/raid1/www/Hosts/bankrupt/TCR_Public/051013.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, October 13, 2005, Vol. 9, No. 243
Headlines
AAIPHARMA INC: Has Until Jan. 5 to File Plan of Reorganization
AAIPHARMA INC: Court Okays Chanin Capital as Valuation Expert
AAIPHARMA INC: Court Okays RSM McGladrey as Tax Consultant
ACCELLENT INC: S&P Places B+ Corporate Credit Rating on Watch
ALOHA AIRGROUP: Exclusive Plan Period Extended to Oct. 26
ALOHA AIRLINES: Has Until October 28 to Decide on Leases
AMERICAN HEALTHCARE: Wants More Time to File Chapter 11 Plan
AMERIGAS PARTNERS: Exchanging $415M Notes for Registered Bonds
ANCHOR GLASS: Inks $2.3 Mil. Premium Financing Pact with Mepco
ANCHOR GLASS: Wants Open-Ended Deadline to Decide on Leases
AOL LATIN AMERICA: Has Until Jan. 23 to File Reorganization Plan
AOL LATIN AMERICA: Amended Plan Support Pact Stretches Deadlines
ASARCO LLC: Gets Court Nod to Hire Keegan Linscott as Accountant
ASARCO LLC: Court Okays Anderson Kill as Special Insurance Counsel
ASARCO LLC: Wants to Resume Payment of Disability Benefits
BILLY HARWELL: Case Summary & 13 Largest Unsecured Creditors
BLACK WARRIOR: Buying All Outstanding BobCat Shares for $51.5 Mil.
BLACK WARRIOR: Commences Stock-for-Warrant Exchange Offer
BREWSTER MAIN: Voluntary Chapter 11 Case Summary
CATHOLIC CHURCH: Spokane Files Reorg. Plan & Disclosure Statement
CATHOLIC CHURCH: Classes & Treatment of Claims in Spokane's Plan
CELLSTAR CORP: Posts $7.6 Million Net Loss in Third Quarter 2005
CELLSTAR CORP: Amends Domestic Revolving Credit Facility
CKE RESTAURANTS: Board Adopts Stockholder Rights Plan
COMDIAL CORP: Wants Until Oct. 31 to Make Lease-Related Decisions
CONGOLEUM CORP: Has Until Dec. 14 to Solicit Plan Acceptances
COOPER TIRE: S&P Lowers Corporate Credit Rating to BB+ from BBB-
CRIIMI MAE: Moody's Upgrades Preferred Stock Ratings to B3
DELPHI CORP: Taps Skadden Arps as Lead Bankruptcy Counsel
DELPHI CORP: Gets Interim Approval to Access $950-Mil of DIP Loans
DELPHI CORP: Court Allows Interim Use of Cash Collateral
DELPHI CORP: Trades Shares on Pink Sheets Under DPHIQ Ticker
DELPHI CORP: Judge Drain Okays Essential Vendor Payment Program
DELTA AIR: Brings In Alston & Bird as Pension Counsel
DELTA AIR: Lenders Want Adequate Protection on $72 Million Loans
DELTA AIR: PBGC Supports DP3's Move to Compel Pension Payment
DONALD C. BAUERLE: Case Summary & 8 Largest Unsecured Creditors
ENRON CORP: Court Approves Photofabrication Settlement Deal
ENRON CORP: Inks Texas Comptroller Claims Settlement Pact
ENRON CORP: Inks Pact Resolving Claims Related to Brazos Financing
ENTERGY NEW ORLEANS: Wants Until Feb. 10 To Decide on Leases
ENTERGY NEW ORLEANS: Wants Court to Restrain Utility Companies
GLASS GROUP: Court Okays Sale of Three Assets to STO USA for $12MM
GLASS GROUP: Panel Wants Court to Reconsider Asset Sale Order
GOLD KIST: S&P Puts B+ Corporate Credit Rating on Positive Watch
GREAT NORTHERN: Administrative Claims Bar Date is Nov. 4
GREAT SOUTHERN: Case Summary & 19 Largest Unsecured Creditors
HANDMAKER JEWISH: Section 341(a) Meeting Slated for Nov. 3
H.I. SCHAUMBURG: Case Summary & 20 Largest Unsecured Creditors
INTERNATIONAL MILL: S&P Rates Restated $328 Million Loan at B+
INTERPOOL INC: Fitch Lifts Long-Term Issuer Rating to BB from BB-
INTERSTATE BAKERIES: Unions Say CBA Extension is "Unnecessary"
INTERSTATE BAKERIES: J.W. Franklin Objects to Lease Rejection
JP MORGAN: Credit Enhancement Prompts Fitch to Raise Rating
JP MORGAN: Fitch Holds BB Rating on $20.4 Million Class H Certs.
KAISER ALUMINUM: Court Orders Russell to File Final Fee Claim
LEVI STRAUSS: Aug. 28 Balance Sheet Upside-Down by $1.25 Billion
MEDIA GROUP: Wants Bernard Costich as Accountants
MINNA EDELMAN: Case Summary & 8 Largest Unsecured Creditors
MOST PRODUCTS: Case Summary & 21 Largest Unsecured Creditors
NATIONAL ENERGY: Wants Court to Nix or Reduce Attala Claims
NATIONAL ENERGY SERVICES: Files 10-Q For Period Ended July 31
NATIONAL R.V.: Files 2004 Annual Report with SEC
NEW HEIGHTS: Wants Entry of Final Decree Delayed to Nov. 21
NEXTMEDIA OPERATING: Soliciting Consents to Amend 10.75% Indenture
NORTHWEST AIRLINES: Equity Trading Restricted to Protect NOLs
ODYSSEY RE: S&P Assigns BB Rating to $100 Million Series A Stocks
ON SEMICONDUCTOR: Settles $31.2 Million Claim for $2.5 Million
OWENS CORNING: Says Asbestos Settlement with Murray is Valid
PETER C. PIERCE: Case Summary & 20 Largest Unsecured Creditors
PHARMACEUTICAL FORMULATIONS: Taps Dovebid as Appraiser
PILGRIM'S PRIDE: S&P Places BB Corporate Credit Rating on Watch
PONDEROSA PINE: Wants McGuireWoods as Special Construction Counsel
POPE & TALBOT: Moody's Lowers $135 Million Debt Ratings to B3
PREFERREDPLUS TRUST: S&P Lowers $31 Million Certs.' Rating to BB+
READ-RITE CORP: Wants Five Licensing Agreements Rejected
RISK MANAGEMENT: Bankruptcy Court Fixes Oct. 31 Claims Bar Date
RITE AID: Names James P. Mastrian as Chief Operating Officer
ROSENTHAL & KLEIN: Case Summary & 20 Largest Unsecured Creditors
ROUNDY'S SUPERMARKETS: S&P Junks Proposed $325 Million Notes
RUFUS INC: Committee Hires Weiser LLP as Financial Advisor
RUFUS INC: Has Until Feb. 6 to Decide on Leases
SEAMLESS WI-FI: Kempisty & Co. Raises Going Concern Doubt
SPIKES ENTERPRISES: BofA Wants Stay Lifted to Foreclose on Assets
TARGA RESOURCES: S&P Assigns Corporate Credit Rating at B+
TECHNEGLAS INC: Selling Columbus Facility to TG707 for $1.95 Mil.
THREE-FIVE SYSTEMS: Section 341(a) Meeting Slated for Oct. 18
THREE-FIVE: Files Schedules of Assets and Liabilities in Arizona
THREE-FIVE SYSTEMS: Wants Baker & McKenzie as Special Counsel
TIMOTHY SHULL: Case Summary & 20 Largest Unsecured Creditors
TITAN CRUISE: Wants Court to Amend DIP Order & Needs More Money
TRISTAR HOTELS: List of 20 Largest Unsecured Creditors
TXU CORP: Paying TXU Europe $220 Million Today to Settle Claims
UAL CORP: Wells Fargo Wants Bankruptcy Court to Reconsider Order
UAL CORP: Court Sets Dec. 30 as Pension Plan Termination Date
UAL CORP: Creditors Committee Objects to $8.3 Billion PBGC Claims
W.R. GRACE: Wants to Depose & Examine Asbestos Claimants' Lawyers
W.R. GRACE: Can Participate in Marsh & New York Settlement
WELLINGTON PROPERTIES: Files Plan of Reorganization in N.C.
WESTPOINT STEVENS: Viasystems Wants Company to Pay for Damages
WHEREHOUSE ENTERTAINMENT: Wants Until Oct. 30 to Object to Claims
WINSTON HOTELS: Moody's Affirms Preferred Stock Rating at B3
WODO LLC: Can Ask for Acceptances from Creditors Until Jan. 13
WOODLOAND HOMES: Case Summary & 20 Largest Unsecured Creditors
WORLDCOM INC: Philadelphia Wants Court to Allow Tax Claims
WORLDCOM: Deutsche Bank Wants Move for Summary Judgment Denied
* Thoits Love Expands Practice with Two New Palo Alto Associates
*********
AAIPHARMA INC: Has Until Jan. 5 to File Plan of Reorganization
--------------------------------------------------------------
The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware extended until Jan. 5, 2006, aaiPharma Inc.
and its debtor-affiliates' exclusive period to file a chapter 11
plan of reorganization. The Debtors' exclusive period to solicit
plan acceptances is also extended to March 6, 2006.
As reported in the Troubled Company Reporter on Sept. 16, 2005,
the Debtors said that the extension will give them more time to
develop a fair and feasible plan that would allow them to emerge
from bankruptcy as a viable business.
Headquartered in Wilmington, North Carolina, aaiPharma Inc.
-- http://aaipharma.com/-- provides product development services
to the pharmaceutical industry and sells pharmaceutical products
which primarily target pain management. AAI operates two
divisions: AAI Development Services and Pharmaceuticals Division.
The Company and eight of its debtor-affiliates filed for chapter
11 protection on May 10, 2005 (Bankr. D. Del. Case No. 05-11341).
Karen McKinley, Esq., and Mark D. Collins, Esq., at Richards,
Layton & Finger, P.A.; Jenn Hanson, Esq., and Gary L. Kaplan,
Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP; and the
firm of Robinson, Bradshaw & Hinson, P.A., represent the Debtors
in their restructuring efforts. When the Debtors filed for
bankruptcy, they reported consolidated assets amounting to
$323,323,000 and consolidated debts totaling $446,693,000.
AAIPHARMA INC: Court Okays Chanin Capital as Valuation Expert
-------------------------------------------------------------
The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware gave aaiPharma Inc. and its debtor-affiliates
permission to employ Chanin Capital Partners, LLC, as their
valuation expert.
As reported in the Troubled Company Reporter on Sept. 15, 2005,
Chanin Capital will receive a $50,000 initial payment from the
Debtors upon the Bankruptcy Court's approval of their retention.
The Debtors will pay the Firm an additional $200,000 after the
Valuation Report is completed and delivered. Chanin Capital will
also receive a $50,000 fee for any deposition or live testimony it
will provide in connection with the Valuation Report.
Headquartered in Wilmington, North Carolina, aaiPharma Inc.
-- http://aaipharma.com/-- provides product development services
to the pharmaceutical industry and sells pharmaceutical products
which primarily target pain management. AAI operates two
divisions: AAI Development Services and Pharmaceuticals Division.
The Company and eight of its debtor-affiliates filed for chapter
11 protection on May 10, 2005 (Bankr. D. Del. Case No. 05-11341).
Karen McKinley, Esq., and Mark D. Collins, Esq., at Richards,
Layton & Finger, P.A.; Jenn Hanson, Esq., and Gary L. Kaplan,
Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP; and the
firm of Robinson, Bradshaw & Hinson, P.A., represent the Debtors
in their restructuring efforts. When the Debtors filed for
bankruptcy, they reported consolidated assets amounting to
$323,323,000 and consolidated debts totaling $446,693,000.
AAIPHARMA INC: Court Okays RSM McGladrey as Tax Consultant
----------------------------------------------------------
The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware gave aaiPharma Inc. and its debtor-affiliates
permission to employ RSM McGladrey, Inc. as their tax consultant,
nunc pro tunc to Sept. 1, 2005.
As previously reported in the Troubled Company Reporter, Keith T.
Wallace, a managing director at RSM McGladrey, disclosed the
current hourly rates of the Firm's professionals:
Designation Hourly Rate
----------- -----------
International - Partner, Managing Director $700
National Tax - Partner, Managing Director $650
Partner, Managing Director $550
Director $460
Manager $350
Supervisor $300
Senior Associate $225
Associate $150
Paraprofessional $100
The Debtors will also pay a $50,000 retainer to RSM McGladrey.
Headquartered in Wilmington, North Carolina, aaiPharma Inc.
-- http://aaipharma.com/-- provides product development services
to the pharmaceutical industry and sells pharmaceutical products
which primarily target pain management. AAI operates two
divisions: AAI Development Services and Pharmaceuticals Division.
The Company and eight of its debtor-affiliates filed for chapter
11 protection on May 10, 2005 (Bankr. D. Del. Case No. 05-11341).
Karen McKinley, Esq., and Mark D. Collins, Esq., at Richards,
Layton & Finger, P.A.; Jenn Hanson, Esq., and Gary L. Kaplan,
Esq., at Fried, Frank, Harris, Shriver & Jacobson LLP; and the
firm of Robinson, Bradshaw & Hinson, P.A., represent the Debtors
in their restructuring efforts. When the Debtors filed for
bankruptcy, they reported consolidated assets amounting to
$323,323,000 and consolidated debts totaling $446,693,000.
ACCELLENT INC: S&P Places B+ Corporate Credit Rating on Watch
-------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings for
Wilmington, Massachusetts-based Accellent Inc., including
the 'B+' corporate credit rating, on CreditWatch with negative
implications, following the company's acceptance of a $1.27
billion buyout offer by Kohlberg Kravis Roberts & Co.
Accellent Corp.'s existing debt, including its senior secured
credit facility and its existing 10% senior subordinated notes due
2012, is expected to be refinanced in connection with the closing
of the merger. Consequently, ratings tied to those borrowings
will likely be withdrawn.
Still, the corporate credit rating on the medical device contract
manufacturer may be affected by shifts in business and financial
strategies relating to the company's change in ownership.
Standard & Poor's expects to review Accellent's strategic plans,
the details of the acquisition proposal, and the likelihood of its
execution in conjunction with our rating review on the company.
ALOHA AIRGROUP: Exclusive Plan Period Extended to Oct. 26
---------------------------------------------------------
The U.S. Bankruptcy Court for the District of Hawaii extended
until Oct. 26, 2005, Aloha Airgroup and Aloha Airlines, Inc.'s
period within which they have the exclusive right to file a plan
of reorganization.
The Court also gave the Debtors until Dec. 31, 2005, to solicit
acceptances of that plan.
Since their chapter 11 filing, the Debtors have focused an
enormous amount of their time and resources on their aircraft
lease issues under section 1110, and obtaining bridge financing
and a DIP loan to assure liquidity during the administration of
their chapter 11 cases.
An extension of exclusivity "will facilitate moving the case
forward towards a fair and equitable solution," the Debtors told
the Bankruptcy Court.
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.
ALOHA AIRLINES: Has Until October 28 to Decide on Leases
--------------------------------------------------------
The U.S. Bankruptcy Court for the District of Hawaii gave Aloha
Airgroup, Inc., and Aloha Airlines, Inc., until Oct. 28 to decide
what to do with their unexpired non-residential real property
leases pursuant to Section 365(d)(4) of the Bankruptcy Code. The
Debtors have the option to assume, assume and assign or reject
those unexpired leases.
The Debtors told 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 assured 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.
AMERICAN HEALTHCARE: Wants More Time to File Chapter 11 Plan
------------------------------------------------------------
American Healthcare Services, Inc., and American Physician
Services, Inc., ask the U.S. Bankruptcy Court for the Northern
District of Georgia, Atlanta Division, for an extension of
their time to file and solicit acceptances of a chapter 11 plan.
The Debtors want until Dec. 7, 2005, to file a plan and until
Feb. 6, 2006, to solicit acceptances of that plan.
The Debtors submit they need the extension to negotiate with
parties-in-interest to come up with a consensual plan.
Headquartered in Roswell, Georgia, American Healthcare Services,
Inc. -- http://www.american-healthcare-services.com/-- provides
practice management to physicians and other health care providers
who work in the fields of ear, nose, throat and head and neck
medicine, including financial and administrative management
services. The Company and its debtor-affiliate filed for chapter
11 protection on March 11, 2005 (Bankr. N.D. Ga. Case No. 05-
64660). When the Debtors filed for protection from their
creditors, they listed estimated assets of $1 million to $10
million and estimated debts of $10 million to $100 million.
AMERIGAS PARTNERS: Exchanging $415M Notes for Registered Bonds
--------------------------------------------------------------
AmeriGas Partners, L.P., commences an offer to exchange up to
$415 million aggregate principal amount of its 7.25% Series B
Senior Notes due 2015 that are registered under the Securities Act
of 1933 for a like principal amount of its outstanding 7.25%
Series A Senior Notes due 2015 which it issued previously without
registration under the Securities Act.
The form and terms of the exchange notes and the original notes
are identical in all material respects, except that the exchange
notes will not be subject to transfer restrictions or entitled to
registration rights, and the additional interest provisions
applicable to the original notes will not apply to the exchange
notes.
AmeriGas Partners, L.P., and AmeriGas Finance Corp., a wholly
owned subsidiary of AmeriGas Partners, L.P., issued the original
notes and will issue the exchange notes.
Wachovia Bank, National Association serves as the exchange agent.
Terms of the Notes
The notes mature on May 20, 2015.
Interest on the exchange notes will accrue at the rate of 7.25%
per annum, payable semiannually in cash in arrears on each May 20
and Nov. 20, commencing on November 20, 2005.
On or after May 20, 2010, the Company may redeem the exchange
notes. Prior to May 20, 2008, the Company may redeem up to 35% of
the original principal amount of the notes with the proceeds of a
registered public offering of its common equity.
The exchange notes will be senior unsecured joint and several
obligations of AmeriGas Partners, L.P. and AmeriGas Finance Corp.
The exchange notes will rank pari passu in right of payment with
all of the other existing and future senior indebtedness and
senior in right of payment to all of the existing and future
subordinated indebtedness. The exchange notes will be effectively
subordinated to all existing and future secured and unsecured
indebtedness and other liabilities of the Company's subsidiaries,
including its operating partnership.
A significant portion of the operating partnership's assets have
been pledged to secure indebtedness under the first mortgage
notes, a bank term loan and the bank credit facilities of the
operating partnership.
As of June 30, 2005, the Company had approximately $489.9 million
of aggregate indebtedness and the aggregate indebtedness of its
operating partnership and its subsidiaries was approximately
$439.5 million. The exchange notes will be non-recourse to our
general partner.
AmeriGas Partners, L.P., is the nation's largest retail propane
distributor, serving nearly 1.3 million customers from over 650
locations in 46 states. UGI Corp. (NYSE: UGI), through its
subsidiaries, will own approximately 44 percent of the Partnership
and individual unitholders will own the remaining 56 percent
assuming that the over-allotment option is not exercised.
Through its subsidiaries, AmeriGas Partners, L.P. (NYSE:APU) is
the largest retail propane distributor in the United States. The
Partnership serves residential, commercial, industrial,
agricultural and motor fuel customers from over 650 retail
locations in 46 states.
* * *
As reported in the Troubled Company Reporter on Apr. 15, 2005,
AmeriGas Partners, L.P.'s -- APU -- $400 million senior notes due
2015, issued jointly and severally with its special purpose
financing subsidiary Amerigas Finance Corp., are rated 'BB+' by
Fitch Ratings. The Rating Outlook is Stable. An indirect
subsidiary of UGI Corp. is the general partner and 44% limited
partner for APU, which, in turn, is a master limited partnership -
- MLP -- for AmeriGas Propane, L.P. -- AGP, an operating limited
partnership. Proceeds from the new senior notes will be utilized
to repurchase outstanding 8.875% APU senior notes pursuant to an
ongoing tender offer.
ANCHOR GLASS: Inks $2.3 Mil. Premium Financing Pact with Mepco
--------------------------------------------------------------
Anchor Glass Container Corporation asks the U.S. Bankruptcy Court
for the Middle District of Florida for authority to enter into a
premium financing agreement with Mepco Acceptance Corporation.
In the ordinary course of business, the Debtor maintains various
types of insurance policies, including one with Mepco Acceptance
Corporation. The Mepco Policies bear a $2,264,348 total annual
premium, which sum Anchor Glass wishes to finance in accordance
with a Premium Finance Agreement with Mepco.
The Policies are extremely valuable, Robert A. Soriano, Esq., at
Carlton Fields PA, in Tampa, Florida, tells Judge Paskay.
Moreover, it is essential to maintain the coverage under the
Policies to preserve Anchor's property, assets and business.
Mr. Soriano says that Anchor Glass has been unable to locate any
source of unsecured premium financing.
Under the Finance Agreement, the premium for the Policies grants
Mepco a security interest in the gross unearned premiums that
would be payable in the event of cancellation of the insurance
policies, Mr. Soriano explains.
In addition, Mepco is authorized to assess and collect late
charges not exceeding 5% of the monthly installment if an
installment is 10 days or more past due. Mepco is also
authorized to cancel the financed insurance policies and obtain
the return of any unearned premiums in the event of an uncured
default in the payment of any installment due.
Headquartered in Tampa, Florida, Anchor Glass Container
Corporation is the third-largest manufacturer of glass containers
in the United States. Anchor manufactures a diverse line of flint
(clear), amber, green and other colored glass containers for the
beer, beverage, food, liquor and flavored alcoholic beverage
markets. The Company filed for chapter 11 protection on Aug. 8,
2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano,
Esq., at Carlton Fields PA, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $661.5 million in assets and $666.6
million in debts. (Anchor Glass Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
ANCHOR GLASS: Wants Open-Ended Deadline to Decide on Leases
-----------------------------------------------------------
Anchor Glass Container Corporation asks the U.S. Bankruptcy Court
for the Middle District of Florida to extend its deadline to
decide on real property, railroad track and pipe, and public
warehouse space leases until the confirmation of a plan of
reorganization.
The Debtor operates glass container manufacturing plants located
throughout central and eastern United States. Anchor Glass leases
facilities that are used as its machine and mold shops, as well as
additional warehouse space for finished products in various
locations throughout the country. Anchor is also a party to
several sidetrack pipe leases and track leases with various
railroad companies, as well as leases for public warehouses.
Anchor's administrative and executive offices located in Tampa,
Florida, are also leased.
Kathleen S. McLeroy, Esq., at Carlton Fields, P.A., in Tampa,
Florida, relates that currently, the Debtor is still analyzing
its leases and executory contracts to determine which should be
assumed or rejected.
Section 365(d)(4) of the Bankruptcy Code provides that "if the
trustee does not assume or reject an unexpired lease of
nonresidential real property under which the debtor is the lessee
within 60 days after the date of the order for relief, or within
such additional time as the court, for cause, within such 60 days
period, fixes, then such lease is deemed rejected, and the
trustee shall immediately surrender such nonresidential real
property to the lessor."
Ms. McLeroy tells Judge Paskay that without an extension, Anchor
will not be able to complete its analysis of which leases should
be assumed or rejected by the current deadline. If the leases
are hastily decided, the estates might be exposed to unnecessary
administrative claims.
The Court will convene a hearing on October 31, 2005 at 9:00 a.m.
to consider the Debtor's request.
Headquartered in Tampa, Florida, Anchor Glass Container
Corporation is the third-largest manufacturer of glass containers
in the United States. Anchor manufactures a diverse line of flint
(clear), amber, green and other colored glass containers for the
beer, beverage, food, liquor and flavored alcoholic beverage
markets. The Company filed for chapter 11 protection on Aug. 8,
2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano,
Esq., at Carlton Fields PA, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $661.5 million in assets and $666.6
million in debts. (Anchor Glass Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
AOL LATIN AMERICA: Has Until Jan. 23 to File Reorganization Plan
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
America Online Latin America, Inc. and its debtor-affiliates'
request for more time to file a chapter 11 plan. The Court
extended the Debtors' exclusive plan-filing period to Jan. 23,
2006, and extended its deadline to solicit acceptances of that
plan to Mar. 21, 2006.
The principal stockholders have consented to the extension, as it
will allow the Debtors to complete the development of a consensual
plan, without distraction by alternative plans of reorganization
that might be filed by other parties.
Headquartered in Fort Lauderdale, Florida, America Online Latin
America, Inc. -- http://www.aola.com/ -- offers AOL-branded
Internet service in Argentina, Brazil, Mexico, and Puerto Rico, as
well as localized content and online shopping over its proprietary
network. Principal shareholders in AOLA are Cisneros Group, one
of Latin America's largest media firms, Brazil's Banco Itau, and
Time Warner, through America Online. The Company and its debtor-
affiliates filed for chapter 11 protection on June 24, 2005
(Bankr. D. Del. Case No. 05-11778). Pauline K. Morgan, Esq., and
Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor, LLP and
Douglas P. Bartner, Esq., at Shearman & Sterling LLP represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed total assets of
$28,500,000 and total debts of $181,774,000.
AOL LATIN AMERICA: Amended Plan Support Pact Stretches Deadlines
----------------------------------------------------------------
America Online Latin America, Inc., amended its Plan Support
Agreement dated June 23, 2004, with:
* America Online, Inc.;
* Time Warner Inc.;
* Aspen Investments LLC; and
* Atlantis Investments LLC.
extending the termination dates of the Agreement. AOL Latin
America has until Nov. 30, 2005, to file a chapter 11 plan
consistent with the terms of the plan agreement. AOL Latin
America also has until March 31, 2006, to have the Court confirm
the plan.
Failure to meet the deadlines terminates the Plan Agreement.
Terms of the Plan Agreement
AOL Latin America agrees to propose a chapter 11 liquidation plan
which will provide for distributions on account of:
* Time Warner's claims arising under or in connection with the
convertible notes issued pursuant to the Note Purchase
Agreement dated as of March 8, 2002, between AO Latin America
and Time Warner;
* AOL's general unsecured claims;
* AOL and Time Warner's interests arising under or in
connection with the Series B Redeemable Convertible Preferred
Stock of AOL Latin America; and
* Aspen Investments and Atlantis Investment's interests arising
under or in connection with the Series C Redeemable
Convertible Preferred Stock of AOL Latin America A held by:
-- Aspen Investments,
-- Atlantis Investment,
-- the children of Gustavo A. Cisneros, and
-- the children of Ricardo J. Cisneros
Time Warner agrees to forbear from exercising any rights or
remedies it may have under the Notes, the Note Purchase Agreement
and all related documents, applicable law or otherwise, with
respect to any default under the Notes or the Note Purchase
Agreement.
A full-text copy of the Original Plan Agreement is available for
free at http://ResearchArchives.com/t/s?24c
Headquartered in Fort Lauderdale, Florida, America Online Latin
America, Inc. -- http://www.aola.com/ -- offers AOL-branded
Internet service in Argentina, Brazil, Mexico, and Puerto Rico, as
well as localized content and online shopping over its proprietary
network. Principal shareholders in AOLA are Cisneros Group, one
of Latin America's largest media firms, Brazil's Banco Itau, and
Time Warner, through America Online. The Company and its debtor-
affiliates filed for chapter 11 protection on June 24, 2005
(Bankr. D. Del. Case No. 05-11778). Pauline K. Morgan, Esq., and
Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor, LLP and
Douglas P. Bartner, Esq., at Shearman & Sterling LLP represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed total assets of
$28,500,000 and total debts of $181,774,000.
ASARCO LLC: Gets Court Nod to Hire Keegan Linscott as Accountant
----------------------------------------------------------------
The Honorable Richard S. Schmidt of the U.S. Bankruptcy Court for
the Southern District of Texas gave ASARCO LLC permission to
employ Keegan, Linscott & Kenon, P.C., as its accountant nunc pro
tunc to Aug. 9, 2005.
As previously reported in the Troubled Company Reporter on
Sept. 27, 2005, James R. Prince, Esq., at Baker Botts L.L.P., in
Dallas, Texas, informs the Court that in the ordinary course of
representing ASARCO before the bankruptcy filing, Keegan received
a $13,669 retainer. Within the 90-day period preceding the
commencement of ASARCO's Chapter 11 cases, the firm received
$84,270 for professional services rendered and as reimbursement
for prepetition expenses incurred.
ASARCO will pay Keegan in accordance with the firm's customary
hourly rates, which range from $65 to $250. Keegan will also be
reimbursed for the necessary out-of-pocket expenses it incurs.
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
through 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.
Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle,
Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-
21346) also filed for chapter 11 protection, and ASARCO has asked
that the three subsidiary cases be jointly administered with its
chapter 11 case. (ASARCO Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 215/945-7000).
ASARCO LLC: Court Okays Anderson Kill as Special Insurance Counsel
------------------------------------------------------------------
The Honorable Richard S. Schmidt of the U.S. Bankruptcy Court for
the Southern District of Texas gave ASARCO LLC permission to
employ Anderson Kill & Olick, L.L.P., as its special insurance
counsel, nunc pro tunc to Aug. 9, 2005.
As previously reported in the Troubled Company Reporter on
Sept. 19, 2005, within the 90-day period preceding the
commencement of ASARCO's Chapter 11 case, Anderson Kill received a
$199,769 payment from ASARCO for professional services rendered
and expenses incurred before the bankruptcy filing. James R.
Prince, Esq., at Baker Botts LLP, in Dallas, Texas, notes that
since March 2004, Anderson Kill has held a $100,000 retainer.
Unless otherwise ordered by the Court, Anderson Kill will
continue to maintain the retainer and will bill ASARCO for its
fees and expenses in accordance with the Bankruptcy Code, and
will file applications for compensation and reimbursement as may
be appropriate.
The firm's professionals that will primarily provide services to
ASARCO and their hourly rates are:
Rhonda D. Orin $390
Robert M. Horkovich 675
William Passannante 525
Daniel M. Healy 250
James Zeas 220
Izak Feldgreber 210
Harris Gershman 190
Brenda Bonazelli 125
In addition, Anderson Kill has a contingency arrangement with
ASARCO with regard to the firm's efforts to recover insurance
proceeds on ASARCO's behalf from London Market Companies.
Pursuant to that arrangement, Anderson Kill will also receive 5%
of the insurance proceeds that it recovers in addition to any
expenses incurred.
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
through 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.
Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle,
Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-
21346) also filed for chapter 11 protection, and ASARCO has asked
that the three subsidiary cases be jointly administered with its
chapter 11 case. (ASARCO Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 215/945-7000).
ASARCO LLC: Wants to Resume Payment of Disability Benefits
----------------------------------------------------------
Before filing for bankruptcy protection, ASARCO, LLC, paid
disability benefits to current and former employees in the
ordinary course of business.
As of the bankruptcy filing, ASARCO provided:
(i) short-term disability benefits to 19 current employees,
aggregating $23,500 per month;
(ii) permanent and total disability benefits to 107 former
hourly employees, totaling around $58,000 per month; and
(iii) long-term disability payments to 10 former salaried
employees, aggregating $11,000 per month.
The average monthly payment per recipient is about $680.
The Participants receiving short-term disability benefits are
expected to return to work in due course, while former employees
receiving permanent disability and long-term disability payments
are not expected to return to work due to their disabilities.
Under the benefit programs, former employees receive monthly
payments until the age of 65, at which time the payments cease
and the former employees typically make application to the
appropriate pension fund. In the event a Participant who was
receiving permanent or long-term disability payments dies, the
Participant's survivor generally would receive 50% of the benefit
until the employee would have turned 65.
Since the Petition Date, ASARCO has not paid the Disability
Benefits to former employees out of an abundance of caution.
ASARCO wants to resume paying the Disability Benefits.
In a stipulation, ASARCO, the Official Committee of Unsecured
Creditors of ASARCO and certain other parties-in-interest agree
to the payment of the Disability Benefits. The parties believe
that payment of the Disability Benefits is provided by the order
of the U.S. Bankruptcy Court for the Southern District of Texas,
Corpus Christi Division, authorizing payment of prepetition
employee wage and benefit obligations.
Other signatories to the Stipulation are:
1. United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers
International Union;
2. The Official Committee of Unsecured Creditors of Debtor
Subsidiaries Capco & LAQ, et al.; and
3. Robert C. Pate, the legal representative of future
asbestos claimants.
Furthermore, the United Steelworkers maintains that payments must
be paid under Section 1114 of the Bankruptcy Code. In any event,
the parties agree that payment of the Disability Benefits should
resume in light of the nature of the payments, the relatively
small dollar amounts at issue, and the potential negative impact
on the Participants if the Disability Benefits are not restored.
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
through 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.
Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle,
Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-
21346) also filed for chapter 11 protection, and ASARCO has asked
that the three subsidiary cases be jointly administered with its
chapter 11 case. (ASARCO Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 215/945-7000).
BILLY HARWELL: Case Summary & 13 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Billy Jason Harwell
a/k/a 8345 Bluffview Way
Colorado Springs, Colorado 80919
Bankruptcy Case No.: 05-41744
Chapter 11 Petition Date: October 10, 2005
Court: District of Colorado (Denver)
Judge: A. Bruce Campbell
Debtor's Counsel: Robert M. Duitch, Esq.
665 SouthPointe Court, Suite 150
Colorado Springs, Colorado 80906-8839
Tel: (719) 632-3450
Fax: (719) 632-0006
Total Assets: $2,661,355
Total Debts: $3,543,434
Debtor's 13 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Tom Clay Hill/Peoples Deficiency claim on $1,440,653
National Bank Colorado foreclosure sale in
c/o Gary J. Ceriani, Esq. State District Court
Davis & Ceriani, P.C. action, matter on
1350 17th Street, Suite 400 appeal.
Denver, CO 80202
Delbert Myers 24620 Highway 40, $815,000
#1 Needham Place Kremmling, Colorado
Williamsburg, CO 81226 Single family
residence & 69 acres
Value of security:
$750,000
Chrysler Financial 2005 Dodge Sprinter $29,000
P.O. Box 2580 Van
Cherry Hill, NJ 08034-0372 Value of security:
$28,000
Internal Revenue Service 2004 Form 1040 taxes $22,000
John E. Lichlyter, P.C. Professional fees $9,665
Chase Mastercard Credit card used $8,800
To pay income taxes
Commerce Bank Credit card $7,900
Blackwell Oil Company Diesel fuel bill $1,116
MBNA Mastercard Credit card $1,100
Capital One Visa Credit card $400
Chevron Oil Company Credit card $200
Diamond Shamrock Credit card $150
Providian Visa Credit card $50
BLACK WARRIOR: Buying All Outstanding BobCat Shares for $51.5 Mil.
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Black Warrior Wireline Corp. (OTCBB-BWWL) entered into a letter of
intent to purchase from the holders of all of the outstanding
equity securities of BobCat Pressure Control, Inc. The purchase
price is $51.5 million, less the amount of long-term debt,
including current maturities, payable in cash at the closing of
the transaction.
The closing of the BobCat acquisition is subject to the completion
by the Company of due diligence inquiries into BobCat, the
negotiation and execution of a definitive purchase agreement,
completion of financing for the transaction and fulfillment of
customary closing conditions to be contained in the definitive
purchase agreement. It is intended that the purchase price for
the BobCat securities will be financed with the proceeds of
additional senior secured borrowings, a portion of which, if the
acquisition is completed, is expected will be repaid using a
portion of the proceeds from the proposed underwritten offering.
About Bobcat Pressure
Bobcat Pressure Control, Inc., provides snubbing services to oil
and natural gas well operators in the Mid-Continent area of the
United States. BobCat also provides other oil field services,
including freezing, hot tap services, well control, fishing,
rental tool services and drillouts.
About Black Warrior
Black Warrior Wireline Corp. is an oil and gas service company
providing services to oil and gas well operators primarily in the
United States and in the Gulf of Mexico. It is headquartered in
Columbus, Mississippi.
At June 30, 2005, Black Warrior's balance sheet reflected a
$25,209,000, equity deficit compared to a $20,849,000, deficit at
Dec. 31, 2004.
BLACK WARRIOR: Commences Stock-for-Warrant Exchange Offer
---------------------------------------------------------
Black Warrior Wireline Corp. (OTCBB-BWWL) commenced an offer to
exchange shares of its common stock for outstanding common stock
purchase warrants.
Black Warrior is offering to exchange one share of Common Stock
for each three warrants and the offer has been extended to the
holders of 18,067,500 common stock purchase warrants.
Each warrant represents the right to purchase one share of Common
Stock at an exercise price of $0.75 per share.
The offer to exchange shares of Common Stock for warrants will
remain open for acceptance by the holders of the 18,067,500
warrants through 6:00 PM Central Time on November 7, 2005.
The commencement of the exchange offer is the initial step of a
series of steps intended to be undertaken by Black Warrior for the
purpose of recapitalizing the Company through the elimination of
the substantial amount of derivative securities it has
outstanding. These derivative securities include common stock
purchase warrants to purchase 70,761,185 shares of Common Stock
and $42,477,902 of principal amount and accrued interest, as of
September 30, 2005, of its outstanding convertible subordinated
notes which, as of that date, are convertible at a conversion
price of $0.75 per share into an aggregate of 56,637,203 shares of
Common Stock.
Additional steps the Company intends to seek to accomplish in
connection with its recapitalization include a 1-for-10 reverse
stock split, an underwritten public offering of shares of the
Company's Common Stock and, subject to meeting all listing
requirements, listing its shares for trading on the Nasdaq Stock
Market.
Agreements with Warrant Holders
Prior to commencing the exchange offer, Black Warrior entered into
agreements with the holders of 52,693,685 warrants to exchange
those warrants for 17,564,562 shares of Common Stock. Of the
52,693,685 warrants:
* an aggregate of 40,755,276 are held by St. James Capital
Partners, L.P. and SJMB, L.P., private investment funds; and
* 11,938,409 are held by Charles E. Underbrink and his family
and other related entities.
Mr. Underbrink is a Director of Black Warrior and is the Chairman
of the general partners of St. James Capital Partners, L.P., and
SJMB, L.P. The exchange of warrants for shares of Common Stock by
Mr. Underbrink and his related entities was completed on Oct. 6,
2005 and the exchange with St. James Capital Partners, L.P. and
SJMB, L.P. will be completed prior to or on June 30, 2006.
The Agreements with St. James Capital Partners, L.P., SJMB, L.P.
and Mr. Underbrink and his related entities also provide that they
will convert an aggregate of $20,277,374 of principal and all
accrued interest (which amounted to $17,111,403 through September
30, 2005) on Black Warrior's outstanding convertible subordinated
notes into shares of Common Stock and, subject to market
conditions, sell those shares to the Company, along with the
shares issued in exchange for their warrants and an additional
5,017,481 shares held by SJMB, L.P., at the closing time of a
proposed underwritten public offering of Common Stock intended to
be undertaken by the Company.
The purchase price paid by the Company for such shares will be the
price per share it receives in the public offering less
commissions and expenses of the underwriters in the public
offering. If the public offering is not completed by June 30,
2006, these agreements to convert and sell the shares in the
public offering will expire.
Public Offering
Following the completion of the exchange offer period, Black
Warrior intends to undertake to complete an underwritten public
offering of shares of its Common Stock. The primary purposes of
the offering will be to raise capital for the Company, including
for the possible repayment of a portion of the Company's senior
secured indebtedness, the repayment of any then remaining
outstanding convertible subordinated note indebtedness, the
repurchase of the shares of the Company's Common Stock from St.
James Capital Partners, L.P., SJMB, L.P. and the Underbrink family
entities and for general corporate purposes.
In addition, under the terms of a Registration Rights Agreement,
the holders of $5,089,125 principal amount and accrued interest
(as of September 30, 2005) on outstanding convertible subordinated
notes will have the right, subject to certain limitations, to
include the shares issuable on conversion of the principal and
interest on the notes, as well as the shares of Common Stock
issued in exchange for their warrants, in the registration
statement. To the extent that the managing underwriter of the
public offering concludes that the amount of shares included in
the offering for the account of selling stockholders must be
reduced, the Company's agreement with the Underbrink family
entities provides that the Underbrink family entities will reduce
their sale of shares to the Company to enable greater
participation in the underwritten public offering by the selling
stockholders. The terms of the underwritten public offering and
the amount and price of the shares of Common Stock proposed to be
offered and sold have not been determined at this time.
Black Warrior Wireline Corp. is an oil and gas service company
providing services to oil and gas well operators primarily in the
United States and in the Gulf of Mexico. It is headquartered in
Columbus, Mississippi.
At June 30, 2005, Black Warrior's balance sheet reflected a
$25,209,000, equity deficit compared to a $20,849,000, deficit at
Dec. 31, 2004.
BREWSTER MAIN: Voluntary Chapter 11 Case Summary
------------------------------------------------
Debtor: Brewster Main Corporation
50 Main Street
Brewster, New York 10509
Bankruptcy Case No.: 05-38455
Chapter 11 Petition Date: October 12, 2005
Court: Southern District of New York (Poughkeepsie)
Debtor's Counsel: Lewis D. Wrobel, Esq.
12 Raymond Avenue
Poughkeepsie, New York 12603
Tel: (845) 473-5411
Fax: (845) 473-3430
Estimated Assets: Not Provided
Estimated Debts: $1 Million to $10 Million
The Debtor does not have unsecured creditors who are not insiders.
CATHOLIC CHURCH: Spokane Files Reorg. Plan & Disclosure Statement
-----------------------------------------------------------------
The Diocese of Spokane delivered its Plan of Reorganization and
an accompanying Disclosure Statement explaining the Plan to the
U.S. Bankruptcy Court for the Eastern District of Washington on
October 10, 2005.
The Diocese filed the Plan to meet the Court's directive. Judge
Williams wanted Spokane to file the Plan and Disclosure Statement
by October 10 to maintain exclusivity. Judge Williams also noted
that the interrelationship between the appeal from the Court's
Orders in the "property of the estate litigation" and Plan
confirmation must be discussed.
According to Most Reverend William S. Skylstad, D.D., the Bishop
of the Diocese of Spokane, the Plan will allow the Diocese to:
-- fairly compensate the victims of sexual abuse by clergy or
others associated with the Diocese;
-- bring healing to victims, parishioners and others affected
by the past acts of sexual abuse; and
-- continue its ministry and mission.
The Diocese will establish a fund for those victims who have
identified themselves and for those who recognize their claims or
identify themselves in the future.
