan ------------- ------------ ------------- 1 Priority Claims $0 Undetermined 2 Secured Claims $42.4 million $17.6 million 3 MIRMA Owner/Lessor Undetermined Undetermined Secured Claims 4 New York Taxing Undetermined Undetermined Authority Secured Claims 5 PG&E/RMR Claims $148 million $392.8 million 6 General Unsecured $1.2 billion $1.3 billion Claims Allowed Claims plus $154 million Postpetition Accrued Interest 7 MAG Long-term $2.0 billion $2.0 billion Note Claims inclusive of $309 million Post- petition Accrued Interest 8 Convenience $5.2 million $14.6 million Claims 9 Equity Interests N/A Undetermined Distribution Under Plan Under the Amended Plan, the recovery percentage on Allowed Consolidated Mirant Debtors Class 4 -- Unsecured Claims -- is 60%, excluding Postpetition Accrued Interest. A full-text copy of the amended Disclosure Statement is available at no charge at: http://www.mirant.com/financials/pdfs/amended_disclosure_statement_032505.pdf and a full-text copy of the amended Plan of Reorganization is available at no charge at: http://www.mirant.com/financials/pdfs/amended_por_032505.pdf 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. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: NRG Energy Eyed Merger & Valued Company at $13 Bil. ---------------------------------------------------------------- NRG Energy, Inc., considered merging with Mirant Corporation in 2004 to boost the value of its portfolio, The Wall Street Journal reported. According to Journal writer Rebecca Smith, NRG talked with a group of Mirant creditors to discuss a merger. This was revealed in April 2005 during a bankruptcy hearing on Mirant's enterprise value. NRG reportedly eyed Mirant as early as Summer 2004 and valued Mirant at about $13 billion. Ms. Smith said a person at NRG with knowledge of the situation disclosed that the discussions halted because NRG was not sure of the direction of the California energy market, in which both NRG and Mirant operate. Mirant's management said it wasn't aware of the talks. 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. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: MAGi Committee Says Disclosure Statement is Confusing ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, tells the U.S. Bankruptcy Court for the Northern District of Texas that the First Amended Disclosure Statement is a confusing, incomprehensible and incomplete description of a proposed scheme to reorganize Mirant Corporation and its debtor-affiliates. A reasonable creditor cannot discern from the Disclosure Statement, even with substantial diligent study, the material fundamental facts necessary to an informed decision on the Plan. The MAGi Committee wants the Disclosure Statement to explicitly state that the Committee believes the proposed Plan is illegal and not confirmable. The MAGi Committee believes that superior recoveries may be achievable for the benefit of MAGi's creditors from alternative restructuring options which were not pursued by the Debtors. The Committee recommends that MAGi creditors and creditors of each of its subsidiaries should vote to reject the Plan. The MAGi Committee agrees with other parties' arguments that the Debtors' sweeping use of substantive consolidation is unprecedented, and contrary to the controlling law of every jurisdiction. According to Deborah D. Williamson, Esq., at Cox Smith Matthews Incorporated, in San Antonio, Texas, "temporary" consolidation has only been permitted where there has been no objection by a major creditor. Ms. Williamson tells Judge Lynn that the Debtors cannot impose substantive consolidation on creditors who dissent without proving on a debtor-by-debtor basis the factual foundation for consolidation. The Debtors must disclose a comparison of creditor recovery on a consolidated versus nonconsolidated basis. The MAGi creditors who are deprived of their right to vote on the Plan are entitled to disclosure of the effect of consolidation on their claim. The MAGi Committee also wants the Debtors to disclose sufficient facts that underlie their business purpose for classifying the MAG Short-term Notes separate from MAG Long-term Notes. The Committee argues that the Debtors' classification scheme is illegitimate and makes the Plan unconfirmable. Ms. Williamson explains that the MAG Long-term Notes were issued pursuant to the same Indenture as the MAG Short-term Notes and is pari passu with all other debt. Other than with respect to maturity and interest rate, the MAG Long-term Notes are identical in fundamental nature to all other claims against MAGI. The Disclosure Statement should also state what efforts were made to include the MAG Long-term Notes within the debt of New MAG Holdco, what financing alternatives, if any, were considered, what alternatives were available to put the MAG Long-term Notes in the same class as other MAGI debt, and why those alternatives were rejected. The MAGi Committee complains that the secured exit facility will leave MAGi over-leveraged, unable to service its debt going- forward, and without any protection against post-Effective Date asset transfers or defaults at the New MAG Holdco level. Efforts by the Debtors to point to the Exit Facility as funding to cover cash flow shortfalls at MAGi post-bankruptcy are disingenuous at best. The sole purpose of the Debtors' financing structure, the MAGi Committee believes, is to put new creditors who will facilitate transfers of MAGi value to Mirant creditors, ahead of the interests of MAGi creditors. No provision has been disclosed by the Debtors as to the availability of this Exit Facility to support MAGi post-bankruptcy because none exist. If a true merger or consolidation is proposed, the MAGi Committee contends that reinstatement of the MAG Long-term Notes is not possible because pursuant to Section 801 of the MAGi note indenture, which applies to each series of MAGI notes, all of the MAGi subsidiaries, including New MAG Holdco, will need to assume the obligations of the Indenture. The Disclosure Statement also fails to include adequate information on these important issues: a. Other Restructuring Options; b. Release of Causes of Action; c. Intercompany Claims; d. Value of "Assets" Transferred to New MAG Holdco; e. Fees of the Indenture Trustee for the MAGi notes and the Bank Agent for the MAGi bank debt; f. Tax Consequences to the Debtors; and g. Tax Consequences to the Holders of Allowed Claims. 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. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: Inks Power Companies' Claims Settlement Pact ------------------------------------------------------------- Pursuant to the Trade Contract Settlement Protocol approved by the U.S. Bankruptcy Court for the District of Maryland, NEGT Energy Trading Holdings Corporation and NEGT Energy Trading - Power, L.P., entered into a settlement agreement and mutual release with Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company. Under the Settlement Agreement, the Power Companies will retain the $3,600,000 cash collateral posted by ET Power in support of a certain Master Power Purchase and Sale Agreement among the parties dated August 31, 2000. The Settlement Agreement also resolves disputes relating to two proofs of claim filed in ET Power's Chapter 11 case: (a) Claim No. 230 filed by Pennsylvania Electric will be allowed at $531,000; and (b) Claim No. 229 filed by Metropolitan Edison will be deemed withdrawn and disallowed. Furthermore, the parties will exchange mutual releases from any liability arising out of the Master Agreement and the Collateral. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and its debtor-affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin T. Fletcher, Esq., at Whiteford, Taylor & Preston L.L.P., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and that plan took effect on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) NBCCAT CORPORATION: Case Summary & 40 Largest Unsecured Creditors ----------------------------------------------------------------- Lead Debtor: NBCCAT Corporation dba TransNational Parts dba XMGM Company dba National Intermodal Services 1800 West 43rd Street Chicago, Illinois 60609 Bankruptcy Case No.: 05-18546 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Remare Transportation Corporation 05-18551 Chapter 11 Petition Date: May 10, 2005 Court: Northern District of Illinois (Chicago) Judge: A. Benjamin Goldgar Debtors' Counsel: Barry A. Chatz, Esq. Joy E. Mason, Esq. Arnstein & Lehr LLP 120 South Riverside Plaza, Suite 1200 Chicago, Illinois 60606 Tel: (312) 876-7100 Fax: (312) 876-0288 Estimated Assets Estimated Debts ---------------- --------------- NBCCAT Corporation $0 to $50,000 $1 Million to $10 Million Remare Transportation $0 to $50,000 $1 Million to Corporation $10 Million A. NBCCAT Corporation's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service (Insolvency) $533,040 200 West Adams, Suite 2300 Chicago, IL 60606 Metroplitan Water Reclamation District $362,278 100 Eest Erie Street Chicago, IL 60611 L.A. Fasteners $47,489 P.O. Box 1048 Saint Charles, IL 601747048 Chicago Bandag, Inc. $44,081 425 Fenton Lane West Chicago, IL 60185 Forest View Properties, LLC $37,199 c/o Malet Realty, Ltd. 900 West Jackson Boulevard, Suite 4W Chicago, IL 60607 Technical Services $24,867 1881 Paysphere Circle Chicago, IL 60674 Bay City Leasing LLC $22,692 P.O. Box 74699 Chicago, IL 60675-4699 Pacific Coast Retreaders $21,232 333 Hegenberger, Suite 705 Oakland, CA 94621 Praxair $17,194 Department LA 21511 Pasadena, CA 91185-1511 Chicago Tire $15,907 16001 South Van Drunen Road South Holland, IL 60473 Norfolk Southern $15,008 110 Franklin Road Roanoke, VA 240420044 State of California $14,762 Employment Development Department P.O. Box 826286 Sacramento, CA 942306286 Buffers USA, Inc. $13,123 P.O. Box 351581 Jacksonville, FL 32235 Illinois Department of Employment Security $12,059 Chicago Region - Revenue 527 South Wells Chicago, IL 60680 Kusper & Raucci $10,500 30 North LaSalle Street, Suite 3400 Chicago, IL 60602 Liberty Sales and Leasing LLC $10,210 3111 West 167th Street Hazel Crest, IL 60429 Cardlock Fuels $9,222 P.O. Box 14014 Orange, CA 928634014 U.S. Trailer Parts & Supply $9,016 4334 South Tripp Chicago, IL 60632 City International Truck Inc. $7,180 4655 South Central Avenue Chicago, IL 60638 Home Depot $7,111 P.O. Box 9903 Macon, GA 31297-9903 B. Remare Transportation Corporation's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service (Insolvency) $849,481 200 West Adams, Suite 2300 Chicago, IL 60606 Automobile Mechanics' Local 701 $144,178 c/o Arnold and Kadjan 19 W. Jackson Blvd., Suite 300 Chicago, IL 60604 Illinois Department of Revenue $77,019 Retailers Occupation Tax Springfield, IL 627960001 Holland & Knight $68,260 131 South Dearborn Street, 30th Floor Chicago, IL 60603 Illinois Department of Employment Security $41,233 Chicago Region - Revenue 527 South Wells Chicago, IL 60680 Kwick Loc Company $35,202 7340 Dorr Street Attn: Rod Hilton Toledo, OH 43615 Initial Security $32,967 P.O. Box 4653 Oak Brook, IL 60522-4653 Stockdale Insurance Agency $27,353 P.O. Box 10269 Bakersfield, CA 93389 Universal Underwriters Group $26,313 1880 Paysphere Circle Chicago, IL 60674 BlueCross Blueshield of Illinois $25,629 Healthcare Service Corporation Chicago, IL 60690-1186 City International Truck Inc. $22,720 4655 South Central Avenue Chicago, IL 60638 Adelphi Capital, LLC $17,104 1054 31st Street NW, Suite 316 Washington, DC 20007 McGriff Intermodal Nell $16,386 P.O. Box 1148 Cullman, AL 350561148 Tire Management, Inc. $13,977 481 Northeast Industrial Drive Attn: Erin Howorth Aurora, IL 60504 Thieman Tailgates, Inc. $12,904 600 East Wayne Street Celina, OH 45822 Fleet Pride $12,838 P.O. Box 847118 Dallas, TX 752847118 The Welding Center $12,581 7400 South Central Avenue Bedford Park, IL 60638 Osco Incorporated $11,970 P.O. Box 70 Lemont, IL 60439-0070 Vineland Construction Company $9,511 71 West Park Avenue Vineland, NJ 08360 Delta Dental $8,482 Client Services - South P.O. Box 44460 San Francisco, CA 94144-0460 NETWORK INSTALLATION: Resumes Stock Trading Under NWKI Ticker ------------------------------------------------------------- Network Installation Corp. (OTC Bulletin Board: NWKI) reported that as a result of its now current 10-KSB filing with the SEC, its shares have resumed trading under its normal ticker symbol 'NWKI'. About the Company 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. * * * As reported in the Troubled Company Reporter on May 11, 2005, 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. NEWPORT AVALON: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Newport Avalon Investors, LLC 255 Happy Valley Road Pleasanton, California 94566 Bankruptcy Case No.: 05-42540 Chapter 11 Petition Date: May 11, 2005 Court: Northern District of California (Oakland) Judge: Randall J. Newsome Debtor's Counsel: Stephen D. Finestone, Esq. Law Offices of Stephen D. Finestone 456 Montgomery Street, 20th Floor San Francisco, California 94104 Tel: (415) 421-2624 Total Assets: $15,549,240 Total Debts: $10,048,166 Debtor's 18 