T R O U B L E D C O M P A N Y R E P O R T E R Friday, September 9, 2005, Vol. 9, No. 214 Headlines ABITIBI-CONSOLIDATED: S&P Affirms BB Corporate Credit Rating ALERIS INTERNATIONAL: Buys ALSCO Holdings for $150 Million ALL COUNTY: Gets Court Nod to Employ John Titler as Bankr. Counsel ALLOY HARDFACING: Case Summary & 20 Largest Unsecured Creditors ALOHA AIRLINES: Wants Until October 28 to Decide on Leases AMERISOURCEBERGEN CORP: Moody's Rates $900M Unsec. Notes at Ba2 ARMSTRONG WORLD: Court Okays Pact Resolving Carlino's $34MM Claim ARVINMERITOR INC: Closing Shock Absorber Operation in Tennessee ASARCO LLC: U.S. Trustee Appoints 7-Member Creditors' Committee ASARCO LLC: Gets Court Nod to Employ Bracewell as Special Counsel ASARCO LLC: Court OKs Retention of Quarles to Tackle Labor Issues ASPECT SOFTWARE: Moody's Places B1 Rating on $475 Million Debts ATA AIR: Chicago Creditors' Move for Panel Appointment Draws Fire AXTEL SA: Moody's Upgrades Corporate Family Rating to B1 from B2 BGK SECURITY: Case Summary & Largest Unsecured Creditors BIO-ONE CORP.: Fred Zeidman Named Chief Restructuring Officer BOMBARDIER RECREATIONAL: Moody's Rates $50M Sr. Sec. Loan at Ba3 BRICE ROAD: Wants to Hire Bailey Cavalieri as Bankruptcy Counsel BRICE ROAD: Section 341(a) Meeting Scheduled for October 13 CAPITAL AUTOMOTIVE: Moody's Reviews Ba1 Preferred Stock Rating CARDTRONICS INC: June 30 Balance Sheet Upside-Down by $49.8 Mil. CATHOLIC CHURCH: Spokane Begins Appeal of Parish Property Decision CCH I LLC: Fitch Expects to Rate Sr. Secured Notes at CCC+ CHASE COMMERCIAL: Fitch Affirms Low-B Ratings on 5 Cert. Classes CHESAPEAKE ENERGY: Offering $250 Million of Preferred Stock CONCENTRA OPERATING: Moody's Rates Proposed $675-Mil Debts at B1 CONCERTO SOFTWARE: S&P Rates Planned $475M Sr. Sec. Facility at B COOK'S INC: Inventory & Equipment to be Auctioned on September 14 CREDIT SUISSE: Credit Enhancement Prompts Fitch's Rating Upgrades DEAN ZANETOS: Case Summary & 6 Largest Unsecured Creditors DELPHI: Detailed Talks with UAW & General Motors Start in October DELTA AIR: Skywest Completes $425M Purchase of Airline Subsidiary DELTA AIR: Cutting Cincinnati Operations by 26% & Selling 11 Jets DOBSON COMMUNICATIONS: Prices $300-Mil Private Debt Offerings DOBSON COMMS: S&P Junks Planned $150M Sr. Unsec. Convertible Notes DONALD L. MATTIA: Case Summary & 20 Largest Unsecured Creditors DRUGMAX INC: Receives Default Waiver from General Electric Capital E.SPIRE COMMS: Court Approves $1MM Administrative Claim Carve-Out ENER1 INC: Plans to Spin Off Three Subsidiaries to Stockholders ENRON CORP: Bankruptcy Court Okays American Express Settlement ENTRAVISION COMMS: Prices Tender Offer for 8.125% Sr. Sub. Notes ENTRAVISION COMMS: Moody's Rates Planned $650MM Facilities at Ba3 FALCON PRODUCTS: Can Sell 87.4% Stake in Czech Falcon Mimon Unit FALCON PRODUCTS: Court Approves $4MM Sale of S&J Unit's Assets FALCON PRODUCTS: Van Kafsouni Buys Belding Property for $350,000 FEDERAL-MOGUL: Defends Merits of Michigan Environmental Settlement FREDERICK MCNEARY: Says Plan Hinges on Prestwick's Ch. 11 Plan FRK PROPERTIES: Case Summary & Largest Unsecured Creditor HALLIBURTON CO: Moody's Reviews (P)Ba1 Preferred Stock Rating HONEY CREEK: Hires Robert & Grant P.C. as Bankruptcy Counsel HOVNANIAN ENT: Earns $116.1 Million of Net Income in 3rd Quarter JERNBERG INDUSTRIES: Completes 363 Sale to KPS Special for $60-Mil JOHN Q. HAMMONS: Tender Offer Yield in JQH Merger is 4.358% JOSEPH BONO: Case Summary & 13 Largest Unsecured Creditors KAISER ALUMINUM: Court Approves 2nd Amended Disclosure Statement KATAYONE ADELI: Case Summary & 20 Largest Unsecured Creditors KERR-MCGEE: Soliciting Consents to Amend Bond Indenture KNOLL INC: UBS & BofA Commit to Provide $450-Mil Credit Facility LAWRENCE BARGAIN: Case Summary & 3 Largest Unsecured Creditors MERIDIAN AUTOMOTIVE: Committee Sues Lenders to Invalidate Liens MERIDIAN AUTOMOTIVE: Wants Until Jan. 25 to Decide on Leases MERIDIAN AUTOMOTIVE: Wants Dec. 1 as Admin. Claims Bar Date MIDLAND REALTY: Fitch Lifts Rating on $7.7-Mil Certs. to BB+ MIRANT CORP: Inks Pact with Committees & Creditors on Plan Terms MIRANT CORP: Court Okays $600K Sale of Transformers to Equisales MIRANT CORP: Court Denies Wells Fargo's Request for Documents MOOG INC: Moody's Rates Planned $50 Million Sr. Sub. Notes at Ba3 MOOG INC: S&P Rates Proposed $50 Million Sr. Sub. Notes at B+ MQ ASSOCIATES: Bondholders Agree to Amend Senior Note Indentures MQ ASSOCIATES: Lenders Waive Reporting Requirement Until Dec. 31 NAKOMA LAND: Wants to Hire Gold Mountain as Real Estate Broker NORTEL NETWORKS: Board Declares Dividends on Preferred Shares NORTHWEST AIRLINES: Duluth May Cut Off Ties Due to AMFA Strike OREGON STEEL: Moody's Upgrades $305 Million Notes' Rating to Ba3 PACIFIC GAS: Can Direct Deutsche Bank to Release $743K from Escrow PACIFIC GAS: Wants Partial Judgment on Lexington's $8-Mil Claims PHOENIX INT'L: Case Summary & 17 Largest Unsecured Creditors PONDEROSA PINE: Employs Cuyler Burk as Insurance Counsel PONDEROSA PINE: Hires FTI Consulting as Financial Advisor PONDEROSA PINE: Employs Paul Hastings as Regulatory Counsel PNC MORTGAGE: Scheduled Paydown Prompts Fitch's Rating Upgrades PROTOCOL SERVICES: Taps Murray Devine as Valuation Experts PROTOCOL SERVICES: Wants to Continue Hiring Ordinary Course Profs. QUADRAMED: Names Keith Hagen President & Chief Executive Officer RELIANCE GROUP: Asks Court to Approve Lloyd's Settlement Agreement RESTAURANT CO: Moody's Rates $190 Million Sr. Unsec. Notes at B2 RHODES INC: Has Until December 31 to Make Lease-Related Decisions SEA STREET RESTAURANT: Voluntary Chapter 11 Case Summary SHORE POINT: Case Summary & 20 Largest Unsecured Creditors SOLUTIA INC: JPMorgan Defends Request for Document Production STANDARD AERO: Senior Vice President Lee Beaumont Resigns STEEL DYNAMICS: Replaces $230-Mil Facility with $350-Mil Facility SUMMIT ONE LLC: Voluntary Chapter 11 Case Summary SUNDANCE FRAMING: Voluntary Chapter 11 Case Summary TECHNICAL OLYMPIC: Prices 4-Mil Share Offering at $28 Per Share TERAFORCE TECHNOLOGY: Selling DNA Computing's Assets for $2.9M++ TERAFORCE TECHNOLOGY: Wants to Tap BKR Cornwell as Tax Accountants TERAFORCE TECHNOLOGY: Court Sets October 14 as Claims Bar Date TOWER AUTOMOTIVE: Products Unit Selling Ky. Assets for $1.15M TOWER AUTOMOTIVE: Wants Until Jan. 27 to File Chapter 11 Plan TOWER AUTOMOTIVE: Wants Until March 31 to Decide on Leases TRANS MAX: Case Summary & 20 Largest Unsecured Creditors TRW AUTOMOTIVE: Fitch Sees No Rating Change after Dalphi Purchase UAL CORP: Battle Brews Over Barclay's Multi-Million Claim UNITED HOSPITAL: Gets Court Nod to Reject Six Burdensome Leases US AIRWAYS: Asks Court to OK Sale/Leaseback Deal with RPK Capital USG CORP: Has Until December 31 to File Plan of Reorganization VARICK STRUCTURED: Moody's Chips $350 Million Notes' Rating to Ba2 VISIPHOR CORP: Settles OSI Systems Dispute for $400 Million W.R. GRACE: Wants Scope of Nelson Mullins' Services Expanded WILLIAMS SCOTSMAN: Moody's Rates $325M Sr. Unsec. Note at (P)B3 WILLIAMS SCOTSMAN: S&P Rates $325 Million Sr. Unsec. Notes at B WINN-DIXIE: Creditors Committee Wants Equity Committee Disbanded WINN-DIXIE: Wants Gordon to Sell Equipment on Sept. 20 Auction WINN-DIXIE: IRS Has Until November 22 to File Proofs of Claim * Abria Financial Group Names Brian Kralik Vice President Finance * Jerry Lombardo Joins Goldin Associates from FTI Consulting * BOOK REVIEW: The Big Board: A History of the New York Stock Market ********* ABITIBI-CONSOLIDATED: S&P Affirms BB Corporate Credit Rating ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'BB-' long-term corporate credit and senior unsecured debt ratings on Abitibi- Consolidated Inc. following the company's announcement of its proposed US$600 million divestiture of its 50% interest in Pan Asia Paper Co. Pte Ltd. The transaction is expected to close later this fall and proceeds will be used for debt reduction. The outlook is negative. "The divestiture is an important step for the company to maintain its rating. The divestiture will improve its balance sheet, as Abitibi currently consolidates about US$300 million of Pan Asia's debt on its balance sheet," said Standard & Poor's credit analyst Daniel Parker. Thus, total debt could be reduced by more than C$1 billion. There is a partial offset on the earnings side, however, as Pan Asia accounts for about 10% of Abitibi's consolidated EBITDA, and the asset had a strong position in a growing market. The affirmation also reflects the continuing cost pressure affecting Abitibi's North American operations, including energy, fiber, and the appreciation of the Canadian dollar. The ratings on Abitibi reflect its high debt levels, heavy exposure to cyclical commodity-oriented groundwood papers, and weak, but improving financial performance in the wake of several years of highly unfavorable industry conditions. These risks are partially offset by the company's leading market share position in newsprint and groundwood papers, and by its competitive cost position in North America. Abitibi's profitability and cash flow generation have been weak because of a stronger Canadian dollar and structural changes to North American newsprint demand. In response to declining demand, newsprint produers (led by Abitibi), have closed substantial capacity to improve industry-operating rates, which are currently at about 96%. Improving newsprint prices have been mitigated by the appreciation of the Canadian dollar. For every one U.S. cent appreciation of the Canadian dollar, EBITDA is negatively affected by about C$35 million (net of hedging). As all of Abitibi's debt is denominated in U.S. dollars, the negative cash flow effect is partially offset by a decline in the translated Canadian dollar debt level. The negative outlook reflects concerns about the relentless cost pressure. The strong Canadian dollar and continued high energy, fiber, and freight prices are negating much of the benefit of higher newsprint prices. In addition, North American newsprint demand continues to decline. For the ratings to improve, Abitibi must demonstrate improved margins and cash flow generation. If the company is unable to do so, the ratings could be lowered. ALERIS INTERNATIONAL: Buys ALSCO Holdings for $150 Million ---------------------------------------------------------- Aleris International, Inc. (NYSE: ARS), entered into a definitive agreement to purchase 100% of the issued and outstanding stock of ALSCO Holdings, Inc., the parent company of ALSCO Metals Corporation, for $150 million in cash. ALSCO Metals Corporation, headquartered in Raleigh, North Carolina, is one of North America's largest suppliers of aluminum building products. The business had revenues approaching $300 million and operating income of $23 million for the 12 months ended June 30, 2005. ALSCO has approximately 615 employees. "Today's announcement marks a significant strategic step for Aleris," said Steve Demetriou, Chairman and Chief Executive Officer of Aleris International, Inc. "We are focused on profitably growing our core rolling business through internal improvement initiatives and strategic acquisitions. This acquisition is an excellent strategic fit that will broaden our customer base and enhance our ability to meet the needs of our customers." Aleris expects the acquisition to result in annualized cost synergies of at least $12 million. "These synergies are anticipated to come from the consolidation of redundant manufacturing operations, optimizing our scrap handling and melting capabilities, and other cost-reduction opportunities," said Demetriou. "We anticipate capturing the cost synergies over the next 18 months." Aleris expects the acquisition to be