Specifically, the Diocese contemplates transferring on the
effective date of the Plan certain assets to the Fund, including:
* the remaining unrestricted cash;
* the net proceeds of sale of Diocese Real Property sold prior
to the Effective Date;
* a pledge of the net proceeds of sale of Diocese Real
Property still held by the Diocese on the Effective Date;
* the net proceeds of sale of the parish building loans or
the assignment of the Loans directly to the Fund;
* proceeds contributed by settling insurers;
* the assignment of the insurance action recoveries as against
non-settling insurers;
* any and all proceeds contributed by participating third
parties;
* any and all proceeds from avoidance actions; and
* any additional contributions required pursuant to the Plan.
The Trusts
Bishop Skylstad relates that in full release, satisfaction and
discharge of all Tort Claims, the Reorganized Debtor will execute
and deliver a settlement trust agreement and litigation trust
agreement, which will establish a settlement trust and a
litigation trust, on or before the Effective Date.
The Trustees of the Settlement Trust and the Litigation Trust
will assume full responsibility for:
* resolving all Tort Claims pursuant to the Settlement Trust
Agreement and the Litigation Trust Agreement or the
Litigation Trust Agreement;
* collecting, investing and distributing funds for the benefit
of the holders of Allowed Tort Claims;
* fulfilling all other obligations under the Settlement Trust
Agreement and the Litigation Trust Agreement; and
* paying the costs and expenses of the Settlement Trust and
the Litigation Trust, all set forth more fully in the
Settlement Trust Agreement and the Litigation Trust
Agreement.
The Diocese or the Reorganized Debtor will make distributions
with respect to all Claims other than Tort Claims.
Bishop Skylstad says the Diocese will fund the Settlement Trust
and the Litigation Trust from:
-- the transfers on the Effective Date to the Fund;
-- any earnings obtained by the Trustees from investments of
the assets after the Effective Date; and
-- any and all Fund proceeds received after the Effective
Date.
The Reorganized Debtor will deliver the initial funding of each
Trust based on the allocation determined by the Bankruptcy Court
as part of the confirmation process.
The allocation of the assets in the Fund as between the
Settlement Trust and the Litigation Trust and any sub-trusts
within the Settlement first -- like the Future Claims Reserve --
will also be determined by the Bankruptcy Court as part of the
confirmation process.
On or before the Effective Date, the Reorganized Debtor will
execute and deliver any other agreements, assignments or
commitments to carry out the terms of the Plan or the funding of
the Settlement Trust and the Litigation Trust.
Any funds received from the Settling Insurers and Insurance
Action Recoveries allocated to the Settlement Trust and the
Litigation Trust received as of the Effective Date will also be
paid or distributed by Spokane to the Trustees to be held and
distributed in accordance with the Settlement Trust Agreement and
the Litigation Trust Agreement.
If, on the Effective Date, there remain any Insurance Actions
that have not been resolved, Spokane may assign all rights and
interests in the Insurance Actions to the Trustees as determined
by the Bankruptcy Court as part of the confirmation process.
In the event and to the extent the Insurance Actions are assigned
to the Trustees, the Trustees will substitute in any Insurance
Actions as the real party-in-interest after the Effective Date.
Copies of the proposed Settlement Trust Agreement and the
Litigation Trust Agreement will be filed by the Diocese 20 days
prior to the hearing on the Disclosure Statement, Bishop Skylstad
explains.
Special Arbitrator
Pursuant to the Plan, the allowance of the Tort Claims in the
Settlement Trust will be evaluated and determined by a Special
Arbitrator selected by the Bankruptcy Court as part of the
confirmation process. The Special Arbitrator will:
* determine the appropriate Tier into which a Tort Claim will
be placed;
* determine whether the Tort Claim is entitled to any
different consideration because of mitigating or aggravating
factors; and
* instruct the Trustee to pay any Allowed Tort Claims of
Settling Tort Claimants in accordance with the terms of the
Settlement Trust.
The Committee of Tort Litigants, the Tort Claimants' Committee,
and the Future Claims Representative will suggest the names of
one or more individuals who would be willing to serve as the
Special Arbitrator, and will notify the Diocese of the
suggestions prior to the Confirmation Hearing. The Court will
select the Special Arbitrator prior to the Effective Date.
Funding
Bishop Skylstad relates that all payments under the Plan, which
are due on the Effective Date will be funded from:
(1) the Cash on hand;
(2) the proceeds of the sale of the Diocese Real Property;
and
(3) any contributions or settlements with any Participating
Third Party and Settling Insurers and from the proceeds
of any DIP or exit financing, if any, received by the
Diocese during the course of the case or prior to or in
conjunction with the Confirmation Hearing.
Moreover, the funds necessary to ensure continuing performance
under the Plan after the Effective Date will be, or may be,
obtained from:
-- any Cash retained by the Reorganized Debtor after the
Effective Date;
-- any Cash generated from the post-Effective Date operations
of the Reorganized Debtor; and
-- any other contributions or financing which the Reorganized
Debtor may obtain on or after the Effective Date.
Payments Effective Upon Tender
Whenever the Plan requires payment to be made, the payment will
be deemed made and effective upon its tender by the Diocese or
the Reorganized Debtor to the Creditor to whom payment is due.
If any Creditor refuses a tender, the amount tendered and refused
will be held by the Diocese or the Reorganized Debtor for the
benefit of that Creditor pending final adjudication of the
dispute.
However, when and if the dispute is finally adjudicated and the
Creditor receives the funds previously tendered and refused, the
Creditor will be obliged to apply the funds in accordance with
the Plan as of the date of the tender.
While the dispute is pending and after adjudication of the
dispute, the Creditor will not have the right to claim interest
or other charges or to exercise any other rights which would be
enforceable by the Creditor if the Diocese or the Reorganized
Debtor failed to pay the tendered payment.
Preservation of Debtor's Claims,
Demands, and Causes of Action
All claims, demands, and causes of action on behalf of the
Diocese or the Estate against any other Person, including but not
limited to, all Avoidance Actions arising before the Effective
Date and all Insurance Actions, which have not been resolved or
disposed of prior to the Effective Date, are preserved in full
for the benefit of the Reorganized Debtor, except for claims or
causes of action, cross-claims, and counterclaims which have been
released pursuant to the Plan or pursuant to a Final Order prior
to the Effective Date.
All defenses, counterclaims, Claims and demands related to the
Tort Claims are preserved and transferred to the Trustees of the
Litigation Trust and the Settlement Trust in accordance with
Section 1123(b). The Diocese and the Reorganized Debtor will
also be entitled to assign their rights under the Plan. On the
Effective Date, the Trustees and the Trust are designated as the
estate representative pursuant to and in accordance with Section
1123(b)(3)(B) with respect to the Insurance Actions, to the
extent the Insurance Actions are assigned to the Trustees.
Discharge
On the Effective Date, the Diocese will be discharged from, and
its liability will be extinguished completely in respect of any
Claim, including, without limitation, Tort Claims and Claims held
by Future Tort Claimants, and any debt, Bishop Skylstad says.
Permanent Injunction
All Persons who have held, hold, or may hold Channeled Claims or
Claims against the Diocese, whether known or unknown, and their
agents, attorneys, and all others acting for or on their behalf,
will be permanently enjoined on and after the Effective Date
from:
(a) commencing or continuing in any manner, any action or any
other proceeding of any kind with respect to any Claim
against the Parties, the Diocese, the Reorganized Debtor,
the Settlement Trust, the Litigation trust, the Trustees,
or the property of the Parties;
(b) seeking the enforcement, attachment, collection or
recovery by any manner or means of any judgment, award,
decree, or order against the Parties or the property of
the Parties, with respect to any discharged Claim or
Channeled Claim;
(c) creating, perfecting, or enforcing any encumbrance of any
kind against the Parties or the property of the Parties
with respect to any discharged Claim or Channeled Claim;
(d) asserting any set-off, right of subrogation, or recoupment
of any kind against any obligation due to the Parties with
respect to any discharged Claim or Channeled Claim; and
(e) taking any act, in any manner and in any place whatsoever,
that does not conform to or comply with provisions of the
Plan, the Settlement Trust Agreement or the Litigation
Trust Agreement.
Channeled Claims refer to the claims of the Tort Claimants
against the Participating Third Parties and the Settling
Insurers, which are channeled to and satisfied pursuant to the
Settlement Trust or Litigation Trust.
Each Non-Settling Tort Claimant will be entitled to continue or
commence an action against the Trustees of the Litigation Trust
-- in their capacity as Trustees only and not in their individual
capacity. The Non-Settling Tort Claimant will be entitled to a
jury trial for the sole purpose of obtaining a judgment as
permitted by the Litigation Trust Agreement, thereby liquidating
the Non-Settling Tort Claimant's Claim so that it may be paid
with other Allowed Tort Claims in the ordinary course of the
operations of the Litigation Trust, consistent with the
provisions of the Litigation Trust Agreement.
The holder of any judgment will be enjoined from executing
against the Litigation Trust or its assets. In the event any
Person takes any action that is prohibited by, or is otherwise
inconsistent with the provisions the Plan related to the release,
discharge and injunction, then, upon notice to the Court by an
affected Party, the action or proceeding in which the Claim of
the Person is asserted will automatically be transferred to the
Court for enforcement.
Administrative Claims Bar Date
All requests for payment of administrative costs and expenses
incurred prior to the Effective will be served and filed with the
Bankruptcy Court no later than 30 days after the Effective Date.
Late claims will be forever barred.
Any Claims for fees, costs, and the Chapter 11 Professionals
after the Effective Date will be treated as part of the fees and
expenses of the Reorganized Debtor and need not be submitted to
the Bankruptcy court for approval.
Continued Corporate Existence
The Diocese will, as a Reorganized Debtor, continue to exist
after the Effective Date as a separate legal entity, with all
powers of a corporation sole under the laws of the State of
Washington and without prejudice to any right to alter or
terminate existence under applicable state law.
From and after the Effective Date, the Reorganized Debtor will
continue to be managed in accordance with the principles of Canon
Law and applicable state law. The Bishop will be the sole
director of the Reorganized Debtor.
Spokane has drafted a budget for fiscal years 2006 to 2007:
Summary of Diocesan Budget
2005 - 2006 2006 - 2007
----------- -----------
Net Excess (Deficit)
for Operations $64,500 $445,500
Net Excess (Deficit)
for Seminary 54,600 (445,400)
Net Excess (Deficit)
for Priest Retirement 0 0
Net Excess (Deficit)
for D & L 0 0
--------- ---------
Total Diocesan Excess (Deficit) 119,100 100
--------- ---------
Victims Assistance Costs
Communications 0 0
Legal 3,600,000 0
Victim Counseling/Assistance 120,000 0
Settlements 0
--------- ---------
Total Victims Assistance 3,720,000 0
--------- ---------
Total Diocesan Excess (Deficit)
After Victims Assist. Costs ($3,600,900) $100
========= =========
A summary of the Diocese's projected budget for fiscal years 2006
and 2007, together with the actual results of Diocesan operations
for each of the fiscal years between 2001 and 2005, is available
at no charge at:
http://bankrupt.com/misc/diocesan_budget.pdf
Reorganization of Parishes or Reformation of Deeds
Prior to the Effective Date, but after the Confirmation Date,
each Parish will be separately incorporated as a Washington non-
profit corporation. All of the deeds to Parish Real Property
will be reformed and a trust agreement will be executed by the
Diocese and Parishes to clarify that:
(1) the Diocese holds legal title only to the Parish Real
Property; and
(2) each Parish holds the beneficial interest in its own
Parish Real Property.
The reorganization alternatives will be reviewed by the Diocese
with the Association of Parishes and will, subject to applicable
canon law, be reviewed in a collaborative spirit.
The post-confirmation reorganization of the Parishes or
reformation of the deeds relating to Parish Real Property will
have no effect whatsoever on, and will not in any way prejudice
or benefit any party to, the "Property of the Estate" litigation,
the Summary Judgment Order issued by Judge Williams, and the
appeal filed by the Diocese and other parties-in-interest.
If the Parish incorporation alternative is chosen, upon
completion of the incorporation and establishment of the
corporate existence of each Parish, the Diocese, as part of the
Plan, will convey legal title to the Parish Real Property to each
Parish that is the owner of the Parish Property.
The Confirmation Order will specifically approve the transfer and
direct the Diocese or the Reorganized Debtor to execute the
documents as are necessary and appropriate to carry out the
transfers.
Each Parish that is separately incorporated will be operated and
governed in accordance with Canon Law. Any disputes regarding
the interpretation and governance of the legal structure and
operation of a Parish will be referred to the appropriate Church
agency for determination.
Dissolution of Committees
Upon the occurrence of the Effective Date, the Committees will
dissolve and the members of the Committees will be released from
all rights and duties arising from or related to the
Reorganization Case.
Alternatives to the Plan
If the Plan is not confirmed, Bishop Skylstad points out that:
(1) the Diocese could propose another plan providing for
different treatment of certain Creditors;
(2) a plan could be filed by a party-in-interest other than
the Diocese; or
(3) the Bankruptcy Court, after appropriate notice and
hearing, could dismiss the Reorganization Case if the
Diocese or a third party is unable to confirm an
alternative plan in a reasonable period of time.
The Diocese believes that the Plan is the best vehicle that is
currently available to it to ensure an equitable and fair
distribution of compensation to all victims.
Bishop Skylstad asserts that the Plan maintains the funding of
programs within the Diocese, which are essential to the
continuation of the historic ministry of the religious
organization. The ability of the Diocese to reorganize its
financial affairs and provide an orderly way to deal with victims
of the abuse also provides for and allows the Diocese to continue
programs that were initiated over the past several years to
respond to the crisis.
A full-text copy of the Diocese's Reorganization Plan is
available for free at:
http://bankrupt.com/misc/spokane_plan.pdf
A full-text copy of the Diocese's Disclosure Statement is
available for free at:
http://bankrupt.com/misc/spokane_disc_statement.pdf
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. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CATHOLIC CHURCH: Classes & Treatment of Claims in Spokane's Plan
----------------------------------------------------------------
In accordance with Section 1122(a) of the Bankruptcy Code, the
Diocese of Spokane's Reorganization Plan groups claims against the
Diocese into 10 classes:
Class Description Recovery Under the Plan
----- ------------ -----------------------
N/A Administrative Paid in full, in cash
Claims
N/A Priority Paid in full, in cash
Unsecured Claims
N/A Priority Paid in full, in cash
Tax Claims
1 Priority Employee The Diocese will assume and honor
Claims employee-related policies after the
Effective Date
Estimated date of distribution
is varied depending on the
Employee's status and use of
vacation and sick leave time
Estimated amount: $13,527
Impaired
2 Prepetition Paid in full, with half of the
Property Tax amount paid 30 days after the
Secured Claims Effective Date and the remaining
half paid six months after the
Effective Date
Estimated amount: $5,303
Impaired
3 General Unsecured $500 per claim which will be paid 30
Convenience Claims days after the Effective Date or
applicable Claim Payment Due
Estimated amount: unknown
Impaired
4 Parish and Catholic Estimated distribution is unknown
Entity Unsecured
Claims To be paid in 60 monthly payments
of principal only, commencing on the
month following the final
distribution to holders of claims in
Class 7
Estimated amount: $4,545,185
Impaired
5 General Unsecured $247,714 plus 4.5% interest per
Claims annum, which will be paid monthly
beginning 30 days after the
Effective Date
Estimated amount: $247,714
Impaired
6 Other Tort Estimated distribution is unknown
Claims
To be paid from proceeds of
applicable insurance to the extent
available. Otherwise, no
distribution
Estimated amount: unknown
Impaired
7 Tort Claims Estimated Distribution is unknown
To be paid from proceeds of
Settlement Trust for the Settling
Tort Claimants, and Litigation Trust
for Non-Settling Tort Claimants.
Settling Tort Claimants will have
Claims determined by Special
Arbitrator and placed in Tiers.
Distribution will depend on Tier in
which Tort Claim is placed and
aggravating or mitigating factors.
Non-settling Tort Claimants share
Pro Rata in proceeds of Litigation
Trust.
Estimated amount: unknown
Impaired
8 Priest Retirement $1,000 per month per priest
Claims
As of October 1, 1005, priest
retirement payments per month
totaled approximately $53,000
A portion of this expense is covered
by an endowment and monthly
contributions from the Parishes
To be paid dependent upon timing of
retirement
Estimated amount: unknown
Unimpaired
9 Parish No distribution
Indemnification
Claims Estimated amount: unknown
Impaired
10 Insurer No distribution
Reimbursement
Claims Estimated amount: unknown
Classes 1, 2, 3, 4, 5, 6 and 7 are entitled to vote on the Plan
and the Diocese will seek acceptances from holders of allowed
claims in these Classes. Classes 8, 9, and 10 are deemed to
reject the Plan and are not allowed to vote on the Plan.
Nothing will affect the Diocese's or the Reorganized Debtor's
rights and defenses with respect to any Unimpaired Claims,
including all rights with respect to legal and equitable defenses
to or set-offs or recoupments against the Unimpaired Claims, Most
Reverend William S. Skylstad, D.D., the Bishop of the Diocese of
Spokane, tells Judge Williams.
Tort Claims
The Plan provides that all Tort Claimants, including Future Tort
Claimants, will have their Claims treated and resolved under
either the Settlement Trust or the Litigation Trust. All Tort
Claimants will automatically be included in the Settlement Trust
unless the Tort Claimant affirmatively elects to have his or her
Claim treated under the terms of the Litigation Trust.
If a Tort Claim is Allowed, the Tort Claim will be classified into
a Tier based on criteria proposed by the Committees, the FCR and
the Diocese and finally determined by the Court. The Plan
recommends a system with three tiers. The criteria for each Tier
will be set forth in the Settlement Trust and will be based on
input from the Committees, the FCR and the Diocese, and finally
determined by the Court.
Tier Category
---- --------
1 Least egregious acts of abuse
2 More serious acts of abuse
3 Most serious types of abuse
A Claimant who has suffered acts that would fit in more than one
tier will only have a recovery in the tier in which the most
serious act occurred.
The parameters for each Tier will be determined at a later date.
If a Tort Claimant wishes to retain his or her right to a jury
trial to liquidate a Tort Claim, the non-settling tort claimant
will have to affirmatively elect the treatment on the Ballot sent
with the Plan.
Any jury trial of a Non-Settling Tort Claimant will be held in
Superior Court for the County of Spokane, Washington.
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. 44; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CELLSTAR CORP: Posts $7.6 Million Net Loss in Third Quarter 2005
----------------------------------------------------------------
CellStar Corporation (OTC Pink Sheets: CLST) reported revenues of
$766.4 million for year-to-date 2005, compared to $587.6 million
in 2004. Revenues in Latin America increased $170.1 million and
revenues in the U.S. increased $8.6 million compared to year-to-
date 2004.
The Company reported a consolidated net loss of $21.3 million for
the nine months ended Aug. 31, 2005, compared to a net loss of
$52.4 million in 2004. The net losses in 2004 and 2005 included
losses from discontinued operations of $14.2 million and
$47.7 million, respectively, related primarily to the Company's
operations in the People's Republic of China. For the nine months
ended Aug. 31, 2005, losses from continuing operations were
$7.2 million, compared to $4.7 million in 2004. The Company's
continuing operations includes the North American and the Latin
American Regions.
"We are pleased with our results so far this year in Latin
America. The 65% growth in revenues is proof that the strategy we
adopted last year is working," said Robert Kaiser, Chairman of the
Board and Chief Executive Officer. "Although our U.S. business is
profitable, it is not where we want it to be. Our reporting
delays and issues in the Asia-Pacific Region have significantly
impacted the region and our ability to generate new business. In
the next several months, we will be very focused on improving the
results in the region, much as we did in Latin America not too
long ago."
On Sept. 2, 2005, the Company sold its PRC and Hong Kong
operations to Fine Day Holdings Limited, a Company formed by Mr.
A.S. Horng, former Chairman and Chief Executive Officer of
CellStar Asia Corporation Limited. On Aug. 25, 2005, the Company
entered into an agreement to sell its operations in Taiwan to a
former employee of the operations. The sale is expected to close
in October 2005. The financial results of these operations have
been reclassified to discontinued operations for 2004 and 2005.
Consolidated gross profit for year-to-date 2005 declined to
$36.7 million from $40 million in 2004. Gross profit as a
percentage of revenues was 4.8% for the nine months ended Aug. 31,
2005, compared to 6.8% for the same period of 2004.
Third Quarter 2005
The Company reported revenues in the third quarter of 2005 of
$277.9 million, an increase of $76.7 million or 38.1%, compared to
$201.2 million in 2004. Revenues in Latin America increased $63.1
million and revenues in the U.S. increased $13.5 million compared
to the third quarter of 2004.
For the third quarter of 2005, the Company reported a consolidated
net loss of $7.6 million, compared to a net loss of $14.2 million
in 2004. The net losses in 2004 and 2005 included losses from
discontinued operations of $5.6 million and $12.9 million,
respectively, related primarily to the Company's operations in the
PRC. For the quarter ended Aug. 31, 2005, losses from continuing
operations were $2.0 million, compared to $1.2 million in 2004.
Consolidated Balance Sheet
Cash and cash equivalents at Aug. 31, 2005, were $8.7 million,
compared to $13.2 million at Nov. 30, 2004.
Compared to Nov. 30, 2004, accounts receivable decreased from
$116.9 million to $85.2 million at Aug. 31, 2005. Accounts
receivable decreased primarily in Latin America largely due to
increased factoring of receivables. Accounts receivable days
sales outstanding (DSO's) for the quarter ended Aug. 31, 2005,
based on monthly accounts receivable balances, were 32.9, compared
to 38.5, for the quarter ended Nov. 30, 2004.
Inventories decreased to $57.8 million at Aug. 31, 2005, from
$87.3 million at Nov. 30, 2004, primarily in the Company's Latin
American operations. Inventory turns for the quarter ended
Aug. 31, 2005, based on monthly inventory balances, were 18.9
turns, compared to 8.8 for the quarter ended Nov. 30, 2004. The
increase was primarily in Latin America due to increased revenues.
Accounts payable decreased to $129.2 million at Aug. 31, 2005,
compared to $162.9 million at Nov. 30, 2004, primarily in the
Company's Latin America operations.
Liquidity
The Company generated net cash from operating activities of
$65 million for the nine months ended Aug. 31, 2005, compared to a
net cash usage of $8.2 million for nine months ended Aug. 31,
2004. During 2005, cash generated from operating activities was
primarily from a reduction in working capital in the discontinued
operations in Asia-Pacific as the revenue base drastically
decreased and due to the higher inventory turns and reduction in
DSO's in the Latin America Region. Cash from discontinued
operations was used primarily in the Asia-Pacific Region to pay
down notes payable and to fund the operating losses in the Asia-
Pacific Region.
As of Aug. 31, 2005, the Company had borrowed $16.2 million under
its domestic revolving credit facility compared to $35.8 million
at Nov. 30, 2004.
"We have been extremely pleased with the cooperation from our
lenders during the last several quarters as we worked through our
issues in the Asia- Pacific Region," said Raymond Durham, Chief
Financial Officer. "We had a very challenging year and they have
worked with us every step of the way. We received the necessary
waivers for the first three quarters of this year and have
modified certain covenants in the loan facility as a result of
exiting Asia-Pacific."
At Aug. 31, 2005, the Company had outstanding $12.4 million of 12%
Senior Subordinated Notes due in January 2007.
CellStar Corporation is a leading provider of value-added
logistics services to the wireless communications industry, with
operations in the North American and Latin American regions.
CellStar facilitates the effective and efficient distribution of
handsets, related accessories and other wireless products from
leading manufacturers to network operators, agents, resellers,
dealers and retailers. CellStar also provides activation services
in some of its markets that generate new subscribers for wireless
carriers. Additional information about CellStar may be found on
its Web site at http://www.cellstar.com.
* * *
Going Concern Doubt
Grant Thornton LLP expressed substantial doubt about Cellstar's
ability to continue as a going concern after it audited the
Company's financial statements for the period ended Nov. 30, 2004.
The auditors point to the Company's:
-- $118.1 million net loss for the 2004 fiscal year;
-- covenant violations on its borrowing arrangements;
-- exit on its Asian operations that constituted a large
percentage of its historical operations; and
-- experiencing restrictions in its business activities with
vendors.
In June 2005, the Company disclosed that it had retained the
services of Raymond James & Associates, Inc., to act as its
investment banking advisor to assist the Company with the
evaluation of its financial and strategic alternatives.
CELLSTAR CORP: Amends Domestic Revolving Credit Facility
--------------------------------------------------------
CellStar Corporation (OTC Pink Sheets: CLST) obtained on Oct. 7,
an amendment to its domestic revolving credit facility modifying
certain financial covenants going forward, and waiving any non-
compliance with those covenants which would have occurred during
the quarters ended Feb. 28, 2005, May 31, 2005 and August 31,
2005. The amendments also take into consideration the financial
impact of the Company's exit of the Asia-Pacific Region.
"Our bank group has supported the Company tremendously as we've
worked through our reporting delays and issues in the Asia-Pacific
Region," said Robert Kaiser, Chairman of the Board and Chief
Executive Officer. "These amendments will allow us to move beyond
these issues and concentrate our efforts on our operations in
North America and Latin America."
Credit Facilities
As previously reported in the Troubled Company Reporter, the
Company has an $85 million Loan and Security Agreement that
expires in November 2006. The Facility is considered a current
liability as the lender has dominion over cash receipts related to
the Company's domestic operations. Also, the Facility contains an
acceleration clause that the lenders could choose to invoke if the
Company were to default.
Funding under the Facility is limited by a borrowing base test,
which is measured weekly on eligible domestic accounts receivable
and inventory. Interest on borrowings under the Facility is at
the London Interbank Offered Rate or at the bank's prime lending
rate, plus an applicable margin.
The Facility is secured by a pledge of 100% of the outstanding
stock of all U.S. subsidiaries and 65% of the outstanding stock of
all first tier foreign subsidiaries as defined by the Facility.
The Facility is further secured by the Company's domestic accounts
receivable, inventory, property, plant and equipment and all other
domestic real property and intangible assets. The Facility
contains, among other provisions, covenants relating to the
maintenance of minimum net worth and certain financial ratios,
dividend payments, additional debt, mergers and acquisitions and
disposition of assets.
If the Company terminates the Facility prior to maturity, the
Company will incur a termination fee. The termination fee was
$1.7 million as of Nov. 30, 2004, and decreases by $850,000 per
year until September 2006 and remain at $425,000 thereafter. As
of Nov. 30, 2004, the Company had borrowed $35.8 million, at an
interest rate of 5.50%, an increase of $16.5 million from
$19.3 million at November 30, 2003. The increase in borrowings
was a result of the Company reducing domestic trade payables in
the second quarter of 2004 and maintaining payables at that level.
Under the Facility, the Company had additional borrowing
availability of $26.4 million at Nov. 30, 2004. At Aug. 26, 2005,
the Company had borrowed $15.1 million and had additional
borrowing availability of $22.1 million. The interest rate was
7.00% on Aug. 26, 2005.
From February 2004 to September 2005, the Company amended the
Facility and obtained waivers that:
-- modified financial covenants;
-- increased borrowing availability under the Facility;
-- extended the maturity date until November 2006; and
-- granted extensions for its failure to:
* file its Annual Report on Form 10-K for the fiscal year
ended Nov. 30, 2004,
* file its Quarterly Reports on Form 10-Q for the
quarters ended Feb. 28, 2005, and May 31, 2005, and
* cause its independent public accountants to deliver a
letter to the trustee pursuant to the Company's
indenture for its Subordinated Notes.
The Company would not have been in compliance with certain
covenants without the waivers or modifications. In addition, the
Company obtained the consent of the lender to sell its Greater
China Operations. The Company will utilize the proceeds to reduce
the borrowings under the Facility.
CellStar Corporation is a leading provider of value-added
logistics services to the wireless communications industry, with
operations in the North American and Latin American regions.
CellStar facilitates the effective and efficient distribution of
handsets, related accessories and other wireless products from
leading manufacturers to network operators, agents, resellers,
dealers and retailers. CellStar also provides activation services
in some of its markets that generate new subscribers for wireless
carriers. Additional information about CellStar may be found on
its Web site at http://www.cellstar.com/
* * *
Going Concern Doubt
Grant Thornton LLP expressed substantial doubt about Cellstar's
ability to continue as a going concern after it audited the
Company's financial statements for the period ended Nov. 30, 2004.
The auditors point to the Company's:
-- $118.1 million net loss for the 2004 fiscal year;
-- covenant violations on its borrowing arrangements;
-- exit on its Asian operations that constituted a large
percentage of its historical operations; and
-- experiencing restrictions in its business activities with
vendors.
In June 2005, the Company disclosed that it had retained the
services of Raymond James & Associates, Inc., to act as its
investment banking advisor to assist the Company with the
evaluation of its financial and strategic alternatives.
CKE RESTAURANTS: Board Adopts Stockholder Rights Plan
-----------------------------------------------------
The Board of Directors for CKE Restaurants, Inc. (NYSE: CKR)
approved the adoption of a stockholder rights plan. Under the
Plan, all stockholders of record as of the close of business on
Oct. 17, 2005, will receive a distribution of rights to purchase
shares of a newly authorized series of preferred stock. The
rights become exercisable in the event that a tender offer for at
least 15 percent of CKE's common stock is announced, or an
acquirer acquires at least 15 percent of the shares of the common
stock.
"Our Board of Directors has adopted the Plan to help protect the
long-term interests of the Company's stockholders. While the Plan
will not prohibit the acquisition of the Company, it establishes
certain rights to ensure that should any unsolicited acquisition
occur, it would be on terms that maximize value and are equitable
to all stockholders," stated Andrew F. Puzder, President and Chief
Executive Officer. The adoption of the Plan is intended as a
means to guard against abusive takeover tactics and is not in
response to any particular proposal.
The rights, which expire on December 31, 2008 (or on December 31,
2006 if the Plan is not ratified by the Company's stockholders by
that date), will be distributed to stockholders as of the close of
business on Monday, Oct. 17, 2005, the record date, as a non-
taxable distribution. There will be no rights certificates issued
unless certain conditions are met. The rights are not currently
exercisable and will initially trade with CKE's common stock.
CKE Restaurants, Inc., through its subsidiaries, franchisees and
licensees, operates some of the most popular U.S. regional brands
in quick-service and fast-casual dining, including the Carl's
Jr.(R), Hardee's(R), La Salsa Fresh Mexican Grill(R) and Green
Burrito(R) restaurant brands. The CKE system includes more than
3,200 locations in 44 states and in 13 countries. CKE is publicly
traded on the New York Stock Exchange under the symbol "CKR" and
is headquartered in Carpinteria, California.
* * *
As reported in the Troubled Company Reporter on July 13, 2005,
Standard & Poor's Ratings Services raised its ratings on quick-
service restaurant operator CKE Restaurants Inc. The corporate
credit and senior secured debt ratings were raised to 'B+' from
'B', and the subordinated debt rating was elevated to 'B-' from
'CCC+'. The outlook is stable.
COMDIAL CORP: Wants Until Oct. 31 to Make Lease-Related Decisions
-----------------------------------------------------------------
Comdial Corporation and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Delaware to further extend
the period within which they can elect to assume, assume and
assign, or reject their unexpired nonresidential real property
leases. The Debtors want their decision period extended until
Oct. 31, 2005.
The Debtors remind the Court that the sale of substantially all of
their assets to Vertical Communications Acquisitions Corp. closed
on Sept. 28, 2005.
The Debtors give the Court three reasons supporting the extension:
1) although the sale transaction already closed on Sept. 28,
2005, the requested extension is out of an abundance of
caution on their part because Vertical Communications has
not made a final decision on all the leases connected with
the asset sale;
2) they do no want to assume any lease connected with the asset
sale that Vertical Communications may later on decide it is
not interested in; and
3) they assure the Court that the requested extension will not
prejudice the lessors of those leases.
The Court will convene a hearing at 9:30 a.m., on Oct. 25, 2005,
to consider the Debtors' request.
Headquartered in Sarasota, Florida, Comdial Corporation --
http://www.comdial.com/-- and its affiliates develop and market
sophisticated communications products and advanced phone systems
for small and medium-sized enterprises. The Company and its
debtor-affiliates filed for chapter 11 protection on May 26, 2005
(Bankr. D. Del. Case No. 05-11492). Jason M. Madron, Esq., and
John Henry Knight, 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
total assets of $30,379,000 and total debts of $35,420,000.
CONGOLEUM CORP: Has Until Dec. 14 to Solicit Plan Acceptances
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey extended
the deadline until Dec. 14, 2005, for Congoleum Corporation
(AMEX:CGM) to solicit acceptances of its plan of reorganization.
The Debtor has reached a new agreement in principle with
representatives of certain secured asbestos claimants concerning
treatment of their claims, and expects to prepare a revised plan
and submit it to the Bankruptcy Court by Oct. 24, 2005. Congoleum
intends to seek permission of the Bankruptcy Court to distribute a
summary of the plan modifications promptly thereafter, so
claimants may vote on the revised plan before the new deadline. A
hearing date to consider confirmation of this modified plan of
reorganization has not been set.
Settlement Agreement
Also, Congoleum ask the Bankruptcy Court to approve a settlement
agreement with Mt. McKinley Insurance Company and Everest
Reinsurance Company. Under the terms of the settlement, Mt.
McKinley and Everest will pay $21.5 million into an escrow
account. The escrow agent will transfer the funds to the trust
for asbestos claimants to be formed by Congoleum's plan once the
plan goes effective and the Court approves the payment.
"A distribution priority issue arose among the asbestos claimants
and modifications are being finalized to resolve them," Roger S.
Marcus, Chairman of the Board, said. "We believe the proposed
changes should allow us to move forward with the support necessary
for confirmation of our plan. We do not expect a significant
delay from these changes and remain hopeful that we can emerge
from bankruptcy in the spring of 2006."
Mr. Marcus added "We continue to make progress obtaining insurance
proceeds to fund the trust for claimants. Completed insurance
settlements now total over $164 million, we have additional
settlements being finalized, and we are in ongoing negotiations
with other carriers."
Headquartered in Mercerville, New Jersey, Congoleum Corporation --
http://www.congoleum.com/-- manufactures and sells resilient
sheet and tile floor covering products with a wide variety of
product features, designs and colors. The Company filed for
chapter 11 protection on December 31, 2003 (Bankr. N.J. Case No.
03-51524) as a means to resolve claims asserted against it related
to the use of asbestos in its products decades ago. Domenic
Pacitti, Esq., at Saul Ewing, LLP, represents the Debtors in their
restructuring efforts. When the Company filed for protection from
its creditors, it listed $187,126,000 in total assets and
$205,940,000 in total debts. At June 30, 2005, Congoleum Corp.'s
balance sheet showed a $35,939,000 stockholders' deficit, compared
to a $20,989,000 deficit at Dec. 31, 2004. Congoleum is a 55%
owned subsidiary of American Biltrite Inc. (AMEX:ABL).
COOPER TIRE: S&P Lowers Corporate Credit Rating to BB+ from BBB-
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
and senior unsecured ratings on Cooper Tire & Rubber Co. to a
speculative-grade 'BB+' from 'BBB-'. The commercial paper rating
on the company was lowered to 'B' from 'A-3' and then withdrawn.
"The rating actions result from the poor near-term earnings and
cash flow prospects for the tire manufacturer, which will cause
credit protection measures to be weaker than previously expected,"
said Standard & Poor's credit analyst Martin King.
Findlay, Ohio-based Cooper Tire has total debt of about
$720 million. The rating outlook is negative.
Cooper has reported depressed operating results during the past
year and is expected to continue to experience earnings pressure
for at least the next few quarters. Although sales were up 3.5%
during the first half of 2005, EBITDA declined 36%. The poor
results were caused by a number of factors such as:
-- operating inefficiencies the company is experiencing while
it shifts its domestic manufacturing operations toward
higher margin products and increases its supply of economy
tires from Asia;
-- reduced unit sales in the passenger car tire segment due to
market share losses, imbalanced inventory, and intentional
shifts away from unprofitable customers;
-- persistently high raw material costs, which increased by $31
million in the second quarter from the same period last
year;
-- start-up costs associated with a new tire plant being
constructed in China; and
-- a strike during the first quarter at an important
manufacturing plant.
Although the work stoppage has ended, Cooper lost sales as a
result of the strike that will not be recovered because of the
company's capacity constraints. Cooper estimates that the strike
reduced operating income by about $20 million during the first
half of the year.
Standard & Poor's expects Cooper to face many of the same
challenges in the second half of 2005. The company will
experience continued market share pressure because of its capacity
constraints and because order fill rates are lower than historical
levels.
In addition, Cooper expects the first-quarter labor disruption to
continue to hurt earnings, and it will likely depress operating
income by $6 million to $7 million in the third quarter.
Furthermore, rising raw material prices will be a continuing
concern as the high price of oil drives up commodity costs (a $35
million-$40 million increase is expected in the third quarter).
As a result, Cooper's 2005 operating results will fall
significantly short of our previous expectations.
CRIIMI MAE: Moody's Upgrades Preferred Stock Ratings to B3
----------------------------------------------------------
Moody's Investors Service upgraded the preferred stock ratings of
CRIIMI MAE Inc. to B3, from Caa2. This rating remains on review
for possible further upgrade, as the rating agency evaluates the
impact of CDP Capita l-- Financing's planned acquisition of CRIIMI
MAE.
During 2005, CRIIMI MAE commenced a review of its strategic
alternatives, including a possible sale of the REIT. The REIT
recently announced that it had reached an agreement to be acquired
by CDP Capital -- Financing Inc., a subsidiary of Caisse de depot
et placement du Quebec, the pension fund for the Province of
Quebec.
According to Moody's, the rating upgrade reflects CRIIMI MAE's
improved financial performance and lower leverage. The REIT's
return on average equity increased to 6.22% for 2004, up from 1%
in 2003. During the same period, debt as a percentage of assets
declined to 59%, from 72%. CRIIMI MAE's improving financial
metrics are indicative of its stronger financial flexibility,
according to Moody's. The REIT's activities have been largely
limited to managing its existing mortgage securities portfolio and
its debt, partially offsetting the improved fundamentals.
The review for possible upgrade reflects the benefits that
acquisition by the Caisse may produce in financial flexibility and
access to resources. During the review, Moody's will assess the
likelihood and character of potential support from the Caisse.
These ratings were upgraded, with a review for possible upgrade:
CRIIMI MAE Inc.:
-- cumulative preferred stock Series B, to B3 from Caa2
Moody's began its review for possible upgrade of CRIIMI MAE's
preferred stock rating in March 2005.
CRIIMI MAE Inc. (NYSE:CMM) is a commercial mortgage REIT
headquartered in Rockville, Maryland, USA. It reported assets of
$1.1 billion and equity of $437 million as of June 30, 2005.
DELPHI CORP: Taps Skadden Arps as Lead Bankruptcy Counsel
---------------------------------------------------------
Delphi Corp., and its debtor-affiliates seek the U.S. Bankruptcy
Court for the Southern District of New York's authority to employ
Skadden, Arps, Slate, Meagher & Flom LLP and affiliates as their
principal restructuring and bankruptcy counsel.
Delphi Chairman and Chief Executive Officer, Robert S. Miller,
Jr., relates that since July 12, 2005, Skadden has performed
extensive legal work for the Debtors in connection with their
ongoing restructuring efforts designed to complete their
transformation plan and to preserve the value of the company.
The Debtors entered into an engagement agreement with Skadden
dated as of July 12, 2005.
The Debtors believe that continued representation by their
prepetition restructuring counsel, Skadden, is critical to their
efforts to restructure their businesses because Skadden has
become familiar with their business and financial and legal
affairs and, accordingly, is well-suited to guide them through
the chapter 11 process.
According to Mr. Miller, Skadden has assisted the Debtors and
their affiliates in connection with, among other things, acting
as special corporate counsel to the Debtors and providing advice
regarding, without limitation, their efforts to effectuate a
consensual resolution with General Motors Corporation and the
Debtors' major unions, attending board of directors meetings and
internal company meetings from time to time, and the preparations
for the filing of the Debtors' Chapter 11 cases.
The Debtors have selected Skadden as their attorneys because of
the firm's experience and knowledge in the field of debtors' and
creditors' rights and business reorganizations under Chapter 11
of the Bankruptcy Code. John Wm. Butler, Jr., Esq., co-leader of
Skadden worldwide corporate restructuring practice will
coordinate the overall representation of the Debtors along with
Peter Allan Atkins, Esq.
Mr. Butler has served as counsel in transactional work with
debtors, sellers, purchasers and creditors of financially
troubled companies, in non-judicial restructurings, and in
chapter 11 reorganization cases in several hundred transactions
across North America and in international transactions located in
Asia, Australia, Europe, South America and the Middle East. Mr.
Butler has also represented creditors' and equity committees,
secured lenders and chapter 7 trustees in numerous cases.
In addition, other members of Skadden who have been actively
involved in representing the Debtors prior to the Petition Date
will continue to perform services for the Debtors postpetition.
Each of the Debtors desire to employ Skadden under a general
retainer because of the extensive legal services that will be
required in connection with their chapter 11 cases.
Services To Be Rendered
Skadden will be required to:
(a) advise the Debtors with respect to their powers and duties
as debtors and debtors-in-possession in the continued
management and operation of their business and properties;
(b) attend meetings and negotiate with representatives of
creditors and other parties-in-interest;
(c) advise and consult on the conduct of the case, including
all of the legal and administrative requirements of
operating in chapter 11;
(d) advise the Debtors in connection with any contemplated
sales of assets or business combinations, including the
negotiation of asset, stock purchase, merger or joint
venture agreements, formulate and implement bidding
procedures, evaluate competing offers, draft appropriate
corporate 11 documents with respect to the proposed sales,
and counsel the Debtors in connection with the closing of
those sales;
(e) advise the Debtors on matters relating to the evaluation
of the assumption, rejection or assignment of unexpired
leases and executory contracts;
(f) provide advice to the Debtors with respect to legal issues
arising in or relating to the Debtors' ordinary course of
business including attendance at senior management
meetings, meetings with the Debtors' financial advisors
and meetings of the board of directors, and advice on
employee, workers' compensation, employee benefits,
executive compensation, tax, environmental, banking,
insurance, securities, corporate, business operation,
contracts, joint ventures, real property, press and public
affairs and regulatory matters and advise the Debtors with
respect to continuing disclosure and reporting
obligations, if any, under securities laws;
(g) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions on
their behalf, the defense of any actions commenced against
those estates, negotiations concerning all litigation in
which the Debtors may be involved and objections to claims
filed against the estates;
(h) negotiate and prepare on the Debtors' behalf plan(s) of
reorganization, disclosure statement(s) and all related
agreements and documents and take any necessary action on
behalf of the Debtors to obtain confirmation of those
plan(s);
(i) prepare on the Debtors' behalf all petitions, motions,
applications, answers, orders, reports, and papers
necessary to the administration of the estates;
(j) attend meetings with third parties and participate in
negotiations;
(k) appear before the Court, any appellate courts, and the
U.S. Trustee, and protect the interests of the Debtors'
estates before those courts and the U.S. Trustee; and
(l) perform all other necessary legal services and provide all
other necessary legal advice to the Debtors in connection
with the Debtors' chapter 11 cases and bring the Debtors'
chapter 11 cases to a conclusion.