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ B.D. Evans Trade Debt $154,664 Construction P.O. Box 2026 Livermore, CA 94551-2026 MCH Electric, Inc. Trade Debt $50,313 31084 South Highway 33 Tracy, CA 95304-9348 Bruce Keeton Construction Trade Debt $50,000 41635 Enterprise Circle No., Suite A Temecula, CA 92590 Maggiora Bros. Drilling Trade Debt $31,444 Ultra Block of California Trade Debt $15,687 Roessler Associates Trade Debt $15,000 Giacalone Design Servcies Trade Debt $13,300 Von Euw & L.J. Nunes Trade Debt $11,574 Trucking Landtech Consultants Trade Debt $6,925 Geoconsultants Trade Debt $5,036 Sideman & Bancroft Trade Debt $4,499 J.F. Pacific Liners, Inc Trade Debt $3,000 New Holland Credit Co. Trade Debt $2,547 Langford Land Surveying Trade Debt $1,400 Ryan & Lifter Trade Debt $1,100 Terra Nostra Consultants Trade Debt $628 Bonneau Dickson Trade Debt $300 A-1 Enterprises Trade Debt $193 NORTHWESTERN CORP: Inks Settlement Pact with Montana PSC -------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) reported that the Montana Public Service Commission unanimously agreed to enter into a stipulation to settle a dispute over the recovery of prior year natural gas costs. The stipulation stems from a disagreement that arose in 2002 regarding a ruling made by the MPSC to disallow approximately $10.6 million in natural gas costs for purchases made between Nov. 1, 2002, and June 30, 2004. As a result of the stipulation with the Commission, the Company will be allowed to recover approximately $4.6 million of these prior costs plus interest, and a lawsuit filed by NorthWestern in the Montana District Court in Helena will be dismissed. "We're pleased to have this issue behind us and work constructively together on the more pressing issue of working to mitigate high natural gas costs," said Mike Hanson, NorthWestern's President. "The cost of natural gas is not just a Montana problem, it's a national problem that will require all of us working together to address the higher natural gas costs faced by our customers." As part of the stipulation, NorthWestern has established a Technical Advisory Committee to advise the Company on future natural gas procurement activities and tools, which will lead to recommendations to the MPSC to develop rules regarding natural gas procurement practices. NorthWestern formed a similar committee in 2002 to advise the Company on electricity procurement practices, and provide input on the development of the Electric Default Supply Resource Plan in 2003. NorthWestern Energy does not earn any profit on the sale of the natural gas commodity to its customers; therefore, customers are assured of paying the wholesale cost of the commodity regardless of the amount they use. Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on Nov. 1, 2004. NVR INC.: Strong Debt Protection Prompts S&P to Lift Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on NVR Inc. to 'BBB-' from 'BB+' and revised the outlook to stable from positive. At the same time, the rating is raised on the $200 million senior unsecured debt. "The raised ratings are driven by NVR's very strong debt protection and profitability measures and a solid market position in key mid-Atlantic markets, including the attractive greater Washington, D.C., area," explained Standard & Poor's credit analyst Elizabeth Campbell. "Offsetting credit considerations include higher-than-average geographic concentration and a largely off-balance-sheet model home and controlled lot land strategy, which reduces the transparency of the financial presentation." The stable outlook is supported by NVR's pursuit of primarily organic growth and its focus on profitability over growth, which have resulted in a comparatively stable business and financial profile during the most recent housing cycle. A robust $3.3 billion contract backlog provides good near-term visibility to the company's earnings, and with very little speculative inventory, the company is well positioned should housing demand weaken. NVR is expected to maintain solid debt protection measures, gradually increase share in existing markets, and pursue any share repurchase activity on a leverage neutral basis. ORGANIZED LIVING: Wants to Hire LoftusGroup as Financial Advisors ----------------------------------------------------------------- Organized Living, Inc., asks the U.S. Bankruptcy Court for the Southern District of Ohio for permission to employ Loftusgroup LLC as its financial advisors and chief restructuring advisors. Loftusgroup is expected to: a) analyze the Debtor's long-term financial projections and develop long-term financial projections in cooperation with the Debtor's management; b) manage the Debtor's cash flow and prepare budgets and forecasts of cash flow usage and analyze the Debtor's operations and make recommendations regarding asset sales; c) examine and prepare potential alternatives for a plan of reorganization and analyze the potential impact of that plan's structures and methodologies on the Debtor's estate and potential recoveries to the Debtor's creditors and equity holders; d) prepare monthly operating reports and financial reports for the Creditors Committee and other parties in interest; and e) perform all other financial and restructuring advisory services that are necessary in the Debtor's chapter 11 case. William Loftus, a Managing Director at Loftusgroup, is the co- chief restructuring officer for the Debtor. Mr. Loftus discloses that his Firm received a $150,000 retainer. Mr. Loftus charges $450 per hour for his services. Mr. Loftus reports Loftusgroup's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- William Avelone Senior Consultant $450 H.G. Hollingsworth Senior Consultant $450 Stephen Katter Consultant $250 Loftusgroup assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Westerville, Ohio, Organized Living, Inc., -- http://www.organizedliving.com/-- is an innovative retailer of storage and organization products for the home and office with stores throughout the U.S. The Company filed for chapter 11 protection on May 4, 2005 (Bankr. S.D. Ohio Case No. 05-57620). Kristin E. Richner, Esq., at Squire, Sanders & Dempsey L.L.P., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. ORGANIZED LIVING: Wants to Hire Squire Sanders as Bankr. Counsel ---------------------------------------------------------------- Organized Living, Inc., asks the U.S. Bankruptcy Court for the Southern District of Ohio for permission to employ Squire, Sanders & Dempsey L.L.P., as its general bankruptcy counsel. Squire Sanders is expected to: a) advise the Debtor with respect to its powers and duties as a debtor-in-possession in the continued management and operation of its business and property; b) prepare on the Debtor's behalf all motions, applications, answers, orders, reports and papers necessary to the administration of the Debtor's estate, and assist in the preparation of the Debtor's Schedules of Assets and Liabilities and Statement of Financial Affairs; c) advise the Debtor in connection with any post-petition financing and cash collateral arrangements and negotiate and draft documents related to the post-petition financing and cash collateral; d) advise the Debtor with any contemplated sale of assets, including the negotiation of asset and stock sales agreements, and in implementing appropriate procedures with respect to closing those sales transactions; e) take all necessary action to protect and preserve the Debtor's estate, including the prosecution of actions on its behalf, the defense of any actions commenced against the Debtor, and negotiations concerning all litigation in which the Debtor is involved; f) negotiate and prepare on the Debtor's behalf, a plan of reorganization, disclosure statement and all related agreements and documents to that plan and disclosure statement; and g) perform all other necessary legal services to the Debtor that is appropriate and necessary in its chapter 11 case. Kristin E. Richner, Esq., a Member at Squire Sanders, is the lead attorney for the Debtor. Ms. Richner discloses that the Firm received a $150,000 retainer. Ms. Richner reports Squire Sanders's professionals bill: Designation Hourly Rate ------------ ----------- Partners $280 - $675 Associates/Counsel $165 - $425 Legal Assistants $280 - $675 Squire Sanders assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Westerville, Ohio, Organized Living, Inc., -- http://www.organizedliving.com/-- is an innovative retailer of storage and organization products for the home and office with stores throughout the U.S. The Company filed for chapter 11 protection on May 4, 2005 (Bankr. S.D. Ohio Case No. 05-57620). When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. PEGASUS SATELLITE: Can Amend Spectrasite Master Site Pact --------------------------------------------------------- Pegasus Satellite Communications, Inc., and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Maine to: (i) enter into the First Amendment and the Replacement Site Agreements; (ii) assume the Master Site Agreement, as amended by the First Amendment; and (iii) settle Spectrasite's damage claim. As reported in the Troubled Company Reporter on April 13, 2005, Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, tells the United States Bankruptcy Court for the District of Maine that the Broadcast Assets include the Debtors' rights under a certain Master Site Agreement, dated as of July 17, 2000, with Spectrasite Broadcast Towers, Inc., and Pegasus Broadcast Television, Inc. The Master Site Agreement was executed in connection with: (i) an Asset Purchase Agreement, dated as of April 18, 2000, by and among, inter alia, Spectrasite and PBT; and (ii) a Site Development and Build-to-Suit Agreement, dated as of July 17, 2000, by and between Spectrasite and PBT. The Master Site Agreement set the general terms and conditions under which PBT leases or subleases space on Spectrasite's antenna towers to place, operate and maintain the Debtors' analog and digital broadcast communications equipment for their broadcast television business. Pursuant to the Master Site Agreement, Spectrasite and PBT have entered into 16 individual site agreements for space on Spectrasite's various antenna towers. Claims Dispute Spectrasite asserted that the Debtors owe past rent for digital antenna space available to the Debtors under the Asset Purchase Agreement and the Existing Site Agreements. The Debtors contend that they do not and will not have an obligation to pay rent for digital antenna space until they commence digital operations as required by the FCC. Under the Master Site Agreement, Spectrasite asserted that it is entitled to reimbursement for costs of certain improvements that may be necessary at tower sites where the Debtors lease space. However, the Debtors do not believe that Spectrasite has incurred any expenses that would be reimbursable under the Master Site Agreement. On October 12, 2004, Spectrasite filed a general, unsecured, non- priority claim for $9,122,504 in respect of amounts owed by PBT under the Asset Purchase Agreement and the Master Site Agreement. Amendment The parties agree to amend the Master Site Agreement to resolve the claim. Under the First Amendment, the Debtors will pay $307,518 to Spectrasite and convey to Spectrasite all of their interest in 10,333 warrants held by Pegasus Towers, Inc., a PBT subsidiary, to purchase Spectrasite common stock to settle any amounts owing under the Asset Purchase Agreement and Master Site Agreement. The Debtors estimate that the Warrants have a value of $967,169. Moreover, the Master Site Agreement will be amended to provide that PBT may assign its entire interest in the Master Site Agreement or in one or more Replacement Site Agreements without the prior consent of Spectrasite, to Pegasus Communications Corporation or an affiliate of PCC. On the effectiveness of the First Amendment and payment of the Settlement Amount, Spectrasite will withdraw with prejudice any claims it has filed against the Debtors in their Chapter 11 cases. 