immediately accretive to earnings and cash flow. The transaction will be funded with cash and borrowings under its revolving credit facility. Aleris currently operates three rolling mills, including a direct chill casting facility in Kentucky and continuous cast facilities in Ohio and California. Through this acquisition Aleris will add to its portfolio the ALSCO rolling mill located in Bellwood, Virginia. "The addition of this rolling mill facility will allow us to expand our spectrum of products and build upon our rolling, metal sourcing, melting and recycling competencies," said John Wasz, President, Aleris Rolled Products Segment. In addition to the Bellwood rolling facility, Aleris will acquire coating and fabrication facilities located in Roxboro, North Carolina, Ashville, Ohio and Beloit, Wisconsin. Closing of the sale is subject to regulatory approval and is expected early in the fourth quarter. Aleris International, Inc. -- http://www.aleris.com/-- is a global leader in aluminum recycling and the production of specification alloys and is a major North American manufacturer of common alloy sheet. The Company is also a leading manufacturer of value-added zinc products that include zinc oxide, zinc dust and zinc metal. Headquartered in Beachwood, Ohio, a suburb of Cleveland, Aleris operates 29 production facilities in the U.S., Brazil, Germany, Mexico and Wales, and employs approximately 3,400 employees. * * * Standard & Poor's Ratings Services currently rates the Company's 10-3/8% Senior Secured Notes at B. ALL COUNTY: Gets Court Nod to Employ John Titler as Bankr. Counsel ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Northern District of Iowa approved All County Electrical Company's request to employ John M. Titler, Esq., as its bankruptcy counsel. Mr. Titler will: 1) provide legal advice as to the Debtor's powers and duties as the debtor-in-possession; 2) prepare all petitions, motions, complaints, answers, orders, reports, schedules, plans, disclosure statements and other legal papers as may be necessary and appropriate; 3) institute, defend and maintain suits and other legal proceedings for and on behalf of the Debtor for the purpose of collecting and protecting its assets and for the enforcement of Debtor's rights, generally, to the extent required; and 4) perform all other legal services for the Debtor as may be necessary or appropriate herein. Mr. Titler will be paid from the Debtor's assets at a rate of $175 per hour plus allowable out of pocket expenses. Mr. Titler assures the Court that he doesn't represent any interest adverse to the Debtor or its estate. Headquartered in Waterloo, Iowa, All County Electrical Company -- http://www.all-county-electrical.com/-- installs and repairs residential, commercial and industrial electrical, telephone, data, fire and burglar alarm systems. The Company filed for chapter 11 protection on June 8, 2005 (Bankr. N.D. Iowa Case No. 05-02707). John M. Titler, Esq., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets and debts between $1 million to $10 million. ALLOY HARDFACING: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Alloy Hardfacing and Engineering Company 20425 Johnson Memorial Drive Jordan, Minnesota 55352 Bankruptcy Case No.: 05-46034 Type of Business: The Debtor designs, manufactures and install custom-made equipment for ASME welding, blood processing, cooking, conveyance, engineering, feather processing, field service, heat transfer, mixers, pelletizing, sealing, separation, control systems, and waste water treatment. See http://www.alloy-inc.com/ Chapter 11 Petition Date: September 7, 2005 Court: District of Minnesota (Minneapolis) Judge: Robert J. Kressel Debtor's Counsel: Thomas J. Lallier, Esq. Foley & Mansfield, P.L.L.P. 250 Marquette, Suite 1200 Minneapolis, Minnesota 55401 Tel: (612) 338-8788 Fax: (612) 338-8690 Total Assets: $904,119 Total Debts: $1,697,061 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ William Aulik $600,000 c/o Johnson West 1400 Pioneer Building Saint Paul, MN 55101 Baldwin Supply Company Trade debt $225,421 601 11th Avenue South Minneapolis, MN 55415 Mark S. Aulik Trade debt $102,284 Alloy Hardfacing & Engineering Jordan, MN 55352 Oxygen Service Co. Inc. Trade debt $53,097 1111 Pierce Butler Route Saint Paul, MN 55104 American Express Company Trade debt $28,356 P.O. Box 0001 Chicago, IL 60679-0001 GW Transportation Service Trade debt $15,796 710 Johnson Drive Delano, MN 55328 Total Logistics Corporation Trade debt $15,285 6860 Shingle Creek Parkway Suite 206 Minneapolis, MN 55430 TS/UMT Trade debt $13,706 8259 Melrose Drive Overland Park, KS 66214 Minnesota Valley AG Coop Trade debt $11,713 27252 Helena Boulevard P.O. Box 93 New Prague, MN 56071 Ferguson Enterprises, Inc. Trade debt $9,281 2350 West County Road C #150 Saint Paul, MN 55113 Platinum Plus for Business Trade debt $8,845 P.O. Box 15469 Wilmington, DE 19886-5469 Circle Gear Trade debt $8,015 1501 South 55th Court Cicero, IL 60804 Davenport Dryer LLC $7,725 P.O. Box 6635 Rock Island, IL 61204 Darling International Trade debt $7,000 P.O. BOX 179 Alton, IA 51003 William Aulik 1997 Tahoe $6,897 c/o Johnson West 1400 Pioneer Bldg. Saint Paul, MN 55101 Bosch Rexroth Pneumatics Trade debt $6,785 5150 Prairie Stone Parkway Schaumburg, IL 60192 Building Fastners Trade debt $6,661 2827 Anthony Lane South Minneapolis, MN 55418 Sunsource Technologies Trade debt $6,208 10286 West 70th Street Eden Prairie, MN 55344 Industrial Kiln & Dryer Trade debt $6,012 12700 Shelbyville Road Louisville, KY 40243 Chicago Tube & Iron Trade debt $5,734 2940 Eagandale Boulevard Saint Paul, MN 55121 ALOHA AIRLINES: Wants Until October 28 to Decide on Leases ---------------------------------------------------------- Aloha Airgroup, Inc., and Aloha Airlines, Inc., ask the U.S. Bankruptcy Court for the District of Hawaii to extend the period within which they can elect to assume, assume and assign or reject unexpired leases of non-residential real property until October 28, 2005. The Debtors tell the Court that the leased premises are being utilized in their operations. They don't want to make a premature rejection or assumption of a lease which may prove to be important or cumbersome to the estates. The Debtors assure the Court that they are current in all their postpetition rent obligations. Headquartered in Honolulu, Hawaii, Aloha Airgroup, Inc. -- http://www.alohaairlines.com/-- provides air carrier service connecting the five major airports in the State of Hawaii. Aloha Airgroup and its subsidiary Aloha Airlines, Inc., filed for chapter 11 protection on Dec. 30, 2004 (Bankr. D. Hawaii Case No. 04-03063). Alika L. Piper, Esq., Don Jeffrey Gelber, Esq., and Simon Klevansky, Esq., at Gelber Gelber Ingersoll & Klevansky represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors it listed more than $50 million in estimated assets and debts. AMERISOURCEBERGEN CORP: Moody's Rates $900M Unsec. Notes at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned Ba2 ratings to AmerisourceBergen Corporation's (ABC's) new $500 million and $400 million offerings of senior unsecured notes. Proceeds from these transactions are expected to be used to refinance two existing senior note offerings. The company recently announced board authorization of approximately $400 million in share repurchases, which will raise total repurchase availability to $750 million. Following these announcements, Moody's affirmed ABC's existing long-term and speculative grade liquidity ratings. The rating outlook remains stable. The notes are being sold in privately negotiated transactions without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issue has been designed to permit resale under Rule 144A. ABC's Ba2 ratings are supported by: 1) solid operating cash flow relative to debt; 2) the likelihood that excess cash generated from lower working capital requirements will be used for shareholder initiatives; and 3) uncertainty associated with changes in PharMerica reimbursement. Since mid-December 2004, ABC has lowered guidance two times, due to lack of drug price increases and ongoing reductions in buy opportunities. Despite the fact that ABC had liquidated about $485 million of excess inventory during fiscal 2004, it appears that stricter enforcement of lower inventory levels as outlined under inventory management agreements has resulted in even fewer buy opportunities and lower profitability. Further reduction of inventory is resulting in approximately $1 billion in additional one-time cash flow benefits. The Ba2 ratings also reflect ABC's high reliance (85% of net earnings) on drug distribution -- a sector that continues to undergo transition due largely to a changing business model. Fee for service contract negotiations appear to be occurring, but the lack of clear incentives on the part of manufacturers to move to fee-for-service arrangements appears to be providing challenges during the transition. In addition, lack of transparency in negotiated contracts make an assessment of the impact difficult. In the meantime, Moody's believes that players in this sector have limited control over key factors affecting their margins in drug distribution. Further, Moody's believes that the ratings reflect a relatively aggressive posture toward shareholder initiatives. The company recently indicated its intention to accelerate share buybacks under its existing program. As of June 30, 2005, ABC has repurchased almost $800 million in shares during fiscal 2005. The rating agency expects ABC to continue using excess cash generated during the last quarter of fiscal 2005 for share buybacks. Under the prior senior note indenture, the company was limited in its ability to make restricted payments in the form of dividends or share repurchases. Moody's expects that the new senior notes will be governed by an indenture with greater flexibility. Recent regulations governing the Medicare Modernization Act of 2003 result in uncertainty for PharMerica, ABC's institutional pharmacy division, comprising about 15% of the company's net earnings. The new regulations appear to recognize the value added by institutional pharmacies, and Moody's believes that eliminating the need to negotiate with individual state Medicaid programs could be beneficial to this sector. However, the new regulations introduce the addition of risk-taking Prescription Drug Plans, which are likely to be health benefits companies. Under current legislation, the rating agency expects that rebates, which are currently negotiated between manufacturers and institutional pharmacies, will be moved to the PDP level. One uncertainty relates to how much leverage and, therefore, how much rebate will be retained by the institutional pharmacies. The stable outlook assumes that despite declining margins and net income, ABC should have enough flexibility in its cash position to continue buying back shares as well as to make a moderate-sized acquisition without significantly leveraging its balance sheet. Fewer buy opportunities should result not only in one-time liquidation benefits, but also less volatile working capital swings. A key factor limiting upside potential is the likelihood that ABC, along with the rest of the drug distribution sector, will be in a transition period over the near term. Prior to a ratings upgrade, ABC must demonstrate its ability to reverse profitability trends as the company weathers transitions in both its drug distribution and institutional pharmacy businesses. If profits and cash flow return to stronger levels and shareholder initiatives are not likely to result in significant increases in debt, so that operating cash flow and free cash flow to adjusted debt metrics are sustainable in the 20% and 