Mr. Butler assures the Court that the members, counsel and
associates of the firm of Skadden:
(a) do not have any connection with any of the Debtors, their
affiliates, their creditors, the U.S. Trustee, any person
employed in the office of the U.S. Trustee, or any other
party-in-interest, or their attorneys and accountants,
(b) are "disinterested persons," as that term is defined in
Section 101(14) of the Bankruptcy Code, and
(c) do not hold or represent any interest adverse to the
Debtors' estates.
In addition, Skadden informed the Debtors that no other attorney
at Skadden is related to any United States Bankruptcy Judge for
the Southern District of New York or to the United States Trustee
for that district, except that Adlai S. Hardin III, Esq., a
Corporate Restructuring associate employed by Skadden in its New
York office, is the son of Judge Adlai Hardin.
Retainer
The Engagement Agreement provided for the implementation of a
retainer program pursuant to which the Debtors paid an initial
retainer of $500,000.
Skadden periodically invoiced the Debtors and drew down the
Initial Retainer and was paid certain supplemental amounts to
replenish the Initial Retainer:
$1,600,000 on August 19, 2005,
$2,000,000 on September 8, 2005, and
$1,750,000 on September 27, 2005.
Skadden received a filing retainer of $4,000,000 to be utilized
in accordance with the Engagement Agreement to cover a portion of
the projected fees, charges and disbursements to be incurred
during the reorganization cases.
Skadden will apply the Retainer to pay any fees, charges and
disbursements which remain unpaid as of the Petition Date and
will retain the remainder of the Retainer to be applied to any
fees, charges and disbursements which remain unpaid at the end of
the reorganization cases.
As of October 7, 2005, the amount of the Retainer was $4,033,019.
Skadden's books and records reflect that for the period July 12,
2005, through October 8, 2005, the firm received an aggregate of
$9,850,000 from the Debtors, including payments received for
services rendered prior to the filing on October 8, 2005, and is
inclusive of the Retainer balance of $4,033,019. The aggregate
amount applied to fees, charges and disbursements for the same
period was $5,816,981, exclusive of the Retainer balance of
$4,033,019.
Skadden's fees are based in part on its guideline hourly rates,
which are periodically adjusted. Skadden will be providing
professional services to the Debtors under its standard bundled
rate schedule and, therefore, Skadden will not be seeking to be
separately compensated for certain staff, clerical and resource
charges.
As of September 1, 2005, the hourly rates under the bundled rate
structure range from:
$585 to $835 for partners and of counsel,
$560 to $640 for counsel and special counsel,
$295 to $540 for associates, and
$90 to $230 for legal assistants and support staff.
Skadden will continue to charge the Debtors for all other
services provided and for other charges and disbursements
incurred in the rendition of services.
Headquartered in Troy, Michigan, Delphi Corporation --
http://www.delphi.com/-- is the single largest global supplier of
vehicle electronics, transportation components, integrated systems
and modules, and other electronic technology. The Company's
technology and products are present in more than 75 million
vehicles on the road worldwide. The Company filed for chapter 11
protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and
Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP,
represents the Debtors in their restructuring efforts. As of
Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530
in total assets and $22,166,280,476 in total debts. (Delphi
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
DELPHI CORP: Gets Interim Approval to Access $950-Mil of DIP Loans
------------------------------------------------------------------
After exhaustive negotiations involving their financial and legal
advisors, Delphi Corporation and its debtor-affiliates concluded
that the Financing offered by JPMorgan Chase Bank, N.A., as
administrative agent, and a syndicate of other financial
institutions arranged by J. P. Morgan Securities, Inc., and
Citigroup Global Markets Inc., presented the best option available
and would enable the Debtors to preserve their value as a going
concern.
Tranche A Tranche B
Commitment Commitment
Lender Amount Amount
------ ---------- ----------
JPMorgan Chase Bank, N.A. $875,000,000 $125,000,000
270 Park Avenue
New York, New York 10017
Citicorp USA, Inc. $875,000,000 $125,000,000
-------------- ------------
$1,750,000,000 $250,000,000
============== ============
Robert S. Miller, Jr., Delphi Corp.'s Chairman and Chief Executive
Officer, points out that the proposal received from the Agent
is competitive and addresses the Debtors' working capital and
liquidity needs. "The Debtors have been unable to obtain credit
from any source on terms more favorable than those offered
pursuant to the Financing."
The Debtors engaged in good faith and extensive, arm's-length
negotiations with the JPMorgan Chase Bank, N.A., and Citicorp
USA, Inc. These negotiations culminated in an agreement by the
Agent and CUSA to provide debtor-in-possession financing.
The salient terms of the DIP Credit Agreement are:
Borrower: Delphi Corporation
Guarantors: All Affiliated Debtors (and future
affiliated-debtors, if any)
Commitment: $2,000,000,000, consisting of:
-- a $1,750,000,000 Tranche A
Revolving Facility; and
-- a $250,000,000 Tranche B Term Loan.
Letters
of Credit: Up to $325,000,000 of the Revolving Facility
will be available for the issuance of Letters
of Credit backed by JPMorgan Chase Bank, N.A.,
and the other Issuing Lenders.
Borrowing
Base: The amount that can be borrowed at any time is
limited by the imposition of a Borrowing Base
equal to the sum of:
(i) 85% of Eligible Non-GM Receivables, plus
(ii) 85% of GM Receivables, plus
(iii) Available Inventory, equal to 85% of the
Net Orderly Liquidation Value of
Delphi's domestic inventory, provided,
however, that amount does not exceed
32.5% (increasing to 65% after a formal
appraisal) of Eligible Inventory, plus
(iv) a Fixed Asset Component equal to 80% of
the Net Orderly Liquidation Value of
Eligible Equipment plus 50% of the fair
market value of Eligible Real Estate,
minus
(v) the Carve-Out, minus
(vi) an amount equal to the excess of the
aggregate amount of Secured Domestic
Hedging Obligations over $75,000,000;
provided that:
(x) the aggregate amount of the Fixed
Asset Component will at no time
account for more than 30% of the
aggregate amount of the Borrowing
Base, and
(y) GM Receivables will at no time
account for more than 25% of the
total Eligible Receivables
included in the Borrowing Base.
Until the Agents have received a third party
appraisal with respect to the Fixed Asset
Component, the aggregate dollar amount of the
Fixed Asset Component included in the Borrowing
Base will be $300,000,000.
Maturity Date: The DIP Facility matures on the earliest of
substantial consummation of a confirmed chapter
11 plan and October 8, 2007.
Purpose: Proceeds will be used for working capital and
for other general corporate purposes.
Priority
and Liens: Obligations under the Financing will constitute
allowed claims having priority over any and all
administrative expenses, and will be secured by
a valid, binding, continuing, enforceable and
fully perfected first priority senior security
interest in and lien on all of the Debtors'
estates.
Prepetition
Agent's
Recommendation
for Priming
Liens: The Prepetition Agent recommends that the
Prepetition Secured Lenders consent and agree
to the priming of their liens in the
Prepetition Collateral, subject to the Court's
approval of adequate protection.
DIP Lender
Consent to
Prepetition
Secured
Lenders'
Subordinate
Liens: The DIP Lenders have agreed that the
subordinated and junior lien in favor of the
Prepetition Secured Lenders upon the
Prepetition Collateral is a Permitted Lien
under the DIP Credit Agreement.
Carve-Out: The Agent's liens and the DIP Lenders'
superpriority claim will be subject and
subordinate only to:
* all fees required to be paid to the Clerk
of the Bankruptcy Court and the U.S.
Trustee;
* all fees and expenses incurred by a
trustee under Section 726(b) of the
Bankruptcy Code;
* after the occurrence and during the
continuance of an Event of Default, the
payment of allowed and unpaid professional
fees and disbursements in an aggregate
amount not exceeding $35,000,000; and
* all unpaid professional fees and
disbursements incurred or accrued when no
Event of Default is continuing, in an
aggregate amount not exceeding $5,000,000.
Interest Rate: At Delphi's option, either:
-- 50 basis points over an averaged Federal
Funds Rate plus 1.50% or
-- one, three or six month LIBOR plus 2.50%;
Default
Interest: Upon the occurrence and during the continuance
of any default in payment of amounts due,
interest will be payable on demand at 2% above
the then applicable rate.
Financial
Covenant: Monthly cumulative minimum Global EBITDAR,
commencing January 2006.
Minimum Global
For the Period EBITDAR Target
-------------- --------------
01/01/2006 through 01/31/2006 ($125,000,000)
02/01/2006 through 02/28/2006 ($100,000,000)
03/01/2006 through 03/31/2006 ($75,000,000)
04/01/2006 through 04/30/2006 ($50,000,000)
05/01/2006 through 05/31/2006 ($25,000,000)
06/01/2006 through 06/30/2006 ($25,000,000)
07/01/2006 through 07/31/2006 ($50,000,000)
08/01/2006 through 08/31/2006 ($25,000,000)
09/01/2006 through 09/30/2006 $50,000,000
10/01/2006 through 10/31/2006 $100,000,000
11/01/2006 through 11/30/2006 $150,000,000
12/01/2006 through 12/31/2006 $165,000,000
01/01/2007 through 01/31/2007 $200,000,000
02/01/2007 through 02/28/2007 $250,000,000
03/01/2007 through 03/31/2007 $300,000,000
04/01/2007 through 04/30/2007 $350,000,000
05/01/2007 through 05/31/2007 $400,000,000
06/01/2007 through 06/30/2007 $500,000,000
07/01/2007 through 07/31/2007 $550,000,000
08/01/2007 through 08/31/2007 $600,000,000
09/01/2007 through 09/30/2007 $650,000,000
10/01/2007 through 10/31/2007 $700,000,000
Affirmative
Covenants: Usual and customary, including reporting
requirements, delivery of a Borrowing Base
Certificate, collateral monitoring and review,
and using best efforts to obtain a rating from
S&P and Moody's on the Revolving Facility and
the Term Facility.
Negative
Covenants: Usual and customary, including restrictions on
Liens, mergers, indebtedness, dividends,
investments, dispositions of assets, and
transactions with Affiliates.
Events of
Default: Among others, events of default include:
* failure to pay;
* breach of covenants;
* failure to deliver a Borrowing Base
Certificate when due;
* any material misrepresentation or false
warranty;
* conversion of the Debtors' cases to
Chapter 7, dismissal, appointment of examiner
or trustee;
* approval of any superpriority claim, which is
pari passu with or senior to the claims of
the DIP Lenders against the Debtors; and
* termination of the use of cash collateral.
Fees: Delphi will pay the fees set forth in a non-
public letter dated September 22, 2005, from
JPMorgan Chase Bank, N.A., J.P. Morgan
Securities, Inc., and Citigroup Global Markets,
Inc.
A full-text copy of the 152-page DIP Credit Agreement is
available for free at:
http://bankrupt.com/misc/delphiDIPagreement.pdf
The Debtors seek the U.S. Bankruptcy Court for the Southern
District of New York's authority to borrow from the DIP Lenders
under the DIP Credit Agreement up to an aggregate $950,000,000
(inclusive of the issuance of up to an aggregate face amount of
$325,000,000 of Letters of Credit), pending a final hearing. At
the final hearing, the Debtors will seek authority to borrow the
full amount -- $2 billion.
Objections
(1) Bank of America
Bank of America Leasing & Capital, LLC's predecessor-in-interest,
Fleet National Bank, entered into two separate leases of
aircraft, engines and avionics with SM 5105 LLC, a Delaware
limited liability company and the predecessor-in-interest of
Delphi Automotive Systems Human Resources LLC:
(a) The first lease is dated as of March 30, 2001, pursuant
to which a certain Learjet 60 Aircraft bearing
Manufacturer's Serial Number 237 and FAA Registration
Number N699DA along with engines and avionics were
leased to SM 5105 LLC.
(b) The second lease is also dated as of March 30, 2001,
pursuant to which a certain Bombardier CL-600-2B16
(Variant 604) Aircraft bearing Manufacturer's Serial
Number 5498 and FAA Registration Number N599DA along
with engines and avionics were leased to SM 5105 LLC --
the Challenger Lease.
Patrick E. Mears, Esq., at Barnes & Thornburg LLP, in Grand
Rapids, Michigan, notes that as security for their proposed
debtor-in-possession financing, the Debtors propose to grant to
the Postpetition Lenders liens and security interests in all of
the Debtors' property including leaseholds but excluding certain
specified property.
Bank of America objects to the DIP Financing Motion insofar as it
may be deemed to grant to the Postpetition Lenders a lien and
security interest in the property that is subject to the Learjet
Lease and the Challenger Lease. "This property does not
constitute property of the estate within the meaning of section
541 of the Federal Bankruptcy Code since the property is the
subject of true leases," Mr. Mears argues.
Bank of America also objects to the Motion insofar as it attempts
to grant to the Postpetition Lenders any interest in the Learjet
Lease and the Challenger Lease. In the event that the Court
determines otherwise, Mr. Mears asserts that the Interim and
Final Financing Orders entered in the Debtors' Chapter 11 cases
should clearly state that any interest so granted is expressly
subject to the terms of the leases and does not attach to the
lessor's interests under the leases.
(2) Ad Hoc Committee of Prepetition Secured Lenders
An Ad Hoc Committee -- consisting of a group of lenders,
including funds managed by DK Acquisition Partners LP and Latigo
Partners under the Prepetition Credit Agreement -- asks the Court
to adjourn the hearing to consider approval of the DIP Financing
Motion on an interim basis for a short period of time to allow
the Ad Hoc Committee and the other Prepetition Secured Lenders an
opportunity to study the Debtors' postpetition financing request
and to discuss with the Prepetition Agent and the Debtors the
terms under which the Prepetition Secured Lenders would consent
to the Debtors incurring indebtedness on a priming basis.
Allan S. Brilliant, Esq., at Goodwin Procter LLP, in New York,
relates that although there was much publicity about the Debtors'
intention to file for chapter 11, the actual time of the filing
came as a surprise to the members of the Ad Hoc Committee.
Moreover, the Debtors did not share the terms of the Debtors'
proposed postpetition financing or its adequate protection
proposal with the Prepetition Secured Lenders at any time prior
to the Petition Date. "Discussions, if any, were solely with the
Prepetition Agent, which is hopelessly conflicted because it is
also the agent in respect of the Debtors' proposed postpetition
financing," Mr. Brilliant notes.
The Ad Hoc Committee also believes that the Debtors have not --
and cannot -- satisfy their burden of proof with respect to the
need to incur postpetition indebtedness on a senior secured basis
under Section 364(d) of the Bankruptcy Code. Mr. Brilliant
argues that the priming of secured parties by senior liens is an
extraordinary remedy that is available to a debtor who desires to
obtain postpetition credit only if (a) the debtor is unable to
obtain such credit otherwise, and (b) there is adequate
protection of existing lien holders.
By their own admission, the Debtors obtained eight different
financing proposals, four of which would have refinanced in full
all indebtedness outstanding under the Prepetition Credit
Agreement, Mr. Brilliant points out. The Debtors have
acknowledged that credit is otherwise available without priming.
Given that alternative credit is available without priming
the Prepetition Secured Lenders' liens, albeit on less favorable
terms to the Debtors, Mr. Brilliant asserts that the Debtors have
not satisfied the requirements of Section 364(d)(1)(A).
Moreover, Mr. Brilliant continues, the Debtors' interim request
of $950 million appears disproportionate with their immediate
cash needs. The Debtors have indicated that they expect to
borrow only $200 million during the first 30 days of their
chapter 11 cases. "Should the Court decide to grant the Motion
on an interim basis, the Debtors should only be permitted to
incur indebtedness on a postpetition interim basis sufficient to
avoid irreparable harm to their businesses. Given the Debtors'
current cash position and their expected borrowing needs over the
near term, it is highly unlikely that the Debtors' businesses
would suffer any harm by substantially reducing the amount of
indebtedness the Debtors may incur on an interim basis.
Accordingly, the Debtors' maximum interim borrowing authority
should be limited to their publicly disclosed borrowing needs of
$200 million plus an additional $50 million to provide for
exigencies."
Interim Approval
At a hearing in Manhattan on Oct. 11, 2005, John Wm. Butler, Jr.,
Esq., at Skadden Arps Slate Meagher & Flom, told the Honorable
Robert D. Drain that there are ongoing discussions and
negotiations about what the final adequate protection package will
look like. Mr. Butler stressed that the DIP Facility and the
company's other continuing
financing agreements give Delphi's worldwide operations access to
more than $4 billion of flexible working capital financing.
Representing General Motors, Martin J. Bienenstock, Esq., at Weil
Gotshal & Manges, said that GM is very supportive of a successful
reorganization of Delphi. Mr. Bienenstock made it clear,
however, that GM and Delphi are having intense discussions about
the treatment and priming of set-off claims. GM and many other
parties are both Delphi customers and Delphi creditors.
Judge Drain overruled all objections not resolved or withdrawn.
The Debtors, Judge Drain observed, have represented that (i)
their management and financial advisors are convinced the company
should not operate with less than $400 million of available
liquidity and (ii) they are unlikely to draw more than
$565,000,000 before the Final DIP Financing Hearing a few weeks
from now on October __, 2005. Mr. Butler has stressed that
Delphi's suppliers' confidence is predicated on adequate
liquidity. On that basis, Judge Drain authorized Delphi to
borrow up to $950,000,000 (which includes $350,000,000 to back
letters of credit) under the DIP Credit Agreement backed by
JPMorgan Chase Bank, N.A., and Citicorp USA, Inc., on an interim
basis.
Judge Drain indicated that he wants the period during which the
to-be-appointed Creditors' Committee has the right to investigate
the prepetition lenders' liens extended to 120 days.
Judge Drain obtained confirmation from Mr. Butler that the Carve-
Out is comprehensive (meaning it includes folks who'd typically
complain if they were excluded) and does not kick in unless and
until there is an actual event of default under the DIP Facility.
Kenneth S. Ziman, Esq., at Simpson Thacher & Bartlett LLP,
representing the Prepetition Lending Group, did not object to the
Debtors' interim request. Mr. Ziman made it clear on the record
that his clients are reserving all of their rights with regard to
the Final DIP Order.
Donald S. Bernstein, Esq., at Davis Polk & Wardwell, who
represents the DIP Agent and the Joint Lead Arrangers, raised
minor concerns over some defined terms, all of which are clerical
rather than substantive.
Headquartered in Troy, Michigan, Delphi Corporation --
http://www.delphi.com/-- is the single largest global supplier of
vehicle electronics, transportation components, integrated systems
and modules, and other electronic technology. The Company's
technology and products are present in more than 75 million
vehicles on the road worldwide. The Company filed for chapter 11
protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and
Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP,
represents the Debtors in their restructuring efforts. As of
Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530
in total assets and $22,166,280,476 in total debts. (Delphi
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
DELPHI CORP: Court Allows Interim Use of Cash Collateral
--------------------------------------------------------
As of October 8, 2005, Delphi Corporation says it owes
approximately $2,579,783,051.85 under its Prepetition Credit
Agreement -- that certain Third Amended and Restated Credit
Agreement, dated as of June 14, 2005, among Delphi, as borrower,
JPMorgan Chase Bank, N.A., as administrative agent, the lenders
from time to time party thereto, Citicorp USA, Inc., as
syndication agent, Credit Suisse First Boston, Deutsche Bank AG,
New York Branch, and HSBC Bank USA, as co-documentation agents
for the revolving facility, Deutsche Bank AG, New York Branch, as
documentation agent for the term facility, J.P. Morgan Securities
Inc. and Citigroup Global Markets Inc., as joint bookrunners for
the revolving facility, J.P. Morgan Securities Inc., Citigroup
Global Markets, Inc., and Deutsche Bank Securities Inc., as joint
bookrunners for the term facility, J.P. Morgan Securities Inc.
and Citigroup Global Markets, Inc., as joint lead arrangers.
Delphi's obligations fall into three buckets:
$1,500,000,000.00 on account of Revolving Loans;
$988,329,620.59 on account of Term Loans; and
$91,453,431.26 of L/C Reimbursement Obligations.
-----------------
$2,579,783,051.85
=================
All of Delphi's obligations, as borrower, and the Subsidiary
Debtors' obligations, as guarantors, are secured by security
interests in substantially all of the material tangible and
intangible assets of Delphi and the Existing Guarantors.
The Prepetition Collateral Package does not include about $1.2
billion of receivables generated by Delphi and Delphi Automotive
Systems LLC (including in its capacity as successor by merger to
Delco Electronics Corporation). In addition, the Prepetition
Secured Lenders do not have perfected security interests in:
(a) real property located in jurisdictions that impose
material real estate recording taxes and other real
property to the extent that the Prepetition Secured
Lenders did not obtain a valid mortgage or deed of trust
or otherwise failed to perfect their security interest
therein,
(b) real property with a value less than $5 million, and
(c) the capital stock of foreign subsidiaries pledged under
the Existing Agreements to the extent that local law
requirements were not satisfied.
A portion of the Revolving Loans may not be secured by Domestic
Manufacturing Plant or Facility and shares of stock or
indebtedness of any U.S. subsidiary of Delphi that owns Domestic
Manufacturing Property.
In the ordinary course of their operations, John Wm. Butler, Jr.,
Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, relates, the
Debtors generate cash from their use of the Prepetition
Collateral pledged to the Prepetition Secured Lenders.
The Debtors will use this cash in the normal course of their
businesses to finance their operations, make essential payments
including employee salaries, payroll, taxes, the purchase of
goods, materials, and for other general corporate and working
capital purposes.
As of October 8, 2005, John D. Sheehan, Delphi's Chief
Restructuring Officer told Judge Gonzalez, the Debtors have a
cash balance of approximately $500,000,000. For the first 30
days of Delphi's chapter 11 cases, Mr. Sheehan projects the
company's cash balances will decline:
Cash & Investments at Oct. 8, 2005 $500,000,000
Projected Cash Receipts 1,800,000,000
Projected Cash Disbursements (2,425,000,000)
DIP Facility Draw 200,000,000
--------------
Projected Change in Cash ($425,000,000)
--------------
Ending Cash & Investments $75,000,000
==============
The Debtors ask the U.S. Bankruptcy Court for the Southern
District of New York for authority to use the Cash Collateral
sitting in their bank accounts to pay their ongoing obligations.
They also ask the Court for authority to continue using cash that
rolls in the door as customers pay their bills.
Section 363 of the Bankruptcy Code governs the Debtors' use of
property of the estates. Section 363(c)(1) of the Bankruptcy
Code provides that:
If the business of the debtor is authorized to be
operated under Section . . . 1108 . . . of this title
and unless the court orders otherwise, the trustee
may enter into transactions, including the sale or
lease of property of the estate, in the ordinary
course of business, without notice or a hearing, and
may use property of the estate in the ordinary course
of business without notice or a hearing.
Section 363(c)(2) of the Bankruptcy Code, however, provides an
exception with respect to "cash collateral" to the general grant
of authority to use property of the estate in the ordinary course
set forth in section 363 of the Bankruptcy Code. Specifically, a
trustee or debtor-in-possession may not use, sell, or lease "cash
collateral" under subsection (c)(1) unless:
(A) each entity that has an interest in such
collateral consents; or
(B) the court, after notice and a hearing, authorizes
such use, sale, or lease in accordance with the
provisions of this section."
Substantially all cash generated by the Debtors' businesses as of
the Petition Date constitutes "cash collateral," as that term is
defined in Section 363(a) of the Bankruptcy Code, and is subject
to the interest of the Prepetition Secured Lenders. The Debtors
seek to use Cash Collateral during the period commencing
immediately after the filing of their chapter 11 petitions until
the indefeasible payment in full in cash of all Obligations to
their Secured Lenders.
Kenneth S. Ziman, Esq., at Simpson Thacher & Bartlett LLP, in New
York, confirmed that Delphi met with his client, JPMorgan in its
role as the Prepetition Agent, to discuss the terms under which
the Prepetition Secured Lenders would consent to the Debtors' use
of Cash Collateral. The parties agree that the Prepetition
Secured Lenders and the Prepetition Agent will receive, as
adequate protection:
(1) Superpriority Administrative Priority Claims
under section 507(b) of the Bankruptcy Code, for
the aggregate amount of any diminution in value of
the Prepetition Collateral that will be immediately
junior to the DIP Lenders' claims;
(2) valid and perfected security interests and liens
in and on all of the Debtors' right, title, and
interest in, to, and under the Collateral securing
the Debtors' Obligations under the DIP, immediately
junior to the DIP Lenders' postpetition liens;
(3) payment, in cash, of all accrued but unpaid interest
and fees under the Prepetition Credit Agreement at
the non-default rate;
(4) monthly cash payments for accruing interest; and
(5) payment of JPMorgan's professionals' fees and expenses.
On an emergency basis, the Honorable Arthur J. Gonzalez approved
Delphi's request to dip into the Prepetition Lenders' cash
collateral Saturday afternoon. Tuesday evening, the Honorable
Robert D. Drain ratified Delphi's interim authority to use those
encumbered funds until a final permanent financing order is put in
place at later this month. Later this month, the Debtors will be
asking the Bankruptcy Court to put its final stamp of approval on
a new $2 billion debtor-in-possession financing facility backed by
JPMorgan Chase Bank, N.A., and Citicorp USA, Inc., and priming
Delphi's Postpetition Lenders's liens. Judge Drain granted Delphi
interim authority to draw up to $950 million under the DIP
Facility Tuesday evening.
Headquartered in Troy, Michigan, Delphi Corporation --
http://www.delphi.com/-- is the single largest global supplier of
vehicle electronics, transportation components, integrated systems
and modules, and other electronic technology. The Company's
technology and products are present in more than 75 million
vehicles on the road worldwide. The Company filed for chapter 11
protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and
Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP,
represents the Debtors in their restructuring efforts. As of
Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530
in total assets and $22,166,280,476 in total debts. (Delphi
Bankruptcy News, Issue Nos. 2 and 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
DELPHI CORP: Trades Shares on Pink Sheets Under DPHIQ Ticker
------------------------------------------------------------
Delphi Corporation (OTC: DPHIQ) disclosed that effective Monday,
Oct. 11, 2005, the Company's common stock will be traded under the
symbols DPHIQ on the Pink Sheets.
In light of its voluntary filing for relief under chapter 11 of
the Bankruptcy Code on Oct. 8, 2005, Delphi has determined it will
not request a hearing to appeal the NYSE's determination to
suspend its securities including:
-- its 6-1/2% Notes due May 1, 2009,
-- its 7-1/8% debentures due May 1, 2029, and
-- the 8.25% Cumulative Trust Preferred Securities of Delphi
Trust I,
from being traded on the New York Stock Exchange.
Delphi preferred shares are also trading on the Pink Sheets under
the symbol DPHAQ.
Headquartered in Troy, Michigan, Delphi Corp. --
http://www.delphi.com/-- is the single largest global supplier of
vehicle electronics, transportation components, integrated systems
and modules, and other electronic technology. The Company's
technology and products are present in more than 75 million
vehicles on the road worldwide. The Company filed for chapter 11
protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and
Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP,
represents the Debtors in their restructuring efforts. As of
Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530
in total assets and $22,166,280,476 in total debts.
DELPHI CORP: Judge Drain Okays Essential Vendor Payment Program
---------------------------------------------------------------
Delphi Corporation and its debtor-affiliates sought and obtained
authority from the U.S. Bankruptcy Court for the Southern District
of New York to continue their Vendor Rescue Program and pay
prepetition amounts owed to critical suppliers that are essential
to the uninterrupted functioning of the Debtors' business
operations. The Bankruptcy Court makes it clear that no creditor
has any right to compel Delphi to make any payment. Rather, the
Debtors have the authority to make the payment if they believe
it's in their best interest.
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, LLP, explained the import of this program to Judge Gonzalez
in graphic terms at the Bridge Order Hearing Saturday afternoon
in Manhattan. If Delphi can't obtain parts or services it needs,
vehicle production lines stop, plants close, workers lose their
jobs, local tax receipts dry up, and communities are wrecked.
Mr. Butler related that Delphi spends some $50 million annually
doing whatever it takes to protect and maintain a supply chain
where inventory turns are measured in hours rather than days.
"Failure to pay the Essential Supplier Claims would, in the
Debtors' business judgment," John D. Sheehan, Delphi's Chief
Restructuring Officer warned, "very likely result in the
Essential Suppliers halting their provision of goods and services
to the Debtors, in most cases because the Essential Suppliers
could not afford to continue to operate their businesses if the
Debtors fail to pay their prepetition claims."
Delphi stresses that payment of the Essential Supplier Claims is
vital to the Debtors' reorganization efforts because the
Essential Suppliers are the sole source from which the Debtors
can procure the goods and services they provide. Not paying the
Essential Supplier Claims would very likely result in the
Essential Suppliers' ceasing operations, thereby forcing the
Debtors to try to obtain goods and services elsewhere.
Replacement goods and services, however, would not be available
for a prolonged period and, even then, would likely be available
only at a higher price or on terms unfavorable to the Debtors.
Those replacement goods might also be incompatible with equipment
or systems currently operated by the Debtors, or not be of the
quality required by the Debtors and their customers, thereby
creating a devastating administrative burden on the Debtors and
causing tremendous disruptions to the Debtors' businesses.
Indeed, Delphi says, the failure to pay these claims would likely
result in:
(a) the Debtors' inability to obtain necessary materials to
produce their products,
(b) temporary shutdowns of the manufacturing facilities of the
Debtors and the Debtors' original equipment manufacturer
customers within as few as 24 hours from a vendor's
failure to timely ship parts to the Debtors (with
corresponding potentially catastrophic damage claims), and
(c) severe negative effects on the Debtors and the Debtors'
OEM customers, which include many of the largest vehicle
producers in the United States, and the Debtors' long-term
business relationships with those customers.
These effects are primarily due to the highly integrated nature
of the OEM supply chain, the Debtors' central role in the supply
chain, and the OEM customers' stringent quality requirements that
significantly limit the availability of alternative sources of
supply.
Delphi does not intend to disclose publicly the identity of any
individual Essential Creditors. Deirdre A. Martini, Esq.,
representing the U.S. Trustee, told Judge Gonzalez that the
Department of Justice will want that detailed information from
Delphi. Nobody balked at Ms. Martini's request at Saturday's
hearing.
Delphi wants authority to spend up to $90 million to pay
Essential Supplier Claims -- approximately 6.9% of the Debtors'
average $1.3 billion monthly disbursements to trade creditors
over the preceding 12 months.
In calculating the amount of the Essential Supplier Claims Cap,
the Debtors, with FTI Consulting's assistance, carefully analyzed
all of their vendors to identify the Debtors' sole source
suppliers, whose products are necessary for the Debtors to
continue operating their manufacturing facilities. The Debtors
then analyzed whether the suppliers provided goods and services
pursuant to enforceable long-term contracts and, if so, whether
enforcement of those contracts could be accomplished in a timely
manner without unduly disrupting the Debtors' businesses.
The Debtors also evaluated the financial and operational prospects
of their suppliers which are parties to enforceable contracts to
identify those suppliers whose financial or operational position
is so precarious that if the Debtors' prepetition obligations are
not paid, the suppliers' businesses would most likely fail.
Delphi used two methods of analysis to determine which of their
suppliers were so financially or operationally constrained:
-- First, the Debtors reviewed their Financially Troubled
Supplier Database, which the Debtors maintain in the
ordinary course of their businesses. The FTSD contains
information on all suppliers in the Vendor Rescue Program
or which the Debtors are actively monitoring because the
Debtors have identified those suppliers as high risk.
-- Second, the Debtors reviewed supplier information
available through Open Ratings, an Internet solution
provider that uses business data from inside and outside
the enterprise, cleans and unifies this data, and applies
proprietary analytics to deliver actionable intelligence
on the performance, financial opportunities, and risks
presented by the Debtors' suppliers. Utilizing the Open
Ratings software, the Debtors can quantify the financial
and operational stability of each of their suppliers.
Upon development of the FTSD and Open Ratings reports, the
Debtors' personnel who are responsible for managing and
tracking the Debtors' supplier relationships, and who have
an intimate knowledge of the Debtors' supplier base,
reviewed and further refined the pool of suppliers which
would likely be unable or unwilling to continue to provide
critical goods and services if their prepetition claims
remain unpaid.
FTI concluded that Delphi needed the ability to pay up to $145
million of Critical Vendor Claims. The Debtors didn't want to
bring that large of a request to the Bankruptcy Court.
Additionally, they didn't want to run the risk of being told "no"
in some exceptional cases. That prompted the Debtors to
accelerate payments totaling about $76 million to Super-Critical
Vendors Thursday and Friday of last week.
The Debtors stress that the $90 million amount represents only a
small portion of the total amount of prepetition trade claims
outstanding for all creditors. It represents the Debtors' best
estimate as to the minimum amount that must be paid to only
Essential Suppliers:
(x) with whom the Debtors have no enforceable long-term
contracts,
(y) with whom the Debtors have contracts that may be
terminable for any reason, or
(z) whose financial condition is so distressed that payments
to the vendor are necessary for the vendor to survive.
To minimize the amount of payments required, the Debtors request
authority to identify Essential Suppliers in the ordinary course
of their business circumstances warrant. Identifying the
Essential Suppliers now would likely cause those suppliers to
demand payment in full. When determining whether a creditor is
an Essential Supplier, the Debtors, in their sole discretion,
will consider, among other things:
(1) whether the goods or services the creditor provides can
be replaced or acquired on better terms,
(2) whether failure to pay prepetition trade claims will
require the Debtors to incur higher costs for goods or
services postpetition,
(3) whether the enforcement of a contract with a vendor who
refuses to ship product can be accomplished in a timely
and cost-efficient manner without unduly disrupting the
Debtors' operations in light of all relevant
circumstances,
(4) whether failure to pay prepetition trade claims will
cause the Debtors to lose significant sales or future
revenue, and
(5) whether failure to pay prepetition trade claims will
cause the Debtors to be unable to meet their
commitments to their OEM customers, potentially
incurring significant damage claims as a result.
For creditors who are not financially troubled and are parties to
long-term contracts, Mr. Butler assured Judge Gonzalez, the
Debtors intend to enforce the terms of those contracts -- and
haul creditors into bankruptcy court if necessary.
The Debtors propose to condition the payment of Essential
Supplier Claims on the agreement of the individual Essential
Suppliers to continue supplying goods and services to the Debtors
on MNS-2 payment terms and those other terms and conditions as
are embodied in the Delphi's general terms and conditions or
other more favorable trade terms, practices and programs in
effect between that supplier and the Debtors in the twelve months
prior to the Petition Date, or other favorable trade terms as are
agreed to by the Debtors and the Essential Supplier. The Debtors
reserve the right to negotiate new trade terms with any Essential
Supplier as a condition to payment of any Essential Supplier
Claim.
To ensure that the Essential Suppliers deal with the Debtors on
Customary Trade Terms, the Debtors propose sending a form letter
to the Essential Suppliers along with a copy of the order
granting their motion. That letter, once agreed to and accepted
by an Essential Supplier, will be referred to as a "Trade
Agreement." The Debtors seek only the authority to enter into
Trade Agreements and not a mandate that they do so.
The Debtors submit that there may be limited circumstances in
which payment to certain Essential Suppliers, prior to or in lieu
of the Debtors' and that Essential Supplier's having entered into
a Trade Agreement, is necessary to avoid causing irreparable harm
to the Debtors' business operations. In those cases, the Debtors
seek authority to make payments on account of that Essential
Supplier's claims, notwithstanding the fact that following
diligent efforts to enter into a Trade Agreement with an
Essential Supplier, no Trade Agreement has been reached.
To treat those Super-Critical Vendors who received the prefunded
payments last week identically to creditors receiving
postpetition Critical Vendor Payments from Delphi, the Debtors
propose to waive their rights to assert preference claims in
exchange for Trade Agreements with the recipients of the
prefunded payments.
Mr. Butler stressed that Delphi doesn't intend to spend $90
million in the next day or two or three. The purpose of this
program, he said, is to give the company the flexibility to make
the payments it determines, in its business judgment, are
appropriate. It gives Delphi some tools to discipline creditors
who attempt to take advantage of the Debtors' plight.
Rogue Suppliers
Judge Gonzalez asked Mr. Butler about the use of the term "Rogue
Supplier" in Delphi's motion papers, wondering if it is a term of
art in the automotive industry.
"No," Mr. Butler said, "that was my hyperbole." Agreeing with
Judge Gonzalez that some creditors might take offense at that
term when they see the order approving the program, Mr. Butler
directed Skadden's scrivener to change that term to "Non-
Conforming Supplier" in the text of the order circulated to
creditors.
Autocam Objects
Autocam Corporation complains that:
(i) the proposed treatment by Delphi Corporation, et al., of
Rogue Suppliers discriminates against the rights of
suppliers under the Bankruptcy Code and applicable state
law; and
(ii) the Debtors' proposed treatment of Prefunded Suppliers
fails to clearly set forth the extent of the proposed
waiver of the Debtors' causes of action under Section 547
of the Bankruptcy Code.
Patrick E. Mears, Esq., at Barnes & Thornburg LLP, in Grand
Rapids, Michigan, notes that the Debtors seek to conditionally
pay the claims of any Rogue Supplier. Upon payment of those
claims, the Debtors propose that they be allowed to file a Notice
of Waiver and an Order to Show Cause, which will require the
Rogue Supplier to appear before the Court and demonstrate why the
Rogue Supplier has not violated the automatic stay provisions of
Section 362 of the Bankruptcy Code.
"By requesting the proposed relief against Rogue Suppliers, the
Debtors are essentially asking [the] Court to circumvent any
protections afforded to suppliers under the Bankruptcy Code and
applicable state law. If [the Debtors' request] is granted, any
supplier alleged to be a Rogue Supplier would have the burden of
proving that the automatic stay provisions of section 362(a) were
not violated by the supplier's conduct. The Debtors would, in
effect, not be required to plead any facts relating to the
alleged violation of the automatic stay," Mr. Mears says.
Moreover, he continues, the Debtors seem to be proposing that a
supplier's refusal to ship or a supplier's reliance on the terms
of its contract with the Debtors would render the supplier a
Rogue Supplier. The Debtors' request will circumvent the
protections afforded suppliers of goods under the provisions
under their contract and applicable law, including Section 365 of
the Bankruptcy Code and Section 2-609 of the Uniform Commercial
Code, which allows a seller of goods to suspend performance when
a reasonable ground for insecurity arise.
Mr. Mears points out that the Debtors also propose special
treatment for Prefunded Suppliers, i.e., those critical vendors
receiving payment prior to the Petition Date. Specifically, the
Debtors propose that any supplier deemed to be a Prefunded
Supplier will have an opportunity to execute the Waiver in
exchange for a waiver and release of any rights that the Debtors
or their estates may have under Section 547 of the Bankruptcy
Code to avoid the Prefunding Transfers.
"While the express language of the Motion seems to indicate that
only the Prefunding Transfers will not be subject to avoidance
pursuant to section 547 of the Bankruptcy Code, it is not
entirely clear whether the Debtors are seeking to grant a waiver
and release to Prefunded Suppliers with respect to only the
payments designated Prefunded Transfers, or any payments that
qualify for avoidance under section 547 of the Bankruptcy Code.
Furthermore, it is unclear exactly how the Debtors will
distinguish between Prefunded Transfers and non-Prefunded
Transfers," Mr. Mears says.
Thus, Autocam asserts that the Court should require the Debtors
to modify their Motion and clarify their intentions with respect
to the treatment of Essential Vendors, Prefunded Suppliers and
Rogue Suppliers.
Program Approved
Judge Drain approved the Debtors' requests to maintain their
Vendor Rescue Plan and implement their proposed Essential Vendor
program, finding that it appears appropriate under Sec. 363 of
the Bankruptcy Code.
Mr. Butler reported that, to Delphi's delight, there have been no
plant disruptions or shutdowns since the chapter 11 filing.
Mr. Butler told Judge Drain that Delphi really questioned whether
it needed Court authority to continue the Vendor Rescue Plan.
The company brought it to the Court for review out of an
abundance of caution and in the interest of full disclosure.
Judge Drain recommended that the Debtors talk to the Creditors'
Committee, once appointed, about whether any dollar cap or other
limit should be placed on the Vendor Rescue Plan. It's
predictable that at some point, Judge Drain opined, some vendor
will require a large cash payment.
Mr. Butler indicated that the Essential Vendor Payment Program is
very similar to the programs put in place in the Collins & Aikman
and Meridian Automotive chapter 11 cases. Strict criteria must
be met to qualify for payment. Mr. Butler said he's already had
three calls from creditors complaining about those criteria.
Delphi doesn't intend to deviate from those criteria.
Judy O'Neill, Esq., at Foley & Lardner, LLP, said her clients,
ABC Technologies and Intermet, are confused about the use of the
phrase "more favorable payment terms" in the draft order.
"We can assume that's favorable for the Debtors," Judge Drain
said, as the Courtroom erupted in laughter.
Headquartered in Troy, Michigan, Delphi Corp. --
http://www.delphi.com/-- is the single largest global supplier of
vehicle electronics, transportation components, integrated systems
and modules, and other electronic technology. The Company's
technology and products are present in more than 75 million
vehicles on the road worldwide. The Company filed for chapter 11
protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and
Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP,
represents the Debtors in their restructuring efforts. As of
Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530
in total assets and $22,166,280,476 in total debts. (Delphi
Bankruptcy News, Issue Nos. 1 and 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
DELTA AIR: Brings In Alston & Bird as Pension Counsel
-----------------------------------------------------
Delta Air Lines Inc. and its debtor-affiliates sought and obtained
permission from the U.S. Bankruptcy Court for the Southern
District of New York to employ Alston & Bird LLP as their special
pension and employee benefits counsel.