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. Maine 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) PRESTIGE BRANDS: Moody's Up Ratings, Citing Strong Performance -------------------------------------------------------------- Moody's Investors Service has upgraded the senior implied and senior subordinated notes ratings of Prestige Brands, Inc., following the debt repayment associated with the company's completed initial public equity offering and the company's release of strong fiscal 2005 operating results. Moody's also upgraded Prestige's speculative grade liquidity rating and affirmed ratings on its first-lien senior secured credit facilities. The rating actions reflect the sizable leverage reduction and improved liquidity that result from the partial usage of IPO proceeds to repay debt. Additional support for the rating action stems from the $10M increase in revolver size, the resetting of covenants at more comfortable cushions relative to expected credit metrics, and reduced pricing on the bank credit facility. The ratings actions are in-line with the guidance provided in Moody's review action, initiated in November 2004 and reiterated in January 2005. The ratings outlook is stable. These ratings are affected by this action: * Senior implied, upgraded to B1 from B2; * $60 million senior secured revolving credit facility due 4/6/09, affirmed at B1; * $370 million senior secured term loan facility due 4/6/11, affirmed at B1; * $100 million second lien senior secured term loan C facility due 10/6/11, withdrawn at B2; * $126 million 9.25% senior subordinated notes due 4/15/12, upgraded to B3 from Caa1; * Senior unsecured issuer rating, upgraded to B2 from B3. The rating upgrades recognize Prestige's improved credit protection measures and liquidity following its $515 million initial public offering, whereby proceeds were used to repay approximately $184 million in senior secured debt and subordinated notes. The company's strong fiscal 2005 operating results further support the rating actions, with double-digit sales gains in its OTC and Household segments modestly offset by declines in its Personal Care product lines. Overall Prestige grew year-over-year sales by around 9% and adjusted EBITDA by 26%. In addition to reduced debt levels and improved earnings, lower interest expense associated with the debt repayment (around $10 to 12 million) further enhances Prestige's strong cash flow generation. Lastly, amendments to Prestige's senior secured credit facility benefit the liquidity profile, with a $10 million increase in revolver commitment, a relaxing of the cash flow sweep requirement (only if leverage exceeds 4.25x at March 2006), and a resetting of Prestige financial covenants to levels that provide at least 15-20% EBITDA cushions. Prior to the transactions, Prestige's maximum leverage covenant was a material restraint to the SGL rating, due to a modest 7% EBITDA cushion. The B1 rating on the company's first lien senior secured facilities has been affirmed, as these facilities did not directly benefit from the repayment of junior debt classes, and now represent the vast majority of the company's debt structure. The second-lien senior secured facility has been withdrawn due to its repayment from IPO proceeds. Prestige's new ratings and stable outlook continue to be supported by: (1) its diverse portfolio of leading brands (in largely stable, recession-resistant categories), (2) its experienced management team, and (3) its scalable, low-cost operating platform. In combination, these factors result in high margins, strong predictable cash flows, and high brand equities, which support Prestige's debt. Notwithstanding its improved credit profile, Prestige's ratings are restrained by its limited scale, still large funded debt levels, heavy competition and brand support needs for many product lines, and integration risk associated with its acquisition-based strategy. Although Prestige's strong cash flow capability (at double-digit percentages of funded debt) suggests the potential for further improvement to its credit profile, Moody's believes that Prestige will use its financial flexibility to engage in additional debt- financed acquisitions and/or to support its sales and market shares in certain circumstances. As such, Moody's does not expect further rating upgrades in the absence of sustained debt-to-EBITDA levels below 4.0x. However, given Prestige's strong credit metrics and moderate risk profile, Moody's anticipates limited downward rating pressures over the coming year-to-eighteen months. Such action would be prompted by a return to leverage levels over 6.0x due to high-priced, debt-financed acquisitions or an erosion in the company's competitive position in important categories. Prestige Brands, Inc., headquartered in Irvington, New York, is a provider of branded consumer products in the OTC, Household and Personal Care segments, with brands including Compound W, Chloraseptic, Comet, and Spic and Span. The company was formed by GTCR Golder Rauner to acquire Medtech Holdings, Inc., The Denorex Company, the Spic and Span Company, and Bonita Bay Holdings from February to April 2004. The company acquired the Little Remedies brand through its acquisition of Vetco, Inc., in October 2004. Net sales for the fiscal year ended March 2005 were $303 million. RECOTON CORPORATION: Court Confirms Joint Plan of Liquidation ------------------------------------------------------------- The Honorable Allan Gropper of the U.S. Bankruptcy Court for the Southern District of New York confirmed the Joint Liquidating Plan of Recoton Corporation and its debtor-affiliates on May 6, 2005. Judge Gropper determined that the plan meets the 13 standards for confirmation stated in 11 U.S.C. Sec. 1129: (1) the Plan complies with the Bankruptcy Code; (2) the Debtors have complied with the Bankruptcy Code; (3) the Plan was proposed in good faith; (4) all plan-related cost and expense payments are reasonable; (5) the Plan identifies the individuals who will serve as officers and directors post-emergence; (6) all regulatory approvals that are necessary have been obtained or are respected; (7) creditors receive more under the plan than they would in a chapter 7 liquidation; (8) all impaired creditors have voted to accept the Plan, or, if they voted to reject, then the plan complies with the absolute priority rule; (9) the Plan provides for full payment of Priority Claims; (10) at least one non-insider impaired class voted to accept the Plan; (11) the Plan is feasible and confirmation is unlikely to be followed by a liquidation or need for further financial reorganization; (12) all amounts owed to the Clerk and the U.S. Trustee will be paid; and (13) the Plan provides for the continuation of all retiree benefits in compliance with 11 U.S.C. Sec. 1114. About the Plan The Plan provides for the substantive consolidation of the Debtors' assets and liabilities for distribution purposes. A Liquidating Trust will be established to facilitate distribution to creditors. The Trust will also conduct a fair market valuation on the Debtors' assets within 90 days from the Effective Date. The company's senior secured lenders, holders of other secured claims, and holders of priority claims are unimpaired. Impaired classes consist of: (1) junior lender claims; (2) general unsecured claims; and (3) sub-debt claims. Intercompany claims, subordinated claims and equity interests will be cancelled on the Effective Date. The Junior Lenders, owed $19,750,000, will receive on the Effective Date ratable shares of the: (1) Series B Beneficial Interests for allowed secured claims; (2) Series D Beneficial Interests for contingent claims; and (3) Series G Beneficial Interests for residual claims. General Unsecured creditors, owed $60 million, will receive on the Effective Date, pro rata shares of the Series A Beneficial Interests and Series E Beneficial Interests. Sub-debt claim holders, owed $41,626,651, will receive pro rata shares of the Series F Beneficial Interests. A full-text copy of the Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=050511022719 Recoton Corporation is a global leader in the development and marketing of consumer electronic accessories, audio products and gaming products. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-12180) on April 8, 2003. Kristopher M. Hansen, Esq. and Lawrence M. Handelsman, Esq., of Stroock & Stroock & Lavan assist the debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed $234,649,054 in assets and $234,605,283 in debts. REFOCUS GROUP: Asks Shareholders to Okay Privatization Deal ----------------------------------------------------------- Refocus Group, Inc.'s (OTC: RFCG.OB) board of directors unanimously adopted a resolution to seek stockholder approval to amend the company's Certificate of Incorporation, as amended, to effect a going private transaction involving a 1-for-2,000 reverse stock split of the outstanding shares of the company's common stock to be followed immediately by a forward 2,000-for-1 split, with stockholders holding less than one full share following the reverse stock split receiving a cash payment for the value of such fractional share. If the transactions are approved and completed, Refocus expects to have fewer than 300 stockholders of record, permitting Refocus to terminate registration of its common stock with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to suspend its duty to file reports with the Securities and Exchange Commission. The company intends to file for termination of such registration and suspension of such reporting requirements as soon as practicable following approval and completion of the split transactions. Once the company makes this filing, its common stock will no longer be eligible for quotation on the OTC Bulletin Board. Refocus Group's board of directors believes deregistration would eliminate growing expenses and commitments associated with being a public company. Deregistration would also allow Refocus' management to concentrate additional attention on operations and financial management, which would further enhance the company's financial performance and stockholder value. As discussed, if Refocus stockholders approve the proposal, stockholders holding less than one full share following the reverse stock split will receive a cash payment for the value of such fractional share. As a result, stockholders who hold fewer than 2,000 shares of Refocus common stock immediately before the split transactions will receive a cash payment equal to $0.35 per pre-split share. Stockholders holding 2,000 or more shares of Refocus common stock immediately before the split transactions will not be entitled to receive a cash payment and will continue to hold the same number of shares after completion of the reverse and forward split transactions. Refocus Group's board of directors has received a fairness opinion from its financial advisor, Hill Schwarz Spilker Keller LLC, that the cash consideration to be paid as a result of the proposed reverse split transaction is fair, from a financial point of view, to Refocus' stockholders holding less than one full share subsequent to the reverse split. The proposed split transactions are subject to approval by the holders of a majority of the voting shares. Stockholders will be asked to approve the split transactions by a written consent solicitation to be conducted later this year. As reported on March 1, 2005, Medcare Investment Fund III, Ltd. of San Antonio, Texas, purchased 280,000 shares of the company's newly authorized Series A-1 Convertible Preferred Stock. The holders of Series A Convertible Preferred Stock are entitled to vote on all matters required or permitted to be voted upon by the holders of the common stock of the company on an "as converted" basis. As a result, Medcare is the beneficial owner of greater than 50 percent of the outstanding voting stock of the company. Medcare has indicated that it intends to vote in favor of the proposed split transactions, but has not made any formal commitment to do so. Refocus intends to file a preliminary consent solicitation statement and Schedule 13E-3 with the Securities and Exchange Commission outlining the transaction. All stockholders are advised to read the definitive consent solicitation statement and Schedule 13E-3 carefully when the documents are available. Upon filing, stockholders may obtain a free copy of the consent solicitation statement and Schedule 13E-3 at the SEC's Web site at http://www.sec.gov/Refocus will also mail a copy of the definitive consent solicitation to its stockholders entitled to vote on this matter. For more information on "going private" in general, refer to http://www.sec.gov/answers/gopriv.htm About the Company Refocus Group (OTC: RFCG.OB) -- http://www.refocus-group.com/-- is a Dallas-based medical device company engaged in the research and development of treatments for eye disorders. Refocus holds over 90 domestic and international pending applications and issued patents, the vast majority directed to methods, devices and systems for the treatment of presbyopia, ocular hypertension and primary open-angle glaucoma. The company's most mature device is its patented scleral implant and related automated scleral incision handpiece and system, used in the Scleral Spacing Procedure for the surgical treatment of presbyopia, primary open- angle glaucoma and ocular hypertension in the human eye. At Dec. 31, 2004, Refocus Group's balance sheet showed a $2,253,161 stockholders' deficit, compared to $1,150,451 in positive equity at Dec. 31, 2003. ROCK OF AGES: Asking Secured Lenders to Waive Covenant Default -------------------------------------------------------------- Rock of Ages Corporation (NASDAQ:ROAC) reported its financial results for the first quarter of 2005. The Company disclosed that it was in violation of the Cash Flow to Debt Service covenant on its credit facility as modified in the first quarter of 2005. The Company is in the process of obtaining a waiver from its lenders for the first quarter violation and expects to obtain that waiver prior to the filing of its Form 10-Q. The Company and its lenders have not modified any of the required covenants for the balance of 2005 but the