15% range, respectively, the ratings or outlook may be raised. If ABC experiences further declines in cash flow or raise debt levels, so that operating and free cash flow to adjusted debt metrics fall below the 15% and 10% range, respectively, the ratings or outlook could be lowered. ABC's SGL-1 speculative grade liquidity rating reflects our expectation that over the next twelve months, ABC will not likely need external sources of liquidity due to the significant one-time boost in operating cash flow. Ratings assigned: AmerisourceBergen Corporation: * Ba2 $500 million new senior unsecured notes due 2015 * Ba2 $400 million senior unsecured notes due 2012. Ratings affirmed: * Ba2 corporate family rating (formerly senior implied rating) * SGL-1 speculative grade liquidity rating Ratings expected to be withdrawn (upon tender): AmerisourceBergen Corporation: * Ba2 $500 million 8 1/8% senior unsecured notes due 2008 * Ba2 $300 million 7 1/4% senior notes due 2012. AmerisourceBergen Corporation, headquartered in Valley Forge, Pennsylvania, is one of the nation's leading wholesale distributors of pharmaceutical products and related services. ARMSTRONG WORLD: Court Okays Pact Resolving Carlino's $34MM Claim ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved a stipulation inked among Armstrong World Industries, Inc., Carlino Arcadia Associates L.P., as successor to Carlino Development Group, Inc., and Wagman Construction, Inc., resolving the parties dispute regarding Carlino's $34,254,844 claim. Pursuant to the Stipulation, Carlino will be granted an allowed prepetition general unsecured claim for $388,024 and an allowed administrative expense claim for $242,934. AWI will remit to Carlino one-half of the Administrative Expense Claim. AWI will pay to Carlino the remainder of that claim on the effective date of any confirmed plan of reorganization in AWI's Chapter 11 case. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. As of March 31, 2005, the Debtors' balance sheet reflected a $1.42 billion stockholders' deficit. (Armstrong Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARVINMERITOR INC: Closing Shock Absorber Operation in Tennessee --------------------------------------------------------------- ArvinMeritor, Inc. (NYSE: ARM) plans to close its Light Vehicle Systems shock absorber assembly operation in Pulaski, Tenn., U.S. The company will transfer a portion of the production to its Detroit, Mich., U.S., and Toronto, Ont., Canada facilities, with remaining business being phased out by July 2006. The company met with employees today to discuss the transfer and closure plans, which will affect all 268 employees. "As announced in our second-quarter earnings release, ArvinMeritor identified the need to rationalize 11 sites, to further focus its businesses on serving customer needs and improve its return on invested capital," said Sidney Del Gaudio, vice president and general manager of LVS Undercarriage Systems. "Pulaski was one of the 11 sites chosen because its overall costs exceeded the short- and long-term returns required to sustain the business and remain competitive." ArvinMeritor's Light Vehicle Systems (LVS) business group posted $4.8 billion in sales during fiscal year 2004, and employs 17,000 people at 75 facilities in 23 countries. LVS -- a market leader in the product categories it serves -- supplies integrated systems and modules to the world's leading passenger car and light truck OEMs. With advanced technology and systems design expertise in apertures, undercarriage, wheel and emissions control, LVS combines high-quality components into cost-effective, performance- based solutions for virtually every car and light truck on the road today. ArvinMeritor, Inc. -- http://www.arvinmeritor.com/-- is a premier $8 billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. Headquartered in Troy, Mich., ArvinMeritor employs approximately 31,000 people at more than 120 manufacturing facilities in 25 countries. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. * * * As reported in the Troubled Company Reporter on Sept. 6, 2005, Fitch Ratings has affirmed the senior unsecured 'BB+' rating and Stable Outlook of ArvinMeritor, Inc. The company has announced an exchange tender offer for up to $300 million in face amount of its $499 million 6.8% notes due 2009 and its $150 million 7-1/8% notes also due 2009. Fitch has assigned an indicative rating of 'BB+' and a Stable Outlook to the new issue. The new debt would mature in 2015 and has not yet been priced. On Sept. 4, 2005, Standard & Poor's Ratings Services assigned its 'BB' rating to ArvinMeritor Inc.'s proposed $300 million senior unsecured notes due September 15, 2015. At the same time, S&P affirmed all other long-term ratings on the company and related entities. Total consolidated debt at June 30, 2005, stood at about $1.5 billion. As reported in the Troubled Company Reporter on Sept. 2, 2005, Moody's Investors Service assigned a Ba2 rating to approximately $300 million of new unsecured notes maturing in 2015 which ArvinMeritor, Inc. intends to issue under an exchange offer to existing holders of two debt obligations. The exchange offer will be for up to $300 million par value split, based on amounts tendered, between the 7.125% senior unsecured notes maturing in March 2009 ($150 million total) and the 6.80% senior unsecured notes maturing in February 2009 (total $499 million). The Ba2 rating is level with the current Corporate Family and Senior Unsecured ratings. ASARCO LLC: U.S. Trustee Appoints 7-Member Creditors' Committee --------------------------------------------------------------- Pursuant to Section 1102(a) and 1102(b) of the Bankruptcy Code, Richard W. Simmons, the United States Trustee for Region 7, appoints seven creditors to the Official Unsecured Creditors' Committee in ASARCO LLC's case: (1) Deutsche Bank Trust Company 60 Wall Street, 60-2715 New York, NY 10005 Attention: Mr. Stanley Burg Phone: (212) 250-5280 (2) Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Mr. Steve Cimalore Phone: (302) 636-6058 (3) Road Machinery, LLC 716 S. Seventh Street Phoenix, Arizona 85034 Attention: Mr. Chuck Paugh Phone: (602) 252-7121 (4) Hecla Mining Company 6500 Mineral Drive, Suite 200 Coeur d'Alene, Idaho 3815 Attention: Mr. Mike White Phone: (208) 769-4110 (5) Pension Benefit Guaranty Corporation 1200 K Street, N.W. Washington D.C. 20005-4026 Attention: Mr. Roger Reiersen Phone: (202) 326-4070 x 3704 (6) United Steelworkers Five Gateway Center Pittsburgh, Pennsylvania 15222 Attention: David R. Jury Phone: (412) 562-2545 (7) The Doe Run Resources Corporation 1801 Park 270 Drive, Suite 300 St. Louis, Missouri 63146 Attention: Mr. Lou Marucheau Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 thru 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos Of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos- driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. ASARCO has asked that the five subsidiary cases be jointly administered with its chapter 11 case. (ASARCO Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Gets Court Nod to Employ Bracewell as Special Counsel ----------------------------------------------------------------- ASARCO LLC sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of Texas to employ Bracewell & Giuliani LLP as special litigation counsel pursuant to Section 327(e) of the Bankruptcy Code, nunc pro tunc to Aug. 9, 2005. As reported in the Troubled Company Reporter on Aug. 31, 2005, Bracewell represented the company as environmental counsel, advising ASARCO on many issues, including environmental litigation. ASARCO will compensate Bracewell for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates: Professionals Hourly Rate ------------- ----------- Attorneys $400 - $200 paraprofessionals $75 ASARCO will also reimburse the firm for actual and necessary out-of-pocket expenses. Mr. Groten discloses that, within the 90-day period preceding the commencement of ASARCO's bankruptcy case, Bracewell received payment from ASARCO of $293,997 for professional services rendered and expenses incurred before the Petition Date. In addition, although Bracewell has a general unsecured claim against ASARCO for about $163,598 for prepetition services rendered for which the firm did not receive payment, it does not have or represent any interest adverse to the Debtor or its estate on the matters for which it is being retained as special counsel. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 thru 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos Of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos- driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. ASARCO has asked that the five subsidiary cases be jointly administered with its chapter 11 case. (ASARCO Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Court OKs Retention of Quarles to Tackle Labor Issues ----------------------------------------------------------------- ASARCO LLC sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Texas to employ Quarles & Brady Streich Lang as special litigation counsel for labor and employment issues, nunc pro tunc to Aug. 9, 2005. As previously reported in the Troubled Company Reporter on Aug. 31, 2005, Q&B represented the company in collective bargaining and in related labor matters and has provided advice and counsel to ASARCO on labor relations matters, including representing ASARCO at the Copper Group and Ray bargaining tables for contracts to replace those that expired June 30, 2004, and June 30, 2005. In addition, Q&B has defended ASARCO in numerous cases before the National Labor Relations Board filed in 2005 by the labor unions representing ASARCO's Arizona and Texas employees. The Debtor proposes to compensate Q&B for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates. The Debtor will also reimburse the firm for actual and necessary out-of-pocket expenses. Q&B's hourly rates for L&E lawyers at its Phoenix office range from $185 to $395. Q&B's current customary hourly rates for paraprofessionals range from $130 to $160. The professionals at Q&B who will primarily represent the Debtor and their hourly rates are: Professional Position Hourly Rate ------------ -------- ----------- Jon E. Pettibone Partner $365 Lisa Duran Partner $290 Dawn Valdivia Associate $200 The fee arrangement with ASARCO provides for a $45 discount to Mr. Pettibone's fee. The fee arrangement also provides for a $30,000 advance to be replenished monthly. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 thru 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos Of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos- driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. ASARCO has asked that the five subsidiary cases be jointly administered with its chapter 11 case. (ASARCO Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASPECT SOFTWARE: Moody's Places B1 Rating on $475 Million Debts --------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to Aspect Software Inc., a provider of contact center software products, applications and services. The ratings assigned are Corporate Family rating of B2 and B1 for the proposed secured revolver and first lien term loan facility. There is also a second lien term facility which Moody's was not asked to rate. Proceeds of the term loan and an unrated secured lien facility will be used to finance the $788 million acquisition of Aspect Communications Corporation by Concerto Software Inc. with the new company to be named Aspect Software Inc. These first time ratings have been assigned: * Corporate Family Rating - B2 * $ 50 million revolving credit facility due 2010 - B1 * $ 425 million senior secured term loan due 2010 - B1 The ratings outlook is Stable. The ratings reflect: 1) relatively mature nature of the call center software business; 2) ongoing competition with larger, better financed competitors, despite the company's increased scale and potential and possible leadership positions in key products; 3) possible integration risks as Heritage Concerto making its biggest acquisition thus far over the past 18 months; and 4) high leverage resulting from the combination with the potential for additional leverage from possible leveraged dividends of the company's venture investors. The ratings also consider: 1) the combined entity will become one of the largest contact center software providers with product strengths in each of the key contact center categories; 2) diversified client base of over 5,000 installed customers across a wide range of industry sectors; 3) good revenue and cashflow visibility with reasonable software maintenance contract renewal rates; and 4) reasonable credit protection measures with free cashflow representing over 10% of combined debt amount. The contact center industry is relatively mature, with growth rates generally expected to track overall economic growth rates. New offshoring volume often times takes away existing domestic volume and thus does not necessarily contribute to the overall growth of the sector. Organic revenue growth of the merged company is expected to be measured, net of market share gains. Both Heritage Concerto and Aspect provide software products and services to the contact center industry. The combined company will become one of the largest software service providers in the sector. Market share figures in key products are expected to be 30%. Aspect on a combined basis along with Avaya will be the two largest competitors in the contact software sector. However, both Avaya and another competitor Nortel are bigger in size though neither is a "pure play" in the contact center software business. The combined company is also expected to become a more integrated service provider, combining inbound (automatic call distribution/ACD) strength of Heritage Aspect's business, outbound (predictive dialer/PD) strength of Heritage Concerto's business, and workforce management software. The benefits of one stop shopping are yet to be proven, but could potentially enhance the merged company's ability to maintain market share. The current transaction represents the fifth acquisition for Heritage Concerto over the past 18 months and it is by far the largest. Successful integration is an important factor in future rating considerations. The combined company will have a diversified customer base, with over 5,000 customers. Top 10 and 20 customers represent about 22% and 30% of total revenue, respectively. The customer base is also diversified across vertical markets and Heritage Aspect and Concerto also serve some of the largest outsourcing contact centers in India. Although there is some customer overlap, revenue cannibalization is not expected to be significant due partly to different product strengths of heritage Concerto and Aspect. The combined company benefits from good revenue visibility due to the recurring nature of its maintenance contracts, typical of a software provider. Renewal rates are in the high 80% range, which is still reasonable. Pro-forma leverage is about 3.7 x EBITDA, assuming management projected cost synergy can be achieved. The amount of synergy assumed here appears to be consistent with transaction of this kind. Interest coverage is satisfactory at 3.2x. One element of potential risk is a possible leveraging event as a result of the eventual exit of the company's venture investors. Golden Gate Capital and Oak Investment combined own more than 75% of the company. The B1 ratings on the first lien revolver and term loan facility are notched above that of the Corporate Family rating. This is a reflection of the first priority of the first lien piece in the pro forma capital structure and the credit support provided by $250 million second lien tranche, unrated by Moody's and the fresh $200 million equity contribution from the sponsors. While the company's balance sheet is comprised largely of intangible assets of goodwill and IP, enterprise value should provide adequate protection and cushion for the first lien holders. Moody's was not asked to rate the second lien piece which is expected to be taken up by a club of private lenders. Moody's also notes that the cash flow of the U.S. guarantors represent over 80% of consolidated cash flow, and that IPs largely reside in the U.S. entities. The ratings could be positively influenced if the company can successfully integrate its operations; de-leverage and enhance credit metrics. Conversely, the ratings could be negatively impacted if leverage and coverage ratios, currently modest for its rating category, were to worsen as a result of poor operating results and/or a further leveraging event. Concerto Software Inc. is headquartered in Westford, Massachusetts with operations across the Americas, Europe and Asia Pacific. Concerto provides products and services that enable business processes including customer service, collections, and sales and telemarketing for in-house and outsourced contact centers. Aspect Communications Corp. is headquartered in San Jose, California, with offices in countries around the world. The company develops, markets, licenses and supports an end-to-end, integrated suite of contact center software applications that support: * customer communications, * customer and contact center information; and * workforce productivity. LTM revenue for the combined company is $636 million. ATA AIR: Chicago Creditors' Move for Panel Appointment Draws Fire ----------------------------------------------------------------- As reported in the Troubled Company Reporter on August 29, 2005, the Ad Hoc Committee of unsecured creditors, which holds $800,000 in claims against Chicago Express Airlines, Inc., asked the U.S. Bankruptcy Court for the Southern District of Indiana to direct the U.S. Trustee to appoint an official committee of unsecured creditors in Chicago Express' chapter 11 case. The Chicago Express creditors allege that they have been denied adequate representation in the ATA Airlines, Inc. and its debtor-affiliates' jointly administered bankruptcy cases. Aaron L. Hammer, Esq., Esq., at Freeborn & Peters LLP, in Chicago, Illinois, tells the U.S. Bankruptcy Court for the Southern District of Indiana that neither the non-Chicago Express Debtors nor the present Creditors Committee have taken any action to avoid the $481 million in guarantee obligations which Chicago Express was required to provide to certain bondholders on account of the non-Chicago Express Debtors' various prepetition financing transactions, although Chicago Express did not benefit from the Guarantees. Mr. Hammer points out that, unsurprisingly, the Creditors Committee -- which has two ATA bondholder members that hold the Chicago Express Guarantee claims -- has not clamored for avoidance of the fraudulent Guarantees. In addition, the non-Chicago Express Debtors siphoned significant value from Chicago Express in the period immediately prior to the Petition Date, which resulted in the $15.6 million net intercompany receivable due from ATA Airlines, Inc., to Chicago Express. Objections (1) Creditors Committee The Official Committee of Unsecured Creditors opposes the request of the Ad Hoc Committee for the appointment of an official creditors committee of Chicago Express Airlines, Inc., now known as C8 Airlines, Inc. C.R. Bowles, Jr., Esq., at Greenebaum, Doll & McDonald, PLLC, in Louisville, Kentucky, asserts that the interests of all of the Debtors' creditors are being adequately represented. He says that the Creditors Committee has taken a very active role in the Debtors' Chapter 11 cases and has performed its fiduciary duties. Mr. Bowles points out that the Ad Hoc Committee, in its accusation against the Creditors Committee's inaction with respect to the Prepetition Guarantees and the Intercompany Receivable, ignores the findings of Kenneth Malek, the Examiner appointed by the U.S. Trustee, that: (a) the costs and time required to resolve the complex issue of the validity of the guarantees by Chicago Express are "inconsistent with the value and time sensitivities of the [estate of Chicago Express]"; and (b) Chicago Express has a valid prepetition receivable from ATA Airlines of approximately $17 million, that Chicago Express owes ATA Holdings Corp. a prepetition amount of approximately $1.9 million, and that Chicago Express owes ATA Airlines a postpetition amount of approximately $2.4 million. Mr. Bowles adds that, based on a straight forward application of the absolute priority rule, the Chicago Express creditors may not receive any distribution from the Chicago Express Estate as there may not be sufficient funds in that Estate to pay its third party administrative creditors. Even if the prepetition guarantees and the intercompany receivables are invalidated, this would not produce a recovery for the Chicago Express creditors unless the Estate has sufficient funds to pay the administrative claims in full, Mr. Bowles avers. Moreover, the Creditors Committee would be violating its fiduciary duties to the Chicago Express creditors if it acted as the Ad Hoc Committee is suggesting and pursued the litigation at this time, further dissipating the remaining assets of the Chicago Express Estate. According to Mr. Bowles, contrary to the Ad Hoc Committee's claims, the Creditors Committee's composition clearly shows that the bondholders do not dominate the Creditors Committee. The Committee is composed of two trade creditors -- Flying Food Group, LLC and Airport Terminal Services -- and two unions -- ALPA and the Association of Flight Attendants -- in addition to three entities that represent the interests of the Debtors' bondholders -- John Hancock Funds and Loeb Partners plus Wells Fargo Bank, N.A. as indenture trustee. There are other avenues for the Chicago Express creditors to participate in the Debtors' restructuring, Mr. Bowles notes. Section 1109 of the Bankruptcy Code allows creditors, including the Ad Hoc Committee to be heard on any issue. In addition, in the event of a filing of a plan of liquidation for Chicago Express, the Chicago Express creditors will be able to object to its terms and may vote for or against the plan. Accordingly, the Creditors Committee asks the Court to deny the Motion. (2) Debtors The Debtors echo the sentiments of the Creditors Committee and object to the request for the creation of an official creditors committee for Chicago Express. Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, Indiana, asserts that the Motion is untimely, unfounded and unsupported by facts. Ms. Hall tells the Court that there may be no recovery to unsecured creditors of Chicago Express, notwithstanding the presence or avoidance of certain prepetition guarantees. She points out that Chicago Express' estate is slightly more than $1 million based on the sale of its assets. Its remaining assets are an engine, certain avoidance actions, and two postpetition receivables related to services to Indiana cities and that is in negotiations. According to Ms. Hall, ATA Airlines' postpetition receivable has continued to grow as ATA has continued to fund the postpetition administrative expenses of Chicago Express, to attempt to maximize the return to its creditors. Ms. Hall argues that the Chicago Express creditors will not be well served by expending what proceeds there are to pay professionals of another committee. She warns that the costs may guarantee administrative insolvency of the Chicago Express estate. Moreover, the issues being raised in the Motion have been raised and asserted numerous times in pleadings filed by NatTel, LLC, including an appeal of the Court's order authorizing the sale of Chicago Express assets, which appeal was later withdrawn. It is not clear from the Motion whether NatTel is a member of the "ad hoc" committee identified, but the issues raised are the same. The time and energy expended in attending to these issues over and over again wastes resources of all the estates, including that of Chicago Express. In addition, the Debtors believe that the request made in the Motion was earlier made of the U.S. Trustee, who declined to appoint an additional committee for Chicago Express, though he did offer to add a trade creditor of Chicago Express to the Creditors Committee. This offer was declined, says Ms. Hall. Pursuant to Section 1102(a) of the Bankruptcy Code, the appointment of an additional committee is completely discretionary and depends on the facts of each case. Ms. Hall reminds the Court that nothing raised in the Motion requires the appointment of an additional committee, and the attendant expense, complexity, and waste of resources that the appointment would entail. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) AXTEL SA: Moody's Upgrades Corporate Family Rating to B1 from B2 ---------------------------------------------------------------- Moody's Investors Service has upgraded Axtel, S.A. de C.V.'s corporate family rating to B1 from B2 to reflect Axtel's improved credit metrics as a result of solid sales and EBITDA growth. The same change to B1 from B2 was made to the senior unsecured rating for the Mexican corporate. The outlook on the ratings is stable. This issue was affected by Moody's upgrade: -- US$250 million of 11% Senior Unsecured Notes due 2013 Axtel's ratings upgrade is supported by its strong and consistent increase in sales over the past two years, as well as 2004 growth in EBITDA, which Moody's expects will be, by FYE 2005, equivalent to over 4 times cash interest expenses. Growth in EBITDA has also strengthened the company's financial position, as total debt dropped from 2.9 times EBITDA in 2003 to 1.6 times at FYE 2004. The consistent earnings growth reflects Axtel's successful strategy of: 1) assuring its access to high-profile subscribers such as business customers and large residential developments; and 2) choosing the right technology (wireless local loop) to compete against incumbent Telmex. This strategy, coupled with sharp operating expense management, has generated the means for funding the expansion of the company's network; the consequent increase in telephone lines (530,000 as of June 2005) has more than offset expected reductions in the average revenue per user. The ratings also benefited from Axtel's consistent market share gains, from 9% in 2003 to the current 10.9% in the business customers segment; this represents 38.9% of the company's total lines and approximately 69% of revenues as of June 2005. The company also has a sound maturity profile, as no significant debt matures before 2013, and strong sponsorship from large shareholders. Axtel has also reduced its foreign exchange exposure, as it has entered into cross currency swaps to hedge interest payments on the $250MM senior notes up to 2008. The company's ratings are restrained, however, by low free cash flow generation, declining prices in traditional telephone services and by the uncertainties around any possible acquisition of a related or non-related business, which could impact the company's leverage and profitability. Despite the recent sales growth performance, it is unlikely that the company will be able to post similar rates of sales increase in the years to come, due to competition from the dominant telephone carrier and the effects of wireless substitution, which have been forcing a reduction in tariffs. However, Moody's expects that the company's strategy of targeting business customers, as well as new residential developments, will generate double digit sales growth for the coming years. The rating outlook is stable as per Moody's belief that Axtel's sales, EBITDA and cash generation will increase mostly as a consequence of the development of the Mexican fixed line market coupled with market share gains in existing or new cities. Moody's rating also recognizes that the company is expanding its network to support revenue growth in a cost-effective manner. Moody's also regards Axtel as well positioned, from a cash and technology perspective, to participate in the market for fixed line telecommunication services, which will eventually offer bandwidth for video at home and home networking, besides the current Internet access. Factors that could contribute to upward pressure on the B1 rating would be if the company posts free cash flow in amounts that reduce its leverage exposure, as demonstrated by FCF to total debt higher than 10% and if it increases interest coverage, as per EBITDA over 6.5 times interest expense. Should credit metrics be impacted by an acquisition that increases leverage, should projected subscriber base growth slow sharply, or should average revenue per user drop more than the expected annual decline of 10%, the rating agency would place pressure on the rating. Axtel, with headquarters in the city of Monterrey, Mexico, is a competitive local telephone company providing bundled products including voice, data and Internet services. BGK SECURITY: Case Summary & Largest Unsecured Creditors -------------------------------------------------------- Debtor: BGK Security Services, Inc. 7810 South Claremont Avenue Chicago, Illinois 60620 Bankruptcy Case No.: 05-36263 Type of Business: The Debtor is a security agency. Chapter 11 Petition Date: September 8, 2005 Court: Northern District of Illinois (Chicago) Judge: Jack B. Schmetterer Debtor's Counsel: Richard N. Golding, Esq. Weinberg Richmond LLP 333 West Wacker Drive Chicago, Illinois 60606 Tel: (312) 845-2512 Fax: (312) 807-3903 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million A full-text copy of the Debtor's 8-page List of Unsecured Creditors is available for free at: http://bankrupt.com/misc/BGKSecurityListofUnsecuredClaims.pdf BIO-ONE CORP.: Fred Zeidman Named Chief Restructuring Officer ------------------------------------------------------------- Bio-One Corp. (Pink Sheets:BICO) has named Fred Zeidman as its Chief Restructuring Officer of the Company. Mr. Zeidman's most recent successes include acting as Chairman of Seitel, Inc. and overseeing the restructuring of Seitel, Inc. in Chapter 11, and the recovery of nearly a quarter of a billion dollars in damages for the shareholders of AremisSoft. "Mr. Zeidman's skills are exactly what the shareholders of Bio-One need. We are fortunate to have his services for the Company in this critical period," stated John Ruddy, Director of Bio-One Corporation. Mr. Zeidman added, "Bio-One has a significant, multi-million dollar investment in Interactive Nutrition International, Inc. The Company intends to vigorously protect the interests of its shareholders and creditors in INII." About Fred S. Zeidman Mr. Zeidman was appointed Chairman of the United States Holocaust Memorial Council by President George W. Bush in March 2002. The Council, which includes 55 Presidential-appointed members and ten members from the U.S. Congress, is the governing board of the United States Holocaust Memorial Museum. A prominent Houston-based business and civic leader, Mr. Zeidman is Chairman of the Board of Seitel, Inc. and Chairman of the Board of Corporate Strategies, Inc. In 2004 he joined Greenberg Traurig as Senior Managing Director of Governmental Affairs. Mr. Zeidman also currently serves as a director of Prosperity Bank in Houston. Mr. Zeidman holds a Bachelor's degree from Washington University in St. Louis, and a Master's in Business Administration from New York University. Mr. Zeidman's Prior Posts Seitel is a leading provider of seismic data and related geophysical expertise to the petroleum industry. Their products and services are used by oil and gas companies to assist in the exploration for and development and management of oil and gas reserves. AremisSoft Corporation was a publicly traded company involved in software manufacturing that was the victim of a massive fraud at the hands of its former executive, which caused over $500 million in shareholder losses. As Trustee appointed by the United States District Court of the District of New Jersey, Mr. Zeidman has been charged with investigating and recovery damages on behalf of the former shareholders. To date the trustees have recovered in excess of $240 million. Bio-One Default Bio-One is currently in default under the Secured Convertible Debenture for its failure to make the required payments and for its failure to properly perfect Cornell Capital's security interest in accordance with in the Secured Convertible Debenture and the Security Agreement. Pursuant to this default, Cornell Capital Partners, LP, may foreclose on all of the assets of Bio- One, including, but not limited to, all of Bio-One's ownership interests in all of its subsidiaries. Therefore, as a result of a foreclosure, Bio-One would no longer have an ownership if any of its subsidiaries and could be forced to curtail or cease its business operations. About Bio-One Headquartered in Winter Park, Florida, Bio-One Corporation manufactures nutritional supplements that it markets to healthcare providers. Bio-One's latest balance sheet, dated Sept. 30, 2004, shows $52 million in assets and $40 million in liabilities. Grant Thornton cautions that these financial statements are unreliable. BOMBARDIER RECREATIONAL: Moody's Rates $50M Sr. Sec. Loan at Ba3 ---------------------------------------------------------------- Moody's Investors Service upgraded Bombardier Recreational Products' (BRP) senior secured revolving credit facility to Ba3 from B1 and assigned a Ba3 rating to BRP's US $50 million senior secured term loan. At the same time, Moody's affirmed both BRP's B1 corporate family rating and its B3 subordinated notes rating, in addition to withdrawing the rating on the US $275 million senior secured term loan, which was repaid with the proceeds from the new term loan and cash on hand. The ratings outlook is stable. The ratings upgrade of the senior secured revolving credit facility to Ba3 reflects the improved expected loss prospects of the debt in light of the reduction in the term loan outstanding and its priority position in the capital structure and the strong asset collateralization, namely inventory, accounts receivable and fixed assets and BRP's strong brand value. The overall ratings of BRP reflect its strong cash flow, which, together with the $40 million of proceeds from the sale of its utility business, has enabled BRP to repay close to US $230 million of funded debt since the beginning of 2004. In addition, the ratings of BRP reflect the company's strong brand names and market positions in: * snowmobiles, * personal watercraft, * sport boats, and * marine engines. BRP's ratings are also supported by management's emphasis on cost controls and the company's generally conservative financial profile. The ratings further reflect the company's vulnerability to: * increased energy costs; * economic cycles; * foreign exchange fluctuations; * seasonal spending patterns; * the discretionary nature of the demand for its products; and * the risks associated with BRP's revised ATV strategy of selling to the sports, recreational-utility and youth enthusiasts. Management's restructuring actions to rationalize capacity, consolidate distribution centers and reduce manufacturing costs are credit positives, yet the increase in oil prices and the potential cascading