Edward H. Bastian, executive vice president and chief financial
officer of Delta Air Lines, Inc., relates that the Debtors have
selected Alston & Bird because of its extensive experience in
employee benefits. The firm has also advised the Debtors with
respect to their pension-related issues since 1984.
Alston & Bird will be employed to provide:
(a) advice and legal representation on legal matters
pertaining to the qualified retirement plans of the
Debtors, which include:
-- the Delta Retirement Plan,
-- the Delta Pilots Retirement Plan,
-- the Delta Family-Care Savings Plan,
-- the Delta Pilots Target Benefit Plan, and
-- various other qualified plans;
(b) advice and legal representation on legal matters
pertaining to the nonqualified retirement plans, which
include:
-- the Delta Pilots Bridge Plan,
-- the Delta Pilots Supplemental Annuity Plan,
-- various other non-qualified plans;
(c) advice and legal representation on legal matters
pertaining to any welfare benefit plans of the Debtors,
which include:
-- the Delta Family-Care Disability and Survivorship Plan,
-- the Delta Pilots Disability and Survivorship Plan, and
-- various other welfare benefit plans;
(d) advice and legal representation in connection with any
governmental and regulatory matters pertaining to the
Delta Plans, including representation of the Debtors
before the Pension Benefit Guaranty Corporation, the
Internal Revenue Service and the U.S. Department of Labor;
(e) advice and legal representation in any litigation
involving the Delta Plans whether initiated before or
after the Petition Date including, the case of Delta Air
Lines, Inc. ERISA Litigation MDL Docket 1424, U.S.
District Court, the Northern District of Georgia, and
other litigation involving the Plans; and
(f) advice and legal representation with respect to certain
tax, employment and compliance matters.
To minimize costs, Alston & Bird is prepared to work closely with
the Debtors and each of their other retained professionals to
clearly delineate their duties so as to prevent unnecessary
duplication of services whenever possible.
The firm's current hourly rates are:
Professional Hourly Rate
------------ -----------
Partners and counsel $300 to $750
Associates $145 to $450
Paraprofessionals and staff $50 to $335
It is also Alston & Bird's policy to charge its clients for out-
of-pocket expenses.
Alston & Bird has received a $400,000 retainer from the Debtors.
As of August 18, 2005, the firm has received $1,549,672 in fees
and costs for legal services rendered within the past 12 months.
Approximately $683,000 of the amount was for work performed in
connection with the Debtors' restructuring efforts and in
contemplation of the Debtors' bankruptcy filing.
Philip C. Cook, Esq., a partner at Alston & Bird, assures the
Court that the firm does not:
(i) represent or hold any interest adverse to the Debtors or
their estates with respect to the matters on which the
firm seeks to be employed; or
(ii) have any connections with the Debtors, any creditors or
other parties-in-interest, their attorneys and
accountants, or the U.S. Trustee or any of its employees.
Mr. Cook discloses that Alston & Bird previously represented, or
currently represents, among others, First Union Commercial
Corporation, in matters totally unrelated to the Debtors. FUCC is
believed to be affiliated with Wachovia Corporation. Wachovia
Corporation, as a client group, represents 1.15% of Alston &
Bird's revenue for January 1, 2004, through July 31, 2005.
He also relates that Gregory L. Riggs is the former senior vice
president - general counsel and chief corporate affairs officer of
Delta. Mr. Riggs retired from Delta on July 1, 2005, and has
joined Alston & Bird as Senior Counsel.
As a retired employee of Delta, Mr. Riggs is entitled to various
benefits, including medical, life, disability and retirement
benefits. As a result, Mr. Riggs is a creditor of Delta.
Mr. Cook tells the Court that, while at Alston & Bird, Mr. Riggs
will not perform work on any matters that are related or connected
in any way to the benefits he may be entitled to as a former
employee or the claims that he may hold, and will be screened off
from all work performed by the firm related to the employee
benefit or pension matters of the Debtors.
Headquartered in Atlanta, Georgia, Delta Air Lines --
http://www.delta.com/-- is the world's second-largest airline in
terms of passengers carried and the leading U.S. carrier across
the Atlantic, offering daily flights to 502 destinations in 88
countries on Delta, Song, Delta Shuttle, the Delta Connection
carriers and its worldwide partners. The Company and 18
affiliates filed for chapter 11 protection on Sept. 14, 2005
(Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner,
Esq., at Davis Polk & Wardwell, represents the Debtors in their
restructuring efforts. As of June 30, 2005, the Company's balance
sheet showed $21.5 billion in assets and $28.5 billion in
liabilities. (Delta Air Lines Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
DELTA AIR: Lenders Want Adequate Protection on $72 Million Loans
----------------------------------------------------------------
On Nov. 25, 2003, Special Value Bond Fund, LLC, Special Value
Bond Fund II, LLC, and Special Value Absolute Return Fund, LLC --
the Tennenbaum Lenders -- entered into a series of nine secured
loan transactions with Delta Air Lines, Inc. In accordance with
the transactions, the Tennenbaum Lenders and the Fuqua Family
Trust made nine loans to Delta, each in the individual amount of
$9,555,556, aggregating $86,000,000.
As of September 23, 2005, the outstanding principal balance due on
each Loan is $7,947,053, for a total principal amount due on the
nine Loans of $71,523,474, plus accrued interest and reimbursable
expenses relating to each Loan.
The primary collateral for the Loans consists of nine Boeing 757-
200 passenger aircraft. The liens and security interests in the
Aircraft and the other collateral for the Loans were granted
pursuant to:
(i) nine separate Mortgage and Security Agreements, each dated
November 24, 2003, each entered into by Delta in favor of
Wells Fargo Bank Northwest, N.A., as Security Trustee for
the benefit of the Tennenbaum Lenders and the Fuqua Family
Trust; and
(ii) nine separate Mortgage Supplements No. 1, each dated
November 25, 2005, each corresponding to a Mortgage and
Security Agreement.
According to Thomas R. Kreller, Esq., at Milbank, Tweed, Hadley &
McCloy LLP, in Los Angeles, California, all nine of the Aircraft
remain in service in Delta's operating fleet and are being flown
on their scheduled routes by Delta in the ordinary course of
Delta's business. However, by reason of Delta's continued use of
the Aircraft, the Aircraft are depreciating in value.
Pursuant to Section 363(e) of the Bankruptcy Code, the use of the
Tennenbaum Lenders' Collateral, including the Aircraft, may be
prohibited or conditioned in a manner as to provide the
Tennenbaum Lenders with adequate protection of their interests in
the Collateral.
Mr. Kreller notes that, under Section 363(o), the burden is on
Delta to show that the Tennenbaum Lenders' interests in the
Collateral are adequately protected.
The Tennenbaum Lenders ask the Court to prohibit Delta from using
the Aircraft unless:
(i) they receive cash payments equal to the regular fully
amortized payments payable to them under the Loan
Agreements; and
(ii) Delta perform its maintenance obligations and insurance
obligations with respect to the Collateral and provide
reporting and access to books and records related to the
Collateral, in each case as provided in the Loan
Documents.
Headquartered in Atlanta, Georgia, Delta Air Lines --
http://www.delta.com/-- is the world's second-largest airline in
terms of passengers carried and the leading U.S. carrier across
the Atlantic, offering daily flights to 502 destinations in 88
countries on Delta, Song, Delta Shuttle, the Delta Connection
carriers and its worldwide partners. The Company and 18
affiliates filed for chapter 11 protection on Sept. 14, 2005
(Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner,
Esq., at Davis Polk & Wardwell, represents the Debtors in their
restructuring efforts. As of June 30, 2005, the Company's balance
sheet showed $21.5 billion in assets and $28.5 billion in
liabilities. (Delta Air Lines Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
DELTA AIR: PBGC Supports DP3's Move to Compel Pension Payment
-------------------------------------------------------------
As reported in the Troubled Company Reporter on Oct. 7, 2005,
DP3, Inc., doing business as Delta Pilots' Pension Preservation
Organization, asked the U.S. Bankruptcy Court for the Southern
District of New York to compel the continued payment of ongoing
minimum funding contributions to the retired pilots' defined
benefit plan and ongoing non-qualified pension benefit pursuant to
the CBA.
The Pension Benefit Guaranty Corporation supports DP3 Inc.'s
request to compel the Debtors to pay their postpetition pension
plan contributions to the PBGC on account of the Delta Pilots
Retirement Plan pursuant to the collective bargaining agreement
between the Debtors and their pilots.
Three pension plans sponsored by Delta Air Lines, Inc., are
covered by the PBGC's Title IV insurance program. The due date
for the next minimum funding contribution for the Delta
Retirement Plan and the Pilots Defined Benefit Pension Plan is
October 15, 2005.
Jeffrey B. Cohen, chief counsel of the PBGC, relates that, until a
pension plan is lawfully terminated, it must be funded in
accordance with the minimum funding rules prescribed by Section
412 of the Internal Revenue Code and the parallel provision of
Title I of ERISA. The sponsor of the pension plan and each member
of the sponsor's controlled group must contribute to the plan
amounts determined annually pursuant to the minimum funding rules.
The annual minimum funding contributions are payable in quarterly
installments. Any remaining amount due for the pension plan year
may be contributed as a "catch up" payment up to 8.5 months after
the close of the plan year. Upon taking over a terminated pension
plan, the PBGC becomes authorized to pursue collection of amounts
owed to the plan, including any unpaid minimum funding
contributions.
Furthermore, the Internal Revenue Code and ERISA impose a
statutory lien with respect to unpaid minimum funding
contributions that exceed $1,000,000. The PBGC has the exclusive
authority to enforce and collect amounts due under the statutory
lien. If an employer is unable to satisfy the minimum funding
standards for a plan year without experiencing a "substantial
temporary business hardship," the employer may apply to the
Internal Revenue Service for a waiver of some or all of the
required contribution.
The PBGC reserves its rights to submit further pleadings
compelling the Debtors to make postpetition pension contributions
with respect to the benefit pension plans.
Headquartered in Atlanta, Georgia, Delta Air Lines --
http://www.delta.com/-- is the world's second-largest airline in
terms of passengers carried and the leading U.S. carrier across
the Atlantic, offering daily flights to 502 destinations in 88
countries on Delta, Song, Delta Shuttle, the Delta Connection
carriers and its worldwide partners. The Company and 18
affiliates filed for chapter 11 protection on Sept. 14, 2005
(Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner,
Esq., at Davis Polk & Wardwell, represents the Debtors in their
restructuring efforts. As of June 30, 2005, the Company's balance
sheet showed $21.5 billion in assets and $28.5 billion in
liabilities. (Delta Air Lines Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
DONALD C. BAUERLE: Case Summary & 8 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Donald C. Bauerle
a/k/a Donald C. Bauerle, Jr.
488 West Highbanks Road
Debary, Florida 32713
Bankruptcy Case No.: 05-13634
Chapter 11 Petition Date: October 11, 2005
Court: Middle District of Florida (Orlando)
Debtor's Counsel: Elizabeth A. Green, Esq.
Gronek & Latham, LLP
390 North Orange Avenue, Suite 600
Orlando, Florida 32801
Tel: (407) 481-5800
Fax: (407) 481-5801
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 8 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Brush, Janet Judgment lien on $10,300,000
c/o Matthew Julian unspecified property
Baker Hostetler LLP
200 South Orange Ave., #2300
Orlando, FL 32801
Codisco, Inc. Personal loan $2,500,000
488 West Highbanks Road
Debary, FL 32713
Codisco International Inc. Personal loan $69,000
488 West Highbanks Road
Debary, FL 32713
Mark L. Horwitz, Esq. Attorney fees $69,000
First Community Bank Personal guaranty on $38,818
purchase of six boats
by Coastline Int'l
Inc.
Internal Revenue Service 2004 Income tax $24,601
Volusia County Tax Collector 2005 Real estate $10,796
taxes for Condo
and Boat Dock at
Ponce Inlet
Volusia County Tax Collector 2005 Real Property $4,002
Taxes for 3.5 acres
Located in Debary, FL
Volusia County Tax Collector 2005 Real Property taxes $2,323
On vacant lot in Debary
Country Clubs
ENRON CORP: Court Approves Photofabrication Settlement Deal
-----------------------------------------------------------
Enron Energy Marketing Corp. and Photofabrication Engineering,
Inc., were parties to certain prepetition transactions relating
to the sale of power. Following discussions, EEMC and
Photofabrication have negotiated a settlement agreement under
which:
(a) Photofabrication will pay EEMC the payments due under
their Contract and for accounts receivable due and owing
to EEMC for all financial and physical commodity
transactions between them under the Contract.
Photofabrication stipulates that it has no claims for
offset, credits or other deductions that would reduce the
amount of the accounts receivable other than payments
made; and
(b) the parties will exchange a mutual release of claims
related to the Contract.
The Settlement Agreement also contemplates that each liability
scheduled by EEMC related to Photofabrication will be deemed
irrevocably withdrawn, with prejudice, and to the extent
applicable expunged and disallowed in its entirety.
Accordingly, EEMC sought and obtained Judge Gonzalez's approval
to enter into and execute the Settlement Agreement.
Edward A. Smith, Esq., at Cadwalader, Wickersham & Taft LLP, in
New York, relates that the Settlement Agreement will clearly
benefit EEMC and its creditors. The Settlement will avoid future
disputes and litigation concerning the Contract. The Settlement
Agreement will also allow EEMC to capture the value of the
Contract and the Accounts Receivable for its estate, while
avoiding the costs associated with possible future legal action.
Headquartered in Houston, Texas, Enron Corporation --
http://www.enron.com/-- is in the midst of restructuring various
businesses for distribution as ongoing companies to its creditors
and liquidating its remaining operations. Before the company
agreed to be acquired, controversy over accounting procedures had
caused Enron's stock price and credit rating to drop sharply.
Enron filed for chapter 11 protection on December 2, 2001 (Bankr.
S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the
Company's Modified Fifth Amended Plan on July 15, 2004, and
numerous appeals followed. The Confirmed Plan took effect on
Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen,
Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in
their restructuring efforts. (Enron Bankruptcy News, Issue No.
160; Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENRON CORP: Inks Texas Comptroller Claims Settlement Pact
---------------------------------------------------------
The Texas Comptroller of Public Accounts filed two claims against
Enron Corporation and its debtor-affiliates:
Claim No. Amount Debtor
--------- ------ ------
22812 $170,577 Enron Management Inc.
1928 $2,500,000 Enron Corp.
On Nov. 13, 2003, the Texas Comptroller amended Claim No.
1928 by filing Claim No. 24456 for $11,138,687 against Enron.
On Feb. 26, 2004, the Court sustained the Reorganized
Debtors' 26th Omnibus Claims Objection, disallowing, among
others, Claim No. 1928.
On March 11, 2005, the Reorganized Debtors filed their 92nd
Omnibus Claims Objection, pursuant to which they sought to modify
and allow Claim Nos. 22812 and 24456.
On September 11, 2003, the Texas Comptroller filed Administrative
Claim No. 24212 against Enron for $14,679 and Priority Claim No.
24273 against Enron for $2,538,981.
As part of the parties' ongoing settlement discussions, the Texas
Comptroller withdrew Claim Nos. 24212 and 24273. The parties
also agreed that a $3,623,657 refund is owed to Enron and that
the refund will be set off against the amounts owed by Enron on
Claim No. 24456.
The Texas Comptroller conducted audits regarding franchise taxes
for ECTMI and RMTC for reporting years 2001, 2002, and 2003.
The audits resulted in a determination of an overall deficiency
due from each of the Debtors.
As part of the parties' ongoing settlement discussion, the Texas
Comptroller will be allowed a priority tax claim against ECTMI
for $125,497 and a priority tax claim for $247,103 against RMTC.
After further negotiations, parties agree that:
(1) Claim No. 22812 will be allowed against EMI for $158,680
as a priority tax claim, and as a general unsecured claim
for $13,351, plus interest;
(2) Claim No. 24456 will allowed against Enron for $7,584,518
as a priority tax claim, net of the set-off of the Refund
plus interest;
(3) the Texas Comptroller is allowed a priority tax claim
against ECTMI for $125,497 plus interest;
(4) the Texas Comptroller is allowed a priority tax claim
against RMTC for $247,103 plus interest; and
(5) all scheduled liabilities related to the Texas Comptroller
are disallowed in their entirety in favor of the Allowed
Claims.
Headquartered in Houston, Texas, Enron Corporation --
http://www.enron.com/-- is in the midst of restructuring various
businesses for distribution as ongoing companies to its creditors
and liquidating its remaining operations. Before the company
agreed to be acquired, controversy over accounting procedures had
caused Enron's stock price and credit rating to drop sharply.
Enron filed for chapter 11 protection on December 2, 2001 (Bankr.
S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the
Company's Modified Fifth Amended Plan on July 15, 2004, and
numerous appeals followed. The Confirmed Plan took effect on
Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen,
Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in
their restructuring efforts. (Enron Bankruptcy News, Issue No.
160; Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENRON CORP: Inks Pact Resolving Claims Related to Brazos Financing
------------------------------------------------------------------
Reorganized Enron Corporation and its debtor-affiliates ask the
U.S. Bankruptcy Court for the Southern District of New York to
approve a settlement agreement they entered into with their non-
Debtor affiliates, JP Morgan Chase Bank, and Lenders in connection
with the Brazos Financing Structure.
As previously reported, on or before the Bar Date, JPMC:
(i) as Agent on behalf of the Lenders, filed Claim No. 11224;
and
(ii) on behalf of Brazos, filed Claim No. 11225,
against Enron Corp. for claims arising in connection with, among
other things, the April 14, 1997 Guaranty, the April 14, 1997
Credit Agreement and the May 14, 2002 Forbearance Agreement.
In addition, JPMC filed 70 proofs of claim against the Debtors
relating to the Brazos Financing. Each of the JPMC Claims
asserts claims in an unliquidated amount against 70 Debtors
arising out of, in connection with, or related to:
1. the Transaction Documents and any related documents;
2. the use and occupancy of Enron Center North; and
3. any acts or omissions of those Debtors, which may have
harmed or caused damage to the Claimant.
On Jan. 18, 2005, JPMC filed a Request for Payment of
Administrative Expense Claim pursuant to which it asserted that
Enron Leasing Partners, L.P., has an administrative rent claim
against Enron and its affiliated Debtors for their use and
occupancy of Enron Center North.
On Sept. 26, 2003, Enron and several of its affiliates commenced
an adversary proceeding against, among other persons, JPMC and
certain Lenders.
ELP, a non-Debtor affiliate of Enron, holds a scheduled,
prepetition claim against Enron for $472,369,095 and an
administrative rent claim for $8,300,000 pursuant to the
Sublease, dated April 14, 1997. ELP holds a scheduled,
prepetition claim against Enron Property & Services Corp. for
$7,933,829.
Enron Property Management Corp. holds a scheduled prepetition
claim against Enron for $6,645,738.
ELP holds an 80.2% preferred stock interest in EPHC. EPHC holds
a scheduled prepetition claim against Enron for $109,878,637. As
part of the Debtors' comprehensive review and reconciliation of
all filed and scheduled claims, Enron determined that the
Original EPHC Claim is no longer accurate and that Enron's
liability to EPHC is $131,992,165. ELP's net interest in
Enron Pipeline Holding Company, a non-Debtor affiliate of Enron,
is $99,593,207.
The salient terms of the Settlement are:
(1) Enron's non-Debtor affiliate, Organizational Partner,
Inc., will pay $5,000,000, ELP will pay $3,620,470, and
EPMC will pay $1,474,235, to the Settling Lenders;
(2) on the Closing Date:
(i) the ELP Claim will be fully allowed as a Class 4
general unsecured claim against Enron,
(ii) the EPSC Claim will be fully allowed as a Class 4
general unsecured claim against EPSC,
(iii) the EPMC Claim will be fully allowed as a Class 4
general unsecured claim against Enron,
(iv) upon the liquidation and dissolution of EPHC, a
evidenced by the filing with the Delaware Secretary
of State of a Certificate of Dissolution of EPHC,
the Amended EPHC Claim will be allowed in amount
equal to the Net EPHC Claim as a Class 4 general
unsecured claim against Enron,
(v) the Guaranty Claim will be allowed as a Class 4
general unsecured claim against Enron for
$117,811,631, and
(vi) the Administrative Rent Claim will be fully allowed
as an administrative claim against Enron;
(3) On the Closing Date with respect to all Allowed Claims
except the EPHC Claim, and on the EPHC Dissolution Date
with respect to the allowed portion of the EPHC Claim, the
amount of each Allowed Claim set forth for each Settling
Lender will be deemed to be assigned to the Settling
Lender without the need for any additional documentation
or the entry of any additional orders of the Bankruptcy
Court;
(4) the distribution of the Allowed Claims will be made in
accordance with the Plan and will be paid to the Settling
Lenders after the deduction of any out-of-pocket fees and
expenses, if any, owing to the Agent in respect of the
Allowed Claims;
(5) In the event that any Settling Lender holds or owns any
debt or obligations under the Credit Agreement, which were
held or owned by a Named Defendant as of the Petition
Date, that portion of any distributions attributable to
the Guaranty Claim will be placed into the Disputed Claims
Reserve in accordance with the terms and conditions of the
Plan. Any holder of the Recovery Action Indebtedness will
receive no distributions on account of the Recovery Action
Indebtedness with respect to the Guaranty Claim until the
earliest to occur of:
(a) entry of a Final Order in the Adversary Proceeding
dismissing the claims and causes of action asserted
against the defendant, in which case, any
distributions so reserved will be released to the
Agent, on behalf of the holder of Recovery Action
Indebtedness;
(b) entry of a Final Order granting the relief requested
in the Adversary Proceeding, in which case, any
distributions so reserved will be released to Enron
or its designee or, in the event that the Litigation
Trust has been created and Litigation Trust Claims
are assigned thereto, to the Litigation Trust, as
the case may be;
(c) the entry of a Final Order declaring that the
amounts attributable to the Guaranty Claim are not
subject to any potential objection, offsets, or
other challenges, including equitable subordination,
and directing a release of the distribution that has
been placed into the Disputed Claims Reserve to the
Settling Lender; and
(d) entry of a Final Order compromising and settling the
claims and causes of action asserted against such
defendant in the Adversary Proceeding, in which
case, any distributions so reserved will be
released to the party entitled thereto;
(6) The Enron Parties and the Settling Lenders will release
each other from all claims relating to the Synthetic Lease
Transaction;
(7) On the Closing Date, each claim, other than the Allowed
Claims and any counterclaim with respect to any other
actions initiated by any Enron Party or any subsidiary or
affiliate of an Enron Party in connection with the
Synthetic Lease Transaction will be deemed irrevocably
withdrawn, with prejudice, and to the extent applicable
expunged and disallowed, with respect to that portion of
the claim applicable to a Settling Lender; and
(8) The rights, remedies, claims and obligations of any Lender
which is not a Party to the Settlement Agreement as a
Settling Lender with respect to that Remaining Lender's
Loans and Notes and that Remaining Lender's interests in
or under the Credit Agreement and the other Credit
Documents are in no way affected, diminished, impaired or
released by the Settlement Agreement. Any Remaining
Lender may elect to become a Settling Lender by executing
a copy of the Settlement Agreement prior to the entry of
a Court Order approving the Settlement.
The Settling Parties and their pro rata share of the
distributions are:
Settling Party Pro Rata Share
-------------- --------------
ABN AMRO BANK N.V. 0.072472958524
B Office LLC 0.072472958524
BZ Realty Holdings Ltd 0.269876573904
Bank One, NA 0.047107423025
Contrarian Funds, LLC 0.036236479284
Credit Suisse, New York & Cayman Is 0.047107423025
Deutsche Batik Trust Company America 0.036236479284
Edouard VII Properties, Inc. 0.047107423025
Goldman Sachs Credit Partners L.P. 0.077993627048
JPMorgan Chase Bank, N.A. 0.101335314281
Mizuho Global, Ltd. 0.083343902310
Royal Bank of Canada 0.072472958524
Wachovia Bank National Association 0.036236479284
Headquartered in Houston, Texas, Enron Corporation --
http://www.enron.com/-- is in the midst of restructuring various
businesses for distribution as ongoing companies to its creditors
and liquidating its remaining operations. Before the company
agreed to be acquired, controversy over accounting procedures had
caused Enron's stock price and credit rating to drop sharply.
Enron filed for chapter 11 protection on December 2, 2001 (Bankr.
S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the
Company's Modified Fifth Amended Plan on July 15, 2004, and
numerous appeals followed. The Confirmed Plan took effect on
Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen,
Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in
their restructuring efforts. (Enron Bankruptcy News, Issue No.
160; Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENTERGY NEW ORLEANS: Wants Until Feb. 10 To Decide on Leases
------------------------------------------------------------
The Bankruptcy Code provides that a debtor must assume or reject
unexpired non-residential real property leases within 60 days
after the Petition Date. However, Section 365(d)(4) of the
Bankruptcy Code provides that upon a showing of "cause" by the
debtor, a court may grant an extension of time to assume or
reject unexpired leases.
Accordingly, Entergy New Orleans, Inc., asks the U.S. Bankruptcy
Court for the Eastern District of Louisiana to extend the lease
decision deadline to February 10, 2006.
In determining whether cause exists for an extension, courts have
relied on several factors, including, but not limited to:
a) the significance of the leases to the debtor's business and
potential chapter 11 plan;
b) whether the lessor continues to receive postpetition rental
payments;
c) whether the debtor has had time to intelligently appraise
its financial situation and potential value of the leases
to the formulation of a plan;
d) how the debtor's continued possession of the premises will
affect the lessor;
e) whether the landlord has suffered damage that is not
compensable under the Bankruptcy Code; and
f) any factors bearing on whether the debtor has had a
reasonable amount of time to decide to assume to reject the
leases.
Elizabeth J. Futrell, Esq., at Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, LLP, in Baton Rouge, Louisiana,
states that it will take the Debtor additional time to determine
whether the Real Property Leases are a necessary part of its
restoration efforts and continued operations considering the
destruction of Hurricane Katrina.
In addition, Ms. Futrell says the extension will:
a) avert the forfeiture of the Debtor's valuable assets;
b) promote the Debtor's ability to maximize the value of its
Chapter 11 estate;
c) avoid incurring needless administrative expenses by
minimizing the likelihood of an inadvertent rejection of a
valuable lease or premature assumption of a burdensome one;
and
d) permit the Debtor to decide whether the Real Property
Leases are necessary for its future operations.
Moreover, Ms. Futrell assures the Court that the proposed
extension does not adversely affect any substantive rights of or
prejudice any of the Debtor's lessors. Any lessor may request
the Court to fix an earlier date by which the Debtor must decide
on the leases.
Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc.
-- http://www.entergy-neworleans.com/-- is a wholly owned
subsidiary of Entergy Corporation. Entergy New Orleans provides
electric and natural gas service to approximately 190,000 electric
and 147,000 gas customers within the city of New Orleans. Entergy
New Orleans is the smallest of Entergy Corporation's five utility
companies and represents about 7% of the consolidated revenues and
3% of its consolidated earnings in 2004. Neither Entergy
Corporation nor any of Entergy's other utility and non-utility
subsidiaries were included in Entergy New Orleans' bankruptcy
filing. Entergy New Orleans filed for chapter 11 protection on
Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J.
Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed total assets of
$703,197,000 and total debts of $610,421,000. (Entergy New
Orleans Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ENTERGY NEW ORLEANS: Wants Court to Restrain Utility Companies
--------------------------------------------------------------
In operating its business, Entergy New Orleans, Inc., obtains
utility services, including telephone, cable, water, and trash
collection from these utility companies:
* AllTel Telephone Co.,
* AT&T,
* AT&T Global Network Services,
* AT&T Teleconference Services,
* BellSouth,
* BellSouth Co.,
* BellSouth Telecommunications, Inc.,
* Cingular Wireless, LLC,
* COX Communication,
* COX Communication New Orleans,
* COX Communications,
* Nextel Communications,
* Nextel Communications, Inc.,
* Sewerage & Water Board,
* Sewerage & Water Board of New Orleans,
* Verizon Wireless, Inc.,
* Waste Management, and
* Waste Management of LA, LLC.
Section 366(a) of the Bankruptcy Code prohibits utility companies
from altering, refusing or discontinuing service to a debtor for
the 20 days of a bankruptcy case. However, upon expiration of
the Utility Stay Period, Section 366(b) provides that a utility
company may, but need not, terminate services if a debtor has not
furnished adequate assurance of payment
"It is imperative to the continued successful operation of the
Debtor's business, and its restoration efforts in the aftermath
of Hurricane Katrina, that Utility Services remain uninterrupted
during the course of this Chapter 11 Case," Elizabeth J. Futrell,
Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
LLP, in Baton Rouge, Louisiana, asserts.
In this regard, the Debtor asks the U.S. Bankruptcy Court for the
Eastern District of Louisiana to enjoin and restrain the Utility
Companies from discontinuing, altering or refusing service for or
on account of unpaid charges for prepetition Utility Services.
The Debtor assures the Court that it fully intends to continue
its payment habits and to timely tender all postpetition payments
for Utility Services furnished by the Utility Companies.
If it fails to pay for the postpetition Utility Services within
five business days after the due date prescribed in the billing
statement, the Debtor proposes that the unpaid Utility Company
will have the right to require the Debtor to pay the past due
billing statement and make a deposit. The Postpetition Deposit
will be equal to the lesser of:
1. the average billing period over the last 12 months; or
2. the actual billing statement for that account for July
2005.
The Debtor will be required to post the Deposit within 10
business days after the date of notice from the Utility Company.
If the Debtor fails to make the deposit within the period, the
Utility Company will be free to discontinue any service with
respect to the unpaid account.
Ms. Futrell tells the Court that the Debtor's steady payment
history should protect the Utility Companies from an unreasonable
risk of non-payment without need of further deposit. In addition,
each Utility Company would be entitled to an administrative
expense claim, pursuant to Section 503(b)(1) of the Bankruptcy
Code, for any past due amounts owed by the Debtor for postpetition
Utility Services at the time of plan confirmation or at any other
relevant claim determination date.
Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc.
-- http://www.entergy-neworleans.com/-- is a wholly owned
subsidiary of Entergy Corporation. Entergy New Orleans provides
electric and natural gas service to approximately 190,000 electric
and 147,000 gas customers within the city of New Orleans. Entergy
New Orleans is the smallest of Entergy Corporation's five utility
companies and represents about 7% of the consolidated revenues and
3% of its consolidated earnings in 2004. Neither Entergy
Corporation nor any of Entergy's other utility and non-utility
subsidiaries were included in Entergy New Orleans' bankruptcy
filing. Entergy New Orleans filed for chapter 11 protection on
Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J.
Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed total assets of
$703,197,000 and total debts of $610,421,000. (Entergy New
Orleans Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
GLASS GROUP: Court Okays Sale of Three Assets to STO USA for $12MM
------------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
The Glass Group, Inc.'s request to:
a) sell certain of its assets free and clear of liens, claims
and encumbrances; and
b) authorize the assumption and assignment of certain unexpired
nonresidential real property leases and executory contracts
and the rejection of certain unexpired leases and executory
contracts pursuant to the Asset Purchase Agreement between
the Debtor and STO USA, Inc.
The Court approved the sale transaction and the terms and
conditions of the Asset Purchase Agreement on Oct. 6, 2005.
On Aug. 15, 2005, the Court entered an amended order approving the
auction and bidding procedures for the sale of substantially all
of the Debtor's assets.
Pursuant to the Court-approved bidding procedures, the Court
determined on Sept. 30, 2005, that STO USA submitted the highest
and best offer for three of the Debtor's assets, the Flat River
Facility located in Park Hills, Missouri and the Williamstown and
Mays Landing Facilities located in New Jersey.
The Court also determined that no higher or better offer was made
for the three assets other than the offer of STO.
On Oct. 3, 2006, the Debtor and STO USA executed the Asset
Purchase Agreement, in which STO paid $12 million for the Flat
River, Mays Landing and Williamstown facilities. The Purchase
Agreement also calls for the Debtor's assumption and assignment of
the Acquired Contracts to STO USA and the Debtor's assumption of
the Assumed Liabilities.
The Debtor tells the Court that STO USA is a good faith purchaser
and is entitled to all the protections afforded in accorded by
Section 363(m) of the Bankruptcy Code.
Pursuant to the Purchase Agreement, the sale transaction is
expected to close by October 28, 2005.
A full-text copy of the Asset Purchase Agreement is available for
a fee at:
http://www.researcharchives.com/bin/download?id=051012211422
Headquartered in Millville, New Jersey, The Glass Group, Inc.
-- http://www.theglassgroup.com/-- manufactures molded glass
container and specialty products with plants in New Jersey and
Missouri. Its products include cosmetic bottles, pharmaceutical
vials, specialty jars, and coated containers. The Company filed
for chapter 11 protection on Feb. 28, 2005 (Bankr. D. Del. Case
No. 05-10532). Derek C. Abbott, Esq., at Morris, Nichols, Arsht &
Tunnell represents the Debtor in its restructuring efforts. When
the Debtor filed for protection from its creditors, it estimated
assets and debts of $50 million to $100 million.
GLASS GROUP: Panel Wants Court to Reconsider Asset Sale Order
-------------------------------------------------------------
The Official Committee of Unsecured Creditors of The Glass Group,
Inc., ask the U.S. Bankruptcy Court for the District of Delaware
to enter an order:
a) modifying its Sale Order dated Oct. 6, 2005, approving
the sale of certain assets to STO USA, Inc., by striking
paragraph 38 of the Order and to reconsider the Sale Order;
or
b) staying the Sale Order pending the appeal of the Committee.
The Committee reminds the Court that it entered an order approving
the sale of the Debtor's Flat River, Mays Landing and Williamstown
facilities to STO USA for $12 million on Oct. 6, 2005.
Gujarat Glass Ltd., a foreign corporation and competitor of the
Debtor and STO reappeared literally minutes after the Court signed
the Sale Order and advised the Court that it was prepared to sign
an asset purchase agreement on the same terms and conditions as
the STO Agreement, except that the purchase price was $4 million
or 25% higher than STO's bid for the three facilities.
But the Court upheld the STO bid on the grounds that the Gujarat
bid was not supported by the labor unions representing the workers
in the three Glass Group facilities and by CapitalSource Finance
LLC, the Debtor's DIP lender.
The Committee presents two grounds for the Court to modify and
reconsider its Sale Order.
Paragraph 38 of the Sale Order
Should be Stricken
First, Paragraph 38 of the Sale Order waives the effect of
Bankruptcy Rules 6004(g) and 6006(d), which would serve to stay
the effectiveness of the Sale Order for a 10-day period. The
Committee is concerned that STO USA may attempt to force the
Debtor to close the sale before the Committee can be heard on its
motion.
That would place the Debtor in a position of having to make a
choice between closing with STO on an accelerated basis in an
effort by STO to moot the Committee's fiduciary duty to maximize
value for creditors of the estate.
Additionally, neither the Debtor nor STO proffered any testimony
or evidence at the sale hearing for the relief granted in
paragraph 38 of the Sale Order, so there is no basis in the
record for the granting of that relief in the Sale Order.
STO's Bid Should be Denied
in Favor of Gujarat's Bid
Second, the additional $4 million in Gujarat's bid is very likely
to be the difference between concluding the Debtor's chapter 11
case with all administrative claims paid and a small distribution
to creditors, and conversion to Chapter 7 and a pro rata payment
to chapter 11 administrative claimants that could be years away.
The Committee believes that the Gujarat Bid is the highest and
best offer for the Debtor's assets and should be approved over the
STO Agreement.
Alternatively, the Committee asks the Court that it should stay
the Sale Order pending the Committee's appeal.
The Committee reasons out that:
1) if a stay pending the appeal is not granted, unsecured
creditors will suffer significant, irreparable harm; and
2) granting the relief it is seeking will not cause substantial
harm to the other parties connected with the asset sale but
would serve the public interest of the creditors and other
parties-in-interest.
The Court will convene a hearing at 11:30 a.m., tomorrow,
Thursday, Oct. 14, 2005, to consider the Committee's request.
Headquartered in Millville, New Jersey, The Glass Group, Inc.
-- http://www.theglassgroup.com/-- manufactures molded glass
container and specialty products with plants in New Jersey and
Missouri. Its products include cosmetic bottles, pharmaceutical
vials, specialty jars, and coated containers. The Company filed
for chapter 11 protection on Feb. 28, 2005 (Bankr. D. Del. Case
No. 05-10532). Derek C. Abbott, Esq., at Morris, Nichols, Arsht &
Tunnell represents the Debtor in its restructuring efforts. When
the Debtor filed for protection from its creditors, it estimated
assets and debts of $50 million to $100 million.
GOLD KIST: S&P Puts B+ Corporate Credit Rating on Positive Watch
----------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B+' corporate
credit rating and other ratings on poultry processor, Gold Kist
Inc., on CreditWatch with positive implications.
At June 30, 2005, Atlanta, Ga.-based Gold Kist had total debt
(adjusted for capitalized operating leases) of $246.3 million.
The CreditWatch placement follows the company's recent
announcement that it had repaid -- out of cash flow from
operations -- all obligations under its first amended and restated
credit agreement and its second consolidated, amended, and
restated note agreement. These obligations totaled about $62
million in principal, accrued interest, and fees. In addition,
the company terminated both agreements.
"Besides the permanent repayment of debt, the company continues to
have strong operating results as well as very strong credit
protection measures given the commodity orientation and volatility
of poultry processing," said Standard & Poor's credit analyst
Jayne Ross.
Standard & Poor's will discuss with management its operating plans
and financial strategies. Key to Standard & Poor's review and
analysis will be the company's ability to maintain strong credit
protection measures throughout a poultry cycle.
GREAT NORTHERN: Administrative Claims Bar Date is Nov. 4
--------------------------------------------------------
The Hon. Louis H. Kornreich of the U.S. Bankruptcy Court for the
District of Maine set Nov. 4, 2005, at 4:00 p.m., as the deadline
for all creditors owed money by Great Northern Paper, Inc., on
account of administrative expense claims arising from Jan. 9,
2003, through Sept. 30, 2005, to file their proofs of claim.
Administrative Claimants must file written proofs of claim on or
before the Nov. 4 Administrative Claims Bar Date and those forms
must be delivered by hand or mail:
Clerk of the U.S. Bankruptcy Court
202 Harlow Street,
Bangor, Maine 04401
Great Northern Paper, Inc., one of the largest producers of
groundwood specialty papers in North America, filed for chapter 11
protection on January 9, 2003 (Bankr. Maine Case No. 03-10048).
The court converted the Debtor's case to a Chapter Seven
proceeding on May on May 22, 2003. Alex M. Rodolakis, Esq., and
Harold B. Murphy, Esq., at Hanify & King, P.C., represent the
Debtor in its restructuring efforts. When the Company filed for
protection from its creditors, it listed debts and assets of more
than $100 million each.
GREAT SOUTHERN: Case Summary & 19 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: Great Southern Xpress, Inc.
P.O. Box 622
Dalton, Georgia 30722
Bankruptcy Case No.: 05-44187
Type of Business: The Debtor is a trucking company.
Chapter 11 Petition Date: October 11, 2005
Court: Northern District of Georgia (Rome)
Judge: Paul W. Bonapfel
Debtor's Counsel: R. Scott Cunningham, Esq.
R. Scott Cunningham, PC
P.O. Box 2529
Dalton, Georgia 30722-2529
Tel: (706) 226-3642
Total Assets: $8,741,520
Total Debts: $5,699,862
Debtor's 19 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Truck Tire Center of Chattanooga $98,510
P.O. Box 2125
Cleveland, TN 37320
Thermo King Service, Inc. $40,474
75 Remittance Drive, Suite 1023
Chicago, IL 60675-1023
Volvo & GMC Trucks of Atlanta $28,060
700 Ruskin Drive
Forest Park, GA 30050
QualComm Incorporated $21,082
Headrick's Body Shop, Inc. $11,762
Tandem $11,327
Thermo King of Chattanooga $9,443
Foster Sales $8,877
Penske Truck Leasing $7,560
Dan Cederberg, AESQ $5,511
Regions Interstate Billing $4,797
Fleetpride $4,598
Kleen A Matic $4,054
Freightliner of Chattanooga $3,782
JJK Security & Investigations, Inc. $3,588
J.J. Keller $3,293
Commercial Lubricants, Inc. $3,272
Rapid Fuel $3,123
Ownbey Enterprises $3,028
HANDMAKER JEWISH: Section 341(a) Meeting Slated for Nov. 3
----------------------------------------------------------
The U.S. Trustee for Region 14 will convene a meeting of Handmaker
Jewish Services for the Aging's creditors at 11:30 a.m., on
Nov. 3, 2005, at the U.S. Trustee Meeting Room, James A. Walsh
Court, 38 S. Scott Ave, St 140, Tucson, Arizona. 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 Tucson, Arizona, Handmaker Jewish Services for
the Aging owns and operates a multiple residence-retirement
community complex facility. The Company filed for chapter 11
protection on Sept. 30, 2005 (Bankr. D. Ariz. Case No. 05-05924).
Michael W. McGrath, Esq., at Mesch Clark & Rothschild, represents
the Debtor in its restructuring efforts. When the Debtor filed
for portection from its creditors, it listed $10,384,351 in assets
and $21,625,125 in debts.
H.I. SCHAUMBURG: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: H.I. Schaumburg Investment, LLC
fka JBD Allied, LLC
74 East Long Lake Road
Bloomfield Hills, Michigan 48304-2380
Bankruptcy Case No.: 05-51150
Type of Business: The Debtor previously filed for chapter 11
protection on March 29, 2002 (Bankr. N.D. Ill.
Case No. 02-12528).
Chapter 11 Petition Date: October 12, 2005
Court: Northern District of Illinois (Chicago)
Debtor's Counsel: Mark E. Leipold, Esq.