Company believes it is probable that it will either be in compliance with those covenants or will be able to cure any default under those covenants for the balance 2005. Rock of Ages Corporation, Rock of Ages Kentucky Cemeteries, LLC, Carolina Quarries, Inc., Autumn Rose Quarries, Inc., Pennsylvania Granite Corp., Keith Monument Company LLC, Rock of Ages Memorials Inc. and Sioux Falls Monument Co., are parties to a Financing Agreement, dated as of December 17, 1997, as amended, with THE CIT GROUP/BUSINESS CREDIT, INC., and CHITTENDEN BANK. That facility consists of an acquisition term loan line of credit of up to $30.0 million and a revolving credit facility of up to another $20.0 million based on eligible accounts receivable, inventory and certain fixed assets. The Facility expires in October 2007. "Because winter snows and freezing temperatures affect virtually every aspect of our business, the first quarter historically is the seasonally weakest quarter of the year for Rock of Ages. As we last experienced in 2003, heavy snow and rain in March exacerbated this seasonal pattern again this year by delaying by several weeks the return to normal market conditions. This had an especially dramatic impact on our quarrying operations, although manufacturing and retailing also were affected to a lesser extent," said Chairman and CEO Kurt Swenson. "The company's first quarter results also reflected planned increases in personnel, sales and marketing and other expenses associated with the implementation of our strategy to grow our Memorials division, which includes our retail and manufacturing segments. Our staffing program is now nearly complete. Rick Wrabel, President of the Memorials division, has assembled an outstanding team of industry veterans and professionals from outside our industry with extensive experience in building retail businesses. We believe our team has the right mix of skills and experience successfully to implement our aggressive growth plan. "We are making significant strides in our Outreach program, which is designed to expand our retail distribution capability by establishing mutually beneficial relationships with funeral homes and cemeteries that complement our owned and authorized store network. Our new branding and marketing programs have been well- received by our retailers, who also are enthusiastic about our plans to expand the range of products we offer as we roll out our 'total memorialization' concept in the months to come. We plan to support our expanding retail capabilities with a print advertising program in leading media that will be launched in the second half of this year. We are confident that these and other investments we are making will deliver growth in our Memorials division beginning later this year and accelerating in 2006 and beyond," Swenson added. First Quarter Results For the three months ended March 31, 2005, revenue decreased to $10,471,000 from $12,162,000 for the first quarter of 2004. For the first quarter of 2003, revenue was $9,572,000. The net loss for the first quarter of 2005 was $6,954,000. This compares to a net loss of $3,424,000, for the first quarter of 2004, and a net loss of $4,881,000, for the first quarter of 2003. At March 31, 2005, cash and equivalents amounted to $2,555,000, and shareholders' equity was $52,932,000. About the Company Rock of Ages -- http://www.RockofAges.com/-- is the largest integrated granite quarrier, manufacturer and retailer of finished granite memorials and granite blocks for memorial use in North America. RUSSEL METALS: Selling Lachine Facility for $5.7 Million -------------------------------------------------------- Russel Metals Inc. (TSX:RUS) sold its previously closed Lachine, Quebec distribution center. The Lachine facility was made redundant as a result of the acquisition of Acier Leroux. The sale generated $5.7 million in cash and will result in a one-time gain on the sale of $2.8 million, which will be recorded as part of the restructuring charges in the second quarter. The sale of Armabec, a small rebar operation in Quebec, will close later in May, generating a further $1.5 million in cash and no gain or loss on sale. These sales and the sale of Delta Joists in the previous quarter are the last major asset disposals associated with the acquisition of Acier Leroux. Russel Metals is one of the largest metals distribution companies in North America. It carries on business in three distribution segments: metals service centers, energy tubular products and steel distributors, under various names including Russel Metals, A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, Leroux Steel, McCabe Steel, Megantic Metal, Metaux Russel, Milspec Industries, Pioneer Pipe, Russel Leroux, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Vantage Laser, Wirth Steel and York-Ennis. * * * As reported in the Troubled Company Reporter on February 9, 2004, Standard & Poor's Ratings Services raised its ratings on Russel Metals, Inc., including the long-term corporate credit rating, which was raised to 'BB' from 'BB-'. At the same time, Standard & Poor's assigned its 'BB-' rating to Russel Metals' US$175 million notes. The rating on the notes is one notch lower than the long-term corporate credit rating, reflecting the significant amount of priority debt, including secured bank lines and subsidiary obligations, which would rank ahead of the notes in the event of default. S&P says the outlook is stable. SARGENT ELECTRIC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Sargent Electric Company 28th and Liberty Avenue P.O. Box 30 Pittsburgh, Pennsylvania 15230 Bankruptcy Case No.: 05-26052 Type of Business: The Debtor is an electrical contractor. See http://www.sargent.com/ Frederic B. Sargent, an affiliate of Sargent Electric Company, filed for chapter 11 protection on Jan. 12, 2004, and his case is pending before the Honorable M. Bruce McCullough (Bankr. W.D. Pa. Case No. 04-20387). Chapter 11 Petition Date: May 10, 2005 Court: Western District of Pennsylvania (Pittsburgh) Judge: M. Bruce McCullough Debtor's Counsel: Douglas Anthony Campbell, Esq. Campbell & Levine, LLC 1700 Grant Building Pittsburgh, Pennsylvania 15219 Tel: (412) 261-0310 Fax: (412) 261-5066 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Great American Trade debt $3,500,000 Attn: Ed Dudley 681 Andersen Drive Pittsburgh, PA 15220 GE Capital Trade debt $304,398 Attn: Jennifer Monterroso 201 West Big Beaver Road, Suite 1400 Troy, MI 48084 ZurichAmerican Insurance Trade debt $291,111 135 South LaSalle Chicago, IL 60674 GE Supply Trade debt $187,410 Attn: Maureen Warner 400 Technology Center, Suite R Smyrna, GA 30082 White Electrical Trade debt $179,571 Construction 1730 Atahoochee Avenue Atlanta, GA 30318 Valley Electric Supply Trade debt $148,576 Company Attn: Linda Clinkenbean 1361 North State Road 67 P.O. Box 724 Vincennes, IN 47591 Southlake Electric Supply Trade debt $144,805 Attn: Bob Grady 2030 Route 41 P.O. Box 130 Schererville, IN 46375 American Express Trade debt $129,927 P.O. Box 650448 Dallas, TX 752650448 Advance Electrical Supply Trade debt $119,467 Attn: Cassandra Vanempel 2050 South Lake Street Mundelein, IL 60060 Daniell-Sapp-Boorn Assoc. Trade debt $116,848 Attn: Walter Sapp 960 Penn Avenue, Suite 1100 Pittsburgh, PA 15222 GE Capital Fleet Services Trade debt $103,206 Attn: Keith Berquist, Bankr/Litigation Mgr. 3 Capital Drive Eden Prairie, MN 55344 High Voltage Maintenance Trade debt $92,280 P.O. Box 73974 Chicago, IL 60673 Portgage Electric Supply Trade debt $79,319 Company Attn: Larry Campbell 6487 Melton Road Portage, IN 46368 Graybar Electric Trade debt $75,844 Attn: Todd Campbell 900 Ridge Avenue Pittsburgh, PA 15212 Calumet Electric Supply Trade debt $69,882 Company Attn: Beth Thompson 456 East Chicago Avenue P.O. Box 540 East Chicago, IN 46312 Macallister Trade debt $65,147 Attn: Michele Shetterly 7515 East 30th Street Indianapolis, IN 46206 Simplex Grinnell LP Trade debt $61,600 Attn: Wendy Donnelly 230 Executive Drive Cranberry, PA 15086 Tyco Thermal Controls Trade debt $54,547 Attn: Kevin Gratkowski, General Manager 2505 West Zinny Drive Posen, IL 60469 Anixter, Inc. Trade debt $52,225 Attn: Lori Crump 1601 Waters' Ridge Road Lewisville, TX 75057 Scott Electric Company Trade debt $51,493 Attn: Steve Thomas P.O. Box S 1000 South Main Street Greensburg, PA 156010899 SALEM COMMS: Earns $2.4 Million of Net Income in First Quarter -------------------------------------------------------------- Salem Communications Corporation (Nasdaq:SALM), the leading radio broadcaster focused on Christian and family-themed programming, reported results for the first quarter ended March 31, 2005. Commenting on these results, Edward G. Atsinger III, President and CEO, said, "Our first quarter performance, which significantly exceeded that of the overall radio industry, was driven by revenue growth of 25.5% from our national advertising business as well as 15.7% same station revenue growth at our Contemporary Christian Music radio stations. We also were able to leverage our 11.0% same station revenue growth into 17.5% same station operating income growth." Mr. Atsinger continued, "We are well positioned to drive returns for our shareholders over the long-term as we develop to maturity the significant number of radio stations we have that are in a start-up or early development stage. This is our most significant growth opportunity and we intend to fully exploit it by continuing the development of our Contemporary Christian Music and News Talk stations." First Quarter 2005 Results For the quarter ended March 31, 2005, net broadcasting revenue increased 10.8% to $47.8 million from $43.2 million for the same period a year ago. The company reported operating income of $9.0 million for the quarter, compared with operating income of $7.8 million for the same period last year. The company reported net income of $2.4 million for the quarter compared to net income of $1.2 million for the same period last year. Station operating income, SOI, increased 10.8% to $17.3 million for the first quarter of 2005 from $15.6 million for the corresponding period last year. SOI margin was 36.2% in both the first quarter of 2005 and the first quarter of 2004. On a same station basis, net broadcasting revenue increased 11.0% to $41.2 million and SOI increased 17.5% to $16.2 million for the first quarter of 2005 compared to the first quarter of 2004. Same station results have been favorably impacted by revenue and SOI growth from our national advertising business as well as from our Contemporary Christian Music, CCM, radio stations. EBITDA increased 13.9% to $12.3 million for the first quarter of 2005 compared to $10.8 million for the first quarter of 2004. EBITDA for the first quarter of 2004 includes $0.2 million of loss on disposal of assets. Excluding this item, Adjusted EBITDA increased 11.4% for the first quarter of 2005 compared to the first quarter of 2004. Per share numbers were calculated based on 26,022,654 weighted average diluted shares for the quarter ended March 31, 2005, and 23,678,124 weighted average diluted shares for the comparable 2004 period. Balance Sheet As of March 31, 2005, the company had net debt of $295.7 million and was in compliance with all of its covenants under its credit facilities and bond indentures. Salem's bank leverage ratio was 4.7 as of March 31, 2005 versus a compliance covenant of 6.75. Salem's bond leverage ratio was 5.4 as of March 31, 2005 versus a compliance covenant of 7.0. Acquisitions Since December 31, 2004, Salem has disclosed these acquisitions: -- KCRO (660 AM) in Omaha, Neb. (Omaha-Council Bluffs, Neb.