effect on consumer spending for recreational products is a risk. Moody's believes the company's liquidity profile with modest cash balances ($35 million at April 30, 2005), minimal amortizing debt, an undrawn $250 million revolver, annual operating cash flow of around $100 million, suspension of the defined benefit pension plan and access to bank and capital markets, should provide BRP with adequate liquidity to meet the significant seasonal working capital needs of its business. The stable outlook is predicated on Moody's expectation that BRP will continue to repay debt with excess cash flow and that BRP will maintain its leading market positions and maintain or increase sales and profits through new product introductions, manufacturing optimization efforts, and low-cost sourcing arrangements. The stable outlook also reflects Moody's belief that BRP's improving credit metrics with adjusted EBIT margins (adjusted EBIT/revenue) for the LTM ended April 2005 of 5.5% (up from 2.6% in January 2004) and leverage (adjusted debt/adjusted EBITDA) of 2.6x (down from 6.5x in January 2004) will substantially be maintained even if demand for its products moderates. In accordance with Moody's Global Standard Adjustments, these analytical adjustments were made to BRP's reported numbers: * capitalize operating leases; * expense unrecorded stock compensation (and adjust cash flow for the income tax benefit); * add back the uncollected portion of securitized receivables; and * record an obligation for BRP's potential contingent liability for floor plan financing. A ratings upgrade could be considered if the company's margins improve closer to high single or low double digit and retained cash flow to adjusted debt is maintained at or above its current level of about 20%. However, an upgrade would also be contingent upon the assumption that BRP can maintain its improved credit profile within the normal cyclical and seasonal patterns of the industry and potential decrease in consumer spending. Given the continuing improvements in leverage, Moody's does not anticipate downward rating pressure outside of event risk associated with acquisitions or a severe pull back in demand in the marine industry. However, an increase in leverage to around 4x and a retreat in EBIT margins to the low single digits combined with a change in its strategy or a severe downturn in consumer spending could cause Moody's to revise the ratings down. The Ba3 rating on BRP's term loan reflects its priority in the capital structure as supported by subsidiary guarantees and collateral pledges. BRP is the borrower under the term loan, which is guaranteed by all U.S. and Canadian subsidiaries. The term loan is secured by substantially all of the assets of the borrowers and guarantors. Because of these benefits, along with strong asset coverage and brand value, the rating of the term loan is notched one level above the B1 corporate family rating. In connection with the new term loan, the company amended the secured credit facility (credit facility includes the revolver and term loan). The amended facility reduced the pricing of the revolver, eliminated the excess cash flow sweep of the term loan and removed the fixed charge covenant; the amended credit facility still contains customary limitations and financial covenants governing maximum total leverage, minimum interest coverage, and maximum capital expenditures. The term loan amortizes 1% per year with a bullet payment due on maturity. Rating upgraded: * Senior secured revolver to Ba3 from B1; Rating assigned: * US $50 million senior secured term loan at Ba3; Ratings affirmed: * US $200 million subordinated notes at B3; * Corporate family rating at B1. With corporate headquarters in Valcourt, Quebec, Bombardier Recreational Products Inc. is a leading designer, manufacturer, and distributor of motorized recreational products worldwide. Net sales for the twelve-month period ended April 2005 were approximately C$2.4 billion. BRICE ROAD: Wants to Hire Bailey Cavalieri as Bankruptcy Counsel ---------------------------------------------------------------- Brice Road Developments, L.L.C., asks the U.S. Bankruptcy Court for the Southern District of Ohio for permission to employ Bailey Cavalieri LLC as its general bankruptcy counsel. Bailey Cavalieri will: a) advise the Debtor of its rights, powers, and duties as a debtor and debtor-in-possession in continuing to operate and manage its business and property; b) prepare on behalf of the Debtor all necessary and appropriate applications, motions, draft orders, other pleadings, notices, schedules, and other documents, and review all financial and other reports to be filed in its chapter 11 case; c) advise the Debtor concerning responses to, applications, motions, other pleadings, notices, and other papers that may be filed and served in its chapter 11 case and assist in the negotiation and documentation of financing agreements, cash collateral orders and related transactions; e) review the nature and validity of any liens asserted against the Debtor's property and advise it concerning the enforceability those liens; f) advise the Debtor concerning actions that it might take to collect and recover property for the benefit of its estate and assist in connection with any potential property dispositions; g) counsel the Debtor in connection with the formulation, negotiation, and promulgation of a plan of reorganization and its related documents; h) advise the Debtor concerning executory contract and unexpired lease assumptions, assignments, and rejections and lease restructurings and assist in reviewing, estimating and resolving claims asserted against the Debtor's estates; i) commence and conduct any and all litigation necessary to assert rights held by the Debtor, protect assets of the Debtor's chapter 11 estate and further the goal of completing the Debtor's successful reorganization; and j) perform all other necessary legal services to the Debtor in connection with its chapter 11 case. Yvette A. Cox, Esq., a Member of Bailey Cavalieri, is one of the lead attorneys for the Debtor. Ms. Cox disclosed that her Firm received a $10,000 retainer. Ms. Cox charges $325 per hour for her services. Ms. Cox reports Bailey Cavalieri's professionals bill: Designation Hourly Rate ----------- ----------- Members $260 - $445 Associates & Counsel $175 - $270 Paralegals $140 - $145 Professional Designation Hourly Rate ------------ ----------- ----------- Timothy A. Riedel Counsel $270 Matthew T. Schaeffer Associate $230 Timothy B. McGranor Associate $220 Adam J. Biehl Associate $210 Craig R. Hartpence Paralegal Assistant $145 Beth A. Dannaher Paralegal Assistant $140 Bailey Cavalieri assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Dublin, Ohio, Brice Road Developments, L.L.C., owns Kensington Commons, a 264-unit apartment complex located outside of Columbus, Ohio. The Company filed for chapter 11 protection on Sept. 2, 2005 (Bankr. S.D. Ohio Case No. 05-66007). When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. BRICE ROAD: Section 341(a) Meeting Scheduled for October 13 ----------------------------------------------------------- The U.S. Trustee for Region 9 will convene a meeting of Brice Road Developments, L.L.C.'s creditors at 10:00 a.m., on Oct. 13, 2005, at the Office of the US Trustee, 170 North High Street, Suite 204 Columbus, Ohio 43215. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Dublin, Ohio, Brice Road Developments, L.L.C., owns Kensington Commons, a 264-unit apartment complex located outside of Columbus, Ohio. The Company filed for chapter 11 protection on Sept. 2, 2005 (Bankr. S.D. Ohio Case No. 05-66007). Yvette A Cox, Esq., at Bailey Cavalieri LLC 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. CAPITAL AUTOMOTIVE: Moody's Reviews Ba1 Preferred Stock Rating -------------------------------------------------------------- Moody's Investors Service placed its ratings of Capital Automotive REIT on review for possible downgrade. This review was prompted by CARS' announcement that it has agreed to be acquired for cash by clients advised by DRA Advisors LLC. The total transaction value is approximately $3.4 billion, including the assumption of CARS indebtedness and preferred shares. CARS' Series A and Series B Cumulative Redeemable Preferred Shares will remain outstanding after the close of the acquisition as preferred shares of CARS. The closing of the transaction, which is expected to occur in late 2005 or early 2006, is subject to the approval of the REIT's common shareholders and other customary closing conditions. Holders of common limited partnership interests in Capital Automotive L.P., the REIT's operating partnership, will be given the choice of either receiving cash, or continuing their interest in the operating partnership indirectly through a membership interest in an affiliate of DRA. Moody's remarked that although the precise capital structure of CARS subsequent to this transaction is not yet clear, it is likely that leverage, particularly secured leverage, will increase materially, while other credit metrics are likely to deteriorate. Thus, a rating downgrade could be more than one notch. In its review, Moody's will focus on CARS' pro forma capital structure -- specifically, overall leverage and the use of secured debt -- and strategic profile. Ratings under review for possible downgrade are: Capital Automotive REIT: * Senior unsecured debt rated Baa3 * preferred stock rated Ba1 Capital Automotive REIT [NasdaqNM: CARS], headquartered in McLean, Virginia, is a self-administered, self-managed real estate investment trust. The REIT's strategy is to acquire real property and improvements used by operators of multi-site, multi-franchised automotive dealerships and related businesses. As of June 30, 2005, the REIT had real estate investments primarily consisting of interests in 345 properties, representing 509 automotive franchises in 32 states. The properties are leased under long-term, triple-net leases with a weighted average initial lease term of approximately 15.1 years. Approximately 76% of the REIT's real estate portfolio is located in the top 50 metropolitan areas in the USA in terms of population, and 73% of the REIT's real estate portfolio is invested in properties leased to the "Top 100" dealer groups as published by "Automotive News." The REIT reported assets of $2.4 billion and shareholders equity of more than $1 billion at June 30, 2005. CARDTRONICS INC: June 30 Balance Sheet Upside-Down by $49.8 Mil. ---------------------------------------------------------------- Cardtronics, Inc., reported its financial results for the quarter ended June 30, 2005. For the second quarter of 2005, revenues totaled $69.2 million, representing a 99.4% increase over the $34.7 million in revenues recorded during the second quarter of 2004. Net income for the second quarter of 2005 totaled approximately $200,000, compared to approximately $800,000 million for the same period in 2004. The quarterly results for both periods include write-offs of deferred financing costs totaling $2.5 million in each period, resulting from the refinancing of the Company's bank credit facilities in May 2005 and June 2004. The year-over-year increase in revenues was primarily due to the Company's acquisition of the E*TRADE ATM portfolio in June 2004, and, to a lesser extent, additional acquisitions consummated during the first six months of 2005, including: * the BAS Communications, Inc. ATM portfolio in March 2005; * the Neo Concepts, Inc. ATM portfolio in April 2005; and * Bank Machine Limited in the United Kingdom in May 2005. The decrease in net income was primarily due to the additional interest, depreciation and amortization expense amounts