Gould & Ratner
222 North LaSalle Street
Chicago, Illinois 60601
Tel: (312) 899-1651
Fax: (312) 236-3241
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Capital Crossing Bank 1550 North Roselle $6,891,318
101 Summer Street Road, Schaumburg,
Boston, MA 02110 Illinois 60195
Value of Security:
$4,085,000
Internal Revenue Service Accrued Property $542,878
[Address Not Provided] Taxes
Other accruals $82,738
Kitchen Bar $42,500
1540 North Roselle Road
Schaumburg, IL 60195
Horizon Realty Services, Inc. $13,500
3715 Ventura Drive, Suite 200
Arlington Heights, IL 60004
Horizon Realty Services, Inc. $13,500
3715 Ventura Drive, Suite 200
Arlington Heights, IL 60004
Coldwell Banker $7,000
Security Deposit $5,833
BGT Landscaping $2,040
Rainbow Shuttle & Limousine $690
US Food Service, Inc. $546
Ultra Pool $398
American Hotel Register Company $211
Able Card Corporation $177
Illinois Hotel and Lodging $170
Association
TasteeFare $166
Office Depot Credit Plan $162
Macke Water Systems $72
Poplar Creek Floral $68
Cintas Corporation $64
INTERNATIONAL MILL: S&P Rates Restated $328 Million Loan at B+
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B+' corporate
credit rating on International Mill Services Inc. and removed it
from CreditWatch where it was placed on September 12, 2005. The
outlook is negative.
At the same time, Standard & Poor's assigned its 'B+' rating and
recovery rating of '3' to the company's amended and restated $328
million first-lien senior secured term loan due in 2010. In
addition, Standard & Poor's affirmed its 'B+' rating and recovery
rating of '3' on its $55 million revolving credit facility due in
2009. Standard & Poor's also affirmed its 'B-' and '5' recovery
rating on the company's second-lien senior secured $50 million
term loan due in 2011. In addition, Standard & Poor's withdrew
ratings it assigned to its Tube City IMS Corp. affiliate on
September 12, 2005, as the company did not complete a proposed
transaction.
Horsham, Pennsylvania-based IMS had total debt of about $320
million as of Sept. 30, 2005.
These actions followed the company's recent announcement that it
has cancelled its recapitalization plans, which included income
participating securities (IPS), because of an adverse announcement
by the Canadian government regarding income trust structures. The
company now plans to increase its first-lien term loan by $65
million and use the proceeds to:
* repay $7 million outstanding on its revolving credit
facility;
* pay fees and expenses of $8.5 million; and
* make a $50 million distribution to its shareholders.
Wellspring Capital Management LLC is substantially the owner of
the company. Standard & Poor's considered the IPS
recapitalization to be a more aggressive financial structure, as
it distributed nearly all of its free cash flow to the
shareholders. Although the company did not proceed with its
proposed IPS transaction, the negative outlook reflects higher
debt levels associated with the proposed dividend and the
company's shareholders proclivity toward taking a more aggressive
posture.
"The company's financial sponsors have demonstrated a willingness
to increase the financial leverage of the company to bolster their
investment returns. Ratings on the company could be lowered
should its sponsors seek other transactions that further increase
the company's financial risk or if a significant downturn in the
steel industry causes its customers to become insolvent, which is
unlikely in the next couple of years," said Standard & Poor's
credit analyst Paul Vastola. "Despite the volatility associated
with IMS' key end market -- the North American steel industry -
the company's performance is expected to continue to benefit from
a high percentage of long-term contracts and key supplier status
to its customers."
INTERPOOL INC: Fitch Lifts Long-Term Issuer Rating to BB from BB-
-----------------------------------------------------------------
Fitch Ratings has upgraded the long-term and preferred debt
ratings of Interpool Inc. and its subsidiary, Interpool Capital
Trust. Interpool's Rating Outlook remains Positive.
Approximately $470 million of unsecured debt and securities and
$650 million of secured revolving credit facilities are covered by
Fitch's actions.
The ratings reflect Interpool's strong market position within the
container and chassis segments, solid profitability, moderate
leverage, and improved liquidity.
Rating concerns center on Interpool's significant customer
concentrations, the impact of high fuel prices on global trade,
and the potential cost of repatriating accumulated earnings or
equity from Interpool Limited, which is registered in Barbados for
tax purposes. Also considered was the adverse impact of sustained
economic or political instability throughout the Pacific Rim,
particularly China.
With Interpool now current on all of its SEC-related filings and
re-listed on the New York Stock exchange, Fitch believes that the
company's operating results could improve over the intermediate
term. The improvement in operating results should be driven by
fleet utilization remaining high, and demand for containers and
chassis, which is expected to remain strong due to major expansion
of the world cellular container ship fleet through 2008 coupled
with continued growth in global containerized traffic.
Over the intermediate term, management intends to strengthen
Interpool's credit metrics with a goal of having the company's
unsecured debt be rated investment grade. Consideration in
raising Interpool's debt from current levels will be driven by the
company's compliance with Sarbanes-Oxley section 404,
strengthening financial performance, declining leverage, and
continued unencumbering of the balance sheet.
Interpool's interim 2005 financial performance continues to
reflect favorable overall market conditions in both the container
and chassis segments. Due to higher global containerized traffic
and expansion of shipping fleets via delivery of newer and larger
ships that require the use of a larger number of chassis and
containers, utilization of Interpool's container and chassis
fleets at June 30, 2005 equaled 97% and 96%, and was 99% and 97%,
respectively, at Dec. 31, 2004.
Interpool's reported net income for the first six months ended
June 30, 2005 was $37 million, an increase of $6 million over the
company's first half of 2004 net income of $31 million. Year-to-
date 2005 net income includes non-cash income of $14 million
stemming from a change in the fair value of warrants. Also, prior
year net income reflected an insurance settlement of $5 million.
Excluding the change in the fair value of the warrants, annualized
return on average equity was a respectable 11.40%.
Overall credit quality also remained good. Accounts receivable
over 60 days past due equaled $9.8 million at both Dec. 31, 2004
and June 30, 2005. Nonperforming accounts receivable totaled $12
million at June 30, 2005, compared to $13 million at Dec. 31,
2005. Write-offs for the six months ended June 30, 2005 equaled
$0.9 million versus $0.8 million for the same period a year ago.
Between the 2002 to 2004 period, annual net write-offs have
averaged approximately 0.9% of annual revenues.
New and expanded funding and liquidity arrangements were completed
during 2005 with various financial institutions. During the first
half of 2005, Interpool received an additional $223 million in net
financing commitments. As of June 30, 2005, approximately $424
million, excluding $72 million, under the Container Applications
International, Inc., revolving credit facility was available for
future use by Interpool.
Headquartered in Princeton, N.J., with roots dating to 1968,
Interpool Inc. is the holding company for Interpool Limited,
Interpool Container Funding, SRL, Trac Lease, Inc., and owns 50%
of Container Applications International, Inc. Interpool Limited
and Interpool Container Funding, SRL, house the container
business. Trac Lease houses most of the domestic chassis
business. CAI is a short-term lessor and serves as an outlet for
Interpool's off-lease containers that are not renewed for long-
term lease. Interpool is publicly traded and listed on the New
York Stock Exchange (symbol: IPX).
Fitch has upgraded these ratings:
Interpool, Inc.
-- Long-term issuer to 'BB' from 'BB-';
-- Senior unsecured debt to 'BB' from 'B';
-- Senior secured credit facility to 'BB+' from 'BB-'.
Interpool Capital Trust
-- Preferred stock to 'B+' from 'CCC+'.
Fitch has also assigned the following ratings:
Interpool Limited
-- Senior secured credit facility 'BB+';
-- Long-term issuer 'BB'.
Interpool Container Funding, SRL
-- Senior secured credit facility 'BB+';
-- Long-term issuer 'BB'.
INTERSTATE BAKERIES: Unions Say CBA Extension is "Unnecessary"
--------------------------------------------------------------
As previously reported in the Troubled Company Reporter,
Interstate Bakeries Corporation and its debtor-affiliates asked
the U.S. Bankruptcy Court for the Western District of Missouri for
permission to enter into and implement agreements that extend the
terms of related Collective Bargaining Agreements up to five years
and may modify, amend, replace or otherwise change the terms and
conditions of employment, including changing wages and benefits
and changing work rules or operational guidelines.
Unions Respond
(1) BCTGM
The Bakery, Confectionery, Tobacco Workers, and Grain Millers
International Union does not oppose the Debtors' request.
However, on BCTGM's behalf, Jeffrey Freund, Esq., at Bredhoff &
Kaiser, P.L.L.C., in Washington, D.C., asserts that the Debtors'
request is unnecessary since collective bargaining agreements
reached during a Chapter 11 proceeding are "ordinary course"
transactions that are not subject to third party objections and
do not require Court approval.
Because collective bargaining over mandatory subjects is required
by law, and because it is a violation of a federal statute for an
employer to refuse to engage in these bargaining in good faith,
collective bargaining agreements on mandatory subjects are
perforce "in the ordinary course of business," Mr. Freund
explains.
Under the National Labor Relations Act, "mandatory subjects of
bargaining" include wages, hours and other terms and conditions
of employment.
"[T]he Court is without authority to disapprove collective
bargaining agreements containing nothing more than terms on
subjects that are the product of arms-length collective
bargaining," Mr. Freund emphasizes.
BCTGM represents approximately 10,000 of the Debtors' 32,600
employees. BCTGM's local affiliates are parties to over 200 CBAs
with the Debtors. The CBAs, Mr. Freund reports, were all
negotiated under the statutory scheme established in Section 151
of the National Labor Relations Act.
(2) IBT and IAMAW
The International Brotherhood of Teamsters and the International
Association of Machinists and Aerospace Workers support BCTGM's
contentions.
"While courts acknowledge that most collective bargaining
agreements do not require approval, in fact, debtors present most
of their agreements for approval, leading to at least an
unnecessary proceeding, and at worst, an inappropriate level of
review of ordinary collective agreements," Frederick Perillo,
Esq., at Previant, Goldberg, Uelmen, Gratz, Miller & Brueggeman,
S.C., in Milwaukee, Wisconsin, points out.
"The Court should therefore clearly express that in entertaining
this motion, there is no implication that future, garden-variety,
collective agreements ought to be subject to public inspection
and objection, even though they may differ in substance or
structure from the particular agreements at issue in this
motion," Mr. Perillo says.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S.
The Company and seven of its debtor-affiliates filed for chapter
11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No.
04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at
Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed $1,626,425,000 in
total assets and $1,321,713,000 (excluding the $100,000,000 issue
of 6.0% senior subordinated convertible notes due August 15, 2014,
on August 12, 2004) in total debts. (Interstate Bakeries
Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
INTERSTATE BAKERIES: J.W. Franklin Objects to Lease Rejection
-------------------------------------------------------------
As reported in the Troubled Company Reporter on Sept. 13, 2005,
Interstate Bakeries Corporation and its debtor-affiliates sought
the U.S. Bankruptcy Court for the Western District of Missouri's
authority to reject 11 unexpired non-residential real property
leases effective as of Aug. 31, 2005, to reduce postpetition
administrative costs:
Landlord Location Lease Date
-------- -------- ----------
Gerard Limited 525 East Palmdale Boulevard, 07/07/1987
Partnership Plaza Del Centro, Palmdale,
California
Elmer A and Helen 1900 West Main Independence, 08/06/1990
Belt Kansas
Meriwether 931 SE Main Street, 05/11/1993
Properties, LLC Wetumpka, Alabama
Greenbriar, Ltd. 557 First Street, North 01/01/1991
Alabaster, Alabama
Duncan Properties 1001 South Van Buren, Enid, 06/11/1991
Oklahoma
Cherry Building, 1720 Cherry Street, Kansas 12/01/1995
LLC City, Missouri
T.G.L. Properties, 9,10 & 11 Town & Country 07/08/1997
L.L.C. Marketplace, Warrenton,
Missouri
Wiltham Place Ltd. 8031 South 83rd Avenue, 02/18/1999
Partnership Lavista, Nebraska
SRW Inc. 3201 South Third Street, 05/11/2000
Memphis, Tennessee
J.W. Franklin Co. 609 East Young, 09/15/2000
Warrensburg, Missouri
Lincoln Henderson 7254 North 30th Street, 11/27/2000
Omaha North 30th Omaha, Nebraska
Street LLC
J.W. Franklin Objects
On Sept. 15, 2000, Debtor Interstate Brands Corporation entered
into a Shopping Center Lease Agreement with J.W. Franklin Co., for
retail space located at 609 East Young Street, Suites A-6 & 7, in
Warrensburg, Missouri.
Interstate Brands executed a commencement date addendum to the
Shopping Center Lease on the same date that provided for the
lease commencement date as November 21, 2000, and the primary
lease term as December 1, 2000, through November 30, 2005.
Michele L. Whetstone, Esq., in Blue Springs, Missouri, relates
that the Shopping Center Lease provides for a $2,718 monthly
rental payment to J.W. Franklin, plus a Common Area Maintenance
estimate of $525 per month for 2005, through the expiration of
the Lease. Interstate Brands' pro rata share of the Common Area
Maintenance deficiency for the year 2004 is $236.
Mr. Whetstone informs the Court that Interstate Brands has paid
$66 of the 2004 Common Area Maintenance deficiency, leaving a
remaining balance of $170.
Mr. Whetstone further notes that Interstate Brands, with J.W.
Franklin's permission, made a special modification to the common
parking lot of the shopping center in the form of a ramp, to
assist the delivery of products to the Debtor's bakery outlet
store. Pursuant to the Shopping Center Lease, the Debtors were
required to remove the ramp and restore the parking lot to its
original condition. However, the Debtors have not complied to
this.
For these reasons, J.W. Franklin asks the Court to deny the
Debtors' request to reject the Shopping Center Lease.
Mr. Whetstone asserts that J.W. Franklin's request is warranted
because Interstate Brands:
(1) has only returned one key for the Premises and has not
returned a copy of the postal station key to J.W.
Franklin;
(2) damaged the back door to the Premises in a way that
prevented the door from properly locking, thereby leaving
the Premises unsecured;
(3) failed to pay its remaining $170 balance on the 2004
CAM charges, while continuing to operate its bakery outlet
store in the Premises for over 10 months postpetition;
(4) failed to give J.W. Franklin any prior notice of its
intent to reject the Shopping Center Lease and vacate the
Premises, thereby limiting the firm's opportunity to
mitigate loss of rental income due to Interstate Brands'
rejection;
(5) failed to notify J.W. Franklin of its intent to reject the
Lease upon the cessation of its operations on August 4,
2005; and
(6) showed bad faith by not allowing J.W. Franklin immediate
access to the Premises.
"The harm [Interstate Brands] has caused [J.W. Franklin]
outweighs the savings the [Debtors' Chapter 11] estate may
experience as a result of the rejection of the subject Lease,"
Mr. Whetstone contends.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S.
The Company and seven of its debtor-affiliates filed for chapter
11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No.
04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at
Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed $1,626,425,000 in
total assets and $1,321,713,000 (excluding the $100,000,000 issue
of 6.0% senior subordinated convertible notes due August 15, 2014,
on August 12, 2004) in total debts. (Interstate Bakeries
Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
JP MORGAN: Credit Enhancement Prompts Fitch to Raise Rating
-----------------------------------------------------------
Fitch Ratings upgrades J.P. Morgan Commercial Mortgage Finance
Corp.'s mortgage pass-through certificates, series 1997-C5:
-- $51.7 million class F to 'BBB-' from 'BB+'.
Fitch also affirms these certificates:
-- $173.6 million class A-3 'AAA';
-- Interest-only class X 'AAA';
-- $51.7 million class B 'AAA';
-- $56.9 million class C 'AAA'.
Fitch does not rate the $56.9 million class D, $15.5 million class
E, $36.2 million class G, or the $2.9 million class H
certificates.
The upgrade reflects the increased credit enhancement from loan
payoffs and amortization. As of the October 2005 distribution
date, the pool's aggregate certificate balance has been reduced by
56% to $445.3 million from $1.03 billion at issuance. The pool
remains diverse, with the top five loans and California
representing less than 20% of the pool.
Three assets (1.4%) are being specially serviced, including two 90
days delinquent (0.94%) and a real estate owned (REO) (0.42%).
Losses are expected on two of these assets.
The largest specially serviced loan (0.70%) is secured by a retail
property in Covington, VA. The loan is 90 days delinquent and
foreclosure is expected. The next specially serviced asset is
secured by a hotel in Monroe, PA (0.42%). This REO asset has been
marketed for sale and is expected to be sold shortly. The third
specially serviced loan (0.23%) is secured by a retail property in
West Seneca, New York. Foreclosure is expected by year-end.
Losses are expected on two of the specially serviced loans. Class
H is more than sufficient to absorb losses.
Losses realized to-date total $23.0 million, or 2.2% of the
original pool balance.
JP MORGAN: Fitch Holds BB Rating on $20.4 Million Class H Certs.
----------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-
through certificates, series 2000-C9, are upgraded by Fitch
Ratings:
-- $10.2 million class D to 'AA+' from 'AA'.
Fitch also affirms these classes:
-- $18.2 million class A-1 'AAA';
-- $404.7 million class A-2 'AAA';
-- Interest-only class X 'AAA';
-- $36.6 million class B 'AAA';
-- $38.7 million class C 'AAA';
-- $28.5 million class E 'A-';
-- $14.3 million class F 'BBB';
-- $14.3 million class G 'BBB-';
-- $20.4 million class H 'BB'.
The $21.2 million class J certificates are not rated by Fitch.
The upgrade to class D reflects the defeasance of an additional
10.7% of the pool as well as 3.3% paydown since Fitch's previous
rating action. Since issuance, 29% of the pool has defeased. As
of the September 2005 distribution date, the pool's aggregate
principal balance has been reduced by approximately 25% to $607.0
million from $814.4 million at issuance.
Four loans (1.8%) are currently being specially serviced,
including three delinquent loans (1.5%). The largest of these
delinquent loans (0.78%) is secured by an office property in
Lancaster, NY. The property is 65% occupied and a foreclosure is
expected before year-end. The next delinquent loan (0.55%) is
secured by a multifamily property in Elgin, IL. Current occupancy
is 44% and the special servicer is negotiating workout options.
The loss anticipated on one of the specially serviced loans is
expected to be absorbed by class J, which is not rated by Fitch.
The pool's realized losses to date total $25.6 million, or 3.2% of
the original pool balance.
KAISER ALUMINUM: Court Orders Russell to File Final Fee Claim
-------------------------------------------------------------
Judge Fitzgerald directs Russell Reynolds to file with the U.S.
Bankruptcy Court for the District of Delaware a final fee
application for allowance of its compensation and expenses in
accordance with the applicable provisions of the Bankruptcy Code,
the Bankruptcy Rules and the Local Rules. Russell Reynolds may
submit records in summary format describing the services it has
provided and may not keep time records of hours spent performing
those services.
The Court therefore modifies and waives the information
requirements of Bankruptcy Rule 2016 and Local Rule 2016-2 to the
extent necessary, with respect to Russell Reynolds.
As reported in the Troubled Company Reporter on Sept. 19, 2005,
Kelly Beaudin Stapleton, the United States Trustee for Region 3,
objected to Kaiser Aluminum Corporation and its debtor-affiliates'
proposal that Russell Reynolds Associates be exempted from the
filing of fee applications and the necessity to obtain further
Court approval for its compensation or reimbursement of expenses.
This request is contrary to relevant law, the U.S. Trustee argues.
The U.S. Trustee asserts that the U.S. Court of Appeals for the
Third Circuit in In re Engel, 124 F.3d 567, 571-72 (3d Cir.
1997), has made it quite clear that fee applications are a
requirement in bankruptcy and must be carefully reviewed under
Section 330 of the Bankruptcy Code.
The U.S. Trustee further contends that the Application fails to
provide the specific services Russell Reynolds will be providing
or the justification for its fee. Moreover, the U.S. Trustee
notes that there will be expenses that the Debtors will reimburse,
which are completely unknown at this time.
The U.S. Trustee tells the Court that the correct procedure is not
to approve the compensation up-front without any oversight, but to
allow the Court and parties-in-interest the ability to assess the
services performed at the end of the engagement to determine if
the fees are justifiable and expenses are reasonable.
Headquartered in Foothill Ranch, California, Kaiser Aluminum
Corporation -- http://www.kaiseraluminum.com/-- is a leading
producer of fabricated aluminum products for aerospace and high-
strength, general engineering, automotive, and custom industrial
applications. The Company filed for chapter 11 protection on
February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold
off a number of its commodity businesses during course of its
cases. Corinne Ball, Esq., at Jones Day, represents the Debtors
in their restructuring efforts. On June 30, 2004, the Debtors
listed $1.619 billion in assets and $3.396 billion in debts.
(Kaiser Bankruptcy News, Issue No. 80; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
LEVI STRAUSS: Aug. 28 Balance Sheet Upside-Down by $1.25 Billion
----------------------------------------------------------------
Levi Strauss & Co. reported financial results for the third
quarter ended August 28, 2005, and filed its third-quarter 2005
Form 10-Q with the Securities and Exchange Commission. The
results reflect modest net sales growth and good profit
performance for the period.
Third-quarter 2005 net sales were $1.02 billion compared to $995
million for the third quarter of 2004, representing an increase of
2.4% on a reported basis and 1.8% on a constant-currency basis.
The sales increase was driven primarily by increased net sales in
the Asia Pacific region, the U.S. Levi's(R) brand and the U.S.
Levi Strauss Signature(R) brand. These gains were partially offset
by lower sales in the European region and the U.S. Dockers(R)
brand.
Operating income increased 9 percent to $139 million for the third
quarter, or 14% of net sales, compared to $128 million, or 13
percent of net sales, for the same period of 2004. The
improvement reflects lower restructuring charges and other
corporate expense. Net income for the third quarter decreased $8
million to $38 million compared to net income of $47 million in
the same quarter of 2004. The decrease was driven by lower income
tax expense in the third quarter of 2004 as a result of a tax-rate
benefit.
"We had another good quarter, consistent with our goals for this
year," said Phil Marineau, chief executive officer. "We delivered
modest sales growth and strong margins and operating profit in a
difficult retail environment. I'm pleased with the revenue growth
in Asia Pacific and in the U.S. Levi's(R) and Levi Strauss
Signature(R) brands. Our revenue performance in Europe is weaker
than we had hoped, but we continue to see profit improvements and
believe we're on the right strategic course. For the balance of
the year, we remain cautious about sales in the United States and
Europe in light of energy prices and the retail environment."
Third-Quarter 2005 Results
Gross profit was essentially flat at $454 million compared to
$456 million in the third quarter of 2004. The gross margin
decreased 130 basis points to 44.6% of net sales for the third
quarter compared to 45.9% of net sales in the same quarter last
year. The gross margin in the third quarter of 2005 was primarily
affected by a higher sales mix of lower-margin fashion and
seasonal products in the United States, partially offset by a net
sales increase for the Levi's(R) brand in the United States, a net
sales increase for Asia Pacific, and the more premium positioning
of the Levi's(R) brand in Europe.
Selling, general and administrative expenses increased $19 million
or 6% to $320 million in the third quarter of 2005 from $301
million in same period of 2004. Higher SG&A expenses were
primarily attributable to an increase in advertising and promotion
expense and higher incentive compensation costs. These were
partially offset by lower salary and wages and related expenses as
well as decreased distribution costs, reflecting the impact of
cost-savings initiatives. As a percent of sales, SG&A expenses
were 31% in the third quarter of 2005 compared to 30% in the same
period of 2004.
Restructuring charges, net of reversals, were $5 million for the
third quarter of 2005 versus $28 million in the prior-year period.
The 2005 charges were for third-quarter 2005 activities related
primarily to European reorganization initiatives that began last
year, including moving the Dockers(R) brand operation to Brussels
from Amsterdam. The substantially higher 2004 charges primarily
reflected costs related to the 2004 closure of two manufacturing
plants in Spain and 2004 U.S. and European organizational changes.
Other operating income increased in the third quarter of 2005,
driven primarily by a $5 million increase in royalty income from
licensees. Royalty income was $16 million for the 2005 quarter,
compared to $12 million in the same period last year. The
increase reflects the company's decision last year to license
certain product categories.
Income tax expense for the third quarter was $40 million compared
to $18 million in the comparable 2004 period. The effective tax
rate for the third quarter of 2004 was significantly lower due
primarily to a revision in the estimate of annual earnings for
domestic and foreign subsidiaries.
"We have improved our financial strength this year, delivering
stronger profitability through the first nine months of the year,"
said Hans Ploos van Amstel, chief financial officer. "Our
improved earning power has allowed us to increase our investment
in product, advertising and stronger marketing, consistent with
our strategy to reinvest part of our increased profits into key
brand-building initiatives. This strategy is even more important
in light of the current competitive environment. We're also
pleased that we completed settlement discussions in late August
with the U.S. Internal Revenue Service relating to our
consolidated U.S. federal corporate income tax returns for 1990 to
1999. The IRS examination of those tax years is now closed."
Levi Strauss & Co. is one of the world's leading branded apparel
companies, with sales in more than 110 countries. Levi Strauss
designs and markets jeans and jeans-related pants, casual and
dress pants, tops, jackets and related accessories for men, women
and children under its Levi's(R), Dockers(R) and Levi Strauss
Signature(R) brands. Levi Strauss also licenses its trademarks in
various countries throughout the world for accessories, pants,
tops, footwear, home and other products.
At Aug. 28, 2005, Levi Strauss & Co.'s balance sheet showed a
$1,251,678,000 stockholders' deficit, compared to a $1,370,924,000
deficit at Nov. 28, 2004.
MEDIA GROUP: Wants Bernard Costich as Accountants
-------------------------------------------------
The Media Group, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Connecticut for authority to
retain Bernard W. Costich, CPA, as their accountant.
Bernard Costich will:
(a) prepare federal and state tax returns;
(b) review proof of claims and prepare objection where
appropriate;
(c) provide litigation support;
(d) collect accounts receivable;
(e) respond to creditor and other parties of interest requests
for information and documentation;
(f) supervise the disbursement of accounts receivables
collected on behalf of the purchaser of the Dura Lube
Assets;
(g) prepare monthly operating reports and the U.S. Trustee's
quarterly fee statements; and
(h) provide such other accounting services as may be requested
by the Debtors, their attorneys or the Committee and their
attorneys.
The Debtors tell the Court that Bernard W. Costich will be the
lead accountant and will bill $250 per hour for his services. The
Debtors also tell the Court that the Firm's accounting clerks will
bill at $50 per hour. The Debtors disclose that the Firms fees
shall not exceed $30,000.
To the best of the Debtor's knowledge, the Firm is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in Stamford, Connecticut, The Media Group Inc.,
distributes and markets automotive additives and general
merchandise. The Company filed for chapter 11 protection on
July 9, 2004 (Bankr. D. Conn. Case No. 04-50845). Douglas S.
Skalka, Esq., at Neubert Pepe and Monteith, represents the Debtors
in their restructuring efforts. When the Debtor filed for
protection from its creditors, it listed $10,915,723 in total
assets and $14,743,552 in total debts.
MINNA EDELMAN: Case Summary & 8 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Minna J. Edelman, Esq.
4941 Arlington Avenue
Riverdale, New York 10471
Bankruptcy Case No.: 05-45512
Type of Business: The Debtor is a lawyer.
Chapter 11 Petition Date: October 12, 2005
Court: Southern District of New York (Manhattan)
Debtor's Counsel: Bruce R. Alter, Esq.
Alter & Goldman
550 Mamaroneck Avenue, Suite 510
Harrison, New York 10528
Tel: (914) 670-0030
Fax: (914) 670-0031
Total Assets: $143,000
Total Debts: $2,263,037
Debtor's 8 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
The Society of Lloyd's Litigation $1,898,109
Mound Cotton Wollan & Greengrass
One Battery Park Plaza
New York, NY 10004-1486
Michael James Edelman Loan $307,000
4941 Arlington Avenue
Riverdale, NY 10471
Internal Revenue Service Federal Taxes $110,043
General Appeals
Appeals Office
290 Broadway, 11th Floor
New York, NY 10007
Bronx Water & Sewer $27,000
American Names Association Inc. $25,000
Almstead Tree & Shrub Care Services rendered $2,913
Schwartz & Schwartz Associates $1,621
Audi Financial Services $695
MOST PRODUCTS: Case Summary & 21 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Most Products, Inc.
P.O. Box 375
Plainwell, Michigan 49080
Bankruptcy Case No.: 05-17270
Type of Business: The Debtor manufactures and sells tanning
products.
Chapter 11 Petition Date: October 12, 2005
Court: Western District of Michigan (Grand Rapids)
Debtor's Counsel: Michael M. Malinowski, Esq.
Michael M. Malinowski, PLC
740 Alger Street, Southeast
Grand Rapids, Michigan 49507
Tel: (616) 475-4994
Fax: (616) 475-5313
Total Assets: $885,133
Total Debts: $2,609,653
Debtor's 21 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Mary Thomasma Value of security: $916,777
3131 Manhattan Lane Southeast $885,133
Grand Rapids, MI 49506
Venture Bus Sols Inc $101,025
c/o Smith Konning Firm
550 West Centre Avenue
Portage, MI 49024
Wasatch Products Dev Inc $95,874
c/o David C. Myers
161 Ottawa Northwest #205-E
Grand rapids, MI 49503
RNA Corp $82,850
Kandra Group LLC $82,731
Laverne Stanley $81,190
Ripple Effect Inc $24,023
Thomasma Real Estate LLC $17,177
Xelapack $15,342
Formulated Solutions $10,369
Miller Johnson Firm $8,500
Macher USA $7,825
Prasher Law Group PLC $7,097
Bob Vanderveen $6,119
Decorative Industries $5,605
DC Screen Printing $5,000
Advertising Specialist Inc $4,750
Unicall Int'l Inc $4,190
American Equity Ins Co $4,165
Attitude Products $3,870
Monroe Sweeris Tromp $2,750
NATIONAL ENERGY: Wants Court to Nix or Reduce Attala Claims
-----------------------------------------------------------
As previously reported, National Energy & Gas Transmission, Inc.,
filed objections to these claims:
a. Claim Nos. 309 and 631 filed by VCC Attala OP LLC;
b. Claim Nos. 304 and 630 filed by TCC Attala OP LLC;
c. Claim Nos. 308 and 629 filed by BATCL-1987 II, Inc.;
d. Claim Nos. 306 and 628 filed by Newcourt Capital USA, Inc.;
e. Claim No. 307 filed by TCC Attala OL LLC; and
f. Claim No. 305, VCC Attala OL LLC
Dennis J. Shaffer, Esq., at Whiteford, Taylor & Preston, LLP, in
Baltimore, Maryland, argues that the claims of TCC Attala OL, VCC
Attala OL, BATCL-1987 II, and Newcourt should be disallowed and
expunged in their entirety. Mr. Shaffer points out that Attala
did not address these claims in its response to NEG's Objections
nor did Attala address these claims at the hearing held on
August 11 and 12, 2005.
VCC Attala OL and TCC Attala OL seek $300 million in payments
under a tolling guaranty, to which they are not entitled, Mr.
Shaffer argues. Not only has NEG already compromised and settled
all claims arising under the Tolling Guaranty but the Attala
Entities have also conceded that the only parties entitled to
payment under the Tolling Guaranty were the certificate holders.
Mr. Shaffer adds that the claims of Newcourt and BATCL-1987 II
should also be disallowed because they have no right to assert
claims based on the Indemnity Agreement, which is an agreement
between the TCC Attala OP and VCC Attala OP and NEG. Moreover,
even if Newcourt and BATCL-1987 II were parties to the Indemnity
Guaranty, Mr. Shaffer says, their claims duplicate the claims of
Attala Owner Participants.
According to Mr. Shaffer, for NEG to be liable to the Attala
Owner Participants under the Indemnity Guaranty, Attala
Generating Company LLC must first be liable to the Owner
Participants under the Tax Indemnity Agreement. AGC has no
liability under the TIA to the extent that Termination Value has
been paid, he says.
Mr. Shaffer points out that in 10 proofs of claim and 59 pages of
briefing, and at the Hearing, the Owner Participants have yet to
submit to the Court any explanation of how they calculate that
Net Economic Return equals $240 million.
Mr. Shaffer argues that not only have the Attala Entities failed
to submit any calculation of their claim to the Court, they have
not even reduced their claims to present value. Therefore, if
the Court awards them any relief, Mr. Shaffer says, it should be
limited to their discounted lost tax benefits, which NEG
calculates to be $6,083,505 (VCC) and $1,520,876 (TCC).
According to Mr. Shaffer, the Attala Entities also assert a claim
with no supporting documentation for over $2.3 million under the
general guaranty in the Participation Agreement, which NEG
guaranteed in the Indemnity Guaranties.
NEG asks the Court to:
(a) disallow and expunge the Attala Claims;
(b) alternatively, with respect to the Claim No. 631, reduce
and allow that claim as a general unsecured claim for
$6,083,505;
(c) alternatively, with respect to the Claim No. 630, reduce
and allow that claim as a general unsecured claim for
$1,520,876; and
(d) deny the Attala Entities' Motion for Partial Summary
Judgment.
Attala's Executive Summary
The Attala Entities believe that while the overall transaction
underlying their Claims and agreements was complex and heavily
negotiated by sophisticated parties, each represented by
professionals, NEG's liability to the Owner Participants is
ultimately based on three agreements:
* The Tax Indemnity Agreements
* The Participation Agreements, and
* The Indemnity Guaranties.
Merrill Cohen, Esq., at Cohen & Baldinger, in Bethesda, Maryland,
points out that none of the Owner Participants' claims were
assigned to the Certificate Holders as security. The Tax
Indemnity Agreements provide that the Owner Participants are
entitled to receive indemnity payments, in an amount calculated
to preserve their Net Economic Return, upon the occurrence of a
negotiated trigger. These indemnities are separate and apart
from AGC's obligations to pay Equity Rent or Termination Value,
Mr. Cohen says.
NEG also expressly guaranteed the Owner Participants' indemnity
claims under the Participation Agreements, Mr. Cohen relates.
Like the indemnity payments under the Tax Indemnity Agreements,
the Owner Participants' claims under the Participation Agreements
were specifically excluded from the property assigned to the
Indenture Trustee and the Certificate Holders.
Mr. Cohen tells the Court that Net Economic Return is defined as
the Owner Participant's anticipated net after-tax yield,
calculated according to the multiple investment sinking fund
method analysis and aggregate GAAP income and after-tax cash
flow.
Using that formula, the Owner Participants calculate that the
aggregate after-tax cash flow is:
$80,743,067 for VCC Attala OP LLC
$20,185,767 for TCC Attala OP LLC
Assuming a January 1, 2004, Tax Indemnity Agreement event, the
payment required to preserve the aggregate after-tax cash flow
is:
$110,871,000 for VCC Attala OP LLC
$27,717,750 for TCC Attala OP LLC
Using a combined rate of 45.8435% to gross up the lump sum in
order to preserve the Owner Participants' Net Economic Return,
the Tax Indemnity Agreement Claims are:
$192,073,089 for VCC Attala OP LLC
$48,018,272 for TCC Attala OP LLC
Mr. Cohen points out that Owner Participants simply calculated
their Claims under the express provisions of the Tax Indemnity
Agreements, utilizing objective numbers and formulas, to derive
the amount of $240,091,361.
According to Mr. Cohen, the Debtors contend that allowing the
Owner Participants' Claims in the amount provided for under the
Tax Indemnity Agreements would grant the Owner Participants a
"windfall" at the expense of NEG other creditors. Mr. Cohen
refutes the Debtors' assertion and argues that at this point in
time, the Owner Participants have not received anything on
account of their Claims and have lost their investment in the
transaction through foreclosure on the Facility. "What the Owner
Participants seek here is to merely receive the benefit of their
bargain -- a lump-sum payment which preserves their Net Economic
Return," Mr. Cohen insists.
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company and
its debtor-affiliates filed for Chapter 11 protection on July 8,
2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq.,
Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at
Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin
T. Fletcher, Esq., at Whiteford, Taylor & Preston, L.L.P.,
represent the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$7,613,000,000 in assets and $9,062,000,000 in debts. NEGT
received bankruptcy court approval of its reorganization plan in
May 2004, and that plan took effect on Oct. 29, 2004.
The Hon. Paul Mannes confirmed NEGT Energy Trading Holdings
Corporation, NEGT Energy Trading - Gas Corporation, NEGT ET
Investments Corporation, NEGT Energy Trading - Power, L.P., Energy
Services Ventures, Inc., and Quantum Ventures' First Amended Plan
of Liquidation on Apr. 19, 2005. The Plan took effect on May 2,
2005. (PG&E National Bankruptcy News, Issue No. 50; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
NATIONAL ENERGY SERVICES: Files 10-Q For Period Ended July 31
-------------------------------------------------------------
National Energy Services Company, Inc., delivered its financial
results for the nine-months ended July 31, 2005, to the Securities
and Exchange Commission on Sept. 28, 2005.
National Energy incurred a $293,016 net loss for the nine months
ended July 31, 2005 -- a 49% improvement over the $571,788 net
loss recorded in the nine months ended July 31, 2004. The Company
has incurred substantial losses for the fiscal years ended Oct.
31, 2004 and 2003.
The Company's balance sheet showed $1,794,572 of assets at
July 31, 2005, and liabilities totaling $2,382,797. Working
capital deficit has increased by $82,910 since October 31, 2004.
The deficit is now $328,648. National Energy has minimal
liquidity and its working capital is severely strained, as it has
fully utilized its credit lines.
PPL Spectrum Agreement
Prior to the current fiscal year, PPL Spectrum, Inc., provided
financing to National Energy's clients in connection with the
Company's Energy Gatekeeper Program. Under its arrangement with
PPL, the Company executed notes payable to PPL for the amount of
the financing, and took notes receivable from the client in like
amount.
In 2004 PPL Spectrum, Inc. terminated the arrangement under which
it had previously provided equipment financing to the Company's
customers.
Effective March 1, 2005 the Company assigned to PPL all of the
notes receivable that arose from customer financing provided by
PPL. In turn, PPL released the Company from the corresponding
notes payable to them.
Although the transaction had no material effect on the Company's
net worth, the Company's balance sheet was substantially modified:
July 31, 2005 October 31, 2004
------------- ----------------
Current Assets $902,731 $2,313,452
Total Assets 1,794,572 4,809,103
Current Liabilities 1,231,379 2,559,190
Total Liabilities 2,382,797 5,104,311
Going Concern Doubt
Bagell Josephs & Company, LLC, expressed substantial doubt about
National Energy's ability to continue as a going concern after it
audited the Company's financial statements for the fiscal years
ended Oct. 31, 2004 and 2003. The auditing firm pointed to the
Company's recurring losses and substantial accumulated deficits.
National Energy's Management echoes that doubt as it talks about
the company's financial status at July 31, 2005.
About National Energy
Headquartered in Egg Harbor Township, N.J., National Energy
Services Company, Inc. -- http://www.nescorporation.com/--
provides energy-saving services exclusively to the long-term care
industry. The company offers activated air laundry systems that
are most effective in cold water, thereby lowering energy costs.
The Company also installs energy-efficient lighting systems, which
reduce energy consumption while improving the quality of light in
a facility. In addition to these and other energy-saving upgrades
and improvements, the Company offers financing packages
specifically designed for the long term care community.
NATIONAL R.V.: Files 2004 Annual Report with SEC
------------------------------------------------
National R.V. Holdings, Inc. (NYSE: NVH) completed its annual
audit for its 2004 fiscal year and has filed its Annual Report on
Form 10-K for 2004 with the Securities and Exchange Commission.
The Form 10-K filing reflects an unqualified opinion on the
Company's consolidated financial statements from its independent
registered public accountants and does not contain a going concern
paragraph. The Company also filed its amended Form 10-Q for the
third quarter of 2004.
In April 2005, the Company disclosed that the filing of its Annual
Report would be delayed as it dealt with various accounting
matters in connection the audit of its 2004 fiscal year,
including, as previously reported:
-- certain restatements of prior period financial statements;
-- the completion of its Sarbanes-Oxley Section 404 assessment
of internal control over financial reporting; and
-- the required evaluation of its ability to continue as a
going concern.
As previously reported, the independent registered public
accountants' report contained an adverse opinion on the
effectiveness of the Company's internal controls over financial
reporting as of Dec. 31, 2004. During the ensuing months, the
Company worked with its independent registered public accountants
to complete the audit and with its bankers to secure a new credit
facility.
"We are pleased to finally close the 2004 audit and file this
report," stated Tom Martini, National R.V. Holdings' chief
financial officer. "This has been a lengthy and challenging
process, especially in light of the new requirements of Sarbanes-
Oxley. With this filing behind us, we are now able to dedicate
our resources to further implement our growth initiatives."
Executive Appointments
The Company has recently appointed Len Southwick president of its
National RV division and has named John Draheim as a senior vice
president of sales, marketing, and product planning and
development of the division.
Mr. Southwick assumes the role of president of National RV from
Brad Albrechtsen who will continue in his role as CEO of National
R.V. Holdings and who had been serving in a dual role as the
Company's CEO and also the president of National RV. Prior to his
appointment as president, Mr. Southwick held the title of
executive vice president, and has been with National RV in various
positions for over two years. He started as vice president of
customer service, where he was successful in garnering improvement
in National RV's Dealer Satisfaction Index scores. As his
responsibilities expanded over the last year to include product
development and engineering, and later manufacturing and
materials, Mr. Southwick has been key in driving improvements in
National RV's manufacturing efficiencies. Prior to joining
National RV, Mr. Southwick had over 20 years experience in the
automotive industry.
"With each additional area of responsibility, Len has proven
himself to be a tireless, enthusiastic, and capable leader. We
are confident that he will continue to add value to National RV in
his new role as president," commented Mr. Albrechtsen. "Filling
this position enables me to focus more on strategic, investor,
legal, and compliance issues while still working with the division
presidents to improve our operations."
Mr. Draheim's background includes ten years in the automotive
industry, from 1988 to 1997, first with Volkswagen and then with
Kia. In 1997 he joined Fleetwood, where he held various positions
in both the motorhome and towable divisions, including regional
sales director, director of sales and product planning, and
finally vice president of the RV Group. He spent the last year at
Holiday Rambler, a division of Monaco, where he served as the
national director of sales.
"We welcome John to National RV, and look forward to the expertise
he will bring to our sales and marketing efforts as well as to the
product planning arena," stated Len Southwick, National RV's
president.