- Iowa market) for $3.1 million (now operated by Salem under a local marketing agreement); -- WGUL (860 AM) in Dunedin, Fla. (Tampa-St. Petersburg- Clearwater market), and WLSS (930 AM) in Sarasota, Fla. (Sarasota-Bradenton market), for $9.5 million; and -- KHLP (1420 AM) in Omaha, Neb. (Omaha-Council Bluffs market), for $0.9 million. Since December 31, 2004, Salem has completed these acquisitions: -- KAST (92.9 FM) in Astoria, Ore. (Portland market), for $8 million; -- WKAT (1360 AM) in Miami, Fla. (Miami-Ft. Lauderdale- Hollywood market), for $10.0 million; -- KGBI (100.7 FM) in Omaha, Neb. (Omaha-Council Bluffs, market), for $10.0 million ($8.0 million cash and $2.0 million promotional consideration); -- WHK (previously WRMR) (1420 AM), in Cleveland, Ohio (Cleveland market), for $10.0 million; and -- Christianity.com, an online provider of compelling Christian content and a wide range of ministry resources, for $3.4 million. Since December 31, 2004, Salem has completed these acquisitions via exchange: -- WIND (560 AM) in Chicago, Ill., (Chicago market), KKHT (100.7 FM), in Winnie, Texas (Houston-Galveston market), and KNIT (1480 AM), in Dallas, Texas (Dallas-Ft. Worth market) (part of an exchange with Univision); and -- KGMZ (107.9 FM) in Honolulu, Hawaii (Honolulu market) (part of an exchange with Cox). The acquisition via exchange of KSFS (94.3 FM) in Sacramento, Calif., (Sacramento market), which is part of an exchange with Univision, is pending and is expected to be completed in the second quarter of 2005. Divestitures Since December 31, 2004, Salem has announced the divestiture of: -- WCCD (1000 AM) in Parma, Ohio (Cleveland market) for $2.1 million. Since December 31, 2004, Salem has completed the divestitures via exchange of: -- WZFS (106.7 FM) in Des Plaines, Ill. (Chicago market) (part of an exchange with Univision); and -- KHNR (650 AM) and KJPN (940 AM) in Honolulu, Hawaii (Honolulu market) (part of an exchange with Cox). The divestiture via exchange of KSFB (100.7 FM) in San Rafael, Calif., (San Francisco market), which is part of an exchange with Univision, is pending and is expected to be completed in the second quarter of 2005. Second Quarter 2005 Outlook For the second quarter of 2005, Salem is projecting net broadcasting revenue between $50.9 million and $51.4 million. Net income for the second quarter of 2005 is projected to be between $0.11 per diluted share and $0.13 per diluted share. Salem is projecting SOI between $18.5 million and $19.0 million for the second quarter of 2005. Second quarter 2005 outlook reflects: -- Start up costs associated with recently acquired stations in the Atlanta, Chicago, Cleveland, Dallas, Detroit, Honolulu, Houston, Sacramento, Miami, Omaha and Tampa markets. -- Costs associated with the introduction of News Talk programming on our stations in Baltimore, Dallas, Philadelphia, San Antonio and San Francisco; -- The exchange of WPPN (106.7 FM) in Des Plaines, Ill. (Chicago market), and KVVZ (100.7 FM) in San Rafael, Calif. (San Francisco market) to Univision Communications for WIND (560 AM) in Chicago, Ill. (Chicago market), KKHT (100.7 FM) in Winnie, Texas (Houston-Galveston market); KSFS (94.3 FM) in Jackson, Calif. (Sacramento market), and KNIT (1480 AM) in Dallas, Texas (Dallas-Ft. Worth market); -- Continued growth from Salem's underdeveloped radio stations, particularly our News Talk and CCM stations; -- Reduced inventory loads at KLTY (94.9 FM), our CCM radio station in Dallas; -- Second quarter 2005 net broadcasting revenue growth in the mid to high single digits and same station net broadcasting revenue growth in the mid single digits; and -- Second quarter 2005 SOI approximately even with second quarter 2004 SOI, due to the impact of start-up costs associated with recently acquired stations, and same station SOI growth in the mid to high single digits. Full Year 2005 Outlook Additionally, for 2005 as a whole, the company expects corporate expenses of approximately $20.0 million. This includes costs associated with the implementation of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 of approximately $0.8 million and increased litigation related costs of approximately $0.7 million. Salem also expects acquisition related and income producing capital expenditures of approximately $7.5 million and maintenance capital expenditures of approximately $5.5 million. Acquisition related and income producing capital expenditures include the upgrades of our radio station signals at WYLL (1160 AM) in Chicago, Ill. (Chicago market), and WFSH (104.7 FM) in Athens, Ga. (Atlanta market), as well as studio construction costs in Honolulu, Hawaii that will allow the company to eliminate office rent expense in that market. Stock Repurchases In November, 2004, the company reported that its board of directors authorized a stock repurchase program for up to $25 million of company stock, which could occur through open-market or privately negotiated transactions. This authority was given subject to the company remaining in compliance with its credit facilities and bond indentures, which contain limitations on the company's ability to enter into such transactions. Currently, these limitations may prevent us from repurchasing more that $5 million of company stock. To date, no stock repurchases have been made. In making any repurchases, the company intends to be opportunistic and will evaluate potential repurchases based on the market's valuation of the company stock, available acquisition opportunities, indebtedness and other factors. Salem Communications Corporation (Nasdaq: SALM) -- http://www.salem.cc/-- headquartered in Camarillo, is the leading U.S. radio broadcaster focused on Christian and family-themed programming. Upon the close of all announced transactions, the company will own 105 radio stations, including 67 stations in 24 of the top 25 markets. In addition to its radio properties, Salem owns Salem Radio Network(R), which syndicates talk, news and music programming to approximately 1,900 affiliates; Salem Radio Representatives(TM), a national radio advertising sales force; Salem Web Network(TM), a leading Internet provider of Christian content and online streaming; and Salem Publishing(TM), a leading publisher of Christian-themed magazines. * * * As reported in the Troubled Company Reporter on Dec. 16, 2004, Moody's Investors Service upgraded the long-term debt ratings for Salem Communications Holding Corporation. The upgrades are driven mostly by improvements at development-stage stations, better than expected financial performance in 2004, the company's willingness to issue equity to reduce total debt and the subsequent balance sheet de-leveraging. Moody's said the outlook is stable. SAXON ASSET: S&P Rating on Class BF-1 Trust Tumbles to D -------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class BF-1 fixed collateral issued by Saxon Asset Securities Trust 2000- 2 to 'D' from 'CCC'. Concurrently, ratings on three other classes from the same transaction are affirmed. The rating on class BF-1 was lowered as a result of the $93,788 principal write-down realized by the class during the April 2005 remittance period. Originally rated 'BBB', the class is supported by excess spread, overcollateralization, and subordination of the BF-2 class. Losses have continued to exceed excess interest, thereby depleting overcollateralization and exhausting the remaining principal balance of the BF-2 subordinate class in the April 2005 distribution. Net losses as a percentage of excess interest cash flow remained greater than 100% for most of the past 12 months and were as high as 970% and 381% in March 2005 and April 2005, respectively. As of the April 2005 distribution date, cumulative realized losses were 5.59% of the original pool balance, while total delinquencies were 27.04%. Serious delinquencies (90-plus days, foreclosure, and REO) were 22.80%. While the mortgage pool has paid down to approximately 13.73% of its original balance, substantial losses have contributed to the complete erosion of the overcollateralization to 0.00% of the original pool balance, compared with its original target of 1.25% and current target of 0.50%. As of the April 2005 distribution date, the transaction had realized net losses averaging approximately $338,470 per month and excess interest cash flows of $66,227 per month during the most recent 12 months. Although collateral performance for the three remaining classes in the fixed-rate loan group is worse than Standard & Poor's original expectations, the ratings are affirmed to reflect adequate credit support provided by subordination and, to a lesser extent, excess spread and overcollateralization. Given the current delinquency status and pattern of losses, along with minimal excess cash flow amounts, collateral performance is likely to continue to result in losses that will further exhaust credit support to the transaction. The transaction will continue to be monitored closely, and the ratings will be adjusted accordingly. The collateral consists of 30-year, fixed-rate, first-lien subprime mortgage loans secured by one- to four-family residential properties. Rating Lowered Saxon Asset Securities Trust 2000-2 Rating ------ Class To From ----- -- ---- BF-1 D CCC Ratings Affirmed Saxon Asset Securities Trust 2000-2 Class Rating ----- ------ AF-6 AAA MF-1 AA MF-2 A SOLECTRON CORP: Names M. Busselen as VP for Corp. Communications ---------------------------------------------------------------- Solectron Corporation (NYSE:SLR) reported the appointment of Michael Busselen as the new vice president of Corporate Communications and Public Relations. As a member of the global management team, Mr. Busselen will be charged with helping communicate the company's key value proposition and differentiation, while ensuring consistent dialogue with global internal and external stakeholders. Mr. Busselen joins Solectron from Fleishman-Hillard, a global public relations firm where he worked for 10 years, most recently as a senior partner and general manager of the San Diego office. In this role Busselen served as senior counselor for all of the office's clients, acted as a senior advisor for a number of the agency's largest accounts, and was responsible for leading the firm's global technology practice. "Michael brings a tremendous depth and breadth of communications and marketing experience to Solectron," said Craig London, executive vice president, Marketing, Strategy, Global Services, Mergers and Acquisitions. "This company has a terrific story to tell, and as chief communications strategist Michael will play a key role in ensuring our success." Prior to his position with Fleishman-Hillard, Mr. Busselen spent nearly five years at Cadence Design Systems, where he was responsible for public relations, public affairs, internal communications and community relations. In total, Mr. Busselen brings more than 17 years of experience in all aspects of corporate communications, including managing internal and external communications, and developing positioning strategies for companies in a diverse array of industries. Solectron Corporation -- http://www.solectron.com/-- provides a full range of worldwide manufacturing and integrated supply chain services to the world's premier high-tech electronics companies. Solectron's offerings include new-product design and introduction services, materials management, product manufacturing, and product warranty and end-of-life support. The company is based in Milpitas, California, and had sales from continuing operations of $11.64 billion in fiscal 2004. * * * As reported in the Troubled Company Reporter on Jan. 13, 2005, Fitch Ratings affirmed Solectron Corporation's debt ratings: -- 'BB-' senior unsecured debt; -- 'BB+' senior secured bank credit facility; -- 'B' subordinated debt. Fitch says the Rating Outlook is Stable. Approximately $1.2 billion of debt is affected by Fitch's action. TERESA ELLIS: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Teresa A. Ellis c/o Teresa Nelson 6711 36th Avenue Southwest Seattle, Washington 98126 Bankruptcy Case No.: 05-16097 Chapter 11 Petition Date: May 10, 2005 Court: Western District of Washington (Seattle) Judge: Thomas T. Glover Debtor's Counsel: Aimee S. Willig, Esq. Bush Strout & Kornfeld 601 Union Street, Suite 5500 Seattle, Washington 98101-2373 Tel: (206) 292-2110 Fax: (206) 292-2104 Total Assets: $1,509,800 Total Debts: $175,355 The Debtor did not file a list of its 20 Largest Unsecured Creditors. THISTLE MINING: Court Approves Plan of Compromise & Reorganization ------------------------------------------------------------------ The Ontario Superior Court of Justice sanctioned Thistle Mining Inc.'s plan of compromise and reorganization on May 10, 2005. The Company filed its CCAA Plan on March 24, 2005. Majority of the Company's two affected creditors approved the plan on May 3, 2005. At this time, it is anticipated that Thistle will emerge from its restructuring process in late May or early June 2005. Thistle Mining (TSX: THT and AIM: TMG) -- http://www.thistlemining.com/-- says its goal is to become one of the fastest gold mining growth operations in the world. Thistle has focused on acquiring companies with established reserves and will not be developing green field sites. The company operations in South Africa and Kazakhstan are in production, while the Masbate project in the Philippines is forecast to commence production in the latter half of 2005. The Company obtained an order on January 7, 2005, to commence Thistle's restructuring under the Companies' Creditors Arrangement Act. TNP ENTERPRISES: PNM Resources Buy-Out Spurs Moody's to Up Ratings ------------------------------------------------------------------ Moody's Investors Service upgraded the debt ratings of TNP Enterprises, Inc. (TNP, senior unsecured to Ba2 from B1) and its principal operating utility subsidiary, Texas-New Mexico Power Company (TNMP, senior unsecured Baa3 from Ba2). The rating outlook for both TNP and TNMP is stable. The upgrades reflect the anticipated acquisition of TNP by larger and more conservatively financed PNM Resources (PNM, Baa3 senior unsecured / stable outlook), as well as an improving trend in TNP's financial profile and regulatory situation. The stable ratings outlook reflects Moody's belief that the pending acquisition of TNP by PNM is imminent, as the companies await a final recommendation from the New Mexico examiner and final approval from the New Mexico Public Service Commission. As part of the acquisition financing plan, PNM is expected to retire TNP's term loan facility shortly after the closing of the