associated with the aforementioned acquisitions. For the six months ended June 30, 2005, revenues totaled $127.5 million, representing an increase of 88.3% over the $67.7 million in revenues recorded during the first six months of 2004. Net income for the six months ended June 30, 2005, totaled $2.1 million, compared to $1.1 million for the same period in 2004. As was the case with the quarterly results outlined above, the year-over-year increase in revenues was due primarily to the E*TRADE ATM portfolio acquisition consummated in June 2004. The year-over-year increase in net income was largely due to the fact that the 2004 results included an additional $1.3 million, net of tax, in stock compensation charges when compared to the 2005 results. The 2005 results are not fully reflective of the operations of the acquired Neo Concepts, Inc. portfolio (which was in transition to the Company's operating platform during the second quarter) or of Bank Machine Limited, which has only been included in the Company's financial results for two months during the second quarter. "Cardtronics has achieved a tremendous amount of progress with respect to its growth initiatives during the first six months of 2005," remarked Jack Antonini, Chief Executive Officer of Cardtronics. "With the Bank Machine acquisition, our first outside of the United States, we have demonstrated our commitment to expanding our domestic ATM operating expertise to selected international markets. Additionally, we have continued to make great strides domestically with our bank-branding program, as evidenced by the recent agreement with JPMorgan Chase to brand our ATMs located in Duane Reade drugstores throughout the New York metropolitan area. Combined, we have laid a solid foundation for our future domestic and international growth initiatives." Headquartered in Houston, Texas, Cardtronics Inc. -- http://www.cardtronics.com/-- an owner/operator of ATMs with a nationwide U.S. network of more than 25,000 locations operating in every major market and in all 50 states as well as 1,000 locations throughout the United Kingdom. Major U.S. merchant-clients include A&P, Albertson's, Amerada Hess, Barnes & Noble College Bookstores, BP Amoco, Chevron, Costco, CVS/pharmacy, ExxonMobil, Duane Reade, Rite Aid, SSP/Circle K, Sunoco, Target and Walgreens. Cardtronics' unique ATM footprint enables it to offer ATM branding opportunities to financial institutions across the USA. Branded ATMs deployed at Cardtronics' major merchant-clients increase account access convenience for the depositors of these financial institutions as well as customer foot traffic for the merchant- clients. At June 30, 2005, Cardtronics Inc.'s balance sheet showed a $49,760,000 stockholders' deficit, compared to a $2,164,000 deficit at Dec. 31, 2004. CATHOLIC CHURCH: Spokane Begins Appeal of Parish Property Decision ------------------------------------------------------------------ The Diocese of Spokane and 22 members of the Association of Parishes in Washington filed separate notices advising Judge Williams that they will take an appeal to the U.S. District Court for the Eastern District of Washington from the Bankruptcy Court's order granting the Committee of Tort Litigant's request for partial summary judgment and finding that certain properties that the Diocese "held for another" actually constitute property of the Diocese's estate. The Diocese and the Association of Parishes and certain related schools and ministries will also take an appeal from the Bankruptcy Court's order denying the Association's request to dismiss the Litigants Committee's complaint for lack of standing and lack of jurisdiction. Saint Phillips Villa, Inc., filed a joinder to the Association's appeal. Saint Phillips holds a $2,064 claim against Spokane. Spokane will also ask the District Court to determine whether Judge Williams erred in her decision denying Spokane's cross- motion for summary judgment. The 22 members of the Association of Parishes are: 1. Assumption Church Spokane, 2. Cathedral of Our Lady of Lourdes Spokane, 3. Mary Queen of Heaven Church Spokane, 4. Our Lady of Fatima Parish Spokane, 5. Sacred Heart Church Spokane, 6. St. Aloysius Church Spokane, 7. St. Ann Church Medical Lake, 8. St. Anne Church Spokane, 9. St. Anthony Church Spokane, 10. St. Augustine Church Spokane, 11. St. Charles Church Spokane, 12. St. Francis Assisi Church Spokane, 13. St. Francis Xavier Church Spokane, 14. St. John Vianney Church Spokane Valley, 15. St. Joseph Church Colbert, 16. St. Joseph Church Otis Orchards, 17. St. Joseph Church Spokane, 18. St. Mary Church Spokane Valley, 19. St. Mary Presentation Church Deer Park, 20. St. Peter Church Spokane, 21. St. Rose of Lima Cheney, and 22. St. Thomas Moore Parish Spokane A complete list of the members of the Association of Parishes and the schools and ministries is available for free at: http://bankrupt.com/misc/assoc_parishes_schools_ministries.pdf The parishes, schools and ministries are represented by John D. Munding, Esq., at Crumb & Munding, P.S., in Spokane, and Ford Elsaesser, Esq., at Elsaesser Jarzabek Anderson Marks Elliott & McHugh, in Sandpoint, Idaho. Spokane & Parishes Want Order Stayed The Diocese of Spokane, the Association of Parishes and the related schools and ministries seek leave from the Bankruptcy Court to file appeals from Judge Williams' Orders. The 22 members of the Association of Parishes also ask the Bankruptcy Court to stay the Orders pending the appeals. Shaun M. Cross, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, in Spokane, Washington, explains that the Bankruptcy Court's Orders are of great significance to the Diocese and other defendants. Unless reversed by an appellate court, the Orders have the effect of creating a "law of the case" which would result in the Diocese being forced to submit a plan of reorganization that includes property in which it has no beneficial interest. That plan, Mr. Cross points out, would pit the Diocese against the true beneficial owners of the disputed property, the schools and parishes, in violation of the civil and canonical trust relationship between the Diocese, on the one hand, and the parishes and schools on the other. The Bankruptcy Court's decision will lead to the disruption of Diocese's reorganization process and subject all non-debtors in other bankruptcies to unrestricted litigation advanced by creditors committees acting as de facto trustees, says John D. Munding, Esq., at Crumb & Munding, P.S., in Spokane, Washington. According to Mr. Munding, the Bankruptcy Court's decision granting summary judgment substantially affects and implicates rights of the 22 Parishes, in property, by divesting them of their interests in property without considering evidence properly before the Bankruptcy Court. If not corrected now, Mr. Munding says Judge Williams' decision will prevent all the defendants in the case from defending their interests in property. "Before the Court was substantial evidence raising issues of material fact with respect to the existence of a trust relationship between the Diocese of Spokane and the non-debtor defendants. The Court did not rule the evidence was inadmissible or irrelevant, rather it refused to consider the evidence, relying instead on selected portions of the evidence to justify an opinion contrary to the facts demonstrated by the historical documents, statements and practices of the parties," Mr. Munding says. Under this judicial process, the Parishes have been denied their right to be heard in a meaningful way, Mr. Munding argues. Mr. Munding also points out that, by denying the Association of Parishes' Motion to Dismiss, the Bankruptcy Court has unilaterally upset the carefully drafted congressional legislation codified in the Bankruptcy Code. "The Order is of great significance to the 22 Parishes because, unless reversed by an appellate court, it means that a creditors committee, which has no case or controversy with the 22 Parishes, has standing to quiet title and extinguish the 22 Parishes' interest in real property." Mr. Munding maintains that the Bankruptcy Court's decision also fails to cite to any Ninth Circuit law that allows a creditors committee standing to file an adversary proceeding of this nature against non-debtors seeking declaratory relief under Section 541 of the Bankruptcy Code. No federal court, bankruptcy or appellate court has ever specifically addressed this issue or allowed this type of action. This lack of authority, Mr. Munding contends, leaves substantial ground for difference of opinion concerning the findings in the Order and emphasizes the need for a decision at the appellate level. A stay pending appeal is necessary, Mr. Munding asserts, to allow full appellate view of decisions that are of national importance and which are of significance in the adversary actions. The stay will avoid the parties' litigating further motions before a final appellate decision on these issues have been issued. None of the parties will suffer significant injury from the stay. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 215/945-7000) CCH I LLC: Fitch Expects to Rate Sr. Secured Notes at CCC+ ---------------------------------------------------------- Fitch expects to assign a 'CCC+' rating and an 'R3' recovery rating to the proposed issuance of senior secured notes offered by CCH I, LLC, as well as a 'CCC+' rating and an 'R3' recovery rating to the proposed offering of senior unsecured notes issued by CCH I Holdings, LLC. CCHI and CIH are wholly owned subsidiaries of Charter Communications Holdings, LLC. The notes are being offered as part of a debt exchange launched by Charter Holdings. Fitch will assign the ratings to the new CCHI and CIH notes upon the closing of the proposed debt exchange. Additionally, in the event the proposed debt exchange fails to close or that less than 100% of Charter Holdings noteholders tender for the exchange, Fitch expects to maintain the 'CCC+' senior unsecured debt rating and 'R3' recovery rating assigned to Charter Holdings. Lastly, Fitch has affirmed the 'CCC' issuer default rating and Stable Rating Outlook assigned to Charter Communications, Inc. This rating action reflects Fitch's belief that a bankruptcy filing by Charter, absent the proposed debt exchange, is not imminent. Such determination is a key consideration in characterizing a proposed debt exchange as a distressed debt exchange. Fitch believes that amounts available for borrowings under Charter's bank revolver, continued access to capital markets, and nominal amounts of scheduled maturities through 2006 will provide the company with sufficient liquidity and financial flexibility to continue to operate outside a bankruptcy filing. Fitch acknowledges that Charter's proposed debt exchange contains characteristics normally found in a distressed debt exchange, namely the exchange of bonds at a level lower than the par value of the original securities, and the lengthened maturity dates relative to the original debt securities. The exchange offer will utilize two intermediate holding companies within Charter's capital structure, both of which would be structurally senior to any remaining Charter Holdings noteholders. While Fitch recognizes the structural subordination within Charter's intermediate holding company structure, the lack of notching within these intermediate holding companies reflects the lack of material credit enhancement (in the form of an operating company guaranty), and Fitch's opinion that the recovery prospects of the various intermediate holding companies are substantially equivalent. From Fitch's perspective the proposed debt exchange does not materially change or enhance the recovery prospects of the