National R.V. Holdings, Inc., through its two wholly owned
subsidiaries, National RV, Inc., and Country Coach, Inc., is one
of the nation's leading producers of motorized recreation
vehicles. NRV is located in Perris, California, where it produces
Class A gas and diesel motor homes under model names Dolphin,
Islander, Sea Breeze, Tradewinds and Tropi-Cal. CCI is located in
Junction City, Oregon where it produces high-end Class A diesel
motor homes under the model names Affinity, Allure, Inspire,
Intrigue, and Magna, and bus conversions under the Country Coach
Prevost brand.
NEW HEIGHTS: Wants Entry of Final Decree Delayed to Nov. 21
-----------------------------------------------------------
New Heights Recovery & Power, LLC, asks the U.S. Bankruptcy Court
for the District of Delaware to further extend the time to file a
final report and delay entry of a final decree formally closing
its chapter 11 case until Nov. 21, 2005.
As reported in the Troubled Company Reporter on May 30, 2005, the
Court extended the deadline by which the Debtor must file a final
report and delayed the entry of the automatic final decree until
Sept. 21, 2005.
The Debtor reminds the Court that pursuant to Paragraph 11 of the
Sale Order, the Court will enter a form of order for a Final
Decree upon certification of counsel that post-closing matters
have been accomplished. The Debtor says the post-closing matters
include:
(a) submission of a final schedule itemizing the Final
Distribution made pursuant to the Sale Order;
(b) handling of all unclaimed distributions pursuant to the
Plan;
(c) payments of fees to the U.S. Trustee;
(d) consent of the U.S. Trustee to the entry of a Final
Decree; and
(e) submission of a final report.
The Debtor tells the Court that although it has made the Final
Distribution pursuant to the Sale Order and Plan, it has not
resolved the issues relating to New Jersey's claim. The Debtor
says that once the claim is resolved, it will have completed any
remaining tasks and file a final report.
Headquartered in Ford Heights, Illinois, New Heights Recovery &
Power, LLC -- http://www.tires2power.com/-- is the owner and
operator of the Tire Combustion Facility and other tire rubber
processing facilities. The Company filed for chapter 11
protection on April 29, 2004 (Bankr. Del. Case No. 04-11277).
Eric Lopez Schnabel, Esq., at Klett Rooney Lieber & Schorling
represents the Debtor. When the Company filed for chapter 11
protection, it listed both its estimated debts and assets of $50
million. The Debtor first filed for bankruptcy in March 26, 1996,
as a result to the amendment of the Retail Rate Law, and emerged
in 1998.
NEXTMEDIA OPERATING: Soliciting Consents to Amend 10.75% Indenture
------------------------------------------------------------------
NextMedia Operating, Inc., commenced a tender offer and consent
solicitation for any and all of its $200 million outstanding
principal amount 10.75% Senior Subordinated Notes due 2011.
The tender offer and the consent solicitation are being made upon
the terms and subject to the conditions set forth in the Offer to
Purchase and Consent Solicitation Statement and related Consent
and Letter of Transmittal, each dated Oct. 11, 2005.
The tender offer is scheduled to expire at 5:00 p.m., New York
City time, on Nov. 8, 2005, unless extended or earlier terminated.
The total consideration for each $1,000 principal amount of Notes
validly tendered and accepted for purchase will be fixed on the
second business day immediately preceding the Consent Time.
The Price Determination Date will be extended to the extent the
Consent Time has been extended. However, once the Price
Determination Date has been determined, it will not be extended
even if the Consent Time is thereafter extended. The total
consideration will be based on the present value on the expected
payment date of the sum of $1,053.75 (the redemption price payable
for the Notes on their earliest redemption date) plus all
scheduled interest payments on the Notes from the expected payment
date through July 1, 2006 (the earliest date on which the Notes
are redeemable at a fixed redemption price) discounted to present
value on the expected payment date, minus accrued and unpaid
interest to, but not including, the expected payment date.
The present value on the expected payment date will be determined
using a discount rate equal to the yield to maturity of the 2.75%
U.S. Treasury Note due June 30, 2006, on the Price Determination
Date, plus a fixed spread of 50 basis points. The total
consideration for each Note tendered includes a consent payment of
$20.00 per $1,000 principal amount of Notes to holders who validly
tender their Notes and deliver their consents prior to 5:00 p.m.,
New York City time, on Oct. 25, 2005, unless such date is
extended. Holders who tender their Notes after the Consent Time
will not receive the consent payment. Tendered Notes may not be
withdrawn and consents may not be revoked after the Consent Time
except as set forth in the Offer to Purchase and Consent
Solicitation Statement. Holders who properly tender their Notes
also will be paid accrued and unpaid interest up to, but not
including, the payment date.
Consent Solicitation
The consents are being solicited to eliminate substantially all of
the restrictive covenants (including, without limitation, the
covenants limiting the incurrence of debt, and the payment of
dividends on and the repurchase of NextMedia's capital stock),
certain affirmative covenants and certain events of default
contained in the indenture governing the Notes. Holders may not
tender their Notes without delivering consents or deliver consents
without tendering their Notes.
The obligation of NextMedia to accept for purchase and pay for the
Notes in the tender offer is conditioned on, among other things:
-- the completion by NextMedia of a new financing arrangement,
-- the availability of sufficient funds to purchase tendered
Notes, and
-- the execution of a supplemental indenture implementing the
Proposed Amendments following delivery of consents to the
Proposed Amendments by holders of at least a majority of the
aggregate principal amount of outstanding Notes, each as
described in more detail in the Offer to Purchase and
Consent Solicitation Statement.
NextMedia has retained Goldman, Sachs & Co. to serve as the dealer
manager for the tender offer and the consent solicitation.
Questions regarding the tender offer and the consent solicitation
may be directed to Goldman, Sachs & Co. at (877) 686-5059 or (212)
357-7867. Requests for documents in connection with the tender
offer and the consent solicitation may be directed to Global
Bondholder Services Corporation, the information agent, at (212)
430-3774.
NextMedia Operating, Inc., is a diversified out-of-home media
company headquartered in Denver, Colorado. NextMedia, through its
subsidiaries and affiliates, owns and operates 58 stations in 14
markets throughout the United States and more than 5,100 bulletin
and poster displays. Additionally, NextMedia owns advertising
displays in more than 2,400 retail locations across the United
States. Investors in NextMedia's ultimate parent entity,
NextMedia Investors, LLC, include Thomas Weisel Capital Partners,
Alta Communications, Weston Presidio Capital and Goldman Sachs
Capital Partners, as well as senior management. NextMedia was
founded by veteran media executives Carl E. Hirsch, Executive
Chairman, and Seven Dinetz, President and CEO.
* * *
As reported in the Troubled Company Reporter on July 26, 2005,
Standard & Poor's Ratings Services lowered its ratings on
NextMedia Operating Inc., including lowering the long-term
corporate credit rating to 'B' from 'B+', because of the increase
in debt to EBITDA resulting from sizable debt-financed
acquisitions. At the same time, Standard & Poor's revised its
outlook on the Englewood, Colorado-based radio broadcaster to
stable from negative. Pro forma for the recently announced $80
million acquisition of two San Jos,, California, radio stations
from Infinity Radio, NextMedia had approximately $300 million in
debt outstanding at March 31, 2005.
NORTHWEST AIRLINES: Equity Trading Restricted to Protect NOLs
-------------------------------------------------------------
The Northwest Airlines Corporation and its debtor-affilaliates
estimate that as of December 31, 2004, they had a consolidated Net
Operating Loss carryforward of approximately $2.1 billion. In
addition, the Debtors anticipate generating substantial additional
NOLs during 2005. Based on current projections, the Debtors
expect to use a substantial portion of their NOL carryforwards to
offset future income and dramatically reduce their federal income
tax liability, subject to certain limitations.
According to Bruce R. Zirinsky, Esq., at Cadwalader, Wickersham &
Taft LLP, in New York, the Debtors' consolidated NOL
carryforwards are valuable assets of their estates, because
Section 172 of the Internal Revenue Code generally permits
corporations to carry forward NOLs to offset future income,
thereby reducing federal income tax liability on future income
and significantly improving their cash position.
The Debtors' ability to use their NOL carryforwards is subject to
certain statutory limitations. Mr. Zirinsky relates that one
limitation is contained in Section 382 of the Internal Revenue
Code, which, for a corporation that undergoes a change of
ownership, limits that corporation's ability to use its NOLs and
certain other tax attributes to offset future income.
For purposes of Section 382, an ownership change occurs when the
percentage of a loss company's equity -- measured by value --
owned by one or more 5% shareholders increases by more than 50
percentage points over the lowest percentage of stock owned by
those shareholders at any time during a three-year rolling
testing period. A Section 382 change of ownership before
confirmation of a plan would effectively eliminate the Debtors'
ability to use their NOL carryforwards and certain other tax
attributes.
Mr. Zirinsky notes that the limitations imposed by Section 382 in
the context of an ownership change pursuant to a confirmed
Chapter 11 plan are significantly more relaxed, particularly
where the plan involves the retention or receipt of at least 50%
of the stock of the reorganized Debtors by shareholders or
Qualified Creditors.
It is possible that any realistic plan of reorganization will
involve the issuance of NWA Corp. common stock to creditors in
satisfaction, either in whole or in part, of the Debtors'
prepetition indebtedness. In that event, Mr. Zirinsky says, the
Debtors may seek to avail themselves of the special relief
afforded by Section 382 for changes in ownership under a
confirmed Chapter 11 plan.
If the U.S. Bankruptcy Court for the Southern District of New York
does not grant their request, the Debtors could lose the
substantial benefits of their NOL carryforwards before their
emergence from Chapter 11 as a result of continued trading and
accumulation of claims by creditors in claims against, and by
stockholders in interests in, Northwest. Accordingly, consistent
with the automatic stay, the Debtors need the ability to monitor
and possibly object to changes in the ownership of stock and
claims to assure that:
(i) a 50% change of ownership does not occur before the
effective date of a Chapter 11 plan in their cases, and
(ii) for a change of ownership occurring under a Chapter 11
plan, the Debtors have the opportunity to avail themselves
of the special relief provided by Section 382.
Accordingly, the Debtors seek the Court's authority to protect
and preserve valuable "NOLs" in excess of $2.1 billion by
establishing notice and waiting periods to govern transfers of
equity interests in and claims against the Debtors and procedures
for objecting to those transfers in certain circumstances.
If left unrestricted, Mr. Zirinsky says, trading could severely
limit the Debtors' ability to use valuable assets of their
estates, namely their NOLs, and could have significant negative
consequences for the Debtors, their estates and the
reorganization process.
Specifically, Mr. Zirinsky explains, trading of equity interests
in and claims against the Debtors' securities could adversely
affect the Debtors' NOLs if:
(i) too many 5% or greater blocks of equity securities are
created, or too many shares are added to or sold from such
blocks, such that, together with previous trading by 5%
shareholders during the preceding three year period, an
ownership change within the meaning of Section 382 is
triggered prior to consummation, and outside the context,
of a confirmed Chapter 11 plan; or
(ii) the beneficial ownership4 of claims against the Debtors
which are currently held by "qualified creditors"5 under
the applicable tax regulations is transferred, prior to
consummation of the plan, and those claims -- either alone
or when accumulated with other claims currently held by
nonqualified creditors -- would be converted under a plan
of reorganization into a 5% or greater block of the stock
of the reorganized Debtors.
Thus, to preserve to the fullest extent possible the flexibility
to craft a plan of reorganization, which maximizes the use of
their NOL carryforwards, the Debtors seek limited relief that
will enable them to closely monitor certain transfers of claims
and equity securities so as to be in a position to act
expeditiously to prevent those transfers if necessary to preserve
their NOL carryforwards. Mr. Zirinsky points out that by
establishing procedures for continuously monitoring claims-
trading and equity-securities-trading, the Debtors can preserve
their ability to seek relief at the appropriate time if it
appears that additional trading may jeopardize the use of their
NOL carryforwards.
Accordingly, the Debtors ask the Court to establish these
procedures:
1. Procedure for Trading in Equity Securities
(a) Notice of Substantial Equityholder Status
Substantial Equityholders must file a notice with the
Court of their status.
(b) Acquisition of Equity Securities
Before transferring equity securities that would
increase the amount of NWA Corp. shares beneficially
owned by a Substantial Equityholder or that would
result in a person or entity becoming a Substantial
Equityholder, that person, entity or Substantial
Equityholder must file with the Court a Notice of
Intent to Purchase, Acquire or Otherwise Accumulate an
Equity Interest, describing the intended transaction.
(c) Disposition of Equity Securities
Before disposing of equity securities, Substantial
Equityholders are also required to file with the Court
a Notice of Intent to Sell, Trade or Otherwise Transfer
an Equity Interest.
(d) Objection Procedures
The Debtors will have 30 days after actual receipt of
an Equity Acquisition Notice or an Equity Disposition
Notice to file an objection to the proposed transfer of
equity securities on the grounds that the transfer may
adversely affect their ability to utilize their NOLs or
tax attributes as a result of an ownership change.
If the Debtors file a timely Objection, the Proposed
Transaction will not be effective unless approved by a
final and nonappealable Court order.
If the Debtors don't file a timely Objection or if they
provide a written authorization, then the Proposed
Transaction may proceed solely as described in the
Notice.
(e) Definitions
A Substantial Equityholder is any person or entity that
beneficially owns at least 3,750,000 shares --
representing approximately 4% of all issued and
outstanding shares on a fully diluted basis -- of the
stock of NWA Corp.
Beneficial ownership of equity securities will be
determined in accordance with applicable rules under
Section 382 of the Internal Revenue Code and, thus,
will include direct and indirect ownership -- e.g., a
holding company would be considered to beneficially own
all shares owned or acquired by its subsidiaries --
ownership by the holder's family members and persons
acting in concert with the holder to make a coordinated
acquisition of stock, and ownership of shares which the
holder has an option to acquire.
An "option" to acquire stock includes any contingent
purchase, warrant, convertible debt, put, stock subject
to risk of forfeiture, contract to acquire stock or
similar interest, regardless of whether it is
contingent or otherwise not currently exercisable.
2. Procedure for Trading in Claims
(a) Notice of Substantial Claimholder Status
Substantial Claimholders are required to file with the
Court a notice of their status.
(b) Acquisition of Claims
Before buying claims, Substantial Claimholders are
required to file with the Court a Notice of Intent to
Purchase, Acquire or Otherwise Accumulate a Claim.
(c) Disposition of Claims
Before selling claims, Substantial Claimholders are
required to file a Notice of Intent to Sell, Trade or
Otherwise Dispose of a Claim.
(d) Objection Procedures
The Debtors will have 30 calendar days after receipt of
a Claims Acquisition Notice or Claims Disposition
Notice to file with the Court an objection to any
proposed transfer of claims on the grounds that the
transfer may adversely affect their ability to utilize
their NOLs or tax attributes after an ownership
change.
If the Debtors file a timely objection, the proposed
transaction will not be effective unless approved by a
final nonappealable Court order.
If the Debtors don't file a timely objection or if they
provide written authorization, then the Proposed
Transaction may proceed.
(e) Definitions
A Substantial Claimholder is any person or entity that
beneficially owns:
(i) an aggregate principal amount of claims against
the Debtors or any controlled entity through
which a Substantial Claimholder beneficially
owns an indirect interest in claims against the
Debtors,
(ii) a lease or leases under which one or more of the
Debtors are lessees and pursuant to which
payments are or will become due, or
(iii) any combination of (i) and (ii),
in each case, equal to or exceeding $120,000,000.
Beneficial ownership of claims will be determined in
accordance with applicable rules under Section 382 of
the Internal Revenue Code and, thus, will include
direct and indirect ownership -- e.g., a holding
company would be considered to beneficially own all
claims owned or acquired by its subsidiaries --
ownership by family members and any group of persons
acting pursuant to a formal or informal understanding
to make a coordinated acquisition of claims, and
ownership of claims, which the holder has an option to
acquire.
An option to acquire claims includes any contingent
purchase, put, contract to acquire a claim(s) or
similar interest, regardless of whether it is
contingent or otherwise not currently exercisable.
3. Non-Compliance with the Trading Procedures
Any purchase, sale or other transfer of claims against, or
equity securities in, the Debtors in violation of the
procedures will be null and void and will confer no rights
on the transferee.
* * *
The Court grants the Debtors' request on an interim basis. Judge
Gropper rules that any purchase, sale or other transfer of claims
against, or equity securities in, the Debtors in violation of the
procedures will be null and void and will confer no rights on the
transferee.
Northwest Airlines Corporation -- http://www.nwa.com/-- is
the world's fourth largest airline with hubs at Detroit,
Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,400 daily departures. Northwest is a member of
SkyTeam, an airline alliance that offers customers one of the
world's most extensive global networks. Northwest and its travel
partners serve more than 900 cities in excess of 160 countries on
six continents. The Company and 12 affiliates filed for chapter
11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at
Cadwalader, Wickersham & Taft LLP in New York, and Mark C.
Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in
Washington represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they listed $14.4 billion in total assets and $17.9
billion in total debts. (Northwest Airlines Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ODYSSEY RE: S&P Assigns BB Rating to $100 Million Series A Stocks
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' preferred
stock rating to Odyssey Re Holding Corp.'s (NYSE:ORH) proposed
Series A perpetual stock issue of $100 million.
At the same time, Standard & Poor's affirmed its 'BBB-'
counterparty credit rating on ORH and affirmed its 'A-'
counterparty credit and financial strength ratings on ORH's
operating subsidiaries: Odyssey America Reinsurance Corp.,
Clearwater Insurance Co., and Hudson Specialty Insurance Co.
The outlook is stable.
"The ratings are based on the operating companies' (collectively
referred to as Odyssey Re) strong competitive position, improved
operating performance, and strong liquidity," noted Standard &
Poor's credit analyst Steve Ader.
Partially offsetting these factors are:
* the group's capital adequacy (though improving);
* asset risk that is high relative to similarly rated peers;
* a relatively short track record of strong operating earnings
since its IPO in 2001; and
* 81% ownership by lower-rated Fairfax Financial Holdings Ltd.
As the 18th-largest reinsurer in the world based on 2004
reinsurance premiums, Odyssey Re continues to realize the benefits
of its opportunistic strategy as demonstrated by strong revenue
growth in a favorable premium environment and much-improved
underwriting results in the past four years. During this period,
the group's business-mix diversification improved significantly,
not only geographically, but also by line of business and
distribution source.
Standard & Poor's expects premiums to flatten in 2005, reflective
of declining premium rates and management's desire to adhere to
strict underwriting guidelines. Earnings, materially impacted by
Hurricane Katrina and Rita losses, are expected to be consistent
with other diversified peers with a combined ratio approximating
110% and a pretax ROR (before investment gains) of negative 2%, as
continued strong current accident year results are offset by
hurricane losses and continued modest reserve additions for prior
years. Capital adequacy, reflecting the $100 million October
common equity and $100 million preferred equity issuance, is
expected to improve to a strong level by year-end 2005, with
continued modest improvement in 2006. Financial leverage (as
measured by debt plus preferreds to total capital) subsequent to
the fourth quarter 2005 equity and hybrid issuances and redemption
of $109.1 million of convertible bonds, is expected to increase to
23% (18% debt/total capital) with double leverage approaching 120%
by year-end 2005.
Although the current rating and outlook is partially tied to lower
rated Fairfax Financial Holdings Ltd. (FFH owns 81% of ORH), the
potential for a revision to a positive outlook exists if Odyssey
is successful in posting strong operating performance in 2006 and
if capital adequacy continues to improve well into the strong
level following our ongoing assessment of reserve adequacy.
Alternatively, if Odyssey is unsuccessful in meeting S&P's
expectations or if FFH's financial strength was to materially
diminish, Standard & Poor's will consider adverse ratings actions.
ON SEMICONDUCTOR: Settles $31.2 Million Claim for $2.5 Million
--------------------------------------------------------------
ON Semiconductor Corp. entered into a settlement agreement with
one of its customers (and that customer's customer), resolving a
potential claim for costs the customers incurred in remedying
certain alleged failures of products purchased directly or
indirectly from the Company.
The potential claim was estimated by the customer to aggregate
approximately $31.2 million. Under the settlement agreement, ON
Semiconductor agreed to pay its $2.5 million in cash and each
party agreed to bear its own costs and expenses in connection with
the claim.
ON Semiconductor has not publicly disclosed the identity of its
Complaining Tier I and Tier II Customers. In its latest annual
report, ON Semiconductor says it has approximately 200 direct
customers worldwide and services approximately 320 significant
original equipment manufacturers indirectly through its
distributor and electronic manufacturing service provider
customers. ON Semiconductor's direct and indirect customers
include:
(1) leading original equipment manufacturers in a broad
variety of industries, such as Intel, Motorola, Nokia,
Philips, Siemens and Sony;
(2) electronic manufacturing service providers, such as
Flextronics, Jabil and Solectron; and
(3) global distributors, such as Arrow, Avnet, EBV
Elektronik, Future, Solomon Enterprise and World Peace.
ON Semiconductor Corp. -- http://www.onsemi.com/-- supplies power
solutions to engineers, purchasing professionals, distributors and
contract manufacturers in the computer, cell phone, portable
devices, automotive and industrial markets.
* * *
As reported in the Troubled Company Reporter on June 7, 2005,
Standard & Poor's Ratings Services raised its corporate credit
rating for Phoenix, Arizona-based ON Semiconductor Corp. to
B+/Stable/-- from B/Positive/--.
"The action recognizes the company's improved debt-protection
measures following a series of debt and equity refinancing actions
in the past several quarters, as well as expectations that
operating profitability, cash flows, and liquidity will remain
near recent levels," said Standard & Poor's credit analyst Bruce
Hyman. The ratings continue to reflect its still-limited debt-
protection measures and the company's position as a supplier of
commodity semiconductors in a challenging operating environment,
and adequate operating liquidity.
OWENS CORNING: Says Asbestos Settlement with Murray is Valid
------------------------------------------------------------
In late 1998, Owens Corning and its debtor-affiliates commenced
their National Settlement Program, which was designed to better
manage the Debtors' asbestos liabilities and predict the timing
and amount of payments for both pending and future claims.
J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington,
Delaware relates that under the NSP, the Debtors negotiated with
prominent asbestos law firms to establish procedures and fix
payments for resolving present and future claims brought by the
law firms without litigation for a projected period of at least
10 years. In exchange for the firms resolving their clients'
claims under the NSP, the Debtors became obligated to process the
claim information under administrative procedures and make
settlement payments to all qualifying plaintiffs.
Under the NSP, the firms were required to submit claim forms and
supporting evidence for each of their clients. The information
typically included proof of product exposure, supporting medical
evidence and an executed release.
Under most agreements, the Debtors issued checks, either in a
lump sum settlement for a group of plaintiffs' claims or
individual checks for each particular plaintiff, to the law
firms.
In certain cases, funds were distributed even though the
plaintiffs had not satisfied some or all of the conditions
precedent to the payments, Ms. Stickles notes. In some
instances, plaintiffs subsequently provided the requisite
documentation after receiving payment.
When they filed for bankruptcy, Owens Corning and Fibreboard had
entered into NSP agreements with more than 100 law firms,
including The Murray Law Firm, providing for the resolution of
over 400,000 pending asbestos-related personal injury claims.
"Each of the [NSP] agreements was reached with plaintiffs' firms
after arm's-length negotiations. The settlement agreements
reflected the best resolution the Debtors could achieve, taking
into account the myriad factors that inform asbestos settlements,
including disease mix, jurisdiction, plaintiffs' firm, and
overall docket conditions," Ms. Stickles maintains.
The NSP resulted in the Debtors resolving claims for
substantially less money than plaintiffs sought in the tort
system, and the average settlement payment was less than the
Debtors' settlements in the years prior for similar claims, Ms.
Stickles points out. "The agreements also allowed the Debtors to
resolve the majority of the cases then pending against them,
without the uncertainty and inconsistency of the tort system, and
without the significant litigation costs that would have been
incurred if the agreements had not been reached."
Commercial Committee's Allegations
However, the Official Committee of Unsecured Creditors alleged
that the Debtors:
-- incurred obligations and made transfers to the law firms
since the NSP commenced, including certain One Year
Payments and Four Year Payments pursuant to the NSP. The
Debtors received less than fair consideration in exchange
for certain One Year Payments and the Four Year Payments
under the NSP;
-- incurred obligations and made transfers to the law firms
with intent to hinder, delay, or defraud its other non-
asbestos creditors;
-- generally received less than reasonably equivalent value in
exchange for the transfers or obligations, and each was
insolvent on the date each of that transfer was made or
that obligation was incurred, or became insolvent as a
result of that transfer or obligation;
-- who were insolvent at the time of, or was rendered
insolvent by, the transfer made or obligation incurred,
also received less than reasonably equivalent value in
exchange for any of the transfer or obligation to the
extent funds were disbursed to the law firms' clients even
though the clients had not satisfied the conditions
precedent to payment;
-- engaged in business or transactions, or were about to
engage in business or transactions, for which any property
remaining with them were unreasonably small capital, or
they intended to incur, or believed that they would incur,
debts that would be beyond their ability to pay as those
debts matured; and
-- made those transfers or incurred those obligations at a
time when each Debtor was insolvent, or became insolvent as
a result of those transfers or obligations, or was engaged
in business or transactions, or was about to engage in
business or transactions, for which any property remaining
with the Debtors was unreasonably small capital, or the
Debtors intended to incur, or believed that they would
incur, debts that would be beyond their ability to pay as
those debts matured.
The Commercial Committee further contended that:
-- at the time the transfers or obligations were made or
incurred, each of the Debtors was engaged or about to be
engaged in a business or transaction for which their
remaining assets were unreasonably small in relation to
their business transactions;
-- the Debtors intended to incur or believed that it would
incur debts beyond their ability to pay as the debts became
due;
-- as of the Petition Date, one or more existing creditors of
the Debtors were entitled to avoid the Four Year Payments
under applicable state law; and
-- some or all of the One Year Payments and the Four Year
Payments under the NSP Agreement are avoidable as
fraudulent transfers or obligations under Sections 544 and
548 of the Bankruptcy Code and applicable state law,
including the Uniform Fraudulent Transfer Act or the
Uniform Fraudulent Conveyance Act.
Owens Corning's Stand
In contrast, the Debtors believe that the NSP payments made to
the law firms are not avoidable under Sections 544 or 548 and any
applicable state law, whether under the UFTA or the UFCA.
To resolve the controversy created by the Commercial Committee's
allegations, Owens Corning, Fibreboard Corporation, Integrex, and
their affiliated Debtors ask the U.S. Bankruptcy Court for the
District of Delaware to declare that:
(a) The NSP agreement with the law firms was a valid agreement
enforceable in accordance with its terms, subject to
applicable bankruptcy law, including Section 365; and
(b) The NSP payments made, to the extent disbursed to the
firms' clients after the clients' satisfaction of the
conditions precedent to payment, are not avoidable or
recoverable as fraudulent transfers under Sections 544,
548 and 550 or any applicable state law.
In the alternative, to preserve any valid claim relating to the
NSP payments for the benefit of creditors and their estates, the
Debtors seek to avoid and recover from The Murray Law Firm and an
unknown number of John Does:
-- NSP payments made to the law firms as attorneys' fees and
costs; or
-- those portions of any NSP payment made to an individual
asbestos claimant or group of asbestos claimants for
payment to the law firms in compensation of attorney's fees
and costs.
The Murray Law Firm represented asbestos personal injury
plaintiffs who entered into the NSP Agreement with the Debtors.
The John Does are those persons who entered into the NSP
Agreement, or are the agents, successors or assigns of, the non-
debtor parties to the NSP Agreement.
Integrex, a debtor, was involved in the processing and payment of
asbestos-related claims on behalf of Owens Corning and
Fibreboard.
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com/-- manufactures fiberglass
insulation, roofing materials, vinyl windows and siding, patio
doors, rain gutters and downspouts. The Company filed for chapter
11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
represents the Debtors in their restructuring efforts. At Sept.
30, 2004, the Company's balance sheet shows $7.5 billion in assets
and a $4.2 billion stockholders' deficit. The company
reported $132 million of net income in the nine-month period
ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No.
117; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PETER C. PIERCE: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Peter C. Pierce
59 Schoolmasters Lane
Dedham, Massachusetts 02026
Bankruptcy Case No.: 05-20780
Chapter 11 Petition Date: October 11, 2005
Court: District of Massachusetts (Boston)
Judge: Robert Somma
Debtor's Counsel: Donald R. Lassman, Esq.
Law Offices of Donald R. Lassman
P.O. Box 920385
Needham, Massachusetts 02492
Tel: (781) 455-8400
Total Assets: $1,071,739
Total Debts: $1,455,226
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Edwards & Angell, LLP $350,559
Attn: Mark Pogue, Esq.
2800 Financial Plaza
Providence, RI 02903-2407
J.A. Cambece Law Office, P.C. $28,378
8 Bourbon Street
Peabody, MA 01960-1338
Citi Platinum Select Card Bank loan $15,137
P.O. Box 6003
Hagerstown, MD 21747-6003
Chase $14,391
Chase Card Member Services Bank loan $12,353
Nutter, Mcclennen & Fish, LLP $11,355
UNLV/CITI $10,638
Citibank USC $10,638
Universal Card/Cbsdna $10,638
Discover $10,551
Fleet National Bank $9,707
Bank of America Bank loan $9,444
Bank of America $8,878
American Express $8,409
Bank of America $7,227
Midland Credit $6,418
ARS National Services $5,035
Associated Recovery Systems $5,035
First USA Bank NA Bank loan $5,035
Discover $2,915
PHARMACEUTICAL FORMULATIONS: Taps Dovebid as Appraiser
------------------------------------------------------
Pharmaceutical Formulations, Inc., asks the U.S. Bankruptcy Court
for the District of Delaware for authority to retain Dovebid
Valuation Services, Inc., as its appraiser.
Dovebid Valuation's proposed appraisal of the Debtor's machinery
and equipment is part of the terms of the settlement resolving
General Electric Capital Corporation's limited objection to the
sale of substantially all of the Debtor's assets to Leiner Health
Products, LLC, for approximately $23 million.
General Electric holds a security interest in certain of the
Debtor's machinery and equipment on account of a prepetition
promissory note. General Electric has agreed to be paid out of
the proceeds of the sale.
The Debtor selected Dovebid Valuation as appraiser based on the
Firm's extensive experience and expertise in capital asset
valuation for large corporations.
Dovebid Valuation will:
a) conduct an appraisal of the Debtor's machinery and
equipment located at 460 Plainfield Avenue, Edison, New
Jersey;
b) provide written appraisal with a detailed listing of
machinery and equipment and their corresponding value
estimates, and that will conform with the Uniform
Standards of Professional Appraisal Practice;
c) meet periodically meet with the Debtor's accountants and
attorneys, regarding the status of its appraisal; and
d) if required, appear in court during the term of the
retention to testify or to consult with the Debtor in
connection with the valuation of the Debtor's property.
The Debtor has agreed to pay Dovebid Valuation an appraisal fee of
$15,000 upon completion of the appraisal report. The Firm is also
entitled to a reimbursement of any necessary expenses incurred
during the appraisal process.
To the best of the Debtor's knowledge, Dovebid Valuation is a
"disinterested person" as that term is defined in section 101(14)
of the Bankruptcy Code.
Headquartered in Foster City, California, DoveBid Valuation --
http://www.dovebid.com/-- is a global provider of capital asset
auction and valuation services to large corporations and financial
institutions. The Firm has over 65 years of auction experience in
the capital asset industry with more than 35 locations in 15
countries.
Headquartered in Edison, New Jersey, Pharmaceutical Formulations,
Inc. -- http://www.pfiotc.com/-- is a publicly traded private
label manufacturer and distributor of nonprescription over-the-
counter solid dose generic pharmaceutical products in the United
States. The Company filed for chapter 11 protection on July 11,
2005 (Bankr. Del. Case No. 05-11910). Matthew Barry Lunn, Esq.,
and Michael R. Nestor, Esq., at Young Conaway Stargatt & Taylor
LLP, represent the Debtor in its chapter 11 proceeding. As of
Apr. 30, 2005, the Debtor reported $40,860,000 in total assets and
$44,195,000 in total debts.
PILGRIM'S PRIDE: S&P Places BB Corporate Credit Rating on Watch
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB' corporate
credit rating and other ratings on the second largest U.S. poultry
processor, Pilgrim's Pride Corp., on CreditWatch with positive
implications.
At June 30, 2005, Pittsburg, Texas-based Pilgrim's Pride had total
debt (adjusted for capitalized operating leases) of $614.1
million.
The CreditWatch placement reflects the company's strong operating
results and its very strong credit protection measures given the
commodity orientation and volatility of poultry processing.
Standard & Poor's will discuss with management its operating plans
and financial strategies. Key to Standard & Poor's review and
analysis will be the company's ability to maintain strong credit
protection measures throughout a poultry cycle.
PONDEROSA PINE: Wants McGuireWoods as Special Construction Counsel
------------------------------------------------------------------
Ponderosa Pine Energy, LLC, and its debtor-affiliates ask the
Honorable Novalyn L. Winfield of the U.S. Bankruptcy Court for the
District of New Jersey for permission to employ McGuireWoods LLP
as their special construction counsel, nunc pro tunc to
Aug. 29, 2005.
McGuireWoods will:
(a) negotiate a firm price proposal with Deltak LLC;
(b) negotiate a letter of intent with Deltak LLC;
(c) negotiate a final binding contract with Deltak for material
procurement and the purchase of Long Lead Time Parts; and
(d) negotiate and draft contracts with other suppliers and
contractors for the repair, installation and reconstruction
of the heat recovery steam generator, as necessary.
The Debtors relate that McGuireWoods' services will not duplicate
any work of the retained professionals.
Joseph Tirone, Esq., a partner at McGuireWoods LLP, discloses the
current hourly rates of professionals to be engaged:
Designation Hourly Rate
----------- -----------
Partners $225 - $500
Associates $195 - $335
Paralegals/Clerks $80 - $160
Mr. Tirone assures the Debtors that McGuireWoods LLP is
disinterested as that term is defined in Section 101(14) of the
U.S. Bankruptcy Code.
With 725 lawyers in 15 offices worldwide, McGuireWoods LLP --
http://www.mcguirewoods.com/-- is a full service law firm that
serves public, private, government and nonprofit clients from many
industries including automotive, energy resources, health care,
technology and transportation.
Headquartered in Morristown, New Jersey, Ponderosa Pine Energy,
LLC, and its affiliates are utility companies that supply
electricity and steam. The Company and its debtor-affiliates
filed for chapter 11 protection on April 14, 2005 (Bankr. D. N.J.
Case No. 05-22068). Mary E. Seymour, Esq., Sharon L. Levine,
Esq., and Kenneth A. Rosen, Esq., at Lowenstein Sandler PC
represent the Debtor in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
estimated assets and debts of more than $100 million.
POPE & TALBOT: Moody's Lowers $135 Million Debt Ratings to B3
-------------------------------------------------------------
Moody's Investors Service downgraded Pope & Talbot Inc.'s
corporate family and senior unsecured debt ratings to B2 and B3
from Ba3 and B1 respectively. The rating action reflects the
impact of a combination of factors:
1) permanently elevated input costs;
2) continued appreciation of the Canadian dollar;
3) the cash drain from softwood lumber duty payments;
4) negative uncertainty concerning output prices for pulp and
lumber; and
5) a recent debt-financed acquisition.
As a result of these influences, the company's profit margins have
been suppressed, and so too has its cash flow as a proportion of
debt. Since this circumstance is not expected to change over the
near term, the rating has been downgraded to a level more
reflective of expected credit metrics. With the ratings revision,
the outlook was restored to stable.
Ratings Downgraded:
* Corporate Family: to B2 from Ba3
* $75.0 million 8.375% senior unsecured debentures due
June 1, 2013 to B3 from B1
* $60.0 million 8.375% senior unsecured notes due June 1, 2013
to B3 from B1
Outlook is stable.
As noted above, the rating action is prompted by a combination of
influences. Ongoing input cost pressure has increased unit costs
for all producers. It is not clear that this pressure will abate.
Even as output prices potentially decline, it seems unlikely that
costs for energy and chemicals will decrease substantially for the
foreseeable future. Should input costs prove to be permanently
elevated, pressure on margins will persist.
Secondly, the Canadian dollar continues its appreciation causing
Pope & Talbot's US dollar denominated costs to escalate and
margins to remain depressed. Also, the company's performance
continues to suffer from the impact of softwood lumber duties.
The company experienced negative Free Cash Flow in each of 2001,
2002 and 2003 before a modest recovery was observed in 2004. At
this juncture, Moody's anticipates significant negative FCF for
2005, both on an operational basis and after considering the
impact of the Fort St. James sawmill acquisition. While softwood
pulp and lumber prices have increased from cyclical lows in the
past several quarters, the pulp market is encountering softness
and the lumber market may be vulnerable to a near term retreat
from recent highs. There is therefore strong potential of near
term revenues declining from levels observed in recent quarters.
Lastly, on April 25, 2005, Pope & Talbot announced the completion
of its' acquisition of the Fort St. James, British Columbia,
sawmill from Canfor Corporation for $37 million. With debt
increasing by approximately 15% while annualized cash flow
increases by a smaller proportion, leverage to cash flow
increases. This combination of circumstances generated financial
metrics that are much worse than those that are representative of
the prior Ba3 rating. Using average annualized cash flow figures
for the past three-and-a-half years and the June 30, 2005 debt
figure, Moody's observed RCF/Debt of 3.1% and (RCF-Capex)/Debt of
-3.5%.
Despite management's actions to improve performance and financial
metrics, near term results are not expected to be dramatically
different from those observed over the recent past. They are
however, expected to gradually improve to levels commensurate with
a B2 rating (RCF/Debt of 5.0% and (RCF-Capex)/Debt of 2.0%.), and
accordingly, Moody's downgraded Pope & Talbot's corporate family
rating to B2. With Pope & Talbot's bank credit facility and
certain capital lease obligations benefiting from security
positions, the rating on the company's senior unsecured notes is
notched down from the B2 corporate family rating to B3.
Pope & Talbot's liquidity arrangements are adequate for its needs.
Liquidity is provided from four sources:
a) A C$80.0 million Canadian revolving bank line (approximately
US$65 million);
b) A C$100.0 million Canadian revolving line of credit
(approximately US$81 million);
c) a US$35 million revolving facility that matures in March
of 2007; and
d) A US$35 million off-balance sheet evergreen Accounts
Receivable securitization program (generally fully utilized
and does not feature any ratings triggers).
When financial covenants are accounted for, Moody's estimates the
company had approximately US$73 million of available liquidity
under the revolving credit facilities at June 30th. The C$180
million line of credit consists of two extendable revolving credit
facilities that mature on July 29, 2006 (renewed in July 2005).
Drawings are convertible into term loans if the revolving periods
are not extended. The lines are secured by the Company's Canadian
pulp mill land, the Fort St. James sawmill, equipment and certain
inventory and accounts receivable.
Financial covenants include a maximum leverage ratio of 62.5% that
is tested at year-end, a net worth test ($139.7 million versus
$139.55 million threshold at June 30th), and a minimum fixed
charge coverage ratio (1.60x at June 30th versus threshold of
1.05x). While the company was marginally in compliance with
covenants for its respective credit facilities, management has
acknowledged the possibility of covenants breaches if they are not
renegotiated. Moody's anticipates that remedial action is
ongoing.
At the B2 corporate family rating level, the outlook is stable.
This is predicated on the assumption that the company will take
the necessary steps to improve its performance and address bank
credit facility covenant compliance issues.
Over time, ratings and outlook upgrades are not expected unless
Pope & Talbot engages in material debt reduction. Lower ratings
could result from any number of factors that would retard the
company's ability to close the gap between the above-noted
financial metrics appropriate for the rating versus those that
have been observed over the recent past. This would include:
* weakness in commodity prices;
* further cost increases or Canadian dollar appreciation; and
* further debt-financed acquisition activity.
A material deterioration in the company's liquidity arrangements,
including the failure to renegotiate the covenants on a timely
basis, would also result in a ratings' action.
Pope & Talbot, Inc. is headquartered in Portland, Oregon, and
produces pulp and wood products with manufacturing facilities in
the north western United States and western Canada.
PREFERREDPLUS TRUST: S&P Lowers $31 Million Certs.' Rating to BB+
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the
$31,200,000 corporate bond-backed certificates issued by
PreferredPLUS Trust Series CTR-1 to 'BB+' from 'BBB-' and removed
it from CreditWatch, where it was placed with negative
implications on September 8, 2005.
The rating action reflects:
* the lowered rating on the underlying securities;
* the $31,200,000 8.00% notes due December 15, 2019 issued by
Cooper Tire & Rubber Co.; and
* its subsequent removal from CreditWatch negative on
October 5, 2005.
PreferredPLUS Trust Series CTR-1 is a swap-independent synthetic
transaction that is weak-linked to the underlying collateral, the
$31,200,000 Cooper Tire & Rubber Co. 8.00% notes.
READ-RITE CORP: Wants Five Licensing Agreements Rejected
--------------------------------------------------------
Tevis T. Thompson, Jr., the Chapter 7 Trustee appointed in Read-
Rite Corp.'s bankruptcy case, asks the Honorable Randall J.
Newsome of the U.S. Bankruptcy Court for the Northern District of
California for authority to reject all executory contracts with
Computer Associates International, Inc., and its alleged
affiliates, nunc pro tunc to May 4, 2004.
The Chapter 7 Trustee sold substantially all of Read-Rites
assets to Western Digital (Fremont), Inc., for $87 million on
July 25, 2003.
On March 4, 2004, the Chapter 7 Trustee filed a motion to assume
some software licensing agreements with Computer Associates,
International, Inc., Sterling Software Company, Ask Computer
Systems, Inc., and Cheyenne Software, Inc. The Chapter 7 Trustee
also filed a motion to reject a licensing agreement with Platinum
Technology, Inc. The rejection was approved as of March 4, 2004.
Computer Associates objected to the assumption of the four
licensing agreements on Apr. 2, 2004. Computer Associates alleges
that it is the successor licensor of Sterling, Ask, Cheyenne, and
Platinum's software products.
Western Digital and the Chapter 7 Trustee asked Computer
Associates to provide copies of the license agreements with the
four companies. Computer Associates wasn't able to produce any of
those agreements.
Western Digital and the Chapter 7 Trustee have also asked Computer
Associates to provide documentation supporting its contention that
it was the successor licensor under the agreements with Sterling,
Platinum, Ask, and Cheyenne. Computer Associates hasn't.