transaction, and call or otherwise redeem TNP's subordinated notes and preferred stock. Consequently, we expect the ratings for these securities to be withdrawn at the time of the redemption. For the latest twelve months ended March 2005, TNP generated approximately $130 million EBITDA (excluding carrying charges) and $90 million funds from operations (FFO), resulting in an approximately 11% FFO to total debt and 3x FFO interest coverage ratio, and had approximately $150 million of cash on hand. For the latest twelve months ended March 2005, TNMP generated an approximately 20% FFO to total debt and 4x FFO interest coverage ratio, and reported an approximately 70% total debt to total capitalization. Over the intermediate to longer-term, we expect TNMP to generate FFO to total debt in the low teen's and FFO to interest of approximately 3x. Moody's notes the recently issued revised True-up order by the Public Utility Commission of Texas -- PUCT, which should result in an approximately $135 million recoverable True-up balance by year-end 2005. The revised True-up determination will not become final until a 45-day period for a "motion for rehearing" expires. Once final, TNMP will have 60 days to file an application to collect competitive transition charges related to the True-up balance, which we refer to as the CTC application. Moody's expects the CTC application to be resolved by year-end, which will then allow TNMP to commence collecting cash from its customers on the regulatory asset, thereby improving the intermediate term financial profile of the utility, somewhat offset by rate reductions in both Texas and New Mexico which were agreed to as part of the merger approval process. The stable rating outlook for TNMP reflects its improved financial profile. A further rating upgrade could result if TNMP demonstrates the sustainable ability to generate stronger funds from operations, such as a ratio of FFO to adjusted debt in the high teen's and FFO to interest of over 4x. A downgrade could result if adverse legal or regulatory decisions develop in the 2004 True-up proceeding, or if FFO to total debt deteriorated towards the 10% level. Ratings upgraded include: -- TNP Enterprises, Inc. * $110 million term loan facility to Ba2 from B1 * $275 million 10.25% subordinated notes to Ba3 from B2 * $200 million preferred stock to B1 from B3 -- Texas New Mexico Power Company * Issuer Rating to Baa3 from Ba2 * $250 million 6.125% global notes to Baa3 from Ba2 * $175 million 6.25% notes to Baa3 from Ba2 TNP Enterprises is headquartered in Fort Worth, Texas. PNM Resources is headquartered in Albuquerque, New Mexico. TRUMP HOTELS: Plan of Reorganization to Take Effect by May 20 ------------------------------------------------------------- Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates' (OTCBB: DJTCQ.OB) plan of reorganization will become effective on or about May 20, 2005, marking the Company's formal emergence from the reorganization proceedings voluntarily commenced on Nov. 21, 2004. The Company will request approval from the U.S. Bankruptcy Court for the District of New Jersey to use the Plan's effective date (and not March 28, 2005) as the record date for making distributions under the Plan. The Committees representing holders of the Company's securities that participated in the formulation and approval of the Plan support the Debtors' request. 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. TRUMP HOTELS: Posts $45.4 Million Net Loss for First Quarter 2005 ----------------------------------------------------------------- Trump Hotels & Casino Resorts, Inc. (OTCBB:DJTCQ.OB) reported consolidated net revenues for the quarter ended March 31, 2005 of $267.2 million, compared to $273.9 million for the quarter ended March 31, 2004. Consolidated income from operations for the quarter ended March 31, 2005 was $14.4 million, compared to $25.6 million for the quarter ended March 31, 2004. During the 2005 first quarter, in connection with its reorganization proceedings commenced on November 21, 2004 and described below, the Company recorded reorganization expenses of $5.7 million in professional fees. The net loss for the 2005 first quarter was $45.4 million, or $1.52 per share, compared to a net loss of $48.9 million, or $1.63 per share, in the first quarter of 2004. As disclosed in March 2005, the Company reached a settlement with the State of Indiana's Revenue Department covering state income taxes resulting from the non-deductibility of wagering taxes in computing Indiana state taxes. Consequently, an additional $2.5 million of income taxes were recorded in the first quarter 2005 for these prior year taxes. Given the transfer of the management of Trump 29 Casino in Coachella, California to the Twenty Nine Palms Band of Luiseno Mission Indians of California in the fourth quarter of 2004, the results of THCR Management Services, LLC for the first quarter 2004 of $2.2 million are reflected as a discontinued operation. Provisions for income taxes in the first quarter of 2004 include a $19.1 million charge resulting from the aforementioned non- deductibility of wagering taxes in computing Indiana state income taxes. EBITDA for the quarter ended March 31, 2005 was $45.9 million, compared to $52.2 million reported for the quarter ended March 31, 2004. Readers are advised that the term "EBITDA" is not a measure of financial performance under generally accepted accounting principles. The Company uses EBITDA because it believes that it is used by certain investors in measuring an entity's operating performance. A reconciliation of EBITDA to income from operations and net loss is included in the attached schedules. On November 21, 2004, the Company commenced its reorganization proceedings. For information on the process, including the detailed disclosure statement, plan of reorganization and confirmation order, interested parties are encouraged to visit the Company's Web site at http://www.thcrrecap.com/ The plan of reorganization was confirmed April 5, 2005, as amended April 11, 2005. The effective date for the closing is now scheduled for May 12, 2005. As previously announced, the Plan, which was supported by an overwhelming percentage of its equity holders and bondholders, calls for an approximately $400 million reduction in the Company's indebtedness with a reduced interest rate to 8.5%, representing an annual interest expense savings of approximately $98 million. The Plan also permits a working capital facility of up to $500 million secured by a first priority lien on substantially all of the Company's assets, which is expected to allow the Company to refurbish and expand its current properties and permit the Company to enter into new and emerging markets. Trump Taj Mahal Trump Taj Mahal Associates reported net revenues of $112.6 million for the 2005 first quarter, compared to $112.7 million for the same quarter in 2004. Income from operations for the quarter ended March 31, 2005 was $10.1 million, compared to $12.1 million for the quarter ended March 31, 2004. EBITDA was $22.9 million for the quarter ended March 31, 2005, compared to $25.1 million for the quarter ended March 31, 2004. Trump Plaza Trump Plaza Associates reported net revenues of $63.9 million for the 2005 first quarter, compared to $65.6 million for the same quarter in 2004. Income from operations for the 2005 first quarter was $2.0 million, compared to of $4.5 million for the 2004 first quarter. EBITDA was $7.6 million for the quarter ended March 31, 2005, compared to $10.6 million for the same quarter in 2004. Trump Marina Trump Marina Associates reported net revenues of $57.7 million for the 2005 first quarter, compared to net revenues of $58.2 million for the 2004 first quarter. Income from operations for the quarter ended March 31, 2005 was $4.7 million, compared to $4.0 million for the quarter ended March 31, 2004. EBITDA was $10.4 million for the quarter ended March 31, 2005, compared to $9.8 million for the quarter ended March 31, 2004. Trump Indiana Trump Indiana, Inc., reported net revenues of $32.9 million for the first quarter ended March 31, 2005, compared to net revenues of $37.4 million for the quarter ended March 31, 2004. Income from operations for the quarter ended March 31, 2005 was $4.0 million, compared to $5.5 million for the quarter ended March 31, 2004. Trump Indiana's EBITDA for the 2005 first quarter was $7.2 million, compared to EBITDA of $8.9 million for the 2004 first quarter. Trump Atlantic City Trump Atlantic City Associates' combined net revenues of Plaza Associates and Taj Associates for the quarter ended March 31, 2005 was $176.5 million, compared to $178.3 million for the quarter ended March 31, 2004. Income from operations for the quarter ended March 31, 2005 was $8.0 million, compared to income from operations of $16.6 million for the quarter ended March 31, 2004. Income from operations was reduced by $4.1 million of reorganization expenses in first quarter 2005. EBITDA for the 2005 first quarter was $30.5 million, compared to $35.6 million for the same period in 2004. Trump Casino Holdings Trump Casino Holdings, LLC's combined net revenues of Marina Associates and Trump Indiana for the quarter ended March 31, 2005 were $90.7 million, compared to $95.6 million for the quarter ended March 31, 2004. Income from operations for the quarter ended March 31, 2005 was $8.2 million, compared to $10.7 million for the quarter ended March 31, 2004. Income from operations was reduced by $1.6 million of reorganization expenses in the first quarter of 2005. EBITDA for the quarter ended March 31, 2005 was $17.3 million, compared to EBITDA of $18.2 million for the same period in 2004. Trump Hotels & Casino Resorts, Inc. Condensed Consolidated Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $290,008 Rooms 17,134 Food & beverage 28,337 Other 8,649 Promotional Allowances (76,947) -------- Net revenues 267,181 -------- COSTS & EXPENSES Gaming 138,301 Rooms 6,565 Food & beverage 9,382 General & administrative 66,999 -------- Total expenses 221,247 -------- EBITDA 45,934 Less: CRDA 1,105 Depreciation & Amortization 24,776 Reorganization expenses 5,681 -------- Income (loss) from operations 14,372 -------- Interest income (470) Interest expense 54,987 Other non-operating (income) expense, net (120) -------- Total non-operating expense, net 54,397 -------- Loss before loss in joint venture & income taxes (40,025) Loss in joint venture (605) Provision for income taxes (4,763) -------- Loss before discontinued operations (45,393) Discontinued operations: - -------- NET LOSS ($45,393) ======== Trump Atlantic City Associates Condensed Consolidated Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $193,511 Rooms 12,499 Food & beverage 20,534 Other 6,288 Promotional Allowances (56,308) -------- Net revenues 176,524 -------- COSTS & EXPENSES Gaming 91,064 Rooms 5,317 Food & beverage 6,613 General & administrative 43,037 -------- Total expenses 146,031 -------- EBITDA 30,493 Less: CRDA 842 Depreciation & Amortization 17,535 Reorganization expenses 4,072 -------- Income (loss) from operations 8,044 -------- Interest income (324) Interest expense 37,698 Other non-operating (income) expense, net (65) -------- Total non-operating expense, net 37,309 -------- Loss before income taxes (29,265) Provision for income taxes (1,006) -------- NET LOSS ($30,271) ======== Trump Casino Holdings, LLC Condensed Consolidated Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $96,497 Rooms 4,635 Food & beverage 7,803 Other 2,361 Promotional Allowances (20,639) -------- Net revenues 90,657 -------- COSTS & EXPENSES Gaming 47,237 Rooms 1,248 Food & beverage 2,769 General & administrative 22,107 -------- Total expenses 73,361 -------- EBITDA 17,296 Less: CRDA 263 Depreciation & Amortization 7,200 Reorganization expenses 1,609 -------- Income (loss) from operations 8,224 -------- Interest income (140) Interest expense 16,284 Other non-operating (income) expense, net (55) -------- Total non-operating expense, net 16,089 -------- Loss before loss in joint venture & income taxes (7,865) Los in joint venture (605) Provision for income taxes (3,757) -------- NET LOSS ($12,227) ======== Trump Taj Mahal Associates Condensed Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $122,757 # of Slots 4,330 Win per Slot/Day 192 Slot Win 74,914 # of Tables 127 Win per Table/Day 3,669 Table Win 41,933 Table Drop 221,263 Hold % 19% Poker, Keno, Race Win 5,910 Rooms 7,239 # of Rooms Sold 98,938 AVG Room Rates 73 Occupancy % 87.9% Food & Beverage 12,227 Other 3,636 Promotional allowances (33,253) -------- Net revenues 112,606 -------- COSTS & EXPENSES Gaming 55,384 Rooms 3,310 Food & beverage 4,221 General & admin 26,793 -------- Total expenses 89,708 -------- EBITDA $22,898 ======== A reconciliation of EBITDA to income from operations for each of the periods is as follows: EBITDA $22,898 Depreciation and amortization (12,295) Reorganization expenses (10) Non-cash write-downs and charges related to required regulatory obligations (CRDA) (516) -------- Income from operations $10,077 ======== Trump Plaza Associates