various holding companies, including CCHI and CIH, relative to each other. Fitch acknowledges that the notes that will be issued by CCHI will be senior secured. However because the notes will be secured by the economic interests of a non-operating holding company (CCH II, LLC) and because of the restrictions on the security holders' ability to utilize the collateral to remedy a payment default, Fitch does not believe that the security interests provide meaningful credit enhancement to the holders of the CCHI secured debt, and that the recovery prospects of the CCHI noteholders are within the same recovery rating scale as the rest of Charter's intermediate holding companies. In general, Fitch believes that the proposed debt exchange is positive for Charter's overall credit profile. The debt exchange positions the company to extend maturities scheduled for 2009 and 2010 to 2015, and extend maturities scheduled for 2011 and 2012 to 2014 and 2015 respectively. The debt exchange will also modestly reduce outstanding debt and leverage. Pro forma leverage (on a latest 12-month basis) as of the end of second-quarter 2004 after giving effect to the $300 million issuance by CCO Holdings, LLC in August was 9.99 times (x). Assuming a 50% participation in the exchange, Fitch estimates pro forma leverage of 9.83x as of the end of second quarter 2004. Fitch points out that as a condition for the exchange to close, leverage at Charter Holdings adjusted for debt exchange must be below 8.75x, which will likely require in excess of $2 billion of the old Charter Holdings notes be tendered before the exchange can close. The proposed exchange offer will not in Fitch's opinion improve the company's near-term liquidity profile. Fitch expects that the exchange offer will have a neutral impact on the company's cash interest requirements. Overall, Charter's liquidity position is supported by the $870 million available under the company's secured credit facility, all of which is available for borrowing under the covenant structure. The company has nominal amounts of debt scheduled to mature during the remainder of 2005, and in 2006 scheduled maturities total $55 million. Scheduled maturities in 2007 total approximately $385 million. In light of Fitch's expectation of limited near-term EBITDA growth, Fitch does not expect any meaningful improvement of credit protection metrics. Overall, Fitch's current ratings for Charter reflect the company's highly levered balance sheet and the absence of any prospects to meaningfully delever its balance sheet over the near term. Additionally, the ratings incorporate Fitch's expectation that Charter will continue to generate negative free cash flow given the company's operating profile, elevated capital expenditures, and the increasing cash interest requirements on debt that has converted to, or is scheduled to convert to cash interest payment. CHASE COMMERCIAL: Fitch Affirms Low-B Ratings on 5 Cert. Classes ---------------------------------------------------------------- Fitch Ratings affirms Chase Commercial Mortgage Securities Corp., commercial mortgage pass-through certificates, series 1999-2: --$53.0 million class A-1 at 'AAA'; --$469.3 million class A-2, at 'AAA'; --Interest-only class X at 'AAA'; --$41.1 million class B at 'AA'; --$37.2 million class C at 'A'; --$11.7 million class D at 'A-'; --$27.4 million class E at 'BBB'; --$11.7 million class F at 'BBB-'; --$27.4 million class G at 'BB+'; --$7.8 million class H at 'BB'; --$6.8 million class I at 'BB-'; --$8.8 million class J at 'B+'; --$6.8 million class K at 'B'; --$5.9 million class L at 'B-'. The $17.1 million class M is not rated by Fitch. The rating affirmations reflect the transactions current stable performance and scheduled loan amortization. As of the August 2005 distribution date, the pool's aggregate collateral balance has been reduced approximately 6.2% to $732.2 million from $782.7 million at issuance. Interest shortfalls continue to affect the below investment grade classes J, K, L and M and are expected to continue for the next six months. Additionally, loan modifications on two specially serviced loans have resulted in deferred interest which is being accrued to class M. Five loans comprising 4.8% of the pool are currently in special servicing. The largest specially serviced loan (2.2%) is secured by a flex office/warehouse complex located in Englewood, CO and is currently 90 days delinquent. The loan was transferred to the special servicer in May 2005 due to a technical default. The borrower failed to lease up the vacant space in accordance with the Modification agreement. Borrower has found a buyer and lender has agreed to accept a discounted payoff and expected closing at the end of September 2005. The next largest loan in special servicing (1.0%) is a multifamily property located in Euless, TX and is currently real-estate owned. The Trust foreclosed in March 2005 and immediately took over property management. Management is working on leasing up the property before disposition. Losses are expected upon liquidation. CHESAPEAKE ENERGY: Offering $250 Million of Preferred Stock ----------------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) intends to commence a public offering of $250 million of a new series of its cumulative convertible preferred stock with a liquidation preference of $100 per share. Chesapeake intends to use the net proceeds of the offering, together with the proceeds from a concurrent offering of common stock, to repay debt under its bank credit facility or for general corporate purposes. The offering will be made under the company's existing shelf registration statement. The company intends to grant underwriters a 30-day option to purchase a maximum of $37.5 million in additional shares of convertible preferred stock to cover any over-allotments in the offering. Lehman Brothers, Banc of America Securities LLC, Credit Suisse First Boston, Morgan Stanley and Wachovia Securities will be joint book-running managers for the offering. Copies of the preliminary prospectus and records relating to the offering may be obtained from the offices of Lehman Brothers Inc., c/o ADP Financial Services, Integrated Distribution Services, 1155 Long Island Avenue, Edgewood, NY 11717; Banc of America Securities LLC, Attn: Prospectus Department, 100 West 33rd Street, New York, NY 10001, 646-733-4166; Credit Suisse First Boston, One Madison Avenue, Level 1B, New York, NY 10010, 212-325-2580; Morgan Stanley, Prospectus Department, 1585 Broadway, LLB, New York, NY 10036; Wachovia Securities Capital Markets, LLC, Equity Capital Markets, 7 St. Paul Street, 1st Floor, Baltimore, MD 21202. Chesapeake Energy Corporation is the third largest independent producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast, Barnett Shale and Ark-La-Tex regions of the United States. * * * As reported in the Troubled Company Reporter Aug. 19, 2005, Moody's assigned a Ba3 rating to Chesapeake Energy's (CHK) new $600 million issue of 12 year 6.5% senior unsecured notes and to CHK's existing $600 million issue of 13 year 6.25% senior unsecured notes. Moody's affirmed CHK's Ba3 corporate family rating, existing Ba3 senior unsecured note ratings, and B3 preferred stock rating. Moody's said the outlook remains positive. The new note proceeds will be used to repay outstanding borrowings under the revolving bank credit facility (unrated), which was partially tapped to fund four recent transactions costing $410 million. CHK had approximately $455 million of bank debt outstanding as of June 2005. CONCENTRA OPERATING: Moody's Rates Proposed $675-Mil Debts at B1 ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of Concentra Operating Corporation in conjunction with Concentra's proposed acquisitions of Beech Street Corporation and Occupational Health and Rehabilitation Inc. At the same time, Moody's assigned a rating of B1 to Concentra's proposed $150 million Revolving Credit Facility and a $525 million Term Loan B. The ratings outlook remains stable, although flexibility within the current rating category has been reduced. Ratings of Concentra Operating Corporation affirmed: * B1 corporate family rating * B1 senior secured revolving credit facility of $100 million due 2008 (to be withdrawn concurrent with the proposed transaction) * B1 senior secured term loan of $335 million due 2009 (to be withdrawn concurrent with the proposed transaction) * B3 senior subordinated notes of $180 million due 2010 * B3 senior subordinated notes of $150 million due 2012 Ratings of Concentra Operating Corporation assigned: * B1 senior secured revolving credit facility of $150 million due 2010 * B1 senior secured term loan of $525 million due 2011 These rating actions follow Concentra's announcement that it intends to acquire Beech Street Corporation, a leading Preferred Provider Organization, in a transaction valued at $165 million. For the twelve months ended June 30, 2005, Beech Street generated revenues of $70.4 million and EBITDA of $13.2 million, resulting in a purchase price of over two times trailing revenue and over 12 times trailing EBITDA. Concentra also announced that it intends to acquire Occupational Health and Rehabilitation, a regional operator of 34 centers primarily in the northeastern United States, for a purchase price of $48.6 million. For the twelve months ended June 30, 2005, OH&R generated revenues of $58.2 million and EBITDA of $4.3 million. Concurrently, Concentra has proposed to refinance its existing senior secured credit facility of $367.5 million. Moody's understands that Concentra plans to finance the proposed acquisitions and retirement of its credit facility through issuing $525 million in Senior Term Debt and utilizing $59.4 million of retained cash. The affirmation of Concentra's ratings also reflects Moody's belief that Concentra's improved operating results and free cash flow generation will continue, and will help to support the incremental debt associated with the proposed acquisitions. Concentra's Health Services business has generated mid-teens revenue growth over the past few quarters supported by mid to upper single digit same store revenue growth, an increase in ancillary services and on-site activity and the addition of new centers through development and acquisitions. Despite a decline in revenues, profitability at Concentra's Care Management services division has expanded significantly following a restructuring plan that resulted in reduced operating costs and the termination of unprofitable offices and accounts. Concentra has also benefited from tight control of working capital investments; in particularly, day's sales outstanding in receivables continue to drop. As a result, Moody's currently expects that Concentra will generate approximately $110 to $115 million in operating cash flow and $60 to $70 million in free cash flow over the next two years. Adjusting for capitalizing leases on the balance sheet, Moody's currently projects that the ratio of free cash flow to debt should be 5% to 6% over the next two years. Credit risk factors include Concentra's high customer concentration risk in the group health sub-segment of Network Services, and the loss of customer accounts due to in-sourcing trends and increased consolidation in the managed care industry. In particular, results in the Network Services Division in 2005 are being adversely affected by the loss of a major client. Recent results have also been negatively affected by increased competition and adverse regulatory and legislative changes. In addition, Moody's believes that Concentra's operating risk and financial risk profile has increased with: * the two proposed acquisitions based on the premium paid for these companies; &nbs