Western Digital determined that it was not using and did not need
or want any of the five companies' software. Western Digital
advised the Chapter 7 Trustee and Computer Associates and the
parties agreed that the Agreements will be rejected.
Headquartered in Fremont, California, Read-Rite Corp. filed for
chapter 7 liquidation on June 17, 2003 (Bankr. N.D. Calif. Case
No. 03-43576). Katherine D. Ray, Esq,, at Goldberg, Stinnett,
Meyers and Davis represents the Debtor. Tevis T. Thompson, Jr.,
is the appointed Chapter 7 Trustee of the Debtor. Jeremy W. Katz,
Esq., and Matthew J. Shier, Esq., at Pinnacle Law Group represent
the Chapter 7 Trustee.
RISK MANAGEMENT: Bankruptcy Court Fixes Oct. 31 Claims Bar Date
---------------------------------------------------------------
The Honorable Kay Woods of the U.S. Bankruptcy Court for the
Northern District of Ohio, Eastern Division, set Oct. 31, 2005, as
the deadline for all creditors owed money on account of claims
arising prior to July 7, 2005, against Risk Management
Alternatives, Inc., and its debtor-affiliates, to file proofs of
claims.
Judge Woods also set 4:00 p.m. on Nov. 15, 2005, as the deadline
for all administrative claimants to file proofs of claims.
Governmental units have until Jan. 3, 2006, to file proofs of
claims.
Creditors must file written proofs of claim on or before their
corresponding Claims Bar Date and those forms must be sent to:
Bankruptcy Services, LLC
c/o RMA Management Services, Inc.
Claims Processing Center
757 Third Avenue, Suite 304
New York, New York 10017
Headquartered in Duluth, Georgia, Risk Management Alternatives,
Inc. -- http://www.rmainc.net/-- provides consumer and commercial
debt collections, accounts receivable management, call center
operations, and other back-office support to firms in the
financial services, telecommunications, utilities, and healthcare
sectors, as well as government entities. The Company and ten
affiliates filed for chapter 11 protection on July 7, 2005 (Bankr.
N.D. Ohio Case Nos. 05-43959 through 05-43969). Shawn M. Riley,
Esq., at McDonald, Hopkins, Burke & Haber Co., LPA, represents the
Debtors in their chapter 11 proceedings. When the Debtors filed
for protection from their creditors, they estimated more than $100
million in assets and between $50 million to $100 million in
debts.
RITE AID: Names James P. Mastrian as Chief Operating Officer
------------------------------------------------------------
Rite Aid Corporation (NYSE, PCX: RAD) reported that James P.
Mastrian has been promoted to Chief Operating Officer.
The company reported the promotions of Mark Panzer to Senior
Executive Vice President and Chief Marketing Officer and Mark de
Bruin to Executive Vice President, Pharmacy. Both will report to
Mr. Mastrian. All three promotions are effective immediately.
"Combining all the functions that directly impact the
profitability of our stores under Jim Mastrian's proven leadership
will better position us to grow our business and improve our
performance, especially in pharmacy," said Mary Sammons, Rite Aid
President and CEO.
In his new position, Mr. Mastrian, 63, formerly Senior Executive
Vice President, Marketing, Logistics and Pharmacy Services, will
have overall responsibility for all store operations, category
management, marketing, merchandising, supply chain, pharmacy
services and the company's new pharmacy benefit management
company. He will continue to report to Sammons.
Mr. Mastrian, a pharmacist with 40 years of experience in the
retail drugstore industry, joined Rite Aid in 1998 as Executive
Vice President of Category Management and was promoted to
Executive Vice President of Marketing in 1999 and to Senior
Executive Vice President in 2000. Prior to Rite Aid, Mr. Mastrian
was Senior Executive Vice President of Merchandising and Marketing
for Office Max. From 1990 to 1997 he held positions of increasing
responsibility with Revco D.S., a chain of retail drugstores based
in the Midwest, rising to Executive Vice President of Marketing.
He also held senior management positions at Gray Drug Fair Stores
and People's Drug Stores, Inc.
In his new position, Mr. Panzer, 48, formerly Senior Executive
Vice President, Store Operations, will oversee category
management, marketing, merchandising and supply chain. A veteran
of the retail drugstore industry, he joined Rite Aid in 2001 as
Executive Vice President, Store Operations and was promoted the
following year to Senior Executive Vice President. Prior to
joining Rite Aid, he served as a corporate vice president of
marketing and sales at Albertson's grocery chain, where he
developed marketing and merchandising programs for 2,600 stores in
37 states. Mr. Panzer began his career in 1972 with Osco Drug,
Inc., a division of Jewel Companies acquired by American Stores
and later merged with Albertson's. He held a variety of
operations and marketing positions of increasing responsibility
both at Osco and American Stores.
"Mark's unique combination of operational and marketing expertise
will be a major asset in his new role as he continues to develop
programs designed to increase transactions, attract new customers
and improve the Rite Aid shopping experience," Mr. Sammons said.
In his new position, Mark de Bruin, 46, formerly Senior Vice
President, Pharmacy Services, will oversee pharmacy operations,
managed care, clinical services, pharmacy purchasing, government
affairs and the company's new pharmacy benefit management company.
Mr. De Bruin, who started his career as a pharmacist for American
Drug Stores, joined Rite Aid in 2003 after serving as Vice
President, Managed Care and Pharmacy Procurement for Albertson's,
Inc. From 1994 to 1999 he worked for RxAMERICA, Inc., a pharmacy
benefit management company, rising to General Manager, and has
served in a variety of managed health care positions for American
Drug Stores and Vons supermarket chain. He is a member of the
U.S. Department's Health and Human Services Medicaid Commission
and serves as chairman of the policy council for the National
Association of Chain Drug Stores.
"Mark has repeatedly demonstrated his knowledge and expertise in
all aspects of the pharmacy business, both at Rite Aid and as a
leader in the retail drugstore industry," Mr. Sammons said.
"Giving him responsibility for the many functions that directly
affect pharmacy, including pharmacy operations, puts an even
stronger focus on that critical part of our business."
Rite Aid Corporation is one of the nation's leading drugstore
chains with annual revenues of $16.8 billion and approximately
3,350 stores in 28 states and the District of Columbia.
* * *
As reported in the Troubled Company Reporter on Sept. 1, 2005,
Moody's Investors Service lowered the Speculative Grade Liquidity
Rating of Rite Aid Corporation to SGL-3 from SGL-2, affirmed all
long-term debt ratings (Corporate Family Rating of B2), and
revised the rating outlook to negative from stable. The downgrade
of the Speculative Grade Liquidity Rating reflects Moody's
expectation that mediocre operating cash flow and planned capital
investment increases over the next twelve months will require the
company to rely on external financing sources to cover the cash
flow deficit.
While liquidity over the next twelve months is adequate, revision
of the outlook to negative on Rite Aid's long-term debt ratings
reflects Moody's concern that operating results have stabilized at
a level insufficient to fully fund fixed charges such as debt
service, cash preferred stock dividends, and capital investment,
as well as the company's weak operating performance relative to
higher rated peers.
This rating is lowered:
-- Speculative Grade Liquidity Rating to SGL-3 from SGL-2.
Ratings affirmed are:
-- $860 million 2nd-lien senior secured notes (comprised of 3
separate issues) at B2;
-- $1.28 billion of senior notes (comprised of 8 separate
issues) at Caa1;
-- $250 million of 4.75% convertible notes (2006) at Caa1; and
-- Corporate Family Rating (previously called the Senior
Implied Rating) at B2.
ROSENTHAL & KLEIN: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Rosenthal & Klein, Inc.
123,123-A, New York City Terminal Market
Hunts Point
Bronx, New York 10474
Tel: (718) 542-1800
Bankruptcy Case No.: 05-45649
Chapter 11 Petition Date: October 12, 2005
Court: Southern District of New York (Manhattan)
Debtor's Counsel: Leslie S. Barr, Esq.
Brauner Baron Rosenzweig & Klein, LLP
61 Broadway, 18th Floor
New York, New York 10006-2794
Tel: (212) 797-9100
Fax: (212) 797-9161
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Joe Bassetti & Sons $250,000
P.O. Box 369
605 Summer Avenue
Minotola, NJ 08341
Martrac $100,000
P.O. Box 1309
Paramus, NJ 07653-1309
Kingsburg Orchards $100,000
P.O. Box 38
Kingsburg, CA 93631
Attn: Bob Maxwell
Veg Pro International, Inc. $81,000
Astern International, Inc. $73,590
Naumes, Inc. $63,000
B&B Farms $60,000
Mike Pirrone Produce, Inc. $50,000
Sun World International Inc. $45,000
R&R Produce, Inc. $38,000
Redi Fresh Produce, Inc. $37,500
Steinbeck Country Produce $37,000
The Nunes Company, Inc. $36,700
Bacchus Fresh International $29,500
Maurice A. Auerbach, Inc. $28,000
North Atlantic Energy, Inc. $26,000
Arbittier Farms, Inc. $21,000
K&M of the Treasure Coast, Inc. $20,000
Lodestone Diversified, Inc. $16,500
Paterson Pickle Co., Inc. $16,125
ROUNDY'S SUPERMARKETS: S&P Junks Proposed $325 Million Notes
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Milwaukee, Wisconsin-based Roundy's Supermarkets Inc. to
'B' from 'BB-' and removed it from CreditWatch, where it was
placed with negative implications on September 28, 2005. The
outlook is stable.
At the same time, Standard & Poor's assigned a 'CCC+' rating to
the company's proposed $175 million floating-rate notes due 2012
and $150 million senior subordinated notes due 2013.
These notes will be issued under rule 144A with future
registration rights. At the same time, the proposed $825 million
bank facility was assigned a 'B' rating with a recovery rating of
'3', indicating a meaningful (50%-80%) recovery of principal.
Proceeds from this refinancing will be used to pay a $550 million
dividend, refinance existing debt, and cover fees and expenses.
"The rating actions reflect significantly weaker credit metrics
following Roundy's refinancing transaction," said Standard &
Poor's credit analyst Stella Kapur.
Pro forma for the refinancing and dividend payout, Roundy's total
debt will increase 80% to $1 billion, from $601 million at the end
of 2004.
While recognizing the company's good market position and
relatively stable retail historical operating performance, the
rating change primarily reflects the material deterioration in
credit protection measures. The proposed transaction would result
in 2005 pro forma last 12 monthslease-adjusted debt to EBITDA of
6.8x as of July 2, 2005, compared with 4.7x at the end of 2004.
EBITDA interest coverage is anticipated to deteriorate to the low
2x area from 3.1x in 2004.
While credit metrics are currently weak for ratings, Standard &
Poor's anticipates that they will improve to levels more
appropriate for the rating by 2007. Furthermore, Roundy's
stronger business profile and adequate liquidity levels provide
support for the rating and would partially offset a weaker
financial profile.
RUFUS INC: Committee Hires Weiser LLP as Financial Advisor
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gave the
Official Committee of Unsecured Creditors of Rufus, Inc.,
permission to employ Weiser, LLP, as its financial advisor, nunc
pro tunc to Aug., 24, 2005.
The Committee selected Weiser as financial advisor because of the
Firm's substantial experience in accounting and financial
consulting, including turnarounds and bankruptcy.
Weiser will:
a) review all financial information prepared by the Debtor or
its consultants, including a review of the Debtor's
financial statements as of the filing of the petition;
b) monitor the Debtor's activities regarding cash
expenditures, receivable collections, asset sales and
projected cash requirements;
c) attend meetings including the Committee, the Debtor,
its creditors, their attorneys and Federal and state
authorities;
d) review the Debtor's periodic operating cash flow and
statements;
e) review the Debtor's books and records for related party
transactions, potential preferences, fraudulent
conveyances and other potential pre-petition
investigations;
f) assist in investigations to be undertaken with respect to
the pre-petition act, conduct, property and financial
condition of the Debtor, its management, and creditor.
g) review and analyze proposed transactions for which the
Debtor seeks Court approval;
h) assist in any sale process of the Debtor;
i) assist the Committee in developing, evaluating,
structuring and negotiating the terms and conditions of
all potential plans of reorganization including the
preparation of a liquidation analysis;
j) analyze claims filed against the Debtor's estate;
k) estimate the value of the securities, if any, that may be
issued to unsecured creditors under any plan of
reorganization;
l) provide expert testimony on the result of its findings;
m) assist the Committee in developing alternative plans
including contacting potential plan sponsors; and
n) provide other financial advisory services with respect to
the Debtor, including valuation, general restructuring and
advice with respect to financial, business and economic
issues, as requested by the Committee.
The Hourly billing rates for Weiser's professionals are:
Professional Hourly Rate
------------ -----------
Partners $312 - $400
Senior Managers $264 - $312
Managers $204 - $264
Seniors $168 - $204
Assistants $108 - $132
Paraprofessionals $72 - $132
To the Best of the Committees' knowledge, Weiser does not hold any
interest adverse to the Debtor or its estate and is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
Weiser, LLP, -- http://www.mrweiser.com/-- has provided
accounting and consulting services to business enterprises and
high net-worth individuals for nearly a century. The Firm has
offices in New York City, Long Island, Westchester, Edison and New
Jersey and maintains a staff of approximately 400 professionals.
Weiser ranks as one of the top 10 accounting firms in the New York
metropolitan area and top 20 nationally.
Headquartered in Meriden, Connecticut, Rufus, Inc., sells dogs,
dog food, supplies and accessories. The Debtor also operates a
chain of six retail stores in the Northeastern United States. The
Company filed for chapter 11 protection on Aug. 10, 2005 (Bankr.
D. Del. Case No. 05-12218). Edward J. Kosmowski, Esq., and Ian S.
Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP,
represent the Debtor in its bankruptcy proceeding. When the
Debtor filed for protection from its creditors, it listed
$1.8 million in total assets and $12.7 million in total debts.
RUFUS INC: Has Until Feb. 6 to Decide on Leases
-----------------------------------------------
The Hon. Mary F. Walrath of the U.S. Bankruptcy Court for the
District of Delaware extended, until Feb. 6, 2006, the time within
which Rufus, Inc., can elect to assume, assume and assign or
reject six unexpired leases of non-residential real property.
The Debtor operates its remaining pet stores on the six locations
subject to the unexpired leases. The unexpired leases, the Debtor
says, are an integral component of its efforts to maximize the
value of its estate through a sale of substantially all of its
assets.
The Debtor assures the Bankruptcy Court that the extension will
not prejudice its lessors and that it will continue to perform its
obligations under the leases.
A list of the unexpired non-residential real property leases is
available for free at http://researcharchives.com/t/s?24d
Headquartered in Meriden, Connecticut, Rufus, Inc., sells dogs,
dog food, supplies and accessories. The Debtor also operates a
chain of six retail stores in the Northeastern United States. The
Company filed for chapter 11 protection on Aug. 10, 2005 (Bankr.
D. Del. Case No. 05-12218). Edward J. Kosmowski, Esq., and Ian S.
Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP,
represent the Debtor in its bankruptcy proceeding. When the
Debtor filed for protection from its creditors, it listed
$1.8 million in total assets and $12.7 million in total debts.
SEAMLESS WI-FI: Kempisty & Co. Raises Going Concern Doubt
---------------------------------------------------------
Kempisty & Company, Certified Public Accountants PC, expressed
substantial doubt about the ability of Seamless Wi-Fi, Inc.
(OTCBB:SLWF) (fka Alpha Wireless Broadband, Inc., fka Internet
Business International, Inc.) to continue as a going concern after
it audited the Company's financial statements for the fiscal year
ended June 30, 2005. The auditing firm points to Seamless'
operating losses since inception and its need to raise additional
capital to fund operations.
In its Form 10-KSB for the fiscal year ended June 30, 2005,
submitted to the Securities and Exchange Commission, Seamless
reports a $3,914,199 net loss in fiscal 2005 compared to a
$5,175,480 net loss in fiscal 2004. The loss narrowed, Seamless
says, because 2004's results reflected a sizeable write down of
assets.
Seamless' fiscal 2005 revenues totaled $2,113. Seamless sold some
unused W-Fi network equipment it previously bought for $35,346.
The Company's balance sheet showed $1,682,025 of assets at
June 30, 2005, and liabilities totaling 4,814,790.
Current Default
The Company is currently in default on a note payable totaling
$620,054 to Professional Plaza LLC. The note payable bears
interest at prime plus 4% and is due May 14, 2006. The note is
secured by the Company's series A convertible preferred stock.
Because of the default status, noteholders now have the option to
convert the preferred stock to common stock.
Based in Las Vegas, Nevada, Internet Business International Inc.,
nka Seamless Wi-Fi, provides wireless communications products and
services. The company, through Seamless Peer 2 Peer, develops
Phenom Encryption Software, which enables secure communications
over Wi-Fi, local area networks, and wide area networks with its
virtual Internet extranet network technology. Seamless, through
Seamless Skyy-Fi, Inc., provides wireless data, voice, and video
communication primarily for hotels, restaurants, coffee houses,
and cafes. The company was formerly known as Internet Business's
International, Inc. and changed its name to Alpha Wireless
Broadband, Inc. in September 2004; and then to Seamless Wi-Fi,
Inc. in June 2005.
SPIKES ENTERPRISES: BofA Wants Stay Lifted to Foreclose on Assets
-----------------------------------------------------------------
Bank of America, N.A., the successor-in-interest to NationsBank of
Georgia, N.A., asks the U.S. Bankruptcy Court for the Northern
District of Georgia, Newnan Division, to lift the automatic stay
in Spikes Enterprises, Inc.'s chapter 11 case so it can conduct a
foreclosure sale of its collateral. The foreclosure, advertised
on June 7, was stayed by the bankruptcy filing.
In the alternative, BofA wants adequate protection from the Debtor
or wants Spike's chapter 11 case converted to a chapter 7
liquidation.
The Debtor executed a Promissory Note dated May 10, 1994, in favor
of NationsBank of Georgia, for $1,206,000. NationsBank held the
deed of the Debtor's real property in Peachtree, Georgia, as
security for the debt.
The Bank notes that the Debtor's case has been pending for more
than two months. It appears to the Bank that the Debtor doesn't
have a reasonable possibility of having a plan confirmed in a
reasonable time.
Among the variety of reasons presented to support its request, the
Bank is most concerned about the lack of insurance coverage for
the property. The Bank believes that the absence of insurance
puts its interest at risk. Against this backdrop, the Bank urges
the Court to grant any one of its requests.
Headquartered in Fayetteville, Georgia, Spikes Enterprises is a
Kentucky Fried Chicken franchisee. The Company filed for chapter
11 protection on June 6, 2005 (Bankr. N.D. Ga. Case No. 05-17180).
Paul Reece Marr, Esq., represents the Debtor in its restructuring
efforts. When the Debtor filed for protection from its creditors,
it estimated assets between $1 million to $10 million and
estimated debts between $500,000 to $1 million.
TARGA RESOURCES: S&P Assigns Corporate Credit Rating at B+
----------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' corporate
credit rating to midstream energy company Targa Resources Inc.
At the same time, Standard & Poor's assigned its 'B-' rating to
the Houston, Texas-based company's $350 million senior unsecured
notes due 2013.
Furthermore, Standard & Poor's assigned its preliminary 'B+'
rating to Targa's proposed $2.4 billion senior secured credit
program. The program consists of:
* a seven-year $1.15 billion term loan;
* a two-year $700 million bridge term loan;
* a six-year $250 million revolving facility; and
* a seven-year $300 million synthetic letter of credit
facility.
Standard & Poor's also assigned a recovery rating of '2' to these
facilities. The 'B+' rating and '2' recovery rating indicate the
expectation for substantial recovery (80%-100%) of principal in
the event of payment default.
The preliminary bank debt and recovery ratings are subject to
review of final documentation. The outlook is stable. The
proceeds will be used to help fund Targa's acquisition of Dynegy
Inc.'s midstream business, which was purchased for $2.3 billion.
"The ratings on Targa reflect the expected integration of Dynegy's
midstream operations and the firm's weak business and aggressive
financial profile," said Standard & Poor's credit analyst John
Kennedy.
The stable outlook on Targa relies on:
* the successful integration of the Dynegy assets and continued
efforts to manage the unpredictable natural gas gathering and
processing cash flows;
* the successful management of the substantially larger
operations; and
* the successful assets sale proceeds being applied to debt
reduction.
TECHNEGLAS INC: Selling Columbus Facility to TG707 for $1.95 Mil.
-----------------------------------------------------------------
Techneglas, Inc., asks the U.S. Bankruptcy Court for the Southern
District of Ohio, Eastern Division, for authority to sell its real
property located in Columbus, Ohio, to TG707, Inc.
The Columbus facility consists of 48 acres of land housing
approximately one million square feet of:
a) manufacturing and administrative offices,
b) finishing operations and warehouse facilities, and
c) storage and parking facilities.
The Debtor tells the Court it currently spends $150,000 per month
to maintain the Columbus facility.
The Debtor estimates that the overall proceeds of the sale
transaction will exceed $6 million, consisting of:
* a $1.95 million cash payment on the sale closing;
* issuance of $50,000 worth of stock from TG707; and
* TG707's assumption of all environmental liabilities
associated with the plan, approximately $2.5 million.
The Debtor's First Amended Joint Plan of Reorganization was
confirmed on Friday, Oct. 7, 2005. Under the Plan, the Columbus
facility won't be necessary in the Debtor's business. As such,
the Debtor wants to maximize the facility's value and minimize the
estate's administrative costs by selling the facility to TG707,
subject to the Court's approval.
Headquartered in Columbus, Ohio, Techneglas, Inc. --
http://techneglas.com/-- manufactures television glass (CRT
panels, CRT funnels, solder glass and specialty glass), dopant
sources, glass resins and specialty bulbs. The Company and its
debtor-affiliates filed for chapter 11 protection on Sept. 1, 2004
(Bankr. S.D. Ohio Case No. 04-63788). David L. Eaton, Esq., Kelly
K. Frazier, Esq., and Marc J. Carmel, Esq., at Kirkland & Ellis,
and Brenda K. Bowers, Esq., Robert J. Sidman, Esq., at Vorys,
Sater, Seymour and Pease LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed total assets of $137 million and
total debts of $336 million.
THREE-FIVE SYSTEMS: Section 341(a) Meeting Slated for Oct. 18
-------------------------------------------------------------
The U.S. Trustee for Region 14 will convene a meeting of Three-
Five Systems, Inc.'s creditors at 3:00 p.m., on Oct. 18, 2005, at
the U.S. Trustee Meeting Room, 230 North First Avenue, Suite 102,
Phoenix, Arizona.
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 Tempe, Arizona, Three-Five Systems, Inc. --
http://tfsc.com/-- provides specialized electronics manufacturing
services to original equipment manufacturers. TFS offers a broad
range of engineering and manufacturing capabilities. The Company
filed for chapter 11 protection on Sept. 8, 2005 (Bankr. D. Ariz.
Case No. 05-17104). Thomas J. Salerno, Esq., at Squire, Sander &
Dempsey, LLP, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
$11,694,467 in total assets and $2,880,377 in total debts.
The Company's subsidiary, TFS Electronic Manufacturing Services,
Inc. filed for chapter 11 protection on Aug. 19, 2005 (Bankr. D.
Ariz. Case No. 05-15403).
THREE-FIVE: Files Schedules of Assets and Liabilities in Arizona
----------------------------------------------------------------
Three-Five Systems, Inc., delivered its Schedules of Assets and
Liabilities to the U.S. Bankruptcy Court for the District of
Arizona, disclosing:
Name of Schedule Assets Liabilities
---------------- ------ -----------
A. Real Property
B. Personal Property $25,720,044
C. Property Claimed
As Exempt
D. Creditors Holding $1,000,000
Secured Claims
E. Creditors Holding Unsecured $437,767
Priority Claims
F. Creditors Holding Unsecured $1,738,528
Nonpriority Claims
G. Executory Contracts and
Unexpired Leases
H. Codebtors
I. Current Income of
Individual Debtor(s)
J. Current Expenditures of
Individual Debtor(s)
----------- -----------
Total $25,720,044 $3,1176,295
Headquartered in Tempe, Arizona, Three-Five Systems, Inc. --
http://tfsc.com/-- provides specialized electronics manufacturing
services to original equipment manufacturers. TFS offers a broad
range of engineering and manufacturing capabilities. The Company
filed for chapter 11 protection on Sept. 8, 2005 (Bankr. D. Ariz.
Case No. 05-17104). Thomas J. Salerno, Esq., at Squire, Sander &
Dempsey, LLP, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
$11,694,467 in total assets and $2,880,377 in total debts.
The Company's subsidiary, TFS Electronic Manufacturing Services,
Inc. filed for chapter 11 protection on Aug. 19, 2005 (Bankr. D.
Ariz. Case No. 05-15403).
THREE-FIVE SYSTEMS: Wants Baker & McKenzie as Special Counsel
-------------------------------------------------------------
Three-Five Systems, Inc., asks the U.S. Bankruptcy Court for the
District of Arizona for permission to employ Baker & McKenzie as
its special counsel.
Penang Sale Transaction
The Debtor tells the Court that the Penang Sale Transaction arises
out of the Debtor's decision to sell its Malaysian subsidiary,
Three-Five Systems Electronic Manufacturing Services Sdn Bhd,
through a proposed stock sale transaction. The Debtors say that
negotiations with potential buyers are ongoing and a draft stock
purchase and sale agreement has already been prepared.
Baker & McKenzie will:
(a) negotiate and complete a stock purchase agreement for the
sale of all the Debtor's stock in its Malaysian subsidiary
to a willing buyer;
(b) perform all necessary closing matters related to the
Penang Sale Transaction, which includes obtaining all
necessary regulatory approvals in Malaysia to complete the
transaction; and
(c) provide all other related advice to the Debtor and its
representatives in connection with the Penang Sale
Transaction.
Philippines Sale Transaction
The Debtor tells the Court that the Philippines Sale Transaction
arises out of the Debtor's decision to sell its and Three-Five
Systems Pacific, Inc.'s assets and operations located in the
Philippines through an agreement executed on June 3, 2005.
Baker & McKenzie will:
(a) perform all post-closing matters necessary to complete the
transaction, including the transfer of contracts;
(b) cancel PEZA tax registration in the Philippines; and
(c) close the Philippine business and any remaining Philippine
operations.
Vitelcom Litigation
The Debtor tells the Court that the Vitelcom Litigation arises out
of Vitelcom Mobile Technology, S.A.'s failure to pay the Debtor
for certain products the Debtor sold Vitelcom. The Debtor says
that Baker & McKenzie will act as its special litigation counsel
in connection with the $1,431,146 claim against Vitelcom and its
representative, Rogelio de Lorenzo Serrano, pending before the
Spanish Court of First Instance No. 15 Malaga (Case No. 373/05).
Baker & McKenzie will:
(a) advise the Debtor on legal strategies in the prosecution
and resolution of the Vitelcom Litigation;
(b) implement those strategies in the prosecution and
resolution of the Vitelcom Litigation;
(c) prosecute the initial claim in any trial or hearing, and
prosecute or defend any appeal or subsequent proceedings;
(d) gather and present all necessary evidence to prosecute the
initial claim in any trial or hearing;
(e) defend the Debtor against Vitelcom's attempts to avoid its
payment obligations to Debtor; and
(f) provide all other necessary litigation services in the
Vitelcom Litigation.
The Debtor discloses that Baker & McKenzie's professionals bill:
Designation Hourly Rate
----------- -----------
Partners $250 - $525
Associates $150 - $400
Legal Assistants $60 - $200
To the best of the Debtor's knowledge, the Firm does not hold any
interest adverse to the Debtor or its estates.
Headquartered in Tempe, Arizona, Three-Five Systems, Inc. --
http://tfsc.com/-- provides specialized electronics manufacturing
services to original equipment manufacturers. TFS offers a broad
range of engineering and manufacturing capabilities. The Company
filed for chapter 11 protection on Sept. 8, 2005 (Bankr. D. Ariz.
Case No. 05-17104). Thomas J. Salerno, Esq., at Squire, Sander &
Dempsey, LLP, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
$11,694,467 in total assets and $2,880,377 in total debts.
The Company's subsidiary, TFS Electronic Manufacturing Services,
Inc. filed for chapter 11 protection on Aug. 19, 2005 (Bankr. D.
Ariz. Case No. 05-15403).
TIMOTHY SHULL: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Timothy Allen & Cheryl Ann Shull
3681 North 650 East
Churubusco, Indiana 46723
Bankruptcy Case No.: 05-16400
Chapter 11 Petition Date: October 11, 2005
Court: Northern District of Indiana (Fort Wayne)
Debtors' Counsel: Daniel J. Skekloff, Esq.
Skekloff, Adelsperger & Kleven, LLP
927 South Harrison Street
Fort Wayne, Indiana 46802
Tel: (260) 407-7000
Fax: (260) 407-7137
Estimated Assets: Less than $50,000
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Chase Home Finance 1620 Sprunger Ave., $54,391
P.O. Box 24696 Fort Wayne, IN
Columus, OH 43224-0696
Aurora Loan Services Inc. 6018 Landsdowne $52,252
(Charles F. Curry Co.) Drive, Fort Wayne
P.O. Box 1706 IN
Scottsbluff, NE 69363-1706
EMC Mortgage Corp. 219 East Pettit Ave., $49,976
P.O. Box 141358 Fort Wayne, IN
Irving, TX 75014-1358
Countrywide Home Loans 3616 South Hanna Street, $44,630
Fort Wayne, IN
Aegis Mortgage Corp. 2818 Drexel Avenue $43,841
Fort Wayne, IN
Aurora Loan Services, Inc. 4518 Gaywood Drive, $40,201
(Charles F. Curry Co.) Fort Wayne, IN
EMC Mortgage Corp. 6021 Downington Dr., $36,674
Fort Wayne, IN
Chase Manhattan Mortgage 3714 South Hanna St., $36,607
Corp. Fort Wayne, IN
Chase Home Finance 2020 Sherman Blvd., $36,558
Fort Wayne, IN
Countrywide Home Loans 3927 South Clinton $31,684
Street, Fort Wayne,
IN
Countrywide Home Loans 1313 Summit Street $31,574
Fort Wayne, IN
Nelnet Student loan $20,828
Chase Visa credit card $17,847
Countrywide Home Loans 2107 Bevel Avenue, $17,547
Fort Wayne, IN
Countrywide Home Loans 2101 Brown Street, $14,474
Fort Wayne, IN
Three Rivers Federal C.U. Motorcycle $10,511
Lowes Credit card $2,074
Capital One Bank Visa credit card $1,908
CNF Inc. Thrift and $855
Stock Plan
GE Money Bank Credit card $528
TITAN CRUISE: Wants Court to Amend DIP Order & Needs More Money
---------------------------------------------------------------
Titan Cruise Lines and its debtor-affiliate ask the U.S.
Bankruptcy Court for the Middle District of Florida to enter an
amended DIP Financing Order that authorizes the Debtors to obtain
additional post-petition loans.
The Debtors remind the Court that it the DIP Financing Order
entered Sept. 15, 2005, permit them to obtain up to $850,000 in
post-petition working capital line of credit from First American
Bank.
Since the entry of the DIP Financing Order, the Debtors have
experienced an unanticipated loss of days in operation as a result
of extreme weather conditions and because of that, they have not
met budgeted revenue goals necessary to become self-sustaining in
the near term. To continue their efforts to reorganize, the
Debtors need additional operating funds from First American on an
emergency basis.
First American has agreed to loan an additional $300,000 of post-
petition loans to the Debtors on the same terms and conditions as
the Court's DIP Financing Order.
The Court held a hearing on Oct. 7, 2005, to consider the Debtors'
request, but Bankruptcy Court records show that it has yet to
enter an order approving the Debtors' request.
Headquartered in Saint Petersburg, Florida, Titan Cruise Lines and
its subsidiary owns and operates an offshore casino gaming
operation. The Company and its subsidiary filed for chapter 11
protection on August 1, 2005 (Bankr. M.D. Fla. Case Nos. 05-15154
and 05-15188). Gregory M. McCoskey, Esq., at Glenn Rasmussen &
Fogarty, P.A., represents the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they estimated assets and debts between $10 million to
$50 million.
TRISTAR HOTELS: List of 20 Largest Unsecured Creditors
------------------------------------------------------
Tristar Hotels & Investments, LLC, released a list of its 20
Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
IHG Holiday Inn $2,000,000
3 Ragna Drive #100
Atlanta, GA 30346-2149
Charlie Mallios $200,000
715 Sandbank Road
Mountholly Springs, PA 17065
George Lois $200,000
715 Sandbank Road
Mountholly Springs, PA 17065
Internal Revenue Services $125,000
S&S Tours $80,000
Subodh Sharma $80,000
Intercontinental Hotel - Holiday Inn $80,000
Choice Hotels International $75,000
City of San Mateo Finance Department $45,000
American Express Credit Department $40,000
PG&E $30,822
David Turnwoski $28,000
Kevin Foulke $26,000
York Hotel $25,000
Marcus Daniel Merchasin $25,000
Law Offices of Miller, Star, Regallio $25,000
Clear Channel's $22,000
ADP Insurance State Company $20,000
Cypress Security $16,000
Gary Mugg $15,000
Headquartered in Mountain View, California, Tristar Hotels and
Investments, LLC, filed for chapter 11 protection on Sept. 13,
2005 (Bankr. N.D. Calif. Case No. 05-55789). Steven J. Sibley,
Esq., at the Law Offices of DiNapoli and Sibley represents the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed estimated assets and
debts of $10 million to $50 million.
TXU CORP: Paying TXU Europe $220 Million Today to Settle Claims
---------------------------------------------------------------
TXU Corp. will pay TXU Europe Ltd. $220 million today, Oct. 13,
2005, to be distributed to creditors. The payment is pursuant to
a settlement agreement the Company previously inked with TXU
Europe.
The Company signed a comprehensive settlement agreement, early
this year, resolving potential claims relating to TXU Europe Ltd.
and its affiliates and major creditor groups.
As of Oct. 4, 2005, all of the conditions giving rise to the
obligations of the Company under the Europe Agreement have been
satisfied, allowing the Company to release the payment today.
The payment will be sourced from cash from operations, which will
be subsequently offset by any insurance proceeds the Company is
able to collect from its insurance carriers. The Company has not
yet received any commitments from its insurance carriers.
A full-text copy of the Settlement Agreement is available for free
at http://ResearchArchives.com/t/s?24b
TXU Corp. -- http://www.txucorp.com/-- a Dallas-based energy
company, manages a portfolio of competitive and regulated energy
businesses in North America, primarily in Texas. In TXU Corp.'s
unregulated business, TXU Energy provides electricity and related
services to 2.5 million competitive electricity customers in
Texas, more customers than any other retail electric provider in
the state. TXU Power has over 18,300 megawatts of generation in
Texas, including 2,300 MW of nuclear and 5,837 MW of lignite/coal-
fired generation capacity. The company is also one of the largest
purchasers of wind-generated electricity in Texas and North
America. TXU Corp.'s regulated electric distribution and
transmission business, TXU Electric Delivery, complements the
competitive operations, using asset management skills developed
over more than one hundred years, to provide reliable electricity
delivery to consumers. TXU Electric Delivery operates the largest
distribution and transmission system in Texas, providing power to
more than 2.9 million electric delivery points over more than
99,000 miles of distribution and 14,000 miles of transmission
lines.
* * *
As reported in the Troubled Company Reporter on Feb. 1, 2005,
TXU Corp. securities rated by Fitch Ratings remain unchanged
following the announcement that TXU reached a comprehensive
settlement agreement resolving potential claims relating to TXU
Europe. The ratings are:
-- Senior unsecured 'BBB-';
-- Preferred stock 'BB+';
-- Commercial paper 'F3'.
UAL CORP: Wells Fargo Wants Bankruptcy Court to Reconsider Order
----------------------------------------------------------------
As previously reported in the Troubled Company Reporter, the U.S.
Bankruptcy Court for the Northern District of Illinois enforced
the Interim Adequate Protection Stipulation entered into in March
2003, and approved by the Court on April 16, 2003. The basic
purpose was to provide Wells Fargo Bank, as Class A Pass Through
Trustee and Subordination Agent for Series 1997-1 EETC, with
adequate protection payments, while discussions were ongoing
between itself and the Debtors to renegotiate the 1997-1 EETC.
Wells Fargo wants the Court to reconsider its decision to
enforce the Interim Adequate Protection Stipulation, prohibiting
Wells Fargo from exercising remedies expressly provided for in
the Equipment Trust Notes.
Ann Acker, Esq., at Chapman and Cutler, in Chicago, Illinois,
tells Judge Wedoff that the ETNs were specifically structured to
be bankruptcy remote, meaning the Debtors' bankruptcy would not
adversely affect the Trust. Structured financings are based on
one principle -- a defined group of assets can be structurally
isolated and serve as the basis of a financing that is
independent from the bankruptcy risks of the former owner of the
assets. The focal point of a structured finance transaction is
the separation of the assets serving as collateral for the
transaction from the credit risk of another entity. The
separation benefits the issuer by reducing the return required by
investors through a reduction in the credit risk and, hence, the
interest rate.
"The primary theme of these transactions is bankruptcy
remoteness," explains Ms. Acker. Great care is taken to ensure
that the transaction eliminates bankruptcy risk. Holders of
certificates have an interest in the Trust, not in the property
held by the Trust. A determination that a bankrupt certificate
holder could adversely affect the mechanics of a trust, including
the exercise of remedies, would have a detrimental effect on many
structured finance transactions.
Therefore, the Debtors' argument that the security holders
violated the automatic stay is unsupportable. Under Section 362
of the Bankruptcy Code, a party can only violate the automatic
stay by taking unauthorized action against property of a debtor's
bankruptcy estate. The only property transferred was the
Equipment Notes, which are not owned by the Debtors, but rather
evidence and collateralize debts owed by the Debtors. The
Equipment Notes are held in the name of a Subordination Agent and
beneficially held by separate trusts. Therefore, Ms. Acker says
that the automatic stay does not apply to the transfer of the
underlying Equipment Notes. The Debtor's motion to void the
transfer because the automatic stay is applicable must be denied.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 102; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Court Sets Dec. 30 as Pension Plan Termination Date
-------------------------------------------------------------
The Pension Benefit Guaranty Corporation's request with respect
to the termination of the United Airlines Pilot Defined Benefit
Pension Plan is denied, the Hon. Eugene Wedoff of the U.S.
Bankruptcy Court for the Northern District of Illinois rules.
The PBGC's request with respect to the establishment of a
termination date is granted. Judge Wedoff sets Dec. 30,
2005, as the termination date of the Pilot Plan, should the court
determine that the Pilot Plan must be terminated.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 102; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Creditors Committee Objects to $8.3 Billion PBGC Claims
-----------------------------------------------------------------
The Official Committee of Unsecured Creditors objects to
$8,300,000,000 in claims filed by the Pension Benefit Guaranty
Corporation for unfunded benefit liabilities of UAL Corporation
and its debtor-affiliates' defined benefit pension plans. Carole
Neville, Esq., at Sonnenschein, Nath & Rosenthal, in New York
City, states that the PBGC's Claims will ultimately approach
$10,000,000,000.
If a pension plan has less assets than liabilities, the
difference equals the unfunded benefit liabilities, explains Ms.
Neville. Benefit liabilities are calculated by determining the
present value of all pension payments due over the life of the
plan. This calculation requires numerous assumptions about the
future. The choice of assumptions affects the amount of the
benefit liabilities. Ms. Neville argues that the PBGC's
assumptions produce a grossly overstated claim that asserts a
disproportionate share of the distribution to unsecured
creditors.
(1) Discount Rate Too Low
The PBGC assumes "unreasonably low" discount rates, notes Ms.
Neville. Pursuant to PBGC Regulations, the PBGC uses a discount
rate of 4.10% to estimate the plans' benefit liabilities. This
abnormally low interest rate overstates the PBGC's Claims, and if
allowed, will unfairly dilute the recovery of other creditors.
Ms. Neville suggests that the Court utilize the "prudent investor
rate" or a "similar realistic investment rate" to discount the
plans' benefit liabilities.
The prudent investor rate is the return on pension funds expected
by a reasonable, prudent, long-term pension-fund portfolio
investor who seeks the best long-term return on investment
consistent with preserving capital and minimizing risk.
(2) Unsupported Retirement and Mortality Rate Assumptions
In calculating the unfunded benefit liabilities, the PBGC uses
retirement and mortality assumptions that overstate the PBGC
Claims. Since the PBGC has not disclosed many of the assumptions
used to estimate the plans' benefit liabilities, the Committee
cannot determine the level of influence that retirement and
mortality rate assumptions have had in overstating the PBGC
Claims. The PBGC should not be permitted to use the retirement
and mortality rate assumptions prescribed in the PBGC
Regulations, because they are not reflective of historical
experience. The Court should require the PBGC to use "reasonable
retirement and mortality-rate assumptions that reflect historical
data under the Debtors' pension plans," states Ms. Neville.
(3) Claims Not Reduced for Consideration Received
Ms. Neville argues that the PBGC Claims are overstated because
the amounts are not reduced by the consideration received under
the PBGC Agreement. The $1,500,000,000 in notes and preferred
stock the PBGC will receive under the PBGC Agreement exceeds what
the PBGC gave up.
Under the PBGC Agreement, the PBGC will relinquish:
(a) a claim for minimum funding contributions to the pension
plans;
(b) the right to assert the PBGC Claims against all 27 Debtors
-- most of which have no assets;
(c) the alleged, but unsustainable, right to set off certain
tax refunds received by the Debtors' postpetition;
(d) the release of perfected liens against the assets of non-
debtor controlled group members with minimal value; and
(e) the release of the administrative claim for insurance
premiums of $8,000,000.
Ms. Neville asserts that the PBGC relinquished substantially less
than the $1,500,000,000 it stands to receive under the PBGC
Agreement. Accordingly, the PBGC Claims must be reduced by the
excess of value received over the value the PBGC gave up.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 102; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
W.R. GRACE: Wants to Depose & Examine Asbestos Claimants' Lawyers
-----------------------------------------------------------------
W.R. Grace & Co. and its debtor-affiliates ask Judge Fitzgerald of
the U.S. Bankruptcy Court for the District of Delaware for leave
to conduct immediate discovery of attorneys who represent
claimants with personal injury asbestos claims against Grace.