Condensed Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $70,754 # of Slots 2,829 Win per Slot/Day 206 Slot Win 52,375 # of Tables 91 Win per Table/Day 2,244 Table Win 18,379 Table Drop 121,102 Hold % 15.2% Rooms 5,260 # of Rooms Sold 71,662 AVG Room Rates 73.40 Occupancy % 88.1% Food & Beverage 8,307 Other 2,652 Promotional allowances (23,055) -------- Net revenues 63,918 -------- COSTS & EXPENSES Gaming 35,680 Rooms 2,007 Food & beverage 2,392 General & admin 16,224 -------- Total expenses 56,303 -------- EBITDA $7,615 ======== A reconciliation of EBITDA to income from operations for each of the periods is as follows: EBITDA $7,615 Depreciation and amortization (5,240) Reorganization expenses (10) Non-cash write-downs and charges related to required regulatory obligations (CRDA) (326) -------- Income from operations $2,039 ======== Trump Marina Associates Condensed Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $63,033 # of Slots 2,546 Win per Slot/Day 215 Slot Win 49,223 # of Tables 75 Win per Table/Day 2,031 Table Win 13,711 Table Drop 76,077 Hold % 18% Poker, keno, race win 99 Rooms 3,953 # of Rooms Sold 52,075 AVG Room Rates 75.91 Occupancy % 79.5% Food & Beverage 7,017 Other 1,915 Promotional allowances (18,205) -------- Net revenues 57,713 -------- COSTS & EXPENSES Gaming 29,374 Rooms 766 Food & beverage 1,566 General & admin 15,639 -------- Total expenses 47,345 -------- EBITDA $10,368 ======== A reconciliation of EBITDA to income from operations for each of the periods is as follows: EBITDA $10,368 Depreciation and amortization (5,433) Reorganization expenses (10) Non-cash write-downs and charges related to required regulatory obligations (CRDA) (263) -------- Income from operations $4,662 ======== Trump Indiana, Inc. Condensed Statements of Operations For the three months ended March 31, 2005 (Unaudited) (In thousands) REVENUES Casino $33,464 # of Slots 1,624 Win per Slot/Day 185 Slot Win 27,076 # of Tables 39 Win per Table/Day 1,352 Table Win 4,747 Table Drop 30,271 Hold % 15.7% Poker 1,641 Rooms 682 # of Rooms Sold 12,435 AVG Room Rates 54.89 Occupancy % 46.1% Food & Beverage 786 Other 446 Promotional allowances (2,434) -------- Net revenues 32,944 -------- COSTS & EXPENSES Gaming 17,863 Rooms 482 Food & beverage 1,203 General & admin 6,179 -------- Total expenses 25,727 -------- EBITDA $7,217 ======== A reconciliation of EBITDA to income from operations for each of the periods is as follows: EBITDA $7,217 Depreciation and amortization (1,767) Reorganization expenses (11) Non-cash write-downs and charges related to required regulatory obligations (CRDA) (1,470) -------- Income from operations $3,969 ======== 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. TRUMP HOTELS: Record Date for Plan Distributions is March 28 ------------------------------------------------------------ Michel S. Pawlowski, a holder of 138,275 shares in Trump Hotels & Casino Resorts, Inc., asked the Bankruptcy Court to uphold February 9, 2005, as the date of record used in determining stakeholders entitled to receive any distributions under the plan. As previously reported, the Amended Confirmation Order changed the distribution record date from February 9, 2005, to March 28, 2005. According to Mr. Pawlowski, the switching of the Record Date without informing stockholders months in advance of the implication and possibility for the change is an "example of bait and switch, having a detrimental effect on the stockholders." Mr. Pawlowski relates that between December 30, 2004, and February 15, 2005, insider-trading records indicate an acquisition of 628,981 shares without notice to stockholders. The information in those records, available to inside traders, was not made available to stockholders. The information, Mr. Pawlowski asserts would have enabled stockholders to gain. Instead, Mr. Pawlowski says, stockholders were left in the dark of massive potential loss. While stockholders fled, inside traders acted on special information and acquired devalued stock before and after the original record date, Mr. Pawlowski continues. If the same information was made available to stockholders that inside traders used, Mr. Pawlowski believes that stockholders would have continued to invest and not liquidate their shares. The Original Record Date, Mr. Pawlowski adds, also provided some assurance that if the original Chapter 11 Plan had been modified, shareholders as of February 9, 2005, would participate in any distribution even if they had liquidated stock after that date to lower the anticipated loss of the Chapter 11 reorganization. Mr. Pawlowski further asks the Court to hold up the emergence of Trump Entertainment Resorts, Inc., from Chapter 11, pending a review by the U.S. Securities and Exchange Commission of potential insider trading advantages not provided to all shareholders. Equity Committee Responds Until the Court confirmed the Plan on April 5, 2005, no official date had been set to determine which of the Debtors' creditors and equity security holders would be entitled to receive distributions under the Plan, Daniel K. Astin, Esq., at The Bayard Firm, in Wilmington, Delaware, asserts. The Court previously set a Voting Record Date of February 9, 2005. Mr. Astin notes that the Court explicitly provided that the Voting Record Date was solely for determining which holders of claims or equity interests were entitled to vote on the Plan. Mr. Astin relates that at the Confirmation Hearing, after consulting with the Debtors and other key creditor constituencies, the Official Committee of Equity Security Holders asked the Court to establish a Distribution Date of March 28, 2005. This date was selected, Mr. Astin explains, because March 28 was the date that the Debtors issued their press release announcing the compromise and settlement with the Equity Committee and the resulting Plan amendments. Between the time the Debtors filed the initial version of the Plan and March 28, the Debtors made substantial concessions to the Equity Committee increasing distributions to shareholders (other than Donald J. Trump) by $25 million or more in estimated value. The Equity Committee believes that Mr. Pawlowski received express notice that the provisions of any version of the Plan filed or distributed prior to confirmation were subject to change at, or before, the Confirmation Hearing. In fact, Mr. Astin points out, the Plan defines the Distribution Record Date as the date that could be established by order of the Court. "Yet, rather than heeding these admonitions, Mr. Pawlowski chose to liquidate his equity interests in the Debtors and rely on the unconfirmed February 9 date as a backstop, just in case a better result materialized." "[Mr. Pawlowski] is a disgruntled former shareholder who apparently made the decision to cut his losses shortly before the Equity Committee reached its settlement with the Debtors, and now wants a second bite at the distribution to shareholders under the Plan," Mr. Astin says. "[Mr. Pawlowski's] desire to have his cake and eat it too is not a sufficient justification to go back and retroactively change the Distribution Date to an inequitable and problematic date." On Mr. Pawlowski's allegations of insider trading and bait-and- switch tactics, the Equity Committee considers them as lacking in merit and evidentiary support. The allegations, Mr. Astin contends, are "completely irrelevant to the consummation of the Plan, which should be allowed to proceed in due course." Accordingly, the Equity Committee asks the Court to deny Mr. Pawlowski's request. Debtors Join Equity Committee in Opposing Pawlowski's Request The Debtors tell Judge Wizmur that Mr. Pawlowski ignores these facts: 1. The Amended Plan dated March 30, 2005, defined the Distribution Record Date as, "February 9, 2005 (or such other date established by Bankruptcy Court order)"; and 2. The provision in the Plan and the accompanying Disclosure Statement that: "[t]he Debtors reserve the right . . . to amend, modify or withdraw the Plan prior to the entry of the Confirmation Order." Mr. Pawlowski just relied on the proposed terms of the Plan and not on a final order, Charles A. Stanziale, Jr., Esq., at Schwartz Tobia Stanziale Sedita & Campisano, in Montclair, New Jersey, states. Mr. Stanziale points out that the proposed terms of a plan are not binding on a debtor or any other party and can not be relied on until the time as an order confirming the plan becomes final. Moreover, Mr. Stanziale says, Mr. Pawlowski did not object to the Plan or the Plan's flexible provisions with respect to the "Distribution Record Date." "[Mr. Pawlowski] sold his common stock shares and now seeks a belated opportunity to recoup some of his losses," Mr. Stanziale says. "Such opportunism should not be rewarded by the Court." March 28 is the Record Date Mr. Pawlowski withdrew his request. The Record Date is March 28, 2005. 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. UNIVERSAL HOSPITAL: March 31 Balance Sheet Upside-Down by $92 Mil. ------------------------------------------------------------------ Universal Hospital Services, Inc., the leader in medical equipment lifecycle services, reported financial results for the first quarter 2005, ended March 31, 2005. Total revenues were $55.3 million for the first quarter of 2005, representing a $6.3 million or 13% increase from total revenues of $49.0 million for the same period of 2004. Gross margin for the first quarter of 2005 totaled $23.7 million, representing a $1.6 million or 7% increase from total gross margin of $22.1 million for the same period of 2004. Net income for the quarter was $1.0 million, compared to net income of $1.4 million for the same quarter last year. EBITDA before management/board fees and SOX compliance costs was $20.0 million, representing a $1.4 million or 7% increase from $18.6 million for the same period of 2004. "We realized three consecutive months of record revenues in the first quarter," said Gary Blackford, President and CEO. "This is primarily the result of our commitment to and focus on the transition of UHS from an equipment rental company to an equipment life cycle services company. Our first quarter results reflect our progress in executing on our stated strategies. Looking forward, we remain cautious about the hospital marketplace, but given our execution to date, we are optimistic about the prospects for the rest of the year." About the Company Based in Edina, Minnesota, Universal Hospital Services, Inc. is a leading medical equipment lifecycle services company. UHS offers comprehensive solutions that maximize utilization, increase productivity and support optimal patient care resulting in capital and operational efficiencies. UHS currently operates through more than 75 offices, serving customers in all 50 states and the District of Columbia. At Mar. 31, 2005, Universal Hospital Services, Inc.'s balance sheet showed a $92,075,000 stockholders' deficit, compared to a $93,058,000 deficit at Dec. 31, 2004. UAL CORP: Judge Wedoff Okays Termination of Pension Plans --------------------------------------------------------- The Honorable Eugene Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois put his stamp of approval on United Airlines' plan to terminate its employees' pension plans -- the largest pension plan default in U.S. history. About 120,000 current and retired United employees are affected by the Court's decision. Strikes threaten to erupt as a result of the Court's ruling. "A strike is a real prospect if that agreement is approved," Jack Carriglio, counsel for United's pilots, told the Associated Press. Under the terms of the agreement, the PBGC would terminate and become trustee of the company's four pension plans and the agency's multi-billion dollar claims against the carrier will be settled. The PBGC and its financial advisers believe the settlement is superior to the recovery the agency would have received as an unsecured creditor in bankruptcy. Collectively, United's pension plans are underfunded by $9.8 billion on a termination basis, $6.6 billion of which is guaranteed, according to the PBGC. The four plans are: -- the UA Pilot Defined Benefit Plan, which covers 14,100 participants and has $2.8 billion in assets to pay $5.7 billion in promised benefits; -- the United Airlines Ground Employees Retirement Plan, which covers 36,100 participants and has $1.3 billion in assets to pay $4.0 billion in promised benefits; -- the UA Flight Attendant Defined Benefit Pension Plan, which covers 28,600 participants and has $1.4 billion in assets to pay $3.3 billion in promised benefits; and -- the Management, Administrative and Public Contact Defined Benefit Pension Plan, which covers 42,700 participants and has $1.5 billion in assets to pay $3.8 billion in promised benefits. The Pension Benefit Guaranty Corporation will assume responsibility for United's pension obligations. The PBGC originally opposed United's plan, but agreed to the distressed termination in exchange for $1.5 billion of new preferred securities that must be issued under any plan of reorganization confirmed in United's chapter 11 cases. The Associated Press reports that the PBGC will only guarantee $5 billion of United's $9.8 billion pension fund. Judge Wedoff approved the carrier's deal with the PBGC because, he found, there's nothing illegal about it and it doesn't violate the terms of any of United's collective bargaining agreements. "The least bad of the available choices here has got to be the one that keeps an airline functioning, that keeps employees being paid," Judge Wedoff said from the bench at a hearing Tuesday afternoon. "It's not a good outcome. It's unfortunately a necessary outcome," United's CFO Jake Brace told the AP. "This is not in any way a joyous day. It is an important step in our restructuring and in making our airline successful and viable for the long term." "We believe that this agreement, under the circumstances, is in the best interests of the pension insurance program and its stakeholders," said PBGC Executive Director Bradley D. Belt. "The PBGC has an obligation to reduce its losses for the protection of workers and retirees, other companies that pay insurance premiums, and taxpayers. By reaching a settlement now, we further that goal." The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits for about 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. 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. USGEN NEW ENGLAND: U.S. Trustee Objects to Plan Confirmation ------------------------------------------------------------ United States Trustee W. Clarkson McDow, Jr., tells Judge Mannes of the U.S. Bankruptcy Court for the District of Maryland that the Second Amended Plan of Liquidation propounded by USGen New England, Inc., includes release and "Limitation of Liability" provisions contrary to Section 1129(a)(1) of the Bankruptcy Code. These provisions impermissibly limit the liability of counsel for USGen and the Official Committee of Unsecured Creditors to their client. According to Mr. McDow, Rule 704 of the Rules of United States District Court for the District of Maryland states that "[the] Court shall apply the Rules of Professional Conduct as they have been adopted by the Maryland Court of Appeals." Because the Release involves a transaction between attorney and client, the provisions of the Maryland Lawyers' Rules of Professional Conduct 1.8 are implicated. Mr. McDow says two subsections of the Rule are at issue: "(a) A lawyer shall not enter into a business, financial or property transaction with a client unless: (1) the transaction is fair and equitable to the client; and (2) the client is advised to seek the advice of independent counsel in the transaction and is given a reasonable opportunity to do so. * * * (c) A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where: (1) the client is related to the donee; or (2) the client is represented by independent counsel in connection with the gift." The U.S. Trustee notes that USGen's and the Committee's counsel, who stand to benefit from a release, have the burden of proof to demonstrate compliance with Rule 1.8(a). The court in Hughes v. McDaniel, 202 Md. 626, 633-34, 98 A.2d 1,4 (1953), held that: " . . . any challenged transaction between attorney and client is prima facie fraudulent and void, and the burden is cast upon the attorney to show that he used no undue influence of deception, that the transaction was fully understood, and that it was fair in all respects. . . ." The U.S. Trustee asks the Court to deny confirmation of the Plan absent removal or modification of those objectionable Plan provisions. Headquartered in Bethesda, Maryland, USGen New England, Inc., an affiliate of PG&E Generating Energy Group, LLC, owns and operates several electric generating facilities in New England and purchases and sells electricity and other energy-related products at wholesale. The Debtor filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30465). John E. Lucian, Esq., Marc E. Richards, Esq., Edward J. LoBello, Esq., and Craig A. Damast, Esq., at Blank Rome, LLP, represent the Debtor in its restructuring efforts. When it sought chapter 11 protection, the Debtor reported assets amounting to $2,337,446,332 and debts amounting to $1,249,960,731. (PG&E National Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) VERIZON HAWAII: S&P Hacks Rating on $300 Million Notes to B+ ------------------------------------------------------------ Standard & Poor's Ratings Services withdrawn its 'A+/Watch Neg/--' corporate credit rating on Verizon Hawaii Inc., and lowered its rating on the company's $300 million debentures due 2006 to 'B+' from 'A+' because of the completion of the acquisition of the company by The Carlyle Group on May 3, 2005 for $1.6 billion. The ratings are removed from CreditWatch. Verizon Hawaii has been merged into Hawaiian Telcom Communciations Inc. (B+/Negative/--). The debentures, which have been assumed by Hawaiian Telcom, are assigned a recovery rating of '3' because they now share in the collateral of Hawaiian Telcom's regulated subsidiary's assets on a pari passu basis with Hawaiian Telcom's $950 million secured credit facility. The ratings on Hawaiian Telcom have been affirmed, including the 'B+/Negative/--' corporate credit rating. "The ratings on Hawaiian Telcom reflect its aggressive financial policy, concentrated service area, potential accelerated competition from cable telephony, and risks associated with building a new back-office infrastructure," said Standard & poor's credit analyst Rosemarie Kalinowski. Tempering factors include opportunity for growth in the long distance and digital subscriber line (DSL) segments, a dominant local market position, and an experienced management team. Hawaiian Telcom's financial policy is considered aggressive because of the leveraging up of the capital structure to effectuate the $1.6 billion (including $300 million assumed debt) acquisition of Verizon Hawaii from Verizon Communications Inc. by The Carlyle Group. Pro forma for this transaction, debt to EBITDA is about 5.2x for 2004--higher than the metric for some of the company's peers. XOMA LTD: Shareholder Equity Soars by $20 Million in First Quarter ------------------------------------------------------------------ XOMA Ltd. (Nasdaq:XOMA), a biopharmaceutical company developing antibody and protein-based drugs for cancer, immunological disorders and infectious diseases, reported its financial results for the quarter ended March 31, 2005. For the first quarter of 2005, the Company reported net income of $30.1 million compared with the first quarter of 2004 net loss of $20.2 million. The 2005 net income figure includes a non- recurring gain of $40.9 million, recognizing the extinguishment of a long-term loan due to Genentech, Inc. (NYSE: DNA) as part of a restructuring of XOMA's arrangement with Genentech with regard to the RAPTIVA(R) product. XOMA's loss from operations fell by 46%, from $20.0 million in the prior year quarter to $10.8 million in the first quarter of 2005. The improved results reflected higher revenues, as well as reduced research and development expenses and the elimination of losses from the collaboration agreement with Genentech following its re-structuring. As of March 31, 2005, XOMA held $61.7 million in cash, cash equivalents and short-term investments, compared with $24.3 million at December 31, 2004. The increase primarily reflects $56.6 million net proceeds from the convertible note offering completed in February of 2005, partially offset by cash used in operating activities of $18.8 million. "The first quarter financial results reflect several actions we've taken to improve XOMA's financial position," said Peter Davis, XOMA's chief financial officer. "Re-structuring our collaboration agreement with Genentech has had an immediate positive effect on both revenues and expenses. We have recorded our first revenue from our NIAID agreement, which began in March and we have taken steps to reduce expenses going forward. For the full year 2005 we expect to have cut our operating losses by at least half and to record a modest profit." Revenues for the three months ended March 31, 2005, were $3 million, compared with $200,000 for the three months ended March 31, 2004. License and collaborative fees revenues increased to $0.5 million for the quarter, compared with $0.2 million for the same period of 2004, reflecting amortization of the $10.0 million in upfront payments received in 2004 from Chiron, which are being recognized as revenue over the five-year expected term of the agreement. The amortization of this payment began in the second quarter of 2004. Contract revenues increased to $1.3 million for the 2005 quarter, compared with zero in the first quarter of 2004, primarily due to clinical trial services performed on behalf of Genentech and contract manufacturing services performed under the NIAID contract which began in March of this year. Royalties of $1.2 million were recorded for the three months ended March 31, 2005, compared with zero for the 2004 quarter. This increase resulted primarily from RAPTIVA(R) royalties earned under the restructured arrangement with Genentech. Beginning on January 1, 2005, XOMA earns a mid-single digit royalty on worldwide sales of RAPTIVA(R). Revenues for the next several years will be largely determined by the timing and extent of royalties generated by worldwide sales of RAPTIVA(R) and by the establishment and nature of future manufacturing, outlicensing and collaboration arrangements. Long-term Debt At December 31, 2004, XOMA's balance sheet reflected a $40.9 million long-term note due to Genentech, which was extinguished under the restructuring of the Genentech agreement that was announced in January 2005. In February of 2005, XOMA issued $60 million of 6.5% convertible senior notes due in 2012, which is shown on the March 31, 2005 balance sheet as convertible long term debt. Liquidity and Capital Resources Cash, cash equivalents and short-term investments at March 31, 2005, were $61.7 million compared with $24.3 million at December 31, 2004. The $37.4 million increase primarily reflects cash proceeds of $56.6 million from the February 2005 financing partially offset by cash used in operations of $18.8 million. Based on current spending levels, anticipated revenues, partner funding, remaining net proceeds received from XOMA's last underwritten public offering, and proceeds from the convertible senior notes issued in February of 2005, the Company estimates that it should have sufficient cash resources to meet anticipated net cash needs through at least 2008. Any significant revenue shortfalls or increases in planned spending on development programs or more rapid progress of development programs could shorten this period. Additional licensing arrangements or collaborations or otherwise entering into new equity or other financing arrangements could extend this period. Progress or setbacks by potentially competing products may also affect XOMA's ability to secure new funding on acceptable terms. About the Company XOMA Ltd. -- http://www.xoma.com/-- develops for commercialization antibody and other protein-based biopharmaceuticals to treat cancer, immune disorders and infectious diseases. The Company pipeline includes proprietary products along with collaborative product development programs with Chiron Corporation, Millennium Pharmaceuticals, Inc., and Aphton Corporation. The Company also has a royalty interest in RAPTIVA(R), a product marketed worldwide that was developed under a collaboration arrangement with Genentech, Inc. At March 31, 2005, XOMA Ltd.'s balance sheet showed $6,542,000 of positive equity, compared to a $24,610,000 stockholders' deficit at Dec. 31, 2004. YUKOS OIL: Fulbright Asks Court to Seal Distribution Motion ----------------------------------------------------------- On March 18, 2005, Fulbright & Jaworski L.L.P. filed an Expedited Motion for Order Authorizing Distribution From Retainer Pending Approval of Final Fee Application. Pursuant to Local Bankruptcy Rule 2016(g), Fulbright filed detailed descriptions of its services rendered, time spent, hourly rates charged, and the name of the professional or paraprofessional performing the work from the Petition Date through February 28, 2005. According to Zack A. Clement, Esq., at Fulbright & Jaworski L.L.P., in Houston, Texas, the body of the Motion for Distribution and an exhibit refer to a Yukos arbitration file that is being handled by Fulbright other than the U.S. Bankruptcy Restructuring File. "The Arbitration Agreement in the arbitration matter contains confidentiality provisions, which arguably preclude the disclosure of even the existence of the arbitration." While there are clear exceptions to these provisions, like disclosures lawfully required in related judicial proceedings, Mr. Clement relates, the Fulbright arbitration attorneys have sought input from opposing counsel in the arbitration. Accordingly, to protect any confidential information and out of an abundance of caution, Fulbright asks the U.S. Bankruptcy Court for the Southern District of Texas to seal the Motion for Distribution. 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) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***