"It is now virtually undisputable that the quality of the medical
evidence submitted in support of large numbers of asbestos claims
around the country is substandard and, in some cases, may be
fraudulent," David W. Carickhoff, Esq., at Pachulski, Stang,
Ziehl, Young, Jones & Weintraub P.C., in Wilmington, Delaware,
states.
Mr. Carickhoff asserts that the center of the controversy are the
relationships among the lawyers who file the claims and screening
companies and doctors who provide "medical" evidence supporting
the claims.
Information about those relationships and the claim manufacturing
process, however important, remains largely unknown. Mr.
Carickhoff relates that although law firms and doctors currently
are under investigation in courts and by at least one federal
grand jury, no one has yet unraveled the web of relationships,
transactions and incentives that have fueled the filing of junk
asbestos claims. As recognized by the Court, that information
typically will not be known by the claimants themselves and
cannot be gleaned from the claims, but rather must be learned
directly from the lawyers and doctors involved in claim filings.
Red Flags of Fraud
Along with the pertinent facts surrounding asbestos claims
debacle established by the Debtors in their prior briefs, Mr.
Carickhoff points out that new evidence continues to mount
revealing the unreliable diagnostic methods employed by doctors
and screening companies in asbestos and silica cases.
"Indeed, the same doctors that supported the baseless silica
claims are the same doctors who support thousands of Grace
claims. And the same lawyers who filed the bogus silica claims
are the same lawyers who have filed asbestos claims against
Grace," Mr. Carickhoff notes.
On July 20, 2005, The New York Times reported that federal
prosecutors in Manhattan are investigating three plaintiffs' law
firms in connection with various asbestos claims pending in the
G-1 Holdings bankruptcy. Mr. Carickhoff says one the three firms
under investigation is a firm with known asbestos/silica
"retreads" against W.R. Grace & Co. Key to those investigations
are interviews with former firm employees in which the employees
"described coaching potential claimants and noted efforts to
influence doctors' diagnoses." In addition, a significant number
of the litigants with claims against Grace are the same litigants
with claims against G-1 Holdings.
Mr. Carickhoff relates that the same prosecutors investigating
G-1 Holdings' claims are also investigating the conduct of the
plaintiffs' lawyers during the Texas silica litigation, including
the fact that "[s]ome of the same law firms that brought [silica]
claims also brought asbestos claims, some of the doctors who
diagnosed silica injury in claimants also diagnosed asbestos
injury in claimants -- and many of the same people claiming they
were hurt by silica previously claimed they were harmed by
asbestos."
Moreover, on August 2, 2005, the United States Congress, through
the Energy and Commerce Committee and Oversight and
Investigations Subcommittee, sent letters to the screening
companies and doctors involved in the silica litigation
requesting information relating to their specific roles in the
silica litigation. The congressional investigation was sparked
by Congress' concern "that individuals entrusted with the health
care of patients may have corrupted basic principles or medical
standards and practice in the service of litigation."
Furthermore, at the heart of the silica claims controversy before
Judge Janis Graham Jack of the U.S. District Court for the
Southern District of Texas was the existence of thousands of
known silica/asbestos "retread" claims. Mr. Carickhoff explains
that a "retread" is a case in which a single claimant has brought
both claims for asbestosis and silicosis, often based on the same
x-ray result. Out of 10,000 silica plaintiffs in the Texas
Silica Multidistrict Litigation, some 6,000 had previously
brought claims for asbestosis. Judge Jack ultimately described
this practice as the "opportunistic transformations of asbestosis
reads into silicosis reads."
Mr. Carickhoff states that the law firms representing the
silicosis claimants are openly acknowledging what the doctors
before Judge Jack attested to -- that the retread claimants do
not in fact have both silicosis and asbestosis. In the cases
where there are retreads, it is the asbestosis diagnoses that are
coming under increasing fire.
As Judge Jack pointed out, when claimants "made fraudulent claims
in asbestosis and now those same people who made fraudulent
claims are trying to make another pneumoconiosis claim . . . that
impacts their credulity tremendously."
To date, Grace has been able to confirm, based on very limited
Social Security number information available to it, that at least
76 current and past claims -- brought by eight different law
firms -- are retreads from claims brought in the Silica
Multidistrict Litigation. However, based on name comparisons of
only 3,500 of the 10,000 silica plaintiffs, Grace has
preliminarily confirmed 1,300 to 1,400 retread plaintiffs so far.
Remarkably, Mr. Carickhoff informs Judge Fitzgerald, the Debtors'
preliminary investigation has revealed that at least five of the
silica plaintiffs -- Donald Connell, Cora Lee Rogers, James
Hyatt, Zettie Shields, and Effie Coleman -- whose cases were
singled out by name in Judge Jack's opinion as invalid retread
claims, appear to have current claims against Grace.
"The presence of these confirmed retreads alone suggests, at a
bare minimum, that the original diagnoses of asbestosis are
suspect," Mr. Carickhoff asserts.
Perhaps even more serious among the problems that Judge Jack
recognized in the Texas Silica MDL is the absence of adequate
occupational and exposure histories to support the diagnoses.
Mr. Carickhoff avers that occupational and exposure histories are
vital because, as Dr. Gary Friedman testified in the silica case,
"infections and a host of different diseases" can look like
pneumoconiosis on an x-ray.
The lack of adequate exposure and occupational histories, Mr.
Carickhoff says, is critical in determining the validity and
value of the claims because without these the x-ray readings and
corresponding asbestosis diagnoses are unreliable and the claims
that are supported by them should receive little, if any, value
in an estimation, particularly when "the suspect practices now
are more thoroughly understood."
"The presence of the same inadequate exposure theories, the same
doctors and the same law firms is powerful evidence that the same
malfeasance that occurred in the 'diagnosis' of silica injuries
also occurred during the 'diagnosis' of asbestos-related
disease," Mr. Carickhoff argues.
The presence of so many of the same "great red flags of fraud"
that were present in the silica litigation makes it clear that
further discovery is necessary in Grace's proceeding to determine
how many of the asbestos PI claims are based on suspect practices
that produce unreliable medical exposure data, Mr. Carickhoff
maintains.
Grace Picks 18 Firms
The Debtors intend to propound a two-page questionnaire to all
asbestos PI claimants' counsel to obtain basic information about
the relationships among the attorneys, doctors, screening
companies and other persons who generated the data that provides
the foundation for the nearly 118,000 current asbestos PI claims
against Grace.
In addition to the questionnaire, the Debtors also propose to
seek immediate direct discovery of the firms who:
(a) have filed silica "retreads" against Grace as confirmed
by a social security number match;
(b) have filed silica "retreads" as confirmed by last name,
first name, and middle initial match; and
(c) firms that were criticized by Judge Jack in "In re
Silica Products Liability Litigation" for having brought
large numbers of "retread" silica/asbestos claims and
who now are before the Court with thousands of claims
against Grace.
Accordingly, these 18 law firms fit the criteria for Grace's
direct discovery:
* Alwyn Luckey,
* Baron and Budd;
* Campbell Cherry Harrison Davis Dove,
* Chris Parks & Associates,
* Foster & Sear,
* Grenfell, Sledge & Stevens,
* Lanier Parker & Sullivan P.C.,
* Lanier & Wilson,
* Law Office of Joseph F. Bruegger,
* Morris & Sakalarios,
* Neegan & Bickham,
* Nix Law Firm,
* O'Quinn, Laminack & Pirtle,
* Parker & Parks LLP,
* Reaud, Morgan & Quinn,
* Robins, Cloud, Greenwood & Lubel,
* Silber Pearlman, and
* The Eaves Law Firm.
Under the Federal Rules of Bankruptcy Procedure and Federal Rules
of Civil Procedure, Mr. Carickhoff argues that the Debtors have a
right to take discovery that is co-extensive with their right to
take discovery had the same claims been brought in the typical
litigation posture. The Court has recognized that discovery will
provide "a much better basis for estimation of current claims and
possibly future claims than anything else."
Mr. Carickhoff tells Judge Fitzgerald that the discovery of
attorneys is essential because in the Debtors' case, the
attorneys are the entities that are uniquely in possession of the
relevant information. "Indeed, common sense dictates that the
only sufficient source capable of providing information as to the
full extent of the attorneys' pre-existing network of
relationships with doctors, screening companies and even other
law firms is the attorneys themselves," Mr. Carickhoff says.
Mr. Carickhoff maintains that the Debtors' proposed discovery
would allow suspect practices and potential fraud to be properly
accounted for before it is permitted to infect and irreparably
harm the estimation process.
"Whatever minimal burden these requests may generate is far
outweighed by the debtors' and the Court's need for the
information in [Grace's] estimation proceeding," Mr. Carickhoff
insists.
Chris Parks Objects
Christopher Parks, Esq., at Chris Parks & Associates, in Port
Arthur, Texas, informs the Court that neither Chris Parks, P.C.,
nor Parker & Parks, L.L.P., were criticized by Judge Jack, owing
to the fact that these firms have never appeared before Judge
Jack, nor have they filed any -- much less "large numbers" -- of
silica "retread" cases.
Contrary to the Debtors' flippant accusations, Mr. Parks asserts
that none of the Parks Firms fit the Debtors' criteria on direct
discovery.
Mr. Parks explains that the Debtors listed those plaintiffs whose
social security numbers matched for both silica and asbestos
claims. Only one claimant, Richard Barrientos, is listed as
being represented by Chris Parks and one other claimant, Joseph
H. Carrier, is allegedly represented by Parker & Parks.
Evidently, the match of one's plaintiff's social security number
is the only reason for the Parks Firms to be included in the
group of 18 law firms.
Therefore, the Parks Firms ask the Court to deny the Debtors'
request because it is based on erroneous facts and that they have
no connection with regards to the issues subject for the proposed
immediate discovery.
Mr. Parks tells Judge Fitzgerald that the Parks Firms had
"absolutely no knowledge of any silica-related claims having even
been filed" by Mr. Carrier or Mr. Barrientos. The Parks Firms
neither filed a silica lawsuit, nor has any connection, financial
or otherwise, to any silica lawsuit for Mr. Carrier or Mr.
Barrientos.
Subsequently after the Debtors' request for immediate discovery
was filed, the Parks Firms discovered that Mr. Barrientos is
represented by Heard, Robins in a silica case.
"It is unreasonable to permit [the] Debtors to launch an
immediate assault of depositions and subpoenas on [the Parks
firms] based on the fact that only one client of each firm has a
social security match to a silicosis lawsuit and these firms have
absolutely no connection with any possible silicosis claim filed
by either client," Mr. Parks notes.
Debtors Disclose Anticipated Witnesses for Phase II
In accordance with the Court's case management order for the
estimation of asbestos property damage liabilities, the Debtors
present their preliminary witness disclosures for Phase II
property damage estimation.
Mr. O'Neill tells Judge Fitzgerald that the disclosure is divided
into three parts:
(1) listing of fact witnesses that the debtors anticipate
calling to testify at the Phase II trial live or by
deposition, along with the subjects on which those
witnesses are expected to testify;
(2) listing of expert witnesses that the Debtors have
retained to provide trial testimony in Phase II, the
nature of their expertise, and the currently anticipated
subjects of their testimony; and
(3) identifying other types of expert witnesses that the
Debtors have not yet retained to testify in Phase II,
but anticipate they may retain in the future, to provide
trial testimony.
In addition to the witnesses, the Debtors reserve the right to
call to testify at the Phase II trial:
-- any fact or expert witness listed on any other party's
Phase II witness disclosure;
-- any claimant how submitted a property damage claim, as
well as any person that signed any property damage claim
form, to testify regarding the facts surrounding the
claims that they submitted or signed; and
-- any fact or expert witnesses the Debtors will identify on
October 17, 2005, in accordance with the PD Estimation
CMO to testify in Estimation Phase I, to address any
Phase I issues that may still remain as of the Phase II
trial.
The Debtors believe that Phase I issues -- which centers on
constructive notice and dust sampling methodology -- can and
should be resolved during Phase I and will not remain as "open
issues" by the Phase II hearing. However, the Debtors recognize
that the Official Committee of Asbestos Property Damage Claimants
is still trying to avoid the Phase I issues.
To the extent the PD Committee, over their opposition, is
successful in deferring any Phase I issues to Phase II, the
Debtors would call their Phase I witnesses to testify at
Phase II.
The Debtors continue to analyze the thousands of PD claims
submitted in their Chapter 11 cases and reserve the right to
supplement their disclosure with additional facts and expert
witnesses that may be needed to address Estimation Phase II
issues raised by those claims.
Mr. O'Neill discloses to the Court the fact witnesses anticipated
to testify with respect to Phase II issues:
(1) James Cintani and Thomas F. Egan
As former WR Grace employees, they will describe relevant
Grace products generally, including:
* the application and uses of the products;
* the history of the products;
* the reformulation of the products; and
* issues related to product identification.
(2) Daniel A. Speights and Amanda G. Steinmeyer
Representing Speights & Runyan, Attorneys at Law, they
will be called to testify regarding property damage
claims submitted in the Debtors' Chapter 11 cases by the
Speights & Runyan firm, including testimony regarding
any statement made in those claims and their supporting
materials.
The Retained Expert Witnesses are:
(1) Morton Corn, Ph.D.
An environmental health engineer and industrial
hygienist, Dr. Corn may testify about the current and
historical standards, policies, and regulations
applicable to asbestos and asbestos-containing products.
He may explain the various methods and technologies for
measuring asbestos in the air and may render an opinion
as to asbestos levels in buildings. Dr. Corn may also
testify about assessing the risk to building occupants,
maintenance workers, custodians, and others of exposure
to asbestos-containing materials in buildings.
In addition, Dr. Corn may also comment on the issue of
quantitative risk assessment and explain how government
regulators have calculated theoretical risks for
exposure to low levels of asbestos concentrations. He
may opine that calculated theoretical risks can best be
understood when compared to other risks commonly
experienced. He may give an opinion about any alleged
release of asbestos fibers from asbestos-containing
materials and the potential for reentrainment of
particles from surfaces. Dr. Corn may also give an
opinion about the maintenance of asbestos-containing
materials under operations and maintenance plans, and
the necessity or lack of necessity for removal or
enclosure of asbestos-containing materials in buildings.
Moreover, Dr. Corn may also be expected to give testimony
consistent with or analogous to the substance of the
testimony given in previous property damage cases
prosecuted by Martin Dies, Edward Westbrook and Daniel
Speights on behalf of PD claimants.
(2) William G. Hughson, M.D., D. Phil.
Dr. Hughson is a medical doctor and epidemiologist with
extensive expertise in the evaluation and treatment of
patients who have been exposed to asbestos. Dr. Hughson's
testimony will address the relationship between asbestos
exposure and disease. Dr. Hughson will describe, based
on his clinical experience as well as the scientific
literature, the nature and magnitude of the risk of
disease from exposure to asbestos in buildings. He will
explain how dose, fiber type, and fiber size affect the
risk of disease and will address the linear no-threshold
hypothesis. He will discuss epidemiological and other
studies of the risk of disease from asbestos exposure.
(3) Richard Lee, Ph.D.
Dr. Lee is a microscopist, material analyst, and
theoretical physicist with expertise in the constituent
analysis of asbestos samples and the measurement and
analysis of asbestos levels. Dr. Lee's testimony will
cover the techniques regarding the collection, analysis
and measurement of asbestos levels in buildings, and the
development of scientific knowledge on the same. He may
discuss the standards and regulations governing asbestos
in air, and the levels of asbestos in buildings and the
ambient air. He may testify regarding product
identification through the use of bulk sampling,
including the analytical techniques involved and the
interpretation of data obtained. He may also testify
regarding soil sampling for asbestos, including sampling
methods and analytical techniques.
(4) Roger G. Morse, A.I.A.
An architect with expertise in asbestos evaluation and
control, Mr. Morse may give an opinion about the
maintenance of asbestos-containing materials under
operations and maintenance plans, and the necessity or
lack of necessity for removal or enclosure of asbestos-
containing materials in buildings. Mr. Morse may opine
on the state-of-the-art of architects' knowledge
concerning the use of asbestos in building products. He
may describe the development, use, and characteristics
of asbestos-containing materials in building
construction, including the cost-saving aspects and
comparisons to alternative construction methods. He
will also testify about the valuation of property damage
claims.
(5) Thomas B. Florence, Ph.D.
As president of APRC, a research and consulting firm,
Dr. Florence has expertise in assessing liabilities,
including asbestos liabilities. He will address the
valuation and estimation of Grace's liabilities arising
from the asbestos PD claims made against Grace.
The Debtors further disclose other potential expert witnesses for
Phase II Estimation:
(1) Experts on Canadian Law
The Debtors may call on experts on Canadian law to
address the likelihood of success on the merits of
pending Canadian claims when adjudicated in Canada.
(2) Experts on California University Claims
The Debtors may need experts to testify about the
nature, extent, and timing of California State
University's and the University of California's
knowledge of asbestos-related issues, to the extent
those California claims remain at the time of the
Phase II trial.
(3) Experts on Category II Claims
The Debtors may call on experts to address the merits
and valuation of Category B PD claims, including:
-- whether the properties identified are hazardous or
require remediation; and
-- the costs of remediation efforts or the impact on
property values for the Category B properties
identified.
(4) Experts on Valuation of Claims
The Debtors may call on additional experts to testify
regarding the valuation of Category I PD claims,
including the costs of abatement, and the costs of an
operations or maintenance program.
(5) Experts on Risk Assessment
The Debtors may call on additional experts to address
whether Category I or Category II claims pose a risk
that they require remediation.
(6) Experts on Construction and Renovation Work
The Debtors may need additional experts to testify on
issues relating to construction and renovation work in
the buildings at issue and to testify concerning the
relationship of these activities to asbestos-containing
materials in buildings.
Headquartered in Columbia, Maryland, W.R. Grace & Co. --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Company and its debtor-
affiliates filed for chapter 11 protection on April 2, 2001
(Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq.,
at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the
Debtors in their restructuring efforts. (W.R. Grace Bankruptcy
News, Issue No. 95; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
W.R. GRACE: Can Participate in Marsh & New York Settlement
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gave
W.R. Grace & Co., and its debtor-affiliates permission to
participate in a settlement between:
1. Marsh & McClennan Companies, Inc., Marsh, Inc., and their
subsidiaries and affiliates; and
2. the Attorney General of the State of New York and the
Superintendent of Insurance of the State of New York.
Marsh & McClennan Companies is a global professional services
firm with annual revenues exceeding $11 billion. It is the
parent company of:
-- Marsh Inc., a risk and insurance services firm;
-- Putnam Investments, one of the largest investment
management companies in the United States; and
-- Mercer Inc., a global provider of consulting services.
In October 2004, New York Attorney General Eliot Spitzer
commenced actions against Marsh before the Supreme Court of the
State of New York, charging the insurance brokerage firm of
fraudulent and anti-competitive practices in connection with the
brokering of insurance business in violation of the New York
Executive Law, the General Business Law and common law.
The New York Superintendent of Insurance also issued a citation,
charging Marsh with having used fraudulent, coercive and
dishonest practices, having demonstrated untrustworthiness,
violating Section 340 of the General Business Law, and having
engaged in determined violations of the Insurance Law.
The Attorney General and the Superintendent accused Marsh of
deceiving clients by:
-- steering the clients' insurance business to favored
insurance companies; and
-- soliciting fictitious bids to assure that insurance
policies were placed to benefit favored insurers.
They argued that Marsh received contingent commissions from
favored insurers, which Marsh failed to adequately disclose. The
complaint alleged that Marsh collected approximately $800,000,000
in contingent commissions in 2003.
On January 30, 2005, Marsh agreed to settle the complaint by
establishing an $850,000,000 settlement fund to compensate U.S.
policyholder clients who retained Marsh to place, renew, consult
on or service insurance between January 1, 2001, and December 31,
2004, where the placement, renewal, consultation or servicing
resulted in contingent commissions or overrides Marsh recorded
during the period. The fund is payable in four annual
installments over the next four years.
Marsh entered into the settlement agreement without admitting or
denying anything.
James H.M. Sprayregen, Esq., at Kirkland & Ellis, LLP, in
Chicago, Illinois, tells Judge Fitzgerald that from 2001 to 2004,
the Debtors purchased insurance policies from various insurance
carriers for which Marsh acted as the Debtors' broker. From 2001
to 2003, the Debtors also purchased surety bonds from various
surety companies through Marsh.
Mr. Sprayregen says W.R. Grace & Co. and W.R. Grace & Co.-Conn.
have received offer letters dated May 20, 2005, from Marsh
setting forth the amounts the Debtors are eligible to receive
from the Fund and the related terms and conditions of the
settlement offer.
The first Offer Letter relates to insurance policies as to which
Marsh had acted as the Debtors' broker. The first Offer Letter
indicates that the Debtors paid on the policies $48,605,602 in
premiums or consulting fees, and Marsh recorded $2,680,608 in
attributed contingent commissions or overrides.
The second Offer Letter relates to surety bonds the Debtors
procured through Marsh. The second Offer Letter indicates that
the Debtors paid on the bonds $109,027 in premiums, and Marsh
recorded $7,644 in attributed contingent commissions or
overrides.
The premium amounts stated in the Offer Letters are substantially
consistent with the Debtors' own records.
The Debtors are eligible to receive $1,385,307 to be paid in four
annual installments beginning November 1, 2005, Mr. Sprayregen
says. The next payments are due June 30, 2006, June 30, 2007,
and June 30, 2008.
The deadline for electing to participate in the Settlement Fund
is September 20, 2005.
Mr. Sprayregen relates that the Debtors have decided to accept
the settlement offers. By electing to receive cash, the Debtors
will tender a release and waiver of all claims and causes of
actions against Marsh relating to the Complaint or the Citation,
except for claims relating to the purchase or sale of Marsh
securities.
Mr. Sprayregen notes that any eligible client that elects not to
participate in the Settlement Fund will retain any rights to
pursue an individual or class against the brokerage firm,
including participating in a putative class action entitled In
re: Insurance Brokerage Antitrust Litigation, Civil No. 04-5148
(FSH), MDL No. 1663, against Marsh and other companies pending in
the U.S. District Court for the District of New Jersey.
The Class Action asserts numerous violations of federal and state
statutory and common law, and seeks various forms of damages and
other relief on behalf of policyholders.
Mr. Sprayregen, however, points out that Marsh is permitted under
the Settlement to use the non-participating client's allocated
share of the Fund to satisfy any pending or other claims by
policyholders. No distribution will be made to non-participating
policyholders until all participating policyholders have been
paid their full aggregate amount due as calculated under the
Settlement Agreement.
In addition, any payment to non-participating policyholders will
not exceed 80% of the policyholder's original allocated share.
Any amounts that remain in the Fund as of June 20, 2008, will be
distributed on a pro rata basis to participating policyholders.
In no event will any of the funds be used to pay attorney's fees.
Headquartered in Columbia, Maryland, W.R. Grace & Co. --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Company and its debtor-
affiliates filed for chapter 11 protection on April 2, 2001
(Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq.,
at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the
Debtors in their restructuring efforts. (W.R. Grace Bankruptcy
News, Issue No. 94; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WELLINGTON PROPERTIES: Files Plan of Reorganization in N.C.
-----------------------------------------------------------
Wellington Properties, LLC, has unveiled its Chapter 11 Plan of
Reorganization and delivered a copy of it (together with a
Disclosure Statement explaining the economic assumptions
underpinning the Plan) to the U.S. Bankruptcy Court for the Middle
District of North Carolina, Durham Division.
The Plan provides that the Debtor will:
1) obtain funds through a combination of existing funds on
hand, a new capital contribution, and business operations;
2) pay administrative expenses and outstanding ad valorem
taxes on the Effective Date;
3) restructure allowed secured claims so as to permit full
payment over a reasonable period of time;
4) pay allowed unsecured claims without interest 60 days after
the Effective Date; and
5) issue new equity interests to an investor in return for the
new capital contribution.
LaSalle Bank National Association, as trustee for the Registered
Holders of LB Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 1998-C1, for whom GMAC Commercial
Mortgage Corporation has been designated as Servicer and as
Special Servicer, will be paid adequate protection payments as
authorized by the Court. The outstanding balance of the secured
claim will become the restated principal balance of the promissory
note. The salient terms governing the issuance of the new
promissory note are:
a) interest will accrue at the rate of 7.36% per annum;
b) payments during years one through four would be made
monthly in arrears and in amounts calculated as if the note
were interest only and at rates of 6%, 7%, 8% and 9%,
respectively, with accrued but unpaid interest bearing
interest until paid and with all interest which accrued
after the Effective Date to be paid in full by the end of
year four;
c) payments during years five and after would be made
monthly in arrears and in amounts calculated as if the note
were being amortized on the remainder of a 30-year term
commencing at the Effective Date; and
d) the promissory note will be secured by existing liens on
all or substantially all of the Debtor's real and personal
property.
After its emergence, the Debtor will retain substantially all of
its assets, subject to existing liens to secure repayment of
indebtedness to some creditors.
Terrell M. Rhye will make capital a capital contribution to fund
the Debtor's emergence from bankruptcy. Mr. Rhye's contribution
will give him at least 51% equity stake in the Reorganized
Wellington.
Headquartered in Durham, North Carolina, Wellington Properties,
LLC, owns and operates a 501-unit apartment complex known as
Wellington Place located in Durham, North Carolina. The Company
filed for chapter 11 protection on March 29, 2005 (Bankr.
M.D.N.C. Case No. 05-80920). John A. Northen, Esq., at Northen
Blue, L.L.P., represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
total assets of $11,625,087 and total debts of $12,632,012.
WESTPOINT STEVENS: Viasystems Wants Company to Pay for Damages
--------------------------------------------------------------
WestPoint Stevens, Inc., and Viasystems Group, Inc., a
manufacturer of wiring harnesses and other electronic components
for consumer goods, had an ongoing business relationship related
to WestPoint's "Restwarmer" heated mattress pad that dates back
into the 1980s.
Joseph L. Schwartz, Esq., at Riker, Danzig, Scherer, Hyland &
Perretti, LLP, in New York, tells the U.S. Bankruptcy Court for
the Southern District of New York that because of the necessity to
have sufficient components to build the anticipated Restwarmer
Product units, because of the lag time in the delivery of certain
of the components, Viasystems would require the needed inventory
of parts and components in advance of actually receiving a
purchase order from WestPoint.
Fahrenheit Blanket
Beginning in 2001, WestPoint developed a new product called the
Fahrenheit Blanket. WestPoint asked Viasystems to provide the
wiring and controls for the Fahrenheit Product and assist in its
manufacture and assembly. WestPoint started selling that product
in 2002.
In late 2003, WestPoint ordered Viasystems to stop the production
of the Fahrenheit Product. Mr. Schwartz reports that as of
January 2004, following the completion of all of the units of the
Fahrenheit Product that WestPoint accepted, Viasystems had an
excess inventory of materials and components totaling $195,843,
with incidental labor costs of $16,582.
Cancelled Purchase Orders
On May 26, 2004, WestPoint placed an order with Viasystems for
$690,050 of materials for the Restwarmer Product, to which
Viasystems complied. However, Mr. Schwartz points out that
WestPoint refused to pay Viasystems for the inventory materials
related to the Fahrenheit Product and for all the materials
Viasystems supplied for the Restwarmer Purchaser Order.
WestPoint issued and then cancelled certain purchase orders on the
Fahrenheit Product after the components had been produced. This
cancellation, Mr. Schwartz argues, was in breach of WestPoint's
obligations to Viasystems. Furthermore, WestPoint remains
obligated to purchase the balance of the Fahrenheit Inventory.
Mr. Schwartz asserts that despite Viasystems' demand for payment
on January 16, 2005, WestPoint has failed to pay of the Fahrenheit
Inventory. Viasystems has attempted to cover its damages by
selling the Fahrenheit Inventory. However, there is no market for
it.
Viasystems Asserts Damages
Viasystems asserts that WestPoint breached the contracts on the
Fahrenheit Product and the Restwarmer Product, by failing and
refusing to pay Viasystems for the goods that it ordered.
Thus, Viasystems asks the Court to compel WestPoint to pay it
$212,424 for damages related to the Fahrenheit Inventory, and
$195,603 for damages related to the Restwarmer Product.
Viasystems also charges WestPoint with fraud and asks the Court to
award it $195,603, plus punitive damages in an amount to be
determined at trial. Viasystems asserts that WestPoint knowingly
and intentionally made false representations designed to obtain
Viasystems' goods with no intention of paying for all of them.
"WestPoint's representations were outrageous, made evil with
motive, were wanton and willful or with reckless disregard for the
rights of Viasystems," Mr. Schwartz says.
Headquartered in West Point, Georgia, WestPoint Stevens, Inc., --
http://www.westpointstevens.com/-- is the #1 US maker of bed
linens and bath towels and also makes comforters, blankets,
pillows, table covers, and window trimmings. It makes the Martex,
Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux
brands, as well as the Martha Stewart bed and bath lines; other
licensed brands include Ralph Lauren, Disney, and Joe Boxer.
Department stores, mass retailers, and bed and bath stores are its
main customers. (Federated, J.C. Penney, Kmart, Sears, and Target
account for more than half of sales.) It also has nearly 60 outlet
stores. Chairman and CEO Holcombe Green controls 8% of WestPoint
Stevens. The Company filed for chapter 11 protection on
June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J.
Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the
Debtors in their restructuring efforts. (WestPoint Bankruptcy
News, Issue No. 57; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WHEREHOUSE ENTERTAINMENT: Wants Until Oct. 30 to Object to Claims
-----------------------------------------------------------------
Wherehouse Entertainment, Inc., and its debtor affiliates ask the
U.S. Bankruptcy Court for the District of Delaware to extend,
until Oct. 30, 2005, the period within which they can object to
claims filed against the Debtors' estate.
Since the chapter 11 filing, the Debtors have worked diligently to
review all claims filed in these cases. They already have filed
nine omnibus claims objections seeking to reduce and allow or
expunge administrative, secured and priority claims.
To date, the Debtors have been able to reach a consensual
resolution regarding the amount and priority of numerous claims to
which the Debtors had objected. In addition, they successfully
reached consensual resolutions with a variety of claimants without
the need to file an objection to some claims.
Accordingly, the Debtors believe that the extension period is
necessary to allow them to thoroughly complete their review of the
claims to ensure efficient and accurate completion of the claims
reconciliation process.
Headquartered in Torrance, California, Wherehouse Entertainment,
Inc., sells prerecorded music, videocassettes, DVDs, video games,
personal electronics, blank audio cassettes and videocassettes,
and accessories. The Company and its debtor-affiliates filed for
chapter 11 protection on January 20, 2003, (Bankr. Del. Case No.
03-10224). Mark D. Collins, Esq., and Paul Noble Heath, Esq., at
Richards Layton & Finger represent the Debtors in their
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $227,957,000 in total assets and
$222,530,000 in total debts.
WINSTON HOTELS: Moody's Affirms Preferred Stock Rating at B3
------------------------------------------------------------
Moody's Investors Service affirmed the B3 preferred stock rating
of Winston Hotels, Inc. and revised its rating outlook to
positive, from stable. The rating outlook change reflects the
success Winston Hotels has enjoyed in generating consistent
earnings growth and flag diversity, as well as limited earnings
volatility during the recent lodging downturn.
Moody's noted that Winston Hotels' fixed charge coverage is good
for its peer group at 2.4x YTD (including capitalized interest,
principal amortization and adjusted for reserves) and has stayed
in the 2.2x to 2.7x range for the past two years. Winston Hotels
posted positive RevPAR growth of 7.1% for 2Q05 versus the prior
year. Although occupancy rates decreased slightly from 70.4% to
69.4% because the REIT sold four hotels, year-over-year occupancy
rates improved from 65% to 67% at YE2004. ADR also increased 8.7%
from $80.67 to $87.70 during 2Q05 as compared to 2Q04. In
addition, operating margins have improved from 12.8% for 2003 to
14.4% for 2004 and held steady at 18% for YTD 2005.
Moody's rating action indicates that Winston Hotels has shown
resilience in a post-September 11 lodging environment, which
created substantial challenges for all hotel sub-sectors,
including the mid-scale and high-end limited-service hotel
segments on which Winston Hotels focuses. Although Winston Hotels
owns some high-end limited-service, extended-stay and full-service
hotels, the vast majority of the REIT's properties are in the mid-
scale non-food-and-beverage category, and 72% are located in the
Mid-Atlantic/Southeast, with a concentration in North Carolina and
Georgia.
Moody's stated that Winston Hotels had eleven mezzanine loans to
third-party hotel owners totaling $31 million at 2Q05. The REIT
is in the process of expanding this lending program through a
joint venture with GE Capital, in which GE will provide the first
mortgages and Winston will provide the mezzanine piece. Asset
quality performance has been good so far, but it is still early
days.
In order to receive a rating upgrade, Winston Hotels would need to
show further growth in RevPAR, increased size (to assets near $500
million) and diversification at a measured pace, and a stable
level of secured debt and leverage. The rating would be pressured
if:
* asset or RevPAR growth were to stall;
* fixed charge coverage were to decline to the low 2x range; or
* there were asset quality problems in its mezzanine loan
portfolio.
At the same time, Moody's has withdrawn ratings on the shelf
filings of Winston Hotels, Inc. for business reasons.
This rating are affirmed:
Winston Hotels, Inc.:
-- preferred stock at B3.
These ratings have been withdrawn:
Winston Hotels, Inc.:
-- senior debt shelf at (P)B1
-- preferred stock shelf at (P)B3
-- subordinate debt shelf at (P)B3
Winston Hotels, Inc. [NYSE:WXH] is a lodging REIT headquartered in
Raleigh, North Carolina, USA. At June 30, 2005, Winston Hotels
had total assets of $424 million, and equity of $238 million.
WODO LLC: Can Ask for Acceptances from Creditors Until Jan. 13
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Western District of Washington
extended Wodo, LLC's period to solicit acceptances for its Plan of
Reorganization until Jan. 13, 2006.
The Debtor says it needs the extension so that it can make
necessary amendments on the submitted Plan that will incorporate
the negotiated resolution of WULA's claim. WULA is major secured
creditor holding approximately $20 million in claims against the
Debtor.
The compromise agreement requires the Debtor to make an initial
payment to WULA by Oct. 17, 2005. The Debtor has filed a motion
for approval of the compromise. The Debtor anticipates WULA's
affirmative vote on a Plan as a result of the compromise
agreement.
Headquartered in Bellingham, Washington, Wodo, LLC, fka Trillium
Commons, LLC, is a real estate company. The Company filed for
chapter 11 protection on January 18, 2005 (Bankr. W.D. Wash. Case
No. 05-10556). Gayle E. Bush, Esq., at Bush Strout & Kornfeld
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it listed total
assets of $90,380,942 and total debts of $21,451,210.
WOODLOAND HOMES: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Woodland Homes of Fort Wayne, LLC
1020 East Dupont Road
Fort Wayne, Indiana 46845
Bankruptcy Case No.: 05-16583
Type of Business: The Debtor is one of Northeast Indiana's
major new home contractors.
See http://www.woodland-homes.com/
Chapter 11 Petition Date: October 12, 2005
Court: Northern District of Indiana (Fort Wayne)
Judge: Robert E. Grant
Debtor's Counsel: R. David Boyer, II, Esq.
Helmke, Beams, Boyer & Wagner
202 West Berry Street, Suite 300
Fort Wayne, Indiana 46802
Tel: (260) 422-7422
Fax: (260) 422-6704
Total Assets: $730,496
Total Debts: $1,034,624
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Steve Janh Sr. Line of credit $199,244
[address not provided]
Brueggermann Lumber Trade debt $122,962
7147 Ricker Road
New Haven, IN 46774
Keystone Concrete Trade debt $64,034
P.O. Box 121
Churubusco, IN 46723
Zehr's Antique & Furniture Trade debt $59,797
Stock Building Supply Trade debt $59,354
Adams Drywall Trade debt $41,606
Cox Interiors Inc. Trade debt $39,843
Nob Brick Corp. Trade debt $39,736
Clark & Mithcell, Inc. Trade debt $37,720
Dial One TSM Trade debt $26,502
Schwartz Masonry Trade debt $20,868
Jerry Bailey Trucking Inc Trade debt $18,535
Moreau & Sons Concrete Trade debt $17,152
B&T Distributors, Inc. Trade debt $16,210
Lee Supply Corp Trade debt $15,452
Menards Store credit card $12,609
All Phase Insulation Trade debt $11,272
J. Jay & M. Schumucker Trade debt $10,947
Old Fort Supply Trade debt $10,676
Klotz & Sons Construction Trade debt $10,383
WORLDCOM INC: Philadelphia Wants Court to Allow Tax Claims
----------------------------------------------------------
Carolyn Hochstadter Dicker, Esq., at Klehr, Harrison, Harvey,
Branzburg & Ellers, LLP, in Philadelphia, Pennsylvania, tells the
U.S. Bankruptcy Court for the Southern District of New York that
pursuant to records, WorldCom, Inc., and its debtor-affiliates
currently owe the City of Philadelphia these business privilege
taxes inclusive of interest and penalties through Sept. 7, 2005:
Period Principal Interest Penalty Total
------ --------- -------- ------- -----
12/31/2002 $167,920 $48,697 $86,059 $302,676
04/15/2003 45,476 113,690 159,166
04/15/2004 91,847 15,614 33,294 140,755
12/31/2004 962 48 67 1,077
--------- -------- ------- --------
TOTAL $260,728 $109,835 $233,111 $603,674
========= ======== ======= ========
Interest and penalties continue to accrue through the date of
payment, Ms. Dicker says.
Accordingly, Philadelphia asks the Court to compel the Debtors to
pay the Taxes as an allowed expense claim against their estates.
Pursuant to Section 202 of the City of Philadelphia Business
Privilege Tax Regulations, the Debtors were required to file tax
returns with respect to business privilege taxes on an annual
basis by the 15th day of April following the year in which the tax
was due and submit payment thereof with the filing of the returns.
Furthermore, Section 503 of the Bankruptcy Code provides for the
payment of taxes due after the commencement of the bankruptcy case
as administrative expense priority tax claims together with
penalties and interest accrued through the date of payment.
"Because the Taxes are, respectively, due for a year-ending
postpetition, these taxes constitute claims payable under section
503(b) of the Bankruptcy Code," Ms. Dicker asserts.
Philadelphia believes that the Debtors have sufficient resources
to satisfy the administrative expense claim for Taxes.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom
Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
WORLDCOM: Deutsche Bank Wants Move for Summary Judgment Denied
--------------------------------------------------------------
WorldCom, Inc. and its debtor-affiliates asked the U.S. Bankruptcy
Court for the Southern District of New York to grant them summary
judgment and disallow Deutsche Bank AG, London Branch's claims:
(1) The Dividend Claim -- Claim No. 25985 for $7,906,920,
asserted on account of unpaid dividends on MCI Group
common stock; and
(2) The Conversion Claim -- Claim No. 25986 for $256,160,
alleging damages attributable to the Debtors' decision not
to effect the conversion of MCI Group common stock to
WorldCom Group common stock.
Deutsche Bank Responds
A determination as a matter of law as to the Debtors' solvency as
of particular dates in March and July 2002, cannot be made based
on the limited evidence of the bankruptcy filing, the distribution
to unsecured creditors and the restated balance sheets, Edward J.
Estrada, Esq., at LeBoeuf, Lamb, Greene &
MacRae, LLP, in New York argues.
"It is not sufficient simply to measure current assets against
current liabilities, or determine that the present estimated
'liquidation' value of the corporation's assets would produce
insufficient funds to satisfy the corporation's existing
liabilities," Mr. Estrada maintains.
"The Debtors have failed to establish insolvency as a matter of
law," Mr. Estrada contends.
Mr. Estrada further argues that even though a debtor may be
presumed to be insolvent due to the presence of various indicia of
insolvency, the true state of its financial affairs can only be
determined after a thorough factual showing at trial.
Accordingly, Deutsche Bank AG, London Branch asks the Court to
deny the Debtors' request.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom
Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
* Thoits Love Expands Practice with Two New Palo Alto Associates
----------------------------------------------------------------
Thoits, Love, Hershberger & McLean, one of Silicon Valley's most
established general practice law firms, named Allison K. Arnell
and Alexandra S. Narancic as the firm's associates for the Trusts
and Estates practice based in Palo Alto.
"We are very excited to have Alexandra and Allison join our
expanding Trusts & Estates practice group," said Michael Curtis,
shareholder, Thoits. "The addition of Alexandra and Allison will
allow us to continue providing our clients in the Bay Area, and
now Santa Cruz County, with the high quality legal services for
which Thoits is known."
Allison K. Arnell joins the firm from San Francisco-based Morrison
& Foerster LLP where she represented banks and borrowers in
secured and unsecured lending transactions. She received her B.A.
with honors from the University of California at Davis, and is a
member of the Phi Beta Kappa Society. She received her law
degree, cum laude, from the University of California, Hastings
College of the Law and is a member of the Thurston Society and
Order of the Coif. During law school, Ms. Arnell served as a
judicial extern to U.S. District Court Judge Charles Breyer and
U.S. Bankruptcy Court Judge Dennis Montali. Having studied abroad
at the Pontificia Universidad Cat¢lica de Chile while in college,
Ms. Allison is fluent in Spanish.
Alexandra S. Narancic worked for Andersen and, most recently, for
Ernst & Young's Personal Financial Consulting Group. She received
her B.A. from the University of Chicago and her law degree from
Hastings College of the Law where she was a member of the Hastings
Communications and Entertainment Law Journal. She also holds an
LL.M. in Taxation with Honors from Golden Gate School of Law.
While getting her LL.M. she externed for the Alameda County
Superior Court in the Probate Department. Ms. Narancic's
professional activities include membership in the State Bar of
California Tax Section and Young Tax Lawyers Association. Her
interest in residential real estate led her to become a licensed
real estate broker. Having grown up in Germany, she is fluent in
German as well as Serbian.
Headquartered in Palo Alto, California, 94301, Thoits, Love,
Hershberger & McLean -- http://www.thoits.com/-- has been a
prominent member of the Palo Alto legal community for over 55
years. The firm is dedicated to providing high quality legal
services to clients of all sizes.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com/
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania,
USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L.
Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P.
Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick
F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M.
Pinili, and Peter A. Chapman, Editors.
Copyright 2005. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without prior
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herein is obtained from sources believed to be reliable, but is
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